Exhibit 10.1

TENTH AMENDMENT TO CREDIT AND SECURITY AGREEMENT

This TENTH AMENDMENT TO CREDIT AND SECURITY AGREEMENT (the “Amendment”) dated
November 30, 2011, is entered into by and among MISCOR GROUP, LTD., an Indiana
corporation (“MISCOR”), MAGNETECH INDUSTRIAL SERVICES, INC., an Indiana
corporation (“MIS”), and HK ENGINE COMPONENTS, LLC, an Indiana limited liability
company (“HK” and together with MISCOR and MIS, the “Borrowers” and each a
“Borrower”) and WELLS FARGO BANK, NATIONAL ASSOCIATION (the “Lender”), acting
through its Wells Fargo Business Credit operating division.

RECITALS

The Lender and the Borrowers are parties to a Credit and Security Agreement
dated January 14, 2008, as amended (the “Credit Agreement”).

The Borrowers have requested that the Lender make an additional term loan and
extend the term of the Credit Agreement, which the Lender is willing to do
pursuant to the terms and conditions of this Amendment.

NOW, THEREFORE, in consideration of the premises and of the mutual covenants and
agreements herein contained, it is agreed as follows:

1. Defined Terms. Capitalized terms used in this Amendment which are defined in
the Credit Agreement shall have the same meanings as defined therein, unless
otherwise defined herein. In addition, Section 1.1 of the Credit Agreement shall
be amended by adding or amending, as the case may be, the following defined term
to read as follows:

“EBITDA” means, with respect to any fiscal period, the Borrowers’ consolidated
net income (or loss), minus extraordinary gains, interest income, non-operating
income and income tax benefits and decreases in any change in LIFO reserves,
plus non-cash extraordinary losses, Interest Expense, income taxes, depreciation
and amortization and increases in any change in LIFO reserves for such period,
in each case, determined on a consolidated basis in accordance with GAAP.

“Fixed Charges” means, with respect to any fiscal period and with respect to the
Borrowers as determined on a consolidated basis in accordance with GAAP, the
sum, without duplication, of (a) cash Interest Expense paid during such period
(other than interest paid-in-kind, amortization of financing fees, and other
non-cash Interest Expense), (b) principal payments paid in cash during such
period in respect of Borrowers’ obligations for borrowed money or amounts
evidenced by notes or similar instruments, including, without limitation, cash
payments with respect to Capital Leases, cash payments made to Subordinated
Creditors (other than the cash payment to the Subordinated Creditors made on or
about October 7, 2011 in the aggregate amount of not more than $950,000) and
payments on the Term Note, but excluding principal payments made with respect to
the Credit Facility, and (d) all dividends and distributions (other than
Pass-Through Tax Liabilities) paid in cash during such period.

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“Fixed Charge Coverage Ratio” means, with respect to the Borrowers for any
period, the ratio of (i) EBITDA for such period, minus (a) Non-Financed Capital
Expenditures made (to the extent not already incurred in a prior period) or
incurred during such period, (b) cash taxes paid during such period, to the
extent greater than zero, and (c) all distributions for Pass-Through Tax
Liabilities to (ii) Fixed Charges for such period.

“Interest Expense” means, for any period, the aggregate of the interest expense
of the Borrowers for such period, determined on a consolidated basis in
accordance with GAAP.

“Maturity Date” means July 31, 2013.

“Non-Financed Capital Expenditures” means Capital Expenditures not financed by
the seller of the capital asset, by a third party lender or by means of any
extension of credit by Lender other than by means of an Advance under the Credit
Facility;

“Pass-Through Tax Liabilities” means the amount of state and federal income tax
paid or to be paid by an Owner of a Borrower on taxable income earned by such
Borrower and attributable to such Owner as a result of such Borrower’s
“pass-through” tax status, assuming the highest marginal income tax rate for
federal and state (for the state or states in which any Owner is liable for
income taxes with respect to such income) income tax purposes, after taking into
account any deduction for state income taxes in calculating the federal income
tax liability and all other deductions, credits, deferrals and other reductions
available to such Owners from or through such Borrower.

2. Amendment of Section 2.17 and Section 2.18. Section 2.17 and Section 2.18
shall be amended to read as follows:

Section 2.17 Term Advance. On or about April 15, 2008, the Lender made an
advance to the Borrowers under this Section 2.17 in the original principal
amount of One Million Five Hundred Thousand Dollars ($1,500,000) (the “Existing
Term Advance”), which Existing Term Advance is secured by the Collateral as
provided in Article III and the Mortgage. The Lender agrees, subject to the
terms and conditions of this Agreement, to make a single advance to the
Borrowers on the date the conditions in Paragraph 7 of the Tenth Amendment and
the applicable conditions of Section 4.1 hereof have been satisfied (the “Term
Advance”) in the amount of One Million Dollars ($1,000,000), the proceeds of
which shall be used in part, to satisfy the Existing Term Advance. The
Borrowers’ joint and several obligation to pay the Term Advance shall be
evidenced by the Term Note and shall be secured by the Collateral as provided in
Article III and the Mortgage. Upon fulfillment of the applicable conditions set
forth herein, the Lender shall disburse the proceeds of the Term Advance in the
manner specified in Section 2.2(d).

Section 2.18 Payment of Term Note. The outstanding principal balance of the Term
Note shall be due and payable as follows:

 

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(a) In equal monthly installments of Twenty Seven Thousand Seven Hundred Seventy
Eight Dollars ($27,778), commencing on December 1, 2011, and on the 1st day of
each month thereafter;

(b) If Lender at any time obtains an appraisal of the Borrowers’ Equipment the
value of which was used to determine the amount of the Term Advance (the
“Subject Equipment”) as permitted under Section 6.9(d) herein, and the appraisal
shows the aggregate outstanding principal balance of the Term Note to exceed one
hundred percent (100%) of the Net Forced Liquidation Value of the Subject
Equipment, then the Borrowers, upon demand by Lender, shall in Lender’s
discretion either make additional monthly principal payments in an amount equal
to the amount of such excess divided by twelve (12) months, or immediately
prepay the Term Note in the amount of such excess, in each case together with
any prepayment or contracted funds breakage fee due pursuant to Section 2.8;

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

(d) On the Termination Date, the entire unpaid principal balance of the Term
Note, and all unpaid interest accrued thereon, shall in any event be due and
payable.

3. Amendment of Section 6.2(a). Section 6.2(a) of the Credit Agreement shall be
amended to read as follows:

Section 6.2 Financial Covenants.

(a) Stop Loss. The Borrowers will not incur a Net Loss during any fiscal
year-to-date period, as determined as of the end of each fiscal month ending on
or after January 31, 2012, in excess of Two Hundred Fifty Thousand Dollars
($250,000).

(b) Capital Expenditures. The Borrowers collectively, will not incur or contract
to incur Capital Expenditures of more than Six Hundred Thousand Dollars
($600,000) during any fiscal year ending on or after December 31, 2011.

(c) Fixed Charge Coverage Ratio. The Borrowers will maintain a Fixed Charge
Coverage Ratio of not less than 1.1 to 1.0 as of the end of each fiscal month
for the twelve (12) months then ended, commencing with the fiscal month ending
March 31, 2012.

(d) Minimum Net Income. For the fiscal year ending on December 31, 2011, the
Borrowers will achieve during such year Net Income of not less than the Five
Hundred Thousand Dollars ($500,000).

4. Extension and Amendment of Subordinated Debt. The Borrowers have advised the
Lender that (i) each of BDeWees, Inc. and XGen III, Ltd. (the “3D Subordinated
Creditors”) have agreed to extend the terms of their respective notes receivable
from MIS and MISCOR pursuant to the terms of those certain Loan Extension and
Modification Agreements dated as of the date

 

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hereof between each of the 3D Subordinated Creditors and the Borrowers and a
Second Amended and Restated Promissory Note (Secured by Personal Property) dated
as of the date hereof in the original principal amount of $2,000,000.00 issued
to each of the 3D Subordinated Creditors thereunder, in the forms attached
hereto as Exhibit B -1 (the “3D Modification Agreements”) and (ii) John Martell
(“Martell” and together with the 3D Subordinated Creditors, the “Subordinated
Creditors”) has agreed to extend the terms of his note receivable from MIS and
MISCOR pursuant to the terms of that certain Mutual Release dated November 30,
2011 among John and Bonnie Martell, Martell Electric, LLC, and Ideal
Consolidated, Inc. (the “Martell Parties”) and MISCOR and an Amended Promissory
Note (Secured) dated as of the date hereof in the original principal amount of
$1,680,094.60 issued to Martell thereunder, in the forms attached hereto as
Exhibit B-2 (the “Martell Modification Agreements” and together with the 3D
Modification Agreements, the “Modification Agreements”). Lender hereby consents
to the terms of the Modification Agreements, provided the Subordinated Creditors
enter into Subordination Agreements in favor of Lender, all on terms acceptable
to the Lender in its sole discretion.

5. Amendment of Notice Information. The Credit Agreement is further amended by
amending the notice information set forth on the signature pages to the Credit
Agreement for both the Borrowers and the Lender, as follows:

MISCOR Group, Ltd.

800 Nave Road SE

Massillon, Ohio 44646

Telecopier: 330/830-3522

Attention: Michael Moore

e-mail: mmoore@magnetech.com

Wells Fargo Bank, National Association

MAC N2814-220

150 South Wacker Drive, Suite 2200

Chicago, IL 60606-4204

Telecopier: 312/444-9423

Attention: Daniel J. Manella

e-mail: Daniel.J.Manella@wellsfargo.com

6. No Other Changes. Except as explicitly amended by this Amendment, all of the
terms and conditions of the Credit Agreement shall remain in full force and
effect and shall apply to any advance or letter of credit thereunder.

7. Accommodation Fee. The Borrowers shall pay to the Lender a fully earned,
non-refundable fee in the amount of Fifty Thousand Dollars ($50,000) in
consideration of the Lender’s execution of this Amendment.

8. Conditions Precedent. This Amendment shall be effective when the Lender shall
have received an executed original hereof, together with each of the following,
each in substance and form acceptable to the Lender in its sole discretion:

 

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(a) The replacement Term Note in the form of Exhibit A attached hereto duly
executed by the Borrowers (the “Replacement Note”).

(b) Subordination Agreements from the Subordinated Creditors, with regard to the
indebtedness of the Borrowers to the Subordinated Creditors as modified by the
Modification Agreements, all on terms acceptable to the Lender, duly executed by
each of such Subordinated Creditors.

(c) With respect to each Borrower, a Certificate of the Secretary of the
Borrower certifying as to (i) the resolutions of the board of directors or
manager, as applicable, of the Borrower approving the execution and delivery of
this Amendment and the Replacement Note, (ii) the fact that the Constituent
Documents of the Borrower, which were certified and delivered to the Lender
pursuant to the Certificate of Authority of the Borrower’s secretary issued in
connection with the original execution of the Credit Agreement, continue in full
force and effect and have not been amended or otherwise modified except as set
forth in the Certificate to be delivered, and (iii) certifying that the officers
and agents of the Borrower who have been previously certified to the Lender as
being authorized to sign and to act on behalf of the Borrower continue to be so
authorized or setting forth the sample signatures of each of the officers and
agents of the Borrower authorized to execute and deliver this Amendment and all
other documents, agreements and certificates on behalf of the Borrower.

