EXHIBIT 10.1
SECOND WAIVER OF RIGHTS
AGREEMENT
This Second Waiver of Rights Agreement (the
“ Agreement ”) is made and
entered into on April 17, 2007, to be effective as of January
15, 2007 (the “ Effective Date
”), by and between Pediatric Prosthetics,
Inc. , an Idaho corporation (“
Pediatric ”) and AJW
Partners, Inc., AJW Partners, LLC, AJW Offshore, Ltd., AJW
Qualified Partners, LLC and New Millennium Capital Partners, II,
LLC (collectively the “
Purchasers ”), each individually a
“ Party ” and collectively the
“ Parties .”
W
I
T N E S
S E T H
:
WHEREAS , pursuant to a Securities Purchase Agreement
entered into with the Purchasers on May 30, 2006 (the “
Closing ” and the
“Purchase Agreement” ),
Pediatric agreed to sell the Purchasers an aggregate of $1,500,000
in three tranches of Callable Secured Convertible Notes (the
“Notes” ), of which $600,000 in
Notes were sold on May 30, 2006 and $400,000 in Notes were sold on
or around February 16, 2007, with the remaining $500,000 in Notes
to be sold in a subsequent tranche when Pediatric receives
effectiveness of its Form SB-2 Registration Statement as set forth
in the Purchase Agreement. Additionally, pursuant to the Purchase
Agreement and in connection with the sale of the Notes, Pediatric
granted 50,000,000 Warrants to purchase shares of Pediatric’s
common stock at $0.10 per share to the Purchasers (the “
Warrants ” or “
Warrant Agreements ”);
WHEREAS , Pediatric agreed to register the shares of
common stock which the Notes are convertible into and the shares of
common stock which the Warrants are exercisable for (the “
Underlying Securities ”), pursuant to
a Registration Rights Agreement (the “ Rights
Agreement ”) entered into with the Purchasers at
the Closing;
WHEREAS , the Parties have previously entered into a
Waiver of Rights Agreement dated October 25, 2006 (the “
Waiver Agreement ”), to amend certain
of the documents entered into by the Parties at the Closing,
including the Rights Agreement, which Waiver Agreement shall not be
affected by the terms and conditions of this Agreement;
WHEREAS , pursuant to Section 4(n) of the Purchase
Agreement, as amended by the Waiver Agreement, Pediatric agreed to
use its best efforts to obtain shareholders consent on or before
December 15, 2006, to increase its authorized shares of common
stock (the “ Shareholder Approval
”); and pursuant to Section 2(a) of the Rights Agreement, as
amended by the Waiver Agreement, Pediatric agreed to file a
registration statement with the Commission (the “
Registration Statement ”) covering
the Underlying Securities no later than January 15, 2007 (“
Filing Date ”) and pursuant to
Section 3(a) of the Rights Agreement, as amended by the Waiver
Agreement, to obtain effectiveness of such Registration Statement
by April 16, 2007 (the “ Effectiveness Date
”);
WHEREAS , pursuant to Section 3(V) of the Securities
Purchase Agreement, Pediatric agreed to maintain effective controls
and procedures (the “ Controls and
Procedures ”), which Controls and Procedures
Pediatric has had difficultly in maintaining to date;
WHEREAS , pursuant to Section 3(X) of the Securities
Purchase Agreement, Pediatric agreed that following the Closing, it
would be “solvent,” defined as having assets with a
fair market value greater than its liabilities (“
Solvency ”), which Pediatric no
longer believes is correct;
Pediatric
Prosthetics, Inc. Second Waiver of Rights Agreement
Page 1of 6
WHEREAS , pursuant to Section 7(G) of the Securities
Purchase Agreement and Section 3.9 of the Notes, Pediatric agreed
to obtain authorization to have its common stock quoted on the
OTCBB, which authorization has not been obtained to date (the
“ Listing Requirement
”);
NOW,
THEREFORE , in
consideration for the promises and pledges contained below and
other good and valuable consideration, which consideration
Pediatric and the Purchasers acknowledge receipt of, and the
premises and the mutual covenants, agreements, and considerations
herein contained, the Parties hereto agree as follows:
1.
Waiver of the
Defaults.
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Due to the fact
that Pediatric has experienced delays in filing its periodic
reports and information statement filing with the Commission in
connection with comments received from the Commission, which
comments were unforeseen at the Closing, and in consideration for
the grant of the Additional Warrants (as defined below) the
Purchasers agree:
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(1)
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To reconfirm
the waiver of Pediatric’s failure to file a registration
statement covering the Underlying Securities prior to January 15,
2007, which was the required filing date as provided in the Waiver
Agreement, which default has previously been waived via
email;
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(2)
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That Pediatric
is not in default of the Registration Rights Agreement or Warrant
Agreements as a result of such Registration Statement not including
the shares issuable to the Purchasers in connection with the
exercise of the Warrants;
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To waive
Pediatric’s inability to maintain effective Controls and
Procedures and to require Pediatric moving forward to use its
“best efforts” to maintain effective Controls and
Procedures;
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To waive the
Solvency requirement as provided by the Securities Purchase
Agreement;
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To waive the
Listing Requirement as provided by the Securities Purchase
Agreement and Notes, and instead to require Pediatric to use its
“best efforts” to obtain listing of its securities on
the OTCBB as soon hereafter as practicable; and
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which
acknowledgments and waivers shall be effective as of the Effective
Date.
2.
Amendment to Rights
Agreement .
(a)
Subject to satisfaction of the
conditions precedent set forth in Section 5 below, and in
consideration for the issuance of the Additional Warrants, as
defined below, Section 1(a)(iii) of the Rights Agreement is hereby
amended and replaced in its entirety and the following new Section
1(a)(iii), inserted in lieu thereof:
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