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Exhibit 10.2

MATERIAL TECHNOLOGIES, INC.
 
INCENTIVE STOCK OPTION AGREEMENT

THIS INCENTIVE STOCK OPTION AGREEMENT is made and entered into as of this 23rd
day of May, 2008, by and between Material Technologies, Inc., a Delaware
corporation (“Company”), and Robert M. Bernstein (referred to herein as the
“Optionee”), with reference to the following recitals of facts:

WHEREAS, the Board has authorized the granting to Optionee of an incentive stock
option (“Option”) to purchase shares of common stock of the Company (the
“Shares”) upon the terms and conditions hereinafter stated; and

WHEREAS, the Board and stockholders of the Company have heretofore adopted a
2008 Incentive and Nonstatutory Stock Option Plan, as amended (the “Plan”),
pursuant to which this Option is being granted;

WHEREAS, it is the intention of the parties that this Option be an Incentive
Stock Option (a “Qualified Stock Option”);

NOW, THEREFORE, in consideration of the covenants herein set forth, the parties
hereto agree as follows:

1.             Shares; Price.  The Company hereby grants to Optionee the right
to purchase, upon and subject to the terms and conditions herein stated,
300,000,000 Shares for cash (or other consideration acceptable to the Board of
Directors of the Company, in their sole and absolute discretion) at the price of
$0.005082 per Share, such price being not less than the fair market value per
share of the Shares covered by these Options as of the date hereof and as
determined by the Board of Directors of the Company.

2.             Term of Option; Continuation of Employment.  This Option shall
expire, and all rights hereunder to purchase the Shares shall terminate, ten
years from the date hereof.  This Option shall earlier terminate as set forth in
Paragraphs 5 and 6 hereof.  Nothing contained herein shall be construed to
interfere in any way with the right of the Company to terminate the employment
or engagement, as applicable, of Optionee or to increase or decrease the
compensation of Optionee from the rate in existence at the date hereof.

3.             Vesting of Option.  Subject to the provisions of Paragraphs 5 and
6 hereof, this Option shall vest and become exercisable during the term of
Optionee's employment or engagement in whole or in part beginning on the date of
this Agreement.

4.             Exercise.  In order to exercise this Option with respect to all
or any part of the Shares for which this Option is at the time exercisable,
Optionee must take the following actions:

 
 

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(a)           Execute and deliver to the Company a written notice of exercise
stating the number of Shares being purchased (in whole shares only) and such
other information set forth on the form of Notice of Exercise attached hereto as
Appendix A; and

(b)           Pay the aggregate Exercise Price for the purchased shares in one
or more of the following forms:
 
(i)            Cash or check made payable to the Company; or

(ii)           A promissory note payable to the Company, but only to the extent
authorized by the Company.

Should the Common Stock be registered under Section 12 of the Securities
Exchange Act of 1934, as amended (the “Exchange Act”) at the time the Option is
exercised, then the Exercise Price may also be paid as follows:

(iii)           In shares of Common Stock held by Optionee for the requisite
period necessary to avoid a charge to the Company’s earnings for financial
reporting purposes and valued at Fair Market Value on the Exercise Date; or

(iv)           To the extent the Option is exercised for vested Shares, through
a special sale and remittance procedure pursuant to which Optionee shall
concurrently provide irrevocable instructions (a) to a Company-approved
brokerage firm to effect the immediate sale of the purchased shares and remit to
the Company, out of the sale proceeds available on the settlement date,
sufficient funds to cover the aggregate Exercise Price payable for the purchased
shares plus all applicable Federal, State and local income and employment taxes
required to be withheld by the Company by reason of such exercise; and (b) to
the Company to deliver the certificates for the purchased shares directly to
such brokerage firm in order to complete the sale (a “cashless exercise
transaction”).

