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			EXHIBIT 10.1

						

						

						

						

						

						

						

						

					MATERIAL TECHNOLOGIES, INC.

					____________________________

				

				

				SECURITIES PURCHASE AGREEMENT

				

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			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.

				

				          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,

				

				

				

			

		

		
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			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.

			

			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 

			

			

			

			

		

		
			

			

			
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			(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.

			

			          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 

				

				

				

			

			

			

			
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			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.

			

			          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.

				

				

				

			

			

			

			
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			          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.
			

			

			          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

					

		

		
			

				

				

				

				

				

				

				

				

				

				

				

				

				

				

				

				

				

			

		

		
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			EXHIBIT A

				

				Form of Warrant

			

		

		
			

				

				

				

				

				

				

				

				

				

				

				

				

				

				

				

				

				

				

				

				

				

				

				

				

				

				

				

				

				

				

				

			

		

		
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			EXHIBIT 10.2

						

						

						

					WARRANT TO PURCHASE COMMON STOCK

					

					

				

		

		
			THIS WARRANT AND THE SHARES ISSUABLE HEREUNDER HAVE BEEN ACQUIRED FOR INVESTMENT AND NOT FOR DISTRIBUTION, AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED.  NEITHER THE WARRANT NOR THE SHARES MAY BE SOLD, PLEDGED, OR OTHERWISE TRANSFERRED WITHOUT AN EFFECTIVE REGISTRATION THEREOF UNDER SUCH ACT OR PURSUANT TO RULE 144 OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE COMPANY AND ITS COUNSEL THAT SUCH REGISTRATION IS NOT REQUIRED.

				

				Issuer: Material Technologies, Inc.

				Class of Stock: Common

				Issue Date: May 30, 2006

				Expiration Date: December 31, 2007

				

				

				          Material Technologies, Inc., a Delaware corporation (the “Company”) hereby grants to La Jolla Cove Investors, Inc., a California corporation (the “Holder”) the right to purchase up to 20,000,000 shares of the Company’s Class A Common Stock (the “Warrant Shares”).  This warrant (the "Warrant") shall expire and Holder shall no longer be able to purchase the Warrant Shares on the Expiration Date.

				

			

		

		
			ARTICLE 1

				EXERCISE

					

				

		

		
			          1.1        Method of Exercise.  Holder may exercise this Warrant by delivering a duly executed Notice of Exercise in substantially the form attached as Appendix 1 to the principal office of the Company, along with a check payable to the Company for the aggregate Exercise Price for the Warrant Shares being purchased.  Holder 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, Holder 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 Holder. 

				

				          1.2        Delivery of Certificate and New Warrant Delivery of Certificate and New Warrant.  As promptly as practicable after the receipt of the Notice of Exercise, but in any event not more than three (3) Business Days  after the Company’s receipt of the Notice of Exercise, the Company shall issue the Warrant Shares being purchased and cause to be mailed for delivery by overnight courier, or if a Registration Statement covering the Shares has been declared effective by the SEC, cause to be electronically transferred, to Holder a certificate representing the Warrant Shares acquired and, if this Warrant has not been fully exercised and has not expired, a new Warrant substantially in the form of this Warrant representing the right to acquire the portion of the Warrant Shares not so acquired.

				

				          1.3        Replacement of Warrants.  On receipt of evidence reasonably satisfactory to the Company of the loss, theft, destruction or mutilation of this Warrant and, in the case of loss, theft or destruction, on delivery of an indemnity agreement reasonably satisfactory in form and amount to the 

			

			

			

			

			

			

			

			

			Company or, in the case of mutilation, or surrender and cancellation of this warrant, the Company at its expense shall execute and deliver, in lieu of this Warrant, a new warrant of like tenor.

			

			          1.4        Exercise Price.  The Exercise Price for the Warrant Shares 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 amount paid to the Company upon acquisition of this Warrant (the "Premium")..

