Document:

ADDENDUM
      TO CONVERTIBLE DEBENTURE, WARRANT TO PURCHASE COMMON STOCK AND SECURITIES
      PURCHASE AGREEMENT

    

    This
      Addendum to Convertible Debenture, Warrant to Purchase Common Stock and
      Securities Purchase Agreement (“Addendum”) is entered into as of the 2nd day of
      May 2006 by and between Material Technologies, Inc., a Delaware corporation
      (“Material”) and Golden Gate Investors, Inc., a California corporation
      (“GGI”).

    

    WHEREAS,
      Material and GGI are parties to that certain 5 1⁄4 % Convertible Debenture dated
      as of December 16, 2005 (“Debenture”); and

    

    WHEREAS,
      Material and GGI are parties to that certain Warrant to Purchase Common Stock
      dated as of December 16, 2005 (“Warrant”); and

    

    WHEREAS,
      Material and GGI are parties to that certain Securities Purchase Agreement
      dated
      as of December 16, 2005 (“Securities Purchase Agreement”); and 

    

    WHEREAS,
      the parties desire to amend the Debenture, Warrant and Securities Purchase
      Agreement in certain respects.

    

    NOW,
      THEREFORE, in consideration of the mutual promises and covenants contained
      herein, and for other good and valuable consideration, the receipt and
      sufficiency of which are hereby acknowledged, Material and GGI agree as
      follows:

    

    	1.  	
            All
              terms used herein and not otherwise defined herein shall have the
              definitions set forth in the Debenture.

          

     

    	2.  	
            The
              Debenture Principal Amount shall be $1,000,000. The Purchase Price
              for the
              Debenture shall be $1,000,000. All amounts previously advanced by GGI
              to
              Material, and any additional amounts advanced by GGI to Material prior
              to
              the Effective Date, shall be applied to the Purchase
              Price.

          

     

    	3.  	
            Upon
              notification and verification that the Registration Statement for the
              Conversion Shares has been filed with the Securities and Exchange
              Commission, GGI shall immediately send via wire $20,000 of the Purchase
              Price.

          

     

    	4.  	
            Upon
              notification and verification that the Registration Statement for the
              Conversion Shares has been declared effective by the Securities and
              Exchange Commission (such date, the “Effective Date”), and such shares can
              legally be issued to GGI, Material shall immediately deliver 20,000,000
              Material registered shares (in 50 certificates of 400,000 shares each),
              registered in the name of Golden Gate Investors, Inc., to Alan L. Atlas,
              Esq., who shall hold the shares in trust as a joint escrow agent for
              Material and GGI. The delivery of such shares shall occur no later
              than
              five days after the Effective Date. Upon receipt of the Material
              registered Common Shares by Alan L. Atlas, Esq., GGI shall immediately
              send via wire the remainder of the Purchase Price ($1,000,000 less
              the sum
              of all amounts previously advanced to Material) which has not previously
              been funded, which shall occur no later than five days after the Effective
              Date. Such shares may only be released by Alan L. Atlas, Esq. pursuant
              to
              valid Debenture conversion notices submitted by GGI. It is understood
              that
              GGI shall not be considered the owner of the Material Common Shares
              held
              in escrow, and GGI agrees that it will not vote the shares in escrow
              or
              exercise any control whatsoever over such shares until such time as
              the
              shares are released to GGI by the escrow
              agent.

          

    

    
      
         

      

      
        1

        
          

        

      

      
         

      

    

    	5.  	
            The
              second sentence of section 3.1(a) of the Debenture is amended to read
              as
              follows: “The number of shares into which this Debenture may be converted
              is equal to the dollar amount of the Debenture being converted divided
              by
              the Conversion Price.” 

          

    

    	6.  	
            The
              last paragraph of section 3.1(a) of the Debenture is amended to read
              as
              follows: “If the Holder elects to convert a portion of the Debenture and,
              on the day that the election is made, the Volume Weighted Average Price
              is
              below the lesser of: (i) $0.05, or (ii) the lowest price at which any
              of
              the 20,000,000 additional shares referenced in section 12 herein are
              issued or sold, the Company shall have the option to do one of the
              following: (x) redeem that portion of the Debenture that Holder elected
              to
              convert, plus any accrued and unpaid interest, at 108% of such amount,
              or
              (y) increase the Discount Multiplier to 99% on that portion of the
              Debenture that Holder elected to convert, or (z) one time during any
              six
              month period, not permit any Debenture conversions by Holder for a
              period
              of 60 days.”

