8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the

Securities Exchange Act of 1934

Date of Report (Date of Earliest Event Reported): February 2, 2007

MFRI, INC.

(Exact Name of Registrant as Specified in its Charter)

Delaware	0-18370	36-3922969
(State or other jurisdiction of incorporation or organization)	(Commission File Number)	(I.R.S. Employer Identification No.)
7720 Lehigh Avenue Niles, Illinois	60714
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code: (847) 966-1000

Not applicable

(Former Name or Former Address, if Changed Since Last Report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 1.01. Entry into a Material Definitive Agreement.

As of February 2, 2007, MFRI, Inc. (the “Company”) entered into Common Stock Purchase Agreements with a number of institutional investors in connection with the sale (the “Sale”) by the Company of approximately 1,000,000 shares of common stock of the Company (the “Common Shares”) at a price of $18.50 per share. The Common Shares are being offered pursuant to an existing effective shelf registration statement on Form S-3 (Registration No. 333-139432) that the Company filed with the U.S. Securities and Exchange Commission on December 15, 2006. The sale of 608,000 Common Shares occurred on February 5, 2007 and the sale of the remaining Common Shares is expected to close on or about February 6, 2007.

Item 7.01. Regulation FD Disclosure.

Limitation on Incorporation by Reference: In accordance with general instruction B.2 of Form 8-K, the information in this Item 7.01 of this report, including Exhibit 99.1, is furnished under Item 9 and pursuant to Regulation FD, and will not be deemed to be “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934 or otherwise subject to the liabilities of that section, or incorporated by reference in any filing under the Securities Act of 1933 or the Securities Exchange Act of 1934, except as will be expressly set forth by specific reference in such filing. This report will not be deemed a determination or an admission as to the materiality of any information in the report that is required to be disclosed solely by Regulation FD.

The information contained in the exhibits listed in Item 9.01 below is incorporated herein by reference.

Item 8.01. Other Events.

As of February 6, 2007, the Company entered into a Placement Agent Agreement with Lane Capital Markets, LLC relating to the placement of certain of the Common Shares in the Sale.

Item 9.01. Financial Statements and Exhibits.

Exhibit Number	Description
1.1	Form of Common Stock Purchase Agreement dated as of February 2, 2007 by and between MFRI, Inc. and the purchaser(s).
1.2	Placement Agent Agreement dated as of February 6, 2007 by and between MFRI, Inc. and Lane Capital Markets, LLC.
99.1	Press Release dated February 5, 2007.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

	MFRI, INC.
	(Registrant)
Date: February 6, 2007	By:	/s/ Michael D. Bennett
		Michael D. Bennett
		Vice President

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EXHIBIT INDEX

Exhibit Number	Description
1.1	Form of Common Stock Purchase Agreement dated as of February 2, 2007 by and between MFRI, Inc. and the purchaser(s) named therein.
1.2	Placement Agent Agreement dated as of February 6, 2007 by and between MFRI, Inc. and Lane Capital Markets, LLC.
99.1	Press Release dated February 5, 2007.

EX-1

EXHIBIT 1.1

FORM OF COMMON STOCK PURCHASE AGREEMENT

This COMMON STOCK PURCHASE AGREEMENT is made and entered into as of February 2, 2007 (this "Agreement"), by and MFRI, Inc., a Delaware corporation ("Seller"), and the Purchaser or Purchasers listed on the Signature Page or Pages hereto (each a "Purchaser" and collectively, the "Purchasers").

WHEREAS, Seller desires to sell to the Purchasers, and the Purchasers desire to purchase from Seller, shares of common stock, par value $0.01 per share, of Seller ("Shares"), subject to the terms and conditions set forth in this Agreement.

NOW, THEREFORE, in consideration of the mutual covenants and agreements set forth herein and for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Seller and each of the Purchasers, severally and not jointly, hereby agree as follows:

ARTICLE I

DEFINITIONS

1.1Definitions. As used in this Agreement, and unless the context requires a different meaning, the following terms have the meanings indicated:

"Action" against a Person means any lawsuit, action, proceeding, investigation or complaint before any governmental authority, mediator or arbitrator.

"Affiliate" means, with respect to a specified Person, any other Person, whether now in existence or hereafter created, directly or indirectly controlling, controlled by or under direct or indirect common control with such specified Person. For purposes of this definition, "control" (including, with correlative meanings, "controlling," "controlled by," and "under common control with") means the power to direct or cause the direction of the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise.

"Agreement" shall have the meaning specified in the Preamble.

"Business Day" means any day other than a Saturday, a Sunday or a legal holiday or other date on which the NASDAQ Global Market does not open for trading.

"Closing" shall have the meaning specified in Section 2.3.

"Closing Date" shall have the meaning specified in Section 2.3.

"Commission" means the United States Securities and Exchange Commission.

"Common Stock Price" shall have the meaning specified in Section 2.2.

"Common Stock" means the shares of common stock, par value $0.01 per share, of Seller.

"Confidential Information" means, with respect to each Purchaser, all oral or written information, documents, records and data that Seller or its Representatives furnishes or otherwise discloses to such Purchaser or any of its Representatives in connection with the transaction contemplated hereby together with all copies, extracts, analyses, compilations, studies, memoranda, notes or other documents, records or data (in whatever form maintained, whether documentary, computer or other electronic storage or otherwise) prepared by any Person that contain or otherwise reflect or are generated from such information, documents, records, or data. The term "Confidential Information" does not include any information that (a) at the time of disclosure or thereafter is generally available to the public (other than as a result of a disclosure by such Purchaser or its Representatives in breach of this Agreement), (b) is developed by such Purchaser or any of its Representatives, independent of, and without reliance in whole or in part on, any Confidential Information or any knowledge of Confidential Information, (c) becomes available to such Purchaser or its Representatives on a non-confidential basis from a source other than Seller or its Representatives who, insofar as is known to the recipient after reasonable inquiry, is not prohibited from transmitting the information to the recipient by a contractual, legal, fiduciary or other obligation to such Purchaser or (d) was available to such Purchaser or its Representatives on a non-confidential basis prior to its disclosure to such Purchaser or its Representatives by Seller or its Representatives.

"Exchange Act" means the Securities Exchange Act of 1934, as amended from time to time, and the rules and regulations of the Commission promulgated thereunder.

"GAAP" means generally accepted accounting principles in the United States of America as in effect from time to time.

"Indemnified Party" shall have the meaning specified in Section 6.3.

"Indemnifying Party" shall have the meaning specified in Section 6.3.

"NASDAQ" means the National Association of Securities Dealers Automated Quotation System.

"Parties" means Seller and the Purchasers.

"Person" means any individual, corporation, company, voluntary association, partnership, joint venture, trust, limited liability company, unincorporated organization or government or any agency, instrumentality or political subdivision thereof, or any other form of entity.

"Prospectus" means any prospectus or prospectuses included in the Registration Statement at the effective time of the Registration Statement, as supplemented by a prospectus supplement relating to the Purchased Units and the offering thereof to be filed pursuant to Rule 424(b) under the Securities Act. Any reference in this Agreement to the Prospectus shall be

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deemed to refer to and include the documents incorporated by reference therein pursuant to Item 12 of Form S-3 that were filed under the Exchange Act on or before the issue date of the Prospectus; and any reference to the terms "amend," "amendment" or "supplement" with respect to the Prospectus shall be deemed to refer to and include the filing of any document under the Exchange Act after the issue date of the Prospectus deemed to be incorporated therein by reference.

"Purchase Price" means, with respect to a particular Purchaser, the amount set forth opposite such Purchaser's name on Purchaser’s Signature Page to this Agreement.

"Purchased Shares" means, with respect to a particular Purchaser, the number of Shares of Common Stock set forth opposite such Purchaser's name under "Purchased Shares" on Purchaser’s Signature Page to this Agreement, which is equal to the rounded amount of the quotient determined by dividing (a) the Purchase Price of such Purchaser by (b) the Common Stock Price. "Purchaser" or "Purchasers" shall have the meaning specified in the Preamble.

"Purchaser Material Adverse Effect" means, with respect to each Purchaser, any material and adverse effect on (i) the ability of such Purchaser to meet its obligations under this Agreement on a timely basis or (ii) the ability of such Purchaser to consummate the transactions under this Agreement.

"Purchaser Related Parties" shall have the meaning specified in Section 6.1.

"Registration Statement" means Seller's registration statement (File No. 333-139432) on Form S-3 filed with the Commission on December 18, 2006, including a form of prospectus, as supplemented, and including the exhibits and financial statements, as amended at the time of the Closing, and any post-effective amendment thereto that becomes effective prior to the Closing Date. Any reference in this Agreement to the Registration Statement shall be deemed to refer to and include the documents incorporated by reference therein pursuant to Item 12 of Form S-3 that were filed under the Exchange Act on or before the effective date of the Registration Statement; and any reference to the terms "amend," "amendment" or "supplement" with respect to the Registration Statement shall be deemed to refer to and include the filing of any document under the Exchange Act after the effective date of the Registration Statement deemed to be incorporated therein by reference.

"Representatives" of any Person means the officers, directors, employees, agents, counsel, investment bankers and other representatives of such Person.

"Securities Act" means the Securities Act of 1933, as amended from time to time, and the rules and regulations of the Commission promulgated thereunder.

"Seller" shall have the meaning specified in the Preamble.

"Seller Commission Documents" shall have the meaning specified in Section 3.5.

"Seller Material Adverse Effect" means any material adverse effect on (i) the condition (financial or otherwise), business, prospects, properties, net worth or results of operations of Seller and its subsidiaries, taken as a whole, (ii) the ability of Seller to meet its obligations under

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this Agreement on a timely basis, or (iii) the ability of Seller to consummate the transactions under this Agreement.

"Seller Related Parties" shall have the meaning specified in Section 6.2.

"Subsidiaries" shall mean Midwesco Filter Resources, Inc., a Delaware corporation; Perma-Pipe Inc., a Delaware corporation, and Thermal Care, Inc., a Delaware corporation.

ARTICLE II

AGREEMENT TO SELL AND PURCHASE

2.1Sale and Purchase. On the basis of the representations and warranties contained herein and subject to the terms and conditions hereof, at the Closing, Seller hereby agrees to issue and sell to each Purchaser, and each Purchaser hereby agrees to purchase from Seller, the number of Purchased Shares set forth opposite such Purchaser's name on Purchaser’s Signature Page to this Agreement, and each Purchaser agrees to pay Seller the amount of the Purchase Price in respect of such Purchased Shares set forth opposite such Purchaser's name on Purchaser’s Signature Page to this Agreement as consideration for the Purchased Shares.

2.2Consideration. The amount per share of Common Stock each Purchaser will pay to Seller to purchase the Purchased Shares (the "Common Stock Price") shall be $18.50.

2.3Closing. Subject to the terms and conditions hereof, the consummation of the purchase and sale of the Purchased Shares hereunder (the "Closing") shall take place on February 5, 2007, or at such other time and date thereafter as the Purchaser and Seller may mutually agree (such date, the "Closing Date"), at the offices of DLA Piper US LLP, 203 North LaSalle Street, Suite 1900, Chicago, Illinois 60601.

2.4Independent Obligations. The obligation of each Purchaser hereunder is several and not joint and is independent of the obligation of each other Purchaser, and the failure of, or Seller's waiver of, performance by any Purchaser does not excuse performance by any other Purchaser or Seller. No Purchaser shall be responsible in any way for the performance of the obligations of any other Purchaser under this Agreement. Nothing contained herein, and no action taken by any Purchaser pursuant hereto, shall be deemed to constitute the Purchasers as a partnership, an association, a joint venture or any other kind of entity, or create a presumption that the Purchasers are in any way acting in concert or as a group with respect to such obligations or the transactions contemplated by this Agreement. Each Purchaser shall be entitled to independently protect and enforce its rights, including, without limitation, the rights arising out of this Agreement, and it shall not be necessary for any other Purchaser to be joined as an additional party in any proceeding for such purpose. Each Purchaser acknowledges that such Purchaser is not relying upon any Person in making its investment in Seller. Each Purchaser acknowledges and agrees that Seller may execute a counterpart of this Agreement with any Purchaser that contains terms which vary from those herein; provided, that in no event shall the Common Stock Price vary from the Common Stock Price paid by Purchaser hereunder. Each Purchaser also agrees that Seller may sell Shares through a placement agent on such terms as the placement agent and its purchasers may agree, provided, in no event shall the Common Stock

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Price vary from the Common Stock Price paid by Purchaser hereunder. Each Purchaser agrees that no Purchaser nor the respective controlling persons, officers, directors, partners, agents, or employees of any Purchaser shall be liable to any other Purchaser for any action heretofore or hereafter taken or omitted to be taken by any of them in connection with the transactions contemplated by this Agreement.

