Insider Subordination Agreement


    Exhibit
      10.5

    

      INSIDER
        SUBORDINATION AGREEMENT

       

      THIS
        AGREEMENT is made and entered into effective this 9th
        day of
        March, 2007, by and between MISCOR Group, Ltd., HK Engine Components, LLC.
        (collectively, the “Borrowers”), MFB Financial (hereinafter referred to as the
“Bank”), and John A. Martell (the “Subordinating Party”).

       

      W
        I-T N E S S E T H:

       

      WHEREAS,
        Borrowers are presently, or will hereafter become, indebted to Subordinating
        Party as eAdenced by one or more promissory note(s) and other instruments
        (the
“Martell Notes”); and

       

      WHEREAS,
        Borrowers and Subordinating Party have requested that Bank extend credit
        to
        Borrowers, but Bank is willing to do so if, and only if, all of the indebtedness
        owing or to become owing by Borrowers to Subordinating Party, and all collateral
        for such indebtedness, are expressly subordnated to any and all indebtedness
        now
        or hereafter owhg to Bank by Borrowers and all collateral for such
        indebtedness.

       

      NOW,
        THEREFORE, in consideration of the mutual terms and provisions contained
        herein,
        and in order for Borrowers and Subordinating Party to induce Bank to extend
        credit to Borrowers, the parties agree to as follows:

       

      1.  For
        purposes hereof, the following terms shall have the following meanings:


       

      	a.  	
              “Bank”
                shall mean and refer to MFB Financial, a banking institution with
                its
                principal place of business located in St. Joseph County, Indiana,
                as well
                as to all related and affiliated financial institutions and entities,
                as
                well as to all successors, assigns and participants of MFB
                Financial.

            


       


      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      


      


       

      	b.  	
              “Superior
                Indebtedness” shall mean and refer to any and all indebtedness and
                obligations now or hereafter owing by one or more of the Borrowers
                to
                Bank, including, but not limited to, future advances, and all obligations
                of one or more of the Borrowers to Bank under any and all promissory
                notes, mortgages, security agreements, assignments, leases, guaranties,
                and all other agreements or documents heretofore or hereafter executed
                by
                one or more of the Borrowers to or in favor of Bank, including any
                and all
                interest, late charges, prepayment premiums, and all other amounts
                accruing or payable under any such documents, including principal
                and
                interest accruing before or after commencement of any voluntary or
                involuntary bankruptcy or reorganization, insolvency or similar
                proceedings regarding one or more of the Borrowers, whether such
                indebtedness or obligations be direct or indirect, absolute or contingent,
                or primary or secondary, and all partial or full extensions, renewals
                or
                modifications thereof. The “Superior Indebtedness” shall specifically
                include, but not be limited to, the indebtedness owing by Borrowers
                to
                Bank represented by a certain promissory note dated of even date
                herewith,
                in the original principal amount of $5,000,000.00, together with
                all
                renewals, extensions and modifications thereof, as well as all accrued
                and
                accruing interest and costs as provided in paragraph
                3.

            


       

      	c.  	
              “Subordinated
                Debt” shall mean any and all indebtedness and obligations now or hereafter
                owing by one or more of the Borrowers to Subordinating Party, including,
                but not limited to, future advances, and all obligations of one or
                more of
                the Borrowers under any and all notes, mortgages, security agreements,
                assignments, leases, guaranties, and all other agreements or documents
                heretofore or hereafter executed by one or more of the Borrowers
                to or in
                favor of Subordinating Party, including all interest, late charges,
                prepayment premiums, and othor amounts set forth in any such documents,
                and including principal and interest accruing before or after commencement
                of any voluntary or involuntary bankruptcy or reorganization, insolvency
                or similar proceedings regarding one or more of the Borrowers, whether
                such indebtedness or obligations be direct or indirect, absolute
                or
                contingent, or primary or secondary, and all partial or full extensions,
                renewals or modifications thereof. The “Subordinated Debt” shall
                specifically include, but not be limited to, the Martell Debt Instruments
                and all amounts owing thereunder, together with all renewals, extensions
                and modifications thereof.

