Document:

EX-4.21

 

Exhibit 4.21

COMMERCIAL TIME NOTE (Revolving)

(Ohio version)

Amount        City, State        Date

$600,000.00

For Value Received, Shopsmith, Inc., (“Borrower”), whose mailing address is 6530 Poe Avenue,
Dayton, OH 45414, promises to pay to the order of NATIONAL CITY BANK, SUCCESSOR BY MERGER TO THE
PROVIDENT BANK (“Bank”), having a banking office at 6 North Main Street, Dayton, OH 45412,
Attention: Commercial Loan Division, Locator No. 21-2215, at the address specified on the bills
received by Borrower from Bank or at such other place as the holder hereof may designate in
writing, Six Hundred Thousand and No One-Hundredths Dollars ($600,000.00) (or, if less, the unpaid
principal balance shown on an attachment to this Note or on Bank’s loan account records) payable on
August 15, 2005, in lawful money of the United states, together with interest payable commencing on
June 30, 2005, and Monthly thereafter and at maturity.

This note represents an arrangement that allows Borrower to obtain advances without giving Bank a
separate note for each advance. Bank will record the date and amount of each advance on an
attachment to this Note or on Bank’s loan account records. Borrower agrees that each advance so
recorded shall be prima facie evidence that an advance was made on the date and in the amount
indicated. The number of advances and the amount of each advance are not limited; provided,
however, that the maximum unpaid principal balance outstanding at any time shall not exceed the
face value of this Note.

Prior to maturity, principal and any overdue interest shall bear interest computed daily (on the
basis of a 360-day year and actual days elapsed) at a fluctuating rate which id One and One Half of
One Percent (1.50%) per annum above the Prime Rate.

If any payment is required to be made on a day which is not a Banking Day, such payment shall be
due on the next immediately following Banking Day and interest shall continue to accrue at the
applicable rate.

Prepayment: (a) Borrower shall have the right to prepay the principal of this Note in whole or
part, provided, that (i) each such prepayment shall be in the principal sum of One Thousand and No
Hundredths Dollars ($1,000.00) or any integral multiple thereof of an amount equal to the then
aggregate unpaid balance of this Note and (ii) concurrently with the prepayment of the entire
unpaid principal balance of this Note, Borrower shall prepay the accrued interest on the principal
being prepaid. (b) Each prepayment of the principal of this Note may be made without premium or
penalty.

If Borrower fails to pay any amount due hereunder, or any fee in connection herewith, in full
within ten (10) days after its due date, Borrower, in each case, will incur and shall pay a late
fee equal to the greater of twenty dollars ($20.00) or five percent (5%) of the unpaid amount. The
payment of a late charge will not cure or constitute a waiver of any Event of Default under this
Note.

Bank shall have the right to apply payments in respect of the indebtedness evidenced by this Note
with such allocation to the respective parts thereof and the respective due dates thereof as Bank
in its sole discretion may from time to time deem advisable. Remittances in payment of any part of
the amounts owing under this Note shall not, regardless of any receipt or credit issued therefore,
constitute payment until the required amount is actually received by the holder hereof in
immediately available U.S. funds and shall be made and accepted subject to the condition that any
check or draft may be handled for collection in accordance with the practice of the collecting bank
or banks. Acceptance by the holder hereof of any payment in an amount less than the amount then
due on this Note shall be deemed an acceptance on account only and shall not in any way excuse the
existence of a default.

If this Note is not paid in full at maturity (whether by lapse of time, acceleration of maturity or
otherwise) the interest rate otherwise in effect hereunder shall be increased by two percent (2%)
per annum, provided that in no event shall the

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principal of and interest on this Note bear interest after maturity at a rate less than the
interest rate actually in effect hereunder immediately after maturity.

The occurrence of any of the following shall constitute an Event of Default hereunder: (a)
Borrower’s Bank Debt or any part thereof shall not be paid in full promptly when due (whether by
lapse of time, acceleration of maturity or otherwise); (b) any Obligor shall die or be dissolved;
(c) any representation or warranty made by any Obligor in this Note or Related Writing shall be
false or erroneous in any material respect; (d) any Obligor shall fail or omit to perform or
observe any agreement made by that Obligor in this Note or any Related Writing; (e) a judgement
shall be entered against any Obligor in any court of record; (f) any deposit account of any Obligor
is attached or levied upon; (g) any voluntary petition by or involuntary petition against any
Obligor shall be files pursuant to any chapter of any bankruptcy code or any Obligor shall make an
assignment for the benefit of creditors; (h) any Obligor enters into any merger or consolidation
or sells, leases or otherwise disposes of all or substantially all of such Obligor’s assets in any
manner other than in the ordinary course of business; (i) any indebtedness (other than any
evidenced by this Note) of any Obligor shall not be paid when due, or there shall occur any event,
condition, or other thing which gives (or which with the lapse of any applicable grace period, the
giving of notice, or both would give) any creditor the right to accelerate or which automatically
accelerates the maturity of any such indebtedness; (j) the security afforded by the collateral
securing this Note at any time in the sole opinion of the Bank becomes insufficient; (k) there
shall occur any event, condition or other thing that has, or in Bank’s judgement, is likely to
have, a material adverse effect on the financial condition, properties, or business operations of
any Obligor or on Bank’s ability to enforce or exercise any agreement or right arising under, out
of, or in connection with any Related Writing; or (l) any property in which any Obligor now has or
hereafter acquires any rights or which now or hereafter secures any Bank Debt shall be or become
encumbered by any mortgage, security interest, or other lien, except any mortgage, security
interest, or other lien consented to by Bank. Upon the occurrence of and Event of Default, the
holder of this Note may, in its sole discretion, declare this Note to be due and payable and, if
applicable, that Borrower no longer be permitted to obtain advances; and the principal of and
interest on this Note shall thereupon become immediately payable in full, without any presentment,
demand or notice of any kind, which Borrower hereby waives. Borrower will pay to Bank all costs
and expenses of collection of this Note, including, without limitation, attorneys’ fees.

In this Note, Bank Debt means Debt payable to Bank or to any affiliate of Bank, whether initially
payable to Bank or such affiliate or acquired by Bank or such affiliate by purchase, pledge or
otherwise and whether assigned to or participated to or from Bank or such affiliate in whole or
part; Banking Day means any day (other than any Saturday, Sunday or legal holiday) on which Bank’s
banking office is open to the public for carrying on substantially all of its banking functions;
Debt means, collectively, all monetary liabilities, and any changes or expenses incurred in
connection therewith, now or hereafter owing by the Person or Persons in question, including,
without limitation, every such liability whether owing by such Person or one (1) of such Persons
alone or jointly, severally or jointly and severally, whether owing absolutely or contingently, or
directly or indirectly, and whether created by loan, overdraft, guaranty or other contract or by
quasi-contract, tort, statute or other operation of law; Obligor means any Person who is or shall
become obligated or whose property is or shall serve as collateral for the payment or Borrower’s
Bank Debt or any part thereof in any manner and, in addition to Borrower, includes, without
limitation, any maker, endorser, guarantor, subordinating creditor, assignor, pledgor, mortgagor or
hypothecator of property; Person means a natural person or entity of any kind, including, without
limitation, any corporation, partnership, trust, government body, or any other form or kind of
entity; Prime Rate means the fluctuating rate of interest which is publicly announced from time to
time by Bank at its principal place of business as being its “prime rate” or “base rate” thereafter
in effect, with each change in the Prime Rate automatically, immediately and without notice
changing the fluctuating interest rate thereafter applicable hereunder, it being agreed that the
Prime Rate is not necessarily the lowest rate of interest then available from Bank on fluctuating
rate loans; and Related Writing means a writing of any form or substance signed by any Obligor
(whether as principal or agent) or by any attorney, accountant or other representative of any
Obligor and received by Bank in respect of Borrower’s Bank Debt or any part thereof, including,
without limitation, any credit application, credit agreement, reimbursement agreement, financial
statement, promissory note, guaranty, indenture, mortgage, security
agreement, authorization

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subordination agreement, certificate, opinion or any similar writing, but shall not include
any commitment letter issued by Bank, without regard to whether Borrower or any other Person signed
or acknowledged receipt thereof.

