Document:

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                                                                   EXHIBIT 10.10

                      U.S. Small Business Administration

                     Certified Development Company Program

                                  "504" NOTE

                  Loan Number  CDC-753817  30 08-OH
                             ------------------------------

                                                          Kirtland, Ohio
                                                       -----------------------
                                                              (City and State)

$   175,000.00                                      (Date)  March 10      1995
 ---------------                                          --------------,   ---

   For value received, the Undersigned promises to pay to the order of
     Lake County Small Business Assistance Corporation
 -----------------------------------------------------------------------------
                          Payee (development company)
at its office in (City and State)     Kirtland, Ohio
                                  --------------------------------------------,
or upon assignment or transfer of this Note by the Payee, and written notice
thereof to the Undersigned, at such other place as may be designated from time
to time by said assignee or transferee, _____________________________________
                                       ----------------------------------------
One Hundred Seventy Five Thousand ----00/100ths----------------------  dollars,
---------------------------------------------------------------------
                              (Write out amount)
with interest on the outstanding balance at     6.999  % per annum commencing
                                            -----------
on     May 17, 1995        1995  (date of Debenture).
   ---------------------,    ---

   Loan payments shall be made in equal installments, each in the amount of
$2,036.87  commencing on the first day of    June    1995  and continuing due
----------,                               ---------,   --,
and payable on the first day of each month thereafter until    May 1     2005
                                                            ----------,  ----,
when the full unpaid balance of principal and interest shall become due and
payable. In addition to the aforesaid loan payments, Undersigned's total monthly
obligation shall include the service fees set forth in the Servicing Agent
Agreement (SBA Form 1506) attached to and incorporated into this Note.

     This Promissory Note evidences and related Collateral is given, to secure a
loan made by the Payee to the Undersigned and such Note and Collateral will be
assigned by Payee to the Small Business Administration (SBA) to secure the
guaranty by SBA pursuant to section 503(a) of the Small Business Investment Act
(15 U.S.C. section 697(a)), of a Debenture to be issued and sold by the Payee
(the "Debenture"), which is hereby incorporated herein by reference.

     All payments under this note shall be applied in this order:   (1) to the
servicing fees set forth in the Servicing Agent Agreement, (2) to interest, (3)
to principal, (4) to the late fee set forth in this Note.

Late Charge
-----------

In the event Payee or its Agent or assignee accepts a late payment after the
fifteenth day of the month in which such payment is due, the Undersigned agrees
to pay a late payment charge equal to five percent of the late amount or
$100.00, whichever is greater, as compensation for additional collection
efforts.

Definitions
-----------

The term "Indebtedness" as used herein shall mean the indebtedness evidenced by
this Note, including principal, interest, service fees, late payment

                                      -1-

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charges, and expenses including but not limited to the expenses related to the
care and preservation of Collateral and interest at the note rate thereon,
whether contingent, now due or hereafter to become due, and the stated
prepayment premium, if applicable. The term "Collateral" as used in this Note
shall mean any funds, guaranties, or other property, or rights therein of any
nature whatsoever, or the proceeds thereof, which are, or hereafter may be
hypothecated, directly or indirectly, by the Undersigned or others, in
connection with, or as security for, the Indebtedness or any part thereof. The
Collateral, and each part thereof, shall secure the Indebtedness and each part
thereof. The covenants and conditions set forth or referred to in any
instruments of hypothecation constituting the Collateral are hereby incorporated
in this Note as covenants and conditions of the Undersigned with the same force
and effect as though such covenants and conditions were fully set forth herein.
The term "CSA" shall mean the Central Servicing Agent appointed by the
development company (SBA Form 1506) and accepted by the Undersigned to receive
all payments by the Undersigned under this Note. The term "Undersigned" shall
mean the borrower under this Note and, if the operating small concern for the
benefit of which this loan is made is not the borrower, such operating small
concern.

Prepayment
----------

Payment of the entire outstanding balance of the Indebtedness may be made prior
to the maturity date hereof, timing to be arranged with Payee or SBA as assignee
but no partial prepayments may be made. The amount required to prepay this Note
shall be the aggregate of the Indebtedness including interest to the prepayment
(repurchase) date, and any prepayment premium required by the schedule to be
attached to this Note and incorporated by this reference. For purposes of
prepayment the repurchase date is the next semi-annual payment date on the
Debenture. The Undersigned must make a written request for prepayment to the
payee or SBA as assignee at least forty-five (45) days before the prepayment
date. Ten (10) business days prior to the scheduled prepayment date the
undersigned shall cause to be transferred by wire a non-refundable good faith
deposit of one thousand dollars ($1,000) to the CSA. Such deposit shall be
applied in full to the repurchase price of said debenture and shall be forfeited
if undersigned fails to pay the designated total prepayment amount to the CSA on
the designated prepayment date, as compensation for the cost of arranging the
failed prepayment.

Acceleration
------------

The Indebtedness shall immediately become due and payable, upon the appointment
of a receiver or liquidator, whether voluntary or involuntary, for the
Undersigned or for any of its property, or upon the filing of a petition by or
against the Undersigned under the provisions of any State or Federal insolvency
law or under the provisions of the Bankruptcy Code of 1978 or upon the making by
the Undersigned of an assignment for the benefit of its creditors. Payee with
the consent of SBA, or SBA as assignee is authorized to declare all or any part
of the Indebtedness immediately due and payable upon the happening of any of the
following events: (1) Failure to pay any part of the Indebtedness when due; (2)
nonperformance by the Undersigned of any agreement with, or any condition
imposed by, the development company or SBA; (3) failure of the Undersigned or
any person acting on behalf of the Undersigned to disclose any material fact, in
any application, declaration or other document delivered to the development
company or SBA or any misrepresentation by or for the benefit of the Undersigned
in such document; (4) the reorganization, merger or consolidation of the
Undersigned without

                                      -2-
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prior written consent of the development company and SBA, or the making of an
agreement therefor; (5) the sale of the Collateral, or any part of it or any
interest in it, or any agreement that the Collateral will be alienated by the
Undersigned, or any alienation of the Collateral by operation of law or
otherwise; (6) the Undersigned's failure duly to account, to Payee's or SBA's
(as assignee) satisfaction, at such time or times as may be required, for any of
the Collateral, or proceeds thereof, coming into the control of the Undersigned;
(7) the institution of any suit affecting the Undersigned deemed by SBA to
affect adversely its interest hereunder in the Collateral or otherwise; (8) any
change, without prior written approval by SBA, affecting ten or more percent in
the legal or equitable ownership of the Undersigned; (9) any change in the
respective ownerships of the Undersigned; (10) if the Undersigned and/or its
affiliates acquire directly or indirectly an ownership interest of ten or more
percent in the development company; (11) any other event prohibited by the
related security or other instruments; or (12) any violation by the Undersigned
of SBA regulations.  Payee's or SBA's as assignee failure to exercise its rights
under this paragraph shall not constitute a waiver thereof.  Upon acceleration
pursuant to this paragraph, the indebtedness shall be computed in the same
manner as is set forth for the prepayment amount in the preceding paragraph
captioned "Prepayment".

Collateral
----------

Upon the nonpayment of the Indebtedness, or any part thereof, when due, whether
by acceleration or otherwise, Payee with SBA's consent or SBA as assignee is
empowered to sell, assign, and deliver the whole or any part of the Collateral
at public or private sale. After deducting all expenses incidental to such sale
or sales, Payee or SBA as assignee may apply the proceeds thereof to the payment
of the Indebtedness as it shall deem proper. The Undersigned hereby waives all
rights to redemption or appraisement whether before or after sale. Payee with
SBA's consent or SBA as assignee is further empowered, to convert into money all
or any part of the Collateral, by suit or otherwise, and to surrender,
compromise, release, renew, extend, exchange, or substitute any item of the
Collateral in transactions with the Undersigned or any third party. Whenever any
item of the Collateral shall not be paid when due, or otherwise shall be in
default, whether or not the Indebtedness, or any part thereof, has become due,
Payee or SBA as assignee shall have the same rights and powers with respect to
such item of the Collateral as are granted in respect thereof in this paragraph
in case of nonpayment of the Indebtedness, or any part thereof, when due. None
of the rights, remedies, privileges, or powers of Payee or SBA as assignee
expressly provided for herein shall be exclusive, but each of them shall be
cumulative with and in addition to every other such power now or hereafter
existing in favor of Payee or SBA as assignee, whether at law or in equity, by
statute or otherwise.

The Undersigned agrees to take all necessary steps to administer, supervise,
preserve, and protect the Collateral; and regardless of any action taken by
Payee or SBA as assignee, there shall be no duty upon Payee or SBA as assignee
in this respect.  The Undersigned shall pay all expenses of any nature,
including but not limited to reasonable attorney's fees and costs, which Payee
or SBA as assignee may deem necessary in connection with the satisfaction of the
Indebtedness or the administration, preservation (including, but not limited to,
adequate insurance of), or the realization upon the Collateral.  Payee with
SBA's consent or SBA as assignee is authorized to pay at any time and from time
to time any or all of such expenses, add the amount of such payment to the
amount of the Indebtedness, and charge interest thereon at the rate specified
herein with respect to the principal amount of this Note.

The security rights of Payee or SBA as assignee hereunder shall not be impaired
by any indulgence, including but not limited to (a) any renewal,

                                      -3-

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extension, or modification which Payee or SBA as assignee may grant with respect
to the Indebtedness or any part thereof, or (b) any surrender, compromise,
release, exchange, or substitution which Payee or SBA as assignee may grant in
respect of the Collateral, or (c) any indulgence granted in respect to any
endorser, guarantor, or surety. The Payee or SBA as assignee of this Note, the
Collateral, any guaranty, and any other document (or any of them), sold,
transferred, or pledged, shall forthwith become vested with and entitled to
exercise all the powers and rights given by this Note as if said purchaser,
transferee, or pledgee were originally named as Payee in this Note.

                                                   Napro, Inc.
                                                   -----------------------------

/s/ Evangelia S. Tsengas                  [Title]      /s/ Steven Tsengas
------------------------------                     -----------------------------
Evangelia S. Tsengas, Sec
                            [Name of Undersigned]  Steven Tsengas, President
                                                   -----------------------------
  In consideration of the guarantee by Small Business Administration of a
Debenture in the amount of $   175,000.00        issued by
                            -------------------,

               Lake County Small Business Assistance Corporation
--------------------------------------------------------------------------------

                             (Development Company)

(which Debenture is identified as Small Business Project _______________________
                     Napro, Inc., Sanar Plastics Division                     )
------------------------------------------------------------------------------
                            (Name of Small Concern)

said   Lake County Small Business Assistance Corporation               hereby
     -----------------------------------------------------------------
                             (Development Company)

assigns and transfers all rights, title and interest in this Note to the Small
Business Administration.

                         SEAL

                               Lake County Small Business Assistance Corporation
                                                     --------------------------
                                                    Bryon A. Pike, President

                                                     By  /s/ Bryon A. Pike
                                                        ------------------------

Attest  /s/ Norman Smyke
       ------------------------------------
       Norman Smyke, Secretary

                                      -4-
<PAGE>

                          U.S. GOVERNMENT GUARANTEED
            6.9000% DEVELOPMENT COMPANY PARTICIPATION CERTIFICATES
                               SERIES 1995-10C
                     DEBENTURE PREPAYMENT PREMIUM SCHEDULE

SMALL BUSINESS CONCERN:  NAPRO, INC, SANAR PLASTICS
                         DIVISION
                ISSUER:  LAKE COUNTY SMALL BUSINESS ASSISTANCE
                         CORPORATION

      DEBENTURE NUMBER:  1995-10C/05-499-01021
       SBA LOAN NUMBER:  753817-3008
   DEBENTURE PRINCIPAL:  $175000.00
-------------------------------------------------------------------------------

                                 PREMIUM AMOUNT               PREPAYMENT
          PAYMENT DATE           * SEE NOTE (1)              RATE (INT.%)
          ------------           --------------              ------------

          NOV. 1, 1995                 11611.29                   6.90000
          MAY  1, 1996                 11168.62                   6.90000

          NOV. 1, 1996                  8568.54                   5.52000
          MAY  1, 1997                  8189.54                   5.52000

          NOV. 1, 1997                  5848.10                   4.14000
          MAY  1, 1998                  5543.91                   4.14000

          NOV. 1, 1998                  3486.14                   2.76000
          MAY  1, 1999                  3269.11                   2.76000

          NOV. 1, 1999                  1522.29                   1.38000
          MAY  1, 2000                  1406.16                   1.38000

           * NOTE (1) PREMIUM AMOUNT IS BASED ON DEBENTURE BALANCE.
                      NO PREPAYMENT PREMIUM AFTER THE FIFTH YEAR.

<PAGE>

                                LOAN AGREEMENT
                                --------------

     THIS AGREEMENT made and entered into this 10 day of March, 1995, by and
between Napro, Inc., an Ohio corporation, (hereinafter referred to as
"Borrower") and Lake County Small Business Assistance Corporation, a not for
profit corporation, (hereinafter referred to as "Lender")

WITNESSETH:

A.   WHEREAS, Section 504 of the Small Business Investment Act of 1958
authorizes the U.S. Small Business Administration (hereinafter referred to as
"SBA") to guarantee debentures (hereinafter referred to as "504 Debenture")
issued by a qualified local development company (hereinafter referred to as "504
Company") the proceeds of the 504 Debentures to be in turn loaned by the 504
Company to a small business; and

B.   WHEREAS, to qualify as a 504 Company, a local development company must be
certified by SBA, and

C.   WHEREAS, the Lender has been duly qualified and certified by SBA as a 504
Certified Development Company, under Certificate No. 05-499, and

D.   WHEREAS, the Borrower has applied to the Lender for a loan (the "Loan") for
the purpose of purchasing machinery and equipment and,

E.   WHEREAS, the Lender desires to issue and sell 504 Debentures, and lend
proceeds to the Borrower for such purposes.

NOW, THEREFORE, in consideration of the mutual covenants herein set forth, the
parties agree as follows:

1.   PURPOSE AND AMOUNT OF LOAN.
     ---------------------------

        a. Subject to the terms and conditions of this Agreement and the
Authorization, the Lender agrees to lend the principal amount of ONE HUNDRED
SEVENTY FIVE THOUSAND DOLLARS ($175,000.00) to Borrower for the purpose of
assisting Borrower to purchase machinery and equipment and by the partial
repayment and "takeout" of Borrower's interim construction financing. Said ONE
HUNDRED SEVENTY FIVE THOUSAND DOLLARS ($175,000.00) shall be obtained by Lender
from the proceeds of the sale of 504 Debentures to be issued by Lender and
guaranteed by SBA.

        b. The Borrower agrees that it will apply the funds received by it under
this Agreement in accordance with the use of loan proceeds specified in the SBA
Authorization and Guaranty Agreement No. CDC-753817 30 08-OH (the "SBA
Guaranty"). The Borrower further agrees that no application of any funds
received from the Lender hereunder shall be made in violation of the Small

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Business Investment Act of 1958, as amended, or the Regulations promulgated
hereunder.

        c. The proceeds of the Loan shall be paid and distributed to Bank One,
Cleveland, NA, in partial repayment of its interim financing. Distribution of
the Loan shall be made through the Colson Services Corp., P.O. Box 1289, Bowling
Green Station, New York, New York, 10274, as Central Servicing Agent
(hereinafter referred to as "CSA") and Lender shall have no responsibility with
respect thereto.

        d. Borrower has executed the Authorization and Debenture Guarantee (SBA
Form 1248) as required by SBA and contemporaneously with this Agreement agrees
to execute all other documents and do all things necessary in order to
consummate the SBA transaction herein contemplated.

        e. In the event that Lender and Borrower do not succeed in completing
the transaction with SBA, with the result that the 504 Debentures issued by
Lender in connection with this Loan are not sold, Lender shall not have any
obligation to go forward with the loan, and this Loan Agreement shall be
cancelled.

