Document:

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

    

    This
      Addendum to Convertible Debenture, Warrant to Purchase Common Stock and
      Securities Purchase Agreement (“Addendum”) is entered into as of the 9th day of
      June 2006 by and between Material Technologies, Inc., a Delaware corporation
      (“Material”) and Golden Gate Investors, Inc., a California corporation
      (“GGI”).

    

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

    

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

    

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

    

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

    

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

    

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

          

    

    	2.  	
            The
              parties shall enter into an additional three $1,000,000 convertible
              debentures, each on the same terms and conditions as the Convertible
              Debenture. The parties must enter into each such additional convertible
              debenture no later than sixty days after the Debenture Principal Amount
              is
              less than $600,000 for the prior debenture. GGI shall fund $100,000
              of the
              Purchase Price for each additional convertible debenture at the time
              of
              entering into each additional convertible debenture, with the remaining
              portion of the Purchase Price to be funded upon notification and
              verification that the Registration Statement has been declared effective
              by the Securities and Exchange Commissions and shares can legally be
              issued to GGI. In the event that GGI fails to enter into any of the
              three
              additional convertible debentures in accordance with the terms hereof,
              GGI
              shall pay to Material liquidated damages of
              $100,000.

          

    

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

          

    

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

    

    Material
      Technologies, Inc.                     Golden
      Gate Investors, Inc.

    

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

    

    Name:
      Robert M. Bernstein                     Name:
      Travis Huff

    

    Title:
      CEO                                              Title:
      Portfolio ManagerNAYNA
      NETWORKS, INC.

    NOTICE
      OF GRANT OF STOCK OPTION

    

    The
      Participant has been granted an option (the “Option”)
      to
      purchase certain shares of Stock of Nayna Networks, Inc. pursuant to the Nayna
      Networks, Inc. 2006 Executive Stock Plan (the “Plan”),
      as
      follows:

    

    
      	
              Participant:

            	_______________
	
              Date
                of Grant:

            	
              June
                10, 2006

            
	
              Number
                of Option Shares:

            	_______________
	
              Exercise
                Price:

            	
              $0.85
                per share

            
	
              Initial
                Vesting Date:

            	
              January
                1, 2006

            
	
              Option
                Expiration Date:

            	
              The
                date ten (10) years after the Date of Grant

            
	
              Tax
                Status of Option:

            	
              Nonstatutory
                Stock Option 

            
	
              Vested
                Shares:

            	
              Except
                as provided in the Stock Option Agreement, the number of Vested Shares
                (disregarding any resulting fractional share) as of any date is determined
                by multiplying the Number of Option Shares by the “Vested
                Ratio”
                determined as of such date as follows:

            
	 	 	
              Vested
                Ratio

            
	 	
              Prior
                to Initial Vesting Date

            	
              0

            
	 	
              On
                Initial Vesting Date, provided the Participant’s Service has not
                terminated prior to such date

            	
              1/3

            
	 	
              Plus

            	 
	 	
              For
                each additional full month of the Participant’s continuous Service from
                Initial Vesting Date until the Vested Ratio equals 1/1, an
                additional

            	
              1/36

            

    

    

    Notwithstanding
      the foregoing, in the event of a Change in Control (as such term is defined
      in
      the Plan), and provided that the Participant’s Service has not terminated prior
      to such date, 100% of the Number of Option Shares which were not otherwise
      Vested Shares shall accelerate and become Vested Shares as of the date of the
      Change in Control.

    

    By
      their
      signatures below, the Company and the Participant agree that the Option is
      governed by this Grant Notice and by the provisions of the Plan and the Stock
      Option Agreement, both of which are attached to and made a part of this
      document. The Participant acknowledges receipt of copies of the Plan and the
      Stock Option Agreement, represents that the Participant has read and is familiar
      with their provisions, and hereby accepts the Option subject to all of their
      terms and conditions.

    

    
      	
              NAYNA
                NETWORKS, INC.

            	
              PARTICIPANT

            
	 	 
	 	 
	
              By:
                ________________________________

            	________________________________
	 	
              Signature

            
	
              Its:
                ________________________________

            	________________________________
	 	
              Date

            
	
              Address:

            	
              4699
                Old Ironsides Drive, Suite 420

            	________________________________
	 	
              Santa
                Clara, CA 95054

            	
              Address

            
	 	 	________________________________

    

     

    
      	ATTACHMENTS:	
              2006
                Executive Stock Plan, as amended to the Date of Grant; Stock Option
                Agreement and Exercise NoticeEXHIBIT 10.151

              CONFIDENTIAL SETTLEMENT AGREEMENT AND MUTUAL RELEASE

      This Confidential Settlement Agreement and Mutual Release ("Agreement") is
entered into as of the 9th day of June, 2006 (the "Effective  Date"),  by, among
and  between  Claimants  Isaac  Yeffet and Yeffet  Security  Consultants,  Inc.,
("Claimants")   on  the  one   hand  and   Respondent-Counterclaimant   HiEnergy
Technologies,  Inc. (the "Company") on the other.  Each of the Claimants and the
Company referred  sometimes  herein  individually a "Party" and collectively the
"Parties".