            


       

      	d.  	
              It
                is understood and agreed that the “Subordinated Debt” shall include any
                and all indebtedness and liabilities of each and every nature and
                description owing or to become owing by one or more of the Borrowers
                to
                the Subordinating Party and/or to Subordinating Party’s successors and
                assigns. It is further understood and agreed that the “Superior
                Indebtedness” shall include any and all indebtedness and liabilities of
                each and every nature and description owing or to become owing by
                one or
                more of the Borrowers to Bank and/or to Bank’s successors and assigns.
                

            


       


      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      


      All
        references herein to “Borrowers” shall mean and refer to one or more of the
        Borrowers, in any combination. Accordingly, any reference to assets or property
        of Borrowers shall include any and all assets and property of one or more
        of the
        Borrowers, in any combination. All promises and agreements of Borrowers
        contained herein shall be construed as the promises and agreements of each
        of
        the Borrowers, Whenever the context thereof requires, reference herein made
        to
        the singular number shall be understood as including the plural, and likewise,
        the plural shall be understood as including the singular. Specifically, but
        not
        in limitation of the foregoing, the term “Borrowers” shall refer to each entity
        included in the definition of that term, above.

       

      2.  Subordinating
        Party hereby agrees that any and all of the Subordinated Debt shall be and
        hereby is absolutely and unconditionally subordinated in every manner and
        to
        every extent to the Superior Indebtedness and to the prior payment and
        satisfaction in full of the Superior Indebtedness. The Subordinating Party
        further agrees that each and every security interest, mortgage, lien, claim,
        right or title of Bank in, to or against any real or personal property or
        assets
        of Borrowers shall be superior to each and every security interest, mortgage
        or
        lien which Subordinating Party has or may acquire in the same property or
        assets. Each and every security interest, mortgage or lien hold by or in
        favor
        of Subordinating Party in, to or against such property or assets is and shall
        remain absolutely and unconditionally subordinated, junior, inferior and
        postponed in priority, operation and effect to the priority, operation and
        effect of any security interest, mortgage or lien held by or in favor of
        Bank,
        all with the same force and effect as though such security interest, mortgage
        or
        lien field by or in favor of Bank had attached and was perfected prior to
        the
        perfection of any such security interest, mortgage or lien of Subordinating
        Party. Subordinating Party agrees to execute such instruments and documents
        as
        Bank may request from time to time in order to evidence or accomplish the
        intent
        of this Agreement, and Subordinating Party and Borrowers expressly consent
        to
        the delivery, filing and recording of any such instruments or documents with
        such persons and authorities as Bank shall deem appropriate. Bank makes no
        representation or warranty concerning any collateral or the 

       


      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      


      validity,
        perfection or priority of any security interest, lien or mortgage. Bank shall
        have no duty to preserve, protect, care for, insure, take possession of,
        collect, dispose of or realize upon any property. Bank may in its discretion
        apply the proceeds of collateral to any indebtedness then owing by Borrowers
        to
        Bank secured thereby in any order as Bank deems appropriate.

       

      3.  Borrowers
        agree that any and all of the Superior Indebtedness must be fully paid and
        discharged, together with all interest thereon and all expenses of collecting
        the same or otherwise protecting and/or enforcing the rights and/or interests
        of
        Bank, including, but not limited to, attorneys’ and legal assistants’ fees and
        collection expenses, before any payment to Subordinating Party, by way of
        cash,
        setoff or otherwise, may be paid to Subordinating Party by Borrowers.
        Notwithstanding the foregoing and any other provision hereof, Borrowers shall
        be
        entitled to pay regularly scheduled interest payments on the Subordinated
        Debt
        provided that there shall not have occurred a default in any of Borrower’s
        obligations to Bank.

       

      4.  Subordinating
        Creditor and Borrowers will cause each instrument evidencing Subordinated
        Debt
        to be endorsed with the following legend:

       

      The
        indebtedness evidenced by this instrument is subordinated to the prior payment
        in full of the Superior Indebtedness (as defined in the Insider Subordination
        Agreement hereinafter referred ant to the Insider Subordination Agreement
        dated
        effective as of March 9th,
        2007,
        by the maker hereof and payee named herein in favor of MFB Financial, the
        Bank
        referred to in such Insider Subordination Agreement.”

       

      Subordinating
        Party and Borrowers also agree that each and every financing statement filed
        with any governmental office pertaining to the Subordinated Indebtedness
        and/or
        the security therefor shall contain the following:

       

      Notwithstanding
        the order of filing of financing statements concerning the Debtor, the security
        interests described herein are, and shall at all times 

       


      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      


      remain,
        subordinate and inferior to any and all security interests now or hereafter
        held
        by or in favor of MFB Financial and its successors and assigns.

