Document:

matechexh10_17.htm

    
      
        

      
Exhibit
10.17

       

      STOCKHOLDER
LOCKUP AGREEMENT

      

      THIS 
AGREEMENT (the Agreement”) is dated October 27, 2006 (the Effective Date”), and
is made by and between the entities and individuals whose names appear on the
signature pages of this Agreement (collectively the Stockholders” or
individually a Stockholder”) and Material Technologies, Inc., a Delaware
corporation (the Company”).

      

      The
Stockholders are the holders of outstanding Shares of Common Stock and rights to
acquire Common Stock of the Company (the Shares”).  The Company is a
publicly-held corporation.  The Stockholders and the Company wish to make
special provisions for the relationships between and among the Stockholders and
between themselves and the Company.  They have reached agreement about
certain procedures about the transfer of Shares.  They believe that these
provisions, as set forth in this Agreement, are necessary and desirable and
serve the best interests of the Stockholders and the Company.  The Company
and certain parties which have agreed to provide financial accommodations to the
Company have required that the undersigned Stockholders enter into this
Agreement.  In consideration of these premises and the mutual covenants
expressed in this Agreement, and other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged the parties agree as
follows.

      

      Section
1.  Share Transfer Restrictions

       

      Section 1.01.  Prohibition Against Any
Transfers Except as Authorized in This Agreement.  Except as
otherwise provided in Section 1.02 of this Agreement, an interest in the
Shares of the Company may not be voluntarily or involuntarily transferred,
assigned, hypothecated or sold, by operation of law or otherwise, by any
Stockholder for a period of three years from the Effective Date of this
Agreement.  Notwithstanding the foregoing, in the event the Company shall
pay or convert in full its Class A Senior Secured Convertible Debentures, then
this Agreement shall be terminated at the option of the Company.

       

      All
Stockholders signing this Agreement shall be subject to the restrictions on the
sale or transfer of their Common Stock regarding the Stockholders of the Company
whether or not any other stockholder of the Company signed this
Agreement.

       

      Section 1.02.  Exempted
Transfers.  The prohibition in Section 1.01 shall not
apply to a transfer of an interest in the Shares of the Company, with
restrictive legends, so long as the transferee of such Shares agrees to be bound
by this Agreement, and executes an Agreement substantially identical to this
Agreement:  (i) to the Company; (ii) to any other holder of
Shares; (iii) to members of a Stockholder’s immediate family, which
immediate family for the purposes of this section shall mean a Stockholder’s
spouse, parents, lineal descendants (including adopted children and
stepchildren) and the spouse of any lineal descendant and brothers and sisters;
(iv) to a trust treated as owned by a grantor who is a person listed in
Section 1.02(iii) above under Sections 671-679 of the Internal Revenue
Code, (v) that has been approved in writing by the Company; (vi) to
any executor or administrator upon the death of a Stockholder; or (vii) by
merger or share exchange or an exchange of existing Shares for other Shares of
the same or a different class or series in the Company; or (viii) the sale,
transfer or pledge of Shares by a Stockholder to a bank or other financial
institution or person for the purpose of obtaining funds to be loaned to the
Company.  Notwithstanding anything contained herein to the contrary,
an

      
        
           

        

        
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      interest
in the Shares of the Company may not be voluntarily or involuntarily
transferred, by operation of law or otherwise, if such transfer would result in
a violation of the Securities Act of 1933, as amended (the Act”), as may be
applicable.

      

      Notwithstanding
the foregoing, after the Company has successfully raised at least $2.5 million
in financing, the Stockholder may sell up to $2,500,000 worth of Shares in an
arm’s length transaction with a third-party, at a discount of no more than fifty
percent (50%) of the lowest closing bid price for the ten (10) prior trading
days, without restriction and without the necessity of the buyer thereof
becoming subject to this Agreement.