Borrower certifies to Bank that all funds disbursed under this Note will be used for business or
commercial purposes.

Borrower hereby authorizes Bank to share all credit and financial information relating to Borrower
with Bank’s parent company, with any subsidiary or affiliate of Bank or of Bank’s parent company,
with any actual or proposed participant in or assignee of all or any part of Bank’s interests or
rights hereunder, or with any other person or entity reasonably deemed incidental by Bank to the
administration of the indebtedness evidenced hereby.

In no event shall the interest rate in effect on this Note exceed the maximum rate permissible
under the law governing this Note.

If (a) at any time any governmental authority shall require National City Corporation, a Delaware
corporation, its successors or assigns, or Bank, whether or not the requirement has the force of
law, to maintain, as support for the indebtedness advanced under this Note, capital in a specified
minimum amount that either is not required or is greater than that required at the date of this
Note, whether the requirement is implemented pursuant to the “risk-based capital guidelines”
(published at 12 CFR 3 in respect of “national banking associations”, 12 CFR 208 in respect of
“state member banks”, and 12 CFR 225 in respect of “bank holding companies”) or otherwise, and (b)
as a result thereof the rate of return on capital of National City Corporation, its successors or
assigns, or Bank or both (taking into account their then policies as to capital adequacy and
assuming full utilization of their capital) shall be directly or indirectly reduced by reason of
any new or added capital thereby attributable to the indebtedness advanced under this Note; then,
and in each such case, Borrower shall, on Bank’s demand, pay Bank as an additional fee such amounts
as will in Bank’s reasonable opinion reimburse National City Corporation, its successors and
assigns, and Bank for any such reduced rate of return. In determining the amount of any such fee,
Bank may use reasonable averaging and attribution methods. Each determination by Bank shall be
conclusive absent manifest error.

If Borrower consists of more than one Person, Borrower shall be jointly and severally liable on
this Note. 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 Bank and its
successors and assigns; provided, that no Person other than Borrower may obtain advances hereunder.

Any holder’s delay or omission in the exercise of any right under this Note shall not operate as a
waiver of that right or of any other right under this Note.

If any provision of this Note is determined by a court of competent jurisdiction to be invalid,
illegal or unenforceable, that determination shall not affect any other provision of this Note, and
each such other provision shall be construed and enforced as if the invalid, illegal or
unenforceable provision were not contained herein.

This Note and Related Writings set forth the entire agreement between the parties regarding the
transactions contemplated hereby, and supercede all prior agreements, commitments, discussions,
representations and understandings, whether written or oral, and any and all contemporaneous oral
agreements, commitments, discussions, representations and understandings between the parties
relating to the subject matter hereof.

No amendment, modification or supplement to this Note or any Related Writing shall be binding
unless executed in writing by all parties thereto, and this provision shall not be subject to
waiver by any party and shall be strictly enforced.

DIRECT DEBIT: The following is applicable if checked by Borrower: (X) Payments shall be paid by
the Borrower by debiting Borrower’s Checking account, number 380147 on the due date.

This Note shall be governed by the law of the State of Ohio.

Borrower authorizes any attorney-at-law to appear in any state or federal court of record in the
United States after this Note matures (whether by lapse of time, acceleration of maturity or
otherwise); to waive the issuance and service of process; to confess judgement against Borrower in
favor of the holder of this Note for the amount then appearing due, together with interest and
costs of suit; and to release all errors and waive all rights of appeal and stay of execution. If

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any judgement against Borrower is vacated for any reason, this warrant of attorney may be used to
obtain additional judgements.

BORROWER HEREBY, AND EACH HOLDER OF THIS NOTE, BY TAKING POSSESSION THEREOF, KNOWINGLY AND
VOLUNTARILY WAIVES JURY TRIAL IN RESPECT OF ANY ACTION, CLAIM, COUNTERCLAIM, CROSSCLAIM,
PROCEEDING, OR SUIT, WHETHER AT LAW OR IN EQUITY, WHETHER SOUNDING IN TORT, CONTRACT, OR OTHERWISE
AT ANY TIME ARISING UNDER OR IN CONNECTION WITH THIS NOTE OR ANY OTHER RELATED WRITING, THE
ADMINISTRATION, ENFORCEMENT, OR NEGOTIATION OF THIS NOTE OR ANY OTHER RELATED WRITING, OR THE
PERFORMANCE OF ANY OBLIGATION IN RESPECT OF THIS NOTE OR ANY OTHER RELATED WRITING.

WARNING—BY SIGNING THIS PAPER YOU GIVE UP YOUR RIGHT TO NOTICE AND COURT TRIAL. IF YOU DO NOT PAY
ON TIME A COURT JUDGEMENT 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

Shopsmith, Inc.

By: /s/ Robert Folkerth

Printed Name: Robert Folkerth

Its: President

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COMMERCIAL NOTE ADDENDUM (OHIO)

Amount          City, State          Date

$600,000.00

This Commercial Note Addendum (this “Addendum”) is made by Shopsmith, Inc. (“Borrower”), and Ohio
corporation, at the place and as the date first set forth above.

Borrower has executed and delivered to National City Bank, successor by merger to The Provident
Bank (“Bank”) a promissory note of even date herewith in the face amount set forth above and
captioned Commercial Time Note.

This Addendum is hereby made a part of the Note described above and that note is hereby
supplemented by adding the following Events of Default thereto:

	1.	 	Information. It shall be an Event of Default if Bank shall not receive:

	 	(a)	 	as soon as available, and in any event within Ninety (90) days after each month of each
of the Borrower’s fiscal years, the Reporting Group’s balance sheet as at the end of each
of the Borrower’s fiscal years, The Reporting Group’s balance sheet as at the end of the
period and the Reporting Group’s statements of cash flow, income, and surplus
reconciliation for Borrower’s then current fiscal year to date, prepared for Borrower
alone, and on comparative basis with the prior year, in accordance with GAAP, and in form
and detail satisfactory to Bank, and
	 
	 	(b)	 	as soon as available, and in any event within Ninety (90) days after the end of each of
Borrower’s fiscal years, a complete copy of an annual report (including, without
limitation, all financial statements therein and notes thereto) of the Reporting Group for
that year, prepared in the manner described in the next preceding clause (a), (i)
certified, without qualification as to GAAP, as having been audited by independent
certified public accountants selected by Borrower and satisfactory to Bank, and (ii)
accompanied by a copy of any management report, letter, or similar writing furnished to any
member of the Reporting Group by those accountants.
	 
	 	(c)	 	as soon as available, and in any event within Fifteen (15) days after each month of
each of the Borrower’s fiscal years, accounts receivable agings and accounts payable
agings.
	 
	 	(d)	 	as soon as available, and in any event within Ninety (90) days after each calendar year
end, personal financial statements from John R. Folkerth.
	 
