LOAN AND SECURITY AGREEMENT
BY AND BETWEEN
SAMIR FINANCIAL II, L.L.C.,
AND
HARTVILLE GROUP, INC.
AND
PETSMARKETING XXXXXXXXX.XXX AGENCY, INC.
DATED AS OF FEBRUARY 19, 2003
LOAN AND SECURITY AGREEMENT
THIS LOAN AND SECURITY AGREEMENT (as amended, modified or supplemented from
time to time, this "AGREEMENT") made this 19th day of February, 2003 by and
between SAMIR FINANCIAL II, L.L.C., an Illinois limited liability company
("LENDER"), 00000 Xxxxx Xxxxxxxx Xxxxx, Xxxxxxx, Xxxxxxxx 00000, and HARTVILLE
GROUP, INC., a Nevada corporation, with its principal place of business at 0000
X. Xxxx Xxxxxx, Xxxxx Xxxxxx, Xxxx 00000 ("HARTVILLE"), and PETSMARKETING
XXXXXXXXX.XXX AGENCY, INC., an Ohio corporation with its principal place of
business at 0000 X. Xxxx Xxxxxx, Xxxxx Xxxxxx, Xxxx 00000
("PETSMARKETING")(each of Hartville and Petsmarketing is sometimes hereafter
referred to as a "BORROWER" and are collectively referred to as "BORROWERS").
W I T N E S S E T H:
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WHEREAS, Borrowers have requested a $3,000,000 Loan from Lender, and the
parties wish to provide for the terms and conditions upon which such Loan or
other financial accommodations, if made by Lender, shall be made;
NOW, THEREFORE, in consideration of any Loan (including any Loan by renewal
or extension) hereafter made to Borrowers by Lender, and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged by each Borrower, the parties agree as follows:
1. DEFINITIONS.
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"ACCOUNT", "ACCOUNT DEBTOR", "CHATTEL PAPER", "COMMERCIAL TORT CLAIMS",
"DEPOSIT ACCOUNTS", "DOCUMENTS", "ELECTRONIC CHATTEL PAPER", "EQUIPMENT",
"FIXTURES", "GENERAL INTANGIBLES", "GOODS", "INSTRUMENTS", "INVENTORY",
"INVESTMENT PROPERTY", "LETTER-OF-CREDIT RIGHT", "PROCEEDS" and "TANGIBLE
CHATTEL PAPER" shall have the respective meanings assigned to such terms in the
Illinois Uniform Commercial Code, as the same may be in effect from time to
time.
"AFFILIATE" shall mean any Person (i) which directly or indirectly through
one or more intermediaries controls, is controlled by, or is under common
control with, any Borrower, (ii) which beneficially owns or holds five percent
(5%) or more of the voting control or equity interests of any Borrower, or (iii)
five percent (5%) or more of the voting control or equity interests of which is
beneficially owned or held by any Borrower.
"BUSINESS DAY" shall mean any day other than a Saturday, a Sunday or any
day that banks in Chicago, Illinois are required or permitted to close.
"CAPITAL EXPENDITURES" shall mean with respect to any period, the aggregate
of all expenditures (whether paid in cash or accrued as liabilities and
including expenditures for capitalized lease obligations) by Borrowers and its
Subsidiaries during such period that are required by generally accepted
accounting principles, consistently applied, to be included in or reflected by
the property, plant and equipment or similar fixed asset accounts (or intangible
accounts subject to amortization) on the balance sheet of Borrowers.
"COLLATERAL" shall mean all of the property of Borrowers described in
Section 5 hereof, together with all other real or personal property of any
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Obligor or any other Person now or hereafter pledged to Lender to secure, either
directly or indirectly, repayment of any of the Liabilities.
"ENVIRONMENTAL LAWS" shall mean all federal, state, district, local and
foreign laws, rules, regulations, ordinances, and consent decrees relating to
health, safety, hazardous substances, pollution and environmental matters, as
now or at any time hereafter in effect, applicable to any Borrower's business or
facilities owned or operated by any Borrower, including laws relating to
emissions, discharges, releases or threatened releases of pollutants,
contamination, chemicals, or hazardous, toxic or dangerous substances, materials
or wastes into the environment (including, without limitation, ambient air,
surface water, ground water, land surface or subsurface strata) or otherwise
relating to the generation, manufacture, processing, distribution, use,
treatment, storage, disposal, transport or handling of Hazardous Materials
"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
amended, modified or restated from time to time.
"EVENT OF DEFAULT" shall have the meaning specified in Section 15 hereof.
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"FISCAL YEAR" shall mean each twelve (12) month accounting period of
Borrower, which ends on December 31st of each year.
"HARTVILLE/LASALLE COMMERCIAL PAPER" shall mean $1,500,000 of Commercial
Paper or a Certificate of Deposit issued by ABN AMRO North America, Inc. or
LaSalle Bank National Association to Hartville, whether in certificate or book
entry form and any renewals and substitutions therefor and all interest,
dividends, substitutions, products and proceeds thereof.
"HAZARDOUS MATERIALS" shall mean any hazardous, toxic or dangerous
substance, materials and wastes, including, without limitation, hydrocarbons
(including naturally occurring or man-made petroleum and hydrocarbons),
flammable explosives, asbestos, urea formaldehyde insulation, radioactive
materials, biological substances, polychlorinated biphenyls, pesticides,
herbicides and any other kind and/or type of pollutants or contaminants
(including, without limitation, materials which include hazardous constituents),
sewage, sludge, industrial slag, solvents and/or any other similar substances,
materials, or wastes and including any other substances, materials or wastes
that are or become regulated under any Environmental Law (including, without
limitation any that are or become classified as hazardous or toxic under any
Environmental Law).
"INDEMNIFIED PARTY" shall have the meaning specified in Section 18 hereof.
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"LASALLE BANK LETTER OF CREDIT" shall mean that certain Letter of Credit in
the amount of $1,500,000 issued by LaSalle Bank National Association ("LASALLE")
on behalf of Hartville for the benefit of Hartville's Subsidiary, Hartville
Insurance Company, and any renewals or substitutions therefor.
"LIABILITIES" shall mean any and all obligations, liabilities and
indebtedness of Borrowers to Lender or to any parent, affiliate or subsidiary of
Lender of any and every kind and nature, howsoever created, arising or evidenced
and howsoever owned, held or acquired, whether now or hereafter existing,
whether now due or to become due, whether primary, secondary, direct, indirect,
absolute, contingent or otherwise (including, without limitation, obligations of
performance), whether several, joint or joint and several, and whether arising
or existing under written or oral agreement or by operation of law.
"LOAN" or "LOANS" shall mean all loans and advances made by Lender to or on
behalf of Borrowers hereunder.
"LOCK BOX" and "LOCK BOX ACCOUNT" shall have the meanings specified in
subsection 8(a) hereof.
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"MATERIAL ADVERSE EFFECT" shall mean a material adverse effect on the
business, property, assets, prospects, operations or condition, financial or
otherwise, of a Person.
"OBLIGOR" shall mean each Borrower and each other Person who is or shall
become primarily or secondarily liable for any of the Liabilities.
"ORIGINAL TERM" shall have the meaning specified in Section 10 hereof.
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"OTHER AGREEMENTS" shall mean all agreements, instruments and documents,
other than this Agreement, including, without limitation, guaranties, mortgages,
trust deeds, pledges, powers of attorney, consents, assignments, contracts,
notices, security agreements, leases, financing statements and all other
writings heretofore, now or from time to time hereafter executed by or on behalf
of any Borrower or any other Person and delivered to Lender or to any parent,
affiliate or subsidiary of Lender in connection with the Liabilities or the
transactions contemplated hereby, as each of the same may be amended, modified
or supplemented from time to time.
"PARENT" shall mean any Person now or at any time or times hereafter owning
or controlling (alone or with any other Person) at least a majority of the
issued and outstanding equity of Borrower and, if Borrower is a partnership, the
general partner of a Borrower.
"PBGC" shall have the meaning specified in subsection 12(b)(v) hereof.
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"PERMITTED LIENS" shall mean (i) statutory liens of landlords, carriers,
warehousemen, processors, mechanics, materialmen or suppliers incurred in the
ordinary course of business and securing amounts not yet due or declared to be
due by the claimant thereunder or amounts which are being contested in good
faith and by appropriate proceedings and for which the applicable Borrower has
maintained adequate reserves; (ii) liens or security interests in favor of
Lender; (iii) zoning restrictions and easements, licenses, covenants and other
restrictions affecting the use of real property that do not individually or in
the aggregate have a material adverse effect on any Borrower's ability to use
such real property for its intended purpose in connection with any Borrower's
business; (iv) liens in connection with purchase money indebtedness and
capitalized leases otherwise permitted pursuant to this Agreement, provided,
that such liens attach only to the assets the purchase of which was financed by
such purchase money indebtedness or which is the subject of such capitalized
leases; (v) existing, specific liens on equipment; (vi) involuntary liens
securing amounts less than $50,000 and which are released or for which a bond
acceptable to Lender in its sole discretion has been posted within ten days of
its creation, (vii) liens specifically permitted by Lender in writing in
accordance with an intercreditor or subordination agreement satisfactory to
Lender; and (viii) other liens permitted under the Hartville/LaSalle CD.
"PERSON" shall mean any individual, sole proprietorship, partnership, joint
venture, trust, unincorporated organization, association, corporation, limited
liability company, institution, entity, party or foreign or United States
government (whether federal, state, county, city, municipal or otherwise),
including, without limitation, any instrumentality, division, agency, body or
department thereof.
"PLAN" shall have the meaning specified in subsection 12(b)(v) hereof.
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"SUBSIDIARY" shall mean any corporation of which more than fifty percent
(50%) of the outstanding capital stock having ordinary voting power to elect a
majority of the board of directors of such corporation (irrespective of whether
at the time stock of any other class of such corporation shall have or might
have voting power by reason of the happening of any contingency) is at the time,
directly or indirectly, owned by Borrower, or any partnership, joint venture or
limited liability company of which more than fifty percent (50%) of the
outstanding equity interests are at the time, directly or indirectly, owned by
any Borrower or any partnership of which any Borrower is a general partner.
2. LOANS.
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(a) LOAN.
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Subject to the terms and conditions of this Agreement and the Other
Agreements, Lender shall make a Loan to Borrowers in the aggregate amount of
Three Million Dollars ($3,000,000).
(b) REPAYMENTS.
