Contract
THIS
NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
OR
ANY STATE SECURITIES LAWS. 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.
SECOND
AMENDED AND RESTATED SECURED TERM NOTE
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 Six Hundred
Thousand ($600,000), or, if different, the aggregate principal amount
outstanding hereunder together with any accrued and unpaid interest hereon,
on
January 12, 2008 (the “Maturity
Date”)
if not
sooner paid. The Note amends and restates in its entirety and is given in
substitution and not in satisfaction of the certain Amended and Restated Secured
Term Note of the Company dated April 17, 2007.
Capitalized
terms used herein without definition shall have the meanings ascribed to such
terms in that certain Reaffirmation and Ratification Agreement dated as of
January 12, 2007 by and between the Company and the Holder (as amended, modified
and/or supplemented from time to time, the “Agreement”).
The
following terms shall apply to this Second Amended and Restated Secured Term
Note (this “Note”):
ARTICLE
I
CONTRACT
RATE AND AMORTIZATION
1.1 Contract
Rate.
Subject
to Sections 2.2 and 3.9, interest payable on the outstanding principal amount
of
this Note (the “Principal
Amount”)
shall
accrue at a rate per annum equal to seventeen and one half percent (17.50%).
Interest shall be (i) calculated on the basis of a 360-day year, and (ii)
payable monthly, in arrears, commencing on the first business day of each
consecutive calendar month hereafter through and including the Maturity Date,
and on the Maturity Date, whether by acceleration or otherwise.
ARTICLE
II
EVENTS
OF DEFAULT
2.1 Events
of Default.
The
occurrence of any of the following events set forth in this Section 2.1 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 Subsidiaries 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
representation, 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) 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;
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(f) 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;
(g) 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;
(h) Change
in Control.
The
occurrence of any of the following: (i) 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 13d-3 and
13d-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 Company
(other than a “Person” or “group” that beneficially owns 20% or more of such
outstanding voting equity interests of the Company on the date hereof), (ii)
the
Board of Directors of the Company shall cease to consist of a majority of the
Company’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;
(i) 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; or
(j) Replacement
Note.
The
Company’s failure to issue a replacement Note to the Holder and the Company
shall fail to deliver such replacement Note within seven (7) business
days.
2.2 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 5.0%
per annum, 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.
2.3 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, and the Agreement
and/or any other related agreement and/or may elect, in addition to all rights
and remedies of the Holder under the Agreement and/or other related agreements
require the Company to make a Default Payment (“Default
Payment”).
The
Default Payment shall be 110% 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 2.3.
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ARTICLE
III
MISCELLANEOUS
3.1 Cumulative
Remedies.
The
remedies under this Note shall be cumulative.
3.2 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.
3.3 Notices.
Any
notice herein required or permitted to be given shall be in writing and shall
be
deemed effectively 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 (except that notices to the Company should go to
its
new address at 000 Xxxxxxx Xxxxxx, Xxxxxxxxxx, XX 00000; Attention: Chief
Executive Officer, Fax: 000-000-0000 and that copies of notices shall also
be
sent to Moomjian, Waite, Wactlar & Xxxxxxx, LLP 000 Xxxxxxx Xxxxxxxxxx,
Xxxxx 000 Xxxxxxx Xxx Xxxx 00000, Fax Number 000-000-0000 Attn; Xxxx Xxxxxxxx,
Esq.), and to the Holder at the address provided in the Purchase Agreement
for
such Holder, with a copy to Laurus Capital Management, LLC, Attn: Portfolio
Services, 000 Xxxxxxx Xxxxxx, 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.
3.4 Amendment
Provision.
The
term “Note” and all references thereto, as used throughout this instrument, the
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.
3.5 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.
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3.6 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.
3.7 Governing
Law, Jurisdiction and Waiver of Jury Trial.
(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.
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3.8 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.
3.9 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.
3.10 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 Security Agreement and
(ii)
pursuant to the Pledge Agreement. The obligations of the Company under this
Note
are guaranteed by certain Subsidiaries of the Company pursuant to the Subsidiary
Guaranty.
3.11 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.
3.12 This
Note
may be prepaid at any time without premium or penalty.
3.13 Registered
Obligation.
This
Note is intended to be a registered obligation within the meaning of Treasury
Regulation Section 1.871-14(c)(1)(i) and the Company (or its agent) shall
register this Note (and thereafter shall maintain such registration) as to
both
principal and any stated interest. Notwithstanding any document, instrument
or
agreement relating to this Note to the contrary, transfer of this Note (or
the
right to any payments of principal or stated interest thereunder) may only
be
effected by (i) surrender of this Note and either the reissuance by the Company
of this Note to the new holder or the issuance by the Company of a new
instrument to the new holder, or (ii) transfer through a book entry system
maintained by the Company (or its agent), within the meaning of Treasury
Regulation Section 1.871-14(c)(1)(i)(B)
[Balance
of page intentionally left blank; signature page follows]
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IN
WITNESS WHEREOF,
the
Company has caused this Second Amended and Restated Secured Term Note to be
signed in its name effective as of this 17th day of July 2007.
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WINDSWEPT
ENVIRONMENTAL GROUP, INC.
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By:
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/s/ Xxxxxx X’Xxxxxx
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Name:
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Title:
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WITNESS:
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/s/
Xxxxx Xxxx
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