UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
 
FORM 8-K
Current Report Pursuant to Section 13 or 15(d) of
the Securities Act of 1934

Date of Report:  September 30, 2011
(Date of earliest event reported)

OurPet’s Company
(Exact name of registrant as specified in its charter)

Colorado
000-31279
34-1480558
(State or other jurisdiction
(Commission
(I.R.S. Employer
of incorporation)
File Number)
Identification Number)

1300 East Street, Fairport Harbor, OH 44077
(Address of principal executive offices including zip code)

440-354-6500
(Registrant’s telephone number, including area code)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
 
¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
 
¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
 
¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
 
¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
 
 
 

 
 
Item 1.01.
Entry into a Material Definitive Agreement.

Effective September 30, 2011, OurPet’s Company (“OurPet’s”) obtained funding for an equipment loan from Growth Capital Corp. (“Lender”), whose funds are made available to the Lender by the Director of Development of the State of Ohio (the “State”) through the State’s 166 loan program.  On May 19, 2011, OurPet’s entered into a Loan Agreement (the “Loan Agreement”) and a Security Agreement with the Lender and executed a Cognovit Promissory Note (the “Note”) for the principal amount of $225,000 (the “Loan”).  However, the terms for disbursement of the Loan were contingent upon certain conditions being met prior to funding being authorized by the State and the Loan actually being eligible for disbursement to OurPet’s.  Until the Loan was funded, no obligations under the Loan Agreement and related loan documents were binding upon OurPet’s.

The Note matures on October 1, 2016 and provides for interest and principal payments on the principal balance beginning November 1, 2011.  The interest rate is 3%. An additional service fee equal to ¼ of 1% of the principal balance of the Loan is paid in monthly installments along with the interest and principal payments.  The purpose of the Loan is to fund the acquisition of equipment molds used by OurPet’s in the manufacture of certain products.  Under the Loan Agreement, the Lender was granted a first lien on the equipment purchased by OurPet’s with the loan funds.

The foregoing descriptions of the Loan Agreement, Note and Security Agreement are not complete and are qualified in their entirety by reference to the Loan Agreement, Note and Security Agreement, which are attached to this current report as Exhibits 10.58, 10.59 and 10.60 respectively.

Item 2.03      Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant.

The disclosure under Item 1.01 of this report is also responsive to Item 2.03 of this report and is incorporated by reference.

Item 3.02      Unregistered Sales of Equity Securities.

In connection with the Loan referenced above under Items 1.01 and 2.03, and as previously reported in OurPet’s Form 10Q filed with the Securities and Exchange Commission on August 16, 2010, OurPet’s Board of Directors authorized the issuance of warrants to Steven and Evangelia Tsengas providing for the right to purchase in the aggregate 28,125 shares of OurPet’s common stock at $0.807 per share.  The warrants were issued in consideration for their commitment to the Lender and the State to provide an unlimited guaranty for the Loan once it was funded  The warrants vest over a 36 month period in which 1/36th of the warrants vest each calendar month so long as the guarantee remains outstanding.  The vesting of the warrants began when the Loan funded and must be exercised prior to their expiration date of June 28, 2015.  Upon exercise of the warrants, the shares will be restricted securities pursuant to Rule 144 of the Securities Act of 1933, as amended (the “Act”), in reliance on the exemption from registration provided by Section 4(2) of the Act.  A copy of the form of warrant is attached to this current report as Exhibit 10.61.
 
 
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Item 9.01.     Financial Statements and Exhibits.

(d)      Exhibits.

 
 10.58
Loan Agreement dated May 19, 2011 executed by OurPet’s and the Lender

 
 10.59
Cognovit Promissory Note dated May 19, 2011 executed by OurPet’s

 
 10.60
Security Agreement dated May 19, 2011 executed by OurPet’s and the Lender

 
 10.61
Form of Warrant issued to Steven and Evangelia Tsengas

 
3

 
 
SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
 
Date: October 6, 2011
OurPet’s Company
     
 
By:
/s/ Scott R. Mendes
 
Scott R. Mendes, Chief Financial
 
 Officer and Treasurer

 
4

 

EXHIBIT INDEX

Exhibit Number
 
Description
     
10.58
 
Loan Agreement dated May 19, 2011 executed by OurPet’s and the Lender
     
10.59
 
Cognovit Promissory Note dated May 19, 2011 executed by OurPet’s
     
10.60
 
Security Agreement dated May 19, 2011 executed by OurPet’s and the Lender
     
10.61
 
Form of Warrant issued to Steven and Evangelia Tsengas

 
 

 
Ohio 166 - Loan Agreement
Exhibit 10.58
10/5/2011
 

LOAN AGREEMENT

THIS LOAN AGREEMENT is made and entered into by and between the Lender and the Borrower, under the circumstances summarized in the following recitals (the capitalized terms used in the recitals being used therein as defined in Article I hereof):

WHEREAS, pursuant to the Act, the Director of Development of the State of Ohio (the “Director”) is authorized, among other things, to make loans to assist in acquiring constructing, reconstructing, rehabilitating, renovating, enlarging, improving, equipping, or furnishing buildings, structures, improvements and equipment and other property for industry, commerce, distribution or research in the State of Ohio; and

WHEREAS, by the Escrow Agreement the Director has made funds available to the Lender for the purpose of providing assistance to borrowers to pay a portion of the Allowable Costs of Projects under the Demonstration Program and the Act; and

WHEREAS, the Borrower has requested that the Lender provide the financial assistance under the Demonstration Program for the Project hereinafter described; and

WHEREAS, the Director has determined that the Project constitutes an eligible project within the meaning of the Act and that the financial assistance to be provided pursuant to this Loan Agreement is appropriate under the Demonstration Program and the Act and will be in furtherance of and in implementation of the public policy set forth in the Act; and

WHEREAS, the financial assistance to be provided pursuant to this Loan Agreement has been recommended by the Development Financing Advisory Board and approved by the Controlling Board pursuant to the Act;

NOW THEREFORE, in consideration of the mutual promises and the representations and agreements hereinafter contained, the Lender and the Borrower agree as follows:

ARTICLE I

DEFINITIONS

Section 1.1.        Use of Defined Terms .   In addition to the words and terms elsewhere defined in this Loan Agreement or by reference to the Security Documents or other instruments, the words and terms set forth in Section 1.2 hereof shall have the meanings therein set forth unless the context or use expressly indicates a different meaning or intent.  Such definitions shall be equally applicable to both the singular and plural forms of any of the words and terms therein defined.

Section 1.2.        Definitions .    As used herein:

“Act” means Chapter 166, Ohio Revised Code, as from time to time enacted and amended.

“Adverse Market Conditions” means such economic conditions as shall have been determined by the Director, with the advice of the Federal Reserve Bank of Cleveland, including but not limited to the following consideration:  (a) two (2) consecutive quarters of decline in the Federal Reserve Bank of Cleveland’s Ohio Manufacturing Index, whether as a whole or by relevant manufacturing section;   (b) at least twelve (12) of thirty-six (36) months of decline in the Federal Reserve Bank of Cleveland’s National Industrial Index, whether as a whole, or by relevant manufacturing sector; or  (c ) decline within the relevant manufacturing sector, as announced by Standard and Poor’s Industrial Outlook.

 
1

 

Ohio 166 - Loan Agreement
Exhibit 10.58
10/5/2011
 
 
“Allowable Costs” means allowable costs of the Project within the meaning of the Act.
 
“Application” means the Borrower’s application for financial assistance submitted to the Lender requesting assistance under Demonstration Program in connection with the Project.
 
“Borrower” means the person(s) or entit(y) (ies) named in the Term Sheet.

“Closing Date” means the date of execution and delivery of the Loan Documents.

“Controlling Board” means the Controlling Board of the State of Ohio created by Section 127.12, Ohio Revised Code.

“Cost Certification” means a certification by the Borrower, as of the Disbursement Date, setting forth in detail satisfactory to the Lender the costs incurred by the Borrower in connection with the Project, including a detail by category of all Allowable Costs.

“Demonstration Program” means the financial assistance program administered by the Lender pursuant to the Escrow Agreement and the Act.

“Development Financing Advisory Board” means the Development Financing Advisory Board of the State of Ohio created by Section 122.40, Ohio Revised Code.

“Disbursement Date” means the date set forth in the Term Sheet for the disbursement of the Loan.

“Equity Contribution” means the cash equity required to be contributed by the Borrower to pay Allowable Costs of the Project in excess of the Loan as set forth in the Term Sheet.

“ERISA” means the Employee Retirement Income Security Act of 1974, as from time to time enacted and amended.

“Escrow Account” means the escrow account established pursuant to the Escrow Agreement and maintained by the Escrow Agent.

“Escrow Agent” means the entity identified in and serving as escrow agent pursuant to the Escrow Agreement.

“Escrow Agreement” means the Loan Administration and Escrow Agreement among the Director, the Lender and the Escrow Agent, dated as set forth in the Term Sheet.

“Event of Default” means any of the events described as an event of default in Section 5.1 hereof.

“Financing Statements” means, as applicable, the financing statements relating to the property subject to the lien of the Security Documents signed by the Borrower as “Debtor” and naming the Lender as the “Secured Party.”
 
 
2

 
 
Ohio 166 - Loan Agreement
Exhibit 10.58
10/5/2011
 

“GAAP” means generally accepted accounting principles applied on a basis consistent with that of prior years.

“Governing Instruments” means, as applicable, the articles of incorporation, code of regulations, resolutions and actions of the directors and shareholders, partnership agreement and certificate of partnership of the Borrower, as from time to time amended or supplemented.

“Governmental Authority” means the United States of America, the State of Ohio, or any other state or any political subdivision thereof, any municipality, any agency, department, commission or board of any of the foregoing having jurisdiction over the Borrower or the Project, and all applicable constitutions, statutes, rules, regulations, codes, ordinances, orders, requirements or other laws of any of the foregoing.

“Guarantor(s)” means, as applicable, the person(s), or entit(y) (ies) named in the Term Sheet.

“Guaranty” or “Guaranties” means, as applicable, the guaranty or guaranties of even date herewith from the Guarantor(s) to the Lender unconditionally and absolutely guarantying in full repayment of the Loan.

“Lender” means the entity named in the Term Sheet.

“Loan” means the loan by the Lender to the Borrower of the Loan Amount, in accordance with the Demonstration Program, the Loan Approval Documents and this Loan Agreement, to be disbursed in accordance with Section 3.6 hereof.

“Loan Agreement” means this Loan Agreement, as from time to time amended or supplemented.

“Loan Amount” means the amount set forth in the Term Sheet, as determined by the Loan Approval Documents.

“Loan Approval Documents” means, with respect to the Loan, the determinations of the Director to the Development Financing Advisory Board, the resolution of the Development Financing Advisory Board, and the approval of the Controlling Board, each dated as set forth in the Term Sheet.

“Loan Documents” means all documents and instruments delivered to or required by the Lender to evidence and secure the Loan in accordance with the Demonstration Program and the Loan Approval Documents, including without limitation, this Loan Agreement, the Note and the Security Documents.

“Minority” means non-white or Spanish-speaking and/or surnamed individuals, or such other criteria as shall be determined from time to time by the Federal Bureau of Census.

“Minority Employment Requirement” means the obligation of the Borrower to employ Minority employees hired as a result of the Project:  (a) in the same percentage of its workforce as are found in the population of the county in which the Project is located; or  (b) if the Project is located in a city having a population in excess of fifty thousand (50,000), then in the same percentage as are found in the population of such city.
 
