Document:

Unassociated Document

     

    REAFFIRMATION
      AND RATIFICATION AGREEMENT

     

    April
      17,
      2007

     

    Laurus
      Master Fund, Ltd.

    c/o
      Laurus Capital Management, LLC

    825
      Third
      Avenue

    New
      York,
      New York 10022

     

    Ladies
      and Gentlemen:

     

    Reference
      is hereby made to each of the (i) Securities Purchase Agreement, dated
      June 30, 2005, between Laurus Master Fund, Ltd. (the “Purchaser”) and
      Windswept Environmental Group, Inc. (the “Company”) (as amended, modified or
      supplemented from time to time, the "Purchase Agreement"); (ii) Amended and
      Restated Secured Convertible Term Note dated September 29, 2006, issued by
      the
      Company in favor of Purchaser, in the aggregate principal amount of
      $5,942,175.00 (as amended, modified or supplemented from time to time, the
      "Note"); (iii) Option Agreement (as amended, modified or supplemented from
      time
      to time, the "Option"), dated June 30, 2005, between the Purchaser and the
      Company granting Purchaser the right to purchase 30,395,179 shares of the
      Company's common stock, par value $0.0001 per share (the "Common Stock") at
      an
      exercise price of $.0001 per share; (iv) Common Stock Purchase Warrant (as
      amended, modified or supplemented from time to time, the "Warrant"), dated
      June
      30, 2005, issued by the Company to Purchaser granting Purchaser the right to
      purchase 13,750,000 shares of the Common Stock; (v) Master Security Agreement
      (as amended, modified or supplemented from time to time, the "Security
      Agreement"), dated June 30, 2005, by and among the Purchaser, the Company and
      its wholly owned subsidiaries, Trade-Winds Environmental Restoration Inc.,
      a New
      York corporation ("Trade-Winds"), and North Atlantic Laboratories, Inc., a
      New
      York corporation ("North Atlantic" and together with Trade-Winds, the
      "Subsidiaries"); (vi) Funds Escrow Agreement (the "Escrow Agreement"), dated
      June 30, 2005, by and among the Purchaser, the Company and Loeb & Loeb LLP;
      (vii) Registration Rights Agreement, dated June 30, 2005, by and between the
      Purchaser and the Company (as amended, modified or supplemented from time to
      time, the "Registration Rights Agreement"); (viii) Stock Pledge Agreement dated
      June 30, 2005, by and among the Purchaser, the Company and the Subsidiaries
      (as
      amended, modified or supplemented from time to time, the "Pledge Agreement");
      (ix) the Guaranty dated June 30, 2005 issued by Michael O’Reilly to the
      Purchaser (as amended, modified or supplemented from time to time, the “O’Reilly
      Guaranty”); and (x) Subsidiary Guarantee, dated June 30, 2005, issued by each of
      the Subsidiaries to the Purchaser (as amended, modified or supplemented from
      time to time, the “Subsidiary Guarantee”). (the documents referred to in each of
      the preceding clauses (i) through (x) are collectively referred to herein as
      the
“Existing Security and Guaranty Agreements”).

     

    To
      induce
      Laurus to provide additional financial accommodations to the Company evidenced
      by (i) that certain Amended and Restated Secured Term Note, dated the date
      hereof, made by the Company in favor of Laurus (as amended, modified or
      supplemented from time to time, the “Amended and Restated Laurus Term Note”)
      each of the Company, Trade-Winds and North Atlantic hereby jointly and
      severally: 

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    (a) represents
      and warrants to Laurus that it has reviewed and approved the terms and
      provisions of Amended and Restated Laurus Term Note and the documents,
      instruments and agreements entered into in connection therewith; 

     

    (b) acknowledges,
      ratifies and confirms that all indebtedness incurred by, and all other
      obligations and liabilities of, each of the Company, Trade-Winds and North
      Atlantic under the Amended and Restated Laurus Term Note are (i) “Obligations”
under, and as defined in the Subsidiary Guaranty, (ii) “Obligations” under, and
      as defined in, the Master Security Agreement and (iii) “Obligations” under, and
      as defined in, the Stock Pledge Agreement;

     

    (c) acknowledges,
      ratifies and confirms that each of the Amended and Restated Laurus Term Note
      are
“Documents” under, and as defined in, each of the Subsidiary Guaranty, the
      Master Security Agreement and the Stock Pledge Agreement ;

     

