SECURITY AGREEMENT
(TO PAY FOR PAST LEGAL SERVICES)
This Agreement is made as of August 1, 2002 by and between ▇▇▇▇▇▇ ▇.
BRUNETTE, an individual who resides at ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ (hereafter "BRUNETTE"), and ▇▇▇▇▇▇ ▇▇▇▇, ▇▇., an individual
who resides at ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ (hereafter "HILL"), and
MATERIAL TECHNOLOGIES, INC., a Delaware corporation with offices at ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, #▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ (hereafter "MATECH"), with
reference to the following facts:
Whereas, on ▇▇▇▇▇ ▇▇, ▇▇▇▇ ▇▇▇▇▇▇▇▇ and HILL entered into a Basic
Attorney Representation Agreement with MATECH and its current President and
majority shareholder ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ (hereafter "▇▇▇▇▇▇▇▇▇") to represent
them in any legal action against them subsequently brought by ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇ (a copy of which is attached as Exhibit A hereto);
Whereas, on April 30, 2001 MATECH filed a lawsuit in the Los Angeles
Superior Court entitled Material Technologies, Inc. v. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇,
▇▇▇▇ ▇▇▇▇▇ ▇▇. ▇▇▇▇▇▇▇▇, seeking the return of 244,427 shares of MATECH common
stock, or the reasonable value thereof, and on April 30, 2001 ▇▇▇▇ filed a
lawsuit in said Court entitled ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇ v. ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇,
Material Technologies, Inc., et al, LASC Civil No. BC249547 seeking damages for
breach of contract, and other claims (hereafter collectively called the
"Superior Court Actions");
Whereas, on or about April 25, 2002 said Court granted MATECH/
▇▇▇▇▇▇▇▇▇'▇ Summary Adjudication motion in ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, et al, BC249547
denying ▇▇▇▇'▇ breach of contract and related causes of action, thereby
rendering ▇▇▇▇'▇ remaining claims similarly vulnerable, and the Matech ▇. ▇▇▇▇
BC249495 action subject to Summary Judgment for MATECH; and
Whereas, on or about July 15, 2002 ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇ and MATECH/
▇▇▇▇▇▇▇▇▇ entered into a written Settlement Agreement to avoid further
litigation, which the parties hereto deem to be a successful defense of the ▇▇▇▇
lawsuit under the said Basic Attorney Representation Agreement.
Therefore, the undersigned parties agree as follows:
1. Consideration
(a) In return for past legal services rendered by BRUNETTE and HILL
to MATECH and ▇▇▇▇▇▇▇▇▇, and in addition to any previous
monies or MATECH Common Stock issued to them for such
services, MATECH agrees to promptly enter into a Promissory
Note payable jointly to BRUNETTE and HILL 50-50 percent each
in the amount of $1,481,895.00 U.S., plus interest thereon at
the rate of eight percent (6%) per annum commencing on August
1, 2002 until paid by MATECH from its earnings before
interest, taxes, depreciation and amortization ("EBITDA"),
which will be determined in accordance with generally accepted
accounting principles consistently applied until paid in full,
in the form and on the terms in that Promissory Note attached
hereto and made a part hereof by this reference as Exhibit B.
(hereafter the "Note").
(b) Said payments on said Note shall be made from time to time
EBIDTA to BRUNETTE and HILL in equal amounts until the entire
debt is paid in the names of "▇▇▇▇▇▇ ▇. Brunette" for
BRUNETTE, and "▇▇▇▇▇▇ ▇▇▇▇, ▇▇." for HILL. Said monies
actually paid shall then be reportable by MATECH for federal
and state governments on Form 1099 as Independent Consultant
income to BRUNETTE and HILL, respectively, and not as
employees of MATECH.
2. Entire Agreement
The parties acknowledge that they have had sufficient opportunity to
make diligent inquiry into and consult with independent counsel
concerning this Agreement. This Agreement contains the entire
Agreement between the parties as to the above subject matter and
supercedes in its entirety the Basic Attorney Representation Agreement
attached as Exhibit A and the letter dated March 23, 2001 which
supplemented the Basic Attorney Representation Fee Agreement.
3. Invalid Provisions
If, after the date hereof, any provisions of this Agreement is held to
be illegal, invalid or unenforceable under present or future laws
effective during the terms of this Agreement, such provision shall be
fully severable. In lieu thereof, there shall be added a provision as
similar in terms to such illegal, invalid or unenforceable provisions
as may be possible and be legal, valid and enforceable.
4. Successors
This Agreement shall be binding upon all assignees, affiliates and
successors in interest to MATECH to the full extent of the law
applicable hereto.
