Document:

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                                                                     EXHIBIT 4.2

                   INTERNATIONAL REMOTE IMAGING SYSTEMS, INC.

                             Stock Option Agreement

                            PART I --NOTICE OF GRANT

Employee's Name:                          Kshitij Mohan
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Employee's Address:
                                    ------------------------------------

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

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Start Date:                         January 6, 2003
                                    -----------------

Date of Grant:                      February 20, 2003
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Exercise Price per Share:                  $2.50
                                    ------------

Total Number of Shares Covered:           70,000
                                    ------------

Type of Option:                                   Incentive Stock Option
                                    ------------

                                          X       Nonstatutory Stock Option
                                    ------------

Expiration Date (Term of Option):   January 6, 2008 (5-Years)
                                    -------------------------

Vesting Schedule:          Subject to the termination provisions of this
                           Agreement, this Option may be exercised, in whole or
                           in part, with respect to that portion of this Option
                           which has vested as of the exercise date. This Option
                           shall vest and become exercisable in three equal
                           installments on the first, second and third
                           anniversaries of your Start Date. In each case, the
                           number of Shares that may be purchased pursuant to
                           the exercise of this Option shall be rounded to the
                           nearest full Share.
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                            PART II - TERMS OF GRANT

      1. Grant of Option. International Remote Imaging Systems, Inc. (the
"Company") hereby grants to you ("Employee") an option (the "Option") to
purchase the number of Shares set forth in the Notice of Grant at the exercise
price per share set forth in the Notice of Grant (the "Exercise Price") subject
to the terms and conditions of this Agreement.

      2. Certain Definitions. The following definitions shall apply to this
Agreement:

            (a) "Administrator" means the Compensation Committee of the Board of
Directors, or such other board committee as may be subsequently authorized to
administer the Company's stock option plans (the "Administrator").

            (b) "Consultant" means any person, including an advisor, engaged by
the Company or a Parent or Subsidiary to render services and who is compensated
for such services, but it does not include not include a director who is paid
only a director's fee by the Company.

            (c) "Continuous Status as an Employee or Consultant" means that the
employment or consulting relationship is not interrupted or terminated by the
Company. Continuous Status as an Employee or Consultant shall not be considered
interrupted in the case of any leave of absence approved by the Board, including
sick leave, military leave, or any other personal leave authorized under Company
policies.

            (d) ""Disability" means any illness, disability or other incapacity
in such a manner that you are physically rendered unable regularly to perform
the your essential duties for a period in excess of one hundred twenty (120)
consecutive days or more than one hundred eighty (180) days in any consecutive
twelve (12) month period.

            (e) "Fair Market Value" means, as of any date, the value of a Share
determined as follows:

                  (i) If the Company's common stock is listed on any established
stock exchange or a national market system, including without limitation, the
National Market System of the National Association of Securities Dealers, Inc.
Automated Quotation ("NASDAQ") System, the Fair Market Value of a Share shall be
the closing sales price for the common stock (or the closing bid, if no sales
are reported) as quoted on such system or exchange (or the exchange with the
greatest volume of trading in the common stock) on the last market trading day
prior to the day of determination, as reported in the Wall Street Journal or
such other source as the Administrator deems reliable;

                  (ii) If the Company's common stock is quoted on the NASDAQ
System (but not on the National Market System thereof) or is regularly quoted by
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recognized securities dealers but selling prices are not reported, the Fair
Market Value of a Share shall be the mean between the high bid and low asked
prices for the common stock on the last market trading day prior to the day of
determination, as reported in the Wall Street Journal or such other source as
the Administrator deems reliable; or

                  (iii) In the absence of any established market for the
Company's common stock, the Fair Market Value shall be determined in good faith
by the Administrator.

            (f) "Termination Event" means the termination of your status as an
employee for "cause" as defined in your employment agreement with the Company.

      2. Exercise of Option.

            (a) Vesting Schedule. This Option is exercisable during its term in
accordance with the Vesting Schedule set forth in the Notice of Grant.