          

    

    	7.  	
            If
              GGI elects to convert a portion of the Debenture and, on the day that
              the
              election is made, the Volume Weighted Average Price is $0.32 or higher,
              the Discount Multiplier shall be 72%.

          

    

    	8.  	
            The
              Warrant is hereby cancelled, as is the Warrant prepayment set forth
              in the
              December 16, 2005 letter agreement between the
              parties.

          

    

    	9.  	
            The
              second full paragraph of section 3.1(a) of the Debenture is amended
              to
              read as follows: “Beginning in the first full calendar month after the
              Registration Statement is declared effective, Holder must convert at
              least
              10%, but no more than 40%, of the face value of the Debenture per calendar
              month into Common Shares of the Company, provided that the Common Shares
              are available, registered and freely tradable. Material may reduce
              the
              monthly maximum figure from 40% to 6% for any three calendar months
              (but
              not two consecutive calendar months) during the term of the Debenture
              by
              giving written notice of such election to GGI at least ten business
              days
              prior to the first day of the applicable calendar
              month.”

          

    

    	10.  	
            The
              Deadline shall be the 120th
              day after the new Registration Statement is filed with the SEC, provided
              that the Company responds to all SEC comments within 15 business days
              of
              receipt thereof.

          

    

    	11.  	
            The
              parties shall enter into an additional three $1,000,000 convertible
              debentures, each on the same terms and conditions as the Convertible
              Debenture. The parties must enter into each such additional convertible
              debenture no later than thirty days after the Debenture Principal Amount
              is less than $400,000 for the prior debenture. GGI shall fund $100,000
              of
              the Purchase Price for each additional convertible debenture at the
              time
              of entering into each additional convertible debenture, with the remaining
              portion of the Purchase Price to be funded upon notification and
              verification that the Registration Statement has been declared effective
              by the Securities and Exchange Commissions and shares can legally be
              issued to GGI. In the event that GGI fails to enter into either of
              the
              three additional convertible debentures in accordance with the terms
              hereof, GGI shall pay to Material liquidated damages of
              $100,000.

          

    

    
      
         

      

      
        2

        
          

        

      

      
         

      

    

    	12.  	
            In
              the Registration Statement, Material may register up to an additional
              20,000,000 shares for sale or issuance to parties other than
              GGI.

          

    

    	13.  	
            Except
              as specifically amended herein, all other terms and conditions of the
              Debenture and Securities Purchase Agreement shall remain in full force
              and
              effect.

          

    

    IN
      WITNESS WHEREOF, Material and GGI have caused this Addendum to be signed by
      its
      duly authorized officers on the date first set forth above.

    

    Material
      Technologies, Inc.     Golden
      Gate Investors, Inc.

    

    By:
      /s/
      Robert M.
      Bernstein                                                     
By:
      /s/
      Travis Huff

    

    Name:
      Robert M. Bernstein     Name:
      Travis Huff

    

    Title:
      Chief Executive
      Officer                                                    Title:
      Portfolio Manager

    

    

    
      
         

      

      
        3Material
      Technologies, Inc.

     

    ____________________________

    

    

    SECURITIES
      PURCHASE AGREEMENT

    

    __________________________

    

     

    
      
         

      

      
         

        
          

        

      

      
         

        
        

      

    

    SECURITIES
      PURCHASE AGREEMENT

    

     

    This
      Securities Purchase Agreement (this “Agreement”) is made and entered into
      effective as of the 30th day of May, 2006 (the “Effective Date”) by and between
      Material Technologies, Inc., a Delaware corporation (the “Company”), and La
      Jolla Cove Investors, Inc., a California corporation (the “Purchaser”). The
      Company and Purchaser shall each be referred to as a “Party” and collectively as
      the “Parties.”

     

    The
      Parties hereby agree as follows:

     

    1.  PURCHASE
      OF WARRANTS.

     

    Subject
      to the terms of this Agreement, the Purchaser agrees to purchase from the
      Company, and the Company agrees to sell to the Purchaser, a warrant to purchase
      up to Twenty Million (20,000,000) shares of Class A common stock of the Company
      (the “Warrant Shares”), in the form attached hereto as Exhibit
      A
      (the
“Warrant”). As consideration for the purchase of the Warrant, Purchaser agrees
      to advance the sum of Fifty Thousand Dollars ($50,000) (the “Premium”) to the
      Company against the exercise price to be received by the Company upon exercise
      of the Warrant. The Warrants shall be exercisable until December 31, 2007,
      and
      must be exercised by Purchaser in accordance with the schedule set forth in
      Section 5(e) hereof.

