AMENDMENT AND FEE WAIVER AGREEMENT
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This Amendment and Fee Waiver Agreement dated as of August 25, 2006 (the
"Amendment and Fee Waiver Agreement") is entered into by and between Windswept
Environmental Group, Inc., a Delaware corporation (the "Borrower"), and Laurus
Master Fund, Ltd., a Cayman Islands company ("Laurus"). Capitalized terms used
herein without definition shall have the meanings ascribed to such terms in the
Securities Purchase Agreement (as defined below) and the Note (as defined
below).
WHEREAS, the Borrower filed a registration statement on October 3, 2005 (as
amended, modified or supplemented, the "Initial Registration Statement"), in
order to register a portion of the shares of the Borrower's Common Stock (as
amended, modified or supplemented, the "Common Stock") underlying (a) an Amended
and Restated Secured Convertible Term Note the Borrower issued to Laurus on
October 6, 2005 in the aggregate original principal amount of $7,350,000 (as
amended, modified or supplemented, the "Note") pursuant to the terms of the
Securities Purchase Agreement, dated as of June 30, 2005, between the Borrower
and Laurus ( as amended, modified or supplemented, the "Securities Purchase
Agreement" and together with the Related Agreements as defined therein, the
"Loan Documents"); (b) a warrant issued by the Borrower to Laurus on June 30,
2005 to purchase 13,750,000 shares of the Common Stock (as amended, modified or
supplemented, the "Warrant"); and (c) an option issued by the Borrower to Laurus
on June 30, 2005 to purchase 30,395,179 shares of Common Stock (as amended,
modified or supplemented, the "Option");
WHEREAS, the Borrower and Laurus entered into Amendment and Fee Waiver
Agreements dated as of November 23, 2005, January 13, 2006, February 28, 2006,
March 20, 2006, May 11, 2006, June 12, 2006, June 30, 2006 and July 21, 2006
(the "Amendments");
WHEREAS, pursuant to Section 3.7 of the Note, as amended, the Borrower is
obligated to reserve from its authorized and unissued shares of Common Stock a
sufficient number of shares to provide for the issuance of shares upon the full
conversion and/or exercise of the Warrant, the Option and the Note after the
earlier to occur of (x) November 1, 2006 and (y) the date of the Borrower's next
shareholders meeting (the "Additional Authorization Date"), which Additional
Authorization Date shall be maintained;
WHEREAS, pursuant to Section 6 of the Option, as amended, the Borrower is
obligated to reserve from its authorized and unissued Common Stock a sufficient
number of shares to provide for the issuance of shares upon the full exercise of
the Option, after the Additional Authorization Date;
WHEREAS, pursuant to Section 6 of the Warrant, as amended, the Borrower is
obligated to reserve from its authorized and unissued Common Stock a sufficient
number of shares to provide for the issuance of shares upon the full exercise of
the Warrant, after the Additional Authorization Date;
WHEREAS, the Securities Purchase Agreement sets forth, among other things,
the terms of the issuance of the Note, the Option and the Warrant;
WHEREAS, pursuant to Section 4.3(d) of the Securities Purchase Agreement,
as amended, the Borrower is obligated to reserve from its authorized and
unissued Common Stock a sufficient number of shares to provide for the issuance
of shares upon the full conversion and/or exercise of the Note, the Warrant and
the Option, after the Additional Authorization Date;
WHEREAS, the Borrower entered into a registration rights agreement with
Laurus on June 30, 2005 (the "Registration Rights Agreement") in order to set
forth Borrower's obligations to register the shares of Common Stock underlying
the Note, the Option and the Warrant with the Securities and Exchange
Commission;
WHEREAS, the parties have previously agreed that in order to most
efficiently expedite the accomplishment of their respective goals, to: (a) work
toward having the Initial Registration Statement, with the current number of
shares included therein (but not including any shares underlying the $1,350,000
note issued on October 6, 2005), declared effective as soon as possible; (b)
after the Initial Registration Statement is effective, file a proxy statement
and hold a shareholders meeting to approve the intended increase in the number
of authorized shares; and (c) after the shareholders meeting and after
Borrower's June 30, 2006 audited financial statements are final, file a new or
post-effective Registration Statement(s) to cover all of the shares of common
stock required to be registered pursuant to the Registration Rights Agreement
(the "Second Registration Statement");
WHEREAS, to reassess the foregoing plan and to formulate a new plan that
accomplishes the objectives of Laurus and the Borrower, Laurus has agreed to
extend the deadline for the Borrower to have its Initial Registration Statement
declared effective under the Registration Rights Agreement until September 20,
