Document:

Stock Pledge Agreement

     

    Exhibit
      10.2

     

     

    STOCK
      PLEDGE AGREEMENT

     

     

    This
      Stock Pledge Agreement (this “Agreement”)
      is
      dated as of April
      29,
      2005
      and amended and restated as of March __, 2006May
      31,
      2006,
      among
      Laurus Master Fund, Ltd. (the “Pledgee”),
      Accentia Biopharmaceuticals, Inc., ,
      MISCOR
      Group, Ltd., an Florida
      Indiana
      corporation
      (the “Parent”),
      and
      each of the other undersigned parties (other than the Pledgee) (the Parent
      and
      each such other undersigned party, a “Pledgor”
and
      collectively, the “Pledgors”).

     

    BACKGROUND

     

    Magnetech
      Industrial Services of Alabama LLC, an
      Indiana
limited
      liability company
      (the “Company”)
      that is a subsidiary of Parent,
      has entered into a Security
      and Purchase
      Agreement, dated as of May
      31,
      2006 (as
      amended, modified, restated and/or supplemented from time to time, the
“Security
      Agreement”),
      pursuant to which the Pledgee provides or will provide certain financial
      accommodations to the Company
      that are guaranteed by the Parent and
      certain subsidiaries of the Parent.

     

    In
      order
      to induce the Pledgee to provide or continue to provide the financial
      accommodations described in the the
      Securities Purchase Agreement and the Security
      Agreement, each Pledgor has agreed to pledge and grant a security interest
      in
      the collateral described herein to the Pledgee on the terms and conditions
      set
      forth herein.

     

    NOW,
      THEREFORE, in consideration of the premises and for other good and valuable
      consideration the receipt of which is hereby acknowledged, the parties hereto
      agree as follows:

     

    1. Defined
      Terms.
      All
      capitalized terms used herein which are not defined shall have the meanings
      given to them in the Securities
      Purchase Agreement and the Security
      Agreement, as applicable.

     

    2. Pledge
      and Grant of Security Interest.
      To
      secure the full and punctual payment and performance of (the following clauses
      (a) and (b), collectively, the “Obligations”)
      (a)
      the obligations under the Master
      Security Agreement by and among the Parent, certain subsidiaries of the Parent
      and the Pledgee dated as of the date hereof (as amended, modified or
      supplemented, the “MSA”) and the Documents
      referred
      to in the MSA, Securities
      Purchase Agreement, the Related Agreements referred to in the Securities
      Purchase Agreement, the
      Security Agreement and the Ancillary Agreements referred to in the Security
      Agreement (the Securities
      Purchase Agreement, the Related Agreements, the MSA,
      the Related Agreements, the Security
      Agreement and the Ancillary Agreements, as each may be amended, restated,
      modified and/or supplemented from time to time, collectively, the “Documents”)
      and
      (b) all other obligations and liabilities of the
      Company and each
      Pledgor to the Pledgee whether now existing or hereafter arising, direct or
      indirect, liquidated or unliquidated, absolute or contingent, due or not due
      and
      whether under, pursuant to or evidenced by a note, agreement, guaranty,
      instrument or otherwise (in each case, irrespective of the genuineness,
      validity, regularity or enforceability of such Obligations, or of any instrument
      evidencing any of the Obligations or of any collateral therefor or of the
      existence or extent of such collateral, and irrespective of the allowability,
      allowance or disallowance of any or all of such in any case commenced by or
      against any Pledgor under Title 11, United States Code, including, without
      limitation, obligations of
      the Company and
      each
      Pledgor for post-petition interest, fees, costs and charges that would have
      accrued or been added to the Obligations but for the commencement of such case),
      each Pledgor hereby acknowledges,
      confirms and agrees that such Pledgee has and shall continue to have a security
      interest in all of the Collateral (as defined below) heretofore granted by
      each
      Pledgor to Pledgee pursuant to the Original Stock Pledge Agreement and each
      Pledgor hereby pledges,
      

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    assigns,
      hypothecates, transfers and grants a security interest to Pledgee in all of
      the
      following (the “Collateral”):

     

    (a) the
      shares of stock or
      other equity interests set
      forth
      on Schedule
      A
      annexed
      hereto and expressly made a part hereof (together with any additional shares
      of
      stock or other equity interests acquired by any Pledgor, the “Pledged
      Stock”),
      the
      certificates representing the Pledged Stock and all dividends, cash, instruments
      and other property or proceeds from time to time received, receivable or
      otherwise distributed in respect of or in exchange for any or all of the Pledged
      Stock;

     

    (b) all
      additional shares of stock or
      other equity interests of
      any
      issuer (each, an “Issuer”)
      of the
      Pledged Stock from time to time acquired by any Pledgor in any manner,
      including, without limitation, stock dividends or a distribution in connection
      with any increase or reduction of capital, reclassification, merger,
      consolidation, sale of assets, combination of shares, stock split, spin-off
      or
      split-off (which shares shall be deemed to be part of the Collateral), and
      the
      certificates representing such additional shares, and all dividends, cash,
      instruments and other property or proceeds from time to time received,
      receivable or otherwise distributed in respect of or in exchange for any or
      all
      of such shares; and

     

    (c) all
      options and rights, whether as an addition to, in substitution of or in exchange
      for any shares of any Pledged Stock and all dividends, cash, instruments and
      other property or proceeds from time to time received, receivable or otherwise
      distributed in respect of or in exchange for any or all such options and
      rights.

     

    3. Delivery
      of Collateral.
      All
      certificates representing or evidencing the Pledged Stock shall be delivered
      to
      and held by or on behalf of Pledgee pursuant hereto and shall be accompanied
      by
      duly executed instruments of transfer or assignments in blank, all in form
      and
      substance satisfactory to Pledgee. Each Pledgor hereby authorizes the Issuer
      upon demand by the Pledgee to deliver any certificates, instruments or other
      distributions issued in connection with the Collateral directly to the Pledgee,
      in each case to be held by the Pledgee, subject to the terms hereof. Upon the
      occurrence and during the continuance of an Event of Default (as defined below),
      the Pledgee shall have the right, during such time in its discretion and without
      notice to the Pledgor, to transfer to or to register in the name of the Pledgee
      or any of its nominees any or all of the Pledged Stock. In addition, the Pledgee
      shall have the right at such time to exchange certificates or instruments
      representing or evidencing Pledged Stock for certificates or instruments of
      smaller or larger denominations.

     

    4. Representations
      and Warranties of each Pledgor.
      Each
      Pledgor jointly and severally represents and warrants to the Pledgee (which
      representations and warranties shall be deemed to continue to be made until
      all
      of the Obligations have been paid in full and each Document and each agreement
      and instrument entered into in connection therewith has been irrevocably
      terminated) that, except as set forth in any Schedule to the Security Agreement
      or in any Schedule to the Guaranty referred to in the Security
      Agreement:

     

    (a) the
      execution, delivery and performance by each Pledgor of this Agreement and the
      pledge of the Collateral hereunder do not and will not result in any violation
      of any agreement, indenture, instrument, license, judgment, decree, order,
      law,
      statute, ordinance or other governmental rule or regulation applicable to any
      Pledgor;

    
      
        
        

      

      
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    (b) this
      Agreement constitutes the legal, valid, and binding obligation of each Pledgor
      enforceable against each Pledgor in accordance with its terms;

     

    (c) (i)
      all
      Pledged Stock owned by each Pledgor is set forth on Schedule
      A
      hereto
      and (ii) each Pledgor is the direct and beneficial owner of each share of the
      Pledged Stock;

     

    (d) all
      of
      the shares of the Pledged Stock have been duly authorized, validly issued and
      are fully paid and nonassessable;

     

