Security Agreement dated as of March 3, 2005 between the registrant and Strasbourger
      Pearson Tulcin Wolff Incorporated, as agent for purchasers of subordinated
      convertible debentures


    

      Exhibit
        10.8

      


      


      SECURITY
        AGREEMENT

      


      THIS
        SECURITY AGREEMENT made the as of the 3rd day of March, 2005 by and among
        MAGNETECH
        INTEGRATED SERVICES CORP., an
        Indiana corporation (the “Company”),
        MAGNETECH
        INDUSTRIAL SERVICES, INC., an
        Indiana corporation (“MIS”;
        together, with the Company, the “Debtors”),
        and
        Strasbourger Pearson Tulcin Wolff, Inc., as agent for the Debenture holders
        (the
        "Agent").

      


      W
        I T N E S S E T H:

      


      A. The
        Company has issued an aggregate of $4,000,000 in 6% Subordinated Secured
        Convertible Promissory Debentures (the “Debentures”)
        to the
        parties identified in Schedule “A” attached hereto (the “Lenders”)
        pursuant to a Private Placement Memorandum dated January 25, 2005.

      


      B. The
        Lenders have appointed the Agent to represent them and take all action under
        the
        Security Agreement for their benefit.

      


      NOW
        THEREFORE, for good and valuable consideration, the parties agree as
        follow:

      


      1) Grant
        of Security Interest.
        In
        order to secure the payment of indebtedness to the Lenders evidenced by the
        Debentures, and any other obligation or liability of the Debtors to any Lender
        under, pursuant to, or in connection with the Debentures, direct or indirect,
        absolute or contingent, due or to become due, now existing or hereafter arising
        (hereinafter collectively called the "Obligations"),
        the
        Debtors hereby grant and convey to the Agent for the benefit of the Lenders
        a
        continuing security interest in and to the following property and assets
        of the
        Debtors, whether now existing or hereafter acquired, produced or created,
        including, without limitation: a)
        accounts
        receivable, chattel paper, instruments, notes, drafts, acceptances and other
        forms of instruments or obligations, now or hereafter owing to the Debtors,
        whether arising from the sale of goods or rendition of services by the Debtors,
        all of the Debtors rights in, to and under all purchase orders, now or hereafter
        received by the Debtors for goods or services, and monies due or to become
        due
        to the Debtors under all contracts for the sale of goods or the performance
        of
        services by the Debtors (whether or not yet earned by performance), or in
        connection with any other transaction (including, without limitation, the
        right
        to receive the Proceeds of said purchase orders and contracts), and collateral
        security and guarantees of any kind given by any obligor with respect to
        any of
        the foregoing; b)
        equipment and fixtures; c)
        all
        motor vehicles; d)
        all
        general intangibles; e)
        documents; f)
        all of
        the Debtors’ inventory (within the meaning of the Uniform Commercial Code as,
        from time to time, in effect in the State of Indiana; hereinafter, the
        "Uniform
        Commercial Code"),
        including, without limitation, goods, merchandise and other personal property,
        now or hereafter owned or acquired and wheresoever located, that are held
        for
        sale or lease or are furnished or to be furnished under a contract of service
        or
        are raw materials used or consumed or to be consumed in the Debtors' businesses,
        and all additions and accessions thereto, and all returns and refunds applicable
        thereto and the right to collect the same; g)
        all
        proceeds and products thereof, and all increases, substitutions, replacements,
        additions and accessions thereto (all of the foregoing, hereinafter referred
        to
        collectively as the "Collateral").
        

      


      The
        security interest granted herein to Agent on behalf of the Lenders is for
        the
        ratable benefit of all Lenders and each Lender may realize upon the Collateral,
        as set forth in Section 4 hereof, to the extent of its Debenture Percentage
        (as
        hereinafter defined), as computed from time to time. The amount of each Lender's
        "Debenture Percentage" shall be the percentage computed by dividing the
        Obligations owed to such Lender by the aggregate Obligations owed to all
        Lenders.

      



      
        
          
          

        

        
          
            

          

        

        
          
          

        

      


      2) Priority
        of Lien.
        The
        Debtors represent and warrant to the Agent for the benefit of the Lenders
        that
        (a) the lien granted by the Debtors to the Agent in the Collateral is a second
        priority security interest subject only to (i) the encumbrances listed on
        Schedule B hereto and (ii) the lien granted in favor of MFB Financial, pursuant
        to a Commercial Security Agreement dated November 1, 2004 between MIS and
        MFB
        Financial, as security for a $3 million credit facility provided by MFB
        Financial (the “Credit
        Facility”).
        The
        encumbrances listed on Schedule B, together with the security interest in
        favor
        of MFB Financial, are referred to herein as the “Permitted Encumbrances.” The
        lien granted herein shall also be subordinate to any refinancing of the Credit
        Facility with a new lender, such subordination shall be up to the maximum
        amount
        permitted under the existing Credit Facility.

