STOCK PURCHASE AGREEMENT Between Material Technologies, Inc. (“COMPANY”) __________________________________________________________________ and BIRCHINGTON INVESTMENTS LIMITED __________________________________ April 7, 2005...

CERTAIN DEFINITIONS............................................................................................................. 1
          1.1       Certain Definitions..................................................................................................... 1

ARTICLE II     PURCHASE AND SALE OF CONVERTIBLE PREFERRED SHARES.............. 4

          2.1       Purchase and Sale; Purchase Price............................................................................. 4
          2.2       Execution and Delivery of Documents; The Closing..................................................... 5

ARTICLE III    REPRESENTATIONS AND WARRANTIES....................................................... 6
          3.1       Representations, Warranties and Agreements of the Company.................................... 6
          3.2       Representations and Warranties of Birchington.......................................................... 11

ARTICLE IV    OTHER AGREEMENTS OF THE PARTIES....................................................... 14
          4.1       Manner of Offering................................................................................................... 14
          4.2       Notice of Certain Events........................................................................................... 14
          4.3       Blue Sky Laws......................................................................................................... 14
          4.4       Integration................................................................................................................ 14
          4.5       Furnishing of Rule 144(c) Materials........................................................................... 14
          4.6       Solicitation Materials................................................................................................. 15
          4.7       Listing of Common Stock.......................................................................................... 15
          4.8       Recognised Stock Exchange..................................................................................... 15
          4.9       Indemnification......................................................................................................... 15
          4.10     Notice and Consultation Before Securities Issuance................................................... 17
          4.11     Lock-Up Agreement................................................................................................ 18
          4.12     Use of Proceeds....................................................................................................... 18
          4.13     Sale of Birchington Consideration Shares.................................................................. 18
          4.14     Short Sales............................................................................................................... 18
          4.15     Liquidation of Shares and Escrow Shares.................................................................. 18
          4.16     Definitive Certificates................................................................................................ 18
          4.17     Investing Through a Subsidiary Established in the European Union............................. 18

MISCELLANEOUS..................................................................................................................... 19

          5.1       Fees and Expenses................................................................................................... 19
          5.2       Entire Agreement...................................................................................................... 19
          5.3       Notices.................................................................................................................... 19
          5.4       Amendments; Waivers.............................................................................................. 20
          5.5       Headings.................................................................................................................. 20
          5.6       No Third Party Beneficiaries..................................................................................... 20
          5.7       Governing Law; Venue; Service of Process............................................................... 20
          5.8       Survival.................................................................................................................... 21
          5.9       Counterpart Signatures............................................................................................. 21
          5.10     Publicity................................................................................................................... 21
          5.11     Severability.............................................................................................................. 21
          5.12     Limitation of Remedies............................................................................................. 21
          5.13     Successors and Assigns........................................................................................... 22

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          WHEREAS, subject to the terms and conditions set forth in this Agreement, the Company desires to issue and sell to Birchington and Birchington desires to acquire from the Company Eight Million Eight Hundred Thousand (8,800,000) shares of the Company’s common stock, $0.001 par value (the “Common Stock”), for the Purchase Price.  The consideration to be paid by Birchington for the Common Stock shall be subject to certain downside price protection (the “Downside Price Protection”) provided in Section 2 of the Escrow Agreement.

          IN CONSIDERATION of the mutual covenants contained in this Agreement, the Company and Birchington agree as follows:

ARTICLE I
CERTAIN DEFINITIONS

1.1          Certain Definitions.  As used in this Agreement, and unless the context requires a different meaning, the following terms have the meanings indicated:

          “1940 Act” shall have the meaning set forth in Section 3.1(n) hereof.

          “Affiliate” means, with respect to any Person, any Person that, directly or indirectly, controls, is controlled by or is under common control with such Person.  For the purposes of this definition, “control” (including, with correlative meanings, the terms “controlled by” and “under common control with”) shall mean the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such Person, whether through the ownership of voting securities or by contract or otherwise.

          “Agreement” shall have the meaning set forth in the introductory paragraph of this Agreement.

          “Birchington” shall have the meaning in the introductory paragraph.

          “Birchington Consideration Shares” shall have the meaning in Section 2.1(c) hereof.

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            “Execution Date” means the date of this Agreement first written above.

            “G&P” means Gottbetter & Partners, LLP.

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            “Holder” or “Holders” shall have the meaning set forth in Section 4.5 hereof. 

