Promissory Note


    Exhibit
      10.2

     

    
      
        

          

            

              
                	 	 	 	 
	
                        MISCOR
                          GROUP, LTD., HK ENGINE COMPONENTS, LLC,

                        MAGNETECH
                          INDUSTRIAL SERVICES, INC., MAGNETECH

                        POWER
                          SERVICES, LLC, MARTELL ELECTRIC, LLC

                        1125
                          S. WALNUT STREET

                        SOUTH
                          BEND, IN 46619

                      	 	
                        MFB
                          FINANCIAL

                        4100
                          Edison Lakes Parkway, Suite 300

                        MISHAWAKA,
                          IN 46545

                      	
                        ACCOUNT
                          # 600000547

                        Loan
                          Number 70-0028852 

                        Date:
                          March
                          9, 2007   

                        Maturity
                          Date ON
                          DEMAND 

                        Loan
                          Amount $
                          5,000,000.00 

                        Renewal
                          Of    

                      
	
                        BORROWER’S
                          NAME AND ADDRESS

                        “I”
                          includes each borrower above, jointly and severally.

                      	 	
                        LENDER’S
                          NAME AND ADDRESS

                        “You”
                          means the lender, its successors and assigns.

                      	 


              

            

          

        

      

    

    


    For
      value
      received, I promise to pay to you, or your order, at your address listed above
      the PRINCIPAL sum of FIVE
      MILLION AND N0/100 Dollars
      $
5,000,000,00   

    ⁪ Single
      Advance:
      I will
      receive all of this principal sum on    .
      No
      additional advances are contemplated under this note.

    x Multiple
      Advance:
      The
      principal sum shown above is the maximum amount of principal I can borrow under
      this note. On 02-28-2007   

    I
      will
      receive the amount of $    
      and
      future principal advances are contemplated.

    Conditions:
      The
      conditions for future advances are TELEPHONE
      ADVANCES MAY BE MADE WITH THE OFFICER’S APPROVAL. FUNDS WILL BE DEPOSITED INTO
      THE, BORROWER’S
      OPERATING ACCOUNT            

     

    x Open
      End Credit:
      You and
      I agree that I may borrow up to the maximum amount of principal more than one
      time. This feature is subject to 

    all
      other
      conditions and expires on DEMAND  .

    ⁪ Closed
      End Credit:
      You and
      I agree that I may borrow up to the maximum only one time (and subject to all
      other conditions).

    INTEREST:
      I agree
      to pay interest on the outstanding principal balance from 02-28-2007 
      at the
      rate of  8.750
      % per
      year until 03-01-2007   .

    x Variable
      Rate:
      This
      rate may then change as stated below,

    x Index
      Rate:
      The
      future rate will be 0.500
      PERCENT ABOVE the
      following index rate: THE
      HIGHEST RATE ON CORPORATE, LOANS POSTED BY AT LEAST
      75% 0F THE USA’S THIRTY LARGEST BANKS KNOWN AS THE WALL STREET JOURNAL PRIME
      RATE.      

     

    ⁪ No
      Index:
      The
      future rate will not be subject to any internal or external index. It will
      be
      entirely in your control.

    x Frequency
      and Timing:
      The rate
      on this note may change as often as EVERY
      DAY BEGINNING 03-01-2007    

    A
      change
      in the interest rate will take effect ON
      THE
      SAME DAY       

    ⁪ Limitations:
      During
      the term of this loan, the applicable annual interest rata will not be more
      than
  %
      or less
      than

    .
      The
      rate may not change more than   %
      each
      

    Effect
      of Variable Rate:
      A change
      In the interest rate will have the following effect on the
      payments:

    x
      The
      amount of each scheduled payment will change.  x
      The
      amount of the final payment will change.

    ⁪               

    ACCRUAL
      METHOD:
      Interest
      will be calculated on a   ACTUAL/360  
      basis.

    POST
      MATURITY RATE:
      I agree
      to pay interest on the unpaid balance of this note owing after maturity, and
      until paid in full, as stated below:

    ⁪
      on the
      same fixed or variable rate basis in effect before maturity (as indicated
      above).

    x
      at a
      rate equal to 18.00%            

    x LATE
      CHARGE:
      If a
      payment Is made more than  15 
      days
      after it is due, I agree to pay a late charge of 5.000%
      OF
      THE
      LATE AMOUNT WITH A MIN
      OF
      $50.00 AND A MAX OF $500.00            

    ADDITIONAL
      CHARGES:
      In
      addition to interest, I agree to pay the following charges which ⁪
      are
x
      are not
  included
      in the principal amount

    above:
      LOAN
      CLOSING FEES            

    PAYMENTS:
      I agree
      to pay this note as follows:

    MONTHLY
      PAYMENTS OF ACCRUED INTEREST CALCULATED ON THE AMOUNT OF CREDIT OUTSTANDING
      BEGINNING ON 04-01-2007. PRINCIPAL PLUS ANY UNPAID INTEREST DUE UPON
      DEMAND.

