Document:

form8k_032510ex101.htm

                                                 EXHIBIT 10.1

 

RESTRICTED STOCK UNIT AGREEMENT

____________________________

 

DST SYSTEMS, INC. 2005 EQUITY INCENTIVE PLAN

_____________________

 

(Time and Performance Vesting; Executive Officer)

THIS AGREEMENT is made and entered into as of the "Grant Date" (see Paragraph 1(a)), by and between DST SYSTEMS, INC. ("Company") and recipient ("Employee") of an Award under the DST Systems, Inc. 2005 Equity Incentive Plan, as amended and interpreted from time to time (the "Plan").

 

WHEREAS, Awards under the Plan are administered by the Compensation Committee of Company’s Board of Directors or other committee designated by the Board (the "Committee") or Company officer to which the Committee delegates authority as provided in the Plan;

 

WHEREAS, the Committee wishes to grant to Employee rights ("Restricted Stock Units" or "RSUs") to receive shares of Company common stock ("Shares") on or after the time the RSUs "Vest," which occurs with respect to all or a portion of the RSUs on any date that the condition(s) required for Company to issue all or a portion of the underlying Shares under Section 3 have been satisfied ("Vesting Date");

 

WHEREAS, the RSUs may Vest (becoming "Vested RSUs") and the underlying Shares be issued on or after the satisfaction of certain conditions generally including continued "Employment" (as defined in Paragraph 3(i)) and the satisfaction of preestablished performance goals, and subject to the other provisions of this Agreement, all while remaining subject to a risk of forfeiture as provided for in Paragraph 3(d); and

 

WHEREAS, Company, in its discretion, may allow Employee the potential tax benefit of deferring the issuance of Shares beyond the RSU Vesting Dates as provided in Paragraph 3(g), and, therefore, an RSU Vesting Date may not be the same date as the issuance of one or more of the Shares underlying the Vested RSUs.

 

The parties agree as follows:

1.           GRANT OF RSU.

 

a.   RSU Grant.  The Grant Date and the number of RSUs granted in this Award are shown in the email communication to Employee to which this Agreement is attached.  Also attached to the email communication is an Appendix to this Agreement which gives Vesting details, including time-based and performance vesting criteria and potential Vesting dates, as further described in Paragraphs 3(a) and (b) of this Agreement.  Vesting of each RSU as provided in Section 3 entitles Employee to the issuance of one Share, subject to the other terms and conditions of the Plan and this Agreement.  In order for the grant to be effective, Employee must timely confirm acceptance of the terms and conditions of this Agreement pursuant to the instructions in the communication.

  

  

  

b.           Administration.  Company’s Chief Financial Officer may adopt Administrative Procedures for RSUs and the Committee may maintain rules for Awards issued under the Plan.  As amended from time to time, such procedures and rules (collectively, the "Rules") shall apply to all actions taken with respect to this Agreement.  The Committee or its delegate may take any action deemed necessary or appropriate to administer this Agreement and the issuance of Shares attributable to Vested RSUs in accordance and consistent with Internal Revenue Code ("Code") Section 409A and regulations and guidance issued thereunder ("409A").

 

2.           RESTRICTIONS.

 

a.   Non-Transferability.  Except as may be permitted under the Plan with respect to transfers to a Permitted Transferee, the RSUs are not transferable during the "Original Delay Period" (as defined in Paragraph 3(g)) and through any "Extended Issuance Date" (as defined in Paragraph 3(g)), by sale, assignment, disposition, gift, exchange, pledge, hypothecation, or otherwise, other than as provided in Paragraph 3(j) upon Employee’s death.  Any attempted disposition of the RSUs, or the levy of any execution, attachment or similar process upon the RSUs prior to issuance of the Shares, shall be null and void and without effect.

b.           No Privilege of Stock Ownership; Dividend Equivalents.  Holding RSUs does not give Employee the rights of a shareholder (including without limitation the right to vote or receive dividends or other distributions) with respect to the Shares underlying the RSUs that Company may issue under the terms and conditions of this Agreement.  Notwithstanding the foregoing, if Company declares a dividend on Shares, then a "Dividend Equivalent" (as defined in the Plan) in the form of additional RSUs will be paid on the RSUs.  Dividend Equivalents will be converted to additional RSUs on the date the actual dividend is paid to Company shareholders.  The number of additional RSUs credited shall be the quotient (rounded up to the next whole Share) obtained by dividing the aggregate cash amount that would have been paid as a dividend on the Shares underlying all RSUs credited to Employee in this Award (whether or not such RSUs have Vested) by the Fair Market Value of a Share on the date such dividend payment is made to Company shareholders.  Any additional RSUs credited to Employee's RSU Account which are attributable to Dividend Equivalents shall be subject to the same risk of forfeiture and the same Vesting conditions, and result in the issuance of Shares at the same time and same manner, as the original underlying RSUs.  All rights to any Dividend Equivalents shall be subject to the restrictions on transferability described in Paragraph 2(a) and shall become null and void upon forfeiture of the RSUs under Paragraph 3(d).  To the extent that Employee has elected an Extended Issuance Delay (as defined in Paragraph 3(h)), with respect to any RSUs, any additional RSUs credited to Employee's RSU Account attributable to Dividend Equivalents shall be distributed at the same time as the original RSUs subject to the extended deferral election.

3.           VESTING, FORFEITURE, AND SHARE ISSUANCE.

 

a.   Appendix A Vesting Requirements.  For purposes of Paragraph 3(b), the Committee shall determine Company and/or business unit performance target(s) applicable to the RSUs (collectively, the "Goal").  No later than the date required by the Plan for establishing the Goal, the Goal will be established, set forth on an Appendix A to this Agreement and communicated to Employee.  By accepting the terms and conditions of this Agreement in accordance with Paragraph 1(a), Employee shall be deemed to have consented to Appendix A, and at all times, Appendix A, its Goal, terms and conditions are incorporated herein by reference.  The Goal may relate to one or more calendar years (each a "Performance Year") including or following the Grant Date year (each applicable period, a "Performance Period" and shown on Appendix A).  For purposes of Paragraph 3(b), Appendix A shall also set forth the "Scheduled Vesting Date(s)", which may be the date of, or a date following, a Committee meeting following a specified Performance Period or Performance Year thereof, at which financial results are determined for Award purposes ("Applicable Committee Meeting" or “Applicable Meeting Date”).  At the Applicable Committee Meeting following each measurement period until the RSUs are fully Vested or forfeited, the Committee (1) shall determine whether and the extent to which Company has achieved the Goal for such period and, if appropriate, shall certify Goal achievement ("Certification"), and (2) shall determine whether Vesting in whole or in part may occur based upon the Certification and elapsing of the "Time Condition" shown on Appendix A.

  

  

  

 

       b.         Time and Performance Vesting.  The RSUs shall become Vested in connection with Certification as provided in Appendix A but no earlier than any Scheduled Vesting Date.  Vesting shall not occur as to any portion of the RSUs for which Goal achievement Certification does not occur at the Applicable Committee Meeting following the final Performance Year (the "Deadline"), and if Certification does not occur by the Deadline, all RSUs granted under this Agreement that have not Vested shall be forfeited as of the Deadline.

 

c.           Other Vesting.

 

	
(i)  

	
Effect of Retirement or Reduction in Force on Vesting

	
  

	
(A)

	
If Employee’s "Retirement" or a "Reduction in Force" (each as defined in Paragraph 3(i) and each an "Event") occurs during a Performance Year (such Performance Year in which the Event occurs, the "Event Year"), then neither Vesting nor forfeiture shall occur as of the date of the Event with respect to RSUs that have not Vested prior to the date of the Event ("Remaining RSUs").  As of the Applicable Meeting Date in the calendar year following the Event Year ("Post-Event Year"), a determination shall be made, in accordance with the Subparagraphs below, as to whether any Remaining RSUs shall Vest on the Scheduled Vesting Date in the Post-Event Year.

	
  

	
(B)

	
If Certification occurs for the Event Year, a pro rata portion of RSUs that would have Vested on the Scheduled Vesting Date in the Post-Event Year (assuming the Time Condition had not applied) shall Vest on such Scheduled Vesting Date (regardless of whether the Time Condition has been satisfied).  The number of Remaining RSUs Vesting shall be the number of Remaining RSUs that, but for the Event, would have Vested on such Scheduled Vesting Date based on the Certification for the Event Year, divided by twelve, multiplied by the number of calendar months between the first day of the Event Year and the date of the Event (and if the Time Condition has not been satisfied, an additional number of RSUs that, but for the Time Condition, would have Vested on previous Scheduled Vesting Dates based on the Certification for Performance Years preceding the Event Year).  Any remaining RSUs shall be forfeited as of the Scheduled Vesting Date in the Post-Event Year.

	
  

	
(C)

	
If no RSUs would have Vested in the Post-Event Year due to lack of Certification for the Event Year, all Remaining RSUs shall be forfeited as of the Scheduled Vesting Date in the Post-Event Year.

	
  

	
(D)

	
A Reduction in Force subsequent to a Change in Control is a Termination Without Cause for which Vesting occurs as provided in Subparagraph 3(c)(ii)(B).  Subparagraph 3(c)(ii)(C) governs a Retirement that occurs subsequent to a Change in Control.

