8-K

                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549



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


                                    FORM 8-K

                                 CURRENT REPORT
                     PURSUANT TO SECTION 13 OR 15(D) OF THE
                         SECURITIES EXCHANGE ACT OF 1934



       Date of report (Date of earliest event reported): OCTOBER 14, 2004
                                ----------------



                                LYNCH CORPORATION
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               (Exact Name of Registrant as Specified in Charter)



INDIANA                             1-106                     38-1799862
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(State or Other Jurisdiction      (Commission                (IRS Employer
of Incorporation)                  File Number)              Identification No.)

50 KENNEDY PLAZA, SUITE 1250, PROVIDENCE, RI                           02903
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(Address of Principal Executive Offices)                             (Zip Code)

        Registrant's telephone number, including area code: 401-453-2007

 ------------------------------------------------------------------------------
          (Former Name or Former Address, if Changed Since Last Report)

     Check the  appropriate  box below if the Form 8-K  filing  is  intended  to
simultaneously  satisfy the filing obligation of the registrant under any of the
following provisions (see General Instruction A.2. below):

     / / Written  communications  pursuant to Rule 425 under the  Securities Act
(17 CFR 230.425)

     / / Soliciting  material pursuant to Rule 15a-12 under the Exchange Act (17
CFR 240.15a-12)

     / / Pre-commencement  communications  pursuant to Rule 15d-2(b)  under the
Exchange Act (17 CFR 240.15d-2(b))

     / /  Pre-commencement  communications  pursuant to Rule 13e-4(c)  under the
Exchange Act (17 CFR 240.13e-4(c))





Item 1.01 ENTRY INTO MATERIAL DEFINITIVE AGREEMENT.

     LOAN AGREEMENT WITH FIRST NATIONAL BANK OF OMAHA.

     In connection with the completion of the acquisition described in Item 2.01
hereof,  on October 14, 2004, M-tron  Industries,  Inc.,  ("M-tron"),  and Piezo
Technology,  Inc., ("PTI"), each wholly-owned  subsidiaries of Lynch Corporation
(the  "Registrant"),  entered into a loan agreement (the "Loan  Agreement") with
First  National Bank of Omaha  ("FNBO"),  which is filed as Exhibit 10.1 to this
Current Report on Form 8-K. The Loan Agreement provides for loans in the amounts
of $2,000,000  (the "Term Loan") and $3,000,000  (the "Bridge  Loan"),  together
with a $5,500,000 revolving line of credit (the "Revolving Loan"). The Term Loan
bears  interest at the  greater of FNBO's  prime rate plus 50 basis  points,  or
4.5%,  and is to be repaid in monthly  installments  of  $37,514,  with the then
remaining  principal  balance  plus  accrued  interest  to be paid on the  third
anniversary  of the Loan  Agreement.  The Bridge Loan bears interest at the same
rate as the Term Loan.  Accrued  interest  thereon is  payable  monthly  and the
principal  amount  thereof,  together with accrued  interest,  is payable on the
first  anniversary of the Loan  Agreement.  The Revolving Loan bears interest at
the greater of FNBO's prime rate, or 4.5%. Amounts outstanding thereunder are to
be repaid,  together with accrued  interest,  on May 31, 2005.  All  outstanding
obligations under the Loan Agreement are collateralized by security interests in
the assets of M-tron and PTI, as well as by a mortgage on PTI's premises.

     The Loan Agreement contains a variety of affirmative and negative covenants
of types customary in an asset-based lending facility,  including those relating
to reporting  requirements,  maintenance  of records,  properties  and corporate
existence,  compliance with laws,  incurrence of other  indebtedness  and liens,
restrictions on certain payments and transactions  and  extraordinary  corporate
events.  The Loan  Agreement  also  contains  financial  covenants  relating  to
maintenance  of levels of minimal  tangible net worth and working  capital,  and
current, leverage and fixed charge ratios, and restricting the amount of capital
expenditures.  In addition,  the Loan Agreement provides that the following will
constitute events of default thereunder,  subject to certain grace periods:  (i)
payment defaults; (ii) failure to meet reporting  requirements;  (iii) breach of
other obligations  under the Loan Agreement;  (iv) default with respect to other
material  indebtedness;  (v) final judgment for a material amount not discharged
or stayed; and (vi) bankruptcy or insolvency.

     Pursuant to an Unconditional Guaranty for Payment and Performance, filed as
Exhibit 10.2 to this Current  Report on Form 8-K, the  Registrant  guaranteed to
FNBO the payment and performance of its subsidiaries' obligations under the Loan
Agreement and ancillary agreements and instruments.

     SALE OF SHARES TO VENATOR MERCHANT FUND, L.P.

     On October 15, 2004,  the  Registrant  entered  into a Securities  Purchase
Agreement  (the  "Purchase   Agreement")   with  Venator   Merchant  Fund,  L.P.
("Venator"),  which is filed as Exhibit 10.3 to this Current Report on Form 8-K.
Under the Purchase Agreement, the Registrant sold to Venator pursuant to Section
4(2) of the  Securities  Act of 1933,  as  amended,  and  Rule  506  promulgated
thereunder,  136,643 shares of its Common Stock,  par value $0.01 per share (the


                                       2



"Common  Stock"),  for  $13.173 per share,  or an  aggregate  purchase  price of
approximately   $1,800,000.   Venator  is  an  investment  limited   partnership
controlled by the Registrant's  Chairman of the Board, Marc J. Gabelli.  The per
share purchase price for the Common Stock is equal to the average of the closing
prices of the Common Stock during the 60-trading day period ended on October 13,
2004. In connection  with the  transaction,  the Registrant  obtained a fairness
opinion from Caymus Partners, LLC.

     In addition,  the Registrant  entered into a Registration  Rights Agreement
with Venator dated October 15, 2004 (the "Registration Rights Agreement"), which
is filed as Exhibit  10.4 to this  Current  Report on Form 8-K, to register  the
Common Stock purchased by Venator.  The Registration  Rights Agreement  requires
the Registrant to file a registration statement with the Securities and Exchange
Commission  for the resale of the Common  Stock by Venator  within 60 days after
the closing date, and to cause the registration statement to become effective as
promptly  thereafter as  practicable  and to maintain the  effectiveness  of the
registration  statement for a minimum period of two years,  subject to extension
of that period as provided in the Registration Rights Agreement.


Item 2.01   COMPLETION OF ACQUISITION OR DISPOSITION OF ASSETS.

     On October 15, 2004,  M-tron completed its acquisition of all of the issued
and  outstanding  shares of PTI for  approximately  $8.7  million in cash.  Such
shares were  purchased from the Amended and Restated  Employee  Stock  Ownership
Plan and Trust for Employees of Piezo Technology, Inc. dated September 23, 2002,
and from the following individuals:  William H. Horton, Robert B. Angove, Robert
C. Helmbold,  Yansheng S. Zhou, Michael D. Howard,  David A. Symonds,  Blaine D.
Andersen,  Parminder S. Beesla,  Paul A. Dechen,  Jr., Dominic A. Gutierrez,  G.
Eric Hague, Stephen E. Davis, Gary Archibald, Zurong Cai, Trung Lively and Huong
Nguyen.  The  acquisition  was  partially  funded  by  proceeds  under  the Loan
Agreement.  The Agreement for Purchase and Sale of Shares,  dated  September 14,
2004,  relating to the PTI shares was  previously  filed as Exhibit  10.1 to the
Registrant's Current Report on Form 8-K filed September 14, 2004.


Item 2.03 CREATION OF A DIRECT  FINANCIAL  OBLIGATION OR AN OBLIGATION  UNDER AN
          OFF-BALANCE SHEET ARRANGEMENT OF A REGISTRANT.


          See Item 1.01-Entry into Material Definitive Agreement, discussing the
Loan Agreement, by and among M-tron, PTI and FNBO, dated October 14, 2004.



Item 3.02 UNREGISTERED SALES OF EQUITY SECURITIES.

          See Item 1.01-Entry into Material Definitive Agreement, discussing the
sale of shares to Venator pursuant to the Securities Purchase Agreement,  by and
between the Registrant and Venator, dated October 15, 2004.

                                       3



Item 9.01 FINANCIAL STATEMENTS AND EXHIBITS.

          a) FINANCIAL STATEMENTS OF BUSINESS ACQUIRED

     PTI's  financial  statements  are not included in this Form 8-K but will be
attached in a subsequent Form 8-K to be filed on or before December 30, 2004.


          b) PRO FORMA FINANCIAL INFORMATION

     PTI's pro forma financial  information is not included in this Form 8-K but
will be attached in a subsequent  Form 8-K to be filed on or before December 30,
2004.

          c) EXHIBITS

        Number        Exhibit
        ------        -------

        10.1          Loan Agreement,  by and among M-tron,  PTI and FNBO, dated
                      October 14, 2004.

        10.2          Unconditional  Guaranty for Payment and  Performance  with
                      FNBO, dated October 14, 2004.

        10.3          Securities  Purchase Agreement by and among the Registrant
                      and Venator, dated October 15, 2004.

        10.4          Registration Rights Agreement, by and among the Registrant
                      and Venator, dated October 15, 2004.



                                    SIGNATURE

     Pursuant to the  requirements  of the Securities  Exchange Act of 1934, the
registrant  has duly  caused  this  report  to be  signed  on its  behalf by the
undersigned hereunto duly authorized.



                                       LYNCH CORPORATION


                                       By: /s/ John C. Ferrara
                                           -------------------------------------
                                           John C. Ferrara
                                           President and Chief Executive Officer

October 20, 2004

                                       4

EX-10.1

&

                                 LOAN AGREEMENT


     THIS  LOAN  AGREEMENT  (this  "Agreement")  is  dated as of the 14th day of
October,  2004  and  is by and  between  M-TRON  INDUSTRIES,  INC.,  a  Delaware
corporation  ("M-TRON"),  and PIEZO  TECHNOLOGY,  INC.,  a  Florida  corporation
(collectively,  the "Borrowers"), and FIRST NATIONAL BANK OF OMAHA (the "Bank"),
a national banking association established at Omaha, Nebraska.

                              W I T N E S S E T H :

     WHEREAS,  M-TRON has an existing term loan with the Bank  evidenced by term
note  number  2000001751-6  with a due date of April  30,  2007  pursuant  to an
existing  additional  loan agreement  with the Bank,  which shall remain in full
force in accordance with its terms; and

     WHEREAS,  M-TRON has an  existing  revolving  line of credit  with the Bank
evidenced by  revolving  note number  2000001751-5  with a due date of April 30,
2005 pursuant to an existing  additional  loan  agreement  with the Bank,  which
shall be paid in full from the proceeds of the Revolving Note; and

     WHEREAS, the Borrowers have requested the Bank to lend to the Borrowers the
sum of up to  $5,000,000  for the  purpose  of  partially  funding  the  cost of
acquiring 100% of the outstanding  shares of Piezo  Technology,  Inc., a Florida
corporation  ("Piezo"),  in the form of two loans in the  amounts of  $2,000,000
(the "Term Loan") and $3,000,000 (the "Bridge Loan"), together with a $5,500,000
revolving line of credit (the "Revolving Loan") (collectively referred to as the
"Loans"); and

     WHEREAS,  the Bank is willing  to provide  such  credit  facilities  to the
Borrowers upon the terms and conditions herein set forth.

                                   ARTICLE I

                                   DEFINITIONS

     SECTION 1.01. DEFINED TERMS. As used in this Agreement, the following terms
have the  following  meanings  (terms  defined in the  singular to have the same
meaning when used in the plural and vice versa):

     "Affiliate" means any person (a) which directly or indirectly controls,  or
is  controlled  by,  or  is  under  common  control  with,  the  Borrowers  or a
Subsidiary;  (b) which directly or indirectly  beneficially  owns or holds 5% or
more of any class of voting stock of the Borrowers or any Subsidiary;  or (c) 5%
or more of the voting  stock of which is  directly  or  indirectly  beneficially
owned or held by the Borrowers or a  Subsidiary.  The term  "control"  means the




possession,  directly  or  indirectly,  or the  power to  direct  or  cause  the
direction  of the  management  and  policies  of a person,  whether  through the
ownership of voting securities, by contract, or otherwise.

     "Banking Day" means a day on which the Bank is open for  substantially  all
of its business.

     "Borrower" or "Borrowers"  shall mean M-TRON  Industries,  Inc., a Delaware
corporation  and Piezo  Technology,  Inc.,  a Florida  corporation  as joint and
several borrowers under this Agreement.

     "Borrowing Base" means the lesser of:

          (a) $5,500,000,  less the amount of any Letters of Credit in an amount
     not to exceed $100,000,  issued and outstanding on the Borrowers'  account;
     or

          (b)  The  aggregate  of (i)  80% of the  Borrowers'  current  accounts
     receivable on the date reported, plus (ii) 50% of the Borrowers' Inventory,
     (up to a maximum amount of availability of $2,600,000)  valued at the lower
     of cost or market,  and less any Accounts  reasonably  deemed ineligible by
     the Bank.

     "Bridge Loan" shall have the meaning set forth in Section 2.01.

     "Bridge  Loan  Termination  Date"  shall mean the  earliest to occur of the
following:  (a) a date  that is one year  subsequent  to the date of the  Bridge
Note, (b) the date the Obligations  are  accelerated  pursuant to this Agreement
and (c) the date the Bank has received (i) notice in writing from the  Borrowers
of the Borrowers'  election to termination this Agreement and (ii)  indefeasible
payment in full of the Obligations.

     "Bridge Note" shall have the meaning set forth in Section 2.02.

     "Business Day" means a Banking Day on which  commercial  banks are open for
business in Omaha, Nebraska.

     "Capital  Leases"  shall have the same  meaning in this  Agreement as those
terms are defined by GAAP.

     "Closing"  shall mean the date on which the Bank receives  this  Agreement,
executed by the Borrowers,  together with the Term Note, the Bridge Note and the
Revolving Note.

     "Code"  means the Internal  Revenue  Code of 1986,  as amended from time to
time, and the regulations and published interpretations thereof.

     "Collateral" means all Property which is subject or is to be subject to the
Lien granted by the Security Agreement.

     "Commonly Controlled Entity" means an entity,  whether or not incorporated,
which is under common  control with the Borrowers  within the meaning of Section
414(b) or 414(c) of the Code.

                                       2


     "Debt" means (a) all  Indebtedness;  (b) any liability for borrowed  money;
(c)  obligations  evidenced  by  bonds,  debentures,   notes  or  other  similar
instruments;  (d)  obligations  for the deferred  purchase  price of Property or
services (including trade obligations);  (e) obligations as lessee under Capital
Leases;  (f) current  liabilities in respect of unfunded  vested  benefits under
Plans covered by ERISA; (g) obligations under letters of credit; (h) obligations
under acceptance  facilities;  and (i) all guaranties,  endorsements (other than
for  collection  or  deposit  in the  ordinary  course  of  business)  and other
contingent  obligations  to purchase,  to provide  funds for payment,  to supply
funds to invest  in any  person or  entity  or  otherwise  to assure a  creditor
against loss.

     "Default" means any of the events specified in Article VIII, whether or not
any  requirement  for the giving of notice,  the lapse of time,  or both, or any
other condition, has been satisfied.

     "Dollars"  and the sign "$" mean  lawful  money  of the  United  States  of
America.

     "EBITDA"  means  earnings  before   interest,   taxes,   depreciation   and
amortization, all experienced during the applicable reporting period.

     "ERISA"  means the Employee  Retirement  Income  Security  Act of 1974,  as
amended from time to time,  and the  regulations  and published  interpretations
thereof.

     "Event of  Default"  has the  meaning  provided  for in  Article IX of this
Agreement.

     "Excess  Cash Flow" means EBITDA  less:  payments to the Bank;  payments on
account of Subordinated Debt; and less allowable capital expenditures.

     "Fixed  Charge  Coverage  Ratio" means as of any day the ratio derived when
comparing  EBITDA,  less  capital  expenditures,  dividends  and  taxes  to  the
Borrowers'  payments  on the  principal  and  interest  of the  Obligations  and
Subordinated  Debt made during the  applicable  reporting  period ending on that
day.

     "GAAP" means generally accepted accounting  principles,  applied on a basis
consistent  with the  accounting  principles  applied in the  preparation of the
annual financial statements of the Borrowers referred to in Section 4.04 of this
Agreement. All accounting terms not otherwise defined in this Agreement have the
meaning assigned to them in accordance with GAAP.

     "Guarantor" means Lynch Corporation, an Indiana corporation.

     "Guaranty" means the Guaranty in substantially  the form of Exhibit G to be
delivered by the Guarantor under the terms of this Agreement.

     "Indebtedness"  means,  as to the  Borrowers,  all  items of  indebtedness,
obligation  or   liability,   whether   matured  or  unmatured,   liquidated  or
unliquidated,  direct or  contingent,  joint or several  including,  but without
limitation:

          (a)  All  indebtedness  guaranteed,  directly  or  indirectly,  in any
     manner,  or endorsed  (other than for collection or deposit in the ordinary
     course of business) or discounted with recourse;

                                       3


          (b) All  indebtedness  in effect  guaranteed,  directly or indirectly,
     through   agreements,   contingent   or  otherwise  (i)  to  purchase  such
     indebtedness;  or (ii) to  purchase,  sell or lease (as  lessee or  lessor)
     property,  products, materials or supplies or to purchase or sell services,
     primarily  for the purpose of enabling  the debtor to make  payment of such
     Indebtedness or to insure the owner of the Indebtedness against loss;

          (c) All  indebtedness  secured  by (or for  which  the  holder of such
     Indebtedness  has a right,  contingent or otherwise,  to be secured by) any
     mortgage, deed of trust, pledge, lien, security interest or other charge or
     encumbrance upon property owned or acquired subject thereto, whether or not
     the liabilities secured thereby have been assumed; and

          (d) All indebtedness incurred as the lessee of goods or services under
     leases  that,  in  accordance  with GAAP,  should not be  reflected  on the
     lessee's balance sheet.

     "Inventory" shall mean Borrower's merchandise,  raw materials, and finished
and unfinished products which have not yet been sold.

     "Lien"  means any  mortgage,  deed of  trust,  pledge,  security  interest,
hypothecation,  assignment, deposit arrangement, encumbrance, lien (statutory or
other) or  preference,  priority or other  security  agreement  or  preferential
arrangement,  charge or encumbrance of any kind or nature whatsoever (including,
without limitation, any conditional sale or other title retention agreement, any
financing  lease having  substantially  the same  economic  effect as any of the
foregoing and the filing of any financing statement under the Uniform Commercial
Code or comparable law of any jurisdiction to evidence any of the foregoing).

     "Loan  Documents"  means this  Agreement and each  document  referred to in
Article II of this Agreement.

     "Material  Adverse Effect" means a material adverse effect on the financial
condition, properties or operations of either of the Borrowers.

     "Mortgage" means the agreement  between the Borrowers and the Bank creating
a first lien on the  Property  and a security  interest  in all of the  personal
property located thereon as security for payment of the Obligations.

     "National  Prime  Rate"  shall  mean the Prime Rate  published  by The Wall
Street Journal.

     "Note" or "Notes" means any  promissory  note delivered by the Borrowers to
the Bank.

     "Obligations" means the obligation of the Borrowers:

          (a) to pay the  principal of and  interest on the Notes in  accordance
     with the terms thereof and to satisfy all of its other  liabilities  to the
     Bank,  whether  hereunder or  otherwise,  whether now existing or hereafter
     incurred,  matured or unmatured,  direct or  contingent,  joint or several,
     including any extensions, modifications, renewals thereof and substitutions
     therefor and including, but not limited to, any obligations under letter of
     credit agreements;

                                       4


          (b) to repay to the Bank all amounts advanced by the Bank hereunder or
     otherwise on behalf of the Borrowers,  including,  but without  limitation,
     advances  for  principal  or interest  payments to prior  secured  parties,
     mortgagees or licensers, or taxes, levies,  insurance,  rent or repairs to,
     or maintenance or storage of, any of the real or personal property securing
     the Borrowers' payment and performance of this Agreement; and

          (c) to reimburse the Bank, on demand,  for the Bank's  reasonable  and
     necessary  out-of-pocket  expenses and costs, including the reasonable fees
     and  expenses  of  its  counsel,   in  connection  with  the   preparation,
     administration,  amendment,  modification, or enforcement of this Agreement
     and the Loan Documents required hereunder,  including,  without limitation,
     any  proceeding  brought or  threatened  to  enforce  payment of any of the
     Obligations referred to in the foregoing subparagraphs (a) and (b).

     "PBGC" shall mean the Pension Benefit Guaranty Corporation.

     "Permit"  or  "Permits"  means any license or permit,  and all  licenses or
permits,  required under any environmental law or regulation required to operate
the facilities of the Borrowers.

     "Property"  or  "Properties"  shall  mean the real  property  set  forth in
Exhibit A which is subject to the Mortgage.

     "Revolving Loan" shall have the meaning set forth in Section 2.09.

     "Revolving  Loan  Termination  Date"  means  the  earliest  to occur of the
following:  (a) May 31,  2005,  (b) the date  the  Obligations  are  accelerated
pursuant to this  Agreement and (c) the date the Bank has received (i) notice in
writing  from  the  Borrowers  of the  Borrowers'  election  to  terminate  this
Agreement and (ii) indefeasible payment in full of the Obligations.

     "Revolving Note" shall have the meaning set forth in Section 2.10.

     "Security Agreement" means the agreement between the Borrowers,  as debtor,
and the Bank, as secured party,  creating a first  security  interest in all the
Borrowers' assets, including general intangibles, securing the Obligations.

     "Subordinated  Debt" means  Indebtedness of the Borrowers to entities other
than the Bank that has been subordinated, in form acceptable to the Bank, to the
Obligations.

     "Tangible  Net  Worth"  means  total  assets  less total  liabilities  (but
excluding  Subordinated  Debt  existing  on the Closing  Date,  in an amount not
exceeding  $2,500,000) and less the following  types of assets:  (a) receivables
and other investments in or amounts due from any shareholder,  employee or other
person or entity  related to or  affiliated  with the  Borrowers;  (b) goodwill,
patents, copyrights,  mailing lists, trade names, trademarks,  servicing rights,
organizational  and  franchise  costs,  bond  underwriting  costs and other like
assets properly classified as intangible;  and (c) treasury stock.  Tangible Net
Worth shall not include any debt due to the Borrowers not acceptable to the Bank
in the exercise of its reasonable discretion.

     "Term Loan" shall have the meaning set forth in Section 2.05.

                                       5


     "Term Loan Termination  Date" means the earliest to occur of the following:
(a) a date which is three years subsequent to the date of the Term Note, (b) the
date the Obligations are accelerated pursuant to this Agreement and (c) the date
the Bank has received (i) notice in writing from the Borrowers of the Borrowers'
election to terminate  this Agreement and (ii)  indefeasible  payment in full of
the Obligations.

     "Term Note" shall have the meaning set forth in Section 2.06.

     "Working  Capital"  means  current  assets,  less  investments  in or other
amounts  due from any  member,  employee  or any person or entity  related to or
affiliated  with the Borrowers and less  prepayments,  less current  liabilities
(less any  portion of such  current  liabilities  that  constitute  debt that is
expressly  subordinated to the Bank in a writing  acceptable to the Bank, in the
exercise of its reasonable  discretion).

     SECTION 1.02.  ACCOUNTING  TERMS.  All  accounting  terms not  specifically
defined herein shall be construed in accordance  with GAAP consistent with those
applied in the  preparation of the financial  statements  referred to in Section
4.04,  and all financial  data  submitted  pursuant to this  Agreement  shall be
prepared in accordance with such principles.

                                   ARTICLE II

                          AMOUNT AND TERMS OF THE LOANS

     SECTION 2.01. BRIDGE LOAN. The Bank agrees, on the terms and conditions set
forth in this Agreement,  to make a loan (the "Bridge Loan") to the Borrowers on
the Closing Date in a principal amount up to but not exceeding  $3,000,000.  The
Bridge Loan shall have a term of one year from the date of the Bridge Note.  The
Borrowers  shall  have the right at any time and from time to time to prepay the
Bridge Loan in whole or in part  without  premium or penalty  but with  interest
accrued on the amount prepaid to the date of payment.

     SECTION  2.02.  BRIDGE NOTE.  The  obligation of the Borrowers to repay the
Bridge  Loan  shall be  evidenced  by a note  (the  "Bridge  Note")  in the form
attached  hereto as Exhibit B. The Bridge Note interest  shall be payable at the
rate provided herein and pursuant to the terms of this Agreement.

     SECTION  2.03.  INTEREST ON BRIDGE NOTE.  Interest on the Bridge Note shall
accrue at the  greater  of the  floating  National  Prime  Rate or 4.5% prior to
acceleration or maturity,  and 6% in excess of the floating  National Prime Rate
in  effect  from  time  to time  after  maturity,  whether  by  acceleration  or
otherwise.

     SECTION  2.04.  REPAYMENT  OF BRIDGE NOTE.  Interest  only shall be payable
monthly on the Bridge Note.  All  outstanding  principal  and accrued but unpaid
interest shall be payable on the Bridge Loan Termination Date.

     SECTION 2.05.  TERM LOAN. The Bank agrees,  on the terms and conditions set
forth in this  Agreement,  to make a loan (the "Term Loan") to the  Borrowers on
the Closing Date in a principal amount up to but not exceeding  $2,000,000.  The
Term Loan shall have a term of three  years from the date of the Term Note.  The


                                       6


Borrowers  shall  have the right at any time and from time to time to prepay the
Term Loan in whole or in part  without  premium  or  penalty  but with  interest
accrued on the amount prepaid to the date of payment.