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REPAYMENT OF LOAN. The Loan and all other Liabilities shall be repaid, if
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not sooner due or declared due, on the last day of the Original Term. The Loan
may be prepaid in whole or part without penalty at any time, and in the event
that the Loan is so prepaid, the Lender will promptly refund to the Borrower the
unallocated portion of any "Prepaid Interest" (as defined in the Note).
(c) NOTE.
----
The Loan shall, in Lender's sole discretion, be evidenced by a promissory
note in form and substance satisfactory to Lender. However, if the Loan is not
so evidenced, such Loan may be evidenced solely by entries upon the books and
records maintained by Lender.
3. RESERVED.
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4. INTEREST, FEES AND CHARGES.
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(a) INTEREST RATE.
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The Loan shall bear interest at the rate of two and one half percent (2.5%)
per month or thirty percent (30%) per annum, payable in advance commencing on
the date of this Agreement and continuing on the same day of each month. The
first nine (9) months of interest due and payable hereunder in the aggregate
amount of Six Hundred Seventy-Five Thousand ($675,000.00) shall be paid to
Lender in advance from the initial proceeds of the Loan. Upon the occurrence of
an Event of Default and during the continuance thereof, the Loan shall bear
interest at the rate of three percent (3.0%) per month or thirty-six percent
(36%) per annum, which interest shall be payable on demand. All interest shall
be calculated on the basis of a 360-day year.
(b) FEES AND CHARGES.
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(i) CLOSING FEE AND BALANCE OF GOOD FAITH DEPOSIT: Borrowers shall pay to
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Lender a closing fee (the "CLOSING FEE") equal to Three Hundred Twenty-Five
Thousand and 00/100 Dollars ($325,000.00), which Closing Fee shall be fully
earned and payable on the date of disbursement of the Loan. In addition,
Borrowers shall pay to Lender on the date of the disbursement of the Loan the
balance of the good faith deposit in the amount of $20,000.
(ii) COSTS AND EXPENSES: Borrowers shall reimburse Lender for all costs and
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expenses, including, without limitation, legal expenses and attorneys' fees,
incurred by Lender in connection with the (i) documentation and consummation of
this transaction and any other transactions between Borrowers and Lender,
including, without limitation, Uniform Commercial Code and other public record
searches and filings, overnight courier or other express or messenger delivery,
appraisal costs, surveys, title insurance and environmental audit or review
costs; (ii) collection, protection or enforcement of any rights in or to the
Collateral; (iii) collection of any Liabilities; and (iv) administration and
enforcement of any of Lender's rights under this Agreement. Borrowers shall also
pay all normal service charges with respect to all accounts maintained by
Borrowers with Lender and any additional services requested by Borrowers from
Lender. All such costs, expenses and charges shall constitute Liabilities
hereunder, shall be payable by Borrowers to Lender on demand, and until paid,
shall bear interest at the highest rate then applicable to Loans hereunder.
(iii) MONITORING AND COLLATERAL MANAGEMENT FEE: Borrowers will pay to
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Lender a monitoring and collateral management fee (the "COLLATERAL MANAGEMENT
FEE") of $3,000 each month, payable in advance, commencing on the date of this
Agreement, (with the first fee payable from the initial proceeds of the Loan),
and continuing on the fifteenth day of each month thereafter until the
Liabilities are paid in full.
(c) MAXIMUM INTEREST.
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It is the intent of the parties that the rate of interest and other charges
to Borrowers under this Agreement shall be lawful; therefore, if for any reason
the interest or other charges payable under this Agreement are found by a court
of competent jurisdiction, in a final determination, to exceed the limit which
Lender may lawfully charge to Borrowers, then the obligation to pay interest and
other charges shall automatically be reduced to such limit and, if any amount in
excess of such limit shall have been paid, then such amount shall be refunded to
Borrowers.
5. COLLATERAL.
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(a) GRANT OF SECURITY INTEREST TO LENDER.
-----------------------------------------
As security for the payment of all Loans now or in the future made by
Lender to Borrowers hereunder and for the payment or other satisfaction of all
other Liabilities, each Borrower hereby assigns to Lender and grants to Lender a
continuing security interest in the following property of such Borrower, whether
now or hereafter owned, existing, acquired or arising and wherever now or
hereafter located: (a) all Accounts and all Goods whose sale, lease or other
disposition by such Borrower has given rise to Accounts and have been returned
to, or repossessed or stopped in transit by, such Borrower; (b) all Chattel
Paper, Instruments, Documents and General Intangibles (including, without
limitation, all patents, patent applications, trademarks, trademark
applications, trade names, trade secrets, goodwill, copyrights, copyright
applications, registrations, licenses, software, franchises, customer lists, tax
refund claims, claims against carriers and shippers, guarantee claims, contracts
rights, payment intangibles, security interests, security deposits and rights to
indemnification); (c) all Inventory (whether or not Eligible Inventory); (d) all
Goods (other than Inventory), including, without limitation, Equipment and
Fixtures; (e) all Investment Property; (f) all Deposit Accounts, bank accounts,
deposits and cash; (g) all Letter-of-Credit Rights; (h) Commercial Tort Claims
listed on Exhibit C hereto (i) any other property of such Borrower now or
hereafter in the possession, custody or control of Lender or any agent or any
parent, affiliate or subsidiary of Lender or any participant with Lender in the
Loans, for any purpose (whether for safekeeping, deposit, collection, custody,
pledge, transmission or otherwise) and (j) all additions and accessions to,
substitutions for, and replacements, products and Proceeds of the foregoing
property, including, without limitation, proceeds of all insurance policies
insuring the foregoing property, and all of such Borrower's books and records
relating to any of the foregoing and to such Borrower's business.
(b) OTHER SECURITY.
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Lender, in its sole discretion, without waiving or releasing any
obligation, liability or duty of Borrowers under this Agreement or the Other
Agreements or any Event of Default, may at any time or times hereafter, but
shall not be obligated to, pay, acquire or accept an assignment of any security
interest, lien, encumbrance or claim asserted by any Person in, upon or against
the Collateral. All sums paid by Lender in respect thereof and all costs, fees
and expenses including, without limitation, reasonable attorney fees, all court
costs and all other charges relating thereto incurred by Lender shall constitute
Liabilities, payable by Borrowers to Lender on demand and, until paid, shall
bear interest at the highest rate then applicable to Loans hereunder.
(c) POSSESSORY COLLATERAL.
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Upon a Borrower's receipt of any portion of the Collateral evidenced by an
agreement, Instrument or Document, including, without limitation, any Tangible
Chattel Paper and any Investment Property consisting of certificated securities,
Borrower shall deliver the original thereof to Lender together with an
appropriate endorsement or other specific evidence of assignment thereof to
Lender (in form and substance acceptable to Lender). If an endorsement or
assignment of any such items shall not be made for any reason, Lender is hereby
irrevocably authorized, as such Borrower's attorney and agent-in-fact, to
endorse or assign the same on such Borrower's behalf.
(d) ELECTRONIC CHATTEL PAPER.
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To the extent that a Borrower obtains or maintains any Electronic Chattel
Paper, such Borrower shall create, store and assign the record or records
comprising the Electronic Chattel Paper in such a manner that (i) a single
authoritative copy of the record or records exists which is unique, identifiable
and except as otherwise provided in clauses (iv), (v) and (vi) below,
unalterable, (ii) the authoritative copy identifies Lender as the assignee of
the record or records, (iii) the authoritative copy is communicated to and
maintained by the Lender or its designated custodian, (iv) copies or revisions
that add or change an identified assignee of the authoritative copy can only be
made with the participation of Lender, (v) each copy of the authoritative copy
and any copy of a copy is readily identifiable as a copy that is not the
authoritative copy and (vi) any revision of the authoritative copy is readily
identifiable as an authorized or unauthorized revision.
6. PRESERVATION OF COLLATERAL AND PERFECTION OF SECURITY INTERESTS
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THEREIN.
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Borrowers shall, at Lender's request, at any time and from time to time,
authenticate, execute and deliver to Lender such financing statements, documents
and other agreements and instruments (and pay the cost of filing or recording
the same in all public offices deemed necessary or desirable by Lender) and do
such other acts and things or cause third parties to do such other acts and
things as Lender may deem necessary or desirable in its sole discretion in order
to establish and maintain a valid, attached and perfected security interest in
the Collateral in favor of Lender (free and clear of all other liens, claims,
encumbrances and rights of third parties whatsoever, whether voluntarily or
involuntarily created, except Permitted Liens) to secure payment of the
Liabilities, and in order to facilitate the collection of the Collateral. Each
Borrower irrevocably hereby makes, constitutes and appoints Lender (and all
Persons designated by Lender for that purpose) as such Borrower's true and
lawful attorney and agent-in-fact to execute and file such financing statements,
documents and other agreements and instruments and do such other acts and things
as may be necessary to preserve and perfect Lender's security interest in the
Collateral. Each Borrower further agrees that a carbon, photographic,
photostatic or other reproduction of this Agreement or of a financing statement
shall be sufficient as a financing statement. Each Borrower further ratifies
and confirms the prior filing by Lender of any and all financing statements
which identify such Borrower as debtor, Lender as secured party and any or all
Collateral as collateral.
7. POSSESSION OF COLLATERAL AND RELATED MATTERS.
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Until an Event of Default has occurred, each Borrower shall have the right,
except as otherwise provided in this Agreement, in the ordinary course of such
Borrower's business, to (a) sell, lease or furnish under contracts of service
any of such Borrower's Inventory normally held by such Borrower for any such
purpose; and (b) use and consume any raw materials, work in process or other
materials normally held by such Borrower for such purpose; provided, however,
that a sale in the ordinary course of business shall not include any transfer or
sale in satisfaction, partial or complete, of a debt owed by such Borrower.