(d) Such other matters as the Lender may require.

9. Representations and Warranties. Each Borrower (as to such Borrower) hereby
represents and warrants to the Lender as follows:

(a) The Borrower has all requisite power and authority to execute this Amendment
and the Replacement Note, and this Amendment and the Replacement Note have been
duly executed and delivered by the Borrower and constitutes the legal, valid and
binding obligations of the Borrower, enforceable in accordance with their terms.

(b) The execution, delivery and performance by the Borrower of this Amendment
and the Replacement Note have been duly authorized by all necessary action and
does not (i) require any authorization, consent or approval by any governmental
department, commission, board, bureau, agency or instrumentality, domestic or
foreign, (ii) violate any provision of any law, rule or regulation or of any
order, writ, injunction or decree presently in effect, having applicability to
the Borrower, or the Constituent Documents of the Borrower, or (iii) result in a
breach of or constitute a default under any indenture or loan or credit
agreement or any other agreement, lease or instrument to which the Borrower is a
party or by which it or its properties may be bound or affected.

(c) All of the representations and warranties contained in Article V of the
Credit Agreement are correct on and as of the date hereof as though made on and
as of such date, except to the extent that such representations and warranties
relate solely to an earlier date.

 

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10. References. All references in the Credit Agreement to “this Agreement” shall
be deemed to refer to the Credit Agreement as amended hereby; and any and all
references in the Security Documents to the Credit Agreement shall be deemed to
refer to the Credit Agreement as amended hereby.

11. No Waiver. The execution of this Amendment and the acceptance of all other
agreements and instruments related hereto shall not be deemed to be a waiver of
any Default or Event of Default under the Credit Agreement or a waiver of any
breach, default or event of default under any Security Document or other
document held by the Lender, whether or not known to the Lender and whether or
not existing on the date of this Amendment.

12. Release. Each Borrower hereby absolutely and unconditionally releases and
forever discharges the Lender, and any and all participants, parent
corporations, subsidiary corporations, affiliated corporations, insurers,
indemnitors, successors and assigns thereof, together with all of the present
and former directors, officers, agents and employees of any of the foregoing,
from any and all claims, demands or causes of action of any kind, nature or
description, whether arising in law or equity or upon contract or tort or under
any state or federal law or otherwise, which such Borrower had, now has or has
made claim to have against any such person for or by reason of any act,
omission, matter, cause or thing whatsoever arising from the beginning of time
to and including the date of this Amendment, whether such claims, demands and
causes of action are matured or unmatured or known or unknown.

13. Fees, Costs and Expenses. Each Borrower hereby reaffirms its agreement under
the Credit Agreement to pay or reimburse the Lender on demand for all costs and
expenses incurred by the Lender in connection with the Loan Documents, including
without limitation all reasonable fees and disbursements of legal counsel.
Without limiting the generality of the foregoing, the Borrowers specifically
agree to pay all reasonable fees and disbursements of counsel to the Lender for
the services performed by such counsel in connection with the preparation of
this Amendment and the documents and instruments incidental hereto. The Borrower
hereby agrees that the Lender may, at any time or from time to time in its sole
discretion and without further authorization by the Borrower, make a loan to the
Borrower under the Credit Agreement, or apply the proceeds of any loan, for the
purpose of paying any such fees, disbursements, costs and expenses.

14. Miscellaneous. This Amendment may be executed in any number of counterparts,
each of which when so executed and delivered shall be deemed an original and all
of which counterparts, taken together, shall constitute one and the same
instrument.

Signatures appear on following page

 

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IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly
executed as of the date first above written.

 

MISCOR GROUP, LTD.     WELLS FARGO BANK, NATIONAL ASSOCIATION By:          By: 
      Michael P. Moore, Chief Executive Officer       Daniel J. Manella, Vice
President MAGNETECH INDUSTRIAL SERVICES, INC.     By:             Michael P.
Moore, Chief Executive Officer       HK ENGINE COMPONENTS, LLC     By:          
  Michael P. Moore, Chief Executive Officer      

 

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Exhibit A

to Tenth Amendment to Credit and Security Agreement

TERM NOTE

 

$1,000,000.00    November 30, 2011

For value received, the undersigned, MISCOR GROUP, LTD., an Indiana corporation
(“MISCOR”), MAGNETECH INDUSTRIAL SERVICES, INC., an Indiana corporation (“MIS”),
and HK ENGINE COMPONENTS, LLC, an Indiana limited liability company (“HK” and
together with MISCOR and MIS, the “Borrowers” and each a “Borrower”), hereby
jointly and severally promise to pay to the order of WELLS FARGO BANK, NATIONAL
ASSOCIATION (the “Lender”), acting through its Wells Fargo Business Credit
operating division, on the Termination Date set forth in the Credit and Security
Agreement dated January 14, 2008, as amended, that was entered into by the
Lender and the Borrowers (as amended from time to time, the “Credit Agreement”),
at Lender’s office located at Milwaukee, Wisconsin, or at any other place
designated at any time by the holder hereof, in lawful money of the United
States of America and in immediately available funds, the principal sum of One
Million Dollars ($1,000,000) or the aggregate unpaid principal amount of the
Term Advance made by the Lender to the Borrowers under the Credit Agreement
together with interest on the principal amount hereunder remaining unpaid from
time to time, computed on the basis of the actual number of days elapsed and a
360-day year, from the date hereof until this Term Note is fully paid at the
rate from time to time in effect under the Credit Agreement.

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

The Borrowers hereby agree to pay all costs of collection, including reasonable
attorneys’ fees and legal expenses in the event this Term Note is not paid when
due, whether or not legal proceedings are commenced.

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

 

MISCOR GROUP, LTD. By:     Name:   Michael P. Moore Its:   Chief Executive
Officer MAGNETECH INDUSTRIAL SERVICES, INC. By:     Name:   Michael P. Moore
Its:   Chief Executive Officer HK ENGINE COMPONENTS, LLC By:     Name:   Michael
P. Moore Its:   Chief Executive Officer

 

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Exhibit B-1

to Tenth Amendment to Credit and Security Agreement

3D Modification Agreements

LOAN EXTENSION AND MODIFICATION AGREEMENT

THIS AGREEMENT, (“Agreement”) made on November 30, 2011, at Canton, Ohio, by and
among Magnetech Industrial Services, Inc. (“Magnetech”), an Indiana corporation,
and MISCOR Group, Ltd. (“MISCOR”), an Indiana corporation, both with an address
at 800 Nave Road, SE, Massillon, Ohio 44646 (collectively, “Borrowers”, and
sometimes individually a “Borrower”) and BDeWees, Inc. (“Lender”), an Ohio
corporation with an address at 6424 Selkirk Circle NW, Canton, Ohio 44718.

RECITALS:

A. On or about November 30, 2007, Borrowers and Lender closed on a transaction
(the “Transaction”) in which, among other things, Borrowers became indebted,
jointly and severally, to Lender in the amount of $2,000,000.00, as evidenced by
Borrowers’ promissory note dated November 30, 2007, for the principal amount of
$2,000,000.00, executed and delivered to Lender and payable to it or its order,
which contained additional terms and provisions, which such note was amended and
restated on December 1, 2010 (collectively, the “Note”).

B. Borrowers’ indebtedness to Lender as of the date hereof under all of the
terms of the Note is $2,000,000.00, plus any interest accrued on the Note since
Borrowers’ last payment of interest on the Note. Borrowers are not delinquent on
payment of interest.

C. As used in this Agreement, the term “Indebtedness” will mean Borrowers’
indebtedness to Lender under the Second Amended Note (defined herein) –
including principal, interest, and all other amounts which Borrowers now and in
the future may owe to Lender under the terms of the Second Amended Note –
together with any additional amounts Borrowers and either of them may owe now or
in the future to Lender pursuant to the terms of any of the other documents the
parties executed as a part of or in connection with the said closing of the
Transaction or as a part of the Loan Modification (defined below), including
this Agreement.

D. Borrowers wish to extend the time for Borrowers to repay the $2,000,000.00
presently owed to Lender in exchange for additional payments of principal, a
first priority interest in certain collateral (subject to the prior interests of
Wells Fargo Bank, National Association (“Wells Fargo”), and certain other
changes (the “Loan Modification”).

AGREEMENT:

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THEREFORE, in consideration of the foregoing and of the mutual agreements set
forth herein, the parties agree as follows:

1. Incorporation of Recitals. All of the recitals set forth above, including the
definitions, are incorporated herein by reference.

2. Second Amendment and Restatement of Note. The Note will be amended and
restated as set forth in the form of the Second Amended and Restated Promissory
Note, labeled as Exhibit A, attached and incorporated herein by reference (the
“Second Amended Note”).

3. Continued Effect of Intercreditor Agreement and Cross-Default. XGen III, Ltd.
(“XGen”), an Ohio limited liability company, was also a party to the Transaction
in 2007, received its own promissory note from Borrowers, entered into a
commercial security agreement to secure said note, and filed a UCC-1 financing
statement, just like Lender. In order to memorialize their respective rights and
obligations, Lender and XGen entered into an Intercreditor Agreement dated
November 30, 2007 (the “Intercreditor Agreement”). All provisions of the
Intercreditor Agreement shall remain in full force and effect notwithstanding
the Loan Modification; provided, however, that references in the Intercreditor
Agreement to the BDeWees Note, the BDeWees Security Agreement, the XGen Note,
and the XGen Security Agreement will now refer to, respectively, the Second
Amended Note, the XGen Note as amended in connection with loan modifications
identical to those for Lender (XGen’s own loan extension and modification
agreement with Borrowers, which contains those identical modifications, will
sometimes be referred to herein as the “XGen Loan Modification”) and the BDeWees
Security Agreement and the XGen Security Agreement, respectively, as amended.
Any default under any one of the following four documents – the Second Amended
Note, the BDeWees Security Agreement, as amended, the XGen Note as amended in
connection with the XGen Loan Modification, and the XGen Security Agreement, as
amended – shall also constitute a default under the remaining three of those
documents.

4. Special Repayments Expected to Reduce Principal Payments. As a part of the
Loan Modifications, Borrowers and Lender further agree that Borrowers shall be
required to make certain extra payments of principal to Lender on the Second
Amended Note (each a “Special Repayment”) as follows:

(a) Scheduled Special Repayments. Borrowers shall make Special Repayments on the
dates and in the amounts set forth below:

(i) November 30, 2011- $316,666;

(ii) December 29, 2011- $300,000; and

(iii) No later than June 30, 2012- $250,000.

 

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In addition to the Special Payments set forth in this subsection (a), Borrowers
shall make regularly scheduled payments as more fully set forth in the Second
Amended Note.

(b) Additional Special Repayment. An additional Special Repayment shall be owed
in the circumstances described below.