     SECTION 2.06.  TERM NOTE. The obligation of the Borrowers to repay the Term
Loan shall be evidenced by a note (the "Term Note") in the form attached  hereto
as Exhibit  C. The Term Note  interest  shall be  payable  at the rate  provided
herein and pursuant to the terms of this Agreement.

     SECTION 2.07. INTEREST ON TERM NOTE. Interest on the Term Note shall accrue
at a variable  rate equal to the greater of the  floating  National  Prime Rate,
plus 50 basis points or 4.5% prior to  acceleration or maturity and 6% in excess
of the floating  National Prime Rate in effect from time to time after maturity,
whether by acceleration or otherwise.

     SECTION  2.08.  REPAYMENT  OF TERM  NOTE.  The Term  Note  shall be due and
payable in full on the third  anniversary  date of the Term Note.  The Term Note
shall be amortized over a five-year  period.  The Borrowers agrees to pay to the
Lender on a monthly basis principal and accrued interest on the Term Note during
the first three  years of the Term Note and shall pay all  amounts of  principal
and accrued  interest which remain on the Term Note on the third  anniversary of
the Term Note.

     SECTION 2.09.  REVOLVING LOAN. The Bank agrees, on the terms and subject to
the  conditions  set forth in this  Agreement,  to lend up to  $5,500,000 to the
Borrowers on the terms and conditions of this Agreement (the "Revolving  Loan").
The Bank will credit  proceeds of the Revolving Loan to the  Borrowers'  deposit
accounts with the Bank, bearing number 26712880,  as requested by the Borrowers.
Subject to the terms hereof, the Bank will lend the Borrowers, from time to time
until the Revolving  Loan  Termination  Date such sums in integral  multiples of
$10,000 as the Borrowers may request by reasonable  same-day notice to the Bank,
received by the Bank not later than 11:00 a.m. of such day,  but which shall not
exceed in the aggregate principal amount at any one time outstanding $5,500,000,
less the  aggregate  amounts  of any issued  and  outstanding  letters of credit
issued by the Bank at the  request of and on the account of the  Borrowers  (the
"Loan Commitment").  The Borrowers may borrow,  repay without penalty or premium
and reborrow hereunder, from the date of this Agreement until the Revolving Loan
Termination  Date,  either the full amount of the Loan  Commitment or any lesser
sum which is $10,000 or an integral multiple thereof. It is the intention of the
parties that the outstanding  balance of the Revolving Loan shall not exceed the
Borrowing  Base as determined in the Borrowing Base  Certificate,  and if at any
time said balance  exceeds the Borrowing Base, the Borrowers shall forthwith pay
the Bank  sufficient  funds to reduce the balance of the Revolving Loan until it
is in compliance with this requirement.

     SECTION 2.10.  REVOLVING  NOTE.  The Revolving Loan shall be evidenced by a
Promissory Note (the  "Revolving  Note") having stated maturity on the Revolving
Loan Termination Date, in the form attached hereto as Exhibit D.

     SECTION 2.11.  INTEREST ON REVOLVING  NOTE.  Interest on the Revolving Note
shall accrue at the greater of the floating National Prime Rate or 4.5% prior to
acceleration or maturity,  and 6% in excess of the floating  National Prime Rate
in  effect  from  time  to time  after  maturity,  whether  by  acceleration  or
otherwise.

                                       7


     SECTION 2.12.  REPAYMENT OF REVOLVING NOTE. The Revolving Note shall be due
and  payable on May 31,  2005.  Interest  only  shall be payable  monthly on the
Revolving Note. All outstanding  principal and interest shall be due and payable
on May 31, 2005.

     SECTION 2.13.  PAYMENTS.  All  principal,  interest and fees due under this
Agreement,  the  Notes  and the  Loan  Documents  shall  be paid in  immediately
available  funds as contracted  in this  Agreement and no later than the payment
due date set forth in the  periodic  statements  mailed to the  Borrowers by the
Bank.  Should a payment  come due on a day other than a Banking Day, the payment
shall be made no later than the next Banking Day and interest  shall continue to
accrue during the extended period.

     SECTION 2.14. FEES AND COST OF LOANS.

          (a) At the Closing,  the Borrowers  shall pay to the Bank a commitment
     fee of $37,500,  which fee the Borrowers  agrees and  acknowledges has been
     earned by the Bank.

          (b) The Borrowers  shall pay all costs  associated with the Closing of
     the Loans, including, but not limited to, title, survey,  environmental and
     appraisal reports, mortgage fees and taxes and the Bank's legal fees.

     SECTION 2.15. USE OF PROCEEDS. The proceeds of the Loans hereunder shall be
used by the  Borrowers  to acquire all of the issued and  outstanding  shares of
Piezo,  to provide a working line of credit to support  accounts  receivable and
inventory  of Piezo after such  acquisition  and to refinance  certain  existing
mortgage and equipment  indebtedness of Piezo. The Borrowers will not,  directly
or  indirectly,  use any part of such  proceeds for the purpose of purchasing or
carrying  any margin  stock  within the meaning of  Regulation U of the Board of
Governors of the Federal  Reserve  System or to extend  credit to any person for
the purpose of purchasing or carrying any such margin stock,  or for any purpose
which  violates,  or  is  inconsistent  with,  Regulation  X of  such  Board  of
Governors.

     SECTION  2.16.  ILLEGALITY.  Notwithstanding  any other  provision  in this
Agreement,  if the Bank  determines that any applicable law, rule or regulation,
or any change therein,  or any change in the  interpretation  or  administration
thereof by any governmental authority, central bank or comparable agency charged
with the  interpretation  or administration  thereof,  or compliance by the Bank
with any  request or  directive  (whether or not having the force of law) of any
such  authority,  central  bank or  comparable  agency shall make it unlawful or
impossible  for the Bank to  maintain  its  commitment,  then upon notice to the
Borrowers by the Bank the  commitment of the Bank shall  terminate.  In no event
shall  interest  payable  hereunder be in excess of the maximum rate of interest
permitted  under  applicable  law. The Borrower  hereby  agrees to give the Bank
written  notice in the event that the  Borrower  has actual  knowledge  that any
interest  payment made to the Bank with respect to any Loan will cause the total
interest  payments  collected in connection with this Note in any one year to be
usurious  under  applicable  law,  and the Bank  hereby  agrees  not to  collect
knowingly any interest from the Borrower in the form of fees or otherwise  which
will render  this Note or the Loans  usurious.  In the event that such  interest
would be usurious in the Bank's  opinion,  the Bank reserves the right to reduce
the  interest  payable  by the  Borrower.  Additionally,  at the  option  of the
Borrowers,  any interest which may have been paid which exceeds the maximum rate


                                       8


permitted by law shall be applied to the  principal or returned to the Borrower.
This  provision  shall survive the closing of this Note and the repayment of the
Loans.


                                  ARTICLE III

                              CONDITIONS OF LENDING

     SECTION 3.01. CONDITIONS PRECEDENT TO ALL LOANS. The obligation of the Bank
to make all Loans to the Borrowers is subject to the  conditions  precedent that
the Bank shall have received on or before the Closing each of the following,  in
form and substance satisfactory to the Bank and its counsel:

          (a) NOTE. Each respective Note duly executed by each of the Borrowers;

          (b) SECURITY AGREEMENT.  A Security Agreement duly executed by each of
     the Borrowers  together with the  Financing  Statements  (Form UCC-1) to be
     duly filed under the Uniform Commercial Code of all jurisdictions necessary
     or, in the opinion of the Bank,  desirable to perfect the security interest
     created by the Security Agreement;

          (c) EVIDENCE OF ALL CORPORATE  ACTION BY  BORROWERS.  Certified (as of
     the date of this Agreement) copies of all corporate action taken by each of
     the  Borrowers,   including  resolutions  of  their  Boards  of  Directors,
     authorizing  the execution,  delivery and performance of the Loan Documents
     to which they are parties and each other  document to be  delivered by them
     pursuant to this Agreement;

          (d) INCUMBENCY AND SIGNATURE  CERTIFICATE OF BORROWERS.  A certificate
     (dated as of the date of this  Agreement) of the Secretaries of each of the
     Borrowers  certifying the names and true  signatures of the officers of the
     Borrowers  authorized to sign the Loan  Documents to which they are parties
     and the  other  documents  to be  delivered  by the  Borrowers  under  this
     Agreement;

          (e) OPINION OF COUNSEL FOR BORROWERS.  A favorable  opinion of counsel
     for each of the Borrowers, in substantially the form of Exhibit E;

          (f) GUARANTY. A Guaranty duly executed by the Guarantor;

          (g) EVIDENCE OF ALL CORPORATE  ACTION BY  GUARANTOR.  Certified (as of
     the date of this  Agreement)  copies of all  corporate  action taken by the
     Guarantor, including resolutions of its Board of Directors, authorizing the
     execution, delivery and performance of the Guaranty;

          (h) INCUMBENCY AND SIGNATURE  CERTIFICATE OF GUARANTOR.  A certificate
     (dated as of the date of this  Agreement) of the Secretary of the Guarantor
     certifying  the names and true  signatures of the officers of the Guarantor
     authorized to sign the Guaranty;

          (i) OPINION OF COUNSEL FOR GUARANTOR.  A favorable  opinion of counsel
     for the Guarantor, in substantially the form of Exhibit F;

                                       9


          (j) SUBORDINATED DEBT. Proof, to the reasonable  satisfaction of Bank,
     that Lynch Corporation,  an Indiana corporation,  has advanced an amount of
     at  least  $1,800,000  which at all  times  shall  be  subordinated  to all
     Obligations to the Bank;

          (k) LOCKBOX AGREEMENT. A lockbox agreement duly executed by Piezo in a
     form satisfactory to the Bank; and

          (l)  MORTGAGE.  A mortgage  creating a security  interest  in the real
     property  of Piezo set forth in  Exhibit  A, duly  executed  by each of the
     Borrowers to be duly filed in the appropriate jurisdictions.

          (m)  PATENT   SECURITY   AGREEMENT.   A  patent   security   agreement
     substantially in the form of Exhibit I securing the  intellectual  property
     set forth therein.

          (n) OFFICER'S CERTIFICATE, ETC. The following statements shall be true
     and the Bank shall have received a certificate  signed by a duly authorized
     officer of each of the Borrowers dated the date of the Term Loan and Bridge
     Loan stating that:

               (i) the representations  and warranties  contained in Articles IV
          and V of this Agreement, in the Security Agreement and in the Guaranty
          are  correct on and as of the date of the Term Loan and Bridge Loan as
          though made on and as of such date; and

               (ii)  no  Default  or  Event  of  Default  has  occurred  and  is
          continuing or would result from the Term Loan or Bridge Loan; and

          (o) ADDITIONAL DOCUMENTATION.  The Bank shall have received such other
     approvals, opinions or documents as the Bank may reasonably request.

     SECTION 3.02. CONDITIONS PRECEDENT TO REVOLVING LOAN. The obligation of the
Bank to make  subsequent  advances  under the Revolving Loan shall be subject to
the further conditions precedent that on the date of such Revolving Loan:

          (a) The  following  statements  shall be true and the Bank  shall have
     received a certificate  signed by a duly authorized  officer of each of the
     Borrowers dated the date of such Revolving Loan stating that:

               (i) the  representation  and warranties  contained in Articles IV
          and V of this Agreement, in the Security Agreement and in the Guaranty
          are  correct  on and as of the date of such  Revolving  Loan as though
          made on and as of such date; and

               (ii)  no  Default  or  Event  of  Default  has  occurred  and  is
          continuing, or would result from such loan.

          (b) The Bank shall have received a borrowing  base  certificate in the
     form of Exhibit H (the "Borrowing Base Certificate").

                                       10


          (c) The Bank shall have  received  such other  approvals,  opinions or
     documents as the Bank may reasonably request.

                                   ARTICLE IV

            REPRESENTATIONS AND WARRANTIES OF M-TRON INDUSTRIES, INC.

     To induce the Bank to enter into this Agreement,  M-TRON  Industries,  Inc.
("M-TRON") makes the following representations and warranties:

     SECTION 4.01.  EXISTENCE AND POWER. M-TRON is a corporation duly formed and
in  good  standing  under  the  laws  of  the  State  of  Delaware.  M-TRON  has
accomplished  all  necessary  actions  required  by  a  corporate  entity  under
applicable law to own all  Collateral,  and shares in Piezo,  and to execute and
deliver,  and to perform all of its  obligations  under,  the Loan  Documents to
which it is a party.

     SECTION 4.02.  AUTHORIZATION  OF BORROWING;  NO CONFLICT AS TO LAW OR OTHER
AGREEMENTS.  The  execution,  delivery  and  performance  by  M-TRON of the Loan
Documents  and the  borrowings  from  time  to time  hereunder  have  been  duly
authorized by all necessary  corporate actions of M-TRON and do not and will not
(a)  require  any  material  consent  or  approval,  or  authorization,  by  any
governmental department,  commission,  board, bureau, agency or instrumentality,
domestic or foreign, other than those obtained and in full force and effect, (b)
violate,  in any material respect,  any provision of any law, rule or regulation
or of  any  order,  writ,  injunction  or  decree  presently  in  effect  having
applicability  to  M-TRON,  or  violate  any  provision  of the  Certificate  of
Incorporation  or By-laws of M-TRON,  (c) result in a breach of or  constitute a
default beyond any applicable  cure period under any indenture or loan or credit
agreement or any other material  agreement,  lease or instrument to which M-TRON
is a party or by which it or its  properties  may be bound or  affected,  or (d)
result in, or require,  the  creation or  imposition  of any  mortgage,  deed of
trust,  pledge,  lien,  security  interest or other charge or encumbrance of any
nature to or with any other  creditor  of  M-TRON,  in the  aggregate  exceeding
$100,000,  upon or with respect to any of the  properties now owned or hereafter
acquired by M-TRON.

     SECTION 4.03. LEGAL  AGREEMENTS.  The Loan Documents to which it is a party
constitute  the  legal,  valid and  binding  obligations  of M-TRON  enforceable
against M-TRON in accordance  with their  respective  terms,  and as to the Loan
Documents  to  which  M-TRON  is not a party,  M-TRON  believes  such  documents
constitute  the legal,  valid and binding  obligations  of the parties  thereto,
enforceable  against such parties in  accordance  with their  respective  terms,
except (a) as  limited by  applicable  bankruptcy,  insolvency,  reorganization,
moratorium  and other  laws of  general  application  affecting  enforcement  of
creditors'  rights  generally  and  (b)  as  limited  by  laws  relating  to the
availability  of  specific  performance,  injunctive  relief or other  equitable
remedies.

     SECTION  4.04.  FINANCIAL  CONDITION.  M-TRON has furnished to the Bank its
financial  statements as of December 31, 2003 and for the eight months ending in
August 31, 2004 (the "Financial  Statements").  The Financial  Statements fairly
present the financial condition of M-TRON on the dates thereof and were prepared


                                       11


in  accordance  with  GAAP.  There has been no  material  adverse  change in the
operations, properties or condition (financial or otherwise) of M-TRON since the
date of the Financial Statements, and no additional borrowings have been made by
M-TRON other than the borrowing  contemplated hereby or approved by the Bank. No
certificate  or  statement  furnished  to the Bank by or on  behalf of M-TRON in
connection  with  the  transactions  contemplated  hereby  contains  any  untrue
statement  of a material  fact or omits to state a material  fact  necessary  in
order to make the statements contained therein or herein not misleading.

     SECTION  4.05.  LITIGATION.  There  are no  actions,  suits or  proceedings
pending or, to the knowledge of M-TRON,  threatened  against or affecting M-TRON
or the  properties  of  M-TRON  before  any  court or  governmental  department,
commission,  board,  bureau,  agency or  instrumentality,  domestic  or foreign,
which, if determined adversely to M-TRON, would have a Material Adverse Effect.

     SECTION  4.06.  TAXES.  M-TRON has filed all  federal,  state and local tax
returns  which to the  knowledge of M-TRON are required to be filed,  and M-TRON
has paid or caused to be paid to the respective taxing  authorities all taxes as
shown on said  returns or on any  assessment  received  by it to the extent such
taxes have become due except those which M-TRON is  contesting in good faith and
with respect to which adequate reserves have been set aside.

     SECTION 4.07.  LABOR DISPUTES AND ACTS OF GOD. Neither the business nor the
properties of M-TRON or any  Subsidiary or the Guarantor has been subject to any
fire,  explosion,  accident,  strike,  lockout or other labor dispute,  drought,
storm, hail,  earthquake,  embargo,  act of God or of the public enemy, or other
casualty  (whether or not covered by insurance) having a Material Adverse Effect
on M-TRON or such Subsidiary or the Guarantor.

     SECTION 4.08. OTHER  AGREEMENTS.  Neither M-TRON nor any Subsidiary nor the
Guarantor is a party to any indenture, loan or credit agreement, or to any lease
or other  agreement  or  instrument,  or  subject to any  charter  or  corporate
restriction  which would  reasonably be anticipated  to have a Material  Adverse
Effect on M-TRON or any Subsidiary or the Guarantor, or the ability of M-TRON or
the Guarantor to carry out its obligations  under the Loan Documents to which it
is a party. Neither M-TRON nor any Subsidiary nor the Guarantor is in default in
any  respect  in  the  performance,  observance  or  fulfillment  of  any of the
obligations,  covenants or  conditions  contained in any agreement or instrument
material to its business to which it is a party.

     SECTION 4.09. NO DEFAULT ON OUTSTANDING JUDGMENTS OR ORDERS. M-TRON and its
Subsidiaries and the Guarantor have satisfied all judgments,  and neither M-TRON
nor any Subsidiary nor the Guarantor is in default with respect to any judgment,
writ,  injunction,  decree,  rule or regulation of any court or  arbitrator,  or
federal,  state, municipal or other governmental authority,  commission,  board,
bureau, agency or instrumentality, domestic or foreign.

     SECTION 4.10.  OWNERSHIP AND LIENS.  M-TRON and each  Subsidiary have title
to, or valid  leasehold  interests  in,  all of their  material  properties  and
assets,  real and personal,  including the  properties  and assets and leasehold
interest  reflected  in the  Financial  Statements  referred to in Section  4.04
(other  than any  properties  or assets  disposed of in the  ordinary  course of


                                       12


business),  and  none of the  properties  and  assets  owned  by  M-TRON  or any
Subsidiary and none of their leasehold interests are subject to any Lien, except
such as may be permitted pursuant to Section 7.01 of this Agreement.

     SECTION 4.11.  SUBSIDIARIES  AND OWNERSHIP OF STOCK.  Set forth in Schedule
4.11 is a complete and accurate list of the  Subsidiaries of M-TRON (which shall
include Piezo),  showing the  jurisdiction of  incorporation of each and showing
the  percentage  of  M-TRON's   ownership  of  the  outstanding  stock  of  each
Subsidiary.  All of the  outstanding  capital stock of each such  Subsidiary has
been validly issued, is fully paid and nonassessable and is owned by M-TRON free
and clear of all Liens.

     SECTION 4.12.  ERISA.  M-TRON and each  Subsidiary are in compliance in all
material respects with all applicable  provisions of ERISA. Neither a Reportable
Event nor a Prohibited  Transaction  has occurred and is continuing with respect
to any Plan;  no notice of intent to terminate a Plan has been filed nor has any
Plan been terminated;  no circumstances exist which constitute grounds entitling
the PBGC to  institute  proceedings  to  terminate,  or  appoint  a  trustee  to
administer,  a Plan; nor has the PBGC instituted any such  proceedings;  neither
M-TRON nor any Commonly  Controlled Entity has completely or partially withdrawn
from a Multiemployer  Plan; M-TRON and each Commonly  Controlled Entity have met
their  minimum  funding  requirements  under ERISA with  respect to all of their
Plans and the  present  value of all  vested  benefits  under each Plan does not
exceed the fair market value of all Plan assets  allocable to such benefits,  as
determined on the most recent  valuation date of the Plan and in accordance with
the provisions of ERISA; and neither M-TRON nor any Commonly  Controlled  Entity
has incurred any liability to the PBGC under ERISA.

     SECTION 4.13.  OPERATION OF BUSINESS.  M-TRON and its  Subsidiaries and the
Guarantor  possess  all  licenses,  permits,  franchises,  patents,  copyrights,
trademarks  and trade names,  or rights  thereto,  to conduct  their  respective
businesses  substantially  as now  conducted  and as  presently  proposed  to be
conducted,  and  M-TRON  and  its  Subsidiaries  and  the  Guarantor  are not in
violation of any valid rights of others with respect to any of the foregoing.

     SECTION  4.14.  DEBT.  Schedule  4.14 is a complete and correct list of all
credit agreements,  indentures, purchase agreements,  guaranties, Capital Leases
and other investments, agreements and arrangements presently in effect providing
for or relating to extensions of credit  (including  agreements and arrangements
for the issuance of letters of credit or for acceptance financing) in respect of
which  M-TRON  or any  Subsidiary  is in any  manner  directly  or  contingently
obligated;  the maximum  principal  or face  amounts of the credit in  question,
outstanding or to be  outstanding,  are correctly  stated,  and all Liens of any
nature given or agreed to be given as security therefor are correctly  described
or indicated in such Schedule.

     SECTION 4.15.  ENVIRONMENT.  M-TRON and each  Subsidiary have duly complied
with, and their businesses,  operations, assets, equipment, Property, leaseholds
or other facilities are in compliance with, the provisions of all federal, state
and local environmental,  health and safety laws, codes and ordinances,  and all
rules and  regulations  promulgated  thereunder,  the failure of compliance with
which would  reasonably be anticipated to result in a Material  Adverse  Effect.
M-TRON and each  Subsidiary  have been  issued and will  maintain  all  required
federal, state and local permits, licenses,  certificates and approvals relating
to (a) air emissions; (b) discharges to surface water or groundwater;  (c) noise
emissions; (d) solid or liquid waste disposal; (e) the use, generation, storage,


                                       13


transportation or disposal of toxic or hazardous  substances or wastes (intended
hereby  and  hereafter  to  include  any and all such  materials  listed  in any
federal,  state or local law,  code or ordinance  and all rules and  regulations
promulgated  thereunder  as hazardous or  potentially  hazardous);  or (f) other
environmental,  health or safety matters. A true,  accurate and complete list of
all such permits,  licenses,  certificates  and approvals is attached  hereto as
Schedule 4.15.  Neither  M-TRON nor any  Subsidiary  has received  notice of, or
knows of facts which  constitute any violations of, any federal,  state or local
environmental,  health  or safety  laws,  codes or  ordinances  and any rules or
regulations  promulgated thereunder with respect to its businesses,  operations,
assets,  equipment,   Property,   leaseholds  or  other  facilities.  Except  in
accordance with a valid governmental  permit,  license,  certificate or approval
listed in Schedule 4.15, there has been no emission, spill, release or discharge
into or upon (a) the air; (b) soils, or any improvements  located  thereon;  (c)
surface  water  or  groundwater;  or (d)  the  sewer,  septic  system  or  waste
treatment,  storage or disposal  system  servicing  the premises of any toxic or
hazardous  substances or wastes at or from the premises;  and accordingly except
for inventory of raw  materials,  supplies,  work in progress and finished goods
listed in  Schedule  4.15 that is to be used or sold in the  ordinary  course of
business the premises of M-TRON and its  Subsidiaries are free of all such toxic
or  hazardous  substances  or  wastes.  There  has  been  no  complaint,  order,
directive, claim, citation or notice by any governmental authority or any person
or entity with respect to (a) air emissions;  (b) spills, releases or discharges
to soils or  improvements  located  thereon,  surface water,  groundwater or the
sewer,  septic system or waste treatment,  storage or disposal systems servicing
the premises;  (c) noise emissions;  (d) solid or liquid waste disposal; (e) the
use,  generation,  storage,  transportation  or disposal  of toxic or  hazardous
substances  or waste;  or (f)  other  environmental,  health  or safety  matters
affecting  M-TRON or its  business,  operations,  assets,  equipment,  Property,
leaseholds or other  facilities.  Neither M-TRON nor its  Subsidiaries  have any
indebtedness,  obligation or liability,  absolute or contingent,  matured or not
matured,  with  respect to the  storage,  treatment,  cleanup or disposal of any
solid wastes, hazardous wastes or other toxic or hazardous substances (including
without limitation any such  indebtedness,  obligation or liability with respect
to any current  regulation,  law or statute  regarding such storage,  treatment,
cleanup or disposal)  which is not shown on Schedule 4.15. Set forth in Schedule
4.15  is a list  of all  real  property  owned  or  leased  by  M-TRON  and  its
Subsidiaries at any time since December 31, 1998, wherever located,  and a brief
description of the business conducted at such location.

                                   ARTICLE V

            REPRESENTATIONS AND WARRANTIES OF PIEZO TECHNOLOGY, INC.

     To induce the Bank to enter into this  Agreement,  Piezo  Technology,  Inc.
("Piezo") makes the following representations and warranties:

     SECTION 5.01.  EXISTENCE AND POWER.  Piezo is a corporation duly formed and
in good standing under the laws of the State of Florida.  Piezo has accomplished
all necessary actions required by a corporate entity under applicable law to own
the Property and Collateral,  and to execute and deliver,  and to perform all of
its obligations under, the Loan Documents to which it is a party.

