Contract
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 00000 Xxx Xxxxxxx Xxxx., Xxxxx 000,
Xxx Xxxxxxx, Xxxxxxxxxx 00000, 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/ Xxxxxx X.
Xxxxxxxxx
Xxxxxx X.
Xxxxxxxxx, 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:_______________________________________
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