Exhibit 10.03


 


COMMERCIAL SECURITY AGREEMENT


 


	Principal	Loan Date	Maturity	Loan No	Call / Coll	Account	Officer	Initials


 


	$1,000,000.00	08-24-2015	09-01-2020	775	04A0 / 5 / BL1	2920	DAD	 


 


References in the boxes above are for
Lender's use only and do not limit the applicability of this document to any particular loan or item.


 


Any item above containing "***"
has been omitted due to text length limitations.


 





	Borrower:	
        OURPET'S COMPANY, VIRTU COMPANY
        and SMP COMPANY INCORPORATED

        

        1300 EAST STREET

        

        FAIRPORT HARBOR,
OH 44077
	Lender:	
        FIRSTMERIT BANK, N.A.

        Commercial Credit Services
#90383

        106 South Main Street

        Akron, OH 44308

        (800) 554-4362



 


	Grantor:	
        OURPET'S COMPANY

        1300 EAST STREET

        

        FAIRPORT HARBOR, OH 44077



 


 


THIS COMMERCIAL SECURITY
AGREEMENT dated August 24, 2015, is made and executed among OURPET'S COMPANY ("Grantor"); OURPET'S COMPANY, VIRTU COMPANY
and SMP COMPANY INCORPORATED ("Borrower"); and FIRSTMERIT BANK, N.A. ("Lender").


 


GRANT OF SECURITY INTEREST.
For valuable consideration, Grantor grants to Lender a security interest in the Collateral to secure the Indebtedness and agrees
that Lender shall have the rights stated in this Agreement with respect to the Collateral, in addition to all other rights which
Lender may have by law.


 


COLLATERAL DESCRIPTION.
The word "Collateral" as used in this Agreement means the following described property, whether now owned or hereafter
acquired, whether now existing or hereafter arising, and wherever located, in which Grantor is giving to Lender a security interest
for the payment of the Indebtedness and performance of all other obligations under the Note and this Agreement:


 


All inventory, equipment,
accounts (including but not limited to all health-care-insurance receivables), chattel paper, instruments (including but not limited
to all promissory notes), letter-of-credit rights, letters of credit, documents, deposit accounts, investment property, money,
other rights to payment and performance, and general intangibles (including but not limited to all software and all payment intangibles);
all oil, gas and other minerals before extraction; all oil, gas, other minerals and accounts constituting as-extracted collateral;
all fixtures; all timber to be cut; all attachments, accessions, accessories, fittings, increases, tools, parts, repairs, supplies,
and commingled goods relating to the foregoing property, and all additions, replacements of and substitutions for all or any part
of the foregoing property; all insurance refunds relating to the foregoing property; all good will relating to the foregoing property;
all records and data and embedded software relating to the foregoing property, and all equipment, inventory and software to utilize,
create, maintain and process any such records and data on electronic media; and all supporting obligations relating to the foregoing
property; all whether now existing or hereafter arising, whether now owned or hereafter acquired or whether now or hereafter subject
to any rights in the foregoing property; and all products and proceeds (including but not limited to all insurance payments) of
or relating to the foregoing property.


 


In addition, the word "Collateral"
also includes all the following, whether now owned or hereafter acquired, whether now existing or hereafter arising, and wherever
located:


 


(A) All accessions, attachments,
accessories, tools, parts, supplies, replacements of and additions to any of the collateral described herein, whether added now
or later.


 


(B) All products and produce
of any of the property described in this Collateral section.


 


(C) All accounts, general intangibles,
instruments, rents, monies, payments, and all other rights, arising out of a sale, lease, consignment or other disposition of any
of the property described in this Collateral section.


 


(D) All proceeds (including
insurance proceeds) from the sale, destruction, loss, or other disposition of any of the property described in this Collateral
section, and sums due from a third party who has damaged or destroyed the Collateral or from that party's insurer, whether due
to judgment, settlement or other process.


 


(E) All records and data relating
to any of the property described in this Collateral section, whether in the form of a writing, photograph, microfilm, microfiche,
or electronic media, together with all of Grantor's right, title, and interest in and to all computer software required to utilize,
create, maintain, and process any such records or data on electronic media.


 


CROSS-COLLATERALIZATION.
In addition to the Note, this Agreement secures all obligations, debts and liabilities, plus interest thereon, of either Grantor
or Borrower to Lender, or any one or more of them, as well as all claims by Lender against Borrower and Grantor or any one or more
of them, whether now existing or hereafter arising, whether related or unrelated to the purpose of the Note, whether voluntary
or otherwise, whether due or not due, direct or indirect, determined or undetermined, absolute or contingent, liquidated or unliquidated,
whether Borrower or Grantor may be liable individually or jointly with others, whether obligated as guarantor, surety, accommodation
party or otherwise, and whether recovery upon such amounts may be or hereafter may become barred by any statute of limitations,
and whether the obligation to repay such amounts may be or hereafter may become otherwise unenforceable.


 


FUTURE ADVANCES. In
addition to the Note, this Agreement secures all future advances made by Lender to Borrower regardless of whether the advances
are made a) pursuant to a commitment or b) for the same purposes.


