EXHIBIT 10.01
THIS NOTE AND THE COMMON SHARES ISSUABLE UPON CONVERSION OF THIS NOTE HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE
SECURITIES LAWS. THIS NOTE AND THE COMMON SHARES ISSUABLE UPON CONVERSION OF
THIS NOTE MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE
ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THIS NOTE UNDER SAID ACT
AND ANY APPLICABLE STATE SECURITIES LAWS OR AN OPINION OF COUNSEL REASONABLY
SATISFACTORY TO WINDSWEPT ENVIRONMENTAL GROUP, INC. THAT SUCH REGISTRATION IS
NOT REQUIRED.
AMENDED AND RESTATED SECURED CONVERTIBLE TERM NOTE
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FOR VALUE RECEIVED, WINDSWEPT ENVIRONMENTAL GROUP, INC., a Delaware
corporation (the "COMPANY"), promises to pay to LAURUS MASTER FUND, LTD.,
c/o M&C Corporate Services Limited, P.O. Box 309 GT, Xxxxxx House, South Church
Street, Xxxxxx Town, Grand Cayman, Cayman Islands, Fax: 000-000-0000 (the
"HOLDER") or its registered assigns or successors in interest, on order, the sum
of Seven Million Three Hundred Fifty Thousand Dollars ($7,350,000), or, if
different, the aggregate principal amount outstanding hereunder together with
any accrued and unpaid interest hereon, on June 30, 2008 (the "MATURITY DATE")
if not sooner paid. This note amends and restates in its entirety (and is given
in substitution for and not in satisfaction of) that certain promissory amended
and restated note in the principal amount of $6,000,000 issued by the Company in
favor of Xxxxxx on September 9, 2005.
Capitalized terms used herein without definition shall have the
meanings ascribed to such terms in that certain Securities Purchase
Agreement dated as of the date hereof by and between the Company and the Holder
(as amended, modified and/or supplemented from time to time, the "PURCHASE
AGREEMENT").
The following terms shall apply to this Amended and Restated Secured
Convertible Term Note (this "NOTE"):
ARTICLE I
CONTRACT RATE AND AMORTIZATION
1.1 Contract Rate. Subject to Sections 4.2 and 5.10, interest payable
on the outstanding principal amount of this Note (the "PRINCIPAL AMOUNT")
shall accrue at a rate per annum equal to the "prime rate" published in The Wall
Street Journal from time to time (the "PRIME RATE"), plus two percent (2.0%)
(the "CONTRACT RATE"). The Contract Rate shall be increased or decreased as the
case may be for each increase or decrease in the Prime Rate in an amount equal
to such increase or decrease in the Prime Rate; each change to be effective as
of the day of the change in the Prime Rate. Subject to Section 1.2, the Contract
Rate shall not at any time be less than seven and one quarter percent (7.25%).
Interest shall be (i) calculated on the basis of a 360 day year, and (ii)
payable monthly, in arrears, commencing on August 1, 2005,
on the first business day of each consecutive calendar month thereafter
through and including the Maturity Date, and on the Maturity Date, whether by
acceleration or otherwise.
1.2 Contract Rate Adjustments and Payments. The Contract Rate shall be
calculated on the last business day of each calendar month hereafter (other
than for increases or decreases in the Prime Rate which shall be calculated and
become effective in accordance with the terms of Section 1.1) until the Maturity
Date (each a "DETERMINATION DATE") and shall be subject to adjustment as set
forth herein. If (i) the Company shall have registered the shares of the Common
Stock underlying the conversion of this Note and each Warrant on a registration
statement declared effective by the Securities and Exchange Commission (the
"SEC"), and (ii) the market price (the "MARKET PRICE") of the Common Stock as
reported by Bloomberg, L.P. on the Principal Market for the five (5) trading
days immediately preceding a Determination Date exceeds the then applicable
Fixed Conversion Price by at least twenty-five percent (25%), the Contract Rate
for the succeeding calendar month shall automatically be reduced by 200 basis
points (200 b.p.) (2%) for each incremental twenty-five percent (25%) increase
in the Market Price of the Common Stock above the then applicable Fixed
Conversion Price. Notwithstanding the foregoing (and anything to the contrary
contained herein), in no event shall the Contract Rate at any time be less than
zero percent (0%).
