Document:

<PAGE>

                                                                   Exhibit 10.80

        PORTIONS OF THIS EXHIBIT HAVE BEEN OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL
TREATMENT. SUCH PORTIONS ARE DESIGNATED "***".

        This Automotive Filter Sales Agreement (Agreement) is made October 1,
2002 by and between Monro Muffler Brake, Inc.(Buyer), having an office at 200
Holleder Parkway, Rochester, NY 14615 and The Valvoline Company (Seller), having
an office at 3499 Blazer Parkway, Lexington, KY 40509, and continuing until
October 31, 2007 unless previously terminated as allowable herein.

        PRICING

        The pricing on the attached Schedule A will be firm for one year from
the signing of this agreement. Seller may from time to time change prices upward
or downward. Price increases may take effect on the anniversary date of this
agreement providing the Buyer has been given ninety (90) days written notice.
Such future price increases shall be limited to ***.

        MARKETING AND PROMOTIONAL ALLOWANCES

        The following cooperative advertising promotional allowance credits will
be issued quarterly to assist Buyer in the promotion of oil changes:

        Valvoline Branded Oil Filters                     *** per unit

        Valvoline Branded Air filters                     *** per unit

        The above cooperative advertising promotional allowance credits will be
issued in the form of credit memos within 30 days of the end of each calendar
quarter.

        CHANGEOVER

In consideration of entering into this agreement and in recognition of the
Buyer's costs with such implementation, and the waiver of the Buyer requiring
the Seller to relabel and/or replace existing product, the Seller agrees to
provide an initial changeover credit to the Buyer of ***. Thereafter, a credit
of *** each year will be provided by October 15th, beginning in 2003. This will
provide a total reimbursement of *** for costs related to the changeover.

        BRAND DEVELOPMENT FUND

Seller will provide Buyer with a Brand Development Fund of *** per filter unit
to promote the growth of the filter line. This fund will be capped at ***
annually. This fund will be paid quarterly in the form of a credit to Buyer's
account based upon the filters purchased.

        FREIGHT

        Seller agrees to deliver product to the Buyer at up to five (5)
warehouse destinations, freight prepaid, FOB the Buyer's receipt address for
regular stock orders meeting prepaid shipment minimums. Freight will be prepaid
on orders of 500 units or more. For orders less than 500 units, freight will be
added to the bottom of the invoice. Seller agrees to allow the Buyer to
transport orders from the Seller's designated shipping/receiving point.

                                       35
<PAGE>

        PAYMENT TERMS

        All orders, regardless of size, will receive terms of ***.

        TURN TIME

        All orders will be shipped within five (5) working days from receipt of
order.

        ORDER FILL

        Seller agrees to all terms and conditions relating to shipping and order
fill as shown in Buyers Vendor Compliance Policy.

        DEFECTS/WARRANTY

        Credit for field defects will be provided via a credit of *** annually.
Filters will be disposed of at the store level.

        STOCK ADJUSTMENT

        Annual obsolescence stock returns will be allowed in the amount of 15%
of the previous year's purchases. No handling charge will be assessed for goods
in salable condition. Salable condition is defined as packaging that is clean
and free of all pricing stickers, marks, scratches, and in good physical
condition.

        CATALOG SUPPORT

        Seller will provide buyer with an updated application catalog each year,
along with any needed supplements or bulletins.

        Seller will also provide application data in an industry accepted AAIA
format. Updates to be provided on a monthly basis, or as requested by buyer.

        LINE REVIEW

        Seller and Buyer to review product line assortment on an annual basis
using sales history and VIO (vehicles in operation) data. All product groups
will be reviewed and products will be added and deleted as deemed necessary.

        ASSIGNMENTS

        This agreement is non-assignable by the Buyer without the prior written
approval of the Seller.

        WARRANTY

        Contact Valvoline Key Account Manager. Filter Kit will be sent overnight
to store with instructions on necessary form completion and mailing
instructions. After the filter review, a report will be generated which will
indicate either the filter was not the cause of the problem or it was. If it
was, the address and contact information for the insured party (Champion Labs)
will be provided.

                                       36
<PAGE>

        SUPPLIER CHANGE OF CONTROLLING INTEREST

    a.                  In the event that a change of control of the Seller
        shall result in a party, person or corporate entity controlling a
        majority share of the Seller, and such party, person or corporate entity
        shall be a citizen of, or based in, a country which is, or becomes,
        listed on the United States of America's Department of State's Office of
        Defense Trade Control's Embargo Reference Chart, Buyer shall have the
        immediate right to terminate this agreement.

    b.                  In the event that the Seller is acquired, either
        directly or indirectly, through the sale of assets, merger, or
        otherwise, the Buyer, at its sole discretion, may terminate this
        Agreement upon 60 days written notice.

    c.                  In the event of a material change affecting the Buyer's
        petroleum products merchandise agreement The Valvoline Company, the
        Buyer reserves the right to cancel this agreement with 60 days written
        notice to the Seller.

CUSTOMER CHANGE OF CONTROLLING INTEREST

In the event that the Buyer is acquired, either directly or indirectly, through
the sale of assets, merger, or otherwise, the Buyer, or its successor(s) may
terminate this Agreement upon 60 days written notice.

<TABLE>
<S>                                  <C>
MONRO MUFFLER BRAKE, INC.            THE VALVOLINE COMPANY, A DIVISION OF ASHLAND INC

By: /s/ David M. Baier               By: /s/ William S. Collier
    -------------------------            ---------------------------------------

Print Name: David M. Baier           Print Name: William S. Collier
            -----------------                    -------------------------------

Title: Vice President                Title: Vice President
       ----------------------               ------------------------------------
</TABLE>

                                       37<PAGE>

Exhibit 4.14
                                                        COMMERCIAL LOAN
                                                                     OBLIGOR NO.

                                 PROMISSORY NOTE

$750,000.00             Dayton               Ohio             December 31, 2002
                        (City)              (State)                (Date)

The undersigned, for value received, promises to pay to the order of The
Provident Bank, at any of its offices, the sum of Seven Hundred Fifty Thousand
and 00/100 Dollars ($750,000.00), (the "Maximum Credit") or so much thereof as
is loaned by the holder pursuant to the provisions hereof, together with
interest until demand or maturity at the rate to vary with the Provident Bank
Prime Rate plus One and One-half Percent (P + 1.50%) per year computed on the
basis of a year of 360 days for the actual number of days elapsed, and after
default hereunder, demand or maturity, whether at stated maturity or by
acceleration, at a rate four (4) percentage points greater than the stated rate
(the "Default Rate"). Interest shall be due and payable monthly on or before the
first (1st) day of each and every month, commencing February 1, 2003, and at
maturity.

Principal shall be due and payable at maturity, December 31, 2003, at which time
all unpaid principal, interest and other charges shall be due and payable in
full.

The undersigned hereby state(s) that the purpose of the loan evidenced by this
Note is working capital.

This note and all other existing Notes are secured by a Security Agreement dated
December 31, 2002 and all previous Security Agreements.

[X] REVOLVING CREDIT: If this box is checked, this Note is a revolving credit
subject to the terms of this paragraph. Subject to the conditions hereof and of
any other agreements between the parties relating hereto and until demand, if
the principal is payable on demand, or maturity (whether at scheduled or
accelerated maturity), if the principal is payable other than on demand, the
undersigned may borrow and reborrow from the holder and the holder may, in its
sole discretion, lend and relend to the undersigned such amounts not to exceed
the Maximum Credit as the undersigned may at any time and from time to time
request upon satisfactory notice to the holder.

Notwithstanding anything to the contrary contained herein or in any other
agreement between the undersigned and the holder, if this Note provides that the
principal hereof is payable on demand, then this Note is a demand Note due and
owing immediately, without prior demand of the holder and immediate action to
enforce its payment may be taken at any time, without notice and without reason.
If any payment of principal or interest is not paid when due, or if the holder
deems itself insecure for any reason, including but not limited to, the
insolvency, bankruptcy, business failure, death, default in the payment of other
obligations or receivership of or concerning any maker, guarantor or indorser
hereof, this Note shall, if payable other than on demand, at the option of its
holder, become immediately due and payable, without demand or notice. The
undersigned shall promptly provide such financial information as the holder
shall reasonably request from time to time.