8. COLLECTIONS.
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(a) Lender may, at any time and from time to, whether before or after
notification to any Account Debtor and whether before or after the maturity of
any of the Liabilities, (i) enforce collection of any of Borrowers' Accounts or
other amounts owed to Borrowers by suit or otherwise; (ii) exercise all of
Borrowers' rights and remedies with respect to proceedings brought to collect
any Accounts or other amounts owed to Borrowers; (iii) surrender, release or
exchange all or any part of any Accounts or other amounts owed to Borrowers, or
compromise or extend or renew for any period (whether or not longer than the
original period) any indebtedness thereunder; (iv) sell or assign any Account of
Borrowers or other amount owed to Borrowers upon such terms, for such amount and
at such time or times as Lender deems advisable; (v) prepare, file and sign
Borrowers' name on any proof of claim in bankruptcy or other similar document
against any Account Debtor or other Person obligated to Borrowers; and (vi) do
all other acts and things which are necessary, in Lender's sole discretion, to
fulfill Borrowers' obligations under this Agreement and to allow Lender to
collect the Accounts or other amounts owed to Borrowers. In addition to any
other provision hereof, Lender may at any time, whether before or after the
occurrence and during the continuance of an Event of Default, at Borrowers'
expense, notify any parties obligated on any of the Accounts to make payment
directly to Lender of any amounts due or to become due thereunder. Lender's
rights and remedies with respect to Borrowers' Accounts pursuant to this Section
8(b) and as otherwise provided in this Agreement is subject to Petsmarketing's
insurance trust obligations to Clarendon National Insurance Company and its
successors.
(b) For purposes of calculating interest and fees, Lender shall, within
three (3) Business Days after receipt by Lender at its office in Chicago,
Illinois of (i) checks and (ii) cash or other immediately available funds from
collections of items of payment and Proceeds of any Collateral, apply the whole
or any part of such collections or Proceeds against the Liabilities in such
order as Lender shall determine in its sole discretion. For purposes of
determining the amount of Loans available for borrowing purposes, checks and
cash or other immediately available funds from collections of items of payment
and Proceeds of any Collateral shall be applied in whole or in part against the
Liabilities, in such order as Lender shall determine in its sole discretion, on
the day of receipt, subject to actual collection.
(c) On a monthly basis, Lender shall deliver to Borrowers an account
statement showing all Loans, charges and payments, which shall be deemed final,
binding and conclusive upon Borrowers unless Borrowers notify Lender in writing,
specifying any error therein, within thirty (30) days of the date such account
statement is sent to Borrowers and any such notice shall only constitute an
objection to the items specifically identified.
9. COLLATERAL, AVAILABILITY AND FINANCIAL REPORTS AND SCHEDULES.
(a) MONTHLY REPORTS.
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Petsmarketing shall deliver to Lender, in addition to any other reports, as
soon as practicable and in any event: within fifteen (15) days after the end of
each month, (A) a detailed trial balance of such Borrower's Accounts aged per
invoice date, in form and substance reasonably satisfactory to Lender including,
without limitation, the names and addresses of all Account Debtors of such
Borrower, and (B) a summary and detail of accounts payable (such Accounts and
accounts payable divided into such time intervals as Lender may require in its
sole discretion), including a listing of any held checks.
(b) FINANCIAL STATEMENTS.
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Each Borrower shall deliver to Lender the following financial information,
all of which shall be prepared in accordance with generally accepted accounting
principles consistently applied, and shall be accompanied by a compliance
certificate in the form of Exhibit B hereto, which compliance certificate shall
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include a calculation of all financial covenants contained in this Agreement:
(i) no later than thirty (30) days after each calendar month, copies of
internally prepared financial statements, including, without limitation, balance
sheets and statements of income, retained earnings and cash flow of Borrower,
certified by the Chief Financial Officer of such Borrower; and (ii) no later
than ninety (90) days after the end of each of Borrowers' Fiscal Years, audited
consolidated annual financial statements with an unqualified opinion by
independent certified public accountants selected by Borrowers and reasonably
satisfactory to Lender;
(c) OTHER INFORMATION.
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Promptly following request therefore by Lender, such other business or
financial data, reports, appraisals and projections as Lender may reasonably
request.
10. TERMINATION.
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THIS AGREEMENT SHALL BE IN EFFECT FROM THE DATE HEREOF UNTIL FEBRUARY 19,
2004 (THE "ORIGINAL TERM"). Provided that no Event of Default has occurred and
is then existing, Lender will extend the Original Term for an additional one
year ending on the anniversary date of the Original Term (the "RENEWAL TERM")
upon payment by Borrowers to Lender of a $250,000 renewal fee (the "RENEWAL
FEE"). Borrowers must advise Lender at least forty (40) days (the date of such
notice by Borrowers to Lender is referred to as the "Extension Notice Date")
prior to the end of the Original Term if Borrowers intend to extend the Original
Term for an additional one year, and if so advised, the Renewal Fee must be paid
by Borrowers to Lender within three (3) days of the Extension Notice Date. At
such time as Borrowers have repaid all of the Liabilities and this Agreement has
terminated, each Borrower shall deliver to Lender a release, in form and
substance satisfactory to Lender, of all obligations and liabilities of Lender
and its officers, directors, employees, agents, parents, subsidiaries and
affiliates to Borrower, and if Borrowers are obtaining new financing from
another lender, Borrowers shall deliver such lender's indemnification of Lender,
in form and substance satisfactory to Lender, for checks which Lender has
credited to either Borrower's account, but which subsequently are dishonored for
any reason or for automatic clearinghouse or wire transfers not yet posted to
such Borrower's account.
Upon the occurrence of an Event of Default or if the Original Term of this
Agreement is not renewed, Borrowers shall immediately cease to permit, allow or
cause Hartville Insurance Company, Ltd. ("HIC") to acquire a quota share
participation in any pet health insurance originated by Petsmarketing or any
other Person. In the event of such non-renewal or upon the occurrence of an
Event of Default, Borrowers authorize Lender to take whatever action or actions
that Lender may deem appropriate, whether in the name of either Borrower or
Lender, to ensure that HIC ceases to incur any additional reinsurance risk in
connection with health care insurance plans originated by Petsmarketing or any
other Person. In addition, Borrowers will cause the LaSalle Letter of Credit to
be canceled as soon as possible upon the demand of Lender after the occurrence
of an Event of Default and/or after the end of the Original Term or if the
Original Term is extended at the option of Lender, after the Renewal Term.
Borrowers hereby irrevocably constitute and appoint Lender as their
attorney-in-fact for the purposes set forth above, such appointment being
coupled with an interest for as long as the Liabilities remain outstanding. Upon
payment and performance in full of all of the monetary Liabilities and
termination of this Agreement as provided herein, Lender shall promptly deliver
to Borrowers termination statements, requests for re-conveyances and such other
documents as may be reasonably required to terminate Lender's security interest
in the Collateral.
11. REPRESENTATIONS AND WARRANTIES.
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Each Borrower hereby represents and warrants to Lender, which
representations and warranties (whether appearing in this Section 11 or
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elsewhere) shall be true at the time of such Borrower's execution hereof and the
closing of the transactions described herein or related hereto, shall remain
true until the repayment in full and satisfaction of all the Liabilities and
termination of this Agreement, and shall be remade by each Borrower at the time
each Loan is made pursuant to this Agreement.
(a) FINANCIAL STATEMENTS AND OTHER INFORMATION.
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The financial statements and other information delivered or to be delivered
by each Borrower to Lender at or prior to the date of this Agreement accurately
reflect the financial condition of such Borrower as of the respective dates of
such statements and other information, and there has been no adverse change in
the financial condition, the operations or any other status of such Borrower
since the date of the financial statements delivered to Lender most recently
prior to the date of this Agreement. All written information now or heretofore
furnished by such Borrower to Lender is true and correct as of the date with
respect to which such information was furnished.
(b) LOCATIONS.
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The office where each Borrower keeps its books, records and accounts (or
copies thereof) concerning the Collateral, such Borrower's principal place of
business and all of each Borrower's other places of business, locations of
Collateral and post office boxes and locations of bank accounts are as set forth
in Exhibit A and at other locations within the continental United States of
----------
which Lender has been advised by a Borrower in accordance with subsection
- ----------
12(b)(i). The Collateral, including, without limitation, the Equipment (except
--------
any part thereof which a Borrower shall have advised Lender in writing consists
of Collateral normally used in more than one state) is kept, or, in the case of
vehicles, based, only at the addresses set forth on Exhibit A, and at other
---------
locations within the continental United States of which Lender has been advised
by a Borrower in writing in accordance with subsection 12(b)(i) hereof.
--------------------
(c) LOANS BY BORROWERS.
--------------------
Borrowers have not made any loans or advances to any Affiliate or other
Person except for advances authorized hereunder to employees, officers and
directors of Borrowers for travel and other expenses arising in the ordinary
course of Borrowers' business and loans, if any, permitted pursuant to
subsection 13(f) hereof.
(d) LIENS.
-----
Each Borrower is the lawful owner of all Collateral now purportedly owned
or hereafter purportedly acquired by such Borrower, free from all liens, claims,
security interests and encumbrances whatsoever, whether voluntarily or
involuntarily created and whether or not perfected, other than the Permitted
Liens.
(e) ORGANIZATION, AUTHORITY AND NO CONFLICT.
-------------------------------------------
Hartville is a corporation duly organized, validly existing and in good
standing in the State of Nevada, its state organizational identification number
is C10954-3000 and is duly qualified and in good standing in all states where
the nature and extent of the business transacted by it or the ownership of its
assets makes such qualification necessary. Petsmarketing is a corporation duly
organized, validly existing and in good standing in the State of Ohio, its state
organizational identification number is 1147049 and is duly qualified and in
good standing in all states where the nature and extent of the business
transacted by it or the ownership of its assets makes such qualification
necessary. Each Borrower has the right and power and is duly authorized and
empowered to enter into, execute and deliver this Agreement and the Other
Agreements and perform its obligations hereunder and thereunder. Each Borrower's
execution, delivery and performance of this Agreement and the Other Agreements
does not conflict with the provisions of the organizational documents of such
Borrower, any statute, regulation, ordinance or rule of law, or any agreement,
contract or other document which may now or hereafter be binding on such
Borrower, and such Borrower's execution, delivery and performance of this
Agreement and the Other Agreements shall not result in the imposition of any
lien or other encumbrance upon any of such Borrower's property under any
existing indenture, mortgage, deed of trust, loan or credit agreement or other
agreement or instrument by which such Borrower or any of its property may be
bound or affected.
(f) LITIGATION.
----------
Except as set forth on Schedule 11(f) hereto, there are no actions or
proceedings which are pending or threatened against Borrowers which might have a
Material Adverse Effect on a Borrower, and such Borrower shall, promptly upon
becoming aware of any such pending or threatened action or proceeding, give
written notice thereof to Lender. Borrowers have no Commercial Tort Claims
pending other than those set forth on Exhibit C hereto as Exhibit C may be
amended from time to time.
(g) COMPLIANCE WITH LAWS AND MAINTENANCE OF PERMITS.