      


      3) Covenants
        of Debtors.
        Subject
        to the subordination provisions granted in favor of MFB Financial under the
        Credit Facility (the “Subordination
        Agreement”),
        the
        Debtors covenant and agree as follows:

      


      a) To
        pay
        and perform all of the Obligations secured by this Agreement according to
        their
        terms.

      


      b) To
        pay
        and perform all of the obligations secured by the Permitted Encumbrances
        when
        due.

      


      c) To
        take
        all commercially reasonable actions necessary to defend the title to the
        Collateral against all persons and against all claims and demands
        whatsoever.

      


      d) On
        at
        least twenty (20) days notice in writing by the Agent, to do the following:
        furnish any further assurance of title reasonably requested by the Agent,
        execute any written agreement or do any other acts necessary to effectuate
        the
        purposes and provisions of this Agreement, execute any instrument or statement
        required by law or otherwise in order to perfect, continue or terminate the
        security interest of the Agent, on behalf of the Lenders, in the Collateral
        and
        pay all costs of filing in connection therewith.

      


      e) To
        keep
        the Collateral, at the Debtors expense, in good repair and condition (reasonable
        wear and tear excepted).

      


      f) To
        retain
        possession of the tangible Collateral during the existence of this Agreement
        at
        their respective operating locations and not to remove, sell, exchange, assign,
        loan, deliver, lease, license, further mortgage or otherwise dispose of any
        Collateral (other than inventory sold or receivables collected in the ordinary
        course of business) without the prior written consent of the Agent.

      


      g) To
        keep
        the Collateral free and clear of all encumbrances, other than the security
        interest granted hereby and the Permitted Encumbrances.

      


      h) To
        pay,
        when due, all taxes, assessments and license fees relating to the Collateral
        except as same may be contested by the Debtors in good faith by proper
        proceedings and providing adequate reserves for the accrual of same are
        maintained if required by generally accepted accounting principles.

      


      i) To
        keep
        the Collateral and records relating to the Collateral available for inspection
        by the Agent at all reasonable times during normal business hours.

      



      
        
          
          

        

        
          2

          
            

          

        

        
          
          

        

      


      j) To
        keep
        the Collateral insured against loss by fire, theft and other casualties,
        such
        insurance to be in amounts as are customary for similarly situated companies.
        The Debtors shall give prompt written notice to the Agent and to insurers
        of
        loss or damage to the Collateral and shall promptly file proofs of loss with
        insurers. The Debtor shall name the Agent as a loss payee under such insurance
        as its interest may appear. Concurrently with the execution of this Agreement,
        the Debtor is delivering to the Agent a certificate or other document from
        the
        insurer evidencing Agent’s loss payee status and the commitment to give the
        Agent thirty (30) days notice prior to cancellation of the policy.

      


      k) To
        comply
        with the material terms and conditions of any leases covering the premises
        wherein the Collateral is located and any material orders, ordinances, laws
        or
        statutes of any city, state or governmental department having jurisdiction
        with
        respect to such premises or the conduct of business thereon, except if the
        failure to comply therewith would not result in the termination of any such
        lease or the inability of the Debtors to operate its business
        thereon.

      


      l) To
        promptly advise the Agent in writing prior to any change in the location
        of
        Debtors' place of business and chief executive office in order to permit
        the
        Agent to take such actions as it may deem necessary or advisable to protect
        and
        preserve the security interests of the Lender.

      


      4) Financing
        Statements

      


      a) Concurrently
        with the execution of this Agreement, Debtors are filing such documents as
        may
        be necessary to perfect the security interest granted hereby, including Form
        UCC-1 Financing Statements and all other documents necessary to perfect the
        security interest in the Collateral granted herein.

      


      b) The
        Agent, for itself and on behalf of each of the Lenders, is hereby authorized
        by
        the Debtors to sign on behalf of the Debtors and file such other Form UCC-1
        Financing Statements and all other documents necessary to perfect the security
        interest in the Collateral granted herein, and to file Form UCC-3 Amendments,
        Releases and Termination Statements and all other documents
        necessary.

      


      (c) Debtors
        agree to pay or reimburse the Agent for any and all filing costs reasonably
        incurred by Agent.

      


      5) Events
        of Default and Remedies.

