Novo Integrated Sciences, Inc.

2018 Incentive Plan

 

Dated as of January 16, 2018

 

1. Establishment and Effective Date. Novo Integrated Sciences, Inc., a Nevada
corporation (the “Company”) has established this Novo Integrated Sciences, Inc.
2018 Incentive Plan (the “Plan”) as of the date first set forth above, which
shall be the effective date of the Plan (the “Effective Date”).     2. Purpose.
The purpose of this Plan is to aid the Company in attracting, retaining,
motivating and rewarding employees, non-employee directors and key consultants
to the Company or its subsidiaries, to provide for equitable and competitive
compensation opportunities, to recognize individual contributions and reward
achievement of Company goals, and promote the creation of long-term value for
stockholders by closely aligning the interests of Participants with those of
stockholders. The Plan authorizes equity-based and cash-based incentives for
Participants.     3. Definitions. In addition to the terms defined above and
elsewhere in the Plan, the following capitalized terms used in the Plan have the
respective meanings set forth in this Section:       (a) “Award” means any
Option, SAR, Restricted Stock, Phantom Stock, Sale Phantom Stock, Stock granted
as a bonus, Performance Award, other Stock-Based Award or Annual Incentive
Award, together with any related right or interest, granted to a Participant
under the Plan.         (b) “Award Agreement” means a Stock Option Agreement, a
Stock Appreciation Rights Agreement, a Phantom Stock Agreement, a Sale Phantom
Stock Agreement, a Restricted Stock Agreement, an agreement related to another
share-based agreement pursuant to Section 7(h) or an agreement related to a
Performance Award pursuant to Section 7(g) and Section 8, as applicable.        
(c) “Beneficiary” means the legal representatives of the Participant’s estate
entitled by will or the laws of descent and distribution to receive the benefits
under a Participant’s Award upon a Participant’s death, provided that, if and to
the extent authorized by the Committee, a Participant may be permitted to
designate a Beneficiary, in which case the “Beneficiary” instead will be the
person, persons, trust or trusts (if any are then surviving) which have been
designated by the Participant in his or her most recent written beneficiary
designation filed with the Company to receive the benefits specified under the
Participant’s Award upon such Participant’s death.         (d) “Board” means the
Company’s Board of Directors.         (e) “Change in Control” and related terms
have the meanings specified in Section 10(c).         (f) “Code” means the
Internal Revenue Code of 1986, as amended, and proposed and final Treasury
Department regulations issued thereunder.         (g) “Committee” means the
Compensation Committee of the Board, if one exists, or the Board if a
Compensation Committee does not exist at any time.         (h) “Effective Date”
has the meaning specified in Section 1.         (i) “Eligible Person” has the
meaning specified in Section 6.      

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  (j) “Exchange Act” means the Securities Exchange Act of 1934, as amended.    
    (k) “Fair Market Value” means the fair market value per share of Stock as
determined by the Committee under any method of determining fair market value as
shall be permissible under the Code and the rules and regulations thereunder.  
      (l) “Option” means a right, granted to a Participant under Section 7(b),
to purchase Stock at a specified price during specified time periods.        
(m) “Other Stock-Based Awards” means Awards granted to a Participant under
Section 7(h).         (n) “Participant” means a person who has been granted an
Award under the Plan which remains outstanding, including a person who is no
longer an Eligible Person.         (o) “Performance Award” means a conditional
right, granted to a Participant under Section 7(g) and Section 8, to receive
cash, Stock or other Awards or payments, as determined by the Committee, based
upon performance criteria specified by the Committee.         (p) “Phantom
Stock” means a right granted to a Participant under Section 7(d).         (q)
“Restricted Stock” means Stock granted to a Participant under Section 7(f) which
is subject to certain restrictions and to a risk of forfeiture.         (r)
“Sale Phantom Stock” means a right granted to a Participant under Section 7(e).
        (s) “Stock” means the Company’s Common Stock, and any other equity
securities of the Company that may be substituted or resubstituted for Stock
pursuant to Section 12(c).         (t) “Stock Appreciation Rights” or “SAR”
means a right granted to a Participant under Section 7(c).         (u)
“Termination of Service” means (1) with respect to an Award granted to an
employee, the termination of the employment relationship between the employee
and the Company; (2) with respect to an Award granted to a consultant, the
termination of the consulting or advisory arrangement between the consultant and
the Company; and (3) with respect to an Award granted to a non-employee
director, the cessation of the provision of services as a director of the
Company. A Termination of Service shall not be deemed to have resulted by reason
of a bona fide leave of absence approved by the Company. Notwithstanding the
foregoing, if the Participant’s status changes from employee, consultant or
non-employee director to any other status eligible to receive an Award under the
Plan, no Termination of Service shall occur for purposes of the Plan until the
Participant’s new status with the Company terminates.