As collateral security for the payment of the amounts from time to time owing
hereunder, the undersigned and all indorsers hereby grant to the holder a
security interest in (i) all property in which the holder now or hereafter holds
a security interest pursuant to any and all assignments, pledges and security
agreements between the undersigned and the holder and (ii) all accounts,
securities and properties now or hereafter in the possession of the holder and
in which the undersigned or any indorsers have any interest. Upon this Note
becoming due under any of its terms and provisions, and not being fully paid and
satisfied, the total sum then due hereunder may, at any time and from time to
time, be charged against any account or accounts maintained with the holder
hereof by any of the undersigned or any indorser, without notice to or further
consent from any of them, and the undersigned and all indorsers agree to be and
remain jointly and severally liable for all remaining indebtedness represented
by this Note in excess of the amount or amounts so applied. The undersigned and
the holder intend that this indebtedness shall be secured by any and all
mortgages heretofore or hereafter granted by the undersigned in favor of the
holder.

Prime rate is that annual percentage rate of interest which is established by
The Provident Bank from time to time as its prime rate, whether or not such rate
is publicly announced, and which provides a base to which loan rates may be
referenced. Prime rate is not necessarily the lowest lending rate of The
Provident Bank. A rate based on the prime rate will change each time and as of
the date that the prime rate changes. If any payment of principal or interest is
not paid when due or if the undersigned shall otherwise default in the
performance of its obligations hereunder or under any other note or agreement
with the holder, the holder at its option, may charge and collect, or add to the
unpaid balance hereof, a late charge up to the greater of $250 or .1% of the
unpaid balance of this Note at the time of such delinquency for each such
delinquency to cover the extra expense incident to handling delinquent accounts,
and/or increase the interest rate on the unpaid balance to the Default Rate. The
holder may charge interest at the rate provided herein on all interest and other
amounts owing hereunder which are not paid when due.

                                    Page 15

<PAGE>

The undersigned, all indorsers hereof, any other party hereto, and any guarantor
hereof (collectively "Obligors") each (i) waive(s) presentment, demand, notice
of demand, protest, notice of protest and notice of dishonor and any other
notice required to be given by law in connection with the delivery, acceptance,
performance, default or enforcement of this Note, of any endorsement or guaranty
of this Note or of any document or instrument evidencing any security for
payment of this Note; and (ii) consent(s) to any and all delays, extensions,
renewals or other modifications of this Note or waivers of any term hereof or
release or discharge by the holder of any of Obligors or release, substitution
or exchange of any security for the payment hereof or the failure to act on the
part of the holder or any indulgence shown by the holder, from time to time and
in one or more instances, (without notice to or further assent from any of
Obligors) and agree(s) that no such action, failure to act or failure to
exercise any right or remedy, on the part of the holder shall in any way affect
or impair the obligations of any Obligors or be construed as a waiver by the
holder of, or otherwise affect, any of the holder's rights under this Note,
under any endorsement or guaranty of this Note or under any document or
instrument evidencing any security for payment of this Note. The undersigned and
all indorsers further agree to reimburse the holder for all advances, charges,
costs and expenses, including reasonable attorneys' fees, incurred or paid in
exercising any right, power or remedy conferred by this Note, or in the
enforcement thereof. If the undersigned are more than one (1), the liability of
the undersigned hereon is joint and several, and the term "undersigned", as used
herein, means any one or more of them.

The undersigned and all indorsers authorize any attorney at law, including an
attorney engaged by the holder, to appear in any court of record in the State of
Ohio or any other State or Territory of the United States, after the
indebtedness evidenced hereby, or any part thereof, becomes due and waive the
issuance and service of process and confess judgment against any one or more
than one of the undersigned and all indorsers in favor of the holder, for the
amount then appearing due, together with costs of suit and, thereupon, to
release all errors and waive all rights of appeal and stay of execution, but no
such judgment or judgments against any one of the undersigned shall be a bar to
a subsequent judgment or judgments against any one or more than one of such
persons against whom judgment has not been obtained hereon. This warrant of
attorney to confess judgment is a joint and several warrant of attorney. The
foregoing warrant of attorney shall survive any judgment; and if any judgment be
vacated for any reason, the holder hereof nevertheless may hereafter use the
foregoing warrant of attorney to obtain an additional judgment or judgments
against the undersigned and all indorsers or any one or more of them. The
undersigned and all indorsers hereby expressly waive any conflict of interest
that the holder's attorney may have in confessing such judgment against such
parties and expressly consent to the confessing attorney receiving a legal fee
from the holder for confessing such judgment against such parties.

If the undersigned or any indorser or guarantor hereof would have the right to
rescind the loan evidenced by this Note pursuant to a right so to do under the
Truth-in-Lending Act because one or more mortgages now exist in favor of the
holder hereof covering the principal home or homes of the undersigned or any
indorser or guarantor hereof, the holder's acceptance of this Note shall
constitute a waiver of its right under any such mortgage to treat such principal
home or homes as security for the repayment or guaranty of this Note except for
the principal home or homes described in the Mortgage dated N/A .

THE PROVISIONS OF THIS NOTE SHALL BE GOVERNED BY AND INTERPRETED IN ACCORDANCE
WITH THE LAWS OF OHIO. AS A SPECIFICALLY BARGAINED INDUCEMENT FOR THE HOLDER TO
EXTEND CREDIT TO BORROWER, AND AFTER HAVING THE OPPORTUNITY TO CONSULT COUNSEL,
THE UNDERSIGNED AND ALL INDORSERS HEREBY EXPRESSLY WAIVE THE RIGHT TO TRIAL BY
JURY IN ANY LAWSUIT OR PROCEEDING RELATED TO THIS NOTE OR ARISING IN ANY WAY
FROM ANY INDEBTEDNESS OR OTHER TRANSACTIONS INVOLVING THE HOLDER AND THE
UNDERSIGNED. THE UNDERSIGNED HEREBY DESIGNATE(S) ALL COURTS OF RECORD SITTING IN
CINCINNATI, OHIO AND HAVING JURISDICTION OVER THE SUBJECT MATTER, STATE AND
FEDERAL, AS FORUMS WHERE ANY ACTION, SUIT OR PROCEEDING IN RESPECT OF OR ARISING
FROM OR OUT OF THIS NOTE, ITS MAKING, VALIDITY OR PERFORMANCE, MAY BE PROSECUTED
AS TO ALL PARTIES, THEIR SUCCESSORS AND ASSIGNS, AND BY THE FOREGOING
DESIGNATION THE UNDERSIGNED CONSENT(S) TO THE JURISDICTION AND VENUE OF SUCH
COURTS.

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

                                               SHOPSMITH, INC.

_____________________________________          By:______________________________
                                                  Robert L. Folkerth, President

Address 6530 Poe Avenue

        Dayton, Ohio 45414

                                    Page 16

<PAGE>

                               SECURITY AGREEMENT

         This SECURITY AGREEMENT by THE PROVIDENT BANK ("Secured Party") and
SHOPSMITH, INC. a(n) Ohio Corporation (Organizational ID No. 419738) ("Debtor").

         1.       SECURITY INTEREST.

                  Debtor hereby assigns, pledges and transfers to Secured Party
and grants Secured Party a continuing security interest in all of the property
described in this Section 1, all of which properties are hereafter called
"Collateral". Each of the types of Collateral described in Sections 1.1, 1.2,
1.3, 1.4, 1.5 and 1.6 hereof are included unless the phrase "Not Included" is
inserted in the place provided.

         1.1      ____________________ All of Debtor's accounts, chattel paper,
accounts receivable, contract rights, documents and instruments; all other
obligations or indebtedness owed to Debtor from whatever source arising; all
guarantees of any of the foregoing and all security therefor; all of the right,
title and interest of Debtor in and with respect to the goods, services or other
property which gave rise to or which secure any of the foregoing and all
insurance policies and proceeds relating thereto; all of the foregoing whether
now owned by Debtor or hereafter acquired or in existence.

