Exhibit 10.18
CREDIT AGREEMENT
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This Credit Agreement (the "Agreement") is entered into as of this
31/st/ day of December, 2001, by and between OURPET'S COMPANY, a Colorado
corporation ("OurPet's"), and VIRTU COMPANY, an Ohio corporation ("Virtu")
(OurPet's and Virtu are each individually referred to as "Corporation" and
collectively as "Corporations"), XXXXXX XXXXXXX, individually as a natural
person ("ST") and XXXXXXXXX X. XXXXXXX, individually as a natural person ("EST")
(OurPet's, Virtu, ST and EST are hereinafter collectively referred to as
"Borrower"), jointly and severally, and FIRSTMERIT BANK, N.A., a national
banking association (hereinafter referred to as "Bank").
Section 1. Definitions.
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Certain capitalized terms have the meanings set forth in Section 8.1
hereof or in the Security Agreement. All financial terms used in this Agreement
but not defined herein or in the Security Agreement have the meanings given to
them by generally accepted accounting principles. All other undefined terms have
the meanings given to them in the Uniform Commercial Code as in effect from time
to time in the State of Ohio.
Section 2. Loan.
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2.1 Revolving Credit Loans. (a) Subject to the terms and conditions
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hereof, Bank hereby extends to Borrower a line of credit facility (the "Line of
Credit Facility") under which Bank will make loans (the "Revolving Loans") to
Borrower at Borrower's request from time to time during the term of this
Agreement in amounts up to the lesser of (i) One Million Five Hundred Thousand
and no/100 Dollars ($1,500,000.00) or (ii) the sum of (A) Seventy-Five Percent
(75%) of the net amount of Corporations' Eligible Accounts, plus (B) Forty
Percent (40%) of the net amount of Corporations' Eligible Inventory, provided,
however, that Revolving Loans outstanding at any time based upon Eligible
Inventory shall not exceed Seven Hundred Fifty Thousand and no/100 Dollars
($750,000.00). However, Bank shall have sole discretion at all times as to
whether or not to make any Revolving Loans. Borrower may borrow, prepay (without
penalty or charge), and reborrow under the Line of Credit Facility, provided
that the principal amount of all Revolving Loans outstanding at any one time
under the Line of Credit Facility shall not exceed the foregoing limits. If the
amount of Revolving Loans outstanding at any time under the Line of Credit
Facility exceeds the limits set forth above, Borrower shall immediately pay the
amount of such excess to Bank in cash.
(b) Borrower may request a Revolving Loan by written or telephone
notice to Bank. Bank will make Revolving Loans by crediting the amount thereof
to Borrower's demand deposit account at Bank. Loan proceeds shall be used for
Corporation's general working capital and other related corporate purposes and
for no other purposes.
(c) On the date hereof, Borrower shall duly execute and deliver to
Bank a Revolving Note in the form of Exhibit 2.1 attached hereto and
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incorporated herein by reference (the "Revolving Note"), in the principal amount
of One Million Five Hundred Thousand and no/100 Dollars ($1,500,000.00). The
Revolving Note shall bear interest and will be repayable in the manner set forth
in the Revolving Note, the terms of which are incorporated herein by this
reference.
(d) The Line of Credit Facility shall be effective as of the date
hereof and shall continue in full force and effect until such time as all of
Borrower's Revolving Loans have been paid in full, including principal,
interest, costs, expenses, attorney's fees and other fees and charges or until
April 1, 2003, unless earlier demand for payment is made by Bank to Borrower as
provided herein. Borrower may
prepay the principal balance of the Revolving Note, in whole or in part, at any
time without premium or penalty.
(e) ANYTHING HEREIN TO THE CONTRARY NOTWITHSTANDING, THE LINE
OF CREDIT FACILITY IS A DISCRETIONARY FACILITY AND NOTHING CONTAINED IN THIS
AGREEMENT SHALL REQUIRE BANK, AT ANY TIME, TO MAKE REVOLVING LOANS OR OTHER
EXTENSIONS OF CREDIT TO BORROWER, AND THE GRANTING AMOUNT OF ANY REVOLVING LOAN
OR OTHER EXTENSIONS OF CREDIT HEREUNDER, SHALL AT ALL TIMES BE IN BANK'S SOLE
DISCRETION.
2.2 Fees.
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(a) Origination Fee. Borrower has paid to Bank an origination
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fee in the amount of Three Thousand Seven Hundred Fifty and no/100 Dollars
($3,750.00), said fee being deemed earned in full upon payment and shall be
non-refundable.
(b) Loan Documentation Fee. Borrower shall pay to Bank its
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reasonable out-of-pocket fees, costs and expenses incurred in negotiating,
reviewing, administering and preparing this Agreement, the Revolving Note, the
other Loan Documents and all other documents required to consummate the
transactions contemplated hereby.
(c) Loan Monitoring Fees. Borrower shall pay to Bank a Two
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Hundred Fifty and no/100 Dollars ($250.00) quarterly loan monitoring fee,
payable in advance, commencing on January 1, 2002, and continuing on the first
day of each quarter thereafter during the term of this Agreement. Said loan
monitoring fee shall be deemed earned upon receipt and shall be non-refundable.
2.3 Security. To secure the prompt payment when due of all
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principal and interest advanced by Bank pursuant to the Revolving Note, as well
as for the payment of the Obligations and any and all other sums owing pursuant
to this Agreement or the other Loan Documents, and for the performance and
observance of all of the covenants, agreements and conditions contained in the
Revolving Note, this Agreement, all other Loan Documents or with respect to the
Obligations, whether now existing or hereafter arising, either created by
Borrower alone or together with another or others, primary or secondary, secured
or unsecured, absolute or contingent, liquidated or unliquidated, direct or
indirect, whether evidenced by note, draft, application for letters of credit or
otherwise, and any and all renewals, amendments, modifications, restatements of
or substitutes therefore, each Corporation hereby grants to Bank a first
continuing security interest in all of such corporation's accounts, chattel
paper, instruments and general intangibles, machinery and equipment, inventory
and supplies, all furniture and fixtures and interest in joint ventures or other
entities, as more fully described in, and pursuant to, the Security Agreement
executed and delivered by each such corporation dated of even date herewith, and
all additions, substitutions, increments, proceeds and products with respect
thereto, whether now or later acquired (all of the property described in each
Security Agreement being hereinafter collectively referred to as the
"Collateral"), subject to Permitted Liens (as herein defined). It is each
Corporation's express intention that this Agreement and the continuing security
interest granted hereby and pursuant to each Security Agreement, in addition to
covering all present Obligations of Borrower to Bank, shall extend to all future
Obligations of Borrower, whether jointly or severally, to Bank, whether or not
such Obligations are increased, reduced or entirely extinguished and thereafter
increased, reduced or reincurred, and whether or not such Obligations are
specifically contemplated by Borrower and Bank as of the date hereof. The
absence of any reference to this Agreement in any documents, instruments or
agreements evidencing or relating to any Obligation secured hereby shall not
limit or be construed to limit the scope or applicability of this Agreement.
Section 3. Representations And Warranties.
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Borrower, jointly and severally, hereby warrants and represents to Bank
the following:
3.1 Organization and Qualification. OurPet's is a duly organized,
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validly existing corporation in good standing under the laws of the State of
Colorado, has the requisite corporate power and authority to carry on its
business and to enter into and perform this Agreement, the Revolving Note, the
Security Agreement and the other Loan Documents to which it is a party, is
qualified and licensed to do business in each jurisdiction in which such
qualification or licensing is required. Virtu is a duly organized, validly
existing corporation in good standing under the laws of the State of Ohio, has
the requisite corporate power and authority to carry on its business and to
enter into and perform this Agreement, the Revolving Note, the Security
Agreement and the other Loan Documents to which it is a party, is qualified and
licensed to do business in each jurisdiction in which such qualification or
licensing is required. All information provided to Bank with respect to OurPet's
and Virtu and their operations is true, correct and complete. ST and EST have
the power, authority and capacity to enter into this Agreement, the Revolving
Note and the other Loan Documents, to which each is a party.
3.2 Due Authorization. The execution, delivery and performance by
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Borrower of this Agreement, the Security Agreement, the Revolving Note and the
other Loan Documents have been duly authorized by all necessary corporate or
individual action, as the case may be, and will not contravene any law or any
governmental rule or order binding on Borrower, or the articles of incorporation
or bylaws of each Corporation, nor violate any agreement or instrument by which
Borrower is bound nor result in the creation of a Lien on any assets of each
Corporation except the Lien to Bank granted herein. Borrower has duly executed
and delivered this Agreement, the Security Agreement, the Revolving Note, and
the other Loan Documents to which each is a party and they are valid and binding
obligations of Borrower enforceable against Borrower in accordance with their
respective terms except as limited by equitable principles and by bankruptcy,
insolvency or similar laws affecting the rights of creditors generally. No
notice to or consent by any governmental body is needed in connection with this
transaction, except for the approval of the U.S. Small Business Administration
regarding its loan to OurPet's (the "SBA Loan").
3.3 Litigation. Except as set forth on Schedule 3.3 attached hereto,
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there are no suits or proceedings pending or to the best of Borrower's
knowledge, threatened, against or affecting Borrower or Borrower's assets or
properties, and no proceedings before any governmental body are pending or
threatened, against Borrower or Borrower's assets or properties.
3.4 Margin Stock. No part of the Revolving Loans shall be used to
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purchase or carry, or to reduce or retire or refinance any credit incurred to
purchase or carry, any margin stock (within the meaning of Regulations U and X
of the Board of Governors of the Federal Reserve System) or to extend credit to
others for the purpose of purchasing or carrying any margin stock. If requested
by Bank, Borrower shall furnish to Bank statements in conformity with the
requirements of Federal Reserve Form U-1.
3.5 Business. Borrower is not a party to or subject to any agreement or
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restriction which is so unusual or burdensome that it might have a material
adverse effect on Borrower's business, properties, assets or prospects.
3.6 Licenses, etc. Except as set forth on Schedule 3.6 attached hereto,
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Borrower has obtained any and all licenses, permits, franchises, governmental
authorizations, patents, trademarks, copyrights or other rights necessary for
the ownership of its properties and the advantageous conduct of Borrower's
business. Borrower possesses adequate licenses, patents, patent applications,
copyrights, trademarks, trademark applications, and trade names to continue to
conduct Borrower's business as heretofore conducted by Borrower, without any
conflict with the rights of any other person or entity. All of the
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foregoing are in full force and effect and none of the foregoing are known to be
in conflict with the rights of others.
3.7 Laws and Taxes. Borrower is in compliance with all laws,
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regulations, rulings, orders, injunctions, decrees, conditions or other
requirements applicable to or imposed upon Borrower by any law or by any
governmental authority, court or agency (collectively, "Requirements of Law").
Borrower has filed all required tax returns and reports that are now required to
be filed by Borrower in connection with any federal, state and local tax, duty
or charge levied, assessed or imposed upon Borrower or Borrower's assets,
including unemployment, social security, and real estate taxes. Borrower has
paid all taxes that are now due and payable. Except as set forth on Schedule 3.7
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attached hereto, no taxing authority has asserted or assessed any additional tax
liabilities against Borrower that are outstanding on the date of this Agreement,
and Borrower has not filed for any extension of time for the payment of any tax
or the filing of any tax return or report.
3.8 Financial Condition. All financial information relating to
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Borrower that has been or may hereafter be delivered to Bank is true and correct
and has been prepared in accordance with generally accepted accounting
principles consistently applied. Borrower has no material obligations or
liabilities of any kind not disclosed in that financial information, and there
has been no material adverse change in the financial condition of Borrower nor
has Borrower suffered any damage, destruction or loss which has adversely
affected Borrower's business or assets since the submission of the most recent
financial information to Bank.
3.9 Title. Borrower has good and marketable title to the assets
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reflected on the most recent balance sheet or personal financial statement
submitted to Bank and the Collateral, free and clear from all liens and
encumbrances of any kind, except for (collectively, the "Permitted Liens"): (a)
current taxes and assessments not yet due and payable, (b) liens and
encumbrances, if any, reflected or noted on such balance sheets or notes
thereto, (c) assets disposed of in the ordinary course of business, (d) any
security interests, pledges, assignments or mortgages granted to Bank to secure
the repayment or performance of the Obligations, and (e) the capital leases
described on Schedule 3.9 attached hereto and the SBA loan.
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3.10 Defaults. Borrower is in compliance with all material agreements
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applicable to it and there does not now exist any default or violation by
Borrower of or under any of the terms, conditions or obligations of (a) each
Corporation's Articles of Incorporation or Regulations/Bylaws, or (b) any
indenture, mortgage, deed of trust, franchise, permit, contract, agreement or
other instrument to which Borrower is a party or by which it is bound, and the
consummation of the transactions contemplated by this Agreement shall not result
in such default or violation.
3.11 Environmental Laws. (a) Borrower has obtained all permits,
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licenses and other authorizations which are required under Environmental Laws
and Borrower is in compliance in all respects with all terms and conditions of
the required permits, licenses and authorizations, and is also in compliance in
all respects with all other limitations, restrictions, conditions, standards,
prohibitions, requirements, obligations, schedules and timetables contained in
the Environmental Laws.
(b) Borrower is not aware of, and has not received notice of, any
past, present or future events, conditions, circumstances, activities,
practices, incidents, actions or plans which may interfere with or prevent
compliance or continued compliance, in any material respect, with Environmental
Laws, or may give rise to any material common law or legal liability, or
otherwise form the basis of any material claim, action, demand, suit,
proceeding, hearing, study or investigation, based on or related to the
manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling or the emission, discharge, release or threatened release
into the environment, of any pollutant, contaminant, chemical, or industrial,
toxic or hazardous substance or waste.
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(c) There is no civil, criminal or administrative action suit, demand,
claim, hearing, notice or demand letter, notice of violation, investigation or
proceeding pending or threatened against Borrower, relating in any way to
Environmental Laws.
3.12 Subsidiaries and Partnerships. OurPet's has no subsidiaries other
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than Virtu and SMP Company, Inc., an Ohio corporation ("SMP"). Neither OurPet's
nor Virtu is not a party to any partnership agreement or joint venture
agreement. Except as set forth on Schedule 3.12 attached hereto, SMP neither has
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nor will have during the term of this Agreement, any assets or liabilities.