2.   INTEREST.
     ---------

        Interest on the Loan to be made hereunder shall be determined by the
Secretary of the Treasury one day before the sale of the 504 Debentures,
pursuant to Section 504 (b) (3) of the Small Business Investment Act, 15 USC
Section 697 (b) (3).

3.   TERM.
     -----

        The term of the Loan shall be ten (10) years. The note shall be payable
in 120 equal monthly installments. The first installment shall be due and
payable on the 1st day of May 1995, and the principal of the Loan shall be
repaid on or before the 1st day of April, 2005. All payments shall be applied
first to interest and service charges and then to principal. Payment of
principal and interest shall be made by wire, to COLSON SERVICES CORP., P.O. Box
1289, Bowling Green Station, New York, New York, 10274 as CSA for Borrower.
Simultaneously with the wiring of each payment to CSA, Borrower will mail to
Lender a copy of the wire.

4.   THE NOTE.
     ---------

        The Loan to be made hereunder shall be evidenced by a Promissory Note
(hereinafter referred to as "Note"), in such form as the Lender shall require
and shall be executed by the corporate officers of Napro, Inc.

5.   CENTRAL SERVICING AGENT AGREEMENT.
     ----------------------------------

        Borrower agrees to use the services of CSA as Fiscal agent

                                       2
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in connection with the Loan and to enter into an agreement on SBA Form 1506 (the
"CSA Agreement") among Borrower, Lender and CSA. The CSA Agreement shall
provide, among other things, for the following:

        a. Borrower shall pay to Lender a processing fee of 1.5% of the net
proceeds of the 504 Debenture. In addition, Borrower shall pay to Lender one-
half of one percent (1/2 of 1%) of the outstanding balance of the Loan
determined at five (5) year anniversary intervals at the beginning of such
interval, as an annual servicing fee, payable in monthly installments.

        b. Borrower shall pay the Colson Services Corp. an origination fee of
one-fourth of 1% of the 504 Debenture amount at the time of the disbursement of
the Loan and an annual servicing fee payable monthly of one-tenth of 1% of the
unpaid balance of the Loan such balance to be determined at five (5) year
anniversary intervals at the beginning of such interval.

        c. CSA shall withhold from the 504 Debenture sale proceeds an amount
equal to one half of one percent (1/2 of 1%) of the net debenture proceeds and
place such deposit amount ("Reserve Deposit") in a Master Reserve Account. This
deposit is not refundable.

6.   PROVIDE ADDITIONAL EQUITY.
     --------------------------

        The Borrower agrees to provide additional equity funds to cover
additional project costs incurred as a result of overruns or unanticipated
expenses or changes in work orders in the project as specified in the SBA
Guaranty.

7.   INSUFFICIENT FUNDS.
     -------------------

        If the proceeds of the 504 Debentures are insufficient to cover all
disbursements required by the terms of the CSA Agreement, Borrower shall be
solely responsible for providing whatever additional funds may be needed to
comply with the said Agreement. These disbursements, which shall be specified in
said Agreement, may include, without being limited to, principal and accrued
interest of interim Lender, the Reserve Fund Account, the Processing Fee of
Lender and the initiation fee of CSA.

8.   SECURITY.
     ---------

        a. Borrower shall give a second purchase money security interest
pursuant to the Uniform Commercial Code in all machinery and equipment to be
acquired from the proceeds of this Loan, or hereafter acquired, and the proceeds
therefrom, subject only to a prior lien not to exceed TWO HUNDRED TEN THOUSAND
DOLLARS ($210,000.00) in favor of Bank One, Cleveland, NA. Borrower shall
provide Lender with a complete list of all furniture, machinery, trade fixtures
and equipment against which the aforesaid security interest attaches.

                                       3
<PAGE>

       b.   Borrower shall give a security interest pursuant to the Uniform
Commercial Code, on all machinery and equipment (excluding automotive
equipment), furniture, trade fixtures, inventory, contract rights, accounts
receivable and general intangibles now owned, to be acquired and hereafter
acquired, subject only to a prior lien on existing 504 loan #CDC-544570 30
05-OH.

       c.   The following shareholders shall individually and personally
guaranty the Note for the full balance owing thereon, plus accrued interest,
penalties, and late charges, if any:
                               Steven Tsengas
                               Evangelia Tsengas
                               Nicholas Tsengas

9.   REPRESENTATIONS:
     ----------------

       In order to induce the Lender to make the Loan hereunder, Borrower
represents and warrants:

       a.   That Borrower is a corporation duly organized, validly existing and
in good standing under the laws of the State of Ohio and has authority to enter
into this agreement and to borrow hereunder.

       b.   That making and performance by the Borrower of this Agreement, and
the execution and delivery of the Note, and any Security Agreements and
Instruments have been duly authorized by all necessary corporate action and will
not violate any law, rule, regulation, order, writ, judgement, decree,
determination or award presently in effect having applicability to the Borrower
or any provision of the Borrower's Certificate of Incorporation or By Laws or
result in a breach of or constitute a default under any indenture or bank loan
or credit agreement or any other agreement or instrument to which the Borrower
is a party or by which it or its property may be bound or affected.

       c.   That when this Agreement is executed by the Borrower and the Lender,
and when the Note is executed and delivered by the Borrower for value, each such
instrument shall constitute a legal, valid, and binding obligation of the
company in accordance with its terms.  Any Security Agreements or Instruments,
Financing Statements, Mortgages and other liens on chattels or real estate shall
constitute legal, valid, and binding liens free and clear of all prior liens and
encumbrances except as provided for herein.

       d. That Borrower certifies that there has been no adverse change since
the date of loan application in the financial condition, organization,
operation, business prospects, fixed properties, or personnel of the Borrower.

       e.   That Borrower is not a party to any action, suit of

                                       4

<PAGE>

proceeding pending, or, to the knowledge of the Borrower, threatened at law or
in equity before any court or administrative officer or agency which brings into
question the validity of the transaction herein contemplated or might result in
any adverse change in the business or financial condition of the Borrower.

     f.   That the Borrower is not in default of any obligations, covenants, or
conditions contained in any bond, debenture, note, or other evidence of
indebtedness or mortgages or collateral instruments securing the same. The
making of this agreement and the consummation of the transaction contemplated
herein will not violate any provision of law or result in a breach or constitute
a default under any agreement to which Borrower is a party or result in a
creation of any lien, charge or encumbrance upon any of its property or its
assets.

     g.   Borrower has filed all tax returns which are required to be filed and
has paid or made provision for the payment of all taxes which have or may become
due pursuant to said returns or pursuant to any assessments received by them. No
tax liability has been asserted by the Internal Revenue Service or other taxing
agency, federal, state or foreign, for taxes materially in excess of those
already provided for and the Borrower knows of no basis for any such deficiency
assessment.

     h.   Borrower hereby indemnifies and holds Lender harmless against any
losses, claims, damages, or liabilities to which it may be subject as a result
of any claim for services in the nature of a finder's fee or commission with
respect to the transactions contemplated hereunder or arising out of any such
claims and will reimburse Lender for any legal or other expenses incurred by it
in investigating or defending any such claim or liability asserted therefore.

     i.   The Borrower shall use all of the proceeds of this loan for the
purpose stated in paragraph 1 hereof.

10. CONDITIONS OF LOAN.
    ------------------

     a.   All of the representations and warranties contained in this Agreement
shall be true and correct on and as of the closing date.

     b.   All proceedings taken in connection with the transaction contemplated
by this Agreement and all documents incidental thereto shall be satisfactory in
form, scope and substance to Lender's counsel, and Lender shall have received
copies of all documents which it or its counsel may reasonably request in
connection with said transaction in form, scope and substance satisfactory to
its counsel.

     c.   All necessary approvals or consents, if any, such approvals or
consents be required of governmental bodies having jurisdiction with respect to
the construction herein

                                       5
<PAGE>

obtained such consents shall constitute a default hereunder.

     d.   If Borrower, or any person or entity constituting part of Borrower, or
any guarantor of the loan to be made hereunder is a corporation, there shall be
delivered to Lender (with respect to each such corporation, if there be more
than one) a copy of the record of specifically authorizing its officers to
execute this Agreement and all other documents necessary to the consummation of
this transaction. The record of the minutes of the Board of Directors shall be
certified to be true by the Secretary or Assistant Secretary of such
corporation.

     e.   Borrower shall have secured mortgage title insurance for the
protection of Lender at Borrower's expense; and Borrower shall have paid (or, at
the option of Lender, will pay promptly after closing) all reasonable expenses
incurred by but not limited to, expenses for appraisals, reappraisals, surveys,
searches, guarantees, policies of title insurance, attorney fees incurred by
Lender in connection with the transaction, whether or not a loan is made.
Borrower has deposited the sum of $300.00 with Lender to such the payment of
such costs. Any unused portion thereof will be returned to Borrower; any costs
exceeding said sum shall be paid by Borrower to Lender at or prior to closing of
the Loan.

     f.   All necessary approvals or consents required with respect to this
transaction by any mortgagee or other party having interest in the Real Estate
shall have been obtained, and failure to have obtained such consents shall
constitute a default hereunder.

     g.   The SBA transaction described hereinabove shall have been concluded,
and 504 Debentures shall have been sold.

11.  AFFIRMATIVE COVENANTS.
     ---------------------

     Until payment in full of the Note and all other payments due to the Lender
hereunder, and the performance of all of the terms, conditions and provisions of
this Agreement and the mortgages, Borrower shall cause the following to be done.

     a.   Borrower will at all times keep proper books of account in a manner
satisfactory to Lender and/or SBA. Borrower hereby authorizes Lender or SBA to
make or cause to be made, at Borrower's expense and in such manner and at such
times as Lender may require, (a) inspection and audit of any books, records and
papers in the custody or control of Borrower or others, relating to Borrower's
financial or business conditions, including the making of copies thereof and
extracts therefore, and (b) inspections and appraisals of any Borrower's assets.
Borrower shall furnish to Lender and SBA for the twelve month period ending
December 31, 1994 and annually thereafter (no later than three months following
the expiration of any such period) and at such other times and in such form as
Lender may prescribe,

                                       6
<PAGE>

such other times and in such form as Lender may prescribe, Borrower's financial
and operating statements. Borrower hereby authorizes all Federal, State and
Municipal authorities to furnish reports of examination, records and other
information relating to the conditions and affairs of Borrower and any desired
information relating to the conditions and affairs of Borrower and any desired
information from reports, returns, files and records of such authorities upon
request therefrom by Lender and SBA. Lender shall be given free access to the
Real Estate for the purpose of such inspection or audits and also for the
purpose of determining the condition of the premises.
     b.   Borrower will deliver to Lender within fifteen (15) days after any
written request therefore from Lender such information as may be reasonably
necessary to determine whether the Borrower is complying with its covenants and
agreements contained in this Loan Agreement or an Event of Default has occurred.

     c.   Borrower will punctually pay or cause to be paid the principal and
interest to become due in respect to the Note in accordance with the terms
thereof.

     d.   Borrower will, upon demand, promptly pay and discharge all taxes,
assessments or other governmental charges which may lawfully be levied or
assessed on their income or profits or any part thereof, and also all lawful
claims for labor or material

     e.   Borrower certifies that as a result of this project five (5) full-time
equivalent jobs will be created within two (2) years of project completion.

     f.   Borrower will, upon demand, pay or cause to be paid the principal and
interest on all indebtedness heretofore or hereafter incurred or assumed by it
when and as the same shall become due and payable, unless such indebtedness be
renewed or extended, and will observe, perform and discharge all of the
covenants, conditions, and obligations which are imposed on it by and all
indentures and other agreements securing or evidencing so to prevent an
occurrence of any act of omission which under the provisions thereof may be
declared to be default thereunder which may result in a lien placed upon the
Real Estate.

     g.   Borrower will at all times cause all of the property to be maintained
and kept in such condition and repair that Lender's security will be adequately
protected.

     h.   In the event that any provision of this Agreement or any other
instrument executed at closing or the application thereof to any person or
circumstances shall be declared null and void, invalid or held for any reason to
be unenforceable by a Court of competent jurisdiction, the remainder of such
agreement shall nevertheless remain in full force and effect, and to this end,
the provisions of all covenants, conditions and agreements described herein are
deemed separate.

                                       7

<PAGE>

     i.   All of the building improvements upon the Real Estate which are of
insurable character will be kept insured by financially sound and reputable
insurers against loss or damage by fire, explosion and other hazards customarily
insured against by extended coverage for the full insurance value of the
property insured and in any event an amount sufficient to prevent the owner
thereof from becoming a co-insurer, the proceeds thereto to be paid to Lender to
satisfy the balance owing on the Note, including accrued interest, at the time
of the loss, the remainder of the insurance proceeds to be payable to the
Borrower. If the proceeds of the insurance together with such other funds as are
available to Borrower are sufficient to pay for the restoration of the premises,
Borrower and Lender shall negotiate in good faith for the application of such
funds to such restoration. Borrower agrees to deliver certificates showing
compliance with these insurance requirements. Borrower will maintain, with
financially sound and reputable insurers, insurance against other hazards and
risks including Workmen's Compensation Insurance, if appropriate.

     j.   Borrower will give Lender prior notice, in writing, of any public
hearing or meeting before any administrative or other public agency which may,
in any manner, affect the Real estate or chattels pledged as security hereunder.

     k.   Borrower agrees that it will at all times during the term of the Loan
comply fully with all applicable local, state and federal laws, rules and
regulations relating to the sale, use or upon the Real Estate.

     l.   The Borrower further agrees to provide information, and execute and
deliver any and all additional documents and instruments as may be reasonably
requested by Lender, its Assigns or Counsel, and CSA including by not limited
to:

     (i)    Executing the SBA Form 159 "Compensation Agreement".

     (ii)   Displaying the SBA Form 722 "Equal Opportunity" Poster".

     (iii)  Executing Standby Agreement on SBA Form 155 of Steven Tsengas in the
            amount of $150,000.00 and all accrued and future interest thereon

     (iv)   Providing information as required of the Lender by the SBA for its
            annual reporting requirements.

     (v)    Executing SBA Form 160, "Resolution of the Board of Directors" and a
            Certificate of Good Standing with copy of the Articles of
            Incorporation.

