Document:

Security Agreement

 Exhibit 10.1 
  
 SECURITY AGREEMENT 
 (Deposit Account(s)) 
 Borrower Grantor 
  
 This Security Agreement (together with all amendments, supplements and other modifications, this “Agreement”)
executed in Columbus, OH, as of this 15th day of
October 2004, by PECO II, Inc. (together with its permitted successors and assigns, heirs and personal representatives, “Grantor”) whose mailing address is 1376 State Road 598, Galion, OH 44833-9355 to
NATIONAL CITY BANK (“Bank”), having a banking office at 155 East Broad Street, Columbus, OH 43251, Attention: Commercial Loans Division, Locator No. 16-0061. 
  
 1. Grant of Interest. Grantor hereby grants to Bank a security interest in all
of Grantor’s right, title and interest in the following property of Grantor wherever located and whether now existing or hereafter acquired or created (collectively, the “Collateral”): 
  

	 	 ̈	all Deposit Accounts with Bank
[                                 Bank] in Grantor’s name (and including any
changes in the numbering or designation of the foregoing) with all present and future renewals, replacements, substitutions, increases in value, rollovers, additions thereto, interest and earnings thereon, rights and accessions thereto, whether now
existing or hereafter arising, (collectively, the “Deposit”) and all Proceeds of the foregoing. 

  
 OR 
  

	 	x	a Deposit Account with Bank [National City Bank] in Grantor’s name which is identified as Account Number
                                 (and including any changes in the numbering or
designation of the foregoing) with all present and future renewals, replacements, substitutions, increases in value, rollovers, additions thereto, interest and earnings thereon, rights and accessions thereto, whether now existing or hereafter
arising, (the “Deposit”) and all Proceeds of the foregoing. 

  
 This Collateral secures the full and prompt payment to Bank of all obligations of Grantor to Bank, whether incurred directly or acquired by purchase, pledge, or otherwise and whether participated in whole or in part,
including, without limitation, (i) every such obligation to Bank whether in a joint, several, or joint and several capacity, whether now owing or existing or later arising or created, owed absolutely or contingently, created by loan,
overdraft, guaranty, or other contract, quasi-contract, tort, statute or otherwise, whether for principal, interest, fees, expenses or otherwise and (ii) any and all obligations of Grantor to Bank or to any affiliate of Bank, whether now
owing or existing or later arising or created, owed absolutely or contingently, whether evidenced or acquired (including all renewals, extensions, and modifications thereof or substitutions), under any agreement, device or arrangement designed to
protect Grantor from fluctuations of interest rates, exchange rates or forward rates, including, but not limited to, dollar-denominated or cross-currency exchange agreements, foreign 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, (collectively the “Subject Debt”). 
  

	 	 ̈	[Withdrawals permitted above dollar limitation—National City accounts only] Anything herein to the contrary notwithstanding, the security interest in the Deposit granted
to Bank by Grantor under this Agreement shall be limited to the sum of                      and     /100 Dollars
($                    ) (the “Minimum Amount”) plus all expenses, legal and otherwise (including court costs
and reasonable attorney’s fees), paid or incurred by Bank in enforcing this Agreement. Subject to the covenants contained herein and any further restrictions contained in any deposit account control agreement or other agreement relating to
Bank’s Control over the Deposit and in any deposit agreement or other documents governing the Deposit, unless and until an Event of Default occurs or Bank demands payment of any part of the Subject Debt, Grantor may withdraw funds from the
Deposit so long as the total amount of the Deposit does not fall below the Minimum Amount. 

  

	 	x	[No withdrawals] Grantor shall not have the right to withdraw any amount from the Deposit unless Grantor obtains Bank’s prior written consent. 

 

 2. Representations and Warranties. Grantor represents and warrants to Bank as follows:

  
 (a) Existence. Grantor’s legal name
is exactly as set forth in the first paragraph of this Agreement. 
  
 (b) Ownership. Grantor owns all of the presently existing Collateral, free and clear of any and all adverse claims, assignments, attachments, leases, mortgages, security interests or other liens of any kind or nature
(“Encumbrances”) except those in favor of Bank and those consented to in writing by Bank (collectively, the “Permitted Encumbrances”). Each Encumbrance granted hereby, when duly and properly perfected,
will be a first priority security interest in the Collateral, prior to all Encumbrances except for Permitted Encumbrances, and will secure the payment of the Subject Debt. 
  
 (c) Authority; No Consent. Grantor has all right, power and authority to enter into and deliver this
Agreement and grant to Bank the Encumbrances on the Collateral. This Agreement is a valid obligation of Grantor, enforceable in accordance with its terms. No consent, authorization, approval or other action of any third party is required for the
grant by Grantor of the Encumbrances hereunder. 
  