“Change in Control”. At any time there is a Change of Control (as defined in
this paragraph) of a Borrower as a result of or contemporaneously with an
exchange or issuance of securities to one or more persons, Borrowers will be
required to pay the then remaining principal balance (plus all then accrued but
unpaid interest) under the Second Amended Note. For purposes of this Agreement,
the term “Change in Control” shall mean a situation (whether occasioned by
issuance, sales, or transfers of a Borrower’s securities or by any merger,
consolidation, recapitalization, reorganization, or other transaction involving
a Borrower) in which: (A) for Magnetech, MISCOR no longer holds record or
beneficial ownership of more than fifty percent (50%) of Magnetech’s outstanding
capital stock and/or no longer possesses the voting power to elect directly a
majority of Magnetech’s board of directors; and (B) for MISCOR, any person,
company or organization, not a five percent (5%) or more shareholder as of the
date of this Agreement, acquires record beneficial ownership of more than fifty
percent (50%) of MISCOR’s outstanding capital stock.

(c) Application and Effect of Special Repayment. Any Special Repayment shall be
applied to reduce outstanding principal on the Second Amended Note; provided,
however, that if Borrowers are at that time delinquent in any installment
payment or other amount then owed under the Second Amended Note, the Special
Repayment will be applied first to satisfy the delinquency and the balance, if
any, will be applied to reduce outstanding principal. Nothing in this Agreement
or in the Second Amended Note will be deemed to prevent or excuse any
delinquency in making installment payments under the Second Amended Note, nor
will any Special Repayment be deemed any type of prepayment of one or more
monthly installment payments under the Second Amended Note. Except as expressly
provided above in this subsection (iv), each Special Repayment shall be applied
to principal payments in the inverse order of their due date.

Notwithstanding the foregoing, Lender acknowledges that payment of the foregoing
Special Repayments shall be subject to the terms of a Subordination Agreement in
favor of Wells Fargo.

5. Lender’s Consent for Additional Indebtedness. Neither Borrower shall incur
additional indebtedness in excess of the Permitted Indebtedness without the
written consent of

 

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Lender given in advance which Lender may grant or withhold in the exercise of
its sole discretion. For purposes of this Agreement the term “Permitted
Indebtedness” shall mean (a) amounts owed from time to time to Wells Fargo
pursuant to its revolving and term loan facility (including any obligations
pursuant to letters of credit issued thereunder) in the maximum aggregate amount
of $6,000,000, (b) existing notes and capital leases with (i) Centier in the
amount of $103,697, (ii) Freeman-Spicer in the amount of $100,671 and
(iii) Visalia Equipment Lease in the amount of $868,279, (d) amounts owed to
John A. Martell (“Martell”) in the amount of $2,078,841, (e) certain
miscellaneous other capital leases in the amount of $18,778 and (f) indebtedness
incurred for capital expenditures that do not exceed $100,000 in the aggregate
per calendar year and is secured only by the capital asset acquired with the
indebtedness.

Notwithstanding anything to the contrary, neither Borrower shall make any
scheduled payment or prepayment of principal to Martell on account of loans or
other extensions of credit or any other financial accommodations or payment to
Martell (other than for reasonable compensation for services provided to a
Borrower, including reasonable expenses), excepts as follows:

 

  (A) $316,666 payment of principal on November __, 2011;

 

  (B) $120,000 payment of principal on December 29, 2011;

 

  (C) $250,000 payment of principal, no later than June 30, 2012; and

 

  (D) Commencing January 1, 2012, monthly payments of principal of $7,500 a
month, increasing to $12,500 a month on January 1, 2013.

6. Effective Date. This Agreement shall be effective as of the date all of the
following conditions precedent have been met, in the sole discretion of Lender:

 

  (a)

Borrowers shall have provided copies of the executed loan documents among
Borrowers and Martell, reflecting (i) the payment schedule set forth in
Paragraph 5 above, (ii) a maturity date no earlier than October 31, 2013,
(iii) an interest rate of (A) the Prime Rate plus two percent (2%), with a
minimum interest rate of seven and one half of one percent (7 1/2%) through
February 28, 2013, and (B) the Prime Rate plus two percent (2%), with a minimum
interest rate of nine and one half of one percent (9 1/2%) commencing March 1,
2013 and thereafter, and (iv) no prior security interest in Lender’s Collateral.

 

  (b)

Borrowers shall have provided copies of the executed loan documents (including
all amendments) among Borrowers and Wells Fargo, reflecting (A) a maximum
borrowing amount of $6,000,000, (b) consent to the indebtedness to Lender, and
(c) except as otherwise provided in Lender’s Subordination Agreement in favor of
Wells Fargo, no prohibition on Lender’s ability to enforce its rights against

 

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Lender’s Collateral or ability to receive, for its sole benefit, proceeds from
enforcement against Lender’s Collateral.

 

  (c) Borrowers shall have provided evidence to Lender that Lender has a second
priority lien on Lender’s Collateral consisting of:

(i) All of Magnetech’s machinery, equipment, tools and dies, hand tools, motor
vehicles, rolling stock, leasehold improvements, furniture, supplies, office
equipment, computers and other data processing hardware, improvements, parts and
other tangible personal property used or held for use in the operation of
Magnetech (but only that which is located at Magnetech’s Massillon Site or which
is used at or in connection with or arises from the operation of or otherwise
pertains to Magnetech’s business at its Massillon Site), whether now existing or
hereafter arising, whether now owned or hereafter acquired or whether now or
hereafter subject to any rights in the foregoing property; and

(ii) All of Magnetech’s inventory (but only that which is located at Magnetech’s
Massillon Site or which is used at or in connection with or arises from the
operation of or otherwise pertains to Magnetech’s business at its Massillon
Site), (“Inventory”), now owned and hereafter acquired, including, but not
limited to, all raw materials, work-in-process, parts, finished goods,
merchandise, and other personal property held for sale or lease or to be
furnished under a contract of service for Magnetech’s own account and all
replacements, improvements, substitutions, attachments, accessories, and
accessions thereon or thereto;

(iii) All of Magnetech’s receivables (but only that which is located at
Magnetech’s Massillon Site or which is used at or in connection with or arises
from the operation of or otherwise pertains to Magnetech’s business at its
Massillon Site), (“Receivables”), now existing and hereafter coming into
existence, including, but not limited to, accounts, contract rights, chattel
paper, notes, drafts, acceptances, and other forms of receivables;

(each as more fully set forth in the Security Agreement).

7. Governing Law; Jurisdiction. This Agreement shall be construed in accordance
with the laws of the State of Ohio without regard to principles of conflict of
laws. Any action or suit commended by any of the parties hereto concerning this
Agreement shall be commenced and maintained in a court of competent jurisdiction
located in the State of Ohio.

8. Release of Claims. In consideration of this Agreement, each Borrower hereby
releases and discharges Lender and its respective shareholders, directors,
member, officers, managers, employees, attorneys, affiliates and subsidiaries
from any and all claims, demands, liability and causes of action whatsoever, now
known or unknown, arising prior to the date hereof

 

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out of or in any way related to the extension or administration of the
Indebtedness of Borrowers or any security interest related thereto.

9. No Set-Offs. Borrowers hereby declare that to the best of their knowledge, no
Borrower has any set offs, counterclaims, defenses or other causes of action
against Lender.

10. Counterparts; Facsimile. This Agreement may be executed in counterparts and
all such counterparts shall constitute one agreement binding on all the parties,
notwithstanding that the parties are not signatories to the same counterpart.
The parties may execute this Agreement by facsimile or e-mail PDF, and all such
facsimiles or e-mail PDF signatures shall have the same force and effect as
manual signatures delivered in person.

11. Fees and Expenses. Borrowers hereby agree, jointly and severally, to
reimburse Lender for its reasonable out-of-pocket costs, fees and expenses
incurred in connection with this Agreement and all exhibits related hereto,
including, without limitation, reasonable attorneys’ fees.

12. Representations and Warranties. Each Borrower hereby represents and warrants
to Lender that: (a) such Borrower has the legal power and authority to execute
and delivery this Agreement; (b) the officials executing this Agreement have
been duly authorized to execute and deliver the same and bind such Borrower with
respect to the provisions hereof; (c) the execution and delivery hereof by such
Borrower and the performance and observance by such Borrower of the provisions
hereof do not violate or conflict with the organizational documents and
agreements of such Borrower or any law applicable to such Borrower or result in
a breach of any provisions of or constitute a default under any other agreement,
instrument, or document binding upon or enforceable against such Borrower or its
properties; and (d) this Agreement constitutes a valid and binding obligation
upon such Borrower in every respect.

13. Controlling Effect. The provisions of this Agreement (including those
provisions incorporated herein by reference) shall apply to, and control in the
event of any conflict with or ambiguity in, any and all of the documents
referred to or incorporated by reference in this Agreement.

IN WITNESS WHEREOF, the parties have caused their duly authorized officers to
execute this Agreement in multiple counterparts at the place and effective as of
the date set forth at the outset.

 

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MAGNETECH INDUSTRIAL SERVICES, INC.,

an Indiana corporation

By:       Name:   Michael P. Moore   Title:   President & CEO

 

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MISCOR Group, Ltd, an Indiana corporation By:       Name:   Michael P. Moore  
Title:   President & CEO BDeWees, Inc., an Ohio corporation By:       Bernard L.
DeWees, its President  

 

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CONSENT OF XGEN III, LTD.

Pursuant to Section 4 of the Intercreditor Agreement (defined above), XGen III,
Ltd. hereby gives its advance written consent to the provisions contained in and
referred to in the foregoing Agreement.

Executed at _____________________, Ohio, on November __, 2011, by a duly
authorized officer of XGen III, Ltd.

 

XGen III, Ltd., an Ohio limited liability company By:       Thomas J. Embrescia,
its President

 

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THIS INSTRUMENT IS SUBJECT TO THE TERMS OF A SUBORDINATION AGREEMENT BY BDEWEES,
INC. AND XGEN III, LTD. IN FAVOR OF WELLS FARGO BANK, NATIONAL ASSOCIATION,
ACTING THROUGH ITS WELLS FARGO BUSINESS CREDIT OPERATING DIVISION, DATED AS OF
NOVEMBER 30, 2011.

SECOND AMENDED AND RESTATED

PROMISSORY NOTE

(SECURED BY PERSONAL PROPERTY)

Date of Note: November 30, 2007

Amendment: December 1, 2010

Principal Amount: $2,000,000.00 Second Amendment: November 30, 2011 (the “Second
Amendment Date”)

This Note amends and restates the original promissory note dated November 30,
2007, as amended and restated on December 1, 2010, in the original principal
amount of $2,000,000.00 made by Magnetech Industrial Services, Inc., an Indiana
corporation, and MISCOR Group, Ltd., an Indiana corporation, both with an
address at 800 Nave Road SE, Massillon, Ohio 44646 (collectively “Borrowers”),
and delivered to BDeWees, Inc., an Ohio corporation, (“Lender”) with an address
at 6424 Selkirk Circle NW, Canton, Ohio 44718.

PROMISE TO PAY. Borrowers, jointly and severally, promise to pay Lender, or
order, in lawful money of the United States of America, the principal amount of
Two Million Dollars ($2,000,000.00), together with interest on the unpaid
principal balance from November 30, 2007, until paid in full.

