Exhibit 10(g)

 

[BARCODE]

*01010055716200000110010E40*

 

COMMERCIAL SECURITY AGREEMENT

 

Principal

 

Loan Date

 

Maturity

 

Loan No

 

Call/Coll

 

Account

 

Officer

 

Initials

 

$5,000,000.00

 

05-21-2003

 

 

 

11001

 

402/326

 

N0100567162

 

RXW0Y

 

 

 

 

References in the shaded area are for Lender’s use only and do not limit the
applicability of this document to any particular loan or item.
Any item above containing ***** has been omitted due to text length limitations.

 

Grantor:

The Ohio Art Company
1 Toy St., P.O. Box 111
Bryan, OH 43506

 

Lender:

KeyBank National Association
OH-MM-Toledo-Seagate
3 Seagate
Toledo, OH 43504

 

THIS COMMERCIAL SECURITY AGREEMENT dated May 21, 2003, is made and executed
between The Ohio Art Company (“Grantor”) and KeyBank National Association
(“Lender”).

 

GRANT OF SECURITY INTEREST. For valuable consideration, Grantor grants to Lender
a security interest in the Collateral to secure the Indebtedness and agrees that
Lender shall have the rights stated in this Agreement with respect to the
Collateral, in addition to all other rights which Lender may have by law.

 

COLLATERAL DESCRIPTION. The word “Collateral” as used in this Agreement means
the following described property, whether now owned or hereafter acquired,
whether now existing or hereafter arising, and whenever located, in which
Grantor is giving to Lender a security interest for the payment of the
Indebtedness and performance of all other obligations under the Note and this
Agreement:

 

All inventory, equipment, accounts (including but not limited to all
health–care–insurance receivables), chattel paper, instruments (including but
not limited to all promissory notes), letter–of–credit rights, letters of
credit, documents, deposit accounts, investment property, money, other rights to
payment and performance, and general intangibles (including but not limited to
all software and all payment intangibles); all attachments, accessions,
accessories, fittings, increases, tools, parts, repairs, supplies, and
commingled goods relating to the foregoing property, and all additions,
replacements of and substitutions for all or any part of the foregoing property;
all insurance refunds relating to the foregoing property; all good will relating
to the foregoing property; all records and data and embedded software relating
to the foregoing property, and all equipment, inventory and software to utilize,
create, maintain and process any such records and data on electronic media; and
all supporting obligations relating to the foregoing property; all whether now
existing or hereafter arising, whether now owned or hereafter acquired or
whether now or hereafter subject to any rights in the foregoing property; and
all products and proceeds (including but not limited to all insurance payments)
of or relating to the foregoing property; whether any of the foregoing is owned
now or acquired later; all accessions, additions, replacements, and
substitutions relating to any of the foregoing; all records of any kind relating
to any of the foregoing; all proceeds relating to any of the foregoing
(including insurance, general intangibles and accounts proceeds)

 

In addition, the word “Collateral” also includes all the following, whether now
owned or hereafter acquired, whether now existing or hereafter arising, and
whenever located:

 

(A)      All accessions, attachments, accessories, tools, parts, supplies,
replacements of and additions to any of the collateral described herein, whether
added now or later,

 

(B)        All products and produce of any of the property described in this
Collateral section.

 

(C)        All accounts, general intangibles, instruments, rents, monies,
payments, and all other rights, arising out of a sale, lease, or other
disposition of any of the property described in this Collateral section.

 

(D)       All proceeds (including insurance proceeds) from the sale,
destruction, loss, or other disposition of any of the property described in this
Collateral section, and sums due from a third party who has damaged or destroyed
the Collateral or from that party’s insurer, whether due to judgment, settlement
or other process.

 

(E)         All records and data relating to any of the property described in
this Collateral section, whether in the form of a writing, photograph,
microfilm, microfione, or electronic media, together with all of Grantor’s
right, title, and interest in and to all computer software required to utilize,
create, maintain, and process any such records or data on electronic media.

 

Despite any other provision of this Agreement, Lender is not granted, and will
not have, a nonpurchase money security interest in household goods, to the
extent such a security interest would be prohibited by applicable law. In
addition, if because of the type of any Property, Lender is required to give a
notice of the right to cancel under Truth in Lending for the Indebtedness, then
Lender will not have a security interest in such Collateral unless and until
such a notice is given.

 

CROSS–COLLATERALIZATION. In addition to the Note, this Agreement secures all
obligations, debts and liabilities, plus interest thereon, of Grantor to Lender,
or any one or more of them, as well as all claims by Lender against Grantor or
any one or more of them, whether now existing or hereafter arising, whether
related or unrelated to the purpose of the Note, whether voluntary or otherwise,
whether due or not due, direct or indirect, determined or undetermined, absolute
or contingent, liquidated or unliquidated whether Grantor may be liable
individually or jointly with others, whether obligated as guarantor, surety,
accommodation party or otherwise, and whether recovery upon such amounts may be
or hereafter may become barred by any statute of limitations, and whether the
obligation to repay such amounts may be or hereafter may become otherwise
unenforceable.

 

RIGHT OF SETOFF. To the extent permitted by applicable law, Lender reserves a
right of setoff in all Grantor’s accounts with Lender (whether checking,
savings, or some other account). This includes all accounts Grantor holds
jointly with someone else and all accounts Grantor may open in the future.
However, this does not include any IRA or Keogh accounts, or any trust accounts
for which setoff would be prohibited by law. Grantor authorizes Lender, to the
extent permitted by applicable law, to charge or setoff all sums owing on the
Indebtedness against any and all such accounts.

 

GRANTOR’S REPRESENTATIONS AND WARRANTIES WITH RESPECT TO THE COLLATERAL. With
respect to the Collateral, Grantor represents and promises to Lender that:

 

Perfection of Security Interest. Grantor agrees to execute financing statements
and to take whatever other actions are requested by Lender to perfect and
continue Lender’s security interest in the Collateral. Upon request of Lender,
Grantor will deliver to Lender any and all of the documents evidencing or
constituting and Collateral, and Grantor will note Lender’s interest upon any
and all chattel paper if not delivered to Lender for possession by Lender. This
is a continuing Security Agreement and will continue in effect even though all
or any part of the

 

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Indebtedness is paid in full and even though for a period of time Grantor may
not be indebted to Lender.

 

Notices to Lender. Grantor will promptly notify Lender in writing at Lender’s
address shown above (or such other addresses as Lender may designate from time
to time) prior to any (1) change in Grantor’s name; (2) change in Grantor’s
assumed business name(s); (3) change in the management of the Corporation
Grantor; (4) change in the authorized signer(s); (5) change in Grantor’s
principal office address; (6) change in Grantor’s state of organization; (7)
conversion of Grantor to a new or different type of business entity; or (8)
change in any other aspect of Grantor that directly or indirectly relates to any
agreements between Grantor and Lender. No change in Grantor’s name or state of
organization will take effect until after Lender has received notice.