			

		

		
			ARTICLE 2

				ADJUSTMENT TO THE WARRANT SHARES

					

				

		

		
			          The number of Warrant Shares purchasable upon the exercise of this Warrant and the Exercise Price shall be subject to adjustment form time to time upon the occurrence of certain events, as follows:

				

				          2.1        Reclassification.  In case of any reclassification or change of outstanding securities of the class issuable upon exercise of this Warrant then, and in any such case, the Holder, upon the exercise hereof at any time after the consummation of such reclassification or change, shall be entitled to receive in lieu of each Warrant Share theretofore issuable upon exercise of this Warrant, the kind and amount of shares of stock, other securities, money and/or property received upon such reclassification or change by a holder of one share.  The provisions of this Section 2.1 shall similarly apply to successive reclassifications or changes.

				

				          2.2        Subdivision or Combination of Shares.  If the Company at any time while this Warrant remains outstanding and unexpired shall subdivide or combine its shares, the Exercise Price shall be proportionately decreased in the case of a subdivision or increased in the case of a combination.

				

				          2.3        Stock Dividends.  If the Company, at any time while this Warrant is outstanding shall pay a dividend with respect to its shares payable in shares, or make any other distribution of shares with respect to shares (except any distribution provided for in Section 2.1 and Section 2.2 above), then the Exercise Price shall be adjusted, effective from and after the date of determination of shareholders entitled to received such dividend or distribution, to that price determined by multiplying the Exercise Price in effect immediately prior to such date of determination by a fraction, (a) the numerator of which shall be the total number of shares outstanding immediately prior to such dividend or distribution, and (b) the denominator of which shall be the total number of shares outstanding immediately after such dividend or distribution.

				

				          2.4        Non-Cash Dividends.  If the Company at any time while this Warrant is outstanding shall pay a dividend with respect to shares payable in securities other than shares or other non-cash property, or make any other distribution of such securities or property with respect to shares (except any distribution specifically provided for in Section 2.1 and Section 2.2 above), then this Warrant shall represent the right to acquire upon exercise of this Warrant such securities or property which a holder of shares would have been entitled to receive upon such dividend or distribution, without the payment by Holder of any additional consideration for such securities or property.

				

				          2.5        Effect of Reorganization and Asset Sales.  If any (i) reorganization or reclassification of the Common Stock (ii) consolidation or merger of the Company with or into another corporation, or (iii) sale or all or substantially all of the Company’s operating assets to another corporation followed by a liquidation of the Company (any such transaction shall be referred to herein as an “Event”), is effected in such a way that holders of Common Stock are entitled to receive securities and/or assets as a result of 

			

			

			

		

		
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			their Common Stock ownership, Holder, upon exercise of this Warrant, shall be entitled to receive such shares of stock, securities or assets which Holder would have received had it fully exercised this Warrant on or prior the record date for such Event.  The Company shall not merge into or consolidate with another corporation or sell all of its assets to another corporation for a consideration consisting primarily of securities or such corporation, unless the successor or acquiring corporation, as the case may be, shall expressly assume the due and punctual observance and performance of each and every covenant and condition of this Warrant to be performed or observed by the Company and all of the obligations and liabilities hereunder, subject to such modification as shall be necessary to provide for adjustments which shall be as nearly equivalent as practicable to the adjustments provided for in this Section 2.  The foregoing provisions shall similarly apply to successive mergers, consolidations or sales of assets.

			

			          2.6        Adjustment of Number of Shares.  Upon each adjustment in the Exercise Price, the number of Shares shall be adjusted, to the nearest whole share, to the product obtained by multiplying the number of Shares purchasable immediately prior to such adjustment by a fraction (a) the numerator of which shall be the Exercise Price prior to the adjustment and (b) the denominator of which shall be the Exercise Price immediately thereafter.

			

			          2.7        No Impairment.  The Company shall not, by amendment of its charter documents or through a reorganization, transfer of assets, consolidation, merger, dissolution, issue, or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms to be observed or performed under this Warrant by the Company, but shall at all times in good faith assist in carrying out all of the provisions of this Warrant and in taking all such action as may be reasonably necessary or appropriate to protect Holder’s rights hereunder against impairment.  If the Company takes any action affecting its Common Stock other than as described above that adversely affects Holder’s rights under this Warrant, the Exercise Price shall be adjusted downward and the number of Warrant Shares issuable upon exercise of this Warrant shall be adjusted upward in such a manner that the aggregate Exercise Price of this Warrant is unchanged.

			

			          2.8        Fractional Shares.  No fractional Warrant Shares shall be issuable upon the exercise of this Warrant, and the number of Warrant Shares to be issued shall be rounded down to the nearest whole share.

