Document:

matechexh10_5.htm

    
      
        

      
Exhibit 10.5

    TEAMING
AGREEMENT

    

    

    THIS
AGREEMENT, entered into this 6th day of June, 2008, e-RADLIK, Inc. a Delaware corporation
with a principal place of business at 252 Denison Hill Road, North Stonington,
CT 06359 (hereinafter “e-R”) and Material Technologies, Inc., a
corporation located at 11661 San Vincente Blvd., Suite 707, Los Angeles,
CA  90049 (hereinafter “MATECH”) (individually, a “Party”;
collectively, the “Parties” or the “Team”).

    

    RECITALS

    

    WHEREAS,
e-R has extensive experience and contacts, as well as technical expertise, in
shipbuilding metal fatigue sensing requirements;

    

    WHEREAS,
MATECH has experience in metal fatigue technology system, support and
integration and has been exploring and evaluating such systems; and

    

    WHEREAS,
General Dynamics Corp. may be interested in pursuing a program for the
development of improved technology and methodology relating to ship yard and
ship building applications as a supplement to or alternative to current
radiograph practices for the sensing of metal fatigue and related structural
examination (“THE PROGRAM”);

    

    WHEREAS,
each Party further believes that their combined experience and technology
related to THE PROGRAM will permit them to design, develop and/or produce the
technology to achieve the desired performance, cost and schedule parameters for
shipbuilding metal fatigue sensing; and

    

    WHEREAS,
each Party will work together to develop a business plan to support the
commercialization and post Program resale of the THE PROGRAM and related
technology for shipbuilding metal fatigue sensing and monitoring.

    

    NOW,
THEREFORE, in consideration of the foregoing recitals and the mutual promises,
covenants and conditions set forth herein, the Parties agree as
follows:

    

    1.            
INCORPORATION OF
RECITALS

    

    All
recitals set forth above are hereby incorporated by reference and form a part of
this Agreement between the Parties.

    

    
      	
              2.

            	
              CONTRACTOR-SUBCONTRACTOR
      RELATIONSHIPS

            

    

    

    The
Parties agree to participate, under a teaming arrangement as that term is
defined in Federal Acquisition Regulation (FAR) 9.601(2), in order to submit
proposals to, and, if successful, perform contracts with commercial customers,
prime contractors or governments related to THE PROGRAM and its use as a
stand-alone system or integrated into a larger system. In any such proposal
efforts and resulting contracts, it is understood and agreed
that

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    e-R shall
serve as prime contractor for the Team and that MATECH shall serve as its
subcontractor for that portion of the effort under THE PROGRAM falling under
MATECH’s area of responsibility as identified in Exhibit A attached
hereto and made a part hereof.

    

    
      	
              3.

            	
              RESPONSIBILITY OF THE
      PARTIES

            

    

    

    
      	
               
      

            	
              A.

            	
              e-R’s
      Responsibilities

            

    

    

    
      	
               
      

            	
              1)

            	
              Notify
      MATECH of any contacts received from any commercial customer, prime
      contractor, or the government concerning THE PROGRAM and provide MATECH
      with copies of any correspondence when such contacts have been in writing.
      MATECH shall also be notified of, and allowed the opportunity to
      participate in, any meetings with any commercial customer, prime
      contractor, or the government concerning the Parties’ efforts in
      developing THE PROGRAM and the feasibility of obtaining a contract or
      contracts from any commercial customer, prime contractor or the government
      for THE PROGRAM either as a stand-alone system or as a component of a
      larger integrated system.

            

    

    

    
      	
               
      

            	
              2)

            	
              Exercise
      its best efforts to secure a prime contract or contracts for THE PROGRAM
      which includes the work identified in Exhibit A as
      falling within MATECH’s area of responsibility and to secure acceptance of
      MATECH as subcontractor for that
effort.

            

    

    

    
      	
               
      

            	
              3)

            	
              Furnish
      MATECH with a copy of all procurement solicitations issued to e-R relating
      to THE PROGRAM.

            

    

    

    
      	
               
      

            	
              4)

            	
              Issue
      to MATECH a solicitation(s) for that portion of any solicitation(s) from
      any commercial customer, prime contractor, or the government for THE
      PROGRAM that relate to MATECH’s area of responsibility as set forth in
      Exhibit A
      herein.

            

    

    

    
      	
               
      

            	
              5)

            	
              Prepare
      and submit proposals or bids, as applicable, on behalf of the Team for the
      development and/or integration requirements for all phases of THE PROGRAM
      to all commercial customers, prime contractors, or the government, with
      such proposals or bids to include the work identified as falling within
      MATECH’s area of responsibility as defined in Exhibit A and
      to include, unmodified, the provisions of MATECH’s proposal input relative
      to those areas of responsibility.

            

    

    

    
      	
               
      

            	
              6)

            	
              If
      and when awarded a prime contract or contracts relating to THE PROGRAM,
      award a subcontract to MATECH for the work identified as falling within
      MATECH’s area of responsibility as defined in Exhibit A,
      subject to agreement following good faith negotiations as to delivery
      schedules, price and other terms and conditions. Any such subcontract
      shall be the same contract type as the prime contract (for example, Cost
      Plus Fixed Fee, Cost Plus Incentive Fee, Firm Fixed Price, etc.) and
      include those terms

            

    

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    
      	
               
      

            	
              and
      conditions which are required by government regulations to be flowed down
      to major subcontractors.

            

    

    

    
      	
               
      

            	
              7)

            	
              If
      and when awarded a prime contract or contracts related to THE PROGRAM,
      provide overall Program Management.

            

    

    

    
      	
               
      

            	
              8)

            	
              Cooperate
      with MATECH in a reasonable and practicable manner to facilitate the
      successful competition of the Team for all contracts relative to THE
      PROGRAM.

            

    

    

    
      	
               
      

            	
              B.

            	
              MATECH’s
      Responsibilities

            

    

    

    
      	
               
      

            	
              1)

            	
              Provide
      qualified personnel to participate in any meetings e-R may hold with: (i)
      any contractor seeking or acting in a role of prime contractor concerning
      the use of THE PROGRAM as a part of a related system or bid; or (ii) a
      commercial customer or the government concerning the feasibility of
      obtaining a contract or contracts with such contractor, commercial
      customer, or the government related to providing the requirements for all
      phases of THE PROGRAM.