 

(ii)           Effect of Change in Control on Vesting

  

  

  

 

	
  

	
(A)

	
Subject to Section 6 of this Agreement and Section 14 of the Plan, if full Vesting of RSUs has not occurred by the date of a "Change in Control" (as defined in Paragraph 6(b)), then the Certification requirements set forth in Appendix A shall no longer apply.  The RSUs that have not Vested as of the date of Change in Control ("Non-Vested CIC RSUs") shall Vest, subject to continued Employment and to all other terms and provisions of this Agreement other than the Certification conditions set forth in Appendix A, in one-third (1/3) increments over the immediately following three anniversary dates of the date of the Change in Control.

	
  

	
(B)

	
Notwithstanding the above, upon a "Termination Without Cause" or a termination of Employment in connection with a "Resignation for Good Reason" (each as defined in Paragraph 3(i)) following a Change in Control, all RSUs that have not otherwise been forfeited under this Agreement shall become fully Vested.

	
  

	
(C)

	
A Retirement that occurs after a Change in Control and is the result of a termination by the Company that constitutes a Termination Without Cause shall cause full Vesting as provided in Subparagraph 3(c)(ii)(B).  A Retirement due to a voluntary resignation occurring after a Change in Control shall only cause a pro rata portion of the number of RSUs that would have Vested on the next anniversary date of the Change in Control to Vest as of the date of such Retirement.  The pro rata amount shall be the number of RSUs that would have Vested on such anniversary date, divided by twelve, multiplied by the number of calendar months between the preceding Change in Control anniversary date, or if none, the Change in Control date, to the date of the Retirement.  The remaining RSUs shall be forfeited as of such Retirement.

(iii)           Effect of Death and Disability on Vesting.   In addition to any potential Vesting which may occur as provided in this Section 3 and subject to the other terms and conditions of this Agreement, Vesting shall occur in full as of the date of Employee’s "Disability" (as that term is defined in the Rules) or death regardless of any lack of Goal achievement or Certification; provided, however, in no event shall Vesting occur on account of Employee's death or Disability if Employee's Employment has been terminated before the date of Employee's death or Disability.  Any death or Disability occurring after forfeiture of the RSUs under Paragraph 3(d) of this Agreement shall not affect the forfeited status of such RSUs.

(iv)           Effect of a Business Unit Divestiture on Vesting. If a "Business Unit Divestiture" (or "BUD," as defined in Paragraph 3(i)) occurs and (A) Certification occurs for any Performance Year ending before the BUD, or (B) Certification occurs for the Performance Year in which the BUD occurred (“BUD Year”), then regardless of whether the Time Condition has been satisfied, RSUs that have not Vested by the date of the BUD shall Vest pro rata based upon the number of Performance Period months elapsed prior to the date of the BUD.  If Certification occurs for any Performance Year ending before the BUD Year, Vesting shall occur at the time of the BUD.  If no Certification occurs for any Performance Year ending before the BUD Year, but Certification occurs for the BUD Year, Vesting shall occur on the Scheduled Vesting Date in the year after the BUD Year (“Post-BUD Year”).  The number of RSUs pro rata Vesting (either at the time of the BUD or the Scheduled Vesting Date in the Post-BUD Year) is the number of RSUs granted, less any RSUs for which Vesting has already occurred prior to the BUD, divided by sixty (60), multiplied by the number of months from the first day of the Performance Period to the date of the BUD.  If Certification occurs before the BUD, any remaining RSUs shall be forfeited as of the date of the BUD.  If Certification occurs at the Applicable Committee Meeting in the Post-BUD Year, any remaining RSUs shall be forfeited on the Scheduled Vesting Date in the Post-BUD Year.  If no Certification occurs at such Applicable Committee Meeting, all RSUs shall be forfeited as of the Scheduled Vesting Date in the Post-BUD Year.

(v)          Calculations.  The pro rata calculations set forth in this Paragraph 3(c) shall include the calendar month in which the Vesting event occurred only if the date of such event is subsequent to the 15th day of such month.  For any calculations in this Agreement that require the number of RSUs to be divided or for a designated percentage of the RSUs to Vest, if such number is not evenly divisible or an applied percentage or formula would result in the issuance of a fractional Share, any fractional Share shall be rounded up to the next whole number and the Corporate Secretary’s office shall allocate the additional Shares(s) to the Vesting tranche.  In no event shall Vesting occur with respect to a number of RSUs that exceeds the original RSU grant amount.

 

d.           Forfeiture.  Forfeiture of RSUs shall occur under the circumstances set forth below. Upon any such forfeiture, under no circumstance will Company be obligated to make any payment to Employee, and no Shares shall be issued, as a result of such forfeited RSUs.  In addition to the forfeiture of all RSUs, upon forfeiture for "Cause" (as defined in Paragraph 3(i)) all Shares previously issued under this Agreement shall also be forfeited and transferred to Company as provided in Section 5.

  

  

  

 

(i)          Subject to the other provisions of this Section 3, all non-Vested RSUs shall be forfeited if either (A) Certification does not occur prior to or on the Deadline, or (B) Employee ceases Employment during the Original Delay Period (even if a portion of the RSUs have Vested).

(ii)          Notwithstanding any other provision of this Agreement, Cause shall result in forfeiture of the RSUs and all Shares issued pursuant thereto.  Employee acknowledges and agrees that forfeiture for Cause can occur during any Original Delay Period or Extended Delay Period, prior or subsequent to any RSU Vesting or Share issuance and whether or not Employee is eligible for a Retirement.

(iii)          If Vesting occurs for a portion of the RSUs in connection with a Retirement before a Change in Control as provided in Paragraph 3(c), the remaining RSUs shall be immediately forfeited to Company as of the Scheduled Vesting Date in the Post-Event Year.

 

        (iv)          If Vesting occurs for a portion of the RSUs in connection with a Retirement after a Change in Control as provided in Subparagraph 3(c)(ii)(C), the

     remaining  RSUs shall be immediately forfeited as of the Change in Control anniversary date on which pro rata Vesting occurred.

 

e.            Share Issuance.

 

(i)          Except as otherwise provided herein, upon the Vesting of a specific number of RSUs as provided in Paragraphs 3(a) and (b), Company shall issue a corresponding number of Shares to Employee as soon as administratively practical after the Vesting Date; provided that tax withholding obligations have been satisfied as provided in Section 4.  The preceding sentence notwithstanding,

	
  

	
(A)

	
if the Vesting event is Retirement, no issuance of Shares is to occur with respect to such Retirement unless that Retirement is also a 409A Separation;

	
  

	
(B)

	
if the Vesting event is Retirement but such Retirement is not a 409A Separation, issuance of Shares shall not occur until Employee's 409A Separation;

	
  

	
(C)

	
if the Vesting event is a Change in Control and the RSUs are subject to 409A, no issuance of Shares is to occur unless that Change in Control is also a 409A Change in Control; and

	
  

	
(D)

	
if the Vesting event is a Change in Control but such Change in Control is not a 409A Change in Control, no issuance of Shares is to occur until the first to occur of Employee's 409A Separation or a 409A Change in Control.

(ii)          Company will not issue Shares upon a Vesting Date to the extent that either Employee has elected an "Extended Issuance Delay" (as defined in Paragraph 3(g)) and/or the issuance of Shares is subject to the six-month delay period required under Section 409A a "409A Issuance Delay" (as defined in Paragraph 3(h)).  Employee acknowledges and agrees that Company will not issue any Shares pursuant to this Agreement any earlier than the first business day after the Vesting Date nor any later than ninety days after such Vesting Date.  If one or both of an Extended Issuance Delay or a 409A Issuance Delay applies, Company shall issue the Shares as soon as administratively practical (but no earlier than one business day and no later than ninety days) after expiration of the latest ending applicable period.  Company’s transfer agent may issue Shares in certificate or book entry form as determined by Company’s Corporate Secretary.

(iii)          Upon issuance of the Shares, Employee shall have all rights of a shareholder with respect thereto including the right to vote and receive all dividends or other distributions made or paid with respect to the Shares.  The number of Shares issuable in any circumstance shall be reduced by the number of Shares withheld for taxes as provided in Section 4.

  

  

  

f.           Limited Accelerated Issuance of Shares for FICA Related Taxes.  Paragraph 4(b) governs the limited accelerated payment of Shares underlying RSUs for which a Vesting Date has not yet occurred but which, due to Employee's eligibility for Retirement after any level of Goal achievement but prior to the Scheduled Vesting Date after satisfaction of the Time Condition, or after a Change in Control but prior to the subsequent incremental Vesting dates, may be no longer subject to a risk of forfeiture as provided in Subparagraph 3(c)(ii)(C) (other than for Cause).  Such limited issuance may occur for the satisfaction of "FICA Related Taxes."

g.           Extended Issuance Delays.  The period from the Grant Date to a Vesting Date is the "Original Delay Period."  In circumstances allowed by the Rules and where a valid and timely Section 409A deferral election has been made (an "Extended Issuance Delay"), Shares that Company would otherwise issue after the Original Delay Period may be issued on the Extended Issuance Date timely elected by Employee.  The period from the Vesting Date to the Extended Issuance Date is the "Extended Delay Period."

h.           Section 409A Issuance Delays.  To the extent that an RSU is or becomes subject to 409A and Employee is a "specified employee" under Company’s Specified Employee Identification Procedures, then, notwithstanding any other provision of this Agreement or the Rules and for the avoidance of negative tax consequences to Employee, any issuance of Shares or cash pursuant to this Agreement on account of Employee's 409A Separation shall be delayed until the first day after six-months following such 409A Separation, as required for the avoidance of penalties and/or excise taxes under 409A ("409A Issuance Delay").

i.           Definitions.  For purposes of this Agreement, the following terms have the meanings set forth below:

(i)           A "409A Change in Control" is a Change in Control that also qualifies as a change in control under 409A(a)(2)(A)(v).

