Material Technologies, Inc. SECURITIES PURCHASE AGREEMENT
Material
Technologies, Inc.
____________________________
__________________________
This
Securities Purchase Agreement (this “Agreement”) is made and entered into
effective as of the 30th day of May, 2006 (the “Effective Date”) by and between
Material Technologies, Inc., a Delaware corporation (the “Company”), and La
Jolla Cove Investors, Inc., a California corporation (the “Purchaser”). The
Company and Purchaser shall each be referred to as a “Party” and collectively as
the “Parties.”
The
Parties hereby agree as follows:
1. PURCHASE
OF WARRANTS.
Subject
to the terms of this Agreement, the Purchaser agrees to purchase from the
Company, and the Company agrees to sell to the Purchaser, a warrant to purchase
up to Twenty Million (20,000,000) shares of Class A common stock of the Company
(the “Warrant Shares”), in the form attached hereto as Exhibit
A
(the
“Warrant”). As consideration for the purchase of the Warrant, Purchaser agrees
to advance the sum of Fifty Thousand Dollars ($50,000) (the “Premium”) to the
Company against the exercise price to be received by the Company upon exercise
of the Warrant. The Warrants shall be exercisable until December 31, 2007,
and
must be exercised by Purchaser in accordance with the schedule set forth in
Section 5(e) hereof.
2. EXERCISE
PRICE.
The
exercise price (“Exercise Price”) of the Warrants shall be $0.01
per
share, provided, however, in no event shall the Exercise Price be lower or
higher than the lowest price at which the Company sold any Common Stock (through
direct stock issuances, conversions of debentures, etc, but not including stock
issued for services) during the thirty days prior to the exercise date. Upon
the
exercise of the Warrant Shares, the Exercise Price shall be reduced pro rata
to
permit the Holder to recapture the Premium.
3. DELIVERY
OF THE WARRANT.
Within
two (2) business days of the execution of this Agreement by the Company and
the
Purchaser, Purchaser will deliver to the Company a check or wire transfer funds
in the amount of the Premium, and the Company shall issue and deliver to
Purchaser the Warrant.
4. REPRESENTATIONS,
WARRANTIES AND COVENANTS OF THE COMPANY
The
Company hereby represents and warrants to Purchaser as follows:
a) Corporate
Power.
The
Company has all requisite corporate power to execute and deliver this Agreement
and the Warrant and to carry out and perform its obligations under the terms
of
this Agreement.
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b) Authorization.
All
corporate action on the part of the Company, its directors and its stockholders
necessary for the authorization, execution, delivery and performance of this
Agreement by the Company and the performance of the Company’s obligations
hereunder, including the issuance and delivery of the Warrant and the
reservation of the equity securities issuable upon exercise of the Warrant,
has
been taken or will be taken prior to the issuance of such equity securities.
This Agreement and the Warrant, when executed and delivered by the Company,
shall constitute valid and binding obligations of the Company enforceable in
accordance with their terms, subject to laws of general application relating
to
bankruptcy, insolvency, the relief of debtors and, with respect to rights to
indemnity, subject to federal and state securities laws. The Purchaser’s Class A
common stock of the Company, when issued in compliance with the provisions
of
the Warrant, will be validly issued, fully paid and nonassessable and free
of
any liens or encumbrances.
The
issuance of the Warrant pursuant to the provisions of this Agreement will not
violate any preemptive rights, rights of first refusal, or any other rights
granted by the Company, and the Warrant will be issued in compliance with all
applicable federal and state securities laws, and will be free of any liens
or
encumbrances, other than any liens or encumbrances created by or imposed upon
the Purchaser through no action of the Company; provided, however, that the
Warrant may be subject to restrictions on transfer under state and/or federal
securities laws as set forth herein or as otherwise required by such laws at
the
time the transfer is proposed.
c) Governmental
Consents.
