Document:

Exhibit 10.7

 

2005 Stock Option/Stock
Issuance Plan

 

 

MEDLYTE
DIAGNOSTICS, INC.

1998 STOCK OPTION/STOCK ISSUANCE PLAN

 

ARTICLE ONE

GENERAL PROVISIONS

 

I.              PURPOSE OF THE PLAN

 

This 1998 Stock Option/Stock
Issuance Plan is intended to promote the interests of Medlyte Diagnostics, Inc.,
a California corporation, by providing eligible persons in the Corporation’s
employ or service with the opportunity to acquire a proprietary interest, or
otherwise increase their proprietary interest, in the Corporation as an
incentive for them to continue in such employ or service.

 

Capitalized terms herein
shall have the meanings assigned to such terms in the attached Appendix.

 

II.            STRUCTURE OF THE PLAN

 

A.            The Plan shall be divided into two (2) separate
equity programs:

 

(i)    the Option Grant Program under which eligible
persons may, at the discretion of the Plan Administrator, be granted options to
purchase shares of Common Stock, and

 

(ii)   the Stock Issuance Program under which eligible
persons may, at the discretion of the Plan Administrator, be issued shares of
Common Stock directly, either through the immediate purchase of such shares or
as a bonus for services rendered the Corporation (or any Parent or Subsidiary).

 

B.            The provisions of Articles One and Four shall
apply to both equity programs under the Plan and shall accordingly govern the
interests of all persons under the Plan.

 

III.           ADMINISTRATION OF THE PLAN

 

A.            The Plan shall be administered by the Board.
However, any or all administrative functions otherwise exercisable by the Board
may be delegated to the Committee. Members of the Committee shall serve for
such period of time as the Board may determine and shall be subject to removal
by the Board at any time. The Board may also at any time terminate

 

 

the functions
of the Committee and reassume all powers and authority previously delegated to
the Committee.

 

B.            The
Plan Administrator shall have full power and authority (subject to the
provisions of the Plan) to establish such rules and regulations as it may
deem appropriate for proper administration of the Plan and to make such
determinations under, and issue such interpretations of, the Plan and any
outstanding options or stock issuances thereunder as it may deem necessary or
advisable. Decisions of the Plan
Administrator shall be final and binding on all parties who have an interest in
the Plan or any option or stock issuance thereunder.

 

IV.           ELIGIBILITY

 

A.            The
persons eligible to participate in the Plan are as follows:

 

(i)    Employees,

 

(ii)   non-employee
members of the Board or the non-employee members of the board of directors of
any Parent or Subsidiary, and

 

(iii)  consultants
and other independent advisors who provide services to the Corporation (or any
Parent or Subsidiary).

 

B.            The
Plan Administrator shall have full authority to determine, (i) with
respect to the grants made under the Option Grant Program, which eligible
persons are to receive the option grants, the time or times when those grants
are to be made, the number of shares to be covered by each such grant, the
status of the granted option as either an Incentive Option or a Non-Statutory
Option, the time or times when each option is to become exercisable, the
vesting schedule (if any) applicable to the option shares and the maximum
term for which the option is to remain outstanding, and (ii) with respect
to stock issuances made under the Stock Issuance Program, which eligible
persons are to receive such stock issuances, the time or times when those
issuances are to be made, the number of shares to be issued to each
Participant, the vesting schedule (if any) applicable to the issued shares
and the consideration to be paid by the Participant for such shares.

 

C.            The
Plan Administrator shall have the absolute discretion either to grant options
in accordance with the Option Grant Program or to effect stock issuances in
accordance with the Stock Issuance Program.

 

V.            STOCK SUBJECT TO THE PLAN

 

A.            The
stock issuable under the Plan shall be shares of authorized but unissued or
reacquired Common Stock. The maximum
number of shares of Common Stock which may be issued over the term of the Plan
shall not exceed 4,340,000 shares.

 

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B.            Shares of Common Stock subject to outstanding
options shall be available for subsequent issuance under the Plan to the extent
(i) the options expire or terminate for any reason prior to exercise in
full or (ii) the options are cancelled in accordance with the
cancellation-regrant provisions of Article Two.
Unvested shares issued under the Plan and subsequently repurchased by the
Corporation, at the option exercise or direct issue price paid per share,
pursuant to the Corporation’s repurchase rights under the Plan shall be added
back to the number of shares of Common Stock reserved for issuance under the
Plan and shall accordingly be available for reissuance through one or more
subsequent option grants or direct stock issuances under the Plan.

