FINANCING ESCROW AGREEMENT
This Escrow Agreement (this
“Agreement”) is dated as of July 31, 2008, by and between Material Technologies,
Inc., a Delaware corporation (“MaTech”), on the one hand, Continental Advisors,
SA (“Continental”), on the other hand, and Corporate Legal Services, LLP (the
“Agent”), as escrow agent. Each of MaTech and Continental Advisors
shall be referred to as a “Party” and collectively as the
“Parties.”
I.
Escrow
1.01 Appointment and Acknowledgment of
Escrow Agent.
MaTech and Continental Advisors 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 cause to be deposited one hundred percent (100%) of the net proceeds of any
financing with Continental (including by sale of shares, debentures, or any
other securities, as well as the proceeds of any exercise or conversion of
warrants or other convertible securities) into a bank account in the name of
Agent at a bank to be determined from time to time by Agent, but initially
National Bank of California.
The funds described in Section 1.01(a)
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 not
include such dividends, interest, or accretions.
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 request for withdrawal from MaTech, which shall not exceed the
maximum amount of Two Hundred Sixty Thousand Dollars ($260,000) (the “Maximum
Monthly Withdraw Amount”) in any thirty day period, the Agent shall without
further action remit such the amount requested to MaTech within three business
days.
(b) Upon
the closing of any transaction pursuant to which MaTech receives cash proceeds
of not less than One Hundred Thousand Dollars ($100,000), the Maximum Monthly
Withdrawal Amount shall be reduced by ten percent (10%) of the net
cash proceeds received by MaTech (the “Reduction”), but such Reduction shall not
exceed One Hundred Sixty Thousand Dollars ($160,000). The Reduction
shall continue for a number of months equal to the result of
(i)
the
amount of cash proceeds received by MaTech, divided by (ii) the amount of such
Reduction.
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 legal fees and expenses) incurred by the Agent in connection with its
duties hereunder.
(c) MaTech
and Continental Advisors, 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. 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 faith on the advice of any counsel retained by
the Agent, which may be Corporate Legal Services, LLP. 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 knowing,
intentional and deliberate bad faith. Agent shall not be responsible
for or liable for any loss that is caused by events not within the exclusive
control of Agent, and shall not be liable or responsible for any loss, damage or
expense caused by a delay or event caused by any third party or other event not
within the control of Agent, including delays caused by the bank or federal
reserve, errors in processing wire requests or bank drafts or similar
events. The Agent shall not have any fiduciary duty to any of the
Parties hereunder, and shall not be deemed to be providing legal services to any
Party hereunder by reason of this Agreement.
(d) The
Parties specifically acknowledge and agree that Agent shall have full authority
to comply with any instruction to release Escrowed Property, up to the Maximum
Monthly Withdrawal Amount, as adjusted as provided herein, without any further
consent, notification or other action of Continental Advisors, and Agent shall
have the right to disregard any instruction of Continental Advisors to the
contrary.
(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 so long
as the Agent shall have given its prior written consent thereto. The
Agent shall not be bound by any assignment by MaTech or Continental Advisors of
its rights hereunder unless the Agent shall have received written notice thereof
from the assignor and shall have consented to such assignment. 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, 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 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,
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). 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, terminate. 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 Continental Advisors 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 intentional, knowing and deliberate bad faith or gross active
negligence, will terminate upon the delivery by the Agent of all the Escrowed
Property under any provision of this Agreement. This Agreement shall
be deemed to have terminated on the date all of the Escrowed Property has been
distributed by Agent, or the date Agent provides written notice of termination
of this Agreement to MaTech, whichever is earlier.
(j) As
consideration for acting as escrow agent hereunder, MaTech shall pay, out of the
Escrowed Funds, 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) Any
interest or dividends paid on the Escrowed Property shall be retained by the
Agent as additional compensation as and when received by the
Agent. Any fees charged by the bank holding the Escrowed Property
(such as monthly bank service charges) shall be paid out of the Escrowed
Property.
II.
Miscellaneous
2.01 Further Action.
At any time and from time to time,
MaTech and Continental Advisors 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.
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. Any legal action or proceeding arising from or related to this
Agreement must be brought within six months following the termination of this
Agreement, or shall forever be barred.
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.
00000 Xxx Xxxxxxx Xxxxxxxxx,
Xxxxx 000
Xxx Xxxxxxx,
XX 00000
Attn: Xxxxxx X.
Xxxxxxxxx, President
Facsimile (000)
000-0000
If to
Continental To
the last known address provided in
Advisors:
writing by Continental Advisors
If to
Agent:
Corporate Legal Services, LLP
0000 Xxxx Xxxxxx
Xxxxx Xxxxxx, Xxxxxxxxxx
00000
Facsimile: (000)
000-0000
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 Continental Advisors 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.
2.9 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.
2.10 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 Santa Monica, 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.
IN WITNESS WHEREOF, the Parties have
duly executed this Financing Escrow Agreement as of the date first written
above.
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“MaTech”
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“Continental
Advisors”
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Material
Technologies, Inc.
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Continental
Advisors, SA
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/s Xxxxxx X.
Xxxxxxxxx
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By: Xxxxxx
X. Xxxxxxxxx
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By:
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Its: President
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Its:
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“Agent”
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Corporate
Legal Services, LLP
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By: Xxxx
Xxxxxxxx, Esq.
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Its: Managing
Partner
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