            “Indemnified Party” shall have the meaning set forth in Section 4.9(b) hereof.

            “Indemnifying Party” shall have the meaning set forth in Section 4.9(b) hereof.

            “G&P” means Gottbetter & Partners, LLP.

            “Losses” shall have the meaning set forth in Section 4.9(a) hereof.

            “Material” shall mean having a financial consequence in excess of $25,000.

            “Material Adverse Effect” shall have the meaning set forth in Section 3.1(a) hereof.

            “NASD” means the National Association of Securities Dealers, Inc.

            “Nasdaq” shall mean the Nasdaq Stock Market, Inc.^®

            “New Securities” shall have the meaning set forth in Section 4.10 hereof.

            “OTCBB” shall mean the NASD over-the counter Bulletin Board^®.

            “Person” means an individual or a corporation, partnership, trust, incorporated or unincorporated association, joint venture, limited liability company, joint stock company, government (or an agency or political subdivision thereof) or other entity of any kind.

            “Proceeding” means an action, claim, suit, investigation or proceeding (including, without limitation, an investigation or partial proceeding, such as a deposition), whether commenced or threatened.

            “Purchase Price” shall have the meaning set forth in Section 2.1(b) hereof.

            “Recognised Stock Exchange” shall mean a stock exchange satisfying requirements which provide for amongst other things, the maintenance of appropriate financial resources by companies listed on it, proper monitoring and enforcement procedures and the promotion and maintenance of standards and safeguards for investors.

            “Redemption Price” shall mean an amount equal to the Stated Value of the Shares outstanding that are subject to redemption.

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           “Trading Day” means (a) a day on which the Common Stock is quoted on the Nasdaq, the OTCBB or the principal stock exchange on which the Common Stock has been listed, or (b) if the Common Stock is not quoted on Nasdaq, the OTCBB or any stock exchange, a day on which the Common Stock is quoted in the over-the-counter market, as reported by the Pink Sheets LLC (or any similar organization or agency succeeding its functions of reporting prices).

           “Transaction Documents” means this Agreement and all exhibits and schedules hereto and all other documents, instruments and writings required pursuant to this Agreement.

ARTICLE II
PURCHASE AND SALE OF SHARES

2.1          Purchase and Sale; Purchase Price.

          (a)        Subject to the terms and conditions set forth herein, the Company shall issue and sell and Birchington shall purchase Eight Million Eight Hundred Thousand  (8,800,000) shares of the Company’s Common Stock (the “Shares”). 

          (b)        The purchase price (the “Purchase Price”) shall be the number of Shares multiplied by the average of the Closing Bid Price per share of Common Stock during the ten (10) Trading Days immediately preceding the Closing Date.

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          (i)         the Company shall execute and deliver to the Escrow Agent certificates in the name of Birchington representing the Shares and the Escrow Shares;

          (ii)        the Company shall execute and deliver to Birchington a certificate of its President, in the form of Exhibit A annexed hereto, certifying that attached thereto is a copy of resolutions duly adopted by the Board of Directors of the Company authorizing the Company to execute and deliver the Transaction Documents and to enter into the transactions contemplated thereby;

          (iii)       counsel for the Company shall deliver to the Escrow Agent an executed copy of its opinion in the form annexed hereto as Exhibit B;

          (iv)       the Company, the Escrow Agent and Birchington shall execute and deliver to each other an executed Escrow Agreement;

          (v)        Birchington shall deliver to the Escrow Agent the Birchington Consideration Shares; and

          (vi)    the Company shall wire the monies owed to G&P pursuant to Section 5.1 hereof for legal fees with the following wire instructions:

            Citibank, N.A.
            ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇

▇

            ▇▇▇ ▇▇▇▇, ▇▇
            ABA Routing No.: ▇▇▇▇▇▇▇▇▇
            Account Name: Gottbetter & Partners, LLP
            Account No. ▇▇▇▇▇▇▇▇
            Reference:  Material Technologies, Inc. (“Company”).