    (d) acknowledges,
      ratifies and confirms that all of the terms, conditions, representations and
      covenants contained in the Existing Security and Guaranty Agreements are in
      full
      force and effect and shall remain in full force and effect after giving effect
      to the execution and effectiveness of each of the Amended and Restated Laurus
      Term Note;

     

    (e) represents
      and warrants that no offsets, counterclaims or defenses exist as of the date
      hereof with respect to any of the undersigned’s obligations under any Existing
      Security and Guaranty Agreement; 

     

    (f) acknowledges,
      ratifies and confirms the grant by each of the Company, Trade-Winds and North
      Atlantic to Laurus of a security interest in the assets of (including the equity
      interests owned by) each of the Company, Trade-Winds and North Atlantic,
      respectively, as more specifically set forth in the Existing Security and
      Guaranty Agreements; and

     

    (g) The
      Company shall use the net proceeds from its sale of the Amended and Restated
      Term Note solely to expand its residential business in Suffolk County, New
      York
      (including purchases of capital equipment, advertising and marketing
      expenditures, and the leasing of a retail sales office storefront). Under no
      condition will the proceeds from the sale of the Amended and Restated Term
      Note
      be used by the Company, Trade-Winds or North Atlantic to (i) reduce existing
      debt of the Company, Trade-Winds or North Atlantic (including but not limited
      to
      trade payables, lease obligations, and accrued expenses thereof) or (ii) settle
      any outstanding litigation of the Company, Trade-Winds or North Atlantic. The
      Company agrees to furnish the Purchaser with all written evidence that it may
      reasonably require with documenting such use of proceeds.

     

    [The
      remainder of this page is intentionally left blank]

     

    
      
        
        

      

      
        2

        
          

        

      

      
        
        

      

    

     

    This
      letter agreement shall be governed by and construed in accordance with the
      laws
      of theState of New York.

    
      	 	 	 
	 	
              Very
                truly yours,

            
	 	 
	 	
              WINDSWEPT
                ENVIRONMENTAL GROUP, INC. 

            
	 
 	 
 	 
 
	
            	By:  	
              /s/ Michael
                O’Reilly

            
	 	
              

              Name:
                Michael O’Reilly

            
	 	Title:  
              President
              / CEO

    

     

    
      	 	 	 
	 	
              TRADE-WINDS
                ENVIRONMENTAL RESTORATION INC.

            
	 
 	 
 	 
 
	
            	By:  	
              /s/ Michael
                O’Reilly

            
	 	
              
Name:
              Michael O’Reilly
	 	Title:  
              President / CEO

    

     

    
      	 	 	 
	 	
              NORTH
                ATLANTIC LABORATORIES, INC.

            
	 
 	 
 	 
 
	
            	By:  	
              /s/ Michael
                O’Reilly

            
	 	
              

              Name:
                Michael O’Reilly

            
	 	Title:  
              President / CEO

    

     

    
      
        	
                Acknowledged
                  and Agreed to by: 

              	 	 	 
	 	 	 	 	 
	LAURUS MASTER
                FUND,
                LTD.  	 	 	 
	 	 	 	 	 
	By: 	
                /s/
                  David Grin

              	 	 	
              
	 	
                
Name:	 	 	
              
	 	
                Title:

              	 	 	
              

      

       

      
        
          
          

        

        
          3EXHIBIT
      10.1

    

    ENGLISH
      TRANSLATION 

    

    OF

    

    SALE
      AND PURCHASE AGREEMENT

    Ukraine,
      the Transcarpathian Region

    Town
      of Perechyn, the fifteenth of May two thousand and seven

    

    We,
      the
      undersigned, the Steatit Open Joint Stock Company, code in the Business Register
      14314814, located at 33 Chervonoarmiyska Street, Perechyn, represented by its
      director Mykola Pavlovych Borisenko, resident of the town of Perechyn, at 4,
      50
      years of October Square, Apt. 52, acting on the grounds of the Company’s Charter
      (hereinafter referred to as the Seller), on one part, and Ukcyl Limited Company,
      code in the Business Register 34570661, located at 33 Chervonoarmiyska Street,
      Perechyn, represented by its director Anatoly Pavlovich Zhdankin, resident
      of 43
      Shevchenko, Apt. 20, village of Veliky Berezny, acting on the grounds of the
      Company’s Charter (hereinafter referred to as the Buyer), on the other part,
      have entered into the present Agreement on the following:

    

    
      	
              1.

