ADDENDUM TO CONVERTIBLE DEBENTURE, WARRANT TO PURCHASE COMMON STOCK AND SECURITIES PURCHASE AGREEMENT
ADDENDUM
TO CONVERTIBLE DEBENTURE, WARRANT TO PURCHASE COMMON STOCK AND SECURITIES
PURCHASE AGREEMENT
This
Addendum to Convertible Debenture, Warrant to Purchase Common Stock and
Securities Purchase Agreement (“Addendum”) is entered into as of the 2nd day of
May 2006 by and between Material Technologies, Inc., a Delaware corporation
(“Material”) and Golden Gate Investors, Inc., a California corporation
(“GGI”).
WHEREAS,
Material and GGI are parties to that certain 5 ¼ % Convertible Debenture dated
as of December 16, 2005 (“Debenture”); and
WHEREAS,
Material and GGI are parties to that certain Warrant to Purchase Common Stock
dated as of December 16, 2005 (“Warrant”); and
WHEREAS,
Material and GGI are parties to that certain Securities Purchase Agreement
dated
as of December 16, 2005 (“Securities Purchase Agreement”); and
WHEREAS,
the parties desire to amend the Debenture, Warrant and Securities Purchase
Agreement in certain respects.
NOW,
THEREFORE, in consideration of the mutual promises and covenants contained
herein, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Material and GGI agree as
follows:
| 1. |
All
terms used herein and not otherwise defined herein shall have the
definitions set forth in the Debenture.
|
| 2. |
The
Debenture Principal Amount shall be $1,000,000. The Purchase Price
for the
Debenture shall be $1,000,000. All amounts previously advanced by GGI
to
Material, and any additional amounts advanced by GGI to Material prior
to
the Effective Date, shall be applied to the Purchase
Price.
|
| 3. |
Upon
notification and verification that the Registration Statement for the
Conversion Shares has been filed with the Securities and Exchange
Commission, GGI shall immediately send via wire $20,000 of the Purchase
Price.
|
| 4. |
Upon
notification and verification that the Registration Statement for the
Conversion Shares has been declared effective by the Securities and
Exchange Commission (such date, the “Effective Date”), and such shares can
legally be issued to GGI, Material shall immediately deliver 20,000,000
Material registered shares (in 50 certificates of 400,000 shares each),
registered in the name of Golden Gate Investors, Inc., to ▇▇▇▇ ▇. Atlas,
Esq., who shall hold the shares in trust as a joint escrow agent for
Material and GGI. The delivery of such shares shall occur no later
than
five days after the Effective Date. Upon receipt of the Material
registered Common Shares by ▇▇▇▇ ▇. Atlas, Esq., GGI shall immediately
send via wire the remainder of the Purchase Price ($1,000,000 less
the sum
of all amounts previously advanced to Material) which has not previously
been funded, which shall occur no later than five days after the Effective
Date. Such shares may only be released by ▇▇▇▇ ▇. Atlas, Esq. pursuant
to
valid Debenture conversion notices submitted by GGI. It is understood
that
GGI shall not be considered the owner of the Material Common Shares
held
in escrow, and GGI agrees that it will not vote the shares in escrow
or
exercise any control whatsoever over such shares until such time as
the
shares are released to GGI by the escrow
agent.
|
1
| 5. |
The
second sentence of section 3.1(a) of the Debenture is amended to read
as
follows: “The number of shares into which this Debenture may be converted
is equal to the dollar amount of the Debenture being converted divided
by
the Conversion Price.”
|
| 6. |
The
last paragraph of section 3.1(a) of the Debenture is amended to read
as
follows: “If the Holder elects to convert a portion of the Debenture and,
on the day that the election is made, the Volume Weighted Average Price
is
below the lesser of: (i) $0.05, or (ii) the lowest price at which any
of
the 20,000,000 additional shares referenced in section 12 herein are
issued or sold, the Company shall have the option to do one of the
following: (x) redeem that portion of the Debenture that Holder elected
to
convert, plus any accrued and unpaid interest, at 108% of such amount,
or
(y) increase the Discount Multiplier to 99% on that portion of the
Debenture that Holder elected to convert, or (z) one time during any
six
month period, not permit any Debenture conversions by Holder for a
period
of 60 days.”
|
| 7. |
If
GGI elects to convert a portion of the Debenture and, on the day that
the
election is made, the Volume Weighted Average Price is $0.32 or higher,
the Discount Multiplier shall be 72%.
|
| 8. |
The
Warrant is hereby cancelled, as is the Warrant prepayment set forth
in the
December 16, 2005 letter agreement between the
parties.
|
| 9. |
The
second full paragraph of section 3.1(a) of the Debenture is amended
to
read as follows: “Beginning in the first full calendar month after the
Registration Statement is declared effective, Holder must convert at
least
10%, but no more than 40%, of the face value of the Debenture per calendar
month into Common Shares of the Company, provided that the Common Shares
are available, registered and freely tradable. Material may reduce
the
monthly maximum figure from 40% to 6% for any three calendar months
(but
not two consecutive calendar months) during the term of the Debenture
by
giving written notice of such election to GGI at least ten business
days
prior to the first day of the applicable calendar
month.”
|
| 10. |
The
Deadline shall be the 120th
day after the new Registration Statement is filed with the SEC, provided
that the Company responds to all SEC comments within 15 business days
of
receipt thereof.
|
| 11. |
The
parties shall enter into an additional three $1,000,000 convertible
debentures, each on the same terms and conditions as the Convertible
Debenture. The parties must enter into each such additional convertible
debenture no later than thirty days after the Debenture Principal Amount
is less than $400,000 for the prior debenture. GGI shall fund $100,000
of
the Purchase Price for each additional convertible debenture at the
time
of entering into each additional convertible debenture, with the remaining
portion of the Purchase Price to be funded upon notification and
verification that the Registration Statement has been declared effective
by the Securities and Exchange Commissions and shares can legally be
issued to GGI. In the event that GGI fails to enter into either of
the
three additional convertible debentures in accordance with the terms
hereof, GGI shall pay to Material liquidated damages of
$100,000.
|
2
| 12. |
In
the Registration Statement, Material may register up to an additional
20,000,000 shares for sale or issuance to parties other than
GGI.
|
| 13. |
Except
as specifically amended herein, all other terms and conditions of the
Debenture and Securities Purchase Agreement shall remain in full force
and
effect.
|
IN
WITNESS WHEREOF, Material and GGI have caused this Addendum to be signed by
its
duly authorized officers on the date first set forth above.
Material
Technologies, Inc. Golden
Gate Investors, Inc.
By:
/s/
▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇▇▇
By:
/s/
▇▇▇▇▇▇ ▇▇▇▇
Name:
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ Name:
▇▇▇▇▇▇ ▇▇▇▇
Title:
Chief Executive
Officer Title:
Portfolio Manager
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