 3.
Covenants. 
  
 (a) No Transfer or
Encumbrance. Grantor agrees that it will not, without in each case obtaining Bank’s prior written consent, (i) liquidate, transfer or otherwise dispose of all or any part of the Collateral except as otherwise permitted herein, or
(ii) grant any Encumbrances in or permit any Collateral to be or become subject to any Encumbrance except for Permitted Encumbrances. Grantor shall comply with all applicable laws, rules and regulations related to the Collateral. Grantor
agrees to join Bank to take all steps necessary to preserve, protect and defend Bank’s security interest in the Collateral, at Grantor’s expense, as Bank may from time to time require. 
  
 (b) Notice. Grantor agrees to give Bank:

  
 (i) not less than thirty (30)
days’ prior written notice of any change in Grantor’s name or the continuing status of Bank’s security interest as the first and prior lien on the Collateral, 
  
 (ii) immediate written notice if any third party claims any Encumbrance on any of the Collateral or
claims that Grantor’s use thereof infringes or unlawfully conflicts with any rights of such party, and 
  
 (iii) from time to time, upon Bank’s request, statements and schedules further identifying and describing the Collateral, in
form and substance satisfactory to Bank. 
  
 (c)
Further Assurances. Grantor agrees to execute and deliver from time to time upon request of Bank such other instruments of assignment, conveyance and transfer and take such other action as Bank may reasonably request for the
purpose of perfecting, continuing, amending, protecting or further evidencing the arrangements contemplated hereby or to enable Bank to exercise and enforce its rights and remedies hereunder. Grantor will, at Grantor’s expense, upon each
request of Bank (i) cooperate with Bank in obtaining Control of all Deposit Accounts, and (ii) comply with every other requirement deemed necessary by Bank for the perfection of its security interest in the Collateral. 
  
 4. Remedies. If any Event of Default occurs or after demand is made by Bank,
Bank has the right, at its option at any time and from time to time, without notice to Grantor to exercise the following rights and remedies which may be exercised simultaneously: 
  
 (a) Bank shall have the right, at any time and from time to time, to give any necessary notice and to surrender the
Deposit to the issuer thereof and obtain payment thereunder, subject to any early withdrawal penalty or other fees imposed by the issuer, when applicable, and to take control of all or any Collateral. 
  
 (b) Bank shall have the right, at any time and from time to time, to
sell, transfer or otherwise dispose of, or to attach, execute or levy on, any of the Collateral and to effect transfer of title upon sale or other disposition of all or a part of the Collateral. For this purpose, Grantor irrevocably appoints Bank as
Grantor’s attorney-in-fact to execute endorsements, assignments and instruments in the name of Grantor and each of them (if more than one) as shall be necessary or reasonable. 
  
 (c) Bank shall have full power and right to exercise any and all rights and remedies available at law (including,
without limitation, those afforded by the UCC) or in equity to collect, enforce or satisfy any of the 

  

 
Subject Debt and exercise any or all of the rights and remedies in respect of the Collateral, including, without limitation, those provided herein or in any
Related Writing. 
  
 After deducting all expenses incurred in enforcing its rights
in the Collateral, Bank shall have the right to apply the net proceeds of the Collateral to the Subject Debt without notice and with such allocation as to item and maturity as Bank in its sole discretion deems advisable, and shall refund the
surplus, if any, to Grantor. 
  
 5. Indemnity; Fees and
Expenses. Grantor agrees to indemnify Bank from and against any and all claims, losses, and liabilities arising from or with respect to the Collateral and this Agreement, except claims, losses, or liabilities resulting from Bank’s gross
negligence or willful misconduct. Grantor will reimburse Bank, on demand, for any and all fees, costs, and expenses (including, without limitation, reasonable attorneys’ fees) incurred by Bank in (a) custody, preservation, use,
collection or realization of the Collateral, (b) protection or enforcement of its rights in the Collateral or under this Agreement or (c) failure of Grantor to perform or observe any provisions hereof. 
  
 6. Bank May Perform. If Grantor fails to perform any agreement contained
herein, Bank may itself perform (but is not required to perform) or cause performance of, such agreement, and the expenses of Bank incurred in connection therewith shall be payable by Grantor upon Bank’s demand. If Grantor does not reimburse
Bank, such amounts paid will become part of the Subject Debt and will be secured hereunder. The powers conferred on Bank hereunder are solely to protect its interest in the Collateral and shall not impose any duty upon it to exercise any such
powers. 
  