 
3

 
 
Ohio 166 - Loan Agreement
Exhibit 10.58
10/5/2011
 

“Note” means the Promissory Note of even date herewith from the Borrower to the Lender in the Loan Amount, evidencing the obligation of the Borrower to repay the Loan.

“Notice Address” means the addresses of the Lender, the Borrower and the Guarantor(s) set forth in the Term Sheet, or such additional or different address, notice of which is given under Section 6.2 hereof.

“PBGC” means the Pension Benefit Guaranty Corporation created by Title IV of ERISA.
 
“Plan” means any employee benefit plan or other plan maintained for employees of the Borrower and covered by Title IV of ERISA.

“Plans and Specifications” means, as applicable, the plans and specifications of other appropriate documents describing the Project and provided to the Lender.

“Prohibited Transaction” means any prohibited transaction as defined in Section 4975 of the Internal Revenue Code of 1986, as amended, or in Title I of ERISA.

“Project” means, as applicable, the Project Site, the Project Facilities and the Project Equipment, together constituting an eligible project within the meaning of the Act,  and, as applicable, the acquisition, construction, reconstruction, rehabilitation, enlargement, improvement, equipping, furnishing and operation of the Project in accordance with the Project Purposes, the Plans and Specifications and the Loan Approval Documents.

“Project Equipment” means, as applicable, the machinery, equipment, apparatus, furniture, and other personal property and fixtures described in Exhibit D attached hereto and made a part hereof, wherever located, together with all attachments, additions, and accessions thereto, replacements thereof, and all other machinery, equipment, fixtures, personal property and parts which may be acquired in substitution therefore or in replacement thereof.

“Project Facilities” means, as applicable, all the buildings, structures, additions, improvements, facilities,  and fixtures now or hereafter located in, upon or under, or based at the Project Site and owned by the Borrower, including, without limitation, the buildings, structures, additions, improvements, facilities and fixtures described in Exhibit C attached hereto and made part hereof.

“Project Purposes” means the purposes set forth in the Term Sheet.

“Project Site” means the real property described in Exhibit B attached hereto and made a part hereof and commonly known by the address set forth in the Term Sheet.

“Reportable Event” means any reportable event as defined in Title IV of ERISA.

“Security Agreement” means, as applicable, the Security Agreement of even date herewith between the Borrower and the Lender securing the repayment of the Loan.

“Security Documents” means, as applicable, the Security Agreement, the Financing Statements and the Guaranty, or, as the context may indicate, any one or more of the foregoing.

“Service Area” means the counties serviced by the Lender as set forth in the Term Sheet.

 
4

 
 
Ohio 166 - Loan Agreement
Exhibit 10.58
10/5/2011
 
 
“Term Sheet” means Exhibit A attached hereto and made a part hereof.

Section 1.3.       Certain Words and References .       Any reference herein to the Director shall include those succeeding to his functions, duties, or responsibilities pursuant to or by operation of law or lawfully performing such functions.  Any reference to a section or provision of the Constitution of the State of Ohio or to the Act or to a section, provision or chapter of the Ohio Revised Code shall include such section, provision or chapter as from time to time amended, modified, revised, supplemented or superseded.

ARTICLE II

DETERMINATIONS, REPRESENTATIONS AND WARRANTIES

Section 2.1.      Determinations of the Director .    Pursuant to the Demonstration Program and the Act, and on the basis of the representations and other information provided by the Borrower, the Director has heretofore made certain determinations, as set forth in the Loan Approval Documents, which are hereby confirmed, and the Director hereby determines that the financial assistance to be provided by the Lender pursuant to this Loan Agreement will conform to the requirements of the Act and will implement the purposes of the Act by creating new jobs or preserving existing jobs and employment opportunities and improving the economic welfare of the people of the State of Ohio.

Section 2.2.       Representations and Warranties of the Borrower .   The Borrower represents and warrants throughout the term of this Loan Agreement that:

 
(a)
Borrower is duly organized and validly existing under the laws of the State of Colorado and qualified to do business in the State of Colorado and Borrower is a Colorado corporation qualified to do business in Ohio.

 
(b)
It has full power and authority to execute, deliver and perform the Loan Documents and to enter into and carry out the transactions contemplated by the Loan Documents.  Such execution, delivery and performance do not and will not conflict with or violate any provision of law, administrative regulation, court order or consent decree applicable to the Borrower, or the Governing Instruments, or conflict with, constitute a default under, or result in a breach of any indenture, mortgage, deed of trust, guaranty, lease, agreement or instrument to which the Borrower is jointly or individually a party or by which it or any of its property or assets may be bound.  The Loan Documents have, by proper action, been duly authorized, executed and delivered by the Borrower, and all necessary actions by the Borrower have been taken to constitute the Loan Documents legal, valid and binding obligations of the Borrower, subject to applicable bankruptcy, insolvency, reorganization, moratorium, or other laws in effect from time to time affecting the rights of creditors generally, and except to the extent that the enforceability thereof may be limited by the application of general principles of equity.

 
(c)
The provision of financial assistance pursuant to the Loan Approval Documents and this Loan Agreement induced the Borrower to undertake the Project, which the Borrower expects to and will utilize its best efforts to preserve the existing jobs and employment opportunities, and create the new jobs and employment opportunities, each as set forth in the Term Sheet, in the period immediately following the Closing Date, and improve the economic welfare of the people of the State of Ohio.
 
 
5

 
 
Ohio 166 - Loan Agreement
Exhibit 10.58
10/5/2011
 
 
 
(d)
The Project will be, as applicable, completed and operated in accordance with the Plans and Specifications and the Project Purposes, and will be operated and maintained in such manner as to conform with all applicable zoning, planning, building, environmental and other applicable Governmental Authority and as to be consistent with the purposes of the Act.

 
(e)
The Project will be used and operated in a manner consistent with the Project Purposes until the date on which the Loan has been fully repaid and knows of no reason why the project will not be so operated.

 
(f)
There are not actions, suits or proceedings pending or, to the best of the Borrower’s knowledge, threatened against or affecting the Borrower or the Project which, if adversely determined, would individually or in the aggregate materially impair the ability of the Borrower to perform and of its obligations under the Loan Documents or materially and adversely affect the financial condition of the Borrower.

 
(g)
There are no actions, temporary restraining orders, injunctions, suits, proceedings, inquiries or investigations at law or in equity, or before any judicial or administrative court or agency, pending or, to the best of the Borrower’s knowledge, threatened against or affecting, or involving the properties, securities or business of, the Borrower, and there is no reasonable basis for any such action, temporary restraining order, injunction, suit, proceeding, inquiry or investigation, which would adversely affect the transactions contemplated by the Loan Documents or the delivery, validity or enforceability of any of the Loan Documents.

 
(h)
The Borrower is not in default under any of the Loan Documents, or in the payment of any indebtedness for borrowed money or under any agreement or instrument evidencing any such indebtedness and no event has occurred which by notice, the passage of time, or otherwise, would constitute any such event of default.

 
(i)
The Project Site is zoned under a zoning ordinance which permits the operation of the Project thereon in accordance with the water, storm and sanitary sewers, gas, electric, and telephone, and rights of access to public ways are available or will be provided to the Project Site in sufficient locations and capabilities to meet the requirements of operating the Project and of any applicable Governmental Authority.

 
(j)
The Borrower has made no contract or arrangement of any kind, other than as described in the Loan Approval Documents and the Loan Documents, which has given rise to, or the performance of which by the other party thereto would give rise to, a lien or claim of lien on the Project or other collateral covered by the Loan Documents.
 
 
6

 
 
Ohio 166 - Loan Agreement
Exhibit 10.58
10/5/2011
 
 
 
(k)
No representation or warranty of the Borrower contained in the Application, the Commitment, the Loan Documents and no statement contained in any certificate, schedule, list, financial statement or other instrument furnished by or on behalf of the Borrower in connection with the Loan contains any untrue statement of any material fact, or omits to state any material fact necessary to make the statements contained herein or therein not misleading.

 
(l)
The financial statements of the Borrower heretofore delivered to the Lender are true and correct in all respects, have been prepared in accordance with GAAP, and fairly present the financial condition and the results of operation of the Borrower as of the dates thereof.  No materially adverse change has occurred in the financial condition of the Borrower reflected therein since the respective dates thereof.

 
(m)
All proceeds of the Loan shall be used for the payment of Allowable Costs of the Project.  No part of any such proceeds shall be knowingly paid to or retained by the Borrower or any partner, officer, shareholder, director or employee of the Borrower, as the case may be, as a fee, kick-back or consideration of any type.

 
(n)
The Project Site and the principal place of business of the Borrower are located in the county or counties named in the Term Sheet.

 
(o)
The Borrower has obtained any and all requisite governmental consents, permits, licenses and approvals necessary for it to construct and operate the Project, as the case may be, and to enter into, execute and deliver the Loan Documents and to perform its respective obligations thereunder.

 
(p)
The Borrower is solvent and does not contemplate insolvency.  A receiver has not been appointed for the Borrower or for any of its assets or properties, nor is any application for receivership pending with respect to the Borrower.

 
(q)
Borrower has not changed its name, except to OurPet’s Company, nor does it utilize any trade names other than as set forth in the Term Sheet.

 
(r)
No note or notice of violation of any Governmental Authority has been received by the Borrower in connection with the Project, and the Borrower has no reason to believe that any such note or notice may or will be entered as result of the Project.

 
(s)
The Borrower has not received and has no knowledge of any notice or request from any insurance company, board of fire underwriters or Governmental Authority requesting the performance of any work or alteration with respect to the Project.

 
(t)
To the best of its knowledge, except as described in Exhibit E attached hereto and made a part thereof:

(i )  no pollutants or other toxic or hazardous substances, including any solid, liquid, gaseous or thermal irritant or contaminant, such as smoke, vapor, soot, fumes, acids, alkalis, chemicals or waste, including, without limitation, materials to be recycled, reconditioned or reclaimed have been or shall be discharged, dispersed, released, stored, treated, generated, disposed of, or allowed to escape at, under or on the Project Site;
 
 
7

 
 
Ohio 166 - Loan Agreement
Exhibit 10.58
10/5/2011
 
 
 
(ii)
no asbestos or asbestos-containing materials have been installed, used, incorporated into the Project, or disposed of at the Project Site;

 
(iii)
no underground storage tanks are located at the Project Site, or were located at the Project Site and subsequently removed or filled;

 
(iv)
no investigation, administrative order, consent order and agreement, litigation, or settlement with respect to any such substances is proposed, in existence or threatened or anticipated with respect to the Project;

 
(v)
the Project is in compliance with all applicable Governmental Authority; and

 
(vi)
no notice has been served on the Borrower, from any entity, governmental body, or individual claiming any violation of any Governmental Authority or requiring compliance with any Governmental Authority or demanding payment or contribution for environmental damage or injury to natural resources.

ARTICLE III

THE LOAN;  THE PROJECT;  DISBURSEMENT

Section 3.1.      Loan and Repayment .        On the terms and conditions of this Loan Agreement, the Lender shall lend to the Borrower the Loan Amount to assist in the financing of the Allowable Costs of the Project.  The Loan shall be evidenced and secured by the Note, the Security Documents and other Loan Documents, as applicable.  Those instruments shall be executed and delivered by the Borrower to the Lender on the Closing Date, concurrently with the execution and delivery of this Loan Agreement and the delivery of all other documents and the satisfaction of all other closing conditions required by the Commitment.  The Loan shall be disbursed on or about the Disbursement Date pursuant to Section 3.6 hereof, upon the satisfaction of the conditions set forth in Section 3.5 hereof.  The Loan shall be disbursed only from and only to the extent that on the Disbursement Date funds not heretofore committed are available to make the Loan from moneys in the Escrow Account.  The terms of repayment of the Loan shall be as set forth in the Note, and the Borrower shall make all payments required to be made under the Note as and when due.

