EXHIBIT 10.01
THIS NOTE AND THE COMMON SHARES ISSUABLE UPON CONVERSION OF THIS
NOTE HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED, OR ANY
STATE
SECURITIES LAWS. THIS NOTE AND THE COMMON SHARES
ISSUABLE UPON
CONVERSION OF
THIS NOTE MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE
ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THIS NOTE UNDER
SAID ACT
AND ANY APPLICABLE STATE SECURITIES LAWS OR AN OPINION OF COUNSEL
REASONABLY
SATISFACTORY TO WINDSWEPT ENVIRONMENTAL GROUP, INC. THAT SUCH REGISTRATION IS
NOT REQUIRED.
AMENDED AND RESTATED SECURED CONVERTIBLE TERM NOTE
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FOR VALUE RECEIVED, WINDSWEPT ENVIRONMENTAL
GROUP, INC., a
Delaware
corporation (the "COMPANY"), promises to pay to LAURUS MASTER FUND, LTD.,
c/o M&C Corporate Services Limited,
P.O. Box 309 GT,
Ugland House, South Church
Street, George Town, Grand Cayman, Cayman Islands, Fax: 345-949-8080 (the
"HOLDER") or its registered assigns or
successors in interest, on order, the sum
of Seven Million Three Hundred Fifty Thousand Dollars ($7,350,000), or, if
different, the aggregate principal amount outstanding
hereunder together
with
any accrued and unpaid interest
hereon, on June 30, 2008 (the "MATURITY
DATE")
if not sooner paid. This note amends and restates in
its entirety (and is given
in substitution for and not in satisfaction
of) that certain
promissory amended
and restated note in the principal amount
of $6,000,000 issued by the Company in
favor of Holder on September 9, 2005.
Capitalized terms
used herein without definition shall have the
meanings ascribed to such terms in that certain Securities Purchase
Agreement dated as of the date hereof by and
between the Company and the Holder
(as amended, modified and/or supplemented from time to time, the "PURCHASE
AGREEMENT").
The following
terms shall apply to
this Amended and Restated Secured
Convertible Term Note (this "NOTE"):
ARTICLE I
CONTRACT RATE AND AMORTIZATION
1.1 Contract Rate. Subject to Sections 4.2 and 5.10, interest payable
on the outstanding principal amount of this Note (the "PRINCIPAL AMOUNT")
shall accrue at a rate per annum equal to
the "prime rate" published in The Wall
Street Journal from time to time (the
"PRIME RATE"),
plus two percent
(2.0%)
(the "CONTRACT RATE"). The Contract Rate shall be
increased or decreased as the
case may be for each increase or decrease in the Prime
Rate in an amount
equal
to such increase or decrease in the Prime
Rate; each change to
be effective as
of the day of the change in the Prime Rate.
Subject to Section 1.2, the Contract
Rate shall not at any time be less than
seven and one quarter
percent (7.25%).
Interest shall be (i) calculated on the basis of a 360 day year, and (ii)
payable monthly, in arrears, commencing on
August 1, 2005,
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on the first business day of each consecutive calendar month thereafter
through and including the Maturity Date,
and on the Maturity
Date, whether by
acceleration or otherwise.
1.2 Contract Rate Adjustments and Payments. The Contract Rate shall
be
calculated on the last business day of each calendar month
hereafter (other
than for increases or decreases in the
Prime Rate which shall be calculated and
become effective in accordance with the
terms of Section 1.1) until the Maturity
Date (each a "DETERMINATION DATE") and shall be subject to
adjustment
as set
forth herein. If (i) the Company shall have
registered the shares of the Common
Stock underlying the conversion of this
Note and each Warrant on a registration
statement declared effective by the Securities and Exchange
Commission
(the
"SEC"), and (ii) the market price (the
"MARKET PRICE") of the Common Stock as
reported by Bloomberg, L.P. on the Principal Market for the five (5)
trading
days immediately preceding a Determination Date exceeds the then applicable
Fixed Conversion Price by at least
twenty-five percent
(25%), the Contract Rate
for the succeeding calendar month shall automatically be reduced by 200 basis
points (200 b.p.) (2%) for each incremental
twenty-five
percent (25%)
increase
in the Market Price of the Common Stock above the then applicable Fixed
Conversion Price. Notwithstanding the foregoing (and anything to the
contrary
contained herein), in no event shall the Contract
Rate at any time be less than
zero percent (0%).
