Document:

Exhibit
10.3

 

SECOND AMENDMENT TO
FORBEARANCE AGREEMENT

 

This SECOND AMENDMENT TO FORBEARANCE AGREEMENT (this “Amendment”)
is entered into as of June 15, 2009, by and among AMERICAN DEFENSE
SYSTEMS, INC., a Delaware corporation, A. J. PISCITELLI & ASSOCIATES,
INC., a New York corporation, AMERICAN PHYSICAL SECURITY GROUP, LLC, a Delaware
limited liability company (the “Borrowers”) and TD BANK, N.A., a
national banking association, and successor by merger to COMMERCE BANK, N.A
(the “Lender”).

 

RECITALS

 

The Borrowers and the Lender are parties to the Forbearance Agreement
and Amendment to Loan Agreement, dated as of April 27, 2009, as amended by
the Amendment to Forbearance Agreement, dated as of May 27, 2009 (the “Forbearance
Agreement”). Terms defined in the Forbearance Agreement shall have the same
defined meanings when such terms are used herein. The Borrowers have requested
that the Lender agree to extend the Forbearance Period. The Lender has agreed
to do so, subject to the terms of this Amendment. Accordingly, for valuable
consideration, the receipt and sufficiency of which are acknowledged, the
Lender and the Borrowers agree as follows:

 

1.             The definition of Forbearance Period in the
Forbearance Agreement is amended to read as follows:

 

“Forbearance Period” shall mean the period
beginning on the Forbearance Effective Date and ending on the earlier to occur
of: (i) the termination of the Forbearance Period as a result of any
Forbearance Default, and (ii) July 15, 2009.

 

2.             The Revolving
Credit Cap shall continue to be $2,500,000.

 

3.             Except as
specifically amended hereby, all terms, conditions, covenants, representations
and warranties contained in the Forbearance Agreement and the Loan Documents,
and all rights of the Lender and all of the obligations under the Forbearance
Agreement and the Loan Documents, shall remain in full force and effect. Each
of the Borrowers hereby confirms that the Forbearance Agreement and the Loan
Documents are in full force and effect, and that no Borrower has any right of
setoff, recoupment or other offset or any defense, claim or counterclaim with
respect to the Forbearance Agreement or any Loan Document or the Borrowers’
obligations thereunder.

 

4.             The execution,
delivery and effectiveness of this Amendment shall not directly or indirectly: (i) create
any obligation to make any further Loans or to continue to defer any
enforcement action after the occurrence of any Default or Event of Default
(including, without 

 

 

limitation, any Forbearance Default); (ii) constitute a consent or
waiver of any past, present or future violations of any provisions of the
Forbearance Agreement and the Loan Documents; (iii) amend, modify or
operate as a waiver of any
provision of the Forbearance Agreement or any Loan Document or any right, power
or remedy of the Lender except as expressly set forth herein; or (iv) constitute
a course of dealing or other basis for altering any obligations under the
Forbearance Agreement and the Loan Documents or any other contract or
instrument. Except as expressly set forth herein, the Lender reserves all of
its rights, powers, and remedies under the Forbearance Agreement Loan Documents
and applicable law. All of the provisions of the Forbearance Agreement and the
Loan Documents, including, without limitation, the time of the essence
provisions, are hereby reiterated, and if ever waived previously, are hereby
reinstated.

 

5.             The Borrowers shall
pay to the Lender, on the date of this Amendment, a forbearance extension fee
of $10,000.

 

6.             In addition to, and
not in lieu of, the terms of the Loan Documents relating to the reimbursement
of the Lender fees and expenses, the Borrowers shall reimburse the Lender
promptly on demand for all fees, costs, charges and expenses, including the
fees, costs and expenses of counsel and other expenses (including all fees and
expenses of Hunton & Williams LLP), incurred in connection with this
Amendment.

 

IN  WITNESS WHEREOF,  this Second
Amendment to Forbearance Agreement has been executed by the parties hereto as
of the date first written above.

 

 

	
   

  	
  BORROWERS:

  
	
   

  	
   

  
	
   

  	
  AMERICAN DEFENSE SYSTEMS, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  President

  
	
   

  	
   

  	
   

  
	
   

  	
  A.J. PISCITELLI & ASSOCIATES, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  President

  
	
   

  	
   

  	
   

  
	
   

  	
  AMERICAN PHYSICAL SECURITY GROUP, LLC

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  President

  
	
   

  	
   

  	
   

  
	
   

  	
  LENDER:

  
	
   

  	
   

  	
   

  
	
   

  	
  TD BANK, N.A.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Vice PresidentExhibit
10.1

 

 

May 20, 2009

 

Mr. Paul Hulme

 

Dear Paul:

 

This letter sets out the details of the offer of an overseas assignment
from Huntsman Polyurethanes (UK) Ltd. (hereafter called The Home Company) to Huntsman
Singapore Pte. Ltd (hereafter called The Host Company) and also covers the
terms and conditions upon which your contract of employment with The Home
Company shall be amended during the period of assignment and how those
arrangements will apply.  This contract
also replaces any contractual overseas contracts currently in place between
yourself and Huntsman.