       

      Further,
        Subordinating Party and Borrowers will mark their respective books of account
        in
        such a manner as shall be effective to give proper notice of the effect of
        this
        Subordination Agreement and will, in the case of any hereafter arising
        Subordinated Debt which is not evidenced by an instrument, upon Bank’s request,
        cause such Subordinated Debt to be evidenced by an appropriate instrument
        or
        instruments containing the language required above; provided however, that
        the
        foregoing shall not permit Borrowers to incur or assume any indebtedness
        in
        violation of the terms governing the Superior Indebtedness. Subordinating
        Party
        and Borrowers each will at their own expense and at any time and from time
        to
        time, promptly execute and deliver all further instruments and documents,
        and
        take all further action, that may be necessary or desirable, or that Bank
        may
        reasonably request, in order to protect any right or interest granted or
        purported to be granted hereby or to enable Bank to exercise and enforce
        its
        rights and remedies hereunder.

       

      5.  Borrowers
        shall not make any payment, and Subordinating Party shall not receive or
        accept
        any payment, with respect to any of the Subordinated Debt in violation of
        this
        Agreement. In the event Subordinating Party receives any payment from Borrowers
        that is not expressly permitted hereby, whether such payment be in cash by
        setoff (or otherwise, Subordinating Party shall be liable and accountable
        therefor to Bank. Subordinating Party shall be deemed to have received each
        and
        every such payment in trust for the use and benefit of Bank, and Subordinating
        Party shall not commingle the same with any other funds and shall pay over
        and
        deliver each such payment immediately to Bank, even if Bank does not make
        demand
        for such payment or delivery.

       

      6.  This
        subordination shall survive and remain in full force and effect in the event
        of
        any administration of the property and/or affairs of Borrowers arising from
        any
        assignment for the benefit of creditors, bankruptcy, receivership, liquidation
        or other like proceedings.

       

      7.  This
        Agreement is a continuing subordination and shall continue in full force
        and
        effect, and Bank may make extensions of credit to Borrowers in reliance upon
        this Agreement, at any time any Superior Indebtedness or costs described
        in
        Paragraph 3 hereof remain unpaid. Subordinating Party agrees that Bank, at
        any
        time and from time to time, may enter into such agreements with Borrowers
        as
        Bank may deem proper affecting any property which secures all or any portion
        of
        the Superior Indebtedness (the “Collateral”), and may sell, surrender or
        otherwise deal with any of the Collateral without notice to Subordinating
        Party
        and without in any way impairing or affecting this Agreement. The obligations
        of
        Subordinating Party, and the subordination’s provided for herein, shall not be
        affected or impaired by any compromise, release, renewal, extension,
        forbearance, indulgence, alteration, change in, modification of, grant of
        participation in, or other disposition of any documents or instruments executed
        by Borrowers in favor of Bank, any release of any guarantor of the obligations
        of Borrowers to Bank or any other person, any failure of Bank to pursue its
        remedies against the Collateral or any one or more of the guarantors or any
        other person, any failure to collect any of the indebtedness owing by Borrowers
        to Bank when due, any failure to give notice of acquisition or expected
        acquisition of a purchase money security interest, or any delay or omission
        by
        Bank in the exercise of any right or remedy against Borrowers or any guarantor
        of the obligations of Borrowers to Bank.

       

      8.  In
        the
        event of the liquidation of Borrowers or the Collateral, or distribution
        of
        Borrowers’ assets, any obligation of Borrowers to Bank shall be satisfied and
        discharged before Subordinating Party receives any distributive share or
        payment
        on account of its obligations 

       


