matechexh10_14.htm


    
      

    

    Exhibit
10.14


     

     

    AMENDMENT DATED OCTOBER 27, 2006

    TO

    CLASS A SENIOR SECURED CONVERTIBLE DEBENTURE

    
 

    
      	
              ORIGINAL ISSUANCE DATE

            	
              September 23, 2003

            
	
              CONVERTIBLE DEBENTURE DUE

            	
              December 31, 2008 (as amended)

            
	
              AMOUNT DUE AS OF OCTOBER 15, 2006

            	
              $323,707.63

            


    

    


    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 Palisades Capital, LLC or
registered assigns (the “Holder”).

    


    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,
      2008.

            


    

    


    
      	
                

            	
              2.

            	
              Section 3.1(a) of the Debenture is hereby amended and restated
      to read as follows:

            


    

    


    The Holder of this Debenture shall have the right, at its option, to
convert this Debenture into shares of Common Stock at any time following March
30, 2004.  The number of shares of Common Stock issuable upon the
conversion of this Debenture is determined pursuant to Section 3.2 and rounding
the result to the nearest whole share.  At any time after delivery by
Holder to the Company of a Notice of Intent to Convert, the Company shall not
have the right to pre-pay the balance due on the Debenture.  The
Holder of this Debenture may not convert any portion of this Debenture only to
the extent the issuance of the shares upon such conversion would cause the
Holder to beneficially own more than 4.99% of the issued and outstanding common
stock of the Company upon the date of such conversion.  The Company
will accept and rely upon the Holder’s written representation that the issuance
will not cause the holder to beneficially own more than 4.99% of the issued and
outstanding common stock of the Company.

    


    
      	
                

            	
              3.

            	
              The seventy five (75) day period referred to in Section 3.1(b)
      of the Debenture is hereby amended to be five (5) days after receipt of
      notice by the Company.

            


    

    


    
      	
                

            	
              4.

            	
              Section 3.2(a) is hereby amended and restated to read as
      follows:

            


    

    


    Subject to Section 3.1, upon the Company’s receipt of a facsimile or
original of Holder’s duly completed and signed Notice of Conversion (a copy of
which is attached hereto as Exhibit A), the Company shall instruct the escrow
agent pursuant to that certain Escrow Agreement of even date herewith to
transfer to the Holder that number of shares of Common Stock into which the
Debentures are convertible in accordance with the provisions regarding
conversion.

    


    
      
        
            

        

        
          1

          
            

          

        

        
            

        

      

    

    


    
      	
                

            	
              5.

            	
              Section 3.2(b) is amended to add the words “or if less than the
      total remaining balance of the Debenture is being converted” after the
      word “destroyed” in the
parenthetical.

            


    

    


    
      	
                

            	
              6.

            	
              The Company has informed the Holder that it is considering
      completing a reverse split of its common stock.  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
      (10) trading days immediately preceding the Conversion Date or (ii)
      $0.10.

            


    

    


    
      	
                

            	
              7.

            	
              Section 6.3(d) is amended and restated to read: “The Company
      shall not increase the compensation paid or payable to any of its officers
      or directors by more than five percent (5%) in any one calendar year,
      except that Robert M. Bernstein’s compensation may be increased to a
      maximum of $250,000 per year starting with the 2007 calendar
      year.”

            


    

    


    
      	
                

            	
              8.

            	
              The Company has informed the Holder that it intends to issue up
      to 70 million post-split shares of Class A common stock to Robert M.
      Bernstein, or his designees or assigns, after the effectiveness of a
      reverse split of its common stock, to induce Mr. Bernstein to enter into a
      new employment agreement with the Company and to release the Company from
      any claims that may be owed to Mr.
Bernstein.

            


    

    


    
      	
                

            	
              a.

            	
              With respect to all shares issued to Mr. Bernstein, the Company
      agrees that the Company shall require Mr. Bernstein to execute the
      Stockholder Lockup Agreement attached hereto as Exhibit A, and
      the Company shall not waive or modify any of the provisions of the
      Stockholder Lockup Agreement in connection with such shares of Class A
      Common Stock issued to Robert M. Bernstein, or any transferee or assignee
      of such shares, and shall not permit any of such shares to be transferred
      without legend at any time prior to the date which is three years
      from the date thereof, except that the Company shall have the right to
      terminate any such Stockholder Lockup Agreement and restriction in the
      event this Debenture is paid in full or converted in full by the
      Holder.

            


    

     

    
      	 	 	The Company will place a legend on each certificate of the
      shares issued to Mr. Bernstein or his designees or assignees stating “this
      certificate may not be transferred until October 27, 2009” and such legend
      shall not be removed from such certificate except in accordance with the
      Stockholder Lockup Agreement.  In the event Mr. Bernstein
      transfers any of the shares represented by such certificate, such legend
      shall be placed on each certificate representing such shares, and any
      transferee, and any subsequent transferee, shall agree to be bound by such
      provision until the termination of the Stockholder Lockup
    Agreement.
	 	 	 