(ii)           A "409A Separation" is Employee’s separation from service with Company as determined under 409A(a)(2)(A)(i).  A 409A Separation may occur on account of any separation from service including separation due to death, disability, resignation, or termination of employment by Company with or without Cause.

(iii)           A "Business Unit Divestiture" is Employee's termination of Employment in connection with the consummation of a merger, reorganization, consolidation, or sale of assets, or stock or other transaction that the Committee determines is a business unit divestiture event, that involves a Subsidiary (as defined in Subparagraph 3(i)(v)(B)), joint venture, division or other business unit, and that results in a group of employees of such business unit being employed by an acquiring company and no longer having employment with Company.

(iv)           "Cause" means either a violation of Section 5 or termination of Employment for any act of dishonesty, willful misconduct, gross negligence, intentional or conscious abandonment or neglect of duty, criminal activity, fraud or embezzlement, any unauthorized disclosure or use of material confidential information or trade secrets, or violation of any noncompete or non-disclosure agreement to which Employee is subject.

(v)           "Employment" means Employee is regularly and continuously employed, for more than fifty percent (50%) of the number of hours designated for base salary purposes as full-time employment, by:

  

  

  

	
  

	
(A)

	
Company;

	
  

	
(B)

	
any corporation in an unbroken chain of corporations beginning with Company or in an unbroken chain of corporations ending with Company if, on the Grant Date, each corporation other than the last corporation in the unbroken chain owns 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 or any entity in which Company has a direct or indirect equity interest of at least fifty percent (50%) ("Subsidiary");

	
  

	
(C) 

	
any individual or entity that directly or through one or more intermediaries controls or is controlled by or under common control with Company ("Affiliate"); or

	
  

	
(D)

	
any entity in which Company directly or indirectly owns stock possessing such minimum percentage (at least twenty percent (20%)) of the total combined voting power of all classes of stock or owns such minimum percentage (at least twenty percent 20%)) of the capital interests or profit interests as the Committee from time to time determines for purposes of this Subparagraph 3(i)(v) (also an "Affiliate").

Employee is not deemed to have terminated Employment through, and the RSUs shall not be forfeited solely as a result of, any change in Employee’s duties or position or Employee’s temporary leave of absence approved by Company.

(vi)           The "Extended Issuance Date" is (a) if a Retirement Installment applies, each date during an Extended Delay Period that Employee shall receive an issuance of Shares in an installment, or if earlier, the date of death following Retirement; or (b) if a Retirement Installment does not apply, the earlier of (i) the Extended Issuance Date elected by Employee pursuant to the Rules; or (ii) the date of a 409A Separation during the Extended Delay Period.

(vii)           A "Reduction in Force" means a termination of Employment with Company during the Original Delay Period as part of Company’s termination of the employment of at least ten (10) employees within a business unit in connection with a single plan of reduction to occur within a rolling 90-day period or longer period incorporated into a specific plan of reduction.

(viii)           A "Resignation for Good Reason" means Employee's resignation for good reason (as defined below) subsequent to the date of a Change in Control during the three-year period following such date if: (x) Employee provides written notice to the Company Secretary within ninety (90) days after the initial occurrence of a good reason event describing in detail the event and stating that Employee's employment will terminate upon a specified date in such notice (the "Good Reason Termination Date"), which date is not earlier than thirty (30) days after the date such notice is provided to Company (the "Notice Delivery Date") and not later than ninety (90) days after the Notice Delivery Date, and (y) Company does not remedy the event prior to the Good Reason Termination Date.  For purposes of this Agreement, Employee shall have "good reason" if there occurs without Employee's consent:

  

  

  

	
  

	
(A)

	
a material reduction in the character of the duties assigned to Employee or in Employee’s level of work responsibility or conditions;

	
  

	
(B)

	
a material reduction in Employee’s base salary as in effect immediately prior to the Change in Control or as the same may have been increased thereafter;

	
  

	
(C)

	
the material relocation of Employee's principal office to a location at least 35 miles outside of the metropolitan area where such office was located at the time of the Change in Control, except for required travel on Company business to an extent substantially consistent with Employee’s obligations immediately prior to the Change in Control; or

	
  

	
(D)

	
any material breach by Company of an employment agreement between Company or its successor and Employee, provided, however, that Employee shall not have "good reason" under this Subparagraph (viii) on account of any alleged breach of an employment agreement based on a material reduction in employee benefits as of a Change in Control that is immaterial or where benefits to Employee from participation in such employee benefit plans are not reduced by more than ten percent (10%) in the aggregate.

 

(ix)           A "Retirement" means, notwithstanding the definition of "Retirement" under the Plan, a termination of Employment on or after age 591⁄2 (either by Employee voluntarily or by Company as a Termination Without Cause) and following a minimum of three (3) years of employment.

 

(x)           A "Scheduled Vesting Date" shall mean the second Friday in March following the Applicable Meeting Date.

(xi)           A "Termination Without Cause" means Company’s termination of Employee’s Employment that is not for Cause.

(xii)           A "Retirement Installment" is an election made pursuant to the Rules to receive, after Retirement and prior to death, any Share issuance amounts in incremental installments over the number of years elected by Employee as allowed by the Rules.

j.          Payments to Third Party.  Upon death of Employee followed by a valid written request for payment, the Shares shall be issued as soon as administratively practical to Employee’s beneficiary named in a written beneficiary designation filed with Company’s Corporate Secretary on a form for the Plan or, if there is no such designated beneficiary, to Employee’s executor or administrator or other personal representative acceptable to the Corporate Secretary.  Any request to pay any person or persons other than Employee shall be accompanied by such documentation as Company may reasonably require, including without limitation, evidence satisfactory to Company of the authority of such person or persons to receive the payment.

  

  

  

4.           TAXES.

a.           Tax Withholding; Valuation.  Employee understands and agrees that, at the time any tax withholding obligation arises in connection with (i) a Share issuance, (ii) Retirement-eligibility, or (iii) an RSU Vesting, Company may withhold, in Shares if a valid election applies under this Section 4 or in cash from payroll or other amounts Company owes or will owe Employee, any applicable withholding, payroll and other required tax amounts due upon Vesting, issuance of Shares, Retirement-eligibility, or any other applicable event.  Tax Withholding may be made by any means permitted under the Plan, as approved by the Committee, and as permitted under the law.  The valuation of the RSUs, and any Shares that Company may issue attributable to Vested RSUs, for tax and other purposes shall be as set forth in the Rules and in applicable laws and regulations ("Valuation Rules").  In the absence of the satisfaction of tax obligations, Company may refuse to issue the Shares.

b.           Acceleration of Share Issuance to Cover Employment Tax Liabilities.  Employee understands and agrees that certain tax withholding amounts may be due prior to an issuance of Shares.  For instance, withholding amounts for the Federal Insurance Contributions Act tax imposed under Code Sections 3101, 3121(a) or 3121(v)(2) ("FICA Tax") may be due upon Employee meeting Retirement-eligibility requirements during an Original Delay Period subsequent to a Change in Control.  If Shares are issued on an accelerated basis to satisfy the FICA Tax as provided in this Paragraph, then Employee may have income tax at source on wages imposed under Section 3401 or the corresponding withholding provisions of applicable state, local, or foreign tax laws (together with the FICA Tax, the "FICA Related Taxes").  When and in the manner permitted by the Committee or its delegate in their sole discretion and unless otherwise prohibited by law, Employee may irrevocably elect in writing on a Company designated form to satisfy the FICA Related Taxes through the accelerated issuance of Shares (including the accelerated issuance of Shares for which a Vesting Date may not have yet occurred but for which the underlying RSU is no longer subject to substantial risk of forfeiture).  In no event, however, may the value (determined under the Valuation Rules) of the total accelerated Share issuance exceed the aggregate amount of the FICA Related Taxes.

c.           Satisfaction in Share Retention.  Unless otherwise determined by the Committee or its delegate in their sole discretion and unless otherwise prohibited by law, Employee (or his or her guardian, legal representative or successor) may, in the manner determined by the Committee or its delegate, irrevocably elect in writing on a Company designated form to satisfy any income tax withholding obligation in connection with the RSUs by requesting Company to retain whole Shares which would otherwise have been issued, which Shares shall not belong to Employee upon such retention.

d.           Remedies.  If withholding is not effected by Company for any reason at the time of the taxation event, then Employee agrees to pay Company any withholding amounts due within the deadline imposed by Company.  If, within the deadline imposed by Company, Employee has not paid any withholding amounts due or has not elected, if allowed by the Committee or its delegate in their sole discretion, whether to have Shares retained for taxes or to pay cash for the tax withholding, then Company may, at its sole discretion (a) retain whole Shares which would otherwise have been issued (including without limitation withdrawal of Shares that had previously been placed into Employee’s book entry account), (b) deduct such amounts in cash from payroll or other amounts Company owes or will owe Employee, or (c) effect some combination of Share retention and cash deduction.

