ex10_5.htm


    
      

    

    Exhibit
      10.5

     

    CREDIT
      AND SECURITY AGREEMENT

     

     

    AGREEMENT
      made this 8th day of November, 2007, by Nature Vision, Inc., a Minnesota
      corporation (herein called “Parent”) and Nature Vision Operating, Inc., a
      Minnesota corporation, (herein called “Subsidiary”) (Parent and Subsidiary each
      sometimes called “Borrower” and collectively sometimes called “Borrowers”) for
      the benefit of M&I Business Credit, LLC, a Minnesota limited liability
      company (herein with its participants, successors and assigns, called
“Lender”).

    


    


    R
      E C I T A L S

    


    Lender
      has made loans to Parent
      pursuant to a Demand Term Note dated September 19, 2007 (herein called the
      “Note”) secured by a Security Agreement (herein called the “Security Agreement”)
      and a Revolving Mortgage, Assignment of Rents, Security Agreement and Fixture
      Financing Statement (herein called the “Mortgage”).  The aforesaid
      loans shall also be governed by the terms of this Agreement.

    


    Borrowers
      have requested that Lender make loans to Borrower from time to time at Lender’s
      sole discretion and, in connection therewith, has executed and delivered for
      Lender’s benefit various ancillary and supplemental agreements and documents
      (herein called the “Security Documents”), which include, without limitation, the
      Note, Security Agreement and Mortgage.

     

    


    This
      Agreement sets forth certain additional obligations undertaken by Borrowers
      to
      induce Lender to make such loans.  The obligations of Borrower set
      forth herein are joint and several.

    


    Any
      term
      used in the Uniform Commercial Code (“UCC”) and not otherwise defined in this
      Agreement shall have the meaning given to the term in the UCC.

    


    ACCORDINGLY,
      to induce Lender to make one or more loans to Borrowers, and for good and
      valuable consideration, the receipt and sufficiency of which are hereby
      acknowledged, Borrowers hereby represent, warrant and agree for the benefit
      of
      Lender that:

    


    1.           The
      Loans.  Lender shall not be obligated to make any loans to
      Borrowers.  All loans which Lender may determine to make under this
      Agreement shall be repayable on demand.  Borrowers will comply with
      the following procedure in requesting loans from Lender:

    


    (a)           Borrowers
      will request loans from Lender in such manner as Lender may from time to time
      prescribe.

    


    (b)           Lender
      may make loans in any amount and in any manner requested orally or in writing
      (i) by any officer of any Borrower; or (ii) by any person designated as any
      Borrower’s agent by any officer of any Borrower in a writing delivered to
      Lender; or (iii) by any person reasonably believed by Lender to be an officer
      of
      any Borrower or such a designated agent.  Except as otherwise
      instructed in writing by such officer, agent or person, Lender may disburse
      loan
      proceeds by deposit with any bank to or for the account of any Borrower or
      to or
      for the account of any third party designated by such officer, agent, or person,
      or by an instrument payable to any Borrower or to any such third party delivered
      to any such officer, agent, or person or to any such third party, or in any
      other manner deemed appropriate by Lender.  All principal of and
      interest on loans made by Lender shall be repayable at the offices of Lender
      in
      Minneapolis, Minnesota, unless Lender designates a different place of payment
      by
      written notice to Borrowers.

     

    
      
        
        

      

      
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    (c)           Lender
      may make loans on the basis of Collateral available hereunder and under the
      Security Documents or any other basis deemed appropriate by Lender from time
      to
      time.  Lender may change from time to time, at its sole discretion and
      without notice to Borrowers, the standards, criteria and formulae used by Lender
      in determining the type and amount of Collateral eligible for
      advance.  In any event, subject to change at Lender’s discretion,
      Borrowers shall not request loans on the basis of the following
      Collateral:

    


    (1)           Accounts
      receivable which are (i) disputed or subject to claims or set offs; or (ii)
      progress billings; or (iii) owed by an account debtor not located in the United
      States or Canada and not secured by a bank letter of credit satisfactory to
      Lender in its sole discretion; or (iv) owed by an account debtor which is the
      subject of any bankruptcy or insolvency proceeding or is insolvent or has made
      an assignment for the benefit of creditors or has failed or suspended or gone
      out of business.

    


    (2)           Collateral
      which is not as warranted herein or in the Security Documents.

    


    (3)           Collateral
      which Lender, in its discretion, has declared ineligible collateral by written
      notice to Borrowers.

    


    (4)           Accounts
      receivable not paid within ninety (90) days after invoice or, if Lender in
      its
      discretion has determined that a particular dated receivable is eligible for
      advance, within thirty (30) days after the due date stated.

    


    (5)           Accounts
      receivable owed to Borrowers by any shareholder, subsidiary or affiliate of
      any
      Borrower or by any person or company obligated to pay any receivable deemed
      ineligible under clauses (1) through (4), if such ineligible receivable is
      10%
      or more of the total amount due from such person or company.

    


    Notwithstanding
      any apportionment, exclusion or segregation of Collateral made by Lender for
      purposes of determining the amount or maximum amount of loans made to Borrowers,
      all rights and interests of Lender hereunder and under the Security Documents,
      and all other collateral rights, interests and properties available to Lender,
      shall secure and may be applied to pay any or all indebtedness of Borrowers
      secured thereby, in any manner or order of application and without regard to
      any
      such apportionment, exclusion or segregation.

    


    
      
        
        

      

      
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    (d)           Borrowers
      will pay interest on all outstanding loans under this Agreement at an annual
      rate (computed on the basis of actual days elapsed in a 360-day year) which
      shall at all times be equal to the greater of (i) six percent
      (6%) per annum, or (ii)  three-quarters percent
      (.75%) above the rate of interest publicly announced by M&I
      Marshall & Ilsley Bank from time to time as its prime rate (or any
      similar successor rate), each change in the interest rate shall take effect
      simultaneously with the corresponding change in the designated bank’s prime rate
      or any similar successor rate; provided that in no event shall the Borrowers
      pay
      interest at a rate greater than the highest rate permitted by
      law.  All interest shall accrue on the principal balance outstanding
      from time to time and shall be payable on the first day of the next month in
      which accrued and in any event on demand.  Borrowers agree that Lender
      may at any time or from time to time, without further request by Borrowers,
      make
      a loan to Borrowers, or apply the proceeds of any loans, for the purpose of
      paying all such interest promptly when due.  In the computation of
      interest, Lender may allow two banking days for the collection of uncollected
      funds.  Notwithstanding anything to the contrary stated herein, the
      interest charges payable pursuant to this Paragraph 1(d) for each twelve month
      period shall never be less than One Hundred Twenty Thousand Dollars
      ($120,000).  If for any twelve month period the interest pursuant to
      Paragraph 1(d) shall be less than $120,000, Borrowers shall pay on the
      anniversary date of this Agreement ending each twelve months the amount of
      the
      difference between $120,000 and the interest charges for such twelve month
      period.

    


    (e)           In
      addition to any other amounts payable by Borrowers to Lender, Borrowers agrees
      to pay to the Lender on the date of this Agreement and on each anniversary
      date
      of this Agreement an annual fee equal to the greater of Forty-Five Thousand
      Dollars ($45,000) or three-quarters percent (.75%) of the maximum amount that
      the Lender may loan to Borrowers during the twelve (12) months following such
      payment; provided, however, payment of such fee does not obligate Lender to
      make
      any loans to Borrowers, and Lender, in its sole discretion, shall determine
      if
      it will make loans and the amounts of any such loans pursuant to the terms
      of
      Paragraphs 1(a) through 1(h) of this Agreement.

    


    (f)           Lender
      may maintain from time to time, at its discretion, liability records as to
      any
      and all loans made or repaid and interest accrued or paid under this
      Agreement.  All entries made on any such record shall be presumed
      correct until Borrowers establish the contrary.  On demand by Lender,
      Borrowers will admit and certify in writing the exact principal balance which
      Borrowers then assert to be outstanding to Lender for loans under this
      Agreement.  Any billing statement or accounting rendered by Lender
      shall be conclusive and fully binding on Borrowers unless specific written
      notice of exception is given to Lender by Borrowers within thirty (30) days
      after its receipt by Borrowers.

    


    
      
        
        

      

      
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    (g)           Borrowers’
      obligations with respect to all loans shall be fully binding and enforceable
      without any note or other evidence of indebtedness.  Nevertheless, if
      Lender so requests, Borrowers will duly execute and deliver to Lender a
      promissory note in negotiable form payable on demand to the order of Lender
      in a
      principal amount equal to the principal balance then outstanding to Lender
      for
      loans under this Agreement, together with interest as set forth in Paragraph
      1(d).