 

C.            Should any change be made to the Common Stock
by reason of any stock split, stock dividend, recapitalization, combination of
shares, exchange of shares or other change affecting the outstanding Common
Stock as a class without the Corporation’s receipt of consideration,
appropriate adjustments shall be made to (i) the maximum number and/or
class of securities issuable under the Plan and (ii) the number and/or
class of securities and the exercise price per share in effect under each
outstanding option in order to prevent the dilution or enlargement of benefits
thereunder. The adjustments determined by the Plan
Administrator shall be final, binding and conclusive.  In no event shall any such adjustments be
made in connection with the conversion of one or more outstanding shares of the
Corporation’s preferred stock into shares of Common Stock.

 

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ARTICLE TWO

OPTION GRANT PROGRAM

 

I.              OPTION TERMS

 

Each option shall be
evidenced by one or more documents in the form approved by the Plan
Administrator, provided, however, that each such document shall comply
with the terms specified below. Each document
evidencing an Incentive Option shall, in addition, be subject to the provisions
of the Plan applicable to such options.

 

A.            Exercise Price.

 

1.             The exercise price per share shall be fixed
by the Plan Administrator in accordance with the following provisions;

 

(i)    The exercise price per share shall not be
less than eighty-five percent (85%) of the Fair Market Value per share of
Common Stock on the option grant date.

 

(ii)   If the person to whom the option is granted is
a 10% Shareholder, then the exercise price per share shall not be less than one
hundred ten percent (110%) of the Fair Market Value per share of Common Stock
on the option grant date.

 

2.             The exercise price shall become immediately
due upon exercise of the option and shall, subject to the provisions of Section I
of Article Four and the documents evidencing the option, be payable in
cash or check made payable to the Corporation. Should the Common
Stock be registered under Section 12 of the 1934 Act at the time the
option is exercised, then the exercise price may also be paid as follows:

 

(i)    in shares of Common Stock held for the requisite
period necessary to avoid a charge to the Corporation’s earnings for financial
reporting purposes and valued at Fair Market Value on the Exercise Date, or

 

(ii)   to the extent the option is exercised for
vested shares, through a special sale and remittance procedure pursuant to
which the Optionee shall concurrently provide irrevocable instructions (A) to
a Corporation-designated brokerage firm to effect the immediate sale of the
purchased shares and remit to the Corporation, out of the sale proceeds
available on the settlement date, sufficient funds to cover the aggregate
exercise price payable for the purchased

 

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shares plus all applicable
Federal, state and local income and employment taxes required to be withheld by
the Corporation by reason of such exercise and (B) to the Corporation to
deliver the certificates for the purchased shares directly to such brokerage
firm in order to complete the sale.

 

Except to the extent such
sale and remittance procedure is utilized, payment of the exercise price for
the purchased shares must be made on the Exercise Date.

 

B.            Exercise and Term of Options.  Each option shall be exercisable at such
time or times, during such period and for such number of shares as shall be
determined by the Plan Administrator and set forth in the documents evidencing
the option grant. However, no option shall have a term in
excess of ten (10) years measured from the option grant date.

 

C.            Effect of Termination of Service.

 

1.             The following provisions shall govern the
exercise of any options held by the Optionee at the time of cessation of
Service or death:

 

(i)    Should the Optionee cease to remain in Service
for any reason other than death, Disability or Misconduct, then the Optionee
shall have a period of three (3) months following the date of such
cessation of Service during which to exercise each outstanding option held by
such Optionee.

 

(ii)   Should Optionee’s Service terminate by reason
of Disability, then the Optionee shall have a period of twelve (12) months
following the date of such cessation of Service during which to exercise each
outstanding option held by such Optionee.

 

(iii)  If the Optionee dies while holding an outstanding
option, then the personal representative of his or her estate or the person or
persons to whom the option is transferred pursuant to the Optionee’s will or
the laws of inheritance shall have a twelve (12)-month period following the
date of the Optionee’s death to exercise such option.

 

(iv)  Under no circumstances, however, shall any such
option be exercisable after the specified expiration of the option term.

 

(v)   During the applicable post-Service exercise period,
the option may not be exercised in the aggregate for more than the number of
vested shares for which the option is exercisable on the date of the Optionee’s
cessation of Service. Upon the expiration of the applicable
exercise period or (if earlier) upon the expiration of the option term, the
option shall terminate and cease

 

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to be outstanding for any
vested shares for which the option has not been exercised.
However, the option shall, immediately upon the Optionee’s cessation of
Service, terminate and cease to be outstanding with respect to any and all
option shares for which the option is not otherwise at the time exercisable or
in which the Optionee is not otherwise at that time vested.