         1.2      ____________________ All of Debtor's inventory, including,
without limitation, all goods, merchandise and other personal property which are
held for sale or lease, or are furnished or to be furnished under any contract
of service by Debtor, or are raw materials, work-in-progress, supplies or
materials used or consumed in Debtor's business, and all products thereof, and
all substitutions, replacements, additions and accessories thereto, all whether
now owned or hereafter acquired by Debtor; and all of Debtor's right, title and
interest in and to any leases or rental agreements for such inventory.

         1.3      ____________________ All of Debtor's equipment, including,
without limitation, all furniture, fixtures, machinery and other equipment of
any kind and all substitutions and replacements thereof and accessories and
parts therefor, all whether now owned or hereafter acquired by Debtor.

         1.4      ____________________ All of Debtor's general intangibles,
including, without limitation, all payment intangibles, software, goodwill,
patents, formulas, blueprints, proprietary manufacturing processes, trademarks,
licenses, franchises, beneficial interests in trusts, joint venture interests,
partnership interests, rights to tax refunds, pension plan overfundings,
literary rights and other contractual rights of Debtor, all whether now owned or
hereafter acquired by Debtor.

         1.5      _____________________ All of Debtor's investment property,
including, without limitation, all securities, whether certificated or
uncertificated, all security entitlements, all securities accounts, all
commodity contracts and all commodity accounts owned by Debtor or in which
Debtor has an interest, all whether now owned or hereafter acquired by Debtor.

         1.6      ____________________ All of Debtor's deposit accounts and
letter-of-credit rights.

         1.7      ______________________________________________________________
________________________________________________________________________________

         1.8      ______________________________________________________________
_____________________________________________________________, together with all
dividends, distributions, income, interest, premiums, monies, claims for monies,
stock dividends and stock splits, now or hereafter due and payable thereon, and
all proceeds thereof, all securities issued in replacement thereof, and all
other securities substituted therefor (all of which are hereinafter sometimes
collectively referred to as "Pledged Stock"). Debtor covenants that the Pledged
Stock shall have a market value at all times of not less than ________% of the
Indebtedness.

         1.9      All instruments, documents, securities, cash, property,
deposit accounts, certificates of deposit and the proceeds of any of the
foregoing, owned by Debtor or in which Debtor has an interest, which now or
hereafter are at any time in the possession or control of Secured Party or in
transit by mail or carrier to or from Secured Party, or in possession of any
third party acting on behalf of Secured Party, without regard to whether Secured
Party received same in pledge, for safekeeping, as agent for collection or
transmission or otherwise or whether Secured Party had conditionally released
the same.

         1.10     All supporting obligations, ledger sheets, files, records,
documents, blueprints, drawings and instruments (including without limitation,
computer programs, tapes and related electronic data processing software)
evidencing an interest in or relating to the Collateral described in this
Section 1.

         1.11     All proceeds and products of the Collateral described above
in this Section 1, including, without limitation, all claims against third
parties for damage to or loss or destruction of any of the foregoing, including
insurance proceeds, and accounts, contract rights, chattel paper and general
intangibles arising out of any sale, lease or other disposition of any of the
foregoing.

         2.       INDEBTEDNESS.

                  The security interests granted hereby are granted to secure
all of Debtor's debts, obligations, or liabilities of every kind, nature, class
and description to Secured Party, now due or to become due, direct or indirect,
absolute or contingent, presently existing or hereafter arising, joint or
several, secured or unsecured, consumer or commercial, purchase money or
non-purchase money, related or unrelated, similar or dissimilar, whether for
payment or performance, regardless of how the same arise or by what instrument,
agreement or book account they may be evidenced, or whether evidenced by any
instrument, agreement or book account, including, without limitation, all loans
(including any loan by renewal or extension), all overdrafts, all guarantees,
all bankers acceptances, all agreements, all letters of credit issued by Secured
Party for Debtor and the applications relating thereto, all Indebtedness of
Debtor to Secured Party, all undertakings to take or refrain from taking any
action, and all Indebtedness, liabilities and obligations owing from Debtor to
others which Secured Party may obtain by purchase, negotiation, discount,
assignment or otherwise, further including, without limitation, the following
obligations (all of which obligations are collectively referred to herein as the
"Indebtedness"):

         2.1      A loan to Debtor by Secured Party of $750,000.00, evidenced by
a promissory note dated December 31, 2002, and all renewals, extensions and
modifications thereof;

         2.2      All costs incurred by Secured Party to obtain, preserve,
and/or enforce the security interests granted by this Agreement; to collect the
obligations secured hereby; and to maintain and preserve the Collateral, with
such costs including, but not limited to, expenditures made by Secured Party for
taxes, assessments, insurance premiums, repairs, reasonable attorneys' fees and
other legal expenses, storage costs, rents, and expenses of sale, together with
interest on the above amounts at the highest rate being paid by Debtor on any of
its obligations to Secured Party, all of which Debtor agrees to pay to Secured
Party; and

         2.3      ______________________________________________________________
________________________________________________________________________________
________________________________________________________________________________

         Notwithstanding the foregoing, Secured Party waives any rights arising
out of this Security Agreement to the Collateral as security for any
Indebtedness of an individual Debtor to which the Truth-In-Lending Act and
Regulation Z promulgated thereunder apply.

         3.       DEBTOR'S WARRANTIES.

         3.1      Except for the security interests granted herein, Debtor
represents and warrants that it is, and as to the Collateral to be acquired
after the date hereof, shall be, the owner of the Collateral free from any lien,
security interest or encumbrance, and Debtor shall defend the Collateral and its
proceeds and products against all claims and demands

                                    Page 17

<PAGE>

of all persons at any time claiming the same or any interest therein adverse to
Secured Party, and shall preserve the Collateral free from any subsequent liens,
encumbrances or security interests.

                                    Page 18

<PAGE>

         3.2      Debtor represents and warrants that at the time any account
becomes subject to a security interest in favor of Secured Party, said account
shall be a good and valid account representing a bona fide outright sale of
goods by Debtor or services performed by Debtor and such goods shall have been
shipped to the respective account debtors or the services have been performed
for the respective account debtors. Each account shall not be subject to any
claim for credit, allowance or adjustment by account debtor or any setoff,
defense or counterclaim. Debtor shall immediately notify Secured Party in the
event of the refusal of any goods which are the subject of any such account, and
of the bankruptcy, insolvency or financial embarrassment of any account debtor
and of any claim asserted for credit, allowance, adjustment, setoff or
counterclaim.

         3.3      If it is an organization, Debtor represents and warrants that:
(a) its exact legal name is that indicated on the first page hereof; (b) it is
an organization of the type and is organized in the jurisdiction set forth on
the first page hereof; and (c) the organizational identification number, or
statement that Debtor has none, set forth on the first page hereof is accurate.
If Debtor is an individual, Debtor represents and warrants that the address set
forth on the last page hereof is Debtor's principal residence.

         4.       DEBTOR'S OBLIGATIONS.

         4.1      Debtor shall keep accurate and complete records and accounts
in accordance with sound accounting practices of all of its Collateral, and
shall at all reasonable times allow Secured Party to inspect the Collateral, to
examine, audit or make extracts from Debtor's books and records, and to arrange
for verification of the Collateral under reasonable procedures directly with
account debtors and other persons or by other procedures. Debtor will furnish to
Secured Party on request additional statements of any account together with all
notes or other documents and information relating thereto.