    


    (h)           In
      requesting any loans under this Agreement, Borrowers shall be deemed to
      represent and warrant to Lender that, as of the date of the proposed loans,
      (i)
      all of the representations and warranties made in Paragraphs 3 and 4 will be
      true and correct except for changes caused by trans­actions permitted under
      this Agreement, and (ii) no breach or default under, and no Event of Default
      defined or described in, this Agreement or any of the Security Documents will
      exist.

    


    2.           Affiliate.  For
      the purposes of this Agreement, “Affiliate” refers to any corporation,
      partnership, individual or other entity which now or hereafter controls, is
      controlled by, or is under common control with any
      Borrower.  Borrowers agree that any breach, default or event of
      default by or attributable to any Affiliate under any agreement between such
      Affiliate and Lender shall constitute a breach of this Agreement and an Event
      of
      Default hereunder and under the Security Documents.  “Affiliated
      Corporation” shall refer to any entity that is not a natural
      person.

    


    3.           Security
      Interest.

    
       

      (a)         
        Grant of Security Interest.  Borrowers hereby assign to Lender
        and grant Lender a security interest (collectively referred to as the “Security
        Interests”) in the property described below, as security for the payment and
        performance of each and every debt, liability and obligation of every type
        and
        description which any Borrower may now or at any time hereafter owe to Lender
        (whether such debt, liability or obligation now exists or is hereafter created
        or incurred, whether it arises in a transaction involving Lender alone or
        in a
        transaction involving other creditors of any Borrower, and whether it is
        direct
        or indirect, due or to become due, absolute or contingent, primary or secondary,
        liquidated or unliquidated, or sole, joint, several or joint and several,
        and
        including specifically, but not limited to, all indebtedness of any Borrower
        arising under this or any other present or future loan or credit agreement,
        promissory note, guaranty or other undertaking of any Borrower enforceable
        by
        Lender; all such debts, liabilities and obligations are herein collectively
        referred to as the “Obligations”).  The Security Interests shall
        attach to the all of the personal property and fixtures of any Borrower (the
        "Collateral"), including all proceeds and products thereof and, including,
        without limitation the following:

    

     

    
      	
               

            	
              INVENTORY:  All
                inventory, as such term is defined in the UCC, of every type and
                description, now owned or hereafter acquired by any Borrower, including
                inventory consisting of whole goods, spare parts or components, supplies
                or materials and inventory acquired, held or furnished for sale,
                for lease
                or under service contracts or for manufacture or processing, or any
                other
                purpose, and wherever located.

            


    

     

    
      
        
        

      

      
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              DOCUMENTS
                OF TITLE:  All warehouse receipts, bills of lading and
                other documents of title of every type and description now owned
                or
                hereafter acquired by any Borrower.

            


    

    


    
      	
               

            	
              ACCOUNTS:  All
                accounts of any Borrower, as such term is defined in the UCC, now
                existing
                or hereafter arising, including each and every right of any Borrower
                to
                the payment of money, whether such right to payment now exists or
                hereafter arises, whether such right to payment arises out of a sale,
                lease or other disposition of goods or other property, out of a rendering
                of services, out of a loan, out of the overpayment of taxes or other
                liabilities, or any other transaction or event, whether such right
                to
                payment is created, generated or earned by any Borrower or by some
                other
                person whose interest is subsequently transferred to any Borrower,
                whether
                such right to payment is or is not already earned by performance,
                and
                howsoever such right to payment may be evidenced, together with all
                other
                rights and interests (including all liens, security interests and
                guaranties) which any Borrower may at any time have by law or agreement
                against any account debtor or other person obligated to make any
                such
                payment or against any property of such account debtor or other person;
                all contract rights, chattel papers, bonds, notes and other debt
                instruments, and all loans and obligations receivable, tax refunds
                and
                other rights to payment in the nature of general intangibles; all
                checking
                accounts, savings accounts and other depository accounts and all
                savings
                certificates and certificates of deposit maintained with or issued
                by
                Lender or any other bank or other financial
                institution.

            


    

    


    
      	
               

            	
              EQUIPMENT
                AND FIXTURES:  All equipment, as such term is defined
                in the UCC, now owned or hereafter acquired by any Borrower and all
                fixtures of every type and description now owned or hereafter acquired
                by
                any Borrower, including (without limitation) all present and future
                machinery, vehicles, furniture, fixtures, manufacturing equipment,
                shop
                equipment, office and recordkeeping equipment, parts, tools, supplies
                and
                all other goods (except inventory) used or bought for use by any
                Borrower
                for any business or enterprise; including (without limitation) all
                goods
                that are or may be attached or affixed or otherwise become fixtures
                upon
                any real property; and including specifically (without limitation)
                the
                goods described in any equipment schedule or list herewith or hereafter
                furnished to Lender by any Borrower, all accessions attachments,
                parts and
                repairs now or hereafter attached or affixed or used in connection
                with
                equipment, all substitutions and replacements thereof, and all like
                or
                similar property now owned or hereafter acquired by any
                Borrower.  (No such schedule or list need be furnished in order
                for the security interest granted herein to be valid as to all of
                Borrower's equipment.)

            


    

    


    
      	
               

            	
              INVESTMENT
                PROPERTY:  All investment property, as such term is
                defined in the UCC, whether now owned or hereafter acquired by any
                Borrower, including (without limitation) all securities, security
                entitlements, securities accounts, commodity contracts, commodity
                accounts, stocks, bonds, mutual fund shares, money market shares
                and U.S.
                Government securities.

            


    

     

    
      
        
        

      

      
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              GENERAL
                INTANGIBLES:  All general intangibles of every type and
                description now owned or hereafter acquired by any Borrower, including
                (without limitation) all present and future intellectual property,
                proprietary rights, foreign and domestic patents, patent applications,
                trademarks, trademark applications, service marks, service mark
                applications, trade dress, mask works, copyrights, trade names, trade
                secrets, shop drawings, engineering drawings, blueprints, specifications,
                parts lists, manuals, operating instructions, customer or supplier
                lists
                and contracts, licenses, permits, franchises, the right to use Borrowers’
                corporate names, and the goodwill of Borrowers’
                businesses.

            


    

    


    
      	
               

            	
              MISCELLANEOUS
                COLLATERAL:  All instruments, chattel paper, deposit
                accounts, documents, goods, letter-of-credit rights, letters of credit,
                all sums on deposit in any collateral account, and any items in any
                lockbox, now existing or hereafter arising, and any money or other
                assets
                of any Borrower that come into the possession, custody or control
                of the
                Lender.

            


    

    


    (b)           Representations,
      Warranties and Covenants.  Borrowers represent, warrant and
      covenant as follows:

    


    (1)           Borrowers
      have (or will have at the time it acquires rights in Collateral hereafter
      arising) and will maintain so long as the Security Interests may remain
      outstanding, absolute title to each item of Collateral and all proceeds thereof,
      free and clear of all interests, liens, attachments, encumbrances and security
      interests except the Security Interests and as provided herein and except as
      Lender may otherwise agree in writing.  Borrowers will defend the
      Collateral against all claims or demands of all persons (other than Lender)
      claiming the Collateral or any interest therein.  Borrowers will not
      sell or otherwise dispose of the Collateral or any interest therein, except
      the
      sale of inventory in the ordinary course of Borrowers’ business, without
      Lender’s prior written consent.  Borrowers’ interest in the Collateral
      is freely transferable to any person, without condition, limitation,
      jurisdiction or restriction of governmental authority, or any other
      qualification whatsoever.

    


    (2)           Borrowers’
      exact legal names and federal employer identification and organization
      identification numbers are as set forth below and state of organization is
      as
      set forth above.  Borrowers do business solely under their own name
      and the trade names (if any) set forth below.  The places of business
      and chief executive office of Borrowers are located at the address(es) set
      forth
      below, and all tangible Collateral is located at such address(es), except for
      inventory in transit and inventory and tooling in the possession of vendors
      in
      China.  All of Borrowers’ records relating to their business or the
      Collateral are kept at its chief executive office.  Borrowers will not
      permit any tangible Collateral or any records pertaining to Collateral to be
      located in any state or area in which, in the event of such location, a
      financing statement covering such Collateral would be required to be, but has
      not in fact been, filed in order to perfect the Security
      Interests.  Borrowers will not change their names, articles of
      incorporation or jurisdiction of organization without prior written consent
      of
      Lender.  Borrowers will not change their identity or corporate
      structure or the location of their place of business, without prior written
      notice to Lender.