            (b)  Notwithstanding the foregoing, at Closing, the Company shall deliver to the Escrow Agent certificates representing the Shares and the Escrow Shares, that shall be held by the Escrow Agent upon the terms and conditions set forth in the Escrow Agreement, and that shall bear the following legends:

THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN OFFERED AND SOLD IN AN “OFFSHORE TRANSACTION” IN RELIANCE UPON REGULATION S AS PROMULGATED BY THE SECURITIES AND EXCHANGE COMMISSION AND IN ACCORDANCE WITH SECTION 4(2) OF THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”).  ACCORDINGLY, THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 AND MAY NOT BE TRANSFERRED OTHER THAN IN ACCORDANCE WITH REGULATION S, PURSUANT TO REGISTRATION UNDER THE SECURITIES ACT, OR PURSUANT TO AN AVAILABLE EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT, THE AVAILABILITY OF WHICH IS TO BE ESTABLISHED TO THE SATISFACTION OF THE COMPANY. 

          (c)  Pursuant to a non-exclusive corporate finance engagement agreement between the Company and ▇▇▇▇▇▇ ▇▇▇▇, the Company shall deliver its advisory fee to ▇▇▇▇▇▇ ▇▇▇▇ in the form of restricted Common Stock.

          (d)  Prior to the engagement of ▇▇▇▇▇▇ ▇▇▇▇ by the Company, the Company shall be required to obtain a consent from Research Works to enter into this Agreement.

ARTICLE III
REPRESENTATIONS AND WARRANTIES

3.1          Representations, Warranties and Agreements of the Company.  The Company hereby makes the following representations and warranties to Birchington, all of which shall survive the Closing:

          (a)        Organization and Qualification.  The Company is a corporation, duly incorporated, validly existing and in good standing under the laws of the State of Delaware, with the requisite corporate power and authority to own and use its properties and assets and to carry on its business as currently conducted.  The Company has no subsidiaries other than as set forth on Schedule 3.1(a) attached hereto (collectively, the “Subsidiaries”).  Each of the Subsidiaries is a corporation, duly incorporated, validly

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                        (i)         Birchington understands and acknowledges that (A) the Shares acquired pursuant to this Agreement and any Escrow Shares acquired pursuant to the Escrow Agreement have not been registered under the Securities Act, are being sold in reliance upon an exemption from registration afforded by Regulation S and that such Shares and Escrow Shares have not been registered with any state securities commission or authority; (B) pursuant to the requirements of Regulation S, the Shares and Escrow Shares may not be transferred, sold or otherwise exchanged unless in compliance with the provisions of Regulation S and/or pursuant to registration under the Securities Act, or pursuant to an available exemption thereunder; and (C) other than as set forth in this Agreement between the Company and Birchington, the Company is under no obligation to register the Shares or the Escrow Shares under the Securities Act or any state securities law, or to take any action to make any exemption from any such registration provisions available.

                        (ii)        Birchington (A) is not a U.S. person and is not acquiring the Shares or Escrow Shares, if any, for the account of any U.S. person; (B) if a corporation, it is not organized or incorporated under the laws of the United States; (C) if a corporation, no director or executive officer is a national or citizen of the United States; and (D) it is not otherwise deemed to be a “U.S. Person” within the meaning of Regulation S.

                        (iii)       Birchington was not formed specifically for the purpose of acquiring the Shares purchased pursuant to this Agreement or for acquiring the Escrow Shares pursuant to the Escrow Agreement.

                        (iv)       Birchington is purchasing the Shares and acquiring the Escrow Shares, if any, for its own account and risk and not for the account or benefit of a U.S. Person as defined in Regulation S and no other person has any interest in or participation in the Shares or Escrow Shares or any right, option, security interest, pledge or other interest in or to the Shares or Escrow Shares.  Birchington understands, acknowledges and agrees that it must bear the economic risk of its investment in the Shares for an indefinite period of time and that prior to any such offer or sale, the Company may require, as a condition to effecting a transfer of the Shares or the Escrow

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Shares, an opinion of counsel, acceptable to the Company, as to the registration or exemption therefrom under the Securities Act and any state securities laws, if applicable.

                        (v)        Birchington will, after the expiration of the Restricted Period, as set forth under Regulation S Rule 903(b)(3)(iii)(A), offer, sell, pledge or otherwise transfer the Shares or the Escrow Shares, if any, only in accordance with Regulation S, or pursuant to an available exemption under the Securities Act and, in any case, in accordance with applicable state securities laws.  The transactions contemplated by this Agreement have neither been pre-arranged with a purchaser who is in the United States or who is a U.S. Person, nor are they part of a plan or scheme to evade the registration provisions of the United States federal securities laws.