	 	(e)	 	concurrently with each delivery of financial statements pursuant to clause (a), (b) or
(c) of this section 1, a compliance certificate signed by Borrower’s chief financial
officer (or other officer acceptable to Bank) and otherwise in form and substance
satisfactory to Bank (i) certifying that to the best of that officer’s knowledge and
belief, (A) those financial statements have been prepared in accordance with GAAP and
fairly present in all material respects the financial condition and results of operations
of the Reporting Group, if any, in accordance with GAAP subject, in the case of interim
financial statements, to routine year-end adjustments and (B) no Event of Default then
exists or if it does, a brief description of the Event of Default and Borrower’s intentions
in respect thereof, and (ii) setting forth calculations with respect to each subsection of
section 2.

	2.	 	Financial Standards. Each of the following shall be an Event of Default:

2.1 Tangible Net Worth. If the Reporting Group’s Tangible Net Worth shall at any time be
less than the required amount of One Million One Hundred Thrity-five Thousand and 00/100
dollars ($1,135,000.00), tested quarterly.

2.2 Net Income. If the Reporting Group’s Net Income shall at any time be less than
negative Two Hundred Thirty-five Thousand and 00/100 (-$235,000.00), tested quarterly

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	3.	 	Mergers and Equity Investments. It shall be an Event of Default if any member of the
Reporting Group shall, without having first obtained Bank’s consent, (a) be a party to any
merger of consolidation, (b) purchase or otherwise acquire all or substantially all of the
assets and business of any corporation or other business enterprise, (c) create, acquire, or
have any Subsidiary, or make or keep any investment in any stocks or other equity securities
of any kind, except any existing investment of Subsidiary fully disclosed in the Most Recent
Financial Statements or any future investment in the stocks or other equity securities of any
such Subsidiary, (d) be or become a party to any joint venture of partnership, except any
existing joint venture or partnership fully disclosed in the Most Recent Financial Statements,
(e) sell or otherwise transfer any equity interest in any Subsidiary of that member to any
other Person, except if and to the extent the sale of other transfer is required under
applicable law solely for the purpose of qualifying directors, or (f) issue, if that member is
a direct Subsidiary of any other member of the Reporting Group, any equity interest, except if
and to the extent the issuance is to such other member or is required under applicable law
solely for the purpose of qualifying directors.
	 
	4.	 	Credit Extensions and Non-Equity Investments. It shall be an Event of Default if any member
of the Reporting Group shall, without having first obtained Bank’s consent, (a) make or have
outstanding at any time any advance or loan to any Person, except any existing advance or loan
fully disclosed in the Most Recent Financial Statements or any existing or future advance made
by a member of the Reporting Group to an officer or employee of that member solely for the
purpose of paying the ordinary and necessary business expenses of that member or (b) make or
keep any investment in any notes, bonds, or other obligations of any kind for the payment of
money, except any existing investment fully disclosed in the Most Recent Financial Statements
or any existing or future investment, maturing not more than one (1) year from the date when
made, in direct obligations of the United States of America or any agency thereof if the full
faith and credit of the United States of America is obligated thereupon, in certificates of
deposit issued by Bank, or in any other obligation that carries the highest quality rating of
any nationally-recognized rating agency, or (c) be or become a guarantor of any kind, except
any existing guaranty fully disclosed in the Most Recent Financial Statements or any existing
or future endorsement of a check or other medium of payment for deposit or collection, or any
similar transaction in the ordinary course of business.
	 
	5.	 	Borrowings. It shall be an Event of Default if any member of the Reporting Group shall,
without having first obtained Bank’s consent, create, assume, or have outstanding at any time
any Debt, except any existing Debt fully disclosed in the Most Recent Financial Statements,
any existing or future Bank Debt, any existing or future Subordinated Debt, or any existing or
future Debt secured by any mortgage, security interest, or other lien expressly consented to
by Bank.
	 
	6.	 	Definitions. As used in this Addendum, except where the context clearly requires otherwise,
“Compensation” includes all considerations (including without limitation, deferred
compensation and disbursements to trusts), whatever the form or kind, for services rendered;
“Dividend” means a payment made, liability incurred, or other consideration given by any
Person (other than any stock dividend or stock split payable solely in capital stock of that
Person) for the purchase, acquisition, redemption or retirement of any capital stock of that
Person or as a dividend, return of capital, or other distribution in respect of that Person’s
capital stock; “GAAP” means generally accepted accounting principles applied in a manner
consistent with those used in preparation of the Most Recent Financial Statements; “Most
Recent Financial Statements” means the financial statements included in the Reporting Group’s
most recent annual report delivered to Bank on or before the date of this Addendum; “Net
Income” means net income as determined in accordance with GAAP, after taxes, if any, and after
extraordinary items, but without giving effect to any gain resulting from any reappraisal or
write-up of any asset; “Reporting Group” means (I) Borrower alone, if all of the financial
statements herein before selected are prepared for Borrower alone, in which case all
determinations referred to in section 2 shall be for Borrower alone and in accordance with
GAAP; (II) Borrower and each Subsidiary of Borrower, if any of the financial statements herein
before selected are prepared on a consolidated basis, in which case all determinations
referred to in section 2 shall be on a consolidated basis and in accordance with GAAP, and
(III) Borrower and each other Person whose assets, liabilities, income, cash flow, and
shareholder’s equity are reported on a combined basis with those of Borrower, if any of the
financial statements herein before selected are prepared on a combined basis, in which case
all determinations referred to in section 2

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	 	 	shall be on a combined basis and in accordance with GAAP; “Subordinated”, as applied to any
liability of any Person, means a liability which at the time in question is subordinated (by a
writing in form and substance satisfactory to Bank) in favor of the prior payment in full of
that Person’s Debt to Bank; “Subsidiary” means a corporation or other business entity if shares
constituting a majority of its outstanding capital stock (or other form of ownership) or
constituting a majority of the voting power in any election of directors (or shares constituting
both majorities) are (or upon the exercise of any outstanding warrants, options or other rights
would be) owned directly or indirectly at the time in question by the corporation in question or
other Subsidiary of that corporation or any combination of the foregoing; “Tangible Net Worth”
means, as to any Person, the excess (as determined in accordance with GAAP) of the net book
value (after deducting all applicable valuation reserves and without any consideration to any
re-appraisal or write-up of assets) of that Person’s tangible assets (i.e., all assets other
than intangibles such as patents, costs of businesses over net assets acquired, good will, and
treasury shares) over that Person’s Debt; and the foregoing definitions shall be applicable to
the respective plurals of the foregoing defined terms. Any accounting term used in the Addendum
shall have the meaning ascribed thereto by GAAP as in effect on the date hereof, subject,
however, to such modification, if any, as may be provided in this Addendum or in the note hereby
supplemented.

	 	 	 
	 

	 	Borrower:
	 
	 	 
	 

	 	Shopsmith, Inc.
	 
	 	 
	 

	 	By: /s/ Robert Folkerth
	 
	 	 
	 

	 	Printed Name: Robert Folkerth

	 
	 	 
	 

	 	Title: President

WARNING—BY SIGNING THIS PAPER YOU GIVE UP YOUR RIGHT TO NOTICE AND COURT TRIAL. IF YOU DO NOT PAY
ON TIME A COURT JUDGEMENT MAY BE TAKEN AGAINST YOU WITHOUT YOUR PRIOR KNOWLEDGE AND THE POWERS OF A
COURT CAN BE USED TO COLLECT FORM 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.