                                       14


     SECTION 5.02.  AUTHORIZATION  OF BORROWING;  NO CONFLICT AS TO LAW OR OTHER
AGREEMENTS.  The  execution,  delivery  and  performance  by  Piezo  of the Loan
Documents  and the  borrowings  from  time  to time  hereunder  have  been  duly
authorized by all necessary  corporate  actions of Piezo and do not and will not
(a)  require  any  material  consent  or  approval,  or  authorization,  by  any
governmental department,  commission,  board, bureau, agency or instrumentality,
domestic or foreign, other than those obtained and in full force and effect, (b)
violate,  in any material respect,  any provision of any law, rule or regulation
or of  any  order,  writ,  injunction  or  decree  presently  in  effect  having
applicability   to  Piezo,   or  violate  any   provision  of  the  Articles  of
Incorporation  or By-laws of Piezo,  (c) result in a breach of or  constitute  a
default beyond any applicable  cure period under any indenture or loan or credit
agreement or any other material agreement, lease or instrument to which Piezo is
a party or by which it or its properties may be bound or affected, or (d) result
in, or require,  the  creation or  imposition  of any  mortgage,  deed of trust,
pledge,  lien, security interest or other charge or encumbrance of any nature to
or with any other creditor of Piezo, in the aggregate exceeding  $100,000,  upon
or with  respect to any of the  properties  now owned or  hereafter  acquired by
Piezo.

     SECTION 5.03. LEGAL  AGREEMENTS.  The Loan Documents to which it is a party
constitute the legal, valid and binding obligations of Piezo enforceable against
Piezo in accordance with their respective terms, and as to the Loan Documents to
which Piezo is not a party, Piezo believes such documents  constitute the legal,
valid and binding  obligations of the parties thereto,  enforceable against such
parties in  accordance  with their  respective  terms,  except (a) as limited by
applicable bankruptcy, insolvency, reorganization,  moratorium and other laws of
general application affecting enforcement of creditors' rights generally and (b)
as  limited  by laws  relating  to the  availability  of  specific  performance,
injunctive relief or other equitable remedies.

     SECTION  5.04.  FINANCIAL  CONDITION.  Piezo has  furnished to the Bank its
financial  statements  as of September 30, 2003 and for the eleven months ending
on August 28, 2004 (the "Financial Statements"). The Financial Statements fairly
present the financial  condition of Piezo on the dates thereof and were prepared
in accordance with GAAP. Except as set forth in Schedule 5.04, there has been no
material adverse change in the operations, properties or condition (financial or
otherwise)  of  Piezo  since  the  date  of  the  Financial  Statements,  and no
additional  borrowings  have  been  made  by  Piezo  other  than  the  borrowing
contemplated  hereby  or  approved  by the Bank.  No  certificate  or  statement
furnished  to  the  Bank  by or on  behalf  of  Piezo  in  connection  with  the
transactions  contemplated  hereby  contains any untrue  statement of a material
fact or omits to state a material fact necessary in order to make the statements
contained therein or herein not misleading.

     SECTION  5.05.  LITIGATION.  There  are no  actions,  suits or  proceedings
pending or, to the knowledge of Piezo,  threatened against or affecting Piezo or
the properties of Piezo before any court or governmental department, commission,
board,  bureau,  agency or  instrumentality,  domestic  or  foreign,  which,  if
determined adversely to Piezo, would have a Material Adverse Effect.

     SECTION  5.06.  TAXES.  Piezo has filed  all  federal,  state and local tax
returns which to the knowledge of Piezo are required to be filed,  and Piezo has
paid or  caused to be paid to the  respective  taxing  authorities  all taxes as


                                       15


shown on said  returns or on any  assessment  received  by it to the extent such
taxes have become due except those which Piezo is  contesting  in good faith and
with respect to which adequate reserves have been set aside.

     SECTION 5.07.  LABOR DISPUTES AND ACTS OF GOD. Neither the business nor the
properties of Piezo or any Subsidiary have been subject to any fire,  explosion,
accident,  strike,  lockout  or  other  labor  dispute,  drought,  storm,  hail,
earthquake,  embargo,  act of God or of the  public  enemy,  or  other  casualty
(whether or not covered by insurance), having a Material Adverse Effect on Piezo
or such Subsidiary.

     SECTION 5.08. OTHER AGREEMENTS. Neither Piezo nor any Subsidiary is a party
to any indenture,  loan or credit agreement,  or to any lease or other agreement
or  instrument,  or subject to any charter or corporate  restriction  that would
reasonably  be  anticipated  to have a Material  Adverse  Effect on Piezo or any
Subsidiary,  or the ability of Piezo to carry out its obligations under the Loan
Documents to which it is a party. Neither Piezo nor any Subsidiary is in default
in any  respect in the  performance,  observance  or  fulfillment  of any of the
obligations,  covenants or  conditions  contained in any agreement or instrument
material to its business to which it is a party.

     SECTION 5.09. NO DEFAULT ON OUTSTANDING  JUDGMENTS OR ORDERS. Piezo and its
Subsidiaries have satisfied all judgments,  and neither Piezo nor any Subsidiary
is in default with respect to any judgment,  writ,  injunction,  decree, rule or
regulation of any court or  arbitrator,  or federal,  state,  municipal or other
governmental  authority,  commission,  board, bureau, agency or instrumentality,
domestic or foreign.

     SECTION 5.10. OWNERSHIP AND LIENS. Piezo and each Subsidiary have title to,
or valid  leasehold  interests in, all of their material  properties and assets,
real and personal,  including the properties  and assets and leasehold  interest
reflected in the  Financial  Statements  referred to in Section 5.04 (other than
any properties or assets  disposed of in the ordinary  course of business),  and
none of the  properties  and assets owned by Piezo or any Subsidiary and none of
their  leasehold  interests  are  subject  to any  Lien,  except  such as may be
permitted pursuant to Section 7.11 of this Agreement.

     SECTION 5.11.  SUBSIDIARIES  AND OWNERSHIP OF STOCK.  Set forth in Schedule
5.11 is a complete and accurate list of the  Subsidiaries  of Piezo (which shall
include Piezo),  showing the  jurisdiction of  incorporation of each and showing
the percentage of Piezo's ownership of the outstanding stock of each Subsidiary.
All of the  outstanding  capital stock of each such  Subsidiary has been validly
issued,  is fully paid and nonassessable and is owned by Piezo free and clear of
all Liens.

     SECTION 5.12.  ERISA.  Except as set forth in Schedule 5.12, Piezo and each
Subsidiary  are in  compliance  in all  material  respects  with all  applicable
provisions of ERISA. Neither a Reportable Event nor a Prohibited Transaction has
occurred  and is  continuing  with  respect to any Plan;  no notice of intent to
terminate  a  Plan  has  been  filed  nor  has  any  Plan  been  terminated;  no
circumstances  exist which  constitute  grounds  entitling the PBGC to institute
proceedings to terminate,  or appoint a trustee to  administer,  a Plan; nor has
the PBGC  instituted  any  such  proceedings;  neither  Piezo  nor any  Commonly


                                       16


Controlled  Entity has completely or partially  withdrawn  from a  Multiemployer
Plan; Piezo and each Commonly  Controlled  Entity have met their minimum funding
requirements  under  ERISA with  respect to all of their  Plans and the  present
value of all vested  benefits  under  each Plan does not exceed the fair  market
value of all Plan assets  allocable to such benefits,  as determined on the most
recent  valuation  date of the Plan and in  accordance  with the  provisions  of
ERISA;  and neither  Piezo nor any Commonly  Controlled  Entity has incurred any
liability to the PBGC under ERISA.

     SECTION 5.13. OPERATION OF BUSINESS. Piezo and its Subsidiaries possess all
licenses, permits, franchises, patents, copyrights,  trademarks and trade names,
or rights thereto, to conduct their respective  businesses  substantially as now
conducted  and  as  presently  proposed  to be  conducted,  and  Piezo  and  its
Subsidiaries  are not in violation of any valid rights of others with respect to
any of the foregoing.

     SECTION  5.14.  DEBT.  Schedule  5.14 is a complete and correct list of all
credit agreements,  indentures, purchase agreements,  guaranties, Capital Leases
and other investments, agreements and arrangements presently in effect providing
for or relating to extensions of credit  (including  agreements and arrangements
for the issuance of letters of credit or for acceptance financing) in respect of
which  Piezo  or  any  Subsidiary  is in any  manner  directly  or  contingently
obligated;  the maximum  principal  or face  amounts of the credit in  question,
outstanding or to be  outstanding,  are correctly  stated,  and all Liens of any
nature given or agreed to be given as security therefor are correctly  described
or indicated in such Schedule.

     SECTION 5.15.  ENVIRONMENT.  Piezo and each  Subsidiary  have duly complied
with, and their businesses,  operations, assets, equipment, Property, leaseholds
or other facilities are in compliance with, the provisions of all federal, state
and local environmental,  health and safety laws, codes and ordinances,  and all
rules and  regulations  promulgated  thereunder,  the failure of compliance with
which would  reasonably be anticipated to result in a Material  Adverse  Effect.
Piezo and each  Subsidiary  have been  issued  and will  maintain  all  required
federal, state and local permits, licenses,  certificates and approvals relating
to (a) air emissions; (b) discharges to surface water or groundwater;  (c) noise
emissions; (d) solid or liquid waste disposal; (e) the use, generation, storage,
transportation or disposal of toxic or hazardous  substances or wastes (intended
hereby  and  hereafter  to  include  any and all such  materials  listed  in any
federal,  state or local law,  code or ordinance  and all rules and  regulations
promulgated  thereunder  as hazardous or  potentially  hazardous);  or (f) other
environmental,  health or safety matters. A true,  accurate and complete list of
all such permits,  licenses,  certificates  and approvals is attached  hereto as
Schedule 5.15. Neither Piezo nor any Subsidiary has received notice of, or knows
of facts  which  constitute  any  violations  of,  any  federal,  state or local
environmental,  health  or safety  laws,  codes or  ordinances  and any rules or
regulations  promulgated thereunder with respect to its businesses,  operations,
assets,  equipment,   Property,   leaseholds  or  other  facilities.  Except  in
accordance with a valid governmental  permit,  license,  certificate or approval
listed in Schedule 5.15, there has been no emission, spill, release or discharge
into or upon (a) the air; (b) soils, or any improvements  located  thereon;  (c)
surface  water  or  groundwater;  or (d)  the  sewer,  septic  system  or  waste
treatment,  storage or disposal  system  servicing  the premises of any toxic or
hazardous  substances or wastes at or from the premises;  and accordingly except
for inventory of raw  materials,  supplies,  work in progress and finished goods
listed in  Schedule  5.15 that is to be used or sold in the  ordinary  course of
business the premises of Piezo and its  Subsidiaries  are free of all such toxic
or  hazardous  substances  or  wastes.  There  has  been  no  complaint,  order,


                                       17


directive, claim, citation or notice by any governmental authority or any person
or entity with respect to (a) air emissions;  (b) spills, releases or discharges
to soils or  improvements  located  thereon,  surface water,  groundwater or the
sewer,  septic system or waste treatment,  storage or disposal systems servicing
the premises;  (c) noise emissions;  (d) solid or liquid waste disposal; (e) the
use,  generation,  storage,  transportation  or disposal  of toxic or  hazardous
substances  or waste;  or (f)  other  environmental,  health  or safety  matters
affecting  Piezo  or its  business,  operations,  assets,  equipment,  Property,
leaseholds  or other  facilities.  Neither Piezo nor its  Subsidiaries  have any
indebtedness,  obligation or liability,  absolute or contingent,  matured or not
matured,  with  respect to the  storage,  treatment,  cleanup or disposal of any
solid wastes, hazardous wastes or other toxic or hazardous substances (including
without limitation any such  indebtedness,  obligation or liability with respect
to any current  regulation,  law or statute  regarding such storage,  treatment,
cleanup or disposal)  which is not shown on Schedule 5.15. Set forth in Schedule
5.15  is a list  of  all  real  property  owned  or  leased  by  Piezo  and  its
Subsidiaries at any time since December 31, 1998, wherever located,  and a brief
description of the business conducted at such location.

                                   ARTICLE VI

                              AFFIRMATIVE COVENANTS

     So long as any  Note  shall  remain  unpaid  or the  Bank  shall  have  any
Commitment under this Agreement, the Borrowers will:

     SECTION 6.01.  MAINTENANCE OF EXISTENCE.  Preserve and maintain,  and cause
each  Subsidiary  to preserve and  maintain,  its  corporate  existence and good
standing  in the  jurisdiction  of its  incorporation,  and  qualify  and remain
qualified,  and cause each  Subsidiary  to qualify  and remain  qualified,  as a
foreign  corporation  in  each  jurisdiction  in  which  such  qualification  is
required.

     SECTION 6.02.  MAINTENANCE OF RECORDS.  Keep, and cause each  Subsidiary to
keep,  adequate records and books of account,  in which complete entries will be
made in accordance  with GAAP  consistently  applied,  reflecting  all financial
transactions of the Borrowers and its Subsidiaries.

     SECTION 6.03. MAINTENANCE AND PROPERTIES.  Maintain, keep and preserve, and
cause each  Subsidiary  to maintain,  keep and preserve,  all of its  properties
(tangible  and  intangible)  necessary  or useful in the  proper  conduct of its
business in good working order and condition, ordinary wear and tear excepted.

     SECTION 6.04. CONDUCT OF BUSINESS.  Continue,  and cause each Subsidiary to
continue, to operate its business in the ordinary course.

     SECTION 6.05. MAINTENANCE OF INSURANCE. Maintain, and cause each Subsidiary
to maintain,  insurance with financially sound and reputable insurance companies
or  associations  in such amounts and covering such risks as are usually carried
by companies  engaged in the same or a similar business and similarly  situated,
which insurance may provide for reasonable deductibility from coverage thereof.

                                       18


     SECTION 6.06.  COMPLIANCE WITH LAWS.  Comply,  and cause each Subsidiary to
comply, in all respects with all applicable laws, rules, regulations and orders,
the failure of compliance  with which would  reasonably be anticipated to result
in a Material Adverse Effect.

     SECTION 6.07. RIGHT OF INSPECTION.  At any reasonable time and from time to
time,  upon  reasonable  advance  notice,  permit  the  Bank  or  any  agent  or
representative  thereof to examine  and make  copies of and  abstracts  from the
records and books of account of, and visit the  properties of, the Borrowers and
any  Subsidiary,  and to discuss  the  affairs,  finances  and  accounts  of the
Borrowers and any Subsidiary with any of their respective officers and directors
and the Borrowers' independent accountants.

     SECTION 6.08. REPORTING REQUIREMENTS. Furnish to the Bank:

          (a) MONTHLY  FINANCIAL  STATEMENTS.  As soon as  available  and in any
     event  within  25  days  after  the  end of each  month,  consolidated  and
     consolidating  balance sheets of the Borrowers and their Subsidiaries as of
     the end of such  quarter,  consolidated  and  consolidating  statements  of
     income,  retained  earnings,  aging  of  all  accounts  receivables  and  a
     Borrowing  Base  Certificate  (in a  form  approved  by  the  Bank)  of the
     Borrowers and their  Subsidiaries  for the period  commencing at the end of
     the previous month and ending with the end of such month,  and consolidated
     and  consolidating  statements  of cash flows for the portion of the fiscal
     year ended with the last day of such month,  all in  reasonable  detail and
     stating in comparative  form the respective  figures for the  corresponding
     date and period in the previous  fiscal year and all prepared in accordance
     with GAAP consistently applied and certified by the chief financial officer
     of the Borrowers (subject to year-end adjustments);

          (b) ANNUAL FINANCIAL STATEMENTS. As soon as available and in any event
     within  120  days  after  the end of  each  fiscal  year of the  Borrowers,
     consolidated  and  consolidating  balance sheets of the Borrowers and their
     Subsidiaries  as of the end of  such  fiscal  year,  and  consolidated  and
     consolidating  statements of income and retained  earnings of the Borrowers
     and  their   Subsidiaries  for  such  fiscal  year,  and  consolidated  and
     consolidating  statements  of changes in cash  flows of the  Borrowers  and
     their  Subsidiaries  for such fiscal  year,  all in  reasonable  detail and
     stating in comparative  form the respective  figures for the  corresponding
     date and period in the prior  fiscal year and all  prepared  in  accordance
     with  GAAP  consistently  applied  and  as to the  consolidated  statements
     accompanied  by an opinion  thereon  acceptable to the Bank by  independent
     accountants of recognized standing selected by the Borrowers and acceptable
     to the Bank;

          (c) MANAGEMENT LETTERS.  Promptly upon receipt thereof,  copies of any
     reports  submitted  to the  Borrowers  or  any  Subsidiary  by  independent
     certified  public   accountants  in  connection  with  examination  of  the
     financial  statements  of the  Borrowers  or any  Subsidiary  made  by such
     accountants;

          (d)  CERTIFICATE  OF NO DEFAULT.  Within 25 days after the end of each
     month of each  fiscal year of the  Borrowers,  a  certificate  of the chief
     financial  officer of the Borrowers (i) certifying  that to the best of his


                                       19


     knowledge no Default or Event of Default has occurred and is continuing or,
     if a  Default  or  Event or  Default  has  occurred  and is  continuing,  a
     statement  as to the nature  thereof and the action which is proposed to be
     taken  with  respect  thereto;  and (ii)  with  computations  demonstrating
     compliance with the covenants contained in Article VII;

          (e)  ACCOUNTANTS'  REPORT.  Simultaneously  with the  delivery  of the
     annual financial  statements  referred to in Section 6.08(b), a certificate
     of the  independent  public  accountants who audited such statements to the
     effect  that,  in making the  examination  necessary  for the audit of such
     statements, they have obtained no knowledge of any condition or event which
     constitutes  a Default or Event of Default  or, if such  accountants  shall
     have obtained knowledge of any such condition or event,  specifying in such
     certificate  each such  condition or event of which they have knowledge and
     the nature or status thereof;

          (f) NOTICE OF  LITIGATION.  Promptly after the  commencement  thereof,
     notice  of  all  actions,   suits  and  proceedings  before  any  court  or
     governmental   department,    commission,    board,   bureau,   agency   or
     instrumentality,  domestic  or  foreign,  affecting  the  Borrowers  or any
     Subsidiary  which,  if  determined  adversely  to  the  Borrowers  or  such
     Subsidiary,  would  reasonably be  anticipated  to have a Material  Adverse
     Effect;

          (g) NOTICE OF DEFAULTS AND EVENTS OF DEFAULT.  As soon as  practicable
     and in any event within five days after the  occurrence  of each Default or
     Event of  Default,  a written  notice  setting  forth the  details  of such
     Default or Event of Default and the action which is proposed to be taken by
     the Borrowers with respect thereto;

          (h) ERISA REPORTS. As soon as practicable,  and in any event within 30
     days after the Borrowers know or have reason to know that any circumstances
     exist that constitute  grounds entitling the PBGC to institute  proceedings
     to terminate a Plan  subject to ERISA with respect to the  Borrowers or any
     Commonly  Controlled  Entity,  and  promptly  but in any event  within  two
     Business Days of receipt by the Borrowers or any Commonly Controlled Entity
     of notice that the PBGC intends to terminate a Plan or appoint a trustee to
     administer  the same,  and promptly  but in any event within five  Business
     Days of the  receipt of notice  concerning  the  imposition  of  withdrawal
     liability with respect to the Borrowers or any Commonly  Controlled Entity,
     the Borrowers will deliver to the Bank a certificate of the chief financial
     officer of the Borrowers  setting forth all relevant details and the action
     which the Borrowers proposes to take with respect thereto;

          (i) REPORTS TO OTHER CREDITORS. Promptly after the furnishing thereof,
     copies of any  statement or report  furnished to any party  pursuant to the
     terms of any indenture, loan, credit or similar agreement and not otherwise
     required to be furnished  to the Bank  pursuant to any other clause of this
     Section 6.08;

          (j)  PROXY  STATEMENTS,  ETC.  Promptly  after the  sending  or filing
     thereof,  copies of all proxy statements,  financial statements and reports
     which the  Borrowers or any  Subsidiary  sends to their  stockholders,  and
     copies of all regular,  periodic and special reports,  and all registration


                                       20


     statements  which the Borrowers or any Subsidiary files with the Securities
     and  Exchange  Commission  or  any  governmental  authority  which  may  be
     substituted therefor, or with any national securities exchange; and

          (k)  GENERAL  INFORMATION.   Such  other  information  respecting  the
     condition or  operations,  financial or otherwise,  of the Borrowers or any
     Subsidiary as the Bank may from time to time reasonably request.

     SECTION 6.09.  ENVIRONMENT.  Be and remain, and cause each Subsidiary to be
and remain,  in compliance  with the provisions of all federal,  state and local
environmental,  health and safety laws, codes and ordinances,  and all rules and
regulations  issued  thereunder,  the  failure of  compliance  with which  would
reasonably be anticipated  to result in a Material  Adverse  Effect;  notify the
Bank  immediately  of any  notice  of a  hazardous  discharge  or  environmental
complaint received from any governmental  agency or any other party;  notify the
Bank  immediately  of any  hazardous  discharge  from or affecting its premises;
immediately contain and remove the same, in compliance with all applicable laws;
promptly pay any fine or penalty  assessed in connection  therewith;  permit the
Bank to inspect the premises, to conduct tests thereon and to inspect all books,
correspondence and records pertaining thereto; and at the Bank's request, and at
the Borrowers' expense,  provide a report of a qualified environmental engineer,
satisfactory in scope,  form and content to the Bank, and such other and further
assurances  reasonably  satisfactory  to the Bank  that the  condition  has been
corrected.

                                  ARTICLE VII

                               NEGATIVE COVENANTS

     So long as any  Note  shall  remain  unpaid  or the  Bank  shall  have  any
Commitment  under this  Agreement,  the Borrowers will not,  without the written
consent of the Bank, in the Bank's sole discretion:

     SECTION 7.01. LIENS.  Create,  incur,  assume or suffer to exist, or permit
any Subsidiary to create,  incur,  assume or suffer to exist,  any Lien, upon or
with respect to any of its properties, now owned or hereafter acquired, except:

          (a) Liens in favor of the Bank;

          (b) Liens for taxes or  assessments  or other  government  charges  or
     levies if not yet due and payable or, if due and payable, if they are being
     contested  in  good  faith  by  appropriate   proceedings   and  for  which
     appropriate reserves are maintained;

          (c)  Liens  imposed  by  law,  such  as   mechanics',   materialmen's,
     landlords',  warehousemen's  and carriers'  Liens, and other similar Liens,
     securing  obligations incurred in the ordinary course of business which are
     not past due for more  than 60 days or which are  being  contested  in good
     faith by appropriate  proceedings and for which  appropriate  reserves have
     been established;

          (d) Liens under workers' compensation,  unemployment insurance, Social
     Security or similar legislation;

                                       21


          (e) Liens,  deposits  or pledges  to secure the  performance  of bids,
     tenders,  contracts (other than contracts for the payment of money), leases
     (permitted  under  the  terms  of  this  Agreement),  public  or  statutory
     obligations,  surety, stay, appeal, indemnity, performance or other similar
     bonds,  or other  similar  obligations  arising in the  ordinary  course of
     business;

          (f) Judgment and other similar Liens arising in connection  with court
     proceedings,  provided the execution or other  enforcement of such Liens is
     effectively  stayed  and the  claims  secured  thereby  are being  actively
     contested in good faith and by appropriate proceedings;

          (g)   Easements,   rights-of-way,   restrictions   and  other  similar
     encumbrances which, in the aggregate,  do not materially interfere with the
     occupation,  use and  enjoyment by the  Borrowers or any  Subsidiary of the
     Property or assets encumbered  thereby in the normal course of its business
     or materially impair the value of the Property subject thereto;

          (h) Liens  securing  obligations  of a Subsidiary  to the Borrowers or
     another Subsidiary;

          (i)  Purchase-money  Liens on any property  hereafter  acquired or the
     assumption of any Lien on Property existing at the time of such acquisition
     (and not created in contemplation of such acquisition),  or a Lien incurred
     in connection with any conditional sale or other title retention  agreement
     or a Capital Lease, provided that:

               (i) any property  subject to any of the  foregoing is acquired by
          the  Borrowers  or  any  Subsidiary  in  the  ordinary  course  of its
          respective business and the Lien on any such property attaches to such
          asset concurrently or within 90 days after the acquisition thereof;

               (ii) the  obligation  secured by any Lien so created,  assumed or
          existing  shall not  exceed  90% of the lesser of the cost or the fair
          market value as of the time of  acquisition  of the  property  covered
          thereby to the Borrowers or Subsidiary acquiring the same;

               (iii)  each  such  Lien  shall  attach  only to the  property  so
          acquired and fixed improvements thereon;

               (iv) the Debt secured by all such Liens shall not exceed $100,000
          at any time outstanding in the aggregate; and

               (v) the Debt secured by such Lien is permitted by the  provisions
          of Section 7.02, and the related  expenditure  is permitted  under the
          terms of this Agreement; and

          (j) As to  Borrower  M-Tron,  Liens  existing  on the date  hereof and
     identified in Schedule 7.01.