ARTICLE III

REPRESENTATIONS AND WARRANTIES

RELATED TO SELLER

Seller hereby represents and warrants to the Purchasers as follows:

3.1Corporate Existence of Seller. Seller and each of its Subsidiaries (a) is a corporation duly formed, validly existing and in good standing under the laws of the State of Delaware and (b) has all requisite corporate power necessary to own its assets and carry on its business as its business is now being conducted.

3.2Valid Issuance of Purchased Shares. The offer and sale of the Purchased Shares have been duly authorized by Seller and, when issued and delivered to the Purchasers against payment therefor in accordance with the terms of this Agreement, will be validly issued, fully paid and nonassessable.

3.3Form S-3 Eligibility. As of the date of the filing of the Registration Statement, Seller met all of the requirements for the use of Form S-3 under the Securities Act, and, as of the Closing Date, Seller will meet the requirements for the use of Form S-3 under the Securities Act applicable to the sale of the Purchased Shares.

3.4Registration Statement. The Registration Statement, at the time it became effective, and the prospectus contained therein, complied, and on the date of this Agreement and the Closing Date and when any post-effective amendment to the Registration Statement becomes effective or any supplement to such prospectus is filed with the Commission, the Registration Statement, the Prospectus and any such amendment or supplement, respectively, will comply, in all material respects with the applicable requirements of the Securities Act; all documents incorporated, or deemed to be incorporated, into the Registration Statement or the Prospectus by reference pursuant to the requirements of Item 12 of Form S-3 under the Securities Act, when they were or are filed with the Commission, conformed or will conform as of their respective dates in all material respects with the applicable requirements of the Exchange Act; and each part of the Registration Statement and any amendment thereto, at the time such part became effective, and the Prospectus and any amendment or supplement thereto, at the time it was or is filed with the Commission pursuant to Rule 424 under the Securities Act and at the time of the Closing, did not and will not contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading, except that this representation and warranty does not apply to statements or omissions in the Registration Statement or Prospectus (or in amendments or supplements thereto) made in reliance upon information, if any, furnished in writing to Seller by any Purchaser.

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3.5Seller Commission Documents. Seller has filed with the Commission all registration statements, reports, schedules and statements required to be filed by it under the Exchange Act or the Securities Act (all such documents, collectively, the "Seller Commission Documents"). The Seller Commission Documents, including, without limitation, any audited or unaudited financial statements and any notes thereto or schedules included therein, at the time filed (in the case of registration statements, solely on the dates of effectiveness) (except to the extent corrected by a subsequently filed Seller Commission Document filed prior to the date hereof) (a) complied as to form in all material respects with applicable accounting requirements and with the published rules and regulations of the Commission with respect thereto, (b) were prepared in accordance with GAAP applied on a consistent basis during the periods involved (except as may be indicated in the notes thereto or, in the case of unaudited statements, as permitted by the applicable rules and regulations of the Commission), and (c) fairly present (subject in the case of unaudited statements to normal, recurring and year-end audit adjustments) in all material respects the consolidated financial position and status of the business of Seller as of the dates thereof and the consolidated results of its operations and cash flows for the periods then ended. Grant Thornton LLP and Deloitte & Touche LLP are independent registered public accounting firms with respect to Seller and neither has resigned or been dismissed as independent registered public accountants of Seller as a result of or in connection with any disagreement with Seller on any matter of accounting principles or practices, financial statement disclosure or auditing scope or procedures.

3.6No Breach. The execution, delivery and performance by Seller of this Agreement and all other agreements and instruments to be executed and delivered by Seller pursuant hereto or in connection with the transactions contemplated by this Agreement, and compliance by Seller with the terms and provisions hereof, do not and will not (a) violate any provision of any statute, rule, regulation or order of any court or governmental authority having jurisdiction over Seller or any of its properties or assets, (b) conflict with or result in a violation of Seller's certificate of incorporation or bylaws, or (c) result in a violation or breach of or constitute a default under any material agreement to which Seller or any Subsidiary is a party or by which Seller, any of its Subsidiaries, or any of its properties is bound, except, in the case of clauses (a) and (c), where such violation, breach or default would not, individually or in the aggregate, reasonably be expected to have a Seller Material Adverse Effect.

3.7Authority. Seller has all necessary corporate power and authority to execute, deliver and perform its obligations under this Agreement and to consummate the transactions contemplated hereby; the execution, delivery and performance by Seller of this Agreement and the consummation of the transactions contemplated hereby have been duly authorized by all necessary corporate action on its part; and this Agreement constitutes the legal, valid and binding obligation of Seller, enforceable in accordance with its terms, except as such enforceability may be limited by bankruptcy, insolvency, fraudulent transfer and similar laws affecting creditors' rights generally or by general principles of equity.

3.8Approvals. No authorization, consent, approval, waiver, license, qualification or written exemption from, nor any filing, declaration, qualification or registration with, any governmental authority or any other Person is required in connection with the execution, delivery or performance by Seller of this Agreement, except where the failure to receive such authorization, consent, approval, waiver, license, qualification or written exemption, or to make

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such filing, declaration, qualification or registration, would not, individually or in the aggregate, reasonably be expected to have a Seller Material Adverse Effect.

3.9Investment Company Status. Seller is not an "investment company" within the meaning of the Investment Company Act of 1940, as amended.

3.10Certain Fees. No fees or commissions will be payable by Seller or Purchaser to any broker, finder, or investment banker engaged by Seller with respect to the sale of any of the Purchased Shares or the consummation of the transactions contemplated by this Agreement, other than Commissions payable by Seller to Lane Capital Markets, LLC.

3.11No Other Agreements. Other than any existing confidentiality agreements in favor of Seller that have been executed by any Purchaser or to which any Purchaser is otherwise bound, there are no other agreements by, among or between Seller or its Affiliates, on the one hand, and any other Purchaser or its Affiliates, on the other hand, with respect to the transactions contemplated hereby.

ARTICLE IV

REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS

Each Purchaser, severally and not jointly, hereby represents and warrants to Seller as follows:

4.1Existence. Such Purchaser (a) is an entity duly organized, validly existing and in good standing, as applicable, under the laws of its jurisdiction of organization and (b) has all requisite power necessary to own its assets and carry on its business as its business is now being conducted.

4.2No Conflicts. The execution, delivery and performance by such Purchaser of this Agreement and all other agreements and instruments to be executed and delivered by such Purchaser pursuant hereto or in connection herewith, compliance by such Purchaser with the terms and provisions hereof and the purchase of the Purchased Shares by such Purchaser do not and will not (a) violate any provision of any statute, rule, regulation or order of any court or governmental authority having jurisdiction over such Purchaser or any of its properties or assets, (b) conflict with or result in a violation of any provision of the organizational documents of such Purchaser, or (c) result in a violation or breach of or constitute a default under any material agreement to which such Purchaser is a party or by which such Purchaser or any of its properties is bound, except, in the case of clauses (a) and (c), where such violation, breach or default would not, individually or in the aggregate, reasonably be expected to have a Purchaser Material Adverse Effect.

4.3Ownership of Securities. Based upon Seller's Quarterly Report on Form 10-Q for the quarter ended October 31, 2006, such Purchaser and its Affiliates do not, as of the date hereof, and, as of the Closing Date, will not, own ten percent or more of Seller's issued and outstanding Common Stock.

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4.4Trading Activities. Such Purchaser's trading activities, if any, with respect to Seller's Common Stock will be in compliance with all applicable state and federal securities laws, rules and regulations and the rules and regulations of the NASDAQ.

4.5Certain Fees. No fees or commissions will be payable by such Purchaser or Seller to any broker, finder, or investment banker engaged by such Purchaser with respect to the purchase of any of the Purchased Shares or the consummation of the transaction contemplated by this Agreement, other than Commissions payable by Seller to Lane Capital Markets, LLC.

4.6No Other Agreements. Other than any existing confidentiality agreements in favor of Seller that have been executed by any Purchaser or to which any Purchaser is otherwise bound, there are no other agreements by, among or between such Purchaser and any of its Affiliates, on the one hand, and any of Seller or its Affiliates, on the other hand, with respect to the transactions contemplated hereby.

4.7Seller Information. Each Purchaser acknowledges and agrees that Seller has provided or made available to such Purchaser (through EDGAR, Seller's website, or otherwise) the Registration Statement, all documents filed by Seller with the Commission since February 1, 2004 through the date of this Agreement and incorporated by reference into the Registration Statement and all press releases issued by Seller since February 1, 2006 through the date of this Agreement.

4.8Accredited Status. Each Purchaser is an institution that is an "accredited investor" as defined in Rule 501 of Regulation D promulgated pursuant to the Securities Act.

4.9Prior Sales. Since the earlier to occur of (i) the date on which the Purchaser first contacted the Seller about the transactions subject to this Agreement and (ii) the date that is the tenth (10th) trading day prior to the date of this Agreement, the Purchaser has not engaged in any short selling of the Seller’s securities, or established or increased any “put equivalent position” as defined in Rule 16(a)-1(h) under the Exchange Act with respect to Seller’ securities.

ARTICLE V

CLOSING CONDITIONS

                5.1        Conditions to the Closing.

(a)Mutual Conditions. The respective obligation of each Party to consummate the purchase and issuance and sale of the Purchased Shares shall be subject to the satisfaction on or prior to the Closing Date of each of the following conditions (any or all of which may be waived by a particular Party on behalf of itself in writing, in whole or in part, to the extent permitted by applicable law):

(i)no statute, rule, regulation or order shall have been enacted or promulgated, and no action shall have been taken, by any governmental authority of competent jurisdiction that temporarily, preliminarily or permanently restrains, precludes, enjoins or otherwise prohibits the consummation of the transactions

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contemplated by this Agreement or makes the transactions contemplated by this Agreement illegal;

(ii)there shall not be pending any suit, action or proceeding by any governmental authority seeking to restrain, preclude, enjoin or prohibit the transactions contemplated by this Agreement;

(iii)a “Notification Form: Listing of Additional Shares” relating to the Purchased Shares shall have been filed with NASDAQ; and

(iv)no stop order suspending the effectiveness of the Registration Statement or any part thereof shall have been issued and no proceedings for that purpose shall have been instituted or threatened by any governmental authority.

(b)Each Purchaser's Conditions. The respective obligation of each Purchaser to consummate the purchase of its Purchased Shares shall be subject to the satisfaction on or prior to the Closing Date of each of the following conditions (any or all of which may be waived by a particular Purchaser on behalf of itself in writing, in whole or in part, to the extent permitted by applicable law):

(i)Seller shall have performed and complied with the covenants and agreements contained in this Agreement that are required to be performed and complied with by Seller on or prior to the Closing Date;

(ii)the representations and warranties of Seller contained in this Agreement that are qualified by materiality or Seller Material Adverse Effect shall be true and correct when made and as of the Closing Date and all other representations and warranties shall be true and correct in all material respects when made and as of the Closing Date, in each case as though made at and as of the Closing Date (except that representations made as of a specific date shall be required to be true and correct as of such date only);

(iii)since October 31, 2006, no Seller Material Adverse Effect shall have occurred and be continuing;

(iv)Seller shall have delivered, or caused to be delivered, to the Purchasers at the Closing, Seller's closing deliveries described in Section 5.3 of this Agreement; and

(v)Seller shall have filed with the Commission a prospectus supplement to the Prospectus related to the purchase and sale of the Purchased Shares.

(c)Seller's Conditions. The obligation of Seller to consummate the sale of the Purchased Shares to each of the Purchasers shall be subject to the satisfaction on or prior to the Closing Date of each of the following conditions with respect to each Purchaser individually and not the Purchasers jointly (any or all of which may be waived by Seller in writing, in whole or in part, to the extent permitted by applicable law):

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(i)such Purchaser shall have performed and complied with the covenants and agreements contained in this Agreement that are required to be performed and complied with by that Purchaser on or prior to the Closing Date;

(ii)the representations and warranties of such Purchaser contained in this Agreement that are qualified by materiality or Purchaser Material Adverse Effect shall be true and correct when made and as of the Closing Date and all other representations and warranties of such Purchaser contained in this Agreement shall be true and correct in all material respects when made and as of the Closing Date, in each case as though made at and as of the Closing Date (except that representations and warranties made as of a specific date shall be required to be true and correct as of such date only);

(iii)since the date of this Agreement, no Purchaser Material Adverse Effect shall have occurred and be continuing; and

(iv)such Purchaser shall have delivered, or caused to be delivered, to Seller at the Closing, such Purchaser's closing deliveries described in Section 5.4 of this Agreement.