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COMMERCIAL NOTE: BORROWING BASE ADDENDUM/REVOLVING (OHIO)

Amount            City, State            Date

$600,000.00

This Borrowing Base Addendum (this “Addendum”) is made by Shopsmith, Inc. (“Borrower”), an Ohio
corporation, at the place and as of the date set forth above.

Borrower has executed and delivered to National City Bank, successor by merger to The Provident
Bank (“Bank”) a promissory note (the “Note”) of even date herewith in the face amount set forth
above and captioned Commercial Time Note.

This addendum is hereby made a part of the Note and the Note is hereby supplemented by adding the
following provisions hereto:

Additional Conditions: Subject Loans.

Borrower shall not be entitled to obtain and Subject Loan if, after giving effect to that Subject
Loan and all others for which requests are then pending, the aggregate unpaid principal balance of
the Subject Loans would exceed the lesser of either the then amount of the Subject commitment or an
amount (the “Borrowing Base”) equal to Eighty percent (80%) of the then net book value (after
deducting any discount or other incentive for early payment but without deducting any bad debt
reserve) of all Eligible Receivables from Lowe’s, all as determined in good faith by Bank on Bank’s
receipt of each weekly Borrowing Base Report and at such other times as Bank in its sole discretion
shall deem advisable, on the basis, in Bank’s sole discretion, of the then most recent Borrowing
Base Report received by Bank, or the then most recent field audit (if any) made by Bank (or one or
more Persons selected by Bank) or any other information obtained by Bank. Bank shall have the
right in its sole discretion, at any time and from time to time, to change the foregoing percentage
by giving Borrower not less than ten (10) days prior written notice of the percentage as so changed
and the effective date of the change.

Mandatory Prepayment. Borrower shall prepay the principal of the Subject Loans whenever Bank
determines in good faith that the aggregate unpaid principal balance of the Subject Loans exceeds
the Borrowing Base, by an amount equal to the excess.

Additional Event of Default. It shall be an Event of Default if Bank shall not receive a Borrowing
Base Report from Borrower on a weekly basis.

Definitions. As used in this Addendum, except where the context clearly requires otherwise,
"Account” means any right to payment for goods sold or leased or for services rendered which is not
evidenced by an Instrument or Chattel Paper, whether or not it has been earned by performance, and
includes, without limitation, all rights to payment earned or unearned under a charter or other
contract involving the use or hire of a vessel and all rights incident to the charter or contract;
"Account Debtor” means any Person who, or any of whose property, shall at the time in question be
obligated in respect of all or any part of a Receivable or any part thereof and includes, without
limitation, co-makers, endorsers, guarantors, pledgors, hypothecators, mortgagors, and any other
Person who agrees, conditionally or otherwise, to make any loan to, purchase from, or investment
in, any other Account Debtor or otherwise assure Borrower against loss on any Receivable in which
Borrower now has or hereafter acquires any rights; “Borrowing Base Report” means a report,
certified by an appropriate officer of Borrower to be true and complete to the best of the
officer’s knowledge and belief, setting forth the Borrowing Base as of the date on which that
report is prepared, and otherwise being in form and detail satisfactory to Bank; “Chattel Paper”
means a writing or writings (other than a charter or other contract involving the use or hire of a
vessel) which evidence both a monetary obligation and a security interest in or a lease of specific
goods, and, when a transaction is evidenced both by such a security agreement or lease and by an
Instrument or series of Instruments, the group of writings taken together constitutes Chattel
Paper; “Document” means (a) a document that purports to be issued by or addressed to a bailee and
that purports to cover goods that are in the bailee’s possession that are either identified or
fungible portions of an identified mass, and includes a bill of lading, dock warrant, dock receipt,
warehouse receipt, or order for the delivery of goods, or any other document that in the regular
course of business or

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financing is treated as adequately evidencing that the Person in possession of it is entitled to
receive, hold, and dispose of the document and the goods it covers or (b) a receipt issued by the
owner of the goods including distilled spirits or agricultural commodities that are stored under a
statute requiring a bond against withdrawal or a license for the issuance of receipts in the nature
of a warehouse receipt; “Eligible Receivable” means any duly invoiced Account of which Borrower is
the sole owner and in which Bank has an enforceable and duly perfected first priority security
interest, except any such Account (a) which is not payable in installments and which shall not have
been paid in full within ninety (90) days after the original due date or the date first invoiced to
the Account Debtor, whichever first elapses, (b) which is payable in installments (i) if it was not
by its terms so payable when first invoiced to the Account Debtor, (ii) if any installment thereof
shall not have been paid in full within sixty (60) days after its original due date, or (iii) to
the extent that any installment thereof is not payable within ninety (90) days after the date of
determination, (c) if the Account Debtor thereon is then obligated to Borrower on other Accounts
and if more than twenty five percent (25%), by amount, of all Accounts on which that Account Debtor
is then obligated to Borrower are excepted under clauses (a) and (b) above, (d) if the Account
Debtor thereon is then obligated to Borrower on other Accounts, to the extent that the aggregate
amount of all Accounts upon which that Account Debtor is then obligated to Borrower exceeds N/A
(N/A%) of all Eligible Receivables, (e) if the payment of which by the Account Debtor is not, or
does not remain, unconditional, (f) if and to the extent that the Account Debtor has asserted a
defense or offset of any kind against the payment thereof, (g) which according to its terms may be
paid by the Account Debtor by an offset of any claim of the Account Debtor or any other Person
against Borrower, (h) which arises other than from the sale of Inventory in the ordinary course of
Borrower’s business, (i) if the Account Debtor thereon is an Affiliate, director, officer,
employee, or agent of Borrower or of any Affiliate of Borrower, (j) if the Account Debtor thereon
is insolvent or is the subject of any Proceeding or is, at the time in question, in default in any
way on an existing obligation (except any obligation classified as an Account) to Borrower, (k) if
the Account Debtor thereon is not a resident of the United States of America or is not subject to
service or legal process in the United States of America or Canada, unless payment of the Account
is assured by an irrevocable letter of credit in form and substance satisfactory to Bank and issued
by a financial institution that is a resident of the United States of America, is subject to
service of legal process in the United States of America, and is otherwise satisfactory to Bank,
or, if the Account Debtor is a resident of Canada, unless Borrower shall have taken or caused to be
taken all actions from time to time requested by Bank in order to assure the attachment,
enforceability, and perfection of Bank’s security interest under the law of each province in which
the Account Debtor resides, and shall have furnished to Bank such written evidence (including,
without limitation, one or more opinions of legal counsel rendered to Bank by counselors authorized
to practice law in each such province), in form and substance satisfactory to Bank, that all such
actions have been taken (l) if the Account Debtor thereon is a resident of any jurisdiction denying
creditors access to its courts in the absence of qualification to transact business therein or in
the filing of a so-called “notice of business activities report” or other similar filing, unless
Borrower has taken all action required by the jurisdiction in question to have access to its
courts, (m) which is subject to any law (including, without limitation, the Assignment of Claims
Act of 1940 (31 USC 3272, et. seq. and 41 USC 15 et. seq.), rule, regulation, order, or agreement
now or hereafter in effect which restricts or requires notice of or consent to assignment, unless
all such required notices shall have been given, all such required consents shall have been
obtained, and all other such requirements shall have been complied with in order the Bank shall
have the unconditional right to enforce the Account against the Account Debtor thereon, (n) is
subject to any mortgage, security interest, or other lien securing payment or performance of any
obligation other than Bank Debt, (o) which is described in any financing statement naming any
Person other than Bank as the secured party of record, or (p) the collection of which Bank, in the
exercise of its good faith judgement, determines to have become impaired for any reason;
“Instrument” means a negotiable instrument, or a certified security, or any other writing which
evidences a right to the payment of money and is not itself a security agreement or lease and is of
a type which is in the ordinary course of business transferred by delivery with any necessary
endorsement or assignment; “Proceeds” means whatever is received or receivable upon sale, exchange,
collection, or other disposition of any property or Proceeds, whether directly or indirectly, and
includes, without limitation, the proceeds of any casualty, liability, or title insurance relating
to any such property and any goods or other property returned after any such sale, exchange,
collection, or other disposition; “Products” means property directly or indirectly resulting from
any manufacturing, processing, assembling, or

Page 29

 

commingling of any goods; and the foregoing definitions shall be applicable to the respective
plurals of the foregoing defined terms.