         4.2      Debtor shall keep the Collateral insured against such
casualties, and in such amounts and on such terms as Secured Party shall require
and the policies shall provide for at least 30 days written notice of
cancellation to Secured Party. Debtor shall furnish Secured Party with
satisfactory evidence of such insurance and Secured Party shall be added to any
such insurance as loss payee. Debtor shall promptly pay when due all taxes and
assessments imposed on, or with respect to the Collateral, and shall maintain
the Collateral in good condition and repair. If Debtor fails to pay the premiums
on any such insurance or such taxes when due, or to maintain the Collateral in
good condition and repair, the Secured Party may do so for Debtor's account and
add the amount of its expenditures with respect thereto to Debtor's outstanding
obligations, which amount shall be payable on demand with interest at the
highest rate being paid by Debtor on any of its obligations to Secured Party.
Secured Party shall have the right to settle and compromise any and all claims
under any of the insurance policies required to be maintained by Debtor
hereunder and Debtor hereby irrevocably appoints Secured Party as its
attorney-in-fact, with power to demand, receive and receipt for all monies
payable thereunder, to execute in the name of the Debtor any proof of loss,
notice, draft, and other instruments in connection with such policies or loss
thereunder and generally to do and perform any and all acts as Debtor could
perform in connection with such policies.

         4.3      Debtor shall execute such financing statements and other
documentation and shall take any other actions (at Debtor's own expense) as
shall reasonably be requested by Secured Party in order to insure the
attachment, perfection, and first priority of, and the ability of Secured Party
to enforce, the security interests granted Secured Party hereunder and to carry
out the terms of this Agreement, including, but not limited to: (a) endorsing,
assigning and delivering promissory notes and tangible chattel paper to Secured
Party; (b) taking all steps necessary to perfect Secured Party's security
interest in letter of credit rights, deposit accounts, securities accounts,
commodity accounts and other investment property; (c) promptly notifying Secured
Party in the event any of the Collateral is in the possession of a bailee and
promptly obtaining an acknowledgement from the bailee that the bailee holds such
Collateral for the benefit of Secured Party and shall act upon the instructions
of Secured Party, without further consent of Debtor; and (d) taking all steps
necessary to vest in Secured Party control of electronic chattel paper. A
photocopy of this Security Agreement shall be sufficient as a financing
statement and may be filed in any appropriate office in lieu thereof. Debtor
hereby irrevocably authorizes Secured Party, at any time and from time to time,
to file any initial financing statements and amendments thereto to the extent
permitted by, and in accordance with, the provisions of the Uniform Commercial
Code.

         4.4      If Debtor shall at any time hold or acquire a claim arising in
tort (and, if Debtor is an individual, such claim arose in the course of
Debtor's business or profession, and does not include claims for personal injury
or death), Debtor shall immediately notify Secured Party in a writing signed by
Debtor of the brief details thereof and grant to Secured Party in such writing a
security interest therein and in the proceeds thereof, all upon the terms of
this Agreement, with such writing to be in form and substance satisfactory to
Secured Party.

         4.5      Upon request of Secured Party, Debtor shall furnish Secured
Party:

                  a.       Within 90 days after the end of Debtor's fiscal year,
                           a financial statement, including a balance sheet, and
                           statements of income, retained earnings and changes
                           in financial position, each prepared in accordance
                           with generally accepted accounting principles
                           consistently applied, certified by Debtor's chief
                           financial officer or certified public accountant;

                  b.       Within 45 days after the close of each quarter,
                           financial statements similar to those in (a) above
                           and certified by Debtor's chief financial officer;

                  c.       Promptly, such other information as Secured Party may
                           reasonably request from time to time, including,
                           without limitation, at the end of each month,
                           financial statements similar to those in (a) above;
                           and

                  d.       Promptly, in the case of a Debtor who is a natural
                           person, financial statements in a form acceptable to
                           Secured Party.

         4.6      Until the Indebtedness is paid in full, Debtor, if it is an
organization, agrees that it will:

                  a.       preserve its corporate existence and not, in one
                           transaction or a series of related transactions,
                           merge into or consolidate with any other entity, or
                           sell all or substantially all of its assets;

                  b.       not change the state of its incorporation;

                  c.       not change its corporate name without providing
                           Secured Party with 30 days' prior written notice; and

                  d.       if Debtor does not have an organizational
                           identification number (as issued by the Secretary of
                           State of the state in which it is organized) and
                           later obtains one, promptly notify Secured Party of
                           such organizational identification number. Until the
                           Indebtedness is paid in full, Debtor, if Debtor is an
                           individual, agrees that it will not change the state
                           of Debtor's principal residence without providing
                           Secured Party with 30 days' prior written notice.

         5.       DEBTOR'S RIGHTS WITH RESPECT TO COLLATERAL.

         5.1      With respect to the Collateral specified in Section 1.1,
Debtor is authorized to collect the proceeds of such Collateral and utilize them
in the ordinary course of business, provided that Secured Party shall have the
right at any time, before or after default, to notify account debtors on any and
all of Debtor's accounts of the security interest of Secured Party in such
accounts, to send requests for verification to the account debtors, and to
notify such account debtors to make payments of such accounts directly to
Secured Party. At the request of Secured Party, Debtor shall so notify such
account debtors and indicate on all billings that the accounts are payable
directly to Secured Party. In addition, Debtor shall, at the request of Secured
Party, hold all proceeds from collection of accounts in trust for Secured Party
without commingling the same with other funds, and shall promptly turn over the
same to Secured Party in the identical form received, endorsed by Debtor to
Secured Party. The proceeds of such Collateral shall be applied to the
Indebtedness in such order as Secured Party determines in its sole discretion.

                                    Page 19

<PAGE>

         5.2      Debtor shall also have the right to utilize the Collateral as
specified in Section 1.2 in the ordinary course of business, and to sell such
Collateral in the ordinary course of business, provided that such Collateral is
replaced with Collateral of like kind and quality, with a fair market value
equal to or in excess of that sold, provided, however, that Secured Party may,
by notice to Debtor, require that no such sales be made without the prior
written approval of Secured Party.

         5.3      Until default, Debtor shall have the right to use, consume, or
sell any items of the Collateral described in Section 1.3 in the regular course
of business, but not to otherwise dispose of such Collateral.

         5.4      In the event Debtor receives any certificates, proceeds or
other property constituting Pledged Stock after the date hereof, Debtor shall
hold such Pledged Stock in trust for Secured Party and shall promptly deliver
the same to Secured Party; provided, however, that Debtor may retain any cash
dividends, other than liquidating dividends or distributions of return of
capital and interest, so long as no event of default has occurred hereunder.

         6.       DEFAULT.

                  If the Indebtedness is due other than on demand, upon the
happening of any one or more of the following events or conditions, Secured
Party may, at its option, declare the entire amount of Indebtedness of Debtor to
it then outstanding due and payable immediately without notice to Debtor, and
Secured Party may proceed to enforce payment of the same, and to exercise all of
the rights and remedies of a Secured Party under the Uniform Commercial Code, in
addition to the rights and remedies provided herein. The events of default
hereunder are as follows:

         6.1      The failure of Debtor to pay any of the Indebtedness when due.

         6.2      The failure of Debtor to observe or perform any of the
provisions of this Agreement or any other agreement between the Debtor and the
Secured Party.

         6.3      If any warranty, representation, certificate, schedule,
financial statement or other information given to Secured Party hereunder shall
prove to be untrue or materially misleading.

         6.4      The death of any person signing as Debtor to this Agreement or
of any guarantor.

         6.5      If any proceedings are instituted by or against Debtor under
any insolvency laws, or if Debtor shall become insolvent or otherwise suffer
such changes in his condition or affairs as in the sole discretion of Secured
Party impairs Secured Party's security interests hereunder, or increases its
risk as to repayment of any item of the Indebtedness, or if Secured Party shall
otherwise deem itself insecure with respect to the Indebtedness.

                  If the Indebtedness is due on demand, the Secured Party may
proceed to enforce payment of same and exercise all of the remedies provided
herein at any time, without notice and without reason.

