matechexh10_59.htm


    
      
 


    Exhibit
10.59

     

    AMENDMENT
DATED JUNE 16, 2008

    TO

     

    CLASS A
SENIOR SECURED CONVERTIBLE DEBENTURE

     

     

     

     

       

      
        	ORIGINAL ISSUANCE
      DATE	September 23,
      2003
	 	 
	CONVERTIBLE
      DEBENTURE DUE	December 31, 2009
      (as amended) 
	AMOUNT DUE AS OF
      APRIL 30, 2008	$2,110,041.75 


      

    

     

    WHEREAS, Material
Technologies, Inc., a Delaware corporation (the “Company”) entered and executed
that certain Class A Senior Secured Convertible Debenture, dated September 23,
2003 (the “Debenture”), in favor of Hyde
Investments, Ltd. or registered assigns (the
“Holder”);

     

    WHEREAS, the Company has
entered into that certain Escrow Agreement, dates as of the date hereof, between
the Company and the Holder, among others (the “Escrow Agreement”), and that
certain Settlement Agreement, dated as of the date hereof, between the Company
and the Holder, among others (the “Settlement Agreement”);
and

     

    WHEREAS, the Company and
Holder have agreed to amend the Debenture as set forth herein, with all other
terms remaining in full force and effect.  Capitalized terms used
herein shall have the same meaning as in the Debenture.

     

    NOW THEREFORE, the parties
hereby agree as follows:

     

    
      	
               
      

            	
              1.

            	
              The
      Maturity Date shall be extended to December 31,
  2009.

            


    

     

    
      	
               
      

            	
              2.

            	
              Article
      1 of the Debenture is hereby amended and restated to read as
      follows:

            


    

     

    The
Company shall pay interest on the unpaid principal amount and accrued but unpaid
interest of this Class A Senior Secured Convertible Debenture (the “Debenture”)
in monthly payments of accrued interest, payable on the first day of each month,
at the rate of Ten Percent (10%) per annum, payable in arrears, in cash, until
the entire balance of this Debenture has been paid in full or has been
converted.  Interest shall accrue from the date of each advance, on
the full amount of such advance.  If an Event of Default occurs
hereunder and, if such Event of Default is curable, such Event of Default
continues for a period of 30 days without being cured, then the interest rate
set forth herein shall be increased to a Default Interest Rate of 18% per annum,
and the total principal and accrued interest balance of this Debenture shall
bear interest at the Default Interest Rate from the date of the occurrence of
such Event of Default.


    
      
         


      

      
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    Notwithstanding
the foregoing, the Company shall be required to make minimum monthly interest
payments of $4,000.  From the date hereof until the Maturity Date, any
interest due and payable hereunder in excess of $4,000 per month shall be
accrued and added to the principal balance of this Debenture on a daily basis,
and shall be due and payable on the Maturity Date.

     

    3.           The
first paragraph of Article 2 of the Debenture is hereby amended and restated to
read as follows:

     

      
The Company shall pay amounts due hereunder by business check or cashier’s check
payable to the order of Corporate Legal Services, LLP, at 2224 Main Street,
Santa Monica, CA 90405, or by wire transfer to the attorney-client trust account
of Corporate Legal Services, LLP.

     

    4.           The
following is hereby added to the end of Section 6.1: “Any Event of Default, or
other default or breach of the terms, conditions or covenants of (i) any
debenture, promissory note or warrant agreement issued as of the date hereof
pursuant to the Settlement Agreement, (ii) the Escrow Agreement or (iii) the
Settlement Agreement, shall be deemed an Event of Default under this
Debenture.  In addition, the entry of any judgment against the Company
in excess of $150,000, regardless of where, how, to whom or under what agreement
such liability arises, shall be an Event of Default under this Debenture, unless
(i) the Company pays such judgment within 60 days, or (ii) the Company duly
files an appeal of such judgment and execution of such judgment is
stayed.  Finally, the entry of any order or judgment in favor of any
judgment creditor or other creditor attaching the assets of the Company shall be
an Event of Default under this Debenture.  The conversion price of
this Debenture shall not be at any time more than $0.10 per share, regardless of
any combination of shares of the Common Stock of the Company by reverse split or
otherwise.”