	 	 	 
	 

	 	Borrower: Shopsmith, Inc.
	 
	 	 
	 

	 	By: /s/ Robert Folkerth
	 
	 	 
	 

	 	Printed Name: Robert Folkerth

	 
	 	 
	 

	 	Title: President

WARNING—BY SIGNING THIS PAPER YOU GIVE UP YOUR RIGHT TO NOTICE AND COURT TRIAL. IF YOU DO NOT PAY
ON TIME A COURT JUDGEMENT 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.

Page 30EX-4.22

 

Exhibit 4.22

OPEN END MORTGAGE AND SECURITY AGREEMENT

KNOW ALL MEN BY THESE PRESENTS THAT SHOPSMITH, INC. (collectively the “Mortgagor”), an Ohio
corporation, whose address is 6530 Poe Avenue, Dayton, OH 45414, for the consideration of Seven
Hundred Eighteen Thousand and 00/100 Dollars ($718,000.00) received or to be received to
Mortgagor’s full satisfaction and to Mortgagor or on Mortgagor’s behalf paid or to be paid by
NATIONAL CITY BANK, a national banking association, successor by merger to the Provident Bank,
having its principal place of business located at 6 North Main Street, Dayton, OH 45412,
Attention: Commercial Loan Division, Locator 21-2215, (the “Bank:), gives, grants,
bargains, sells, assigns and conveys unto Bank, its successors and assigns, the following described
real property, appurtenances and rights:

Situated in the City of Vandalia, Montgomery County, Ohio as is more particularly
described on Exhibit A which is attached to and made a part of the Mortgage

Together with, all and singular, the right, title and interest of Mortgagor, including any after
acquired title or reversion, in and to the ways, easements, streets, alleys, passages, water, water
courses, riparian rights, minerals, royalties, rights, liberties and privileges in any way
appertaining to the Premises; and

Together with, all rents, issues, proceeds, income, revenues and profits accruing and to accrue
from the Premises; and

Together with, all buildings and improvements of every kind and description now or hereafter
constructed or placed thereon or therein and all materials intended for construction,
reconstruction, alteration and repairs of such improvements now or hereafter erected thereon or
therein, all of which materials shall be deemed to be included within the property subject to this
Mortgage immediately upon the delivery thereof to the premises, and all fixtures in which Mortgagor
now has or at any time hereafter acquires an interest and which are attached to or contained in and
used in connection with the premises, and all renewals or replacements thereof or articles in
substitution therefore, whether or not the same are or shall be attached to the buildings or other
improvements in any manner; it being mutually agreed that all the aforesaid property owned by
Mortgagor and placed by it on the Premises shall, so far as permitted by law, be deemed to be
fixtures and a part of the realty, security for the indebtedness and covered by this Mortgage, and
as to the balance of the property aforesaid, this Mortgage is a security agreement for the purpose
of creating hereby a security interest in the property, securing the indebtedness, for the benefit
of Bank; and

Together with, all right, title and interest now owned or hereafter acquired by Mortgagor in and to
any leases for equipment of any kind or nature used in connection with the Premises; and Together
with, all rewards and other compensation heretofore or hereafter to be made to the present and all
subsequent owners of the property subject to this Mortgage for any taking by eminent domain, either
permanent or temporary, of all or any part of property or any easement or appurtenance thereof,
including severance and consequential damage and change in grade of streets, which awards and
compensation are hereby assigned to the Bank.

The property mentioned above is referred to as “the Premises” to the extent the same is realty and
as “the Collateral” to the extent the same is personalty. The Premises and the Collateral are
collectively referred to as “Mortgage Property”, except where the reference is to the Premises or
the Collateral specifically.

To Have and to Hold the Mortgaged Property, with the appurtenances thereunto belonging, unto Bank,
its successors and assigns, forever, against all lawful claims and demands whatsoever.

Mortgagor represents to Bank, its successors and assigns, that at and until the ensealing of these
presents, Mortgagor is the owner of the Premises and has good right to bargain, sell and convey the
same in manner and form as above written, and Mortgagor will execute, acknowledge and deliver any
further assurances as may be necessary or required hereto to evidence or confirm the interest in
the Premises granted by this Mortgage.

The Condition of this Mortgage is, Whereas Mortgagor has executed and delivered this Mortgage for
the purpose of securing the performance of the covenants and agreements contained in this Mortgage
and in any loan agreement made with respect to any loan secured hereby, and to secure the payment
when due of:

Page 31

 

(a) the principal and interest of the promissory note (“the Note”), bearing even date herewith
executed by Mortgagor, in the principal sum of Six Hundred Thousand and 00/100 Dollars
($600,000.00), with interest at the rate specified in the Note, the balance of the Note being due
and payable on August 15, 2005 or such earlier date as in the Note provided; a letter of credit
dated ___herewith executed by Mortgagor in the amount of One Hundred Eighteen Thousand and
00/100 Dollars ($118,000.00).

(b) all sums expended or advanced by Bank pursuant to any term or provision of this Mortgage or to
any other agreement delivered in connection with this transaction;

(c) all unpaid advances of Bank with respect to the Mortgaged Property for the payment of taxes,
assessments, insurance premiums or costs incurred in the protection or operation of the Mortgaged
Property as provided in Section 5301.233 of the Ohio Revised Code;

(d) any and all obligations and liabilities of Borrower to Bank, whether absolute or contingent,
whether now existing or hereafter created, arising, evidenced or acquired (including all renewals,
extensions and modifications thereof and substitutions therefor) under (i) any agreement, device or
arrangement designed to protect Borrower from fluctuations of interest rates, exchange rates or
forward rates, including, but not limited to, dollar-denominated or cross-currency exchange
agreements, forward currency exchange agreements, interest rate caps, collars or floors, forward
rate currency or interest rate options, puts, warrants, swaps, swaptions, U.S. Treasury locks and
U.S. Treasury options, (ii) any other interest rate hedging transactions, such as, but not limited
to, managing the Borrower’s interest rate risk associated with any pending or potential capital
market transactions such as fixed rate bond issues and (iii) any and all cancellations, buybacks,
reversals, terminations or assignments of any of the foregoing.

(e) the unpaid balances of any loan advances made this date or subsequent to recordation hereof and
all other liabilities, obligations and indebtedness of Mortgagor to Bank, direct or contingent, now
or hereafter owing by Mortgagor to Bank to the extent that the total unpaid loan indebtedness
secured hereby, exclusive of the interest thereon and amounts referenced in clause (c) above, does
not exceed the maximum amount specified in this mortgage which is Seven Hundred Eighteen Thousand
and 00/100 Dollars ($718,000.00).

And Whereas, Mortgagor further covenants and agrees as follows:

	1.	 	To pay promptly the principal and interest on the indebtedness evidenced by the Note at the
time and in the manner herein and in the Note provided.
	 