    


    
      
        
        

      

      
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    (3)           None
      of the Collateral is or will become a fixture on real estate, unless a
      sufficient fixture filing is in effect with respect thereto.

    


    (4)           Each
      account and other right to payment and each instrument, document, chattel paper
      and other agreement constituting or evidencing Collateral is (or, in the case
      of
      all future Collateral, will be when arising or issued) the valid, genuine and
      legally enforceable obligation, subject to no defense, setoff or counterclaim,
      of the account debtor or other obligor named therein or in Borrowers’ records
      pertaining thereto as being obligated to pay such
      obligation.  Borrowers will not agree to modify, amend, subordinate,
      cancel or terminate the obligation of any such account debtor or other obligor,
      without Lender’s prior written consent.

    


    (5)           Borrowers
      will keep all tangible Collateral in good repair, working order and condition,
      normal depreciation, wear and tear excepted, and will, from time to time,
      replace any worn, broken or defective parts.

    


    (6)           Borrowers
      will promptly pay all taxes and other governmental charges levied or assessed
      upon or against any Collateral or upon or against the creation, perfection
      or
      continuance of the Security Interests.

    


    (7)           Borrowers
      will keep all Collateral free and clear of all security interests, liens and
      encumbrances except the Security Interests and as provided herein and except
      other security interests approved in writing by Lender.

    


    (8)           Borrowers
      will at all reasonable times permit Lender or its representatives to examine
      or
      inspect any Collateral, or any evidence of Collateral, wherever
      located.

    


    (9)           Borrowers
      will promptly notify Lender of any loss of or material damage to any Collateral
      or of any substantial adverse change, known to Borrowers, in any Collateral
      or
      the prospect of payment thereof.

    


    (10)         Upon
      request by Lender, whether such request is made before or after the occurrence
      of any Event of Default, Borrowers will promptly deliver to Lender in pledge
      all
      instruments, documents and chattel paper constituting Collateral, duly endorsed
      or assigned by Borrowers.

    


    (11)         Borrowers
      will at all times keep all tangible Collateral insured against risks of fire
      (including so-called extended coverage), theft, collision (for Collateral
      consisting of motor vehicles) and such other risks and in such amounts as Lender
      may reasonably request, with any loss payable to Lender to the extent of its
      interest.

    


    
      
        
        

      

      
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    (12)          Borrowers
      will use and keep the Collateral, and will require that others use and keep
      the
      Collateral, only for lawful purposes, without violation of any federal, state
      or
      local law, statute or ordinance.

    


    (13)          Borrowers
      from time to time will execute and deliver or endorse any and all instruments,
      documents, conveyances, assignments, security agreements, financing statements
      and other agreements and writings which Lender may reasonably request in order
      to secure, protect, perfect or enforce the Security Interests or the rights
      of
      Lender under this Agreement (but any failure to request or assure that Borrowers
      execute, deliver or endorse any such item shall not affect or impair the
      validity, sufficiency or enforceability of this Agreement and the Security
      Interests, regardless of whether any such item was or was not executed,
      delivered or endorsed in a similar context or on a prior occasion).

    


    (14)          Promptly
      upon knowledge thereof, the Borrowers will deliver to Lender notice of any
      commercial tort claims it may bring against any person, including the name
      and
      address of each defendant, a summary of the facts, an estimate of Borrowers’
damages, copies of any complaint or demand letter submitted by Borrowers, and
      such other information as the Lender may request.  Upon request by
      Lender, Borrowers will grant the Lender a security interest in all commercial
      tort claims it may have against any person.

    


    (15)          The
      proper place to file financing statements to perfect the Security Interests
      other than in Collateral which are fixtures is the Office of Secretary of State
      of Minnesota and the proper place to file a financing statement to perfect
      the
      Security Interest in Collateral which are fixtures is the County Recorder of
      Crow Wing County, Minnesota. When the financing statements prepared by Lender
      are filed there, Lender will have valid and perfected Security Interests in
      the
      Collateral, subject to no prior security interest, assignment, lien or
      encumbrance (except interests, if any, specifically approved by Lender in
      writing).

    


    If
      any
      Borrower at any time fails to perform or observe any of the foregoing
      agreements, and if such failure shall continue for a period of ten (10) calendar
      days after Lender gives Borrowers written notice thereof (or in the case of
      the
      agreements contained in Paragraphs 3(b)(7) and 3(b)(11) above, immediately
      upon
      the occurrence of such failure, without notice or lapse of time), Lender may,
      but need not, perform or observe such agreement on behalf and in the name,
      place
      and stead of Borrowers (or, at Lender’s option, in the name of Lender) and may,
      but need not, take any and all other actions which Lender may reasonably deem
      necessary to cure or correct such failure (including, without limitation, the
      payment of taxes, the satisfaction of security interests, liens or encumbrances,
      the performance of obligations owed to account debtors or other obligors, the
      procurement and maintenance of insurance, the execution of assignments, security
      agreements and financing statements, and the endorsement of instruments); and
      Borrowers shall thereupon pay to Lender on demand the amount of all monies
      expended and all costs and expenses (including reasonable attorneys’ fees and
      legal expenses) incurred by Lender in connection with or as a result of the
      performance or observance of such agreements or the taking of such action by
      Lender, together with interest thereon from the date expended or incurred at
      the
      highest lawful rate then applicable to any of the Obligations.  To
      facilitate the performance or observance by Lender of such agreements of
      Borrowers, Borrowers hereby irrevocably appoint Lender, or the delegate of
      Lender, acting alone, as the attorney-in-fact of Borrower with the right (but
      not the duty) from time to time to create, prepare, complete, execute, deliver,
      endorse or file in the name and on behalf of Borrowers any and all instruments,
      documents, assignments, security agreements, financing statements, applications
      for insurance and other agreements and writings required to be obtained,
      executed, delivered or endorsed by Borrowers under this Paragraph
      3(b).

    


    
      
        
        

      

      
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    (c)           Proceeds;
      Collateral Account.  Borrowers agree to deliver to Lender, or, at
      Lender’s option, to deposit in one or more special collateral accounts
      maintained for Lender by any bank reasonably satisfactory to Lender, all
      proceeds of cash sales of inventory, all collections on accounts, contract
      rights, chattel paper and other rights to payment constituting Collateral,
      and
      all other cash proceeds of Collateral, immediately upon receipt thereof, in
      the
      form received, except for Borrowers’ endorsement when deemed
      necessary.  Without limiting the foregoing, Borrowers further agree
      upon Lender’s request to establish a lockbox and related services with a
      financial institution approved by Lender for the collection and processing
      of
      all accounts and other payment rights of Borrowers.  Once established,
      such lockbox service may not be terminated without Lender’s written approval and
      the proceeds of all related collections shall be remitted to Lender’s collateral
      account in accordance with Lender’s instructions.  Amounts deposited
      in a collateral account shall not bear interest and shall not be subject to
      withdrawal by Borrower, except after full payment and discharge of all
      Obligations.  All such collections shall constitute proceeds of
      Collateral and shall not constitute payment of any Obligation.  Until
      delivered to Lender or deposited in a collateral account, all proceeds or
      collections of Collateral shall be held in trust by Borrowers for and as the
      property of Lender and shall not be commingled with any funds or property of
      Borrowers.  Lender may deposit any and all collections received by it
      from Borrowers or out of any collateral account in Lender’s general account and
      may commingle such collections with other property of Lender or any other
      person.  All items shall be delivered to Lender or deposited in any
      collateral account subject to final payment.  If any such item is
      returned uncollected, Borrowers will immediately pay Lender, or, for items
      deposited in a collateral account, the bank maintaining such account, the amount
      of that item, or such bank in its discretion may charge any uncollected item
      to
      Borrowers’ commercial account or other account.  Borrower shall be
      liable as an endorser on all items deposited in any collateral account, whether
      or not in fact endorsed by Borrowers.  Lender from time to time at its
      discretion may apply funds on deposit in any collateral account to the payment
      of any or all Obligations, in any order or manner of application satisfactory
      to
      Lender.

