LETTER AGREEMENT
EXHIBIT
10.2
September
3, 2008
Valens
U.S. SPV I, LLC
Valens
Offshore SPV I, Ltd.
PSource
Structured Debt Limited
LV
Administrative Services, Inc., as agent
c/o
Valens Capital Management, LLC
000
Xxxxxxx Xxxxxx, 00xx
Xxxxx
Xxx
Xxxx,
Xxx Xxxx 00000
Ladies
and Gentlemen:
Reference
is made to (a) the Securities Purchase Agreement, dated as of June 30, 2005
(as
amended, restated, modified and/or supplemented from time to time, the
“Purchase
Agreement”),
by
and among WINDSWEPT ENVIRONMENTAL GROUP, INC., a Delaware corporation
(“Company”),
VALENS U.S. SPV I, LLC, a Delaware limited liability company (“Valens
U.S.”),
as
assignee of Laurus Master Fund, Ltd. (“Laurus”),
VALENS
OFFSHORE SPV I, LTD.,
a
Cayman Islands company (“Valens
Offshore”),
as
assignee of Laurus, and PSOURCE
STRUCTURED DEBT LIMITED,
a
Guernsey company (“PSource”
and,
together with Valens U.S. and Valens Offshore as assignees of Laurus Master
Fund, Ltd., collectively, the “Purchasers”),
as
assignee of Laurus, (b) the Second Amended and Restated Secured Term Note,
dated
as of April 17, 2007 (as amended, restated, modified and/or supplemented from
time to time, the “Secured
Term Note”),
made
by the COMPANY
in favor
of the PURCHASERS,
as
assignees of Laurus, (c) the Amended and Restated Secured Convertible Term
Note,
dated as of October 6, 2005 (as amended, restated, modified and/or supplemented
from time to time, the “Secured
Convertible Term Note”
and,
together with the Secured Term Note, the “Existing
Notes”),
made
by the COMPANY
in favor
of the PURCHASERS,
as
assignees of Laurus, (d) the Master Security Agreement, dated as of June 30,
2005, among the COMPANY,
TRADE-WINDS ENVIRONMENTAL GROUP, INC.
(“Tradewinds”),
NORTH
ATLANTIC LABORATORIES, INC.
(“North
Atlantic”),
ENVIRONMENTAL
RESTORATION, INC.
(“Environmental
Restoration, Inc.”)
and
RESTORENET,
INC.
(“Restorenet”
and,
together with Tradewinds, North Atlantic, Environmental Restoration,
collectively, the “Subsidiaries”)
and
the PURCHASERS,
as
assignees of Laurus (as
amended, restated, modified and/or supplemented from time to time, the
“Security
Agreement”),
(e)
the Subsidiary Guaranty, dated as of June 30, 2005, by the Subsidiaries in
favor
of the Purchasers, as assignees of Laurus (as amended, modified or supplemented
from time to time, the “Guaranty”),
and
(f) the Reaffirmation and Ratification Agreements, dated as of January 12,
2007,
April 17, 2007 and July 17, 2007, by the Company, Trade-Winds and North Atlantic
(as amended, restated, modified and/or supplemented from time to time the
“Reaffirmation
Agreements”
and,
together with the Purchase Agreement, the Existing Notes, the Security
Agreement, the Guaranty and all other ancillary documents, instruments and
agreements executed in connection therewith, each an “Existing
Agreement”
and
collectively, the “Existing
Agreements).
Defined terms used in this letter agreement (the “Letter
Agreement”)
but
not otherwise defined in this Letter Agreement shall have the meanings ascribed
to those terms in the Purchase Agreement.
1
To
induce
Purchasers to, among other things, continue to provide financial accommodations
to the Companies and, more specifically, to agree to the terms of (a) the Demand
Note, dated as of the date hereof, in the principal amount of $9,948 in favor
of
Valens U.S., (b) the Demand Note, dated as of the date hereof, in the principal
amount of $37,737 in favor of Valens Offshore and (c) the Demand Note, dated
as
of the date hereof, in the principal amount of $207,315 in favor of PSource
(collectively, the “Demand
Notes”),
each
of the undersigned (other than the Purchasers and Agent) hereby:
(a) acknowledges,
ratifies and confirms that the Purchasers have made several term loans to the
Company (the “Original
Term Loans”)
and
such Original Term Loans are evidenced by the Existing Notes;
(b) acknowledges,
ratifies and confirms that, as of the date hereof, the aggregate outstanding
principal amount of the Original Term Loans is $6,320,028.14;
(c) acknowledges,
ratifies and confirms that on the date hereof (the “Closing
Date”),
subject to the terms and conditions set forth herein and in the New Agreements
(as defined below), the Purchasers shall make an additional advance to the
Company in an aggregate amount equal to Two Hundred and Fifty Thousand Dollars
($250,000) (the “Additional
Advances”).