 

For further information on overseas assignments please refer to the
Global Expatriation Management & Associate Handbook.

 

1.                                       CONTINUATION OF CONTRACT OF
EMPLOYMENT WITH THE HOME COUNTRY

 

Although you will be working with The Host Company, your contract of
employment with The Home Company will continue in existence during your
assignment, except as herein provided. 
In particular the provision regarding termination of employment will
remain in full force and operation throughout the period of your
assignment.  The following terms shall be
in operation throughout the duration of your assignment.

 

2.             DURATION OF AND CONDITIONS OF
ASSIGNMENT

 

2.1                                 Duration

 

The assignment will start on 1 May 2009 and will last for
approximately three years. It will not be extended beyond 30 April 2012
without your agreement.   Please refer to
the Expatriation Handbook for further details relating to extended assignments.

 

2.2                                 Conditions

 

The offer of assignment is subject to the conditions that you are
granted the necessary entry papers into the host country and that you are
medically fit for service with The Host Company.  Your Host Company HR contact will coordinate
i) any necessary host country work permit/visa application process on your
behalf and ii) arrange any necessary medical examinations.

 

 

3.             ROLE & LOCATION OF
SERVICE

 

Your appointment will be as Divisional President, Textile Effects.

 

4.             BASE ANNUAL SALARY

 

For the purpose of calculating your overseas remuneration package, an
initial home notional salary (basic annual salary) has been established at £249,900
per annum.  During the period of your
assignment your salary will be subject to normal home country review.

 

5.             EXPATRIATE REMUNERATION PACKAGE

 

Please find enclosed a copy of your overseas salary proforma.   Huntsman’s expatriate remuneration policy
for expatriates has been applied in calculating your overseas remuneration
package.  Details will be explained to
you by The Home Company HR contact, further information can also be found in
the Expatriation Handbook.

 

5.1           Gross Salary

 

During your assignment to The Host Company, your remuneration package
will be based on a gross annual salary of £254,898 per annum.    From this gross figure a home net salary
will be derived, following hypothetical deductions of home tax, social security
and pension fund contributions.

 

5.2           Indexation

 

Please refer to the Expatriation Handbook for details relating to
salary indexation.

 

5.3           International Location Allowance (ILA)

 

You will also receive an ILA equal to 10% of your gross annual
salary.  Please note that the ILA is not
a pensionable benefit.

 

5.4                                 Remuneration Delivery

 

You may choose from a defined range of options to split the delivery of
your expatriate salary into a percentage paid in your home country with the
balance being paid in the host country, on the understanding that the ILA is
always payable in your home country, please refer to your salary proforma for
details.  Once a year (usually following
the annual salary review exercise) you may elect to alter your preferred split
payment option.  Salary payments will be
credited into the bank accounts of your choice in the home and host country
only, arrangements for salary payments into offshore accounts are not
possible.  Payment will be made on the
usual home and host country pay dates.

 

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5.5                                 Salary Review

 

Your expatriation salary calculation will be reviewed at least once a
year, taking into account all changes which have taken place in your home
country in as far as changes concerning tax brackets, social security, annual
salary review, cost of living index and rates of exchange.

 

6.             TAXATION

 

6.1                                 Host Country Tax

 

It is clear that the payments described above are net payments.  (The Home or Host Company will be responsible
for administering payment of relevant tax, social security and pension fund
contributions).  You agree therefore that
your gross remuneration as declared to the host country authorities for any tax
year may increase or decrease depending on the measures of the host country
government in relation to tax tables and premiums and to any tax concession
that may be applicable to non-residents.

 

The Host Company will provide you with support for host country income
tax returns for the duration of this assignment.  In return, you agree to disclose all
information necessary to prepare an accurate and complete return, and to comply
with the host country income tax requirements. 
In case of non compliance with the above, you will not be covered by tax
equalisation in the host country.

 

The Home or Host Company will not be liable for any additional tax
payable as a result of additional income from any other source.  Such tax liability shall be for your own
account.

 

We draw your attention to the fact that the split remuneration payments
will not affect the host country taxable income, as payments in both countries
will have to be considered as income derived from The Host Company and taxable
as such.

