Form of Letter Agreement by and among the Company and the purchasers of the Debentures

 

MSTI Holdings, Inc.

259-263 Goffle Road

Hawthorne, New Jersey 07506

September 6, 2007

DKR SoundShore Oasis Holding Fund Ltd.

Attn: Rajni Narasi

1281 East Main Street

Stamford, CT 06902

Alpha Capital Anstalt

c/o LH Financial

160 Central Park South

Suite 2701

New York, NY 10019

Gemini Master Fund, Ltd.

c/o Gemini Strategies, LLC

12220 El Camino Real, #400

San Diego, CA 92130

Whalehaven Capital Fund Limited

14 Par-La-Ville Road

3^rd Floor

Hamilton, Bermuda HM08

CMS Capital

c/o Nissim

9612 Van Nuys Blvd., #108

Panorama City, CA 91402

Brio Capital L.P.

401 E. 34^th Street

Suite South 33C

New York, NY 10016

Dear Sirs:

 

Reference is made to that certain Registration Rights Agreement dated as of May 25, 2007 (the “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 herein and not otherwise defined shall have the meanings ascribed to them in the Agreement.

 

 

 

Pursuant to Section 1 of the Agreement, the Company must cause the Initial Registration Statement to be declared effective by the Commission by the Effectiveness Date. Pursuant to Section 2(b), if the Initial Registration Statement is not declared effective by the Commission by the Effectiveness Date, on such Effectiveness Date and on each monthly anniversary of such Effectiveness Date (if such Registration Statement has not been declared effective by the Commission by such date) until such Registration Statement is declared effective by the Commission, the Company shall pay to each Purchaser an amount in cash, as partial liquidated damages.

 

The Company does not believe that it can cause the Initial Registration Statement to be declared effective by the Commission by the current Effectiveness Date. The undersigned Purchasers hereby grant the Company a one-time extension of the Effectiveness Date for the Initial Registration Statement to November 21, 2007 (the “Extension Date”). Accordingly, the undersigned Purchasers hereby waive any non-compliance with the aforementioned Section 2(b) of the Agreement with respect to the Initial Registration Statement, and waive any Default or Event of Default, and any breach or threatened breach, arising under the Agreement or any Transaction Document, including, without limitation, the Debentures and the Warrants, and waive any and all penalties, damages, and claims, including, without limitation, any and all liquidated damages, resulting or that could result, as a result of the Initial Registration Statement being declared effective on or before the Extension Date and not being declared effective by the Effectiveness Date. Notwithstanding the foregoing, in the event that the Initial Registration Statement is not declared effective by the Extension Date, the Event Date for purposes of Section 2(b)(iv) of the Agreement shall remain the Effectiveness Date.

 

 

Pursuant to Section 2(b) of the Agreement, if prior to the effective date of a Registration Statement, the Company fails to file a pre-effective amendment and otherwise respond in writing to comments made by the Commission in respect of such Registration Statement within 10 Trading Days after the receipt of comments by or notice from the Commission that such amendment is required in order for such Registration Statement to be declared effective, the Company shall pay to each purchaser an amount in cash, as partial liquidated damages. Pursuant to Section 3(a), not less than 5 Trading Days prior to the filing each such Registration Statement, the Company shall furnish to each Purchaser copies of all documents proposed to be filed.

 

The undersigned Purchasers hereby grant the Company a one-time waiver in order to waive any non-compliance with the aforementioned Sections 2(b) and 3(a) of the Agreement with respect to filing a response to comments made by the Commission on August 21, 2007 (the “SEC Comment Letter”) and waive any Default or Event of Default, and any breach or threatened breach, arising under the Agreement or any Transaction Document, including, without limitation, the Debentures and the Warrants, and waive any and all penalties, damages, and claims, including, without limitation, any and all liquidated damages, resulting or that could result, as a result of the Company’s failure to file a pre-effective amendment within 10 Trading Days of receiving the SEC Comment Letter and to furnish the Purchasers with copies of all such documents proposed to be filed in response to the SEC Comment Letter 5 Trading Days prior to filing such documents with the Commission.

 

The Company hereby represents and warrants to the Purchasers that there is no other Default or Event of Default under the Agreement except as described herein.

 

Subject to the waivers 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 Purchaser reserves all rights, remedies, powers, or privileges available under the Transaction Documents, at law or otherwise. 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.

 

Except as expressly provided above, nothing contained in this letter or any other communication between the Company and the Purchasers shall constitute a waiver of any past, present or future violation, Default or Event of Default of the Company under the Agreement. Similarly, except as expressly set forth in this letter agreement, the Purchasers hereby expressly reserve any rights, privileges and remedies under the Agreement that it may have with respect to any violation, Default or Event of Default.

 

The Company hereby agrees and covenants that it will file a current report on Form 8-K with the Commission disclosing the material terms of this letter agreement by 9:30 a.m. Eastern time on the first Trading Day immediately following the execution of this letter agreement by the Company and Purchasers holding a majority of the outstanding Registrable Securities (including for this purpose any Registrable Securities issuable upon conversion of the Debentures or exercise of the Warrants) (the “Majority Purchasers”).

 

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. Pursuant to Section 6(f) of the Agreement, this letter agreement will become effective and binding on all of the Purchasers upon obtaining (i) the executed signature pages of the Majority Purchasers and (ii) the executed signature pages of investors holding a majority of the units to that certain waiver letter attached hereto as Exhibit A. 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,

 

 

Frank Matarazzo

Chief Executive Officer

ACCEPTED AND AGREED:

Dated:_______________, 2007

 

By:_______________________________

Name:_____________________________

Title:______________________________