BUSINESS
LOAN AGREEMENT (ASSET BASED)


 


	
        Principal

        $5,000,000.00
	
        Loan Date

        04-16-2014
	
        Maturity

        06-30-2015
	
        Loan No

        53125
	Call / Coll	
        Account

        2920
	Officer	Initials
	
        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	Lender:	FIRSTMERIT
    BANK, N.A.
	 	COMPANY
    INCORPORATED	 	Commercial
    Credit Services #90383
	 	1300
    EAST STREET	 	106
    South Main Street
	 	FAIRPORT
    HARBOR, OH 44077	 	Akron,
    OH 44308
	 	 	 	(800)
    554-4362
	 	 	 	 


 


THIS
BUSINESS LOAN AGREEMENT (ASSET BASED) dated April 16, 2014, is made and executed between OURPET’S COMPANY, VIRTU COMPANY
and SMP COMPANY INCORPORATED (“Borrower”) and FIRSTMERIT BANK, N.A. (“Lender”) on the following terms
and conditions. Borrower has received prior commercial loans from Lender or has applied to Lender for a commercial loan or loans
or other financial accommodations, including those which may be described on any exhibit or schedule attached to this Agreement.
Borrower understands and agrees that: (A) in granting, renewing, or extending any Loan, Lender is relying upon Borrower’s
representations, warranties, and agreements as set forth in this Agreement; (B) the granting, renewing, or extending of any Loan
by Lender at all times shall be subject to Lender’s sole judgment and discretion; and (C) all such Loans shall be and remain
subject to the terms and conditions of this Agreement.


 


TERM.
This Agreement shall be effective as of April 16, 2014, and shall continue in full force and effect until such time as all
of Borrower’s Loans in favor of Lender have been paid in full, including principal, interest, costs, expenses, attorneys’ fees,
and other fees and charges, or until such time as the parties may agree in writing to terminate this Agreement.


 


LINE
OF CREDIT. Lender agrees to make Advances to Borrower from time to time from the date of this Agreement to the Expiration Date,
provided the aggregate amount of such Advances outstanding at any time does not exceed the Borrowing Base. Within the foregoing
limits, Borrower may borrow, partially or wholly prepay, and reborrow under this Agreement as follows:


 


Conditions
Precedent to Each Advance. Lender’s Obligation to make any Advance to or for the account of Borrower under this Agreement is
subject to the following conditions precedent, with all documents, Instruments, opinions, reports, and other items required under
this Agreement to be in form and substance satisfactory to Lender:


 


(1)   Lender
shall have received evidence that this Agreement and all Related Documents have been duly authorized, executed, and delivered by
Borrower to Lender.


 


(2)   Lender
shall have received such opinions of counsel, supplemental opinions, and documents as Lender may request.


 


(3)   The
security interests in the Collateral shall have been duly authorized, created, and perfected with first lien priority and shall
be in full force and effect.


 


(4)   All
guaranties required by Lender for the credit facility(ies) shall have been executed by each Guarantor, delivered to Lender, and
be in full force and effect.


 


(5)   Lender,
at its option and for its sole benefit, shall have conducted an audit of Borrower’s Accounts, Inventory, books, records, and operations,
and Lender shall be satisfied as to their condition.


 


(6)   Borrower
shall have paid to Lender all fees, costs, and expenses specified in this Agreement and the Related Documents as are then due and
payable.


 


(7)   There
shall not exist at the time of any Advance a condition which would constitute an Event of Default under this Agreement, and Borrower
shall have delivered to Lender the compliance certificate called for in the paragraph below titled “Compliance Certificate.”


 


Making
Loan Advances. Advances under this credit facility, as well as directions for payment from Borrower’s accounts, may be requested
orally or in writing by authorized persons. Lender may, but need not, require that all oral requests be confirmed in writing. Each
Advance shall be conclusively deemed to have been made at the request of and for the benefit of Borrower (1) when credited to any
deposit account of Borrower maintained with Lender or (2) when advanced in accordance with the instructions of an authorized person.
Lender, at its option, may set a cutoff time, after which all requests for Advances will be treated as having been requested on
the next succeeding Business Day.


 


Mandatory
Loan Repayments. If at any time the aggregate principal amount of the outstanding Advances shall exceed the applicable Borrowing
Base, Borrower, immediately upon written or oral notice from Lender, shall pay to Lender an amount equal to the difference between
the outstanding principal balance of the Advances and the Borrowing Base. On the Expiration Date, Borrower shall pay to Lender
in full the aggregate unpaid principal amount of all Advances then outstanding and all accrued unpaid interest, together with all
other applicable fees, costs and charges, if any, not yet paid.


 


Loan
Account. Lender shall maintain on its books a record of account in which Lender shall make entries for each Advance and such
other debits and credits as shall be appropriate in connection with the credit facility. Lender shall provide Borrower with periodic
statements of Borrower’s account, which statements shall be considered to be correct and conclusively binding on Borrower unless
Borrower notifies Lender to the contrary within thirty (30) days after Borrower’s receipt of any such Statement which Borrower
deems to be incorrect.


 


COLLATERAL.
To secure payment of the Primary Credit Facility and performance of all other Loans, obligations and duties owed by Borrower
to Lender, Borrower (and others, if required) shall grant to Lender Security Interests in such property and assets as Lender may
require. Lender’s Security Interests in the Collateral shall be continuing liens and shall include the proceeds and products of
the Collateral, including without limitation the proceeds of any insurance. With respect to the Collateral, Borrower agrees and
represents and warrants to Lender:


 


Perfection
of Security Interests. Borrower agrees to execute all documents perfecting Lender’s Security Interest and to take whatever
actions are requested by Lender to perfect and continue Lender’s Security Interests in the Collateral. Upon request of Lender,
Borrower will deliver to Lender any and all of the documents evidencing or constituting the Collateral, and Borrower will note
Lender’s interest upon any and all chattel paper and instruments if not delivered to Lender for possession by Lender. Contemporaneous
with the execution of this Agreement, Borrower will execute one or more UCC financing statements and any similar statements as
may be required by applicable law, and Lender will file such financing statements and all such similar statements in the appropriate
location or locations. Borrower hereby appoints Lender as its irrevocable attorney-in-fact for the purpose of executing any documents
necessary to perfect or to continue any Security interest. Lender may at any time, and without further authorization from Borrower,
file a carbon, photograph, facsimile, or other reproduction of any financing statement for use as a financing statement. Borrower
will reimburse Lender for all expenses for the perfection, termination, and the continuation of the perfection of Lender’s security
interest in the Collateral. Borrower promptly will notify Lender before any change in Borrower’s name including any change to the
assumed business names of Borrower. Borrower also promptly will notify Lender before any change in Borrower’s Social Security Number
or Employer Identification Number. Borrower further agrees to notify Lender in writing prior to any change in address or location
of Borrower’s principal governance office or should Borrower merge or consolidate with any other entity.


