MSTI Holdings, Inc. Hawthorne, New Jersey 07506 May 23, 2008
▇▇▇-▇▇▇
▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇,
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
May
23,
2008
To
the
MSTI Holdings, Inc. Debenture Holders:
Reference
is hereby made to that certain Securities Purchase Agreement, dated as of May
25, 2007 (the “Purchase
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 letter agreement (this “Agreement”)
and
not otherwise defined shall have the meanings ascribed to them in the Purchase
Agreement.
1.
Additional
Indebtedness.
Section
7(a) of the Debentures states that so long as any portion of the Debentures
remains outstanding, unless the holders of at least 85% in principal amount
of
the then outstanding Debentures shall have otherwise given prior written
consent, the Company shall not, directly or indirectly, other than Permitted
Indebtedness, enter into, create, incur, assume, guarantee or suffer to exist
any indebtedness for borrowed money of any kind.
The
Purchasers hereby consent solely to the issuance of the Additional Debentures
(as defined below).
2. Additional
Debentures; Other Financing.
(a)
Each
of
the Purchasers hereby agrees to purchase from the Company, and the Company
hereby agrees to sell to the Purchasers, additional Debentures in the aggregate
principal amount of $75,000 (the “Additional
Debentures”),
in
the denominations set forth on Schedule
I
hereto.
Upon receipt by the Company of the funds, the Company shall promptly deliver
newly issued Debentures to the Purchasers as set forth on said Schedule
I.
(b) The
rights and obligations of each Purchaser (severally and not jointly with the
rights of the other Purchasers) and of the Company with respect to the
Additional Debentures and the shares of Common Stock issuable under the
Additional Debentures (the “Additional
Underlying Shares”)
shall
be identical in all respects to the rights and obligations of such Purchaser
and
of the Company with respect to the Debentures and the Underlying Shares. The
Purchase Agreement is hereby amended so that the term “Debentures” includes the
Additional Debentures and the term “Underlying Shares” includes the Additional
Underlying Shares. The Registration Rights Agreement entered into in connection
with the Purchase Agreement is hereby amended so that the term “Registrable
Securities” includes in the calculation thereof the Additional Underlying
Shares. The parties confirm and ratify that the term “Obligations” in the
Security Agreement and Subsidiary Guarantee includes the Additional
Debentures.
3. Representations
and Warranties of the Company.
The
Company hereby makes to the Purchasers the following representations and
warranties:
(a) Authorization;
Enforcement.
The
Company has the requisite corporate power and authority to enter into and to
consummate the transactions contemplated by this Agreement and otherwise to
carry out its obligations hereunder. The execution and delivery of this
Agreement by the Company and the consummation by the Company of the transactions
contemplated hereby have been duly authorized by all necessary action on the
part of the Company and no further action is required by the Company, its board
of directors or its stockholders in connection therewith other than in
connection with the Required Approvals. This Agreement has been duly executed
by
the Company and, when delivered in accordance with the terms hereof, will
constitute the valid and binding obligation of the Company enforceable against
the Company in accordance with its terms, except (i) as limited by general
equitable principles and applicable bankruptcy, insolvency, reorganization,
moratorium and other laws of general application affecting enforcement of
creditors’ rights generally, (ii) as limited by laws relating to the
availability of specific performance, injunctive relief or other equitable
remedies and (iii) insofar as indemnification and contribution provisions may
be
limited by applicable law.
(b) No
Conflicts.
The
execution, delivery and performance of this Agreement by the Company and the
consummation by the Company of the transactions contemplated hereby do not
and
will not: (i) conflict with or violate any provision of the Company’s
certificate or articles of incorporation, bylaws or other organizational or
charter documents; or (ii) conflict with, or constitute a default (or an event
that with notice or lapse of time or both would become a default) under, result
in the creation of any Lien (except as contemplated by the Security Documents)
upon any of the properties or assets of the Company in connection with, or
give
to others any rights of termination, amendment, acceleration or cancellation
(with or without notice, lapse of time or both) of, any material agreement,
credit facility, debt or other material instrument (evidencing Company debt
or
otherwise) or other material understanding to which such Company is a party
or
by which any property or asset of the Company is bound or affected; or (iii)
conflict with or result in a violation of any law, rule, regulation, order,
judgment, injunction, decree or other restriction of any court or governmental
authority to which the Company is subject (including federal and state
securities laws and regulations), or by which any property or asset of the
Company is bound or affected, except, in the case of each of clauses (ii) and
(iii), such as could not have or reasonably be expected to result in a Material
Adverse Effect.