  

  

  

5.           VIOLATION OF NONCOMPETE, NONUSE AND NONDISCLOSURE PROVISIONS.  Employee acknowledges that Employee’s agreement to this Section 5 is a key consideration for the grant of the RSUs.  Employee hereby agrees with Company as follows:

a.           Noncompete.  During the period that Employee is employed by "Employer" (as defined in Paragraph 5(h)), and thereafter during any period for which Employee is receiving, by agreement of Employee and Employer, any separation payment(s) (whether made in lump sum or installments), Employee agrees that, without consent of Employer, Employee will not engage directly or indirectly within any country where Employee was employed by Employer, in any manner or capacity, as advisor, consultant, principal, agent, partner, officer, director, employee or otherwise, in any business or activity which is competitive with any business conducted by Company, a Subsidiary (as defined in Subparagraph 3(i)(v)(B)) or Affiliate (as defined in Paragraph 5(h)); provided, however, that the Committee may determine as provided in Paragraph 6(a) that such obligation shall not apply to any period after termination of employment if such termination was on the date of a Change in Control or within eighteen (18) months subsequent to such date.

b.           Nonsolicitation.  Employee further agrees that during the twelve month (12) period subsequent to termination of employment with Employer, Employee will not solicit any employee of Company, its Subsidiary or Affiliate to leave such employment to become employed by a competitor of Company, its Subsidiary or Affiliate or solicit or contact any person, business or entity which was a customer of Company, its Subsidiary or Affiliate at the time of such termination of employment, or any prospective customers of Company, its Subsidiary or Affiliate to which Company, its Subsidiary or Affiliate has made a proposal to do business within the twelve (12) month period prior to the date of termination of employment, for purposes of selling goods or services of the type sold or rendered by Company, its Subsidiary or Affiliate at the time of termination of employment.

c.           Ownership of Confidential Information, and Inventions and Works.  All "Confidential Information,"  "Inventions and Works" (each as defined in Paragraph 5(h)) and documents and other materials containing Confidential Information, Inventions and Works are the exclusive property of Employer.  Employee shall make full and prompt disclosure to Employer of all Inventions.  Employee assigns and agrees to assign to Employer all of Employee’s right, title and interest in Inventions.  Employee acknowledges and agrees that all Works are "works made for hire" under the United States copyright laws and that all ownership rights vest exclusively in Employer from the time each Work is created.  Should a court of competent jurisdiction hold that a Work is not a "work made for hire," Employee agrees to assign and hereby assigns to Employer all of Employee’s right, title and interest in the Work.  In the event any Invention or Work may be construed to be non-assignable, Employee hereby grants to Employer a perpetual, royalty-free, non-exclusive license to make, use, sell, have made, and/or sublicense such non-assignable Invention or Work.  Employee agrees to assist Employer to obtain and vest its title to all Inventions and Works, including any patent or copyright applications or patents or copyrights in any country, by executing all necessary or desirable documents, including applications for patent or copyright and assignments thereof, during and after employment, without charge to Employer, at the request and expense of Employer.

  

  

  

d.           Recordkeeping and Return of Confidential Information, Inventions and Works. Employee agrees to maintain regular records of all Inventions and Works developed or written while employed with Employer.  Employee agrees to comply with any procedures disseminated by Employer with respect to such recordkeeping.  Employee agrees to provide such records to Employer periodically and/or upon request by Employer.  Employee agrees to return to Employer all Confidential Information, Inventions and Works in any tangible form, and copies thereof in the custody or possession of Employee, and all originals and copies of analyses, compilations, studies or documents pertaining to any Confidential Information, Inventions and  Works, in whatever form or medium, upon a request by Employer, or upon termination of employment.

e.           Nonuse and Nondisclosure.  Employee shall not, either during or after Employee’s employment by Employer, disclose any Confidential Information, Inventions or Works to any other person or entity outside of his employment, or use any Confidential Information, Inventions or Works for any purpose without the prior written approval of an officer of Employer, except to the extent required to discharge Employee’s duties assigned by Employer.

f.           Subsequent Employer Notice. During the term of Employee’s employment with Employer and for the longer of one year thereafter, or any period in which the non-compete or non-solicitation obligation set forth herein applies (the "Identification Period"), Employee agrees to identify to potential subsequent employer(s), partner(s) or business associate(s) Employee’s obligations under this Agreement prior to committing to a position with the employer(s), partner(s), or business associate(s).  Employee agrees that Employer may, at its discretion, provide a copy of Section 5 of this Agreement to any of Employee’s subsequent employer(s), partner(s), or business associate(s), and may notify any or all of them of Employee’s obligations under this Agreement.  During the Identification Period, Employee shall give written notice to Employer’s Human Resources Department identifying any subsequent employer(s), partner(s), or business associate(s) of Employee.

g.           Remedies.    Notwithstanding anything to the contrary herein, if in Employer’s sole discretion an event has occurred that constitutes Cause (including, without limitation, a violation of this Section 5), whether prior to, on or after an RSU Vesting or Share issuance date or during an Original Delay Period or Extended Delay Period, then, in addition to all other remedies available to Company, the RSUs for which Share issuance has not occurred shall be immediately forfeited to Company and any Shares that have been issued pursuant the Vesting of underlying RSUs, if such issuance has occurred, shall be immediately transferred by Employee to Company (with Employee taking all steps necessary to effect the transfer and provided that, if the Shares are no longer available for transfer, Employee shall reimburse to Company the amount of Employee’s ordinary income from the Vesting of the RSUs); provided, however, that no consideration shall be paid by Company to Employee for any forfeiture, transfer or reimbursement pursuant to this Paragraph 5(g).  Employee agrees that the provisions of Section 5 hereof are necessary for protection of the business of Company and that violation of such provisions is cause for termination of employment and would cause irreparable injury to Company not adequately remediable in damages.  Employee agrees that any breach of its obligations under Section 5 shall, in addition to any other relief to which Company may be entitled, entitle Company to temporary, preliminary and final injunctive relief against further breach of such obligations, along with attorneys’ fees and other costs incurred by Company in connection with such action.

h.           Section 5 Definitions.  For purposes of Section 5, the following terms have the meanings set forth below:

  

  

  

(i)           "Employer" means any Company-related entity that has employed Employee, whether it be Company, its Subsidiary (as defined in Subparagraph 3(i)(v)(B)), or an Affiliate (either as defined in Subparagraph 3(i)(v)(C), and also for purposes of this Section 5, any entity in which Company has a direct or indirect equity interest of at least twenty-five percent (25%)).

(ii)           "Confidential Information" means non-public information about Company, its Subsidiaries and Affiliates, including, without limitation, (A) inventions not disclosed to the public by Company, its Subsidiary or Affiliate, products, designs, prototypes, data, models, file formats, interface protocols, documentation, formulas, improvements, discoveries, methods, computer hardware, firmware and software, source code, object code, programming sequences, algorithms, flow charts, test results, program formats and other works of authorship relating to or used in the current or prospective business or operations of Company, Subsidiaries and Affiliates, all of which is Confidential Information, whether or not patentable or made on Employer premises or during normal working hours; and (B) business strategies, trade secrets, pending contracts, unannounced services and products, financial projections, customer lists, information about real estate Company, its Subsidiary or Affiliate is interested in acquiring, and non-public information about others obtained as a consequence of employment by Employer, including without limitation information about customers and their services and products, the account holders or shareholders of customers of Company, Subsidiaries and Affiliates, and associates, suppliers or competitors of Company, Subsidiaries and Affiliates.

(iii)           "Inventions" means all discoveries, improvements, and inventions relating to or used in the current or prospective business or operations of Company, its Subsidiaries and Affiliates, whether or not patentable, which are created, made, conceived or reduced to practice by Employee or under Employee’s direction or jointly with others during Employee’s employment by Employer, whether or not during normal working hours or on the premises of Employer.

(iv)           "Works" mean all original works fixed in a tangible medium of expression by Employee or under Employee’s direction or jointly with others during Employee’s employment by Employer, whether or not during normal working hours or on the premises of Employer, and related to or used in the current or prospective business or operations of Employer.

i.           Survival.  Except as limited in time in Paragraphs 5(a) and (b), Employee’s obligations in this Section 5 shall survive and continue beyond the RSU Vesting or forfeiture dates, the Original Delay Period or an Extended Delay Period, any issuance or transfer of Shares, and any termination or expiration of the Agreement for any reason.

6.           CHANGE IN CONTROL.

a.           Committee Non-Competition Determination.  Notwithstanding any provision of this Agreement to the contrary, if Company is contemplating a transaction (whether or not Company is a party to it) or monitoring an event that would cause Company to undergo a Change in Control (as defined in Paragraph 6(b)), the Committee (as constituted before such Change in Control) may determine that the noncompete obligation set forth in Paragraph 5(a) shall not apply to any period after termination of employment if such termination was on the date of a Change in Control or within eighteen (18) months subsequent to such date.

  

  

  

b.           Definition of Change in Control.   For purposes of this Agreement, a "Change in Control" shall have the same meaning  as the definition of such term in the Plan, as amended and interpreted from time to time, as of the date of the event that may cause a Change in Control.

Notwithstanding the occurrence of a Change in Control under the applicable definition, a Change in Control shall not occur with respect to Employee if, in advance of such event, Employee agrees with Company in writing that such event shall not constitute a Change in Control; provided, however, in no event shall Employee's agreement under this paragraph affect a payment subject to 409A from being made where such payment event is a 409A Change in Control.

c.           Committee Action in Connection with Change in Control.  The Committee (as constituted before such Change in Control) has the authority to take the actions set forth in Section 14 of the Plan.  For instance, by way of example and not limitation, the Committee (as constituted before such Change in Control) may determine in its sole discretion that Company, or any successor company in the applicable merger or sale agreement, may pay cash to Employee in an amount equal to the amount (as determined by the Committee) that could have been attained by Employee had the Award been currently payable, in lieu of issuing Shares that would otherwise be issued in connection with Vesting or the termination of an Extended Delay Period on or after the Change in Control.