 

No Violation. The execution and delivery of this Agreement will not violate any
law or agreement governing Grantor or to which Grantor is a party, and its
certificate or articles of incorporation and bylaws or code of regulations do
not prohibit any term or condition of this Agreement.

 

Enforceability of Collateral. To the extent the Collateral consists of accounts,
chattel paper, or general intangibles, as defined by the Uniform Commercial
Code, the Collateral is enforceable in accordance with its terms, is genuine,
and fully complies with all applicable laws and regulations concerning form,
content and manner of preparation and execution, and all persons appearing to be
obligated on the Collateral have authority and capacity to contract and are in
fact obligated as they appear to be on the Collateral. At the time any Account
becomes subject to a security interest in favor of Lender, the Account shall be
a good and valid account representing an undisputed, bona fide indebtedness
incurred by the account debtor, for merchandise held subject to delivery
instructions or previously shipped or delivered pursuant to a contract of sale,
or for services previously performed by Grantor with or for the account debtor.
So long as this Agreement remains in effect, Grantor shall not, without Lender’s
prior written consent, compromise, settle, adjust, or extend payment under or
with regard to any such Accounts. There shall be no setoffs or counterclaims
against any of the Collateral, and no agreement shall have been made under which
any deductions or discounts may be claimed concerning the Collateral except
those disclosed to Lender in writing.

 

Location of the Collateral. Except in the ordinary course of Grantor’s business,
Grantor agrees to keep the Collateral (or to the extent the Collateral consists
of intangible property such as accounts or general intangibles, the records
concerning the Collateral) at Grantor’s address shown above or at such other
locations as are acceptable to Lender. Upon Lender’s request, Grantor will
deliver to Lender in form satisfactory to Lender a schedule of real properties
and Collateral locations relating to Grantor’s operations, including without
limitation the following: (1) all real property Grantor owns or is purchasing;
(2) all real property Grantor is renting or leasing; (3) all storage facilities
Grantor owns, rents, leases, or uses; and (4) all other properties where
Collateral is or may be located.

 

Removal of the Collateral. Except in the ordinary course of Grantor’s business,
including the sales of inventory, Grantor shall not remove the Collateral from
its existing location without Lender’s prior written consent. To the extent that
the Collateral consists of vehicles, or other titled property, Grantor shall not
take or permit any action which would require application for certificates of
title for the vehicles outside the State of Ohio, without Lender’s prior written
consent. Grantor shall, whenever requested, advise Lender of the exact location
of the Collateral.

 

Transactions Involving Collateral. Except for inventory sold or accounts
collected in the ordinary course of Grantor’s business, or as otherwise provided
for in this Agreement, Grantor shall not sell, offer to sell, or otherwise
transfer or dispose of the Collateral. While Grantor is not in default under
this Agreement, Grantor may sell inventory, but only in the ordinary course of
its business and only to buyers who qualify as a buyer in the ordinary course of
business. A sale in the ordinary course of Grantor’s business does not include a
transfer in partial or total satisfaction of a debt of any bulk sale. Grantor
shall not pledge, mortgage, encumber or otherwise permit the Collateral to be
subject to any lien, security interest, encumbrance, or charge, other than the
security interest provided for in this Agreement, without the prior written
consent of Lender.  This includes security interests even if junior in right to
the security interests granted under this Agreement. Unless waived by Lender,
all proceeds from any disposition of the Collateral (for whatever reason) shall
be held in trust for Lender and shall not be commingled with any other funds;
provided however, this requirement shall not constitute consent by Lender to any
sale or other disposition. Upon receipt, Grantor shall immediately deliver any
such proceeds to Lender.

 

Title. Grantor represents and warrants to Lender that Grantor holds good and
marketable title to the Collateral, free and clear of all liens and encumbrances
except for the lien of this Agreement. No financing statement covering any of
the Collateral is on file in any public office other than those which reflect
the security interest created by this Agreement or to which Lender has
specifically consented. Grantor shall defend Lender’s rights in the Collateral
against the claims and demands of all other persons.

 

Repairs and Maintenance. Grantor agrees to keep and maintain, and to cause
others to keep and maintain, the Collateral in good order, repair and condition
at all times while this Agreement remains in effect. Grantor further agrees to
pay when due all claims for work done on, or services rendered or material
furnished in connection with the Collateral so that no lien or encumbrance may
ever attach to or be filed against the Collateral.

 

Inspection of Collateral. Lender and Lender’s designated representatives and
agents shall have the right at all reasonable times to examine and inspect the
Collateral wherever located.

 

Taxes, Assessments and Liens. Grantor will pay when due all taxes, assessments
and liens upon the Collateral, its use or operation, upon this Agreement, upon
any promissory note or notes evidencing the indebtedness, or upon any of the
other Related Documents. Grantor may withhold any such payment or may elect or
contest any lien if Grantor is in good faith conducting an appropriate
proceeding to contest the obligation to pay and so long as Lender’s interest in
the Collateral is not jeopardized in Lender’s sole opinion. If the Collateral is
subjected to a lien which is not discharged within fifteen (15) days, Grantor
shall deposit with Lender cash, a sufficient corporate surety bond or other
security satisfactory to Lender in an amount adequate to provide for the
discharge of the lien plus any interest, costs, attorneys’ fees or other charges
that could accrue as a result of foreclosure or sale of the Collateral. In any
contest Grantor shall defend itself and Lender and shall satisfy any final
adverse judgment before enforcement against the Collateral. Grantor shall name
Lender as an additional obligee under any surety bond furnished in the contest
proceedings. Grantor further agrees to furnish Lender with evidence that such
taxes, assessments, and governmental and other charges have been paid in full
and in a timely manner. Grantor may withhold any such payment or may elect to
contest any lien if Grantor is in good faith conducting an appropriate
proceeding to contest the obligation to pay and so long as Lender’s interest in
the Collateral is not jeopardized.

 

Compliance with Governmental Requirements. Grantor shall comply promptly with
all laws, ordinances, rules and regulations of all governmental authorities, now
or hereafter in effect, applicable to the ownership, production, disposition, or
use of the Collateral, including all laws or regulations relating to the undue
erosion of highly-erodible land or relating to the conversion of wetlands for
the production of an agricultural product or commodity. Grantor may contest in
good faith any such law, ordinance or regulation and withhold compliance during
any proceeding, including appropriate appeals, so long as Lender’s interest in
the Collateral, in Lender’s opinion, is not jeopardized.

