Exhibit 10.11

SUBORDINATION AGREEMENT

This Subordination Agreement, dated as of January 14, 2008, is made by BDeWees,
Inc., an Ohio corporation and XGen III, Ltd., an Ohio limited liability
company  (collectively, the “Subordinated Creditors”), for the benefit of Wells
Fargo Bank, National Association, acting through its Wells Fargo Business Credit
operating division (the “Lender”).
 
MISCOR Group, Ltd., an Indiana corporation (“MISCOR”), Magnetech Industrial
Services, Inc., an Indiana corporation (“MIS”), Martell Electric, LLC, an
Indiana limited liability company (“Martell”), HK Engine Components, LLC, an
Indiana limited liability company (“HK”), Magnetech Power Services, LLC, an
Indiana limited liability company (“MPS”), Ideal Consolidated, Inc., an Indiana
corporation (“Ideal”) and 3-D Service, Ltd., an Ohio limited liability company
(“3D”) AND American Motive Power, Inc., a Nevada corporation (“AMP” and together
with MISCOR, MIS, Martell, HK, MPS, Ideal and 3D, the “Borrowers” and each a
“Borrower”) are now or hereafter may be indebted to the Lender on account of
loans or the other extensions of credit or financial accommodations from the
Lender to the Borrowers, or to any other person under the guaranty or
endorsement of the Borrowers.
 
MISCOR has issued two promissory Notes, one each to BDeWees, Inc., and XGen III,
Ltd., each Note in the original principal amount of Two Million Dollars
($2,000,000.00), in partial payment of the purchase price for the membership
interest units of 3D, a copy of which promissory Notes are attached hereto as
Exhibit A and Exhibit B (together with all renewals, extensions and
modifications thereof and any Notes or Notes issued in substitution therefore,
the “Subordinated Notes”).
 
As a condition to making any loan or extension of credit to the Borrowers, the
Lender has required that the Subordinated Creditors subordinate the payment of
the Subordinated Notes to the payment of any and all indebtedness of the
Borrowers to the Lender.  Assisting the Borrowers in obtaining credit
accommodations from the Lender and subordinating its interests pursuant to the
terms of this Agreement are in the Subordinated Creditors’ best interest.
 
ACCORDINGLY, in consideration of the loans and other financial accommodations
that have been made and may hereafter be made by the Lender for the benefit of
the Borrower, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Subordinated Creditors hereby
agree as follows:
 
1.            Definitions.  As used herein, the following terms have the
meanings set forth below:
 
“Borrower Default” means a Default or Event of Default as defined in any
agreement or instrument evidencing, governing, or issued in connection with
Lender

 

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Indebtedness, including, but not limited to, the Credit Agreement, or any
default under or breach of any such agreement or instrument.
 
“Collateral” means all collateral now or hereafter securing payment of the
Lender Indebtedness, including all proceeds thereof.
 
“Credit Agreement” means that certain Credit and Security Agreement dated as of
January 14, 2008, by and among the Borrowers and the Lender as the same may
hereafter be amended, supplemented or restated from time to time.
 
“Lender Indebtedness” means each and every debt, liability and obligation of
every type and description which the Borrowers may now or at any time hereafter
owe to the Lender, whether such debt, liability or obligation now exists or is
hereafter created or incurred, and whether it is or may be direct or indirect,
due or to become due, absolute or contingent, primary or secondary, liquidated
or unliquidated, or joint, several or joint and several, all interest thereon
and all fees, costs and other charges related thereto (including all interest,
fees, costs and other charges accruing after the commencement of any case,
proceeding or other action relating to the bankruptcy insolvency or
reorganization of any Borrower, whether or not allowed in such proceeding or
other action), all renewals, extensions and modifications thereof and any Notes
issued in whole or partial substitution therefor.
 
“Lien” means any security interest, mortgage, deed of trust, pledge, lien,
charge, encumbrance, title retention agreement or analogous instrument or
device, including the interest of each lessor under any capitalized lease and
the interest of any bondsman under any payment or performance bond, in, of or on
any assets or properties of a person, whether now owned or hereafter acquired
and whether arising by agreement or operation of law.
 