 

6.2                                 Home Country Tax

 

The Home Company will provide consultancy support for your home country
tax affairs for the tax year back to the home country.  You are responsible for your home country tax
affairs & tax returns in the intervening years of your assignment.  At the beginning of your assignment a  ‘one-off’ consultancy
with an externally appointed tax consultant will be provided to enable you to
address any concerns relating to your  ‘home
country personal financial affairs’.  
Any ongoing/extra support required for personal financial affairs will
be for your own account.  (i.e. The Home
Company will support a one-off consultancy only; no further costs are supported
under the Huntsman global expatriation policy for personal financial affairs,
including all matters relating to home housing.)   Should you wish to take advantage of this
benefit please let me know.

 

Please note: Your remuneration during the period of your assignment is
based on the assumption that no home country tax will be payable on any of that

 

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remuneration.  However, if the
duration of your stay abroad is less than a complete tax year, or if you spend
a large number of days in your home country you may become liable for home
country income tax on the employment income related to your assignment.  Huntsman will not be responsible for home
country tax liabilities on your expatriation remuneration if any time spent in
the home country is not approved by your Line Manager and The Host Company HR
contact beforehand.

 

6.3           To Clarify the Tax Position

 

Throughout the duration of
this assignment, notwithstanding any external legal requirements, you will be
subject to hypothetical home country tax for ‘employment related items only’
e.g. salary, company benefits, assignment allowances & benefits as if
you had continued working throughout in the home location.  Huntsman will bear any additional ‘employment
related’ tax costs in the home and host locations  It follows therefore, that any tax refunds generated
as a result of your assignment will be for Huntsman.

 

7.             ANNUAL HOLIDAY / VACATION

 

Whilst on assignment your holidays will consist of the following:-

 

i)              Normal home country basic annual
holiday entitlement.  (26.5 days)

 

ii)                                      Host location national/public/discretionary
days.  The Host Company HR contact can
advise you of the dates.

 

Any outstanding pro-rata home country annual holidays should normally
be taken before the start of your assignment (similarly you should not carry
forward or be paid for any unused holidays at the end of your assignment).  The rules regarding the taking of
holidays whilst on assignment will be defined by The Host Company HR contact.

 

8.             PENSION FUND

 

During the period of your assignment, it is anticipated that you will accrue
benefits in the PU UK Pension Plan.  If,
for external legal reasons beyond the control of Huntsman, you are obliged to
exit those pension arrangements, the Home Company HR department will confirm
what alternative options are available to you. 
The IPP guarantee that has been confirmed to you in an earlier note will
continue to apply.

 

9.             SOCIAL SECURITY

 

The Home Company HR contact will advise you of the relevant
arrangements reference membership of your home country social security.   Further details about the administrative
procedure and the Company support relating to expatriate’s social security
arrangements may be obtained from The Home Company HR contact.

 

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10.           MEDICAL INSURANCE

 

You
and your accompanying family members will be enrolled under an International
Healthcare Scheme, details of which will be made available to you.  For items that may not be covered under the
scheme, you will be expected to make a contribution towards the cost at a rate that
is equal to any personal cost you would normally incur in your Home
country.  Claims for company
reimbursement may need to be supported in writing by a member of the relevant
medical profession.

 

Huntsman
will not fund costs for cosmetic treatments.

 

Please note that Huntsman
retains the right to change insurance providers or medical/dental/optical
practitioners at any
time.

 

11.           EMERGENCY ASSISTANCE SERVICES (SOS)

 

You will be offered membership of the International SOS scheme,
providing you with an emergency support service for obtaining medical
treatment, evacuation, repatriation advice & assistance.

 

12.           RELOCATION

 

12.1                           Transfer of Personal Effects

 

Huntsman will assist with transferring your personal effects to the
host country and again on return to the home country or transfer to another
country.  Please contact your HR Manager
for shipping policy details and assistance. 
Huntsman’s external relocation agent will assist with any customs
formalities required to transfer ‘allowable’ personal effects across
international borders.

 

12.2         Relocation Allowance

 

On return to the home country or transfer to another country, you will receive
a transfer allowance equal to 10% (net) of your notional home salary.

 

In some countries it may be necessary for you to provide proof of
expenditure, the host or home HR contact will advise if this is necessary.

 

13.           HOME VISITS

 

The Host Company will provide
you and your accompanying family with one home country return trip, for each
twelve months of your assignment, with the return to the home country counting
as the final visit.  (i.e. 2 year
assignment = one interim home trip, 3 year assignment = two interim home
trips).  The timing of the visits to be
agreed with your Line Manager, home visits should not normally be taken during
the first six months or last six months of the assignment.   The class of travel will be economy.

 

5

 

For these home visits, The
Host Country will pay for scheduled travel (door to door) between the host and
home countries, but not for hotel accommodation or car hire during your stay in
the home country.   There will be no
restrictions on routing but any additional costs due to unusual or longer
routing will be for your own account.  Also,
it is a condition that during each visit you and your family spend time in your
home country in order to renew family and business links.  This benefit cannot be taken as a cash
alternative.  Please ensure you retain all
travel tickets, boarding passes and receipts for any necessary expense claim or
tax reporting requirements.

 

14.           ACCOMMODATION WHILST ON ASSIGNMENT

 

14.1                           Temporary

 

If required The Host Company will provide temporary accommodation for
the first few weeks of your assignment. 
If self-catering facilities are not available in the temporary
accommodation, you may claim reasonable subsistence expenses (reimbursed
against receipt only). It is expected that transfer to longer term
accommodation is arranged as soon as possible after arriving in the host country.  This arrangement will also apply on your
return to the home country or transfer to another assignment.

 

14.2                           Long Term

 

You will be provided with a suitable standard of long term
accommodation in the host location, please refer to the expatriation handbook
for more details.  Rental costs and any
related tax liabilities, within the defined host housing guidelines, will be
met by The Host Company.  Please note
that as the Company provides accommodation in the host country, all home
housing costs are for your own account.

 

14.3                           Utilities

 

If your immediate family members are joining you on assignment
(spouse/partner/children) the host country utilities will be for your own
account.   Please refer to the
expatriation handbook for policy details.

 

15.           TRAVEL ARRANGEMENTS (at start and
end of assignment)

 

The Host Company will support the travel costs of you and any
accompanying family members to and from the host country at the start and end
of your assignment in accordance with the Huntsman Business Travel Policy in
operation at the time of travel.

 

16.           CAR

 

During your assignment you will be provided with a leased vehicle which
is consistent with The Host Company’s car policy.   Tax assessment for car benefit(s) will
be managed under home country gross to net salary calculations.

 

6

 

17.           DISCIPLINE

 

In the interests of safety and good practice you are required to comply
with the disciplinary rules in force in The Host Company and any
additional rules that may be notified to you by Huntsman from time to
time.

 

18.           TERMINATION OF ASSIGNMENT

 

18.1                           Your assignment will cease at the
end of 30 April 2012 or such earlier date as The Home Company will notify
you by not less than three months prior written notice.  You may terminate the assignment at any time
by giving The Home Company no less than three months prior written notice.

 

18.2                           On termination of your assignment
in accordance with 18. 1 above you will revert to the full terms of your home
country contract of employment, subject to the following:

 

At the end of your
assignment, your annual base salary will reflect the position offered to you by
Huntsman on your return to the home country (which shall be no lower than the
annual home notional salary applicable at the end of your assignment), and the
terms and benefits corresponding to that position will apply.

 

18.3                           Notwithstanding 18. 1 above, The
Home Company may, by notice in writing, terminate forthwith your assignment in
any of the following events:

 

i)                                         If you shall be guilty of any
serious misconduct or, after warning, neglect of duty or shall commit any
serious or persistent breach of your terms of employment or shall become
bankrupt or insolvent or make an arrangement with your creditors.

 

ii)                                      If by any reason of illness you
are unable to carry out your duties for any time in excess of six calendar
months during any period of twelve calendar months (calculated from the date of
commencement of illness).

 

18.4                           You agree that on the termination
of your assignment under this contract and in accordance with the terms
specified in 18.1, 2, & 3 above, there shall be excluded in relation
to your assignment under this agreement any claim i) in respect of any rights
conferred by the host country employment protection legislation or, ii) for a
redundancy payment pursuant to that legislation.

 

18.5                           Should you terminate your employment with Huntsman whilst on this
overseas assignment, Huntsman retains the right not to pay any associated
relocation costs or allowances as result of your resignation.

 

7

 

18.6                           Should Huntsman terminate your home country contract whilst on this
overseas assignment, Huntsman will relocate you and your accompanying family to
your home country and normal relocation policy support will be provided.

 

19.           SECRECY

 

You are reminded that during your assignment, and on return to the home
country, the secrecy clause of The Home Company contract of employment will
continue to apply.

 

20.           LAW

 

This agreement is governed by the employment laws that are applicable
in your home country.

 

If you would like to accept the offer of assignment based on the terms
and conditions outline above, would you please sign and return the enclosed
copy of this letter.

 

Yours sincerely,

 

 

	
  /s/ Dave Hopson

  	
   

  
	
  Dave Hopson

  	
   

  
	
  Home Country HR Manager

  	
   

  

 

 

I have read, understood and accept the assignment to The Host Company
on the terms and conditions outlined herein. 
I also acknowledge receipt of an electronic copy of the Global
Expatriation Management & Associate Handbook.

 

 

	
  Signed

  	
   

  	
  Date:

  
	
   

  	
   

  	
   

  
	
  /s/ Paul Hulme

  	
   

  	
  June 15, 2009

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  enc.  Salary Proforma

  	
   

  	
   

  

 

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