tko_8k-ex0402.htm


    Exhibit 4.2

     

    
      


       

      PARTIAL RELEASE OF
LIEN

       

      THIS PARTIAL RELEASE OF LIEN,
dated of as February 20, 2009, is by and between TELKONET, INC., a Utah
corporation (the “Company”), the
guarantors listed on the signature page hereto (the “Guarantors”) and YA GLOBAL INVESTMENTS, L.P.
(“YA
Global”).  All capitalized terms used herein shall have the
respective meanings assigned thereto in the Transaction Documents (as defined
below) unless otherwise defined herein.

       

       

      W I T N E S S E T
H:

       

      WHEREAS, in connection with
that certain Securities Purchase Agreement dated as of May 30, 2008 between the
Company and YA Global (the “SPA”) and the Secured Convertible Debentures (the
“Debentures”)
issued to YA Global thereunder, the Company, the Guarantors and YA Global
entered into a Security Agreement dated as of May 30, 2008.  The SPA,
the Debentures, the Security Agreement, and all documents entered into in
connection therewith are referred to herein collectively as the “Transaction
Documents”.

       

      WHEREAS, pursuant to the
Security Agreement, the Company pledged and assigned certain collateral to YA
Global to secure its payment obligations under the Transaction Documents (the
“Obligations”), which collateral includes, without limitation, 18,500,000 shares
(the “Pledged
Shares”) of common stock of MTSI Holdings, Inc. (“MSTI”).

       

      WHEREAS, the Company desires
to sell 2,800,000 Pledged Shares which are subject to the Security Agreement and
use the proceeds to repay a portion of the Obligations.

       

      WHEREAS, on the terms and
conditions set forth herein, YA Global desires to consent to the sale by the
Company of 2,800,000 Pledged Shares and release its lien and security interest
thereon.

       

      NOW, THEREFORE, in
consideration of the foregoing, and the respective agreements, warranties and
covenants contained herein, the parties hereto agree, covenant and warrant as
follows:

       

      1. Conditions.

       

      YA Global
hereby consents to the sale by the Company of 2,800,000 Pledged Shares, subject
to the following conditions:

       

      (a) The
minimum proceeds received from the sale shall be $10,000.

       

      (b) The
Company shall use the proceeds from the sale to pay the interest when due on the
Debentures.

       

      (c) The
proceeds shall be applied first to the quarterly payment of accrued and unpaid
interest on April 1, 2009 and second to subsequent quarterly payments of accrued
and unpaid interest on the Debentures.  Pending payment the proceeds
shall be held in a separate escrow account established by the
Company.

       

      
        
          
          

        

        
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      (d) The sale
of the 2,800,000 Pledged Shares shall occur on or before February 27,
2009.

       

      2. Release of Lien; Waiver of
Section 7.1 of the Security Agreement.

       

      (a) In
connection with (i) the sale of 2,800,000 Pledged Shares pursuant to the terms
and conditions set forth in Section 1 above and (ii) the transfer of the
Commitment Fee Shares (as defined below), YA Global agrees, to release its lien
and security interest on such Pledged Shares and the Commitment Fee
Shares.  YA Global agrees to promptly file all UCC termination
statements and to execute such additional documents, instruments, and agreements
that are reasonably required in order to release its lien and security interest
on the 2,800,000 Pledged Shares and the Commitment Fee Shares.  The
Company agrees to pay the reasonable actual costs and fees incurred by YA Global
in connection with such release, which cost shall not exceed $2,500 without the
Company’s prior written consent.  The release of the 2,800,000 Pledged
Shares and the Commitment Fee Shares shall not alter, vary or diminish the force
and effect of the Security Agreement or any other security documents with
respect to the remainder of the collateral and any and all liens and security
interests created by any such documents, or otherwise, in favor of YA Global
shall remain in full force and effect with respect to the remaining
collateral.

       

      (b) In
connection with the (i) sale of 2,800,000 Pledged Shares pursuant
to the terms and conditions set forth in Section 1 above and (ii) the transfer
of the Commitment Fee (as defined below), YA Global agrees to waive compliance
with Section 7.1 of the Security Agreement.

       

      3. Commitment
Fee.

       

      (a) In
consideration for YA Global’s consent to the Company’s sale of 2,800,000 Pledged
Shares and the release of its lien and security interest on the 2,800,000
Pledged Shares, the Company agrees to pay YA Global a commitment fee payable in
MSTI common stock equal to 1% of MSTI common stock owned by the Company
following the sale of the 2,800,000 Pledged Shares (the “Commitment Fee
Shares”).

       

      (b) In
connection with the transfer if the Commitment Fee Shares, YA Global represents,
warrants and covenants as follows:

       

      (i) Investment
Purpose.  YA Global is acquiring the Commitment Fee Shares for
its own account for investment only and not with a view towards, or for resale
in connection with, the public sale or distribution thereof.  YA
Global does not presently have any agreement or understanding, directly or
indirectly, with any Person to  distribute any of the Commitment Fee
Shares.

       

      (ii) Accredited Investor
Status.  YA Global is an “Accredited Investor”
as that term is defined in Rule 501(a)(3) of Regulation of the Securities Act of
1933, as amended (the “Securities Act”).  YA Global is not a
registered broker-dealer under Section 15 of the Securities Exchange Act of
1934, as amended.