 




    	 



    	 



    

 


	Loan
    No: 53125	BUSINESS
        LOAN AGREEMENT (ASSET BASED)

        (Continued)
	Page
    2


 


Collateral
Records. Borrower does now, and at all times hereafter shall, keep correct and accurate records of the Collateral, all of which
records shall be available to Lender or Lender’s representative upon demand for inspection and copying at any reasonable time.
With respect to the Accounts, Borrower agrees to keep and maintain such records as Lender may require, including without limitation
Information concerning Eligible Accounts and Account balances and agings. Records related to Accounts (Receivables) are or will
be located at 1300 EAST STREET, FAIRPORT HARBOR, OH 44077. With respect to the Inventory, Borrower agrees to keep and maintain
such records as Lender may require, including without limitation information concerning Eligible Inventory and records itemizing
and describing the kind, type, quality, and quantity of Inventory, Borrower’s Inventory costs and selling prices, and the daily
withdrawals and additions to Inventory. Records related to Inventory are or will be located at 1300 EAST STREET, FAIRPORT HARBOR,
OH 44077. The above is an accurate and complete list of all locations at which Borrower keeps or maintains business records concerning
Borrower’s collateral.


 


Collateral
Schedules. Concurrently with the execution and delivery of this Agreement, Borrower shall execute and deliver to Lender schedules
of Accounts and Inventory and schedules of Eligible Accounts and Eligible Inventory in form and substance satisfactory to the Lender.
Thereafter supplemental schedules shall be delivered according to the following schedule: With respect to Eligible Accounts, schedules
shall be delivered AS DIRECTED BY THE RELATIONSHIP MANAGER. With respect to Eligible Inventory, schedules shall be delivered AS
DIRECTED BY THE RELATIONSHIP MANAGER.


 


Representations
and Warranties Concerning Accounts. With respect to the Accounts, Borrower represents and warrants to Lender: (1) Each
Account represented by Borrower to be an Eligible Account for purposes of this Agreement conforms to the requirements of the definition
of an Eligible Account; (2) All Account information listed on schedules delivered to Lender will be true and correct, subject to
immaterial variance; and (3) Lender, its assigns, or agents shall have the right at any time and at Borrower’s expense to inspect,
examine, and audit Borrower’s records and to confirm with Account Debtors the accuracy of such Accounts.


 


Representations
and Warranties Concerning Inventory. With respect to the Inventory, Borrower represents and warrants to Lender: (1)
All Inventory represented by Borrower to be Eligible Inventory for purposes of this Agreement conforms to the requirements
of the definition of Eligible Inventory; (2) All Inventory values listed on schedules delivered to Lender will be true and correct,
subject to immaterial variance; (3) The value of the Inventory will be determined on a consistent accounting basis; (4) Except
as agreed to the contrary by Lender in writing, all Eligible Inventory is now and at all times hereafter will be in Borrower’s
physical possession and shall not be held by others on consignment, sale on approval, or sale or return; (5) Except as reflected
in the Inventory schedules delivered to Lender, all Eligible Inventory is now and at all times hereafter will be of good and merchantable
quality, free from defects; (6) Eligible Inventory is not now and will not at any time hereafter be stored with a bailee, warehouseman,
or similar party without Lender’s prior written consent, and, in such event, Borrower will concurrently at the time of bailment
cause any such bailee, warehouseman, or similar party to issue and deliver to Lender, in form acceptable to Lender, warehouse
receipts in Lender name evidencing the storage of inventory; and (7) Lender, its assigns, or agents shall have the right at any
time and at Borrower’s expense to inspect and examine the Inventory and to check and test the same as to quality, quantity,
value, and condition.


 


CONDITIONS
PRECEDENT TO EACH ADVANCE. Lender’s Obligation to make the initial Advance and each subsequent Advance under this Agreement
shall be subject to the fulfillment to Lender’s satisfaction of all of the conditions set forth in this Agreement and in the Related
Documents.


 


Loan
Documents. Borrower shall provide to Lender the following documents for the Loan: (1) the Note; (2) subordinations; (3) together
with all such Related Documents as Lender may require for the Loan; all in form and substance satisfactory to Lender and Lender’s
counsel.


 


Borrower’s
Authorization. Borrower shall have provided in form and substance satisfactory to Lender properly certified resolutions, duly
authorizing the execution and delivery of this Agreement, the Note and the Related Documents. In addition, Borrower shall have
provided such other resolutions, authorizations, documents and instruments as Lender or its counsel, may require.


 


Fees
and Expenses Under This Agreement. Borrower shall have paid to Lender all fees, costs, and expenses specified in this Agreement
and the Related Documents as are then due and payable.


 


Representations
and Warranties. The representations and warranties set forth in this Agreement, in the Related Documents, and in any document
or certificate delivered to Lender under this Agreement are true and correct.


 


No
Event of Default. There shall not exist at the time of any Advance a condition which would constitute an Event of Default under
this Agreement or under any Related Document.


 


MULTIPLE
BORROWERS. This Agreement has been executed by multiple obligors who are referred to in this Agreement individually, collectively
and interchangeably as “Borrower.” Unless specifically stated to the contrary, the word “Borrower” as used
in this Agreement, including without limitation all representations, warranties and covenants, shall include all Borrowers. Borrower
understands and agrees that, with or without notice to any one Borrower, Lender may (A) make one or more additional secured or
unsecured loans or otherwise extend additional credit with respect to any other Borrower; (B) with respect to any other Borrower
alter, compromise, renew, extend, accelerate, or otherwise change one or more times the time for payment or other terms of any
indebtedness, including increases and decreases of the rate of interest on the indebtedness; (C) exchange, enforce, waive, subordinate,
fail or decide not to perfect, and release any security, with or without the substitution of new collateral; (D) release, substitute,
agree not to sue, or deal with any one or more of Borrower’s or any other Borrower’s sureties, endorsers, or other guarantors on
any terms or in any manner Lender may choose; (E) determine how, when and what application of payments and credits shall be made
on any indebtedness; (F) apply such security and direct the order or manner of sale of any Collateral, including without limitation,
any non-judicial sale permitted by the terms of the Controlling security agreement or deed of trust, as Lender in its discretion
may determine; (G) sell, transfer, assign or grant participations in all or any part of the Loan; (H) exercise or refrain from
exercising any rights against Borrower or others, or otherwise act or refrain from acting; (I) settle or compromise any indebtedness;
and (J) subordinate the payment of all or any part of any of Borrower’s indebtedness to Lender to the payment of any liabilities
which may be due Lender or others.


 


REPRESENTATIONS
AND WARRANTIES. Borrower represents and warrants to Lender, as of the date of this Agreement, as of the date of each disbursement
of loan proceeds, as of the date of any renewal, extension or modification of any Loan, and at all times any Indebtedness exists:


 


Organization.
OURPET’S COMPANY is a Corporation for profit which is, and at all times shall be, duly organized, validly existing, and in
good standing under and by virtue of the laws of the State of Ohio. OURPET’S COMPANY is duly authorized to transact business in
all other states in which OURPET’S COMPANY is doing business, having obtained all necessary filings, governmental licenses and
approvals for each state in which OURPET’S COMPANY is doing business. Specifically, OURPET’S COMPANY is, and at all times shall
be, duly qualified as a foreign corporation in all states in which the failure to so qualify would have a material adverse effect
on its business or financial condition. OURPET’S COMPANY has the full power and authority to own its properties and to transact
the business in which it is presently engaged or presently proposes to engage. OURPET’S COMPANY maintains an office at 1300 EAST
STREET, FAIRPORT HARBOR, OH 44077. Unless OURPET’S COMPANY has designated otherwise in writing, the principal office is the office
at which OURPET’S COMPANY keeps its books and records including its records concerning the Collateral. OURPET’S COMPANY will notify
Lender prior to any change in the location of OURPET’S COMPANY’s state of organization or any change in OURPET’S COMPANY’s name.
OURPET’S COMPANY shall do all things necessary to preserve and to keep in full force and effect its existence, rights and Privileges,
and shall comply with all regulations, rules, ordinances, statutes, orders and decrees of any governmental or quasi-governmental
authority or court applicable to OURPET’S COMPANY and OURPET’S COMPANY’s business activities.


