Document:

Registration Rights Agreement

    

       

      Exhibit
        4.4

       

      REGISTRATION
        RIGHTS AGREEMENT

       

      This
        Registration Rights Agreement (this “Agreement”) is made and entered into as of
        May 31, 2006, by and between MISCOR Group, Ltd., an Indiana corporation (the
        “Company”), and Laurus Master Fund, Ltd. (the “Purchaser”). 

       

      This
        Agreement is made pursuant to the Security and Purchase Agreement, dated
        as of
        the date hereof, by and between Magnetech Industrial Services of Alabama,
        LLC,
        an Indiana limited liability and indirect subsidiary of the Company (“MIS”) (as
        amended, modified or supplemented from time to time, the “Security Agreement”)
        In consideration for the Purchaser’s loan to MIS, the Company has agreed to
        issue warrants to purchase 375,000 shares of its Common Stock (as defined
        herein) (the “Warrants”).

       

      The
        Company and the Purchaser hereby agree as follows: 

       

      1.  Definitions.
        Capitalized terms used and not otherwise defined herein that are defined
        in the
        Security Agreement shall have the meanings given such terms in the Security
        Agreement. As used in this Agreement, the following terms shall have the
        following meanings: 

       

      “Commission”
        means the Securities and Exchange Commission.

       

      “Common
        Stock”
        means shares of the Company’s common stock, no par value. 

       

      “Effectiveness
        Date”
        means, (i) with respect to the Registration Statement required to be filed
        in
        connection with the shares of Common Stock issuable upon exercise of the
        Warrants issued on the date hereof, a date no later than one hundred eighty
        (180) days following such date and (ii) with respect to each additional
        Registration Statement required to be filed hereunder (if any), a date no
        later
        than ninety (90) days following the applicable Filing Date. 

       

      “Effectiveness
        Period”
        has the meaning set forth in Section 2(a). 

       

      “Exchange
        Act”
        means the Securities Exchange Act of 1934, as amended, and any successor
        statute.

       

      “Filing
        Date”
        means, with respect to (1) the Registration Statement required to be filed
        in
        connection with the shares of Common Stock issuable to the Holder upon exercise
        of a Warrant, the date which is sixty (60) days after the issuance of such
        Warrants, and (2) the Registration Statement required to be filed in connection
        with the shares of Common Stock issuable to the Holder as a result of
        adjustments to the Exercise Price made pursuant to Section 4 of the Warrant
        or
        otherwise, sixty (60) days after the occurrence of such event or the date
        of the
        adjustment of the Exercise Price.

       

      “Guaranty”
        shall mean that certain Guaranty issued by the Company and certain of its
        subsidiaries to the Purchaser in connection with the transactions contemplated
        by the Security Agreement, dated as of the date hereof, as it is amended,
        modified or supplemented.

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      “Holder”
        or “Holders”
        means the Purchaser or any of its affiliates or transferees to the extent
        any of
        them hold Registrable Securities (provided such affiliates or transferees
        execute a copy or counterpart or joinder of this Agreement agreeing to be
        bound
        by its terms and conditions), other then those purchasing Registrable Securities
        in a market transaction.

       

      “Indemnified
        Party”
        has the meaning set forth in Section 5(c).

       

      “Indemnifying
        Party”
        has the meaning set forth in Section 5(c).

       

      “Offering”
        means the sale of the Warrants to the Purchaser on the date hereof.

       

      “Proceeding”
        means an action, claim, suit, investigation or proceeding (including, without
        limitation, an investigation or partial proceeding, such as a deposition),
        whether commenced or threatened. 

       

      “Prospectus”
        means the prospectus included in a Registration Statement (including, without
        limitation, a prospectus that includes any information previously omitted
        from a
        prospectus filed as part of an effective registration statement in reliance
        upon
        Rule 430A promulgated under the Securities Act), as amended or supplemented
        by
        any prospectus supplement, with respect to the terms of the offering of any
        portion of the Registrable Securities covered by such Registration Statement,
        and all other amendments and supplements to the Prospectus, including
        post-effective amendments, and all material incorporated by reference or
        deemed
        to be incorporated by reference in such Prospectus. 

       

      “Registrable
        Securities”
        means the shares of Common Stock issuable upon exercise of the
        Warrants.

       

      “Registration
        Statement”
        means each registration statement required to be filed hereunder, including
        the
        Prospectus therein, amendments and supplements to such registration statement
        or
        Prospectus, including pre- and post-effective amendments, all exhibits thereto,
        and all material incorporated by reference or deemed to be incorporated by
        reference in such registration statement. 

       

      “Related
        Agreements”
        shall have the meaning ascribed thereto in the Guaranty.

       

      “Rule
        144”
        means Rule 144 promulgated by the Commission pursuant to the Securities Act,
        as
        such Rule may be amended from time to time, or any similar rule or regulation
        hereafter adopted by the Commission having substantially the same effect
        as such
        Rule.

       

      “Rule
        415”
        means Rule 415 promulgated by the Commission pursuant to the Securities Act,
        as
        such Rule may be amended from time to time, or any similar rule or regulation
        hereafter adopted by the Commission having substantially the same effect
        as such
        Rule.

       

      “Securities”
        shall mean the Warrants and the Warrant Shares.

       

      “Securities
        Act”
        means the Securities Act of 1933, as amended, and any successor
        statute.

      
        
          
          

        

        
          2

          
            

          

        

        
          
          

        

      

       

      “Security
        Agreement”
        has the meaning given to such term in the Preamble hereto.

       

      “Trading
        Market”
        means any of the NASD Over The Counter Bulletin Board, NASDAQ Capital Market,
        the NASDAQ National Market, the American Stock Exchange or the New York Stock
        Exchange 

       

      “Warrants”
        has the meaning given such term in the Preamble hereto.

       

      “Warrant
        Shares” shall
        mean the shares of Common Stock issuable upon exercise of the
        Warrants.

       

      2.  Registration.

       

      (a)  On
        or prior to each Filing Date, the Company shall prepare and file with the
        Commission a Registration Statement covering the Registrable Securities for
        a
        selling stockholder resale offering to be made on a continuous basis pursuant
        to
        Rule 415. Each Registration Statement shall be on Form S-3 (except if the
        Company is not then eligible to register for resale the Registrable Securities
        on Form S-3, in which case such registration shall be on another appropriate
        form in accordance herewith). The Company shall use its best efforts to cause
        each Registration Statement to be declared effective under the Securities
        Act as
        promptly as possible after the filing thereof, but in any event no later
        than
        the Effectiveness Date. The Company shall use its best efforts to keep each
        Registration Statement continuously effective under the Securities Act until
        the
        date which is the earlier date of when (i) all Registrable Securities covered
        by
        such Registration Statement have been sold or (ii) all Registrable Securities
        covered by such Registration Statement may be sold immediately without
        registration under the Securities Act pursuant to Rule 144 (notwithstanding
        any
        volume restrictions that may be applicable pursuant to Rule 144(k)), as
        determined by the counsel to the Company pursuant to a written opinion letter
        to
        such effect, addressed and acceptable to the Company’s transfer agent and the
        affected Holders (each, an “Effectiveness Period”).

       

      (b)  
        Within three business days of the Effectiveness Date, the Company shall cause
        its counsel to issue a blanket opinion substantially in the form attached
        hereto
        as Exhibit
        A
        (with customary assumptions, qualifications and limitations), and provided
        that
        the Company’s counsel shall have received any representations letters and other
        information reasonably requested to provide such opinion, to the transfer
        agent
        stating that the shares are subject to an effective registration statement
        and
        can be reissued free of restrictive legend upon notice of a sale by the
        Purchaser and confirmation by the Purchaser that it has complied with the
        prospectus delivery requirements, provided that the Company has not advised
        the
        transfer agent orally or in writing that the opinion has been withdrawn.
        Copies
        of the blanket opinion required by this Section 2(b) shall be delivered to
        the
        Purchaser within the time frame set forth above. 

       

      3.  Registration
        Procedures.
        If and whenever the Company is required by the provisions hereof to effect
        the
        registration of any Registrable Securities under the Securities Act, the
        Company
        will, as expeditiously as possible: 

       

      (a)  prepare
        and file with the Commission a Registration Statement with respect to such
        Registrable Securities, respond as promptly as possible to any comments received
        from the Commission, and use its best efforts to cause such Registration
        Statement to become 

      
        
          
          

        

        
          3

          
            

          

        

        
          
          

        

      

       

      and
        remain effective for the Effectiveness Period with respect thereto, and promptly
        provide to the Purchaser copies of all filings and Commission letters of
        comment
        relating thereto;

       

      (b)  prepare
        and file with the Commission such amendments and supplements to such
        Registration Statement and the Prospectus used in connection therewith as
        may be
        necessary to comply with the provisions of the Securities Act with respect
        to
        the disposition of all Registrable Securities covered by such Registration
        Statement and to use its best efforts to keep such Registration Statement
        effective until the expiration of the Effectiveness Period applicable to
        such
        Registration Statement;

       

      (c)  furnish
        to the Purchaser such number of copies of the Registration Statement and
        the
        Prospectus included therein (including each preliminary Prospectus) as the
        Purchaser reasonably may request to facilitate the public sale or disposition
        of
        the Registrable Securities covered by such Registration Statement;

       

      (d)  use
        its best efforts to register or qualify the Purchaser’s Registrable Securities
        covered by such Registration Statement under the securities or “blue sky” laws
        of such jurisdictions within the United States as the Purchaser may reasonably
        request, provided, however, that the Company shall not for any such purpose
        be
        required to qualify generally to transact business as a foreign corporation
        in
        any jurisdiction where it is not so qualified or to consent to general service
        of process in any such jurisdiction;

       

      (e)  list
        the Registrable Securities covered by such Registration Statement with any
        securities exchange on which the Common Stock of the Company is then listed;
        

       

      (f)  immediately
        notify the Purchaser at any time when a Prospectus relating thereto is required
        to be delivered under the Securities Act, of the happening of any event of
        which
        the Company has knowledge as a result of which the Prospectus contained in
        such
        Registration Statement, as then in effect, includes an untrue statement of
        a
        material fact or omits to state a material fact required to be stated therein
        or
        necessary to make the statements therein not misleading in light of the
        circumstances then existing (and in such event Purchaser and any other selling
        Holders shall discontinue disposition of Registrable Securities under the
        applicable Registration Statement until notified in writing by the Company
        that
        use of the applicable Prospectus may be resumed); and

       

      (g)  make
        available for inspection by the Purchaser and any attorney, accountant or
        other
        agent retained by the Purchaser, all publicly available, non-confidential
        financial and other records, pertinent corporate documents and properties
        of the
        Company, and cause the Company’s officers, directors and employees to supply all
        publicly available, non-confidential information reasonably requested by
        the
        attorney, accountant or agent of the Purchaser.

       

      4.  Registration
        Expenses.
        All expenses relating to the Company’s compliance with Sections 2 and 3 hereof,
        including, without limitation, all registration and filing fees, printing
        expenses, fees and disbursements of counsel for the Company and independent
        public accountants for the Company, fees and expenses (including reasonable
        fees
        of counsel for the Company) incurred in connection with complying with state
        securities or “blue sky” laws, fees 

       

      

      
        
          
          

        

        
          4

          
            

          

        

        
          
          

        

      

       

      of
        the NASD, transfer taxes, and fees of transfer agents and registrars are
        called
“Registration Expenses.” All selling commissions applicable to the sale of
        Registrable Securities, including any fees and disbursements of any special
        counsel to the Holders, are called “Selling Expenses.” The Company shall only be
        responsible for all Registration Expenses.

       

      5.  Indemnification.

       

      (a)  In
        the event of a registration of any Registrable Securities under the Securities
        Act pursuant to this Agreement, the Company will indemnify and hold harmless
        each Holder, and its officers, directors and each other person, if any, who
        controls such Holder within the meaning of the Securities Act, against any
        losses, claims, damages or liabilities, joint or several, to which such Holder,
        or such persons may become subject under the Securities Act or otherwise,
        insofar as such losses, claims, damages or liabilities (or actions in respect
        thereof) arise out of or are based upon any untrue statement or alleged untrue
        statement of any material fact contained in any Registration Statement under
        which such Registrable Securities were registered under the Securities Act
        pursuant to this Agreement, any preliminary Prospectus or final Prospectus
        contained therein, or any amendment or supplement thereof, or arise out of
        or
        are based upon the omission or alleged omission to state therein a material
        fact
        required to be stated therein or necessary to make the statements therein
        not
        misleading, and will reimburse such Holder, and each such person for any
        reasonable legal or other expenses incurred by them in connection with
        investigating or defending any such loss, claim, damage, liability or action;
        provided,
        however,
        that the Company will not be liable in any such case if and to the extent
        that
        any such loss, claim, damage or liability arises out of or is based upon
        an
        untrue statement or alleged untrue statement or omission or alleged omission
        (i)
        so made in conformity with information furnished by or on behalf of the
        Purchaser or any such person in writing specifically for use in any such
        document, or (ii) contained in any preliminary Prospectus if such deficiency
        is
        corrected in the final Prospectus and such final Prospectus is provided to
        the
        Purchaser and the other Holders; and provided further, however, that the
        Company
        will not be liable in any such case if and to the extent that any such loss,
        claim, damage, liability or action arose from or is related to the failure
        of
        Purchaser, any Holder or any such person to deliver a Prospectus as required
        by
        the Securities Act.

       

      (b)  In
        the event of a registration of the Registrable Securities under the Securities
        Act pursuant to this Agreement, the Purchaser will indemnify and hold harmless
        the Company, and its officers, directors and each other person, if any, who
        controls the Company within the meaning of the Securities Act, against all
        losses, claims, damages or liabilities, joint or several, to which the Company
        or such persons may become subject under the Securities Act or otherwise,
        insofar as such losses, claims, damages or liabilities (or actions in respect
        thereof) arise out of or are based upon any untrue statement or alleged untrue
        statement of any material fact which was furnished in writing by the Purchaser
        or any selling Holder to the Company expressly for use in (and such information
        is contained in) the Registration Statement under which such Registrable
        Securities were registered under the Securities Act pursuant to this Agreement,
        any preliminary Prospectus or final Prospectus contained therein, or any
        amendment or supplement thereof, or arise out of or are based upon the omission
        or alleged omission to state therein a material fact required to be stated
        therein or necessary to make the statements therein not misleading, and will
        reimburse the Company and each such person for any reasonable legal or other
        expenses incurred by them in connection with investigating or defending any
        such
        loss,

      
        
          
          

        

        
          5

          
            

          

        

        
          
          

        

      

       

      claim,
        damage, liability or action, provided,
        however,
        that the Purchaser will be liable in any such case if and only to the extent
        that any such loss, claim, damage or liability arises out of or is based
        upon an
        untrue statement or alleged untrue statement or omission or alleged omission
        so
        made in conformity with information furnished in writing to the Company by
        or on
        behalf of the Purchaser or any selling Holder specifically for use in any
        such
        document. Notwithstanding the provisions of this paragraph, the Purchaser
        shall
        not be required to indemnify any person or entity in excess of the amount
        of the
        aggregate proceeds (net of any selling commissions, fees and discounts) received
        by the Purchaser and all other Holders in respect of Registrable Securities
        in
        connection with any such registration under the Securities Act.

       

      (c)  Promptly
        after receipt by a party entitled to claim indemnification hereunder (an
        “Indemnified Party”) of notice of the commencement of any action, such
        Indemnified Party shall, if a claim for indemnification in respect thereof
        is to
        be made against a party hereto obligated to indemnify such Indemnified Party
        (an
“Indemnifying Party”), notify the Indemnifying Party in writing thereof, but the
        omission so to notify the Indemnifying Party shall not relieve it from any
        liability which it may have to such Indemnified Party other than under this
        Section 5 and shall only relieve it from any liability which it may have
        to such
        Indemnified Party under this Section 5 if and to the extent the Indemnifying
        Party is prejudiced by such omission. In case any such action shall be brought
        against any Indemnified Party and it shall notify the Indemnifying Party
        of the
        commencement thereof, the Indemnifying Party shall be entitled to participate
        in
        and, to the extent it shall wish, to assume and undertake the defense thereof
        with counsel reasonably satisfactory to such Indemnified Party, and, after
        notice from the Indemnifying Party to such Indemnified Party of its election
        so
        to assume and undertake the defense thereof, the Indemnifying Party shall
        not be
        liable to such Indemnified Party under this Section 5(c) for any legal expenses
        subsequently incurred by such Indemnified Party in connection with the defense
        thereof; if the Indemnified Party retains its own counsel, then the Indemnified
        Party shall pay all fees, costs and expenses of such counsel, provided,
        however,
        that, if the defendants in any such action include both the Indemnified Party
        and the Indemnifying Party and outside counsel to the Indemnified Party shall
        have reasonably concluded that there may be reasonable defenses available
        to it
        which are different from or additional to those available to the Indemnifying
        Party or if the interests of the Indemnified Party are reasonably deemed
        to
        conflict in any material respect with the interests of the Indemnifying Party,
        the Indemnified Party shall have the right to select one separate counsel
        and to
        assume such legal defenses and otherwise to participate in the defense of
        such
        action, with the reasonable expenses and fees of such separate counsel and
        other
        expenses related to such participation to be reimbursed by the Indemnifying
        Party as incurred. No compromise or settlement of any claims in an action
        shall
        be binding on an Indemnifying Party for purposes of the Indemnifying Party’s
        indemnity obligations under this Agreement without the Indemnifying Party’s
        express written consent. 

       

      (d)  A
        party granted the right to direct the defense of any action under this Section
        5
        shall keep the other parties hereto informed of material developments in
        the
        action and shall promptly submit to the other parties copies of all pleadings,
        responsive pleadings, motions and other similar legal documents and papers
        received or submitted in connection with the action. The parties shall make
        available to each other and each other’s counsel and accountants all of their
        books and records relating to the action, and each party shall provide to
        the
        others such assistance as may be reasonably required to insure the proper
        and
        adequate defense of the 

      
        
          
          

        

        
          6

          
            

          

        

        
          
          

        

      

       

      action.
        Each party shall use its good faith efforts to avoid the waiver of any privilege
        of another party. The assumption of the defense of any action by an Indemnifying
        Party shall not constitute an admission of responsibility to indemnify or
        in any
        manner impair or restrict the Indemnifying Party’s rights to later seek to be
        reimbursed its costs or expenses if indemnification under this Agreement
        with
        respect to the action was not required. An Indemnifying Party may elect to
        assume the defense of an action at any time during the pendency of the action,
        even if initially the Indemnifying Party did not elect to assume the defense,
        so
        long as the assumption at such later time would not materially prejudice
        the
        rights of the Indemnified Party.

       

      (e)  In
        order to provide for just and equitable contribution in the event of joint
        liability under the Securities Act in any case in which either (i) the
        Purchaser, or any officer, director or controlling person of the Purchaser,
        makes a claim for indemnification pursuant to this Section 5 but it is
        judicially determined (by the entry of a final judgment or decree by a court
        of
        competent jurisdiction and the expiration of time to appeal or the denial
        of the
        last right of appeal) that such indemnification may not be enforced in such
        case
        notwithstanding the fact that this Section 5 provides for indemnification
        in
        such case, or (ii) contribution under the Securities Act may be required
        on the
        part of the Purchaser or such officer, director or controlling person of
        the
        Purchaser in circumstances for which indemnification is provided under this
        Section 5; then, and in each such case, the Company and the Purchaser will
        contribute to the aggregate losses, claims, damages or liabilities to which
        they
        may be subject (after contribution from others) in such proportion so that
        the
        Purchaser is responsible only for the portion represented by the percentage
        that
        the public offering price of its securities offered by the Registration
        Statement bears to the public offering price of all securities offered by
        such
        Registration Statement, provided,
        however,
        that, in any such case, (A) the Purchaser will not be required to contribute
        any
        amount in excess of the public offering price of all such securities offered
        by
        it pursuant to such Registration Statement; and (B) no person or entity guilty
        of fraudulent misrepresentation (within the meaning of Section 11(f) of the
        Securities Act) will be entitled to contribution from any person or entity
        who
        was not guilty of such fraudulent misrepresentation.

       

      6. Representations,
        Warranties and Covenants.
        The Company represents and warrants to, and covenants and agrees with, the
        Purchaser as follows:

       

      (a) Corporate
        Organization.
        Each Guarantor is a corporation, partnership or limited liability company,
        as
        the case may be, duly organized, validly existing and in good standing under
        the
        laws of its jurisdiction of organization. Each Guarantor has the corporate,
        limited liability company or partnership, as the case may be, power and
        authority to own and operate its properties and assets and, insofar as it
        is or
        shall be a party thereto, to issue and sell the Warrant and the Warrant
        Shares.

       

      i.  The
        authorized capital stock of the Company, as of the date hereof, consists
        of 300
        million shares of Common Stock, no par value, of which 105,454,796 shares
        are
        issued and outstanding, and 20 million shares of preferred stock, no par
        value,
        none of which are issued and outstanding. 

       

      ii.  Except
        as disclosed in the Company’s Registration Statement on Form S-1, File No.
        333-129354, including in the exhibits thereto (as amended to the date hereof,
        the “Current Registration Statement”), and other than: (i) the shares reserved
        for issuance 

      
        
          
          

        

        
          7

          
            

          

        

        
          
          

        

      

       

      under
        the Company’s stock option plans; and (ii) shares which may be granted pursuant
        to the Guaranty and the Related Agreements (as defined in the Guaranty),
        there
        are no outstanding options, warrants, rights (including conversion or preemptive
        rights and rights of first refusal), proxy or stockholder agreements, or
        arrangements or agreements of any kind for the purchase or acquisition from
        the
        Company of any of its securities. Except as disclosed in the Current
        Registration Statement, neither the offer, issuance or sale of the Warrant,
        or
        the issuance of any of the Warrant Shares, nor the consummation of any
        transaction contemplated hereby will result in a change in the price or number
        of any securities of the Company outstanding, under anti-dilution or other
        similar provisions contained in or affecting any such securities.

       

      iii.  All
        issued and outstanding shares of the Company’s Common Stock: (i) have been
        duly authorized and validly issued and are fully paid and nonassessable;
        and
        (ii) were issued in compliance with all applicable state and federal laws
        concerning the issuance of securities.

       

      iv.  The
        rights, preferences, privileges and restrictions of the shares of the Common
        Stock are as stated in the Company’s Articles of Incorporation as amended or
        restated to the date hereof (the “Charter”). The Warrant Shares have been duly
        and validly reserved for issuance. When issued in compliance with the provisions
        of this Agreement and the Company’s Charter, the Securities will be validly
        issued, fully paid and nonassessable, and will be free of any liens or
        encumbrances; provided, however, that the Securities may be subject to
        restrictions on transfer under state and/or federal securities laws as set
        forth
        herein or as otherwise required by such laws at the time a transfer is
        proposed.

       

      v.  The
        issuance of the Warrant and the subsequent exercise of the Warrant for Warrant
        Shares are not and will not be subject to any preemptive rights or rights
        of
        first refusal that have not been properly waived or complied with. 

       

      (b)  Disclosure
        Controls and Procedures.
        Except as disclosed in the Current Registration Statement:

       

      i.  The
        Company maintains disclosure controls and procedures (“Disclosure Controls”)
        designed to ensure that information required to be disclosed by the Company
        in
        the reports that it files or submits under the Exchange Act is recorded,
        processed, summarized, and reported, within the time periods specified in
        the
        rules and forms of the Commission.

       

      ii.  There
        is no weakness in any of the Company’s Disclosure Controls or Financial
        Reporting Controls (as defined in the Security and Purchase Agreement dated
        as
        of August 24 among the Company, certain subsidiaries of the Company and the
        Purchaser) that is required to be disclosed in any of the Exchange Act Filings,
        except as so disclosed.

       

      (c)  No
        Violation.
        Except as disclosed in the Current Registration Statement, the issuance and
        sale
        of the Securities will not, with or without the passage of time or giving
        of

      
        
          
          

        

        
          8

          
            

          

        

        
          
          

        

      

       

      notice,
        result in any material violation of any term of provision of any indebtedness,
        mortgage, indenture, contract or agreement to which the Company is a party
        or by
        which it or any of its assets are bound, or be in conflict with or constitute
        a
        default under any such term or provision, or result in the creation of any
        mortgage, pledge, lien, encumbrance or charge upon any of the properties
        or
        assets of the Company or the suspension, revocation, impairment, forfeiture
        or
        nonrenewal of any permit, license, authorization or approval applicable to
        the
        Company, its business or operations or any of its assets or
        properties.

       

      (d)  Registration
        Rights and Voting Rights.
        Except as set forth on Schedule 8(b)
        and except as disclosed in the Current Registration Statement, neither the
        Company nor any of its subsidiaries is presently under any obligation, and
        neither the Company nor any of its subsidiaries has granted any rights, to
        register any of the Company’s or its subsidiaries’ presently outstanding
        securities or any of its securities that may hereafter be issued. Except
        as set
        forth on Schedule
        8(b)
        and except as disclosed in the Current Registration Statement, to the Company’s
        knowledge, no stockholder of the Company or any of its subsidiaries has entered
        into any agreement with respect to the voting of equity securities of the
        Company or any of its subsidiaries.

       

      (e)  Valid
        Offering.
        Assuming the accuracy of the representations and warranties of the Purchaser
        contained in this Agreement, the offer, sale and issuance of the Securities
        will
        be exempt from the registration requirements of the Securities Act and will
        have
        been registered or qualified (or are exempt or pre-empted from registration
        and
        qualification) under the registration, permit or qualification requirements
        of
        all applicable state securities laws. 