 

Hazardous Substances. Grantor represents and warrants that the Collateral never
has been, and never will be so long as this Agreement remains a lien on the
Collateral, used in violation of any Environmental Laws or for the generation,
manufacture, storage, transportation, treatment, disposal, release or threatened
release of any Hazardous Substance. The representations and warranties contained
herein are based on Grantor’s due diligence in investigating the Collateral for
Hazardous Substances. Grantor hereby (1) releases and waives any future claims
against Lender for indemnity or contribution in the event Grantor becomes liable
for cleanup or other costs under any Environmental Laws, and (2) agrees to
indemnify and hold harmless Lender against any and all claims and losses
resulting from a breach of this provision of this Agreement. This obligation to
indemnify shall survive the payment of the Indebtedness and the satisfaction of
this Agreement.

 

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Maintenance of Casualty Insurance.  Grantor shall procure and maintain all risks
insurance, including without limitation fire, theft and liability coverage
together with such other insurance as Lender may require with respect to the
Collateral, in form, amounts, coverages and basis reasonably acceptable to
Lender and issued by a company or companies reasonably acceptable to Lender.
Grantor, upon request of Lender, will deliver to Lender from time to time the
policies or certificates of insurance in form satisfactory to Lender, including
stipulations that coverages will not be cancelled or diminished without at least
ten (10) days’ prior written notice to Lender and not including any disclaimer
of the insurer’s liability for failure to give such a notice.  Each insurance
policy also shall include an endorsement providing that coverage in favor of
Lender will not be impaired in any way by any act, omission or default of
Grantor or any other person.  In connection with all policies covering assets in
which Lender holds or is offered a security interest, Grantor will provide
Lender with such loss payable or other endorsements as Lender may require.  If
Grantor at any time fails to obtain or maintain any insurance as required under
this Agreement, Lender may (but shall not be obligated to) obtain such insurance
as Lender deems appropriate, including if Lender so chooses “single interest
insurance,” which will cover only Lender’s interest in the Collateral.

 

Application of Insurance Proceeds.  Grantor shall promptly notify Lender of any
loss or damage to the Collateral.  Lender may make proof of loss if Grantor
fails to do so within fifteen (15) days of the casualty.  All proceeds of any
insurance on the Collateral, including accrued proceeds thereon, shall be held
by Lender as part of the Collateral.  If Lender consents to repair or
replacement of the damaged or destroyed Collateral, Lender shall, upon
satisfactory proof of expenditure, pay or reimburse Grantor from the proceeds
for the reasonable cost of repair or restoration.  If Lender does not consent to
repair or replacement of the Collateral, Lender shall retain a sufficient amount
of the proceeds to pay all of the indebtedness, and shall pay the balance to
Grantor.  Any proceeds which have not been disbursed within six (6) months after
their receipt and which Grantor has not committed to the repair or restoration
of the Collateral shall be used to prepay the indebtedness.

 

Insurance Reserves.  Lender may require Grantor to maintain with Lender reserves
for payment of insurance premiums, which reserves shall be created by monthly
payments from Grantor of a sum estimated by Lender to be sufficient to produce,
at least fifteen (15) days before the premium due date, amounts at least equal
to the insurance premiums to be paid.  If fifteen (15) days before payment is
due, the reserve funds are insufficient, Grantor shall upon demand pay any
deficiency to Lender.  The reserve funds shall be held by Lender as a general
deposit and shall constitute a non-interest-bearing account which Lender may
satisfy by payment of the insurance premiums required to be paid by Grantor as
they become due.  Lender does not hold the reserve funds in trust for Grantor,
and Lender is not the agent of Grantor for payment of the insurance premiums
required to be paid by Grantor.  The responsibility for the payment of premiums
shall remain Grantor’s sole responsibility.

 

Insurance Reports.  Grantor, upon request of Lender, shall furnish to Lender
reports on each existing policy of insurance showing such information as Lender
may reasonably request including the following: (1) the name of the insurer; (2)
the risks insured; (3) the amount of the policy; (4) the property insured; (5)
the then current value on the basis of which insurance has been obtained and the
manner of determining that value; and (6) the expiration date of the policy.  In
addition, Grantor shall upon request by Lender (however not more often than
annually) have an independent appraiser satisfactory to Lender determine, as
applicable, the cash value or replacement cost of the Collateral.

 

Financing Statements.  Grantor authorizes Lender to file a UCC-1 financing
statement, or alternatively, a copy of this Agreement to perfect Lender’s
security interest.  At Lender’s request, Grantor additionally agrees to sign all
other documents that are necessary to perfect, protect, and continue Lender’s
security interest in the Property.  Grantor will pay all filing fees, the
transfer fees, and other fees and costs involved unless prohibited by law or
unless Lender is required by law to pay such fees and costs.  Grantor
irrevocably appoints Lender to execute financing statements and documents of
title in Grantor’s name and to execute all documents necessary to transfer title
if there is a default. Lender may file a copy of this Agreement as a financing
statement.  If Grantor changes Grantor’s name or address, or the name or address
of any person granting a security interest under this Agreement changes, Grantor
will promptly notify the Lender of such change.

 

GRANTOR’S RIGHT TO POSSESSION AND TO COLLECT ACCOUNTS.  Until default and except
as otherwise provided below with respect to accounts, Grantor may have
possession of the tangible personal property and beneficial use of all the
Collateral and may use it in any lawful manner not inconsistent with this
Agreement or the Related Documents, provided that Grantor’s right to possession
and beneficial use shall not apply to any Collateral where possession of the
Collateral by Lender is required by law to perfect Lender’s security interest in
such Collateral.  Until otherwise notified by Lender, Grantor may collect any of
the Collateral consisting of accounts.  At any time and even though no Default
exists, Lender may exercise its rights to collect the accounts and to notify
account debtors to make payments directly to Lender for application to the
Indebtedness.  If Lender at any time has possession of any Collateral, whether
before or after Default, Lender shall be deemed to have exercised reasonable
care in the custody and preservation of the Collateral if Lender takes such
action for that purpose as Grantor shall request or as Lender, in Lender’s sole
discretion, shall deem appropriate under the circumstances, but failure to honor
any request by Grantor shall not of itself be deemed to be a failure to exercise
reasonable care.  Lender shall not be required to take any steps necessary to
preserve any rights in the Collateral against prior parties, nor to protect,
preserve or maintain any security interest given to secure the indebtedness.

