Document:

mis_8k0118ex101.htm

    Exhibit
      10.1

    

    

    

    

    
      	
              
              

               

               

              CREDIT
                AND SECURITY AGREEMENT

               

              
              

              BY
                AND AMONG

               

              
              

              MISCOR
                GROUP, LTD.

              MAGNETECH
                INDUSTRIAL SERVICES, INC.

              MARTELL
                ELECTRIC, LLC

              HK
                ENGINE COMPONENTS, LLC

              MAGNETECH
                POWER SERVICES, LLC

              IDEAL
                CONSOLIDATED, INC.

              3-D
                SERVICE, LTD.

              AMERICAN
                MOTIVE POWER, INC.

               

              AND

               

              
              

              WELLS
                FARGO BANK, NATIONAL ASSOCIATION

               

              Acting
                through its Wells Fargo Business Credit operating division

               

               

               

               

               

               

               

              
              

              
              

            
	
              
              

              January
                14, 2008

               

               

               

              
              

            

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    CREDIT
      AND SECURITY AGREEMENT

     

    Dated
      January 14, 2008

     

    MISCOR
      GROUP, LTD., an Indiana corporation (“MISCOR”), MAGNETECH INDUSTRIAL SERVICES,
      INC., an Indiana corporation (“MIS”), MARTELL ELECTRIC, LLC, an Indiana
      limited liability company (“Martell”), HK ENGINE COMPONENTS, LLC, an Indiana
      limited liability company (“HK”), MAGNETECH POWER SERVICES, LLC, an Indiana
      limited liability company (“MPS”), IDEAL CONSOLIDATED, INC., an Indiana
      corporation (“Ideal”), 3-D SERVICE, LTD., an Ohio limited liability company
      (“3D”), and AMERICAN MOTIVE POWER, INC., a Nevada corporation (“AMP” and
      together with MISCOR, MIS, Martell, HK, MPS, Ideal and 3D, the “Borrowers” and
      each a “Borrower”) and WELLS FARGO BANK, NATIONAL ASSOCIATION (as more fully
      defined in Article I herein, the “Lender”) acting through its Wells Fargo
      Business Credit operating division, hereby agree as follows:

     

     

    ARTICLE
      I

     

    DEFINITIONS

     

    Section
      1.1   Definitions.  Except
      as otherwise expressly provided in this Agreement, the following terms shall
      have the meanings given them in this Section:

     

    “Accounts”
      shall have the meaning given it under the UCC.

     

    “Accounts
      Advance Rate” means up to eighty five percent (85%), or such lesser rate as the
      Lender in its sole discretion may deem appropriate from time to
      time.

     

    “Advance”
      means a Revolving Advance or the Real Estate Advance.

     

    “Affiliate”
      or “Affiliates” means any Person controlled by, controlling or under common
      control with the Borrowers, including any Subsidiary of any
      Borrower.  For purposes of this definition, “control,” when used with
      respect to any specified Person, means the power to direct the management and
      policies of such Person, directly or indirectly, whether through the ownership
      of voting securities, by contract or otherwise.

     

    “Aggregate
      Face Amount” means the aggregate amount that may then be drawn under each
      outstanding Letter of Credit, assuming compliance with all conditions for
      drawing.

     

    “Agreement”
      means this Credit and Security Agreement.

     

    “Availability”
      means the amount, if any, by which the Borrowing Base exceeds the sum of
      (i) the outstanding principal balance of the Revolving Note and (ii) the
      L/C Amount.

     

    “Book
      Net
      Worth” means the aggregate of the Stockholders’ equity in the Borrowers,
      determined on a consolidated basis in accordance with GAAP.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    “Borrowing
      Base” means at any time the lesser of:

     

               
      (a)   The Maximum Line Amount; or

     

               
      (b)   Subject to change from time to time in the Lender’s sole
      discretion, the sum of:

     

    (i)  
      The lesser of (A) the sum of (1) the product of the Accounts Advance Rate times Eligible
      Accounts of each of MIS, HK, MPS, 3D and, upon its acceptance by the Lender
      as
      an Eligible Borrower, AMP, plus (2) the
      lesser
      of (x) the product of the Special Accounts Advance Rate times Eligible
      Accounts of each of Martell and Ideal, or (y) $2,000,000, or
      (B) $13,750,000, less

     

    (ii)  
      The Borrowing Base Reserve, less

     

    (iii)  
      The Personal Property Tax Reserve, less

     

    (iv)  
      The Real Estate Tax Reserve, less

     

    (v)   
      Indebtedness that any Borrower owes to the Lender that has not yet been advanced
      on the Revolving Note, including, without limitation, the L/C Amount, and the
      dollar amount that the Lender in its reasonable discretion then determines
      to be
      a reasonable determination of each Borrower’s credit exposure with respect to
      any swap, derivative, foreign exchange, hedge, deposit, treasury management
      or
      other similar transaction or arrangement offered to any Borrower by Lender
      that
      is not described in Article II of this Agreement.

     

    “Borrowing
      Base Reserve” means, as of any date of determination, such amounts (expressed as
      either a specified amount or as a percentage of a specified category or item)
      as
      the Lender may from time to time establish and adjust in reducing Availability
      (a) to reflect events, conditions, contingencies or risks which, as determined
      by the Lender, do or may affect (i) the Collateral or its value, (ii) the
      assets, business or prospects of each Borrower, or (iii) the security interests
      and other rights of the Lender in the Collateral (including the enforceability,
      perfection and priority thereof), or (b) to reflect the Lender’s judgment that
      any collateral report or financial information furnished by or on behalf of
      any
      Borrower to the Lender is or may have been incomplete, inaccurate or misleading
      in any material respect, or (c) in respect of any state of facts that the Lender
      determines constitutes a Default or an Event of Default..

     

    “Business
      Day” means day on which the Federal Reserve Bank of New York is open for
      business, and such day relates to a LIBOR Advance a day on which dealings are
      carried on in the London Interbank Eurodollar market.

     

    “Capital
      Expenditures” means for a period, any expenditure of money during such period
      for the lease, purchase or other acquisition of any capital asset, whether
      payable currently or in the future.

     

    “Change
      of Control” means the occurrence of any of the following events:

     

    
      
        
        

      

      
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    (a)  
      With regard to MISCOR, any Person or “group” (as such term is used in Sections
      13(d) and 14(d) of the Securities Exchange Act of 1934) other than John Martell
      and Tontine Capital Partners LP and/or its affiliates is or becomes the
“beneficial owner” (as defined in Rules 13d-3 and 13d-5 under the Securities
      Exchange Act of 1934, except that a Person will be deemed to have “beneficial
      ownership” of all securities that such Person has the right to acquire, whether
      such right is exercisable immediately or only after the passage of time),
      directly or indirectly, of more than forty nine percent (49%) of the voting
      power of all classes of Owners of MISCOR.

     

    (b)  
      With regard to the Borrowers other than MISCOR, any such Borrower is no longer
      a
      wholly owned Subsidiary of MISCOR.

     

    (c)  
      Rich Tamborski or a replacement selected by Tontine Partners and acceptable
      to
      the Lender in its sole discretion shall cease to actively manage the Borrowers’
day-to-day business activities.

     

    “Collateral”
      means all of each Borrower’s Accounts, chattel paper and electronic chattel
      paper, deposit accounts, documents, Equipment, General Intangibles, goods,
      instruments, Inventory, Investment Property, letter-of-credit rights, letters
      of
      credit, all sums on deposit in any Collateral Account, and any items in any
      Lockbox; together with (i) all substitutions and replacements for and
      products of any of the foregoing; (ii) in the case of all goods, all
      accessions; (iii) all accessories, attachments, parts, equipment and
      repairs now or hereafter attached or affixed to or used in connection with
      any
      goods; (iv) all warehouse receipts, bills of lading and other documents of
      title now or hereafter covering such goods; (v) all collateral subject to
      the Lien of any Security Document; (vi) any money, or other assets of any
      Borrower that now or hereafter come into the possession, custody, or control
      of
      the Lender; (vii) all sums on deposit in the Special Account;
      (viii) proceeds of any and all of the foregoing; (ix) books and records of
      each Borrower, including all mail or electronic mail addressed to any Borrower;
      and (x) all of the foregoing, whether now owned or existing or hereafter
      acquired or arising or in which any Borrower now has or hereafter acquires
      any
      rights.

     

    “Collateral
      Account” means the “Lender Account” as defined in each Wholesale Lockbox and
      Collection Account Agreement.

     

    “Collateral
      Pledge Agreement” means the Collateral Pledge Agreement by MISCOR in favor of
      the Lender pursuant to which MISCOR has pledged to the Lender its ownership
      interest in each of the other Borrowers.

     

    “Commitment”
      means the Lender’s commitment to make Advances to, and to issue Letters of
      Credit for the account of, the Borrowers.

     

    “Constituent
      Documents” means with respect to any Person, as applicable, such Person’s
      certificate of incorporation, articles of incorporation, by-laws, certificate
      of
      formation, articles of organization, limited liability company agreement,
      management agreement, operating agreement, shareholder agreement, partnership
      agreement or similar document or agreement governing such Person’s existence,
      organization or management or concerning disposition of ownership interests
      of
      such Person or voting rights among such Person’s owners.

     

    
      
        
        

      

      
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    “Credit
      Facility” means the credit facility under which Revolving Advances and Letters
      of Credit may be made available to the Borrowers by the Lender under Article
      II.

     

    “Current
      Maturities of Long Term Debt” means as of a given date, the amount of the
      Borrower’s long-term debt (other than Revolving Advances) and capitalized leases
      which became due during the fiscal year-to-date period ending on the designated
      date.

     

    “Cut-off
      Time” means 11:00 a.m. Central Time.

     

    “Debt
      Service Coverage Ratio” means (i) the sum of (A) Net Income (Loss), and (B)
      depreciation and amortization to the extent the same has reduced such Net Income
      (Loss), dividedby
      (ii) the sum of
      (A) Current Maturities of Long Term Debt, and (B) Unfinanced Capital
      Expenditures.

     

    “Default”
      means an event that, with giving of notice or passage of time or both, would
      constitute an Event of Default.

     

    “Default
      Period” means any period of time beginning on the day a Default or Event of
      Default occurs and ending on the date identified by the Lender in writing as
      the
      date that such Default or Event of Default has been cured or
      waived.

     

    “Default
      Rate” means an annual interest rate in effect during a Default Period or
      following the Termination Date, which interest rate shall be equal to three
      percent (3%) over the applicable Floating Rate, as such rate may change from
      time to time.

     

    “Director”
      means a director if the Borrower is a corporation, a governor or manager if
      the
      Borrower is a limited liability company, or a general partner if the Borrower
      is
      a partnership.

     

    “ERISA”
      means the Employee Retirement Income Security Act of 1974, as amended from
      time
      to time.

     

    “ERISA
      Affiliate” means any trade or business (whether or not incorporated) that is a
      member of a group which includes any Borrower and which is treated as a single
      employer under Section 414 of the IRC.

     

    “Eligible
      Accounts” means, as to each Eligible Borrower, all unpaid Accounts of such
      Borrower arising from the sale or lease of goods or the performance of services,
      net of any credits, but excluding any such Accounts having any of the following
      characteristics:

     

    (i)  
      That portion of Accounts unpaid one hundred twenty (120) days or more after
      the
      invoice date;

     

    (ii)  
      That portion of Accounts related to goods or services with respect to which
      such
      Borrower has received notice of a claim or dispute, which are subject to a
      claim
      of offset or a contra account, or which reflect a reasonable reserve for
      warranty claims or returns;

     

    
      
        
        

      

      
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      (iii)  
        That portion of Accounts not yet earned by the final delivery of goods by
        such
        Borrower to the account debtor, or that portion of Accounts not yet earned
        by
        the final rendition of services by such Borrower to the account debtor, unless
        such Accounts constitute progress billings of Martell or Ideal;

       

      (iv)  
        Accounts constituting (i) proceeds of copyrightable material unless such
        copyrightable material shall have been registered with the United States
        Copyright Office, or (ii) proceeds of patentable inventions unless such
        patentable inventions have been registered with the United States Patent
        and
        Trademark Office;

       

      (v)  
        Accounts owed by any unit of government, whether foreign or domestic (except
        that there shall be included in Eligible Accounts that portion of Accounts
        owed
        by such units of government for which such Borrower has provided evidence
        satisfactory to the Lender that (A) the Lender has a first priority
        perfected security interest and (B) such Accounts may be enforced by the
        Lender directly against such unit of government under all applicable
        laws);

       

      (vi)   Accounts
        denominated in any currency other than United States dollars.

       

      (vii)  
        Accounts owed by an account debtor located outside the United States or Canada
        which are not (A) backed by a bank letter of credit naming the Lender as
        beneficiary or assigned to the Lender, in the Lender’s possession or control,
        and with respect to which a control agreement concerning the letter-of-credit
        rights is in effect, and acceptable to the Lender in all respects, in its
        sole
        discretion, or (B) covered by a foreign receivables insurance policy
        acceptable to the Lender in its sole discretion;

       

      (viii)  
        Accounts owed by an account debtor that is insolvent, the subject of bankruptcy
        proceedings or has gone out of business;

       

      (ix)  
        Accounts owed by an Owner, Subsidiary, Affiliate, Officer or employee of
        such
        Borrower;

       

      (x)  
        Accounts not subject to a duly perfected security interest in the Lender’s favor
        or which are subject to any Lien in favor of any Person other than the
        Lender;

       

      (xi)  
        That portion of Accounts that has been restructured, extended, amended or
        modified;

       

      (xii)  
        That portion of Accounts that constitutes advertising, finance charges, service
        charges or sales or excise taxes;

       

      (xiii)  
        Accounts owed by an account debtor, regardless of whether otherwise eligible,
        to
        the extent that the aggregate balance of such Accounts exceeds fifteen percent
        (15%) of the aggregate amount of all Accounts of such Borrower;

       

      (xiv)  
        Accounts owed by an account debtor, regardless of whether otherwise eligible,
        if
        thirty five percent (35%) or more of the total amount of Accounts due from
        such
        debtor is ineligible under clauses (i), (ii), or (x) above;
        and

       

    

    
      
        
        

      

      
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    (xv)  
      Accounts, or portions thereof, otherwise deemed ineligible by the Lender in
      its
      sole discretion.

     

    “Eligible
      Borrower” means each Borrower from time to time a party to this Agreement and
      which the Lender has approved as an “Eligible Borrower” following completion of
      a satisfactory pre-loan audit conducted by the Lender, receipt by the Lender
      of
      a Customer Identification Information Form and such other forms and
      verifications as the Lender may need to comply with the U.S.A. Patriot Act
      and
      receipt by the Lender of such agreements, instruments and certifications as
      the
      Lender requires for such Borrower and which are substantially the same as such
      items or deliveries the Lender normally requires from a Borrower prior to the
      making of an initial advance, all as generally set forth in Section 4.1
      hereof.  Each of the Borrowers party to this Agreement as of the
      Funding Date, other than AMP, shall be deemed to be an Eligible
      Borrower.

     

    “Environmental
      Law” means any federal, state, local or other governmental statute, regulation,
      law or ordinance dealing with the protection of human health and the
      environment.

     

    “Equipment”
      shall have the meaning given it under the UCC.

     

    “Event
      of
      Default” is defined in Section 7.1.

     

    “Financial
      Covenants” means the covenants set forth in Section 6.2.

     

    “Floating
      Rate” means an annual interest rate equal to the Prime Rate, which interest rate
      shall change when and as the Prime Rate changes.

     

    “Floating
      Rate Advance” means an Advance bearing interest at the Floating
      Rate.

     

     “Funding
      Date” is defined in Section 2.1.

     

    “GAAP”
      means generally accepted accounting principles, applied on a basis consistent
      with the accounting practices applied in the financial statements described
      in
      Section 5.6.

     

    “General
      Intangibles” shall have the meaning given it under the UCC.

     

    “Guarantor”
      means any Person now or in the future who agrees to guaranty the
      Indebtedness.

     

    “Guaranty”
      means each unconditional continuing guaranty executed by a Guarantor in favor
      of
      the Lender (collectively, the “Guaranties”).

     

    “Hazardous
      Substances” means pollutants, contaminants, hazardous substances, hazardous
      wastes, petroleum and fractions thereof, and all other chemicals, wastes,
      substances and materials listed in, regulated by or identified in any
      Environmental Law.

     

    “Indebtedness”
      is used herein in its most comprehensive sense and means any and all advances,
      debts, obligations and liabilities of the Borrowers to the Lender, heretofore,
      now or hereafter made, incurred or created, whether voluntary or involuntary
      and
      however arising,

     

    
      
        
        

      

      
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    whether
      due or not due, absolute or contingent, liquidated or unliquidated, determined
      or undetermined, including under any swap, derivative, foreign exchange, hedge,
      deposit, treasury management or other similar transaction or arrangement at
      any
      time entered into by the Borrowers with the Lender, and whether any Borrower
      may
      be liable individually or jointly with others, or whether recovery upon such
      Indebtedness may be or hereafter becomes unenforceable.

     

    “Indemnified
      Liabilities” is defined in Section 8.6

     

    “Indemnitees”
      is defined in Section 8.6.

     

    “IRC”
      means the Internal Revenue Code of 1986, as amended from time to
      time.

     

    “Infringement”
      or “Infringing” when used with respect to Intellectual Property Rights means any
      infringement or other violation of Intellectual Property Rights.

     

    “Intellectual
      Property Rights” means all actual or prospective rights arising in connection
      with any intellectual property or other proprietary rights, including all rights
      arising in connection with copyrights, patents, service marks, trade dress,
      trade secrets, trademarks, trade names or mask works.

     

    “Interest
      Payment Date” is defined in Section 2.9(a).

     

    “Interest
      Period” means the period that commences on (and includes) the Business Day on
      which either a LIBOR Advance is made or continued, or on which a Floating Rate
      Advance is converted to a LIBOR Advance, and ending on (but excluding) the
      Business Day numerically corresponding to such date that is one, two or three
      months thereafter as designated by the Borrower, during which period the
      outstanding principal balance of the LIBOR Advance shall bear interest at the
      LIBOR Advance Rate; provided, however,
      that:

     

    (a)  
      No Interest Period may be selected for an Advance for a principal amount less
      than One Million Dollars ($1,000,000), and no more than five (5) different
      Interest Periods may be outstanding at any one time;

     

    (b)  
      If an Interest Period would otherwise end on a day which is not a Business
      Day,
      then the Interest Period shall end on the next Business day thereafter, unless
      that Business Day is the first Business Day of a month, in which case the
      Interest Period shall end on the last Business Day of the preceding
      month;

     

    (c)  
      No Interest Period may end later than the Maturity Date.

     

    “Inventory”
      shall have the meaning given it under the UCC.

     

    “Investment
      Property” shall have the meaning given it under the UCC.

     

    “L/C
      Amount” means the sum of (i) the Aggregate Face Amount of any outstanding
      Letters of Credit, plus (ii) the
      amount
      of each Obligation of Reimbursement that either remains unreimbursed or has
      not
      been paid through a Revolving Advance on the Credit Facility.

     

    
      
        
        

      

      
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    “L/C
      Application” means an application for the issuance of standby letters of credit pursuant
      to
      the terms of a Standby Letter of Credit Agreement in form acceptable to the
      Lender.

     

    “Ledger
      Balance” means the balance in the Borrowers’ Operating Account at the end of
      each Business Day after all debits and credits for that Business Day have been
      posted.

    

    “Lender”
      means Wells Fargo Bank, National Association in its broadest and most
      comprehensive sense as a legal entity, and is not limited in its meaning to
      Lender’s Wells Fargo Business Credit operating division, or to any other
      operating division of Lender.

    

    “Letter
      of Credit” is defined in Section 2.3(a).