    


    


    


    


    ⁪ Unpaid
      Interest:
      Any
      accrued Interest not paid when due (whether duo by reason of a schedule of
      payments or due because of Lender’s demand) will become part of the principal
      thereafter, and will bear interest at the interest rate in affect from time
      to
      time as provided for in this agreement.

    


    ADDITIONAL
      TERMS:
      ALL
      ADDITIONAL TERMS RELATING TO FINANCIAL STATEMENTS WILL BE ON A CONSOLIDATING
      BASIS.

    I
      WILL
      PROVIDE ANNUAL AUDITED FINANCIAL STATEMENTS WITH APPROPRIATE FOOTNOTES TO THE
      BANK.

    I
      WILL
      PROVIDE QUARTERLY 100S TO THE BANK.

    I
      WILL
      PROVIDE MONTHLY COMPANY PREPARED FINANCIAL STATEMENTS TO THE BANK.

    I
      WILL
      PROVIDE MONTHLY BORROWING BASE CERTIFICATES & ACCOUNTS RECEIVABLE TO THE
      BANK.

    ALL
      LOANS
      WILL BE ADVANCED AT 60% OF ACCOUNTS RECEIVABLE, LESS THAN 90 DAYS OLD, NOT
      IN
      DISPUTE AND EXCLUDING INTERCOMPANY.

    I
      WILL
      MAINTAIN MY PRIMARY CHECKING RELATIONSHIP WITH MFB FINANCIAL.

    
      	
              x SECURITY:
                This note is separately secured by (describe separate document by
                type and
                date): SECURITY AGREEMENTS DATED 2/28/07 FOR ACCOUNTS
                RECEIVABLE

               

              (This
                section is for your internal use. Failure to list a separate security
                document does not mean the agreement will not secure this
                note.)

            	 	
              PURPOSE:
                The purpose of this loan is  WORKING
                CAPITAL  

               

              SIGNATURES:
                I AGREE TO THE TERMS OF THIS NOTE (INCLUDING THOSE ON PAGE 2). I
                HAVE
                RECEIVED A COPY ON TODAY’S DATE.

              MISCOR
                GROUP, LTD., HK ENGINE COMPONENTS, LLC, MAGNETECH INDUSTRIAL SERVICES,
                INC.

              MAGNETECH
                POWER SERVICES, LLC, MARTELL ELECTRIC LLC

               

              SEE
                ATTACHED SIGNATURE PAGE

            
	
               

              Signature
                for Lender

               

              /s/
                Donald R. Kyle    

              Donald
                R. Kyle, Executive Vice President/COO

            	 	 


    

    



    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    DEFINITIONS:
      As used
      on page 1, “x“
means
      the terms that apply to this loan. “I, “me” or “my” means each Borrower who
      signs this note and each other person or legal entity (including guarantors,
      endorsers, and sureties) who agrees to pay this note (together referred to
      as
“us”). “You” or “your” means the Lender and its successors and
      assigns.

    APPLICABLE
      LAW:
      The law
      of the state of Indiana will govern this note. Any term of this note which
      is
      contrary to applicable law will not be effective, unless the law permits you
      and
      me to agree to such a variation. If any provision of this agreement cannot
      be
      enforced according to its terms, this fact will not offset the enforceability
      of
      the remainder of this agreement. No modification of this agreement may be made
      without your express written consent. Time is of the essence in this
      agreement.

    COMMISSIONS
      OR OTHER REMUNERATION:
      I
      understand and agree that any insurance premiums paid to insurance companies
      as
      part of this note will involve money retained by you or paid back to you as
      commissions or other remuneration.

    In
      addition, I understand and agree that some other payments to third parties
      as
      part of this note may also involve money retained by you or paid back to you
      as
      commissions or other remuneration.

    PAYMENTS:
      Each
      payment I make on this note will first reduce the amount I owe you for charges
      which are neither interest nor principal. The remainder of each payment will
      then reduce accrued unpaid interest, and then unpaid principal. If you and
      I
      agree to a different application of payments, we will describe our agreement
      on
      this note. I may prepay a part of, or the entire balance or this loan without
      penalty, unless we specify to the contrary on this note. Any partial prepayment
      will not excuse or reduce any later scheduled payment until this note is paid
      in
      full (unless, when I make the prepayment, you and I agree in writing to the
      contrary).