“Subordinated Indebtedness” means all obligations arising under the Subordinated
Notes and each and every other debt, liability and obligation of every type and
description which any Borrower may now or at any time hereafter owe to the
Subordinated Creditor, whether such debt, liability or obligation now exists or
is hereafter created or incurred, and whether it is or may be direct or
indirect, due or to become due, absolute or contingent, primary or secondary,
liquidated or unliquidated, or joint, several or joint and several.
 
2.            Subordination.  The payment of all of the Subordinated
Indebtedness is hereby expressly subordinated to the extent and in the manner
hereinafter set forth to the payment in full of the Lender Indebtedness; and
regardless of any priority otherwise available to the Subordinated Creditors by
law or by agreement, the Lender shall hold a first priority Lien in the
Collateral, and any Lien claimed therein (including any proceeds thereof) by the
Subordinated Creditors shall be and remain fully subordinate for all purposes to
the Lien of the Lender therein for all purposes whatsoever.  The Subordinated
Indebtedness shall continue to be subordinated to the Lender Indebtedness even
if the Lender Indebtedness is

 

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subordinated, avoided or disallowed under the United States Bankruptcy Code or
other applicable law.
 
3.            Payments.  Until all of the Lender Indebtedness has been paid in
full and the Lender has released its Lien in the Collateral, the Subordinated
Creditors shall not, without the Lender’s prior written consent, demand, receive
or accept any payment (whether of principal, interest or otherwise) from any
Borrower in respect of the Subordinated Indebtedness, or exercise any right of
or permit any setoff in respect of the Subordinated Indebtedness, except that
the Borrowers shall be permitted to exercise any right of set off they may have
against the Subordinated Notes and the Subordinated Creditors may
accept scheduled payments (but not prepayments) of interest and the final
payment of principal required to be paid under the Subordinated Notes, so long
as at the time of each such payment no Borrower Default has occurred and is
continuing or will occur as a result of or immediately following any such
payment.
 
4.            Receipt of Prohibited Payments.  If the Subordinated Creditors
receive any payment on the Subordinated Indebtedness that the Subordinated
Creditors are not entitled to receive under the provisions of this Agreement,
the Subordinated Creditors will hold the amount so received in trust for the
Lender and will forthwith turn over such payment to the Lender in the form
received (except for the endorsement of the Subordinated Creditors where
necessary) for application to then-existing Lender Indebtedness (whether or not
due), in such manner of application as the Lender may deem appropriate.  If the
Subordinated Creditors exercise any right of setoff which the Subordinated
Creditors are not permitted to exercise under the provisions of this Agreement,
the Subordinated Creditors will promptly pay over to the Lender, in immediately
available funds, an amount equal to the amount of the claims or obligations
offset.  If the Subordinated Creditors fail to make any endorsement required
under this Agreement, the Lender, or any of its officers or employees or agents
on behalf of the Lender, is hereby irrevocably appointed as the attorney-in-fact
(which appointment is coupled with an interest) for the Subordinated Creditors
to make such endorsement in the Subordinated Creditors’ name.
 
5.            Action on Subordinated Indebtedness.  The Subordinated Creditors
will not commence any action or proceeding against any Borrower to recover all
or any part of the Subordinated Indebtedness, or join with any Creditors (unless
the Lender shall so join) in bringing any proceeding against any Borrower under
any bankruptcy, reorganization, readjustment of debt, arrangement of debt
receivership, liquidation or insolvency law or statute of the federal or any
state government, or take possession of, sell, or dispose of any Collateral, or
exercise or enforce any right or remedy available to the Subordinated Creditors
with respect to any such Collateral, unless and until the Lender Indebtedness
has been paid in full and the Lender has released its Lien in the Collateral.
 
6.            Action Concerning Collateral.
 
(a)            Notwithstanding any Lien now held or hereafter acquired by the
Subordinated Creditor, the Lender may take possession of, sell, dispose of, and

 

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otherwise deal with all or any part of the Collateral, and may enforce any right
or remedy available to it with respect to any Borrower or the Collateral, all
without notice to or consent of the Subordinated Creditors except as
specifically required by applicable law.
 