 

(vi)  Should Optionee’s Service be terminated for Misconduct,
then all outstanding options held by the Optionee shall terminate immediately
and cease to remain outstanding.

 

2.             The Plan Administrator shall have the
discretion, exercisable either at the time an option is granted or at any time
while the option remains outstanding, to;

 

(i)    extend the period of time for which the
option is to remain exercisable following Optionee’s cessation of Service or
death from the limited period otherwise in effect for that option to such
greater period of time as the Plan Administrator shall deem appropriate, but in
no event beyond the expiration of the option term, and/or

 

(ii)   permit the option to be exercised, during the
applicable post-Service exercise period, not only with respect to the number of
vested shares of Common Stock for which such option is exercisable at the time
of the Optionee’s cessation of Service but also with respect to one or more
additional installments in which the Optionee would have vested under the
option had the Optionee continued in Service.

 

D.            Shareholder Rights.
The holder of an option shall have no shareholder rights with respect to the
shares subject to the option until such person shall have exercised the option,
paid the exercise price and become the recordholder of the purchased shares.

 

E.             Unvested Shares.
The Plan Administrator shall have the discretion to grant options which are
exercisable for unvested shares of Common Stock. Should the Optionee
cease Service while holding such unvested shares, the Corporation shall have
the right to repurchase, at the exercise price paid per share, any or all of
those unvested shares.  The
terms upon which such repurchase right shall be exercisable (including the
period and procedure for exercise and the appropriate vesting schedule for
the purchased shares) shall be established by the Plan Administrator and set
forth in the document evidencing such repurchase right.  The Plan Administrator may not impose a
vesting schedule upon the option grant or any shares of Common Stock
subject to that option which is more restrictive than twenty percent (20%) per
year vesting, with the initial vesting to occur not later than one (1) year
after the option grant date. However, such limitation shall not be
applicable to any option grants made to individuals who are officers of the
Corporation, non-employee Board members or independent consultants.

 

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F.             First Refusal Rights.  Until
such time as the Common Stock is first registered under Section 12 of the
1934 Act, the Corporation shall have the right of first refusal with respect to
any proposed disposition by the Optionee (or any successor in interest) of any
shares of Common Stock issued under the Plan. Such right of first
refusal shall be exercisable in accordance with the terms established by the
Plan Administrator and set forth in the document evidencing such right.

 

G.            Limited Transferability of Options. During the lifetime of the Optionee, the
option shall be exercisable only by the Optionee and shall not be assignable or
transferable other than by will or by the laws of descent and distribution
following the Optionee’s death.

 

H.            Withholding. The
Corporation’s obligation to deliver shares of Common Stock upon the exercise of
any options granted under the Plan shall be subject to the satisfaction of all
applicable Federal, state and local income and employment tax withholding
requirements.

 

II.            INCENTIVE OPTIONS

 

The terms specified below
shall be applicable to all Incentive Options.
Except as modified by the provisions of this Section II, all the
provisions of the Plan shall be applicable to Incentive Options.
Options which are specifically designated as Non-Statutory Options shall not
be subject to the terms of this Section II.

 

A.            Eligibility. Incentive
Options may only be granted to Employees.

 

B.            Exercise Price. The
exercise price per share shall not be less than one hundred percent (100%) of
the Fair Market Value per share of Common Stock on the option grant date.

 

C.            Dollar Limitation. The aggregate Fair Market Value of the shares
of Common Stock (determined as of the respective date or dates of grant) for
which one or more options granted to any Employee under the Plan (or any other
option plan of the Corporation or any Parent or Subsidiary) may for the first
time become exercisable as Incentive Options during any one (1) calendar
year shall not exceed the sum of One Hundred Thousand Dollars ($100,000).
To the extent the Employee holds two (2) or more such options which become
exercisable for the first time in the same calendar year, the foregoing
limitation on the exercisability of such options as Incentive Options shall be
applied on the basis of the order in which such options are granted.

 

D.            10% Shareholder.
If any Employee to whom an Incentive Option is granted is a 10% Shareholder,
then the option term shall not exceed five (5) years measured from the
option grant date.