PAYMENT. Borrowers will pay regular monthly payments of all accrued unpaid
interest to date, with the first such payment beginning January 1, 2008, and
with all subsequent interest payments to be due on the same day of each
successive month thereafter.

 

  (a) Beginning on January 1, 2012 and through and including December 1, 2012,
each monthly payment will consist of a principal payment of $10,000.00, plus all
unpaid interest accrued to the date of such installment payment.

 

  (b) Beginning on January 1, 2013, each monthly payment will consist of a
principal payment of $15,000.00, plus all unpaid interest accrued to the date of
such installment payment.

 

  (c) Borrowers’ final payment on this Note, due on August 1, 2013, will be a
balloon payment equal to the outstanding principal balance of this Note and all
unpaid interest having accrued to date.

Interest accruing on this Note for any given period is computed on the basis of
a 360-day year; that is, by dividing the annual interest rate by a year of
360-days, multiplied by the outstanding principal balance, multiplied by the
actual number of days within the given period (not to exceed the number of days
in which the amount of the outstanding principal balance remained the same).
Borrowers will pay Lender at 6424 Selkirk Circle NW, Canton, Ohio 44718 or at
such other place as Lender may designate in writing.

VARIABLE INTEREST RATE. (a) Beginning on the day after the Second Amendment Date
through June 30, 2012, the interest rate on this Note shall be the Index Rate
plus six percentage points, but shall not be less than ten and one half of one
percent (10 1/2%) per annum without compounding, and (b) commencing July 1, 2012
and thereafter, the interest rate on this Note shall be the Index Rate plus nine
percentage

 

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points, but shall not be less than nineteen percent (19%) per annum without
compounding. Under no circumstances will the interest rate on this Note be more
than the maximum rate allowed by applicable law.

“Index Rate” means the prime rate published by The Wall Street Journal, and if
that rate is not available for any reason, then the prime rate announced by
Charter One Bank, Cleveland, Ohio (“Bank”) from time to time which is not
necessarily the lowest rate charged by Bank on its loans and is set by Bank in
its sole discretion. If the Index Rate becomes unavailable during the term of
this Note, Lender may designate a substitute index from a comparable financial
institution in the Cleveland, Ohio, area after notifying Borrowers.

PREPAYMENT. Borrowers may pay without penalty all or a portion of the amount
owed earlier than it is due. Early payments will not, unless agreed to by Lender
in writing, relieve Borrowers of Borrowers’ obligations to continue to make the
monthly payments described above. Rather, early payments will reduce the
principal balance due. Borrowers agree not to send Lender payments marked “paid
in full”, “without recourse”, or similar language. If Borrowers send such a
payment, Lender may accept it without losing any of Lender’s rights under this
Note, and Borrowers will remain obligated to pay any further amount owed to
Lender. All written communications concerning disputed amounts, including any
check or other payment instrument which indicates that the payment constitutes
“payment in full” of the amount owed or which is tendered with other conditions
or limitations or as full satisfaction of a disputed amount must be mailed or
delivered to: BDeWees, Inc., 6424 Selkirk Circle NW, Canton, Ohio 44718.

LATE CHARGE. If a payment is 7 days or more late, Borrowers will be charged
10.000% of the unpaid portion of the regularly scheduled payment.

INTEREST AFTER DEFAULT. Upon an Event of Default, including (a) failure to make
any principal payments pursuant to that certain Loan Extension and Modification
Agreement, dated November 30, 2011, among Borrowers and Lender (the
“Modification Agreement”), and (b) timely payment upon final maturity, Lender,
at its option, may, if permitted under applicable law, increase the variable
interest rate on this Note to five (5) percentage points over the then
applicable interest rate. The interest rate will not exceed the maximum rate
permitted by applicable law.

DEFAULT. Each of the following shall constitute an event of default (“Event of
Default”) under this Note:

Payment Default. Borrowers fail to make any payment in full when due under this
Note.

Other Defaults. Borrowers fail to comply with or to perform any other term,
obligation, covenant or condition contained in this Note or to comply with or to
perform any term, obligation, covenant or condition contained in any other
agreement between Lender and one or both Borrowers (including without limitation
the Modification Agreement) or on any agreement by and between Lender and 3-D
Service, Ltd (“3-D”) or contained in any note made by Borrowers to XGen III,
Ltd., an Ohio limited liability company (“XGen”) or in any agreement between
XGen and any one or both Borrowers or in any agreement between XGen and 3-D.

Cure Provisions. If any default, other than a default in payment is curable, it
may be cured (and no event of default will have occurred) if Borrowers, after
receiving written notice from Lender demanding cure of such default cure the
default within thirty (30) days.

LENDER’S RIGHTS. Upon an Event of Default, Lender may declare the entire unpaid
principal balance on this Note and all accrued unpaid interest immediately due
and payable, and then Borrowers will pay that

 

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amount. Lender’s rights are subject to the provisions of an Intercreditor
Agreement dated November 30, 2007, by and between Lender and XGen.

SECURITY. This Note is secured in accordance with the provisions of a security
agreement between Lender and 3-D dated November 30, 2007, as amended, by 3-D’s
successor in interest by merger, Magnetech Industrial Services, Inc.
(“Magnetech”), as well as in accordance with the provisions of other security
agreements between Lender and Magnetech now or hereafter entered into.

ATTORNEYS’ FEES; EXPENSES. Lender may hire or pay someone else to help collect
this Note if Borrowers do not pay. Borrowers will pay Lender the costs for
collection efforts. This includes, subject to any limits under applicable law,
Lender’s attorneys’ fees and Lender’s legal expenses, whether or not there is a
lawsuit, including attorneys’ fees, expenses for bankruptcy proceedings
(including efforts to modify or vacate any automatic stay or injunction), and
appeals. If not prohibited by applicable law, Borrowers also will pay any court
costs, in addition to all other sums provided by law. All of the amounts set
forth in this paragraph shall become part of the principal amount due and owing
under this Note, and as such shall bear interest hereunder until paid in full.
Nevertheless, if Borrowers are prevailing parties in any claim or lawsuit
between Borrowers and Lender regarding this Note, then Borrowers shall not owe
Lender any fees or expenses and, instead, Lender shall reimburse Borrowers for
the attorneys fees and expenses they incur in such action.

GOVERNING LAW. This Note will be governed by, construed and enforced in
accordance with federal law and the laws of the State of Ohio. This Note has
been made and entered into in the State of Ohio. Borrowers consent to personal
jurisdiction in the courts in the State of Ohio.

SUCCESSOR INTERESTS. The terms of this Note shall be binding upon Borrowers, and
upon Borrowers’ successors and assigns, and shall inure to the benefit of Lender
and its successors and assigns.

GENERAL PROVISIONS. If any part of this Note cannot be enforced, this fact will
not affect the rest of the Note. Borrowers do not agree or intend to pay, and
Lender does not agree or intend to contract for, charge, collect, take, reserve
or receive (collectively referred to herein as “charge or collect”), any amount
in the nature of interest or in the nature of a fee for this loan, which would
in any way or event (including demand, prepayment, or acceleration) cause Lender
to charge or collect more for this loan than the maximum Lender would be
permitted to charge or collect by federal law or the law of the State of Ohio
(as applicable). Any such excess interest or unauthorized fee shall, instead of
anything stated to the contrary, be applied first to reduce the principal
balance of this Note, and when the principal has been paid in full, be refunded
to Borrowers. Lender may delay or forgo enforcing any of its rights or remedies
under this Note without losing them. No single or partial exercise of any right,
power or remedy of Lender shall preclude the exercise of any other right, power
or remedy. Borrowers and any other person who signs, guarantees or endorses this
Note, to the extent allowed by law, waives presentment, demand for payment, and
notice of dishonor. The records of Lender shall constitute presumptive evidence
of the amounts owing under this Note. Upon any change in the terms of this Note,
and unless otherwise expressly stated in writing, no party who signs this Note,
whether as maker, guarantor, accommodation maker or endorser, shall be released
from liability. All such parties agree that Lender may renew or extend
(repeatedly and for any length of time) this Note or release any party or
guarantor collateral; or impair, fail to realize upon or perfect Lender’s
security interest in the collateral; and take any other action deemed necessary
by Lender without the consent of or notice to anyone. Borrowers, and all
endorsers of this Note, hereby waive all acts on the part of the Lender or
holder of this Note required in fixing Borrowers’ liability hereunder,
including,

 

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without limitation, presentment, demand, notice of dishonor, protest, and notice
of non-payment and protest, and any other notice whatsoever, and further waive
any default by reason of extension of time for payment or any other indulgence
or forbearance granted to Borrowers or endorser hereof..

Borrowers hereby acknowledge that the proceeds of this Note have been used for
business purposes and not for consumer, family or household purposes.

CONFESSION OF JUDGMENT. Each of the Borrowers authorizes any attorney of record
to appear for it in any court of record in the State of Ohio, after an
obligation becomes due and payable whether by its terms or upon default, waive
the issuance and service of process, and release all errors, and confess a
judgment against it in favor of the holder of such obligation, for the principal
amount of such obligation plus interest thereon, together with court costs and
attorneys’ fees. Stay of execution and all exemptions are hereby waived. If any
obligation is referred to an attorney for collection, and the payment is
obtained without the entry of a judgment, the obligors shall pay to the holder
of such obligation its attorneys’ fees.

PRIOR TO SIGNING THIS NOTE, BORROWERS READ AND UNDERSTOOD ALL THE PROVISIONS OF
THIS NOTE, INCLUDING THE VARIABLE INTEREST RATE PROVISIONS. BORROWERS AGREE TO
THE TERMS OF THE NOTE.

BORROWERS ACKNOWLEDGE RECEIPT OF A COMPLETED COPY OF THIS PROMISSORY NOTE.

 

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BORROWERS:

 

   MAGNETECH INDUSTRIAL SERVICES, INC.            

By:______________________________________

Its:______________________________________

WARNING – BY SIGNING THIS PAPER YOU GIVE UP YOUR RIGHT TO NOTICE AND COURT
TRIAL. IF YOU DO NOT PAY ON TIME A COURT JUDGMENT MAY BE TAKEN AGAINST YOU
WITHOUT YOUR PRIOR KNOWLEDGE AND THE POWERS OF A COURT CAN BE USED TO COLLECT
FROM YOU REGARDLESS OF ANY CLAIMS YOU MAY HAVE AGAINST THE CREDITOR WHETHER FOR
RETURNED GOODS, FAULTY GOODS, FAILURE ON HIS PART TO COMPLY WITH THIS AGREEMENT,
OR ANY OTHER CAUSE.

 

   MISCOR GROUP, LTD.             

By:______________________________________

Its:______________________________________

WARNING – BY SIGNING THIS PAPER YOU GIVE UP YOUR RIGHT TO NOTICE AND COURT
TRIAL. IF YOU DO NOT PAY ON TIME A COURT JUDGMENT MAY BE TAKEN AGAINST YOU
WITHOUT YOUR PRIOR KNOWLEDGE AND THE POWERS OF A COURT CAN BE USED TO COLLECT
FROM YOU REGARDLESS OF ANY CLAIMS YOU MAY HAVE AGAINST THE CREDITOR WHETHER FOR
RETURNED GOODS, FAULTY GOODS, FAILURE ON HIS PART TO COMPLY WITH THIS AGREEMENT,
OR ANY OTHER CAUSE.