    

    “LIBOR”
      means the rate per annum (rounded upward, if necessary, to the nearest whole
      one
      eighth of one percent (1/8 %) determined pursuant to the following
      formula:

    

    
      	
              LIBOR
                =

            	
              Base
                LIBOR

            	 
	 	
              100%
                - LIBOR Reserve Percentage

            	 

    

    

    (i)  
      "Base LIBOR" means the rate per annum for United States dollar deposits quoted
      by the Lender as the Inter-Bank Market Offered Rate, with the understanding
      that
      such rate is quoted by the Lender for the purpose of calculating effective
      rates
      of interest for loans making reference thereto, on the first day of a Interest
      Period for delivery of funds on said date for a period of time approximately
      equal to the number of days in such Interest Period and in an amount
      approximately equal to the principal amount to which such Interest Period
      applies. The Borrower understands and agrees that the Lender may base its
      quotation of the Inter-Bank Market Offered Rate upon such offers or other market
      indicators of the Inter-Bank Market as the Lender in its discretion deems
      appropriate including the rate offered for U.S. dollar deposits on the London
      Inter-Bank Market.

    

    (ii)  
      "LIBOR Reserve Percentage" means the reserve percentage prescribed by the Board
      of Governors of the Federal Reserve System (or any successor) for "Eurocurrency
      Liabilities" (as defined in Regulation D of the Federal Reserve Board, as
      amended), adjusted by the Lender for expected changes in such reserve percentage
      during the applicable Interest Period.

    

    “LIBOR
      Advance” means a Revolving Advance bearing interest at the LIBOR Advance
      Rate.

     

    “LIBOR
      Advance Rate” means, an annual interest rate equal to the sum of LIBOR plus two and
      eight
      tenths (2.8%) percent.

     

    “Licensed
      Intellectual Property” is defined in Section 5.11(c).

     

    “Lien”
      means any security interest, mortgage, deed of trust, pledge, lien, charge,
      encumbrance, title retention agreement or analogous instrument or device,
      including the interest of each lessor under any capitalized lease and the
      interest of any bondsman under any payment

     

    
      
        
        

      

      
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    or
      performance bond, in, of or on any assets or properties of a Person, whether
      now
      owned or subsequently acquired and whether arising by agreement or operation
      of
      law.

     

    “Loan
      Documents” means this Agreement, the Revolving Note, the Real Estate Note, each
      Guaranty, each Subordination Agreement, each L/C Application, each Standby
      Letter of Credit Agreement and the Security
      Documents, together with every other agreement, note, document, contract or
      instrument to which any Borrower now or in the future may be a party and which
      is required by the Lender.

     

    “Loan
      Year” is defined in Section 2.7(b).

     

    “Lockbox”
      means “Lockbox” as defined in each Wholesale Lockbox and Collection Account
      Agreement.

     

    “Material
      Adverse Effect” means any of the following:

     

    (i)  
      A material adverse effect on the business, operations, results of operations,
      prospects, assets, liabilities or financial condition of the Borrowers, as
      a
      whole;

     

    (ii)  
      A material adverse effect on the ability of the Borrowers to perform their
      obligations under the Loan Documents;

     

    (iii)  
      A material adverse effect on the ability of the Lender to enforce the
      Indebtedness or to realize the intended benefits of the Security Documents,
      including a material adverse effect on the validity or enforceability of any
      Loan Document or of any rights against any Guarantor, or on the status,
      existence, perfection, priority (subject to Permitted Liens) or enforceability
      of any Lien securing payment or performance of the Indebtedness; or

     

    (iv)  
      Any claim against a Borrower or threat of litigation which if determined
      adversely to such Borrower would cause such Borrower to be liable to pay an
      amount exceeding Two Hundred Fifty Thousand Dollars ($250,000) or would result
      in the occurrence of an event described in clauses (i), (ii) and (iii)
      above.

     

    “Maturity
      Date” is defined in Section 2.11.

     

    “Maximum
      Line Amount” means Thirteen Million Seven Hundred Fifty Thousand Dollars
      ($13,750,000).

     

    “Minimum
      Interest Charge” has the meaning given in Section 2.7(c).

     

    “Mortgage”
      means that certain Real Estate Mortgage, Security Agreement and Assignment
      of
      Leases and Rents by MIS in favor of the Lender.

     

    “Multiemployer
      Plan” means a multiemployer plan (as defined in Section 4001(a)(3) of ERISA) to
      which any Borrower or any ERISA Affiliate contributes or is obligated to
      contribute.

     

    
      
        
        

      

      
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    “Net
      Income (Loss)” means the Borrowers’ aggregate fiscal year-to-date after-tax net income (loss)
      from
      continuing operations, including
      extraordinary, non-operating or non-cash losses but excluding
      extraordinary, non-operating or non-cash gains, all as determined on a
      consolidated basis in accordance with GAAP.

     

    “Note”
      means the Revolving Note or the Real Estate Note, and “Notes” means the
      Revolving Note and the Real Estate Note.

     

    “OFAC”
is
      defined in Section 6.11(c).

     

    “Obligation
      of Reimbursement” means the obligation of a Borrower to reimburse the Lender
      pursuant to the terms of the Standby Letter of Credit Agreement and any applicable
      L/C
      Application.

     

    “Officer”
      means with respect to any Borrower, an officer if such Borrower is a
      corporation, a manager if such Borrower is a limited liability company, or
      a
      partner if such Borrower is a partnership.

     

    “Operating
      Account” means deposit account number 4121656938 maintained by the Borrowers
      with the Lender, or any other deposit account which the parties agree shall
      be
      the Operating Account.

     

    “Original
      Maturity Date” means January 1, 2011.

     

    “Overadvance”
      means the amount, if any, by which the outstanding principal balance of the
      Revolving Note, plus the L/C Amount, is in excess of the then-existing Borrowing
      Base.

     

    “Owned
      Intellectual Property” is defined in Section 5.11(a).

     

    “Owner”
      means with respect to any Borrower, each Person having legal or beneficial
      title
      to an ownership interest in such Borrower or a right to acquire such an
      interest.

     

    “Patent
      and Trademark Security Agreement” means each Patent and Trademark Security
      Agreement now or hereafter executed by a Borrower in favor of the
      Lender.

     

    “Pension
      Plan” means a pension plan (as defined in Section 3(2) of ERISA) maintained for
      employees of the Borrower or any ERISA Affiliate and covered by Title IV of
      ERISA.

     

    “Permitted
      Lien” and “Permitted Liens” are defined in Section 6.3(a).

     

    “Person”
      means any individual, corporation, partnership, joint venture, limited liability
      company, association, joint-stock company, trust, unincorporated organization
      or
      government or any agency or political subdivision thereof.

     

    “Personal
      Property Tax Reserve” means, at any time, an amount equal to the difference of
      (i) the sum, without duplication, of (a) personal property taxes on each
      Borrower’s assets assessed in prior years, plus (b) one
      twelfth
      (1/12) of the total estimated assessment of personal property taxes on each
      Borrower’s assets for the current calendar year multiplied by the
      number

     

    
      
        
        

      

      
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    of
      calendar months or portions thereof, elapsed since the beginning of the current
      calendar year, minus (ii) any
      portion of such personal property taxes which have been paid, as evidenced
      by an
      official receipt of the relevant taxing authority.

     

    “Plan”
      means an employee benefit plan (as defined in Section 3(3) of ERISA) maintained
      for employees of a Borrower or any ERISA Affiliate.

     

    “Premises”
      means all locations where each Borrower conducts its business or has any rights
      of possession, including but not limited to the locations described in Exhibit D attached
      hereto.

     

    “Prime
      Rate” means at any time the rate of interest most recently announced by the
      Lender at its principal office as its Prime Rate, with the understanding that
      the Prime Rate is one of the Lender’s base rates, and serves as the basis upon
      which effective rates of interest are calculated for those loans making
      reference thereto, and is evidenced by the recording thereof in such internal
      publication or publications as the Lender may designate.  Each change
      in the rate of interest shall become effective on the date each Prime Rate
      change is announced by the Lender.

     

    “Real
      Estate” means MIS’ real property subject to the Mortgage located in Saraland,
      Alabama.

     

    “Real
      Estate Advance” is defined in Section 2.5.

     

    “Real
      Estate Note” means the Borrowers’ promissory note, payable to the order of the
      Lender in substantially the form of Exhibit B hereto, as same may
      be renewed and amended from time to time, and all replacements
      thereto.

     

    “Real
      Estate Tax Reserve” means, at any time, an amount equal to the difference of (i)
      the sum, without duplication, of (a) real estate taxes on the Real Estate
      assessed in prior years, plus (b) one
      twelfth
      (1/12) of the total estimated assessment of real estate taxes on the Real Estate
      for the current calendar year multiplied by the
      number of calendar months or portions thereof elapsed since the beginning of
      the
      current calendar year, minus (ii) any
      portion of such real estate taxes which have been paid, as evidenced by an
      official receipt of the relevant taxing authority.

     

    “Reportable
      Event” means a reportable event (as defined in Section 4043 of ERISA), other
      than an event for which the thirty (30) day notice requirement under ERISA
      has
      been waived in regulations issued by the Pension Benefit Guaranty
      Corporation.

     

    “Revolving
      Advance” is defined in Section 2.1.

     

    “Revolving
      Note” means the Borrowers’ revolving promissory note, payable to the order of
      the Lender in substantially the form of Exhibit A hereto, as same may
      be renewed and amended from time to time, and all replacements
      thereto.

     

    “Security
      Documents” means this Agreement, the Wholesale Lockbox and Collection Account
      Agreement, the Patent and Trademark Security Agreement, the Mortgage, the
      Collateral

     

    
      
        
        

      

      
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    Pledge
      Agreement, and any
      other document delivered to the Lender from time to time to secure the
      Indebtedness.

     

    “Security
      Interest” is defined in Section 3.1.

     

    “Special
      Account” means a specified cash collateral account maintained with Lender or
      another financial institution acceptable to the Lender in connection with
      Letters of Credit, as contemplated by Section 2.4.

     

    “Special
      Accounts Advance Rate” means up to forty percent (40%), or such lesser rate as
      the Lender in its sole discretion may deem appropriate from time to time,
      including, without limitation, in the event the Borrowers hereafter request
      that
      the Lender make Advances based on Inventory or Equipment.

     

    “Standby
      Letter of Credit Agreement” means an agreement governing the issuance of standby
      letters of credit by Lender entered into between a Borrower as applicant and
      Lender as issuer.

     

    “Subordinated
      Creditor” means each of
      (i) John Martell, (ii) Strasbourger, Pearson, Tulcin, Wolfee, Inc., as the
      authorized agent for the holders of certain subordinated Secured Convertible
      Debentures, (iii) BDeWees, Inc., and XGenIII, Ltd., as former owners of 3D,
      and
      (iv) every other Person now or in the future who agrees to subordinate
      indebtedness of a Borrower held by that Person to the payment of the
      Indebtedness, in each case on terms acceptable to the Lender in its
      discretion.

     

    “Subordination
      Agreement” means a subordination agreement executed by a Subordinated Creditor
      in favor of the Lender and acknowledged by the
      applicable  Borrower.

     

    “Subsidiary”
      means any Person of which more than fifty percent (50%) of the outstanding
      ownership interests having general voting power under ordinary circumstances
      to
      elect a majority of the board of directors or the equivalent of such Person,
      regardless of whether or not at the time ownership interests of any other class
      or classes shall have or might have voting power by reason of the happening
      of
      any contingency, is at the time directly or indirectly owned by a Borrower,
      by
      such Borrower and one or more other Subsidiaries, or by one or more other
      Subsidiaries.

     

    “Target
      Ledger Balance” means Zero Dollars ($0.00), or such other dollar amount which
      the parties agree shall be the Target Ledger Balance that is to remain in the
      Operating Account as of the end of each Business Day.

     

    “Termination
      Date” means the earliest of (i) the Maturity Date, (ii) the date the Borrowers
      terminate the Credit Facility, or (iii) the date the Lender demands payment
      of
      the Indebtedness, following an Event of Default, pursuant to Section
      7.2.

     

    “Treasury
      Management Start Date” means, with respect to each Borrower, the date a Lockbox
      and depository accounts for such Borrower have been established with the Lender
      and have become fully operational.

     

    
      
        
        

      

      
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    “UCC”
      means the Uniform Commercial Code in effect in the state designated in this
      Agreement as the state whose laws shall govern this Agreement, or in any other
      state whose laws are held to govern this Agreement or any portion of this
      Agreement.

     

    “Unfinanced
      Capital Expenditures” means Capital Expenditures for which the Borrower has not
      become indebted to another party or incurred a contractual liability (other
      than
      to the Lender).

     

    “Unused
      Amount” is defined in Section 2.8(b).

     

    “Wholesale
      Lockbox and Collection Account Agreement” means each Wholesale Lockbox and
      Collection Account Agreement by and between one or more Borrowers and the
      Lender.

     

    Section
      1.2    Other Definitional
      Terms;
      Rules of Interpretation.  The words “hereof”, “herein” and
“hereunder” and words of similar import when used in this Agreement shall refer
      to this Agreement as a whole and not to any particular provision of this
      Agreement.  All accounting terms not otherwise defined herein have the
      meanings assigned to them in accordance with GAAP.  All terms defined
      in the UCC and not otherwise defined herein have the meanings assigned to them
      in the UCC.  References to Articles, Sections, subsections, Exhibits,
      Schedules and the like, are to Articles, Sections and subsections of, or
      Exhibits or Schedules attached to, this Agreement unless otherwise expressly
      provided.  The words “include”, “includes” and “including” shall be
      deemed to be followed by the phrase “without limitation”.  Unless the
      context in which used herein otherwise clearly requires, “or” has the inclusive
      meaning represented by the phrase “and/or”.  Defined terms include in
      the singular number the plural and in the plural number the
      singular.  Reference to any agreement (including the Loan Documents),
      document or instrument means such agreement, document or instrument as amended
      or modified and in effect from time to time in accordance with the terms thereof
      (and, if applicable, in accordance with the terms hereof and the other Loan
      Documents), except where otherwise explicitly provided, and reference to any
      promissory note includes any promissory note which is an extension or renewal
      thereof or a substitute or replacement therefor.  Reference to any
      law, rule, regulation, order, decree, requirement, policy, guideline, directive
      or interpretation means as amended, modified, codified, replaced or reenacted,
      in whole or in part, and in effect on the determination date, including rules
      and regulations promulgated thereunder.

     

     

    ARTICLE
      II

     

    AMOUNT
      AND TERMS OF THE
      CREDIT FACILITY

     

    Section
      2.1   Revolving
      Advances.  The Lender agrees, subject to the terms and
      conditions of this Agreement, to make advances (“Revolving Advances”) to the
      Borrowers from time to time from the date that all of the conditions set forth
      in 4.1 are satisfied (the “Funding Date”) to and until (but not including) the
      Termination Date in an amount not in excess of the Maximum Line
      Amount.  The Lender shall have no obligation to make a Revolving
      Advance to the extent that the amount of the requested Revolving Advance exceeds
      Availability.  The Borrowers’ joint and several obligation to pay the
      Revolving Advances shall be evidenced by the Revolving Note and shall be secured
      by the Collateral as provided in Article III and the

     

    
      
        
        

      

      
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    Mortgage.  Within
      the limits set forth in this Section 2.1, the Borrower may borrow, prepay
      pursuant to Section 2.12, and reborrow.

     

    Section
      2.2   Procedures for Initiating
      Revolving Advances; the Loan Manager Service.  Revolving
      Advances shall be initiated either (i) manually by the Borrowers pursuant to
      the
      procedure set forth in this Section 2.2, or (ii) upon Borrowers’ request and
      with the Lender’s consent, automatically by the Lender through the Lender’s Loan
      Manager service, which credits Revolving Advances on an ongoing basis to the
      Operating Account without the further request of the Borrowers.  The
      Loan Manager service is a service that is offered by the Lender to the Borrowers
      in the Lender’s sole discretion, and may be terminated by the Lender at any time
      following reasonable notice to the Borrowers.  If the Lender offers to
      make the Loan Manager service available to the Borrowers, and the Borrowers
      agree to utilize the Loan Manager service, then the Borrowers hereby authorize
      and direct the Lender, subject to Availability, to advance funds each Business
      Day in an amount sufficient to restore the Ledger Balance of the Operating
      Account to the Target Ledger Balance.  If the Loan Manager service is
      terminated for any reason, by either the Borrowers or the Lender, then it is
      the
      responsibility of the Borrowers after termination to initiate Revolving Advances
      manually from time to time as the Borrowers deem appropriate.

    

    The
      Borrowers shall comply with the following procedures in requesting Revolving
      Advances:

    

    (a)  
      Selection
      of Interest Rates for Revolving Advances.  During any period in
      which the Borrowers are enrolled in the Loan Manager service, each Revolving
      Advance may only be funded as a Floating Rate Advance.  During any
      period in which the Borrowers are not enrolled in the Loan Manager service,
      then
      each Revolving Advance may be funded as either a Floating Rate Advance or a
      LIBOR Advance, as the Borrowers shall specify in a request delivered to the
      Lender conforming to the requirements of Section 2.2(b).  Floating
      Rate Advances and LIBOR Advances may be outstanding at the same
      time.  Each request for a LIBOR Advance shall be in multiples of One
      Million Dollars ($1,000,000), with a minimum request of at least One Million
      Dollars ($1,000,000).  LIBOR Advances shall not be available during
      Default Periods.

    

    (b)  
      Procedures
      for Requesting Revolving Advances.  If the Borrowers do not
      utilize the Loan Manager service, the Borrowers shall request each Revolving
      Advance so that the request is received by the Lender not later than the Cut-off
      Time on the Business Day, as applicable, on
      which a Floating
      Rate Advance is to be made or the Cut-off Time on the third Business Day
      preceding the Business Day on which a LIBOR Advance is to be made.  Each request that
      conforms to the terms of this Agreement shall be effective upon receipt by
      the
      Lender, shall be in writing or by telephone or telecopy transmission, and shall
      be confirmed in writing by the Borrowers if so requested by the Lender, by
      (i)
      an Officer of the Borrowers, or (ii) a Person designated as the Borrowers’ agent
      by an Officer of the Borrowers in a writing delivered to the Lender, or (iii)
      a
      Person whom the Lender reasonably believes to be an Officer of the Borrowers
      or
      such a designated agent, which confirmation shall specify whether the Advance
      shall be a Floating Rate Advance or a LIBOR Advance and, with respect to any
      LIBOR Advance, shall specify the principal amount of the LIBOR Advance and
      the
      Interest Period applicable thereto.  The Borrower shall repay all
      Revolving Advances even if the Lender does not receive such confirmation and
      even if the Person requesting a Revolving Advance was not in

    
      
        
        

      

      
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    fact
      authorized to do so.  Any request for a Revolving Advance, whether
      written or telephonic, and whether initiated manually by the Borrowers or
      automatically through the Borrowers’ utilization of the Lender’s Loan Manager
      service, shall be deemed to be a representation by the Borrowers that all
      conditions set forth in Article IV of this Agreement have been satisfied as
      of
      the time of the request.

    

    (c)  
      Protective
      Advances by the Lender.  The Lender may at any time initiate a
      Revolving Advance in such amount as the Lender, in its sole discretion, deems
      necessary to (i) protect its interest as secured party in any Collateral, (ii)
      purchase Collateral for the Borrowers, or (iii) exercise any other rights
      granted to it by the Borrowers under this Agreement.

     

    (d)  
      Disbursement.  During
      any period in which the Borrowers are not enrolled in the Loan Manager service,
      the Lender shall disburse the proceeds of the requested Revolving Advance by
      crediting them to the Borrowers’ Operating Account, unless the Lender and the
      Borrowers shall agree to another manner of disbursement.  If the
      Borrowers are enrolled in the Lender’s Loan Manager service, the Lender shall
      disburse the proceeds of each automated Revolving Advance by crediting the
      Borrowers’ Operating Account.  The Lender may also disburse the
      proceeds of any Revolving Advance that it may initiate under this Section 2.2
      by
      crediting them to the Operating Account or directly to any third Person as
      the
      Lender may deem necessary.