            

    

    

    
      	
               
      

            	
              2)

            	
              Respond
      in a timely manner to all solicitations received from e-R relating to
      MATECH’s area of responsibility for THE
PROGRAM.

            

    

    

    
      	
               
      

            	
              3)

            	
              Provide
      qualified personnel, as requested, to assist e-R in any discussions and
      negotiations with prospective or actual commercial customers, prime
      contractors, or the government relating to the development, submittal or
      negotiation of proposals relating to the requirements for THE
      PROGRAM.

            

    

    

    
      	
               
      

            	
              4)

            	
              Accept
      subcontracts from e-R for the work identified in Exhibit A as
      falling within MATECH’s area of responsibility, subject to agreement
      following good faith negotiations as to delivery schedules, price, and
      other terms and conditions. Any such subcontract shall be the same
      contract type as the prime contract (for example, Cost Plus Fixed Fee,
      Cost Plus Incentive Fee, Firm Fixed Price, etc.), and include those terms
      which are required by government regulations to be flowed down to major
      subcontractors. MATECH’s commitment is further subject to the
      following:

            

    

    

    
      	
               
      

            	
              a)

            	
              In
      the event that any prime contract awarded omits more than 10% of the work
      identified in Exhibit A as
      falling within MATECH’s area of responsibility, MATECH shall have the
      option of: (i) negotiating a subcontract for such lesser effort; or (ii)
      terminating this Agreement, as it relates to that prime contract effort
      only, upon written notice to e-R.

            

    

    

    
      	
               
      

            	
              b)

            	
              Termination
      of this Agreement, in whole or in part, as provided in this paragraph,
      shall not relieve the Parties from their obligations with respect to the
      other Party’s proprietary information and
such

            

    

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    
      	
               
      

            	
              obligations
      to survive such termination. Excepting this limitation, upon termination
      of any part of THE PROGRAM efforts hereunder, either Party may pursue that
      program effort so terminated independent of the
  other.

            

    

    

    
      	
               
      

            	
              5)

            	
              Cooperate
      generally with e-R, in a reasonable and practicable manner, to facilitate
      the successful competition of the Team for all contracts relative to all
      phases of THE PROGRAM.

            

    

    

    
      	
              4.

            	
              RELATIONSHIP OF THE
      PARTIES

            

    

    

    
      	
               
      

            	
              A.

            	
              To
      encourage the exchange of proprietary information between the Parties and
      a mutual dedication of effort to accomplishing the objectives of this
      Agreement, each Party agrees that it will not participate with any other
      party in pursuit of THE PROGRAM contemplated by this Agreement. As a team,
      each of the Parties hereto agrees to offer its fullest support and
      cooperation to preserve in good faith the spirit of the teaming concept
      evidenced by this Agreement. It is understood, however, that neither Party
      shall be precluded from its normal marketing efforts in connection with
      the sale of its standard products and services. It is further understood
      and agreed that, should any prospective or actual commercial customer or
      prime contractor identify or define its system requirements so as to
      require only products/technology fully within one of the Parties’ area of
      expertise, then either Party may terminate this Agreement as to that prime
      contractor, and the Parties shall be free to pursue contracts with that
      prime contractor independently, subject only to the provisions of
      paragraph 6 below concerning proprietary
  information.

            

    

    

    
      	
               
      

            	
              B.

            	
              This
      Agreement is not intended to constitute, create, give effect to, or
      otherwise recognize a joint venture, partnership, or formal business
      entity of any kind. Each Party shall act as an independent contractor and
      neither Party shall act as an agent or partner of the other Party. The
      rights and obligations of the Parties under this Agreement are limited to
      those expressly set forth herein.

            

    

    

    
      	
               
      

            	
              C.

            	
              Nothing
      contained in this Agreement is to be construed as providing for the
      sharing of profits or losses arising out of the efforts of either or both
      Parties. Neither Party will be liable to the other for any costs,
      expenses, risks, or liabilities arising out of the other Party’s efforts
      in connection with this Agreement or the preparation and submission of any
      proposal(s) for THE PROGRAM.

            

    

    

    
      	
              5.

            	
              EXPENSES

            

    

    

    Except
for the compensation which may be paid to the Parties in accordance with any
contract or subcontract relating to THE PROGRAM, each Party shall bear its own
expenses incurred in its respective participation in meetings between the
Parties and/or with prospective prime contractors or the government, as well as
any proposal preparation, submission and negotiation activities.

    

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    6.            
LICENSES

    

    Unless
otherwise stated in this Agreement, no license to the other Party under any
patents or copyrights is granted or implied by conveying proprietary or other
information to that Party. None of such information which may be transmitted or
exchanged by the respective Parties shall constitute any representation,
warranty, assurance; guaranty or inducement by either Party to the other with
respect to the infringement of patents or other rights of others.

    

    
      	
              7.

            	
              INTELLECTUAL PROPERTY
      RIGHTS

            

    

    

    A.           For
purposes of this Section 7, the following terms are defined as
follows:

    

    
      	
               
      

            	
              i.

            	
              “Background
      Intellectual Property Rights” shall mean, with respect of each
      Party, the Intellectual Property Rights, excluding Foreground Intellectual
      Property owned by, used by, or otherwise in the possession or control of
      that Party, as of the date of this Agreement and which relates to, is or
      will be used in connection with or on THE
  PROGRAM.

            

    

    

    
      	
               
      

            	
              ii.

            	
              “Documentation”
      shall mean all written text including, but not limited to, manuals,
      brochures, specifications and hardware or software descriptions, in
      electronic, printed and/or camera ready form and related materials
      customarily needed to use, provide service for, or otherwise support THE
      PROGRAM.

            

    

    

    
      	
               
      

            	
              iii.

            	
              “Foreground
      Intellectual Property” shall mean all Intellectual Property Rights
      resulting from the work undertaken by MATECH and e-R under this
      Agreement.

            

    

    

    
      	
               
      

            	
              iv.