                        (vi)       The offer leading to the sale evidenced hereby was made in an “offshore transaction.”  For purposes of Regulation S, Birchington understands that an “offshore transaction” as defined under Regulation S is any offer or sale not made to a person in the United States and either (A) at the time the buy order is originated, the purchaser is outside the United States, or the seller or any person acting on his behalf reasonably believes that the purchaser is outside the United States; or (B) for purposes of (1) Rule 903 of Regulation S, the transaction is executed in, or on or through a physical trading floor of an established foreign exchange that is located outside the United States or (2) Rule 904 of Regulation S, the transaction is executed in, on or through the facilities of a designated offshore securities market, and neither the seller nor any person acting on its behalf knows that the transaction has been prearranged with a buyer in the United States.

                        (vii)      Neither Birchington nor any Affiliate of Birchington or any Person acting on its behalf, has made or is aware of any “directed selling efforts” in the United States, which is defined in Regulation S to be any activity undertaken for the purpose of, or that could reasonably be expected to have the effect of, conditioning the market in the United States for any of the Shares being purchased hereby or Escrow Shares being acquired pursuant to the Escrow Agreement.

                        (viii)     Birchington understands that the Company is the seller of the Shares which are the subject of this Agreement and the Escrow Shares which are the subject of the Escrow Agreement, and that, for purpose of Regulation S, a “distributor” is any underwriter, dealer or other person who participates, pursuant to a contractual arrangement, in the distribution of securities offered or sold in reliance on Regulation S and that an “affiliate” is any partner, officer, director or any person directly or indirectly controlling, controlled by or under common control with any person in question.  Birchington agrees that it will not, during the Restricted Period set forth under Rule 903(b)(iii)(A), act as a distributor, either directly or though any affiliate, nor shall it sell, transfer, hypothecate or otherwise convey the Shares or the Escrow Shares other than to a non-U.S. Person.

          The Company acknowledges and agrees that Birchington makes no representations or warranties with respect to the transactions contemplated hereby other than those specifically set forth in this Section 3.2.

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ARTICLE IV
OTHER AGREEMENTS OF THE PARTIES

4.1       Manner of Offering.  The Securities are being issued pursuant to Section 4(2) of the Securities Act and Regulation S thereunder.  The Birchington Consideration Shares are being issued pursuant to Section 4(2) of the Securities Act.

4.2       Notice of Certain Events.  The Company shall, on a continuing basis, as long as Birchington owns any of the Shares or the Escrow Shares, (i) advise Birchington promptly after obtaining knowledge of, and, if requested by Birchington, confirm such advice in writing, of (A) the issuance by any state securities commission of any stop order suspending the qualification or exemption from qualification of the Shares or the Escrow Shares, for offering or sale in any jurisdiction, or the initiation of any proceeding for such purpose by any state securities commission or other regulatory authority, or (B) any event that makes any statement of a material fact made by the Company in Section 3.1 or in the Disclosure Documents untrue or that requires the making of any additions to or changes in Section 3.1 or in the Disclosure Documents in order to make the statements therein, in each case at the time such Disclosure Documents were delivered to Birchington and in the light of the circumstances under which they were made, not misleading, (ii) use its best efforts to prevent the issuance of any stop order or order suspending the qualification or exemption from qualification of the Securities under any state securities or Blue Sky laws, and (iii) if at any time any state securities commission or other regulatory authority shall issue an order suspending the qualification or exemption from qualification of the Securities under any such laws, use its best efforts to obtain the withdrawal or lifting of such order at the earliest possible time.

4.3       Blue Sky Laws.  The Company shall cooperate with Birchington in connection with obtaining an exemption from registration of the Shares and Escrow Shares under the securities or Blue Sky laws of such jurisdictions as Birchington may request; provided, however, that the Company shall be not required in connection therewith to qualify as a foreign corporation where it is not now so qualified.  The Company agrees that it will execute all necessary documents and pay all necessary state filing or notice fees to enable the Company to sell the Shares and Escrow Shares to Birchington.

4.4          Integration.  The Company shall not and shall use its best efforts to ensure that no Affiliate shall sell, offer for sale or solicit offers to buy or otherwise negotiate in respect of any security (as defined in Section 2 of the Securities Act) that would be integrated with the offer or sale of the Securities in a manner that would require the registration under the Securities Act of the sale of the Securities to Birchington.

4.5       Furnishing of Rule 144(c) Materials.  The Company shall, for so long as any of the Securities remain outstanding and during any period in which the Company is no longer subject to Section 13 or 15(d) of the Exchange Act, make available to any registered holder of the Securities (“Holder” or “Holders”) in connection with any sale

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4.9    Indemnification.