      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      


      against
        Borrowers. Any dividends or other payments with respect to the Collateral,
        by
        virtue of any insolvency proceedings instituted by or against Borrowers,
        shall
        also be distributed first to Bank, in an amount required to satisfy the full
        about of the Superior Indebtedness. In order to enable Bank to enforce its
        rights hereunder in any such action or proceeding, Bank is hereby irrevocably
        authorized and empowered, in its discretion, to make and present, for and
        on
        behalf of Subordinating Party such proofs of claims against Borrowers or
        against
        any Bankruptcy trustee or debtor in possession on account of indebtedness
        hereby
        subordinated as Bank may deem expedient or proper, and to vote such proofs
        of
        claims in any such proceedings, and to receive and collect any and all Mends
        or
        other payments or disbursements made thereof in whatever form the same may
        be
        paid or issued, and to apply same on account of any indebtedness owing to
        Bank
        by Borrowers which relate to the Superior Indebtedness; and Subordinating
        Party
        further agree to execute and deliver to Bank such assignment(s), release(s)
        or
        other instruments as may be required by Bank in order to enable it to enforce
        any and all such claims and to collect any and all dividends or other payments
        or disbursements which may be made at any time (a) in connection with any
        such
        liquidation of Borrowers or the Collateral or the distribution of Borrowers’
assets and/or (b) on account of all or any of the indebtedness hereby
        subordinated.

       

      9.  All
        persons executing the Agreement in a representative capacity warrant that
        they
        have authority to execute this Agreement and bind the entities they purport
        to
        represent. Subordinating Party represents, warrants and certifies that the
        execution and delivery of this Agreement (i) do not violate the provisions
        of
        the Martell Debt Instruments and the documents pertaining thereto (ii) are
        binding acts of Subordinating Party, and (iii) this Agreement will be an
        enforceable obligation of Subordinating Party according to the terms and
        provisions hereof.

       

      10.  This
        Agreement constitutes the entire understanding of the parties hereto pertaining
        to the matters covered hereby and may only be modified or amended by a writing
        signed by ad parties. This Agreement is binding on, and shall inure to, the
        parties hereto and their respective heirs, representatives, successors and
        assigns.

       

      11.  Subordinating
        Party and each of the Borrowers acknowledge and agree that (i) they have
        been
        given the opportunity to consult with counsel and other advisors of their
        respective choice, and after having the opportunity to consult with such
        counsel
        and advisors, knowingly, voluntarily and without duress, coercion, unlawful
        restraint, intimidation or compulsion, enter into this Agreement, (ii) this
        Agreement has been entered into in exchange for good and valuable consideration,
        the receipt and sufficiency of which Borrowers and the Subordinating Party
        acknowledge, and (iii) they have carefully and completely read all of the
        terms
        and provisions of this Agreement and are not relying on the opinions or advice
        of Bank or its agents or representatives in entering into this
        Agreement.

       

      12.  The
        parties agree that this Agreement is the product of their joint efforts,
        that it
        expresses their agreement, and that it should not be interpreted in favor
        of or
        against any party merely because of that party’s efforts in preparing
        it.

       

      13.  This
        Agreement shall be enforceable in, and interpreted under, the laws of the
        State
        of Indiana. The parties hereto acknowledge that the transactions contemplated
        by
        this Subordination Agreement bear a reasonable relation to the state of Indiana.
        The parties hereto agree that the internal laws of the state of Indiana shall
        govern this Subordination Agreement and the exhibits hereto, including, but
        not
        limited to, all issues related to usury. Any action to enforce the terms
        of this
        Subordination Agreement or any of its exhibits shall be brought exclusively
        in


       


      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      


      the
        state
        and/or federal courts situated in St. Joseph County, Indiana. Service of
        process
        upon any party hereto in any action to enforce the terms of this Subordination
        Agreement may be made by serving a copy of the summons and complaint, in
        addition to any other relevant documents, by commercial overnight courier
        to
        such party at its principal address set forth in this Agreement.

       

      14.  The
        subordination’s and priorities specified in this Agreement are not conditioned
        upon the nonavoidability and perfection of the security interest to which
        another security interest is subordinated and, if the security interest to
        which
        another security interest is subordinated is not perfected or is avoidable,
        for
        any reason, then the subordination’s and relative priority agreements provided
        herein shall continue to be effective as to the particular Collateral which
        is
        the subject of the unperfected or avoidable security interest. In no event
        shall
        Subordinating Party institute, or join as a party in the institution of any
        action, suit or proceeding or take any action of any kind whatsoever seeking
        a
        determination that a security interest held by Bank is unperfected or avoidable,
        or in any way make any assertions to that effect. 