 

4. Administration.

 

  (a) Authority of the Committee. The Plan shall be administered by the
Committee, which shall have full and final authority, in each case subject to
and consistent with the provisions of the Plan, to select Eligible Persons to
become Participants; to grant Awards; to determine the type and number of
Awards, the dates on which Awards may be exercised and on which the risk of
forfeiture or deferral period relating to Awards shall lapse or terminate, the
acceleration of any such dates, the expiration date of any Award, whether, to
what extent, and under what circumstances an Award may be settled, or the
exercise price of an Award may be paid, in cash, Stock, other Awards, or other
property, and other terms and conditions of, and all other matters relating to
Awards; to prescribe documents evidencing or setting terms of Awards (such Award
documents need not be identical for each Participant), amendments thereto, and
rules and regulations for the administration of the Plan and amendments thereto;
to construe and interpret the Plan and Award documents and correct defects,
supply omissions or reconcile inconsistencies therein; and to make all other
decisions and determinations as the Committee may deem necessary or advisable
for the administration of the Plan. Decisions of the Committee with respect to
the administration and interpretation of the Plan shall be final, conclusive,
and binding upon all persons interested in the Plan, including Participants,
Beneficiaries, transferees under Section 12(b) and other persons claiming rights
from or through a Participant, and stockholders.      

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  (b) Limitation of Liability. The Committee and each member thereof, and any
person acting pursuant to authority delegated by the Committee, shall be
entitled, in good faith, to rely or act upon any report or other information
furnished by any executive officer, other officer or employee of the Company or
a subsidiary, the Company’s independent auditors, consultants, legal counsel or
any other agents assisting in the administration of the Plan. Members of the
Committee, any person acting pursuant to authority delegated by the Committee,
and any officer or employee of the Company or a subsidiary acting at the
direction or on behalf of the Committee or a delegee shall not be personally
liable for any action or determination taken or made in good faith with respect
to the Plan, and shall, to the extent permitted by law, be fully indemnified and
protected by the Company with respect to any such action or determination.

 

5. Stock Subject to Plan.

 

  (a) Overall Number of Shares Available for Delivery. Subject to adjustment as
provided in Section 12(c), the total number of shares of Stock reserved and
available for delivery in connection with Awards under the Plan (excluding, for
the avoidance of doubt, any Phantom Stock or Sale Phantom Stock) shall be
10,000,000 shares of common stock of the Company. Any shares of Stock delivered
under the Plan shall consist of authorized and unissued shares or treasury
shares.         (b) Share Counting Rules.           (i) The Committee may adopt
reasonable counting procedures to ensure appropriate counting, avoid double
counting (as, for example, in the case of tandem or substitute awards) and make
adjustments if the number of shares of Stock actually delivered differs from the
number of shares previously counted in connection with an Award.            
(ii) Shares that are potentially deliverable under an Award under the Plan that
are canceled, expired, forfeited, settled in cash or otherwise terminated
without a delivery of such shares to the Participant will not be counted as
delivered under the Plan and shall be available for Awards under this Plan.
However, shares withheld in payment of the exercise price or taxes relating to
an Award and shares equal to the number surrendered in payment of any exercise
price or taxes relating to an Award shall be deemed to constitute shares
delivered to the Participant and shall not be available for reissue as Awards
under this Plan.             (iii) Because shares will count against the number
reserved in Section 5(a) upon delivery, and subject to the share counting rules
under this Section 5(b), the Committee may determine that Awards may be
outstanding that relate to a greater number of shares than the aggregate
remaining available under the Plan, so long as Awards will not result in
delivery and vesting of shares in excess of the number then available under the
Plan.        

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6. Eligibility. Awards may be granted under the Plan only to Eligible Persons.
For purposes of the Plan, an “Eligible Person” means an employee of the Company
or any subsidiary, a non-employee director or key consultant to the Company, or
a subsidiary, and any person who has been offered employment by the Company or a
subsidiary, provided that such prospective employee may not receive any payment
or exercise any right relating to an Award until such person has commenced
employment with the Company or a subsidiary.     7. Specific Terms of Awards.

 

  (a) General. Awards may be granted on the terms and conditions set forth in
this Section 7. In addition, the Committee may impose on any Award or the
exercise thereof, at the date of grant or thereafter (subject to Section 12(e)),
such additional terms and conditions, not inconsistent with the provisions of
the Plan, as the Committee shall determine, including terms requiring forfeiture
of Awards in the event of Termination of Service by the Participant, terms in
the event of a Change in Control and terms permitting a Participant to make
elections relating to his or her Award. The Committee shall retain full power
and discretion with respect to any term or condition of an Award that is not
mandatory under the Plan. The Committee shall require the payment of lawful
consideration for an Award to the extent necessary to satisfy the requirements
of the Nevada Revised Statutes, and may otherwise require payment of
consideration for an Award except as limited by the Plan.         (b) Options.
The Committee is authorized to grant Options to Participants on the following
terms and conditions which options may be incentive options or non-qualified
options for purposes of the Code:           (i) The exercise price per share of
Stock purchasable under an Option shall be determined by the Committee, provided
that such exercise price shall be not less than the Fair Market Value of a share
of Stock on the date of grant of such Option.             (ii) The Committee
shall determine the term of each Option, provided that in no event shall the
term of any Option or SAR issued in tandem therewith exceed seven years. The
Committee shall determine the time or times at which or the circumstances under
which an Option may be exercised in whole or in part (including based on
achievement of performance goals and future service requirements), the methods
by which such exercise price may be paid or deemed to be paid and the form of
such payment (subject to Section 12(j)), including, without limitation, cash,
Stock (including through withholding of Stock deliverable upon exercise, if such
withholding will not result in the recognition of additional accounting expense
to the Company), other Awards or awards granted under other plans of the Company
or any subsidiary, or other property (including through “cashless exercise”
arrangements, to the extent permitted by applicable law), and the methods by or
forms in which Stock will be delivered or deemed to be delivered in satisfaction
of Options to Participants.             (iii) Options shall be issued pursuant
to a Stock Option Agreement, substantially in the form as attached hereto as
Exhibit A.           (c) Stock Appreciation Rights. The Committee is authorized
to grant SARs to Participants on the following terms and conditions:          
(i) An SAR shall confer on the Participant to whom it is granted a right to
receive, upon vesting thereof, an amount in case equal to the excess of (A) the
Fair Market Value of one share of Stock on the date of exercise (or, in the case
of a “Limited SAR,” the Fair Market Value determined by reference to the Change
in Control Price, as defined under Section 10(d)) over (B) the grant price of
the SAR as determined by the Committee.        