      


      a) The
        following shall constitute an "Event of Default” by the Debtors
        hereunder:

      


      (1) An
        Event
        of Default (as defined therein) shall occur under any of the Debentures after
        giving effect to any applicable notice provision and cure period provided
        for
        therein;

      


      (2) Failure
        by the Debtors to comply with or perform any obligation secured by the Permitted
        Encumbrances after giving effect to any applicable notice provision and cure
        period provided therein;

      


      (3) Failure
        by the Debtors to comply with or perform any provision of this Agreement,
        and
        such failure is not remedied within thirty (30) days after the Debtors’ receipt
        of written notice of same;

      



      
        
          
          

        

        
          3

          
            

          

        

        
          
          

        

      


      (4) Any
        representation of the Debtors set forth herein shall have been false or
        misleading in any material respect when made; or

      


      (5) Subjection
        of any of the Collateral with an aggregate value in excess of $50,000 to
        levy of
        execution or other judicial process,

      


      b) Upon
        any
        default by the Debtors hereunder, the Agent, on behalf of the Lenders, subject
        to the terms of the Subordination Agreement, shall have all the rights, remedies
        and privileges with respect to repossession, retention and sale of any or
        all of
        the Collateral of the Debtors and disposition of the proceeds as are accorded
        by
        the applicable sections of the Uniform Commercial Code.

      


      c) Upon
        any
        default by the Debtors hereunder and upon demand of the Agent, the Debtors
        shall
        assemble the Collateral and make it available to the Agent at the place and
        at
        the time designated in the demand.

      


      d) If
        the
        Debtors shall default in the performance of any of the provisions of this
        Agreement on the Debtors part to be performed, the Agent may perform same
        for
        the Debtors’ account. Any monies expended in so doing and the reasonable
        attorneys' fees and the legal and other expenses for pursuing, searching
        for,
        receiving, taking, keeping, storing, advertising for the sale of and selling
        the
        Collateral incurred by the Agent, shall be chargeable with interest to the
        Debtors and added to the Obligations owed to the Lenders that are secured
        hereby, ratably according to their respective Loan Percentage.

      


      6) The
        Agent

      


      a) Authorization.

      


      (1) Each
        Lender has irrevocably authorized the Agent, as agent hereunder, to take
        such
        action on its behalf and as its agent under this Agreement, the Debenture
        executed in favor of such Lender and all other documents executed in connection
        therewith (collectively, the "Loan Documents"), and to exercise such powers
        as
        are specifically delegated to it hereunder and thereunder, including, without
        limitation, powers with respect to the enforcement and collection of the
        Obligations, and to exercise such other powers as are reasonably incidental
        thereto; provided, however, that the Agent shall not, without the express
        authorization of the Required Lenders, be authorized to waive any payment
        default under the Debentures.

      


      (2) Except
        as
        set forth in subparagraph (1) hereinabove, the Agent shall not be required
        to
        but may, in its sole discretion, exercise any discretion or take any action,
        but
        shall be required to act or to refrain from acting (and shall be fully protected
        in so acting or refraining from acting) upon the instructions of the Required
        Lenders, and such instructions shall be binding upon all Lenders; provided,
        however, that the Agent shall not be required to take any action that exposes
        the Agent to personal liability or which is contrary to this Agreement or
        applicable law.

      


      b) Notices.

      


      (1) The
        Agent
        shall transmit promptly to each Lender each notice received by it from the
        Debtors hereunder that the Debtors is not required to furnish to the Lenders
        and
        each of the Lenders shall transmit promptly to the Agent each notice received
        by
        it from the Debtors that is not otherwise required to be delivered to the
        Agent
        by the terms hereof. The Agent shall be under no obligation toward any Lender
        to
        ascertain or inquire as to the performance or observance of any of the terms,
        covenants or conditions 


      
        
          
          

        

        
          4

          
            

          

        

        
          
          

        

      


      hereof
        to
        be performed or observed by the Debtors, but the Agent and each Lender shall
        promptly notify one another of any Event of Default of which it has actual
        notice.

      


      (2) Each
        Lender expressly authorizes the Agent to collect all sums due such Lender
        under
        the Loan Documents. The Agent shall promptly disburse to the Lenders (to
        the
        extent of their ratable interest therein according to the outstanding Loan
        Percentage of each Lender) available funds received by it for the benefit
        of the
        Lenders.

      


      c) Exculpation.
        In
        exercising its duties and powers hereunder, the Agent shall exercise the
        same
        care that it would exercise in dealing with loans for its own account, but
        neither the Agent nor any of its directors, officers, employees or attorneys
        shall be responsible for the truth or accuracy of any representations or
        warranties given or made herein or for the validity, effectiveness, sufficiency
        or enforceability of this Agreement, or any other Loan Documents, and the
        Agent
        or any of its directors, officers, employees or attorneys shall not be liable
        to
        any of the Lenders for any action taken or omitted to be taken by it or any
        of
        them under the Loan Documents, except in the case of its or their wilful
        misconduct or gross negligence. Each of the Lenders represents and warrants
        to
        the Agent that it has made its own independent judgment with respect to entering
        into this Agreement and the other Loan Documents and undertaking its obligations
        hereunder and thereunder. Each Lender also acknowledges that it will,
        independently and without reliance upon the Agent or any other Lender and
        based
        on such documents and information as it shall deem appropriate at the time,
        continue to make its own credit decisions in taking or not taking action
        under
        this Agreement and the Loan Documents. The powers conferred by this Agreement
        on
        the Agent hereunder are solely to protect the Lenders' interest in the
        Collateral and shall not impose any duty upon the Agent to exercise any such
        powers. Except for the safe custody of any Collateral in its possession and
        the
        accounting for monies actually received by it hereunder, the Agent shall
        have no
        duty as to any Collateral or as to the taking of any necessary steps to preserve
        rights against prior parties or any other rights pertaining to the Collateral.
        Neither the Agent nor any of its directors, officers, employees (excluding
        any
        independent contractors employed by the Agent) or attorneys shall have any
        responsibility (1) to the Debtors on account of the failure or delay in
        performance or breach of any Lender of any of its obligations hereunder,
        or (2)
        to any Lender on account of the failure of or delay in performance or breach
        by
        any other Lender or the Debtors of any of their obligations
        hereunder.

