Document:

Energy and Engine Technology Corporation Exhibit 10 Sec Agr Sub

SECURITY
AGREEMENT

(Subsidiary)

	
      1.
	
      Identification.

	 	
      This
      Security Agreement (the "Agreement"), dated as of April ____, 2005, is
      entered into by and between BMZ Generators Technology, Inc., a Florida
      corporation, Anchor Manufacturing, Inc., a Florida corporation (each
      referred to as “Debtor”), and Barbara Mittman, as collateral agent acting
      in the manner and to the extent described in the Collateral Agent
      Agreement defined below (the "Collateral Agent"), for the benefit of the
      parties identified on Schedule A hereto (collectively, the
      "Lenders").

	
      2.
	
      Recitals.

	 	
      2.1
	
      Debtor
      is a wholly-owned subsidiary of Energy & Engine Technology
      Corporation, a Nevada corporation (“Energy & Engine”). The Lenders
      have made or are making loans to Energy & Engine (the "Loans"). It is
      beneficial to Debtor that the Loans were made, are being made and will be
      made. Debtor will obtain substantial benefit from the proceeds of the
      Loans.

	 	
      2.2
	
      The
      Loans are evidenced by certain convertible promissory notes (each a
      “Convertible Note”) issued by Energy & Engine on or about the date of
      this Agreement pursuant to subscription agreements (each a “Subscription
      Agreement”) to which Debtor and Lenders are parties. The Notes are further
      identified on Schedule A hereto and were and will be executed by Debtor as
      “Borrower” or “Debtor” for the benefit of each Lender as the “Holder” or
      “Lender” thereof. Schedule
      A hereto may be amended to include such other Lenders who become parties
      hereto and sign this Agreement, the Collateral Agent Agreement and any
      other agreement reasonably requested by the Collateral Agent, who will
      have purchased Notes pursuant to the Subscription Agreement, in the
      aggregate principal amount of $500,000.

	 	
      2.3
	
      In
      consideration of the Loans made by Lenders to Energy & Engine and for
      other good and valuable consideration, and as security for the performance
      by Energy & Engine of its obligations under the Notes and as security
      for the repayment of the Loans and all other sums due from Debtor to
      Lenders arising under the Notes presently outstanding or to be
      outstanding, Subscription Agreements, and any other agreement between or
      among them (collectively, the "Obligations"), Debtor, for good and
      valuable consideration, receipt of which is acknowledged, has agreed to
      grant to the Collateral Agent, for the benefit of the Lenders, a security
      interest in the Collateral (as such term is hereinafter defined), on the
      terms and conditions hereinafter set forth. Obligations include all future
      advances by Lenders to Debtor advanced on a pro rata basis by all Lenders
      on substantially the same terms.

	 	
      2.4
	
      The
      Lenders have appointed Barbara Mittman as Collateral Agent pursuant to
      that certain Collateral Agent Agreement dated at or about April ____, 2005
      (“Collateral Agent Agreement”), among the Lenders and Collateral
      Agent.

	 	
      2.5
	
      The
      following defined terms which are defined in the Uniform Commercial Code
      in effect in the State of New York on the date hereof are used herein as
      so defined: Accounts, Chattel Paper, Documents, Equipment, General
      Intangibles, Instruments, Inventory and
Proceeds.

132

	
      3.
	
      Grant
      of General Security Interest in Collateral.

	 	
      3.1
	
      As
      security for the Obligations of Debtor, Debtor hereby grants the
      Collateral Agent, for the benefit of the Lenders, a security interest in
      the Collateral.

	 	
      3.2
	
      “Collateral”
      shall mean all of the following property of
Debtor:

	 	 	
      (A)
	
      All
      now owned and hereafter acquired right, title and interest of Debtor in,
      to and in respect of all Accounts, Goods, real or personal property, all
      present and future books and records relating to the foregoing and all
      products and Proceeds of the foregoing, and as set forth
      below:

	 	 	 	
      (i)
	
      Accounts:
      All now owned and hereafter acquired right, title and interest of Debtor
      in, to and in respect of all: Accounts, interests in goods represented by
      Accounts, returned, reclaimed or repossessed goods with respect thereto
      and rights as an unpaid vendor; contract rights; Chattel Paper; investment
      property; General Intangibles (including but not limited to, tax and duty
      claims and refunds, registered and unregistered patents, trademarks,
      service marks, certificates, copyrights trade names, applications for the
      foregoing, trade secrets, goodwill, processes, drawings, blueprints,
      customer lists, licenses, whether as licensor or licensee, chooses in
      action and other claims, and existing and future leasehold interests in
      equipment, real estate and fixtures); Documents; Instruments; letters of
      credit, bankers’ acceptances or guaranties; cash moneys, deposits;
      securities, bank accounts, deposit accounts, credits and other property
      now or hereafter owned or held in any capacity by Debtor, as well as its
      affiliates, agreements or property securing or relating to any of the
      items referred to above;

	 	 	 	
      (ii)
	
      Goods:
      All now owned and hereafter acquired right, title and interest of Debtor
      in, to and in respect of goods, including, but not limited
    to:

	 	 	 	 	
      (a)
	
      All
      Inventory, wherever located, whether now owned or hereafter acquired, of
      whatever kind, nature or description, including all raw materials,
      work-in-process, finished goods, and materials to be used or consumed in
      Debtor’ business, finished goods, timber cut or to be cut, oil, gas,
      hydrocarbons and minerals, extracted or to be extracted; and all names or
      marks affixed to or to be affixed thereto for purposes of selling same by
      the seller, manufacturer, lessor or licensor thereof and all Inventory
      which may be returned to Debtor by its customers or repossessed by Debtor
      and all of Debtor’ right, title and interest in and to the foregoing
      (including all of Debtor’ rights as a seller of
goods);

	 	 	 	 	
      (b)
	
      All
      Equipment and fixtures, wherever located, whether now owned or hereafter
      acquired, including, without limitation, all machinery, motor vehicles,
      furniture and fixtures, and any and all additions, substitutions,
      replacements (including spare parts), and accessions thereof and thereto
      (including, but not limited to Debtor’ rights to acquire any of the
      foregoing, whether by exercise of a purchase option or
      otherwise);

133

	 	 	 	
      (iii)
	
      Property:
      All now owned and hereafter acquired right, title and interests of Debtor
      in, to and in respect of any real or other personal property in or upon
      which Debtor has or may hereafter have a security interest, lien or right
      of setoff;

	 	 	 	
      (iv)
	
      Books
      and Records:
      All present and future books and records relating to any of the above
      including, without limitation, all computer programs, printed output and
      computer readable data in the possession or control of the Debtor, any
      computer service bureau or other third party;
and

	 	 	 	
      (v)
	
      Products
      and Proceeds:
      All products and Proceeds of the foregoing in whatever form and wherever
      located, including, without limitation, all insurance proceeds and all
      claims against third parties for loss or destruction of or damage to any
      of the foregoing.

	 	 	
      (B)
	
      All
      now owned and hereafter acquired right, title and interest of Debtor in,
      to and in respect of the following:

	 	 	 	
      (i)
	
      the
      shares of stock, partnership interests, member interests or other equity
      interests at any time and from time to time acquired by Debtor of any and
      all entities now or hereafter existing, all or a portion of such stock or
      other equity interests which are acquired by such entities at any time
      (such entities, together with the existing issuers, being hereinafter
      referred to collectively as the "Pledged Issuers" and individually as a
      "Pledged Issuer"), the certificates representing such shares, partnership
      interests, member interests or other interests all options and other
      rights, contractual or otherwise, in respect thereof and all dividends,
      distributions, cash, instruments, investment property and other property
      from time to time received, receivable or otherwise distributed in respect
      of or in exchange for any or all of such shares, partnership interests,
      member interests or other interests;

	 	 	 	
      (ii)
	
      all
      additional shares of stock, partnership interests, member interests or
      other equity interests from time to time acquired by Debtor, of any
      Pledged Issuer, the certificates representing such additional shares, all
      options and other rights, contractual or otherwise, in respect thereof and
      all dividends, distributions, cash, instruments, investment property and
      other property from time to time received, receivable or otherwise
      distributed in respect of or in exchange for any or all of such additional
      shares, interests or equity; and 

	 	 	 	
      (iii)
	
      all
      security entitlements of Debtor in, and all Proceeds of any and all of the
      foregoing in each case, whether now owned or hereafter acquired by Debtor
      and howsoever its interest therein may arise or appear (whether by
      ownership, security interest, lien, claim or
otherwise).