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    (ii) The Committee shall determine at the date of grant or thereafter, the
time or times at which and the circumstances under which a SAR may be exercised
in whole or in part (including based on achievement of performance goals and
future service requirements), the method of exercise, method of settlement, form
of consideration payable in settlement, method by or forms in which Stock will
be delivered or deemed to be delivered to Participants, whether or not a SAR
shall be free-standing or in tandem or combination with an Option, and the
maximum term of a SAR, which in no event shall exceed a period of seven years
from the date of grant. Limited SARs that may only be exercised in connection
with a Change in Control or other event as specified by the Committee may be
granted on such terms, not inconsistent with this Section 7(c), as the Committee
may determine.             (iii) Stock Appreciation Rights shall be granted
pursuant to a Stock Appreciation Rights Agreement, substantially in the form as
attached hereto as Exhibit B.           (d) Phantom Stock. The Committee is
authorized to grant Phantom Stock to Participants on the following terms and
conditions:           (i) A share of Phantom Stock shall confer on the
Participant to whom it is granted a right to receive, upon vesting thereof, such
payments or amounts as set forth in the Phantom Stock Agreement.            
(ii) The Committee shall determine at the date of grant or thereafter, the time
or times at which and the circumstances under which Phantom Stock shall vest in
whole or in part, method of settlement, form of consideration payable in
settlement.             (iii) Phantom Stock shall be issued pursuant to a
Phantom Stock Agreement, substantially in the form as attached hereto as Exhibit
C-1. Shares of Phantom Stock shall not be certificated.           (e) Sale
Phantom Stock. The Committee is authorized to grant Sale Phantom Stock to
Participants on the following terms and conditions:           (i) A share of
Phantom Stock shall confer on the Participant to whom it is granted a right to
receive a proportionate share of such payments or amounts as set forth in the
Sale Phantom Stock Agreement.             (ii) The Committee shall determine at
the date of grant or thereafter, method of settlement, and form of consideration
payable in settlement as to any Sale Phantom Stock.             (iii) Sale
Phantom Stock shall be issued pursuant to a Sale Phantom Stock Agreement,
substantially in the form as attached hereto as Exhibit C-2. Shares of Sale
Phantom Stock shall not be certificated.           (f) Restricted Stock. The
Committee is authorized to grant Restricted Stock to Participants on the
following terms and conditions:           (i) Restricted Stock shall be subject
to such restrictions on transferability, risk of forfeiture and other
restrictions, if any, as the Committee may impose, which restrictions may lapse
separately or in combination at such times, under such circumstances (including
based on achievement of performance goals and future service requirements), in
such installments or otherwise and under such other circumstances as the
Committee may determine at the date of grant or thereafter. Except to the extent
restricted under the terms of the Plan and any Award document relating to the
Restricted Stock, a Participant granted Restricted Stock shall have all of the
rights of a stockholder, including the right to vote the Restricted Stock and
the right to receive dividends thereon (subject to any mandatory reinvestment or
other requirement imposed by the Committee).        

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    (ii) Except as otherwise determined by the Committee, upon Termination of
Service during the applicable restriction period, Restricted Stock that is at
that time subject to restrictions shall be forfeited and reacquired by the
Company; provided that the Committee may provide, by rule or regulation or in
any Award document, or may determine in any individual case, that restrictions
or forfeiture conditions relating to Restricted Stock will lapse in whole or in
part, including in the event of terminations resulting from specified causes.  
          (iii) Restricted Stock granted under the Plan may be evidenced in such
manner as the Committee shall determine. If certificates representing Restricted
Stock are registered in the name of the Participant, the Committee may require
that such certificates bear an appropriate legend referring to the terms,
conditions and restrictions applicable to such Restricted Stock, that the
Company retain physical possession of the certificates, and that the Participant
deliver a stock power to the Company, endorsed in blank, relating to the
Restricted Stock.             (iv) Restricted Stock shall be issued pursuant to
a Restricted Stock Agreement, substantially in the form as attached hereto as
Exhibit D.           (g) Performance Awards. Performance Awards, denominated in
cash or in Stock or other Awards, may be granted by the Committee in accordance
with Section 8.         (h) Other Stock-Based Awards. The Committee is
authorized, subject to limitations under applicable law, to grant to
Participants such other Awards that may be denominated or payable in, valued in
whole or in part by reference to, or otherwise based on, or related to, Stock or
factors that may influence the value of Stock, including, without limitation,
convertible or exchangeable debt securities, other rights convertible or
exchangeable into Stock, purchase rights for Stock, Awards with value and
payment contingent upon performance of the Company or business units thereof or
any other factors designated by the Committee, and Awards valued by reference to
the book value of Stock or the value of securities of or the performance of
specified subsidiaries or other business units. The Committee shall determine
the terms and conditions of such Awards. Stock delivered pursuant to an Award in
the nature of a purchase right granted under this Section 7(h) shall be
purchased for such consideration, paid for at such times, by such methods, and
in such forms, including, without limitation, cash, Stock, other Awards, notes,
or other property, as the Committee shall determine. Cash awards, as an element
of or supplement to any other Award under the Plan, may also be granted pursuant
to this Section 7(h).