      


      d) Reliance.
        The
        Agent, as Agent hereunder: 

      


      (1) shall
        be
        entitled to rely on any communication, instrument or document believed by
        it to
        be genuine or correct and to have been signed or sent by a person or persons
        believed by it to be the proper person or persons; 

      


      (2) shall
        be
        entitled to consult with legal counsel, independent public accountants and
        other
        professional advisers and experts selected by it, and shall not be liable
        for
        any action taken or omitted to be taken in good faith by Agent in accordance
        with the advice of such counsel, accountants or experts; 

      


      (3) makes
        no
        warranty or representation to any Lender and shall not be responsible to
        any
        Lender for any statements, warranties or representations made in or in
        connection with this Agreement; 

      


      (4) shall
        not
        have any duty to ascertain or to inquire as to the performance or observance
        of
        any of the terms, covenants or conditions of this Agreement on the part of
        the
        Debtors or to inspect the property (including the books and records) of the
        Debtors,

      



      
        
          
          

        

        
          5

          
            

          

        

        
          
          

        

      


      (5) shall
        not
        be responsible to any Lender for the due execution, legality, validity,
        enforceability, genuineness, sufficiency or venue of this Agreement or any
        other
        instrument or document furnished pursuant hereto; and 

      


      (6) shall
        incur no liability under or in respect of this Agreement by acting upon notice,
        consent, certificate or other instrument or writing (which may be by telegram,
        telecopier, cable or telex) believed by it to be genuine and signed or sent
        by
        the proper party or parties.

      


      e) Expenses
        and Indemnification.
        Each
        Lender agrees:

      


      (1) to
        reimburse the Agent, as agent hereunder, on demand, pro rata in accordance
        with
        its Debenture Percentage, for all reasonable expenses incurred by the Agent
        in
        connection with the preparation, execution, operation and enforcement of,
        or
        legal advice in respect of rights or responsibilities under, this Agreement
        and
        any document delivered in connection herewith, to the extent that such expenses
        are not timely reimbursed or reimbursable by the Debtors, and

      


      (2) to
        indemnify and hold harmless the Agent and any of its directors, officers
        or
        employees, on demand, pro rata in accordance with its Debenture Percentage,
        from
        and against all liabilities, obligations, losses, damages, penalties, actions,
        judgments, suits, costs, expenses or disbursements of any kind or nature
        whatsoever that may be imposed on, incurred by, or asserted against the Agent
        in
        any way relating to or arising out of the Loan Documents or any action taken
        or
        omitted by the Agent under the Loan Documents, to the extent that expenses
        and
        costs incurred by it in connection with such liability are not reimbursed
        by the
        Debtors, provided that no Lender shall be liable for any portion of such
        liabilities, obligations, losses, damages, penalties, actions, judgments,
        suits,
        costs, expenses or disbursements resulting from the Agent’s gross negligence or
        willful misconduct.

      


      f) Other
        Lenders.
        None of
        the Lenders shall be deemed to be agent of any other Lenders; none of such
        Lenders or any of their respective directors, officers or employees shall
        have
        any responsibility to the Debtors on account of the failure or delay in
        performance or breach of any other Lender of any of its obligations hereunder
        or
        to any other Lender on account of the failure of or delay in performance
        or
        breach by any other Lender or the Debtors of its obligations
        hereunder.

      


      (g) Removal
        or Resignation of Agent.
        The
        Agent may resign at any time by giving written notice thereof to the Lenders
        and
        the Debtors and shall not be removed and upon any such resignation the Required
        Lenders shall have the right to appoint a successor Agent. "Required Lenders"
        shall mean any Lender or Lenders holding Debentures evidencing, in the
        aggregate, an amount equal to not less than 66% of the aggregate principal
        amount of all Debentures then outstanding. If no successor Agent shall have
        been
        so appointed by the Required Lenders, and shall have accepted such appointment,
        within thirty (30) days after the retiring Agent's giving of notice of
        resignation or the Required Lenders' removal of the retiring Agent, then
        the
        retiring Agent may, on behalf of the Lenders, appoint a successor Agent.
        Upon
        the acceptance by a successor Agent of its appointment as Agent hereunder,
        such
        successor Agent shall thereupon succeed to and become vested with all the
        rights, powers, privileges and duties of the retiring Agent, and the retiring
        Agent shall be discharged from its duties and obligations under this Agreement.
        After any retiring Agent's resignation or removal hereunder as Agent, the
        provisions of this Section 6 shall inure to its benefit as to any actions
        taken
        or omitted to be taken by it while it was Agent under this
        Agreement.

