STOCKGRANT AND GENERAL RELEASE AGREEMENT

          (a)       The MaTech Shares will be “unvested shares” until the date which is thirty six (36) months from the Effective Date (the “Forfeiture Period”).  If Bernstein is not continuously employed by MaTech during and at the end of the Forfeiture Period, then Bernstein will be forced to forfeit the MaTech Shares to MaTech upon the cessation of his employment (a “Share Forfeiture”).

          (b)       Notwithstanding the above, if Bernstein ceases to be employed by MaTech as the result of a “Termination Without Cause” or a “Resignation For Good Reason,” as defined herein, then he will not be required to forfeit the MaTech Shares upon termination of his employment.

          (c)       Under the terms of Bernstein’s Employment Agreement with MaTech dated October 1, 2006, MaTech is entitled to terminate Bernstein’s employment at any time with or without cause.  For the purposes of this Agreement, MaTech’s termination of Bernstein is a “Termination For Cause” if it is due to Bernstein: i) committing any material act of dishonesty, ii) disclosing Confidential Information, (as defined in the Employment Agreement), iii) is guilty of gross carelessness or gross misconduct, iv) engages in unfair competition (as defined in the Employment Agreement), or v) unjustifiably and materially neglects his duties under the Employment Agreement.  Any termination by MaTech of Bernstein’s employment for any reason other than those delineated in this Section will be considered a “Termination Without Cause.”

          (d)       If Bernstein resigns from his employment with MaTech, then his resignation will be deemed a “Resignation for Good Reason” under the terms of this Agreement if, and only if, one or more of the following conditions occur and such condition(s) is (are) not fully corrected within ten (10) business days after written notice from Bernstein to MaTech:

          (i)       the assignment to Bernstein of any duties or responsibilities materially inconsistent with the job description outlined in Section 2 of the Employment Agreement; or

          (ii)      the failure by MaTech to either pay Bernstein any salary or bonus due hereunder within ten (10) business days of the date that such payment is due and/or to provide any employment benefits as required by his Employment Agreement.

          (a)       Bernstein is an individual with authority to execute and deliver this Agreement, and to carry out the provisions of this Agreement.

          (b)       The Agreement, when executed and delivered, will create valid and binding obligations of Bernstein, enforceable in accordance with their terms, except (i) as limited by applicable bankruptcy, insolvency, reorganization, moratorium or other laws

of general application affecting enforcement of creditors’ rights, and (ii) general principles of equity that restrict the availability of equitable remedies.

          (c)       Bernstein acknowledges that by executing this Agreement he is extinguishing all debts and/or other obligations owed to him by MaTech as of the date of this Agreement. 

          (d)       Bernstein acknowledges and represents that in executing this Agreement, Bernstein has not relied on any inducements, promises, or representations made by any Party or any party representing or serving such Party, unless expressly set forth herein.

          (e)       The MaTech Shares will be held in Bernstein’s own account, and not as a nominee or agent, and not with a view to the resale or distribution of all or any part of the MaTech Shares. Bernstein is prepared to hold the MaTech Shares for an indefinite period and has no present intention of selling, granting any participating interest in, or otherwise distributing any of the MaTech Shares.  Bernstein does not have any contract, undertaking, agreement or arrangement with any person to sell, transfer or grant a participating interest in, any of the MaTech Shares.

          (f)       Bernstein has a preexisting business relationship with MaTech, which is of a nature and duration sufficient to make Bernstein aware of the character, business acumen and general business and financial circumstances of the.  In addition, Bernstein has been furnished with, and has had access to, such information concerning MaTech’s business, management and financial condition as he considers necessary or appropriate for deciding whether to accept the MaTech Shares, and Bernstein has had an opportunity to ask questions and receive answers from MaTech regarding the terms and conditions of the issuance of the MaTech Shares.

          (g)       Bernstein is fully aware of: (i) the speculative nature of the MaTech Shares; (ii) the lack of liquidity for the MaTech Shares and (iii) the transfer restrictions and repurchase rights applicable to the MaTech Shares.

          (h)       Bernstein is aware the MaTech Shares have not been registered under the 1933 Act and are being issued to Bernstein in reliance upon the exemption from such registration provided by Section 4(2) of the 1933 Act.  Bernstein hereby confirms that he has been informed that the MaTech Shares are restricted securities under the 1933 Act and may not be resold or transferred unless the MaTech Shares are first registered under the Federal securities laws or unless an exemption from such registration is available. Accordingly, Bernstein hereby acknowledges that Bernstein is prepared to hold the MaTech Shares for an indefinite period and that Bernstein is aware that SEC Rule 144 issued under the 1933 Act which exempts certain resales of unrestricted securities is not presently available to exempt the resale of the MaTech Shares from the registration requirements of the 1933 Act.

