Document:

Secured Convertible Minimum Borrowing Note dated August 24, 2005 issued to
      Laurus Master Fund, Ltd.

    

       

      Exhibit
        4.9

       

      

       

      THIS
        NOTE AND THE COMMON SHARES ISSUABLE UPON CONVERSION OF THIS NOTE HAVE NOT
        BEEN
        REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES
        LAWS. THIS NOTE AND THE COMMON SHARES ISSUABLE UPON CONVERSION OF THIS NOTE
        MAY
        NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF
        AN
        EFFECTIVE REGISTRATION STATEMENT AS TO THIS NOTE OR SUCH SHARES UNDER SAID
        ACT
        AND ANY APPLICABLE STATE SECURITIES LAWS OR AN OPINION OF COUNSEL REASONABLY
        SATISFACTORY TO MAGNETECH INTEGRATED SERVICES CORP. THAT SUCH REGISTRATION
        IS
        NOT REQUIRED.

       

      SECURED
        CONVERTIBLE MINIMUM BORROWING NOTE

       

       

      FOR
        VALUE
        RECEIVED, each of MAGNETECH INTEGRATED SERVICES CORP., an Indiana corporation
        (the “Parent”),
        and
        the other companies listed on Exhibit
        A
        attached
        hereto (such other companies together with the Parent, each a “Company”
        and
        collectively, the “Companies”),
        jointly and severally, promises to pay to LAURUS MASTER FUND, LTD., c/o M&C
        Corporate Services Limited, P.O. Box 309 GT, Ugland House, South Church Street,
        George Town, Grand Cayman, Cayman Islands, Fax: 345-949-8080 (the “Holder”)
        or its
        registered successors or permitted assigns in interest, the sum of Four Million
        Dollars ($4,000,000), or, if different, the aggregate principal amount of
        all
        Revolving Loans (as defined in the Security Agreement referred to below),
        without duplication of any amounts owing by the Companies to the Holder under
        the Revolving Note (as defined in the Security Agreement), together with
        any
        accrued and unpaid interest hereon, on August 24, 2008 (the “Maturity
        Date”)
        if not
        sooner paid.

       

      Capitalized
        terms used herein without definition shall have the meanings ascribed to
        such
        terms in the Security and Purchase Agreement among the Companies and the
        Holder
        dated as of the date hereof (as amended, modified and/or supplemented from
        time
        to time, the “Security
        Agreement”).
        This
        Note is issued pursuant to, and is subject to the terms and conditions of,
        the
        Security Agreement.

       

      The
        following terms shall apply to this Minimum Borrowing Note (this “Note”):

       

      ARTICLE
        I

      CONTRACT
        RATE

       

      1.1 Contract
        Rate.
        Subject
        to Sections 4.2 and 5.10, interest payable on the outstanding principal amount
        of this Note (the “Principal
        Amount”)
        shall
        accrue at a rate per annum equal to the “prime rate” published in The
        Wall Street Journal
        from
        time to time (the “Prime
        Rate”),
        plus
        one percent (1.0%) (the “Contract
        Rate”).
        The
        Contract Rate shall be increased or decreased as the case may be for each
        increase or decrease in the Prime Rate in an amount equal to such increase
        or
        decrease in the Prime Rate; each change to be effective as of the day of
        the
        change in the Prime Rate. Interest shall be (i) calculated on the basis of
        a 360
        day year, and (ii) payable monthly, in arrears, commencing on September 1,
        2005
        and on the first business day of each consecutive calendar month thereafter
        through and including the Maturity Date and on the Maturity Date, whether
        by
        acceleration or otherwise.

      
        
          
          

        

        
          
            

          

        

        
          
          

        

      

       

      1.2 Contract
        Rate Adjustments.
        The
        Contract Rate shall be calculated on the last business day of each calendar
        month hereafter (other than for increases or decreases in the Prime Rate
        which
        shall be calculated and become effective in accordance with the terms of
        Section
        1.1) until the Maturity Date (each a “Determination
        Date”)
        and
        shall be subject to adjustment as set forth herein. If (i) the Parent shall
        have
        registered the Grant Shares and the shares of the Common Stock underlying
        the
        conversion of each Minimum Borrowing Note then outstanding and each Warrant
        then
        outstanding on a registration statement declared effective by the Securities
        and
        Exchange Commission (the “SEC”),
        and
        (ii) the average of the Closing Prices (as defined below) of the Common Stock
        as
        reported by Bloomberg, L.P. on the Principal Market for the five (5) trading
        days immediately preceding a Determination Date (the “Closing
        Price Average”)
        exceeds the then applicable Fixed Conversion Price by at least twenty-five
        percent (25%), the Contract Rate for the succeeding calendar month shall
        automatically be reduced by 200 basis points (200 b.p.) (2.0%) for each
        incremental twenty-five percent (25%) increase in the Closing Price Average
        of
        the Common Stock above the then applicable Fixed Conversion Price.
        Notwithstanding the foregoing (and anything to the contrary contained herein),
        in no event shall the Contract Rate at any time be less than zero percent
        (0%).
        For purposes of this Note, the “Closing
        Price”of
        the
        Common Stock shall mean: (i) in the event that the Common Stock is listed
        on the
        American Stock Exchange or New York Stock Exchange or the National or SmallCap
        Market of The Nasdaq Stock Market, Inc. (“Nasdaq”), the closing or last sale
        price, as the case may be, reported for the applicable day or (ii) in the
        event
        that the Common Stock is not traded on the American Stock Exchange or New
        York
        Stock Exchange or on the Nasdaq but is quoted on the NASD Over The Counter
        Bulletin Board, then the average of the closing bid and asked prices reported
        for the applicable day.

       

      ARTICLE
        II

      LOANS;
        PAYMENTS UNDER THIS NOTE

       

      2.1 Loans.
        All
        Loans evidenced by this Note shall be made in accordance with the terms and
        provisions of the Security Agreement.

       

      2.2 No
        Effective Registration.
        Notwithstanding anything to the contrary herein, the Holder shall not be
        required to accept shares of Common Stock as payment following a conversion
        by
        the Holder under this Note if there fails to exist an effective current
        Registration Statement (as defined in the Registration Rights Agreement)
        covering the shares of Common Stock to be issued, or if an Event of Default
        hereunder exists and is continuing, unless (i) such requirement is otherwise
        waived in writing by the Holder in whole or in part at the Holder’s option or
        (ii) an exemption from registration for resale of all of the Common Stock
        issued
        and issuable under this Note is available pursuant to Rule 144 of the Securities
        Act.

       

      2.3 Optional
        Redemption in Cash.
        The
        Companies will have the option of prepaying this Note (“Optional
        Redemption”)
        by
        paying to the Holder a sum of money equal to one hundred fifteen percent
        (115%)
        of the principal amount of this Note together with accrued but unpaid interest
        thereon and any and all other sums due, accrued or payable to the Holder
        arising
        under this Note, the Security Agreement or any other Ancillary Agreement
        (other
        than the Revolving Note and the Term Note) (the “Redemption
        Amount”)
        outstanding on the Redemption Payment Date (as defined below). The Company
        shall
        deliver to the Holder a written notice of redemption (the “Notice
        of Redemption”)
        specifying the date for such 

      
        
          
          

        

        
          2

          
            

          

        

        
          
          

        

      

       

      Optional
        Redemption (the “Redemption
        Payment Date”),
        which
        date shall be seven (7) days after the date of the Notice of Redemption (the
        “Redemption
        Period”).
        A
        Notice of Redemption shall not be effective with respect to any portion of
        this
        Note for which the Holder has previously delivered a Notice of Conversion
        (defined below) pursuant to Section 3.1, or for conversions elected to be
        made
        by the Holder pursuant to Section 3.1 during the Redemption Period. The
        Redemption Amount shall be determined as if such Holder’s conversion elections
        had been completed immediately prior to the date of the Notice of Redemption.
        On
        the Redemption Payment Date, the Redemption Amount (plus any additional interest
        and fees accruing on the Notes during the Redemption Period) must be irrevocably
        paid in full in immediately available funds to the Holder. In the event the
        Companies fail to pay the Redemption Amount on the Redemption Payment Date,
        then
        such Redemption Notice shall be null and void.