      


      7) Liability
        for Deficiency.
        The
        Company shall remain liable for any deficiency resulting from a sale of the
        Collateral and shall pay any such deficiency forthwith on demand.

      



      
        
          
          

        

        
          6

          
            

          

        

        
          
          

        

      


      8) Waiver.
        Waiver
        of or acquiescence in any default by the Debtors, or failure of the Agent
        to
        insist upon strict performance by the Debtors of any warranties or covenants
        in
        this Agreement, shall not constitute a waiver of any subsequent or other
        default
        or failure.

      


      9) Notices.
        All
        notices to any party hereof shall be in writing and shall be sufficiently
        given
        at the time of delivery if delivered to such party in person by confirmed
        facsimile transmission, by Federal Express or similar receipted delivery,
        or on
        the fifth (5th) business day after mailing if mailed, postage prepaid, by
        certified mail, return receipt requested, addressed to such party at his
        address
        herein set forth or to such other address as he, by notice to the others,
        may
        designate from time to time.

      


      10) Captions.
        The
        captions are inserted only as a matter of convenience and for reference and
        in
        no way define, limit or describe the scope of this Agreement nor the intent
        of
        any provision thereof.

      


      11) Successors
        and Assigns.
        The
        terms, warranties and agreements herein contained shall bind and inure to
        the
        benefit of the respective parties hereto, and their respective legal
        representatives, successors and assigns.

      


      12) Gender
        and Number.
        The
        gender and number used in this Agreement are used as a reference term only
        and
        shall apply with the same effect whether the parties are of the masculine
        or
        feminine gender, corporate or other form, and the singular shall likewise
        include the plural.

      


      13) Modification
        of Agreement.
        This
        Agreement may be amended only by a writing signed by or on behalf of the
        parties
        hereto.

      


      14) Governing
        Law.
        The
        parties hereto acknowledge that the transactions contemplated by this Agreement
        and the exhibits hereto bear a reasonable relation to the State of New York.
        The
        parties hereto agree that the internal laws of the State of New York shall
        govern this Agreement and the exhibits hereto, including, but not limited
        to,
        all issues related to usury. Any action to enforce the terms of this Agreement
        or any of its exhibits shall be brought exclusively in the state and/or federal
        courts situated in the County and State of New York. Service of process in
        any
        action to enforce the terms of this Agreement may be made by serving a copy
        of
        the summons and complaint, in addition to any other relevant documents, by
        commercial overnight courier to the other party at its principal address
        set
        forth in this Agreement.


      
        
          
          

        

        
          7

          
            

          

        

        
          
          

        

      


      IN
        WITNESS WHEREOF, the parties have signed this agreement on the day and year
        first above written.

      


      
        	 	
                AGENT:

              
	 	 	 
	 	
                STRASBOURGER
                  PEARSON TULCIN WOLFF, INC.

              
	 	 	 
	 	 	 
	 	 	 
	 	
                By:

              	 /s/
                Michael J. Schumacher
	 	
                Name:

              	 Michael
                J. Schumacher
	 	
                Title:

              	 President
	 	 	 
	 	
                DEBTORS:

              
	 	 	 
	 	
                MAGNETECH
                  INTEGRATED SERVICES CORP.

              
	 	 	 
	 	 	 
	 	 	 
	 	
                By:

              	 /s/
                John A. Martell
	 	 	
                JOHN
                  A. MARTELL

              
	 	 	
                President/Chief
                  Executive Officer

              
	 	 	 
	 	
                MAGNETECH
                  INDUSTRIAL SERVICES, INC.

              
	 	 	 
	 	 	 
	 	 	 
	 	
                By:

              	 /s/
                John A. Martell
	 	 	
                JOHN
                  A. MARTELL

              
	 	 	
                President/Chief
                  Executive Officer

              


      

      



      
        
          
          

        

        
          8

          
            

          

        

        
          
          

        

      


      SCHEDULES

      


      
        	
                A.

              	
                
                  The
                    Company has issued an aggregate of $4,000,000 in 6% Subordinated
                    Secured
                    Convertible Promissory Debentures (the "Debentures") to the parties
                    identified in Schedule "A" attached hereto (the "Lenders") pursuant
                    to a
                    Private Placement Memorandum dated January 25,
                    2005.

                

              


      

      


      
        	
                B.