     

    Section
      2.3   Letters of
      Credit.

     

    (a)  
      Issuance
      of
      Letters of Credit.    The Lender agrees, subject to the
      terms and conditions of this Agreement, issue, at any time after the Funding
      Date and prior to the Termination Date, one or more irrevocable standby or
      documentary letters of credit (each, a “Letter of Credit”) for the Borrowers’
account.  The Lender will not issue any Letter of Credit if the face
      amount of the Letter of Credit to be issued would exceed the lesser of (i)
      One
      Million Dollars ($1,000,000), or (ii) Availability.  Each Letter of
      Credit, if any, shall be issued pursuant to a separate L/C Application made
      by
      the Borrower.  The terms and conditions set forth in each such L/C
      Application shall supplement the terms and conditions of the Standby Letter
      of
      Credit Agreement.

     

    (b)   
      Expiry
      Date.  No Letter of Credit shall be issued with an expiry date
      later than one (1) year from the date of issuance or the Maturity Date in effect
      as of the date of issuance, whichever is earlier.

     

    (c)  
      Conditions
      Precedent.  Any request for issuance of a Letter of Credit
      shall be deemed to be a representation by the Borrowers that the conditions
      set
      forth in Section 4.2 have been satisfied as of the date of the
      request.

     

    (d)  
      Obligation
      of Reimbursement.  If a draft is submitted under a Letter of
      Credit when the Borrowers are unable, because a Default Period exists or for
      any
      other reason, to obtain a Revolving Advance to pay the Obligation of
      Reimbursement, the Borrowers shall pay to the Lender on demand and in
      immediately available funds, the amount of the Obligation of Reimbursement
      together with interest, accrued from the date of the draft until payment in
      full
      at the Default Rate.  Notwithstanding the Borrowers’ inability to
      obtain a Revolving Advance for

     

    
      
        
        

      

      
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    any
      reason, the Lender may, in its sole discretion, make a Revolving Advance in
      an
      amount sufficient to discharge any outstanding Obligation of Reimbursement
      and
      any accrued but unpaid interest and fees payable with respect to
      same.

     

    Section
      2.4   Special Account. If
      the Credit Facility is terminated for any reason while any Letter of Credit
      is
      outstanding, the Borrowers shall thereupon pay the Lender in immediately
      available funds for deposit in the Special Account an amount equal to the L/C
      Amount plus any anticipated fees and costs.  If the Borrowers fail to
      promptly make any such payment in the amount required hereunder, then the Lender
      may make a Revolving Advance against the Credit Facility in an amount sufficient
      to fulfill this obligation and deposit the proceeds to the Special
      Account.  The Special Account shall be an interest bearing account
      either maintained with the Lender or with a financial institution acceptable
      to
      the Lender.  Any interest earned on amounts deposited in the Special
      Account shall be credited to the Special Account.  The Lender may
      apply amounts on deposit in the Special Account at any time or from time to
      time
      to the Indebtedness in the Lender’s sole discretion.  The Borrowers
      may not withdraw any amounts on deposit in the Special Account as long as the
      Lender maintains a security interest therein.  The Lender agrees to
      transfer any balance in the Special Account to the Borrowers when the Lender
      is
      required to release its security interest in the Special Account under
      applicable law.

     

    Section
      2.5   Real
      Estate Advance.

     

    (a)   The
      Lender agrees, subject to the terms and conditions of this Agreement, to make
      a
      single advance to the Borrowers on the later of the Funding Date or the date
      the
      condition in Section 4.1(dd) has been satisfied (the “Real Estate Advance”) in
      the amount of One
      Million Two Hundred Fifty Thousand Dollars ($1,250,000).  The
      Borrowers’ joint and several obligation to pay the Real Estate Advance shall be
      evidenced by the Real Estate Note and shall be secured by the Collateral as
      provided in Article III and the Mortgage.

    

    (b)  
      Upon fulfillment of the applicable conditions set forth in Article IV, the
      Lender shall disburse the proceeds of the Real Estate Advance in the manner
      specified in Section 2.2(d).

     

    Section
      2.6   Payment of Real
      Estate
      Note.  The outstanding principal balance of the Real Estate
      Note shall be due and payable as follows:

     

    (a)  
      In equal monthly installments of Ten Thousand Four Hundred Seventeen Dollars
      ($10,417), beginning on either the first day of the month following the making
      of the Real Estate Advance if made on or prior to the fifteenth (15th)
      day of
      the month or the first day of the second month following the making of the
      Real
      Estate Advance if made on or after the sixteenth (16th)
      of the
      month, and on the 1st
      day of
      each month thereafter, with a
      final payment of the entire unpaid principal balance of the Real Estate Note,
      and all unpaid interest accrued thereon, due on January 1, 2018;
      and

     

    (b)  
      If the Lender at any time
      obtains an appraisal of the
      Real Estate and the appraisal shows the outstanding principal balance of the
      Real Estate Note to exceed seventy five percent (75%) of the appraised “as is”
market value of the Real Estate, then the Borrowers shall, upon demand by the
      Lender, make additional monthly principal payments in an amount equal to the
      amount of such excess divided by twelve (12) months, or, in Lender’s
      discretion,
      immediately

    
      
        
        

      

      
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    prepay
      the Real Estate Note in the
      amount of such excess, together, in each case, with any prepayment fee owed
      pursuant to Section 2.8.

    

    (c)  
All
      prepayments of principal with
      respect to the Real Estate Note shall be applied to the most remote principal
      installment or installments then unpaid.

     

    (d)  
Notwithstanding
      the foregoing, on the
      Termination Date, the Lender may, in its sole discretion, declare the entire unpaid
      principal
      balance of the Real Estate Note, and all unpaid interest accrued thereon, to
      be
      immediately due and payable.

     

    Section
      2.7   Interest; Minimum
      Interest
      Charge; Default Interest Rate; Application of Payments; Participations;
      Usury.

     

    (a)  
      Interest.  Except
      as provided in Section 2.2, Section 2.7(c) and Section 2.7(f), the principal
      amount of each Advance shall bear interest at the Floating Rate.

     

    (b)  
      Minimum
      Interest Charge.  Notwithstanding any other terms of this
      Agreement to the contrary, the Borrowers shall pay to the Lender interest of
      not
      less than (i) Twenty Five Thousand Dollars ($25,000) per month during the first
      Loan Year, (ii) Twenty Thousand Dollars ($20,000) per month during the second
      Loan Year, and (iii) Fifteen Thousand Dollars ($15,000) per month during each
      Loan Year thereafter (the “Minimum Interest Charge”) during the term of this
      Agreement, and the Borrowers shall pay any deficiency between the Minimum
      Interest Charge and the amount of interest otherwise calculated under Section
      2.7(a) on the first day of each month and on the Termination
      Date.  When calculating this deficiency, the Default Rate, if
      applicable, shall be disregarded.  As used in this
      subsection (b), “Loan Year” means each one-year period ending on an anniversary
      of the Funding Date.

     

    (c)  
      Default
      Interest Rate.  At any time during any Default Period or
      following the Termination Date, in the Lender’s sole discretion and without
      waiving any of its other rights or remedies, the principal of the Notes shall
      bear interest at the Default Rate or such lesser rate as the Lender may
      determine, effective as of the first day of the month in which any Default
      Period begins through the last day of such Default Period, or any shorter time
      period that the Lender may determine.  The decision of the Lender to
      impose a rate that is less than the Default Rate or to not impose the Default
      Rate for the entire duration of the Default Period shall be made by Lender
      in
      its sole discretion and shall not be a waiver of any of its other rights and
      remedies, including its right to retroactively impose the full Default Rate
      for
      the entirety of any such Default Period or following the Termination
      Date.

     

    (d)  
      Application
      of Payments.  Payments received in the Lender’s general account
      shall be applied to the Indebtedness as provided in Section 2.13, but the amount
      of principal paid shall continue to accrue interest at the applicable rate
      following application to the Indebtedness through the end of the Business Day
      thereafter.  If the Borrowers have elected to use the Lender’s Ready
      Remit service, then payments received by wire transfer directly into the
      Lender’s general account shall be applied to the Indebtedness as provided in
      Section 2.10, but the amount of principal paid shall continue to accrue interest
      at the applicable rate following application to the Indebtedness through the
      end
      of the Business Day thereafter.

    
      
        
        

      

      
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    (e)  
      Participations.  If
      any Person shall acquire a participation in the Advances or the Obligation
      of
      Reimbursement, the Borrowers shall be obligated to the Lender to pay the full
      amount of all interest calculated under this Section 2.7, along with all other
      fees, charges and other amounts due under this Agreement, regardless if such
      Person elects to accept interest with respect to its participation at a lower
      rate than that calculated under this Section 2.7, or otherwise elects to accept
      less than its prorata share of such fees, charges and other amounts due under
      this Agreement.

    (f)  
      Usury.  In
      any event no rate change shall be put into effect which would result in a rate
      greater than the highest rate permitted by law.  Notwithstanding
      anything to the contrary contained in any Loan Document, all agreements which
      either now are or which shall become agreements between the Borrowers and the
      Lender are hereby limited so that in no contingency or event whatsoever shall
      the total liability for payments in the nature of interest, additional interest
      and other charges exceed the applicable limits imposed by any applicable usury
      laws.  If any payments in the nature of interest, additional interest
      and other charges made under any Loan Document are held to be in excess of
      the
      limits imposed by any applicable usury laws, it is agreed that any such amount
      held to be in excess shall be considered payment of principal hereunder, and
      the
      indebtedness evidenced hereby shall be reduced by such amount so that the total
      liability for payments in the nature of interest, additional interest and other
      charges shall not exceed the applicable limits imposed by any applicable usury
      laws, in compliance with the desires of the Borrowers and the
      Lender.  This provision shall never be superseded or waived and shall
      control every other provision of the Loan Documents and all agreements between
      the Borrowers and the Lender, or their successors and assigns.

     

    Section
      2.8   Fees.

     

    (a)  
      Origination
      Fee.  The Borrowers shall pay the Lender a fully earned and
      non-refundable origination fee of Ninety Thousand Dollars ($90,000), due and
      payable upon the execution of this Agreement.  

     

    (b)  
      Unused
      Line
      Fee.  For the purposes
      of this Section 2.8, “Unused Amount” means the Maximum Line Amount reduced by
      outstanding Revolving Advances.  The Borrowers agree to pay to the
      Lender an unused line fee at the rate of two tenths percent (.20%) per annum
      on
      the average daily Unused Amount from the date of this Agreement to and including
      the Termination Date, due and payable monthly in arrears on the first day of
      the
      month and on the Termination Date.

     

    (c)  
      Collateral
      Exam Fees.  The Borrowers shall pay the Lender fees in
      connection with any collateral exams, audits or inspections conducted by or
      on
      behalf of the Lender of any Collateral or the Borrowers’ operations or business
      at the rates established from time to time by the Lender as its collateral
      exam
      fees (which fees are currently Nine Hundred Fifty Dollars ($950) per day per
      collateral examiner), together with all actual out-of-pocket costs and expenses
      incurred in conducting any such collateral examination or
      inspection.

     

    (d)  
      Collateral
      Monitoring Service Fees.  The Borrowers shall pay the Lender
      fees in connection with any service conducted by or on behalf of the Lender
      for
      purposes of identifying ineligible Collateral, calculating the Borrowing Base,
      and performing related collateral

     

    
      
        
        

      

      
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          18
          -

        
          

        

      

      
        
        

      

    

    monitoring
      services at the rates established from time to time by the Lender (which fees
      currently include an initial set-up fee of Seven Hundred Fifty Dollars ($750)
      for each receivable aging  for each Borrower that is being monitored,
      and a monthly fee of Ninety Dollars ($90) for each such aging), together with
      any out-of-pocket costs and expenses incurred by Lender, which fees shall be
      due
      and payable monthly in arrears on the first day of the month and on the
      Termination Date.

     

    (e)  
      Letter
      of
      Credit Fees.  The Borrowers shall pay to the Lender a fee with
      respect to each Letter of Credit that has been issued, which shall be calculated
      on a per diem basis at an annual rate equal to two percent (2.0%) of
      the
      Aggregate Face Amount, from and including the date of issuance of the Letter
      of
      Credit until the date that the Letter of Credit terminates or is returned to
      the
      Lender, which fee shall be due and payable monthly in arrears on the first
      day
      of each month and on the date that the Letter of Credit terminates or is
      returned to the Lender; provided, however,
      effective as
      of the first day of the month in which any Default Period begins through the
      last day of such Default Period, or any shorter time period that the Lender
      may
      determine, in the Lender’s sole discretion and without waiving any of its other
      rights and remedies, such fee shall increase to five percent (5.0%) of
      the Aggregate Face
      Amount.  The foregoing fee shall be in addition to any other fees,
      commissions and charges imposed by Lender with respect to such Letter of
      Credit.

     

    (f)  
      Letter
      of
      Credit Administrative Fees. The Borrowers shall pay all administrative
      fees charged by Lender in connection with the honoring of drafts under any
      Letter of Credit, amendments thereto, transfers thereof and all other activity
      with respect to the Letters of Credit at the then – current rates published by
      Lender for such services rendered on behalf of customers of Lender
      generally.

     

    (g)  
      Termination
      Fees. If (i) the Lender terminates the Credit Facility during a Default
      Period, or if (ii) the Borrowers terminate the Credit Facility on a date prior
      to the Maturity Date, then the Borrowers shall pay the Lender as liquidated
      damages and not as a penalty a termination fee in an amount equal to a
      percentage of the Maximum Line Amount calculated as
      follows:  (A) two percent (2.0%) if the termination occurs on or
      before the first anniversary of the Funding Date; (B) one percent (1.0%) if
      the termination occurs after the first anniversary of the Funding Date, but
      on
      or before the second anniversary of the Funding Date; and (C) one half
      percent (.5%) if the termination occurs after the second anniversary of the
      Funding Date.

     

    (h)  
Prepayment
      Fees.  The Borrowers
      may
      prepay the principal amount of the Real Estate Note at any time, whether
      voluntarily or by acceleration, subject to the payment of fees as
      follows:  If the Real Estate Note is prepaid for any reason, the
      Borrowers shall pay to the Lender a prepayment fee in an amount equal to
      (i) two percent (2.0%) of the amount prepaid, if prepayment occurs on or
      before the first anniversary of the Funding Date; (ii) one percent (1.0%)
      of the amount prepaid, if prepayment occurs after the first anniversary of
      the
      Funding Date but on or before the second anniversary of the Funding Date; and
      (iii) one half percent (.50%) of the amount prepaid, if prepayment occurs
      after the second anniversary of the Funding Date.

     

    The
      Borrowers acknowledge that prepayment may result in Lender incurring additional
      costs, expenses and/or liabilities, and that it is difficult to ascertain the
      full extent of such costs,

     

    
      
        
        

      

      
        -
          19
          -

        
          

        

      

      
        
        

      

    

    expenses
      and/or liabilities.  The Borrowers therefore agree to pay the
      above-described prepayment fee and agree that said prepayment fee represents
      a
      reasonable estimate of the prepayment costs, expenses and/or liabilities of
      the
      Lender.

     

    (i)  
      Contracted
      Funds Breakage Fees.  The Borrower may prepay the principal
      amount of the Revolving Note at any time, whether voluntarily or by
      acceleration, provided,
      however, that if the
      principal amount of any LIBOR Advance is prepaid, the Borrower shall pay to
      the
      Lender immediately upon demand a contracted funds breakage fee equal to the
      sum
      of the discounted monthly differences for each month from the month of
      prepayment through the month in which such Interest Period matures, calculated
      as follows for each such month:

     

    
      	
               

            	
              (i)

            	
            	
              Determine
                the
                amount of interest which would have accrued each month on the amount
                prepaid at the interest rate applicable to such amount had it remained
                outstanding until the last day of the applicable Interest Period.
                

            

    

    

    
      	
               

            	
              (ii)

            	
            	
              Subtract
                from
                the amount determined in (i) above the amount of interest which would
                have
                accrued for the same month on the amount prepaid for the remaining
                term of
                such Interest Period at LIBOR in effect on the date of prepayment
                for new
                loans made for such term in a principal amount equal to the amount
                prepaid. 

            

    

    

    
      	
               

            	
              (iii)

            	
            	
              If
                the result obtained in (ii) for any month is greater than zero, discount
                that difference by LIBOR used in (ii) above.

            

    

    

    The
      Borrower acknowledges that a prepayment of the Revolving Note may result in
      the
      Lender incurring additional costs, expenses or liabilities, and that it is
      difficult to ascertain the full extent of such costs, expenses or
      liabilities.  The Borrower therefore agrees to pay the above-described
      contracted funds breakage fee and agrees that this fee represents a reasonable
      estimate of the contracted funds breakage costs, and any expenses or liabilities
      of the Lender.

     

    (j)  
      Treasury
      Management Fees.  The Borrowers will pay service fees to the
      Lender for treasury management services provided to them by the Lender pursuant
      to the Master Agreement for Treasury Management services (the “Master Treasury
      Agreement”) entered into among the Borrowers and the Lender, or, if a Master
      Treasury Agreement has not been entered into, the Borrowers will pay service
      fees for its use of the Loan Manager service, the Ready Remit service, or any
      other service that the Lender may provide to the Borrowers under this Agreement
      or any other agreement entered into by the parties, in the amount prescribed
      in
      the Lender’s current service fee schedule.

     

    (k)  
      Overadvance
      Fees.  The Borrowers shall pay an Overadvance fee in the amount
      of One Thousand Dollars ($1,000) for each day during which an Overadvance
      exists, regardless of how the Overadvance arises or whether or not the
      Overadvance has been agreed to in advance by the Lender; provided, however,
      that from
      the first day of any month during which any Default Rate commences or exists
      at
      any time, the daily Overadvance charge (if an Overadvance exists) shall be
      Two
      Thousand Dollars ($2,000).  The acceptance of payment of an
      Overadvance fee by the Lender shall not be deemed to constitute either consent
      to the Overadvance or the waiver of the resulting Event of Default, unless
      the
      Lender specifically consents to the Overadvance in writing that waives the
      Event
      of Default on whatever conditions the Lender deems appropriate.

     

    
      
        
        

      

      
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          20
          -

        
          

        

      

      
        
        

      

    

    (l)  
      Other
      Fees
      and Charges.  The Lender
      may
      from time to time impose additional fees and charges as consideration for
      Advances made in excess of Availability or for other events that constitute
      an
      Event of Default or a Default hereunder, including fees and charges for the
      administration of Collateral by the Lender, and fees and charges for the late
      delivery of reports, which may be assessed in the Lender’s sole discretion on
      either an hourly, periodic, or flat fee basis, and in lieu of or in addition
      to
      imposing interest at the Default Rate.

     

    Section
      2.9   Time
      for Interest Payments; Payment on Non-Business Days; Computation of Interest
      and
      Fees.

     

    (a)  
      Time
      For
      Interest Payments.  Accrued and unpaid interest shall be due
      and payable on the first day of each month and on the Termination Date (each
      an
“Interest Payment Date”), or if any such day is not a Business Day, on the next
      succeeding Business Day. Interest will accrue from the most recent date to
      which
      interest has been paid or, if no interest has been paid, from the date of
      advance to the Interest Payment Date.  If an Interest Payment Date is
      not a Business Day, payment shall be made on the next succeeding Business
      Day. 

     

    (b)  
      Payment
      on
      Non-Business Days.  Whenever any payment to be made hereunder
      shall be stated to be due on a day which is not a Business Day, such payment
      may
      be made on the next succeeding Business Day, and such extension of time shall
      in
      such case be included in the computation of interest on the Advances or the
      fees
      hereunder, as the case may be.

