NEITHER
THE SECURITIES REPRESENTED BY THIS CERTIFICATE NOR THE SHARES ISSUABLE UPON
EXERCISE HEREOF HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE ASECURITIES
ACT@)
OR THE SECURITIES LAWS OF ANY STATE.  NEITHER THE SECURITIES
REPRESENTED HEREBY MAY BE SOLD, TRANSFERRED, PLEDGED OR OTHERWISE DISPOSED NOR
MAY THE SHARES BE ISSUED UPON EXERCISE UNLESS SUCH SECURITIES AND SHARES ARE
REGISTERED UNDER THE SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS OR THE
COMPANY RECEIVES AN OPINION OF COUNSEL ACCEPTABLE TO THE COMPANY THAT SUCH SALE,
TRANSFER, PLEDGE OR ISSUANCE IS EXEMPT FROM REGISTRATION.








DOCUMENT
CAPTURE TECHNOLOGIES, INC.





STOCK
OPTION AGREEMENT




THIS
STOCK OPTION AGREEMENT (the AAgreement@), is made
as of this 15th day of July 2008 by and between Document Capture Technologies,
Inc., a Delaware corporation (the ACompany@), and
Edward M. Straw (AOptionee@).





RECITAL





On July
15, 2008, the Company’s Board of Directors authorized the grant to Optionee of
an option to purchase the number of shares of common stock (the ACommon
Shares@) of the
Company specified in Paragraph 1 hereof, at the price specified therein, such
option to be for the term and upon the terms and conditions hereinafter stated.
The Board of Directors, or such other committee or individual that the Board of
Directors appoints, shall be the “Administrator” for purposes of this
Agreement.





AGREEMENT





NOW,
THEREFORE, in consideration of the promises and of the undertakings of the
parties hereto contained herein, it is hereby agreed:





1.  Number
of Shares; Option Price.  Pursuant to said action of the Board of
Directors, the Company hereby grants to Optionee the option (AOption@) to
purchase, upon and subject to the terms and conditions hereof, 1,000,000 Common
Shares of the Company at the price of $0.30 per share (“Exercise
Price”).





2.  Term.  This
Option shall expire on the day before the tenth (10th)
anniversary of the date hereof (the AExpiration
Date@)
unless such Option shall have been terminated prior to that date in accordance
with the provisions of this Agreement.  The term AAffiliate@ as used
herein shall have the meaning as set forth in the Federal Securities laws of the
United States.





3.  Shares
Subject to Exercise.  Common Shares subject to exercise shall be
one-fourth (1/4) of such Common Shares on or after July 15, 2009, one-fourth
(1/4) of such Common Shares on or after July 15, 2010, one-fourth (1/4) of such
Common Shares on or after July 15, 2011, and one-fourth (1/4) of such Common
Shares on or after July 15, 2012. All Common Shares shall thereafter remain
subject to exercise for the term specified in Paragraph 2
hereof.  Upon the merger or consolidation of the Company, or an event
in which more than 50% of the Company’s voting capital stock is acquired by one
or more individuals acting as a “group” within the meaning of Section 13 of the
Securities Exchange Act of 1934, as amended, then all of the Common Shares
underlying the Option shall immediately become exercisable.









4.  Method
and Time of Exercise.  The Option may be exercised by written notice
delivered to the Company at its principal executive office stating the number of
Common Shares with respect to which the Option is being exercised, together
with:





(A)  a
check or money order made payable to the Company in the amount of the exercise
price and any withholding tax, as provided under Paragraph 5 hereof;
or





(B) 
if expressly authorized in writing by the Administrator, in its sole discretion,
at the time of the Option exercise, the tender to the Company of Common Shares
owned by Optionee having a fair market value, as determined by the
Administrator, not less than the exercise price, plus the amount of applicable
federal, state and local withholding taxes; or





(C)  the
Optionee may, at its option, elect to exercise this Option, in whole or in part
and at any time or from time to time, on a cashless basis, by surrendering this
Option, with the purchase form attached to this Option as Exhibit A duly
executed by or on behalf of the Optionee, at the principal office of the
Company, or at such other office or agency as the Company may designate, by
canceling a portion of this Option in payment of the Exercise Price payable in
respect of the number of Common Shares purchased upon such
exercise.  In the event of an exercise pursuant to this subsection
4(c), the number of Common Shares issued to the Holder shall be determined
according to the following formula:





X = Y(A-B)


A


Where:
            X
      =
            the
      number of Common Shares that shall be issued to the
  Holder;


Y
      =
              the
      number of Common Shares for which this Option is being exercised (which
      shall include both the number of Common Shares issued to the Holder and
      the number of Common Shares subject to the portion of the Option being
      cancelled in payment of the Exercise
Price);


A
      =
              the
      Fair Market Value (as defined below) of one Common Share;
    and


B
      =
              the
      Exercise Price then in
effect.