3.13 ERISA. Corporation is in compliance with all of Borrower's
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obligations to contribute to any employee benefit plan or pension plan regulated
by the Federal Employee Retirement Income Security Act of 1974 ("ERISA").
Corporation has not received notice informing Borrower that Borrower is not in
full compliance with any of the requirements of ERISA, and the regulations
promulgated thereunder and, there exists no event described in Section 4043(3)
thereof ("Reportable Event").
3.14 Statements. Any certificate or written statement or the most
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recent projections furnished prior to the date of this Agreement by Borrower to
Bank or any other person in connection with the negotiation of this Agreement or
any of the other Loan Documents or the transactions contemplated hereby, to the
best knowledge of Borrower after reasonable inquiry, does not contain any untrue
statement of a material fact and does not omit any material fact necessary to
make the statements contained herein or therein, in the light of the
circumstances under which it was made, not misleading.
3.15 Solvency. Borrower is Solvent and upon consummation of the
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transactions contemplated by this Agreement will be Solvent. "Solvent" means
that: (a) the present fair salable value of Borrower's assets is in excess of
the total amount of its liabilities (including contingent liabilities); (b)
Borrower does not have unreasonably small capital and is able to pay Borrower's
debts as they become due; and (c) Borrower does not intend to or believe
Borrower will incur obligations beyond Borrower's ability to pay as they mature.
3.16 Office and Principal Place of Business. Corporation has its at
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at 0000 Xxxx Xxxxxx, Xxxxxxxx Xxxxxx, Xxxx Xxxxxx, Xxxx 00000.
3.17 Legal Name. The exact legal name of OurPet's and Virtu
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(including the name given each such Corporation's organization documents)
is as set forth on Page 1 of this Agreement.
Section 4. Affirmative Covenants. For so long as any obligation of Borrower
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in connection with this Agreement or any of the other Loan Documents remains
outstanding, Borrower shall, unless the Bank otherwise consents in writing,
which consent may be withheld in Bank's sole discretion, do all of the
following:
4.1 Protection of Security Interest in Collateral. Subject only to the
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Permitted Encumbrances, Borrower shall maintain the lien created by the Security
Agreement as a first lien upon the Collateral encumbered thereby, and take such
actions and execute and deliver to the Bank such instruments and documents as
the Bank may reasonably require from time to time at Borrower's expense in
connection therewith, including without limitation any supplemental security
agreements, UCC financing statements, continuation statements or other
instruments and documents extending or perfecting the security interest of the
Bank in and to the Collateral as it may exist from time to time.
4.2 Books and Records. Borrower shall maintain proper books of account
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records and enter therein complete and accurate entries and records of all of
its transactions in accordance with
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generally accepted accounting principles and give representatives of Bank access
thereto at all reasonable times, including permission to examine, copy and make
abstracts from any such books and records and such other information which might
be helpful to Bank in evaluating the status of the Revolving Loans as it may
reasonably request from time to time. Borrower shall give Bank reasonable access
to the Collateral and the other property securing the Obligations for the
purpose of performing examinations thereof and to verify its condition or
existence.
4.3 Financial Statements. Borrower shall maintain a standard and
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modern system for accounting and shall furnish to Bank:
(a) Within forty-five (45) days after the end of each fiscal
quarter, a copy of Corporation's consolidated financial statements for the
previous quarter and for the year to date in a form reasonably acceptable to
Bank, prepared and certified as complete and correct, subject to changes
resulting from year-end adjustments, by the chief financial officer of
Corporation;
(b) Within one hundred twenty (120) days after the end of each
fiscal year, a copy of Corporation's consolidated financial statements for the
previous year audited by a firm of independent certified public accountants
acceptable to Bank (which acceptance will not be unreasonably withheld), and
accompanied by an audit opinion of such accountants without significant
qualification;
(c) With the statements submitted under (a) and (b) above, a
certificate signed by the chief financial officer of Corporation, (i) stating
such officer is familiar with all documents relating to Bank and that no Event
of Default specified in this Agreement, nor any event which upon notice or lapse
of time, or both would constitute such an Event of Default, has occurred, or if
any such condition or event existed or exists, specifying it and describing what
action such corporation has taken or proposes to take with respect thereto, and
(ii) setting forth, in summary form, figures showing the financial status of
such corporation in respect of the financial covenants and restrictions
contained in this Agreement;
(d) Within two hundred fifty (250) days after the end of each
fiscal year, a copy of Corporation's consolidated federal income tax return;
(e) Within one hundred sixty (160) days after each calendar
year, a copy of each individual Borrower's current annual personal financial
statement and federal income tax return for such year;
(f) Within twenty (20) days after the end of each month,
Corporation shall deliver to Bank a Collateral Report, including monthly
accounts receivable aging certification with all receivables and retainages
identified, in a form proscribed by or acceptable to Bank;
(g) Within twenty (20) days after each month, a monthly
Borrowing Base Certificate in the form of Exhibit 4.3 attached hereto and
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incorporated herein by reference (the "Borrowing Base Certificate"); and
(h) Such other information of Borrower as Bank may from time
to time reasonably request.
If at any time Borrower has any subsidiaries which have financial
statements that could be consolidated with those of Borrower under generally
accepted accounting principles, the financial statements required by subsections
(a) and (b) above shall be the financial statements of Borrower and all such
subsidiaries prepared on a consolidated and consolidating basis.
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4.4 Condition and Repair. Each Corporation shall maintain its assets
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in good repair and working order and shall make all appropriate repairs and
replacements thereof.
4.5 Insurance. Each Corporation shall insure their respective
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properties and businesses against loss or damage of the kinds and in the amounts
customarily insured against by corporations with established reputations engaged
in the same or similar business as such corporations. All such policies shall
(a) be issued by financially sound and reputable insurers, (b) name Bank as an
additional insured, as the Bank's interest may appear and, where applicable, as
loss payee under a lender loss payable endorsement satisfactory to Bank, and (c)
shall provide for thirty (30) days written notice to Bank before such policy is
altered or canceled all of which shall be evidenced by a Certificate of
Insurance delivered to Bank by such corporations on the date of execution of
this Agreement.
4.6 Taxes. Borrower shall pay when due all taxes, assessments and
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other governmental charges imposed upon Borrower or Borrower's assets,
franchises, business, income or profits before any penalty or interest accrues
thereon, and all claims (including, without limitation, claims for labor,
services, materials and supplies) for sums which by law might be a lien or
charge upon any of Borrower's assets, provided that (unless any material item or
property would be lost, forfeited or materially damaged as a result thereof) no
such charge or claim need be paid if it is being diligently contested in good
faith, if Bank is notified in advance of such contest.
4.7 Existence; Business. Each Corporation shall (a) maintain its
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corporate existence, (b) engage primarily in business of the same general
character as that now conducted, and (c) refrain from entering into any lines of
business substantially different from the business or activities in which it is
presently engaged.
4.8 Compliance with Laws. Each Corporation shall comply with all
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federal, state and local laws, regulations and orders applicable to it or its
business assets or prospects including, but not limited to, Requirements of Law
and all Environmental Laws, and shall immediately notify Bank of any violation
of any rule, regulation, statute, ordinance, order or law relating to the public
health or the environment and of any complaint or notifications received by it
regarding to any environmental or safety and health rule, regulation, statute,
ordinance or law.
4.9 Payment of Obligations. Borrower shall pay, discharge or
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otherwise satisfy at or before maturity or before they become delinquent, as the
case may be, all its Indebtedness and other obligations of whatever kind or
nature other than de minimus amounts not paid in the ordinary course of
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Borrower's business.
4.10 Notice of Default. Borrower shall, within three (3) days of
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Borrower's knowledge thereof, give written notice to Bank of (a) the occurrence
of any event or the existence of any condition which would be, after notice or
lapse of applicable grace periods, an Event of Default, and (b) the occurrence
of any event or the existence of any condition which would prohibit Borrower
from continuing to make any of the representations set forth in this Agreement.
4.11 Depository/Banking Services. Bank shall be the primary depository
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of each Corporation's funds, and the principal bank of account of each
Corporation, as long as this Agreement is in effect, and each Corporation shall
grant Bank the first and last opportunity to provide any corporate banking
services required by Borrower and its Affiliates, including, without limitation,
payroll, cash management and employee benefit plan services.
4.12 Other Amounts Deemed Loans. If either Corporation fails to pay
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any tax, assessment, governmental charge or levy or to maintain insurance within
the time permitted by this Agreement, or to
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discharge any Lien prohibited hereby, or to comply with any other obligation,
Bank may, but shall not be obligated to, pay, satisfy, discharge or bond the
same for the account of such Corporation, and to the extent permitted by law and
at the option of Bank, all monies so paid by Bank on behalf of such Corporation
shall be deemed Loans and Obligations.
Section 5. Negative Covenants. Without the prior written consent of Bank,
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Borrower shall be prohibited from doing the following:
5.1 Indebtedness. Each Corporation shall not incur, create, assume or
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permit to exist any additional Indebtedness for borrowed money (other than the
Obligations, the Junior Indebtedness and unsecured Indebtedness on account of
deposits, advances or progress payments under contracts or similar obligations
incurred in the ordinary course of Borrower's business).
5.2 Prepayments. Each Corporation shall not, voluntarily prepay any
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Indebtedness owing by such Corporation prior to the stated maturity date thereof
other than (i) the Obligations and (ii) Indebtedness to trade creditors where
the prepayment will result in a discount on the amount due, unless the effect of
such prepayment will cause an Event of Default hereunder.
5.3 Leases. Except for the operating lease with Xxxx Properties
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regarding OurPet's lease of its principal business location, each Corporation
shall not enter into any lease of real or personal property as lessee if the
aggregate payments due under such lease and all other leases of Corporation then
in effect, would exceed $50,000 in any fiscal year.
5.4 Capital Expenditures. Each Corporation shall not make any plant or
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fixed capital expenditure, or any commitment therefor, or obtain equipment
subject to a purchase money security interest, trust deed or least, in any
fiscal year on a consolidated basis, which in the aggregate are in excess of
$300,000.
5.5 Pledge or Encumbrance of Assets. Other than the Permitted Liens,
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each Corporation shall not create, incur, assume or permit to exist any Lien on
the Collateral (whether or not junior or subordinated), except for Liens to
Bank, Liens existing on the date of this Agreement which have been disclosed to
and approved by Bank in writing and Liens imposed by law which secure amounts
not at the time due and payable.
5.6 Guarantees and Loans. Each Corporation shall not enter into any
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direct or indirect guarantees other than by endorsement of checks for deposit or
other than in the ordinary course of business nor make any advance or loan other
than in the ordinary course of business as presently conducted, including,
without limitation, loans and advances to employees of such Corporation.
5.7 Capital Stock; Dividends. Each Corporation shall not (a) declare
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or pay any dividend or distributions (except stock dividends or stock
distributions) on its capital stock, (b) make any payments of any kind to its
shareholders (including, without limitation, debt repayments, payments for goods
or services or otherwise, but excluding reasonable and ordinary salary and bonus
payments to shareholders employed by such Corporation and excluding scheduled
interest only with respect to the Junior Indebtedness, provided, however, that
after the payment hereof, no Event of Default shall have occurred hereunder and
all financial covenants herein shall be in compliance) or (c) redeem any shares
of its capital stock in any fiscal year.
5.8 Merger; Disposition of Assets. Each Corporation shall not (a)
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change its capital structure, (b) merge or consolidate with any corporation or
other entity (c) amend or change its Articles of
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Incorporation or Code of Regulations/Bylaws or (d) sell, transfer or otherwise
dispose of all or any substantial part of its assets whether now owned or
hereafter acquired.
5.9 Transactions with Affiliates and Subsidiaries. Each Corporation
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shall not (a) directly or indirectly issue any guarantee for the benefit of any
person, Affiliate or Subsidiary, except for any guarantee in favor of Bank, (b)
directly or indirectly make any loans or advances to or investments in person,
Affiliate or Subsidiary, or (c) enter into any transaction with any of its
Affiliates or Subsidiaries, other than transactions entered into on an arm's
length basis in the normal course of each Corporation's business.
5.10 Investments. Each Corporation shall not purchase or hold
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beneficially any stock, securities or evidences or indebtedness of, or make any
investment or acquire any interest, in, any other firm, partnership, corporation
or entity other than short term investments of excess working capital in one or
more of the following: (a) investments (of one year or less) in direct or
guaranteed obligations of the United States, or any agencies thereof; and (b)
investments (of one year or less) in certificates of deposit of banks or trust
companies organized under the laws of the United States or any jurisdiction
thereof, provided that such banks of trust companies are insured by the Federal
Deposit Insurance Corporation and have capital in excess of $25,000,000.
5.11 Acquisitions. Each Corporation shall not purchase for cash or
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otherwise acquire all or any part of the business or assets of, or any stock or
other evidence of beneficial ownership of, any company or entity whatsoever,
without the prior written consent of Bank.
5.12 Minimum Adjusted Tangible Net Worth. Borrower shall not permit
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Corporations' Adjusted Tangible Net Worth, on a consolidated basis, to be less
than $1,200,000 as of November 30, 2001, and $1,300,000 as of December 31, 2001
and thereafter, measured quarterly commencing on December 31, 2001 and on each
March 31, June 30, September 30 and December 31 thereafter. "Adjusted Tangible
Net Worth" shall mean the "Net Worth" of the Corporations minus the following
items (without duplication of deductions), if any: (i) all deferred charges (net
of amortization); (ii) the book amount of all assets which would be treated as
intangible assets under GAAP, including, without limitation, such items as
favorable leases, good will, unamortized debt discount and expense, organization
expenses, franchisee fees, trademarks, trademark applications, trade names,
service marks, brand names, copyrights, patents, patent applications and
licenses, and rights with respect to the foregoing; (iii) any write-up in the
book amount of any asset resulting from a revaluation thereof from the book
amount entered upon acquisition; and (iv) any note(s), receivable(s) or
advance(s) to affiliates, related parties, officers or shareholders. "Net Worth"
shall mean the total assets of Corporations (including Junior Indebtedness as
defined in Section 5.15 hereof) less the total liabilities of Corporations as
determined in accordance with GAAP. "GAAP" shall mean all computations and
determinations as to accounting or financial matters made in accordance with
generally accepted accounting principles consistently applied.