     

    (c)  
      Computation
      of Interest and Fees.  Interest accruing on the outstanding
      principal balance of the Advances and fees hereunder outstanding from time
      to
      time shall be computed on the basis of actual number of days elapsed in a year
      of three hundred sixty (360) days.

     

    Section
      2.10   Lockbox; Collateral
      Account;
      Application of Payments.

    

    (a)  
      Treasury
      Management Start Date.  With respect to each Borrower, until
      the Treasury Management Start Date has occurred for such Borrower, such Borrower
      shall continue to use its currently existing lockbox and treasury management
      services with its current service providers; provided, that
      collections are forwarded to the Lender for application to payment of the
      Indebtedness upon terms and conditions acceptable to the Lender.  The
      Borrowers agree to cooperate with the Lender to establish each Lockbox, the
      Collateral Account and other depository accounts with the Lender, and, in any
      event, the Treasury Management Start Date for each of MIS, Magnetech, Martell,
      HK, MPS, Ideal and 3D shall occur by not later than  21, 2008.

    

    (b)  
      Lockbox;
      Collateral Account; Ready RemitSMService.  Upon
      the occurrence of the applicable Treasury Management Start Date and thereafter
      during the term hereof, each Borrower shall instruct all account debtors to
      pay
      Accounts owed to such Borrower as follows:

    

    (i)  
      All payments by check shall be sent directly to the applicable Lockbox;
      and

    

    (ii)  
      All payments by wire transfer or ACH shall be sent to the Collateral Account,
      unless the Lender and Borrowers have agreed that the Borrowers may use
      the

    
      
        
        

      

      
        -
          21
          -

        
          

        

      

      
        
        

      

    

    Lender’s
      Ready Remit service, in which case the Borrowers shall instruct account debtors
      originating wire transfers for payment purposes to use the payment
      identification code assigned by the Lender to the Borrowers, which will cause
      such payments to be received directly into the Lender’s general
      account.

    

    If,
      notwithstanding such instructions, the Borrowers receive any payments directly,
      the Borrowers shall promptly deposit such payments directly into the Collateral
      Account.  The Borrowers shall also deposit all other cash proceeds of
      Collateral regardless of source or nature directly into the Collateral
      Account.  Until so deposited, the Borrowers shall hold all such
      payments and cash proceeds in trust for and as the property of the Lender shall
      not commingle such property with any of its other funds or
      property.  All deposits in the Collateral Account shall constitute
      proceeds of Collateral and shall not constitute payment of the
      Indebtedness.

    

    (c)  
      Application
      of Payments to the Borrowers’ Indebtedness.

    

    (i)  
      Checks, ACH deposits and wire transfers to the Collateral Account shall be
      processed in accordance with the terms of the Wholesale Lockbox and Collateral
      Account Agreement, and the collected funds then transferred to the Lender’s
      general account, where they will be applied to the Indebtedness on the Business
      Day of receipt in the Lender’s general account.

    

    (ii)  
      Wire transfers received in the Lender’s general account pursuant to the Ready
      Remit service shall be applied to the Indebtedness on the Business Day of
      receipt, if received no later than 12:30 p.m. Central Time, or the next Business
      Day if received after 12:30 p.m. Central Time.  

     

    Section
      2.11   Maturity
      Date.  Unless terminated (i) by the Lender on the Maturity Date
      or pursuant to Section 7.2 or (ii) by the Borrowers pursuant to Section 2.12,
      the Credit Facility shall remain in effect until the Original Maturity Date
      and,
      thereafter, shall automatically renew for successive one year periods (the
      Original Maturity Date and each anniversary thereof which is at the end of
      any
      one year period in which the Credit Facility has been automatically renewed
      is
      herein referred to as a “Maturity Date”).

     

     

    Section
      2.12   Voluntary Prepayment;
      Termination of the Credit Facility by the Borrowers. Except as otherwise
      provided herein, the Borrowers may prepay the Advances in whole at any time
      or
      from time to time in part.  The Borrowers may terminate the Credit
      Facility at any time if the (i) give the Lender at least thirty (30) days
      advance written notice prior to the proposed Termination Date, and (ii) pay
      the Lender applicable termination and prepayment fees and contracted funds
      breakage fees in accordance with Sections 2.9(g), 2.9(h) and
      2.9(i).  If the Borrowers terminate the Credit Facility, all
      Indebtedness shall be immediately due and payable, and if the Borrowers give
      the
      Lender less than the required thirty (30) days advance written notice, then
      the
      interest rate applicable to borrowings evidenced by Revolving Note shall be
      the
      Default Rate for the period of time commencing thirty (30) days prior to the
      proposed Termination Date through the date that the Lender actually receives
      such written notice. If the Borrowers do not wish the Lender to consider renewal
      of the Credit Facility on the next Maturity Date, then the Borrowers shall
      give
      the Lender at least thirty (30) days written notice prior to the Maturity Date
      that it will not be requesting renewal. If the Borrowers fail to give the Lender
      such

     

    
      
        
        

      

      
        -
          22
          -

        
          

        

      

      
        
        

      

    

     

    timely
      notice, then the interest rate applicable to borrowings evidenced by the
      Revolving Note shall be the Default Rate for the period of time commencing
      thirty (30) days prior to the Maturity Date through the date that the Lender
      actually receives such written notice.

     

    Section
      2.13   Mandatory
      Prepayment.  Without notice or demand, unless the Lender shall
      otherwise consent in a written agreement that sets forth the terms and
      conditions which the Lender in its discretion may deem appropriate, including,
      without limitation, the payment of an Overadvance fee, if an Overadvance shall
      at any time exist with respect to the Credit Facility, then the Borrowers shall
      (i) first, immediately prepay the Revolving Advances to the extent
      necessary to eliminate such excess; and (ii) if prepayment in full of the
      Revolving Advances is insufficient to eliminate such excess (due, for example,
      to the L/C Amount), pay to the Lender in immediately available funds for deposit
      in the Special Account an amount equal to the remaining excess.  Any
      voluntary or mandatory payment received by the Lender under this Agreement
      may
      be applied to the Indebtedness, in such order and in such amounts as the Lender
      in its sole discretion may determine from time to time.

     

    Section
      2.14   Revolving Advances
      to Pay
Indebtedness.  Notwithstanding
      the terms of Section 2.1, the Lender may, in its discretion at any time or
      from
      time to time, without the Borrowers’ request and even if the conditions set
      forth in Section 4.2 would not be satisfied, make a Revolving Advance in an
      amount equal to the portion of the Indebtedness from time to time due and
      payable.

     

    Section
      2.15   Use
      of Proceeds.  The Borrowers shall use the proceeds of the
      initial Advances to repay outstanding indebtedness, if any, to MFB Financial
      and
      to finance the acquisition of the stock of AMP, and thereafter the proceeds
      of
      Advances and each Letter of Credit shall be used for ordinary working capital
      purposes and other proper business purposes to the extent permitted
      hereunder.

     

    Section
      2.16   Liability
      Records.  The Lender may maintain from time to time, at its
      discretion, records as to the Indebtedness.  All entries made on any
      such record shall be presumed correct until the Borrowers establish the
      contrary.  Upon the Lender’s demand, the Borrowers will admit and
      certify in writing the exact principal balance of the Indebtedness that the
      Borrowers then assert to be outstanding.  Any billing statement or
      accounting rendered by the Lender shall be conclusive and fully binding on
      the
      Borrowers unless the Borrowers give the Lender specific written notice of
      exception within thirty (30) days after receipt.

     

     

    ARTICLE
      III

     

    SECURITY
      INTEREST;
      OCCUPANCY; SETOFF

     

    Section
      3.1   Grant
      of Security Interest. Each Borrower hereby pledges, assigns and grants to
      the Lender, a lien and security interest (collectively referred to as the
“Security Interest”) in the Collateral, as security for the payment and
      performance of: (a) all present and future Indebtedness of the Borrowers to
      the
      Lender; (b) all obligations of the Borrowers and rights of the Lender under
      this
      Agreement; and (c) all present and future obligations of each of the Borrowers
      to the Lender of other kinds. Upon request by the Lender, each Borrower
      will

     

    
      
        
        

      

      
        -
          23
          -

        
          

        

      

      
        
        

      

    

    grant
      to
      the Lender, a security interest in all commercial tort claims that such Borrower
      may have against any Person.

     

    Section
      3.2   Notification of
      Account
      Debtors and Other Obligors.  The Lender may at any time a
      Default Period then exists notify any account debtor or other Person obligated
      to pay the amount due that such right to payment has been assigned or
      transferred to the Lender for security and shall be paid directly to the
      Lender.  The Borrowers will join in giving such notice if the Lender
      so requests.  At any time after the Borrowers or the Lender gives such
      notice to an account debtor or other obligor, the Lender may, but need not,
      in
      the Lender’s name or in a Borrower’s name, demand, sue for, collect or receive
      any money or property at any time payable or receivable on account of, or
      securing, any such right to payment, or grant any extension to, make any
      compromise or settlement with or otherwise agree to waive, modify, amend or
      change the obligations (including collateral obligations) of any such account
      debtor or other obligor.  The Lender may, in the Lender’s name or in a
      Borrower’s name, as such  Borrower’s agent and attorney-in-fact,
      notify the United States Postal Service to change the address for delivery
      of
      such Borrower’s mail to any address designated by the Lender, otherwise
      intercept such Borrower’s mail, and receive, open and dispose of such Borrower’s
      mail, applying all Collateral as permitted under this Agreement and holding
      all
      other mail for such Borrower’s account or forwarding such mail to such
      Borrower’s last known address.

     

    Section
      3.3   Assignment of
      Insurance.  As additional security for the payment and
      performance of the Indebtedness, each Borrower hereby assigns to the Lender
      any
      and all monies (including proceeds of insurance and refunds of unearned
      premiums) due or to become due under, and all other rights of such Borrower
      with
      respect to, any and all policies of insurance now or at any time hereafter
      covering the Collateral or any evidence thereof or any business records or
      valuable papers pertaining thereto, and each Borrower hereby directs the issuer
      of any such policy to pay all such monies directly to the Lender.  At
      any time, whether or not a Default Period then exists, the Lender may (but
      need
      not), in the Lender’s name or in a Borrower’s name, execute and deliver proof of
      claim, receive all such monies, endorse checks and other instruments
      representing payment of such monies, and adjust, litigate, compromise or release
      any claim against the issuer of any such policy.  Any monies received
      as payment for any loss under any insurance policy mentioned above (other than
      liability insurance policies) or as payment of any award or compensation for
      condemnation or taking by eminent domain, shall be paid over to the Lender
      to be
      applied, at the option of the Lender, either to the prepayment of the
      Indebtedness or shall be disbursed to the Borrowers under staged payment terms
      reasonably satisfactory to the Lender for application to the cost of repairs,
      replacements, or restorations.  Any such repairs, replacements, or
      restorations shall be effected with reasonable promptness and shall be of value
      at least equal to the value of the items or property destroyed prior to such
      damage or destruction.

     

    Section
      3.4   Occupancy.  

     

    (a)  
      Right
      to
      Possession Upon Default.  Each Borrower hereby irrevocably
      grants to the Lender the right to take exclusive possession of the Premises
      at
      any time during a Default Period without notice or consent.

     

    
      
        
        

      

      
        -
          24
          -

        
          

        

      

      
        
        

      

    

    (b)  
      Lender’s
      Use of Premises.  The Lender may use the Premises only to hold,
      process, manufacture, sell, use, store, liquidate, realize upon or otherwise
      dispose of goods that are Collateral and for other purposes that the Lender
      may
      in good faith deem to be related or incidental purposes.

     

    (c)  
      Termination
      of Occupancy.  The Lender’s right to hold the Premises shall
      cease and terminate upon the earlier of (i) payment in full and discharge
      of all Indebtedness and termination of the Credit Facility, and (ii) final
      sale or disposition of all goods constituting Collateral and delivery of all
      such goods to purchasers.

     

    (d)  
      No
      Obligation.  The Lender shall not be obligated to pay or
      account for any rent or other compensation for the possession, occupancy or
      use
      of any of the Premises; provided, however,
      that if the
      Lender does pay or account for any rent or other compensation for the
      possession, occupancy or use of any of the Premises, the Borrowers shall
      reimburse the Lender promptly for the full amount thereof.  In
      addition, the Borrowers will pay, or reimburse the Lender for, all taxes, fees,
      duties, imposts, charges and expenses at any time incurred by or imposed upon
      the Lender by reason of the execution, delivery, existence, recordation,
      performance or enforcement of this Agreement or the provisions of this Section
      3.4.

     

    Section
      3.5   License.  Without
      limiting the generality of any other Security Document, each Borrower hereby
      grants to the Lender a non-exclusive, worldwide and royalty-free license to
      use
      or otherwise exploit all Intellectual Property Rights of such Borrower for
      the
      purpose of:  (a) completing the manufacture of any in-process
      materials during any Default Period so that such materials become saleable
      Inventory, all in accordance with the same quality standards previously adopted
      by such Borrower for its own manufacturing and subject to such Borrower’s
      reasonable exercise of quality control; and (b) selling, leasing or
      otherwise disposing of any or all Collateral during any Default
      Period.

     

    Section
      3.6   Financing
      Statement.  Each Borrower authorizes the Lender to file from
      time to time, such financing statements against collateral described as “all
      personal property” or “all assets” or describing specific items of collateral
      including commercial tort claims as the Lender deems necessary or useful to
      perfect the Security Interest.  All financing statements filed before
      the date hereof to perfect the Security Interest were authorized by the
      Borrowers and are hereby re-authorized.  A carbon, photographic or
      other reproduction of this Agreement or of any financing statements signed
      by a
      Borrower is sufficient as a financing statement and may be filed as a financing
      statement in any state to perfect the security interests granted
      hereby.  For this purpose, the Borrowers represent and warrant that
      the information set forth on Schedule 3.6 is true and correct.

     

    Section
      3.7   Setoff.  The
      Lender may at any time or from time to time, at its sole discretion and without
      demand and without notice to anyone, setoff any liability owed to a Borrower
      by
      the Lender, whether or not due, against any Indebtedness, whether or not
      due.  In addition, each other Person holding a participating interest
      in any Indebtedness shall have the right to appropriate or setoff any deposit
      or
      other liability then owed by such Person to a Borrower, whether or not due,
      and
      apply the same to the payment of said participating interest, as fully as if
      such Person had lent directly to a Borrower the amount of such participating
      interest.

     

    
      
        
        

      

      
        -
          25
          -

        
          

        

      

      
        
        

      

    

    Section
      3.8   Collateral. This Agreement does not contemplate a sale of
      accounts, contract rights or chattel paper, and, as provided by law, the
      Borrowers are entitled to any surplus and shall remain liable for any
      deficiency. The Lender’s duty of care with respect to Collateral in its
      possession (as imposed by law) shall be deemed fulfilled if it exercises
      reasonable care in physically keeping such Collateral, or in the case of
      Collateral in the custody or possession of a bailee or other third Person,
      exercises reasonable care in the selection of the bailee or other third Person,
      and the Lender need not otherwise preserve, protect, insure or care for any
      Collateral.  The Lender shall not be obligated to preserve any rights
      any Borrower may have against prior parties, to realize on the Collateral at
      all
      or in any particular manner or order or to apply any cash proceeds of the
      Collateral in any particular order of application.  The Lender has no
      obligation to clean-up or otherwise prepare the Collateral for
      sale.  Each Borrower waives any right it may have to require the
      Lender to pursue any third Person for any of the Indebtedness.

     

     

    ARTICLE
      IV

     

    CONDITIONS
      OF
      LENDING

     

    Section
      4.1   Conditions Precedent
      to the
      Initial Advances and Letter of Credit.  The Lender’s obligation
      to make the initial Advances or to issue any Letters of Credit shall be subject
      to the condition precedent that the Lender shall have received all of the
      following, each properly executed by the appropriate party and in form and
      substance satisfactory to the Lender:

     

    (a)  
      This Agreement.

     

    (b)  
      The Notes.

     

    (c)  
      A Standby Letter of Credit Agreement, and L/C Application for each Letter of
      Credit that a Borrower wishes to have issued thereunder.

     

    (d)  
      A true and correct copy of any and all leases pursuant to which a Borrower
      is
      leasing the Premises, together with a landlord’s disclaimer and consent with
      respect to each such lease.

     

    (e)  
      A true and correct copy of any and all mortgages pursuant to which a Borrower
      has mortgaged the Premises, together with a mortgagee’s disclaimer and consent
      with respect to each such mortgage.

     

    (f)  
      A true and correct copy of any and all agreements pursuant to which a Borrower’s
      property is in the possession of any Person other than such Borrower, together
      with, in the case of any goods held by such Person for resale, (i) a
      consignee’s acknowledgment and waiver of Liens, (ii) UCC financing
      statements sufficient to protect such Borrower’s and the Lender’s interests in
      such goods, and (iii) UCC searches showing that no other secured party has
      filed a financing statement against such Person and covering property similar
      to
      such Borrower’s other than such Borrower, or if there exists any such secured
      party, evidence that each such secured party has received notice from such
      Borrower and the Lender sufficient to protect such Borrower’s and the Lender’s
      interests in such Borrower’s goods from any claim by such secured
      party.

     

    
      
        
        

      

      
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    (g)  
      An acknowledgment and waiver of Liens from each warehouse in which a Borrower
      is
      storing Inventory.

     

    (h)  
      A true and correct copy of any and all agreements pursuant to which a Borrower’s
      property is in the possession of any Person other than such Borrower, together
      with, (i) an acknowledgment and waiver of Liens from each subcontractor who
      has possession of such Borrower’s goods from time to time, (ii) UCC
      financing statements sufficient to protect such Borrower’s and the Lender’s
      interests in such goods, and (iii) UCC searches showing that no other
      secured party has filed a financing statement covering such Person’s property
      other than such Borrower, or if there exists any such secured party, evidence
      that each such secured party has received notice from such Borrower and the
      Lender sufficient to protect such Borrower’s and the Lender’s interests in such
      Borrower’s goods from any claim by such secured party.

     

    (i)  
      A Wholesale Lockbox and Collection Account Agreement with respect to the
      Borrowers.

     

    (j)  
      An agreement with MFB Financial in respect of lockbox receipts of certain
      Borrowers to be forwarded to the Lender from and after the Funding
      Date.

     

    (k)  
      A Patent and Trademark Security Agreement from each applicable
      Borrower.

     

    (l)  
The
      Collateral Pledge
      Agreement of MISCOR, together with original certificates evidencing its
      ownership interest in each of the other Borrowers, to the extent applicable,
      together with stock powers duly executed in blank.

     

    (m)  
The
      Mortgage.

     

    (n)  
      A Subordination Agreement from each of the initial Subordinated Creditors,
      each
      acknowledged by the Borrowers.

     

    (o)  
      Current searches of appropriate filing offices showing that (i) no Liens
      have been filed and remain in effect against any Borrower except Permitted
      Liens
      or Liens held by Persons who have agreed in writing that upon receipt of
      proceeds of the initial Advances, they will satisfy, release or terminate such
      Liens in a manner satisfactory to the Lender, and (ii) the Lender has duly
      filed all financing statements necessary to perfect the Security Interest,
      to
      the extent the Security Interest is capable of being perfected by
      filing.

     

    (p)  
      A certificate of each Borrower’s Secretary or Assistant Secretary certifying
      that attached to such certificate are (i) the resolutions of such
      Borrower’s Directors and, if required, Owners, authorizing the execution,
      delivery and performance of the Loan Documents, (ii) true, correct and
      complete copies of such Borrower’s Constituent Documents, and
      (iii) examples of the signatures of such Borrower’s Officers or agents
      authorized to execute and deliver the Loan Documents and other instruments,
      agreements and certificates, including Advance requests, on such Borrower’s
      behalf.