     (vi)   Providing Lease satisfactory to Lender on the premises located at
            1300 East Street, Fairport

                                       8
<PAGE>

             Harbor, Ohio, for a period of ten (10) years, including options.

     m.   Lender must certify on form submitted by SBA as to whether or not
Federal Flood Insurance is required.  If insurance is required, Borrower must
purchase and maintain Federal Flood Insurance in amounts and coverages equal to
the lesser of the outstanding principal balance of the Loan, the value of the
property to be insured or the maximum limit of coverage available.
Notwithstanding, if Flood Insurance becomes required during the life of the
Loan, Borrower must purchase same.  Failure to maintain any required Flood
Insurance will cause the Borrower to become ineligible for any further flood
disaster assistance.

     n.   Borrower shall maintain a minimum cashflow ratio or 1.20 starting in
fiscal year 1994.  The ratio is to be tested quarterly in the first year of this
agreement and annually thereafter.  Basis for calculation shall be the preceding
period's net income or loss, plus depreciation expense, plus interest expense,
less distributions, divided by all required principal and interest payments for
the subsequent period.

     o.   Borrower shall maintain an adjusted tangible net worth of $180,000.00
at fiscal year end 12/31/94, $280,000.00 at 12/31/95 and $380,000.00 at
12/31/96, $480,000.00 at 12/31/97 $580,000.00 at 12/31/98 and thereafter.
Tangible net worth shall be defined as net worth minus intangible assets as
defined by "Generally Accepted Accounting Principals," minus loans and
receivables from related parties, shareholders and affiliates, plus subordinated
debt.

     p.   Borrower shall provide and maintain hazard insurance (fire and
extended coverage), including theft, in an amount of ONE HUNDRED SEVENTY FIVE
THOUSAND DOLLARS ($175,000.00)  to cover the pledged collateral, or proceeds
therefrom, in a form and with an insurance company satisfactory to Lender, with
loss payable clause on the personal property and New York Standard Mortgage
Clause or its equivalent on real estate to Lender.

     q.   While the outstanding principal balance of the loan is TWO HUNDRED
THOUSAND DOLLARS ($200,000.00) or more, Borrower shall provide Lender a "review"
year-end financial statement of the Borrower prepared by an independent public
accountant within ninety (90) days, of the close of Borrower's fiscal year,
ending December 31st.

     r.   Borrower shall inject the sum of FORTY TWO THOUSAND DOLLARS
($42,000.00) prior to any disbursement of this loan, in

                                       9
<PAGE>

the form of cash or kind, acceptable to SBA; if any of said funds are loaned,
repayment terms must be for a term equal, at least, to the terms of this
agreement, and be subordinate to liens securing this loan. If any portion of
said funds are borrowed, the Lender will supply to SBA District Director copies
of debt instruments. This injection may not be repaid at a rate faster than the
SBA debenture.

12.  NEGATIVE COVENANTS.
     -------------------

     Until payment in full of the Note and performance of all the obligations of
this Agreement:

     a.   Borrower will not, without the prior written consent of Lender or SBA:

     (i)  (if Borrower is a corporation) declare or pay any dividend or make
any distribution upon its capital stock, or consolidate, or merge with any other
company, or give any preferential treatment, make any advance, directly or
indirectly; by way of loan, gift, bonus, or otherwise, to any company directly
or indirectly controlling or affiliated with or controlled by Borrower, or any
other company, or to any officer, director or employee of Borrower, or of any
other company, or to any officer, director or employee of Borrower, or of any
such company,

     (ii) (if Borrower is a partnership or individual) make any distribution of
assets of the business of Borrower, other than treatment, make any advance,
directly or indirectly, by way of loan, gift, bonus or otherwise, to any partner
or any of its employees, or to any company directly or indirectly controlling or
affiliated with or controlled by Borrower, or any other company.

     b.   Borrower shall not sell, convey, lease, hypothecate, or otherwise
dispose of any of its fixed assets, both realty or chattels, without the prior
written consent of Lender or SBA.

     c.   Borrower will not, prior to payment in full of the indebtedness
evidenced by the SBA Loan Note, without prior written consent of the holder of
the Note, pledge, mortgage, or otherwise cause or permit to be encumbered in any
manner whatsoever, any of Borrower's property or assets, whether then owned or
thereafter acquired; except by purchase money liens upon property acquired after
the date of the Note, and other liens upon such property at the time of the
acquisition thereof.

     d.   The Borrower will neither permit nor suffer to exist without prior
written SBA consent any material change in the project's plans and/or
specifications submitted to the SBA in order to induce the SBA to guaranty the
Debenture to be issued by
                                      10

<PAGE>

the Lender as per the SBA Guaranty. Material change will include any significant
variance in the accepted plans and specifications, increased to contract prices,
and/or additional financial obligations with respect to the construction and
Acquisition Assets.

     e.   During the term of the Loan, neither the Borrower nor its affiliates
nor its principal nor its close associates will acquire either directly or
indirectly an ownership position or interest in the Lender in excess of 10% of
the votes or shares of Lender, its successors or assigns. If this should occur,
the debenture shall immediately become due and payable.

     f.   If during the term of the loan, Borrower shall effect a change of
ownership or control of the business without prior written consent of SBA, which
consent shall not be unreasonably withheld, then and in that event, all
outstanding obligations may be accelerated and payment thereof called for by SBA
and Lender.

13.  EVENTS OF DEFAULT.
     ------------------

     The principal indebtedness evidenced by the Note or the unpaid balance
thereof at the time outstanding, shall be due and payable at the election of the
Lender if any one or more of the following events (herein called "Events of
Default") shall occur for any reason whatsoever, and whether such occurrence
shall be voluntary, involuntary, or come about to be effected by operation of
law, or pursuant to or in compliance with any judgment, decree or order of any
court or any order, rule or regulation of any administrative or governmental
body:

     a.   Default shall be made in payment of any principal or interest on the
Note when due and payable, and such default shall be continued for a period of
thirty (30) days; or

     b.   Default shall be made in the performance or observance of any of the
covenants or agreements contained in Articles 11, 12 or 13 hereof, or of any
other provision of the Note, Mortgage, or the Security Agreement; or

     c.   Any representation or warranty made by the Borrower herein or any
statement or representations made in any certificate statement, or opinion
delivered pursuant hereto shall prove to have been incorrect in any material
respect as of the date when made; or

     d.   Any obligations of the Borrower for the payment of borrowed money
(other than its' obligations hereunder or under the Note) shall not be paid at
its maturity or any such obligations shall become or be declared, pursuant to
the terms thereof, to be due and payable prior to the express maturity thereof
by reason of default or other violations of the terms thereof; or

                                      11

<PAGE>

     e.   Default shall be made in the performance or observance of any of the
other covenants or agreements by (a), (b), (c), or (d) above, and such default
shall have continued for a period of thirty (30) days after notice thereof to
the Borrower by Lender; or

     f.   Borrower shall admit in writing its inability to pay its debts
generally as they become due, make an assignment for the benefit of creditors,
file a petition in bankruptcy, be adjudicated insolvent or bankrupt, petition
or apply to any tribunal for the appointment of any receiver or trustee
therefore or of any substantial part of its property or commence any proceedings
under any arrangement, readjustment or debt, or statute of any jurisdiction,
whether now or hereafter in effect; or there is commenced against Borrower any
such proceedings which remains undismissed for a period of thirty (30) days; or

     g.   Borrower by any act indicates its consent to, approval or
acquiescence in any proceeding or in the appointment of any receiver or of any
trustee for Borrower with respect to a substantial part of its property.

14.  EXPENSES OF COLLECTION OR ENFORCEMENT.
     --------------------------------------

     The Borrower agrees, if at any time that Borrower defaults on any provision
of this Loan Agreement, to pay the Lender or its assigns, in addition to any
other amounts that may be due from the Borrower, an amount equal to the costs
and expenses of collection, enforcement or correction or waiver of the default
incurred by the Lender or its assigns in such collection, enforcement,
correction or waiver of default.

15.  WAIVER OF NOTICE.
     -----------------

     The Borrower and Guarantors hereby expressly waive any requirement for
presentation, demand, protest, notice of protest or other notice of dishonor of
any kind, other than the notice specifically provided.

16.  NOTICES.
     --------

     All notices, consents, requests, demands, and other communications
hereunder shall be in writing and shall be deemed to have been duly given to a
party hereto if mailed by certified mail, prepaid, to Lender at its address set
forth at the beginning of this Agreement, and to Borrower at the address set
forth at the beginning of this Agreement, and to Borrower at the address set
forth in the Note or at such other addresses as any party may have designated in
writing to any other party hereto.

17.  SURVIVAL OF REPRESENTATIONS AND WARRANTIES.
     -------------------------------------------

     All agreements, representations and warranties contained herein shall
survive the execution and delivery of this

                                      12
<PAGE>

Agreement, the Note, the Security Agreements, and the Mortgage, any
investigation at any time made by the Lender or on its behalf, and any sale or
transfer of the Note and Mortgage.

18.  CONSTRUCTION AND AMENDMENT.
     ---------------------------

     This Loan Agreement constitutes the entire agreement between the parties
pertaining to the subject matter hereof and supersedes all prior and
contemporaneous agreements and understandings of the parties in connection
therewith, except with reference to the Authorization and Debenture Guaranty
Agreement executed the 13th day of September, 1994, which terms and conditions
are incorporated herein by reference. This Agreement may not be changed, amended
or terminated orally but only by an agreement in writing and executed by Lender
or its assigns, and the Borrower. It is understood that any such change or
amendments would require the prior written consent of SBA.

19.  PAYMENT.
     --------

     The Borrower shall make payments to the Lender in accordance with the terms
and conditions and instructions contained in the Central Servicing Agent
Agreement.

20.  COUNTERPARTS.
     -------------

     This Agreement may be executed in two or more counterparts, each of which
shall be deemed an original, but all of which together shall constitute one and
the same instrument.

21.  NO WAIVER: REMEDIES CUMULATIVE.
     -------------------------------

     No failure or delay on the part of the Lender in exercising any power or
right hereunder, or under the Note or Mortgage, shall operate as a waiver
thereof, except as specifically provided herein, nor shall any single or partial
exercise thereof or the exercise of any other right or power hereunder or under
the Note or Mortgage is intended to be exclusive of any other remedy, and each
and every such remedy shall be cumulative and shall be in addition to every
other remedy given hereunder or now or hereafter existing at law or in equity or
by statute or otherwise.

22.  EXECUTION BY ADDITIONAL PARTIES AND GUARANTOR.
     ----------------------------------------------

     When any party other than those named at the outset of this Agreement join
in the execution thereof, they have done so for the purpose of consenting to all
of the terms and conditions hereof and agree by such execution to be bound
hereby. Any party who has signed this Agreement as Guarantor shall be deemed to
have guaranteed performance by Borrower of all of its obligations hereunder and
under the Note or Mortgage, and all such persons or entities who have signed as
Guarantor shall be deemed to have

                                      13

<PAGE>

made such guarantees unconditionally, and they shall be jointly and severally
liable for the performance by Borrower of all such obligations.

23.  OBLIGATIONS SURVIVE CLOSING.
     ----------------------------

     All obligations of Borrower and Guarantors under this Loan Agreement, and
under the Note, the Mortgage and the Security Agreements, which have not been
duly performed, paid and satisfied at the time of closing of the Loan, shall
survive the closing.

24.  GOVERNING LAW.
     --------------

     This Agreement and the Note, the Mortgage, the Security Agreement and the
Financing Statements shall be governed by and interpreted in accordance with the
laws of the State of Ohio.

25.  SUCCESSORS AND ASSIGNS.
     -----------------------

     This Agreement shall be binding upon the Borrower, its successors and
assigns, except that the Borrower may not assign or transfer its rights without
prior written consent of SBA. This Agreement shall inure to the benefit of the
Lender, its successors and assigns, and, hereof, all subsequent holders of the
Note.

SIGNED IN THE PRESENCE OF:              "BORROWER"

/s/ William J. DiPalma                  BY: /s/ Steven Tsengas
-------------------------------            ------------------------------
                                            President

/s/ William J. DiPalma                  AND: /s/ Evangelia S. Tsengas
-------------------------------             -----------------------------
                                            Secretary

                                        "LENDER"

/s/ William J. DiPalma                  BY: /s/ Bryon A. Pike
-------------------------------            ------------------------------
                                            President

/s/ William J. DiPalma                  AND: /s/ Norman Smyke
-------------------------------             -----------------------------
                                            Secretary

                                     14
<PAGE>

                                                      OMB Approval No. 3245-0201

[LOGO]                                                --------------------------
                                                             SBA LOAN NO.
                                                      --------------------------

                                                         CDC 753817 30 08 OH
                                                      --------------------------

                      SMALL BUSINESS ADMINISTRATION (SBA)
                                   GUARANTY

                                                                 March 10  ,1995
                                                                 ---------- ----

     In order to induce  U.S. Small Business Administration    , (hereinafter
                        --------------------------------------
                          (SBA or other Lending Institution)
called "Lender") to make a loan or loans, or renewal or extension thereof, to
SANAR PLASTIC DIVISION OF NAPRO, INC.
--------------------------------------------------------------------------------
____________________(hereinafter called "Debtor"), the Undersigned hereby
unconditionally guarantees to Lender, its successors and assigns, the due and
punctual payment when due, whether by acceleration or otherwise, in accordance
with the terms thereof, of the principal of and interest on and all other sums
payable, or stated to be payable, with respect to the note of the Debtor, made
by the Debtor to Lender, dated March 10, 1995
                         -------------------------------------------------------
__________________ in the principal amount of $  175,000.00     , with interest
                                              -----------------
at the rate of _____________________________ per cent per annum. Such note, and
the interest thereon and all other sums payable with respect thereto are
hereinafter collectively called "Liabilities." As security for the performance
of this guaranty the Undersigned hereby mortgages, pledges, assigns, transfers
and delivers to Lender certain collateral (if any), listed in the schedule on
the reverse side hereof. The term "collateral" as used herein shall mean any
funds, guaranties, agreements or other property or rights or interests of any
nature whatsoever, or the proceeds thereof, which may have been, are, or
hereafter may be, mortgaged, pledged, assigned, transferred or delivered
directly or indirectly by or on behalf of the Debtor or the Undersigned or any
other party to Lender or to the holder of the aforesaid note of the Debtor, or
which may have been, are, or hereafter may be held by any party as trustee or
otherwise, as security, whether immediate or underlying, for the performance of
this guaranty or the payment of the Liabilities or any of them or any security
therefor.