	 	
      3.3
	
      The
      Collateral Agent is hereby specifically authorized, after the Maturity
      Date (defined in the Notes) accelerated or otherwise, or after an Event of
      Default (as defined herein) and the expiration of any applicable cure
      period, to transfer any Collateral into the name of the Collateral Agent
      and to take any and all action deemed advisable to the Collateral Agent to
      remove any transfer restrictions affecting the
  Collateral.

134

	
      4.
	
      Perfection
      of Security Interest.

	 	
      4.1
	
      Debtor
      shall prepare, execute and deliver to the Collateral Agent UCC-1 Financing
      Statements. The Collateral Agent is instructed to prepare and file at
      Debtor’s cost and expense, financing statements in such jurisdictions
      deemed advisable to the Collateral Agent, including but not limited to
      Nevada and Florida. The Financing Statements are deemed to have been filed
      for the benefit of the Collateral Agent and Lenders identified on Schedule
      A hereto.

 

	 	
      4.2
	
      All
      other certificates and instruments constituting Collateral from time to
      time required to be pledged to Collateral Agent pursuant to the terms
      hereof (the "Additional Collateral") shall be delivered to Collateral
      Agent promptly upon receipt thereof by or on behalf of any of Debtor. All
      such certificates and instruments shall be held by or on behalf of
      Collateral Agent pursuant hereto and shall be delivered in suitable form
      for transfer by delivery, or shall be accompanied by duly executed
      instruments of transfer or assignment or undated stock powers executed in
      blank, all in form and substance satisfactory to Collateral Agent. If any
      Collateral consists of uncertificated securities, unless the immediately
      following sentence is applicable thereto, Debtor shall cause Collateral
      Agent (or its custodian, nominee or other designee) to become the
      registered holder thereof, or cause each issuer of such securities to
      agree that it will comply with instructions originated by Collateral Agent
      with respect to such securities without further consent by Debtor. If any
      Collateral consists of security entitlements, Debtor shall transfer such
      security entitlements to Collateral Agent (or its custodian, nominee or
      other designee) or cause the applicable securities intermediary to agree
      that it will comply with entitlement orders by Collateral Agent without
      further consent by Debtor. 

	 	
      4.3
	
      Within
      five (5) days after the receipt by Debtor of any Additional Collateral, a
      Pledge Amendment, duly executed by Debtor, in substantially the form of
      Annex I hereto (a "Pledge Amendment"), shall be delivered to Collateral
      Agent in respect of the Additional Collateral to be pledged pursuant to
      this Agreement. Debtor hereby authorizes Collateral Agent to attach each
      Pledge Amendment to this Agreement and agrees that all certificates or
      instruments listed on any Pledge Amendment delivered to Collateral Agent
      shall for all purposes hereunder constitute
Collateral.

	 	
      4.4
	
      If
      Debtor shall receive, by virtue of Debtor's being or having been an owner
      of any Collateral, any (i) stock certificate (including, without
      limitation, any certificate representing a stock dividend or distribution
      in connection with any increase or reduction of capital, reclassification,
      merger, consolidation, sale of assets, combination of shares, stock split,
      spin-off or split-off), promissory note or other instrument,
      (ii) option or right, whether as an addition to, substitution for, or
      in exchange for, any Collateral, or otherwise, (iii) dividends payable in
      cash (except such dividends permitted to be retained by Debtor pursuant to
      Section 5.2 hereof) or in securities or other property or
      (iv) dividends or other distributions in connection with a partial or
      total liquidation or dissolution or in connection with a reduction of
      capital, capital surplus or paid-in surplus, Debtor shall receive such
      stock certificate, promissory note, instrument, option, right, payment or
      distribution in trust for the benefit of Collateral Agent, shall segregate
      it from Debtor's other property and shall deliver it forthwith to
      Collateral Agent, in the exact form received, with any necessary
      endorsement and/or appropriate stock powers duly executed in blank, to be
      held by Collateral Agent as Collateral and as further collateral security
      for the Obligations.

135

	
      5.
	
      Distribution
      on Liquidation.

	 	
      5.1
	
      If
      any sum is paid as a liquidating distribution on or with respect to the
      Collateral, Debtor shall deliver same to the Collateral Agent to be
      applied to the Obligations, then due, in accordance with the terms of the
      Convertible Notes.

	 	
      5.2
	
      So
      long as no Event of Default exists, Debtor shall be entitled (i) to
      exercise all voting power pertaining to any of the Collateral, provided
      such exercise is not contrary to the interests of the Lenders and does not
      impair the Collateral and (ii) may receive and retain any and all
      dividends, interest payments or other distributions paid in respect of the
      Collateral.

	 	
      5.3.
	
      Upon
      the occurrence and during the continuation of an Event of Default, all
      rights of Debtor, upon notice given by Collateral Agent, to exercise the
      voting power and receive payments, which it would otherwise be entitled to
      pursuant to Section 5.2, shall cease and all such rights shall thereupon
      become vested in Collateral Agent, which shall thereupon have the sole
      right to exercise such voting power and receive such
    payments.

	 	
      5.4
	
      All
      dividends, distributions, interest and other payments which are received
      by Debtor contrary to the provisions of Section 5.3 shall be received in
      trust for the benefit of Collateral Agent, shall be segregated from other
      funds of Debtor, and shall be forthwith paid over to Collateral Agent as
      Collateral in the exact form received with any necessary endorsement
      and/or appropriate stock powers duly executed in blank, to be held by
      Collateral Agent as Collateral and as further collateral security for the
      Obligations.

	
      6.
	
      Further
      Action By Debtor; Covenants and Warranties.

	 	
      6.1
	
      Collateral
      Agent at all times shall have a perfected security interest in the
      Collateral. Debtor has and will continue to have full title to the
      Collateral free from any liens, leases, encumbrances, judgments or other
      claims. Collateral Agent's security interest in the Collateral constitutes
      and will continue to constitute a first, prior and indefeasible security
      interest in favor of Collateral Agent. Debtor will do all acts and things,
      and will execute and file all instruments (including, but not limited to,
      security agreements, financing statements, continuation statements, etc.)
      reasonably requested by Collateral Agent to establish, maintain and
      continue the perfected security interest of Collateral Agent in the
      Collateral, and will promptly on demand, pay all costs and expenses of
      filing and recording, including the costs of any searches reasonably
      deemed necessary by Collateral Agent from time to time to establish and
      determine the validity and the continuing priority of the security
      interest of Collateral Agent, and also pay all other claims and charges
      that, in the opinion of Collateral Agent, exercised in good faith, are
      reasonably likely to materially prejudice, imperil or otherwise affect the
      Collateral or Collateral Agent’s or Lenders’ security interests therein.
      Notwithstanding anything to the foregoing in this Section 6.1, the Debtor
      may grant a purchase money security interest in the assets to be purchased
      from Anchor Tampa, Inc. to secure its obligations under that certain
      purchase money note to be issued in connection with such acquisition in an
      amount not to exceed $137,500 for a term not longer than one (1) year, and
      shall constitute an exception to Collateral Agent’s first priority
      perfected lien on the Assets.

136

	 	
      6.2
	
      Other
      than in the ordinary course of business, and except for Collateral which
      is substituted by assets of identical or greater value or which has become
      obsolete or is of inconsequential in value, Debtor will not sell,
      transfer, assign or pledge those items of Collateral (or allow any such
      items to be sold, transferred, assigned or pledged), without the prior
      written consent of Collateral Agent other than a transfer of the
      Collateral to a wholly-owned subsidiary on prior notice to Collateral
      Agent, and provided the Collateral remains subject to the security
      interest herein described. Although Proceeds of Collateral are covered by
      this Agreement, this shall not be construed to mean that Collateral Agent
      consents to any sale of the Collateral, except as provided herein. Sales
      of Collateral in the ordinary course of business shall be free of the
      security interest of Lenders and Collateral Agent and Lenders and
      Collateral Agent shall promptly execute such documents (including without
      limitation releases and termination statements) as may be required by
      Debtor to evidence or effectuate the same.