1.3 Principal Payments. Amortizing payments of the aggregate principal
amount outstanding under this Note at any time (the "PRINCIPAL AMOUNT")
shall be made by the Company on November 1, 2005 and on the first business day
of each succeeding month thereafter through and including the Maturity Date
(each, an "AMORTIZATION DATE"). Subject to Article III below, commencing on the
first Amortization Date, the Company shall make monthly payments to the Holder
on each Repayment Date, each such payment in the amount of the sum of
$229,687.50 plus (II) the aggregate sum of all Additional Principal Amounts (as
defined below) together with any accrued and unpaid interest on such portion of
the Principal Amount plus any and all other unpaid amounts which are then owing
under this Note, the Purchase Agreement and/or any other Related Agreement
(collectively, the "MONTHLY AMOUNT"). Any outstanding Principal Amount together
with any accrued and unpaid interest and any and all other unpaid amounts which
are then owing by the Company to the Holder under this Note, the Purchase
Agreement and/or any other Related Agreement shall be due and payable on the
Maturity Date. For purposes hereof, the term "ADDITIONAL PRINCIPAL AMOUNT" shall
mean (A) the amount of each disbursement (if any) by the Holder after the
Closing Date to, or for the benefit of, the Company pursuant to the terms of the
side letter dated the date hereof between the Holder and the Company and divided
by (B) the number of months remaining from the time of such disbursement until
the Maturity Date.
ARTICLE II
CONVERSION AND REDEMPTION
2.1 Payment of Monthly Amount.
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(a) Payment in Cash or Common Stock. If the Monthly Amount (or a
portion of such Monthly Amount if not all of the Monthly Amount may be
converted into shares of Common Stock pursuant to Section 3.2) is required to be
paid in cash pursuant to Section 2.1(b), then the Company shall pay the Holder
an amount in cash equal to 103% of the
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Monthly Amount (or such portion of such Monthly Amount to be paid in cash)
due and owing to the Holder on the Amortization Date. If the Monthly Amount (or
a portion of such Monthly Amount if not all of the Monthly Amount may be
converted into shares of Common Stock pursuant to Section 3.2) is required to be
paid in shares of Common Stock pursuant to Section 2.1(b), the number of such
shares to be issued by the Company to the Holder on such Amortization Date (in
respect of such portion of the Monthly Amount converted into shares of Common
Stock pursuant to Section 2.1(b)), shall be the number determined by dividing
(i) the portion of the Monthly Amount converted into shares of Common Stock, by
(ii) the then applicable Fixed Conversion Price. For purposes hereof, subject to
Section 3.6 hereof, the initial "FIXED CONVERSION PRICE" means $ 0.09.
(b) Monthly Amount Conversion Conditions. Subject to Sections
2.1(a), 2.2, and 3.2 hereof, the Holder shall convert into shares of Common
Stock all or a portion of the Monthly Amount due on each Amortization Date if
the following conditions (the "CONVERSION CRITERIA") are satisfied: (i) the
average closing price of the Common Stock as reported by Bloomberg, L.P. on the
Principal Market for the five (5) trading days immediately preceding such
Amortization Date shall be greater than or equal to 110% of the Fixed Conversion
Price and (ii) the amount of such conversion does not exceed thirty percent
(30%) of the aggregate dollar trading volume of the Common Stock for the period
of twenty-two (22) trading days immediately preceding such Amortization Date. If
subsection (i) of the Conversion Criteria is met but subsection (ii) of the
Conversion Criteria is not met as to the entire Monthly Amount, the Holder shall
convert only such part of the Monthly Amount that meets subsection (ii) of the
Conversion Criteria. Any portion of the Monthly Amount due on an Amortization
Date that the Holder has not been able to convert into shares of Common Stock
due to the failure to meet the Conversion Criteria, shall be paid in cash by the
Company at the rate of 103% of the Monthly Amount otherwise due on such
Amortization Date, within three (3) business days of such Amortization Date.
2.2 No Effective Registration. Notwithstanding anything to the
contrary herein, none of the Company's obligations to the Holder may be
converted into Common Stock unless (a) either (i) an effective current
Registration Statement (as defined in the Registration Rights Agreement)
covering the shares of Common Stock to be issued in connection with satisfaction
of such obligations exists or (ii) an exemption from registration for resale of
all of the Common Stock issued and issuable is available pursuant to Rule 144 of
the Securities Act and (b) no Event of Default (as hereinafter defined) exists
and is continuing, unless such Event of Default is cured within any applicable
cure period or otherwise waived in writing by the Holder.