(b)            In addition, and without limiting the generality of the
foregoing, if (i) a Borrower Default has occurred and is continuing, (ii) a
Borrower or the Lender intends to sell or otherwise dispose of any Collateral to
an unrelated third party outside the ordinary course of business, (iii) the
Lender has given written notice thereof to the Subordinated Creditor, and (iv)
the Subordinated Creditors have failed, within ten (10) days after receipt of
such notice, to purchase for cash the Lender Indebtedness for the full amount
thereof, the Subordinated Creditors shall be deemed to have consented to such
sale or disposition, to have released any Lien it may have in such Collateral
and to have authorized the Lender and its agents to file partial releases with
respect to such Collateral.
 
(c)            The Lender shall have no duty to preserve, protect, care for,
insure, take possession of, collect, dispose of, or otherwise realize upon any
of the Collateral, and in no event shall the Lender be deemed the Subordinated
Creditors’ agent with respect to the Collateral.  All proceeds received by the
Lender with respect to any Collateral may be applied, first, to pay or reimburse
the Lender for all costs and expenses (including reasonable attorneys’ fees)
incurred by the Lender in connection with the collection of such proceeds, and,
second, to any Lender Indebtedness secured by the Lender’s Lien in that
Collateral in any order that it may choose.
 
7.            Bankruptcy and Insolvency.  In the event of any receivership,
insolvency, bankruptcy, assignment for the benefit of creditors, reorganization
or arrangement with creditors, whether or not pursuant to bankruptcy law, the
sale of all or substantially all of the assets of any Borrower, dissolution,
liquidation or any other marshalling of the assets or liabilities of any
Borrower, the Subordinated Creditors will file all claims, proofs of claim or
other instruments of similar character necessary to enforce the obligations of
such Borrower in respect of the Subordinated Indebtedness and will hold in trust
for the Lender and promptly pay over to the Lender in the form received (except
for the endorsement of the Subordinated Creditors where necessary) for
application to the then-existing Lender Indebtedness, any and all moneys,
dividends or other assets received in any such proceedings on account of the
Subordinated Indebtedness, unless and until the Lender Indebtedness has been
paid in full and the Lender’s Lien in the Collateral has been terminated.  If
the Subordinated Creditors shall fail to take any such action, the Lender, as
attorney-in-fact for the Subordinated Creditor, may take such action on the
Subordinated Creditors’ behalf.  The Subordinated Creditors hereby irrevocably
appoints the Lender, or any of its officers or employees on behalf of the
Lender, as the attorney-in-fact for the Subordinated Creditors (which
appointment is coupled with an interest) with the power but not the duty to
demand, sue for, collect and receive any and all such moneys, dividends or other
assets and give acquittance therefor and to file any claim, proof of claim or
other instrument of similar character, to vote claims comprising Subordinated
Indebtedness to accept or reject any plan

 

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of partial or complete liquidation, reorganization, arrangement, composition or
extension and to take such other action in the Lender’s own name or in the name
of the Subordinated Creditors as the Lender may deem necessary or advisable for
the enforcement of the agreements contained herein; and the Subordinated
Creditors will execute and deliver to the Lender such other and further
powers-of-attorney or instruments as the Lender may request in order to
accomplish the foregoing.  If the Lender desires to permit the use of cash
collateral or to provide post-petition financing to a Borrower, the Subordinated
Creditors shall not object to the same or assert that their interests are not
being adequately protected.
 