 






     


     


    

 


BORROWER'S WAIVERS AND
RESPONSIBILITIES. Except as otherwise required under this Agreement or by applicable law, (A) Borrower agrees that Lender need
not tell Borrower about any action or inaction Lender takes in connection with this Agreement; (B) Borrower assumes the responsibility
for being and keeping informed about the Collateral; and (C) Borrower waives any defenses that may arise because of any action
or inaction of Lender, including without limitation any failure of Lender to realize upon the Collateral or any delay by Lender
in realizing upon the Collateral; and Borrower agrees to remain liable under the Note no matter what action Lender takes or fails
to take under this Agreement.


 


GRANTOR'S REPRESENTATIONS
AND WARRANTIES. Grantor warrants that: (A) this Agreement is executed at Borrower's request and not at the request of Lender;
(B) Grantor has the full right, power and authority to enter into this Agreement and to pledge the Collateral to Lender; (C) Grantor
has established adequate means of obtaining from Borrower on a continuing basis information about Borrower's financial condition;
and (D) Lender has made no representation to Grantor about Borrower or Borrower's creditworthiness.


 


GRANTOR'S WAIVERS.
Grantor waives all requirements of presentment, protest, demand, and notice of dishonor or non-payment to Borrower or Grantor,
or any other party to the Indebtedness or the Collateral. Lender may do any of the following with respect to any obligation of
any Borrower, without first obtaining the consent of Grantor: (A) grant any extension of time for any payment, (B) grant any renewal,
(C) permit any modification of payment terms or other terms, or (D) exchange or release any Collateral or other security. No such
act or failure to act shall affect Lender's rights against Grantor or the Collateral.


 


RIGHT OF SETOFF. To
the extent permitted by applicable law, Lender reserves a right of setoff in all Grantor's accounts with Lender (whether checking,
savings, or some other account). This includes all accounts Grantor holds jointly with someone else and all accounts Grantor may
open in the future. However, this does not include any IRA or Keogh accounts, or any trust accounts for which setoff would be prohibited
by law. Grantor authorizes Lender, to the extent permitted by applicable law, to charge or setoff all sums owing on the Indebtedness
against any and all such accounts, and, at Lender's option, to administratively freeze all such accounts to allow Lender to protect
Lender's charge and setoff rights provided in this paragraph.


 


GRANTOR'S REPRESENTATIONS
AND WARRANTIES WITH RESPECT TO THE COLLATERAL. With respect to the Collateral, Grantor represents and promises to Lender that:


 


Perfection of Security Interest.
Grantor agrees to take whatever actions are requested by Lender to perfect and continue Lender's security interest in the Collateral.
Upon request of Lender, Grantor will deliver to Lender any and all of the documents evidencing or constituting the Collateral,
and Grantor will note Lender's interest upon any and all chattel paper and instruments if not delivered to Lender for possession
by Lender. This is a continuing Security Agreement and will continue in effect even though all or any part of the Indebtedness
is paid in full and even though for a period of time Borrower may not be indebted to Lender.


 


Notices to Lender. Grantor
will promptly notify Lender in writing at Lender's address shown above (or such other addresses as Lender may designate from time
to time) prior to any (1) change in Grantor's name; (2) change in Grantor's assumed business name(s); (3) change in the management
of the Corporation Grantor; (4) change in the authorized signer(s); (5) change in Grantor's principal office address; (6) change
in Grantor's state of organization; (7) conversion of Grantor to a new or different type of business entity; or (8) change in any
other aspect of Grantor that directly or indirectly relates to any agreements between Grantor and Lender. No change in Grantor's
name or state of organization will take effect until after Lender has received notice.


 


No Violation. The execution
and delivery of this Agreement will not violate any law or agreement governing Grantor or to which Grantor is a party, and its
certificate or articles of incorporation and bylaws do not prohibit any term or condition of this Agreement.


 


Enforceability of Collateral.
To the extent the Collateral consists of accounts, chattel paper, or general intangibles, as defined by the Uniform Commercial
Code, the Collateral is enforceable in accordance with its terms, is genuine, and fully complies with all applicable laws and regulations
concerning form, content and manner of preparation and execution, and all persons appearing to be obligated on the Collateral have
authority and capacity to contract and are in fact obligated as they appear to be on the Collateral. At the time any account becomes
subject to a security interest in favor of Lender, the account shall be a good and valid account representing an undisputed, bona
fide indebtedness incurred by the account debtor, for merchandise held subject to delivery instructions or previously shipped or
delivered pursuant to a contract of sale, or for services previously performed by Grantor with or for the account debtor. So long
as this Agreement remains in effect, Grantor shall not, without Lender's prior written consent, compromise, settle, adjust, or
extend payment under or with regard to any such Accounts. There shall be no setoffs or counterclaims against any of the Collateral,
and no agreement shall have been made under which any deductions or discounts may be claimed concerning the Collateral except those
disclosed to Lender in writing.


 


Location of the Collateral.
Except in the ordinary course of Grantor's business, Grantor agrees to keep the Collateral (or to the extent the Collateral consists
of intangible property such as accounts or general intangibles, the records concerning the Collateral) at Grantor's address shown
above or at such other locations as are acceptable to Lender. Upon Lender's request, Grantor will deliver to Lender in form satisfactory
to Lender a schedule of real properties and Collateral locations relating to Grantor's operations, including without limitation
the following: (1) all real property Grantor owns or is purchasing; (2) all real property Grantor is renting or leasing; (3) all
storage facilities Grantor owns, rents, leases, or uses; and (4) all other properties where Collateral is or may be located.