5.2Termination. In the event that any condition to a Party's obligation to close specified in Section 5.1 is not satisfied or waived on the Closing Date, such Party may terminate this Agreement upon written notice to the other Party. In the event of any termination of this Agreement, this Agreement shall forthwith become null and void. In the event of such termination, there shall be no liability on the part of any Party hereto; provided that nothing herein shall relieve any Party from any liability or obligation with respect to any willful breach of this Agreement. Notwithstanding the foregoing, any termination of this Agreement by any Purchaser shall not serve to terminate this Agreement as between any Purchaser not so terminating and Seller.

5.3Seller Deliveries. At the Closing, subject to the terms and conditions of this Agreement, Seller will deliver, or cause to be delivered, to the Purchasers:

(a)the applicable Purchased Shares, which Seller shall cause to be electronically delivered to Purchaser's account or physically delivered, registered in such name(s) as such Purchaser shall, with reasonable notice, have designated, all free and clear of any liens, encumbrances or interests of any other Person; and

(b)an officer's certificate in customary form attesting to the matters set forth in Section 5.1(b)(i), (ii) and (iii).

(c)an opinion of counsel substantially in the form attached hereto as Exhibit A.

5.4Purchaser Deliveries. The Closing, subject to the terms and conditions of this Agreement, each Purchaser will deliver, or cause to be delivered, to Seller:

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(a)payment to Seller of the amount of the applicable Purchase Price set forth opposite such Purchaser's name on Purchaser’s Signature Page to this Agreement for the applicable Purchased Shares by wire transfer of immediately available funds to an account designated by Seller in writing prior to the Closing; and

(b)an officer's certificate in customary form attesting to the matters set forth in Section 5.1(c)(i), (ii) and (iii).

ARTICLE VI

INDEMNIFICATION

6.1Indemnification by Seller. Seller agrees to indemnify each Purchaser and its Affiliates and each of their respective officers, directors, employees and agents (collectively, "Purchaser Related Parties") from, and hold each of them harmless against, any and all actions, suits, proceedings (including any investigations, litigation or inquiries), demands, and causes of action, and, in connection therewith, and promptly upon demand, pay or reimburse each of them for all reasonable costs, losses, liabilities, damages, or expenses of any kind or nature whatsoever, including, without limitation, the reasonable fees and disbursements of counsel and all other reasonable expenses incurred in connection with investigating, defending or preparing to defend any such matter that may be incurred by them or asserted against or involve any of them as a result of, arising out of, or in any way related to the breach of any of the representations, warranties or covenants of Seller contained herein, provided such claim for indemnification relating to a breach of a representation or warranty is made prior to the expiration of such representation or warranty. Furthermore, Seller agrees that it will indemnify and hold harmless each Purchaser and Purchaser Related Parties from and against any and all claims, demands or liabilities for broker's, finder's, placement or other similar fees or commissions incurred by Seller or alleged to have been incurred by Seller in connection with the sale of any of the Purchased Shares or the consummation of the transactions contemplated by this Agreement.

6.2Indemnification by Purchasers. Each Purchaser agrees, severally and not jointly, to indemnify Seller and its officers, directors, employees and agents (collectively, "Seller Related Parties") from, and hold each of them harmless against any and all actions, suits, proceedings (including any investigations, litigation, or inquiries), demands, and causes of action, and, in connection therewith, and promptly upon demand, pay or reimburse each of them for all reasonable costs, losses, liabilities, damages, or expenses of any kind or nature whatsoever, including, without limitation, the reasonable fees and disbursements of counsel and all other reasonable expenses incurred in connection with investigating, defending or preparing to defend any such matter to the extent that it may be incurred by them or asserted against or involve any of them as a result of, arising out of, or in any way related to the breach of any of the representations, warranties or covenants of Purchaser contained herein, provided such claim for indemnification relating to a breach of a representation or warranty is made prior to the expiration of such representation or warranty. Furthermore, each Purchaser agrees, severally and not jointly, that it will indemnify and hold harmless Seller and Seller Related Parties from and against any and all claims, demands or liabilities for broker's, finder's, placement or other similar fees or commissions incurred by such Purchaser or alleged to have been incurred by such

11

Purchaser in connection with the purchase of any of the Purchased Shares or the consummation of the transactions contemplated by this Agreement.

6.3Indemnification Procedures. Promptly after any Seller Related Party or Purchaser Related Party (hereinafter, the "Indemnified Party") has received notice of any indemnifiable claim hereunder, or the commencement of any Action or proceeding by a third person, which the Indemnified Party believes in good faith is an indemnifiable claim under this Agreement, the Indemnified Party shall give the indemnitor hereunder (the "Indemnifying Party") written notice of such claim or the commencement of such Action or proceeding, but failure to so notify the Indemnifying Party will not relieve the Indemnifying Party from any liability it may have to such Indemnified Party hereunder except to the extent that the Indemnifying Party is materially prejudiced by such failure. Such notice shall state the nature and the basis of such claim to the extent then known. The Indemnifying Party shall have the right to defend and settle, at its own expense and by its own counsel, any such matter as long as the Indemnifying Party pursues the same diligently and in good faith. If the Indemnifying Party undertakes to defend or settle, it shall promptly notify the Indemnified Party of its intention to do so, and the Indemnified Party shall cooperate with the Indemnifying Party and its counsel in all commercially reasonable respects in the defense thereof and the settlement thereof. Such cooperation shall include, but shall not be limited to, furnishing the Indemnifying Party with any books, records and other information reasonably requested by the Indemnifying Party and in the Indemnified Party's possession or control. Such cooperation of the Indemnified Party shall be at the cost of the Indemnifying Party. After the Indemnifying Party has notified the Indemnified Party of its intention to undertake to defend or settle any such asserted liability, and for so long as the Indemnifying Party diligently pursues such defense, the Indemnifying Party shall not be liable for any additional legal expenses incurred by the Indemnified Party in connection with any defense or settlement of such asserted liability; provided, however, that the Indemnified Party shall be entitled (a) at its expense, to participate in the defense of such asserted liability and the negotiations of the settlement thereof and (b) if (i) the Indemnifying Party has failed to assume the defense and employ counsel or (ii) if the defendants in any such Action include both the Indemnified Party and the Indemnifying Party and counsel to the Indemnified Party shall have concluded that there may be reasonable defenses available to the Indemnified Party that are different from or in addition to those available to the Indemnifying Party or if the interests of the Indemnified Party reasonably may be deemed to conflict with the interests of the Indemnifying Party, then the Indemnified Party shall have the right to select a separate counsel and to assume such legal defense and otherwise to participate in the defense of such Action, with the expenses and fees of such separate counsel and other expenses related to such participation to be reimbursed by the Indemnifying Party as incurred. Notwithstanding any other provision of this Agreement, the Indemnifying Party shall not settle any indemnified claim without the consent of the Indemnified Party, unless the settlement thereof imposes no liability or obligation on, and includes a complete release from liability of, the Indemnified Party.

6.4Survival. The Parties' obligations under this Article VI shall only become operative following the Closing Date and shall not survive any termination of this Agreement pursuant to Section 5.2.

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ARTICLE VII

MISCELLANEOUS

                7.1            Intentionally Deleted.

7.2Interpretation of Provisions. Article, Section and Schedule references are to this Agreement, unless otherwise specified. All references to instruments, documents, contracts, and agreements are references to such instruments, documents, contracts, and agreements as the same may be amended, supplemented, and otherwise modified from time to time, unless otherwise specified. The word "including" shall mean "including but not limited to." Whenever a Party has an obligation under this Agreement, the expense of complying with that obligation shall be an expense of such Party unless otherwise specified. Whenever any determination, consent, or approval is to be made or given by a Party, such action shall be in such Party's sole discretion unless otherwise specified in this Agreement. If any provision in this Agreement is held to be illegal, invalid, not binding, or unenforceable, such provision shall be fully severable and this Agreement shall be construed and enforced as if such illegal, invalid, not binding, or unenforceable provision had never comprised a part of this Agreement, and the remaining provisions shall remain in full force and effect. This Agreement has been reviewed and negotiated by sophisticated parties with access to legal counsel and shall not be construed against the drafter.

7.3Survival. The representations and warranties set forth in Section 3.2, Section 3.10, Section 3.11, Section 4.5 and Section 4.6 hereunder shall survive indefinitely, and the other representations and warranties set forth herein shall survive for a period of twelve (12) months, in each case, following the Closing Date regardless of any investigation made by or on behalf of Seller or the Purchasers. The covenants made in this Agreement shall survive the Closing of the transactions described herein and remain operative and in full force and effect regardless of acceptance of any of the Purchased Shares and payment therefor.

                7.4          No Waiver; Modifications in Writing.

(a)Delay. No failure or delay on the part of any Party in exercising any right, power or remedy hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such right, power or remedy preclude any other or further exercise thereof or the exercise of any other right, power or remedy. The remedies provided for herein are cumulative and are not exclusive of any remedies that may be available to a Party at law or in equity or otherwise.

(b)Specific Waiver. Except as otherwise provided herein, no amendment, waiver, consent, modification or termination of any provision of this Agreement shall be effective unless signed by each of the Parties hereto or thereto affected by such amendment, waiver, consent, modification or termination. Any amendment, supplement or modification of or to any provision of this Agreement, any waiver of any provision of this Agreement, and any consent to any departure from the terms of any provision of this Agreement shall be effective only in the specific instance and for the specific purpose for which made or given. Except where notice is specifically required by this Agreement, no

13

notice to or demand on a Party in any case shall entitle such Party to any other or further notice or demand in similar or other circumstances.

                7.5          Binding Effect; Assignment.

(a)Binding Effect. his Agreement shall be binding upon Seller, the Purchasers and their respective successors and permitted assigns. Except as expressly provided in this Agreement, this Agreement shall not be construed so as to confer any right or benefit upon any Person other than the Parties to this Agreement, and their respective successors and permitted assigns.

(b)Assignment of Rights. All or any portion of the rights and obligations of each Purchaser under this Agreement may not be transferred by such Purchaser without the written consent of Seller.

7.6Confidentiality. Notwithstanding anything herein to the contrary, to the extent that any Purchaser has executed or is otherwise bound by a confidentiality agreement in favor of Seller as of the date hereof, such Purchaser shall continue to be bound by such confidentiality agreement in accordance with its terms.

7.7Communications. All notices and communications provided for hereunder shall be in writing and shall be given by registered or certified mail, return receipt requested, regular mail, telecopy, air courier guaranteeing overnight delivery or personal delivery to the following addresses:

(a)If to the Purchaser, to the addresses listed on Purchaser’s Signature Page hereto.

                                (b)          If to Seller:

MFRI, Inc.

7720 Lehigh Avenue

Niles, Illinois 60714

Attn: David Unger

Facsimile: (847) 929-1310

With a copy to:

DLA Piper US LLP

203 North LaSalle Street, Suite 1900

Chicago, Illinois 60601

Attn: Hal M. Brown

Facsimile: (312) 630-5399

or to such other address as Seller or any Purchaser may designate in writing. All notices and communications shall be deemed to have been duly given: at the time delivered by hand, if personally delivered; upon actual receipt if sent by registered or certified mail, return receipt

14

requested, or regular mail, if mailed; when receipt acknowledged, if sent via telecopy; and upon actual receipt when delivered to an air courier guaranteeing overnight delivery.

7.8Entire Agreement. Except with respect to any confidentiality agreements referred to in Section 7.6, this Agreement is intended by the Parties as a final expression of their agreement and intended to be a complete and exclusive statement of the agreement and understanding of the Parties hereto in respect of the subject matter contained herein. There are no restrictions, promises, warranties or undertakings, other than those set forth or referred to herein with respect to the rights granted by Seller or any of its Affiliates or the Purchasers or any of their Affiliates set forth herein. This Agreement supersedes all prior agreements and understandings between the Parties with respect to such subject matter, including any term sheets and commitment letters.

7.9Governing Law. This Agreement will be construed in accordance with and governed by the laws of the State of Delaware without regard to principles of conflicts of laws.

