REGISTRATION RIGHTS AGREEMENT

 

 

 

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

 

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

 

The Company and the Purchaser hereby agree as follows:

 

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

 

“Commission” means the Securities and Exchange Commission.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

2.  Registration.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

 

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

 

5.  Indemnification.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

(g)  [omitted]. 

 

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

 

 

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

(g)  Legends.

 

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

 

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

 

 

 

ii.  The Warrants shall bear substantially the following legend:

 

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

 

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

 

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

 

8.  Miscellaneous.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

	If to the Company:	MISCOR Group, Ltd.
		1125 South Walnut Street
		South Bend, Indiana 46619
		Attention: Chief Financial Officer
		Facsimile: 574 ###-###-####
		with a copy to:

		Barnes & Thornburg LLP
		600 1st Source Bank Center
		100 North Michigan
		South Bend, Indiana 46601
		Attention: Richard L. Mintz, Esq.
		Facsimile: 574 ###-###-####
	If to a Purchaser:	To the address set forth under such Purchaser name on the signature pages hereto.
	If to any other Person who is
	then the registered Holder:	To the address of such Holder as it appears in the stock transfer books of the Company

 

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

 

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

 

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

 

(j)  Governing Law, Jurisdiction and Waiver of Jury Trial. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE AND PERFORMED IN SUCH STATE, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW. The Company hereby consents and agrees that the state or federal courts located in the County of New York, State of New York shall have exclusion jurisdiction to hear and determine any Proceeding between the Company, on the one hand, and the Purchaser, on the other hand, pertaining to this Agreement or to any matter arising out of or related to this Agreement; provided, that the Purchaser and the Company acknowledge that any appeals from those courts may have to be heard by a court located outside of the County of New York, State of New York, and further provided, that nothing in this Agreement shall be deemed or operate to preclude the Purchaser from bringing a Proceeding in any other jurisdiction to collect the obligations, to realize on the Collateral or any other security for the obligations, or to enforce a judgment or other court order in favor of the Purchaser. The Company expressly submits and consents in advance to such jurisdiction in any Proceeding commenced in any such

 

 

 

 

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

 

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

 

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

 

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

 

 

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

	MISCOR GROUP, LTD.
	By:	/s/ John A. Martell
	Name:	John A. Martell
	Title:	President
	LAURUS MASTER FUND, LTD.
	By:	/s/ David Grin
	Name:	David Grin
	Title:	Partner
	Address for Notices:
	825 Third Avenue, 14th Floor
	New York, New York 10022
	Attention: David Grin
	Facsimile: 212 ###-###-####

 

 

EXHIBIT A

 

____________, 200___

 

[Registrar and Transfer Company

10 Commerce Drive

Cranford, New Jersey 07016

Attn: William Tatler]

 

Re:

MISCOR Registration Statement on Form [S-3]

 

Ladies and Gentlemen:

 

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

 

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

 

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

	Very truly yours,
	[Company counsel]

 

Schedule A to Exhibit A

Selling Stockholder	R/N/O	Shares   Being Offered

 

 

None.

 

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

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

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

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

d) were issued to Jackson Steinem Inc.;

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

 

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

 

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

 

 

 

 

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