 

8. Performance Awards.

 

  (a) Performance Awards Generally. The Committee is authorized to grant any of
the awards described in Sections 7(d), 7(e), 7(f), 7(g) and 7(h) as Performance
Awards, the terms and conditions of which are described in this Section 8.
Performance Awards may be denominated as a cash amount, number of shares of
Stock, or specified number of other Awards (or a combination) which may be
earned upon achievement or satisfaction of performance conditions specified by
the Committee. In addition, the Committee may specify that any other Award shall
constitute a Performance Award by conditioning the right of a Participant to
exercise the Award or have it settled, and the timing thereof, upon achievement
or satisfaction of such performance conditions as may be specified by the
Committee. The Committee may use such business criteria and other measures of
performance as it may deem appropriate in establishing any performance
conditions, and may exercise its discretion to reduce or increase the amounts
payable under any Award subject to performance conditions.

 

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  (b) Performance Goal Generally. The performance goal for such Performance
Awards shall consist of one or more business criteria and a targeted level or
levels of performance with respect to each of such criteria, as specified by the
Committee consistent with this Section 8. The performance goal shall be
objective, including the requirement that the level or levels of performance
targeted by the Committee result in the achievement of performance goals being
“substantially uncertain.” The Committee may determine that such Performance
Awards shall be granted, exercised and settled upon achievement of any one
performance goal or that two or more of the performance goals must be achieved
as a condition to grant, exercise and settlement of such Performance Awards.
Performance goals may differ for Performance Awards granted to any one
Participant or to different Participants.

 

    (i) One or more of the following business criteria for the Company, on a
consolidated basis, shall be used by the Committee in establishing performance
goals for such Performance Awards: (1) revenues; (2) earnings from operations,
earnings before or after taxes, earnings before or after interest, depreciation,
amortization, incentives, service fees or extraordinary or special items; (3)
net income or net income per common share (basic or diluted); (4) return on
assets, return on net assets, return on investment, return on capital, or return
on equity; (5) cash flow, free cash flow, cash flow return on investment, or net
cash provided by operations; (6) economic value created or added; (7) operating
margin or profit margin; (8) stock price, dividends or total stockholder return;
and (9) strategic business criteria, consisting of one or more objectives based
on meeting specified market penetration or value added, product development or
introduction, geographic business expansion goals, cost targets, debt reduction,
customer satisfaction, employee satisfaction, information technology, and goals
relating to acquisitions or divestitures of subsidiaries, affiliates or joint
ventures. The targeted level or levels of performance with respect to such
business criteria may be established at such levels and in such terms as the
Committee may determine, in its discretion, including in absolute terms, as a
goal relative to performance in prior periods, or as a goal compared to the
performance of one or more comparable companies or an index covering multiple
companies.             (ii) Achievement of performance goals in respect of such
Performance Awards shall be measured over a performance period as specified by
the Committee.             (iii) The Committee may establish a Performance Award
pool, which shall be an unfunded pool, for purposes of measuring performance of
the Company in connection with Performance Awards. The amount of such
Performance Award pool shall be based upon the achievement of a performance goal
or goals based on one or more of the business criteria set forth in Section
8(b)(i) during the given performance period, as specified by the Committee in
accordance with Section 8(b)(ii). The Committee may specify the amount of the
Performance Award pool as a percentage of any of such business criteria, a
percentage thereof in excess of a threshold amount, or as another amount which
need not bear a strictly mathematical relationship to such business criteria.  
          (iv) Settlement of such Performance Awards shall be in cash, Stock, or
other property, in the discretion of the Committee.        

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9. Certain Provisions Applicable to Awards.

 