Section 3.2.      The Project .   The Borrower (a)  has commenced or shall promptly hereafter commence the Project;  (b) shall pay or cause to be paid all expenses incurred in connection with the Project from funds made available therefor in accordance with this Loan Agreement or otherwise; and (c ) shall demand, sue for, levy and recover all sums of money and debts which may be due and payable under the terms of any contract, order, receipt, guaranty, warranty, writing or instruction in connection with the Project and will enforce the terms of any contract, agreement, obligation, bond or other performance security  with respect thereto.  The Borrower covenants and confirms its agreement in the Commitment that, to the extent that the Project involves construction, all wages paid to laborers and mechanics employed on the Project shall be paid at not less than the prevailing rates of wages for laborers and mechanics for the class of work called for by the Project, which wages shall be determined in accordance with the requirements of Sections 4115.03 through 4115.16, Ohio Revised Code, for determination of prevailing wage rates, subject, however, to the exceptions set forth in Section 166.02(E) of the Act.

 
8

 
 
Ohio 166 - Loan Agreement
Exhibit 10.58
10/5/2011
 
 
Section 3.3.      Inspections .    At its option, the Lender may retain, at the Borrower’s expense, an architect, engineer, appraiser or other consultant for the purpose of verifying costs and performing inspections of the Project.  Such inspections shall impose no responsibility or liability of any nature upon the Lender, the Director, the State of Ohio, their respective agents, representatives or designees nor, without limitation, carry any warranty or representation as to the adequacy or safety of the structures or any of their component parts or any other physical condition or feature pertaining to the Project.

Section 3.4.     Insufficiency of Proceeds .    In the event that the Loan is not sufficient to pay all costs of the Project, the Borrower shall, nonetheless and irrespective of the cause of such deficiency, pay all costs of the Project in full from its own funds.

Section 3.5.     Conditions to Disbursement    The Loan shall be disbursed in accordance with Section 3.6 of this Loan Agreement, provided the Lender shall have received the instruments, certifications, documents and opinions described in Exhibit F attached hereto and made a part hereof, each in form and substance satisfactory to the Lender.

Section 3.6.      Disbursement of Loan .     The Loan shall be disbursed in accordance with the terms of the Escrow Agreement in the amount of the Loan Amount, as determined by the Lender in his sole discretion based on the Cost Certification, to or at the direction of the Borrower on or about the Disbursement Date upon satisfaction of the conditions specified in Section 3.5 hereof and confirmation that the Security Documents and all other documents or instruments required to create and perfect the liens and security interests intended to be created by the Security Documents at the level of priority therein provided have been filed for record in such places and in such manner as to create and perfect fully and completely such liens and security interests.  If for any reason the Loan shall not have been disbursed on the Disbursement Date, this Loan Agreement shall automatically terminate and, subject to the provisions of Sections 3.7  and 3.8  hereof, be of no further force and effect.  For purposes of this Section, time is of the essence.

Section 3.7.     Payment of Costs .     The Borrower shall pay all costs incident to the Loan, including but not limited to recording and title fees, title examination and insurance fees, UCC search and filing fees, and legal fees.

Section 3.8.     Indemnification .    The Borrower shall defend, indemnify and hold the Lender and the Director and any officials of the Lender and the State of Ohio harmless against any and all losses, costs, expenses, claims or actions arising out of or connected with the execution and delivery of this Loan Agreement or any other Loan Documents and the preparation of documents relating to the disbursement of the Loan, including, but not limited to, all aforementioned costs and expenses and the costs and expenses, including attorneys’ fees, of any action brought pursuant to Chapter 4115, Ohio Revised Code, regardless of whether or not the disbursement of the Loan shall actually occur.  Without detracting from the generality of the foregoing, the Borrower expressly agrees to defend, indemnify and hold harmless the Lender and the Director from and against any and all claims, demands, judgments, damages, actions, causes of action, injuries, administrative orders, consent agreements and orders, liabilities, penalties, costs and expenses of any kind whatsoever, including claims arising out of loss of life, injury to persons, property, or business or damage to natural resources in connection with the activities of the Borrower, its predecessors in interest, third parties who have trespassed on the Project, or parties in a contractual relationship with the Borrower, or any of them, whether or not occasioned wholly or in part by any condition, accident or event caused by any act or omission of the Lender, the Director, the Borrower, previous owners of the Project Site or any of their officers, agents, employees, successors, assigns or guarantors, which:
 
 
9

 
 
Ohio 166 - Loan Agreement
Exhibit 10.58
10/5/2011
 
 
 
(a)
arises out of the actual, alleged or threatened discharge, disposal, release, storage, treatment, generation, disposal or escape of pollutants or other toxic or hazardous substances, including any solid, liquid, gaseous or thermal irritant or contaminant, including smoke, vapor, soot, fumes, acid, alkalis, chemicals and waste (including materials to be recycled, reconditioned or reclaimed); or

 
(b)
actually or allegedly arises out of the use, specification, or inclusion of any product, material or process containing chemicals, the failure to detect the existence or proportion of chemicals in the soil, air, surface water or ground water, or the performance or failure to perform the abatement of any pollution source or the replacement or removal of any soil, water, surface water, or groundwater containing chemicals.

The Borrower, its successors and assigns shall bear, pay and discharge when and as the same become due and payable, any and all such judgments or claims for damages, penalties or otherwise against the Lender and the Director described herein, shall hold the Director harmless for those judgments or claims, and shall assume the burden and expense of defending all suits, administrative proceedings, and negotiations of any description with any and all persons, political subdivisions or government agencies arising out of any of the occurrences set forth herein.  The provisions of this Section 3.8 shall survive the termination of this Loan Agreement indefinitely.

ARTICLE IV

ADDITIONAL COVENANTS AND AGREEMENTS

Section 4.1.      Affirmative Covenants of the Borrower .   Throughout the term of this Loan Agreement the Borrower shall, as applicable:
 
 
(a)
Taxes and Assessments .     Pay and discharge promptly, or cause to be paid and discharged promptly, when due and payable, all taxes, assessments and governmental charges or levies imposed upon it, its income or any of its property, or upon any part thereof, as well as all claims of any kind (including claims for labor, materials and supplies) which, if unpaid, might by law become a lien or charge upon its property; provided, however, that the Borrower may, at its expense, contest in good faith and with due diligence the validity or amount of such taxes, assessments and other charges, and may permit such charges to remain unpaid during the period of contest.

 
(b)
Maintain Existence .     Do, or cause to be done, all things necessary to preserve and keep in full force and effect its existence and its material rights and franchises.
 
 
10

 
 
Ohio 166 - Loan Agreement
Exhibit 10.58
10/5/2011
 
 
 
(c)
Maintain Property . Maintain and keep its property in good repair, working order and condition, and from time to time make all repairs, renewals and replacements which, in the opinion of the Borrower, are necessary and proper so that the business carried on in connection therewith may be properly and advantageously conducted at all times; provided, however, that nothing in this subsection (c ) shall prevent the Borrower from selling or otherwise disposing of any property whenever, in the good faith judgment of the Borrower, such property is obsolete, worn out, without economic value or unnecessary for the conduct of the business of the Borrower.

 
(d)
Maintain Insurance . Keep its insurable property insured against loss or damage by fire and other risks, maintain public liability insurance against claims for personal injury, death, or property damage suffered by others upon, in or about any premises occupied by the Borrower, and maintain all such worker’s compensation or similar insurance as may be required under the laws of any state or jurisdiction in which it may be engaged in business.  All insurance for which provision has been made in this subsection  (d) shall be maintained against such risks and in at least such amounts as such insurance is usually carried by persons engaged in the same or similar businesses, including but not necessarily limited to the risks and amounts set forth in the Term Sheet.  All insurance herein provided for shall be effected and maintained in force under a policy or policies issued by financially sound insurers of recognized responsibility licensed to do business in Ohio, except that the Borrower may effect workers’ compensation or similar insurance in respect of operations in any state or other jurisdiction either through an insurance fund operated by such state or other jurisdiction or by causing to be maintained a system or systems of self-insurance which is in accordance with applicable law.
 
 
(e)
Furnish Information .      Furnish to the Lender:

 
(i)
Periodic Financial Reports .        Within the time described in the Term Sheet, the balance sheet of the Borrower as of the end of such reporting period, together with related statements of income and retained earnings (or accumulated deficit) and changes in financial position for such period, setting forth in comparative form the corresponding figures as of the end of or for the corresponding period of the previous fiscal year, all in reasonable detail and prepared in accordance with GAAP, subject to usual year-end audit adjustment.

 
(ii)
Annual Reports .      Within the time described in the Term Sheet:  (A)  the annual financial statement of the Borrower described in the Term Sheet containing a profit and loss statement and balance sheet of the Borrower as of the end of such period, together with related statements of income and retained earnings (or accumulated deficit)  and changes in financial position for such period, setting forth in comparative form the corresponding figures as of the end of or for the previous fiscal year, all in reasonable detail and all examined by and accompanied by a review letter or opinion of the chief financial officer of the Borrower (or, if required by the Lender, the Borrower’s independent certified public accountants) to the effect that such financial statement was prepared in accordance with GAAP and presents fairly the Borrower’s financial position at the close of such period and the results of its operations for such period;  (B)  schedules of costs of goods and sales, overhead and administrative expenses; and  (C )  a certification to the Lender by the Borrower’s independent certified public accountants that the Borrower is not in default under any of its financial obligations.
 
 
11

 
 
Ohio 166 - Loan Agreement
Exhibit 10.58
10/5/2011
 
 
 
(iii)
Employment Data .      Upon request, but in any event not less frequently than semi-annually, a certificate in the form attached hereto as Exhibit G and made a part hereof.
 
 
(iv)
Certificate; No Default .      With the financial reports required to be furnished under this Section, a certificate in the form attached hereto as Exhibit H and made a part hereof.

 
(v)
Information Concerning Operations .      Such other employment, economic and statistical data concerning the Project and such other information respecting the business, properties or the condition or operations, financial or otherwise, of the Borrower as the Lender may reasonably request, including, without limitation, any and all reports of the Borrower to the Securities and Exchange Commission.

 
(f)
Deliver Notice .        Promptly deliver to the Lender a copy of each notice, certificate, request or communication given or received by it under or in connection with the Loan, and forthwith upon learning of any of the following, deliver written notice thereof to the Lender, describing the same and the steps being taken by the Borrower with respect thereto:

 
(i)
the occurrence of an Event of Default or an event or circumstance which would constitute an Event of Default, but for the requirement that notice be given or time elapse or both; or

 
(ii)
any action, suit or proceeding at law or in equity or before any governmental instrumentality or agency, instituted or threatened which, if adversely determined, would materially impair the right or ability of the Borrower to carry on the business which is contemplated in connection with the Project or would materially impair the right or ability of the Borrower to perform the transactions contemplated by the Loan Documents, or would materially and adversely affect the business, operations, properties, assets or condition of the Borrower; or

 
(iii)
the occurrence of a Reportable Event under, or the institution of steps by the Borrower to withdraw from, or the institution of any steps to terminate, any Plan as to which the Borrower may have liability.

 
(g)
Inspection Rights .      At any reasonable time and from time to time, permit the Lender, or any agents or representatives thereof, to examine and make copies of and abstract from the records and books of account of, and visit the properties of the Borrower, and discuss the general business affairs of the company with any of its officers, as the case may be; provided, however, that the Borrower reserves the right to restrict access to any of its facilities in accordance with reasonably adopted procedures relating to safety and security.
 
