Exhibit 10.3

 

SECURITIES EXCHANGE
AGREEMENT

 

THIS SECURITIES EXCHANGE AGREEMENT (“Agreement”) is made effective this 7th day
of May, 2013 between Fantasy Funding, Inc., an Colorado corporation (“FFI”) and
The PAWS Pet Company, Inc., an Illinois corporation (the “Corporation” or
“PAWS”), on the other hand.

 

RECITALS

 

WHEREAS, the Corporation is a publicly traded company that currently trades on
the over the counter market under the stock symbol “PAWS”; and

 

WHEREAS, FFI subscribed to the purchase of an 8% Debenture on August 13, 2010 in
the amount of One Hundred and Fifty ($150,000) (the “Debenture”); and

 

WHEREAS, the Debenture carries warrants to purchase three hundred thousand
(300,000) shares of Common Stock with an exercise price of One Dollar ($1.00);
and

 

WHEREAS, the quarterly payments of interest on the Debenture have not been made
since July of 2012 for which Ten Thousand, One Hundred and Ninety-One Dollars
and Seventy-Eight Cents ($10,191.78) is due and owing; and

 

WHEREAS, the penalty interest on the Debenture have not been made since July of
2012 for which One Thousand, Two Hundred and Eleven Dollars and Eighty-Four
Cents ($1,211.84) is due and owing; and

 

WHEREAS, (i)the closing price of the Common Stock on last trading day preceding
the date of this Agreement was $0.079; and (ii) using the Black-Scholes method
to calculate the value of the Warrants as of the date of this Agreement, the
value of the Warrants is, as of the last trading day preceding the date of this
Agreement, Zero Dollars ($0); and

 

NOW, THEREFORE, in consideration of the mutual promises, covenants,
undertakings, payments, exchanges, restrictions and agreements specified herein
and for other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties, with full intent to be obligated
legally, agree as follows:

 

Section 1. Incorporation of Recitals. The recitals of this Agreement specified
above, by this reference, are made a part of this Agreement.

 

Section 2. Exchange of Securities. PAWS hereby agrees to issue sixteen hundred
and fifteen (1,615) shares of Series C Preferred Stock to Fantasy Funding, Inc.
in exchange the cancellation of the Debenture and the attached warrants.

 

2.1 For the purposes of this Agreement, the “Sixty Day Low” as that term is
defined in the Corporation’s Series C Preferred Stock Certificate of Designation
shall be $0.005.

 

2.2 For the purposes of this Agreement, the “Conversion Ratio” as that term is
defined in the Corporation’s Series C Preferred Stock Certificate of Designation
shall be $0.005.

 

2.3 The number of shares of Common Stock to be issued in conversion for each one
(1) share of Series C Stock issued pursuant to this Agreement and when
converted, if any, pursuant to the terms of the Series C Preferred Stock
Certificate of Designation shall be twenty thousand (20,000) shares.

 

 

 

 

Section 3. Securities Law Matters.

 

3.1 The parties hereto acknowledge and agree that the offer and issuance of the
shares of Series C Stock being offered and issued under this Agreement is being
made pursuant to the exemption from registration afforded by Section 3(a)(9) of
the Securities Act of 1933, as amended.

 

3.2 The parties hereto acknowledge that no commission or other remuneration has
been paid by either party for soliciting the exchange of the Warrants for the
Shares of Series C Stock being offered and issued under this Agreement.

 

Section 4. Agreement of Settlement and General Release. Simultaneously with the
execution of this Agreement, the parties shall enter into an Agreement of
Settlement and General Release, the terms of which are incorporated herein in
its entirety by reference.

 

Section 5. Completion and Binding Effect.

 

5.1 The Corporation, by its execution and delivery of this Agreement, hereby
agrees to complete this settlement with FFI as set forth in the recitals herein
and upon receipt thereof acknowledge, agree and affirm that this Agreement is
binding, complete and in effect.

 

5.2 FFI, by its execution and delivery of this Agreement, hereby agrees to
complete this settlement with the Corporation as set forth in the recitals
herein and upon receipt thereof acknowledge, agree and affirm that this
Agreement is binding, complete and in effect.

 

Section 6. Each Party to Pay Its Costs. Each party to this Agreement shall bear
and pay that party’s own costs, expenses, and receivers’ and attorneys’ fees
incurred with respect to any differences resolved hereby and any costs, expenses
and attorneys’ fees incurred with respect to the drafting, preparation,
negotiation and execution and delivery of this Agreement.