            (b) Method of Exercise. This Option is exercisable by delivery of an
exercise notice (the "Exercise Notice") which shall state the election to
exercise this Option, the number of Shares with respect to which this Option is
being exercised (the "Exercised Shares") and such other representations and
agreements as may be required by the Company. The Exercise Notice shall be
signed by Employee and shall be delivered in person or by certified mail to the
Secretary of the Company. The Exercise Notice shall be accompanied by payment of
the aggregate Exercise Price as to all Exercised Shares. This Option shall be
deemed to be exercised upon receipt by the Company of such fully executed
Exercise Notice accompanied by such aggregate Exercise Price and any additional
documentation required by the Company. No Shares shall be issued pursuant to the
exercise of this Option unless such issuance and exercise complies with all
relevant provisions of law and the requirements of any stock exchange upon which
the Shares are then listed. Assuming such compliance, for income tax purposes
the Exercised Shares shall be considered transferred to Employee on the date
this Option is exercised with respect to such Exercised Shares.

            (b) Accelerated Termination. Your Option will terminate and cease to
be exercisable immediately upon the occurrence of a Termination Event.

            (c) Termination of Employment or Consulting Relationship. In the
event that your Continuous Status as an Employee or Consultant terminates (other
than upon your death or Disability or as a result of a Termination Event), you
may exercise this Option until the earlier of (i) ninety (90) days after
termination of the employment or consulting relationship or (ii) the Expiration
Date set forth in the Notice of Grant.

            (d) Disability of Employee. In the event that your Continuous Status
as an Employee or Consultant terminates as a result of your Disability, you may
exercise this Option at any time within twelve (12) months from the date of such
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termination, but only to the extent that you were was entitled to exercise it at
the date of such termination (but in no event later than the Expiration Date set
forth in the Notice of Grant).

            (e) Death of Employee. In the event of the death of your death, this
Option may be exercised at any time within twelve (12) months following the date
of death (but in no event later than the Expiration Date set forth in the Notice
of Grant), by your estate or by a person who acquired the right to exercise the
Option by bequest or inheritance, but only to the extent that you were entitled
to exercise the Option at the date of death.

      3. Method of Payment. Payment of the aggregate Exercise Price shall be by
any of the following, or a combination thereof, at the election of Employee:

            (a) cash;

            (b) check;

            (c) delivery of a properly executed Exercise Notice together with
such other documentation as the Administrator and Employee's broker, if
applicable, shall require to effect a "cashless" exercise of this Option and
delivery to the Company of the sale or loan proceeds required to pay the
Exercise Price; or

            (d) if permitted by the Administrator in its sole discretion,
surrender of other Shares which have been held by Employee for a period of time
equal to or exceeding six (6) months (or such other period of time as permitted
by the Administrator in its sole discretion) which have a fair market value on
the date of surrender (determined according to the closing sales price on the
prior day) equal to the aggregate Exercise Price of the Exercised Shares.

      4. Non-Transferability of Option. This Option may not be transferred in
any manner other than by will or by the laws of descent or distribution and may
be exercised during the lifetime of Employee only by Employee. The terms of this
Agreement shall be binding upon the executors, administrators, heirs, successors
and assigns of Employee.

      5. Term of Option. This Option may be exercised only prior to or on the
Expiration Date (the "Term") set forth in the Notice of Grant and may be
exercised during the Term only in accordance with the terms of this Agreement.

      6. Withholding Taxes. Upon the exercise of the Option, the Company shall
have the right to require you to pay the Company the amount of any taxes which
the Company may be required to withhold with respect to issuance of the Shares
to you pursuant to the exercise of the Option.
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      7. Adjustments Upon Changes in Capitalization, Dissolution, Merger or
Asset Sale.

            (a) Changes in Capitalization. Subject to any required action by the
shareholders of the Company, if the outstanding Shares are increased, decreased,
changed into or exchanged for a different number or kind of shares of securities
of the Company through reorganization, recapitalization, reclassification, stock
combination, stock dividend, stock split, reverse stock split or other similar
transaction, an appropriate and proportionate adjustment shall be made in the
maximum number and kind of shares issuable upon exercise of this Option. Any
such adjustment in the Option shall be made without change in the aggregate
purchase price applicable to the Options but with a corresponding adjustment in
the price for each share or other unit of any security covered by the Option.
Such adjustment shall be made by the Administrator, whose determination in that
respect shall be final, binding and conclusive.

            (b) Dissolution or Liquidation. In the event of the proposed
dissolution or liquidation of the Company, to the extent that an Option had not
been previously exercised, it will terminate immediately prior to the
consummation of such proposed action.