 7. Notices. Each notice to Grantor shall be in
writing and shall be deemed to have been given or made when sent to Grantor, by certified mail, return receipt requested, or nationally recognized overnight courier service to the address of Grantor set forth herein or at such other address as
Grantor may furnish to Bank from time to time. Every notice to Bank shall be in writing and shall be effective when delivered to Bank at its banking office or at such other address as Bank may furnish to Grantor. Grantor assumes all risks arising
out of or in connection with each notice given hereunder. 
  
 8.
Power of Attorney. Grantor hereby irrevocably appoints Bank as its attorney-in-fact, with full power of substitution, to do the following: (a) to demand, collect, receive, receipt for, sue and recover all sums of money or other
property which may now or hereafter become due, owing or payable from the Collateral; (b) to execute, sign and endorse any and all claims, instruments, receipts, checks, drafts or warrants issued in payment for the Collateral; (c) to settle or
compromise any and all claims arising under the Collateral, and in the place and stead of Grantor, to execute and deliver its release and settlement for the claim; and (d) to file any claim or claims or to take any action or institute or take part
in any proceedings, either in its own name or in the name of Grantor, or otherwise, which in the discretion of Bank may seem to be necessary or advisable. This power is given as security for the Subject Debt, and the authority hereby conferred is
and shall be irrevocable and shall remain in full force and effect until terminated by Bank. 
  
 9. Definitions. As used in this Agreement, the following terms shall have the following meanings: “Deposit Account” means a demand, time, savings, passbook or similar
account maintained with a bank and does not include Investment Property or accounts evidenced by an Instrument; “Event of Default” means any event of default as defined and occurring under any Related Writing;
“Person” means an individual or entity of any kind, including, without limitation, any association, company, cooperative, corporation, partnership, trust, governmental body, or any other form or kind of entity;
“Record” means information that is inscribed on a tangible medium or which is stored in an electronic or other medium and is retrievable in perceivable form; “Related Writing” means a Record of any
kind that (i) evidences the Subject Debt or pursuant to which any Subject Debt is issued, (ii) evidences any Collateral or any interest therein or Proceeds or Products thereof or which otherwise relates thereto in any manner, or
(iii) is a financial statement, audit report, opinion, notice, certificate or other Record any kind that is furnished to Bank by Grantor or by any officer, partner, employee, agent, auditor or counsel of Grantor; and
“UCC” means the Uniform Commercial Code as currently in effect in the jurisdiction where the chief executive office of the Bank is located and as the Uniform Commercial Code may hereafter be amended, adopted and effective in
such jurisdiction. All terms used in this Agreement which are defined under the UCC and not otherwise defined herein, including, without limitation, all terms relating to the Collateral, shall have the meaning as set forth in the UCC. 
  
 10. General Provisions. The provisions of this Agreement shall be
binding upon the successors, assigns, heirs and personal representatives of the parties hereto. If Grantor is more than one Person, those Persons shall be jointly and severally liable for the payment and performance of Grantor’s obligations
under this Agreement. No single or partial exercise of any right, power or privilege shall preclude any further or other 

  

 
exercise thereof or of any other right, power or privilege, as each such right, power or privilege may be exercised either independently or concurrently with
others and as often and in such order as Bank may deem expedient. This Agreement contains the entire security agreement between Grantor and Bank and may be in addition to other security agreements executed by Grantor in favor of Bank. If any one or
more of the provisions hereof should be invalid, illegal or unenforceable in any respect, the finding shall only affect the provisions found to be void and the remaining provisions shall not be impaired. No course of dealing in respect of, nor any
omission or delay in the exercise of, any right, power or privilege by Bank under this Agreement shall operate as a waiver thereof, nor shall any single or partial exercise thereof preclude any further or other exercise thereof or of any other
right, power or privilege, as each such right, power or privilege may be exercised either independently or concurrently with others and in such order as Bank may deem expedient. The provisions of this Agreement may be modified, altered or amended
only by written agreement signed by Bank and Grantor. Each right, power or privilege is in addition to and not in limitation of any other rights, powers and privileges that Bank may otherwise have or acquire by operation of law (including, without
limitation, the right of offset), by other contract or otherwise. This Agreement shall be governed by the law (excluding conflict of laws rules) of the jurisdiction in which Bank’s banking office is located. 
  
 11. Defeasance. Bank’s security interest in the Collateral shall
remain in effect in accordance with this Agreement until the Subject Debt has been fully satisfied and shall not be affected by the lapse of time or by the fact that there may be a time or times when no Subject Debt is outstanding. If and when
Bank’s security interest shall have terminated in accordance with the provisions of this Agreement, Grantor agrees to pay to Bank, on demand, an amount equal to all reasonable costs and expenses incurred by Bank in terminating its security
interests. 
  