     

    (q)  
      With respect to each Borrower, a current certificate issued by the Indiana
      Secretary of State or similar state authority, certifying that the
      Borrower
      is in compliance with all applicable organizational requirements of the state
      of
      such Borrower’s organization.

     

    
      
        
        

      

      
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    (r)  
      Evidence that each Borrower is duly licensed or qualified to transact business
      in all jurisdictions where the character of the property owned or leased or
      the
      nature of the business transacted by it makes such licensing or qualification
      necessary.

     

    (s)  
      A certificate of an Officer of each Borrower confirming the representations
      and
      warranties set forth in Article V.

     

    (t)  
      An authorized individuals letter regarding those Persons authorized to request
      Advances, confirm such requests, and sign collateral reports.

     

    (u)  
      Certificates of the insurance required hereunder, with all hazard insurance
      containing a lender’s loss payable endorsement and mortgagee endorsement in the
      Lender’s favor and with all liability insurance naming the Lender as an
      additional insured.

     

    (v)  
      Promptly following the execution thereof by all parties, a fully executed copy
      of that certain Stock Purchase Agreement made and entered into as of January
      7,
      2008, by and among MISCOR , as Purchaser and the Shareholders of AMP, Lawrence
      Mehlenbacher, Joseph Fearon, Thomas Coll, Richard Rizzieri, and Gary
      Walsh.

     

    (w)  
      Payment of the fees and commissions due under Section 2.8 through the date
      of
      the initial Advance or Letter of Credit and expenses incurred by the Lender
      through such date and required to be paid by the Borrowers under Section 8.5,
      including all legal expenses incurred through the date of this
      Agreement.

     

    (x)  
      Evidence that after making the initial Revolving Advance, satisfying all
      obligations owed to MFB Financial, satisfying all trade payables older than
      sixty (60) days from invoice date, book overdrafts and closing costs,
      Availability shall be not less than either (i) Two Million Dollars ($2,000,000)
      if the Real Estate Advance is made simultaneously with the initial Revolving
      Advance or (ii) One Million Five Hundred Thousand Dollars if Real Estate Advance
      is not made simultaneously with the initial Revolving Advance.

     

    (y)  
      Evidence that the Borrowers’ Book Net Worth is at least Thirty Five Million
      Dollars ($35,000,000) as of the Funding Date.

     

    (z)  
      A Customer Identification Information form and such other forms and verification
      as Lender may need to comply with the U.S.A. Patriot Act.

     

    (aa)  
      with respect to the Real Estate (i) an appraisal ordered by the Lender or its
      agent of said real property and all improvements thereon, conforming to Uniform
      Standards of Professional Appraisal Practice and issued by a real estate
      appraiser acceptable to the Lender, reflecting values acceptable to the Lender
      in its discretion, (ii) an American Land Title Association policy of title
      insurance, with such endorsements as the Lender may require, issued by an
      insurer in such amounts as the Lender may require, insuring the Lender’s first
      priority lien on said real estate, subject only to such exceptions as the Lender
      in its discretion may approve, together with such evidence relating to the
      payment of liens or potential liens as the Lender may require, and (iii) an
      American Land Title Association survey certified to the Lender and to the title
      company that is acceptable to the Lender.

    
      
        
        

      

      
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    (bb)  
      with respect to the Real Estate (i) a current environmental site assessment
      indicating that the real property is subject to no “recognized environmental
      conditions”, as that term is defined by the American Society for Testing and
      Materials, in its standards for environmental due diligence, and is not in
      need
      of remedial action to avoid subjecting its owner to any present or future
      liability or contingent liability with respect to the release of toxic or
      hazardous wastes or substances.

     

    (cc)  
      with respect to the Real Estate (i) a flood hazard determination form,
      confirming whether or not the parcel is in a flood hazard area and whether
      or
      not flood insurance must be obtained, and, if the real estate is located in
      a
      flood hazard area, (ii) a policy of flood insurance.

     

    (dd)  
      with respect to the making of the Real Estate Advance only, either (i) a copy
      of
      a “closure letter” from the appropriate environmental agency or authority of the
      State of Alabama with regard to the removal of certain fuel storage tanks
      formerly on the Real Estate, or (ii) evidence of the Borrowers’ purchase of
      environmental insurance satisfactory to the Lender in its discretion with
      respect to the Real Estate covering potential liabilities with regard to such
      tanks and their removal; provided, however,
      that
      notwithstanding the Lender’s willingness to make the Real Estate Advance based
      on receipt of such policy, in the event the Borrowers have not obtained the
      “closure letter” referred to above by January 31, 2009, an Event of Default
      shall be deemed to have occurred.

     

    (ee)  
      with respect to the Real Estate, copies of management services and maintenance
      contracts, fire, health and safety reports, certificates of occupancy, leases
      and rent rolls, and such other information relating to the real estate and
      the
      improvements thereon that the Lender in its discretion deems
      necessary.

     

    (ff)  
      Such other documents as the Lender in its sole discretion may
      require.

     

    Section
      4.2   Conditions Precedent
      to All
      Advances and Letters of Credit.  The Lender’s obligation to
      make each Advance or to issue any Letter of Credit shall be subject to the
      further conditions precedent that:

     

    (a)  
      the representations and warranties contained in Article V are correct on
      and as of the date of such Advance or issuance of a Letter of Credit as though
      made on and as of such date, except to the extent that such representations
      and
      warranties relate solely to an earlier date; and

     

    (b)  
      no event has occurred and is continuing, or would result from such Advance
      or
      issuance of a Letter of Credit which constitutes a Default or an Event of
      Default.

     

     

    ARTICLE
      V

     

    REPRESENTATIONS
      AND
      WARRANTIES

     

    Each
      Borrower (as to such Borrower) represents and warrants to the Lender as
      follows:

     

    Section
      5.1   Existence and Power;
      Name;
      Chief Executive Office; Inventory and Equipment Locations; Federal Employer
      Identification Number and Organizational Identification
      Number.  Each Borrower is a corporation or a limited liability
      company, duly organized, validly

     

    
      
        
        

      

      
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    existing
      and in good standing under the laws of the State of Indiana and each Borrower
      is
      duly licensed or qualified to transact business in all jurisdictions where
      the
      character of the property owned or leased or the nature of the business
      transacted by it makes such licensing or qualification necessary.  The
      Borrower has all requisite power and authority to conduct its business, to
      own
      its properties and to execute and deliver, and to perform all of its obligations
      under, the Loan Documents.  During its existence, the Borrower has
      done business solely under the names set forth in Schedule 5.1.  The
      Borrower’s chief executive office and principal place of business is located at
      the address set forth in Schedule 5.1, and all of
      the Borrower’s records relating to its business or the Collateral are kept at
      that location.  All Inventory and Equipment is located at that
      location or at one of the other locations listed in Schedule 5.1.  The
      Borrower’s federal employer identification number and organization
      identification number are correctly set forth in Schedule 3.6.

     

    Section
      5.2   Capitalization.  Schedule
      5.2 constitutes a
      correct and complete list of all ownership interests of the Borrower and rights
      to acquire ownership interests including the record holder, number of interests
      and percentage interests on a fully diluted basis, and an organizational chart
      showing the ownership structure of all Subsidiaries of the
      Borrower.

     

    Section
      5.3   Authorization of
      Borrowing;
      No Conflict as to Law or Agreements.  The execution, delivery
      and performance by the Borrower of the Loan Documents and the borrowings from
      time to time hereunder have been duly authorized by all necessary corporate
      or
      company action, as applicable, and do not and will not (i) require any
      consent or approval of the Borrower’s Owners; (ii) require any
      authorization, consent or approval by, or registration, declaration or filing
      with, or notice to, any governmental department, commission, board, bureau,
      agency or instrumentality, domestic or foreign, or any third party, except
      such
      authorization, consent, approval, registration, declaration, filing or notice
      as
      has been obtained, accomplished or given prior to the date hereof;
      (iii) violate any provision of any law, rule or regulation (including
      Regulation X of the Board of Governors of the Federal Reserve System) or of
      any order, writ, injunction or decree presently in effect having applicability
      to the Borrower or of the Borrower’s Constituent Documents; (iv) result in
      a breach of or constitute a default under any indenture or loan or credit
      agreement or any other material agreement, lease or instrument to which the
      Borrower is a party or by which it or its properties may be bound or affected;
      or (v) result in, or require, the creation or imposition of any Lien (other
      than the Security Interest) upon or with respect to any of the properties now
      owned or hereafter acquired by the Borrower.

     

    Section
      5.4   Legal
      Agreements.  This Agreement constitutes and, upon due execution
      by the Borrower, the other Loan Documents to which the Borrower is a party
      will
      constitute the legal, valid and binding obligations of the Borrower, enforceable
      against the Borrower in accordance with their respective terms.

     

    Section
      5.5   Subsidiaries.  Except
      as set forth in Schedule
      5.5 hereto, the Borrower has no Subsidiaries.

     

    Section
      5.6   Financial Condition;
      No
      Adverse Change.  The Borrower has furnished to the Lender its
      audited financial statements of MISCOR for its fiscal year ended December 31,
      2006, and unaudited financial statements for the fiscal-year-to-date period
      ended December 31, 2007, and those statements fairly present the Borrower’s
      financial condition on the dates thereof

     

    
      
        
        

      

      
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    and
      the
      results of its operations and cash flows for the periods then ended and were
      prepared in accordance with generally accepted accounting
      principals.  Since the date of the most recent financial statements,
      there has been no change in the Borrower’s business, properties or condition
      (financial or otherwise) which has had a Material Adverse Effect.

     

    Section
      5.7   Litigation.  There
      are no actions, suits or proceedings pending or, to the Borrower’s knowledge,
      threatened against or affecting the Borrower or any of its Affiliates or the
      properties of the Borrower or any of its Affiliates before any court or
      governmental department, commission, board, bureau, agency or instrumentality,
      domestic or foreign, which, if determined adversely to the Borrower or any
      of
      its Affiliates, would have a Material Adverse Effect on the financial condition,
      properties or operations of the Borrower or any of its Affiliates.

     

    Section
      5.8   Regulation U.  The
      Borrower is not engaged in the business of extending credit for the purpose
      of
      purchasing or carrying margin stock (within the meaning of Regulation U of
      the
      Board of Governors of the Federal Reserve System), and no part of the proceeds
      of any Advance will be used to purchase or carry any margin stock or to extend
      credit to others for the purpose of purchasing or carrying any margin
      stock.

     

    Section
      5.9   Taxes.  The
      Borrower and its Affiliates have paid or caused to be paid to the proper
      authorities when due all federal, state and local taxes required to be withheld
      by each of them.  The Borrower and its Affiliates have filed all
      federal, state and local tax returns which to the knowledge of the Officers
      of
      the Borrower or any Affiliate, as the case may be, are required to be filed,
      and
      the Borrower and its Affiliates have paid or caused to be paid to the respective
      taxing authorities all taxes as shown on said returns or on any assessment
      received by any of them to the extent such taxes have become due.

     

    Section
      5.10   Titles and
      Liens.  The Borrower has good and absolute title to all
      Collateral free and clear of all Liens other than Permitted Liens.  No
      financing statement naming the Borrower as debtor is on file in any office
      except to perfect only Permitted Liens.

     

    Section
      5.11   Intellectual Property
      Rights.

     

    (a)  
      Owned
      Intellectual Property.  Schedule 5.11 is a complete
      list of all patents, applications for patents, trademarks, applications to
      register trademarks, service marks, applications to register service marks,
      mask
      works, trade dress and copyrights for which the Borrower is the owner of record
      (the “Owned Intellectual Property”).  Except as disclosed on Schedule 5.11, (i) the
      Borrower owns the Owned Intellectual Property free and clear of all restrictions
      (including covenants not to sue a third party), court orders, injunctions,
      decrees, writs or Liens, whether by written agreement or otherwise, (ii) no
      Person other than the Borrower owns or has been granted any right in the Owned
      Intellectual Property, (iii) all Owned Intellectual Property is valid,
      subsisting and enforceable and (iv) the Borrower has taken all commercially
      reasonable action necessary to maintain and protect the Owned Intellectual
      Property.

     

    (b)  
      Intentionally Left
      Blank.  

     

    (c)  
      Intellectual
      Property Rights Licensed from Others.  Schedule 5.11 is a complete
      list of all agreements under which the Borrower has licensed Intellectual
      Property Rights from

     

    
      
        
        

      

      
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    another
      Person (“Licensed Intellectual Property”) other than readily available,
      non-negotiated licenses of computer software and other intellectual property
      used solely for performing accounting, word processing and similar
      administrative tasks (“Off-the-shelf Software”) and a summary of any ongoing
      payments the Borrower is obligated to make with respect
      thereto.  Except as disclosed on Schedule 5.11 and in written
      agreements, copies of which have been given to the Lender, the Borrower’s
      licenses to use the Licensed Intellectual Property are free and clear of all
      restrictions, Liens, court orders, injunctions, decrees, or writs, whether
      by
      written agreement or otherwise.  Except as disclosed on Schedule 5.11, the Borrower is
      not obligated or under any liability whatsoever to make any payments of a
      material nature by way of royalties, fees or otherwise to any owner of, licensor
      of, or other claimant to, any Intellectual Property Rights.

     

    (d)  
      Other
      Intellectual Property Needed for Business.  Except for
      Off-the-shelf Software and as disclosed on Schedule 5.11, the Owned
      Intellectual Property and the Licensed Intellectual Property constitute all
      Intellectual Property Rights used or necessary to conduct the Borrower’s
      business as it is presently conducted or as the Borrower reasonably foresees
      conducting it.

     

    (e)  
      Infringement.  Except
      as disclosed on Schedule
      5.11, the Borrower has no knowledge of, and has not received any written
      claim or notice alleging, any Infringement of another Person’s Intellectual
      Property Rights (including any written claim that the Borrower must license
      or
      refrain from using the Intellectual Property Rights of any third party) nor,
      to
      the Borrower’s knowledge, is there any threatened claim or any reasonable basis
      for any such claim.

     

    Section
      5.12   Plans.  Except
      as disclosed to the Lender in writing prior to the date hereof, neither the
      Borrower nor any ERISA Affiliate (i) maintains or has maintained any Pension
      Plan, (ii) contributes or has contributed to any Multiemployer Plan or
      (iii) provides or has provided post-retirement medical or insurance benefits
      with respect to employees or former employees (other than benefits required
      under Section 601 of ERISA, Section 4980B of the IRC or applicable state
      law).  Neither the Borrower nor any ERISA Affiliate has received any
      notice or has any knowledge to the effect that it is not in full compliance
      with
      any of the requirements of ERISA, the IRC or applicable state law with respect
      to any Plan.  No Reportable Event exists in connection with any
      Pension Plan.  Each Plan which is intended to qualify under the IRC is
      so qualified, and no fact or circumstance exists which may have an adverse
      effect on the Plan’s tax-qualified status.  Neither the Borrower nor
      any ERISA Affiliate has (i) any accumulated funding deficiency (as defined
      in Section 302 of ERISA and Section 412 of the IRC) under any Plan, whether
      or
      not waived, (ii) any liability under Section 4201 or 4243 of ERISA for any
      withdrawal, partial withdrawal, reorganization or other event under any
      Multiemployer Plan or (iii) any liability or knowledge of any facts or
      circumstances which could result in any liability to the Pension Benefit
      Guaranty Corporation, the Internal Revenue Service, the Department of Labor
      or
      any participant in connection with any Plan (other than routine claims for
      benefits under the Plan).

     

    Section
      5.13   Default.  The
      Borrower is in compliance with all provisions of all agreements, instruments,
      decrees and orders to which it is a party or by which it or its property is
      bound or affected, the breach or default of which could have a Material Adverse
      Effect.

     

    
      
        
        

      

      
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    Section
      5.14   Environmental
      Matters.

     

    (a)  
      Presence
      of
      Hazardous Substances.  Except as disclosed on Schedule 5.14, there are
      not
      present in, on or under the Premises any Hazardous Substances in such form
      or
      quantity as to create any material liability or obligation for either the
      Borrower or the Lender under the common law of any jurisdiction or under any
      Environmental Law, and no Hazardous Substances have ever been stored, buried,
      spilled, leaked, discharged, emitted or released in, on or under the Premises
      in
      such a way as to create any such material liability.

     

    (b)  
      Disposal
      of
      Hazardous Substances.  Except as disclosed on Schedule 5.14, the Borrower
      has not disposed of Hazardous Substances in such a manner as to create any
      material liability under any Environmental Law.

     

    (c)  
      Claims.  Except
      as disclosed on Schedule
      5.14, there have not existed in the past, nor are there any threatened or
      impending requests, claims, notices, investigations, demands, administrative
      proceedings, hearings or litigation relating in any way to the Premises or
      the
      Borrower, alleging material liability under, violation of, or noncompliance
      with
      any Environmental Law or any license, permit or other authorization issued
      pursuant thereto.  

     

    (d)  
      Compliance
      with Environmental Law.  Except as disclosed on Schedule 5.14, the Borrower’s
      businesses are and have in the past always been conducted in accordance with
      all
      Environmental Laws and all licenses, permits and other authorizations required
      pursuant to any Environmental Law and necessary for the lawful and efficient
      operation of such businesses are in the Borrower’s possession and are in full
      force and effect, nor has Borrower been denied insurance on grounds related
      to
      potential environmental liability.  No permit required under any
      Environmental Law is scheduled to expire within 12 months and there is no threat
      that any such permit will be withdrawn, terminated, limited or materially
      changed.

     

    (e)  
      Lists.  Except
      as disclosed on Schedule
      5.14, the Premises are not and never have been listed on the National
      Priorities List, the Comprehensive Environmental Response, Compensation and
      Liability Information System or any similar federal, state or local list,
      schedule, log, inventory or database.

     

    (f)  
      Environmental
      Reports.  The Borrower has delivered to the Lender all
      environmental assessments, audits, reports, permits, licenses and other
      documents describing or relating in any way to the Premises or Borrower’s
      businesses.

     

    Section
      5.15   Submissions to
      Lender.  All financial and other information provided to the
      Lender by or on behalf of the Borrower in connection with the Borrower’s request
      for the credit facilities contemplated hereby (i) is true and correct in
      all material respects, (ii) does not omit any material fact necessary to
      make such information not misleading and, (iii) as to projections,
      valuations or proforma financial statements, presents a good faith opinion
      as to
      such projections, valuations and proforma condition and results.

     

    Section
      5.16   Financing
      Statements.  The Borrower has authorized the filing of
      financing statements sufficient when filed to perfect the Security Interest
      and
      the other security interests created in the Borrower’s Collateral by the
      Security Documents.  When such financing statements are filed in the
      offices noted therein, the Lender will have a valid and perfected

     

    
      
        
        

      

      
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    security
      interest in all Collateral which is capable of being perfected by filing
      financing statements.  None of the Collateral is or will become a
      fixture on real estate, unless a sufficient fixture filing is in effect with
      respect thereto.

     

    Section
      5.17   Rights to
      Payment.  Each right to payment and each instrument, document,
      chattel paper and other agreement constituting or evidencing Collateral is
      (or,
      in the case of all future Collateral, will be when arising or issued) the valid,
      genuine and legally enforceable obligation, subject to no defense, setoff or
      counterclaim, of the account debtor or other obligor named therein or in the
      Borrower’s records pertaining thereto as being obligated to pay such
      obligation.