 




    	 



    	 



    

 





	Loan
    No: 53125	BUSINESS
        LOAN AGREEMENT (ASSET BASED)

        (Continued)
	Page
    3


 


VIRTU
COMPANY is a Corporation for profit which is, and at all times shall be, duly organized, validly existing, and in good Standing
under and by virtue of the laws of the State of Ohio. VIRTU COMPANY is duly authorized to transact business in all other states
in which VIRTU COMPANY is doing business, having obtained all necessary filings, governmental licenses and approvals for each state
in which VIRTU COMPANY is doing business. Specifically, VIRTU COMPANY is, and at all times shall be, duly qualified as a foreign
corporation in all states in which the failure to so qualify would have a material adverse effect on its business or financial
condition. VIRTU COMPANY has the full power and authority to own its properties and to transact the business in which it is presently
engaged or presently proposes to engage. VIRTU COMPANY maintains an office at 1300 EAST STREET, FAIRPORT HARBOR, OH 44077. Unless
VIRTU COMPANY has designated otherwise in writing, the principal office is the office at which VIRTU COMPANY keeps its books and
records including its records concerning the Collateral. VIRTU COMPANY will notify Lender prior to any change in the location of
VIRTU COMPANY’S state of organization or any change in VIRTU COMPANY’S name. VIRTU COMPANY shall do all things necessary to preserve
and to keep in full force and effect its existence, rights and Privileges, and shall comply with all regulations, rules, ordinances,
statutes, orders and decrees of any governmental or quasi-governmental authority or court applicable to VIRTU COMPANY and VIRTU
COMPANY’S business activities.


 


SMP
COMPANY INCORPORATED is a Corporation for profit which is, and at all times shall be, duly organized, validly existing, and in
good standing under and by virtue of the laws of the State of Ohio. SMP COMPANY INCORPORATED is duly authorized to transact business
in all other states in which SMP COMPANY INCORPORATED is doing business, having obtained all necessary filings, governmental licenses
and approvals for each state in which SMP COMPANY INCORPORATED is doing business. Specifically, SMP COMPANY INCORPORATED is, and
at all times shall be, duly qualified as a foreign Corporation in all states in which the failure to so qualify would have a material
adverse effect on its business or financial condition. SMP COMPANY INCORPORATED has the full power and authority to own its properties
and to transact the business in which it is presently engaged or presently proposes to engage. SMP COMPANY INCORPORATED maintains
an office at 1300 EAST STREET, FAIRPORT HARBOR, OH 44077. Unless SMP COMPANY INCORPORATED has designated otherwise in writing,
the principal office is the office at which SMP COMPANY INCORPORATED keeps its books and records including its records concerning
the Collateral. SMP COMPANY INCORPORATED will notify Lender prior to any change in the location of SMP COMPANY INCORPORATED’s
state of organization or any change in SMP COMPANY INCORPORATED’s name. SMP COMPANY INCORPORATED shall do all things necessary to
preserve and to keep in full force and effect its existence, rights and Privileges, and shall comply with all regulations, rules,
ordinances, statutes, orders and decrees of any governmental or quasi-governmental authority or court applicable to SMP COMPANY
INCORPORATED and SMP COMPANY INCORPORATED’s business activities.


 


Assumed
Business Names. Borrower has filed or recorded all documents or filings required by law relating to all assumed business names
used by Borrower. Excluding the name of Borrower, the following is a complete list of all assumed business names under which Borrower
does business: None.


 


Authorization.
Borrower’s execution, delivery, and performance of this Agreement and all the Related Documents have been duly authorized by all
necessary action by Borrower and do not conflict with, result in a violation of, or constitute a default under (1) any Provision
of (a) Borrower’s articles of incorporation or organization, or bylaws, code of regulations, or (b) any agreement or other instrument
binding upon Borrower or (2) any law, governmental regulation, court decree, or order applicable to Borrower or to Borrower’s properties.


 


Financial
Information. Each of Borrower’s financial statements supplied to Lender truly and completely disclosed Borrower’s financial
condition as of the date of the statement, and there has been no material adverse change in Borrower’s financial condition subsequent
to the date of the most recent financial statement supplied to Lender. Borrower has no material contingent obligations except as
disclosed in such financial statements.


 


Legal
Effect. This Agreement constitutes, and any instrument or agreement Borrower is required to give under this Agreement when
delivered will constitute legal, valid, and binding obligations of Borrower enforceable against Borrower in accordance with their
respective terms.


 


Properties.
Except as contemplated by this Agreement or as previously disclosed in Borrower’s financial statements or in writing to Lender
and as accepted by Lender, and except for property tax liens for taxes not presently due and payable, Borrower owns and has good
title to all of Borrower’s properties free and clear of all Security Interests, and has not executed any security documents or
financing statements relating to such properties. All of Borrower’s properties are titled in Borrower’s legal name, and Borrower
has not used or filed a financing statement under any other name for at least the last five (5) years.


 


Hazardous
Substances. Except as disclosed to and acknowledged by Lender in writing, Borrower represents and warrants that: (1) During
the period of Borrower’s ownership of the Collateral, there has been no use, generation, manufacture, storage, treatment, disposal,
release or threatened release of any Hazardous Substance by any person on, under, about or from any of the Collateral. (2) Borrower
has no knowledge of, or reason to believe that there has been (a) any breach or violation of any Environmental Laws; (b) any use,
generation, manufacture, storage, treatment, disposal, release or threatened release of any Hazardous Substance on, under, about
or from the Collateral by any prior owners or occupants of any of the Collateral; or (c) any actual or threatened litigation or
Claims of any kind by any person relating to such matters. (3) Neither Borrower nor any tenant, contractor, agent or other authorized
user of any of the Collateral shall use, generate, manufacture, store, treat, dispose of or release any Hazardous Substance
on, under, about or from any of the Collateral; and any such activity shall be conducted in compliance with all applicable federal,
state, and local laws, regulations, and ordinances, including without limitation all Environmental Laws. Borrower authorizes Lender
and its agents to enter upon the Collateral to make such inspections and tests as Lender may deem appropriate to determine compliance
of the Collateral with this section of the Agreement. Any inspections or tests made by Lender shall be at Borrower’s expense and
for Lender’s purposes only and shall not be construed to create any responsibility or liability on the part of Lender to Borrower
or to any other person. The representations and warranties contained herein are based on Borrower’s due diligence in investigating
the Collateral for hazardous waste and Hazardous Substances. Borrower hereby (1) releases and waives any future claims against
Lender for indemnity or contribution in the event Borrower becomes liable for cleanup or other costs under any such laws, and (2)
agrees to indemnify, defend, and hold harmless Lender against any and all Claims, losses, liabilities, damages, penalties, and
expenses which Lender may directly or indirectly sustain or suffer resulting from a breach of this section of the Agreement or
as a consequence of any use, generation, manufacture, storage, disposal, release or threatened release of a hazardous waste or
substance on the Collateral. The provisions of this section of the Agreement, including the obligation to indemnify and defend,
shall survive the payment of the Indebtedness and the termination, expiration or satisfaction of this Agreement and shall not be
affected by Lender’s acquisition of any interest in any of the Collateral, whether by foreclosure or otherwise.


