mis_8k0118ex1010.htm


    Exhibit
      10.10

     

    SUBORDINATION
      AGREEMENT

     

     

    This
      Subordination Agreement, dated as of January 14, 2008, is made by STRASBOURGER,
      PEARSON, TULCIN, WOLFFE,
      INC., a New York corporation, acting as the authorized agent for
      the holders of certain Subordinated Secured Convertible Debentures (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”), 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.

     

    The
      Subordinated Creditors have made loans or granted other financial accommodations
      to one or more of the Borrowers.

     

    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 Creditors’ loans and other financial accommodations 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
      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 Debentures 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 Creditors,
      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.

     

    “Debentures”
      means the Subordinated Secured Convertible Debentures issued in March 2005
      by
      MISCOR Group, Ltd. f/k/a Magnetech Integrated Services Corp. and payable to
      the
      order of the Subordinated Creditors in the original principal amounts set forth
      on Exhibit A
hereto,
      which debentures are scheduled to be paid in full on or before
      February 28, 2008, together with all renewals, extensions and modifications
      thereof and any note or notes issued in substitution
      therefor.

     

    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


    
      
        
        

      

      
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    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 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 Subordinated Creditors
      may accept scheduled payments of interest and principal required to be paid
      under the Debentures, so long as 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’ names.

     

    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 creditor (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.


    
      
        
        

      

      
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    6.           
      Action
      Concerning Collateral.

     

    (a)           
      Notwithstanding any Lien now held or hereafter acquired by the Subordinated
      Creditors, the Lender may take possession of, sell, dispose of, and 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 Creditors, 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 Creditors, may
      take
      such action on the Subordinated Creditors’ behalf.  The Subordinated
      Creditors hereby irrevocably appoint the Lender, or any of its officers or
      employees on behalf of the Lender, as the attorney-in-fact for the Subordinated
      Creditors


    
      
        
        

      

      
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    (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 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 its interests are not being adequately
      protected.

     

    8.           
      Restrictive
      Legend; Transfer of Subordinated Indebtedness.  The
      Subordinated Creditors will cause the Debentures 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 Debentures bearing such legend.  At the request of
      the Lender, the Subordinated Creditors shall deposit with the Lender the
      Debentures 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 holder of the
      Debentures 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 Creditors, 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;


    
      
        
        

      

      
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    (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 Creditors); and

     

    (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 Creditors:

     

    Strasbourger,
      Pearson, Tulcin, Wolffe, Inc.

    33
      Whitehall Street, 17th
      Floor

    New
      York, NY  10004

    Telefacsimile:  (212)
      785-1833

    Attention:       Mr.
      Michael J. Schumacher and

    Mr.
      Ron
      Moschetta 

     

    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


    
      
        
        

      

      
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    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 Creditors.

     

    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
      Creditors.

     

    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.

     

    THE
      PARTIES WAIVE ANY RIGHT TO TRIAL BY JURY IN ANY ACTION OR PROCEEDING BASED
      ON OR
      PERTAINING TO THIS ACKNOWLEDGMENT.


    
      
        
        

      

      
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    IN
      WITNESS WHEREOF, the Subordinated Creditors have executed this Subordination
      Agreement as of the date and year first above-written.

     

     

    
      
        	
                STRASBOURGER
                  PEARSON TULCIN WOLFF INC.

              
	
                By:

              	
                /s/
                  Michael J. Schumacher

              	 	
                By:

              	
                /s/
                  Rom Moschetta

              
	
                Printed
                  Name:

              	
                Michael
                  J. Schumacher

              	 	
                Printed
                  Name:

              	
                Rom
                  Moschetta

              
	
                Title:

              	
                President

              	 	
                Title:

              	 
	
                Date:

              	
                1/7/08

              	 	
                Date:

              	
                1/02/08

              


      

    

     

     


    
      
        
        

      

      
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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

            


    

     

     

     

     


    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    


     

    Exhibit
      A

     

    Attach
      copy of Debentures with following legend:

     

    THIS
      INSTRUMENT IS SUBJECT TO THE TERMS OF A SUBORDINATION AGREEMENT BY STRASBOURGER, PEARSON, TULCIN,
      WOLFFE,
      INC., AS AUTHORIZED AGENT, IN FAVOR OF WELLS FARGO BANK, NATIONAL
      ASSOCIATION, ACTING THROUGH ITS WELLS FARGO BUSINESS CREDIT OPERATING DIVISION,
      DATED AS OF JANUARY 14, 2008.