                                       22


     SECTION 7.02. DEBT. Create, incur, assume or suffer to exist, or permit any
Subsidiary to create, incur, assume or suffer to exist, any Debt, except:

          (a) Debt of the Borrowers under this Agreement or the Note;

          (b) Debt described in Schedule 7.02(b),  but no voluntary  prepayment,
     renewals, extensions or refinancing thereof;

          (c) Debt of the Borrowers  subordinated  on terms  satisfactory to the
     Bank to the Borrowers' obligations under this Agreement and the Note;

          (d) Debt of the Borrowers to any  Subsidiary  or of any  Subsidiary to
     the Borrowers or another Subsidiary;

          (e) Accounts  payable to trade  creditors for goods or services  which
     are not aged more than 90 days from the billing date and current  operating
     liabilities (other than for borrowed money) which are not more than 90 days
     past due, in each case  incurred in the  ordinary  course of  business,  as
     presently  conducted,  and paid within the specified time, unless contested
     in good faith and by appropriate proceedings;

          (f) Debt in respect of letters of credit issued for the account of the
     Borrowers or any Subsidiary in an aggregate  outstanding face amount at any
     time of up to $100,000;

          (g) Debt incurred in connection  with  acceptances of the Borrowers or
     any Subsidiary in an aggregate amount  outstanding at any one time of up to
     $50,000; and

          (h) Debt of the Borrowers or any Subsidiary  secured by purchase-money
     Liens permitted by Section 7.02.

          (i) Debt  existing  on the date  hereof  and  identified  in  Schedule
     7.02(i).

     SECTION  7.03.  MERGERS,  ETC.  Wind  up,  liquidate  or  dissolve  itself,
reorganize,  merge  or  consolidate  with or  into,  or  convey,  sell,  assign,
transfer,  lease or  otherwise  dispose of (whether in one  transaction  or in a
series of  transactions)  all or  substantially  all of its assets  (whether now
owned or hereafter  acquired) to any person, or acquire all or substantially all
of the assets or the business of any person,  or permit any Subsidiary to do so,
except  that  (a) any  Subsidiary  may  merge  into or  transfer  assets  to the
Borrowers and (b) any Subsidiary may merge into or consolidate  with or transfer
assets to any other  Subsidiary.  Notwithstanding  the foregoing,  the Borrowers
shall be permitted,  at any time,  to sell the Property  which is the subject of
the  mortgage  referred to in Section  3.01(l) so long as (a) the sales price of
such  Property  is  equal  to or  greater  than the  amount  of the  outstanding
principal  and  interest of the Bridge Loan at the time of such sale and (b) the
proceeds of the sale are immediately applied to the Bridge Loan.

     SECTION 7.04. LEASES.  Create,  incur, assume or suffer to exist, or permit
any Subsidiary to create,  incur,  assume or suffer to exist,  any obligation as
lessee  for the  rental or hire of any real or  personal  property,  except  (a)
Capital Leases permitted by Section 7.01(i);  (b) leases existing on the date of
this  Agreement and any extensions or renewals  thereof;  (c) leases (other than


                                       23


Capital  Leases) which do not in the  aggregate  require the Borrowers and their
Subsidiaries  on  a  consolidated  basis  to  make  payments  (including  taxes,
insurance,   maintenance  and  similar  expenses  which  the  Borrowers  or  any
Subsidiary  is  required to pay under the terms of any lease) in any fiscal year
of the Borrowers in excess of $50,000;  and (d) leases between the Borrowers and
any Subsidiary or between any Subsidiaries.

     SECTION 7.05. SALE AND LEASEBACK.  Sell,  transfer or otherwise dispose of,
or permit any Subsidiary to sell,  transfer or otherwise dispose of, any real or
personal property to any person and thereafter directly or indirectly lease back
the same or similar property. Notwithstanding the foregoing, the Borrowers shall
be  permitted,  at any time, to sell the Property so long as (a) the sales price
of such  Property  is equal to or  greater  than the  amount of the  outstanding
principal  and  interest of the Bridge Loan at the time of such sale and (b) the
proceeds of the sale are immediately applied to the Bridge Loan .

     SECTION  7.06.  DIVIDENDS.  As to  Borrower  M-TRON,  declare  or  pay  any
dividends in excess of fifty percent (50%) of M-TRON's prior year earnings,  but
only so long as M-TRON is in compliance  with all other terms of this Agreement;
or purchase,  redeem,  retire or otherwise  acquire for value any of its capital
stock now or hereafter  outstanding;  or make any  distribution of assets to its
stockholders as such whether in cash, assets or obligations of the Borrowers; or
allocate  or  otherwise  set apart any sum for the  payment of any  dividend  or
distribution on, or for the purchase, redemption or retirement of any shares of,
its capital  stock;  or make any other  distribution  by reduction of capital or
otherwise  in respect of any shares of its capital  stock;  or permit any of its
Subsidiaries  to  purchase  or  otherwise  acquire  for  value  any stock of the
Borrowers or another  Subsidiary,  except that the Borrowers (a) may declare and
deliver dividends and make  distributions  payable solely in common stock of the
Borrowers; and (b) may purchase or otherwise acquire shares of its capital stock
by exchange for or out of the proceeds received from a substantially  concurrent
issue of new shares of its capital stock.

     SECTION 7.07. SALE OF ASSETS.  Sell, lease,  assign,  transfer or otherwise
dispose  of, or permit  any  Subsidiary  to sell,  lease,  assign,  transfer  or
otherwise dispose of, any of its owned or hereafter  acquired assets (including,
without   limitation,   shares  of  stock  and   indebtedness  of  Subsidiaries,
receivables and leasehold  interests),  except (a) inventory  disposed of in the
ordinary  course of  business;  (b) the sale or other  disposition  of assets no
longer  used  or  useful  in the  conduct  of its  business;  and (c)  that  any
Subsidiary  may sell,  lease,  assign or  otherwise  transfer  its assets to the
Borrowers.

     SECTION 7.08. INVESTMENTS. Make, or permit any Subsidiary to make, any loan
or advance to any  person,  or  purchase  or  otherwise  acquire,  or permit any
Subsidiary  to  purchase  or  otherwise  acquire,  any  capital  stock,  assets,
obligations  or other  securities  of,  make any  capital  contribution  to,  or
otherwise invest in or acquire any interest in, any person,  or participate as a
partner or joint venture with any other person, except (a) direct obligations of
the United States or any agency thereof with maturities of one year or less from
the date of  acquisition;  (b)  commercial  paper of a domestic  issuer rated at
least  "A-1" by  Standard & Poor's  Corporation  or "P-1" by  Moody's  Investors
Service,  Inc.; (c)  certificates of deposit with maturities of one year or less
from the date of acquisition  issued by any  commercial  bank having capital and
surplus in excess of $50,000,000;  (d) stock, obligations or securities received
in settlement of debts (created in the ordinary course of business) owing to the
Borrowers  or any  Subsidiary;  and (e)  loans  and  advances  to  employees  of


                                       24


Borrowers  in respect of  business-related  expenses  incurred  in the  ordinary
course  of  business  and for such  employees  to  purchase  computer  and other
equipment in an aggregate amount not exceeding $50,000.

     SECTION 7.09. GUARANTIES, ETC. Assume, guaranty, endorse or otherwise be or
become directly or contingently  responsible or liable, or permit any Subsidiary
to assume, guaranty,  endorse or otherwise be or become directly or contingently
responsible or liable  (including,  but not limited to, an agreement to purchase
any obligation,  stock, assets,  goods or services,  or to supply or advance any
funds,  assets,  goods or  services,  or an  agreement to maintain or cause such
person to  maintain a minimum  working  capital  or  Tangible  Net Worth,  or to
otherwise  assure the creditors of any person against loss),  for obligations of
any person,  except  guaranties by  endorsement  of negotiable  instruments  for
deposit  or  collection  or  similar  transactions  in the  ordinary  course  of
business.

     SECTION 7.10.  TRANSACTIONS  WITH  AFFILIATES.  Enter into any transaction,
including, without limitation, the purchase, sale or exchange of property or the
rendering of any service, with any Affiliate,  or permit any Subsidiary to enter
into any  transaction,  including,  without  limitation,  the purchase,  sale or
exchange of property or the rendering of any service, with any Affiliate, except
in the ordinary  course of and pursuant to the  reasonable  requirements  of the
Borrowers' or such  Subsidiary's  business and upon fair and reasonable terms no
less  favorable  to the  Borrowers  or such  Subsidiary  than would  obtain in a
comparable arm's-length transaction with a person not an Affiliate.

     SECTION 7.11. INTEREST PAYMENTS ON LYNCH CORPORATION  SUBORDINATED DEBT. As
to Borrower M-TRON,  pay any interest on any Subordinated Debt owed by M-TRON to
Lynch Corporation, an Indiana corporation,  unless (a) the Borrowers are in full
compliance  with the terms of this  Agreement  and (b) such amount to be paid as
interest  on such  Subordinated  Debt does not,  in any year,  exceed  the total
amount of 5% of the then outstanding principal of such obligation.

     SECTION 7.12. PAYMENT OF OTHER INDEBTEDNESS IN THE EVENT OF DEFAULT. In the
event that Borrowers are in Default under the terms of this  Agreement,  pay any
Indebtedness  to any party other than the Bank,  until such time as such default
has been cured.

                                  ARTICLE VIII

                               FINANCIAL COVENANTS

     So long as any  Note  shall  remain  unpaid  or the  Bank  shall  have  any
Commitment under this Agreement, Borrower M-TRON agrees to fully comply with the
following:

     SECTION 8.01. MINIMUM WORKING CAPITAL. The Borrower M-TRON will maintain at
all times an excess of current assets over current  liabilities of not less than
$950,000.

     SECTION 8.02. MINIMUM TANGIBLE NET WORTH. The Borrower M-TRON will maintain
at all times a tangible net worth of not less than $4,200,000.

     SECTION 8.03. CAPITAL  EXPENDITURES.  The Borrower M-TRON will not make any
expenditures  for fixed or capital assets if, after giving effect  thereto,  the


                                       25


aggregate of all such  expenditures  made by the Borrowers would exceed $850,000
during any fiscal year of the Borrowers.

     SECTION 8.04. CURRENT RATIO. For the period beginning with the date of this
Agreement through March 31, 2005, the Borrower M-TRON will maintain at all times
a ratio of current assets to current liabilities of not less than 1 to 1. At all
times after March 31, 2005, the Borrower will maintain a ratio of current assets
to current liabilities of not less than 1.1 to 1.

     SECTION  8.05.  LEVERAGE  RATIO.  The Borrower  M-TRON will maintain at all
times a ratio of total liabilities (excluding Subordinated Debt in an amount not
exceeding $2,500,000) to tangible net worth of not greater than 4 to 1.

     SECTION 8.06. FIXED CHARGE COVERAGE RATIO.  Beginning on December 31, 2004,
the Borrower  M-TRON will  maintain a Fixed Charge  Coverage  Ratio of 1.2 to 1,
tested at the end of each calendar quarter. The parties acknowledge and agree at
such time that the Bridge Loan  becomes due and payable that the maturity of the
principal  balance of the Bridge Loan shall not in and of itself cause a default
under this section.

                                   ARTICLE IX

                     EVENTS OF DEFAULT, RIGHTS AND REMEDIES

     SECTION 9.01. EVENTS OF DEFAULT. Each of the following shall be an Event of
Default  and give  the  Bank the  right to  exercise  its  remedies  under  this
Agreement:

          (a) the Borrowers shall fail to pay when due, or within a 5 day period
     thereafter,  any  Obligations  or any other  installment  of  principal  or
     interest or fee payable to the Bank;

          (b) the  Borrowers  shall  fail to  timely,  or within a 15 day period
     thereafter, provide reports to the Bank as provided in Article VI;

          (c)  the  Borrowers  shall  fail  to  observe  or  perform  any  other
     obligation  to be observed or performed by it hereunder or under any of the
     Loan Documents. Upon Borrower's knowledge of any such failure, the Borrower
     shall  immediately  notify the Bank of the same and the Borrower shall cure
     such failure within 15 days  thereafter.  Without  creating or imposing any
     obligation or duty on the Bank to inquire,  investigate or monitor,  in the
     event that the Bank becomes aware of any such failure to observe or perform
     any  obligation to be observed or performed by the  Borrowers  hereunder or
     under any Loan  Document,  the Bank  shall  notify  the  Borrowers  of such
     failure and the Borrower shall cure such failure within 15 days thereafter.
     The  failure of the  Borrower  to so cure such  failure  within such 15 day
     period shall  constitute  an Event of Default  under this  Subsection.  The
     Parties  agree  that the delay of the Bank to so notify  the  Borrowers  as
     provided in this Subsection  shall not constitute a waiver of any provision
     of this Agreement but shall only require that the Bank notify the Borrowers
     and the  Borrowers  be granted  such right to cure such  failure  with such
     period prior to the exercise of the Banks rights pursuant to this Section;

                                       26


          (d) the Borrowers  shall fail to pay any  Indebtedness in an aggregate
     principal  amount in  excess of  $100,000  due any third  persons  and such
     failure shall continue beyond any applicable grace period, or the Borrowers
     shall default under any material  agreement  binding the Borrowers and such
     default shall continue beyond any applicable grace period;

          (e) any financial statement,  representation,  warranty or certificate
     made or  furnished  by or with  respect  to the  Borrowers  to the  Bank in
     connection  with this  Agreement,  or as an inducement to the Bank to enter
     into  this  Agreement,  or in any  separate  statement  or  document  to be
     delivered to the Bank hereunder,  shall be materially  false,  incorrect or
     incomplete when made;

          (f) either Borrower shall admit its inability to pay its debts as they
     mature or shall make an assignment  for the benefit of themselves or any of
     their creditors;

          (g) proceedings in bankruptcy, or for reorganization of the Borrowers,
     or for the readjustment of debt under the Bankruptcy  Code, as amended,  or
     any part thereof,  or under any other laws,  whether state or federal,  for
     the  relief of  debtors,  now or  hereafter  existing,  shall be  commenced
     against  or  by  the  Borrowers  and,  except  with  respect  to  any  such
     proceedings instituted by the Borrowers,  shall not be discharged or stayed
     within 60 days of their commencement;

          (h) a receiver or trustee  shall be appointed for the Borrowers or for
     any substantial part of its respective  assets, or any proceedings shall be
     instituted for the  dissolution  or the full or partial  liquidation of the
     Borrowers,  and except with respect to any such  appointments  requested or
     instituted  by  the  Borrowers  such  receiver  or  trustee  shall  not  be
     discharged  within 60 days of his  appointment,  and except with respect to
     any such proceedings instituted by the Borrowers such proceedings shall not
     be discharged within 60 days of their commencement,  or the Borrowers shall
     discontinue business or materially change the nature of its business;

          (i) the  Borrowers  shall suffer final  judgments for payment of money
     aggregating  in  excess  of  $100,000   which  are  not  covered,   without
     reservation,  by insurance and shall not discharge the same within a period
     of 30 days unless,  pending  further  proceedings,  execution  has not been
     commenced or, if commenced, has been effectively stayed; or

          (j) the letter  agreement  between  Lynch  Corporation,  the parent of
     M-TRON,  and the Bank dated  October 18, 2002  ceasing to be  effective  or
     enforceable,

          (k) Lynch Corporation,  the parent of M-TRON shall, at any time have a
     Tangible Net Worth of less than $7,500,000,

          (l) a judgment  creditor of the Borrowers  shall obtain  possession of
     any of the Bank's  Collateral  by any  means,  including  (without  implied
     limitation) levy, distraint, replevin or self-help.

                                       27


     SECTION  9.02.  RIGHTS  AND  REMEDIES.  If an Event of  Default  shall have
occurred  and be  continuing,  the Bank may  refrain  from  making  any  further
disbursements   hereunder  (but  the  Bank  may  make  disbursements  after  the
occurrence of such an Event of Default  without  thereby  waiving its rights and
remedies  hereunder),  and the Bank  may  exercise  any or all of the  following
rights and remedies:

          (a) the Bank may exercise  and enforce its rights and  remedies  under
     any or all of the Loan Documents;

          (b) the Bank may enter upon the Property,  if allowed under applicable
     law, and take possession thereof; or

          (c) The Bank may exercise  any other rights and remedies  available to
     it by law or agreement.

                                   ARTICLE X

                                  MISCELLANEOUS

     SECTION 10.01. NO WAIVER;  CUMULATIVE REMEDIES.  No failure or delay on the
part of the Bank in  exercising  any  right,  power  or  remedy  under  the Loan
Documents  shall  operate  as a waiver  thereof  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 under the
Loan Documents.  The remedies  provided in the Loan Documents are cumulative and
not exclusive of any remedies provided by law.

     SECTION 10.02. AMENDMENTS, ETC. No amendment, modification,  termination or
waiver of any provision of any of the Loan Documents or consent to any departure
by the  Borrowers  therefrom  shall be  effective  unless  the same  shall be in
writing  and  signed  by the Bank and the  Borrowers,  and then  such  waiver or
consent  shall be effective  only in the specific  instance and for the specific
purpose for which  given.  No notice to or demand on the  Borrowers  in any case
shall entitle the Borrowers to any other or further  notice or demand in similar
or other circumstances.

     SECTION 10.03.  ADDRESSES FOR NOTICES,  ETC. Except as otherwise  expressly
provided  herein,  all  notices,  requests,  demands  and  other  communications
provided  for under the Loan  Documents  shall be in writing and sent by mail or
telecopy (if by telecopy  with a  confirmation  mailed  within two Business Days
thereafter), to the applicable party at its address indicated below:

      If to Borrower M-TRON:         M-TRON Industries, Inc.
                                     c/o Lynch Corporation
                                     Suite 1250
                                     50 Kennedy Plaza
                                     Providence, RI  02903
                                     Attention:  Chief Executive Officer
                                     Facsimile:  (401) 543-2009

                                       28


      with a copy to:                Olshan Grundman Frome Rosenzweig &
                                       Wolosky LLP
                                     Park Avenue Tower
                                     65 East 55th Street
                                     New York, NY  10022
                                     Attention:  David J. Adler
                                     Facsimile:  (212) 451-2222

      If to Borrower Piezo:          Piezo Technology, Inc.
                                     c/o Lynch Corporation
                                     Suite 1250
                                     50 Kennedy Plaza
                                     Providence, RI  02903
                                     Attention:  Chief Executive Officer
                                     Facsimile:  (401) 543-2009

      with a copy to:                Olshan Grundman Frome Rosenzweig &
                                       Wolosky LLP
                                     Park Avenue Tower
                                     65 East 55th Street
                                     New York, NY  10022
                                     Attention:  David J. Adler
                                     Facsimile:  (212) 451-2222

      If to the Bank:                First National Bank of Omaha
                                     1620 Dodge Street STOP 4250
                                     Omaha, NE  68197-4250
                                     Facsimile:  402-498-5119
                                     Attention:  Mark K. McMillan

or, as to each party, at such other address as shall be designated by such party
in a written  notice to the other party  complying as to delivery with the terms
of this Section. All such notices,  requests,  demands and other communications,
when  mailed,  shall be  effective  when  deposited  in the mails,  addressed as
aforesaid, or, when telecopied,  shall be effective when confirmation of receipt
is received,  except that notices or requests to the Bank pursuant to any of the
provisions hereunder shall not be effective until received by the Bank.

     SECTION 10.04.  TIME OF ESSENCE.  Time is of the essence in the performance
of this Agreement.

     SECTION  10.05.  EXECUTION  IN  COUNTERPARTS.  The  Loan  Documents  may be
executed  in any  number of  counterparts,  each of which when so  executed  and
delivered  shall be deemed to be an original  and all of which  counterparts  of
each instrument or agreement,  taken together,  shall constitute but one and the
same instrument.

     SECTION 10.06. BINDING EFFECT, ASSIGNMENT. The Loan Documents to which they
are parties  shall be binding upon and inure to the benefit of the Borrowers and


                                       29


the Bank and their respective successors and assigns,  except that the Borrowers
shall not have the right to assign its rights thereunder or any interest therein
without the prior written consent of the Bank.

     SECTION 10.07.  GOVERNING LAW; CHOICE OF FORUM. The Loan Documents,  to the
extent they do not  otherwise  provide,  shall be governed by, and  construed in
accordance  with,  the laws of the State of New York,  without  giving effect to
that body of law  relating  to choice of laws.  The parties  agree that,  in the
event any action is commenced by any party, the sole venue for such action shall
be in the Douglas County  District Court for the State of Nebraska or the United
States District Court for the District of Nebraska.

     SECTION 10.08. SEVERABILITY OF PROVISIONS.  Any provision of this Agreement
which is prohibited or unenforceable  shall be ineffective to the extent of such
prohibition or unenforceability  without  invalidating the remaining  provisions
hereof.

     SECTION 10.09.  HEADINGS.  Section  headings in this Agreement are included
herein for convenience of reference only and shall not constitute a part of this
Agreement for any other purpose.

     SECTION  10.10.  INTEGRATION.  Except  with  regard  to the  existing  loan
agreement  and the  note  related  thereto  as note  number  2000001751-6,  this
Agreement   supersedes,   replaces  and   terminates   any  prior  oral  offers,
negotiations, understandings or agreements and any commitment letters or similar
writings relating to any of the matters contemplated herein.

     SECTION 10.11.  COSTS,  EXPENSES AND TAXES.  The Borrowers agrees to pay on
demand  all costs  and  expenses  incurred  by the Bank in  connection  with the
preparation,   execution,  delivery,  filing  and  administration  of  the  Loan
Documents,  and  of any  amendment,  modification  or  supplement  to  the  Loan
Documents, including, without limitation, the fees and out-of-pocket expenses of
counsel for the Bank,  incurred in  connection  with advising the Bank as to its
rights and responsibilities  hereunder. The Borrowers also agree to pay all such
costs  and  expenses,   including  court  costs,  incurred  in  connection  with
enforcement of the Loan Documents, or any amendment,  modification or supplement
thereto,  whether by negotiation,  legal proceedings or otherwise.  In addition,
the  Borrowers  shall pay any and all stamp and other taxes and fees  payable or
determined to be payable in connection with the execution,  delivery, filing and
recording of any of the Loan  Documents and the other  documents to be delivered
under any such Loan  Documents,  and agrees to hold the Bank  harmless  from and
against any and all liabilities  with respect to any delay in paying or omission
to pay such taxes and fees.  This  provision  shall survive  termination of this
Agreement.

     SECTION 10.12. INDEMNITY.  The Borrowers hereby agrees to defend, indemnify
and  hold the  Bank  harmless  from and  against  any and all  claims,  damages,
judgments,  penalties,  costs and expenses  (including  attorney  fees and court
costs now or hereafter  arising from the aforesaid  enforcement  of this clause)
arising  directly or  indirectly  from the  activities  of the Borrowers and its
Subsidiaries,  its  predecessors in interest or third parties with whom it has a
contractual  relationship,  or arising directly or indirectly from the violation
of any environmental  protection,  health or safety law, whether such claims are
asserted by any  governmental  agency or any other person.  This indemnity shall
survive termination of this Agreement.

                                       30



     IN WITNESS  WHEREOF,  the parties  hereto have caused this  Agreement to be
executed by their respective officers thereunto duly authorized,  as of the date
first above written.

                                        M-TRON INDUSTRIES, INC., a Delaware
                                        corporation


                                        By    /s/ David L. Rein
                                            ------------------------------
                                        Name  David L. Rein
                                        Title Vice President


                                        PIEZO TECHNOLOGY, INC., a Florida
                                        corporation


                                        By    /s/ David L. Rein
                                            ------------------------------
                                        Name  David L. Rein
                                        Title Vice President

                                        FIRST NATIONAL BANK OF OMAHA


                                        By  /s/ Mark McMillan
                                            ------------------------------
                                        Name  Mark McMillan
                                        Title Vice President



STATE OF SOUTH DAKOTA        )
                             ) ss.
COUNTY OF YANKTON            )


     On this 14th day of October,  2004,  before me, the  undersigned,  a Notary
Public,  personally  appeared  DAVID L. REIN,  on behalf of said  entity as VICE
PRESIDENT of M-TRON Industries, Inc. , a Delaware corporation,  who executed the
foregoing  instrument,  and  acknowledged  that  he  executed  the  same  as his
voluntary act and deed, as well as that of the corporation.


                                         /s/ Leann Sejnola
                                         -----------------------------------
                                         Notary Public


                                       31

STATE OF SOUTH DAKOTA        )
                             ) ss.
COUNTY OF YANKTON            )


     On this 14th day of October,  2004,  before me, the  undersigned,  a Notary
Public,  personally  appeared  DAVID L. REIN,  on behalf of said  entity as VICE
PRESIDENT of Piezo  Technology,  Inc., a Florida  corporation,  who executed the
foregoing  instrument,  and  acknowledged  that  he  executed  the  same  as his
voluntary act and deed, as well as that of the corporation.


                                         /s/ Leann Sejnola
                                         -----------------------------------
                                         Notary Public





                                       32

EX-10.2

                             UNCONDITIONAL GUARANTY

                           OF PAYMENT AND PERFORMANCE


     THIS UNCONDITIONAL GUARANTY OF PAYMENT AND PERFORMANCE (this "Guaranty") is
made as of October  14,  2004,  by LYNCH  CORPORATION,  an  Indiana  corporation
("Guarantor"),  for the  benefit  of FIRST  NATIONAL  BANK OF OMAHA,  a national
banking association ("Lender").