            	
              SUBJECT
                OF THE AGREEMENT

            

    

    

    
      	
              1.1.

            	
              The
                Seller hereby agrees to sell the commercial production building
                (hereinafter referred to as the Property) with the total area of
                2,237.0
                sq. m, located at 33 (thirty-three) Chervonoarmiyska Street, Perechyn,
                in
                the land lot of the area of 0.8 hectares, marked on the master plan
                of the
                Seller upon the agreement between the parties (Appendix 1) which
                is an
                integral part to the present Agreement, while the Buyer hereby agrees
                to
                accept the Property and pay for it at the price and under terms specified
                in the present Agreement. The exact area of the land parcel which
                is being
                transferred shall be finalized during the submission of the cadastre
                register record.

            

    

    
      	
              1.2.

            	
              The
                production building marked in the plan under letter M belongs to
                the
                Seller on the basis of the ownership certificate issued by the Perechyn
                Township Council on August 20, 2003 based on the resolution of the
                executive council N 77 of august 18, 2003, registered with the Uzhgorod
                Municipal Technical Inventory Bureau on August 21, 2003 in book 1,
                record
                N 123, registration number 2349551.

            

    

    

    
      	
              2.

            	
              THE
                PRICE OF THE AGREEMENT

            

    

    

    
      	
              2.1.

            	
              At
                the time of signing the present Agreement, the price of the alienated
                property is four hundred twenty five thousand and five hundred Hryvnias
                (425,500) including VAT in the amount of seventy thousand nine hundred
                sixteen Hryvnias and 67 Kopecks (70,916.67) and cannot be modified
                in case
                of 100% pre-payment. If the payment is made in installments, the
                remainder
                balance of the amount shall be adjusted based on monthly inflation
                rate.

            

    

    
      	
              2.2.

            	
              According
                to the abstract from the register of ownership rights for real estate
                under N 14321360 issued on April 20, 2007 by the district communal
                enterprise Technical Inventory Bureau with the Perechyn District
                Council,
                the value of the property (commercial production building, letter
                M) which
                is being alienated is one hundred thirty thousand and eighty one
                Hryvnias
                (134,081). according to the appraisal report prepared by the appraiser
                Y.
                Y. Gribovsky on March 31, 2007, the value of the commercial production
                building (letter M) is four hundred twenty five thousand and four
                hundred
                and twelve Hryvnias (425,412).

            

    

     

    
      
         

      

      
        1

        
          

        

      

      
         

      

    

     

    
      	
              3.

            	
              TERMS
                OF PAYMENT FOR THE PURCHASED
                PROPERTY

            

    

    

    
      	
              3.1.

            	
              The
                Buyer hereby agrees to pay the value for the Property specified in
                Article
                2.1 of the present Agreement in installments as
                follows:

            

      	3.1.1. 	Eighty five thousand (85,000) Hryvnias within two
              banking
              days from the date of signing the present
              Agreement;

      	3.1.2.	One hundred sixty five thousand (165,000) Hryvnias
              following the performance of Article 7.1.2 of the present Agreement
              by the
              Seller which is then confirmed by the corresponding
              Act.

      	3.1.3. 	One hundred seventy five thousand (175,000) Hryvnias
              until September 30, 2007.

      	 	 

    

     

    
      	
              3.2.

            	
              Payments
                for the purchased property shall be completed by the Buyer by way
                of bank
                transfer of funds to the account of the
                Seller.

            

    

    

    
      	
              4.

            	
              TRANSFER
                OF THE PROPERTY

            

    

    

    
      	
              4.1.

            	
              The
                right of ownership to the Property is transferred to the Buyer on
                provision of completion of all obligations outlined in Article 3.1
                of the
                present Agreement in its entirety.

            

    

    
      	
              4.2.

            	
              The
                transfer of the Property shall be completed from the Seller to the
                Buyer
                within three days upon the complete settlement of payments under
                the Sale
                and Purchase Agreement.

            

    

    
      	
              4.3.

            	
              The
                transfer of the Property from the Seller and acceptance of the Property
                by
                the Buyer is confirmed by the Acceptance and Transfer Act which is
                signed
                by the two parties.

            

    

    
      	
              4.4.

            	
              During
                the transfer of the Property, the Seller shall transfer the entire
                technical documentation on the Property to the
                Buyer.

            

    

    
      	
              4.5.