 


Removal of the Collateral.
Except in the ordinary course of Grantor's business, including the sales of inventory, Grantor shall not remove the Collateral
from its existing location without Lender's prior written consent. To the extent that the Collateral consists of vehicles, or other
titled property, Grantor shall not take or permit any action which would require application for certificates of title for the
vehicles outside the State of Ohio, without Lender's prior written consent. Grantor shall, whenever requested, advise Lender of
the exact location of the Collateral.


 


Transactions Involving Collateral.
Except for inventory sold or accounts collected in the ordinary course of Grantor's business, or as otherwise provided for in this
Agreement, Grantor shall not sell, offer to sell, or otherwise transfer or dispose of the Collateral. While Grantor is not in default
under this Agreement, Grantor may sell inventory, but only in the ordinary course of its business and only to buyers who qualify
as a buyer in the ordinary course of business. A sale in the ordinary course of Grantor's business does not include a transfer
in partial or total satisfaction of a debt or any bulk sale. Grantor shall not pledge, mortgage, encumber or otherwise permit the
Collateral to be subject to any lien, security interest, encumbrance, or charge, other than the security interest provided for
in this Agreement, without the prior written consent of Lender. This includes security interests even if junior in right to the
security interests granted under this Agreement. Unless waived by Lender, all proceeds from any disposition of the Collateral (for
whatever reason) shall be held in trust for Lender and shall not be commingled with any other funds; provided however, this requirement
shall not constitute consent by Lender to any sale or other disposition. Upon receipt, Grantor shall immediately deliver any such
proceeds to Lender.


 






     


     


    

 


Title. Grantor represents
and warrants to Lender that Grantor holds good and marketable title to the Collateral, free and clear of all liens and encumbrances
except for the lien of this Agreement. No financing statement covering any of the Collateral is on file in any public office other
than those which reflect the security interest created by this Agreement or to which Lender has specifically consented. Grantor
shall defend Lender's rights in the Collateral against the claims and demands of all other persons.


 


Repairs and Maintenance.
Grantor agrees to keep and maintain, and to cause others to keep and maintain, the Collateral in good order, repair and condition
at all times while this Agreement remains in effect. Grantor further agrees to pay when due all claims for work done on, or services
rendered or material furnished in connection with the Collateral so that no lien or encumbrance may ever attach to or be filed
against the Collateral.


 


Inspection of Collateral.
Lender and Lender's designated representatives and agents shall have the right at all reasonable times to examine and inspect the
Collateral wherever located.


 


Taxes, Assessments and Liens.
Grantor will pay when due all taxes, assessments and liens upon the Collateral, its use or operation, upon this Agreement, upon
any promissory note or notes evidencing the Indebtedness, or upon any of the other Related Documents. Grantor may withhold any
such payment or may elect to contest any lien if Grantor is in good faith conducting an appropriate proceeding to contest the obligation
to pay and so long as Lender's interest in the Collateral is not jeopardized in Lender's sole opinion. If the Collateral is subjected
to a lien which is not discharged within fifteen (15) days, Grantor shall deposit with Lender cash, a sufficient corporate surety
bond or other security satisfactory to Lender in an amount adequate to provide for the discharge of the lien plus any interest,
costs, attorneys' fees or other charges that could accrue as a result of foreclosure or sale of the Collateral. In any contest
Grantor shall defend itself and Lender and shall satisfy any final adverse judgment before enforcement against the Collateral.
Grantor shall name Lender as an additional obligee under any surety bond furnished in the contest proceedings. Grantor further
agrees to furnish Lender with evidence that such taxes, assessments, and governmental and other charges have been paid in full
and in a timely manner. Grantor may withhold any such payment or may elect to contest any lien if Grantor is in good faith conducting
an appropriate proceeding to contest the obligation to pay and so long as Lender's interest in the Collateral is not jeopardized.


 


Compliance with Governmental
Requirements. Grantor shall comply promptly with all laws, ordinances, rules and regulations of all governmental authorities,
now or hereafter in effect, applicable to the ownership, production, disposition, or use of the Collateral, including all laws
or regulations relating to the undue erosion of highly-erodible land or relating to the conversion of wetlands for the production
of an agricultural product or commodity. Grantor may contest in good faith any such law, ordinance or regulation and withhold compliance
during any proceeding, including appropriate appeals, so long as Lender's interest in the Collateral, in Lender's opinion, is not
jeopardized.


 


Hazardous Substances.
Grantor represents and warrants that the Collateral never has been, and never will be so long as this Agreement remains a lien
on the Collateral, used in violation of any Environmental Laws or for the generation, manufacture, storage, transportation, treatment,
disposal, release or threatened release of any Hazardous Substance. The representations and warranties contained herein are based
on Grantor's due diligence in investigating the Collateral for Hazardous Substances. Grantor hereby (1) releases and waives any
future claims against Lender for indemnity or contribution in the event Grantor becomes liable for cleanup or other costs under
any Environmental Laws, and (2) agrees to indemnify, defend, and hold harmless Lender against any and all claims and losses resulting
from a breach of this provision of this Agreement. This obligation to indemnify and defend shall survive the payment of the Indebtedness
and the satisfaction of this Agreement.