(c) Issuance
of the Additional Debentures.
The
Additional Debentures are duly authorized and, upon the execution of this
Agreement by a Purchaser, will be duly and validly issued, fully paid and
nonassessable, free and clear of all Liens imposed by the Company other than
restrictions on transfer provided for in the Transaction Documents. The
Additional Underlying Shares, when issued in accordance with the terms of the
Additional Debentures, will be validly issued, fully paid and nonassessable,
free and clear of all Liens imposed by the Company. The Company has reserved
from its duly authorized capital stock a number of shares of Common Stock
sufficient for issuance of the Additional Underlying Shares.
(d) Equal
Consideration.
Except
as set forth in this Agreement, no consideration has been offered or paid to
any
person to amend or consent to a waiver, modification, forbearance or otherwise
of any provision of any of the Transaction Documents that is not proportional
to
such Purchaser’s holding of Debentures.
(e) Affirmation
of Prior Representations and Warranties.
The
Company’s representations and warranties listed in Section 3.1 of the Purchase
Agreement are true and correct as of the date hereof, provided that the
Company’s representations and warranties are qualified by any SEC Filings made
prior to the date hereof.
-
2 -
4. Representations
and Warranties of the Purchasers.
Each
Purchaser hereby represents and warrants as of the date hereof to the Company
as
follows:
(a) Authority.
The
execution and delivery of this Agreement and performance by such Purchaser
of
the transactions contemplated by this Agreement have been duly authorized by
all
necessary corporate or similar action on the part of such Purchaser. This
Agreement has been duly executed by such Purchaser and, when delivered by such
Purchaser in accordance with the terms hereof, will constitute the valid and
legally binding obligation of such Purchaser, enforceable against it in
accordance with its terms, except (i) as limited by general equitable principles
and applicable bankruptcy, insolvency, reorganization, moratorium and other
laws
of general application affecting enforcement of creditors’ rights generally,
(ii) as limited by laws relating to the availability of specific performance,
injunctive relief or other equitable remedies and (iii) insofar as
indemnification and contribution provisions may be limited by applicable
law.
(b) Own
Account.
Such
Purchaser (i) understands that the Additional Debentures and the Additional
Underlying Shares (the “Securities”)
are
“restricted securities” and have not been registered under the Securities Act or
any applicable state securities law, (ii) is acquiring the Securities as
principal for its own account and not with a view to or for distributing or
reselling such Securities or any part thereof in violation of the Securities
Act
or any applicable state securities law, (iii) has no present intention of
distributing any of such Securities in violation of the Securities Act or any
applicable state securities law and (iv) has no arrangement or understanding
with any other persons regarding the distribution of such Securities (this
representation and warranty not limiting such Purchaser’s right to sell the
Additional Underlying Shares pursuant to the Registration Statement or otherwise
in compliance with applicable federal and state securities laws) in violation
of
the Securities Act or any applicable state securities law. Such Purchaser is
acquiring the Securities hereunder in the ordinary course of its business.
Such
Purchaser does not have any agreement or understanding, directly or indirectly,
with any Person to distribute any of the Securities.
(c) Purchaser
Status.
Such
Purchaser is an “accredited investor” as defined in Rule 501(a)(1), (a)(2),
(a)(3), (a)(7) or (a)(8) under the Securities Act. Such Purchaser is not
required to be registered as a broker-dealer under Section 15 of the Exchange
Act.
(d) Experience
of Such Purchaser.
