Exhibit 10.1

SETTLEMENT AGREEMENT
AND GENERAL RELEASE

          This SETTLEMENT AGREEMENT AND GENERAL RELEASE (this “Agreement”) is
effective as of October 27, 2006, by and between Material Technologies, Inc., a
Delaware corporation (the “Company”), on the one hand, and PALISADES CAPITAL,
LLC, HYDE INVESTMENTS, LTD. AND LIVINGSTON INVESTMENTS, LTD. (each a “Debenture
Holder” and collectively the “Debenture Holders”), on the other hand.  Each of
the Company and the Debenture Holders are sometimes referred to below as a
“Party” and collectively as the “Parties.”

R E C I T A L S

          A.     WHEREAS, the Debenture Holders believe that Company is indebted
to Debenture Holders in the amount of $2,108,290.13 as of October 15, 2006
pursuant to the terms of those certain Senior Secured Convertible Debentures
issued in September 2003 (the “Debentures”), as set forth in Schedule A attached
hereto and made a part hereof; and

          B.     WHEREAS, a dispute has arisen concerning the exact amount owed
to the Debenture Holders (the “Dispute”), and the Company has requested an
extension of the maturity date of the Debentures, which is currently December
31, 2006; and

          C.     WHEREAS, the Parties wish amicably to agree on an exact amount
owed under the Debentures and to resolve and settle all disputes between them in
the manner set forth below.

          NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, and subject to the mutual promises
contained in this Agreement, the Parties do hereby agree as follows:

W I T N E S S E T H :

          1.     The Release.

                    (a)     The Company, for itself and its respective past,
present and future administrators, affiliates, agents, assigns, attorneys,
directors, employees, executors, heirs, insurers, officers, managers, parents,
partners, predecessors, representatives, servants, shareholders, subpartners,
subsidiaries, successors, transferees, underwriters, clients and customers, and
all persons acting by, through, under or in concert with any of them, and each
of them, hereby releases and discharges (i) each Debenture Holder, GCH Capital,
Ltd., and each of their respective subsidiaries, and their respective past,
present and future administrators, affiliates, agents, assigns, attorneys,
directors, employees, executors, heirs, insurers, officers, managers, parents,
partners, predecessors, representatives, servants, shareholders, subpartners,
subsidiaries, successors, transferees, underwriters, clients, customers, and
each of them; and (ii) all persons acting by, through,

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under or in concert with any of them, of and from any and all actions, causes of
action, claims, costs, damages, debts, demands, expenses, liabilities, losses
and obligations, actual or contingent, known or unknown, arising on or prior to
the date hereof (the “Released Claims”).

                    (b)     The Company acknowledges that there is a risk that
subsequent to the execution of this Agreement, one or more Parties will incur or
suffer loss, damages or injuries which are in some way caused by or related to
the Released Claims, but which are unknown and unanticipated at the time this
Agreement is signed.  The Company hereby assumes the above-mentioned risk and
understands that this Agreement SHALL APPLY TO ALL UNKNOWN OR UNANTICIPATED
RESULTS OF THE TRANSACTIONS AND OCCURRENCES DESCRIBED ABOVE, AS WELL AS THOSE
KNOWN AND ANTICIPATED, and the Company acknowledges in executing the releases
(the “Releases”) contained in this Agreement, that it does so with full
knowledge of any and all rights and benefits that it might otherwise have had
under California Civil Code Section 1542, and  upon the advice of counsel,
hereby waives and relinquishes any and all such rights and benefits.  The
Company acknowledges and agrees that this waiver is an essential and material
term hereof, without which this Agreement (including, without limitation, the
Releases) would not have been entered into.  Section 1542 reads as follows:

> > > "A general release does not extend to claims which the creditor does not
> > > know or suspect to exist in his favor at the time of executing the
> > > release, which, if known by him, must have materially affected his
> > > settlement with the debtor."

The Company certifies that it has read the foregoing recitation of Section 1542
and understands the meaning of such section and such fact is indicated by the
signing of such Party’s initials hereto:

                                    _____________
                                    Company's
                                    Initials                          

The Company further acknowledges that it may hereafter discover facts different
from or in addition to those known or believed to be true with respect to the
Released Claims.  The Company agrees that the Releases shall be and shall remain
effective in all respects, notwithstanding any such different or additional
facts, or any facts which are intentionally concealed from either  by the
other.  In this regard, and without limitation, the Company declares that it
realizes that it may have damages it presently knows nothing about and that, as
to them, they have been released pursuant to the Releases.  The Company further
declares that it understands that the parties being released would not have
agreed to compromise their respective claims if the Releases did not cover
damages and their results which may not yet have manifested themselves or which
may be unknown or not anticipated at the present time.

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                    (c)     The Releases shall not be deemed an admission by the
Company of any sort.  No right shall inure to any third party (other than third
parties described in subparagraph (a) above) from the obligations,
representations and agreements made or reflected herein.