7.10Execution in Counterparts. This Agreement may be executed in any number of counterparts and by different Parties hereto in separate counterparts, each of which counterparts, when so executed and delivered, shall be deemed to be an original and all of which counterparts, taken together, shall constitute but one and the same Agreement.

7.11Costs and Expenses. Each Party shall be responsible for such Party's own expenses in connection with this Agreement and the transactions contemplated hereby.

7.12Distributions. If the Closing occurs on a date after a record date relating to a dividend to be paid to holders of Common Stock after the date of this Agreement, the Common Stock Price shall be reduced by the per share of Common Stock amount of such distribution and the applicable Purchase Price set forth on Schedule 2.1 hereto shall be reduced accordingly.

7.13Use of Proceeds. Seller shall use the proceeds from the transactions contemplated hereby in the manner set forth in the Prospectus.

[Signature Page Follows]

15

SIGNATURE PAGES - MFRI, INC.

COMMON STOCK PURCHASE AGREEMENT DATED AS FEBRUARY 2, 2007

IN WITNESS WHEREOF, the parties hereto execute this Agreement, effective as of the date first above written.

PURCHASER:

[Name of Purchaser – Please Print]

By:

Its:

Purchaser Address:

Purchaser Fax Number:

Purchaser Tax ID No:

Number of Purchased Shares:

Aggregate Purchase Price for

Purchased Shares:$

DELIVERY INSTRUCTIONS

The manner of settlement of the Purchased Shares shall be as follows: (check one):

[___] A. Delivery by electronic book-entry (DWAC”) at The Depository Trust Company, registered in the Purchaser’s name and address as set forth below:

___________________

___________________

___________________

OR

[___] B. Delivery of physical stock certificates to the Purchaser at the address set forth above on this Signature Page to this Agreement.

SELLER:

MFRI, INC.

By:

Its:

17

EXHIBIT A

203 North LaSalle Street, Suite 1900

Chicago, Illinois 60601-1293

main 312.368.4000 fax 312.236.7516

February 5, 2007

To: Each Purchaser

Re: Opinion of Counsel for MFRI, Inc., a Delaware

corporation (the “Company”)

Ladies and Gentlemen:

We have served as counsel for the Company in connection with the registration by the Company of ___________ shares of its common stock par value $0.01 per share ("Shares"). The Shares are being sold to the purchaser ("Purchasers") pursuant to a Common Stock Purchase Agreement dated as of February 2, 2007 ("Purchase Agreement"). We have been requested by the Company to render our opinion to you in regard to certain matters related to said transaction.

We have examined and relied and base our opinion on originals or copies, certified or otherwise identified to our satisfaction, of the following documents and records:

1.The respective certificates of incorporation and bylaws of the Company and its subsidiaries set forth on Schedule 1 hereto (the “Subsidiaries”), in each case as amended through the date hereof;

2.The Registration Statement on Form S-3 (No. 333-139432) filed with the Securities and Exchange Commission on December 18, 2006 (the “Registration Statement”);

3.The Base Prospectus dated January 4, 2007 filed as part of the Registration Statement, the preliminary supplement thereto dated February 2, 2007 (the “Preliminary Prospectus Supplement”) and the supplement thereto dated February 5, 2007 (the “Prospectus Supplement”) filed as part of the Registration Statement (the Base Prospectus and Preliminary Prospectus Supplement are referred to collectively herein as the “Preliminary Prospectus,” and the Base Prospectus and Prospectus Supplement are referred to collectively herein as the “Prospectus”);

                4.            The Purchase Agreement;

February 5, 2007

Page 2

                5.            An Officer’s Certificate of the Company, dated as of the date hereof;

6.Resolutions of the Board of Directors of the Company adopted on December 7, 2006, as certified by the Secretary of the Company on the date hereof as then being complete, accurate and in effect; and

7.Such other agreements, documents and matters of fact as we have deemed necessary for rendering the opinions set forth in this letter.

All defined terms used in this letter which are not defined herein have the definitions ascribed to them in the Purchase Agreement.

The opinions set forth herein are qualified as stated therein and are qualified further by the following:

a.This opinion is based upon existing laws, ordinances and regulations in effect as of the date hereof and as they presently apply.

b.Except as set forth herein, we express no opinion as to the effect of the laws of any state or jurisdiction other than the Delaware General Corporation Law and the federal laws of the United States of America upon the transactions described herein. To the extent we opine herein as to the effects of the laws of any jurisdictions other than the foregoing, we have assumed such laws are identical to the laws of the State of Illinois.

c.In rendering the opinions set forth below, we have relied, to the extent we believe appropriate, as to matters of fact, (i) upon certificates or statements of public officials and of officers of the Company, and (ii) upon such matters of fact contained in representations and warranties contained in Purchase Agreement and the Registration Statement, and we have made no independent investigation or verification of said facts.

d.We have assumed the competency of all signatories, the genuineness of all signatures, the authenticity of all documents submitted to us as originals, the conformity to original documents of all documents submitted to us as certified or photostatic copies, and the accuracy and completeness of all records made available to us.

e.We have assumed that (i) the Purchase Agreementhave been duly authorized, executed and delivered by the parties thereto (other than the Company), are within such parties’ corporate, power, and are their legal, valid and binding obligation(s) and that they are in compliance with all applicable laws, rules and regulations governing the conduct of their respective businesses and this transaction, (ii) the Purchase Agreement will be enforced in circumstances and in a manner which are commercially reasonable, and (iii) the parties to the Purchase Agreement (other than the Company) are not subject to any statute, rule or regulation or any impediment that requires them or our client to obtain the consent, or to make any declaration or filing with any governmental authority in connection with the transactions contemplated by the Purchase Agreement.

February 5, 2007

Page 3

f.Requirements in the Purchase Agreement specifying that provisions thereof may only be waived in writing may not be valid, binding or enforceable to the extent that an oral agreement or an implied agreement by trade practice or course of conduct has been created modifying any provision of such documents.

g.In rendering our opinion in paragraphs (i) and (ii) below regarding the organization, existence and good standing of the Company and its Subsidiaries, we have relied solely upon certificates of good standing issued as of recent dates by the Secretaries of State of Delaware and such other states as we have deemed necessary and appropriate, or oral verifications from such Secretaries of States obtained by CT Corporation as to good standing, as applicable, which we have assumed to be accurate as of the date hereof.

h.Whenever our opinion, with respect to the existence or absence of facts, is qualified by the phrase “to our knowledge,” “we are not aware,” “has come to our attention,” or a phrase of similar import, it indicates that during the course of our representation of the Company in connection with the subject transaction, no information has come to the attention of our attorneys who have worked on the subject transaction, and our attorneys who have principal responsibility for representing the Company on other matters in areas relevant to the opinions being rendered, which would give us current actual knowledge of the existence or absence of such facts. Without limiting the generality of the foregoing, it is expressly understood that no opinion is expressed with regard to: (a) the financial ability of the Company to meet its obligations under the Purchase Agreement; (b) although we are not aware of any untruthfulness or inaccuracy, the truthfulness or accuracy of any applications, reports, plans, documents, financial statements or other matters furnished to the Purchasers by (or on behalf of) the Company in connection with the Purchase Agreement or the Registration Statement; or (c) although we are not aware of any untruthfulness or inaccuracy, the truthfulness or accuracy of any representations or warranties made by the Company in the Purchase Agreement, the Registration Statement or other documents described herein, which are not the subject of any of the opinions stated herein. However, except to the extent expressly set forth herein, we have not undertaken any independent investigation to determine the existence or absence of such facts, and no inference as to our knowledge of the existence or absence of such facts should be drawn from the fact of our representation of the Company on any other matter.

i.We have examined the latest compilations that are available to us of the applicable statutes of such jurisdictions that relate to the issuance of the Shares and, in certain instances, the written regulations and rulings issued thereunder. We have not obtained special written rulings of the SEC, state securities commissions or other administrative bodies or officials charged with the administration of such statutes, regulations and rulings and we have not obtained and do not rely on opinions of other counsel.

Based on the foregoing, and in reliance thereon, but subject to the assumptions, limitations and qualifications expressed herein, we are of the opinion that:

i.The Company is a corporation duly organized and existing and is in good standing under the laws of the State of Delaware, and has the corporate power and

February 5, 2007

Page 4

authority to own, lease and operate its properties and conduct its business as described in the Prospectus.

ii.Each of the Company's Subsidiaries has been duly organized and is validly existing and in good standing under the laws of the jurisdiction of its formation, has the corporate power and authority to own, lease and operate its properties and to conduct its business as described in the Prospectus.

iii.The Shares have been duly and validly authorized by all necessary corporate action and, when issued and delivered in accordance with, and against payment therefor, as specified in, the Purchase Agreement, will be fully paid and non-assessable.

iv.The Purchase Agreement has been duly and validly authorized, executed and delivered by the Company, and the Company has the corporate power and authority to perform its obligations thereunder.

v.The execution, delivery and performance of the Purchase Agreement, and the consummation of the transactions contemplated thereby and the issuance and sale of the Shares in accordance therewith do not result in a violation of any provision of the certificate of incorporation or bylaws of the Company or, to our knowledge, any other applicable law, administrative regulation or administrative or court decree, and will not, to our knowledge, conflict with or constitute a breach of, or default under, or result in the creation or imposition of any lien, charge or encumbrance upon any property or assets of the Company or any of its respective Subsidiaries pursuant to any agreement or other instrument that is binding upon the Company or any Subsidiary, or to which any of their properties or assets is subject.

vi.The Registration Statement is effective under the 1933 Act and, to our knowledge, no stop order suspending the effectiveness of the Registration Statement has been issued under the 1933 Act and no proceedings for that purpose have been initiated or threatened by the SEC.

vii.The Shares conform in all material respects to the descriptions thereof contained in the Prospectus.

viii.No consent, approval, authorization, or order of, or qualification with, any governmental body or agency and no consent, approval, or authorization of any person other than the Company is required for the performance by the Company of its obligations under the Purchase Agreement, except such as may be required under the federal securities laws and the securities or Blue Sky laws of various states in connection with the Shares.

ix.The Registration Statement and the Prospectus (except for financial statements and schedules and other financial and statistical data included therein as to which we do not express any opinion), excluding the documents incorporated by reference therein, as of their respective effective or issue dates, comply as to form in all material respects with the requirements for registration statements on Form S-3 under the 1933 Act and the 1933 Act Regulations.

February 5, 2007

Page 5

x.To our knowledge, except as described in the Prospectus, there are no outstanding rights, warrants or options to acquire, or instruments convertible into or exchangeable for, or agreements or understandings with respect to the sale or issuance of any shares of capital stock or partnership interests of or other equity interest in the Company or any of its Subsidiaries.

xi.Each document filed pursuant to the 1934 Act (other than the financial statements, schedules and other financial and statistical data, as to which we do not express any opinion) and incorporated or deemed to be incorporated by reference in the Preliminary Prospectus or in the Prospectus complied when so filed as to form in all material respects with the 1934 Act and the 1934 Act Regulations.

* * *

We have participated in the preparation of the Registration Statement and the Prospectus, including communicating with officers, employees and other representatives of the Company, representatives of the Company's independent public accountants, and you and your representatives, and have reviewed the documents incorporated by reference into the Registration Statement, and no facts have come to our attention that cause us to believe that the Registration Statement (including the documents incorporated by reference therein) (except for financial statements and supporting schedules and other financial and statistical information and data included or incorporated by reference therein or omitted therefrom as to which we make no statement), at the time the Registration Statement became effective, or at the date of the Purchase Agreement, contained an untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary to make the statements therein not misleading, that the Prospectus (including the documents incorporated by reference therein) (except as aforesaid), as of the date of the Purchase Agreement or the date hereof, contained or contains an untrue statement of a material fact or omitted or omits to state a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. The statements set forth in this paragraph are given solely on the basis that any statement contained or not contained in a document or deemed to be incorporated in the Registration Statement or Prospectus shall be deemed to be or deemed not to be contained in the Registration Statement or the Prospectus if such statement or omission has been modified or superseded by any subsequent statement in or deemed incorporated in the Registration Statement or the Prospectus prior to the relevant time in question. Notwithstanding the foregoing, in this paragraph we are not passing upon and assume no responsibility for the accuracy, completeness or fairness of the statements contained in the Registration Statement or the Prospectus, nor are we making any representation that we have independently verified or checked the accuracy, completeness or fairness of such statements.