      WHEREAS, on November 21, 2003, Yeffet Security  Consultants,  Inc. filed a
claim seeking (i) consulting fees for remuneration and travel and other expenses
due and owing to Yeffet Security Consultants,  Inc., on the date on which he was
terminated, October 29, 2003; and (ii) the remainder of compensation,  including
any stock options issued or due under its contracts with HiEnergy  Technologies,
Inc.; and

      WHEREAS, on April 23, 2004,  Claimants amended their claims to include (i)
a claim by  Yeffet  Security  Consultants,  Inc.  seeking  damages  based on the
commissions  it  was  entitled  to  in  connection  with   investments  made  by
individuals who purchased shares of HiEnergy Technologies,  Inc. stock; and (ii)
a claim by Isaac Yeffet seeking a determination  that stock options as described
in the First Amended Stock Option Agreement had vested; and

      WHEREAS,   on  June  15,  2004,  HiEnergy   Technologies,   Inc.  filed  a
counterclaim  against Claimants seeking  disgorgement of monies paid to claimant
and rescission of the Consulting  Agreement and First Amended and Restated Stock
Option Agreement; and

      WHEREAS,  the Parties to this  Agreement  desire to resolve  all  disputes
between them, of every kind,  without  further  expense,  inconvenience  and the
distraction of protracted arbitration; and

      WHEREAS,  the  Parties  to this  Agreement  desire to settle and fully and
finally resolve all such claims;

      NOW,  THEREFORE,  in consideration of the covenants and agreements  herein
set forth, it is agreed by and among Claimants and HiEnergy  Technologies,  Inc.
as follows:

I.    DEFINITIONS

      (a) The "Arbitration" means the claims and counterclaims presently pending
in the American Arbitration Association, captioned "Yeffet Security Consultants,
Inc. and Isaac Yeffet v. HiEnergy Technologies,  Inc. and HiEnergy Technologies,
Inc.  Counterclaimant  v. Yeffet Security  Consultants,  Inc. and Isaac Yeffet -
AAA# 18-145-21094-03 02 MERT C."

                                       1
<PAGE>

      (b) "Claimants" mean Yeffet Security Consultants, Inc. and Isaac Yeffet.

      (c) "HiEnergy  Technologies,  Inc." means HiEnergy Technologies,  Inc. and
all of its predecessors, successors and assigns.

      (d)  "Claims"  means  any  and  all  actions,  causes  of  action,  suits,
liabilities,  fines,  penalties,  orders,  debts,  obligations,  sums of  money,
accounts,   reckonings,   bonds,  bills,  specialties,   covenants,   contracts,
controversies,  agreements, promises, variances, trespasses, damages, judgments,
executions  and other  claims and  demands  whatsoever,  in law,  in equity,  or
otherwise,  whether  known or unknown,  and whether or not  concealed or hidden,
which exist or may exist now,  including  but not  limited to those  asserted or
that could have been asserted in the Arbitration. All claims arising out of this
Agreement or any claims arising in the future  relating to any future  contracts
between the Parties are explicitly excluded.

      (e) "Costs"  means all costs,  fees,  and expenses of any kind,  including
those for counsel, experts, advisors, witnesses, stenographers and the like.

II.   TERMS AND CONDITIONS

The  Parties  hereto  stipulate  and agree the  within  dispute be and is hereby
amicably  resolved and all Claims by and between the Parties  hereto are settled
upon the following terms and conditions:

      1. Confidentiality. The entirety of this Agreement shall be treated by the
Parties as  confidential  and its terms may not be  disclosed  by the Parties or
their  counsel to any person or entity not a party  hereto,  except to a party's
outside  auditors  and counsel or except to the extent that such  disclosure  is
required by law, including,  without limitation,  disclosure in filings with the
Securities and Exchange Commission.  It shall not be a violation of this section
for a Party to disclose  upon inquiry that the dispute has been  resolved to the
Parties'  mutual  satisfaction  on  confidential   terms.   Notwithstanding  the
foregoing, HiEnergy Technologies, Inc., may disclose the terms of this Agreement
to the extent  reasonably  required in order to obtain any third-party  consents
required in connection with the transfer of stock referred to in Paragraph 4, or
to insurers in connection with policy matters.

      2.  Dismissal  Order.  Following  the payments and issuance of  Settlement
Shares which HiEnergy Technologies,  Inc. is to make under Paragraphs 3 and 4 of
this  Agreement,  the  Parties  shall  cause  to  be  filed  with  the  American
Arbitration   Association  an  agreed   stipulation  for  voluntary   dismissal,
dismissing all of Claimants  Claims with prejudice,  with each claimant  bearing
its own Costs, and further dismissing HiEnergy Technologies, Inc.'s Counterclaim
with prejudice,  with HiEnergy  Technologies,  Inc., bearing its own Costs. This
case is to remain on the active arbitration calendar until all conditions of the
Settlement  Agreement are  fulfilled and the Parties  execute a dismissal of the
action.