                    (d)     The Company represents and warrants that it alone is
the owner of the Released Claims, that it has not heretofore assigned or
transferred, nor purported to assign or transfer to any third party, and is not
aware of any third party, who might assert some interest in any of the Released
Claims.  The Company further agrees to indemnify, defend and hold harmless the
Debenture Holders from all liability, claims, demands, damages, costs, expenses
and attorneys’ fees incurred by the Debenture  Holders as a result of any third
party asserting any such assignment or transfer of any such interest, right or
claim.

                    (e)     The Company represents and warrants that none of the
Released Claims is subject to any purported or actual lien, security interest,
encumbrance or other contractual right of any third party.  The Company further
agrees to indemnify, defend and hold harmless the Debenture Holders from all
liability, claims, demands, damages, costs, expenses and attorneys’ fees
incurred by the Debenture Holders as a result of any third party asserting the
existence of any of the foregoing.

                    (f)     The Company acknowledges that it has read this
Agreement, has been, or has had the opportunity to be, represented by
independent counsel of their its choice in connection with the circumstances
leading up to the execution of the Releases, understands the terms, conditions
and consequences of the Releases, and is freely and voluntarily entering into
the Releases.

          2.     Representations and Warranties.  Each of the Parties hereby
represents and warrants to the other as follows:

                    (a)     It has full power and authority to execute, deliver
and perform this Agreement (including, without limitation, as applicable, the
Releases) and to do any and all other things reasonably required hereunder.

                    (b)     The execution, delivery and performance of this
Agreement are not in contravention of or in conflict with any other agreement,
indenture or undertaking to which it is a party or by which it, or any of its
property, may be bound or affected.

                    (c)     Other than as set forth in this Agreement, the
Releases are not conditioned upon the occurrence or nonoccurrence of any event
or the granting of any consent or approval or related to or dependent upon any
other event or any agreement or business transaction between the Parties.

                    (d)     All covenants, representations and warranties
contained in this Agreement (including, without limitation, the Releases) shall
survive the execution and delivery of this Agreement.

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          3.     Payments and Deliveries. 

                    (a)     As consideration and as a condition for the
obligations of the Debenture Holders under this Agreement, the Company agrees to
do the following:

                              (i)     The Company will issue seven-year warrants
to purchase 35,000,000 shares of post-split common stock, at a purchase price of
the lesser of (i) $0.001 per share, or (ii) fifty percent (50%) of market price,
which warrants shall contain a cashless exercise provision and piggy-back
registration rights as set forth in Exhibits A-E; provided, that the maximum
number of shares that the Company shall be required to register on any one
registration statement shall not exceed 30% of the total number of shares of
common stock registered for other parties on such registration statement.

                              (ii)     The warrants will be issued as follows:

> > > > (a)  10,000,000 warrants to Palisades Capital, LLC;
> > > > (b)  7,500,000 warrants to GCH Capital, Ltd.;
> > > > (c)  8,000,000 warrants to Hyde Investments, Ltd.;
> > > > (d)  5,500,000 warrants to Livingston Investments, Ltd.; and;
> > > > (e)  4,000,000 warrants to Palisades Capital, Ltd..

                              (iii)     The Company shall execute an Amendment
to each of the Debentures as set forth in Exhibits F-H (the “Debenture
Amendments”).

                              (iv)     All share amounts referred to herein are
deemed to be after the effect of an anticipated one for three hundred reverse
split of the Class A Common Stock of the Company. 

The Company shall provide proof that the Company has entered into a new
employment agreement with Robert M. Bernstein, and a general release and
settlement agreement pursuant to which Mr. Bernstein releases the Company from
any and all claims he may have against the Company.  To induce Mr. Bernstein to
enter into such agreements, the Company may increase Mr. Bernstein’s
compensation up to a maximum of $250,000 per year, and may issue to Mr.
Bernstein up to 35 million post-split shares of its Class A Common Stock, and to
his assigns, up to 35 million post-split shares of its Class A Common Stock;
provided, however, that Mr. Bernstein and any other person or entity receiving
any of the shares shall execute the Shareholder Lockup Agreement attached hereto
as Exhibit I, and the Company shall not waive or amend any of the provisions of
such Agreement, or otherwise release any shares under such Agreement, at any
time prior to the full repayment or conversion of the Debentures, without the
written consent of all of the then-Debenture Holders.

                              (v)     In the event the Debenture Holders elect
to exercise or convert any convertible security held by such Debenture Holder,
the Company shall deliver the common stock issuable upon such exercise or
conversion, without restrictive

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legend if legally permitted, within five calendar days of the Company’s receipt
of a notice of exercise or conversion.

                              (vi)     The Company shall execute an escrow
agreement as set forth in Exhibit J (the “Escrow Agreement”).

                    (b)     As consideration and as a condition for the
obligations of the Company under this Agreement, the Debenture Holders, and each
of them, agrees to do the following:

                              (i)     The Debenture Holders shall execute the
Amendments.