			

			          2.9        Certificate as to Adjustments.  Upon any adjustment of the Exercise Price, the Company, at its expense, shall compute such adjustment and furnish Holder with a certificate of its Chief Financial Officer setting forth such adjustment and the facts upon which such adjustment is based.  The Company shall, upon written request, furnish Holder a certificate setting forth the Exercise Price in effect upon the date thereof and the series of adjustments leading to such Exercise Price.

			

			          2.10      No Rights of Shareholders.  This Warrant does not entitle Holder to any voting rights or any other rights as a shareholder of the Company prior to the exercise of Holder’s right to purchase Warrant Shares as provided herein.

			

		

		
			ARTICLE 3

				REPRESENTATIONS AND COVENANTS OF THE COMPANY

					

				

		

		
			          3.1        Representations and Warranties.  The Company hereby represents and warrants to Holder that all Warrant Shares which may be issued upon the exercise of the purchase right represented by this Warrant, shall, upon issuance, be duly authorized, validly issued, fully paid and nonasessable, and free of any liens and encumbrances except for restrictions on transfer provided for herein or under applicable federal and state securities laws.

				

				

				

			

		

		
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			          3.2        Notice of Certain Events.  If the Company proposes at any time (a) to declare any dividend or distribution upon its Common Stock, whether in cash, property, stock, or other securities and whether or not a regular cash dividend; (b) to offer for subscription pro rata to the holders of any class or series of its stock any additional shares of stock of any class or series or other fights; (c) to effect any reclassification or recapitalization of Common Stock; (d) to merge or consolidate with or into any other corporation, or sell, lease, or convey all or substantially all of its assets, or to liquidate, dissolve or wind up; or (e) offer holders of registration rights the opportunity to participate in an underwritten public offering of the Company’s securities for cash, then, in connection with each such event, the Company shall give Holder (1) at least 10 days prior written notice of the date on which a record will be taken for such dividend, distribution, or subscription rights (and specifying the date on which the holders of Common Stock will be entitled thereto) or for determining rights to vote, if any, in respect of the matters referred to in (c) and (d) above; (2) in the case of the matters referred to in (c) and (d) above at least 10 days prior written notice of the date when the same will take place (and specifying the date on which the holders of Common Stock will be entitled to exchange their Common Stock for securities or other property deliverable upon the occurrence of such event); and (3) in the case of the matter referred to in (e) above, the same notice as is given to the holders of such registration rights.

			

			          3.3        Information Rights.  So long as Holder holds this Warrant, the Company shall deliver to Holder (a) promptly after mailing, copies of all notices or other written communications to the shareholders of the Company, (b) promptly upon their availability, the annual audited financial statements of the Company certified by independent public accountants of recognized standing, and (c) within forty-five (45) days after the end of each fiscal quarter, the Company’s quarterly, unaudited financial statements.

			

			          3.4        Reservation of Warrant Shares.  The Company has reserved and will keep available, out of the authorized and unissued shares of Common Stock, the full number of shares sufficient to provide for the exercise of the rights of purchase represented by this Warrant.

			

		

		
			ARTICLE 4

				REPRESENTATIONS AND COVENANTS OF THE HOLDER

					

				

		

		
			          4.1        Private Issue.  Holder understands (i) that the Shares issuable upon exercise of Holder’s rights contained in the Warrant are not registered under the Act or qualified under applicable state securities laws on the ground that the issuance contemplated by the Warrant will be exempt from the registration and qualifications requirements thereof, and (ii) that the Company’s reliance on such exemption is predicated on Holder’s representations set forth in this Article 4.

				

				          4.2        Financial Risk.  Holder has such knowledge and experience in financial and business matters as to be capable of evaluating the merits and risks of its investment and has the ability to bear the economic risks of its investment.

				

				          4.3        Accredited Investor.  Holder is an “accredited investor,” as such term is defined in Regulation D promulgated pursuant to the Securities Act of 1933, as amended.