(v)           Notwithstanding any provisions herein to the contrary, if the Fair
Market Value of one share of the Company’s Common Stock is greater than the
Exercise Price (at the date of calculation as set forth below), in lieu of
exercising this Option by payment of cash, the Optionee may elect to receive
shares equal to the value (as determined below) of this Option (or the portion
thereof being canceled) by surrender of this Option at the principal office of
the Company together with the properly endorsed Notice of Exercise in which
event the Company shall issue to the Optionee a number of shares of Common Stock
computed using the following formula (a “net issuance transaction”):

X = Y (A-B)
A
 
Where    X =          the number of shares of Common Stock to be issued to the
Optionee
 
Y =          the number of shares of Common Stock purchasable under the Option
or, if only a portion of the Option is being exercised, the portion of the
Option being canceled (at the date of such calculation)
 

 
 

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A =          the Fair Market Value of one share of the Company’s Common Stock
(at the date of such calculation)
 
B =           Exercise Price (as adjusted to the date of such calculation)
 
For purposes of Rule 144 and sub-section (d)(3)(ii) thereof, it is intended,
understood and acknowledged that the Common Stock issuable upon exercise of this
Option in a net issuance transaction shall be deemed to have been acquired at
the time this Option was issued.  Moreover, it is intended, understood and
acknowledged that the holding period for the Common Stock issuable upon exercise
of this Option in a net issuance transaction shall be deemed to have commenced
on the date this Option was issued.

(c)           Execute and deliver to the Company such written representations as
may be requested by the Company in order for it to comply with the applicable
requirements of Federal and State securities laws.

(d)           Make appropriate arrangements with the Company (or Parent or
Subsidiary   employing or retaining Optionee) for the satisfaction of all
Federal, State and local income and employment tax withholding requirements
applicable to the Option exercise, if any.
 
(e)            If requested, execute and deliver to the Company a written
statement as provided for in Paragraph 11 hereof.
 
5.             Termination of Employment or Engagement.  If Optionee shall cease
to serve as an employee of the Company for any reason, whether voluntarily or
involuntarily, Optionee shall have the right, during the remaining term of the
Option, to exercise in whole or in part this Option to the extent, but only to
the extent, that this Option was exercisable as of the last day of employment,
and had not previously been exercised. The Option may be exercised only with
respect to installments that the Optionee could have exercised at the date of
termination of employment.

 Notwithstanding anything herein to the contrary, all rights under this Option
shall expire in any event on the date specified in Paragraph 2 hereof.

6.             Death of Optionee.  If the Optionee shall die while an employee
of the Company, Optionee’s personal representative or the person entitled to
Optionee’s rights hereunder may at any time during the remaining term of this
Option, exercise this Option and purchase Shares to the extent, but only to the
extent, that Optionee could have exercised this Option as of the date of
Optionee’s death; provided, in any case, that this Option may be so exercised
only to the extent that this option has not previously been exercised by
Optionee.

7.             No Rights as Stockholder.  Optionee shall have no rights as a
stockholder with respect to the Shares covered by any installment of this Option
until the date of the issuance of a stock certificate to Optionee, and no
adjustment will be made for dividends or other rights for which the record date
is prior to the date such stock certificate or certificates are issued except as
provided in Paragraph 8 hereof.

8.             Recapitalization.  Subject to any required action by the
stockholders of the Company, the number of Shares covered by this Option, and
the price per Share thereof, shall be

 
 

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proportionately adjusted for any increase in the number of issued Shares
resulting from a forward split of shares or the payment of a stock dividend, or
any other increase in the number of such shares affected without receipt of
consideration by the Company; provided however that the conversion of any
convertible securities of the Company shall not be deemed having been “effected
without receipt of consideration by the Company.”  The number of Shares covered
by this Option, and the price per Share thereof, shall not be affected or
adjusted for any decrease in the number of issued shares of common stock of the
Company resulting from a reverse split of shares, or any other decrease in the
number of such shares affected.

In the event of a proposed dissolution or liquidation of the Company, a merger
or consolidation in which the Company is not the surviving entity, or a sale of
all or substantially all of the assets of the Company, this Option shall
terminate immediately prior to the consummation of such proposed action, unless
otherwise provided by the Board.  The Board may, at its sole and absolute
discretion and without obligation, declare that this Option shall terminate as
of a date fixed by the Board and grant Optionee the right for a period
commencing 30 days prior to and ending immediately prior to such date, or during
the remaining term of this Option, whichever occurs sooner, to exercise this
Option as to all or any part of the Shares, without regard to the installment
provision of Paragraph 3; provided, however, that such exercise shall be subject
to the consummation of such dissolution, liquidation, merger, consolidation or
sale.