All
consents, approvals, orders, or authorizations of, or registrations,
qualifications, designations, declarations, or filings with, any governmental
authority, required on the part of the Company in connection with the valid
execution and delivery of this Agreement, the offer, sale or issuance of the
Warrant and the equity securities issuable upon exercise of the Warrant, or
the
consummation of any other transaction contemplated hereby shall have been
obtained and will be effective at the Closing, except for notices required
or
permitted to be filed with certain state and federal securities commissions,
which notices will be filed on a timely basis.
d) Offering.
Assuming the accuracy of the representations and warranties of Purchaser
contained in Section 5 hereof, the offer, issue, and sale of the Warrant is
and
will be exempt from the registration and prospectus delivery requirements of
the
Securities Act of 1933, as amended (the “Act”), and have been registered or
qualified (or are exempt from registration and qualification) under the
registration, permit, or qualification requirements of all applicable state
securities laws.
e)
Use
of Proceeds.
The
Company shall use the proceeds from the exercise of the Warrants to reduce
debt
obligations of the Company. The proceeds from the Premium will be used for
general working capital purposes.
f)
Piggyback
Registration Rights.
If the
Company at any time proposes to register any of its securities under the Act,
including under an S-1 Registration Statement or otherwise, it will each such
time give written notice to the Purchaser of its intention so to do. Upon the
written request of Purchaser given within 10 days after receipt of any such
notice, the Company will use its best efforts to cause all shares underlying
the
exercise of the Warrant to be registered under the Act (with the securities
which the Company at the time propose to register). All expenses incurred by
the
Company in complying with this Section, including without limitation all
registration and filing fees, listing fees, printing expenses, fees and
disbursements of all independent accountants, or counsel for the Company and
the
expense of any special audits incident to or required by any such registration
and the expenses of complying with the securities or blue sky laws of any
jurisdiction shall be paid by the Company.
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5. REPRESENTATIONS
AND WARRANTIES OF THE PURCHASER
a) Purchase
for Own Account.
Purchaser represents that he is acquiring the Warrant and the equity securities
issuable upon exercise of the Warrant (collectively, the “Securities”) solely
for his own account and beneficial interest for investment and not for sale
or
with a view to distribution of the Securities or any part thereof, has no
present intention of selling (in connection with a distribution or otherwise),
granting any participation in, or otherwise distributing the same, and does
not
presently have reason to anticipate a change in such intention.
b) Ability
to Bear Economic Risk.
Purchaser acknowledges that investment in the Securities involves a high degree
of risk, and represents that he is able, without materially impairing his
financial condition, to hold the Securities for an indefinite period of time
and
to suffer a complete loss of his investment.
c) Further
Limitations on Disposition.
Purchaser further acknowledges that the Securities are restricted securities
under Rule 144 of the Act, and, therefore, when issued by the Company to the
Purchaser will contain a restrictive legend substantially similar to the
following:
THESE
SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE “ACT”). THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN
THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THE SECURITIES UNDER
THE ACT OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH
REGISTRATION IS NOT REQUIRED.
Without
in any way limiting the representations set forth above, Purchaser further
agrees not to make any disposition of all or any portion of the Securities
unless and until:
(i) There
is
then in effect a Registration Statement under the Act covering such proposed
disposition and such disposition is made in accordance with such Registration
Statement; or
(ii) Purchaser
shall have notified the Company of the proposed disposition and shall have
furnished the Company with a detailed statement of the circumstances surrounding
the proposed disposition, and if reasonably requested by the Company, Purchaser
shall have furnished the Company with an opinion of counsel, reasonably
satisfactory to the Company, that such disposition will not require registration
under the Act or any applicable state securities laws.
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Notwithstanding
the provisions of subparagraphs (i) and (ii) above, no such registration
statement or opinion of counsel shall be necessary for a transfer by such
Purchaser to a partner (or retired partner) of Purchaser, or transfers by gift,
will or intestate succession to any spouse or lineal descendants or ancestors,
if all transferees agree in writing to be subject to the terms hereof to the
same extent as if they were Purchasers hereunder.
d) Accredited
Investor Status.
Purchaser is an “accredited investor” as such term is defined in Rule 501 under
the Act.
e)
Scheduled
Exercise of Warrant.