  (a) Stand-Alone, Additional, Tandem, and Substitute Awards. Options and SARs
granted under the Plan may, in the discretion of the Committee, be granted
either alone or in addition to or in tandem with the other, and any Award
granted under the Plan may, in the discretion of the Committee, be granted in
substitution or exchange for any other Award or any award granted under another
plan of the Company, or any business entity to be acquired by the Company or a
subsidiary, or any other right of a Participant to receive payment from the
Company or any subsidiary, provided that such substitution or exchange does not
cause the recipient to become subject to excise taxes under Code Section 409A.
Options and SARs granted in addition to or in tandem with the other may be
granted either as of the same time as or a different time from the grant of such
other Award, except to the extent that grants at different times would cause the
recipient of the Option or SAR to become subject to excise taxes under Code
Section 409A.         (b) Term of Awards. The term of each Award shall be for
such period as may be determined by the Committee, subject to the express
limitations set forth in Section 7(b)(ii).         (c) Form and Timing of
Payment under Awards; Deferrals. Subject to the terms of the Plan (including
Section 12(j)) and any applicable Award document, payments to be made by the
Company or a subsidiary upon the exercise of an Option or other Award or
settlement of an Award may be made in such forms as the Committee shall
determine, including, without limitation, cash, Stock, or other property. The
settlement of any Award may be accelerated, and cash paid in lieu of Stock in
connection with such settlement, in the discretion of the Committee or upon
occurrence of one or more specified events (subject to Section 12(j)), provided
such acceleration does not cause the recipient to become subject to excise taxes
under Code Section 409A.         (d) Limitation on Vesting of Certain Awards. If
the granting or vesting of full-value Awards (as defined in Section 5(a)) is
subject to performance conditions, the minimum vesting period of such Awards
shall be no less than one year. If neither the granting nor vesting of
full-value Awards is subject to performance conditions, such Awards shall have a
minimum vesting period of no less than three years; provided, however, that such
Awards may vest on an accelerated basis in the event of a Participant’s death,
disability, Termination of Service after age 65 (or such other age as determined
by the Committee), or in the event of a Change in Control or other special
circumstances; provided however, the vesting of no more than 10% of the shares
of Stock authorized under the Plan may be accelerated for other special
circumstances. For purposes of this Section 9(d)), (i) a performance period that
precedes the grant of the Award will be treated as part of the vesting period if
the participant has been notified promptly after the commencement of the
performance period that he or she has the opportunity to earn the Award based on
performance and continued service, and (ii) vesting over a one-year period or
three-year period will include periodic vesting (i.e., monthly step vesting in
the case of a one-year award, or annual step vesting over a two or three year
award) over such period if the rate of such vesting is proportional (or less
rapid) to the number of months or years that have lapsed, as applicable, in such
period. The foregoing notwithstanding, up to 10% of the shares of Stock
authorized under the Plan may be granted as full- value Awards without the
minimum vesting requirements set forth in this Section 9(d)).         (e)
Deferred Compensation Awards. Notwithstanding anything to the contrary contained
herein, any Award which is subject to Code Section 409A shall, at a minimum,
comply with all of the requirements set forth in Code Section 409A as are
necessary to allow the deferral of federal income tax on the deferred
compensation resulting from the Award and to avoid the constructive receipt of
such deferred compensation.      

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10. Change in Control.

 

  (a) Effect of “Change in Control” on Non-Performance Based Awards. In the
event of a “Change in Control,” the following provisions shall apply to
non-performance based Awards, including Awards as to which performance
conditions previously have been satisfied or are deemed satisfied under Section
10(b), unless otherwise determined by the Committee at the time of the Change in
Control or as otherwise provided in a current employment agreement between the
Company and the Participant or as otherwise provided in the applicable Award
Agreement:

 

    (i) All deferral of settlement, forfeiture conditions and other restrictions
applicable to Awards granted under the Plan shall lapse and such Awards shall be
fully payable as of the time of the Change in Control without regard to deferral
and vesting conditions, except to the extent of any waiver by the Participant or
other express election to defer beyond the Change in Control and subject to
applicable restrictions set forth in Section 12(a);             (ii) Any Award
carrying a right to exercise that was not previously exercisable and vested
shall become fully exercisable and vested as of the time of the Change in
Control and shall remain exercisable and vested for the balance of the stated
term of such Award without regard to any Termination of Service by the
Participant other than a termination for “cause” (as defined in any employment
or severance agreement between the Company or its subsidiary and the Participant
then in effect or, if none, as defined by the Committee and in effect at the
time of the Change in Control), subject only to applicable restrictions set
forth in Section 12(a); and             (iii) The Committee may, in its
discretion, determine to extend to any Participant who holds an Option the right
to elect, during the 60-day period immediately following the Change in Control,
in lieu of acquiring the shares of Stock covered by such Option, to receive in
cash the excess of the Change in Control Price over the exercise price of such
Option, multiplied by the number of shares of Stock covered by such Option, and
to extend to any Participant who holds other types of Awards denominated in
shares the right to elect, during the 60-day period immediately following the
Change in Control, in lieu of receiving the shares of Stock covered by such
Award, to receive in cash the Change in Control Price multiplied by the number
of shares of Stock covered by such Award.

 

  (b) Effect of “Change in Control” on Performance-Based Awards. In the event of
a “Change in Control,” with respect to an outstanding Award subject to
achievement of performance goals and conditions, such performance goals and
conditions shall be deemed to be met or exceeded if and to the extent so
provided by the Committee in the Award document governing such Award or other
agreement with the Participant.         (c) Definition of “Change in Control.” A
“Change in Control” shall be deemed to have occurred if, after the Effective
Date, there shall have occurred any of the following:

 

    (i) a complete dissolution or liquidation of the Company, or similar
occurrence;             (ii) the consummation of a merger, consolidation,
acquisition, separation, reorganization, or similar occurrence, where the
Company is not the surviving entity in a single transaction or a series of
related transactions;             (iii) a transfer of substantially all of the
assets of the Company or more than 50% of the outstanding Common Stock, each in
a single transaction or a series of related transactions; or

 

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    (iv) the individuals who constitute the Board as of the Effective Date, or
who have been recommended for election to the Board by two-thirds of the Board
consisting of individuals who are either on the Board as of the Effective Date
or such successors, cease for any reason to constitute at least a majority of
such Board.