       

      15.  The
        following miscellaneous provisions shall apply to this Agreement:

       

      	a.  	
              Waiver.
                The failure of any party hereto at any time or from time to time
                to
                require performance of another party’s obligations under this Agreement
                shall in no manner affect the right to enforce any provision of this
                Agreement at a subsequent time, and the waiver of any rights arising
                out
                of any breach shall not be construed as a waiver of any rights arising
                out
                of any subsequent breach.

            


       

      	b.  	
              Severability.
                If any one or more of the provisions of this Agreement shall be held
                invalid or unenforceable, the validity and enforceability of all
                other
                provisions of this Agreement shall not be
                affected.

            


       

      	c.  	
              Counterparts.
                This Agreement may be executed in one or more counterparts, each
                of which
                shall be deemed an original but all of which together shall constitute
                one
                and the same instrument, and shall become effective when one or more
                counterparts have been signed by each of the
                parties.

            


       


      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      


      


       

      	d.  	
              Fees
                and Expenses.
                In the event any party breaches this Agreement, all costs and expenses,
                including attorneys, fees, incurred by a non-breaching party shall
                be
                included in the damages which may be recovered as a result of such
                breach
                or default. In any litigation relating to this Agreement and the
                transactions contemplated hereby, the prevailing party shall be entitled
                to recover its costs and reasonable attorneys’
                fees.

            


       

      	e.  	
              Limitations
                on fights of Third Parties.
                Nothing expressed or implied in this Agreement is intended or shall
                be
                construed to confer upon or give any person or entity other than
                the
                parties hereto any rights or remedies under or by reason of this
                Agreement
                or the transactions contemplated hereby.

            


       

      	f.  	
              Contents
                of Agreement.
                Each person signing this Agreement (whether for herself or for himself
                Individually or on behalf of an entity or organization) acknowledges
                that
                this Agreement may reflect changes from previous drafts, if any,
                and that
                he or she has read and reviewed this Agreement carefully. Each person
                signing this Agreement also acknowledges that he or she has not relied
                on
                any other party to this Agreement, or on any officer, agent, partner,
                employee or attorney of any other party to this Agreement, to explain
                the
                provisions of this Agreement to him or her, or to identify changes
                that
                have been made from prior drafts or versions of this Agreement, if
                any.
                Rather, each person signing this Agreement agrees to be solely responsible
                for being aware of the contents of this
                Agreement.

            


       

      16.  Borrowers
        and Subordinating Party agree to give Bank written notice, by registered
        or
        certified mail, postage prepaid, of any action or inaction by Bank or any
        of its
        officers, directors, employees, agents or attorneys in connection with this
        Agreement, the Superior Indebtedness, the Collateral, or any related
        transactions, that may be actionable against Bank or any officer, director,
        employee, agent or attorney of Bank, or a defense to the enforcement hereof
        or
        payment of any loans or any promissory note, including, but not limited to,
        any
        commission of a tort or violation of any contractual duty or duties implied
        by
        law. Borrowers and Subordinating Party agree that unless such notice is given
        as
        promptly as possible (and in any event within ninety (90) days) after Borrowers
        and/or Subordinating Party have knowledge, or with the exercise of reasonable
        diligence should have had knowledge, of any such 

       


      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      


      action
        or
        inaction, Borrowers and Subordinating Party shall not assert, and shall be
        deemed to have waived, any such claim or defense.

       

      All
        notices and other communications required or permitted to be given pursuant
        to
        the terms of this Subordination Agreement shall be in writing and mailed
        by
        registered or certified mail with return receipt requested, and delivered
        to the
        applicable party at the address indicated below:

       

      


       

        
          	 	
                  If
                    to Subordinating Party:

                	
                  John
                    A. Martell

                  1125
                    South Walnut Street

                  South
                    Bend, Indiana 46679

                
	 	 	 
	 	
                  If
                    to the Borrowers

                	
                  MISCOR
                    Group, Ltd.

                  1125
                    South Walnut Street

                  South
                    Bend, Indiana 46679

                  Attn:
                    President

                
	 	 	 
	 	
                  If
                    to Bank:

                	
                  MFB
                    Financial

                  4100
                    Edison Lakes Parkway, Suite 300

                  Mishawaka,
                    Indiana 46545

                  Attn:
                    Donald R. Kyle, Chief Operating Officer

                
	 	 	 
	 	
                  With
                    a copy to:

                	
                  Steven
                    L. Hostetler, Esq.

