Conversion Option dated September 12 2005 among John A. Martell, Magnetech
      Industrial Services, Inc. and the registrant


    

      Exhibit
        4.12

       

      


       

      CONVERSION
        OPTION

       

      This
        Conversion Option (“Option”)
        is
        made as of September 12, 2005 by Magnetech Integrated Services Corp., an
        Indiana
        corporation (“Parent”),
        and
        Magnetech Industrial Services, Inc., an Indiana corporation and wholly owned
        subsidiary of Parent (“Company”),
        in
        favor of John A. Martell (“Lender”).

       

      Lender
        has loaned to the Company $3,000,000 as evidenced by the Company’s Promissory
        Note dated effective as of January 1, 2004, a copy of which is attached hereto
        as Exhibit
        A
        (the
“Note”).
        Parent and the Company wish to provide Lender with an option to convert the
        indebtedness under the Note into shares of common stock of Parent, no par
        value
        (the “Common
        Stock”),
        in
        accordance with the terms of this Option. 

       

      1. Option
        to Convert. Subject
        to the terms and conditions of this Option, Lender has the option to convert,
        at
        any time and from time to time, any or all amounts owed by the Company to
        the
        Lender under the Note, including without limitation principal, interest and
        fees, into shares of Common Stock at a conversion price of $0.10 per share
        (the
“Conversion
        Price,”
        which
        shall be subject to adjustment as provided in this Option).

       

      2. Adjustments
        to Conversion Price.
        The
        Conversion Price and number and kind of shares or other securities to be
        issued
        upon exercise of this Option shall be adjusted from time to time as
        follows:

       

      (a) Reorganization
        or Reclassification.
        If
        Parent effects a reorganization or reclassification in which the Common Stock
        is
        changed into the same or a different number of shares of stock or other
        securities or property, lawful provision shall be made as part of the terms
        of
        the reorganization or reclassification so that this Option shall remain
        outstanding and evidence the right to convert into the number and kind of
        stock
        and other securities and property that would have been received by a holder
        of
        that number of shares of Common Stock issuable upon the exercise in full
        of this
        Option immediately before such reorganization or reclassification. Such terms
        shall provide for adjustments which shall be as nearly equivalent as may
        be
        practicable to adjustments provided for in this Section 2.

       

      (b) Merger,
        Consolidation or Asset Sale.
        If
        Parent merges or consolidates with or into another company or entity or sells
        all or substantially all of its assets, lawful provision shall be made as
        part
        of the terms of the merger, consolidation or sale so that this Option shall
        remain outstanding and evidence the right to convert into the number and
        kind of
        stock and other securities and property that would have been received by
        a
        holder of that number of shares of Common Stock issuable upon the exercise
        in
        full of this Option immediately before such merger, consolidation or sale
        of
        assets. Such terms shall provide for adjustments which shall be as nearly
        equivalent as may be practicable to adjustments provided for in this Section
        2.


       

      (c) Stock
        Splits, Combinations and Dividends.
        If the
        shares of Common Stock are subdivided or combined into a greater or smaller
        number of shares of Common Stock, or if a dividend is paid on the Common
        Stock
        or any preferred stock issued by the Company in shares of Common Stock, the
        Conversion Price shall be proportionately reduced in case of 

       


      
        
          
          

        

        
          
            

          

        

        
          
          

        

      


      subdivision
        of shares or stock dividend or proportionately increased in the case of
        combination of shares.

       

      (d) Share
        Issuances.
        Subject
        to the provisions of this Section 2, if Parent shall at any time prior to
        the
        exercise of this Option in full issue any shares of Common Stock to a person
        other than the Lender (except (i) pursuant to Sections 2(a), (b) or (c) above;
        (ii) pursuant to options, warrants, or other obligations to issue shares
        outstanding on the date hereof as disclosed to the Lender in writing; or
        (iii)
        pursuant to any employee equity incentive plan adopted by Parent) for a
        consideration per share (the “Offer
        Price”)
        less
        than the Conversion Price in effect at the time of such issuance, then the
        Conversion Price shall be reduced to a price determined by multiplying the
        Conversion Price by a fraction (x) the numerator of which is the sum of (A)
        the
        number of shares of Common Stock outstanding immediately before the issuance
        of
        the Common Stock plus (B) the number of shares of Common Stock that the
        aggregate offering price of the total number of shares so offered would purchase
        at the Conversion Price, and (y) the denominator of which is the sum of (A)
        the
        number of shares of Common Stock outstanding immediately before the issuance
        plus (B) the number of new shares of Common Stock being issued. 