                  Secured Party's remedies include, but are not limited to, the
right to take possession of the collateral or any part thereof, and Debtor
hereby grants Secured Party authority to enter upon any premises on which the
Collateral or any part thereof may be situated, and remove the Collateral from
such premises or use such premises, together with the materials, supplies, books
and records of Debtor, to maintain possession and/or the condition of the
Collateral and to prepare the Collateral for sale. Debtor shall, upon demand by
Secured Party, assemble the Collateral specified in Section 1.2 hereof, and make
it available at a place designated by Secured Party and convenient to both
parties. All rights and remedies of Secured Party hereunder shall be cumulative,
not exclusive, and shall be enforceable alternatively, successively or
concurrently with any other remedy available hereunder or otherwise available at
law or in equity. Debtor hereby authorizes Secured Party to specifically
disclaim any warranties of title, possession, quiet enjoyment and the like in
connection with any sale of the Collateral.

         7.       POWER OF ATTORNEY.

                  Debtor hereby irrevocably appoints Secured Party as Debtor's
true and lawful attorney-in-fact, with full power of substitution, for Debtor,
and in Debtor's name, place and stead, upon the occurrence of any event of
default in as defined in Section 6 above, and in the event that Secured Party
elects to exercise any rights granted to it hereunder. As attorney-in-fact,
Secured Party may act for Debtor with respect to the Collateral as if Secured
Party were the owner thereof, and may endorse and cash promissory notes, checks
and other instruments, institute legal proceedings, make, adjust, and settle
claims, and do all other acts necessary and incidental to the exercise of its
rights provided hereunder, or otherwise available to it in the event of default.
Neither Secured Party nor its agents shall be liable for any acts or omissions
or for any error of judgment or mistake of fact or law in its capacity as such
attorney-in-fact.

         8.       MISCELLANEOUS.

                  Any required notices to Debtor, including notice of the sale
of any of the Collateral, shall be deemed to be reasonable if mailed to Debtor
at the address shown below, or such other address furnished Secured Party in
writing, at least five (5) business days prior to the action which is the
subject of the notice. The term "Debtor" as used herein shall include the
singular as well as the plural, and other words in the singular shall include
the plural and words of one gender shall include the other gender when the sense
requires. Except as used in item (ii) of the following sentence, the term
"Uniform Commercial Code" as used herein shall mean the Uniform Commercial Code
as adopted by the State of Ohio, as said Uniform Commercial Code may be amended
from time to time. The Debtor acknowledges and agrees that, with respect to any
term used herein that is defined in either (i) the Uniform Commercial Code at
the time that this Agreement was signed, or (ii) the Uniform Commercial Code as
in force at any relevant time in the jurisdiction in which any financing
statement is filed, the meaning to be ascribed thereto shall be that under the
more encompassing of the two definitions. No waivers by Secured Party of any
default shall be effective unless given in writing, and shall not operate as a
waiver of any other default. The rights of Secured Party shall inure to the
benefit of its successors and assigns, and the obligations of Debtor shall bind
Debtor's heirs, executors, administrators, successors and assigns. If there is
more than one Debtor, their obligations hereunder shall be joint and several.

                  This Agreement contains the entire understanding between the
parties hereto with respect to the transactions contemplated herein and such
understanding shall not be modified except in a writing signed by or on behalf
of the parties hereto. This Agreement shall be deemed to be a contract entered
into and made pursuant to the laws of the State of Ohio and shall in all
respects be governed, construed, applied and enforced in accordance with the
laws of said state, except to the extent the Uniform Commercial Code provides
for the application of the laws of another state.

                  As a specifically bargained inducement for Secured Party to
extend credit to Debtor: (i) THE DEBTOR HEREBY EXPRESSLY WAIVES THE RIGHT TO
TRIAL BY JURY IN ANY LAWSUIT OR PROCEEDING RELATED TO THIS SECURITY AGREEMENT OR
ARISING IN ANY WAY FROM THE INDEBTEDNESS OR TRANSACTIONS INVOLVING SECURED PARTY
AND THE DEBTOR AND (ii) THE DEBTOR HEREBY DESIGNATE(S) ALL COURTS OF RECORD
SITTING IN CINCINNATI, OHIO AND HAVING JURISDICTION OVER THE SUBJECT MATTER,
STATE AND FEDERAL, AS FORUMS WHERE ANY ACTION, SUIT OR PROCEEDING IN RESPECT OF
OR ARISING FROM OR OUT OF THIS SECURITY AGREEMENT, ITS MAKING, VALIDITY OR
PERFORMANCE, MAY BE PROSECUTED AS TO ALL PARTIES, THEIR SUCCESSORS AND ASSIGNS,
AND BY THE FOREGOING DESIGNATION THE DEBTOR CONSENT(S) TO THE JURISDICTION AND
VENUE OF SUCH COURTS.

                  EXECUTED AT ______,  ______ ON THE 31ST DAY OF DECEMBER, 2002.
                                       (State)

THE PROVIDENT BANK ("Secured Party")        DEBTOR: SHOPSMITH, INC.

                                    Page 20

<PAGE>

BY:________________________________         BY:_________________________________
   Clifford Bishop, Vice President             Robert L. Folkerth, President

                                            BY:_________________________________

ADDRESS: ONE EAST FOURTH STREET             ADDRESS (Principal Residence if
         CINCINNATI, HAMILTON COUNTY,       Individual):
         OHIO 45202                         6530 Poe Avenue
                                            Dayton, OH 45414

                                    Page 21

<PAGE>

                                 LOAN AGREEMENT

AGREEMENT, DATED December 31, 2002, between Shopsmith, Inc. an Ohio Corporation
("Borrower"), whose mailing address is 6530 Poe Avenue, Dayton, Ohio 45414, and
The Provident Bank ("Bank") an Ohio banking corporation whose mailing address is
One East Fourth Street, Cincinnati, Ohio 45202.

         1.       Definitions. As used herein, the following terms, when initial
capital letters are used, shall have the respective meanings set forth below. In
addition, all terms defined in the Uniform Commercial Code shall have the
meanings given therein unless otherwise defined herein.

         1.1      Affiliate shall mean any person, company or business entity
controlling, controlled by or under common control with, Borrower, whether such
common control is direct or indirect, and all officers, directors and
shareholders of Borrower and such entities.

         1.2      Event of Default shall mean any event described in Section
6.1.

         1.3      Loans shall have the meaning set forth in Section 2.1.

         1.4      Notes shall mean the Revolving Promissory Notes evidencing the
Loan pursuant to Section 2.2.

         1.5      Obligations shall mean, without limitation, all Loans (as
defined in Section 2) and all other debts, obligations, or liabilities of every
kind and description of Borrower to Bank, now due or to be become due, direct or
indirect, absolute or contingent, presently existing or hereafter arising, joint
or several, secured or unsecured, whether for payment or performance, regardless
of how the same arise or by what instrument, agreement or book account they may
be evidenced, or whether evidenced by any instrument, agreement or book account,
including, without limitation, all loans (including any loan by renewal or
extension), all overdrafts, all guarantees, all bankers acceptances, all
agreements, all letters of credit issued by Bank for Borrower and the
applications relating thereto, all indebtedness of Borrower to Bank, all
undertakings to take or refrain from taking any action and all indebtedness,
liabilities and obligations owing from Borrower to others which Bank may obtain
by purchase, negotiation, discount, assignment or otherwise. Obligations shall
also include all interest and other charges chargeable to the Borrower or due
from the Borrower to the Bank from time to time and all costs and expenses
referred to in Section 7.

         1.6      "Permitted Liens" shall mean the liens and interests in favor
of Bank granted in connection herewith and, to the extent reflected on
Borrower's books and records and not impairing the operations of Borrower or any
performance hereunder or contemplated hereby:

                  (i)      liens arising by operation of law for taxes not yet
due and payable:

                  (ii)     statutory liens of mechanics, materialmen, shippers
and warehousemen for services or materials for which payment is not yet due;

                  (iii)    liens incurred or deposits made in the ordinary
course of business in connection with workers' compensation, unemployment
insurance and other types of social security;

                  (iv)     liens, if any, specifically permitted by Bank from
time to time in writing; and

                  (v)      the following if the validity or amount thereof is
being contested in good faith and by appropriate and lawful proceedings promptly
initiated and diligently conducted of which Borrower has given prior notice to
Bank and for which appropriate reserves (in Bank's reasonable judgment) have
been estab-

                                    Page 22

<PAGE>

lished and so long as levy and execution have been and continue to be
stayed: claims and liens for taxes due and payable and claims of mechanics,
materialmen, shippers, warehousemen, carriers and landlords.