       

      (f)  Full
        Disclosure.
        The Company has provided the Purchaser with all information requested by
        the
        Purchaser in connection with its decision to purchase the Warrants. Neither
        this
        Agreement, the Related Agreements, the exhibits and schedules hereto and
        thereto
        nor any other document delivered by the Company to Purchaser or its attorneys
        or
        agents in connection herewith or therewith or with the transactions contemplated
        hereby or thereby, contain any untrue statement of a material fact nor omit
        to
        state a material fact necessary in order to make the statements contained
        herein
        or therein, in light of the circumstances in which they are made, not
        misleading. The financial projections and other estimates set forth on
Schedule
        6(f)
        were based on the Company’s experience in the industry and on assumptions of
        fact and opinion as to future events which the Company, at the date of the
        issuance of such projections or estimates, believed to be
        reasonable. 

       

      (g)  [omitted]. 

       

      (h)  Listing.
        The
        Company shall promptly secure the listing or quotation, as applicable, of
        the
        shares of Common Stock issuable upon exercise of the Warrant on the Principal
        Market upon which shares of Common Stock are listed or quoted for trading,
        as
        applicable (subject to official notice of issuance) and shall maintain such
        listing or quotation, as applicable, so long as any other shares of Common
        Stock
        shall be so listed or quoted, as applicable. The Company will comply in all
        material respects with the Company’s reporting, filing and other obligations
        under the bylaws or rules of the National Association of Securities Dealers
        (“NASD”) and such exchanges, as applicable. 

       

       

      
        
          
          

        

        
          9

          
            

          

        

        
          
          

        

      

       

      (i)  Market
        Regulations.
        The Company shall notify the Commission, NASD and applicable state authorities,
        in accordance with their requirements, of the transactions contemplated by
        this
        Agreement, and shall take all other necessary action and proceedings as may
        be
        required and permitted by applicable law, rule and regulation, for the legal
        and
        valid issuance of the Securities to the Purchaser and promptly provide copies
        thereof to the Purchaser.

       

      (j)  No
        Integrated Offering.
        Neither the Company, nor any of its affiliates, nor any person acting on
        its or
        their behalf, has directly or indirectly made any offers or sales of any
        security or solicited any offers to buy any security under circumstances
        that
        would cause the offering of the Securities pursuant to the Security Agreement
        to
        be integrated with prior offerings by the Company for purposes of the Securities
        Act which would prevent the Company from selling the Securities pursuant
        to Rule
        506 under the Securities Act, or any applicable exchange-related stockholder
        approval provisions, nor will the Company or any of its affiliates or
        subsidiaries take any action or steps that would cause the offering of the
        Common Stock to be integrated with other offerings (other than such concurrent
        offering to the Purchaser).

       

      (k)  Stop
        Transfer.
        The Warrants and the Warrant Shares are all restricted securities under the
        Securities Act as of the date of this Agreement. The Company will not issue
        any
        stop transfer order or other order impeding the sale and delivery of any
        of the
        Registrable Securities at such time as such Registrable Securities are
        registered for public sale or an exemption from registration is available,
        except as required by federal or state securities laws.

       

      (l)  Dilution.
        The Company understands the nature of the Registrable Securities issuable
        upon
        the exercise of each Warrant and recognizes that the issuance of such
        Registrable Securities may have a potential dilutive effect. The Company
        specifically acknowledges that its obligation to issue the Registrable
        Securities is binding upon the Company and enforceable regardless of the
        dilution such issuance may have on the ownership interests of other shareholders
        of the Company.

       

      (m)  Other
        Agreements.
        Except for agreements made in the ordinary course of business, there is no
        agreement that has not been filed with the Commission as an exhibit to a
        registration statement or to a form required to be filed by the Company under
        the Exchange Act, the breach of which could reasonably be expected to have
        a
        material and adverse effect on the Company and its subsidiaries, or would
        prohibit or otherwise interfere with the ability of the Company to enter
        into
        and perform any of its obligations under this Agreement in any material
        respect.

       

      (n)  Reissuance
        of Securities.
        The Company agrees to reissue certificates representing the Warrant Shares
        without the legends set forth in Section 7(g) hereof at such time
        as:

       

      i.  the
        holder thereof is permitted to dispose of such Securities pursuant to Rule
        144(k) under the Securities Act; or

       

      ii.  upon
        resale subject to an effective registration statement after such Securities
        are
        registered under the Securities Act.

      
        
          
          

        

        
          10

          
            

          

        

        
          
          

        

      

       

      The
        Company agrees to cooperate with the Purchaser in connection with all resales
        pursuant to Rule 144(d) and Rule 144(k) and provide legal opinions necessary
        to
        allow such resales provided the Company and its counsel receive reasonably
        requested representations from the Purchaser and broker, if any.

       

      (o)  Opinion.
        On the date of issuance of the Warrants, the Company will deliver to the
        Purchaser an opinion acceptable to the Purchaser from the Company’s external
        legal counsel. The Company will provide, at the Company’s expense, such other
        legal opinions in the future as are deemed reasonably necessary by the Purchaser
        (and acceptable to the Purchaser) in connection with the exercise of the
        Warrants.

       

      (p)  Margin
        Stock.The
        Company will not permit any of the proceeds of the Warrant to be used directly
        or indirectly to “purchase” or “carry” “margin stock” or to repay indebtedness
        incurred to “purchase” or “carry” “margin stock” within the respective meanings
        of each of the quoted terms under Regulation U of the Board of Governors
        of the
        Federal Reserve System as now and from time to time hereafter in
        effect.

       

      (q)  Authorization
        and Reservation of Shares.
        The Company shall at all times have authorized and reserved a sufficient
        number
        of shares of Common Stock to provide for the exercise of the
        Warrants.

       

      7.  Representations,
        Warranties and Covenants of the Purchaser.
        The Purchaser represents and warrants to, and covenants and agrees with,
        the
        Company
        as follows
        (such representations and warranties do not lessen or obviate the
        representations and warranties of the Company set forth in this
        Agreement):

       

      (a)  Requisite
        Power and Authority.
        The Purchaser has all necessary power and authority under all applicable
        provisions of law to execute and deliver this Agreement and the Related
        Agreements and to carry out their provisions. All corporate action on the
        Purchaser’s part required for the lawful execution and delivery of this
        Agreement and the Related Agreements have been or will be effectively taken
        prior to the Closing. Upon their execution and delivery, this Agreement and
        the
        Related Agreements will be valid and binding obligations of the Purchaser,
        enforceable in accordance with their terms, except:

       

      i.  as
        limited by applicable bankruptcy, insolvency, reorganization, moratorium
        or
        other laws of general application affecting enforcement of creditors’ rights;
        and

       

      ii.  as
        limited by general principles of equity that restrict the availability of
        equitable and legal remedies.

       

      (b)  Investment
        Representations.
        The Purchaser understands that the Securities are being offered and sold
        pursuant to an exemption from registration contained in the Securities Act
        based
        in part upon the Purchaser’s representations contained in this Agreement,
        including, without limitation, that the Purchaser is an “accredited investor”
within the meaning of Regulation D under the Securities Act. The Purchaser
        confirms that it has received or has had full access to all the information
        it
        considers necessary or appropriate to make an informed investment decision
        with
        respect to the Warrants to be purchased by it under this Agreement and

      
        
          
          

        

        
          11

          
            

          

        

        
          
          

        

      

       

      the
        Warrant Shares acquired by it upon the exercise of the Warrants. The Purchaser
        further confirms that it has had an opportunity to ask questions and receive
        answers from the Company regarding the Company’s management and financial
        affairs and the terms and conditions of the Offering, the Securities and
        to
        obtain additional information (to the extent the Company possessed such
        information or could acquire it without unreasonable effort or expense)
        necessary to verify any information furnished to the Purchaser or to which
        the
        Purchaser had access.

       

      (c)  The
        Purchaser Bears Economic Risk.
        The Purchaser has substantial experience in evaluating and investing in private
        placement transactions of securities in companies similar to the Company
        so that
        it is capable of evaluating the merits and risks of its investment in the
        Company and has the capacity to protect its own interests. The Purchaser
        must
        bear the economic risk of this investment until the Securities are sold pursuant
        to: (i) an effective registration statement under the Securities Act; or
        (ii) an
        exemption from registration is available with respect to such sale.

       

      (d)  Acquisition
        for Own Account.
        The Purchaser is acquiring the Warrants and the Warrant Shares for the
        Purchaser’s own account for investment only, and not as a nominee or agent and
        not with a view towards or for resale in connection with their
        distribution.

       

      (e)  The
        Purchaser Can Protect Its Interest.
        The Purchaser represents and warrants that by reason of its, or of its
        management’s, business and financial experience, the Purchaser has the capacity
        to evaluate the merits and risks of its investment in the Securities and
        to
        protect its own interests in connection with the transactions contemplated
        in
        this Agreement and the Related Agreements. Further, the Purchaser is aware
        of no
        publication of any advertisement in connection with the transactions
        contemplated in the Agreement or the Related Agreements.

       

      (f)  Accredited
        Investor.
        The Purchaser is an accredited investor within the meaning of Regulation
        D under
        the Securities Act.

       

      (g)  Legends.

       

      i.  The
        Warrant Shares, if not issued by DWAC system, shall bear a legend which shall
        be
        in substantially the following form until such shares are covered by an
        effective registration statement filed with the Commission:

       

      “THE
        SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
        SECURITIES ACT OF 1933, AS AMENDED, OR ANY APPLICABLE STATE SECURITIES LAWS.
        THESE SHARES MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN
        THE
        ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH SECURITIES ACT
        AND
        APPLICABLE STATE LAWS OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO
        MISCOR
        GROUP, LTD. THAT SUCH REGISTRATION IS NOT REQUIRED.”

       

       

      
        
          
          

        

        
          12

          
            

          

        

        
          
          

        

      

       

      ii.  The
        Warrants shall bear substantially the following legend:

       

      “THIS
        WARRANT AND THE COMMON SHARES ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE
        NOT
        BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY APPLICABLE
        STATE SECURITIES LAWS. THIS WARRANT AND THE COMMON SHARES ISSUABLE UPON EXERCISE
        OF THIS WARRANT MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED
        IN
        THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THIS WARRANT OR
        THE
        UNDERLYING SHARES OF COMMON STOCK UNDER SAID ACT AND APPLICABLE STATE SECURITIES
        LAWS OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO MISCOR GROUP, LTD.
        THAT
        SUCH REGISTRATION IS NOT REQUIRED.”

       

      (h)  Limitation
        on Acquisition of Common Stock of the Company.
        Notwithstanding anything to the contrary contained in this Agreement, any
        Related Agreement or any document, instrument or agreement entered into in
        connection with any other transactions between the Purchaser and the Company,
        the Purchaser may not acquire stock in the Company (including, without
        limitation, pursuant to a contract to purchase, by exercising an option or
        warrant, by converting any other security or instrument, by acquiring or
        exercising any other right to acquire, shares of stock or other security
        convertible into shares of stock in the Company, or otherwise, and such
        contracts, options, warrants, conversion or other rights shall not be
        enforceable or exercisable) to the extent such stock acquisition would cause
        any
        interest (including any original issue discount) payable by the Company to
        the
        Purchaser not to qualify as “portfolio interest” within the meaning of Section
        881(c)(2) of the Code, by reason of Section 881(c)(3) of the Code, taking
        into account the constructive ownership rules under Section 871(h)(3)(C)
        of the
        Code. 

       

      (i) Shorting.
        Neither Laurus nor any of its Affiliates or investment partners has, will,
        or
        will cause any Person to, directly engage in “short sales” of the Company’s
        Common Stock as long as any Note shall be outstanding and for a period of
        one
        year after all Obligations under the Notes have been paid in full.

       

      8.  Miscellaneous.

       

      (a)  Remedies.
        In the event of a breach by the Company or by a Holder, of any of their
        respective obligations under this Agreement, each Holder or the Company,
        as the
        case may be, in addition to being entitled to exercise all rights granted
        by law
        and under this Agreement, including recovery of damages, will be entitled
        to
        specific performance of its rights under this Agreement.

       

      (b)  No
        Piggyback on Registrations.
        Except as and to the extent set forth on Schedule
        8(b)
        hereto and except with the written consent of the Purchaser, which consent
        shall
        not be unreasonably withheld, neither the Company nor any of its security
        holders (other than the Holders in such capacity pursuant hereto) may include
        securities of the Company in any Registration Statement other than the
        Registrable Securities, and the Company shall not after the date hereof enter
        into any agreement providing any such right for inclusion of shares in the
        

      
        
          
          

        

        
          13

          
            

          

        

        
          
          

        

      

       

      Registration
        Statement to any of its security holders. Except as and to the extent specified
        in Schedule
        8(b)
        hereto, the Company has not previously entered into any agreement granting
        any
        registration rights with respect to any of its securities to any Person that
        have not been fully satisfied. 

       

      (c)  Compliance.
        Each Holder covenants and agrees that it will comply with the prospectus
        delivery requirements of the Securities Act as well as all other federal
        and
        state securities laws, rules and regulations applicable to it in connection
        with
        sales of Registrable Securities pursuant to any Registration Statement.

       

      (d)  Discontinued
        Disposition.
        Each Holder agrees by its acquisition of such Registrable Securities that,
        upon
        receipt of a notice from the Company of the occurrence of a Discontinuation
        Event (as defined below), such Holder will forthwith discontinue disposition
        of
        such Registrable Securities under the applicable Registration Statement until
        such Holder’s receipt of the copies of the supplemented Prospectus and/or
        amended Registration Statement or until it is advised in writing (the “Advice”)
        by the Company that the use of the applicable Prospectus may be resumed,
        and, in
        either case, has received copies of any additional or supplemental filings
        that
        are incorporated or deemed to be incorporated by reference in such Prospectus
        or
        Registration Statement. The Company may provide appropriate stop orders to
        enforce the provisions of this paragraph. For purposes of this Agreement,
        a
“Discontinuation Event” shall mean (i) when the Commission notifies the Company
        whether there will be a “review” of such Registration Statement and whenever the
        Commission comments in writing on such Registration Statement (the Company
        shall
        provide true and complete copies thereof and all written responses thereto
        to
        each of the Holders); (ii) any request by the Commission or any other Federal
        or
        state governmental authority for amendments or supplements to such Registration
        Statement or Prospectus or for additional information; (iii) the issuance
        by the
        Commission of any stop order suspending the effectiveness of such Registration
        Statement covering any or all of the Registrable Securities or the initiation
        of
        any Proceedings for that purpose; (iv) the receipt by the Company of any
        notification with respect to the suspension of the qualification or exemption
        from qualification of any of the Registrable Securities for sale in any
        jurisdiction, or the initiation or threatening of any Proceeding for such
        purpose; and/or (v) the occurrence of any event or passage of time that makes
        the financial statements included in such Registration Statement ineligible
        for
        inclusion therein or any statement made in such Registration Statement or
        Prospectus or any document incorporated or deemed to be incorporated therein
        by
        reference untrue in any material respect or that requires any revisions to
        such
        Registration Statement, Prospectus or other documents so that, in the case
        of
        such Registration Statement or Prospectus, as the case may be, it will not
        contain any untrue statement of a material fact or omit to state any material
        fact required to be stated therein or necessary to make the statements therein,
        in light of the circumstances under which they were made, not
        misleading.

       

      (e)  Piggy-Back
        Registrations.
        If at any time during any Effectiveness Period there is not an effective
        Registration Statement covering all of the Registrable Securities required
        to be
        covered during such Effectiveness Period and the Company shall determine
        to
        prepare and file with the Commission a registration statement relating to
        an
        offering for its own account or the account of others under the Securities
        Act
        of any of its equity securities, other than on Form S-4 or Form S-8 (each
        as promulgated under the Securities Act) or their then
        equivalents

      
        
          
          

        

        
          14

          
            

          

        

        
          
          

        

      

       

      relating
        to equity securities to be issued solely in connection with any acquisition
        of
        any entity or business or equity securities issuable in connection with stock
        option or other employee benefit plans, then the Company shall send to each
        Holder written notice of such determination and, if within fifteen (15) days
        after receipt of such notice, any such Holder shall so request in writing,
        the
        Company shall include in such registration statement all or any part of such
        Registrable Securities such Holder requests to be registered, to the extent
        the
        Company may do so without violating registration rights of others which exist
        as
        of the date of this Agreement, subject to customary underwriter cutbacks
        applicable to all holders of registration rights and subject to obtaining
        any
        required consent of any selling stockholder(s) to such inclusion under such
        registration statement. If the Company provides written notice to the Holders
        as
        required above and such Holder is permitted but elects not to register its
        Registrable Securities on such registration statement, then the Company shall
        have no obligation to file a Registration Statement with respect to such
        Holder’s Registrable Securities.

       

      (f)  Amendments
        and Waivers.
        The provisions of this Agreement, including the provisions of this sentence,
        may
        not be amended, modified or supplemented, and waivers or consents to departures
        from the provisions hereof may not be given, unless the same shall be in
        writing
        and signed by the Company and the Holders of at least a majority of the then
        outstanding Registrable Securities (and in such event the amendment,
        modification, supplement or waiver shall be binding on all Holders).
        Notwithstanding the foregoing, a waiver or consent to depart from the provisions
        hereof with respect to a matter that relates exclusively to the rights of
        certain Holders and that does not directly or indirectly affect the rights
        of
        other Holders may be given by Holders of at least a majority of the Registrable
        Securities to which such waiver or consent relates; provided,
        however,
        that the provisions of this sentence may not be amended, modified, or
        supplemented except in accordance with the provisions of the immediately
        preceding sentence.

       

      (g)  Notices.
        Any notice or request hereunder shall be given to the Company or the Purchaser
        at the respective addresses set forth below or as may hereafter be specified
        in
        a notice designated as a change of address under this Section 8(g). Any notice
        or request hereunder shall be given by registered or certified mail, return
        receipt requested, hand delivery, overnight mail, Federal Express or other
        national overnight next day carrier (collectively, “Courier”) or telecopy
        (confirmed by mail). Notices and requests shall be, in the case of those
        by hand
        delivery, deemed to have been given when delivered to any party to whom it
        is
        addressed, in the case of those by mail or overnight mail, deemed to have
        been
        given three (3) business days after the date when deposited in the mail or
        with
        the overnight mail carrier, in the case of a Courier, the next business day
        following timely delivery of the package with the Courier, and, in the case
        of a
        telecopy, when confirmed. The address for such notices and communications
        shall
        be as follows:

      
        	 	
                 

                If
                  to the Company:

              	
                 

                MISCOR
                  Group, Ltd.

              
	 	 	
                1125
                  South Walnut Street

              
	 	 	
                South
                  Bend, Indiana 46619

              
	 	 	
                Attention:
                  Chief Financial Officer

              
	 	 	
                Facsimile:
                  574-232-8131

              
	 	 	
                 

                with
                  a copy to:

              
	 	 	 

      

      

      
        
          
          

        

        
          15

          
            

          

        

        
          
          

        

      

      

      
        	 	 	
                Barnes
                  & Thornburg LLP

              
	 	 	
                600
                  1st
                  Source Bank Center

              
	 	 	
                100
                  North Michigan

              
	 	 	
                South
                  Bend, Indiana 46601

              
	 	 	
                Attention:
                  Richard L. Mintz, Esq.

              
	 	 	
                Facsimile:
                  574-237-1125

              
	 	 	 
	 	
                 

                If
                  to a Purchaser:

                 

              	
                 

                To
                  the address set forth under such Purchaser name on the signature
                  pages
                  hereto.

                 

              
	 	
                If
                  to any other Person who is 

              	 
	 	
                then
                  the registered Holder:

              	
                To
                  the address of such Holder as it appears in the stock transfer
                  books of
                  the Company

              

      

       

      or
        such other address as may be designated in writing hereafter in accordance
        with
        this Section 8(g) by such Person.

       

      (h)  Successors
        and Assigns.
        This Agreement shall inure to the benefit of and be binding upon the successors
        and permitted assigns of each of the parties and shall inure to the benefit
        of
        and be binding on each Holder. The Company may not assign its rights or
        obligations hereunder without the prior written consent of each Holder. Each
        Holder may assign their respective rights hereunder in the manner and to
        the
        Persons as permitted under the Security Agreement. 

       

      (i)  Execution
        and Counterparts.
        This Agreement may be executed in any number of counterparts, each of which
        when
        so executed shall be deemed to be an original and, all of which taken together
        shall constitute one and the same agreement. In the event that any signature
        is
        delivered by facsimile transmission, such signature shall create a valid
        binding
        obligation of the party executing (or on whose behalf such signature is
        executed) the same with the same force and effect as if such facsimile signature
        were the original thereof.

       

      (j)  Governing
        Law, Jurisdiction and Waiver of Jury Trial.
        THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED AND ENFORCED IN ACCORDANCE
        WITH THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE AND
        PERFORMED IN SUCH STATE, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW.
        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 exclusion jurisdiction
        to
        hear and determine any Proceeding between the Company, on the one hand, and
        the
        Purchaser, on the other hand, pertaining to this Agreement or to any matter
        arising out of or related to this Agreement; provided,
        that the Purchaser and the Company acknowledge 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 Agreement shall be deemed or operate to preclude the
        Purchaser from bringing a Proceeding 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
        Purchaser. The Company expressly submits and consents in advance to such
        jurisdiction in any Proceeding commenced in any such

       

       

       

      
        
          
          

        

        
          16

          
            

          

        

        
          
          

        

      

       

      
        court,
          and 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 Proceeding 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 Section 9(g) 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. The parties hereto desire that their 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, the parties
          hereto
          waive all rights to trial by jury in any Proceeding brought to resolve
          any
          dispute, whether arising in contract, tort, or otherwise between the Purchaser
          and/or the Company arising out of, connected with, related or incidental
          to the
          relationship established between then in connection with this Agreement.
          If
          either party hereto shall commence a Proceeding to enforce any provisions
          of
          this Agreement, the Security Agreement or any other Ancillary Agreement,
          then
          the prevailing party in such Proceeding shall be reimbursed by the other
          party
          for its reasonable attorneys’ fees and other costs and expenses incurred with
          the investigation, preparation and prosecution of such
          Proceeding.

      

      (k)  Cumulative
        Remedies.
        The remedies provided herein are cumulative and not exclusive of any remedies
        provided by law.

       

      (l)  Severability.
        If any term, provision, covenant or restriction of this Agreement is held
        by a
        court of competent jurisdiction to be invalid, illegal, void or unenforceable,
        the remainder of the terms, provisions, covenants and restrictions set forth
        herein shall remain in full force and effect and shall in no way be affected,
        impaired or invalidated, and the parties hereto shall use their reasonable
        efforts to find and employ an alternative means to achieve the same or
        substantially the same result as that contemplated by such term, provision,
        covenant or restriction. It is hereby stipulated and declared to be the
        intention of the parties that they would have executed the remaining terms,
        provisions, covenants and restrictions without including any of such that
        may be
        hereafter declared invalid, illegal, void or unenforceable.

       

      (m)  Headings.
        The headings in this Agreement are for convenience of reference only and
        shall
        not limit or otherwise affect the meaning hereof.

       

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

       

      

      
        
          
          

        

        
          17

          
            

          

        

        
          
          

        

      

       

      IN
        WITNESS WHEREOF, the parties have executed this Registration Rights Agreement
        as
        of the date first written above.

      
        	 	
                 

                MISCOR
                  GROUP, LTD.

              
	 	 	 
	 	
                By:

              	/s/ John A. Martell
	 	
                Name:

              	John A. Martell
	 	
                Title:

              	President
	 	
                 

                LAURUS
                  MASTER FUND, LTD. 

              
	 	 	 
	 	
                By:

              	/s/ David Grin
	 	
                Name:

              	David Grin
	 	
                Title:

              	Partner
	 	
                 

                Address
                  for Notices:

                 

              
	 	
                825
                  Third Avenue, 14th Floor

              
	 	
                New
                  York, New York 10022

              
	 	
                Attention:
                  David Grin

              
	 	
                Facsimile:
                  212-541-4434

              

      

       

      

      
        
          
          

        

        
          18

          
            

          

        

        
          
          

        

      

       

      EXHIBIT
        A

       

      ____________,
        200___

       

      [Registrar
        and Transfer Company

      10
        Commerce Drive

      Cranford,
        New Jersey 07016

      Attn:
        William Tatler]

       

      
        	 	
                Re:

              	
                MISCOR
                  Registration Statement on Form
                  [S-3]

              

      

       

      Ladies
        and Gentlemen:

       

      As
        counsel to MISCOR Group, Ltd., an Indiana corporation (the “Company”), we have
        been requested to render our opinion to you in connection with the resale
        by the
        individuals or entitles listed on Schedule
        A
        attached hereto (the “Selling Stockholders”), of an aggregate of __________
        shares (the “Shares”) of the Company’s Common Stock.

       

      A
        Registration Statement on Form [S-3] under the Securities Act of 1933, as
        amended (the “Act”), with respect to the resale of the Shares was declared
        effective by the Securities and Exchange Commission on [date]. Enclosed is
        the
        Prospectus dated [date]. We understand and assume that the Shares are to
        be
        offered and sold in the manner described in the Prospectus. We further assume
        that the Selling Stockholders will comply with their prospectus delivery
        requirements under the Act.

       

      Based
        upon the foregoing, upon request by the Selling Stockholders at any time
        while
        the registration statement remains effective, it is our opinion that the
        Shares
        have been registered for resale under the Act and new certificates evidencing
        the Shares upon their transfer or re-registration by the Selling Stockholders
        may be issued without restrictive legend. We will advise you if the registration
        statement is not available or effective at any point in the future.

