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)
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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
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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.
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(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
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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
|
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If to
Continental
Advisors:
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To the
last known address provided in
writing
by Continental Advisors
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| 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
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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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