    (e) no
      consent or approval of any person, corporation, governmental body, regulatory
      authority or other entity, is or will be necessary for (i) the execution,
      delivery and performance of this Agreement, (ii) the exercise by the Pledgee
      of
      any rights with respect to the Collateral or (iii) the pledge and assignment
      of,
      and the grant of a security interest in, the Collateral hereunder;

     

    (f) there
      are
      no pending or, to the best of Pledgor’s knowledge, threatened actions or
      proceedings before any court, judicial body, administrative agency or arbitrator
      which may materially adversely affect the Collateral;

     

    (g) each
      Pledgor has the requisite power and authority to enter into this Agreement
      and
      to pledge and assign the Collateral to the Pledgee in accordance with the terms
      of this Agreement;

     

    (h) each
      Pledgor owns each item of the Collateral and, except for the pledge and security
      interest granted to Pledgee hereunder, the Collateral shall be, immediately
      following the closing of the transactions contemplated by the Documents, free
      and clear of any other security interest, mortgage, pledge, claim, lien, charge,
      hypothecation, assignment, offset or encumbrance whatsoever (collectively,
      “Liens”);

     

    (i) there
      are
      no restrictions on transfer of the Pledged Stock contained in the certificate
      of
      incorporation or by-laws (or equivalent organizational documents) of the Issuer
      or otherwise which have not otherwise been enforceably and legally waived by
      the
      necessary parties;

     

    (j) none
      of
      the Pledged Stock has been issued or transferred in violation of the securities
      registration, securities disclosure or similar laws of any jurisdiction to
      which
      such issuance or transfer may be subject;

     

    (k) the
      pledge and assignment of the Collateral and the grant of a security interest
      under this Agreement vest in the Pledgee all rights of each Pledgor in the
      Collateral as contemplated by this Agreement; and

     

    (l) The
      Pledged Stock constitutes one hundred percent (100%) of the issued and
      outstanding shares of capital stock of each Issuer.

    
      
        
        

      

      
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    5. Covenants.
      Each
      Pledgor jointly and severally covenants that, until the Obligations shall be
      indefeasibly satisfied in full and each Document and each agreement and
      instrument entered into in connection therewith is irrevocably
      terminated:

     

    (a) No
      Pledgor will sell, assign, transfer, convey, or otherwise dispose of its rights
      in or to the Collateral or any interest therein; nor will any Pledgor create,
      incur or permit to exist any Lien whatsoever with respect to any of the
      Collateral or the proceeds thereof other than that created hereby. 

     

    (b) Each
      Pledgor will, at its expense, defend Pledgee’s right, title and security
      interest in and to the Collateral against the claims of any other
      party.

     

    (c) Each
      Pledgor shall at any time, and from time to time, upon the written request
      of
      Pledgee, execute and deliver such further documents and do such further acts
      and
      things as Pledgee may reasonably request in order to effectuate the purposes
      of
      this Agreement including, but without limitation, delivering to Pledgee, upon
      the occurrence of an Event of Default, irrevocable proxies in respect of the
      Collateral in form satisfactory to Pledgee. Until receipt thereof, upon an
      Event
      of Default that has occurred and is continuing beyond any applicable grace
      period, this Agreement shall constitute Pledgor’s proxy to Pledgee or its
      nominee to vote all shares of Collateral then registered in each Pledgor’s
      name.

     

    (d) No
      Pledgor will consent to or approve the issuance of (i) any additional shares
      of
      any class of capital stock or other equity interests of the Issuer; or (ii)
      any
      securities convertible either voluntarily by the holder thereof or automatically
      upon the occurrence or nonoccurrence of any event or condition into, or any
      securities exchangeable for, any such shares, unless, in either case, such
      shares are pledged as Collateral pursuant to this Agreement.

     

    (e) Each
      Pledgor agrees to execute and deliver to each Issuer that is a limited liability
      company or a limited partnership a control acknowledgment (“Control
      Acknowledgement”)
      substantially in the form of Exhibit A hereto. Each Pledgor shall cause each
      such Issuer to acknowledge in writing its receipt and acceptance thereof. Such
      Control Acknowledgement shall instruct such Issuer to follow instructions from
      Pledgee without any Pledgor’s consultation or consent.

     

    6. Voting
      Rights and Dividends.
      In
      addition to the Pledgee’s rights and remedies set forth in Section 8 hereof, in
      case an Event of Default shall have occurred and be continuing, beyond any
      applicable cure period, the Pledgee shall (i) be entitled to vote the
      Collateral, (ii) be entitled to give consents, waivers and ratifications in
      respect of the Collateral (each Pledgor hereby irrevocably constituting and
      appointing the Pledgee, with full power of substitution, the proxy and
      attorney-in-fact of each Pledgor for such purposes) and (iii) be entitled to
      collect and receive for its own use cash dividends paid on the Collateral.
      No
      Pledgor shall be permitted to exercise or refrain from exercising any voting
      rights or other powers if, in the reasonable judgment of the Pledgee, such
      action would have a material adverse effect on the value of the Collateral
      or
      any part thereof; and, provided,
      further,
      that
      each Pledgor shall give at least five (5) days’ written notice of the manner in
      which such Pledgor intends to exercise, or the reasons for refraining from
      exercising, any voting rights or other powers other than with respect to any
      election of directors and voting with respect to any incidental matters.
      Following the occurrence of an Event of Default, all dividends and all other
      distributions in respect of any of the 

    
      
        
        

      

      
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    Collateral,
      shall be delivered to the Pledgee to hold as Collateral and shall, if received
      by any Pledgor, be received in trust for the benefit of the Pledgee, be
      segregated from the other property or funds of any other Pledgor, and be
      forthwith delivered to the Pledgee as Collateral in the same form as so received
      (with any necessary endorsement).

     

    7. Event
      of Default.
      An
“Event of Default” under this Agreement shall occur upon the happening of any of
      the following events:

     

    (a) An
“Event
      of Default” under any Document or any agreement or note related to any Document
      shall have occurred and be continuing beyond any applicable cure
      period;

     

    (b) Any
      Pledgor shall default in the performance of any of its obligations under any
      Document, including, without limitation, this Agreement, and such default shall
      not be cured during the cure period applicable thereto;

     

    (c) Any
      representation or warranty of any Pledgor made herein, in any Document or in
      any
      agreement, statement or certificate given in writing pursuant hereto or thereto
      or in connection herewith or therewith shall be false or misleading in any
      material respect; 

     

    (d) Any
      portion of the Collateral is subjected to a levy of execution, attachment,
      distraint or other judicial process or any portion of the Collateral is the
      subject of a claim (other than by the Pledgee) of a Lien or other right or
      interest in or to the Collateral and such levy or claim shall not be cured,
      disputed or stayed within a period of fifteen (15) business days after the
      occurrence thereof; or

     

    (e) Any
      Pledgor shall (i) apply for, consent to, or suffer to exist the appointment
      of,
      or the taking of possession by, a receiver, custodian, trustee, liquidator
      or
      other fiduciary of itself or of all or a substantial part of its property,
      (ii)
      make a general assignment for the benefit of creditors, (iii) commence a
      voluntary case under any state or federal bankruptcy laws (as now or hereafter
      in effect), (iv) be adjudicated a bankrupt or insolvent, (v) file a petition
      seeking to take advantage of any other law providing for the relief of debtors,
      (vi) acquiesce to, or fail to have dismissed, within thirty (30) days, any
      petition filed against it in any involuntary case under such bankruptcy laws,
      or
      (vii) take any action for the purpose of effecting any of the
      foregoing.

