EXHIBIT 10.2
PURERAY CORPORATION
2008 STOCK OPTION AND INCENTIVE PLAN
5,500,000 Shares
October 15, 2008

 

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PureRay Corporation
2008 STOCK OPTION AND INCENTIVE PLAN
TABLE OF CONTENTS

         
ARTICLE 1 DEFINITIONS
    1  
 
       
ARTICLE 2 THE PLAN
    5  
 
       
2.1 Name
    5  
2.2 Purpose
    5  
2.3 Effective Date
    5  
 
       
ARTICLE 3 PARTICIPANTS
    5  
 
       
ARTICLE 4 ADMINISTRATION
    5  
 
       
4.1 Duties and Powers of the Committee
    5  
4.2 Interpretation; Rules
    6  
4.3 No Liability
    6  
4.4 Majority Rule
    6  
4.5 Company Assistance
    6  
 
       
ARTICLE 5 SHARES OF STOCK SUBJECT TO PLAN
    6  
 
       
5.1 Limitations
    6  
5.2 Adjustments Upon Occurrence of Certain Events
    7  
 
       
ARTICLE 6 OPTIONS
    8  
 
       
6.1 Types of Options Granted
    8  
6.2 Option Grant and Agreement
    8  
6.3 Optionee Limitations
    9  
6.4 $100,000 and Section 162(m) Limitations
    9  
6.5 Exercise Price
    9  
6.6 Exercise Period
    10  
6.7 Option Exercise
    10  
6.8 Reload Options
    11  
6.9 Nontransferability of Option
    11  
6.10 Termination of Employment or Service
    12  
6.11 Employment Rights
    12  
6.12 Certain Successor Options
    12  
 
       
ARTICLE 7 RESTRICTED STOCK
    12  
 
       
7.1 Awards of Restricted Stock
    12  
7.2 Non-Transferability
    13  
7.3 Lapse of Restrictions
    13  
7.4 Termination of Employment
    13  
7.5 Treatment of Dividends
    13  

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7.6 Delivery of Shares
    13  
 
       
ARTICLE 8 STOCK CERTIFICATES
    13  
 
       
ARTICLE 9 TERMINATION AND AMENDMENT
    15  
 
       
9.1 Termination and Amendment
    15  
9.2 Effect on Grantee’s Rights
    15  
 
       
ARTICLE 10 RESTRICTIONS ON STOCK GRANTED UNDER THIS PLAN
    15  
 
       
10.1 Right of First Refusal
    15  
10.2 Market Stand-Off Agreement
       
 
       
ARTICLE 11 RELATIONSHIP TO OTHER COMPENSATION PLANS
    16  
 
       
ARTICLE 12 MISCELLANEOUS
    17  
 
       
12.1 Replacement or Amended Grants
    17  
12.2 Leave of Absence
    17  
12.3 Plan Binding on Successors
    17  
12.4 Singular, Plural; Gender
    17  
12.5 Headings, etc.
    17  
12.6 Section 16 Compliance
    17  
 
       
EXHIBIT A
       
Form Stock Option Agreement (Employees)
    A-1  
 
       
EXHIBIT B
       
Form Stock Option Agreement
       
(Non-Employee Directors, Consultants, Advisors)
    B-1  
 
       
EXHIBIT C
       
Form Restricted Stock Award Agreement
    C-1  

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PURERAY CORPORATION
2008 STOCK OPTION AND INCENTIVE PLAN
ARTICLE 1
DEFINITIONS
     As used in this Plan, the following terms have the following meanings
unless the context clearly indicates to the contrary:
     “Award” means a grant of Restricted Stock.
     “Board” means the Board of Directors of the Company.
     “Cause” means (i) the commission of an act of fraud, embezzlement, theft or
proven dishonesty, or any other illegal act or practice (whether or not
resulting in criminal prosecution or conviction), including theft or destruction
of property of the Company, a Parent, or a Subsidiary, or any other act or
practice which the Committee shall, in good faith, deem to have resulted in the
recipient’s becoming unbondable under the Company’s, a Parent’s or any
Subsidiary’s fidelity bond; (ii) the willful engagement in misconduct which is
deemed by the Committee, in good faith, to be materially injurious to the
Company, a Parent or any Subsidiary, monetarily or otherwise, including, but not
limited to, improperly disclosing trade secrets or other confidential or
sensitive business information and data about the Company, a Parent or any
Subsidiary and competing with the Company, a Parent or any Subsidiary, or
soliciting employees, consultants or customers of the Company, a Parent or any
Subsidiary in violation of law or any employment or other agreement to which the
recipient is a party; (iii) the continued failure or habitual neglect by a
person who is an Employee to perform his or her duties with the Company, a
Parent or any Subsidiary; or (iv) other violation of rules or policies of the
Company, a Parent or any Subsidiary, or conduct evidencing willful disregard of
the interests of the Company, a Parent or any Subsidiary. For purposes of this
Plan, no act or failure to act by the recipient shall be deemed “willful” unless
done or omitted to be done by the recipient not in good faith and without
reasonable belief that the recipient’s action or omission was in the best
interest of the Company, a Parent or any Subsidiary. Notwithstanding the
foregoing, if the recipient has entered into an employment agreement that is
binding as of the date of employment termination, and if such employment
agreement defines “Cause,” then the definition of “Cause” in such agreement
shall apply to such recipient under this Plan. “Cause” shall be determined by
the Committee based upon information presented by the Company and the Employee
and shall be final and binding on all parties hereto.
     “Code” means the United States Internal Revenue Code of 1986, including
effective date and transition rules (whether or not codified). Any reference
herein to a specific section of the Code shall be deemed to include a reference
to any corresponding provision of future law.
     “Committee” means a committee of at least two Directors appointed from time
to time by the Board, having the duties and authority set forth herein in
addition to any other authority granted by the Board; provided, however, that
with respect to any Options or Awards granted to an individual who is also a
Section 16 Insider, the Committee shall consist of either the entire Board of

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Directors or a committee of at least two Directors (who need not be members of
the Committee with respect to Options or Awards granted to any other
individuals) who are Non-Employee Directors, and all authority and discretion
shall be exercised by such Non-Employee Directors, and references herein to the
“Committee” means such Non-Employee Directors insofar as any actions or
determinations of the Committee shall relate to or affect Options or Awards made
to or held by any Section 16 Insider. In selecting the Committee, the Board
shall also consider the benefits under Section 162(m) of the Code of having a
Committee composed of “outside directors” (as that term is defined in the Code)
for certain grants of Options to highly compensated executives. At any time that
the Board shall not have appointed a committee as described above, any reference
herein to the Committee means a reference to the Board.
     “Company” means PureRay Corporation, a Washington corporation.
     “Corporate Transaction” means any of the following transactions to which
the Company is a party: (a) a merger, consolidation, share exchange, combination
or other transaction or series of transactions (other than a public offering by
the Company for cash of the Company’s capital stock, debt or other securities,
and other than ordinary public trading of such securities) in which the persons
holding securities possessing more than 50% of the total combined voting power
of the Company’s outstanding securities immediately after such transaction are
different from the persons holding those securities immediately before such
transaction; or (b) the sale, transfer or other disposition of all or
substantially all of the Company’s assets.
     “Director” means a member of the Board and any person who is an advisory or
honorary director of the Company if such person is considered a director for the
purposes of Section 16 of the Exchange Act, as determined by reference to such
Section 16 and to the rules, regulations, judicial decisions, and interpretative
or “no-action” positions with respect thereto of the SEC, as the same may be in
effect or set forth from time to time.
     “Employee” means an employee (as defined in Section 3401(c) of the Code and
the regulations promulgated thereunder) of the Company or a Parent or
Subsidiary.
     “Exchange Act” means the Securities Exchange Act of 1934. Any reference
herein to a specific section of the Exchange Act shall be deemed to include a
reference to any corresponding provision of future law.
     “Exercise Price” means the price at which an Optionee may purchase a share
of Stock under a Stock Option Agreement.
     “Fair Market Value” on any date means (i) the closing sales price of the
Stock on such date on the national securities exchange on which the Stock is
traded on that date; (ii) if the Stock is not traded on any national securities
exchange, (a) the closing sales price of the Stock on the over-the-counter
market on that date or (b) the average selling price during the 5 days before
such date (the “Valuation Period”), provided that the Committee must irrevocably
specify the commitment to grant the stock right with an exercise price set using
such an average selling price before the beginning of the Valuation Period; or
(iii) if the Stock is not readily tradable on any national securities exchange
or on the over-the-counter market, the fair market value determined

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by the Board or the Committee based on the reasonable application of a
reasonable valuation method that shall take into consideration all available
information material to the value of the Stock, including the opinions of
independent experts, the value of the tangible and intangible assets of the
Company, the present value of anticipated future cash flows of the Company, the
market value of companies and other entities engaged in trades or businesses
substantially similar to those engaged in by the Company the value of which can
be readily determined through objective, nondiscretionary means, recent arm’s
length transactions involving the sale or transfer of Stock, and other relevant
factors such as control premiums or discounts for lack of marketability.
     “Grantee” means a person who is an Optionee or a person who has received an
Award of Restricted Stock.
     “Incentive Stock Option” means an option to purchase any stock of the
Company, which complies with and is subject to the terms, limitations and
conditions of Section 422 of the Code and any regulations promulgated with
respect thereto.
     “Immediate Family” means a Grantee’s spouse, the lineal descendant or
antecedent, brother or sister, of Grantee or Grantee’s spouse, or the spouse of
any lineal descendant or antecedent, brother or sister of Grantee, or Grantee’s
spouse, whether or not any of the above are adopted.
     “Non-Employee Director” shall have the meaning set forth in Rule 16b-3
under the Exchange Act, as the same may be in effect from time to time, or in
any successor rule thereto, and shall be determined for all purposes under the
Plan according to interpretative or “no-action” positions with respect thereto
issued by the SEC.
     “Officer” means a person who constitutes an officer of the Company for the
purposes of Section 16 of the Exchange Act, as determined by reference to such
Section 16 and to the rules, regulations, judicial decisions, and interpretative
or “no-action” positions with respect to such rule of the SEC, as the same may
be in effect or set forth from time to time.
     “Option” means an option, whether or not an Incentive Stock Option, to
purchase Stock granted pursuant to the provisions of Article 6 of this Plan.
     “Optionee” means a person to whom an Option has been granted under this
Plan.
     “Parent” means any corporation (other than the Company) in an unbroken
chain of corporations ending with the Company if, at the time of the grant (or
modification) of the Option, each of the corporations other than the Company
owns stock possessing 50 percent or more of the total combined voting power of
the classes of stock in one of the other corporations in such chain.
     “Permanent and Total Disability” has the same meaning as given to that term
by Code Section 22(e)(3) and any regulations or rulings promulgated thereunder.