 

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LOAN EXTENSION AND MODIFICATION AGREEMENT

THIS AGREEMENT, (“Agreement”) made on November 30, 2011, at Canton, Ohio, by and
among Magnetech Industrial Services, Inc. (“Magnetech”), an Indiana corporation,
and MISCOR Group, Ltd. (“MISCOR”), an Indiana corporation, both with an address
at 800 Nave Road, SE, Massillon, Ohio 44646 (collectively, “Borrowers”, and
sometimes individually a “Borrower”) and XGen III, Ltd. (“Lender”), an Ohio
limited liability company with an address at 3029 Prospect Avenue, Cleveland,
Ohio 44115.

RECITALS:

E. On or about November 30, 2007, Borrowers and Lender closed on a transaction
(the “Transaction”) in which, among other things, Borrowers became indebted,
jointly and severally, to Lender in the amount of $2,000,000.00, as evidenced by
Borrowers’ promissory note dated November 30, 2007, for the principal amount of
$2,000,000.00, executed and delivered to Lender and payable to it or its order,
which contained additional terms and provisions, which such note was amended and
restated on December 1, 2010 (collectively, the “Note”).

F. Borrowers’ indebtedness to Lender as of the date hereof under all of the
terms of the Note is $2,000,000.00, plus any interest accrued on the Note since
Borrowers’ last payment of interest on the Note. Borrowers are not delinquent on
payment of interest.

G. As used in this Agreement, the term “Indebtedness” will mean Borrowers’
indebtedness to Lender under the Second Amended Note (defined herein) –
including principal, interest, and all other amounts which Borrowers now and in
the future may owe to Lender under the terms of the Second Amended Note –
together with any additional amounts Borrowers and either of them may owe now or
in the future to Lender pursuant to the terms of any of the other documents the
parties executed as a part of or in connection with the said closing of the
Transaction or as a part of the Loan Modification (defined below), including
this Agreement.

H. Borrowers wish to extend the time for Borrowers to repay the $2,000,000.00
presently owed to Lender in exchange for additional payments of principal, a
first priority interest in certain collateral (subject to the prior interests of
Wells Fargo Bank, National Association (“Wells Fargo”), and certain other
changes (the “Loan Modification”).

AGREEMENT:

THEREFORE, in consideration of the foregoing and of the mutual agreements set
forth herein, the parties agree as follows:

14. Incorporation of Recitals. All of the recitals set forth above, including
the definitions, are incorporated herein by reference.

 

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15. Second Amendment and Restatement of Note. The Note will be amended and
restated as set forth in the form of the Second Amended and Restated Promissory
Note, labeled as Exhibit A, attached and incorporated herein by reference (the
“Second Amended Note”).

16. Continued Effect of Intercreditor Agreement and Cross-Default. BDeWees, Inc.
(“BDeWees”), an Ohio corporation, was also a party to the Transaction in 2007,
received its own promissory note from Borrowers, entered into a commercial
security agreement to secure said note, and filed a UCC-1 financing statement,
just like Lender. In order to memorialize their respective rights and
obligations, Lender and BDeWees entered into an Intercreditor Agreement dated
November 30, 2007 (the “Intercreditor Agreement”). All provisions of the
Intercreditor Agreement shall remain in full force and effect notwithstanding
the Loan Modification; provided, however, that references in the Intercreditor
Agreement to the XGen Note, the XGen Security Agreement, the BDeWees Note, and
the BDeWees Security Agreement will now refer to, respectively, the Second
Amended Note, the BeDwees Note as amended in connection with loan modifications
identical to those for Lender (BDeWees’s own loan extension and modification
agreement with Borrowers, which contains those identical modifications, will
sometimes be referred to herein as the “BDeWees Loan Modification”) and the XGen
Security Agreement and the BDeWees Security Agreement, respectively, as amended.
Any default under any one of the following four documents – the Second Amended
Note, the XGen Security Agreement, as amended, the BDeWees Note as amended in
connection with the BDeWees Loan Modification, and the BDeWees Security
Agreement, as amended – shall also constitute a default under the remaining
three of those documents.

17. Special Repayments Expected to Reduce Principal Payments. As a part of the
Loan Modifications, Borrowers and Lender further agree that Borrowers shall be
required to make certain extra payments of principal to Lender on the Second
Amended Note (each a “Special Repayment”) as follows:

(a) Scheduled Special Repayments. Borrowers shall make Special Repayments on the
dates and in the amounts set forth below:

(i) November 30, 2011- $316,666;

(ii) December 29, 2011- $300,000; and

(iii) No later than June 30, 2012- $250,000.

In addition to the Special Payments set forth in this subsection (a), Borrowers
shall make regularly scheduled payments as more fully set forth in the Second
Amended Note.

 

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(b) Additional Special Repayment. An additional Special Repayment shall be owed
in the circumstances described below.

“Change in Control”. At any time there is a Change of Control (as defined in
this paragraph) of a Borrower as a result of or contemporaneously with an
exchange or issuance of securities to one or more persons, Borrowers will be
required to pay the then remaining principal balance (plus all then accrued but
unpaid interest) under the Second Amended Note. For purposes of this Agreement,
the term “Change in Control” shall mean a situation (whether occasioned by
issuance, sales, or transfers of a Borrower’s securities or by any merger,
consolidation, recapitalization, reorganization, or other transaction involving
a Borrower) in which: (A) for Magnetech, MISCOR no longer holds record or
beneficial ownership of more than fifty percent (50%) of Magnetech’s outstanding
capital stock and/or no longer possesses the voting power to elect directly a
majority of Magnetech’s board of directors; and (B) for MISCOR, any person,
company or organization, not a five percent (5%) or more shareholder as of the
date of this Agreement, acquires record beneficial ownership of more than fifty
percent (50%) of MISCOR’s outstanding capital stock.

(ci) Application and Effect of Special Repayment. Any Special Repayment shall be
applied to reduce outstanding principal on the Second Amended Note; provided,
however, that if Borrowers are at that time delinquent in any installment
payment or other amount then owed under the Second Amended Note, the Special
Repayment will be applied first to satisfy the delinquency and the balance, if
any, will be applied to reduce outstanding principal. Nothing in this Agreement
or in the Second Amended Note will be deemed to prevent or excuse any
delinquency in making installment payments under the Second Amended Note, nor
will any Special Repayment be deemed any type of prepayment of one or more
monthly installment payments under the Second Amended Note. Except as expressly
provided above in this subsection (iv), each Special Repayment shall be applied
to principal payments in the inverse order of their due date.

Notwithstanding the foregoing, Lender acknowledges that payment of the foregoing
Special Repayments shall be subject to the terms of a Subordination Agreement in
favor of Wells Fargo.

18. Lender’s Consent for Additional Indebtedness. Neither Borrower shall incur
additional indebtedness in excess of the Permitted Indebtedness without the
written consent of Lender given in advance which Lender may grant or withhold in
the exercise of its sole discretion. For purposes of this Agreement the term
“Permitted Indebtedness” shall mean (a) amounts owed from time to time to Wells
Fargo pursuant to its revolving and term loan facility (including any

 

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obligations pursuant to letters of credit issued thereunder) in the maximum
aggregate amount of $6,000,000, (b) existing notes and capital leases with
(i) Centier in the amount of $103,697, (ii) Freeman-Spicer in the amount of
$100,671 and (iii) Visalia Equipment Lease in the amount of $868,279,
(d) amounts owed to John A. Martell (“Martell”) in the amount of $2,078,841,
(e) certain miscellaneous other capital leases in the amount of $18,778 and
(f) indebtedness incurred for capital expenditures that do not exceed $100,000
in the aggregate per calendar year and is secured only by the capital asset
acquired with the indebtedness.

Notwithstanding anything to the contrary, neither Borrower shall make any
scheduled payment or prepayment of principal to Martell on account of loans or
other extensions of credit or any other financial accommodations or payment to
Martell (other than for reasonable compensation for services provided to a
Borrower, including reasonable expenses), excepts as follows:

 

  (A) $316,666 payment of principal on November __, 2011;

 

  (B) $120,000 payment of principal on December 29, 2011;

 

  (C) $250,000 payment of principal, no later than June 30, 2012; and

 

  (D) Commencing January 1, 2012, monthly payments of principal of $7,500 a
month, increasing to $12,500 a month on January 1, 2013.

19. Effective Date. This Agreement shall be effective as of the date all of the
following conditions precedent have been met, in the sole discretion of Lender:

 

  (d)

Borrowers shall have provided copies of the executed loan documents among
Borrowers and Martell, reflecting (i) the payment schedule set forth in
Paragraph 5 above, (ii) a maturity date no earlier than October 31, 2013,
(iii) an interest rate of (A) the Prime Rate plus two percent (2%), with a
minimum interest rate of seven and one half of one percent (7 1/2%) through
February 28, 2013 and (B) the Prime Rate plus two percent (2%), with a minimum
interest rate of nine and one half of one percent (9 1/2%) commencing March 1,
2013 and thereafter, and (iv) no prior security interest in Lender’s Collateral.

 

  (e) Borrowers shall have provided copies of the executed loan documents
(including all amendments) among Borrowers and Wells Fargo, reflecting (A) a
maximum borrowing amount of $6,000,000, (b) consent to the indebtedness to
Lender, and (c) except as otherwise provided in Lender’s Subordination Agreement
in favor of Wells Fargo, no prohibition on Lender’s ability to enforce its
rights against Lender’s Collateral or ability to receive, for its sole benefit,
proceeds from enforcement against Lender’s Collateral.

 

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  (f) Borrowers shall have provided evidence to Lender that Lender has a second
priority lien on Lender’s Collateral consisting of:

(i) All of Magnetech’s machinery, equipment, tools and dies, hand tools, motor
vehicles, rolling stock, leasehold improvements, furniture, supplies, office
equipment, computers and other data processing hardware, improvements, parts and
other tangible personal property used or held for use in the operation of
Magnetech (but only that which is located at Magnetech’s Massillon Site or which
is used at or in connection with or arises from the operation of or otherwise
pertains to Magnetech’s business at its Massillon Site), whether now existing or
hereafter arising, whether now owned or hereafter acquired or whether now or
hereafter subject to any rights in the foregoing property; and

(ii) All of Magnetech’s inventory (but only that which is located at Magnetech’s
Massillon Site or which is used at or in connection with or arises from the
operation of or otherwise pertains to Magnetech’s business at its Massillon
Site), (“Inventory”), now owned and hereafter acquired, including, but not
limited to, all raw materials, work-in-process, parts, finished goods,
merchandise, and other personal property held for sale or lease or to be
furnished under a contract of service for Magnetech’s own account and all
replacements, improvements, substitutions, attachments, accessories, and
accessions thereon or thereto;

(iii) All of Magnetech’s receivables (but only that which is located at
Magnetech’s Massillon Site or which is used at or in connection with or arises
from the operation of or otherwise pertains to Magnetech’s business at its
Massillon Site), (“Receivables”), now existing and hereafter coming into
existence, including, but not limited to, accounts, contract rights, chattel
paper, notes, drafts, acceptances, and other forms of receivables;

     (each as more fully set forth in the Security Agreement).