 

Section 7. Enforcement. In the event any party shall institute any action or
proceeding to interpret or enforce any provision of this Agreement to seek
relief from any violation of this Agreement, or to otherwise obtain any judgment
or order relating to or arising from the subject matter of this Agreement, each
prevailing party shall be entitled to receive from each losing party such
prevailing party’s actual attorneys’ fees and cost incurred to prosecute or
defend such action or proceeding, including, but not limited to, actual
attorneys’ fees and costs incurred preparatory to such prosecution and defense.
Moreover, while a court of competent jurisdiction may assist in determining
whether or not the fees actually incurred are reasonable under the circumstances
then existing, that court is not to be governed by any judicially or
legislatively established fee schedule, and said fees and costs are to include
those as may be incurred on appeal of any issue and all of which fees and costs
shall be included as part of any judgment, by cost bill or otherwise, and where
applicable, any appellate decision rendered in or arising out of such action or
proceeding. For purposes of this Agreement, in any action or proceeding
instituted by a party, the prevailing party shall be that party in any such
action or proceeding (i) in whose favor a judgment is entered, or (ii) prior to
trial, hearing or judgment any other party shall pay all or any portion of
amounts claimed by the party seeking payment, or such other party shall
eliminate the condition, cease the act, or otherwise cure the act of commission
or omission claimed by the party initiating such action or proceeding.

 

Section 8. Successors in Interest. This Agreement and the releases specified in
this Agreement shall obligate each party, its representatives, successors,
assign, general partners, limited partners, agents, employees, directors,
officers, shareholders, representatives, attorneys, accountants, parent and
subsidiary Investors, affiliates, and all persons acting by, through, under or
in concert with any of them, and each of them.

 

Section 9. Notices. Any and all notices permitted or required to be given
pursuant to the provisions of this Agreement shall be in writing and may be
served by (a) registered or certified mail, return receipt requested, postage
prepaid, and addressed to the party to be notified at the appropriate address
specified below; (b) delivering the same in person to such party, or by prepaid
telegram, addressed to the party to be notified at said address; (c) delivery by
Federal Express or other recognized courier service, addressed to the party to
be notified at such address; or (d) telecopy (a.k.a. telefax or facsimile),
provided that such telecopy is confirmed by mail or other delivery in the manner
previous described). Notice given by certified mail as aforesaid shall be deemed
given and received two (2) days after mailing, whether or not actually received.
Any notice given in any other above authorized manner shall be deemed received
upon actual receipt; but shall also be deemed received upon attempted delivery
if such delivery is not accepted. The addresses of the parties are as follows:

 

 

 

  If to FFI:   Fantasy Funding, Inc.         2125 N. St. Francis Place        
Casa Grande, Arizona  85122         Attn: President               If to the
Corporation:   The PAWS Pet Company, Inc.         455 N.E. 5th Avenue, #D464    
    Delray Beach, Florida  33483         Attn: President  

 

Should the address and/or facsimile number of any party be changed, the other
party should be given notice in the manner provided in this section.

 

Section 10. Successors and Assigns. This Agreement shall inure to the benefit
of, and obligate, the undersigned parties and their respective successors and
assigns. Whenever, in this Agreement, a reference to any party is made, such
reference shall be deemed to include a reference to the successors and assigns
of such party.

 

Section 11. Entire Agreement. This Agreement and the Corporation Agreement
represent the final written expression and the complete and exclusive statement
of all the agreements, conditions, promises, representations, warranties, and
covenants between the parties with respect to the subject matter of this
Agreement, and this Agreement supersedes all prior or contemporaneous
agreements, negotiations, representations, warranties, covenants, understandings
and discussions by and between and among the parties, their respective
representatives, and any other person with respect to the subject matter
specified in this Agreement. This Agreement may be amended only by an instrument
in writing that expressly refers to this Agreement, and which specifically
states that such instrument is intended to amend this Agreement, that is signed
by each of the parties, or their respective successors and assigns.

 

Section 12. Validity and Severability. In the event any part of this Agreement,
for any reason, is ruled or determined to be invalid, such determination shall
not affect the validity of any remaining portion of this Agreement, which
remaining portion shall remain in complete force and effect as if this Agreement
had been executed with the invalid portion of the Agreement eliminated. It is
hereby declared the intention of the parties that the parties would have
executed the remaining portion of this Agreement without including any such
part, parts or portion that, for any reason, hereafter may be determined to be
invalid.