The
Additional Advances shall be evidenced by the Demand Notes. Each of the Company
and the Subsidiaries (collectively, the “Security
Parties”)
hereby
acknowledge and agree that the Purchasers’ obligation to purchase the Demand
Notes on the Closing Date shall be contingent upon the satisfaction (or waiver
by LV Administrative Services, Inc., as agent for the Purchasers, the
“Agent”)
of the
items and matters set forth in the closing checklist provided by the Agent
to
the Security Parties on or prior to the Closing Date;
(d) acknowledges,
ratifies and confirms that in consideration of the Purchasers’ agreement to make
the Additional Advance, (i) the Company shall issue the Demand Notes to the
Purchasers and (ii) the Company shall pay to Valens Capital Management, LLC,
the
investment manager of the Purchasers (“VCM”),
a
non-refundable payment in an amount equal to Three Thousand Seven Hundred Fifty
Dollars ($3,750), plus reasonable expenses (including legal fees and expenses)
incurred in connection with the entering into of this Letter Agreement and
the
ancillary documents, and expenses incurred in connection with VCM’s due
diligence review of the Company and its Subsidiaries) and all related matters.
Each of the foregoing payments in clause (ii) above shall be deemed fully earned
on the Closing Date and shall not be subject to rebate or proration for any
reason.
(e) represents
and warrants to the Agent and the Purchasers that it has reviewed and approved
the terms and provisions of the Demand Notes, this Letter Agreement, the
Guaranty by Xxxxxxx X’Xxxxxx (“Principal”)
in
favor of the Purchasers and Agent, dated as of the date hereof (as amended,
restated, modified and/or supplemented from time to time, the “Individual
Guaranty”)
and
all documents, instruments and agreements executed in connection herewith and
therewith (together the “New
Agreements);
2
(f) acknowledges,
ratifies and confirms that all of the terms, conditions, representations and
covenants contained in the Existing Agreements to which it is a party are in
full force and effect and shall remain in full force and effect after giving
effect to the execution and effectiveness of the New Agreements;
(g) acknowledges,
ratifies and confirms that the defined term “Obligations” under each of the
Purchase Agreement and the Related Agreements include, without limitation,
all
obligations and liabilities of the Security Parties under the New Agreements
and
the Existing Agreements, as applicable, and all other obligations and
liabilities of each of the undersigned to each Purchaser and Agent (including
interest accruing after the filing of any petition in bankruptcy, or the
commencement of any insolvency, reorganization or like proceeding, whether
or
not a claim for post-filing or post-petition interest is allowed or allowable
in
such proceeding), whether now existing or hereafter arising, direct or indirect,
liquidated or unliquidated, absolute or contingent (collectively, the
“Obligations”);
(h) acknowledges,
ratifies and confirms that the New Agreements (i) are “Documents” under, and as
defined in, the Security Agreement and the Guaranty and (ii) “Related
Agreements” under, and as defined in, the Purchase Agreement.
(i) acknowledges
and confirms that (i) the occurrence of a breach and/or an Event of Default
under any of the New Agreements shall constitute a breach and/or an Event of
Default under the Existing Agreements and (ii) the occurrence of a breach and/or
an Event of Default under any of the Existing Agreements shall constitute a
breach and/or an Event of Default under the New Agreements;
(j) represents
and warrants that no offsets, counterclaims or defenses exist as of the date
hereof with respect to any of the undersigned’s obligations under any of the
Existing Agreements;
(k) acknowledges,
ratifies and confirms (i) that the security interest grants to Laurus set forth
in the Existing Agreements extend to each Purchaser, as assignees of Laurus,
and
to Agent, as agent for each Purchaser, (ii) that the grant by each Security
Party to the Purchasers and Agent of a security interest under the Existing
Agreements extends to and covers all assets (including, without limitation,
the
equity interests owned by such Security Party) of each Security Party as more
specifically set forth in the Existing Agreements and the New Agreements, as
applicable (the “Security
Interest Grants”),
(iii)
that the Security Interest Grants secure all Obligations, and (iv) that each
Purchaser and Agent have all rights and remedies of a secured creditor under
the
Existing Agreements, New Agreement and applicable law. To the extent not
otherwise granted by the terms of the Existing Agreements, each Security Party
grants to each Purchaser and Agent, as agent for each Purchaser, a security
interest in all cash, cash equivalents, accounts, accounts receivable, deposit
accounts, inventory, equipment, goods, fixtures, documents, instruments
(including, without limitation, promissory notes and equity securities),
contract rights, general intangibles (including, without limitation, payment
intangibles), chattel paper, supporting obligations, investment property,
letter-of-credit rights, trademarks, trademark applications, tradestyles,
patents, patent applications, copyrights, copyright applications and other
intellectual property in which each Security Party now has or hereafter may
acquire any right, title or interest, all proceeds and products thereof
(including, without limitation, proceeds of insurance) and all additions,
accessions and substitutions thereto or therefor;
3
(l) represents
and warrants that (i) all of the representations made by or on behalf of the
Security Parties in the Existing Agreements to which it is a party are true
and
correct in all material respects on and as of the date hereof; (ii) the Security
Parties have the corporate power and authority to execute and deliver the New
Agreements; (iii) all corporate action on the part of the Security Parties
