Form 8-K for MSTI HOLDINGS, INC.
2-Jun-2008
Entry into a Material Definitive Agreement, Unregistered Sale of Equity Secur
Item 1.01 Entry into a Material Definitive Agreement.
In connection with our May 2007 private offering of convertible debentures (the "Debentures") and warrants to purchase common stock (the "Warrants"), we entered into a Securities Purchase Agreement (the "Purchase Agreement") with the purchasers of the Debentures and Warrants (the "Purchasers"), which prohibited us from, directly or indirectly, among other things, creating or incurring any indebtedness (other than Permitted Indebtedness, as such term is defined in the Purchase Agreement) without the consent of the holders of at least 85% of the principal amount of outstanding Debentures.
On May 27, 2008, the Purchasers executed a letter agreement (the "Letter Agreement") with us containing, among other things, the following:
(i) Each of the Purchasers consent to the issuance of additional Debentures;
(ii) The Purchasers agree to purchase an aggregate of an additional $81,522 of Debentures (the "Additional Debentures") in the denominations set forth in the Letter Agreement, with the same rights and obligations as the original Debentures;
(iii) The Purchase Agreement is amended to include the Additional Debentures and the shares issuable upon the exercise of the Additional Debentures; and
(iv) The Registration Rights Agreement entered into in connection with the Purchase Agreement is amended so that the term "Registrable Securities" includes the shares issuable upon the exercise of the Additional Debentures.
The foregoing summary is not a complete description of the terms of the Letter Agreement, and reference is made to the complete text of such Letter Agreement, attached hereto as Exhibit 10.1.
Item 3.02 Unregistered Sales of Equity Securities.
As described in Item 1.01 above, on May 27, 2008, we issued $81,522 of Additional Debentures, due April 30, 2010, that are convertible into an aggregate of 125,418 shares of our common stock at a conversion price of $0.65 per share. The Additional Debentures were issued with an 8% Original Issue Discount. As a result, we received $75,000 from the issuance of the Additional Debentures.
We are prohibited from effecting the conversion of Additional Debentures to the extent that as a result of such conversion the holder of the Additional Debentures beneficially owns more than 4.99% (or, if such limitation is waived by the holder upon no less than 61 days prior notice to us, 9.99%) in the aggregate of the issued and outstanding shares of our common stock immediately after giving effect to the issuance of shares of our common stock upon the conversion. Such Additional Debentures bear 8% interest per annum commencing on the first anniversary of the issue date of the Additional Debentures, payable quarterly in cash or common stock, at our option. The Additional Debentures are senior indebtedness and the holders of the Additional Debentures have a security interest in all of our assets and those of our subsidiaries.
In addition, for one year following issuance of the Additional Debentures, the holders of the Debentures have the right of first refusal to participate in any equity or equity-linked financing conducted by us (other than traditional bank financing) whereby each holder has the right to purchase its pro rata portion that is equal to the ratio of (x) the subscription amount paid by such purchaser and (y) the sum of the aggregate subscription amounts paid by all purchasers of the Debentures participating in the right of first refusal. The Additional Debentures have "full-ratchet" anti-dilution protection for the period in which the Additional Debentures remain outstanding.
The foregoing description of the Additional Debentures does not purport to be complete and is qualified in its entirety by reference to the complete text of the form of Securities Purchase Agreement and Debenture which are filed herewith as Exhibits 10.3 and 10.2, respectively.
The issuance of the Additional Debentures was made solely to "accredited investors," as that term is defined in Regulation D under the Securities Act and were not registered under the Securities Act, or the securities laws of any state, and were offered and sold in reliance on the exemption from registration afforded by Section 4(2) and Regulation D (Rule 506) under the Securities Act and corresponding provisions of the state securities laws, which exempt transactions by an issuer not involving any public offering.
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