	 	
      6.3
	
      Debtor
      will, at all reasonable times and upon reasonable notice, allow Collateral
      Agent or its representatives free and complete access to the Collateral
      and all of Debtor's records which in any way relate to the Collateral, for
      such inspection and examination as Collateral Agent reasonably deems
      necessary.

	 	
      6.4
	
      Debtor,
      at its sole cost and expense, will protect and defend this Security
      Agreement, all of the rights of Collateral Agent and Lenders hereunder,
      and the Collateral against the claims and demands of all other
      persons.

	 	
      6.5
	
      Debtor
      will promptly notify Collateral Agent of any levy, distraint or other
      seizure by legal process or otherwise of any part of the Collateral, and
      of any threatened or filed claims or proceedings that are reasonably
      likely to affect or impair any of the rights of Collateral Agent under
      this Security Agreement in any material
respect.

	 	
      6.6
	
      Debtor,
      at its own expense, will obtain and maintain in force insurance policies
      covering losses or damage to those items of Collateral which constitute
      physical personal property. The insurance policies to be obtained by
      Debtor shall be in form and amounts reasonably acceptable to Collateral
      Agent. Debtor shall make the Collateral Agent a first loss payee thereon
      to the extent of its interest in the Collateral. Collateral Agent is
      hereby irrevocably (until the Obligations are paid in full) appointed
      Debtor’ attorney-in-fact to endorse any check or draft that may be payable
      to Debtor so that Collateral Agent may collect the proceeds payable for
      any loss under such insurance. The proceeds of such insurance (subject to
      the rights of senior secured parties), less any costs and expenses
      incurred or paid by Collateral Agent in the collection thereof, shall be
      applied either toward the cost of the repair or replacement of the items
      damaged or destroyed, or on account of any sums secured hereby, whether or
      not then due or payable.

	 	
      6.7
	
      Collateral
      Agent may, at its option, and without any obligation to do so, pay,
      perform and discharge any and all amounts, costs, expenses and liabilities
      herein agreed to be paid or performed by Debtor. Upon Debtor’ failure to
      do so, all amounts expended by Collateral Agent in so doing shall become
      part of the Obligations secured hereby, and shall be immediately due and
      payable by Debtor to Collateral Agent upon demand and shall bear interest
      at the lesser of 15% per annum or the highest legal amount from the dates
      of such expenditures until paid.

137

	 	
      6.8
	
      Upon
      the request of Collateral Agent, Debtor will furnish to Collateral Agent
      within five (5) business days thereafter, or to any proposed assignee of
      this Security Agreement, a written statement in form reasonably
      satisfactory to Collateral Agent, duly acknowledged, certifying the amount
      of the principal and interest and any other sum then owing under the
      Obligations, whether to its knowledge any claims, offsets or defenses
      exist against the Obligations or against this Security Agreement, or any
      of the terms and provisions of any other agreement of Debtor securing the
      Obligations. In connection with any assignment by Collateral Agent of this
      Security Agreement, Debtor hereby agrees to cause the insurance policies
      required hereby to be carried by Debtor, if any, to be endorsed in form
      satisfactory to Collateral Agent or to such assignee, with loss payable
      clauses in favor of such assignee, and to cause such endorsements to be
      delivered to Collateral Agent within ten (10) calendar days after request
      therefor by Collateral Agent.

	 	
      6.9
	
      Debtor
      will, at its own expense, make, execute, endorse, acknowledge, file and/or
      deliver to the Collateral Agent from time to time such vouchers, invoices,
      schedules, confirmatory assignments, conveyances, financing statements,
      transfer endorsements, powers of attorney, certificates, reports and other
      reasonable assurances or instruments and take further steps relating to
      the Collateral and other property or rights covered by the security
      interest hereby granted, as the Collateral Agent may reasonably require to
      perfect its security interest hereunder.

	 	
      6.10
	
      Debtor
      represents and warrants that it is the true and lawful exclusive owner of
      the Collateral, free and clear of any liens and
    encumbrances.

	 	
      6.11
	
      Debtor
      hereby agrees not to divest itself of any right under the Collateral
      except as permitted herein absent prior written approval of the Collateral
      Agent, except to a subsidiary organized and located in the United States,
      on prior notice to Collateral Agent provided the Collateral remains
      subject to the security interest herein
described.

	 	
      6.12
	
      Debtor
      shall cause each Subsidiary of Debtor not in existence on the date hereof
      to execute and deliver to Collateral Agent promptly and in any event
      within 10 days after the formation, acquisition or change in status
      thereof (A) a guaranty guaranteeing the Obligations and (B) a security and
      pledge agreement, together with (x) certificates evidencing all of the
      capital stock of any entity owned by such Subsidiary, (y) undated stock
      powers executed in blank with signature guaranteed, and (z) such opinion
      of counsel and such approving certificate of such Subsidiary as Collateral
      Agent may reasonably request in respect of complying with any legend on
      any such certificate or any other matter relating to such shares and (E)
      such other agreements, instruments, approvals, legal opinions or other
      documents reasonably requested by Collateral Agent in order to create,
      perfect, establish the first priority of or otherwise protect any lien
      purported to be covered by any such pledge and security Agreement or
      otherwise to effect the intent that all property and assets of such
      Subsidiary shall become Collateral for the Obligations. For purposes of
      this Agreement, “Subsidiary”
      means, with respect to any entity at any date, any corporation, limited or
      general partnership, limited liability company, trust, estate,
      association, joint venture or other business entity) of which more
      than 50% of (A) the outstanding capital stock having (in the absence
      of contingencies) ordinary voting power to elect a majority of the board
      of directors or other managing body of such entity, (B) in the case
      of a partnership or limited liability company, the interest in the capital
      or profits of such partnership or limited liability company or (C) in
      the case of a trust, estate, association, joint venture or other entity,
      the beneficial interest in such trust, estate, association or other entity
      business is, at the time of determination, owned or controlled directly or
      indirectly through one or more intermediaries, by such
    entity.

 

 

 

138

 

	
      7.
	
      Power
      of Attorney.

	 	
      After
      the occurrence and during the uncured continuation of an Event of Default
      as defined in Section 9 below, Debtor hereby irrevocably constitutes and
      appoints the Collateral Agent as the true and lawful attorney of Debtor,
      with full power of substitution, in the place and stead of Debtor and in
      the name of Debtor or otherwise, at any time or times, in the discretion
      of the Collateral Agent, to take any action and to execute any instrument
      or document which the Collateral Agent may deem necessary or advisable to
      accomplish the purposes of this Agreement. This power of attorney is
      coupled with an interest and is irrevocable until the Obligations are
      satisfied.

	
      8.
	
      Performance
      By The Collateral Agent.

	 	
      If
      Debtor fails to perform any material covenant, agreement, duty or
      obligation of Debtor under this Agreement, the Collateral Agent may, after
      any applicable cure period, at any time or times in its discretion, take
      action to effect performance of such obligation. All reasonable expenses
      of the Collateral Agent incurred in connection with the foregoing
      authorization shall be payable by Debtor as provided in Paragraph 12.1
      hereof. No discretionary right, remedy or power granted to the Collateral
      Agent under any part of this Agreement shall be deemed to impose any
      obligation whatsoever on the Collateral Agent with respect thereto, such
      rights, remedies and powers being solely for the protection of the
      Collateral Agent.

	
      9.
	
      Event
      of Default.

	 	
      An
      event of default ("Event of Default") shall be deemed to have occurred
      hereunder upon the occurrence of any event of default as defined and
      described in this Agreement, in the Notes, Subscription Agreement, and any
      other agreement to which Debtor and a Collateral Agent or Lender are
      parties. Upon and after any Event of Default, after the applicable cure
      period, if any, any or all of the Obligations shall become immediately due
      and payable at the option of the Collateral Agent, for the benefit of the
      Lenders, and the Collateral Agent may dispose of Collateral as provided
      below. A default by Debtor of any of its material obligations pursuant to
      this Agreement shall be an Event of Default hereunder and an event of
      default as defined in the Notes, and Subscription
    Agreement.

	
      10.
	
      Disposition
      of Collateral.

