[GRAPHIC OMITTED] Electronic Sensor
Technology 1077 Business Center Circle
Newbury Park, California 91320
Tel. (805) 480-1994
FAX
(805) 480-1984
June 29, 2009
Midsummer Investment, Ltd.
295 Madison Avenue, 38th Floor
New York, New York 10017
Attention: Michel Amsalem
Islandia L.P.
485 Madison Avenue, 23rd Floor
New York, New York 10022
Attention: Edgar Berner
Re: Exercise of Warrants Issued by Electronic
Sensor
Technology, Inc. (the
"Company")
------------------------------------------------
Dear Mr. Amsalem and Mr. Berner:
We refer to (a) the Warrant dated as of
December 7, 2005 issued by the
Company to Midsummer Investment, Ltd. ("Midsummer") entitling
Midsummer to
purchase from the Company up to 3,899,030 shares of common stock of
the Company
(the "Midsummer Warrant") and (b) the Warrant dated as of December
7, 2005
issued by the Company to Islandia L.P. ("Islandia"; Midsummer and
Islandia are
hereinafter referred to collectively as the "Warrant Holders")
entitling
Islandia to purchase from the Company up to 2,166,128 shares of
common stock of
the Company (the "Islandia Warrant"; the Midsummer Warrant and the
Islandia
Warrant are hereinafter referred to collectively as the
"Warrants"). Defined
terms not otherwise defined herein, shall have the meanings set
forth in the
Securities Purchase Agreement dated as of December 7, 2005 among
the Company,
Midsummer and Islandia (the "Purchase Agreement").
1. Exchange. The Company
hereby agrees to issue each Warrant Holder in
exchange for such Warrant Holder's Warrants, and for no additional
cash or other
consideration, shares of Common Stock, in the following individual
amounts: (i)
as to the Midsummer Warrant, the Company shall issue Midsummer
3,899,030 shares
and (ii) as to the Islandia Warrant, the Company shall issue
Islandia 2,166,128
shares (such shares issuable to the Midsummer and Islandia, the
"Exchange
Shares"). Such Exchange Shares shall be issued without any legends
or
restrictions, electronically, pursuant to the DTC instructions
included on the
Warrant Holder's signature page hereto, within 3 Trading Days from
the date
hereof. Subject to the terms and conditions herein, the Company and
each Warrant
Holder acknowledges and agrees that upon the issuance and
acceptance of the
Exchange Shares pursuant to this Section, the original certificate
evidencing
its Warrants will be deemed cancelled, and the other Transaction
Documents and
that certain letter agreement dated March 18, 2008 among the
Company, Midsummer
and Islandia shall be deemed terminated and shall have no further
force and
effect.
<PAGE>
2. Representations and
Warranties. The Company hereby makes to the
Warrant Holders 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 and thereunder. The
execution and delivery of this
Agreement by the Company and the
consummation by it 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. 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 or
any Subsidiary'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 upon
an