(ii)  The
Fair Market Value per Common Share shall be determined as follows:





(a) If
the Common Shares are listed on a national securities exchange, the Nasdaq Stock
Market, the OTC Bulletin Board or another nationally recognized trading system
as of the Exercise Date, which shall be deemed to have been effected immediately
prior to the close of business on the business day on which this option shall
have been surrendered to the Company as provided in Section 4(c) hereof
(“Exercise Date”), the Fair Market Value per Common Share shall be deemed to be
the average of the high and low reported sale prices per Common Share thereon on
the trading day immediately preceding the Exercise Date, as defined below,
(provided that
if the Common Shares are not so listed on such day, the Fair Market Value per
Common Share shall be determined pursuant to clause (b) below).









(b) If
the Common Shares are not listed on a national securities exchange, the Nasdaq
Stock Market, the OTC Bulletin Board or another nationally recognized trading
system as of the Exercise Date, as defined below, the Fair Market Value per
Common Share shall be deemed to be the amount most recently determined by the
Board of Directors of the Company or an authorized committee of the Board of
Directors of the Company (the “Board”) to represent the fair market value per
share of the Common Shares (including without limitation a determination for
purposes of granting common stock options or issuing common stock under any
plan, agreement or arrangement with employees of the Company); and, upon request
of the Optionee, the Board (or a representative thereof) shall, as promptly as
reasonably practicable but in any event not later than 15 days after such
request, notify the Optionee of the Fair Market Value per Common
Share.  Notwithstanding the foregoing, if the Board has not made such
a determination within the three-month period prior to the Exercise Date, as
defined below, then (A) the Board shall make, and shall provide or cause to
be provided to the Optionee notice of, a determination of the Fair Market Value
per Common Share within 15 days of a request by the Optionee that it do so, and
(B) the exercise of this Option pursuant to this subsection 4(c) shall be
delayed until such determination is made and notice thereof is provided to the
Optionee.





Not less
than 100 shares may be purchased at any one time unless the number purchased is
the total number purchasable under such Option at the time.  Only
whole shares may be purchased.





5.  Tax
Withholding.  As a condition to exercise of this Option, the Company
may require Optionee to pay over to the Company all applicable federal, state
and local taxes which the Company is required to withhold with respect to the
exercise of this Option. At the discretion of the Administrator and upon the
request of Optionee, the minimum statutory withholding tax requirements may be
satisfied by the withholding of Common Shares otherwise issuable to Optionee
upon the exercise of this Option.





6.  Intentionally
left blank.





7.  Nontransferability.  Except
with the express written approval of the Administrator, this Option may not be
assigned or transferred except by will, qualified domestic relations order or by
the laws of descent and distribution, and may be exercised only by Optionee
during his lifetime and after his death, by his personal representative or by
the person entitled thereto under his will or the laws of intestate
succession.





8.  Optionee
Not a Shareholder.  Optionee shall have no rights as a shareholder
with respect to the Common Shares of the Company covered by this Option until
the date of issuance of a stock certificate or stock certificates to him upon
exercise of this Option.  No adjustment will be made for dividends or
other rights for which the record date is prior to the date such stock
certificate or certificates are issued.





9.  No
Right to Employment.  Nothing in the Option granted hereby shall
interfere with or limit in any way the right of the Company or of any of its
Affiliates to terminate Optionee's employment or consulting at any time, nor
confer upon Optionee any right to continue in the employ of, or consult with,
the Company or any of its Affiliates.





10.  Anti-dilution
Adjustment.





10.1   Stock
Dividends, Stock Splits, Etc.   If the Company declares or pays a
dividend on its Common Stock payable in Common Stock or other securities, or
subdivides the outstanding Common Stock into a greater amount of Common Stock,
then upon exercise of this Option, for each Common Share acquired, Optionee
shall receive, without cost to Optionee, the total number and kind of securities
to which Optionee would have been entitled had Optionee owned the Common Shares
of record as of the date the dividend or subdivision occurred.









10.2  Reclassifications,
Exchange or Substitution.  Upon any reclassification, exchange,
substitution, or other event that results in a change of the number and/or class
of the securities issuable upon exercise of this Option, Optionee shall be
entitled to receive, upon exercise of this Option, the number and kind of
securities and property that Optionee would have received for the Common Shares
if this Option had been exercised immediately before such reclassification,
exchange, substitution, or other event.  The Company or its successor
shall promptly issue to Optionee a new Option for such new securities or other
property.  The new Option shall provide for adjustments which shall be
as nearly equivalent as may be practicable to the adjustments provided for in
this Section 10.2, including, without limitation, adjustments to the Exercise
Price and to the number of securities or property issuable upon exercise of the
new Option.  The provisions of this Section 10.2 shall similarly
apply to successive reclassifications, exchanges, substitutions, or other
events.