	 	
      Upon
      and after any Event of Default which is then
continuing,

	 	
      10.1
	
      The
      Collateral Agent may exercise its rights with respect to each and every
      component of the Collateral, without regard to the existence of any other
      security or source of payment for the Obligations. In addition to other
      rights and remedies provided for herein or otherwise available to it, the
      Collateral Agent shall have all of the rights and remedies of a lender on
      default under the Uniform Commercial Code then in effect in the State of
      New York.

139

	 	
      10.2
	
      If
      any notice to Debtor of the sale or other disposition of Collateral is
      required by then applicable law, five business (5) days prior written
      notice (which Debtor agrees is reasonable notice within the meaning of
      Section 9.612(a) of the Uniform Commercial Code) shall be given to Debtor
      of the time and place of any sale of Collateral, which Debtor hereby
      agrees may be by private sale. The rights granted in this Section are in
      addition to any and all rights available to Collateral Agent under the
      Uniform Commercial Code.

	 	
      10.3
	
      The
      Collateral Agent is authorized, at any such sale, if the Collateral Agent
      deems it advisable to do so, in order to comply with any applicable
      securities laws, to restrict the prospective bidders or purchasers to
      persons who will represent and agree, among other things, that they are
      purchasing the Collateral for their own account for investment, and not
      with a view to the distribution or resale thereof, or otherwise to
      restrict such sale in such other manner as the Collateral Agent deems
      advisable to ensure such compliance. Sales made subject to such
      restrictions shall be deemed to have been made in a commercially
      reasonable manner.

	 	
      10.4
	
      All
      proceeds received by the Collateral Agent for the benefit of the Lenders
      in respect of any sale, collection or other enforcement or disposition of
      Collateral, shall be applied (after deduction of any amounts payable to
      the Collateral Agent pursuant to Paragraph 12.1 hereof) against the
      Obligations pro rata among the Lenders in proportion to their interests in
      the Obligations. Upon payment in full of all Obligations, Debtor shall be
      entitled to the return of all Collateral, including cash, which has not
      been used or applied toward the payment of Obligations or used or applied
      to any and all costs or expenses of the Collateral Agent incurred in
      connection with the liquidation of the Collateral (unless another person
      is legally entitled thereto). Any assignment of Collateral by the
      Collateral Agent to Debtor shall be without representation or warranty of
      any nature whatsoever and wholly without recourse. To the extent allowed
      by law, each Lender may purchase the Collateral and pay for such purchase
      by offsetting up to such Lender’s pro rata portion of the proceeds with
      sums owed to such Lender by Debtor arising under the Obligations or any
      other source.

140

	
      11.
	
      Waiver
      of Automatic Stay.
      Debtor acknowledges and agrees that should a proceeding under any
      bankruptcy or insolvency law be commenced by or against Debtor, or if any
      of the Collateral should become the subject of any bankruptcy or
      insolvency proceeding, then the Collateral Agent should be entitled to,
      among other relief to which the Collateral Agent or Lenders may be
      entitled under the Note, Subscription Agreement, and any other agreement
      to which the Debtor, Lenders or Collateral Agent are parties,
      (collectively "Loan Documents") and/or applicable law, an order from the
      court granting immediate relief from the automatic stay pursuant to 11
      U.S.C. Section 362 to permit the Collateral Agent to exercise all of its
      rights and remedies pursuant to the Loan Documents and/or applicable law.
      Debtor EXPRESSLY WAIVES THE BENEFIT OF THE AUTOMATIC STAY IMPOSED BY 11
      U.S.C. SECTION 362. FURTHERMORE, Debtor EXPRESSLY ACKNOWLEDGES AND AGREES
      THAT NEITHER 11 U.S.C. SECTION 362 NOR ANY OTHER SECTION OF THE BANKRUPTCY
      CODE OR OTHER STATUTE OR RULE (INCLUDING, WITHOUT LIMITATION, 11 U.S.C.
      SECTION 105) SHALL STAY, INTERDICT, CONDITION, REDUCE OR INHIBIT IN ANY
      WAY THE ABILITY OF THE COLLATERAL AGENT TO ENFORCE ANY OF ITS RIGHTS AND
      REMEDIES UNDER THE LOAN DOCUMENTS AND/OR APPLICABLE LAW. Debtor hereby
      consents to any motion for relief from stay which may be filed by the
      Collateral Agent in any bankruptcy or insolvency proceeding initiated by
      or against Debtor, and further agrees not to file any opposition to any
      motion for relief from stay filed by the Collateral Agent. Debtor
      represents, acknowledges and agrees that this provision is a specific and
      material aspect of this Agreement, and that the Collateral Agent would not
      agree to the terms of this Agreement if this waiver were not a part of
      this Agreement. Debtor further represents, acknowledges and agrees that
      this waiver is knowingly, intelligently and voluntarily made, that neither
      the Collateral Agent nor any person acting on behalf of the Collateral
      Agent has made any representations to induce this waiver, that Debtor has
      been represented (or has had the opportunity to be represented) in the
      signing of this Agreement and in the making of this waiver by independent
      legal counsel selected by Debtor and that Debtor has had the opportunity
      to discuss this waiver with counsel. Debtor further agrees that any
      bankruptcy or insolvency proceeding initiated by Debtor will only be
      brought in the Federal Court within the Southern District of New
      York.

	
      12.
	
      Miscellaneous.

	 	
      12.1
	
      Expenses.
      Debtor shall pay to the Collateral Agent, on demand, the amount of any and
      all reasonable expenses, including, without limitation, attorneys' fees,
      legal expenses and brokers' fees, which the Collateral Agent may incur in
      connection with (a) sale, collection or other enforcement or disposition
      of Collateral; (b) exercise or enforcement of any the rights, remedies or
      powers of the Collateral Agent hereunder or with respect to any or all of
      the Obligations upon breach or threatened breach; or (c) failure by Debtor
      to perform and observe any agreements of Debtor contained herein which are
      performed by the Collateral Agent.

141

	 	
      12.2
	
      Waivers,
      Amendment and Remedies.
      No course of dealing by the Collateral Agent and no failure by the
      Collateral Agent to exercise, or delay by the Collateral Agent in
      exercising, any right, remedy or power hereunder shall operate as a waiver
      thereof, and no single or partial exercise thereof shall preclude any
      other or further exercise thereof or the exercise of any other right,
      remedy or power of the Collateral Agent. No amendment, modification or
      waiver of any provision of this Agreement and no consent to any departure
      by Debtor therefrom, shall, in any event, be effective unless contained in
      a writing signed by the Collateral Agent, and then such waiver or consent
      shall be effective only in the specific instance and for the specific
      purpose for which given. The rights, remedies and powers of the Collateral
      Agent, not only hereunder, but also under any instruments and agreements
      evidencing or securing the Obligations and under applicable law are
      cumulative, and may be exercised by the Collateral Agent from time to time
      in such order as the Collateral Agent may
elect.

	 	
      12.3
	
      Notices.
      All notices or other communications given or made hereunder shall be in
      writing and shall be personally delivered or deemed delivered the first
      business day after being faxed (provided that a copy is delivered by first
      class mail) to the party to receive the same at its address set forth
      below or to such other address as either party shall hereafter give to the
      other by notice duly made under this
Section:

	 	
      To
      Debtor:
	
      c/o
      Energy & Engine Technology Corporation

      5308
      West Plano Parkway

      Plano,
      TX 75093

      Attn:
      Jolie G. Kahn, Esq.

      Fax:
      (972) 732-6440

	 	
      To
      Lenders:
	
      To
      the addresses and telecopier numbers set forth on Schedule A
    

	 	
      To
      the Collateral Agent:
	
      Barbara
      R. Mittman

      Grushko
      & Mittman, P.C.

      551
      Fifth Avenue, Suite 1601

      New
      York, New York 10176

      Fax:
      (212) 697-3575

	 	
      Any
      party may change its address by written notice in accordance with this
      paragraph.