    


    
      
        
        

      

      
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    (d)           Collection
      Rights of Lender.  In addition to the rights of Lender under
      Paragraph 3(c), with respect to any and all rights to payment constituting
      Collateral, Lender may at any time either before or after the occurrence of
      an
      Event of Default under Paragraph 7 notify any account debtor or other person
      obligated to pay the amount due that such right to payment has been assigned
      or
      transferred to Lender for security and shall be paid directly to
      Lender.  Borrowers will join in giving such notice, if Lender so
      requests.  At any time after Borrowers or Lender give such notice to
      an account debtor or other obligor, Lender may, but need not, in Lender’s name
      or in Borrowers’ name, (i) demand, sue for, collect or receive any money or
      property at any time payable or receivable on account of, or securing, any
      such
      right to payment, or grant any extension to, make any compromise or settlement
      with or otherwise agree to waive, modify, amend or change the obligations
      (including collateral obligations) of any such account debtor or other obligor;
      and (ii) as agent and attorney-in-fact of Borrowers notify the United States
      Postal Service to change the address for delivery of Borrowers’ mail to any
      address designated by Lender and otherwise intercept, receive, open and dispose
      of Borrowers’ mail, applying all Collateral as permitted under this Agreement
      and holding all other mail for Borrower’s account or forwarding such mail to
      Borrowers’ last known address.

    


    (e)           Assignment
      of Insurance.  As additional security for the payment and
      performance of the Obligations, Borrowers hereby assign to Lender any and all
      monies (including, without limitation, proceeds of insurance and refunds of
      unearned premiums) due or to become due under, and all other rights of Borrowers
      with respect to, any and all policies of insurance now or at any time hereafter
      covering the Collateral or any evidence thereof or any business records or
      valuable papers pertaining thereto (excluding any life insurance), and Borrowers
      hereby direct the issuer of any such policy to pay all such monies directly
      to
      Lender.  At any time, whether before or after the occurrence of any
      Event of Default, Lender may (but need not), in Lender’s name or in Borrowers’
names, execute and deliver proofs of claim, receive all such monies, endorse
      checks and other instruments representing payment of such monies, and adjust,
      litigate, compromise or release any claim against the issuer of any such
      policy.

    


    (f)           Filing
      of Financing Statements.  Borrowers authorize Lender to file
      financing statements describing the Collateral and describing any other
      statutory liens held by Lender.

    


    (g)           Verification.  At
      any time or from time to time, under its own name or under a trade name, Lender
      may (but shall not be obligated to) send to and discuss with Borrowers’ account
      debtors requests for verification of amounts owed to Borrowers.  If
      Lender so requests at any time, Borrowers will send requests for verification
      to
      its account debtors or join in any requests for verification sent by
      Lender.

    


    (h)           Surplus
      and Deficiency; Care of Collateral.  This Agreement does not
      contemplate a sale of accounts, contract rights or chattel paper, and, as
      provided by law, Borrowers are entitled to any surplus and shall remain liable
      for any deficiency.  Lender’s duty of care with respect to Collateral
      in its possession (as imposed by law) shall be deemed fulfilled if it exercises
      reasonable care in physically keeping such Collateral, or in the case of
      Collateral in the custody or possession of a bailee or other third person,
      exercises reasonable care in the selection of the bailee or other third person,
      and Lender need not otherwise preserve, protect, insure or care for any
      Collateral.  Lender shall not be obligated to preserve any rights
      Borrowers may have against prior parties, to realize on the Collateral at all
      or
      in any particular manner or order or to apply any cash proceeds of the
      Collateral in any particular order of application.

    


    
      
        
        

      

      
        15

        
          

        

      

      
        
        

      

    

     

    4.           Representations
      and Warranties.  Borrowers represent and warrant to Lender
      that:

    


    (a)           Each
      Borrower is a corporation duly organized and existing in good standing under
      the
      laws of the State of Minnesota. Each Borrower has the corporate power to own
      its
      property and to carry on its business as now conducted and is duly qualified
      to
      do business in all states in which such qualification is
      required.  Since September 2004, the formal corporate names of the
      Borrowers have been Nature Vision, Inc and Nature Vision Operating,
      Inc.  Borrowers do not own any capital stock of any corporation or
      equity or any entity, except that Parent owns all of the issued and outstanding
      stock of Subsidiary.

    


    (b)           Each
      Borrower is duly authorized and empowered to execute, deliver and perform this
      Agreement and the Security Documents and to borrow money from
      Lender.

    


    (c)           The
      execution and delivery of this Agreement and the Security Documents, and the
      performance by each Borrower of its obligations thereunder, do not and will
      not
      violate or conflict with any provision of law or the Articles of Incorporation
      or By-Laws of any Borrower and do not and will not violate or conflict with,
      or
      cause any default or event of default to occur under, any agreement binding
      upon
      any Borrower.

    


    (d)           The
      execution and delivery of this Agreement and the Security Documents have been
      duly approved by all necessary action of the directors and shareholders of
      each
      Borrower; and this Agreement and the Security Documents have in fact been duly
      executed and delivered by each Borrower and constitute its lawful and binding
      obligations, legally enforceable against it in accordance with their respective
      terms (sub­ject to laws generally affecting the enforcement of creditors’
rights).

    


    (e)           No
      litigation, tax claims or governmental proceedings are pending or are threatened
      against any Borrower or any Affiliate and no judgment or order of any court
      or
      administrative agency is outstanding against any Borrower or any
      Affiliate.

    


    (f)           The
      transaction evidenced by this Agreement does not violate any law pertaining
      to
      usury or the payment of interest on loans.

    


    (g)           The
      authorization, execution, delivery and performance of this Agreement and the
      Security Documents are not and will not be subject to the jurisdiction, approval
      or consent of, or to any requirement of registration with or notification to,
      any federal, state or local regulatory body or administrative
      agency.

    


    
      
        
        

      

      
        16

        
          

        

      

      
        
        

      

    

     

    (h)           The
      conduct of its business by Borrowers are not subject to registration with,
      notification to, or regulation, licensing, franchising, consent or approval
      by
      any state or federal governmental authority or administrative agency, except
      general laws and regulations which are not related or applicable particularly
      or
      uniquely to the type of business conducted by Borrowers, which do not materially
      restrict or limit the business of Borrowers, and with which Borrowers are in
      full compliance.  All registrations and notifications required to be
      made, and all licenses, franchises, permits, operating certificates, approvals
      and consents required to be issued, to enter into or conduct such business
      have
      been duly and lawfully made or obtained and issued, and all terms and conditions
      set forth therein or imposed thereby have been duly met and complied
      with.

    


    (i)           To
      the best knowledge of Borrowers based upon reasonable inquiry, no director,
      shareholder, officer, employee or agent of, or consultant to, Borrower is
      prohibited by law, by regulation, by contract, or by the terms of any license,
      franchise, permit, certificate, approval or consent from participating in the
      business of Borrowers as director, shareholder, partner, officer, employee
      or
      agent of, or as consultant to, Borrowers, or is the subject of any pending
      or,
      to Borrowers’ best knowledge, threatened proceeding which, if determined
      adversely, would or could result in such a prohibition.

    


    (j)           All
      assets of Borrowers and any Affiliate are free and clear of liens, security
      interests and encumbrances, except those permitted under Paragraph
      6(b).

    


    (k)           Borrowers
      and all Affiliates have filed all federal and state tax returns which are
      required to be filed, and all taxes shown as due thereon have been
      paid.  Borrowers and all Affiliates have paid or caused to be paid to
      the proper authorities when due all federal, state and local taxes required
      to
      be withheld by them.

    


    (l)           Borrowers
      have furnished to Lender the financial statements described below for the
      periods described below:

    


    December
      31, 2005

    December
      31, 2006

    September
      30, 2007

    


    These
      statements were prepared in accordance with generally accepted accounting
      principles consistently maintained, present fairly the financial condition
      of
      Borrowers as at the dates thereof, and disclose fully all liabilities of
      Borrowers, whether or not contingent, with respect to any pension
      plan.  Since the date of the most recent financial statement, there
      has been no material adverse change in the financial condition of
      Borrowers.

    


    
      
        
        

      

      
        17

        
          

        

      

      
        
        

      

    

     

    (m)           Each
      qualified retirement plan of Borrowers presently conforms to and is administered
      in a manner consistent with the Employee Retirement Income Security Act of
      1974.

    


    (n)           Borrowers
      will not request or maintain any credit for the purpose of purchasing or
      carrying any security, within the meaning of Regulations T, U or X of the Board
      of Governors of the Federal Reserve System.

    


    5.           Affirmative
      Covenants.  Borrowers covenant and agree that they
      will:

    


    (a)           Use
      the proceeds of any and all loans made by Lender solely for lawful and proper
      corporate purposes of the Borrowers.