2006;
WHEREAS, the parties have concurred that, until a new plan is formulated,
to maintain the deadline for the Borrower to have its Second Registration
Statement declared effective under the Registration Rights Agreement at December
30, 2006;
WHEREAS, pursuant to Section 2(b) of the Registration Rights Agreement and
Section 2 of each of the Amendments, the Borrower is required to pay a daily
amount in cash equal to one-thirtieth (1/30th) of the product of the then
outstanding principal amount of the Note multiplied by the following (the
"Fees") if the Registration Statement has not been declared effective by the
Securities and Exchange Commission (prior to giving effect to this Amendment and
Fee Waiver Agreement):
o 1.5% for the first 30 day period beginning on August 26, 2006;
o 2.0% thereafter and
WHEREAS, Laurus has hereby agreed to postpone the date by which any Fees
may accrue and become payable until September 21, 2006 with respect to Initial
Registration Statement, but will, until a new plan is formulated, remain
December 31, 2006 with respect to the Second Registration Statement.
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NOW, THEREFORE, in consideration of the mutual promises set forth herein,
and for other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties hereby agree as follows:
1. Extension of Deadline by which the Borrower must have the Securities and
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Exchange Commission Declare Effective its Initial Registration Statement. Laurus
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hereby agrees to postpone the deadline by which the Borrower must have the
Securities and Exchange Commission declare effective its Initial Registration
Statement from August 25, 2006 until September 20, 2006. This modification shall
apply to the Registration Rights Agreement only.
2. Postponement. Laurus hereby agrees to postpone the date by which any
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Fees may accrue and become payable until September 21, 2006 with respect to the
Initial Registration Statement.
3. Laurus Representations. Laurus hereby represents and warrants to the
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Borrower that Laurus is an "accredited investor" as defined in Rule 501(a) of
Regulation D promulgated under the Securities Act of 1933 and a "qualified
institutional buyer" as defined in Rule 144A under the Securities Act of 1933
and has knowledge and experience in financial and business matters such that it
is capable of evaluating the merits and risks of the investment to be made
hereunder.
4. Borrower Representations. The Borrower hereby represents and warrants to
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Laurus that (i) no Event of Default exists on the date hereof, after giving
effect to this Amendment and Fee Waiver Agreement, (ii) on the date hereof, all
representations, warranties and covenants made by the Borrower in connection
with the Loan Documents are true, correct and complete and (iii) on the date
hereof, all the Borrower's and its Subsidiaries' covenant requirements have been
met.
5. From and after the date hereof, all references in the Loan Documents and
in the other Related Agreements to the Post-Closing Letter shall be deemed to be
references to the Post-Closing Letter, as the case may be, as modified hereby.
6. No Other Amendments. Except as expressly set forth in this Amendment and
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Fee Waiver Agreement no other term or provision of any Loan Document or any
other Amendment is hereby amended or affected in any way and the Loan Documents
and the Amendments shall remain in full force and effect after the date hereof.
7. The Borrower understands that the Borrower has an affirmative obligation
to make prompt public disclosure of material amendments to such agreements.
8. Governing Law. This Amendment and Fee Waiver Agreement shall be governed
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by and construed in accordance with the laws of the State of New York, without
regard to principles of conflicts of laws.
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9. Facsimile Signatures; Counterparts. This Amendment and Fee Waiver
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Agreement may be executed by facsimile signatures and in any number of
counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.
IN WITNESS WHEREOF, the parties hereto have executed this Amendment as a
sealed instrument as of the date set forth in the first paragraph hereof.
WINDSWEPT ENVIRONMENTAL GROUP, INC.
By: /s/ Xxxxxxx X'Xxxxxx
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Name: Xxxxxxx X'Xxxxxx
Title: President and Chief Executive Officer
LAURUS MASTER FUND, LTD.
By: /s/ Xxxxx Grin
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Name: Xxxxx Grin
Title: Director
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