20. Governing Law; Jurisdiction. This Agreement shall be construed in accordance
with the laws of the State of Ohio without regard to principles of conflict of
laws. Any action or suit commended by any of the parties hereto concerning this
Agreement shall be commenced and maintained in a court of competent jurisdiction
located in the State of Ohio.

21. Release of Claims. In consideration of this Agreement, each Borrower hereby
releases and discharges Lender and its respective shareholders, directors,
member, officers, managers, employees, attorneys, affiliates and subsidiaries
from any and all claims, demands, liability and causes of action whatsoever, now
known or unknown, arising prior to the date hereof out of or in any way related
to the extension or administration of the Indebtedness of Borrowers or any
security interest related thereto.

 

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22. No Set-Offs. Borrowers hereby declare that to the best of their knowledge,
no Borrower has any set offs, counterclaims, defenses or other causes of action
against Lender.

23. Counterparts; Facsimile. This Agreement may be executed in counterparts and
all such counterparts shall constitute one agreement binding on all the parties,
notwithstanding that the parties are not signatories to the same counterpart.
The parties may execute this Agreement by facsimile or e-mail PDF, and all such
facsimiles or e-mail PDF signatures shall have the same force and effect as
manual signatures delivered in person.

24. Fees and Expenses. Borrowers hereby agree, jointly and severally, to
reimburse Lender for its reasonable out-of-pocket costs, fees and expenses
incurred in connection with this Agreement and all exhibits related hereto,
including, without limitation, reasonable attorneys’ fees.

25. Representations and Warranties. Each Borrower hereby represents and warrants
to Lender that: (a) such Borrower has the legal power and authority to execute
and delivery this Agreement; (b) the officials executing this Agreement have
been duly authorized to execute and deliver the same and bind such Borrower with
respect to the provisions hereof; (c) the execution and delivery hereof by such
Borrower and the performance and observance by such Borrower of the provisions
hereof do not violate or conflict with the organizational documents and
agreements of such Borrower or any law applicable to such Borrower or result in
a breach of any provisions of or constitute a default under any other agreement,
instrument, or document binding upon or enforceable against such Borrower or its
properties; and (d) this Agreement constitutes a valid and binding obligation
upon such Borrower in every respect.

26. Controlling Effect. The provisions of this Agreement (including those
provisions incorporated herein by reference) shall apply to, and control in the
event of any conflict with or ambiguity in, any and all of the documents
referred to or incorporated by reference in this Agreement.

IN WITNESS WHEREOF, the parties have caused their duly authorized officers to
execute this Agreement in multiple counterparts at the place and effective as of
the date set forth at the outset.

 

MAGNETECH INDUSTRIAL SERVICES, INC.,

an Indiana corporation

By:       Name:   Michael P. Moore   Title:   President & CEO

 

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MISCOR Group, Ltd, an Indiana corporation By:       Name:   Michael P. Moore  
Title:   President & CEO XGen III, Ltd., an Ohio limited liability company By:  
    Thomas J. Embrescia, its President

 

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CONSENT OF BDEWEES, INC.

Pursuant to Section 4 of the Intercreditor Agreement (defined above), BDeWees,
Inc. hereby gives its advance written consent to the provisions contained in and
referred to in the foregoing Agreement.

Executed at _____________________, Ohio, on November __, 2011, by a duly
authorized officer of BDeWees, Inc.

 

BDeWees, Inc., an Ohio corporation By:       Bernard L. DeWees, its President

 

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THIS INSTRUMENT IS SUBJECT TO THE TERMS OF A SUBORDINATION AGREEMENT BY BDEWEES,
INC. AND XGEN III, LTD. IN FAVOR OF WELLS FARGO BANK, NATIONAL ASSOCIATION,
ACTING THROUGH ITS WELLS FARGO BUSINESS CREDIT OPERATING DIVISION, DATED AS OF
NOVEMBER 30, 2011.

SECOND AMENDED AND RESTATED

PROMISSORY NOTE

(SECURED BY PERSONAL PROPERTY)

Date of Note: November 30, 2007

Amendment: December 1, 2010

Principal Amount: $2,000,000.00 Second Amendment: November 30, 2011 (the “Second
Amendment Date”)

This Note amends and restates the original promissory note dated November 30,
2007, as amended and restated on December 1, 2010, in the original principal
amount of $2,000,000.00 made by Magnetech Industrial Services, Inc., an Indiana
corporation, and MISCOR Group, Ltd., an Indiana corporation, both with an
address at 800 Nave Road SE, Massillon, Ohio 44646 (collectively “Borrowers”),
and delivered to XGen III, Ltd., an Ohio limited liability company, (“Lender”)
with an address at 3029 Prospect Ave, Cleveland, Ohio 44115.

PROMISE TO PAY. Borrowers, jointly and severally, promise to pay Lender, or
order, in lawful money of the United States of America, the principal amount of
Two Million Dollars ($2,000,000.00), together with interest on the unpaid
principal balance from November 30, 2007, until paid in full.

PAYMENT. Borrowers will pay regular monthly payments of all accrued unpaid
interest to date, with the first such payment beginning January 1, 2008, and
with all subsequent interest payments to be due on the same day of each
successive month thereafter.

 

  (d) Beginning on January 1, 2012 and through and including December 1, 2012,
each monthly payment will consist of a principal payment of $10,000.00, plus all
unpaid interest accrued to the date of such installment payment.

 

  (e) Beginning on January 1, 2013, each monthly payment will consist of a
principal payment of $15,000.00, plus all unpaid interest accrued to the date of
such installment payment.

 

  (f) Borrowers’ final payment on this Note, due on August 1, 2013, will be a
balloon payment equal to the outstanding principal balance of this Note and all
unpaid interest having accrued to date.

Interest accruing on this Note for any given period is computed on the basis of
a 360-day year; that is, by dividing the annual interest rate by a year of
360-days, multiplied by the outstanding principal balance, multiplied by the
actual number of days within the given period (not to exceed the number of days
in which the amount of the outstanding principal balance remained the same).
Borrowers will pay Lender at 3029 Prospect Ave, Cleveland, Ohio 44115 or at such
other place as Lender may designate in writing.

VARIABLE INTEREST RATE. (a) Beginning on the day after the Second Amendment Date
through June 30, 2012, the interest rate on this Note shall be the Index Rate
plus six percentage points, but shall not be less than ten and one half of one
percent (10 1/2%) per annum without compounding, and (b) commencing July 1, 2012
and thereafter, the interest rate on this Note shall be the Index Rate plus nine
percentage

 

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points, but shall not be less than nineteen percent (19%) per annum without
compounding. Under no circumstances will the interest rate on this Note be more
than the maximum rate allowed by applicable law.

“Index Rate” means the prime rate published by The Wall Street Journal, and if
that rate is not available for any reason, then the prime rate announced by
Charter One Bank, Cleveland, Ohio (“Bank”) from time to time which is not
necessarily the lowest rate charged by Bank on its loans and is set by Bank in
its sole discretion. If the Index Rate becomes unavailable during the term of
this Note, Lender may designate a substitute index from a comparable financial
institution in the Cleveland, Ohio, area after notifying Borrowers.

PREPAYMENT. Borrowers may pay without penalty all or a portion of the amount
owed earlier than it is due. Early payments will not, unless agreed to by Lender
in writing, relieve Borrowers of Borrowers’ obligations to continue to make the
monthly payments described above. Rather, early payments will reduce the
principal balance due. Borrowers agree not to send Lender payments marked “paid
in full”, “without recourse”, or similar language. If Borrowers send such a
payment, Lender may accept it without losing any of Lender’s rights under this
Note, and Borrowers will remain obligated to pay any further amount owed to
Lender. All written communications concerning disputed amounts, including any
check or other payment instrument which indicates that the payment constitutes
“payment in full” of the amount owed or which is tendered with other conditions
or limitations or as full satisfaction of a disputed amount must be mailed or
delivered to: XGen III, Ltd., 3029 Prospect Ave, Cleveland, Ohio 44115.

LATE CHARGE. If a payment is 7 days or more late, Borrowers will be charged
10.000% of the unpaid portion of the regularly scheduled payment.

INTEREST AFTER DEFAULT. Upon an Event of Default, including (a) failure to make
any principal payments pursuant to that certain Loan Extension and Modification
Agreement, dated November 30, 2011, among Borrowers and Lender (the
“Modification Agreement”), and (b) timely payment upon final maturity, Lender,
at its option, may, if permitted under applicable law, increase the variable
interest rate on this Note to five (5) percentage points over the then
applicable interest rate. The interest rate will not exceed the maximum rate
permitted by applicable law.

DEFAULT. Each of the following shall constitute an event of default (“Event of
Default”) under this Note:

Payment Default. Borrowers fail to make any payment in full when due under this
Note.

Other Defaults. Borrowers fail to comply with or to perform any other term,
obligation, covenant or condition contained in this Note or to comply with or to
perform any term, obligation, covenant or condition contained in any other
agreement between Lender and one or both Borrowers (including without limitation
the Modification Agreement) or on any agreement by and between Lender and 3-D
Service, Ltd (“3-D”) or contained in any note by Borrowers to BDeWees, Inc., an
Ohio corporation (“BDeWees”) or in any agreement between BDeWees and any one or
both Borrowers or in any agreement between BDeWees and 3-D.

Cure Provisions. If any default, other than a default in payment is curable, it
may be cured (and no event of default will have occurred) if Borrowers, after
receiving written notice from Lender demanding cure of such default cure the
default within thirty (30) days.

LENDER’S RIGHTS. Upon an Event of Default, Lender may declare the entire unpaid
principal balance on this Note and all accrued unpaid interest immediately due
and payable, and then Borrowers will pay that

 

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amount. Lender’s rights are subject to the provisions of an Intercreditor
Agreement dated November 30, 2007, by and between Lender and BDeWees.

SECURITY. This Note is secured in accordance with the provisions of a security
agreement between Lender and 3-D dated November 30, 2007, as amended, by 3-D’s
successor in interest by merger, Magnetech Industrial Services, Inc.
(“Magnetech”), as well as in accordance with the provisions of other security
agreements between Lender and Magnetech now or hereafter entered into.

ATTORNEYS’ FEES; EXPENSES. Lender may hire or pay someone else to help collect
this Note if Borrowers do not pay. Borrowers will pay Lender the costs for
collection efforts. This includes, subject to any limits under applicable law,
Lender’s attorneys’ fees and Lender’s legal expenses, whether or not there is a
lawsuit, including attorneys’ fees, expenses for bankruptcy proceedings
(including efforts to modify or vacate any automatic stay or injunction), and
appeals. If not prohibited by applicable law, Borrowers also will pay any court
costs, in addition to all other sums provided by law. All of the amounts set
forth in this paragraph shall become part of the principal amount due and owing
under this Note, and as such shall bear interest hereunder until paid in full.
Nevertheless, if Borrowers are prevailing parties in any claim or lawsuit
between Borrowers and Lender regarding this Note, then Borrowers shall not owe
Lender any fees or expenses and, instead, Lender shall reimburse Borrowers for
the attorneys fees and expenses they incur in such action.