10.3    Adjustments
for Combinations, Etc.   If the outstanding shares of Common
Stock are combined or consolidated, by reclassification or otherwise, into a
lesser number of shares, the Exercise Price shall be proportionately
increased.





10.4    Merger
or Consolidation.   In case of any consolidation of the Company
with, or merger of the Company into any other corporation, or in the case of any
sale or conveyance of all or substantially all of the assets of the Company
other than in connection with a plan of complete liquidation of the Company,
then as a condition of such consolidation, merger or sale or conveyance,
adequate provision will be made whereby the registered holder of the Option will
have the right to acquire and receive upon exercise of this Option in lieu of
the shares of Common Stock immediately theretofore subject to acquisition upon
the exercise of this Option, such shares of stock, securities or assets as may
be issued or payable with respect to or in exchange for the number of shares of
Common Stock immediately theretofore subject to acquisition and receivable upon
exercise of this Option had such consolidation, merger or sale or conveyance not
taken place.  In any such case, the Company will make appropriate
provision to insure that the provisions of this Section 10 hereof will
thereafter be applicable as nearly as may be in relation to any shares of stock
or securities thereafter deliverable upon the exercise of this
Option.





11.  Restrictions
on Sale of Common Shares.  Optionee represents and agrees that upon
his exercise of this Option, in whole or in part, unless there is in effect at
that time under the Securities Act a registration statement relating to the
Common Shares issued to him, he will acquire the Common Shares issuable upon
exercise of this Option for the purpose of investment and not with a view to
their resale or further distribution, and that upon such exercise thereof he
will furnish to the Company a written statement to such effect, satisfactory to
the Company in form and substance.  Optionee agrees that any
certificates issued upon exercise of this Option may bear a legend indicating
that their transferability is restricted in accordance with applicable state and
federal securities law.  Any person or persons entitled to exercise
this Option under the provisions of Paragraphs 5 and 6 hereof shall, upon each
exercise of this Option under circumstances in which Optionee would be required
to furnish such a written statement, also furnish to the Company a written
statement to the same effect, satisfactory to the Company in form and
substance.





12.  Notices.  All
notices to the Company shall be addressed to the Chief Financial Officer at the
principal executive office of the Company, and all notices to Optionee shall be
addressed to Optionee at the address of Optionee on file with the Company or its
subsidiary, or to such other address as either may designate to the other in
writing.  A notice shall be deemed to be duly given if and when
enclosed in a properly addressed sealed envelope deposited, postage prepaid,
with the United States Postal Service.  In lieu of giving notice by
mail as aforesaid, written notices under this Agreement may be given by personal
delivery to Optionee or to the Chief Financial Officer (as the case may
be).





13.  Sale
or Other Disposition.  If Optionee at any time contemplates the
disposition (whether by sale, gift, exchange, or other form or transfer) of any
Shares acquired by exercise of this Option, he or she shall first notify the
Company in writing of such proposed disposition and cooperate with the Company
in complying with all applicable requirements of law, which, in the judgment of
the Company, must be satisfied prior to such disposition.







[SIGNATURE
PAGE FOLLOWS]









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


DOCUMENT
      CAPTURE TECHNOLOGIES, INC.By
      :
              /s/
      David P. ClarkName:
              David
      P. ClarkTitle:
              Chief
      Executive Officer
 
 
 OPTIONEE
 
 
 By
      :
              /s/
      Edward M. StrawName:
              Edward
      M. Straw


Address:
            455
      CENTRAL PARK WEST
              20A
              NY, NY
10025









EXHIBIT
A







PURCHASE
FORM






To: Document Capture
      Technologies, Inc.
            Dated:____________






The
undersigned, pursuant to the provisions set forth in the attached option, hereby
elects to purchase (check
applicable box):




_________
shares of the Common Stock of Document Capture Technologies, Inc. covered by
such Option; or





the
maximum number of shares of Common Stock covered by such Option pursuant to the
cashless exercise procedure set forth in subsection 4(c).





The
undersigned herewith makes payment of the full Exercise Price for such shares at
the price per share provided for in such Option.  Such payment takes
the form of (check applicable
box or boxes):




$______
in lawful money of the United States; and/or





the
cancellation of such portion of the attached Option as is exercisable for a
total of _____ Common Shares (using a Fair Market Value of $_____ per share for
purposes of this calculation) ; and/or





the
cancellation of such number of Option Shares as is necessary, in accordance with
the formula set forth in subsection 4(c), to exercise this Option with
respect to the maximum number of Option Shares purchasable pursuant to the
cashless exercise procedure set forth in subsection 4(c).




Print
      or Type Name(Signature
      must conform in all respects to name of holder as specified on the face of
      the Option)(Street
      Address)(City)                      (State)      (Zip
      Code)