Document:

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:

      

      1-21-2014Subordination Agreement

    Exhibit
      10.6

     

    
 

    SUBORDINATION
      AGREEMENT

     

    THIS
      AGREEMENT is made and entered into effective this 9th
      day of
      March, 2007, by and between MISCOR Group, Ltd. (an Indiana corporation
      hereinafter referred to as the “Borrower”), MFB Financial (hereinafter referred
      to as the “Bank”) and the holder(s) of all or any portion of a subordinated
      secured convertible debenture (the “Debenture”) in an amount of up to
      $4,025,000.00 (with such holder(s) being referred to herein as the
“Subordinating Party”), acting by and through its/their duly authorized agent,
      Strasbourger Pearson Tulcin Wolff, Inc. (the “Agent”).

     

    W
      I T N E S S E T H:

     

    WHEREAS,
      Borrower is presently, or will hereafter become, indebted to Subordinating
      Party
      pursuant to the Debenture (a true and accurate copy of the Debenture is attached
      hereto as Exhibit “A”); and

     

    WHEREAS,
      Borrower and Subordinating Party have requested that Bank extend credit to
      Borrower, but Bank is willing to do so T and only it all of the indebtedness
      owing or to become owing by Borrower to Subordinating Party, and all collateral
      for such indebtedness, are expressly subordinated to any and all indebtedness
      now or hereafter owing to Bank by Borrower and all collateral
      therefor.

     

    NOW,
      THEREFORE, in consideration of the mutual terms and provisions contained herein,
      and in order for Borrower and Subordinating Party to induce Bank to extend
      credit to Borrower, 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 Borrower to Bank, including,
                but not
                limited to, future advances, and all obligations of Borrower 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 Borrower 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 Borrower, 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 Borrower to Bank represented by a certain
                promissory note dated February __, 2007, 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 Borrower to Subordinating Party, or any of them, including,
                but
                not limited to, future advances, and all obligations of Borrower
                under any
                and all notes, mortgages, security agreements, assignments, leases,
                guaranties, and all other agreements or documents heretofore or hereafter
                executed by Borrower to or in favor of Subordinating Party, including
                all
                interest, late charges, prepayment premiums, and other 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 Borrower,
                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 Debenture
                and all
                amounts owing thereunder, together with all renewals, extensions
                and
                modifications thereof.

            

    

     

    
      	d.  	
              Notwithstanding
                any other provision of this Agreement, including, but not limited
                to,
                subparagraph b of this paragraph, the amount of the Superior Indebtedness
                which shall have priority pursuant hereto shall be limited to the
                principal sum of $5,500,000.00, plus accrued and accruing interest
                on said
                principal sum and the costs described in paragraph 3 hereof unless
                

            

    

     

    
      
        
        

      

      
        2

        
          

        

      

      
        
        

      

    

    Agent,
      on
      behalf of Subordinating Party, agrees in writing to a greater amount. Any
      indebtedness owing by Borrower to Bank in excess of said amount ($5,500,000.00
      plus interest and costs) shall not be included in the term “Superior
      Indebtedness” for purposes of this Agreement, The remainder of this Agreement
      shall be interpreted with the limitation contained in this subparagraph in
      mind
      and the provisions of this subparagraph shall take precedence and priority
      over
      each and every conflicting provision of this Agreement.

     

    
      	e.  	
              It
                is 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 to Bank by Borrower either alone
                or
                in combination with others.

            

    

     

    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 Borrower 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 held 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
      hen held 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 Borrower expressly consent to
      the
      delivery, filing and recording of any such instruments or documents with such
      persons and authorities as Bank shall 

     

    
      
        
        

      

      
        3

        
          

        

      

      
        
        

      

    

    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 c0Uateral to any indebtedness then owing by
      Borrower to Bank secured thereby in any order as Bank deems
      appropriate.