GOVERNING LAW. This Note will be governed by, construed and enforced in
accordance with federal law and the laws of the State of Ohio. This Note has
been made and entered into in the State of Ohio. Borrowers consent to personal
jurisdiction in the courts in the State of Ohio.

SUCCESSOR INTERESTS. The terms of this Note shall be binding upon Borrowers, and
upon Borrowers’ successors and assigns, and shall inure to the benefit of Lender
and its successors and assigns.

GENERAL PROVISIONS. If any part of this Note cannot be enforced, this fact will
not affect the rest of the Note. Borrowers do not agree or intend to pay, and
Lender does not agree or intend to contract for, charge, collect, take, reserve
or receive (collectively referred to herein as “charge or collect”), any amount
in the nature of interest or in the nature of a fee for this loan, which would
in any way or event (including demand, prepayment, or acceleration) cause Lender
to charge or collect more for this loan than the maximum Lender would be
permitted to charge or collect by federal law or the law of the State of Ohio
(as applicable). Any such excess interest or unauthorized fee shall, instead of
anything stated to the contrary, be applied first to reduce the principal
balance of this Note, and when the principal has been paid in full, be refunded
to Borrowers. Lender may delay or forgo enforcing any of its rights or remedies
under this Note without losing them. No single or partial exercise of any right,
power or remedy of Lender shall preclude the exercise of any other right, power
or remedy. Borrowers and any other person who signs, guarantees or endorses this
Note, to the extent allowed by law, waives presentment, demand for payment, and
notice of dishonor. The records of Lender shall constitute presumptive evidence
of the amounts owing under this Note. Upon any change in the terms of this Note,
and unless otherwise expressly stated in writing, no party who signs this Note,
whether as maker, guarantor, accommodation maker or endorser, shall be released
from liability. All such parties agree that Lender may renew or extend
(repeatedly and for any length of time) this Note or release any party or
guarantor collateral; or impair, fail to realize upon or perfect Lender’s
security interest in the collateral; and take any other action deemed necessary
by Lender without the consent of or notice to anyone. Borrowers, and all
endorsers of this Note, hereby waive all acts on the part of the Lender or
holder of this Note required in fixing Borrowers’ liability hereunder,
including,

 

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without limitation, presentment, demand, notice of dishonor, protest, and notice
of non-payment and protest, and any other notice whatsoever, and further waive
any default by reason of extension of time for payment or any other indulgence
or forbearance granted to Borrowers or endorser hereof..

Borrowers hereby acknowledge that the proceeds of this Note have been used for
business purposes and not for consumer, family or household purposes.

CONFESSION OF JUDGMENT. Each of the Borrowers authorizes any attorney of record
to appear for it in any court of record in the State of Ohio, after an
obligation becomes due and payable whether by its terms or upon default, waive
the issuance and service of process, and release all errors, and confess a
judgment against it in favor of the holder of such obligation, for the principal
amount of such obligation plus interest thereon, together with court costs and
attorneys’ fees. Stay of execution and all exemptions are hereby waived. If any
obligation is referred to an attorney for collection, and the payment is
obtained without the entry of a judgment, the obligors shall pay to the holder
of such obligation its attorneys’ fees.

PRIOR TO SIGNING THIS NOTE, BORROWERS READ AND UNDERSTOOD ALL THE PROVISIONS OF
THIS NOTE, INCLUDING THE VARIABLE INTEREST RATE PROVISIONS. BORROWERS AGREE TO
THE TERMS OF THE NOTE.

BORROWERS ACKNOWLEDGE RECEIPT OF A COMPLETED COPY OF THIS PROMISSORY NOTE.

 

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BORROWERS:

 

   MAGNETECH INDUSTRIAL SERVICES, INC.             

By:______________________________________

Its:______________________________________

WARNING – BY SIGNING THIS PAPER YOU GIVE UP YOUR RIGHT TO NOTICE AND COURT
TRIAL. IF YOU DO NOT PAY ON TIME A COURT JUDGMENT MAY BE TAKEN AGAINST YOU
WITHOUT YOUR PRIOR KNOWLEDGE AND THE POWERS OF A COURT CAN BE USED TO COLLECT
FROM YOU REGARDLESS OF ANY CLAIMS YOU MAY HAVE AGAINST THE CREDITOR WHETHER FOR
RETURNED GOODS, FAULTY GOODS, FAILURE ON HIS PART TO COMPLY WITH THIS AGREEMENT,
OR ANY OTHER CAUSE.

 

   MISCOR GROUP, LTD.             

By:______________________________________

Its:______________________________________

WARNING – BY SIGNING THIS PAPER YOU GIVE UP YOUR RIGHT TO NOTICE AND COURT
TRIAL. IF YOU DO NOT PAY ON TIME A COURT JUDGMENT MAY BE TAKEN AGAINST YOU
WITHOUT YOUR PRIOR KNOWLEDGE AND THE POWERS OF A COURT CAN BE USED TO COLLECT
FROM YOU REGARDLESS OF ANY CLAIMS YOU MAY HAVE AGAINST THE CREDITOR WHETHER FOR
RETURNED GOODS, FAULTY GOODS, FAILURE ON HIS PART TO COMPLY WITH THIS AGREEMENT,
OR ANY OTHER CAUSE.

 

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Exhibit B-2

to Tenth Amendment to Credit and Security Agreement

Martell Modification Agreements

MUTUAL RELEASE

This Mutual Release (the “Release”) is made by and among MISCOR GROUP, LTD., an
Indiana corporation (“MISCOR”), John A. Martell and Bonnie Martell (the
“Martells”), Martell Electric, LLC, an Indiana liability company (“Martell
Electric”), and Ideal Consolidated, Inc., an Indiana corporation (“Ideal
Consolidated”). The Martells, Martell Electric and Ideal Consolidated are called
the “Martell Parties.”

Recitals

A. The Martell Parties entered into a February 3, 2010 Purchase Agreement with
MISCOR (the “Agreement”). Among other things, the Agreement provided for the
sale from MISCOR to the Martells of Ideal Consolidated and Martell Electric.

B. A dispute arose between the Martell Parties and MISCOR concerning certain
terms and obligations under the Agreement. The primary disputed issue, from
which most of the other disputes flowed, was whether the amount of working
capital left by MISCOR in Martell Electric and Ideal Consolidated was too low.

C. The parties to this Agreement desire that all disputes presently existing
among them, including, without limitation, all disputes arising out of the
Agreement, be settled and that the parties be spared the trouble and expense of
litigation. They also mutually desire that all of the terms and conditions of
their compromise and settlement be and remain strictly confidential.

D. Simultaneous with the execution of this Release:

(1) MISCOR shall give the Martells the Amended Promissory Note, a copy of which
is attached as Exhibit A.

(2) The Martells shall deliver to MISCOR an executed subordination agreement
relating to MISCOR’s indebtedness to Wells Fargo Bank and BDeWees, Inc. and XGen
III, Ltd. The subordination agreements are attached

--------------------------------------------------------------------------------

as Exhibit B (Wells Fargo Bank) and Exhibit C (BDeWees, Inc. and XGen III,
Ltd.).

(3) MISCOR shall execute extensions of the leases for the facilities it leases
in Hammond, Indiana and Boardman, Ohio, as described in the Letter Agreement.

Agreement

In consideration of the matters set forth in the Recitals, the conditions and
terms of this Release, and other good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, the parties agree as follows:

1. Release by the Martell Parties. Upon payment of (a) the $316,666 principal
payment due under the Amended Promissory Note at MISCOR’S closing of its
refinancing with Wells Fargo Bank and, (b) the corrected interest payment due
for the period of time in 2010 when the amount of subdebt to the Martells was
being determined, the Martell Parties release and discharge MISCOR and its
former, present and future subsidiaries, divisions, affiliates, shareholders,
agents, officers, directors, employees, successors, assigns, insurers, and any
and all other persons or entities acting by, through or under any of them, both
individually and in their representative capacities (collectively, the “Martell
Releasees”) from any and all obligations, claims, demands, damages, actions,
causes of action or liabilities of whatsoever nature, whether known or unknown,
disclosed or undisclosed, accrued or contingent, that the Martell Parties now
have against any of the Martell Releasees, including, without limitation, any
claims arising on or before the date hereof out of the Agreement, but
specifically excluding any and all obligations of future payment or performance
pursuant to the (e) Amended Promissory Note, (f) any real estate leases, (g) the
agreements under which security interests are granted to secure the indebtedness
represented by the Amended Promissory Note, (h) the obligation of MISCOR or its
subsidiaries to pay John A. Martell for services or reimburse John A. Martell
for expenses he incurred in performing services for MISCOR or its subsidiaries;
and (i) any instruments or rights relating to the ownership or equity in MISCOR.

 

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2. Release by MISCOR. MISCOR, for itself, its successors and assigns, hereby
releases and discharges each of the Martell Parties from any and all
obligations, claims, demands, damages, actions, causes of action or liabilities
of whatsoever nature, whether known or unknown, disclosed or undisclosed,
accrued or contingent, that MISCOR now has or may have against any of the
Martell Parties, including, without limitation, any claims arising on or before
the date hereof out of the Agreement, but specifically excluding any and all
obligations of future payment or performance pursuant to the (a) Amended
Promissory Note, and (b) any security agreements which presently secure MISCOR’s
obligations to the Martell Parties, Martell Electronic and Ideal Consolidated,
and (c) any leases between the Martell Parties and MISCOR.

3. Confidentiality. The parties agree to keep completely confidential and not
disclose the terms and conditions of this Release except to the extent required
by law.

4. No Admission. The parties acknowledge that this Release constitutes a
compromise and settlement of disputed claims, that the parties deny and continue
denying liability for any and all claims, and that this Release and the actions
taken pursuant to this Release do not constitute any acknowledgment or admission
on the part of any party of any liability or a precedent upon which any
liability may be asserted.

5. Binding On Successors and Assigns. The terms and conditions of this Release
shall be binding upon and shall inure to the benefit of the parties and their
respective successors and assigns.

6. Governing Law. This Release and the parties’ obligations hereunder shall be
construed under and governed by the internal laws of Indiana, without regard to
principles of choice of law.

7. Entire Agreement. This Release, the Amended Promissory Note, the documents
and instruments providing security for the Amended Promissory Note, and the
related subordination agreements given by the Martells to Wells Fargo and
BDeWees, Inc. and XGen III, Ltd. (“Subordination Agreements”) contain the entire
agreement of the parties with respect to the settlement of the disputed claims
and all other claims the parties have or could have asserted as of the date of
execution of this Release. In executing this Release, no party

 

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has relied on representations or promises of any other party other than the
representations and promises contained in this Release, the Letter Agreement,
the Amended Promissory Note, the Subordination Agreements, and the lease
extensions.

8. Captions. The captions in this Release are for convenience only, are not
integral parts of this Release, and are not to be construed in the
interpretation of any part of this Release.

9. Negotiated Release; Construction. This Release is the result of negotiations
among the parties, and no party shall be deemed to be the drafter of this
Release. The language and all parts of this Release shall in all cases be
construed as a whole, according to their fair meanings, and not strictly for or
against any party.

