Shock bolt on the chain side. It's going to ruin the inner threads if I force it out. My only idea is to take a dremel and grind the bad threads away.

Maybe try to find a die in the form of a nut and repair the thread before removing. Or, if you remove the bolt as is, it might be possible to use a tap to correct any damage to the thread in the swing arm.

On my RD350B, someone had forced on a crown nut to the upper fork mount with the wrong thread pitch, but I managed to correct it with a nut shaped die with the correct pitch.

I would cut if off close to flush with your dremel 

Either grind off the bad threads like you said or cut if off close like msavitt said.  Don't know which would be quicker and easier.

I have used a small "V" shaped file to clean up threads like that.

i  forgot I have a thread file around here if I can find it,   bunged up the threads a v strom countshaft one time. If not,  I'm going to spring for a Harbor Freight tap and die set, see if that works before I start  cutting.

Those threads might clean up fine with a proper file.  Thread restorer die would obviously work too.  Good luck!

If you go with a tap n die set just be sure the 10mm is 1.25 pitch. Other thing is if its damaged is it because someone has belted it end on a compressed the threads so running die over makes what you can see look nice but might not be in time with whats in the arm--i'm complicating things sorry.