     1. For valuable consideration, the receipt of which is hereby acknowledged,
Guarantor unconditionally, absolutely and irrevocably guarantees and promises to
pay to Lender,  or order, any and all amounts,  including,  without  limitation,
principal and interest,  taxes,  insurance premiums,  impounds,  reimbursements,
late charges,  default interest,  damages,  indemnity  obligations and all other
amounts, costs, fees, expenses and charges of any kind or type whatsoever, which
may or at  any  time  be due to  Lender  pursuant  to the  following  agreements
(collectively, the "Documents"):

          A. Loan Agreement (the "Loan Agreement"), dated as of the date hereof,
     between  Lender and M-Tron  Industries,  Inc., a Delaware  corporation  and
     Piezo  Technology,  Inc.,  a  Florida  corporation  jointly  and  severally
     (collectively the "Borrowers") pertaining to that certain loan (the "Loan")
     secured by Borrowers'  interest in certain land  described  therein and the
     improvements to be constructed thereon (the "Premises");

          B. Promissory Note, dated as of the date hereof, executed by Borrowers
     and payable to Lender,  in the amount of $2,000,000.00  evidencing the Term
     Loan, (as defined in the Loan Agreement)  between Borrowers and Lender (the
     "Term Note");

          C. Promissory Note, dated as of the date hereof, executed by Borrowers
     and  payable to  Lender,  in the amount of  $3,000,000.00,  evidencing  the
     Bridge  Loan,  (as defined in the Loan  Agreement)  between  Borrowers  and
     Lender (the "Bridge Note");

          D. Promissory Note, dated as of the date hereof, executed by Borrowers
     and  payable to  Lender,  in the amount of  $5,500,000.00,  evidencing  the
     Revolving  Loan, (as defined in the Loan Agreement)  between  Borrowers and
     Lender (the "Revolving Note")(the Term Note, Bridge Note and Revolving Note
     are collectively referred to as the "Notes")

          E. Mortgage,  Assignment of Rents and Leases,  Security  Agreement and
     Fixture Filing (the "Mortgage"),  dated as of the date hereof,  executed by
     Borrowers  for the benefit of Lender,  providing  a lien upon and  security
     interest in the Premises as security for the Notes;

          F.  Environmental  Indemnity  Agreement,  dated as of the date hereof,
     executed by Borrowers for the benefit of Lender;

          G.  Any  other   document,   agreement,   instrument  or   certificate
     contemplated by any of the foregoing agreements entered into between Lender
     and Borrowers with respect to the Loan, or any other documents, agreements,
     instruments or  certificates  now or hereafter  entered into between Lender
     and Borrowers with respect to the Loan; and

          H. Any amendment of the foregoing documents,  agreements,  instruments
     or certificates now or hereafter entered into between Lender and Borrowers.

     2. Guarantor also unconditionally  guarantees the truthfulness and accuracy
of  all  representations,   warranties  and  certifications  of  Borrowers,  the
satisfaction of all conditions by Borrowers and the full and timely  performance
of all  obligations  to be  performed  by  Borrowers,  under or  pursuant to the
Documents  (the matters  which are  guaranteed  pursuant to Sections 1 and 2 are
hereinafter collectively referred to as the "Obligations").  This Guaranty shall





continue to be in full force and effect so long as any Obligation remains unpaid
between the Borrowers and the Lender.  The  obligations of Guarantor  under this
Guaranty are primary,  joint and several and  independent of the  obligations of
Borrowers and any and every other guarantor of the  Obligations,  and a separate
action or actions may be brought and  executed  against  Guarantor  or any other
such guarantor,  whether or not such action is brought against  Borrowers or any
other such guarantor and whether or not Borrowers or any other such guarantor be
joined in such action or actions.

     3.  This  is  an  absolute  and  unconditional   guaranty  of  payment  and
performance and not of collection and Guarantor  unconditionally  (a) waives any
requirement  that Lender first make demand  upon,  or seek to enforce or exhaust
remedies  against,  Borrowers or any other person or entity (including any other
guarantor)  or any of the  collateral  or  property of  Borrowers  or such other
person or entity  before  demanding  payment  from,  or seeking to enforce  this
Guaranty  against,  Guarantor;  (b)  waives and agrees not to assert any and all
rights,  benefits and  defenses  which might  otherwise  be available  under any
provisions of law,  statute or rule  (including any statutes or rules  amending,
supplementing or supplanting same) which might operate,  contrary to Guarantor's
agreements  in this  Guaranty,  to limit  Guarantor's  liability  under,  or the
enforcement  of,  this  Guaranty;  (c)  waives  the  benefits  of any  statutory
provision limiting the right of Lender to recover a deficiency judgement,  or to
otherwise proceed, against any person or entity obligated for the payment of the
Obligations,  after any foreclosure or trustee's sale of any collateral securing
payment of the  Obligations,  (d)  subject to  Section  2,  covenants  that this
Guaranty  will  not  be  discharged  until  all  of the  Obligations  are  fully
satisfied; and (e) agrees that this Guaranty shall remain in full effect without
regard  to,  and  shall  not  be  affected  or  impaired  by,  any   invalidity,
irregularity or unenforceability in whole or in part of any of the Documents, or
any  limitation  of the liability of Borrowers or Guarantor  thereunder,  or any
limitation  on the  method  or  terms of  payment  thereunder  which  may now or
hereafter be caused or imposed in any manner whatsoever.

     4.  This  Guaranty  is  a  continuing   guaranty,   and  the   obligations,
undertakings  and conditions to be performed or observed by Guarantor under this
Guaranty  shall not be affected or impaired by reason of the happening from time
to time of the following with respect to the  Documents,  all without notice to,
or the further consent of, Guarantor: (a) the waiver by Lender of the observance
or   performance   by  Borrowers  or  Guarantor  of  any  of  the   obligations,
undertakings,  conditions or other provisions contained in any of the Documents,
except to the extent of such waiver; (b) the extension,  in whole or in part, of
the time for payment of any amount owing or payable under the Documents; (c) the
modification  or  amendment  (whether  material  or  otherwise)  of  any  of the
obligations  of  Borrowers  under,  or  any  other  provisions  of,  any  of the
Documents,  except to the  extent of such  modification  or  amendment;  (d) the
taking or the omission of any of the actions referred to in any of the Documents
(including,  without limitation, the giving of any consent referred to therein);
(e) any  failure,  omission,  delay or lack on the part of  Lender  to  enforce,
assert or exercise any provision of the Documents, including any right, power or
remedy  conferred on Lender in any of the Documents or any action on the part of
Lender  granting  indulgence or extension in any form;  (f) the assignment to or
assumption  by any third  party of any or all of the  rights or  obligations  of
Borrowers  under all or any of the  Documents;  (g) the release or  discharge of
Borrowers from the performance or observance of any  obligation,  undertaking or
condition to be performed by Borrowers  under any of the  Documents by operation
of law,  including any rejection or disaffirmance of any of the Documents in any
bankruptcy or similar  proceedings;  (h) the receipt and acceptance by Lender or
any other person or entity of notes, checks or other instruments for the payment
of money and  extensions  and  renewals  thereof;  (i) any  action,  inaction or
election of remedies by Lender which results in any impairment or destruction of
any  subrogation  rights of  Guarantor,  or any rights of  Guarantor  to proceed
against any other person or entity for reimbursement;  (j) any setoff,  defense,
counterclaim, abatement, recoupment, reduction, change in law or any other event
or circumstance which might otherwise  constitute a legal or equitable discharge
or defense of a guarantor,  indemnitor  or surety under the laws of the State of
Nebraska,  the state in which the Premises is located or any other jurisdiction;
and (k) the  termination  or  renewal  of any of the  Obligations  or any  other
provision thereof.

     5.  Guarantor  represents  and  warrants  to Lender  that:  (a) neither the
execution nor delivery of this Guaranty nor  fulfillment of nor compliance  with
the terms and provisions hereof will conflict with, or result in a breach of the
terms or  conditions  of,  or  constitute  a default  under,  any  agreement  or
instrument to which Guarantor is now a party or by which Guarantor may be bound,
or result in the creation of any lien,  charge or encumbrance  upon any property
or assets  of  Guarantor,  which  conflict,  breach,  default,  lien,  charge or
encumbrance could result in a material adverse change in the financial condition
of Guarantor; (b) no further consents,  approvals or authorizations are required
for the execution and delivery of this Guaranty by Guarantor or for  Guarantor's
compliance with the terms and provisions of this Guaranty;  (c) this Guaranty is


                                       2


the legal,  valid and binding agreement of Guarantor and is enforceable  against
Guarantor in accordance  with its terms,  except as such  enforceability  may be
limited by applicable bankruptcy,  insolvency,  liquidation,  reorganization and
other laws  affecting  the rights of creditors  generally and subject to general
principles of equity; (d) Guarantor has the full power, authority,  capacity and
legal right to execute and deliver this Guaranty,  and, to the extent  Guarantor
is a  corporation,  partnership,  limited  liability  company  or other  form of
entity,  the parties  executing  this  Guaranty on behalf of Guarantor are fully
authorized and directed to execute the same to bind Guarantor;  (e) Guarantor is
not  a  "foreign  individual,"  "foreign  corporation,"  "foreign  partnership,"
"foreign limited  liability  company",  "foreign trust," or "foreign estate," as
those terms are defined in the U.S.  Internal  Revenue Code and the  regulations
promulgated  thereunder;  Guarantor's  Social  Security  Number or  Federal  Tax
Identification  Number is  accurately  set forth herein next to the signature of
Guarantor; Guarantor has delivered to Lender either audited financial statements
or, if Guarantor does not have audited financial statements, certified financial
statements;   such  financial  statements  and  other  information  relating  to
Guarantor  heretofore  delivered to Lender are true, correct and complete in all
material  respects as of the date of this Guaranty;  Guarantor  understands that
Lender is relying upon such  information,  and  Guarantor  represents  that such
reliance is reasonable;  and the financial  statements of Guarantor delivered by
Borrowers  to  Lender  pursuant  to the Loan  Agreement  have been  prepared  in
accordance with generally accepted accounting  principles  consistently  applied
and accurately reflect, as of the date of this Guaranty, the financial condition
of Guarantor; (f) during the term of this Guaranty,  Guarantor will not transfer
or  dispose  of any  material  part of its  assets  except  for  full  and  fair
consideration and reasonably  equivalent value;  furthermore,  at the request of
Lender, Guarantor will furnish Lender annually,  within one hundred twenty (120)
days after the close of each calendar year, a financial statement  consisting of
a balance sheet and such other  financial  information  as Lender may reasonably
request; and (g) the Documents are conclusively  presumed to have been signed in
reliance on this Guaranty,  and the  assumption by Guarantor of its  obligations
under this Guaranty results in direct financial benefit to Guarantor.

     6. Subject to Section 2 above,  this Guaranty shall commence upon execution
and delivery of any of the Documents and shall continue in full force and effect
until all of the Obligations are duly,  finally and permanently paid,  performed
and  discharged  and are not subject to any right of reborrowing or extension by
Borrowers,  and  Lender  gives  Guarantor  written  notice of the full and final
satisfaction of the Obligations.  The Obligations  shall not be considered fully
paid,  performed  and  discharged  unless and until all payments by Borrowers to
Lender are no longer subject to any right on the part of any person  whomsoever,
including  but not limited to  Borrowers,  Borrowers  as a  debtor-in-possession
and/or any trustee in  bankruptcy,  to disgorge  such payments or seek to recoup
the amount of such payments or any part thereof.  This Guaranty  shall remain in
full force and effect and  continue  to be  effective  in the event that (i) any
petition  is filed by or against  Borrowers  or  Guarantor  for  liquidation  or
reorganization,  including,  without  limitation,  under  Title 11 of the United
States  Code,  11 U.S.C.  Sec.  101 et seq.  (the  "Code"),  (ii)  Borrowers  or
Guarantor  becomes insolvent or makes an assignment for the benefit of creditors
or (iii) a receiver or trustee is appointed for all or any  significant  part of
Borrowers' or Guarantor's  assets.  This Guaranty shall continue to be effective
or be reinstated,  as applicable,  if at any time payment and performance of the
Obligations,  or any part thereof,  is, pursuant to applicable law, rescinded or
reduced in amount, or must otherwise be restored or returned by Lender,  whether
as a "voidable preference",  "fraudulent conveyance" or otherwise, all as though
such payment or performance  had not been made. In the event that any payment of
the  Obligations,  or any part  thereof,  is  rescinded,  reduced,  restored  or
returned,  the  Obligations  shall be reinstated and deemed reduced only by such
amount paid to Lender and not so rescinded, reduced, restored or returned.

     7.  Guarantor  shall  neither have any right of  subrogation,  indemnity or
reimbursement  nor hold any other claim against  Borrowers,  and Guarantor  does
hereby  release  Borrowers from any and all claims by Guarantor now or hereafter
arising against Borrowers.  Furthermore,  Guarantor hereby  unconditionally  and
irrevocably waives (a) any right to participate in any security now or hereafter
held by Lender or in any claim or remedy of Lender or any other  person  against
Borrowers  with  respect to the  Obligations,  (b) any  statute  of  limitations
affecting Guarantor's liability hereunder,  (c) all principles and provisions of
law  which  conflict  with  the  terms  of  this  Guaranty  and  (d)  diligence,
presentment,  protest, demand for performance, notice of nonperformance,  notice
of intent to accelerate,  notice of acceleration,  notice of protest,  notice of
dishonor,  notice of execution of any Documents,  notice of extension,  renewal,
alteration  or  amendment,  notice of  acceptance  of this  Guaranty,  notice of
defaults under any of the Documents and all other notices whatsoever.

     8.  Notwithstanding  the preceding  Section 7, in the event that  Guarantor
shall have any claims against  Borrowers,  any  indebtedness of Borrowers now or


                                       3


hereafter  held by  Guarantor  is hereby  subordinated  to the  indebtedness  of
Borrowers to Lender. Any such indebtedness of Borrowers to Guarantor,  if Lender
so requests,  shall be collected,  enforced and received by Guarantor as trustee
for Lender and be paid over to Lender on account of the Obligations, but without
reducing or affecting in any manner the  liability of Guarantor  under the other
provisions of this Guaranty.

     9. It is not  necessary  for Lender to inquire into the powers of Borrowers
or its  officers,  directors,  partners or agents acting or purporting to act on
its behalf, and Guarantor shall be liable for the Obligations in accordance with
their terms  notwithstanding any lack of authorization or defect in execution or
delivery by Borrowers.

     10. In addition to the amounts  guaranteed  under this Guaranty,  Guarantor
agrees  to pay (i)  Lender's  reasonable  attorneys'  fees and  other  costs and
expenses which may be incurred by Lender in the enforcement of this Guaranty and
(ii) interest (including postpetition interest to the extent a petition is filed
by or against  Borrowers  under the Code) at the Default Rate (as defined in the
Note) on any Obligations not paid when due. Guarantor hereby agrees to indemnify
and hold harmless Lender for, from and against any loss, cause of action, claim,
cost,  expense or fee,  including but not limited to  attorney's  fees and court
costs,  suffered  or  occasioned  by the  failure of  Borrowers  to satisfy  its
obligations under the Documents.  The agreement to indemnify Lender contained in
this  paragraph   shall  be  enforceable   notwithstanding   the  invalidity  or
unenforceability  of  the  Documents  or  any  of  them  or  the  invalidity  or
unenforceability of any other paragraph  contained in this Guaranty.  All moneys
available to Lender for  application in payment or reduction of the  liabilities
of  Borrowers  under the  Documents  may be applied by Lender to the  payment or
reduction of such liabilities of Borrowers,  in such manner, in such amounts and
at such time or times as Lender may elect.

     11.  All  notices,  demands,   requests,   consents,   approvals  or  other
instruments required or permitted to be given pursuant to this Guaranty shall be
in  writing  and  given by (i) hand  delivery,  (ii)  facsimile,  (iii)  express
overnight  delivery service or (iv) certified or registered mail, return receipt
requested,  and shall be deemed to have been delivered upon (a) receipt, if hand
delivered,  (b) transmission,  if delivered by facsimile,  (c) the next Business
Day (as  defined in the Loan  Agreement),  if  delivered  by  express  overnight
delivery  service or (d) the third  Business Day following the day of deposit of
such notice with the United  States  Postal  Service,  if sent by  certified  or
registered  mail,  return  receipt  requested.  Notices shall be provided to the
addresses (or facsimile numbers, as applicable) specified below:

         If to Guarantor:              Lynch Corporation
                                       50 Kennedy Plaza, Suite 1250
                                       Providence, Rhode Island  02903
                                       Attention: Chief Executive Officer
                                       Telecopy:    (401) 453-2009


         If to Lender:                 First National Bank of Omaha
                                       1620 Dodge Street STOP 4250
                                       Omaha, NE 68197-4250
                                       Attention:  Mark K. McMillan
                                       Telecopy:   (402) 498-5119

or to such other address or such other person as either  Guarantor or Lender may
from time to time hereafter  specify to the other party in a notice delivered in
the manner provided above.

     12. It is the intent of Guarantor  and Lender that this  Guaranty  shall be
deemed to be a contract  made under and  governed  by the  internal  laws of the
State of New York,  without  regard to its  principles  of conflicts of law. For
purposes of any action or proceeding involving this Guaranty,  Guarantor submits
to the  jurisdiction  of all  federal and state  courts  located in the State of
Nebraska  and  consents  that it may be  served  with  any  process  or paper by
registered  mail or by personal  service within or without the State of Nebraska
in accordance with applicable law. Furthermore,  Guarantor waives and agrees not
to assert  in any such  action,  suit or  proceeding  that it is not  personally
subject to the jurisdiction of such courts,  that the action, suit or proceeding
is  brought  in an  inconvenient  forum  or that  venue of the  action,  suit or


                                       4


proceeding  is  improper.  Nothing  contained  in this  section  shall  limit or
restrict the right of Lender to commence any  proceeding in the federal or state
courts  located  in the state in which the  Premises  is  located  and/or  where
Guarantor  resides  to the extent  Lender  deems such  proceeding  necessary  or
advisable to exercise remedies available under the Documents.

     13.  Guarantor  intends  that the  business  relationship  created  between
Borrowers and Lender by the Loan Agreement, the Note, the Mortgage and the other
Documents is solely that of creditor and  Borrowers and has been entered into by
such parties in reliance upon the economic and legal  bargains  contained in the
Documents.  Furthermore,  Guarantor  shall  support  the  intent  of  Guarantor,
Borrowers  and Lender that the Loan,  the Note and the  Mortgage do not create a
joint venture,  partnership,  trust, trust agreement or the like, if, and to the
extent that, any challenge occurs, and Guarantor shall not assert that the Loan,
the Note or the Mortgage  creates a joint  venture,  partnership,  trust,  trust
agreement or the like.

     14.  Guarantor  acknowledges  that  Lender did not prepare or assist in the
preparation  of any of the  projected  financial  figures  used by  Borrowers in
analyzing  the  economic   viability  and   feasibility   of  the   transactions
contemplated by the Loan Agreement.  Furthermore,  Guarantor  acknowledges  that
Borrowers  has not relied  upon,  nor may it hereafter  rely upon,  the analysis
undertaken  by  Lender  in  determining  the  amount  of the Loan and that  such
analysis will not be made available to Borrowers.

     15.  All of  Lender's  rights and  remedies  under the  Documents  and this
Guaranty are intended to be distinct,  separate and cumulative and no such right
and remedy is intended to be in  exclusion  of or a waiver of any of the others.
If under  applicable law, Lender proceeds to realize benefits under any Document
granting Lender a lien upon any collateral  pledged under such Document,  either
by judicial  foreclosure or by non-judicial sale or enforcement,  Lender may, at
its sole  option,  determine  which of such  remedies  or rights  it may  pursue
without  affecting any of such rights and remedies under this  Guaranty.  If, in
the exercise of any of its rights and remedies,  Lender shall forfeit any of its
rights or remedies,  including its right to enter a deficiency  judgment against
Borrowers or any pledgor,  whether  because of any applicable laws pertaining to
"election of remedies" or the like,  Guarantor hereby consents to such action by
Lender and  waives any claim  based  upon such  action,  even if such  action by
Lender shall result in a full or partial loss of any rights of subrogation which
Guarantor might  otherwise have had but for such action by Lender.  Any election
of remedies  which results in the denial or impairment of the right of Lender to
seek a deficiency  judgment  against  Borrowers or any pledgor  shall not impair
Guarantor's  obligation to pay the full amount of the Obligations.  In the event
Lender  shall bid at any  foreclosure  or  trustee's  sale or at any  private or
public sale permitted by law or under the Documents,  Lender may bid all or less
than the amount of the  Obligations  and the amount of such bid need not be paid
by Lender  but shall be  credited  against  the  Obligations.  The amount of the
successful  bid at any such  sale  shall be  conclusively  deemed to be the fair
market value of the collateral  and the  difference  between such bid amount and
the remaining balance of the Obligations shall be conclusively  deemed to be the
amount of the Obligations  guaranteed under this Guaranty,  notwithstanding that
any  present  or future law or court  decision  or ruling may have the effect of
reducing the amount of any deficiency  claim to which Lender might  otherwise be
entitled but for such bidding at any such sale.

     16. This Guaranty is solely for the benefit of Lender,  its  successors and
assigns  and is not  intended to nor shall it be deemed to be for the benefit of
any third party, including, without limitation, Borrowers. This Guaranty and all
obligations  of Guarantor  hereunder  shall be binding upon the  successors  and
assigns of Guarantor (including,  a debtor-in-possession on behalf of Guarantor)
and shall, together with the rights and remedies of Lender, hereunder,  inure to
the benefit of Lender,  all future holders of any  instrument  evidencing any of
the  Obligations  and its  successors  and  assigns.  No sales,  participations,
assignments,  transfers  or other  dispositions  of any  agreement  governing or
instrument evidencing the Obligations or any portion thereof or interest therein
shall in any manner  affect the rights of Lender or its  successors  and assigns
hereunder. Guarantor may not assign, sell, hypothecate or otherwise transfer any
interest in or obligation under this Guaranty.

     17. If any provision of this Guaranty is unenforceable,  the enforceability
of the other  provisions  shall not be  affected  and they shall  remain in full
force and effect.

     18.  Guarantor  agrees to take such action and to sign such other documents
as may be appropriate to carry out the intent of this Guaranty.

                                       5


     19. This  Guaranty  may be executed  in one or more  counterparts,  each of
which shall be deemed an original.

     20. LENDER,  BY ACCEPTING THIS GUARANTY,  AND GUARANTOR  HEREBY  KNOWINGLY,
VOLUNTARILY AND  INTENTIONALLY  WAIVE THE RIGHT THEY MAY HAVE TO A TRIAL BY JURY
WITH RESPECT TO ANY AND ALL ISSUES PRESENTED IN ANY ACTION, PROCEEDING, CLAIM OR
COUNTERCLAIM  BROUGHT  BY  LENDER  OR  GUARANTOR  AGAINST  THE  OTHER  OR  THEIR
SUCCESSORS  WITH RESPECT TO ANY MATTER ARISING OUT OF OR IN CONNECTION WITH THIS
GUARANTY, THE RELATIONSHIP OF LENDER, BORROWERS AND/OR GUARANTOR, BORROWERS' USE
OR  OCCUPANCY  OF THE  PREMISES,  AND/OR ANY CLAIM FOR INJURY OR DAMAGE,  OR ANY
EMERGENCY OR STATUTORY REMEDY. THIS WAIVER BY LENDER AND GUARANTORS OF ANY RIGHT
THEY  MAY  HAVE TO A  TRIAL  BY  JURY  HAS  BEEN  NEGOTIATED  AND IS A  MATERIAL
INDUCEMENT FOR LENDER ACCEPTING THIS GUARANTY.  FURTHERMORE,  EACH OF LENDER AND
GUARANTOR HEREBY KNOWINGLY,  VOLUNTARILY AND  INTENTIONALLY  WAIVES THE RIGHT IT
MAY HAVE TO SEEK PUNITIVE, CONSEQUENTIAL,  SPECIAL AND INDIRECT DAMAGES FROM THE
OTHER AND ANY OF THE OTHER'S AFFILIATES, OFFICERS, DIRECTORS OR EMPLOYEES OR ANY
OF THEIR  SUCCESSORS WITH RESPECT TO ANY AND ALL ISSUES PRESENTED IN ANY ACTION,
PROCEEDING,  CLAIM OR COUNTERCLAIM  BROUGHT BY EITHER PARTY AGAINST THE OTHER OR
ANY OF THE OTHER'S AFFILIATES,  OFFICERS, DIRECTORS OR EMPLOYEES OR ANY OF THEIR
SUCCESSORS  WITH RESPECT TO ANY MATTER ARISING OUT OF OR IN CONNECTION WITH THIS
GUARANTY OR ANY DOCUMENTS  CONTEMPLATED  HEREIN OR RELATED HERETO. THE WAIVER BY
LENDER AND GUARANTOR OF ANY RIGHT THEY MAY HAVE TO SEEK PUNITIVE, CONSEQUENTIAL,
SPECIAL AND INDIRECT  DAMAGES HAS BEEN NEGOTIATED AND IS AN ESSENTIAL  ASPECT OF
THEIR BARGAIN.

     21. Guarantor shall be liable under this Guaranty for the maximum amount of
such liability that can be incurred hereby without  rendering this Guaranty,  as
it  relates  to the  Guarantor,  voidable  under  applicable  laws  relating  to
fraudulent  conveyance or fraudulent  transfer,  and not for any greater amount.
Guarantor  agrees  that the  Obligations  may at any time and from  time to time
exceed the amount of the liability of Guarantor hereunder without impairing this
Guaranty or affecting the rights and remedies of Lender hereunder.

     22.  Guarantor,  by  executing  this  Guaranty,   hereby  consents  to  the
completion,  execution  and  delivery  of the  Amended  and  Restated  Note  and
acknowledges  that its  obligations to Lender under this Guaranty are continuing
in nature and are not  altered,  modified or affected in any manner by virtue of
the completion,  execution and delivery of the Amended and Restated Note and the
terms and conditions of the amendments to the Note set forth therein.

     23. Guarantor acknowledges and agrees that it has received a copy, read and
understands  the  Loan  Agreement  and  its  related  documents  between  M-Tron
Industries, Inc., Piezo Technology, Inc., and the Lender.