       

      ARTICLE
        III

      CONVERSION
        RIGHTS AND FIXED CONVERSION PRICE

       

      3.1 Optional
        Conversion.
        Subject
        to the terms of this Article III, the Holder shall have the right, but not
        the
        obligation, at any time until the Maturity Date, or during an Event of Default
        (as defined in Article IV), and, subject to the limitations set forth in
        Section
        3.2 hereof, to convert all or any portion of the outstanding Principal Amount
        and/or accrued interest under this Note and fees due and payable under this
        Note, the Security Agreement and any other Security Documents with respect
        to
        this Note into fully paid and nonassessable shares of the Common Stock at
        the
        Fixed Conversion Price. Such conversion shall constitute complete satisfaction
        of the Principal Amount and/or accrued interest and fees so converted. For
        purposes hereof, subject to Section 3.6 hereof, the initial “Fixed
        Conversion Price”
        means
        (i) with respect to the first $3,500,000 of the aggregate principal amount
        converted pursuant to the terms of this Note, any other Minimum Borrowing
        Note
        or the Revolving Note (and all interest and fees related thereto), $0.19
        per
        share of Common Stock and (ii) with respect to the remaining principal amount
        converted pursuant to the terms of this Note, any other Minimum Borrowing
        Note
        or the Revolving Note (and all interest and fees related thereto), $0.32
        per
        share of Common Stock. The shares of Common Stock to be issued upon such
        conversion are herein referred to as the “Conversion
        Shares.”

       

      3.2 Conversion
        Limitation.
        Notwithstanding anything contained herein to the contrary, the Holder shall
        not
        be entitled to convert pursuant to the terms of this Note an amount that
        would
        be convertible into that number of Conversion Shares which would exceed the
        amount by which (i) 9.99% of the issued and outstanding shares of Common
        Stock
        exceeds (ii) the number of shares of Common Stock beneficially owned by the
        Holder. For purposes of the immediately preceding sentence, beneficial ownership
        shall be determined in accordance with Section 13(d) of the Exchange Act
        and
        Regulation 13d-3 thereunder. The Conversion Shares limitation described in
        this
        Section 3.2 shall automatically become null and void following notice to
        any
        Company upon the occurrence and during the continuance of an Event of Default,
        or upon 75 days prior notice to the Parent. Notwithstanding anything contained
        herein to the contrary, the provisions of this Section 3.2 are irrevocable
        and
        may not be waived by the Holder or any Company.

      
        
          
          

        

        
          3

          
            

          

        

        
          
          

        

      

       

      3.3 Mechanics
        of Holder’s Conversion.
        In the
        event that the Holder elects to convert this Note into Common Stock, the
        Holder
        shall give notice of such election by delivering an executed and completed
        notice of conversion in substantially the form of Exhibit
        B
        hereto
        (appropriately completed) (“Notice
        of Conversion”)
        to the
        Parent and such Notice of Conversion shall provide a breakdown in reasonable
        detail of the Principal Amount, accrued interest and fees that are being
        converted. The election to convert shall be irrevocable except (i) if an
        Event
        of Default has occurred and is continuing or (ii) if the Parent has consented
        to
        such a revocation. On each Conversion Date (as hereinafter defined) and in
        accordance with its Notice of Conversion, the Holder shall make the appropriate
        reduction to the Principal Amount, accrued interest and fees as entered in
        its
        records and shall provide written notice thereof to the Parent within two
        (2)
        Business Days after the Conversion Date. Each date on which a Notice of
        Conversion is delivered or telecopied to the Parent in accordance with the
        provisions hereof shall be deemed a Conversion Date (the “Conversion
        Date”).
        Pursuant to the terms of the Notice of Conversion, the Parent will issue
        instructions to the transfer agent accompanied by an opinion of Parent’s counsel
        within three (3) Business Days of the date of the delivery to the Parent
        of the
        Notice of Conversion and shall cause the transfer agent to transmit the
        certificates representing the Conversion Shares to the Holder by crediting
        the
        account of the Holder’s designated broker with the Depository Trust Corporation
        (“DTC”)
        through its Deposit Withdrawal Agent Commission (“DWAC”)
        system
        within three (3) Business Days after receipt by the Parent of the Notice
        of
        Conversion (the “Delivery
        Date”).
        In
        the case of the exercise of the conversion rights set forth herein the
        conversion privilege shall be deemed to have been exercised and the Conversion
        Shares issuable upon such conversion shall be deemed to have been issued
        upon
        the Conversion Date. The Holder shall be treated for all purposes as the
        record
        holder of the Conversion Shares, unless the Holder provides the Parent written
        instructions to the contrary and further provides Parent any information
        reasonably requested and pays any transfer taxes or other fees relating to
        the
        issuance of the shares in a name other than that of the Holder. 

       

      3.4 Fractional
        Shares.
        The
        Parent shall not be required to issue fractional shares of Common Stock upon
        any
        conversion of this Note. In lieu of any fractional shares of Common Stock
        that
        would otherwise be issuable upon conversion, the Parent shall pay the Holder
        an
        amount in cash equal to the product of such fraction multiplied by the then
        applicable Fixed Conversion Price. 

       

      3.5 Conversion
        Mechanics.
        The
        number of shares of Common Stock to be issued upon each conversion of this
        Note
        shall be determined by dividing that portion of the principal and interest
        and
        fees to be converted, if any, by the then applicable Fixed Conversion
        Price.

       

      3.6 Adjustment
        Provisions.
        The
        Fixed Conversion Price and number and kind of shares or other securities
        to be
        issued upon conversion determined pursuant to Section 3.1 shall be subject
        to
        adjustment from time to time upon the occurrence of certain events during
        the
        period that this conversion right remains outstanding, as follows:

       

      (a) Reclassification.
        If the
        Parent at any time shall, by reclassification or otherwise, change the Common
        Stock into the same or a different number of securities of any class or classes,
        this Note, as to the unpaid Principal Amount and accrued interest thereon,
        shall
        thereafter be deemed to evidence the right to purchase the number and kind
        of
        securities that 

      
        
          
          

        

        
          4

          
            

          

        

        
          
          

        

      

       

      would
        have been issued to the Holder had the Holder converted this Note into Common
        Stock immediately before such reclassification or other change.

       

      (b) 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 Parent in shares of Common Stock, the
        Fixed
        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, in each such case by the ratio which the total number of shares
        of
        Common Stock outstanding immediately after such event bears to the total
        number
        of shares of Common Stock outstanding immediately prior to such
        event.

       

      (c) Share
        Issuances.
        Subject
        to the provisions of this Section 3.6, if the Parent shall at any time prior
        to
        the conversion or repayment in full of the Principal Amount issue any shares
        of
        Common Stock or securities convertible into Common Stock to a person other
        than
        the Holder (except (i) pursuant to Sections 3.6(a) or (b) above; (ii) pursuant
        to options, warrants, or other obligations to issue shares outstanding on
        the
        date hereof as disclosed to the Holder in writing; (iii) pursuant to any
        equity
        incentive plan for directors, officers or employees adopted by the Parent;
        or
        (iv) the Notes, the Warrants, and Common Stock issued upon conversion or
        exercise, as applicable, of any of the Notes or Warrants) for a consideration
        per share (the “Offer
        Price”)
        less
        than the Fixed Conversion Price in effect at the time of such issuance, then
        the
        Fixed Conversion Price shall be immediately reset pursuant to the formula
        below.
        For purposes hereof, the issuance of any security of the Company convertible
        into or exercisable or exchangeable for Common Stock shall result in an
        adjustment to the Fixed Conversion Price upon the issuance of such securities
        rather than upon the issuance of Common Stock in connection with the conversion,
        exercise or exchange, as applicable, of such securities. 

       

      If
        the
        Company issues any additional shares of Common Stock for a consideration
        per
        share less than the then-applicable Fixed Conversion Price pursuant to this
        Section 3.6 then, and thereafter successively upon each such issue, the Fixed
        Conversion Price shall be adjusted by multiplying the then applicable Fixed
        Conversion Price by the following fraction: 

       

      
        	
                 

                A
                  +
                  B

                 

              
	
                 

                (A
                  + B) + [((C - D) x B) / C]

                 

              

      

       

      A
        = Total
        amount of shares convertible pursuant to this Note

       

      B
        =
        Actual shares sold in the offering

       

      C
        = Fixed
        Conversion Price

       

      D
        = Offer
        Price

       

      

      
        
          
          

        

        
          5

          
            

          

        

        
          
          

        

      

       

      (d) Computation
        of Consideration.
        For
        purposes of any computation respecting consideration received pursuant to
        Section 3.6(c) above, the following shall apply:

       

      (i) in
        the
        case of 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 the Parent for
        any
        underwriting of the issue or otherwise in connection therewith;

       

      (ii) in
        the
        case of 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 the 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 securities shall be deemed to be the consideration received
        by
        the Parent for the issuance of such convertible securities plus the additional
        minimum consideration, if any, to be received by the 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
        3.6(d)).

       

      3.7 Reservation
        of Shares.
        During
        the period the conversion right exists, the Parent will reserve from its
        authorized and unissued Common Stock a sufficient number of shares to provide
        for the issuance of Conversion Shares upon the full conversion of this Note.
        The
        Parent represents that upon issuance, the Conversion Shares will be duly
        and
        validly issued, fully paid and non-assessable. The Parent agrees that its
        issuance of this Note 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 Conversion
        Shares upon the conversion of this Note.

