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Exhibit
10.38
CONTRIBUTION
AGREEMENT
This Contribution Agreement (the “
Agreement ”) is made as of June 20, 2008 by and
among OurPet’s Company (the “ Company ”),
Senk Properties, an Ohio general partnership, and
Dr. William M. Fraser (each a “ Contributor
” and collectively, the “ Contributors
”).
Recitals
WHEREAS, the Company is
involved in litigation on certain of its SmartScoop ™ products and
will be incurring expenses with respect to such litigation (the
“ Litigation ”); and
WHEREAS, Contributors previously loaned
in the aggregate $100,000.00 to the Company (the “
Previous Loan ”) to be used for expenses related to
the Litigation (“ Litigation Expenses
”).
WHEREAS, Contributors have agreed to
initially loan in the aggregate an additional $15,000 and may loan
in the aggregate up to an additional $75,000 (inclusive of the
$15,000) to the Company to further support the Litigation Expenses
(the “ Loan ”). In connection with and as an
inducement to make such Loan, the Company will issue warrants to
each Contributor and further will replace certain warrants issued
to each Contributor in connection with the Previous Loan with new
warrants at a revised exercise price (the “ Replacement
Warrants ”).
NOW, THEREFORE, for good and valuable
consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereto agree as follows:
1. Loan . Upon receipt
of the Loan from the Contributors, the Company shall issue a
promissory note to each Contributor in the principal amount of such
Contributor’s share of the Loan, upon the terms and
conditions set forth in the form of promissory note attached hereto
as Exhibit A and incorporated herein by reference (the
“ Note ”). Payment on each Note would be
thirty-six (36) months after the date such note was issued,
with the option to prepay without penalty. In the event the Company
desires to prepay a portion of the Loan, such prepayment shall be
made pari passu to all Contributors. Furthermore, in the
event the Company raises additional capital through equity or
convertible financing equal to or greater than One Million Five
Hundred Thousand Dollars ($1,500,000), then, subject to
Section 3 below, to the Company shall repay the interest and
principal outstanding under the Notes in accordance with the terms
set forth in the Notes.
2. Warrants . In
connection with the Loan, the Company shall issue warrants (“
Warrants ”) to each Contributor as follows: for each
two dollars ($2.00) loaned, the Contributor would receive one
Warrant, exercisable at $0.50 per share for a period of five
(5) years. The Company shall also issue the Replacement
Warrants to each Contributor exercisable at the Exercise Price, for
a period of five (5) years, and the earlier warrants issued
in
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