8.            Restrictive Legend; Transfer of Subordinated Indebtedness.  The
Subordinated Creditors will cause the Subordinated Notes and all other Notes,
bonds, debentures or other instruments evidencing the Subordinated Indebtedness
or any part thereof to contain a specific statement thereon to the effect that
the indebtedness thereby evidenced is subject to the provisions of this
Agreement, and the Subordinated Creditors will mark their books conspicuously to
evidence the subordination effected hereby.  Attached hereto is a true and
correct copy of the Subordinated Notes bearing such legend.  At the request of
the Lender, the Subordinated Creditors shall deposit with the Lender the
Subordinated Notes and all of the other Notes, bonds, debentures or other
instruments evidencing the Subordinated Indebtedness, which Notes, bonds,
debentures or other instruments may be held by the Lender so long as any Lender
Indebtedness remains outstanding or the Lender’s Lien in the Collateral has not
been terminated.  The Subordinated Creditors are the lawful holders of the
Subordinated Notes and have not transferred any interest therein to any other
person or entity.  Without the prior written consent of the Lender, the
Subordinated Creditors will not assign, transfer or pledge to any other person
any of the Subordinated Indebtedness or agree to a discharge or forgiveness of
the same.
 
9.            Continuing Effect.  This Agreement shall constitute a continuing
agreement of subordination, and the Lender may, without notice to or consent by
the Subordinated Creditor, modify any term of the Lender Indebtedness in
reliance upon this Agreement.  Without limiting the generality of the foregoing,
the Lender may, at any time and from time to time, without the consent of or
notice to the Subordinated Creditors and without incurring responsibility to the
Subordinated Creditors or impairing or releasing any of the Lender’s rights or
any of the Subordinated Creditors’ obligations hereunder:
 
(a)            change the interest rate or change the amount of payment or
extend the time for payment or renew or otherwise alter the terms of any Lender
Indebtedness or any instrument evidencing the same in any manner;
 
(b)            sell, exchange, release or otherwise deal with any property at
any time securing payment of the Lender Indebtedness or any part thereof;
 
(c)            release anyone liable in any manner for the payment or collection
of the Lender Indebtedness or any part thereof;
 
(d)            exercise or refrain from exercising any right against any
Borrower or any other person (including the Subordinated Creditor); and

 

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(e)            apply any sums received by the Lender, by whomsoever paid and
however realized, to the Lender Indebtedness in such manner as the Lender shall
deem appropriate.
 
10.            No Commitment.  None of the provisions of this Agreement shall be
deemed or construed to constitute or imply any commitment or obligation on the
part of the Lender to make any future loans or other extensions of credit or
financial accommodations to the Borrowers.
 
11.            Marshalling.  The Subordinated Creditors hereby waive any and all
rights to require the marshalling of assets in connection with the exercise of
any of the Lender’s remedies permitted by applicable law or agreement.
 
12.            Notice.  All notices and other communications hereunder shall be
in writing and shall be (i) personally delivered, (ii) transmitted by registered
mail, postage prepaid, or (iii) transmitted by telefacsimile, in each case
addressed to the party to whom notice is being given at its address as set forth
below:
 
If to the Lender:
 
Wells Fargo Business Credit
111 East Wayne Street, 2nd Floor
MAC N8622-02A
Fort Wayne, Indiana 46802
Attention:  Lynn A. Gruber
Telefacsimile:  260/461-6037

 
If to the Subordinated Creditor:
 
BDeWees, Inc.
5316 Hawick Street, NW
Canton, OH 44708
Attn:  Bernard L. DeWees

XGen III, Ltd.
3029 Prospect Ave
Cleveland Ohio 44115
Attn:  Thomas J. Embrescia

with a copy to:
Day Ketterer Ltd.
Millenium Centre #300
200 Market Avenue, N.
Canton, Ohio  44701
Attn:  Daniel A. Minkler

 

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or at such other address as may hereafter be designated in writing by that
party.  All such notices or other communications shall be deemed to have been
given on (i) the date received if delivered personally, (ii) the date of posting
if delivered by mail, or (iii) the date of transmission if delivered by
telefacsimile.
 
13.            Conflict in Agreements.  If the subordination provisions of any
instrument evidencing Subordinated Indebtedness conflict with the terms of this
Agreement, the terms of this Agreement shall govern the relationship between the
Lender and the Subordinated Creditor.
 