     

    8. Remedies.
      In case
      an Event of Default shall have occurred and is continuing, the Pledgee may:
      

     

    (a) Transfer
      any or all of the Collateral into its name, or into the name of its nominee
      or
      nominees;

     

    (b) Exercise
      all corporate rights with respect to the Collateral including, without
      limitation, all rights of conversion, exchange, subscription or any other
      rights, privileges or options pertaining to any shares of the Collateral as
      if
      it were the absolute owner thereof, including, but without limitation, the
      right
      to exchange, at its discretion, any or all of the 

    
      
        
        

      

      
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    Collateral
      upon the merger, consolidation, reorganization, recapitalization or other
      readjustment of the Issuer thereof, or upon the exercise by the Issuer of any
      right, privilege or option pertaining to any of the Collateral, and, in
      connection therewith, to deposit and deliver any and all of the Collateral
      with
      any committee, depository, transfer agent, registrar or other designated agent
      upon such terms and conditions as it may determine, all without liability except
      to account for property actually received by it; and

     

    (c) Subject
      to any requirement of applicable law, sell, assign and deliver the whole or,
      from time to time, any part of the Collateral at the time held by the Pledgee,
      at any private sale or at public auction, with or without demand, advertisement
      or notice of the time or place of sale or adjournment thereof or otherwise
      (all
      of which are hereby waived, except such notice as is required by applicable
      law
      and cannot be waived), for cash or credit or for other property for immediate
      or
      future delivery, and for such price or prices and on such terms as the Pledgee
      in its sole discretion may determine, or as may be required by applicable
      law.

     

    Each
      Pledgor hereby waives and releases any and all right or equity of redemption,
      whether before or after sale hereunder. At any such sale, unless prohibited
      by
      applicable law, the Pledgee may bid for and purchase the whole or any part
      of
      the Collateral so sold free from any such right or equity of redemption. All
      moneys received by the Pledgee hereunder, whether upon sale of the Collateral
      or
      any part thereof or otherwise, shall be held by the Pledgee and applied by
      it as
      provided in Section 10 hereof. No failure or delay on the part of the Pledgee
      in
      exercising any rights hereunder shall operate as a waiver of any such rights
      nor
      shall any single or partial exercise of any such rights preclude any other
      or
      future exercise thereof or the exercise of any other rights hereunder. The
      Pledgee shall have no duty as to the collection or protection of the Collateral
      or any income thereon nor any duty as to preservation of any rights pertaining
      thereto, except to apply the funds in accordance with the requirements of
      Section 10 hereof. The Pledgee may exercise its rights with respect to property
      held hereunder without resort to other security for or sources of reimbursement
      for the Obligations. In addition to the foregoing, Pledgee shall have all of
      the
      rights, remedies and privileges of a secured party under the Uniform Commercial
      Code of New York (the “UCC”) regardless of the jurisdiction in which enforcement
      hereof is sought.

     

    9. Private
      Sale.
      Each
      Pledgor recognizes that the Pledgee may be unable to effect (or to do so only
      after delay which would adversely affect the value that might be realized from
      the Collateral) a public sale of all or part of the Collateral by reason of
      certain prohibitions contained in the Securities Act, and may be compelled
      to
      resort to one or more private sales to a restricted group of purchasers who
      will
      be obliged to agree, among other things, to acquire such Collateral for their
      own account, for investment and not with a view to the distribution or resale
      thereof. Each Pledgor agrees that any such private sale may be at prices and
      on
      terms less favorable to the seller than if sold at public sales and that such
      private sales shall be deemed to have been made in a commercially reasonable
      manner. Each Pledgor agrees that the Pledgee has no obligation to delay sale
      of
      any Collateral for the period of time necessary to permit the Issuer to register
      the Collateral for public sale under the Securities Act.

     

    10. Proceeds
      of Sale.
      The
      proceeds of any collection, recovery, receipt, appropriation, realization or
      sale of the Collateral shall be applied by the Pledgee as
      follows:

    
      
        
        

      

      
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    (a) First,
      to
      the payment of all costs, reasonable expenses and charges of the Pledgee and
      to
      the reimbursement of the Pledgee for the prior payment of such costs, reasonable
      expenses and charges incurred in connection with the care and safekeeping of
      the
      Collateral (including, without limitation, the reasonable expenses of any sale
      or any other disposition of any of the Collateral), attorneys’ fees and
      reasonable expenses, court costs, any other fees or expenses incurred or
      expenditures or advances made by Pledgee in the protection, enforcement or
      exercise of its rights, powers or remedies hereunder;

     

    (b) Second,
      to the payment of the Obligations, in whole or in part, in such order as the
      Pledgee may elect, whether or not such Obligations is then due;

     

    (c) Third,
      to
      such persons, firms, corporations or other entities as required by applicable
      law including, without limitation, Section 9-615(a)(3) of the UCC;
      and

     

    (d) Fourth,
      to the extent of any surplus to the Pledgors or as a court of competent
      jurisdiction may direct.

     

    In
      the
      event that the proceeds of any collection, recovery, receipt, appropriation,
      realization or sale are insufficient to satisfy the Obligations, each Pledgor
      shall be jointly and severally liable for the deficiency plus the costs and
      fees
      of any attorneys employed by Pledgee to collect such deficiency.

     

    11. Waiver
      of Marshaling.
      Each
      Pledgor hereby waives any right to compel any marshaling of any of the
      Collateral.

     

    12. No
      Waiver.
      Any and
      all of the Pledgee’s rights with respect to the Liens granted under this
      Agreement shall continue unimpaired, and Pledgor shall be and remain obligated
      in accordance with the terms hereof, notwithstanding (a) the bankruptcy,
      insolvency or reorganization of any Pledgor, (b) the release or substitution
      of
      any item of the Collateral at any time, or of any rights or interests therein,
      or (c) any delay, extension of time, renewal, compromise or other indulgence
      granted by the Pledgee in reference to any of the Obligations. Each Pledgor
      hereby waives all notice of any such delay, extension, release, substitution,
      renewal, compromise or other indulgence, and hereby consents to be bound hereby
      as fully and effectively as if such Pledgor had expressly agreed thereto in
      advance. No delay or extension of time by the Pledgee in exercising any power
      of
      sale, option or other right or remedy hereunder, and no failure by the Pledgee
      to give notice or make demand, shall constitute a waiver thereof, or limit,
      impair or prejudice the Pledgee’s right to take any action against any Pledgor
      or to exercise any other power of sale, option or any other right or
      remedy.

     

    13. Expenses.
      The
      Collateral shall secure, and each Pledgor shall pay to Pledgee on demand, from
      time to time, all reasonable costs and expenses, (including but not limited
      to,
      reasonable attorneys’ fees and costs, taxes, and all transfer, recording, filing
      and other charges) of, or incidental to, the custody, care, transfer,
      administration of the Collateral or any other collateral, or in any way relating
      to the enforcement, protection or preservation of the rights or remedies of
      the
      Pledgee under this Agreement or with respect to any of the
      Obligations.

     

    14. The
      Pledgee Appointed Attorney-In-Fact and Performance by the
      Pledgee.
      Upon
      the occurrence of an Event of Default, each Pledgor hereby irrevocably
      constitutes and appoints the Pledgee 

    
      
        
        

      

      
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    as
      such
      Pledgor’s true and lawful attorney-in-fact, with full power of substitution, to
      execute, acknowledge and deliver any instruments and to do in such Pledgor’s
      name, place and stead, all such acts, things and deeds for and on behalf of
      and
      in the name of such Pledgor, which such Pledgor could or might do or which
      the
      Pledgee may deem necessary, desirable or convenient to accomplish the purposes
      of this Agreement, including, without limitation, to execute such instruments
      of
      assignment or transfer or orders and to register, convey or otherwise transfer
      title to the Collateral into the Pledgee’s name. Each Pledgor hereby ratifies
      and confirms all that said attorney-in-fact may so do and hereby declares this
      power of attorney to be coupled with an interest and irrevocable. If any Pledgor
      fails to perform any agreement herein contained, the Pledgee may itself perform
      or cause performance thereof, and any costs and expenses of the Pledgee incurred
      in connection therewith shall be paid by the Pledgors as provided in Section
      10
      hereof.