                                       6

     IN WITNESS  WHEREOF,  the undersigned  Guarantor has executed this Guaranty
effective  as of the  date  set  forth  in the  introductory  paragraph  of this
Guaranty.


                                    GUARANTOR:

                                    Lynch Corporation, an Indiana Corporation

                                    By   /s/ John C. Ferrara
                                        ---------------------------------

                                    Its President & CEO

                                    Federal Tax I.D. Number:

                                    38-1799862
                                    ----------




STATE OF CONNECTICUT )
                     ) SS.  GREENWICH
COUNTY OF FAIRFIELD  )



     The  foregoing  instrument  was  acknowledged  before  me this  14th day of
October,  2004, by JOHN C. FERRARA as PRESIDENT and duly  authorized  officer of
Lynch Corporation as his and the corporation's free act and deed.



                                        /s/ Michael J. McIntosh
                                        ----------------------------------
                                        Notary Public


My Commission Expires:

____________________________________

EX-10.3

                                LYNCH CORPORATION
                          SECURITIES PURCHASE AGREEMENT

     This Securities  Purchase Agreement (this "AGREEMENT") is dated October 15,
2004, between Lynch  Corporation,  an Indiana  corporation (the "Company"),  and
Venator Merchant Fund L.P., a Delaware limited partnership (the "PURCHASER").

     WHEREAS,  subject to the terms and  conditions  set forth in this Agreement
and pursuant to Section 4(2) of the Securities Act (as defined below),  and Rule
506  promulgated  thereunder,  the  Company  desires  to  issue  and sell to the
Purchaser, and the Purchaser desires to purchase from the Company, approximately
$1,800,000  of  Common  Stock on the  Closing  Date and on the  terms  set forth
herein.

     NOW,  THEREFORE,  IN CONSIDERATION of the premises and the mutual covenants
contained in this Agreement,  and for other good and valuable  consideration the
receipt  and  adequacy  of which are hereby  acknowledged,  the  Company and the
Purchaser agree as follows:

                                   ARTICLE I.
                                   DEFINITIONS

     1.1  DEFINITIONS.  In  addition  to the  terms  defined  elsewhere  in this
Agreement,  for all purposes of this  Agreement,  the  following  terms have the
meanings indicated in this Section 1.1:

     "ACTION" shall have the meaning ascribed to such term in Section 3.1(j).

     "AFFILIATE"  means any Person that,  directly or indirectly  through one or
more  intermediaries,  controls or is controlled  by or is under common  control
with a Person as such terms are used in and construed under Rule 144.

     "AUTHORIZATION" has the meaning ascribed to such term in Section 3.1(e).

     "BUSINESS DAY" means any day except Saturday, Sunday and any day that shall
be a federal legal holiday or a day on which banking  institutions  in the State
of New York are  authorized or required by law or other  governmental  action to
close.

     "CLOSING"  means the closing of the  purchase  and sale of the Common Stock
pursuant to Section 2.1.

     "CLOSING  DATE"  means  the date of the  Closing,  which  shall be the date
hereof.

     "COMMISSION" means the Securities and Exchange Commission.

     "COMMON  STOCK" means the common stock of the Company,  $0.01 par value per
share,  and any  securities  into  which  such  common  stock may  hereafter  be
reclassified.

     "COMPANY PARTY" has the meaning ascribed to such term in Section 4.6.


     "EFFECTIVE  DATE" means the date that the  Registration  Statement is first
declared effective by the Commission.

     "EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.

     "GOVERNMENTAL  ENTITY"  has the  meaning  ascribed  to such term in Section
3.1(e).

     "LAW" has the meaning ascribed to such term in Section 3.1(e).

     "LIEN" means a lien, charge, security interest, encumbrance, right of first
refusal or other restriction.

     "MATERIAL  ADVERSE EFFECT" has the meaning ascribed to such term in Section
3.1(b).

     "ORDER" has the meaning ascribed to such term in Section 3.1(d).

     "PER SHARE  PURCHASE  PRICE"  means  $13.173  (being an amount equal to the
average of the closing prices of the Common Stock on the American Stock Exchange
for the sixty (60) consecutive Trading Days ending October 13, 2004).

     "PERSON"   means  an  individual  or   corporation,   partnership,   trust,
incorporated or  unincorporated  association,  joint venture,  limited liability
company,  joint stock company,  government (or an agency or subdivision thereof)
or other entity of any kind.

     "PURCHASER PARTY" has the meaning ascribed to such term in Section 4.5.

     "REGULATION D" has the meaning ascribed to such term in Section 3.1(n).

     "REGISTRATION   STATEMENT"  means  a  registration  statement  meeting  the
requirements  set forth in the  Registration  Rights  Agreement and covering the
resale by the Purchaser of the Shares.

     "REGISTRATION  RIGHTS  AGREEMENT" means the Registration  Rights Agreement,
dated the date of this Agreement,  between the Company and the Purchaser, in the
form of Exhibit A hereto.

     "RULE 144" means Rule 144  promulgated  by the  Commission  pursuant to the
Securities  Act, as such Rule may be amended  from time to time,  or any similar
rule or regulation  hereafter adopted by the Commission having substantially the
same effect as such Rule.

     "SEC REPORTS" has the meaning ascribed to such term in Section 3.1(h).

     "SECURITIES" means the Shares.

     "SECURITIES ACT" means the Securities Act of 1933, as amended.

     "SHARE AMOUNT" has the meaning ascribed to such term in Section 2.1.


                                       2



     "SHARES"  means the  shares  of Common  Stock  issued  or  issuable  to the
Purchaser pursuant to this Agreement.

     "SUBSCRIPTION   AMOUNT"  means   $1,799,998.20   (being  the  Share  Amount
multiplied by the Per Share  Purchase  Price),  in United States  dollars and in
immediately available funds.

     "SUBSIDIARY" means any "SIGNIFICANT  SUBSIDIARY" as defined in Rule 1-02(w)
of Regulation S-X promulgated by the Commission under the Exchange Act.

     "TRADING  DAY"  means  (i) a day on which the  Common  Stock is traded on a
Trading Market, or (ii) if the Common Stock is not listed on a Trading Market, a
day on which  the  Common  Stock is traded on the  over-the-counter  market,  as
reported by the OTC Bulletin  Board,  or (iii) if the Common Stock is not quoted
on the OTC  Bulletin  Board,  a day on which the  Common  Stock is quoted in the
over-the-counter   market  as  reported  by  the   National   Quotation   Bureau
Incorporated  (or  any  similar  organization  or  agency  reporting  securities
prices);  provided,  that in the event  that the  Common  Stock is not listed or
quoted as set forth in (i), (ii) and (iii) hereof, then Trading Day shall mean a
Business Day.

     "TRADING  MARKET"  means the  following  markets or  exchanges on which the
Common  Stock is listed or  quoted  for  trading  on the date in  question:  the
American Stock Exchange, the New York Stock Exchange, the Nasdaq National Market
or the Nasdaq SmallCap Market.

     "TRANSACTION  DOCUMENTS" means this Agreement and the  Registration  Rights
Agreement and any other documents or agreements  executed in connection with the
transactions contemplated hereunder.

                                  ARTICLE II.
                                PURCHASE AND SALE

     2.1  CLOSING.  Subject  to the  terms  and  conditions  set  forth  in this
Agreement,  at a  closing  taking  place  on the  date  of this  Agreement,  the
Purchaser is purchasing from the Company, and the Company is issuing and selling
to the  Purchaser,  136,643 shares of Common Stock (the "SHARE  AMOUNT")  (being
that number of shares of Common Stock as equals $1,799,998.20 divided by the Per
Share Purchase Price, rounded to the nearest whole number of shares),  with each
such share being purchased at the Per Share Purchase Price.

     2.2 CLOSING DELIVERIES.

          (a)  At the  Closing  the  Company  is  delivering  or  causing  to be
     delivered to the Purchaser the following:

               (i)  this Agreement duly executed by the Company; and

               (ii) the  Registration  Rights  Agreement  duly  executed  by the
          Company.

          (b) At the  Closing  the  Purchaser  is  delivering  or  causing to be
     delivered to the Company the following:

                                       3


               (i) this Agreement duly executed by the Purchaser;

               (ii) the  Subscription  Amount by wire  transfer  to the  account
          designated in writing by the Company; and

               (iii) the  Registration  Rights  Agreement  duly  executed by the
          Purchaser.

          (c) Within 15 days after the Closing, the Company shall deliver to the
     Purchaser a  certificate  evidencing  a number of shares equal to the Share
     Amount.

                                  ARTICLE III.
                         REPRESENTATIONS AND WARRANTIES

     3.1 REPRESENTATIONS  AND WARRANTIES OF THE COMPANY.  Except as set forth in
the SEC Reports,  the Company  hereby makes the  following  representations  and
warranties as of the date hereof and as of the Closing Date to the Purchaser:

          (a) SUBSIDIARIES. The Company owns, directly or indirectly, all of the
     capital  stock of each  Subsidiary  free and  clear  of any  lien,  charge,
     security interest, encumbrance, right of first refusal or other restriction
     (collectively,  "LIENS"),  and all the  issued  and  outstanding  shares of
     capital  stock of each  Subsidiary  are validly  issued and are fully paid,
     non-assessable and free of preemptive and similar rights.

          (b)  ORGANIZATION  AND  QUALIFICATION.  Each of the  Company  and each
     Subsidiary is an entity duly incorporated or otherwise  organized,  validly
     existing and in good  standing  under the laws of the  jurisdiction  of its
     incorporation or organization (as applicable), with the requisite power and
     authority  to own and use its  properties  and  assets  and to carry on its
     business as currently conducted.  Neither the Company nor any Subsidiary is
     in violation of any of the  provisions  of its  respective  certificate  or
     articles  of  incorporation,  bylaws  or other  organizational  or  charter
     documents.  Each of the Company and the  Subsidiaries  is duly qualified or
     licensed  to  conduct  business  and  is  in  good  standing  as a  foreign
     corporation or other entity in each jurisdiction in which the nature of the
     business  conducted  or  property  owned  by it  makes  such  qualification
     necessary, except where the failure to be so qualified or in good standing,
     as the case may be, would not have or  reasonably  be expected to result in
     (i) a material adverse effect on the legality,  validity or  enforceability
     of any Transaction Document,  (ii) a material adverse effect on the results
     of operations,  assets,  business or financial condition of the Company and
     the Subsidiaries, taken as a whole, or (iii) adversely impair the Company's
     ability  to  perform  in  any  material  respect  on  a  timely  basis  its
     obligations  under any  Transaction  Document (any of (i), (ii) or (iii), a
     "MATERIAL ADVERSE EFFECT").

          (c)  AUTHORIZATION;   ENFORCEMENT.   The  Company  has  the  requisite
     corporate   power  and  authority  to  execute  and  deliver  each  of  the
     Transaction  Documents and to enter into and to consummate the transactions
     contemplated by each of the Transaction  Documents to which it is party and
     otherwise  to carry  out its  obligations  thereunder.  The  execution  and
     delivery of each of the Transaction Documents to which it is a party by the
     Company and the consummation by it of the transactions contemplated thereby


                                       4


     have  been  duly  authorized  by all  necessary  action  on the part of the
     Company  and  no  further   action  is  required  by  the  Company  or  its
     stockholders in connection  therewith.  Each Transaction Document including
     this  Agreement has been (or upon delivery will have been) duly executed by
     the Company and, when delivered in accordance  with the terms hereof,  will
     constitute  the valid and binding  obligation  of the  Company  enforceable
     against the Company in  accordance  with its terms except (i) as limited by
     applicable  bankruptcy,  insolvency,  reorganization,  moratorium and other
     laws of general  application  affecting  enforcement  of creditors'  rights
     generally  and (ii) as  limited by laws  relating  to the  availability  of
     specific performance, injunctive relief or other equitable remedies.

          (d) NO  CONFLICTS.  The  execution,  delivery and  performance  of the
     Transaction Documents by the Company and the consummation by the Company of
     the transactions contemplated thereby do not and will not (i) conflict with
     or violate any provision of the Company's or any  Subsidiary's  certificate
     or articles of  incorporation,  bylaws or other  organizational  or charter
     documents, or (ii) conflict with, or constitute a default (or an event that
     with notice or lapse of time or both would become a default) under, or give
     to  others  any  rights  of   termination,   amendment,   acceleration   or
     cancellation  (with or  without  notice,  lapse of time or  both)  of,  any
     agreement,  credit facility, debt or other instrument (evidencing a Company
     or  Subsidiary  debt or  otherwise)  or other  understanding  to which  the
     Company or any  Subsidiary  is a party or by which any property or asset of
     the Company or any Subsidiary is bound or affected, or (iii) conflict with,
     or result in or constitute any violation of, any award, decision, judgment,
     decree,  injunction,  writ, order, subpoena, ruling, verdict or arbitration
     award entered,  issued,  made or rendered by any federal,  state,  local or
     foreign government or any other Governmental  Entity (each an "ORDER"),  or
     any Law, applicable to the ----- Company or any of its Subsidiaries,  or to
     any of their respective properties or assets, or to any Securities; or (iv)
     result in the creation or  imposition  of (or the  obligation  to create or
     impose) any Lien on any of the  properties  or assets of the Company or any
     of its subsidiaries,  or on any of the Securities; or (v) conflict with, or
     result in or constitute  any  violation  of, or result in the  termination,
     suspension or revocation of, any Authorization applicable to the Company or
     any  of its  subsidiaries,  or to any of  their  respective  properties  or
     assets,  or to any of the Securities,  or result in any other impairment of
     the rights of the holder of any such  Authorization;  except in the case of
     each of clauses (ii) and (iii),  such as would not,  individually or in the
     aggregate,  have or reasonably be expected to result in a Material  Adverse
     Effect.

          (e)  FILINGS,  CONSENTS  AND  APPROVALS.  Assuming the accuracy of the
     representations  of the  Purchaser  set forth in  Section  3.2  hereof,  no
     registration  (including  any  registration  under the  Securities  Act) or
     filing with, or any notification to, or any approval, permission,  consent,
     ratification, waiver, authorization, order, finding of suitability, permit,
     license,  franchise,  exemption,  certification  or similar  instrument  or
     document  (each,  an  "AUTHORIZATION")  of or  from,  any  court,  arbitral
     tribunal, arbitrator,  administrative or regulatory agency or commission or
     other  governmental  or  regulatory  authority,  agency or governing  body,
     domestic or foreign (each, a "GOVERNMENTAL  ENTITY"),  or any other person,
     or  under  any  statute,   law,  ordinance,   rule,  regulation  or  agency
     requirement of any Governmental  Entity (each, a "LAW"), on the part of the
     Company or any of its  subsidiaries  is  required  in  connection  with the


                                       5


     execution  or delivery by the Company of the  Transaction  Documents or the
     performance by the Company of its obligations under each of the Transaction
     Documents  except as would not have a material effect on the Company or its
     performance of its obligations under the Transaction Documents.

          (f)  ISSUANCE  OF  THE  SECURITIES.  The  Securities  have  been  duly
     authorized and, when issued and paid for in accordance with the Transaction
     Documents,  will be duly and validly issued,  fully paid and nonassessable,
     free and clear of all Liens,  except for such  restrictions  on transfer or
     ownership  imposed by  applicable  federal or state  securities  laws.  The
     Company has reserved  from its duly  authorized  capital  stock the maximum
     number of shares of Common Stock issuable pursuant to this Agreement.

          (g)  CAPITALIZATION.  As of the date hereof,  the  authorized  capital
     stock of the Company  consists of 10,000,000  shares of Common Stock. As of
     August 12,  2004,  there were  1,495,483  shares of Common Stock issued and
     outstanding.  Other than as contemplated in this Agreement, the Company has
     not issued any capital  stock since  September 30, 2004 other than pursuant
     to the exercise of employee stock options under the Company's  stock option
     plans. No Person has any right of first refusal, preemptive right, right of
     participation,  or any similar  right to  participate  in the  transactions
     contemplated by the Transaction  Documents.  Except as disclosed in the SEC
     Reports,  there are no  outstanding  options,  warrants,  scrip,  rights to
     subscribe, calls or commitments of any character whatsoever relating to, or
     securities,  rights or obligations convertible into or exchangeable for, or
     giving any  Person any right to  subscribe  for or  acquire,  any shares of
     Common Stock, or contracts, commitments,  understandings or arrangements by
     which  the  Company  or any  Subsidiary  is or may  become  bound  to issue
     additional  shares of Common Stock, or securities or rights  convertible or
     exchangeable  into  shares  of  Common  Stock.  The  issue  and sale of the
     Securities will not obligate the Company to issue shares of Common Stock or
     other securities to any Person (other than the shares of Common Stock being
     issued to the  Purchaser  hereunder)  and will not result in a right of any
     holder of Company securities to adjust the exercise,  conversion,  exchange
     or reset price under such securities.

          (h) SEC  REPORTS;  FINANCIAL  STATEMENTS.  The  Company  has filed all
     reports  required  to be filed  by it under  the  Exchange  Act,  including
     pursuant to Section 13(a) or 15(d) thereof, for the two years preceding the
     date hereof (or such  shorter  period as the Company was required by law to
     file such  material)  (the  foregoing  materials,  including  the  exhibits
     thereto,  being collectively  referred to herein as the "SEC REPORTS") on a
     timely basis or has timely  filed a valid  extension of such time of filing
     and has  filed any such SEC  Reports  prior to the  expiration  of any such
     extension.  As of their  respective  dates, the SEC Reports complied in all
     material  respects  with the  requirements  of the  Securities  Act and the
     Exchange Act and the rules and  regulations of the  Commission  promulgated
     thereunder,  and none of the SEC Reports, when filed,  contained any untrue
     statement of a material  fact or omitted to state a material  fact required
     to be stated therein or necessary in order to make the statements  therein,
     in light of the  circumstances  under which they were made, not misleading.
     The financial  statements of the Company included in the SEC Reports comply
     in all material  respects with applicable  accounting  requirements and the
     rules and  regulations of the Commission  with respect thereto as in effect


                                       6


     at the time of filing.  Such  financial  statements  have been  prepared in
     accordance  with  generally  accepted  accounting  principles  applied on a
     consistent  basis during the periods  involved  ("GAAP"),  except as may be
     otherwise  specified in such financial  statements or the notes thereto and
     except that  unaudited  financial  statements may not contain all footnotes
     required by GAAP, and fairly present in all material respects the financial
     position of the Company and its consolidated subsidiaries as of and for the
     dates thereof and the results of operations  and cash flows for the periods
     then  ended,  subject,  in the case of  unaudited  statements,  to  normal,
     immaterial, year-end audit adjustments.

          (i) MATERIAL  CHANGES.  Since the date of the latest audited financial
     statements included within the SEC Reports,  except as disclosed in the SEC
     Reports,  (i) there has been no event,  occurrence or development  that has
     had or that could  reasonably  be expected to result in a Material  Adverse
     Effect,  (ii) the Company has not incurred any  liabilities  (contingent or
     otherwise) other than (A) trade payables and accrued  expenses  incurred in
     the  ordinary  course of business  consistent  with past  practice  and (B)
     liabilities  that would not be required to be  reflected  in the  Company's
     financial  statements  pursuant to GAAP or that would not be required to be
     disclosed  in filings made with the  Commission,  (iii) the Company has not
     altered its method of accounting,  and (iv) the Company has not declared or
     made  any  dividend  or  distribution  of cash  or  other  property  to its
     stockholders  or purchased,  redeemed or made any agreements to purchase or
     redeem any shares of its capital stock.

          (j) LITIGATION.  Except as disclosed in the SEC Reports,  there are no
     actions,   suits,   inquiries,   notices  of  violation,   proceedings   or
     investigations  pending or, to the  knowledge  of the  Company,  threatened
     against or affecting the Company, any Subsidiary or any of their respective
     properties   before  or  by  any   court,   arbitrator,   governmental   or
     administrative  agency or regulatory  authority  (federal,  state,  county,
     local or foreign)  (collectively,  an "ACTION") which (i) adversely affects
     or  challenges  the  legality,  validity  or  enforceability  of any of the
     Transaction  Documents or the  Securities  or (ii) would,  if there were an
     unfavorable  decision,  have or  reasonably  be  expected  to  result  in a
     Material  Adverse Effect.  Neither the Company nor any Subsidiary,  nor any
     director  or  officer  thereof,  is or has been the  subject  of any Action
     involving  a claim of  violation  of or  liability  under  federal or state
     securities laws or a claim of breach of fiduciary duty. There has not been,
     and to the knowledge of the Company,  there is not pending or contemplated,
     any investigation by the Commission involving the Company or any current or
     former  director or officer of the Company.  The  Commission has not issued
     any  stop  order  or  other  order  suspending  the  effectiveness  of  any
     registration  statement  filed by the Company or any  Subsidiary  under the
     Exchange Act or the Securities Act.

          (k) CERTAIN FEES. No brokerage or finder's fees or commissions  are or
     will  be  payable  by the  Company  to any  broker,  financial  advisor  or
     consultant,  finder,  placement  agent,  investment  banker,  bank or other
     Person with respect to the transactions contemplated by this Agreement. The
     Purchaser shall have no obligation with respect to any fees or with respect
     to any  claims  made by or on  behalf of other  Persons  for fees of a type
     contemplated  in  this  Section  that  may be due in  connection  with  the
     transactions contemplated by this Agreement.

                                       7


          (l)  CERTAIN  REGISTRATION  MATTERS.  Assuming  the  accuracy  of  the
     Purchaser's representations and warranties set forth in Section 3.2(b)-(e),
     no registration under the Securities Act is required for the offer and sale
     of the  Shares  by the  Company  to the  Purchaser  under  the  Transaction
     Documents.  The Company is  eligible  to register  the resale of its Common
     Stock for  resale by the  Purchaser  under Form S-3  promulgated  under the
     Securities Act.

          (m)  DISCLOSURE.   The  Company  understands  and  confirms  that  the
     Purchaser  will rely on the  foregoing  representations  and  covenants  in
     effecting  transactions  in  securities  of  the  Company.  All  disclosure
     provided to the  Purchaser  regarding  the  Company,  its  business and the
     transactions  contemplated  hereby furnished by or on behalf of the Company
     are true and correct and do not contain any untrue  statement of a material
     fact or omit to state  any  material  fact  necessary  in order to make the
     statements  made therein,  in light of the  circumstances  under which they
     were made, not misleading.

          (n)  REGULATION D. None of the Company or any affiliate (as defined in
     Rule 501(b) of Regulation D ("REGULATION  D") under the Securities  Act) of
     the Company has directly, or through any agent, (a) sold, offered for sale,
     solicited offers to buy or otherwise  negotiated in respect of any security
     (as defined in the Securities  Act) which is or will be integrated with the
     sale of the Securities in a manner that would require the  registration  of
     the Securities under the Securities Act or; (b) engaged in or used any form
     of general  solicitation  or general  advertising  (within  the  meaning of
     Regulation  D) in  connection  with the sale of the  Securities,  including
     articles,  notices  or other  communications  published  in any  newspaper,
     magazine or similar  medium or broadcast over  television or radio,  or any
     seminar  or  meeting  whose  attendees  have been  invited  by any  general
     solicitation or general advertising.

     3.2 REPRESENTATIONS  AND WARRANTIES OF THE PURCHASER.  The Purchaser hereby
represents  and warrants as of the date hereof and as of the Closing Date to the
Company as follows:

          (a)  ORGANIZATION;   AUTHORITY.   The  Purchaser  is  an  entity  duly
     organized,  validly  existing  and in good  standing  under the laws of the
     jurisdiction  of  its   organization   with  the  requisite   corporate  or
     partnership  power  and  authority  to  enter  into and to  consummate  the
     transactions  contemplated  by the  applicable  Transaction  Documents  and
     otherwise to carry out its obligations thereunder. The execution,  delivery
     and performance by the Purchaser of the  transactions  contemplated by this
     Agreement has been duly  authorized by all necessary  [corporate or, if the
     Purchaser is not a corporation, such partnership, limited liability company
     or other  applicable  like action,] on the part of the  Purchaser.  Each of
     this Agreement and the Registration Rights Agreement has been duly executed
     by the Purchaser,  and when  delivered by the Purchaser in accordance  with
     the terms hereof,  will constitute the valid and legally binding obligation
     of the Purchaser, enforceable against it in accordance with its terms.

          (b)  INVESTMENT  INTENT.  The Purchaser is acquiring the Securities as
     principal for its own account for  investment  purposes only and not with a
     view to or for  distributing  or  reselling  such  Securities  or any  part


                                       8


     thereof,  without prejudice,  however, to the Purchaser's right, subject to
     the provisions of this Agreement, at all times to sell or otherwise dispose
     of all or any part of such Securities pursuant to an effective registration
     statement  under  the  Securities  Act or  under  an  exemption  from  such
     registration and otherwise in compliance with applicable  federal and state
     securities laws. The Purchaser is acquiring the Securities hereunder in the
     ordinary course of its business.  The Purchaser does not have any agreement
     or understanding, directly or indirectly, with any Person to distribute any
     of the Securities.

          (c)  PURCHASER  STATUS.  At the time the  Purchaser  was  offered  the
     Securities,  it was, and at the date hereof it is an "accredited  investor"
     as defined in Rule 501(a) under the  Securities  Act. The  Purchaser is not
     required  to be  registered  as a  broker-dealer  under  Section  15 of the
     Exchange Act.