      

      Section
1.03.  Attempted
Transfers in Violation of Share Transfer Restrictions.  An attempt
to transfer an interest in the Shares of the Company in violation of Section 1
shall be void and the Company shall refuse to register the Shares in question in
the name of the transferee on the books of the Company.  The Company shall
place stop transfer instructions on the Shares in an effort to monitor
compliance with this Agreement.

      

      Section
2.  Miscellaneous

      

      Section
2.01.  Binding
Effect. 
This Agreement shall be binding upon the parties and their heirs, executors,
administrators, successors, assigns and any other transferee and the spouse of
any individual Stockholder.  Each transferee and the spouse each transferee
shall sign the form in Exhibit A evidencing their consent to be bound by
the terms of this Agreement as a prerequisite to registration of any Shares in
the name of the transferee.  Failure to sign shall not, however, in any way
prevent this Agreement from being binding on the transferee and the transferee’s
spouse.

      

      Section 2.02.  Shares Covered by this
Agreement.  This Agreement shall apply to all Shares that are now or
hereafter registered in the Company’s records in the name of a Stockholder and
to all Shares now or hereafter beneficially owned by a Stockholder pursuant to a
trust under which the Stockholder is a beneficiary, other than shares purchased
by a Stockholder in an open-market transaction through a broker/dealer, in a
transaction that was not pre-arranged with another Stockholder that has executed
an Agreement similar to this Agreement.  It shall also apply to any stock
options and any warrants, stock conversion privileges or any other Share rights
actually or beneficially now or hereafter owned by a Stockholder in the Company
and all Shares or rights to Shares of any other corporation into which such
Shares may be changed, or for which they may be exchanged, whether through
reorganization recapitalization, stock split-up, combinations of Shares, merger
or consolidation.  Any Shares acquired by means of stock options, warrants,
conversion privilege or other right exercised subsequent to any sale pursuant to
this Agreement shall be offered for sale at the same price and on the identical
other terms as the Shares owned or previously owned by the Stockholder acquiring
such Shares.

      

      Section
2.03. 
Remedies.  Any controversy or claim arising out of or related to
this Agreement or other documents or agreements between the Company and one or
more of the Stockholders, or the governance of the Company shall be settled,
except as may otherwise be provided herein, by binding arbitration in accordance
with the Commercial Arbitration Rules of the American Arbitration Association in
a proceeding to be held in Los Angeles, California.  Any dispute as to
whether a controversy or claim is subject to arbitration shall be submitted as
part of the arbitration proceeding.  The arbitration shall be conducted by
a single arbitrator selected by the American Arbitration Association.  The
arbitrator shall take evidence directly

      
        
           

        

        
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      from
witnesses and documents as presented by the parties; all witnesses shall be made
available for cross examination. The arbitrator shall render a written decision,
stating his reason for it, and shall render an award within six months of the
request for arbitration or fifteen days following the arbitration hearing, and
such an award shall be final and binding upon both parties.  The award may
include any legal or equitable relief that could be ordered by a court of
general jurisdiction.  Judgment upon the award may be entered in any court
of record of competent jurisdiction, or application may be made to such court
for judicial acceptance of the award and an order of enforcement, as the law of
such jurisdiction may require or allow. 

      

      Section 2.04.  Waiver.  A
party’s failure to insist on compliance or enforcement of any provision of this
Agreement, shall not effect the validity or enforceability or constitute a
waiver of future enforcement of that provision or of any other provision of this
Agreement by that party or any other party.

      

      Section 2.05.  Governing Law. 
This Agreement shall in all respects be subject to, and governed by, the laws of
the State of California.

      

      Section 2.06.  Severability. 
The invalidity or unenforceability of any provision in this Agreement shall not
in any way affect the validity or enforceability of any other provision and this
Agreement shall be construed in all respects as if such invalid or unenforceable
provision had never been in the Agreement.

      

      Section 2.07.  Entire
Agreement.  The parties expressly acknowledge that this Agreement,
and the Company’s Articles of Incorporation, as amended, and its Bylaws, as
amended, constitute the entire contract between the parties concerning the
subject matter contained herein, and that unless otherwise provided in this
Agreement, any other agreements or understandings, oral or written, of any
nature concerning such matters are superseded and revoked.