-----------------------------------------------------
Each Borrower has obtained all governmental consents, franchises,
certificates, licenses, authorizations, approvals and permits, the lack of which
would have a Material Adverse Effect on such Borrower. Each Borrower is in
compliance in all material respects with all applicable federal, state, local
and foreign statutes, orders, regulations, rules and ordinances (including,
without limitation, Environmental Laws and statutes, orders, regulations, rules
and ordinances relating to taxes, employer and employee contributions and
similar items, securities, ERISA or employee health and safety) the failure to
comply with which would have a Material Adverse Effect on such Borrower.
(h) AFFILIATE TRANSACTIONS.
-----------------------
Except as set forth on Schedule 11(h) hereto or as permitted pursuant to
--------------
subsection 11(c) hereof, neither Borrower is conducting, permitting or suffering
--------------
to be conducted, transaction with any Affiliate other than transactions with
Affiliates for the purchase or sale of Inventory or services in the ordinary
course of business pursuant to terms that are no less favorable to such Borrower
than the terms upon which such transfers or transactions would have been made
had they been made to or with a Person that is not an Affiliate.
(i) NAMES AND TRADE NAMES.
------------------------
Each Borrower's name has always been as set forth on the first page of this
Agreement and Borrowers use no trade names, assumed names, fictitious names or
division names in the operation of its business, except as set forth on Schedule
----------
11(i) hereto.
----
(j) EQUIPMENT.
---------
Each Borrower has good and indefeasible and merchantable title to and
ownership of all Equipment purportedly owned by such Borrower, subject to the
Permitted Liens. No Equipment is an accession to other personal property unless
such personal property is subject to a second priority lien in favor of Lender,
subject to Permitted Liens.
(k) ENFORCEABILITY.
--------------
This Agreement and the Other Agreements to which Borrowers are a party are
the legal, valid and binding obligations of Borrowers and are enforceable
against Borrowers in accordance with their respective terms.
(l) RESERVED.
---------
(m) INDEBTEDNESS.
------------
Except as set forth on Schedule 11(m) hereto, neither Borrower is obligated
-------------
(directly or indirectly), for any loans or other indebtedness for borrowed money
other than the Loans.
(n) MARGIN SECURITY AND USE OF PROCEEDS.
----------------------------------------
Borrowers do not own any margin securities, and none of the proceeds of the
Loans hereunder shall be used for the purpose of purchasing or carrying any
margin securities or for the purpose of reducing or retiring any indebtedness
which was originally incurred to purchase any margin securities or for any other
purpose not permitted by Regulation U of the Board of Governors of the Federal
Reserve System as in effect from time to time.
(o) PARENT, SUBSIDIARIES AND AFFILIATES.
--------------------------------------
Except as set forth on Schedule 11(o) hereto, neither Borrower has any
-------------
Parents, Subsidiaries or other Affiliates or divisions, nor is either Borrower
engaged in any joint venture or partnership with any other Person.
(p) NO DEFAULTS.
------------
Neither Borrower is in default under any material contract, lease or
commitment to which it is a party or by which it is bound, nor does either
Borrower know of any dispute regarding any contract, lease or commitment which
would have a Material Adverse Effect on such Borrower.
(q) EMPLOYEE MATTERS.
-----------------
Except as set forth on Schedule 11(q), there are no controversies pending
or threatened between either Borrower and any of its employees, agents or
independent contractors other than employee grievances arising in the ordinary
course of business which would not, in the aggregate, have a Material Adverse
Effect on such Borrower, and each Borrower is in compliance with all federal and
state laws respecting employment and employment terms, conditions and practices
except for such non-compliance which would not have a Material Adverse Effect on
such Borrower.
(s) INTELLECTUAL PROPERTY.
----------------------
Each Borrower possesses adequate licenses, patents, patent applications,
copyrights, service marks, trademarks, trademark applications, tradestyles and
trade names to continue to conduct its business as heretofore conducted by it.
(t) ENVIRONMENTAL MATTERS.
----------------------
Except as set forth in Schedule 11(s) hereto, neither Borrower has
generated, used, stored, treated, transported, manufactured, handled, produced
or disposed of any Hazardous Materials, on or off its premises (whether or not
owned by it) in any manner which at any time violates any Environmental Law or
any license, permit, certificate, approval or similar authorization thereunder
and the operations of the such Borrower comply in all material respects with all
Environmental Laws and all licenses, permits, certificates, approvals and
similar authorizations thereunder. There has been no investigation, proceeding,
complaint, order, directive, claim, citation or notice by any governmental
authority or any other Person, nor is any pending or to the best of the such
Borrower's knowledge threatened with respect to any non-compliance with or
violation of the requirements of any Environmental Law by such Borrower or the
release, spill or discharge, threatened or actual, of any Hazardous Materials or
the generation, use, storage, treatment, transportation, manufacture, handling,
production or disposal of any Hazardous Materials or any other environmental,
health or safety matter, which affects such Borrower or its business, operations
or assets or any properties at which such Borrower has transported, stored or
disposed of any Hazardous Materials. Neither Borrower has any material liability
(contingent or otherwise) in connection with a release, spill or discharge,
threatened or actual, of any Hazardous Materials or the generation, use,
storage, treatment, transportation, manufacture, handling, production or
disposal of any Hazardous Materials.
(u) ERISA MATTERS.
--------------
Except as set forth on Schedule 11(t), each Borrower has paid and
discharged all obligations and liabilities arising under ERISA of a character
which, if unpaid or unperformed, might result in the imposition of a lien
against any of its properties or assets.
12. AFFIRMATIVE COVENANTS.
----------------------
Until payment and satisfaction in full of all Liabilities and termination
of this Agreement, unless Borrowers obtain Lender's prior written consent
waiving or modifying any of Borrowers' covenants hereunder in any specific
instance, each Borrower covenants and agrees as follows:
(a) MAINTENANCE OF RECORDS.
------------------------
Borrowers shall at all times keep accurate and complete books, records and
accounts with respect to all of such Borrower's business activities, in
accordance with sound accounting practices and generally accepted accounting
principles consistently applied and insurance industry custom and practice, and
shall keep such books, records and accounts, and any copies thereof, only at the
addresses indicated for such purpose on Exhibit A;
----------
(b) NOTICES.
-------
Each Borrower shall:
(i) LOCATIONS. Promptly (but in no event less than ten (10) days prior to
---------
the occurrence thereof) notify Lender of the proposed opening of an new place of
business or new location of Collateral, the closing of any existing place of
business or location of Collateral, any change of in the location of such
Borrower's books, records and accounts (or copies thereof), the opening or
closing of any post office box, the opening or closing of any bank account or,
if any of the Collateral consists of Goods of a type normally used in more than
one state, the use of any such Goods in any state other than a state in which
such Borrower has previously advised Lender that such Goods will be used.
(ii) INTENTIONALLY DELETED.
----------------------
(iii) LITIGATION AND PROCEEDINGS. Promptly upon becoming aware thereof,
---------------------------
notify Lender of any actions or proceedings which are pending or threatened
against a Borrower which might have a Material Adverse Effect on such Borrower
and of any Commercial Tort Claims of such Borrower which may arise, which notice
shall constitute such Borrower's authorization to amend Exhibit C to add such
Commercial Tort Claim.
(iv) NAMES AND TRADE NAMES. Notify Lender within ten (10) days of the
-----------------------
change of its name or the use of any trade name, assumed name, fictitious name
or division name not previously disclosed to Lender in writing.
(v) ERISA MATTERS. Promptly notify Lender of (x) the occurrence of any
--------------
"reportable event" (as defined in ERISA) which might result in the termination
by the Pension Benefit Guaranty Corporation (the "PBGC") of any employee benefit
plan ("Plan") covering any officers or employees of the Borrower, any benefits
of which are, or are required to be, guaranteed by the PBGC, (y) receipt of any
notice from the PBGC of its intention to seek termination of any Plan or
appointment of a trustee therefore or (z) its intention to terminate or withdraw
from any Plan.
(vi) ENVIRONMENTAL MATTERS. Immediately notify Lender upon becoming aware
----------------------
of any investigation, proceeding, complaint, order, directive, claim, citation
or notice with respect to any non-compliance with or violation of the
requirements of any Environmental Law by such Borrower or the generation, use,
storage, treatment, transportation, manufacture handling, production or disposal
of any Hazardous Materials or any other environmental, health or safety matter
which affects such Borrower or its business operations or assets or any
properties at which such Borrower has transported, stored or disposed of any
Hazardous Materials.
(vii) DEFAULT; MATERIAL ADVERSE CHANGE. Promptly advise Lender of any
-----------------------------------
material adverse change in the business, property, assets, prospects, operations
or condition, financial or otherwise, of each Borrower, the occurrence of any
Event of Default hereunder or the occurrence of any event which, if uncured,
will become an Event of Default after notice or lapse of time (or both). All of
the foregoing notices shall be provided by Borrowers to Lender in writing.
(c) COMPLIANCE WITH LAWS AND MAINTENANCE OF PERMITS.
-----------------------------------------------------
Each Borrower shall maintain all governmental consents, franchises,
certificates, licenses, authorizations, approvals and permits, the lack of which
would have a Material Adverse Effect on Borrowers and each Borrower shall remain
in compliance with all applicable federal, state, local and foreign statutes,
orders, regulations, rules and ordinances (including, without limitation,
Environmental Laws and statutes, orders, regulations, rules and ordinances
relating to taxes, employer and employee contributions and similar items,
securities, ERISA or employee health and safety) the failure with which to
comply would have a Material Adverse Effect on Borrowers, or either of them.
Following any determination by Lender that there is non-compliance, or any
condition which requires any action by or on behalf of Borrower in order to
avoid non-compliance, with any Environmental Law, at Borrowers' expense cause an
independent environmental engineer acceptable to Lender to conduct such tests of
the relevant site(s) as are appropriate and prepare and deliver a report setting
forth the results of such tests, a proposed plan for remediation and an estimate
of the costs thereof.
(d) INSPECTION AND AUDITS.
-----------------------
Borrowers shall permit Lender, or any Persons designated by it, to call at
Borrowers' places of business two times each year and after the occurrence and
during the continuance of an Event of Default at any reasonable times, and,
without hindrance or delay, to inspect the Collateral and to inspect, audit,
check and make extracts from each Borrower's books, records, journals, orders,
receipts and any correspondence and other data relating to each Borrower's
business, the Collateral or any transactions between the parties hereto, and
shall have the right to make such verification concerning each Borrower's
business as Lender may consider reasonable under the circumstances. Each
Borrower shall furnish to Lender such information relevant to Lender's rights
under this Agreement as Lender shall at any time and from time to time request.