     

    5.           In
Section 6.1, clause (b), the words “required hereunder” are hereby added after
the words “the Company does not make a payment.”

     

    6.           The
following Section 6.4 is hereby added to the Debenture:  If an Event
of Default occurs which is not cured within its applicable cure period, if it is
curable, the conversion price of this Debenture after such cure period has
expired shall be reduced to half of the pre-Event of Default conversion
price.  For clarification, if the conversion price before an Event of
Default were the lesser of 50% of market price or $0.10, then the new conversion
price would be the lesser of 25% of market price or $0.05.

     

    7.           Section
6.3(i) is hereby deleted and the following provisions are added to the end of
Section 6.3. Covenants:

     

    
      	
               
      

            	
              i.

            	
              The
      Company shall not issue any shares of its Class A Common Stock without a
      legend stating that such shares may not be sold, transferred, pledged,
      assigned or alienated for a period of at least one year following the date
      of the issuance of such certificate, other than shares issued to or with
      the written consent of the Holder.  Notwithstanding the
      foregoing,

            


    


    
      
         


      

      
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              this
      provision shall not apply to (i) any shares issued to purchasers in a
      financing where the Company receives net proceeds of at least Five Hundred
      Thousand Dollars ($500,000) and the shares are sold for not less than
      fifty percent (50%) of the closing price of the Company’s common stock
      reported as of the closing date of such financing, and (ii) any shares
      issued in connection with an acquisition of assets by the Company where
      (a) the Company provides to the Holder a fairness opinion as to the value
      of the acquired assets, and (b) the Company receives assets that are worth
      at least fifty percent (50%) of the closing price per share of the
      Company’s common stock as of the closing date of the
      acquisition.

            


    

    
      	
               
      

            	
              j.

            	
              The
      Company shall not into any agreement pursuant to which any party other
      than the Holder has pre-emptive rights, the right to receive shares of any
      class of securities of the Company for no additional consideration, the
      right to receive a set, pre-determined percentage of the outstanding
      shares of the Company for any period of time, or any other similar right
      that has the effect of maintaining a set percentage of the issued and/or
      outstanding shares of any class or classes of the capital stock of the
      Company.

            


    

    
      	
               
      

            	
              k.

            	
              The
      Company shall not enter into any agreement giving another party
      anti-dilution protection unless (1) all shares received pursuant to such
      provision are subject to a two-year lock-up from the date of issuance, and
      (2) all such shares received are subject to a “dribble-out,” following the
      two-year lock-up, restricting their sale to not more than 1/20th
      of 5% of the previous month’s total trading volume in any single trading
      day.

            


    

    
      	
               
      

            	
              l.

            	
              The
      Company will not file any Registration Statement on Form S-8 nor issue any
      shares registered on Form S-8, exclusive of shares currently registered on
      Form S-8.  However, when the total capital in the Company’s cash
      account drops below $500,000, the Company may issue up to $30,000 worth of
      securities registered on Form S-8, valued at the market price of the
      common stock on the date of issuance, per month,
      non-cumulative.  Any issuance of S-8 shares will be supported by
      an opinion of the Company’s counsel that such issuance complies in all
      respects with federal securities laws.  This opinion will be
      provided to the legal representative of the Holder upon
      request.  Further, the Company will ensure that every entity or
      individual that receives S-8 shares will be subject to a “dribble-out”
      restricting their sale to not more than 1/20th
      of 2%
      of the previous month’s total trading volume in any single trading day,
      non-cumulative.  The above described dribble-out is not an
      aggregate sale restriction for all entities and individuals receiving S-8
      shares;

            
	 	m.	The
      Company shall not provide material non-public information to the Holder or
      its representatives.


    

    
    

     

    8.           Section
6.4 is hereby added to the Debenture, and reads as
follows:  The Company shall comply with each of the following
covenants, and the failure of the Company to comply with such covenants shall be
an Event of Default:

     

    
      	
               
      

            	
              a.

            	
              If
      the Company inadvertently provides material non-public information to the
      Holder or its representatives, the Company shall issue a press
      release

            


    


    
      
         


      

      
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              or
      file a current report on Form 8-K, or take such other action as may be
      required to render such information no longer “non-public” as soon as
      possible after discovery, but no later than five business days following
      written request by the Holder or its counsel that the Company file such
      report or issue such press release.