				

			

		

		
			ARTICLE 5

				MISCELLANEOUS

					

				

		

		
			          5.1        Transfer Procedure.  Holder shall have the right without the consent of the Company to transfer or assign in whole or in part this Warrant or the Warrant Shares issuable upon exercise of this Warrant. Holder agrees that unless there is in effect a registration statement under the Securities Act covering the proposed transfer of all or part of this Warrant, prior to any such proposed transfer the 

			

			

		

		
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			Holder shall give written notice thereof to the Company (a “Transfer Notice”).  Each Transfer Notice shall describe the manner and circumstances of the proposed transfer in reasonable detail and, if the company so requests, shall be accompanied by an opinion of legal counsel, in a form reasonably satisfactory to the Company, to the effect that the proposed transfer may be effected without registration under the Act; provided that the Company will not require opinions of counsel for transactions involving transfers to affiliates or pursuant to Rule 144 promulgated by the Securities and Exchange Commission under the act, except in unusual circumstances.

			

			          5.2        Notices, etc.  All notices and other communications required or permitted hereunder shall be in writing and shall be delivered personally, or sent by facsimile or by a nationally recognized overnight courier service, and shall be deemed given when so delivered personally, or by facsimile or overnight courier service as follows:

			

			To the Company:

			

			Material Technologies, Inc.

			11611 San Vicente Boulevard, Suite 707

			Los Angeles, CA 90049

			Telephone: 310-208-5589

			Facsimile: 310-473-3177

			

			To the Holder:

			

			La Jolla Cove Investors, Inc.

			7817 Herschel Avenue, Suite 200

			La Jolla, CA 92037

			Telephone: 858-551-8789

			Facsimile: 858-551-8779

			

			The Company or the Holder may change the foregoing address by notice given pursuant to this Section.

			

			          5.3        Waiver.  This Warrant and any term hereof may be changed, waived, discharged or terminated only by an instrument in writing signed by the party against which enforcement of such change, waiver, discharge or termination is sought.

			

			          5.4        Attorneys Fees.  In the event of any dispute between the parties concerning the terms and provisions of this warrant, the party prevailing in such dispute shall be entitled to collect from the other party all costs incurred in such dispute, including reasonable attorneys fees.

			

			          5.5        Governing Law; Jurisdiction.  This warrant shall be governed by and construed in accordance with the laws of the State of California, without giving effect to its principles regarding conflicts of law. Each of the parties consents to the jurisdiction of the federal courts whose districts encompass any part of the City of San Diego or the state courts of the State of California sitting in the City of San Diego in connection with any dispute arising under this Warrant and hereby waives, to the maximum extent permitted by law, any objection including any objection based on forum non conveniens, to the bringing of any such proceeding in such jurisdictions.

			

			          5.6        Remedies.  The Company acknowledges that a breach by it of its obligations hereunder will cause irreparable harm to the Holder, by vitiating the intent and purpose of the transactions hereby. Accordingly, the Company acknowledges that the remedy at law for a breach of its obligations under this Warrant will be inadequate and agrees, in the event of a breach or threatened breach by the Company of 

			

			

		

		
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			the provisions of this Warrant, that the Holder shall be entitled, in addition to all other available remedies at law or in equity, and in addition to the penalties assessable herein, to an injunction or injunctions restraining, preventing or curing any breach of this Warrant and to enforce specifically the terms and provisions hereof, without the necessity of showing economic loss and without any bond or other security being required.

			

			Material Technologies, Inc.                                                        La Jolla Cove Investors, Inc.

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

			Title:  President                                                                         Title:  Portfolio Manager                        

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		
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			APPENDIX 1

				

				NOTICE OF EXERCISE

				

			

		

		
			          1.       The undersigned hereby elects to purchase _____ shares of the Common Stock of Material Technologies, Inc. pursuant to the terms of the Warrant to Purchase Common Stock issued on May 30, 2006 in favor of La Jolla Cove Investors, Inc., and tenders herewith payment of the purchase price of such shares in full.

				

				          2.       Please issue a certificate or certificates representing said shares in the name of the undersigned or in such other name as is specified below:

				

			

		

		
			_________________________________

				

				_________________________________

				

				_________________________________

				

				(Name and Address)

				

				

				

			

		

		
			          3.       The undersigned makes the representations and covenants set forth in Article 4 of the Warrant to Purchase Common Stock.

				

				

				

				                                                                                                                                                              

				                                                                                                              (Signature)

				

				___________________________

				                    (Date)

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		

		
			7

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