 

 

7.           GENERAL.

a.           No Employment Contract.  Except to the extent the terms of any separate written employment contract between Employee and Company may expressly provide otherwise, Company shall be under no obligation to continue Employee’s employment with Company for any period of specific duration and may terminate such employment at any time, for Cause or as a Termination Without Cause.

b.           Compliance With Certain Laws and Regulations.  If the Committee determines that the consent or approval of any governmental regulatory body or that any action with respect to the RSUs is necessary or desirable in connection with the granting of the RSUs or the issuance of Shares, Employee shall supply Company with such representations and information as Company may request and shall otherwise cooperate with Company in obtaining any such approval or taking such action.

c.           Construction and No Waiver.  Notwithstanding any provision of this Agreement, the granting of the RSUs and the issuance of the Shares are subject to the provisions of the Plan and any procedures or Rules promulgated thereunder by the Committee or its delegate.  The failure of Company in any instance to exercise any of its rights granted under this Agreement, the Plan or the Rules shall not constitute a waiver of any other rights that may arise under this Agreement.

  

  

  

d.           Notices.  Any notice required to be given or delivered to Company under the terms of this Agreement shall be in writing and addressed to Company in care of its Corporate Secretary at its corporate offices, and such notice shall be deemed given only upon actual receipt by Company.  Any notice required to be given or delivered to Employee shall be in writing and addressed to Employee at the address on file with Company’s Human Resources Department or such other address specified in a written notice given by Employee to Company, and all such notices shall be deemed to have been given or delivered upon personal delivery or upon deposit in the U.S. mail, postage prepaid and properly addressed to the party to be notified.

e.           Governing Law.  This Agreement shall be governed by and construed in accordance with the laws of Delaware without reference to its principles of conflicts of law.

f.           Entire Agreement.  This Agreement contains the entire agreement between the parties with respect to the subject matter hereof, and supersedes all prior agreements or understandings between the parties relating thereto.

g.           Amendment.  This Agreement may be amended only in the manner provided by Company evidencing both parties’ agreement to the amendment.  This Agreement may also be amended, without prior notice to Employee and without Employee's consent, (i) prior to any Change in Control by the Committee if the Committee in good faith determines that the amendment does not materially adversely affect any of Employee's rights under this Agreement or (ii) at any time if the Committee deems it necessary or appropriate to ensure that the RSUs either remain exempt from, or compliant with, Internal Revenue Code Section 409A.

h.           Acknowledgement.  The RSU grant and this Agreement are subject to the terms and conditions of the Plan, the Rules, and any other rules or procedures adopted by the Committee or its delegate. The Plan is incorporated in this Agreement by reference and all capitalized terms used in this Agreement have the meaning set forth in the Plan, unless this Agreement specifies a different meaning.  Employee agrees to accept as binding, conclusive and final all decisions and interpretations by the Committee of the Plan, this Agreement, the Rules, and other applicable rules or procedures regarding any issues arising thereunder, including without limitation all decisions and interpretations related to 409A and regulations and guidance issued thereunder.

By acknowledging and agreeing to the terms and conditions of this Agreement, Employee accepts the RSUs and acknowledges that the RSUs are subject to all the terms and provisions of the Plan (including without limitation the powers of the Committee to make determinations and adjustments as provided in Sections 3, 4.2, 5, 14.1 and 15.1 of the Plan), this Agreement, the Rules, and other applicable rules or procedures.exhibit10-108.htm

     

    
      

      

    

     

    
      EXHIBIT
10-108

      

      EMPLOYMENT
AGREEMENT

      

      

      THIS EMPLOYMENT AGREEMENT is
dated as of March 22, 2010, between Imaging Diagnostic Systems,
Inc., a Florida corporation (the "Company"), and Linda B. Grable (the
"Executive").

      

      WITNESSETH:

      

      WHEREAS, The Company is
engaged in the business of developing laser-based medical optical imaging
devices; and

      

      WHEREAS, the Company has the
intent to market and sell its products and services to clients and potential
clients throughout the world; and

      

      WHEREAS, the Company wishes to
employ the Executive as its Chairman of the Board and Chief Executive Officer,
charged with all the responsibilities and duties legally required by the State
of Florida and to oversee various broad and specific aspects of its business;
and

      

      WHEREAS, in the course of the
Executive’s employment, the Executive will have access to and acquire knowledge
of valuable trade secrets, confidential information and other proprietary
information belonging and relating to the Company and its business, and which
the Company has a legitimate interest in protecting; and

      

      WHEREAS, the Company and
Executive are willing to commit to such employment, subject to the terms and
conditions contained in this Employment Agreement (the
“Agreement”);

      

      NOW, THEREFORE, in
consideration of the premises and the mutual covenants set forth in this
Agreement, and intending to be legally bound, the Company and the Executive
agree as follows:

      

      1.           EMPLOYMENT.  The Company
hereby employs the Executive and the Executive hereby accepts employment upon
the terms and conditions hereinafter set forth.

      

      2.           TERM &
TERMINATION.

      

      (a)         Term.  The Company hereby
employs the Executive, and the Executive, hereby accepts employment with the
Company, for a period commencing on March 22, 2010, and ending two years from
that date (the "Term"). All Company obligations under this Agreement shall cease
upon its termination, except for those stock options which have been
vested.

      (b)         Termination without
Cause.  The Company may
terminate the Executive’s employment without cause.  Such termination
will become effective upon the date specified in

      
        
           

        

        
          
          

          
            

          

        

        
           

        

      

      the
termination notice, provided that such date is at least 60 days from the date of
such notice.  In the event of such termination without
cause:

      

      (i)              For
the remainder of the Term following the effective date of termination, the
Company will continue to pay the Executive her salary pursuant to Section
3(a).

      

      (ii)              The
Company will continue to maintain for the remainder of the Term following the
effective date of termination, for the benefit of the Executive, the employee
benefit programs referred to in Section 3(b) as in effect on the date of
termination.

      

      (iii)              On
the effective date of termination, all options that were scheduled to vest will
vest and will remain exercisable for a period of three years from the date of
termination.

      

      (c)         Termination for
Cause.  The Company may terminate the Executive’s employment at
any time for cause by giving written notice of termination setting forth such
cause.  Such termination shall become effective upon the giving of
such notice, except that, where the basis for cause is capable of cure within 30
days, termination based upon cause shall not become effective unless Executive
shall fail to complete such cure within 30 days of receipt of written notice of
the existence of such cause. Upon such termination the Executive shall have no
right to compensation, commission, bonus, benefits or reimbursement pursuant to
this Agreement, for any period subsequent to the effective date of
termination.  Further, upon termination for cause, all of the
Executive’s unvested stock options shall terminate. For purposes of this
section, “cause” shall mean; (1) the Executive is convicted of a felony; (2) the
Executive, in carrying out her duties hereunder, commits gross negligence or
willful misconduct resulting, in either case, in material harm to the Company;
(3) the Executive misappropriates Company funds or otherwise defrauds the
Company; (4) the Executive materially breaches any provision of this Agreement;
or (5) the Executive materially fails to perform her duties under section
4.

      

      (d)         Death or
Disability.  Upon the death or disability of the Executive, the
Executive shall be entitled to and the Company will pay the Executive’s salary
from the date of death or from the date of disability through the end of the
Term. (For purposes of this Section, “disability” shall mean that for a period
of six months in any 12-month period the Executive is incapable of substantially
fulfilling her duties because of physical, mental or emotional incapacity
arising from injury, sickness or disease.)  Should the Executive be
rendered disabled, the Company will continue to maintain for the benefit of the
Executive the employee benefit programs referred to in Section 3(b) that were in
effect on the date of the disability.

      

      (e)         Special
Termination.  In the event that (i) the Company materially
breaches this Agreement or the performance of its duties and obligations
hereunder; or (ii) any entity or person not now an executive officer of the
Company becomes either individually or as part of a group the beneficial owner
of 20% or more of the Company’s common stock, the Executive, by written notice
to the Company, may elect to deem the Executive’s employment hereunder
to

      
        
           

        

        
          2

          
            

          

        

        
           

        

      

      have been
terminated by the Company without cause under Section 2(b) hereof, in which
event the Executive shall be entitled to the compensation provided for in
Section 2(b).

      

      (f)         Voluntary
Termination. The Executive, on 30 days prior written notice to the
Company, may terminate her employment voluntarily.  Upon such
termination, the Company will pay the Executive’s compensation through the date
of such termination.  After such date, the Executive shall no longer
be entitled to receive any compensation, reimbursement or benefits and all
unvested stock options shall terminate upon termination of the Executive’s
employment.

      

      (g)         Continuing
Effect. Notwithstanding any
termination of this Agreement at the end of the Term or otherwise, the
provisions of Sections 6 - 11 shall remain in full force and effect and the
provisions of these Sections shall be binding upon the legal representatives,
heirs, successors and assigns of the Executive.

      

      3.           COMPENSATION.

      

      (a)           The
Company will pay the Executive an annual base salary of $168,000 per annum in
equal semi-monthly installments.

      

      (b)           During
the term of her employment, the Executive shall be entitled to participate in
employee benefits plans or programs of the Company, if any, to the extent the
Executive is eligible to participate thereunder, including the Comprehensive
Group Insurance Program maintained by the Company, paid by the Company for the
Executive and spouse/children.

      

      (c)           The
Company shall provide the Executive with a $500 per month car allowance and a
cellular phone and major credit card for use on Company business.

      

      (d)           The
Executive shall receive an option to purchase up to an aggregate of 6,000,000
shares of the Company’s common stock at an exercise price of $.05 per share
pursuant to the Company’s standard form of stock option
agreement.  The option shall vest 3,000,000 upon the effective date of
this Agreement and 3,000,000 on March 22, 2011.