2.3 Optional Redemption in Cash. The Company may prepay this Note
("OPTIONAL REDEMPTION") by paying to the Holder a sum of money equal to one
hundred twenty percent (120%) of the Principal Amount outstanding at such time
together with accrued but unpaid interest thereon and any and all other sums
due, accrued or payable to the Holder arising under this Note, the Purchase
Agreement or any other Related Agreement (the "REDEMPTION AMOUNT") outstanding
on the Redemption Payment Date (as defined below). The Company shall deliver to
the Holder a written notice of redemption (the "NOTICE OF REDEMPTION")
specifying the date for such Optional Redemption (the "REDEMPTION PAYMENT
DATE"), which date shall be ten (10) business days after the date of the Notice
of Redemption (the "REDEMPTION
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PERIOD"). A Notice of Redemption shall not be effective with respect to any
portion of this Note for which the Holder has previously delivered a Notice of
Conversion (as hereinafter defined) or for conversions elected to be made by the
Holder pursuant to Section 3.3 during the Redemption Period. The Redemption
Amount shall be determined as if the Holder's conversion elections had been
completed immediately prior to the date of the Notice of Redemption. On the
Redemption Payment Date, the Redemption Amount must be paid in good funds to the
Holder. In the event the Company fails to pay the Redemption Amount on the
Redemption Payment Date as set forth herein, then such Redemption Notice will be
null and void.
ARTICLE III
HOLDER'S CONVERSION RIGHTS
3.1 Optional Conversion. Subject to the terms set forth in this
Article III and the availability of issuable Common Stock, the Holder shall
have the right, but not the obligation, to convert all or any portion of the
issued and outstanding Principal Amount and/or accrued interest and fees due and
payable into fully paid and nonassessable shares of Common Stock at the Fixed
Conversion Price. The shares of Common Stock to be issued upon such conversion
are herein referred to as, the "Conversion Shares."
3.2 Conversion Limitation. Notwithstanding anything contained
herein to the contrary, the Holder shall not be entitled to convert
pursuant to the terms of this Note an amount that would be convertible into that
number of Conversion Shares which would exceed the difference between (i) 4.99%
of the outstanding shares of Common Stock and (ii) the number of shares of
Common Stock beneficially owned by the Holder. For purposes of the immediately
preceding sentence, beneficial ownership shall be determined in accordance with
Section 13(d) of the Exchange Act and Regulation 13d-3 thereunder. The
Conversion Shares limitation described in this Section 3.2 shall automatically
become null and void without any notice to the Company upon the occurrence and
during the continuance of an Event of Default, or upon 75 days prior written
notice to the Company. Notwithstanding anything contained herein to the
contrary, the provisions of this Section 3.2 are irrevocable and may not be
waived by the Holder or the Company.
3.3 Mechanics of Xxxxxx's Conversion. In the event that the Holder
elects to convert this Note into Common Stock, the Holder shall give notice
of such election by delivering an executed and completed notice of conversion in
substantially the form of Exhibit A hereto (appropriate completed) ("NOTICE OF
CONVERSION") to the Company and such Notice of Conversion shall provide a
breakdown in reasonable detail of the Principal Amount, accrued interest and
fees that are being converted. On each Conversion Date (as hereinafter defined)
and in accordance with its Notice of Conversion, the Holder shall make the
appropriate reduction to the Principal Amount, accrued interest and fees as
entered in its records and shall provide written notice thereof to the Company
within two (2) business days after the Conversion Date. Each date on which a
Notice of Conversion is delivered or telecopied to the Company in accordance
with the provisions hereof shall be deemed a Conversion Date (the "CONVERSION
DATE"). Pursuant to the terms of the Notice of Conversion, the Company will
issue instructions to the transfer agent accompanied by an opinion of counsel
within one (1) business day of the date of the delivery to the Company of the
Notice of Conversion and shall cause the transfer agent to transmit the
certificates representing the Conversion Shares to the Holder by crediting the
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account of the Holder's designated broker with the Depository Trust
Corporation ("DTC") through its Deposit Withdrawal Agent Commission ("DWAC")
system within three (3) business days after receipt by the Company of the Notice
of Conversion (the "DELIVERY DATE"). In the case of the exercise of the
conversion rights set forth herein the conversion privilege shall be deemed to
have been exercised and the Conversion Shares issuable upon such conversion
shall be deemed to have been issued upon the date of receipt by the Company of
the Notice of Conversion. The Holder shall be treated for all purposes as the
record holder of the Conversion Shares, unless the Holder provides the Company
written instructions to the contrary.