              	
                Permitted
                  Encumbrances.

              


      

      


      



      
        
          
          

        

        
          
            

          

        

        
          
          

        

         

        SCHEDULE
          A TO SECURITY AGREEMENT

      

       

      

        
          
            MAGNETECH
              INTEGRATED SERVICES CORP.

            
              Private
                Placement of Subordinated Secured Convertible
                Debentures

            


            
              	
                      Purchaser

                    	 	
                      Closing
                        Date

                    	 	
                      Principal
                        Amount 

                      of
                        Debentures

                    	 	
                      Warrants

                    	 
	 	 	 	 	 	 	 	 
	
                      David
                        L. Cohen

                    	 	 	
                      3/4/2005

                    	 	
                      $

                    	
                      100,000.00

                    	 	 	
                      105,729

                    	 
	
                      Michael
                        Poujol & Angela Poujol JTWROS

                    	 	 	
                      3/4/2005

                    	 	
                      $

                    	
                      250,000.00

                    	 	 	
                      264,323

                    	 
	
                      Gregg
                        M. Gaylord & Linda S. Covillon Gaylord LV TR 1/18/99

                    	 	 	
                      3/4/2005

                    	 	
                      $

                    	
                      50,000.00

                    	 	 	
                      52,865

                    	 
	
                      Pershing
                        as Cust., IRA FBO Thomas D'Avanzo

                    	 	 	
                      3/4/2005

                    	 	
                      $

                    	
                      50,000.00

                    	 	 	
                      52,865

                    	 
	
                      Dr.
                        Frank Lake, III

                    	 	 	
                      3/4/2005

                    	 	
                      $

                    	
                      30,000.00

                    	 	 	
                      31,719

                    	 
	
                      Dr.
                        Leo Mazzocchi & Nancy T. Mazzocchi JTWROS

                    	 	 	
                      3/4/2005

                    	 	
                      $

                    	
                      25,000.00

                    	 	 	
                      26,432

                    	 
	
                      William
                        Sybesma & Martina Jane Sybesma JTWROS

                    	 	 	
                      3/4/2005

                    	 	
                      $

                    	
                      75,000.00

                    	 	 	
                      79,297

                    	 
	
                      Gary
                        M. Glasscock

                    	 	 	
                      3/4/2005

                    	 	
                      $

                    	
                      100,000.00

                    	 	 	
                      105,729

                    	 
	
                      Dr.
                        Domenic Strazzulla

                    	 	 	
                      3/4/2005

                    	 	
                      $

                    	
                      50,000.00

                    	 	 	
                      52,865

                    	 
	
                      RS
                        & VS Ltd., SJDE LLC Gen. Partner

                    	 	 	
                      3/4/2005

                    	 	
                      $

                    	
                      25,000.00

                    	 	 	
                      26,432

                    	 
	
                      Stephen
                        T. Skoly, Jr.

                    	 	 	
                      3/4/2005

                    	 	
                      $

                    	
                      50,000.00

                    	 	 	
                      52,865

                    	 
	
                      Thomas
                        J. Keeney

                    	 	 	
                      3/4/2005

                    	 	
                      $

                    	
                      25,000.00

                    	 	 	
                      26,432

                    	 
	
                      Paul
                        Quattrocchi & Danielle Quattrocchi JTWROS

                    	 	 	
                      3/4/2005

                    	 	
                      $

                    	
                      25,000.00

                    	 	 	
                      26,432

                    	 
	
                      Dr.
                        Barry G. Landry

                    	 	 	
                      3/4/2005

                    	 	
                      $

                    	
                      50,000.00

                    	 	 	
                      52,865

                    	 
	
                      Robert
                        L. Thompson MD TR ISERP Profit Sharing Plan FBO Robert L.
                        Thompson
                        MD

                    	 	 	
                      3/4/2005

                    	 	
                      $

                    	
                      25,000.00

                    	 	 	
                      26,432

                    	 
	
                      Dr.
                        Michael O. Bernstein

                    	 	 	
                      3/4/2005

                    	 	
                      $

                    	
                      50,000.00

                    	 	 	
                      52,865

                    	 
	
                      Steven
                        A. Lamb

                    	 	 	
                      3/4/2005

                    	 	
                      $

                    	
                      50,000.00

                    	 	 	
                      52,865

                    	 
	
                      Norman
                        Dudey TR The Norman Dudey Trust U A Dated 6/10/1991 FBO Norman
                        Dudey

                    	 	 	
                      3/4/2005

                    	 	
                      $

                    	
                      50,000.00

                    	 	 	
                      52,865

                    	 
	
                      Frank
                        R. Cserpes Jr. & Sharon M. Cserpes TRS Frank R. Cserpes Jr. Trust DTD
                        4/12/02 AMD DTD 1/22/03

                    	 	 	
                      3/4/2005

                    	 	
                      $

                    	
                      50,000.00

                    	 	 	
                      52,865

                    	 
	
