CONVERTIBLE BRIDGE LOAN TERMINATION
AND
CONVERSION OF DEBT
AGREEMENT
This CONVERTIBLE BRIDGE LOAN TERMINATION AND CONVERSION OF DEBT AGREEMENT
dated as of January 14, 2003 ( the "Agreement"), is entered Into by and among
THE HARBOUR GROUP, INC., a Virginia corporation ("Harbour"), UNIVERSAL GUARDIAN
CORPORATION, a Nevada corporation ("Universal"), XXXXXXX XXXXXXXX, an individual
("Xxxxxxxx"), and DYDX GROUP OF FUNDS, LLC, A California limited liability
company as collateral agent for Xxxxxxxx ("Dydx"). Harbour, Universal, Xxxxxxxx
and Dydx are referred to herein at times individually as a "party" or
collectively as the "parties."
RECITALS
A. Harbour, Universal, Xxxxxxxx and Dydx are all parties to that certain Loan
and Security Agreement, Bridge Loan Note, and all Loan Documents related thereto
all dated as of October 14, 2002 ( collectively, the "Xxxxxxxx Loan Documents")
for a convertible bridge loan from Xxxxxxxx to Harbour in the principal amount
of US$200,000 (the "Xxxxxxxx Bridge Loan").
B. Universal guaranteed Harbour's obligations under the Xxxxxxxx Loan Documents.
C. As full repayment of the Xxxxxxxx Bridge Loan, the parties desire to allow
and accept the conversion of the full principal amount of the Xxxxxxxx Bridge
Loan, and all accrued interest thereon, into Series A Preferred Stock of
Universal.
In consideration of the mutual promises contained herein, and for other
good and valuable consideration, the parties agree as follows:
AGREEMENT
1. Conversion of Xxxxxxxx Bridge Loan: The entire unpaid US$200,000 principal
amount of the Xxxxxxxx Bridge Loan and all accrued interest thereon in the
amount of US$5,000 (for the loan term from October 14, 2002, through and
including January 14, 2003) is hereby converted as of January 14, 2003, into
Series A Preferred Stock of Universal ("Shares") at the conversion rate of
US$1.25 per Share, for a total number of 164,000 converted Shares ("Converted
Shares").
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2. Loan Fee Shares: Pursuant to the terms of the Xxxxxxxx Bridge Loan, Xxxxxxxx
received a loan fee in the amount of $100,000 Shares ("Loan Fee Shares").
Xxxxxxxx remains entitled to such Loan Fee Shares.
3. No Late Fee: No late fee is due Xxxxxxxx under the Xxxxxxxx Loan Documents.
4. Total Converted Shares and Loan Fee Shares: Pursuant to the conversion
hereunder, Universal agrees to properly authorize, issue and deliver to Xxxxxxxx
a total of 264,000 Converted Shares and Loan Fee Shares ("Xxxxxxxx Total
Shares").
5. Delivery of Shares: The Xxxxxxxx Total Shares due hereunder shall be fully
and properly authorized, issued and delivered by Universal to Xxxxxxxx no later
than February 22, 2003.
6. Termination of Xxxxxxxx Bridge Loan: Subject to Universal's delivery of the
Xxxxxxxx Total Shares as required in this Agreement, (a) the Xxxxxxxx Bridge
Loan is deemed fully and timely repaid, (b) all of the Xxxxxxxx Loan Documents
are null, void and no longer of any force or effect as to all of parties, (c)
all security interest of Xxxxxxxx and/or Dydx under the Xxxxxxxx Loan Documents
are automatically released and extinguished, (d) any rights any party may have
under the xxxxxxxx Loan Documents that may extend and exist beyond the
termination of such documents are fully and completely waived and extinguished,
(e) Xxxxxxxx and Dydx shall file any necessary documents with the requisite
government offices to evidence the full and complete release of any security
interests granted Xxxxxxxx and/or Dydx under the Xxxxxxxx Loan Documents, and
(f) Dydx no longer is acting as the collateral agent for Xxxxxxxx and Dydx is
fully and completely released from any obligations, duties and liabilities as
collateral agent under the Xxxxxxxx Loan Documents. The failure of Universal to
deliver the Xxxxxxxx Total Shares as required in this Agreement shall result in
(a) this Agreement and obligations hereunder being null, void and no longer of
any force or effect and (b) the Xxxxxxxx Loan Documents being unaffected by this
Agreement and remaining in full force and effect.
