Document:

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

        
          

        

      

      
         

      

    

    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

        
          

        

      

      
         

      

    

    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 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.

     

    
      
         

      

      
        3

        
          

        

      

      
         

      

    

    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.

     

    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.

     

    
      
         

      

      
        4

        
          

        

      

      
         

      

    

    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 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

    

    
      
         

      

      
        5

        
          

        

      

      
         

      

    

    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 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:
      CEO                                               Title:
      Portfolio Manager 

    
      
         

      

      
        6

        
          

        

      

      
         

      

    

     

    

     

    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)

     

     

    
      
         

      

      
        7ADDENDUM
      TO WARRANT TO PURCHASE COMMON STOCK

    

    This
      Addendum to Warrant to Purchase Common Stock is entered into as of the 12th
      day
      of June 2006 by and between Material Technologies, Inc., a Delaware corporation
      (the “Company”) and La Jolla Cove Investors, Inc., a California corporation (the
“Holder”). 

    

    WHEREAS,
      the Company and Holder are parties to that certain Warrant to Purchase Common
      Stock dated as of May 30, 2006 (“Warrant”); and

    

    WHEREAS,
      the parties desire to amend the Warrant in certain respects.

    

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

    

    	1.  	
            All
              terms used herein shall have the definitions set forth in the
              Warrant.

          

    

    	2.  	
            The
              number of Warrant Shares is hereby increased to 50,000,000. 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 1,250,000 of the Warrant Shares per week, to continue for
              40
              consecutive weeks until all of the Warrant Shares have been purchased
              by
              Holder.

          

    

    	3.  	
            Except
              as specifically amended herein, all other terms and conditions of the
              Warrant shall remain in full force and
              effect.

          

    

    IN
      WITNESS WHEREOF, the Company and Holder have caused this Addendum to Warrant
      to
      Purchase Common Stock to be signed by its duly authorized officers on the date
      first set forth above.

    

    

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

    

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

    

    Name:
      Robert M. Bernstein                Name:
      Travis Huff

    

    Title:
      CEO                                      
      Title:
      Portfolio Manager

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