       

      3.8 Registration
        Rights.
        The
        Holder has been granted registration rights with respect to the Conversion
        Shares as set forth in a Registration Rights Agreement.

       

      3.9 Issuance
        of New Note.
        Upon
        any partial conversion of this Note, a new Note containing the same date
        and
        provisions of this Note shall, at the request of the Holder, be issued by
        the
        Parent to the Holder for the principal balance of this Note and interest
        which
        shall not have been converted or paid. Subject to the provisions of Article
        IV
        of this Note, the Parent shall not pay any costs, fees or any other
        consideration to the Holder for the production and issuance of a new
        Note.

       

      ARTICLE
        IV

      EVENTS
        OF DEFAULT AND DEFAULT RELATED PROVISIONS

       

      4.1 Events
        of Default.
        The
        occurrence of an Event of Default under the Security Agreement shall constitute
        an event of default (“Event
        of Default”)
        hereunder. 

       

      4.2 Default
        Interest.
        Following the occurrence and during the continuance of an Event of Default,
        the
        Companies shall, jointly and severally, pay additional interest on the

      
        
          
          

        

        
          6

          
            

          

        

        
          
          

        

      

       

      outstanding
        principal balance of this Note in an amount equal to one percent (1%) per
        month
        from the date of such Event of Default until the date such Event of Default
        is
        cured or waived.

       

      4.3 Default
        Payment.
        Following the occurrence and during the continuance of an Event of Default,
        the
        Holder, at its option, may elect, in addition to all rights and remedies
        of the
        Holder under the Security Agreement and the Ancillary Agreements and all
        obligations of each Company under the Security Agreement and the Ancillary
        Agreements, to require the Companies, jointly and severally, to make a Default
        Payment (“Default
        Payment”).
        The
        Default Payment shall be 112% of the outstanding principal amount of this
        Note,
        plus accrued but unpaid interest under this Note, all other fees arising
        under
        this Note, the Security Agreement or any other Ancillary Agreement (other
        than
        the Revolving Note and the Term Note), and all other amounts payable hereunder.
        The Default Payment shall be applied first to any fees due and payable to
        the
        Holder pursuant to this Note, the Security Agreement and/or the other Ancillary
        Agreements (other than the Revolving Note and the Term Note), then to accrued
        and unpaid interest due on this Note and then to the outstanding principal
        balance of this Note, and any remaining balance of the Default Payment shall
        be
        retained by the Holder. The Default Payment shall be due and payable immediately
        on the date that the Holder has exercised its rights pursuant to this Section
        4.3.

       

      ARTICLE
        V

      MISCELLANEOUS

       

      5.1 Conversion
        Privileges.
        The
        conversion privileges set forth in Article III shall remain in full force
        and
        effect immediately from the date hereof until the date this Note is indefeasibly
        paid in full and irrevocably terminated.

       

      5.2 Cumulative
        Remedies.
        The
        remedies under this Note shall be cumulative.

       

      5.3 Failure
        or Indulgence Not Waiver.
        No
        failure or delay on the part of the Holder hereof in the exercise of any
        power,
        right or privilege hereunder shall operate as a waiver thereof, nor shall
        any
        single or partial exercise of any such power, right or privilege preclude
        other
        or further exercise thereof or of any other right, power or privilege. All
        rights and remedies existing hereunder are cumulative to, and not exclusive
        of,
        any rights or remedies otherwise available.

       

      5.4 Notices.
        Any
        notice herein required or permitted to be given shall be in writing and shall
        be
        deemed effectively given: (a) upon personal delivery to the party notified,
        (b)
        when sent by confirmed telex or facsimile if sent during normal business
        hours
        of the recipient, if not, then on the next business day, (c) five days after
        having been sent by registered or certified mail, return receipt requested,
        postage prepaid, or (d) one business day after deposit with a nationally
        recognized overnight courier, specifying next day delivery, with written
        verification of receipt. All communications shall be sent to the respective
        Company at the addresses provided for such Company in the Security Agreement
        executed in connection herewith, and to the Holder at the address provided
        in
        the Security Agreement for such Holder, with a copy to John E. Tucker, Esq.,
        825
        Third Avenue, 14th
        Floor,
        New York, New York 10022, facsimile number (212) 541-4434, or at such other
        address as the respective Company or the Holder may designate by ten days
        advance written notice to the other parties hereto.

      
        
          
          

        

        
          7

          
            

          

        

        
          
          

        

      

       

      5.5 Amendment
        Provision.
        The
        term “Note” and all references thereto, as used throughout this instrument,
        shall mean this instrument as originally executed, or if later amended or
        supplemented, then as so amended or supplemented, and any successor instrument
        as such successor instrument may be amended or supplemented.

       

      5.6 Assignability.
        This
        Note shall be binding upon each Company and its successors and assigns, and
        shall inure to the benefit of the Holder and its successors and assigns,
        and may
        be assigned by the Holder in accordance with the requirements of the Security
        Agreement. No Company may assign any of its obligations under this Note without
        the prior written consent of the Holder, any such purported assignment without
        such consent being null and void.

       

      5.7 Cost
        of Collection.
        In case
        of any Event of Default under this Note, the Companies shall, jointly and
        severally, pay the Holder’s reasonable costs of collection, including reasonable
        attorneys’ fees.

       

      5.8 Governing
        Law, Jurisdiction and Waiver of Jury Trial.

       

      (a) THIS
        NOTE
        SHALL BE GOVERNED BY AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS
        OF
        THE STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF
        LAW.

       

      (b) EACH
        COMPANY HEREBY CONSENTS AND AGREES THAT THE STATE OR FEDERAL COURTS LOCATED
        IN
        THE COUNTY OF NEW YORK, STATE OF NEW YORK SHALL HAVE EXCLUSIVE JURISDICTION
        TO
        HEAR AND DETERMINE ANY CLAIMS OR DISPUTES BETWEEN ANY COMPANY, ON THE ONE
        HAND,
        AND THE HOLDER, ON THE OTHER HAND, PERTAINING TO THIS NOTE, THE SECURITY
        AGREEMENT OR ANY OF THE OTHER ANCILLARY AGREEMENTS OR TO ANY MATTER ARISING
        OUT
        OF OR RELATED TO THIS NOTE, THE SECURITY AGREEMENT OR ANY OF THE OTHER ANCILLARY
        AGREEMENTS; PROVIDED,
        THAT
        EACH COMPANY ACKNOWLEDGES THAT ANY APPEALS FROM THOSE COURTS MAY HAVE TO
        BE
        HEARD BY A COURT LOCATED OUTSIDE OF THE COUNTY OF NEW YORK, STATE OF NEW
        YORK;
        AND FURTHER PROVIDED,
        THAT
        NOTHING IN THIS NOTE SHALL BE DEEMED OR OPERATE TO PRECLUDE THE HOLDER FROM
        BRINGING SUIT OR TAKING OTHER LEGAL ACTION IN ANY OTHER JURISDICTION TO COLLECT
        THE OBLIGATIONS, TO REALIZE ON THE COLLATERAL OR ANY OTHER SECURITY FOR THE
        OBLIGATIONS, OR TO ENFORCE A JUDGMENT OR OTHER COURT ORDER IN FAVOR OF THE
        HOLDER. EACH COMPANY EXPRESSLY SUBMITS AND CONSENTS IN ADVANCE TO SUCH
        JURISDICTION IN ANY ACTION OR SUIT COMMENCED IN ANY SUCH COURT, AND EACH
        COMPANY
        HEREBY WAIVES ANY OBJECTION WHICH IT MAY HAVE BASED UPON LACK OF PERSONAL
        JURISDICTION, IMPROPER VENUE OR FORUM
        NON CONVENIENS.
        EACH
        COMPANY HEREBY WAIVES PERSONAL SERVICE OF THE SUMMONS, COMPLAINT AND OTHER
        PROCESS ISSUED IN ANY SUCH ACTION OR SUIT AND AGREES THAT SERVICE OF SUCH
        SUMMONS, COMPLAINT AND OTHER PROCESS MAY BE MADE BY REGISTERED OR CERTIFIED
        MAIL
        ADDRESSED TO THE COMPANY AT THE ADDRESS SET FORTH IN THE SECURITY AGREEMENT
        AND

      
        
          
          

        

        
          8

          
            

          

        

        
          
          

        

      

       

      THAT
        SERVICE SO MADE SHALL BE DEEMED COMPLETED UPON THE EARLIER OF THE COMPANY’S
        ACTUAL RECEIPT THEREOF OR THREE (3) DAYS AFTER DEPOSIT IN THE U.S. MAILS,
        PROPER
        POSTAGE PREPAID.