            (c) Merger or Asset Sale. In the event of a merger of the Company
with or into another corporation, or the sale of substantially all of the assets
of the Company or a similar event that the Administrator determines, in its
discretion, would materially alter the structure of the Company or its
ownership, the Administrator, upon 30 days prior written notice to you, will, in
its discretion, do one or more of the following: (i) shorten the period during
which the Option is exercisable (provided it remains exercisable for at least 30
days after the date the notice is given); (ii) accelerate any vesting schedule
to which this Option is subject; (iii) arrange to have the surviving or
successor entity grant replacement options with appropriate adjustments in the
number and kind of securities and option prices; or (iv) cancel the Option upon
payment to the you in cash, to the extent then exercisable (including the effect
of any accelerated vesting), of an amount equal to the excess of the fair market
value of the number of Shares as to which the Option is then exercisable (at the
effective time of the merger, reorganization, sale of other event) over the
aggregate exercise price with respect to such Shares.

      8. Conditions Upon Issuance of Shares.

            (a) Legal Compliance. Shares shall not be issued pursuant to the
exercise of the Option unless the exercise of such Option and the issuance and
delivery of such Shares shall comply with all relevant provisions of law,
including, without limitation, the Securities Act of 1933, as amended, the
Securities Exchange Act of 1934, the rules and regulations promulgated
thereunder, the requirements of any stock exchange or quotation system upon
which the Shares may then be listed or quoted, and any other requirements of law
or of any regulatory bodies having jurisdiction over such issuance and delivery,
and shall be further subject to the approval of counsel for the
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Company with respect to such compliance. Any securities delivered upon exercise
of the Option shall be subject to such restrictions, and the person acquiring
such securities shall, if requested by the Company, provide such assurances and
representations to the Company as the Company may deem necessary or desirable to
assure compliance with all applicable legal requirements.

            (b) Investment Representation. As a condition to the exercise of an
Option, the Company may require you to represent and warrant at the time of any
such exercise that the Shares are being purchased only for investment and
without any present intention to sell, transfer or distribute such Shares.

      9. Not an Employment or Service Contract. Nothing in this Option shall be
construed as an agreement by the Company, express or implied, to employ Employee
or contract for Employee's services, to restrict the right of the Company to
discharge Employee or cease contracting for Employee's services or to modify,
extend or otherwise affect in any manner whatsoever the terms of any employment
agreement or contract for services which may exist between Employee and the
Company.

      10. Interpretation. The Administrator's decisions, determinations and
interpretations regarding the Option and this Agreement shall be final and
binding.

      11. Governing Law. The interpretation, performance and enforcement of this
Agreement shall be governed by the laws of the State of Delaware without
regard to the principles of conflicts of law.

Employee:                           International Remote Imaging Systems, Inc.

                                    By:
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Name:       Kshitij Mohan           Name:
     -------------------------            ------------------------------------

                                    Title:
                                          ------------------------------------
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                           DESIGNATION OF BENEFICIARY

      In the event of my death, I hereby designate the following as my
beneficiary(ies) to receive all of my vested Options that are unexercised at
that time.

Name:        (print)
----                          ------------------------------------------------
                              (First)            (Middle)         (Last)

------------------            ------------------------------------------------
Relationship to               (Address)
Beneficiary(ies)
                              ------------------------------------------------

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

Dated:
      ------------            ------------------------------------------------
                              Signature of Employee

                          CONSENT OF SPOUSE OF EMPLOYEE

      The undersigned spouse of Employee has read and hereby approves the terms
and conditions of this Stock Option Agreement. In consideration of the Company's
granting his or her spouse the right to purchase Shares as set forth in this
Agreement, the undersigned hereby agrees to be irrevocably bound by the terms
and conditions of this Agreement and further agrees that any community property
interest shall be similarly bound. The undersigned hereby appoints the
undersigned's spouse as attorney-in-fact for the undersigned with respect to any
amendment or exercise of rights under this Agreement.

                                    --------------------------------
                                    Signature of Spouse of Employee

                                    --------------------------------
                                    (Print Name of Spouse)

                                    --------------------------------
                                    (Date Signed)
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                                  EXERCISE FORM

                      (To Be Executed Upon Exercise of Option)

      The undersigned hereby exercises the Option with regard to _____________
shares of common stock and herewith makes payment of the purchase price in full.
The undersigned requests that the certificate(s) for such shares and the Option
for the unexercised portion of this Option be issued to the Employee.

