AMENDMENT AND WAIVER AGREEMENT
This
Amendment Waiver Agreement (this “Agreement”),
is
made and entered into as of February 5, 2008, by and among Solomon Technologies,
Inc., a Delaware corporation (the “Company”)
and
Iroquois Master Fund, Ltd. (“Iroquois”
or
the
“Holder”),
a
Cayman Islands Corporation. Capitalized terms not defined in this Agreement
have
the same meanings ascribed to them in the Purchase Agreement (as defined
below).
WHEREAS,
the Company and Holder are parties to that certain Securities Purchase
Agreement, dated as of January 17, 2007, as amended on August 24, 2007 (the
“Purchase
Agreement”),
under
which the Company issued to the Holders and certain other investors its Variable
Rate Self-Liquidating Senior Secured Convertible Debentures with an aggregate
principal amount of $5,350,000 (the “Debentures”),
and
Common Stock Purchase Warrants to purchase up to, in the aggregate, 2,006,250
shares of Common Stock (the “Warrants”);
and
WHEREAS,
commencing on February 15, 2008, Holder is entitled to use Rule 144 to
sell, without volume or manner restrictions, the Conversion Shares issuable
upon
(i) conversion of the Debentures then held by the Holder or (ii) payment of
a
Monthly Redemption Amount by the Company; and
WHEREAS,
as long as the Debentures are outstanding the Company will owe to the Holder
a
Monthly Redemption Amount payable on each Monthly Redemption Date;
and
WHEREAS,
the Company owes to the Holder a Monthly Redemption Amount that became payable
on January 1, 2008 (the “January
2008 Redemption”)
and
remains unpaid as of the date of this Agreement; and
WHEREAS,
the Company owes to the Holder a Monthly Redemption Amount that became payable
on February 1, 2008 (the “February
2008 Redemption”)
and
remains unpaid as of the date of this Agreement; and
WHEREAS,
the Company proposes to deliver shares to Iroquois for the January 2008
Redemption and the February 2008 Redemption in unrestricted Conversion Shares
that are salable pursuant to Rule 144 (subject to volume limitations), and
has
requested that the Holder waives certain provisions of the Transaction Documents
in connection with the delay of the January 2008 Redemption and the February
2008 Redemption; and
WHEREAS,
beginning with the Monthly Redemption due March 1, 2008, and continuing until
the Debentures are fully redeemed, the Company proposes to make the Holder’s
Monthly Redemptions by paying to the Holder its respective Monthly Redemption
Share Amount of Conversion Shares, and has requested that the Holder waive
certain provisions of the Transaction Documents in connection with the payment
of the Monthly Redemption Amounts in Conversion Shares; and
WHEREAS,
the Company proposes to include the shares of Common Stock issuable upon
exercise of the Warrants in a registration statement (the “New
Registration Statement”)
on
Form SB-2 (or another appropriate form) that the Company will file pursuant
to a
pending private equity placement; and
WHEREAS,
the Company will use its commercially reasonable best efforts to file the New
Registration Statement with the Commission no later than May 31, 2008;
and
WHEREAS,
the parties desire to waive and amend certain provisions of the Debentures
and
the Registration Rights Agreement, each as previously amended, according to
the
terms of this Agreement; and
WHEREAS,
the Company desires to issue to Iroquois, as inducement to enter into this
Agreement, 21,116 restricted shares of Common Stock (the “Inducement
Shares”).
NOW
THEREFORE, in consideration of the terms contained in this Agreement, and other
good and valuable consideration, the receipt and sufficiency of which is
acknowledged, the parties, intending to be legally bound, agree as
follows:
Section
1. Amendment
of the Registration Rights Agreement.
Notwithstanding the provisions of Section 1 of the Registration Rights
Agreement, the Holder agrees that the definition of Registrable Securities
shall
not include any shares that can be sold by the holder thereof without volume
or
manner restrictions pursuant to Rule 144 or any successor rule under the
Securities Act provided that counsel to the Company provides the transfer agent
of the Company with an opinion that such Registrable Securities may be resold
pursuant to Rule 144 without volume or manner restrictions.