 

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III.           CORPORATE TRANSACTION

 

A.            The shares subject to each option outstanding
under the Plan at the time of a Corporate Transaction shall automatically vest
in full so that each such option shall, immediately prior to the effective date
of the Corporate Transaction, become fully exercisable for all of the shares of
Common Stock at the time subject to that option and may be exercised for any or
all of those shares as fully-vested shares of Common Stock.
However, the shares subject to an outstanding option shall not vest on such an accelerated basis if
and to the extent: (i) such option is assumed by the successor corporation
(or parent thereof) in the Corporate Transaction and the Corporation’s
repurchase rights with respect to the unvested option shares are concurrently assigned
to such successor corporation (or parent thereof) or (ii) such option is
to be replaced with a cash incentive program of the successor corporation which
preserves the spread existing on the unvested option shares at the time of the
Corporate Transaction and provides for subsequent payout in accordance with the
same vesting schedule applicable to those unvested option shares or (iii) the
acceleration of such option is subject to other limitations imposed by the Plan
Administrator at the time of the option grant.

 

B.            All outstanding repurchase rights shall also
terminate automatically, and the shares of Common Stock subject to those
terminated rights shall immediately vest in full, in the event of any Corporate
Transaction, except to the extent: (i) those repurchase rights are
assigned to the successor corporation (or parent thereof) in connection with
such Corporate Transaction or  (ii) such
accelerated vesting is precluded by other limitations imposed by the Plan
Administrator at the time the repurchase right is issued.

 

C.            Immediately following the consummation of the
Corporate Transaction, all outstanding options shall terminate and cease to be
outstanding, except to the extent assumed by the successor corporation (or
parent thereof).

 

D.            Each option which is assumed in connection
with a Corporate Transaction shall be appropriately adjusted, immediately after
such Corporate Transaction, to apply to the number and class of securities
which would have been issuable to the Optionee in consummation of such
Corporate Transaction, had the option been exercised immediately prior to such
Corporate Transaction. Appropriate adjustments shall also be made
to (i) the number and class of securities available for issuance under the
Plan following the consummation of such Corporate Transaction and (ii) the
exercise price payable per share under each outstanding option, provided
the aggregate exercise price payable for such securities shall remain the same.

 

E.             The Plan Administrator shall have the
discretion, exercisable either at the time the option is granted or at any time
while the option remains outstanding, to provide for the automatic acceleration
(in whole or in part) of one or more outstanding options (and the immediate
termination of the Corporation’s repurchase rights with respect to the shares
subject to those options) upon the occurrence of a Corporate Transaction,
whether or not those options are to be assumed in the Corporate Transaction.

 

8

 

F.             The Plan Administrator shall also have full
power and authority, exercisable either at the time the option is granted or at
any time while the option remains outstanding, to structure such option so that
the shares subject to that option will automatically vest on an accelerated
basis should the Optionee’s Service terminate by reason of an Involuntary
Termination within a designated period (not to exceed eighteen (18) months)
following the effective date of any Corporate Transaction in which the option
is assumed and the repurchase rights applicable to those shares do not
otherwise terminate. Any option so accelerated shall remain
exercisable for the fully-vested option shares until the earlier of (i) the
expiration of the option term or (ii) the expiration of the one (1)-year
period measured from the effective date of the Involuntary Termination.  In addition, the Plan Administrator may
provide that one or more of the Corporation’s outstanding repurchase rights
with respect to shares held by the Optionee at the time of such Involuntary
Termination shall immediately terminate on an accelerated basis, and the shares
subject to those terminated rights shall accordingly vest at that time.

 

G.            The portion of any Incentive Option
accelerated in connection with a Corporate Transaction shall remain exercisable
as an Incentive Option only to the extent the applicable One Hundred Thousand
Dollar limitation is not exceeded.  To
the extent such dollar limitation is exceeded, the accelerated portion of such
option shall be exercisable as a Non-Statutory Option under the Federal tax
laws.

 

H.            The grant of options under the Plan shall in
no way affect the right of the Corporation to adjust, reclassify, reorganize or
otherwise change its capital or business structure or to merge, consolidate,
dissolve, liquidate or sell or transfer all or any part of its business or
assets.

 

IV.           CANCELLATION AND REGRANT OF
OPTIONS

 

The Plan Administrator shall
have the authority to effect, at any time and from time to time, with the
consent of the affected option holders, the cancellation of any or all
outstanding options under the Plan and to grant in substitution therefore new
options covering the same or different number of shares of Common Stock but
with an exercise price per share based on the Fair Market Value per share of
Common Stock on the new option grant date.

 

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ARTICLE THREE

STOCK ISSUANCE PROGRAM

 

I.              STOCK ISSUANCE TERMS

 

Shares of Common Stock may
be issued under the Stock Issuance Program through direct and immediate
issuances without any intervening option grants.
Each such stock issuance shall be evidenced by a Stock Issuance Agreement which
complies with the terms specified below.