 12. Jurisdiction and Venue; Waiver of Jury
Trial. Any action, claim, counterclaim, crossclaim, proceeding, or suit arising under or in connection with this Agreement (each an “Action”) may be brought in any federal or state court located in the city in which
Bank’s banking office is located. Grantor hereby unconditionally submits to the jurisdiction of any such court with respect to each such Action and hereby waives any objection Grantor may now or hereafter have to the venue of any such Action
brought in any such court. GRANTOR HEREBY, AND EACH HOLDER OF THE SUBJECT DEBT OR ANY PART 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 AGREEMENT OR ANY OTHER RELATED WRITING, THE ADMINISTRATION, ENFORCEMENT, OR NEGOTIATION OF THIS AGREEMENT OR ANY OTHER RELATED WRITING, OR
THE PERFORMANCE OF ANY OBLIGATION IN RESPECT OF THIS AGREEMENT OR ANY OTHER RELATED WRITING. 
  
 This Agreement is executed as of the date first written above, with the intent to be legally bound hereby. 
  

					
	 Grantor:

	
	PECO II, Inc.
			
	By:	 	 /s/ Sandra A. Frankhouse
	 	 (SEAL)

	 Name:
	 	 Sandra A. Frankhouse
	 	 
	 Title:
	 	 Chief Financial Officer
	 	 

  

 LOAN SETTLEMENT STATEMENT 
 AND BORROWER’S AUTHORIZATION 
  
 Borrower: PECO II, Inc. 
  
 Principal
Amount of Note: $3,500,000.00 
  
 Note dated: October 15, 2004

  
 In connection with the above referenced loan transaction, NATIONAL CITY
BANK has incurred or will incur the following expenses: 
  

				
	 Origination Fee
	  	$	5,000.00
	 TOTAL:
	  	$	5,000.00

  
 Please pay the above charges in the
following manner (Check One): 
  

	x	Check in the above amount attached hereto. 

  

	 ̈	Please debit my Account Number 982338667 and send copy of Debit Advice to above Borrower. 

  

	 ̈	Please deduct the above charges from the proceeds of the loan. 

  
 In addition, NATIONAL CITY BANK is authorized to deduct from the proceeds of the above referenced note the following amounts to be paid to the following:

  

				
	 Undisbursed
	  	$	3,500,000.00
	 TOTAL
	  	$	3,500,000.00
	 	  	
	

  

							
	Borrower: PECO II, Inc.	  	 	 	 
				
	 By:
	 	 /s/ Sandra A. Frankhouse
	  	 Its:
Chief Financial Officer
	 	Date: October 15, 2004
	 	 	Sandra A. Frankhouse	  	 	 	 

  
 Acknowledgement

  

							
	Bank: NATIONAL CITY BANK	  	 	 	 
				
	 By:
	 	/s/ Tom D. Peoples	  	 Its:
VP
	 	Date: October 15, 2004
	 	 	Tom D. Peoples	  	 	 	 

  

 FORM OF CONFIRMATION FOR DEMAND LINE OF CREDIT 
  

							
	Borrower:	  	 PECO II, Inc.
 1376 State Route
598
 Galion, OH 44833-9355
	  	Lender:	  	 National City Bank
 Columbus - Corporate
Banking LOC 0018
 155 East Broad Street
 Columbus,
OH 43251

  
 Borrower has executed and delivered to
National City Bank (“Lender”) a Promissory Note (“Note”) in the amount of $ Three Million Five Hundred Thousand and 00/100 dollars ($3,500,000.00) (“Demand Line”) 
  
 This form will confirm that the Lender has agreed, subject to the statutory and other
requirements by which it is governed and the terms and conditions which are set forth in this form as well as those set forth in the Note, to provide to the Borrower the Demand Line in the amount set forth above. The terms and provisions of the
Demand Line including, without limitation, the interest rate and the minimum advance amounts, are set forth in the Note. The Note, together with this form, must be executed by the Borrower prior to the Lender considering making any advances to the
Borrower. This Demand Line will be reviewed from time to time by the Lender to allow the Lender to determine whether or not it should be continued. 
  
 Advances made under the Demand Line, if any, shall be made at the sole discretion of the Lender and shall be due and payable on demand. 

 
 The Lender shall have the right to demand repayment of the entire amount outstanding under
the Demand Line at any time and for any reason without any prior notice to the Borrower. 
  
 In extending the Demand Line to Borrower, Lender expects that Borrower will provide the information described in this form. 
  