      

      Section 2.08.  Amendment. 
This Agreement shall not be modified or amended except by means of a writing
signed by each Stockholder and one or more officers duly authorized to act on
behalf of the Company.

      

      Section
2.09. 
Termination.  This Agreement shall terminate upon the earlier of
three years from the date hereof, or the date upon which the Company has repaid
or converted in full all of its Class A Senior Secured Convertible Debentures
(as may be extended, amended or modified at any time by the Company and the
holder of the Debentures).

      

      Section 2.10.  Compliance with Securities
Laws.

      

      (a)   Investment
Representation.  Each Stockholder represents to all other
Stockholders and to the Company that all Shares have been acquired for
investment and not with a view to the sale or distribution thereof within the
meaning of the Securities Act of 1933, as amended (the Securities Act”); and
that he, she or it has no present intention of selling or otherwise disposing of
any of the Shares for their own account and no one else has or will have a
beneficial ownership in any of his, her or its Shares; and that he, she or it
has been advised that the Shares have not been registered with the Securities
and Exchange Commission and may not be offered, sold or otherwise transferred
except in compliance with the Securities Act.

      
        
           

        

        
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      (b)   Restricted Securities;
Legend Requirement.  Each Stockholder acknowledges and understands
that the Shares are restricted, that they are being issued to him, her or it in
a private transaction in reliance upon Regulation D under the Securities Act,
and that the Shares have not been registered under the Act or the securities
laws of any states in reliance on exemptions from the registration requirements
of the Act and state securities laws.  The Shares are subject to
restrictions on transferability and may not be transferred or resold except as
permitted under the Securities Act and applicable state laws pursuant to
registration or exemption therefrom.  In addition, this Agreement contains
additional restrictions on the transferability of the Shares.  The Shares
have not been approved or disapproved by the U. S. Securities and Exchange
Commission or any other regulatory authority.  Each Stockholder further
acknowledges and understands that each certificate evidencing the Shares will
bear substantially the following legend:

      

      The
Shares represented by this Certificate have not been registered under the
Securities Act of 1933 (the "Act") and are restricted securities” as that term
is defined in Rule 144 under the Act.  The Shares may not be offered for
sale, sold or otherwise transferred except pursuant to an effective registration
statement under the Act, or pursuant to an exemption from registration under the
Act, the availability of which is to be established to the satisfaction of the
Company.  In addition, the rights and obligations of the holder of this
Certificate, and the ability of the holder to transfer the Shares represented by
this Certificate, are subject to the terms and conditions of a Stockholder
Lock-Up Agreement, a copy of which can be obtained from the Company upon written
request.”

      

      (c)   If
the Board of Directors so requests, the Stockholder shall deliver an opinion of
counsel satisfactory to the Company and its counsel, to the effect that the
proposed transfer at such time will not violate the Securities Act or applicable
state securities laws.

      

      Section
2.11. Counterparts/Facsimile
..  This Agreement may be executed in two or more counterparts, each of
which shall be deemed an original but all of which together will constitute one
and the same instrument.  A facsimile or other reproduction of this
Agreement may be executed by one or more of the parties, and an executed copy of
this Agreement may be delivered by one or more of the parties by facsimile or
similar instantaneous electronic transmission device pursuant to which the
signature of, or on behalf of, such party can be seen, and such execution and
delivery shall be considered valid, binding and effective for all
purposes.  At the request of a party, the other parties agree to execute an
original of this Agreement as well as any facsimile or other reproduction of
this Agreement.

      

      Section
2.12. 
Notices.  Any and all offers, acceptances, consents, waivers and
other notices required by this Agreement shall be deemed to be sent or delivered
when personally delivered to the recipient as follows:  in the case of the
Company, at its registered office located at 11661 San Vicente Blvd., Suite 707,
Los Angeles, California 90049, and in the case of a Stockholder or his, her or
its successor in interest, at the Stockholder’s address appearing on the books
of the Company or at such other address as may be designated by the Stockholder
(or his, her or its successor in interest).  Any notice required to be made
within a stated period of time shall be considered timely mailed if deposited
before midnight of the last day of the stated period.