 
12

 
 
Ohio 166 - Loan Agreement
Exhibit 10.58
10/5/2011
 
 
 
 (h)
Job Creation and Preservation .      Create and preserve not fewer than ninety percent (90%) of the new jobs and employment opportunities, and preserve not fewer than the existing jobs and employment opportunities, each as represented by the Borrower in the Application and this Loan Agreement, within the three (3)-year period immediately following the Closing Date.

 
(i)
Minority Employment .      Except as may be occasioned by Adverse Market Conditions, achieve not less than ninety percent (90%) of the Minority Employment Requirement on the Project within the three (3)-year period immediately following the Closing Date.

 
(j)
Buy-Ohio Requirement .      Utilize its best efforts to purchase goods and services from Ohio-based companies.

 
 (k)
Key Person Life Insurance .
 
(i)
Maintain life insurance policies with collateral assignments of the proceeds thereof in form and substance satisfactory to the Lender, on the life/lives of the person(s) named in the Term Sheet, with a death benefit payable in an amount not less than the principal amount from time to time outstanding under the Note;
 
(ii)
deliver to the Lender, upon request, proof that all such policies remain in full force and effect, and
 
(iii)
furnish or cause to be furnished to the Lender written notice, as to each such policy:   (A)  that the premium is to become due and the amount and due date thereof, at least thirty (30) days before said due date, and, if applicable, (B) that the premium has not been paid, the amount thereof and the date coverage under such policy shall expire, at least thirty (30) days before said expiration date.

Section 4.2.      Negative Covenants of the Borrower .      Throughout the term of this Loan Agreement the Borrower shall not, as applicable:

 
(a)
Existence of Borrower .      Sell, transfer or otherwise dispose of all, or substantially all, of its assets, consolidate with or merge into any other entity, or permit one or more other entities to consolidate with or merge into it; provided, however, that the Borrower may, without violating the agreement contained in this subsection (a) consolidate with or merge into another entity, or permit one or more other entities to consolidate with or merge into it, or sell, transfer or otherwise dispose of all, or substantially all, of its assets and thereafter dissolve, if:

 
(i)
the prior written consent of the Lender is obtained;

 
(ii)
the surviving, resulting, or transferee entity, as the case may be, assumes in writing all of the obligations of the Borrower hereunder (if such surviving, resulting or transferee entity is other than the Borrower); and
 
 
13

 
 
Ohio 166 - Loan Agreement
Exhibit 10.58
10/5/2011
 
 
 
(iii)
the surviving, resulting or transferee entity, as the case may be, is an entity duly organized and validly existing under the laws of the State of Ohio or duly qualified to do business therein and has a net worth of not less that that of the Borrower immediately prior to such disposition, consolidation or merger, transfer or change of form.

 
(b)
ERISA .      Voluntarily terminate any Plan so as to result in any material liability of the Borrower to the PBGC, enter into any Prohibited Transaction involving any Plan which results in any material liability of the Borrower to the PBGC, cause or permit any occurrence of any Reportable Event which results in any material liability of the Borrower to the PBGC, or allow or suffer to exist any other event or condition which results in any material liability of the Borrower to the PBGC.

 
(c)
Agreements .      Enter into any agreement containing any provision which would be violated or breached by the performance of its obligations hereunder or under any instrument or document delivered by it hereunder or in connection herewith.

 
(d)
Assignment, Sale or Lease .      In whole or in part, assign this Loan Agreement or sell, lease or grant the right to occupy or use any portion of the Project, except as permitted by the Loan Approval Documents, without the prior written consent of the Lender.

 
(e)
Sale and Leaseback .      Enter into any agreement providing for the leasing by the Borrower, as lessee, of the Project or any part thereof, which has been or is to be sold or transferred by the Borrower or any lessor of the Project or any part thereof.

 
(f)
Suspension of Operation .      Suspend  or discontinue operation of the Project without the prior written consent of the Lender.

 
(g)
Removal of Assets .      Without the prior written consent of the Lender, remove, transfer or transport from the Service Area, any of its assets comprising all or part of the Project or given as security for the Loan, other than the operation of motor vehicles or the shipment of goods in the ordinary course of business.

 
(h)
Encumbered Assets .      Pledge, assign, sell and leaseback, hypothecate or in any manner encumber any of its assets excepting, however, purchase money security interests.

 
(i)
Contingent Liabilities .      Without the prior written consent of the Lender, guaranty or become a surety or otherwise contingently liable for any obligations of others, except pursuant to the deposit and collection of checks and similar items in the ordinary course of business.

 
(j)
Financial Covenants .      Without the prior written consent of the Lender, fail to comply with any of one or more of the covenants set forth in the Term Sheet.

 
14

 
 
Ohio 166 - Loan Agreement
Exhibit 10.58
10/5/2011
 
 
ARTICLE V

EVENTS OF DEFAULT AND REMEDIES

Section 5.1.      Events of Default .      Each of the following shall be an event of default under this Loan Agreement:

 
(a)
The Borrower shall fail to pay, or cause to be paid, any amount payable pursuant to this Loan Agreement or under the Note within ten (10) days immediately following the date on which such payment is due and payable; or
 
(b)
The Borrower or any of the Guarantors shall, as applicable:
 
(i)
die or become insolvent;
 
(ii)
admit in writing its inability to pay its debts generally as they become due;
 
(iii)
have an order for relief entered in any case commenced by or against it under the federal bankruptcy laws, as now or hereafter in effect;
 
(iv)
commence a proceeding under any other federal or state bankruptcy, insolvency, reorganization or other similar law, or have such a proceeding commenced against it and either have an order of insolvency or reorganization entered against it or have the proceeding remain undismissed and unstayed for a period of ninety (90) days;
 
(v)
make an assignment for the benefit of creditors; or,
 
(vi)
have a receiver, trustee or custodian appointed for it or for the whole or any substantial part of its property; or

 
(c) 
The Borrower shall fail to observe and perform any agreement, term, covenant or condition contained in this Loan Agreement, other than as required pursuant to subsections (a) and (b) of this Section 5.1, and such failure shall continue for a period of thirty (30) days after notice of such failure is given to the Borrower by the Lender, or for such longer period as the Lender may agree to in writing; provided, that if the failure is of such nature that it can be corrected but not within the applicable period, such failure shall not constitute an Event of Default so long as the Borrower institutes curative action within the applicable period and diligently pursues such action to completion; or

 
(d)
Any representation or warranty made by the Borrower or the Guarantors or any of their respective partners, agents, directors or officers, as the case may be, herein or in the Application, the Commitments, any other of the Loan Documents, or in connection herewith or therewith shall prove to have been incorrect in any material respect when made; or

 
(e)
The Borrower shall fail to pay any indebtedness of the Borrower, or any interest or premium thereon, when due (whether by scheduled maturity, required prepayment, by acceleration, on demand or otherwise) and such failure shall continue after the applicable grace period, if any, specified in the agreement or instrument relating to any such indebtedness, or any other event, shall occur and shall continue after the applicable grace period, if any, specified in such agreement or instrument, if the effect of such default or event is to accelerate, or to permit the acceleration of, the maturity of such indebtedness or any such indebtedness shall be declared to be due and payable, or required to be prepaid (other than by a regularly scheduled required prepayment), prior to the stated maturity thereof; or
 
 
15

 
 
Ohio 166 - Loan Agreement
Exhibit 10.58
10/5/2011
 
 
 
(f)
A judgment or order for the payment of money shall be rendered against the Borrower or any of the Guarantors and either:
 
(i)
enforcement proceedings shall have been commenced by any creditor upon such judgment or order; or
 
(ii)
there shall be any period of thirty (30) consecutive days during which a stay of enforcement of such judgment or order, by reason of a pending appeal or otherwise, shall not be in effect; or

 
(g)
Any default under the Note, the Security Documents or any other of the Loan Documents shall have occurred and be continuing; or

 
(h)
The Borrower fails to meet its respective minimum funding requirements under ERISA, with respect to any Plan; or

 
(i)
The Borrower shall suspend or discontinue operation of the Project without the prior written consent of the Lender.

Section 5.2.      Remedies on Default .      Whenever an Event of Default shall have occurred and be continuing any one or more of the following remedial steps may be taken:

 
(a)
If the Loan has not been disbursed, the Lender may terminate any and all of its obligations under this Loan Agreement;

 
(b)
The Lender may declare all payments under the Note to be immediately due and payable, whereupon the same shall become immediately due and payable;

 
(c)
The Lender may exercise any or all or any combination of the remedies specified in the Security Documents or in any other of the Loan Documents;

 
(d)
The Lender may have access to, inspect, examine and make copies of the books and records accounts and financial data of the Borrower; or

 
(e)
The Lender may pursue all remedies now or hereafter existing at law or in equity to collect all amounts then due and thereafter to become due under this Loan Agreement, the Note, the Security Documents or any of the other Loan Documents, or to enforce the performance and observance of any other obligation or agreement of the Borrower or the Guarantors under the Loan Documents.

Section 5.3.      No Remedy Exclusive .      No remedy conferred upon or reserved to the Lender by this Loan Agreement is intended to be exclusive of any other available remedy or remedies, but each and every such remedy shall be cumulative and shall be in addition to every other remedy given under this Loan Agreement, the Loan Documents, or now or hereafter existing at law, in equity or by statute.  No delay or omission to exercise any right or power accruing upon any default shall impair any such right or power or shall be construed to be a waiver thereof,  but any such right and power may be exercised from time to time and as often as may be deemed expedient.  In order to entitle the Lender to exercise any remedy reserved to it in this Loan Agreement, it shall not be necessary to give any notice, other than such notice as may be expressly provided for herein or required by law.

 
16

 
 
Ohio 166 - Loan Agreement
Exhibit 10.58
10/5/2011
 
 
Section 5.4.      Agreement to Pay Fees and Expenses .      If an Event of Default shall occur and the Lender shall incur expenses, including reasonable attorneys’ fees, in connection with the enforcement of this Loan Agreement or any other of the Loan Documents, or the collection of sums due thereunder, the Borrower shall reimburse the Lender for the expenses so incurred upon demand.  If the Borrower shall request waiver or modification of any of the terms or provisions of this Loan Agreement and the Lender shall incur expenses, including, without limitation, accountants’ and attorneys’ fees, in connection therewith, regardless of whether such waiver or modification is eventually granted by the Lender, the Borrower shall promptly reimburse the Lender for such expenses so incurred upon demand.  If any such expenses are not so reimbursed, the amount thereof, together with interest thereon from the date of demand for payment at the Interest Rate for Advances (as defined in the Security Documents), shall constitute indebtedness secured by the Security Documents, and in any action brought to collect such indebtedness or to foreclose or enforce the Security Documents, the Lender shall be entitled to seek the recovery of such expenses in such action.

Section 5.5.      No Waiver .      No failure by the Lender to insist upon the strict performance by the Borrower of any provision hereof shall constitute a waiver of his right to strict performance, and no express waiver shall be deemed to apply to any other existing or subsequent right to remedy the failure by the Borrower to observe or comply with any provision hereof.

ARTICLE VI

MISCELLANEOUS

Section 6.1.      Term of Agreement .     This Loan Agreement shall be and remain in full force and effect from the date of its delivery until: (a) the termination of this Loan Agreement pursuant to Section 5.2(a) hereof, or (b)  such time as the Loan shall have been fully repaid and all other sums payable by the Borrower under this Loan Agreement, the Security Documents,  the Note and the other Loan Documents shall have been fully paid.