 UBorrower’s Financial Statements. Borrower shall furnish to the Lender 
  
 within Forty Five (45) days after the end of each fiscal Quarter of Borrower, the balance sheet of the Borrower as of the end of such fiscal Quarter
[commencing with the fiscal Quarter ending Sept 30, 04 together with statements of cash flow, income and surplus reconciliation prepared for the Borrower and on a comparative basis with the prior year, in accordance with generally accepted
accounting principles consistently applied, in form and detail satisfactory to the Lender, and certified as having been Audited by an independent certified public accountant selected by the Borrower and satisfactory to the Lender. 
  
 Lender’s granting of any advance under the Demand Line or making any
other accommodation to Borrower in the absence of the financial information to be provided pursuant to this form shall not constitute a waiver of Lender’s rights to require delivery of such information, and shall not preclude the exercise of
any right, power or remedy granted to Lender under the Note and any related writings or provided by law. 
  
 THE BORROWER ACKNOWLEDGES THAT THIS FORM AND THE NOTE DO NOT CONSTITUTE A COMMITMENT BY THE LENDER TO MAKE ANY ADVANCES TO THE BORROWER OR HONOR THE
BORROWER’S REQUEST FOR AN ADVANCE. 
  
 If you agree that the
above accurately reflects the understanding of the Borrower and the Lender, please so indicate by signing below. 
  

			
	 BORROWER
 PECO II, Inc.

		
	 By:
	 	 /s/ Sandra A. Frankhouse

	 Printed Name: Sandra A. Frankhouse

	 Its: Chief Financial Officer.Promissory Note

  
 Exhibit 10.2

  
 

 
  
 PROMISSORY NOTE 

 

									
	Borrower:	  	 PECO II, Inc.
 1376 State Route
598
 Galion, OH 44833-9355
	  	Lender:	  	 National City Bank
 Columbus - Corporate
Banking LOC 0078
 155 East Broad Street
 Columbus,
OH 43251

  

			
	Principal Amount: $3,500,000.00	  	Date of Note: October 15, 2004

  
 PROMISE TO PAY. PECO II, Inc.
(“Borrower”) promises to pay to National City Bank (“Lender”), or order, in lawful money of the United States of America, the principal amount of Three Million Five Hundred Thousand & 00/100 Dollars ($3,500,000.00), together
with interest on the unpaid principal balance from October 15, 2004, until paid in full. 
  
 PAYMENT. Borrower will pay this loan on demand. Payment in full is due immediately upon Lender’s demand. If no demand is made, Borrower will pay this loan in accordance with the following payment schedule:

  
 No Commitment and Closing Fee. This Note evidences an
arrangement whereby, for Borrower’s convenience, Borrower may, without having to execute and deliver a separate note each time, obtain such loans (each a “Subject Loan”) as Borrower may from time to time request and as Lender in its
sole discretion may from time to time be willing to make, subject in any case to the condition that (a) each Subject Loan shall be in an amount that is an integral multiple of one thousand dollars ($1,000) and (b) that the aggregate unpaid principal
balance of the Subject Loans shall not at any time exceed the face amount of this Note. NOTWITHSTANDING ANY PROVISION OR INFERENCE TO THE CONTRARY, LENDER SHALL HAVE NO OBLIGATION TO EXTEND ANY CREDIT TO OR FOR THE ACCOUNT OF BORROWER BY REASON OF
THIS NOTE. Borrower shall pay Lender, on the date of this Note, a non refundable Origination fee in an amount equal to Five Thousand and 00/100 dollars ($5,000.00). 
  
 Loan Requests; Disbursement. A Subject Loan is properly requested if requested orally or in writing not later than 2:00 p.
m., Banking Office Time, of the Banking Day upon which that Subject Loan is to be made. Each request for a Subject Loan shall of itself constitute, both when made and when honored, a representation and warranty by Borrower to Lender that Borrower is
entitled to obtain the requested Subject Loan. Louder is hereby irrevocably authorized to make an appropriate entry on this Note, in a loan account on Lender’s books and records, or both, whenever Borrower obtains a Subject Loan. Each such
entry shall be prima facie evidence of the data entered, but the making of such an entry shall not be a condition to Borrower’s obligation to pay. Lender is hereby directed, absent notice from Borrower to the contrary, to disburse the proceeds
of each such Subject Loan to Borrower’s general checking account with Lender. Lender shall have no duty to follow, nor any liability for, the application of any proceeds of any Subject Loan. 
  