We call your attention to the fact that, although we represent the Company in connection with the subject transaction, our engagement has been limited to the specific matters as to which we have been consulted.

This opinion is limited to the matters stated herein. We disavow any obligation to update this opinion or advise you of any changes in our opinion in the event of changes in applicable

February 5, 2007

Page 6

laws or facts or if additional or newly discovered information is brought to our attention. This opinion is provided to you as a legal opinion only and not as a guaranty or warranty of the matters discussed herein or in the documents referred to herein. No opinion may be inferred or implied beyond the matters expressly stated herein and no portion of this opinion may be quoted or in any other way published without the prior written consent of the undersigned. Further, this opinion may be relied upon only by the addressees hereof and not by any other party.

Very truly yours,

DLA PIPER US LLP

cc: MFRI, Inc.

SCHEDULE 1

Midwesco Filter Resources, Inc.

Perma-Pipe Inc.

Thermal Care. Inc.

EX-2

February 5, 2007

David Unger

Chairman of the Board & Chief Executive Officer

MFRI, Inc.

7720 Lehigh Avenue

Niles, IL 60714

Dear Mr. Unger:

This letter (the “Agreement”) constitutes the agreement between Lane Capital Markets LLC (“LCM” or the “Placement Agent”) and MFRI, Inc. (the “Company”), in connection with the proposed placement (the “Placement”) by the Company of up to 1,090,000 registered shares (the “Company Shares”) of its common stock, par value $0.01 per share (the “Common Stock”). LCM shall serve as a placement agent in connection with the Placement and shall be the exclusive placement agent with respect to Shares sold to certain clients of Placement Agent (“Lane Clients”) agreed to in writing between Placement Agent and the Company from time to time (the “Shares”) and as a non-exclusive placement agent with respect to the balance of the Shares. In all cases, LCM’s engagement hereunder shall be on a “reasonable best efforts” basis. The terms of such Placement shall be mutually agreed upon by the Company and the purchasers of the Shares (each a “Purchaser and, collectively, the “Purchasers”) and nothing herein constitutes that LCM would have the power or authority to bind the Company or any Purchaser or an obligation for the Company to issue any Shares or complete the Placement. This Agreement and the stock purchase agreement and any agreement contemplated thereby to be executed and delivered by the Company and the Purchasers in connection with the Placement shall be collectively referred to herein as the “TransactionDocuments.” The date of the closing of the Placement shall be referred to herein as the “Closing Date.” The Company expressly acknowledges and agrees that LCM’s obligations hereunder are on a reasonable best efforts basis only and that the execution of this Agreement does not constitute a commitment by LCM to purchase the Shares and does not ensure the successful placement of the Shares or any portion thereof or the success of LCM with respect to securing any other financing on behalf of the Company.

SECTION 1.COMPENSATION AND OTHER FEES. (A) As compensation for the services provided by LCM hereunder, the Company agrees to pay to LCM a cash fee payable immediately upon the closing of the Placement equal to 3% of the aggregate gross proceeds raised in the Placement solely from the Placement of the Shares to Lane Clients. (B) The Company also agrees to reimburse LCM up to a maximum of $15,000 for its legal expenses incurred (with supporting invoices/receipts) in connection with the preparation of this Agreement and consummation of the transactions contemplated hereby. Such reimbursement shall be payable immediately upon (but only in the event of) the closing of the Placement. (C) In addition, as additional compensation for the services provided by LCM hereunder, the Company agrees to pay to LCM a cash fee equal to 3% of the aggregate gross proceeds raised from any Lane Client in any subsequent financing of equity or debt or other capital raising activity of the Company (or any affiliate of the Company) (each, a “Subsequent Financing”) within 12 months after the date hereof. Any such amount shall be due and payable immediately upon the closing of a Subsequent Financing.

MFRI, Inc.

February 5, 2007

Page 2

SECTION 2. REGISTRATION STATEMENT.

The Company represents and warrants to, and agrees with, the Placement Agent that:

(A)On December 18, 2006 the Company filed, with the U.S. Securities and Exchange Commission (the “Commission”), a registration statement on Form S-3 (Registration File No.333-139432) under the Securities Act of 1933, as amended (the “Securities Act”), which became effective on January 4, 2007, for the registration under the Securities Act of the Shares. At the time of such filing, the Company met the requirements of Form S-3 under the Securities Act. Such registration statement meets the requirements set forth in Rule 415(a)(1)(x) under the Securities Act and complies with said Rule. The Company will file with the Commission pursuant to Rule 424(b) under the Securities Act, and the rules and regulations (the “Rules and Regulations”) of the Commission promulgated thereunder, a supplement to the form of prospectus included in such registration statement relating to the placement of the Shares and the plan of distribution thereof and will include in such supplement all further information (financial and other) with respect to the Company required to be set forth therein. Such registration statement, including the exhibits thereto, as amended at the date of this Agreement, is hereinafter called the “Registration Statement” such prospectus in the form in which it appears in the Registration Statement is hereinafter called the “Base Prospectus” and the supplemented form of prospectus, in the form in which it will be filed with the Commission pursuant to Rule 424(b) (including the Base Prospectus as so supplemented) is hereinafter called the “Prospectus Supplement.” Any reference in this Agreement to the Registration Statement, the Base Prospectus or the Prospectus Supplement shall be deemed to refer to and include the documents incorporated by reference therein (the “Incorporated Documents”) pursuant to Item 12 of Form S-3 which were filed under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), on or before the date of this Agreement, or the issue date of the Base Prospectus or the Prospectus Supplement, as the case may be; and any reference in this Agreement to the terms “amend,” “amendment” or “supplement” with respect to the Registration Statement, the Base Prospectus or the Prospectus Supplement shall be deemed to refer to and include the filing of any document under the Exchange Act after the date of this Agreement, or the issue date of the Base Prospectus or the Prospectus Supplement, as the case may be, deemed to be incorporated therein by reference. All references in this Agreement to financial statements and schedules and other information which is “contained,” “included,” “described,” “referenced,” “set forth” or “stated” in the Registration Statement, the Base Prospectus or the Prospectus Supplement (and all other references of like import) shall be deemed to mean and include all such financial statements and schedules and other information which is or is deemed to be incorporated by reference in the Registration Statement, the Base Prospectus or the Prospectus Supplement, as the case may be. No stop order suspending the effectiveness of the Registration Statement or the use of the Base Prospectus or the Prospectus Supplement has been issued, and no proceeding for any such purpose is pending or has been initiated or, to the Company's knowledge, is threatened by the Commission. For purposes of this Agreement, “free writing prospectus” has the meaning set forth in Rule 405 under the Securities Act and the “Time of Sale Prospectus” means the preliminary prospectus, if any, or the Prospectus Supplement (if used prior to or at the time of sale), each together with the free writing prospectuses, if any, used in connection with the Placement, including any documents incorporated by reference therein.

MFRI, Inc.

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(B)The Registration Statement (and any further documents to be filed with the Commission) contains all exhibits and schedules as required by the Securities Act. Each of the Registration Statement and any post-effective amendment thereto, at the time it became effective, complied in all material respects with the Securities Act and the Exchange Act and the applicable Rules and Regulations and did not and, as amended or supplemented, if applicable, will not, contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading. The Base Prospectus, the Time of Sale Prospectus, if any, and the Prospectus Supplement, each as of its respective date, comply in all material respects with the Securities Act and the Exchange Act and the applicable Rules and Regulations. Each of the Base Prospectus, the Time of Sale Prospectus, if any, and the Prospectus Supplement, as amended or supplemented, did not and will not contain as of the date thereof any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. The Incorporated Documents, when they were filed with the Commission, conformed in all material respects to the requirements of the Exchange Act and the applicable Rules and Regulations, and none of such documents, when they were filed with the Commission, and when read together with the other information in the Registration Statement, contained any untrue statement of a material fact or omitted to state a material fact necessary to make the statements therein (with respect to Incorporated Documents incorporated by reference in the Base Prospectus or Prospectus Supplement), in light of the circumstances under which they were made not misleading; and any further documents so filed and incorporated by reference in the Base Prospectus, the Time of Sale Prospectus, if any, or Prospectus Supplement, when such documents are filed with the Commission, will conform in all material respects to the requirements of the Exchange Act and the applicable Rules and Regulations, as applicable, and will not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. The representations and warranties set forth in this Section 2 (B) are given on the basis that any statement contained or not contained in a document or deemed to be incorporated in the Registration Statement, the Time of Sale Prospectus, the Prospectus Supplement or the Base Prospectus prior to the Time of Sale shall be deemed to be or deemed not to be contained in the Registration Statement, Time of Sale Information or the Prospectus if such statement or omission has been modified or superseded by any subsequent statement in or deemed incorporated in the Registration Statement, Time of Sale Information, the Preliminary Prospectus or the Prospectus prior to the Time of Sale. No post-effective amendment to the Registration Statement reflecting any facts or events arising after the date thereof which represent, individually or in the aggregate, a fundamental change in the information set forth therein is required to be filed with the Commission. There are no documents required to be filed with the Commission in connection with the transaction contemplated hereby that (x) have not been filed as required pursuant to the Securities Act or (y) will not be filed within the requisite time period. There are no contracts or other documents required to be described in the Base Prospectus, the Time of Sale Prospectus, if any, or Prospectus Supplement, or to be filed as exhibits or schedules to the Registration Statement, which have not been, or will not be, described or filed as required.

(C)The Company is eligible to use free writing prospectuses in connection with the Placement pursuant to Rules 164 and 433 under the Securities Act. Any free writing prospectus that the Company is required to file pursuant to Rule 433(d) under the Securities Act has been, or will be, filed with the Commission in accordance with the requirements of the Securities Act and the

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applicable rules and regulations of the Commission thereunder. Each free writing prospectus that the Company has filed, or is required to file, pursuant to Rule 433(d) under the Securities Act or that was prepared by or behalf of or used by the Company complies or will comply in all material respects with the requirements of the Securities Act and the applicable rules and regulations of the Commission thereunder. The Company will not, without the prior consent of the Placement Agent, prepare, use or refer to, any free writing prospectus and the Placement Agent will not, without the prior consent of the Company, prepare, use or refer to, any free writing prospectus.

(D)The Company has delivered, or will as promptly as practicable deliver, to the Placement Agent complete conformed copies of the Registration Statement and of each consent and certificate of experts, as applicable, filed as a part thereof, and conformed copies of the Registration Statement (without exhibits), the Base Prospectus, the Time of Sale Prospectus, if any, and the Prospectus Supplement, as amended or supplemented, in such quantities and at such places as the Placement Agent reasonably requests. Neither the Company nor any of its directors and officers has distributed and none of them will distribute, prior to the Closing Date, any offering material in connection with the offering and sale of the Shares other than the Base Prospectus, the Time of Sale Prospectus, if any, the Prospectus Supplement, the Registration Statement, copies of the documents incorporated by reference therein and any other materials permitted by the Securities Act.

SECTION 3.REPRESENTATIONS AND WARRANTIES. Except as set forth under the corresponding section of the Disclosure Schedules which Disclosure Schedules shall be deemed a part hereof, the Company hereby makes the representations and warranties set forth below to the Placement Agent.

(A)Organization and Qualification. All of the direct and indirect subsidiaries (individually, a “Subsidiary”) of the Company set forth on Schedule 3(A) are wholly-owned and the Company owns, directly or indirectly the capital stock or other equity interests of each Subsidiary free and clear of any “Liens” (which for purposes of this Agreement shall mean a lien, charge, security interest, encumbrance, right of first refusal, preemptive right or other restriction), and all the issued and outstanding shares of capital stock of each Subsidiary are validly issued and are fully paid, non-assessable and free of preemptive and similar rights to subscribe for or purchase securities, except for the Liens created under the Company’s Loan Agreement with Bank of America, N.A. The Company and each of the Subsidiaries is an entity duly incorporated or otherwise organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation or organization (as applicable), with the requisite power and authority to own and use its properties and assets and to carry on its business as currently conducted. Neither the Company nor any Subsidiary is in violation or default of any of the provisions of its respective certificate or articles of incorporation, bylaws or other organizational or charter documents. Each of the Company and the Subsidiaries is duly qualified to conduct business and is in good standing as a foreign corporation or other entity in each jurisdiction in which the nature of the business conducted or property owned by it makes such qualification necessary, except where the failure to be so qualified or in good standing, as the case may be, could not have or reasonably be expected to result in (i) a material adverse effect on the legality, validity or enforceability of any Transaction Document, (ii) a material adverse effect on the results of operations, assets, business or financial condition of the Company and the Subsidiaries, taken as a whole, or (iii) a material adverse effect on the Company’s ability to perform in any material respect on a timely basis its obligations under any Transaction Document (any of (i), (ii) or (iii), a “Material Adverse Effect”) and no “Proceeding” (which for purposes of this Agreement shall mean any action, claim, suit,

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investigation or proceeding (including, without limitation, an investigation or partial proceeding, such as a deposition), whether commenced or threatened), which to the actual or contractive knowledge of the Company, has been instituted in any such jurisdiction revoking, limiting or curtailing or seeking to revoke, limit or curtail such power and authority or qualification.