     

    3.  Borrower
      agrees 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
      Borrower.

     

    4.  Borrower,
      and Agent on behalf of Subordinating Party, represent to Bank and agree that
      the
      amount of the Subordinated Debt is not and shall not hereafter be represented
      by
      any notes or other negotiable instruments, except the Debenture. Agent, on
      behalf of Subordinating Party, and Borrower will cause each instrument
      evidencing Subordinated Debt to be endorsed with the following
      legend:

     

    “The
      obligations of the Company created by this Debenture are subordinate in right
      of
      payment to any the Company pursuant to that certain Loan Agreement dated March
      9th,
      2007 by
      and between Company (now known as MISCOR Group, Ltd.”) and MFB Financial
      creating a $5.5 million credit facility (the “Credit Facility”), and each
      promissory note given by Company pursuant thereto.

     

    
      
        
        

      

      
        4

        
          

        

      

      
        
        

      

    

    Agent,
      Subordinating Party and Borrower 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 ad Imes 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, Agent and Borrower 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 foregohg shall not permit Borrower to incur or assume any
      indebtedness in violation of the terms governing the Superior Indebtedness.
      Agent on behalf of Subordinabng Party, and Borrower each will, at it’s 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.  Borrower
      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 Borrower
      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 

     

    
      
        
        

      

      
        5

        
          

        

      

      
        
        

      

    

    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 Borrower 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 Borrower 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 Borrower 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 subordinations 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 Borrower in
      favor of Bank, any release of any guarantor of the obligabons of Borrower 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 Borrower to Bank when due, any
      failure to give notice of acquisition or expected acquisition of a 

     

    
      
        
        

      

      
        6

        
          

        

      

      
        
        

      

    

    purchase
      money security interest, or any delay or omission by Bank in the exercise of
      any
      right or remedy against Borrower or any guarantor of the obligations of
      Borrowerto Bank.

     

    8.  In
      the
      event of the liquidation of Borrower or the Collateral, or distribution of
      Borrower’s assets, any obligation of Borrower to Bank shall be satisfied and
      discharged before Subordinating Party receives any distributive share or payment
      on account of its obligations against Borrower. Any dividends or other payments
      with respect to the Collateral, by virtue of any insolvency proceedings
      instituted by or against Borrower, 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 Borrower 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 dividends 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 Borrower which
      relate to the Superior Indebtedness; and Agent 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 Borrower or the Collateral or the distribution of Borrower’s
      assets and/or (b) on account of all or any of the indebtedness hereby
      subordinated.

     

    
      
        
        

      

      
        7

        
          

        

      

      
        
        

      

    

     

    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. In particular, but not in limitation of the foregoing, the person
      signing this Agreement on behalf of the Agent for Subordinating Party
      represents, warrants and certifies that the execution and delivery of this
      Agreement by Agent on behalf of Subordinating Party (i) do not violate the
      provisions of the Debenture 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. Agent and Borrower further represent, warrant and agree
      as
      follows:

     

    
      	A.  	
              A
                true and accurate copy of the Debenture is attached hereto as Exhibit
                “A.”

            

    

     

    
      	B.  	
              The
                Debenture has not been amended, supplemented, modified in any respect
                or
                to any extent, except that the maturity date has been extended to
                February
                28, 2008, and the amount of the “Credit Facility” to which the Debenture
                is subordinated has been increased to
                $5,500,000.00.

            

    

     

    
      	C.  	
              The
                “Company” under the Debenture is the Borrower, notwithstanding the name
                difference, as “Magnetech Integrated Services Corp.” is the former legal
                name of the Borrower, and “Magnetech Integrated Services Corp.” and the
                Borrower are one and the same entity. The same name change was effected
                by
                an amendment to Borrower’s Articles of Incorporation filed with the
                Indiana Secretary of State on September 23,
                2005.

            

    

     

    
      	D.  	
              The
                Debenture has been, and hereby is, deemed amended to the extent necessary
                to be consistent with, and to give full effect to, this Agreement
                and the
                subordinations provided for herein. To the extent any provision hereof
                is
                inconsistent in any respect or to any extent with this Subordination
                Agreement, and/or to the extent the provisions of this Agreement
                are
                inconsistent with the Debenture, the Debenture is hereby deemed modified
                and amended so that this Subordination Agreement is in all respects
                authorized by, and consistent with, the
                Debenture.

