Exhibit 10.3
February 13, 2009
VIA
FACSIMILE
American Defense
Systems, Inc.
230 Duffy Avenue,
Hicksville, NY 11801
Attention: Chief Financial
Officer
Facsimile: (516) 390-5308
Re: Forbearance
Gentlemen:
Reference is made to (a) the
Certificate of Designations, Preferences and Rights (the “
Certificate of Designation ”) of Series A
Convertible Preferred Stock of American Defense Systems, Inc.,
a Delaware corporation (the “ Company ”)
pursuant to which the Company designated and issued its
Series A Convertible Preferred Stock, par value $0.001 per
share (the “ Series A Preferred Stock ”)
and (b) the Consent and Agreement of Series A Convertible
Preferred Stockholders, dated as of May 23, 2008, by and
between the Company and the holders of the Series A Preferred
Stock (the “ Consent ”). All capitalized terms
used in this letter and not otherwise defined herein shall have
their respective meanings set forth in the Certificate of
Designations and the Consent.
The Company has informed the
undersigned, West Coast Opportunity Fund, LLC (the “
Investor ”), that it will not be in compliance with
the Financial Covenants for the Fiscal Year ended December 31,
2008, the requirement to publicly disclose and disseminate the
Company’s Operating Results by the Operating Results
Announcement Deadline, or the requirement to certify the same, all
as required by Section 6 of the Consent (collectively, the
“Financial Covenant Triggering Event”). The Consent
provides that such breaches shall be deemed Triggering Events under
Section 3(a)(vii) of the Certificate of
Designation.
The Investor, as a Holder of
Series A Preferred Stock, hereby agrees, subject to the
satisfaction of the Forbearance Conditions (as defined below), to
forbear (the “ Forbearance ”) from taking any
action or exercising any of their remedies under the Certificate of
Designation, the Consent or otherwise with respect to the Financial
Covenant Triggering Event, including, without limitation, the
exercise of its right to cause the Company to redeem the
Series A Preferred Stock and to increase the Dividend Rate to
the rates during a Triggering Period, until the earlier of
(a) the date on which any Triggering Event (other than the
Financial Covenant Triggering Event) shall occur or exist and
(b) February 27, 2009 (such period being hereinafter
called, the “ Forbearance Period ”).
The effectiveness of the Forbearance
is subject to the continued sat