            	
              The
                Buyer hereby agrees no later than by October 1, 2007, to install
                fencing
                along the perimeter of the land parcel on which the Property the
                subject
                of the Sale and Purchase Agreement is located and provide its
                security.

            

    

    

    
      	
              5.

            	
              OBLIGATIONS
                OF THE PARTIES

            

    

    

    
      	
              5.1.

            	
              Each
                Party under the Agreement hereby agrees to execute its obligations
                defined
                by the present Agreement and to assist the other Party in performance
                of
                the latter’s obligations under the
                Agreement.

            

    

    
      	
              5.2.

            	
              The
                Parties are materially responsible for failure to complete its obligations
                or default its obligations under the present Agreement in
                full.

            

    

    
      	
              5.3.

            	
              The
                Parties under the Agreement hereby agree with the objective of joint
                use,
                to arrange the mutual work on repair of backup high voltage electric
                cable
                to the Steatit Open Joint Stock
                Company.

            

    

     

    
      
         

      

      
        2

        
          

        

      

      
         

      

    

     

    
      	
              6.

            	
              OBLIGATIONS
                OF THE BUYER

            

    

    

    
      	
              6.1.

            	
              The
                Buyer hereby agrees to the
                following:

            

    

    
      	
              6.1.1.

            	
              To
                make payment of the amount of the value of the Property as specified
                in
                Article 3.1 of the present Agreement and under the terms specified
                herein.

            

    

    
      	
              6.1.2.

            	
              To
                accept the Property within the specified term of the present Agreement
                and
                sign the Property Acceptance and Receipt
                Act.

            

    

    

    
      	
              7.

            	
              OBLIGATIONS
                OF THE SELLER

            

    

    

    
      	
              7.1.

            	
              The
                Seller hereby agree to the
                following:

            

    

    
      	
              7.1.1.

            	
              To
                transfer the property to the Buyer within the term specified by the
                present Agreement.

            

    

    
      	
              7.1.2.

            	
              To
                transfer the property to the Buyer free from any items in the purchased
                premises that belong to the Seller or any other third party which
                are not
                parties to the present Agreement, gradually, in accordance with the
                Appendix to the present Agreement (Appendix
                2)

            

    

    
      	
              7.1.3.

            	
              Within
                three days after the written request of the Buyer, to release the
                approval
                of the re-registration of the lease agreement for the land lot specified
                in Article 1.1 of the present
                Agreement

            

    

    
      	
              7.1.4.

            	
              To
                issue approvals for connecting if necessary to the telephone lines,
                current water supply and sewer systems, electric power supply, water
                and
                gas within three days following the written request of the Buyer.
                The use
                of the above listed networks of telephone, current water supply and
                sewer
                systems, electric power supply, water and gas which belong to the
                Steatit
                Open Joint Stock Company should be made based on terms of agreements
                entered between the Steatit Open Joint Stock Company and the Ukcyl
                Limited
                Company which should be executed prior to approval for their
                connection.

            

    

    
      	
              7.1.5.

            	
              To
                allow the connection of the property to the electric power supply
                of 10 kV
                through RU-10 kV of the Steatit Open Joint Stock Company based on
                a
                supplemental agreement between the parties which is an addition to
                the
                present Agreement.

            

    

    
      	
              7.1.6.

            	
              Until
                September 1, 2007, the de-install remains of the central gate house
                for
                possibility of entry to the territory of the purchased property of
                the
                freight transport and provide the permanent access for the automobile
                transport of the Buyer through the territory of the shared use which
                is
                marked in the master plan (Appendix 1 to the Agreement) by letters
                ZH-E
                and through the transport gate of the Steatit Open Joint Stock
                Company.

            

    

    
      	
              7.1.7.

            	
              Limits
                of the land lot which is transferred along with the sale of the property
                are marked in the master plan which is the Appendix to the present
                Agreement.

            

    

    
      	
              7.1.8.

            	
              Within
                one day from the moment when the entire amount of the purchase is
                deposited to the account specified in Article 3.1 of the present
                Agreement, to issue the notarized statement of the deposit of funds
                to the
                Seller’s account and forward the statement to the
                Buyer.

            

    

    

    
      	
              8.

            	
              LIABILITIES
                OF THE PARTIES

            

    

    

    
      	
              8.1.

            	
              In
                case of default of terms of payment for the property, the Buyer,
                in
                addition to the principal payment, shall pay to the Seller the penalty
                fees as provisioned by the legislation, namely double daily rate
                of the
                National Bank of Ukraine for each day of the payment
                delay.