(B)Authorization; Enforcement. The Company has the requisite corporate power and authority to enter into and to consummate the transactions contemplated by each of the Transaction Documents and otherwise to carry out its obligations hereunder and thereunder. The execution and delivery of each of the Transaction Documents by the Company and the consummation by it of the transactions contemplated thereby have been duly authorized by all necessary action on the part of the Company and no further action is required by the Company, its board of directors or its stockholders in connection therewith other than in connection with the “Required Approvals” (as defined in subsection 3(D) below). Each Transaction Document has been (or upon delivery will have been) duly executed by the Company and, when delivered in accordance with the terms hereof and thereof, will constitute the valid and binding obligation of the Company enforceable against the Company in accordance with its terms except (i) as limited by applicable bankruptcy, insolvency, reorganization, moratorium and other laws of general application affecting enforcement of creditors’ rights generally and (ii) as limited by laws relating to the availability of specific performance, injunctive relief or other equitable remedies.

(C)No Conflicts. The execution, delivery and performance of the Transaction Documents by the Company, the issuance and sale of the Shares and the consummation by the Company of the other transactions contemplated hereby and thereby do not and will not (i) conflict with or violate any provision of the Company’s or any Subsidiary’s certificate or articles of incorporation, bylaws or other organizational or charter documents, or (ii) conflict with, or constitute a default (or an event that with notice or lapse of time or both would become a default) under, result in the creation of any Lien upon any of the properties or assets of the Company or any Subsidiary, or give to others any rights of termination, amendment, acceleration or cancellation (with or without notice, lapse of time or both) of, any agreement, credit facility, debt or other instrument (evidencing a Company or Subsidiary debt or otherwise) or other understanding to which the Company or any Subsidiary is a party or by which any property or asset of the Company or any Subsidiary is bound or affected, or (iii) subject to the Required Approvals, conflict with or result in a violation of any law, rule, regulation, order, judgment, injunction, decree or other restriction of any court or governmental authority to which the Company or a Subsidiary is subject (including federal and state securities laws and regulations), or by which any property or asset of the Company or a Subsidiary is bound or affected; except in the case of each of clauses (ii) and (iii), such as could not have or reasonably be expected to result in a Material Adverse Effect.

(D)Filings, Consents and Approvals. The Company is not required to obtain any consent, waiver, authorization or order of, give any notice to, or make any filing or registration with, any court or other federal, state, local or other governmental authority or other “Person” (defined as an individual or corporation, partnership, trust, incorporated or unincorporated association, joint venture, limited liability company, joint stock company, government (or an agency or subdivision thereof) or other entity of any kind, including, without limitation, any “Trading Market” (which, for purposes of this Agreement shall mean the following markets or exchanges on which the Common Stock is listed or quoted for trading on the date in question: the Nasdaq Global Market) in connection with the

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execution, delivery and performance by the Company of the Transaction Documents, other than such filings or consents as have been made, received or as are required to be made under applicable Federal and state securities laws (collectively, the “Required Approvals”).

(E)Issuance of the Shares; Registration. The Shares are duly authorized and, when issued and paid for in accordance with the applicable Transaction Documents, will be duly and validly issued, fully paid and nonassessable, free and clear of all Liens imposed by the Company other than restrictions on transfer provided for in the Transaction Documents. Prior to the Closing Date, the Company will have reserved from its duly authorized capital stock the maximum number of shares of Common Stock issuable pursuant to the Transaction Documents. The Shares are being issued pursuant to the Registration Statement and the issuance of the Shares has been registered by the Company under the Securities Act. The Registration Statement is effective and available for the issuance of the Shares thereunder and the Company has not received any notice that the Commission has issued or intends to issue a stop-order with respect to the Registration Statement or that the Commission otherwise has suspended or withdrawn the effectiveness of the Registration Statement, either temporarily or permanently, or intends or has threatened in writing to do so. The "Plan of Distribution" section under the Registration Statement permits the issuance and sale of the Shares hereunder. Upon transfer of the Shares, the Company will transfer good and marketable title to such Shares.

(F)Capitalization. The capitalization of the Company is as set forth in the Registration Statement. The Company has not issued any capital stock since its most recently filed periodic report under the Exchange Act, other than pursuant to the exercise of employee stock options under the Company’s stock option plans, the issuance of shares of Common Stock to employees pursuant to the Company’s employee stock purchase plan and pursuant to the conversion or exercise of securities exercisable, exchangeable or convertible into Common Stock (“Common Stock Equivalents”). No Person has any right of first refusal, preemptive right, right of participation, or any similar right to participate in the transactions contemplated by the Transaction Documents. Assuming the Purchasers do not own shares of Common Stock prior to the Closing, as a result of the purchase and sale of the Shares, there are no outstanding options, warrants, script rights to subscribe to, calls or commitments of any character whatsoever relating to, or securities, rights or obligations convertible into or exercisable or exchangeable for, or giving any Person any right to subscribe for or acquire, any shares of Common Stock, or contracts, commitments, understandings or arrangements by which the Company or any Subsidiary is or may become bound to issue additional shares of Common Stock or Common Stock Equivalents and the issuance and sale of the Shares will not obligate the Company to issue shares of Common Stock or other securities to any Person (other than the Purchasers) and will not result in a right of any holder of Company securities to adjust the exercise, conversion, exchange or reset price under such securities. All of the outstanding shares of capital stock of the Company are validly issued, fully paid and nonassessable, have been issued in compliance with all federal and state securities laws, and none of such outstanding shares was issued in violation of any preemptive rights or similar rights to subscribe for or purchase securities. No further approval or authorization of any stockholder, the Board of Directors of the Company or others is required for the issuance and sale of the Shares. There are no stockholders agreements, voting agreements or other similar agreements with respect to the Company’s capital stock to which the Company is a party or, to the knowledge of the Company, between or among any of the Company’s stockholders.

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(G)SEC Reports; Financial Statements. The Company has complied in all material respects with requirements to file all reports, schedules, forms, statements and other documents required to be filed by it under the Securities Act and the Exchange Act, including pursuant to Section 13(a) or 15(d) thereof, for the two years preceding the date hereof (or such shorter period as the Company was required by law to file such material) (the foregoing materials, including the exhibits thereto and documents incorporated by reference therein, being collectively referred to herein as the “SEC Reports”) on a timely basis or has received a valid extension of such time of filing and has filed any such SEC Reports prior to the expiration of any such extension. As of their respective dates, the SEC Reports complied in all material respects with the requirements of the Securities Act and the Exchange Act and the rules and regulations of the Commission promulgated thereunder, and none of the SEC Reports, when filed, contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. The financial statements of the Company included in the SEC Reports comply in all material respects with applicable accounting requirements and the rules and regulations of the Commission with respect thereto as in effect at the time of filing. Such financial statements have been prepared in accordance with United States generally accepted accounting principles applied on a consistent basis during the periods involved (“GAAP”), except as may be otherwise specified in such financial statements or the notes thereto and except that unaudited financial statements may not contain all footnotes required by GAAP, and fairly present in all material respects the financial position of the Company and its consolidated subsidiaries as of and for the dates thereof and the results of operations and cash flows for the periods then ended, subject, in the case of unaudited statements, to normal, immaterial, year-end audit adjustments.

(H)Material Changes; Undisclosed Events, Liabilities or Developments. Since the date of the latest audited financial statements included within the SEC Reports, except as specifically disclosed in the SEC Reports, (i) there has been no event, occurrence or development that has had or that could reasonably be expected to result in a Material Adverse Effect, (ii) the Company has not incurred any liabilities (contingent or otherwise) other than (A) trade payables, accrued expenses and other liabilities, including bank and other debt and lease liabilities, incurred in the ordinary course of business consistent with past practice and (B) liabilities not required to be reflected in the Company’s financial statements pursuant to GAAP or required to be disclosed in filings made with the Commission, (iii) the Company has not altered its method of accounting, (iv) the Company has not declared or made any dividend or distribution of cash or other property to its stockholders or purchased, redeemed or made any agreements to purchase or redeem any shares of its capital stock and (v) the Company has not issued any equity securities to any officer, director or “Affiliate” (defined as any Person that, directly or indirectly through one or more intermediaries, controls or is controlled by or is under common control with a Person, as such terms are used in and construed under Rule 144 under the Securities Act), except pursuant to existing Company stock option plans. Except as set forth on Schedule 3(H), the Company does not have pending before the Commission any request for confidential treatment of information. Except for the issuance of the Shares contemplated by this Agreement or as set forth on Schedule 3(H), no event, liability or development has occurred or exists with respect to the Company or its Subsidiaries or their respective business, properties, operations or financial condition, that would be required to be disclosed by the Company under applicable securities laws at the time this representation is made that has not been publicly disclosed one Trading Day prior to the date that this representation is made.

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(I)Litigation. There is no action, suit, inquiry, notice of violation, Proceeding or investigation pending or, to the knowledge of the Company, threatened against or affecting the Company, any Subsidiary or any of their respective properties before or by any court, arbitrator, governmental or administrative agency or regulatory authority (federal, state, county, local or foreign) (collectively, an “Action”) which (i) adversely affects or challenges the legality, validity or enforceability of any of the Transaction Documents or the Shares or (ii) could, if there were an unfavorable decision, have or reasonably be expected to result in a Material Adverse Effect except as set forth on Schedule 3(I). Neither the Company nor any Subsidiary, nor any director or officer thereof, is or has been the subject of any Action involving a claim of violation of or liability under federal or state securities laws or a claim of breach of fiduciary duty. There has not been, and to the knowledge of the Company, there is not pending or contemplated, any investigation by the Commission involving the Company or any current or former director or officer of the Company. The Commission has not issued any stop order or other order suspending the effectiveness of any registration statement filed by the Company or any Subsidiary under the Exchange Act or the Securities Act. No executive officer, to the knowledge of the Company, is, or is now expected to be, in violation of any material term of any employment contract, confidentiality, disclosure or proprietary information agreement or non-competition agreement, or any other contract or agreement or any restrictive covenant, and the continued employment of each such executive officer does not subject the Company or any of its Subsidiaries to any liability with respect to any of the foregoing matters. The Company and its Subsidiaries are in compliance in all material respects with all U.S. federal, state, local and foreign laws and regulations relating to employment and employment practices, terms and conditions of employment and wages and hours, except where the failure to be in compliance could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.

(J)Labor Relations. No material labor dispute exists or, to the knowledge of the Company, is imminent with respect to any of the employees of the Company which could reasonably be expected to result in a Material Adverse Effect.

(K)Compliance. Neither the Company nor any Subsidiary (i) is in default under or in violation of (and no event has occurred that has not been waived that, with notice or lapse of time or both, would result in a default by the Company or any Subsidiary under), nor has the Company or any Subsidiary received notice of a claim that it is in default under or that it is in violation of, any indenture, loan or credit agreement or any other agreement or instrument to which it is a party or by which it or any of its properties is bound (whether or not such default or violation has been waived), (ii) is in violation of any order of any court, arbitrator or governmental body, or (iii) is or has been in violation of any statute, rule or regulation of any governmental authority, including without limitation all foreign, federal, state and local laws applicable to its business and all such laws that affect the environment, except in each case as could not have a Material Adverse Effect.

(L)Regulatory Permits. The Company and the Subsidiaries possess all certificates, authorizations and permits issued by the appropriate federal, state, local or foreign regulatory authorities necessary to conduct their respective businesses as described in the SEC Reports, except where the failure to possess such permits could not have or reasonably be expected to result in a Material Adverse Effect (“Material Permits”), and neither the Company nor any Subsidiary has received any notice of proceedings relating to the revocation or modification of any Material Permit.