3.4 Late Payments. The Company understands that a delay in the
delivery of the Conversion Shares in the form required pursuant to this
Article beyond the Delivery Date could result in economic loss to the Holder. As
compensation to the Holder for such loss, in addition to all other rights and
remedies which the Holder may have under this Note, applicable law or otherwise,
the Company shall pay late payments to the Holder for any late issuance of
Conversion Shares in the form required pursuant to this Article II upon
conversion of this Note, in the amount equal to $500 per business day after the
Delivery Date. The Company shall make any payments incurred under this Section
in immediately available funds upon demand.
3.5 Conversion Mechanics. The number of shares of Common Stock to
be issued upon each conversion of this Note shall be determined by dividing
that portion of the principal and interest and fees to be converted, if any, by
the then applicable Fixed Conversion Price. In the event of any conversions of a
portion of the outstanding Principal Amount pursuant to this Article III, such
conversions shall be deemed to constitute conversions of the outstanding
Principal Amount applying to Monthly Amounts for the remaining Amortization
Dates in chronological order.
3.6 Adjustment Provisions. The Fixed Conversion Price and number
and kind of shares or other securities to be issued upon conversion
determined pursuant to this Note shall be subject to adjustment from time to
time upon the occurrence of certain events during the period that this
conversion right remains outstanding, as follows:
(a) Reclassification. If the Company at any time shall, by
reclassification or otherwise, change the Common Stock into the same or a
different number of securities of any class or classes, this Note, as to the
unpaid Principal Amount and accrued interest thereon, shall thereafter be deemed
to evidence the right to purchase an adjusted number of such securities and kind
of securities as would have been issuable as the result of such change with
respect to the Common Stock (i) immediately prior to or (ii) immediately after,
such reclassification or other change at the sole election of the Holder.
(b) Stock Splits, Combinations and Dividends. If the
shares of Common Stock are subdivided or combined into a greater or smaller
number of shares of Common Stock, or if a dividend is paid on the Common Stock
or any preferred stock issued by the Company in shares of Common Stock, the
Fixed Conversion Price shall be proportionately reduced in case of subdivision
of shares or stock dividend or proportionately increased in the case of
combination of shares, in each such case by the ratio which the total number of
shares of Common Stock outstanding immediately after such event bears to the
total number of shares of Common Stock outstanding immediately prior to such
event.
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(c) Share Issuances. Subject to the provisions of this
Section 3.6, if the Company shall at any time prior to the conversion or
repayment in full of the Principal Amount issue any shares of Common Stock or
securities convertible into Common Stock to a Person other than the Holder or
its permitted assigns (except (i) pursuant to Sections 3.6(a) or (b) above; (ii)
pursuant to options, warrants, or other obligations to issue shares outstanding
on the date hereof as disclosed to the Holder in writing; (iii) pursuant to
options that may be issued under any employee incentive stock option and/or any
qualified stock option plan adopted by the Company), (iv) pursuant to warrants
issued to key employees of the Company as part of incentive programs and (v)
warrants or options issued by the Company in connection with acquisitions of
wholly-owned Subsidiaries in which neither the Company nor any of its
Subsidiaries receives any cash consideration) for a consideration per share (the
"OFFER PRICE") less than the Fixed Conversion Price in effect at the time of
such issuance, then the Fixed Conversion Price shall be immediately reset to
such lower Offer Price. For purposes hereof, the issuance of any security of the
Company convertible into or exercisable or exchangeable for Common Stock shall
result in an adjustment to the Fixed Conversion Price upon the issuance of such
securities.
(d) Computation of Consideration. For purposes of any
computation respecting consideration received pursuant to Section 3.6(c) above,
the following shall apply:
(i) in the case of the issuance of shares of Common
Stock for cash, the consideration shall be the amount of such cash,
provided that in no case shall any deduction be made for any commissions,
discounts or other expenses incurred by the Company for any underwriting of
the issue or otherwise in connection therewith;
(ii) in the case of the issuance of shares of Common
Stock for a consideration in whole or in part other than cash, the
consideration other than cash shall be deemed to be the fair market value
thereof as determined in good faith by the Board of Directors of the
Company (irrespective of the accounting treatment thereof); and
(iii) upon any such exercise, the aggregate considera-
tion received for such securities shall be deemed to be the consideration
received by the Company for the issuance of such securities plus the
additional minimum consideration, if any, to be received by the Company
upon the conversion or exchange thereof (the consideration in each case to
be determined in the same manner as provided in subsections (i) and (ii)
of this Section 3.6(d)).