          (d)  EXPERIENCE  OF THE  PURCHASER.  The  Purchaser,  either  alone or
     together with its representatives,  has such knowledge,  sophistication and
     experience  in  business  and  financial  matters  so as to be  capable  of
     evaluating  the  merits  and  risks of the  prospective  investment  in the
     Securities,  and has so evaluated the merits and risks of such  investment.
     The  Purchaser is able to bear the economic  risk of an  investment  in the
     Securities  and, at the present  time, is able to afford a complete loss of
     such investment.

          (e)  GENERAL  SOLICITATION.   The  Purchaser  is  not  purchasing  the
     Securities  as a result  of any  advertisement,  article,  notice  or other
     communication regarding the Securities published in any newspaper, magazine
     or similar media or broadcast over  television or radio or presented at any
     seminar or any other general solicitation or general advertisement.

          (f)  REGISTRATION  REQUIRED.  The Purchaser  hereby covenants with the
     Company  not to make  any sale of the  Shares  without  complying  with the
     provisions  hereof and of the Registration  Rights  Agreement,  and without
     effectively   causing  the  prospectus   delivery   requirement  under  the
     Securities Act to be satisfied (unless the Purchaser is selling such Shares
     in a transaction not subject to the prospectus delivery  requirement),  and
     the Purchaser acknowledges that the certificates evidencing the Shares will
     be  imprinted  with a  legend  that  prohibits  their  transfer  except  in
     accordance therewith.

          (g) ACCESS TO  INFORMATION.  The  Purchaser  acknowledges  that it has
     reviewed the SEC Reports and has been afforded (i) the  opportunity  to ask
     such questions as it has deemed necessary of, and to
     receive answers from,  representatives  of the Company concerning the terms
     and  conditions  of the  offering of the Shares and the merits and risks of
     investing in the Securities;  (ii) access to information  about the Company
     and the Subsidiaries and their respective financial  condition,  results of
     operations,  business,  properties,  management and prospects sufficient to
     enable it to evaluate its  investment;  and (iii) the opportunity to obtain
     such  additional  information  that the  Company  possesses  or can acquire
     without  unreasonable  effort  or  expense  that  is  necessary  to make an
     informed investment  decision with respect to the investment.  Neither such


                                       9


     inquiries  nor any  other  investigation  conducted  by or on behalf of the
     Purchaser or its  representatives or counsel shall modify,  amend or affect
     the Purchaser's  right to rely on the truth,  accuracy and  completeness of
     the Company's  representations and warranties  contained in the Transaction
     Documents.

          (h) CERTAIN FEES.  The Purchaser has not entered into any agreement or
     arrangement  that would entitle any broker or finder to compensation by the
     Company in connection with the sale of the Securities to the Purchaser

          (i) NO TAX, LEGAL OR INVESTMENT ADVICE. The Purchaser understands that
     nothing in the Transaction  Documents or any other  materials  presented to
     the  Purchaser in connection  with the purchase and sale of the  Securities
     constitutes tax, legal, or investment  advice.  The Purchaser has consulted
     such tax, legal, and investment advisors as it, in its sole discretion, has
     deemed  necessary or  appropriate  in  connection  with its purchase of the
     Securities.

          (j) The  Purchaser  represents  and  warrants  that it is aware of the
     following Telephone  Interpretation in the SEC Manual of Publicly Available
     Telephone Interpretations (July 1997):

          A.65. Section 5

          An issuer  filed a Form S-3  registration  statement  for a  secondary
          offering  of  common  stock  which  is not yet  effective.  One of the
          selling  shareholders  wanted  to do a  short  sale  of  common  stock
          "against  the box" and  cover the short  sale with  registered  shares
          after the effective  date.  The issuer was advised that the short sale
          could not be made before the registration statement becomes effective,
          because the shares  underlying the short sale are deemed to be sold at
          the time such sale is made. There would,  therefore, be a violation of
          Section 5 if the shares were  effectively  sold prior to the effective
          date.

          (k) The Purchaser represents and warrants that, in connection with its
     purchase of the Securities,  it has complied with all applicable provisions
     of the Act, the rules and  regulations  promulgated by the SEC  thereunder,
     including Regulation M, and applicable state securities laws.

     The Company acknowledges and agrees that the Purchaser does not make or has
not made any  representations  or  warranties  with respect to the  transactions
contemplated hereby other than those specifically set forth in this Section 3.2.

                                  ARTICLE IV.
                         OTHER AGREEMENTS OF THE PARTIES

     4.1 TRANSFER RESTRICTIONS.

          (a) The  Securities  may only be disposed of in compliance  with state
     and federal securities laws,  including pursuant to an exemption therefrom.


                                       10


     In connection with any transfer of the Securities other than pursuant to an
     effective registration statement, pursuant to paragraph (k) of Rule 144, to
     the Company,  to an Affiliate of a Purchaser or in connection with a pledge
     as contemplated  in Section 4.1(b),  the Company may require the transferor
     thereof  to provide to the  Company an opinion of counsel  selected  by the
     transferor,  the form and  substance of which  opinion  shall be reasonably
     satisfactory  to the  Company,  to the effect that such  transfer  does not
     require  registration of such  transferred  Securities under the Securities
     Act. As a condition of transfer, any such transferee shall agree in writing
     to be bound by the terms of this  Agreement  and shall have the rights of a
     Purchaser under this Agreement and the Registration Rights Agreement.

          (b) The Purchaser agree to the  imprinting,  so long as is required by
     this Section 4.1(b),  of a legend on any of the Securities in the following
     form:

          THESE  SECURITIES  HAVE NOT BEEN  REGISTERED  WITH THE  SECURITIES AND
          EXCHANGE  COMMISSION  OR THE  SECURITIES  COMMISSION  OF ANY  STATE IN
          RELIANCE UPON AN EXEMPTION FROM REGISTRATION  UNDER THE SECURITIES ACT
          OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY,  MAY NOT
          BE  OFFERED  OR SOLD  EXCEPT  PURSUANT  TO AN  EFFECTIVE  REGISTRATION
          STATEMENT  UNDER  THE  SECURITIES  ACT  OR  PURSUANT  TO AN  AVAILABLE
          EXEMPTION FROM, OR IN A TRANSACTION  NOT SUBJECT TO, THE  REGISTRATION
          REQUIREMENTS  OF THE SECURITIES ACT AND IN ACCORDANCE  WITH APPLICABLE
          STATE  SECURITIES  LAWS AS EVIDENCED BY A LEGAL  OPINION OF COUNSEL TO
          THE  TRANSFEROR  TO SUCH  EFFECT,  THE  SUBSTANCE  OF  WHICH  SHALL BE
          REASONABLY ACCEPTABLE TO THE COMPANY.  THESE SECURITIES MAY BE PLEDGED
          IN  CONNECTION  WITH A BONA  FIDE  MARGIN  ACCOUNT  WITH A  REGISTERED
          BROKER-DEALER  OR OTHER LOAN WITH A FINANCIAL  INSTITUTION  THAT IS AN
          "ACCREDITED  INVESTOR" AS DEFINED IN RULE 501(a) UNDER THE  SECURITIES
          ACT.

          The Company  acknowledges and agrees that a Purchaser may from time to
     time pledge and/or grant a security interest pursuant to a bona fide margin
     agreement in a bona fide margin account and, if required under the terms of
     such arrangement,  agreement or account, the Purchaser may transfer pledged
     or secured Securities to the pledgees or secured parties.  Such a pledge or
     transfer  would not be  subject to  approval  of the  Company  and no legal
     opinion of legal counsel of the pledgee,  secured party or pledgor shall be
     required  in  connection  therewith.  However,  at  the  discretion  of the
     Company, such legal opinion may be required in connection with a subsequent
     transfer  following  default by the Purchaser  transferee of the pledge. No
     notice shall be required of such pledge.  At the Purchaser's  expense,  the
     Company will execute and deliver such reasonable documentation as a pledgee
     or secured party of Securities may reasonably  request in connection with a


                                       11


     pledge or transfer of the  Securities,  including,  if the  Securities  are
     subject to registration pursuant to the Registration Rights Agreement,  the
     preparation  and filing of any required  prospectus  supplement  under Rule
     424(b)(3)  under the  Securities Act or other  applicable  provision of the
     Securities  Act to  appropriately  amend the list of  Selling  Stockholders
     thereunder.

          (c) The Purchaser  agrees that, in addition to the other  restrictions
     on  transfer  set forth in this  Section  4.1,  without  the prior  written
     consent  of the  Company,  until the date that is six  months  and two days
     after the Closing Date, the Purchaser shall not sell or otherwise  transfer
     or dispose of, directly or indirectly, any of the Shares.

     4.2  FURNISHING  OF  INFORMATION.   As  long  as  the  Purchaser  owns  the
Securities,  the  Company  covenants  to timely  file (or obtain  extensions  in
respect  thereof  and file  within the  applicable  grace  period)  all  reports
required  to be filed by the  Company  after  the date  hereof  pursuant  to the
Exchange Act.  Upon the  Purchaser's  request,  the Company shall deliver to the
Purchaser a written  certification of a duly authorized officer as to whether it
has  complied  with  the  preceding  sentence.  As  long as the  Purchaser  owns
Securities,  if the  Company is not  required to file  reports  pursuant to such
laws, it will prepare and furnish to the  Purchaser and make publicly  available
in accordance with Rule 144(c) such information as is required for the Purchaser
to sell the  Securities  under Rule 144. The Company  further  covenants that it
will take  such  further  action as any  holder  of  Securities  may  reasonably
request,  all to the extent  required from time to time to enable such Person to
sell such Securities  without  registration  under the Securities Act within the
limitation of the exemptions provided by Rule 144.

     4.3  INTEGRATION.  The  Company  shall not sell,  offer for sale or solicit
offers to buy or  otherwise  negotiate in respect of any security (as defined in
Section 2 of the Securities Act) that would be integrated with the offer or sale
of the  Securities  in a manner that would  require the  registration  under the
Securities  Act of the sale of the  Securities to the Purchaser or that would be
integrated  with the offer or sale of the  Securities  for purposes of the rules
and  regulations  of any Trading  Market such that it would require  shareholder
approval  prior to the  closing of such  other  transaction  unless  shareholder
approval is  obtained  before the closing of such  subsequent  transaction.

     4.4 SECURITIES LAWS DISCLOSURE;  PUBLICITY. The Company shall timely file a
Current Report on Form 8-K, and, if required,  issue a press release  reasonably
acceptable to the Purchaser disclosing the transactions  contemplated hereby and
make such other  filings  and  notices in the  manner and time  required  by the
Commission.  The  Company and the  Purchaser  shall  consult  with each other in
issuing any press releases with respect to the transactions contemplated hereby,
and neither the Company nor the Purchaser  shall issue any such press release or
otherwise  make any such  public  statement  without  the prior  consent  of the
Company,  with  respect to any press  release of the  Purchaser,  or without the
prior  consent  of the  Purchaser,  with  respect  to any press  release  of the
Company,  which  consent  shall not  unreasonably  be  withheld,  except if such
disclosure is required by law, in which case the disclosing party shall promptly
provide  the  other  party  with  prior  notice  of  such  public  statement  or
communication.

     4.5 INDEMNIFICATION OF PURCHASERS.  The Company will indemnify and hold the
Purchaser and its directors,  officers,  shareholders,  partners,  employees and


                                       12


agents  (each,  a  "PURCHASER   PARTY")   harmless  from  any  and  all  losses,
liabilities,  obligations,  claims, contingencies,  damages, costs and expenses,
including all judgments, amounts paid in settlements, court costs and reasonable
attorneys' fees and costs of  investigation  that any Purchaser Party may suffer
or incur as a result of or  relating  to: (a) any  misrepresentation,  breach or
inaccuracy, of any of the representations,  warranties,  covenants or agreements
made by the Company in this Agreement or in the other Transaction Documents;  or
(b) any cause of action,  suit or claim  brought or made  against the  Purchaser
Party  and  arising  solely  out of or  solely  resulting  from  the  execution,
delivery,  performance  or  enforcement  of this  Agreement  or any of the other
Transaction  Documents and without causation by any other activity,  obligation,
condition or liability  pertaining to the Purchaser.  The Company will reimburse
the Purchaser  Parties for their reasonable legal and other expenses  (including
the cost of any investigation,  preparation and travel in connection  therewith)
incurred in connection therewith, as such expenses are incurred.

     4.6  INDEMNIFICATION OF THE COMPANY.  The Purchaser will indemnify and hold
the Company and its directors, officers,  shareholders,  partners, employees and
agents (each, a "COMPANY PARTY") harmless from any and all losses,  liabilities,
obligations,  claims, contingencies,  damages, costs and expenses, including all
judgments,  amounts paid in settlements,  court costs and reasonable  attorneys'
fees and costs of investigation  that any Company Party may suffer or incur as a
result of or relating to any misrepresentation,  breach or inaccuracy, of any of
the representations,  warranties,  covenants or agreements made by the Purchaser
in this  Agreement or in the other  Transaction  Documents.  The Purchaser  will
reimburse  the Company  Parties for their  reasonable  legal and other  expenses
(including the cost of any  investigation,  preparation and travel in connection
therewith) incurred in connection therewith, as such expenses are incurred.

     4.7 LISTING OF COMMON STOCK. The Company shall use commercially  reasonably
efforts  to  maintain  the  listing of the Common  Stock on the  American  Stock
Exchange,  and as soon as reasonably  practicable following the Closing (but not
later than the Effective  Date) to list all of the Shares on the American  Stock
Exchange.  The Company further agrees, if the Company applies to have the Common
Stock traded on any other Trading  Market,  it will include in such  application
all of the Shares,  and will take such other action as is necessary or desirable
in the opinion of the  Purchaser  to cause the Shares to be listed on such other
Trading  Market as  promptly  as  possible.  The  Company  will take all  action
reasonably  necessary to continue the listing and trading of its Common Stock on
a Trading  Market and will comply in all respects with the Company's  reporting,
filing and other obligations under the bylaws or rules of the Trading Market.

                                   ARTICLE V.
                                  MISCELLANEOUS

     5.1 FEES AND  EXPENSES.  The  Company  shall  pay the  reasonable  fees and
expenses of the Purchaser's advisers, counsel, accountants and other experts, if
any, and other expenses  incurred by the Purchaser  incident to the negotiation,
preparation,  execution, delivery and performance of this Agreement. The Company
shall pay all stamp and other  taxes and duties  levied in  connection  with the
sale of the Securities.

                                       13


     5.2 ENTIRE AGREEMENT. The Transaction Documents, together with the exhibits
and  schedules  thereto,  contain the entire  understanding  of the parties with
respect to the subject  matter  hereof and supersede  all prior  agreements  and
understandings, oral or written, with respect to such matters, which the parties
acknowledge have been merged into such documents, exhibits and schedules.

     5.3  NOTICES.  All  notices,  requests,  demands  or  other  communications
provided  for or permitted to be given  pursuant to this  Agreement  shall be in
writing  and shall be deemed to have been duly given when  delivered  personally
(which  personal  delivery  shall  include  delivery  by  responsible  overnight
courier),  or five days after being sent by registered or certified mail, return
receipt requested, postage prepaid:

                 (a)  If to the Company to:

                      Lynch Corporation
                      50 Kennedy Plaza, Suite 1250
                      Providence, Rhode Island 02903
                      Attention:  Chief Executive Officer
                      Tel:  (401) 453-2007

                      with a copy to:

                      Olshan Grundman Frome Rosenzweig & Wolosky LLP
                      Park Avenue Tower
                      65 East 55th Street
                      New York, New York 10022
                      Attention:  David J. Adler, Esq.
                      Tel:  (212) 451-2300

                 (b)  If to the Purchaser to:

                      Venator Merchant Fund L.P.
                      One Corporate Center
                      Rye, New York 10580
                      Attention:  Marc J. Gabelli
                      Tel:  (914) 921-5100

By giving to the other party at least five days' written notice thereof,  either
party  hereto  shall have the right from time to time and at any time during the
term of this  Agreement  to change its  respective  address and each party shall
have the right to specify as its  address  any other  address  within the United
States of America.

     5.4  AMENDMENTS;  WAIVERS.  No provision of this Agreement may be waived or
amended except in a written instrument  signed, in the case of an amendment,  by
the Company and the Purchaser or, in the case of a waiver,  by the party against
whom  enforcement  of any such waiver is sought.  No waiver of any default  with
respect to any provision,  condition or  requirement of this Agreement  shall be


                                       14


deemed to be a  continuing  waiver in the  future or a waiver of any  subsequent
default or a waiver of any other provision, condition or requirement hereof, nor
shall any delay or omission of either party to exercise  any right  hereunder in
any manner impair the exercise of any such right.

     5.5  CONSTRUCTION.  The headings  herein are for  convenience  only, do not
constitute a part of this  Agreement  and shall not be deemed to limit or affect
any of the provisions hereof. The language used in this Agreement will be deemed
to be the language chosen by the parties to express their mutual intent,  and no
rules of strict  construction  will be applied against any party. This Agreement
shall be construed as if drafted  jointly by the parties,  and no presumption or
burden of proof shall arise favoring or  disfavoring  any party by virtue of the
authorship  of any  provisions  of  this  Agreement  or  any of the  Transaction
Documents.

     5.6 SUCCESSORS AND ASSIGNS.  This Agreement shall be binding upon and inure
to the benefit of the parties and their  successors and permitted  assigns.  The
Company may not assign this  Agreement  or any rights or  obligations  hereunder
without the prior written consent of the Purchaser. The Purchaser may assign any
or all of its rights under this  Agreement  to any Person to whom the  Purchaser
assigns or transfers any Securities,  provided such transferee agrees in writing
to be bound,  with  respect to the  transferred  Securities,  by the  provisions
hereof that apply to the "Purchaser".

     5.7 NO  THIRD-PARTY  BENEFICIARIES.  This  Agreement  is  intended  for the
benefit of the parties  hereto and their  respective  successors  and  permitted
assigns and is not for the benefit of, nor may any provision  hereof be enforced
by, any other Person, except as otherwise set forth in Section 4.9.

     5.8 GOVERNING  LAW. All questions  concerning the  construction,  validity,
enforcement and interpretation of the Transaction Documents shall be governed by
and construed and enforced in accordance  with the internal laws of the State of
New York,  without  regard to the  principles of conflicts of law thereof.  Each
party  agrees  that  all  legal  proceedings   concerning  the  interpretations,
enforcement and defense of the  transactions  contemplated by this Agreement and
any other Transaction  Documents  (whether brought against a party hereto or its
respective affiliates,  directors, officers, shareholders,  employees or agents)
shall be commenced  exclusively  in the state or federal  courts  sitting in the
County of New York,  State of New York.  Each party  hereto  hereby  irrevocably
submits to the exclusive jurisdiction of the state and federal courts sitting in
the County of New York,  State of New York for the  adjudication  of any dispute
hereunder or in connection herewith or with any transaction  contemplated hereby
or discussed  herein  (including  with respect to the  enforcement of any of the
Transaction Documents),  and hereby irrevocably waives, and agrees not to assert
in any suit, action or proceeding,  any claim that it is not personally  subject
to the jurisdiction of any such court,  that such suit,  action or proceeding is
improper.  Each party  hereto  hereby  irrevocably  waives  personal  service of
process  and  consents  to  process  being  served in any such  suit,  action or
proceeding  by  mailing a copy  thereof  via  registered  or  certified  mail or
overnight  delivery  (with evidence of delivery) to such party at the address in
effect for notices to it under this Agreement and agrees that such service shall
constitute good and sufficient  service of process and notice  thereof.  Nothing
contained  herein shall be deemed to limit in any way any right to serve process
in any manner  permitted by law. Each party hereto  (including  its  affiliates,
agents,  officers,  directors and employees) hereby  irrevocably  waives, to the


                                       15


fullest extent  permitted by applicable  law, any and all right to trial by jury
in any legal  proceeding  arising out of or relating  to this  Agreement  or the
transactions  contemplated  hereby.  If either party shall commence an action or
proceeding  to  enforce  any  provisions  of a  Transaction  Document,  then the
prevailing  party in such action or proceeding  shall be reimbursed by the other
party for its  attorneys  fees and other costs and  expenses  incurred  with the
investigation, preparation and prosecution of such action or proceeding.

     5.9 SURVIVAL.  The  representations,  warranties,  agreements and covenants
contained herein shall survive the Closing and delivery of the Shares.

     5.10 EXECUTION. This Agreement may be executed in two or more counterparts,
all of which when taken  together shall be considered one and the same agreement
and shall become effective when  counterparts have been signed by each party and
delivered to the other  party,  it being  understood  that both parties need not
sign the same  counterpart.  In the event that any  signature  is  delivered  by
facsimile  transmission,  such  signature  shall  create  a  valid  and  binding
obligation  of the  party  executing  (or on  whose  behalf  such  signature  is
executed)  with the same force and effect as if such  facsimile  signature  page
were an original thereof.

     5.11 SEVERABILITY. If any provision of this Agreement is held to be invalid
or  unenforceable  in  any  respect,  the  validity  and  enforceability  of the
remaining  terms  and  provisions  of  this  Agreement  shall  not in any way be
affected or impaired  thereby and the parties will attempt to agree upon a valid
and enforceable provision that is a reasonable substitute therefor,  and upon so
agreeing, shall incorporate such substitute provision in this Agreement.

     5.12 REPLACEMENT OF SECURITIES. If any certificate or instrument evidencing
any Securities is mutilated,  lost, stolen or destroyed, the Company shall issue
or cause to be issued in exchange  and  substitution  for and upon  cancellation
thereof,  or  in  lieu  of  and  substitution  therefor,  a new  certificate  or
instrument,  but only upon receipt of evidence  reasonably  satisfactory  to the
Company  of such  loss,  theft  or  destruction  and  customary  and  reasonable
indemnity,  if requested.  The  applicants  for a new  certificate or instrument
under  such  circumstances  shall  also  pay any  reasonable  third-party  costs
associated with the issuance of such replacement Securities.

     5.13  REMEDIES.  In  addition  to being  entitled  to  exercise  all rights
provided herein or granted by law, including recovery of damages,  the Purchaser
and the Company will be entitled to specific  performance  under the Transaction
Documents.  The  parties  agree  that  monetary  damages  may  not  be  adequate
compensation  for any loss  incurred  by  reason of any  breach  of  obligations
described in the foregoing  sentence and hereby agree to waive in any action for
specific  performance  of any such  obligation  the defense that a remedy at law
would be adequate.

                           [SIGNATURE PAGE TO FOLLOW]




                                       16


     IN WITNESS WHEREOF, the parties hereto have caused this Securities Purchase
Agreement to be duly executed by their respective authorized  signatories on the
date first indicated above.

                                    LYNCH CORPORATION


                                    By:    /s/ John C. Ferrara
                                           -------------------------------------
                                    Name:  John C. Ferrara
                                    Title: President and Chief Executive Officer


                                    VENATOR MERCHANT FUND L.P.
                                    By:  Venator Global LLC, its General Partner


                                    By:    /s/ Marc J. Gabelli
                                           ------------------------------------
                                    Name:  Marc J. Gabelli
                                    Title: President





                                       17

EX-10.4

                          REGISTRATION RIGHTS AGREEMENT

     This REGISTRATION  RIGHTS AGREEMENT (this  "Agreement") is made and entered
into this 15th day of  October,  2004,  by and  between  Lynch  Corporation,  an
Indiana  corporation  ("Lynch"),  and  Venator  Merchant  Fund L.P.,  a Delaware
limited partnership (the "Purchaser").

                                    RECITALS

     Lynch and the Purchaser are entering into a Securities  Purchase  Agreement
of even date herewith (the "Purchase Agreement"),  providing for the purchase by
Purchaser and sale by Lynch of 136,643  shares of common stock,  par value $0.01
per share,  of Lynch ("Common  Stock").  The shares of Common Stock purchased by
the Purchaser  pursuant to the Purchase  Agreement are referred to herein as the
"Shares."

     This Agreement is being entered into  concurrently  with the closing of the
transactions  contemplated by the Purchase Agreement.  The parties hereto desire
that the Shares be subject to the rights and obligations described herein.

     NOW,  THEREFORE,  in  consideration  of the  premises  and  the  covenants,
agreements,  representations and warranties set forth herein, and for other good
and valuable consideration, the parties agree as follows:

     1.  DEFINITIONS.  Capitalized  terms used herein and not otherwise  defined
shall have the meanings  given them in the Purchase  Agreement.  As used in this
Agreement:

         (a)  "Commission"  means the Securities and Exchange  Commission or any
other federal agency at the time administering the Securities Act.

         (b)  "Exchange  Act"  means the  Securities  Exchange  Act of 1934,  as
amended,  or any similar federal statute  enacted  hereafter,  and the rules and
regulations  of the  Commission  thereunder,  all as the same shall be in effect
from time to time.

         (c) "Holder" means the Purchaser or any  Transferee  complying with the
provisions of Section 19 that holds Registrable Securities.

         (d) "Prospectus"  means a prospectus forming a part of the Registration
Statement.

         (e) The terms "register,"  "registered" and  "registration"  refer to a
registration  effected  by  preparing  and filing a  registration  statement  in
compliance   with  the  Securities  Act  and  the  declaration  or  ordering  of
effectiveness of such registration statement by the Commission.

         (f)  "Registrable   Securities"  means  the  Shares,  as  well  as  any
securities  issued as a dividend or other  distribution  with  respect to, or in
exchange or in replacement of, the Shares.

         (g)  "Registration  Period"  has the  meaning  ascribed to such term in
Section 2.

                                       18


         (h) "Rule 144" means Rule 144  promulgated  under the Securities Act or
any similar rule enacted hereafter,  as the same shall be in effect from time to
time.