     

    2.  EXERCISE
      PRICE.

     

    The
      exercise price (“Exercise Price”) of the Warrants shall be $0.01
      per
      share, provided, however, in no event shall the Exercise Price be lower or
      higher than the lowest price at which the Company sold any Common Stock (through
      direct stock issuances, conversions of debentures, etc, but not including stock
      issued for services) during the thirty days prior to the exercise date. Upon
      the
      exercise of the Warrant Shares, the Exercise Price shall be reduced pro rata
      to
      permit the Holder to recapture the Premium.

     

    3.  DELIVERY
      OF THE WARRANT.

     

    Within
      two (2) business days of the execution of this Agreement by the Company and
      the
      Purchaser, Purchaser will deliver to the Company a check or wire transfer funds
      in the amount of the Premium, and the Company shall issue and deliver to
      Purchaser the Warrant. 

     

    4.  REPRESENTATIONS,
      WARRANTIES AND COVENANTS OF THE COMPANY

     

    The
      Company hereby represents and warrants to Purchaser as follows:

     

    a)  Corporate
      Power.
      The
      Company has all requisite corporate power to execute and deliver this Agreement
      and the Warrant and to carry out and perform its obligations under the terms
      of
      this Agreement.

     

    
      
         

      

      
        Page
          1 of 6

        
          

        

      

      
         

      

    

    b)  Authorization.
      All
      corporate action on the part of the Company, its directors and its stockholders
      necessary for the authorization, execution, delivery and performance of this
      Agreement by the Company and the performance of the Company’s obligations
      hereunder, including the issuance and delivery of the Warrant and the
      reservation of the equity securities issuable upon exercise of the Warrant,
      has
      been taken or will be taken prior to the issuance of such equity securities.
      This Agreement and the Warrant, when executed and delivered by the Company,
      shall constitute valid and binding obligations of the Company enforceable in
      accordance with their terms, subject to laws of general application relating
      to
      bankruptcy, insolvency, the relief of debtors and, with respect to rights to
      indemnity, subject to federal and state securities laws. The Purchaser’s Class A
      common stock of the Company, when issued in compliance with the provisions
      of
      the Warrant, will be validly issued, fully paid and nonassessable and free
      of
      any liens or encumbrances.
      The
      issuance of the Warrant pursuant to the provisions of this Agreement will not
      violate any preemptive rights, rights of first refusal, or any other rights
      granted by the Company, and the Warrant will be issued in compliance with all
      applicable federal and state securities laws, and will be free of any liens
      or
      encumbrances, other than any liens or encumbrances created by or imposed upon
      the Purchaser through no action of the Company; provided, however, that the
      Warrant may be subject to restrictions on transfer under state and/or federal
      securities laws as set forth herein or as otherwise required by such laws at
      the
      time the transfer is proposed.

     

    c)  Governmental
      Consents.
      All
      consents, approvals, orders, or authorizations of, or registrations,
      qualifications, designations, declarations, or filings with, any governmental
      authority, required on the part of the Company in connection with the valid
      execution and delivery of this Agreement, the offer, sale or issuance of the
      Warrant and the equity securities issuable upon exercise of the Warrant, or
      the
      consummation of any other transaction contemplated hereby shall have been
      obtained and will be effective at the Closing, except for notices required
      or
      permitted to be filed with certain state and federal securities commissions,
      which notices will be filed on a timely basis.

     

    d)  Offering.
      Assuming the accuracy of the representations and warranties of Purchaser
      contained in Section 5 hereof, the offer, issue, and sale of the Warrant is
      and
      will be exempt from the registration and prospectus delivery requirements of
      the
      Securities Act of 1933, as amended (the “Act”), and have been registered or
      qualified (or are exempt from registration and qualification) under the
      registration, permit, or qualification requirements of all applicable state
      securities laws.

     

    e)      
      Use
      of Proceeds.
      The
      Company shall use the proceeds from the exercise of the Warrants to reduce
      debt
      obligations of the Company. The proceeds from the Premium will be used for
      general working capital purposes.