            

    

    
    

     

    
      
         

      

      
        3

        
          

        

      

      
         

      

    

     

    
      	
              8.2.

            	
              In
                case of default of terms provisioned in Article 7 of the present
                Agreement
                and period of their performance, the defaulted party shall compensate
                for
                all damages incurred by the other party under the Agreement in full,
                but
                no more than 10% of the total value of the property under the Sale
                and
                Purchase Agreement.

            

    

    
      	
              8.3.

            	
              Payment
                of penalty fees does not relieve the defaulting party of the completion
                of
                obligations undertaken under the
                Agreement.

            

    

    
      	
              8.4.

            	
              In
                case if the Buyer shall not make the payment specified in the Agreement
                under October 1, 2007, or declines to accept the purchased property,
                the
                Seller reserves the right to demand the acceptance of the purchased
                property and payment of the cost along with compensation of damages
                incurred as a result of the delay of
                performance.

            

    

    

    
      	
              9.

            	
              WARRANTIES
                AND CLAIMS

            

    

    

    
      	
              9.1.

            	
              The
                Seller hereby guarantees that the property which is being alienated
                under
                the present Agreement is not a property under mortgage or any other
                encumbrance, of any financial or other institutions as well as private
                individuals, is free from lien, is not sold or leased to third parties,
                is
                not arrested, or made a subject of any litigation or any other demands
                or
                liabilities thereof.

            

    

    

    The
      representative of the Seller hereby guarantees the following:

    
      	 	
              -

            	
              There
                are no hidden defects which may significantly reduce the value or
                possibility for designated use of the property specified in the present
                Agreement; all circumstances of significant value were disclosed
                to the
                BUYER; prior to execution of the present Agreement the property has
                not
                been alienated to another parties, or placed under arrest or any
                lien, tax
                pledge, a pledge into charters of any legal entity, is not a subject
                of
                litigation or voluntary retention; the property has not been transferred
                for use of tenants (lessees), encumbrances or any other rights of
                third
                parties with regard thereof; the property is not a registered landmark,
                is
                not unsafe or condemned.

            

    

    
      	 	
              -

            	
              The
                representatives of the Seller and the Buyer also guarantee that neither
                of
                the parties is restricted in its right to execute the present Agreement,
                is not incapacitate in full or in part, or suffers from a medical
                condition which may be a hindrance to understanding the full essence
                of
                the present Agreement.

            

    

    
      	
              9.2.

            	
              In
                case of any property and non-property claims from third parties with
                regard to actions or inactions of the Seller which are focused on
                the
                property purchased by the Buyer, the latter reserves the right to
                suspend
                payments provisioned in Article 3.1. of the present Agreement until
                the
                resolution of the matter of stated
                claims.

            

    

    
      	
              9.3.

            	
              The
                Seller hereby guarantees that under provisions of proper completion
                of
                obligations of the Buyer under the present Agreement no matter subject
                or
                intentions reflected in the Agreement shall be modified
                herein.

            

    

    
      	
              9.4.

            	
              Absence
                of bans or tax pledge has been
                verified.

            

    

    

    
      	
              10.

            	
              RISK
                OF ACCIDENTAL LOSS OF THE
                PROPERTY

            

    

     

    
      
         

      

      
        4

        
          

        

      

      
         

      

    

     

    The
      Buyer
      is held liable for risk of accidental loss of the property from the moment
      of
      signing the property Acceptance and Receipt Act.

    

    
      	
              11.

            	
              DISPUTE
                RESOLUTION

            

    

    

    All
      disputes which may arise during the execution of terms of the present Agreement
      are to be solved by way of negotiating. If the parties fail to reach settlement
      within one month, then the dispute shall be transferred for review and
      resolution by appropriate judicial bodies according to the procedure specified
      by the effective legislation.

    

    
      	
              12.

            	
              MODIFICATIONS
                TO TERMS OF THE AGREEMENT AND ITS
                TERMINATION

            

    

    

    
      	
              12.1.

            	
              All
                modifications and additions to the present Agreement shall be made
                in
                writing only following by the notarized certified of such modifications
                and additions.

            

    

    
      	
              12.2.

            	
              In
                case of either party under the Agreement defaulting on terms of the
                present Agreement, the said Agreement may be modified or terminated
                at the
                demand of the other party by the decision of the court or commercial
                court.