	2.	 	In order more fully to protect the security of this Mortgage, in the Event of Default not
cured within any applicable grace period, to pay to Bank, if so required by Bank, in addition
to the payments of principal and interest under the terms of the Note and concurrently
therewith until the Note is fully paid, the following sums:

	 	(a)	 	a sum equal to taxes and assessments, both general and special, next due upon the
Mortgaged Property;
	 
	 	(b)	 	the premiums that will next become due and payable on policies of insurance covering
the Mortgaged Property and required under the provisions hereof.

Sums due for taxes and insurance premiums shall be divided by the number of payment dates to elapse
before the date such taxes, assessments and insurance premiums, respectively, will become due and
payable. These sums shall be held by Bank in trust, but without interest accruing thereon, to pay
each of the particular items.

	3.	 	To keep the Mortgaged Property free from statutory liens of every kind except current taxes
and assessments not yet due and payable; to pay, before delinquency and before any payment for
nonpayment attaches thereto, all taxes, assessments, and other governmental or municipal or
public dues, charges, fines or impositions which are or may be levied against the Mortgaged
Property of any part thereof, and, except when payment for all such items has theretofore been
made under paragraph 2 hereof, to timely deliver to Bank receipted bills evidencing payment
therefor.

Page 32

 

	4.	 	To keep the improvements now existing or hereafter erected on or on the Mortgaged Property
insured against loss or damage by, or abatement of rental income, resulting from fire and “all
risk” perils. Mortgagor covenants to maintain flood insurance as required by the Flood
Disaster Protection Act of 1973, as amended, and to maintain any additional flood insurance
reasonably required by the Bank. All perils insured, with the exception of flood, shall be in
an amount not less than the replacement value of the Mortgaged Property, and in any event, in
an amount necessary to prevent the operation of any coinsurance provision contained in any
policy of such insurance. Mortgagor agrees to pay promptly when due any premiums on such
insurance and further agrees, if requested by the Bank, to furnish a certificate from the
company carrying such insurance acknowledging that such insurance is adequate in any amount to
prevent the operation of any coinsurance provision contained therein. All such insurance
shall be carried in companies approved by the Bank in its reasonable discretion and the
policies and renewals thereof shall be deposited with and held by the Bank and have attached
thereto standard non-contributing mortgagee clauses (in favor of and entitling the Bank to
collect any and all proceeds payable under such insurance) as well as the standard waiver of
subrogation endoresement, all to be in a form acceptable to the Bank.

If any such loss or damage occurs as described herein to the improvements in or on the Premises,
Mortgagor shall give prompt notice to the Bank and the insurance carrier. Mortgagor shall be
entitled to adjust, compromise, and collect any such losses, subject to the following conditions:
(a) Mortgagor obtains the written approval of Bank as to the amount of the losses, which approval
shall not be unreasonably withheld or delayed; (b) an Event of Default has not occurred and is not
then continuing under any of the terms, covenants and conditions of this Mortgage, the Note, or any
other instrument 3executed in connection with or to additionally secure the indebtedness evidenced
by the Note; (c) Bank shall first be given satisfactory proof, in accordance with the plans and
specifications therefor previously approved by Bank, that such improvements have been fully
restored, or by the expenditures of such money will be fully restored, free and clear of all
mechanic’s and materialman’s liens; (d) if such proceeds shall be insufficient to restore the said
improvements, Mortgagor shall deposit promptly with Bank funds which, together with the insurance
proceeds, shall be sufficient to restore and rebuild the improvements on or in the Premises; and
(e) the excess of the insurance proceeds above the amount necessary to complete such restoration
shall be applied as hereinbefore provided, at the option of Bank, as a credit upon the indebtedness
secured hereby. If Mortgagor does not meet the foregoing provisions, Mortgagor authorizes Bank to
collect, adjust and compromise any losses under any of the insurance aforesaid. After deducting
costs of collection, Bank shall be entitled to apply the proceeds, at its option, as follows: (x) a
credit upon any portion, as selected by Bank, of the indebtedness secured hereby; or (y) in
restoration of the improvements, in which event the Bank shall not be obligated to see to the
proper application thereof nor shall the amount so released or used be deemed a payment on any
indebtedness secured hereby; or (z) so deliver same to the owner of the Mortgaged Property. Under
no circumstances shall Bank become obligated to take any action to restore the improvements so
damaged.

In the event of foreclosure of this Mortgage, or other transfer of title to the Mortgaged Property
in lieu of foreclosure, all right, title and interest of Mortgagor in and to any insurance policies
then in force shall pass to the purchaser or grantee thereof.

	5.	 	If any action shall be commenced or any written notice shall be received for the taking by
exercise of the power of eminent domain of title to or the temporary use of the Mortgaged
Property, or any part thereof, the Mortgagor will promptly give written notice thereof to the
Bank describing the nature and extent of the proposed taking. Any proceeds received from any
award made in such eminent domain proceedings (or conveyance in lieu thereof) are pledged by
Mortgagor as additional security for the payment of the Note and shall , if received prior to
the release and discharge of this Mortgage, be made available to Mortgagor in the same manner
and under the same conditions as insurance proceeds under paragraph 4 hereof.

	6.	 	That no other building or other improvement on or in the Premises shall be structurally or
materially altered, removed or demolished, nor shall any fixtures or appliances on, in or
about the buildings or improvements be severed, removed, sold or mortgaged, without the
consent of Bank which consent shall not be unreasonably withheld or delayed. If any of the
fixtures, chattels or srticles of personal property covered by this Mortgage is destroyed in
whole or in part, they shall be replaced promptly by similar fixtures, chattels or srticles of
personal property at least

Page 33

 

	 	 	equal in quality and condition as those replaced, free from any security interest in or
encumberance thereon or reservation of title thereto.

	7.	 	To permit, commit or suffer no waste, impairment or deterioration of the Mortgaged Property
or any part thereof; to keep and maintain the Mortgaged Property and every part thereof with
buildings, fixtures, machinery and appurtenances in good repair and condition; to effect such
repairs as Bank may reasonably require and from time to time make all needful and proper
replacements so that the buildings, fixtures, machinery and appurtenances will, at all times,
be in good condition, fit and proper for the respective purposes for which they were erected
or installed; to comply with all statutes, orders, requirements or decrees relating to the
Mortgaged Property by any federal, state or municipal authority to the extent necessary to
avoid any violations thereof; and to permit Bank or its agents, at all reasonable times, to
enter upon and inspect the Mortgaged Property.