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     “Plan” means the Company’s 2008 Stock Option and Incentive Plan, the terms
of which are set forth herein.
     “Purchasable” refers to Stock which may be purchased by an Optionee under
the terms of this Plan on or after a certain date specified in the applicable
Stock Option Agreement.
     “Reload Option” has the meaning set forth in Section 6.8 of the Plan.
     “Restricted Stock” means Stock issued, subject to restrictions, to a
Grantee pursuant to Article 7 of this Plan.
     “Restricted Stock Agreement” means an agreement setting forth the terms of
an Award by the Company, a sample form of which is attached hereto as Exhibit C.
     “SEC” means the United States Securities and Exchange Commission.
     “Section 16 Insider” means any person who is subject to the provisions of
Section 16 of the Exchange Act, as provided in Rule 16a-2 promulgated pursuant
to the Exchange Act.
     “Stock” means the Common Stock, par value $0.0001 per share, of the Company
or, in the event that the outstanding shares of Stock are hereafter changed into
or exchanged for shares of a different stock or securities of the Company or
some other entity, such other stock or securities.
     “Stock Option Agreement” means an agreement between the Company and an
Optionee under which the Optionee may purchase Stock under this Plan, a sample
form of which is attached hereto as Exhibit A (Employees) and Exhibit B
(Non-Employee Directors, Consultants and Advisors) (which forms may be varied by
the Committee in granting an Option).
     “Subsidiary” means any corporation (other than the Company) in an unbroken
chain of corporations beginning with the Company if, at the time of the grant
(or modification) of the Option, each of the corporations other than the last
corporation in the unbroken chain owns stock possessing 50 percent or more of
the total combined voting power of all classes of stock in one of the other
corporations in such chain.
     “Transfer” means and includes any sale, assignment, encumbrance,
hypothecation, pledge, conveyance in trust, gift, transfer by bequest, devise or
descent, or other transfer or disposition of any kind, including but not limited
to transfers to receivers, levying creditors, trustees or receivers in
bankruptcy proceedings or general assignees for the benefit of creditors,
whether voluntary or by operation of law, directly or indirectly, except for:
(i) a transfer of vested Stock acquired pursuant to an Option or Award by gift
during a Grantee’s lifetime or on a Grantee’s death by will or intestacy to such
Grantee’s Immediate Family or to a trust or other entity for the benefit of
Grantee or Grantee’s Immediate Family or (ii) pursuant to a domestic relations
order issued by a court of competent jurisdiction, provided that, in each case
of (i) or (ii) above, each transferee or other recipient executes a written
agreement to be bound by the terms and conditions of the Plan, including without
limitation, Section 10 hereof; (ii) any transfer of Stock acquired pursuant to
an Option or Award by a Grantee made (A) pursuant to a

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statutory merger or statutory consolidation of the Company with or into another
corporation or corporations, or otherwise by operation of law or (B) pursuant to
the winding up and dissolution of the Company.
ARTICLE 2
THE PLAN
     2.1 Name. This Plan shall be known as the Company’s “2008 Stock Option and
Incentive Plan.”
     2.2 Purpose. The purpose of the Plan is to advance the interests of the
Company, its Subsidiaries and its shareholders by affording certain Employees
and Directors of the Company and its Subsidiaries, as well as key consultants
and advisors to the Company or any Subsidiary, an opportunity to acquire or
increase their proprietary interests in the Company. The objective of the
issuance of the Options and Awards is to promote the growth and profitability of
the Company and its Subsidiaries because the Grantees will be provided with an
additional incentive to achieve the Company’s objectives through participation
in its success and growth and by encouraging their continued association with or
service to the Company.
     2.3 Effective Date. The Plan shall become effective on the date it is
adopted by the Board; provided, however, that if the Company’s shareholders have
not approved the Plan on or prior to the first anniversary of such effective
date, then all options granted under the Plan shall be non-Incentive Stock
Options.
ARTICLE 3
PARTICIPANTS
     The class of persons eligible to participate in the Plan shall consist of
all persons whose participation in the Plan the Committee determines to be in
the best interests of the Company, which shall include, but not be limited to,
Employees or Directors of the Company or any Subsidiary, as well as key
consultants and advisors to the Company or any Subsidiary.
ARTICLE 4
ADMINISTRATION
     4.1 Duties and Powers of the Committee. The Plan shall be administered by
the Committee. The Committee shall select one of its members as its Chairman and
shall hold its meetings at such times and places as it may determine. The
Committee shall keep minutes of its meetings and shall make such rules and
regulations for the conduct of its business as it may deem necessary. The
Committee shall have the power to act by unanimous written consent in lieu of a
meeting, and to meet telephonically. In administering the Plan, the Committee’s
actions and determinations shall be binding on all interested parties. The
Committee shall have the power to grant Options or Awards in accordance with the
provisions of the Plan and may grant Options and Awards singly, in combination,
or in tandem; provided, however, that the Committee shall not grant Incentive
Stock Options in tandem with Options which do not qualify as Incentive Stock
Options in such a manner that the exercise of one affects the right to exercise
the other. Subject to the

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provisions of the Plan, the Committee shall have the discretion and authority to
determine those individuals to whom Options or Awards will be granted and
whether such Options shall be accompanied by the right to receive Reload
Options, the number of shares of Stock subject to each Option or Award, such
other matters as are specified herein, and any other terms and conditions of a
Stock Option Agreement or Restricted Stock Agreement. To the extent not
inconsistent with the provisions of the Plan, the Committee may give a Grantee
an election to surrender an Option or Award in exchange for the grant of a new
Option or Award, and shall have the authority to amend or modify an outstanding
Stock Option Agreement or Restricted Stock Agreement, or to waive any provision
thereof, provided that the Grantee consents to such action.
     4.2 Interpretation; Rules. Subject to the express provisions of the Plan,
the Committee also shall have complete authority to interpret the Plan, to
prescribe, amend, and rescind rules and regulations relating to it, to determine
the details and provisions of each Stock Option Agreement, and to make all other
determinations necessary or advisable for the administration of the Plan,
including, without limitation, the amending or altering of the Plan and any
Options or Awards granted under the Plan as may be required to comply with or to
conform to any federal, state, or local laws or regulations.
     4.3 No Liability. Neither any member of the Board nor any member of the
Committee shall be liable to any person for any act or determination made in
good faith with respect to the Plan or any Option or Award granted hereunder.
     4.4 Majority Rule. A majority of the members of the Committee shall
constitute a quorum, and any action taken by a majority at a meeting at which a
quorum is present, or any action taken without a meeting evidenced by a writing
executed by all the members of the Committee, shall constitute the action of the
Committee.
     4.5 Company Assistance. The Company shall supply full and timely
information to the Committee on all matters relating to eligible persons, their
employment, death, retirement, disability, or other termination of employment or
service, and such other pertinent facts as the Committee may require. The
Company shall furnish the Committee with such clerical and other assistance as
is necessary in the performance of its duties.
ARTICLE 5
SHARES OF STOCK SUBJECT TO PLAN
     5.1 Limitations. Subject to any antidilution adjustment pursuant to the
provisions of Section 5.2 of this Plan, the maximum number of shares of Stock
that may be issued hereunder shall be 5,500,000 shares of Stock. Any or all
shares of Stock subject to the Plan may be issued in any combination of
Incentive Stock Options, non-Incentive Stock Options or Restricted Stock, and
the amount of Stock subject to the Plan may be increased from time to time in
accordance with Article 10, provided that the total number of shares of Stock
issuable pursuant to Incentive Stock Options may not be increased to more than
5,500,000 (other than pursuant to anti-dilution adjustments) without shareholder
approval. Shares subject to an Option or issued as an Award may be either
authorized and unissued shares or shares issued and later acquired by the
Company. The shares covered by any unexercised portion of an Option that has
terminated for any reason (except as set

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forth in the following paragraph), or any forfeited portion of an Award, may
again be optioned or awarded under the Plan, and such shares shall not be
considered as having been optioned or issued in computing the number of shares
of Stock remaining available for option or award hereunder.
     5.2 Adjustments Upon Occurrence of Certain Events.
          (a) In the event of a Corporate Transaction, the Committee, in its
discretion, may, but need not notwithstanding other provisions of this Plan:
     (i) declare that (1) all Options outstanding at the time of such Corporate
Transaction but not otherwise fully exercisable, shall become exercisable
immediately, notwithstanding the provisions of the respective Stock Option
Agreements regarding exercisability, so that such Options shall become
exercisable for all shares at the time subject to such Options; (2) all such
Options shall terminate on a stated date or within a stated number of days after
the Committee gives written notice of the immediate right to exercise all such
Options and of the decision to terminate all Options not exercised by such date
or within such period; and/or (3) all then-remaining restrictions pertaining to
Awards under the Plan shall immediately lapse; and/or
     (ii) issue or assume Awards or Options, or arrange that all Options or
Awards granted under the Plan shall be assumed by the surviving corporation in
the Corporate Transaction or substituted on an equitable basis with options or
restricted stock issued by such surviving corporation, and provide notice
thereof to all Grantees of such adjustment.
          (b) If, in a transaction that is not a Corporate Transaction, (x) the
outstanding shares of Stock are changed into or exchanged for a different number
or kind of shares or other securities of the Company by reason of a
reorganization, recapitalization, reclassification, exchange of shares, or stock
split or stock dividend, (y) there is any material spin-off or spin-out, or
other material distribution of assets, or (z) there is any assumption and
conversion to the Plan by the Company of an acquired company’s outstanding
option grants, then:

  (i)   the aggregate number and kind of shares of Stock for which Options or
Awards may be granted hereunder shall be adjusted appropriately by the
Committee; and     (ii)   the rights of Optionees (concerning the number of
shares subject to Options and the Exercise Price) under outstanding Options and
the rights of the holders of Awards (concerning the terms and conditions of the
lapse of any then-remaining restrictions), shall be adjusted appropriately by
the Committee.

          (c) Liquidation or Dissolution. In the event of a liquidation or
dissolution of the Company in a transaction not involving a Corporate
Transaction, then notwithstanding other provisions hereof: the adoption of a
plan of dissolution or liquidation of the Company shall cause all

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then-remaining restrictions pertaining to Awards under the Plan to lapse, and
shall cause every Option outstanding under the Plan to terminate to the extent
not exercised prior to the adoption of the plan of dissolution or liquidation by
the shareholders; and the Committee may declare all Options granted under the
Plan to be exercisable at a time prior to the liquidation or dissolution to be
determined by the Committee, notwithstanding the provisions of the respective
Stock Option Agreements regarding exercisability.
          (d) Committee Has Discretion. The adjustments and other actions
described in paragraphs (a) through (c) of this Section 5.2, if any, and the
manner of their application, shall be determined solely by the Committee, and
any such adjustment may provide for the elimination of fractional share
interests; provided, however, that any adjustment made by the Committee shall be
made in a manner that will not cause an Incentive Stock Option to be other than
an Incentive Stock Option under applicable statutory and regulatory provisions;
and provided further, that if an adjustment is required because of a stock split
or stock dividend as a result of which the number of outstanding shares of Stock
is increased, then without any further action by the Committee (A) the aggregate
number of shares of Stock for which Options or Awards may be granted hereunder,
and the aggregate number of shares of Stock Purchasable under each Stock Option
Agreement, shall be proportionately increased, and (B) the Exercise Price under
each Stock Option Agreement shall be proportionately decreased. The adjustments
required under this Article 5 shall apply to any successors of the Company and
adjustments under 5.2(b) shall be made regardless of the number or type of
successive events requiring such adjustments.
ARTICLE 6
OPTIONS
     6.1 Types of Options Granted. The Committee may, under this Plan, grant
either Incentive Stock Options or Options which do not qualify as Incentive
Stock Options. Within the limitations provided in this Plan, both types of
Options may be granted to the same person at the same time, or at different
times, under different terms and conditions, as long as the terms and conditions
of each Option are consistent with the provisions of the Plan. Without
limitation of the foregoing, Options may be granted subject to conditions based
on the financial performance of the Company or any other factor the Committee
deems relevant. An attempted exercise of an Incentive Stock Option outside of
those time parameters will be permitted, but the Incentive Stock Option
thereupon will become a non-Incentive Stock Option subject to all the terms of
the Plan governing non-Incentive Stock Options.
     6.2 Option Grant and Agreement. Each Option granted hereunder shall be
evidenced by minutes of a meeting or the written consent of the Committee and by
a written Stock Option Agreement executed by the Company and the Optionee. The
terms of the Option, including the Option’s duration, time or times of exercise,
Exercise Price, whether the Option is intended to be an Incentive Stock Option,
and whether the Option is to be accompanied by the right to receive a Reload
Option, shall be stated in the Stock Option Agreement. Unless a Stock Option
Agreement specifically provides that that the Option granted thereunder is
intended to be an Incentive Stock Option, such Option shall not be an Incentive
Stock Option. No Incentive Stock Option may be granted more than ten years after
the earlier to occur of the effective date of the Plan or the date the Plan is
approved by the Company’s shareholders.