            

    

    

    
      	
              13.

            	
              EXPENSES

            

    

    

    All
      expenses related to execution of the present Agreement, its notarized
      certification are undertaken by the Buyer.

    

    
      	
              14.

            	
              OTHER
                TERMS

            

    

    

    
      	
              14.1.

            	
              The
                right to execute the present Sale and Purchase Agreement which is
                granted
                to the Director M. P. Borisenko on behalf of the joint stock company
                is
                confirmed by resolution of the Supervisory Board, Minutes of the
                session
                of the Supervisory Board and is an integral part of the present
                Agreement.

            

    

    
      	
              14.2.

            	
              This
                Agreement is subject for registration in the district Technical Inventory
                Bureau of the Perechyn District Council following the full payment
                under
                the present Agreement.

            

    

    
      	
              14.3.

            	
              The
                present Agreement is drawn in three copies of equal legal effect.
                One copy
                of the Agreement is kept in files of the Privat Notary with the Perechyn
                District Notary Precinct V. Yu. Kononchuk while the two others are
                maintained by the parties.

            

    

    

    LEGAL
      ADDRESSES AND BANK DETAILS OF THE PARTIES

    

    
      	
              Seller

            	 	
              Buyer

            
	
              Steatit
                Open Joint Stock Company

            	 	
              Ukcyl
                Limited Company 

            
	
              Code
                in the Business Register 14313814

            	 	
              33
                Chervonoarmiyska Street, Town of Perechyn, Transcarpathian region
                89200

            
	
              33
                Chervonoarmiyska Street, Town of Perechyn 

            	 	
              Phone
                / Fax 03145 23046, 21285

            
	
              a/c
                26008012584 with the Finance Joint Stock Company Credit-Bank
                (Ukraine)

              Uzhgorod
                Interbank Code MFO 312237

            	 	
              a/c
                26005053902903 with the Transcarpathian Regional Division of the
                PrivatBank Commercial Bank Interbank Code MFO 312378

            
	 	 	
              Company
                Code 34570661

              Registration
                Certificate of the Tax Administration 100020425

              Taxpayer’s
                ID 345706607103

            
	
              Income
                tax payer on general terms according to section 10.1 article 10 of
                the Law
                of Ukraine of December 28, 1994 N 334/94-BP On taxation of business
                income
                

            	 	
              Income
                tax payer on general terms according to section 10.1 article 10 of
                the Law
                of Ukraine of December 28, 1994 N 334/94-BP On taxation of business
                income
                

            
	 	 	 
	
              Director
                (signed) M. P. Borisenko

            	 	
              Director
                (signed) A. P. Zhdankin

            
	 	 	 
	
              Seal

            	 	
              Seal

            

    

    

    
      
         

      

      
        5

        
          

        

      

      
         

      

    

    

    May
      fifteenth, two thousand and seven

    

    The
      present Agreement is certified by me, V. Yu. Kononchuk, a private notary with
      the Perechyn District Notarial Precinct.

    

    The
      Agreement is signed by the parties in my presence. The identity of the parties
      is verified, capacity, authority and right of the Steatit OJSC and Uksil LTD
      as
      well as authority of their representatives and the Seller’s ownership rights for
      the property to be alienated have been checked.

    The
      present Agreement is subject for registration in the Technical Inventory Bureau
      and the State Register of Executive Documents pursuant to the
      legislation.

    

    Recorded
      in the Register under number 681

    The
      fee
      collected - according the Law of Ukraine On Notaries

    

    Private
      Notary (signed)  V.
      Yu.
      Kononchuk

    Seal

     

    
      
         

      

      
        6

        
          

        

      

      
         

      

    

    Appendix
      3 to the Agreement of May 15, 2007

    

    AGREEMENT

    On
      shared use of electric power supply network and electrical
      equipment

    

    May
      15,
      2007

    Town
      of
      Perechyn 

    

    Owner
      -
      the Steatit Open Joint Stock Company, represented by its director Mykola
      Pavlovych Borisenko, acting on the grounds of the Company’s Charter, on one
      part, and 

    Operator
      - the Ukcyl Limited Company, represented by its director Anatoly Pavlovich
      Zhdankin, acting on the grounds of the Company’s Charter, on the other part,
      have entered into the present Agreement on the following:

    

    
      	
              1.

            	
              The
                Subject of the Agreement

            

    

    

    
      	
              1.1.

