INTEREST AMENDMENT AND WAIVER
AGREEMENT
THIS INTEREST
AMENDMENT AND WAIVER AGREEMENT (“ Amendment ”)
is made to (1) that certain Securities Purchase Agreement
(“ November 11 Purchase Agreement ”) dated
as of November 11, 2004 among the Hartville Group, Inc. (the
“ Company ”) and Bristol Investment Fund, Ltd.,
Palisades Master Fund, L.P. and Crescent International Ltd. (the
“ November 11 Purchasers ”) for the
purchase of the Convertible Debentures, due November 11, 2006,
issued to the November 11 Purchasers (the “
November 11 Debentures ”) and the Common Stock
Purchase Warrants issued to the November 11 Purchasers (the
“ November 11 Warrants ”) and (2) that
certain Securities Purchase Agreement (“ November 26
Purchase Agreement ” and collectively with the
November 11 Purchase Agreement, the “ Purchase
Agreements ”) dated as of November 26, 2004 among
the Company and Islandia, L.P., Midsummer Investment, Ltd. and
Satellite Strategic Finance Associates, LLC (the “
November 26 Purchasers ”) for the purchase of the
Convertible Debentures, due November 26, 2006, issued to the
November 26 Purchasers (the “ November 26
Debentures ” and collectively with the November 11
Debentures, the “ Debentures ”) and the Common
Stock Purchase Warrants issued to the November 26 Purchasers
(the “ November 26 Warrants ” and
collectively with the November 11 Warrants, the “
Warrants ”).
For good and
valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereby agree as
follows:
1.
Adjustment to the Purchase Price of the Warrants . Section
2(b) of the Warrants is hereby amended and restated as follows:
“ Exercise Price . The exercise price of the Common
Stock under this Warrant shall be $0.01, subject to adjustment
hereunder (the “ Exercise Price ”). ”
The adjustment to the Warrants shall be automatic and require no
further action by the Company or any Purchaser, except that any
Purchaser may require the Company to deliver a new Warrant with the
amended terms of this Amendment and the Company shall deliver such
new Warrant within 3 Trading Days of receipt by the Company of the
existing Warrant.
2. Call
Provision in the Warrants . The following provision shall be
added as new Section 2(f) of the Warrants: “ Call
Provision . Subject to the provisions of Section 2(d) and this
Section 2(f), if the VWAP for each of 10 consecutive Trading
Days (the “ Measurement Period ”) exceeds $0.50
(subject to adjustment for forward and reverse stock splits,
recapitalizations, stock dividends and the like after October ___,
2005) (the “ Threshold Price ”), then the
Company may, within 1 Trading Day of the end of such period, call
for cancellation of all or any portion of this Warrant for which a
Notice of Exercise has not yet been delivered (such right, a
“ Call ”). To exercise this right, the Company
must deliver to the Holder an irrevocable written notice (a “
Call Notice ”), indicating therein the portion of
unexercised portion of this Warrant to which such notice applies.
If the conditions set forth below for such Call are satisfied from
the period from
43
the date of
the Call Notice through and including the Call Date (as defined
below), then any portion of this Warrant subject to such Call
Notice for which a Notice of Exercise shall not have been received
by the Call Date will be cancelled at 6:30 p.m. (New York City
time) on the tenth Trading Day after the date the Call Notice is
received by the Holder (such date, the “ Call Date
”). Any unexercised portion of this Warrant to which the Call
Notice does not pertain will be unaffected by such Call Notice. In
furtherance thereof, the Company covenants and agrees that it will
honor all Notices of Exercise with respect to Warrant Shares
subject to a Call Notice that are tendered through 6:30 p.m. (New
York City time) on the Call Date. The parties agree that any Notice
of Exercise delivered following a Call Notice shall first reduce to
zero the number of Warrant Shares subject to such Call Notice prior
to reducing the remaining Warrant Shares available for purchase
under this Warrant. For example, if (x) this Warrant then
permits the Holder to acquire 100 Warrant Shares, (y) a Call
Notice pertains to 75 Warrant Shares, and (z) prior to 6:30
p.m. (New York City time) on the Call Date the Holder tenders a
Notice of Exercise in respect of 50 Warrant Shares, then
(1) on the Call Date the right under this Warrant to acquire
25 Warrant Shares will be automatically cancelled, (2) the
Company, in the time and manner required under this Warrant, will
have issued and delivered to the Holder 50 Warrant Shares in
respect of the exercises following receipt of the Call Notice, and
(3) the Holder may, until the Termination Date, exercise this
Warrant for 25 Warrant Shares (subject to adjustment as herein
provided and subject to subsequent Call Notices). Subject again to
the provisions of this Section 2(f), the Company may deliver
subsequent Call Notices for any portion of this Warrant for which
the Holder shall not have delivered a Notice of Exercise.
Notwithstanding anything to the contrary set forth in this Warrant,
the Company may not deliver a Call Notice or require the
cancellation of this Warrant (and any Call Notice will be void),
unless, from the beginning of the 10 consecutive Trading Days used
to determine whether the Common Stock has achieved the Threshold
Price through the Call Date, (i) the Company shall have honored in
accordance with the terms of this Warrant all Notices of Exercise
delivered by 6:30 p.m. (New York City time) on the Call Date and
(ii) the Registration Statement shall be effective as to all
Warrant Shares and the prospectus thereunder available for use by
the Holder for the resale of all such Warrant
|