 




    	 



    	 



    

 





	Loan
    No: 53125	BUSINESS
        LOAN AGREEMENT (ASSET BASED)

        (Continued)
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Litigation
and Claims. No litigation, Claim, investigation, administrative proceeding or similar action (including those for unpaid taxes)
against Borrower is pending or threatened, and no other event has occurred which may materially adversely affect Borrower’s financial
condition or properties, other than litigation, Claims, or other events, if any, that have been disclosed to and acknowledged by
Lender in writing.


 


Taxes.
To the best of Borrower’s knowledge, all of Borrower’s tax returns and reports that are or were required to be filed, have
been filed, and all taxes, assessments and other governmental charges have been paid in full, except those presently being or to
be contested by Borrower in good faith in the ordinary course of business and for which adequate reserves have been provided.


 


Lien
Priority. Unless otherwise previously disclosed to Lender in writing, Borrower has not entered into or granted any Security
Agreements, or permitted the filing or attachment of any Security Interests on or affecting any of the Collateral directly or indirectly
securing repayment of Borrower’s Loan and Note, that would be prior or that may in any way be superior to Lender’s Security Interests
and rights in and to such Collateral.


 


Binding
Effect. This Agreement, the Note, all Security Agreements (if any), and all Related Documents are binding upon the signers
thereof, as well as upon their successors, representatives and assigns, and are legally enforceable in accordance with their respective
terms.


 


AFFIRMATIVE
COVENANTS. Borrower covenants and agrees with Lender that, so long as this Agreement remains in effect, Borrower will:


 


Notices
of Claims and Litigation. Promptly inform Lender in writing of (1) all material adverse changes in Borrower’s financial
condition, and (2) all existing and all threatened litigation, Claims, investigations, administrative proceedings or similar actions
affecting Borrower or any Guarantor which could materially affect the financial condition of Borrower or the financial condition
of any Guarantor.


 


Financial
Records. Maintain its books and records in accordance with GAAP, applied on a consistent basis, and permit Lender to examine
and audit Borrower’s books and records at all reasonable times.


 


Financial
Statements. Furnish Lender with the following:


 


Additional
Requirements. 1) BORROWER WILL PROVIDE TO THE LENDER MONTHLY BORROWING BASE CERTIFICATES WITHIN 20 DAYS OF MONTH END.


 


2)
THE MONTH END BORROWING BASE SHALL BE SUPPORTED BY ACCOUNTS RECEIVABLE
AND PAYABLE AGINGS, INVENTORY LISTING REPORTS AND OTHER REPORTS AS DESIGNATED BY THE LENDER WITHIN 20 DAYS OF MONTH END.


 


3)
PROVIDE ANNUAL AUDITED FINANCIAL STATEMENTS OF OURPET’S COMPANY WITHIN
120 DAYS OF FISCAL YEAR END.


 


4)
PROVIDE QUARTERLY INTERNAL FINANCIAL STATEMENTS OR FORM 10-Q OF OURPET’S
COMPANY WITHIN 45 DAYS OF QUARTER END.


 


All
financial reports required to be provided under this Agreement shall be prepared in accordance with GAAP, applied on a consistent
basis, and certified by Borrower as being true and correct.


 


Additional
Information. Furnish such additional information and statements, as Lender may request from time to time.


 


Financial
Covenants and Ratios. Comply with the following covenants and ratios:


 


Minimum
Income and Cash flow Requirements. Other Cash Flow requirements are as follows: Borrower shall not permit the Corporations
Debt Service Coverage Ratio, on a consolidated basis, to be less than 1.15 to 1.00 measured quarterly on a trailing twelve month
basis starting with the trailing twelve months for the quarter end March 31, 2013.


 


Debt
Service Coverage Ratio shall mean the sum of the net income or loss of Corporations after taxes and less cash distributions, cash
dividends and advances made to shareholders or related parties plus depreciation plus amortization plus interest expense, exclusive
of extraordinary gains/loss, divided by the sum of the scheduled and paid current maturities of long term debt plus cash interest
expense due and paid plus principal payments paid on subordinated debt plus unfunded capital expenditures less any new capital
contributed from proceeds of new subordinated debt and/or proceeds from stock issuance (only to the extent that such proceeds (1)
were utilized to fund specific unfunded capital expenditures, or (2) were utilized to refinance existing subordinated debt for
the applicable accounting period.)


 


Unfunded
capital expenditures defined as Total Capital Expenditures less proceeds of long term debt (other than subordinated debt).


 


Tangible
Net Worth Requirements. Other Net Worth requirements are as follows:
Borrower shall maintain Adjusted Tangible Capital of not less than $4,500,000.00, tested at the end of each quarter
end beginning December 31, 2012 and measured at each fiscal quarter end thereafter. Adjusted Tangible Capital means Tangible Capital
plus subordinated debt. Tangible Capital means Tangible Net Worth less any receivables, promissory notes, advances to, or investments
in any affiliated or other related entity to Borrower or individuals related to Borrower. Tangible Net Worth means total assets
less total liabilities as defined by GAAP, less any intangible assets. Intangible Assets means assets that have no tangible value,
including but not limited to goodwill, trademarks, patents, copyrights, and organization expenses.


 


Additional
Requirements. Permissible Pay down for Over the Hill Limited. Borrower shall be permitted to make a one-time payment in the
amount of $25,000.00 (including any accrued interest to date) to Over the Hill Limited so long as said payment does not cause a
default on the Adjusted Tangible Capital covenant and/or the Debt Service Coverage covenant.


 


Permissible
Pay down for Beachcraft Limited Partnership. Borrower shall be permitted to make a one-time payment in the amount of $75,000.00
(including any accrued interest to date) to Beachcraft Limited Partnership c/o Dr. James W. McCourt so long as said payment does
not cause a default on the Adjusted Tangible Capital covenant and/or the Debt Service Coverage covenant.


 


Except
as provided above, all computations made to determine compliance with the requirements contained in this paragraph shall be made
in accordance with generally accepted accounting principles, applied on a consistent basis, and certified by Borrower as being
true and correct.


 


Insurance.
Maintain fire and other risk insurance, public liability insurance, and such other insurance as Lender may require with respect to Borrower’s properties and operations, in form, amounts, coverages and with insurance companies acceptable to Lender. Borrower,
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. 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 Borrower or any other person. In connection with all policies covering assets
in which Lender holds or is offered a security interest for the Loans, Borrower will provide Lender with such lender’s loss payable
or other endorsements as Lender may require.