 

LENDER’S EXPENDITURES.  If any action or proceeding is commenced that would
materially affect Lender’s interest in the Collateral or if Grantor fails to
comply with any provision of this Agreement or any Related Documents, including
but not limited to Grantor’s failure to discharge or pay when due any amounts
Grantor is required to discharge or pay under this Agreement or any Related
Documents, Lender on Grantor’s behalf may (but shall not be obligated to) take
any action that Lender deems appropriate, including but not limited to
discharging or paying all taxes, liens, security interests, encumbrances and
other claims, at any time levied or placed on the Collateral and paying all
costs for insuring, maintaining and preserving the Collateral.  All such
expenditures incurred or paid by Lender for such purposes will then bear
interest at the rate charged under the Note from the date incurred or paid by
Lender to the date of repayment by Grantor.  All such expenses will become a
part of the Indebtedness and, at Lender’s option, will (A) be payable or demand;
(B) be added to the balance of the Note and be apportioned among and be payable
with any installment payments to become due during either (1) the term of any
applicable insurance policy; or (2) the remaining term of the Note; or (C) be
treated as a balloon payment which will be due and payable at the Note’s
maturity.  The Agreement also will secure payment of these amounts.  Such right
shall be in addition to all other rights and remedies to which Lender may be
entitled upon Default.

 

DEFAULT.  Default will occur if payment in full is not made immediately when
due.

 

RIGHTS AND REMEDIES ON DEFAULT.  If Default occurs under this Agreement, at any
time thereafter, Lender shall have all the rights of a secured party under the
Ohio Uniform Commercial Code.  In addition and without limitation, Lender may
exercise any one or more of the following rights and remedies:

 

Accelerate Indebtedness.  Lender may declare the entire Indebtedness, including
any prepayment penalty which Grantor would be required to pay, immediately due
and payable, without notice of any kind to Grantor.

 

Assemble Collateral.  Lender may require Grantor to deliver to Lender all or any
portion of the Collateral and any and all certificates of title and other
documents relating to the Collateral.  Lender may require Grantor to assemble
the Collateral and make it available to Lender at a place to be designated by
Lender.  Lender also shall have full power to enter upon the property of Grantor
to take possession of and remove the Collateral.  If the Collateral contains
other goods not covered by this Agreement at the time of repossession, Grantor
agrees Lender may take such other goods, provided that Lender makes reasonable
efforts to return them to Grantor after repossession.

 

Sell the Collateral.  Lender shall have full power to sell, lease, transfer, or
otherwise deal with Collateral or proceeds thereof in Lender’s own name or that
of Grantor.  Lender may sell the Collateral at public auction or private sale. 
Unless the Collateral threatens to decline speedily in value or is of a type
customarily sold on a recognized market Lender will give Grantor, and other
persons as required by law, reasonable notice of

 

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the time and place of any public sale, or the time after which any private sale
or any other disposition of the Collateral is to be made. However, no notice
need be provided to any person who, after Event of Default occurs, enters into
and authenticates an agreement waiving that person’s right to notification of
sale. The requirements of reasonable notice shall be met if such notice is given
at least ten (10) days before the time of the sale or disposition. All expenses
relating to the disposition of the Collateral, including without limitation the
expenses of retaking, holding, insuring, preparing for sale and selling the
Collateral, shall become a part of the Indebtedness secured by this Agreement
and shall be payable on demand, with interest at the Note rate from date of
expenditure until repaid.

 

Appoint Receiver.  Lender shall have the right to have a receiver appointed to
take possession of all or any part of the Collateral, with the power to protect
and preserve the Collateral, to operate the Collateral preceding foreclosure or
sale, and to collect the Rents from the Collateral and apply the proceeds, over
and above the cost of the receivership, against the Indebtedness. The receiver
may serve without bond if permitted by law.  Lender’s right to the appointment
of a receiver shall exist whether or not the apparent value of the Collateral
exceeds the Indebtedness by a substantial amount. Employment by Lender shall not
disqualify a person from serving as a receiver.

 

Collect Revenues, Apply Accounts.  Lender, either itself or through a receiver,
may collect the payments, rents, income and revenues from the Collateral. Lender
may at any time in Lender’s discretion transfer any Collateral into Lender’s own
name or that of Lender’s nominee and receive the payments, rents, income, and
revenues therefrom and hold the same as security for the Indebtedness or apply
it to payment of the Indebtedness in such order of preference as Lender may
determine. Insofar as the Collateral consists of accounts, general intangibles,
insurance policies, instruments, chattel paper, chooses in action, or similar
property, Lender may demand, collect, receipt for, settle, compromise, adjust,
sue for, foreclose, or realize on the Collateral as Lender may determine,
whether or not Indebtedness or Collateral is then due. For these purposes,
Lender may, on behalf of and in the name of Grantor, receive open, and dispose
of mail addressed to Grantor; change any address to which mail and payments are
to be sent: and endorse notes, checks, drafts, money orders, documents of file,
instruments and items pertaining to payment, shipment, or storage of any
Collateral. To facilitate collection, Lender may notify account debtors and
obligors on any Collateral to make payments directly to Lender.

 

Obtain Deficiency.  If Lender chooses to sell any or all of the Collateral,
Lender may obtain a judgment against Grantor for any deficiency remaining on the
Indebtedness due to Lender after application of all amounts received from the
exercise of the rights provided in this Agreement. Grantor shall be liable for a
deficiency even if the transaction described in this subsection is a sale of
accounts or chattel paper.

 

Other Rights and Remedies.  Lender shall have all the rights and remedies of a
secured creditor under the provisions of the Uniform Commercial Code, as may be
amended from time to time. In addition, Lender shall have and may exercise any
or all other rights and remedies it may have available at law, in equity, or
otherwise.

 

Election of Remedies.  Except as may be prohibited by applicable law, all of
Lender’s rights and remedies, whether evidenced by this Agreement, the Related
Documents, or by any other writing, shall be cumulative and may be exercised
singularly or concurrently. Election by Lender to pursue any remedy shall not
exclude pursuit of any other remedy, and an election to make expenditures or to
take action to perform an obligation of Grantor under this Agreement, after
Grantor’s failure to perform, shall not affect Lender’s right to declare a
default and exercise its remedies.

 

MISCELLANEOUS PROVISIONS.  The following miscellaneous provisions are a part of
this Agreement:

 

Amendments.  This Agreement, together with any Related Documents, constitutes
the entire understanding and agreement of the parties as to the matters set
forth in this Agreement.  No alteration of or amendment to this Agreement shall
be effective unless given in writing and signed by the party or parties sought
to be changed or bound by the alteration or amendment.

 

Attorneys’ Fees;  Expenses. Grantor agrees to pay upon demand all of Lender’s
costs and expenses, including Lender’s attorney’s fees and Lender’s legal
expenses, incurred in connection with the enforcement of this Agreement. Lender
may hire or pay someone else to help enforce this Agreement, and Grantor shall
pay the costs and expenses of such enforcement. Costs and expenses include
Lender’s attorneys’ fees and legal expenses whether or not there is a lawsuit,
including attorneys’ fees and legal expenses for bankruptcy proceedings
(including efforts to modify or vacate any automatic stay or injunction),
appeals, and any anticipated post–judgment collection services. Grantor also
shall pay all court costs and such additional fees as may be directed by the
court.