 

Notwithstanding the foregoing, with respect to any deferred compensation Award
which is subject to Code Section 409A and with respect to which Section
409A(a)(2)(A)(v) is applicable, a “Change in Control” shall not have been deemed
to have occurred unless the requirements of Section 409A(a)(2)(A)(v) have been
satisfied.

 

  (d) Definition of “Change in Control Price.” “Change in Control Price” means
an amount in cash equal to the amount of cash and fair market value of property
that is the highest price per share paid (including extraordinary dividends) in
any transaction triggering the Change in Control or any liquidation of shares
following a sale of substantially all assets of the Company.

 

11. Additional Award Forfeiture Provisions.

 

  (a) Forfeiture of Options and Other Awards and Gains Realized Upon Prior
Option Exercises or Award Settlements. Unless otherwise determined by the
Committee, each Award granted hereunder shall be subject to the following
additional forfeiture conditions, to which the Participant, by accepting an
Award hereunder, agrees. If any of the events specified in Section 11(b)(i),
Section 11(b)(ii), or Section 11(b)(iii) occurs (a “Forfeiture Event”), all of
the following forfeitures will result, with such forfeitures becoming effective
at the later of the occurrence of the Forfeiture Event or the Participant’s
Termination of Service:

 

    (i) The unexercised portion of the Option, whether or not vested, and any
other Award not then settled (except for an Award that has not been settled
solely due to an elective deferral by the Participant and otherwise is not
forfeitable in the event of any termination of service of the Participant) will
be immediately forfeited and canceled upon the occurrence of the Forfeiture
Event; and             (ii) The Participant will be obligated to repay to the
Company, in cash, within five business days after demand is made therefor by the
Company, the total amount of Award Gain (as defined herein) realized by the
Participant upon each exercise of an Option or settlement of an Award
(regardless of any elective deferral) that occurred on or after (A) the date
that is six months prior to the occurrence of the Forfeiture Event, if the
Forfeiture Event occurred while the Participant was employed by the Company or a
subsidiary, or (B) the date that is six months prior to the date the
Participant’s employment by the Company or a subsidiary terminated, if the
Forfeiture Event occurred after the Participant ceased to be so employed. For
purposes of this Section, the term “Award Gain” shall mean (i) in respect of a
given Option exercise, the product of (X) the Fair Market Value per share of
Stock at the date of such exercise (without regard to any subsequent change in
the market price of shares) minus the exercise price times (Y) the number of
shares as to which the Option was exercised at that date, and (ii) in respect of
any other settlement of an Award granted to the Participant, the Fair Market
Value of the cash or Stock paid or payable to Participant (regardless of any
elective deferral) less any cash or the Fair Market Value of any Stock or
property (other than an Award or award which would have itself then been
forfeitable hereunder and excluding any payment of tax withholding) paid by the
Participant to the Company as a condition of or in connection with such
settlement.

 

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  (b) Events Triggering Forfeiture. The forfeitures specified in Section 11(a)
will be triggered upon the occurrence of any one of the following Forfeiture
Events at any time during the Participant’s employment by the Company or a
subsidiary or during the one-year period following termination of such
employment:

 

    (i) The Participant, acting alone or with others, directly or indirectly,
prior to a Change in Control, (A) engages, either as employee, employer,
consultant, advisor, or director, or as an owner, investor, partner, or
stockholder unless the Participant’s interest is insubstantial, in any business
in an area or region in which the Company conducts business at the date the
event occurs, which is directly in competition with a business then conducted by
the Company or a subsidiary; (B) induces any customer, supplier, licensee or
licensor of the Company or a subsidiary, or other company with which the Company
or a subsidiary has a business relationship, to curtail, cancel, not renew, or
not continue his or her or its business with the Company or any subsidiary; or
(C) induces, or attempts to influence, any employee of or service provider
(including, but not limited to, licensees and licensors) to the Company or a
subsidiary to terminate such employment or service. The Committee shall, in its
discretion, determine which lines of business the Company conducts on any
particular date and which third parties may reasonably be deemed to be in
competition with the Company. For purposes of this Section 11(b)(i), a
Participant’s interest as a stockholder is insubstantial if it represents
beneficial ownership of less than five percent of the outstanding class of
stock, and a Participant’s interest as an owner, investor, or partner is
insubstantial if it represents ownership, as determined by the Committee in its
discretion, of less than five percent of the outstanding equity of the entity;  
          (ii) The Participant discloses, uses, sells, or otherwise transfers,
except in the course of employment with or other service to the Company or any
subsidiary, any confidential or proprietary information of the Company or any
subsidiary, including but not limited to information regarding the Company’s
current and potential customers, organization, employees, finances, and methods
of operations and investments, so long as such information has not otherwise
been disclosed to the public or is not otherwise in the public domain, except as
required by law or pursuant to legal process, or the Participant makes
statements or representations, or otherwise communicates, directly or
indirectly, in writing, orally, or otherwise, or takes any other action which
may, directly or indirectly, disparage or be damaging to the Company or any of
its subsidiaries or their respective officers, directors, employees, advisors,
businesses or reputations, except as required by law or pursuant to legal
process; or             (iii) The Participant fails to cooperate with the
Company or any subsidiary or by making himself or herself available to testify
on behalf of the Company or such subsidiary in any action, suit, or proceeding,
whether civil, criminal, administrative, or investigative, or otherwise fails to
assist the Company or any subsidiary in any such action, suit, or proceeding by
providing information and meeting and consulting with members of management of,
other representatives of, or counsel to, the Company or such subsidiary, as
reasonably requested.