 

A.            Purchase Price.

 

1.             The purchase price per share shall be fixed
by the Plan Administrator but shall not be less than eighty-five percent (85%)
of the Fair Market Value per share of Common Stock on the issue date.  However, the purchase price per share of
Common Stock issued to a 10% Shareholder shall not be less than one hundred and
ten percent (110%) of such Fair Market Value.

 

2.             Subject to the provisions of Section I
of Article Four, shares of Common Stock may be issued under the Stock
Issuance Program for any of the following items of consideration which the Plan
Administrator may deem appropriate in each individual instance:

 

(i)    cash or check made payable to the Corporation,
or

 

(ii)   past services rendered to the Corporation (or
any Parent or Subsidiary).

 

B.            Vesting
Provisions.

 

1.             Shares of Common Stock issued under the Stock
Issuance Program may, in the discretion of the Plan Administrator, be fully and
immediately vested upon issuance or may vest in one or more installments over
the Participant’s period of Service or upon attainment of specified performance
objectives. However, the Plan Administrator may not
impose a vesting schedule upon any stock issuance effected under the Stock
Issuance Program which is more restrictive than twenty percent (20%) per year
vesting, with initial vesting to occur not later than one (1) year after the
issuance date. Such limitation shall not apply to any
Common Stock issuances made to the officers of the Corporation, non-employee
Board members of independent consultants.

 

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2.             Any new, substituted or additional securities
or other property (including money paid other than as a regular cash dividend)
which the Participant may have the right to receive with respect to the
Participant’s unvested shares of Common Stock by reason of any stock dividend,
stock split, recapitalization, combination of shares, exchange of shares or
other change affecting the outstanding Common Stock as a class without the
Corporation’s receipt of consideration shall be issued subject to (i) the
same vesting requirements applicable to the Participant’s unvested shares of
Common Stock and (ii) such escrow arrangements as the Plan Administrator
shall deem appropriate.

 

3.             The Participant shall have full shareholder
rights with respect to any shares of Common Stock issued to the Participant
under the Stock Issuance Program, whether or not the Participant’s interest in
those shares is vested. Accordingly, the Participant shall have the
right to vote such shares and to receive any regular cash dividends paid on
such shares.

 

4.             Should the Participant cease to remain in
Service while holding one or more unvested shares of Common Stock issued under
the Stock Issuance Program or should the performance objectives not be attained
with respect to one or more such unvested shares of Common Stock, then those
shares shall be immediately surrendered to the Corporation for cancellation,
and the Participant shall have no further shareholder rights with respect to
those shares.  To
the extent the surrendered shares were previously issued to the Participant for
consideration paid in cash or cash equivalent (including the Participant’s
purchase-money indebtedness), the Corporation shall repay to the Participant
the cash consideration paid for the surrendered shares and shall cancel the
unpaid principal balance of any outstanding purchase-money note of the
Participant attributable to such surrendered shares.

 

5.             The Plan Administrator may in its discretion
waive the surrender and cancellation of one or more unvested shares of Common
Stock (or other assets attributable thereto) which would otherwise occur upon
the non-completion of the vesting schedule applicable to such shares.
Such waiver shall result in the immediate vesting of the Participant’s interest
in the shares of Common Stock as to which the waiver applies.
Such waiver may be effected at any time, whether before or after the
Participant’s cessation of Service or the attainment or non- attainment of the
applicable performance objectives.

 

C.            First Refusal Rights.  Until such time as the Common Stock is
first registered under Section 12 of the 1934 Act, the Corporation shall
have the right of first refusal with respect to any proposed disposition by the
Participant (or any successor in interest) of any shares of Common Stock issued
under the Stock Issuance Program. Such right of first refusal shall be
exercisable in accordance with the terms established by the Plan Administrator
and set forth in the document evidencing such right.

 

11

 

II.            CORPORATE TRANSACTION

 

A.            Upon the occurrence of a Corporate
Transaction, all outstanding repurchase rights under the Stock Issuance Program
shall terminate automatically, and the shares of Common Stock subject to those
terminated rights shall immediately vest in full, except to the extent: (i) those
repurchase rights are assigned to the successor corporation (or parent thereof)
in connection with such Corporate Transaction or (ii) such accelerated
vesting is precluded by other limitations imposed by the Plan Administrator at
the time the repurchase right is issued.