      

       

      (e)           The
Executive will be entitled to nine paid holidays and six weeks of vacation for
each 12-month period without loss of compensation or other benefits to which she
is entitled under this Agreement, to be taken at such times as the Executive may
select and the affairs of the Company may permit.

      

      4.           DUTIES.

      

      (a)           General
Duties.  The Executive shall be employed as the Chairman of the
Board and Chief Executive Officer, with duties and responsibilities that are
customary for such position, and as directed by the Company’s
by-laws.  The Executive will use the standard of care befitting of
such an executive in performing duties and in discharging responsibilities
pursuant to this Agreement, which duties and responsibilities shall be
discharged competently, carefully, and faithfully.

      
        
           

        

        
          3

          
            

          

        

        
           

        

      

      

      (b)           Corporate Code of
Conduct.  The Executive agrees to adhere to the Company’s
Corporate Code of Conduct.

      

      (c)           Extent of
Services.  The Executive will devote all of her time, attention
and energies during normal business hours (exclusive of periods of sickness and
disability and of such normal holiday and vacation periods as have been
established by the Company) to the affairs of the Company.  The
Executive will not enter the employ of, or serve as a consultant to, or in any
way perform any services with or without compensation to any person, business or
organization without the prior consent of the Board of Directors of the Company;
provided, that the Executive shall be permitted to devote a limited amount of
time, without compensation, to charitable or similar organizations.

      

      5.           PLACE OF
PERFORMANCE.  The Executive
hereby acknowledges that the Company’s existing and potential clients are
located throughout the world and that the Company is actively engaged in
marketing and selling its products and services to such clients throughout the
world.

      

      6.           NON-DISCLOSURE
OF CONFIDENTIAL INFORMATION.  The Executive
acknowledges that, during her employment, she will learn and will have access to
confidential information regarding the Company and its affiliates, including
without limitation (i) proprietary or secret plans, designs, processes,
programs, documents, software, agreements or material relating to the business,
products, services or activities of the Company and its affiliates and (ii)
market reports, customer investigations, clinical data, scientific or
engineering research, customer lists and/or similar information that is
proprietary information of the Company or its affiliates (collectively,
“Confidential Business and Technical Information”).  The Executive
recognizes and acknowledges that the Confidential Business and Technical
Information, as it may exist from time to time, represents valuable, special and
unique assets of the Company, access to and knowledge of which are essential to
the performance of the Executive’s duties hereunder.

      

      The
Executive will not, during or after the term of her employment by the Company,
in whole or in part, disclose any such Confidential Business and Technical
Information to any person, firm, corporation, association or entity for any
reason or purpose whatsoever, nor shall the Executive make use of any such
Confidential Business and Technical Information for her own purposes or for the
benefit of any person, firm, corporation or entity except the Company under any
circumstances during or after the term of her employment, provided that after
the term of her employment these restrictions shall not apply to such secrets,
information and processes which are then in the public domain provided that the
Executive was not responsible, directly or indirectly, for such secrets,
information or processes entering the public domain without the Company’s
consent.

      

      In the
event an action is instituted and prior knowledge is an issue, it shall be the
obligation of the Executive to prove by clear and convincing evidence that the
Confidential

      
        
           

        

        
          4

          
            

          

        

        
           

        

      

      Business
and Technical Information disclosed was in the public domain, was already known
by the recipient, or was developed independently by the
recipient.  The Executive agrees to hold as the Company’s property all
memoranda, books, papers, letters, formulas and other data, and all copies
thereof and therefrom, in any way containing Confidential Business and Technical
Information or otherwise relating to the Company’s business and affairs, whether
made by her or otherwise coming into her possession, and upon termination of her
employment, or on demand of the Company, at any time, to deliver the same to the
Company.

      

      7.           NON-COMPETITION
AGREEMENT.

      

      (a)           The
Executive acknowledges and agrees that, pursuant to Florida Statutes Section
542.335, based on having access to and acquiring knowledge of highly sensitive
and valuable trade secrets, and confidential or proprietary information
belonging or relating to the Company, the Executive would be in a position to
cause serious and irreparable harm to the Company in the event that, following
the termination of her employment hereunder, the Executive were to compete with
or be involved in an enterprise which competes with the Company, engages in the
same business as the Company, or performs research and development in the field
of medical optical imaging.

      

      (b)           Until
termination of her employment and for a period of 24 months commencing on the
date of termination, the Executive, directly or indirectly, in association with
or as a stockholder, director, officer, consultant, executive, partner, joint
venturer, member or otherwise of or through any person, firm, corporation,
partnership, association or entity, covenants that the Executive will not
compete with the Company or any of its affiliates in the design, manufacture,
construction, offer, sale or marketing of products or services that are
competitive with the products or services offered by the Company during such
period, within the United States or anywhere in the world.  The
Executive covenants and agrees that during her employment and for a period of 24
months immediately following the termination of such employment, the Executive
will not, either individually or in partnership or jointly or in conjunction
with any person, firm, business, corporation, partnership, joint venture,
entity, syndicate or association, as an executive, principal, agent, officer,
director, consultant, advisor, distributor, dealer, contractor, trustee, lender,
shareholder or in any manner or capacity whatsoever, directly or indirectly, be
employed by, render services to, carry on or be engaged in, or be concerned with
or be interested in or advise, lend money to, guarantee the debts or obligations
of, or in any manner participate in the management, operation or control of any
business which is directly competitive with the business of the Company, engages
in the same business as the Company or performs research and development in the
medical optical imaging field with any entity located anywhere in the
world.

      

      (c)           For
the purposes of this paragraph a business shall be deemed to be in “direct
competition” or “directly competitive” with the Company if such business is
engaged in developing, manufacturing, marketing, selling, or distributing
medical optical imaging devices.

      

      8.           NON-SOLICITATION.  The Executive
covenants and agrees that while she is employed by the Company and for a period
of 24 months immediately following the termination of such employment, she will
not, directly or indirectly, in any manner whatsoever, on her
own

      
        
           

        

        
          5

          
            

          

        

        
           

        

      

      behalf,
or on behalf of any person, firm, business, corporation, partnership, joint
venture, entity, syndicate or association solicit, induce or cause, or attempt
to induce or cause, any person who is then an employee of or consultant to the
Company to cease providing services to the Company.

      

      9.           REASONABLENESS OF
CONFIDENTIALITY, NON-COMPETITION AND NON-SOLICITATION OBLIGATION AND
COVENANTS.

      

      (a)           The
Executive hereby acknowledges and confirms that the obligations and covenants
set out in the above paragraphs are reasonable and necessary to protect the
legitimate interests of the Company.  Without limiting the generality
of the foregoing, the Executive hereby acknowledges and confirms that given,
among other things, the nature and international scope of the Company’s
operations and of the employment duties to be performed by the Executive
hereunder, the geographic scope and duration of the restrictions set forth above
are reasonable and necessary to protect the legitimate interests of the
Company.

      

      (b)           The
Executive further acknowledges and agrees that these obligations and covenants
will not preclude her from becoming gainfully employed following their
termination of her employment in her profession.

      

      10.           INVENTIONS.

      

      (a)           The
Executive hereby sells, transfers and assigns to the Company or to any person or
entity designated by the Company, all of the entire right, title and interest of
the Executive in and to all inventions, ideas, disclosures and improvements,
whether patented or unpatented, and copyrightable material, made or conceived by
the Executive, solely or jointly, in whole or in part, during the term hereof
which (i) relate to methods, apparatus, designs, products, processes or devices
sold, leased, used or under construction or development by the Company or any
subsidiary, or (ii) otherwise relate to or pertain to the business, functions or
operations of the Company or any subsidiary, or (iii) arise wholly or partly
from the efforts of the Executive during the term hereof.  The
Executive shall communicate promptly and disclose to the Company, in such form
as the Company requests, all information, details and data pertaining to the
aforementioned inventions, ideas, disclosures and improvements; and, whether
during the term hereof or thereafter, the Executive shall execute and deliver to
the Company such formal transfers and assignments and such other papers and
documents as may be required of the Executive at the Company’s expense to permit
the Company or any person or entity designated by the Company to file and
prosecute the patent applications and, as to copyrightable material, to obtain
copyright thereon.  Any invention made by the Executive within one
year following the termination of employment shall be deemed to fall within the
provisions of this Section unless proven by the Executive to have been first
conceived and made following such termination.

      

      (b)           No
Payment.  The Executive
acknowledges and agrees that no separate or additional payment or compensation
will be required to be made to her in consideration of her undertakings in this
Section.

      
        
           

        

        
          6

          
            

          

        

        
           

        

      

      11.           EQUITABLE
RELIEF.

      

      (a)           The
Company and the Executive recognize that the services to be rendered under this
Agreement by the Executive are special, unique and of extraordinary character,
and that in the event of the breach by the Executive of the terms and conditions
of this Agreement or if the Executive, without the prior consent of the Board of
Directors of the Company, shall leave her employment for any reason and take any
action in violation of Section 6, Section 7 or Section 8, the Company will be
entitled to institute and prosecute proceedings in any court of competent
jurisdiction referred to in Section 11(b) below, to enjoin the Executive from
breaching the provisions of Section 6, Section 7, or Section 8.  In
such action, the Company will not be required to plead or prove irreparable harm
or lack of an adequate remedy at law.  Nothing contained in this
Section 11 shall be construed to prevent the Company from seeking such other
remedy as the Company may elect in any arbitration proceeding based on any
breach of this Agreement by the Executive.