 

Caption Headings.  Caption headings in this Agreement are for convenience
purposes only and are not to be used to interpret or define the provisions of
this Agreement.

 

Governing Law.  This Agreement will be governed by, construed and enforced in
accordance with federal law and laws of the State of Ohio. This Agreement has
been accepted by Lender in the State of Ohio.

 

No Waiver by Lender. Lender shall not be deemed to have waived any rights under
this Agreement unless such waiver is given in writing and signed by Lender. No
delay or omission on the part of Lender in exercising any right shall operate as
a waiver of such right or any other right. A waiver by Lender of a provision of
this Agreement shall not prejudice or constitute a waiver of Lender’s right
otherwise to demand strict compliance with that provision or any other provision
of this Agreement. No prior waiver by Lender, nor any course of dealing between
Lender and Grantor, shall constitute a waiver of any Lender’s rights or of any
of Grantor’s obligations as to any future transactions. Whenever the consent of
Lender is required under this Agreement, the granting of such consent by Lender
in any instance shall not constitute continuing consent to subsequent instances
where such consent is required and in all cases such consent may be granted or
withheld in the sole discretion of Lender.

 

Notices.  Any notice required to be given under this Agreement shall be given in
writing, and shall be effective when actually delivered, when actually received
by telefacsimile (unless otherwise required by law), when deposited with a
nationally recognized overnight courier, or, if mailed, when deposited in the
United States mail, as first class, certified or registered mail postage
prepaid, directed to the addresses shown near the beginning of this Agreement.
Any party may change its address for notices under this Agreement by giving
formal written notice to the other parties, specifying that the purpose of the
notice is to change the party’s address. For notice purposes, Grantor agrees to
keep Lender informed at all times of Grantor’s current address. Unless otherwise
provided or required by law, if there is more than one Grantor, any notice given
by Lender to any Grantor is deemed to be notice given to all Grantors.

 

Power of Attorney.  Grantor hereby appoints Lender as Grantor’s irrevocable
attorney-in-fact for the purpose of executing any documents necessary to
perfect, amend, or to continue the security interest granted in this Agreement
or to demand termination of filings of other secured parties. Lender may at any
time, and without further authorization from Grantor, file a carbon,
photographic or other reproduction of any financing statement or of this
Agreement for use as a financing statement. Grantor will reimburse Lender for
all expenses for the perfection and the continuation of the perfection of
Lender’s security interest in the Collateral.

 

Severability.  If a court of competent jurisdiction finds any provision of this
Agreement to be illegal, invalid, or unenforceable as to any circumstance, that
finding shall not make the offending provision illegal, invalid, or
unenforceable as to any other circumstance. If feasible, the offending provision
shall be considered modified so that it becomes legal, valid and enforceable. If
the offending provision cannot be so modified, it shall be considered deleted
from this Agreement. Unless otherwise required by law, the illegality,
invalidity, or unenforceability of any provision of this Agreement shall not
affect the legality, validity or enforceability of any other provision of this
Agreement.

 

4

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Successors and Assigns.  Subject to any limitations stated in this Agreement on
transfer of Grantor’s interest, this Agreement shall be binding upon and inure
to the benefit of the parties, their successors and assigns.  If ownership of
the Collateral becomes vested in a person other than Grantor, Lender, without
notice to Grantor, may deal with Grantor’s successors with reference to this
Agreement and the Indebtedness by way of forbearance or extension without
releasing Grantor from the obligations of this Agreement or liability under the
Indebtedness.

 

Survival of Representations and Warranties.  All representations, warranties,
and agreements made by Grantor in this Agreement shall survive the execution and
delivery of this Agreement, shall be continuing in nature, and shall remain in
full force and effect until such time as Grantor’s Indebtedness shall be paid in
full.

 

Time is of the Essence.  Time is of the essence in the performance of this
Agreement.

 

Waive Jury.  All parties to this Agreement hereby waive the right to any jury
trial in any action, proceeding, or counterclaim brought by any party against
any other party.

 

DEFINITIONS.              The following capitalized words and terms shall have
the following meanings when used in this Agreement.  Unless specifically stated
to the contrary, all references to dollar amounts shall mean amounts in lawful
money of the United States of America.  Words and terms used in the singular
shall include the plural, and the plural shall include the singular, as the
context may require.  Words and terms not otherwise defined in this Agreement
shall have the meanings attributed to such terms in the Uniform Commercial Code:

 

Account.  The word “Account” means a trade account, account receivable, other
receivable, or other right to payment for goods sold or services rendered owing
to Grantor (or to a third party grantor acceptable to Lender).

 

Agreement.  The word “Agreement” means this Commercial Security Agreement, as
this Commercial Security Agreement may be amended or modified from time to time,
together with all exhibits and schedules attached to this Commercial Security
Agreement from time to time.

 

Borrower.  The word “Borrower” means The Ohio Art Company, and all other persons
and entities signing the Note in whatever capacity.

 

Collateral.  The word “Collateral” means all of Grantor’s right, title and
interest in and to all the Collateral as described in the Collateral Description
section of this Agreement.

 

Default.  The word “Default” means the Default set forth in this Agreement in
the section titled “Default”.

 

Environmental Laws.  The words “Environmental Laws” mean any and all state,
federal and local statutes, regulations and ordinances relating to the
protection of human health or the environment, including without limitation the
Comprehensive Environmental Response, Compensation, and Liability Act of 1980,
as amended, 42 U.S.C. Section 9601, et seq. (“CERCLA”), the Superfund Amendments
and Reauthorization Act of 1986, Pub. L. No. 99-499 (“SARA”), the Hazardous
Materials Transportation Act, 49 U.S.C. Section 1801, et seq., the Resource
Conservation and Recovery Act, 42 U.S.C. Section 6901, et seq., or other
applicable state or federal laws, rules, or regulations accepted pursuant
thereto.

 

Event of Default.  The words “Event of Default” mean any of the events of
default set forth in this Agreement in the default section of this Agreement.

 

Grantor.  The word “Grantor” means the Ohio Art Company.

 

Hazardous Substances.  The words “Hazardous Substances” mean materials that,
because of their quantity, concentration or physical, chemical, or infectious
characteristics, may cause or pose a present or potential hazard to human health
or the environment when improperly used, treated, stored, disposed of,
generated, manufactured, transported or otherwise handled.  The words “Hazardous
Substances” are used in their very broadest sense and include without limitation
any and all hazardous or toxic substances, materials or waste as defined by or
listed under the Environmental Laws.  The term “Hazardous Substances” also
includes, without limitation, petroleum and petroleum by-products or any
fraction thereof and asbestos.