            

    

     

    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
      

     

    
      
        
        

      

      
        8

        
          

        

      

      
        
        

      

    

    signed
      by
      all parties. This Agreement is binding on, and shall inure to, the parties
      hereto and their respective heirs, representatives, successors and
      assigns.

     

    11.  Agent,
      on
      behalf of the Subordinating Party, and Borrower, each acknowledges and agrees
      that (i) it has been given the opportunity to consult with counsel and other
      advisors of its choice, and after having the opportunity to consult with such
      counsel and advisors, knowingly, voluntarily and without duress, coercion,
      unlawful restraint, intimidation or compulsion, enters into this Agreement,
      (ii)
      this Agreement has been entered into in exchange for good and valuable
      consideration, the receipt and sufficiency of which Borrower and the
      Subordinating Party each acknowledges, and (iii) it has carefully and completely
      read all of the terms and provisions of this Agreement and is 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 theirjoint 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, ad 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 in any action to enforce the terms of this Subordination Agreement
      may be made by serving a copy of 

     

    
      
        
        

      

      
        9

        
          

        

      

      
        
        

      

    

    the
      summons and complaint, in addition to any other relevant documents, by
      commercial overnight courier to the other party at its principal address set
      forth in this Subordination Agreement.

     

    14.  The
      subordination’s and priorities specified in this Subordination 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 subordinations 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.

            

    

     

    
      
        
        

      

      
        10

        
          

        

      

      
        
        

      

    

    

     

    
      	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 Rights 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.  Borrower
      agrees 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. Borrower agrees
      that
      unless such notice is given as promptly as possible (and in any event within
      ninety (90) days) after Borrower has knowledge, or with the exercise of
      reasonable diligence should have had knowledge, of any such action or inaction,
      Borrower shall not assert, and shall be deemed to have waived, any such claim
      or
      defense.

     

    
      
        
        

      

      
        11

        
          

        

      

      
        
        

      

    

    

     

    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 Agent and/or

                Subordinating
                  Party:

              	
                 

                Strasbourger
                  Pearson Tulcin Wolff, Inc.

                33
                  Whitehall Street, 17th
                  Floor

                New
                  York, NY 10004

              
	 	 	 
	 	
                If
                  to the Borrower:

              	
                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 

     

    
      
        
        

      

      
        12

        
          

        

      

      
        
        

      

    

    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.

     

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

     

    “BORROWER”

    

    MISCOR
      Group, Ltd., an Indiana corporation

    

    By:
      /s/
      JOHN A. MARTELL

    John
      A.
      Martell, President and Chief

    Executive
      Officer

    

    “SUBORDINATING
      PARTY” by its “AGENT”

    

    Strasbourger
      Pearson Tulcin Wolff, Inc., a New York Corporation

    

    By:
      /s/
      Michael Schumacher

    Michael
      Schumacher

    

    MFB
      Financial

    

    By:
      /s/
      Donald R. Kyle

    Donald
      R.
      Kyle, Chief Operating Officer

    

    

     

    
      
        
        

      

      
        13

        
          

        

      

      
        
        

      

    

    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. Martell, President and Chief Executive Officer, on behalf
      of
      MISCOR Group, Ltd., an Indiana Corporation 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

     

    STATE
      OF
      NEW YORK )

    )
      SS:

    NEW
      YORK
      COUNTY )

    

    Before
      me, the undersigned, a Notary Public in and for said County and State personally
      appeared Michael Schumacher, on behalf of Strasbourger Pearson Tulcin Wolff,
      Inc., a New York Corporation and acknowledged of the execution of the foregoing
      Subordination Agreement this 9th
      day of
      March, 2007.

     

    /s/
      illegible

    Notary
      Public, State of New York

    No.
      02G06031473

    Qualified
      in New York County

    Commission
      Expires September 20, 2010

     

    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

    
14

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