Such
Purchaser, either alone or together with its representatives, has such
knowledge, sophistication and experience in business and financial matters
so as
to be capable of evaluating the merits and risks of the prospective investment
in the Securities, and has so evaluated the merits and risks of such investment.
Such Purchaser is able to bear the economic risk of an investment in the
Securities and, at the present time, is able to afford a complete loss of such
investment.
(e) General
Solicitation.
Such
Purchaser is not purchasing the Securities as a result of any advertisement,
article, notice or other communication regarding the Securities published in
any
newspaper, magazine or similar media or broadcast over television or radio
or
presented at any seminar or any other general solicitation or general
advertisement.
5. Public
Disclosure.
The
Company shall, as soon as practical, issue a Current Report on Form 8-K,
disclosing the material terms of the transactions contemplated hereby and
attaching this Agreement as an exhibit thereto, but in any event within 5
business days of the full execution hereof. The Company shall consult with
the
Purchasers in issuing any press releases with respect to the transactions
contemplated hereby.
-
3 -
6. Independent
Nature of Purchasers' Obligations and Rights.
The
Company has elected to provide all Purchasers with the same terms and 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
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 Agreement or any Transaction Document. Nothing contained
herein or in any Transaction Document, and 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
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 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 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
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 Agreement. This 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 Agreement shall be governed by and construed in accordance
with
the laws of the State of New York.
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
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/ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ | |
|
▇▇▇▇▇
▇▇▇▇▇▇▇▇▇
Chief
Executive Officer
|
-
4 -
[DEBENTURE
HOLDER SIGNATURE PAGE]
ACCEPTED
AND AGREED:
DKR
SOUNDSHORE OASIS HOLDING FUND LTD.
|
By:
DKR Oasis Management Company L.P., its investment manager
|
||
|
By:
/s/ ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇
|
Dated:
May 27, 2008
|
|
|
Name:
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
|
||
|
Title:
Authorized Signatory
|
||
|
ALPHA
CAPITAL ANSTALT
|
||
|
By:
/s/ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇
|
Dated:
May 27, 2008
|
|
|
Name:
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
|
||
|
Title:
Director
|
||
|
GEMINI
MASTER FUND, LTD.
|
||
|
By:
/s/ ▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇
|
Dated:
May 27, 2008
|
|
|
Name:
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
|
||
|
Title:
President
|
||
|
WHALEHAVEN
CAPITAL FUND LIMITED
|
||
|
By:
/s/ ▇▇▇▇▇
▇▇▇▇▇▇▇▇
|
Dated:
May 27, 2008
|
|
|
Name:
▇▇▇▇▇ ▇▇▇▇▇▇▇▇
|
||
|
Title:
Chief Financial Officer
|
||
|
CMS
CAPITAL
|
||
|
By:
/s/ ▇▇▇▇▇▇
▇▇▇▇▇
|
Dated:
May 27, 2008
|
|
|
Name:
▇▇▇▇▇▇ ▇▇▇▇▇
|
||
|
Title:
Director
|
||
|
BRIO
CAPITAL L.P.
|
||
|
By:
/s/ ▇▇▇▇▇
▇▇▇▇▇▇
|
Dated:
May 27, 2008
|
|
|
Name:
▇▇▇▇▇ ▇▇▇▇▇▇
|
||
|
Title:
Manager of General Manager
|
:
-
5 -
SCHEDULE
I
|
Name
of Purchaser
|
Purchase
Price
|
Amount
of
Debenture
|
||
|
DKR
Soundshore Oasis Holding Fund Ltd.
|
$55,785
|
$60,636
|
||
|
Alpha
Capital Anstalt
|
6,198
|
6,737
|
||
|
Gemini
Master Fund, Ltd.
|
6,198
|
6,737
|
||
|
Whalehaven
Capital Fund Limited
|
3,719
|
4,042
|
||
|
CMS
Capital
|
1,860
|
2,022
|
||
|
Brio
Capital L.P.
|
1,240
|
1,348
|
||
|
TOTAL
|
$75,000
|
$81,522
|
||
-
6 -