matechexh10_31.htm


    
      

    

     

    Exhibit
10.31

    
 

    
      STOCK
OPTION AGREEMENT

MATERIAL TECHNOLOGIES, INC.,
a Delaware
corporation (the “Company”)


       

    

    
                THIS
STOCK OPTION AGREEMENT (this “Option”) is intended to certify that, pursuant to
that certain Consulting Agreement with the Company of even date herewith, Bud
Shuster, an individual, or his assigns (collectively, the “Holder”) is entitled,
subject to the terms and conditions set forth herein, to purchase, 24,000 shares
of Class B common stock of the Company (the “Option Shares”) from Robert M.
Bernstein, an individual (the “Seller”), upon exercise at a purchase price of
$0.50 per Option Share (the “Option
Price”).

          1.       TERM. 
Subject to the terms of this Option, the Holder shall have the right, at any
time during the period commencing at 9:00 a.m., Pacific Time, on the 9th day of
April, 2008 and ending at 5:00 p.m., Pacific Time, on the 8th day of April, 2018
(the “Termination Date”), to purchase from the Seller the Option Shares upon
payment to the Seller of the Option
Price. 

          Notwithstanding
anything to the contrary contained in this Option or otherwise, the Holder shall
not be required, although it shall have the right, to exercise this
Option.

          2.       MANNER
OF EXERCISE.  Payment of the aggregate Option Price shall be made as
described below.  The exercise shall be made no sooner than 70 days
following delivery by the Holder to Seller of a “notice of intent”
to exercise the Option. 
No sooner than 70 days following the receipt of such “notice of intent” and upon
the payment of all or a portion of the Option Price and delivery of the Election
to Purchase, a form of which is attached hereto, the Seller shall cause to be
issued and cause to be delivered within ten business days to or upon the written
order of the Holder, and in such name or names as the Holder may designate, a
certificate or certificates for the number of full Option Shares so purchased
upon each exercise of the Option.  Such certificate or certificates shall
be deemed to have been issued and any person so designated to be named therein
shall be deemed to have become a holder of record of such securities as of the
date which is 61 days following surrender of the Option (or if less than the
entire Option is exercised, upon the delivery of the new Option described below)
and payment of the Option Price, as aforesaid, notwithstanding that the
certificate or certificates representing such securities shall not actually have
been delivered or that the stock transfer books of the Company shall then be
closed.  The Option shall be exercisable, at the election of each Holder,
either in full or from time to time in part and, in the event that a certificate
evidencing the Option is exercised in respect of less than all of the Option
Shares specified therein at any time prior to the Termination Date, a new
certificate evidencing the remaining portion of the Option shall be issued by
the Company to such
Holder.

          Payment
of the Option Price may be made by either of the following, or a combination
thereof, at the election of
Holder:

          (i)       Cash
Exercise: cash, bank or cashiers check, or wire
transfer;



      
        
          
          

        

        
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          (ii)       Cashless
Exercise: surrender of this Option at the known address of the
Seller together with notice of cashless election, in which event the Seller
shall issue Holder a number of shares of common stock computed using the
following formula:

     

    X = Y (A-B)/A

     

    where:  X = the number of shares of common
stock to be issued to Holder.

     

    Y = the number of shares of common stock for
which this Option is being exercised.

     

    A = the Market Price of
one share of common stock (for purposes of this Section 3(ii), the “Market
Price” shall be defined as the average closing price of the common stock for the
five trading days prior to the date of exercise of this Option (the “Average
Closing Price”), as reported by the OTC Bulletin or in any over-the-counter
market, provided, however, that if the common stock is listed on a stock
exchange, the Market Price shall be the Average Closing Price on such exchange
for the five trading days prior to the date of exercise of the Options.  If
the common stock is/was not traded during the five trading days prior to the
date of exercise, then the closing price for the last publicly traded day shall
be deemed to be the closing price for any and all (if applicable) days during
such five trading day period.

     

    B = the Exercise
Price.

     

              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 cashless exercise 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 cashless exercise transaction shall be deemed to
have commenced on the date this Option was
issued.

          (iii)      Promissory
Note: through a promissory note payable to the Seller, but only to
the extent authorized by the
Seller.

          In
case of the purchase of less than all the Option Shares, the Seller shall cancel
this Option upon the surrender hereof and shall execute and deliver a new Option
of like tenor for the balance of the Option Shares.  Upon the exercise of
this Option, the issuance of certificates for securities, properties or rights
underlying this Option shall be made forthwith (and in any event within five
business days thereafter) without charge to the Holder including, without
limitation, any tax that may be payable in respect of the issuance thereof, and
such certificates shall be issued in such names as may be directed by the
Holder: provided, however, that the Seller shall not be required to pay any tax
in respect of income or capital gain of the Holder or any tax which may be
payable in respect of any transfer involved in the issuance and delivery of any
such certificates in a name other than that of the Holder (a “Transfer Tax”),
and the Seller shall not be required to issue or deliver such certificates
unless or until the person or persons requesting the issuance thereof shall have
paid to the Seller the amount of any such Transfer Tax or shall have established
to the satisfaction of the Seller that any such Transfer Tax has been
paid.