     

    15. Waivers.
      THE
      PARTIES HERETO DESIRES THAT THEIR DISPUTES BE RESOLVED BY A JUDGE APPLYING
      SUCH
      APPLICABLE LAWS. THEREFORE, TO ACHIEVE THE BEST COMBINATION OF THE BENEFITS
      OF
      THE JUDICIAL SYSTEM AND OF ARBITRATION, THE PARTIES HERETO WAIVE ALL RIGHTS
      TO
      TRIAL BY JURY IN ANY ACTION, SUIT, OR PROCEEDING BROUGHT TO RESOLVE ANY DISPUTE,
      WHETHER ARISING IN CONTRACT, TORT, OR OTHERWISE BETWEEN PLEDGEE, AND/OR ANY
      PLEDGOR ARISING OUT OF, CONNECTED WITH, RELATED OR INCIDENTAL TO THE
      RELATIONSHIP ESTABLISHED BETWEEN THEN IN CONNECTION WITH THIS AGREEMENT, ANY
      OTHER DOCUMENT OR THE TRANSACTIONS RELATED HERETO OR THERETO. 

     

    16. Recapture.
      Notwithstanding anything to the contrary in this Agreement, if the Pledgee
      receives any payment or payments on account of the Obligations, which payment
      or
      payments or any part thereof are subsequently invalidated, declared to be
      fraudulent or preferential, set aside and/or required to be repaid to a trustee,
      receiver, or any other party under the United States Bankruptcy Code, as
      amended, or any other federal or state bankruptcy, reorganization, moratorium
      or
      insolvency law relating to or affecting the enforcement of creditors’ rights
      generally, common law or equitable doctrine, then to the extent of any sum
      not
      finally retained by the Pledgee, each Pledgor’s obligations to the Pledgee shall
      be reinstated and this Agreement shall remain in full force and effect (or
      be
      reinstated) until payment shall have been made to Pledgee, which payment shall
      be due on demand.

     

    17. Captions.
      All
      captions in this Agreement are included herein for convenience of reference
      only
      and shall not constitute part of this Agreement for any other
      purpose.

     

    18. Miscellaneous.

     

    (a) This
      Agreement constitutes the entire and final agreement among the parties with
      respect to the subject matter hereof and may not be changed, terminated or
      otherwise varied except by a writing duly executed by the parties
      hereto.

     

    (b) No
      waiver
      of any term or condition of this Agreement, whether by delay, omission or
      otherwise, shall be effective unless in writing and signed by the party sought
      to be charged, and then such waiver shall be effective only in the specific
      instance and for the purpose for which given.

    
      
        
        

      

      
        8

        
          

        

      

      
        
        

      

    

     

    (c) In
      the
      event that any provision of this Agreement or the application thereof to any
      Pledgor or any circumstance in any jurisdiction governing this Agreement shall,
      to any extent, be invalid or unenforceable under any applicable statute,
      regulation, or rule of law, such provision shall be deemed inoperative to the
      extent that it may conflict therewith and shall be deemed modified to conform
      to
      such statute, regulation or rule of law, and the remainder of this Agreement
      and
      the application of any such invalid or unenforceable provision to parties,
      jurisdictions, or circumstances other than to whom or to which it is held
      invalid or unenforceable shall not be affected thereby, nor shall same affect
      the validity or enforceability of any other provision of this
      Agreement.

     

    (d) This
      Agreement shall be binding upon each Pledgor, and each Pledgor’s successors and
      assigns, and shall inure to the benefit of the Pledgee and its successors and
      assigns.

     

    (e) Any
      notice or other communication required or permitted pursuant to this Agreement
      shall be given in accordance with the Security Agreement. 

     

    (f) THIS
      AGREEMENT AND THE OTHER DOCUMENTS SHALL BE GOVERNED BY AND CONSTRUED AND
      ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO
      CONTRACTS MADE AND PERFORMED IN SUCH STATE, WITHOUT REGARD TO PRINCIPLES OF
      CONFLICTS OF LAW.

     

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

    
      
        
        

      

      
        9

        
          

        

      

      
        
        

      

    

     

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

     

    (h) It
      is
      understood and agreed that any person or entity that desires to become a Pledgor
      hereunder, or is required to execute a counterpart of this Agreement after
      the
      date hereof pursuant to the requirements of any Document, shall become a Pledgor
      hereunder by (x) executing a Joinder Agreement in form and substance
      satisfactory to the Pledgee, (y) delivering supplements to such exhibits
      and annexes to such Documents as the Pledgee shall reasonably request and/or
      set
      forth in such joinder agreement and (z) taking all actions as specified in
      this
      Agreement as would have been taken by such Pledgor had it been an original
      party
      to this Agreement, in each case with all documents required above to be
      delivered to the Pledgee and with all documents and actions required above
      to be
      taken to the reasonable satisfaction of the Pledgee.

     

    (i) This
      Agreement may be executed in one or more counterparts, each of which shall
      be
      deemed an original and all of which when taken together shall constitute one
      and
      the same agreement. Any signature delivered by a party by facsimile transmission
      shall be deemed an original signature hereto.

      

     

    [Remainder
      of Page Intentionally Left Blank]

     

    

     

    

    
      
        
        

      

      
        10

        
          

        

      

      
        
        

      

    

     

    IN
      WITNESS WHEREOF, the parties have duly executed this Agreement as of the day
      and
      year first written above.

     

    

    
      	 	
              MISCOR
                GROUP, LTD. 

            
	 	 	 
	 	
              By:

            	/s/
              John A. Martell
	 	
              Name:

            	John
              A. Martell
	 	
              Title:

            	President
	 	 	 
	 	 	 
	 	
              MAGNETECH
                INDUSTRIAL SERVICES, INC.

            
	 	 	 
	 	
              By:

            	/s/
              John A. Martell
	 	
              Name:

            	John
              A. Martell
	 	
              Title:

            	President
	 	 	 
	 	 	 
	 	
              MAGNETECH
                INDUSTRIAL SERVICES OF ALABAMA, LLC

            
	 	 	 
	 	
              By:

            	/s/
              John A. Martell
	 	
              Name:

            	John
              A. Martell
	 	
              Title:

            	President
	 	 	 
	 	 	 
	 	
              MARTELL
                ELECTRIC, LLC

            
	 	 	 
	 	
              By:

            	/s/
              John A. Martell
	 	
              Name:

            	John
              A. Martell
	 	
              Title:

            	President
	 	 	 
	 	 	 
	 	
              HK
                ENGINE COMPONENTS, LLC

            
	 	 	 
	 	
              By:

            	/s/
              John A. Martell
	 	
              Name:

            	John
              A. Martell
	 	
              Title:

            	President
	 	 	 
	 	 	 

    

    

    
      
        
        

      

      
        11

        
          

        

      

      
        
        

      

    

    

    
      	 	
              LAURUS
                MASTER FUND, LTD.

            
	 	 	 
	 	
              By:

            	/s/
              David Grin
	 	
              Name:

            	David
              Grin
	 	
              Title:

            	Partner

    

    

     

    

     

    

    
      
        
        

      

      
        12

        
          

        

      

      
        
        

      

    

     

    SCHEDULE
      A to the Stock Pledge Agreement

     

    Pledged
      Stock

     

    
      	
              Pledgor

            	
              Issuer

            	
              Class
                of Stock

            	
              Stock
                Certificate Number

            	
              Par
                Value

            	
              Number
                of 

              Shares

            
	
               

              MISCOR
                Group, Ltd.

            	
               

              Magnetech
                Industrial Services, Inc.