    INTEREST:
      Interest
      accrues on the principal remaining unpaid from time to time, until paid in
      full.
      If I receive the principal in more than one advance, each advance will start
      to
      earn interest only when I receive the advance. The interest rate in effect
      on
      this note at any given time will apply to the entire principal advanced at
      that
      time. You and I may provide in this agreement for accrued interest not paid
      when
      due to be added to principal. Notwithstanding anything to the contrary, I do
      not
      agree to pay and you do not intend to charge any rate of interest that is higher
      than the maximum rate of interest you could charge under applicable law for
      the
      extension of credit that is agreed to here (either before or after maturity).
      If
      any notice of interest accrual is sent and is in error, we mutually agree to
      correct it, and if you actually collect more interest than allowed by law and
      this agreement, you agree to refund it to me.

    INDEX
      RATE:
      The
      index will serve only as a device for setting the rate on this note. You do
      not
      guarantee by selecting this index, or the margin, that the rate on this note
      will be the same rate you charge on any other loans or class of loans to me
      or
      other borrowers.

    ACCRUAL
      METHOD:
      The
      amount of interest that I will pay on this loan will be calculated using the
      interest rate and accrual method stated on page 1 of this note. For the purpose
      of interest calculation, the accrual method will determine the number of days
      in
      a “year.” If no accrual method is stated, then you may, use any reasonable
      accrual method for calculating interest.

    POST
      MATURITY RATE:
      For
      purposes of deciding when the “Post Maturity Rate” (shown on page 1) applies,
      the term “maturity” means the date of the last scheduled payment indicated on
      page 1 of this note or the date you accelerate payment on the note, whichever
      is
      earlier.

    SINGLE
      ADVANCE LOANS:
      If this
      is a single advance loan, you and I expect that you will make only one advance
      of principal. However, you may add other amounts to the principal if you make
      any payments described in the “PAYMENTS BY LENDER” paragraph below, or if we
      have agreed that accrued interest not paid when due may be added to
      principal.

    MULTIPLE
      ADVANCE LOANS:
      If this
      is a multiple advance loan, you and I expect that you will make more than one
      advance of principal. If this is closed end credit, repaying a part of the
      principal will not entitle me to additional credit.

    PAYMENTS
      BY LENDER:
      If you
      are authorized to pay, on my behalf, charges I am obligated to pay (such as
      property insurance premiums), then you may treat those payments made by you
      as
      advances and add them to the unpaid principal under this note, or you may demand
      immediate payment of the charges.

    SETOFF:
      I agree
      that you may set off any amount due and payable under this note against any
      right I have to receive money from you.

    “Right
      to
      receive money from you” means:

    (1)
      any
      deposit account balance I have with you;

    (2)
      any
      money owed to me on an item presented to you or in your possession for
      collection or exchange; and

    (3)
      any
      repurchase agreement or other nondeposit obligation.

    “Any
      amount due and payable under this note” means the total amount of which you are
      entitled to demand payment under the terms of this note at the time you set
      off.
      This total includes any balance the due date for which you properly accelerate
      under this note.

    If
      my
      right to receive money from you is also owned by someone who has not agreed
      to
      pay this note, your right of setoff will apply to my interest in the obligation
      and to any other amounts I could withdraw on my sole request or endorsement.
      Your right of setoff does not apply to an account or other obligation where
      my
      rights are only as a representative. It also does not apply to any Individual
      Retirement Account or other tax-deferred retirement account.

    You
      will
      not be liable for this dishonor of any check when the dishonor occurs because
      you set off this debt against any of my accounts, I agree to hold you harmless
      from any such claims arising as a result of your exercise of your right of
      set-off.

    REAL
      ESTATE OR RESIDENCE SECURITY:
      If this
      note is secured by real estate or a residence that is personal property, the
      existence of a default and your remedies for such a default will be determined
      by applicable law, by the terms of any separate instrument creating the security
      interest and, to the extent not prohibited by law and not contrary in the terms
      of the separate security instrument, by the “Default” and “Remedies’ paragraphs
      herein.

    DEFAULT:
      I will
      be in default if any one or more of the following occur (1) I fail to make
      a
      payment on time or in the amount due; (2) I fail to keep the property insured,
      if required; (3) I fail to pay, or keep any promise, on any debt or agreement
      I
      have with you; (4) any other creditor of mine attempts to collect any debt
      I owe
      him through court proceedings; (5) I die, am declared incompetent, make an
      assignment for the benefit of creditors, or become insolvent (either because
      my
      liabilities exceed my assets or I am unable to pay my debts as they become
      due);
      (6) I make any written statement or provide any financial information that
      is
      untrue or inaccurate at the time it was provided; (7) I do or fail to do
      something which causes you to believe that you will have difficulty collecting
      the amount I owe you; (8) any collateral securing this note is used in a manner
      or for a purpose which threatens confiscation by a legal authority; (9) I change
      my name or assume an additional name without first notifying you before making
      such a change; (10) I fail to plant, cultivate and harvest crops in due season;
      (11) any loan proceeds are used for a purpose that will contribute to excessive
      erosion of highly erodible land or to the conversion of wetlands to produce
      an
      agricultural commodity, as further explained in 7 C.F.R. Part 1940, Subpart
      G,
      Exhibit M.