3.7 Reservation of Shares. During the period the conversion right
exists, the Company will reserve from its authorized and unissued Common
Stock a sufficient number of shares to provide for the issuance of Conversion
Shares upon the full conversion of this Note, the Warrant and the Option; it
being understood that, notwithstanding the foregoing, prior to the earlier to
occur of (x) December 31, 2005 and (y) the date of the Company's next
shareholder's meeting, the number of shares otherwise required to be reserved by
the Company under this Section 3.7 may be less than that sufficient to provide
for the issuance of Conversion Shares upon the full conversion of this Note, the
Warrant and the Option; provided that the number of reserved shares shall at no
time be less than 84,000,000 (subject to proportionate reduction upon conversion
of this Note, the Warrant or the Option). The Company represents that upon
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issuance, the Conversion Shares will be duly and validly issued, fully paid
and non-assessable. The Company agrees that its issuance of this Note shall
constitute full authority to its officers, agents, and transfer agents who are
charged with the duty of executing and issuing stock certificates to execute and
issue the necessary certificates for the Conversion Shares upon the conversion
of this Note.
3.8 Registration Rights. The Holder has been granted registration
rights with respect to the Conversion Shares as set forth in the Registration
Rights Agreement.
3.9 Issuance of New Note. Upon any partial conversion of this
Note, a new Note containing the same date and provisions of this Note
shall, at the request of the Holder, be issued by the Company to the Holder for
the principal balance of this Note and interest which shall not have been
converted or paid. Subject to the provisions of Article IV of this Note, the
Company shall not pay any costs, fees or any other consideration to the Holder
for the production and issuance of a new Note.
ARTICLE IV
EVENTS OF DEFAULT
4.1 Events of Default. The occurrence of any of the following
events set forth in this Section 4.1 shall constitute an event of default
("EVENT OF DEFAULT") hereunder:
(a) Failure to Pay. The Company fails to pay when due any
installment of principal, interest or other fees hereon in accordance
herewith, or the Company fails to pay any of the other Obligations (under and as
defined in the Master Security Agreement) when due, and, in any such case, such
failure shall continue for a period of three (3) business days following the
date upon which any such payment was due.
(b) Breach of Covenant. The Company or any of its Sub-
sidiaries breaches any covenant or any other term or condition of this Note
in any material respect and such breach, if subject to cure, continues for a
period of thirty (30) days after the occurrence thereof.
(c) Breach of Representations and Warranties. Any repre-
sentation, warranty or statement made or furnished by the Company or any of
its Subsidiaries in this Note, the Purchase Agreement or any other Related
Agreement shall at any time be false or misleading in any material respect on
the date as of which made or deemed made.
(d) Default Under Other Agreements. The occurrence of any
default (or similar term) in the observance or performance of any other
agreement or condition relating to any indebtedness or contingent obligation of
the Company or any of its Subsidiaries beyond the period of grace, if any, the
effect of which default is to cause, or permit the holder or holders of such
indebtedness or beneficiary or beneficiaries of such contingent obligation to
cause, such indebtedness to become due prior to its stated maturity or such
contingent obligation to become payable;
(e) Material Adverse Effect. Any change or the occurrence
of any event which could reasonably be expected to have a Material Adverse
Effect;
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(f) Bankruptcy. The Company or any of its Subsidiaries
shall (i) apply for, consent to or suffer to exist the appointment of, or
the taking of possession by, a receiver, custodian, trustee or liquidator of
itself or of all or a substantial part of its property, (ii) make a general
assignment for the benefit of creditors, (iii) commence a voluntary case under
the federal bankruptcy laws (as now or hereafter in effect), (iv) be adjudicated
a bankrupt or insolvent, (v) file a petition seeking to take advantage of any
other law providing for the relief of debtors, (vi) acquiesce to, without
challenge within ten (10) days of the filing thereof, or failure to have
dismissed, within thirty (30) days, any petition filed against it in any
involuntary case under such bankruptcy laws, or (vii) take any action for the
purpose of effecting any of the foregoing;
(g) Judgments. Attachments or levies in excess of $75,000
in the aggregate are made upon the Company or any of its Subsidiary's
assets or a judgment is rendered against the Company's property involving a
liability of more than $75,000 which shall not have been vacated, discharged,
stayed or bonded within thirty (30) days from the entry thereof;
(h) Insolvency. The Company or any of its Subsidiaries
shall admit in writing its inability, or be generally unable, to pay its
debts as they become due or cease operations of its present business;
(i) Change in Control. Any "Person" or "group" (as such
terms are defined in Sections 13(d) and 14(d) of the Exchange Act, as in