Section 6.2.      Notices .      All notices, certificates, requests or other communications hereunder shall be in writing and shall be deemed to be sufficiently given three (3) days after deposit in United States registered or certified mail, postage prepaid, and addressed to the appropriate Notice Address.  The Borrower or the Lender may, by notice given hereunder, designate any further or different addresses to which subsequent notices, certificates, requests or other communications shall be sent.

Section 6.3.      Binding Effect .      This Loan Agreement shall inure to the benefit of, and shall be binding in accordance with its terms upon, the Lender, the Borrower and their respective successors and assigns.

Section 6.4.      Amendments and Supplements .      This Loan Agreement contains the entire agreement of the parties hereto with respect to the subject matter hereof, and may not be amended or supplemented except by an instrument in writing executed by the Lender and the Borrower.

 
17

 
 
Ohio 166 - Loan Agreement
Exhibit 10.58
10/5/2011
 
 
Section 6.5.      Execution of Counterparts .       This Loan Agreement may be executed in any number of counterparts, each of which shall be regarded as an original and all of which shall constitute but one and the same instrument.

Section 6.6.      Severability .      If any provision of this Loan Agreement, or any term, condition, covenant, obligation or agreement contained herein is determined by a court to be invalid or unenforceable, such determination shall not affect any other provision, term, condition, covenant, obligation or agreement each of which shall be construed and enforced as if such invalid or unenforceable portion were not contained herein.  Such invalidity or unenforceability shall not affect any valid and enforceable application thereof, and each such provision, term, condition, covenant, obligation or agreement, shall be deemed to be effective, operative, made, entered into or taken in the manner and to the full extent permitted by law.

Section 6. 7.      Captions .      The captions and headings in the Loan Agreement shall be solely for convenience of reference and shall in no way define, limit or describe the scope or intent of any provision or Sections of this Loan Agreement.

Section 6. 8.      Governing Law .      This Loan Agreement shall be deemed to be a contract made under the laws of the State of Ohio and for all purposes shall be governed by and construed in accordance with the laws of the State of Ohio.

IN WITNESS WHEREOF, this Loan Agreement has been executed and delivered as of the 19 th day of May, 2011.

 
GROWTH CAPITAL CORP
 
Lender
     
 
By:
 
   
John Kropf
   
Its: Executive Director
     
 
OURPET’S COMPANY
 
Borrower
     
 
By:  
/s/ Steven Tsengas
   
Dr. Steven Tsengas
   
Its: Chairman & CEO
     
 
Dr. Steven Tsengas
 
GUARANTOR
     
 
By:
/s/ Steven Tsengas
   
Dr. Steven Tsengas, Individually

 
18

 

Exhibit 10.59
COGNOVIT PROMISSORY NOTE

$225,000.00
 
May 19
 , 2011

For value received, OURPET’S COMPANY (the “Borrower”), promises to pay to the order of Growth Capital Corp. (the “Lender”), at IMG Center, 1360 East Ninth Street, Ste. 350, Cleveland, OH 44114, or at such other address as may be designated in writing by the Lender, the principal sum of Two Hundred Twenty Five Thousand Dollars, together with interest on the unpaid principal balance from time to time outstanding, at the rate of 3 percent (3.0%) per annum until paid. The principal of and interest on this Note shall be paid in sixty (60) consecutive monthly installments in accordance with the schedule attached hereto and made a part hereof, which shall be due and payable on the first day of each calendar month commencing November 1 st , 2011 (the “First Installment Date”) and ending October 1 st , 2016 the “Last Installment Date”); provided, however, that the amount of the installment payable on the First Installment Date shall include interest accrued hereon from the Closing Date to the First Installment Date, and that the amount of the installment payable on the Last Installment Date shall be equal to the balance of the principal sum then outstanding, together with all interest accrued thereon. In addition, the Borrower promises to pay to the order of the Lender, at the above address, a monthly service fee equal to one-twelfth (1/12) of one-fourth (1/4) of one percent (1%) of the principal balance outstanding under this Note.

The annual rate of interest stated herein shall apply to a three-hundred-sixty-five (365) day period, and amounts of interest due hereunder shall be computed upon the actual days in each month. Installments of principal and interest shall be applied first to interest as provided herein and the balance to principal due hereunder.

The Borrower may prepay all or any portion of the principal sum hereof at any time without penalty. All such prepayments shall be applied to the payment of the principal installments due hereon in the inverse order of their maturity, and shall be accompanied by the payment of accrued interest on the amount of the prepayment to the date thereof.

The payment of this Note and all interest hereon is secured by the Security documents, as defined in the Loan Agreement dated May 19, 2011 between the Lender and the Borrower (the “Loan Agreement”). The covenants, conditions and agreements contained in the Loan Agreement, the Security Documents and any and all other documents or instruments evidencing or securing the loan evidenced by this Note (collectively, the “Loan Documents”) are hereby made a part of this Note.

If default shall occur in the payment of any installment of interest, or of principal and interest, under this Note, in either case continuing for a period of ten (10) days after any such payment shall have become due and payable, or if an Event of Default (as defined in any of the Loan Documents) shall have occurred and be continuing, then, at the option of the Lender, the entire principal sum and all interest accrued hereon shall become due and payable at once, without demand or notice, said notice and demand being hereby expressly waived.
 
 
 

 

Exhibit 10.59
Except where prohibited by law, the Borrower promises to pay all costs of collection, including, but not limited to, reasonable attorney’s fees paid or incurred by the Lender on account of such collection caused by default, whether under the terms of this Note or under the terms of the agreements or conditions of the Loan Agreement, whether or not suit is filed with respect thereto.

For the period during which a default shall exist in the payment of each and every installment of principal or interest, or of principal and interest, or of service fees due and payable under this Note, a late charge equal to five percent (5%) of each such installment shall be due and payable, in addition to all other sums due hereunder, for each and every month during which such default shall exist. For any period during which a default shall exist under Sections 4.1(h), (I) or (j) and 5.1© of the Loan Agreement, this Note shall bear interest at the rate which is the lesser of (a) twelve percent (12%) per annum, or (b) highest rate permitted by the laws of the State of Ohio.

The Borrower authorizes any attorney-at-law to appear in any court of record in the State of Ohio, or in any other State or territory of the United States after the above indebtedness becomes due thereon, together with the costs of suit, and thereupon to waive all errors and rights of appeal and stay of execution.

This Note was executed at Cleveland, Ohio and shall be construed in accordance with the laws of the State of Ohio.
 

 
WARNING: BY SIGNING THIS PAPER YOU GIVE UP YOUR RIGHT TO NOTICE AND COURT TRIAL. IF YOU DO NOT PAY ON TIME A COURT JUDGEMENT 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 OF HIS PART TO COMPLY WITH THE AGREEMENT, OR ANY OTHER CAUSE.
 

 
   
OURPET’S COMPANY
   
BORROWER
     
 
By: 
 
     
 
Its:
 

 
 

 

Exhibit 10.60

SECURITY AGREEMENT

SECURITY AGREEMENT made this 19 th day of May, 2011 between OURPET’S COMPANY whose principal place of business is 1300 East Street, Fairport Harbor, Ohio 44077 (“Debtor”), and GROWTH CAPITAL CORP ., having an address at IMG Center, 1360 East Ninth Street, Suite 350, Cleveland, Ohio 44060 (“Secured Party”).

In consideration of the mutual covenants and agreements contained herein and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Debtor and Secured Party, intending to be bound legally, agree as follows:

1.            Security Interest .

(a)           To secure prompt and complete payment and performance of the Obligations (as defined below), Debtor hereby pledges, assigns, transfers and grants to Secured Party a continuing security interest in all Equipment and Fixtures of the Debtor acquired with the proceeds of the loan by Debtor to Secured Party in the principal amount of $225,000.00, including but not limited to the Equipment described in Exhibit A now owned or at any time hereafter acquired by the Debtor or in which the Debtor now has or at any time in the future may acquire any right, title or interest, wherever located or situated, and to the extent not otherwise included, all Supporting Obligations, Proceeds, (including condemnation proceeds), all Accessions and additions thereto and all substitutions and replacements therefore and products of any and all of the foregoing (hereinafter, collectively called the “Collateral”).

(b)           Debtor expressly acknowledges that the security interest granted hereunder shall remain as security for payment and performance of the Obligations, whether now existing or which may hereafter be incurred by future advances, or otherwise. The notice of the continuing grant of this security interest therefore shall not be required to be stated on the face of any document representing any such Obligations, nor otherwise identify it as being secured hereby.

2.            Definitions . The following terms shall have the following meanings:

(a)           “Equipment,” “Fixtures,” and “Supporting Obligations” shall have the meaning given to such terms in Article 9 of the UCC;

(b)           “Collateral” shall have the meaning assigned to it in Section 1 of this Agreement;

(c)           “Loan Documents” shall have the meaning given to such term in the Loan Agreement by and between Debtor and Secured Party of even date herewith.

 
 

 

(d)           Obligations” means any and all obligations, indebtedness, liabilities, guaranties, covenants and duties owing by Debtor to Secured Party, including without limitation, any obligations under any of the Financing Agreements, whether due or to become due, absolute or contingent, now existing or hereafter incurred or arising, whether or not otherwise guaranteed or secured and whether evidenced by any note or draft or documented on the books and records of Secured Party or otherwise on open account, including without limitation, all costs, expenses, fees, charges and attorneys' and other professional fees incurred by Secured Party in connection with, involving or related to the administration, protection, modification, collection, enforcement, preservation or defense of any of the Secured Party's rights with respect to any of the Obligations, the Collateral or any agreement, instrument or document evidencing, governing, securing or relating to any of the foregoing, including without limitation, all costs and expenses incurred in inspecting or surveying mortgaged real estate, if any, or conducting environmental studies or tests, and in connection with any “workout” or default resolution negotiations involving legal counsel or other professionals and any re-negotiation or restructuring of any of the Obligations;

(f)           “UCC” means the Uniform Commercial Code as in effect from time-to-time in the State of Ohio.

3.            Debtor's Representations and Warranties . Debtor represents and warrants to Secured Party as follows:

(a)            Good Standing and Qualification/Legal Capacity . The Debtor is a corporation duly organized, validly existing and in good standing under the laws of the State of Colorado, and is authorized and qualified to do business in the State of Ohio (“Debtor’s State”) and has all requisite power and authority to own and operate its properties and to carry on its business as now being conducted.  Debtor is not organized under the laws of any jurisdiction other than the Debtor’s State.

(b)            Office . The chief executive office and principal place of business of the Debtor, and the office where Debtor's books and records concerning Collateral are kept, is, and has been for at least six (6) months, at the address above.

(c)           Places of Business . The Debtor has no other places of business and locates no Collateral, specifically including books and records, at any location other than at Debtor's place of business set forth in the first paragraph of this Agreement.

(d)            Collateral . The Debtor is and shall continue to be the sole owner of the Collateral free and clear of all liens, encumbrances, security interests and claims except the liens granted to Secured Party; the Debtor is fully authorized to sell, transfer, pledge and/or grant a security interest in each and every item of the Collateral to Secured Party; all documents and agreements related to the Collateral shall be true and correct and in all respects what they purport to be; all signatures and endorsements that appear thereon shall be genuine and all signatories and endorsers shall have full capacity to contract; none of the transactions underlying or giving rise to the Collateral shall violate any applicable state or federal laws or regulations; all documents relating to the Collateral shall be legally sufficient under such laws or regulations and shall be legally enforceable in accordance with their terms; and the Debtor agrees to defend the Collateral against the claims of all persons other than Secured Party.