          (a)        Indemnification

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arising out of, or relating to, a breach or breaches of any representation, warranty, covenant or agreement by Birchington under this Agreement or any of the other Transaction Documents.

          (b)        Conduct of Indemnification Proceedings.  If any Proceeding shall be brought or asserted against any Person entitled to indemnity hereunder (an “Indemnified Party”), such Indemnified Party promptly shall notify the Person from whom indemnity is sought (the “Indemnifying Party”) in writing, and the Indemnifying Party shall assume the defense thereof, including the employment of counsel reasonably satisfactory to the Indemnified Party and the payment of all fees and expenses incurred in connection with defense thereof; provided, that the failure of any Indemnified Party to give such notice shall not relieve the Indemnifying Party of its obligations or liabilities pursuant to this Agreement, except (and only) to the extent that it shall be finally determined by a court of competent jurisdiction (which determination is not subject to appeal or further review) that such failure shall have proximately and materially adversely prejudiced the Indemnifying Party.

            An Indemnified Party shall have the right to employ separate counsel in any such Proceeding and to participate in, but not control, the defense thereof, but the fees and expenses of such counsel shall be at the expense of such Indemnified Party or Parties unless: (1) the Indemnifying Party has agreed to pay such fees and expenses; or (2) the Indemnifying Party shall have failed promptly to assume the defense of such Proceeding and to employ counsel reasonably satisfactory to such Indemnified Party in any such Proceeding; or (3) the named parties to any such Proceeding (including any impleaded parties) include both such Indemnified Party and the Indemnifying Party, and such Indemnified Party shall have been advised by counsel that a conflict of interest is likely to exist if the same counsel were to represent such Indemnified Party and the Indemnifying Party (in which case, if such Indemnified Party notifies the Indemnifying Party in writing that it elects to employ separate counsel at the expense of the Indemnifying Party, the Indemnifying Party shall not have the right to assume the defense of the claim against the Indemnified Party but will retain the right to control the overall Proceedings out of which the claim arose and such counsel employed by the Indemnified Party shall be reasonably acceptable to the Indemnifying Party and shall be at the expense of the Indemnifying Party).  The Indemnifying Party shall not be liable for any settlement of any such Proceeding effected without its written consent.  No Indemnifying Party shall, without the prior written consent of the Indemnified Party, effect any settlement of any pending Proceeding in respect of which any Indemnified Party is a party, unless such settlement includes an unconditional release of such Indemnified Party from all liability on claims that are the subject matter of such Proceeding, provided, however, the Indemnifying Party may settle or compromise any asserted liability without the consent of the Indemnitee so long as such settlement or compromise releases the Indemnitee and does not include any admission or statement of fault against the Indemnitee. 

            All fees and expenses of the Indemnified Party to which the Indemnified Party is entitled hereunder (including reasonable fees and expenses to the extent incurred in connection with investigating or preparing to defend such Proceeding in a manner not

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            No right of indemnification under this Section shall be available as to a particular Indemnified Party if there is a non-appealable final judicial determination that such Losses arise solely or substantially out of the negligence or bad faith of such Indemnified Party in performing the obligations of such Indemnified Party under this Agreement or a breach by such Indemnified Party of its obligations under this Agreement.

          (c)        Contribution.  If a claim for indemnification under this Section is unavailable to an Indemnified Party or is insufficient to hold such Indemnified Party harmless for any Losses in respect of which this Section would apply by its terms (other than by reason of exceptions provided in this Section), then each Indemnifying Party, in lieu of indemnifying such Indemnified Party, shall contribute to the amount paid or payable by such Indemnified Party as a result of such Losses in such proportion as is appropriate to reflect the relative benefits received by the Indemnifying Party on the one hand and the Indemnified Party on the other and the relative fault of the Indemnifying Party and Indemnified Party in connection with the actions or omissions that resulted in such Losses as well as any other relevant equitable considerations.   The relative fault of such Indemnifying Party and Indemnified Party shall be determined by reference to, among other things, whether there was a judicial determination that such Losses arise in part out of the negligence or bad faith of the Indemnified Party in performing the obligations of such Indemnified Party under this Agreement or the Indemnified Party’s breach of its obligations under this Agreement.  The amount paid or payable by a party as a result of any Losses shall be deemed to include any attorneys’ or other fees or expenses incurred by such party in connection with any Proceeding to the extent such party would have been indemnified for such fees or expenses if the indemnification provided for in this Section was available to such party.