 




    	 



    	 



    

 





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    No: 53125	BUSINESS
        LOAN AGREEMENT (ASSET BASED)

        (Continued)
	Page
    5


 


Insurance
Reports. Furnish to Lender, upon request of Lender, reports on each existing insurance policy showing such information as Lender
may reasonably request, including without limitation the following: (1) the name of the insurer; (2) the risks insured; (3) the
amount of the policy; (4) the properties insured; (5) the then current property values on the basis of which insurance has been
obtained, and the manner of determining those values; and (6) the expiration date of the policy. In addition, upon request of Lender
(however not more often than annually), Borrower will have an independent appraiser satisfactory to Lender determine, as applicable,
the actual cash value or replacement cost of any Collateral. The cost of such appraisal shall be paid by Borrower.


 


Subordination.
Prior to disbursement of any Loan proceeds, deliver to Lender subordination agreements on Lender’s forms, executed by Borrower’s
creditors named below, subordinating all of Borrower’s indebtedness to such creditors, or such lesser amounts as may be agreed
to by Lender in writing, and any security interests in collateral securing that indebtedness to the Loans and security interests
of Lender.


 


	Name of Creditor	 	Total Amount of Debt	 
	EQUITY TRUST COMPANY CUSTODIAN	 	$	300,000.00	 
	FBO THOMAS C. BELRIN IRA	 	 	 	 
	LJR LIMITED PARTNERSHIP	 	$	150,000.00	 
	SENK PROPERTIES, LLC	 	$	50,000.00	 
	PETZONE PRODUCTS	 	$	50,000.00	 
	NELSON D. MOSTOW LIVING TRUST	 	$	50,000.00	 
	DTD 10-21-92	 	 	 	 
	BEACHCRAFT LIMITED PARTNERSHIP	 	$	75,000.00	 
	OVER THE HILL LIMITED	 	$	25,000.00	 



 


Other
Agreements. Comply with all terms and conditions of all other agreements, whether now or hereafter existing, between Borrower
and any other party and notify Lender immediately in writing of any default in connection with any other such agreements.


 


Loan
Proceeds. Use all Loan proceeds solely for Borrower’s business operations, unless specifically consented to the contrary by
Lender in writing.


 


Taxes,
Charges and Liens. Pay and discharge when due all of its indebtedness and obligations, including without limitation all assessments,
taxes, governmental charges, levies and liens, of every kind and nature, imposed upon Borrower or its properties, income, or profits,
prior to the date on which penalties would attach, and all lawful claims that, if unpaid, might become a lien or charge upon any
of Borrower’s properties, income, or profits. Provided however, Borrower will not be required to pay and discharge any such assessment,
tax, charge, levy, lien or claim so long as (1) the legality of the same shall be contested in good faith by appropriate proceedings,
and (2) Borrower shall have established on Borrower’s books adequate reserves with respect to such contested assessment, tax, charge,
levy, lien, or claim in accordance with GAAP.


 


Performance.
Perform and comply, in a timely manner, with all terms, conditions, and provisions set forth in this Agreement, in the Related
Documents, and in all other instruments and agreements between Borrower and Lender. Borrower shall notify Lender immediately in
writing of any default in connection with any agreement.


 


Operations.
Maintain executive and management personnel with substantially the same qualifications and experience as the present executive
and management personnel; provide written notice to Lender of any change in executive and management personnel; conduct its business
affairs in a reasonable and prudent manner.


 


Environmental
Studies. Promptly conduct and complete, at Borrower’s expense, all such investigations, studies, samplings and testings as
may be requested by Lender or any governmental authority relative to any substance, or any waste or by-product of any substance
defined as toxic or a hazardous substance under applicable federal, state, or local law, rule, regulation, order or directive,
at or affecting any property or any facility owned, leased or used by Borrower.


 


Compliance
with Governmental Requirements. Comply with all laws, ordinances, and regulations, now or hereafter in effect, of all governmental
authorities applicable to the conduct of Borrower’s properties, businesses and operations, and to the use or occupancy of the Collateral,
including without limitation, the Americans With Disabilities Act. Borrower may contest in good faith any such law, ordinance,
or regulation and withhold compliance during any proceeding, including appropriate appeals, so long as Borrower has notified Lender
in writing prior to doing so and so long as, in Lender’s sole opinion, Lender’s interests in the Collateral are not jeopardized.
Lender may require Borrower to post adequate security or a surety bond, reasonably satisfactory to Lender, to protect Lender’s
interest.


 


Inspection.
Permit employees or agents of Lender at any reasonable time to inspect any and all Collateral for the Loan or Loans and Borrower’s
other properties and to examine or audit Borrower’s books, accounts, and records and to make copies and memoranda of Borrower’s
books, accounts, and records. If Borrower now or at any time hereafter maintains any records (including without limitation computer
generated records and computer software programs for the generation of such records) in the possession of a third party, Borrower,
upon request of Lender, shall notify such party to permit Lender free access to such records at all reasonable times and to provide
Lender with copies of any records it may request, all at Borrower’s expense.


 


Compliance
Certificates. Unless waived in writing by Lender, provide Lender within forty-five (45) days after the end of each fiscal quarter,
with a certificate executed by Borrower’s chief financial officer, or other officer or person acceptable to Lender, certifying
that the representations and warranties set forth in this Agreement are true and correct as of the date of the certificate and
further certifying that, as of the date of the certificate, no Event of Default exists under this Agreement.


 


Environmental
Compliance and Reports. Borrower shall comply in all respects with any and all Environmental Laws; not cause or permit to exist,
as a result of an intentional or unintentional action or omission on Borrower’s part or on the part of any third party, on property
owned and/or occupied by Borrower, any environmental activity where damage may result to the environment, unless such environmental
activity is pursuant to and in compliance with the conditions of a permit issued by the appropriate federal, state or local governmental
authorities; shall furnish to Lender promptly and in any event within thirty (30) days after receipt thereof a copy of any notice,
summons, lien, citation, directive, letter or other communication from any governmental agency or instrumentality concerning any
intentional or unintentional action or omission on Borrower’s part in connection with any environmental activity whether or not
there is damage to the environment and/or other natural resources.


 


Additional
Assurances. Make, execute and deliver to Lender such promissory notes, mortgages, deeds of trust, security agreements, assignments,
financing statements, instruments, documents and other agreements as Lender or its attorneys may reasonably request to
evidence and secure the Loans and to perfect all Security Interests.


 




    	 



    	 



    

 





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        LOAN AGREEMENT (ASSET BASED)

        (Continued)
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LENDER’S
EXPENDITURES. If any action or proceeding is commenced that would materially affect Lender’s interest in the Collateral or
if Borrower fails to comply with any Provision of this Agreement or any Related Documents, including but not limited to Borrower’s
failure to discharge or pay when due any amounts Borrower is required to discharge or pay under this Agreement or any Related Documents,
Lender on Borrower’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 any Collateral and paying all costs for insuring, maintaining and preserving any 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 Borrower. 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.


 


NEGATIVE
COVENANTS. Borrower covenants and agrees with Lender that while this Agreement is in effect, Borrower shall not, without the
prior written consent of Lender:


 


Capital
Expenditures. Make or contract to make capital expenditures, including leasehold improvements, in any fiscal year in excess
of $750,000.00 or incur liability for rentals of property (including both real and personal property) in an amount which,
together with capital expenditures, shall in any fiscal year exceed such sum.