 
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4.            Affirmative Covenants of the Debtor . The Debtor covenants and agrees that from the date hereof until full and final payment and performance of all Obligations, the Debtor shall:

(a)            Insurance and Endorsement . (i) Keep the Collateral and Debtor’s other properties insured against loss or damage by flood (if applicable) and by fire and other hazards (so-called “All Risk” coverage) in amounts and with companies satisfactory to Secured Party to the same extent and covering such risks as is customary in the same or a similar business; maintain public liability coverage, including without limitation, products liability coverage, against claims for personal injuries or death; and maintain all worker’s compensation, employment or similar insurance as may be required by applicable law; (ii) All insurance shall contain such terms, be in such form, and be for such periods satisfactory to Secured Party, and be written by such carriers duly licensed by the State of Ohio and satisfactory to Secured Party.  Without limiting the generality of the foregoing, such insurance must provide that it may not be canceled without ten (10) days prior written notice to Secured Party.  The Debtor shall cause Secured Party to be endorsed as a loss payee with a long form Lender’s Loss Payable Clause, in form and substance acceptable to Secured Party on all such insurance.  In the event of a failure to provide and maintain insurance as herein provided, Secured Party may, at its option, provide such insurance and charge the amount thereof to the Debtor.  The Debtor shall furnish to Secured Party certificates or other satisfactory evidence of compliance with the foregoing insurance provisions.  The Debtor hereby irrevocably appoints Secured Party as its attorney-in-fact, coupled with an interest, to make proofs of loss and claims for insurance, and to receive payments of the insurance and execute all documents, checks and drafts in connection with payment of the insurance.  Any Proceeds received by Secured Party shall be applied to the Obligations in such order and manner as Secured Party shall determine in its sole discretion, or shall be remitted to the Debtor, in either event at Secured Party’s sole discretion

(b)            Tax and Other Liens . Comply with all statutes and government regulations and pay all taxes (including withholdings), assessments, governmental charges or levies, or claims for labor, supplies, rent and other obligations made against it or its property which, if unpaid, might become a lien or charge against the Debtor or its properties.

(c)            Place of Business . Maintain its place of business and chief executive offices at the address set forth in the first paragraph of this Agreement.

(d)            Maintenance of Existence . Maintain its existence and comply with all valid and applicable statutes, rules and regulations, and maintain its properties in good repair, working order and operating condition. The Debtor shall immediately notify Secured Party of any event causing material loss in the value of its assets.
 
 
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(e)            Collateral Duties . Do whatever Secured Party may request from time to time by way of obtaining, executing, delivering and filing financing statements, assignments, landlord's or mortgagee's waivers, and other notices and amendments and renewals thereof, and the Debtor will take any and all steps and observe such formalities as Secured Party may request in order to create and maintain a valid and enforceable first lien upon, pledge of, and first priority security interest in, any and all of the Collateral.  Secured Party is authorized to file financing statements without the signature of the Debtor and to execute and file such financing statements on behalf of the Debtor as specified by the UCC to perfect or maintain Secured Party's security interest in all of the Collateral. All charges, expenses and fees Secured Party may incur in filing any of the foregoing, together with reasonable costs and expenses of any lien search required by Secured Party, and any taxes relating thereto, shall be charged to the Debtor and added to the Obligations.

5.            Negative Covenants of the Debtor . The Debtor covenants and agrees that from the date hereof until full and final payment and performance of all Obligations, the Debtor shall not without the prior written consent of Secured Party:

(a)            Encumbrances . Incur or permit to exist any lien, mortgage, charge or other encumbrance against any of the Collateral, whether now owned or hereafter acquired, except  liens required or expressly permitted by this Agreement.

(b)            Sale, Lease, and/or License of Assets . Sell, lease, license or otherwise dispose of any of its assets, except for sales of inventory in the ordinary course of business.

(c)            Name Changes . Change its corporate name, identity or structure, or conduct its business under any trade name or style other than as set forth in this Agreement.

(d)            Maintenance of Collateral . Permit to incur or suffer any loss, theft, substantial damage or destruction of any of the Collateral which is not immediately replaced with Collateral of equal or greater value, or which is not fully covered by insurance, the proceeds of which shall have been endorsed over to Secured Party in accordance with the Loan Agreement.

(e)            Maintenance of Existence .  Fail to preserve and maintain its corporate existence in the jurisdiction of its incorporation, organization or formation.

(f)            UCC-3 Termination Statements .  File any UCC-3 termination statement affecting any UCC-1 Financing Statement in favor of the Secured Party.

 
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           6.            Rights of Secured Party . Upon the occurrence of any Event of Default, Secured Party shall have the right to declare all of the Obligations to be immediately due and payable and shall then have the rights and remedies of a secured party under the UCC or under any other applicable law, including, without limitation, the right to take possession of the Collateral, and in addition thereto, the right to enter upon any premises on which the Collateral or any part thereof may be situated and remove the same therefrom and the right to occupy the Debtor's premises for the purposes of liquidating Collateral, including without limitation, conducting an auction thereon. Secured Party may require the Debtor to make the Collateral (to the extent the same is moveable) available to Secured Party at a place to be designated by Secured Party. Secured Party may, at its option, sell the Collateral on credit, and furthermore may sell the Collateral without giving any warranties as to the Collateral and may specifically disclaim any warranties of title or the like, which shall not be considered to adversely affect the commercial reasonableness of any sale of the Collateral. Unless the Collateral is perishable or threatens to decline speedily in value or is of a type customarily sold on a recognized market, Secured Party will give the Debtor at least ten (10) days' prior written notice at the address of the Debtor set forth above (or at such other address or addresses as the Debtor shall specify in writing to Secured Party) of the time and place of any public sale thereof or of the time after which any private sale or any other intended disposition thereof is to be made. Any such notice shall be deemed to meet any requirement hereunder or under any applicable law (including the UCC) that reasonable notification be given of the time and place of such sale or other disposition. After deducting all costs and expenses of collection, storage, custody, sale or other disposition and delivery (including reasonable attorneys' fees) and all other reasonable charges against the Collateral, the residue of the Proceeds of any such sale or disposition shall be applied to the payment of the Obligations in such order of priority as Secured Party shall determine and any surplus shall be returned to the Debtor or to any person or party lawfully entitled thereto. In the event the Proceeds of any sale, lease or other disposition of the Collateral hereunder, including without limitation, the Proceeds from the collection of Accounts, are insufficient to pay all of the Obligations in full, the Debtor will be liable for the deficiency, together with interest thereon, at the maximum rate allowable by law, and the costs and expenses of collection of such deficiency, including (to the extent permitted by law) without limitation, attorneys' fees, expenses and disbursements.

7.            Right of Secured Party to Use and Operate Collateral, Etc . Upon the occurrence of any Event of Default, Secured Party shall have the right and power to take possession of all or any part of the Collateral, and to exclude the Debtor and all persons claiming under the Debtor wholly or partly therefrom, and thereafter to hold, store, and/or use, operate, manage and control the same. Upon any such taking of possession, Secured Party without obligation to do so, may, from time to time, at the expense of the Debtor, make all such repairs, replacements, alterations, additions and improvements to the Collateral as Secured Party may deem proper. The Debtor hereby expressly waives any obligation of the Secured Party to process and/or prepare any Collateral prior to any sale or other disposition thereof.  Upon any taking of possession of all or any part of the Collateral, Secured Party shall have the right to manage and control the Collateral and to carry on the business and to exercise all rights and powers of the Debtor in respect thereto as Secured Party shall reasonably deem best, including the right to enter into any and all such agreements with respect to the operation of the Collateral or any part thereof as Secured Party may see fit; and Secured Party shall be entitled to collect and receive all issues, profits, fees, revenues and other income of the same and every part thereof. Such issues, profits, fees, revenues and other income shall be applied to pay the expenses of holding and operating the Collateral and of conducting the business thereof, and of all maintenance, repairs, replacements, alterations, additions and improvements, and to make all payments which Secured Party may be required or may elect to make, if any, for taxes, assessments, insurance and other charges upon the Collateral or any part thereof, and all other payments which Secured Party may be required or authorized to make under any provision of this Agreement (including legal costs and attorneys' fees). The remainder of such issues, profits, fees, revenues and other income shall be applied to the payment of the Obligations in such order of priority as Secured Party shall determine. Without limiting the generality of the foregoing, Secured Party shall have the right to apply for and have a receiver appointed by a court of competent jurisdiction in any action taken by Secured Party to enforce its rights and remedies hereunder in order to manage, protect and preserve the Collateral and continue the operation of the business of the Debtor and to collect all revenues and profits thereof and apply the same to the payment of all expenses and other charges of such receivership including the compensation of the receiver and to the payment of the Obligations as aforesaid until a sale or other disposition of such Collateral shall be finally made and consummated.

 
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8.            Events of Default . The Debtor shall be in default under this Agreement upon the happening of any of the following events or conditions (herein individually called an “Event of Default” and collectively called “Events of Default”):

(a)          Failure by Debtor to do anything required by the Note and other Loan Documents;
(b)          The occurrence of an Event of Default under the terms of any other Loan Document.

9.            Perfection .  The Debtor shall at any time and from time to time, at Debtor’s expense, take such steps as the Secured Party may reasonably request for the Secured Party (a) to obtain an acknowledgement, in form and substance satisfactory to the Secured Party, of any bailee having possession of any of the Collateral that the bailee holds such Collateral for the Secured Party, (b) to obtain “control” of any Investment Property, Deposit Accounts, Letter-Of-Credit Rights or electronic Chattel Paper (as such terms are defined in the UCC), with any agreements establishing control to be in form and substance satisfactory to the Secured Party, (c) to obtain possession of all or any portion of the Collateral in order to perfect its security interest therein in addition to the filing of a financing statement, and (d) otherwise to insure the continued perfection and priority of the Secured Party’s security interest in any of the Collateral and of the preservation of its rights therein.

10.          Application of Payments .  To the extent that Debtor uses the proceeds of the loan secured hereby to purchase any Collateral, Debtor’s repayment shall be applied on a “first-in-first-out” basis so that the portion of said loan used to purchase a particular item of Collateral shall be paid in the chronological order Debtor purchased such Collateral.

11.          Termination; Assignment, Etc . This Agreement and the security interest in the Collateral created hereby shall terminate when all of the Obligations have been paid and finally discharged in full. No waiver by Secured Party or by any other holder of the Obligations of any default shall be effective unless in writing signed by Secured Party or such other holder nor shall any waiver granted on any one occasion operate as a waiver of any other default or of the same default on a future occasion. In the event of a sale or assignment by Secured Party of all or any of the Obligations held by Secured Party, Secured Party may assign or transfer its respective rights and interests under this Agreement in whole or in part to the purchaser or purchasers of such Obligations, whereupon such purchaser or purchasers shall become vested with all of the powers and rights hereunder, and Secured Party shall thereafter be forever released and fully discharged from any liability or responsibility hereunder with respect to the rights and interests so assigned except that Secured Party shall be liable for damages suffered by the Debtor as a result of actions taken by Secured Party in bad faith or with willful misconduct.

 
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12.          Notices . Except as otherwise provided herein, notice to the Debtor or to Secured Party shall be deemed to have been sufficiently given or served in accordance with the terms of the Loan Agreement.