                                       2
<PAGE>

      3. Cash Payments.  HiEnergy Technologies shall make cash payments totaling
$216,540.91,  not  including  accrued  interest,  if  any,  to  Yeffet  Security
Consultants, Inc. as follows:

      (a) Within  fifteen (15)  business  days  following  the execution of this
Agreement,  HiEnergy  Technologies,  Inc. shall cause to be paid to the order of
Yeffet  Security  Consultants,  Inc. the amount of  $27,000.00,  by certified or
cashier's check.  $27,000 is 15% of the agreed upon total settlement cash payout
of $180,000,  not including past wages and expenses as provided in paragraph (c)
below, to Claimants.

      (b)  Within  150 days  following  the  execution  by all  Parties  of this
Agreement, HiEnergy Technologies, Inc. shall cause to be paid to Yeffet Security
Consultants,  Inc. the amount of  $153,000.00  plus simple  interest  which will
begin  and  continue  to accrue at eight  percent  (8%) per annum on any  unpaid
balance from the Effective Date, until said unpaid balance is paid, by certified
or cashier's check. HiEnergy Technologies, Inc. understands and agrees that time
is of the essence and it will use its best efforts to provide the amount  listed
in this  paragraph to Yeffet  Security  Consultants,  Inc. If,  despite its best
efforts,  HiEnergy  Technologies,  Inc.  fails to provide this amount within 150
days from the date of this  Agreement,  the company shall have a further  30-day
cure period to provide  same.  Should  HiEnergy  Technologies,  Inc.  secure and
receive investment in an aggregate amount over two million five hundred thousand
dollars  ($2,500,000.00)  at any time  within  the time  frame  described  above
("Qualified Financing"),  HiEnergy Technologies,  Inc. shall immediately pay the
above amount, plus accrued interest,  via certified or cashier's check to Yeffet
Security  Consultants,  Inc.  Furthermore,  the  Company may pay the full amount
listed in this paragraph,  plus any accumulated interest, at a time prior to the
maturation times listed above without penalty.

      (c)  Within  150 days  following  the  execution  by all  Parties  of this
Agreement, HiEnergy Technologies, Inc. shall cause to be paid to Yeffet Security
Consultants,  Inc.,  the amount of $36,540.91,  representing  the amount owed to
Yeffet for expenses and services  rendered in 2003,  plus simple  interest which
will begin and continue to accrue at eight  percent (8%) per annum on any unpaid
balance from the Effective Date, until said unpaid balance is paid, by certified
or cashier's check. HiEnergy Technologies, Inc. understands and agrees that time
is of the essence and it will use its best efforts to provide the amount  listed
in this  paragraph to Yeffet  Security  Consultants,  Inc. If,  despite its best
efforts,  HiEnergy  Technologies,  Inc.  fails to provide this amount within 150
days from the date of this  Agreement,  the company shall have a further  30-day
cure period to provide  same.  Should  HiEnergy  Technologies,  Inc.  secure and
receive  investment  in a Qualified  Financing at any time within the time frame
described above,  HiEnergy  Technologies,  Inc. shall  immediately pay the above
amount,  plus accrued  interest,  via  certified  or  cashier's  check to Yeffet
Security  Consultants,  Inc.  Furthermore,  the  Company may pay the full amount
listed in this paragraph,  plus any accumulated interest, at a time prior to the
maturation times listed above without penalty.

      (d)  In  connection  with  above   Paragraphs  3(b)  and  3(c),   HiEnergy
Technologies,  Inc.,  on  receipt  of a written  request  form  Yeffet  Security
Consultants,  Inc., agrees to promptly provide Yeffet Security Consultants, Inc.
with separate  promissory notes to the extent of the unpaid balance of the above
amounts and incorporating the above terms.

                                       3
<PAGE>

      4. Stock Payment.

      (a)  Within 60 days  following  the  execution  of this  Agreement  by all
Parties hereto, HiEnergy Technologies,  Inc. shall issue to Isaac Yeffet 775,000
shares of the Company's common stock (the "Settlement Shares").

      t 6 0 (b) If at any time or from time to time, the Company shall determine
to register any of its securities,  for its own account or the account of any of
its shareholders (other than a registration  relating solely to employee benefit
plans or a  registration  relating  solely to an SEC Rule 145  transaction)  the
Company will:

            (i) give to Mr. Yeffet written notice thereof as soon as practicable
prior to filing the registration statement;

            (ii)  include,  at the  Company's  sole  cost and  expense,  in such
registration and in any underwriting  involved therein all the Settlement Shares
specified in a written request or requests,  made within fifteen (15) days after
receipt of such written notice from the Company, by Mr. Yeffet;