5.13 Debt Service Coverage Ratio. Borrower shall not permit the
---------------------------
Corporations' Debt Service Coverage Ratio, on a consolidated basis, to be less
than 1.15 to 1.00 measured quarterly commencing on December 31, 2001 and on each
March 31, June 30, September 30 and December 31 thereafter. "Debt Service
Coverage Ratio" shall mean the sum of the net income or loss of Corporations
after taxes and after cash distributions, cash dividends and advances to
shareholders plus depreciation, plus amortization, plus interest expense,
divided by the sum of the current portion of long term debt plus interest
(whether jointly, severally or jointly and severally) for the applicable
accounting period, including but not limited to required principal and interest
on the Revolving Loans.
5.14 Notification. Each Corporation shall promptly provide Bank
------------
with at least thirty (30) days prior written notice of: (a) any change in any
location where such Corporation's inventory is maintained,
9
and any new locations where such Corporation's inventory is to be maintained;
(b) any change in the location of the office where such Corporation's records
pertaining to its respective accounts and contract rights are kept; (c) the
location of any new places of business for such Corporation and the changing or
closing of any of its existing places of business; (d) any change in such
Corporation's name or state of incorporation; and (e) any change in such
Corporation's place of business.
5.15 Subordination of Debt. Borrower shall cause to be subordinate all
---------------------
Indebtedness not owing to Bank, including interest thereon ("Junior
Indebtedness"), which may at any time now or hereafter be owed to any officer,
employee, director, shareholder or Related Person by Borrower in favor of the
Obligations, including, but not limited to, the Junior Indebtedness described on
Exhibit 5.15 attached hereto. Borrower shall obtain and deliver to Bank
------------
subordination agreements from said officers, employees, directors, shareholders
or Related Persons for said Junior Indebtedness in form and content acceptable
to Bank. Upon the occurrence of an Event of Default under this Agreement,
Borrower shall without notice from Bank immediately cease payment of any fees or
advances to any officer, employee, director, shareholder or Related Person, and
shall also cease payment of the sums, if any, allowed to be paid by the terms of
the subordination agreements(s).
Section 6. Events of Default and Remedies.
------------------------------
6.1 Events of Default. The occurrence of any one or more of the
-----------------
following events shall constitute an Event of Default hereunder
("Event of Default"):
(a) Borrower defaults in the payment of any principal or interest on
any Obligation within ten (10) days when due and payable, by
acceleration or otherwise; or
(b) any representation or warranty made by Borrower herein or in any
of the Loan Documents is incorrect when made or reaffirmed; or
(c) Borrower fails to observe or perform any covenant, condition
or agreement herein and the failure or inability of Borrower
to cure such default within thirty (30) days of the occurrence
thereof, provided that such thirty (30) day grace period shall
not apply to (i) a breach of any covenant which in Bank's good
faith judgment is incapable of cure, (ii) any failure to maintain
insurance or permit inspection of the Collateral or of the books
and records of Borrower, (iii) any breach in any negative covenant
set forth in Section 5 hereof, or (iv) any breach of any covenant
which has already occurred; or
(d) a court enters a decree or order for relief with respect to
Borrower in an involuntary case under any applicable bankruptcy,
insolvency or other similar law then in effect, or appoints a
receiver, liquidator, assignee, custodian, trustee, sequestrator
(or other similar official) of Borrower or for any substantial
part of Borrower's property, or orders the wind-up or liquidation
of Borrower's affairs; or a petition initiating an involuntary
case under any such bankruptcy, insolvency or similar law is filed
and is pending with respect to Borrower for sixty (60) days
without dismissal; or
(e) Borrower commences a voluntary case under any applicable
bankruptcy, insolvency or other similar law in effect, or makes
any general assignment for the benefit of creditors, or fails
generally to pay Borrower's debts as such debts become due, or
takes any action in furtherance of any of the foregoing; or
(f) Borrower defaults (whether due to non-payment or non-performance)
under the terms of any Indebtedness or lease, and such default
gives any creditor or lessor the right to
10
accelerate the maturity of any such indebtedness or lease payments
which right is not contested in good faith by Borrower or is determined
by any court of competent jurisdiction to be valid; or
(g) a final judgment for the payment of money which exceeds $5,000 is
rendered against Borrower and remains undischarged for thirty (30) days
during which execution is not effectively stayed or is not sufficiently
bonded over in favor of Bank; or
(h) Bank shall deem itself insecure in good faith believing that the
prospect of repayment of the Obligations or performance of the
covenants and conditions of this Agreement is materially impaired; or
(i) Intentionally Omitted.
(j) an Event of Default or default occurs under any Loan Document, or
Borrower denies any Obligations then existing or attempts to limit or
terminate its/his obligation for future Obligations, including future
Revolving Loans; or
(k) the dissolution, termination, consolidation, liquidation or similar
event with respect to or involving Borrower; or the death or
incompetency of any individual Borrower; or
(l) the commencement of any foreclosure proceedings, proceedings in aid of
execution, attachment actions, levies against, or the filing by any
taxing authority of a lien against any of the Collateral or any
property securing the repayment of any of the Obligations; or
(m) the material loss, theft or substantial damage to the Collateral or any
property securing the repayment of the Obligations if such occurrence
is not covered by insurance for which Bank receives the insurance
proceeds with respect thereto within 90 days from the date of loss, or
the result of such occurrence will be, in Bank's reasonable judgment,
the failure or inability of each Corporation to continue substantially
normal operation of its business within thirty (30) days of the date of
such occurrence; or
(n) Bank ceases to be each Corporation's (i) primary depository bank in
which substantially all of Borrower's funds are deposited, and (ii)
primary bank of account; or
(o) (i) the validity or effectiveness of any of the Loan Documents or its
transfer, grant, pledge, mortgage, or assignment by Borrower executing
such Loan Document is impaired; (ii) any party executing any of the
Loan Documents asserts that any of such Loan Documents is not a legal,
valid and binding obligation of the party thereto enforceable in
accordance with its terms; (iii) the security interest or Lien
purporting to be created by any of the Loan Documents will for any
reason cease to be a valid, perfected lien subject to no other liens
other than Liens permitted by the terms of this Agreement; or (iv) any
Loan Document is amended, hypothecated, subordinated, terminated or
discharged, or if any person is released from any of its covenants or
obligations under any of the Loan Documents except as permitted by Bank
in writing; or
(p) a Reportable Event (as defined in ERISA) occurs with respect to any
employee benefit plan maintained by each Corporation for its employees
other than a Reportable Event caused solely by a decrease in
employment; or a trustee is appointed by a United States District Court
to administer any employee benefit plan; or the Pension Benefit
Guaranty
11
Corporation institutes proceedings to terminate any of
Corporation's employee benefit plans; or
(q) there shall occur any material event of default including
specifically, but without limitation, due to non-payment or
non-performance, under any loan, agreement, document or instrument
to which Borrower is now or hereinafter a party, or by which any of
Borrower's property is bound, creating or relating to any
indebtedness in favor of Bank, and such default or event of default
is not cured within the period of grace, if any, provided therein.
6.2 Remedies. If any Event of Default shall occur, Bank may cease
--------
advancing money hereunder, and/or declare all Obligations to be due and payable
forthwith, whereupon they shall forthwith become due and payable without
presentment, demand, protest, or notice of any kind, all of which are hereby
expressly waived by Borrower, and/or implement any remedies available to Bank
under or in connection with this Agreement or any of the other Loan Documents,
or otherwise as a secured creditor including, without limitation, foreclosing
on, or proceeding against, any security, and exercising any other rights to
security whether under the Loan Documents or any other agreement or as provided
by law, all in such order and in such manner as Bank in its sole discretion may
determine.
6.3 Setoff. If any Event of Default shall occur, Bank is authorized,
------
without notice to Borrower, to offset and apply to all or any part of the
Obligations all moneys, credits and other property of any nature whatsoever of
Borrower now or at any time hereafter in the possession of, in transit to or
from, under the control or custody of, or on deposit with (whether held by
Borrower individually or jointly with another party), Bank, including but not
limited to certificates of deposit.
6.4 Default Rate. After the occurrence of an Event of Default, all
------------
amounts of principal outstanding as of the date of the occurrence of such Event
of Default shall bear interest at the Default Rate (as defined in the Revolving
Note), in Bank's sole discretion, without notice to Borrower. This provision
does not constitute a waiver of any Events of Default or an agreement by Bank to
permit any late payments whatsoever.
6.5 Late Payment Penalty. If any payment is not paid when due (whether
--------------------
by acceleration or otherwise after the expiration of applicable notice grace and
cure periods, if any), Borrower agrees to pay to Bank a late payment fee equal
to the greater of Thirty-Five Dollars ($35.00) or seven percent (7%) of the
payment amount then due.
6.6 No Remedy Exclusive. No remedy set forth herein is exclusive of any
-------------------
other available remedy or remedies, but each is cumulative and in addition to
every other remedy available under this Agreement, the Loan Documents or as may
be now or hereafter existing at law, in equity or by statute. Borrower waives
any requirement of marshalling of assets which may be secured by any of the Loan
Documents.
6.7 Effect of Termination. The termination of this Agreement shall not
---------------------
affect any rights of either party or any obligation of either party to the
other, arising prior to the effective date of such termination, and the
provisions hereof shall continue to be fully operative until all transactions
entered into, rights created or Obligations incurred prior to such termination
have been fully disposed of, concluded or liquidated. The security interest,
lien and rights granted to Bank hereunder and under the Loan Documents shall
continue in full force and effect, notwithstanding the termination of this
Agreement or the fact that no Loans are outstanding to Borrower, until all of
the obligations, have been paid in full.
Section 7. Conditions Precedent.
--------------------
12
7.1 Conditions to Initial Loans. Bank shall have no obligation to make
---------------------------
or advance any Revolving Loan until Borrower has delivered to Bank at or before
the closing date, in form and substance satisfactory to Bank:
(a) Executed Revolving Note.
(b) A corporate resolution of each Corporation regarding the
authorization of the transactions contemplated hereby in form satisfactory to
Bank.
(c) A Closing Certificate of each Corporation regarding the
certification each of Corporation's Articles of Incorporation, Code of
Regulations, directors and officers.
(d) A Good Standing Certificate for each Corporation issued by the
Secretary of State of the jurisdiction of its incorporation.
(e) Intentionally Omitted.
(f) Executed Security Agreement of each Corporation in the form of
Exhibit 8.4 attached hereto.
-----------
(g) All appropriate financing statements (Form UCC-1) and consents
or waivers of landlords, warehousemen and mortgagees, as requested by Bank.
(h) Intentionally Omitted.
(i) Intentionally Omitted.
(j) UCC searches, tax lien and litigation searches, insurance
certificates, notices or other document which Bank may require to reflect,
perfect or protect Bank's first priority lien in the Collateral and all other
property pledged to secure the Obligations and to fully consummate this
transaction.
(k) All requisite releases of liens, termination statements and
satisfactions of mortgages necessary to release all liens and encumbrances
against the Collateral and any other property pledged to secure the Revolving
Loans and all requisite waivers and subordination agreements, in a form
satisfactory to Bank, to be executed and delivered by each Corporation's
creditors, landlords and mortgagees which are necessary to grant Bank a first
lien in the Collateral, including but not limited to all Inventory and Equipment
of each Corporation.
(l) The Origination Fee and Loan Documentation Fee have been paid
in full.
(m) A Certificate of Insurance as described in Section 4.5 hereof.
(n) The monthly Borrowing Base Certificate referred to in Section
7.2(d), if applicable.
(o) A Subordination Agreement with respect to any subordinated
indebtedness, in form and substance satisfactory to Bank.
13
(p) Bank shall have received to its reasonable satisfaction from
Corporation, an accounts receivable report, equipment list, inventory list and
leases and other information regarding the Collateral, together with such other
financial information requested by Bank to evidence compliance with the
financial covenants set forth herein.
(q) Such additional documentation, certifications, information and
materials as Bank may reasonably request.
7.2 Conditions to Each Revolving Loan. On the date of each Revolving
----------------------------------
Loan, the following statements in subparagraphs (a) through (c) below shall be
true and the documents required by subparagraph (d) below shall be required:
(a) All of the representations and warranties contained herein and
in the Loan Documents shall be correct in all material respects as though made
on such date;
(b) No event shall have occurred and be continuing, or would result
from such Loan, which constitutes an Event of Default, or would constitute an
Event of Default but for the requirement that notice be given of lapse of time
or both;
(c) The aggregate unpaid principal amount of the Revolving Loans
after giving effect to such Revolving Loan shall not violate the lending limits
set forth in Section 2.1 of this Agreement; and
(d) Corporation shall provide Bank with the monthly Borrowing Base
Certificate.
The acceptance by Borrower of the proceeds of each Revolving Loan
shall be deemed to constitute a representation and warranty by Borrower that the
conditions in Section 7.2 of this Agreement, other than those that have been
waived in writing by Bank, have been satisfied. Borrower authorizes Bank to make
distributions of loan proceeds to any one or more of them.
Section 8. Miscellaneous Provisions.
------------------------
8.1 Definitions. Certain terms are defined in the context of this
-----------
Agreement. The terms hereinafter set forth, not defined in the context, shall
have the following meanings:
"Affiliate" means, (a) any Person which, directly or indirectly, is in
control of, is controlled by or is under common control with, Borrower, or (b)
any person who is a shareholder, director, officer or employee (i) of Borrower
or (ii) of any Person described in the preceding clause (a). A Person will be
deemed to control another Person if such Person possesses, directly or
indirectly, the power to (a) vote ten percent (10%) or more of the voting equity
of such other Person, or (b) direct or cause the direction of the management and
policies of such other Person, whether through voting securities, by contract or
otherwise.
"Eligible Accounts" means at any time, all of each Corporation's
Accounts (as "Accounts" is defined in the Uniform Commercial Code as in effect
from time to time in the state of Borrower's organization) which contain selling
terms and conditions acceptable to Bank. The net amount of any Eligible Account
against which Borrower may borrow shall exclude all returns, discounts, credits,
and offsets of any nature. Unless otherwise agreed to by Bank in writing,
Eligible Accounts do not include:
(a) Accounts with respect to which the Account Debtor is employee or
agent of Borrower.
(b) Accounts with respect to which the Account Debtor is a subsidiary
of, or affiliated with Borrower or its shareholders, officers, or
directors.
14
(c) Accounts with respect to which goods are placed on
consignment, guaranteed sale, or other terms by reason of
which the payment by the Account Debtor may be conditional.
(d) Accounts with respect to which the Account Debtor is not a
resident of the United States, except to the extent such
Accounts are supported by insurance, bonds or other
assurances satisfactory to Lender.