     The Undersigned waives any notice of the incurring by the Debtor at any
time of any of the Liabilities, and waives any and all presentment, demand,
protest or notice of dishonor, nonpayment, or other default with respect to any
of the Liabilities and any obligation of any party at any time comprised in the
collateral. The Undersigned hereby grants to Lender full power, in its
uncontrolled discretion and without notice to the undersigned, but subject to
the provisions of any agreement between the Debtor or any other party and Lender
at the time in force, to deal in any matter with the Liabilities and the
collateral, including, but without limiting the generality of the foregoing, the
following powers:

     (a)  To modify or otherwise change any terms of all or any of the
          Liabilities or the rate of interest thereon (but not to increase the
          principal amount of the note of the Debtor to Lender), to grant any
          extension or renewal thereof and any other indulgence with respect
          thereto, and to effect any release, compromise or settlement with
          respect thereto;

     (b)  To enter into any agreement of forbearance with respect to all or any
          part of the Liabilities, or with respect to all or any part of the
          collateral, and to change the terms of any such agreement;

     (c)  To forbear from calling for additional collateral to secure any of the
          Liabilities or to secure any obligation comprised in the collateral;

     (d)  To consent to the substitution, exchange, or release of all or any
          part of the collateral, whether or not the collateral, if any,
          received by Lender upon any such substitution, exchange, or release
          shall be of the same or of a different character or value than the
          collateral surrendered by Lender;

     (e)  In the event of the nonpayment when due, whether by acceleration or
          otherwise, of any Liabilities, or in the event of default in the
          performance of any obligation comprised in the collateral, to realize
          on the collateral or any part thereof, as a whole or in such parcels
          or subdivided interests as Lender may elect, at any public or private
          sale or sales, for cash or on credit or for future delivery, without
          demand, advertisement or notice of the time or place of sale or any
          adjournment thereof (the Undersigned hereby waiving any such demand,
          advertisement and notice to the extent permitted by law), or by
          foreclosure or otherwise, or to forbear from realizing thereon, all as
          Lender in its uncontrolled discretion may deem proper, and to purchase
          all or any part of the collateral for its own account at any such sale
          or foreclosure, such powers to be exercised only to the extent
          permitted by law.

     The obligations of the Undersigned hereunder shall not be released,
discharged or in any way affected, nor shall the Undersigned have any rights or
recourse against Lender, by reason of any action Lender may take or omit to
take under the foregoing powers.

     In case the Debtor shall fail to pay all or any part of the Liabilities
when due, whether by acceleration or otherwise, according to the terms of said
note, the Undersigned, immediately upon the written demand of Lender, will pay
to Lender the amount due and unpaid by the Debtor as aforesaid, in like manner
as if such amount constituted the direct and primary obligation of the
Undersigned. Lender shall not be required, prior to any such demand on, or
payment by, the Undersigned, to make any demand upon or pursue or exhaust any of
its rights or remedies against Debtor or others with respect to the payment of
any of the Liabilities, or to pursue or exhaust any of its rights or remedies
with respect to any part of the collateral. The Undersigned shall have no right
of subrogation whatsoever with respect to the Liabilities or the collateral
unless and until Lender shall have received full payment of all the Liabilities.
<PAGE>

     The obligations of the Undersigned hereunder, and the rights of Lender in
the collateral, shall not be released, discharged or in any way affected, nor
shall the Undersigned have any rights against Lender; by reason of the fact that
any of the collateral may be in default at the time of acceptance thereof by
Lender or later; nor by reason of the fact that a valid lien in any of the
collateral may not be conveyed to, or created in favor of, Lender; nor by reason
of the fact that any of the collateral may be subject to equities or defenses or
claims in favor of others or may be invalid or defective in any way; nor by
reason of the fact that any of the Liabilities may be invalid for any
reason whatsoever; nor by reason of the fact that the value of any of the
collateral, or the financial condition of the Debtor or of any obligor under or
guarantor of any of the collateral, may not have been correctly estimated or may
have changed or may hereafter change; nor by reason of any deterioration, waste,
or loss by fire, theft, or otherwise of any of the collateral, unless such
deterioration, waste, or loss be caused by the willful act or willful failure to
act of Lender.

     The Undersigned agrees to furnish Lender, or the holder of the aforesaid
note of the Debtor, upon demand, but not more often than semiannually, so long
as any part of the indebtedness under such note remains unpaid, a financial
statement setting forth, in reasonable detail, the assets, liabilities, and net
worth of the Undersigned.

     The Undersigned acknowledges and understands that if the Small Business
Administration (SBA) enters into, has entered into, or will enter into, a
Guaranty Agreement, with Lender or any other lending institution, guaranteeing a
portion of Debtor's Liabilities, the Undersigned agrees that it is not a
coguarantor with SBA and shall have no right to contribution against SBA. The
Undersigned further agrees that all liability hereunder shall continue
notwithstanding payment by SBA under its Guaranty Agreement to the other lending
institution.

     The term "Undersigned" as used in this agreement shall mean the signer or
signers of this agreement, and such signers, if more than one, shall be jointly
and severally liable hereunder.  The Undersigned further agrees that all
liability hereunder shall continue notwithstanding the incapacity, lack of
authority, death, or disability of any one or more of the Undersigned, and that
any failure by Lender or its assigns to file or enforce a claim against the
estate of any of the Undersigned shall not operate to release any other of the
Undersigned from liability hereunder. The failure of any other person to sign
this guaranty shall not release or affect the liability of any signer hereof.

                                             /s/ Steve Tsengas
                                             -----------------------------------
                                             STEVE TSENGAS

                                             /s/ Nicholas Tsengas
                                             -----------------------------------
                                             NICHOLAS TSENGAS

                                             /s/ Konstantine Tsengas
                                             -----------------------------------
                                             KONSTANTINE TSENGAS

_____________
     NOTE.--Corporate guarantors must execute guaranty in corporate name, by
duly authorized officer, and seal must be affixed and duly attested; partnership
guarantors must execute guaranty in firm name, together with signature of a
general partner. Formally executed guaranty is to be delivered at the time of
disbursement of loan.

                    (LIST COLLATERAL SECURING THE GUARANTY)<PAGE>

                                                                   EXHIBIT 10.11

                          NATIONAL BANK OF CANADA and
                        NATIONAL CANADA BUSINESS CORP.

         INVENTORY AND ACCOUNTS RECEIVABLE LOAN AND SECURITY AGREEMENT

                                                               November 20, 1998

VIRTU COMPANY, the debtor hereunder (hereinafter called the "Borrower") for
valuable consideration, receipt whereof from NATIONAL BANK OF CANADA ("Bank"), a
commercial banking institution organized and existing under the laws of Canada
with a United States branch office located in New York, New York, and from
NATIONAL CANADA BUSINESS CORP. ("NCBC"), a Delaware corporation having its
principal place of business in New York, New York, with an office located in
Cleveland, Ohio (the Bank and NCBC being herein collectively called the
"Lender") is hereby acknowledged, hereby grants to NCBC (individually and as
agent for Bank) the secured party hereunder, a continuing security interest in
the following (collectively the "Collateral"):

     (a) All of the Borrower's accounts, accounts receivable, chattel paper,
     instruments and other obligations of any kind, whether or not evidenced by
     an instrument or chattel paper, and whether or not it has been earned by
     performance (collectively hereinafter referred to as "Accounts" or
     "Accounts Receivable"), whether now or hereafter existing, arising out of
     or in connection with the sale or lease of goods or the rendering of
     services or otherwise, and all rights now or hereafter existing in and to
     all security agreements, leases and other contracts securing or otherwise
     relating to any such Accounts;

     (b) All of the Borrower's inventory and goods in all of its forms, wherever
     located and whether now or hereafter existing, and all accessions thereto
     and products thereof, including raw materials, materials awaiting
     manufacture, work-in-process, finished products, tangible property, stock
     in trade, wares, packing and shipping materials, goods which have been
     returned to, repossessed by, or stopped in transit by Borrower, materials
     used or consumed in Borrower's business, any documents of title
     representing any of the above, and Borrower's books and records relating to
     any of the foregoing (collectively hereinafter referred to as "Inventory");

     (c) All warehouse receipts, bills of lading and other documents of title of
     every kind and character, now or at any time hereafter evidencing or
     representing all or any part of goods sold in the ordinary course to
     Borrower's customers;

     (d) All claims for tax refunds, whether now existing or hereafter arising,
     of the Borrower against any city, county, state or federal government or
     any agency or authority or other subdivision thereof, and the proceeds
     thereof;

     (e) All contract rights and general intangibles (collectively hereinafter
     referred to as "General Intangibles") of every kind, character and
     description, both now owned and hereafter acquired, including, without
     limitation, goodwill, copyrights, licenses, trademarks, trade styles, trade
     names, patents, patent applications, deposit accounts, blueprints,
     drawings, purchase orders, customer lists, monies due or recoverable from
     pension funds, route lists, infringement claims, computer programs,
     computer discs, computer tapes, literature, reports, catalogs, life
     insurance policies, and insurance premium rebates;

     (f) All books and records (including customer lists, ledger and account
     cards, computer tapes, discs and printouts, and other computer materials
     and records), together with all file cabinets and other containers,
     equipment or furnishings in or on which such books and records are located,
     whether now in existence of hereafter created or acquired;

     (g) All machinery, equipment, furniture, fixtures, molds, vehicles, trucks,
     trailers, rolling stock and other fixed assets whether now in existence or
     hereafter created or acquired; and

     (h) All proceeds ("Proceeds") of every kind and nature of any and all of
     the foregoing Collateral and, to the extent not otherwise included, all
     payments under insurance (whether or not Lender is the loss payee thereof),
     any indemnity, warranty, or guaranty, payable by reason of loss or damage
     to or otherwise with respect to any of the foregoing Collateral, and
     including, without limitation, all monies due or to become due in
     connection with any of the Collateral, guaranties and security for the
     payment of such monies, the right of stoppage in transit, and all returned
     or repossessed goods arising from a sale or lease thereof. (Although
     Proceeds are covered, Lender
<PAGE>

     does not authorize the sale or other transfer of any of the Collateral or
     the transfer of any interest in the Collateral);

in each case, whether now owned or hereafter acquired by the Borrower and
howsoever its interest therein may arise or appear (whether by ownership, lease,
security interest, claim, or otherwise) and in the products and proceeds
thereof.

     The security interest granted hereby is to secure payment and performance
of all debts, liabilities and obligations of Borrower to the Lender hereunder
and also any and all other debts, liabilities and obligations of Borrower to
Lender of every kind and description, direct or indirect, absolute or
contingent, due or to become due, now existing or hereafter arising, including
without limiting the generality of the foregoing, the obligations of Borrower
under the Cognovit Unconditional Guaranty of even date herewith given to Lender,
and any debt, liability or obligation of Borrower to others, which Lender may
have obtained by assignment or otherwise, and further, including, without
limitation, all interest upon any of the foregoing and all fees, charges, and
expenses including reasonable attorney's fees, incurred by Lender in connection
with the foregoing (all hereinafter sometimes collectively called
"Obligations"). Lender's security interest in the Collateral shall attach to all
Collateral without further act on the part of Lender or Borrower.

     1.  BORROWER'S NAME AND PLACES OF BUSINESS. Borrower warrants that Borrower
         --------------------------------------
has no places of business other than that shown at the end of this Agreement,
unless other places of business are listed immediately below, in which event
Borrower represents that it has additional places of business at the following
locations and none other:

         Virtu Company, Highway Auto (Lake Co. Auto Sales and Leasing)
                              1221 Mentor Avenue
                            Painesville, Ohio 44077

The office where Borrower keeps its records concerning its Accounts, General
Intangibles, contract rights and other property, and the Borrower's chief
executive office is located at:

                                 Virtu Company
                               1300 East Street
                          Fairport Harbor, Ohio 44077

All Inventory presently owned by Borrower is or will be stored at the two (2)
locations described immediately above.

Borrower will promptly notify Lender in writing of any change in the location of
any place of business or the location of any Inventory or the establishment of
any new place of business or location of Inventory or chief executive office or
office where its aforesaid records are kept which would be shown in this
Agreement if it were executed after such change.

     Borrower further warrants that its full name is as set forth above and that
it does not do business under any tradename other than Virtu, Inc. and OurPets
Company. Except as set forth below, Borrower did not at any time during the
immediately preceding five years have any name other than its current name or do
business under any tradename other than as set forth above. Borrower's prior
name(s) or tradename(s) during the immediately preceding five years were as
follows:

                                  Virtu, Inc.

     Borrower will give Lender prompt written notice upon Borrower changing its
name or doing business under any tradename(s) other than those currently used by
it and set forth above.

     2.  BORROWER'S ADDITIONAL REPRESENTATIONS AND WARRANTIES. Borrower
         ----------------------------------------------------
represents and warrants to Lender that:

        (a)  Borrower is a corporation duly organized and existing under the
laws of the State of Ohio and is duly qualified and in good standing in every
other state in which it is doing business.

        (b)  The execution, delivery and performance hereof are within the
Borrower's corporate (or other) powers and authority, have been duly authorized,
are not in contravention of law or the terms of the Borrower's charter, by-laws
or other incorporation papers (or other instruments of

                                       2
<PAGE>

organization), or of any indenture, agreement or undertaking to which the
Borrower is a party or by which it or any of its properties may be bound.

        (c) Borrower's charter (or other instruments of organization for
example, Certificate or Articles of Incorporation) and all amendments thereto
have been duly filed and are in proper order. All capital stock (or other equity
interests) issued by Borrower and outstanding was and is properly issued and all
books and records of Borrower, including but not limited to its minute books,
by-laws and books of account, are accurate and up to date and will be so
maintained.

        (d) There are no actions or proceedings pending by or against Borrower
before any court or administrative agency and Borrower has no knowledge or
notice of any pending, threatened or imminent litigation, governmental
investigations, or claims, complaints, actions, or prosecutions involving
Borrower, except for ongoing collection matters in which Borrower is the
plaintiff. If any of the foregoing arise during the term of this Agreement,
Borrower shall promptly notify Lender in writing.

        (e) Borrower has good and marketable title to the Collateral, free and
clear of liens, claims, security interests or encumbrances, except for the
security interests granted to Lender by Borrower, those disclosed in the UCC
searches obtained by Lender, and any security interest which Borrower has
disclosed in writing to Lender and to which Lender has given its prior written
consent.

        (f) Borrower has duly complied with, and its properties, business
operations and leaseholds are in compliance in all material respects with, the
provisions of all federal, state and local laws, rules and regulations
applicable to Borrower, its properties or the conduct of its business,
including, without limitation, all environmental laws and ERISA laws, and there
have been no citations, notices or orders of noncompliance issued to Borrower
under any such law, rule or regulation. Borrower holds all licenses, permits,
franchises, approvals and consents as are required in the conduct of its
business and the ownership and operation of its properties.

        (g) All Accounts represent bona fide sales of goods and/or services for
which Borrower has an unconditional right to payment. None of the Accounts are
subject to any rights of offset, counterclaim, cancellation or contractual
rights of return, not in the ordinary course of business. All Inventory is now
and at all times hereafter shall be of good and merchantable quality, free from
defects.

        (h) All financial statements relating to Borrower which have been or may
hereafter be delivered by Borrower to Lender have been prepared in accordance
with GAAP and fairly present Borrower's financial condition as of the date
thereof and Borrower's results of operations for the period then ended. There
has been no material adverse change in the financial condition of Borrower since
the date of the most recent of such financial statements submitted to Lender.

        (i) Borrower at all times hereafter shall maintain a standard and modern
system of accounting in accordance with GAAP with records pertaining to the
Collateral which contain information as may from time to time be requested by
Lender.