13.          Miscellaneous . This Agreement shall inure to the benefit of and be binding upon Secured Party and the Debtor and their respective successors and assigns and all persons who become bound as a Debtor to this Agreement. In case any provision in this Agreement shall be invalid, illegal or unenforceable, the validity, legality, and enforceability of the remaining provisions shall not in any way be affected or impaired thereby. This Agreement may be executed in any number of counterparts and by the different parties hereto on separate counterparts, each of which shall be an original, but all of which together shall constitute one instrument.  The paragraph headings used in this Agreement are for convenience of reference only and are not to affect the construction hereof or to be taken into consideration in the interpretation hereof.

14.          Governing Law . Except as otherwise provided herein, this Agreement shall be governed by the laws of the State of Ohio and may not be amended except in writing.

15.          Waivers, Etc . The Debtor hereby waives presentment, demand, notice, protest and all other demands and notices in connection with this Agreement or the enforcement of Secured Party's rights hereunder or in connection with any Obligations or any Collateral and consents to and waives notice of: (a) the granting of renewals, extensions of time for payment or other indulgences to the Debtor or to any account debtor in respect of any account receivable of the Debtor; (b) substitution, release or surrender of any Collateral; (c) the addition or release of persons primarily or secondarily liable on any of the Obligations or on any account receivable or other Collateral; and (d) the acceptance of partial payments on any Obligations or on any account receivable or other Collateral and/or the settlement or compromise thereof. No delay or omission on the part of Secured Party in exercising any right hereunder shall operate as a waiver of such right or of any other right hereunder. Any waiver of any such right on any one occasion shall not be construed as a bar to or waiver of any such right on any future occasion.

 
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IN WITNESS WHEREOF, the parties have executed this Agreement as a sealed instrument as of the date first above written.

 
OURPET’S COMPANY
 
       
 
By:
 /s/ Steven Tsengas
 
 
Name: 
Dr. Steven Tsengas
 
 
Title:
Chairman and CEO
 
       
 
GROWTH CAPITAL CORP.
 
       
 
By:
/s/ John Kropf
 
   
John Kropf, Executive Director
 
 
 
8

 
Exhibit 10.61
 
THIS WARRANT AND ANY SECURITIES ACQUIRED UPON THE EXERCISE OF THIS WARRANT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR ANY STATE SECURITIES LAWS AND NEITHER THE SECURITIES NOR ANY INTEREST THEREIN MAY BE OFFERED, SOLD, TRANSFERRED, PLEDGED OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT OR SUCH LAWS OR AN EXEMPTION FROM REGISTRATION UNDER SUCH ACT AND SUCH LAWS THAT, IN THE OPINION OF COUNSEL FOR THE HOLDER, WHICH COUNSEL AND OPINION ARE REASONABLY SATISFACTORY TO COUNSEL FOR THIS CORPORATION, IS AVAILABLE.

 
Warrant to Purchase
   
Date: ____________
28,125
   
 
Shares of Common Stock,
 
as herein described
   
No. 315
 

OurPet’s
Company
___________________________

Common Stock Purchase Warrant
___________________________

Article 1.      General Provisions.
 
Section 1.01            This certifies that, for good and valuable consideration, OurPet’s Company, a corporation organized under the laws of Colorado (the “ Company ”), grants to  Steven and Evangelia Tsengas (the “ Warrantholder ”), the right to purchase from the Company 28,125 validly issued, fully paid and nonassessable shares (the “ Warrant Shares ”) of the Company’s Common Stock, without par value, on or after the date that funds are issued to the Company pursuant to the Regional 166 Loan (the “ 166 Loan ”) approved by the Controlling Board of the State of Ohio (the “ Effective Date ”) and on or before June 28, 2015 (the “ Expiration Date ”), at the exercise price of $0.807 (U.S. dollars) per share (the “ Exercise Price ”), all subject to the terms, conditions and adjustments herein set forth.
 
 
 

 
 
Exhibit 10.61
 
Article 2.      Duration, Vesting and Exercise of Warrants.
 
Section 2.01             Duration; Vesting of Warrants .   The vested portion of this Warrant may be exercised, in whole or in part, at any time on or after the Effective Date and prior to the close of business on the Expiration Date.  Subject to adjustment from time to time as provided in Section 4 below, this Warrant shall vest and become exercisable over a period of thirty-six (36) months beginning on the Effective Date, in which 1/36 th of the Warrant Shares granted to the Warrantholder shall vest each calendar month thereafter. At the end of the thirty-sixth (36 th ) month all of the Warrant Shares granted herein shall be fully vested and exercisable.  In the event that, prior to the Warrant Shares becoming fully vested and exercisable, the Company’s lender terminates the guaranty provided by Warrantholder which secures the Company’s 166 Loan with such lender, then the vesting schedule set forth above shall terminate and no further Warrant Shares shall vest and become exercisable.  In the event that the 166 Loan terminates without funding, then this Warrant shall be cancelled without further action required by the Company.
 
Section 2.02             Exercise of Warrant.
 
(a)            This warrant may be exercised, in whole or in part, by surrendering it, together with a Notice of Exercise, duly executed, accompanied by a certified or official bank check (or such other form of payment as the Company may accept) in payment of the Exercise Price.  Warrants may be surrendered at the Company’s corporate offices indicated in Section 7.10 hereof, or as such corporate office may be relocated from time to time.
 
(b)            Notwithstanding the foregoing, the Warrantholder may, without the payment of cash or other consideration (other than the surrender of the right to purchase certain Warrant Shares implicit in the following formula), exercise this Warrant for “Net Warrant Shares”. The Warrantholder shall provide written notice to the Company specifying the gross number of Warrant Shares as to which this Warrant is then exercised. The number of Net Warrant Shares deliverable upon such exercise will be determined by the following formula: Net Warrant Shares = [WS x (CP - EP)]/CP, where “WS” is the gross number of Warrant Shares as to which this Warrant is to be exercised; “CP” is the average price of the Common Stock  (as currently traded on the NASDAQ over-the-counter bulletin board or “ OTCBB ”) on the ten (10) trading days preceding the date of the request to exercise this Warrant; and “EP” shall mean the then applicable Exercise Price.
 
(c)            This Warrant shall be exercisable during the period provided in Section 2.01 at any time or in whole or from time to time in part.  As soon as practicable after the Warrant has been so exercised, the Company shall issue and deliver or cause to be delivered to, or upon the order of, the holder of the Warrant, in such name or names as may be directed by such holder, a certificate or certificates for the number of full Warrant Shares to which such holder is entitled and, if this Warrant shall not have been exercised in full, a new Warrant for the number of shares of Common Stock as to which this Warrant shall not have been exercised, subject to the surrender of the right to purchase certain Warrant Shares implicit in the exercise of this Warrant under Section 2.02(b) .  This warrant, when so surrendered, shall be cancelled by or on behalf of the Company.
 
 
 

 
 
Exhibit 10.61
 
Section 2.03             Common Stock Issued Upon Exercise of Warrant .
 
(a)            All Warrant Shares shall be duly authorized, validly issued, fully paid and nonassessable.  The Company shall pay all documentary stamp taxes attributable to the initial issuance of Warrant Shares.  The Company shall not be required, however, to pay any tax imposed in connection with any transfer involved in the issue of the Warrant Shares in a name other than that of that holder of this Warrant upon exercise.  In such case, the Company shall not be required to issue any certificate for Warrant Shares until the person or persons requesting the same shall have paid to the Company the amount of any such tax or shall have established to the Company’s satisfaction that the tax has been paid or that no tax is due.
 
(b)            Irrespective of the date of issue of certificates for any Warrant Shares acquired upon exercise of this Warrant, each person in whose name any certificate is issued shall be deemed to have become the holder of record of the Warrant Shares represented thereby on the date on which this Warrant was exercised and payment of the Exercise Price was tendered as provided in Section 2.02 with respect to such Warrant Shares.
 
Article 3.       Restrictions on Transfer; Restrictive Legends .
 
Section 3.01              Restrictions on Transfer . This Warrant may not be offered, sold, transferred, pledged or otherwise disposed of in whole or in part, to any person; provided that the Warrantholder may offer, sell or transfer this Warrant to any Affiliate (defined herein) of the Warrantholder, subject to compliance with any applicable securities laws. Affiliate ” means any person who is an “affiliate” as defined in Rule 12b-2 of the General Rules and Regulations under the Securities and Exchange Act of 1934.

Section 3.02              Restrictive Legends . Except as otherwise permitted by this Article 3 , each stock certificate for Warrant Shares issued upon the exercise of any Warrant and each stock certificate issued upon the direct or indirect transfer of any such Warrant Shares shall be stamped or otherwise imprinted with a legend in substantially the following form:

THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS AND NEITHER THE SECURITIES NOR ANY INTEREST HEREIN MAY BE OFFERED, SOLD, TRANSFERRED, PLEDGED OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT OR SUCH LAWS OR AN EXEMPTION FROM REGISTRATION UNDER SUCH ACT AND SUCH LAWS THAT, IN THE OPINION OF COUNSEL FOR THE HOLDER, WHICH COUNSEL AND OPINION ARE REASONABLY SATISFACTORY TO COUNSEL FOR THIS CORPORATION, IS AVAILABLE.

Section 3.03            Removal of Legend . Notwithstanding the foregoing, the Warrantholder may require the Company to issue a Warrant or a stock certificate for Warrant Shares, in each case without a legend, if either (a) such Warrant or such Warrant Shares, as the case may be, have been registered for resale under the Securities Act, (b) the Warrantholder has delivered to the Company an opinion of legal counsel (from a firm reasonably satisfactory to the Company) which opinion shall be addressed to the Company and be reasonably satisfactory in form and substance to the Company’s counsel, to the effect that such registration is not required with respect to such Warrant or such Warrant Shares, as the case may be, or (c) such Warrant or Warrant Shares are sold in compliance with Rule 144 or Rule 144(k) (or any successor provision then in effect) under the Securities Act, the Company receives customary representations to such effect and the Company receives an opinion of counsel to the Company in customary form that such legend may be removed.

 
 

 
 
Exhibit 10.61
 
Article 4.     Anti-Dilution Provisions .
 
Section 4.01              Stock Dividends, Splits, Combinations .  If at any time after the date of the issuance of this Warrant, the Company (a) declares a dividend or other distribution payable in Common Stock or subdivides its outstanding Common Stock into a larger number or (b) combines its outstanding Common Stock into a smaller number, then (i) the number of Warrant Shares to be delivered upon exercise of this Warrant will, upon the occurrence of an event set forth in clause (a) above, be increased and, upon the occurrence of an event set forth in clause (b) above, be decreased so that such Warrantholder will be entitled to receive the number of Common Stock that such Warrantholder would have owned immediately following such action had this Warrant been exercised immediately prior thereto and (ii) the Exercise Price in effect immediately prior to such dividend, other distribution, subdivision or combination, as the case may be, shall be adjusted proportionately by multiplying such Exercise Price by a fraction, of which the numerator shall be the number of Warrant Shares purchasable upon exercise of this Warrant immediately prior to such adjustment and of which the denominator shall be the number of Warrant Shares purchasable immediately thereafter.