    

    f)       
      Piggyback
      Registration Rights.
      If the
      Company at any time proposes to register any of its securities under the Act,
      including under an S-1 Registration Statement or otherwise, it will each such
      time give written notice to the Purchaser of its intention so to do. Upon the
      written request of Purchaser given within 10 days after receipt of any such
      notice, the Company will use its best efforts to cause all shares underlying
      the
      exercise of the Warrant to be registered under the Act (with the securities
      which the Company at the time propose to register). All expenses incurred by
      the
      Company in complying with this Section, including without limitation all
      registration and filing fees, listing fees, printing expenses, fees and
      disbursements of all independent accountants, or counsel for the Company and
      the
      expense of any special audits incident to or required by any such registration
      and the expenses of complying with the securities or blue sky laws of any
      jurisdiction shall be paid by the Company. 

    

    
      
         

      

      
        Page
          2 of 6

        
          

        

      

      
         

      

    

    5.  REPRESENTATIONS
      AND WARRANTIES OF THE PURCHASER

     

    a)  Purchase
      for Own Account.
      Purchaser represents that he is acquiring the Warrant and the equity securities
      issuable upon exercise of the Warrant (collectively, the “Securities”) solely
      for his own account and beneficial interest for investment and not for sale
      or
      with a view to distribution of the Securities or any part thereof, has no
      present intention of selling (in connection with a distribution or otherwise),
      granting any participation in, or otherwise distributing the same, and does
      not
      presently have reason to anticipate a change in such intention.

     

    b)  Ability
      to Bear Economic Risk.
      Purchaser acknowledges that investment in the Securities involves a high degree
      of risk, and represents that he is able, without materially impairing his
      financial condition, to hold the Securities for an indefinite period of time
      and
      to suffer a complete loss of his investment.

     

    c)  Further
      Limitations on Disposition.
      Purchaser further acknowledges that the Securities are restricted securities
      under Rule 144 of the Act, and, therefore, when issued by the Company to the
      Purchaser will contain a restrictive legend substantially similar to the
      following:

     

    THESE
      SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
      (THE “ACT”). THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN
      THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THE SECURITIES UNDER
      THE ACT OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH
      REGISTRATION IS NOT REQUIRED.

     

    Without
      in any way limiting the representations set forth above, Purchaser further
      agrees not to make any disposition of all or any portion of the Securities
      unless and until:

     

    (i) There
      is
      then in effect a Registration Statement under the Act covering such proposed
      disposition and such disposition is made in accordance with such Registration
      Statement; or

     

    (ii) Purchaser
      shall have notified the Company of the proposed disposition and shall have
      furnished the Company with a detailed statement of the circumstances surrounding
      the proposed disposition, and if reasonably requested by the Company, Purchaser
      shall have furnished the Company with an opinion of counsel, reasonably
      satisfactory to the Company, that such disposition will not require registration
      under the Act or any applicable state securities laws.

     

    
      
         

      

      
        Page
          3 of 6

        
          

        

      

      
         

      

    

    Notwithstanding
      the provisions of subparagraphs (i) and (ii) above, no such registration
      statement or opinion of counsel shall be necessary for a transfer by such
      Purchaser to a partner (or retired partner) of Purchaser, or transfers by gift,
      will or intestate succession to any spouse or lineal descendants or ancestors,
      if all transferees agree in writing to be subject to the terms hereof to the
      same extent as if they were Purchasers hereunder.

     

    d)  Accredited
      Investor Status. 
      Purchaser is an “accredited investor” as such term is defined in Rule 501 under
      the Act.

     

    e)   
       Scheduled
      Exercise of Warrant.
      Purchaser agrees that, beginning on the date that a Registration Statement
      filed
      by the Company with the Securities and Exchange Commission becomes effective
      that registers the Warrant Shares, Purchaser will exercise the Warrant, pay
      the
      Exercise Price to the Company, and acquire the Warrant Shares, at a rate of
      at
      least One Million Two Hundred Fifty Thousand (1,250,000) of the Warrant Shares
      per week, to continue for sixteen (16) consecutive weeks until all of the
      Warrant Shares have been purchased by Purchaser. In the event Purchaser does
      exercise the Warrant in accordance with this schedule Purchaser shall pay
      liquidated damages of $50,000 to the Company.

    

    6.  MISCELLANEOUS

     

    a)  Binding
      Agreement.
      The
      terms and conditions of this Agreement shall inure to the benefit of and be
      binding upon the respective successors and assigns of the Parties. Nothing
      in
      this Agreement, expressed or implied, is intended to confer upon any third
      party
      any rights, remedies, obligations, or liabilities under or by reason of this
      Agreement, except as expressly provided in this Agreement.

