EXHIBIT 10.9
FOREBEARANCE AND DEFERRAL AGREEMENT
THIS FOREBEARANCE AND DEFERRAL AGREEMENT (this "Agreement"), dated
as of June 30, 2005, is made by and among Windswept Environmental Group,
Inc., a Delaware corporation ("WEGI"), Xxxxxxx X'Xxxxxx, an individual with an
address at c/o WEGI, 000 Xxxxxxxxxxx Xxxxxx, Xxx Xxxxx, Xxx Xxxx 00000 ("MOR"),
Dr. Xxxxx Xxxxxxxx and Xxxx Xxxxxx, each of whom is an individual with an
address at c/o FPM Group, Ltd., 000 Xxxxxxx Xxxxxx, Xxxxxxxxxx, Xxx Xxxx 00000
(together, the "Series A Preferred Stockholders").
W I T N E S S E T H:
WHEREAS, WEGI has (a) granted to Laurus Master Fund, Ltd., a Cayman
Islands company ("Laurus") an option (the "Option") and a warrant (the
"Warrant") to acquire securities of WEGI pursuant to the Securities Purchase
Agreement, dated the date hereof, by and between Laurus and WEGI and (b) sold to
Laurus a secured convertible promissory note in the principal amount of
$5,000,000 (the "Note") with a maturity date of June 30, 2008 (the "Maturity
Date"); and
WHEREAS, an aggregate of $102,000 of accrued dividend payments and
interest due thereon from WEGI to the Series A Preferred Stockholders
pursuant to the Certificate of Designations of Series A Convertible Preferred
Stock of WEGI (the "Certificate of Designations") have accrued and have remained
unpaid over the last five consecutive quarters of WEGI.
NOW, THEREFORE, in consideration of the foregoing and for other
good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto hereby agree:
Section 1. Series A Preferred Stockholders.
(a) The Series A Preferred Stockholders hereby agree to forbear from
appointing a second director pursuant to Section 4(d) of the Certificate of
Designations until the earlier of (i) the third anniversary of the date hereof
or (ii) the repayment in full by WEGI of the Note.
(b) The Series A Preferred Stockholders hereby agree to defer the
(i) $1.3 million mandatory redemption due on June 30, 2007, as required by
Section 8(d) of the Certificate of Designations of Series A Convertible
Preferred Stock of WEGI (the "Certificate of Designations") and (ii) payment of
preferred stock dividend payments due as of the date hereof and all preferred
stock dividend payments accruing hereafter pursuant to the terms and provisions
hereof, plus interest at a rate per annum, equal to the higher of
(a) six percent (6%) of the Stated Value (as defined in the Certificate of
Designations) and (b) a percentage of the Stated Value equal to the Inflation
Rate (as defined in the Certificate of Designations) plus two and one-half
percent (2 1/2 %), except as provided in Section 2 below until the earlier of
(1) six months after the repayment in full by WEGI of the Note or (2) June 30,
2010.
(c) The Series A Preferred Stockholders hereby agree to vote any and
all of the shares of the Common Stock for which they have voting power in favor
of the Authorization Amendment (as defined below).
Section 2. WEGI.
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(a) WEGI hereby agrees to grant to each of the Series A Preferred
Stockholders options exercisable for a ten-year period at the market price
of shares of common stock, par value $0.0001 of WEGI (the "Common Stock") on the
date hereof (the "Closing Date"), to purchase 250,000 shares of Common Stock.
(b) WEGI hereby agrees to pay, out of funds legally available
therefor, accrued and unpaid dividends in an aggregate of (i) $17,500 to
each of the Series A Preferred Stockholders, on each of June 30, 2005, September
30, 2005 and December 30, 2005 and (ii) $25,000 to each of the Series A
Preferred Stockholders on February 28, 2007.
Section 3. MOR.
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(a) MOR hereby agrees to (i) propose at the next meeting of the
stockholders of WEGI (the "Meeting") an amendment to the Certificate of
Incorporation to give effect to the terms and provisions set forth in Section 1
hereof, to the extent legally required, and to (ii) vote all of the shares of
the Common Stock for which he has voting power in favor of such amendment.
(b) MOR also hereby agrees to (i) propose at the Meeting an
amendment to the Certificate of Incorporation to increase the amount of
authorized shares of Common Stock from 150,000,000 to that number required to
enable Laurus to fully exercise and convert the Option, Warrant and Note (the
"Authorization Amendment") and (ii) vote all of the shares of the Common Stock
for which he has voting power in favor of such amendment.
Section 4. Survival.
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All agreements, representations and warranties and covenants
contained herein or made in writing by or on behalf of the parties hereto in
connection with the transactions contemplated hereby shall survive the execution
of this Agreement and the consummation of such transactions.
Section 5. Severability.
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If any term, provision, covenant or restriction of this Agreement is
held by a court of competent jurisdiction or other authority to be invalid,
void or unenforceable, the remainder of the terms, provisions, covenants and
restrictions of this Agreement shall remain in full force and effect and shall
in no way be affected, impaired or invalidated so long as the economic or legal
substance of the transactions contemplated hereby is not affected in any manner
materially adverse to any parties. Upon such a determination, the parties shall
negotiate in good faith to modify this Agreement so as to effect the original
intent of the parties as closely as possible in an acceptable manner in order
that the transactions contemplated hereby are consummated as originally
contemplated to the fullest extent possible.
Section 6. Miscellaneous.
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This Agreement shall be interpreted, construed and enforced in
accordance with the laws of the State of New York without regard to its
conflicts of laws principles, except to the extent that the General Corporation
of the State of Delaware applies to Section 3 above. This Agreement embodies the
entire agreement and understanding among the parties hereto and supersedes all
prior agreements and understandings, oral and written, relating to the subject
matter hereof. This Agreement may not be modified or amended or any term or
provision hereof waived or discharged, except in writing signed by the party
against whom such modification, waiver or discharge is sought to be enforced.
This Agreement may be executed simultaneously in two or more counterparts, each
of which shall be deemed an original but all of which together shall constitute
one and the same instrument. All of the terms of this Agreement shall be binding
upon the respective successors and assigns of the parties hereto and shall inure
to the benefit of and be enforceable by the parties hereto and their respective
successors and assigns. The headings in this Agreement are for purposes of
reference only and shall not limit or otherwise affect the meaning hereof.
[SIGNATURE PAGE FOLLOWS]
IN WITNESS WHEREOF, the parties hereto have caused their duly
authorized officers to execute and deliver this Agreement as of the date first
set forth above.
WINDSWEPT ENVIRONMENTAL GROUP, INC.
By: /s/ Xxxxxxx X. Xxxxxx
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Name: Xxxxxxx X. Xxxxxx
Title:
/s/ Xxxxxxx X'Xxxxxx
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Xxxxxxx X'Xxxxxx
/s/ Xxxxx Xxxxxxxx
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Xxxxx Xxxxxxxx
/s/ Xxxx Xxxxxx
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Xxxx Xxxxxx
Acknowledged and Agreed to
As of this 30th day of June, 2005
LAURUS MASTER FUND, LTD.
By: /s/ Xxxxx Grin
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Name: Xxxxx Grin
Title: Director