      
        	 	
                 

                Very
                  truly yours,

              
	 	
                 

                [Company
                  counsel]

              
	 	 

      

      
        
          
          

        

        
          19

          
            

          

        

        
          
          

        

      

       

      Schedule
        A to Exhibit A

      
        	
                 

                Selling
                  Stockholder

              	
                 

                R/N/O

              	
                 

                Shares

                 

                Being
                  Offered

              
	 	 	 
	 	 	 
	 	 	 
	 	 	 

      

       

      

      
        
          
          

        

        
          20

          
            

          

        

        
          
          

        

      

       

      SCHEDULE
        6(f)

      

      

      None.

      

      
        
          
          

        

        
          21

          
            

          

        

        
          
          

        

      

      SCHEDULE
        8(b)

      

       

      The
        Company is obligated to register for resale shares of its Common Stock
        that:

      

      a) were
        issued upon the conversion of shares of Series A Preferred Stock issued by
        Magnetech Industrial Services, Inc. in a private offering occurring in February
        2004; 

      

      b) 
        were issued in a private offering that commenced in May 2004; 

      

      c) are
        issuable upon conversion of warrants and subordinated convertible debentures
        issued in a private offering that commenced in January 2005; 

      

      d) were
        issued to Jackson Steinem Inc.; 

      

      e) are
        issuable upon conversion of outstanding warrants issued to Strasbourger Pearson
        Tulcin Wolff Incorporated (“Strasbourger”) or its designees pursuant to the
        Company’s placement agency agreements with Strasbourger; and

       

      f) were
        issued to Purchaser and are issuable to Purchaser upon conversion of warrants
        and convertible notes issued to Purchaser in a prior financing
        transaction.

       

      In
        an effort to satisfy the foregoing registration obligations, the Company
        filed a
        Registration Statement on Form S-1 with the Commission that was declared
        effective May 12, 2006. That Registration Statement included all of its
        outstanding shares of the Company’s Common Stock as well as shares of Common
        Stock issuable upon conversion of outstanding warrants and subordinated
        convertible debentures, other than restricted shares of Common Stock and
        incentive stock options issued to the officers of the Company (other than
        John
        Martell).

       

       

       

       

      22Security and Purchase Agreement

    

       

      Exhibit
        10.1

       

      

       

      

       

      

       

      SECURITY
        AND PURCHASE AGREEMENT

       

       

      LAURUS
        MASTER FUND, LTD.

       

      and

      

      MAGNETECH
        INDUSTRIAL SERVICES OF ALABAMA, LLC

       

      

       

      Dated:
        May 31, 2006

       

      

       

      

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      
        	 	
                TABLE
                  OF CONTENTS

              	 
	 	 	
                Page

              
	
                1.

              	
                General
                  Definitions and Terms; Rules of Construction.

              	
                1

              
	
                2.

              	
                Loan
                  Facility

              	
                2

              
	
                3.

              	
                Repayment
                  of the Loans

              	
                4

              
	
                4.

              	
                Procedure
                  for Loans

              	
                4

              
	
                5.

              	
                Interest
                  and Payments.

              	
                5

              
	
                6.

              	
                Security
                  Interest.

              	
                6

              
	
                7.

              	
                Representations,
                  Warranties and Covenants Concerning the Collateral

              	
                7

              
	
                8.

              	
                Payment
                  of Accounts.

              	
                9

              
	
                9.

              	
                Collection
                  and Maintenance of Collateral.

              	
                9

              
	
                10.

              	
                Inspections
                  and Appraisals

              	
                10

              
	
                11.

              	
                Financial
                  Reporting

              	
                10

              
	
                12.

              	
                Additional
                  Representations and Warranties

              	
                11

              
	
                13.

              	
                Covenants

              	
                20

              
	
                14.

              	
                Further
                  Assurances

              	
                26

              
	
                15.

              	
                Representations,
                  Warranties and Covenants of Laurus.

              	
                26

              
	
                16.

              	
                Power
                  of Attorney

              	
                28

              
	
                17.

              	
                Term
                  of Agreement

              	
                28

              
	
                18.

              	
                Termination
                  of Lien

              	
                28

              
	
                19.

              	
                Events
                  of Default

              	
                29

              
	
                20.

              	
                Remedies

              	
                31

              
	
                21.

              	
                Waivers

              	
                31

              
	
                22.

              	
                Expenses

              	
                32

              
	
                23.

              	
                Assignment
                  By Laurus

              	
                32

              

      

       

       

      
        
          
          

        

        
          i

          
            

          

        

        
          
          

        

      

       

      
        	
                24.

              	
                No
                  Waiver; Cumulative Remedies

              	
                33

              
	
                25.

              	
                Application
                  of Payments

              	
                33

              
	
                26.

              	
                Indemnity

              	
                33

              
	
                27.

              	
                Revival

              	
                34

              
	
                28.

              	
                Borrowing
                  Agency Provisions

              	
                34

              
	
                29.

              	
                Notices

              	
                35

              
	
                30.

              	
                Governing
                  Law, Jurisdiction and Waiver of Jury Trial

              	
                36

              
	
                31.

              	
                Limitation
                  of Liability

              	
                37

              
	
                32.

              	
                Entire
                  Understanding

              	
                37

              
	
                33.

              	
                Severability

              	
                37

              
	34.   	Survival 	37
	
                35.

              	
                Captions

              	
                38

              
	
                36.

              	
                Counterparts;
                  Telecopier Signatures

              	
                38

              
	
                37.

              	
                Construction

              	
                38

              
	
                38.

              	
                Publicity

              	
                38

              
	
                39.

              	
                Joinder

              	
                38

              

      

       

      

       

      
        
          
          

        

        
          ii

          
            

          

        

        
          
          

        

      

      

       

      SECURITY
        AND PURCHASE AGREEMENT

       

      This
        Security and Purchase Agreement is made as of May 31, 2006 by and among LAURUS
        MASTER FUND, LTD., a Cayman Islands corporation (“Laurus”),
        MAGNETECH INDUSTRIAL SERVICES OF ALABAMA, LLC, an Indiana limited liability
        company (“the
        Parent”),
        and
        each party listed on Exhibit
        A
        attached
        hereto (each an “Eligible
        Subsidiary”
and
        collectively, the “Eligible
        Subsidiaries”;
        the
        Parent and each Eligible Subsidiary, each a “Company” and collectively, the
“Companies”).

       

      BACKGROUND

       

      The
        Companies have requested that Laurus make advances available to the Companies;
        and

       

      Laurus
        has agreed to make such advances on the terms and conditions set forth in
        this
        Agreement.

       

      AGREEMENT

       

      NOW,
        THEREFORE, in consideration of the mutual covenants and undertakings and
        the
        terms and conditions contained herein, the parties hereto agree as
        follows:

       

      1. General
        Definitions and Terms; Rules of Construction.

       

      (a) General
        Definitions.
        Capitalized terms used in this Agreement shall have the meanings assigned
        to
        them in Annex
        A.

       

      (b) Accounting
        Terms.
        Any
        accounting terms used in this Agreement which are not specifically defined
        shall
        have the meanings customarily given them in accordance with GAAP and all
        financial computations shall be computed, unless specifically provided herein,
        in accordance with GAAP consistently applied.

       

      (c) Other
        Terms.
        All
        other terms used in this Agreement and defined in the UCC, shall have the
        meaning given therein unless otherwise defined herein.

       

      (d) Rules
        of Construction.
        All
        Schedules, Addenda, Annexes and Exhibits hereto or expressly identified to
        this
        Agreement are incorporated herein by reference and taken together with this
        Agreement constitute but a single agreement. The words “herein”, “hereof” and
“hereunder” or other words of similar import refer to this Agreement as a whole,
        including the Exhibits, Addenda, Annexes and Schedules thereto, as the same
        may
        be from time to time amended, modified, restated or supplemented, and not
        to any
        particular section, subsection or clause contained in this Agreement. Wherever
        from the context it appears appropriate, each term stated in either the singular
        or plural shall include the singular and the plural, and pronouns stated
        in the
        masculine, feminine or neuter gender shall include the masculine, the feminine
        and the neuter. The term “or” is not exclusive. The term “including” (or any
        form thereof) shall not be limiting or exclusive. All references to statutes
        and
        related regulations shall include any amendments of same and any successor
        statutes and regulations. All references in this

      
        
          
          

        

        
          1

          
            

          

        

        
          
          

        

      

       

      Agreement
        or in the Schedules, Addenda, Annexes and Exhibits to this Agreement to
        sections, schedules, disclosure schedules, exhibits, and attachments shall
        refer
        to the corresponding sections, schedules, disclosure schedules, exhibits,
        and
        attachments of or to this Agreement. All references to any instruments or
        agreements, including references to any of this Agreement or the Ancillary
        Agreements shall include any and all modifications or amendments thereto
        and any
        and all extensions or renewals thereof.

       

      2. Loan
        Facility.

       

      (a) Revolving
        Loans.

      

      (i)
        Subject to the terms and conditions set forth herein and in the Ancillary
        Agreements, Laurus may make revolving loans (the “Revolving
        Loans”)
        to
        Companies from time to time during the Term which, in the aggregate at any
        time
        outstanding, will not exceed the lesser of (x) (I) the Capital Availability
        Amount minus (II) such reserves as Laurus may reasonably in its good faith
        judgment deem proper and necessary from time to time based on the occurrence
        of
        significant business developments of any Company (the “Reserves”)
        and
        (y) an amount equal to (I) the Accounts Availability minus (II) the Reserves.
        The amount derived at any time from Section 2(a)(i)(y)(I) minus
        2(a)(i)(y)(II) shall be referred to as the “Formula
        Amount.”
The
        Companies shall, jointly and severally, execute and deliver to Laurus on
        the
        Closing Date the Revolving Note evidencing the Revolving Loans funded on
        the
        Closing Date. 

       

      (ii)
        Notwithstanding the limitations set forth above, if requested by any Company,
        Laurus retains the right to lend to such Company from time to time such amounts
        in excess of such limitations as Laurus may determine in its sole
        discretion.

       

      (iii)
        The
        Companies acknowledge that the exercise of Laurus’ discretionary rights
        hereunder may result during the Term in one or more increases or decreases
        in
        the advance percentages used in determining Accounts Availability and each
        of
        the Companies hereby consent to any such increases or decreases which may
        limit
        or restrict advances requested by the Companies, provided that in the case
        of
        any such decrease in the advance percentages the events giving rise to such
        decrease and Laurus’ use of such discretion are attributable to a significant
        change in the assets, liabilities, condition (financial or otherwise),
        properties, operations, prospects or Eligible Accounts in the reasonable
        good
        faith judgment of Laurus.

       

      (iv)
        If
        any interest, fees, costs or charges payable to Laurus hereunder are not
        paid
        when due, each of the Companies shall thereby be deemed to have requested,
        and
        Laurus is hereby authorized at its discretion to make and charge to the
        Companies’ account, a Loan as of such date in an amount equal to such unpaid
        interest, fees, costs or charges.

       

      (v)
        If
        any Company at any time after three (3) days written notice to such Company
        from
        Laurus (provided however that such written notice to such Company shall not
        be
        required in the event that an Event of Default has occurred and is continuing)
        fails to perform or observe any of the covenants contained in this Agreement
        or
        any Ancillary Agreement, Laurus may, but need not, perform or observe such
        covenant on behalf and in the name, place and stead of such Company (or,
        at
        Laurus’ option, in Laurus’ name) and may, but need not, take any
        and

      
        
          
          

        

        
          2

          
            

          

        

        
          
          

        

      

      all
        other
        actions which Laurus may deem necessary to cure or correct such failure
        (including the payment of taxes, the satisfaction of Liens, the performance
        of
        obligations owed to Account Debtors, lessors or other obligors, the procurement
        and maintenance of insurance, the execution of assignments, security agreements
        and financing statements, and the endorsement of instruments). The amount
        of all
        monies expended and all costs and expenses (including attorneys’ fees and legal
        expenses) incurred by Laurus in connection with or as a result of the
        performance or observance of such agreements or the taking of such action
        by
        Laurus shall be charged to the Companies’ account as a Revolving Loan and added
        to the Obligations. To facilitate Laurus’ performance or observance of such
        covenants by each Company, each Company hereby irrevocably appoints Laurus,
        or
        Laurus’ delegate, acting alone, as such Company’s attorney in fact (which
        appointment is coupled with an interest) with the right (but not
        the
        duty) from time to time to create, prepare, complete, execute, deliver, endorse
        or file in the name and on behalf of such Company any and all instruments,
        documents, assignments, security agreements, financing statements, applications
        for insurance and other agreements and writings required to be obtained,
        executed, delivered or endorsed by such Company.

       

      (vi)
        Laurus will account to Company Agent monthly with a statement of all Loans
        and
        other advances, charges and payments made pursuant to this Agreement, and
        such
        account rendered by Laurus shall be deemed final, binding and conclusive
        unless
        Laurus is notified by Company Agent in writing to the contrary within thirty
        (30) days of the date each account was rendered specifying the item or items
        to
        which objection is made.

       

          (vii)
        During the Term, the Companies may borrow and prepay Loans in accordance
        with
        the terms and conditions hereof. 

       

          (viii)
        If
        any Eligible Account is not paid by the Account Debtor within ninety (90)
        days
        after the date that such Eligible Account was invoiced or if any Account
        Debtor
        asserts a deduction, dispute, contingency, set-off, or counterclaim with
        respect
        to any Eligible Account, (a “Delinquent
        Account”),
        the
        Companies shall jointly and severally (i) reimburse Laurus for the amount
        of the
        Loans made with respect to such Delinquent Account plus an adjustment fee
        in an
        amount equal to a fifteenth of one percent (0.15%) of the gross face amount
        of
        such Eligible Account or (ii) immediately replace such Delinquent Account
        with
        an otherwise Eligible Account.

       

      (b) Receivables
        Purchase.
        Following the occurrence and during the continuance of an Event of Default,
        Laurus may, at its option, elect to convert the credit facility contemplated
        hereby to an accounts receivable purchase facility. Upon such election by
        Laurus
        (subsequent notice of which Laurus shall provide to Company Agent), the
        Companies shall be deemed to hereby have sold, assigned, transferred, conveyed
        and delivered to Laurus, and Laurus shall be deemed to have purchased and
        received from the Companies, all right, title and interest of the Companies
        in
        and to all Accounts which shall at any time constitute Eligible Accounts
        (the
“Receivables
        Purchase”).
        All
        outstanding Loans hereunder shall be deemed obligations under such accounts
        receivable purchase facility. The conversion to an accounts receivable purchase
        facility in accordance with the terms hereof shall not be deemed an exercise
        by
        Laurus of its secured creditor rights under Article 9 of the UCC. Immediately
        following Laurus’ request, the Companies shall execute all such further
        documentation as may be required by Laurus to more fully set forth the accounts
        receivable purchase facility herein contemplated, including,
        without

      
        
          
          

        

        
          3

          
            

          

        

        
          
          

        

      

       

      limitation,
        Laurus’ standard form of accounts receivable purchase agreement and account
        debtor notification letters, but any Company’s failure to enter into any such
        documentation shall not impair or affect the Receivables Purchase in any
        manner
        whatsoever.

       

      (c) Term
        Loan.
        Subject
        to the terms and conditions set forth herein and in the Ancillary Agreements,
        Laurus shall make a term loan (the “Term
        Loan”)
        to the
        Parent (for the benefit of Companies) in an aggregate amount equal to
        $2,100,000. The Term Loan shall be advanced on the Closing Date and shall
        be,
        with respect to principal, payable in consecutive monthly installments of
        principal commencing on November 1, 2006 and on the first day of each month
        thereafter, subject to acceleration upon the occurrence of an Event of Default
        or termination of this Agreement. The first twenty-nine principal installments
        shall each be in the amount of $70,000 and the thirtieth and final installment
        shall be in an amount equal to the unpaid principal balance of the Term Loan
        plus all accrued and unpaid interest thereon. The Term Loan shall be evidenced
        by the Term Note

       

      3. Repayment
        of the Loans.
        The
        Companies (a) may prepay the Obligations from time to time in accordance
        with
        the terms and provisions of the Notes (and Section 17 hereof if such prepayment
        is due to a termination of this Agreement); (b) shall repay on the expiration
        of
        the Term (i) the then aggregate outstanding principal balance of the Loans
        together with accrued and unpaid interest, fees and charges and; (ii) all
        other
        amounts owed Laurus under this Agreement and the Ancillary Agreements; and
        (c)
        subject to Section 2(a)(ii), shall repay on any day on which the then aggregate
        outstanding principal balance of the Loans are in excess of the Formula Amount
        at such time, Loans in an amount equal to such excess. Any payments of
        principal, interest, fees or any other amounts payable hereunder or under
        any
        Ancillary Agreement shall be made prior to 12:00 noon (New York time) on
        the due
        date thereof in immediately available funds.

       

      4. Procedure
        for Revolving Loans.
        Company
        Agent may by written notice request a borrowing of Revolving Loans prior
        to
        12:00 noon (New York time) on the Business Day of its request to incur, on
        the
        next Business Day, a Loan. Together with each request for a Revolving Loan
        (or
        at such other intervals as Laurus may request), Company Agent shall deliver
        to
        Laurus a Borrowing Base Certificate in the form of Exhibit
        B
        attached
        hereto, which shall be certified as true and correct by the Chief Executive
        Officer or Chief Financial Officer of Company Agent together with all supporting
        documentation relating thereto. All Revolving Loans shall be disbursed from
        whichever office or other place Laurus may designate from time to time and
        shall
        be charged to the Companies’ account on Laurus’ books. The proceeds of each
        Revolving Loan made by Laurus shall be made available to Company Agent on
        the
        Business Day following the Business Day so requested in accordance with the
        terms of this Section 4 by way of credit to the applicable Company’s operating
        account maintained with such bank as Company Agent designated to Laurus.
        Interest will begin to accrue on such Revolving Loans on the day the applicable
        Company receives the proceeds of such Revolving Loan. Any and all Obligations
        due and owing hereunder may be charged to the Companies’ account and shall
        constitute Revolving Loans.

      
        
          
          

        

        
          4

          
            

          

        

        
          
          

        

      

       

      5. Interest
        and Payments. 

       

      (a) Interest.

       

      (i) Except
        as
        modified by Section 5(a)(iii) below, the Companies shall jointly and severally
        pay interest at the Contract Rate on the unpaid principal balance of each
        Loan
        until such time as such Loan is collected in full in good
        funds in
        dollars of the United States of America.

       

      (ii) Interest
        and payments shall be computed on the basis of actual days elapsed in a year
        of
        360 days. At Laurus’ option, Laurus may charge the Companies’ account for said
        interest.

       

      (iii) Effective
        upon the occurrence of any Event of Default and for so long as any Event
        of
        Default shall be continuing, the Contract Rate shall automatically be increased
        as set forth in the Notes (such increased rate, the “Default
        Rate”),
        and
        all outstanding Obligations, including unpaid interest, shall continue to
        accrue
        interest from the date of such Event of Default at the Default Rate applicable
        to such Obligations. 

       

      (iv) In
        no
        event shall the aggregate interest payable hereunder exceed the maximum rate
        permitted under any applicable law or regulation, as in effect from time
        to time
        (the “Maximum
        Legal Rate”),
        and
        if any provision of this Agreement or any Ancillary Agreement is in
        contravention of any such law or regulation, interest payable under this
        Agreement and each Ancillary Agreement shall be computed on the basis of
        the
        Maximum Legal Rate (so that such interest will not exceed the Maximum Legal
        Rate). 

       

      (v) The
        Companies shall jointly and severally pay principal, interest and all other
        amounts payable hereunder, or under any Ancillary Agreement, without any
        deduction whatsoever, including any deduction for any set-off or
        counterclaim.

       

      (b) Payments;
        Certain Closing Conditions.

       

      (i) Closing
        Payment.
        Upon
        execution of this Agreement by each Company and Laurus: (x) the Companies
        shall
        jointly and severally pay to Laurus Capital Management, LLC a closing payment
        in
        an amount equal to three and six tenths percent (3.60%) of the Total Investment
        Amount (the “Closing
        Payment”);
        The
        Closing Payment shall be deemed fully earned on the Closing Date and shall
        not
        be subject to rebate or proration for any reason.

       

      (ii) Unused
        Line Payment.
        None.

       

      (iii) Overadvance
        Payment.
        Without
        affecting Laurus’ rights hereunder in the event (x) the Loans exceed the Formula
        Amount (each such event, an “Overadvance”)
        without the written consent of Laurus, all such Overadvances shall bear
        additional interest at a rate of 1.0% per month for all times such amounts
        shall
        be in excess of the Formula Amount and (y) an Overadvance exists following
        the
        receipt by the Companies of the written consent of Laurus, all such Overadvances
        shall bear additional interest at a rate mutually acceptable to Laurus and
        Parent for all times such amounts shall be in excess of the Formula Amount.
        All
        amounts that are incurred pursuant to this Section 5(b)(iii) shall be due
        and
        payable by the 

      
        
          
          

        

        
          5

          
            

          

        

        
          
          

        

      

       

      Companies
        monthly, in arrears, on the first business day of each calendar month and
        upon
        expiration of the Term. 

       

      (iv) Expenses.
        The
        Companies shall jointly and severally reimburse Laurus for its expenses
        (including reasonable legal fees and expenses) incurred in connection with
        the
        preparation and negotiation of this Agreement and the Ancillary Agreements,
        and
        expenses incurred in connection with Laurus’ due diligence review of each
        Company and its Subsidiaries and all related matters. Amounts required to
        be
        paid under this Section 5(b)(iv) will be paid on the Closing Date and shall
        be
        $15,000 for such expenses referred to in this Section 5(b)(iv), plus the
        cost of
        local real estate counsel for Laurus.

       

      6. Security
        Interest.

       

      (a) To
        secure
        the prompt payment to Laurus of the Obligations, each Company hereby assigns,
        pledges and grants to Laurus a continuing security interest in and Lien upon
        all
        of the Collateral. All of each Company’s Books and Records relating to the
        Collateral shall, until delivered to or removed by Laurus, be kept by such
        Company in trust for Laurus until all Obligations have been paid in full.
        Each
        confirmatory assignment schedule or other form of assignment hereafter executed
        by each Company shall be deemed to include the foregoing grant, whether or
        not
        the same appears therein. 

       

      (b) Each
        Company hereby (i) authorizes Laurus to file any financing statements,
        continuation statements or amendments thereto that (x) indicate the Collateral
        (1) as all assets and personal property of such Company or words of similar
        effect, regardless of whether any particular asset comprised in the Collateral
        falls within the scope of Article 9 of the UCC of such jurisdiction, or (2)
        as
        being of an equal or lesser scope or with greater detail, and (y) contain
        any
        other information required by Part 5 of Article 9 of the UCC for the sufficiency
        or filing office acceptance of any financing statement, continuation statement
        or amendment and (ii) ratifies its authorization for Laurus to have filed
        any
        initial financial statements, or amendments thereto if filed prior to the
        date
        hereof. Each Company acknowledges that it is not authorized to file any
        financing statement or amendment or termination statement with respect to
        any
        financing statement without the prior written consent of Laurus and agrees
        that
        it will not do so without the prior written consent of Laurus, subject to
        such
        Company’s rights under Section 9-509(d)(2) of the UCC.

       

      (c) Each
        Company hereby grants to Laurus an irrevocable, non-exclusive license
        (exercisable upon the termination of this Agreement due to an occurrence
        and
        during the continuance of an Event of Default without payment of royalty
        or
        other compensation to such Company) to use, transfer, license or sublicense
        any
        Intellectual Property now owned, licensed to, or hereafter acquired by such
        Company, and wherever the same may be located, and including in such license
        access to all media in which any of the licensed items may be recorded or
        stored
        and to all computer and automatic machinery software and programs used for
        the
        compilation or printout thereof, and represents, promises and agrees that
        any
        such license or sublicense is not and will not be in conflict with the
        contractual or commercial rights of any third Person;
        provided, that such license will terminate
        on the termination of this Agreement and the payment in full of all
        Obligations.

       

      
        
          
          

        

        
          6

          
            

          

        

        
          
          

        

      

       

      7. Representations,
        Warranties and Covenants Concerning the Collateral.
        Each
        Company represents, warrants (each of which such representations and warranties
        shall be deemed repeated upon the making of each request for a Revolving
        Loan
        and made as of the time of each and every Revolving Loan hereunder) and
        covenants as follows:

       

      (a) all
        of
        the Collateral (i) is owned by it free and clear of all Liens (including
        any
        claims of infringement) except those in Laurus’ favor and
        Permitted Liens and (ii) is not subject to any agreement prohibiting the
        granting of a Lien or requiring notice of or consent to the granting of a
        Lien.

       

      (b) it
        shall
        not encumber, mortgage, pledge, assign or grant any Lien in any Collateral
        or
        any other assets to anyone other than Laurus and except for Permitted
        Liens.

       

      (c) the
        Liens
        granted pursuant to this Agreement, upon completion of all filings and other
        actions necessary to perfect such liens in the Collateral under applicable
        law,
        constitute valid perfected security interests in all of the Collateral in
        favor
        of Laurus as security for the prompt and complete payment and performance
        of the
        Obligations, enforceable in accordance with the terms hereof against any
        and all
        of its creditors and purchasers and such security interest is prior to all
        other
        Liens in existence on the date hereof.

       

      (d) no
        effective security agreement, mortgage, deed of trust, financing statement,
        equivalent security or Lien instrument or continuation statement covering
        all or
        any part of the Collateral is or will be on file or of record in any public
        office, except those relating to Permitted Liens.