Lender, through its officers, employees or agents shall have the right, at any
time and from time to time, in Lender's name, to verify the validity, amount or
any other matter relating to any of a Borrower's Accounts, by mail, telephone,
telegraph or otherwise. Borrowers authorize Lender to discuss the affairs,
finances and business of Borrowers with any officers, employees or directors of
Borrowers or with a Parent or any Affiliate or the officers, employees or
directors of a Parent or any Affiliate, and to discuss the financial condition
of Borrowers with Borrowers' independent public accountants. Any such
discussions shall be without liability to Lender or to Borrowers' independent
public accountants. Borrowers shall pay to Lender all customary fees and all
costs and out-of-pocket expenses incurred by Lender in the exercise of its
rights hereunder, and all of such fees, costs and expenses shall constitute
Liabilities hereunder, including normal audit fees and out-of-pocket expenses
related to such audit, including but not limited to, airfare, lodging, and
meals, to cover Lender's periodic examinations of Collateral, as well as
Borrowers' books and records. Audit fees will be charged at the rate of $10,000
for each audit, payable in advance. All of such fees, costs and expenses shall
be constituted Liabilities hereunder, shall be payable on demand and, until
paid, shall bear interest at the highest rate then applicable to Loans
hereunder.
(e) INSURANCE.
---------
Each Borrower shall:
(i) Keep the Collateral properly housed and insured for the full
insurable value thereof against loss or damage by fire, theft, explosion,
sprinklers, collision (in the case of motor vehicles) and such other risks as
are customarily insured against by Persons engaged in businesses similar to that
of such Borrower, with such companies, in such amounts, with such deductibles,
and under policies in such form, as shall be reasonably satisfactory to Lender.
Original (or certified) copies of such policies of insurance have been or shall
be, within thirty (30) days of the date hereof, delivered to Lender, together
with evidence of payment of all premiums therefore, and shall contain an
endorsement, in form and substance acceptable to Lender, showing loss under such
insurance policies payable to Lender. Such endorsement, or an independent
instrument furnished to Lender, shall provide that the insurance company shall
give Lender at least thirty (30) days written notice before any such policy of
insurance is altered or canceled and that no act, whether willful or negligent,
or default of a Borrower or any other Person shall affect the right of Lender to
recover under such policy of insurance in case of loss or damage. In addition,
each Borrower shall cause to be executed and delivered to Lender an assignment
of proceeds of its business interruption insurance policies. Each Borrower
hereby directs all insurers under all policies of insurance to pay all proceeds
payable thereunder directly to Lender. Each Borrower irrevocably makes,
constitutes and appoints Lender (and all officers, employees or agents
designated by Lender) as such Borrower's true and lawful attorney (and
agent-in-fact) for the purpose of making, settling and adjusting claims under
such policies of insurance, endorsing the name of such Borrower on any check,
draft, instrument or other item of payment for the proceeds of such policies of
insurance and making all determinations and decisions with respect to such
policies of insurance.
(ii) Maintain, at its expense, such public liability and third
party property damage insurance as is customary for Persons engaged in
businesses similar to that of Borrowers with such companies and in such amounts,
with such deductibles and under policies in such form as shall be reasonably
satisfactory to Lender and original (or certified) copies of such policies have
been or shall be, within ninety (90) days after the date hereof, delivered to
Lender, together with evidence of payment of all premiums therefore; each such
policy shall contain an endorsement showing Lender as additional insured
thereunder and providing that the insurance company shall give Lender at least
thirty (30) days written notice before any such policy shall be altered or
canceled.
If Borrowers at any time or times hereafter shall fail to obtain or maintain any
of the policies of insurance required above or to pay any premium relating
thereto, then Lender, without waiving or releasing any obligation or default by
Borrowers hereunder, may (but shall be under no obligation to) obtain and
maintain such policies of insurance and pay such premiums and take such other
actions with respect thereto as Lender deems advisable. Such insurance, if
obtained by Lender, may, but need not, protect Borrowers' interests or pay any
claim made by or against Borrowers with respect to the Collateral. Such
insurance may be more expensive than the cost of insurance Borrowers may be able
to obtain on its own and may be cancelled only upon Borrowers providing evidence
that it has obtained the insurance as required above. All sums disbursed by
Lender in connection with any such actions, including, without limitation, court
costs, expenses, other charges relating thereto and reasonable attorneys' fees,
shall constitute Loans hereunder, shall be payable on demand by Borrowers to
Lender and, until paid, shall bear interest at the highest rate then applicable
to Loans hereunder.
(f) COLLATERAL.
----------
Each Borrower shall keep the Collateral in good condition, repair and order
and shall make all necessary repairs to the Equipment and replacements thereof
so that the operating efficiency and the value thereof shall at all times be
preserved and maintained. Borrower shall permit Lender to examine any of the
Collateral at any time and wherever the Collateral may be located and, each
Borrower shall, immediately upon written request therefore by Lender, deliver to
Lender any and all evidence of ownership of any of the Equipment including,
without limitation, certificates of title and applications of title. Each
Borrower shall, at the written request of Lender, indicate on its records
concerning the Collateral a notation, in form satisfactory to Lender, of the
security interest of Lender hereunder.
(g) USE OF PROCEEDS.
-----------------
All monies and other property obtained by Borrowers from Lender pursuant to
this Agreement shall be used solely for business purposes of Borrowers.
(h) TAXES.
-----
Each Borrower shall file all required tax returns and pay all of its taxes
when due, including, without limitation, taxes imposed by federal, state or
municipal agencies, and shall cause any liens for taxes to be promptly released;
provided, that Borrower shall have the right to contest the payment of such
taxes in good faith by appropriate proceedings so long as (i) the amount so
contested is shown on such Borrower's financial statements; and (ii) the
contesting of any such payment does not give rise to a lien for taxes. If such
Borrower fails to pay any such taxes and in the absence of any such contest by
such Borrower, Lender may (but shall be under no obligation to) advance and pay
any sums required to pay any such taxes and/or to secure the release of any lien
therefore, and any sums so advanced by Lender shall constitute Loans hereunder,
shall be payable by such Borrower to Lender on demand, and, until paid, shall
bear interest at the highest rate then applicable to Loans hereunder.
(i) INTELLECTUAL PROPERTY.
----------------------
Each Borrower shall maintain adequate licenses, patents, patent
applications, copyrights, service marks, trademarks, trademark applications,
tradestyles and trade names to continue its business as heretofore conducted by
it or as hereafter conducted by it.
13. NEGATIVE COVENANTS.
-------------------
Until payment and satisfaction in full of all Liabilities and termination
of this Agreement, unless Borrowers obtain Lender's prior written consent
waiving or modifying any of such Borrower's covenants hereunder in any specific
instance, each Borrower agrees as follows:
(a) GUARANTIES.
----------
Except in connection with the LaSalle Bank Letter of Credit, Borrowers
shall not assume, guarantee or endorse, or otherwise become liable in connection
with, the obligations of any Person, except by endorsement of instruments for
deposit or collection or similar transactions in the ordinary course of
business.
(b) INDEBTEDNESS.
------------
Borrowers shall not create, incur, assume or become obligated (directly or
indirectly), for any loans or other indebtedness of borrowed money other than
the loans, except that Borrowers may (i) incur a reimbursement obligation to
LaSalle in accordance with the LaSalle Bank Letter of Credit agreements; (ii)
borrow money from a person other than Lender on an unsecured and subordinated
basis if a subordination agreement in favor of Lender and in form and substance
satisfactory to Lender is executed and delivered to Lender relative thereto;
(iii) maintain its present indebtedness listed on Schedule 11(n) hereto; (iii)
--------------
incur unsecured indebtedness to trade creditors in the ordinary course of
business; (iv) incur purchase money indebtedness or capitalized lease
obligations in connection with Capital; and (v) incur operating lease
obligations.
(c) LIENS.
-----
Borrowers shall not grant or permit to exist (voluntarily or involuntarily)
any lien, claim, security interest or other encumbrance whatsoever on any of its
assets, other than Permitted Liens.
(d) MERGERS, SALES, ACQUISITIONS, SUBSIDIARIES AND OTHER TRANSACTIONS
-------------------------------------------------------------------
OUTSIDE THE ORDINARY COURSE OF BUSINESS.
-------------------------------------------
Neither Borrower shall (i) enter into any merger or consolidation; (ii)
change the state of such Borrower's organization or enter into any transaction
which has the effect of changing such Borrower's state of organization (iii)
sell, lease or otherwise dispose of any of its assets other than in the ordinary
course of business; (iv) purchase the stock, other equity interests or all or a
material portion of the assets of any Person or division of such Person; or (v)
enter into any other transaction outside the ordinary course of such Borrower's
business, including, without limitation, any purchase, redemption or retirement
of any shares of any class of its stock or any other equity interest. Neither
Borrower shall form any Subsidiaries or enter into any joint ventures or
partnerships with any other Person.
(e) DIVIDENDS AND DISTRIBUTIONS.
-----------------------------
Borrowers shall not declare or pay any dividend or other distribution
(whether in cash or in kind) on any class of its stock (if Borrower is a
corporation) or on account of any equity interest in Borrower (if Borrower is a
partnership, limited liability company or other type of entity).
(f) INVESTMENTS; LOANS.
-------------------
Neither Borrower shall purchase or otherwise acquire, or contract to
purchase or otherwise acquire, the obligations or stock of any Person, other
than direct obligations of the United States; nor shall either Borrower lend or
otherwise advance funds to any Person except for advances made to employees,
officers and directors for travel and other expenses arising in the ordinary
course of business.
(g) FUNDAMENTAL CHANGES, LINE OF BUSINESS.
-----------------------------------------
Neither Borrower shall amend its organizational documents or change its
Fiscal Year or enter into a new line of business materially different from such
Borrower's current business.
(h) EQUIPMENT.
---------
Borrowers shall not permit any Equipment to become an accession to any
other personal property unless such personal property is subject to a second
priority lien in favor of Lender, subject to the Permitted Liens.
(i) AFFILIATE TRANSACTIONS.
-----------------------
Except as set forth on Schedule 11(i) hereto or as permitted pursuant to
--------------
subsection 11(c) hereof, Borrowers shall not conduct, permit or suffer to be
---------------
conducted, transactions with Affiliates for the purchase or sale of Inventory or
services in the ordinary course of business pursuant to terms that are less
favorable to Borrowers than the terms upon which such transfers or transactions
would have been made had they been made to or with a Person that is not an
Affiliate.