 


Maintenance of Casualty
Insurance. Grantor shall procure and maintain all risks insurance, including without limitation fire, theft and liability coverage
together with such other insurance as Lender may require with respect to the Collateral, in form, amounts, coverages and basis
reasonably acceptable to Lender and issued by a company or companies reasonably acceptable to Lender. Grantor, upon request of
Lender, will deliver to Lender from time to time the policies or certificates of insurance in form satisfactory to Lender, including
stipulations that coverages will not be cancelled or diminished without at least ten (10) days' prior written notice to Lender
and not including any disclaimer of the insurer's liability for failure to give such a notice. Each insurance policy also shall
include an endorsement providing that coverage in favor of Lender will not be impaired in any way by any act, omission or default
of Grantor or any other person. In connection with all policies covering assets in which Lender holds or is offered a security
interest, Grantor will provide Lender with such loss payable or other endorsements as Lender may require. If Grantor at any time
fails to obtain or maintain any insurance as required under this Agreement, Lender may (but shall not be obligated to) obtain such
insurance as Lender deems appropriate, including if Lender so chooses "single interest insurance," which will cover only
Lender's interest in the Collateral.


 


Application of Insurance
Proceeds. Grantor shall promptly notify Lender of any loss or damage to the Collateral, whether or not such casualty or loss
is covered by insurance. Lender may make proof of loss if Grantor fails to do so within fifteen (15) days of the casualty. All
proceeds of any insurance on the Collateral, including accrued proceeds thereon, shall be held by Lender as part of the Collateral.
If Lender consents to repair or replacement of the damaged or destroyed Collateral, Lender shall, upon satisfactory proof of expenditure,
pay or reimburse Grantor from the proceeds for the reasonable cost of repair or restoration. If Lender does not consent to repair
or replacement of the Collateral, Lender shall retain a sufficient amount of the proceeds to pay all of the Indebtedness, and shall
pay the balance to Grantor. Any proceeds which have not been disbursed within six (6) months after their receipt and which Grantor
has not committed to the repair or restoration of the Collateral shall be used to prepay the Indebtedness.


 


Insurance Reserves.
Lender may require Grantor to maintain with Lender reserves for payment of insurance premiums, which reserves shall be created
by monthly payments from Grantor of a sum estimated by Lender to be sufficient to produce, at least fifteen (15) days before the
premium due date, amounts at least equal to the insurance premiums to be paid. If fifteen (15) days before payment is due, the
reserve funds are insufficient, Grantor shall upon demand pay any deficiency to Lender. The reserve funds shall be held by Lender
as a general deposit and shall constitute a non-interest-bearing account which Lender may satisfy by payment of the insurance premiums
required to be paid by Grantor as they become due. Lender does not hold the reserve funds in trust for Grantor, and Lender is not
the agent of Grantor for payment of the insurance premiums required to be paid by Grantor. The responsibility for the payment of
premiums shall remain Grantor's sole responsibility.


 


Insurance Reports. Grantor,
upon request of Lender, shall furnish to Lender reports on each existing policy of insurance showing such information as Lender
may reasonably request including the following: (1) the name of the insurer; (2) the risks insured; (3) the amount of the policy;
(4) the property insured; (5) the then current value on the basis of which insurance has been obtained and the manner of determining
that value; and (6) the expiration date of the policy. In addition, Grantor shall upon request by Lender (however not more often
than annually) have an independent appraiser satisfactory to Lender determine, as applicable, the cash value or replacement cost
of the Collateral.


 


Financing Statements.
Grantor authorizes Lender to file a UCC financing statement, or alternatively, a copy of this Agreement to perfect Lender's security
interest. At Lender's request, Grantor additionally agrees to sign all other documents that are necessary to perfect, protect,
and continue Lender's security interest in the Property. Grantor will pay all filing fees, title transfer fees, and other fees
and costs involved unless prohibited by law or unless Lender is required by law to pay such fees and costs. Grantor irrevocably
appoints Lender to execute documents necessary to transfer title if there is a default. Lender may file a copy of this Agreement
as a financing statement.


 






     


     


    

 


GRANTOR'S RIGHT TO POSSESSION
AND TO COLLECT ACCOUNTS. Until default and except as otherwise provided below with respect to accounts, Grantor may have possession
of the tangible personal property and beneficial use of all the Collateral and may use it in any lawful manner not inconsistent
with this Agreement or the Related Documents, provided that Grantor's right to possession and beneficial use shall not apply to
any Collateral where possession of the Collateral by Lender is required by law to perfect Lender's security interest in such Collateral.
Until otherwise notified by Lender, Grantor may collect any of the Collateral consisting of accounts. At any time and even though
no Event of Default exists, Lender may exercise its rights to collect the accounts and to notify account debtors to make payments
directly to Lender for application to the Indebtedness. If Lender at any time has possession of any Collateral, whether before
or after an Event of Default, Lender shall be deemed to have exercised reasonable care in the custody and preservation of the Collateral
if Lender takes such action for that purpose as Grantor shall request or as Lender, in Lender's sole discretion, shall deem appropriate
under the circumstances, but failure to honor any request by Grantor shall not of itself be deemed to be a failure to exercise
reasonable care. Lender shall not be required to take any steps necessary to preserve any rights in the Collateral against prior
parties, nor to protect, preserve or maintain any security interest given to secure the Indebtedness.


