matechexh10_18.htm


    
      
        
 

    

     

    Exhibit 10.18

     

     

    ESCROW
AGREEMENT


     

               
This Escrow Agreement (this “Agreement”) is dated as of October 27, 2006, by and
between Material Technologies, Inc., a Delaware corporation (“MaTech”), on the
one hand, Palisades Capital, LLC (“Palisades”), Hyde Investments, Ltd. (“Hyde”),
and Livingston Investments, Ltd. (“Livingston” and together with Palisades and
Hyde, the “Debenture Holders”), on the other hand, and The Lebrecht Group, APLC
(the “Agent”), as escrow agent.  Each of MaTech and the Debenture Holders
shall be referred to as a “Party” and collectively as the
“Parties.”

     

    I.         
Escrow

     

               
1.01     Appointment
and Acknowledgment of Escrow Agent.

     

               
MaTech and the Debenture Holders hereby appoint the Agent, and the Agent hereby
agrees to serve, as Escrow Agent pursuant to the terms of this Agreement. 
The Agent acknowledges, or upon its receipt will acknowledge, the
following:

     

                           
(a)        MaTech will deposit a number of
shares equal to 9.99% of its issued and outstanding Class A Common Stock (the
“Shares”) into a brokerage account in the name of Agent at Empire
Securities.  If at any time the number of Shares held by the Agent pursuant
to this Agreement represents less than 9.99% of the MaTech issued and
outstanding common stock, then within ten (10) calendar days MaTech will deposit
more shares with the Agent so that the number of shares held by Agent pursuant
to this Agreement is approximately 9.99% of MaTech’s issued and outstanding
Class A Common Stock.

     

                           
(b)        MaTech and the Debenture Holders
will deposit with the Agent a signed copy of those certain Class A Senior
Secured Convertible Debentures, as amended, with a combined outstanding
principal and interest amount of $2,108,290.13 as of October 15, 2006 (the
“Debentures”).

     

               
The properties described in Sections 1.01(a) and 1.01(b) collectively are
referred to as the “Escrowed Property.”  If the Escrowed Property includes
property on which dividends are paid, on which interest is earned, or to which
other accretions are added, then the Escrowed Property shall include such
dividends, interest, or accretions.  If the Escrowed Property consists of
stock, the stock shall not be considered issued and outstanding until such time
as it is released pursuant to this Agreement.

     

               
1.02     Operation
of Escrow.

     

               
The Parties hereto agree that the escrow created by this Agreement (the
“Escrow”) shall operate as follows:

     

                           
(a)        Upon receipt of a notice of
conversion executed by any of the Debenture Holders, or its duly authorized
representative, which converts all or a portion 




    
      
         

      

      
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of any of
the Debentures (a “Conversion Notice”), the Agent shall (i) confirm the accuracy
of the numbers contained in the Conversion Notice, (ii) provide a copy of the
Conversion Notice to MaTech within two (2) business days of receipt, and (iii)
cause that number of Shares so issuable as set forth in the Conversion Notice to
be electronically transferred or journaled to the recipient designated in such
Conversion Notice within three (3) business days of receipt.

       

                             
(b)        Upon the repayment or conversion
in full of the Debentures, the Agent shall return any Shares then in its
possession to MaTech for cancellation.

       

                             
(c)        Any holder of the Debentures may cancel
this Agreement, solely as it pertains to those Debentures held by the cancelling
Debenture Holder, by providing written notice to the Agent.  Upon such
cancellation, the Agent shall return to such Debenture Holder or its designated
representative the copy of the Debenture owned by such Debenture
Holder.

       

                 
1.03     Further
Provisions Relating to the Escrow.

       

                             
(a)        Distributions by the Agent in
accordance with the terms of this Agreement shall operate to divest all right,
title, interest, claim, and demand, either at law or in equity, of any party to
this Agreement (other than the distributee) in and to the Escrowed Property
distributed and shall be a perpetual bar both at law and in equity with respect
to such distributed Escrowed Property against the parties to this Agreement and
against any person claiming or attempting to claim such distributed escrowed
property from, through, or under such party.

       

                             
(b)        MaTech agrees to reimburse the
Agent for the Agent’s reasonable fees and other expenses (including brokerage
fees and expenses, postage and mailing costs, legal fees and expenses) incurred
by the Agent in connection with its duties hereunder.