(e) Accounts with respect to which Borrower is or may become
liable to the Account Debtor for goods sold or services
rendered by the Account Debtor to Borrower.
(f) Accounts which are subject to dispute, counterclaim or
setoff.
(g) Accounts with respect to which the goods have not been
shipped or delivered, or the services have not been rendered,
to the Account Debtor.
(h) Accounts with respect to which Lender, in its sole
discretion, deems the creditworthiness or financial condition
of the Account Debtor to be unsatisfactory.
(i) Accounts of any Account Debtor who has filed or has had filed
against it a petition in bankruptcy or an application for
relief under any provision of any state or federal
bankruptcy, insolvency, or debtor-in-relief acts; or who has
had appointed a trustee, custodian, or receiver for the
assets of such Account Debtor; or who has made an assignment
for the benefit of creditors or has become insolvent or fails
generally to pay its debts (including its payrolls) as such
debts become due.
(j) Accounts with respect to which the Account Debtor is the
United States government or any department or agency of the
United States.
(k) Accounts which have not been paid in full within under 90
days from the invoice date. The entire balance of any Account
of any single Account Debtor will be ineligible whenever the
portion of the Account which has not been paid within under
90 days from the invoice date is in excess of 50.00% of the
total amount outstanding on the Account.
"Account Debtor" means the Person who is obligated on an account
receivable.
"Eligible Inventory" means at any time, all of each Corporation's
Inventory as defined below except:
(a) Inventory which is not owned by such Corporation free and
clear of all security interests, liens, encumbrances, and
claims of third parties.
(b) Inventory which Bank, in its sole discretion, deems to be
obsolete, unsalable, damaged, defective or unfit for further
processing.
(c) Work in progress.
(d) Components.
(e) Inventory stored outside of Ohio with Bank's consent.
15
"Environmental Laws" means all federal, state, local and foreign laws
relating to pollution or protection of the environment, including laws relating
to emissions, discharges, releases or threatened releases of pollutants,
contaminants, chemicals, or industrial toxic or hazardous substances or wastes
into the environment (including without limitation ambient air, surface water,
ground water or land), or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or handling of
pollutants, contaminants, chemicals or industrial, toxic or hazardous substances
or wastes, and any and all regulations, codes, plans, orders, decrees,
judgments, injunctions, notices or demand letters issued, entered promulgated or
approved thereunder.
"ERISA" means the Federal Employee Retirement Income Security Act of
1974.
"Indebtedness" means (a) all items (except items of capital stock,
capital surplus, general contingency reserves, retained earnings, deferred
income taxes, amounts attributable to minority interests, if any) which in
accordance with generally accepted accounting principles would be included in
determining total liabilities on a consolidated basis as shown on the liability
side of a balance sheet as at the date as of which Indebtedness is to be
determined, (b) all indebtedness secured by any mortgage, pledge, lien or
conditional sale or other title retention agreement to which any property or
asset owned or held is subject, whether or not the indebtedness secured thereby
will have been assumed (excluding non-capitalized leases which may amount to
title retention agreements but including capitalized leases), and (c) all
indebtedness of others which Borrower or any Subsidiary of Borrower has directly
or indirectly guaranteed, endorsed (otherwise than for collection or deposit in
the ordinary course of business), discounted or sold with recourse or agreed
(contingently or otherwise) to purchase or repurchase or otherwise acquire, or
in respect of which Borrower or any Subsidiary of Borrower has agreed to apply
or advance funds (whether by way of loan, stock purchase, capital contribution
or otherwise) or otherwise to become directly or indirectly liable.
"Inventory" means all of each Corporation's raw materials, work in
process, finished goods, merchandise, parts and supplies, of every kind and
description, and goods held for sale or lease or furnished under contracts of
service in which such Corporation now has or hereafter acquires any right,
whether held by such Corporation or others, and all documents of title,
warehouse receipts, bills of lading, and all other documents of every type
covering all or any part of the foregoing. Inventory includes inventory
temporarily out of such Corporation's custody or possession and all returns on
Accounts.
"Lien" means any security interest, mortgage, pledge, assignment, lien
or other encumbrance of any kind, including interests of vendors or lessors
under conditional sale contracts and capitalized leases.
"Loan Documents" means the Agreement, the Revolving Note, the Security
Agreements, and every other document or agreement executed by any party
evidencing or securing any of the Obligations; and "Loan Document" means any one
of the Loan Documents.
"Loan" means the Revolving Loans.
"Obligation(s)" is used in its most comprehensive sense and includes,
without limitation, all loans, advances, debts, indebtedness, liabilities and
obligations (including, principal, interest, late charges, collection costs,
attorneys' fees and the like) of Borrower owed to Bank and/or any affiliate of
Bank, of every kind, nature and description, whether now existing or hereafter
arising, either created by Borrower alone or together with another or others, or
acquired by Bank or any affiliate of Bank, by purchase, assignment or otherwise,
and whether direct or indirect, primary or as guarantor or surety, secured or
unsecured, absolute or contingent, liquidated or unliquidated, whenever and
however arising, whether evidenced by note, draft, application for letter of
credit or otherwise, and any renewals, amendments, modifications, restatements
of or substitutes therefor. The term "Obligations" shall include, but not be
16
limited to, all indebtedness owed by Borrower to Bank by reason of credit
extended or to be extended under the Agreement, the Revolving Note, the other
Loan Documents and any other document or instrument related to any of the
foregoing. It is Borrower's express intention that the term "Obligations" shall
include, but not be limited to, all present Obligations of Borrower to Bank,
shall extend to all future Obligations of Borrower to Bank, whether or not such
Obligations are increased, reduced or entirely extinguished and thereafter
increased, reduced or reincurred, whether or not such Obligations are related to
the indebtedness identified above by class, type or kind and whether or not such
Obligations are specifically contemplated by Borrower and Bank as of the date
hereof.
"Permitted Liens" has the meaning assigned thereto as set forth in Section
3.9 of the Agreement.
"Person" means and includes an individual, corporation, partnership,
limited liability company, limited liability partnership, trust, unincorporated
organization or association and a government or any department or agency
thereof.
"Prime Rate" means the rate of interest per annum announced to be its prime
rate from time to time by Bank at its principal office in Akron, Ohio whether or
not Bank will at times lend to borrowers at lower rates of interest or, if there
is no such prime rate, then its base rate or such other rate as may be
substituted by Bank for the prime rate.
"Related Person" shall mean any Person who controls, is controlled by or is
under common control with Borrower.
"Security Agreement" means each Security Agreement of even date herewith by
and between each Corporation and Bank securing the Obligations.
"Subsidiary" means any corporation of which each Corporation directly or
indirectly owns or controls at the time outstanding stock having under ordinary
circumstances (not depending on the happening of a contingency) voting power to
elect a majority of the board of directors of said corporation.
8.2 Miscellaneous. This Agreement, the exhibits and the other Loan
-------------
Documents are the complete agreement of the parties hereto and supersede all
previous understandings relating to the subject matter hereof. This Agreement
may be amended only in writing signed by the party against whom enforcement of
the amendment is sought. This Agreement may be executed in counterparts. If any
part of this Agreement is held invalid, the remainder of this Agreement shall
not be affected thereby. This Agreement is and is intended to be a continuing
agreement and shall remain in full force and effect until the Revolving Loans
are finally and irrevocably paid in full and the Line of Credit Facility is
terminated. Time is of the essence in this Agreement and the Loan Documents.
8.3 Waiver by Borrower. Borrower waives notice of non-payment, demand,
------------------
presentment, protest or notice of protest of any Accounts or other Collateral,
and all other notices (except those notices specifically provided for in this
Agreement); consents to any renewals or extensions of time of payment thereof;
and generally waives any and all suretyship defenses and defenses in the nature
thereof.
8.4 Binding Effect. This Agreement shall be binding upon and inure to the
--------------
benefit of the respective legal representatives, successors and assigns of the
parties hereto; however, Borrower may not assign any of their rights or delegate
any of their obligations hereunder. Bank (and any subsequent assignee) may
transfer and assign this Agreement or may assign partial interests or
participation in the Revolving Loans to other persons. Bank may disclose to all
prospective and actual assignees and
17
participants all financial, business and other information about Borrower which
Bank may possess at any time.
8.5 Security. The Obligations are secured as provided herein, in the
--------
Security Agreement, in the Loan Documents and in each other document or
agreement which by its terms secures the repayment or performance of the
Obligations.
8.6 Survival. All representations, warranties, covenants and agreements
--------
made by Borrower herein and in the Loan Documents shall survive the execution
and delivery of this Agreement, the Loan Documents and the issuance of the
Revolving Note.
8.7 Delay or Omission. No delay or omission on the part of Bank in
-----------------
exercising any right, remedy or power arising from any Event of Default shall
impair any such right, remedy or power or any other right, remedy or power or be
considered a waiver of any right, remedy or power of any Event of Default nor
shall the action or omission to act by Bank upon the occurrence of any Event of
Default impair any right, remedy or power arising as a result thereof or affect
any subsequent Event of Default of the same or different nature.
8.8 Notices. Any notices under or pursuant to this Agreement shall be
-------
deemed duly sent when delivered in hand, by recognized overnight courier service
or when mailed by registered or certified mail, return receipt requested,
addressed as follows:
To Borrower: OurPet's Company
Virtu Company
Xxxxxx Xxxxxxx
Xxxxxxxxx X. Xxxxxxx
0000 Xxxx Xxxxxx
Xxxxxxxx, Xxxx 00000
Attention: Xx. Xxxxxx Xxxxxxx, Chairman/CEO
To Bank: FirstMerit Bank, N.A.
0000 Xxxxxxxx Xxxx
Xxxxxx, Xxxx 00000
Attention: Xxx Xxxxx, Vice President
Either party may change such address by sending notice of the change to the
other party.
8.9 No Partnership. Nothing contained herein or in any of the Loan
--------------
Documents is intended to create or shall be construed to create any relationship
between Bank and Borrower other than as expressly set forth herein or therein
and shall not create any joint venture, partnership or other relationship.
8.10 Indemnification. If after receipt of any payment of all or part of the
---------------
Obligations, Bank is for any reason compelled to surrender such payment to any
person or entity, because such payment is determined to be void or voidable as a
preference, impermissible setoff, or diversion of trust funds, or for any other
reason, this Agreement shall continue in full force and effect and Borrower
shall be liable to, and shall indemnify, save and hold Bank, its officers,
directors, attorneys and employees harmless of and from the amount of such
payment surrendered. The provisions of this Section shall be and remain
effective notwithstanding any contrary action which may have been taken by Bank
in reliance on such payment, and
18
any such contrary action so taken shall be without prejudice to Bank's rights
under this Agreement and shall be deemed to have been conditioned upon such
payment becoming final, indefeasible and irrevocable. In addition, Borrower
shall indemnify, defend, save and hold Bank, its officers, directors, attorneys
and employees harmless of, from and against all claims, demands, liabilities,
judgments, losses, damages, costs and expenses, joint or several (including all
accounting fees and attorneys' fees reasonably incurred), that Bank or any such
indemnified party may incur arising out of this Agreement, any of the Loan
Documents, any Environmental Laws, or any act taken by Bank hereunder except for
the willful misconduct or gross negligence of such indemnified party. The
provisions of this Section shall survive the termination of this Agreement.
8.11 Further Assurances. Borrower shall, at its sole cost and expense, upon
------------------
Bank's request, promptly execute and deliver or cause to be executed and deliver
to Bank any and all documents, instruments, agreements and information deemed
necessary by Bank, in Bank's reasonable discretion, to perfect or to continue
the perfection of Bank's liens created hereunder, to facilitate the collection
of the Collateral or otherwise to give effect to or carry out the terms or
intent of this Agreement or any of the other Loan Documents.
8.12 Governing Law; Jurisdiction; Waiver of Jury Trial. This Agreement, the
-------------------------------------------------
Revolving Note, and the other Loan Documents shall be governed by the domestic
laws of the State of Ohio. Borrower agrees that the state and federal courts in
or having jurisdiction over Lake County, Ohio, has exclusive jurisdiction over
all matters arising out of this Agreement, and that service of process in any
such proceeding shall be effective if mailed to Borrower at the address
described in the Notices section of this Agreement. BANK AND BORROWER EACH
HEREBY WAIVES THE RIGHT TO TRIAL BY JURY OF ANY MATTERS ARISING OUT OF THIS
AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.
8.13 Joint and Several Liability. If there is more than one Borrower
---------------------------
hereunder, the obligations, covenants, promises, warranties and representations
of each Borrower shall be joint and several. Each natural person executing this
Note as a Borrower acknowledges and agrees that he or she (a) was a co-applicant
to the Loan and intends to be bound as a co-obligor hereunder, and shall not be
deemed to be an accommodation party or surety with respect to the Loan, (b) has
the joint right to control the distribution of proceeds of the Loan, and (c) has
a direct economic interest in the success of the Corporation and shall benefit
from the Loan.
8.14 Confession of Judgment. Each Borrower hereby irrevocably authorizes
----------------------
any attorney-at-law to appear for Borrower in any court of record in the State
of Ohio, or in any other state or territory of the United States, admit the
maturity of the Obligations after the same become due either by lapse of time or
acceleration of maturity or otherwise, and waive the issuing and service of
process and confess judgment against Borrower for the amount then appearing due,
together with costs of suit, and thereupon to waive all errors and all rights of
appeal and stay of execution. Each Borrower expressly (a) waives a conflict of
interest as to any attorney retained by the holder of the Obligations to confess
judgment against Borrower upon the Obligations, and (b) consents to the attorney
retained by the holder hereof receiving a legal fee from such holder for legal
services rendered for confessing judgment against Borrower upon the Obligations.
A copy of this Agreement, certified by the holder hereof, may be filed in each
such proceeding in place of filing the original as a warrant of attorney. The
authority and power to appear for and enter judgment against Borrower, or
additional exercises thereof or by any imperfect exercise thereof, shall not be
extinguished by any judgment entered pursuant thereto. This warrant of attorney
to confess judgment shall remain in full force and effect so long as any portion
of the Obligations remains unpaid, and any confession of judgment and subsequent
vacation thereof shall not constitute termination of this warrant of attorney to
confess judgment.
19
IN WITNESS WHEREOF, Borrower and Bank have executed this Agreement by their
duly authorized officers as of the date first above written.