 

Indebtedness.  The word “Indebtedness” means the indebtedness evidenced by the
Note or related Documents, including all principal and interest together will
all other indebtedness and costs and expenses for which Grantor is responsible
under this Agreement or under any of the Related Documents.

 

Lender.  The word “Lender” means KeyBank National Association, its successors
and assigns.

 

Note.  The word “Note” means the Note executed by The Ohio Art Company in the
principal amount of $5,000,000.00 dated May 21, 2003, together with all renewals
of, extensions of, modifications of, refinancings of, consolidations of, and
substitutions for the note or credit agreement.

 

Property.  The word “Property” means all of Grantor’s right, title and interest
in and to all the Property as described in the “Collateral Description” section
of this Agreement.

 

Related Documents.  The words “Related Documents” mean all promissory notes,
credit agreements, loan agreements, environmental agreements, guaranties,
security agreements, mortgages, deeds of trust, security deeds, collateral
mortgages, and all other instruments, agreements and documents, whether now or
hereafter existing, executed in connection with the Indebtedness.

 

GRANTOR HAS READ AND UNDERSTOOD ALL THE PROVISIONS OF THIS COMMERCIAL SECURITY
AGREEMENT AND AGREES TO ITS TERMS.  THIS AGREEMENT IS DATED MAY 21, 2003.

 

GRANTOR:

 

 

THE OHIO ART COMPANY

 

By:

/s/ Jerry D. Kneipp

 

 

Jerry D. Kneipp, CFO & Treasurer of The Ohio Art Company

 

5

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FIRST AMENDMENT
TO
COMMERCIAL SECURITY AGREEMENT

 

 

This First Amendment To Commercial Security Agreement is made as of the 21st day
of May, 2003 by and between THE OHIO ART COMPANY, an Ohio corporation, (the
“Grantor”) and KEYBANK NATIONAL ASSOCIATION, a national banking association (the
“Lender”).

 

WHEREAS, the Grantor intends to execute a certain Commercial Security Agreement
dated as of May 6, 2003 (the “Agreement”) pursuant to which the Grantor will
grant to the Lender a security interest in certain Collateral to secure the
repayment by Grantor of a certain Promissory Note of even date herewith, in the
original principal amount of Five Million Dollars ($5,000,000.00) executed in
favor of Lender, (the “Note”);

 

WHEREAS, BORROWER desires to modify one or more terms of the Agreement and
Lender is willing to agree to and accept such modifications;

 

WHEREAS capitalized terms not expressly defined in this Amendment shall have the
respective meanings set forth in the Agreement;

 

NOW THEREFORE, in consideration of the mutual promises and covenants set forth
herein and in the Note, the parties agree that the Agreement is amended as
follows:

 

1.                                       Setoff.  The section titled “RIGHT OF
SETOFF” shall be deleted and replaced with the following:  “In the event of a
default by Borrower (i) under this Commercial Security Agreement, (ii) under any
other agreement between Borrower and Lender, or (iii) under any other document
executed by Borrower in favor of Lender, and to the extent permitted by
applicable law, Lender reserves a right of setoff in all Grantor’s accounts with
Lender (whether checking ,savings, or some other account.)  This includes all
accounts Grantor holds jointly with

 

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someone else and all accounts Grantor may open in the future. However, this does
not include any IRA, Keogh or any trust accounts for which setoff would be
prohibited by law. Grantor authorizes Lender, to the extent permitted by
applicable law, to charge or setoff all sums owing on the Indebtedness against
any and all such accounts. Nothing herein shall affect the Lender’s right to
demand payment under the Promissory Note.

 

2.                                       Enforceability of Collateral.  The
third sentence of the section captioned “Enforceability of Collateral” shall be
deleted and replace with the following: “After Default, Grantor shall not,
without Lender’s prior written consent, compromise, settle, adjust or extend
payment under or with regard to any such Accounts. For purposes of this
Agreement, the term “Default” means the failure by Borrower to pay or perform
any obligation undertaken by Borrower in any agreement with Lender or document
executed in favor of Lender.

 

3.                                       Hazardous Substances.  The section
titled “Hazardous Substances” shall begin with the words, “Except as otherwise
disclosed in writing,’.

 

4.                                       Insurance Reserves.  In the section
titled “Insurance Reserves” the following words shall be inserted at the
beginning of the first sentence: “In the event that Borrower fails to obtain
and/or maintain insurance as required by this Agreement or any other Agreement
between Borrower and Lender or any other document executed by Borrower in favor
of Lender.”

 

5.                                       Default.  The section titled “Default”
is hereby deleted and replaced with the following:

 

It shall be an event of default hereunder if

 

(a)                                  Borrower fails to make any interest payment
when due or within ten (10) days thereafter;

 

(b)                                 Borrower fails to pay any principal amount
immediately upon demand by Lender;

 

2

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(c)                                  Borrower fails to perform any obligation
undertaken by Borrower in any agreement between Borrower and Lender or any
document executed by Borrower in favor of Lender.  (Each an “Event of Default”).

 

6.                                       Conflicting Documents.  The terms of
this Amendment shall control in the event of a conflict between this First
Amendment (as the same may be subsequently amended by the parties from time to
time), and the Agreement.

 

IN WITNESS WHEREOF, this FIRST AMENDMENT has been executed as of the date first
written above.

 

 

 

THE OHIO ART COMPANY

 

 

 

 

 

BY: /s/ Jerry D. Kneipp

 

 

 

 

 

 

ITS: CFO/TREASURER

 

 

 

 

 

 

KEYBANK NATIONAL ASSOCIATION

 

 

 

 

 

BY:

 

 

 

 

 

 

ITS:

 

 

3

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[BARCODE]

*01010056716200000110010D20*

 

PROMISSORY NOTE

 

Principal

 

Loan Date

 

Maturity

 

Loan No

 

Call / Coll

 

Account

 

Officer

 

Initials

 

$5,000,000.00

 

05-21-2003

 

 

 

11001

 

402 / 326

 

NO100567162

 

RXWOY

 

 

 

 

 

References in the shaded area are for Lender’s use only and do not limit the
applicability of this document to any particular loan or item.

Any item above containing ***** has been omitted due to text length limitations.

 

 

 

 

 

Borrower:                         The Ohio Art Company
1 Toy St., P.O. Box 111
Bryan, OH 43506

Lender:                                     KeyBank National Association
OH-MM-Toledo-Seagate
3 Seagate
Toledo, OH 43604

 

Principal Amount:

 

$5,000,000.00

 

Initial Rate: 3.250%

 

Date of Note:

 

May 21, 2003

 

PROMISE TO PAY.  The Ohio Art Company (“Borrower”) promises to pay to KeyBank
National Association (“Lender”), or order, in lawful money of the United States
of America, on demand, the principal amount of Five Million & 00/100 Dollars
($5,000,000.00) or so much as may be outstanding, together with interest on the
unpaid outstanding principal balance of each advance. Interest shall be
calculated from the date of each advance until repayment of each advance.