       

       

      (e) For
        purposes of any computation respecting consideration received pursuant to
        Section 2(d) above, the following shall apply:

      


      (i) with
        respect to the issuance of shares of Common Stock for cash, the consideration
        shall be the amount of such cash, provided that in no case shall any deduction
        be made for any commissions, discounts or other expenses incurred by Parent
        for
        any underwriting of the issue or otherwise in connection therewith;

      


      (ii) with
        respect to the issuance of shares of Common Stock for a consideration in
        whole
        or in part other than cash, the consideration other than cash shall be deemed
        to
        be the fair market value thereof as determined in good faith by the Board
        of
        Directors of Parent (irrespective of the accounting treatment thereof);
        and

      


      (iii) with
        respect to any shares of Common Stock issued upon the exercise or conversion
        of
        any option, warrant or other convertible security, the aggregate consideration
        received for such shares of Common Stock shall be deemed to be the consideration
        received by Parent for the issuance of such convertible securities plus the
        additional minimum consideration, if any, to be received by Parent upon the
        conversion or exchange thereof (the consideration in each case to be determined
        in the same manner as provided in subsections (i) and (ii) of this Section
        2(e)).

      


      (f) Higher
        Value.
        If any
        action would require adjustment of the Conversion Price pursuant to more
        than
        one of the provisions of this Section 2, only one adjustment will be made
        with
        respect to that action and such adjustment will be the amount of the adjustment
        that has the highest value to the Lender.

      


      (g) Certificate.
        After
        the occurrence of any transaction the result of which is an adjustment to
        the
        Conversion Price or the number and kind of shares or other securities to
        be



      
        
          
          

        

        
          2

          
            

          

        

        
          
          

        

      


      issued
        upon exercise of this Option, an authorized officer of Parent shall promptly
        provide to Lender a written statement certifying as to the type and amount
        of
        the adjustment. 

      


      (h) Fractional
        Shares.
        Parent
        shall not be required to deliver fractional shares of Common Stock issuable
        upon
        an exercise of this Option. In lieu of issuing fractional shares, Parent
        shall
        pay an amount in cash equal to the fair market value of such fractional shares
        as determined in good faith by the Board of Directors of Parent. 

      


      3. Mechanics
        of Conversion.
        To
        exercise this Option, Lender shall complete, execute and deliver to Parent,
        at
        its principal offices, the Conversion Notice attached as Exhibit
        B
        to this
        Option. The effective date of conversion shall be the date on which the
        Conversion Notice is received by Parent. Within five (5) business days after
        receipt of the Conversion Notice, Parent shall issue or cause to be issued
        to
        Lender a certificate evidencing that number of duly authorized, validly issued,
        fully paid and non-assessable shares of Common Stock determined by dividing
        the
        amount of principal, interest and/or fees under the Note being converted
        by the
        Conversion Price in effect at the effective date of conversion. 

       

      4. Reservation
        of Shares.
        While
        this Option is outstanding, Parent shall reserve from its authorized and
        unissued Common Stock a sufficient number of shares to provide for the issuance
        of Common Stock upon the full exercise of this Option. Parent agrees that
        its
        issuance of this Option shall constitute full authority to its officers,
        agents,
        and transfer agents who are charged with the duty of executing and issuing
        stock
        certificates to execute and issue the necessary certificates for the Common
        Stock upon any exercise of this Option.

       

      5. Full
        Satisfaction.
        Conversion of the amounts owed under the Note into the Common Stock in
        accordance with this Option shall be deemed full satisfaction of such amounts.
        In the case of a partial conversion of the Note, (a) amounts owed under the
        Note
        that are not converted into Common Stock will continue to be owing by the
        Company to Lender under the same terms and conditions set forth in the Note,
        and
        (b) the conversion of principal and interest shall apply to amounts last
        falling
        due under the Note and shall not affect the timing or amount of succeeding
        required installments under the Note. 

       

      6. Authorization.
        Parent
        and the Company represent and warrant, jointly and severally, to Lender that
        (a)
        they are duly authorized to execute, deliver and perform this Option, (b)
        such
        execution, delivery and performance will not violate, contravene or cause
        a
        default under Parent’s or the Company’s articles of incorporation or bylaws, any
        legal requirement, rule or order to which Parent or the Company is subject,
        or
        any agreement, covenant or obligation to which Parent or the Company is a
        party
        or to which it is subject, and (c) upon issuance, the Common Stock will be
        duly
        authorized, validly issued, fully paid and non-assessable. 