         2.       Loans and Interest

         2.1      The Bank proposes to make loans to the Borrower in an
aggregate amount not to exceed the lesser of (i) 80% of the outstanding amount
of Eligible Accounts from Lowes Companies, Inc. or (ii) $750,000.00, (the lesser
of (i) or (ii) being referred to hereinafter as the "Maximum Loan Amount").
Should the outstanding amount of loans at any time exceed the Maximum Loan
Amount, Borrower shall on demand immediately repay such excess amount. All such
loans will be made from time to time in the absolute discretion of the Bank, and
neither this Agreement nor any loans or other action by the Bank shall obligate
the Bank to make further loans to the Borrower. Such loans may be made in excess
of the Maximum Loan Amount in the sole discretion of the Bank. All loans shall
be herein collectively called the "Loans".

         2.2      The Loans shall be evidenced by Promissory Notes (the "Notes")
in form satisfactory to Bank and shall bear interest on the daily outstanding
balance thereof at the rate set forth in such Notes. In case of any change in
law or governmental rules, regulations, guidelines or orders (or any
interpretations thereof) or the introduction of new laws, regulations or
guidelines, which require Bank to reserve for unfunded credit commitments, Bank
may charge Borrower an additional fee which will compensate Bank for such
requirements.

         2.3      All payments of interest, principal and all other amounts
owing hereunder or under the Notes shall be made by the Borrower to the Bank in
immediately available funds at its principal office in Cincinnati, Ohio or at
such other place as the Bank may designate in writing, at such times as shall be
set forth herein or in the Notes or if not so set forth, such amounts shall be
payable on demand. Borrower hereby authorizes Bank, at Bank's option, to charge
any account or charge or increase any Loan balance of Borrower at Bank for the
payment or repayment of any interest or principal of the Loans or any fees,
charges or other amounts due to Bank hereunder.

         3.       Representations and Warranties. The Borrower hereby represents
and warrants to the Bank that:

         3.1      (a) The Borrower is a corporation duly organized, validly
existing and in good standing under the laws of the State of its incorporation
and has the corporate power and authority to conduct its business as now
conducted and as proposed to be conducted while this Agreement is in effect; (b)
the execution and delivery of this Agreement and the Notes and the performance
of the transactions contemplated hereby and thereby are within the corporate
authority of the Borrower and have been duly authorized by all proper and
necessary corporate action; (c) the execution and delivery of this Agreement and
the Notes and the performance of the transactions contemplated hereby and
thereby will not violate or contravene any provisions of law or the articles of
incorporation or bylaws of the Borrower, or result in a breach or default in
respect of the terms of any other agreement to which the Borrower is a party or
by which it is bound, which breach or default would result in the creation,
imposition or enforcement of any lien against any of the Borrower's assets, or
would have a material adverse affect on the conduct of the Borrower's business
as it is now being conducted and proposed to be conducted while this Agreement
is in effect; and (d) the Borrower is duly qualified as a foreign corporation
and is in good standing and duly authorized to do business in every jurisdiction
where the nature of its properties or the conduct of its business requires such
qualification and authorization.

         3.2      This Agreement and the Notes are legal and binding obligations
of the Borrower enforceable in accordance with their terms.

                                    Page 23

<PAGE>

         3.3      The execution and delivery of this Agreement and the Notes and
the performance of the transactions contemplated hereby and thereby do not
require any approval or consent of any governmental agency or authority, or of
any other party.

         3.4      The Borrower has delivered to the Bank copies of its
consolidated and consolidating financial statements as of and for the year or
other period ending ______________________, prepared by _________________. All
of these financial statements are true and correct, are in accordance with the
respective books of account and records of the Borrower and its subsidiaries (if
any) and have been prepared in accordance with generally accepted accounting
principles applied on a basis consistent with prior periods, and accurately
present the financial condition of the Borrower and its subsidiaries (if any)
and their assets and liabilities and the results of their operations as at such
date.

         3.5      Since the ending date of the financial statement described in
Section 3.4, there has been no change in the assets, liabilities, financial
condition or operation of the Borrower and its subsidiaries, other than changes
in the ordinary course of business, the effect of which have not, individually
or in the aggregate, been materially adverse.

         3.6      Except to the extent reflected in the financial statements
described in Section 3.4, the Borrower, as of the date of this Agreement, does
not know or have reasonable grounds to know of any basis for the assertion
against it of any liabilities or obligations of any nature, direct or indirect,
accrued, absolute or contingent, including, without limitation, liabilities for
taxes then due or to become due whether incurred in respect of or measured by
the income of the Borrower for any period prior to the date of this Agreement or
arising out of transactions entered into, or any state of facts existing prior
thereto.

         3.7      The Borrower has filed all federal, state, local and other tax
returns and reports required to be filed by it and such returns and reports are
true and correct. The Borrower has paid all taxes, assessments and other
governmental charges lawfully levied or imposed on or against it or its
properties, other than those presently payable without penalty or interest.

         3.8      There is no litigation or proceeding or governmental
investigation pending or, to the knowledge of the Borrower, threatened against
or relating to the Borrower, its properties or business which is not reflected
in the financial statements described in Section 3.4

         3.9      The Borrower is not, to its knowledge, in violation of or
default under any statute, regulation, license, permit, order, writ, injunction
or decree of any government, governmental department, commission, board, bureau,
agency, instrumentality or court, which violation or default would have a
material adverse effect on the business, properties or condition, financial or
otherwise, of the Borrower.

         3.10     The Borrower is not, to its knowledge, in default under a
material order, writ, judgment, injunction, decree, indenture, agreement, lease
or other instrument or contract, which default would have a material adverse
effect on the business, properties or condition, financial or otherwise, of the
Borrower, or in the performance of any covenants or conditions respecting any of
its indebtedness, and no holder of any indebtedness of the Borrower has given
notice of any asserted default thereunder, and no liquidation or dissolution of
the Borrower and no receivership, insolvency, bankruptcy, reorganization or
other similar proceedings relative to the Borrower or its properties is pending
or, to the knowledge of the Borrower, is threatened against.

         3.11     The Borrower maintains places of business only at 6530 Poe
Avenue, Dayton, Ohio 45414.

         3.12     No representation or warranty by or with respect to the
Borrower contained herein or in any certificate or other document furnished by
the Borrower pursuant hereto contains any untrue statement of a

                                    Page 24

<PAGE>

material fact or omits to state a material fact necessary to make such
representation or warranty not misleading in light of the circumstances under
which it was made.

         3.13     The foregoing representations and warranties are made by the
Borrower with the knowledge and intention that the Bank will rely thereon, and
shall survive the execution and delivery of this Agreement and the making of all
Loans hereunder.

         4.       Affirmative Covenants. The Borrower covenants and agrees that
until all of the Obligations have been paid in full, unless the Bank shall
otherwise consent in writing, it shall and shall cause each of its subsidiaries
to:

         4.1      Maintain complete and accurate books of account and records
pertaining to the operations of the Borrower, and all such books of account and
records shall be kept and maintained at the location specified in Section 4.11.
The Borrower shall not move such books of account and records or change its
chief executive office without giving the Bank at least 30 days prior written
notice. All such books of account and records and all financial statements and
reports furnished to the Bank shall be maintained and prepared in accordance
with generally accepted accounting principles applied on a basis consistent with
prior periods.

         4.2      Grant the Bank, or its representatives, full and complete
access to all books of account, records, correspondence and other papers of the
Borrower, as they may deem necessary or appropriate at the time.

         4.3      Deliver to the Bank not more than 90 days after the close of
each fiscal year of the Borrower, or within such further time as the Bank may
permit, consolidated and consolidating audited financial statements for Borrower
and its subsidiaries, including a balance sheet and related profit and loss
statement, prepared in accordance with generally accepted accounting principles
by independent certified public accountants acceptable to the Bank, who shall
give their unqualified opinion with respect thereto.