       

      (c) EACH
        COMPANY DESIRES THAT ITS DISPUTES BE RESOLVED BY A JUDGE APPLYING SUCH
        APPLICABLE LAWS. THEREFORE, TO ACHIEVE THE BEST COMBINATION OF THE BENEFITS
        OF
        THE JUDICIAL SYSTEM AND OF ARBITRATION, EACH COMPANY HERETO WAIVES ALL RIGHTS
        TO
        TRIAL BY JURY IN ANY ACTION, SUIT, OR PROCEEDING BROUGHT TO RESOLVE ANY DISPUTE,
        WHETHER ARISING IN CONTRACT, TORT, OR OTHERWISE BETWEEN THE HOLDER, AND/OR
        ANY
        COMPANY ARISING OUT OF, CONNECTED WITH, RELATED OR INCIDENTAL TO THE
        RELATIONSHIP ESTABLISHED BETWEEN THEM IN CONNECTION WITH THIS NOTE, THE SECURITY
        AGREEMENT, ANY OTHER ANCILLARY AGREEMENT OR THE TRANSACTIONS RELATED HERETO
        OR
        THERETO.

       

      5.9 Severability.
        In the
        event that any provision of this Note is invalid or unenforceable under any
        applicable statute or rule of law, then such provision shall be deemed
        inoperative to the extent that it may conflict therewith and shall be deemed
        modified to conform with such statute or rule of law. Any such provision
        which
        may prove invalid or unenforceable under any law shall not affect the validity
        or enforceability of any other provision of this Note.

       

      5.10 Maximum
        Payments.
        Nothing
        contained herein shall be deemed to establish or require the payment of a
        rate
        of interest or other charges in excess of the maximum permitted by applicable
        law. In the event that the rate of interest required to be paid or other
        charges
        hereunder exceed the maximum rate permitted by such law, any payments in
        excess
        of such maximum rate shall be credited against amounts owed by the Companies
        to
        the Holder and thus refunded to the Companies.

       

      5.11 Security
        Interest and Guarantee.
        The
        Holder has been granted a security interest (i) in certain assets of the
        Companies as more fully described in the Security Agreement and (ii) pursuant
        to
        the Pledge Agreement dated as of the date hereof. The obligations of the
        Companies under this Note are guaranteed by certain Subsidiaries of the
        Companies pursuant to the Guaranty dated as of the date hereof.

       

      5.12 Construction.
        Each
        party acknowledges that its legal counsel participated in the preparation
        of
        this Note and, therefore, stipulates that the rule of construction that
        ambiguities are to be resolved against the drafting party shall not be applied
        in the interpretation of this Note to favor any party against the
        other.

       

      5.13 Registered
        Obligation.
        This
        Note is intended to be a registered obligation within the meaning of Treasury
        Regulation Section 1.871-14(c)(1)(i) and the Company (or its agent) shall
        register the Note (and thereafter shall maintain such registration) as to
        both
        principal and any stated interest. Notwithstanding any document, instrument
        or
        agreement relating to this Note to the contrary, transfer of this Note (or
        the
        right to any payments of principal or stated interest thereunder) may only
        be
        effected by (i) surrender of this Note and either the reissuance by the Company
        of this Note to the new holder or the issuance by the Company of a new

      
        
          
          

        

        
          9

          
            

          

        

        
          
          

        

      

       

      instrument
        to the new holder, or (ii) transfer through a book entry system maintained
        by
        the Company (or its agent), within the meaning of Treasury Regulation Section
        1.871-14(c)(1)(i)(B).

       

      [Balance
        of page intentionally left blank; signature page follows]

       

      

      
        
          
          

        

        
          10

          
            

          

        

        
          
          

        

      

       

      IN
        WITNESS WHEREOF,
        each
        Company has caused this Secured Convertible Minimum Borrowing Note to be
        signed
        in its name effective as of this 24th day of August, 2005.

       

      

       

      

      

      
        	 	 	
                MAGNETECH
                  INTEGRATED SERVICES CORP.

              
	 	 	 	 	 
	 	 	
                By:

              	 /s/
                John A. Martell
	 	 	 	
                Name:

              	 John
                A. Martell
	 	 	 	
                Title:

              	 President
&
                CEO
	
                WITNESS:

              	 	 	 	 
	 	 	 	 	 
	 /s/
                Laura D. Seng	 	 	 	 

      

      

      

      
        	 	 	
                MAGNETECH
                  INDUSTRIAL SERVICES, INC.

              
	 	 	 	 	 
	 	 	
                By:

              	 /s/
                John A. Martell
	 	 	 	
                Name:

              	 John
                A. Martell
	 	 	 	
                Title:

              	 President
	
                WITNESS:

              	 	 	 	 
	 	 	 	 	 
	 /s/
                Laura D. Seng	 	 	 	 

      

      

      

      
        	 	 	
                MARTELL
                  ELECTRIC, LLC

              
	 	 	 	 	 
	 	 	
                By:

              	 /s/
                John A. Martell
	 	 	 	
                Name:

              	 John
                A. Martell
	 	 	 	
                Title:

              	 President
	
                WITNESS:

              	 	 	 	 
	 	 	 	 	 
	 /s/
                Laura D. Seng	 	 	 	 

      

       

      

      
        
          
          

        

        
          11

          
            

          

        

        
          
          

        

      

      

      

      
        	 	 	
                HK
                  ENGINE COMPONENTS, LLC

              
	 	 	 	 	 
	 	 	
                By:

              	 /s/
                John A. Martell
	 	 	 	
                Name:

              	 John
                A. Martell
	 	 	 	
                Title:

              	 Manager
	
                WITNESS:

              	 	 	 	 
	 	 	 	 	 
	 /s/
                Laura D. Seng	 	 	 	 

      

      

      

      
        	 	 	
                HK
                  MACHINED PARTS, LLC

              
	 	 	 	 	 
	 	 	
                By:

              	 /s/
                John A. Martell
	 	 	 	
                Name:

              	 John
                A. Martell
	 	 	 	
                Title:

              	 Manager
	
                WITNESS:

              	 	 	 	 
	 	 	 	 	 
	 /s/
                Laura D. Seng	 	 	 	 

      

      

      

      
        	 	 	
                HK
                  WESTON PROPERTIES, LLC

              
	 	 	 	 	 
	 	 	
                By:

              	 /s/
                John A. Martell
	 	 	 	
                Name:

              	 John
                A. Martell
	 	 	 	
                Title:

              	 Manager
	
                WITNESS:

              	 	 	 	 
	 	 	 	 	 
	 /s/
                Laura D. Seng	 	 	 	 

      

      

      
        
          
          

        

        
          12

          
            

          

        

        
          
          

        

      

      

      
        	 	 	
                HK
                  CAST PRODUCTS, LLC

              
	 	 	 	 	 
	 	 	
                By:

              	 /s/
                John A. Martell
	 	 	 	
                Name:

              	 John
                A. Martell
	 	 	 	
                Title:

              	 Manager
	
                WITNESS:

              	 	 	 	 
	 	 	 	 	 
	 /s/
                Laura D. Seng	 	 	 	 

      

       

      

       

      

      
        
          
          

        

        
          13

          
            

          

        

        
          
          

        

      

       

      EXHIBIT
        A

       

      OTHER
        COMPANIES

      
         

        

        Magnetech
          Industrial Services, Inc., an Indiana corporation

        Martell
          Electric, LLC, an Indiana limited liability company

        HK
          Engine
          Components, LLC, an Indiana limited liability company

        HK
          Machined Parts, LLC, an Indiana limited liability company

        HK
          Weston
          Properties, LLC, an Indiana limited liability company

        HK
          Cast
          Products, LLC, an Indiana limited liability company

        

      

      
        
          
          

        

        
          14

          
            

          

        

        
          
          

        

      

       

      EXHIBIT
        B

       

       

      NOTICE
        OF CONVERSION

       

      (To
        be
        executed by the Holder in order to convert the

      Secured
        Convertible Minimum Borrowing Note)

      

      Magnetech
        Integrated Services Corp.

      1125
        S.
        Walnut Street

      South
        Bend, Indiana 46619

      Attention:
        Chief Financial Officer

       

      The
        undersigned hereby elects to convert $_________ of the principal, $_________
        of
        the interest and $________ of the fees due on the Secured Convertible Minimum
        Borrowing Note dated as of August 24, 2005 (the “Note”)
        issued
        by Magnetech Integrated Services Corp. (the “Parent”)
        and
        the other Companies named and as defined therein into shares of Common Stock
        of
        the Parent in accordance with the terms and conditions set forth in the Note,
        as
        of the date written below.

