matechexh10_34.htm


    
      
        

      
Exhibit 10.34

    


    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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