Exhibit 10.4
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, Centaur Value Fund, LP and United Centaur Master Fund
(together, 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 Holders of
Series A Preferred Stock, hereby agree, 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 satisfaction of the
following