 The unpaid principal balance of each Subject Loan shall at all times bear
interest at the Contract Rate, provided, that so long as (a) any principal of any Subject Loan remains unpaid after Lender shall have given Borrower notice of demand for any such principal or after the commencement of any Proceeding with respect to
Borrower, or (b) any accrued interest on any Subject Loan remains unpaid after the due date of that interest, then, and in each such case, all unpaid principal of this Note and all overdue interest on that principal shall bear interest at a
fluctuating rate equal to two percent (2%) per annum above the rate that would otherwise be applicable, but in no case less than two percent (2%) per annum above the Prime Rate; provided further, that in no event shall any principal of or interest
on any Subject Loan bear interest at any time after the giving of any such notice or the commencement of any such Proceeding, whichever shall first occur, at a lesser rate than the rate applicable thereto immediately after the giving of that notice
or the commencement of that Proceeding,” as the case may be. The “Contract Rate” shall at all times be a fluctuating rate equal to One and one half of one percent (1.50%) per annum plus the One Month LIBOR, provided, that in
the event the One Month LIBOR is unavailable as a result of Lender’s good faith determination of the occurrence of one of the events specified in the section labeled “LIBOR Unavailable”, the “Contract Rate” shall be a
fluctuating rate equal to Three quarter of One percent (.75%) below the Prime Rate. 
  
 Interest on each Subject Loan shall be payable in arrears on December 1, 2004, and on the First day of each month thereafter and on demand. The One Month LIBOR rate shall be adjusted by Lender, as
necessary, at the end of each Banking Day during the term hereof. 
  
 LIBOR Unavailable. Notwithstanding any provision or inference to the contrary, the Contract Rate shall not be based on One Month LIBOR if Lender shall determine in good faith that (a) any governmental authority has asserted that it is
unlawful for Lender to fund, make, or maintain loans bearing interest based on One Month LIBOR, or (b) circumstances affecting the market selected by Lender for the purpose of funding the Subject Loans make it impracticable for Lender to determine
One Month LIBOR. Lender’s books and records shall be conclusive (absent obvious error) as to whether Lender shall have determined that the Contract Rate is prohibited from being based on One Month LIBOR. If the Contract Rate is prohibited from
being based on One Month LIBOR as a result of the occurrence of one of the events referenced in this section, then, and in each such case, notwithstanding any provision or inference to the contrary, the then outstanding principal balance of this
Note shall, upon Lender giving Borrower notice of Lender’s determination of the occurrence of such an event, bear interest at a Contract Rate based on the Prime Rate including the applicable spread described above. 
  
 Unless otherwise agreed or required by applicable law, payments will be applied first to
any accrued unpaid interest; then to principal; then to any unpaid collection costs; and then to any 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 One Month LIBOR. “One Month LIBOR” means, with respect to a loan, the rate per annum (rounded upwards, if necessary, to the next higher 1/16 of 1%)
determined by Lender and equal to the average rate per annum at which deposits (denominated in United States dollars) in an amount similar to the principal amount of that loan and with a maturity of one (1) month are offered at 11:00 A.M. London
time (or as soon thereafter as practicable) on the Date of Reference by banking institutions in the London, United Kingdom market, as such interest rate is referenced and reported by the British Bankers Association in the Bridge Financial Telerate
system “Page 3750” report or, if the same is unavailable, any other generally accepted authoritative source of such interest rate as Lender may reference from time to time (the “Index”). Lender will tell Borrower the current
Index rate upon Borrower’s request. The interest rate change will not occur more often than each change in One Month LIBOR. Borrower understands that Lender may make loans based on other rates as well. The interest rate to be applied to the
unpaid principal balance of this Note will be at a rate of 1.500 percentage points over the Index. NOTICE: Under no circumstances will the interest rate on this Note be more than the maximum rate allowed by applicable law. 
  
 PREPAYMENT. 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 under the payment schedule. Rather, 

  

 PROMISSORY NOTE 
 (Continued) 
  

 
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: National City Bank, Columbus - Corporate Banking LOC 0078, 155 East Broad Street, Columbus, OH 43251. 
  
 LATE CHARGE. If a payment is 10 days or more late, Borrower will be charged 5.000% of the unpaid portion of the regularly scheduled
payment or $20.00, 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 to 3.500 percentage points over the Index. The interest rate will not exceed the
maximum rate permitted by applicable law. 
  
 LENDER’S RIGHTS. Upon
default, 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; provided, however that in the case of an Event of Default of the type described in
the “Insolvency” subsection above, such acceleration shall be automatic and not optional. 
  
 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. 
  
 DISHONORED ITEM FEE. Borrower will pay a fee to Lender of $25.00 if Borrower makes a
payment on Borrower’s loan and the check or preauthorized charge with which Borrower pays is later dishonored. 
  