	8.	 	Mortgagor will not cause or permit any toxic or hazardous substance or waste, or underground
storage tanks, or any other pollutants which could be detrimental to the Mortgaged Property,
human health, or the environment, or that would violate any local, state or federal laws or
regulations (collectively, “Environmental Conditions”) to be pesent on or affect or
contaminate the Mortgaged Property. Mortgagor agrees to absolutely and unconditionally
indemnify, defend and save Bank, its successors and assigns, harmless, from and against any of
the following which may result from the existance of any Environmental Conditions at the
Mortgaged Property: (a) any liability (including, without limitation, strict liability),
loss, cost, damage, action, penalty or expense (inclusing, without limitation, attorneys’ fees
and expenses) arising from the imposition or recording of a lien, the incurrance of any
clean-up and removal costs under or other noncompliance with or violation of any hazardous
waste, environmental protection, spill compensation, clean air and water, or other local,
state or federal law or regulation (collectively, the “Environmental Laws”) with respect to
the Mortgaged Property or any Environmental Condition, or liability to any third party in
connection with any violation of any Environmental Laws or other action by Mortgagor or its
agents; (b) any loss of value in the Mortgaged Property as a result of any such lien, clean-up
and removal costs; and (c) any liability, loss, cost, damage or expense arising from any
failure or defect in title occasioned by any of the applicable Environmental Laws. Mortgagor
shall, at all times comply with, and cause all occupants of the Mortgaged Property to comply
with, all applicable Environmental Laws. Mortgagor agrees to promptly notify Bank of any
litigation or proceedings pending, threatened or commenced of the commencement of any
litigation or proceedings pending, threatened or commenced (whether or not served) against
Mortgagor or any other party in connection with Environmental Conditions or Environmental Laws
and of the receipt of any notice from any Governmental Agency or authority in regard to
Environmental Conditions and/or Environmental Laws. Mortgagor shall immediately, upon
receipt, provide Bank with true, complete and correct copies of all such notices and other
documentation related to said notices, litigation or proceedings. Mortgagor agrees that
Mortgagor’s indemnification of Bank and other obligations, as set out above in this paragraph
8, shall survive the release of this Mortgage (in whole or in part) and remain in effect
notwithstanding the payment in full of the Note and any other indebtedness secured hereby or
any foreclosure of any lien or security interest.

     (b) Mortgagor agrees to indemnify, defend and save Bank, its successors and assigns,
harmless, from and against any and all liability, loss, cost, damage or expense suffered by Bank
(including costs of defense, settlement and attorneys’ fees) which arises out of or results from
any Unpermitted Fill Activities (as hereinafter defined) by Mortgagor or its agents after the
date of the Loan Agreement (as hereinafter defined), including, but not limited to, liability,
loss, cost, damage or expense from actions taken by federal, state or local courts,
administrative agencies or other governmental bodies, including, any and all fines levied and
any and all orders or directives from any federal, state or local courts, administrative
agencies or other governmental bodies, requiring restoration or enhancement of any Wetland (as
hereinafter defined) or creation of new Wetlands. “Unpermitted Fill Activities” means the
unauthorized discharge of dredged or fill material in violation of (i) section 404 of the
Federal Water Pollution Control Act, 33 U.S.C. 1344, and/or (ii) any federal, state or local
law or regulation. “Wetland” is real property which is subject to the jurisdiction of section
404 of the Federal Water Pollution Control Act, 33 U.S.C. 1344.

	9.	 	That, unless approval is first obtained in writing from the Bank, Mortgagor will not
voluntarily create or permit to be created or filed against the Mortgaged Property any
mortgage lien or other lien or liens inferior or superior to the

Page 34

 

	 	 	lien of this Mortgage, or if filed, will have same discharged or record either by payment, the
bonding thereof or other lawful means for discharging any such lien, within sixty (60) days
after notice of filing, and further, Mortgagor will keep and maintain the same free from the
claims of all persons supplying labor or materials which will enter into the construction of any
and all buildings and improvements now being constructed or which hereafter may be constructed
on or in the Premises, notwithstanding by whom such labor or materials may have been contracted.
If Bank consents to any lien inferior to the lien of this Mortgage, any default in the
performance or observance of the terms and conditions contained in the instruments creating or
extending such lien shall be a default hereunder.

	10.	 	That Mortgagor shall pay for appraisals that Bank is required to obtain by laws or
regulations that apply to national banks but not more frequently than every other calendar
year.

	11.	 	To save Bank harmless from all loss, cost and expense, incurred by reason of any action,
suit, proceeding, hearing, motion or application before any court or administrative body
(excepting an action to foreclose or to collect the debt secured hereby) wherein proof of
claim is required to be filed or in which it becomes necessary to defend or uphold the terms
of and the lien created by this Mortgage. All money paid or expended by Bank in that regard,
together with interest thereon from date of such payment at the then applicable rate under the
Note, shall be so much additional indebtedness secured hereby and shall be immediately and
without notice due and payable to Bank.

	12.	 	That Mortgagor will at all times promptly and faithfully keep and perform, or cause to be
kept and performed, all covenants and conditions contained in any easement agreements, party
wall agreements, deeds or other instruments, which in any way affect the Mortgaged Property
and are to be kept and performed by Mortgagor, and Mortgagor further covenants that it will
not do or permit anything to be done under such instruments, the doing of which, or refrain
from doing anything, the omission of which, will impair or tend to impair the security of this
Mortgage.

	13.	 	That nothing contained in this mortgage nor any transaction related thereto shall be
construed or shall so operate either presently or prospectively, to require Mortgagor to make
any payment or do any act contrary to law, but if any clause and provision herein contained
shall otherwise so operate to invalidate this Mortgage in whole or in part then such clauses
and provisions only shall be held for naught as though not herein contained and the remainder
of this Mortgage shall remain operative and in full force and effect.

	14.	 	That this Mortgage is a security agreement for the purpose of creating a security interest
securing the indebtedness secured hereby in and to the Collateral and any other indebtedness
hereinafter due from Mortgagor to Bank.
	 
	 	 	Mortgagor authorizes Bank to file, in the jurisdiction where this Mortgage will be given effect,
financing statements covering the Collateral and at the request of Bank, Mortgagor will join
Bank in executing one or more such financing statements pursuant to the Uniform Commercial Code
in a form satisfactory to Bank, and will pay the cost of filing the same or filing or recording
this instrument, as a financing statement, in all public offices at any time and from time to
time wherever Bank deems filing or recording of any financing statements or of this instrument
to be desirable or necessary.
	 
	 	 	Mortgagor within five (5) days upon request by mail shall execute, acknowledge and deliver to
Bank a security agreement or other similar instrument in form satisfactory to Bank, covering all
property, of any kind whatsoever owned by Mortgagor, which, in the sole opinion of Bank is
essential to the operation of the Mortgaged Property and concerning which there may be any doubt
as to its being subject to the lien of this Mortgage under the laws of the State of Ohio, and
shall further execute, acknowledge and deliver any financing statement, affidavit, continuation
statement or certificate or other document as Bank may request in order to protect, preserve,
maintain, continue and extend the security interest under and the priority of such security
agreement or other instrument. Mortgagor further agrees to pay to Bank on demand all costs and
expenses incurred by Bank in connection with the preparation, execution, recording and filing of
any such documents.
	 
	15.	 	That Mortgagor will furnish to Bank forthwith upon Bank’s request, such information in
writing about Mortgagor’s financial condition, properties and operations, as Bank may from
time to time reasonably request.