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(M)Title to Assets. The Company and the Subsidiaries have good and marketable title in fee simple to all real property owned by them that is material to the business of the Company and the Subsidiaries and good and marketable title in all personal property owned by them that is material to the business of the Company and the Subsidiaries, in each case free and clear of all Liens, except for Liens that do not materially interfere with the use made and proposed to be made of such property by the Company and the Subsidiaries and Liens for the payment of federal, state or other taxes, the payment of which is neither delinquent nor subject to penalties. Any real property and facilities held under lease by the Company and the Subsidiaries are held by them under valid, subsisting and enforceable leases of which the Company and the Subsidiaries are in compliance, except where failure to do so could not reasonably be expected to have a Material Adverse Effect.

(N)Patents and Trademarks. The Company and the Subsidiaries have, or have rights to use, all patents, patent applications, trademarks, trademark applications, service marks, trade names, trade secrets, inventions, copyrights, licenses and other similar intellectual property rights necessary or material for use in connection with their respective businesses as described in the SEC Reports and which the failure to so have could have a Material Adverse Effect (collectively, the “Intellectual Property Rights”). To the knowledge of the Company, all such Intellectual Property Rights are enforceable and there is no existing infringement by another Person of any of the Intellectual Property Rights of others. The Company and its Subsidiaries have taken reasonable security measures to protect the secrecy, confidentiality and value of all of their intellectual properties, except where failure to do so could not reasonably be expected to have a Material Adverse Effect.

(O)Insurance. The Company and the Subsidiaries are insured by insurers of recognized financial responsibility against such losses and risks and in such amounts as are prudent and customary in the businesses in which the Company and the Subsidiaries are engaged, including, but not limited to, directors and officers insurance coverage.

(P)Transactions With Affiliates and Employees. Except as set forth in the SEC Reports, none of the officers or directors of the Company and, to the knowledge of the Company, none of the employees of the Company is presently a party to any material transaction with the Company or any Subsidiary (other than for services as employees, officers and directors), including any contract, agreement or other arrangement providing for the furnishing of services to or by, providing for rental of real or personal property to or from, or otherwise requiring payments to or from any officer, director or such employee or, to the knowledge of the Company, any entity in which any officer, director, or any such employee has a substantial interest or is an officer, director, trustee or partner, other than (i) for payment of salary or consulting fees for services rendered, (ii) reimbursement for expenses incurred on behalf of the Company and (iii) for other employee benefits, including stock option agreements under any stock option plan of the Company.

(Q)Sarbanes-Oxley. The Company is in material compliance with all provisions of the Sarbanes-Oxley Act of 2002 which are applicable to it as of the date hereof and of the closing date of the Placement.

(R) Certain Fees. Except as otherwise provided in this Agreement, no brokerage or finder’s fees or commissions are or will be payable by the Company to any broker, financial advisor or

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consultant, finder, placement agent, investment banker, bank or other Person with respect to the transactions contemplated by the Transaction Documents.

(S)Trading Market Rules. The issuance and sale of the Shares hereunder does not contravene the rules and regulations of the Trading Market.

(T)Investment Company. The Company is not, and is not an Affiliate of, and immediately after receipt of payment for the Shares, will not be or be an Affiliate of, an “investment company” within the meaning of the Investment Company Act of 1940, as amended. The Company intends to conduct its business in a manner so that it will not become subject to the Investment Company Act.

(U)Registration Rights. No Person has any right to cause the Company to effect a registration under the Securities Act of any securities of the Company.

(V)Listing and Maintenance Requirements. The Company’s Common Stock is registered pursuant to Section 12(b) or 12(g) of the Exchange Act, and the Company has taken no action designed to, or which to its knowledge is likely to have the effect of, terminating the registration of the Common Stock under the Exchange Act nor has the Company received any notification that the Commission is contemplating terminating such registration. The Company has not, in the 12 months preceding the date hereof, received notice from any Trading Market on which the Common Stock is or has been listed or quoted to the effect that the Company is not in compliance with the listing or maintenance requirements of such Trading Market. The Company is, and has no reason to believe that it will not in the foreseeable future continue to be, in compliance with all such listing and maintenance requirements.

(W) Intentionally Deleted.

(X)Solvency. The Company has no knowledge of any facts or circumstances which lead it to believe that it will file for reorganization or liquidation under the bankruptcy or reorganization laws of any jurisdiction within one year from the Closing Date.

(Y)Tax Status. Except for matters that would not, individually or in the aggregate, have or reasonably be expected to result in a Material Adverse Effect, the Company and each Subsidiary has filed all necessary federal, state and foreign income and franchise tax returns and has paid or accrued all taxes shown as due thereon, and the Company has no knowledge of a tax deficiency which has been asserted or threatened against the Company or any Subsidiary.

(Z)Foreign Corrupt Practices. Neither the Company, nor to the knowledge of the Company, any agent or other person acting on behalf of the Company, has violated in any material respect any provision of the Foreign Corrupt Practices Act of 1977, as amended.

(AA)Accountants. The Company’s Independent Public Accountants are set forth in the Registration Statement. To the knowledge of the Company, such accountants, who the Company expects will express their opinion with respect to the financial statements to be included in the Company’s next Annual Report on Form 10-K, are a registered public accounting firm as required by the Securities Act.

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(BB)Regulation M Compliance. The Company has not, and to its knowledge no one acting on its behalf has, (i) taken, directly or indirectly, any action designed to cause or to result in the stabilization or manipulation of the price of any security of the Company to facilitate the sale or resale of any of the Shares, (ii) sold, bid for, purchased, or, paid any compensation for soliciting purchases of, any of the Shares (other than for the placement agent’s placement of the Shares), or (iii) paid or agreed to pay to any person any compensation for soliciting another to purchase any other securities of the Company.

(CC)Approvals. The issuance and listing on the Nasdaq Global Market of the Shares requires no further approvals, including but not limited to, the approval of shareholders.

(DD)NASD Affiliations. There are no affiliations with any NASD member firm among the Company’s officers or, to the knowledge of the Company, any director of the Company, except as set forth in the Base Prospectus.

SECTION 4.INDEMNIFICATION. The Company agrees to the indemnification and other agreements set forth in the Indemnification Provisions (the “Indemnification”) attached hereto as Addendum A, the provisions of which are incorporated herein by reference and shall survive the termination or expiration of this Agreement.

SECTION 5.ENGAGEMENT TERM. LCM’s engagement hereunder will be for the period of 30 days. The engagement may be terminated by either the Company or LCM at any time on written notice. Notwithstanding anything to the contrary contained herein, the provisions concerning confidentiality, indemnification, contribution and the Company’s obligations to pay fees and reimburse expenses contained herein and the Company’s obligations contained in the Indemnification Provisions will survive any expiration or termination of this Agreement. LCM agrees not to use any confidential information concerning the Company provided to them by the Company for any purposes other than those contemplated under this Agreement.

SECTION 6.LCM INFORMATION. The Company agrees that any information or advice rendered by LCM in connection with this engagement is for the confidential use of the Company only in their evaluation of the Placement and, except as otherwise required by law, the Company will not disclose or otherwise refer to the advice or information in any manner without LCM’s prior written consent.

SECTION 7.NO FIDUCIARY RELATIONSHIP. This Agreement does not create, and shall not be construed as creating rights enforceable by any person or entity not a party hereto, except those entitled hereto by virtue of the Indemnification Provisions hereof. The Company acknowledges and agrees that LCM is not and shall not be construed as a fiduciary of the Company and shall have no duties or liabilities to the equity holders or the creditors of the Company or any other person by virtue of this Agreement or the retention of LCM hereunder, all of which are hereby expressly waived.

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SECTION 8.CLOSING. The obligations of the Placement Agent and the closing of the sale of the Shares hereunder are subject to the accuracy, when made and on the Closing Date, of the representations and warranties on the part of the Company and its Subsidiaries contained herein, to the accuracy of the statements of the Company and its Subsidiaries made in any certificates pursuant to the provisions hereof, to the performance by the Company and its Subsidiaries of their obligations hereunder, and to each of the following additional terms and conditions:

(A)No stop order suspending the effectiveness of the Registration Statement shall have been issued and no proceedings for that purpose shall have been initiated or threatened by the Commission, and any request for additional information on the part of the Commission (to be included in the Registration Statement, the Base Prospectus or the Prospectus Supplement or otherwise) shall have been complied with to the reasonable satisfaction of the Placement Agent. Any filings required to be made by the Company in shall have been timely filed with the Commission.

(B)The Placement Agent shall not have discovered and disclosed to the Company on or prior to the Closing Date that the Registration Statement, the Base Prospectus or the Prospectus Supplement or any amendment or supplement thereto contains an untrue statement of a fact which, in the opinion of counsel for the Placement Agent, is material or omits to state any fact which, in the opinion of such counsel, is material and is required to be stated therein or is necessary to make the statements therein not misleading.

(C)All corporate proceedings and other legal matters incident to the authorization, form, execution, delivery and validity of each of this Agreement, the Shares, the Registration Statement, the Base Prospectus and the Prospectus Supplement and all other legal matters relating to this Agreement and the transactions contemplated hereby shall be reasonably satisfactory in all material respects to counsel for the Placement Agent, and the Company shall have furnished to such counsel all documents and information that they may reasonably request to enable them to pass upon such matters.

(D)The Placement Agent shall have received from outside counsel to the Company such counsel’s written opinion, addressed to the Placement Agent dated as of the Closing Date, in form and substance reasonably satisfactory to the Placement Agent and its counsel.

(E)Neither the Company nor any of its Subsidiaries shall have sustained since the date of the latest audited financial statements included or incorporated by reference in the Base Prospectus, any loss or interference with its business from fire, explosion, flood, terrorist act or other calamity, whether or not covered by insurance, or from any labor dispute or court or governmental action, order or decree, otherwise than as set forth in or contemplated by the Base Prospectus and (ii) since such date there shall not have been any change in the capital stock or long-term debt of the Company or any of its Subsidiaries or any change, or any development involving a prospective change, in or affecting the business, general affairs, management, financial position, stockholders’ equity, results of operations or prospects of the Company and its Subsidiaries, otherwise than as set forth in or contemplated by the Base Prospectus, the effect of which, in any such case described in clause (i) or (ii), is, in the judgment of the Placement Agent, so material and adverse as to make it impracticable or inadvisable to proceed with the sale or delivery of the Shares

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on the terms and in the manner contemplated by the Base Prospectus, the Time of Sale Prospectus, if any, and the Prospectus Supplement.

(F)The Common Stock is registered under the Exchange Act and, as of the Closing Date, the Shares shall be listed and admitted and authorized for trading on the Nasdaq Global Market, and satisfactory evidence of such actions shall have been provided to the Placement Agent. The Company shall have taken no action designed to, or likely to have the effect of terminating the registration of the Common Stock under the Exchange Act or delisting or suspending from trading the Common Stock from the Nasdaq Global Market, nor has the Company received any information suggesting that the Commission or the Nasdaq Global Market is contemplating terminating such registration or listing.

(G)Subsequent to the execution and delivery of this Agreement, there shall not have occurred any of the following: (i) trading in securities generally on the New York Stock Exchange, the Nasdaq Global Market or the American Stock Exchange or in the over-the-counter market, or trading in any securities of the Company on any exchange or in the over-the-counter market, shall have been suspended or minimum or maximum prices or maximum ranges for prices shall have been established on any such exchange or such market by the Commission, by such exchange or by any other regulatory body or governmental authority having jurisdiction, (ii) a banking moratorium shall have been declared by federal or state authorities or a material disruption has occurred in commercial banking or securities settlement or clearance services in the United States, (iii) the United States shall have become engaged in hostilities in which it is not currently engaged, the subject of an act of terrorism, there shall have been an escalation in hostilities involving the United States, or there shall have been a declaration of a national emergency or war by the United States, or (iv) there shall have occurred any other calamity or crisis or any change in general economic, political or financial conditions in the United States or elsewhere, if the effect of any such event in clause (iii) or (iv) makes it, in the sole judgment of the Placement Agent, impracticable or inadvisable to proceed with the sale or delivery of the Shares on the terms and in the manner contemplated by the Base Prospectus and the Prospectus Supplement.

(H)No action shall have been taken and no statute, rule, regulation or order shall have been enacted, adopted or issued by any governmental agency or body which would, as of the Closing Date, prevent the issuance or sale of the Shares or materially and adversely affect or potentially and adversely affect the business or operations of the Company; and no injunction, restraining order or order of any other nature by any federal or state court of competent jurisdiction shall have been issued as of the Closing Date which would prevent the issuance or sale of the Shares or materially and adversely affect or potentially and adversely affect the business or operations of the Company.