    


    (b)           Pay
      all taxes, assessments and governmental charges prior to the time when any
      penalties or interest accrue, unless contested in good faith with an adequate
      reserve for payment; and pay to the proper authorities when due all federal,
      state and local taxes required to be withheld by then.

    


    (c)           Continue
      the conduct of their business; maintain their corporate existence; maintain
      all
      rights, licenses and franchises; and comply with all applicable laws and
      regulations.

    


    (d)           Maintain
      their property in good working order and condition and make all needful and
      proper repairs, replace­ments, additions and improvements
      thereto.

    


    (e)           Deliver
      to Lender:

    


    (1)           Within
      ninety (90) days after the end of each fiscal year, a statement of Borrowers’
financial condition as at the end of such fiscal year and a statement of
      earnings and retained earnings of Borrowers for such fiscal year, with
      comparative figures for the preceding fiscal year, prepared, if Lender so
      requests, on a consolidating and consolidated basis to include any Affiliated
      Corporation, certified without qualification by independent certified public
      accountants acceptable to Lender.

    


    (2)           Within
      twenty (20) days after the end of each fiscal month, a statement of Borrowers’
financial condition and an operating statement and statement of earnings and
      retained earnings of Borrowers for such month, in each case with comparative
      figures for the same month in the preceding fiscal year, prepared on the same
      basis as the most recent annual statement provided pursuant to clause (1) above,
      certified by an officer of any Borrower.

    


    (3)           Within
      twenty (20) days after the end of each fiscal month a compliance certificate
      certified by an officer of any Borrower in form acceptable to
      Lender.

    


    (4)           Within
      fifteen (15) days after the end of each month, an aging of Borrowers’ accounts
      receivable as at the end of such month.

    


    
      
        
        

      

      
        18

        
          

        

      

      
        
        

      

    

     

    (5)           Within
      fifteen (15) days after the end of each month, an inventory certification report
      as at the end of such month.

    


    (6)           Within
      fifteen (15) days after the end of each month, an aging of Borrowers’ accounts
      payable as at the end of such month.

    


    (7)           Immediately
      upon filing, any reports filed with any regulatory agency, including the
      Securities and Exchange Commission or any exchange wherein Borrowers’ securities
      are registered.

    


    (8)           Immediately
      upon mailing, any notices, reports or other mailings sent to any Borrower’s
      shareholders.

    


    (9)           From
      time to time, any and all receivables, schedules, collection reports, equipment
      schedules, copies of invoices to account debtors and shipment documents and
      delivery receipts for goods sold, and other material, reports, records or
      information required by Lender.

    


    (f)           Permit
      any officer, employee, attorney or accountant for Lender to audit, review,
      make
      extracts from, or copy any and all corporate and financial books, records and
      properties of Borrowers at all times during ordinary business hours, to send
      and
      discuss with account debtors and other obligors’ requests for verification of
      amounts owed to Borrowers, and to discuss the affairs of Borrowers with any
      of
      its directors, officers, employees or agents.

    


    (g)           Maintain
      property, liability, business interruption, workman’s compensation and other
      forms of insurance in reasonable amounts designated at any time or from time
      to
      time by Lender.

    


    (h)           At
      all times maintain the consolidated book net worth of Borrowers plus
      subordinated debt and Borrowers’ consolidated tangible net worth (excluding all
      assets designated by Lender as intangible) plus subordinated debt, as determined
      in accordance with generally accepted accounting principles, at amounts equal
      to
      or in excess of the amounts set forth in the table below:

    


    
      	 	
              Book
                Net Worth Plus
                Subordinated Debt

            	
              Tangible
                Net Worth Plus Subordinated Debt

            
	
              From
                date of this Agreement through 12/30/07

            	
              $5,250,000

            	
              $3,750,000

            
	
              As
                of 12/31/07

            	
              $6,000,000,
                plus upon its sale, the
                recorded gain on the Parent’s sale of its New Hope, MN
                facility

            	
              $4,500,000,
                upon its sale, the
                recorded
                gain on the Parent’s sale of its New Hope, MN
                facility

            
	
              From
                January 31, 2008 and thereafter

            	
              See
                below

            	
              See
                below

            


    

     

    
      
        
        

      

      
        19

        
          

        

      

      
        
        

      

    

     

    During
      each month of fiscal year 2008 and for each fiscal year thereafter, the Book
      Net
      Worth and Tangible Net Worth Covenants shall be adjusted to be equal to the
      following:

    


    
      	
               

            	
              (a)

            	
              Each
                such covenant shall be equal to the Borrower’s final Book Net Worth and
                Tangible Net Worth as of the end of the immediately preceding fiscal
                year,
                plus/minus (i) an amount equal to the year-to-date
                budgeted net income or loss approved by the Borrower’s Board of Directors
                for the then applicable fiscal year (the “Board-Approved
                Budget”), minus (ii) 25% of the budgeted
                year-end net income of the Borrower as set forth in the Board-Approved
                Budget, plus (iii) upon its sale, the recorded gain on
                the Parent’s sale of its New Hope, MN facility; provided
                however, that notwithstanding the above, the Board-Approved
                Budget must indicate that the Borrowers’ Book Net Worth and Tangible Net
                Worth as of the then applicable fiscal year end will be at least
                $100,000
                greater than the Borrowers’ Book Net Worth and Tangible Net Worth as of
                the immediately preceding fiscal year end, exclusive of gain on the
                sale
                of the Parent’s New Hope facility.

            


    

    


    The
      Borrower agrees that it shall deliver the Board-Approved Budget to the Lender
      on
      or before January 20th of each
      fiscal
      year.

    


    (i)           Notify
      Lender promptly of (i) any disputes or claims by customers of Borrowers; (ii)
      any goods returned to or recovered by Borrowers; (iii) any change in the persons
      constituting the officers and directors of Borrowers; and (iv) the occurrence
      of
      any breach, default or event of default by or attributable to any Borrower
      under
      this Agreement or any of the Security Documents.

    


    (j)           Cause
      to be maintained in force for the benefit of Lender a Support Agreement with
      Jeffrey P. Zernov.

    


    (k)           Until
      the real estate described in the Revolving Mortgage, Assignment of Rents,
      Security Agreement and Fixture Financing Statement dated September 12, 2007
      is
      sold and proceeds thereof of not less than $2,000,000 is applied to reduce
      the
      Indebtedness, the outstanding Indebtedness of Borrowers to Lender may at no
      time
      exceed the amount of Collateral eligible for loan advance as determined by
      Lender’s standards, criteria and formulae then in effect less
      $500,000.

    


    6.           Negative
      Covenants.  Borrowers covenant and agree that they will not,
      except with the prior written approval of Lender:

    


    (a)           Become
      or remain liable in any manner in respect of any indebtedness or contractual
      liability (including, without limitation, notes, bonds, debentures, loans,
      guaran­ties, obligations of partnerships, and pension liabilities, in each
      case whether or not contingent and whether or not subordinated),
      except:

    


    (1)           Indebtedness
      arising under this Agreement;

    


    
      
        
        

      

      
        20

        
          

        

      

      
        
        

      

    

     

    (2)           Unsecured
      indebtedness, other than for money borrowed or for the purchase of a capital
      asset, incurred in the ordinary course of its business, which becomes due and
      must be fully satisfied within twelve months after the date on which it is
      incurred;

    


    (3)           Unsecured
      indebtedness, in an amount not exceeding One Million Dollars ($1,000,000) at
      any
      one time outstanding, which is fully subordinated in right of payment to all
      indebtedness owed to Lender pursuant to a subordination agreement accepted
      or
      approved in writing by Lender;

    


    (4)           Indebtedness
      arising out of the lease or purchase of goods constituting equipment and either
      unse­cured or secured only by a purchase money security interest securing
      purchase money indebtedness, but in any event only if such equipment is acquired
      in compliance with Paragraph 6(c); and

    


    (5)           Presently
      outstanding unsecured borrowings for the amounts of Five Hundred Thousand
      Dollars ($500,000) from Cass Creek and One Hundred Thousand Dollars ($100,000)
      from William Sherwood.

    


    (6)           Other
      presently outstanding unsecured borrowings, if any, disclosed in the financial
      statements referred to in Paragraph 4(m), but not including any extensions
      or
      renewals thereof.