	16.	 	That the occurrence of any one or more of the following events shall be an “event of Default”
hereunder:

Page 35

 

(a) failure by Mortgagor to pay the principal sum secured by this Mortgage or to pay any
installment thereof or interest thereon, as they severally become due or within any grace period
applicable thereto as set forth in the Note; or

(b) failure by Mortgagor to perform or observe any of the terms, covenants or conditions herein
or in the Note contained, or upon the occurrence of any event of default under any other
instrument executed in connection with or additionally to secure the indebtedness evidenced by
the Note, and the continuation of such failure for a period of thirty (30) or more days after
the giving of written notice thereof by Bank to Mortgagor, provided that if such failure cannot
be cured by the payment of monies and cannot reasonably be cured within thirty (30) days,
Mortgagor shall have a reasonable time to effect a cure, if curative action is commenced within
said thirty (30) day period and is thereafter pursued diligently and in good faith to
completion; or

(c) filing by, or against, Mortgagor, of any complaint or action for relief under any
bankruptcy, insolvency, or similar laws provided, however, that if Mortgagor contests the filing
of an involuntary petition in bankruptcy that is filed against it and such petition is dismissed
within sixty (60) days after the date it was filed, then such filing shall not, in and of
itself, constitute an event of default hereunder; or

(d) seeking or acquiescing by Mortgagor in the appointment of, or the entry by a court of
competent jurisdiction of an order appointing, any trustee, receiver or liquidator of Mortgagor
or of all or a part of Mortgagor’s assets, rents, revenues, issues, earnings, profits or income
thereof; or

(e) making by Mortgagor of any general assignment for the benefit of creditors, or the admission
in writing of its inability to pay its debts generally as they become due; or

(f) if, without Bank’s prior written consent, Mortgagor should hereafter deed, quitclaim,
assign, convey, transfer, sell, sell under contract of sale, land contract, lease with option to
purchase, dispose of or further encumber the Mortgaged Property, or any part thereof, or any
interest therein, or agree to do so, or such shall occur by any means, voluntary or involuntary,
by operation of law or otherwise, or if the controlling interest in Mortgagor is transferred by
slae, assignment, pledge or other transfer. Failure of Bank to give such prior written consent
or to exercise the aforesaid option provided for in this paragraph shall not be deemed a waiver
of its right to exercise the option at any other time during which Mortgagor is in default under
the terms of this paragraph. Consent to one such transaction shall not be deemed a waiver of
the right to require such consent to future or successive transactions.

	17.	 	Upon the occurrence of any Event of Default hereunder which shall not have been cured within
the grace period, if any, applicable thereto, Bank may exercise any or all or any combination
of the rights, powers and remedies conferred upon or reserved to it under this Mortgage, the
Note or any other instrument supplemental or collateral thereto, or executed and delivered in
connection therewith, now or hereafter existing at law, in equity or by statute including,
without limitation, the following:

(a) Bank may, at its option and whether electing to declare the whole indebtedness due and
payable or not, perform any such term, covenant or condition which Mortgagor has failed to
perform or observe without waiver of any other remedy, and any amount paid or advanced by Bank
in connection therewith, or any other costs, charges or expenses incurred in the protection or
operation of the Mortgaged Property and the maintenance of this lien with interest thereon at
the then applicable rate under the Note shall be repayable by Mortgagor upon demand, shall be a
lien upon the Mortgaged Property prior to any right or title to, interest in or claim thereon
attaching or accruing subsequent to the lien of this Mortgage and shall be deemed to be included
in and secured by this Mortgage; or

(b) at the option of the Bank, the whole indebtedness secured hereby shall become immediately
due and payable, although the period for payment thereof may not have expired, anything
hereinbefore or in Mortgagor’s loan documents contained to the contrary notwithstanding, and
thereupon, Bank may proceed at law or in equity to collect the entire indebtedness secured
hereby and/or proceed to foreclose this Mortgage as against all or any part of the Mortgaged
Property or otherwise pursue any other right or remedy herein or by law provided; or

Page 36

 

(c) the Bank may exercise any rights, powers, or remedies it may have as a secured party under
the Uniform Commercial Code as adopted in the State of Ohio.

	18.	 	That Bank, in any suit to foreclose this Mortgage, shall be entitled to the appointment of a
receiver of the rents, leases and profits of the Mortgaged Property as a matter of right and
without notice, with power to manage and operate the Mortgaged Property, to collect the rents,
issues and profits of the Mortgaged Property due and to become due during the pendency of such
foreclosure suit to and including the date of confirmation of the sale under such foreclosure
and during the redemption period, if any, after such confirmation, such rents and profits
being expressly assigned and pledged as additional security for the payment of the
indebtedness secured by this Mortgage without regard to the value of the Mortgaged Property or
the solvency of any person or persons liable for the payment of the Mortgage indebtedness, and
regardless of whether Bank has an adequate remedy at law. Mortgagor for itself and any
subsequent owner waives any and all defenses to the application for a receiver and
specifically consents to such appointment without notice, but nothing herein contained is to
be construed to deprive the holder of the Mortgage of any other right, remedy or privilege it
may now have under the law to have a receiver appointed. The provision for the appointment of
a receiver and the assignment of such rents, issues and profits is made an express condition
upon which the loan hereby secured is made. The rights and remedies herein provided for shall
be deemed to be cumulative and in addition to, and not in limitation of, those provided by
law.
	 
	19.	 	That the mailing of a written notice or demand, addressed to the owner of record of the
Mortgaged Property, directed to the owner at the last address actually furnished to the Bank,
or directed to said owner at the Mortgaged Property, and mailed by United States mail,
certified or registered, return receipt requested, shall be sufficient notice and demand in
any case arising under this instrument and required by the provisions hereof or by law.
	 
	20.	 	That all the covenants hereof shall run with the land.
	 
	21.	 	That failure of Bank to exercise the option for acceleration of maturity and/or foreclosure
following any event of default as aforesaid or to exercise any other option granted to Bank
hereunder in any one or more instances, or the acceptance by Bank of partial payments
hereunder shall not constitute a waiver of any such default, nor extend or affect the grace
period, if any, but such option shall remain continuously in force. Acceleration of maturity,
once claimed hereunder by Bank may, at the option of Bank, be rescinded by written
acknowledgment to that effect by Bank, but the tender and acceptance of partial payments alone
shall not in any way affect or rescind such acceleration of maturity, nor extend or affect the
grace period, if any.
	 
	22.	 	The undersigned Mortgagor and bank without further acceptance, hereby waive trial by jury in
any action, proceeding, claim or counterclaim, whether in contract or tort, at law or in
equity, arising out of or in any way related to this agreement and the loan evidenced hereby.
This provision may not be waived, conditioned or modified except in writing signed by the duly
authorized officers of bank and the Mortgagor.

PROVIDED, ALWAYS, NEVERTHELESS, if Mortgagor shall pay all of the indebtedness and shall fully keep
and perform all of the terms, covenants and conditions by Mortgagor to be kept and performed herein
and in the Note contained, then this Mortgage shall be void and shall be released by Bank, at the
cost and expense of Mortgagor; otherwise this Mortgage is to be and shall remain in full force and
effect.

ALL OF THE COVENANTS herein contained are joint and several and shall also bind, and the benefits
and advantages thereof shall also inure, to the respective heirs, executors, administrators,
successors and permitted assigns of the parties. Whenever used, the singular number shall include
the plural, the plural the singular, and the use of any gender shall include all genders.

TIME IS OF THE ESSENCE with respect to each and every covenant, agreement and obligation of
Mortgagor under this Mortgage.

IN WITNESS, this Mortgage has been executed to be effective in Dayton, Ohio this ___day of
___, 20___.

MORTGAGOR: Shopsmith, Inc. (an Ohio corporation)

Page 37

 

By: /s/ Robert Folkerth

Printed Name: Robert Folkerth

Title: President

STATE OF OHIO

COUNTY OF

BEFORE ME, a notary Public in and for said County and State, personally appeared Robert Folkerth as
President of the above-named corporation, Shopsmith, Inc. who acknowledged that he signed the
foregoing instrument for and on behalf of the Corporation, and by authority of its Board of
Directors, and that the same is the free act and deed of the Corporation and the free act and deed
of each of them personally and as such officers.

IN TESTIMONY, I set my hand and official seal, this ___day of ___, 20___.

Notary Public___

THIS INSTRUMENT WAS PREPARED BY NATIONAL CITY BANK. (#74915)

Page 38

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