        (j) Borrower is now and shall be at all times hereafter solvent and able
to pay its debts (including trade debts) as they mature.

        (k) Borrower's accounting systems are Year 2000 compliant.

        (l) At the time of closing, after considering required advances for the
repayment of Metropolitan Bank, past due trade payables and all other past due
obligations, Borrower shall have a minimum unused borrowing availability under
this credit facility with Lender of Twenty Five Thousand and 00/l00 Dollars
(U.S. $25,000.00) or an aggregate minimum unused borrowing availability under
this credit facility and Lender's credit facility with Sanar Manufacturing
Company of Fifty Thousand and 00/l00 Dollars (U.S. $50,000.00).

        (m) At the time of closing, Borrower shall have obtained landlord
waivers and mortgagee waivers acceptable to Lender for Borrower's places of
business located in Fairport Harbor, Ohio and Painesville, Ohio.

        (n) At the time of closing, Borrower shall have delivered secured
guaranties acceptable to Lender from Steven Tsengas, OurPet's Company and Sanar
Manufacturing Company.

                                       3
<PAGE>

        (o) Each warranty, representation and agreement contained in this
Agreement shall be automatically deemed repeated with each advance and shall be
conclusively presumed to have been relied on by Lender regardless of any
investigation made or information possessed by Lender. The warranties,
representations and agreements set forth herein shall be cumulative and in
addition to any and all other warranties, representations and agreements which
Borrower shall now or hereafter give, or cause to be given, to Lender.

     3. LOANS. (a) Subject to the terms and provisions of this Agreement, Lender
        -----
will make such loans to Borrower as from time to time Lender elects to make
which are secured by Borrower's Collateral and the proceeds thereof. The
aggregate unpaid principal of all such loans outstanding at any one time shall
not exceed the lesser of (a) One Million and 00/l00 Dollars (U.S. $l,000,000.00)
(the "Advance Limit") or (b) Eighty percent (80.0%) of the unpaid face amount of
Qualified Accounts, as defined below, (or such other percentages thereof as may
from time to time be fixed by the Lender upon notice to Borrower), plus Fifty
percent (50.0%) of the cost or market value, whichever is lower, of all Eligible
Inventory, as defined below, (hereinafter called the "Inventory Value"), but in
no event shall Inventory Value be in excess of Four Hundred Thousand and 00/l00
Dollars (U.S. $400,000.00). The sum produced by applying at any given time the
then prevailing percentages to the Inventory Value and to the total of Qualified
Accounts is herein called the "Borrowing Base". All such loans shall bear
interest, and where appropriate under the Lender's prevailing policy shall bear
a service charge at the rate agreed on from time to time by the parties, which
shall be conclusively evidenced by the Lender's records of disbursements and
repayments. The Borrower's loans are presently evidenced by that certain
Cognovit Secured Revolving Credit Note ("Secured Note") bearing even date
herewith. The unpaid principal balances of the Borrower's loans shall bear
interest from the date hereof upon disbursed and unpaid principal balances
(calculated on the basis of a year of 360 days) at a rate per annum which shall,
from day to day, be equal to Two percent (2.0%) per annum, plus the rate for
commercial loans announced from time to time in the United States as its prime
rate ("Prime Rate") by Bank, each change in the rate to be charged hereon to
become effective, without notice to the Borrower, on the effective date of each
change in the Prime Rate, and interest shall be payable monthly in arrears on
the first day of each month, commencing on the first day of December, 1998. The
Prime Rate is a reference rate and is not necessarily the lowest rate charged by
Lender or Bank for extensions of credit. The Bank's Prime Rate is, as of the
date hereof, Eight percent (8.0%) per annum. Lender may, at its option, add such
interest and all Lender expenses to Borrower's loan account with Lender, which
amounts shall thereafter accrue interest at the rate then applicable under this
Agreement. Lender agrees to reduce the then-applicable interest rate by One-Half
percent (0.50%) at such time, and only for so long as, Borrower and Sanar
Manufacturing Company have achieved net income of Seven Hundred Fifty Thousand
and 00/100 Dollars (U.S. $750,000.00) on a consolidated basis in fiscal year
1999 based upon their CPA-prepared year-end financial statement. All such loans
shall be payable on demand or, if no demand then, on the Termination Date as
that term is defined in the Secured Note. All unpaid principal balances shall
bear interest from and after written notice by Lender to Borrower of the
occurrence of an Event of Default and without constituting a waiver of any such
Event of Default, at the rate of Five percent (5.0%) per annum above the Prime
Rate. Interest shall continue to accrue until all of the Borrower's Obligations
are paid in full.

        (b) Lender is hereby authorized to make the advances provided for in
this Agreement based upon telephonic or other instructions received from anyone
purporting to be an authorized person, or, at the discretion of Lender, if such
advances are necessary to satisfy any Obligations. All requests for advances
hereunder shall specify the date on which the requested advance is to be made
(which day shall be a Business Day, defined as any day which is not a Saturday,
Sunday, or other day on which banks in the State of Ohio are authorized or
required to close) and the amount of the requested advance. Requests received
after 11:00 a.m. Eastern time on any day shall be deemed to have been made as
of the opening of business on the immediately following Business Day. All
advances made under this Agreement shall be conclusively presumed to have been
made to, at the request of, and for the benefit of Borrower when deposited to
the credit of Borrower or otherwise disbursed in accordance with the
instructions of Borrower or in accordance with the terms and conditions of this
Agreement.

        (c) In consideration of Lender's agreement to extend financial
accommodations to Borrower hereunder, Borrower agrees to pay Lender a fee
("Closing Fee") in the amount of Ten Thousand and 00/l00 Dollars (U.S.
$l0,000.00), which shall be fully earned, due and payable upon the execution and
delivery of this Agreement.

        (d) In consideration of Lender's agreement to extend financial
accommodations to Borrower hereunder, Borrower agrees to pay Lender an annual
fee ("Annual Facility Fee") in the amount of One-Half percent (0.50%) of the
Advance Limit, which shall be paid yearly on the anniversary date of

                                       4
<PAGE>

the execution of this Agreement for the term of this Agreement, including all
renewal terms, or so long as any of the Obligations are outstanding.

        (e)    If the average outstanding daily principal balance of all loans
by Lender to Borrower shall be less than the Advance Limit in any calendar
month, Borrower shall pay to Lender on the first (1st) day of the next
succeeding calendar month a fee ("Unused Line Fee") equal to One-Half percent
(0.50%) per annum of the amount on any day by which the Advance Limit exceeds
the daily principal balance of all such loans. Such fee shall be calculated on
the basis of a three hundred sixty (360) day year for the actual number of days
elapsed.

        (f)    Borrower agrees to pay Lender a fee ("Collateral Management Fee")
in an amount equal to Two Hundred and 00/100 Dollars (U.S. $200.00) on or before
the first (1st) day of each calendar month, in respect of Lender's services for
the preceding calendar month, during the term of this Agreement, including all
renewal terms or so long as any of the Obligations are outstanding.

        (g)    Borrower and Sanar Manufacturing Company agree to pay Lender a
combined, aggregate fee ("Audit Fee") in an amount equal to Six Hundred and
00/100 Dollars (U.S. $600.00) per day per auditor, plus out-of-pocket expenses
for each audit or examination of Borrower performed by Lender. Borrower
acknowledges and agrees that Lender will conduct audits prior to closing and at
least quarterly thereafter.

        (h)    If Borrower fails to cure any reporting deficiency within fifteen
(15) days of notification thereof by Lender, Borrower agrees to pay Lender a fee
("Late Reporting Fee") in an amount equal to Fifty and 00/100 Dollars (U.S.
$50.00) per document per day for each Business Day any report, financial
statement or schedule required by this Agreement to be delivered to Lender is
past due.

     4. DEFINITION OF QUALIFIED ACCOUNT; ELIGIBLE INVENTORY. The term "Qualified
        ---------------------------------------------------
Account", as used herein, means an Account owing to Borrower which met the
following specifications at the time it came into existence and continues to
meet the same until it is collected in full:

        (a)    Not more than ninety (90) days have elapsed since the invoice
date of such Account, unless otherwise extended terms of sale exist.

        (b)    The Account arose from the performance of services or an outright
sale of goods by Borrower, such goods have been shipped to the Account debtor,
and Borrower has possession of, or has delivered to Lender shipping and delivery
receipts evidencing such shipment.

        (c)    The Account is not subject to any prior assignment, claim, lien,
or security interest, and Borrower will not make any further assignment thereof
or create any further security interest therein, nor permit Borrower's rights
therein to be reached by attachment, levy, garnishment or other judicial
process.

        (d)    The Account is not subject to set-off, credit, allowance or
adjustment by the Account debtor, except for a discount allowed for prompt
payment, and the Account debtor has not complained as to his liability thereon
and has not returned any of the goods from the sale of which the Account arose.

        (e)    The Account arose in the ordinary course of Borrower's business
and did not arise from the performance of services or a sale of goods to a
Related Person (a "Related Person" being defined as an officer, director,
shareholder, employee, agent, subsidiary, parent, affiliate or supplier of the
Borrower) or any officer, director, employee or agent of a Related Person.

        (f)    No notice of bankruptcy, insolvency or financial embarrassment of
the Account debtor has been received by or is known to the Borrower.

        (g)    Lender has not notified Borrower that the Account or Account
debtor is unsatisfactory to Lender in Lender's exclusive discretion.

        (h)    The Account is an Account in which Lender holds a valid,
perfected first security interest.

        (i)    Unless there has been a valid assignment of the Account to Lender
pursuant to the Federal Assignment of Claims Act, the Account debtor is not a
governmental entity.

                                       5
<PAGE>

        (j)    The Account debtor is a resident of the United States or Canada.

        (k)    The Account debtor's total obligations to Borrower do not exceed
Twenty percent (20%) of all Accounts, except that none of PetsMart, Pet Co.,
WalMart and Target's separate total obligations to Borrower shall individually
exceed Fifty percent (50.0%) of all of Borrower's Accounts; and (ii) the
respective obligations of PetsMart, Pet Co., WalMart and Target to Borrower and
Sanar Manufacturing Company shall not exceed Twenty-Five percent (25.0%) of all
of Borrower's and Sanar's Accounts on a consolidated basis.

        (l)    The Account is not an Account owed by any Account debtor that has
failed to pay Twenty-Five percent (25.0%) or more of its Accounts owed to
Borrower within ninety (90) days of invoice date.

        (m)    The Account is not a contra account and is not comprised of
finance charges, chargebacks, unearned income or sales on consignment; nor is
the Account subject to progress billing.

        (n)    The Account constitutes acceptable collateral to Lender, in its
sole discretion.

     The term "Eligible Inventory", as used herein, means Borrower's Inventory,
first quality consisting of colorant and/or resin raw materials only and
finished goods held for manufacture, sale or resale in the ordinary course of
Borrower's business which is located at Borrower's premises and acceptable to
Lender in all respects. General criteria for Eligible Inventory may be
established and revised from time to time by Lender in Lender's exclusive
discretion. In determining such acceptability, Lender may, but need not, rely on
reports and schedules of Inventory furnished to Lender by Borrower, but reliance
thereon by Lender from time to time shall not be deemed to limit Lender's right
to revise standards of eligibility at any time. In general, except in Lender's
sole discretion, Eligible Inventory shall not include work in process, goods in
transit, components which are not part of finished goods, spare parts, packaging
and shipping materials, supplies used or consumed in Borrower's business, and
further Eligible Inventory shall not include Inventory at the premises of third
parties or subject to a security interest or lien in favor of any third party,
bill and hold goods, Inventory which is not subject to Lender's perfected
security interest, returned and/or defective goods, "seconds" and Inventory
purchased on consignment. Eligible Inventory shall be valued at the lower of
cost or wholesale market value in accordance with a "first in first out" cost
accounting system.

     5. COLLECTIONS; NOTICE OF ASSIGNMENT; EXPENSES.
        -------------------------------------------

        (a)    Borrower will immediately upon receipt of all checks, drafts,
cash and other remittances (collectively, "Remittances") in payment of any
Inventory sold or in payment or on account of Borrower's Accounts, contracts,
contract rights, notes, bills, drafts, acceptances, General Intangibles, choses
in action and all other forms of obligations, deliver the same to the Lender in
the same form received, except for endorsement of Borrower where necessary to
permit collection of items, which endorsement Borrower agrees to make. All
Remittances shall be delivered to Lender for deposit to Lender's cash collateral
account, an account maintained by Lender with National City Bank or successor
pursuant to a cash collateral deposit account agreement in form and substance
satisfactory to Lender. The funds in the cash collateral account, over which
Lender alone shall have power of application or withdrawal, will be at the
location designated in the Tri-Party Lockbox and Depository Agreement and shall
be applied in whole or in part against the principal or interest of any loans
secured hereby. The receipt of such items of payment shall be deemed to have
been paid to Lender two (2) Business Days after the date Lender actually
receives receipt of such item of payment. Notwithstanding anything to the
contrary contained herein, payments received by Lender after 11:00 a.m. Eastern
time shall be deemed to have been received by Lender as of the opening of
business on the immediately following Business Day. The order and method of such
application shall be in the sole discretion of Lender, and any portion of such
funds which the Lender elects not so to apply and deems not required as
Collateral may be paid over from time to time by Lender to Borrower.

        (b)    Any and all deposits or other sums at any time credited by or due
from Lender to Borrower, whether in Borrower's disbursement account or other
accounts, shall at all times constitute additional security for all of the
Obligations and may be set-off by the Lender in its sole discretion against any
Obligations at any time whether or not they are then due, or other security held
by Lender is considered by Lender to be adequate. Any and all instruments,
documents, policies and certificates of insurance, securities, goods, accounts,
choses in action, general intangibles, chattel paper, cash, property and the
proceeds thereof (whether or not the same are Collateral or proceeds thereof
hereunder) owned by Borrower or in which Borrower has an interest, which now or
hereafter are at any time in possession

                                       6
<PAGE>

or control of Lender or in transit by mail or carrier to or from Lender or in
the possession of any third party acting in Lender's behalf, without regard to
whether Lender received the same in pledge, for safekeeping, as agent for
collection or transmission or otherwise or whether Lender has conditionally
released the same, shall constitute additional security for the Obligations and
may be applied by the Lender in its sole discretion at any time to Obligations
which are then owing, whether due or not due.

          (c)  The Lender or the Lender's designee may at any time, with or
without notice to Borrower, notify customers or Account debtors that Collateral
has been assigned to Lender and that payments shall be made directly to Lender.
Upon request of Lender at any time, Borrower will so notify such Account debtors
and will indicate on all billings to such Account debtors that their Accounts
must be paid to Lender. The Lender shall have full power to collect, compromise,
endorse, sell or otherwise deal with the Collateral or proceeds thereof in its
own name or in the name of the Borrower. Borrower shall pay to Lender on demand
any and all reasonable counsel fees and other expenses incurred by the Lender in
connection with the preparation or enforcement of this Agreement, documents
relating thereto or modifications thereof, and any and all expenses, including,
but not limited to, a collection charge on all Accounts collected, all
attorneys' fees and expenses, and all other expenses of like or unlike nature
which may be expended by the Lender to obtain or enforce payment of any Account
either as against the Account debtor, Borrower or any guarantor or surety of
Borrower or in the prosecution or defense of any action or concerning any matter
growing out of or connected with the subject matter of this Agreement, the
Obligations or the Collateral or any of Lender's rights or interests therein or
thereto, including, without limiting the generality of the foregoing, any
counsel fees or expenses incurred in any bankruptcy or insolvency proceedings.