     

    Section
      5.18   Financial
      Solvency.  Both before and after giving effect to all of the
      transactions contemplated in the Loan Documents, none of the
      Borrowers:

     

    (a)  
      Was or will be insolvent, as that term is used and defined in Section 101(32)
      of
      the United States Bankruptcy Code and Section 2 of the Uniform Fraudulent
      Transfer Act;

     

    (b)  
      Has unreasonably small capital or is engaged or about to engage in a business
      or
      a transaction for which any remaining assets of such Borrowers are unreasonably
      small;

     

    (c)  
      By executing, delivering or performing its obligations under the Loan Documents
      or other documents to which it is a party or by taking any action with respect
      thereto, intends to, nor believes that it will, incur debts beyond its ability
      to pay them as they mature;

     

    (d)  
      By executing, delivering or performing its obligations under the Loan Documents
      or other documents to which it is a party or by taking any action with respect
      thereto, intends to hinder, delay or defraud either its present or future
      creditors; and

     

    (e)  
      At this time contemplates filing a petition in bankruptcy or for an arrangement
      or reorganization or similar proceeding under any law of any jurisdiction,
      nor,
      to the best knowledge of such Borrower, is the subject of any actual, pending or
      threatened bankruptcy, insolvency or similar proceedings under any law of any
      jurisdiction.

     

     

    ARTICLE
      VI

     

    COVENANTS

     

    So
      long
      as the Indebtedness shall remain unpaid, or the Credit Facility shall remain
      outstanding, the Borrowers will comply with the following requirements, unless
      the Lender shall otherwise consent in writing:

     

    Section
      6.1   Reporting
      Requirements.  The Borrowers will deliver, or cause to be
      delivered, to the Lender (or its designated agent) each of the following, which
      shall be in form and detail acceptable to the Lender:

     

    (a)  
      Annual
      Financial Statements.  As soon as available, and in any event
      within ninety (90) days after the end of each fiscal year of the Borrowers,
      the Borrowers’ audited financial statements with the unqualified opinion of
      independent certified public accountants

     

    
      
        
        

      

      
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          34
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    selected
      by the Borrowers and acceptable to the Lender, which annual financial statements
      shall include the Borrowers’ balance sheet as at the end of such fiscal year and
      the related statements of the Borrowers’ income, retained earnings and cash
      flows for the fiscal year then ended, prepared on a consolidating and
      consolidated basis all in reasonable detail and prepared in accordance with
      GAAP, together with (i) copies of all management letters prepared by such
      accountants; (ii) a report signed by such accountants stating that in
      making the investigations necessary for said opinion they obtained no knowledge,
      except as specifically stated, of any Default or Event of Default and all
      relevant facts in reasonable detail to evidence, and the computations as to,
      whether or not the Borrowers are in compliance with the Financial Covenants;
      and
      (iii) a certificate signed by the Officer who is the Borrowers’ chief
      financial officer substantially in the form of Exhibit C hereto stating that
      such financial statements have been prepared in accordance with GAAP, fairly
      represent the Borrowers’ financial position and the results of operations, and
      whether or not such Officer has knowledge of the occurrence of any Default
      or
      Event of Default and, if so, stating in reasonable detail the facts with respect
      thereto.

     

    (b)  
      Monthly
      Financial Statements.  As soon as available and in any event
      within thirty (30) days after the end of each month, the unaudited/internal
      balance sheet and statements of income and retained earnings of the Borrowers
      as
      at the end of and for such month and for the year-to-date period then ended,
      prepared, if the Lender so requests, on a consolidating and consolidated basis,
      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, subject to year-end audit adjustments and which fairly represent
      the
      Borrowers’ financial position and the results of operations; and accompanied by
      a certificate signed by the Officer who is the Borrowers’ chief financial
      officer, substantially in the form of Exhibit C hereto stating
      (i) that such financial statements have been prepared in accordance with
      GAAP, subject to year-end audit adjustments, and fairly represent the Borrowers’
financial position and the results of its operations, (ii) whether or not
      such Officer has knowledge of the occurrence of any Default or Event of Default
      not theretofore reported and remedied and, if so, stating in reasonable detail
      the facts with respect thereto, and (iii) all relevant facts in reasonable
      detail to evidence, and the computations as to, whether or not the Borrowers
      are
      in compliance with the Financial Covenants.

     

    (c)  
      Collateral
      Reports.  Within fifteen (15) days after the end of each month
      or more frequently if the Lender so requires, agings of each Borrower’s accounts
      receivable and accounts payable, a detailed inventory report, and a calculation
      of each Borrower’s Accounts, Eligible Accounts, Inventory and Eligible Inventory
      as at the end of such month or shorter time period.

     

    (d)  
      Projections.  No
      later than fifteen (15) days prior to the last day of each fiscal year, the
      Borrowers’ projected balance sheets, income statements, statements of cash flow
      and projected Availability for each month of the succeeding fiscal year, each
      in
      reasonable detail.  Such items will be certified by the Borrowers’
chief financial officer as being the most accurate projections available and
      identical to the projections used by the Borrowers for internal planning
      purposes and be delivered with a statement of underlying assumptions and such
      supporting schedules and information as the Lender may in its discretion
      require.

     

    
      
        
        

      

      
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          35
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    (e)  
      Supplemental
      Reports.  Weekly, or more frequently if the Lender so requires,
      the Borrowers will deliver to the Lender the “daily collateral reports,”
including receivables schedules and collection reports, and if so requested
      by
      the Lender from time to time, copies of invoices to account debtors in excess
      of
      amounts determined by the Lender from time to time, and signed and dated
      shipment documents and delivery receipts for goods sold to said account
      debtors.

     

    (f)  
      Litigation.  Immediately
      after commencement thereof, notice in writing of all litigation or of any
      adversarial proceedings before a governmental or regulatory agency affecting
      the
      Borrower (i) that is of the type described in Section 5.14(c) or
      (ii) which seek a monetary recovery against the Borrower in excess of One
      Hundred Thousand Dollars ($100,000).

     

    (g)  
      Defaults.  When
      any Officer of the Borrowers becomes aware of the probable occurrence of any
      Default or Event of Default, and no later than three (3) days after such Officer
      becomes aware of such Default or Event of Default, notice of such occurrence,
      together with a detailed statement by a responsible Officer of the Borrowers
      of
      the steps being taken by the Borrowers to cure the effect thereof.

     

    (h)  
      Plans.  As
      soon as possible, and in any event within thirty (30) days after any
      Borrower knows or has reason to know that any Reportable Event with respect
      to
      any Pension Plan has occurred, a statement signed by the Officer who is the
      Borrowers’ chief financial officer setting forth details as to such Reportable
      Event and the action which the Borrowers propose to take with respect thereto,
      together with a copy of the notice of such Reportable Event to the Pension
      Benefit Guaranty Corporation.  As soon as possible, and in any event
      within ten (10) days after any Borrower fails to make any quarterly
      contribution required with respect to any Pension Plan under Section 412(m)
      of
      the IRC, the Borrowers will deliver to the Lender a statement signed by the
      Officer who is the Borrowers’ chief financial officer setting forth details as
      to such failure and the action which the Borrowers propose to take with respect
      thereto, together with a copy of any notice of such failure required to be
      provided to the Pension Benefit Guaranty Corporation.  As soon as
      possible, and in any event within ten (10) days after any Borrower knows or
      has
      reason to know that it has or is reasonably expected to have any liability
      under
      Sections 4201 or 4243 of ERISA for any withdrawal, partial withdrawal,
      reorganization or other event under any Multiemployer Plan, the Borrowers will
      deliver to the Lender a statement of the Borrowers’ chief financial officer
      setting forth details as to such liability and the action which the Borrowers
      propose to take with respect thereto.

     

    (i)  
      Disputes.  Promptly
      upon knowledge thereof, notice of (i) any disputes or claims by any
      Borrower’s customers either made outside the ordinary course of business, in
      each case exceeding Twenty Thousand Dollars ($20,000) individually, or exceeding
      Thirty Thousand Dollars ($30,000) in the aggregate during any fiscal year;
      (ii) credit memos; and (iii) any goods returned to or recovered by a
      Borrower.

     

    (j)  
      Officers
      and Directors.  Promptly upon knowledge thereof, notice any
      change in the persons constituting the Borrowers’ Officers and
      Directors.

     

    
      
        
        

      

      
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          36
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    (k)  
      Collateral.  Promptly
      upon knowledge thereof, notice of any loss of or material damage to any
      Collateral or of any substantial adverse change in any Collateral or the
      prospect of payment thereof.

     

    (l)  
      Commercial
      Tort Claims.  Promptly upon knowledge thereof, notice of any
      commercial tort claims it may bring against any Person, including the name
      and
      address of each defendant, a summary of the facts, an estimate of the Borrowers’
damages, copies of any complaint or demand letter submitted by a Borrower,
      and
      such other information as the Lender may request.

     

    (m)  
      Intellectual
      Property.

     

    (i)  
      Thirty (30) days prior written notice of its intent to acquire material
      Intellectual Property Rights; except for transfers permitted under Section
      6.17,
      the Borrowers will give the Lender thirty (30) days prior written notice of
      its
      intent to dispose of material Intellectual Property Rights and upon request
      shall provide the Lender with copies of all proposed documents and agreements
      concerning such rights.

     

    (ii)  
      Promptly upon knowledge thereof, notice of (A) any Infringement of its
      Intellectual Property Rights by others, (B) claims that a Borrower is
      Infringing another Person’s Intellectual Property Rights and (C) any
      threatened cancellation, termination or material limitation of its Intellectual
      Property Rights.

     

    (iii)  
      Promptly upon receipt, copies of all registrations and filings with respect
      to
      its Intellectual Property Rights.

     

    (n)  
      Reports
      to
      Owners.  Promptly upon their distribution, copies of all
      financial statements, reports and proxy statements which the Borrowers shall
      have sent to their Owners.

     

    (o)  
      SEC
      Filings.  Promptly after the sending or filing thereof, copies
      of all regular and periodic reports which the Borrowers shall file with the
      Securities and Exchange Commission or any national securities
      exchange.

     

    (p)  
      Tax Returns
      of Borrowers.  As soon as possible, and in any event no later
      than five (5) days after they are due to be filed, copies of the state and
      federal income tax returns and all schedules thereto of Borrowers.

     

    (r)  
      Violations
      of Law.  Promptly upon knowledge thereof, notice of any
      Borrower’s violation of any law, rule or regulation, the non-compliance with
      which could have a Material Adverse Effect on the Borrowers.

     

    (s)  
      Other
      Reports.  From time to time, with reasonable promptness, any
      and all receivables schedules, inventory reports, collection reports, deposit
      records, equipment schedules, copies of invoices to account debtors, shipment
      documents and delivery receipts for goods sold, and such other material,
      reports, records or information as the Lender may request.

     

    
      
        
        

      

      
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          37
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    Section
      6.2   Financial
      Covenants.

     

    (a)  
      Minimum
      Book Net Worth.  The Borrower
      will
      maintain, as of each date described below during the term hereof, its Book
      Net
      Worth at an amount not less than the amount set forth below opposite such
      date:

     

    
      	
              Date

            	
              Minimum
                Book Net Worth

            
	
              
              

              December
                31, 2007

            	
              
              

              Book
                Net Worth as of prior December 31 minus $2,300,000

            
	 	 
	
              
              

              December
                31, 2008, and each December 31 thereafter

            	
              
              

              Book
                Net Worth as of prior December 31 plus
                $1,000,000

            

    

     

    (b)  
      Minimum
      Net
      Income.  The Borrower will achieve during each fiscal
      year-to-date period ending during the periods described below, Net Income of
      not
      less than the amount set forth opposite such period (numbers appearing between
      “< >” are negative):

     

    
      	
              Period

            	
              Minimum
                Net Income

            
	
              
              

              Fiscal
                year ending December 31, 2007

            	
              
              

              <$2,300,000>

            
	
              
              

              Fiscal
                year ending December 31, 2008, and each fiscal year
                thereafter

              
              

            	
              
              

              $1,000,000

              
              

            

    

     

    (c)  
      Capital
      Expenditures.  The Borrowers will not incur or contract to
      incur Capital Expenditures of more than One Million Five Hundred Thousand
      Dollars ($1,500,000) in the aggregate during any fiscal year during the term
      hereof, with no more than Five Hundred Thousand Dollars ($500,000) to be paid
      from the Borrowers’ working capital in any fiscal year. 

     

    (d)  
      Debt
      Service Coverage Ratio.  The Borrowers will maintain a Debt
      Service Coverage ratio of not less than (i) 1.0 to 1.0 as of the end of each
      fiscal quarter for the fiscal year-to-date period then ended, (ii) 1.1 to 1.0
      as
      of each fiscal year end for the fiscal year then ended.

     

     

    Section
      6.3   Permitted Liens;
      Financing
      Statements.

     

    (a)  
      No Borrower will create, incur or suffer to exist any Lien upon or of any of
      its
      assets, now owned or hereafter acquired, to secure any indebtedness; excluding, however,
      from the
      operation of the foregoing, the following (each a “Permitted Lien”;
      collectively, “Permitted Liens”):

     

    (i)  
      In the case of any Borrower’s property which is not Collateral, covenants,
      restrictions, rights, easements and minor irregularities in title which do
      not
      materially interfere with such Borrower’s business or operations as presently
      conducted;

     

    (ii)  
      Liens in existence on the date hereof and listed in Schedule 6.3 hereto, securing
      indebtedness for borrowed money permitted under Section 6.4;

     

    
      
        
        

      

      
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    (iii)  
      The Security Interest and Liens created by the Security Documents;
      and

     

    (iv)  
      Purchase money Liens relating to the acquisition of machinery and equipment
      of
      such Borrower not exceeding the lesser of cost or fair market value thereof
      and
      so long as no Default Period is then in existence and none would exist
      immediately after such acquisition.

     

    (b)  
      No Borrower will amend any financing statements in favor of the Lender except
      as
      permitted by law.

     

    Section
      6.4   Indebtedness.  No
      Borrower will incur, create, assume or permit to exist any indebtedness or
      liability on account of deposits or advances or any indebtedness for borrowed
      money or letters of credit issued on such Borrower’s behalf, or any other
      indebtedness or liability evidenced by notes, bonds, debentures or similar
      obligations, except:

     

    (a)  
      Any existing or future Indebtedness or any other obligations of such Borrower
      to
      the Lender;

     

    (b)  
      Any indebtedness of such Borrower in existence on the date hereof and listed
      in
Schedule 6.4 hereto;

     

    (c)  
      Any indebtedness relating to Permitted Liens; and

     

    (d)  
      Any indebtedness incurred in connection with an acquisition by such Borrower
      in
      accordance with the provisions of Section 6.6(e).

     

    Section
      6.5   Guaranties.  No
      Borrower will assume, guarantee, endorse or otherwise become directly or
      contingently liable in connection with any obligations of any other Person,
      except:

     

    (a)  
      The endorsement of negotiable instruments by such Borrower for deposit or
      collection or similar transactions in the ordinary course of business;
      and

     

    (b)  
      Guaranties, endorsements and other direct or contingent liabilities in
      connection with the obligations of other Persons, in existence on the date
      hereof and listed in Schedule
      6.4 hereto.

     

    Section
      6.6   Investments and
      Subsidiaries.  No Borrower will make or permit to exist any
      loans or advances to, or make any investment or acquire any interest whatsoever
      in, any other Person or Affiliate, including any partnership or joint venture,
      nor purchase or hold beneficially any stock or other securities or evidence
      of
      indebtedness of any other Person or Affiliate, except:

     

    (a)  
      Investments in direct obligations of the United States of America or any agency
      or instrumentality thereof whose obligations constitute full faith and credit
      obligations of the United States of America having a maturity of one year or
      less, commercial paper issued by U.S. corporations rated “A-1” or “A-2” by
      Standard & Poor’s Ratings Services or “P-1” or “P-2” by Moody’s
      Investors Service or certificates of deposit or bankers’ acceptances having a
      maturity of

     

    
      
        
        

      

      
        -
          39
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    one
      year
      or less issued by members of the Federal Reserve System having deposits in
      excess of One Hundred Million Dollars ($100,000,000) (which certificates of
      deposit or bankers’ acceptances are fully insured by the Federal Deposit
      Insurance Corporation);

     

    (b)  
      Travel advances or loans to such Borrower’s Officers and employees not exceeding
      at any one time an aggregate of Fifty Thousand Dollars ($50,000);

     

    (c)  
      Prepaid rent not exceeding one month or security deposits; 

     

    (d)  
      Current investments in the Subsidiaries in existence on the date hereof and
      listed in Schedule 5.5
      hereto; and

     

    (e)           
      Acquisitions of all or substantially all of the equity interests or assets
      of
      another Person or its business in compliance with the limitations set forth
      in
      Section 6.20, provided the
      financing for such acquisitions is provided by third parties on either an
      unsecured basis or secured only by the assets of the Person or business being
      acquired, and no funds of any Borrower (other than the proceeds of such third
      party financing) are used in any acquisition or for the funding of any such
      new
      subsidiary’s or business unit’s working capital needs without the prior written
      consent of the Lender.

     

    Section
      6.7   Dividends and
      Distributions.  MISCOR will not declare or pay any dividends
      (other than dividends payable solely in stock of MISCOR) on any class of its
      stock or make any payment on account of the purchase, redemption or other
      retirement of any shares of such stock or make any distribution in respect
      thereof, either directly or indirectly.  

     

    Section
      6.8   Intentionally
      Left Blank.

     

    Section
      6.9   Books
      and Records; Collateral
      Examination,
      Inspection and Appraisals.

     

    (a)  
      The Borrowers will keep accurate books of record and account for itself
      pertaining to the Collateral and pertaining to the Borrowers’ business and
      financial condition and such other matters as the Lender may from time to time
      request in which true and complete entries will be made in accordance with
      GAAP
      and, upon the Lender’s request, will permit any officer, employee, attorney,
      accountant or other agent of the Lender to audit, review, make extracts from
      or
      copy any and all company and financial books and records of the Borrowers at
      all
      times during ordinary business hours, to send and discuss with account debtors
      and other obligors requests for verification of amounts owed to the Borrowers,
      and to discuss the Borrowers’ affairs with any of its Directors, Officers,
      employees or agents.

     

    (b)  
      The Borrowers hereby irrevocably authorize all accountants and third parties
      to
      disclose and deliver to the Lender or its designated agent, at the Borrowers’
expense, all financial information, books and records, work papers, management
      reports and other information in their possession regarding the
      Borrowers.  

     

    (c)  
      The Borrowers will permit the Lender or its employees, accountants, attorneys
      or
      agents, to examine and inspect any Collateral or any other property of the
      Borrowers at any time during ordinary business hours.

     

    
      
        
        

      

      
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    (d)  
      The Lender may also, from time to time so long as no Default Period then exists,
      no more than one time each calendar year, obtain at the Borrowers’ expense an
      appraisal of  the Collateral and of the Real Estate by an appraiser
      acceptable to the Lender in its sole discretion.  Unless an Event of
      Default has occurred and is continuing, in which event the Lender may obtain
      such appraisals as it deems necessary, new appraisals are typically obtained
      prior to the extension of the maturity date of the Credit Facility, prior to
      advancing any additional funds based on the value of the appraised assets and
      to
      ascertain the impact of changes in market conditions; provided; however,
      that the
      foregoing list of possible reasons for obtaining an appraisal shall not limit
      the Lender’s rights to obtain such appraisals as are provided for
      herein.

     

    Section
      6.10   Account
      Verification.

     

    (a)  
      The Lender or its agent may at any time and from time to time send or require
      the Borrowers to send requests for verification of accounts or notices of
      assignment to account debtors and other obligors. The Lender or its agent may
      also at any time and from time to time telephone account debtors and other
      obligors to verify accounts.

     

    (b)  
      The Borrowers shall pay when due each account payable due to a Person holding
      a
      Permitted Lien (as a result of such payable) on any Collateral.

     

    Section
      6.11   Compliance with
      Laws.

     

    (a)  
      The Borrowers shall (i) comply with the requirements of applicable laws and
      regulations, the non-compliance with which would materially and adversely affect
      its business or its financial condition and (ii) use and keep the
      Collateral, and require that others use and keep the Collateral, only for lawful
      purposes, without violation of any federal, state or local law, statute or
      ordinance.