 


Indebtedness
and Liens. (1) Except for trade debt incurred in the normal course of business and indebtedness to Lender contemplated by this
Agreement, create, incur or assume indebtedness for borrowed money, including capital leases, (2) sell, transfer, mortgage, assign,
pledge, lease, grant a security interest in, or encumber any of Borrower’s assets (except as allowed as Permitted Liens), or (3)
sell with recourse any of Borrower’s accounts, except to Lender.


 


Loans,
Acquisitions and Guaranties. (1) Loan, invest in or advance money or assets to any other person, enterprise or entity,
(2) purchase, create or acquire any interest in any other enterprise or entity, or (3) incur any Obligation as surety or guarantor
other than in the ordinary course of business.


 


Agreements.
Enter into any agreement containing any provisions which would be violated or breached by the performance of Borrower’s obligations
under this Agreement or in connection herewith.


 


CESSATION
OF ADVANCES. If Lender has made any commitment to make any Loan to Borrower, whether under this Agreement or under any other
agreement, Lender shall have no obligation to make Loan Advances or to disburse Loan proceeds if: (A) Borrower or any Guarantor
is in default under the terms of this Agreement or any of the Related Documents or any other agreement that Borrower or any Guarantor
has with Lender; (B) Borrower or any Guarantor dies, becomes incompetent or becomes insolvent, files a petition in bankruptcy or
similar proceedings, or is adjudged a bankrupt; (C) there occurs a material adverse change in Borrower’s financial condition, in
the financial condition of any Guarantor, or in the value of any Collateral securing any Loan; or (D) any Guarantor seeks, claims
or otherwise attempts to limit, modify or revoke such Guarantor’s guaranty of the Loan or any other loan with Lender; or (E) Lender
in good faith deems itself insecure, even though no Event of Default shall have occurred.


 


RIGHT
OF SETOFF. To the extent permitted by applicable law, Lender reserves a right of setoff in all Borrower’s accounts with Lender
(whether checking, savings, or some other account). This includes all accounts Borrower holds jointly with someone else and all
accounts Borrower 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. Borrower authorizes Lender, to the extent permitted by applicable law, to Charge or setoff all
sums owing on the debt 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.


 


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 Loan.


 


Other
Defaults. Borrower 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.


 


Default
in Favor of Third Parties. Borrower or any 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 any Grantor’s property or Borrower’s or any Grantor’s ability to repay the Loans or 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 on Borrower’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.


 


Insolvency.
The dissolution or termination of Borrower’s existence as a going business, the insolvency of Borrower, the appointment of
a receiver for any part of Borrower’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.


 


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.


 


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 by any governmental agency against any collateral securing the
Loan. This includes a garnishment of any of Borrower’s accounts, including deposit accounts, with Lender. However, this Event of
Default shall not apply if there is a good faith dispute by Borrower as to the validity or reasonableness of the claim which is
the basis of the creditor or forfeiture proceeding and if Borrower 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 of any of the Indebtedness or any Guarantor
dies or becomes incompetent, or revokes or disputes the validity of, or liability under, any Guaranty of the Indebtedness.


 


Change
in Ownership. Any change in ownership of twenty-five percent (25%) or more of the common stock of Borrower.


 


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


 


Insecurity.
Lender in good faith believes itself insecure.


 


Right
to Cure. If any default, other than a default on Indebtedness, is curable and if Borrower or Grantor, as the case may be, has
not been given a notice of a similar default within the preceding twelve (12) months, it may be cured if Borrower or Grantor, as
the case may be, after Lender sends written notice to Borrower or Grantor, as the case may be, demanding cure of such default:
(1) cure the default within fifteen (15) days; or (2) if the cure requires more than fifteen (15) days, immediately initiate steps
which Lender deems in Lender’s sole discretion to be sufficient to cure the default and thereafter continue and complete all reasonable
and necessary steps sufficient to produce compliance as soon as reasonably practical.


 




    	 



    	 



    

 





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    No: 53125	BUSINESS
        LOAN AGREEMENT (ASSET BASED)

        (Continued)
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EFFECT
OF AN EVENT OF DEFAULT. If any Event of Default shall occur, except where otherwise provided in this Agreement or the
Related Documents, all commitments and obligations of Lender under this Agreement or the Related Documents or any other agreement
immediately will terminate (including any Obligation to make further Loan Advances or disbursements), and, at Lender’s option,
all Indebtedness immediately will become due and payable, all without notice of any kind to Borrower, except that in the case of
an Event of Default of the type described in the “Insolvency” subsection above, such acceleration shall be automatic
and not optional. In addition, Lender shall have all the rights and remedies provided in the Related Documents or available at
law, in equity, or otherwise. Except as may be prohibited by applicable law, all of Lender’s rights and remedies 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 Borrower or of any Grantor shall not
affect Lender’s right to declare a default and to exercise its rights and remedies.


 


PRIOR
AGREEMENTS. THIS LOAN AGREEMENT SHALL SUPERSEDE ANY PRIOR BUSINESS LOAN AGREEMENT BETWEEN BORROWER AND LENDER.


 


CONTINUITY
OF OPERATIONS. Borrower covenants and agrees with Lender that while this Agreement is in effect, Borrower shall not, without
the prior written consent of Lender:


 


(1) ENGAGE
IN ANY BUSINESS ACTIVITIES SUBSTANTIALLY DIFFERENT THAN THOSE IN WHICH BORROWER IS PRESENTLY ENGAGED, (2) CEASE OPERATIONS, LIQUIDATE,
MERGE, TRANSFER, ACQUIRE OR CONSOLIDATE WITH ANY OTHER ENTITY, CHANGES ITS NAME, DISSOLVE OR TRANSFER OR SELL COLLATERAL OUT OF
THE ORDINARY COURSE OF BUSINESS.


 


CONTINUITY
OF OPERATIONS. Borrower covenants and agrees with Lender that while this Agreement is in effect, Borrower shall not, without
the prior written consent of Lender:


 


(3) PURCHASE
OR RETIRE ANY OF BORROWER’S OUTSTANDING SHARES OR ALTER OR AMEND BORROWER’S CAPITAL STRUCTURE.


 


LETTER
OF CREDIT DRAWS. BORROWER HEREBY AUTHORIZES LENDER TO DRAW AGAINST THIS LINE OF CREDIT FOR REIMBURSEMENT OF ANY PAYMENTS MADE
BY LENDER PURSUANT TO ANY LETTER OF CREDIT, CHECK GUARANTEE LETTER, OR FOREIGN EXCHANGE CONTRACT, ISSUED OR SIGNED BY LENDER, OR
ANY AFFILIATE OF LENDER, FOR THE ACCOUNT OF BORROWER. BORROWER AGREES TO REIMBURSE LENDER FOR ANY SUCH PAYMENTS IN ACCORDANCE WITH
THE TERMS OF THIS AGREEMENT. BORROWER AGREES THAT LENDER MAY REDUCE THE AVAILABILITY OF THIS LINE OF CREDIT BY THE AMOUNT OF THE
LETTER OF CREDIT, CHECK GUARANTEE LETTER OR 15% OF THE FOREIGN EXCHANGE CONTRACT, FOR THE PERIOD OF TIME THAT THE LETTER OF CREDIT,
CHECK GUARANTEE LETTER OR FOREIGN EXCHANGE CONTRACT, IS OUTSTANDING IF THE LETTER OF CREDIT, CHECK GUARANTEE LETTER OR FOREIGN
EXCHANGE CONTRACT, IS ISSUED AGAINST THIS LINE OF CREDIT.