5. Audit and Inspection
BRUNETTE and HILL, either individually or jointly, may, at their sole
discretion, and upon reasonable prior notice to MATECH, but not less
than three calendar days, be granted access to the financial ledgers,
books of account and similar business records of MATECH for the purpose
of auditing its income, expenses, tax records, public filings, and the
like to determine amounts payable to BRUNETTE and Hill on such Note
EBIDTA. And, they may make copies of such records as they deem
reasonably necessary at their sole expense.
6. Supplemental Documents
All parties agree to promptly sign and return any and all forms or
supplementary documents, in good faith, and take additional actions
which are necessary to give full force and effect to the basic terms
and intent of this Agreement.
7. Corporate Authority
▇▇▇▇▇▇▇▇▇ represents and warrants that MATECH has fully authorized the
execution of this Agreement under its Bylaws and Articles and Delaware
law, and that MATECH's Board of Directors has approved and/or ratified
his signing this Agreement on MATECH's behalf.
8. Construction Under California Law
This Agreement is entered into in the State of California, and shall be
construed and interpreted in accordance with its laws, except for its
choice of law principles. In any action to interpret or enforce the
terms of this Agreement the prevailing party shall be reimbursed its
costs, including reasonable attorneys fees, by the other party.
9. Arbitration of Disputes
If a dispute arises between Attorneys and client regarding fees or
services in connection with the above-referenced transaction, such
dispute shall be submitted to binding arbitration. This includes any
claim for breach of contract, negligence, breach of fiduciary duty or
other wrongdoing.
Any actions, controversies, claims, disputes and/or other factual or
legal matters in question arising out of or relating to this Agreement,
or the alleged breach thereof, shall be settled by arbitration
conducted in accordance with the California Arbitration Act (Code of
Civil Procedure Section 1280, et seq.) as then in effect except as
provided herein.
The parties to such arbitration shall be entitled to conduct discovery
and take depositions pursuant to the provisions of Code of Civil
Procedure Section 1283.05, without giving effect to the limitations
contained in Code of Civil Procedure Section 1283.059(e).
Unless the parties agree otherwise, any arbitration shall be held in
Los Angeles County, California, before three independent arbitrators
appointed by the Judicial Arbitration and Mediation Services. In the
event that the Judicial Arbitration and Mediation Services shall not
then exist or fail or refuse to appoint such arbitrators, one
arbitrator shall be selected by one party or factions and one
arbitrator shall be selected by the other party or faction. The two
arbitrators shall select a third arbitrator to arbitrate the dispute.
If either party or faction party does not timely select an arbitrator,
the arbitrator selected by the other party or faction shall arbitrate
the dispute.
Costs and fees of the arbitrators shall be borne by the non-prevailing
party, unless the arbitrators determine otherwise. The award of the
arbitrators, which may include equitable relief, shall be final and
judgment may be entered upon it in accordance with applicable law in
any court having jurisdiction thereof. Any demand for arbitration
shall be in writing and must be made within a reasonable time after the
claim, dispute or other matter in questions has arisen. In no event
shall the demand for arbitration be made after the date that
institution of legal or equitable proceedings based upon such claim,
dispute or other matter would be barred by the applicable statute of
limitations or the date specified in this Agreement, whichever is the
earlier.
Such arbitration shall be conducted in accordance with the rules of California
Code of Civil Procedures § 1280 et seq. The arbitrator shall have the discretion
to order the losing party in the arbitration proceedings to reimburse the
prevailing party for all costs and fees incurred in connection with the
arbitration, including without limitation, attorney fees and arbitrator's fee.
YOUR INITIALS You acknowledge that we have explained to you that such binding
BELOW SIGNIFY arbitration may deprive you of various rights that you otherwise
ACKNOWLEDGMENT OF might have in a legal action, including without limitation the right
THIS EXPLANATION to a jury trial, the right to appeal, and full discovery rights.
(initials)
10. Effectiveness
This Agreement shall become effective as of the date first stated above
upon mutual execution by the parties, and may be executed in several
counterparts, each of which shall be deemed an original but all of
which together shall constitute one and the same Agreement.
11. No Personally Liability
Each of the parties hereto acknowledge and agree that ▇▇▇▇▇▇▇▇▇ shall
have no obligation to pay any sums under this agreement or the note,
and all personal obligations of ▇▇▇▇▇▇▇▇▇ under the Basic Attorney
Representation Agreement attached as Exhibit A and the letter dated
March 23, 2001, are hereby null and void.
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ MATERIAL TECHNOLOGIES, INC.
By By
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Individually President
(corporate seal)
▇▇▇▇▇▇ ▇▇▇▇, ▇▇. ▇▇▇▇▇▇ ▇. BRUNETTE
By By
▇▇▇▇▇▇ ▇▇▇▇, ▇▇., Esq. ▇▇▇▇▇▇ ▇. Brunette, Esq.