       

                             
(c)        MaTech and the Debenture Holders,
jointly and severally, agree to indemnify and hold harmless the Agent against
and in respect of any and all claims, suits, actions, proceedings (formal or
informal), investigations, judgments, deficiencies, damages, settlements,
liabilities, and legal and other expenses (including legal counsel fees and
expenses of attorneys chosen by the Agent) as and when incurred and whether or
not involving a third party arising out of or based upon any act, omissions,
alleged act, or alleged omission by the Agent or any other cause, in any case in
connection with the acceptance of, or the performance or nonperformance by the
Agent of, any of the Agent’s duties under this Agreement, except as a result of
the Agent’s bad faith or gross negligence or willful breach of this
Agreement.  The Agent shall be fully protected by acting in reliance upon
any notice, advice, direction, other document, or signature believed by the
Agent to be genuine, by assuming that any person purporting to give the Agent
any notice, advice, direction, or other document in accordance with the
provisions hereof, in connection with this Agreement, or in connection with the
Agent’s duties under this Agreement, has been duly authorized so to do, or by
acting or failing to act in good



    

    
      
         

      

      
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    faith on the
advice of any counsel retained by the Agent, which may be The Lebrecht Group,
APLC.  The Debenture Holders, and each of them, acknowledges that The
Lebrecht Group, APLC acts as counsel to MaTech and may continue to serve in that
capacity, and neither anything contained herein, the execution or delivery
hereof by the Agent, nor the performance by the Agent of its duties hereunder
shall in any way affect or require termination of such relationship with
MaTech.  The Agent shall not be liable for any mistake of fact or of law or
any error of judgment, or for any act or any omission, except as a result of the
Agent’s bad faith or gross negligence or willful breach of this Agreement. 
If any of the Escrowed Property is represented by stock certificates, the Agent
shall not be liable if the Agent submits all or a portion of the Escrowed
Property to be broken into smaller denominations to the appropriate transfer
agent, and such transfer agent fails to return properly that portion of the
Escrowed Property to the Agent which such transfer agent was instructed to
return.

     

                           
(d)        The Agent makes no representation
as to the validity, value, genuineness, or the collectibility of any security or
other document or instrument held by or delivered to the Agent.

     

                           
(e)        The Agent shall have no duties or
responsibilities except those expressly set forth herein.  The Parties
hereto agree that the Agent will not be called upon to construe any contract or
instrument.  The Agent shall not be bound by any notice of a claim, or
demand with respect thereto, or any waiver, modification, amendment,
termination, cancellation, or revision of this Agreement, unless in writing and
signed by the other Parties hereto and received by the Agent and, if the Agent’s
duties as Escrow Agent hereunder are affected, unless the Agent shall have given
its prior written consent thereto.  The Agent shall not be bound by any
assignment by MaTech or the Debenture Holders of its rights hereunder unless the
Agent shall have received written notice thereof from the assignor.  The
Agent is authorized to comply with and obey laws, rules, regulations, orders,
judgments, and decrees of any governmental authority, court, or other
tribunal.  If the Agent complies with any such law, rule, regulation,
order, judgment, or decree, the Agent shall not be liable to any of the Parties
hereto or to any other person even if such law, rule, order, regulation,
judgment, or decree is subsequently reversed, modified, annulled, set aside,
vacated, found to have been entered without jurisdiction, or found to be in
violation of or beyond the scope of a constitution or a law.

     

                           
(f)         If the Agent shall be
uncertain as to the Agent’s duties or rights hereunder, shall receive any
notice, advice, direction, or other document from any other party with respect
to the Escrowed Property which, in the Agent’s opinion, is in conflict with any
of the provisions of this Agreement, or should be advised that a dispute has
arisen with respect to the payment, ownership, or right of possession of the
Escrowed Property or any part thereof, or the property to be exchanged for the
Escrowed Property (or as to the delivery, non-delivery, or content of any
notice, advice, direction, or other document), the Agent shall be entitled,
without liability to anyone, to refrain from taking any action other than to use
the Agent’s reasonable efforts to keep safely the Escrowed Property until the
Agent shall be directed otherwise in writing by both other parties hereto or by
an order, decree, or judgment of a court of competent jurisdiction which has


    
 


    
      
         

      

      
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    been finally
affirmed on appeal or which by lapse of time or otherwise is no longer subject
to appeal (a “Final Judgment”), but the Agent shall be  under no duty to
institute or to defend any proceeding, although the Agent may, in the Agent’s
discretion and at the expense of MaTech as provided in Section 1.03(c),
institute or defend such proceedings.

