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
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
subm