            	
              The
                Owner hereby transfers while the Operator accepts the following equipment
                for shared use and operation:

            

    

    Two
      cable
      lines 10 kWatt from the railroad traction substation to the RU-10kV of the
      Steatit Open Joint Stock Company;

    Two
      cable
      lines from the RU-10kV to the commercial production building (letter M), two
      cells in the distribution switch to ensure the voltage of consumption up to
      2000
      kWatt (appendix - circuit).

    
      	
              1.2.

            	
              The
                status of the equipment and electrical networks is ready for use
                and
                operation. If the equipment and electrical networks are not in operational
                condition (with the exception of the 10 kV reserve cable from the
                traction
                substations as provisioned in the present Agreement) the parties
                mutually
                undertake repair thereof.

            

    

    

    
      	
              2.

            	
              Objective
                of Use

            

    

    

    
      	
              2.1.

            	
              The
                need to maintain production and commercial activities of the Ukcyl
                LTD.

            

    

    

    
      	
              3.

            	
              Procedure
                of Property Transfer for
                Operation

            

    

    

    
      	
              3.1.

            	
              The
                property in shared use shall be transferred by the Owner and accepted
                by
                the Operator within three days from the date of signing of the present
                Agreement.

            

    

    
      	
              3.2.

            	
              The
                property transfer for use and operation shall be completed by
                corresponding specialists of the parties pursuant to the Acceptance
                and
                Transfer Act.

            

    

    

    
      	
              4.

            	
              Term
                of Operation

            

    

    

    
      	
              4.1.

            	
              The
                property for mutual use and operation is accepted as transferred
                to the
                Operator as of the date of signing the Acceptance and Receipt
                Act.

            

    

    
      	
              4.2.

            	
              The
                present Agreement is valid for three years and may be extended for
                another
                term based on written agreement between the
                parties.

            

    

     

    
      
         

      

      
        7

        
          

        

      

      
         

      

    

     

    
      	
              5.

            	
              Procedure
                of Payments for Use

            

    

    

    
      	
              5.1.

            	
              The
                amount of payment for use is 300 Hryvnias per month including VAT
                of 50
                Hryvnias and may be adjusted based on agreement between the
                parties.

            

    

    
      	
              5.2.

            	
              The
                payment for use shall be transferred by bank to the account of the
                Owner
                no later than by the 25th day of the current
                month.

            

    

    
      	
              5.3.

            	
              The
                compensation of expenses for use of electric power in the network
                is
                completed based on the procedure agreed between the parties or as
                a
                specified percentage of the total volume of electric consumption
                of the
                parties.

            

    

    

    
      	
              6.

            	
              Rights
                and Obligations of the
                Owner

            

    

    

    
      	
              6.1.

            	
              The
                Owner reserves the right to hold inspections of the procedure of
                use by
                the Operator of the property transferred for shared use according
                to terms
                of this agreement.

            

    

    
      	
              6.2.

            	
              the
                Owner is obligated:

            

    

    
      	 	
              -

            	
              To
                introduce the Operator with the regulations of technical operation
                of the
                property transferred for shared
                use.

            

    

    
      	 	
              -

            	
              To
                assist the Operator as needed with the proper operation and use of
                the
                equipment.

            

    

    

    
      	
              7.

            	
              Rights
                and Obligations of the
                Operator

            

    

    

    
      	
              7.1.

            	
              The
                Operator agrees to:

            

    

    
      	 	
              -

            	
              use
                the property and equipment transferred into the shared use as designated
                and in accordance with the present
                Agreement;

            

    

    
      	 	
              -

            	
              make
                due payments for use;

            

    

    
      	 	
              -

            	
              maintaining
                the procedures of use and operation and upkeep of the property and
                equipment pursuant to its technical
                documentation;

            

    

    
      	 	
              -

            	
              prevent
                access and use by untrained
                personnel;

            

    

    
      	 	
              -

            	
              Maintain
                the equipment in complete
                readiness.

            

    

    

    
      	
              7.2.

            	
              The
                Operator reserves the right to terminate the use of the equipment
                early by
                notifying the Owner one month prior to the expiration of term of
                use of
                the equipment.

            

    

    

    
      	
              8.

            	
              Procedure
                for Return of the Property to the
                Owner

            

    

    

    
      	
              8.1.

            	
              Upon
                the expiration of the term of use, or in case of early termination
                of use,
                the Operator is obligated to transfer the property in shared use
                back to
                its owner within three days, pursuant to the Acceptance and Transfer
                Agreement.