 

B.            The Plan Administrator shall have the
discretionary authority, exercisable either at the time the unvested shares are
issued or any time while the Corporation’s repurchase rights with respect to
those shares remain outstanding, to provide that those rights shall
automatically terminate on an accelerated basis, and the shares of Common Stock
subject to those terminated rights shall immediately vest, in the event the
Participant’s Service should subsequently terminate by reason of an Involuntary
Termination within a designated period (not to exceed eighteen (18) months)
following the effective date of any Corporate Transaction in which those
repurchase rights are assigned to the successor corporation (or parent thereof).

 

III.           SHARE ESCROW/LEGENDS

 

Unvested shares may, in the
Plan Administrator’s discretion, be held in escrow by the Corporation until the
Participant’s interest in such shares vests or may be issued directly to the
Participant with restrictive legends on the certificates evidencing those
unvested shares.

 

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ARTICLE FOUR

MISCELLANEOUS

 

I.              FINANCING

 

The Plan Administrator may
permit any Optionee or Participant to pay the option exercise price or the
purchase price for shares issued to such person under the Plan by delivering a
full-recourse, interest-bearing promissory note payable in one or more
installments and secured by the purchased shares.
However, any promissory note delivered by a consultant must be secured by
collateral in addition to the purchased shares of Common Stock.
In no event shall the maximum credit available to the Optionee or Participant
exceed the sum of (i) the aggregate option exercise price or
purchase price payable for the purchased shares plus (ii) any Federal,
state and local income and employment tax liability incurred by the Optionee or
the Participant in connection with the option exercise or share purchase.

 

II.            EFFECTIVE DATE AND TERM OF
PLAN

 

A.            The Plan shall become effective when adopted
by the Board, but no option granted under the Plan may be exercised, and no
shares shall be issued under the Plan, until the Plan is approved by the
Corporation’s shareholders. If such shareholder approval is not obtained
within twelve (12) months after the date of the Board’s adoption of the Plan,
then all options previously granted under the Plan shall terminate and cease to
be outstanding, and no further options shall be granted and no shares shall be
issued under the Plan. Subject to such limitation, the Plan
Administrator may grant options and issue shares under the Plan at any time
after the effective date of the Plan and before the date fixed herein for
termination of the Plan.

 

B.            The Plan shall terminate upon the earliest
of (i) the expiration of the ten (10)-year period measured from the date
the Plan is adopted by the Board, (ii) the date on which all shares
available for issuance under the Plan shall have been issued as vested shares
or (iii) the termination of all outstanding options in connection with a
Corporate Transaction.  All
options and unvested stock issuances outstanding at that time under the Plan
shall continue to have full force and effect in accordance with the provisions
of the documents evidencing such options or issuances.

 

III.           AMENDMENT OF THE PLAN

 

A.            The Board shall have complete and exclusive
power and authority to amend or modify the Plan in any or all respects.
However, no such amendment or modification shall adversely affect the rights
and obligations with respect to options or unvested stock issuances at the time
outstanding under the Plan unless the Optionee or the Participant consents to
such

 

13

 

amendment or modification.  In addition, certain amendments may require
shareholder approval pursuant to applicable laws and regulations.

 

B.            Options may be granted under the Option Grant
Program and shares may be issued under the Stock Issuance Program which are in
each instance in excess of the number of shares of Common Stock then available
for issuance under the Plan, provided any excess shares actually issued under
those programs shall be held in escrow until there is obtained shareholder
approval of an amendment sufficiently increasing the number of shares of Common
Stock available for issuance under the Plan. If such shareholder
approval is not obtained within twelve (12) months after the date the first
such excess issuances are made, then (i) any unexercised options granted
on the basis of such excess shares shall terminate and cease to be outstanding
and (ii) the Corporation shall promptly refund to the Optionees and the
Participants the exercise or purchase price paid for any excess shares issued
under the Plan and held in escrow, together with interest (at the applicable
Short Term Federal Rate) for the period the shares were held in escrow, and
such shares shall thereupon be automatically cancelled and cease to be
outstanding.

 

IV.           USE  OF PROCEEDS

 

Any cash proceeds received
by the Corporation from the sale of shares of Common Stock under the Plan shall
be used for general corporate purposes.

 

V.            WITHHOLDING

 

The Corporation’s obligation
to deliver shares of Common Stock upon the exercise of any options or upon the
issuance or vesting of any shares issued under the Plan shall be subject to the
satisfaction of all applicable Federal, state and local income and employment
tax withholding requirements.