       

      (e) it
        shall
        not dispose of any of the Collateral whether by sale, lease or otherwise
        except
        for the sale of Inventory in the ordinary course of business and for the
        disposition or transfer in the ordinary course of business during any fiscal
        year of obsolete and worn-out Equipment having an aggregate fair market value
        of
        not more than $200,000 and only to the extent that (i) the proceeds of any
        such
        disposition are used to acquire replacement Equipment which is subject to
        Laurus’ first priority security interest or are used to repay Loans or to pay
        general corporate expenses, or (ii) following the occurrence of an Event
        of
        Default which continues to exist the proceeds of which are remitted to Laurus
        to
        be held as cash collateral for the Obligations.

       

      (f) it
        shall
        defend the right, title and interest of Laurus in and to the Collateral against
        the claims and demands of all Persons whomsoever, and take such actions,
        including (i) all actions necessary to grant Laurus “control” of any
        Investment Property, Deposit Accounts, Letter-of-Credit Rights or electronic
        Chattel Paper owned by it, with any agreements establishing control to be
        in
        form and substance satisfactory to Laurus, (ii) the prompt (but in no event
        later than five (5) Business Days following Laurus’ request therefor) delivery
        to Laurus of all original Instruments, Chattel Paper, negotiable Documents
        and
        certificated Stock owned by it (in each case, accompanied by stock powers,
        allonges or other instruments of transfer executed in blank), (iii) notification
        of Laurus’ interest in Collateral at Laurus’ request, and (iv) the institution
        of litigation
        against third parties as shall be prudent in order to protect and preserve
        its
        and/or Laurus’ respective and several interests in the Collateral.

      
        
          
          

        

        
          7

          
            

          

        

        
          
          

        

      

       

      (g) it
        shall
        promptly, and in any event within ten (10) Business Days after the same is
        acquired by it, notify Laurus of any commercial tort claim (as defined in
        the
        UCC) acquired by it and unless otherwise consented by Laurus, it shall enter
        into a supplement to this Agreement granting to Laurus a Lien in such commercial
        tort claim.

       

      (h) it
        shall
        place notations upon its Books and Records and any of its financial statements
        to disclose Laurus’ Lien in the Collateral.

       

      (i) if
        it
        retains possession of any Chattel Paper or Instrument with Laurus’ consent, upon
        Laurus’ request such Chattel Paper and Instruments shall be marked with the
        following legend: “This writing and obligations evidenced or secured hereby are
        subject to the security interest of Laurus Master Fund, Ltd.” Notwithstanding
        the foregoing, upon the reasonable request of Laurus, such Chattel Paper
        and
        Instruments shall be delivered to Laurus.

       

      (j) it
        shall
        perform in a reasonable time all other steps requested by Laurus to create
        and
        maintain in Laurus’ favor a valid perfected first Lien in all Collateral subject
        only to Permitted Liens.

       

      (k) it
        shall
        notify Laurus promptly and in any event within ten (10) Business Days after
        obtaining knowledge thereof (i) of any event or circumstance that, to its
        knowledge, would cause Laurus to consider any then existing Account as no
        longer
        constituting an Eligible Account; (ii) of any material delay in its performance
        of any of its obligations to any Account Debtor; (iii) of any assertion by
        any
        Account Debtor of any material claims, offsets or counterclaims; (iv) of
        any
        material allowances, credits and/or monies granted by it to any Account Debtor;
        (v) of all material adverse information relating to the financial condition
        of
        an Account Debtor; (vi) of any material return of goods; and (vii) of any
        material loss, damage or destruction of any of the Collateral.

       

      (l) all
        Eligible Accounts (i) represent complete bona fide transactions which require
        no
        further act under any circumstances on its part to make such Accounts payable
        by
        the Account Debtors, (ii) are not subject to any present, future contingent
        offsets or counterclaims, and (iii) do not represent bill and hold sales,
        consignment sales, guaranteed sales, sale or return or other similar
        understandings or obligations of any Affiliate or Subsidiary of such Company.
        It
        has not made, nor will it make, any agreement with any Account Debtor for
        any
        extension of time for the payment of any Account, any compromise or settlement
        for less than the full amount thereof, any release of any Account Debtor
        from
        liability therefor, or any deduction therefrom except in the ordinary course
        of
        its business consistent with historical practice. 

       

      (m) it
        shall
        keep and maintain its Equipment in good operating condition, except for ordinary
        wear and tear, and shall make all necessary repairs and replacements thereof
        so
        that the value and operating efficiency shall at all times be maintained
        and
        preserved. It shall not permit any such items to become a Fixture to real
        estate
        or accessions to other personal property.

       

      (n) it
        shall
        maintain and keep all of its Books and Records concerning the Collateral
        at its
        executive offices listed in Schedule
        12(aa)
        except
        as noted on Schedule
        12(aa).

      
        
          
          

        

        
          8

          
            

          

        

        
          
          

        

      

       

      (o) it
        shall
        maintain and keep the tangible Collateral at the addresses listed in
Schedule
        12(aa),
        provided, that it may change such locations or open a new location, provided
        that it provides Laurus at least thirty (30) days prior written notice of
        such
        changes or new location and (ii) prior to such change or opening of a new
        location where Collateral having a value of more than $50,000 will be located,
        it executes and delivers to Laurus such agreements deemed reasonably necessary
        or prudent by Laurus, including landlord agreements, mortgagee agreements
        and
        warehouse agreements, each in form and substance satisfactory to Laurus,
        to
        adequately protect and maintain Laurus’ security interest in such
        Collateral.

       

      (p) Schedule
        7(p)
        lists
        all banks and other financial institutions at which it maintains deposits
        and/or
        other accounts, and such Schedule correctly identifies the name, address
        and
        telephone number of each such depository, the name in which the account is
        held,
        a description of the purpose of the account, and the complete account number.
        It
        shall not establish any depository or other bank account with any financial
        institution (other than the accounts set forth on Schedule
        7(p))
        without
        Laurus’ prior written consent.

       

      8. Payment
        of Accounts. 

       

      (a) Each
        Company will irrevocably direct all of its present and future Account Debtors
        and other Persons obligated to make payments constituting Collateral to make
        such payments directly to the lockboxes maintained by such Company (the
“Lockboxes”)
        with
        MFB Financial or such other financial institution accepted by Laurus in writing
        as may be selected by such Company (the “Lockbox
        Bank”)
        pursuant to the terms of the certain agreements among one or more Companies,
        Laurus and/or the Lockbox Bank dated on or about the date hereof. On or prior
        to
        the Closing Date, each Company shall and shall cause the Lockbox Bank to
        enter
        into all such documentation acceptable to Laurus pursuant to which, among
        other
        things, the Lockbox Bank agrees to: (a) sweep the Lockbox on a daily basis
        and deposit all checks received therein to an account designated by Laurus
        in
        writing and (b) comply only with the instructions or other directions of
        Laurus
        concerning the Lockbox. All of each Company’s invoices, account statements and
        other written or oral communications directing, instructing, demanding or
        requesting payment of any Account of any Company or any other amount
        constituting Collateral shall conspicuously direct that all payments be made
        to
        the Lockbox or such other address as Laurus may direct in writing. If,
        notwithstanding the instructions to Account Debtors, any Company receives
        any
        payments, such Company shall immediately remit such payments to Laurus in
        their
        original form with all necessary endorsements. Until so remitted, such Company
        shall hold all such payments in trust for and as the property of Laurus and
        shall not commingle such payments with any of its other funds or
        property.

       

      (b) At
        Laurus’ election, following the occurrence of an Event of Default which is
        continuing, Laurus may notify each Company’s Account Debtors of Laurus’ security
        interest in the Accounts, collect them directly and charge the collection
        costs
        and expenses thereof to Company’s and the Eligible Subsidiaries joint and
        several account.

       

      9. Collection
        and Maintenance of Collateral.

      
        
          
          

        

        
          9

          
            

          

        

        
          
          

        

      

       

      (a) Laurus
        may verify each Company’s Accounts from time to time, but not more often than
        once every six (6) months, unless an Event of Default has occurred and is
        continuing, utilizing an audit control company or any other agent of
        Laurus.

       

      (b) Proceeds
        of Accounts received by Laurus will be deemed received on the Business Day
        of
        Laurus’ receipt of such proceeds in good funds in dollars of the United States
        of America to an account designated by Laurus. 

       

      (c) As
        Laurus
        receives the proceeds of Accounts of any Company, it shall (i) apply such
        proceeds, as required, to amounts outstanding under the Notes, and (ii) remit
        all such remaining proceeds (net of interest, fees and other amounts then
        due
        and owing to Laurus hereunder) to Company Agent (for the benefit of the
        applicable Companies) upon request (but no more often than twice a week).
        Notwithstanding the foregoing, following the occurrence and during the
        continuance of an Event of Default, Laurus, at its option, may (a) apply
        such
        proceeds to the Obligations in such order as Laurus shall elect, (b) hold
        all
        such proceeds as cash collateral for the Obligations and each Company
        hereby grants to Laurus a security interest in such cash collateral amounts
        as
        security for the Obligations and/or (c) do any combination of the
        foregoing.

       

      10. Inspections
        and Appraisals.
        At all
        times during normal business hours, Laurus, and/or any agent of Laurus shall
        have the right to (a) have access to, visit, inspect, review, evaluate and
        make
        physical verification and appraisals of each Company’s properties and the
        Collateral, (b) inspect, audit and copy (or take originals if necessary)
        and
        make extracts from each Company’s Books and Records, including management
        letters prepared by the Accountants, and (c) discuss with each Company’s
        directors, principal officers, and independent accountants, each Company’s
        business, assets, liabilities, financial condition, results of operations
        and
        business prospects. Each Company will deliver to Laurus any instrument necessary
        for Laurus to obtain records from any service bureau maintaining records
        for
        such Company. If any internally prepared financial information, including
        that
        required under this Section is unsatisfactory in any manner to Laurus, Laurus
        may request that the Accountants review the same.

       

      11. Financial
        Reporting.
        Company
        Agent will deliver, or cause to be delivered, to Laurus each of the following,
        which shall be in form and detail acceptable to Laurus:

       

      (a) As
        soon
        as available, and in any event within ninety (90) days after the end of each
        fiscal year of the Parent, each Company’s audited financial statements with a
        report of independent certified public accountants of recognized standing
        selected by the Parent and acceptable to Laurus (the “Accountants”),
        which
        annual financial statements shall be without qualification and shall include
        each Company’s balance sheet as at the end of such fiscal year and the related
        statements of each Company’s income, retained earnings
        and cash
        flows for the fiscal year then ended, prepared, if Laurus so requests, on
        a
        consolidating and consolidated basis to include all Subsidiaries and Affiliates
        of each Company, all in reasonable detail and prepared in accordance with
        GAAP,
        together with (i) if and when available, copies of any management letters
        prepared by the Accountants; and (ii) a certificate of the Parent’s President,
        Chief Executive Officer or Chief Financial Officer stating that such financial
        statements have been prepared in accordance with GAAP and whether or not
        such
        officer has knowledge of the 

      
        
          
          

        

        
          10

          
            

          

        

        
          
          

        

      

       

      occurrence
        of any Default or Event of Default hereunder and, if so, stating in reasonable
        detail the facts with respect thereto;

       

      (b) As
        soon
        as available and in any event within forty five (45) days after the end of
        each
        quarter, an unaudited/internal balance sheet and statements of income, retained
        earnings and cash flows of each Company as at the end of and for such quarter
        and for the year to date period then ended, prepared, if Laurus so requests,
        on
        a consolidating and consolidated basis to include all Subsidiaries and
        Affiliates of each Company, in reasonable detail and stating in comparative
        form
        the figures for the corresponding date and periods in the previous year,
        all
        prepared in accordance with GAAP (without footnotes), subject to year-end
        adjustments and accompanied by a certificate of the Parent’s President, Chief
        Executive Officer or Chief Financial Officer, stating (i) that such financial
        statements have been prepared in accordance with GAAP (without footnotes),
        subject to year-end audit adjustments, and (ii) whether or not such officer
        has
        knowledge of the occurrence of any Default or Event of Default hereunder
        not
        theretofore reported and remedied and, if so, stating in reasonable detail
        the
        facts with respect thereto; 

       

      (c) Within
        thirty (30) days after the end of each month (or more frequently if Laurus
        so
        requests), agings of each Company’s Accounts, unaudited trial balances and their
        accounts payable and a calculation of each Company’s Accounts and/or Eligible
        Accounts, provided, however, that if Laurus shall request the foregoing
        information more often than as set forth in the immediately preceding clause,
        each Company shall have thirty (30) days from each such request to comply
        with
        Laurus’ demand; and

       

      (d) Promptly
        after (i) the filing thereof,
        copies of the Parent’s most recent registration statements and annual,
        quarterly, monthly or other regular reports which the Parent files with the
        Securities and Exchange Commission (the “SEC”),
        and
        (ii) the issuance thereof, copies of such financial statements, reports and
        proxy statements as the Parent shall send to its equity holders.

       

      12. Additional
        Representations and Warranties.
        Each
        Company hereby represents and warrants to Laurus as follows:

       

      (a) Organization,
        Good Standing and Qualification.
        It and
        each of its Subsidiaries is a corporation, partnership or limited liability
        company, as the case may be, duly organized, validly existing and in good
        standing under the laws of its jurisdiction of organization. It and each
        of its
        Subsidiaries has the corporate, limited liability
        company
        or partnership, as the case may be, power and authority to own and operate
        its
        properties and assets and, insofar as it is or shall be a party thereto,
        to (i)
        execute and deliver this Agreement and the Ancillary Agreements, (ii) to
        issue
        the Notes and to (iii) carry out the provisions of this Agreement and the
        Ancillary Agreements and to carry on its business as presently conducted.
        It and
        each of its Subsidiaries is duly qualified and is authorized to do business
        and
        is in good standing as a foreign corporation, partnership or limited liability
        company, as the case may be, in all jurisdictions in which the nature or
        location of its activities and of its properties (both owned and leased)
        makes
        such qualification necessary, except for those jurisdictions in which failure
        to
        do so has not had, or could not reasonably be expected to have, individually
        or
        in the aggregate, a Material Adverse Effect.

      
        
          
          

        

        
          11

          
            

          

        

        
          
          

        

      

       

      (b) Subsidiaries.
        Each of
        its direct and indirect Subsidiaries, the direct owner of each such Subsidiary
        and its percentage ownership thereof, is set forth on Schedule
        12(b).

       

      (c) Capitalization;
        Voting Rights.

       

      (i) The
        authorized capital of the Parent, as of the date hereof, consists of one
        class
        of membership interests all of which are owned by Magnetech Industrial Services,
        Inc., an Indiana corporation. The authorized, issued and outstanding capital
        stock of each Subsidiary of each Company is set forth on Schedule
        12(c).

       

      (ii) Except
        as
        disclosed on Schedule
        12(c),
        and
        other than: (i) the shares reserved for issuance under the Parent’s stock option
        plans; and (ii) shares which may be issued pursuant to this Agreement and
        the
        Ancillary Agreements, there are no outstanding options, warrants, rights
        (including conversion or preemptive rights and rights of first refusal),
        proxy
        or equity holder agreements, or arrangements or agreements of any kind for
        the
        purchase or acquisition from the Parent of any of its securities. Except
        as
        disclosed on Schedule
        12(c),
        the
        consummation of any transaction contemplated hereby will not result in a
        change
        in the price or number of any securities of the Parent outstanding, under
        anti-dilution or other similar provisions contained in or affecting any such
        securities.

       

      (iii) All
        issued and outstanding membership interests of the Parent: (i) have been
        duly
        authorized and validly issued and are fully paid and nonassessable; and
        (ii) were issued in compliance with all applicable state and federal laws
        concerning the issuance of securities.

       

      (iv) The
        rights, preferences, privileges and restrictions of the Parent’s membership
        interests are as stated in the Parent’s Articles of Organization (the
“Charter”)
        and
        operating agreement. When issued in compliance with the provisions of this
        Agreement and the Parent’s Charter and operating agreement, the Securities will
        be validly issued, fully paid and nonassessable, and will be free of any
        liens
        or encumbrances; provided,
        however,
        that
        the Securities may be subject to restrictions on transfer under state and/or
        federal securities laws as set forth herein or as otherwise required by such
        laws at the time a transfer is proposed.

       

      (d) Authorization;
        Binding Obligations.
        All
        corporate, partnership or limited liability company, as the case may be,
        action
        on its and its Subsidiaries’ part (including their respective officers and
        directors) necessary for the authorization of this Agreement and the Ancillary
        Agreements, the performance of all of its and its Subsidiaries’ obligations
        hereunder and under the Ancillary Agreements on the Closing Date and, the
        authorization, issuance and delivery of the Notes have been taken or will
        be
        taken prior to the Closing Date. This Agreement and the Ancillary Agreements,
        when executed and delivered and to the extent it is a party thereto, will
        be its
        and its Subsidiaries’ valid and binding obligations enforceable against each
        such Person in accordance with their terms, except:

       

      (i) as
        limited by applicable bankruptcy, insolvency, reorganization, moratorium
        or
        other laws of general application affecting enforcement of creditors’ rights;
        and

       

      (ii) general
        principles of equity that restrict the availability of equitable or legal
        remedies.

      
        
          
          

        

        
          12

          
            

          

        

        
          
          

        

      

       

      The
        issuance of the Notes are not and will not be subject to any preemptive rights
        or rights of first refusal that have not been properly waived or complied
        with.

       

      (e) Liabilities.
        Except
        as listed on Schedule
        12(e),
        neither
        it nor any of its Subsidiaries has any liabilities, except current liabilities
        incurred in the ordinary course of business.

       

      (f) Agreements;
        Action.
        Except
        as set forth on Schedule
        12(f):

       

      (i) There
        are
        no agreements, understandings, instruments, contracts, proposed transactions,
        judgments, orders, writs or decrees to which it or any of its Subsidiaries
        is a
        party or to its knowledge by which it is bound which may involve: (i)
        obligations (contingent or otherwise) of, or payments to, it or any of its
        Subsidiaries in excess of $50,000 (other than obligations of, or payments
        to, it
        or any of its Subsidiaries arising from purchase or sale agreements entered
        into
        in the ordinary course of business); or (ii) the transfer or license of any
        patent, copyright, trade secret or other proprietary right to or from it
        (other
        than licenses arising from the purchase of “off the shelf” or other standard
        products); or (iii) provisions restricting the development, manufacture or
        distribution of its or any of its Subsidiaries’ products or services; or (iv)
        indemnification by it or any of its Subsidiaries with respect to infringements
        of proprietary rights.

       

      (ii) Since
        December 31, 2005 (the “Balance
        Sheet Date”)
        and
        except as listed on Schedule
        12(f),
        neither
        it nor any of its Subsidiaries has: (i) declared or paid any dividends, or
        authorized or made any distribution upon or with respect to any class or
        series
        of its Stock; (ii) incurred any indebtedness for money borrowed or any other
        liabilities (other than ordinary course obligations) individually in excess
        of
        $50,000 or, in the case of indebtedness and/or liabilities individually less
        than $50,000, in excess of $100,000 in the aggregate; (iii) made any loans
        or
        advances to any Person not in excess, individually or in the aggregate, of
        $50,000, other than ordinary advances for travel expenses; or (iv) sold,
        exchanged or otherwise disposed of any of its assets or rights, other than
        the
        sale of its Inventory in the ordinary course of business.

       

      (iii)For
        the
        purposes of subsections (i) and (ii) of this Section 12(f), all indebtedness,
        liabilities, agreements, understandings, instruments, contracts and proposed
        transactions involving the same Person (including Persons it or any of its
        applicable Subsidiaries has reason to believe are affiliated therewith or
        with
        any Subsidiary thereof) shall be aggregated for the purpose of meeting the
        individual minimum dollar amounts of such subsections.

       

      (g)Obligations
        to Related Parties.
        Except
        as set forth on Schedule
        12(g),
        neither
        it nor any of its Subsidiaries has any obligations to their respective officers,
        directors, equity holders or employees other than:

       

      (i) for
        payment of salary for services rendered and for bonus payments;

       

      (ii) reimbursement
        for reasonable expenses incurred on its or its Subsidiaries’
behalf;

      
        
          
          

        

        
          13

          
            

          

        

        
          
          

        

      

       

      (iii) for
        other
        standard employee benefits made generally available to all employees (including
        stock option agreements outstanding under any stock option plan approved
        by its
        and its Subsidiaries’ Board of Directors, as applicable); and

       

      (iv) obligations
        listed in its and each of its Subsidiary’s financial statements.

       

      Except
        as
        described above or set forth on Schedule
        12(g),
        none of
        its officers, directors or, to the best of its knowledge, key employees or
        equity holders, any of its Subsidiaries or any members of their immediate
        families, are indebted to it or any of its Subsidiaries, individually or
        in the
        aggregate, in excess of $50,000 or have any direct or indirect ownership
        interest in any Person with which it or any of its Subsidiaries is affiliated
        or
        with which it or any of its Subsidiaries has a business relationship, or
        any
        Person which competes with it or any of its Subsidiaries, other than passive
        investments in publicly traded companies (representing less than one percent
        (1%) of such company) which may compete with it or any of its Subsidiaries.
        Except as described above, none of its officers, directors or equity holders,
        or
        any member of their immediate families, is, directly or indirectly, interested
        in any material contract with it or any of its Subsidiaries and no agreements,
        understandings or proposed transactions are contemplated between it or any
        of
        its Subsidiaries and any such Person. Except as set forth on Schedule
        12(g),
        neither
        it nor any of its Subsidiaries is a guarantor or indemnitor of any indebtedness
        of any other Person.

       

      (h) Changes.
        Since
        the Balance Sheet Date, except as disclosed in any Schedule to this Agreement
        (including Schedule
        12(h))
        or to
        any of the Ancillary Agreements, there has not been:

       

      (i) any
        change in its or any of its Subsidiaries’ business, assets, liabilities,
        condition (financial or otherwise), properties, operations or prospects,
        which,
        individually or in the aggregate, has had, or could reasonably be expected
        to
        have, a Material Adverse Effect;

       

      (ii) any
        resignation or termination of any of its or its Subsidiaries’ officers, key
        employees or groups of employees; 

       

      (iii) any
        material change, except in the ordinary course of business, in its or any
        of its
        Subsidiaries’ contingent obligations by way of guaranty, endorsement, indemnity,
        warranty or otherwise;

       

      (iv) any
        damage, destruction or loss, whether or not covered by insurance, which has
        had,
        or could reasonably be expected to have, individually or in the aggregate,
        a
        Material Adverse Effect;

       

      (v) any
        waiver by it or any of its Subsidiaries of a valuable right or of a material
        debt owed to it;

       

      (vi) any
        direct or indirect material loans made by it or any of its Subsidiaries to
        any
        of its or any of its Subsidiaries’ equity holders, employees, officers or
        directors, other than advances made in the ordinary course of
        business;

      
        
          
          

        

        
          14

          
            

          

        

        
          
          

        

      

       

      (vii) any
        material change in any compensation arrangement or agreement with any employee,
        officer, director or equity holder; 

       

      (viii) any
        declaration or payment of any dividend or other distribution of its or any
        of
        its Subsidiaries’ assets;

       

      (ix) any
        labor
        organization activity related to it or any of its Subsidiaries;

       

      (x) any
        debt,
        obligation or liability incurred, assumed or guaranteed by it or any of its
        Subsidiaries, except those for immaterial amounts and for current liabilities
        incurred in the ordinary course of business;

       

      (xi) any
        sale,
        assignment or transfer of any Intellectual Property or other intangible
        assets;

       

      (xii) any
        change in any material agreement to which it or any of its Subsidiaries is
        a
        party or by which either it or any of its Subsidiaries is bound which, either
        individually or in the aggregate, has had, or could reasonably be expected
        to
        have, individually or in the aggregate, a Material Adverse Effect;

       

      (xiii) any
        other
        event or condition of any character that, either individually or in the
        aggregate, has had, or could reasonably be expected to have, individually
        or in
        the aggregate, a Material Adverse Effect; or

       

      (xiv) any
        arrangement or commitment by it or any of its Subsidiaries to do any of the
        acts
        described in subsection (i) through (xiii) of this Section 12(h).

       

      (i) Title
        to Properties and Assets; Liens, Etc.
        Except
        as set forth on Schedule 12(i),
        it and
        each of its Subsidiaries has good and marketable title to their respective
        properties and assets, and good title to its leasehold interests, in each
        case
        subject to no Lien, other than Permitted Liens.

       

      All
        facilities, Equipment, Fixtures, vehicles and other properties owned, leased
        or
        used by it or any of its Subsidiaries are in good operating condition and
        repair
        and are reasonably fit and usable for the purposes for which they are being
        used. Except as set forth on Schedule
        12(i),
        itand
        each of its Subsidiaries is in compliance with all material terms of each
        lease
        to which it is a party or is otherwise bound.

       

      (j) Intellectual
        Property.

       

      (i) It
        and
        each of its Subsidiaries owns or possesses sufficient legal rights to all
        Intellectual Property necessary for their respective businesses as now conducted
        and, to its knowledge as presently proposed to be conducted, without any
        known
        infringement of the rights of others. There are no outstanding options, licenses
        or agreements of any kind relating to its or any of its Subsidiary’s
        Intellectual Property, nor is it or any of its Subsidiaries bound by or a
        party
        to any options, licenses or agreements of any kind with respect to the
        Intellectual 

      
        
          
          

        

        
          15

          
            

          

        

        
          
          

        

      

       

      Property
        of any other Person other than such licenses or agreements arising from the
        purchase of “off the shelf” or standard products.

       

      (ii) Neither
        it nor any of its Subsidiaries has received any communications alleging that
        it
        or any of its Subsidiaries has violated any of the Intellectual Property
        or
        other proprietary rights of any other Person, nor is it or any of its
        Subsidiaries aware of any basis therefor.