                                    [NAME OF OPTION HOLDER]

Dated:                              By:
      ----------------------              ------------------------------------
                                          Signature

                                    Name:
                                          ------------------------------------
                                          (Please Print)

                                    Address:
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                                    Social Security No:
                                                       -----------------------exv10w12

 

Exhibit 10.12

     RBC Conflict of Interest — Code of Ethics

Receiving or soliciting gifts to influence a financial transaction represents
significant regulatory risk, is strictly prohibited, and may result in stiff
penalties. The Bank Bribery Act of 1984 increased the urgency for financial
institutions to educate all of their employees against participating in such
transactions, by creating substantial penalties. The Bank Bribery Act and the
adoption of Regulation “O” or the Financial
Institutions Regulatory Act (FIRA) underscored the need for sufficient policy
regarding proper employee/customer/vendor relationships.

Improper employee/customer/vendor relationships may also result in negative
market reaction or reputation risk.

In recognizing that excessive activities and gratuities and access to
information may lead to conflict of interest for employees, directors, and
principal shareholders, the bank has developed this policy to recognize such
positions and to prevent a loss of objectivity by requiring appropriate and
trustworthy conduct.

Employees have an obligation to conduct business within guidelines that
prohibit actual or potential conflicts of interest. An actual or potential
conflict of interest occurs when an employee is in a position to influence a
decision that may result in personal gain for that employee or for a relative
as a result of Company business dealings. No “presumption of guilt” is created
by the mere existence of a relationship with outside firms. However, if the
employees have any influence on transactions involving purchases, contracts,
leases or lending activities, it is imperative that they disclose the existence
of any actual or potential conflict of interest so that safeguards can be
established to protect all parties.

Personal gain may result not only in cases where an employee or relative has a
significant ownership in the firm which does business with our Company, but
also when an employee or relative receives any kickback, bribe, substantial
gift, or special consideration as a result of any transaction or business
dealings involving our Company.

 

 

The materials, products, designs, plans, ideas and data of this Company are the
property of the employer and should never be given to an outside firm or
individual except through normal channels and with appropriate authorization.
Any improper transfer of material or disclosure of information, even though it
is not apparent that the employee or director has personally gained by such
action, constitutes unacceptable conduct. Any employee or director who
participates in such a practice will be subject to disciplinary action, up to
and including possible discharge.

Definitions

	•	 	Officer or Employee — A part-time or full-time salaried officer or
employee of RBC.
	 
	•	 	Gift — May include cash or property, special discounts, price
concessions, special personal items, special personal entertainment or
travel, special personal services, gratuitous personal services,
personal favors or special dispensations of any kind that could be
attributed to the recipient’s position or responsibilities with RBC.
	 
	•	 	Relative — Spouse, minor child and or other dependent of the Officer,
Employee or Director.

Policy statement

Due to the increased number of financial institution failures resulting from
self-dealing, fraud and misconduct of directors, management, and employees the
Board of Directors of RBC intends to hold its employees and directors to this
strict code of ethics and to require reporting of conflicts of interest.
Individuals associated with this Company have a primary responsibility to
uphold the standards of this Company.

Failure to comply with all policies herein described may result in the
termination of employment.

All employees and representatives of RBC are required to act in a responsible
and respectable manner and to remain free of influences that may result in the
loss of objectivity regarding business conducted with RBC customers, vendors or
with RBC itself. Each employee must disclose and avoid any interests or
activities involving another organization or individual that may result in a
conflict of interest, perceived or actual, between RBC and that organization or
individual.

While this policy does not intend to interfere with the personal lives of
employees and representatives, it requires those persons to recognize
situations where conflicts of interest may arise and to avoid them when
possible. If these situations cannot be avoided, they must be reported
immediately to the Chief Executive Officer or Chief Financial Officer.

 

 

Subsequently, the employee or representative should remove himself or herself
from any compromising situations, whether it involves advising the other person
or entity or approving or voting on extensions of credit, placement or
purchasing of contracts, leases or investments.

Confidential information

All employees and directors must acknowledge that all information concerning
bank, customer, depositor and director information is considered confidential
and is to be used for bank purposes only, with the exception of public
information on the company. The use of such information for personal, family,
or other gain is unethical and illegal under securities rulings and the
National Bank Act. Information regarding any business conducted cannot be
disclosed to outside individuals (unless authorized by the bank or its
customer) and may not be used for personal gain.