            	
               

              Common
                Stock

            	
               

              2

            	
               

              no
                par value

            	
               

              1,000

            
	
               

              MISCOR
                Group, Ltd.

            	
               

              Martell
                Electric, LLC

            	
               

              Membership
                Interest

            	
               

              2

            	
               

              N/A

            	
               

              100%

            
	
               

              MISCOR
                Group, Ltd.

            	
               

              HK
                Engine Components, LLC

            	
               

              Membership
                Interest

            	
               

              N/A

            	
               

              N/A

            	
               

              100%

            
	
               

              Magnetech
                Industrial Services, Inc.

            	
               

              Magnetech
                Industrial Services of Alabama, LLC

            	
               

              Membership
                Interest

            	
               

              N/A

            	
               

              N/A

            	
               

              100%

            

    

    

    
      
        
        

      

      
        13

        
          

        

      

      
        
        

      

    

    EXHIBIT
      A to the Stock Pledge Agreement

    

    

    CONTROL
      ACKNOWLEDGMENT

    

    
      	
              ISSUER

            	
              MEMBERSHIP
                INTEREST OWNERS:

            
	 	 
	
              [Issuer]

            	
              [Pledgor]

            
	 	 

    

    

    

    Reference
      is hereby made to that certain Stock Pledge Agreement, dated as of May
      31,
      2006 (the
      “Pledge
      Agreement”),
      between the above-referenced members ( “Pledgors”)
      of ____________, a ___________ [limited liability company][limited partnership],
      (an“[Issuer]”)
      and Laurus Master Fund, Ltd., a Cayman Islands company (“Laurus”).
      Capitalized terms used but not otherwise defined herein shall have the meanings
      ascribed thereto in the Pledge Agreement.

    

    [Issuer]
      is hereby instructed by Pledgors that all of Pledgors' right, title and interest
      in and to all of Pledgors’ rights in connection with any
      [membership][partnership] interests in [Issuer] now and hereafter owned by
      Pledgors are subject to a pledge and security interest in favor of Laurus.
      Pledgors hereby instructs [Issuer] to act upon any instruction delivered to
      it
      by the Laurus with respect to the Collateral without seeking further instruction
      from Pledgors, and, by its execution hereof, [Issuer] agrees to do
      so.

    

    [Issuer],
      by its written acknowledgment and acceptance hereof, hereby acknowledges receipt
      of a copy of the aforementioned Pledge Agreement and agrees promptly to note
      on
      its books the security interest granted under such Pledge Agreement. [Issuer]
      also waives any rights or requirements at any time hereafter to receive a copy
      of such Pledge Agreement in connection with the registration of any Collateral
      in the name of the Laurus or its nominee or the exercise of voting rights by
      the
      Laurus or its nominee.

    

    [Remainder
      of this page intentionally left blank]

    

    
      
        
        

      

      
        14

        
          

        

      

      
        
        

      

    

    IN
      WITNESS WHEREOF, Pledgors have caused this Control Acknowledgment to be duly
      signed and delivered by its officer duly authorized as of this _____ day of
      March 2006.

    

    
      	 	 	
              PLEDGOR.

            
	 	 	 	 
	 	 	 	 
	 	 	
              By:

            	 
	 	 	
              Name:

            	 
	 	 	
              Title:

            	 
	 	 	 	 
	 	 	 	 
	
              Acknowledged
                and accepted this ______
                day of March 2006.

            	 	 
	 	 	 	 
	
              [ISSUER]

            	 	 
	 	 	 	 
	 	 	 	 
	
              By:

            	 	 	 
	
              Name:

            	 	 	 
	
              Title:

            	 	 	 

    

    
 

     

     

    15Master Security Agreement

    
      Exhibit
        10.3

       

       

      MISCOR
        GROUP, LTD. AND CERTAIN OF ITS SUBSIDIARIES

      MASTER
        SECURITY AGREEMENT

       

      

      
        	
                To:

              	
                Laurus
                  Master Fund, Ltd.

              
	 	
                c/o
                  M&C Corporate Services Limited

              
	 	
                P.O.
                  Box 309 GT

              
	 	
                Ugland
                  House

              
	 	
                South
                  Church Street

              
	 	
                George
                  Town

              
	 	
                Grand
                  Cayman, Cayman Islands

              

      

       

      Date:
        May 31, 2006

       

      To
        Whom It May Concern:

       

      1.  To
        secure the payment of all Obligations (as hereafter defined), MISCOR Group,
        Ltd., an Indiana corporation (the “Company”), each of the other undersigned
        parties (other than Laurus Master Fund, Ltd., (“Laurus”)) and each other entity
        that is required to enter into this Master Security Agreement (each an
“Assignor” and, collectively, the “Assignors”) hereby assigns and grants to
        Laurus a continuing security interest in all of the following property now
        owned
        or at any time hereafter acquired by such Assignor, or in which such Assignor
        now has or at any time in the future may acquire any right, title or interest
        (the “Collateral”): all cash, cash equivalents, accounts, accounts receivable,
        deposit accounts , inventory, equipment, goods, fixtures, documents, instruments
        (including, without limitation, promissory notes), contract rights, commercial
        tort claims set forth on Exhibit
        B
        to this Master Security Agreement, general intangibles (including, without
        limitation, payment intangibles and an absolute right to license on terms
        no
        less favorable than those current in effect among such Assignor’s affiliates),
        chattel paper, supporting obligations, investment property (including, without
        limitation, all partnership interests, limited liability company membership
        interests and all other equity interests owned by any Assignor),
        letter-of-credit rights, trademarks, trademark applications, tradestyles,
        patents, patent applications, copyrights, copyright applications and other
        intellectual property in which such Assignor now has or hereafter may acquire
        any right, title or interest, all proceeds and products thereof (including,
        without limitation, proceeds of insurance) and all additions, accessions
        and
        substitutions thereto or therefor. In the event any Assignor wishes to finance
        the acquisition in the ordinary course of business of any hereafter acquired
        equipment and has obtained a written commitment from an unrelated third party
        financing source to finance such equipment, Laurus shall release its security
        interest on such hereafter acquired equipment so financed by such third party
        financing source. Except as otherwise defined herein, all capitalized terms
        used
        herein shall have the meanings provided such terms in the Security Agreement
        referred to below. All items of Collateral which are defined in the UCC shall
        have the meanings set forth in the UCC.  For purposes hereof, the term
        "UCC"  means the Uniform Commercial Code as the same may, from time to
        time, be in effect in the State of New York; provided, that in the event
        that,
        by reason of mandatory provisions of law, any or all of the attachment,
        perfection or priority of, or remedies with respect to, Laurus' security
        interest in any Collateral is governed 

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      by
        the Uniform Commercial Code as in effect in a jurisdiction other than the
        State
        of New York, the term “UCC” shall mean the Uniform Commercial Code as in effect
        in such other jurisdiction for purposes of the provisions of this Agreement
        relating to such attachment, perfection, priority or remedies and for purposes
        of definitions related to such provisions; provided further, that to the
        extent
        that the UCC is used to define any term herein and such term is defined
        differently in different Articles or Divisions of the UCC, the definition
        of
        such term contained in Article or Division 9 shall govern.