            	
              “Intellectual Property
      Rights” means all intellectual property rights worldwide arising
      under statutory or common law, whether or not perfected, including without
      limitation, the following:

            

    

    

    
      	
               
      

            	
              (a)

            	
              all
      patents, patent applications and patent rights, including divisions,
      continuations, renewals, reissues, continuing prosecution, and extensions
      of the foregoing (as and to the extent applicable) now existing, hereafter
      filed, issued or acquired;

            

    

    

    
      	
               
      

            	
              (b)

            	
              all
      rights associated with works of authorship including copyrights, copyright
      applications, copyright registrations, mask works, mask work applications,
      and mask work registrations;

            

    

    

    
      	
               
      

            	
              (c)

            	
              all
      rights relating to the protection of trade secrets and confidential
      information; and

            

    

    

    
      	
               
      

            	
              (d)

            	
              all
      rights related to utility models, database rights, design rights, service
      marks, conductor topography rights, moral rights, logos (in all cases
      whether registered or not and all applications or rights
  of

            

    

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    
      	
               
      

            	
              application
      for any of the foregoing), and Know-How, whenever and however
      arising.

            

    

    

    
      	
               
      

            	
              v.

            	
              “Know-How” shall
      mean information, data, inventions, trade secrets, or experience, whether
      patentable or not, including, but not limited to, all design or
      manufacturing techniques, operating instructions, machinery designs, raw
      material or product specifications, formula, recipes, drawings, blueprints
      and any other technical and commercial information relating to research,
      design, development, manufacture, assembly, use or
  sale.

            

    

    

    
      	
               
      

            	
              B.

            	
              e-RADLIK Background
      Intellectual Property Rights.  e-R grants to MATECH a
      non-exclusive, non-assignable royalty free license to use e-R’s Background
      Intellectual Property Rights strictly insofar as may be necessary to
      enable MATECH to carry out its obligations under this
      Agreement.  MATECH shall not use the e-R Background Intellectual
      Property Rights for any purpose other than the performance of MATECH’s
      obligations under this Agreement.

            

    

    

    
      	
               
      

            	
              C.

            	
              MATECH Background
      Intellectual Property Rights.  Prior to MATECH utilizing
      any of its Background Intellectual Property Rights in THE PROGRAM, MATECH
      will notify e-R that it intends to do so.  e-R will then have
      the option of accepting the Background Intellectual Property Rights,
      suggesting an alternative to such use, or terminating the
      Agreement.  If e-R accepts the utilization of MATECH Background
      Intellectual Property Rights for THE PROGRAM, MATECH will grant a license
      of the utilized Background Intellectual Property Rights in accordance with
      terms to be agreed upon at that
time.

            

    

    

    
      	
               
      

            	
              D.

            	
              Foreground
      Intellectual Property.  Taking into account MATECH and
      e-R’s Background Intellectual Property Rights, the Parties do not
      anticipate the creation of substantial Foreground Intellectual Property
      during the term of this Agreement.  If at anytime MATECH feels
      that Foreground Intellectual Property is being created, MATECH shall
      notify e-R of such development.  All Foreground Intellectual
      Property shall be wholly owned by e-R.  e-R grants to MATECH a
      non-exclusive, non-assignable royalty free license to use the Foreground
      Intellectual Property subject to e-R approval and review to ensure that
      the proposed use does not conflict or compete with any of e-R’s current or
      future applications of its Intellectual Property Rights, such approval not
      to be unreasonably withheld.

            

    

    

    
      	
               
      

            	
              E.

            	
              Ownership of THE
      PROGRAM.  e-R shall own all right, title and interest in
      the proposed aviation system, excluding any MATECH Background Intellectual
      Property Rights therein.  MATECH shall execute such documents,
      render such assistance, and take such other action as e-R may reasonably
      request, at e-R's expense, to apply for, register, perfect, confirm, and
      protect e-R's rights therein.

            

    

    

    
      	
               
      

            	
              F.

            	
              Ownership of
      Foreground Intellectual Property Rights.  e-R shall own
      all right, title and interest in the Foreground Intellectual Property
      Rights in the proposed aviation system including any derivatives,
      improvements or modifications of THE PROGRAM made by MATECH for e-R under
      this Agreement.  MATECH
shall

            

    

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    
      	
               
      

            	
              execute
      such documents, render such assistance, and take such other action as e-R
      may reasonably request, at e-R's expense, to apply for, register, perfect,
      confirm, and protect e-R's rights
therein.

            

    

    

    
      	
               
      

            	
              G.

            	
              Infringement on Third
      Party Intellectual Property. If a Party believes that any
      activities within this Agreement infringe any Intellectual Property Rights
      of a third party, that Party will promptly notify the other Party, and
      will seek to agree upon the appropriate response to be
    taken.

            

    

    

    8.            
TERMINATION

    

    This
Agreement shall terminate upon the first occurrence of the following
events:

    

    
      	
               
      

            	
              A.

            	
              Mutual
      consent of both Parties by execution of a rescission
      agreement;

            

    

    

    
      	
               
      

            	
              B.

            	
              Inability
      of the Parties negotiating in good faith to reach agreement on the terms
      of a subcontract;

            

    

    

    
      	
               
      

            	
              C.

            	
              Upon
      award of a subcontract to MATECH based substantially upon MATECH’s
      proposal for THE PROGRAM, but only as to the subject matter and customer
      identified in that subcontract only.  This Agreement is to
      remain in effect for any other potential customers for the same phase of
      THE PROGRAM and/or resultant system, as well as with respect to all
      customers for any follow-on development and/or production contracts for
      the requirements of THE PROGRAM;

            

    

    

    
      	
               
      

            	
              D.

            	
              Ten
      years after the effective date of this Agreement;
  or

            

    

    

    
      	
               
      

            	
              E.

            	
              Material
      breach of this Agreement, at the option of the non-breaching
      Party.

            

    

    

    
      	
              9.

            	
              MUTUAL
      INDEMNIFICATION

            

    

    

    Each
Party (the “Indemnifying Party”) agrees to indemnify, defend, and hold harmless
the other Party (the “Indemnified Party”) from and against any and all claims,
damages, and liabilities, including any and all expense and costs, legal or
otherwise, caused by the negligent act or omission of the Indemnifying Party,
its subcontractors, agents, or employees, incurred by the Indemnified Party in
the investigation and defense of any claim, demand, or action arising out of the
work performed under this Agreement; including breach of the Indemnifying Party
of this Agreement.  The Indemnifying Party shall not be liable for any
claims, damages, or liabilities caused by the sole negligence of the Indemnified
Party, its subcontractors, agents, or employees.