1.3 Principal Payments. Amortizing payments of the aggregate
principal
amount outstanding under this Note at any time (the "PRINCIPAL AMOUNT")
shall be made by the Company on November 1,
2005 and on the first
business day
of each succeeding month thereafter through and including the Maturity Date
(each, an "AMORTIZATION DATE"). Subject to
Article III below,
commencing on the
first Amortization Date, the Company shall make
monthly payments to the Holder
on each Repayment Date, each such payment in the amount of the sum of
$229,687.50 plus (II) the aggregate sum of
all Additional
Principal Amounts (as
defined below) together with any accrued and
unpaid interest on such portion of
the Principal Amount plus any and all other
unpaid amounts which are then owing
under this Note, the Purchase Agreement and/or any other Related Agreement
(collectively, the "MONTHLY AMOUNT"). Any
outstanding Principal Amount together
with any accrued and unpaid interest and any and all other
unpaid amounts which
are then owing by the Company to the Holder under this Note, the Purchase
Agreement and/or any other Related Agreement shall be due and payable on
the
Maturity Date. For purposes hereof, the
term "ADDITIONAL PRINCIPAL AMOUNT" shall
mean (A) the amount of each disbursement (if any) by the Holder after the
Closing Date to, or for the benefit of, the
Company pursuant to the terms of the
side letter dated the date hereof between
the Holder and the Company and divided
by (B) the number of months remaining from
the time of such
disbursement until
the Maturity Date.
ARTICLE II
CONVERSION AND REDEMPTION
2.1
Payment of Monthly Amount.
--------------------------
(a)
Payment in Cash or
Common Stock. If the Monthly Amount (or a
portion of such Monthly Amount if not all of the Monthly Amount may be
converted into shares of Common Stock
pursuant to Section 3.2) is required to be
paid in cash pursuant to Section
2.1(b), then the Company shall pay the
Holder
an amount in cash equal to 103% of the
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Monthly Amount (or such portion of such Monthly Amount to be paid in
cash)
due and owing to the Holder on the
Amortization Date. If
the Monthly Amount (or
a portion of such Monthly Amount if not all of the Monthly Amount may be
converted into shares of Common Stock
pursuant to Section 3.2) is required to be
paid in shares of Common Stock pursuant to Section 2.1(b), the number of such
shares to be issued by the Company to the
Holder on such
Amortization Date
(in
respect of such portion of the Monthly
Amount converted into shares of Common
Stock pursuant to Section 2.1(b)), shall be the number determined by dividing
(i) the portion of the Monthly Amount
converted into shares
of Common Stock, by
(ii) the then applicable Fixed Conversion
Price. For purposes hereof, subject to
Section 3.6 hereof, the initial "FIXED
CONVERSION PRICE" means $ 0.09.
(b)
Monthly Amount
Conversion
Conditions.
Subject to
Sections
2.1(a), 2.2, and 3.2 hereof, the Holder shall convert into shares of Common
Stock all or a portion of the Monthly
Amount due on each
Amortization
Date if
the following conditions (the "CONVERSION CRITERIA") are satisfied:
(i) the
average closing price of the Common Stock
as reported by Bloomberg, L.P. on the
Principal Market for the five (5) trading days immediately preceding such
Amortization Date shall be greater than or
equal to 110% of the Fixed Conversion
Price and (ii) the amount of such conversion does not exceed thirty percent
(30%) of the aggregate dollar trading volume of the
Common Stock for the period
of twenty-two (22) trading days immediately
preceding such Amortization Date. If
subsection (i) of the Conversion Criteria is met but subsection (ii) of the
Conversion Criteria is not met as to the
entire Monthly Amount, the Holder shall
convert only such part of the Monthly
Amount that meets
subsection (ii) of
the
Conversion Criteria. Any portion of the Monthly Amount
due on an
Amortization
Date that the Holder has not been able to
convert into
shares of Common
Stock
due to the failure to meet the Conversion
Criteria, shall be paid in cash by the
Company at the rate of 103% of the Monthly Amount otherwise due on such
Amortization Date, within three (3)
business days of such Amortization Date.
2.2
No Effective
Registration.
Notwithstanding
anything to the
contrary herein, none of the Company's obligations to the Holder may be
converted into Common Stock unless (a) either (i) an effective current
Registration Statement (as defined in the Registration Rights Agreement)
covering the shares of Common Stock to be
issued in connection with satisfaction
of such obligations exists or (ii) an exemption from
registration for resale of
all of the Common Stock issued and issuable
is available pursuant to Rule 144 of
the Securities Act and (b) no Event of
Default (as
hereinafter defined)
exists
and is continuing, unless such Event of Default is
cured within any applicable
cure period or otherwise waived in writing
by the Holder.
2.3
Optional Redemption in
Cash. The Company may prepay this Note
("OPTIONAL REDEMPTION") by paying to the Holder a sum of money equal to
one
hundred twenty percent (120%) of the
Principal Amount
outstanding at such
time
together with accrued but unpaid interest thereon and any and all other
sums
due, accrued or payable to the Holder
arising under this Note, the Purchase
Agreement or any other Related Agreement
(the "REDEMPTION
AMOUNT")
outstanding
on the Redemption Payment Date (as defined below).