          (d)  Borrower does hereby make, constitute and appoint any officer or
agent of Lender as Borrower's true and lawful attorney-in-fact, with power to
endorse the name of Borrower or any of Borrower's officers or agents upon any
notes, checks, drafts, money orders, or other instruments of payment (including
payments payable under any policy of insurance on the Collateral) or Collateral
that may come into possession of the Lender in full or part payment of any
amounts owing to Lender, to sign and endorse the name of Borrower or any of
Borrower's officers or agents upon any invoice, freight or express bill, bill of
lading, storage or warehouse receipts, drafts against debtors, assignments,
verifications and notices in connection with Accounts, and any instrument or
document relating thereto or to Borrower's rights therein; to give written
notice to such office and offices of the United States Post Office to effect
such change or changes of address so that all mail addressed to Borrower may be
delivered directly to Lender, hereby granting to Borrower's said attorney full
power to do any and all things necessary or desirable to be done in and about
the premises as fully and effectually as Borrower might or could do, and hereby
ratifying all that said attorney shall lawfully do or cause to be done by virtue
hereof. This power of attorney shall be coupled with an interest and thus be
irrevocable for the term of this Agreement and all transactions hereunder and
thereafter for as long as Borrower may be indebted or obligated to Lender.

     6.   FINANCING STATEMENTS/OTHER REQUIRED BORROWER ACTIONS. At the request
          ----------------------------------------------------
of Lender, Borrower will execute one or more Financing Statements pursuant to
the Uniform Commercial Code or other notices appropriate under applicable law in
form satisfactory to Lender and will pay the cost of filing the same in all
public offices wherever filing is deemed by Lender to be necessary or desirable.
Borrower authorizes Lender to file Financing Statements with respect to the
Collateral naming the Borrower as debtor and to sign the Borrower's name
thereto. Further, Borrower shall perform any and all steps and take all actions
requested by Lender from time to time to perfect, maintain, protect, and enforce
Lender's security interest in the Collateral, including executing and delivering
all appropriate documents and instruments as Lender may determine are necessary
to perfect preserve, or enforce Lender's interest in the Collateral, including
financing statements, certificates of title and all other evidence of title, all
in form and substance reasonably satisfactory to Lender.

     7.   BORROWER'S REPORTS.
          ------------------

          (a)  Borrower shall, from time to time hereafter, but not less often
than monthly, execute and deliver to Lender, no later than the fifteenth (15th)
day of each month during the term of this Agreement, a detailed aging of the
Accounts, a perpetual inventory report, a Period End Accounts Receivable and
Loan Reconciliation report, a summary aging, by vendor, of all accounts payable
and any book overdraft. Borrower shall deliver to Lender, as Lender may from
time to time require, collection reports, sales journals, invoices in excess of
Twenty Thousand and 00/l00 Dollars (U.S. $20,000.00), original delivery
receipts, customers' purchase orders, shipping instructions, bills of lading and
other documentation respecting shipment arrangements. Absent such a request by
Lender, copies of all such documentation shall be held by Borrower as custodian
for Lender.

                                        7
<PAGE>

          (b)  At the time of each borrowing hereunder, Borrower will execute
and deliver to Lender a Borrowing Base Certificate, on a form supplied by
Lender.

          (c)  Borrower shall now and from time to time hereafter, but not less
frequently than monthly, execute and deliver to Lender a designation of
Inventory specifying Borrower's cost and the wholesale market value of
Borrower's raw materials, work in process and finished good, and further
specifying such other information as Lender may reasonably request.

          (d)  Borrower will furnish Lender, within thirty (30) days after the
close of each monthly period of Borrower's fiscal year, a balance sheet and
statement of profit and loss reflecting the financial condition of Borrower at
the end of such period and the results of its operations during such period and
for the year to date, such balance sheet and statement of profit and loss to be
certified by Borrower's President or Treasurer to fairly and accurately present
the financial condition at the end of such period and the results of its
operations during such period in accordance with generally accepted accounting
principles, consistently applied.

          (e)  Borrower will furnish Lender annually, within one hundred and
twenty (120) days after the close of Borrower's fiscal year, a full and complete
signed copy of a reviewed report or reports, issued by independent certified
public accountants acceptable to Lender, which report or reports shall include
balance sheets of Borrower as at the end of such year and a statement of profit
and loss of Borrower reflecting its operations during such year and the
accountants' letter to management, such report or reports to be prepared in
accordance with generally accepted accounting principles, consistently applied,
and to bear the certificate of such certified public accountants.

     8.   GENERAL AGREEMENTS OF BORROWER.
          ------------------------------

          (a)  Borrower, at its expense, shall keep and maintain the Collateral
insured against all risk of loss or damage from fire, theft, vandalism,
malicious mischief, explosion, sprinklers, and all other hazards and risks of
physical damage included within the meaning of the term "extended coverage" in
such amounts as are ordinarily insured against by other owners in similar
businesses. Borrower shall also keep and maintain comprehensive general public
liability insurance and property damage insurance, and insurance against loss
from business interruption, insuring against all risks relating to or arising
from Borrower's ownership and use of the Collateral and Borrower's other assets
and the operation of Borrower's business. Borrower has provided copies of its
insurance policies to Lender. All such policies of insurance shall be in such
form, with such companies and in such amounts as may be satisfactory to Lender.
Borrower shall deliver to Lender certified copies of such policies of insurance
and evidence of the payments of all premiums therefor. All such policies of
insurance (except those of public liability and property damage) shall contain a
Lender's Loss Payable indorsement in a form satisfactory to Lender, naming
Lender as sole Lender loss payee thereof to the extent of the Obligations, and
containing a waiver of warranties, and all proceeds payable thereunder shall be
payable to Lender to be applied to the Obligations. As further assurance for the
payment and performance of the Obligations. Borrower hereby assigns to Lender
all sums, including return or unreturned premiums, which may become payable
under any policy of insurance on the Collateral and Borrower hereby directs each
insurance company issuing any such policy to make payment of such sums directly
to Lender. The Lender or its agents have the right to inspect the Inventory and
all records pertaining thereto at intervals to be determined by Lender and
without hindrance or delay. Although, as above set forth, Lender has a
continuing security interest in all of Borrower's Inventory and existing and
future Accounts and other Collateral and in the proceeds thereof, Borrower will
at all times maintain as the minimum security hereunder a Borrowing Base not
less than the aggregate unpaid principal of all loans made hereunder, and if
Borrower fails to do so, Borrower will immediately make the necessary reduction
in the unpaid principal amount of said loans. All such policies of insurance
shall provide that the same shall nor be cancelled or the amount of coverage
thereunder reduced, without thirty (30) days prior written notice thereof to the
Lender.

          (b)  Borrower will at all times keep accurate and complete records of
Borrower's Inventory, Accounts and other Collateral, and Lender, or any of its
agents, shall have the right to call at Borrower's place or places of business
during Borrower's usual business hours, or during the usual business hours of
any third party having control over the records of Borrower, at intervals to be
determined by Lender, and without hindrance or delay, to inspect, audit, check
and make extracts from any copies of the books, records, journals, orders,
receipts and/or correspondence which relate to Borrower's Accounts and other
Collateral or other transactions between the parties thereto, and the general
financial condition of Borrower, and Lender may remove any of such records
temporarily for the purpose of having copies made thereof.

                                        8
<PAGE>

        (c) Borrower, during the term of this Agreement, will not assign any
Accounts or other Collateral to any other party, nor create or permit to be
created any lien, encumbrance or security interest of any kind against any
Collateral, including any of its Accounts and Inventory other than for the
benefit of the Lender.

        (d) Borrower will comply with, and its properties, business operations
and leaseholds will be in compliance in all material respects with, the
provisions of all federal, state and local laws, rules and regulations
applicable to Borrower, its properties or the conduct of its business,
including, without limitation all environmental laws.

        (e) Borrower will pay all real and personal property taxes, assessments
and charges and all franchise, income, unemployment, old age benefits,
withholding, sales and other taxes assessed against it, or payable by it at such
times and in such manner as to prevent any penalty from accruing or any lien or
charge from attaching to its property.

        (f) Borrower will neither declare nor pay dividends either in cash or
kind on any class of its capital stock nor make any distribution on account of
its stock, nor redeem, retire, purchase or otherwise acquire directly or
indirectly any of its stock, whether now or hereafter outstanding, except to
OurPet's Company or as expressly permitted in writing by Lender.

        (g) Borrower will not make any loan or advance to any individual, firm
or corporation, including without limitation any Related Person; provided,
however, that Borrower may make advances to its employees, including its
officers, with respect to reasonable and customary expenses incurred by such
employees which expenses are reimbursable by Borrower.

        (h) Borrower will not invest in or purchase any stock or securities of
any individual, firm, corporation or other person.

        (i) Borrower will not merge or consolidate with or be merged or
consolidated with or into any other corporation or other person, other than the
contemplated transaction consolidating Borrower and Sanar Manufacturing Company
into OurPet's Company, upon not less than thirty (30) days advance written
notice to Lender.

        (j) Borrower will not sell or dispose of any of its assets except in the
ordinary and usual course of its business, nor will it acquire substantially all
of the assets of another.

        (k) Borrower will not enter into any agreements of guaranty, indemnity
or indemnification of the obligations of any individual, partnership, trust,
limited liability company, other corporation or other person, including any
affiliate or subsidiary corporations, except for the transactions contemplated
hereby.

        (1) The Lender may in its own name or in the name of others communicate
with Account debtors in order to verify with them to Lender's satisfaction the
existence, amount and terms of any Accounts or contract rights.

        (m) This Agreement may but need not be supplemented by separate
assignments of accounts and if such assignments are given the rights and
security interests given thereby shall be in addition to and not in limitation
of the rights and security interests given by this Agreement.

        (n) If any of Borrower's Accounts arise out of contracts with the United
States or any department, agency, or instrumentality thereof, Borrower will
immediately notify Lender thereof in writing and execute any instruments and
take any action required by Lender in order that all monies due and to become
due under such contracts shall be assigned to Lender and notice thereof given to
the appropriate governmental agency or authority under the Federal Assignment of
Claims Act.

        (o) If any of Borrower's Accounts should be evidenced by promissory
notes, trade acceptances, or other instruments for the payment of money,
Borrower will immediately deliver same to Lender, appropriately endorsed to
Lender's order and, regardless of the form of such endorsement. Borrower hereby
waives presentment, demand, notice of dishonor, protest and notice of protest
and all other notices with respect thereto.

        (p) Borrower will promptly pay when due all taxes and assessments upon
the Collateral or for its use or operation or upon this Security Agreement, or
upon any note or notes evidencing the Obligations, and will, at the request of
Lender, promptly furnish Lender the receipted bills

                                       9
<PAGE>

therefor. At its option, Lender may discharge taxes, liens or security interests
or other encumbrances at any time levied or placed on the Collateral, may pay
for insurance on the Collateral and may pay for the maintenance and preservation
of the Collateral. Borrower agrees to reimburse Lender on demand for any
payments made, or any expenses incurred, by Lender pursuant to the foregoing
authorization, and any such sums paid or advanced by Lender shall be deemed
secured by the Collateral and constitute part of the Obligations.

        (q) Borrower will not pay to its officers and directors aggregate
compensation, including salaries, withdrawals, fees, bonuses, commissions,
drawing accounts, management fees or other payments, whether directly or
indirectly, in money or otherwise, in any fiscal year which exceeds Two Hundred
and Fifty Thousand and 00/100 Dollars (U.S. $250,000.00). Management fees shall
not exceed Ten percent (10.0%) of gross revenues on an annual basis.

        (r) Borrower shall keep and maintain its equipment in good operating
condition and repair, and shall make all necessary replacements thereto so that
the value and operating efficiency thereof shall at all times be maintained and
preserved. Borrower shall not permit any item of equipment to become a fixture
to real estate or an accession to other property, and the equipment is now and
shall at all times remain personal property.

        (s) All payments hereunder and under the other Loan Documents made by or
on behalf of Borrower shall be made without offset or counterclaim, and Borrower
hereby waives any right to offset, against the repayment of the Obligations, any
claims it may have against Lender.

        (t) Borrower shall immediately and without demand reimburse Lender for
all sums expended by Lender which constitute Lender Expenses and Borrower hereby
authorizes and approves all advances and payments by Lender for items
constituting Lender Expenses. Lender Expenses means all of the following: costs
and expenses (whether taxes, assessments, insurance premiums or otherwise)
required to be paid by Borrower under any of the Loan Documents which are paid
or advanced by Lender, filing, recording, publication, appraisal and search fees
paid or incurred by Lender in connection with Lender's transactions with
Borrower; costs and expenses incurred by Lender in the disbursement or
collection of funds to or from Borrower; charges resulting from the dishonor of
checks; costs and expenses incurred by Lender to correct any default or enforce
any provision of the Loan Documents, or in gaining possession of, maintaining,
handling, preserving, storing, shipping, selling, preparing for sale, or
advertising to sell the Collateral, or any portion thereof, irrespective of
whether a sale is consummated; and costs and expenses incurred by Lender in
enforcing or defending the Loan Documents, including, but not limited to, costs
and expenses incurred in connection with any proceeding; suit, enforcement of
judgment or appeal; and Lender's reasonable attorneys' fees and expenses
incurred in advising, structuring, drafting, reviewing, administering, amending,
terminating, enforcing, defending, or otherwise representing Lender concerning
the Loan Documents or Borrower's Obligations to Lender.

        (u) Borrower will not make any change in Borrower's financial structure
or restructure any of its business operations. Borrower will provide Lender with
sixty (60) days advance notice of any proposed material change in its ownership
structure or in the ownership structure of OurPet's Company.

        (v) Borrower will not prepay any existing indebtedness owing to any
third party.

        (w) Borrower will not suspend or go out of business, except due to
events of force majeure. Borrower represents that it shall maintain appropriate
levels of business interruption insurance to cover such events and satisfy the
Obligations.

        (x) Borrower will not make any plant or fixed capital expenditure, or
any commitment therefor, or purchase or lease any real or personal property or
replacement equipment in excess of One Hundred Thousand and 00/100 Dollars (U.S.
$100,000.00) for any individual transaction or where the aggregate amount of
such transactions in any fiscal year is in excess of Two Hundred Thousand and
00/100 Dollars (U.S. $200,000.00).

        (y) Borrower will not modify or change its method of accounting or enter
into, modify or terminate any agreement presently existing or at any time
hereafter entered into with any third party accounting firm or service bureau
for the preparation or storage of Borrower's accounting records without said
accounting firm or service bureau agreeing to provide Lender information
regarding the Collateral or Borrower's financial condition. Borrower waives the
right to assert a confidential relationship, if any, it may have with any
accounting firm or service bureau in connection with any information requested
by Lender pursuant to or in accordance with this Agreement, and agrees that

                                       10
<PAGE>

Lender may contact directly any such accounting firm or service bureau in order
to obtain such information.

