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DEBT CONVERSION AGREEMENT
BETWEEN
ALL AMERICAN PET COMPANY INC. AND BARRY SCHWARTZ
June 20, 2008
THIS DEBT CONVERSION AGREEMENT ("Agreement"), dated as of June 20, 2008 is by and between All American Pet Company Inc. a Maryland Corporation ("Debtor"), and Barry Schwartz., an individual residing in Los Angeles, California ("Creditor") (collectively, the "Parties").
W I T N E S S E T H
WHEREAS, Debtor owes Creditor for accrued salary for the period January 1, 2007 to July 31, 2008 in the amount of $214,608.15;
WHEREAS, Debtor is a public company and has the ability to issue shares of its Common stock to satisfy the debt (the "Shares"); and
WHEREAS, Creditor is willing to accept Shares as payment of debts owing to
it from Debtor upon the terms and conditions set forth herein.
NOW THEREFORE, in consideration of the promises and respective mutual
agreements herein contained, it is agreed by and between the Parties hereto as
follows:
ARTICLE 1
PAYMENT OF THE SHARES
1.1 Debts Owing. Debtor owes Creditor a total of $214,608.15. The current fair market value of the Shares is $0.02 as that is the price at which the Shares are currently being sold. Creditor hereby agrees to accept no less than 3,000,000 shares or the number of shares that would equal $214,608.15 based on a
price equal to ninety percent (90%) of the average closing price of the stock over all trading days of the month of July 2008. Weekends and holidays will not be considered a trading a day. In determining the closing price for a trading day when the shares did not trade the closing price for the prior day or days prior to that will be used. The calculation will be made on August 5, 2008 and the exact number of shares will then be determined. The shares must be issued
prior to August 30, 2008.
Upon receipt of the Shares as payment in full of the $214,608.15 in debt being carried on Creditor's books from Debtor the Creditor will have no claim to any past due salary for the period of January 1, 2006 through July 31, 2008. Upon execution of this Agreement and the subsequent calculation as set forth herein and issuance
of the Shares the transaction will close (the "Closing"), subject to the terms and conditions herein set forth, and on the basis of the representations, warranties and agreements herein contained, Debtor shall transfer to Creditor the Shares and the Debt will be paid in full.
Barry Schwartz Debt Conversion Agreement
1.2 Instruments of Conveyance and Transfer.
As soon as practicable after the calculation set forth above, the Closing will occur. Debtor shall deliver a certificate or certificates representing the Shares of All American Pet Company Inc. to Creditor along with any and all documents required to effect a sufficient to transfer all rights, title and interest in the Shares to Creditor.
1.3 Consideration and Payment for the Shares. In consideration for the number of Shares to be issued, Creditor shall credit the total sum of $214,608.85 to Debtor as payment in full of past debts owing to Creditor from Debtor.
ARTICLE 2
REPRESENTATIONS AND COVENANTS OF Debtor AND Creditor
2.1 Debtor hereby represents and warrants that:
(a) Debtor shall transfer title, in and to the Shares to Creditor free and clear of all liens, security interests, pledges, encumbrances, charges, restrictions, demands and claims, of any kind and nature whatsoever, whether direct or indirect or contingent.
(b) As soon as practicable after the Closing Date, Debtor shall deliver to Creditor a certificate or certificates representing the Shares subject to no liens, security interests, pledges, encumbrances, charges, restrictions, demands or claims in any other party whatsoever, except as set forth in the legend on the certificate, which legend
shall provide as follows:
THE SHARES (OR OTHER SECURITIES) REPRESENTED BY THE CERTIFICATES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933. THE SHARES MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN OPINION OF COUNSEL THAT AN EXEMPTION FROM REGISTRATION UNDER SUCH ACT IS AVAILABLE.
(c) Creditor acknowledges that the Shares will initially be "restricted securities" (as such term is defined in Rule 144 promulgated under the Securities Act of 1933, as amended ("Rule 144"), that the Shares will include the foregoing restrictive legend, and, except as otherwise set forth in this Agreement, that the Shares cannot
be sold unless registered with the United States Securities and Exchange Commission ("SEC") and qualified by appropriate state securities regulators, or unless Creditor obtains written consent from Debtor and otherwise complies with an exemption from such registration and qualification (including, without limitation, compliance with Rule 144).
(d) Creditor acknowledges and agrees that Debtor makes no other representations or warranties with respect to the Shares or the Debtor.
Barry Schwartz Debt Conversion Agreement
2.2 Creditor represents and warrants to Debtor as follows:
(a) Creditor has adequate means of providing for current needs and contingencies, has no need for liquidity in the investment, and is able to bear the economic risk of an investment in the Shares offered by Debtor of the size contemplated. Creditor represents that Creditor is able to bear the economic risk of the investment
and at the present time could afford a complete loss of such investment. Creditor has had a full opportunity to inspect the books and records of the Debtor and to make any and all inquiries of Debtor officers and directors regarding the Debtor and its business as Creditor has deemed appropriate.