Subject to any required action by the stockholders of the Company, if the
Company shall be the surviving entity in any merger or consolidation, this
Option thereafter shall pertain to and apply to the securities to which a holder
of Shares equal to the Shares subject to this Option would have been entitled by
reason of such merger or consolidation, and the vesting provisions of Section 3
shall continue to apply.

In the event of a change in the Shares of the Company as presently constituted,
which is limited to a change of all of its authorized Shares without par value
into the same number of Shares with a par value, the Shares resulting from any
such change shall be deemed to be the Shares within the meaning of this
Agreement.

To the extent that the foregoing adjustments relate to shares or securities of
the Company, such adjustments shall be made by the Board, whose determination in
that respect shall be final, binding and conclusive.  Except as hereinbefore
expressly provided, Optionee shall have no rights by reason of any subdivision
or consolidation of share of stock of any class or the payment of any stock
dividend or any other increase or decrease in the number of shares of stock of
any class, and the number and price of shares subject to this Option shall not
be affected by, and no adjustments shall be made by reason of, any dissolution,
liquidation, merger or consolidation, or any issue by the Company of shares of
stock of any class or securities convertible into shares of stock of any class.

The grant of this Option shall not affect in any way the right or power of the
Company to make adjustments, reclassifications, reorganizations or changes in
its capital or business structure or to merge, consolidate, dissolve or
liquidate or to sell or transfer all or any part of its business or assets.

9.             Taxation upon Exercise of Option.  Optionee understands that,
upon exercise of this Option, Optionee may recognize income, for federal and
state income tax purposes, in an amount

 
 

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equal to the amount by which the fair market value of the Shares, determined as
of the date of exercise, exceeds the exercise price.  The acceptance of the
Shares by Optionee shall constitute an agreement by Optionee to report such
income in accordance with then applicable law and to cooperate with Company in
establishing the amount of such income and corresponding deduction to the
Company for its income tax purposes.  Withholding for federal or state income
and employment tax purposes will be made, if and as required by law, from
Optionee's then current compensation, or, if such current compensation is
insufficient to satisfy withholding tax liability, the Company may require
Optionee to make  cash payment to cover such liability as a condition of the
exercise of this Option.

10.           Modification, Extension and Renewal of Options.  The Board may
modify, extend or renew this Option or accept the surrender thereof (to the
extent not theretofore exercised) and authorize the granting of a new option in
substitution therefore (to the extent not theretofore exercised), subject at all
times to the Plan.  Notwithstanding the foregoing provisions of this Paragraph
10, no modification shall, without the consent of the Optionee, alter to the
Optionee's detriment or impair any rights of Optionee hereunder.

11.           Investment Intent; Restrictions on Transfer.  Optionee represents
and agrees that if Optionee exercises this Option in whole or in part, Optionee
will in each case acquire the Shares upon such exercise for the purpose of
investment and not with a view to, or for resale in connection with, any
distribution thereof; and that upon such exercise of this Option in whole or in
part, Optionee (or any person or persons entitled to exercise this Option under
the provisions of Paragraphs 5 and 6 hereof) shall furnish to the Company a
written statement to such effect, satisfactory to the Company in form and
substance.  The Company, at its option, may include a legend on each certificate
representing Shares issued pursuant to any exercise of this Option, stating in
effect that such Shares have not been registered under the Securities Act of
1933, as amended (the “Act”), and that the transferability thereof is
restricted.  If the Shares represented by this Option are registered under the
Act, either before or after the exercise of this Option in whole or in part, the
Optionee shall be relieved of the foregoing investment representation and
agreement and shall not be required to furnish the Company with the foregoing
written statement.

Optionee further represents that optionee has had access to the financial
statements or books and records of the Company, has had the opportunity to ask
questions of the Company concerning its business, operations and financial
condition, and to obtain additional information reasonably necessary to verify
the accuracy of such information, and further represents that Optionee has
(either such experience and knowledge in investment, financial and business
matters in investments similar to the stock of the Company that Optionee is
capable of evaluating the merits and risks thereof and has the capacity to
protect his or her own interest in connection therewith.