     

    b)  Governing
      Law; Venue.
      This
      Agreement shall be governed by and construed under the laws of the State of
      California as applied to agreements among California residents, made and to
      be
      performed entirely within the State of California.
      The Parties agree that any action brought to enforce the terms of this Agreement
      will be brought in the appropriate federal or state court having jurisdiction
      over San Diego County, California, United States of America.

     

    c)  Counterparts.
      This
      Agreement may be executed in one or more counterparts, each of which shall
      be
      deemed an original, but all of which together shall constitute one and the
      same
      instrument.

     

    d)  Titles
      and Subtitles.
      The
      titles and subtitles used in this Agreement are used for convenience only and
      are not to be considered in construing or interpreting this
      Agreement.

     

    
      
         

      

      
        Page
          4 of 6

        
          

        

      

      
         

      

    

    e)  Notices.
      All
      notices required or permitted hereunder shall be in writing and shall be deemed
      effectively given: (a) upon personal delivery to the Party to be notified,
      (b)
      when sent by confirmed facsimile if sent during normal business hours of the
      recipient, if not, then on the next business day, or (c) one (1) day after
      deposit with a nationally recognized overnight courier, specifying next day
      delivery, with written verification of receipt. All communications shall be
      sent
      as follows:

     

    If
      to the
      Company:                                              
Material
      Technologies, Inc.

    11661
      San
      Vicente Boulevard, Suite 707

    Los
      Angeles, California 90049

    Attn:
      Robert M. Bernstein

    Facsimile
      No.: (310) 473-3177

    

    with
      a
      copy
      to:                                                    
The
      Lebrecht Group, APLC

    9900
      Research Drive

    Irvine,
      CA 92612

    Attn:
      Brian A. Lebrecht, Esq.

    Facsimile
      No.: (949) 635-1244

    

    If
      to
      Purchaser:                                                    
La
      Jolla
      Cove Investors, Inc.

    7817
      Herschel Avenue, Suite 200

    La
      Jolla,
      CA 92037

    Attn:
      President

    Facsimile
      No.: (858) 551-8779

    

    or
      at
      such other address as the Company or Purchaser may designate by ten (10) days
      advance written notice to the other Party hereto.

     

    f)  Modification;
      Waiver.
      No
      modification or waiver of any provision of this Agreement or consent to
      departure therefrom shall be effective unless in writing and approved by the
      Company and the Purchaser.

     

    g)  Entire
      Agreement.
      This
      Agreement and the Exhibits hereto constitute the full and entire understanding
      and agreement between the Parties with regard to the subjects hereof and no
      Party shall be liable or bound to the other Party in any manner by any
      representations, warranties, covenants and agreements except as specifically
      set
      forth herein.

     

    h)  Expenses.
      Each
      Party shall pay their own expenses in connection with this Agreement and the
      Warrant. In addition, should either Party commence any action, suit or
      proceeding to enforce this Agreement or any term or provision hereof, then
      in
      addition to any other damages or awards that may be granted to the prevailing
      Party, the prevailing Party shall be entitled to have and recover from the
      other
      Party such prevailing Party’s reasonable attorneys’ fees and costs incurred in
      connection therewith.

     

    i)  Currency.
      All
      currency is expressed in U.S. dollars.

     

    
      
         

      

      
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          5 of 6

        
          

        

      

      
         

      

    

    IN
      WITNESS WHEREOF, the
      Parties have executed this Securities Purchase Agreement as
      of the
      date first written above.

     

    

    
      	
              “Company”

            	
              “Purchaser”

            
	 	 
	
              Material
                Technologies, Inc.,

            	
              La
                Jolla Cove Investors, Inc.,

            
	
              a
                Delaware corporation

            	
              a
                California corporation

            
	 	 
	 	 
	
              /s/
                Robert M. Bernstein

            	
              /s/
                Travis Huff 

            
	
              By: Robert
                M. Bernstein

            	
              By: Travis
                Huff 

            
	
              Its: President

            	
              Its: Portfolio
                Manager  

            

    

    

     

    
      
         

      

      
        Page
          6 of 6

        
          

        

      

      
         

        
          

        

      

    

    EXHIBIT
      A

    

    Form
      of
      Warrant

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