(including their respective officers and directors) necessary for the
authorization of the New Agreements, the performance of all obligations of
the
Security Parties hereunder and thereunder and, the authorization, sale, issuance
and delivery of the Demand Notes has been taken; and (iv) the New Agreements,
when executed and delivered and to the extent it is a party thereto, will be
valid and binding obligations of the Security Party; and
(m) releases,
remises, acquits and forever discharges each Purchaser and its respective
employees, agents, representatives, consultants, attorneys, fiduciaries,
officers, directors, partners, predecessors, successors and assigns, subsidiary
corporations, parent corporations, and related corporate divisions (all of
the
foregoing hereinafter called the “Released
Parties”),
from
any and all actions and causes of action, judgments, executions, suits, debts,
claims, demands, liabilities, obligations, damages and expenses of any and
every
character, known or unknown, direct and/or indirect, at law or in equity, of
whatsoever kind or nature, for or because of any matter or things done, omitted
or suffered to be done by any of the Released Parties prior to and including
the
date of execution hereof, and in any way directly or indirectly arising out
of
or in any way connected to this Letter Agreement, the Existing Agreements,
the
New Agreements and any other document, instrument or agreement made by the
undersigned in favor of a Purchaser.
Each
party hereto agrees and acknowledges that the Agent shall maintain, or cause
to
be maintained, for this purpose only as agent of the Company, (i) a copy of
each
assignment agreement delivered to it and (ii) a book entry system, within the
meaning of U.S. Treasury Regulation Sections 15f.103-1(c) and 1.871-14(c) (the
“Register”),
in
which it will register the name and address of each Purchaser and the name
and
address of each assignee of each Purchaser under this Letter Agreement and
the
Purchase Agreement, and the principal amount of, and stated interest on, the
Existing Notes and Demand Notes owing to each such Purchaser and assignee
pursuant to the terms hereof and each assignment agreement. The right, title
and
interest of the Purchasers and their assignees in and to such Existing Notes
and
Demand Notes shall be transferable only upon notation of such transfer in the
Register, and no assignment thereof shall be effective until recorded therein.
The Security Parties, the Purchasers and the Agent shall treat each person
whose
name is recorded in the Register as a Purchaser pursuant to the terms hereof
and
under the Purchase Agreement as a Purchaser and owner of an interest in the
Obligations hereunder and thereunder for all purposes of this Letter Agreement
and the Purchase Agreement, notwithstanding notice to the contrary or any
notation of ownership or other writing or any Note. The Register shall be
available for inspection by the Security Parties or any Purchaser, at any
reasonable time and from time to time, upon reasonable prior
notice.
4
Principal
shall deliver to Agent (in the case of the following clause “(a)”, on or prior
to the execution of this Letter Agreement, and in the case of the following
clause “(b)”, on or prior to the delivery to Agent of a security agreement in
form and substance acceptable to Agent covering the vessel referenced in such
clause “(b)”), in form and substance satisfactory to Agent, endorsements to each
and every insurance policy (the “Insurance
Policies”)
covering (a) the recreational motor vessel DORADO, of about 19 gross and 15
net
tons, length about 38.2 feet, built in 1985 at Owings MD and duly documented
under the laws of the United States with official number 699081 (the
“Dorado”)
and
(b) each other vessel owned by Principal, including without limitation the
New
York State titled vessel (collectively, with the Dorado, the “Vessels”)
naming
Agent, on behalf of the Purchasers, as an additional insured and a lender loss
payee. Principal irrevocably makes, constitutes and appoints Agent (and all
officers, employees or agents designated by Agent), so long as the Obligations
(as defined in the Individual Guaranty) remain outstanding as Principal’s true
and lawful agent and attorney in fact for the purpose of making, settling and
adjusting claims under such Insurance Policies, endorsing the name of Principal
on any check or other item of payment for the proceeds of such Insurance
Policies and for making all determinations and decisions with respect to such
Insurance Policies. Agent shall have no duty to exercise any rights or powers
granted to it pursuant to the foregoing power-of-attorney. Principal shall
promptly notify Agent of any loss, damage, or destruction to the Vessels,
whether or not covered by an Insurance Policy. If Principal receives any
proceeds from such Insurance Policies (the “Proceeds”),
Principal shall promptly remits such Proceeds to Agent. After deducting from
such Proceeds the expenses (including reasonable attorneys’ fees) incurred by
Agent in the collection or handling thereof, Agent may, at its option, make
such
remaining Proceeds available to Principal to replace, repair, restore or rebuild
the Vessel that was damaged or destroyed. If such Vessel is replaced, the
Principal shall enter into all such documents, instruments and agreements as
Agent shall require to evidence the grant by Principal to Agent, as agent for
the Purchasers, of a first priority perfected security interest in such
replacement vessel. All Proceeds at any time held by Agent which are not
otherwise made available to Principal hereunder (the “Cash
Collateral Amount”)
shall
be held by Agent as cash collateral to secure the Obligations (as defined in
the
Individual Guaranty). Agent, as agent for Purchasers, is hereby granted a
security interest in the Cash Collateral Amount and Agent is authorized, without
any prior notice or demand, to debit the Cash Collateral Amount to pay any
amount due with respect to the Obligations (as defined in the Individual