     9.   DEFAULT; REMEDIES UPON DEFAULT; ETC.
          ------------------------------------

          (a)   In addition to and not in derogation of the right of Lender to
demand payment of all Obligations payable on demand, if Borrower shall fail to
pay, when due, any of the Obligations or shall fail to observe or perform any of
the provisions of this Agreement or any other agreement now or hereafter entered
into between Lender and Borrower, or if Borrower shall cause, permit or suffer
any change, direct or indirect, in Borrower's capital ownership in excess of ten
percent (10%), or if any Guarantor shall terminate its guaranty of Borrower's
Obligations or if any Guarantor becomes the subject of an insolvency proceeding
or fails to observe or perform any of the provisions of its guaranty, Borrower
shall be in default hereunder. Other events of default include an insolvency
proceeding commenced by Borrower, an insolvency proceeding commenced against
Borrower; an injunction against Borrower whereby Borrower is enjoined,
restrained or in any way prevented by court order from continuing to conduct all
or any material part of its business affairs; a levy or attachment whereby any
material portion of Borrower's assets is attached, seized, subjected to a writ
or distress warrant, or is levied upon, or comes into the possession of any
judicial officer or assignee; a material impairment of the prospect of repayment
of any portion of the Obligations owing to Lender or a material impairment of
the value or priority of Lender's security interests in the Collateral; a
misrepresentation or misstatement of Collateral or otherwise by Borrower or any
officer, employee, agent or director of Borrower to Lender; a material adverse
change in Borrower's business or financial condition; a judgment entered against
Borrower, a default in any material agreement to which Borrower is a party or by
which Borrower or Borrower's property or assets are bound; and/or Borrower makes
any payment on account of indebtedness which has been subordinated to the
Obligations except to the extent such payment is allowed under any Subordination
Agreement entered into with Lender; any event of default should occur under the
Cognovit Secured Revolving Credit Note, Cognovit Secured Term Note, Cap Ex
Notes, Inventory and Accounts Receivable Loan and Security Agreement, and/or
other documents and instruments executed in conjunction therewith on or about
November 20, 1998 by and between Lender and Sanar Manufacturing Company and/or
its parents or affiliates; and/or any of event of default should occur under the
Cognovit Unconditional Guaranty, Security Agreement [Pledged Collateral],
Security Agreement, and/or other documents and instruments executed in
conjunction therewith on or about November 20, 1998 by and between Lender and
OurPet's Company and/or its affiliates. In the event of such default or if
Lender shall deem itself insecure, all Obligations of Borrower to Lender shall
become immediately due and payable at the option of Lender without notice to
Borrower, and Lender may proceed to enforce payment of the same and to exercise
any and all of the rights and remedies afforded to Lender by the Uniform
Commercial Code or under the terms of this Agreement or otherwise.

          (b)  Upon the occurrence of an event of default Lender may also, at
its election, without notice of its election and without demand, do any one or
more of the following, all of which are authorized by Borrower: (i) cease
advancing money or extending credit to or for the benefit of Borrower under the
Loan Documents or under any other agreement between Borrower and Lender, (ii)
terminate this Agreement as to any future liability or obligation of Lender, but
without affecting Lender's rights and security interests in the Collateral and
without affecting the Obligations; (iii) settle or adjust disputes and claims
directly with Account debtors for amounts and upon terms which Lender considers
advisable and, in such cases, Lender will credit Borrower's loan account with
only the net amounts received by Lender in payment of such disputed Accounts,
after deducting all Lender Expenses incurred or expended in connection
therewith; (iv) enter any premises where the Collateral is located, to take and
maintain possession of the Collateral, or any part of it, and to pay, purchase,
contest or compromise any encumbrance, charge or lien which in Lender's
determination appears to be prior or superior to its security interest and to
pay all expenses incurred in connection therewith; and (v) ship, reclaim,
recover, store, finish, maintain, repair, prepare for sale, advertise for sale
and sell (in the manner provided for herein) the Collateral. Lender is hereby
granted a license or other right to use, without charge, Borrower's labels,
patents, copyrights, rights of use of any name, trade secrets, trade names,
trademarks, service marks, and advertising matter, or any property of a similar
nature, as it pertains to the Collateral, in completing production of,
advertising for sale and selling any Collateral. Borrower's rights under all
licenses and all franchise agreements shall inure to Lender's benefit.

          (c)  If Lender takes possession of the Collateral without prior notice
of Borrower, Lender will within five days deliver notice to Borrower personally,
or send to Borrower by certified mail to Borrower's last known address notice of
such taking of possession as may be required by law. Not less than ten days
prior to any sale or other intended disposition of the Collateral, Lender will
deliver or mail to Borrower notice of the time and place of any public sale or
of the time after which any private sale or other intended disposition of the
Collateral or any portion thereof, is to be made and such notice

                                       11
<PAGE>

shall be deemed reasonable. Such notices may at Lender's option be combined.
NCBC and/or Bank may be the purchaser at any sale of the Collateral. When
authorized to do so under applicable law, the Lender may, at its option, retain
the Collateral in satisfaction of the Obligations.

          (d)  The Collateral and all proceeds and products thereof shall be
security for all Obligations. Until all Obligations have been fully satisfied,
Lender's security interest in the Collateral and all proceeds and products
thereof shall continue in full force and effect and Lender will at all times
have the right to take physical possession of the Collateral and to maintain
such possession on Borrower's premises or to remove the Collateral or any part
thereof to such other places as Lender may desire. If Lender exercises Lender's
right to take possession of the Collateral, Borrower shall, upon Lender's
demand, assemble the Collateral and make it available to Lender at a place
designated by Lender and reasonably convenient to both parties.

          (e)  Borrower shall perform any and all steps requested by Lender to
perfect Lender's security interest in the Collateral and to protect same,
including, but not limited to, leasing warehouses to Lender or its designee,
placing and maintaining signs, appointing custodians, executing and filing
financing or continuation statements in form and substance satisfactory to
Lender and delivering documents or other instruments of title to Lender. If any
Collateral is in the possession or control of any of Borrower's agents or
processors, Borrower shall notify such agents or processors of Lender's interest
therein, and upon request instruct them to hold all such Collateral for Lender's
account and subject to Lender's instructions. A listing of all Collateral,
wherever located, shall be taken by Borrower at least every three (3) months and
whenever requested by Bank, and a copy of each such listing shall be supplied to
Lender. Lender may examine and inspect the Collateral at any time.

          (f)  If in the event of the sale of the Collateral the proceeds
thereof are insufficient to pay all amounts to which Lender is legally entitled,
Borrower will be liable for the deficiency, together with interest thereon and
the reasonable fees of any attorney employed by Lender to collect such
deficiency. Any excess will be remitted without interest by Lender to the party
or parties legally entitled to such excess.

          (g)  This Agreement shall not be construed to be in limitation of or
in substitution for any other grant of security interest from Borrower to Lender
made prior to, subsequent to or contemporaneously herewith, and no such other
grant of a security interest shall be construed to be in limitation of or in
substitution of this Agreement unless expressly and specifically provided
therein.

          (h)  At the option of the Lender, Borrower will furnish to Lender,
from time to time, within five (5) days after the accrual in accordance with
applicable law of Borrower's obligation to make deposits for FICA and
withholding taxes, proof satisfactory to Lender that such deposits have been
made as required. Should Borrower fail to make any of such deposits or furnish
such proof then Lender may, in its so1e and absolute discretion, (a) make any of
such deposits or any part thereof, (b) pay such taxes, or any part thereof, or
(c) set-up such reserves as Lender, in its judgment, shall deem necessary to
satisfy the liability for such taxes. Each amount so deposited or paid shall
constitute an advance under the terms hereof, repayable on demand with interest,
as provided herein, and secured by all Collateral at any time pledged by
Borrower to Lender. Nothing herein shall be deemed to obligate Lender to make
any such deposit or payment or set-up such reserve and the making of one or more
of such deposits or payments or the setting-up of such reserve shall not
constitute (i) an agreement on Lender's part to take any further or similar
action, or (ii) a waiver of any default by Borrower under the terms hereof.

          (i)  All advances by Lender to Borrower under this Agreement and under
any other agreement constitute one general revolving fluctuating loan, and all
indebtedness of Borrower to Lender under this and under any other agreement
shall constitute one general Obligation. Each advance to Borrower hereunder or
otherwise shall be made upon the security of all of the Collateral held and to
be held by Lender. It is distinctly understood and agreed that all of the
rights of Lender contained in this Agreement shall likewise apply, insofar as
applicable, to any modification of or supplement to this Agreement and to any
other agreements between Lender and Borrower. Any default of this Agreement by
Borrower shall constitute, likewise, a default by Borrower under any other
agreement with Lender, and any default by Borrower of any other agreement with
Lender shall constitute a default under this Agreement. The entire Obligations
of Borrower to Lender shall become due and payable when payments become due and
payable hereunder, or otherwise upon default by Borrower, or upon demand by
notice or otherwise.

          (j)  Borrower hereby grants to Lender for a term to commence on the
date of this Agreement and continuing thereafter until all debts and Obligations
of any kind or character owing from Borrower to Lender are fully paid and
discharged, the right to use of all premises or places of business

                                       12
<PAGE>

which Borrower presently has or may hereafter have and where any of said
Collateral may be located, at a total rental for the entire period as set forth
in the landlord waivers executed in conjunction herewith. Lender agrees not to
exercise the rights granted in this paragraph unless and until Lender determines
to exercise its rights against the Collateral herein described.

     10.  PROCESSING AND SALES OF INVENTORY. So long as Borrower is not in
          ---------------------------------
default hereunder, Borrower shall have the right, in the regular course of
business, to process and sell Borrower's Inventory. A sale in the ordinary
course of business shall not include a transfer in total or partial satisfaction
of a debt. Borrower shall not consign any Inventory.

     11.  OBLIGATIONS CONTINUING. The obligations of Borrower under this
          ----------------------
Agreement shall commence with the date hereof and continue in full force and
effect and be binding upon the Borrower until all Obligations of Borrower to
Lender shall have been fully paid and satisfied, and until so paid and
satisfied, Borrower shall continue to make all reports required hereby and to
remit all collections to Lender, as herein provided, and Lender shall be
entitled to retain its security interest in all existing and future Accounts,
Inventory and other Collateral.

     12.  INDEMNITY. Borrower hereby agrees to indemnify Lender and hold Lender
          ---------
harmless from and against any liability, loss, damage, suit, action or
proceeding ever suffered or incurred by Lender as the result of Borrower's
failure to observe, perform or discharge Borrower's duties hereunder. Without
limiting the generality of the foregoing, this indemnity shall extend to any
claims asserted against Lender by any person under any environmental laws or
similar laws by reason of Borrower's or any other person's failure to comply
with laws applicable to solid or hazardous waste materials or other toxic
substances. Notwithstanding any contrary provision of this Agreement, the
obligation of Borrower under this Section 12 shall survive the payment in full
of the Obligations and the termination of this Agreement.

     13.  OTHER PROVISIONS.
          ----------------

          (a)  No delay or omission on the part of Lender in exercising any
rights shall operate as a waiver of such right or any other right. Waiver on any
one occasion shall not be construed as a bar to or waiver of any right or remedy
on any future occasion. All Lender's rights and remedies, whether evidenced
hereby or by any other agreement, instrument or paper, shall be cumulative and
may be exercised consecutively or concurrently. This Agreement may not be
amended or modified, except by an instrument or modification executed by Lender
and Borrower.

          (b)  Lender is authorized to make loans under the terms of this
Agreement to Borrower upon the request, either written or oral, of any of the
following named persons, or persons, from time to time, holding the following
offices of Borrower:

     Steven Tsengas              --  Chairman of the Board, President and Chief
                                     Executive Officer
     Konstantine (Dean) Tsengas  --  Secretary and Treasurer

          (c)  Borrower agrees that any and all loans made by Lender to Borrower
or for its account under this Agreement shall be conclusively deemed to have
been authorized by Borrower and to have been made pursuant to duly authorized
requests therefor on its behalf.

          (d)  Additional Provisions. Borrower furthermore agrees to the
following additional provisions:

               (i)  Within sixty (60) days of the date of this Agreement,
          Borrower shall have delivered to Lender all documents requested by
          Lender necessary to perfect Lender's security interest in Borrower's
          trademarks, patents and like intellectual property rights and
          interests; and

               (ii) All loans from Lender to Borrower and to Sanar Manufacturing
          Company, and all guaranties thereof by OurPet's Company, shall be
          cross-defaulted, cross-collateralized and co-terminous, with the
          effect that any default by Borrower under this Agreement and the
          agreements, instruments and documents executed in conjunction herewith
          shall constitute a default under Lender's agreements, instruments and
          other documents with Sanar Manufacturing Company and OurPet's Company.
          Likewise, any default by Sanar Manufacturing Company and/or OurPet's
          Company under their respective agreements, instruments and documents
          with Lender shall constitute a default

                                       13
<PAGE>

          under this Agreement and the agreements, instruments and documents
          executed in conjunction herewith.

         (e)   BORROWER WAIVES ANY RIGHT IT MAY HAVE TO TRIAL BY JURY IN RESPECT
OF ANY LITIGATION BASED ON, OR ARISING OUT OF, UNDER OR IN CONNECTION WITH, THIS
AGREEMENT OR ANY COURSE OF CONDUCT, COURSE OF DEALING OR OTHER ACTION OF LENDER.

         (f)   Borrower waives demand, protest, notice of protest, notice of
default or dishonor, notice of payment and nonpayment, notice of any default,
and notice of nonpayment at maturity, and agrees that Lender may compromise,
settle or release without notice to Borrower any accounts, documents,
instruments, chattel paper and/or guaranties at any time held by Lender on which
Borrower may in any way be liable. Borrower agrees to any extensions of time of
payment or partial payment at, before or after termination of this Agreement.

         (g)   Borrower, on its own behalf and on behalf of its successors and
assigns hereby expressly waives all rights, if any, to require a marshaling of
assets by Lender or to require that Lender first resort to some or any portion
of the Collateral before foreclosing upon, selling or otherwise realizing on any
other portion thereof.

         (h)   So long as Lender complies with its obligations, Lender shall not
in any way or manner be liable or responsible for: (i) the safekeeping of the
Inventory, Equipment or Collateral; (ii) any loss or damage thereto occurring or
arising in any manner or fashion from any cause; (iii) any diminution in the
value thereof; or (iv) any act or default of any carrier, warehouseman, bailee,
forwarding agency or other person whomsoever. All risk of loss, damage or
destruction of the Inventory, Equipment or Collateral shall be borne by
Borrower.

