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Letter Agreement (this "Agreement") between SINACOLA COMMERCIAL PROPERTIES, LTD., a Texas limited partnership ("Landlord"), and OXYSURE SYSTEMS, INC., a Delaware corporation ("Tenant")

The parties agree that all Tenant’s outstanding lease payment obligations under the Lease up to and including December 31, 2010, including, but not limited to, Base Rent, and Tenant’s Share of Operating Costs, will be deemed satisfied in full, subject to the terms and conditions set forth in this Agreement. Tenant shall have no further lease payment obligations to Landlord under the Lease until after December 31, 2010 unless Tenant is in Default, hereinafter defined.

 

Tenant shall issue Landlord two (2) Promissory Notes (the “Promissory Notes”). The first note (the “First Landlord Note”), in the form attached hereto as Exhibit A, shall be a subordinated convertible note in the principal amount of $110,000. The First Landlord Note shall carry no interest, shall mature on or before October 31, 2012, and shall be convertible, at any time at the Landlord’s option, into the common stock of the Tenant at a strike price of $1.00 per common share. The second note (the “Second Landlord Note”), in the form attached hereto as Exhibit B, shall be a subordinated convertible note in the principal amount of $110,715. The Second Landlord Note shall carry no interest, shall mature on or before October 31, 2012, and shall be convertible, at any time at the Landlord's option, into the common stock of the Tenant at a strike price of $1.50 per common share. However, if Tenant’s common stock has traded at $1.50 or above for 4 consecutive weeks on a nationally recognized market (based on daily closing prices), then the Second Landlord Note shall be convertible at Tenant’s option.

 

New Warrants

Tenant shall issue Landlord 143,465 penny warrants (the “New Warrants”). The New Warrants are convertible into 143,465 fully paid and non-assessable shares of the common stock of Tenant at a purchase price of $0.01 per share, and are exercisable in whole or in part at any time at the Landlord's option on or before December 31, 2015. Such New Warrants shall not be included or subject to the Lockup Agreement (as defined below) and may be transferred by Landlord at any time without the consent of Tenant.  The New Warrants shall be further evidenced by a Stock Purchase Warrant in the form of Exhibit C attached hereto.

 

Tenant acknowledges and agrees that the Lockup Agreement between Landlord and Tenant dated April 15, 2009 (the “Lockup Agreement”) shall only apply to warrants issued to Tenant by Landlord prior to April 15, 2009, and shall not and will not apply to the New Warrants issued pursuant to this Agreement.  If necessary, Tenant will amend or modify the Lockup Agreement to ensure the New Warrants will not be included or governed by the Lockup Agreement.

 

Most Favored Nations Treatment:

For the purposes of this Agreement, the Promissory Notes and the New Warrants issued pursuant to this Agreement shall collectively be referred to as the “Tenant Value Instruments”. The Parties agree that, for a period of 12 months (the 12-month period being the “MFN Period”), commencing on the date hereof, Landlord shall enjoy Most Favorite Nations Treatment (“MFN Treatment”) in respect of the value effect of the consideration represented by the Tenant Value Instruments. Therefore, if Tenant issues similar instruments or combinations of instruments to a third party during the MFN Period, and the (i) ratio of penny warrants issued relative to each dollar loaned or provided to Tenant as equity, is greater than .65 (.65 shares for each dollar) or (ii) the interest payable on any note is greater than 0%, or (iii) the maturity date on any note is less than 22 months (except in the case of an equity event as defined in a note), or (iv) the conversion price in any convertible note is less than the price in the Promissory Notes, or (v) if the combined value of the Tenant Value Instruments is deemed by both Landlord and Tenant to be less favorable than the combined value effect of the consideration represented by such third party issuance, then Tenant shall adjust the provisions for any one or more of the Tenant Value Instruments such that the value effect of above of the consideration represented by the Tenant Value Instruments is pari passu with or better than that of the third party issuance for each item (i) – (v) above.

 

As of the date of this Agreement, the Lease shall remain in full effect and this Agreement shall be binding upon Landlord and Tenant and their respective successors and assigns.  This Agreement shall be interpreted under the laws of the State of Texas, excluding its choice of law provisions, and any disputes arising under this Agreement shall be heard only in the courts located in Dallas County, Texas.

 

This Agreement constitutes the entire agreement of Landlord and Tenant with respect to the subject matter hereof and supersedes all previous agreements and understandings, written or oral, between them with respect to the subject matter hereof.

 

Landlord shall be entitled to recover all of its reasonable attorneys' fees, costs and expenses incurred as a result of any uncured breach of this Agreement by Tenant or incurred by Landlord in enforcing this Agreement.