EXHIBIT 10.2
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.
SECURED CONVERTIBLE 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 Five Million Dollars ($5,000,000), 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.
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 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 July 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 $156,250
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.
(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 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
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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 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
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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
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
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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.
(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)
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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 consideration
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 90,000,000 (subject to proportionate reduction upon conversion of this
Note, the Warrant or the Option). The Company represents that upon 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
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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 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) Material Adverse Effect. Any change or the occurrence of any event
which could reasonably be expected to have a Material Adverse Effect;
(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
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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 Related Agreement or (v) the Purchase Agreement or any
Related Agreement ceases to be a
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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, 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.
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(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 30th day of
June 2005.
WINDSWEPT ENVIRONMENTAL GROUP, INC.
By: /s/ Xxxxxxx X'Xxxxxx
--------------------------------
Name: Xxxxxxx X'Xxxxxx
Title: President
WITNESS:
/s/ Xxxxxxx 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:______________________________