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     Separate Stock Option Agreements may be used for Options intended to be
Incentive Stock Options and those not so intended, but any failure to use such
separate agreements shall not invalidate, or otherwise adversely affect the
Optionee’s interest in, the Options evidenced thereby.
     6.3 Optionee Limitations. The Committee shall not grant an Incentive Stock
Option to any person who, at the time the Incentive Stock Option is granted:
          (a) is not an Employee; or
          (b) owns or is considered to own stock possessing at least 10% of the
total combined voting power of all classes of stock of the Company or any of its
Parent or Subsidiary corporations; provided, however, that this limitation shall
not apply if at the time an Incentive Stock Option is granted the Exercise Price
is at least 110% of the Fair Market Value of the Stock subject to such Option
and such Option by its terms would not be exercisable after five years from the
date on which the Option is granted. For the purpose of this subsection (b), a
person shall be considered to own: (i) the stock owned, directly or indirectly,
by or for his or her brothers and sisters (whether by whole or half blood),
spouse, ancestors and lineal descendants; (ii) the stock owned, directly or
indirectly, by or for a corporation, partnership, estate, or trust in proportion
to such person’s stock interest, partnership interest or beneficial interest
therein; and (iii) the stock which such person may purchase under any
outstanding options of the Company or of any Parent or Subsidiary of the
Company.
     6.4 $100,000 and Section 162(m) Limitations. Except as provided below, the
Committee shall not grant an Incentive Stock Option to, or modify the exercise
provisions of outstanding Incentive Stock Options held by, any person who, at
the time the Incentive Stock Option is granted (or modified), would thereby
receive or hold any Incentive Stock Options of the Company and any Parent or
Subsidiary of the Company, such that the aggregate Fair Market Value (determined
as of the respective dates of grant or modification of each option) of the stock
with respect to which such Incentive Stock Options (including Reload Options)
are exercisable for the first time during any calendar year is in excess of
$100,000 (or such other limit as may be prescribed by the Code from time to
time); provided that the foregoing restriction on modification of outstanding
Incentive Stock Options shall not preclude the Committee from modifying an
outstanding Incentive Stock Option if, as a result of such modification and with
the consent of the Optionee, such Option no longer constitutes an Incentive
Stock Option; and provided that, if the $100,000 limitation (or such other
limitation prescribed by the Code) described in this Section 6.4 is exceeded,
the Incentive Stock Option, the granting or modification of which resulted in
the exceeding of such limit, shall be treated as an Incentive Stock Option up to
the limitation and the excess shall be treated as an Option not qualifying as an
Incentive Stock Option.
     6.5 Exercise Price. The Exercise Price per share of Stock subject to each
Option shall not be less than the Fair Market Value per share of the Stock on
the date of grant. The Committee shall in good faith set the Fair Market Value
of Options and Awards. In the event the Fair Market Value should be determined
to be otherwise, the Company shall have no liability for adverse tax
consequences that that Grantee may incur as a result of such determination.

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     6.6 Exercise Period. The period for the exercise of each Option granted
hereunder shall be determined by the Committee, but the Stock Option Agreement
with respect to each Option intended to be an Incentive Stock Option shall
provide that such Option shall not be exercisable after the expiration of ten
years from the date of grant (or modification) of the Option. In addition, no
Incentive Stock Option granted under the Plan shall be exercisable prior to
shareholder approval of the Plan.
     6.7 Option Exercise.
          (a) Unless otherwise provided in the Stock Option Agreement or
Section 6.6 of this Plan, an Option may be exercised at any time or from time to
time during the term of the Option as to any or all full shares which have
become Purchasable under the provisions of the Option, but not at any time as to
fewer than 100 shares unless the remaining shares that have become so
Purchasable are fewer than 100 shares. The Committee shall have the authority to
prescribe in any Stock Option Agreement that the Option may be exercised only in
accordance with a vesting schedule during the term of the Option.
          (b) An Option shall be exercised by (i) delivery to the Company at its
principal office of a written notice of exercise with respect to a specified
number of shares of Stock and (ii) payment to the Company at that office of the
full amount of the Exercise Price for such number of shares in accordance with
Section 6.7(c). If requested by an Optionee, an Option (other than an Incentive
Stock Option) may be exercised with the involvement of a stockbroker in
accordance with the federal margin rules set forth in Regulation T (in which
case the certificates representing the underlying shares will be delivered by
the Company directly to the stockbroker).
          (c) The Exercise Price is to be paid in full in cash upon the exercise
of the Option, and the Company shall not be required to deliver certificates for
the shares purchased until such payment has been made; provided, however, that
in lieu of cash, in the Company’s sole discretion, all or any portion of the
Exercise Price may be paid by tendering to the Company shares of Stock duly
endorsed for transfer and owned by the Optionee, or by authorization to the
Company to withhold shares of Stock otherwise issuable upon exercise of the
Option, in each case to be credited against the Exercise Price at the Fair
Market Value of such shares on the date of exercise (however, no fractional
shares may be so transferred, and the Company shall not be obligated to make any
cash payments in consideration of any excess of the aggregate Fair Market Value
of shares transferred over the aggregate Exercise Price).
          (d) In addition to and at the time of payment of the Exercise Price,
the Optionee shall pay to the Company in cash the full amount of any federal,
state, and local income, employment, or other withholding taxes applicable to
the taxable income of such Optionee resulting from such exercise; provided,
however, that in the discretion of the Committee any Stock Option Agreement may
provide that all or any portion of such tax obligations may, upon the
irrevocable election of the Optionee, be paid by tendering to the Company whole
shares of Stock duly endorsed for transfer and owned by the Optionee, or by
authorization to the Company to withhold shares of Stock otherwise issuable upon
exercise of the Option, in either case in that number of shares having a Fair
Market Value on the date of exercise equal to the amount of such taxes thereby
being paid,

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and subject to such restrictions as to the approval and timing of any such
election as the Committee may from time to time determine to be necessary or
appropriate to satisfy the conditions of the exemption set forth in Rule 16b-3
under the Exchange Act, if such rule is applicable.
          (e) The holder of an Option shall not have any of the rights of a
shareholder with respect to the shares of Stock subject to the Option until such
shares have been issued and transferred to the Optionee upon the exercise of the
Option.
     6.8 Reload Options.
          (a) The Committee may specify in a Stock Option Agreement (or may
otherwise determine in its sole discretion) that a Reload Option shall be
granted, without further action of the Committee, (i) to an Optionee who
exercises an Option (including a Reload Option) by surrendering shares of Stock
in payment of amounts specified in Sections 6.7(c) or 6.7(d) of this Plan,
(ii) for the same number of shares as are surrendered to pay such amounts,
(iii) as of the date of such payment and at an Exercise Price equal to the Fair
Market Value of the Stock on such date (except Reload Options granted with or
upon exercise of Incentive Stock Options granted to a person described in
Section 6.3(b) hereof, in which case the Exercise Price shall be equal to 110%
of the Fair Market Value of the Stock on such date), and (iv) otherwise on the
same terms and conditions as the Option whose exercise has occasioned such
payment, except as provided below and subject to such other contingencies,
conditions, or other terms as the Committee shall specify at the time such
exercised Option is granted; provided, however, that the Committee may require
that the shares surrendered in payment as provided above must have been held by
the Optionee for at least six months prior to such surrender.
          (b) Unless provided otherwise in the Stock Option Agreement, a Reload
Option may not be exercised by an Optionee (i) prior to the end of a one-year
period from the date that the Reload Option is granted, and (ii) unless the
Optionee retains beneficial ownership of the shares of Stock issued to such
Optionee upon exercise of the Option referred to above in Section 6.8(a)(i) for
a period of one year from the date of such exercise.
     6.9 Nontransferability of Option. Other than as provided below, no Option
shall be Transferable by an Optionee other than by will or the laws of descent
and distribution or, in the case of non-Incentive Stock Options, pursuant to a
domestic relations order issued by a court of competent jurisdiction, and,
during the lifetime of an Optionee, Options shall be exercisable only by such
Optionee (or by such Optionee’s guardian or legal representative, should one be
appointed). However, in connection with the Optionee’s estate plan, a
Non-Incentive Stock Option, to the extent vested, may be assigned in whole or in
part during Optionee’s lifetime to one or more members of the Optionee’s
Immediate Family or to a partnership, trust, limited liability company, or other
entity established for the exclusive benefit of one or more such family members.
The assigned portion shall be exercisable only by the person or persons who
acquire a proprietary interest in the vested Option pursuant to such assignment.
The terms applicable to the assigned portion shall be the same as those in
effect for this Option immediately prior to such assignment and shall be set
forth in such documents issued to the assignee as the Committee may deem
appropriate. No Optionee shall Transfer any Stock received pursuant to the
exercise of an Option issued pursuant to this Plan unless (i) Optionee has first
offered such Stock to the Company in accordance with