          (d)       Non-Exclusivity.  The indemnity and contribution agreements contained in this Section are in addition to any obligation or liability that the Indemnifying Parties may have to the Indemnified Parties.

4.10     Notice and Consultation Before Securities Issuance.  Until such time as Birchington shall have sold all of the Shares or the Escrow Shares, the Company shall not offer or issue any equity, equity equivalent security or debt that with a floating conversion price, or any equity lines of credit (the “New Securities”), without first giving thirty (30) days notice thereof to Birchington and thereafter consulting in good faith with Birchington concerning such issuance. After such consultation between the Company and Birchington, the Company may offer or sell the New Securities on such terms and conditions as the Company deems appropriate.  Birchington shall keep all information concerning the New Securities confidential and shall not trade any of the Company’s securities until information about the New Securities is publicly disclosed or the Company advises Birchington that it has determined not to issue the New Securities.

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ARTICLE V
MISCELLANEOUS

5.1    Fees and Expenses.  Except as set forth in this Agreement each party shall pay the fees and expenses of its advisers, counsel, accountants and other experts, if any, and all other expenses incurred by such party incident to the negotiation, preparation, execution, delivery and performance of this Agreement.  The Company shall pay all stamp and similar taxes and duties levied in connection with the issuance of the Shares pursuant hereto and the issuance and transfer of the Escrow Shares under the Escrow Agreement.  Birchington shall be responsible for any taxes (other than income taxes) payable by Birchington that may arise as a result of the investment hereunder or the transactions contemplated by this Agreement or any other Transaction Document. The Company agrees to pay Birchington’s counsel $7,500.00 for legal fees and disbursements associated with the transactions contemplated by this Agreement.  The Company shall pay (i) all costs, expenses, fees and all taxes incident to and in connection with:  (A) the issuance and delivery of the Securities, (B) the exemption from registration of the Securities for offer and sale to Birchington under the securities or Blue Sky laws of the applicable jurisdiction, (C) the preparation of certificates for the Securities (including, without limitation, printing and engraving thereof), and (D) all fees and expenses of counsel and accountants of the Company.

5.2       Entire Agreement.  This Agreement, together with all of the Exhibits and Schedules annexed hereto, and any other Transaction Document contains the entire understanding of the parties with respect to the subject matter hereof and supersede all prior agreements and understandings, oral or written, with respect to such matters.  This Agreement shall be deemed to have been drafted and negotiated by both parties hereto and no presumptions as to interpretation, construction or enforceability shall be made by or against either party in such regard.

5.3       Notices.  Any notice, request, demand, waiver, consent, approval, or other communication which is required or permitted to be given to any party hereunder shall be in writing and shall be deemed to have been duly given only if delivered to the party personally or sent to the party by facsimile upon electronic confirmation and receipt (promptly followed by a hard-copy delivered in accordance with this Section 5.3) or three days after being mailed by registered or certified mail (return receipt requested), with postage and registration or if sent by nationally recognized overnight courier, one day after being mailed certification fees thereon prepaid, addressed to the party at its address set forth below:

                        If to Company:           ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
                                                          Material Technologies, Inc
                                                          ▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇., ▇▇▇▇▇ ▇▇▇
                                                          ▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
                                                          Attn: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
                                                          Tel: (▇▇▇) ▇▇▇-▇▇▇▇
                                                          Fax: (▇▇▇) ▇▇▇-▇▇▇▇

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ARTICLE VI
LEGAL FEES AND DEFAULT INTEREST RATE

            In the event any party hereto commences legal action to enforce its rights under this Agreement or any other Transaction Document, the non-prevailing party shall pay all reasonable costs and expenses (including but not limited to reasonable attorney’s fees, account’s fees, appraiser’s fees and investigative fees) incurred in enforcing such rights.  In the event of an uncured default by any party hereunder, interest shall accrue on all unpaid amounts due the aggrieved party at the rate of fifteen percent (15%) per annum, compounded annually. 