     

                           
(g)        The Agent (and any successor
escrow agent or agents) reserves the right to resign as the Escrow Agent at any
time, provided fifteen (15) days’ prior written notice is given to the other
parties hereto, and provided further that a mutually acceptable successor Escrow
Agent(s) is named within such fifteen (15) day period.  The Agent may, but
is not obligated to, petition any court in the State of California having
jurisdiction to designate a successor Escrow Agent.  The resignation of the
Agent (and any successor escrow agent or agents) shall be effective only upon
delivery of the Escrowed Property to the successor escrow agent(s).  The
Parties reserve the right to jointly remove the Escrow Agent at any time,
provided fifteen (15) days’ prior written notice is given to the Escrow
Agent.  If no successor Escrow Agent has been appointed and has accepted
the Escrowed Property within fifteen (15) days after the Notice is sent, all
responsibilities of the Agent hereunder shall, nevertheless, case.  The
Agent’s sole responsibility thereafter shall be to use the Agent’s reasonable
efforts to keep safely the Escrowed Property and to deliver the Escrowed
Property as may be directed in writing by both of the other parties hereto or by
a Final Judgment.  Except as set forth in this Section 1.03(g), this
Agreement shall not otherwise be assignable by the Agent without the prior
written consent of the other parties hereto.

     

                           
(h)        MaTech and the Debenture Holders
authorize the Agent, if the Agent is threatened with litigation or is sued, to
interplead all interested parties in any court of competent jurisdiction and to
deposit the Escrowed Property with the clerk of that court.

     

                           
(i)        The Agent’s responsibilities and
liabilities hereunder, except as a result of the Agent’s own bad faith or gross
negligence, will terminate upon the delivery by the Agent of al the Escrowed
Property under any provision of this Agreement.

     

                           
(j)        As consideration for acting
as escrow agent hereunder, MaTech shall pay, in advance and as a condition
precedent to the establishment of the Escrow pursuant to the terms of this
Agreement, a fee to the Agent equal to $5,000.00.  This fee shall be deemed
to have been earned in full by the Agent upon establishment of the Escrow, and
shall not be subject to pro-ration or other setoff in the event the Escrow is
terminated by any party.

     

                           
(k)       Notwithstanding anything in this
Agreement to the contrary, Agent shall not have the right to transfer all or any
portion of the Debentures to any third party, or to Matech, for any reason
without the written consent of the Holder of such Debenture to be
transferred.




    
      
         

      

      
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    II.        
Miscellaneous

     

               
2.01     Further
Action.

     

               
At any time and from time to time, MaTech and the Debenture Holders each agrees,
at its own expense, to take such actions and to execute and deliver such
documents as may be reasonably necessary to effectuate the purposes of this
Agreement.  If any portion of the Escrowed Property consists of stock
certificates, MaTech shall pay any transfer tax arising out of the placing of
the Escrowed Property into the Escrow, the delivery of the Escrowed Property out
of the Escrow, or the transfer of the Escrowed Property into the name of any
person or entity pursuant to the terms of this Agreement.  The Agent shall
have no liability regarding transfer taxes even if one or both of the Parties
hereto fails to comply with the obligations set forth in the prior
sentence.

     

               
2.02     Survival.

     

               
Subject to Section 1.03(i), the covenants, agreements, representations, and
warranties contained in or made pursuant to this Agreement shall survive the
delivery by the Agent of the Escrowed Property, irrespective of any
investigation made by or on behalf of any party.

     

               
2.03     Modification.

     

               
This Agreement sets forth the entire understanding of the parties with respect
to the subject matter hereof, supersedes all existing agreements among them
concerning such subject matter, and (subject to Section 1.03(e)) may be modified
only by a written instrument duly executed by each party.

     

               
2.04     Notices.

     

               
Any notice, advice, direction, or other document or communication required or
permitted to be given hereunder shall be in writing and shall be mailed by
certified mail, return receipt requested, or by Federal Express, Express Mail,
or similar overnight delivery or courier service or delivered (in person or by
facsimile) against receipt to the party to whom it is to be given at address of
such party set forth below (or to such other address as the party shall have
furnished in writing in accordance with the provisions of this Section 2.04)
with a copy to each of the other parties hereto:

     

    
      	 	If to
      MaTech:	
              Material
      Technologies, Inc.

              11661 San
      Vicente Boulevard, Suite 707

              Los Angeles,
      CA  90049 

              Attn: 
      Robert M. Bernstein, President

              Facsimile
      (310) 473-3177

            


    

     

     

    
      
         

      

      
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        	 	If to the
      Debenture Holders: 	
                c/o Corporate
      Legal Services, LLP

                2224 Main
      Street

                Santa Monica,
      California 90405

                Facsimile:
      (310) 396-3290 

              
	 	 	 
	 	If to
      Agent: 	
                The Lebrecht
      Group, APLC 

                9900 Research
      Drive

                Irvine,
      CA  92618

                Attn: 
      Brian A. Lebrecht, Esq.

                Facsimile
      (949) 635-1244

              


      

       

    

               
Any notice, advice, direction, or other document or communication given by
certified mail shall be deemed given at the time of receipt thereof.  Any
notice given by other means permitted by this Section 2.04 shall be deemed given
at the time of receipt thereof.