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Section 10.1 and such assignee agrees in writing to be bound by the terms and
conditions of this Plan, including but not limited to Article 10 and (ii) such
Transfer is made in compliance with applicable federal and state securities
laws, to the Company’s satisfaction.
     6.10 Termination of Employment or Service. The Committee shall have the
power to specify, with respect to the Options granted to a particular Optionee,
the effect upon such Optionee’s right to exercise an Option of termination of
such Optionee’s employment or service under various circumstances, which effect
may include immediate or deferred termination of such Optionee’s rights under an
Option, or acceleration of the date at which an Option may be exercised in full;
provided, that in no event may an Incentive Stock Option be exercised after the
expiration of ten years from the date of its grant. Further, in no event may an
Incentive Stock Option be exercised more than three months following termination
of such Optionee’s employment, unless termination is due to Optionee’s death or
Permanent and Total Disability, in which case an Incentive Stock Option may be
exercised within one year following such termination.
     6.11 Employment Rights. Nothing in the Plan or in any Stock Option
Agreement shall confer on any person any right to continue in the employ of the
Company or any of its Subsidiaries, or shall interfere in any way with the right
of the Company or any of its Subsidiaries to terminate such person’s employment
at any time.
     6.12 Certain Successor Options. To the extent not inconsistent with the
terms, limitations and conditions of Code section 422 and any regulations
promulgated with respect thereto, an Option issued in respect of an option held
by an employee to acquire stock of any entity acquired, by merger or otherwise,
by the Company (or any Subsidiary of the Company) may contain terms that differ
from those stated in this Article 6, but solely to the extent necessary to
preserve for any such employee the rights and benefits contained in such
predecessor option, or to satisfy the requirements of Code section 424(a).
ARTICLE 7
RESTRICTED STOCK
     7.1 Awards of Restricted Stock. The Committee may grant Awards of
Restricted Stock, which shall be governed by a Restricted Stock Agreement
between the Company and the Grantee (a form of which is attached hereto as
Exhibit C). Each Restricted Stock Agreement shall contain such restrictions,
terms, and conditions as the Committee may, in its discretion, determine, and
may require that an appropriate legend be placed on the certificates evidencing
the subject Restricted Stock. Shares of Restricted Stock granted pursuant to an
Award hereunder shall be issued in the name of the Grantee as soon as reasonably
practicable after the Award is granted, provided that the Grantee has executed
the Restricted Stock Agreement governing the Award, the appropriate blank stock
powers and, in the discretion of the Committee, an escrow agreement and any
other documents which the Committee may require as a condition to the issuance
of such Shares. If a Grantee shall fail to execute the foregoing documents
within any time period prescribed by the Committee, the Award shall be void. At
the discretion of the Committee, Shares issued in connection with an Award shall
be deposited together with the stock powers with an escrow agent designated by
the Committee. Unless the Committee determines otherwise and as set forth in the
Restricted Stock Agreement, upon delivery of the Shares to the escrow agent, the
Grantee shall have

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all of the rights of a shareholder with respect to such Shares, including the
right to vote the Shares and to receive all dividends or other distributions
paid or made with respect to the Shares.
     7.2 Non-Transferability. Until any restrictions upon vested Restricted
Stock awarded to a Grantee shall have lapsed in a manner set forth in
Section 7.3, such shares of vested Restricted Stock shall not be Transferable
other than by will or the laws of descent and distribution in accordance with
this Agreement, or pursuant to domestic relations order issued by a court of
competent jurisdiction, nor shall they be delivered to the Grantee, and
thereafter Grantee shall not Transfer any shares of Stock unless (i) Grantee has
first offered such Stock to the Company in accordance with Section 10.1 and such
transferee agrees in writing to be bound by the terms and conditions of this
Plan, including but not limited to Article 10 and (ii) such Transfer is made in
compliance with applicable federal and state securities laws to the Company’s
satisfaction.
     7.3 Lapse of Restrictions. Restrictions upon Restricted Stock awarded
hereunder shall lapse at such time or times (but, with respect to any award to a
Grantee who is also a Section 16 Insider, not less than six months after the
date of the Award) and on such terms and conditions as the Committee may, in its
discretion, determine at the time the Award is granted or thereafter.
     7.4 Termination of Employment or Service. The Committee shall have the
power to specify, with respect to each Award granted to any particular Grantee,
the effect upon such Grantee’s rights with respect to such Restricted Stock of
the termination of such Grantee’s employment or service under various
circumstances, which effect may include immediate or deferred forfeiture of such
Restricted Stock or acceleration of the date at which any then-remaining
restrictions shall lapse.
     7.5 Treatment of Dividends. At the time an Award of Restricted Stock is
made, the Committee may, in its discretion, determine that the payment to the
Grantee of any dividends, or a specified portion thereof, declared or paid on
such Restricted Stock shall be (i) deferred until the lapsing of the relevant
restrictions and (ii) held by the Company for the account of the Grantee until
such lapsing. In the event of such deferral, there shall be credited at the end
of each year (or portion thereof) interest on the amount of the account at the
beginning of the year at a rate per annum determined by the Committee. Payment
of deferred dividends, together with interest thereon, shall be made upon the
lapsing of restrictions imposed on such Restricted Stock, and any dividends
deferred (together with any interest thereon) in respect of Restricted Stock
shall be forfeited upon any forfeiture of such Restricted Stock.
     7.6 Delivery of Shares. Except as provided otherwise in Article 8 below,
within a reasonable period of time following the lapse of the restrictions on
shares of Restricted Stock, the Committee shall cause a stock certificate to be
delivered to the Grantee with respect to such shares and such shares shall be
free of all restrictions hereunder.
ARTICLE 8
STOCK CERTIFICATES
     The Company shall not be required to issue or deliver any certificate for
shares of Stock purchased upon the attempted exercise of any Option granted
hereunder or any portion thereof,

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or deliver any certificate for shares of Restricted Stock granted hereunder, and
no attempted exercise of an Option shall be effective prior to fulfillment of
all of the following conditions:
          (a) The admission of such shares to listing on all stock exchanges on
which the Stock is then listed;
          (b) The completion of any registration or other qualification of such
shares which the Committee shall deem necessary or advisable under any federal
or state law or under the rulings or regulations of the SEC or any other
governmental regulatory body;
          (c) The obtaining of any approval or other clearance from any federal
or state governmental agency or body which the Committee shall determine to be
necessary or advisable; and
          (d) The lapse of such reasonable period of time following the exercise
of the Option as the Board from time to time may establish for reasons of
administrative convenience.
     Stock certificates issued and delivered to Grantees shall bear such
restrictive legends as the Company shall deem necessary or advisable pursuant to
applicable federal and state securities laws including the following:
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE “ACT”), ANY STATE SECURITIES LAWS OR UNDER THE
SECURITIES LAWS OF ANY OTHER JURISDICTIONS. THESE SECURITIES ARE SUBJECT TO
RESTRICTIONS ON TRANSFERABILITY AND RESALE AND MAY NOT BE TRANSFERRED OR RESOLD
EXCEPT AS PERMITTED UNDER THE ACT AND THE APPLICABLE STATE SECURITIES LAWS,
PURSUANT TO REGISTRATION OR EXEMPTION THEREFROM. INVESTORS SHOULD BE AWARE THAT
THEY MAY BE REQUIRED TO BEAR THE FINANCIAL RISKS OF THIS INVESTMENT FOR AN
INDEFINITE PERIOD OF TIME. THE ISSUER OF THESE SECURITIES MAY REQUIRE AN OPINION
OF COUNSEL, AT THE EXPENSE OF THE TRANSFEROR OR TRANSFEREE, IN FORM AND
SUBSTANCE SATISFACTORY TO THE ISSUER TO THE EFFECT THAT ANY PROPOSED TRANSFER OR
RESALE IS IN COMPLIANCE WITH THE ACT AND ANY APPLICABLE STATE SECURITIES LAWS.
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN RIGHTS OF
FIRST REFUSAL AS SET FORTH IN THE COMPANY’S 2008 STOCK OPTION AND INCENTIVE PLAN
ENTERED INTO BY THE COMPANY AND APPROVED BY THE STOCKHOLDERS OF THE COMPANY. A
COPY OF SUCH AGREEMENT IS ON FILE AT THE PRINCIPAL OFFICE OF THE COMPANY. SUCH
RIGHTS OF FIRST REFUSAL AND RIGHTS IS BINDING ON TRANSFEREES OF THESE SHARES.
The inability of the Company to obtain approval from any regulatory body having
authority deemed by the Company to be necessary to the lawful issuance and sale
of any Stock pursuant to Options shall relieve the Company of any liability with
respect to the non-issuance or sale of the Stock as to which such approval shall
not have been obtained. The Company shall, however, use reasonable efforts to
obtain all such approvals.

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ARTICLE 9
TERMINATION AND AMENDMENT
     9.1 Termination and Amendment. The Board may at any time terminate or amend
the Plan; provided, however, that the Board (unless its actions are approved or
ratified by the shareholders of the Company within twelve months of the date
that the Board amends the Plan) may not amend the Plan to:
          (a) Increase the total number of shares of Stock issuable pursuant to
Incentive Stock Options under the Plan, except as contemplated in Section 5.2;
or
          (b) Change the class of employees eligible to receive Incentive Stock
Options that may participate in the Plan.
     9.2 Effect on Grantee’s Rights. No termination, amendment, or modification
of the Plan shall affect adversely a Grantee’s rights under a Stock Option
Agreement or Restricted Stock Agreement without the consent of the Grantee or
his legal representative.
ARTICLE 10
RESTRICTIONS ON STOCK GRANTED UNDER THIS PLAN
     10.1 Right of First Refusal.
          (a) Selling Optionee’s Notice. Before any Grantee may effect any
Transfer of any Stock acquired pursuant to a Grant or Option, such Grantee (the
“Selling Grantee”) must give the Company a written notice signed by the Selling
Grantee (the “Selling Grantee’s Notice”) stating: (a) the Selling Grantee’s bona
fide intention to transfer such Stock; (b) the number of shares of Stock
proposed to be transferred (the “Offered Stock”) to each proposed purchaser or
other transferee (“Proposed Transferee”); (c) the name, address and
relationship, if any, to the Selling Grantee of each Proposed Transferee;
(d) the bona fide cash price or, in reasonable detail, other consideration, per
share for which the Selling Grantee proposes to transfer such Offered Stock to
each Proposed Transferee (the “Offered Price”); (e) the date and time of closing
the proposed transfer of Stock (the “Closing”); and (f) other relevant terms of
the proposed sale. Upon the request of the Company, the Selling Grantee will
promptly furnish to the Company such other information as may be reasonably
requested to establish that the offer and Proposed Transferee(s) are bona fide.
          (b) Company’s Right of First Refusal. The Company and its assignees
shall have a right of first refusal to purchase the Offered Stock (the
“Company’s Right of First Refusal”), if the Company gives written notice of the
exercise of such right to the Selling Grantee within thirty (30) days (the
“Company’s Refusal Period”) after the date of the Selling Grantee’s Notice to
the Company. If the Company does not intend to exercise the Company’s Right of
First Refusal in full or if the Company is not lawfully able to repurchase the
Offered Stock, the

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Company will send written notice thereof (the “Company’s Expiration Notice”) to
the Selling Grantee before the expiration of the Company’s Refusal Period.
          (c) Purchase Price. The purchase price for the Offered Stock to be
purchased by the Company pursuant to the Company’s Right of First Refusal under
this Agreement will be the Offered Price, and will be payable as set forth in
Section 10.1(d) hereof. If the Offered Price includes consideration other than
cash, the cash equivalent value of the non-cash consideration will be determined
by the Committee in good faith, which determination will be binding upon the
Company and the Selling Grantee absent fraud or error.
          (d) Payment. Payment of the purchase price for Offered Stock purchased
by the Company exercising the Company’s Right of First Refusal will be made
within fifteen (15) days after the expiration of the Company’s Refusal Period.
Payment of the purchase price will be made, at the option of the Company, (a) in
cash (by check), (b) by cancellation of all or a portion of any outstanding
indebtedness of the Selling Grantee to the Company, as the case may be, or
(c) by any combination of the foregoing.
          (e) Selling Grantee’s Right to Transfer. If the Company has not
elected pursuant to the Company’s Right of First Refusal to purchase all of the
Offered Stock, then the Selling Grantee may transfer that portion of the Offered
Stock permitted to be sold by the Selling Grantee to any person named as a
Proposed Transferee in the Selling Grantee’s Notice, at the Offered Price or at
a higher price, provided that such transfer (a) is consummated within ninety
(90) days after the date of the Selling Grantee’s Notice and (b) is in
accordance with the terms and conditions of this Agreement. If the Offered Stock
is transferred in accordance with the terms and conditions of this Agreement,
then the transferee(s) of the Offered Stock will thereafter hold such Offered
Stock subject to the Company’s Right of First Refusal. If the Offered Stock is
not so transferred during such ninety (90) day period, then the Selling Grantee
will not transfer any of such Offered Stock without complying again in full with
the provisions of this Agreement
          (f) Right of First Refusal Agreement. To the extent that, on the date
of any grant of any Award or Option, Grantee is or becomes a party to any Right
of First Refusal and Co-Sale Agreement by and between the Company and certain
shareholders of the Company, and the terms of such Right of First Refusal and
Co-Sale Agreement conflict with the terms hereof, the terms of such Right of
First Refusal and Co-Sale Agreement shall govern such conflict.
ARTICLE 11
RELATIONSHIP TO OTHER COMPENSATION PLANS
     The adoption of the Plan shall not affect any other stock option,
incentive, or other compensation plans in effect for the Company or any of its
Subsidiaries; nor shall the adoption of the Plan preclude the Company or any of
its Subsidiaries from establishing any other form of incentive or other
compensation plan for Employees or Directors of the Company or any of its
Subsidiaries.