	 	
      12.4
	
      Term;
      Binding Effect.
      This Agreement shall (a) remain in full force and effect until payment and
      satisfaction in full of all of the Obligations; (b) be binding upon
      Debtor, and its successors and permitted assigns; and (c) inure to the
      benefit of the Collateral Agent, for the benefit of the Lenders and their
      respective successors and assigns. All the rights and benefits granted by
      Debtor to the Collateral Agent and Lenders in the Loan Documents and other
      agreements and documents delivered in connection therewith are deemed
      granted to both the Collateral Agent and
Lenders.

	 	
      12.5
	
      Captions.
      The captions of Paragraphs, Articles and Sections in this Agreement have
      been included for convenience of reference only, and shall not define or
      limit the provisions hereof and have no legal or other significance
      whatsoever.

142

	 	
      12.6
	
      Governing
      Law; Venue; Severability.
      This Agreement shall be governed by and construed in accordance with the
      laws of the State of New York without regard to principles of conflicts or
      choice of law, except to the extent that the perfection of the security
      interest granted hereby in respect of any item of Collateral may be
      governed by the law of another jurisdiction. Any legal action or
      proceeding against Debtor with respect to this Agreement may be brought in
      the courts in the State of New York or of the United States for the
      Southern District of New York, and, by execution and delivery of this
      Agreement, Debtor hereby irrevocably accepts for itself and in respect of
      its property, generally and unconditionally, the jurisdiction of the
      aforesaid courts. Debtor hereby irrevocably waives any objection which
      they may now or hereafter have to the laying of venue of any of the
      aforesaid actions or proceedings arising out of or in connection with this
      Agreement brought in the aforesaid courts and hereby further irrevocably
      waives and agrees not to plead or claim in any such court that any such
      action or proceeding brought in any such court has been brought in an
      inconvenient forum. If any provision of this Agreement, or the application
      thereof to any person or circumstance, is held invalid, such invalidity
      shall not affect any other provisions which can be given effect without
      the invalid provision or application, and to this end the provisions
      hereof shall be severable and the remaining, valid provisions shall remain
      of full force and effect.

	 	
      12.7
	
      Entire
      Agreement.
      This Agreement contains the entire agreement of the parties and supercedes
      all other agreements and understandings, oral or written, with respect to
      the matters contained herein.

	 	
      12.8
	
      Counterparts/Execution.
      This Agreement may be executed in any number of counterparts and by the
      different signatories hereto on separate counterparts, each of which, when
      so executed, shall be deemed an original, but all such counterparts shall
      constitute but one and the same instrument. This Agreement may be executed
      by facsimile signature and delivered by facsimile
      transmission.

	 	
      13.
	
      Intercreditor
      Terms.
      As between the Lenders, any distribution under paragraph 5 shall be made
      proportionately based upon the remaining principal amount (plus accrued
      and unpaid interest) to each as to the total amount then owed to the
      Lenders as a whole. The rights of each Lender hereunder are pari
      passu to
      the rights of the other Lenders hereunder. Any recovery hereunder shall be
      shared ratably among the Lenders according to the then remaining principal
      amount owed to each (plus accrued and unpaid interest) as to the total
      amount then owed to the Lenders as a whole. Kevin W. Smyth is deemed a
      Lender hereunder in connection with the Obligations described on Schedule
      A hereto.

[THIS
SPACE INTENTIONALLY LEFT BLANK]

143

IN
WITNESS WHEREOF, the
undersigned have executed and delivered this Security Agreement, as of the date
first written above.

	
      "DEBTOR"
	
      "DEBTOR"

	
      BMZ
      GENERATORS TECHNOLOGY, INC.
	
      ANCHOR
      MANUFACTURING, INC.

	
      A
      Florida corporation
	
      A
      Florida corporation

	 	 
	 	 
	 	 
	 	 
	 	 
	
      By:
	 	
      By:
	 
	
      Its:
	 	
      Its:
	 

	
      ‘THE
      COLLATERAL AGENT”

	
      BARBARA
      R. MITTMAN

	 
	 
	 
	 

APPROVED
BY “LENDERS”

	 	 	 
	
      LONGVIEW
      FUND, LP
	 	
      LONGVIEW
      EQUITY FUND, LP

	 	 	 
	 	 	 
	 	 	 
	 	 	 
	
      LONGVIEW
      INTERNATIONAL EQUITY FUND, LP
	 	 
	 	 	 
	 	 	 
	 	 	 
	 	 	 
	 	 	 
	
      KEVIN
      W. SMYTH
	 	 

This
Security Agreement (subsidiary) may be signed by facsimile signature
and

delivered
by confirmed facsimile transmission.

144

SCHEDULE
A TO SECURITY AGREEMENT

	
      LENDER
	
      INITIAL
      CLOSING PURCHASE PRICE
	
      SECOND
      CLOSING PURCHASE PRICE

	
      LONGVIEW
      FUND, LP

      600
      Montgomery Street, 44th Floor

      San
      Francisco, CA 94111

      Fax:
      (415) 981-5300
	
      $400,000.00
	
      $200,000.00

	
      LONGVIEW
      EQUITY FUND, LP

      600
      Montgomery Street, 44th Floor

      San
      Francisco, CA 94111

      Fax:
      (415) 981-5300
	
      $420,000.00
	
      $210,000.00

	
      LONGVIEW
      INTERNATIONAL EQUITY FUND, LP

      600
      Montgomery Street, 44th Floor

      San
      Francisco, CA 94111

      Fax:
      (415) 981-5300
	
      $180,000.00
	
      $90,000.00

	
      TOTALS
	
      $1,000,000.00
	
      $500,000.00

	
      KEVIN
      W. SMYTH

      8816
      Lake Sheen Court

      Orlando,
      FL 33826

      Fax:
      (407) 876-6391
	
      $800,000.00
      of Obligations

      (for
      purposes of determining pro rata

145

ANNEX
I

 

TO

 

SECURITY
AGREEMENT

 

PLEDGE
AMENDMENT

 

This
Pledge Amendment, dated _________ __ 200_, is delivered pursuant to Section 4.3
of the Security Agreement referred to below. The undersigned hereby agrees that
this Pledge Amendment may be attached to the Security Agreement, dated April
___, 2005, as it may heretofore have been or hereafter may be amended, restated,
supplemented or otherwise modified from time to time and that the shares listed
on this Pledge Amendment shall be hereby pledged and assigned to Collateral
Agent and become part of the Collateral referred to in such Security Agreement
and shall secure all of the Obligations referred to in such Security
Agreement.

 

	
       

      Name
      of Issuer

       
	
       

      Number
      of 
      Shares

       
	
       

      Class

       
	
       

      Certificate
      Number(s)

       

	 	 	 	 
	 	 	 	 
	 	 	 	 

	 	 	 
	 	
       

      By:
	 
	 	 	
      Name:

	 	 	
      Title:

 

 

146Energy and Engine Technology Corporation Exhibit 10 Funds Esc Agr

 

FUNDS
ESCROW AGREEMENT

 

 

This
Agreement is dated as of the ____ day of April, 2005 among Energy & Engine
Technology Corporation, a Nevada corporation (the "Company"), the Subscribers
identified on Schedule A hereto (each a “Subscriber” and collectively
“Subscribers”), and Grushko & Mittman, P.C. (the "Escrow
Agent"):

 

W I T N E S S E T H:

 

WHEREAS,
the Company and Subscribers intend to enter into a Subscription Agreement
calling for the sale by the Company to the Subscriber of secured promissory
notes (“Notes”) and Warrants for an aggregate purchase price of up to $1,500,000
in the amounts set forth on Schedule A hereto; and

 

WHEREAS,
the parties hereto require the Company to deliver the Notes and Warrants against
payment therefor, with such Notes, Warrants and the Escrowed Funds to be
delivered to the Escrow Agent to be held in escrow and released by the Escrow
Agent in accordance with the terms and conditions of this Agreement;
and

 

WHEREAS,
the Escrow Agent is willing to serve as escrow agent pursuant to the terms and
conditions of this Agreement;

 

NOW
THEREFORE, the parties agree as follows:

 

ARTICLE
I

 

INTERPRETATION

	 	
       

      1.1.
	