 

PAYMENT.  Borrower will pay this loan immediately upon Lender’s demand. Payment
in full is due immediately upon Lender’s demand. Borrower will pay regular
monthly payments of all accrued unpaid interest due as of each payment date,
beginning June 1, 2003, with all subsequent interest payments to be due on the
same day of each month after that. Unless otherwise agreed or required by
applicable law, payments will be applied first to accrued unpaid interest, then
to principal, and any remaining amount to any unpaid collection costs and late
charges. The annual interest rate for this Note is computed on a 365/360 basis;
that is, by applying the ratio of the annual interest rate over a year of 360
days, multiplied by the outstanding principal balance, multiplied by the actual
number of days the principal balance is outstanding. Borrower will pay Lender at
Lender’s address shown above or at such other place as Lender may designate in
writing.

 

VARIABLE INTEREST RATE.  The interest rate on this Note is subject to change
from time to time based on changes in an index which is the Prime Rate announced
by Lender (the “Index”). The Index is not necessarily the lowest rate charged by
Lender on its loans and is set by Lender in its sole discretion. If the Index
becomes unavailable during the term of this loan, Lender may designate a
substitute index after notifying Borrower. Lender will tell Borrower the current
Index rate upon Borrower’s request. The interest rate change will not occur more
often than each day that the Index changes. The interest rate will change
automatically and correspondingly on the date of each announced change of the
Index by Lender. Borrower understands that Lender may make loans based on other
rates as well. The Index currently is 4.250% per annum. The interest rate to be
applied to the unpaid principal balance of this Note will be at a rate of 1.000
percentage point under the Index, resulting in an initial rate of 3.250% per
annum.

NOTICE: Under no circumstances will the interest rate on this Note be more than
the maximum rate allowed by applicable law.

 

PREPAYMENT.  Borrower agrees that all loan fees and other prepaid finance
charges are earned fully as of the date of the loan and will not be subject to
refund upon early payment (whether voluntary or as a result of default), except
as otherwise required by law. Except for the foregoing, Borrower may pay without
penalty all or a portion of the amount owed earlier than it is due. Early
payments will not, unless agreed to by Lender in writing, relieve Borrower of
Borrower’s obligation to continue to make payments of accrued unpaid interest.
Rather, early payments will reduce the principal balance due. Borrower agrees
not to send Lender payments marked “paid in full”, “without recourse”, or
similar language. If Borrower sends such a payment, Lender may accept it without
losing any of Lender’s rights under this Note, and Borrower will remain
obligated to pay any further amount owed to Lender. All written communications
concerning disputed amounts, including any check or other payment instrument
that indicates that the payment constitutes “payment in full” of the amount owed
or that is tendered with other conditions or limitations or as full satisfaction
of a disputed amount must be mailed or delivered to: KeyBank National
Association, OH-MM-Toledo-Seagate, 3 Seagate, Toledo, OH 43604.

 

LATE CHARGE.  If a regularly scheduled interest payment is 10 days or more late,
Borrower will be charged 5.000% of the unpaid portion of the regularly scheduled
payment or $50.00, whichever is greater.  If Lender demands payment of this
loan, and Borrower does not pay the loan in full within 10 days after Lender’s
demand, Borrower also will be charged either 5.000% of the unpaid portion of the
sum of the unpaid principal plus accrued unpaid interest of $50.00, whichever is
greater.

 

INTEREST AFTER DEFAULT.  Upon default, including failure to pay upon final
maturity, Lender, at its option, may, if permitted under applicable law,
increase the variable interest rate on this Note 3.000 percentage points. The
interest rate will not exceed the maximum rate permitted by applicable law.

 

LENDER’S RIGHTS.  Upon Lender’s demand, Lender may declare the entire unpaid
principal balance on this Note and all accrued unpaid interest immediately due,
and then Borrower will pay that amount.

 

ATTORNEYS’ FEES; EXPENSES.  Lender may hire or pay someone else to help collect
this Note if Borrower does not pay. Borrower will pay Lender that amount. This
includes, subject to any limits under applicable law, Lender’s attorneys’ fees
and Lender’s legal expenses, whether or not there is a lawsuit, including
attorneys’ fees, expenses for bankruptcy proceedings (including efforts to
modify or vacate any automatic stay or injunction), and appeals. If not
prohibited by applicable law, Borrower also will pay any court costs, in
addition to all other sums provided by law.

 

JURY WAIVER.  Lender and Borrower hereby waive the right to any jury trial in
any action, proceeding, or counterclaim brought by either Lender or Borrower
against the other.

 

GOVERNING LAW.  This Note will be governed by, construed and enforced in
accordance with federal law and the laws of the State of Ohio. This Note has
been accepted by Lender in the State of Ohio.

 

CONFESSION OF JUDGMENT.  Borrower hereby irrevocably authorizes and empowers any
attorney-at-law, including an attorney hired by Lender, to appear in any court
of record and to confess judgment against Borrower for the unpaid amount of this
Note as evidenced by an affidavit signed by an officer of Lender setting forth
the amount then due, attorneys’ fees plus costs of suit, and to release all
errors, and waive all rights of appeal. If a copy of this Note, verified by an
affidavit, shall have been filed in the proceeding, it will not be necessary to
file the original as a warrant of attorney. Borrower waives the right to any
stay of execution and the benefit of all exemption laws now or hereafter in
effect. No single exercise of the foregoing warrant and power to confess
judgment will be deemed to exhaust the power, whether or not any such exercise
shall be held by any court to be invalid, voidable, or void; but the power will
continue undiminished and may be exercised from time to time as Lender may elect
until all amounts owing on this Note have been paid in full. Borrower waives any
conflict of interest that an attorney hired by Lender may have in acting on
behalf of Borrower in confessing judgment against Borrower while such attorney
is retained by Lender. Borrower expressly consents to such attorney acting for
Borrower in confessing judgment.

 

RIGHT OF SETOFF.  To the extent permitted by applicable law, Lender reserves a
right of setoff in all Borrower’s accounts with Lender (whether

 

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checking, savings, or some other account). This includes all accounts Borrower
holds jointly with someone else and all accounts Borrower may open in the
future. However, this does not include any IRA or Keogh accounts, or any trust
accounts for which setoff would be prohibited by law. Borrower authorizes
Lender, to the extent permitted by applicable law, to change or setoff all sums
owing on the indebtedness against any and all such accounts.