WARNING - BY SIGNING THIS PAPER, YOU GIVE UP YOUR RIGHT TO
----------------------------------------------------------
NOTICE AND COURT TRIAL. IF YOU DO NOT PAY ON TIME, A COURT
----------------------------------------------------------
JUDGMENT MAY BE TAKEN AGAINST YOU WITHOUT YOUR PRIOR
----------------------------------------------------
KNOWLEDGE AND THE POWERS OF A COURT CAN BE USED TO COLLECT
----------------------------------------------------------
FROM YOU REGARDLESS OF ANY CLAIMS YOU MAY HAVE AGAINST THE
----------------------------------------------------------
CREDITOR WHETHER FOR RETURNED GOODS, FAULTY GOODS, FAILURE
----------------------------------------------------------
ON HIS PART TO COMPLY WITH THE AGREEMENT OR ANY OTHER CAUSE.
-----------------------------------------------------------
OURPET'S COMPANY, a Colorado corporation
By: /s/ Xxxxxx Xxxxxxx
------------------------------------
Xxxxxx Xxxxxxx,
Chairman, President and CEO
WARNING - BY SIGNING THIS PAPER, YOU GIVE UP YOUR RIGHT TO
----------------------------------------------------------
NOTICE AND COURT TRIAL. IF YOU DO NOT PAY ON TIME, A COURT
----------------------------------------------------------
JUDGMENT MAY BE TAKEN AGAINST YOU WITHOUT YOUR PRIOR
----------------------------------------------------
KNOWLEDGE AND THE POWERS OF A COURT CAN BE USED TO COLLECT
----------------------------------------------------------
FROM YOU REGARDLESS OF ANY CLAIMS YOU MAY HAVE AGAINST THE
----------------------------------------------------------
CREDITOR WHETHER FOR RETURNED GOODS, FAULTY GOODS, FAILURE
----------------------------------------------------------
ON HIS PART TO COMPLY WITH THE AGREEMENT OR ANY OTHER CAUSE.
-----------------------------------------------------------
VIRTU COMPANY, an Ohio corporation
By: /s/ Xxxxxx Xxxxxxx
------------------------------------
Xxxxxx Xxxxxxx,
Chairman, President and CEO
WARNING - BY SIGNING THIS PAPER, YOU GIVE UP YOUR RIGHT TO
----------------------------------------------------------
NOTICE AND COURT TRIAL. IF YOU DO NOT PAY ON TIME, A COURT
----------------------------------------------------------
JUDGMENT MAY BE TAKEN AGAINST YOU WITHOUT YOUR PRIOR
----------------------------------------------------
KNOWLEDGE AND THE POWERS OF A COURT CAN BE USED TO COLLECT
----------------------------------------------------------
FROM YOU REGARDLESS OF ANY CLAIMS YOU MAY HAVE AGAINST THE
----------------------------------------------------------
CREDITOR WHETHER FOR RETURNED GOODS, FAULTY GOODS, FAILURE
----------------------------------------------------------
ON HIS PART TO COMPLY WITH THE AGREEMENT OR ANY OTHER CAUSE.
-----------------------------------------------------------
/S/ Xxxxxx Xxxxxxx
------------------------------------
XXXXXX XXXXXXX, Individually
20
WARNING - BY SIGNING THIS PAPER, YOU GIVE UP YOUR RIGHT TO
----------------------------------------------------------
NOTICE AND COURT TRIAL. IF YOU DO NOT PAY ON TIME, A COURT
----------------------------------------------------------
JUDGMENT MAY BE TAKEN AGAINST YOU WITHOUT YOUR PRIOR
----------------------------------------------------
KNOWLEDGE AND THE POWERS OF A COURT CAN BE USED TO COLLECT
----------------------------------------------------------
FROM YOU REGARDLESS OF ANY CLAIMS YOU MAY HAVE AGAINST THE
----------------------------------------------------------
CREDITOR WHETHER FOR RETURNED GOODS, FAULTY GOODS, FAILURE
----------------------------------------------------------
ON HIS PART TO COMPLY WITH THE AGREEMENT OR ANY OTHER CAUSE.
-----------------------------------------------------------
/s/ Xxxxxxxxx X. Xxxxxxx
-----------------------------------
XXXXXXXXX X. XXXXXXX, Individually
FIRSTMERIT BANK, N.A.,
a national banking association
By: /s/ Xxx Xxxxx
-------------------------------
Xxx Xxxxx, Vice President
"Bank"
21
REVOLVING NOTE
$1,500,000.00 Lake County, Ohio
December 31, 2001
FOR VALUE RECEIVED, the undersigned, OurPet's Company, a Colorado
corporation, Virtu Company, an Ohio corporation, Xxxxxx Xxxxxxx, individually,
and Xxxxxxxxx X. Xxxxxxx, individually, (collectively, "Borrower"), jointly and
severally, promise to pay immediately ON DEMAND, to the order of FirstMerit
Bank, N.A. ("Bank") at 0000 Xxxxxxxx Xxxx, Xxxxxx, Xxxx 00000, or at such other
place as Bank shall designate, the principal sum of ONE MILLION FIVE HUNDRED
THOUSAND AND 00/100 DOLLARS ($1,500,000.00), or the aggregate unpaid principal
amount of all Revolving Loans made by Bank to Borrower pursuant to Section 2.1
of the Credit Agreement, as hereinafter defined, whichever is less, in lawful
money of the United States of America, with interest at a variable rate per
annum equal to One Percent (1.0%) greater than the Prime Rate (as defined in the
Loan Agreement). The rate of interest shall increase and decrease automatically
and without notice on the same date that the Prime Rate increases or decreases
to that rate which shall be greater than the new Prime Rate by the amount stated
above in this paragraph. Interest shall be payable monthly on the first (1st)
day of each month commencing on February 1, 2002, and continuing on the first
(1st) day of each and every month thereafter, and on demand. As used herein,
"Credit Agreement" means the Credit Agreement dated of even date herewith,
between Borrower and Bank, as the same may from time to time be restated,
amended or otherwise modified. Capitalized terms used herein shall have the
meanings ascribed to them in the Loan Agreement.
Borrower shall pay interest on the unpaid principal amount of each
Revolving Loan from time to time outstanding, from the date of such Loan until
the payment in full thereof, at the rates per annum and at the times as set
forth above; provided, however, that interest on any principal portion which is
not paid when due shall be payable on demand.
The principal balance and all accrued and unpaid interest thereon and any
and all other amounts due hereunder or under the Credit Agreement or the Loan
Documents (as defined in the Credit Agreement) shall be due and payable
immediately on demand.
The amount of Revolving Loans, and payments of principal and interest
thereon, shall be shown on the records of Bank by such method as Bank may
generally employ; provided, however, that failure to make any such entry shall
in no way detract from Borrower's obligations under this Note.
If this Note shall not be paid at maturity, whether such maturity occurs by
reason of demand, lapse of time, by operation of any provision for acceleration
of maturity contained in the Loan Agreement, or otherwise, the principal hereof
and the unpaid interest thereon shall bear interest, until paid, at a rate per
annum which shall be equal to seven percent (7%) above the rate
Page 1 of 5
otherwise then payable (the "Default Rate"). All payments of principal of and
interest on this Note shall be made in immediately available funds at Bank's
address indicated above or at such other place as the holder hereof shall
designate. In the event of a failure to pay interest or principal, within ten
(10) days after the same becomes due, Bank may collect and Borrower agree to pay
a late charge of an amount equal to seven percent (7%) of the amount of such
late payment or thirty-five dollars ($35.00), whichever is greater.
This Note is the Revolving Note referred to in the Credit Agreement.
Reference is made to the Credit Agreement for a description of any additional
rights of the holder with respect to this Note, and other terms and conditions
upon which this Note is issued.
Borrower may prepay all or any portion of this Note in part at any time
without premium or penalty.
All payments received by Bank under this Note will be applied first to
payment of amounts advanced by Bank on behalf of Borrower or which may be due
for insurance, taxes and attorneys' fees or other charges to be paid by Borrower
pursuant to the Credit Agreement and the Loan Documents, then to accrued
interest on this Note, then to principal.
In no event will the interest rate on this Note exceed the highest rate
permissible under any law which a court of competent jurisdiction will, in a
final determination, deem applicable hereto. In the event that a court
determines that Bank has received interest and other charges under this Note in
excess of the highest permissible rate applicable hereto, such excess will be
deemed received on account of, and will automatically be applied to reduce the
amounts due to Bank from Borrower under this Note, other than interest, and the
provisions hereof will be deemed amended to provide for the highest permissible
rate. If there are no such amounts outstanding, Bank will refund to Borrower
such excess.
Borrower and all endorsers, sureties, guarantors and other persons liable
on this Note hereby: (a) waive presentment for payment, demand, notice of
dishonor, protest, notice of protest and all other demands and notices in
connection with the delivery, performance and enforcement of this Note; (b)
consent to one or more renewals, supplements, modifications, restatements,
amendments or extensions of this Note; (c) agree to any substitution, exchange,
addition or release of any such property or the addition or release of any party
or person primarily or secondarily liable herein; (d) agree that Bank or holder
shall not be required first to institute any suit, or to exhaust its remedies
against any Borrower or any other person or party in order to enforce payment of
this Note; (e) consent to any extension, rearrangement, renewal or postponement
of time of payment of this Note and to any other indulgence with respect hereto
without notice, consent or consideration to any of them; and (f) agree that,
notwithstanding the occurrence of any of the foregoing, except as to any such
person expressly released in writing by Bank or holder, they shall be and remain
jointly and severally, directly and primarily, liable for all sums due hereunder
and under any and all of the Loan Documents.
This Note may not be changed orally, but only by an instrument in writing.
Page 2 of 5
To the extent that any of the terms and provisions of this Note are
inconsistent with the terms and provisions of the Credit Agreement, the terms
and provisions of this Note shall control.
If any of the terms or provisions of this Note shall be deemed to be
unenforceable or invalid, the enforceability or validity of the remaining terms
and provisions shall not be affected.
This Note is being delivered in, is intended to be performed in, will be
construed and enforceable in accordance with, and be governed by the internal
laws of, the State of Ohio without regard to principles of conflict of laws.
Borrower agree that the State and Federal courts in, or having jurisdiction
over, Lake County, Ohio or any other court in which Bank institutes proceedings
will have exclusive jurisdiction over all matters arising out of this Note, and
that service of process in any such proceeding will be effective if mailed to
Borrower at the address described in the Notices section of the Credit
Agreement. EACH BORROWER HEREBY WAIVES THE RIGHT TO TRIAL BY JURY OF ANY MATTERS
ARISING OUT OF THIS NOTE.
If there is more than one Borrower hereunder, the obligations, covenants,
promises, warranties and representations of each Borrower shall be joint and
several. Each natural person executing this Note as a Borrower acknowledges and
agrees that he or she (a) was a co-applicant to the Loan and intends to be bound
as a co-obligor hereunder, and shall not be deemed to be an accommodation party
or surety with respect to the Loan, (b) has the joint right to control the
distribution of proceeds of the Loan, and (c) has a direct economic interest in
the success of the corporate co-obligor and shall benefit from the extension of
credit under this Note.
Borrower hereby irrevocably authorizes any attorney-at-law to appear for
Borrower in any court of record in the State of Ohio, or in any other state or
territory of the United States, admit the maturity of this Note after the same
becomes due either by lapse of time or acceleration of maturity or otherwise,
and waive the issuing and service of process and confess judgment against
Borrower for the amount then appearing due, together with costs of suit, and
thereupon to waive all errors and all rights of appeal and stay of execution.
Borrower expressly (a) waives a conflict of interest as to any attorney retained
by the holder of this Note to confess judgment against Borrower upon this Note,
and (b) consents to the attorney retained by the holder hereof receiving a legal
fee from such holder for legal services rendered for confessing judgment against
Borrower upon this Note. A copy of this Note, certified by the holder hereof,
may be filed in each such proceeding in place of filing the original as a
warrant of attorney. The authority and power to appear for and enter judgment
against Borrower, or additional exercises thereof or by any imperfect exercise
thereof, shall not be extinguished by any judgment entered pursuant thereto.
This warrant of attorney to confess judgment shall remain in full force and
effect so long as any portion of the indebtedness evidenced hereby remains
unpaid, and any confession of judgment and subsequent vacation thereof shall not
constitute termination of this warrant of attorney to confess judgment.
Page 3 of 5
--------------------------------------------------------------------------------
"WARNING--BY SIGNING THIS PAPER YOU GIVE UP YOUR RIGHT TO NOTICE AND COURT
TRIAL. IF YOU DO NOT PAY ON TIME A COURT JUDGMENT MAY BE TAKEN AGAINST YOU
WITHOUT YOUR PRIOR KNOWLEDGE AND THE POWERS OF A COURT CAN BE USED TO COLLECT
FROM YOU REGARDLESS OF ANY CLAIMS YOU MAY HAVE AGAINST THE CREDITOR WHETHER FOR
RETURNED GOODS, FAULTY GOODS, FAILURE ON HIS PART TO COMPLY WITH THE AGREEMENT
OR ANY OTHER CAUSE."
--------------------------------------------------------------------------------
OURPET'S COMPANY, a Colorado corporation
By: /s/ Xxxxxx Xxxxxxx
------------------------------------
Xxxxxx Xxxxxxx,
Chairman, President and CEO
--------------------------------------------------------------------------------
"WARNING--BY SIGNING THIS PAPER YOU GIVE UP YOUR RIGHT TO NOTICE AND COURT
TRIAL. IF YOU DO NOT PAY ON TIME A COURT JUDGMENT MAY BE TAKEN AGAINST YOU
WITHOUT YOUR PRIOR KNOWLEDGE AND THE POWERS OF A COURT CAN BE USED TO COLLECT
FROM YOU REGARDLESS OF ANY CLAIMS YOU MAY HAVE AGAINST THE CREDITOR WHETHER FOR
RETURNED GOODS, FAULTY GOODS, FAILURE ON HIS PART TO COMPLY WITH THE AGREEMENT
OR ANY OTHER CAUSE."