            (iii) do and  cause to be done,  at its sole cost and  expense,  all
such things as are customary and reasonably  necessary to facilitate the sale by
Mr. Yeffet of the  Settlement  Shares  pursuant to the  registration  statement,
including but not limited to (w) promptly  preparing and filing with the SEC all
amendments  necessary to comply with the  Securities  Act, (x) furnishing to Mr.
Yeffet such number of prospectuses as he shall reasonably  request,  (y) listing
the  Settlement  Shares on any  securities  exchange,  Nasdaq,  over the counter
market, or other securities  quotation  facilities on which the Company's common
stock is then traded and (z)  notifying  Mr.  Yeffet,  at any time a  prospectus
covered by such  registration  statement is required to be  delivered  under the
Securities  Act, of the  happening  of any event of which it has  knowledge as a
result of which the prospectus included in such registration  statement, as then
in effect,  includes an untrue  statement of a material fact or omits to state a
material fact required to be stated  therein or necessary to make the statements
therein not misleading in the light of the circumstances then existing.

      (c) If,  notwithstanding  the  provisions of Section 4(b),  the Settlement
Shares are not  registered by the Company prior to November 1, 2006, the Company
shall  repurchase the Settlement  Shares from Mr. Yeffet in accordance  with the
provisions of Section 4(d).

      (d)  Beginning  on  November  1, 2006 and for every  month  thereafter  or
portion thereof that the Settlement  Shares may not be freely sold by Mr. Yeffet
either pursuant to (i) an effective  registration statement filed by the Company
or (ii) Rule 144, Mr.  Yeffet shall have the option (but shall not be obligated)
to require  the  Company to  repurchase  from Mr.  Yeffet,  in cash,  $20,000 in
Settlement  Shares  per  month,  at a price per share of  $0.33.  If Mr.  Yeffet
exercises  such  repurchase  option,  the Company will have ten business days to
consummate  each such  repurchase.  Nothing  contained  herein shall require the
Company to purchase more than $20,000 in Settlement Shares per month.

                                       4
<PAGE>

      (e) The  repurchase  obligation  of the Company set forth in Section  4(d)
shall terminate on the earliest to occur of (i) the Settlement Shares shall have
been  registered by the Company  pursuant to a  registration  statement that has
been effective for a period of at least 90 consecutive days (which 90-day period
shall be extended  for the period of any  blackout or other  restriction  on, or
suspension of, Mr. Yeffet's ability to sell Settlement Shares thereunder);  (ii)
the  Settlement  Shares  may be sold by Mr.  Yeffet  for a period of at least 90
consecutive  days pursuant to Rule 144 under the  Securities  Act of 1933 ("Rule
144"), and the Company shall have taken all actions  necessary for Mr. Yeffet to
be able to sell the  Settlement  Shares under Rule 144; or (iii) all  Settlement
Shares shall have been  repurchased by the Company in accordance  with the terms
of Section 4(d).

      (f) Mr. Yeffet shall be permitted to transfer the Settlement Shares at any
time to any family member and any entity controlled by Mr. Yeffet, provided that
such transfer is made in compliance with Section 8(e) of this Agreement, and all
references  in this Section 4 to Mr.  Yeffet shall be deemed to be references to
any such permitted  transferee such that each such permitted transferee shall be
entitled to the benefits of this Section 4.

      (g) In connection with any registration  effected pursuant to Section 4(b)
hereof, the  indemnification  provisions  contained in Exhibit A hereto shall be
applicable.

      (h) The Company agrees at all times to:

            (i) make and keep public information  available,  as those terms are
understood and defined in Rule 144; and

            (ii) use its best  efforts  to file with the SEC in a timely  manner
all reports and other documents required of the Company under the Securities Act
and the Exchange Act.

      (i) The  following  terms used in this Section 4 or Exhibit A hereto shall
have the following meanings.

            (i) "Exchange Act" shall mean the  Securities  Exchange Act of 1934,
as amended, the rules and regulations promulgated thereunder,  and any successor
statute.

            (ii)  "Holder"  shall  mean  Mr.  Yeffet,  or any  other  holder  of
Settlement  Shares  to  whom  the  Settlement  Shares  and  registration  rights
conferred by this Agreement may be  transferred in compliance  with Section 4 of
this Agreement.

            (iii) "Register,"  "registered" and "registration"  shall refer to a
registration  effected  by  preparing  and filing a  registration  statement  in
compliance  with the  Securities  Act,  and the  declaration  or ordering of the
effectiveness  of such  registration  statement,  and compliance with applicable
state securities laws of such states in which Mr. Yeffet notifies the Company of
his intention to offer Settlement Shares.

            (iv) "Rule 144" shall mean Rule 144 under the  Securities Act or any
successor or similar rule as may be enacted by the Commission from time to time.