    


    (b)           Create,
      incur or cause to exist any mortgage, security interest, encumbrance, lien
      or
      other charge of any kind upon any of its property or assets, whether now owned
      or hereafter acquired, except:

    


    (1)           The
      interests created by this Agreement and the Security Documents;

    


    (2)           Liens
      for taxes or assessments not yet due or contested in good faith by appropriate
      proceedings;

    


    (3)           A
      purchase money security interest or lessor’s interest securing indebtedness
      permitted to be outstanding or incurred under Paragraph 6(a)(4);

    


    (4)           Security
      interests approved by Lender in writing; and

    


    (5)           Other
      liens, charges and encumbrances incidental to the conduct of its business or
      the
      ownership of its property which were not incurred in connection with the
      borrowing of money or the purchase of property on credit and which do not in
      the
      aggregate materially detract from the value of its property or materially impair
      the use thereof in its business.

    


    (c)           Expend
      or contract to expend, in any one calendar year, more than Five Hundred Thousand
      Dollars ($500,000) in the aggregate or more than Fifty Thousand Dollars
      ($50,000) in any one transaction for the lease, purchase or other acquisition
      of
      any capital asset, or for the lease of any other asset, whether payable
      currently or in the future.

    


    
      
        
        

      

      
        21

        
          

        

      

      
        
        

      

    

     

    (d)           Sell,
      lease or otherwise dispose of all or any substantial part of its property,
      except as expressly permitted hereunder or under the Security
      Documents.

    


    (e)           Consolidate
      or merge with any other corporation; or acquire any business; or acquire stock
      of any corpora­tion; or enter into any other partnership or joint
      venture.

    


    (f)           Substantially
      alter the nature of the business in which they are engaged.

    


    (g)           Declare
      or pay any dividends (except dividends payable solely in its capital stock),
      or
      purchase or redeem any of its capital stock, or otherwise distribute any
      property on account of its capital stock; or enter into any agreement
      therefor.

    


    (h)           Purchase
      stock or securities of, extend credit to or make investments in, become liable
      as surety for, or guarantee or endorse any obligation of, any person, firm
      or
      corporation, except investments in direct obligations of the United States
      and
      commercial bank deposits and extensions of credit reflected by trade accounts
      receivable arising for goods sold by Borrowers in the ordinary course of its
      business.

    


    (i)           After
      notice from Lender, grant any discount, credit or allowance to any customer
      of
      Borrowers or accept any return of goods sold.

    


    (j)           In
      any manner transfer any property without prior or present receipt of full and
      adequate consideration.

    


    (k)           Permit
      more than Ten Thousand Dollars ($10,000) in the aggregate to be owing to
      Borrowers by the officers, directors or shareholders of any Borrower or any
      Affiliated Corporation, or members of their families, on account of any loan,
      travel advance, credit sale or other transaction or event.

    


    (l)           Pay
      excessive or unreasonable salaries, bonuses, commissions, consultant fees,
      or
      other compensation; or increase the salary, bonus, commissions, consultant
      fees
      or other compensation of any director, officer, or consultant, or any member
      of
      their families, by more than ten percent (10%) in any one year, either
      individually or for all such persons in the aggregate, or pay any such increase
      from any source other than profits earned in the year of payment.

    


    (m)           Permit
      any breach, default or event of default to occur under any note, loan agreement,
      indenture, lease, mortgage, contract for deed, security agreement or other
      contractual obligation binding upon any Borrower.

    


    (n)           Permit
      a “Change of Control” to occur.  As used herein, Change of Control
      means a change of thirty percent (30%) or more in the power to vote the equity
      interests of the Borrowers or Jeffrey P. Zernov ceases to actively manage the
      Borrowers’ day to day business activities.

    


    
      
        
        

      

      
        22

        
          

        

      

      
        
        

      

    

     

    7.           Event
      of Default.  Any breach of any representation, warranty, or
      agreement of any Borrower set forth herein or in the Security Documents or
      in
      any other instrument or agreement securing any of the Obligations shall
      constitute an Event of Default hereunder and under the Security
      Documents.

    


    8.           Remedies
      upon Default.  Upon the occurrence of any Event of Default, and at
      any time thereafter unless and until such Event of Default is waived in writing
      by Lender, Lender may exercise one or several or all of the following rights
      and
      remedies:

    


    (a)           Lender
      may terminate this Agreement with immediate effectiveness and without notice
      or
      lapse of time.  Notwithstanding such termination, all claims, rights
      and security interests of Lender and all debts, liabilities, obligations and
      duties of Borrowers shall remain in full force and effect.

    


    (b)           Lender
      may exercise and enforce any and all rights and remedies available upon default
      to a secured party under the Uniform Commercial Code, including, without
      limitation, the right to take possession of Collateral, or any evidence thereof,
      proceeding without judicial process (without a prior hearing or notice thereof,
      which Borrowers hereby expressly waive) and the right to sell, lease or
      otherwise dispose of any or all of the Collateral, and in connection therewith
      Borrowers will on demand assemble the Collateral and make it available to Lender
      at a place to be designated by Lender which is reasonably convenient to all
      parties.  If notice to Borrowers of any intended disposition of
      Collateral or any other intended action is required by law in a particular
      instance, such notice shall be deemed commercially reasonable if given (in
      the
      manner specified in Paragraph 13(a)) at least ten calendar days prior to the
      date of intended disposition or other action.  For the purpose of
      enabling Lender to exercise such rights and remedies:

    


    (1)           Borrowers
      hereby grant Lender (in addition to Lender’s security interest in general
      intangibles) a nonexclusive license to use, sell or otherwise exploit in any
      manner any and all trade names, trademarks, patents, copyrights, licenses and
      other intangible properties necessary, appropriate or useful in the enforcement
      of the Security Interests; and

    


    (2)           Borrowers
      hereby grant Lender the right to possess and hold all premises owned, leased
      or
      held by Borrowers upon which any Collateral is or may be located (the
“Premises”), subject to the following terms and conditions:

    


    (A)         
       Lender may take possession of the Premises upon the occurrence of an Event
      of Default.

    


    (B)           Lender
      may use the Premises only to hold, process, manufacture and sell or otherwise
      dispose of goods which are inventory, or to provide services under contracts
      for
      receivables, or to use, operate, store, liquidate or realize upon goods which
      are equipment or any other Collateral granted under this Agreement and for
      other
      purposes which Lender may in good faith deem to be related or incidental
      purposes.

    


    
      
        
        

      

      
        23

        
          

        

      

      
        
        

      

    

     

    (C)        
       The right of Lender to hold the Premises shall cease and terminate upon
      the earlier of (i) payment in full and discharge of all Obligations, or (ii)
      final sale or disposition of all goods constituting Collateral (including both
      inventory and equipment) and delivery of all such goods to
      purchasers.

    


    (D)          Lender
      shall not be obligated to pay or account for any rent or other compensation
      for
      this grant or for the possession, occupancy or use of any of the
      Premises.

    


    (E)           Borrowers
      acknowledges and agrees that the breach of this grant is not fully compensable
      by money damages, and that, accordingly, this grant may be enforced by an action
      for specific performance.

    


    (c)           Lender
      may exercise or enforce any and all other rights or remedies available by law
      or
      agreement against the Collateral, against Borrowers, or against any other person
      or property.

    


    9.             
      Acceleration Upon Bankruptcy.  All of the Obligations shall be
      immediately and automatically due and payable, without further act or condition,
      if any case under the United States Bankruptcy Code is commenced voluntarily
      by
      any Borrower or involuntarily against any Borrower.

    


    10.            Setoff.  Borrowers
      agree that Lender may at any time or from time to time, at its sole discretion
      and without demand and without notice to anyone, set off any deposit or other
      liability owed to any Borrower by Lender, whether or not due, against any
      indebtedness owed to Lender by Borrowers (for loans under this Agreement or
      for
      any other transaction or event), whether or not due.  In addition,
      each person holding a participating interest in any loans made to any Borrower
      by Lender shall have the right to appropriate or set off any deposit or other
      liability then owed by such person to Borrower, whether or not due, and apply
      the same to the payment of said participating interest, as fully as if such
      person had lent directly to such Borrower the amount of such participating
      interest.

    


    11.            Termination
      by Borrower.  So long as Lender, in its sole discretion, is
      willing to make loans to Borrowers for ordi­nary working capital purposes
      subject to the availability of Col­lateral deemed eligible by Lender,
      Borrowers may terminate this Agreement and (subject to payment and performance
      of all outstan­ding secured obligations) may obtain any release or
      termination of the Security Documents to which Borrowers are otherwise entitled
      by law, effective only on the third or any subsequent anniversary date of this
      Agreement, and then only if Lender receives at least 60 days prior written
      notice of Borrowers’ intent to terminate this Agreement effective on such
      anniversary date.  Upon any such termination, all obligations of
      Borrowers under this Agreement and the Security Documents shall remain in full
      force and effect until all indebtedness arising under this Agreement and all
      other debts, liabilities and obligations of Borrowers secured hereby, or by
      the
      Security Documents or any other collateral security have been fully paid and
      satisfied.