--------------------------------------------------------------------------------
VIRTU COMPANY, an Ohio corporation
By: /s/ Xxxxxx Xxxxxxx
------------------------------------
Xxxxxx Xxxxxxx,
Chairman, President and CEO
--------------------------------------------------------------------------------
"WARNING--BY SIGNING THIS PAPER YOU GIVE UP YOUR RIGHT TO NOTICE AND COURT
TRIAL. IF YOU DO NOT PAY ON TIME A COURT JUDGMENT MAY BE TAKEN AGAINST YOU
WITHOUT YOUR PRIOR KNOWLEDGE AND THE POWERS OF A COURT CAN BE USED TO COLLECT
FROM YOU REGARDLESS OF ANY CLAIMS YOU MAY HAVE AGAINST THE CREDITOR WHETHER FOR
RETURNED GOODS, FAULTY GOODS, FAILURE ON HIS PART TO COMPLY WITH THE AGREEMENT
OR ANY OTHER CAUSE."
--------------------------------------------------------------------------------
/s/ Xxxxxx Xxxxxxx
----------------------------------------
XXXXXX XXXXXXX, Individually
Page 4 of 5
--------------------------------------------------------------------------------
"WARNING--BY SIGNING THIS PAPER YOU GIVE UP YOUR RIGHT TO NOTICE AND COURT
TRIAL. IF YOU DO NOT PAY ON TIME A COURT JUDGMENT MAY BE TAKEN AGAINST YOU
WITHOUT YOUR PRIOR KNOWLEDGE AND THE POWERS OF A COURT CAN BE USED TO COLLECT
FROM YOU REGARDLESS OF ANY CLAIMS YOU MAY HAVE AGAINST THE CREDITOR WHETHER FOR
RETURNED GOODS, FAULTY GOODS, FAILURE ON HIS PART TO COMPLY WITH THE AGREEMENT
OR ANY OTHER CAUSE."
--------------------------------------------------------------------------------
/s/ Xxxxxxxxx X. Xxxxxxx
----------------------------------------
Xxxxxxxxx X.XXXXXXX, Individually
Page 5 of 5
SECURITY AGREEMENT
Lake County, Ohio December 31, 2001
VIRTU company, an Ohio corporation, located at 0000 Xxxx Xxxxxx,
Xxxxxxxx, Xxxx 00000 (hereinafter the "Debtor") hereby assigns to FIRSTMERIT
BANK, N.A., an national banking association, located at 0000 Xxxxxxxx Xxxx,
Xxxxxx, Xxxx 00000 (hereinafter the "Secured Party") as collateral and grants to
Secured Party a security interest in and to all items of property described in
paragraph 2 of this Security Agreement (the "Agreement").
1. OBLIGATIONS: This assignment of collateral and grant of security interest
shall secure all loans, advances, indebtedness and each and every other
obligation or liability of Debtor owed to Secured Party, however created,
of every kind and description, whether now existing or hereafter arising
and whether direct or indirect, primary or as guarantor or surety,
absolute or contingent, due or to become due, liquidated or unliquidated,
matured or unmatured, participated in whole or in part, created by trust
agreement, lease, overdraft, agreement, or otherwise, whether or not
secured by additional collateral, whether originated with Secured Party
or owed to others and acquired by Secured Party by purchase, assignment
or otherwise, and including, without limitation, all loans, advances,
indebtedness and each and every other obligation or liability arising
under the Credit Agreement of even date herewith by and between the
Debtor, other Co-Borrowers and the Secured Party, the Revolving Note in
the amount of One Million Five Hundred Thousand and 00/100 Dollars
($1,500,000.00) of even date herewith executed by Debtor and the other
Co-Borrowers in favor of Secured Party, letters of credit now or hereafter
issued by Secured Party for the benefit of or at the request of Debtor,
all obligations to perform or forbear from performing acts, and all
agreements, instruments and documents evidencing, guarantying or securing
or otherwise executed in connection with any of the foregoing, together
with any amendments, modifications, extensions and restatements thereof,
and all expenses and attorneys' fees incurred or other sums disbursed by
Secured Party under this Agreement or any other document, instrument or
agreement related to any of the foregoing (collectively the
"Obligations").
2. COLLATERAL: The collateral hereby assigned and in which a security
interest is granted includes that collateral now existing and hereafter
arising or acquired by Debtor, regardless of where it is located, and is
defined as follows (together with all proceeds and products thereof and
all additions and accession thereto, replacements thereof, supporting
obligations therefor, guaranties thereof, insurance or condemnation
proceeds thereof, documents related thereto, all sales of accounts
constituting a right to payment therefrom, all tort or other claims
against third parties arising out of damage thereto or destruction
thereof, all property received wholly or partly in trade or exchange
thereof, all fixtures attached or appurtenant thereto, all leases thereof,
and all rents, revenues, issues, profits and proceeds arising from the
sale, lease, license, encumbrance, collection or any other temporary or
permanent disposition thereof, or any other interest therein,
collectively, the "Collateral"):
(a) all Accounts, all Inventory, all Equipment, all General Intangibles,
all Investment Property;
(b) all instruments, chattel paper, electronic chattel paper, documents,
securities, moneys, cash, letters of credit, letter of credit rights,
promissory notes, warrants, dividends, distributions, commercial tort
claims, contracts, agreements, contract rights or other property,
owned by Debtor or in which Debtor has an interest, including but not
limited to, those which are now or hereafter in the possession or
control of Secured Party or in transit by mail or carrier to or in
the possession of any third party acting on behalf of Secured Party,
without regard to whether Secured Party received the same in pledge,
for safekeeping, as agent for collection or transmission or otherwise
or whether Secured Party had conditionally released the same, and the
proceeds thereof, all rights to payment from, and all claims against
Secured Party, and any deposit accounts of Debtor with Secured Party,
including all demand, time, savings, passbook or other accounts and
all deposits therein; and
(c) all assets and personal property now owned or hereafter acquired; all
now owned and hereafter acquired inventory, equipment, fixtures,
goods, accounts, chattel paper, documents, instruments, general
intangibles, supporting obligations, software, and all rents, issues,
profits, products and proceeds thereof, wherever any of the foregoing
is located.
3. DEFINITIONS: Capitalized terms not otherwise defined in this Agreement
shall have the meanings attributed thereto in the applicable version of
the Uniform Commercial Code adopted in the jurisdiction in the state in
which Debtor is organized, or where appropriate, as the case may be, the
jurisdiction in which the collateral is located, as such definitions may
be enlarged or expanded from time to time by legislative amendment
thereto or judicial decision (the "Uniform Commercial Code"). As used
herein the following capitalized terms will have the following meanings:
(a) "Accounts" means all accounts, accounts receivable,
health-care-insurance receivables, credit card receivables, contract
rights, instruments, documents, chattel paper, tax refunds from
federal, state or local governments and all obligations in any form
including without limitation those arising out of the sale or lease
of goods or the retention of services by Debtor; all guaranties,
letters of credit and other security and supporting obligations for
any of the above; all merchandise resumed to or reclaimed by Debtor,
and all books and records (including computer programs, tapes and
data processing software) evidencing an interest in or relating to
the above; all winnings in a lottery or other game of chance operated
by a governmental unit or person licensed to operate such game by a
governmental unit and all rights to payment therefrom; and all
"Accounts" as same is now or hereafter defined in the Uniform
Commercial Code.
(b) "Equipment" means all goods (excluding inventory or consumer goods),
machinery, machine tools, equipment, fixtures, office equipment,
furniture, furnishings, motors, motor vehicles, tools, dies, parts,
jigs, goods (including, without limitation, each of the items of
equipment set forth on any schedule which is either now or in the
future attached to Secured Party's copy of this Agreement), and all
attachments, accessories,
2
accessions, replacements, substitutions, additions and improvements
thereto, and all supplies used or useful in connection therewith, and
all "Equipment" as same is now or hereafter defined in the Uniform
Commercial Code.
(c) "General Intangibles" means all general intangibles, choses in
action, causes of action, obligations or indebtedness owed to Debtor
from any source whatsoever, payment intangibles, software and all
other intangible personal property of every kind and nature (other
than Accounts) including without limitation patents, trademarks,
trade names, service marks, copyrights and applications for any of
the above, and goodwill, trade secrets, permits, licenses,
franchises, rights under agreements, tax refund claims, and all books
and records including all computer programs, disks, tapes, printouts,
customer lists, credit files and other business and financial
records, and the equipment containing any such information, and all
"General Intangibles" as same is now or hereafter defined in the
Uniform Commercial Code.
(d) "Inventory" means all goods, supplies, wares, merchandises and other
tangible personal property including raw materials, work in process,
supplies and components, and finished goods, whether held for sale or
lease, or furnished or to be furnished under any contract for
service, or used or consumed in business, and also including products
of and accessions to inventory, packing and shipping materials, and
all documents of title, whether negotiable or non-negotiable,
representing any of the foregoing, and all "Inventory" as same is now
or hereafter defined in the Uniform Commercial Code.
(e) "Investment Property" means a security, whether certificated or
uncertificated, security entitlement, securities account, commodity
contract or commodity account and all "Investment Property" as same
is now or hereafter defined in the Uniform Commercial Code.
4. WARRANTIES AS TO DEBTOR: Debtor hereby represents and warrants to Secured
Party as follows:
(a) That it is a corporation with its principal place of business located
at the address otherwise set forth herein, is organized in the State
of Ohio and its charter number is 933375.
(b) Debtor further warrants that its exact legal name is set forth in the
initial paragraph of this Agreement, and its Taxpayer I.D. No. is
00-0000000.
(c) Exhibit A, attached to this Agreement and incorporated herein by
reference, lists the locations of any and all of the Collateral of
Debtor.
5. WARRANTIES AS TO COLLATERAL: Debtor hereby represents and warrants to
Secured Party that:
(a) Except for the security interest hereby granted, Debtor is, and as to
any property which at any time forms a part of the Collateral, shall
be, the sole owner of, with good and marketable title in, each and
every item of the Collateral, or otherwise shall have the full right
and power to grant a security interest in the Collateral, free from
any lien, security interest or encumbrance whatsoever, except for the
capital leases set forth in Exhibit B
3
attached hereto and incorporated herein by reference and the loans
of Debtor with U.S. Small Business Administration (the "Permitted
Liens");
(b) Each item of Collateral is, and shall be, valid, and all information
furnished to Secured Party with regard thereto is, and shall be,
accurate and correct in all respects when furnished;
(c) None of the Collateral shall be sold, assigned, transferred,
discounted, hypothecated, or otherwise subjected to any lien,
encumbrance or security interest except for the Permitted Liens, and
that Debtor shall defend such Collateral and each and every part
thereof against claims of all persons at any time claiming such
Collateral or claiming any interest therein adverse to Secured Party;
(d) The provisions of this Agreement are sufficient to create in favor of
Secured Party a valid and continuing lien on, and first security
interest in, the types of Collateral in which a security interest may
be perfected by the filing of UCC Financing Statements, and when such
UCC Financing Statements are filed in the requisite filing offices,
and the requisite filing fees are paid, such filings shall be
sufficient to perfect such security interest (other than Equipment
affixed to real property so as to become fixtures);
(e) If any of the Collateral is or will be attached to real estate in
such a manner as to become a fixture under applicable state law, that
said real estate is not encumbered in any way, or if said real estate
is encumbered, Debtor will secure from the lien holder or the party
in whose favor it is or will become so encumbered a written
acknowledgment and subordination to the security interest hereby
granted or a written disclaimer of any interest in the Collateral, in
such form as is acceptable to Secured Party.
(f) The financial statements of Debtor dated October 31, 2001, and
heretofore submitted, to the Secured Party are true and correct and
there are no material adverse changes in the conditions, financial or
otherwise, of Debtor since the date of said financial statements.
6. DEBTOR'S RESPONSIBILITIES: Debtor covenants with, and warrants to,
Secured Party that Debtor shall:
(a) Furnish to Secured Party, in writing, a current list of all
Collateral for the purpose of identifying the Collateral and,
further, execute and deliver such supplemental instruments,
documents, agreements and chattel paper, in the form of assignments
or otherwise, as Secured Party shall require for the purpose of
confirming and perfecting, and continuing the perfection of, Secured
Party's security interest in any or all of such Collateral, or as is
necessary to provide Secured Party with control over the Collateral
or any portion thereof;
(b) At its expense and upon request of Secured Party, furnish copies of
invoices issued by Debtor in connection with the Collateral, furnish
certificates of insurance evidencing insurance on Collateral, furnish
proof of payment of taxes and assessments on Collateral, make
available to Secured Party, any and all of Debtor's books, records,
written memoranda, correspondence, purchase orders, invoices and
other instruments or writings that in any way evidence or relate to
the Collateral;
(c) Keep the Collateral insured at all times against risks of loss or
damage by fire (including so-called extended coverage), theft and
such other casualties including collision in the case of any motor
vehicle, all in such amounts, under such forms of policies, upon such
4
terms, for such periods and written by such companies or
underwriters as is satisfactory to Secured Party. In all cases
losses shall be payable to Secured Party and any surplusage shall be
paid to Debtor. All policies of insurance shall provide for at least
thirty (30) days prior written notice of cancellation to Secured
Party. Should Debtor at any time fail to purchase or maintain
insurance, pay taxes, or pay for any expense, incident or such
insurance, Secured Party may, but is not obligated to, pay such
taxes, order and pay for such necessary items of preservation,
maintenance or protection of the Collateral, and Debtor agrees to
reimburse Secured Party for all expenses incurred under this
paragraph;
(d) Pay all taxes or assessments imposed on or with respect to the
Collateral;
(e) Keep all of the Collateral in good condition and repair, protecting
it from weather and other contingencies which might adversely affect
it as secured hereunder;
(f) Notify Secured Party immediately in writing of any information which
Debtor has or may receive which might in any way adversely affect
the value of the Collateral or the rights of Secured Party with
respect thereto;
(g) Notify Secured Party promptly, in writing, of any change in the
location of the Collateral or of any place of business or mailing
addresses or the establishment of any new place of business or
mailing address;
(h) Pay all costs of filing any financing, continuation or termination
statements with respect to the security interest created hereby;
(i) Upon the occurrence of an Event of Default or breach of any
provision of this Security Agreement, pay all expenses and
reasonable attorneys' fees of Secured Party; and Debtor agrees that
said expenses and fees shall be secured under this Agreement;
(j) Maintain possession of all Collateral at the location disclosed to
Secured Party and not to remove the Collateral from that location;
(k) Not sell, contract to sell, lease, encumber, or otherwise transfer
the Collateral (other than inventory) until the Obligations have
been paid and performed, Debtor acknowledging nonetheless that
Secured Party has a security interest in the proceeds of such
Collateral.