       

      (iii) Neither
        it nor any of its Subsidiaries believes it is or will be necessary to utilize
        any inventions, trade secrets or proprietary information of any of its employees
        made prior to their employment by it or any of its Subsidiaries, except for
        inventions, trade secrets or proprietary information that have been rightfully
        assigned to it or any of its Subsidiaries.

       

      (k) Compliance
        with Other Instruments.
        Except
        as set forth in Schedule
        12(k),
        neither
        it nor any of its Subsidiaries is in violation or default of (x) any term
        of its
        Charter or Bylaws, or (y) any provision of any indebtedness, mortgage,
        indenture, contract, agreement or instrument to which it is party or by which
        it
        is bound or of any judgment, decree, order or writ, which violation or default,
        in the case of this clause (y), has had, or could reasonably be expected
        to
        have, either individually or in the aggregate, a Material Adverse Effect.
        The
        execution, delivery and performance of and compliance with this Agreement
        and
        the Ancillary Agreements to which it is a party, and the issuance of the
        Notes
        and the other Securities each pursuant hereto and thereto, will not, with
        or
        without the passage of time or giving of notice, result in any such material
        violation, or be in conflict with or constitute a default under any such
        term or
        provision, or result in the creation of any Lien upon any of its or any of
        its
        Subsidiary’s properties or assets or the suspension, revocation, impairment,
        forfeiture or nonrenewal of any permit, license, authorization or approval
        applicable to it or any of its Subsidiaries, their businesses or operations
        or
        any of their assets or properties. 

       

      (l) Litigation.
        Except
        as set forth on Schedule
        12(l),
        there
        is no action, suit, proceeding or investigation pending or, to its knowledge,
        currently threatened against it or any of its Subsidiaries that prevents
        it or
        any of its Subsidiaries from entering into this Agreement or the Ancillary
        Agreements, or from consummating the transactions contemplated hereby or
        thereby, or which has had, or could reasonably be expected to have, either
        individually or in the aggregate, a Material Adverse Effect, or could result
        in
        any change in its or any of its Subsidiaries’ current equity ownership, nor is
        it aware that there is any basis to assert any of the foregoing. Neither
        it nor
        any of its Subsidiaries is a party to or subject to the provisions of any
        order,
        writ, injunction, judgment or decree of any court or government agency or
        instrumentality. There is no action, suit, proceeding or investigation by
        it or
        any of its Subsidiaries currently pending or which it or any of its Subsidiaries
        intends to initiate.

      
        
          
          

        

        
          16

          
            

          

        

        
          
          

        

      

       

      (m) Tax
        Returns and Payments.
        It and
        each of its Subsidiaries has timely filed all tax returns (federal, state
        and
        local) required to be filed by it. All taxes shown to be due and payable
        on such
        returns, any assessments imposed, and all other taxes due and payable by
        it and
        each of its Subsidiaries on or before the Closing Date, have been paid or
        will
        be paid prior to the time they become delinquent. Except as set forth on
        Schedule
        12(m),
        neither
        it nor any of its Subsidiaries has been advised:

       

      (i) that
        any
        of its returns, federal, state or other, have been or are being audited as
        of
        the date hereof; or

       

      (ii) of
        any
        adjustment, deficiency, assessment or court decision in respect of its federal,
        state or other taxes.

       

      Neither
        it nor any of its Subsidiaries has any knowledge of any liability of any
        tax to
        be imposed upon its properties or assets as of the date of this Agreement
        that
        is not adequately provided for. 

       

      (n) Employees.
        Except
        as set forth on Schedule
        12(n),
        neither
        it nor any of its Subsidiaries has any collective bargaining agreements with
        any
        of its employees. There is no labor union organizing activity pending or,
        to its
        knowledge, threatened with respect to it or any of its Subsidiaries. Except
        as
        disclosed on Schedule
        12(n),
        neither
        it nor any of its Subsidiaries is a party to or bound by any currently effective
        employment contract, deferred compensation arrangement, bonus plan, incentive
        plan, profit sharing plan, retirement agreement or other employee compensation
        plan or agreement. To its knowledge, none of its or any of its Subsidiaries’
employees, nor any consultant with whom it or any of its Subsidiaries has
        contracted, is in violation of any term of any employment contract, proprietary
        information agreement or any other agreement relating to the right of any
        such
        individual to be employed by, or to contract with, it or any of its Subsidiaries
        because of the nature of the business to be conducted by it or any of its
        Subsidiaries; and to its knowledge the continued employment by it and its
        Subsidiaries of their present employees, and the performance of its and its
        Subsidiaries contracts with its independent contractors, will not result
        in any
        such violation. Neither it nor any of its Subsidiaries is aware that any
        of its
        or any of its Subsidiaries’ employees is obligated under any contract (including
        licenses, covenants or commitments of any nature) or other agreement, or
        subject
        to any judgment, decree or order of any court or administrative agency that
        would interfere with their duties to it or any of its Subsidiaries. Neither
        it
        nor any of its Subsidiaries has received any notice alleging that any such
        violation has occurred. Except for employees who have a current effective
        employment agreement with it or any of its Subsidiaries, none of its or any
        of
        its Subsidiaries’ employees has been granted the right to continued employment
        by it or any of its Subsidiaries or to any material compensation following
        termination of employment with it or any of its Subsidiaries. Except as set
        forth on Schedule 12(n),
        neither
        it nor any of its Subsidiaries is aware that any officer, key employee or
        group
        of employees intends to terminate his, her or their employment with it or
        any of
        its Subsidiaries, as applicable, nor does it or any of its Subsidiaries have
        a
        present intention to terminate the employment of any officer, key employee
        or
        group of employees.

       

      (o) Registration
        Rights and Voting Rights.
        Except
        as set forth on Schedule 12(o),
        neither
        it nor any of its Subsidiaries is presently under any obligation, and neither
        it
        nor any of its Subsidiaries has granted any rights, to register any of its
        or
        any of its 

      
        
          
          

        

        
          17

          
            

          

        

        
          
          

        

      

       

      Subsidiaries’
        presently outstanding securities or any of its securities that may hereafter
        be
        issued. Except as set forth on Schedule 12(o),
        to its
        knowledge, none of its or any of its Subsidiaries’ equity holders has entered
        into any agreement with respect to its or any of its Subsidiaries’ voting of
        equity securities.

       

      (p) Compliance
        with Laws; Permits.
        Except
        as disclosed in Schedule
        12(p)
        or
        another Schedule to this Agreement, neither it nor any of its Subsidiaries
        is in
        violation of the Sarbanes-Oxley Act of 2002 or any SEC related regulation
        or
        rule (to the extent they apply to the Parent or any of its Subsidiaries)
        or any
        other applicable statute, rule, regulation, order or restriction of any domestic
        or foreign government or any instrumentality or agency thereof in respect
        of the
        conduct of its business or the ownership of its properties which has had,
        or
        could reasonably be expected to have, either individually or in the aggregate,
        a
        Material Adverse Effect. No governmental orders, permissions, consents,
        approvals or authorizations are required to be obtained and no registrations
        or
        declarations are required to be filed in connection with the execution and
        delivery of this Agreement or any Ancillary Agreement and the issuance of
        any of
        the Securities, except such as have been duly and validly obtained or filed,
        or
        with respect to any filings that must be made after the Closing Date, as
        will be
        filed in a timely manner. It and each of its Subsidiaries has all material
        franchises, permits, licenses and any similar authority necessary for the
        conduct of its business as now being conducted by it, the lack of which could,
        either individually or in the aggregate, reasonably be expected to have a
        Material Adverse Effect.

       

      (q) Environmental
        and Safety Laws.
        Except
        as set forth in Schedule
        12(q),
        neither
        it nor any of its Subsidiaries is in violation of any applicable statute,
        law or
        regulation relating to the environment or occupational health and safety,
        and to
        its knowledge, no material expenditures are or will be required in order
        to
        comply with any such existing statute, law or regulation. Except as set forth
        on
Schedule
        12(q),
        and
        except as used by it in the normal and customary operation of its business
        for
        manufacturing, processing, maintenance and landscaping activities, no Hazardous
        Materials (as defined below) are used or have been used, stored, or disposed
        of
        by it or any of its Subsidiaries or, to its knowledge, by any other Person
        on
        any property owned, leased or used by it or any of its Subsidiaries. For
        the
        purposes of the preceding sentence, “Hazardous
        Materials”
shall
        mean:

       

      (i) materials
        which are listed or otherwise defined as “hazardous” or “toxic” under any
        applicable local, state, federal and/or foreign laws and regulations that
        govern
        the existence and/or remedy of contamination on property, the protection
        of the
        environment from contamination, the control of hazardous wastes, or other
        activities involving hazardous substances, including building materials;
        and

       

      (ii) any
        petroleum products or nuclear materials.

       

      (r) Valid
        Offering.
        Assuming the accuracy of the representations and warranties of Laurus contained
        in this Agreement, the offer and issuance of the Notes will be exempt from
        the
        registration requirements of the Securities Act of 1933, as amended (the
        “Securities
        Act”),
        and
        will have been registered or qualified (or are exempt from registration and
        qualification) under the registration, permit or qualification requirements
        of
        all applicable state securities laws. 

      
        
          
          

        

        
          18

          
            

          

        

        
          
          

        

      

       

      (s) Full
        Disclosure.
        It and
        each of its Subsidiaries has provided Laurus with all information requested
        by
        Laurus in connection with Laurus’ decision to enter into this Agreement. Neither
        this Agreement, the Ancillary Agreements nor the exhibits and schedules hereto
        and thereto nor any other document delivered by it or any of its Subsidiaries
        to
        Laurus or its attorneys or agents in connection herewith or therewith or
        with
        the transactions contemplated hereby or thereby, contain any untrue statement
        of
        a material fact nor omit to state a material fact necessary in order to make
        the
        statements contained herein or therein, in light of the circumstances in which
        they are made, not misleading. The financial projections and other estimates
        attached as Schedule
        12(s)
        were
        based on its and its Subsidiaries’ experience in the industry and on assumptions
        of fact and opinion as to future events which it or any of its Subsidiaries,
        at
        the date of the issuance of such projections or estimates, believed to be
        reasonable. 

       

      (t) Insurance.
        It and
        each of its Subsidiaries has general commercial, product liability, fire
        and
        casualty insurance policies with coverages which it believes are customary
        for
        companies similarly situated to it and its Subsidiaries in the same or similar
        business.

       

      (u) Intentionally
        Deleted.
        

       

      (v) Intentionally
        Deleted. 

       

      (w) No
        Integrated Offering.
        Neither
        it, nor any of its Subsidiaries nor any of its Affiliates, nor any Person
        acting
        on its or their behalf, has directly or indirectly made any offers or sales
        of
        any security or solicited any offers to buy any security under circumstances
        that would cause the offering of the Securities pursuant to this Agreement
        or
        any Ancillary Agreement to be integrated with prior offerings by it for purposes
        of the Securities Act which would prevent it from issuing the Securities
        pursuant to Rule 506 under the Securities Act, or any applicable
        exchange-related equity holder approval provisions, nor will it or any of
        its
        Affiliates or Subsidiaries take any action or steps that would cause the
        offering of the Securities to be integrated with other offerings.

       

      (x) Stop
        Transfer.
        The
        Securities are restricted securities as of the date of this Agreement. Neither
        it nor any of its Subsidiaries will issue any stop transfer order or other
        order
        impeding the sale and delivery of any of the Securities at such time as the
        Securities are registered for public sale or an exemption from registration
        is
        available, except as required by state and federal securities laws.

       

      (y) Patriot
        Act.
        It
        certifies that, to the best of its knowledge, neither it nor any of its
        Subsidiaries has been designated, nor is or shall be owned or controlled,
        by a
“suspected terrorist” as defined in Executive Order 13224. It hereby
        acknowledges that Laurus seeks to comply with all applicable laws concerning
        money laundering and related activities. In furtherance of those efforts,
        it
        hereby represents, warrants and covenants that: (i) none of the cash or property
        that it or any of its Subsidiaries will pay or will contribute to Laurus
        has
        been or shall be derived from, or related to, any activity that is deemed
        criminal under United States law; and (ii) no contribution or payment by
        it or
        any of its Subsidiaries to Laurus, to the extent that they are within its
        or any
        such Subsidiary’s control shall cause Laurus to be in violation of the United
        States Bank Secrecy Act, the United States International Money Laundering
        Control Act 

      
        
          
          

        

        
          19

          
            

          

        

        
          
          

        

      

       

      of
        1986
        or the United States International Money Laundering Abatement and Anti-Terrorist
        Financing Act of 2001. It shall promptly notify Laurus if any of these
        representations, warranties and covenants ceases to be true and accurate
        regarding it or any of its Subsidiaries. It shall provide Laurus with any
        additional information regarding it and each Subsidiary thereof that Laurus
        deems necessary or convenient to ensure compliance with all applicable laws
        concerning money laundering and similar activities. It understands and agrees
        that if at any time it is discovered that any of the foregoing representations,
        warranties and covenants are incorrect, or if otherwise required by applicable
        law or regulation related to money laundering or similar activities, Laurus
        may
        undertake appropriate actions to ensure compliance with applicable law or
        regulation, including but not limited to segregation and/or redemption of
        Laurus’ investment in it. It further understands that Laurus may release
        confidential information about it and its Subsidiaries and, if applicable,
        any
        underlying beneficial owners, to proper authorities if Laurus, in its sole
        discretion, determines that it is in the best interests of Laurus in light
        of
        relevant rules and regulations under the laws set forth in subsection (ii)
        above.

       

      (z) Company
        Name; Locations of Offices, Records and Collateral.
        Schedule 12(z)
        sets
        forth each Company’s name as it appears in official filings in the state of its
        organization, the type of entity of each Company, the organizational
        identification number issued by each Company’s state of organization or a
        statement that no such number has been issued, each Company’s state of
        organization, and the location of each Company’s chief executive office,
        corporate offices, warehouses, other locations of Collateral and locations
        where
        records with respect to Collateral are kept (including in each case the county
        of such locations) and, except as set forth in such Schedule
        12(z),
        such
        locations have not changed during the preceding twelve months. As of the
        Closing
        Date, during the prior five years, except as set forth in Schedule
        12(z),
        no
        Company has been known as or conducted business in any other name (including
        trade names). Each Company has only one state of organization.

       

      (aa) ERISA.
        Based
        upon the Employee Retirement Income Security Act of 1974 (“ERISA”),
        and
        the regulations and published interpretations thereunder: (i) neither it
        nor any
        of its Subsidiaries has engaged in any Prohibited Transactions (as defined
        in
        Section 406 of ERISA and Section 4975 of the Code); (ii) it and each of its
        Subsidiaries has met all applicable minimum funding requirements under Section
        302 of ERISA in respect of its plans; (iii) neither it nor any of its
        Subsidiaries has any knowledge of any event or occurrence which would cause
        the
        Pension Benefit Guaranty Corporation to institute proceedings under Title
        IV of
        ERISA to terminate any employee benefit plan(s); (iv) neither it nor any
        of its
        Subsidiaries has any fiduciary responsibility for investments with
        respect to any plan existing for the benefit of persons other than its or
        such
        Subsidiary’s employees; and (v) neither it nor any of its Subsidiaries has
        withdrawn, completely or partially, from any multi-employer pension plan
        so as
        to incur liability under the Multiemployer Pension Plan Amendments Act of
        1980.

       

      13. Covenants.
        Each
        Company, as applicable, covenants and agrees with Laurus as
        follows:

       

      (a) Stop-Orders.
        It
        shall advise Laurus, promptly after it receives notice of issuance by the
        SEC,
        any state securities commission or any other regulatory authority of any
        stop
        order or of any order preventing or suspending any offering of any securities
        of
        the Parent, 

      
        
          
          

        

        
          20

          
            

          

        

        
          
          

        

      

       

      or
        of the
        suspension of the qualification of the Stock of the Parent for offering or
        sale
        in any jurisdiction, or the initiation of any proceeding for any such
        purpose.

       

      (b) Valid
        Issuance.
        It
        shall take all necessary action and proceedings as may be required and permitted
        by applicable law, rule and regulation, for the legal and valid issuance
        of the
        Notes to Laurus.

       

      (c) Use
        of
        Funds.
        It
        shall use the proceeds of the Loans to acquire substantially all of the assets
        of E. T. Smith Services of Alabama, Inc., including real estate, equipment,
        inventory, accounts and all other working assets, under the SSA Asset Purchase
        Agreement dated May 31, 2006, and for general working capital
        purposes.

       

      (d) Access
        to Facilities.
        It
        shall, and shall cause each of its Subsidiaries to, permit any representatives
        designated by Laurus (or any successor of Laurus), upon reasonable notice
        and
        during normal business hours, at Company’s expense and accompanied by a
        representative of Company Agent (provided that no such prior notice shall
        be
        required to be given and no such representative shall be required to accompany
        Laurus in the event Laurus believes such access is necessary to preserve
        or
        protect the Collateral or following the occurrence and during the continuance
        of
        an Event of Default), to:

      

      (i) visit
        and
        inspect any of its or any such Subsidiary’s properties;

      

      (ii)  examine
        its or any such Subsidiary’s corporate and financial records (unless such
        examination is not permitted by federal, state or local law or by contract)
        and
        make copies thereof or extracts therefrom; and

      

      (iii) discuss
        its or any such Subsidiary’s affairs, finances and accounts with its or any such
        Subsidiary’s chief executive officer and/or chief financial
        officer.

       

      Laurus
        agrees to, and to cause its Affiliates to, maintain the confidentiality of
        and
        not disclose any material, non-public information concerning the Parent or
        its
        Subsidiaries or other Affiliates, unless required by applicable law or legal
        process (and in such event shall provide the Parent prompt notice of such
        required disclosure), to not trade in any of the Parent’s securities on the
        basis of such material, non-public information, and to otherwise comply with
        federal securities laws, rules and regulations.

       

      (e) Taxes.
        It
        shall, and shall cause each of its Subsidiaries to, promptly pay and discharge,
        or cause to be paid and discharged, when due and payable, all lawful taxes,
        assessments and governmental charges or levies imposed upon it and its
        Subsidiaries’ income, profits, property or business, as the case may be;
        provided, however, that any such tax, assessment, charge or levy need not
        be
        paid currently if (i) the validity thereof shall currently and diligently
        be contested in good faith by appropriate proceedings, (ii) such tax,
        assessment, charge or levy shall have no effect on the Lien priority of Laurus
        in the Collateral, and (iii) if it and/or such Subsidiary, as applicable,
        shall
        have set aside on its and/or such Subsidiary’s books adequate reserves with
        respect thereto in accordance with GAAP; and provided, further, that it shall,
        and shall cause each of its Subsidiaries to, pay all such taxes, assessments,
        charges or levies forthwith upon the commencement of proceedings to foreclose
        any lien which may have attached as security therefor.

      
        
          
          

        

        
          21

          
            

          

        

        
          
          

        

      

       

      (f) Insurance.
        It
        shall bear the full risk of loss from any loss of any nature whatsoever with
        respect to the Collateral. It and each of its Subsidiaries shall keep its
        assets
        which are of an insurable character insured by financially sound and reputable
        insurers against loss or damage by fire, explosion and other risks customarily
        insured against by companies in similar business similarly situated as it
        and
        its Subsidiaries; and it and its Subsidiaries shall maintain, with financially
        sound and reputable insurers, insurance against other hazards and risks and
        liability to persons and property to the extent and in the manner which it
        and/or such Subsidiary thereof reasonably believes is customary for companies
        in
        similar business similarly situated as it and its Subsidiaries and to the
        extent
        available on commercially reasonable terms. It and each of its Subsidiaries
        will
        jointly and severally bear the full risk of loss from any loss of any nature
        whatsoever with respect to the assets pledged to Laurus as security for its
        obligations hereunder and under the Ancillary Agreements. At its own cost
        and
        expense in amounts and with carriers reasonably acceptable to Laurus, it
        and
        each of its Subsidiaries shall (i) keep all their insurable properties and
        properties in which they have an interest insured against the hazards of
        fire,
        flood, sprinkler leakage, those hazards covered by extended coverage insurance
        and such other hazards, and for such amounts, as is customary in the case
        of
        companies engaged in businesses similar to it or the respective Subsidiary’s
        including business interruption insurance; (ii) maintain a bond in such amounts
        as is customary in the case of companies engaged in businesses similar to
        it and
        its Subsidiaries’ insuring against larceny, embezzlement or other criminal
        misappropriation of insured’s officers and employees who may either singly or
        jointly with others at any time have access to its or any of its Subsidiaries
        assets or funds either directly or through governmental authority to draw
        upon
        such funds or to direct generally the disposition of such assets; (iii) maintain
        public and product liability insurance against claims for personal injury,
        death
        or property damage suffered by others; (iv) maintain all such worker’s
        compensation or similar insurance as may be required under the laws of any
        state
        or jurisdiction in which it or any of its Subsidiaries is engaged in business;
        and (v) furnish Laurus with (x) copies of all policies and evidence of the
        maintenance of such policies at least thirty (30) days before any expiration
        date, (y) excepting its and its Subsidiaries’ workers’ compensation policy,
        endorsements to such policies naming Laurus as “co-insured” or “additional
        insured” and appropriate loss payable endorsements in form and substance
        satisfactory to Laurus, naming Laurus as lenders loss payee, and (z) evidence
        that as to Laurus the insurance coverage shall not be impaired or invalidated
        by
        any act or neglect of any Company or any of its Subsidiaries and the insurer
        will provide Laurus with at least thirty (30) days notice prior to cancellation.
        It shall instruct the insurance carriers that in the event of any loss
        thereunder, the carriers shall make payment for such loss to Laurus and not
        to
        any Company or any of its Subsidiaries and Laurus jointly. If any insurance
        losses are paid by check, draft or other instrument payable to any Company
        and/or any of its Subsidiaries and Laurus jointly, Laurus may endorse, as
        applicable, such Company’s and/or any of its Subsidiaries’ name thereon and do
        such other things as Laurus may
        deem
        advisable to reduce the same to cash. Laurus is hereby authorized to adjust
        and
        compromise claims. All loss recoveries received by Laurus upon any such
        insurance may be applied to the Obligations, in such order as Laurus in its
        sole
        discretion shall determine or shall otherwise be delivered to Company Agent
        for
        the benefit of the applicable Company and/or its Subsidiaries. Any surplus
        shall
        be paid by Laurus to Company Agent for the benefit of the applicable Company
        and/or its Subsidiaries, or applied as may be otherwise required by law.
        Any
        deficiency thereon shall be paid, as applicable, by Companies and their
        Subsidiaries to Laurus, on demand.

      
        
          
          

        

        
          22

          
            

          

        

        
          
          

        

      

       

      (g) Intellectual
        Property.
        It
        shall, and shall cause each of its Subsidiaries to, maintain in full force
        and
        effect its corporate existence, rights and franchises and all licenses and
        other
        rights to use Intellectual Property owned or possessed by it and reasonably
        deemed to be necessary to the conduct of its business.

       

      (h) Properties.
        It
        shall, and shall cause each of its Subsidiaries to, keep its properties in
        good
        repair, working order and condition, reasonable wear and tear excepted, and
        from
        time to time make all needful and proper repairs, renewals, replacements,
        additions and improvements thereto; and it shall, and shall cause each of
        its
        Subsidiaries to, at all times comply with each provision of all leases to
        which
        it is a party or under which it occupies property if the breach of such
        provision could reasonably be expected to have a Material Adverse
        Effect.

       

      (i) Confidentiality.
        It
        shall not, and shall not permit any of its Subsidiaries to, disclose, and
        will
        not include in any public announcement, the name of Laurus, unless expressly
        agreed to by Laurus or unless and until such disclosure is required by law
        or
        applicable regulation, and then only to the extent of such requirement.
        Notwithstanding the foregoing, each Company and its Subsidiaries may disclose
        Laurus’ identity and the terms of this Agreement to its current and prospective
        debt and equity financing sources.