       

      

       

      

      
        	
                 

                Date
                  of Notice:

              	 
	
                 

                Conversion
                  Price:

              	 
	
                 

                Shares
                  To Be Delivered:

              	 
	
                 

                Signature:

              	 
	
                 

                Print
                  Name:

              	 
	
                 

                Address:

              	 
	
                 

                Holder
                  DWAC instructions:

              	 

      

      

      

       

      

      15Secured Convertible Term Note dated August 24, 2005 issued to Laurus Master
      Fund, Ltd.

     

    Exhibit
      4.10

     

    

     

    THIS
      NOTE AND THE COMMON SHARES ISSUABLE UPON CONVERSION OF THIS NOTE HAVE NOT BEEN
      REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES
      LAWS. THIS NOTE AND THE COMMON SHARES ISSUABLE UPON CONVERSION OF THIS NOTE
      MAY
      NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN
      EFFECTIVE REGISTRATION STATEMENT AS TO THIS NOTE OR SUCH SHARES UNDER SAID
      ACT
      AND ANY APPLICABLE STATE SECURITIES LAWS OR AN OPINION OF COUNSEL REASONABLY
      SATISFACTORY TO MAGNETECH INTEGRATED SERVICES CORP. THAT SUCH REGISTRATION
      IS
      NOT REQUIRED.

     

    SECURED
      CONVERTIBLE TERM NOTE

     

    FOR
      VALUE
      RECEIVED, MAGNETECH INTEGRATED SERVICES CORP., an Indiana corporation (the
      “Company”),
      promises to pay to LAURUS MASTER FUND, LTD., c/o M&C Corporate Services
      Limited, P.O. Box 309 GT, Ugland House, South Church Street, George Town, Grand
      Cayman, Cayman Islands, Fax: 345-949-8080 (the “Holder”)
      or its
      registered assigns or successors in interest, the sum of Three Million Dollars
      ($3,000,000), together with any accrued and unpaid interest hereon, on August
      24, 2008 (the “Maturity
      Date”)
      if not
      sooner paid.

     

    Capitalized
      terms used herein without definition shall have the meanings ascribed to such
      terms in that certain Security and Purchase Agreement dated as of the date
      hereof by and between the Company, certain Subsidiaries of the Company and
      the
      Holder (as amended, modified and/or supplemented from time to time, the
“Security
      Agreement”).
      This
      Note is issued pursuant to, and is subject to the terms and conditions of,
      the
      Security Agreement.

     

    The
      following terms shall apply to this Secured Convertible Term Note (this
“Note”):

     

    ARTICLE
      I

    CONTRACT
      RATE AND AMORTIZATION

     

    1.1 Contract
      Rate.
      Subject
      to Sections 4.2 and 5.10, interest payable on the outstanding principal amount
      of this Note (the “Principal
      Amount”)
      shall
      accrue at a rate per annum equal to the “prime rate” published in The
      Wall Street Journal
      from
      time to time (the “Prime
      Rate”),
      plus
      one percent (1.0%) (the “Contract
      Rate”).
      The
      Contract Rate shall be increased or decreased as the case may be for each
      increase or decrease in the Prime Rate in an amount equal to such increase
      or
      decrease in the Prime Rate; each change to be effective as of the day of the
      change in the Prime Rate. Interest shall be (i) calculated on the basis of
      a 360
      day year, and (ii) payable monthly, in arrears, commencing on September 1,
      2005,
      and on the first business day of each consecutive calendar month thereafter
      through and including the Maturity Date, and on the Maturity Date, whether
      by
      acceleration or otherwise.

     

    1.2 Contract
      Rate Adjustments.
      The
      Contract Rate shall be calculated on the last business day of each calendar
      month hereafter (other than for increases or decreases in the Prime Rate which
      shall be calculated and become effective in accordance with the terms of Section
      1.1) until the Maturity Date (each a “Determination
      Date”)
      and
      shall be subject to 

    
      
        
        

      

      
        
          

        

      

      
        
        

      

    

     

    adjustment
      as set forth herein. If (i) the Company shall have registered the Grant Shares
      and the shares of the Common Stock underlying the conversion of this Note and
      each Warrant then outstanding on a registration statement declared effective
      by
      the Securities and Exchange Commission (the “SEC”),
      and
      (ii) the average of the Closing Prices (as defined below) of the Common
      Stock as reported by Bloomberg, L.P. on the Principal Market for the five (5)
      trading days immediately preceding a Determination Date (the “Closing
      Price Average”)
      exceeds the then applicable Fixed Conversion Price by at least twenty-five
      percent (25%), the Contract Rate for the succeeding calendar month shall
      automatically be reduced by 200 basis points (200 b.p.) (2.0%) for each
      incremental twenty-five percent (25%) increase in the Closing Price Average
      of
      the Common Stock above the then applicable Fixed Conversion Price.
      Notwithstanding the foregoing (and anything to the contrary contained herein),
      in no event shall the Contract Rate at any time be less than zero percent (0%).
      For purposes of this Note, the “Closing
      Price”of
      the
      Common Stock shall mean: (i) in the event that the Common Stock is listed on
      the
      American Stock Exchange or New York Stock Exchange or the National or SmallCap
      Market of The Nasdaq Stock Market, Inc. (“Nasdaq”),
      the
      closing or last sale price, as the case may be, reported for the applicable
      day
      or (ii) in the event that the Common Stock is not traded on the American Stock
      Exchange or New York Stock Exchange or on the Nasdaq but is quoted on the NASD
      Over The Counter Bulletin Board, then the average of the closing bid and asked
      prices reported for the applicable day.

     

    1.3 Principal
      Payments.
      Subject
      to Articles II and III below, amortizing payments of the aggregate principal
      amount outstanding under this Note at any time (the “Principal
      Amount”)
      shall
      be made by the Company on March 1, 2006 and on the first business day of each
      succeeding month thereafter through and including the Maturity Date (each,
      an
“Amortization
      Date”).
      Subject to Articles II and III below, commencing on the first Amortization
      Date,
      the Company shall make monthly payments to the Holder on each Repayment Date,
      each such payment in the amount of $100,000 together with any accrued and unpaid
      interest on such portion of the Principal Amount plus any and all other unpaid
      amounts which are then owing under this Note, the Security Agreement and/or
      any
      other Ancillary Agreement (other than the Revolving Note and each Minimum
      Borrowing Note) (collectively, the “Monthly
      Amount”).
      Any
      outstanding Principal Amount together with any accrued and unpaid interest
      thereon and any and all other unpaid amounts which are then owing by the Company
      to the Holder under this Note, the Security Agreement and/or any other Ancillary
      Agreement (other than the Revolving Note and any Minimum Borrowing Note) shall
      be due and payable on the Maturity Date.

     

    ARTICLE
      II

    CONVERSION
      AND REDEMPTION

     

    2.1 Payment
      of Monthly Amount.

     

    (a) Payment
      in Cash or Common Stock.
      If the
      Monthly Amount is required to be paid in cash pursuant to Section 2.1(b),
      then the Company shall pay the Holder an amount in cash equal to 101% of the
      Monthly Amount (the “Premium
      Fee”)
      due
      and owing to the Holder on the Amortization Date; provided, however, that if
      only a portion of such Monthly Amount may be converted into shares of Common
      Stock pursuant to Section 3.2, then the balance of such Monthly Amount that
      is
      required to be paid in cash shall not be subject to the 

    
      
        
        

      

      
        2

        
          

        

      

      
        
        

      

    

     

    Premium
      Fee. If the Monthly Amount (or a portion of such Monthly Amount if not all
      of
      the Monthly Amount may be converted into shares of Common Stock pursuant to
      Section 3.2) is required to be paid in shares of Common Stock pursuant to
      Section 2.1(b), the number of such shares to be issued by the Company to the
      Holder on such Amortization Date (in respect of such portion of the Monthly
      Amount converted into shares of Common Stock pursuant to Section 2.1(b)), shall
      be the number determined by dividing (i) the portion of the Monthly Amount
      converted into shares of Common Stock, by (ii) the then applicable Fixed
      Conversion Price. For purposes hereof, subject to Section 3.6 hereof, the
      initial “Fixed
      Conversion Price”
      means
      $0.26 per share of Common Stock.