      

      (b)           Any
proceeding or action for equitable relief must be commenced in state court in
Broward County, Florida.  The Executive and the Company irrevocably
and unconditionally submit to the jurisdiction of such court and agree to take
any and all future action necessary to submit to the jurisdiction of such
court.  The Executive and the Company irrevocably waive any objection
that they now have or hereafter may have to the laying of venue of any suit,
action or proceeding brought in such court for equitable relief and further
irrevocably waive any claim that any such suit, action or proceeding brought in
such court has been brought in an inconvenient forum.

      

      12.           ASSIGNMENT. The
rights and obligations of the Company under this Agreement shall inure to the
benefit of and be binding upon the successors and assigns of the Company,
provided that any such successor or assign shall acquire all or substantially
all of the assets and business of the Company.  The Executive's
obligations hereunder may not be assigned or alienated and any attempt to do so
by the Executive will be void.

      

      13.           SEVERABILITY.

      

      (a)           The
Executive expressly agrees that the character, duration and geographical scope
of the provisions set forth in this Agreement are reasonable in light of the
circumstances, as they exist on the date hereof.  Should a decision,
however, be made at a later date by a court of competent jurisdiction that the
character, duration or geographical scope of such provisions is unreasonable,
then it is the intention and the agreement of the Executive and the Company that
this Agreement shall be construed by the court in such a manner as to impose
only those restrictions on the Executive's conduct that are reasonable in the
light of the circumstances and as are necessary to assure to the Company the
benefits of this Agreement.  If, in any judicial proceeding, a court
shall refuse to enforce all of the separate covenants deemed included herein
because taken together they are more extensive than necessary to assure to the
Company the intended benefits of this Agreement, it is expressly understood and
agreed by the parties hereto that the provisions of this Agreement that, if
eliminated, would permit the remaining separate provisions to be enforced in
such proceeding shall be deemed eliminated, for the purposes of such proceeding,
from this Agreement.

      
        
           

        

        
          7

          
            

          

        

        
           

        

      

      

      (b)           If
any provision of this Agreement otherwise is deemed to be invalid or
unenforceable or is prohibited by the laws of the state or jurisdiction where it
is to be performed, this Agreement shall be considered divisible as to such
provision and such provision shall be inoperative in such state or jurisdiction
and shall not be part of the consideration moving from either of the parties to
the other. The remaining provisions of this Agreement shall be valid and binding
and of like effect as though such provision were not included.

      

      14.           NOTICES
AND ADDRESSES. All
notices, offers, acceptance and any other acts under this Agreement (except
payment) shall be in writing, and shall be sufficiently given if delivered to
the addressee in person, by Federal Express or similar receipted delivery, by
facsimile delivery or, if mailed, postage prepaid, by certified mail, return
receipt requested, as follows:

      

      To the
Company:                                  Imaging
Diagnostic Systems, Inc.

      5307 N.W.
35th
Terrace

      Ft.
Lauderdale, Florida 33309

      

      To the
Executive:                                  Linda
B. Grable

      5307 N.W.
35th
Terrace

      Ft.
Lauderdale, Florida 33309

      

      or to
such other address as either of them, by notice to the other may designate from
time to time. The transmission confirmation receipt from the sender's facsimile
machine shall be conclusive evidence of successful facsimile
delivery.  Time shall be counted to, or from, as the case may be, the
delivery in person or by mailing.

      

      15.           COUNTERPART. This
Agreement may be executed in one or more counterparts, each of which shall be
deemed an original but all of which together shall constitute one and the same
instrument.  The execution of this Agreement may be by actual or
facsimile signature.

      

      16.           ARBITRATION. Except
for any controversy or claim seeking equitable relief as provided in Section 11
of this Agreement, any controversy or claim arising out of or relating to this
Agreement, or to the interpretation, breach or enforcement thereof or any other
dispute between the parties, shall be submitted to one arbitrator and settled by
arbitration in Fort Lauderdale, Florida, in accordance with the commercial
arbitration rules of the American Arbitration Association in effect at such
time.  Any award made by such arbitrator shall be final, binding and
conclusive on all parties hereto for all purposes, and judgment may be entered
thereon in any court having jurisdiction thereof.

      

      17.           ATTORNEYS
FEES.  In the event that
there is any controversy or claim arising out of or relating to this Agreement,
or to the interpretation, breach or enforcement thereof, and any action or
proceeding is commenced to enforce the provisions of this Agreement, whether
through litigation or arbitration, the prevailing party shall be entitled to
recover from the non-prevailing party her/its reasonable attorney’s fees, costs
and expenses incurred at all levels.

      
        
           

        

        
          8

          
            

          

        

        
           

        

      

      

      18.           GOVERNING
LAW. This
Agreement and any dispute, disagreement, or issues of construction or
interpretation arising hereunder whether relating to its execution, its
validity, the obligations provided therein or performance shall be governed or
interpreted according to the internal laws of the State of Florida without
regard to choice of law considerations.

      

      19.           ENTIRE
AGREEMENT.  This Agreement
constitutes the entire Agreement between the parties and supersedes all prior
oral and written agreements between the parties with respect to the subject
matter hereof.  Neither this Agreement nor any provision hereof may be
changed, waived, discharged or terminated orally, except by a statement in
writing signed by the party or parties against whom enforcement or the change,
waiver, discharge or termination is sought.

      

      20.           ADDITIONAL
DOCUMENTS.  The parties
hereto shall execute and deliver such additional instruments as may be
reasonably required in order to carry out the purpose and intent of this
Agreement and to fulfill the obligations of the parties hereunder.

      

      21.           SECTION
AND PARAGRAPH HEADINGS.  The section and
paragraph headings in this Agreement are for reference purposes only and shall
not affect the meaning or interpretation of this Agreement.

      

      22.           WAIVER OF
BREACH.  A waiver by the
Company or the Executive of a breach of any provision of the Agreement by the
other party shall not operate or be construed as a waiver of any subsequent
breach by the other party.

      

      IN WITNESS WHEREOF, the
Company and the Executive have executed this Agreement as of the 22nd day
of March, 2010.

      

      
        	
                IMAGING
      DIAGNOSTIC SYSTEMS, INC.

                 

                 

                 

                 

                By:  /s/ Allan L.
      Schwartz

                 

                     Allan
      L. Schwartz, Executive Vice President

                     and
      Chief Financial Officer

              	
                EXECUTIVE

                 

                 

                 

                 

                By:  /s/ Linda B. Grable

                 

                    Linda
      B. Grable, Chief Executive Officer

              

      

      

      

      
        
           

        

        
          9

          
            

          

        

        
           

        

      

      STOCK
OPTION AGREEMENT

      (2010
Non-Statutory Stock Option Plan)

      

      Imaging Diagnostic Systems,
Inc. (the “Company”), desiring to afford an opportunity to the Grantee
named below to purchase certain shares of common stock of the Company, to
provide the Grantee with an added incentive as an employee, director or
consultant of the Company, hereby grants to Grantee, and the Grantee hereby
accepts, an option to purchase the number of such shares optioned as specified
below, during the term ending at midnight (prevailing local time at the
Company’s principal office) on the expiration date of this Option specified
below, at the option exercise price specified below, subject to and upon the
following terms and conditions:

      

      1.  Identifying
Provisions:  As used in this
Option, the following terms shall have the following respective
meanings.

      

      
        	
                 
      

              	
                (a)

              	
                Grantee:
      LINDA B.
      GRABLE

              

      

      

      
        	
                 
      

              	
                (b)

              	
                Date
      of Grant:  March 22, 2010

              

      

      

      
        	
                 
      

              	
                (c)

              	
                Number
      of shares
optioned:  6,000,000

              

      

      

      
        	
                 
      

              	
                (d)

              	
                Option
      exercise price per
share:  $.05

              

      

      

      
        	
                 
      

              	
                (e)

              	
                Expiration
      Date: March 22, 2020

              

      

      

      
        	
                 
      

              	
                (f)

              	
                Plan:  The
      Company’s 2010 Non-Statutory Stock Option Plan;
  and

              

      

      

      
        	
                 
      

              	
                (g)

              	
                Committee:  The stock
      option committee of the Company’s Board of Directors, or if none, the
      Board of Directors.

              

      

      

       

      This
Option is not intended to be an incentive stock option pursuant to Section 422
of the Internal Revenue Code.

       

       

      2.  Vesting:      This
Option shall vest and become exercisable on the following date(s) in the
following amounts:.

      

      Vesting
Date                                Number of
Shares

      

      First
year                                March
22,
2010                                           3,000,000

      

      Second
year                          March
22,
2011                                           3,000,000

       

       

                 3.
Restrictions
on Exercise:  The following
additional provisions shall apply to the exercise of this Option:

      

      (a)  Termination of
Employment.  If the Grantee’s employment by the Company or any of its
subsidiaries is terminated without cause for any reason, other than death only
that portion of this Option exercisable at the time of such termination of
employment may thereafter be exercised, and it may not be exercised more than
three years after such termination nor after the Expiration Date of this Option,
whichever date is sooner. In all other respects, this Option shall terminate
upon such termination of employment.

      
        
           

        

        
          10

          
            

          

        

        
           

        

      

      

        (b)  Death of
Grantee.  If the Grantee shall die during the term of this Option, the
Grantee’s legal representative or representatives, or the person or persons
entitled to do so under the Grantee’s last will and testament or under
applicable intestate laws, shall have the right to exercise this Option, but
only for the number of shares as to which the Grantee was entitled to exercise
this Option in accordance with Section 2 hereof on the date of her death, and
such right shall expire and this Option shall terminate 15 months after the date
of the Grantee’s death or on the Expiration Date of this Option, whichever date
is sooner. In all other respects, this Option shall terminate upon such
death.