            (v)  "Securities  Act" shall  mean the  Securities  Act of 1933,  as
amended,  the rules and regulations  promulgated  thereunder,  and any successor
statute.

            (vi) "Settlement  Shares" shall mean (x) the shares of the Company's
common stock to be issued to Mr. Yeffet in accordance with Section 4(a), (y) any
stock issued in respect thereof in any reorganization,  and (z) any stock issued
in respect of the stock  referred to in (x) or (y) as a result of a stock split,
stock dividend, recapitalization or combination.

                                       5
<PAGE>

      5. HiEnergy Technologies,  Inc.'s Failure to Comply with the terms of this
Agreement.  If HiEnergy  Technologies,  Inc.  breaches any of the obligations of
this  agreement  in  connection  with the  payment of monies or the  delivery of
stock, HiEnergy Technologies, Inc. agrees that a judgment for the unpaid balance
of the cash  payments  plus the cash value of any  undelivered  stock (valued at
$0.33 per  share),  shall be entered by the  Arbitrator  upon five (5)  business
days' notice to HiEnergy  Technologies,  Inc., upon  application by Claimants to
the Arbitrator for entry of judgment. If HiEnergy  Technologies,  Inc. cures any
alleged  breach within the subject  notice period of five (5) business  days, an
entry of judgment may not be entered by Claimants.  HiEnergy Technologies,  Inc.
further agrees that an additional amount of reasonable  attorney's fees actually
incurred by Claimants in connection with seeking the entry of judgment following
HiEnergy Technologies,  Inc.'s breach of this Agreement (measured at $400.00 per
hour for senior  partners  and  $200.00 per hour for  associates)  shall also be
entered in favor of Claimants as part of said judgment.

      6.  Release  by  Claimants.  Provided  that  HiEnergy  Technologies,  Inc.
complies with the terms of the Agreement,  and effective upon Claimants' receipt
of all  compensation set forth in Paragraphs 3 and 4, Claimants will irrevocably
and unconditionally release, remise and forever discharge HiEnergy Technologies,
Inc. from any and all Claims,  including  but not limited to releasing  HiEnergy
Technologies, Inc. from any obligations of any options or warrants the Claimants
may currently  hold or currently  have a claim to, for the purchase of shares of
HiEnergy  Technologies,  Inc. stock (the "Stock Options").  Claimants  represent
that they have not assigned, sold, pledged, encumbered or otherwise hypothecated
any such  Stock  Options  to any third  parties  and agree  that all such  Stock
Options shall be cancelled and have no further effect.

      7. Release by HiEnergy  Technologies,  Inc. Provided that Claimants comply
with the  terms of this  Agreement,  and  effective  as of the same  date as the
release by the Claimants set forth in Paragraph 6, HiEnergy  Technologies,  Inc.
irrevocably  and  unconditionally  releases,   remises  and  forever  discharges
Claimants of and from any and all Claims.

      8. Representations and Warranties.

      (a) Each of the Parties  represents and warrants that it has not assigned,
transferred or conveyed, or purported to have assigned, transferred or conveyed,
to any  person or entity,  any Claim  against  any of the other  parties to this
Agreement,  or any other right  subject to this  Agreement.  Each of the Parties
agrees to indemnify, defend and hold harmless the other parties from and against
any such  Claims  that may be  asserted  against  it, or any of them,  based on,
arising  out  of,  or in  connection  with  any  such  assignment,  transfer  or
conveyance, or purported assignment, transfer or conveyance.

      (b) Each of the Parties to this  Agreement  represents  and warrants  that
they have entered into this  Agreement  after  obtaining the advice of competent
independent  counsel,  and without  reliance  on any written or oral  statement,
representation or warranty except those expressly stated in this Section 8. Each
of the Parties to this Agreement  represents and warrants that they are entering
into  this  Agreement  of their  own free  will,  and  that  they  have not been
pressured by any other person to do so.

                                       6
<PAGE>

      (c) Isaac Yeffet is an "Accredited Investor" as defined in Regulation D of
the  Securities  Act or Isaac  Yeffet,  either  alone  or with his  professional
advisers,  has  sufficient  knowledge  and  experience in financial and business
matters such that Isaac Yeffet is capable of evaluating  the merits and risks of
an  investment  in the  Settlement  Shares and of making an informed  investment
decision with respect  thereto and has the capacity to protect his own interests
in connection with his receipt of the Settlement Shares.

      (d) Isaac  Yeffet is  acquiring  the  Settlement  Shares  solely for Isaac
Yeffet's own account as principal,  for investment  purposes only and not with a
view to the resale or  distribution  thereof,  in whole or in part, and no other
person or entity has a direct or indirect  beneficial interest in the Settlement
Shares.