     

     

    
      
        
        

      

      
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          3.       NO
STOCKHOLDER RIGHTS.  Unless and until this Option is exercised, this
Option shall not entitle the Holder hereof to any voting rights or other rights
as a stockholder of the Company, or to any other rights whatsoever except the
rights herein expressed, and, no dividends shall be payable or accrue in respect
of this
Option.

          4.       EXCHANGE. 
This Option is exchangeable upon the surrender hereof by the Holder to the
Seller for new Options of like tenor representing in the aggregate the right to
purchase the number of securities purchasable hereunder, each of such new
Options to represent the right to purchase such number of securities as shall be
designated by the Holder at the time of such
surrender.

          Upon
receipt by the Seller of evidence reasonably satisfactory to it of the loss,
theft, destruction or mutilation of this Option, and, in case of loss, theft or
destruction, of indemnity or security reasonably satisfactory to it and
reimbursement to the Seller of all reasonable expenses incidental thereto, and
upon surrender and cancellation hereof, if mutilated, the Seller will make and
deliver a new Option of like tenor and amount, in lieu
hereof.

          5.       ELIMINATION
OF FRACTIONAL INTERESTS.  The Seller shall not be required to issue
certificates representing fractions of securities upon the exercise of this
Option, nor shall it be required to issue scrip or pay cash in lieu of
fractional interests.  All fractional interests shall be eliminated by
rounding any fraction up to the nearest whole number of securities, properties
or rights receivable upon exercise of this
Option.

          6.       RESERVATION
AND LISTING OF SECURITIES.  The Seller shall at all times reserve
and keep available out of his shares of Class B common stock, solely for the
purpose of issuance upon the exercise of this Option, such number of shares of
Class B common stock or other securities, properties or rights as shall be
issuable upon the exercise hereof.  The Seller covenants and agrees that,
upon exercise of this Option and payment of the Option Price, all shares of
common stock and other securities issuable upon such exercise shall be duly and
validly issued, fully paid, non-assessable and not subject to the preemptive
rights of any
stockholder.

          7.       ANTIDILUTION
PROTECTION.  For the entire term specified in Section 1 hereof,
the Holder (and Holder’s permitted transferees, on a pro rata basis) shall
receive additional Options, from time to time, in order to preserve Holder’s
right to purchase at least 4% of the Company’s shares of Class B common stock
then
issued.

          8.       RESTRICTION
ON EXERCISE.  Holder hereby agrees that he is limited in the number
of Options that he may exercise, such that his receipt of
Option Shares will not exceed 3,000 per
month.

          9.       NOTICE. 
Any notice, request, instruction, or other document required by the terms of
this Option, or deemed by any of the Parties hereto to be desirable, to be given
to any other party hereto shall be in writing and shall be given by personal
delivery, 

     

     

     

    
      
        
        

      

      
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overnight delivery, mailed by registered or certified mail, postage
prepaid, with return receipt requested, or sent by facsimile transmission to the
addresses of the Parties as follows:

     

    
      	
               
      i.   

            	To:   
      “Seller”	
              Robert M.
      Bernstein

              11661 San
      Vicente Boulevard, Suite 707

              Los
      Angeles, California 90049

              Fax:
      (310) 473-3177

            
	 	 	 
	
               ii. 
      

            	To:   
      “Holder”	
              Bud
      Shuster

              827
      Ritchey Road

              Everett,
      Pennsylvania  15527

              Fax:
      (814) 652-2242

            


    

                                                                                                                         

    The persons and addresses set forth above may be changed from time to time
by a notice sent as aforesaid.  If notice is given by personal delivery or
overnight delivery in accordance with the provisions of this Section, such
notice shall be conclusively deemed given at the time of such delivery provided
a receipt is obtained from the recipient.  If notice is given by mail in
accordance with the provisions of this Section, such notice shall be
conclusively deemed given upon receipt and delivery or refusal.  If notice
is given by facsimile transmission in accordance with the provisions of this
Section, such notice shall be conclusively deemed given at the time of delivery
if during business hours and if not during business hours, at the next business
day after delivery, provided a confirmation is obtained by the
sender.

          10.       CONSENT
TO JURISDICTION AND SERVICE.  The parties consent to the
jurisdiction of any court of the State of California, and of any federal court
located in California, in any action or proceeding arising out of or in
connection with this Option.  Orange County, California shall be proper
venue. 

          11.       SUCCESSORS. 
All the covenants and provisions of this Option shall be binding upon and inure
to the benefit of the Seller, the Holder and their respective legal
representatives, successors and assigns. Holder may assign the Option at his
discretion.