    

    The
Indemnified Party shall notify promptly the Indemnifying Party of the existence
of any claim, demand, or other matter to which the Indemnifying Party’s
indemnification obligations would apply, and shall give them a reasonable
opportunity to settle or defend the same at their own expense and with counsel
of their own selection, provided that the Indemnified Party shall at all times
also have the right to fully participate in the defense.  If the
Indemnifying Party, within a reasonable time after this notice, fails to take
appropriate

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    steps to
settle or defend the claim, demand, or the matter, the Indemnified Party shall,
upon written notice, have the right, but not the obligation, to undertake such
settlement or defense and to compromise or settle the claim, demand, or other
matter on behalf, for the account, and at the risk, of the Indemnifying
Party.

    

    The
rights and obligations of the Parties under this Article shall be binding upon
and inure to the benefit of any successors, assigns, and heirs of the
Parties.

    

    
      	
              10.

            	
              PUBLICITY

            

    

    

    All
publicity and advertising in connection with THE PROGRAM will be subject to
prior approval by both e-R and MATECH.  Further, all publicity and
advertising concerning the existence of this Agreement will be subject to the
mutual prior agreement of the Parties prior to publication, except that this
Agreement may be disclosed by either Party to any governmental entity, including
all required filings with the Securities and Exchange Commission.

    

    
      	
              11.

            	
              ENTIRE AGREEMENT AND
      AMENDMENT

            

    

    

    This
Agreement and the exhibit hereto contain the entire agreement between the
Parties, which supersedes any prior oral or written agreements, commitments,
understandings, or communications with respect to teaming in pursuit of THE
PROGRAM. This Agreement shall be subject at any time to amendment upon the
written agreement of both Parties.

    

    
      	
              12.

            	
              APPLICABLE
      LAW

            

    

    

    This
Agreement and the rights of the Parties hereunder shall be governed by and
construed in accordance with the laws of the State of Delaware including all
matters of construction, validity, performance, and enforcement and without
giving effect to the principles of conflict of laws.

    

    
      	
              13.

            	
              EXCLUSIVE JURISDICTION
      AND VENUE

            

    

    

    The
Parties agree that the Courts of the State of Delaware shall have sole and
exclusive jurisdiction and venue for the resolution of all disputes arising
under the terms of this Agreement and the transactions contemplated
herein.

    

    
      	
              14.

            	
              ATTORNEYS’
      FEES

            

    

    

    In the
event any Party hereto shall commence legal proceedings against the other to
enforce the terms hereof, or to declare rights hereunder, as the result of a
breach of any covenant or condition of this Agreement, the prevailing party in
any such proceeding shall be entitled to recover from the losing party its costs
of suit, including reasonable attorneys’ fees, as may be fixed by the
court.

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    15.           CONFORMITY OF
LAW

    In
furtherance of this Agreement, both Parties shall comply with all U.S.
government laws and regulations, including conformity with the Foreign Corrupt
Practices Act.

    

    
      	
              16.

            	
              POINTS OF
      CONTACT

            

    

    

    For all
purposes of coordination and communications required by this Agreement, the
Parties will be represented as set forth below. The persons named may be changed
by either Party providing written notice of such changes to the other
Party.

     

    
      	
               
      

            	
              

                e-RADLIK:

                 
Name: 

                Title:
      

                  Phone:
      

                    Email:

                  

                

              

            	
               

               

              Samuel
      A. Kovnat

              Chairman
      & CEO 

                (860)
      884-1609 

                  samkovnat@aol.com

                

              

            	
              

                MATECH:

                 
Name: 

                Title:
      

                  Phone:
      

                    Fax:

                  

                

              

            	
               

               

              Robert
      Bernstein

              CEO
      

                (310)
      208-5589 

                  (310)
      473-3177

                

              

            

    

    
    

    
    

    
    

    

    
      	
              17.

            	
              ASSIGNMENT

            

    

    

    This
Agreement may not be assigned or otherwise transferred by either Party in whole
or in part without the express prior written consent of the other Party, which
consent will not unreasonably be withheld.

    

    18.           EFFECTIVE
DATE

     

    
      	
               
      

            	
              The
      effective date of this Agreement is the last date of execution shown
      below.

            

    

    

    

    IN
WITNESS WHEREOF, the Parties hereto have executed this Agreement as of the
Effective Date.

     

    
      	
               
      

            	
              

                e-RADLIK:

                 
by: /s/
      Samuel Kovnat

            	
              

                MATECH:

                 
by: /s/
      Robert Bernstein

            

    

    
      	
               
      

            	
              Name:  Samuel
      Kovnat

              Title:    CEO

              Date:    June
      5, 2008

            	
              Name:
      Robert Bernstein 

                Title:   CEO
      

                  Date:

                

              

            

    

    
    

    
    

    

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    EXHIBIT
A

    

    

    MATECH
will participate and support and have a major scope of work in:

    

    
      	
               
      

            	
              ·

            	
              Definition
      of operational requirements for metal fatigue testing in shipbuilding
      applications;

            

    

    

    
      	
               
      

            	
              ·

            	
              Metal
      fatigue technology trade off studies for applications of metal fatigue
      sensing in shipbuilding;

            

    

    

    
      	
               
      

            	
              ·

            	
              Metal
      fatigue technology integration with shipyard and shipbuilding testing and
      monitoring software systems &
displays;

            

    

    

    
      	
               
      

            	
              ·

            	
              Shipbuilding
      test and evaluation procedures; and

            

    

    

    
      	
               
      

            	
              ·

            	
              Development
      of sustainment documentation and materials for logistics management,
      training development and integrated maintenance and diagnostics necessary
      to achieve initial operational capability (IOC) milestones for metal
      fatigue sensing and monitoring in shipbuilding
    applications.matechexh10_6.htm

    
      
        

      
Exhibit 10.6

    

    CONVERTIBLE
DEBENTURE

    

    THE
SECURITIES OFFERED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, OR ANY STATE SECURITIES LAWS AND ARE BEING OFFERED AND SOLD IN
RELIANCE ON EXEMPTIONS FROM THE REGISTRATION REQUIREMENTS OF SUCH
LAWS.  THE SECURITIES ARE SUBJECT TO RESTRICTIONS OF TRANSFERABILITY
AND RESALE AND MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER SUCH
LAWS PURSUANT TO REGISTRATION OR AN EXEMPTION THEREFROM.  THE
SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE
COMMISSION OR ANY OTHER REGULATORY AUTHORITY, NOR HAVE ANY OF THE FOREGOING
AUTHORITIES PASSED UPON OR ENDORSED THE MERITS OF THIS OFFERING OR THE ACCURACY
OR ADEQUACY OF THE OFFERING MATERIALS.  ANY REPRESENTATION TO THE
CONTRARY IS UNLAWFUL.