(j) REINSURANCE RISK.
-----------------
Borrower shall cause Hartville Insurance Company, LTD. to stop writing or
incurring insurance and/or reinsurance risk based in whole or in part, or
directly or indirectly, on the LaSalle Bank Letter of Credit at any time after
the occurrence of an Event of Default and/or after the Original Term of this
Agreement or, if the Original Term has been extended as provided in Section 10
hereof, the Renewal Term of this Agreement.
14. JOINT AND SEVERAL LIABILITY.
------------------------------
(a) Notwithstanding anything to the contrary contained herein, all
Liabilities of each Borrower hereunder shall be joint and several obligations of
Borrowers;
(b) Notwithstanding any provisions of this Agreement to the contrary, it is
intended that the joint and several nature of the Liabilities of Borrowers and
the liens and security interests granted by borrowers to secure the Liabilities,
not constitute a "Fraudulent Conveyance" (as defined below). Consequently,
Lender and Borrowers agree that if the Liabilities of a Borrower, or any liens
or security interests granted by such Borrower securing the Liabilities would,
but for the application of this sentence, constitute a Fraudulent Conveyance,
the Liabilities of such Borrower and the liens and security interests securing
such Liabilities shall be valid and enforceable only to the maximum extent that
would not cause such Liabilities or such lien or security interest to constitute
a Fraudulent Conveyance, and the Liabilities of such Borrower and this Agreement
shall automatically be deemed to have been amended accordingly. For purposes
hereof, "Fraudulent conveyance" means a fraudulent conveyance under Section 548
of Chapter 11 of Title II of the United States Code (11 U.S.C. Sec. 101, et
seq.), as amended (the "Bankruptcy Code") or a fraudulent conveyance or
fraudulent transfer under the applicable provision of any fraudulent conveyance
or fraudulent transfer law or similar law of any state, nation or other
governmental unit, as in effect from time to time;
(c) Each Borrower assumes responsibility for keeping itself informed of the
financial condition of the other Borrowers, and any and all endorsers and/or
guarantors of any instrument or document evidencing all or any part of such
other Borrower's Liabilities and of all other circumstances bearing upon the
risk of nonpayment by such other Borrowers of their Liabilities and each
Borrower agrees that Lender shall not have any duty to advise such Borrower of
information known to Lender regarding such condition or any such circumstances
or to undertake any investigation not a part of its regular business routine. If
Lender, in its sole discretion, undertakes at any time or from time to time to
provide any such information to a Borrower, Lender shall not be under any
obligation to update any such information or to provide any such information to
such Borrower on any subsequent occasion;
(d) Lender is hereby authorized, without notice or demand and without
affecting the liability of any Borrower hereunder, to, at a time and from time
to time (i) renew, extend, accelerate or otherwise change the time for payment
of, or other terms relating to a Borrower's Liabilities or otherwise modify,
amend or change the terms of any promissory note or other agreement, document or
instrument now or hereafter executed by a Borrower and delivered to Lender; (ii)
accept partial payments on a Borrower's Liabilities; (iii) take and hold
security or collateral for the payment of a Borrower's Liabilities; (iii) take
and hold security or collateral for the payment of a Borrower's Liabilities
hereunder or for the payment of any guaranties of a Borrower's Liabilities or
other liabilities of a Borrower and exchange, enforce, waive and release any
such security or collateral; (iv) apply such security or collateral and direct
the order or manner of sale thereof as Lender, in its sole discretion may
determine; and (v) settle, release, compromise, collect or otherwise liquidate a
Borrower's Liabilities and any security or collateral therefore in any manner,
without affecting or impairing the obligations of the other Borrowers. Lender
shall have the exclusive right to determine the time and manner of application
of any payments or credits, whether received from a Borrower or any other
source, and such determination shall be binding on such Borrower. All such
payments and credits may be applied, reversed and reapplied, in whole or in
part, to any of a Borrower's Liabilities as Lender shall determine in its sole
discretion without affecting the validity or enforceability of the Liabilities
of the other Borrowers;
(e) Each Borrower hereby agrees that, except as hereinafter provided, its
obligations hereunder shall be unconditional, irrespective of (i) the absence of
any attempt to collect a Borrower's Liabilities from and Borrower or any
guarantor or other action to enforce the same; (ii) the waiver or consent by
Lender with respect to any provision of any instrument evidencing Borrowers'
Liabilities, or any part thereof, or any other agreement heretofore, now or
hereafter executed by a Borrower and delivered to Lender; (iii) failure by
Lender to take any steps to perfect and maintain its security interest in, or to
preserve its rights to, any security or collateral for Borrower's Liabilities;
(iv) the institution of any proceeding under the Bankruptcy Code, or any similar
proceeding, by or against a Borrower or Lender's election in any such proceeding
of the application of Section 1111(b)(2) of the Bankruptcy Code; (v) any
borrowing or grant of a security interest by any Borrower as
debtor-in-possession, under Section 364 of the Bankruptcy Code; (vi) the
disallowance, under Section 502 of the Bankruptcy Code, of all or any portion of
Lender's claim(s) for repayment of any of Borrowers' Liabilities; or (vii) any
other circumstance which might otherwise constitute a legal or equitable
discharge or defense of a guarantor; and
(f) No payment made by or for the account of a Borrower including, without
limitations, (i) a payment made by such Borrower on behalf of another Borrower's
Liabilities or (ii) a payment made by any other person under any guaranty, shall
entitle such Borrower, by subrogation or otherwise, to any payment from such
other Borrower or from or out of such other Borrower's property and such
Borrower shall not exercise any right or remedy against such other Borrower or
any property of such other Borrower by reason of any performance of such
Borrower of its joint and several obligations hereunder.
15. DEFAULT.
-------
The occurrence of any one or more of the following events shall constitute
an "Event of Default" by Borrowers hereunder:
(a) PAYMENT.
-------
The failure of any Obligor to pay when due, declared due, or demanded by
Lender, any of the Liabilities and such failure shall continue for ten (10) days
thereafter.
(b) BREACH OF THIS AGREEMENT AND THE OTHER AGREEMENTS.
--------------------------------------------------------
The failure of any Obligor to perform, keep or observe any of the
covenants, conditions, promises, agreements or obligations of such Obligor under
this Agreement or any of the Other Agreements; provided that any such failure by
an Obligor under subparagraphs 12(b)(ii), 11(d) (but only with respect to
involuntarily created liens, claims, security interests and encumbrances),
12(c), (11(q), 11(r), 11(s) and 11(t) of this Agreement shall not constitute an
Event of Default hereunder until the fifteenth (15th) day following the
occurrence thereof.
(c) BREACHES OF OTHER OBLIGATIONS.
--------------------------------
The failure of any Obligor to perform, keep or observe any of the
covenants, conditions, promises, agreements or obligations of such Obligor under
any other agreement with any Person if such failure could reasonably be expected
to have a Material Adverse Effect on such Obligor.
(d) BREACH OF REPRESENTATIONS AND WARRANTIES.
--------------------------------------------
The making or furnishing by any Obligor to Lender of any representation,
warranty, certificate, schedule, report or other communication within or in
connection with this Agreement or the Other Agreements or in connection with any
other agreement between such Obligor and Lender, which is untrue or misleading
in any respect.
(e) LOSS OF COLLATERAL.
--------------------
The loss, theft, damage or destruction of, or (except as permitted hereby)
sale, lease or furnishing under a contract of service of, any of the Collateral
in excess of $100,000 that is not covered by insurance.
(f) LEVY, SEIZURE OR ATTACHMENT.
------------------------------
The making or any attempt by any Person to make any levy, seizure or
attachment upon any of the Collateral.
(g) BANKRUPTCY OR SIMILAR PROCEEDINGS.
------------------------------------
The commencement of any proceedings in bankruptcy by or against any Obligor
or for the liquidation or reorganization of any Obligor, or alleging that such
Obligor is insolvent or unable to pay its debts as they mature, or for the
readjustment or arrangement of any Obligor's debts, whether under the United
States Bankruptcy Code or under any other law, whether state or federal, now or
hereafter existing, for the relief of debtors, or the commencement of any
analogous statutory or non-statutory proceedings involving any Obligor;
provided, however, that if such commencement of proceedings against such Obligor
is involuntary, such action shall not constitute an Event of Default unless such
proceedings are not dismissed within thirty (30) days after the commencement of
such proceedings.
(h) APPOINTMENT OF RECEIVER.
-------------------------
The appointment of a receiver or trustee for any Obligor, for any of the
Collateral or for any substantial part of any Obligor's assets or the
institution of any proceedings for the dissolution, or the full or partial
liquidation, or the merger or consolidation, of any Obligor which is a
corporation, limited liability company or a partnership; provided, however, that
if such appointment or commencement of proceedings against such Obligor is
involuntary, such action shall not constitute an Event of Default unless such
appointment is not revoked or such proceedings are not dismissed within
forty-five (45) days after the commencement of such proceedings.
(i) JUDGMENT.
--------
The entry of any judgment or order against any Obligor in excess of
$25,000, which remains unsatisfied or undischarged and in effect for thirty (30)
days after such entry without a stay of enforcement or execution.
(j) DEATH OR DISSOLUTION OF OBLIGOR.
-----------------------------------
The death of W. Xxxxxxx Xxxxx III, or of any general partner who is a
natural Person of any Obligor which is a partnership, or any member who is a
natural Person of any Obligor which is a limited liability company or the
dissolution of any Obligor which is a partnership, limited liability company,
corporation or other entity.
(k) DEFAULT OR REVOCATION OF GUARANTY.
-------------------------------------
The occurrence of an event of default under, or the revocation or
termination of, any agreement, instrument or document executed and delivered by
any Person to Lender pursuant to which such Person has guaranteed to Lender the
payment of all or any of the Liabilities or has granted Lender a security
interest in or lien upon some or all of such Person's real and/or personal
property to secure the payment of all or any of the Liabilities.
(l) CRIMINAL PROCEEDINGS.
---------------------
The institution in any court of a criminal proceeding against any Obligor,
or the indictment of any Obligor for any crime.
(m) CHANGE OF MANAGEMENT.
----------------------
If W. Xxxxxxx Xxxxx III shall cease to be President of Hartville and
Petsmarketing at any time.