 


FEE PROVISION.
UPON RECEIPT OF A BILLING FROM LENDER, I AGREE TO PAY THE STATED LOAN FEE AND, WHEN APPLICABLE, THE STATED DOCUMENT PREPARATION
FEE.


 


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. Borrower 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 Borrower 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 bankruptey
proceedings (including efforts to modify or vacate any automatic stay or injunction), appeals, and any anticipated post-judgment
collection services. Borrower 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.


 


Consent
to Loan Participation. Borrower agrees and consents to Lender’s sale or transfer, whether now or later, of one or more participation
interests in the Loan to one or more purchasers, whether related or unrelated to Lender. Lender may provide, without any limitation
whatsoever, to any one or more purchasers, or potential purchasers, any information or knowledge Lender may have about Borrower
or about any other matter relating to the Loan, and Borrower hereby waives any rights to privacy Borrower may have with respect
to such matters. Borrower additionally waives any and all notices of sale of participation interests, as well as all notices of
any repurchase of such participation interests. Borrower also agrees that the purchasers of any such participation interests will
be considered as the absolute owners of such interests in the Loan and will have all the rights granted under the participation
agreement or agreements governing the sale of such participation interests. Borrower further waives all rights of offset or counterclaim
that it may have now or later against Lender or against any purchaser of such a participation interest and unconditionally agrees
that either Lender or such purchaser may enforce Borrower’s Obligation under the Loan irrespective of the failure or insolvency
of any holder of any interest in the Loan. Borrower further agrees that the purchaser of any such participation interests may enforce
its interests irrespective of any personal Claims or defenses that Borrower may have against Lender.


 


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, Borrower agrees upon Lender’s request to submit to the jurisdiction of the courts of Summit
County, State of Ohio.


 


Joint
and Several Liability. Ali obligations of Borrower under this Agreement shall be joint and several, and all references to Borrower
shall mean each and every Borrower. This means that each Borrower 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 Borrower, or between Lender and any Grantor, shall constitute a waiver of any of Lender’s
rights or of any of Borrower’s or any 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 ali cases such consent may be granted or withheld in the sole discretion of Lender.


 




    	 



    	 



    

 





	Loan
    No: 53125	BUSINESS
        LOAN AGREEMENT (ASSET BASED)

        (Continued)
	Page
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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 dass, 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, Borrower agrees to keep Lender informed at all times of Borrower’s current address. Unless otherwise provided
or required by law, if there is more than one Borrower, any notice given by Lender to any Borrower is deemed to be notice given
to all Borrowers.


 


Severability.
If a court of competent jurisdiction finds any provision of this Agreement to be illegal, invalid, or unenforceable as to any
person or circumstance, that finding shall not make the offending provision illegal, invalid, or unenforceable as to any other
person or 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.


 


Subsidiaries
and Affiliates of Borrower. To the extent the context of any provisions of this Agreement makes it appropriate, including without
limitation any representation, warranty or covenant, the word “Borrower” as used in this Agreement shall include all
of Borrower’s subsidiaries and affiliates. Notwithstanding the foregoing however, under no circumstances shall this Agreement be
construed to require Lender to make any Loan or other financial accommodation to any of Borrower’s subsidiaries or affiliates.


 


Successors
and Assigns. All covenants and agreements by or on behalf of Borrower contained in this Agreement or any Related Documents
shall bind Borrower’s successors and assigns and shall inure to the benefit of Lender and its successors and assigns. Borrower
shall not, however, have the right to assign Borrower’s rights under this Agreement or any interest therein, without the prior
written consent of Lender.


 


Survival
of Representations and Warranties. Borrower understands and agrees that in extending Loan Advances, Lender is relying on all
representations, warranties, and covenants made by Borrower in this Agreement or in any certificate or other instrument delivered
by Borrower to Lender under this Agreement or the Related Documents. Borrower further agrees that regardless of any investigation
made by Lender, all such representations, warranties and covenants will survive the extension of Loan Advances and delivery to
Lender of the Related Documents, shall be continuing in nature, shall be deemed made and redated by Borrower at the time each Loan
Advance is made, and shall remain in full force and effect until such time as Borrower’s Indebtedness shall be paid in full, or
until this Agreement shall be terminated in the manner provided above, whichever is the last to occur.


 


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. Accounting words and terms not otherwise defined in this Agreement shall have the meanings assigned to them in
accordance with generally accepted accounting principles as in effect on the date of this Agreement:


 


Account.
The word “Account” means a trade account, account receivable, other receivable, or other right to payment for goods
sold or services rendered owing to Borrower (or to a third party grantor acceptable to Lender).


 


Account
Debtor. The words “Account Debtor” mean the person or entity obligated upon an Account.


 


Advance.
The word “Advance” means a disbursement of Loan funds made, or to be made, to Borrower or on Borrower’s behalf under
the terms and conditions of this Agreement.


 


Agreement.
The word “Agreement” means this Business Loan Agreement (Asset Based), as this Business Loan Agreement (Asset Based)
may be amended or modified from time to time, together with all exhibits and schedules attached to this Business Loan Agreement
(Asset Based) 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.


 


Borrowing
Base. The words “Borrowing Base” mean AS DETERMINED BY THE LENDER FROM TIME TO TIME, THE LESSER OF (1) $5,000,000.00
OR (2) THE SUM OF (A) 80.000% OF THE AGGREGATE AMOUNT OF ELIGIBLE ACCOUNTS, PLUS (B) 40.000% OF THE AGGREGATE AMOUNT OF ELIGIBLE
INVENTORY WITH ADVANCES LIMITED TO THE LESSER OF (A) 40.000% OF ELIGIBLE INVENTORY OR (B) $2,000,000.00.


 


Business
Day. The words “Business Day” mean a day on which commercial banks are open in the State of Ohio.


 


Collateral.
The word “Collateral” means all property and assets granted as collateral security for a Loan, whether real or personal
property, whether granted directly or indirectly, whether granted now or in the future, and whether granted in the form of a security
interest, mortgage, collateral mortgage, deed of trust, assignment, pledge, crop pledge, chattel mortgage, collateral chattel mortgage,
chattel trust, factor’s lien, equipment trust, conditional sale, trust receipt, lien, Charge, lien or title retention contract,
lease or consignment intended as a security device, or any other security or lien interest whatsoever, whether created by law,
contract, or otherwise. The word Collateral also includes without limitation all collateral described in the Collateral section
of this Agreement.


 


Eligible
Accounts. The words “Eligible Accounts” mean at any time, all of Borrower’s Accounts which contain selling terms
and conditions acceptable to Lender. The net amount of any Eligible Account against which Borrower may borrow shall exclude all
returns, discounts, credits, and offsets of any nature. Unless otherwise agreed to by Lender in writing, Eligible Accounts do not
include:


 


(1)   Accounts
with respect to which the Account Debtor is employee or agent of Borrower.