 


LENDER'S EXPENDITURES.
If any action or proceeding is commenced that would materially affect Lender's interest in the Collateral or if Grantor fails to
comply with any provision of this Agreement or any Related Documents, including but not limited to Grantor's failure to discharge
or pay when due any amounts Grantor is required to discharge or pay under this Agreement or any Related Documents, Lender on Grantor's
behalf may (but shall not be obligated to) take any action that Lender deems appropriate, including but not limited to discharging
or paying all taxes, liens, security interests, encumbrances and other claims, at any time levied or placed on the Collateral and
paying all costs for insuring, maintaining and preserving the Collateral. All such expenditures incurred or paid by Lender for
such purposes will then bear interest at the rate charged under the Note from the date incurred or paid by Lender to the date of
repayment by Grantor. All such expenses will become a part of the Indebtedness and, at Lender's option, will (A) be payable on
demand; (B) be added to the balance of the Note and be apportioned among and be payable with any installment payments to become
due during either (1) the term of any applicable insurance policy; or (2) the remaining term of the Note; or (C) be treated as
a balloon payment which will be due and payable at the Note's maturity. The Agreement also will secure payment of these amounts.
Such right shall be in addition to all other rights and remedies to which Lender may be entitled upon Default.


 


DEFAULT. Each of the
following shall constitute an Event of Default under this Agreement:


 


Payment Default. Borrower
fails to make any payment when due under the Indebtedness.


 


Other Defaults. Borrower
or Grantor fails to comply with or to perform any other term, obligation, covenant or condition contained in this Agreement or
in any of the Related Documents or to comply with or to perform any term, obligation, covenant or condition contained in any other
agreement between Lender and Borrower or Grantor.


 


Default in Favor of Third
Parties. Borrower or Grantor defaults under any loan, extension of credit, security agreement, purchase or sales agreement,
or any other agreement, in favor of any other creditor or person that may materially affect any of Borrower's or Grantor's property
or ability to perform their respective obligations under this Agreement or any of the Related Documents.


 


False Statements. Any
warranty, representation or statement made or furnished to Lender by Borrower or Grantor or on Borrower's or Grantor's behalf under
this Agreement or the Related Documents is false or misleading in any material respect, either now or at the time made or furnished
or becomes false or misleading at any time thereafter.


 


Defective Collateralization.
This Agreement or any of the Related Documents ceases to be in full force and effect (including failure of any collateral document
to create a valid and perfected security interest or lien) at any time and for any reason.


 


Insolvency. The dissolution
or termination of Borrower's or Grantor's existence as a going business, the insolvency of Borrower or Grantor, the appointment
of a receiver for any part of Borrower's or Grantor's property, any assignment for the benefit of creditors, any type of creditor
workout, or the commencement of any proceeding under any bankruptcy or insolvency laws by or against Borrower or Grantor.


 


Creditor or Forfeiture Proceedings.
Commencement of foreclosure or forfeiture proceedings, whether by judicial proceeding, self-help, repossession or any other method,
by any creditor of Borrower or Grantor or by any governmental agency against any collateral securing the Indebtedness. This includes
a garnishment of any of Borrower's or Grantor's accounts, including deposit accounts, with Lender. However, this Event of Default
shall not apply if there is a good faith dispute by Borrower or Grantor as to the validity or reasonableness of the claim which
is the basis of the creditor or forfeiture proceeding and if Borrower or Grantor gives Lender written notice of the creditor or
forfeiture proceeding and deposits with Lender monies or a surety bond for the creditor or forfeiture proceeding, in an amount
determined by Lender, in its sole discretion, as being an adequate reserve or bond for the dispute.


 


Events Affecting Guarantor.
Any of the preceding events occurs with respect to any guarantor, endorser, surety, or accommodation party of any of the Indebtedness
or guarantor, endorser, surety, or accommodation party dies or becomes incompetent or revokes or disputes the validity of, or liability
under, any Guaranty of the Indebtedness.


 


Adverse Change. A material
adverse change occurs in Borrower's or Grantor's financial condition, or Lender believes the prospect of payment or performance
of the Indebtedness is impaired.


 


Insecurity. Lender in
good faith believes itself insecure.


 


Cure Provisions. If
any default, other than a default in payment, is curable and if Grantor has not been given a notice of a breach of the same provision
of this Agreement within the preceding twelve (12) months, it may be cured if Grantor, after Lender sends written notice to Borrower
demanding cure of such default: (1) cures the default within fifteen (15) days, or, in the case of a default under the clause titled
“Other Defaults”, thirty (30) days; or (2) if the cure requires more than fifteen (15) days, or, in the case of a default
under the clause titled “Other Defaults”, thirty (30) days, immediately initiates steps which Lender deems in Lender's
sole discretion to be sufficient to cure the default and thereafter continues and completes all reasonable and necessary steps
sufficient to produce compliance as soon as reasonably practical.


 






     


     


    

 


RIGHTS AND REMEDIES ON
DEFAULT. If an Event of Default occurs under this Agreement, at any time thereafter, Lender shall have all the rights of a
secured party under the Ohio Uniform Commercial Code. In addition and without limitation, Lender may exercise any one or more of
the following rights and remedies:


 


Accelerate Indebtedness.
Lender may declare the entire Indebtedness, including any prepayment penalty which Borrower would be required to pay, immediately
due and payable, without notice of any kind to Borrower or Grantor.