 

LINE OF CREDIT: This Note evidences a revolving line of credit. Advances under
this Note may be requested either orally or in writing by Borrower or as
provided in this paragraph. Lender may, but need not, require that all oral
requests be confirmed in writing. All communications, instructions, or
directions by telephone or otherwise to Lender are to be directed to Lender’s
office shown above. The following person currently is authorized to request
advances and authorize payments under the line of credit until Lender receives
from Borrower, at Lender’s address shown above, written notice of revocation of
his or her authority: Jerry D. Kneipp, Treasurer of The Ohio Art Company. 
Borrower agrees to be liable for all sums either: (A) advanced in accordance
with the instructions of  an authorized person or (B) credited to any of
Borrower’s accounts with Lender. The unpaid principal balance owing on this Note
at any time may be evidenced by endorsements on this Note or by Lender’s
internal records, including daily computer print-outs.

 

DEMAND LINE OF CREDIT. Borrower understands that Lender is authorized to make an
annual (or more frequent) credit review based upon Borrower’s current financial
condition in determining whether to continue the line of credit. Nevertheless,
Lender may, at any time, with or without cause, refuse to advance funds or
extend credit under the line of credit.

 

SUCCESSOR INTERESTS. The terms of this Note shall be binding upon Borrower, and
upon Borrower’s heirs, personal representatives, successors and assigns, and
shall inure to the benefit of Lender and its successors and assigns.

 

GENERAL PROVISIONS. If any part of this Note cannot be enforced, this fact will
not affect the rest of the Note. Borrower does not agree or intend to pay, and
Lender does not agree or intend to contract for, charge, collect, take, reserve
or receive (collectively referred to herein as “change or collect”), any amount
in the nature of interest or in the nature of a fee for this loan, which would
in any way or event (including demand, prepayment, or acceleration) cause Lender
to charge or collect more for this loan than the maximum Lender would be
permitted to charge or collect by federal law or the law of the State of Ohio
(as applicable).  Any such excess interest or unauthorized fee shall, instead of
anything stated to the contrary, be applied first to reduce the principal
balance of this loan, and when the principal has been paid in full, be refunded
to Borrower. Lender may delay or forgo enforcing any of its rights or remedies
under this Note without losing them. Borrower and any other person who signs,
guarantees or endorses this Note, to the extent allowed by law, waive
presentment, demand for payment, and notice of dishonor. Upon any change in the
terms of this Note, and unless otherwise expressly stated in writing, no party
who signs this Note, whether as maker, guarantor, accommodation maker or
endorser, shall be released from liability. All such parties agree that Lender
may renew or extend (repeatedly any for any length of time) this loan or release
any party or guarantor or collateral; or impair, fall to realize upon or perfect
Lender’s security interest in the collateral; and take any other action deemed
necessary by Lender without the consent of or notice to anyone. All such parties
also agree that Lender may modify this loan without the consent of or notice to
anyone other than the party with whom the modification is made. The obligations
under this Note are joint and several.

 

PRIOR TO SIGNING THIS NOTE, BORROWER READ AND UNDERSTOOD ALL THE PROVISIONS OF
THIS NOTE, INCLUDING THE VARIABLE INTEREST RATE  PROVISIONS. BORROWER AGREES TO
THE TERMS OF THE NOTE.

 

BORROWER ACKNOWLEDGES RECEIPT OF A COMPLETED COPY OF THIS PROMISSORY NOTE.

 

NOTICE:  FOR THIS NOTICE “YOU” MEANS THE BORROWER AND “CREDITOR” AND “HIS” MEANS
LENDER.

 

WARNING – BY SIGNING THIS PAPER YOU GIVE UP YOUR RIGHT TO NOTICE AND COURT
TRIAL. IF YOU DO NOT PAY ON TIME A COURT JUDGMENT MAY BE TAKEN AGAINST YOU
WITHOUT YOUR PRIOR KNOWLEDGE AND THE POWERS OF A COURT CAN BE USED TO COLLECT
FROM YOU REGARDLESS OF ANY CLAIMS YOU MAY HAVE AGAINST THE CREDITOR WHETHER FOR
RETURNED GOODS, FAULTY GOODS, FAILURE ON HIS PART TO COMPLY WITH THE AGREEMENT,
OR ANY OTHER CAUSE.

 

BORROWER:

 

THE OHIO ART COMPANY

 

By:

/s/ Jerry D. Kneipp

 

 

Jerry D. Kneipp, CFO & Treasurer of The Ohio Art Company

 

2

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FIRST AMENDMENT
TO
PROMISSORY NOTE

This FIRST AMENDMENT TO PROMISSORY NOTE is made as of the 21st day of May, 2003
by and between THE OHIO ART COMPANY, an Ohio corporation, (the “Borrower”) and
KEYBANK NATIONAL ASSOCIATION, a national banking association (the “Lender”).

 

WHEREAS, the Borrower intends to execute a certain Promissory Note dated as of
May 6, 2003 in the original principal amount of Five Million Dollars
($5,000,000.00) in favor of Lender, (the “Note”);

 

WHEREAS, BORROWER desires to modify one or more terms of the Note and Lender is
willing to agree to and accept such modification;

 

WHEREAS capitalized terms not expressly defined in this Amendment shall have the
respective meanings set forth in the Note;

 

NOW THEREFORE, in consideration of the mutual promises and covenants set forth
herein and in the Note, the parties agree that the Note is amended as follows:

 

1.                                       Setoff.  The section titled “RIGHT OF
SETOFF” shall be deleted and replaced with the following:  “In the event of a
default by Borrower (i) under this Promissory Note, (ii) under any other
agreement between Borrower and Lender, or (iii) under any other document
executed by Borrower in favor of Lender, and to the extent permitted by
applicable law, Lender reserves a right of setoff in all Grantor’s accounts with
Lender (whether checking, savings, or some other account.)  This includes all
accounts Grantor holds jointly with someone else and all accounts Grantor may
open in the future.  However, this does not include any IRA, Keogh or any trust
accounts for which setoff would be prohibited by law.  Grantor authorizes
Lender, to the extent permitted by applicable law to charge or setoff all sums
owing on the Indebtedness

 

--------------------------------------------------------------------------------

 

against any and all such accounts.  Nothing herein shall affect the Lender’s
right to demand payment under this Promissory Note at any time.

 

2.                                       Conflicting Documents.  The terms of
this Amendment shall control in the event of a conflict between this first
Amendment (as the same may be subsequently amended by the parties from time to
time), and the Note.

 

IN WITNESS WHEREOF, this FIRST AMENDMENT has been executed as of the date first
written above.

 

 

 

THE OHIO ART COMPANY

 

 

 

 

 

BY:

/s/ Jerry D. Kneipp

 

 

 

 

 

 

ITS:

CFO/TREASURER

 

 

 

 

 

 

KEY BANK NATIONAL ASSOCIATION

 

 

 

 

 

BY:

 

 

 

 

 

 

ITS:

 

 

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