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ARTICLE 12
MISCELLANEOUS
     12.1 Replacement or Amended Grants. At the sole discretion of the
Committee, and subject to the terms of the Plan, the Committee may modify
outstanding Options or Awards or accept the surrender of outstanding Options or
Awards and grant new Options or Awards in substitution for them, provided that
no modification of an Option or Award shall adversely affect a Grantee’s rights
under a Stock Option Agreement or Restricted Stock Agreement without the consent
of the Grantee or his legal representative.
     12.2 Leave of Absence. Unless provided otherwise in a particular Stock
Option Agreement, the following provisions shall, at the discretion of the
Committee, apply upon an Optionee’s commencement of an authorized leave of
absence:
          (a) The exercise schedule in effect for such Option shall be frozen as
of the first day of the authorized leave, and the Option shall not become
exercisable for any additional installments of shares of Stock during the period
Optionee remains on such leave.
          (b) Should Optionee resume active Employee status within 60 days after
the start date of the authorized leave, Optionee shall, for purposes of the
applicable exercise schedule, receive service credit for the entire period of
such leave. If Optionee does not resume active Employee status within such
60-day period, then no credit shall be given for the entire period of such
leave.
          (c) In no event shall the Option become exercisable for any additional
shares or otherwise remain outstanding if the Optionee does not resume Employee
status prior to the Expiration Date of the option term.
     12.3 Plan Binding on Successors. The Plan shall be binding upon the
successors and assigns of the Company.
     12.4 Singular, Plural; Gender. Whenever used in this Plan, nouns in the
singular shall include the plural, and the masculine pronoun shall include the
feminine gender.
     12.5 Headings, etc., No Part of Plan. Headings of Articles and Sections of
this Plan are inserted for convenience and reference; they do not constitute
part of the Plan.
     12.6 Section 16 Compliance. With respect to Section 16 Insiders and
“highly-compensated” persons under Section 162(m) of the Code, transactions
under this Plan are intended to comply with all applicable conditions of
Rule 16b-3 or its successors under the Exchange Act and with Section 162(m) of
the Code. To the extent any provision of the Plan or action by the Committee
fails to so comply, it shall be deemed void to the extent permitted by law and
deemed advisable by the Committee. In addition, if necessary to comply with
Rule 16b-3 with respect to any grant of an Option hereunder, and in addition to
any other vesting or holding period specified hereunder or in an applicable
Stock Option Agreement, any Section 16 Insider acquiring an Option shall be
required to hold either the Option or the underlying shares of Stock obtained
upon exercise of the Option for a minimum of six months.

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EXHIBIT A
PureRay Corporation
STOCK OPTION AGREEMENT
THE TRANSFER OF THESE SECURITIES HAS NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, OR ANY OTHER APPLICABLE BLUE SKY LAWS, AND CANNOT BE
SOLD OR OTHERWISE TRANSFERRED UNLESS SUCH SALE OR TRANSFER IS REGISTERED UNDER
SUCH ACTS, OR EXEMPTIONS FROM SUCH REGISTRATION ARE AVAILABLE.
     THIS STOCK OPTION AGREEMENT (this “Agreement”) is entered into as of this
                     day of                                         ,
                    , by and between PureRay Corporation, a Washington
corporation (the “Company”), and                                          (the
“Optionee”).
     On October 15, 2008, the Board of Directors of the Company adopted a Stock
Option and Incentive Plan known as the Company’s “2008 Stock Option and
Incentive Plan” (the “Plan”), and recommended that the Plan be approved by the
Company’s shareholders. On [                    ] [     ], 200[     ], the
shareholders of the Company adopted and approved the Plan. The Committee has
granted the Optionee a stock option to purchase the number of shares of the
Company’s common stock as set forth below, and in consideration of the granting
of that stock option the Optionee intends to remain in the employ of the
Company. The Company and the Optionee desire to enter into a written agreement
with respect to such option in accordance with the Plan. Therefore, as an
employment incentive and to encourage stock ownership, and also in consideration
of the mutual covenants contained herein, the parties hereto agree as follows.
     1. Incorporation of Plan. This option is granted pursuant to the provisions
of the Plan, and the terms and definitions of the Plan are incorporated into
this Agreement by reference and made a part of this Agreement. The Optionee
acknowledges receipt of a copy of the Plan.
     2. Grant of Option. Subject to the terms, restrictions, limitations and
conditions stated in this Agreement, the Company hereby evidences its grant to
the Optionee, not in lieu of salary or other compensation, of the right and
option (the “Option”) to purchase all or any part of the number of shares of the
Company’s no par value Common Stock (the “Stock”), set forth on Schedule A
attached and incorporated into this Agreement by reference. The Option shall be
exercisable in the amounts and at the time(s) specified on Schedule A. The
Option shall expire and shall not be exercisable on the date specified on
Schedule A or on such earlier date as determined pursuant to Section 8, 9, or 10
of this Agreement. Schedule A states whether the Option is intended to be an
Incentive Stock Option.
     3. Purchase Price. The price per share to be paid by the Optionee for the
shares subject to this Option (the “Exercise Price”) shall be as specified on
Schedule A, which price shall be an amount not less than the Fair Market Value
(or 110% of the Fair Market Value if Optionee is a person described in
Section 6.3(b) of the Plan) of a share of Stock as of the Date of Grant (as
defined in Section 11 below) if the Option is an Incentive Stock Option. The
Committee has in good faith set the fair market value of these Options. In the
event the Fair Market Value should be determined to be otherwise, there shall be
no adverse tax liabilities attributable to the Company as a result of additional
tax consequences to Optionee.

A-1

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     4. Exercise Terms. The Optionee must exercise the Option for at least the
lesser of 100 shares or the number of shares of Purchasable Stock as to which
the Option remains unexercised. If this Option is not exercised with respect to
all or any part of the shares subject to this Option prior to its expiration,
the shares with respect to which this Option was not exercised shall no longer
be subject to this Option.
     5. Option Non-Transferable. No Option shall be transferable by an Optionee
other than by will or the laws of descent and distribution or, in the case of
non-Incentive Stock Options, pursuant to a domestic relations order issued by a
court of competent jurisdiction or as otherwise permitted pursuant to
Section 6.9 of the Plan. During the lifetime of an Optionee, Options shall be
exercisable only by such Optionee (or by such Optionee’s guardian or legal
representative, should one be appointed). No Optionee shall Transfer any Stock
received pursuant to the exercise of an Option issued pursuant to the Plan
unless Optionee has first offered such Stock to the Company in accordance with
Section 10.1 and such assignee agrees in writing to be bound by the terms and
conditions of this Plan, including but not limited to Article 10.
     6. Notice of Exercise of Option. This Option may be exercised by the
Optionee, or by the Optionee’s administrators, executors or personal
representatives, by a written notice (in substantially the form of the Notice of
Exercise attached to this Agreement as Schedule B) signed by the Optionee, or by
such administrators, executors or personal representatives, and delivered or
mailed to the Company as specified in Section 15 below to the attention of the
President, Chief Executive Officer or such other officer as the President or
Chief Executive Officer may designate. Any such notice shall (a) specify the
number of shares of Stock which the Optionee or the Optionee’s administrators,
executors or personal representatives, as the case may be, then elects to
purchase hereunder, (b) contain such information as may be reasonably required
pursuant to Section 12 below, and (c) be accompanied by (i) a certified or
cashier’s check or, if acceptable to the Committee, a recourse note payable to
the Company in payment of the total Exercise Price applicable to such shares as
provided herein, (ii) shares of Stock owned by the Optionee and duly endorsed or
accompanied by stock transfer powers having a Fair Market Value equal to the
total Exercise Price applicable to such shares purchased under this Agreement,
or (iii) a certified or cashier’s check or, if acceptable to the Committee, a
recourse note payable to the Company, accompanied by the number of shares of
Stock whose Fair Market Value when added to the amount of the check or note
equals the total Exercise Price applicable to the shares being purchased under
this Agreement. Upon receipt of any such notice and accompanying payment, and
subject to the terms hereof, the Company agrees to issue to the Optionee or the
Optionee’s administrators, executors or personal representatives, as the case
may be, stock certificates for the number of shares specified in such notice
registered in the name of the person exercising this Option.
     7. Adjustment in Option. The number of Shares subject to this Option, the
Exercise Price and other matters are subject to adjustment during the term of
this Option in accordance with Section 5.2 of the Plan.

A-2

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     8. Termination of Employment.
     (a) Except as otherwise specified in Schedule A to this Agreement, in the
event of the termination of the Optionee’s employment with the Company or any of
its Subsidiaries, other than a termination that is either (i) for Cause,
(ii) voluntary on the part of the Optionee and without written consent of the
Company, or (iii) for reasons of death or Permanent and Total Disability or
retirement, the Optionee may exercise this Option at any time within three
(3) months after such termination to the extent of the number of shares which
were Purchasable hereunder at the date of such termination.
     (b) Except as specified in Schedule A attached hereto, in the event of a
termination of the Optionee’s employment that is either (i) for Cause or
(ii) voluntary on the part of the Optionee and without the written consent of
the Company, this Option, to the extent not previously exercised, shall
terminate immediately and shall not thereafter be or become exercisable.
     (c) Unless and to the extent otherwise provided in Schedule A hereto, in
the event of the retirement of the Optionee at or after the normal retirement
date as prescribed from time to time by the Company or any Subsidiary (age 65
unless so prescribed or unless the Committee determines otherwise), the Optionee
shall continue to have the right to exercise any Options for shares which were
Purchasable at the date of the Optionee’s retirement, such rights to be subject
to the provisions of this Agreement. Notwithstanding the foregoing, the Options
will become void and unexercisable on the date which is three months after the
date of retirement unless, with respect to a non-Incentive Stock Option, on (or
effective as of) the date of retirement the Optionee enters into a noncompete
agreement with the Company, in form and substance reasonably satisfactory to the
Company, and continuously complies with such noncompete agreement for the period
of time during which the options may be exercised. (Incentive Stock Options will
remain subject to the requirement of Section 6.10 of the Plan that they must be
exercised, if at all, not later than three months following termination of such
Optionee’s employment, unless termination is due to Optionee’s death or
Permanent and Total Disability, in which case an Incentive Stock Option may be
exercised within one year following such termination; provided that an attempted
exercise of an Incentive Stock Option outside of those time parameters will be
permitted, but the Incentive Stock Option thereupon will become a non-Incentive
Stock Option subject to all the terms of this Agreement and the Plan governing
non-Incentive Stock Options.) This Option does not confer upon the Optionee any
right with respect to continuance of employment by the Company or by any of its
Subsidiaries. This Option shall not be affected by any change of employment so
long as the Optionee continues to be an employee of the Company or one of its
Subsidiaries.
     9. Disabled Optionee. In the event of termination of employment because of
the Optionee’s Permanent and Total Disability, any unvested rights to acquire
shares pursuant to this Option shall immediately vest and the Optionee (or his
or her personal representative) may exercise this Option, within a period ending
on the earlier of (a) the last day of the one year period following the
Optionee’s Permanent and Total Disability or (b) the expiration date of this
Option.