 

  (c) Agreement Does Not Prohibit Competition or Other Participant Activities.
Although the conditions set forth in this Section 11 shall be deemed to be
incorporated into an Award, a Participant is not thereby prohibited from
engaging in any activity, including but not limited to competition with the
Company and its subsidiaries. Rather, the non-occurrence of the Forfeiture
Events set forth in Section 11(b) is a condition to the Participant’s right to
realize and retain value from his or her compensatory Options and Awards, and
the consequence under the Plan if the Participant engages in an activity giving
rise to any such Forfeiture Event are the forfeitures specified herein. The
Company and the Participant shall not be precluded by this provision or
otherwise from entering into other agreements concerning the subject matter of
Section 11(a) and Section 11(b).

 

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  (d) Committee Discretion. The Committee may, in its discretion, waive in whole
or in part the Company’s right to forfeiture under this Section, but no such
waiver shall be effective unless evidenced by a writing signed by a duly
authorized officer of the Company. In addition, the Committee may impose
additional conditions on Awards, by inclusion of appropriate provisions in the
document evidencing or governing any such Award.

 

12. General Provisions.

 

  (a) Compliance with Legal and Other Requirements. The Company may, to the
extent deemed necessary or advisable by the Committee, postpone the issuance or
delivery of Stock or payment of other benefits under any Award until completion
of such registration or qualification of such Stock or other required action
under any federal or state law, rule or regulation, listing or other required
action with respect to any stock exchange or automated quotation system upon
which the Stock or other securities of the Company are listed or quoted, or
compliance with any other obligation of the Company, as the Committee may
consider appropriate, and may require any Participant to make such
representations, furnish such information and comply with or be subject to such
other conditions as it may consider appropriate in connection with the issuance
or delivery of Stock or payment of other benefits in compliance with applicable
laws, rules, and regulations, listing requirements, or other obligations.      
  (b) Limits on Transferability; Beneficiaries. No Award or other right or
interest of a Participant under the Plan shall be pledged, hypothecated or
otherwise encumbered or subject to any lien, obligation or liability of such
Participant to any party (other than the Company or a subsidiary thereof), or
assigned or transferred by such Participant otherwise than by will or the laws
of descent and distribution or to a Beneficiary upon the death of a Participant,
and such Awards or rights that may be exercisable shall be exercised during the
lifetime of the Participant only by the Participant or his or her guardian or
legal representative, except that Awards and other rights may be transferred to
one or more transferees during the lifetime of the Participant, and may be
exercised by such transferees in accordance with the terms of such Award, but
only if and to the extent such transfers are permitted by the Committee, subject
to any terms and conditions which the Committee may impose thereon (including
limitations the Committee may deem appropriate in order that offers and sales
under the Plan will meet applicable requirements of registration forms under the
Securities Act of 1933 specified by the Securities and Exchange Commission). A
Beneficiary, transferee, or other person claiming any rights under the Plan from
or through any Participant shall be subject to all terms and conditions of the
Plan and any Award document applicable to such Participant, except as otherwise
determined by the Committee, and to any additional terms and conditions deemed
necessary or appropriate by the Committee.         (c) Adjustments. In the event
of any large, special and non-recurring dividend or other distribution (whether
in the form of cash or property other than Stock), recapitalization, forward or
reverse split, Stock dividend, reorganization, merger, consolidation, spin-off,
combination, repurchase, share exchange, liquidation, dissolution or other
similar corporate transaction or event affects the Stock, the Committee shall
adjust any or all of (i) the number and kind of shares of Stock which may be
delivered in connection with Awards granted thereafter, (ii) the number and kind
of shares of Stock by which annual per-person Award limitations are measured
under Section 8, (iii) the number and kind of shares of Stock subject to or
deliverable in respect of outstanding Awards and (iv) the exercise price, grant
price or purchase price relating to any Award or, if deemed appropriate, the
Committee may make provision for a payment of cash or property to the holder of
an outstanding Option (subject to Section 12(j)). In addition, the Committee is
authorized to make adjustments in the terms and conditions of, and the criteria
included in, Awards (including Performance Awards and performance goals and any
hypothetical funding pool relating thereto) in recognition of unusual or
nonrecurring events (including, without limitation, events described in the
preceding sentence, as well as acquisitions and dispositions of businesses and
assets) affecting the Company, any subsidiary or other business unit, or the
financial statements of the Company or any subsidiary, or in response to changes
in applicable laws, regulations, accounting principles, tax rates and
regulations or business conditions or in view of the Committee’s assessment of
the business strategy of the Company, any subsidiary or business unit thereof,
performance of comparable organizations, economic and business conditions,
personal performance of a Participant, and any other circumstances deemed
relevant.

 

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  (d) Tax Provisions.