      (e) Isaac Yeffet will not sell or otherwise transfer the Settlement Shares
without  registration  under the  Securities  Act or an exemption  therefrom and
fully  understands  and agrees that Isaac Yeffet must bear the economic  risk of
holding the Settlement  Shares for an indefinite  period of time because,  among
other  reasons,  the  Settlement  Shares  have not  been  registered  under  the
Securities Act or under the securities laws of any state and, therefore,  cannot
be  resold,  pledged,   assigned  or  otherwise  disposed  of  unless  they  are
subsequently  registered  under the  Securities  Act, as amended,  and under the
applicable  securities  laws of such  states or unless  an  exemption  from such
registration is available.

      (f)  Isaac  Yeffet  has  had  an  opportunity  (i)  to  discuss   HiEnergy
Technologies, Inc. 's business, management and financial affairs with management
of HiEnergy Technologies,  Inc. and (ii) to review HiEnergy  Technologies,  Inc.
operations and facilities.

      9. No Reliance; Complete and Final Releases. The Parties to this Agreement
acknowledge  that they are aware that they may in the future  discover  facts in
addition to or  different  from those which they now know or believe to be true,
and that it is their  intention  nevertheless  to fully and  finally  settle and
release any and all Claims,  matters,  disputes and differences relating to such
Claims, known or unknown, suspected or unsuspected,  which now exist, may exist,
or previously existed.  In furtherance of this intention,  it is agreed that the
releases contained in this Agreement shall be and remain in effect as a full and
complete  release  notwithstanding  the  discovery  or  existence  of  any  such
additional or different facts.

      10.  Notice of  Subpoena or Lawful  Demand.  If any of the Parties to this
Agreement  should be served with a subpoena,  document  request or other  lawful
demand for any documents,  court papers, work product or other materials related
to the  Arbitration,  such party shall give written  notice to each of the other
parties by fax and mail as promptly as possible  after receipt of such subpoena,
request or demand to counsel for all the other parties to this Agreement so that
the other parties may have a reasonable opportunity to interpose objections with
the appropriate tribunal with respect to any such production.

                                       7
<PAGE>

      11. Entire  Agreement.  This Agreement  contains the entire  agreement and
understanding  concerning the subject matter addressed herein and supersedes and
replaces any prior  negotiations  and  agreements  between the Parties,  whether
written  or  oral.  There  are no  agreements,  representations,  warranties  or
promises  between the  Parties,  oral or  otherwise,  that differ  from,  alter,
contradict  or  expand  the  terms  of  this  Agreement.  Each  of  the  Parties
acknowledges   and  agrees  that  no  party  to  this  Agreement  has  made  any
inducements,  promises,  warranties or  representations  to any of the others in
connection with entering into this Agreement,  except to the extent specifically
set forth herein.

      12.  Joint  Preparation.   This  Agreement  has  been  negotiated  between
unrelated  parties who are knowledgeable and acting in their own self interests.
Each party has been represented by separate and independent  legal counsel,  and
each has been fully counseled with respect to the import hereof. Any rule of law
that would require  interpretation  of any ambiguities in this Agreement against
the party who has drafted it is not applicable and is expressly waived.

      13.  Further  Assurances.  Each  party  agrees  to  execute  any  and  all
supplementary documents and to take all additional steps reasonably necessary to
give full force and effect to the terms and intent of this Agreement.

      14.  Binding on Successors and Assigns.  This  Agreement  shall be binding
upon and inure to the benefit of the respective  parties,  their assigns,  legal
representatives, and successors.

      15. Parties in Interest. Nothing expressed or implied in this Agreement is
intended or will be  construed to confer upon or give any person or entity other
than the Parties to this  Agreement any rights or remedies under or by reason of
this Agreement or any transaction contemplated by this Agreement.

      16. Severability. Each provision of this Agreement shall be interpreted in
such  manner as to be  effective  and valid  under  applicable  law,  but if any
provision  hereof is held to be prohibited by or invalid under  applicable  law,
such provision  shall be ineffective  only to the extent of such  prohibition or
invalidity,  and the remaining  provisions shall,  nevertheless,  remain in full
force and  effect so long as the  essential  purpose of this  Agreement  remains
intact.

      17.  Modifications  Only in Writing.  This  Agreement  embodies the entire
understanding  of the Parties and shall not be  modified,  amended,  added to or
supplemented  in any way unless any such  modification,  amendment,  addendum or
supplement is in writing and is signed by all the Parties to this Agreement.

      18. Fees and Costs Previously  Incurred.  With the exception of any claims
brought  pursuant to Paragraph 5 above,  each Party to this Agreement shall bear
its own respective attorneys' fees and Costs in connection with the Arbitration,
this Agreement or any other matter of dispute among or between any of them.

