AMENDMENT AND FEE WAIVER AGREEMENT
This Amendment and Fee Waiver Agreement dated as of May 11, 2006 (the
"Amendment and Fee Waiver Agreement") is entered into by and between Windswept
Environmental Group, Inc., a Delaware corporation (the "Borrower"), and Laurus
Master Fund, Ltd., a Cayman Islands company ("Laurus"), and is effective as of
May 10, 2006. Capitalized terms used herein without definition shall have the
meanings ascribed to such terms in the Securities Purchase Agreement (as defined
below) and the Note (as defined below).
WHEREAS, the Borrower filed a registration statement on October 3, 2005
(as amended, modified or supplemented, the "Initial Registration Statement"), in
order to register a portion of the shares of the Borrower's Common Stock (as
amended, modified or supplemented, the "Common Stock") underlying (a) an Amended
and Restated Secured Convertible Term Note the Borrower issued to Laurus on
October 6, 2005 in the aggregate original principal amount of $7,350,000 (as
amended, modified or supplemented, the "Note") pursuant to the terms of the
Securities Purchase Agreement, dated as of June 30, 2005, between the Borrower
and Laurus ( as amended, modified or supplemented, the "Securities Purchase
Agreement" and together with the Related Agreements as defined therein, the
"Loan Documents"); (b) a warrant issued by the Borrower to Laurus on June 30,
2005 to purchase 13,750,000 shares of the Common Stock (as amended, modified or
supplemented, the "Warrant"); and (c) an option issued by the Borrower to Laurus
on June 30, 2005 to purchase 30,395,179 shares of Common Stock (as amended,
modified or supplemented, the "Option");
WHEREAS, the Borrower and Laurus entered into Amendment and Fee Waiver
Agreements dated as of November 23, 2005, January 13, 2006, February 28, 2006
and March 20, 2006 (the "Amendments");
WHEREAS, pursuant to Section 3.7 of the Note and Section 1 of each of the
Amendments, the Borrower is obligated to reserve from its authorized and
unissued shares of Common Stock a sufficient number of shares to provide for the
issuance of shares upon the full conversion and/or exercise of the Warrant, the
Option and the Note after the earlier to occur of (x) November 1, 2006 and (y)
the date of the Borrower's next shareholders meeting (the "Additional
Authorization Date"), which Additional Authorization Date shall be maintained;
WHEREAS, pursuant to Section 6 of the Option and Section 1 of each of the
Amendments, the Borrower is obligated to reserve from its authorized and
unissued Common Stock a sufficient number of shares to provide for the issuance
of shares upon the full exercise of the Option, after the Additional
Authorization Date;
WHEREAS, pursuant to Section 6 of the Warrant and Section 1 of each of the
Amendments, the Borrower is obligated to reserve from its authorized and
unissued Common Stock a sufficient number of shares to provide for the issuance
of shares upon the full exercise of the Warrant, after the Additional
Authorization Date;
WHEREAS, the Securities Purchase Agreement sets forth, among other things,
the terms of the issuance of the Note, the Option and the Warrant;
WHEREAS, pursuant to Section 4.3(d) of the Securities Purchase Agreement
and Section 1 of each of the Amendments, the Borrower is obligated to reserve
from its authorized and unissued Common Stock a sufficient number of shares to
provide for the issuance of shares upon the full conversion and/or exercise of
the Note, the Warrant and the Option, after the Additional Authorization Date;
WHEREAS, the Borrower entered into a registration rights agreement with
Laurus on June 30, 2005 (the "Registration Rights Agreement") in order to set
forth Borrower's obligations to register the shares of Common Stock underlying
the Note, the Option and the Warrant with the Securities and Exchange
Commission;
WHEREAS, the parties have agreed that in order to most efficiently
expedite the accomplishment of their respective goals, to: (a) work toward
having the Initial Registration Statement, with the current number of shares
included therein (but not including any shares underlying the $1,350,000 note
issued on October 6, 2005), declared effective as soon as possible; (b) after
the Initial Registration Statement is effective, file a proxy statement and hold
a shareholders meeting to approve the intended increase in the number of
authorized shares; and (c) after the shareholders meeting and after Borrower's
June 30, 2006 audited financial statements are final, file a new or
post-effective Registration Statement(s) to cover all of the shares of common
stock required to be registered pursuant to the Registration Rights Agreement
(the "Second Registration Statement");
WHEREAS, to accomplish the above in an appropriate timeframe, Laurus has
agreed to extend the deadline for the Borrower to have its Initial Registration
Statement declared effective under the Registration Rights Agreement until June
15, 2006;
WHEREAS, the parties have concurred that the deadline for the Borrower to
have its Second Registration Statement declared effective under the Registration
Rights Agreement shall be maintained at December 30, 2006;
WHEREAS, pursuant to Section 2(b) of the Registration Rights Agreement and
Section 2 of each of the Amendments, the Borrower is required to pay a daily
amount in cash equal to one-thirtieth (1/30th) of the product of the then
outstanding principal amount of the Note multiplied by the following (the
"Fees") if the Registration Statement has not been declared effective by the
Securities and Exchange Commission (prior to giving effect to this Amendment and
Fee Waiver Agreement):
o 1.5% for the first 30 day period beginning on May 11, 2006;
o 2.0% thereafter and
WHEREAS, Laurus has hereby agreed to postpone the date by which any Fees
may accrue and become payable until June 16, 2006 with respect to Initial
Registration Statement , but will remain December 31, 2006 with respect to the
Second Registration Statement.