A-3

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     10. Death of Optionee. Except as otherwise set forth in Schedule A with
respect to the rights of the Optionee upon termination of employment under
Section 8(a) above, in the event of the Optionee’s death while employed by the
Company or any of its Subsidiaries or within three months after a termination of
such employment (if such termination was neither (i) for Cause nor
(ii) voluntary on the part of the Optionee and without the written consent of
the Company), the appropriate persons described in Section 6 of this Agreement
or persons to whom all or a portion of this Option is transferred in accordance
with Section 5 of this Agreement may exercise this Option at any time within a
period ending on the earlier of (a) the last day of the one year period
following the Optionee’s death or (b) the expiration date of this Option. If the
Optionee was an employee of the Company at the time of death, any unvested
rights to acquire shares pursuant to this Option shall immediately vest and this
Option may be so exercised. If the Optionee’s employment terminated prior to his
or her death, this Option may be exercised only to the extent of the number of
shares covered by this Option which were Purchasable under this Agreement at the
date of such termination.
     11. Date of Grant. This Option was granted by the Committee on the date set
forth in Schedule A (the “Date of Grant”).
     12. Compliance with Regulatory Matters. The Optionee acknowledges that the
issuance of capital stock of the Company is subject to limitations imposed by
federal and state law, and the Optionee hereby agrees that the Company shall not
be obligated to issue any shares of Stock upon an attempted exercise of this
Option that would cause the Company to violate law or any rule, regulation,
order or consent decree of any regulatory authority (including without
limitation the SEC) having jurisdiction over the affairs of the Company. The
Optionee agrees that he or she will provide the Company with such information as
is reasonably requested by the Company or its counsel to determine whether the
issuance of Stock complies with the provisions described by this Section 12.
     13. Restriction on Disposition of Shares. Unless the Company otherwise
agrees in writing, the shares purchased pursuant to the exercise of an Incentive
Stock Option shall not be transferred by the Optionee except pursuant to the
Optionee’s will, or the laws of descent and distribution, until such date which
is the later of two years after the grant of such Incentive Stock Option or one
year after the transfer of the shares to the Optionee pursuant to the exercise
of such Incentive Stock Option. An attempted transfer of such shares in
violation of these restrictions will be permitted if such a transfer would have
been permitted under this Agreement for shares purchased pursuant to the
exercise a non-Incentive Stock Option, but the Incentive Stock Option under
which such shares were issued thereupon will become a non-Incentive Stock Option
subject to all the terms of this Agreement and the Plan governing non-Incentive
Stock Options.
     14. Termination as a Subsidiary of the Company. In the event that Optionee
is employed by a Subsidiary of the Company and the Company or its Subsidiaries
cease to own greater than 50% of such Subsidiary, this Option shall terminate on
the date the Company or its Subsidiaries cease to own greater than 50% of such
Subsidiary unless the Board or the Committee determines otherwise.

A-4

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     15. Miscellaneous.
     (a) This Agreement shall be binding upon the parties hereto and their
representatives, successors and assigns.
     (b) This Agreement is executed and delivered in, and shall be governed by
the laws of, the State of Georgia.
     (c) Any requests or notices to be given hereunder shall be deemed given,
and any elections or exercises to be made or accomplished shall be deemed made
or accomplished, upon actual delivery thereof to the designated recipient, or
three days after deposit thereof in the United States mail, registered, return
receipt requested and postage prepaid, addressed, if to the Optionee, at
Optionee’s address shown in the Company’s records and, if to the Company, to the
executive offices of the Company at 3490 Piedmont Road, Suite 1120, Atlanta, GA
30305, or at such other addresses that the parties provide to each other in
accordance with the foregoing notice requirements.
     (d) This Agreement may not be modified except in writing executed by each
of the parties to it.
     (e) In addition to all other provisions of the Plan, Employee acknowledges
that the Stock issuable upon the exercise of the Options granted pursuant to
this Agreement is subject to the Company’s Right of First Refusal and the Market
Stand-Off Agreement under Section 10.1 and 10.2 of the Plan, respectively.

A-5

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     IN WITNESS WHEREOF, the Committee has caused this Stock Option Agreement to
be executed on behalf of the Company, and the Optionee has executed this Stock
Option Agreement, all as of the day and year first above written.

                        PureRay Corporation       OPTIONEE
 
                   
By:
                                 
 
  Name:           Name:    
 
                   
 
  Title:                
 
                   

A-6

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SCHEDULE A
TO
STOCK OPTION AGREEMENT
BETWEEN
PureRay Corporation
AND
 
Dated:                                         

1.   Number of Shares Subject to Option:                Shares.   2.   This
Option (Check one) o is o is not an Incentive Stock Option.   3.   Option
Exercise Price: $                     per Share.   4.   Date of Grant:
                                           5.   Option Vesting Schedule:

      Check one:

  o   Options are exercisable with respect to all shares on or after the date
hereof.     o   Options are exercisable with respect to the number of shares
indicated below on or after the date indicated next to the number of shares:

      No. of Shares   Vesting Date      

A-7

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6.   Option Exercise Period:

      Check One:

  o   All options expire and are void unless exercised on or before
                                        ,           .     o   Options expire and
are void unless exercised on or before the date indicated next to the number of
shares:

      No. of Shares   Expiration Date N/A   N/A

7.   Effect of Termination of Employment of Optionee.

A-8

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SCHEDULE B
TO
STOCK OPTION AGREEMENT
BETWEEN
PureRay Corporation
AND
 
Dated:                                         
NOTICE OF EXERCISE
     The undersigned hereby notifies PureRay Corporation (the “Company”) of this
election to exercise the undersigned’s stock option to purchase
                     shares of the Company’s no par value common stock (the
“Common Stock”), pursuant to the Stock Option Agreement (the “Agreement”)
between the undersigned and the Company dated
                                        ,           . Accompanying this Notice
is (1) a certified or a cashier’s check or, if acceptable to the Committee, a
recourse note payable to the Company, in the amount of
$                               payable to the Company, and/or (2)
                     shares of the Company’s Common Stock presently owned by the
undersigned and duly endorsed or accompanied by stock transfer powers, having an
aggregate Fair Market Value (as defined in the Company’s 2008 Stock Option and
Incentive Plan (the “Plan”)) as of the date hereof of
$                              , and/or (3) authorization to withhold
                     shares of Stock otherwise issuable upon exercise of the
Option having an aggregate Fair Market Value (as defined in the Plan) as of the
date hereof of $                              , with such shares of Stock that
are withheld being credited against the Exercise Price, such amounts of (1),
(2) and (3) being equal, in the aggregate, to the purchase price per share set
forth in Section 3 of the Agreement multiplied by the number of shares being
purchased hereby (in each instance subject to appropriate adjustment pursuant to
Section 5.2 of the Plan).
     IN WITNESS WHEREOF, the undersigned has set his hand and seal, this
           day of                     ,           .

              OPTIONEE [OR OPTIONEE’S ADMINISTRATOR,     EXECUTOR OR PERSONAL
REPRESENTATIVE]
 
       
 
               
 
  Name:    
 
       

         
 
  Position (if other than Optionee):    
 
       

A-9

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EXHIBIT B
PureRay Corporation
STOCK OPTION AGREEMENT
[Non-Employee Directors, Consultants and Advisors]
THE TRANSFER OF THESE SECURITIES HAS NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, OR ANY OTHER APPLICABLE BLUE SKY LAWS, AND CANNOT BE
SOLD OR OTHERWISE TRANSFERRED UNLESS SUCH SALE OR TRANSFER IS REGISTERED UNDER
SUCH ACTS, OR EXEMPTIONS FROM SUCH REGISTRATION ARE AVAILABLE.
     THIS STOCK OPTION AGREEMENT (this “Agreement”) is entered into as of this
      day of                                         ,           , by and
between PureRay Corporation, a Washington corporation (the “Company”), and
                                                             (the “Optionee”).
     On October 15, 2008, the Board of Directors of the Company adopted a Stock
Option and Incentive Plan known as the Company’s “2008 Stock Option and
Incentive Plan” (the “Plan”), and recommended that the Plan be approved by the
Company’s shareholders. On [                    ] [     ], 200[     ], the
shareholders of the Company adopted and approved the Plan. The Committee has
granted the Optionee a stock option to purchase the number of shares of the
Company’s common stock as set forth below, and in consideration of the granting
of that stock option the Optionee intends to remain in the service of the
Company as a non-employee director, consultant or advisor, as the case may be.
The Company and the Optionee desire to enter into a written agreement with
respect to such option in accordance with the Plan. Therefore, as an incentive
and to encourage stock ownership, and also in consideration of the mutual
covenants contained herein, the parties hereto agree as follows.
     1. Incorporation of Plan. This option is granted pursuant to the provisions
of the Plan, and the terms and definitions of the Plan are incorporated into
this Agreement by reference and made a part of this Agreement. The Optionee
acknowledges receipt of a copy of the Plan.
     2. Grant of Option. Subject to the terms, restrictions, limitations and
conditions stated in this Agreement, the Company hereby evidences its grant to
the Optionee, not in lieu of salary or other compensation, of the right and
option (the “Option”) to purchase all or any part of the number of shares of the
Company’s no par value Common Stock (the “Stock”), set forth on Schedule A
attached and incorporated into this Agreement by reference. The Option shall be
exercisable in the amounts and at the time(s) specified on Schedule A. The
Option shall expire and shall not be exercisable on the date specified on
Schedule A or on such earlier date as determined pursuant to Section 8, 9, or 10
of this Agreement. Schedule A states whether the Option is intended to be an
Incentive Stock Option.
     3. Purchase Price. The price per share to be paid by the Optionee for the
shares subject to this Option (the “Exercise Price”) shall be as specified on
Schedule A, which price shall be an amount not less than the Fair Market Value
(or 110% of the Fair Market Value if Optionee is a