14.            No Waiver.  No waiver shall be deemed to be made by the Lender of
any of its rights hereunder unless the same shall be in writing signed on behalf
of the Lender, and each such waiver, if any, shall be a waiver only with respect
to the specific matter or matters to which the waiver relates and shall in no
way impair the rights of the Lender or the obligations of the Subordinated
Creditors to the Lender in any other respect at any time.
 
15.            Binding Effect; Acceptance.  This Agreement shall be binding upon
the Subordinated Creditors and the Subordinated Creditors’ heirs, legal
representatives, successors and assigns and shall inure to the benefit of the
Lender and its participants, successors and assigns irrespective of whether this
or any similar agreement is executed by any other subordinated creditor of any
Borrower.  Notice of acceptance by the Lender of this Agreement or of reliance
by the Lender upon this Agreement is hereby waived by the Subordinated Creditor.
 
16.            Miscellaneous.  The paragraph headings herein are included for
convenience of reference only and shall not constitute a part of this Agreement
for any other purpose.  This Agreement may be executed in any number of
counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.
 
17.            Governing Law; Consent to Jurisdiction and Venue; Waiver of Jury
Trial.  This Agreement shall be governed by and construed in accordance with the
substantive laws (other than conflict laws) of the State of Wisconsin.  Each
party consents to the personal jurisdiction of the state and federal courts
located in the State of Wisconsin in connection with any controversy related to
this Agreement, waives any argument that venue in any such forum is not
convenient, and agrees that any litigation initiated by any of them in
connection with this Agreement may be venued in either the state or federal
courts located in Milwaukee County, Wisconsin.

 

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THE PARTIES WAIVE ANY RIGHT TO TRIAL BY JURY IN ANY ACTION OR PROCEEDING BASED
ON OR PERTAINING TO THIS ACKNOWLEDGMENT.
 
IN WITNESS WHEREOF, the Subordinated Creditors have executed this Subordination
Agreement as of the date and year first above-written.
 

       
BDEWEES, INC.
             
By:
/s/ Bernard L. DeWees
   
Bernard L. DeWees, President
             
XGEN III, LTD.
             
By:
/s/ Thomas J. Embrescia
   
Thomas J. Embrescia, Manager

 

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ACKNOWLEDGMENT BY BORROWERS

The undersigned, being the Borrowers referred to in the foregoing Agreement,
hereby (i) acknowledges receipt of a copy thereof, (ii) agrees to all of the
terms and provisions thereof, (iii) agrees to and with the Lender that it shall
make no payment on the Subordinated Indebtedness that the Subordinated Creditors
would not be entitled to receive under the provisions of the Agreement,
(iv) agrees that any such payment will constitute a default under the Lender
Indebtedness, and (v) agrees to mark its books conspicuously to evidence the
subordination of the Subordinated Indebtedness effected hereby.

MISCOR GROUP, LTD.
 
MAGNETECH POWER SERVICES, LLC
                   
By:
/s/ Richard J. Mullin
 
By:
/s/ Richard J. Mullin
 
Richard J. Mullin, Treasurer
   
Richard J. Mullin, Treasurer
                   
MAGNETECH INDUSTRIAL SERVICES, INC.
 
IDEAL CONSOLIDATED, INC.
         
By:
/s/ Richard J. Mullin
 
By:
/s/ Richard J. Mullin
 
Richard J. Mullin, Treasurer
   
Richard J. Mullin, Treasurer
         
MARTELL ELECTRIC, LLC
 
3-D SERVICE, LTD.
         
By:
/s/ Richard J. Mullin
 
By:
/s/ Richard J. Mullin
 
Richard J. Mullin, Treasurer
   
Richard J. Mullin, Treasurer
         
HK ENGINE COMPONENTS, LLC
 
AMERICAN MOTIVE POWER, INC.
         
By:
/s/ Richard J. Mullin
 
By:
/s/ Richard J. Mullin
 
Richard J. Mullin, Treasurer
   
Richard J. Mullin, Treasurer

 

 

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Exhibit A
 
Attach copy of Subordinated Notes with following legend:
 
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
JANUARY 14, 2008.