                  P.O.
                    Box 1210

                  Mishawaka,
                    Indiana 46546-1210

                


        

      

      


      17.  WAIVER
        OF JURY TRIAL.
        THE
        PARTIES HERETO, AFTER CONSULTING OR HAVING HAD THE OPPORTUNITY TO CONSULT
        WITH
        COUNSEL, KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE ANY RIGHT ANY OF
        THEM
        MAY HAVE TO A TRIAL BY JURY IN ANY LITIGATION BASED UPON OR ARISING OUT OF
        THIS
        AGREEMENT OR ANY RELATED INSTRUMENT OR AGREEMENT OR ANY OF THE TRANSACTIONS
        CONTEMPLATED BY THIS AGREEMENT OR ANY COURSE OF CONDUCT, DEALINGS, STATEMENTS,
        WHETHER ORAL OR WRITTEN, OR ACTIONS 

       


      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      


      OF
        ANY OF
        THEM. NONE OF THE PARTIES HERETO SHALL SEEK TO CONSOLIDATE, BY COUNTERCLAIM
        OR
        OTHERWISE ANY ACTION IN WHICH A JURY TRIAL HAS BEEN WAIVED WITH ANY OTHER
        ACTION
        IN WHICH A JURY TRIAL CANNOT BE OR HAS NOT BEEN WAIVED. THESE PROVISIONS
        SHALL
        NOT BE DEEMED TO HAVE BEEN MODIFIED IN ANY RESPECT OR RELINQUISHED BY ANY
        OF THE
        PARTIES EXCEPT BY A WRITTEN INSTRUMENT EXECUTED BY ALL OF THEM.

       

      Signatures
        on Following Page


      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      


      IN
        WITNESS WHEREOF, the parties hereto ave executed this Agreement on the date
        and
        year first above written.

      “BORROWERS”

      


      MISCOR
        GROUP, Ltd.

      


      By:
        /s/
        John A. Martell

      John
        A.
        Martell, President

      


      HK
        ENGINE
        COMPONENTS, LLC

      


      By:
        /s/
        John A. Martell

      John
        A.
        Martell, Management Member

      


      MAGNETECH
        INDUSTRIAL SERVICES, INC.

      


      By:
        /s/
        John A. Martell

      John
        A.
        Martell, President

      


      MAGNETECH
        POWER SERVICES, LLC

      


      By:
        /s/
        John A. Martell

      John
        A.
        Martell, President

      


      MARTELL
        ELECTRIC, LLC

      


      By:
        /s/
        John A. Martell

      John
        A.
        Martell, Managing Member

      


      “SUBORDINATING
        PARTY”

      


      /s/
        John A. Martell

      John
        A.
        Martell, Individually

      


      “BANK”

      MFB
        Financial

      


      By:
        /s/
        Donald R. Kyle

      Donald
        R.
        Kyle, Chief Operating Officer


      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      


      STATE
        OF
        INDIANA )

      )
        SS:

      ST.
        JOSEPH COUNTY )

      


      Before
        me, the undersigned, a Notary Public in and for said County and State personally
        appeared John A. Martel, Individually, and on behalf of MISCOR Group, Ltd.,
        HK
        Engine Components, LLC, Magnetech Industrial Services, Inc., Magnetech Power
        Services, LLC, and Martell Electric, LLC, and acknowledged of the execution
        of
        the foregoing Subordination Agreement this 8th
        day of
        March, 2007.

       

      /s/
        James M. Lewis

      James
        M.
        Lewis, Notary Public

      Residing
        in St. Joseph County, Indiana

      


      James
        E.
        Lewis

      Notary
        Public, State of Indiana

      St.
        Joseph County

      My
        Commission Expires

      February
        09, 2008

      My
        commission expires:

      


      Feb
        9,
        2008

      


       

      STATE
        OF
        INDIANA )

      )
        SS:

      ST.
        JOSEPH COUNTY )

      


      Before
        me, the undersigned, a Notary Public in and for said County and State personally
        appeared Donald R. Kyle, Chief Operating Officer, on behalf of MFB Financial,
        and acknowledged of the execution of the foregoing Subordination Agreement
        this
        9th
        day of
        March, 2007.

       

      /s/
        Susan M. Scheu

      Susan
        M.
        Scheu, Notary Public

      Residing
        in St. Joseph County, IN

      My
        commission expires:

      


      1-21-2014