    

    ISSUANCE
DATE                                                                                                July
31, 2008

    CONVERTIBLE
DEBENTURE
DUE                                                                   December
31, 2011

    AMOUNT                                                                                                             
US$ 1’000’000.--

    

    FOR VALUE
RECEIVED, Material Technologies, Inc., a Delaware corporation (the “Company”),
hereby promises to pay KREUZFELD LTD. or registered
assigns (the “Holder”) on December 31, 2011 (the “Maturity Date”), the original
principal amount of  US$ one million (US$ 1’000’000.--), and to pay
interest on the principal amount hereof, in such amounts, at such times and on
such terms and conditions as are specified herein.

     

    Article
1. Interest

    

    The
Company shall pay interest on the unpaid principal amount and accrued but unpaid
interest of this Convertible Debenture (the “Debenture”) in quarterly payments
of accrued interest, payable on the first day of each quarter, at the rate of
Ten Percent (10%) per annum, payable in arrears, in cash, until the principal
amount hereof is paid in full or has been converted.  Interest shall
accrue from the date of each advance, on the full amount of such
advance.  Notwithstanding the foregoing, the Company shall have the
right to defer payment of interest until the Maturity Date, provided that the
Company shall not defer any interest payments to the extent of positive Earnings
Before Interest, Taxes, Depreciation and Amortization
(“EBITDA”).  Therefore, at the election of the Company, interest may
be paid out of, and only to the extent of, EBITDA, until the Maturity Date, at
which time all principal and accrued but unpaid interest shall be due and
payable.

    

    Article
2. Method of
Payment

    

    The
Company may SWIFT wire the payment of interest to the account designated by the
Holder of this Debenture.  Alternatively, the Company shall have the
right at any time to pay accrued but unpaid interest in shares of the Company’s
Class A Common Stock (“Common Stock”), based on a price equal to fifty percent
(50%) of the average closing price of such Common Stock for the ten trading days
prior to issuance of such Common Stock to the Holder, so long as such shares
are

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    actually
delivered to the Holder within seven business days of issuance.  In
the event the Company elects to pay any accrued interest by issuance of Common
Stock, then the Company shall notify the Holder in writing not less than ten
(10) business days prior to the issuance of such shares, and the Holder shall
have the right at any time before receipt of delivery of such shares to notify
the Company of the Holder’s desire not to accept payment of interest in the form
of Common Stock.  In such event, the Company shall not have the right
to pay any accrued interest in the form of Common Stock.  In such
event the Company shall have the right to continue to accrue such interest until
the Maturity Date.

    

    The
Company shall have the right at any time to prepay the Debenture in whole or in
part, upon not less than fifteen (15) days prior written notice to the Holders
(a “Prepayment Notice”).  Other than with respect to a prepayment
arising under Section 3.1(b), during the fifteen (15) days following the
Holder’s receipt of such Prepayment Notice, the Holder shall have the right to
convert this Debenture at the then applicable Conversion Price, notwithstanding
any notice provision or conversion limitation set forth in Section 3.1(a), which
shall in such event not apply and be waived.

    

    Article
3.  Conversion

    

    Section
3.1.  Conversion
Privilege

    

    (a)           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 the date hereof, and
then only after not less than thirty (30) days prior notice to the
Company.  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, and the Holder shall
convert the Debenture according to the terms herein on the 30th day
following the mailing or transmission of such notice of intent (the “Notice of
Intent Date”).  In the event such notice of intent is mailed or
transmitted within 30 days of the Maturity Date, the Holder shall have the right
to extend the Maturity Date so as to allow conversion of the Debenture 30 days
after the Notice of Intent Date.

     

    (b)           In
the event the Holder of the Debenture elects to convert all or any portion of
the Debenture into Common Stock at any time, and the then applicable Conversion
Price is less than $0.10 per share, then the Company shall have the right, at
any time during the 30 days following the date of the Holder’s Notice of
Conversion, to prepay all or any portion of the Debenture that has been
requested to be converted, and the Company will therefore not be required to
issue shares of Common Stock upon conversion so long as such Debenture is paid
with good, cleared funds prior to the date the Company is required to issue the
Common Stock.  This provision shall be waived in the event the Holder
at any time elects to convert the Debenture at a Conversion Price equal to
$0.10.

    

    (c)           Less
than all of the principal amount of this Debenture may be converted into Common
Stock if the portion converted is $1,000 or a whole multiple of $1,000 and the
provisions of this Article 3 that apply to the conversion of all of the
Debenture shall also apply to the conversion of a portion of it.  This
Debenture may not be converted, whether in whole or in part, except in
accordance with Article 3.

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    Section 3.2.  Conversion
Procedure.

    

    (a)           Debentures.  Subject
to Section 3.1, after having received not less than thirty (30) days prior
notice of Holder’s intent to purchase (which notice shall not in any event
obligate the Holder to convert any portion of this Debenture), 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 its transfer agent to issue one or more Certificates
representing that number of shares of Common Stock into which the Debentures are
convertible in accordance with the provisions regarding
conversion.  The Company’s transfer agent or attorney shall act as
Registrar and shall maintain an appropriate ledger containing the necessary
information with respect to each Debenture.

    

    (b)           Conversion
Date.  Such conversion shall be effectuated by surrendering to
the Company, or its attorney, the Debentures (or a copy thereof if the Holder
certifies that the original has been lost or destroyed) to be converted together
with a facsimile or original of the signed Notice of Conversion.  The
date on which the Notice of Conversion is effective (“Conversion Date”) shall be
deemed to be the date on which the Holder has delivered to the Company a
facsimile or original of the signed Notice of Conversion, and so long as the
time limitations set forth in Section 3.1(a) have been satisfied.  The
Company shall deliver to the Holder, or per the Holder’s instructions, the
shares of Common Stock within seven (7) business days of receipt of the
Debentures to be converted.