Section 4.02              Distribution of Stock, Other Securities, Evidence of Indebtedness .   In case the Company shall distribute to the holders of Common Stock, shares of its capital stock (other than Common Stock for which adjustment is made under Section 4.01 ), stock or other securities of the Company or any other Person, evidences of indebtedness issued by the Company or any other Person, assets (excluding cash dividends) or options, warrants or rights to subscribe for or purchase the foregoing, then, and in each such case, immediately following the record date fixed for the determination of the holders of Common Stock entitled to receive such distribution, (a) the Exercise Price then in effect shall be adjusted by multiplying the Exercise Price in effect immediately prior to such record date by a fraction (i) the numerator of which shall be such the average price of one share of Common Stock on the OTCBB on the ten (10) trading days preceding such record date (“ Current Market Price ”) less the then fair market value (as determined by the Board of Directors or a duly appointed committee thereof) of the portion of the stock, other securities, evidences of indebtedness so distributed or of such options, warrants or rights applicable to one share of Common Stock (but such numerator shall not be less than 0.10) and (ii) the denominator of which shall be the Current Market Price of one share of Common Stock on such record date  and (b) the number of Warrant Shares shall be adjusted to equal (i) the number of Warrant Shares for which this Warrant is exercisable immediately prior to such adjustment multiplied by the Exercise Price then in effect, divided by (ii) the Exercise Price as adjusted pursuant to clause (a) above. Such adjustment shall become effective at the opening of business on the business day following the record date for the determination of stockholders entitled to such distribution.
 
 
 

 
 
Exhibit 10.61
 

Section 4.03             Reorganization, Merger, Sale of Assets .   In case of any capital reorganization or reclassification or other change of outstanding Common Stock (other than a change in par value), any consolidation or merger of the Company with or into another entity (other than a consolidation or merger of the Company in which the Company is the resulting or surviving entity and which does not result in any reclassification or change of outstanding Common Stock) or the sale of all or substantially all of the assets of the Company to an unrelated third party, upon exercise of this Warrant, the Warrantholder shall have the right to receive the kind and amount of shares of stock or other securities or property to which a holder of the number of Common Stock of the Company deliverable upon exercise of this Warrant would have been entitled upon such reorganization, reclassification, consolidation, merger or sale had this Warrant been exercised immediately prior to such event; and, in such case, appropriate adjustment (as determined in good faith by the Board of Directors or a duly appointed committee thereof) shall be made in the application of the provisions of this Article 4 with respect to the rights and interest thereafter of the Warrantholder, to the end that the provisions set forth in this Article 4 (including provisions with respect to changes in and other adjustments of the Exercise Price and number of Warrant Shares) shall thereafter be applicable, as nearly as reasonably may be, in relation to any shares of stock or other property thereafter deliverable upon exercise of this Warrant.

Section 4.04             Carryover .   Notwithstanding any other provision of this Article 4, no adjustment shall be made to the number of Common Stock to be delivered to the Warrantholder (or to the Exercise Price) if such adjustment represents less than 1% of the number of shares to be so delivered, but any lesser adjustment shall be carried forward and shall be made at the time and together with the next subsequent adjustment that together with any adjustments so carried forward shall amount to 1% or more of the number of shares to be so delivered; provided however , that, upon exercise of this warrant pursuant to Article 2, any adjustment called for by Sections 4.01 , 4.02 or 4.03 which has not been made as a result of this Section 4.04 shall be made.

Section 4.05             No Adjustment for Dividends .   Except as provided in Sections 4.01 , 4.02 and 4.03 , no adjustment in respect of any dividends shall be made during the term of this Warrant or upon the exercise of this Warrant. Notwithstanding any other provision hereof, no adjustments shall be made on Warrant Shares issuable on the exercise of this Warrant for any cash dividends paid or payable to holders of record of Common Stock prior to the date as of which the Warrantholder shall be deemed to be the record holder of such Warrant Shares.

Section 4.06             Notice of Adjustment .   Whenever the number of Warrant Shares or the Exercise Price of such Warrant Shares shall be adjusted, as provided in Section 4.01 , the Company shall forthwith file, at the principal office of the Company (or at such other place as may be designated by the Company), a statement, certified by the chief financial officer of the Company, showing in detail the facts requiring such adjustment, the computation by which such adjustment was made and the Exercise Price that shall be in effect after such adjustment. The Company shall also cause a copy of such statement to be sent by first class mail postage prepaid, to the Warrantholder, at such Warrantholder’s address as shown in the records of the Company.
 
 
 

 
 
Exhibit 10.61
 
Section 4.07              Form of Warrant .   This Warrant need not be changed because of any adjustment to the Exercise Price or any change in the amount or nature of securities issuable or deliverable pursuant to this Article 4 .  The Company may, however, in its discretion, at any time change the form of Warrants to reflect any such change in the amount or nature of securities issuable or deliverable upon exercise, provided such change in form does not otherwise affect the substance thereof.
 
Article 5.      Other Provisions for Protection of Warrantholders .
 
Section 5.01              Reservation of Shares .   The Company shall at all times reserve and keep available such number of shares of its authorized but unissued Common Stock as shall from time to time be sufficient to permit the exercise of all outstanding Warrants.  If at any time the number of authorized but unissued shares of Common Stock shall not be sufficient for such purpose, the Company will take such action as, in the opinion of its counsel, may be necessary to increase its authorized but unissued Common Stock to such number of shares as shall be sufficient for such purpose.
 
Section 5.02              Lost and Misplaced Warrant Certificates .   If any Warrant becomes lost, stolen, mutilated or destroyed, the Company will, on such terms as to indemnify or otherwise as it may in its discretion impose, issue a new Warrant of like denomination, tenor and dates as the Warrant so lost, stolen, mutilated or destroyed.  Any such new Warrant shall constitute an original contractual obligation of the Company, whether or not the allegedly lost, stolen, mutilated or destroyed Warrant shall at any time be enforceable by anyone.
 
Section 5.03             Enforcement of Warrant Rights .   All rights of action are vested in the respective holders of the Warrants.  Any holder of any Warrant may, in his own behalf and for his own benefit, enforce, and may institute and maintain any suit, action or proceeding against the Company suitable to enforce, or otherwise in respect of, his right to exercise his Warrant for the purchase of the number of Warrant Shares issuable or deliverable in exchange therefor.
 
Article 6.       Transfer and Ownership of Warrants .
 
Section 6.01              Negotiability and Ownership .   The Warrants have been, and, if the Warrants are exercised, the Warrant Shares will be, acquired for the account of the holder for investment and not with a view to resale or further distribution thereof.  This Warrant shall be transferable by the holder hereof only in compliance with applicable securities laws.  Any attempted transfer in contravention of this Section shall be null and void.  Any such transferee may be required to execute an investment letter containing representations and warranties as to his or her investment intent, financial sophistication and ability to bear the risk of any investment in the Warrants or the Warrant Shares and to satisfy the Company of the bona fide nature of such representations.
 
Section 6.02              Exchange of Warrants .   At any time after the issuance and prior to expiration, this Warrant may be surrendered at the corporate offices of the Company for exchange and, upon cancellation hereof, one or more new Warrants shall be issued as requested by the holder for the same aggregate number of shares.
 
 
 

 
 
Exhibit 10.61
 
Article 7.      Miscellaneous Provisions .
 
Section 7.01             Closing of Books .   The Company will at no time close its transfer books against the transfer of any warrant or of any shares of Common Stock issued or issuable upon the exercise of any warrant in any manner which interferes with the timely exercise of this Warrant.
 
Section 7.02              Modification and Waiver .   Any provision of this Warrant may be amended and the observance thereof waived only with the written consent of the Company and the Warrantholder.
 
Section 7.03              Ownership of Warrant .   The Company may deem and treat the person in whose name this Warrant is registered as the holder and owner hereof (notwithstanding notations of ownership or writing hereon made by anyone other than the Company) for all purposes and shall not be affected by any notice to the contrary, until presentation of this Warrant for registration of transfer.
 
Section 7.04              Entire Agreement.   This Warrant constitutes the entire agreement between the Company and the Warrantholder with respect to this Warrant.
 
Section 7.05             Binding Effect; Benefit .   This Warrant shall inure to the benefit of and shall be binding upon the Company and the Warrantholder and their respective successors and assigns. Nothing in this Warrant, expressed or implied, is intended to or shall confer on any person other than the Company and the Warrantholder, or their respective successors or assigns, any rights, remedies, obligations or liabilities or by reason of this Warrant.
 
Section 7.06              Severability .   Any term or provision of this Warrant which is invalid or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such invalidity or unenforceability without rendering invalid or unenforceable the terms and provisions of this Warrant or affecting the validity or enforceability of any of the terms or provisions of this Warrant in any other jurisdiction.
 
Section 7.07             No Rights or Liabilities as Stockholder .   Nothing contained in this Warrant shall be determined as conferring upon the Warrantholder any rights as a stockholder of the Company or as imposing any liabilities on the Warrantholder to purchase any securities whether such liabilities are asserted by the Company or by creditors or stockholders of the Company or otherwise.
 
Section 7.08             No Impairment .  The Company will not, by amendment of its articles or through reorganization, consolidation, merger, dissolution, sale of assets or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of this Warrant, but will at all times in good faith assist in the carrying out of all such terms and in the taking of all such action as may be necessary or appropriate in order to protect the rights of the holder of this Warrant against impairment.
 
Section 7.09              Descriptive Headings .   The description headings of the several articles, sections and paragraphs of this Warrant are inserted for convenience only and shall not be deemed a part of this Warrant or to affect the meaning or interpretation of this Warrant.
 
 
 

 
 
Exhibit 10.61
 
Section 7.10             Governing Law .   This Warrant shall be construed and enforced in accordance with, and the rights of the parties shall be governed by, the laws of the State of Ohio, without regard to conflict of laws principles.
 
Section 7.11              Notices .   Any notice given pursuant to this Agreement to be given to the Company shall be sufficiently given if sent by first-class mail, postage prepaid, addressed (until Holder of record is advised in writing of any other address) as follows:
 
OurPet’s Company
1300 East Street
Fairport Harbor, Ohio 44077

IN WITNESS WHEREOF, the Company has caused this Warrant to be signed by its duly authorized officer as of the date set forth on the cover.
 
 
OURPET’S COMPANY
 
       
 
By:
  
 
 
Its:
  
 
 
 
 

 
 
Exhibit 10.61
 
ASSIGNMENT
 
To be executed by the registered Warrantholder to effect a transfer of the within Warrant, subject to the restrictions imposed by Section 3.01 of the Warrant.
 
FOR VALUE RECEIVED, the undersigned registered holder hereby sells, assigns and transfers unto
 
 
  
 
(name)
 
  
   
 
  
 
(address)

the right to purchase the Common Stock evidenced by the within Warrant, and does irrevocably constitute and appoint ________________________ to transfer the said right on the books of the Company, with full power of substitution.
 
Dated:                                          
 
SIGNATURE                                                                                     

 
NOTICE :   The signature to this Assignment must correspond with the name as written upon the face of the within Warrant, in every particular, without alteration or change whatsoever, and must be guaranteed by a bank or trust company, or be a firm having membership on a registered national securities exchange .
 
 
 

 
 
Exhibit 10.61
 
EXERCISE OF WARRANT
 
The undersigned, _____________________________________, pursuant to the provisions of the within Warrant, hereby elects to purchase ______________ shares of Common Stock of OurPet’s Company, covered by the within Warrant, and tenders herewith payment of the Exercise Price in full in the form of certified or bank cashier's check or wire transfer.

Please issue a certificate or certificates for such Common Stock in the following name or names and denominations:

If said number of shares are not all the shares of Common Stock issuable upon exercise of the attached Warrant, a new Warrant is to be issued in the name of the undersigned for the balance remaining of such shares less any faction of a share paid in cash.

 
  
 
(Signature)
 
 
   
 
 
 
(Address)
Dated:                                         
 

NOTICE:   The signature to this Exercise of Warrant must correspond with the name as written upon the face of the within Warrant, in every particular, without alteration or change whatsoever.
 
[This form shall be modified by the Warrantholder and the Company as appropriate in the event Warrantholder exercises the Warrant, in whole or in part, in accordance with Section 2.02(b) of the Warrant.]