	
                

            	
              9.

            	
              The following is added to the Debenture, after Section
      6.3(g):

            


    

    


    
      	
                

            	
              a.

            	
              (h).

            	
              Except for the stock split contemplated above, the Company will
      not permit any split or combination of the common stock of the Company,
      and shall not declare

            


    

    


    
      
        
            

        

        
          2

          
            

          

        

        
            

        

      

    

    


    
      	
                

            	
              or pay any dividend (stock, cash or any other distribution) on
      its common or preferred stock, without the written consent of the
      Holder.

            


    

    


    
      	
                

            	
              b.

            	
              (i)

            	
              The Company shall not issue any shares of its common stock which
      are registered on a registration statement on Form S-8 (a “Form S-8”)
      without the written consent of the Holder, except if each and every of the
      following conditions are met:

            


    

    


    
      	
                

            	
              i.

            	
              The shares are issued as compensation for bonafide consulting
      services, pursuant to a written consulting agreement containing each and
      every understanding and term of the agreement between the consultant and
      the Company, and such shares are lawfully issuable under the rules and
      regulations relating to the use of Form
S-8;

            


    

    


    
      	
                

            	
              ii.

            	
              The Company has provided to its securities counsel copies of all
      agreements with the consultant and each and every recipient of shares that
      have been registered on the Form S-8, has fully explained to such counsel
      in writing all of the services to be provided by such consultant and any
      person, entity or business affiliated in any way with such consultant, and
      the Company has received the written opinion of such counsel that the
      issuance of shares registered on the Form S-8 to such consultant complies
      in all respects with applicable securities laws, including, without
      limitation, those rules and regulations relating to the use of
      registration statements on Form S-8 and the issuance of shares registered
      thereon;

            


    

    


    
      	
                

            	
              iii.

            	
              The issuance of the shares registered on the Form S-8 will not
      exceed an amount equal to $75,000 per month, beginning with November 2006,
      divided by the average closing price of the Company’s common stock for the
      month prior to such issuance (after giving effect to any split of the
      Company’s common stock (forward or
reverse);

            


    

    


    
      	
                

            	
              iv.

            	
              Any person who receives such shares shall agree not to sell more
      than (i) 1/20th
      of 20% of the total volume of the Company’s shares traded during the month
      prior to the issuance of such shares (the “Prior Month’s Volume”) in any
      single trading day, non-cumulative, or (ii) 20% of the Prior Months Volume
      in any single thirty day period.  For example, if the Prior
      Month’s Volume is 1,000,000 shares, the daily trading limit would be
      10,000 shares, and the monthly trading limit would be 200,000
      shares.  In the event such person breaches this limitation, it
      will be an Event of Default under the
Debenture.

            


    

    


    
      	
                

            	
              10.

            	
              Any default under this Debenture, or any of the debentures
      executed on the same date as this Debenture, as amended by an amendment
      dated as of the same date as this Agreement, and any default under or
      breach of that certain Settlement Agreement and General Release dated as
      of the same date hereof, shall be an Event of Default under this
      Debenture.

            


    

    


    
      
        
            

        

        
          3

          
            

          

        

        
            

        

      

    

     

    
      
        	 	11.	To induce the Holder to extend the Maturity Date of the
      Debenture, the Company hereby agrees to pay an extension fee and a
      settlement for delayed delivery of conversion shares of an aggregate of
      $102,223, and hereby confirms that the balance of the Debenture as of
      October 15, 2006, is agreed to be $323,707.63, which includes all
      advances, accrued interest and the above fee to date.
	 	 	 
	 	 	To further induce the Debenture Holder to enter into this
      Agreement, the Company shall execute and deliver to the Holder a
      seven-year warrant to purchase 4,000,000 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; provided,
      that the maximum number of shares that the Company shall be required to
      register on any one registration statement shall not exceed thirty percent
      (30%) of the total number of shares of common stock registered for other
      parties on such registration statement.  All other terms of the
      Debenture, as amended to date, shall remain the
same.


      

    

     

    IN WITNESS WHEREOF, the Company has duly executed this Debenture as of
the date first written above.

    
 

    
      	
              MATERIAL TECHNOLOGIES, INC.

              a Delaware corporation

            	
              PALISADES CAPITAL, LLC

            
	 	 
	 	 
	By:  /s/ Robert
      M. Bernstein	By:  /s/ Reid
      Breitman
	      Robert M. Bernstein	      Reid Breitman
	      Chairman and CEO	     
President


    

     

     

     

     

     

     

    


    
      
        
            

        

        
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