16. REMEDIES UPON AN EVENT OF DEFAULT.
--------------------------------------
(a) Upon the occurrence of an Event of Default described in subsection
----------
15(g) hereof, all of the Liabilities shall immediately and automatically become
-----
due and payable, without notice of any kind. Upon the occurrence of any other
Event of Default, all Liabilities may, at the option of Lender, and without
demand, notice or legal process of any kind, be declared, and immediately shall
become, due and payable.
(b) Upon the occurrence of an Event of Default, Lender may exercise
from time to time any rights and remedies available to it under the Uniform
Commercial Code and any other applicable law in addition to, and not in lieu of,
any rights and remedies expressly granted in this Agreement or in any of the
Other Agreements and all of Lender's rights and remedies shall be cumulative and
non-exclusive to the extent permitted by law. In particular, but not by way of
limitation of the foregoing, Lender may, without notice, demand or legal process
of any kind, take possession of any or all of the Collateral (in addition to
Collateral of which it already has possession), wherever it may be found, and
for that purpose may pursue the same wherever it may be found, and may enter
onto any of Borrowers' premises where any of the Collateral may be, and search
for, take possession of, remove, keep and store any of the Collateral until the
same shall be sold or otherwise disposed of, and Lender shall have the right to
store the same at any of Borrowers' premises without cost to Lender. At
Lender's request, Borrowers shall, at Borrowers' expense, assemble the
Collateral and make it available to Lender at one or more places to be
designated by Lender and reasonably convenient to Lender and Borrowers.
Borrowers recognize that if Borrowers fail to perform, observe or discharge any
of their Liabilities under this Agreement or the Other Agreements, no remedy at
law will provide adequate relief to Lender, and agrees that Lender shall be
entitled to temporary and permanent injunctive relief in any such case without
the necessity of proving actual damages. Any notification of intended
disposition of any of the Collateral required by law will be deemed to be a
reasonable authenticated notification of disposition if given at least ten (10)
days prior to such disposition and such notice shall (i) describe Lender and
Borrowers, (ii) describe the Collateral that is the subject of the intended
disposition, (iii) state the method of the intended disposition, (iv) state that
Borrowers are entitled to an accounting of the Liabilities and state the charge,
if any, for an accounting and (v) state the time and place of any public
disposition or the time after which any private sale is to be made. Lender may
disclaim any warranties that might arise in connection with the sale, lease or
other disposition of the Collateral and has no obligation to provide any
warranties at such time. Any Proceeds of any disposition by Lender of any of
the Collateral may be applied by Lender to the payment of expenses in connection
with the Collateral, including, without limitation, legal expenses and
reasonable attorneys' fees, and any balance of such Proceeds may be applied by
Lender toward the payment of such of the Liabilities, and in such order of
application, as Lender may from time to time elect.
17. CONDITIONS PRECEDENT. The obligation of Lender to fund the Loan is
--------------------
subject to the satisfaction or waiver on or before February 19, 2003 of the
following conditions precedent: Lender shall have received each of the
following agreements, opinions, certificates and other documents as follows:
(i) This Agreement;
(ii) $3,000,000 Promissory Note (Secured);
(iii) Secretary's Certificate of each Borrower;
(iv) Good Standing Certificate for each Borrower dated within twenty days of
this date;
(v) Unanimous Written Consent of the Directors of each Borrower authorizing
the Loans and the execution and delivery of this Agreement;
(vi) Acknowledgment of the filing of a UCC-1 Financing Statement naming (a)
Hartville as Debtor in favor of Lender with the Office of the Nevada
Secretary of State and (b) Petsmarketing as Debtor in favor of Lender in
the Office of the Ohio Secretary of State;
(vii) Guaranty of W. Xxxxxxx Xxxxx III and Whiskers, Inc.;
(viii) Stock Pledge Agreement from each of Hartville, W. Xxxxxxx Xxxxx III
and Whiskers, Inc. together with the stock certificates evidencing
each stock pledge and related stock powers executed in blank;
(ix) Warrant Agreement whereby Hartville agrees to issue to Lender 300,000
restricted warrants to purchase the stock of Hartville as provided
in such Agreement.
(x) Letter Agreement of Hartville Insurance Company regarding incurring new
reinsurance risk after the Original Term or, if applicable, Renewal Term
and the termination of the LaSalle Letter of Credit; and
(xi) Opinion of Borrower's counsel in form satisfactory to Lender.
18. INDEMNIFICATION.
---------------
Borrowers agree to defend (with counsel satisfactory to Lender), protect,
indemnify and hold harmless Lender, each affiliate or subsidiary of Lender, and
each of their respective officers, directors, employees, attorneys and agents
(each an "Indemnified Party") from and against any and all liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, claims,
costs, expenses and disbursements of any kind or nature (including, without
limitation, the disbursements and the reasonable fees of counsel for each
Indemnified Party in connection with any investigative, administrative or
judicial proceeding, whether or not the Indemnified Party shall be designated a
party thereto), which may be imposed on, incurred by, or asserted against, any
Indemnified Party (whether direct, indirect or consequential and whether based
on any federal, state or local laws or regulations, including, without
limitation, securities laws and regulations, Environmental Laws and commercial
laws and regulations, under common law or in equity, or based on contract or
otherwise) in any manner relating to or arising out of this Agreement or any
Other Agreement, or any act, event or transaction related or attendant thereto,
the making or issuance and the management of the Loans or any Letters of Credit
or the use or intended use of the proceeds of the Loans or any Letters of
Credit; provided, however, that Borrowers shall not have any obligation
hereunder to any Indemnified Party with respect to matters caused by or
resulting from the willful misconduct or gross negligence of such Indemnified
Party. To the extent that the undertaking to indemnify set forth in the
preceding sentence may be unenforceable because it is violative of any law or
public policy, Borrowers shall satisfy such undertaking to the maximum extent
permitted by applicable law. Any liability, obligation, loss, damage, penalty,
cost or expense covered by this indemnity shall be paid to each Indemnified
Party on demand, and, failing prompt payment, shall, together with interest
thereon at the highest rate then applicable to Loans hereunder from the date
incurred by each Indemnified Party until paid by Borrowers, be added to the
Liabilities of Borrowers and be secured by the Collateral. The provisions of
this Section 18 shall survive the satisfaction and payment of the other
-----------
Liabilities and the termination of this Agreement.
19. NOTICE.
------
All written notices and other written communications with respect to this
Agreement shall be sent by ordinary, certified or overnight mail, by telecopy or
delivered in person, and in the case of Lender shall be sent to it at 00000
Xxxxx Xxxxxxxx, Xxxxxxx, Xxxxxxxx 00000, Attention: Xxxxxxxx X. Xxxxx (847)
726-2217, and in the case of Borrowers shall be sent to it at its principal
place of business set forth on Exhibit A hereto or as otherwise directed by
---------
Borrowers in writing. All notices shall be deemed received upon actual receipt
thereof or refusal of delivery.
20. CHOICE OF GOVERNING LAW; CONSTRUCTION; FORUM SELECTION.
------------------------------------------------------------
This Agreement and the Other Agreements are submitted by Borrowers to
Lender for Lender's acceptance or rejection at Lender's principal place of
business as an offer by Borrowers to borrow monies from Lender now and from time
to time hereafter, and shall not be binding upon Lender or become effective
until accepted by Lender, in writing, at said place of business. If so accepted
by Lender, this Agreement and the Other Agreements shall be deemed to have been
made at said place of business. THIS AGREEMENT AND THE OTHER AGREEMENTS SHALL
BE GOVERNED AND CONTROLLED BY THE INTERNAL LAWS OF THE STATE OF ILLINOIS AS TO
INTERPRETATION, ENFORCEMENT, VALIDITY, CONSTRUCTION, EFFECT, AND IN ALL OTHER
RESPECTS, INCLUDING, WITHOUT LIMITATION, THE LEGALITY OF THE INTEREST RATE AND
OTHER CHARGES, BUT EXCLUDING PERFECTION OF THE SECURITY INTERESTS IN COLLATERAL
LOCATED OUTSIDE OF THE STATE OF ILLINOIS, WHICH SHALL BE GOVERNED AND CONTROLLED
BY THE LAWS OF THE RELEVANT JURISDICTION IN WHICH SUCH COLLATERAL IS LOCATED.
If any provision of this Agreement shall be held to be prohibited by or invalid
under applicable law, such provision shall be ineffective only to the extent of
such prohibition or invalidity, without invalidating the remainder of such
provision or remaining provisions of this Agreement.
To induce Lender to accept this Agreement, each Borrower irrevocably agrees
that, subject to Lender's sole and absolute election, ALL ACTIONS OR PROCEEDINGS
IN ANY WAY, MANNER OR RESPECT, ARISING OUT OF OR FROM OR RELATED TO THIS
AGREEMENT, THE OTHER AGREEMENTS OR THE COLLATERAL SHALL BE LITIGATED IN COURTS
HAVING SITUS WITHIN THE CITY OF CHICAGO, STATE OF ILLINOIS. EACH BORROWER HEREBY
CONSENTS AND SUBMITS TO THE JURISDICTION OF ANY LOCAL, STATE OR FEDERAL COURTS
LOCATED WITHIN SAID CITY AND STATE. Borrowers irrevocably consent to service of
process by mail. EACH BORROWER HEREBY WAIVES ANY RIGHT IT MAY HAVE TO TRANSFER
OR CHANGE THE VENUE OF ANY LITIGATION BROUGHT AGAINST SUCH BORROWER BY LENDER IN
ACCORDANCE WITH THIS SECTION.
21. MODIFICATION AND BENEFIT OF AGREEMENT.
-----------------------------------------
This Agreement and the Other Agreements may not be modified, altered or
amended except by an agreement in writing signed by Borrowers or such other
person who is a party to such Other Agreement and Lender. Borrowers may not
sell, assign or transfer this Agreement, or the Other Agreements or any portion
thereof, including, without limitation, Borrowers' rights, titles, interest,
remedies, powers or duties hereunder and thereunder. Borrowers hereby consent
to Lender's sale, assignment, transfer or other disposition, at any time and
from time to time hereafter, of this Agreement, or the Other Agreements, or of
any portion thereof, or participations therein, including, without limitation,
Lender's rights, titles, interest, remedies, powers and/or duties and agrees
that it shall execute and deliver such documents as Lender may request in
connection with any such sale, assignment, transfer or other disposition.
22. HEADINGS OF SUBDIVISIONS.
--------------------------
The headings of subdivisions in this Agreement are for convenience of
reference only, and shall not govern the interpretation of any of the provisions
of this Agreement.