Guaranty). Upon the payment in full of the Obligations (as defined in the
Individual Guaranty), the Agent will remit to Principal (or otherwise as a
court
of competent jurisdiction shall direct), the amount, if any, of the Cash
Collateral Amount then held by the Agent.
This
Letter Agreement may be executed in any number of counterparts, each of which
when so executed shall be deemed to be an original, and all which when taken
together shall constitute one and the same agreement.
[Remainder
of this page intentionally left blank.]
5
This
Letter Agreement shall be governed by and construed in accordance with the
laws
of the State of New York.
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Very
truly yours,
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WINDSWEPT
ENVIRONMENTAL
GROUP,
INC., a Delaware corporation
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By:
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/s/
Xxxxxxx X’Xxxxxx
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Name:
Xxxxxxx X’Xxxxxx
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Title:
President
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TRADE-WINDS
ENVIRONMENTAL
GROUP,
INC.,
a
New York corporation
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By:
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/s/
Xxxxxxx X’Xxxxxx
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Name:
Xxxxxxx X’Xxxxxx
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Title:
President
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NORTH
ATLANTIC LABORATORIES,
INC.,
a
New York corporation
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By:
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/s/
Xxxxxxx X’Xxxxxx
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Name:
Xxxxxxx X’Xxxxxx
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Title:
President
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ENVIRONMENTAL
RESTORATION,
INC.,
a
New York corporation
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By:
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/s/
Xxxxxxx X’Xxxxxx
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Name:
Xxxxxxx X’Xxxxxx
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Title:
President
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RESTORENET,
INC., a New
York
corporation
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By:
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/s/
Xxxxxxx X’Xxxxxx
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Name:
Xxxxxxx X’Xxxxxx
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Title:
President
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SIGNATURE
PAGE TO
LETTER
AGREEMENT
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/s/
Xxxxxxx X’Xxxxxx
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Xxxxxxx
X’Xxxxxx, Individually
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STATE OF New York
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)
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): ss.:
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COUNTY OF Suffolk
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)
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On the
3rd day of September, 2008, before me personally came Xxxxxxx X’Xxxxxx to me
known, who being by me duly sworn, did depose and say that he has read the
foregoing instrument and is fully familiar with the contents thereof; that
he
signed his name thereto of his own free will and volition.
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Xxxx
X. Xxxx
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Notary
Public
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Xxxx
X.
Xxxx
Notary
Public, State of New York
No.
01DU6190448
Qualified
In Suffolk County
Commission
Expires 07/28/2012
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AGENT:
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LV
ADMINISTRATIVE SERVICES, INC.
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By:
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/s/
Xxxxx Xxxxxxxxx
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Name:
Xxxxx Xxxxxxxxx
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Title:
Authorized Signatory
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PURCHASERS:
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VALENS
U.S. SPV I, LLC
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By:
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Valens
Capital Management, LLC,
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its
investment manager
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By:
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/s/
Xxxxx Xxxxxxxxx
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Name:
Xxxxx Xxxxxxxxx
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Title:
Authorized Signatory
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VALENS
OFFSHORE SPV I, LTD.
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By:
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Valens
Capital Management, LLC,
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its
investment manager
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By:
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/s/
Xxxxx Xxxxxxxxx
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Name:
Xxxxx Xxxxxxxxx
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Title:
Authorized Signatory
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PSOURCE
STRUCTURED DEBT LIMITED
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By:
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/s/
Soondra Appavoo
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Name:
Soondra Appavoo
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Title: Managing Director, PSource Capital Limited, its investment manager
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