      

      Section
2.13.  Days”
Defined.  Any reference in this Agreement to days” means
all

      
        
           

        

        
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      calendar
days, exclusive of Saturdays, Sundays and days which are legal holidays under
the laws of the State of California.

      

      Section
2.14.  References
to Gender and Number Terms.  In construing this Agreement, feminine
or neuter pronouns shall be substituted for those masculine in form and  visa versa , and
plural terms shall be substituted for singular and singular for plural in any
place in which the context so requires.

      

      Section
2.15. 
Headings.  The section headings in this Agreement are inserted for
convenience only and are not part of the Agreement.

      

      Section
2.16.  References
to the Internal Revenue Code and Other Statutes.  Any reference
to any other statute in this Agreement includes any amendment, replacement or
recodification of such statute.

      

      

      IN
WITNESS WHEREOF, the parties hereto have executed this Stockholder Agreement as
of the Effective Date.

      

      COMPANY:                 Material
Technologies, Inc.

       

      By:  /s/ Robert M.
Bernstein                  
   

      Robert M.
Bernstein, Chairman and CEO

      

      

       STOCKHOLDER:

       

      Entity:

       

      By:                                                       
          

       

       

      Printed
Name:                                    
          

      

      

      

      

      

      

      
        
           

        

        
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      SPOUSAL
CONSENT

      

      

          Each
of the undersigned, being the spouse of a Stockholder who has signed this
Agreement, hereby acknowledges that he or she has read and is familiar with its
provisions and agrees to be bound thereby and to join therein to the extent, if
any, that his or her joinder may be necessary.  The undersigned hereby
agrees that his or her spouse may join in any future amendment or modification
of this Agreement without any further signature, acknowledgment, agreement or
consent on his or her part; and further agrees that any interest which he or she
may have in the Shares of stock in the Company owned directly or beneficially by
his or her spouse shall be subject to the provisions of this
Agreement.

      

      

      

      

      

      By:____________________________________________

      

       Printed
Name:____________________________________

      

      

      

      

      

      

      

      

      

      

      

      

      

      

      

      

      

      

      

      

      

      
        
           

        

        
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      EXHIBIT
A

      

      Signatures by Transferees
and Spouses of Transferees

      

      

      A. Transferees. 
The undersigned, as a transferee of Shares of the Company pursuant to the
Stockholder Agreement dated October 27, 2006, hereby acknowledges and agrees
that he or she has read and is familiar with this Agreement and that he and his
heirs, executors, administrators, successors, assigns and any other transferee
of any interest in the Company’s Shares actually or beneficially owned by him or
her are bound by all of its provisions.

      

      

      Name of
Transferee:___________________________________

      

      

      Printed
Name:________________________________________

      

      

      Date of
Transfer:______________________________________

      

      

          B. Spouses of
Transferees.  Each of the undersigned, being the spouse of a 
who has signed Paragraph A of this Exhibit A, hereby acknowledges that he
or she has read and is familiar with the provisions of the Stockholder Agreement
dated October 27, 2006, and agrees to be bound thereby and to join therein to
the extent, if any, that his or her joinder may be necessary.  The
undersigned hereby agrees that his or her spouse may join in any future
amendment or modification of this Agreement without any future signature,
acknowledgment agreement or consent on his or her part; and further agrees that
any interest which he or she may have in the Shares of stock in the Company
owned directly or beneficially by his or her spouse shall be subject to the
provisions of this Agreement.

      

      

      Name of
Spouse:______________________________

      

      

      Printed
Name:________________________________

      

      

      Date:_______________________________________

      

      

      

      

      

      

      

      
        
           

        

        
          7matechexh10_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.

     

    [remainder of
page intentionally left blank; signature page to follow]

     

     

     

     

     

    
      
         

      

      
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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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