         4.4      Furnish to the Bank such other financial and business
information and reports in form and substance satisfactory to the Bank as and
when the Bank may from time to time request.

         4.5      While this agreement remains in effect and until the
Obligations have been paid in full, (a) maintain its corporate existence in good
standing; (b) make no change in the nature or character of its business or
engage in any business in which it was not engaged on the date of this
Agreement; (c) maintain and keep in full force and effect all licenses and
permits necessary to the proper conduct of its business and (d) at the request
of the Bank, qualify as a foreign corporation and obtain all requisite licenses
and permits in each state (other than the state of its incorporation) where the
Borrower does business.

         4.6      Maintain and keep all of its properties, real and personal, in
good working order, condition and repair and insure and keep insured all such
properties at all times against loss of damage by fire, theft, and such other
risks and hazards as are customarily insured against by corporations in similar
circumstances, or as the Bank may specify from time to time, with insurers and
in amounts acceptable to the Bank. If the Borrower fails to do so, the Bank may
obtain such insurance and charge the cost thereof to the Borrower's account and
add it to the Obligations. All policies shall provide for at least 10 days prior
written notice of cancellation to the Bank.

         4.7      At all times, maintain in full force and effect such liability
insurance with respect to its activities and business interruption and other
insurance as may be reasonably required by Bank, such insurance to be provided
by insurer(s) acceptable to Bank, and if requested by Bank, such insurance shall
name Bank as an additional insured.

                                    Page 25

<PAGE>

         4.8      Give prompt notice in writing to the Bank of any Event of
Default hereunder, or of any condition which with the passage of time or the
giving of notice or both would give rise to an Event of Default, and of any
development, financial or otherwise, which would materially adversely affect its
business, properties or affairs or the ability of the Borrower to perform its
obligations under this Agreement or the Notes.

         4.9      Pay all taxes, assessments or governmental charges lawfully
levied or imposed on or against it and its properties prior to the date when
such taxes, assessments or charges shall become delinquent, unless the Borrower
shall contest the validity thereof in good faith and shall post any bond or
other security required by applicable law or by the Bank against the payment
thereof.

         4.10     At Bank's option, maintain all of its depository accounts with
Bank, including without limitation, all demand deposit, lock box, time deposit,
concentration and zero balance accounts.

         4.11     Maintain the following financial covenants:

                  (a)      Borrower's Net Income (as defined by GAAP) shall be
greater than negative $150,000.00 per quarter and greater than negative
$200,000.00 on a rolling twelve (12) month basis.

                  (b)      Borrower shall maintain a Consolitaed Tangible Net
Worth (defined below) in excess of $1,750,000.00.

                  (c)      Borrower shall not make or permit to be made any
capital expenditure costing in excess of $300,000.00 during any one (1) fiscal
year of Borrower/

         The following terms shall have the following meaning when used herein:

                  "Consolidated Current Assets" and "Consolidated Current
Liabilities" shall mean, at any time, all assets or liabilities, respectively,
that should, in accordance with GAAP (Generally Accepted Accounting Principles),
be classified as current assets or current liabilities, respectively, on a
consolidated balance sheet of Borrower and its subsidiaries (if any).

                  "Consolidated Liabilities" shall mean all indebtedness,
obligations and other liabilities of Borrower, whether matured or unmatured,
liquidated or unliquidated, direct or contingent or joint or several, that
should, in accordance with GAAP, be classified as liabilities on a consolidated
balance sheet of Borrower and its subsidiaries (if any).

                  "Consolidated Net Working Capital" shall mean, at any time,
the amount by which Consolidated Current Assets exceed Consolidated Current
Liabilities.

                  "Consolidated Tangible Net Worth" shall mean, at any time,
Stockholder's Equity, less the sum of (i) any surplus resulting from any
write-up of assets subsequent to _____________, 2002,

                  (ii)     goodwill, including any amounts, however designated
on a consolidated balance sheet of Borrower and its subsidiaries, representing
the excess of the purchase price paid for assets or stock acquired over the
value assigned thereto on the books of the Borrower, (iii) patents, trademarks,
tradenames and copyrights, (iv) any amount at which shares of capital stock of
the Borrower appear as an asset on the Borrower's balance sheet, (v) deferred
expenses and (vi) any other amount in respect of an intangible that should be
classified as an asset on a consolidated balance sheet of Borrower in accordance
with GAAP.

                  "Stockholder's Equity" shall mean, at any time, the aggregate
of the following amounts set forth on a consolidated balance sheet of the
Borrower and its subsidiaries prepared in accordance with GAAP:

                                    Page 26

<PAGE>

(i) the par or stated value of all outstanding capital stock, (ii) capital
surplus, (iii) retained earnings and (iv) all indebtedness which is subordinated
to the Loans in a manner satisfactory to the Bank.

         5.       Negative Covenants. The Borrower covenants and agrees that
until the Obligations have been paid in full, unless the Bank shall consent in
advance in writing, it shall not and shall not permit any subsidiary to:

         5.1      Discontinue its business or liquidate, sell, transfer, assign
or otherwise dispose of a material part of its assets, provided, however, that
it may sell in the ordinary course of business and for a full consideration in
money or money's worth, any product, merchandise or service produced, marketed
or furnished by it.

         5.2      Sell, assign, pledge, grant or suffer to exist a security
interest, lien, mortgage or other encumbrance on any of its assets to any person
other than the Bank, or permit any lien, encumbrance or security interest to
attach to any of its assets, except in favor of the Bank and except Permitted
Liens and encumbrances set forth in Exhibit A hereto.

         5.3      Endorse, guarantee or become surety for the obligations of any
person, firm or corporation, except that the Borrower may endorse checks and
negotiable instruments for collection or deposit in the ordinary course of
business.

         5.4      Make any loans to or repay any existing loans made to it by
its Affiliates.

         5.5      Declare or pay any dividends or make any other payments on its
capital stock, issue, redeem, repurchase or retire any of its capital stock,
grant or issue any warrant, right or option pertaining thereto or other security
convertible into any of the foregoing, or make any distribution to its
stockholders.

         5.6      Change its name or consolidate or merge with any other
corporation or acquire or purchase any equity interest in any other entity,
including shares of stock of other corporations, or acquire or purchase any
assets or obligations of any other entity the value of which exceeds
$________________ (whether in one transaction or in a series of transactions),
except that the Borrower is permitted to own notes and other receivables
acquired in the ordinary course of business.

         5.7      Change its management nor redeem, retire, purchase or
otherwise acquire, directly or indirectly, any of Borrower's capital stock, or
make any material change in Borrower's capital structure or in any of Borrower's
business objectives, purposes and operations that might in any way adversely
affect the repayment of the Loans.

         5.8      Permit to occur a change in record or beneficial ownership of
voting stock of Borrower which Bank, in its sole discretion, deems material with
respect to the control over Borrower.

         5.9      Enter into, or be a party to, any transaction with any of
Borrower's Affiliates, except in the ordinary course of business, pursuant to
the reasonable requirements of Borrower's business, and upon fair and reasonable
terms which are fully disclosed to Bank and are no less favorable to Borrower
than Borrower could obtain in a comparable arm's length transaction with a
person not an Affiliate of Borrower.