         (i) "Securities  Act" means the Securities Act of 1933, as amended,  or
any similar  federal statute  enacted  hereafter,  and the rules and regulations
promulgated thereunder, all as the same shall be in effect from time to time.

         (j) "Transferee" has the meaning ascribed to such term in Section 19.

     2.  REGISTRATION ON FORM S-3.  Lynch,  at its sole cost and expense,  shall
prepare and file with the  Commission,  within 60 days after the Closing Date, a
registration  statement  on Form S-3  pursuant to Rule 415 under the  Securities
Act,  or, in the event that Form S-3 is  unavailable  to Lynch,  a  registration
statement on such other form (in either event,  the  "Registration  Statement"),
covering the resale of the Shares  owned by each Holder,  and shall use its best
efforts: (i) to cause the Registration Statement to become effective as promptly
thereafter  as  possible;   and  (ii)  to  maintain  the  effectiveness  of  the
Registration  Statement for a minimum period of two years,  subject to extension
of that period as provided in Section 5 (or, if sooner, until such time, if any,
as the  registered  Shares are permitted to be sold by each Holder or Transferee
thereof without registration and without limitation pursuant to paragraph (k) of
Rule 144 (the "Registration Period")).

     3.  REGISTRATION  PROCEDURES.  In connection  with the  registration of any
Registrable   Securities,   Lynch   shall,   as   expeditiously   as   possible:

         (a)  Prepare  and  file  with the  Commission  such  pre-effective  and
post-effective  amendments and supplements to the Registration Statement and the
prospectus used in connection with the Registration Statement,  and/or file such
reports  under the Exchange  Act, as may be necessary to cause the  Registration
Statement to become effective,  to keep the Registration  Statement continuously
effective  during  the  Registration  Period  and  not  misleading,  and  as may
otherwise be required or applicable under, and to comply with the provisions of,
the Securities Act with respect to the disposition of all Registrable Securities
covered by the Registration Statement during the Registration Period.

         (b) Furnish to each Holder such number of copies of the Prospectus, and
each amendment or supplement thereto, in conformity with the requirements of the
Securities Act, and such other  documents as the Holders may reasonably  request
in order to facilitate the disposition of Registrable Securities owned by it.

         (c)  Promptly  notify  each  Holder:  (i)  when  a  Prospectus  or  any
Prospectus  supplement or post-effective  amendment is proposed to be filed and,
with  respect  to  any  post-effective  amendment,  when  the  same  has  become
effective,  (ii) of any request by the  Commission or any other federal or state
governmental authority for amendments or supplements to a Registration Statement
or a  Prospectus  or for  additional  information,  (iii) of the issuance by the
Commission of any stop order  suspending  the  effectiveness  of a  Registration
Statement or the  initiation of any  proceedings  for that purpose,  (iv) of the
receipt  by Lynch of any  notification  with  respect to the  suspension  of the
qualification  or  exemption  from  qualification  of  any  of  the  Registrable


                                       2



Securities for sale in any jurisdiction, or the initiation or threatening of any
proceeding  for  such  purpose,  and  (v) of the  occurrence  of  any  event  or
circumstance  that makes any  statement  made in the  Registration  Statement or
Prospectus or any document  incorporated or deemed to be incorporated therein by
reference  untrue in any  material  respect or that  requires  the making of any
changes in the Registration  Statement,  Prospectus or documents so that, in the
case of the Registration  Statement and any amendment or supplement  thereto, it
will not contain any untrue  statement  of a material  fact or omit to state any
material fact required to be stated  therein or necessary to make the statements
therein  not  misleading,  and that in the case of the  Prospectus,  it will not
contain any untrue  statement  of a material  fact or omit to state any material
fact required to be stated therein or necessary to make the statements  therein,
in light of the circumstances under which they were made, not misleading.

         (d) Make  every  reasonable  effort to avoid the  issuance  of,  or, if
issued,  obtain the withdrawal of, any order suspending the effectiveness of the
Registration  Statement,  or the lifting of any suspension of the  qualification
(or exemption from qualification) of any of the Registrable  Securities for sale
in any jurisdiction, at the earliest practicable moment.

         (e) If requested by any of the Holders,  (i) promptly  incorporate in a
Prospectus  supplement or  post-effective  amendment  such  information  as such
Holders  reasonably  request be included  therein  regarding such Holders or the
plan of distribution  of the  Registrable  Securities and (ii) make all required
filings of the Prospectus supplement or such post-effective amendment as soon as
practicable  after  Lynch  has  received  notification  of  such  matters  to be
incorporated  in  such  Prospectus   supplement  or  post-effective   amendment;
provided,  however, that Lynch shall not be required to take any action pursuant
to this  Section  3(e) that would,  in the opinion of counsel to Lynch,  violate
applicable law.

         (f) Upon the occurrence of any event  contemplated  by Section 3(c), as
promptly  as  practicable,  prepare  and  deliver to the  Holders  any  required
supplement  or  amendment,   including  a  post-effective   amendment,   to  the
Registration  Statement  or a  supplement  to the  Prospectus  or  any  document
incorporated  or deemed to be  incorporated  therein by reference,  and file any
other required  document,  including such reports as may be required to be filed
under the Exchange Act, so that, as thereafter  delivered,  the Prospectus  will
not contain an untrue  statement of a material  fact or omit to state a material
fact required to be stated therein or necessary to make the statements  therein,
in light of the circumstances under which they were made, not misleading.

         (g) Use its best efforts to cause all Registrable Securities the resale
of which is registered under cover of the Registration Statement to be listed on
the  American  Stock  Exchange or such other  securities  exchange or  automated
quotation  system,  if any,  as is then the  principal  securities  exchange  or
automated quotation system on which the Common Stock is then listed.

         (h) Use its best efforts to cause all Registrable Securities registered
by the Registration Statement to be registered or qualified under the securities
or "blue  sky" laws of such  states as the  Holders  shall  reasonably  request;
provided,  however,  that Lynch shall not be required to qualify generally to do
business in any  jurisdiction  where it is not then so  qualified or to take any


                                       3


action  that  would  subject  it to  general  service  of  process  in any  such
jurisdiction  where  it is not  then so  subject  or to  subject  itself  to any
material tax in any such jurisdiction where it is not then so subject.

         (i) Cooperate with the Holders to facilitate the timely preparation and
delivery of  certificates  representing  the  Registrable  Securities to be sold
pursuant to the  Registration  Statement free of any restrictive  legends and in
such  denominations  and  registered in such names as the Holders may reasonably
request a reasonable period of time prior to sales of the Registrable Securities
pursuant to the Registration Statement.

     4. OBLIGATION TO FURNISH INFORMATION.  It shall be a condition precedent to
the  obligations  of Lynch to take any action  pursuant to this  Agreement  with
respect  to the  Registrable  Shares of a Holder  that such  Holder  shall  have
furnished to Lynch such  information  regarding it, the  Registrable  Securities
held  by it,  and  the  intended  method  of  disposition  of  such  Registrable
Securities  as Lynch  shall  reasonably  request  and as shall  be  required  in
connection with the action to be taken by Lynch.

     5. DELAY OR SUSPENSION OF REGISTRATION STATEMENT.

         (a) If (i) Lynch is engaged in any active  program  for  repurchase  of
Common Stock; (ii) Lynch is conducting or about to conduct an offering of Common
Stock and Lynch is advised by the investment  banker engaged by Lynch to conduct
the offering that such offering would be affected  adversely by the registration
of the offer and sale of the  Registrable  Securities;  (iii)  there is material
non-public information regarding Lynch that the Board of Directors of Lynch (the
"Board")  reasonably  determines  not to be in Lynch's best interest to disclose
and  that  Lynch is not  otherwise  required  to  disclose,  or (iv)  there is a
significant business opportunity (including, but not limited to, the acquisition
or  disposition  of assets other than in the ordinary  course of business or any
merger,  consolidation,  tender offer or other similar transaction) available to
Lynch that the Board reasonably determines not to be in Lynch's best interest to
disclose, Lynch may (x) postpone or suspend filing of the Registration Statement
for a period  not to exceed  45  consecutive  days or (y)  postpone  or  suspend
effectiveness  of the  Registration  Statement  for a period  not to  exceed  45
consecutive days; PROVIDED that Lynch may not postpone or suspend  effectiveness
of the Registration  Statement under this Section 5(a) for more than 120 days in
the aggregate  during any consecutive  12-month period;  and PROVIDED,  FURTHER,
that no such  postponement  or  suspension  shall be permitted  for  consecutive
45-day  periods  arising  out  of  the  same  set  of  facts,  circumstances  or
transactions.

         (b)  Upon  receipt  of any  notice  from  Lynch to the  Holders  of the
happening of any event of the kind described in Section 5(a),  each Holder shall
forthwith discontinue  disposition of Registrable Securities until such Holder's
receipt  of copies of a  supplemented  or  amended  Prospectus  contemplated  by
Section 3(f), or until it is advised in writing (the "Advice") by Lynch that the
use of the Prospectus may be resumed,  and has received copies of any additional
or supplemental filings that are incorporated by reference in the Prospectus. If
so directed  by Lynch,  each  Holder  shall  deliver to Lynch (at the expense of
Lynch) all  copies,  other than  permanent  file  copies  then in each  Holder's
possession,  of the Prospectus current at the time of receipt of such notice. In
the event Lynch shall give any such  notice,  the  Registration  Period shall be
extended by the number of days during the period from and  including the date of


                                       4


the giving of such notice  pursuant to Section 3(c) or 5(a) to and including the
date when the  Holders  shall  have  received  the copy of the  supplemented  or
amended prospectus contemplated by Section 3(f) or the Advice.

         (c)  Each  Holder  whose  Registrable   Securities  are  covered  by  a
Registration  Statement filed pursuant to Section 2 hereof agrees, if and to the
extent  requested by the managing  underwriter or underwriters in the case of an
underwritten offering of Common Stock by Lynch or any shareholder of Lynch other
than Holders  proposing to make sales of Common Stock pursuant to a registration
statement  under the Securities Act (to the extent timely notified in writing by
Lynch or such managing underwriter or underwriters or such shareholder),  not to
effect any  public  sale or  distribution  of  securities  of Lynch of any class
included in such Registration  Statement,  including a sale pursuant to Rule 144
(or any similar rule then in force) under the Securities  Act, except as part of
such underwritten registration,  during the 10-day period prior to, and a period
of up to 90 days beginning on, the effective date of any  underwritten  offering
made pursuant to such  Registration  Statement;  provided  that, if requested by
such managing  underwriter or  underwriters  or such  shareholder of Lynch,  the
executive  officers and  directors  of Lynch shall have  similarly  agreed;  and
provided  further  that in no event shall the  provisions  of this  Section 5(c)
prevent the sale of Registrable Securities for more than 100 days in any 365-day
period.  In the event Lynch or the managing  underwriter or underwriters or such
shareholder  shall  give any  such  notice,  the  Registration  Period  shall be
extended by the number of days that the Holders are  prohibited  from  effecting
any such public sale or distribution pursuant to this Section 5(c).

     6. EXPENSES OF REGISTRATION.  All expenses  incurred in connection with the
registration  pursuant to Section 2 (excluding any  underwriters'  discounts and
commissions and fees and  disbursements of counsel for the Holders),  including,
without  limitation  all  registration  and  qualification  fees,  and  fees and
disbursements of counsel for Lynch, shall be borne by Lynch.

     7. INDEMNIFICATION.

         (a) To the full extent  permitted by law, Lynch shall,  and hereby does
indemnify and hold harmless each Holder,  each  director,  officer,  partner and
agent of each Holder,  any underwriter  (as defined in the Securities  Act), and
each person, if any, who controls each Holder, or underwriter within the meaning
of the Securities Act, against any losses, claims, damages or liabilities, joint
or  several,  to which  they may become  subject  under the  Securities  Act and
applicable  state  securities  laws insofar as such losses,  claims,  damages or
liabilities  (or  actions in respect  thereof)  arise out of or are based on any
untrue or  alleged  untrue  statement  of any  material  fact  contained  in the
Registration Statement, including any preliminary Prospectus or final Prospectus
or any amendments or supplements  thereto, or arise out of or are based upon the
omission or alleged  omission to state  therein a material  fact  required to be
stated therein in light of the circumstance under which it was made or necessary
to make the  statements  therein not misleading or arise out of any violation by
Lynch of any rule or regulation  promulgated under the Securities Act applicable
to Lynch and relating to action or inaction required of Lynch in connection with
any such  registration;  and shall  reimburse  each such person for any legal or
other expenses  reasonably  incurred by him in connection with  investigating or
defending  any such loss,  claim,  damage,  liability or action.  The  indemnity
agreement  contained  in this  Section  7 shall  not  apply to  amounts  paid in
settlement  of any such  loss,  claim,  damage,  liability,  or  action  if such


                                       5


settlement is effected  without the consent of Lynch (which consent shall not be
unreasonably  withheld)  nor shall Lynch be liable to a Holder,  underwriter  or
controlling person for any such loss, claim, damage,  liability or action to the
extent that it arises out of or is based upon an untrue  statement or an alleged
untrue  statement or omission or alleged  omission made in  connection  with the
Registration Statement,  preliminary Prospectus, final Prospectus, or amendments
or  supplements  thereto,  in reliance upon and in conformity  with  information
furnished by such Holder in writing for use in connection with such registration
by or on behalf of such Holder, underwriter or controlling person.

         (b) To the full extent  permitted by law,  each Holder shall  indemnify
and hold harmless  Lynch,  each of its directors,  each of its officers who have
signed the  registration  statement,  each person,  if any,  who controls  Lynch
within the meaning of the Securities  Act, and any underwriter for Lynch (within
the meaning of the  Securities  Act),  against any  losses,  claims,  damages or
liabilities,  joint or several,  to which Lynch or any such  director,  officer,
controlling  person or underwriter may become subject,  under the Securities Act
and applicable state securities laws, insofar as such losses, claims, damages or
liabilities  (or actions in respect  thereof) arise out of or are based upon any
untrue  statement or alleged untrue  statement of any material fact contained in
the  Registration  Statement,  including  any  preliminary  Prospectus  or final
Prospectus or any  amendments  or  supplements  thereto,  or arise out of or are
based upon the  omission or alleged  omission to state  therein a material  fact
required to be stated  therein or necessary to make the  statements  therein not
misleading in light of the  circumstances,  in each case to the extent, but only
to the  extent,  that such  untrue  statement  or alleged  untrue  statement  or
omission or alleged omission was made in the Registration Statement, preliminary
or final Prospectus,  or amendments or supplements thereto, in reliance upon and
in conformity  with  information  furnished in writing by such Holder for use in
connection with such  registration.  The indemnity  agreement  contained in this
Section 7 shall not apply to amounts paid in settlement of any such loss, claim,
damage,  liability, or action if such settlement is effected without the consent
of such Holder (which consent shall not be unreasonably withheld).

         (c) In no event shall the liability of any Holder under Section 7(b) be
greater  than the lesser of (a) its pro rata portion of any  liability  based on
the total liability of all Holders similarly situated,  or (b) the dollar amount
of the net  proceeds  received by such  Holder upon the sale of the  Registrable
Securities giving rise to such indemnification obligation.

         (d) Promptly after receipt by an indemnified party under this Section 7
of notice of the  commencement of any action or actual knowledge of a claim that
would,  if  asserted,  give  rise  to a  claim  for  indemnity  hereunder,  such
indemnified party shall, if a claim in respect thereof is to be made against any
indemnifying  party  under this  Section 7,  notify  the  indemnifying  party in
writing of the  commencement  thereof or knowledge  thereof and the indemnifying
party  shall  have  the  right  to  participate  in,  and,  to  the  extent  the
indemnifying  party so  desires,  jointly  with  any  other  indemnifying  party
similarly  noticed,  to assume the defense thereof with qualified  counsel.  The
failure to notify an indemnifying party promptly of the commencement of any such
action or of the knowledge of any such claim,  if materially  prejudicial to its
ability to defend such  action,  shall  relieve such  indemnifying  party of any
liability to the indemnified  party under this Section 7, but the omission so to
notify the indemnifying  party shall not relieve it of any liability that it may
have to any indemnified party otherwise than under this Section.

                                       6


         (e) If the  indemnification  provided  for in this Section 7 is for any
reason,  other than pursuant to the terms thereof,  held to be unavailable to an
indemnified party in respect of any losses,  claims,  damages or liabilities (or
actions in respect thereof) referred to therein,  then each  indemnifying  party
shall, in lieu of indemnifying such indemnified party,  contribute to the amount
paid or payable by such  indemnified  party as a result of such losses,  claims,
damages or liabilities (or actions in respect  thereof) in such proportion as is
appropriate to reflect the relative fault of Lynch and each Holder in connection
with the statements or omissions that resulted in such losses, claims,  damages,
liabilities  (or  actions in  respect  thereof),  as well as any other  relevant
equitable  considerations.  The relative  fault shall be determined by reference
to,  among other  things,  whether the untrue or alleged  untrue  statement of a
material  fact  relates  to  information  supplied  by Lynch or a Holder and the
parties'  relative intent,  knowledge,  access to information and opportunity to
correct or prevent such statement or omission.  Lynch and each Holder agree that
it would not be just and equitable if contribution pursuant to this Section 7(e)
were determined by pro rata allocation or by any other method of allocation that
does not take account of the equitable  considerations referred to above in this
Section 7(e). The amount paid or payable by an indemnified  party as a result of
the losses,  claims,  damages or  liabilities  (or  actions in respect  thereof)
referred to above in this  Section  7(e) shall be deemed to include any legal or
other expenses  reasonably incurred by such indemnified party in connection with
investigating  or defending any such action or claim,  but shall be subject,  in
the case of a Holder,  to the limitation of Section 7(c) above. No person guilty
of  fraudulent  misrepresentation  within the  meaning  of Section  11(d) of the
Securities  Act shall be  entitled to  contribution  from any person who was not
guilty  of such  fraudulent  misrepresentation.  No party  shall be  liable  for
contribution with respect to any loss, claim,  damage,  liability,  or action if
such  settlement is effected  without the prior  written  consent of such party,
which consent shall not be reasonably withheld.

     8.  TERMINATION.  This Agreement  shall  terminate  upon  expiration of the
Registration  Period,  provided that the rights and  obligations  of the parties
pursuant to Section 7 shall survive such termination.

     9. RULE 144.  During  the  Registration  Period,  Lynch  shall use its best
efforts to file the reports required to be filed by it under the Exchange Act in
a timely  manner and, if at any time Lynch is not required to file such reports,
it shall, upon the request of any Holder,  use its best efforts to make publicly
available other  information so long as is necessary to permit sales pursuant to
Rule 144.  Lynch  shall take such  further  action as any Holder may  reasonably
request,  all to the extent  required from time to time to enable such Holder to
sell  Registrable  Securities  without  registration  under the  Securities  Act
pursuant to the exemption  provided by Rule 144 under the  Securities  Act. Upon
the  request  of any  Holder,  Lynch  shall  deliver  to the  Holders  a written
statement as to whether it has complied with such information requirements.

     10. REMEDIES.  In case any one or more of the covenants  and/or  agreements
set forth in this  Agreement  shall  have been  breached  by Lynch or any of the
Holders,  the  Holders or Lynch (as the case may be) may  proceed to protect and
enforce its or their  rights  either by suit in equity  and/or by action at law,
including,  but not  limited  to, an action for  damages as a result of any such
breach  and/or an action for  specific  performance  or  injunctive  relief with
respect to any such covenant or agreement contained in this Agreement.

                                       7


     11.  NOTICES.  All  notices,  requests,  demands  or  other  communications
provided  for or permitted to be given  pursuant to this  Agreement  shall be in
writing  and shall be deemed to have been duly given when  delivered  personally
(which  personal  delivery  shall  include  delivery  by  responsible  overnight
courier),  or five days after being sent by registered or certified mail, return
receipt requested, postage prepaid:

            (i)   If to Lynch to:

                  Lynch Corporation
                  50 Kennedy Plaza, Suite 1250
                  Providence, Rhode Island 02903
                  Attention:  Chief Executive Officer
                  Tel:  (401) 453-2007

                  with a copy to:

                  Olshan Grundman Frome Rosenzweig & Wolosky LLP
                  Park Avenue Tower
                  65 East 55th Street
                  New York, New York 10022
                  Attention:  David J. Adler, Esq.
                  Tel:  (212) 451-2300

                  If to the Holders to:

                  Venator Merchant Fund L.P.
                  One Corporate Center
                  Rye, New York 10580
                  Attention: Marc J. Gabelli
                  Tel:  (914) 921-5100

All such notices, requests, demands or other communications to be given by or to
the  Holders  shall be given by or to the  Purchaser.  By  giving  to the  other
parties at least five days' written notice thereof,  any party hereto shall have
the right from time to time and at any time during the term of this Agreement to
change its respective  address and each party shall have the right to specify as
its address any other address within the United States of America.

     12. GRANT OF OTHER REGISTRATION  RIGHTS. From time to time, Lynch may grant
registration  rights to any other  holder  or  prospective  holder of any of the
capital stock of Lynch.

     13. BINDING  AGREEMENT.  This Agreement and each provision  herein shall be
binding upon and  applicable  to, and shall inure to the benefit of, Lynch,  the
Purchaser and their permitted assigns and legal representatives.

     14. CONSENTS AND WAIVERS. No consent or waiver,  express or implied, by any
party  hereto of the breach,  default or  violation by any other party hereto of
its obligations hereunder shall be deemed or construed to be a consent or waiver


                                       8


to or of any  other  breach,  default  or  violation  of the  same or any  other
obligations of such party hereunder.  Failure on the part of any party hereto to
complain  of any act of any of the other  parties or to declare any of the other
parties  hereto in default,  irrespective  or how long such  failure  continues,
shall not constitute a waiver by such party of his rights hereunder.

     15. APPLICABLE LAW AND CONSENT TO JURISDICTION.

         (a) This  Agreement  shall be governed by and  construed in  accordance
with the laws of the State of New York,  without giving effect to the principles
of conflicts of law thereof.

         (b) The  parties  hereto  hereby  irrevocably  submit to the  exclusive
jurisdiction  of the New York state courts,  or the United States District Court
for the Southern  District of New York, in each case sitting in New York County,
New York over any  action  or  proceeding  arising  out of or  relating  to this
Agreement  and the  transactions  contemplated  hereby  and each of the  parties
hereto  hereby  irrevocably  agrees that all claims in respect to such action or
proceeding  shall be heard  and  determined  in such New York  state or  federal
court.  Each of the parties  hereto hereby  irrevocably  waives,  to the fullest
extent legally possible, the defense of an inconvenient forum to the maintenance
of such action or proceeding.

     16. PRIOR AGREEMENTS; AMENDMENTS. This Agreement and the Purchase Agreement
supersede  any prior or  contemporaneous  understanding  or agreement  among the
parties to the Purchase  Agreement  respecting the subject matter hereof.  There
are no arrangements,  understandings or agreements,  oral or written, among such
parties  relating to the subject  matter of this  Agreement,  except those fully
expressed herein or in documents executed contemporaneously herewith,  including
the Purchase  Agreement.  No change or  modification  of this Agreement shall be
valid or binding upon the parties hereto unless such change or  modification  or
waiver  shall be in writing and signed by Lynch and by the  Purchaser,  and such
change  or  modification   shall  be  binding  on  all  Holders  of  Registrable
Securities.

     17. HEADINGS.  The headings and captions in this Agreement are included for
purposes  of  convenience   only  and  shall  not  affect  the  construction  or
interpretation of any of its provisions.

     18.  COUNTERPARTS.  This  Agreement may be executed  simultaneously  in any
number of  counterparts,  each of which shall be deemed an original,  but all of
which when taken together shall constitute one and the same  instrument.  In the
event that any signature is delivered by facsimile transmission,  such signature
shall create a valid and binding  obligation of the party executing (or on whose
behalf such  signature  is  executed)  with the same force and effect as if such
facsimile signature page were an original thereof.

     19. TRANSFER OF RIGHTS AND  OBLIGATIONS.  This Agreement and the rights and
obligations of any Holder under this Agreement may be transferred by such Holder
to an Affiliate of such Holder (any such permitted  transferee being referred to
herein as a "Transferee").  As a condition  precedent to any such transfer,  any
such Transferee  must provide written notice of such assignment to Lynch,  which
notice shall at a minimum include the name and address of such  Transferee,  the


                                       9


Shares with respect to which such  transfer is to occur and the number,  if any,
of other  shares of Common  Stock  held by such  Transferee,  and must  agree in
writing to be bound by the terms of this Agreement.

     20. THIRD PARTY  BENEFICIARIES.  Lynch hereby acknowledges that Transferees
complying   with  the   provisions   of  Section  19  are  express  third  party
beneficiaries of the obligations of Lynch hereunder.

     21. GENDER. As used in this Agreement,  the neuter gender shall include the
masculine  and  feminine  genders and the  masculine  gender  shall  include the
feminine and neuter genders,  the singular shall include the plural and the word
"person" shall include a  corporation,  firm,  company,  trust and other form of
association or entity.

     IN WITNESS  WHEREOF,  the parties  hereto have caused this  Agreement to be
executed and delivered on the date first above written.

                                 LYNCH CORPORATION


                                 By:    /s/ John C. Ferrara
                                        -------------------------------------
                                 Name:  John C. Ferrara
                                 Title: President and Chief Executive Officer


                                 VENATOR MERCHANT FUND L.P.
                                 By:  Venator Global, LLC, its General Partner

                                 By:    /s/ Marc J. Gabelli
                                        --------------------------------------
                                 Name:  Marc J. Gabelli
                                 Title: President




                                       10