          12.       ATTORNEYS
FEES.  If any legal action or any other proceeding, including
arbitration or action for declaratory relief is brought for the interpretation
or enforcement of this Option, the prevailing party shall be entitled to recover
reasonable attorneys’ fees and other costs incurred in that action or
proceeding, in addition to any other relief to which it may be entitled. 
“Prevailing Party” shall include without limitation (a) a Party who dismisses an
action in exchange for sums allegedly due; (b) the Party who receives
performance from the other Party of an alleged breach or a desired remedy that
is substantially equivalent to the relief sought in an action or proceeding; or
(c) the Party determined to be the prevailing Party by an arbitrator or a court
of
law.

          13.       GOVERNING
LAW.  This Option shall be governed, construed and interpreted under
the laws of the state of California, without giving effect to the rules
governing conflicts of law.

     

     

    
 

    
      
        
        

      

      
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          14.       NOTICE
OF RIGHT TO COUNSEL.  Each of the Parties has had the opportunity
to, and has had, this Option reviewed by their respective attorney.  Each
of the Parties affirms to the other that they have apprised themselves of all
relevant information giving rise to this Option and has consulted and discussed
with their independent advisors the provisions of this Option and fully
understands the legal consequences of each provision.  Each Party further
affirms to the other that they have not, and do not, rely upon any
representation of advice from the other or from the other Parties’
counsel.

          15.       REPRESENTATIONS
OF
HOLDER.

                     (a)       Holder
has adequate means of providing for current needs and contingencies, has no need
for liquidity in the investment, and is able to bear the economic risk of an
investment in the Option Shares offered by Seller of the size
contemplated.  Holder represents that Holder is able to bear the economic
risk of the investment and at the present time could afford a complete loss of
such investment.  Holder has had a full opportunity to inspect the books
and records of the Company and to make any and all inquiries of Company officers
and directors regarding the Company and its business as Holder has deemed
appropriate.

                     (b)       Holder
is an “Accredited Investor” as defined in Regulation D of the Securities Act of
1933 (the “Act”) or Holder, either alone or with Holder’s professional advisers
who are unaffiliated with, have no equity interest in and are not compensated by
Seller or any affiliate or selling agent of Seller, directly or indirectly, has
sufficient knowledge and experience in financial and business matters that
Holder is capable of evaluating the merits and risks of an investment in the
Option Shares offered by Seller and of making an informed investment decision
with respect thereto and has the capacity to protect Holder’s own interests in
connection with Holder’s proposed investment in the Option
Shares.

                     (c)       Holder
is acquiring the Option Shares solely for Holder’s own account as principal, for
investment purposes only and not with a view to the resale or distribution
thereof, in whole or in part, and no other person or entity has a direct or
indirect beneficial interest in such Option
Shares.

                     (d)       Holder
will not sell or otherwise transfer the Option Shares without registration under
the Act or an exemption therefrom and fully understands and agrees that Holder
must bear the economic risk of Holder's purchase for an indefinite period of
time because, among other reasons, the Option Shares have not been registered
under the Act or under the securities laws of any state and, therefore, cannot
be resold, pledged, assigned or otherwise disposed of unless they are
subsequently registered under the Act and under the applicable securities laws
of such states or unless an exemption from such registration is
available. 





    
      (SIGNATURE
PAGE IMMEDIATELY FOLLOWS)

       

       

      
        
          
          

        

        
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          IN
WITNESS WHEREOF, intending to be legally bound, the Parties hereto have
executed this Stock Option Agreement on the 9th day of April,
2008.


    

     

    
      	SELLER:	 	 	HOLDER:	 
	 	 	 	 	 
	ROBERT M.
      BERNSTEIN	 	 	BUD SHUSTER	 
	an
      individual	 	 	an
      individual	 
	 	 	 	 	 
	 	 	 	 	 
	
              /s/
      Robert M. Bernstein

            	 	 	
              /s/
      Bud Shuster 

            	 
	
              By:
      Robert M. Bernstein

            	 	 	
              By:
      Bud Shuster

            	 


    

    









     

     

    
      
        
        

      

      
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      FORM
OF ELECTION TO PURCHASE



       

    

    
                The
undersigned, a Holder of the attached Option, hereby irrevocably elects to
exercise the purchase right represented by the attached Option Agreement for,
and to purchase shares of common stock of Material Technologies, Inc., a
Delaware corporation and herewith makes payment of $                                
therefor, and requests that the certificates for such securities be
issued in the name of, and delivered to                                                                             
, whose address is                                                                                                                    
.




        
          	Dated:	Signature	 
	 	 	 
	
                   

                	 	 
	 	
                  (Signature
      must conform in all respects to name

                  of Holder of such
      partial interest as specified on the
face of the Option
      Certificate)

                	 
	 	 	 
	 	 	 
	 	(Insert
      Social Security or Other
Identifying Number of Holder)	 


        



    

     

     

     

     

    
      
        
        

      

      
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