 


(2)   Accounts
with respect to which the Account Debtor is a subsidiary of, or affiliated with Borrower or its shareholders, officers, or directors.


 




    	 



    	 



    

 





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    No: 53125	BUSINESS
        LOAN AGREEMENT (ASSET BASED)

        (Continued)
	Page
    9


 


(3)   Accounts
with res pect to which goods are piaced on consignment, guaranteed sale, or other terms by reason of which the payment by the Account
Debtor may be conditional.


 


(4)   Accounts
with respect to which Borrower is or may become liable to the Account Debtor for goods sold or services rendered by the Account
Debtor to Borrower.


 


(5)   Accounts
which are subject to dispute, counterclaim, or setoff.


 


(6)   Accounts
with respect to which the goods have not been shipped or delivered, or the services have not been rendered, to the Account Debtor.


 


(7)   Accounts
with respect to which Lender, in its sole discretion, deems the creditworthiness or financial condition of the Account Debtor to
be unsatisfactory.


 


(8)   Accounts
of any Account Debtor who has filed or has had filed against it a petition in bankruptcy or an application for relief under any
provision of any state or federal bankruptcy, insolvency, or debtor-in-relief acts; or who has had appointed a trustee, custodian,
or receiver for the assets of such Account Debtor; or who has made an assignment for the benefit of creditors or has become insolvent
or fails generally to pay its debts (including its payrolls) as such debts become due.


 


(9)   Accounts
which have not been paid in full within 90 DAYS from the invoice date.


 


(10)  U.S.
GOVERNMENT ACCOUNTS WITHOUT DIRECT ASSIGNMENT.


 


11)  FOREIGN
ACCOUNTS (EXCLUDING CANADIAN ACCOUNTS EXCEPT FOR QUEBEC ACCOUNTS).


 


12)  TAINT
RULE-THE ENTIRE AMOUNT OF EVERY ACCOUNT WITH 25% OR MORE OF THE AGGREGATE AMOUNT OWED MORE THAN 90 DAYS FROM THE INVOICE DATE.


 


13)  CREDITS
OVER 90 DAYS FROM THE INVOICE DATE.


 


Eligible
Inventory. The words “Eligible Inventory” mean, at any time, all of Borrower’s Inventory as defined below, except:


 


(1)   Inventory
which is not owned by Borrower free and clear of all security interests, liens, encumbrances, and Claims of third parties.


 


(2)   Inventory
which Lender, in its sole discretion, deems to be obsolete, unsalable, damaged, defective, or unfit for further processing.


 


(3)   WORK
IN PROCESS (WIP).


 


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.


 


Expiration
Date. The words “Expiration Date” mean the date of termination of Lender’s commitment to lend under this Agreement.


 


GAAP.
The word “GAAP” means generally accepted accounting principles.


 


Grantor.
The word “Grantor” means each and all of the persons or entities granting a Security Interest in any Collateral for
the Loan, including without limitation all Borrowers granting such a Security Interest.


 


Guarantor.
The word “Guarantor” means any guarantor, surety, or accommodation party of any or all of the Loan.


 


Guaranty.
The word “Guaranty” means the guaranty from Guarantor 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.


 


Inventory.
The word “Inventory” means all of Borrower’s raw materials, work in process, finished goods, merchandise, parts and
supplies, of every kind and description, and goods held for sale or lease or furnished under contracts of service in which Borrower
now has or hereafter acquires any right, whether held by Borrower or others, and all documents of title, warehouse receipts, bills
of lading, and all other documents of every type covering all or any part of the foregoing. Inventory includes inventory temporarily
out of Borrower’s custody or possession and all returns on Accounts.


 


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


 


Loan.
The word “Loan” means any and all loans and financial accommodations from Lender to Borrower whether now or hereafter
existing, and however evidenced, including without limitation those loans and financial accommodations described herein or described
on any exhibit or schedule attached to this Agreement from time to time.


 


Note.
The word “Note” means THE PROMISSORY NOTE DATED MARCH 31, 2014, IN THE ORIGINAL PRINCIPAL AMOUNT OF $5,000,000.00
FROM BORROWER TO LENDER, TOGETHER WITH ALL RENEWALS OF, EXTENSIONS OF, MODIFICATIONS OF, REFINANCINGS OF, CONSOLIDATIONS OF AND
SUBSTITUTIONS FOR THE NOTE(S) OR CREDIT AGREEMENT.


 


Permitted
Liens. The words “Permitted Liens” mean (1) liens and security interests securing Indebtedness owed by Borrower to
Lender; (2) liens for taxes, assessments, or similar charges either
not yet due or being contested in good faith; (3) liens of materialmen, mechanics, warehousemen, or carriers, or other like liens
arising in the ordinary course of business and securing obligations which are not yet delinquent; (4) purchase money liens or purchase
money security interests upon or in any property acquired or held by Borrower in the ordinary course of business to secure indebtedness
outstanding on the date of this Agreement or permitted to be incurred under the paragraph of this Agreement titled “Indebtedness
and Liens”; (5) liens and security interests which, as of the date of this Agreement, have been disclosed to and approved
by the Lender in writing; and (6) those liens and security interests which in the aggregate constitute an immaterial and insignificant
monetary amount with respect to the net value of Borrower’s assets.


 




    	 



    	 



    

 





	Loan
    No: 53125	BUSINESS
        LOAN AGREEMENT (ASSET BASED)

        (Continued)
	Page
    10


 


Primary
Credit Facility. The words “Primary Credit Facility” mean the credit facility described in the Line of Credit 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 Loan.


 


Security
Agreement. The words “Security Agreement” mean and include without limitation any agreements, promises, covenants,
arrangements, understandings or other agreements, whether created by law, contract, or otherwise, evidencing, governing, representing,
or creating a Security Interest.


 


Security
Interest. The words “Security Interest” mean, without limitation, any and all types of collateral security, present
and future, whether in the form of a lien, charge, encumbrance, mortgage, deed of trust, security deed, assignment, pledge, crop
pledge, chattel mortgage, collateral chattel mortgage, chattel trust, factor’s lien, equipment trust, conditional sale, trust receipt,
lien or title retention contract, lease or consignment intended as a security device, or any other security or lien interest whatsoever
whether created by law, contract, or otherwise.


 


BORROWER
ACKNOWLEDGES HAVING READ ALL THE PROVISIONS OF THIS BUSINESS LOAN AGREEMENT (ASSET BASED) AND BORROWER AGREES TO ITS TERMS. THIS
BUSINESS LOAN AGREEMENT (ASSET BASED) IS DATED MARCH 31, 2014.


 


	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	 
	 	 	 
	LENDER:	 
	 	 
	FIRSTMERIT
    BANK, N.A.	 
	 	 	 
	By: 	/s/ Gregory A. Ferrence	 
	 	Authorized
    Officer	 


 


	LASER PRO Lending, Ver. 13.4.0.034 Copr. Harland Financial Solutions, Inc. 1997, 2014. All Rights Reserved. - OH d:\laserpro\commercial\prod\CFI\LPL\C40.FC TR-5015940 PR-51