     

               
2.05     Waiver.

     

               
Any waiver by any party of a breach of any provision of this Agreement shall not
operate as or be construed to be a waiver of any other breach of that provision
or of any breach of any other provision of this Agreement.  The failure of
a party to insist upon strict adherence to any term of this Agreement on one or
more occasions shall not be considered a waiver or deprive that party of the
right thereafter to insist upon strict adherence to that term or any other term
of this Agreement.  Any waiver must be in writing.

     

               
2.06     Binding
Effect.

     

               
Subject to Section 1.03(g), the provisions of this Agreement shall be binding
upon and inure to the benefit of MaTech and the Debenture Holders and their
respective assigns, heirs, and personal representatives, and shall be binding
upon and insure to the benefit of the Agent and the Agent’s successors and
assigns.

     

               
2.07     No
Third Party Beneficiaries.

     

               
This Agreement does not create, and shall not be construed as creating, any
rights enforceable by any person not a party to this Agreement (except as
provided in Section 2.06).

     

               
2.08     Jurisdiction.

     

               
The parties hereby irrevocably consent to the jurisdiction of the courts of the
State of California and of any federal court located in such State in connection
with any action or proceeding arising out of or relating to this Agreement, and
document or instrument delivered pursuant to, in connection with, or
simultaneously with this Agreement, a breach of this Agreement or of any such
document or instrument, or the Escrowed Property.




    
      
         

      

      
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2.09     Separability.

     

               
This entire Agreement shall be void if any provision of this Agreement other
than the second and third sentences of Section 2.11 is invalid, illegal,
unenforceable, or inapplicable to any person or circumstance to which it is
intended to be applicable, except that the provisions of Section 1.03 shall
survive.

     

               
2.10     Headings.

     

               
The headings in this Agreement are solely for convenience of reference and shall
be given no effect in the construction or interpretation of this
Agreement.

     

               
2.11     Counterparts;
Governing Law.

     

               
This Agreement may be executed in any number of counterparts, each of which
shall be deemed an original, but all of which together shall constitute one and
the same instrument.  It shall be governed by and construed in accordance
with the laws of the State of California without giving effect to conflict of
laws.  Any action, suit, or proceeding arising out of, based on, or in
connection with this Agreement , any document or instrument delivered pursuant
to, in connection with, or simultaneously with this Agreement, any breach of
this Agreement or any such document or instrument, or any transaction
contemplated hereby or thereby may be brought only in the appropriate court in
Orange County, California, and each party covenants and agrees not to assert, by
way of motion, as a defense, or otherwise, in any such action, suit, or
proceeding, any claim that such party is not subject personally to the
jurisdiction of such court, that such party’s property is exempt or immune from
attachment or execution, that the action, suit, or proceeding is brought in an
inconvenient forum, that the venue of the action, suit, or proceeding is
improper, or that this Agreement or the subject matter hereof may not be
enforced in or by such court.

     

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IN WITNESS WHEREOF, the Parties have duly executed this Agreement as of the date
first written above.


     

    
      	
              “MaTech”

            	 	
              “Debenture
      Holders”

            	 
	
                

            	 	
                

            	 
	
              Material
      Technologies, Inc.

            	 	
              Palisades
      Capital, LLC

            	 
	
                 

            	 	
                  

            	 
	
                   

            	 	
                  

            	 
	
              /s/
      Robert M.
      Bernstein            
      

            	 	
              /s/ R.H.
      Breitman                                 
      

            	 
	
              By:      
      Robert M. Bernstein

            	 	
              By:      
      R.H. Breitman

            	 
	
              Its:       
      President

            	 	
              Its:       
      President

            	 
	
                 

            	 	
                 

            	 
	
                 

            	 	
                 

            	 
	
                 

            	 	
                 

            	 
	
              “Agent”

            	 	
              Hyde
      Investments, Ltd.

            	 
	
                 

            	 	
                 

            	 
	
              The
      Lebrecht Group, APLC

            	 	
                 

            	 
	
                 

            	 	
              /s/ C.
      Rykov                                        
      

            	 
	
                 

            	 	
              By:      
      C. Rykov

            	 
	
              /s/ Brian
      A.
      Lebrecht                           
      

            	 	
              Its:       
      Managing Director

            	 
	
              By:      
      Brian A. Lebrecht, Esq.

            	 	
                 

            	 
	
              Its:       
      President

            	 	
                 

            	 
	
                 

            	 	
                 

            	 
	
                 

            	 	
              Livingston
      Investments, Ltd.

            	 
	
                 

            	 	
                 

            	 
	
                 

            	 	
                 

            	 
	
                 

            	 	
              /s/ C.
      Rykov                                        
      

            	 
	
                 

            	 	
              By:      
      C. Rykov        

            	 
	
                 

            	 	
              Its:       
      Managing Director

            	 


    

     

     

     

     

     

    
      
         

      

      
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