            

    

    
      	
              8.2.

            	
              The
                return of the property is executed by corresponding specialists of
                the
                Parties. 

            

    

    
      	
              8.3.

            	
              The
                property shall be returned to the Owner in functional states taking
                into
                account it normal tear and wear
                process.

            

    

    

    
      	
              9.

            	
              Liabilities
                of the Parties

            

    

    

    
      	
              9.1.

            	
              The
                Operator undertakes the following liabilities under the present
                Agreement:

            

    

    
      	 	
              -

            	
              in
                case of the past due payments for the shared use of property, the
                Operator
                shall make penalty payments in the amount of double exchange rate
                of the
                National Bank of Ukraine for each day of the payment past
                due.

            

    

    
    

     

    
      
         

      

      
        8

        
          

        

      

      
         

      

    

     

    
      	
              9.2.

            	
              In
                case of outstanding debt of payments for use of property for more
                than one
                month, the Owner reserves the right to disconnect the Operator from
                the
                electric power supply network of shared use in five days following
                the
                written notification until the total repayment of the outstanding
                debt.

            

    

    
      	
              9.3.

            	
              The
                Owner shall compensate to the Operator all expenses incurred by the
                Operator if the interruption of power supply results from the Owner's
                default.

            

    

    
      	
              9.4.

            	
              The
                Owner shall not be held liable to the Operator for termination of
                power
                supply due to reasons beyond the Owner’s
                control.

            

    

    

    
      	
              10.

            	
              Procedure
                for Termination and Modification of the
                Agreement

            

    

    

    
      	
              10.1.

            	
              The
                present Agreement shall not be terminated on a unilateral basis with
                the
                exception of instances when either Party has been systematically
                violating
                terms of the present Agreement or serious breaching regulations of
                use of
                the property which may result in emergency
                situations.

            

    

    
      	
              10.2.

            	
              In
                case of change of terms, procedure and volume of power supply and
                consumption from the electrical power company by either Party of
                the
                Agreement, the parties herein agree to make modifications into the
                present
                Agreement within seven days. If the parties fail to reach agreement
                within
                seven days on the modification of terms, procedure and volume of
                power
                supply, the present Agreement is seen as terminated
                automatically.

            

    

    

    
      	
              11.

            	
              Other
                Terms

            

    

    

    
      	
              11.1.

            	
              The
                present Agreement is drawn in two copies, one for each
                party.

            

    

    
      	
              11.2.

            	
              In
                cases which are not provisioned by the present Agreement, the parties
                shall be governed by the law of
                Ukraine.

            

    

    

    
      	
              12.

            	
              Banking
                Details and Legal Addresses of the
                Parties

            

    

    

    
      	
              Owner

            	 	
              Operator

            
	
              Steatit
                Open Joint Stock Company

            	 	
              Ukcyl
                Limited Company 

            
	
              Code
                in the Business Register 14313814

            	 	
              33
                Chervonoarmiyska Street, Town of Perechyn, Transcarpathian region
                89200

            
	
              33
                Chervonoarmiyska Street, Town of Perechyn 

            	 	
              Phone
                / Fax 03145 23046, 21285

            
	
              a/c
                26008012584 with the Finance Joint Stock Company Credit-Bank
                (Ukraine)

              Uzhgorod
                Interbank Code MFO 312237

            	 	
              a/c
                26005053902903 with the Transcarpathian Regional Division of the
                PrivatBank Commercial Bank Interbank Code MFO 312378

            
	 	 	
              Company
                Code 34570661

              Registration
                Certificate of the Tax Administration 100020425

              Taxpayer’s
                ID 345706607103

            

    

     

    
      
         

      

      
        9

        
          

        

      

      
         

      

    

     

    
      	
              Income
                tax payer on general terms according to section 10.1 article 10 of
                the Law
                of Ukraine of December 28, 1994 N 334/94-BP On taxation of business
                income
                

            	 	
              Income
                tax payer on general terms according to section 10.1 article 10 of
                the Law
                of Ukraine of December 28, 1994 N 334/94-BP On taxation of business
                income
                

            
	 	 	 
	
              Director
                (signed) M. P. Borisenko

            	 	
              Director
                (signed) A. P. Zhdankin

            
	 	 	 
	
              Seal

            	 	
              Seal

            

    

    

    
      
         

      

      
        10

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