 

VI.           REGULATORY APPROVALS

 

The implementation of the
Plan, the granting of any options under the Plan and the issuance of any shares
of Common Stock (i) upon the exercise of any option or (ii) under the
Stock Issuance Program shall be subject to the Corporation’s procurement of all
approvals and permits required by regulatory authorities having jurisdiction
over the Plan, the options granted under it and the shares of Common Stock
issued pursuant to it.

 

VII.         NO EMPLOYMENT OR SERVICE RIGHTS

 

Nothing in the Plan shall
confer upon the Optionee or the Participant any right to continue in Service
for any period of specific duration or interfere with or otherwise restrict in
any way the rights of the Corporation (or any Parent or Subsidiary employing or
retaining such

 

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person) or of the Optionee or the Participant, which
rights are hereby expressly reserved by each, to terminate such person’s
Service at any time for any reason, with or without cause.

 

VIII.        FINANCIAL REPORTS

 

The Corporation shall
deliver a balance sheet and an income statement at least annually to each
individual holding an outstanding option under the Plan, unless such individual
is a key Employee whose duties in connection with the Corporation (or any
Parent or Subsidiary) assure such individual access to equivalent information.

 

As approved and adopted by
the Board of Directors of Lpath, Inc. on November 29, 2005 and approved by
Stockholders on November 29, 2005.

 

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APPENDIX

 

The following definitions
shall be in effect under the Plan:

 

A.            Board shall
mean the Corporation’s Board of Directors.

 

B.            Code shall
mean the Internal Revenue Code of 1986, as amended.

 

C.            Committee shall
mean a committee of two (2) or more Board members appointed by the Board
to exercise one or more administrative functions under the Plan.

 

D.            Common Stock shall
mean the Corporation’s common stock.

 

E.             Corporate Transaction shall mean either of the following
shareholder-approved transactions to which the Corporation is a party:

 

(i)            a merger or consolidation in which securities
possessing more than fifty percent (50%) of the total combined voting power of
the Corporation’s outstanding securities are transferred to a person or persons
different from the persons holding those securities immediately prior to such
transaction, or

 

(ii)           the sale, transfer or other disposition of
all or substantially all of the Corporation’s assets in complete liquidation or
dissolution of the Corporation.

 

F.             Corporation shall
mean Medlyte Diagnostics, Inc., a California corporation, and any successor
corporation to all or substantially all of the assets or voting stock of
Medlyte Diagnostics, Inc. which shall by appropriate action adopt the
Plan.

 

G.            Disability  shall mean the inability of the Optionee or
the Participant to engage in any substantial gainful activity by reason of any
medically determinable physical or mental impairment and shall be determined by
the Plan Administrator on the basis of such medical evidence as the Plan
Administrator deems warranted under the circumstances.

 

H.            Employee shall
mean an individual who is in the employ of the Corporation (or any Parent or
Subsidiary), subject to the control and direction of the employer entity as to
both the work to be performed and the manner and method of performance.

 

I.              Exercise Date shall
mean the date on which the Corporation shall have received written notice of
the option exercise.

 

A-1

 

J.             Fair Market Value per share of Common Stock on any relevant
date shall be determined in accordance with the following provisions:

 

(i)            If the Common Stock is at the time traded on
the Nasdaq National Market, then the Fair Market Value shall be the closing
selling price per share of Common Stock on the date in question, as such price
is reported by the National Association of Securities Dealers on the Nasdaq
National Market. If there is no closing selling price for the
Common Stock on the date in question, then the Fair Market Value shall be the
closing selling price on the last preceding date for which such quotation
exists.

 

(ii)           If the Common Stock is at the time listed on
any Stock Exchange, then the Fair Market Value shall be the closing selling
price per share of Common Stock on the date in question on the Stock Exchange
determined by the Plan Administrator to be the primary market for the Common
Stock, as such price is officially quoted in the composite tape of transactions
on such exchange. If there is no closing selling price for the
Common Stock on the date in question, then the Fair Market Value shall be the
closing selling price on the last preceding date for which such quotation
exists.

 

(iii)          If the Common Stock is at the time neither
listed on any Stock Exchange nor traded on the Nasdaq National Market, then the
Fair Market Value shall be determined by the Plan Administrator after taking
into account such factors as the Plan Administrator shall deem appropriate.