       

      (j) Required
        Approvals.
        It
        shall not, and shall not permit any of its Subsidiaries to, without the prior
        written consent of Laurus, (i) create, incur, assume or suffer to exist any
        indebtedness (exclusive of trade debt) whether secured or unsecured other
        than
        (x) operating leases to the extent constituting indebtedness, (y) Purchase
        Money
        Indebtedness not to exceed $50,000 in the aggregate principal amount outstanding
        at any time for the purchase of vehicles which indebtedness may be secured
        solely by Purchase Money Liens, (z) each Company’s indebtedness to Laurus, (xx)
        as set forth on Schedule 13(l)(i)
        attached
        hereto and made a part hereof and (yy) indebtedness in addition to the other
        indebtedness permitted in this clause (i) not to exceed $50,000 in aggregate
        principal amount outstanding at any time, so long as such indebtedness referred
        to in this clause (yy) is either (I) unsecured or (II) subject to a security
        interest subordinated to the security interest of Laurus with respect to
        the
        Obligations, on terms and conditions satisfactory to Laurus; (ii) cancel
        any
        debt owing to it in excess of $200,000 in the aggregate during any 12 month
        period; (iii) assume, guarantee, endorse or otherwise become directly or
        contingently liable in connection with any obligations of any other Person,
        except the endorsement of negotiable instruments by it or its Subsidiaries
        for
        deposit or collection or similar transactions in the ordinary course of
        business; (iv) directly or indirectly declare, pay or make any dividend or
        distribution on any class of its Stock or apply any of its funds, property
        or
        assets to the purchase, redemption or other retirement of any of its or its
        Subsidiaries’
        Stock outstanding on the date hereof, or issue any preferred stock; (v) purchase
        or hold beneficially any Stock or other securities or evidences of indebtedness
        of, make or permit to exist any loans or advances to, or make any investment
        or
        acquire any interest whatsoever in, any other Person, including any partnership
        or joint venture, except (x) travel advances, (y) loans to its and its
        Subsidiaries’ officers and employees not exceeding at any one time an aggregate
        of $10,000, and (z) loans to its existing Subsidiaries so long as such
        Subsidiaries are designated as either a co-borrower hereunder or has entered
        into such guaranty and security documentation required by Laurus, including,
        without limitation, to grant to Laurus a first priority perfected security
        interest in substantially all of such Subsidiary’s assets to secure the
        Obligations; (vi) create or permit to exist any Subsidiary, other than any
        Subsidiary in existence on the date hereof 

      
        
          
          

        

        
          23

          
            

          

        

        
          
          

        

      

       

      and
        listed in Schedule
        12(b)
        unless
        such new Subsidiary is a wholly-owned Subsidiary and is designated by Laurus
        as
        either a co-borrower or guarantor hereunder and such Subsidiary shall have
        entered into all such documentation required by Laurus, including, without
        limitation, to grant to Laurus a first priority perfected security interest
        in
        substantially all of such Subsidiary’s assets to secure the Obligations; (vii)
        directly or indirectly, prepay any indebtedness (other than to Laurus and
        in the
        ordinary course of business), or repurchase, redeem, retire or otherwise
        acquire
        any indebtedness (other than to Laurus and in the ordinary course of business)
        except to make scheduled payments of principal and interest thereof into
        Stock
        as described on Schedule
        12(c);
        (viii)
        enter into any merger, consolidation or other reorganization with or into
        any
        other Person or acquire all or a portion of the assets or Stock of any Person
        or
        permit any other Person to consolidate with or merge with it, unless
        (1) such Company is the surviving entity of such merger or consolidation,
        (2) no Event of Default shall exist immediately prior to and after giving
        effect
        to such merger or consolidation, (3) such Company shall have provided
        Laurus copies of all documentation relating to such merger or consolidation
        and
        (4) such Company shall have provided Laurus with at least thirty (30) days’
prior written notice of such merger or consolidation; (ix) materially change
        the
        nature of the business in which it is presently engaged; (x) become subject
        to
        (including, without limitation, by way of amendment to or modification of)
        any
        agreement or instrument which by its terms would (under any circumstances)
        restrict its or any of its Subsidiaries’ right to perform the provisions of this
        Agreement or any of the Ancillary Agreements; (xi) change its fiscal year
        or
        make any changes in accounting treatment and reporting practices without
        prior
        written notice to Laurus except as required by GAAP or in the tax reporting
        treatment or except as required by law; (xii) enter into any transaction
        with
        any employee, director or Affiliate, except in the ordinary course on
        arms-length terms; (xiii) bill Accounts under any name except the present
        name
        of such Company; or (xiv) sell, lease, transfer or otherwise dispose of any
        of
        its properties or assets, or any of the properties or assets of its
        Subsidiaries, except for (1) the sale of Inventory in the ordinary course
        of
        business and (2) the disposition or transfer in the ordinary course of business
        during any fiscal year of obsolete and worn-out Equipment and only to the
        extent
        that (x) the proceeds of any such disposition or transfer in excess of $50,000
        in any fiscal year of the Parent are used to acquire replacement Equipment
        which
        is subject to Laurus’ first priority security interest or are used to repay
        Loans or to pay general corporate expenses, or (y) following the occurrence
        of
        an Event of Default which continues to exist, the proceeds of which are remitted
        to Laurus to be held as cash collateral for the Obligations. 

       

      (k) Opinion.
        On the
        Closing Date, it shall deliver to Laurus an opinion acceptable to Laurus
        from
        each Company’s legal counsel. 

       

      (l) Legal
        Name, etc.
        It
        shall not, without providing Laurus with 30 days prior written notice, change
        (i) its name as it appears in the official filings in the state of its
        organization, (ii) the type of legal entity it is, (iii) its organization
        identification number, if any, issued by its state of organization, or (iv)
        its
        state of organization. In addition, without providing Laurus with 7 days
        prior
        written notice, the Parent will not amend its certificate of incorporation,
        by-laws or other organizational document. 

       

      (m) Compliance
        with Laws.
        The
        operation of each of its and each of its Subsidiaries’ business is and shall
        continue to be in compliance in all material respects with all applicable
        federal, state and local laws, rules and ordinances, including to all laws,
        rules, 

      
        
          
          

        

        
          24

          
            

          

        

        
          
          

        

      

       

      regulations
        and orders relating to taxes, payment and withholding of payroll taxes, employer
        and employee contributions and similar items, securities, employee retirement
        and welfare benefits, employee health and safety and environmental
        matters.

       

      (n) Notices.
        It and
        each of its Subsidiaries shall promptly inform Laurus in writing of: (i)
        the
        commencement of all proceedings and investigations by or before and/or the
        receipt of any notices from, any governmental or nongovernmental body and
        all
        actions and proceedings in any court or before any arbitrator against or
        in any
        way concerning any event which could reasonably be expected to have singly
        or in
        the aggregate, a Material Adverse Effect; (ii) any change which has had,
        or
        could reasonably be expected to have, a Material Adverse Effect; (iii) any
        Event
        of Default or Default; and (iv) any default or any event which with the passage
        of time or giving of notice or both would constitute a default under any
        agreement for the payment of money to which it or any of its Subsidiaries
        is a
        party or by which it or any of its Subsidiaries or any of its or any such
        Subsidiary’s properties may be bound the breach of which would have a Material
        Adverse Effect.

       

      (o) Margin
        Stock.
        It
        shall not permit any of the proceeds of the Loans made hereunder, or any
        Note to
        be used directly or indirectly to “purchase” or “carry” “margin stock” or to
        repay indebtedness incurred to “purchase” or “carry” “margin stock” within the
        respective meanings of each of the quoted terms under Regulation U of the
        Board
        of Governors of the Federal Reserve System as now and from time to time
        hereafter in effect. 

       

      (p) Offering
        Restrictions.
        Neither
        it nor any of its Subsidiaries shall, prior to the full repayment of the
        Notes
        (together with all accrued and unpaid interest and fees related thereto),
        (x)
        enter into any equity line of credit agreement or similar agreement or (y)
        issue, or enter into any agreement to issue, any securities with a
        variable/floating conversion and/or pricing feature which are or could be
        (by
        conversion or registration) free-trading securities (i.e. common stock subject
        to a registration statement). 

       

      (q) Financing
        Right of First Refusal.

       

      (i) Until
        all
        obligations under the Notes have been paid in full, Laurus shall have a right
        of
        first refusal to provide any Additional Financing (as defined below) to be
        issued by any Company and/or any of its Subsidiaries (the “Additional
        Financing Parties”),
        subject to the following terms and conditions. From and after the date hereof,
        prior to the incurrence of any additional indebtedness which has a
        convertibility feature (an “Additional Financing”),
        Company Agent shall notify Laurus of such Additional Financing. In connection
        therewith, Company Agent shall submit a fully executed term sheet (a
“Proposed
        Term Sheet”)
        to
        Laurus setting forth the terms, conditions and pricing of any such Additional
        Financing (such financing to be negotiated on “arm’s length” terms and the terms
        thereof to be negotiated in good faith) proposed to be entered into by the
        Additional Financing Parties. Laurus shall have the right, but not the
        obligation, to deliver to Company Agent its own proposed term sheet (the
        “Laurus
        Term Sheet”)
        setting forth the terms and conditions upon which Laurus would be willing
        to
        provide such Additional Financing to the Additional Financing Parties. The
        Laurus Term Sheet shall contain terms no less favorable to the Additional
        Financing Parties than those outlined in Proposed Term Sheet. Laurus shall
        deliver to Company Agent the Laurus Term Sheet within ten Business Days of
        receipt of each such Proposed Term Sheet. If the provisions 

      
        
          
          

        

        
          25

          
            

          

        

        
          
          

        

      

       

      of
        the
        Laurus Term Sheet are at least as favorable to the Additional Financing Parties
        as the provisions of the Proposed Term Sheet, the Additional Financing Parties
        shall enter into and consummate the Additional Financing transaction outlined
        in
        the Laurus Term Sheet. 

       

      (ii) Until
        all
        obligations under the Notes have been paid in full, it shall not, and shall
        not
        permit its Subsidiaries to, agree, directly or indirectly, to any restriction
        with any Person which limits the ability of Laurus to consummate an Additional
        Financing with it or any of its Subsidiaries.  

       

      14. Further
        Assurances.
        At any
        time and from time to time, upon the written request of Laurus and at the
        sole
        expense of Companies, each Company shall promptly and duly execute and deliver
        any and all such further instruments and documents and take such further
        action
        as Laurus may request (a) to obtain the full benefits of this Agreement and
        the
        Ancillary Agreements, (b) to protect, preserve and maintain Laurus’ rights in
        the Collateral and under this Agreement or any Ancillary Agreement, and/or
        (c)
        to enable Laurus to exercise all or any of the rights and powers herein granted
        or any Ancillary Agreement.
        Laurus
        agrees to comply with applicable securities laws in connection with the transfer
        of the Securities.

       

      15. Representations,
        Warranties and Covenants of Laurus.
        Laurus
        hereby represents, warrants and covenants to each Company as
        follows:

       

      (a) Requisite
        Power and Authority.
        Laurus
        has all necessary power and authority under all applicable provisions of
        law to
        execute and deliver this Agreement and the Ancillary Agreements and to carry
        out
        their provisions. All corporate action on Laurus’ part required for the lawful
        execution and delivery of this Agreement and the Ancillary Agreements have
        been
        or will be effectively taken prior to the Closing
        Date.
        Upon their execution and delivery, this Agreement and the Ancillary Agreements
        shall be valid and binding obligations of Laurus, enforceable in accordance
        with
        their terms, except (a) as limited by applicable bankruptcy, insolvency,
        reorganization, moratorium or other laws of general application affecting
        enforcement of creditors’ rights, and (b) as limited by general principles of
        equity that restrict the availability of equitable and legal
        remedies.

       

      (b) Investment
        Representations.
        Laurus
        understands that the Notes are being offered pursuant to an exemption from
        registration contained in the Securities Act based in part upon
        Laurus’ representations and warranties contained in this Agreement, including,
        without limitation, that Laurus is an “accredited investor” within the meaning
        of Regulation D under the Securities Act. Laurus has received or has had
        full
        access to all the information it considers necessary or appropriate to make
        an
        informed investment decision with respect to the Notes to be issued to it
        under
        this Agreement 

       

      (c) Laurus
        Bears Economic Risk.
        Laurus
        has substantial experience in evaluating and investing in private placement
        transactions of securities in companies similar to the Parent so that it
        is
        capable of evaluating the merits and risks of its investment in the Parent
        and
        has the capacity to protect its own interests. Laurus must and is financially
        able to bear the economic risk of this investment including without limitation
        the entire loss of this investment.

      
        
          
          

        

        
          26

          
            

          

        

        
          
          

        

      

       

      (d) Investment
        for Own Account.
        The
        Notes are being issued to Laurus for its own account for investment only,
        and
        not as a nominee or agent and not with a view towards or for resale in
        connection with their distribution.

       

      (e) Laurus
        Can Protect Its Interest.
        By
        reason of its, or of its management’s, business and financial experience, Laurus
        has the capacity to evaluate the merits and risks of its investment in the
        Notes
        and to protect its own interests in connection with the transactions
        contemplated in this Agreement, and the Ancillary Agreements. Further, Laurus
        is
        aware of no publication of any advertisement in connection with the transactions
        contemplated in the Agreement or the Ancillary Agreements.

       

      (f) Accredited
        Investor.
        Laurus
        represents and warrants that it is an accredited investor within the meaning
        of
        Regulation D under the Securities Act.

       

      (g) Patriot
        Act.
        Laurus
        certifies that, to the best of Laurus’ knowledge, Laurus has not been
        designated, and is not owned or controlled, by a “suspected terrorist” as
        defined in Executive Order 13224. Laurus seeks to comply with all applicable
        laws concerning money laundering and related activities. In furtherance of
        those
        efforts, Laurus hereby represents, warrants and covenants that: (i) none
        of the
        cash or property that Laurus will use to make the Loans has been or shall
        be
        derived from, or related to, any activity that is deemed criminal under United
        States law; and (ii) no disbursement by Laurus to any Company to the extent
        within Laurus’ control, shall cause Laurus to be in violation of the United
        States Bank Secrecy Act, the United States International Money Laundering
        Control Act of 1986 or the United States International Money Laundering
        Abatement and Anti-Terrorist Financing Act of 2001. Laurus shall promptly
        notify
        the Company Agent if any of these representations ceases to be true and accurate
        regarding Laurus. Laurus agrees to provide the Company any additional
        information regarding Laurus that the Company deems necessary or convenient
        to
        ensure compliance with all applicable laws concerning money laundering and
        similar activities. Laurus understands and agrees that if at any time it
        is
        discovered that any of the foregoing representations are incorrect, or if
        otherwise required by applicable law or regulation related to money laundering
        similar activities, Laurus may undertake appropriate actions to ensure
        compliance with applicable law or regulation, including but not limited to
        segregation and/or redemption of Laurus’ investment in the Parent. Laurus
        further understands that the Parent may release information about Laurus
        and, if
        applicable, any underlying beneficial owners, to proper authorities
        if the Parent, in its sole discretion, determines that it is in the best
        interests of the Parent in light of relevant rules and regulations under
        the
        laws set forth in subsection (ii) above.

       

      (h) Limitation
        on Acquisition of Common Stock.
        Notwithstanding anything to the contrary contained in this Agreement, any
        Ancillary Agreement, or any document, instrument or agreement entered into
        in
        connection with any other transaction entered into by and between Laurus
        and any
        Company (and/or Subsidiaries or Affiliates of any Company), Laurus shall
        not
        acquire Stock in the Parent
        (including, without limitation, pursuant to a contract to purchase, by
        exercising an option or warrant, by converting any other security or instrument,
        by acquiring or exercising any other right to acquire, shares of Stock or
        other
        security convertible into shares of Stock in the Parent, or otherwise, and
        such
        options, warrants, conversion or other rights shall not be exercisable) to
        the
        extent such stock acquisition would cause any interest (including any original
        issue discount) payable by any Company to Laurus not to qualify as

      
        
          
          

        

        
          27

          
            

          

        

        
          
          

        

      

       

      portfolio
        interest, within the meaning of Section 881(c)(2) of the Internal Revenue
        Code
        of 1986, as amended (the “Code”)
        by
        reason of Section 881(c)(3) of the Code, taking into account the constructive
        ownership rules under Section 871(h)(3)(C) of the Code (the “Stock
        Acquisition Limitation”).
        

       

      16. Power
        of Attorney.
        Each
        Company hereby appoints Laurus, or any other Person whom Laurus may designate
        as
        such Company’s attorney, with power to: (i) endorse such Company’s name on any
        checks, notes, acceptances, money orders, drafts or other forms of payment
        or
        security that may come into Laurus’ possession; (ii) sign such Company’s name on
        any invoice or bill of lading relating to any Accounts, drafts against Account
        Debtors, schedules and assignments of Accounts, notices of assignment, financing
        statements and other public records, verifications of Account and notices
        to or
        from Account Debtors; (iii) verify the validity, amount or any other matter
        relating to any Account by mail, telephone, telegraph or otherwise with Account
        Debtors; (iv) do all things necessary to carry out this Agreement, any Ancillary
        Agreement and all related documents; and (v) notify the post office authorities
        to change the address for delivery of such Company’s mail to an address
        designated by Laurus, and to receive, open and dispose of all mail addressed
        to
        such Company. Each Company hereby ratifies and approves all acts of the
        attorney. Neither Laurus, nor the attorney will be liable for any acts or
        omissions or for any error of judgment or mistake of fact or law, except
        for
        gross negligence or willful misconduct. This power, being coupled with an
        interest, is irrevocable so long as Laurus has a security interest and until
        the
        Obligations have been fully satisfied.
        Notwithstanding anything to the contrary contained in this Section 16, this
        power of attorney shall only be exercisable following the occurrence and
        during
        the continuation of an Event of Default, except with respect to the filing
        of
        financing statements, in which case such power of attorney shall be exercisable
        on and after the date hereof.

       

      17. Term
        of Agreement.
        Laurus’
agreement to make Loans and extend financial accommodations under and in
        accordance with the terms of this Agreement or any Ancillary Agreement shall
        continue in full force and effect until the expiration of the Term. At Laurus’
election following the occurrence of an Event of Default, Laurus may terminate
        this Agreement. The termination of the Agreement shall not affect any of
        Laurus’
rights hereunder or any Ancillary Agreement and the provisions hereof and
        thereof shall continue to be fully operative
        until all transactions entered into, rights or interests created and the
        Obligations have been irrevocably disposed of, concluded or liquidated.
        Notwithstanding the foregoing, Laurus shall release its security interests
        at
        any time after thirty (30) days notice upon irrevocable payment to it of
        all
        Obligations if each Company shall have provided Laurus with an executed release
        of any and all claims which such Company may have or thereafter have under
        this
        Agreement and all Ancillary Agreements 

       

      18. Termination
        of Lien.
        The
        Liens and rights granted to Laurus hereunder and any Ancillary Agreements
        and
        the financing statements filed in connection herewith or therewith shall
        continue in full force and effect, notwithstanding the termination of this
        Agreement or the fact that any Company’s account may from time to time be
        temporarily in a zero or credit position, until all of the Obligations have
        been
        indefeasibly paid or performed in full after the termination of this Agreement.
        Laurus shall not be required to send termination statements to any Company,
        or
        to file them with any filing office, unless and until this 

      
        
          
          

        

        
          28

          
            

          

        

        
          
          

        

      

       

      Agreement
        and the Ancillary Agreements shall have been terminated in accordance with
        their
        terms and all Obligations indefeasibly paid in full in immediately available
        funds.

       

      19. Events
        of Default.
        The
        occurrence of any of the following shall constitute an “Event
        of Default”:

       

      (a) failure
        to make payment of any of the Obligations when required hereunder, and, in
        any
        such case, such failure shall continue for a period of five (5) days following
        the date upon which any such payment was due; 

       

      (b) failure
        by any Company or any of its Subsidiaries to pay any taxes when due unless
        such
        taxes are being contested in good faith
        by
        appropriate proceedings and with respect to which adequate reserves have
        been
        provided on such Company’s and/or such Subsidiary’s books;

       

      (c) failure
        to perform under, and/or committing any breach of, in any material respect,
        this
        Agreement or any covenant contained herein, which failure or breach shall
        continue without remedy for a period of thirty (30) days after the occurrence
        thereof;

       

      (d) any
        representation, warranty or statement made by any Company or any of its
        Subsidiaries hereunder, in any Ancillary Agreement, any certificate, statement
        or document delivered pursuant to the terms hereof, or in connection with
        the
        transactions contemplated by this Agreement should prove to be false or
        misleading in any material respect on the date as of which made or deemed
        made;

       

      (e) the
        occurrence of any default (or similar term) in the observance or performance
        of
        any other agreement or condition relating to any indebtedness or contingent
        obligation of any Company or any of its Subsidiaries beyond the period of
        grace
        (if any), the effect of which default is to cause, or permit the holder or
        holders of such indebtedness or beneficiary or beneficiaries of such contingent
        obligation to cause, such indebtedness to become due prior to its stated
        maturity or such contingent obligation to become payable;

       

      (f) attachments
        or levies in excess of $100,000 in the aggregate are made upon any Company’s
        assets or a judgment is rendered against any Company’s property involving a
        liability of more than $100,000 which shall not have been vacated, discharged,
        stayed or bonded within thirty (30) days from the entry thereof;

       

      (g) any
        Lien
        created hereunder or under any Ancillary Agreement for any reason ceases
        to be
        or is not a valid and perfected Lien having a first priority
        interest;

       

      (h) any
        Company or any of its Subsidiaries shall (i) apply for, consent to or
        suffer to exist the appointment of, or the taking of possession by, a receiver,
        custodian, trustee or liquidator of itself or of all or a substantial part
        of
        its property, (ii) make a general assignment for the benefit of creditors,
        (iii) commence a voluntary case under the federal bankruptcy laws (as now
        or
        hereafter in effect), (iv) be adjudicated a bankrupt or insolvent, (v) file
        a
        petition seeking to take advantage of any other law providing for the relief
        of
        debtors, (vi) acquiesce to without challenge within ten (10) days of the
        filing
        thereof, or failure to have dismissed within thirty (30) 

      
        
          
          

        

        
          29

          
            

          

        

        
          
          

        

      

       

      days,
        any
        petition filed against it in any involuntary case under such bankruptcy laws,
        or
        (vii) take any action for the purpose of effecting any of the
        foregoing;

       

      (i) any
        Company or any of its Subsidiaries shall admit in writing its inability,
        or be
        generally unable, to pay its debts as they become due or cease operations
        of its
        present business;

       

      (j) any
        Company or any of its Subsidiaries directly or indirectly sells, assigns,
        transfers, conveys, or suffers or permits to occur any sale, assignment,
        transfer or conveyance of any assets of such Company or any interest therein,
        except as permitted herein;

       

      (k) any
        “Person” or “group” (as such terms are defined in Sections 13(d) and 14(d) of
        the Exchange Act, as in effect on the date hereof), other than the Holder,
        is or
        becomes the “beneficial owner” (as defined in Rules 13(d)-3 and 13(d)-5 under
        the Exchange Act), directly or indirectly, of 35% or more on a fully diluted
        basis of the then outstanding voting equity interest of the Parent (other
        than a
“Person” or “group” that beneficially owns 35% or more of such outstanding
        voting equity interests of Parent on the date hereof), (ii) the Board of
        Directors of the Parent shall cease to consist of a majority of the Board
        of
        Directors of the Parent on the date hereof (or directors appointed by a majority
        of the Board of Directors in effect immediately prior to such appointment
        or by
        any “Person” or “group” that beneficially owns more than fifty percent (50%) of
        the outstanding voting equity interests of Parent on the date
        hereof)
        or (iii)
        the Parent or any of its Subsidiaries merges or consolidates with, or sells
        all
        or substantially all of its assets to, any other person or entity other than
        an
        entity that is party to this Agreement (other than Laurus);

       

      (l) the
        indictment or threatened indictment of any Company or any of its Subsidiaries
        or
        any executive officer of any Company or any of its Subsidiaries under any
        criminal statute, or commencement or threatened commencement of criminal
        or
        civil proceeding against any Company or any of its Subsidiaries or any executive
        officer of any Company or any of its Subsidiaries pursuant to which statute
        or
        proceeding penalties or remedies sought or available include forfeiture of
        any
        of the property of any Company or any of its Subsidiaries; 

       

      (m) an
        Event
        of Default shall occur under and as defined in any Note or in any other
        Ancillary Agreement;

       

      (n) any
        Company or any of its Subsidiaries shall breach any term or provision of
        any
        Ancillary Agreement to which it is a party, in any material respect which
        breach
        is not cured within any applicable cure or grace period provided in respect
        thereof (if any);

       

      (o) any
        Company or any of its Subsidiaries attempts to terminate, challenges the
        validity of, or its liability under this Agreement or any Ancillary Agreement,
        or any proceeding shall be brought to challenge the validity, binding effect
        of
        any Ancillary Agreement or any Ancillary Agreement ceases to be a valid,
        binding
        and enforceable obligation of such Company or any of its Subsidiaries (to
        the
        extent such Persons are a party thereto); or

       

      (p) an
        SEC
        stop trade order or Principal Market trading suspension of the common stock
        of
        MISCOR Group, Ltd. shall be in effect for five (5) consecutive days or five
        (5)
        days during a period of ten (10) consecutive days, excluding in all cases
        a
        suspension of all 

      
        
          
          

        

        
          30

          
            

          

        

        
          
          

        

      

       

      trading
        on a Principal Market, provided that MISCOR Group, Ltd. shall not have been
        able
        to cure such trading suspension within sixty (60) days of the notice thereof
        or
        list its common stock on another Principal Market within sixty (60) days
        of such
        notice. 

       

      20. Remedies.
        Following the occurrence of an Event of Default, Laurus shall have the right
        to
        demand repayment in full of all Obligations, whether or not otherwise due.
        Until
        all Obligations have been fully and indefeasibly satisfied, Laurus shall
        retain
        its Lien in all Collateral. Laurus shall have, in addition to all other rights
        provided herein and in each Ancillary Agreement, the rights and remedies
        of a
        secured party under the UCC, and under other applicable law, all other legal
        and
        equitable rights to which Laurus may be entitled, including the right to
        take
        immediate possession of the Collateral, to require each Company to assemble
        the
        Collateral, at Companies’ joint and several expense, and to make it available to
        Laurus at a place designated by Laurus which is reasonably convenient to
        both
        parties and to enter any of the premises of any Company or wherever the
        Collateral shall be located, with or without force or process of law, and
        to
        keep and store the same on said premises until sold (and if said premises
        be the
        property of any Company, such Company agrees not to charge Laurus for storage
        thereof), and the right to apply for the appointment of a receiver for such
        Company’s property. Further, Laurus may, at any time or times after the
        occurrence of an Event of Default, sell and deliver all Collateral held by
        or
        for Laurus at public or private sale for cash, upon credit or otherwise,
        at such
        prices and upon such terms as Laurus, in Laurus’ sole discretion, deems
        advisable or Laurus may otherwise recover upon the Collateral in any
        commercially reasonable manner as Laurus, in its sole discretion, deems
        advisable. The requirement of reasonable notice shall be met if such notice
        is
        mailed postage prepaid to Company Agent at Company Agent’s address as shown in
        Laurus’ records, at least ten (10) days before the time of the event of which
        notice is being given. Laurus may be the purchaser at any sale, if it is
        public.
        In connection with the exercise of the foregoing remedies, Laurus is granted
        permission to use all of each Company’s Intellectual Property. The proceeds of
        sale shall be applied first to all costs and expenses of sale, including
        attorneys’ fees, and second to the payment (in whatever order Laurus elects) of
        all Obligations. After the indefeasible payment and satisfaction in full
        of all
        of the Obligations, and after the payment by Laurus of any other amount required
        by any provision of law, including Section 9-608(a)(1)
        of the UCC (but only after Laurus has received what Laurus considers reasonable
        proof of a subordinate party’s security interest), the surplus, if any, shall be
        paid to Company Agent (for the benefit of the applicable Companies) or its
        representatives or to whosoever may be lawfully entitled to receive the same,
        or
        as a court of competent jurisdiction may direct. Each Company and Laurus
        acknowledge that the actual damages that would be incurred by Laurus after
        the
        occurrence of an Event of Default would be difficult to quantify and that
        such
        Company and Laurus have agreed that the fees and obligations set forth in
        this
        Agreement would constitute fair and appropriate liquidated damages in the
        event
        of any such termination.