 COLLATERAL. Borrower acknowledges this Note is secured by any and all mortgages, security agreements, assignments, loan agreements, pledge agreements and any other
document or instrument evidencing a security interest or other lien in favor of Bank and executed and delivered by Borrower or any third party as security for payment of this Note and/or all indebtedness of Borrower to Bank, whether contemporaneous
with the execution of this Note or at any other time. 
  
 SHARING
INFORMATION. Borrower hereby authorizes Lender to share all credit and financial information relating to Borrower with Lender’s parent company and with any subsidiary or affiliate of Lender or of Lender’s parent company. 
  
 FINANCIAL INFORMATION. Borrower will furnish to Lender, at Borrower’s expense,
promptly upon each request of Lender, such information in writing regarding Borrower’s financial condition, income taxes, properties, business operations, if any, and pension plans, if any, as Lender may from time to time reasonably request,
prepared, in the case of financial information, in accordance with generally accepted accounting principles consistently applied and otherwise in form and detail satisfactory to Lender. 
  
 FINAL AGREEMENT. This Note and the related documents 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. 
  
 DIRECT DEBIT. The following is applicable if checked by Borrower: x Payments shall be paid by Borrower by debiting Borrower’s Checking account, number 982338667 on the due date.

  
 DEFINITIONS. As used in this Note, except where the context clearly
requires otherwise, 
  
 “Bank Debt” means, collectively, all Debt to
Lender, whether incurred directly to Lender or acquired by it by purchase, pledge, or otherwise, and whether participated to or from Lender in whole or in part; 
  

“Banking Day” means any day (other than any Saturday, Sunday or legal holiday) on which Lender’s banking office is open to the public for carrying on
substantially all of its banking functions; 
  
 “Banking Office Time”
means, when used with reference to any time, that time determined at the location of Lender’s banking office; 
  
 “Date of Reference” means, on any Banking Day, a date which is two (2) Eurodollar Banking Days prior to the Banking Day in question; 
  
 “Debt” means, collectively, all obligations of the Person or Persons in question,
including, without limitation, every such obligation whether owing by one such Person alone or with one or more other Persons in a joint, several, or joint and several capacity, whether now owing or hereafter arising, whether owing absolutely or
contingently, whether created by lease, loan, overdraft, guaranty of payment, or other contract, or by quasi-contract, tort, statute, other operation of law, or otherwise; 
  
 “Eurodollar Banking Day” means any Banking Day on which banks in the London Interbank Market deal in United States dollar deposits
and on which banking institutions are generally open for domestic and international business at the place where Lender’s banking office is located and in New York City; 
  
 “Note” means this promissory note (including, without limitation, each addendum, allonge, or amendment, if any, hereto);

  
 “Obligor” 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 the Bank 

  

 Page 2 

 PROMISSORY NOTE 
 (Continued) 
  

 
Debt of Borrower and (in addition to Borrower) includes, without limitation, co makers, indorsers, guarantors, pledgers, hypothecators, mortgagors, and any
other Person who agrees, conditionally or otherwise, to assure such other Obligor’s creditors or any of them against loss; 
  
 “Person” means an individual or entity of any kind, including, without limitation, any association, company, cooperative, corporation, partnership, trust,
governmental body, or any other form or kind of entity; 
  
 “Prime Rate”
means the fluctuating rate per annum which is publicly announced from time to time by Lender as being its so called “prime rate” or “base rate” thereafter in effect, with each change in the Prime Rate automatically, immediately,
and without notice changing the Prime Rate thereafter applicable hereunder, it being acknowledged that the Prime Rate is not necessarily the lowest rate of interest then available from Lender on fluctuating rate loans 
  
 “Proceeding” means any assignment for the benefit of creditors, any case in
bankruptcy, any marshalling of any Obligor’s assets for the benefit of creditors, any moratorium on the payment of debts, or any proceeding under any law relating to conservatorship, insolvency, liquidation, receivership, trusteeship, or any
similar event, condition, or other thing; 
  
 “Related Writing” means
this Note and any indenture, note, guaranty, assignment, mortgage, security agreement, subordination agreement, notice, financial statement, legal opinion, certificate, or other writing of any kind pursuant to which all or any part of the Bank Debt
of Borrower is issued, which evidences or secures all or any part of the Bank Debt of Borrower, which governs the relative rights and priorities of Lender and one or more other Persons to payments made by, or the property of, any Obligor, which is
delivered to Lender pursuant to another such writing, or which is otherwise delivered to Lender by or on behalf of any Person (or any employee, officer, auditor, counsel, or agent of any Person) in respect of or in connection with all or any part of
the Bank Debt of Borrower; 
  
 and the foregoing definitions shall be applicable
to the respective plurals of the foregoing defined terms. 
  