B-1

--------------------------------------------------------------------------------

 

person described in Section 6.3(b) of the Plan) of a share of Stock as of the
Date of Grant (as defined in Section 11 below) if the Option is an Incentive
Stock Option. The Committee has in good faith set the fair market value of these
Options. In the event the Fair Market Value should be determined to be
otherwise, there shall be no adverse tax liabilities attributable to the Company
as a result of additional tax consequences to Optionee.
     4. Exercise Terms. The Optionee must exercise the Option for at least the
lesser of 100 shares or the number of shares of Purchasable Stock as to which
the Option remains unexercised. If this Option is not exercised with respect to
all or any part of the shares subject to this Option prior to its expiration,
the shares with respect to which this Option was not exercised shall no longer
be subject to this Option.
     5. Option Non-Transferable. No Option shall be transferable by an Optionee
other than by will or the laws of descent and distribution or, in the case of
non-Incentive Stock Options, pursuant to a domestic relations order issued by a
court of competent jurisdiction or as otherwise permitted pursuant to
Section 6.9 of the Plan. During the lifetime of an Optionee, Options shall be
exercisable only by such Optionee (or by such Optionee’s guardian or legal
representative, should one be appointed). No Optionee shall Transfer any Stock
received pursuant to the exercise of an Option issued pursuant to this Plan
unless Optionee has first offered such Stock to the Company in accordance with
Section 10.1 and such assignee agrees in writing to be bound by the terms and
conditions of the Plan, including but not limited to Article 10.
     6. Notice of Exercise of Option. This Option may be exercised by the
Optionee, or by the Optionee’s administrators, executors or personal
representatives, by a written notice (in substantially the form of the Notice of
Exercise attached to this Agreement as Schedule B) signed by the Optionee, or by
such administrators, executors or personal representatives, and delivered or
mailed to the Company as specified in Section 15 below to the attention of the
President, Chief Executive Officer or such other officer as the President or
Chief Executive Officer may designate. Any such notice shall (a) specify the
number of shares of Stock which the Optionee or the Optionee’s administrators,
executors or personal representatives, as the case may be, then elects to
purchase hereunder, (b) contain such information as may be reasonably required
pursuant to Section 12 below, and (c) be accompanied by (i) a certified or
cashier’s check or, if acceptable to the Committee, a recourse note payable to
the Company in payment of the total Exercise Price applicable to such shares as
provided herein, (ii) shares of Stock owned by the Optionee and duly endorsed or
accompanied by stock transfer powers having a Fair Market Value equal to the
total Exercise Price applicable to such shares purchased under this Agreement,
or (iii) a certified or cashier’s check or, if acceptable to the Committee, a
recourse note payable to the Company, accompanied by the number of shares of
Stock whose Fair Market Value when added to the amount of the check or note
equals the total Exercise Price applicable to the shares being purchased under
this Agreement. Upon receipt of any such notice and accompanying payment, and
subject to the terms hereof, the Company agrees to issue to the Optionee or the
Optionee’s administrators, executors or personal representatives, as the case
may be, stock certificates for the number of shares specified in such notice
registered in the name of the person exercising this Option.

B-2

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     7. Adjustment in Option. The number of Shares subject to this Option, the
Exercise Price and other matters are subject to adjustment during the term of
this Option in accordance with Section 5.2 of the Plan.
     8. Termination of Service.
     (a) Except as otherwise specified in Schedule A to this Agreement, in the
event of the termination of the Optionee’s service to the Company or any of its
Subsidiaries, other than a termination that is either (i) for Cause, or
(ii) voluntary on the part of the Optionee and without written consent of the
Company, the Optionee may exercise this Option at any time within three (3)
months after such termination to the extent of the number of shares which were
Purchasable hereunder at the date of such termination.
     (b) Except as specified in Schedule A attached hereto, in the event of a
termination of the Optionee’s service that is either (i) for Cause or
(ii) voluntary on the part of the Optionee and without the written consent of
the Company, this Option, to the extent not previously exercised, shall
terminate immediately and shall not thereafter be or become exercisable.
     (c) Unless and to the extent otherwise provided in Schedule A hereto, in
the event of the retirement of the Optionee at or after the normal retirement
date (age 65 unless the Committee determines otherwise), the Optionee shall
continue to have the right to exercise any Options for shares which were
Purchasable at the date of the Optionee’s retirement, such rights to be subject
to the provisions of this Agreement. Notwithstanding the foregoing, the Options
will become void and unexercisable on the date which is three months after the
date of retirement unless, with respect to a non-Incentive Stock Option, on (or
effective as of) the date of retirement the Optionee enters into a noncompete
agreement with the Company, which the Company must offer to the Optionee, and
continuously complies with such noncompete agreement for the period of time
during which the options may be exercised.
     9. Continuance of Service. This Option does not confer upon the Optionee
any right with respect to continuance of service to the Company or by any of its
Subsidiaries. This Option shall not be affected by any change of service so long
as the Optionee continues to serve the Company or one of its Subsidiaries.
     10. Death of Optionee. Except as otherwise set forth in Schedule A with
respect to the rights of the Optionee upon termination of service under Section
8(a) above, in the event of the Optionee’s death while in the service of the
Company or any of its Subsidiaries or within three months after a termination of
such service (if such termination was neither (i) for Cause nor (ii) voluntary
on the part of the Optionee and without the written consent of the Company), the
appropriate persons described in Section 6 of this Agreement or persons to whom
all or a portion of this Option is transferred in accordance with Section 5 of
this Agreement may exercise this Option at any time within a period ending on
the earlier of (a) the last day of the one year period following the Optionee’s
death or (b) the expiration date of this Option. If the Optionee was in the
service of the Company at the time of death, any unvested rights to acquire
shares pursuant to this Option shall immediately vest and this Option may be so
exercised to the extent of the number of shares that were Purchasable under this
Agreement at the date of death. If the

B-3

--------------------------------------------------------------------------------

 

Optionee’s service terminated prior to his or her death, this Option may be
exercised only to the extent of the number of shares covered by this Option
which were Purchasable under this Agreement at the date of such termination.
     11. Date of Grant. This Option was granted by the Committee on the date set
forth in Schedule A (the “Date of Grant”).
     12. Compliance with Regulatory Matters. The Optionee acknowledges that the
issuance of capital stock of the Company is subject to limitations imposed by
federal and state law, and the Optionee hereby agrees that the Company shall not
be obligated to issue any shares of Stock upon an attempted exercise of this
Option that would cause the Company to violate law or any rule, regulation,
order or consent decree of any regulatory authority (including without
limitation the SEC) having jurisdiction over the affairs of the Company. The
Optionee agrees that he or she will provide the Company with such information as
is reasonably requested by the Company or its counsel to determine whether the
issuance of Stock complies with the provisions described by this Section 12.
     13. Restriction on Disposition of Shares. Unless the Company otherwise
agrees in writing, the shares purchased pursuant to the exercise of an Incentive
Stock Option shall not be transferred by the Optionee except pursuant to the
Optionee’s will, or the laws of descent and distribution, until such date which
is the later of two years after the grant of such Incentive Stock Option or one
year after the transfer of the shares to the Optionee pursuant to the exercise
of such Incentive Stock Option.
     14. Termination as a Subsidiary of the Company. In the event that Optionee
is in the service of a Subsidiary of the Company and the Company or its
Subsidiaries cease to own greater than 50% of such Subsidiary, this Option shall
terminate on the date the Company or its Subsidiaries cease to own greater than
50% of such Subsidiary unless the Board or the Committee determines otherwise.
     15. Miscellaneous.
     (a) This Agreement shall be binding upon the parties hereto and their
representatives, successors and assigns.
     (b) This Agreement is executed and delivered in, and shall be governed by
the laws of, the State of Georgia.
     (c) Any requests or notices to be given hereunder shall be deemed given,
and any elections or exercises to be made or accomplished shall be deemed made
or accomplished, upon actual delivery thereof to the designated recipient, or
three days after deposit thereof in the United States mail, registered, return
receipt requested and postage prepaid, addressed, if to the Optionee, at
Optionee’s address shown in the Company’s records and, if to the Company, to the
executive offices of the Company at 3490 Piedmont Road, Suite 1120, Atlanta, GA
30305, or at such other addresses that the parties provide to each other in
accordance with the foregoing notice requirements.

B-4

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     (d) This Agreement may not be modified except in writing executed by each
of the parties to it.
     (e) In addition to all other provisions of the Plan, Employee acknowledges
that the Stock issuable upon the exercise of the Options granted pursuant to
this Agreement is subject to the Company’s Right of First Refusal and the Market
Stand-Off Agreement under Section 10.1 and 10.2 of the Plan, respectively.
(Signatures are on the following page.)

B-5

--------------------------------------------------------------------------------

 

     IN WITNESS WHEREOF, the Committee has caused this Stock Option Agreement to
be executed on behalf of the Company, and the Optionee has executed this Stock
Option Agreement, all as of the day and year first above written.

                          PureRay Corporation       OPTIONEE      
By:
                                         
 
  Name:           Name:        
 
                       
 
  Title:                    
 
                       

B-6

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SCHEDULE A
TO
STOCK OPTION AGREEMENT
BETWEEN
PureRay Corporation
AND
 
Dated:                                         

1.   Number of Shares Subject to Option:                      Shares.   2.  
This Option is not an Incentive Stock Option.   3.   Option Exercise Price:
$                     per Share.   4.   Date of Grant:
                                           5.   Option Vesting Schedule:

      Check one:

  o   Options are exercisable with respect to all shares on or after the date
hereof.     o   Options are exercisable with respect to the number of shares
indicated below on or after the date indicated next to the number of shares:

      No. of Shares   Vesting Date      

B-7

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6.   Option Exercise Period:

      Check One:

  o   All options expire and are void unless exercised on or before
                                        ,      .     o   Options expire and are
void unless exercised on or before the date indicated next to the number of
shares:

      No. of Shares   Expiration Date      

7.   Effect of Termination of Service of Optionee.

B-8

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SCHEDULE B
TO
STOCK OPTION AGREEMENT
BETWEEN
PureRay Corporation
AND
 
Dated:                                         
NOTICE OF EXERCISE
     The undersigned hereby notifies PureRay Corporation (the “Company”) of this
election to exercise the undersigned’s stock option to purchase
                     shares of the Company’s no par value common stock (the
“Common Stock”), pursuant to the Stock Option Agreement (the “Agreement”)
between the undersigned and the Company dated
                                                            ,           .
Accompanying this Notice is (1) a certified or a cashier’s check or, if
acceptable to the Committee, a recourse note payable to the Company, in the
amount of $                                         payable to the Company,
and/or (2)                      shares of the Company’s Common Stock presently
owned by the undersigned and duly endorsed or accompanied by stock transfer
powers, having an aggregate Fair Market Value (as defined in the Company’s 2008
Stock Option and Incentive Plan (the “Plan”)) as of the date hereof of
$                                        , and/or (3) authorization to withhold
                     shares of Stock otherwise issuable upon exercise of the
Option having an aggregate Fair Market Value (as defined in the Plan) as of the
date hereof of $                                        , with such shares of
Stock that are withheld being credited against the Exercise Price, such amounts
of (1), (2) and (3) being equal, in the aggregate, to the purchase price per
share set forth in Section 3 of the Agreement multiplied by the number of shares
being purchased hereby (in each instance subject to appropriate adjustment
pursuant to Section 5.2 of the Plan).
     IN WITNESS WHEREOF, the undersigned has set his hand and seal, this
           day of                     ,           .