         (i)   It is the intention of the Lender and the Borrower to comply
strictly with all applicable usury laws; and, accordingly, in no event and upon
no contingency shall the holder hereof ever be entitled to receive, collect, or
apply as interest any interest, fees, charges or other payments equivalent to
interest, in excess of the maximum rate which the Lender may lawfully charge
under applicable statutes and laws from time to time in effect; and, in the
event that the holder hereof ever receives, collects, or applies as interest,
any such excess, such amount which, but for this provision, would be excessive
interest, shall be applied to the reduction of the principal amount of the
indebtedness evidenced hereby; and, if the principal amount of the indebtedness
evidenced hereby, and all lawful interest thereon, is paid in full, any
remaining excess shall forthwith be paid to the Borrower, or other party
lawfully entitled thereto. All interest paid or agreed to be paid by the
Borrower shall, to the maximum extent permitted by applicable law, be amortized,
prorated, allocated and spread throughout the full period until payment in full
of the principal, so that the interest hereon for such full period shall not
exceed the maximum amount permitted by applicable law. Any provision hereof, or
of any other agreement between the Lender and the Borrower, that operates to
bind, obligate or compel the Borrower to pay interest in excess of such maximum
lawful contract rate shall be construed to require the payment of the maximum
rate only. The provisions of this paragraph shall be given precedence over any
other provision contained herein or in any other agreement between the Lender
and the Borrower that is in conflict with the provisions of this paragraph.

          (j)  Borrower acknowledges that the primary reason for naming NCBC
individually and as Agent for the Bank, as secured party, rather than naming
NCBC alone as Lender, is, inter alia, to assure that the liabilities and
obligations of Borrower with respect to letters of credit issued by the Bank
and/or banker's acceptances and/or any financial accommodation extended to or
created by the Bank for the benefit of Borrower are fully secured by the
security interests granted and created hereby. It is expressly understood and
agreed that all actions taken by NCBC and all instruments and documents executed
by NCBC (whether pursuant to the provisions of this Agreement or otherwise)
shall be conclusively deemed to have been taken or executed (as the case may be)
by NCBC either solely on its own behalf, or solely as Agent on the behalf of the
Bank, or on its own behalf and as Agent for the Bank, as the circumstances may
require, NCBC being duly authorized to act as Agent for the Bank when and as
appropriate.

          (k)  The Borrower acknowledges that NCBC has an absolute obligation to
reimburse the Bank and hold it harmless from and against any and all payments
made upon drafts drawn under letters of credit issued by the Bank at the request
of the Borrower and with respect to payments made upon banker's acceptance
issued for the benefit of the Borrower. Borrower agrees that any and all
payments made by NCBC to the Bank in respect of NCBC's reimbursement obligation
to the Bank shall

                                       14
<PAGE>

be (i) conclusively deemed to constitute loan advances from NCBC to the Borrower
with respect to the Borrower's loan, and (ii) automatically added to the unpaid
principal of the Secured Note.

         (l)   All notices and other communications which are required to be in
writing, shall be mailed, certified mail, return receipt requested, sent by
recognized national overnight courier service, telecopied by facsimile machine,
or delivered, if to the Borrower, or to the Guarantors, if any, to the Borrower
at the address reflected below; or Lender, to it at National Canada Business
Corp., 1375 East Ninth Street, Suite 1870, Cleveland, Ohio 44114, Attention:
Albert R. Stoss and Michael P. Grau (Telecopy No.: 216-621-3826); or as to any
such person at such other address as shall be designated by such person in a
written notice to the other parties hereto complying as to delivery with the
terms of this Section 13(l). All such notices and other communications shall be
effective (i) if mailed, when received or three (3) business days after mailing,
whichever is earlier; or (ii) if sent by overnight courier service, on the first
business day after sending, or (iii) if telecopied, upon confirmation of correct
sending on a business day, and (iv) if delivered, upon delivery.

         (m)   The Guarantors agree that:

          (i)   The Lender is hereby authorized from time to time, without
     notice to anyone, to make any sales, pledges, surrenders, compromises,
     settlements, releases, indulgences, alterations, substitutions, exchanges,
     changes in, modifications, or other dispositions including, without
     limitation, cancellations, of all or any part of the loans, or of any
     contract or instrument evidencing any thereof, or of any security or
     collateral therefor, and/or to take any security for or other guarantees
     upon any of said indebtednesses; and the liability of the Guarantors shall
     not be in any manner affected, diminished, or impaired thereby, or by any
     lack of diligence, failure, neglect, or omission on the part of Lender to
     make any demand or protest, or give any notice of dishonor or default, or
     to realize upon or protect any of said indebtednesses or any collateral or
     security therefor.

          (ii)  The Lender shall have the exclusive right to determine how, when
     and what application of payments and credits, if any, shall be made on the
     loans and extensions of credit or any part thereof, and shall be under no
     obligation, at any time, to first resort to, make demand on, file a claim
     against, or exhaust its remedies against the Borrower, or its property or
     estate, or to resort to or exhaust its remedies against any collateral,
     security, property, liens, or other rights whatsoever, before filing suit
     or taking any other action against the Guarantors to enforce the payment
     and performance of their obligations under the Guaranty.

          (iii) The Lender may at any time make demand for payment on, or bring
     suit against, the Guarantors, jointly or severally, or any one or more of
     the Guarantors, less than all, and may compound with any one or more of the
     Guarantors for such sums or on such terms as it may see fit, without notice
     or consent, the same being hereby expressly waived, and release such of the
     Guarantors from all further liability to the Lender hereunder, without
     thereby impairing the rights of the Lender in any respect to demand, sue
     for, and collect the balance of the indebtedness from any of the Guarantors
     not so released.

          (iv)  Subject always to any waiver by the Guarantor(s) of rights of
     contribution, subrogation, indemnification, reimbursement or similar
     rights, as may be contained in the Guaranties (which waiver or waivers
     shall in all events control), (A) any claims against the Borrower accruing
     to any of the Guarantors by reason of payments made to the Lender shall be
     subordinate to any indebtedness now or at any time hereafter owing by the
     Borrower to the Lender, and (B) each Guarantor hereby waives all rights of
     subrogation against the Borrower until all indebtednesses, liabilities and
     obligations of the Borrower to the Lender shall have been fully and finally
     paid and satisfied.

          (v)   The Guarantors join herein for the purpose of acknowledging and
     consenting to the terms and provisions hereof (and especially the
     provisions of (i)-(iv) above), and do further, jointly and severally,
     absolutely and unconditionally guarantee the payment and performance of
     each and every obligation and undertaking of the Borrower hereunder.

         (n)    (i) The specific Termination Date mentioned above may, in the
sole and unrestricted discretion of the Lender, by written notice to the
Borrower, be extended one or more times to a subsequent date or dates unless,
not later than sixty (60) days prior to the specific Termination Date, or, in
the event of the extensions of such Termination Date, not later than sixty (60)
days prior to any such then effective extended Termination Date, the Borrower
shall notify the Lender in writing by registered or certified mail, return
receipt requested, that this Agreement shall not be further extended.

                                       15
<PAGE>

The Lender shall be under no obligation whatsoever to extend the initial
Termination Date, or to further extend any subsequent Termination Date to which
the Lender has previously agreed in writing, any extensions of the initial or
any subsequent Termination Date being in the sole and unrestricted judgment and
discretion of the Lender. FURTHER, BORROWER ACKNOWLEDGES THAT THE OBLIGATIONS OF
BORROWER ARE SUBJECT TO REPAYMENT UPON DEMAND OF LENDER AT ANY TIME, AND THAT
THE RIGHT TO MAKE DEMAND FOR IMMEDIATE REPAYMENT REPRESENTS A BARGAINED FOR
CONSIDERATION TO LENDER WHICH BORROWER ACCEPTS AS A CONDITION FOR LENDER'S
AGREEMENTS HEREIN; (ii) upon the specified Termination Date, or in the event of
the extension of this Agreement to a subsequent Termination Date (when no
effective extension is in force), the loan and all other extensions of credit
(unless sooner declared to be due and payable by the Lender pursuant to the
provisions hereof) shall become due and payable for all purposes. Until all such
indebtednesses, liabilities and obligations secured by this Agreement and other
security agreements of Borrower are satisfied in full, such termination shall
not affect the security interests granted to Lender pursuant to this Agreement,
nor the liens, assignments, and security interests granted and created by other
security agreements of Borrower, nor the duties, covenants and obligations of
Borrower therein and in this Agreement; and all of such liens, assignments,
security interests, duties, covenants and obligations shall remain in full force
and effect until all of the loans and all other indebtednesses, liabilities and
obligations of the Borrower to the Lender shall have been fully paid and
satisfied in all respects; and (iii) if this Agreement is terminated by Lender
upon the occurrence of an Event of Default, or is terminated at Borrower's
request prior to the Termination Date, by mutual agreement of the parties as to
a reasonable calculation of Lender's lost profits as a result thereof Borrower
shall pay to Lender upon the effective date of such termination a fee ("Early
Termination Fee") in an amount equal to: (a) Three percent (3.0%) of the Advance
Limit if such termination occurs on or prior to the first (1st) anniversary of
this Agreement; (b) Two percent (2.0%) of the Advance Limit if such termination
occurs after the first (1st) anniversary of this Agreement but on or prior to
the second (2nd) anniversary of this Agreement; or (c) One percent (1.0%) of the
Advance Limit if such termination occurs after the second (2nd) anniversary of
this Agreement but prior to the Termination Date. In the event that Lender, in
its sole and unrestricted discretion, extends this Agreement in writing beyond
the Termination Date on one or more occasions and specifies a new termination
date ("Extension Date") with respect to such extension, Borrower agrees that the
Early Termination Fee shall be One-Half percent (0.50%) of the Advance Limit
if such termination occurs prior to such Extension Date. The Early Termination
Fee shall be presumed to be the amount of damages sustained by Lender as the
result of the early termination and Borrower agrees that it is reasonable under
the circumstances currently existing. The Termination Fee shall be waived if
Borrower hereafter obtains financing from Bank or National City Bank.

          (o)  In no event shall the Lender's rights hereunder be deemed to
indicate that, the Lender is in control of the business, management or
properties of the Borrower or has power over the daily management functions and
operating decisions made by the Borrower, all such rights and power being hereby
expressly reserved to the Borrower.

          (p)  Time is of the essence of the Borrower's obligations under this
Agreement, the Secured Note, and the other instruments and documents executed
and delivered in connection herewith.

          (q)  Should any one or more of the provisions of this Agreement be
determined to be illegal or unenforceable, all other provisions, nevertheless,
shall remain effective and binding on the parties hereto. In the event of any
conflict between the provisions hereof and the provisions of any other loan
agreement or document between Borrower, Guarantor and Lender, during the
continuance of the Agreement, the provisions of this Agreement shall control.

          (r)  This Agreement may be executed in any number of counterparts,
each of which when so executed and delivered shall be deemed to be an original
and all of which taken together shall constitute but one and the same
instrument.

          (s)  This Agreement shall take effect as a sealed instrument upon its
acceptance and execution by NCBC and Bank in New York, New York, and/or
Cleveland, Ohio, and shall be governed by and construed in accordance with the
internal statutes and laws of the State of Ohio, without regard to principles of
conflicts of law, except as required by mandatory provisions of law, and except
to the extent that the validity or perfection of the security interests granted
and created hereby, or remedies hereunder with respect to any particular
Collateral, are governed by the laws of a jurisdiction other than the State of
Ohio.

          (t)  Borrower hereby irrevocably and unconditionally submits to the
non-exclusive jurisdiction of all State and Federal courts sitting in Cuyahoga
County, Ohio and agrees that all summons

                                       16
<PAGE>

and other court process issued by said courts may be served upon Borrower,
within or outside said courts' territorial jurisdiction, by mailing the same, by
registered or certified mail, or by personal service, to Borrower at its address
specified herein; provided that nothing contained herein shall limit Lender's
right to sue Borrower in any other court having jurisdiction over Borrower or
its assets and to serve summons or other court process upon Borrower in any
manner permitted by applicable law.

        (u)    This Agreement shall be binding upon Borrower and its successors,
assigns, heirs and legal representatives and shall inure to the benefit of
Lender and its successors and assigns. The obligations of Borrower hereunder may
not be assigned or transferred without the prior written consent of Lender which
may be withheld by the Lender in its sole discretion.

        (v)    All personal pronouns used in this Agreement whether used in the
masculine, feminine, or neuter gender, shall include all other genders; the
singular shall include the plural, and vice versa. Section headings are for
convenience only and neither limit nor amplify the provisions of this Agreement.

        (w)    DEBTOR ACKNOWLEDGES THAT THIS AGREEMENT IS SUBJECT TO ACCEPTANCE
BY LENDER AT ITS OFFICES IN NEW YORK, NEW YORK AND/OR CLEVELAND, OHIO AND THAT
UNTIL SO ACCEPTED THE PROVISIONS HEREOF SHALL NOT BE BINDING UPON LENDER.

WITNESS:                                        BORROWER: VIRTU COMPANY

/s/ DREW T. PAROBEK                             By:    /s/ STEVEN TSENGAS
------------------------------                       ---------------------------

/s/ John P. Psellas                             Its:        President
------------------------------                       ---------------------------

                                                     Borrower's Address:
                                                     1300 East Street
                                                     Fairport Harbor, Ohio 44077

Signed in Cleveland, Ohio, this 20th day of November, 1998.

WITNESS:                                        GUARANTORS: OURPET'S COMPANY

/s/ DREW T. PAROBEK                             By:   /s/ STEVEN TSENGAS
------------------------------                       ---------------------------

/s/ John P. Psellas                             Its:        President
------------------------------                       ---------------------------

                                                     Guarantor's Address:
                                                     1300 East Street
                                                     Fairport Harbor, Ohio 44077

Signed in Cleveland, Ohio, this 20th day of November, 1998.

WITNESS:                                        SANAR MANUFACTURING COMPANY

/s/ DREW T. PAROBEK                             By:   /s/ STEVEN TSENGAS
------------------------------                       ---------------------------

/s/ John P. Psellas                             Its:        President
------------------------------                       ---------------------------

                                                     Guarantor's Address:
                                                     1300 East Street
                                                     Fairport Harbor, Ohio 44077

Signed in Cleveland, Ohio, this 20th day of November, 1998.

                                       17
<PAGE>

WITNESS:                                        STEVEN TSENGAS

/s/ DREW T. PAROBEK                             /s/ STEVEN TSENGAS
---------------------                           ------------------------------

/s/ John P. Psellas
---------------------
                                                Guarantor's  Address:
                                                7768 Litchfield Drive
                                                Mentor, Ohio 44060

Signed in Cleveland, Ohio, this 20th day of November, 1998.

WITNESS:                                        NATIONAL BANK OF CANADA

/s/ Drew T. Parobek                             By:  /s/ Albert R. Stoss
---------------------                                -------------------------

/s/ John P. Psellas                             Its: Vice President
---------------------                                -------------------------

Accepted in Cleveland, Ohio, this 20th day of November, 1998.

WITNESS:                                        NATIONAL CANADA BUSINESS CORP.

/s/ DREW T. PAROBEK                             By:  /s/ Albert R. Stoss
---------------------                                -------------------------

/s/ John P. Psellas                             Its: Vice President
---------------------                                -------------------------

Accepted in Cleveland, Ohio, this 20th day of November, 1998.

                                      18

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