      

      (c) Continuity of
Employment.  This Option shall not be exercisable by the Grantee in
any part unless at all times beginning with the date of grant and ending no more
than three months prior to the date of exercise, the Grantee has, except for
military service leave, sick leave or other bona fide leave of absence (such as
temporary employment by the United States Government) been in the continuous
service of the Company, except that such period of three months shall be one (1)
year following any termination of the Grantee’s employment by reason of her
permanent and total disability.

      

      (d) Should (i) the Grantee’s Service be
terminated for misconduct (including, but not limited to, any act of dishonesty,
willful misconduct, fraud or embezzlement) or (ii) the Grantee make any
unauthorized use or disclosure of confidential information or trade secrets of
the Company or its Parent or Subsidiary, then in any such event all outstanding
Options held by the Grantee under this Plan shall terminate immediately and
cease to be exercisable.

      

      4.  Non-Transferable.  The Grantee may
not transfer this Option except by will or the laws of descent and distribution.
This Option shall not be otherwise transferred, assigned, pledged, hypothecated
or disposed of in any way, whether by operation of law or otherwise, and shall
be exercisable during the Grantee’s lifetime only by the Grantee or her guardian
or legal representative.

      

      5. Adjustments
and Corporate Reorganization.  Subject to any required action
by the shareholders of the Company, the number of Shares covered by each
outstanding Option, and the number of Shares which have been authorized for
issuance under the Plan but as to which no Options have yet been granted or
which have been returned to the Plan upon cancellation or expiration of any
Option, as well as the price per Share covered by each such outstanding Option,
shall be proportionately adjusted for any increase or decrease in the number of
issued Shares resulting from a stock split, reverse stock split, stock dividend,
combination or reclassification of the Common Stock, or any other increase or
decrease in the number of issued shares of Common Stock effected without receipt
of consideration by the Company; provided, however, that conversion of any
convertible securities of the Company shall not be deemed to have been “effected
without receipt of consideration.” Such adjustment shall be made by the
Committee, whose determination in that respect shall be final, binding and
conclusive.  Except as expressly provided herein, no issuance by the
Company of shares of stock of any class, or securities convertible into shares
of stock of any class, shall affect, and no adjustment by reason thereof shall
be made with respect to, the number or price of Shares subject to an
Option.

      

      

      In the
event of the proposed dissolution or liquidation of the Company, the Option will
terminate immediately prior to the consummation of such proposed action, unless
otherwise provided by the Committee.  The Committee may, in the
exercise of its sole discretion in such instances, declare that any Option shall
terminate as of a date fixed by the Committee and give each Grantee the right to
exercise her Option as to all or any part of the Option, including Shares as to
which the

      
        
           

        

        
          11

          
            

          

        

        
           

        

      

      Option
would not otherwise be exercisable.  In the event of the proposed sale
of all or substantially all of the assets of the Company, or the merger of the
Company with or into another corporation in a transaction in which the Company
is not the survivor, the Option shall be assumed or an equivalent option shall
be substituted by such successor corporation or a parent or subsidiary of such
successor corporation, unless the Committee determines, in the exercise of its
sole discretion and in lieu of such assumption or substitution, that the Grantee
shall have the right to exercise the Option as to all of the optioned stock,
including shares as to which the Option would not otherwise be
exercisable.  If the Committee makes an Option fully exercisable in
lieu of assumption or substitution in the event of such a merger or sale of
assets, the Committee shall notify the Grantee that the Option shall be fully
exercisable for a period of 30 days from the date of such notice, and the Option
will terminate upon the expiration of such period.

      

      6.  Exercise,
Payment For and Delivery of Stock: This Option may be
exercised by the Grantee or other person then entitled to exercise it by giving
four business days’ written notice of exercise to the Company specifying the
number of shares to be purchased and the total purchase price. The exercise
price shall become immediately due upon exercise of the Option and, subject to
the instrument evidencing the grant, shall be payable in one of the following
alternative forms specified below:

      

      (a)           full
payment in cash or check drawn to the Company’s order;

      

      (b)           full
payment in shares of Common Stock held for at least six (6) months and valued at
fair market value on the Exercise Date (as such term is defined
below);

      

      (c)           full
payment through a combination of shares of Common Stock held for at least six
(6) months and valued at fair market value on the Exercise Date and cash or
check; or

      

      (d)           full
payment through a broker-dealer sale and remittance procedure provided that sale
of the optioned stock is permitted as a result of an effective registration
statement under the Securities Act of 1933, as amended, and compliance with all
applicable securities laws, pursuant to which the Grantee (i) shall provide
irrevocable written instructions to a Company-designated brokerage firm to
effect the immediate sale of the purchased shares and remit to the Company, out
of the sale proceeds available on the settlement date, sufficient funds to cover
the aggregate option price payable for the purchased shares plus all applicable
Federal and State income taxes required to be withheld by the Company in
connection with such purchase and (ii) shall provide written directives to the
Company to deliver the certificates for the purchased shares directly to such
brokerage firm in order to complete the sale transaction.

      

      For
purposes of this section 6, the Exercise Date shall be the date on which written
notice of the option exercise is delivered to the Company.  Except to
the extent the sale and remittance procedure is utilized in connection with the
exercise of the Option, payment of the exercise price for the purchased shares
must accompany such notice.

      

      The 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 not at the time listed or admitted to trading on any
national stock exchange but is traded on the NASDAQ National Market, 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 or any successor
system.  If there is no reported closing selling price for the Common
Stock on the date

      
        
           

        

        
          12

          
            

          

        

        
           

        

      

      in
question, then the closing selling price on the last preceding date for which
such quotation exists shall be determinative of fair market value.

      

       (ii)           If
the Common Stock is at the time listed or admitted to trading on any national
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 Committee 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 reported sale of Common Stock on such
exchange on the date in question, then the fair market value shall be the
closing selling price on the exchange on the last preceding date for which such
quotation exists.

      

       (iii)           If
the Common Stock is quoted on the NASDAQ Capital Market, or any similar system
of automated dissemination of quotations of securities process in common use,
the fair market value shall be the mean between the closing bid and asked
quotations for the Common Stock on such date.

      

       (iv)           If
neither clause (i), (ii) or (iii) is applicable, then the fair market value
shall be the mean between the closing bid and asked quotations for the Common
Stock as reported by the National Quotation Bureau, Inc., if at least two
securities dealers have inserted both bid and asked quotations for Common Stock
on at least five of the ten preceding business days.

      

      7.  Rights in
Shares Before Issuance and Delivery.  No person shall be
entitled to the privileges of stock ownership in respect of any shares issuable
upon exercise of this Option, unless and until such shares have been issued to
such person as fully paid shares.

      

      8.  Requirements
of Law and of Stock Exchanges. By accepting this
Option, the Grantee represents and agrees for herself and her transferees by
will or the laws of descent and distribution that, unless a registration
statement under the Securities Act of 1933 is in effect as to shares purchased
upon any exercise of this Option, (i) any and all shares so purchased shall be
acquired for her personal account and not with a view to or for sale in
connection with any distribution, and (ii) each notice of the exercise of any
portion of this Option shall be accompanied by a representation and warranty in
writing, signed by the person entitled to exercise the same, that the shares are
being so acquired in good faith for her personal account and not with view to or
for sale in connection with any distribution.

      

      No certificate or certificates for
shares of stock purchased upon exercise of this Option shall be issued and
delivered unless and until, in the opinion of counsel for the Company, such
securities may be issued and delivered without causing the Company to be in
violation of or incur liability under any federal, state or other securities
law, any requirement of any securities exchange listing agreement to which the
Company may be a party, or any other requirement of law or of any regulatory
body having jurisdiction over the Company.

      

      9.  Stock
Option Plan.  This Option is subject to, and the Company and
the Grantee agree to be bound by, all of the terms and conditions of the Plan,
as the same shall have been amended from time to time in accordance with the
terms thereof, provided that no such amendment shall deprive the Grantee,
without her consent, of this Option or any of her rights hereunder. Pursuant to
the Plan, the Committee is vested with final authority to interpret and construe
the Plan and this Option, and is authorized to adopt rules and regulations for
carrying out the Plan. A copy of the Plan in its present form is available for
inspection during business hours by the Grantee or other persons entitled to
exercise this Option at the Company’s principal office.  The Plan, as
amended from time to time, is hereby incorporated by reference.

      
        
           

        

        
          13

          
            

          

        

        
           

        

      

      

      10.  Notices.  Any
notice to be given to the Company shall be addressed to the Company in care of
its Secretary at its principal office, and any notice to be given to the Grantee
shall be addressed to her at the address given beneath her signature hereto or
at such other address as the Grantee may hereafter designate in writing to the
Company. Any such notice shall be deemed duly given when actually delivered by
hand, facsimile, certified or registered mail or recognized overnight
courier.

      

      11. Laws
Applicable to Construction. This Agreement has been executed and
delivered by the Company in the State of Florida, and this Agreement shall be
construed and enforced in accordance with the laws of said State.

      

      IN WITNESS WHEREOF, the
Company has granted this Option on March 22, 2010.

      

      

      Imaging Diagnostic Systems, Inc.
                                    ACCEPTED:

      

      

      

      

      By:        /s/ Allan L.
Schwartz    
                                        By:  /s/ Linda B.
Grable

      ALLAN L.
SCHWARTZ                                        
   LINDA B. GRABLE

      Executive Vice President
&

      Chief Financial Officer

      

      
 

      

      14

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