       

      7. No
        Registration.
        This
Option
        and any securities issuable upon the exercise of this Option have not been
        registered under the Securities Act of 1933 (the “Act”) or any applicable state
        securities laws. This Option and such securities may not be offered for sale
        or
        sold, transferred, pledged, hypothecated or otherwise disposed of except
        pursuant to an effective registration statement under the Act and such state
        laws or such securities or such transfer is exempt from such registration
        requirements.

       


      
        
          
          

        

        
          3

          
            

          

        

        
          
          

        

      


      8. Miscellaneous.
        This
        Option sets forth the entire agreement and understanding of the parties in
        respect of the transactions contemplated hereby and supersede all prior
        agreements, arrangements and understandings relating to that subject matter
        hereof. Subject to Section 7, this Option may be assigned by the Lender to
        any
        person to whom the Lender assigns his interests under the Note. This Option
        is
        not assignable by Parent or the Company without the Lender’s express written
        consent. All of the terms of this Option shall be binding upon, inure to
        the
        benefit of and be enforceable by and against each party and its or his
        respective successors, assigns, heirs and personal representatives, as
        applicable. This Option may be amended, modified, superseded or canceled
        and any
        of its terms or conditions may be waived only by a written instrument executed
        by both parties or, in the case of a waiver, by the party waiving compliance.
        This Option shall be governed by and construed in accordance with the laws
        of
        the State of Indiana as applicable to contracts made and to be performed
        in that
        State, without regard to conflict of laws principles. 

      


       

      Signed
        as
        of the date first written above.

       

      


       

      
        	 	
                MAGNETECH
                  INTEGRATED SERVICES CORP. 

              
	 	
                By

              	 /s/
                John A. Martell
	 	 	
                Its

              	 President
&
                CEO
	 	 	 	 
	 	
                MAGNETECH
                  INDUSTRIAL SERVICES, INC.

              
	 	
                By

              	 /s/
                John A. Martell
	 	 	
                Its

              	 President
&
                CEO


      


      
        
          
          

        

        
          4

          
            

          

        

        
          
          

        

      


      

        

          Exhibit
            A

           

          PROMISSORY
            NOTE

           

          
            	
                    $3,000,000.00

                  	
                    South
                      Bend, Indiana

                  
	 	
                    Effective
                      January 1, 2004

                  


          

          


          FOR
            VALUE RECEIVED,
            MAGNETECH INDUSTRIAL SERVICES, INC., an Indiana corporation (“Magnetech”)
            promises to pay to the order of JOHN A MARTELL (“Lender”) the principal sum of
            Three Million Dollars ($3,000,000), with interest thereon at 1% below
            the Prime
            Rate, payable at 1125
            South Walnut Street, South
            Bend, Indiana 46619, or such other place as Lender may designate in writing
            from
            time to time hereafter. For purposes of this Promissory Note, “Prime Rate” shall
            mean the Prime Rate as published in The
            Wall Street Journal,
            and
            which is described as the base rate on corporate loans at large U.S.
            money
            center commercial banks. The Prime Rate will be adjusted on the first
            business
            day of each month during the period this Note is outstanding.

           

          Interest
            only on the outstanding principal balance of the Note shall be due and
            payable
            commencing on February 1, 2004 and continuing on the 1st
            day of
            each month thereafter until December 31, 2008, when all principal and
            accrued
            interest under this Note shall be due and payable in one lump sum amount;
            provided,
            that
            Magnetech, upon at least 60 days prior written notice to Lender (which
            notice
            may not be sent by Magnetech prior to July 1, 2008), may extend the term
            of this
            Note for an additional period of sixty (60) months (the “Extended Term”).


           

          In
            the
            event the term of this Note is extended by Magnetech, interest only on
            the
            outstanding principal balance shall be due and payable to Lender on January
            1,
            2009. Thereafter, equal monthly principal installments of Fifty Thousand
            Dollars
            ($50,000) and all accrued interest on the outstanding principal balance
            shall be
            due and payable commencing on February 1, 2009
            and
            continuing on the 1st
            day of
            each month thereafter until December 31, 2013, when all remaining principal
            and
            accrued interest under this Note shall be due and payable in one lump
            sum
            amount. Notwithstanding anything in this Note to the contrary, the interest
            rate
            payable on the outstanding principal balance of the Note during the Extended
            Term shall be the Prime Rate, plus 1%. The Prime Rate will continue to
            be
            adjusted on the first day of each month during the Extended Term. 