                      Edward
                        Lagomarsino

                    	 	 	
                      3/4/2005

                    	 	
                      $

                    	
                      250,000.00

                    	 	 	
                      264,323

                    	 
	
                      Pershing
                        as Cust., SEP FBO Rodney Schorlemmer

                    	 	 	
                      3/4/2005

                    	 	
                      $

                    	
                      50,000.00

                    	 	 	
                      52,865

                    	 
	
                      Mollie
                        Ann Peters

                    	 	 	
                      3/4/2005

                    	 	
                      $

                    	
                      20,000.00

                    	 	 	
                      21,146

                    	 
	
                      Paul
                        V. Nugent Jr. & Jeanne Mentus Nugent JTWROS

                    	 	 	
                      3/4/2005

                    	 	
                      $

                    	
                      25,000.00

                    	 	 	
                      26,432

                    	 
	
                      Albert
                        Jim Barboni

                    	 	 	
                      3/4/2005

                    	 	
                      $

                    	
                      30,000.00

                    	 	 	
                      31,719

                    	 
	
                      StarInvest
                        Group, Inc.

                    	 	 	
                      3/4/2005

                    	 	
                      $

                    	
                      400,000.00

                    	 	 	
                      422,917

                    	 
	
                      SwissFinanz
                        Partner AG

                    	 	 	
                      3/4/2005

                    	 	
                      $

                    	
                      130,000.00

                    	 	 	
                      137,448

                    	 
	
                      Marcel
                        Riedel

                    	 	 	
                      3/4/2005

                    	 	
                      $

                    	
                      20,000.00

                    	 	 	
                      21,146

                    	 
	
                      Alfred
                        Schneider

                    	 	 	
                      3/4/2005

                    	 	
                      $

                    	
                      20,000.00

                    	 	 	
                      21,146

                    	 
	
                      Maya
                        Salzmann

                    	 	 	
                      3/4/2005

                    	 	
                      $

                    	
                      50,000.00

                    	 	 	
                      52,865

                    	 
	
                      Daniel
                        Stahl

                    	 	 	
                      3/4/2005

                    	 	
                      $

                    	
                      80,000.00

                    	 	 	
                      84,583

                    	 
	
                      Elizabeth
                        Kuhn

                    	 	 	
                      3/4/2005

                    	 	
                      $

                    	
                      50,000.00

                    	 	 	
                      52,865

                    	 
	
                      Paul
                        Remensberger

                    	 	 	
                      3/4/2005

                    	 	
                      $

                    	
                      20,000.00

                    	 	 	
                      21,146

                    	 
	
                      Heinz
                        Wattenhofer

                    	 	 	
                      3/4/2005

                    	 	
                      $

                    	
                      25,000.00

                    	 	 	
                      26,432

                    	 
	
                      Rolph
                        R. Berg-Jaquet

                    	 	 	
                      3/4/2005

                    	 	
                      $

                    	
                      10,000.00

                    	 	 	
                      10,573

                    	 
	
                      Marie
                        Luise Fuchs

                    	 	 	
                      3/4/2005

                    	 	
                      $

                    	
                      10,000.00

                    	 	 	
                      10,573

                    	 
	
                      Josefine
                        Hausammann

                    	 	 	
                      3/4/2005

                    	 	
                      $

                    	
                      10,000.00

                    	 	 	
                      10,573

                    	 
	
                      Hans
                        Hausammann

                    	 	 	
                      3/4/2005

                    	 	
                      $

                    	
                      15,000.00

                    	 	 	
                      15,859

                    	 
	
                      Roger
                        Buerki

                    	 	 	
                      3/4/2005

                    	 	
                      $

                    	
                      10,000.00

                    	 	 	
                      10,573

                    	 
	
                      Hans
                        Nef-Maag

                    	 	 	
                      3/4/2005

                    	 	
                      $

                    	
                      60,000.00

                    	 	 	
                      63,437

                    	 
	
                      James
                        Ladner

                    	 	 	
                      3/4/2005

                    	 	
                      $

                    	
                      50,000.00

                    	 	 	
                      52,865

                    	 
	
                      Max
                        Gertsch

                    	 	 	
                      3/4/2005

                    	 	
                      $

                    	
                      15,000.00

                    	 	 	
                      15,859

                    	 
	
                      Roland
                        Bertschy

                    	 	 	
                      3/4/2005

                    	 	
                      $

                    	
                      5,000.00

                    	 	 	
                      5,286

                    	 
	
                      Christian
                        Baumberger

                    	 	 	
                      3/4/2005

                    	 	
                      $

                    	
                      10,000.00

                    	 	 	
                      10,573

                    	 
	
                      Fred
                        Kin

                    	 	 	
                      3/4/2005

                    	 	
                      $

                    	
                      20,000.00

                    	 	 	
                      21,146

                    	 
	
                      Robert
                        C. Ingram, III

                    	 	 	
                      3/8/2005

                    	 	
                      $

                    	
                      50,000.00

                    	 	 	
                      52,865

                    	 
	
                      Kilmare
                        Worldwide Inc.