7. Restricted Shares: Xxxxxxxx acknowledges and understands that all of the
Xxxxxxxx Total Shares will be restricted Shares pursuant to Rule 144 under the
Securities Act of 1933.
8. Right to Sell Shares to Universal:
(a) Subject to Universal's delivery of the Xxxxxxxx Total Shares as
required in this Agreement, Xxxxxxxx has the right to require (the "Put Right")
Universal to purchase from Xxxxxxxx all or any portion of the Xxxxxxxx Total
Shares until such time as Xxxxxxxx has received the aggregate amount of
US$205,000 from the exercise of such Put Rights. The Put Right may be exercised
only during the period from 12:01 a.m., April 15, 2003, through and including
4:59 p.m., June 30, 2003, must be exercised by providing Universal written
notice stating the amount of Shares Xxxxxxxx desires to sell, may be exercised
in various increments and at various times, and shall be exercised at the
following price per Share:
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(i) During the period from April 15, 2003, through May 15, 2003, at a
purchase price of $1.50 per Share.
(ii) During the period from May 16, 2003, through June 30, 2003, at a
purchase price of $1.75 per Share.
(b) Notwithstanding the foregoing paragraph 8(a), if Universal is not
permitted to purchase any of the tendered Xxxxxxxx Total Shares due to any
applicable corporate or securities laws, Universal's obligation to purchase such
tendered Xxxxxxxx Total Shares shall be deferred until the earliest opportunity
Universal has under applicable corporate or securities laws to purchase such
Shares.
9. Representation by Counsel - Voluntary Agreement: Each party to this Agreement
is encouraged to seek legal counsel before entering into this Agreement. By
executing below, each party to this Agreement acknowledges and warrants that
either (i) he, she or it has been represented by independent counsel of their
choice through all negotiations that preceded the execution of this Agreement,
or (ii) he, she or it has voluntarily chosen to enter into this Agreement
without seeking the advice of his/her/its own independent counsel. Each party
has read, or had read to them, all of this Agreement and each party fully
understands the terms used in this Agreement and their significance. Each party
represents and warrants that this Agreement has been entered into voluntarily
and without any coercion or duress, economic or otherwise
10. No Partnership or Agency: This agreement does not constitute any party the
agent of the other, or create a partnership or joint venture between the
parties, and no party shall have the power to obligate or bind the other in any
manner whatsoever. None
of the parties hereto shall hold itself out contrary to the provisions of this
paragraph by advertising or otherwise. This Agreement shall not be construed to
be foe the benefit of any third party.
11. Recitals and Headings: Each of the Recitals contained in this Agreement are
incorporated herein as material terms. Headings of clauses and sections in this
Agreement are inserted for reference and convenience only and in no way define,
limit or describe the scope or intent of any provision thereof.
12. Governing Law: This Agreement shall be governed and construed under the laws
of the State of Illinois.
13. Entire Agreement: This Agreement contains the full and complete
understanding between the parties with regard to the subject matter hereof and
it cannot be modified or amended except by a written instrument signed by each
party. This Agreement supersedes all prior agreements and understandings between
the parties with regard to the subject matter hereof, whether such agreements
and understandings were written or oral. Each party hereby represents and
warrants that no statement, promise, representation, or inducement, except as
herein set forth, has been made on any party's behalf, or by any of such party's
employees or representatives, and no party hereto is relying on any
representation, warranty or agreement not contained in this Agreement.
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14. Severability: In the event that any provision contained in this Agreement
shall be (i) held by any court or arbitration tribunal to be unenforceable,
illegal, void or contrary to public policy, or (ii) in conflict with any
applicable statue, law, regulation or applicable collective bargaining
agreement, then such provision shall be of no force or effect; provided,
however, that in such even the provision of this Agreement so affected shall be
curtailed and limited only to the minimum extent necessary to permit compliance
with the minimum required, and no other provisions of this Agreement shall be
affected thereby and all such other provisions shall continue in full force and
effect.