    


    
      
        
        

      

      
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    12.           
      Reservation of Right to Make Demand and to Refuse to
      Lend.  Notwithstanding any other provisions contained herein,
      Borrowers acknowledge that Lender reserves the right to demand immediate payment
      of any or all loans and the interest thereon and of all other obligations of
      Borrowers payable on demand, and the right to refuse to make any loans
      hereunder, whether or not (a) an Event of Default has occurred hereunder, (b)
      Borrowers have failed to comply with the terms of this Agreement or the Security
      Documents, (c) Borrowers’ financial or other condition has changed, (d) Lender
      has at that time or in connection with any previous demand or refusal to lend
      given notice of its intention to make demand or to refuse to lend or (e) such
      demand or refusal to lend shall not cause any loss or damage to
      Borrowers.

    


    13.           
      Miscellaneous.  Borrowers agree that:

    


    (a)           This
      Agreement can be waived, amended, terminated or discharged, and the Security
      Interests can be released, only explicitly in a writing signed by
      Lender.  A waiver so signed shall be effective only in the specific
      instance and for the specific purpose given.  Mere delay or failure to
      act shall not preclude the exercise or enforcement of any rights and remedies
      available to Lender.  All rights and remedies of Lender shall be
      cumulative and may be exercised singularly in any order or sequence, or
      concurrently, at Lender’s option, and the exercise or enforcement of any such
      right or remedy shall neither be a condition to nor bar the exercise of
      enforcement of any other.  All notices to be given to Borrowers shall
      be deemed sufficiently given if actually received by any officer of any Borrower
      or if delivered or mailed by registered, certified or ordinary mail, postage
      prepaid, to Borrowers at their address set forth below or at its most recent
      address shown on Lender’s records.

    


    (b)           Borrowers
      will furnish to Lender, prior to the first advance hereunder, (i) a certified
      copy of resolutions of the directors and, if required, the shareholders of
      Borrower, authorizing the execution, delivery and performance of this Agreement
      and the Security Documents; (ii) a certificate of an officer of Borrowers
      confirming the representations and warranties set forth in Paragraphs 3 and
      4;
      (iii) a written opinion of Borrowers’ independent legal counsel, addressed to
      Lender, confirming to the satisfaction of Lender the representations and
      warranties set forth in clause (b)(15) of Paragraph 3 and clauses (a) through
      (h) of Paragraph 4; and (iv) currently certified copies of the Articles of
      Incorporation and Bylaws of Borrowers and a Certificate of Good Standing issued
      as to Borrowers by the Secretary of State of the state of its incorporation
      and
      (v) all certificates of insurance and insurance endorsements required hereunder
      and under the Security Documents; and (vi) all collateral schedules, security
      interest subordination agreements, searches, abstracts, releases and termination
      statements which Lender may request adequately to assure and confirm the
      creation, perfection and priority of the security interests created hereunder
      or
      under the Security Documents.

    


    
      
        
        

      

      
        25

        
          

        

      

      
        
        

      

    

     

    (c)           On
      demand, Borrowers will pay or reimburse Lender for all expenses, including
      all
      reasonable fees and disbursements of legal counsel, incurred by Lender in
      connection with the preparation, negotiation, execution, performance or
      enforcement of this Agreement or the Security Documents, or any document
      contemplated thereby, or the perfection, protection, enforcement or foreclosure
      of the Security Interests created hereby or by the Security Documents, or in
      connection with the protection or enforcement of the interests and collateral
      security of Lender in any litigation or bankruptcy or insolvency proceeding
      or
      the prosecution or defense or any action or proceeding relating in any way
      to
      the transactions contemplated by this Agreement.  Additionally,
      Borrowers will reimburse Lender for all out of pocket expenses incurred in
      connection with periodic field exams and ongoing monitoring.

    


    (d)           Lender
      and its participants, if any, are not partners or joint venturers, and Lender
      shall have no liability or responsibility for any obligation, act or
      omis­sion of its participants under or as to this Agreement.

    


    (e)           This
      Agreement shall be binding upon Borrowers and their successors and assigns
      and
      shall inure to the benefit of Lender and its participants, successors and
      assigns.  This Agreement shall be effective when executed by Borrower
      and delivered to Lender, whether or not this Agreement is executed by
      Lender.  All rights and powers specifically con­ferred upon Lender
      may be transferred or delegated by Lender to any of its participants, successors
      or assigns.  Except to the extent otherwise required by law, this
      Agreement and the transactions evidenced hereby shall be governed by the
      substantive laws of the State of Minnesota.  If any provision or
      application of this Agreement is held unlawful or unenforceable in any respect,
      such illegality or unenforceability shall not affect other provisions or
      applications which can be given effect, and this Agreement shall be construed
      as
      if the unlawful or unenforceable provision or application had never been
      contained herein or prescribed hereby.  All representations and
      warranties contained in this Agreement or in any other agreement between
      Borrowers and Lender shall survive the execution, delivery and performance
      of
      this Agreement and the creation and payment of any indebtedness to
      Lender.  Borrowers waive notice of the acceptance of this Agreement by
      Lender.

    


    14.            Interest
      Rate.  Nothing herein contained nor any transaction related hereto
      shall be construed or shall operate so as to require Borrowers or any person
      liable for repayment of loans made hereunder to pay interest in an amount or
      at
      a rate greater than the maximum allowed, from time to time, by applicable laws,
      if any.  Should any interest or other charges, including any property,
      tangible or intangible, or other items of value received by Lender, imposed
      against or paid by the Borrower or any party liable for the payment of such
      loans, result in a computation of earning of interest in excess of the maximum
      legal rate of interest permitted under applicable law in effect while such
      interest is being earned, then any and all of that excess shall be and is waived
      by Lender, and all of that excess shall be automatically credited against and
      in
      reduction of the principal balance of such loans, without premium, with the
      same
      force and effect as though Borrowers had specifically designated such extra
      sums
      to be so applied to principal and the Lender to accept such extra payment(s)
      as
      a premium-free prepayment, and any portion of the excess that exceeds the
      principal balance of loans made hereunder shall be paid by the Lender to
      Borrowers or to any party liable for the payment of such loans, as applicable,
      it being the intent of the parties hereto that under no circumstances shall
      Borrowers or any party liable for the payment of the indebtedness evidenced
      hereby be required to pay interest in excess of the maximum rate allowed by
      any
      applicable laws.  The provisions of this Agreement are hereby modified
      to the extent necessary to conform with the limitations and provisions of this
      Paragraph, and this Paragraph shall govern over all other provisions in any
      document or agreement now or hereafter existing.  This Paragraph shall
      never be superseded or waived unless there is a written document executed by
      Lender and Borrowers, expressly declaring the usury limitation of this Agreement
      to be null and void, and no other method or language shall be effective to
      supersede or waive this Paragraph.

     

    
      
        
        

      

      
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    15.            Environmental
      Laws.  Borrowers are and will continue to be throughout the term
      of this Agreement in full and complete compliance with all federal, state and
      local laws, rules and regulations governing hazardous and toxic substances,
      waste or materials, any pollutants or contaminants or any other similar
      substances, or pertaining to environmental regulations, contamination or
      cleanup, including, without limitation, the Comprehensive Environmental Response
      Compensation and Liability Act, as amended, or any other state lien or state
      super lien or environmental cleanup statute (all such laws, rules and
      regulations being referred to collectively as “Environmental
      Laws”).

    


    Borrowers
      indemnify, defend and hold Lender and their officers, directors, employees
      and
      agents, harmless from and against any liability, loss, claims, damages or
      expense (including attorneys’ fees and disbursements) arising out of or based
      upon any violation or claim of violation of Environmental Laws by Borrowers
      or
      with respect to any assets owned or used by Borrower or any properties leased
      or
      occupied by Borrowers.  This indemnity shall be continuing and remain
      in full force and effect and shall survive this Agreement and the Security
      Documents or any exercise of any remedy by Lender even if all indebtedness
      and
      other obligations to Lender have been satisfied in full.