Use of confidential information for other than RBC’s business purposes may
result in disclosure of insider information. Insider information is defined as
information of a material nature to affect the price of stock involved. Insider
information may not be used to purchase, trade, or solicit securities until
that information is available to the public.

The use of confidential information received by either the investment or loan
divisions may not be provided to the trust department for investment of
discretionary funds or advice to customers and vice versa. Any transfers of
information regarding customer accounts must be strictly information that is
available to the public.

In addition, all published information (for both internal and external use),
developed programs, equipment, etc. are the property of RBC and are reserved
for use by employees of RBC. Use of these materials for any other purpose may
constitute copyright infringement and theft.

Investment in RDDB stock

The employees and directors of RBC are encouraged to purchase and hold stock
for long-term investment. While RBC may not delve into the personal lives of
its employees, employment in a bank requires prudent and proper conduct in
investment and other situations. Speculation or trading in the stock of the
Company is prohibited, as is the purchase or sale based on insider information.

 

 

Gifts and entertainment

Employees and directors of RBC are not to solicit personal gifts from
prospective or current customers, associates, vendors or any other individual
or business. Any personal gifts received shall be of nominal value. Nominal
value is considered anything below $50.

Employees of RBC are expected to participate in entertainment and amenities of
reasonable cost to facilitate business. In the normal course of business,
reasonable and customary expenses may be paid by the client. Payment by anyone
other than the bank of excessive costs or travel not customary or within
acceptable business practice must not be accepted. Any questionable
circumstances must be reported immediately to a Senior Management member.

Tickets for sporting, cultural, or other events purchased by the Company are to
be used in entertaining potential or actual customers, vendors, or others for
business purposes only. If it is determined three or four days before the event
that the tickets will not be used, an officer may offer them to someone else at
his or her discretion.

External involvement

While RBC encourages its employees to be involved in outside activities,
including charitable and political functions, federal law prohibits RBC from
making political contributions. At no time will employees solicit other
employees for political contributions or coerce others into contributing to any
organization. Conduct must not give the perception that benefit to RBC or
connections are sought or desired.

Capitalizing on opportunities for personal gain or compensation outside of that
provided by RBC for the performance of services for RBC is strictly prohibited.
Employment outside and in addition to employment at RBC must be reported to
your immediate supervisor.

Consultation

Refer to any questions regarding proper ethics and code of conduct to an
immediate supervisor or counsel. Actions or acceptance of gifts that are not
specifically mentioned above must be reviewed as to intent and purpose.
Employees should ask themselves, ” If a situation were to be made public, would
my conduct be embarrassing or come into question?” Actions or acceptance of
gifts must be documented and submitted to the CFO for review.

 

 

Disclosures

Employees, officers and directors of RBC must make annual disclosures of any
relationship, receipt of gifts, compensation or other situations leading to
possible conflicts in the following manner:

	 	 	 
	Employees	 	
report to immediate supervisor, forward to CFO or CEO
	Officers	 	
report to Chief Financial Officer or President & CEO
	President & Directors	 	
report to general counsel

Whistleblower procedures

RBC contracts with National Hotline Services providing a toll-free number 24
hours a day 365 days per year to speak anonymously, or in confidence, with a
hotline professional thoroughly trained to receive reports of perceived
misconduct or wrongful behavior. A written report of each call is sent to the
Chairman of the Audit Committee who will take appropriate actions to resolve
any issues.

Employee accounts

All employees are encouraged to maintain their bank accounts at RBC to allow
RBC to provide service and direct deposit of payroll checks. However, under no
circumstances will RBC pay a rate of interest higher than the rate available to
all depositors on any deposit account.1

At no time will overdraft fees be waived.

Consequences of noncompliance

As previously stated, failure to comply with this policy may result in
termination of employment. The action will be commensurate with the seriousness
of the conduct and an evaluation of the situation. All violations of this
policy will be brought to the attention of the Board of Directors. Termination
of employment will be determined by an officer who is the direct or indirect
supervisor of the employee concerned.

All Directors and Officers of the Company are required to read the compliance
statement and report any or no conflicts on an annual basis.

	1	 	Deferred compensation accounts are a general liability to the Company and not
a deposit account by definition.

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