Exhibit 10.5
 
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
3rd Floor
Hamilton, Bermuda HM08

CMS Capital
c/o Nissim
9612 Van Nuys Blvd., #108
Panorama City, CA 91402

Brio Capital L.P.
401 E. 34th 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.
 

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Extension of Effectiveness Date
 
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.
 
Waiver of Other Provisions
 
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

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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:______________________________
 
 

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