effect on the date hereof) is or becomes the "beneficial owner" (as defined in
Rules 13(d)-3 and 13(d)-5 under the Exchange Act), directly or indirectly, of
20% or more on a fully diluted basis of the then outstanding voting equity
interest of the Parent (other than a "Person" or "group" that beneficially owns
20% or more of such outstanding voting equity interests of the Parent on the
date hereof), (ii) the Board of Directors of the Parent shall cease to consist
of a majority of the Parent's board of directors on the date hereof (or
directors appointed by a majority of the board of directors in effect
immediately prior to such appointment) or (iii) the departure of Xxxxxxx
X'Xxxxxx from senior management of the Company;
(j) Indictment; Proceedings. The indictment or threatened
indictment of the Company or any of its Subsidiaries or any executive
officer of the Company or any of its Subsidiaries under any criminal statute, or
commencement or threatened commencement of criminal or civil proceeding against
the Company or any of its Subsidiaries or any executive officer of the Company
or any of its Subsidiaries pursuant to which statute or proceeding penalties or
remedies sought or available include forfeiture of any of the property of the
Company or any of its Subsidiaries;
(k) The Purchase Agreement and Related Agreements. (i) An
Event of Default shall occur under and as defined in the Purchase Agreement
or any other Related Agreement, (ii) the Company or any of its Subsidiaries
shall breach any term or provision of the Purchase Agreement or any other
Related Agreement in any material respect and such breach, if capable of cure,
continues unremedied for a period of thirty (30) days after the occurrence
thereof, (iii) the Company or any of its Subsidiaries attempts to terminate,
challenges the validity of, or its liability under, the Purchase Agreement or
any Related Agreement, (iv) any proceeding shall be brought to challenge the
validity, binding effect of the Purchase Agreement or any
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Related Agreement or (v) the Purchase Agreement or any Related Agreement
ceases to be a valid, binding and enforceable obligation of the Company or any
of its Subsidiaries (to the extent such persons or entities are a party
thereto);
(l) Stop Trade. An SEC stop trade order or Principal
Market trading suspension of the Common Stock shall be in effect for five
(5) consecutive days or five (5) days during a period of ten (10) consecutive
days, excluding in all cases a suspension of all trading on a Principal Market,
provided that the Company shall not have been able to cure such trading
suspension within thirty (30) days of the notice thereof or list the Common
Stock on another Principal Market within sixty (60) days of such notice; or
(m) Failure to Deliver Common Stock or Replacement Note.
The Company's failure to deliver Common Stock to the Holder pursuant to and
in the form required by this Note and the Purchase Agreement and, if such
failure to deliver Common Stock shall not be cured within two (2) business days
or the Company is required to issue a replacement Note to the Holder and the
Company shall fail to deliver such replacement Note within seven (7) business
days; or
(n) Reserved and Authorized Shares. The Company's failure
to have authorized and reserved shares of Common Stock for issuance on or
after December 31, 2005 sufficient to provide for the issuance of Conversion
Shares upon the full conversion of this Note, the Warrant and the Option.
4.2 Default Interest. Following the occurrence and during the
continuance of an Event of Default, the Company shall pay additional
interest on this Note in an amount equal to two percent (2%) per month, and all
outstanding obligations under this Note, the Purchase Agreement and each other
Related Agreement, including unpaid interest, shall continue to accrue interest
at such additional interest rate from the date of such Event of Default until
the date such Event of Default is cured or waived.
4.3 Default Payment. Following the occurrence and during the
continuance of an Event of Default, the Holder, at its option, may demand
repayment in full of all obligations and liabilities owing by Company to the
Holder under this Note, the Purchase Agreement and/or any other Related
Agreement and/or may elect, in addition to all rights and remedies of the Holder
under the Purchase Agreement and the other Related Agreements and all
obligations and liabilities of the Company under the Purchase Agreement and the
other Related Agreements, to require the Company to make a Default Payment
("DEFAULT PAYMENT"). The Default Payment shall be 120% of the outstanding
principal amount of the Note, plus accrued but unpaid interest, all other fees
then remaining unpaid, and all other amounts payable hereunder. The Default
Payment shall be applied first to any fees due and payable to the Holder
pursuant to this Note, the Purchase Agreement, and/or the other Related
Agreements, then to accrued and unpaid interest due on this Note and then to the
outstanding principal balance of this Note. The Default Payment shall be due and
payable immediately on the date that the Holder has exercised its rights
pursuant to this Section 4.3.
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ARTICLE V
MISCELLANEOUS
5.1 Conversion Privileges. The conversion privileges set forth in
Article III shall remain in full force and effect immediately from the date
hereof until the date this Note is indefeasibly paid in full and irrevocably
terminated.