12.           Notices.  Any notice required to be given pursuant to this Option
or the Plan shall be in writing and shall be deemed to be delivered upon receipt
or, in the case of notices by the Company, five days after deposit in the US.
mail, postage prepaid, addressed to Optionee at the address last provided to the
Company by Optionee for his or her employee records.

13.           Agreement Subject to Plan; Applicable Law.  This Agreement is made
pursuant to the Plan and shall be interpreted to comply therewith.  A copy of
such Plan is available to Optionee, at no charge, at the principal office of the
Company.  Any provision of this Agreement inconsistent

 
 

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with the Plan shall be considered void and replaced with the applicable
provision of the Plan.  This Agreement has been granted, executed and delivered
in the State of Delaware, and the interpretation and enforcement shall be
governed by the laws thereof and subject to the exclusive jurisdiction of the
courts therein.

IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
date first above written.

Material Technologies, Inc.
 
 
 /s/ Robert M.
Bernstein                                                                           
BY: Robert M. Bernstein
ITS: Chief Executive Officer, President
and Chief Financial Officer
 
 
 
/s/ Robert M.
Bernstein                                                                           
Robert M. Bernstein, Optionee
 

Acknowledged as authorized by the Board of Directors of the Company
 

 /s/ Joel R.
Freedman                                                                                     
BY: Joel R. Freedman
ITS: Secretary

 
 

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Appendix A
 
NOTICE OF EXERCISE

Material Technologies, Inc.
11661 San Vicente Boulevard, Suite 707
Los Angeles, CA  90049

(1)           ¨           The undersigned hereby elects to purchase ________
shares of the Common Stock of Material Technologies, Inc. (the “Company”)
pursuant to the terms of the attached Option and tenders herewith payment of the
exercise price in full, together with all applicable transfer taxes, if any.
 
¨           The undersigned hereby elects to purchase ________ shares of the
Common Stock of the Company pursuant to the terms of the cashless exercise
provisions set forth in Section 4(b)(iv) of the attached Option, and shall
tender payment of all applicable transfer taxes, if any.
 
(2)           Please issue a certificate or certificates representing said
shares of Common Stock in the name of the undersigned or in such other name as
is specified below:
 
________________________
(Name)
 
________________________
________________________
(Address)
 
(3)           The undersigned represents that (i) the aforesaid shares of Common
Stock are being acquired for the account of the undersigned for investment and
not with a view to, or for resale in connection with, the distribution thereof
and that the undersigned has no present intention of distributing or reselling
such shares; (ii) the undersigned is aware of the Company’s business affairs and
financial condition and has acquired sufficient information about the Company to
reach an informed and knowledgeable decision regarding its investment in the
Company; (iii) the undersigned is experienced in making investments of this type
and has such knowledge and background in financial and business matters that the
undersigned is capable of evaluating the merits and risks of this investment and
protecting the undersigned’s own interests; (iv) the undersigned understands
that the shares of Common Stock issuable upon exercise of this Option have not
been registered under the Securities Act of 1933, as amended (the “Act”), by
reason of a specific exemption from the registration provisions of the Act,
which exemption depends upon, among other things, the bona fide nature of the
investment intent as expressed herein, and, because such securities have not
been registered under the Act, they must be held indefinitely unless
subsequently registered under the Act or an exemption from such registration is
available; (v) the undersigned is aware that the aforesaid shares of Common
Stock may not be sold pursuant to Rule 144 adopted under the Act unless certain
conditions are met and until the undersigned has held the shares for the number
of years prescribed by Rule 144, that among the conditions for use of the Rule
is the availability of current information to the public about the Company and
the Company has not made such information available and has no present plans to
do so; and (vi) the undersigned agrees not to make any disposition of all or any
part of the
 

 
 

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aforesaid shares of Common Stock unless and until there is then in effect a
registration statement under the Act covering such proposed disposition and such
disposition is made in accordance with said registration statement, or the
undersigned has provided the Company with an opinion of counsel satisfactory to
the Company, stating that such registration is not required.
 
_______________________________________
(Date)
_____________________________________
(Signature)
 
_____________________________________
(Print name)

 
 
 
 
 
 
 

 
 
 

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