       

      
        
          
          

        

        
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      (iii) Reliance on
Exemptions.  YA Global understands that the Commitment Fee
Shares are being transferred to it in reliance on specific exemptions from the
registration requirements of United States federal and state securities laws and
that the Company is relying in part upon the truth and accuracy of, and YA
Global’s compliance with, the representations, warranties and covenants of YA
Global set forth herein in order to determine the availability of such
exemptions and the eligibility of YA Global to acquire the Commitment Fee
Shares.

       

      (iv) Transfer or
Resale.  YA Global understands that:  (i) the
Commitment Fee Shares have not been and are not being registered under the
Securities Act or any state securities laws, and may not be offered for sale,
sold, assigned or transferred unless (A) subsequently registered, (B) YA Global
shall have delivered to MSTI an opinion of counsel, in a generally acceptable
form, to the effect that such Commitment Fee Shares to be sold, assigned or
transferred may be sold, assigned or transferred pursuant to an exemption from
such registration requirements, or (C) YA Global provides MSTI with assurances
reasonably acceptable to MSTI that such Commitment Fee Shares can be sold,
assigned or transferred pursuant to Rule 144, Rule 144(k), or Rule 144A
promulgated under the Securities Act, as amended (or a successor rule thereto)
(collectively, “Rule
144”), in each case following the applicable holding period set forth
therein.  YA Global acknowledges that neither MSTI nor any other
person is under any obligation to register the Commitment Fee Shares under the
Securities Act or any state securities laws or to comply with the terms and
conditions of any exemption thereunder.

       

      (v) Legends.  YA
Global acknowledges that the Commitment Fee Shares shall bear a restrictive
legend in substantially the following form:

       

      THE
SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933.  AS AMENDED, OR APPLICABLE STATE SECURITIES
LAWS.  THE SECURITIES HAVE BEEN ACQUIRED SOLELY FOR INVESTMENT
PURPOSES AND NOT WITH A VIEW TOWARD RESALE AND MAY NOT BE OFFERED FOR SALE, SOLD
TRANSFERRED OR ASSIGNED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT
FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE
STATE SECURITIES LAWS, OR AN OPINION OF COUNSEL, IN A GENERALLY ACCEPTABLE FORM,
THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR APPLICABLE STATE SECURITIES
LAWS.

       

      
        
          
          

        

        
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      (c) In
connection with the transfer of the Commitment Fee Shares the Company
represents, warrants, and covenants as follows:

       

      (i) The
Company owns, beneficially and of record, all right, title and interest in and
to the Commitment Fee Shares, free and clear of any adverse interests, security
interests, claims, liens, pledges, options, encumbrances, charges, agreements,
voting trusts, proxies or other arrangements, restrictions or limitations of any
kind, except for the security interest granted to YA Global.  Upon
release of the Commitment Fee Shares from the pledge in accordance herewith,
title to the Commitment Fee Shares will transfer to YA Global, free and clear of
any adverse claim, securities interests, claims, liens, pledges, options,
encumbrances, charges, agreements, voting trusts, proxies or other arrangements,
restrictions or other legal or equitable limitations of any kind arising from
actions of, or inactions by, the Company.

       

       

      4. Effect of this
Agreement.  Except as modified pursuant hereto, no other
changes or modifications to the Transaction Documents are intended or implied
and in all other respects the Transaction Documents are hereby specifically
ratified, restated and confirmed by all parties hereto as of the effective date
hereof.

       

      


       

      


       

       

       [SIGNATURE
PAGE IMMEDIATELY TO FOLLOW]

       

      


      
        
          
          

        

        
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      IN WITNESS WHEREOF, this
Agreement is executed and delivered as of the day and year first above
written.

       

      


      
        	 
      	
                COMPANY:

              
	 
      	
                Telkonet,
      Inc.

              
	 
      	 
      
	 
      	 
      
	 
      	
                By: /s/ Jason L. Tienor        

              
	 
      	
                Name:
      Jason L. Tienor

              
	 
      	
                Title:
      President & CEO

              
	 
      	 
      
	 
      	
                GUARANTOR:

              
	 
      	
                Ethostream
      LLC:

              
	 
      	 
      
	 
      	 
      
	 
      	
                By: /s/ Jason L. Tienor        

              
	 
      	
                Name:
      Jason L. Tienor

              
	 
      	
                Title:
      President & CEO

              
	 
      	 
      
	 
      	 
      
	 
      	
                GUARANTOR:

              
	 
      	
                Telkonet
      Communications Inc.:

              
	 
      	 
      
	 
      	 
      
	 
      	
                By: /s/ Jason L. Tienor        

              
	 
      	
                Name:
      Jason L. Tienor

              
	 
      	
                Title:
      President & CEO

              
	 
      	 
      
	 
      	 
      
	 
      	
                SECURED
      PARTY:

              
	 
      	
                YA
      Global Investments, L.P.

              
	 
      	 
      
	 
      	
                By:  Yorkville
      Advisors, LLC

              
	 
      	
                Its:  Investment
      Manager

              
	 
      	 
      
	 
      	 
      
	 
      	
                By: /s/ Troy Rillo            

              
	 
      	
                Name: Troy
      Rillo

              
	 
      	
                Title:
      Sr. Managing Director

              


      

      


      


       

       

       

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