    

    (c)           Common Stock to be
Issued.  Subject to the time limitations set forth in Section
3.2(a) above, upon the conversion of any Debentures and upon receipt by the
Company or its attorney of a facsimile or original of Holder’s signed Notice of
Conversion, Company shall instruct Company’s transfer agent to issue Stock
Certificates in the name of Holder (or its nominee) and in such denominations to
be specified at conversion representing the number of shares of Common Stock
issuable upon such conversion, as applicable.

    

    (d)           Rule 144.  If, on
the Conversion Date, the Common Stock issuable upon conversion of this Debenture
is eligible to be issued without the restrictive legend required by Rule 144,
the Company will, at its own expense, provide any and all legal opinions
required for the issuance of the Common Stock without restrictive legends and
within five business days.

    

    (e)           Conversion
Rate.  Subject to the time limitations set forth in Section
3.1(a), Holder is entitled to convert this Debenture, plus accrued but unpaid
interest, into Common Stock of the Company at 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 (the lesser
of the two being referred to as the “Conversion Price”).  No
fractional shares or scrip representing fractions of shares will be issued on
conversion, but the number of shares issuable shall be rounded up or down, as
the case may be, to the nearest whole share.

    

    (f)           Nothing
contained in this Debenture shall be deemed to establish or require the payment
of interest to the Holder at a rate in excess of the maximum rate permitted by
governing law.  In the event that the rate of interest required to be
paid exceeds the maximum rate permitted by

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    governing
law, the rate of interest required to be paid thereunder shall be automatically
reduced to the maximum rate permitted under the governing law and such excess
shall be returned with reasonable promptness by the Holder to the
Company.

    

    (g)           It
shall be the Company’s responsibility to take all necessary actions and to bear
all such costs to issue certificates for the Common Stock as provided herein,
including the responsibility and cost for delivery of an opinion letter to the
transfer agent, if so required.  The person in whose name the
certificate of Common Stock is to be registered shall be treated as a
shareholder of record on and after the conversion date. Upon surrender of any
Debentures that are to be converted in part, the Company shall issue to the
Holder new Debentures representing the unconverted amount, if so requested by
Holder.

    

    (h)           Payment of
Taxes.  The Company shall pay all documentary stamp taxes, if
any, attributable to the initial issuance of the Common Stock; provided,
however, that the Company shall not be required to pay any tax or taxes which
may be payable, (i) with respect to any secondary transfer of the Debentures or
the Common Stock issuable upon exercise hereof or (ii) as a result of the
issuance of the Common Stock to any person other than the Holder, and the
Company shall not be required to issue or deliver any certificate for any Common
Stock unless and until the person requesting the issuance thereof shall have
paid to the Company the amount of such tax or shall have produced evidence that
such tax has been paid to the appropriate taxing authority.

    

    (i)           Conversion
Default.  If, at any time Holder submits a Notice of Conversion
and the Company does not have sufficient authorized but unissued shares of
Common Stock available to effect, in full, a conversion of the Debentures (a
“Conversion Default”), the Company shall promptly issue so many of its
authorized shares as are then available, and then use its best efforts to take
such action as may be required to increase the authorized shares of the Company
in order to provide for the issuance of all required shares upon
Conversion.

     

    Section 3.3.  Company to Reserve
Stock.  The Company shall reserve the number of shares of
Common Stock required pursuant to and upon the terms set forth in the
Subscription Agreement, to permit the conversion of this
Debenture.  All shares of Common Stock which may be issued upon the
conversion hereof shall upon issuance be validly issued,  fully paid
and non-assessable and free from all taxes, liens and charges with respect to
the issuance thereof.

     

    Section 3.4.  Restrictions on
Transfer.  This Debenture has not been registered under the
Securities Act of 1933, as amended, (the “Act”) and is being issued under
Section 4(2) of the Act and Rule 506 of Regulation D promulgated under the
Act.  This Debenture and the Common Stock issuable upon the conversion
thereof may only be offered or sold pursuant to registration under or an
exemption from the Act.  In the event the Company shall file a
registration statement with the Securities and Exchange Commission, on any form
other than a Form S-8, then the Company shall register the shares issuable upon
conversion of this Debenture, as well as any other shares requested to be
registered by the Holder.

     

    Section 3.5.  Mergers, Etc.  If
the Company merges or consolidates with another corporation or sells or
transfers all or substantially all of its assets to another person and the
holders of the Common Stock are entitled to receive stock, securities or
property in respect of or in exchange for

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    Common
Stock, then as a condition of such merger, consolidation, sale or transfer, the
Company and any such successor, purchaser or transferee shall amend this
Debenture to provide that it may thereafter be converted on the terms and
subject to the conditions set forth above into the kind and amount of stock,
securities or property receivable upon such merger, consolidation, sale or
transfer by a holder of the number of shares of Common Stock into which this
Debenture might have been converted immediately before such merger,
consolidation, sale or transfer, subject to adjustments which shall be as nearly
equivalent as may be practicable to adjustments provided for in this Article
3.

     

    Article
4.  Mergers

     

    Any reference herein to the Company
shall refer to such surviving or transferee corporation and the obligations of
the Company shall terminate upon such written assumption.

     

    Article
5.  Reports

     

    The Company will mail to the Holder
hereof at its address as shown on the Register a copy of any annual, quarterly
or other report or proxy statement that it gives to its shareholders generally
at the time such report or statement is sent to shareholders, unless such report
is timely filed with the United States Securities and Exchange
Commission.