 


Assemble Collateral.
Lender may require Grantor to deliver to Lender all or any portion of the Collateral and any and all certificates of title and
other documents relating to the Collateral. Lender may require Grantor to assemble the Collateral and make it available to Lender
at a place to be designated by Lender. Lender also shall have full power to enter upon the property of Grantor to take possession
of and remove the Collateral. If the Collateral contains other goods not covered by this Agreement at the time of repossession,
Grantor agrees Lender may take such other goods, provided that Lender makes reasonable efforts to return them to Grantor after
repossession.


 


Sell the Collateral.
Lender shall have full power to sell, lease, transfer, or otherwise deal with the Collateral or proceeds thereof in Lender's own
name or that of Grantor. Lender may sell the Collateral at public auction or private sale. Unless the Collateral threatens to decline
speedily in value or is of a type customarily sold on a recognized market, Lender will give Grantor, and other persons as required
by law, reasonable notice of the time and place of any public sale, or the time after which any private sale or any other disposition
of the Collateral is to be made. However, no notice need be provided to any person who, after Event of Default occurs, enters into
and authenticates an agreement waiving that person's right to notification of sale. The requirements of reasonable notice shall
be met if such notice is given at least ten (10) days before the time of the sale or disposition. All expenses relating to the
disposition of the Collateral, including without limitation the expenses of retaking, holding, insuring, preparing for sale and
selling the Collateral, shall become a part of the Indebtedness secured by this Agreement and shall be payable on demand, with
interest at the Note rate from date of expenditure until repaid.


 


Appoint Receiver. Lender
shall have the right to have a receiver appointed to take possession of all or any part of the Collateral, with the power to protect
and preserve the Collateral, to operate the Collateral preceding foreclosure or sale, and to collect the rents from the Collateral
and apply the proceeds, over and above the cost of the receivership, against the Indebtedness. The receiver may serve without bond
if permitted by law. Lender's right to the appointment of a receiver shall exist whether or not the apparent value of the Collateral
exceeds the Indebtedness by a substantial amount. Employment by Lender shall not disqualify a person from serving as a receiver.


 


Collect Revenues, Apply
Accounts. Lender, either itself or through a receiver, may collect the payments, rents, income, and revenues from the Collateral.
Lender may at any time in Lender's discretion transfer any Collateral into Lender's own name or that of Lender's nominee and receive
the payments, rents, income, and revenues therefrom and hold the same as security for the Indebtedness or apply it to payment of
the Indebtedness in such order of preference as Lender may determine. Insofar as the Collateral consists of accounts, general intangibles,
insurance policies, instruments, chattel paper, choses in action, or similar property, Lender may demand, collect, receipt for,
settle, compromise, adjust, sue for, foreclose, or realize on the Collateral as Lender may determine, whether or not Indebtedness
or Collateral is then due. For these purposes, Lender may, on behalf of and in the name of Grantor, receive, open and dispose of
mail addressed to Grantor; change any address to which mail and payments are to be sent; and endorse notes, checks, drafts, money
orders, documents of title, instruments and items pertaining to payment, shipment, or storage of any Collateral. To facilitate
collection, Lender may notify account debtors and obligors on any Collateral to make payments directly to Lender.


 


Obtain Deficiency. If
Lender chooses to sell any or all of the Collateral, Lender may obtain a judgment against Borrower for any deficiency remaining
on the Indebtedness due to Lender after application of all amounts received from the exercise of the rights provided in this Agreement.
Borrower shall be liable for a deficiency even if the transaction described in this subsection is a sale of accounts or chattel
paper.


 


Other Rights and Remedies.
Lender shall have all the rights and remedies of a secured creditor under the provisions of the Uniform Commercial Code, as may
be amended from time to time. In addition, Lender shall have and may exercise any or all other rights and remedies it may have
available at law, in equity, or otherwise.


 


Election of Remedies.
Except as may be prohibited by applicable law, all of Lender's rights and remedies, whether evidenced by this Agreement, the Related
Documents, or by any other writing, shall be cumulative and may be exercised singularly or concurrently. Election by Lender to
pursue any remedy shall not exclude pursuit of any other remedy, and an election to make expenditures or to take action to perform
an obligation of Grantor under this Agreement, after Grantor's failure to perform, shall not affect Lender's right to declare a
default and exercise its remedies.


 


ADDITIONAL INDEBTEDNESS.
Indebtedness shall include all obligations and amounts due and to become due under any interest rate management agreement between
Borrower and Lender including, but not limited to, interest rate swaps, caps or collars, forward rate transactions and foreign
exchange transactions.


 


MISCELLANEOUS PROVISIONS.
The following miscellaneous provisions are a part of this Agreement:


 


Amendments. This Agreement,
together with any Related Documents, constitutes the entire understanding and agreement of the parties as to the matters set forth
in this Agreement. No alteration of or amendment to this Agreement shall be effective unless given in writing and signed by the
party or parties sought to be charged or bound by the alteration or amendment.