5.2 Cumulative Remedies. The remedies under this Note shall be
cumulative.
5.3 Failure or Indulgence Not Waiver. No failure or delay on the
part of the Holder hereof in the exercise of any power, right or privilege
hereunder shall operate as a waiver thereof, nor shall any single or partial
exercise of any such power, right or privilege preclude other or further
exercise thereof or of any other right, power or privilege. All rights and
remedies existing hereunder are cumulative to, and not exclusive of, any rights
or remedies otherwise available.
5.4 Notices. Any notice herein required or permitted to be given
shall be in writing and shall be deemed effectivfely given: (a) upon
personal delivery to the party notified, (b) when sent by confirmed telex or
facsimile if sent during normal business hours of the recipient, if not, then on
the next business day, (c) five days after having been sent by registered or
certified mail, return receipt requested, postage prepaid, or (d) one day after
deposit with a nationally recognized overnight courier, specifying next day
delivery, with written verification of receipt. All communications shall be sent
to the Company at the address provided in the Purchase Agreement executed in
connection herewith, and to the Holder at the address provided in the Purchase
Agreement for such Holder, with a copy to Xxxx X. Xxxxxx, Esq., 000 Xxxxx
Xxxxxxx, 00xx Xxxxx, Xxx Xxxx, Xxx Xxxx 00000, facsimile number (000) 000-0000,
or at such other address as the Company or the Holder may designate by ten days
advance written notice to the other parties hereto. A Notice of Conversion shall
be deemed given when made to the Company pursuant to the Purchase Agreement.
5.5 Amendment Provision. The term "Note" and all references
thereto, as used throughout this instrument, the Purchase Agreement or any
Related Agreement, shall mean this instrument as originally executed, or if
later amended or supplemented, then as so amended or supplemented, and any
successor instrument as such successor instrument may be amended or
supplemented.
5.6 Assignability. This Note shall be binding upon the Company and
its successors and assigns, and shall inure to the benefit of the Holder
and its successors and assigns, and may be assigned by the Holder in accordance
with the requirements of the Purchase Agreement. The Company may not assign any
of its obligations under this Note without the prior written consent of the
Holder, any such purported assignment without such consent being null and void.
5.7 Cost of Collection. In case of any Event of Default under this
Note, the Company shall pay the Holder reasonable costs of collection,
including reasonable attorneys' fees.
5.8 Governing Law, Jurisdiction and Waiver of Jury Trial.
10
(a) THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED AND
ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT
REGARD TO PRINCIPLES OF CONFLICTS OF LAW.
(b) THE COMPANY HEREBY CONSENTS AND AGREES THAT THE STATE
OR FEDERAL COURTS LOCATED IN THE COUNTY OF NEW YORK, STATE OF NEW YORK
SHALL HAVE EXCLUSIVE JURISDICTION TO HEAR AND DETERMINE ANY CLAIMS OR DISPUTES
BETWEEN THE COMPANY, ON THE ONE HAND, AND THE HOLDER, ON THE OTHER HAND,
PERTAINING TO THIS NOTE OR ANY OF THE OTHER RELATED AGREEMENTS OR TO ANY MATTER
ARISING OUT OF OR RELATED TO THIS NOTE OR ANY OF THE RELATED AGREEMENTS;
PROVIDED, THAT THE COMPANY ACKNOWLEDGES THAT ANY APPEALS FROM THOSE COURTS MAY
HAVE TO BE HEARD BY A COURT LOCATED OUTSIDE OF THE COUNTY OF NEW YORK, STATE OF
NEW YORK; AND FURTHER PROVIDED, THAT NOTHING IN THIS NOTE SHALL BE DEEMED OR
OPERATE TO PRECLUDE THE HOLDER FROM BRINGING SUIT OR TAKING OTHER LEGAL ACTION
IN ANY OTHER JURISDICTION TO COLLECT THE OBLIGATIONS, TO REALIZE ON THE
COLLATERAL OR ANY OTHER SECURITY FOR THE OBLIGATIONS, OR TO ENFORCE A JUDGMENT
OR OTHER COURT ORDER IN FAVOR OF THE HOLDER. THE COMPANY EXPRESSLY SUBMITS AND
CONSENTS IN ADVANCE TO SUCH THE COMPANY HEREBY WAIVES ANY OBJECTION WHICH IT MAY
HAVE BASED UPON LACK OF PERSONAL JURISDICTION, IMPROPER VENUE OR FORUM NON
CONVENIENS. THE COMPANY HEREBY WAIVES PERSONAL SERVICE OF THE SUMMONS, COMPLAINT
AND OTHER PROCESS ISSUED IN ANY SUCH ACTION OR SUIT AND AGREES THAT SERVICE OF
SUCH SUMMONS, COMPLAINT AND OTHER PROCESS MAY BE MADE BY REGISTERED OR CERTIFIED
MAIL ADDRESSED TO THE COMPANY AT THE ADDRESS SET FORTH IN THE PURCHASE AGREEMENT
AND THAT SERVICE SO MADE SHALL BE DEEMED COMPLETED UPON THE EARLIER OF THE
COMPANY'S ACTUAL RECEIPT THEREOF OR THREE (3) DAYS AFTER DEPOSIT IN THE U.S.