       

      Definitions.
      Capitalized terms used and not otherwise defined herein that are defined
      in the Subscription Agreement shall have the meanings given to such terms
      in the Subscription Agreement. Whenever used in this Agreement, the
      following terms shall have the following respective
    meanings:

	 	 	
       

      (a)
	
       

      "Agreement"
      means this Agreement and all amendments made hereto and thereto by written
      agreement between the parties;

	 	 	
       

      (b)
	
       

      “Closing
      Date” shall have the meaning set forth in Section 1 of the Subscription
      Agreement;

	 	 	
       

      (c)
	
       

      “Collateral
      Agent Agreement” shall have the meaning set forth in Section 3 of the
      Subscription Agreement;

	 	 	
       

      (d)
	
       

      “Due
      Diligence Fee” shall have the meaning set forth in Section 8(b) and
      Schedule 8 of the Subscription Agreement;

	 	 	
       

      (e)
	
       

      "Escrowed
      Payment" means an aggregate cash payment of up to $1,500,000 which is the
      Purchase Price;

	 	 	
       

      (f)
	
       

      “Initial
      Closing Date” shall have the meaning set forth in Section 1(a) of the
      Subscription Agreement;

147

	 	 	
       

      (g)
	
       

      “Initial
      Closing Legal Opinion” means the original signed legal opinion referred to
      in Section 6 of the Subscription Agreement;

	 	 	
       

      (h)
	
       

      “Initial
      Closing Notes” shall have the meaning set forth in Section 1(a) of the
      Subscription Agreement;

	 	 	
       

      (i)
	
       

      “Initial
      Closing Purchase Price” shall mean up to $1,000,000;

	 	 	
       

      (j)
	
       

      “Legal
      Fees” shall have the meaning set forth in Section 8(c) of the Subscription
      Agreement;

	 	 	
       

      (k)
	
       

      “Limited
      Standstill Agreements” shall have the meaning set forth in Section 9(r) of
      the Subscription Agreement;

	 	 	
       

      (l)
	
       

      “Second
      Closing Certificate” shall have the meaning set forth in Section 1(d) of
      the Subscription Agreement;

	 	 	
       

      (m)
	
       

      “Second
      Closing Date” shall have the meaning set forth in Section 1(b) of the
      Subscription Agreement;

	 	 	
       

      (n)
	
       

      “Second
      Closing Legal Opinion” shall have the meaning set forth in Section 1(d) of
      the Subscription Agreement;

	 	 	
       

      (o)
	
       

      “Second
      Closing Notes” shall have the meaning set forth in Section 1(b) of the
      Subscription Agreement;

	 	 	
       

      (p)
	
       

      “Second
      Closing Purchase Price” shall mean up to $500,000;

	 	 	
       

      (q)
	
       

      “Security
      Agreements” shall have the meaning set forth in Section 3 of the
      Subscription Agreement and include the Security Agreements to be provided
      in connection with Company assets and Subsidiary
assets;

	 	 	
       

      (r)
	
       

      "Subscription
      Agreement" means the Subscription Agreement (and the exhibits thereto)
      entered into or to be entered into by the parties in reference to the sale
      and purchase of the Initial Closing Notes, Second Closing Notes and
      Warrants;

	 	 	
       

      (s)
	
       

      “Transfer
      Agent Instructions” shall have the meaning set forth in Section 7.1(b) of
      the Subscription Agreement;

	 	 	
       

      (t)
	
       

      “Warrants”
      shall have the meaning set forth in Section 2 of the Subscription
      Agreement;

	 	 	
       

      (u)
	
       

      Collectively,
      the executed Subscription Agreement, Initial Closing Notes, Security
      Agreements, Collateral Agent Agreement, Initial Closing Legal Opinion,
      Second Closing Notes, Second Closing Legal Opinion, Second Closing
      Certificate, Warrants, Due Diligence Fee, Transfer Agent Instructions,
      Limited Standstill Agreements and Legal Fees are referred to as "Company
      Documents"; and

148

	 	 	
       

      (v)
	
       

      Collectively,
      the Escrowed Payment and the executed Subscription Agreement, Security
      Agreements, and Collateral Agent Agreement are referred to as "Subscriber
      Documents".

	 	
       

      1.2.
	
       

      Entire
      Agreement.
      This Agreement along with the Company Documents and the Subscriber
      Documents constitute the entire agreement between the parties hereto
      pertaining to the Company Documents and Subscriber Documents and
      supersedes all prior agreements, understandings, negotiations and
      discussions, whether oral or written, of the parties. There are no
      warranties, representations and other agreements made by the parties in
      connection with the subject matter hereof except as specifically set forth
      in this Agreement, the Company Documents and the Subscriber
      Documents.

	 	
       

      1.3.
	
       

      Extended
      Meanings.
      In this Agreement words importing the singular number include the plural
      and vice versa; words importing the masculine gender include the feminine
      and neuter genders. The word "person" includes an individual, corporation,
      partnership, trustee or trust or unincorporated association, executor,
      administrator or legal representative.

	 	
       

      1.4.
	
       

      Waivers
      and Amendments.
      This Agreement may be amended, modified, superseded, cancelled, renewed or
      extended, and the terms and conditions hereof may be waived, only by a
      written instrument signed by all parties, or, in the case of a waiver, by
      the party waiving compliance. Except as expressly stated herein, no delay
      on the part of any party in exercising any right, power or privilege
      hereunder shall operate as a waiver thereof, nor shall any waiver on the
      part of any party of any right, power or privilege hereunder preclude any
      other or future exercise of any other right, power or privilege
      hereunder.

	 	
       

      1.5.
	
       

      Headings.
      The division of this Agreement into articles, sections, subsections and
      paragraphs and the insertion of headings are for convenience of reference
      only and shall not affect the construction or interpretation of this
      Agreement.

	 	
       

      1.6.
	
       

      Law
      Governing this Agreement.
      This Agreement shall be governed by and construed in accordance with the
      laws of the State of New York without regard to conflicts
      of laws
      principles that would result in the application of the substantive laws of
      another jurisdiction. Any action brought by either party against the other
      concerning the transactions contemplated by this Agreement shall be
      brought only in the state courts of New York or in the federal courts
      located in the State and county of New York. Both parties and the
      individuals executing this Agreement and other agreements on behalf of the
      Company agree to submit to the jurisdiction of such courts and waive trial
      by jury. The prevailing party (which shall be the party which receives an
      award most closely resembling the remedy or action sought) shall be
      entitled to recover from the other party its reasonable attorney's fees
      and costs. In the event that any provision of this Agreement or any other
      agreement delivered in connection herewith is invalid or unenforceable
      under any applicable statute or rule of law, then such provision shall be
      deemed inoperative to the extent that it may conflict therewith and shall
      be deemed modified to conform with such statute or rule of law. Any such
      provision which may prove invalid or unenforceable under any law shall not
      affect the validity or enforceability of any other provision of any
      agreement.

 

149

 

	 	
       

      1.7.
	
       

      Specific
      Enforcement, Consent to Jurisdiction.
      The Company and Subscriber acknowledge and agree that irreparable damage
      would occur in the event that any of the provisions of this Agreement were
      not performed in accordance with their specific terms or were otherwise
      breached. It is accordingly agreed that the parties shall be entitled to
      an injuction or injunctions to prevent or cure breaches of the provisions
      of this Agreement and to enforce specifically the terms and provisions
      hereof or thereof, this being in addition to any other remedy to which any
      of them may be entitled by law or equity. Subject to Section 1.6 hereof,
      each of the Company and Subscriber hereby waives, and agrees not to assert
      in any such suit, action or proceeding, any claim that it is not
      personally subject to the jurisdiction of such court, that the suit,
      action or proceeding is brought in an inconvenient forum or that the venue
      of the suit, action or proceeding is improper. Nothing in this Section
      shall affect or limit any right to serve process in any other manner
      permitted by law.

 

ARTICLE
II

 

DELIVERIES
TO THE ESCROW AGENT

	 	
       

      2.1.
	
       

      Initial
      Closing Company Deliveries.
      On or about the date hereof, the Company shall deliver to the Escrow Agent
      the executed Subscription Agreement, the Initial Closing Notes, Warrants
      deliverable on the Initial Closing Date, Security Agreements, Collateral
      Agent Agreement and Initial Closing Legal Opinion, Limited Standstill
      Agreements and Transfer Agent Instructions (collectively, the “Initial
      Closing Company Documents”).

	 	
       

      2.2.
	