     

    (b)  
      Without limiting the foregoing undertakings, each Borrower specifically agrees
      that it will comply with all applicable Environmental Laws and obtain and comply
      with all permits, licenses and similar approvals required by any Environmental
      Laws, and will not generate, use, transport, treat, store or dispose of any
      Hazardous Substances in such a manner as to create any material liability or
      obligation under the common law of any jurisdiction or any Environmental
      Law.

     

    (c)  
      The Borrowers shall (i) ensure that no Owner shall be listed on the
      Specially Designated Nationals and Blocked Person List or other similar lists
      maintained by the Office of Foreign Assets Control ("OFAC"), the Department
      of
      the Treasury or included in any Executive Orders, (ii) not use or permit
      the use of the proceeds of the Credit Facility or any other financial
      accommodation from Lender to violate any of the foreign asset control
      regulations of OFAC or other applicable law, (iii) comply with all
      applicable Bank Secrecy Act laws and regulations, as amended from time to time,
      and (iv) otherwise comply with the USA Patriot Act as required by federal
      law and the Lender's policies and practices.

     

    Section
      6.12   Payment of Taxes
      and Other
      Claims.  The Borrowers will pay or discharge, when due,
      (a) all taxes, assessments and governmental charges levied or imposed upon
      it or upon its income or profits, upon any properties belonging to it (including
      the Collateral) or upon or against the creation, perfection or continuance
      of
      the Security Interest,

     

    
      
        
        

      

      
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          41
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    prior
      to
      the date on which penalties attach thereto, (b) all federal, state and
      local taxes required to be withheld by it, and (c) all lawful claims for
      labor, materials and supplies which, if unpaid, might by law become a Lien
      upon
      any properties of a Borrower; provided, that the Borrowers shall not be required
      to pay any such tax, assessment, charge or claim whose amount, applicability
      or
      validity is being contested in good faith by appropriate proceedings and for
      which proper reserves have been made.

     

    Section
      6.13   Maintenance of
      Properties.

     

    (a)  
      The Borrowers will keep and maintain the Collateral and all of their respective
      other properties necessary or useful in its business in good condition, repair
      and working order (normal wear and tear excepted) and will from time to time
      replace or repair any worn, defective or broken parts; provided, however,
      that nothing
      in this covenant shall prevent the Borrowers from discontinuing the operation
      and maintenance of any of their respective properties if such discontinuance
      is,
      in the Borrowers’ judgment, desirable in the conduct of the Borrowers’ business
      and not disadvantageous in any material respect to the Lender.  The
      Borrowers will take all commercially reasonable steps necessary to protect
      and
      maintain their respective Intellectual Property Rights.

     

    (b)  
      The Borrowers will defend the Collateral against all Liens, claims or demands
      of
      all Persons (other than the Lender) claiming the Collateral or any interest
      therein. The Borrowers will keep all Collateral free and clear of all Liens
      except Permitted Liens. The Borrowers will take all commercially reasonable
      steps necessary to prosecute any Person Infringing their respective Intellectual
      Property Rights and to defend itself against any Person accusing any of them
      of
      Infringing any Person’s Intellectual Property Rights.

     

    Section
      6.14   Insurance.  The
      Borrowers will obtain and at all times maintain insurance with insurers
      acceptable to the Lender, in such amounts, on such terms (including any
      deductibles) and against such risks as may from time to time be required by
      the
      Lender, but in all events in such amounts and against such risks as is usually
      carried by companies engaged in similar business and owning similar properties
      in the same general areas in which the Borrowers operate.  Without
      limiting the generality of the foregoing, the Borrowers will at all times
      maintain business interruption insurance including coverage for force majeure
      and keep all tangible Collateral insured against risks of fire (including
      so-called extended coverage), theft, collision (for Collateral consisting of
      motor vehicles) and such other risks and in such amounts as the Lender may
      reasonably request, with any loss payable to the Lender to the extent of its
      interest, and all policies of such insurance shall contain a lender’s loss
      payable endorsement for the Lender’s benefit.  

     

    Section
      6.15   Preservation of
      Existence.  Each Borrower will preserve and maintain its
      existence and all of its rights, privileges and franchises necessary or
      desirable in the normal conduct of its business and shall conduct its business
      in an orderly, efficient and regular manner.

     

    Section
      6.16   Delivery of Instruments,
      etc.  Upon request by the Lender, the Borrowers will promptly
      deliver to the Lender in pledge all instruments, documents and chattel paper
      constituting Collateral, duly endorsed or assigned by the applicable
      Borrower.

     

    
      
        
        

      

      
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    Section
      6.17   Sale
      or Transfer of Assets; Suspension of Business Operations.  No
      Borrower will sell, lease, assign, transfer or otherwise dispose of (i) the
      stock of any Subsidiary, (ii) all or a substantial part of its assets, or
      (iii) any Collateral or any interest therein (whether in one transaction or
      in a series of transactions) to any other Person other than (a) the sale of
      Inventory in the ordinary course of business and (b) the sale of Equipment
      which
      is either obsolete or no longer used in such Borrower’s business or which is to
      be replaced.  No Borrower will liquidate, dissolve or suspend business
      operations.  No Borrower will transfer any part of its ownership
      interest in any Intellectual Property Rights nor permit any agreement under
      which it has licensed Intellectual Property to lapse, except that a Borrower
      may
      transfer such rights or permit such agreements to lapse if it shall have
      reasonably determined that the applicable Intellectual Property Rights are
      no
      longer useful in its business.  If a Borrower transfers any
      Intellectual Property Rights for value, such Borrower will pay over the proceeds
      to the Lender for application to the Indebtedness.  No Borrower will
      license any other Person to use any of such Borrower’s Intellectual Property
      Rights, except that each Borrower may grant licenses in the ordinary course
      of
      its business in connection with sales of Inventory or provision of services
      to
      its customers.

     

    Section
      6.18   Consolidation and
      Merger;
      Asset Acquisitions.  No Borrower will consolidate with or merge
      into any Person, or permit any other Person to merge into it, or acquire (in
      a
      transaction analogous in purpose or effect to a consolidation or merger) all
      or
      substantially all the assets of any other Person, other than in accordance
      with
      the provisions of Section 6.6(e).

     

    Section
      6.19   Sale
      and Leaseback.  No Borrower will enter into any arrangement,
      directly or indirectly, with any other Person whereby such Borrower shall sell
      or transfer any real or personal property, whether now owned or hereafter
      acquired, and then or thereafter rent or lease as lessee such property or any
      part thereof or any other property which such Borrower intends to use for
      substantially the same purpose or purposes as the property being sold or
      transferred.

     

    Section
      6.20   Restrictions on
      Nature of
      Business.  The Borrowers provide mechanical and electrical
      solutions and intend to continue to pursue the acquisition of entities in these
      markets and no Borrower will engage in any line of business materially different
      from that presently engaged in by the Borrowers nor purchase, lease or otherwise
      acquire assets not related to such business.

    

    Section
      6.21   Accounting.  No
      Borrower will adopt any material change in accounting principles other than
      as
      required by GAAP.  No Borrower will adopt, permit or consent to any
      change in its fiscal year.

     

    Section
      6.22   Discounts,
      etc.  After notice from the Lender, no Borrower will grant any
      discount, credit or allowance to any customer of such Borrower or accept any
      return of goods sold.  No Borrower will at any time modify, amend,
      subordinate, cancel or terminate the obligation of any account debtor or other
      obligor of such Borrower.

     

    Section
      6.23   Plans.  Unless
      disclosed to the Lender in writing pursuant to Section 5.12, neither any
      Borrower nor any ERISA Affiliate will (i) adopt, create, assume or become a
      party to any Pension Plan, (ii) incur any obligations to contribute to any
      Multiemployer Plan, (iii) incur

     

    
      
        
        

      

      
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    any
      obligation to provide post-retirement medical or insurance benefits with respect
      to employees or former employees (other than benefits required by law) or (iv)
      amend any Plan in a manner that would materially increase its funding
      obligations.

     

    Section
      6.24   Place
      of Business; Name.  No Borrower will transfer its chief
      executive office or principal place of business, or move, relocate, close or
      sell any business location.  No Borrower will permit any tangible
      Collateral or any records pertaining to the Collateral to be located in any
      state or area in which, in the event of such location, a financing statement
      covering such Collateral would be required to be, but has not in fact been,
      filed in order to perfect the Security Interest.  No Borrower will
      change its name or jurisdiction of organization.

     

    Section
      6.25   Constituent
      Documents.  No Borrower will amend its Constituent
      Documents.  

     

    Section
      6.26   Performance by the
      Lender.  If a Borrower at any time fails to perform or observe
      any of the foregoing covenants contained in this Article VI or elsewhere
      herein, and if such failure shall continue for a period of ten (10) calendar
      days after the Lender gives the Borrowers written notice thereof (or in the
      case
      of the agreements contained in Section 6.12 and Section 6.14, immediately upon
      the occurrence of such failure, without notice or lapse of time), the Lender
      may, but need not, perform or observe such covenant on behalf and in the name,
      place and stead of such Borrower (or, at the Lender’s option, in the Lender’s
      name) and may, but need not, take any and all other actions which the Lender
      may
      reasonably 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 or other obligors, the procurement and maintenance of insurance,
      the execution of assignments, security agreements and financing statements,
      and
      the endorsement of instruments); and the Borrowers shall thereupon pay to the
      Lender on demand the amount of all monies expended and all costs and expenses
      (including reasonable attorneys’ fees and legal expenses) incurred by the Lender
      in connection with or as a result of the performance or observance of such
      agreements or the taking of such action by the Lender, together with interest
      thereon from the date expended or incurred at the Default Rate.  To
      facilitate the Lender’s performance or observance of such covenants of the
      Borrowers, the Borrowers hereby irrevocably appoint the Lender, or the Lender’s
      delegate, acting alone, as each Borrower’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 the Borrowers 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 the Borrowers hereunder.

     

     

    ARTICLE
      VII

     

    EVENTS
      OF DEFAULT, RIGHTS
      AND REMEDIES

     

    Section
      7.1   Events
      of Default.  “Event of Default”, wherever used herein, means
      any one of the following events:

     

    
      
        
        

      

      
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    (a)  
      Default in the payment of the Revolving Note, the Real Estate Note, any
      Obligation of Reimbursement, or any default with respect to any other
      Indebtedness due from Borrowers to Lender as such Indebtedness becomes due
      and
      payable;

     

    (b)  
      Default in the performance, or breach, of any covenant or agreement of the
      Borrowers contained in this Agreement; provided, however,
      that in the
      case of a default in the performance under any of Sections 6.1(a), (b), (d)
      or
      (p) for failure to make a timely delivery thereunder, such a default shall
      not
      constitute an Event of Default if the subject deliveries are made within five
      (5) days of the Borrowers’ receipt of notice from the Lender of such
      default.

     

    (c)  
      An Overadvance arises as the result of any reduction in the Borrowing Base,
      or
      arises in any manner on terms not otherwise approved in advance by the Lender
      in
      writing;

     

    (d)  
      A Change of Control shall occur;

     

    (e)  
      Any Borrower or any Guarantor shall be or become insolvent, or admit in writing
      its or his inability to pay its or his debts as they mature, or make an
      assignment for the benefit of creditors; or any Borrower or any Guarantor shall
      apply for or consent to the appointment of any receiver, trustee, or similar
      officer for it or him or for all or any substantial part of its or his property;
      or such receiver, trustee or similar officer shall be appointed without the
      application or consent of such Borrower or such Guarantor, as the case may
      be;
      or any Borrower or any Guarantor shall institute (by petition, application,
      answer, consent or otherwise) any bankruptcy, insolvency, reorganization,
      arrangement, readjustment of debt, dissolution, liquidation or similar
      proceeding relating to it or him under the laws of any jurisdiction; or any
      such
      proceeding shall be instituted (by petition, application or otherwise) against
      such Borrower or such Guarantor; or any judgment, writ, warrant of attachment
      or
      execution or similar process shall be issued or levied against a substantial
      part of the property of any Borrower or any Guarantor;

     

    (f)  
      A petition shall be filed by or against any Borrower or any Guarantor under
      the
      United States Bankruptcy Code or the laws of any other jurisdiction naming
      such
      Borrower or such Guarantor as debtor;

     

    (g)  
      Any representation or warranty made by any Borrower in this Agreement, by any
      Guarantor in any guaranty delivered to the Lender, or by any Borrower (or any
      of
      its Officers) or any Guarantor in any agreement, certificate, instrument or
      financial statement or other statement contemplated by or made or delivered
      pursuant to or in connection with this Agreement or any such guaranty shall
      be
      incorrect in any material respect;

     

    (h)  
      The rendering against any Borrower of an arbitration award, final judgment,
      decree or order for the payment of money in excess of One Hundred Thousand
      Dollars ($100,000) and the continuance of such arbitration award, judgment,
      decree or order unsatisfied and in effect for any period of thirty
      (30) consecutive days without a stay of execution;

     

    (i)  
      A default under any bond, debenture, note or other evidence of material
      indebtedness of any Borrower owed to any Person other than the Lender, or under
      any indenture or other instrument under which any such evidence of indebtedness
      has been issued or by which it is governed, or under any material lease or
      other
      contract, and the expiration of the applicable

     

    
      
        
        

      

      
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    period
      of
      grace, if any, specified in such evidence of indebtedness, indenture, other
      instrument, lease or contract;

     

    
      (j)  
        Any Reportable Event, which the Lender determines in good faith might constitute
        grounds for the termination of any Pension Plan or for the appointment by
        the
        appropriate United States District Court of a trustee to administer any Pension
        Plan, shall have occurred and be continuing thirty (30) days after written
        notice to such effect shall have been given to the Borrowers by the Lender;
        or a
        trustee shall have been appointed by an appropriate United States District
        Court
        to administer any Pension Plan; or the Pension Benefit Guaranty Corporation
        shall have instituted proceedings to terminate any Pension Plan or to appoint
        a
        trustee to administer any Pension Plan; or any Borrower or any ERISA Affiliate
        shall have filed for a distress termination of any Pension Plan under Title
        IV
        of ERISA; or any Borrower or any ERISA Affiliate shall have failed to make
        any
        quarterly contribution required with respect to any Pension Plan under Section
        412(m) of the IRC, which the Lender determines in good faith may by itself,
        or
        in combination with any such failures that the Lender may determine are likely
        to occur in the future, result in the imposition of a Lien on the Borrowers’
assets in favor of the Pension Plan; or any withdrawal, partial withdrawal,
        reorganization or other event occurs with respect to a Multiemployer Plan
        which
        results or could reasonably be expected to result in a material liability
        of the
        Borrowers to the Multiemployer Plan under Title IV of ERISA;

       

      (k)  
        An event of default shall occur under any Security Document;

       

      (l)  
        Default in the payment of any amount owed by the Borrowers to the Lender
        other
        than any Indebtedness arising hereunder;

       

      (m)  
        Any Guarantor shall repudiate, purport to revoke or fail to perform any
        obligation under such Guaranty in favor of the Lender, any individual Guarantor
        shall die or any other Guarantor shall cease to exist;

       

      (n)  
        Any Borrower shall take or participate in any action which would be prohibited
        under the provisions of any Subordination Agreement or make any payment with
        respect to indebtedness that has been subordinated pursuant to any Subordination
        Agreement;

       

      (o)  
        The Lender believes in good faith that the prospect of payment in full of
        any
        part of the Indebtedness, or that full performance by the Borrowers under
        the
        Loan Documents, is impaired, or that there has occurred any material adverse
        change in the business or financial condition of the Borrowers; 

       

      (p)  
        There has occurred any breach, default or event of default by, or attributable
        to, any Affiliate under any agreement between the Affiliate and the Lender;
        or

       

      (q)  
        The indictment of any Director, Officer, Guarantor, or any Owner of at least
        twenty percent (20%) of the issued and outstanding common stock of MISCOR
        for a
        felony offence under state or federal law.

       

    

    Section
      7.2   Rights
      and Remedies.  During any Default Period, the Lender may
      exercise any or all of the following rights and remedies:

     

    
      
        
        

      

      
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    (a)  
      The Lender may, by notice to the Borrowers, declare the Commitment to be
      terminated, whereupon the same shall forthwith terminate;

     

    (b)  
      The Lender may, by notice to the Borrowers, declare the Indebtedness to be
      forthwith due and payable, whereupon all Indebtedness shall become and be
      forthwith due and payable, without presentment, notice of dishonor, protest
      or
      further notice of any kind, all of which the Borrowers hereby expressly
      waive;

     

    (c)  
      The Lender may, without notice to the Borrowers and without further action,
      apply any and all money owing by the Lender to any Borrower to the payment
      of
      the Indebtedness;

     

    (d)  
      The Lender may exercise and enforce any and all rights and remedies available
      upon default to a secured party under the UCC, including the right to take
      possession of Collateral, or any evidence thereof, proceeding without judicial
      process or by judicial process (without a prior hearing or notice thereof,
      which
      the Borrowers hereby expressly waive) and the right to sell, lease or otherwise
      dispose of any or all of the Collateral (with or without giving any warranties
      as to the Collateral, title to the Collateral or similar warranties), and,
      in
      connection therewith, the Borrowers will on demand assemble the Collateral
      and
      make it available to the Lender at a place to be designated by the Lender which
      is reasonably convenient to the parties;

     

    (e)  
      The Lender may make demand upon the Borrowers and, forthwith upon such demand,
      the Borrowers will pay to the Lender in immediately available funds for deposit
      in the Special Account pursuant to Section 2.4 an amount equal to the aggregate
      maximum amount available to be drawn under all Letters of Credit then
      outstanding, assuming compliance with all conditions for drawing
      thereunder;

     

    (f)  
      The Lender may exercise and enforce its rights and remedies under the Loan
      Documents; 

     

    (g)  
      The Lender may without regard to any waste, adequacy of the security or solvency
      of any Borrower, apply for the appointment of a receiver of the Collateral,
      to
      which appointment the Borrowers hereby consent, whether or not foreclosure
      proceedings have been commenced under the Security Documents and whether or
      not
      a foreclosure sale has occurred; and

     

    (h)  
      The Lender may exercise any other rights and remedies available to it by law
      or
      agreement.

     

    Notwithstanding
      the foregoing, upon the occurrence of an Event of Default described in Section
      7.1(e) or (f), the Indebtedness shall be immediately due and payable
      automatically without presentment, demand, protest or notice of any
      kind.  If the Lender sells any of the Collateral on credit, the
      Indebtedness will be reduced only to the extent of payments actually
      received.  If the purchaser fails to pay for the Collateral, the
      Lender may resell the Collateral and shall apply any proceeds actually received
      to the Indebtedness.

     

    Section
      7.3   Certain
      Notices.  If notice to a Borrower of any intended disposition
      of Collateral or any other intended action is required by law in a particular
      instance, such notice

     

    
      
        
        

      

      
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    shall
      be
      deemed commercially reasonable if given (in the manner specified in Section
      8.3)
      at least ten (10) calendar days before the date of intended disposition or
      other
      action.

     

     

    ARTICLE
      VIII

     

    MISCELLANEOUS

     

    Section
      8.1   No
      Waiver; Cumulative Remedies; Compliance with Laws.  No failure
      or delay by the Lender in exercising any right, power or remedy under the Loan
      Documents shall operate as a waiver thereof; nor shall any single or partial
      exercise of any such right, power or remedy preclude any other or further
      exercise thereof or the exercise of any other right, power or remedy under
      the
      Loan Documents.  The remedies provided in the Loan Documents are
      cumulative and not exclusive of any remedies provided by law.  The
      Lender may comply with any applicable state or federal law requirements in
      connection with a disposition of the Collateral and such compliance will not
      be
      considered adversely to affect the commercial reasonableness of any sale of
      the
      Collateral.

