Exhibit 10.3
THE PAYMENT OF PRINCIPAL AND INTEREST ON THIS
NOTE IS SUBJECT TO CERTAIN SUBORDINATION PROVISIONS SET FORTH IN
SECTION 4 HEREOF. THIS NOTE HAS NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY COMPARABLE STATE
SECURITIES LAW.
SUBORDINATED PROMISSORY
NOTE
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January 4, 2006
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$250,000
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Cleveland, Ohio
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FOR VALUE RECEIVED
, the undersigned,
OURPET’S COMPANY , a Colorado corporation (“
Maker ”), promises to pay to the order of PET ZONE
PRODUCTS LTD ., an Ohio limited liability company (“
Holder ”), the principal sum of Two Hundred Fifty
Thousand and 00/100 Dollars ($250,000), together with interest at
the rate of seven and three-quarters percent (7.75%) per
annum, in accordance with the following terms and conditions. This
Subordinated Promissory Note (this “ Note ”) is
made pursuant to that certain Asset Purchase Agreement, of even
date herewith, by and between Maker and Holder (the “
Purchase Agreement ”). Capitalized terms not otherwise
defined in this Note shall have the meanings ascribed thereto in
the Purchase Agreement.
1. Payment of Principal and
Interest . Interest on this Note shall accrue from and
including the date of issuance through and until the repayment of
the principal amount of this Note and shall be computed on the
basis of a 360-day year comprised of twelve 30-day months. The
principal and interest on this Note shall be paid in twenty
(20) equal quarterly installments in such amounts and upon
such dates as set forth on Exhibit A attached hereto, under
which such payments shall commence and be due and payable on last
business day of the third (3 rd ) month after the Closing
(“ First Installment Date ”) and the remaining
installments shall be due and payable on the last business day of
each successive fiscal quarter. Notwithstanding the foregoing
provisions of this Section 1 , but subject to
applicable law, any overdue principal of and overdue interest on
this Note shall bear interest, payable on demand in immediately
available funds, for each day from the date of payment thereof was
due to the date of actual payment, at a rate of eleven and
three-quarters percent (11.75%) per annum (such sum being
referred to as the “ Default Rate ”), and, upon
and during the occurrence of an Event of Default (as defined
below), this Note shall bear interest from the date of the
occurrence of such Event of Default until such Event of Default is
cured or waived, payable on demand in immediately available funds,
at a rate equal to the Default Rate. In the event that any interest
rate provided in this Section 1 , shall be determined
to be unlawful, such interest rate shall be computed at the highest
rate permitted by applicable law. Any payment by Maker of any
interest amount in excess of that permitted by law shall be
considered a mistake, with the excess being applied to the
principal amount of this Note without prepayment premium or
penalty; if no such principal amount is outstanding, such excess
shall be returned to Maker.
2. Prepayment . Maker
may, at any time or from time to time, prepay all or any part of
the principal amount due hereunder without any premium or penalty
whatsoever.
3. Place of Payment .
All payments on or in respect of this Note shall be made to Holder
at the address set forth in Section 8 of this Note, or,
at the option of Holder, at such other place as Holder may, at any
time or from time to time, designate to Maker in
writing.
4. Events of Default and
Remedies .
(a) The occurrence and continuance
of the following events shall be considered events of default under
this Note (each an “ Event of Default ”):
(i) any failure of Maker to pay any principal or interest on
this Note when due or within five (5) business days thereof;
(ii) there shall been filed or commenced against Maker, an
involuntary case under any applicable bankruptcy, insolvency or
other similar law now or hereafter in effect or an action shall
have been commenced to appoint a receiver, liquidator, assignee,
custodian, trustee or similar official of Maker or for any
substantial part of Maker’s property or assets or for the
winding-up or liquidation of Maker’s affairs and such action
or proceeding shall not have been dismissed within sixty
(60) days; (iii) Maker shall commence a voluntary case
under any applicable bankruptcy, insolvency or other similar law
now or hereinafter in effec
