Hartville Group, Inc. Conversion Agreement and Release
Exhibit 10.1
Hartville Group, Inc.
Conversion Agreement and Release
Conversion Agreement and Release
This Conversion Agreement and Release (the “Agreement”) is entered into as of July 31, 2006
among Hartville Group, Inc., a Nevada corporation (the “Company”), and each of the undersigned
holders of Convertible Debentures issued by the Company (each, a “Holder” and collectively, the
“Holders”).
Background Information
A. The Company issued convertible debentures (convertible into shares of the Company’s Common
Stock) (the “Convertible Debentures”) and Warrants (to purchase shares of the Company’s Common
Stock) (the “Warrants”) to the Holders pursuant to (i) a Securities Purchase Agreement, dated
November 11, 2004, by and among the Company and the purchasers signatory thereto, as amended
pursuant to that certain Interest Amendment and Forbearance Agreement, dated October ___, 2005,
pursuant to which additional Convertible Debentures and Warrants were issued (the “November 11
Purchase Agreement”); and (ii) a Securities Purchase Agreement, dated November 26, 2004, by and
among the Company and the purchasers signatory thereto, as amended pursuant to that certain
Interest Amendment and Forbearance Agreement, dated October ___, 2005, pursuant to which additional
Convertible Debentures and Warrants were issued (the “November 26 Purchase Agreement”). Each of
the November 11 Purchase Agreement and the November 26 Purchase Agreement shall be referred to as a
“Purchase Agreement” and, collectively, as the “Purchase Agreements”.
B. Pursuant to (i) the Registration Rights Agreement, dated November 11, 2004, entered into by
and among the Company and the purchasers signatory thereto, as amended (the “November 11
Registration Rights Agreement”); and (ii) the Registration Rights Agreement, dated November 26,
2004, entered into by and among the Company and the purchasers signatory thereto, as amended (the
“November 26 Registration Rights Agreement”), each of which was entered into in connection with the
Purchase Agreements, the Holders have certain registration rights with respect to the shares of
Common Stock issuable upon conversion of the Convertible Debentures or exercise of the Warrants and
with respect to certain other securities. Each of the November 11 Registration Rights Agreement
and the November 26 Registration Rights Agreement shall be referred to as a “Registration Rights
Agreement” and, collectively, as the “Registration Rights Agreements”.
C. The Holders now desire (i) to elect to either convert all Convertible Debentures issued
pursuant to the Purchase Agreements into shares of Common Stock of the Company or to receive a cash
payment as payment in full with respect to all Convertible Debentures issued pursuant to the
Purchase Agreements, in either case pursuant to the terms of this Agreement and (ii) to terminate
the Purchase Agreements, the Registration Rights Agreements and the Convertible Debentures in their
entirety.
Agreement
The parties hereby acknowledge the foregoing Background Information and agree as follows:
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The aggregate outstanding principal amount of the Convertible Debentures (the “Conversion
Amount”) held by each Holder shall, at the election of each such Holder as indicated on the
signature page to this Agreement, either (i) be converted into such number of shares of the
Company’s Common Stock as is equal to the Conversion Amount for such Holder divided by $0.15 (with
any fractional shares being rounded up to the nearest whole share) (the “Conversion Shares”) or
(ii) agree to receive cash in an amount equal to the Conversion Amount for such Holder multiplied
by 0.20 (the “Cash Payment”).
This Agreement shall become effective upon receipt of executed and completed signature pages
to this Agreement from all Holders of Convertible Debentures (the “Effective Date”);
provided, however, the Effective Date must occur on or before August 1, 2006 or
this Agreement shall be null and void and of no further force or effect. The Company hereby agrees
that upon the Effective Date, it shall promptly issue and send to each Holder such Holder’s
Conversion Shares or Cash Payment, as applicable.
Each Holder agrees that as of the Effective Date, such Holder’s Convertible Debentures shall
be deemed to be converted or re-paid in full, as applicable, and such Holder shall no longer have
any rights with respect to such Convertible Debentures (other than the issuance by the Company of
the Conversion Shares or payment by the Company of the Cash Payment, as applicable).
Each Holder agrees that, as of the Effective Date, all provisions in the Securities Purchase
Agreements, the Registration Rights Agreements and each Convertible Debenture (collectively, the
“Transaction Agreements”) relating solely to the Convertible Debentures and, if after the Effective
Date such Holder shall not hold any Conversion Shares (by virtue of prior conversions or receipt of
Conversion Shares hereunder), shares underlying the Convertible Debentures (other than any
indemnification or contribution provisions), any provisions relating to rights to participate in
future financings and any prohibitions on additional financings by the Company shall terminate in
their entirety and be of no further force or effect. Nothing herein shall be deemed to modify or
amend the rights of a Holder and obligations of the Company under the Transaction Agreements with
respect to its Warrant and the Warrant Shares which rights and obligations shall remain in full
force and effect; except that, the Company’s obligation to register the Warrant Shares under the
Registration Rights Agreement (other than pursuant to any piggy-back registration rights therein)
is hereby terminated. Each Holder further agrees that the Company shall be deemed to have complied
with all of its rights and obligations under the Transaction Agreements and such Holder hereby
releases the Company from all liabilities, damages or obligations pursuant to the Transaction
Agreements, including without limitation any rights to registration of securities, liquidated
damages or interest payments.
The Company, for itself and its affiliates and successors and assigns, hereby releases and
discharges each Holder and its respective directors, officers, shareholders, members, partners,
employees and agents (and any other persons with a functionally equivalent role of a person holding
such titles notwithstanding a lack of such title or any other title) successors and assigns from
all suits, claims, charges, liabilities and causes of action, whatsoever, whether known or unknown,
in law or equity or otherwise, which the Company or its affiliates, successors and assigns have or
may have against any or all of them arising out of, relating to, or in connection solely with with
the Transaction Documents, the Convertible Debentures and the Warrants.
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Each Holder, severally and not jointly with the other Holders, for itself and its affiliates
and successors and assigns, hereby releases and discharges the Company and its respective
directors, officers, shareholders, members, partners, employees and agents (and any other persons
with a functionally equivalent role of a person holding such titles notwithstanding a lack of such
title or any other title), successors and assigns from all suits, claims, charges, liabilities and
causes of action, whatsoever, whether known or unknown, in law or equity or otherwise, which such
Holder or its affiliates, successors and assigns have or may have against any or all of them
arising out of, relating to, or in connection solely with any breach or violation by the Company
under the Transaction Documents, Convertible Debentures or Warrants that occurred prior to the date
hereof.
This Agreement may be executed in multiple counterparts, each of which shall be deemed to be
an original, but all of which taken together shall constitute one and the same Agreement. Any
photostatic, facsimile, or electronic reproduction of the executed Agreement shall constitute an
original.
[Remainder of page intentionally left blank. Signature page follows.]
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Company:
Hartville Group, Inc.
By: |
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| President & CEO |
Holders:
Name of Holder: |
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Signature of Authorized Signatory of Holder: |
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Name of Authorized Signatory: |
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Title of Authorized Signatory: |
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Outstanding Principal Amount of Convertible Debentures: |
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Date of Issue of Convertible Debentures: |
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Please select one of the following conversion alternatives:
| Conversion Shares (equal to the Outstanding Principal Amount divided by $0.15) | ||||
| Cash Payment (equal to the Outstanding Principal Amount multiplied by 0.20) |
Address for Delivery of Conversion Shares or Cash Payment, as applicable:
EIN Number: |
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Facsimile Number: |
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Email Address: |
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