[   SIGNATURE PAGE FOLLOWS   ]

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Schedule 3.1(a)

Subsidiaries

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Schedule 3.1(c)

Capitalization and Registration Rights

Schedule 3.1(d)

Equity and Equity Equivalent Securities

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Schedule 3.1(e)

Conflicts

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Schedule 3.1(f)

Consents and Approvals

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Schedule 3.1(g)

Litigation

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Schedule 3.1(h)

Defaults and Violations

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EXHIBIT A

MATERIAL TECHNOLOGIES, INC. (“COMPANY”)

OFFICER’S CERTIFICATE

            I, ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, being the CEO of Material Technologies, Inc. a Delaware corporation (the “Company”), pursuant to Section 2.2(a)(ii) of that certain Stock Purchase Agreement (the “Purchase Agreement”), dated as of 7 April, 2005, by and between the Company and Birchington Investments Limited, do hereby certify on behalf of the Company that attached hereto is a copy of the resolutions duly adopted by the Board of Directors of the Company authorizing the Company to execute and deliver the Transaction Documents, as such term is defined in the Purchase Agreement and to enter into the transactions contemplated thereby.

            IN WITNESS WHEREOF, I have executed this Officer’s Certificate on behalf of the Company this 7^th day of April, 2005.

Material Technologies, Inc. (“Company”)


By:                                                     
       ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, CEO

▇-▇

▇▇▇▇▇▇▇ ▇

▇▇▇▇▇ ▇, ▇▇▇▇

▇▇▇▇▇▇▇▇▇▇▇ Investments Limited
Suite 621 (1/2)
Europort, Gibraltar
Attention: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇

                        Re:      Material Technologies, Inc.

Ladies and Gentlemen:

            We have acted as counsel to Material Technologies, Inc., a Delaware corporation (the “Company”), in connection with the Stock Purchase Agreement, dated as of April 7, 2005, between you and the Company (the “Purchase Agreement”), and the transactions contemplated thereby.  Capitalized terms used and not otherwise defined herein shall have the respective meanings given to such terms in the Purchase Agreement.

            In addition to the Transaction Documents, we have examined such other documents, records and legal matters as in our judgment are necessary or appropriate to enable us to render the opinions expressed below, including, without limitation, the Company’s certificate of incorporation and by-laws, each as in effect on the date hereof (the “Certificate of Incorporation” and the “By-Laws,” respectively). We have also relied on the certificates furnished by officers of the Company as of the date hereof.  We have, without independent verification, relied upon and assumed the accuracy of such certificates as to factual matters and have not attempted to verify independently the statements contained therein; however, nothing has come to our attention that would cause us to question the accuracy of such statements.

            We have also relied, without independent verification, on the representations and warranties as to factual matters of the Company and Birchington Investments Limited contained in the Purchase Agreement and on certificates of governmental officials.  In all such examinations, we have assumed:  (i) the genuineness of signatures of all persons other than the signatures of persons signing on behalf of the Company; (ii) the authenticity of all documents submitted to us as originals; (iii) the validity of all applicable laws, statutes, ordinances, rules and regulations, and the proper indexing and accuracy of all records and documents which are public records; and (iv) the conformity to authentic original documents of all documents submitted to us as certified, conformed or photostatic copies.

            Based upon the foregoing and subject to the assumptions, limitations, qualifications and exceptions stated herein, we are of the opinion that as of the date hereof:

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            (b)        The Company has the requisite corporate power and authority to enter into and to consummate the transactions contemplated by each of the Transaction Documents, and to otherwise carry out its obligations thereunder.  The execution and delivery of each of the Transaction Documents by the Company and the consummation by it of the transactions contemplated thereby have been duly authorized by all necessary action on the part of the Company.  Each of the Transaction Documents has been duly executed and delivered by the Company and constitutes the valid and binding obligation of the Company enforceable against the Company in accordance with its terms, except as such enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium, liquidation or similar laws relating to, or affecting generally the enforcement of, creditors’ rights or by other equitable principles of general application.

            (c)        No shares of the Common Stock are entitled to statutory preemptive or similar contractual rights known to such counsel.  To our knowledge, except as specifically disclosed in Schedule 3.1(c) to the Purchase Agreement, there are no outstanding options, warrants, script rights to subscribe to, registration rights, calls or commitments of any character whatsoever relating to, or securities, rights or obligations convertible into or exchangeable for, or giving any person any right to subscribe for or acquire, any shares of Common Stock, or contracts, commitments, understandings, or arrangements by which the Company or any Subsidiary is or may become bound to issue additional shares of Common Stock, or securities or rights convertible or exchangeable into shares of Common Stock, except as otherwise provided in the Purchase Agreement.

            (d)       To our knowledge, other than the Required Approvals, neither the Company nor any Subsidiary is required to obtain any consent, waiver, authorization or order of, or make any filing or registration with, any court of other federal, state, local or other governmental authority or other person in connection with the execution, delivery and performance by the Company of the Transaction Documents, the absence of which could reasonably be expected to have a Material Adverse Effect.