    


    16.           Indemnification.  Borrowers
      shall pay, indemnify, defend and hold the Lender, each affiliate of Lender,
      and
      each participant in the obligations with Lender, and each of their respective
      officers, directors, employees, agents, and attorneys-in-fact (each, an
“Indemnified Person”) harmless (to the fullest extent permitted by law)
      from and against any and all claims, demands, suits, actions, investigations,
      proceedings and damages, and all reasonable attorneys’ fees and disbursements
      and other costs and expenses actually incurred in connection therewith (as
      and
      when they are incurred and irrespective of whether suit is brought), at any
      time
      asserted against, imposed upon, or incurred by any of them (a) in connection
      with or as a result of or related to the execution, delivery, enforcement,
      performance, or administration of this Agreement, any of the other Security
      Documents, or the transactions contemplated hereby or thereby, and (b) with
      respect to any investigation, litigation, or proceeding related to this
      Agreement, any other Security Document, or the use of the proceeds of the credit
      provided hereunder (irrespective of whether any Indemnified Person is a party
      thereto), or any act, omission, event, or circumstance in any manner related
      thereto (all the foregoing, collectively, the “Indemnified
      Liabilities”).  The foregoing to the contrary notwithstanding,
      Borrowers shall have no obligation to any Indemnified Person under this
Paragraph 16 with respect to any Indemnified Liability that a court of
      competent jurisdiction finally determines to have resulted directly from the
      willful misconduct or gross negligence of such Indemnified
      Person.  This provision shall survive the termination of this
      Agreement and the repayment of the Obligations.  If any Indemnified
      Person makes any payment to any other Indemnified Person with respect to an
      Indemnified Liability as to which Borrowers were required to indemnify the
      Indemnified Person receiving such payment, the Indemnified Person making such
      payment is entitled to be indemnified and reimbursed by Borrowers with respect
      thereto.  WITHOUT LIMITATION, THE FOREGOING INDEMNITY SHALL APPLY TO
      EACH INDEMNIFIED PERSON WITH RESPECT TO INDEMNIFIED LIABILITIES WHICH IN WHOLE
      OR IN PART ARE CAUSED BY OR ARISE OUT OF ANY NEGLIGENT ACT OR OMISSION OF SUCH
      INDEMNIFIED PERSON OR OF ANY OTHER PERSON.

    


    
      
        
        

      

      
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    17.           Joint
      and Several.  Each Borrower shall be obligated, bound by, subject
      to and comply with each and every agreement, covenant and provision contained
      in
      this Agreement and shall be deemed to have made every representation warranty
      contained in this Agreement.  Each Borrower acknowledges and agrees
      that it is jointly and severally liable with the other Borrower for all
      obligations, liabilities and indebtedness created or arising hereunder and
      the
      release or substitution of any other Borrower shall not release or diminish
      its
      liability hereunder.  Each Borrower agrees that al obligations,
      liabilities and indebtedness are joint and several and the primary obligations
      of each of them, enforceable against each Borrower separately or all or any
      combination of Borrowers together notwithstanding of any right or power of
      any
      party to assert any claim or defense as to the invalidity or unenforceability
      of
      any such obligations, liabilities and indebtedness.  Each Borrower
      hereby waives any defense it may claim as a guarantor, surety or accommodation
      party.  Lender may, from time to time, without notice to any of
      Borrowers, (a) obtain or release any security interest in any property to secure
      any of such obligations, liabilities and indebtedness; (b) obtain or release
      the
      primary or secondary liability of any party or parties with respect to any
      of
      such obligations, liabilities and indebtedness (including, without limitation,
      the liability of any other Borrower); (c) extend or renew for any period, alter
      or exchange any of such obligations, liabilities and indebtedness or release
      or
      compromise any of such obligations, liabilities and indebtedness of any obligor
      with respect to any thereof; or (d) resort to any Borrower for payment of any
      such obligations, liabilities and indebtedness whether or not the Lender shall
      have resorted to any Collateral or to any other Borrower or any other party
      primarily or secondarily liable with respect to any such obligations,
      liabilities and indebtedness.

    


    18.           Earlier
      Agreements.  The Note, Security Agreement and Mortgage and related
      agreements and documents executed and/or delivered in connection therewith
      shall
      remain in full force and effect; provided, however, (a) all loans to Borrower
      shall also be governed by this Agreement, (b)in the event of a conflict between
      the aforesaid agreements and this Agreement, this Agreement shall take
      precedence and be controlling, and (c) this Agreement is a restatement of the
      Security Agreement and replaces the Security Agreement in its
      entirety.

    


    19.           Jurisdiction
      and Venue.  BORROWERS HEREBY CONSENT TO THE EXCLUSIVE JURISDICTION
      OF ANY STATE OR FEDERAL COURT SITUATED IN HENNEPIN COUNTY, MINNESOTA AND WAIVES
      ANY OBJECTION BASED ON FORUM NON CONVENIENS, WITH REGARD TO ANY ACTIONS, CLAIMS,
      DISPUTES OR PROCEEDINGS RELATED TO THIS AGREEMENT, THE COLLATERAL, THE
      OBLIGATIONS, OR ANY OTHER SECURITY DOCUMENT, OR ANY TRANSACTIONS ARISING
      THEREFROM, OR ENFORCEMENT AND/OR INTERPRETATION OF ANY OF THE
      FOREGOING.  Nothing herein shall affect Lender’s rights to serve
      process in any manner permitted by law, or limit Lender’s right to bring
      proceedings against Borrowers in the competent courts of any other jurisdiction
      or jurisdictions.

    


    
      
        
        

      

      
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    20.           Waiver
      of Trial by Jury.  BORROWERS HEREBY WAIVE ANY RIGHT TO A
      TRIAL BY JURY IN ANY ACTION OR PROCEEDING ARISING OUT OF THIS AGREEMENT, THE
      COLLATERAL, THE OBLIGATIONS OR ANY OTHER SECURITY DOCUMENT OR TRANSACTIONS
      BETWEEN BORROWERS AND LENDER.

    


    Signature
      page follows.


    
      
        
        

      

      
        29

        
          

        

      

      
        
        

      

    

     

    IN
      WITNESS WHEREOF, this Agreement has been duly executed and delivered by the
      proper officers thereunto duly authorized on the day and year first above
      written.

    


    
      	 	 	
              NATURE
                VISION, INC. 

            	 
	 	 	 	 	 
	 	 	
              By

            	 /S/
              Jeffrey P. Zernov	 
	 	 	
                   

            	 President
              and Chief Executive Officer	 
	 	 	 	 	 
	 	 	
              By

            	/S/
              Michael Day 	 
	 	 	
            	 Chief
              Financial Officer	 
	 	 	 	 	 
	 	 	
              Federal
                Identification Number:  41-0831186 

            	 
	 	 	 	 	 
	 	 	
              Organizational
                Number:  W164 

            	 
	 	 	 	 	 
	 	 	
              NATURE
                VISION OPERATING, INC. 

            	 
	 	 	 	 	 
	 	 	
              By
                

            	/S/
              Jeffrey P. Zernov	 
	 	 	
                    

            	President
              and Chief Executive Officer	 
	 	 	 	 	 
	 	 	
              By
                

            	/S/
              Michael
              Day                   	 
	 	 	
                    

            	Chief
              Financial Officer	 
	 	 	 	 	 
	 	 	
              Federal
                Identification Number:  41-1901370 

            	 
	 	 	 	 	 
	 	 	
              Organizational
                Number:  9Z969 

            	 
	 	 	 	 	 
	
              TRADE
                NAMES OF BORROWER:

            	 	
              ADDRESS
                OF CHIEF EXECUTIVE OFFICES: 

            	 
	 	 	 	 	 
	
               

            	 	
              1480
                Northern Pacific Road 

            	 
	 	 	
              Brainerd,
                MN  56401 

            	 
	 	 	 	 	 
	 	 	 	 	 


    


    
      
        
        

      

      
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              COLLATERAL
                LOCATIONS:

            	 	
              OTHER
                ADDRESSES:

            	 
	 	 	 	 
	 	 	 	 
	
               

            	 	
               

            	 
	 	 	 	 
	 	 	 	 
	 	 	 	 
	
               

            	 	
               

            	 


    

    
 

    
      	
              Accepted
                at Minneapolis, Minnesota

            	 
	
              on
                November 8, 2007.

            	 
	 	 
	
              M&I
                BUSINESS CREDIT, LLC

            	 
	 	 
	 	 
	
              By

            	/S/
              Thomas J. Kopacek  	 
	
              Its   

            	Vice
              President	 


    

    
 

    31