            


    

    
      	
               
      

            	
              b.

            	
              The
      Company shall irrevocably instruct its transfer agent to provide notice to
      counsel for the Holder of any issuance of any security of the Company
      where the certificate representing such security does not contain a
      restrictive legend.

            


    

    
      	
               
      

            	
              c.

            	
              The
      Company shall not issue any shares of its capital stock which are deemed
      to be issued, but not outstanding, other than pursuant to the Escrow
      Agreement.

            


    

     

    9.      
The
Company has informed the Holder that it is considering completing a
one-for-one-thousand reverse split of its common stock, as described in an
Information Statement filed by the Company on or about April 25,
2008.  The Company acknowledges that the conversion price of the
Debenture shall not be effected by any such reverse split, and that after giving
effect to such reverse split, the conversion price shall remain the lesser of
(i) 50% of the averaged ten closing prices for the Company’s Common Stock for
the ten trading days immediately preceding the Conversion Date or (ii)
$0.10.  The Holder consents to this action.  The parties
acknowledge that the Company is not obligated to complete this reverse-split, or
any reverse split.


    10.         The
Company shall not enter into any agreements giving any other party any
pre-emptive rights.  The Company shall not enter into any agreement
giving another party anti-dilution protection unless (1) all shares received
pursuant to such provision are subject to a two-year lock-up from the date of
issuance, and (2) all such shares received are subject to a “dribble-out,”
following the two-year lock-up, restricting their sale to not more than
1/20th
of 5% of the previous month’s total trading volume in any single trading
day.

     

    11.         The
shareholder lockup provisions will not apply to up to any shares held by Mr.
Robert Bernstein, and sold by him personally in a bona-fide sale to an
unrelated, unaffiliated third party; provided, that (i) the number of shares
sold under this Paragraph 11 shall not exceed Two Million Five Hundred Thousand
Dollars ($2,500,000) worth of stock, calculated based on the number of shares
sold multiplied by the closing price of the stock on the date such shares are
sold (if a market trade) or transferred on the books of the transfer agent (if a
private transfer).  Once Two Million Five Hundred Thousand Dollars
($2,500,000) worth of stock has been sold as calculated above, the lockup on
whatever remains of the shares owned by Mr. Bernstein (if any) goes back
into effect.  In this regard, if Mr. Bernstein sells any of his shares
without legend, then he may only sell up to 1/20th of 5% of the previous month’s
total trading volume in any single trading day, and he may not sell more than 1%
of the issued and outstanding shares of Matech during any 90 day period. 
Further, if Mr. Bernstein sells any of his shares, he must
have


    
      
         


      

      
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    such
shares transferred on the books of the transfer agent within five business days
of the sale.  Mr. Bernstein shall comply with all reporting
requirements under Section 16 of the Securities Exchange Act of 1934, as
amended.  The Company shall take such action as is required to ensure
compliance with the provisions of this Paragraph 11.

     

    12.         To
induce the Holder to extend the Maturity Date of the Debenture and/or enter into
this Agreement and the Settlement Agreement of even date hereof, the Company
hereby agrees to pay an extension fee and a settlement fee of an aggregate of
$278,845.08, which shall be added to the balance of this Debenture as of June
16, 2008.  The balance of the Debenture as of June 16, 2008, is
confirmed and agreed to be $2,137,812.27, which includes all advances, accrued
interest and the above fee to date.

     

    All other
terms of the Debenture, as amended to date, shall remain the same.

     

    IN
WITNESS WHEREOF, the Company has duly executed this Amendment dated June 16,
2008 to Class A Senior Secured Convertible Debenture as of the date first
written above.

     

     

    
      	
              MATERIAL
      TECHNOLOGIES, INC.

              a
      Delaware corporation

            	 	
              HYDE
      INVESTMENTS, LTD.

            
	 	 	 
	 	 	 
	By
      /s/ Robert M. Bernstein	 	By
	    
      Robert M. Bernstein	 	    
      Carsten Rykov
	    
      Chairman and CEO	 	    
      Managing Director


    

     

     

     

     

     

     

     

     

     

    

      
        
           


        

        
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