     

    (b) Monthly
      Amount Conversion Conditions.
      Subject
      to Sections 2.1(a), 2.2, and 3.2 hereof, the Holder shall convert into
      shares of Common Stock all of the Monthly Amount due on each Amortization Date
      (or a portion of such Monthly Amount if not all of the Monthly Amount may be
      converted into shares of Common Stock pursuant to Section 3.2) if the following
      conditions (the “Conversion
      Criteria”)
      are
      satisfied: (i) the average of the Closing Prices (as defined herein)of the
      Common Stock as reported by Bloomberg, L.P. on the Principal Market for the
      five
      (5) trading days immediately preceding such Amortization Date shall be greater
      than or equal to 110% of the Fixed Conversion Price and (ii) the amount of
      such
      conversion does not exceed twenty eight percent (28%) of the aggregate dollar
      trading volume of the Common Stock for the period of twenty-two (22) trading
      days immediately preceding such Amortization Date. If subsection (i) of the
      Conversion Criteria is met but subsection (ii) of the Conversion Criteria is
      not
      met as to the entire Monthly Amount, the Holder shall convert only such part
      of
      the Monthly Amount that meets subsection (ii) of the Conversion Criteria. Any
      portion of the Monthly Amount due on an Amortization Date that the Holder has
      not been able to convert into shares of Common Stock due to the failure to
      meet
      the Conversion Criteria, shall be paid in cash by the Company at the rate of
      101% of the Monthly Amount otherwise due on such Amortization Date, within
      three
      (3) business days of such Amortization Date, pursuant to Section 2.1(a) above.
      

     

    2.2 No
      Effective Registration.
      Notwithstanding anything to the contrary herein, none of the Company’s
      obligations to the Holder under this Note may be converted into Common Stock
      unless (a) either (i) an effective current Registration Statement (as defined
      in
      the Registration Rights Agreement) covering the shares of Common Stock to be
      issued in connection with conversion of such obligations exists or (ii) an
      exemption from registration for resale of all of the Common Stock issued and
      issuable is available pursuant to Rule 144 of the Securities Act and (b) no
      Event of Default (as hereinafter defined) exists and is continuing, unless
      such
      Event of Default is cured within any applicable cure period or otherwise waived
      in writing by the Holder.

     

    2.3 Optional
      Redemption in Cash.
      The
      Company may prepay this Note (“Optional
      Redemption”)
      by
      paying to the Holder a sum of money equal to one hundred fifteen percent (115%)
      of the Principal Amount outstanding at such time together with accrued but
      unpaid interest thereon and any and all other sums due, accrued or payable
      to
      the Holder arising under this Note, the Security Agreement or any other
      Ancillary Agreement (other than the Revolving Note and any Minimum Borrowing
      Note) (the “Redemption
      Amount”)
      outstanding on the Redemption Payment Date (as defined below). The Company
      shall
      deliver to the Holder a written notice of redemption (the “Notice
      of Redemption”)
      specifying the date for such 

    
      
        
        

      

      
        3

        
          

        

      

      
        
        

      

    

     

    Optional
      Redemption (the “Redemption
      Payment Date”),
      which
      date shall be seven (7) business days after the date of the Notice of Redemption
      (the “Redemption
      Period”).
      A
      Notice of Redemption shall not be effective with respect to any portion of
      this
      Note for which the Holder has previously delivered a Notice of Conversion (as
      hereinafter defined) or for conversions elected to be made by the Holder
      pursuant to Section 3.1 during the Redemption Period. The Redemption Amount
      shall be determined as if the Holder’s conversion elections had been completed
      immediately prior to the date of the Notice of Redemption. On the Redemption
      Payment Date, the Redemption Amount must be paid in good funds to the Holder.
      In
      the event the Company fails to pay the Redemption Amount on the Redemption
      Payment Date as set forth herein, then such Redemption Notice will be null
      and
      void.

     

    ARTICLE
      III

    HOLDER’S
      CONVERSION RIGHTS

     

    3.1 Optional
      Conversion.
      Subject
      to the terms set forth in this Article III, the Holder shall have the right,
      but
      not the obligation, to convert all or any portion of the issued and outstanding
      Principal Amount and/or accrued interest under this Note and fees due and
      payable under this Note, the Security Agreement or any other Ancillary Agreement
      (other than the Revolving Note and any Minimum Borrowing Note) into fully paid
      and nonassessable shares of Common Stock at the Fixed Conversion Price. Such
      conversion shall constitute complete satisfaction of the Principal Amount and/or
      accrued interest and fees so converted. The shares of Common Stock to be issued
      upon such conversion are herein referred to as, the “Conversion
      Shares.”

     

    3.2 Conversion
      Limitation.
      Notwithstanding anything contained herein to the contrary, the Holder shall
      not
      be entitled to convert pursuant to the terms of this Note an amount that would
      be convertible into that number of Conversion Shares which would exceed the
      amount by which (i) 9.99% of the outstanding shares of Common Stock exceeds
      (ii)
      the number of shares of Common Stock beneficially owned by the Holder. For
      purposes of the immediately preceding sentence, beneficial ownership shall
      be
      determined in accordance with Section 13(d) of the Exchange Act and Regulation
      13d-3 thereunder. The Conversion Shares limitation described in this Section
      3.2
      shall automatically become null and void following notice to the Company upon
      the occurrence and during the continuance of an Event of Default, or upon 75
      days prior notice to the Company. Notwithstanding anything contained herein
      to
      the contrary, the provisions of this Section 3.2 are irrevocable and may not
      be
      waived by the Holder or any Company.

     

    3.3 Mechanics
      of Holder’s Conversion.
      In the
      event that the Holder elects to convert this Note into Common Stock, the Holder
      shall give notice of such election by delivering an executed and completed
      notice of conversion in substantially the form of Exhibit
      A
      hereto
      (appropriate completed) (“Notice
      of Conversion”)
      to the
      Company and such Notice of Conversion shall provide a breakdown in reasonable
      detail of the Principal Amount, accrued interest and fees that are being
      converted. The election to convert shall be irrevocable except (i) if an Event
      of Default has occurred and is continuing or (ii) if the Company has consented
      to such a revocation. On each Conversion Date (as hereinafter defined) and
      in
      accordance with its Notice of Conversion, the Holder shall make the appropriate
      reduction to the Principal Amount, accrued interest and fees as entered in
      its
      records and shall provide written notice thereof to the 

    
      
        
        

      

      
        4

        
          

        

      

      
        
        

      

    

     

    Company
      within two (2) business days after the Conversion Date. Each date on which
      a
      Notice of Conversion is delivered or telecopied to the Company in accordance
      with the provisions hereof shall be deemed a Conversion Date (the “Conversion
      Date”).
      Pursuant to the terms of the Notice of Conversion, the Company will issue
      instructions to the transfer agent accompanied by an opinion of the Company’s
      counsel within three (3) business days of the date of the delivery to the
      Company of the Notice of Conversion and shall cause the transfer agent to
      transmit the certificates representing the Conversion Shares to the Holder
      by
      crediting the account of the Holder’s designated broker with the Depository
      Trust Corporation (“DTC”)
      through its Deposit Withdrawal Agent Commission (“DWAC”)
      system
      within three (3) business days after receipt by the Company of the Notice of
      Conversion (the “Delivery
      Date”).
      In
      the case of the exercise of the conversion rights set forth herein the
      conversion privilege shall be deemed to have been exercised and the Conversion
      Shares issuable upon such conversion shall be deemed to have been issued upon
      the Conversion Date. The Holder shall be treated for all purposes as the record
      holder of the Conversion Shares, unless the Holder provides the Company written
      instructions to the contrary and further provides the Company any information
      reasonably requested and pays any transfer taxes or other fees relating to
      the
      issuance of the shares in a name other than that of the Holder. 

     

    3.4 Fractional
      Shares.
      The
      Company shall not be required to issue fractional shares of Common Stock upon
      any conversion of this Note. In lieu of any fractional shares of Common Stock
      that would otherwise be issuable upon conversion, the Company shall pay the
      Holder an amount in cash equal to the product of such fraction multiplied by
      the
      then applicable Fixed Conversion Price. 

     

    3.5 Conversion
      Mechanics.
      The
      number of shares of Common Stock to be issued upon each conversion of this
      Note
      shall be determined by dividing that portion of the principal and interest
      and
      fees to be converted, if any, by the then applicable Fixed Conversion Price.
      In
      the event of any conversions of a portion of the outstanding Principal Amount
      pursuant to this Article III, such conversions shall be deemed to constitute
      conversions of the outstanding Principal Amount applying to Monthly Amounts
      for
      the remaining Amortization Dates in chronological order.

     

    3.6 Adjustment
      Provisions.
      The
      Fixed Conversion Price and number and kind of shares or other securities to
      be
      issued upon conversion determined pursuant to this Note shall be subject to
      adjustment from time to time upon the occurrence of certain events during the
      period that this conversion right remains outstanding, as follows:

     

    (a) Reclassification.
      If the
      Company at any time shall, by reclassification or otherwise, change the Common
      Stock into the same or a different number of securities of any class or classes,
      this Note, as to the unpaid Principal Amount and accrued interest thereon,
      shall
      thereafter be deemed to evidence the right to purchase the number of and kind
      of
      securities that would have been issued to the Holder had the Holder converted
      this Note into Common Stock immediately before such reclassification or other
      change.