(l) Take any other and further action necessary or desirable as
requested by Secured Party to grant Secured Party control over the
Collateral, as "control" is defined in the applicable version of the
Uniform Commercial Code, including without limitation (i) executing
and/or authenticating any assignments or third party agreements;
(ii) delivering, or causing the delivery of, any of the Collateral
to the possession of Secured Party; (iii) obtaining written
acknowledgments of the lien of Secured Party and agreements of
subordination to such lien from third parties in possession of the
Collateral in a form acceptable to Secured Party. Debtor consents to
and hereby authorizes any third party in an authenticated record or
agreement between Debtor, Secured Party, and the third party,
including but not limited to depository institutions, securities
intermediaries, and issuers of letters of credit or other support
obligations, to accept direction from Secured Party regarding the
maintenance and disposition of the Collateral and the products and
proceeds thereof, and to enter into agreements with Secured Party
regarding same, without further consent of the Debtor.
5
7. ACCOUNTS RECEIVABLE: Debtor hereby agrees that, notwithstanding the fact
that all or any part of the Obligations is not matured and Debtor is
current in payment according to the tenor of the Obligations, Secured
Party shall have the absolute right to take any one or more of the
following actions:
(a) Secured Party may serve written notice on Debtor instructing Debtor
to deliver to Secured Party all subsequent payments on accounts
receivable which Debtor shall do until notified otherwise;
(b) Secured Party may notify the account debtor(s) of its security
interest and instruct such account debtor(s) to make further
payments on such accounts to Secured Party instead of to Debtor;
and,
(c) Secured Party may serve written notice upon Debtor that all
subsequent xxxxxxxx or statements of account rendered to any account
debtor shall bear a notation directing the account debtor(s) to make
payment directly to Secured Party. Any payment received by Secured
Party pursuant to this paragraph shall be retained in a separate
non-interest bearing account as security for the payment and
performance of all Obligations of Debtor.
8. POWER OF ATTORNEY: Debtor hereby makes, constitutes and appoints Secured
Party its true and lawful attorney in fact to act, with full power of
substitution, with respect to the Collateral in any transaction, legal
proceeding, or other maker in which Secured Party is acting pursuant to
this Agreement, including, but not limited to executing, authentication
and/or filing on its behalf: (i) UCC Financing Statements reflecting the
lien of Secured Party upon the Collateral and any other documents
necessary or desirable to perfect or otherwise continue the security
interest granted herein; and (ii) any third party agreements or
assignments to grant Secured Party control over the Collateral, including
but not limited to third party agreements between Debtor, Secured Party,
and depository institutions, securities intermediaries, and issuers of
letters of credit or other support obligations, which third party
agreements direct the third party to accept direction from Secured Party
regarding the maintenance and disposition of the Collateral and the
products and proceeds thereof.
9. EVENTS OF DEFAULT: Any of the following events shall be an "Events of
Default" hereunder: (a) an event of default occurs under any agreement,
instrument or document evidencing, guarantying, securing or otherwise
executed or delivered in connection with any of the Obligations, as "Event
of Default" shall be defined therein; (b) any representation or warranty
of Debtor set forth in this Agreement or in any agreement, instrument,
document, certificate or financial statement evidencing, guarantying,
securing or otherwise related to, this Agreement or any other Obligation
shall be materially inaccurate or misleading; (c) Debtor shall fail to
maintain in force the insurance required in this Agreement or in any
agreement, instrument, document, certificate or financial statement
evidencing, guarantying, securing or otherwise related to, this Agreement
or any other Obligation, or Debtor shall otherwise default in the
observance or performance of any covenant or agreement set forth in any of
the foregoing for a period of thirty (30) days; (d) any failure to submit
to Secured Party current financial information upon request; (e) the
creation of any lien (except a lien to
6
Secured Party) on, the institution of any garnishment proceedings by
attachment, levy or otherwise against, the entry of a judgment against, or
the seizure of, any of the property of Debtor or any endorser or guarantor
of the Obligations, including, without limitation, any property deposited
with Secured Party; (f) an assignment for the benefit of the creditors of,
or the commencement of any bankruptcy, receivership, insolvency,
reorganization or liquidation proceedings by or against Debtor; (g) the
death or dissolution of Debtor or any endorser or guarantor of the
Obligations; (h) in the judgment of Secured Party, any adverse change
occurs in the existing or prospective financial condition of Debtor that
may affect the ability of Debtor to repay any of the Obligations, or
Secured Party deems itself insecure; or (i) any sale, conveyance or
transfer of any rights in the Collateral securing the Obligations, or any
destruction, loss or damage of or to the Collateral in any material
respect.
10. REMEDIES. Upon the occurrence and until the waiver of an Event of Default,
Secured Party may, without further notice to Debtor, at Secured Party's
option, declare any note and all of the Obligations to become due and
payable in its aggregate amount; provided that the Obligations shall be
accelerated automatically and immediately if the Event of Default is a
filing under the Bankruptcy Code. Secured Party may resort to the rights
and remedies of a secured party under the Uniform Commercial Code,
including but not limited to the right of a secured party to (a) enter any
premises of Debtor, with or without legal process and take possession of
the Collateral and remove it and any records pertaining thereto and/or
remain on such premises and use it for the purpose of collecting,
preparing and disposing of the Collateral; (b) ship, reclaim, recover,
store, finish, maintain and repair the Collateral; and (c) sell the
Collateral at public or private sale. Debtor will be credited with the net
proceeds of such sale only when they are actually received by Secured
Party, and any requirement of reasonable notice of any disposition of the
Collateral will be satisfied if such notice is sent to Debtor ten (10)
days prior to such disposition. Debtor will, upon request, assemble the
Collateral and any records pertaining thereto and make them available at a
place designated by Secured Party. Secured Party may use, in connection
with any assembly or disposition of the Collateral, any trademark, trade
name, trade style, copyright, patent right, trade secret or technical
process used or utilized by Debtor. No remedy set forth herein is
exclusive of any other available remedy or remedies, but each is
cumulative and in addition to every other remedy given under this
Agreement, and of the Obligations, or now or hereafter existing at law or
in equity or by statute. Secured Party may proceed to protect and enforce
its rights by an action at law, in equity or by any other appropriate
proceedings. No failure on the part of Secured Party to enforce any of the
rights hereunder shall be deemed a waiver of such rights or of any Event
of Default and no waiver of any Event of Default shall be deemed to be a
waiver of any subsequent Event of Default.
11. MISCELLANEOUS PROVISIONS:
(a) All rights of Secured Party shall inure to the benefit of its
successors and assigns and all obligations of Debtor shall bind the
heirs, executors, administrators, successors and assigns of Debtor.
(b) Debtor acknowledges and agrees that, in addition to the security
interests granted herein, Secured Party has a banker's lien and
common law right of set-off in and to
7
Debtor's deposits, accounts and credits held by Secured Party and
Secured Party may apply or set-off such deposits or other sums
against the Obligations upon the occurrence of an Event Default as
set forth in paragraph 10 of this Agreement.
(c) This Agreement contains the entire Agreement of the parties and no
oral Agreement whatsoever, whether made contemporaneously herewith
or hereafter shall amend, modify or otherwise affect the terms of
this Agreement.
(d) All rights and liabilities hereunder shall be governed and limited
by and construed in accordance with the laws of the state in which
the Debtor is organized.
(e) Any provision herein which may prove limited or unenforceable under
any law or judicial ruling shall not affect the validity or
enforceability of the remainder of this Agreement.
(f) Debtor hereby authorizes Secured Party to file a copy of this
Agreement as a Financing Statement with appropriate county and state
government authorities necessary to perfect Secured Party's security
interest in the Collateral as set forth herein. Debtor hereby
further authorizes Secured Party to file UCC Financing Statements on
behalf of Debtor and Secured Party with respect to the Collateral.
SECURED PARTY: DEBTOR:
FIRSTMERIT BANK, N.A. VIRTU COMPANY,
an Ohio corporation
By: /s/ Xxx Xxxxx V.P. By: /s/ Xxxxxx Xxxxxxx
--------------------------- -----------------------------
Xxx Xxxxx Xxxxxx Xxxxxxx,
Vice President Chairman, President and CEO
8
SECURITY AGREEMENT
Lake County, Ohio December 31, 2001
OURPET'S COMPANY, a Colorado corporation, located at 0000 Xxxx Xxxxxx,
Xxxxxxxx, Xxxx 00000 (hereinafter the "Debtor") hereby assigns to FIRSTMERIT
BANK, N.A., an national banking association, located at 0000 Xxxxxxxx Xxxx,
Xxxxxx, Xxxx 00000 (hereinafter the "Secured Party") as collateral and grants to
Secured Party a security interest in and to all items of property described in
paragraph 2 of this Security Agreement (the "Agreement").
1. OBLIGATIONS: This assignment of collateral and grant of security
interest shall secure all loans, advances, indebtedness and each and
every other obligation or liability of Debtor owed to Secured Party,
however created, of every kind and description, whether now existing or
hereafter arising and whether direct or indirect, primary or as guarantor
or surety, absolute or contingent, due or to become due, liquidated or
unliquidated, matured or unmatured, participated in whole or in part,
created by trust agreement, lease, overdraft, agreement, or otherwise,
whether or not secured by additional collateral, whether originated with
Secured Party or owed to others and acquired by Secured Party by
purchase, assignment or otherwise, and including, without limitation, all
loans, advances, indebtedness and each and every other obligation or
liability arising under the Credit Agreement of even date herewith by and
between the Debtor, other Co-Borrowers and the Secured Party, the
Revolving Note in the amount of One Million Five Hundred Thousand and
00/100 Dollars ($1,500,000.00) of even date herewith executed by Debtor
and the other Co-Borrowers in favor of Secured Party, letters of credit
now or hereafter issued by Secured Party for the benefit of or at the
request of Debtor, all obligations to perform or forbear from performing
acts, and all agreements, instruments and documents evidencing,
guarantying or securing or otherwise executed in connection with any of
the foregoing, together with any amendments, modifications, extensions
and restatements thereof, and all expenses and attorneys' fees incurred
or other sums disbursed by Secured Party under this Agreement or any
other document, instrument or agreement related to any of the foregoing
(collectively the "Obligations").
2. COLLATERAL: The collateral hereby assigned and in which a security
interest is granted includes that collateral now existing and hereafter
arising or acquired by Debtor, regardless of where it is located, and is
defined as follows (together with all proceeds and products thereof and
all additions and accession thereto, replacements thereof, supporting
obligations therefor, guaranties thereof, insurance or condemnation
proceeds thereof, documents related thereto, all sales of accounts
constituting a right to payment therefrom, all tort or other claims
against third parties arising out of damage thereto or destruction
thereof, all property received wholly or partly in trade or exchange
thereof, all fixtures attached or appurtenant thereto, all leases
thereof, and all rents, revenues, issues, profits and proceeds arising
from the sale, lease, license, encumbrance, collection or any other
temporary or permanent disposition thereof, or any other interest
therein, collectively, the "Collateral"):
(a) all Accounts, all Inventory, all Equipment, all General Intangibles,
all Investment Property;
(b) all instruments, chattel paper, electronic chattel paper, documents,
securities, moneys, cash, letters of credit, letter of credit rights,
promissory notes, warrants, dividends, distributions, commercial tort
claims, contracts, agreements, contract rights or other property,
owned by Debtor or in which Debtor has an interest, including but not
limited to, those which are now or hereafter in the possession or
control of Secured Party or in transit by mail or carrier to or in
the possession of any third party acting on behalf of Secured Party,
without regard to whether Secured Party received the same in pledge,
for safekeeping, as agent for collection or transmission or otherwise
or whether Secured Party had conditionally released the same, and the
proceeds thereof, all rights to payment from, and all claims against
Secured Party, and any deposit accounts of Debtor with Secured Party,
including all demand, time, savings, passbook or other accounts and
all deposits therein; and
(c) all assets and personal property now owned or hereafter acquired; all
now owned and hereafter acquired inventory, equipment, fixtures,
goods, accounts, chattel paper, documents, instruments, general
intangibles, supporting obligations, software, and all rents, issues,
profits, products and proceeds thereof, wherever any of the foregoing
is located.
3. DEFINITIONS: Capitalized terms not otherwise defined in this Agreement
shall have the meanings attributed thereto in the applicable version of
the Uniform Commercial Code adopted in the jurisdiction in the state in
which Debtor is organized, or where appropriate, as the case may be, the
jurisdiction in which the collateral is located, as such definitions may
be enlarged or expanded from time to time by legislative amendment
thereto or judicial decision (the "Uniform Commercial Code"). As used
herein the following capitalized terms will have the following meanings:
(a) "Accounts" means all accounts, accounts receivable,
health-care-insurance receivables, credit card receivables, contract
rights, instruments, documents, chattel paper, tax refunds from
federal, state or local governments and all obligations in any form
including without limitation those arising out of the sale or lease
of goods or the retention of services by Debtor; all guaranties,
letters of credit and other security and supporting obligations for
any of the above; all merchandise resumed to or reclaimed by Debtor,
and all books and records (including computer programs, tapes and
data processing software) evidencing an interest in or relating to
the above; all winnings in a lottery or other game of chance operated
by a governmental unit or person licensed to operate such game by a
governmental unit and all rights to payment therefrom; and all
"Accounts" as same is now or hereafter defined in the Uniform
Commercial Code.
(b) "Equipment" means all goods (excluding inventory or consumer goods),
machinery, machine tools, equipment, fixtures, office equipment,
furniture, furnishings, motors, motor vehicles, tools, dies, parts,
jigs, goods (including, without limitation, each of the items of
equipment set forth on any schedule which is either now or in the
future attached to Secured Party's copy of this Agreement), and all
attachments, accessories,
2
accessions, replacements, substitutions, additions and improvements
thereto, and all supplies used or useful in connection therewith, and
all "Equipment" as same is now or hereafter defined in the Uniform
Commercial Code.
(c) "General Intangibles" means all general intangibles, choses in
action, causes of action, obligations or indebtedness owed to Debtor
from any source whatsoever, payment intangibles, software and all
other intangible personal property of every kind and nature (other
than Accounts) including without limitation patents, trademarks,
trade names, service marks, copyrights and applications for any of
the above, and goodwill, trade secrets, permits, licenses,
franchises, rights under agreements, tax refund claims, and all books
and records including all computer programs, disks, tapes, printouts,
customer lists, credit files and other business and financial
records, and the equipment containing any such information, and all
"General Intangibles" as same is now or hereafter defined in the
Uniform Commercial Code.