       

      21. Waivers.
        To the
        full extent permitted by applicable law, each Company hereby waives (a)
        presentment, demand and protest, and notice of presentment, dishonor, intent
        to
        accelerate, acceleration, protest, default, nonpayment, maturity, release,
        compromise, settlement, extension or renewal of any or all of this Agreement
        and
        the Ancillary Agreements or any other notes, commercial paper, Accounts,
        contracts, Documents, Instruments, Chattel Paper and guaranties at any time
        held
        by Laurus on which such Company may in any way be liable, and hereby ratifies
        and confirms whatever Laurus may do in this regard; (b) all rights to notice
        

      
        
          
          

        

        
          31

          
            

          

        

        
          
          

        

      

       

      and
        a
        hearing prior to Laurus’ taking possession or control of, or to Laurus’ replevy,
        attachment or levy upon, any Collateral or any bond or security that might
        be
        required by any court prior to allowing Laurus to exercise any of its remedies;
        and (c) the benefit of all valuation, appraisal and exemption laws. Each
        Company
        acknowledges that it has been advised by counsel of its choices and decisions
        with respect to this Agreement, the Ancillary Agreements and the transactions
        evidenced hereby and thereby. 

       

      22. Expenses.
        The
        Companies shall jointly and severally pay all of Laurus’ reasonable
        out-of-pocket costs and expenses, including reasonable fees and disbursements
        of
        in-house or outside counsel and appraisers, in connection with the preparation,
        execution and delivery of this Agreement and the Ancillary Agreements, and
        in
        connection with the prosecution or defense of any action, contest, dispute,
        suit
        or proceeding concerning any matter in any way arising out of, related to
        or
        connected with this Agreement or any Ancillary Agreement. The Companies shall
        also jointly and severally pay all of Laurus’ reasonable fees, charges,
        out-of-pocket costs and expenses, including fees and disbursements of counsel
        and appraisers, in connection with (a) the preparation, execution and delivery
        of any waiver, any amendment thereto or consent proposed or executed in
        connection with the transactions contemplated by this Agreement or the Ancillary
        Agreements, (b) Laurus’ obtaining performance of the Obligations under this
        Agreement and any Ancillary Agreements, including, but not limited to, the
        enforcement or defense of Laurus’ security interests, assignments of rights and
        Liens hereunder as valid perfected security interests, (c) any attempt to
        inspect, verify, protect, collect, sell, liquidate or otherwise dispose of
        any
        Collateral, (d) any appraisals or re-appraisals of any property (real or
        personal) pledged to Laurus by any Company or any of its Subsidiaries as
        Collateral for, or any other Person as security for, the Obligations hereunder
        and (e) any consultations in connection with any of the foregoing. The Companies
        shall also jointly and severally pay Laurus’ customary bank charges for all bank
        services (including wire transfers) performed or caused to be performed by
        Laurus for any Company or any of its Subsidiaries at any Company’s or such
        Subsidiary’s request or in connection with any Company’s loan account with
        Laurus. All such costs and expenses together with all filing, recording
        and search fees, taxes and interest payable by the Companies to Laurus shall
        be
        payable on demand and shall be secured by the Collateral. If any tax by any
        Governmental Authority is or may be imposed on or as a result of any transaction
        between any Company and/or any Subsidiary thereof, on the one hand, and Laurus
        on the other hand, which Laurus is or may be required to withhold or pay,
        the
        Companies hereby jointly and severally indemnifies and holds Laurus harmless
        in
        respect of such taxes, and the Companies will repay to Laurus the amount
        of any
        such taxes which shall be charged to the Companies’ account; and until the
        Companies shall furnish Laurus with indemnity therefor (or supply Laurus
        with
        evidence satisfactory to it that due provision for the payment thereof has
        been
        made), Laurus may hold without interest any balance standing to each Company’s
        credit and Laurus shall retain its Liens in any and all Collateral.
        Notwithstanding the foregoing, in connection with a litigation between Laurus,
        on the one hand, and one or more Companies, on the other hand, the
        prevailing party in such action, as determined by the applicable court, shall
        be
        entitled to attorneys fees actually incurred, and costs and necessary
        disbursements incurred, in each case, in connection with any such
        action.

       

      23. Assignment
        By Laurus.
        Laurus
        may assign any or all of the Obligations together with any or all of the
        security therefor to any Person which is not a competitor of any

      
        
          
          

        

        
          32

          
            

          

        

        
          
          

        

      

       

      Company
        and any such transferee shall succeed to all of Laurus’ rights with respect
        thereto. Upon such transfer, Laurus shall be released from all responsibility
        for the Collateral to the extent same is assigned to any transferee. Laurus
        may
        from time to time sell or otherwise grant participations in any of the
        Obligations and the holder of any such participation shall, subject to the
        terms
        of any agreement between Laurus and such holder, be entitled to the same
        benefits as Laurus with respect to any security for the Obligations in which
        such holder is a participant. Each Company agrees that each such holder may
        exercise any and all rights of banker’s lien, set-off and counterclaim with
        respect to its participation in the Obligations as fully as though such Company
        were directly indebted to such holder in the amount of such
        participation.

       

      24. No
        Waiver; Cumulative Remedies.
        Failure
        by Laurus to exercise any right, remedy or option under this Agreement, any
        Ancillary Agreement or any supplement hereto or thereto or any other agreement
        between or among any Company and Laurus or delay by Laurus in exercising
        the
        same, will not operate as a waiver; no waiver by Laurus will be effective
        unless
        it is in writing and then only to the extent specifically stated. Laurus’ rights
        and remedies under this Agreement and the Ancillary Agreements will be
        cumulative and not exclusive of any other right or remedy which Laurus may
        have.

       

      25. Application
        of Payments.
        Except
        as provided in Section 3.3 of the Revolving Note and Section 4.3 of the Term
        Note: (a) after the occurrence and during the continuance of an Event of
        Default, each Company irrevocably waives the right to direct the application
        of
        any and all payments at any time or times hereafter received by Laurus from
        or
        on such Company’s behalf; and (b), notwithstanding whether or not an Event of
        Default has occurred and is continuing, each Company hereby irrevocably agrees
        that Laurus shall have the continuing exclusive right to apply and reapply
        any
        and all payments received at any time or times hereafter against the Obligations
        hereunder in such manner as Laurus may deem advisable notwithstanding any
        entry
        by Laurus upon any of Laurus’ books and records.

       

      26. Indemnity.
        

       

      (a) General
        Indemnity.
        Each
        Company hereby jointly and severally indemnify and hold Laurus, and its
        respective affiliates, employees, attorneys and agents (each, an “Indemnified
        Person”),
        harmless from and against any and all suits, actions, proceedings, claims,
        damages, losses, liabilities and expenses of any kind or nature whatsoever
        (including reasonable attorneys’ fees and disbursements and other costs of
        investigation or defense, including those incurred upon any appeal) which
        may be
        instituted or asserted against or incurred by any such Indemnified Person
        as the
        result of credit having been extended, suspended or terminated under this
        Agreement or any of the Ancillary Agreements or with respect to the execution,
        delivery, enforcement, performance and administration of, or in any other
        way
        arising out of or relating to, this Agreement, the Ancillary Agreements or
        any
        other documents or transactions contemplated by or referred to herein or
        therein
        and any actions or failures to act with respect to any of the foregoing,
        except
        to the extent that any such indemnified liability is finally determined by
        a
        court of competent jurisdiction to have resulted solely from such Indemnified
        Person’s gross negligence or willful misconduct. NO INDEMNIFIED PERSON SHALL BE
        RESPONSIBLE OR LIABLE TO ANY COMPANY OR TO ANY OTHER PARTY OR TO ANY SUCCESSOR,
        ASSIGNEE OR THIRD PARTY BENEFICIARY OR ANY OTHER PERSON ASSERTING CLAIMS
        DERIVATIVELY THROUGH SUCH 

      
        
          
          

        

        
          33

          
            

          

        

        
          
          

        

      

       

      PARTY,
        FOR INDIRECT, PUNITIVE, EXEMPLARY OR CONSEQUENTIAL DAMAGES WHICH MAY BE ALLEGED
        AS A RESULT OF CREDIT HAVING BEEN EXTENDED, SUSPENDED OR TERMINATED UNDER
        THIS
        AGREEMENT OR ANY ANCILLARY AGREEMENT OR AS A RESULT OF ANY OTHER TRANSACTION
        CONTEMPLATED HEREUNDER OR THEREUNDER.

       

      27. Revival.
        The
        Companies further agree that to the extent any Company makes a payment or
        payments to Laurus, which payment or payments or any part thereof are
        subsequently invalidated, declared to be fraudulent or preferential, set
        aside
        and/or required to be repaid to a trustee, receiver or any other party under
        any
        bankruptcy act, state or federal law, common law or equitable cause, then,
        to
        the extent of such payment or repayment, the obligation or part thereof intended
        to be satisfied shall be revived and continued in full force and effect as
        if
        said payment had not been made.

       

      28. Borrowing
        Agency Provisions. 

       

      (a) Each
        Company hereby irrevocably designates Company Agent to be its attorney and
        agent
        and in such capacity to borrow, sign and endorse notes, and execute and deliver
        all instruments, documents, writings and further assurances now or hereafter
        required hereunder, on behalf of such Company, and hereby authorizes Laurus
        to
        pay over or credit all loan proceeds hereunder in accordance with the request
        of
        Company Agent.

       

      (b) The
        handling of this credit facility as a co-borrowing facility with a borrowing
        agent in the manner set forth in this Agreement is solely as an accommodation
        to
        the Companies and at their request. Laurus shall not incur any liability
        to any
        Company as a result thereof.
        To induce Laurus to do so and in consideration thereof, each Company hereby
        indemnifies Laurus and holds Laurus harmless from and against any and all
        liabilities, expenses, losses, damages and claims of damage or injury asserted
        against Laurus by any Person arising from or incurred by reason of the handling
        of the financing arrangements of the Companies as provided herein, reliance
        by
        Laurus on any request or instruction from Company Agent or any other action
        taken by Laurus with respect to this Section 28.

       

      (c) All
        Obligations shall be joint and several, and the Companies shall make payment
        upon the maturity of the Obligations by acceleration or otherwise, and such
        obligation and liability on the part of the Companies shall in no way be
        affected by any extensions, renewals and forbearance granted by Laurus to
        any
        Company, failure of Laurus to give any Company notice of borrowing or any
        other
        notice, any failure of Laurus to pursue to preserve its rights against any
        Company, the release by Laurus of any Collateral now or thereafter acquired
        from
        any Company, and such agreement by any Company to pay upon any notice issued
        pursuant thereto is unconditional and unaffected by prior recourse by Laurus
        to
        any Company or any Collateral for such Company’s Obligations or the lack
        thereof.

       

      (d) Each
        Company expressly waives any and all rights of subrogation, reimbursement,
        indemnity, exoneration, contribution or any other claim which such Company
        may
        now or hereafter have against the other or other Person directly or contingently
        liable for the 

      
        
          
          

        

        
          34

          
            

          

        

        
          
          

        

      

       

      Obligations,
        or against or with respect to any other’s property (including, without
        limitation, any property which is Collateral for the Obligations), arising
        from
        the existence or performance of this Agreement, until all Obligations have
        been
        indefeasibly paid in full and this Agreement has been irrevocably
        terminated.

       

      (e) Each
        Company represents and warrants to Laurus that (i) Companies have one or
        more
        common shareholders, directors and officers, (ii) the businesses and corporate
        activities of Companies are closely related to, and substantially benefit,
        the
        business and corporate activities of Companies, (iii) the financial and other
        operations of Companies are performed on a combined basis as if Companies
        constituted a consolidated corporate group, (iv) Companies will receive a
        substantial economic benefit from entering into this Agreement and will receive
        a
        substantial economic benefit from the application of each Loan hereunder,
        in
        each case, whether or not such amount is used directly by any Company and
        (v)
        all requests for Loans hereunder by the Company Agent are for the exclusive
        and
        indivisible benefit of the Companies as though, for purposes of this Agreement,
        the Companies constituted a single entity. Any restriction against intercompany
        borrowing?

       

      29. Notices.
        Any
        notice or request hereunder may be given to any Company, Company Agent or
        Laurus
        at the respective addresses set forth below or as may hereafter be specified
        in
        a notice designated as a change of address under this Section. Any notice
        or
        request hereunder shall be given by registered or certified mail, return
        receipt
        requested, hand delivery, overnight mail or telecopy (confirmed by mail).
        Notices and requests shall be, in the case of those by hand delivery, deemed
        to
        have been given when delivered to any officer of the party to whom it is
        addressed, in the case of those by mail or overnight mail, deemed to have
        been
        given three (3) Business Days after the date when deposited in the mail or
        with
        the overnight mail carrier, and, in the case of a telecopy, when
        confirmed.

       

      Notices
        shall be provided as follows:

       

      

      
        	 	
                If
                  to Laurus:

              	
                Laurus
                  Master Fund, Ltd.

              	 
	 	
                 

              	
                c/o
                  Laurus Capital Management, LLC

              
	 	
                 

              	
                825
                  Third Avenue, 14th Fl.

              
	 	
                 

              	
                New
                  York, New
                  York 10022

              
	 	
                 

              	
                Attention: 
                  John
                  E. Tucker, Esq.

              
	 	
                 

              	
                Telephone: 
                  (212)
                  541-4434

              
	 	 	
                Telecopier: 
                  (212)
                  541-5800

              
	 	 	 	 
	 	
                If
                  to any Company, 

              	 	 
	 	
                or
                  Company Agent:

              	
                Magnetech
                  Industrial Services of Alabama, LLC

              
	 	 	
                c/o
                  MISCOR Group, Ltd.

              
	 	 	
                1125
                  S. Walnut Street

              
	 	 	
                South
                  Bend, Indiana 46619

              
	 	 	
                Attention: 
                  John
                  Martell

              
	 	 	
                Telephone: 
                  574-234-8131

              
	 	 	
                Facsimile: 
                  574-232-7648

              

      

      

      
        
          
          

        

        
          35

          
            

          

        

        
          
          

        

      

      

      
        	 	
                With
                  a copy to:

              	
                Barnes
                  & Thornburg LLP

              
	 	 	
                600
                  1st
                  Source Bank Center

              
	 	 	
                100
                  North Michigan

              
	 	 	
                South
                  Bend, Indiana 46601

              
	 	 	
                Attention:

              	
                Richard
                  L. Mintz, Esq.

              
	 	 	
                Telephone:

              	
                574-237-1166

              
	 	 	
                Facsimile:

              	
                574-237-1125

              

      

       

       

      or
        such
        other address as may be designated in writing hereafter in accordance with
        this
        Section 29 by such Person.

       

      30. Governing
        Law, Jurisdiction and Waiver of Jury Trial. 

       

      (a) THIS
        AGREEMENT AND THE ANCILLARY AGREEMENTS SHALL BE GOVERNED BY AND CONSTRUED
        AND
        ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK APPLICABLE
        TO
        CONTRACTS MADE AND PERFORMED IN SUCH STATE, 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 LAURUS, ON THE OTHER HAND, PERTAINING TO THIS AGREEMENT OR ANY OF THE
        ANCILLARY AGREEMENTS OR TO ANY MATTER ARISING OUT OF OR RELATED TO THIS
        AGREEMENT OR ANY OF THE ANCILLARY AGREEMENTS; PROVIDED,
        THAT
        LAURUS AND EACH COMPANY ACKNOWLEDGE 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 AGREEMENT SHALL BE DEEMED OR OPERATE TO PRECLUDE LAURUS 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 LAURUS.
        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 COMPANY AGENT AT THE ADDRESS SET FORTH IN SECTION 29 AND THAT
        SERVICE SO MADE SHALL BE DEEMED COMPLETED UPON THE EARLIER OF COMPANY AGENT’S
        ACTUAL RECEIPT THEREOF OR THREE (3) DAYS AFTER DEPOSIT IN THE U.S. MAILS,
        PROPER
        POSTAGE PREPAID.

      
        
          
          

        

        
          36

          
            

          

        

        
          
          

        

      

       

      (c) THE
        PARTIES DESIRE THAT THEIR 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, THE PARTIES HERETO WAIVE 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 LAURUS, AND/OR ANY
        COMPANY ARISING OUT OF, CONNECTED WITH, RELATED OR INCIDENTAL TO THE
        RELATIONSHIP ESTABLISHED BETWEEN THEM IN CONNECTION WITH THIS AGREEMENT,
        ANY
        ANCILLARY AGREEMENT OR THE TRANSACTIONS RELATED HERETO OR THERETO.

       

      31. Limitation
        of Liability.
        Each
        Company acknowledges and understands that in order to assure repayment of
        the
        Obligations hereunder Laurus may be required to exercise any and all of Laurus’
rights and remedies hereunder and agrees that, except as limited by applicable
        law, neither Laurus nor any of Laurus’ agents shall be liable for acts taken or
        omissions made in connection herewith or therewith except for actual bad
        faith,
        gross negligence or willful misconduct .

       

      32. Entire
        Understanding; Maximum Interest.
        This
        Agreement and the Ancillary Agreements contain the entire understanding among
        each Company and Laurus as to the subject matter hereof and thereof and any
        promises, representations, warranties or guarantees not herein contained
        shall
        have no force and effect unless in writing, signed by each Company’s and Laurus’
respective officers. Neither this Agreement, the Ancillary Agreements, nor
        any
        portion or provisions thereof may be changed, modified, amended, waived,
        supplemented, discharged, cancelled or terminated orally or by any course
        of
        dealing, or in any manner other than by an agreement in writing, signed by
        the
        party to be charged.
        Nothing
        contained in this Agreement, any Ancillary Agreement or in any document referred
        to herein or delivered in connection herewith shall be deemed to establish
        or
        require the payment of a rate of interest or other charges in excess of the
        maximum rate permitted by applicable law. In the event that the rate of interest
        or dividends required to be paid or other charges hereunder exceed the maximum
        rate permitted by such law, any payments in excess of such maximum shall
        be
        credited against amounts owed by the Companies to Laurus and thus refunded
        to
        the Companies.

       

      33. Severability.
        Wherever possible each provision of this Agreement or the Ancillary Agreements
        shall be interpreted in such manner as to be effective and valid under
        applicable law, but if any provision of this Agreement or the Ancillary
        Agreements shall be prohibited by or invalid under applicable law such provision
        shall be ineffective to the extent of such prohibition or invalidity, without
        invalidating the remainder of such provision or the remaining provisions
        thereof.

       

      34. Survival.
        The
        representations, warranties, covenants and agreements made herein shall survive
        any investigation made by Laurus and the closing of the transactions
        contemplated hereby to the extent provided therein. All statements as to
        factual
        matters contained in any certificate or other instrument delivered by
or
        on
        behalf of the Companies pursuant hereto in connection with the transactions
        contemplated hereby shall be deemed to be representations and warranties
        by the
        Companies hereunder solely as of the date of such certificate or instrument.
        All
        indemnities set forth herein shall survive the execution, delivery

      
        
          
          

        

        
          37

          
            

          

        

        
          
          

        

      

       

      and
        termination of this Agreement and the Ancillary Agreements and the making
        and
        repaying of the Obligations.

       

      35. Captions.
        All
        captions are and shall be without substantive meaning or content of any kind
        whatsoever.

       

      36. Counterparts;
        Telecopier Signatures.
        This
        Agreement may be executed in one or more counterparts, each of which shall
        constitute an original and all of which taken together shall constitute one
        and
        the same agreement. Any signature delivered by a party via telecopier
        transmission shall be deemed to be any original signature hereto.

       

      37. Construction.
        The
        parties acknowledge that each party and its counsel have reviewed this Agreement
        and that the normal rule of construction to the effect that any ambiguities
        are
        to be resolved against the drafting party shall not be employed in the
        interpretation of this Agreement or any amendments, schedules or exhibits
        thereto.

       

      38. Publicity.
        Each
        Company hereby authorizes Laurus to make, subject to Section 13(f) and to
        any
        limitations that the Parent determines to be necessary or appropriate to
        comply
        with applicable publicity or disclosure restrictions arising in connection
        with
        the registration of the common stock of MISCOR Group, Ltd., the indirect
        owner
        of the Parent, under the Securities Act, appropriate announcements of the
        financial arrangement entered into by and among each Company and Laurus,
        including, without limitation, announcements which are commonly known as
        tombstones, in such publications and to such selected parties as Laurus shall
        in
        its sole and absolute discretion deem appropriate, or as required by applicable
        law.

       

      39. Joinder.
        It is
        understood and agreed that any Person that desires to become a Company
        hereunder, or is required to execute a counterpart of this Agreement after
        the
        date hereof pursuant to the requirements of this Agreement or any Ancillary
        Agreement, shall become a Company hereunder by (a) executing a Joinder Agreement
        in form and substance satisfactory to Laurus, (b) delivering supplements
        to such
        exhibits and annexes to this Agreement and the Ancillary Agreements as Laurus
        shall reasonably request and (c) taking all actions as specified in this
        Agreement as would have been taken by such Company had it been an original
        party
        to this Agreement, in each case with all documents required above to be
        delivered to Laurus and with all documents and actions required above to
        be
        taken to the reasonable satisfaction of Laurus. 

       

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

       

      

      
        
          
          

        

        
          38

          
            

          

        

        
          
          

        

      

       

      IN
        WITNESS WHEREOF, the parties have executed this Security and Purchase Agreement
        as of the date first written above.

      
        	 	
                 

                MAGNTECH
                  INDUSTRIAL SERVICES OF ALABAMA, LLC

              
	 	 	 
	 	
                By:

              	/s/
                John A. Martell
	 	
                Name:

              	John
                A. Martell
	 	
                Title:

              	President
	 	 	 
	 	
                 

                LAURUS
                  MASTER FUND, LTD. 

              
	 	 	 
	 	
                By:

              	/s/
                David Grin
	 	
                Name:

              	David
                Grin
	 	
                Title

              	Partner

      

      : 

       

      

      
        
          
          

        

        
          39

          
            

          

        

        
          
          

        

      

       

      Annex
        A - Definitions

       

      “Account
        Debtor”
means
        any Person who is or may be obligated with respect to, or on account of,
        an
        Account.

       

      “Accountants”
has
        the
        meaning given to such term in Section 11(a).

       

      “Accounts”
means
        all “accounts”, as such term is defined in the UCC, now owned or hereafter
        acquired by any Person, including: (a) all accounts receivable, other
        receivables, book debts and other forms of obligations (other than forms
        of
        obligations evidenced by Chattel Paper or Instruments) (including any such
        obligations that may be characterized as an account or contract right under
        the
        UCC); (b) all of such Person’s rights in, to and under all purchase orders or
        receipts for goods or services; (c) all of such Person’s rights to any goods
        represented by any of the foregoing (including unpaid sellers’ rights of
        rescission, replevin, reclamation and stoppage in transit and rights to
        returned, reclaimed or repossessed goods); (d) all rights to payment due
        to such
        Person for Goods or other property sold, leased, licensed, assigned or otherwise
        disposed of, for a policy of insurance issued or to be issued, for a secondary
        obligation incurred or to be incurred, for energy provided or to be provided,
        for the use or hire of a vessel under a charter or other contract, arising
        out
        of the use of a credit card or charge card, or for services rendered or to
        be
        rendered by such Person or in connection with any other transaction (whether
        or
        not yet earned by performance on the part of such Person); and (e) all
        collateral security of any kind given by any Account Debtor or any other
        Person
        with respect to any of the foregoing. 

       

      “Accounts
        Availability”
means
        up to ninety percent (90%) of the net face amount of Eligible
        Accounts.

       

      “Additional
        Financing Parties”
has
        the
        meaning given to such term in Section 13(u).

       

      “Affiliate”
means,
        with respect to any Person, (a) any other Person (other than a Subsidiary)
        which, directly or indirectly, is in control of, is controlled by, or is
        under
        common control with such Person or (b) any other Person who is a director
        or
        officer (i) of such Person, (ii) of any Subsidiary of such Person or (iii)
        of
        any Person described in clause (a) above. For the purposes of this definition,
        control of a Person shall mean the power (direct or indirect) to direct or
        cause
        the direction of the management and policies of such Person whether by contract
        or otherwise.

       

      “Ancillary
        Agreements”
means
        the Notes, Guaranty, the Related Agreements (as such term is defined in the
        Guaranty), that certain Mortgage Agreement by and among Magnetech Industrial
        Services of Alabama, LLC and Laurus dated as of the date hereof (as amended,
        modified or supplemented, the “Mortgage”), each Security Document and all other
        agreements, instruments, documents, mortgages, pledges, powers of attorney,
        consents, assignments, contracts, notices, security agreements, trust agreements
        and guarantees whether heretofore, concurrently, or hereafter executed by
        or on
        behalf of any Company, any of its Subsidiaries or any other Person or delivered
        to Laurus, relating to this Agreement or to the transactions contemplated
        by
        this Agreement or otherwise relating to the relationship between
        or

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      among
        any
        Company and Laurus, as each of the same may be amended, supplemented, restated
        or otherwise modified from time to time.

