EXHIBIT 10
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
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 Three Hundred Fifty Thousand Dollars
($5,350,000), 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 note in the principal amount of $5,000,000 issued by the
Company in favor of Xxxxxx on June 30, 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 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 $167,187.50 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.
(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
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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 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
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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 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
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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.
(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
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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
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,
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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
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;
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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
8
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 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]
12
IN WITNESS WHEREOF, the Company has caused this Secured
Convertible Term Note to be signed in its name effective as of this 13th day of
July 2005.
WINDSWEPT ENVIRONMENTAL GROUP, INC.
By: /s/ Xxxxxxx X'Xxxxxx
----------------------------------------
Name: Xxxxxxx X'Xxxxxx
Title: President
WITNESS:
/s/ Xxxxxxx Xxxxxxxxx
--------------------------------
13
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:______________________________