(d) "Inventory" means all goods, supplies, wares, merchandises and other
tangible personal property including raw materials, work in process,
supplies and components, and finished goods, whether held for sale or
lease, or furnished or to be furnished under any contract for
service, or used or consumed in business, and also including products
of and accessions to inventory, packing and shipping materials, and
all documents of title, whether negotiable or non-negotiable,
representing any of the foregoing, and all "Inventory" as same is now
or hereafter defined in the Uniform Commercial Code.
(e) "Investment Property" means a security, whether certificated or
uncertificated, security entitlement, securities account, commodity
contract or commodity account and all "Investment Property" as same
is now or hereafter defined in the Uniform Commercial Code.
4. WARRANTIES AS TO DEBTOR: Debtor hereby represents and warrants to Secured
Party as follows:
(a) That it is a corporation with its principal place of business
located at the address otherwise set forth herein, is organized in
the State of Colorado and its charter number is N/A .
---------
(b) Debtor further warrants that its exact legal name is set forth in the
initial paragraph of this Agreement, and its Taxpayer I.D. No. is
00-0000000.
(c) Exhibit A, attached to this Agreement and incorporated herein by
reference, lists the locations of any and all of the Collateral of
Debtor.
5. WARRANTIES AS TO COLLATERAL: Debtor hereby represents and warrants to
Secured Party that:
(a) Except for the security interest hereby granted, Debtor is, and as to
any property which at any time forms a part of the Collateral, shall
be, the sole owner of, with good and marketable title in, each and
every item of the Collateral, or otherwise shall have the full right
and power to grant a security interest in the Collateral, free from
any lien, security interest or encumbrance whatsoever except for the
capital leases set forth in Exhibit B
3
attached hereto and incorporated herein by reference and the loans of
Debtor with U.S. Small Business Administration (the "Permitted
Liens");
(b) Each item of Collateral is, and shall be, valid, and all information
furnished to Secured Party with regard thereto is, and shall be,
accurate and correct in all respects when furnished;
(c) None of the Collateral shall be sold, assigned, transferred,
discounted, hypothecated, or otherwise subjected to any lien,
encumbrance or security interest except for the Permitted Liens, and
that Debtor shall defend such Collateral and each and every part
thereof against claims of all persons at any time claiming such
Collateral or claiming any interest therein adverse to Secured Party;
(d) The provisions of this Agreement are sufficient to create in favor of
Secured Party a valid and continuing lien on, and first security
interest in, the types of Collateral in which a security interest may
be perfected by the filing of UCC Financing Statements, and when such
UCC Financing Statements are filed in the requisite filing offices,
and the requisite filing fees are paid, such filings shall be
sufficient to perfect such security interest (other than Equipment
affixed to real property so as to become fixtures);
(e) If any of the Collateral is or will be attached to real estate in
such a manner as to become a fixture under applicable state law, that
said real estate is not encumbered in any way, or if said real estate
is encumbered, Debtor will secure from the lien holder or the party
in whose favor it is or will become so encumbered a written
acknowledgment and subordination to the security interest hereby
granted or a written disclaimer of any interest in the Collateral, in
such form as is acceptable to Secured Party.
(f) The financial statements of Debtor dated October 31, 2001, and
heretofore submitted, to the Secured Party are true and correct and
there are no material adverse changes in the conditions, financial or
otherwise, of Debtor since the date of said financial statements.
6. DEBTOR'S RESPONSIBILITIES: Debtor covenants with, and warrants to,
Secured Party that Debtor shall:
(a) Furnish to Secured Party, in writing, a current list of all
Collateral for the purpose of identifying the Collateral and,
further, execute and deliver such supplemental instruments,
documents, agreements and chattel paper, in the form of assignments
or otherwise, as Secured Party shall require for the purpose of
confirming and perfecting, and continuing the perfection of, Secured
Party's security interest in any or all of such Collateral, or as is
necessary to provide Secured Party with control over the Collateral
or any portion thereof;
(b) At its expense and upon request of Secured Party, furnish copies of
invoices issued by Debtor in connection with the Collateral, furnish
certificates of insurance evidencing insurance on Collateral, furnish
proof of payment of taxes and assessments on Collateral, make
available to Secured Party, any and all of Debtor's books, records,
written memoranda, correspondence, purchase orders, invoices and
other instruments or writings that in any way evidence or relate to
the Collateral;
(c) Keep the Collateral insured at all times against risks of loss or
damage by fire (including so-called extended coverage), theft and
such other casualties including collision in the case of any motor
vehicle, all in such amounts, under such forms of policies, upon such
4
terms, for such periods and written by such companies or underwriters
as is satisfactory to Secured Party. In all cases losses shall be
payable to Secured Party and any surplusage shall be paid to Debtor.
All policies of insurance shall provide for at least thirty (30) days
prior written notice of cancellation to Secured Party. Should Debtor
at any time fail to purchase or maintain insurance, pay taxes, or pay
for any expense, incident or such insurance, Secured Party may, but
is not obligated to, pay such taxes, order and pay for such necessary
items of preservation, maintenance or protection of the Collateral,
and Debtor agrees to reimburse Secured Party for all expenses
incurred under this paragraph;
(d) Pay all taxes or assessments imposed on or with respect to the
Collateral;
(e) Keep all of the Collateral in good condition and repair, protecting
it from weather and other contingencies which might adversely affect
it as secured hereunder;
(f) Notify Secured Party immediately in writing of any information which
Debtor has or may receive which might in any way adversely affect the
value of the Collateral or the rights of Secured Party with respect
thereto;
(g) Notify Secured Party promptly, in writing, of any change in the
location of the Collateral or of any place of business or mailing
addresses or the establishment of any new place of business or
mailing address;
(h) Pay all costs of filing any financing, continuation or termination
statements with respect to the security interest created hereby;
(i) Upon the occurrence of an Event of Default or breach of any provision
of this Security Agreement, pay all expenses and reasonable
attorneys' fees of Secured Party; and Debtor agrees that said
expenses and fees shall be secured under this Agreement;
(j) Maintain possession of all Collateral at the location disclosed to
Secured Party and not to remove the Collateral from that location;
(k) Not sell, contract to sell, lease, encumber, or otherwise transfer
the Collateral (other than inventory) until the Obligations have been
paid and performed, Debtor acknowledging nonetheless that Secured
Party has a security interest in the proceeds of such Collateral.
(l) Take any other and further action necessary or desirable as requested
by Secured Party to grant Secured Party control over the Collateral,
as "control" is defined in the applicable version of the Uniform
Commercial Code, including without limitation (i) executing and/or
authenticating any assignments or third party agreements; (ii)
delivering, or causing the delivery of, any of the Collateral to the
possession of Secured Party; (iii) obtaining written acknowledgments
of the lien of Secured Party and agreements of subordination to such
lien from third parties in possession of the Collateral in a form
acceptable to Secured Party. Debtor consents to and hereby authorizes
any third party in an authenticated record or agreement between
Debtor, Secured Party, and the third party, including but not limited
to depository institutions, securities intermediaries, and issuers of
letters of credit or other support obligations, to accept direction
from Secured Party regarding the maintenance and disposition of the
Collateral and the products and proceeds thereof, and to enter into
agreements with Secured Party regarding same, without further consent
of the Debtor.
5
7. ACCOUNTS RECEIVABLE: Debtor hereby agrees that, notwithstanding the fact
that all or any part of the Obligations is not matured and Debtor is
current in payment according to the tenor of the Obligations, Secured
Party shall have the absolute right to take any one or more of the
following actions:
(a) Secured Party may serve written notice on Debtor instructing Debtor
to deliver to Secured Party all subsequent payments on accounts
receivable which Debtor shall do until notified otherwise;
(b) Secured Party may notify the account debtor(s) of its security
interest and instruct such account debtor(s) to make further payments
on such accounts to Secured Party instead of to Debtor; and,
(c) Secured Party may serve written notice upon Debtor that all
subsequent xxxxxxxx or statements of account rendered to any account
debtor shall bear a notation directing the account debtor(s) to make
payment directly to Secured Party. Any payment received by Secured
Party pursuant to this paragraph shall be retained in a separate
non-interest bearing account as security for the payment and
performance of all Obligations of Debtor.
8. POWER OF ATTORNEY: Debtor hereby makes, constitutes and appoints Secured
Party its true and lawful attorney in fact to act, with full power of
substitution, with respect to the Collateral in any transaction, legal
proceeding, or other maker in which Secured Party is acting pursuant to
this Agreement, including, but not limited to executing, authentication
and/or filing on its behalf: (i) UCC Financing Statements reflecting the
lien of Secured Party upon the Collateral and any other documents
necessary or desirable to perfect or otherwise continue the security
interest granted herein; and (ii) any third party agreements or
assignments to grant Secured Party control over the Collateral, including
but not limited to third party agreements between Debtor, Secured Party,
and depository institutions, securities intermediaries, and issuers of
letters of credit or other support obligations, which third party
agreements direct the third party to accept direction from Secured Party
regarding the maintenance and disposition of the Collateral and the
products and proceeds thereof.
9. EVENTS OF DEFAULT: Any of the following events shall be an "Events of
Default" hereunder: (a) an event of default occurs under any agreement,
instrument or document evidencing, guarantying, securing or otherwise
executed or delivered in connection with any of the Obligations, as
"Event of Default" shall be defined therein; (b) any representation or
warranty of Debtor set forth in this Agreement or in any agreement,
instrument, document, certificate or financial statement evidencing,
guarantying, securing or otherwise related to, this Agreement or any
other Obligation shall be materially inaccurate or misleading; (c)
Debtor shall fail to maintain in force the insurance required in this
Agreement or in any agreement, instrument, document, certificate or
financial statement evidencing, guarantying, securing or otherwise
related to, this Agreement or any other Obligation, or Debtor shall
otherwise default in the observance or performance of any covenant or
agreement set forth in any of the foregoing for a period of thirty (30)
days; (d) any failure to submit to Secured Party current financial
information upon request; (e) the creation of any lien (except a lien to
6
Secured Party) on, the institution of any garnishment proceedings by
attachment, levy or otherwise against, the entry of a judgment
against, or the seizure of, any of the property of Debtor or any
endorser or guarantor of the Obligations, including, without
limitation, any property deposited with Secured Party; (f) an
assignment for the benefit of the creditors of, or the commencement of
any bankruptcy, receivership, insolvency, reorganization or
liquidation proceedings by or against Debtor; (g) the death or
dissolution of Debtor or any endorser or guarantor of the Obligations;
(h) in the judgment of Secured Party, any adverse change occurs in the
existing or prospective financial condition of Debtor that may affect
the ability of Debtor to repay any of the Obligations, or Secured
Party deems itself insecure; or (i) any sale, conveyance or transfer
of any rights in the Collateral securing the Obligations, or any
destruction, loss or damage of or to the Collateral in any material
respect.
10. REMEDIES. Upon the occurrence and until the waiver of an Event of
Default, Secured Party may, without further notice to Debtor, at
Secured Party's option, declare any note and all of the Obligations to
become due and payable in its aggregate amount; provided that the
Obligations shall be accelerated automatically and immediately if the
Event of Default is a filing under the Bankruptcy Code. Secured Party
may resort to the rights and remedies of a secured party under the
Uniform Commercial Code, including but not limited to the right of a
secured party to (a) enter any premises of Debtor, with or without
legal process and take possession of the Collateral and remove it and
any records pertaining thereto and/or remain on such premises and use
it for the purpose of collecting, preparing and disposing of the
Collateral; (b) ship, reclaim, recover, store, finish, maintain and
repair the Collateral; and (c) sell the Collateral at public or
private sale. Debtor will be credited with the net proceeds of such
sale only when they are actually received by Secured Party, and any
requirement of reasonable notice of any disposition of the Collateral
will be satisfied if such notice is sent to Debtor ten (10) days prior
to such disposition. Debtor will, upon request, assemble the
Collateral and any records pertaining thereto and make them available
at a place designated by Secured Party. Secured Party may use, in
connection with any assembly or disposition of the Collateral, any
trademark, trade name, trade style, copyright, patent right, trade
secret or technical process used or utilized by Debtor. No remedy set
forth herein is exclusive of any other available remedy or remedies,
but each is cumulative and in addition to every other remedy given
under this Agreement, and of the Obligations, or now or hereafter
existing at law or in equity or by statute. Secured Party may proceed
to protect and enforce its rights by an action at law, in equity or by
any other appropriate proceedings. No failure on the part of Secured
Party to enforce any of the rights hereunder shall be deemed a waiver
of such rights or of any Event of Default and no waiver of any Event
of Default shall be deemed to be a waiver of any subsequent Event of
Default.
11. MISCELLANEOUS PROVISIONS:
(a) All rights of Secured Party shall inure to the benefit of its
successors and assigns and all obligations of Debtor shall bind
the heirs, executors, administrators, successors and assigns of
Debtor
(b) Debtor acknowledges and agrees that, in addition to the security
interests granted herein, Secured Party has a banker's lien and
common law right of set-off in and to
7
Debtor's deposits, accounts and credits held by Secured Party and
Secured Party may apply or set-off such deposits or other sums
against the Obligations upon the occurrence of an Event Default as
set forth in paragraph 10 of this Agreement.
(c) This Agreement contains the entire Agreement of the parties and no
oral Agreement whatsoever, whether made contemporaneously herewith or
hereafter shall amend, modify or otherwise affect the terms of this
Agreement.
(d) All rights and liabilities hereunder shall be governed and limited by
and construed in accordance with the laws of the state in which the
Debtor is organized.
(e) Any provision herein which may prove limited or unenforceable under
any law or judicial ruling shall not affect the validity or
enforceability of the remainder of this Agreement.
(f) Debtor hereby authorizes Secured Party to file a copy of this
Agreement as a Financing Statement with appropriate county and state
government authorities necessary to perfect Secured Party's security
interest in the Collateral as set forth herein. Debtor hereby further
authorizes Secured Party to file UCC Financing Statements on behalf
of Debtor and Secured Party with respect to the Collateral.
SECURED PARTY: DEBTOR:
FIRSTMERIT BANK, N.A. OURPET'S COMPANY
a Colorado corporation
By: /s/ Xxx Xxxxx V.P By: /s/ Xxxxxx Xxxxxxx
------------------------ -----------------------
Xxx Xxxxx Xxxxxx Xxxxxxx,
Vice President Chariman, President and CEO
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