         6.       Events of Default and Remedies.

         6.1      If the Loans are due on a specific date (e.g. not due on
demand), the following shall constitute Events of Default under this Agreement:
(a) failure of the Borrower to pay when due any of the Obligations; (b) failure
of the Borrower to observe or perform any covenant contained in this Agreement
or in any other

                                    Page 27

<PAGE>

agreement between the Borrower and the Bank; (c) discovery that any
representation or warranty at any time made by the Borrower to the Bank in this
Agreement or in any other agreement between the Borrower and the Bank, or in any
document or instrument delivered to the Bank pursuant to this Agreement or any
such other agreement is, or becomes, untrue or misleading in any material
respect; (d) acceleration of the maturity of any of the Obligations; (e) any
misrepresentation by the Borrower, orally or in writing, to the Bank for the
purpose of obtaining credit or an extension of credit; (f) failure of the
Borrower or any guarantor, after request by the Bank, to furnish financial
information or to permit the inspection of its books of account and records; (g)
suspension by the Borrower or any guarantor of the operation of its present
business, or the insolvency of the Borrower or any guarantor, or the inability
of the Borrower or any guarantor to meet its debts as they mature, or its
admission in writing to such effect, or its calling any meeting of all or any of
its creditors or committing any act of bankruptcy, or the filing by or against
the Borrower or any guarantor of any petition under any provision of the
Bankruptcy Act, as amended, or the entry of any judgment or filing of any lien
against the Borrower or any guarantor; (h) there shall occur any material
adverse change in the Borrower's condition or affairs (financial or otherwise)
or in that of any endorser, guarantor of surety for any of the Obligations; and
(i) any guarantor of the Obligations denies his obligation to guarantee any
Obligations then existing or attempts to limit or terminate his obligation to
guarantee any future Obligations, including future Loan advances.

         6.2      Upon the occurrence of an Event of Default described in
Section 6.1, or at any time in the sole discretion of the Bank if the Loan is
due on demand, the Bank at its option may: (a) declare the Obligations of the
Borrower immediately due and payable, without presentment, notice, protest or
demand of any kind for the payment of all or any part of the Obligations (all of
which are expressly waived by Borrower) and exercise all of its rights and
remedies against the Borrower and any collateral provided herein or in any other
agreement between Borrower and Bank.

         6.3      The rights, options and remedies of the Bank shall be
cumulative and no failure or delay by the Bank in exercising any right, option
or remedy shall be deemed a waiver thereof or of any other right, option or
remedy, or waiver of any Event of Default hereunder, nor shall any single or
partial exercise of any such right, power or remedy preclude any other or
further exercise thereof or the exercise of any other right, power or remedy
hereunder. Bank shall not be deemed to have waived any of the Bank's rights
hereunder or under any other agreement, instrument or paper signed by Borrower
unless such waiver is in writing and signed by the Bank.

         7.       Miscellaneous

         7.1      Governing Law; Jurisdiction and Venue. The provisions of this
Agreement shall be governed by and interpreted in accordance with the laws of
the State of Ohio. The Bank and Borrower hereby designate all courts of record
sitting in Dayton, Ohio, both state and federal, as forums where any action,
suit or proceeding in respect of or arising out of this Agreement or the
transactions contemplated by this Agreement may be prosecuted as to all parties,
their successors and assigns, and by the foregoing designation the Bank and
Borrower consent to the jurisdiction and venue of such courts.

         7.2      WAIVER OF JURY TRIAL. AS A SPECIFICALLY BARGAINED INDUCEMENT
FOR THE BANK TO EXTEND CREDIT TO BORROWER, AND AFTER HAVING THE OPPORTUNITY TO
CONSULT COUNSEL, BORROWER HEREBY EXPRESSLY WAIVES THE RIGHT TO TRIAL BY JURY IN
ANY LAWSUIT OR PROCEEDING RELATING TO THIS AGREEMENT OR ARISING IN ANY WAY FROM
THE OBLIGATIONS.

         7.3      Other Waivers. The Borrower waives notice of nonpayment,
demand, notice of demand, presentment, protest and notice of protest with
respect to the Obligations, or notice of acceptance hereof, notice of Loans
made, credit extended, Collateral received or delivered, or any other action
taken in reliance hereon,

                                    Page 28

<PAGE>

and all other demands and notices of any description, except such as are
expressly provided for herein. Borrower further waives any and all rights or
relief under valuation and appraisement laws in effect from time to time.

         7.4      Collection Costs. All costs and expenses incurred by the Bank
to collect the Obligations, including, without limitation, stationery and
postage, telephone and telegraph, secretarial and clerical expenses, the fees or
salaries of any collection agents utilized and all attorneys' fees and legal
expenses incurred in obtaining or enforcing payment of any of the Obligations,
or in enforcing or protecting its rights and interests under this Agreement or
under any other instrument or document delivered pursuant hereto, or in
protecting the rights of any holder or holders with respect thereto, or in
defending or prosecuting any actions or proceedings arising out of or relating
to the Bank's transactions with the Borrower, shall be paid by the Borrower to
the Bank, upon demand, or, at the Bank's election, charged to the Borrower's
account and added to the Obligations.

         7.5      Expenses. The Borrower shall reimburse the Bank for all
out-of-pocket costs and expenses incurred by the Bank in connection with the
preparation of this Agreement and the making of the Loans hereunder, including
the reasonable fees and expenses of the Bank's counsel.

         7.6      Notices. All notices, requests, directions, demands, waivers
and other communications provided for herein shall be in writing and shall be
deemed to have been given or made when delivered personally or sent by
registered or certified mail, postage prepaid and return receipt requested,
addressed to the Borrower or the Bank, as the case may be, at their respective
addresses set forth at the beginning of this Agreement. Notices of changes of
address shall be given in the same manner.

         7.7      Severability. Any provision of this Agreement which is
prohibited and unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof or affecting the validity or
enforceability of such provision in any other jurisdiction.

         7.8      Entire Agreement, Modification, Benefit. This Agreement shall
constitute the entire agreement of the parties and no provision of this
Agreement, including the provisions of this Section, may be modified, deleted or
amended in any manner except by agreement in writing executed by the parties.
All terms of this Agreement shall be binding upon, inure to the benefit of and
be enforceable by the parties hereto and their respective successors and
assigns, provided, however, that the Borrower shall not assign or transfer its
rights hereunder.

         7.9      Construction. All references in this Agreement to the single
number and neuter gender shall be deemed to mean and include the plural number
and all genders, and vice versa, unless the context shall otherwise require.

         7.10     Headings. The underlined headings contained herein are for
convenience only and shall not affect the interpretation of this Agreement.

         7.11     Counterparts. This Agreement may be executed in more than one
counterpart, each of which shall be deemed an original.

         7.12     Nonliability of Bank. The relationship between the Borrower
and the Bank shall be solely that of borrower and lender. The Bank shall not
have any fiduciary responsibilities to the Borrower. The Bank undertakes no
responsibility to the Borrower to review or inform the Borrower of any matter in
connection with any phase of the Borrower's business or operations.

                                    Page 29

<PAGE>

         IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed and delivered by their proper and duly authorized officers.

BORROWER:                                             LENDER:

SHOPSMITH, INC.                                 THE PROVIDENT BANK

BY _______________________________      BY _______________________________
   Robert L. Folkerth, President           Clifford Bishop, Vice President

                                    Page 30

<PAGE>

                                    EXHIBIT A
                                 SHOPSMITH, INC.
PERMITTED ENCUMBRANCES

<TABLE>
<S>      <C>                <C>
1.       Debtor:            Shopsmith, Inc.
         Secured Party:     Mid-States Development Company
         File No.           AP0123240
         File Date:         2/16/1999
         Collateral:        Real Property (see Exhibit A)
         AMENDMENT FILED:   5/20/2002 CHANGING MATURITY DATE OF OBLIGATION TO 1/1/2006

2.       Debtor:            Shopsmith, Inc.
         Secured Party:     Bankers/Softech
         File No.           AP0217943
         File Date:         2/29/2000
         Collateral:        Specific equipment

3.       Debtor:            Shopsmith, Inc.
         Secured Party:     Manufactures Commercial
         File No.           AP0250196
         File Date:         6/22/2000
         Collateral:        Lighting equipment

4.       Debtor:            Shopsmith, Inc.
         Secured Party:     Fleetwood Financial Corp.
         File No.           AP0257494
         File Date:         7/24/2000
         Collateral:        Leased equipment
         Assignment filed:  4/5/2001 changing secured party to Sterling National Bank

5.       Debtor:            Shopsmith, Inc.
         Secured Party:     John R. Folkerth, Sr.
         File No.           OH00041430353
         File Date:         11/16/2001
         Collateral:        Collateral (other than Lowe's Accounts which shall be subordinate to Bank)
</TABLE>

                                    Page 31

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