    REMEDIES:
      If I am
      in default on this note you have, but are not limited to, the following
      remedies:

    (1)
      You
      may demand immediate payment of all I owe you under this note (principal,
      accrued unpaid interest and other accrued charges).

    (2)
      You
      may set off this debt against any right I have to the payment of money from
      you,
      subject to the terms of the “Set-Off” paragraph herein.

    (3)
      [initiated and deleted]

    (4)
      You
      may refuse to make advances to me or allow purchases on credit by
      me.

    (5)
      You
      may use any remedy you have under state or federal law.

    By
      selecting any one or more of these remedies you do not give up your right to
      later use any other remedy. By waiving your right to declare an event to be
      a
      default, you do not waive your right to later consider the event as a default
      if
      it continues or happens again.

    COLLECTION
      COSTS AND ATTORNEY’S FEES:
      I agree
      to pay all costs of collection, replevin or any other or similar type of cost
      if
      I am in default. In addition, if you hire an attorney to collect this note,
      I
      also agree to pay any fee you incur with such attorney plus court costs (except
      where prohibited by law). To the extent permitted by the United States
      Bankruptcy Code, I also agree to pay the reasonable attorney’s fees and costs
      you incur to collect this debt so awarded by any court exercising jurisdiction
      under the Bankruptcy Code.

    WAIVER:
      I give
      up my rights to require you to do certain things. I will not require you
      to:

    (1)
      demand payment of amounts due (presentment);

    (2)
      obtain official certification of nonpayment (protest); or

    (3)
      give
      notice that amounts due have not been paid (notice of dishonor).

    I
      waive
      any defenses I have based on suretyship or impairment of collateral, I also
      give
      up any rights I may have under any valuation and appraisement laws which apply
      to me.

    OBLIGATIONS
      INDEPENDENT:
      I
      understand that I must pay this note even it someone also has also agreed to
      pay
      it (by, for example, signing this form or a separate guarantee or endorsement).
      You may sue me alone, or anyone also who is obligated on this note, or any
      number of us together, to collect this note. You may do so without any notice
      that it has not been paid (notice of dishonor). You may without notice release
      any party to this agreement without releasing any other party. If you give
      up
      any of your rights, with or without notice, it will not affect my duty to pay
      this note. Any extension of new credit to any of us, or renewal of this note
      by
      all or less than all of us will not release me from my duty to pay it. (Of
      course, you are entitled to only one payment in full.) I agree that you may
      at
      your option extend this note or the debt represented by this note, or any
      portion of the note or debt, from time to time without limit or notice and
      for
      any term without affecting my liability for payment of the note. I will not
      assign my obligation under this agreement without your prior written
      approval.

    FINANCIAL
      INFORMATION:
      I agree
      to provide you, upon request, any financial statement or information you may
      deem necessary. I warrant that the financial statements and information I
      provide to you are or will be accurate, correct and complete.

    NOTICE:
      Unless
      otherwise required by law, any notice to me shall be given by delivering it
      or
      by mailing it by first class mail addressed to me at my last known address.
      My
      current address is on page 1. I agree to inform you in writing of any change
      in
      my address. I will give any notice to you by mailing it first class to your
      address stated on page 1 of this agreement, or to any other address that you
      have designated.

    



    


    


    
      	
              DATE
                OF TRANSACTION

            	
              PRINCIPAL
                ADVANCE

            	
              BORROWER’S
                INITIALS

              (not
                required)

            	
              PRINCIPAL
                PAYMENTS

            	
              PRINCIPAL
                BALANCE

            	
              INTEREST
                RATE

            	
              INTEREST
                PAYMENTS

            	
              INTEREST
                PAID THROUGH

            
	 	
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    SIGNATURE
      PAGE

     

    Note
      #70-0028852, Dated 2/28/07

     

    IN
      WITNESS WHEREOF, the undersigned have executed and delivered this Agreement
      on
      the date and year first above written.

     

    “Borrowers”

    


    MISCOR
      GROUP, Ltd.

    


    By:/s/
      John Martell __________________

    John
      Martell, President

    


    


    HK
      ENGINE
      COMPONENTS, LLC

    


    By:/s/
      John Martell __________________

    John
      Martell, Managing Member

    


    


    MAGNETECH
      INDUSTRIAL SERVICES, INC.

    


    By:/s/
      John Martell __________________

    John
      Martell, President

    


    


    MAGNETECH
      POWER SERVICES, LLC

    


    By:/s/
      John Martell __________________

    John
      Martell, Managing Member

    


    


    MARTELL
      ELECTRIC, LLC

    


    By:/s/
      John Martell __________________

    John
      Martell, Managing Member