                              (ii)     The Debenture Holders shall execute the
Escrow Agreement.

          4.     Successors.  This Agreement shall be binding upon and shall
inure to the benefit of the Parties and their respective heirs, successors,
representatives, assigns, affiliates, agents, shareholders, directors, employees
and attorneys, past and present, and each of them.

          5.     Integration.  This Agreement and the schedules and exhibits
attached hereto compromise the entire understanding of the Parties concerning
the subject matter hereof, and may only be modified or amended by an agreement
in writing executed by each of the Parties which specifically refers to this
Agreement.  The rights, duties and obligations of the Parties under this
Agreement shall operate independently of any other relationship, contractual or
otherwise, between the Parties.

          6.     Governing Law.  This Agreement shall be construed in all
respects in accordance with the internal laws of the State of California
applicable to agreements made and to be performed entirely within California.
Any dispute which relates to the subject matter hereof, or arises herefrom,
shall be resolved in Los Angeles County, California.  Each of the Parties hereby
submits to the exclusive jurisdiction of such court.  The Parties hereby agree
to waive trial by jury with respect to any such dispute, and shall permit such
dispute to be resolved by bench trial at the Superior Court sitting in Santa
Monica, California.

          7.     Further Assurances.  Each of the Parties agrees to cooperate
with the other Party to execute, acknowledge and deliver any and all additional
agreements, certificates, instruments, dismissals and documents and to take any
and all such further actions, all at the Company’s expense and all as may
reasonably be deemed necessary or appropriate by the Parties to effectuate this
Agreement.

          8.     Agreement Not Drafted by Either Party.  In the event of any
disagreement hereunder, this Agreement shall not be construed as having been
drafted by either Party.

          9.     Counterparts.  This Agreement may be signed in one or more
counterparts, each of which shall constitute an original but all of which, when
taken

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together, shall constitute one and the same agreement.  If this Agreement is
executed in counterparts, then each Party shall execute sufficient counterpart
signature pages for each Party, ultimately, to be provided with an originally
executed counterpart signature page from each Party.

          10.     Gender.  Each gender shall include the other genders whenever
the context may require in this Agreement.

          11.     Authority to Sign.  Each of the individuals whose signature
appears below hereby represents and warrants that he or she has actual authority
to enter into this Agreement on behalf of the entity on whose behalf he or she
signs this Agreement and does so to the fullest extent of his or her authority,
whether as an individual, officer, director, shareholder, partner, joint
venturer or otherwise.

          12.     Captions. The headings of the sections of this Agreement are
intended solely for convenience of reference and are not intended and will not
be deemed for any purpose whatever to modify or explain or place any
construction upon any of the provisions of this Agreement.

          13.     Attorneys' Fees. In the event any party hereto will institute
an action to enforce any rights hereunder, the prevailing party in such action
will be entitled, in addition to any other relief granted, to reasonable
attorneys' fees and costs.

          14.     Confidentiality.  Except as required by law (including the
Company’s obligations under the Securities Exchange Act of 1934), the Parties
shall hold all information pertaining to, or relating to the Company and all
parties released under this Agreement and all arrangements, agreements and
conduct between the Parties, strictly confidential, and shall not disclose any
information regarding any such parties, including without limitation the Company
and/or its principals, to any third party, for any reason whatsoever.

[signature page follows]

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          IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date and year first written above.

"Company"

Material Technologies, Inc.
a Delaware corporation

By:  /s/ Robert M. Bernstein                             
          Robert M. Bernstein
          Its:  President and Chief Executive

"DEBENTURE HOLDERS"

PALISADES CAPITAL, LLC                                HYDE INVESTMENTS, LTD.

By:  /s/ Reid Breitman                                              By:  /s/
Carston Rykov                     
Name:  Reid Breitman                                              Name:  Carston
Rykov
Title:  
  President                                                     Title:   
 Managing Director

LIVINGSTON INVESTMENTS, LTD.

By:  /s/ Carston Rykov                     
Name:  Carston Rykov
Title:     Managing Director

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Schedule A

Hyde Investments Ltd.

  

  

  

  

  

  Total Advances:

  

$1,465,114.06

  Total Interest:

  

$169,787.70

      =============

Balance as of October 15, 2006

  

$1,634,901.76

  

  

  

  

  

  

Palisades Capital, LLC

  

  

        

  Total Advances:

  

$281,227.73

  Total Interest:

  

$81,484.89

      =============

Balance as of October 15, 2006

  

$323,707.63

                 

Livingston Investments, Ltd.

  

  

        

  Total Advances:

  

$431,272.73

  Total Interest:

  

$103,651.54

      =============

Balance as of October 15, 2006

  

$534,924.27

        

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Exhibits A – E

Warrant Agreements

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Exhibits F - H

Debenture Amendments

10

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Exhibit I

Shareholder Lockup Agreement

11

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Exhibit J

Escrow Agreement

12

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