Section
2. Waivers
with respect to the Registration Rights Agreement.
In
consideration for the Inducement Shares and subject to the terms and conditions
of this Agreement, the Holder waives (i) any failure or delay by the Company
that may have occurred through the date hereof in fulfilling any of the
Company’s obligations under the Registration Rights Agreement; and (ii) any
accrued but unpaid liquidated damages as set forth in Section 2(b) of the
Registration Rights Agreement as a result of any past failure or delay by the
Company in fulfilling its obligations under the Registration Rights Agreement
and any such liquidated damages that would have accrued prior to February 15,
2008.
Section
3. New
Registration Statement.
The
Company will include the shares underlying the Warrants and the Inducement
Shares in the New Registration Statement, and the Company will use its
commercially reasonable best efforts to file the New Registration Statement
with
the Commission no later than May 31, 2008.
Section
4. Waivers
with respect to Equity Conditions.
Subject
to the terms and conditions of this Agreement and concerning the Equity
Conditions set forth in Section 1 of each of the Debentures (the “Equity
Conditions”), Holder waives any failure by the Company to meet:
(a) each
of
the Equity Conditions in connection with paying the January 2008 Redemptions
and
the February 2008 Redemptions in Conversion Shares; and
(b) clauses
(ii), (iii), (vi), and (x) of the Equity Conditions in connection with paying
the Monthly Redemptions in Conversion Shares, beginning with the Monthly
Redemption due March 1, 2008, and continuing until the Debentures are fully
redeemed, provided that the Conversion Shares may be sold by the Holder without
volume or manner restrictions and counsel to the Company has provided the Holder
with an opinion addressed to the transfer agent to such effect and acceptable
to
the transfer agent.
Notwithstanding anything to the contrary herein, the Company cannot deliver
stock to Iroquois if the VWAP on the date of notice or delivery is below $0.05
per share.
Section
5. Waiver
of Overdue Redemption Payments.
Subject
to the terms and conditions of this Agreement, Holder hereby waives any Event
of
Default (as defined in the Debentures) occasioned by the Company’s failure to
make timely payment of the January 2008 Redemption Payment and the February
2008
Redemption Payment prior to February 15, 2008.
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Section
6. Effect
on Transaction Documents.
The
foregoing waivers and agreements are given solely in respect of the transactions
described herein. This Agreement does not serve to waive any covenant,
condition, Event of Default or other right of the Holders relating to any
issuance by the Company of debt or equity securities in a capital raising
transaction occurring after the date of this Agreement. Except
as
expressly set forth in this Agreement, all of the terms and conditions of the
Transaction Documents shall continue in full force and effect after the
execution of this Agreement. This
Agreement shall not constitute a novation or accord and satisfaction of any
such
Transaction Document.
Section
7. Filing
of 8-K.
By 8:30
am on February 7, 2008, the Company shall issue a Current Report on Form 8-K,
reasonably acceptable to Holder disclosing the material terms of the
transactions contemplated, which shall include this Agreement as an attachment
thereto.
Section
8. Non-Affiliate.
The
Holder represents and warrants that as of the date of this Agreement (i) it
is
not an Affiliate of the Company and (ii) it has not been an Affiliate of the
Company for at least the three months preceding the date of this Agreement.
Holder covenants that, if it becomes an Affiliate of the Company at any time
while it holds any Debentures or Warrants, it shall promptly notify the Company
of its Affiliate status.
Section
9. Delivery
of Shares.
(a) January
and February 2008 Redemptions:
The
Company and Iroquois hereby agree that with respect to the January and February
2008 Redemptions the Monthly Redemption Date will be February 15, 2008. The
Company will pay the January and February Monthly Redemption Amounts, including
accrued interest on Holder’s Debenture as of January 1, 2008 and February 1,
2008, respectively in Conversion Shares (the “Monthly Redemption Share Amount”)
based on a conversion price equal to 82.5% of the average of the VWAP’s for the
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consecutive Trading Days ending on the Trading Day of February 14, 2008 (the
“Waiver Monthly Redemption Period”). In advance of this Monthly Redemption
Payment, on February 7, 2008 (the “Pre-Redemption Shares Delivery Date), the
Company hereby agrees that within 3 Trading Days of the date hereof, it will
cause its transfer agent to issue to the Holders a number of shares of Common
Stock (bearing the restrictive legend below in 9(c)) to be applied against
such
Monthly Redemption Share Amount equal to the applicable Monthly Redemption
Share
Amount divided by 82.5% of the average VWAP’s for the 10 consecutive Trading
Days immediately preceding the Pre-Redemption Conversion Shares Delivery Date.