 

K.            Incentive Option shall mean an option which satisfies the
requirements of Code Section 422.

 

L.             Involuntary Termination shall mean the termination of the Service of
any individual which occurs by reason of:

 

(i)            such individual’s involuntary dismissal or
discharge by the Corporation for reasons other than Misconduct, or

 

(ii)           such individual’s voluntary resignation
following (A) a change in his or her position with the Corporation which
materially reduces his or her duties and responsibilities or the level of
management to which he or she reports, (B) a reduction in his or her level
of compensation (including base salary, fringe benefits and target bonuses
under any corporate-performance based bonus or incentive programs) by more than
fifteen percent (15%) or (C) a relocation of such individual’s place of
employment by more than fifty (50) miles, provided and only if such change,
reduction or relocation is effected without the individual’s consent.

 

A-2

 

M.           Misconduct shall
mean the commission of any act of fraud, embezzlement or dishonesty by the
Optionee or Participant, any unauthorized use or disclosure by such person of
confidential information or trade secrets of the Corporation (or any Parent or
Subsidiary), or any other intentional misconduct by such person adversely
affecting the business or affairs of the Corporation (or any Parent or
Subsidiary) in a material manner. The foregoing definition shall not be deemed
to be inclusive of all the acts or omissions which the Corporation (or any
Parent or Subsidiary) may consider as grounds for the dismissal or discharge of
any Optionee, Participant or other person in the Service of the Corporation (or
any Parent or Subsidiary).

 

N.            1934 Act shall mean the Securities Exchange Act of
1934, as amended.

 

O.            Non-Statutory Option shall mean an option not intended to satisfy
the requirements of Code Section 422.

 

P.             Option Grant Program shall mean the option grant program in effect
under the Plan.

 

Q.            Optionee shall
mean any person to whom an option is granted under the Plan.

 

R.            Parent shall
mean any corporation (other than the Corporation) in an unbroken chain of
corporations ending with the Corporation, provided each corporation in the
unbroken chain (other than the Corporation) owns, at the time of the
determination, stock possessing fifty percent (50%) or more of the total
combined voting power of all classes of stock in one of the other corporations
in such chain.

 

S.             Participant shall
mean any person who is issued shares of Common Stock under the Stock Issuance
Program.

 

T.            Plan shall
mean the Corporation’s 1998 Stock Option/Stock Issuance Plan, as set forth in
this document.

 

U.            Plan Administrator shall mean either the Board or the Committee
acting in its capacity as administrator of the Plan.

 

V.            Service shall
mean the provision of services to the Corporation (or any Parent or Subsidiary)
by a person in the capacity of an Employee, a non-employee member of the board
of directors or a consultant or independent advisor, except to the extent
otherwise specifically provided in the documents evidencing the option grant.

 

W.           Stock Exchange shall mean either the American Stock Exchange
or the New York Stock Exchange.

 

A-3EXHIBIT 10.6

                    LEASE EXTENSION AND AMENDMENT AGREEMENT

         THIS AGREEMENT entered into as of the 1st day of June, 2005, by and
between THE LAS OLAS COMPANY, INC. ("Lessor") and video Without Boundaries, Inc.

                              W I T N E S S E T H:

         WHEREAS, Lessor and Lessee did enter into the Las Olas Business
Property Lease dated the 13th day of April, 2004 for the premises located at 888
East Las Olas Boulevard, Suite 710, Fort Lauderdale, Florida 33301 (the
"Lease"); and

         WHEREAS, Lessor and Lessee desire to extend the term of the Lease and
amend certain provisions thereof.

         NOW, THEREFORE, for good and valuable consideration, Lessor and Lessee
do hereby agree as follows:

         1. The term of the Lease is hereby extended for a period of one (1)
year, with the Extended Term commencing on the 1st day of June, 2005, and ending
at midnight on the 31st day of May, 2006 (hereinafter called "the Extended
Term").

         2. The Minimum Rent for the Extended Term shall be in the amount of
$59,903.00 payable in monthly installments of $4,991.92 each in advance and
without demand on the first day of each and every month of the Extended Lease
Term hereunder beginning with the month of June, 2005.

         3. All other terms and provisions of the Lease not specifically amended
herein are hereby ratified and confirmed and shall remain in full force and
effect.

         IN WITNESS WHEREOF, the parties hereto have caused these presents to be
executed as of the day and year first above written.

Signed, sealed and delivered              LESSOR:
in the presence of:                       THE LAS OLAS COMPANY, INC., a
                                          Florida Corporation

Witness: /s/ [ILLEGIBLE]                  By: /s/ [ILLEGIBLE]
         ------------------------             ----------------------------------
                                          Its: President

                                          LESSEE:
                                          VIDEO WITHOUT BOUNDARIES, INC.

Witness: /s/ {ILLEGIBLE]                  By: /s/ Jeffrey Harrell
         -------------------------            ----------------------------------
                                          Its: President & CEO

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