 NO SETOFF.
Borrower hereby waives any and all now existing or hereafter arising rights to recoup or offset any obligation of Borrower under or in connection with this Note or any Related Writing against any claim or right of Borrower against Lender.

  
 INDEMNITY: GOVERNMENTAL COSTS. If (a) there shall be enacted any law
(including, without limitation, any change in any law or in its interpretation or administration and any request by any governmental authority) relating to any interest rate or any assessment, reserve, or special deposit requirement against assets
held by, deposits in, or loans by Lender or to any tax (other than any tax on Lender’s overall net income) and (b) in Lender’s sole opinion any such event increases the cost of funding or maintaining any Subject Loan bearing interest based
upon One Month LIBOR or reduces the amount of any payment to be made to Lender in respect thereof, then, and in each such case, upon Lender’s demand, Borrower shall pay Lender an amount equal to each such cost increase or reduced payment, as
the case may be. In determining any such amount, Lender may use reasonable averaging and attribution methods. Each determination by Lender shall be conclusive absent obvious error. 
  
 INDEMNITY: ADMINISTRATION AND ENFORCEMENT. Borrower will reimburse Lender, on Lender’s demand from time to time, for any and all
fees, costs, and expenses (including, without limitation, the fees and disbursements of outside legal counsel and the interdepartmental charges and/or salary of in-house counsel) incurred by Lender in administering this Note or in protecting,
enforcing, or attempting to protect or enforce its rights under this Note. If any amount (other than any principal of any Subject Loan and any interest and late charges) owing under this Note is not paid when due, then, and in each such case,
Borrower shall pay, on Lender’s demand, interest on that amount from the due date thereof until paid in full at a fluctuating rate equal to four percent (4%) per annum plus the Prime Rate. 
  
 WAIVERS; REMEDIES: APPLICATION OF PAYMENTS. Lender may from time to time in its
discretion grant waivers and consents in respect of this Note or any other Related Writing or assent to amendments thereof, but no such waiver, consent, or amendment shall be binding upon Lender unless set forth in a writing (which writing shall be
narrowly construed) signed by Lender. No course of dealing in respect of, nor any omission or delay in the exercise of, any right, power, or privilege by Lender shall operate as a waiver thereof, nor shall any single or partial exercise thereof
preclude any further or other exercise thereof or of any other, as each such right, power, or privilege may be exercised either independently or concurrently with others and as often and in such order as Lender may deem expedient. Without limiting
the generality of the foregoing, neither Lender’s acceptance of one or more late payments or charges nor Lender’s acceptance of interest on overdue amounts at the respective rates applicable thereto shall constitute a waiver of any right
of Lender. Each right, power, or privilege specified or referred to in this Note is in addition to and not in limitation of any other rights, powers, and privileges that Lender may otherwise have or acquire by operation of law, by other contract, or
otherwise. Lender shall be entitled to equitable remedies with respect to each breach or anticipatory repudiation of any provision of this Note, and Borrower hereby waives any defense which might be asserted to bar any such equitable remedy. Lender
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 Lender in its sole discretion may from time to time deem
advisable. 
  
 NOTICES AND OTHER COMMUNICATIONS. Each notice, demand, or
other communication, whether or not received, shall be deemed to have been given to Borrower whenever Lender shall have mailed a writing to that effect by certified or registered mail to Borrower at Borrower’s mailing address (or any other
address of which Borrower shall have given Lender notice after the execution and delivery of this Note); however, no other method of giving actual notice to Borrower is hereby precluded. Borrower hereby irrevocably accepts Borrower’s
appointment as each Obligor’s agent for the purpose of receiving any notice, demand, or other communication to be given by Lender to each such Obligor pursuant to any Related Writing. Lender shall be entitled to assume that any knowledge
possessed by any Obligor other than Borrower is possessed by Borrower. Each communication to be given to Lender shall be in writing unless this Note expressly permits that communication to be made orally, and in any case shall be given to Lender at
Lender’s banking office (or any other address of which Lender shall have given notice to Borrower after the execution and delivery this Note). Borrower hereby assumes all risk arising out of or in connection with each oral communication given
by Borrower and each communication given or attempted by Borrower in contravention of this section. Lender shall be entitled to rely on each communication believed in good faith by Lender to be genuine. 
  
 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 “charge 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 and for any length of time) this loan or release any party or guarantor or collateral; or impair, fail 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 

  

 Page 3 

 PROMISSORY NOTE 
 (Continued) 
  

 
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. 
  
 BORROWER: 
  

			
	PECO II, INC.
		
	By:	 	 /s/ Sandra A. Frankhouse

	 	 	Sandra A. Frankhouse, Chief Financial Officer of PECO II, Inc.

  

 Page 4

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