23. POWER OF ATTORNEY.
-------------------
Each Borrower acknowledges and agrees that its appointment of Lender as its
attorney and agent-in-fact for the limited purposes specified in this Agreement
is an appointment coupled with an interest and shall be irrevocable until all of
the Liabilities are satisfied and paid in full and this Agreement is terminated.
24. CONFIDENTIALITY.
---------------
Borrowers and Lender hereby agree and acknowledge that any and all
information relating to Borrowers which is (i) furnished by Borrowers to Lender
(or to any affiliate of Lender); and (ii) non-public, confidential or
proprietary in nature, shall be kept confidential by Lender or such affiliate in
accordance with applicable law; provided, however, that such information and
other credit information relating to Borrowers may be distributed by Lender or
such affiliate to Lender's or such affiliate's directors, officers, employees,
attorneys, affiliates, assignees, participants, auditors, agents and regulators,
and upon the order of a court or other governmental agency having jurisdiction
over Lender or such affiliate, to any other party. Borrowers and Lender further
agree that this provision shall survive the termination of this Agreement.
Notwithstanding the foregoing, Borrowers hereby consent to Lender publishing a
tombstone or similar advertising material relating to the financing transaction
contemplated by this Agreement.
25. BROKERAGE COMMISSION; THIRD PARTY FEES:
------------------------------------------
Lender shall not be responsible for any brokerage or other fee to Summit
Financial Partners or any other party who assisted Borrowers to arrange the
credit being extended to Borrowers pursuant to this Agreement. Borrower shall
have the sole responsibility to pay any such fee and will indemnify Lender with
respect thereto in accordance with Section 18 above.
26. COUNTERPARTS.
------------
This Agreement and any amendments, waivers, consents or supplements may be
executed in any number of counterparts and by different parties hereto in
separate counterparts, each of which, when so executed and delivered, shall be
deemed an original, but all of which counterparts together shall constitute but
one agreement.
27. ELECTRONIC SUBMISSIONS.
-----------------------
Upon not less than thirty (30) days' prior written notice (the "APPROVED
ELECTRONIC FORM NOTICE"), Lender may permit or require that any of the
documents, certificates, forms, deliveries or other communications, authorized,
required or contemplated by this Agreement or the Other Agreements, be submitted
to Lender in "APPROVED ELECTRONIC FORM" (as hereafter defined), subject to any
reasonable terms, conditions and requirements in the
applicable Approved Electronic Forms Notice. For purposes hereof "ELECTRONIC
FORM" means e-mail, e-mail attachments, data submitted on web-based forms or any
other communication method that delivers machine readable data or information to
Lender, and "APPROVED ELECTRONIC FORM" means an Electronic Form that has been
approved in writing by Lender (which approval has not been revoked or modified
by Lender) and sent to Borrowers in an Approved Electronic Form Notice. Except
as otherwise specifically provided in the applicable Approved Electronic Form
Notice, any submissions made in an applicable Approved Electronic Form shall
have the same force and effect that the same submissions would have had if they
had been submitted in any other applicable form authorized, required or
contemplated by this Agreement or the Other Agreements.
28. WAIVER OF JURY TRIAL; OTHER WAIVERS.
----------------------------------------
(a) EACH BORROWER AND LENDER EACH HEREBY WAIVES ALL RIGHTS TO TRIAL BY JURY
IN ANY ACTION OR PROCEEDING WHICH PERTAINS DIRECTLY OR INDIRECTLY TO THIS
AGREEMENT, ANY OF THE OTHER AGREEMENTS, THE LIABILITIES, THE COLLATERAL, ANY
ALLEGED TORTIOUS CONDUCT BY EACH BORROWER OR LENDER OR WHICH, IN ANY WAY,
DIRECTLY OR INDIRECTLY, ARISES OUT OF OR RELATES TO THE RELATIONSHIP BETWEEN
EACH BORROWER AND LENDER. IN NO EVENT SHALL LENDER BE LIABLE FOR LOST PROFITS OR
OTHER SPECIAL OR CONSEQUENTIAL DAMAGES.
(b) Each Borrower hereby waives demand, presentment, protest and notice of
nonpayment, and further waives the benefit of all valuation, appraisal and
exemption laws.
(c) Each Borrower hereby waives the benefit of any law that would otherwise
restrict or limit Lender or any affiliate of Lender in the exercise of its
right, which is hereby acknowledged and agreed to, to set-off against the
Liabilities, without notice at any time hereafter, any indebtedness, matured or
unmatured, owing by Lender or such affiliate of Lender to each Borrower,
including, without limitation any deposit account at Lender or such affiliate.
(d) OTHER THAN NOTICE, IF ANY, AS SPECIFICALLY PROVIDED IN THIS AGREEMENT,
EACH BORROWER HEREBY WAIVES ALL RIGHTS TO NOTICE AND HEARING OF ANY KIND PRIOR
TO THE EXERCISE BY LENDER OF ITS RIGHTS TO REPOSSESS THE COLLATERAL OF SUCH
BORROWER WITHOUT JUDICIAL PROCESS OR TO REPLEVY, ATTACH OR LEVY UPON SUCH
COLLATERAL.
(e) Lender's failure, at any time or times hereafter, to require strict
performance by Borrower of any provision of this Agreement or any of the Other
Agreements shall not waive, affect or diminish any right of Lender thereafter to
demand strict compliance and performance therewith. Any suspension or waiver by
Lender of an Event of Default under this Agreement or any default under any of
the Other Agreements shall not suspend, waive or affect any other Event of
Default under this Agreement or any other default under any of the Other
Agreements, whether the same is prior or subsequent thereto and whether of the
same or of a different kind or character. No delay on the part of Lender in the
exercise of any right or remedy under this Agreement or any Other Agreement
shall preclude other or further exercise thereof or the exercise of any right or
remedy. None of the undertakings, agreements, warranties, covenants and
representations of Borrower contained in this Agreement or any of the Other
Agreements and no Event of Default under this Agreement or default under any of
the Other Agreements shall be deemed to have been suspended or waived by Lender
unless such suspension or waiver is in writing, signed by a duly authorized
officer of Lender and directed to such Borrower specifying such suspension or
waiver.
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as
of the date first written above.
BORROWERS:
HARTVILLE GROUP, INC.
By:/s/ W. Xxxxxxx Xxxxx III
------------------------
Name: W. Xxxxxxx Xxxxx III
Title: President
PETSMARKETING XXXXXXXXX.XXX AGENCY, INC.
By:/s/ W. Xxxxxxx Xxxxx III
------------------------
Name: W. Xxxxxxx Xxxxx III
Title: President
LENDER:
SAMIR FINANCIAL II, L.L.C., an Illinois
limited liability company
By: /s/ Xxxxxxxx X. Xxxxx
---------------------
Name: Xxxxxxxx X. Xxxxx
Title: Manager
EXHIBIT A -- BUSINESS AND COLLATERAL LOCATIONS
Attached to and made a part of that certain Loan and Security Agreement of
even date herewith between HARTVILLE GROUP, INC. and PETSMARKETING XXXXXXXXX.XXX
AGENCY, INC. ("BORROWERS") and SAMIR FINANCIAL II, L.L.C. ("LENDER").
Borrowers' Business Locations (please indicate which location is the
principal place of business and at which locations originals and all copies of
Borrower's books, records and accounts are kept).
1. 0000 X. Xxxx Xxxxxx
Xxxxx Xxxxxx, Xxxx 00000
EXHIBIT B - COMPLIANCE CERTIFICATE
Attached to and made a part of that certain Loan and Security Agreement, as
it may be amended in accordance with its terms from time to time, including all
exhibits attached thereto (the "AGREEMENT") of even date herewith between
HARTVILLE GROUP, INC. PETSMARKETING XXXXXXXXX.XXX AGENCY, INC. ("BORROWERS") and
SAMIR FINANCIAL II, L.L.C. ("LENDER").
This Certificate is submitted pursuant to subsection 9(c) of the Agreement.
The undersigned hereby certifies to Lender that as of the date of this
Certificate:
1. The undersigned is the President of [Hartville/Petsmarketing].
2. There exists no event or circumstance which is or which with the
passage of time, the giving of notice, or both would constitute an Event of
Default, as that term is defined in the Agreement, or, if such an event of
circumstance exists, a writing attached hereto specifies the nature thereof, the
period of existence thereof and the action that Hartville/Petsmarketing has
taken or proposes to take with respect thereto.
3. No material adverse change in the condition, financial or otherwise,
business, property, or results of operations of Hartville/Petsmarketing has
occurred , or, if such a change has occurred, a writing attached
---------
hereto specifies the nature thereof and the action that Hartville/Petsmarketing
has taken or proposes to take with respect thereto.
4. Borrower is in compliance with the representations, warranties and
covenants in the Agreement, or, if Hartville/Petsmarketing is not in compliance
with any representations, warranties or covenants in the Agreement, a writing
attached hereto specifies the nature thereof, the period of existence thereof
and the action that Hartville/Petsmarketing has taken or proposes to take with
respect thereto.
5. The financial statements of Hartville/Petsmarketing being concurrently
delivered herewith have been prepared in accordance with generally accepted
accounting principles consistently applied and there have been no material
changes in accounting policies or financial reporting practices of
Hartville/Petsmarketing since or, if any such change has occurred,
--------------
such changes are set forth in a writing attached hereto.
6. Attached hereto is a true and correct calculation of the financial
covenants contained in the Agreement.
HARTVILLE GROUP, INC. / PETSMARKETING
XXXXXXXXX.XXX AGENCY, INC.
By:
------------------------------------
Its:
------------------------------------
EXHIBIT C - COMMERCIAL TORT CLAIMS
None.
SCHEDULE 11(F) - LITIGATION
None.
SCHEDULE 11(H) - AFFILIATE TRANSACTIONS
SCHEDULE 11(I) - NAMES & TRADE NAMES
Petshealth Care Plan
SCHEDULE 11(M) - INDEBTEDNESS
SCHEDULE 11(O) - PARENT, SUBSIDIARIES AND AFFILIATES
Whiskers, Inc. owns 90% of the outstanding stock of Hartville Group, Inc.
and Hartville Group owns 100% of Petsmarketing Xxxxxxxxx.xxx Agency. Inc. and
Hartville Insurance Company, Ltd
SCHEDULE 11(Q) - EMPLOYEE MATTERS
SCHEDULE 11(S) - ENVIRONMENTAL MATTERS
None.
SCHEDULE 11(T) - ERISA MATTERS.
None.