       

      2.  The
        term “Obligations” as used herein shall mean and include all debts, liabilities
        and obligations owing by (i) each Assignor to Laurus arising under, out of,
        or
        in connection with: that certain Guaranty made by Assignors in favor of Laurus
        on the date hereof (the “Guaranty”); (ii) Magnetech Industrial Services of
        Alabama, LLC (“MIS”) under that certain Security Agreement dated as of the date
        hereof between MIS and Laurus (the “Security Agreement”) and (iii) the Ancillary
        Agreements referred to in the Security Agreement (the Security Agreement
        and
        each Ancillary Agreement, as each may be amended, modified, restated or
        supplemented from time to time, collectively, the “Documents”), and in
        connection with any documents, instruments or agreements relating to or executed
        in connection with the Documents or any documents, instruments or agreements
        referred to therein or otherwise, and in connection with any other indebtedness,
        obligations or liabilities of each such Assignor to Laurus, whether now existing
        or hereafter arising, direct or indirect, liquidated or unliquidated, absolute
        or contingent, due or not due and whether under, pursuant to or evidenced
        by a
        note, agreement, guaranty, instrument or otherwise, including, without
        limitation, obligations and liabilities of each Assignor for post-petition
        interest, fees, costs and charges that accrue after the commencement of any
        case
        by or against such Assignor under any bankruptcy, insolvency, reorganization
        or
        like proceeding (collectively, the “Debtor Relief Laws”) in each case,
        irrespective of the genuineness, validity, regularity or enforceability of
        such
        Obligations, or of any instrument evidencing any of the Obligations or of
        any
        collateral therefor or of the existence or extent of such collateral, and
        irrespective of the allowability, allowance or disallowance of any or all
        of the
        Obligations in any case commenced by or against any Assignor under any Debtor
        Relief Law.

       

      3.  Each
        Assignor hereby jointly and severally represents, warrants and covenants
        to
        Laurus that:

       

      (a)  it
        is a corporation, partnership or limited liability company, as the case may
        be,
        validly existing, in good standing and formed under the respective laws of
        its
        jurisdiction of formation set forth on Schedule
        A,
        and each Assignor will provide Laurus thirty (30) days’ prior written notice of
        any change in any of its respective jurisdiction of formation;

       

      (b)  its
        legal name is as set forth in its Articles of Incorporation or other
        organizational document (as applicable) as amended through the date hereof
        and
        as set forth on Schedule
        A,
        and it will provide Laurus thirty (30) days’ prior written notice of any change
        in its legal name;

       

      (c)  its
        organizational identification number (if applicable) is as set forth on
Schedule
        A
        hereto, and it will provide Laurus thirty (30) days’ prior written notice of any
        change in its organizational identification number;

      
        
          
          

        

        
          2

          
            

          

        

        
          
          

        

      

       

      (d)  it
        is the lawful owner of its Collateral and it has the sole right to grant
        a
        security interest therein and will defend the Collateral against all claims
        and
        demands of all persons and entities;

       

      (e)  it
        will keep its Collateral free and clear of all attachments, levies, taxes,
        liens, security interests and encumbrances of every kind and nature
        (“Encumbrances”), except (i) Encumbrances securing the Obligations, (ii)
        Encumbrances subordinated to Encumbrances securing the Obligations, provided
        that such subordination is made under (A) the Subordination Agreement dated
        August 24, 2005 among John Martell, Patricia Minehardt, Strasbourger Pearson
        Tulcin Wolff Inc. (“Strasbourger”) and Laurus, (B) the Subordination Agreement
        dated the date hereof among John Martell, Patricia Minehardt, Strasbourger
        and
        Laurus, or (C) terms and conditions satisfactory to Laurus, or (iii)
        Encumbrances securing indebtedness of each such Assignor not to exceed $50,000
        in the aggregate for all such Assignors so long as all such Encumbrances
        are
        removed or otherwise released to Laurus’ satisfaction within ten (10) days of
        the creation thereof;

       

      (f)  it
        will, at its and the other Assignors’ joint and several cost and expense keep
        the Collateral in good state of repair (ordinary wear and tear excepted)
        and
        will not waste or destroy the same or any part thereof other than ordinary
        course discarding of items no longer used or useful in its or such other
        Assignors’ business;

       

      (g)  it
        will not, without Laurus’ prior written consent, sell, exchange, lease or
        otherwise dispose of any Collateral, whether by sale, lease or otherwise,
        except
        for the sale of inventory in the ordinary course of business and for the
        disposition or transfer in the ordinary course of business during any fiscal
        year of obsolete and worn-out equipment or equipment no longer necessary
        for its
        ongoing needs, having an aggregate fair market value of not more than $150,000
        and only to the extent that:

       

      (i)  the
        proceeds of each such disposition are used to acquire replacement Collateral
        which is subject to Laurus’ first priority perfected security interest, or are
        used to repay the Obligations or to pay general corporate expenses;
        or

       

      (ii)  following
        the occurrence of an Event of Default which continues to exist the proceeds
        of
        which are remitted to Laurus to be held as cash collateral for the
        Obligations;

       

      (h)  it
        will insure or cause the Collateral to be insured in Laurus’ name (as an
        additional insured and loss payee) against loss or damage by fire, theft,
        burglary, pilferage, loss in transit and such other hazards as Laurus shall
        specify in amounts and under policies by insurers acceptable to Laurus and
        all
        premiums thereon shall be paid by such Assignor and the policies delivered
        to
        Laurus. If any such Assignor fails to do so, Laurus may procure such insurance
        and the cost thereof shall be promptly reimbursed by the Assignors, jointly
        and
        severally, and shall constitute Obligations;

       

      (i)  it
        will at all reasonable times allow Laurus or Laurus’ representatives free access
        to and the right of inspection of the Collateral; 

      
        
          
          

        

        
          3

          
            

          

        

        
          
          

        

      

       

      (j)  such
        Assignor (jointly and severally with each other Assignor) hereby indemnifies
        and
        saves Laurus harmless from all loss, costs, damage, liability and/or expense,
        including reasonable attorneys’ fees, that Laurus may sustain or incur to
        enforce payment, performance or fulfillment of any of the Obligations and/or
        in
        the enforcement of this Master Security Agreement or in the prosecution or
        defense of any action or proceeding either against Laurus or any Assignor
        concerning any matter growing out of or in connection with this Master Security
        Agreement, and/or any of the Obligations and/or any of the Collateral except
        to
        the extent caused by Laurus’ own gross negligence or willful misconduct (as
        determined by a court of competent jurisdiction in a final and nonappealable
        decision); and

       

      (k)  all
        commercial tort claims (as defined in the Uniform Commercial Code as in effect
        in the State of New York) held by any Assignor are set forth on Schedule
        B
        to this Master Security Agreement; each Assignor hereby agrees that it shall
        promptly, and in any event within five (5) Business Days after the same is
        acquired by it, notify Laurus of any commercial tort claim acquired by it
        and
        unless otherwise consented to in writing by Laurus, it shall enter into a
        supplement to this Master Security Agreement granting to Laurus a security
        interest in such commercial tort claim, securing the Obligations.

       

      4.  The
        occurrence of any of the following events or conditions shall constitute
        an
“Event of Default” under this Master Security Agreement:

       

      (a)  any
        covenant or any other term or condition of this Master Security Agreement
        is
        breached by an Assignor in any material respect and such breach, to the extent
        subject to cure, shall continue without remedy for a period of fifteen (15)
        days
        after the occurrence thereof;

       

      (b)  any
        representation, warranty or statement made or furnished to Laurus under this
        Master Security Agreement by any Assignor or on any Assignor’s behalf should
        prove at any time to be false or misleading in any material respect on the
        date
        as of which made or deemed made;

       

      (c)  the
        loss, theft, substantial damage, destruction, sale or encumbrance to or of
        any
        of the Collateral or the making of any levy, seizure or attachment thereof
        or
        thereon except to the extent:

       

      (i)  such
        loss is covered by insurance proceeds which are used to replace the item
        or
        repay Laurus; or

       

      (ii)  said
        levy, seizure or attachment does not secure indebtedness in excess of $100,000
        in the aggregate for all Assignors and such levy, seizure or attachment has
        been
        removed or otherwise released within ten (10) days of the creation or the
        assertion thereof;

       

      (d)  an
        Event of Default shall have occurred under and as defined in any
        Document.