       

      Second
      Closing Company Deliveries.
      On or prior to the Second Closing Date the Company will deliver to the
      Escrow Agent the Second Closing Notes, Second Closing Certificate, Second
      Closing Legal Opinion and Warrants deliverable on the Second Closing Date
      (collectively, the “Second Closing Company Documents”).

	 	
       

      2.3.
	
       

      Subscriber
      Deliveries. On
      or before the Initial Closing Date, each Subscriber shall deliver to the
      Escrow Agent such Subscriber’s portion of the Initial Closing Purchase
      Price and the executed Subscription Agreement, Security Agreement, and
      Collateral Agent Agreement. On or before the Second Closing Date, each
      Subscriber will deliver such Subscriber’s portion of the Second Closing
      Purchase Price to the Escrow Agent. The Escrowed Payment will be delivered
      pursuant to the following wire transfer
instructions:

 

Citibank,
N.A.

1155
6th
Avenue

New York,
NY 10036, USA

ABA
Number: 0210-00089

For
Credit to: Grushko & Mittman, IOLA Trust Account

Account
Number: 45208884

	 	
       

      2.4.
	
       

      Intention
      to Create Escrow Over Company Documents and Subscriber
      Documents.
      The Subscriber and Company intend that the Company Documents and
      Subscriber Documents shall be held in escrow by the Escrow Agent pursuant
      to this Agreement for their benefit as set forth
herein.

150

	 	
       

      2.5.
	
       

      Escrow
      Agent to Deliver Company Documents and Subscriber Documents.
      The Escrow Agent shall hold and release the Company Documents and
      Subscriber Documents only in accordance with the terms and conditions of
      this Agreement.

 

ARTICLE
III

 

RELEASE
OF ESCROW OF COMPANY DOCUMENTS AND SUBSCRIBER DOCUMENTS

	 	
       

      3.1.
	
       

      Release
      of Escrow.
      Subject to the provisions of Section 4.2, the Escrow Agent shall release
      the Company Documents and Subscriber Documents as
  follows:

	 	 	
       

      (a)
	
       

      On
      the Initial Closing Date, the Escrow Agent will simultaneously release the
      Initial Closing Company Documents to the Subscriber and release the
      Subscription Agreement and the Initial Closing Purchase Price to the
      Company except that: (i) the Security Agreements and Collateral Agent
      Agreement will also be released to the Collateral Agent; (ii) Legal Fees
      will be released to the Subscriber’s attorneys; and (iii) the Due
      Diligence Fee will be released to the recipient identified on Schedule 8
      to the Subscription Agreement.

	 	 	
       

      (b)
	
       

      On
      the Second Closing Date, the Escrow Agent will simultaneously release the
      Second Closing Company Documents to the Subscriber and release the Second
      Closing Purchase Price to the Company.

	 	 	
       

      (c)
	
       

      All
      funds to be delivered to the Company shall be delivered pursuant to the
      wire instructions to be provided in writing by the Company to the Escrow
      Agent. 

	 	 	
       

      (d)
	
       

      Notwithstanding
      the above, upon receipt by the Escrow Agent of joint written instructions
      ("Joint Instructions") signed by the Company and the Subscriber, it shall
      deliver the Company Documents and Subscriber Documents in accordance with
      the terms of the Joint Instructions.

	 	 	
       

      (e)
	
       

      Notwithstanding
      the above, upon receipt by the Escrow Agent of a final and non-appealable
      judgment, order, decree or award of a court of competent jurisdiction (a
      "Court Order"), the Escrow Agent shall deliver the Company Documents and
      Subscriber Documents in accordance with the Court Order. Any Court Order
      shall be accompanied by an opinion of counsel for the party presenting the
      Court Order to the Escrow Agent (which opinion shall be satisfactory to
      the Escrow Agent) to the effect that the court issuing the Court Order has
      competent jurisdiction and that the Court Order is final and
      non-appealable.

	 	
       

      3.2.
	
       

      Acknowledgement
      of Company and Subscriber; Disputes.
      The Company and the Subscriber acknowledge that the only terms and
      conditions upon which the Company Documents and Subscriber Documents are
      to be released are set forth in Sections 3 and 4 of this Agreement. The
      Company and the Subscriber reaffirm their agreement to abide by the terms
      and conditions of this Agreement with respect to the release of the
      Company Documents and Subscriber Documents. Any dispute with respect to
      the release of the Company Documents and Subscriber Documents shall be
      resolved pursuant to Section 4.2 or by agreement between the Company and
      Subscriber.

 

151

 

ARTICLE
IV

 

CONCERNING
THE ESCROW AGENT

	 	
       

      4.1.
	
       

      Duties
      and Responsibilities of the Escrow Agent.
      The Escrow Agent's duties and responsibilities shall be subject to the
      following terms and conditions:

	 	 	
       

      (a)
	
       

      The
      Subscriber and Company acknowledge and agree that the Escrow Agent (i)
      shall not be responsible for or bound by, and shall not be required to
      inquire into whether either the Subscriber or Company is entitled to
      receipt of the Company Documents and Subscriber Documents pursuant to, any
      other agreement or otherwise; (ii) shall be obligated only for the
      performance of such duties as are specifically assumed by the Escrow Agent
      pursuant to this Agreement; (iii) may rely on and shall be protected in
      acting or refraining from acting upon any written notice, instruction,
      instrument, statement, request or document furnished to it hereunder and
      believed by the Escrow Agent in good faith to be genuine and to have been
      signed or presented by the proper person or party, without being required
      to determine the authenticity or correctness of any fact stated therein or
      the propriety or validity or the service thereof; (iv) may assume that any
      person believed by the Escrow Agent in good faith to be authorized to give
      notice or make any statement or execute any document in connection with
      the provisions hereof is so authorized; (v) shall not be under any duty to
      give the property held by Escrow Agent hereunder any greater degree of
      care than Escrow Agent gives its own similar property; and (vi) may
      consult counsel satisfactory to Escrow Agent, the opinion of such counsel
      to be full and complete authorization and protection in respect of any
      action taken, suffered or omitted by Escrow Agent hereunder in good faith
      and in accordance with the opinion of such counsel.

	 	 	
       

      (b)
	
       

      The
      Subscriber and Company acknowledge that the Escrow Agent is acting solely
      as a stakeholder at their request and that the Escrow Agent shall not be
      liable for any action taken by Escrow Agent in good faith and believed by
      Escrow Agent to be authorized or within the rights or powers conferred
      upon Escrow Agent by this Agreement. The Subscriber and Company, jointly
      and severally, agree to indemnify and hold harmless the Escrow Agent and
      any of Escrow Agent's partners, employees, agents and representatives for
      any action taken or omitted to be taken by Escrow Agent or any of them
      hereunder, including the fees of outside counsel and other costs and
      expenses of defending itself against any claim or liability under this
      Agreement, except in the case of gross negligence or willful misconduct on
      Escrow Agent's part committed in its capacity as Escrow Agent under this
      Agreement. The Escrow Agent shall owe a duty only to the Subscriber and
      Company under this Agreement and to no other person.

	 	 	
       

      (c)
	
       

      The
      Subscriber and Company jointly and severally agree to reimburse the Escrow
      Agent for outside counsel fees, to the extent authorized hereunder and
      incurred in connection with the performance of its duties and
      responsibilities hereunder.

152

	 	 	
       

      (d)
	
       

      The
      Escrow Agent may at any time resign as Escrow Agent hereunder by giving
      five (5) days prior written notice of resignation to the Subscriber and
      the Company. Prior to the effective date of the resignation as specified
      in such notice, the Subscriber and Company will issue to the Escrow Agent
      a Joint Instruction authorizing delivery of the Company Documents and
      Subscriber Documents to a substitute Escrow Agent selected by the
      Subscriber and Company. If no successor Escrow Agent is named by the
      Subscriber and Company, the Escrow Agent may apply to a court of competent
      jurisdiction in the State of New York for appointment of a successor
      Escrow Agent, and to deposit the Company Documents and Subscriber
      Documents with the clerk of any such court.

	 	 	
       

      (e)
	
       

      The
      Escrow Agent does not have and will not have any interest in the Company
      Documents and Subscriber Documents, but is serving only as escrow agent,
      having only possession thereof. The Escrow Agent shall not be liable for
      any loss resulting from the making or retention of any investment in
      accordance with this Escrow Agreement.