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NOW, THEREFORE, in consideration of the mutual promises set forth herein,
and for other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties hereby agree as follows:
1. Extension of Deadline by which the Borrower must have the Securities
and Exchange Commission Declare Effective its Initial Registration Statement.
Laurus hereby agrees to postpone the deadline by which the Borrower must have
the Securities and Exchange Commission declare effective its Initial
Registration Statement from May 10, 2006 until June 15, 2006. This modification
shall apply to the Registration Rights Agreement only.
3. Postponement. Laurus hereby agrees to postpone the date by which any
Fees may accrue and become payable until June 16, 2006 with respect to the
Initial Registration Statement.
4. Laurus Representations. Laurus hereby represents and warrants to the
Borrower that Laurus is an "accredited investor" as defined in Rule 501(a) of
Regulation D promulgated under the Securities Act of 1933 and a "qualified
institutional buyer" as defined in Rule 144A under the Securities Act of 1933
and has knowledge and experience in financial and business matters such that it
is capable of evaluating the merits and risks of the investment to be made
hereunder.
5. Borrower Representations. The Borrower hereby represents and warrants
to Laurus that (i) no Event of Default exists on the date hereof, after giving
effect to this Amendment and Fee Waiver Agreement, (ii) on the date hereof, all
representations, warranties and covenants made by the Borrower in connection
with the Loan Documents are true, correct and complete and (iii) on the date
hereof, all the Borrower's and its Subsidiaries' covenant requirements have been
met.
6. From and after the date hereof, all references in the Loan Documents
and in the other Related Agreements to the Post-Closing Letter shall be deemed
to be references to the Post-Closing Letter, as the case may be, as modified
hereby.
7. No Other Amendments. Except as expressly set forth in this Amendment
and Fee Waiver Agreement no other term or provision of any Loan Document or any
other Amendment is hereby amended or affected in any way and the Loan Documents
and the Amendments shall remain in full force and effect after the date hereof.
8. The Borrower understands that the Borrower has an affirmative
obligation to make prompt public disclosure of material amendments to such
agreements.
9. Governing Law. This Amendment and Fee Waiver Agreement shall be
governed by and construed in accordance with the laws of the State of New York,
without regard to principles of conflicts of laws.
10. Facsimile Signatures; Counterparts. This Amendment and Fee Waiver
Agreement may be executed by facsimile signatures and in any number of
counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.
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IN WITNESS WHEREOF, the parties hereto have executed this Amendment as a
sealed instrument as of the date set forth in the first paragraph hereof.
WINDSWEPT ENVIRONMENTAL GROUP, INC.
By: /s/ ▇▇▇▇▇▇▇ ▇'▇▇▇▇▇▇
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Name: ▇▇▇▇▇▇▇ ▇'▇▇▇▇▇▇
Title: President and Chief Executive Officer
LAURUS MASTER FUND, LTD.
By: /s/ ▇▇▇▇▇ Grin
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Name: ▇▇▇▇▇ Grin
Title: Director
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