American Defense settles disputes with series A preferred holders

By Angela McDaniels

Tacoma, Wash., May 26 - American Defense Systems, Inc. said it settled all outstanding disputes with the holders of its series A convertible preferred stock.

The company sold 15,000 of the preferreds and warrants for 3.75 million shares of common stock to West Coast Opportunity Fund, LLC, Centaur Value Partners, LP and United Centaur Master Fund in a private placement in March 2008.

In February, West Coast requested the redemption of its preferreds and the payment of accrued dividends after American Defense Systems failed to meet the preferreds' financial covenants.

According to an 8-K filing with the Securities and Exchange Commission, the terms of the settlement include:

• The holders waived any breach by the company of the financial covenants or the failure to pay dividends on time through Sept. 30;

• American Defense Systems has until Dec. 31, 2009 to redeem $7.5 million, or 50%, of the preferreds, all of which had been due immediately at face value;

• The company paid the March, June and September dividend payments in common stock, using an assumed conversion price of $0.60; and

• The exercise price of the warrants was reduced to $0.01 per share from $2.40.

The conversion price of the preferreds remains $2.00 per share. However, if the company fails to redeem 50% of the preferreds by Dec. 31, 2009, the holders will be entitled to designate two board members and American Defense Systems will be required to seek stockholder approval to lower the conversion price of the preferreds to $0.50 per share.

American Defense Systems makes armor, architectural hardening and security products. It is based in Hicksville, N.Y.

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