     

    Section
      8.2   Amendments;
      Etc.  No amendment, modification, termination or waiver of any
      provision of any Loan Document or consent to any departure by the Borrowers
      therefrom or any release of a Security Interest shall be effective unless the
      same shall be in writing and signed by the Lender, and then such waiver or
      consent shall be effective only in the specific instance and for the specific
      purpose for which given.  No notice to or demand on the Borrowers in
      any case shall entitle the Borrowers to any other or further notice or demand
      in
      similar or other circumstances.

     

    Section
      8.3   Notices; Communication
      of
      Confidential Information; Requests for Accounting.  Except as
      otherwise expressly provided herein, all notices, requests, demands and other
      communications provided for under the Loan Documents shall be in writing and
      shall be (a) personally delivered, (b) sent by first class United
      States mail, (c) sent by overnight courier of national reputation,
      (d) transmitted by telecopy, or (e) sent as electronic mail, in each case
      delivered or sent to the party to whom notice is being given to the business
      address, telecopier number, or e-mail address set forth below next to its
      signature or, as to each party, at such other business address, telecopier
      number, or e-mail address as it may hereafter designate in writing to the other
      party pursuant to the terms of this Section.  All such notices,
      requests, demands and other communications shall be deemed to be an
      authenticated record communicated or given on (a) the date received if
      personally delivered, (b) when deposited in the mail if delivered by mail,
      (c) the date delivered to the courier if delivered by overnight courier, or
      (d) the date of transmission if sent by telecopy or by e-mail, except that
      notices or requests delivered to the Lender pursuant to any of the provisions
      of
      Article II shall not be effective until received by the
      Lender.  All notices, financial information, or other business records
      sent by either party to this Agreement may be transmitted, sent, or otherwise
      communicated via such medium as the sending party may deem appropriate and
      commercially reasonable; provided, however,
      that the
      risk that the confidentiality or privacy of such notices, financial information,
      or other business records sent by either party may be compromised shall be
      borne
      exclusively by the Borrowers.  All requests for an accounting under
      Section 9-210 of the UCC (i) shall be made in a writing signed by a Person
      authorized under Section 2.2(b), (ii) shall be personally delivered, sent
      by registered or certified mail, return receipt requested, or by overnight
      courier of national

     

    
      
        
        

      

      
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    reputation,
      (iii) shall be deemed to be sent when received by the Lender and (iv) shall
      otherwise comply with the requirements of Section 9-210 of the
      UCC.  The Borrowers request that the Lender respond to all such
      requests which on their face appear to come from an authorized individual and
      releases the Lender from any liability for so responding.  The
      Borrowers shall pay the Lender the maximum amount allowed by law for responding
      to such requests.

     

    Section
      8.4   Further
      Documents.  The Borrowers will from time to time execute,
      deliver, endorse and authorize the filing of any and all instruments, documents,
      conveyances, assignments, security agreements, financing statements, control
      agreements and other agreements that the Lender may reasonably request in order
      to secure, protect, perfect or enforce the Security Interest or the Lender’s
      rights under the Loan Documents (but any failure to request or assure that
      the
      Borrowers executes, delivers, endorses or authorizes the filing of any such
      item
      shall not affect or impair the validity, sufficiency or enforceability of the
      Loan Documents and the Security Interest, regardless of whether any such item
      was or was not executed, delivered or endorsed in a similar context or on a
      prior occasion).

     

    Section
      8.5   Costs
      and Expenses.  The Borrowers shall pay on demand all costs and
      expenses, including reasonable attorneys’ fees, incurred by the Lender in
      connection with the Indebtedness, this Agreement, the Loan Documents, any Letter
      of Credit and any other document or agreement related hereto or thereto, and
      the
      transactions contemplated hereby, including all such costs, expenses and fees
      incurred in connection with the negotiation, preparation, execution, amendment,
      administration, performance, collection and enforcement of the Indebtedness
      and
      all such documents and agreements and the creation, perfection, protection,
      satisfaction, foreclosure or enforcement of the Security Interest.

     

    Section
      8.6   Indemnity.  In
      addition to the payment of expenses pursuant to Section 8.5, the Borrowers
      shall
      indemnify, defend and hold harmless the Lender, and any of its participants,
      parent corporations, subsidiary corporations, affiliated corporations, successor
      corporations, and all present and future officers, directors, employees,
      attorneys and agents of the foregoing (the “Indemnitees”) from and against any
      of the following (collectively, “Indemnified Liabilities”):

     

    (i)  
      Any and all transfer taxes, documentary taxes, assessments or charges made
      by
      any governmental authority by reason of the execution and delivery of the Loan
      Documents or the making of the Advances;

     

    (ii)  
      Any claims, loss or damage to which any Indemnitee may be subjected if any
      representation or warranty contained in Section 5.14 proves to be incorrect
      in
      any respect or as a result of any violation of the covenant contained in Section
      6.11(b); and

     

    (iii)  
      Any and all other liabilities, losses, damages, penalties, judgments, suits,
      claims, costs and expenses of any kind or nature whatsoever (including the
      reasonable fees and disbursements of counsel) in connection with the foregoing
      and any other investigative, administrative or judicial proceedings, whether
      or
      not such Indemnitee shall be designated a party thereto, which may be imposed
      on, incurred by or asserted against any such Indemnitee, in any manner related
      to or arising out of or in connection with the making of the Advances and the
      Loan Documents or the use or intended use of

     

    
      
        
        

      

      
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    the
      proceeds of the Advances. Notwithstanding the foregoing, the Borrowers shall
      not
      be obligated to indemnify any Indemnitee for any Indemnified Liability caused
      by
      the willful misconduct of such Indemnitee.

     

    If
      any
      investigative, judicial or administrative proceeding arising from any of the
      foregoing is brought against any Indemnitee, upon such Indemnitee’s request, the
      Borrowers, or counsel designated by the Borrowers and satisfactory to the
      Indemnitee, will resist and defend such action, suit or proceeding to the extent
      and in the manner directed by the Indemnitee, at the Borrowers’ sole costs and
      expense.  Each Indemnitee will use its best efforts to cooperate in
      the defense of any such action, suit or proceeding.  If the foregoing
      undertaking to indemnify, defend and hold harmless may be held to be
      unenforceable because it violates any law or public policy, the Borrowers shall
      nevertheless make the maximum contribution to the payment and satisfaction
      of
      each of the Indemnified Liabilities which is permissible under applicable
      law.  The Borrowers’ obligations under this Section 8.6 shall survive
      the termination of this Agreement and the discharge of the Borrowers’ other
      obligations hereunder.

     

    Section
      8.7   Participants.  The
      Lender and its participants, if any, are not partners or joint venturers, and
      the Lender shall not have any liability or responsibility for any obligation,
      act or omission of any of its participants.  All rights and powers
      specifically conferred upon the Lender may be transferred or delegated to any
      of
      the Lender’s participants, successors or assigns.

     

    Section
      8.8   Execution in Counterparts;
      Telefacsimile Execution.  This Agreement and other Loan
      Documents may be executed in any number of counterparts, each of which when
      so
      executed and delivered shall be deemed to be an original and all of which
      counterparts, taken together, shall constitute but one and the same
      instrument.  Delivery of an executed counterpart of this Agreement by
      telefacsimile shall be equally as effective as delivery of an original executed
      counterpart of this Agreement.  Any party delivering an executed
      counterpart of this Agreement by telefacsimile also shall deliver an original
      executed counterpart of this Agreement but the failure to deliver an original
      executed counterpart shall not affect the validity, enforceability, and binding
      effect of this Agreement.

     

    Section
      8.9   Retention of Borrowers’
Records.  The Lender
      shall have no obligation to maintain any
      electronic records or any documents, schedules, invoices, agings, or other
      papers delivered to the Lender by the Borrowers or in connection with the Loan
      Documents for more than thirty (30) days after receipt by the
      Lender.  If there is a special need to retain specific records, the
      Borrowers must inform the Lender of the need to retain those records with
      particularity, which must be delivered in accordance with the notice provisions
      of Section 8.3 within thirty (30) days of the Lender taking control of
      same.

     

    Section
      8.10   Binding Effect;
      Assignment;
      Complete Agreement; Sharing Information.  The Loan Documents
      shall be binding upon and inure to the benefit of the Borrowers and the Lender
      and their respective successors and assigns, except that the Borrowers shall
      not
      have the right to assign their respective rights thereunder or any interest
      therein without having first received the Lender’s prior written
      consent.  To the extent permitted by law, the Borrowers waive and will
      not assert against any assignee any claims, defenses or set-offs which the
      Borrowers could assert against the Lender.  This Agreement shall also
      bind all Persons who become a party to this Agreement as a
      borrower.  This Agreement, together with the Loan

     

    
      
        
        

      

      
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    Documents,
      comprises the complete and integrated agreement of the parties with respect
      to
      each credit that is subject hereto, and supersedes all prior negotiations,
      communications, discussion, correspondence and agreements, written or oral,
      on
      the subject matter of this Agreement.  To the extent that any
      provision of this Agreement contradicts other provisions of the Loan Documents,
      this Agreement shall control.  The Lender may share any information
      they may have in their possession regarding the Borrower and their respective
      Affiliates, with the Lender’s affiliates, participants, accountants, lawyers and
      other advisors, and the Borrowers waive any right of confidentiality they may
      have with respect to the sharing of such information.

     

    Section
      8.11   Severability of
      Provisions.  Any provision of this Agreement which is
      prohibited or unenforceable shall be ineffective to the extent of such
      prohibition or unenforceability without invalidating the remaining provisions
      hereof.

     

    Section
      8.12   Headings.  Article,
      Section and subsection headings in this Agreement are included herein for
      convenience of reference only and shall not constitute a part of this Agreement
      for any other purpose.

     

    Section
      8.13   Governing Law; Jurisdiction,
      Venue; Waiver of Jury Trial.  The Loan Documents shall be
      governed by and construed in accordance with the substantive laws (other than
      conflict laws) of the State of Wisconsin.  The parties hereto hereby
      (i) consent to the personal jurisdiction of the state and federal courts
      located in the State of Wisconsin in connection with any controversy related
      to
      this Agreement; (ii) waive any argument that venue in any such forum is not
      convenient; (iii) agree that any litigation initiated by the Lender or the
      Borrowers in connection with this Agreement or the other Loan Documents may
      be
      venued in either the state or federal courts located in the City of Milwaukee,
      County of Milwaukee, Wisconsin; and (iv) agree that a final judgment in any
      such suit, action or proceeding shall be conclusive and may be enforced in
      other
      jurisdictions by suit on the judgment or in any other manner provided by
      law.

     

    
      THE
        BORROWERS AND THE LENDER WAIVE ANY RIGHT TO TRIAL BY JURY IN ANY ACTION AT
        LAW
        OR IN EQUITY OR IN ANY OTHER PROCEEDING BASED ON OR PERTAINING TO THIS AGREEMENT
        OR ANY OTHER LOAN DOCUMENT.

       

      

    

    IN
      WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
      by
      their respective officers thereunto duly authorized as of the date set forth
      in
      the initial caption of this Agreement.

     

    

     

    Signatures
      on following page.

     

    
      
        
        

      

      
        -
          51
          -

        
          

        

      

      
        
        

      

    

    

    
      	
              MISCOR
                Group, Ltd.

            	
              MISCOR
                GROUP, LTD.

            
	
              1125
                South Walnut Street

            	 	 
	
              South
                Bend, Indiana 46619

            	 	 
	
              Telecopier:  574/232-7648

            	
              By:

            	/s/
              John A. Martell
	
              Attention:  Richard
                J. Mullin

            	 	
              John
                A. Martell, Chief Executive Officer

            
	
              e-mail:  rmullin@miscor.com

            	 	 
	 	 	 
	 	 	 
	 	 	 
	 	
              MAGNETECH
                INDUSTRIAL SERVICES,
                INC.

            
	 	 	 
	 	 	 
	 	
              By:

            	/s/
              John A. Martell
	 	 	
              John
                A. Martell, Chief Executive Officer

            
	 	 	 
	 	 	 
	 	 	 
	 	
              MARTELL
                ELECTRIC, LLC

            
	 	 	 
	 	 	 
	 	
              By:

            	/s/
              John A. Martell
	 	 	
              John
                A. Martell, Chief Executive Officer

            
	 	 	 
	 	 	 
	 	 	 
	 	
              HK
                ENGINE COMPONENTS,
                LLC

            
	 	 	 
	 	 	 
	 	
              By:

            	/s/
              John A. Martell
	 	 	
              John
                A. Martell, Chief Executive Officer

            
	 	 	 
	 	 	 
	 	 	 
	 	
              MAGNETECH
                POWER SERVICES, LLC

            
	 	 	 
	 	 	 
	 	
              By:

            	/s/
              John A. Martell
	 	 	
              John
                A. Martell, Chief Executive Officer

            
	 	 	 
	 	 	 
	 	 	 
	 	
              IDEAL
                CONSOLIDATED, INC.

            
	 	 	 
	 	 	 
	 	
              By:

            	/s/
              John A. Martell
	 	 	
              John
                A. Martell, Chief Executive Officer

            

    

    

    
      
        
        

      

      
        -
          52
          -

        
          

        

      

      
        
        

      

    

    

    
      	 	
              3-D
                SERVICE, LTD.

            
	 	 	 
	 	 	 
	 	
              By:

            	/s/
              John A. Martell
	 	 	
              John
                A. Martell, Chief Executive Officer

            
	 	 	 
	 	 	 
	 	 	 
	 	
              AMERICAN
                MOTIVE POWER, INC.

            
	 	 	 
	 	 	 
	 	
              By:

            	/s/
              John A. Martell
	 	 	
              John
                A. Martell, Chief Executive Officer

            
	 	 	 
	 	 	 
	
              Wells
                Fargo Bank, National Association,

            	
              WELLS
                FARGO BANK, NATIONAL ASSOCIATION

            
	
              111
                East Wayne Street, 2nd
                Floor

            	 	 
	
              MAC
                N8622-02A

            	 	 
	
              Fort
                Wayne, Indiana 46802

            	
              By:

            	 
	
              Telecopier:  260/461-6037

            	 	
              Lynn
                A. Gruber, Vice President

            
	
              Attention:  Lynn
                A. Gruber

            	 	 
	
              e-mail:  lynn.a.gruber@wellsfargo.com

            	 	 

    

    
 

     

    -
      53 -mis_8k0118ex102.htm

    Exhibit
      10.2

    

    REVOLVING
      NOTE

     

    
      
        	
                $13,750,000.00

              	 	
                January
                  14, 2008

              

      

    

     

    For
      value
      received, the undersigned, MISCOR GROUP, LTD., an Indiana corporation
      (“MISCOR”), MAGNETECH INDUSTRIAL SERVICES, INC., an Indiana corporation (“MIS”),
      MARTELL ELECTRIC, LLC, an Indiana limited liability company (“Martell”), HK
      ENGINE COMPONENTS, LLC, an Indiana limited liability company (“HK”), MAGNETECH
      POWER SERVICES, LLC, an Indiana limited liability company (“MPS”) and IDEAL
      CONSOLIDATED, INC., an Indiana corporation (“Ideal”) , 3-D SERVICE, LTD., an
      Ohio limited liability company (“3D”) and AMERICAN MOTIVE POWER, INC., a Nevada
      corporation (“AMP” and together with MISCOR, MIS, Martell, HK, MPS, Ideal and
      3D, the “Borrowers” and each a “Borrower”), hereby jointly and severally promise
      to pay to the order of WELLS FARGO BANK, NATIONAL ASSOCIATION (the “Lender”),
      acting through its Wells Fargo Business Credit operating division, on the
      Termination Date referenced in the Credit and Security Agreement dated the
      same
      date as this Revolving Note that was entered into by the Lender and the
      Borrowers (as amended from time to time, the “Credit Agreement”), at Lender’s
      office located at Milwaukee, Wisconsin, or at any other place designated at
      any
      time by the holder hereof, in lawful money of the United States of America
      and
      in immediately available funds, the principal sum of Thirteen Million Seven
      Hundred Fifty Thousand Dollars ($13,750,000) or the aggregate unpaid principal
      amount of all Revolving Advances made by the Lender to the Borrowers under
      the
      Credit Agreement, together with interest on the principal amount hereunder
      remaining unpaid from time to time, computed on the basis of the actual number
      of days elapsed and a 360-day year, from the date hereof until this Revolving
      Note is fully paid at the rate from time to time in effect under the Credit
      Agreement.

     

    This
      Revolving Note is the Revolving Note referenced in the Credit Agreement, and
      is
      subject to the terms of the Credit Agreement, which provides, among other
      things, for acceleration hereof.  Principal and interest due hereunder
      shall be payable as provided in the Credit Agreement, and this Revolving Note
      may be prepaid only in accordance with the terms of the Credit
      Agreement.  This Revolving Note is secured, among other things,
      pursuant to the Credit Agreement and the Security Documents as therein defined,
      and may now or hereafter be secured by one or more other security agreements,
      mortgages, deeds of trust, assignments or other instruments or
      agreements.

     

    The
      Borrowers shall pay all costs of collection, including reasonable attorneys’
fees and legal expenses if this Revolving Note is not paid when due, whether
      or
      not legal proceedings are commenced.

     

    
      
        
        

      

      
        1

        
          

        

      

      
        
        

      

    

     

    Presentment
      or other demand for payment, notice of dishonor and protest are expressly
      waived.

     

    
      	 	
              MISCOR
                GROUP, LTD.

            
	 	 	 
	 	 	 
	 	
              By:

            	 /s/
              John A. Martell
	 	
              Name:  John
                A. Martell

            
	 	
              Its:  Chief
                Executive Officer

            
	 	 	 
	 	 	 
	 	
              MAGNETECH
                INDUSTRIAL SERVICES, INC.

            
	 	 	 
	 	 	 
	 	
              By:

            	 /s/
              John A. Martell
	 	
              Name:  John
                A. Martell

            
	 	
              Its:  Chief
                Executive Officer

            
	 	 	 
	 	 	 
	 	
              MARTELL
                ELECTRIC, LLC

            
	 	 	 
	 	 	 
	 	
              By:

            	 /s/
              John A. Martell
	 	
              Name:  John
                A. Martell

            
	 	
              Its:  Chief
                Executive Officer

            
	 	 	 
	 	 	 
	 	
              HK
                ENGINE COMPONENTS, LLC

            
	 	 	 
	 	 	 
	 	
              By:

            	 /s/
              John A. Martell
	 	
              Name:  John
                A. Martell

            
	 	
              Its:  Chief
                Executive Officer

            
	 	 	 
	 	 	 
	 	
              MAGNETECH
                POWER SERVICES, LLC

            
	 	 	 
	 	 	 
	 	
              By:

            	 /s/
              John A. Martell
	 	
              Name:  John
                A. Martell

            
	 	
              Its:  Chief
                Executive Officer

            
	 	 	 

    

    

    
      
        
        

      

      
        2

        
          

        

      

      
        
        

      

    

    

    
      	 	
              IDEAL
                CONSOLIDATED, INC.

            
	 	 	 
	 	 	 
	 	
              By:

            	 /s/
              John A. Martell
	 	
              Name:  John
                A. Martell

            
	 	
              Its:  Chief
                Executive Officer

            
	 	 	 
	 	 	 
	 	
              3-D
                SERVICE, LTD.

            
	 	 	 	 
	 	 	 	 
	 	
              By:

            	 /s/
              John A. Martell	 
	 	
              Name:  John
                A. Martell

            
	 	
              Its:  Chief
                Executive Officer

            
	 	 	 
	 	 	 
	 	
              AMERICAN
                MOTIVE POWER, INC.

            
	 	 	 	 
	 	 	 	 
	 	
              By:

            	 /s/
              John A. Martell	 
	 	
              Name:  John
                A. Martell

            
	 	
              Its:  Chief
                Executive Officer

            

    

    

    -3-

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