10. Advice of Counsel. Each party to this Release has been represented by legal
counsel of his or its own choice in the negotiation of the compromise and
settlement provided for in this Release, and each party has freely decided to
enter into this Release after receiving advice from its own legal counsel about
the legal effect of this Release.

 

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IN WITNESS WHEREOF, the parties have executed this Release on the dates provided
below.

 

MISCOR GROUP, INC.

Date: November __, 2011

By:     Printed:     Michael P. Moore Title:     President

 

MARTELL ELECTRIC, LLC

Date: November __, 2011

By:     Printed:     John A. Martell Title:     President

 

IDEAL CONSOLIDATED, INC. By:     Printed:     John A. Martell Title:    
President

Date: November __, 2011

   John A. Martell    Bonnie Martell

 

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AMENDED PROMISSORY NOTE

(SECURED)

$1,680,094.60

November __, 2011

South Bend, Indiana

THIS INSTRUMENT REPLACES A $425,149 FEBRUARY 3, 2010 SECURED PROMISSORY NOTE.

THIS INSTRUMENT IS SUBJECT TO THE TERMS OF AN AMENDED AND RESTATED SUBORDINATION
AGREEMENT BY JOHN A. MARTELL IN FAVOR OF WELLS FARGO BANK, NATIONAL ASSOCIATION,
ACTING THROUGH ITS WELLS FARGO BUSINESS CREDIT OPERATING DIVISION, DATED AS OF
NOVEMBER ___, 2011.

FOR VALUE RECEIVED, the undersigned, MISCOR GROUP, LTD., an Indiana corporation
(the “Borrower”), hereby promises to pay to the order of JOHN A. MARTELL, a
resident of Michigan (the “Lender”), at his residence of 61249 Howell Drive,
Cassopolis, Michigan 49031 or at such other place as the holder hereof may
designate in writing, in lawful money of the United States of America, the
principal sum of One Million, Six Hundred Eighty Thousand, Ninety-Four and
60/100 Dollars ($1,680,094.60), or such lesser principal sum as may then be owed
by the Borrower to the Lender under this Amended Promissory Note (Secured) (the
“Note”), and any remaining accrued interest (as set forth below), on or before
the earlier of the following dates:

The entire unpaid principal of the Note, and any unpaid and accrued interest
thereon, shall be due in full on October 31, 2013 (the “Stated Maturity Date”).

THE UNPAID INDEBTEDNESS EVIDENCED HEREBY SHALL BECOME IMMEDIATELY DUE AND
PAYABLE UPON THE STATED MATURITY DATE, TOGETHER WITH ANY REMAINING ACCRUED
INTEREST THEREON (AS SET FORTH BELOW).

This Note shall bear interest as follows:

 

  (a) From today through February 28, 2013, interest on the unpaid principal
amount shall be the greater of 7.5% or 2% plus Prime (as defined below);

 

  (b) From March 1, 2013 until the Stated Maturity Date, interest on the unpaid
principal amount shall be the greater of 9.5% or 2% plus Prime;

 

  (c) The rate of interest on the unpaid principal balance, for any of the time
periods set forth in subparagraphs (a) and (b) above, shall be fixed at the
beginning date of each time period.

 

  (d)

As used in this Note, “Prime” shall mean the prime rate of interest published in
the “Money Rates” section of The Wall Street Journal. In the event The Wall
Street Journal ceases to be published on a current basis or ceases to include
publication of the “Prime Rate,” then the Lender or his assignee will select an
alternative measure of the cost of money which, in the

 

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  Lender’s judgment, is reasonably equivalent to the “Prime Rate” as previously
published in The Wall Street Journal, which alternative cost of money shall be
“Prime.”

The first special payment of principal shall be made on the date upon which the
Borrower refinances its primary financing facilities with Well Fargo Bank
National Association. The first special payment of principal shall be in the
amount of Three Hundred Sixteen Thousand Six Hundred Sixty-six Dollars ($316,
666.00).

The second special payment of principal, in the amount of One Hundred, Twenty
Thousand Dollars ($120,000.00) shall be made on or before December 29, 2011.

The third special payment of principal, in the amount of Two Hundred, Fifty
Thousand Dollars ($250,000), shall be made on or before June 30, 2012.

Regular installment payments on the principal sum shall begin January 1, 2012,
and shall be made on the first day of each consecutive month thereafter in
amounts of not less than Seven Thousand Five Hundred Dollars ($7,500). Effective
January 1, 2013, and on the first day of each consecutive calendar month until
the Stated Maturity Date, installment payments on the principal sum shall be not
less than Twelve Thousand Five Hundred Dollars ($12,500), with the final payment
of the entire unpaid principal, and all unpaid accrued interest thereon, due on
the Stated Maturity Date. All payments of principal shall be accompanied by a
payment of all then-accrued but unpaid interest, including unpaid interest which
may have accrued prior to the date of this Note. Payments of both principal and
interest hereunder are to be made in immediately available funds.

At any time there is a Change in Control (as defined in this paragraph) of
Borrower as a result of or contemporaneously with an exchange or issuance of
securities to one or more persons, Borrower will be required to pay the
then-remaining principal balance (plus all then accrued but unpaid interest)
under this Note. For purposes of this Agreement, the term “Change in Control”
shall mean a situation (whether occasioned by issuance, sales, or transfers of a
Borrower’s securities or by any merger, consolidation, recapitalization,
reorganization, or other transaction involving a Borrower) in which any person,
company or organization, not a five percent (5%) or more shareholder as of the
date of this Agreement, acquires record beneficial ownership of more than fifty
percent (50%) of MISCOR’s outstanding capital stock.

If Wells Fargo Bank, National Association lawfully prevents the Borrower from
making payments of principal, then Borrower shall, nonetheless, make payments of
any then-accrued but unpaid interest which would otherwise be payable on the
principal payment date.

If the Borrower fails, refuses, or is prevented from paying any principal,
interest, charges, costs, expenses and/or fees in accordance with the terms of
this Note (“Event of Default”), then Lender shall be entitled, at his sole
option, to accelerate the then outstanding indebtedness hereunder and to take
all other action permissible by law. Upon an Event of Default, the Lender at his
option may, if permitted under applicable law, increase the rate of interest on
this Note to Five (5) percentage points (“Default Rate of Interest”) over the
then applicable interest rate. The Default Rate of Interest will not exceed the
maximum rate permitted by applicable law.

The remedies of the Lender as provided in this Note shall be cumulative and
concurrent, and may be pursued singly, successively, or together against the
Borrower, and/or against any collateral or guarantor, at the sole discretion of
the Lender.

 

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The Borrower hereby waives presentment for payment, demand, notice of
nonpayment, notice of dishonor, protest of any dishonor, notice of protest, and
protest of this Note and all other notices in connection with the delivery,
acceptance, performance, default, or enforcement of the payment of this Note,
and agrees that its liability shall not in any manner be affected by any
indulgence, extension of time, renewal, waiver or modification granted or
consented to by the Lender; and the Borrower agrees that additional makers,
endorsers, guarantors, or sureties may become parties hereto without notice to
the Borrower or affecting the Borrower’s liability hereunder.

It is the intent of the Lender and the Borrower that the rate of interest and
all other charges to the Borrower be lawful. If for any reason the payment of a
portion of the interest or other charges otherwise required to be paid under
this Note would exceed the limit which the Lender may lawfully charge the
Borrower, then the obligation to pay interest or other charges shall
automatically be reduced to such limit.

The Lender shall not by any act of omission or commission be deemed to waive any
of its rights or remedies hereunder unless such waiver be in writing and signed
by the Lender (and then only to the extent specifically set forth therein). A
waiver of any one event shall not be construed as continuing or as a bar to or
waiver of such right or remedy on a subsequent event.

Whenever possible, each provision of this Note shall be interpreted in such
manner as to be effective and valid under applicable law, but if any provision
of this Note shall be prohibited or invalid under such law, such provision shall
be ineffective only to the extent of such prohibition or invalidity, without
invalidating the remainder of such provisions of this Note.

This Note shall not be amended, supplemented or modified except pursuant to a
writing signed by both the Lender and the Borrower.

If at any time or times, the Lender: (a) employs counsel in good faith for
advice or other representation (i) with respect to this Note or any collateral
securing this Note, (ii) to represent Lender in any restructuring, workout,
litigation, contest, dispute, suit or proceeding or to commence, defend or
intervene or to take any other action in or with respect to any litigation,
contest, dispute or proceeding (whether instituted by the Lender, the Borrower
or any other person or entity) in any way or respect relating to this Note or
any collateral securing this Note, or (iii) to enforce any rights of the Lender
against the Borrower; (b) takes any action to protect, collect, sell, liquidate
or otherwise dispose of any collateral securing this Note; and/or (c) attempts
to or enforces any of the Lender’s rights and remedies against the Borrower;
then the costs and expenses incurred by the Lender shall be part of the
indebtedness evidenced by this Note, payable by the Borrower to the Lender on
demand. Without limiting the generality of the foregoing, such expenses and
costs include any and all court costs, reasonable attorneys’ fees and expenses,
and accountants’ fees and expenses.

Payment of this Note is secured pursuant to that certain Security Agreement
dated as of February 10, 2010 (the “Security Agreement”), and other related
documents dealing with the grant of security for the indebtedness represented by
this Note.

This Note may be prepaid in advance of the installments above or the stated
Maturity Date, without penalty and at the election of Borrower at any time.

This Note shall inure to the benefit of the Lender and its successors and
assigns and shall be binding upon the Borrower and its successors and permitted
assigns. As used herein the term “Lender” shall mean and include the successors
and assigns of the identified payee and the holder or holders of this Note from
time to time.

 

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THIS NOTE SHALL BE CONSTRUED IN ALL RESPECTS IN ACCORDANCE WITH, AND ENFORCED
AND GOVERNED BY THE INTERNAL LAWS OF INDIANA, WITHOUT REGARD TO CONFLICTS OF LAW
PRINCIPLES.

THE BORROWER AND THE LENDER HEREBY IRREVOCABLY AND KNOWINGLY WAIVE (TO THE
FULLEST EXTENT PERMITTED BY LAW) ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION OR
PROCEEDING (INCLUDING, WITHOUT LIMITATION, ANY COUNTERCLAIM) ARISING OUT OF THIS
NOTE OR ANY COLLATERAL SECURING THIS NOTE, INCLUDING, WITHOUT LIMITATION, ANY
ACTION OR PROCEEDING (A) TO ENFORCE OR DEFEND ANY RIGHTS UNDER OR IN CONNECTION
WITH THIS NOTE OR THE SECURITY AGREEMENT, OR (B) ARISING FROM ANY DISPUTE OR
CONTROVERSY IN CONNECTION WITH OR RELATED TO THIS NOTE OR THE SECURITY
AGREEMENT. THE LENDER AND THE BORROWER AGREE THAT ANY SUCH ACTION OR PROCEEDING
SHALL BE TRIED BEFORE A COURT AND NOT A JURY.

IN WITNESS WHEREOF, the Borrower has caused this Note to be duly executed by its
authorized officer as of the date first above written.

 

MISCOR GROUP, LTD By:      

Michael P. Moore, President and

Chief Executive Officer

 

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