Purchaser agrees that, beginning on the date that a Registration Statement
filed
by the Company with the Securities and Exchange Commission becomes effective
that registers the Warrant Shares, Purchaser will exercise the Warrant, pay
the
Exercise Price to the Company, and acquire the Warrant Shares, at a rate of
at
least One Million Two Hundred Fifty Thousand (1,250,000) of the Warrant Shares
per week, to continue for sixteen (16) consecutive weeks until all of the
Warrant Shares have been purchased by Purchaser. In the event Purchaser does
exercise the Warrant in accordance with this schedule Purchaser shall pay
liquidated damages of $50,000 to the Company.
6. MISCELLANEOUS
a) Binding
Agreement.
The
terms and conditions of this Agreement shall inure to the benefit of and be
binding upon the respective successors and assigns of the Parties. Nothing
in
this Agreement, expressed or implied, is intended to confer upon any third
party
any rights, remedies, obligations, or liabilities under or by reason of this
Agreement, except as expressly provided in this Agreement.
b) Governing
Law; Venue.
This
Agreement shall be governed by and construed under the laws of the State of
California as applied to agreements among California residents, made and to
be
performed entirely within the State of California.
The Parties agree that any action brought to enforce the terms of this Agreement
will be brought in the appropriate federal or state court having jurisdiction
over San Diego County, California, United States of America.
c) Counterparts.
This
Agreement may be executed in one or more counterparts, each of which shall
be
deemed an original, but all of which together shall constitute one and the
same
instrument.
d) Titles
and Subtitles.
The
titles and subtitles used in this Agreement are used for convenience only and
are not to be considered in construing or interpreting this
Agreement.
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e) Notices.
All
notices required or permitted hereunder shall be in writing and shall be deemed
effectively given: (a) upon personal delivery to the Party to be notified,
(b)
when sent by confirmed facsimile if sent during normal business hours of the
recipient, if not, then on the next business day, or (c) one (1) day after
deposit with a nationally recognized overnight courier, specifying next day
delivery, with written verification of receipt. All communications shall be
sent
as follows:
If
to the
Company:
Material
Technologies, Inc.
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Attn:
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Facsimile
No.: (▇▇▇) ▇▇▇-▇▇▇▇
with
a
copy
to:
The
Lebrecht Group, APLC
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Attn:
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Facsimile
No.: (▇▇▇) ▇▇▇-▇▇▇▇
If
to
Purchaser:
La
Jolla
Cove Investors, Inc.
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Attn:
President
Facsimile
No.: (▇▇▇) ▇▇▇-▇▇▇▇
or
at
such other address as the Company or Purchaser may designate by ten (10) days
advance written notice to the other Party hereto.
f) Modification;
Waiver.
No
modification or waiver of any provision of this Agreement or consent to
departure therefrom shall be effective unless in writing and approved by the
Company and the Purchaser.
g) Entire
Agreement.
This
Agreement and the Exhibits hereto constitute the full and entire understanding
and agreement between the Parties with regard to the subjects hereof and no
Party shall be liable or bound to the other Party in any manner by any
representations, warranties, covenants and agreements except as specifically
set
forth herein.
h) Expenses.
Each
Party shall pay their own expenses in connection with this Agreement and the
Warrant. In addition, should either Party commence any action, suit or
proceeding to enforce this Agreement or any term or provision hereof, then
in
addition to any other damages or awards that may be granted to the prevailing
Party, the prevailing Party shall be entitled to have and recover from the
other
Party such prevailing Party’s reasonable attorneys’ fees and costs incurred in
connection therewith.
i) Currency.
All
currency is expressed in U.S. dollars.
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IN
WITNESS WHEREOF, the
Parties have executed this Securities Purchase Agreement as
of the
date first written above.
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“Company”
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“Purchaser”
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Material
Technologies, Inc.,
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La
Jolla Cove Investors, Inc.,
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a
Delaware corporation
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a
California corporation
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/s/
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/s/
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By: ▇▇▇▇▇▇
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By: ▇▇▇▇▇▇
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Its: President
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Its: Portfolio
Manager
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EXHIBIT
A
Form
of
Warrant