EXHIBIT 10.9
FOREBEARANCE AND DEFERRAL AGREEMENT
THIS FOREBEARANCE AND DEFERRAL AGREEMENT (this "Agreement"), dated
as of June 30, 2005, is made by and among Windswept Environmental Group,
Inc., a Delaware corporation ("WEGI"), Michael O'Reilly, an individual
with an
address at c/o WEGI, 100 Sweeneydale
Avenue, Bay Shore, New
York 11706 ("MOR"),
Dr. Kevin Phillips and Gary Molnar, each of whom is an individual with an
address at c/o FPM Group, Ltd., 909 Marconi
Avenue, Ronkonkoma,
New York 11779
(together, the "Series A Preferred
Stockholders").
W I T N E S S E T H:
WHEREAS, WEGI has (a)
granted to Laurus Master Fund, Ltd., a Cayman
Islands company ("Laurus") an option (the "Option") and a warrant (the
"Warrant") to acquire securities of WEGI pursuant to the Securities Purchase
Agreement, dated the date hereof, by and
between Laurus and WEGI and (b) sold to
Laurus a secured convertible promissory note in the principal amount of
$5,000,000 (the "Note") with a maturity
date of June 30, 2008
(the "Maturity
Date"); and
WHEREAS, an
aggregate of $102,000
of accrued dividend payments and
interest due thereon from WEGI to the Series A Preferred Stockholders
pursuant to the Certificate of Designations of Series A Convertible
Preferred
Stock of WEGI (the "Certificate of
Designations") have accrued and have remained
unpaid over the last five consecutive
quarters of WEGI.
NOW, THEREFORE,
in consideration of the foregoing and for other
good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto
hereby agree:
Section 1. Series A Preferred
Stockholders.
(a) The Series A Preferred Stockholders hereby agree to forbear
from
appointing a second director pursuant to Section 4(d) of the Certificate
of
Designations until the earlier of (i) the third
anniversary of the
date hereof
or (ii) the repayment in full by WEGI of
the Note.
(b) The Series
A Preferred Stockholders hereby
agree to defer the
(i) $1.3 million mandatory redemption due on June 30, 2007, as required
by
Section 8(d) of the Certificate of Designations of Series A Convertible
Preferred Stock of WEGI (the "Certificate
of Designations") and
(ii) payment of
preferred stock dividend payments due as of the date hereof
and all preferred
stock dividend payments accruing
hereafter pursuant to
the terms and provisions
hereof, plus interest at a rate per annum, equal to the higher of
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(a) six percent (6%) of the Stated Value (as defined in the
Certificate of
Designations) and (b) a percentage of the Stated Value equal to the
Inflation
Rate (as defined in the Certificate of Designations) plus two and one-half
percent (2 1/2 %), except as provided in Section 2 below until the
earlier of
(1) six months after the repayment in full by WEGI of the
Note or (2) June 30,
2010.
(c) The Series A Preferred Stockholders hereby agree to vote any
and
all of the shares of the Common Stock
for which they have voting power in favor
of the Authorization Amendment (as defined
below).
Section 2. WEGI.
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(a) WEGI hereby
agrees to grant to ea