           

          Magnetech
            may prepay the unpaid principal balance of this Note at any time or from
            time to
            time without penalty. Any prepayment shall include interest to the date
            it is
            made. Partial prepayments shall be applied to the installments in the
            inverse
            order of their maturity.

           

          Any
            amounts not paid when due shall bear interest at a rate
            which is four percent (4%) per year in excess of the interest rate otherwise
            payable hereon or, if less, at the highest rate then permitted under
            applicable
            law. Interest
            shall be computed on the basis of a three hundred sixty-five (365) day
            year and
            accrue for each day any principal sum remains unpaid.

           

          Upon
            (i)
            the failure by Magnetech to pay any amount when due under the terms of
            this
            Note, (ii) the dissolution of Magnetech, (iii) the making of a general
            assignment for the benefit of creditors by Magnetech, (iv) the filing
            of any
            petition or the commencement of any proceeding voluntarily by Magnetech
            for any
            relief under any bankruptcy or insolvency laws or any law 

           


          
            
              
              

            

            
              
              

              
                

              

            

            
              
              

            

          


          relating
            to the relief of debtors or the consent by Magnetech to the entry of
            an order in
            an involuntary case, or (v) the entry of an order or decree by a court
            of
            competent jurisdiction in an involuntary case, that is for relief against
            Magnetech, under any bankruptcy or insolvency laws or any law relating
            to the
            relief of debtors, all of the indebtedness evidenced hereby and remaining
            unpaid
            shall, at the option of Lender, become immediately due and payable with
            attorneys’ fees and costs incurred by Lender in enforcing this Note.


           

          Magnetech
            and all guarantors, sureties, and endorsers severally waive demand, presentment
            for payment, notice of dishonor, notice of nonpayment, protest, notice
            of
            protest, and diligence by Lender in collection and bringing suit on this
            Note
            and all benefits of homestead, valuation and appraisement laws and expressly
            agree that Lender may renew, extend or otherwise modify this Note from
            time to
            time without notice with full reservation of Lender’s rights. Any such renewal,
            extension or modification shall not release Magnetech or any guarantor,
            surety
            or endorser from any liability under this Note.

           

          Magnetech
            further agrees, subject only to any limitation imposed by applicable
            law, to pay
            all expenses incurred by Lender in collecting any amounts payable hereunder
            which are not paid when due, whether by acceleration or otherwise, including
            reasonable attorneys' and paralegals' fees and expenses and court
            costs.

           

          LENDER'S
            ACCEPTANCE OF LATE OR PARTIAL PAYMENTS, EXCUSE OF ANY DEFAULT, OR DELAY
            IN
            ENFORCEMENT OF ANY RIGHT, SHALL NOT ESTABLISH A CUSTOM OR COURSE OF CONDUCT
            AS
            TO ANY WAIVER OF LENDERS' RIGHTS AND REMEDIES.

           

          This
            Note
            is binding upon Magnetech and its legal representatives, successors and
            assigns
            and shall inure to the benefit of Lender and its successors and assigns.
            This
            Note and all payments due hereunder are being delivered and accepted
            in the
            State of Indiana, and this Note shall be governed in all respects, including
            validity, interpretation and effect, by the laws of the State of Indiana,
            without regard to principles of conflicts of law. 

           

          
            	 	
                    MAGNETECH:

                  
	 	 
	 	
                    MAGNETECH
                      INDUSTRIAL SERVICES, INC.

                  
	 	 	 
	 	
                    By:
                      

                  	
                    /s/
                      John A. Martell

                  
	 	 	
                    John
                      A. Martell, President & CEO

                  


          

          


        




      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      


      EXHIBIT
        B

      


      CONVERSION
        NOTICE

      


       

      Pursuant
        to the Conversion Option dated __________, 2005 made by Magnetech Integrated
        Services Corp. (“Parent”) and Magnetech Industrial Services, Inc. (the
“Company”) in favor of John A. Martell, the undersigned hereby elects to convert
        the amounts shown below owed under the Promissory Note dated effective January
        1, 2004 issued by the Company to Mr. Martell in the original principal amount
        of
        $3,000,000. The conversion shall be made in accordance with the terms and
        conditions set forth in the Conversion Option.

       

      


      
        	
                Amounts
                  to be converted:

              	
                Principal
                  Amount: $

              	 
	 	
                Interest: $

              	 
	 	
                Fees: $

              	 
	
                Date
                  of Notice:

              	 
	 	 	 
	
                Signature:

              	 
	
                Print
                  Name:

              	 
	
                Address: