MSTI Holdings, Inc. Hawthorne, New Jersey 07506 January 31, 2008
000-000
Xxxxxx Xxxx
Xxxxxxxxx,
Xxx Xxxxxx 00000
January
31, 2008
To
the
MSTI Holdings, Inc. Debenture Holders:
1. Liquidated
Damages; Repricing Warrants.
Reference is hereby made to that certain Registration Rights Agreement, dated
as
of May 25, 2007 (the “Registration
Rights Agreement”),
by
and among MSTI Holdings, Inc., a Delaware corporation (the “Company”),
and
each entity identified on the signature pages thereto (each, including its
successors and assigns, a “Purchaser”
and,
collectively, the “Purchasers”).
Capitalized terms used in this Section 1 of this letter agreement and not
otherwise defined shall have the meanings ascribed to them in the Registration
Rights Agreement.
Pursuant
to Section 1 of the Registration Rights Agreement, the Company was required
to
cause the Initial Registration Statement to be declared effective by the
Securities and Exchange Commission (the “Commission”)
on or
prior to the Effectiveness Date, as such date has been extended to November
21,
2007 by letter agreement between the Purchasers and the Company. Pursuant to
Section 2(b) of the Registration Rights Agreement, if the Initial Registration
Statement is not declared effective by the Commission by November 21, 2007,
the
Company is required to pay to each Purchaser, for each month in which the
Registration Statement has not been declared effective, an amount in cash equal
to 1% of the aggregate purchase price paid by such Purchaser for any
unregistered Registrable Securities then held by such Purchaser (“Liquidated
Damages”).
The
undersigned Purchasers hereby waive any non-compliance with the aforementioned
Section 2(b) of the Registration Rights Agreement, and waive any default or
Event of Default (as such term is defined in the Debentures), and any breach
or
threatened breach, arising under the Registration Rights Agreement or any other
Transaction Document, including without limitation the Debentures and the
Warrants, and waive any Liquidated Damages, in each case resulting or that
could
result from the Company’s failure to have the Initial Registration Statement
declared effective by the Commission by November 21, 2007.
In
exchange for such waiver by the Purchasers of their rights to Liquidated
Damages, the parties hereto agree that Section 2(b) of the Warrants be hereby
amended to reduce the exercise price from $1.00 to $0.65 per share.
2. Subsequent
Equity Sales.
Reference is hereby made to that certain Securities Purchase Agreement, dated
as
of May 24, 2007 (the “Purchase
Agreement”),
by
and among the Company and the Purchasers. Capitalized terms used in this Section
2 of this letter agreement and not otherwise defined shall have the meanings
ascribed to them in the Purchase Agreement.
Pursuant
to Section 4.13(a) of the Purchase Agreement, as amended, the Company is
prohibited from issuing shares of Common Stock or Common Stock Equivalents
until
90 days after the Registration Statement is declared effective, except for
Exempt Issuances. The Purchasers hereby waive any non-compliance with the
aforementioned Section 4.13(a), and waive any default or Event of Default (as
such term is defined in the Debentures), and any breach or threatened breach,
arising under the Purchase Agreement or any other Transaction Document,
including without limitation the Debentures and the Warrants, and waive any
and
all penalties, damages, and claims resulting or that could result from the
issuance of (i) shares of Common Stock to Telkonet, Inc. for a purchase price
of
up to $3,000,000, of which $275,000 of such proceeds will be used by the Company
for European investor relations purposes, (ii) shares of Common Stock issued
in
connection with acquisitions or strategic transactions approved by the directors
of the Company, but not including a transaction where the shares are being
issued primarily for the purpose of raising capital or to an entity whose
primary business is investing in securities, and (iii) an additional 2,000,000
shares of Common Stock to employees and consultants under the Company’s 2007
Stock Incentive Plan at an exercise price of no less than $0.65 per
share.
3. Amendment
to Debenture.
The
text of Section 8(a)(ix) of the Debenture is hereby deleted and replaced with
the following:
“Xxxxx
X.
Xxxxxxxxx shall cease to serve as Chief Executive Officer of the Company.”
4. Repricing
Outstanding Options and Warrants.
The
undersigned hereby further agree that, notwithstanding anything in the
Transaction Documents to the contrary, the exercise price of all options and
warrants issued by the Company which are currently outstanding shall be set
at
$0.65 per share.
5. Filing
of 8-K.
On or
before 5:30 pm (New York time) on the date after all undersigned have signed
this letter agreement, the Company shall file a Current Report on Form 8-K,
reasonably acceptable to each undersigned disclosing the material terms of
this
letter agreement, which shall include this letter agreement as an attachment
thereto.
6. Independent
Nature of Purchasers' Obligations and Rights.
The
Company has elected to provide all Purchasers with the same terms and letter
agreement for the convenience of the Company and not because it was required
or
requested to do so by the Purchasers. The obligations of each Purchaser under
this letter agreement, and any Transaction Document, are several and not joint
with the obligations of any other Purchaser, and no Purchaser shall be
responsible in any way for the performance or non-performance of the obligations
of any other Purchaser under this letter agreement or any Transaction Document.
Nothing contained herein or in any Transaction Document, an no action taken
by
any Purchaser pursuant thereto, shall be deemed to constitute the Purchasers
as
a partnership, an association, a joint venture or any other kind of entity,
or
create a presumption that the Purchasers are in any way acting in concert or
as
a group with respect to such obligations or the transactions contemplated by
this letter agreement or the Transaction Documents. Each Purchaser shall be
entitled to independently protect and enforce its rights, including, without
limitation, the rights arising out of this letter agreement or out of the other
Transaction Documents, and it shall not be necessary for any other Purchaser
to
be jointed as an additional party in any proceeding for such purpose. Each
Purchaser has been represented by its own separate legal counsel in their review
and negotiation of this letter agreement and the Transaction
Documents.
7. Miscellaneous.
Subject
to the waivers and agreements provided herein, the Transactions Documents shall
remain in full force and effect. Except as expressly set forth herein, this
letter agreement shall not be deemed to be a waiver, amendment or modification
of any provisions of the Transaction Documents or of any right, power or remedy
of the Purchasers, or constitute a waiver of any provision of the Transaction
Documents (except to the extent herein set forth), or any other document,
instrument and/or agreement executed or delivered in connection therewith,
in
each case whether arising before or after the date hereof or as a result of
performance hereunder or thereunder. The Purchasers reserve all rights,
remedies, powers or privileges available under the Transaction Documents, at
law
or otherwise, subject to the terms of this letter agreement. This letter
agreement shall not constitute a novation or satisfaction and accord of the
Transaction Documents or any other document, instrument and/or agreement
executed or delivered in connection therewith. This letter agreement shall
be
governed by and construed in accordance with the laws of the State of New
York.
-2-
Please
indicate your acknowledgment of and agreement to the foregoing by signing a
copy
of this letter and returning an executed original to the Company.
This
letter agreement may be executed by the parties hereto in counterparts, and
execution may be evidenced by facsimile or other electronic transmission of
a
signed signature page by any party hereto, and all of such counterparts together
shall constitute one and the same instrument.
| Sincerely, | ||
| |
|
|
| /s/ Xxxxx Xxxxxxxxx | ||
| Xxxxx Xxxxxxxxx | ||
| Chief Executive Officer | ||
-3-
[DEBENTURE
HOLDER SIGNATURE PAGE]
ACCEPTED
AND AGREED:
| DKR SOUNDSHORE OASIS HOLDING FUND LTD. | ||||
| By: DKR Oasis Management Company LP, its investment manager | ||||
| By: | /s/ Xxxxxxx Xxxxxx | Dated: 02/04/2008 | ||
| Name: |
Xxxxxxx Xxxxxx |
|||
| Title: | Authorized signatory | |||
| ALPHA CAPITAL ANSTALT | ||||
| By: | /s/ Xxxxxx Xxxxxxxx | Dated: 02/11/2008 | ||
| Name: |
Xxxxxx Xxxxxxxx |
|||
| Title: | Director | |||
| GEMINI MASTER FUND, LTD. | ||||
| By: | /s/ Xxxxxx X. Xxxxxxx | Dated: 02/11/2008 | ||
| Name: |
Xxxxxx X. Xxxxxxx |
|||
| Title: | President of the Investment Manager | |||
| WHALEHAVEN CAPITAL FUND LIMITED | ||||
| By: | /s/ Xxxxx Xxxxxxx | Dated: 02/07/2008 | ||
| Name: |
Xxxxx Xxxxxxx |
|||
| Title: | CFO | |||
|
CMS
CAPITAL
|
||||
| By: | /s/ Xxxxxx Xxxxx | Dated: 02/06/2008 | ||
| Name: |
Xxxxxx Xxxxx |
|||
| Title: | Director | |||
| BRIO CAPITAL L.P. | ||||
| By: | /s/ Xxxxx Xxxxxx | Dated: 02/11/2008 | ||
| Name: |
Xxxxx Xxxxxx |
|||
| Title: | Manager of General Partner | |||
-4-