     

    Article
6.  Defaults and
Remedies

     

    Section 6.1.  Events of
Default.  An “Event of Default” occurs if (a) the Company does
not make the payment of the principal of this Debenture when the same becomes
due and payable at maturity, upon redemption or otherwise, (b) the Company does
not make a payment, other than a payment of principal, for a period of five (5)
business days after its due date, (c) any of the Company’s representations or
warranties contained in this Debenture were false when made or the Company fails
to comply with any of its other agreements in this Debenture and such failure
continues for the period and after the notice specified below, (d) the Company
shall violate or breach any of the covenants contained in this Agreement, or (e)
the Company pursuant to or within the meaning of any Bankruptcy Law (as
hereinafter defined):  (i) commences a voluntary petition under
Bankruptcy Law; (ii) consents to the entry of an order for relief against it in
an involuntary bankruptcy petition; (iii) consents to the appointment of a
Custodian (as hereinafter defined) of it or for all or substantially all of its
property or (iv) makes a general assignment for the benefit of its creditors or
(v) a court of competent jurisdiction enters an order or decree under any
Bankruptcy Law that:  (A) is for relief against the Company in an
involuntary bankruptcy petition; (B) appoints a Custodian of the Company or for
all or substantially all of its property or (C) orders the liquidation of the
Company, and the order or decree remains unstayed and in effect for 60
days.  As used in this Section 6.1, the term “Bankruptcy Law” means
Title 11 of the United States Code or any similar federal or state law for the
relief of debtors.  The term “Custodian” means any receiver, trustee,
assignee, liquidator or similar official under any Bankruptcy Law.

     

    Section 6.2.  Acceleration.  If
an Event of Default occurs and is continuing, the Holder hereof by notice to the
Company, may declare the remaining principal amount of this Debenture, together
with all accrued interest, to be due and payable.  Upon such
declaration, the remaining principal amount as well as any accrued but unpaid
interest shall be due and payable immediately.

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    Section 6.3.  Covenants.  The Company hereby
agrees to comply with each of the following covenants, the breach or violation
of which shall be deemed an Event of Default hereunder.  Without the
prior written consent of the Holders of at least a majority of the outstanding
Debentures:

     

    
      a.            
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;

       

      b.           
The
Company shall at all times comply in all respects with the reporting
requirements of the Securities and Exchange Act of 1934, as amended (the
“Exchange Act”), and shall take such action as is required from time to time to
continue and maintain the eligibility of the Company’s stockholders to transfer
securities without registration under the exemption provided by Rule 144
promulgated under the Act.

    

     

    Article
7.  Record
Ownership

     

    Section 7.1.  Record
Ownership.  The Company, or its attorney, shall maintain a
register of the holders of the Debentures (the “Register”) showing their names
and addresses and the serial numbers and principal amounts of Debentures issued
to or transferred of record by them from time to time.  The Register
may be maintained in electronic, magnetic or other computerized
form.  The Company may treat the person named as the Holder of this
Debenture in the Register as the sole owner of this Debenture.  The
Holder of this Debenture is the person exclusively entitled to receive payments
of interest on this Debenture, receive notifications with respect to this
Debenture, convert it into Common Stock and otherwise exercise all of the rights
and powers as the absolute owner hereof.

     

    Section 7.2.  Registration of
Transfer.  Transfers of this Debenture may be registered on the
books of the Company maintained for such purpose pursuant to Section 7.2 above
(i.e., the Register).  Transfers shall be registered when this
Debenture is presented to the Company with a request to register the transfer
hereof and the Debenture is duly endorsed by the appropriate person, reasonable
assurances are given that the endorsements are genuine and effective, and the
Company has received evidence satisfactory to it that such transfer is rightful
and in compliance with all applicable laws, including tax laws and state and
federal securities laws.  When this Debenture is presented for
transfer and duly transferred hereunder, it shall be canceled and a new
Debenture showing the name of the transferee as the record holder thereof shall
be issued in lieu hereof.  When this Debenture is presented to the
Company with a reasonable request to exchange it for an equal principal amount
of Debentures of other denominations, the Company shall make such exchange and
shall cancel this Debenture and issue in lieu thereof Debentures having a total
principal amount equal to this Debenture in such denominations as agreed to by
the Company and Holder.

     

    Section 7.3.  Lost
Debentures.  If this Debenture becomes defaced or mutilated but
is still substantially intact and recognizable, the Company or its agent may
issue a new Debenture in lieu hereof upon its surrender.  Where the
Holder of this Debenture claims that the Debenture has been lost, destroyed or
wrongfully taken, the Company shall issue a new Debenture in place of the
original Debenture if the Holder so requests by written notice to the Company
actually received by the Company before it is notified that the Debenture has
been acquired by a bona fide purchaser and the Holder has delivered to the
Company an indemnity bond in such amount and issued by such surety
as

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    the
Company deems satisfactory together with an affidavit of the Holder setting
forth the facts concerning such loss, destruction or wrongful taking and such
other information in such form with such proof or verification as the Company
may request.

    

    Sectin 7.4.  Indemnification for
Transfers.  In the event any Holder transfers all or any
portion of the Debenture, the Holder hereby assumes liability for, and hereby
agree to pay, protect, defend (at trial and appellate levels and with attorneys,
consultants and experts reasonably acceptable to Company), and save Company
harmless from and against, and hereby indemnify Company from and against any and
all liens, damages, (including, without limitation, punitive or exemplary
damages) losses, liabilities, obligations, settlement payments, penalties,
fines, assessments, citations, directives, claims, litigation, demands,
defenses, judgments, suits, proceedings, costs, disbursements and expenses of
any kind or of any nature whatsoever (including, without limitation, reasonable
attorneys’, consultants’ and experts’ fees and disbursements actually incurred
in investigating, defending, settling or prosecuting any claim, litigation or
proceeding) (collectively “Costs”) which may at
any time be imposed upon, incurred by or asserted or awarded against Company,
and arising and proximately caused directly from or out of the subsequent
transfer, conveyance or other disposition of the any warrant, Common Stock or
debenture of the Company which results in a violation of, or otherwise
disqualifies the issuance of the such security from any federal and state
exemptions from registration which the Company relied on in issuing the such
security.

     

    Article
8.  Dilution.

     

    The number of shares of Common Stock
issuable upon conversion of the Debentures shall be dilutive.  The
Company’s executive officers and directors have studied and fully understand the
nature of the transactions contemplated by this Debenture and recognize that the
Debenture, if excercised will have a dilutive effect on existing
shareholders.  The board of directors of the Company has concluded, in
its good faith business judgment, that such issuance is in the best interests of
the Company.  The Company specifically acknowledges that its
obligation to issue additional shares of Common Stock is binding upon the
Company and enforceable regardless of the dilution such issuance may have on the
ownership interests of other shareholders of the Company.