     

    (b) 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 

    
      
        
        

      

      
        5

        
          

        

      

      
        
        

      

    

     

    the
      Company in shares of Common Stock, the Fixed 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, in each such
      case by the ratio which the total number of shares of Common Stock outstanding
      immediately after such event bears to the total number of shares of Common
      Stock
      outstanding immediately prior to such event.

     

    (c) Share
      Issuances.
      Subject
      to the provisions of this Section 3.6, if the Company shall at any time prior
      to
      the conversion or repayment in full of the Principal Amount issue any shares
      of
      Common Stock or securities convertible into Common Stock to a Person other
      than
      the Holder (except (i) pursuant to Sections 3.6(a) or (b) above; (ii) pursuant
      to options, warrants, or other obligations to issue shares outstanding on the
      date hereof as disclosed to the Holder in writing; (iii) pursuant to any equity
      incentive plan for directors, officers or employees adopted by the Company;
      or
      (iv) the Notes, the Warrants, and Common Stock issued upon conversion or
      exercise, as applicable, of any of the Notes or Warrants) for a consideration
      per share (the “Offer
      Price”)
      less
      than the Fixed Conversion Price in effect at the time of such issuance, then
      the
      Fixed Conversion Price shall be immediately reset pursuant to the formula below.
      For purposes hereof, the issuance of any security of the Company convertible
      into or exercisable or exchangeable for Common Stock shall result in an
      adjustment to the Fixed Conversion Price upon the issuance of such securities
      rather than upon the issuance of Common Stock in connection with the conversion,
      exercise or exchange, as applicable, of such securities.

     

    If
      the
      Company issues any additional shares of Common Stock for a consideration per
      share less than the then-applicable Fixed Conversion Price pursuant to this
      Section 3.6 then, and thereafter successively upon each such issue, the Fixed
      Conversion Price shall be adjusted by multiplying the then applicable Fixed
      Conversion Price by the following fraction: 

     

    
      	
               

              A
                +
                B

               

            
	
               

              (A
                + B) + [((C - D) x B) / C]

               

            

    

     

    A
      = Total
      amount of shares convertible pursuant to this Note

     

    B
      =
      Actual shares sold in the offering

     

    C
      = Fixed
      Conversion Price

     

    D
      = Offer
      Price

     

    (d) Computation
      of Consideration.
      For
      purposes of any computation respecting consideration received pursuant to
      Section 3.6(c) above, the following shall apply:

     

    (i) in
      the
      case of 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 the Company for
      any
      underwriting of the issue or otherwise in connection therewith;

    
      
        
        

      

      
        6

        
          

        

      

      
        
        

      

    

     

    (ii) in
      the
      case of 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 the Company (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 the Company for the issuance of such convertible securities plus
      the
      additional minimum consideration, if any, to be received by the Company 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
      3.6(d)).

     

    3.7 Reservation
      of Shares.
      During
      the period the conversion right exists, the Company will reserve from its
      authorized and unissued Common Stock a sufficient number of shares to provide
      for the issuance of Conversion Shares upon the full conversion of this Note.
      The
      Company represents that upon issuance, the Conversion Shares will be duly and
      validly issued, fully paid and non-assessable. The Company agrees that its
      issuance of this Note 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 Conversion
      Shares upon the conversion of this Note.

     

    3.8 Registration
      Rights.
      The
      Holder has been granted registration rights with respect to the Conversion
      Shares as set forth in the Registration Rights Agreement.

     

    3.9 Issuance
      of New Note.
      Upon
      any partial conversion of this Note, a new Note containing the same date and
      provisions of this Note shall, at the request of the Holder, be issued by the
      Company to the Holder for the principal balance of this Note and interest which
      shall not have been converted or paid. Subject to the provisions of Article
      IV
      of this Note, the Company shall not pay any costs, fees or any other
      consideration to the Holder for the production and issuance of a new
      Note.

     

    ARTICLE
      IV

    EVENTS
      OF DEFAULT

     

    4.1 Events
      of Default.
      The
      occurrence of an Event of Default under the Security Agreement shall constitute
      an event of default (“Event
      of Default”)
      hereunder. 

     

    4.2 Default
      Interest.
      Following the occurrence and during the continuance of an Event of Default,
      the
      Company shall pay additional interest on the outstanding Principal Amount of
      this Note in an amount equal to one percent (1%) per month from the date of
      such
      Event of Default until the date such Event of Default is cured or
      waived.

     

    4.3 Default
      Payment.
      Following the occurrence and during the continuance of an Event of Default,
      the
      Holder, at its option, may demand repayment in full of all obligations and
      liabilities owing by Company to the Holder under this Note, the Security
      Agreement and/or any other Ancillary Agreement and/or may elect, in addition
      to
      all rights and remedies of the Holder under the Security Agreement and the
      other
      Ancillary Agreements and all obligations and 

    
      
        
        

      

      
        7

        
          

        

      

      
        
        

      

    

     

    liabilities
      of the Company under the Security Agreement and the other Ancillary Agreements,
      to require the Company to make a Default Payment (“Default
      Payment”).
      The
      Default Payment shall be 112% of the outstanding principal amount of the Note,
      plus accrued but unpaid interest under this Note, all other fees arising under
      this Note or the Security Agreement or any other Ancillary Agreement (other
      than
      the Revolving Note and any Minimum Borrowing Note), and all other amounts
      payable hereunder. The Default Payment shall be applied first to any fees due
      and payable to the Holder pursuant to this Note, the Security Agreement, and/or
      the other Ancillary Agreements (other than the Revolving Note and any Minimum
      Borrowing Note), then to accrued and unpaid interest due on this Note and then
      to the outstanding principal balance of this Note, and any remaining balance
      of
      the Default Payment shall be retained by the Holder. The Default Payment shall
      be due and payable immediately on the date that the Holder has exercised its
      rights pursuant to this Section 4.3.

     

    ARTICLE
      V

    MISCELLANEOUS

     

    5.1 Conversion
      Privileges.
      The
      conversion privileges set forth in Article III shall remain in full force and
      effect immediately from the date hereof until the date this Note is indefeasibly
      paid in full and irrevocably terminated.

     

    5.2 Cumulative
      Remedies.
      The
      remedies under this Note shall be cumulative.

     

    5.3 Failure
      or Indulgence Not Waiver.
      No
      failure or delay on the part of the Holder hereof in the exercise of any power,
      right or privilege hereunder shall operate as a waiver thereof, nor shall any
      single or partial exercise of any such power, right or privilege preclude other
      or further exercise thereof or of any other right, power or privilege. All
      rights and remedies existing hereunder are cumulative to, and not exclusive
      of,
      any rights or remedies otherwise available.

     

    5.4 Notices.
      Any
      notice herein required or permitted to be given shall be in writing and shall
      be
      deemed effectively given: (a) upon personal delivery to the party notified,
      (b)
      when sent by confirmed telex or facsimile if sent during normal business hours
      of the recipient, if not, then on the next business day, (c) five days after
      having been sent by registered or certified mail, return receipt requested,
      postage prepaid, or (d) one business day after deposit with a nationally
      recognized overnight courier, specifying next day delivery, with written
      verification of receipt. All communications shall be sent to the Company at
      the
      address provided in the Security Agreement executed in connection herewith,
      and
      to the Holder at the address provided in the Security Agreement for such Holder,
      with a copy to John E. Tucker, Esq., 825 Third Avenue, 14th
      Floor,
      New York, New York 10022, facsimile number (212) 541-4434, or at such other
      address as the Company or the Holder may designate by ten days advance written
      notice to the other parties hereto. 

     

    5.5 Amendment
      Provision.
      The
      term “Note” and all references thereto, as used throughout this instrument,
      shall mean this instrument as originally executed, or if later amended or
      supplemented, then as so amended or supplemented, and any successor instrument
      as such successor instrument may be amended or supplemented.

    
      
        
        

      

      
        8

        
          

        

      

      
        
        

      

    

     

    5.6 Assignability.
      This
      Note shall be binding upon the Company and its successors and assigns, and
      shall
      inure to the benefit of the Holder and its successors and assigns, and may
      be
      assigned by the Holder in accordance with the requirements of the Security
      Agreement. The Company may not assign any of its obligations under this Note
      without the prior written consent of the Holder, any such purported assignment
      without such consent being null and void.

     

    5.7 Cost
      of Collection.
      In case
      of any Event of Default under this Note, the Company shall pay the Holder
      reasonable costs of collection, including reasonable attorneys’
      fees.