 


Attorneys' Fees; Expenses.
Grantor agrees to pay upon demand all of Lender's costs and expenses, including Lender's attorneys' fees and Lender's legal expenses,
incurred in connection with the enforcement of this Agreement. Lender may hire or pay someone else to help enforce this Agreement,
and Grantor shall pay the costs and expenses of such enforcement. Costs and expenses include Lender's attorneys' fees and legal
expenses whether or not there is a lawsuit, including attorneys' fees and legal expenses for bankruptcy proceedings (including
efforts to modify or vacate any automatic stay or injunction), appeals, and any anticipated post-judgment collection services.
Grantor also shall pay all court costs and such additional fees as may be directed by the court.


 


Caption Headings. Caption
headings in this Agreement are for convenience purposes only and are not to be used to interpret or define the provisions of this
Agreement.


 


Governing Law. This Agreement
will be governed by federal law applicable to Lender and, to the extent not preempted by federal law, the laws of the State of
Ohio without regard to its conflicts of law provisions. This Agreement has been accepted by Lender in the State of Ohio.


 


Choice of Venue. If
there is a lawsuit, Grantor agrees upon Lender's request to submit to the jurisdiction of the courts of Summit County, State of
Ohio.


 






     


     


    

 


Joint and Several Liability.
All obligations of Borrower and Grantor under this Agreement shall be joint and several, and all references to Grantor shall mean
each and every Grantor, and all references to Borrower shall mean each and every Borrower. This means that each Borrower and Grantor
signing below is responsible for all obligations in this Agreement. Where any one or more of the parties is a corporation, partnership,
limited liability company or similar entity, it is not necessary for Lender to inquire into the powers of any of the officers,
directors, partners, members, or other agents acting or purporting to act on the entity's behalf, and any obligations made or created
in reliance upon the professed exercise of such powers shall be guaranteed under this Agreement.


 


No Waiver by Lender.
Lender shall not be deemed to have waived any rights under this Agreement unless such waiver is given in writing and signed by
Lender. No delay or omission on the part of Lender in exercising any right shall operate as a waiver of such right or any other
right. A waiver by Lender of a provision of this Agreement shall not prejudice or constitute a waiver of Lender's right otherwise
to demand strict compliance with that provision or any other provision of this Agreement. No prior waiver by Lender, nor any course
of dealing between Lender and Grantor, shall constitute a waiver of any of Lender's rights or of any of Grantor's obligations as
to any future transactions. Whenever the consent of Lender is required under this Agreement, the granting of such consent by Lender
in any instance shall not constitute continuing consent to subsequent instances where such consent is required and in all cases
such consent may be granted or withheld in the sole discretion of Lender.


 


Notices. Any notice
required to be given under this Agreement shall be given in writing, and shall be effective when actually delivered, when actually
received by telefacsimile (unless otherwise required by law), when deposited with a nationally recognized overnight courier, or,
if mailed, when deposited in the United States mail, as first class, certified or registered mail postage prepaid, directed to
the addresses shown near the beginning of this Agreement. Any party may change its address for notices under this Agreement by
giving formal written notice to the other parties, specifying that the purpose of the notice is to change the party's address.
For notice purposes, Grantor agrees to keep Lender informed at all times of Grantor's current address. Unless otherwise provided
or required by law, if there is more than one Grantor, any notice given by Lender to any Grantor is deemed to be notice given to
all Grantors.


 


Power of Attorney. Grantor
hereby appoints Lender as Grantor's irrevocable attorney-in-fact for the purpose of executing any documents necessary to perfect,
amend, or to continue the security interest granted in this Agreement or to demand termination of filings of other secured parties.
Lender may at any time, and without further authorization from Grantor, file a carbon, photographic or other reproduction of any
financing statement or of this Agreement for use as a financing statement. Grantor will reimburse Lender for all expenses for the
perfection and the continuation of the perfection of Lender's security interest in the Collateral.


 


Severability. If a court
of competent jurisdiction finds any provision of this Agreement to be illegal, invalid, or unenforceable as to any circumstance,
that finding shall not make the offending provision illegal, invalid, or unenforceable as to any other circumstance. If feasible,
the offending provision shall be considered modified so that it becomes legal, valid and enforceable. If the offending provision
cannot be so modified, it shall be considered deleted from this Agreement. Unless otherwise required by law, the illegality, invalidity,
or unenforceability of any provision of this Agreement shall not affect the legality, validity or enforceability of any other provision
of this Agreement.


 


Successors and Assigns.
Subject to any limitations stated in this Agreement on transfer of Grantor's interest, this Agreement shall be binding upon and
inure to the benefit of the parties, their successors and assigns. If ownership of the Collateral becomes vested in a person other
than Grantor, Lender, without notice to Grantor, may deal with Grantor's successors with reference to this Agreement and the Indebtedness
by way of forbearance or extension without releasing Grantor from the obligations of this Agreement or liability under the Indebtedness.


 


Survival of Representations
and Warranties. All representations, warranties, and agreements made by Grantor in this Agreement shall survive the execution
and delivery of this Agreement, shall be continuing in nature, and shall remain in full force and effect until such time as Borrower's
Indebtedness shall be paid in full.


 


Time is of the Essence.
Time is of the essence in the performance of this Agreement.


 


Waive Jury. All parties
to this Agreement hereby waive the right to any jury trial in any action, proceeding, or counterclaim brought by any party against
any other party.