      
        
          
          

        

        
          4

          
            

          

        

        
          
          

        

      

       

      5.  Upon
        the occurrence of any Event of Default and at any time thereafter, Laurus
        may
        declare all Obligations immediately due and payable and Laurus shall have
        the
        remedies of a secured party provided in the UCC as in effect in the State
        of New
        York, this Agreement and other applicable law. Upon the occurrence of any
        Event
        of Default and at any time thereafter, Laurus will have the right to take
        possession of the Collateral and to maintain such possession on any Assignor’s
        premises or to remove the Collateral or any part thereof to such other premises
        as Laurus may desire. Upon Laurus’ request, each Assignor shall assemble or
        cause the Collateral to be assembled and make it available to Laurus at a
        place
        designated by Laurus. If any notification of intended disposition of any
        Collateral is required by law, such notification, if mailed, shall be deemed
        properly and reasonably given if mailed at least ten (10) days before such
        disposition, postage prepaid, addressed to the applicable Assignor either
        at
        such Assignor’s address shown herein or at any address appearing on Laurus’
records for such Assignor. Any proceeds of any disposition of any of the
        Collateral shall be applied by Laurus to the payment of all expenses in
        connection with the sale of the Collateral, including reasonable attorneys’ fees
        and other legal expenses and disbursements and the reasonable expenses of
        retaking, holding, preparing for sale, selling, and the like, and any balance
        of
        such proceeds may be applied by Laurus toward the payment of the Obligations
        in
        such order of application as Laurus may elect, and each Assignor shall be
        liable
        for any deficiency. For the avoidance of doubt, following the occurrence
        and
        during the continuance of an Event of Default, Laurus shall have the immediate
        right to withdraw any and all monies contained in any deposit account in
        the
        name of any Assignor and controlled by Laurus and apply same to the repayment
        of
        the Obligations (in such order of application as Laurus may elect). The
        parties hereto each hereby agree that the exercise by any party hereto of
        any right granted to it or the exercise by any party hereto of any remedy
        available to it (including, without limitation, the issuance of a notice
        of
        redemption, a borrowing request and/or a notice of default), in each
        case, hereunder, under the Security Agreement or under any other
        Ancillary Agreement which has been publicly filed with the SEC
        shall not constitute confidential information and no party
        shall have any duty to the other party to maintain such information as
        confidential.

       

      6.  If
        any Assignor defaults in the performance or fulfillment of any of the terms,
        conditions, promises, covenants, provisions or warranties on such Assignor’s
        part to be performed or fulfilled under or pursuant to this Master Security
        Agreement, Laurus may, at its option without waiving its right to enforce
        this
        Master Security Agreement according to its terms, immediately or at any time
        thereafter and without notice to any Assignor, perform or fulfill the same
        or
        cause the performance or fulfillment of the same for each Assignor’s joint and
        several account and at each Assignor’s joint and several cost and expense, and
        the cost and expense thereof (including reasonable attorneys’ fees) shall be
        added to the Obligations and such cost and expense shall be payable on demand
        with interest thereon at the highest rate permitted by law, or, at Laurus’
option, debited by Laurus from any other deposit accounts in the name of
        any
        Assignor and controlled by Laurus.

       

      7.  Each
        Assignor appoints Laurus, any of Laurus’ officers, employees or any other person
        or entity whom Laurus may designate as such Assignor’s attorney, with power to
        execute such documents in each such Assignor’s behalf and to supply any omitted
        information and correct patent errors in any documents executed by any Assignor
        or on any Assignor’s behalf; to file financing statements against such Assignor
        covering the Collateral (and, in connection with 

      
        
          
          

        

        
          5

          
            

          

        

        
          
          

        

      

       

      the
        filing of any such financing statements, describe the Collateral as “all assets
        and all personal property, whether now owned and/or hereafter acquired” (or any
        substantially similar variation thereof)); to sign such Assignor’s name on
        public records; and to do all other things Laurus deem necessary to carry
        out
        this Master Security Agreement. Each Assignor hereby ratifies and approves
        all
        acts of the attorney and neither Laurus nor the attorney will be liable for
        any
        acts of commission or omission, nor for any error of judgment or mistake
        of fact
        or law other than gross negligence or willful misconduct (as determined by
        a
        court of competent jurisdiction in a final and non-appealable decision).
        This
        power being coupled with an interest, is irrevocable so long as any Obligations
        remain unpaid. 

       

      8.  No
        delay or failure on Laurus’ part in exercising any right, privilege or option
        hereunder shall operate as a waiver of such or of any other right, privilege,
        remedy or option, and no waiver whatever shall be valid unless in writing,
        signed by Laurus and then only to the extent therein set forth, and no waiver
        by
        Laurus of any default shall operate as a waiver of any other default or of
        the
        same default on a future occasion. Laurus’ books and records containing entries
        with respect to the Obligations shall be admissible in evidence in any action
        or
        proceeding and shall constitute prima facie proof thereof. Laurus shall have
        the
        right to enforce any one or more of the remedies available to Laurus,
        successively, alternately or concurrently. Each Assignor agrees to join with
        Laurus in executing such documents or other instruments to the extent required
        by the UCC in form satisfactory to Laurus and in executing such other documents
        or instruments as may be required or deemed necessary by Laurus for purposes
        of
        affecting or continuing Laurus’ security interest in the
        Collateral.

       

      9.  The
        Assignors shall jointly and severally pay all of Laurus’ out-of-pocket costs and
        expenses, including reasonable fees and disbursements of in-house or outside
        counsel and appraisers, in connection with the preparation, execution and
        delivery of the Documents, and in connection with the prosecution or defense
        of
        any action, contest, dispute, suit or proceeding concerning any matter in
        any
        way arising out of, related to or connected with any Document. The Assignors
        shall also jointly and severally pay all of Laurus’ reasonable fees, charges,
        out-of-pocket costs and expenses, including reasonable fees and disbursements
        of
        counsel and appraisers, in connection with (a) the preparation, execution
        and
        delivery of any waiver, any amendment thereto or consent proposed or executed
        in
        connection with the transactions contemplated by the Documents, (b) Laurus’
obtaining performance of the Obligations under the Documents, including,
        but not
        limited to the enforcement or defense of Laurus’ security interests, assignments
        of rights and liens hereunder as valid perfected security interests, (c)
        any
        attempt to inspect, verify, protect, collect, sell, liquidate or otherwise
        dispose of any Collateral, (d) any appraisals or re-appraisals of any property
        (real or personal) pledged to Laurus by any Assignor as Collateral for, or
        any
        other Person as security for, the Obligations hereunder and (e) any
        consultations in connection with any of the foregoing. The Assignors shall
        also
        jointly and severally pay Laurus’ customary bank charges for all bank services
        (including wire transfers) performed or caused to be performed by Laurus
        for any
        Assignor at any Assignor’s request or in connection with any Assignor’s loan
        account (if any) with Laurus. All such costs and expenses together with all
        filing, recording and search fees, taxes and interest payable by the Assignors
        to Laurus shall be payable on demand and shall be secured by the Collateral.
        If
        any tax by any nation
        or government, any state or other political subdivision thereof, and any
        agency,
        department or other entity exercising executive, legislative, judicial,
        regulatory or administrative 

      
        
          
          

        

        
          6

          
            

          

        

        
          
          

        

      

       

      functions
        of or pertaining to government (each, a “Governmental Authority”)
        is or may be imposed on or as a result of any transaction between any Assignor,
        on the one hand, and Laurus on the other hand, which Laurus is or may be
        required to withhold or pay, the Assignors hereby jointly and severally
        indemnify and hold Laurus harmless in respect of such taxes, and the Assignors
        will repay to Laurus the amount of any such taxes which shall be charged
        to the
        Assignors’ account; and until the Assignors shall furnish Laurus with indemnity
        therefor (or supply Laurus with evidence satisfactory to it that due provision
        for the payment thereof has been made), Laurus may hold without interest
        any
        balance standing to each Assignor’s credit (if any) and Laurus shall retain its
        liens in any and all Collateral.