The Company shall deliver to
the Holder a written notice of redemption (the "NOTICE OF REDEMPTION")
specifying the date for such Optional Redemption (the "REDEMPTION PAYMENT
DATE"), which date shall be ten (10)
business days after the date of the Notice
of Redemption (the "REDEMPTION
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PERIOD"). A Notice of Redemption shall not be effective with respect to
any
portion of this Note for which the Holder
has previously
delivered a Notice
of
Conversion (as hereinafter defined) or for
conversions elected to be made by the
Holder pursuant to Section 3.3 during the
Redemption
Period. The Redemption
Amount shall be determined as if the Holder's conversion elections had been
completed immediately prior to the date of the
Notice of Redemption. On the
Redemption Payment Date, the Redemption
Amount must be paid in good funds to the
Holder. In the event the Company fails to pay the Redemption Amount on the
Redemption Payment Date as set forth
herein, then such Redemption Notice will be
null and void.
ARTICLE III
HOLDER'S CONVERSION RIGHTS
3.1
Optional Conversion.
Subject to the
terms set forth in this
Article III and the availability of issuable Common Stock, the
Holder shall
have the right, but not the obligation, to convert all or any portion of the
issued and outstanding Principal Amount
and/or accrued interest and fees due and
payable into fully paid and nonassessable shares of Common Stock at the
Fixed
Conversion Price. The shares of Common Stock to be
issued upon such conversion
are herein referred to as, the "Conversion
Shares."
3.2
Conversion Limitation.
Notwithstanding
anything contained
herein to the contrary, the Holder shall not be entitled to convert
pursuant to the terms of this Note an
amount that would be convertible into that
number of Conversion Shares which would
exceed the difference
between (i) 4.99%
of the outstanding shares of Common Stock and (ii) the number of shares of
Common Stock beneficially owned by the Holder. For purposes
of the immediately
preceding sentence, beneficial ownership shall be
determined in accordance with
Section 13(d) of the Exchange Act and Regulation 13d-3 thereunder. The
Conversion Shares limitation described in this Section 3.2
shall
automatically
become null and void without any notice to
the Company upon the
occurrence and
during the continuance of an Event of Default,
or upon 75 days prior
written
notice to the Company. Notwithstanding anything contained herein to the
contrary, the provisions of this Section 3.2 are
irrevocable
and may not be
waived by the Holder or the Company.
3.3
Mechanics of Holder's Conversion. In the event that the Holder
elects to convert this Note into Common Stock, the Holder shall give
notice
of such election by delivering an executed
and completed notice of conversion in
substantially the form of Exhibit A hereto
(appropriate
completed) ("NOTICE
OF
CONVERSION") to the Company and such Notice of Conversion shall provide a
breakdown in reasonable detail of the Principal
Amount, accrued interest and
fees that are being converted. On each Conversion Date (as
hereinafter defined)
and in accordance with its Notice of Conversion, the Holder shall make the
appropriate reduction to the Principal Amount, accrued interest and fees as
entered in its records and shall provide
written notice thereof to the Company
within two (2) business days after the Conversion Date. Each date on which a
Notice of Conversion is delivered or telecopied to the Company in accordance
with the provisions hereof shall be deemed a
Conversion Date (the
"CONVERSION
DATE"). Pursuant to the terms of the
Notice of Conversion,
the Company will
issue instructions to the transfer agent accompanied by an opinion of
counsel
within one (1) business day of the date of the
delivery to the
Company of the
Notice of Conversion and shall cause the transfer agent to transmit the
certificates representing the Conversion
Shares to the Holder by crediting the
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account of the Holder's designated broker with the Depository Trust
Corporation ("DTC") through its Deposit
Withdrawal Agent
Commission
("DWAC")
system within three (3) business days after
receipt by the Company of the Notice
of Conversion (the "DELIVERY DATE"). In the case of the exercise of the
conversion rights set forth herein the
conversion privilege
shall be deemed to
have been exercised and the Conversion Shares issuable upon such conversion
shall be deemed to have been issued upon the date of receipt by the
Company of
the Notice of Conversion. The Holder shall be treated for all purposes
as the
record holder of the Conversion
Shares, unless the Holder provides the
Company
written instructions to the contrary.
3.4
Late Payments.
The Company understands that a delay
in the
delivery of the Conversion Shares in the form required pursuant to this
Article beyond the Delivery Date could
result in economic loss to the Holder. As
compensation to the Holder for such loss,
in addition to all
other rights and
remedies which the Holder may have under
this Note, applicable law or otherwise,
the Company shall pay late payments to the Holder for any late
issuance of
Conversion Shares in the form required pursuant to this Article II upon
conversion of this Note, in the amount equal
to $500 per business day after the
Delivery Date. The Company shall make any
payments incurred
under this Section
in immediately available funds upon
demand.
3.5
Conversion Mechanics.
The number of shares of Common Stock to
be issued upon each conversion of this Note shall be determined
by dividing
that portion of the principal and interest
and fees to be converted, if any, by
the then applicable Fixed Conversion Price.
In the event of any conversions of a
portion of the outstanding Principal Amount pursuant to