 


DEFINITIONS. The following
capitalized words and terms shall have the following meanings when used in this Agreement. Unless specifically stated to the contrary,
all references to dollar amounts shall mean amounts in lawful money of the United States of America. Words and terms used in the
singular shall include the plural, and the plural shall include the singular, as the context may require. Words and terms not otherwise
defined in this Agreement shall have the meanings attributed to such terms in the Uniform Commercial Code:


 


Agreement. The word
"Agreement" means this Commercial Security Agreement, as this Commercial Security Agreement may be amended or modified
from time to time, together with all exhibits and schedules attached to this Commercial Security Agreement from time to time.


 


Borrower. The word "Borrower"
means OURPET'S COMPANY, VIRTU COMPANY and SMP COMPANY INCORPORATED and includes all co-signers and co-makers signing the Note and
all their successors and assigns.


 


Collateral. The word
"Collateral" means all of Grantor's right, title and interest in and to all the Collateral as described in the Collateral
Description section of this Agreement.


 


Default. The word "Default"
means the Default set forth in this Agreement in the section titled "Default".


 


Environmental Laws.
The words "Environmental Laws" mean any and all state, federal and local statutes, regulations and ordinances relating
to the protection of human health or the environment, including without limitation the Comprehensive Environmental Response, Compensation,
and Liability Act of 1980, as amended, 42 U.S.C. Section 9601, et seq. ("CERCLA"), the Superfund Amendments and Reauthorization
Act of 1986, Pub. L. No. 99-499 ("SARA"), the Hazardous Materials Transportation Act, 49 U.S.C. Section 1801, et seq.,
the Resource Conservation and Recovery Act, 42 U.S.C. Section 6901, et seq., or other applicable state or federal laws, rules,
or regulations adopted pursuant thereto.


 


Event of Default. The
words "Event of Default" mean any of the events of default set forth in this Agreement in the default section of this
Agreement.


 


Grantor. The word "Grantor"
means OURPET'S COMPANY.


 


Guaranty. The word "Guaranty"
means the guaranty from guarantor, endorser, surety, or accommodation party to Lender, including without limitation a guaranty
of all or part of the Note.


 






     


     


    

 


Hazardous Substances.
The words "Hazardous Substances" mean materials that, because of their quantity, concentration or physical, chemical
or infectious characteristics, may cause or pose a present or potential hazard to human health or the environment when improperly
used, treated, stored, disposed of, generated, manufactured, transported or otherwise handled. The words "Hazardous Substances"
are used in their very broadest sense and include without limitation any and all hazardous or toxic substances, materials or waste
as defined by or listed under the Environmental Laws. The term "Hazardous Substances" also includes, without limitation,
petroleum and petroleum by-products or any fraction thereof and asbestos.


  


Indebtedness. The word
"Indebtedness" means the indebtedness evidenced by the Note or Related Documents, including all principal and interest
together with all other indebtedness and costs and expenses for which Borrower is responsible under this Agreement or under any
of the Related Documents. Specifically, without limitation, Indebtedness includes the future advances set forth in the Future Advances
provision, together with all interest thereon and all amounts that may be indirectly secured by the Cross-Collateralization provision
of this Agreement.


 


Lender. The word "Lender"
means FIRSTMERIT BANK, N.A., its successors and assigns.


 


Note. The word "Note"
means the Note dated August 24, 2015 and executed by OURPET'S COMPANY, VIRTU COMPANY and SMP COMPANY INCORPORATED in the principal
amount of $1,000,000.00, together with all renewals of, extensions of, modifications of, refinancings of, consolidations of, and
substitutions for the note or credit agreement.


 


Property. The word "Property"
means all of Grantor's right, title and interest in and to all the Property as described in the "Collateral Description"
section of this Agreement.


 


Related Documents. The
words "Related Documents" mean all promissory notes, credit agreements, loan agreements, environmental agreements, guaranties,
security agreements, mortgages, deeds of trust, security deeds, collateral mortgages, and all other instruments, agreements and
documents, whether now or hereafter existing, executed in connection with the Indebtedness.


 


BORROWER AND GRANTOR HAVE
READ AND UNDERSTOOD ALL THE PROVISIONS OF THIS COMMERCIAL SECURITY AGREEMENT AND AGREE TO ITS TERMS. THIS AGREEMENT IS DATED AUGUST
24, 2015.


 


GRANTOR:


 


 


OURPET'S COMPANY





 


By: _/s/ Steven Tsengas___________________________


 


STEVEN TSENGAS, President
of OURPET'S COMPANY


 





 


 


BORROWER:


 


 





OURPET'S COMPANY


 


By: _/s/ Steven Tsengas____________________________


 


STEVEN TSENGAS, President
of OURPET'S COMPANY


 


 


 


VIRTU COMPANY


 





By: _/s/ Steven Tsengas____________________________


 


STEVEN TSENGAS, President
of VIRTU COMPANY


 


 


 


SMP COMPANY INCORPORATED


 


By: /s/ Steven Tsengas____________________________


 


STEVEN TSENGAS, President
of SMP COMPANY --INCORPORATED


 


 


 


LaserPro, Ver. 15.3.0.044 Copr. D+H
USA Corporation 1997, 2015. All Rights Reserved. - OH d:\laserpro\commercial\prod\CFI\LPL\E40.FC TR-5022389 PR-4 (M)