       

      10.  THIS
        MASTER SECURITY AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED AND ENFORCED
        IN
        ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS
        MADE
        AND PERFORMED IN SUCH STATE, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF
        LAWS.
        All of the rights, remedies, options, privileges and elections given to Laurus
        hereunder shall inure to the benefit of Laurus’ successors and assigns. The term
“Laurus” as herein used shall include Laurus, any parent of Laurus’, any of
        Laurus’ subsidiaries and any co-subsidiaries of Laurus’ parent, whether now
        existing or hereafter created or acquired, and all of the terms, conditions,
        promises, covenants, provisions and warranties of this Agreement shall inure
        to
        the benefit of each of the foregoing, and shall bind the representatives,
        successors and assigns of each Assignor.

       

      11.  Each
        Assignor hereby consents and agrees that the state of federal courts located
        in
        the County of New York, State of New York shall have exclusive jurisdiction
        to
        hear and determine any claims or disputes between Assignor, on the one hand,
        and
        Laurus, on the other hand, pertaining to this Master Security Agreement or
        to
        any matter arising out of or related to this Master Security Agreement,
        provided, that Laurus and each Assignor acknowledges that any appeals from
        those
        courts may have to be heard by a court located outside of the County of New
        York, State of New York, and further provided, that nothing in this Master
        Security Agreement shall be deemed or operate to preclude Laurus from bringing
        suit or taking other legal action in any other jurisdiction to collect, the
        Obligations, to realize on the Collateral or any other security for the
        Obligations, or to enforce a judgment or other court order in favor of Laurus.
        Each Assignor expressly submits and consents in advance to such jurisdiction
        in
        any action or suit commenced in any such court, and each Assignor hereby
        waives
        any objection which it may have based upon lack of personal jurisdiction,
        improper venue or forum non conveniens.
        Each Assignor hereby waives personal service of the summons, complaint and
        other
        process issues in any such action or suit and agrees that service of such
        summons, complaint and other process may be made by registered or certified
        mail
        addressed to such assignor at the address set forth on the signature lines
        hereto and that service so made shall be deemed completed upon the earlier
        of
        such Assignor’s actual receipt thereof or three (3) days after deposit in the
        U.S. mails, proper postage prepaid.

       

      The
        parties desire that their disputes be resolved by a judge applying such
        applicable laws. Therefore, to achieve the best combination of the benefits
        of
        the judicial system and of arbitration, the parties hereto waive all rights
        to
        trial by jury in any action, suite, or proceeding brought to resolve any
        dispute, whether arising in contract, tort, or otherwise between Laurus,
        

      
        
          
          

        

        
          7

          
            

          

        

        
          
          

        

      

       

      and/or
        any Assignor arising out of, connected with, related or incidental to the
        relationship established between them in connection with this Master Security
        Agreement or the transactions related hereto.

       

      12.  It
        is understood and agreed that any person or entity that desires to become
        an
        Assignor hereunder, or is required to execute a counterpart of this Master
        Security Agreement after the date hereof pursuant to the requirements of
        any
        Document, shall become an Assignor hereunder by (x) executing a Joinder
        Agreement in form and substance satisfactory to Laurus, (y) delivering
        supplements to such exhibits and annexes to such Documents as Laurus shall
        reasonably request and (z) taking all actions as specified in this Master
        Security Agreement as would have been taken by such Assignor had it been
        an
        original party to this Master Security Agreement, in each case with all
        documents required above to be delivered to Laurus and with all documents
        and
        actions required above to be taken to the reasonable satisfaction of
        Laurus.

       

      13.  Assignors
        hereby acknowledge that the obligations and liabilities secured by that certain
        Pledge Agreement dated as of August 24, 2005 between Assignors and Laurus
        (as
        amended, modified or supplemented, the “Pledge Agreement”) shall include,
        without limitation, all Obligations described herein, and hereby ratifies
        and
        confirms the security interest granted by Assignor to Laurus set forth in
        the
        Pledge Agreement.

       

      14.  All
        notices from Laurus to any Assignor shall be sufficiently given if mailed
        or
        delivered to such Assignor’s address set forth below.

      
        	 	
                 

                Very
                  truly yours,

              
	 	
                MISCOR
                  GROUP, LTD.

              
	 	 	 
	 	 	 
	 	
                By:

              	/s/
                John A. Martell
	 	
                Name:

              	John
                A. Martell
	 	
                Its:
                  

              	President
	 	 	 
	 	
                Address:
                  

              	
                1125
                  S. Walnut Street

              
	 	 	
                South
                  Bend, Indiana

              
	 	 	
                Telephone:
                  574-234-8131

              
	 	 	
                Facsimile:
                  574-2332-7648

              
	 	 	 
	 	 	 
	 	
                MAGNETECH
                  INDUSTRIAL SERVICES, INC.

              
	 	 	 
	 	 	 
	 	
                By:

              	/a/
                John A. Martell
	 	
                Name:

              	John
                A. Martell
	 	
                Its:
                  

              	President
	 	 	 

      

      

      
        
          
          

        

        
          8

          
            

          

        

        
          
          

        

      

      

      
        	 	
                Address:
                  

              	
                1125
                  S. Walnut Street

              
	 	 	
                South
                  Bend, Indiana

              
	 	 	
                Telephone:
                  574-234-8131

              
	 	 	
                Facsimile:
                  574-2332-7648

              
	 	 	 
	 	 	 
	 	
                MARTELL
                  ELECTRIC, LLC

              
	 	 	 
	 	 	 
	 	
                By:

              	/s/
                John A. Martell
	 	
                Name:

              	John
                A. Martell
	 	
                Its:
                  

              	President
	 	 	 
	 	
                Address:
                  

              	
                1125
                  S. Walnut Street

              
	 	 	
                South
                  Bend, Indiana

              
	 	 	
                Telephone:
                  574-234-8131

              
	 	 	
                Facsimile:
                  574-2332-7648

              
	 	 	 
	 	 	 
	 	
                HK
                  ENGINE COMPONENTS, LLC

              
	 	 	 
	 	 	 
	 	
                By:

              	/s/
                John A. Martell
	 	
                Name:

              	John
                A. Martell
	 	
                Its:
                  

              	President
	 	 	 
	 	
                Address:
                  

              	
                1125
                  S. Walnut Street

              
	 	 	
                South
                  Bend, Indiana

              
	 	 	
                Telephone:
                  574-234-8131

              
	 	 	
                Facsimile:
                  574-2332-7648

              
	 	
                 

                ACKNOWLEDGED:

              
	 	
                 

                LAURUS
                  MASTER FUND, LTD.

              
	 	 	 
	 	
                By:

              	/s/
                David Grin
	 	
                Name:

              	David
                Grin
	 	
                Its:
                  

              	Partner
	 	 	 

      

       

      

       

      
        
          
          

        

        
          9

          
            

          

        

        
          
          

        

      

       

      SCHEDULE
        A

       

       

      

      
        	
                Entity

              	
                Jurisdiction
                  of 

                Formation

              	
                Organization
                  Identification Number

              
	
                MISCOR
                  Group, Ltd.

              	
                Indiana

              	 
	
                Magnetech
                  Industrial Services, Inc.

              	
                 

                Indiana

              	 
	
                Martell
                  Electric, LLC

              	
                Indiana

              	 
	
                HK
                  Engine Components, LLC

              	
                Indiana

              	 
	 	 	 
	 	 	 
	 	 	 

      

       

      

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      SCHEDULE
        B

       

      COMMERCIAL
        TORT CLAIMS

       

      

       

      None.

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