MAILS, PROPER POSTAGE PREPAID.
(c) THE COMPANY DESIRES THAT ITS DISPUTES BE RESOLVED BY A
JUDGE APPLYING SUCH APPLICABLE LAWS. THEREFORE, TO ACHIEVE THE BEST
COMBINATION OF THE BENEFITS OF THE JUDICIAL SYSTEM AND OF ARBITRATION, THE
COMPANY HERETO WAIVES ALL RIGHTS TO TRIAL BY JURY IN ANY ACTION, SUIT, OR
PROCEEDING BROUGHT TO RESOLVE ANY DISPUTE, WHETHER ARISING IN CONTRACT, TORT, OR
OTHERWISE BETWEEN THE HOLDER AND THE COMPANY ARISING OUT OF, CONNECTED WITH,
RELATED OR INCIDENTAL TO THE RELATIONSHIP ESTABLISHED BETWEEN THEM IN CONNECTION
WITH THIS NOTE, ANY OTHER RELATED AGREEMENT OR THE TRANSACTIONS RELATED HERETO
OR THERETO.
5.9 Severability. In the event that any provision of this Note is
invalid or unenforceable under any applicable statute or rule of law, then
such provision shall be deemed inoperative to the extent that it may conflict
therewith and shall be deemed modified to conform with such statute or rule of
law. Any such provision which may prove invalid or unenforceable under any law
shall not affect the validity or enforceability of any other provision of this
Note.
11
5.10 Maximum Payments. Nothing contained herein shall be deemed to
establish or require the payment of a rate of interest or other charges in
excess of the maximum permitted by applicable law. In the event that the rate of
interest required to be paid or other charges hereunder exceed the maximum rate
permitted by such law, any payments in excess of such maximum rate shall be
credited against amounts owed by the Company to the Holder and thus refunded to
the Company.
5.11 Security Interest and Guarantee. The Holder has been granted a
security interest (i) in certain assets of the Company and its Subsidiaries
as more fully described in the Master Security Agreement dated as of the date
hereof and (ii) pursuant to the Stock Pledge Agreement dated as of the date
hereof. The obligations of the Company under this Note are guaranteed by certain
Subsidiaries of the Company pursuant to the Subsidiary Guaranty dated as of the
date hereof.
5.12 Construction. Each party acknowledges that its legal counsel
participated in the preparation of this Note and, therefore, stipulates
that the rule of construction that ambiguities are to be resolved against the
drafting party shall not be applied in the interpretation of this Note to favor
any party against the other.
[Balance of page intentionally left blank; signature page follows]
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IN WITNESS WHEREOF, the Company has caused this Secured Convertible
Term Note to be signed in its name effective as of this 6th day of October 2005.
WINDSWEPT ENVIRONMENTAL GROUP,
INC.
By: /s/ Xxxxxx X. Xxxxxxx
----------------------------------
Name: Xxxxxx X. Xxxxxxx
Title: Vice President &
Chief Financial Officer
WITNESS:
/s/ Xxxxxx Xxxxxxxxx
----------------------------------
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EXHIBIT A
---------
NOTICE OF CONVERSION
--------------------
(To be executed by the Holder in order to convert all or part of
the Secured Convertible Term Note into Common Stock)
[Name and Address of Holder]
The undersigned hereby converts $_________ of the principal due on
[specify applicable Repayment Date] under the Secured Convertible Term Note
dated as of June __, 2005 (the "NOTE") issued by Windswept Environmental Group,
Inc. (the "COMPANY") by delivery of shares of Common Stock of the Company
("SHARES") on and subject to the conditions set forth in the Note.
1. Date of Conversion _______________________
2. Shares To Be Delivered: _______________________
By:_______________________________
Name:_____________________________
Title:______________________________