          (a)       MaTech is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware.  MaTech has all requisite corporate power and authority to own and operate its properties and assets, to execute and deliver this Agreement, and to carry out the provisions of this Agreement.

          (b)       All corporate action on the part of MaTech, its officers and directors necessary for the authorization of this Agreement, the performance of all obligations of MaTech hereunder, and the authorization and issuance of the MaTech Shares pursuant hereto, has been taken.  The Agreement, when executed and delivered, will create valid and binding obligations of MaTech enforceable in accordance with their terms, except (i) as limited by applicable bankruptcy, insolvency, reorganization, moratorium or other laws of general application affecting enforcement of creditors’ rights, and (ii) general principles of equity that restrict the availability of equitable remedies. 

          (c)       MaTech acknowledges and represents that in executing this Agreement, it has not relied on any inducements, promises, or representations made by any Party or any party representing or serving such Party, unless expressly set forth herein.

          (d)       Neither this Agreement nor the consummation of the transactions provided for herein conflicts with or violates (i) any provision of MaTech’s Certificate of Incorporation, as amended, or Bylaws, (ii) any agreement by which MaTech or its stockholders, or any of its or their respective properties, is bound, or (iii) any federal, state or local law, rule or regulation or judicial order.

          (e)       The MaTech Shares have been duly authorized and are fully paid and non-assessable and are being issued to Bernstein free and clear of any liens, claims or rights of any entity or person.

          (a)       Bernstein shall have complied with all requirements of this Agreement applicable to the disposition of the MaTech Shares.

          (b)       Bernstein shall have provided MaTech with written assurances, in form and substance satisfactory to MaTech, that (i) the proposed disposition does not require registration of the MaTech Shares under the 1933 Act or (ii) all appropriate action necessary for compliance with the registration requirements of the 1933 Act or any exemption from registration available under the 1933 Act (including Rule 144) has been taken.

 

“The shares represented by this certificate have not been registered under the Securities Act of 1933.  The shares may not be sold or offered for sale in the absence of (a) an effective registration statement for the shares under such Act, (b) a “no action” letter of the Securities and Exchange Commission with respect to such sale or offer or (c) satisfactory assurances to Material Technologies, Inc. that registration under such Act is not required with respect to such sale or offer.”

“The shares represented by this certificate are subject to certain forfeiture rights granted to Material Technologies, Inc. and accordingly may not be sold, assigned, transferred, encumbered, or in any manner disposed of except in conformity with the terms of the Stock Grant and Release Agreement dated November 21, 2006, between Material Technologies, Inc. and Robert M. Bernstein (or the predecessor in interest to the shares).  A copy of such agreement is maintained at Material Technologies, Inc.’s principal corporate offices.”

          (a)       Under Code Section 83, the excess of the fair market value of the MaTech Shares on the date any forfeiture restrictions applicable to such shares lapse over any price paid for such shares will be reportable as ordinary income on the lapse date.  For this purpose, the term “forfeiture restrictions” includes the forfeiture of the MaTech Shares pursuant to Section 3 of this Agreement.  Bernstein may elect under Code Section 83(b) to be taxed at the time the MaTech Shares are acquired, rather than when and as such MaTech Shares cease to be subject to such forfeiture restrictions.  Such election must be filed with the Internal Revenue Service within thirty (30) days after the date of this Agreement.  Even if the fair market value of the MaTech Shares on the date of this Agreement is $0 (and thus no tax is payable), the election must be made to avoid adverse tax consequences in the future.  

          (b)       Bernstein acknowledges that it is Bernstein’s sole responsibility, and not MaTech’s, to file a timely election under code section 83(b), even if Bernstein requests MaTech or its representatives to make this filing on his behalf.

          (c)       Bernstein acknowledges that it is his sole responsibility to make MaTech’s Board of Directors aware immediately upon filing an election under Code Section 83(b).

“A general release does not extend to claims which the creditor does not know or suspect to exist in his favor at the time of executing the release, which if known by him must have materially affected his settlement with the debtor,”

          (a)       In the event of any action, suit or other proceeding instituted to remedy, prevent or obtain relief from a breach of this Agreement, arising out of a breach of this Agreement, involving claims within the scope of the releases contained in this Agreement, or pertaining to a declaration of rights under this Agreement, the prevailing Party shall recover all of such Party’s reasonable attorneys’ fees and costs incurred in each and every such action, suit or other proceeding, including any and all appeals or petitions therefrom.

          (b)       As used herein, attorneys’ fees shall be deemed to mean the full and actual costs of any legal services actually performed in connection with the matters involved, calculated on the basis of the usual fee charged by the attorneys performing such services.