 

Section 13. Captions and Interpretation. Captions of the sections this Agreement
are for convenience and reference only, and the words contained in those
captions shall in no way be held to explain, modify, amplify or aid in the
interpretation, construction or meaning of the terms, conditions and provisions
of this Agreement. The language and all parts to this Agreement, in all cases,
shall be construed in accordance with the fair meaning of that language and
those parts and as if that language and those parts were prepared by all parties
and not strictly for or against any party. Each party and counsel for such party
has reviewed this Agreement. The rule of construction, which requires a court to
resolve any ambiguities against the drafting party, shall not apply in
interpreting the provisions of this Agreement.

 

Section 14. Further Assurances. Each party shall take any and all action
necessary, appropriate or advisable to execute and discharge such party’s
responsibilities and obligations created by the provisions of this Agreement and
to further effectuate, perform, discharge, consummate and carry out the intents
and purposes of this Agreement and the transactions contemplated by the
provisions of this Agreement.

 

Section 15. Number and Gender. Whenever the singular number is used in this
Agreement, and when required by the context, the same shall include the plural,
and vice versa; the masculine gender shall include the feminine and neuter
genders, and vice versa; and the word “person” shall include individual,
company, sole proprietorship, Investors, joint venture, association, joint stock
company, fraternal order, cooperative, league, club, society, organization,
trust, estate, governmental agency, political subdivision or authority, firm,
municipality, congregation, partnership, or other form of entity.

 

 

 

 

Section 16. Reservation of Rights. The failure of any party at any time
hereafter to require strict performance by any other party of any of the
warranties, representations, covenants, terms, conditions and provisions
specified in this Agreement shall not waive, affect or diminish any right of the
party failing to require strict performance to demand strict compliance and
performance therewith and with respect to any other provisions, warranties,
terms and conditions specified in this Agreement, and any waiver of any default
not waive or affect any other default, whether prior or subsequent thereto, and
whether the same or of a different type. None of the representations,
warranties, covenants, conditions, provisions and terms specified in this
Agreement shall be deemed to have been waived by any act or knowledge of any
party, and any such waiver shall be made only by an instrument in writing,
signed by the waiving party and directed to each non-waiving party specifying
such waiver. Each party reserves such party’s right(s) to insist upon strict
compliance with the terms, conditions and provisions of this Agreement at all
times.

 

Section 17. Choice of Law and Consent to Jurisdiction. This Agreement shall be
deemed to have been entered into in the City of Delray Beach, Palm Beach County,
Florida, and all questions concerning the validity, interpretation or
performance of any of the terms, conditions and provisions of this Agreement or
of any of the rights or obligations of the parties shall be governed by, and
resolved in accordance with, the laws of the State of Florida. Any and all
actions or proceedings, at law or in equity, to enforce or interpret the
provisions of this Agreement shall be litigated in courts having situs within
Palm Beach County, Florida, and each party consents to the jurisdiction of any
local, state or federal court located within Palm Beach County, Florida and
consents that any service of process in such action or proceeding may be made by
personal service upon such party wherever such party may be then located, or by
certified or registered mail directed to such party at such party’s last known
address.

 

Section 18. Execution in Counterparts. This Agreement shall be prepared in
multiple copies and forwarded to each of the parties for execution. This
Agreement shall become effective when the Corporation receives a copy or copies
of the Agreement executed by the parties in the names as those names appear at
the end of this Agreement (including by facsimile or .pdf transmission). All of
the signatures of the parties may be affixed to one copy or to separate copies
of this Agreement and when all such copies are received, and signed by all the
parties, those copies shall constitute one agreement that is not otherwise
separable or divisible. The Corporation shall keep all of such signed copies and
shall conform one copy to show all of those signatures and the dates thereof and
shall mail a copy of such conformed copy to each of the parties within thirty
(30) days after the receipt by such counsel of the last signed copy, and shall
cause one such conformed copy to be filed in the principal office of the
Corporation.

 

Section 19. Consent to Agreement. By executing this Agreement, each party, for
itself, represents such party has read or caused to be read this Agreement in
all particulars, and consents to the rights, conditions, duties and
responsibilities imposed upon such party as specified in this Agreement.

 

(Signatures appear on following page)

 

 

 

 

IN WITNESS WHEREOF, the parties have executed this Securities Exchange Agreement
in duplicate and in multiple counterparts, each of which shall have the force
and effect of any original, on the date specified in the preamble of this
Agreement.

 

  THE PAWS PET COMPANY, INC., an Illinois corporation         By: /s/ Daniel
Wiesel     Daniel Wiesel, President
(May 10, 2013)         FANTASY FUNDING, INC., an Colorado corporation        
By: /s/ Sandra S. Steinberg     Sandra S. Steinberg, President
(May 10, 2013)