            (e)        The execution and delivery of the Transaction Documents by the Company and its performance of and compliance with the terms of the Transaction Documents, including, without limitation, the issuance of the Shares and the issuance of the Escrow Shares under the Escrow Agreement do not violate any provision of the Articles of Incorporation or the By-Laws or, to our knowledge, any provision of any applicable federal or state law, rule or regulation, which could reasonably be expected to

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            These opinions are limited to the matters expressly stated herein and are rendered solely for your benefit and may not be quoted or relied upon for any other purpose or by any other person.

            The opinions expressed herein are subject to the following assumptions, limitations, qualifications and exceptions:

            (a)        We have assumed that Birchington subscribing to the Transaction Documents has the legal right, capacity and power to enter into and perform all of its obligations under each of the Transaction Documents.  Furthermore, we have assumed the due authorization by Birchington of all requisite action and the due execution and delivery of the Transaction Documents, and that the Transaction Documents are the valid and binding agreements of Birchington enforceable against it in accordance with their respective terms, except as such enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium, liquidation or similar laws relating to, or affecting generally the enforcement of, creditors’ rights or by other equitable principles of general application.

            (b)        Our opinions on the binding effect and enforceability of any obligation are subject to limitations resulting from the effects of (i) bankruptcy, insolvency, reorganization, receivership, moratorium, fraudulent conveyance, arrangement and assignment for the benefit of creditors laws and similar laws or judicially developed doctrines, and (ii) general principles of equity, whether applied by a court of law or equity.

            (c)        We disclaim any opinion as to (i) any provisions in any documents which purport to waive any procedural due process rights and (ii) any provisions relating to choice of governing law, which choice may depend upon factual circumstances and the laws of other jurisdictions.

            (d)       Enforcement of your rights and remedies may be limited by laws and judicial decisions which have imposed duties and standards of conduct (including, without limitation, obligations of good faith, fair dealing and reasonableness), and in this regard we have assumed that you will exercise your rights and remedies under the Transaction Documents, to the extent required by such laws and judicial decisions, in good faith and in circumstances and a manner which are commercially reasonable.

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            (f)        We express no opinion as to the enforceability of any remedies provided for under any of the Transaction Documents to the extent such remedies would have the effect of compensating the party entitled to the benefit of such remedies in amounts in excess of the actual loss suffered by such party.

            (g)        Whenever our opinion with respect to the existence or absence of facts is indicated to be based on our knowledge, we are referring to the actual current knowledge of partners and associates of ___________ who have had substantive involvement in the representation of the Company in connection with this transaction.  We have not undertaken any independent investigation to determine the existence or absence of such facts (and have not caused to be made any review of any court files or indices) and no inferences as to our knowledge concerning such facts should be drawn from the fact that such representation has been undertaken by us.

            (h)        Our opinions are limited to the matters expressly set forth herein and to laws and facts existing on the date hereof and no opinion is to be implied or inferred beyond the matters expressly so stated.

            (i)         We note that we are members of the bar of the State of _________.  To the extent that the governing law with respect to any matters covered by this opinion is the law of any jurisdiction other than the state of ________, the [State General Corporation Law], the securities laws of any state or the federal securities law of the United States, we have assumed that the law of such other jurisdiction is identical to ______________.

            (j)         In furnishing the opinion regarding the valid existence and good standing of the Company and its Subsidiaries and the qualification of the Company and its Subsidiaries to do business, we have relied solely upon the good standing certificates attached to this opinion.

            This opinion is given as of the date hereof and we assume no obligation to update or supplement this opinion to reflect any facts or circumstances which may hereafter come to our attention or any changes in laws which may hereafter occur.

Very truly yours,

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EXHIBIT C

ESCROW AGREEMENT

ESCROW AGREEMENT (this “Agreement”), dated as of 7^th April, 2005, by and between Material Technologies, Inc.,  “Company”), a Delaware corporation with its principal place of business at ▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇., ▇▇▇▇▇ ▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ (the “Company”);  Gottbetter & Partners, LLP with its principal place of business at ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇ (the “Escrow Agent”); and Birchington Investments Limited, a corporation organized under the laws of the Territory of the British Virgin Islands with its offices at c/o Quijano & Associates BVI Limited, PO Box 313, Road Town, Tortola, British Virgin Islands (“Birchington”).

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