                                       8
<PAGE>

      19.  Notices.  All  notices,  requests,  certifications,  demands or other
communications  related in any way to this  Agreement  shall be in  writing  and
shall be delivered  personally or by overnight  courier or  facsimile,  with all
charges prepaid,  to the addresses  specified below or such other address as may
be designated in writing by notice given in the manner herein provided:

If to Claimants:

         Howard M. Nashel, Esq.
         Nashel Kates Nussman Rapone & Ellis, LLP
         190 Moore Street, Suite 306
         Hackensack, NJ  07601
         (201) 488-7211
         Fax (201) 488-1210

If to HiEnergy Technologies, Inc.:

         Charles F. Harris, Esq.
         Mason Griffin & Pierson, P.C.
         101 Poor Farm Road
         Princeton, NJ  08542
         (609) 921-6543
         Fax (609) 683-7978

With copies to:

         HiEnergy Technologies, Inc.
         1601-B Alton Parkway, Unit B
         Irvine, California 92606
         Attention: Corporate Secretary
         Tel. No.: (949) 757-0855
         Fax No.: (949) 757-1477

If  delivered  personally,  such  notice  shall be deemed to be  effective  upon
receipt. If notice is given by overnight courier, such notice shall be deemed to
be effective two (2) business  days  following  deposit with the courier.  If by
facsimile,  such notice shall be deemed to be effective  two (2) days  following
the sending of the facsimile.

      20. Counterparts.  This Agreement may be executed in one or more identical
counterparts,  each of which shall be deemed an original, but all of which shall
constitute  one and the same  instrument.  For  purposes  of  execution  of this
Agreement,  exchange of  facsimile  signatures  shall bind the Parties as if the
original signatures had been delivered by hand.

                                       9
<PAGE>

      21. Effect of Headings. Paragraph headings appearing in this Agreement are
provided for  convenience of reference only, and shall in no way be construed to
alter or modify the text hereof.

      22. Applicable Law. The rights, obligations and remedies of the Parties as
specified under this Agreement shall be interpreted, construed and enforced, and
all disputes arising out of or relating to this Agreement shall be governed,  by
and in  accordance  with the laws of the  State of New  Jersey,  without  giving
effect to any conflict of law provisions thereof.

      23.  Authority to Execute.  Each of the Parties and signatories  warrants,
covenants  and  represents  that it has executed or caused this  Agreement to be
executed  by duly  authorized  representatives  and that all  corporate  actions
necessary to create a binding and enforceable agreement have been taken.

IN WITNESS WHEREOF,  the Parties have executed or caused an authorized person to
execute this Agreement as of the Effective Date:

Isaac Yeffet:

____/S/ ISAAC YEFFET________________

By:  Isaac Yeffet

Yeffet Security Consultants, Inc.

____/S/ ISAAC YEFFET________________

By:  Isaac Yeffet
Its:  President

HiEnergy Technologies, Inc.

____/S. ROGER W.A. SPILLMANN______

By:  Roger W.A. Spillmann
Its:  President & CEO

                                       10
<PAGE>

                           Exhibit A (Indemnification)

(a) In the event of a  registration  of any of the  Settlement  Shares under the
Securities Act pursuant to Section 4 of the  Settlement  Agreement of which this
Exhibit is a part,  the Company will  indemnify and hold harmless each Holder of
such Settlement  Shares  thereunder,  each underwriter of such Settlement Shares
thereunder  and  each  other  person,  if  any,  who  controls  such  Holder  or
underwriter  within the  meaning of the  Securities  Act,  against  any  losses,
claims,  damages  or  liabilities,  joint  or  several,  to which  such  Holder,
underwriter or controlling person may become subject under the Securities Act or
otherwise, insofar as such losses, claims, damages or liabilities (or actions in
respect  thereof) arise out of or are based upon any untrue statement or alleged
untrue  statement of any material fact contained in any  registration  statement
under which such Settlement Shares were registered under the Securities Act, any
preliminary  prospectus or final prospectus  contained therein, or any amendment
or supplement thereof, or arise out of or are based upon the omission or alleged
omission  to state  therein a material  fact  required  to be stated  therein or
necessary to make the statements therein not misleading, or any violation by the
Company of any rule or regulation  promulgated  under the  Securities Act or any
state  securities  law  applicable  to the  Company  and  relating  to action or
inaction required of the Company in connection with any such  registration,  and
will reimburse each such Holder,  each of its officers,  directors and partners,
and each person  controlling such Holder,  each such underwriter and each person
who  controls  any such  underwriter,  for any  reasonable  legal  and any other
expenses  incurred in connection with  investigating,  defending or settling any
such claim,  loss, damage,  liability or action,  provided that the Company will
not be liable in any such case to the extent that any such claim,  loss,  damage
or liability arises out of or is based on any untrue statement or omission based
upon written information furnished to the Company by an instrument duly executed
by such Holder or underwriter specifically for use therein.