15. Attorneys Fees: In any dispute, action or arbitration between parties
relating to this Agreement, the enforcement of any of its terms, or to any other
contract relating to the subject matter of this Agreement, the prevailing party
shall be entitled to recover, in addition to any other award of damages or other
remedies, its reasonable attorneys' fees, costs and expenses.
16. Authorization: The assent of each party to this Agreement shall be indicated
by his/her/its signature below or by the signature of his/her/its duly
authorized officer, agent or representative below. Each party warrants and
represents that it has full authority enter into this Agreement, and that the
person or persons executing this Agreement upon its behalf are authorized to do
so. Each party warrants and represents that it is wholly free to enter into this
contract and to grant the rights herein granted to the other, and that it is not
a party to any agreements, and does not have any obligations, which conflict
with any of the provisions hereof or restrict any rights granted herein.
17. Notices and Payments: All notices, demands and payments shall be given in
writing either by personal delivery, courier service, by registered or certified
mail, postage prepaid with proof of mailing, or by facsimile transmission with
printed proof from the facsimile machine verifying successful transmission.
Notice may not be given via computer delivered or electronic mail (so-called
e-mail). Notice shall be deemed given when actually delivered if by personal
delivery, courier service or facsimile transmission, or upon the earlier of (i)
three (3) days after deposit into the United States Mail, or (ii) the date of
actual receipt as evidenced by the return of receipt, if by mail. Notices shall
be addressed as appears below for each party, provided that if any party gives
notice of a change of name or address, notices to the giver of that notice shall
thereafter be given as demanded in that notice:
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If to Xxxxxxxx: Xxxxxxx Xxxxxxxx
0000 Xxxxxxxxxx xxxx
Xxxxxx, XX 00000
Fax: 000-000-0000
If to Harbour: The Harbour Group, Inc.
c/o Universal Guardian Corporation
0000 Xxxxx Xxxxxx, Xxxxx 000
Xxxxxxxx, XX 00000
Fax: 000-000-0000
If to Universal: Universal Guardian Corporation
0000 Xxxxx Xxxxxx, Xxxxx 000
Xxxxxxxx, XX 00000
Fax: 000-000-0000
Attention: Xxxxxxx X. Xxxxxxxx
If to Dydx: DyDx Group of Funds, LLC
0000 Xxxxxx xx xxx Xxxxx, Xxx. 0000
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Fax: 000-000-0000
Attention: Xxxx Xxxxxxx
18. No Assignment: This Agreement and any payments due hereunder may not be
assigned by any party to this Agreement without the express written consent of
the other parties to this Agreement.
19. Successors and Assigns: This Agreement shall inure to the benefit of the
parties hereto and to their respective successors, heirs and assigns, subject to
any restrictions on assignment contained elsewhere herein.
20. Counterparts; Transmittal by Facsimile: This Agreement may be executed in
several counterparts, each of which shall be an original as against any party
who signed it, and all of which shall constitute one and the same document. This
Agreement shall not be binding on any party until each party hereto has executed
this Agreement or a counterpart hereof and delivered such executed Agreement or
counterpart, whether by facsimile or otherwise, to the other parties hereto or
to their respective representatives.
21. Further Required Acts: The parties agree to timely execute and deliver all
additional documents, and complete all additional acts, for the purpose of
completing and properly documenting the transaction and subject matter of this
Agreement.
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22. Interpretation and Ambiguities: As the context herein requires, terms stated
in the singular, plural, masculine, feminine, or neuter shall include references
to the other. All parties hereto contributed to the drafting of this Agreement
such that any rules regarding ambiguities are to be construed against the
drafting party shall not apply.
These parties have executed and entered into this Agreement as of the date
first above written.
THE HARBOR GROUP, INC.
a Virginia corporation
By: /s/ Xxxxxxx X. Xxxxxxxx
--------------------------------
Xxxxxxx X. Xxxxxxxx
Title: CEO
UNIVERSAL GUARDIAN CORPORATION
a Nevada corporation
By: /s/ Xxxxxxx X. Xxxxxxxx
--------------------------------
Xxxxxxx X. Xxxxxxxx
Title:
XXXXXXX XXXXXXXX, an individual
DYDX GROUP OF FUNDS, LLC
a California limited liability company,
as Collateral Agent
By: /s/ Xxxx Xxxxxxx
--------------------------------
Xxxx Xxxxxxx
President, Managing Member
