OMNIBUS AMENDMENT AND WAIVER
This
Omnibus Amendment and
Waiver (this
"Amendment"), dated
December __,
2007, by and between
Tarpon Industries, Inc., a Michigan corporation (the
"Company"), and
Laurus Master Fund, Ltd., a Cayman Islands company (the
"Purchaser"), amends (i) that certain Secured Convertible Term
Note, dated as of
December 13,
2005, by the Company in favor of Purchaser in the aggregate
principal amount of $6,000,000 (as amended, modified or supplemented
from time
to time, the "Note")
issued pursuant to the
terms of the
Securities
Purchase
Agreement, dated as of
December 13, 2005, between the Company and the Purchaser
(as amended,
modified or supplemented from time to time, the "Purchase
Agreement") and (ii) that certain Common Stock Purchase
Warrant, issued by the
Company to
the Purchase on December 13, 2005 (as amended, modified or
supplemented from time
to time, the "Warrant"). Capitalized terms used but not
defined herein
shall have the
meanings given them in
the Purchase
Agreement.
Reference is also made to the Security Agreement, dated as of August 9, 2007 by
and among the Company,
Eugene Welding Co. and the Purchaser (as amended,
modified or
supplemented
from time to time,
the "Security Agreement" and,
together with the Ancillary Agreements referred to in the Security
Agreement,
the Note, the Warrant,
the Purchase Agreement
and the other Related Agreements
referred to in the Purchase Agreement, the "Loan Documents").
PREAMBLE
WHEREAS, pursuant
to the terms of the
Purchase Agreement, the Company
issued and sold the Note to Purchaser;
WHEREAS, since the
issuance of the Note to Purchaser the following Events
of Default may have occurred and be continuing, specifically (i) the failure
by
the Company to pay to Purchaser the principal portion of the Monthly Amount
(as
defined in the Note) as otherwise due and payable on each
Amortization Date
(as
defined in the
Note) occurring prior to the Amendment Effective Date (the
aggregate of all such unpaid principal, the "Pastdue Principal"),
(ii) defaults
regarding debt of
Steelbank and actions
taken in connection
with the Canadian
Bankruptcy and
Insolvency Act, (iii)
defaults relating to
the common stock of
the Company no longer
trading on the American Stock Exchange, (iv) defaults
relating to
judgments obtained against the Company by trade creditors as
described in more detail on Schedule A herein (the "Judgment Liens"), and (v)
defaults relating to outstanding personal property taxes to
Marysville County in
the approximate
amount of $42,158 (the
"Property Taxes"). Each of items (i)
through (v) above shall hereafter collectively be referred to as the
"Existing
Defaults";
WHEREAS, Purchaser has
agreed to waive, on
the terms and
conditions set
forth herein, the Existing Defaults; and
WHEREAS, Purchaser
and the Company desire to amend the transactions
contemplated by the
Purchase Agreement, the Note and certain other Related
Agreements.
<PAGE>
NOW,
THEREFORE,
in consideration of the covenants, agreements and
conditions hereinafter set forth, and other good and valuable
consideration, the
receipt and
sufficiency of which
are hereby
acknowledged, the
parties hereto
agree as follows:
Waiver of Certain Events of Default
1.
Laurus hereby
waives the
Existing Defaults. Laurus further waives
default interest
under the Note which
has accrued and remains unpaid as of the
date hereof.
Notwithstanding the
foregoing, the Company
hereby covenants
and
agrees that: (i) it
will raise additional
equity of no less than
five million
dollars ($5,000,000)
by February 28, 2008; (ii) the Pastdue Principal shall be
paid in full on the Maturity Date (as defined in the Note after
giving effect to
the Amendment
Effective Date (as defined below)), together with all other
amounts due and payable on such date under the Purchase
Agreement,
the Related
Agreements referred
to therein, the Security Agreement and the Ancillary
Agreements referred to
therein; (iii) the
Judgment Liens shall be satisfied in
full and/or
otherwise removed by no later than March 30,
2008; and (iv) the
Property Tax liens
shall be satisfied in
full and/or otherwise
removed by no
later than March 30,
2008. Failure
of the Company to comply with any of the
items (i) through
(iv) above will result
in the above waivers
being null and
void and the Company will be liable for all Existing Defaults.
Amendments to the Note
2.
The definition of the "Maturity Date" appearing in the Preamble of
the
Note shall be August 9, 2009.
3.
Section 1.1 of the Note is hereby amended by deleting the first
sentence
appearing therein in
its entirety and
inserting the
following new sentence in
lieu thereof:
"Subject to Sections
4.2 and 5.10,
interest payable on the outstanding
principal amount of
this Note (the
"Principal Amount")
shall accrue at a
rate
per annum equal to the
"prime rate" published in The Wall Street
Journal from time to time (the "Prime Rate"), plus four percent
(4.0%) (the
"Contract Rate")."
4.
Section 1.3 of the Note is hereby amended by deleting existing Section
1.3 in its entirety and inserting the following new Section 1.3 in
lieu thereof:
"1.3
Principal Payments.
Amortizing
payments of the
aggregate
principal
amount outstanding
under this Note at any
time (the "Principal
Amount")
shall be made by the Company on April 1, 2008 and on the first
business day
of
each succeeding month thereafter through and including the Maturity
Date
(each, an "Amortization Date"). Subject to Article III below,
commencing on
the
first Amortization Date, the Company shall make monthly payments to
the
Holder on each Repayment Date, each such payment in the amount of
$40,000
together with any
accrued and unpaid interest on such portion of the
Principal Amount plus any and all other unpaid amounts which are
then owing
under this Note, the Purchase Agreement and/or any other Related
Agreement
(collectively, the
"Monthly Amount").
Any outstanding
Principal Amount
2
<PAGE>
together with any accrued and unpaid interest and any and all other
unpaid
amounts which are then
owing by the Company to the Holder under this Note,
the
Purchase Agreement
and/or any other Related Agreement shall be due and
payable on the Maturity Date."
5.
Section 2.1(a) of the Note is hereby amended by deleting the last
sentence appearing
therein in its
entirety and inserting
the following new
sentence in lieu thereof:
"For
purposes hereof,
subject to Section 3.6
hereof, the initial
"Fixed
Conversion Price" means $0.50."
6.
Effective upon the
Blocker Waiver
Effective Date (as
defined below),
Section 3.2 of the Note is hereby amended by deleting existing Section 3.2 in
its entirety and inserting the following new Section 3.2 in lieu
thereof:
"3.2
Conversion
Limitation.
Notwithstanding
anything
herein to the
contrary, in no event
shall the Holder be
entitled to convert any portion
of
this Note in excess of that portion of this Note upon exercise of which
the
sum of (1) the number of shares of Common Stock beneficially owned by
the
Holder and its Affiliates (other than shares of Common Stock
which