Notwithstanding anything to the contrary herein, the delivery of Pre-Redemption
shares shall not exceed 480,000 shares.
(b) March
2008 Redemption:
The
Company and Iroquois hereby agree that with respect to the March 2008 Redemption
that the Redemption date shall be March 1 as provided in the transaction
documents but that the Pre-Redemption Shares for such payment shall be delivered
by the company on February 15, 2008 with the true-up to occur on March 1, 2008
all as according to the mechanics specified in Section 6(a) of the Purchase
Agreement.
(c) Issuance
of Inducement Shares.
The
Company hereby agrees that within 3 Trading Days of the date hereof, it will
cause its transfer agent to issue to each of the Holders a number of Inducement
Shares determined by the calculation described in this Agreement. The Inducement
Shares may only be transferred or otherwise disposed of in compliance with
state
and federal securities laws. The certificates for the Inducement Shares shall
bear a restrictive legend in substantially the following form:
[NEITHER]
THIS SECURITY [NOR THE SECURITIES INTO WHICH THIS SECURITY IS [EXERCISABLE]
[CONVERTIBLE] HAS NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE
COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN
EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
“ACT”) AND ARE “RESTRICTED SECURITIES” AS THAT TERM IS DEFINED IN RULE 144 UNDER
THE ACT. THE SECURITIES MAY NOT BE OFFERED OR FOR SALE, SOLD OR OTHERWISE
TRANSFERED EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OR PURSUANT TO AN EXEMPTION FROM, OR UNDER THE ACT, THE
AVAILABILITY OF WHICH IS ESTABLISHED TO THE SATISFACTION OF THE COMPANY.]
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(c) The
Holder agrees that the delivery to it of the Conversion Shares to be delivered
to it in accordance with paragraph (a) above shall constitute full payment
of
the January and February 2008 Redemption owed to each Holder.
Section
10. Section 2. Amendment
of the Debenture.
(a)
The
definition of “Maturity Date” in the second paragraph of the Iroquois’
Debentures of is hereby amended as follows:
“,…May
30, 2008 (the “Maturity
Date”).”
(b)
The
definition of “Monthly Redemption Amount” in Section 1 of Iroquois’ Debentures
is hereby deleted and replaced in its entirety with the following:
“Monthly
Redemption Amount”
means an amount equal to the then outstanding principal amount of this Debenture
on the first Monthly Redemption Date following August 24, 2007 multiplied by
a
fraction, the numerator of which is 1 and the denominator of which is the number
of months between such first Monthly Redemption Date and May 30,
2008.”
(c) Nothing
in this Agreement shall serve to amend or be interpreted as amending the
Debentures for Holders thereof other Iroquois.
Section
11. Execution
and Counterparts.
This
Agreement may be executed in two or more counterparts, all of which when taken
together shall be considered one and the same agreement.
[SIGNATURE
PAGES FOLLOW]
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IN
WITNESS WHEREOF, and intending to be legally bound, the parties have executed
this Agreement as of the date first set forth above.
| SOLOMON TECHNOLOGIES, INC. | ||
| |
|
|
| By: | Xxxx X. Laskowksi | |
|
Name:
Xxxx X. Xxxxxxxxx
Title:
Chairman, Board of Directors
|
||
HOLDERS
Name
of
Holder: Iroquois Master Fund, Ltd
Signature
of Authorized Signatory of Holder: /s/
Xxxx Xxxxxxxxx
Name
of
Authorized Signatory: Xxxx
Xxxxxxxxx
Title
of
Authorized Signatory: __________________________
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