     

    5.8 Governing
      Law, Jurisdiction and Waiver of Jury Trial.

     

    (a) THIS
      NOTE
      SHALL BE GOVERNED BY AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS
      OF
      THE STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF
      LAW.

     

    (b) THE
      COMPANY HEREBY CONSENTS AND AGREES THAT THE STATE OR FEDERAL COURTS LOCATED
      IN
      THE COUNTY OF NEW YORK, STATE OF NEW YORK SHALL HAVE EXCLUSIVE JURISDICTION
      TO
      HEAR AND DETERMINE ANY CLAIMS OR DISPUTES BETWEEN THE COMPANY, ON THE ONE HAND,
      AND THE HOLDER, ON THE OTHER HAND, PERTAINING TO THIS NOTE OR ANY OF THE OTHER
      ANCILLARY AGREEMENTS OR TO ANY MATTER ARISING OUT OF OR ANCILLARY TO THIS NOTE
      OR ANY OF THE ANCILLARY AGREEMENTS; PROVIDED,
      THAT
      THE COMPANY ACKNOWLEDGES THAT ANY APPEALS FROM THOSE COURTS MAY HAVE TO BE
      HEARD
      BY A COURT LOCATED OUTSIDE OF THE COUNTY OF NEW YORK, STATE OF NEW YORK; AND
      FURTHER PROVIDED,
      THAT
      NOTHING IN THIS NOTE SHALL BE DEEMED OR OPERATE TO PRECLUDE THE HOLDER FROM
      BRINGING SUIT OR TAKING OTHER LEGAL ACTION IN ANY OTHER JURISDICTION TO COLLECT
      THE OBLIGATIONS, TO REALIZE ON THE COLLATERAL OR ANY OTHER SECURITY FOR THE
      OBLIGATIONS, OR TO ENFORCE A JUDGMENT OR OTHER COURT ORDER IN FAVOR OF THE
      HOLDER. THE COMPANY EXPRESSLY SUBMITS AND CONSENTS IN ADVANCE TO SUCH THE
      COMPANY HEREBY WAIVES ANY OBJECTION WHICH IT MAY HAVE BASED UPON LACK OF
      PERSONAL JURISDICTION, IMPROPER VENUE OR FORUM
      NON CONVENIENS.
      THE
      COMPANY HEREBY WAIVES PERSONAL SERVICE OF THE SUMMONS, COMPLAINT AND OTHER
      PROCESS ISSUED IN ANY SUCH ACTION OR SUIT AND AGREES THAT SERVICE OF SUCH
      SUMMONS, COMPLAINT AND OTHER PROCESS MAY BE MADE BY REGISTERED OR CERTIFIED
      MAIL
      ADDRESSED TO THE COMPANY AT THE ADDRESS SET FORTH IN THE SECURITY AGREEMENT
      AND
      THAT SERVICE SO MADE SHALL BE DEEMED COMPLETED UPON THE EARLIER OF THE COMPANY’S
      ACTUAL RECEIPT THEREOF OR THREE (3) DAYS AFTER DEPOSIT IN THE U.S. MAILS, PROPER
      POSTAGE PREPAID.

     

    (c) THE
      COMPANY DESIRES THAT ITS DISPUTES BE RESOLVED BY A JUDGE APPLYING SUCH
      APPLICABLE LAWS. THEREFORE, TO 

    
      
        
        

      

      
        9

        
          

        

      

      
        
        

      

    

     

    ACHIEVE
      THE BEST COMBINATION OF THE BENEFITS OF THE JUDICIAL SYSTEM AND OF ARBITRATION,
      THE COMPANY HERETO WAIVES ALL RIGHTS TO TRIAL BY JURY IN ANY ACTION, SUIT,
      OR
      PROCEEDING BROUGHT TO RESOLVE ANY DISPUTE, WHETHER ARISING IN CONTRACT, TORT,
      OR
      OTHERWISE BETWEEN THE HOLDER AND THE COMPANY ARISING OUT OF, CONNECTED WITH,
      ANCILLARY OR INCIDENTAL TO THE RELATIONSHIP ESTABLISHED BETWEEN THEM IN
      CONNECTION WITH THIS NOTE, ANY OTHER ANCILLARY AGREEMENT OR THE TRANSACTIONS
      ANCILLARY HERETO OR THERETO.

     

    5.9 Severability.
      In the
      event that any provision of this Note is invalid or unenforceable under any
      applicable statute or rule of law, then such provision shall be deemed
      inoperative to the extent that it may conflict therewith and shall be deemed
      modified to conform with such statute or rule of law. Any such provision which
      may prove invalid or unenforceable under any law shall not affect the validity
      or enforceability of any other provision of this Note.

     

    5.10 Maximum
      Payments.
      Nothing
      contained herein shall be deemed to establish or require the payment of a rate
      of interest or other charges in excess of the maximum permitted by applicable
      law. In the event that the rate of interest required to be paid or other charges
      hereunder exceed the maximum rate permitted by such law, any payments in excess
      of such maximum rate shall be credited against amounts owed by the Company
      to
      the Holder and thus refunded to the Company.

     

    5.11 Security
      Interest and Guarantee.
      The
      Holder has been granted a security interest (i) in certain assets of the Company
      and its Subsidiaries as more fully described in the Security Agreement dated
      as
      of the date hereof and (ii) in the equity interests of the Companies’
      Subsidiaries pursuant to the Pledge Agreement dated as of the date hereof.
      The
      obligations of the Company under this Note are guaranteed by certain
      Subsidiaries of the Company pursuant to the Guaranty dated as of the date
      hereof.

     

    5.12 Construction.
      Each
      party acknowledges that its legal counsel participated in the preparation of
      this Note and, therefore, stipulates that the rule of construction that
      ambiguities are to be resolved against the drafting party shall not be applied
      in the interpretation of this Note to favor any party against the
      other.

     

    5.13 Registered
      Obligation.
      This
      Note is intended to be a registered obligation within the meaning of Treasury
      Regulation Section 1.871-14(c)(1)(i) and the Company (or its agent) shall
      register the Note (and thereafter shall maintain such registration) as to both
      principal and any stated interest. Notwithstanding any document, instrument
      or
      agreement relating to this Note to the contrary, transfer of this Note (or
      the
      right to any payments of principal or stated interest thereunder) may only
      be
      effected by (i) surrender of this Note and either the reissuance by the Company
      of this Note to the new holder or the issuance by the Company of a new
      instrument to the new holder, or (ii) transfer through a book entry system
      maintained by the Company (or its agent), within the meaning of Treasury
      Regulation Section 1.871-14(c)(1)(i)(B).

     

    [Balance
      of page intentionally left blank; signature page follows]

     

    

    
      
        
        

      

      
        10

        
          

        

      

      
        
        

      

    

     

    IN
      WITNESS WHEREOF,
      the
      Company has caused this Secured Convertible Term Note to be signed in its name
      effective as of this 24th
      day of
      August, 2005.

     

    

    
      	 	 	
              MAGNETECH
                INTEGRATED SERVICES CORP.

            
	 	 	 	 	 
	 	 	
              By:

            	 /s/
              John A. Martell
	 	 	 	
              Name:

            	 John
              A. Martell
	 	 	 	
              Title:

            	 President
&
              CEO
	
              WITNESS:

            	 	 	 	 
	 	 	 	 	 
	 /s/
              Laura D. Seng	 	 	 	 

    

    

     

    

    
      
        
        

      

      
        11

        
          

        

      

      
        
        

      

    

     

    EXHIBIT
      A

     

    NOTICE
      OF CONVERSION

     

    (To
      be
      executed by the Holder in order to convert all or part of

    the
      Secured Convertible Term Note into Common Stock)

    

    

    Magnetech
      Integrated Services Corp. 

    1125
      S.
      Walnut Street

    South
      Bend, Indiana 46619

    Attention:
      Chief Financial Officer

     

    The
      undersigned hereby converts $_________ of the principal, $______ of the interest
      and $________ of the fee due on [specify applicable Repayment Date] under the
      Secured Convertible Term Note dated as of August 24, 2005 (the “Note”)
      issued
      by Magnetech Integrated Services Corp. (the “Company”)
      by
      delivery of shares of Common Stock of the Company (“Shares”)
      on and
      subject to the conditions set forth in the Note.

    
      	
               

              1.

            	
               

              Date
                of Notice:

            	 
	
               

              2.

            	
               

              Shares
                To Be Delivered:

            	 
	
               

              3.

            	
               

              Holder
                DWAC Instructions:

            	 
	
               

              4.

            	
               

              Holder
                Address:

            	 

    

     

    
 

    
      	 	 	
              [HOLDER]

            
	 	 	 	 	 
	 	 	
              By:

            	 
	 	 	
              Name:

            	 
	 	 	
              Title:

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00092-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00092-of-00352.parquet"}]]