(b) Each Holder will,  if  Settlement  Shares held by or issuable to such Holder
are included in the securities as to which such  registration is being effected,
indemnify  and hold  harmless the Company,  each of its  directors and officers,
each  underwriter,  if  any,  of the  Company's  securities  covered  by  such a
registration   statement,   each  person  who  controls  the  Company  and  each
underwriter  within the  meaning of the  Securities  Act,  against  all  claims,
losses,  expenses,  damages  and  liabilities  (or  actions in respect  thereof)
arising out of or based on any untrue statement (or alleged untrue statement) of
a  material  fact  contained  in any such  registration  statement,  prospectus,
offering  circular or other document,  or any omission (or alleged  omission) to
state therein a material fact required to be stated therein or necessary to make
the statements  therein not  misleading,  and will  reimburse the Company,  such
directors,  officers, partners, persons or underwriters for any reasonable legal
or any other expenses  incurred in connection with  investigating,  defending or
settling any such claim, loss, damage,  liability or action, in each case to the
extent,  but only to the extent,  that such untrue  statement (or alleged untrue
statement)  or  omission  (or  alleged  omission)  is made in such  registration
statement,  prospectus, offering circular or other document in reliance upon and
in conformity with written information furnished to the Company by an instrument
duly executed by such Holder specifically for use therein.

                                       11
<PAGE>

(c) Each party entitled to indemnification  hereunder (the "Indemnified  Party")
shall  give  notice  to the  party  required  to  provide  indemnification  (the
"Indemnifying Party") promptly after such Indemnified Party has actual knowledge
of any  claims  as to which  indemnity  may be  sought,  and  shall  permit  the
Indemnifying  Party to assume the  defense  of any such claim or any  litigation
resulting therefrom, provided that counsel for the Indemnifying Party, who shall
conduct  the  defense  of such claim or  litigation,  shall be  approved  by the
Indemnified Party (whose approval shall not be unreasonably  withheld),  and the
Indemnified  Party may participate in such defense at such party's expense,  and
provided  further  that the failure of any  Indemnified  Party to give notice as
provided  herein  shall not relieve the  Indemnifying  Party of its  obligations
hereunder,  unless such failure resulted in actual detriment to the Indemnifying
Party.  No  Indemnifying  Party, in the defense of any such claim or litigation,
shall,  except with the consent of each Indemnified  Party,  consent to entry of
any  judgment  or enter  into  any  settlement  which  does  not  include  as an
unconditional  term  thereof  the giving by the  claimant or  plaintiff  to such
Indemnified  Party of a release  from all  liability in respect of such claim or
litigation.

(d)  Notwithstanding  the  foregoing,  to the  extent  that  the  provisions  on
indemnification  contained in the underwriting agreements entered into among the
selling  Holders,  the  Company  and the  underwriters  in  connection  with any
underwritten public offering are in conflict with the foregoing provisions,  the
provisions  in  the  underwriting  agreement  shall  be  controlling  as to  the
Settlement Shares included in the public offering;  provided,  however, that if,
as a result of this  Section  (d),  any Holder,  its  officers,  directors,  and
partners  and any person  controlling  such  Holder is held liable for an amount
which  exceeds the aggregate  proceeds  received by such Holder from the sale of
Settlement Shares included in a registration,  as provided in Section (b) above,
pursuant to such underwriting  agreement (the "Excess  Liability"),  the Company
shall reimburse any such Holder for such Excess Liability.

(e) If the  indemnification  provided  for  hereunder  is  held  by a  court  of
competent jurisdiction to be unavailable to an indemnified party with respect to
any loss,  liability,  claim,  damage or expense  referred to therein,  then the
indemnifying  party, in lieu of indemnifying  such indemnified party thereunder,
shall  contribute to the amount paid or payable by such  indemnified  party as a
result of such loss,  liability,  claim, damage or expense in such proportion as
is appropriate to reflect the relative  fault of the  indemnifying  party on the
one hand and of the  indemnified  party on the other hand in connection with the
statements or omissions which resulted in such loss, liability, claim, damage or
expense as well as any other  relevant  equitable  considerations.  The relevant
fault of the indemnifying party and the indemnified party shall be determined by
reference to, among other things, whether the untrue or alleged untrue statement
of a  material  fact  or the  omission  to  state a  material  fact  relates  to
information  supplied by the indemnifying  party or by the indemnified party and
the parties' relative intent,  knowledge,  access to information and opportunity
to correct or prevent such statement or omission. Notwithstanding the foregoing,
the amount any Holder shall be obligated to contribute  pursuant to this Section
(e) shall be limited to an amount  equal to the  proceeds  to such Holder of the
Settlement  Shares sold pursuant to the registration  statement which gives rise
to such obligation to contribute (less the aggregate amount of any damages which
the Holder has otherwise  been  required to pay in respect of such loss,  claim,
damage,  liability or action or any substantially  similar loss, claim,  damage,
liability or action arising from the sale of such Settlement Shares).

                                       12
<PAGE>

(f) Survival of Indemnity.  The  indemnification  provided  hereunder shall be a
continuing right to indemnification  and shall survive the registration and sale
of any securities by any person or entity entitled to indemnification  hereunder
and the  expiration or  termination  of the  Settlement  Agreement of which this
Exhibit is a part.

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