(I)The Company shall have prepared and filed with the Commission a Current Report on Form 8-K with respect to the Placement, including as an exhibit thereto this Agreement.

(J)The Company shall have entered into common stock purchase agreements with each of the Purchasers and such agreements shall be in full force and effect and shall contain representations and warranties of the Company and the Purchasers as agreed between the Company and the Purchasers.

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February 5, 2007

Page 14

(K)The NASD shall have raised no objection to the fairness and reasonableness of the terms and arrangements of this Agreement.

(L)Prior to the Closing Date, the Company shall have furnished to the Placement Agent such further information, certificates and documents as the Placement Agent may reasonably request.

All opinions, letters, evidence and certificates mentioned above or elsewhere in this Agreement shall be deemed to be in compliance with the provisions hereof only if they are in form and substance reasonably satisfactory to counsel for the Placement Agent.

SECTION 9.GOVERNING LAW. This Agreement will be governed by, and construed in accordance with, the laws of the State of Illinois applicable to agreements made and to be performed entirely in such State. This Agreement may not be assigned by either party without the prior written consent of the other party. This Agreement shall be binding upon and inure to the benefit of the parties hereto, and their respective successors and permitted assigns. Any right to trial by jury with respect to any dispute arising under this Agreement or any transaction or conduct in connection herewith is waived. Any dispute arising under this Agreement may be brought into the courts of the State of Illinois or into the Federal Court located in Chicago, Illinois and, by execution and delivery of this Agreement, the Company hereby accepts for itself and in respect of its property, generally and unconditionally, the jurisdiction of aforesaid courts. Each party hereto hereby irrevocably waives personal service of process and consents to process being served in any such suit, action or proceeding by delivering a copy thereof via overnight delivery (with evidence of delivery) to such party at the address in effect for notices to it under this Agreement and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing contained herein shall be deemed to limit in any way any right to serve process in any manner permitted by law. If either party shall commence an action or proceeding to enforce any provisions of a Transaction Document, then the prevailing party in such action or proceeding shall be reimbursed by the other party for its attorneys fees and other costs and expenses incurred with the investigation, preparation and prosecution of such action or proceeding.

SECTION 10.ENTIRE AGREEMENT/MISC. This Agreement (including the attached Indemnification Provisions) embodies the entire agreement and understanding between the parties hereto and supersedes all prior agreements and understandings relating to the subject matter hereof. If any provision of this Agreement is determined to be invalid or unenforceable in any respect, such determination will not affect such provision in any other respect or any other provision of this Agreement, which will remain in full force and effect. This Agreement may not be amended or otherwise modified or waived except by an instrument in writing signed by both LCM and the Company. The representations, warranties, agreements and covenants contained herein shall survive the closing of the Placement and delivery and/or exercise of the Shares, as applicable. This Agreement may be executed in two or more counterparts, all of which when taken together shall be considered one and the same agreement and shall become effective when counterparts have been signed by each party and delivered to the other party, it being understood that both parties need not sign the same counterpart. In the event that any signature is delivered by facsimile transmission or a .pdf format file, such signature shall create a valid and binding obligation of the party executing (or

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February 5, 2007

Page 15

on whose behalf such signature is executed) with the same force and effect as if such facsimile signature page were an original thereof.

SECTION 11.NOTICES.Any and all notices or other communications or deliveries required or permitted to be provided hereunder shall be in writing and shall be deemed given and effective on the earliest of (a) the date of transmission, if such notice or communication is delivered via facsimile at the facsimile number specified on the signature pages attached hereto prior to 6:30 p.m. (New York City time) on a business day, (b) the next business day after the date of transmission, if such notice or communication is delivered via facsimile at the facsimile number on the signature pages attached hereto on a day that is not a business day or later than 6:30 p.m. (New York City time) on any business day, (c) the business day following the date of mailing, if sent by U.S. nationally recognized overnight courier service, or (d) upon actual receipt by the party to whom such notice is required to be given. The address for such notices and communications shall be as set forth on the signature pages hereto.

[Signature page follows]

Please confirm that the foregoing correctly sets forth our agreement by signing and returning to LCM the enclosed copy of this Agreement.

Very truly yours,
Lane CAPITAL MArkets, LLC
By:	/s/ Ryan M. Lane
Name:	Ryan M. Lane
Title:	Partner and Managing Director
Address for notice:
120 Broadway, Suite 1019
New York, NY, 10271
Copy to:
Kenneth S. Rose, Esq.
Morse Zelnick Rose & Lander, LLP
405 Park Avenue, Suite 1401
New York, NY 10022

Accepted and Agreed to as of the date first written above:
MFRI, Inc.
By:	/s/ David Unger
Name:	David Unger
Title:	Chairman of the Board and Chief Executive Officer
Address for notice:		Copy to:
7720 Lehigh Avenue		Hal Brown, Esq.
Niles, IL 60714		DLA Piper US, LLP
		203 North LaSalle Street, Suite 1900
		Chicago, IL 60601-1293

ADDENDUM A

INDEMNIFICATION PROVISIONS

In connection with the engagement of Lane Capital Markets LLC (“LCM”) by MFRI, Inc. (the “Company”) pursuant to a letter agreement dated February 2, 2007, between the Company and LCM, as it may be amended from time to time in writing (the “Agreement”), the Company and LCM hereby agree as follows:

1. To the extent permitted by law, the Company will indemnify LCM and its affiliates, stockholders, directors, officers, employees and controlling persons (within the meaning of Section 15 of the Securities Act of 1933, as amended, or Section 20 of the Securities Exchange Act of 1934) against all losses, claims, damages, expenses and liabilities, as the same are incurred (including the reasonable fees and expenses of counsel), insofar as such loss, claim, damage, expense or liability arises out of or is based upon any untrue statement or alleged untrue statement of a material fact contained in the Registration Statement, Prospectus Supplement or Time of Sale Prospectus, each as amended or supplemented, if applicable, or arises out of or is based upon any untrue statement or omission or alleged omission to state a material fact necessary to make the statements made therein, in the light of the circumstances under which they were made, not misleading, except insofar as any such loss, claim, damage, expense or liability (a) arises primarily out of or is based primarily upon any untrue statement or omission or alleged untrue statement or omission of a material fact contained in or omitted from and in conformity with information furnished in writing by or on behalf of the Placement Agent to the Company expressly for use therein, or (b) are found in a final judgment (not subject to appeal) by a court of law to have resulted primarily and directly from LCM’s willful misconduct or gross negligence in performing the services described herein.

2. The Placement Agent agrees to indemnify the Company, its directors and officers and any controlling persons (within the meaning of Section 15 of the Securities Act of 1933, as amended, or Section 20 of the Securities Exchange Act of 1934) against all losses, claims, damages, expenses and liabilities, as the same are incurred (including the reasonable cost of investigation) which the Company or any such party may incur under the Securities Act of 1933, the Securities Exchange Act of 1934 or otherwise, insofar as such loss, claim, damage, expense or liability is arises out of or is based upon any untrue statement or alleged untrue statement of a material fact contained in information furnished in writing by or on behalf of the Placement Agent to the Company expressly for use in the Registration Statement, Prospectus Supplement or Time of Sale Prospectus or arises out of or is based upon any omission or alleged omission to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading, in connection with such information. The Placement Agent’s liability hereunder shall be limited to a maximum amount equal to any fees it actually receives pursuant to this Agreement.

3. Promptly after receipt by any person in respect of which indemnity may be sought pursuant to either section 1 or 2 above (the “Indemnified Party”) of notice of any claim or the

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February 5, 2007

Page 2

commencement of any action or proceeding with respect to which the Indemnified Party is entitled to indemnity hereunder, the Indemnified Party will notify the person against whom such indemnity may be sought (the “Indemnifying Party”) in writing of such claim or of the commencement of such action or proceeding, and the Indemnifying Party will assume the defense of such action or proceeding and will employ counsel reasonably satisfactory to the Indemnified Party and will pay the fees and expenses of such counsel. Notwithstanding the preceding sentence, the Indemnified Party will be entitled to employ counsel separate from counsel for the Indemnifying Party and from any other party in such action if counsel for the Indemnified Party reasonably determines that it would be inappropriate under the applicable rules of professional responsibility for the same counsel to represent both parties. In such event, the reasonable fees and disbursements of no more than one such separate counsel will be paid by the Indemnifying Party. The Indemnifying Party will have the exclusive right to settle the claim or proceeding provided that the Indemnifying Party will not settle any such claim, action or proceeding without the prior written consent of the Indemnified Party, which will not be unreasonably withheld. No party shall be liable for any settlement payment made without its prior written consent.

4. Subject to the limitations set forth herein, if for any reason the foregoing indemnity is unavailable to the Indemnified Party or insufficient to hold the Indemnified Party harmless, then the Indemnifying Party shall contribute to the amount paid or payable by the Indemnified Party as a result of such losses, claims, damages or liabilities in such proportion as is appropriate to reflect not only the relative benefits received by the Company on the one hand and LCM on the other, but also the relative fault of the Company on the one hand and LCM on the other that resulted in such losses, claims, damages or liabilities, as well as any relevant equitable considerations. The amounts paid or payable by a party in respect of losses, claims, damages and liabilities referred to above shall be deemed to include any legal or other fees and expenses incurred in defending any litigation, proceeding or other action or claim. Notwithstanding the provisions hereof, LCM’s share of the liability hereunder shall not be in excess of the amount of fees actually received, or to be received, by LCM under the Agreement (excluding any amounts received as reimbursement of expenses incurred by LCM).

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February 5, 2007

Page 3

5. These Indemnification Provisions shall remain in full force and effect whether or not the transaction contemplated by the Agreement is completed and shall survive the termination of the Agreement, and shall be in addition to any liability that the Company might otherwise have to any indemnified party under the Agreement or otherwise.

Very truly yours,
Lane CAPITAL MArkets, LLC
By:	/s/ Ryan M. Lane
Name:	Ryan M. Lane
Title:	Partner and Managing Director

Accepted and Agreed to as of the date first written above:
MFRI, Inc.
By:	/s/ David Unger
Name:	David Unger
Title:	Chairman of the Board and Chief Executive Officer

SCHEDULE 3(A)

Midwesco Filter Resources, Inc.

Perma-Pipe, Inc.

Thermal Care, Inc.

EX-99

EXHIBIT 99.1

PRESS RELEASE

For Immediate Release

Company:	MFRI, Inc.
Contact:	David Unger, Chairman

MFRI ANNOUNCES COMMON STOCK OFFERING

Niles, IL, February 6, 2007 -- MFRI, Inc. (NASDAQ: MFRI) announced today that it has entered into definitive agreements with respect to the sale of approximately 1,000,000 shares of common stock at a price of $18.50 per share pursuant to the Company’s existing shelf registration statement previously filed and declared effective by the U.S. Securities and Exchange Commission (SEC). The Company expects to use the estimated net proceeds of $18,500,000 from the sale of the shares for general business purposes. The sale of 608,000 shares closed today, February 5, 2007, and the sale of the remaining shares is expected to close on or about February 6, 2007

Lane Capital Markets, LLC acted as a placement agent for the offering.

A preliminary prospectus supplement and accompanying prospectus relating to the sale have been filed with the SEC and may be obtained from the SEC website at http://www.sec.gov. This news release is not an offer to sell or a solicitation of an offer to buy any of the shares of the Company’s common stock.

Statements and other information contained in this announcement which can be identified by the use of forward-looking terminology such as “anticipate,” “may,” “will,” “expect,” “continue,” “remain,” “intend,” “aim,” “should,” “prospects,” “could,” “future,” “potential,” believes,” “plans,” “likely,” and “probable,” or the negative thereof or other variations thereon or comparable terminology, constitute “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934 as amended and are subject to the safe harbors created thereby. These statements should be considered as subject to the many risks and uncertainties that exist in the Company’s operations and business environment. Such risks and uncertainties include, but are not limited to, economic conditions, market demand and pricing, competitive and cost factors, raw material availability and prices, global interest rates, currency exchange rates, labor relations and other risk factors.

MFRI, Inc., headquartered in Niles, Illinois, is a manufacturer of custom-designed industrial filtration products, specialty piping and leak detection systems and industrial process cooling equipment. For more company information visit the MFRI, Inc. website at http://www.mfri.com.

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