                    	 	 	
                      3/8/2005

                    	 	
                      $

                    	
                      25,000.00

                    	 	 	
                      26,432

                    	 
	
                      StarInvest
                        Group, Inc.

                    	 	 	
                      3/8/2005

                    	 	
                      $

                    	
                      400,000.00

                    	 	 	
                      422,916

                    	 
	
                      Joseph
                        Quattrocchi

                    	 	 	
                      3/8/2005

                    	 	
                      $

                    	
                      25,000.00

                    	 	 	
                      26,432

                    	 
	
                      Nasrollah
                        Jahdi

                    	 	 	
                      4/15/2005

                    	 	
                      $

                    	
                      25,000.00

                    	 	 	
                      26,432

                    	 
	
                      Highgate
                        House Funds, Ltd.

                    	 	 	
                      4/15/2005

                    	 	
                      $

                    	
                      500,000.00

                    	 	 	
                      528,645

                    	 
	
                      Pershing
                        LLC as Custodian, IRA fbo Richard J. Mullin

                    	 	 	
                      5/9/2005

                    	 	
                      $

                    	
                      100,000.00

                    	 	 	
                      105,729

                    	 
	
                      SwissFinanz
                        Partner AG

                    	 	 	
                      5/9/2005

                    	 	
                      $

                    	
                      60,000.00

                    	 	 	
                      63,437

                    	 
	
                      Daniel
                        Stahl

                    	 	 	
                      5/9/2005

                    	 	
                      $

                    	
                      50,000.00

                    	 	 	
                      52,865

                    	 
	
                      Paul
                        Remensberger

                    	 	 	
                      5/9/2005

                    	 	
                      $

                    	
                      20,000.00

                    	 	 	
                      21,146

                    	 
	
                      Hans
                        Hausammann

                    	 	 	
                      5/9/2005

                    	 	
                      $

                    	
                      20,000.00

                    	 	 	
                      21,146

                    	 
	
                      Hans-Peter
                        Knecht

                    	 	 	
                      5/9/2005

                    	 	
                      $

                    	
                      20,000.00

                    	 	 	
                      21,146

                    	 
	
                      Henry
                        Fortier, III

                    	 	 	
                      5/9/2005

                    	 	
                      $

                    	
                      25,000.00

                    	 	 	
                      26,432

                    	 
	
                      Frederick
                        P. Epstein

                    	 	 	
                      5/9/2005

                    	 	
                      $

                    	
                      50,000.00

                    	 	 	
                      52,865

                    	 
	
                      William
                        Sybesma

                    	 	 	
                      5/9/2005

                    	 	
                      $

                    	
                      75,000.00

                    	 	 	
                      79,297

                    	 
	
                      Gary
                        M. Glasscock

                    	 	 	
                      5/9/2005

                    	 	
                      $

                    	
                      40,000.00

                    	 	 	
                      42,292

                    	 
	
                      Joseph
                        Gazzola & Josephine Gazzola JTWROS

                    	 	 	
                      5/9/2005

                    	 	
                      $

                    	
                      25,000.00

                    	 	 	
                      26,432

                    	 
	 	 	 	 	 	 	 	 	 	 	 
	
                      TOTALS

                    	 	 	 	 	
                      $

                    	
                      4,025,000.00

                    	 	 	
                      4,255,601

                    	 


            

          

          


           

        

      

      
        
          
          

        

        
          
            

          

        

        
          
          

        

      


      SCHEDULE
        B TO SECURITY AGREEMENT

      


      PERMITTED
        ENCUMBRANCES

      


      (1) First
        priority security interest in all of the Debtors’ assets in favor of MFB
        Financial, pursuant to that certain Loan Agreement dated as of November 1,
        2004,
        by and among MIS and such lender for a $3 million credit facility.

      


      (2) Liens
        incurred (other than in connection with borrowed funds) or pledges or deposits
        made in connection with workers' compensation, unemployment insurance, pension
        and social security laws, or to secure the performance of bids, tenders,
        contracts (other than for the repayment of borrowed money) or leases or to
        obtain, accommodate or secure statutory obligations or surety or appeal bonds,
        or to obtain, accommodate or secure indemnity, performance or other similar
        bonds in the ordinary course of business;

      


      (3) Liens
        for
        taxes or assessments and other similar governmental charges or claims, either
        (a) not delinquent or (b) being contested in good faith by appropriate
        proceedings and as to which there shall have been set aside adequate reserves
        as
        determined by the exercise of reasonable judgment; and

      


      (4) Other
        minor liens and encumbrances that do not in the aggregate materially detract
        from the value of the property subject thereto or materially impair the use
        of
        such property.