              OPTIONEE [OR OPTIONEE’S ADMINISTRATOR,     EXECUTOR OR PERSONAL
REPRESENTATIVE]
 
       
 
               
 
  Name:    
 
       

         
 
  Position (if other than Optionee):    
 
       

B-9

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EXHIBIT C
PURERAY CORPORATION
RESTRICTED STOCK AGREEMENT
THE TRANSFER OF THESE SECURITIES HAS NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, OR ANY OTHER APPLICABLE BLUE SKY LAWS, AND CANNOT BE
SOLD OR OTHERWISE TRANSFERRED UNLESS SUCH SALE OR TRANSFER IS REGISTERED UNDER
SUCH ACTS, OR EXEMPTIONS FROM SUCH REGISTRATION ARE AVAILABLE.
     THIS RESTRICTED STOCK AGREEMENT (this “Agreement”) is entered into as of
this       day of                     ,           , by and between PureRay
Corporation, a Washington corporation (the “Company”), and                     
(the “Grantee”).
     On October 15, 2008, the Board of Directors of the Company adopted a Stock
Option and Incentive Plan known as the Company’s “2008 Stock Option and
Incentive Plan” (the “Plan”), and recommended that the Plan be approved by the
Company’s shareholders. On [                    ] [  ], 200[  ], the
shareholders of the Company adopted and approved the Plan. The Committee has
determined that the Grantee is to be granted a restricted stock award (the
“Award”) under the Plan, and in consideration of the granting of that Award to
purchase the specified number of shares of common stock , no par value per
share, of the Company (the “Common Stock”) the Grantee intends to continue
providing services to Company. The Company and the Grantee desire to enter into
a written agreement with respect to such Award in accordance with the Plan.
     NOW, THEREFORE, the Company and the Grantee hereby agree as follows:
     1. Grant of Restricted Stock Award. The Award grants the Grantee shares of
Common Stock (the “Restricted Stock”). The Restricted Stock is granted pursuant
to the Plan and are subject to the terms and conditions thereof, which are
incorporated herein by this reference. To the extent any provision in this
Agreement is inconsistent with the Plan, the provisions of the Plan shall
govern. The Grantee hereby acknowledges receipt of, or access to, a copy of the
Plan.
     2. Date of Grant. The Award is granted on the date set forth on Schedule A
hereto (the “Date of Grant”).
     3. Restrictions on Transfer. On and after the Date of Grant and until each
portion of the Restricted Stock vests as provided in Section 4 hereof, the
Grantee shall not be permitted to Transfer or otherwise dispose of that portion
of the Restricted Stock except (i) a by gift during a Grantee’s lifetime or on a
Grantee’s death by will or intestacy to such Grantee’s Immediate Family or to a
trust or other entity for the benefit of Grantee or Grantee’s Immediate Family,
(ii) pursuant to a domestic relations order issued by a court of competent
jurisdiction, provided that, in each case of (i) or (ii) above, each transferee
or other recipient executes a written agreement to be bound by the terms and
conditions of the Plan, including without limitation, Section 10 hereof;
(ii) any transfer of Stock acquired pursuant to this Award by Grantee made
(A) pursuant to a statutory merger or statutory consolidation of the Company
with or into another corporation or corporations, or otherwise by operation of
law or (B) pursuant to the winding up and dissolution of the Company.
     4. Vesting of Restricted Stock. Restricted Stock will vest in installments,
in the amounts

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and on the dates set forth on Schedule A. The Committee shall have the power, in
its sole discretion, to accelerate the vesting of all or a portion of the
Restricted Stock, to waive any restrictions, including any additional
restrictions set forth on Schedule A, with respect to any part or all of the
Restricted Stock, or to waive the forfeiture of the Restricted Stock and to
retain restrictions on Restricted Stock that would have been forfeited pursuant
to the terms of the Plan and the terms of this Agreement.
     5. Forfeiture of Restricted Stock. Except as otherwise may specified on
Schedule A, the termination of Grantee’s engagement by the Company shall have
the following effect: any Restricted Stock which has not vested as of the
effective date of such termination, for any reason, shall immediately be
forfeited and shall not vest.
     6. Withholding. Grantee must pay to the Company, or make arrangements
satisfactory to the Company regarding the payment of, any federal, state, or
local taxes of any kind (including any employment taxes) required by law to be
withheld with respect to the income realized by Grantee in connection with the
ownership of the Restricted Stock. In connection therewith, and without limiting
any of the Company’s rights under the Plan:
          (a) the Company and its Affiliates shall, to the extent permitted by
law, have the right to deduct any such taxes from any payment otherwise due to
Grantee, including but not limited to salary payments; and
          (b) Grantee hereby authorizes the Company, at the Company’s election,
to transfer to the Company shares of Stock owned by Grantee (including but not
limited to Restricted Stock) with an aggregate Fair Market Value (as of the date
the withholding is effected) that would satisfy the required statutory minimum
(but no more than such required minimum) with respect to the Company’s
withholding obligation. In connection with such authorization Grantee hereby
constitutes and appoints each of the Chief Executive Officer, President, and
Secretary of the Company as the undersigned’s attorney-in-fact, with full power
of substitution, to cause the transfer to the Company of such Restricted Stock
or other shares together with all dividends, income, cash, options, warrants,
rights, instruments and other property, interests or proceeds from time to time
in effect, received, receivable or otherwise distributed in respect of, or in
exchange, replacement, renewal or substitution for, any or all of the Restricted
Stock or other shares; and Grantee acknowledges that such appointment is being
made in connection with a grant of Restricted Stock under the Plan, is coupled
with an interest and is therefore irrevocable.
     7. Legends and Restrictions. If a share certificate is issued evidencing
the Restricted Stock, such certificate shall be registered in the name of the
Grantee but shall be held in custody by the Company, and such share certificate
may contain such legends as required by Article 8 of the Plan or as imposed
under applicable state corporation and securities laws, and under the Plan and
this Agreement. If a share certificate is not issued evidencing the Restricted
Stock but the Restricted Stock are otherwise registered in the Company’s stock
transfer records, the Restricted Stock shall be registered in the name of the
Grantee but the Company shall be authorized to put in place such procedures as
will require the above restrictions to be honored by the transfer agent for the
Stock.
     8. Adjustment in Number of Shares. The number of Restricted Stock shall be
subject to adjustment for stock dividends, stock splits, or similar corporate
changes involving the Common Stock to the extent set forth in Section 5.2 of the
Plan.

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     9. Change in Control. In the event of a Corporate Transaction (as defined
in Article 1 of the Plan), all Restricted Stock under this Agreement that have
not otherwise fully vested shall immediately vest.
     10. Investment Representations.
          (a) No Registration. The Grantee acknowledges that, unless and until
the Company notifies the Grantee otherwise, the issuance of the Restricted Stock
has not been registered under the Securities Act of 1933, as amended (the
“Securities Act”), or under applicable state securities laws.
          (b) Delay of Issuance. The Grantee acknowledges that, pursuant to
Article 8 of the Plan, the Company may delay the issuance of the Restricted
Stock, the delivery of certificates for the Restricted Stock, and the release of
any restrictions on the transfer of the Restricted Stock for such time as the
Company deems necessary or desirable to enable the Company to comply with
(i) the requirements of the Securities Act or the Securities Exchange Act or
1934, as amended, or any rules or regulations of the Securities and Exchange
Commission or any stock exchange promulgated thereunder; or (ii) the
requirements of applicable state laws relating to authorization, issuance or
sale of such securities. The Grantee shall provide such information as the
Company deems necessary or desirable to secure such compliance.
     11. Miscellaneous.
          (a) This Agreement shall be binding upon the parties hereto and their
representatives, successors and assigns.
          (b) This Agreement is executed and delivered in, and shall be governed
by the laws of, the State of Georgia.
          (c) Any requests or notices to be given hereunder shall be deemed
given, and any elections or exercises to be made or accomplished shall be deemed
made or accomplished, upon actual delivery thereof to the designated recipient,
or three days after deposit thereof in the United States mail, registered,
return receipt requested and postage prepaid, addressed, if to the Grantee, at
Grantee’s address shown in the Company’s records and, if to the Company, to the
executive offices of the Company at 3490 Piedmont Road, Suite 1120, Atlanta, GA
30305, or at such other addresses that the parties provide to each other in
accordance with the foregoing notice requirements.
          (d) This Agreement may not be modified except in writing executed by
each of the parties to it.
          (e) In addition to all other provisions of the Plan, Grantee
acknowledges that the vested Stock granted pursuant to this Agreement is subject
to the Company’s Right of First Refusal and the Market Stand-Off Agreement under
Section 10.1 and 10.2 of the Plan, respectively.
     12. Regulatory Approvals. The vesting of the Restricted Stock shall be
subject to the condition that if at any time the Committee or the Company shall
determine in its discretion that the satisfaction of withholding tax or other
tax liabilities, or the listing, registration, or qualification of any shares of
Stock upon any securities exchange or quotation system or under any federal or
state law, or the consent or approval of any regulatory body, is necessary or
desirable as a condition of, or in connection with, such vesting, then in any
such event such vesting shall not be effective unless such

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liabilities have been satisfied or such listing, registration, qualification,
consent, or approval shall have been effected or obtained.
[Remainder of page intentionally blank. Signatures appear on the following
page.]

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IN WITNESS WHEREOF, the Committee has caused this Restricted Stock Agreement to
be executed on
behalf of the Company, and the Grantee has executed this Restricted Stock
Agreement, all as of the
day and year first above written.

                          PureRay Corporation       GRANTEE      
By:
                                         
 
  Name:           Name:        
 
                       
 
  Title:                    
 
                       

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SCHEDULE A
TO
RESTRICTED STOCK AGREEMENT
BETWEEN
PURERAY CORPORATION
AND
 
Dated:                                         

1.   Number of Shares Subject to Award:                      Shares.   2.   Fair
Market Value on Date of Grant: $                per Share.   3.   Date of Grant:
                                           4.   Restricted Stock Vesting
Schedule: Restricted Stock is exercisable with respect to the number of shares
indicated below on or after the date indicated next to the number of shares:

      No. of Shares   Vesting Date      

5.   Effect of Termination of Grantee.

  Choose one:     o   If Grantee’s engagement by the Company is terminated for
any reason other than Cause (as defined in the Plan), all of the unvested
Restricted Stock issued pursuant to the Award shall vest immediately.     o   If
Grantee’s engagement by the Company is terminated for any reason other than
Cause, Death or Disability (as those terms are defined in the Plan), all of the
unvested Restricted Stock issued pursuant to the Award shall vest immediately.  
  o   If Grantee’s engagement by the Company is terminated for any reason, all
of the unvested Restricted Stock issued pursuant to the Award shall vest
immediately.     o   if Grantee’s engagement by the Company is terminated as a
result of Death or Disability, all of the unvested Restricted Stock issued
pursuant to the Award shall

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        vest immediately

    [Note: The default provision in Section 5 of this Agreement provides that if
no indication of the effect of termination is made on this Schedule A, then
termination for any reason shall result in the forfeiture of all unvested
Restricted Stock.]   6.   Other Restrictions.

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