	 	 	
       

      (f)
	
       

      This
      Agreement sets forth exclusively the duties of the Escrow Agent with
      respect to any and all matters pertinent thereto and no implied duties or
      obligations shall be read into this Agreement.

	 	 	
       

      (g)
	
       

      The
      Escrow Agent shall be permitted to act as counsel for the Subscriber in
      any dispute as to the disposition of the Company Documents and Subscriber
      Documents, in any other dispute between the Subscriber and Company,
      whether or not the Escrow Agent is then holding the Company Documents and
      Subscriber Documents and continues to act as the Escrow Agent
      hereunder.

	 	 	
       

      (h)
	
       

      The
      provisions of this Section 4.1 shall survive the resignation of the Escrow
      Agent or the termination of this Agreement.

	 	
       

      4.2.
	
       

      Dispute
      Resolution: Judgments.
      Resolution of disputes arising under this Agreement shall be subject to
      the following terms and conditions:

	 	 	
       

      (a)
	
       

      If
      any dispute shall arise with respect to the delivery, ownership, right of
      possession or disposition of the Company Documents and Subscriber
      Documents, or if the Escrow Agent shall in good faith be uncertain as to
      its duties or rights hereunder, the Escrow Agent shall be authorized,
      without liability to anyone, to (i) refrain from taking any action other
      than to continue to hold the Company Documents and Subscriber Documents
      pending receipt of a Joint Instruction from the Subscriber and Company, or
      (ii) deposit the Company Documents and Subscriber Documents with any court
      of competent jurisdiction in the State of New York, in which event the
      Escrow Agent shall give written notice thereof to the Subscriber and the
      Company and shall thereupon be relieved and discharged from all further
      obligations pursuant to this Agreement. The Escrow Agent may, but shall be
      under no duty to, institute or defend any legal proceedings which relate
      to the Company Documents and Subscriber Documents. The Escrow Agent shall
      have the right to retain counsel if it becomes involved in any
      disagreement, dispute or litigation on account of this Agreement or
      otherwise determines that it is necessary to consult
    counsel.

153

	 	 	
       

      (b)
	
       

      The
      Escrow Agent is hereby expressly authorized to comply with and obey any
      Court Order. In case the Escrow Agent obeys or complies with a Court
      Order, the Escrow Agent shall not be liable to the Subscriber and Company
      or to any other person, firm, corporation or entity by reason of such
      compliance.

 

ARTICLE
V

 

GENERAL
MATTERS

	 	
       

      5.1.
	
       

      Termination.
      This escrow shall terminate upon the release of all of the Company
      Documents and Subscriber Documents or at any time upon the agreement in
      writing of the Subscriber and Company.

	 	
       

      5.2.
	
       

      Notices.
      All notices, demands, requests, consents, approvals, and other
      communications required or permitted hereunder shall be in writing and,
      unless otherwise specified herein, shall be (i) personally served, (ii)
      deposited in the mail, registered or certified, return receipt requested,
      postage prepaid, (iii) delivered by reputable air courier service with
      charges prepaid, or (iv) transmitted by hand delivery, telegram, or
      facsimile, addressed as set forth below or to such other address as such
      party shall have specified most recently by written notice. Any notice or
      other communication required or permitted to be given hereunder shall be
      deemed effective (a) upon hand delivery or delivery by facsimile, with
      accurate confirmation generated by the transmitting facsimile machine, at
      the address or number designated below (if delivered on a business day
      during normal business hours where such notice is to be received), or the
      first business day following such delivery (if delivered other than on a
      business day during normal business hours where such notice is to be
      received) or (b) on the second business day following the date of mailing
      by express courier service, fully prepaid, addressed to such address, or
      upon actual receipt of such mailing, whichever shall first occur. The
      addresses for such communications shall be: 

	 	 	
       

      (a)
	
       

      If
      to the Company, to:

	 	 	 	 
	 	 	 	
      Energy
      & Engine Technology Corporation

      5308
      West Plano Parkway

      Plano,
      TX 75093

      Attn:
      Jolie G. Kahn, Esq.

      Fax:
      (972) 732-6440

	 	 	
       

      (b)
	
       

      If
      to the Subscribers, to: the addresses and fax numbers listed on Schedule A
      hereto

	 	 	
       

      (c)
	
       

      If
      to the Escrow Agent, to:

	 	 	 	
       

      Grushko
      & Mittman, P.C.

      51
      Fifth Avenue, Suite 1601

      New
      York, New York 10176

      Fax:
      212-697-3575

	 	
       

      or
      to such other address as any of them shall give to the others by notice
      made pursuant to this Section 5.2.

 

154

 

	 	
       

      5.3.
	
       

      Interest.
      The Escrowed Payment shall not be held in an interest bearing account nor
      will interest be payable in connection therewith. In the event the
      Escrowed Payment is deposited in an interest bearing account, each
      Subscriber shall be entitled to receive its pro rata
      portion of any accrued interest thereon, but only if the Escrow Agent
      receives from such Subscriber the Subscriber’s United States taxpayer
      identification number and other requested information and
      forms.

	 	
       

      5.4.
	
       

      Assignment;
      Binding Agreement.
      Neither this Agreement nor any right or obligation hereunder shall be
      assignable by any party without the prior written consent of the other
      parties hereto. This Agreement shall enure to the benefit of and be
      binding upon the parties hereto and their respective legal
      representatives, successors and assigns.

	 	
       

      5.5.
	
       

      Invalidity.
      In the event that any one or more of the provisions contained herein, or
      the application thereof in any circumstance, is held invalid, illegal, or
      unenforceable in any respect for any reason, the validity, legality and
      enforceability of any such provision in every other respect and of the
      remaining provisions contained herein shall not be in any way impaired
      thereby, it being intended that all of the rights and privileges of the
      parties hereto shall be enforceable to the fullest extent permitted by
      law.

	 	
       

      5.6.
	
       

      Counterparts/Execution.
      This Agreement may be executed in any number of counterparts and by
      different signatories hereto on separate counterparts, each of which, when
      so executed, shall be deemed an original, but all such counterparts shall
      constitute but one and the same instrument. This Agreement may be executed
      by facsimile transmission and delivered by facsimile
      transmission.

	 	
       

      5.7.
	
       

      Agreement.
      Each of the undersigned states that he has read the foregoing Funds Escrow
      Agreement and understands and agrees to it.

	 	
      ENERGY
      & ENGINE TECHNOLOGY CORPORATION

	 	
      the
      “Company”

	 	
      By:
	 
	 	 	 

	 	 
	 	
      LONGVIEW
      FUND, LP

	 	
      “Subscriber”

	 	 
	 	 
	 	
      LONGVIEW
      EQUITY FUND, LP

	 	
      “Subscriber”

	 	 
	 	 
	 	
      LONGVIEW
      INTERNATIONAL EQUITY FUND, LP

	 	
      “Subscriber”

	 	 
	 	
      ESCROW
      AGENT:

	 	 
	 	 
	 	 
	 	
      GRUSHKO
      & MITTMAN, P.C.

155

SCHEDULE
A TO FUNDS ESCROW AGREEMENT

 

	
      SUBSCRIBERS
	
      INITIAL
      CLOSING PURCHASE PRICE
	
      SECOND
      CLOSING PURCHASE PRICE

	
      LONGVIEW
      FUND, LP

      600
      Montgomery Street, 44th Floor

      San
      Francisco, CA 94111

      Fax:
      (415) 981-5300
	
      $400,000.00
	
      $200,000.00

	
      LONGVIEW
      EQUITY FUND, LP

      600
      Montgomery Street, 44th Floor

      San
      Francisco, CA 94111

      Fax:
      (415) 981-5300
	
      $420,000.00
	
      $210,000.00

	
      LONGVIEW
      INTERNATIONAL EQUITY FUND, LP

      600
      Montgomery Street, 44th Floor

      San
      Francisco, CA 94111

      Fax:
      (415) 981-5300
	
      $180,000.00
	
      $90,000.00

	
      TOTALS
	
      $1,000,000.00
	
      $500,000.00

 

 

156

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00085-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00085-of-00352.parquet"}]]