     

    Article
9.  Notices

     

    Any notice which is required or
convenient under the terms of this Debenture shall be duly given if it is in
writing and delivered in person or mailed by first class mail, postage prepaid
and directed to the Holder of the Debenture at its address as it appears on the
Register or if to the Company to its principal executive offices. The time when
such notice is sent shall be the time of the giving of the notice.

     

    Article
10.  Time

     

    Where this Debenture authorizes or
requires the payment of money or the performance of a condition or obligation on
a Saturday or Sunday or a public holiday, or authorizes or requires the payment
of money or the performance of a condition or obligation within, before or after
a period of time computed from a certain date, and such period of time ends on a
Saturday or a Sunday or a public holiday, such payment may be made or condition
or obligation performed on the next

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    succeeding
business day, and if the period ends at a specified hour, such payment may be
made or condition performed, at or before the same hour of such next succeeding
business day, with the same force and effect as if made or performed in
accordance with the terms of this Debenture.  A “business day” shall
mean a day on which the banks in California are not required or allowed to be
closed.

     

    Article
11.  Waivers

     

    The holders of a majority in principal
amount of the Debentures may waive a default or rescind the declaration of an
Event of Default and its consequences except for a default in the payment of
principal or conversion into Common Stock.

     

    Article
12.  Rules of
Construction

     

    In this Debenture, unless the context
otherwise requires, words in the singular number include the plural, and in the
plural include the singular, and words of the masculine gender include the
feminine and the neuter, and when the sense so indicates, words of the neuter
gender may refer to any gender.  The numbers and titles of sections
contained in the Debenture are inserted for convenience of reference only, and
they neither form a part of this Debenture nor are they to be used in the
construction or interpretation hereof.  Wherever, in this Debenture, a
determination of the Company is required or allowed, such determination shall be
made by a majority of the Board of Directors of the Company and if it is made in
good faith, it shall be conclusive and binding upon the Company and the Holder
of this Debenture.

    

    Article
13.  Governing
Law

     

    The validity, terms, performance and
enforcement of this Debenture shall be governed and construed by the provisions
hereof and in accordance with the laws of the State of California applicable to
agreements that are negotiated, executed, delivered and performed solely in the
State of California.  The prevailing party in any dispute arising
hereunder shall be entitled to recover all of its reasonable attorney’s fees and
costs of defense, prosecution or litigation.

    

    Article
14.  Litigation

    

     (a)           Forum Selection and Consent to
Jurisdiction.  Any litigation based thereon, or arising out of,
under, or in connection with, this agreement or any course of conduct, course of
dealing, statements (whether oral or written) or actions of the Company or
Holder shall be brought and maintained exclusively in the state or federal
courts of the State of California, city of Los Angeles.  The Company
hereby expressly and irrevocably submits to the jurisdiction of the state and
federal courts of the State of California, city of Los Angeles, for the purpose
of any such litigation as set forth above and irrevocably agrees to be bound by
any final judgment rendered thereby in connection with such
litigation.  The Company further irrevocably consents to the service
of process by registered mail, postage prepaid, or by personal service within or
without the State of California.  The Company hereby expressly and
irrevocably waives, to the fullest extent permitted by law, any objection which
it may have or hereafter may have to the laying of venue of any such litigation
brought in any such court referred to above and any claim that any such
litigation has been brought in any inconvenient forum.  To the extent
that the Company has or hereafter may acquire any immunity from jurisdiction of
any court or from any legal process (whether through service or
notice,

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    attachment
prior to judgment, attachment in aid of execution or otherwise) with respect to
itself or its property, the Company hereby irrevocably waives such immunity in
respect of its obligations under this agreement and the other loan
documents.

    

     (b)           Waiver of Jury
Trial.  The Holder and the Company hereby knowingly,
voluntarily and intentionally waive any rights they may have to a trial by jury
in respect of any litigation based hereon, or arising out of, under, or in
connection with, this agreement, or any course of conduct, course of dealing,
statements (whether oral or written) or actions of the Holder or the
Company.  The Company acknowledges and agrees that it has received
full and sufficient consideration for this provision and that this provision is
a material inducement for the Holder entering into this agreement.

    

     (c)           Submission To
Jurisdiction.  Any legal action or proceeding in connection
with this Debenture or the performance hereof must be brought in the federal
courts located in the State of California and the parties hereby irrevocably
submit to the exclusive jurisdiction of such courts for the purpose of any such
action or proceeding.

    

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

     

    
    

    
      	
                    
                      
                  MATERIAL
      TECHNOLOGIES, INC.

                  a
      Delaware corporation

                   
By:
      /s/ Robert Bernstein
Robert
      Bernstein

              Chairman
      and CEO

            	
                    
                KREUZFELD
      LTD.

                a
      Swiss corporation

                 

                By:____________________
      
                  
                  

                  
                  

                  Markus
      Winkler

                

              

              
              

              sole
      officer

            

    

                                                                                                 

    

    

    [Signature
Page to Convertible Debenture]

    

     

     

    
 

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    Exhibit
A

    

    NOTICE OF
CONVERSION

    

    (To be
Executed by the Registered Holder upon Conversion.)

    

    The
undersigned hereby irrevocably elects, as of ______________, 200  to convert
$_________________ of the Debentures into Shares of Common Stock (the “Shares”)
of Material Technologies, Inc., a Delaware corporation (the
“Company”).

    

    Date of
Conversion_________________________________________

    

    Applicable
Conversion Price_________________________________

    

    Number of
Shares Issuable upon this conversion______________

    

    Signature___________________________________________________

    [Name]

    Address_____________________________________________________

    

    ____________________________________________________________

    

    Phone______________________   Fax___________________________

    

     

     

     

    
 

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    Assignment
of Debenture

    

    The
undersigned hereby sell(s) and assign(s) and transfer(s) unto

    

    

    (name,
address and SSN or EIN of assignee)

    

    Dollars
($                                )      
           

    (principal
amount of Debenture, $1,000 or integral multiples of $1,000)

    

    of
principal amount of this Debenture together with all accrued and unpaid interest
hereon.

    

    Date:                                  Signed:                                                                                    
  

                                                                        
(Signature
must conform in all

                                                                         respects
to name of Holder shown

                                                                         of
face of Debenture)

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