(b) Creditor is an "Accredited Investor" as defined in Regulation D of the Securities Act of 1933 (the "Act") or Creditor, either alone or with Creditor's professional advisers who are unaffiliated with, have no equity interest in and are not compensated by Debtor or any affiliate or selling agent of Debtor, directly or indirectly,
has sufficient knowledge and experience in financial and business matters that Creditor is capable of evaluating the merits and risks of an investment in the Shares offered by Debtor and of making an informed investment decision with respect thereto and has the capacity to protect Creditor's own interests in connection with Creditor's proposed investment in the Shares.
(c) Creditor is acquiring the Shares solely for Creditor's own account as principal, for investment purposes only and not with a view to the resale or distribution thereof, in whole or in part, and no other person or entity has a direct or indirect beneficial interest in such Shares.
(d) As Creditor is the original issuer of the Shares, upon transfer of the Shares from Debtor to Creditor, the Shares shall be returned to treasury of Creditor and, thus, shall become authorized but unissued shares of common stock of Creditor.
ARTICLE 3
MISCELLANEOUS
3.1 Entire Agreement. This Agreement sets forth the entire agreement and
understanding of the parties hereto with respect to the transactions contemplated hereby, and supersedes all prior agreements, arrangements and understandings related to the subject matter hereof. No understanding, promise, inducement, statement of intention, representation, warranty, covenant or condition, written or oral, express
or implied, whether by statute or otherwise, has been made by any party hereto which is not embodied in this Agreement or the written statements, certificates, or other documents delivered pursuant hereto or in connection with the transactions contemplated hereby, and no party hereto shall be bound by or liable for any alleged understanding, promise, inducement, statement, representation, warranty, covenant or condition not so set forth.
Barry Schwartz Debt Conversion Agreement
3.2 Notices. Any notice, request, instruction, or other document required
by the terms of this Agreement, or deemed by any of the parties hereto to be desirable, to be given to any other party hereto shall be in writing and shall be given by facsimile, personal delivery, overnight delivery, or mailed by registered or certified mail, postage prepaid, with return receipt requested, to the following addresses:
To Debtor: All American Pet Company Inc.
10850 Wilshire Blvd., Suite 380
Los Angeles, CA 90024
To Creditor: Barry Schwartz
242 South Spalding
Beverly Hills, CA 90212
The persons and addresses set forth above may be changed from time to time by a notice sent as aforesaid. If notice is given by facsimile, personal delivery, or overnight delivery in accordance with the provisions of this Section, said notice shall be conclusively deemed given at the time of such delivery. If notice is
given by mail in accordance with the provisions of this Section, such notice shall be conclusively deemed given seven days after deposit thereof in the United States mail.
3.3 Waiver and Amendment. Any term, provision, covenant, representation, warranty or condition of this Agreement may be waived, but only by a written instrument signed by the party entitled to the benefits thereof. The failure or delay of any party at any time or times to require performance of any provision
hereof or to exercise its rights with respect to any provision hereof shall in no manner operate as a waiver of or affect such party's right at a later time to enforce the same. No waiver by any party of any condition, or of the breach of any term, provision, covenant, representation or warranty contained in this Agreement, in any one or more instances, shall be deemed to be or construed as a further or continuing waiver of any such condition or breach or waiver of any other condition or
of the breach of any other term, provision, covenant, representation or warranty. No modification or amendment of this Agreement
shall be valid and binding unless it be in writing and signed by all parties hereto.
3.4 Choice of Law. This Agreement and the rights of the parties hereunder shall be governed by and construed in accordance with the laws of the State of California including all matters of construction, validity, performance, and enforcement and without giving effect to the principles of conflict of laws.
3.5 Jurisdiction. The parties submit to the jurisdiction of the Courts of the County of Los Angeles, State of California or a Federal Court empanelled in the State of California for the resolution of all legal disputes arising under the terms of this Agreement, including, but not limited to, enforcement of any arbitration
award.
Barry Schwartz Debt Conversion Agreement
3.6 Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original, but all of which shall together constitute one and the same instrument.
3.7 Attorneys' Fees. Except as otherwise provided herein, if a dispute should arise between the parties including, but not limited to arbitration, the prevailing party shall be reimbursed by the non-prevailing party for all reasonable expenses incurred in resolving such dispute, including reasonable attorneys' fees exclusive
of such amount of attorneys' fees as shall be a premium for result or for risk of loss under a contingency fee arrangement.
3.8 Taxes. Any income taxes required to be paid in connection with the payments due hereunder, shall be borne by the party required to make such payment. Any withholding taxes in the nature of a tax on income shall be deducted from payments due, and the party required to withhold such tax shall furnish to the
party receiving such payment all documentation necessary to prove the proper amount to withhold of such taxes and to prove payment to the tax authority of such required withholding.
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement, as of the date first written hereinabove.
Debtor:
All American Pet Company Inc.
a Maryland corporation
/S/ Lisa Bershan
Lisa Bershan
Its: President
Creditor:
/S/ Barry Schwartz
Barry Schwartz
An individual residing in Los Angeles, California
Barry Schwartz Debt Conversion Agreement