       

      “Balance
        Sheet Date”
has
        the
        meaning given such term in Section 12(f)(ii).

       

      “Books
        and Records”
means
        all books, records, board minutes, contracts, licenses, insurance policies,
        environmental audits, business plans, files, computer files, computer discs
        and
        other data and software storage and media devices, accounting books and records,
        financial statements (actual and pro forma), filings with Governmental
        Authorities and any and all records and instruments relating to the Collateral
        or otherwise necessary or helpful in the collection thereof or the realization
        thereupon. 

       

      “Business
        Day”
means
        a
        day on which Laurus is open for business and that is not a Saturday, a Sunday
        or
        other day on which banks are required or permitted to be closed in the State
        of
        New York.

       

      “Capital
        Availability Amount”
means
        $3,700,000.

       

      “Charter”
has
        the
        meaning given such term in Section 12(c)(iv).

       

      “Chattel
        Paper”
means
        all “chattel paper,” as such term is defined in the UCC, including electronic
        chattel paper, now owned or hereafter acquired by any Person.

       

      “Closing
        Date”
means
        the date on which any Company shall first receive proceeds of the initial
        Loans
        or the date hereof, if no Loan is made under the facility on the date
        hereof.

       

      “Closing
        Payment”
has
        the
        meaning given such term in Section 5(b)(i).

       

      “Code”
has
        the
        meaning given such term in Section 15(i).

       

      “Collateral”
means
        all of each Company’s property and assets, whether real or personal, tangible or
        intangible, and whether now owned or hereafter acquired, or in which it now
        has
        or at any time in the future may acquire any right, title or interests including
        all of the following property in which it now has or at any time in the future
        may acquire any right, title or interest:

       

      (a) all
        Inventory;

       

      (b) all
        Equipment;

       

      (c) all
        Fixtures;

       

      (d) all
        General Intangibles;

       

      (e) all
        Accounts;

       

      (f) all
        Deposit Accounts, other bank accounts and all funds on deposit
        therein;

      
        
          
          

        

        
          2

          
            

          

        

        
          
          

        

      

       

      (g) all
        Investment Property;

       

      (h) all
        Stock;

       

      (i) all
        Chattel Paper;

       

      (j) all
        Letter-of-Credit Rights;

       

      (k) all
        Instruments;

       

      (l) all
        commercial tort claims set forth on Schedule
        1(A);

       

      (m) all
        Books
        and Records;

       

      (n) all
        Intellectual Property;

       

      (o) all
        Supporting Obligations including letters of credit and guarantees issued
        in
        support of Accounts, Chattel Paper, General Intangibles and Investment
        Property;

       

      (p) (i)
        all
        money, cash and cash equivalents and (ii) all cash held as cash collateral
        to
        the extent not otherwise constituting Collateral, all other cash or property
        at
        any time on deposit with or held by Laurus for the account of any Company
        (whether for safekeeping, custody, pledge, transmission or otherwise);
        and

       

      (q) all
        products and Proceeds of all or any of the foregoing, tort claims and all
        claims
        and other rights to payment including (i) insurance claims against third
        parties
        for loss of, damage to, or destruction of, the foregoing Collateral and (ii)
        payments due or to become due under leases, rentals and hires of any or all
        of
        the foregoing and Proceeds payable under, or unearned premiums with respect
        to
        policies of insurance in whatever form.

       

      “Company
        Agent”
means
        the Parent.

       

      “Contract
        Rate”
has
        the
        meaning given such term in the respective Note. 

       

      “Default”
means
        any act or event which, with the giving of notice or passage of time or both,
        would constitute an Event of Default.

       

      “Default
        Rate”
has
        the
        meaning given such term in Section 5(a)(iii).

       

      “Delinquent
        Account”
has
        the
        meaning given such term in Section 2(a)(viii).

       

      “Deposit
        Accounts”
means
        all “deposit accounts” as such term is defined in the UCC, now or hereafter held
        in the name of any Person, including, without limitation, the
        Lockboxes.

       

      “Documents”
means
        all “documents”, as such term is defined in the UCC, now owned or hereafter
        acquired by any Person, wherever located, including all bills of lading,
        dock
        warrants, dock receipts, warehouse receipts, and other documents of title,
        whether negotiable or non-negotiable.

      
        
          
          

        

        
          3

          
            

          

        

        
          
          

        

      

       

      “Eligible
        Accounts”
means
        each Account of each Company which conforms to the following criteria: (a)
        shipment of the merchandise or the rendition of services has been completed;
        (b)
        no return, rejection or repossession of the merchandise has occurred;
        (c) merchandise or services shall not have been rejected or disputed by the
        Account Debtor and there shall not have been asserted any offset, defense
        or
        counterclaim; (d) continues to be in full conformity with the representations
        and warranties made by such Company to Laurus with respect thereto; (e) Laurus
        is, and continues to be, satisfied with the credit standing of the Account
        Debtor in relation to the amount of credit extended; (f) there are no facts
        existing or threatened which are likely to result in any adverse change in
        an
        Account Debtor’s financial condition; (g) is documented by an invoice in a form
        approved by Laurus and shall not be unpaid more than ninety (90) days from
        invoice date; (h) not more than thirty percent (30%) of the unpaid amount
        of
        invoices due from such Account Debtor remains unpaid more than one hundred
        fifteen (115) days from invoice date; (i) is not evidenced by chattel paper
        or
        an instrument of any kind with respect to or in payment of the Account unless
        such instrument is duly endorsed to and in possession of Laurus or represents
        a
        check in payment of an Account; (j) the Account Debtor is located in the
        United
        States; or if such Account Debtor is not located in the United States, the
        Accounts of such Account Debtor be insured by Export-Import Bank of the United
        States; provided,
        however,
        Laurus
        may, from time to time, in the exercise of its sole discretion and based
        upon
        satisfaction of certain conditions to be determined at such time by Laurus,
        deem
        certain Accounts as Eligible Accounts notwithstanding that such Account is
        due
        from an Account Debtor located outside of the United States; (k) Laurus has
        a
        first priority perfected Lien in such Account and such Account is not subject
        to
        any Lien other than Permitted Liens; (l) does not arise out of transactions
        with any employee, officer, director, equity holder or Affiliate of any Company;
        (m) is payable to such Company; (n) does not arise out of a bill and hold
        sale
        prior to shipment and does not arise out of a sale to any Person to which
        such
        Company is indebted; (o) is net of any returns, discounts, claims, credits
        and
        allowances; (p) if the Account arises out of contracts between such Company,
        on
        the one hand, and the United States, on the other hand, any state, or any
        department, agency or instrumentality of any of them, such Company has so
        notified Laurus, in writing, prior to the creation of such Account, and there
        has been compliance with any governmental notice or approval requirements,
        including compliance with the Federal Assignment of Claims Act; (q) is a
        good
        and valid account representing an undisputed bona fide indebtedness incurred
        by
        the Account Debtor therein named, for a fixed sum as set forth in the invoice
        relating thereto with respect to an unconditional sale and delivery upon
        the
        stated terms of goods sold by such Company or work, labor and/or services
        rendered by such Company; (r) does not arise out of progress billings prior
        to
        completion of the order; (s) the total unpaid Accounts from such Account
        Debtor
        does not exceed twenty-five percent (25%) of all Eligible Accounts; (t) such
        Company’s right to payment is absolute and not contingent upon the fulfillment
        of any condition whatsoever; (u) such Company is able to bring suit and enforce
        its remedies against the Account Debtor through judicial process; (v) does
        not
        represent interest payments, late or finance charges owing to such Company,
        and
        (w) is otherwise satisfactory to Laurus as determined by Laurus in the exercise
        of its sole discretion. In the event any Company requests that Laurus include
        within Eligible Accounts certain Accounts of one or more of such Company’s
        acquisition targets, Laurus shall at the time of such request consider such
        inclusion,but any such inclusion shall be at the sole option of Laurus and
        shall
        at all times be subject to the execution and delivery to Laurus of all such
        documentation (including, without limitation, guaranty and security
        documentation) as Laurus may require in its sole discretion. 

      
        
          
          

        

        
          4

          
            

          

        

        
          
          

        

      

       

      “Eligible
        Subsidiary”
means
        each Subsidiary of the Parent set forth on Exhibit
        A hereto,
        as the same may be updated from time to time with Laurus’ written
        consent.

       

      “Equipment”
means
        all “equipment” as such term is defined in the UCC, now owned or hereafter
        acquired by any Person, wherever located, including any and all machinery,
        apparatus, equipment, fittings, furniture, Fixtures, motor vehicles and other
        tangible personal property (other than Inventory) of every kind and description
        that may be now or hereafter used in such Person’s operations or that are owned
        by such Person or in which such Person may have an interest, and all parts,
        accessories and accessions thereto and substitutions and replacements
        therefor.

       

      “ERISA”
has
        the
        meaning given such term in Section 12(bb).

       

      “Event
        of Default”
means
        the occurrence of any of the events set forth in Section 19. 

       

      “Exchange
        Act”
means
        the Securities Exchange Act of 1934, as amended.

       

      “Fixtures”
means
        all “fixtures” as such term is defined in the UCC, now owned or hereafter
        acquired by any Person.

       

      “Formula
        Amount”
has
        the
        meaning given such term in Section 2(a)(i).

       

      “GAAP”
means
        generally accepted accounting principles, practices and procedures in effect
        from time to time in the United States of America.

       

      “General
        Intangibles”
means
        all “general intangibles” as such term is defined in the UCC, now owned or
        hereafter acquired by any Person including all right, title and interest
        that
        such Person may now or hereafter have in or under any contract, all Payment
        Intangibles, customer lists, Licenses, Intellectual Property, interests in
        partnerships, joint ventures and other business associations, permits,
        proprietary or confidential information, inventions (whether or not patented
        or
        patentable), technical information, procedures, designs, knowledge, know-how,
        Software, data bases, data, skill, expertise, experience, processes, models,
        drawings, materials, Books and Records, Goodwill (including the Goodwill
        associated with any Intellectual Property), all rights and claims in or under
        insurance policies (including insurance for fire, damage, loss, and casualty,
        whether covering personal property, real property, tangible rights or intangible
        rights, all liability, life, key-person, and business interruption insurance,
        and all unearned premiums), uncertificated securities, choses in action,
        deposit
        accounts, rights to receive tax refunds and other payments, rights to received
        dividends, distributions, cash, Instruments and other property in respect
        of or
        in exchange for pledged Stock and Investment Property, and rights of
        indemnification.

       

      “Goods”
means
        all “goods”, as such term is defined in the UCC, now owned or hereafter acquired
        by any Person, wherever located, including embedded software to the extent
        included in “goods” as defined in the UCC, manufactured homes, standing timber
        that is cut and removed for sale and unborn young of animals.

      
        
          
          

        

        
          5

          
            

          

        

        
          
          

        

      

       

      “Goodwill”
means
        all goodwill, trade secrets, proprietary or confidential information, technical
        information, procedures, formulae, quality control standards, designs, operating
        and training manuals, customer lists, and distribution agreements now owned
        or
        hereafter acquired by any Person.

       

      “Governmental
        Authority”
means
        any nation or government, any state or other political subdivision thereof,
        and
        any agency, department or other entity exercising executive, legislative,
        judicial, regulatory or administrative functions of or pertaining to government.
        

       

      “Guaranty”
means
        the Guaranty, dated the date hereof, made by MISCOR Group, Ltd., Magnetech
        Industrial Services, Inc., Martell Electric, LLC and HK Engine Components,
        LLC
        in favor of Laurus. 

       

      “Hazardous
        Materials”
has
        the
        meaning given such term in Section 12(q).

       

      “Indemnified
        Person”
has
        the
        meaning given such term in Section 26.

       

      “Instruments”
means
        all “instruments”, as such term is defined in the UCC, now owned or hereafter
        acquired by any Person, wherever located, including all certificated securities
        and all promissory notes and other evidences of indebtedness, other than
        instruments that constitute, or are a part of a group of writings that
        constitute, Chattel Paper.

       

      “Intellectual
        Property”
means
        any and all patents, trademarks, service marks, trade names, copyrights,
        trade
        secrets, Licenses, information and other proprietary rights and
        processes.

       

      “Inventory”
means
        all “inventory”, as such term is defined in the UCC, now owned or hereafter
        acquired by any Person, wherever located, including all inventory, merchandise,
        goods and other personal property that are held by or on behalf of such Person
        for sale or lease or are furnished or are to be furnished under a contract
        of
        service or that constitute raw materials, work in process, finished goods,
        returned goods, or materials or supplies of any kind, nature or description
        used
        or consumed or to be used or consumed in such Person’s business or in the
        processing, production, packaging, promotion, delivery or shipping of the
        same,
        including all supplies and embedded software.

       

      “Investment
        Property”
means
        all “investment property”, as such term is defined in the UCC, now owned or
        hereafter acquired by any Person, wherever located.

       

      “Laurus
        Term Sheet”
has
        the
        meaning given such term in Section 13(u).

       

      “Letter-of-Credit
        Rights”
means
        “letter-of-credit rights” as such term is defined in the UCC, now owned or
        hereafter acquired by any Person, including rights to payment orperformance
        under a letter of credit, whether or not such Person, as beneficiary, has
        demanded or is entitled to demand payment or performance.

       

      “License”
means
        any rights under any written agreement now or hereafter acquired by any Person
        to use any trademark, trademark registration, copyright, copyright

      
        
          
          

        

        
          6

          
            

          

        

        
          
          

        

      

       

      registration
        or invention for which a patent is in existence or other license of rights
        or
        interests now held or hereafter acquired by any Person.

       

      “Lien”
means
        any mortgage, security deed, deed of trust, pledge, hypothecation, assignment,
        security interest, lien (whether statutory or otherwise), charge, claim or
        encumbrance, or preference, priority or other security agreement or preferential
        arrangement held or asserted in respect of any asset of any kind or nature
        whatsoever including any conditional sale or other title retention agreement,
        any lease having substantially the same economic effect as any of the foregoing,
        and the filing of, or agreement to give, any financing statement under the
        UCC
        or comparable law of any jurisdiction.

       

      “Loans”
means
        the loans under the Revolving Note and the Term Note and shall include all
        other
        extensions of credit hereunder and under any Ancillary Agreement.

       

      “Lockbox
        Bank”
has
        the
        meaning given such term in Section 8(a).

       

      “Lockboxes”
has
        the
        meaning given such term in Section 8(a).

       

      “Material
        Adverse Effect”
means
        a
        material adverse effect on (a) the business, assets, liabilities, condition
        (financial or otherwise), properties, operations or prospects of any Company
        or
        any of its Subsidiaries (taken individually and as a whole), (b) any Company’s
        or any of its Subsidiary’s ability to pay or perform the Obligations in
        accordance with the terms hereof or any Ancillary Agreement, (c) the value
        of
        the Collateral, the Liens on the Collateral or the priority of any such Lien
        or
        (d) the practical realization of the benefits of Laurus’ rights and remedies
        under this Agreement and the Ancillary Agreements.

       

      “Maximum
        Legal Rate”
has
        the
        meaning given such term in Section 5(a)(iv).

       

      “NASD”
has
        the
        meaning given such term in Section 13(b).

       

      “Notes”
means
        the the Term Note and the Revolving Note made by Companies in favor of Laurus
        in
        connection with the transactions contemplated hereby, as each of the same
        may be
        amended, supplemented, restated and/or otherwise modified from time to
        time.

       

      “Obligations”
means
        all Loans, all advances, debts, liabilities, obligations, covenants and duties
        owing by each Company and each of its Subsidiaries and each of MISCOR Group,
        Ltd., Magnetech Industrial Services, Inc., Martell Electric, LLC and HK Engine
        Components, LLC (each, a “Guarantor”) to Laurus (or any corporation that
        directly or indirectly controls or is controlled by or is under common control
        with Laurus) of every kind and description (whether or not evidenced by any
        note
        or other instrument and whether or not for the payment of money or the
        performance or non-performance of any act), direct or indirect, absolute
        or
        contingent, due or to become due, contractual or tortious, liquidated or
        unliquidated, whether existing by operation of law or otherwise now existing
        or
        hereafter arising including any debt, liability or obligation owing from
        any
        Company and/or each of its Guarantors to others which Laurus may have obtained
        by assignment or otherwise and further including all interest (including
        interest accruing at the then applicable rate provided in this Agreement
        after
        the maturity of the Loans and interest accruing at the then applicable rate
        provided in this Agreement after the filing of any petition in bankruptcy,
        or
        the commencement of any insolvency, 

      
        
          
          

        

        
          7

          
            

          

        

        
          
          

        

      

       

      reorganization
        or like proceeding, whether or not a claim for post-filing or post-petition
        interest is allowed or allowable in such proceeding), charges or any other
        payments each Company and each of its Guarantors is required to make by law
        or
        otherwise arising under or as a result of this Agreement, the Ancillary
        Agreements or otherwise, together with all reasonable expenses and reasonable
        attorneys’ fees chargeable to the Companies’ or any of their Guarantors’
accounts or incurred by Laurus in connection therewith.

       

      “Overadvance”
has
        the
        meaning given such term in Section 5(b)(ii).

       

      “Payment
        Intangibles”
means
        all “payment intangibles” as such term is defined in the UCC, now owned or
        hereafter acquired by any Person, including, a General Intangible under which
        the Account Debtor’s principal obligation is a monetary obligation.

       

      “Permitted
        Liens”
means
        (a) Liens of carriers, warehousemen, artisans, bailees, mechanics and
        materialmen incurred in the ordinary course of business securing sums not
        overdue; (b) Liens incurred in the ordinary course of business in connection
        with worker’s compensation, unemployment insurance or other forms of
        governmental insurance or benefits, relating to employees, securing sums
        (i) not
        overdue or (ii) being diligently contested in good faith provided that adequate
        reserves with respect thereto are maintained on the books of the Companies
        and
        their Subsidiaries, as applicable, in conformity with GAAP; (c) Liens in
        favor of Laurus; (d) Liens for taxes (i) not yet due or (ii) being diligently
        contested in good faith by appropriate proceedings, provided that adequate
        reserves with respect thereto are maintained on the books of the Companies
        and
        their Subsidiaries, as applicable, in conformity with GAAP; and which have
        no
        effect on the priority of Liens in favor of Laurus or the value of the assets
        in
        which Laurus has a Lien; (e) Purchase Money Liens securing Purchase Money
        Indebtedness to the extent permitted in this Agreement and (f) Liens specified
        on Schedule
        2
        hereto.

       

      “Person”
means
        any individual, sole proprietorship, partnership, limited liability partnership,
        joint venture, trust, unincorporated organization, association, corporation,
        limited liability company, institution, public benefit corporation, entity
        or
        government (whether federal, state, county, city, municipal or otherwise,
        including any instrumentality, division, agency, body or department thereof),
        and shall include such Person’s successors and assigns.

       

      “Principal
        Market”
means
        the NASD Over the Counter Bulletin Board, NASDAQ Capital Market, NASDAQ National
        Market System, American Stock Exchange or New York Stock Exchange (whichever,
        if
        any, of the foregoing is at the time the principal trading exchange

      or
        market
        for the common stock of MISCOR Group, Ltd.).

       

      “Proceeds”
means
        “proceeds”, as such term is defined in the UCC and, in any event, shall include:
        (a) any and all proceeds of any insurance, indemnity, warranty or guaranty
        payable to any Company or any other Person from time to time with respect
        to any
        Collateral; (b) any and all payments (in any form whatsoever) made or due
        and
        payable to any Company from time to time in connection with any requisition,
        confiscation, condemnation, seizure or forfeiture of any Collateral by any
        governmental body, governmental authority, bureau or agency (or any person
        acting under color of governmental authority); (c) any claim of any Company
        against third parties (i) for past, present or future infringement of any
        Intellectual Property or (ii) for past, present or future infringement or
        dilution of any trademark or trademark license or 

      
        
          
          

        

        
          8

          
            

          

        

        
          
          

        

      

       

      for
        injury to the goodwill associated with any trademark, trademark registration
        or
        trademark licensed under any trademark License; (d) any recoveries by any
        Company against third parties with respect to any litigation or dispute
        concerning any Collateral, including claims arising out of the loss or
        nonconformity of, interference with the use of, defects in, or infringement
        of
        rights in, or damage to, Collateral; (e) all amounts collected on, or
        distributed on account of, other Collateral, including dividends, interest,
        distributions and Instruments with respect to Investment Property and pledged
        Stock; and (f) any and all other amounts, rights to payment or other property
        acquired upon the sale, lease, license, exchange or other disposition of
        Collateral and all rights arising out of Collateral.

       

      “Proposed
        Term Sheet”
has
        the
        meaning given such term in Section 13(u).

       

      “Purchase
        Money Indebtedness”
means
        (a) any indebtedness incurred for the payment of all or any part of the purchase
        price of any fixed asset, including indebtedness under capitalized leases,
        (b)
        any indebtedness incurred for the sole purpose of financing or refinancing
        all
        or any part of the purchase price of any fixed asset, and (c) any renewals,
        extensions or refinancings thereof (but not any increases in the principal
        amounts thereof outstanding at that time).

       

      “Purchase
        Money Lien”
means
        any Lien upon any fixed assets that secures the Purchase Money Indebtedness
        related thereto but only if such Lien shall at all times be confined solely
        to
        the asset the purchase price of which was financed or refinanced through
        the
        incurrence of the Purchase Money Indebtedness secured by such Lien and only
        if
        such Lien secures only such Purchase Money Indebtedness.

       

      “Receivables
        Purchase”
has
        the
        meaning given such term in Section 2(b).

       

      “Revolving
        Loan”
shall
        have the meaning given such term in Section 2(a)(i).

       

      “Revolving
        Note”
means
        that certain Secured Revolving Note dated as of the Closing Date made by
        the
        Companies in favor of Laurus in the original principal amount of $1,6000,000,
        as
        the same may be amended, supplemented, restated and/or otherwise modified
        from
        time to time.

       

      “SEC”
has
        the
        meaning given such term in Section 12(d).

       

      “Securities”
means
        the Notes.“Securities
        Act”
has
        the
        meaning given such term in Section 12(r).

       

      “Security
        Documents”
means
        all security agreements, mortgages, cash collateral deposit letters, pledges
        and
        other agreements which are executed by any Company or any of its Subsidiaries
        in
        favor of Laurus.

       

      “Software”
means
        all “software” as such term is defined in the UCC, now owned or hereafter
        acquired by any Person, including all computer programs and all supporting
        information provided in connection with a transaction related to any
        program.

      
        
          
          

        

        
          9

          
            

          

        

        
          
          

        

      

       

      “Stock”
means
        all certificated and uncertificated shares, options, warrants, membership
        interests, general or limited partnership interests, participation or other
        equivalents (regardless of how designated) of or in a corporation, partnership,
        limited liability company or equivalent entity whether voting or nonvoting,
        including common stock, preferred stock, or any other “equity security” (as such
        term is defined in Rule 3a11-1 of the General Rules and Regulations promulgated
        by the SEC under the Exchange Act).

       

      “Stock
        Acquisition Limitation”
has
        the
        meaning given such term in Section 15(i).

       

      “Subsidiary”
means,
        with respect to any Person, (i) any other Person whose shares of stock or
        other
        ownership interests having ordinary voting power (other than stock or other
        ownership interests having such power only by reason of the happening of
        a
        contingency) to elect a majority of the directors or other governing body
        of
        such other Person, are owned, directly or indirectly, by such Person or (ii)
        any
        other Person in which such Person owns, directly or indirectly, more than
        50% of
        the equity interests at such time.

       

      “Supporting
        Obligations”
means
        all “supporting obligations” as such term is defined in the UCC.

       

      “Term”
means
        the Closing Date through the close of business on the day immediately preceding
        the third anniversary of the Closing Date, subject to acceleration at the
        option
        of Laurus upon the occurrence of an Event of Default hereunder or other
        termination hereunder.

       

      “Term
        Loan”
shall
        have the meaning set forth in Section 2(d).

       

      “Term
        Note”
means
        that certain Secured Term Note dated as of the Closing Date made by the
        Companies in favor of Laurus in the original principal amount of $2,100,000
        as
        the same may amended, supplemented, restated and/or otherwise modified from
        time
        to time. 

       

      “Total
        Investment Amount”
means
        $2,400,000.

       

      “UCC”
means
        the Uniform Commercial Code as the same may, from time to time be in effect
        in
        the State of New York; provided, that in the event that, by reason of mandatory
        provisions of law, any or all of the attachment, perfection or priority of,
        or
        remedies with respect to, Laurus’ Lien on any Collateral is governed by the
        Uniform Commercial Code as in effect in a jurisdiction other than the State
        of
        New York, the term “UCC” shall mean the Uniform Commercial Code as in effect in
        such other jurisdiction for purposes of the provisions of this Agreement
        relating to such attachment, perfection, priority or remedies and for purposesof
        definitions related to such provisions; provided further, that to the extent
        that UCC is used to define any term herein or in any Ancillary Agreement
        and
        such term is defined differently in different Articles or Divisions of the
        UCC,
        the definition of such term contained in Article or Division 9 shall
        govern.

       

      

      
        
          
          

        

        
          10

          
            

          

        

        
          
          

        

      

       

      Exhibit
        A

       

      Eligible
        Subsidiaries

       

      

       

      The
        Parent has no subsidiaries.

       

      

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      Exhibit
        B

       

      Borrowing
        Base Certificate

       

      

       

      

       

      [See
        attached]

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00105-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00105-of-00352.parquet"}]]