 

    (i) The Company and any subsidiary is authorized to withhold from any Award
granted, any payment relating to an Award under the Plan, including from a
distribution of Stock, or any payroll or other payment to a Participant, amounts
of withholding and other taxes due or potentially payable in connection with any
transaction involving an Award, and to take such other action as the Committee
may deem advisable to enable the Company and Participants to satisfy obligations
for the payment of withholding taxes and other tax obligations relating to any
Award. This authority shall include authority to withhold or receive Stock or
other property and to make cash payments in respect thereof in satisfaction of a
Participant’s withholding obligations, either on a mandatory or elective basis
in the discretion of the Committee. Other provisions of the Plan
notwithstanding, only the minimum amount of Stock deliverable in connection with
an Award necessary to satisfy statutory withholding requirements will be
withheld, except a greater amount of Stock may be withheld if such withholding
would not result in the recognition of additional accounting expense to the
Company.             (ii) No election under Code Section 83(b) (to include in
gross income in the year of transfer the amounts specified in Code Section
83(b)) or under a similar provision of the laws of a jurisdiction outside the
United States may be made unless expressly permitted by the terms of the Award
document or by action of the Committee in writing prior to the making of such
election, which election right shall not be unreasonably withheld if the
Participant requests to make such an election in writing to the Committee. In
any case in which a Participant is permitted to make such an election in
connection with an Award, the Participant shall notify the Company of such
election within ten days of filing notice of the election with the Internal
Revenue Service or other governmental authority, in addition to any filing and
notification required pursuant to regulations issued under Code Section 83(b) or
other applicable provision.

 

  (e) Changes to the Plan. The Board may amend, suspend or terminate the Plan or
the Committee’s authority to grant Awards under the Plan without the consent of
stockholders or Participants; provided, however, that any amendment to the Plan
shall be submitted to the Company’s stockholders for approval not later than the
earliest annual meeting for which the record date is after the date of such
Board action if such stockholder approval is required by any federal or state
law or regulation or the rules of any stock exchange or automated quotation
system on which the Stock may then be listed or quoted, and the Board may
otherwise, in its discretion, determine to submit other amendments to the Plan
to stockholders for approval and provided further, that, without the consent of
an affected Participant, no such Board action may materially and adversely
affect the rights of such Participant under any outstanding Award. Except in
connection with a corporate transaction involving the Company (including,
without limitation, any stock dividend, stock split, extraordinary cash
dividend, recapitalization, reorganization, merger, consolidation, split-up,
spin-off, combination, or exchange of shares), the terms of outstanding awards
may not be amended to reduce the exercise price of outstanding Options or SARs
or cancel outstanding Options or SARS in exchange for cash, other awards or
Options or SARs with an exercise price that is less than the exercise price of
the original Options or SARs without stockholder approval.

 

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  (f) Right of Setoff. The Company or any subsidiary may, to the extent
permitted by applicable law, deduct from and set off against any amounts the
Company or its subsidiary may owe to the Participant from time to time,
including amounts payable in connection with any Award, owed as wages, fringe
benefits, or other compensation owed to the Participant, any such amounts as may
be owed by the Participant to the Company, including but not limited to amounts
owed under Section 11(a), although the Participant shall remain liable for any
part of the Participant’s payment obligation not satisfied through such
deduction and setoff. By accepting any Award granted hereunder, the Participant
agrees to any deduction or setoff under this Section 12(f).         (g) Unfunded
Status of Awards; Creation of Trusts. The Plan is intended to constitute an
“unfunded” plan for incentive and deferred compensation. With respect to any
payments not yet made to a Participant or obligation to deliver Stock pursuant
to an Award, nothing contained in the Plan or any Award shall give any such
Participant any rights that are greater than those of a general creditor of the
Company; provided that the Committee may authorize the creation of trusts and
deposit therein cash, Stock, other Awards or other property, or make other
arrangements to meet the Company’s obligations under the Plan. Such trusts or
other arrangements shall be consistent with the “unfunded” status of the Plan
unless the Committee otherwise determines with the consent of each affected
Participant.         (h) Nonexclusivity of the Plan. Neither the adoption of the
Plan by the Board nor its submission to the stockholders of the Company for
approval shall be construed as creating any limitations on the power of the
Board or a committee thereof to adopt such other incentive arrangements, apart
from the Plan, as it may deem desirable.         (i) Payments in the Event of
Forfeitures; Fractional Shares. Unless otherwise determined by the Committee, in
the event of a forfeiture of an Award with respect to which a Participant paid
cash consideration, the Participant shall be repaid the amount of such cash
consideration. No fractional shares of Stock shall be issued or delivered
pursuant to the Plan or any Award. The Committee shall determine whether cash,
other Awards or other property shall be issued or paid in lieu of such
fractional shares or whether such fractional shares or any rights thereto shall
be forfeited or otherwise eliminated.         (j) Certain Limitations Relating
to Accounting Treatment of Awards. At any time that the Company is accounting
for stock-denominated Awards under the Statement of Financial Accounting
Standards No. 123R (“FAS 123R”), the Company intends that, with respect to such
Awards, the compensation measurement date for accounting purposes shall occur at
the date of grant or such other date that applies to Awards that are treated as
equity awards under FAS 123R, unless the Committee specifically determines
otherwise. Therefore, other provisions of the Plan notwithstanding, in order to
preserve this fundamental objective of the Plan, if any authority granted to the
Committee hereunder or any provision of the Plan or an Award agreement would
result, under FAS 123R, in “liability” accounting, if the Committee was not
specifically aware of such accounting consequence at the time such Award was
granted or provision otherwise became effective, such authority shall be limited
and such provision shall be automatically modified and reformed to the extent
necessary to preserve the accounting treatment of the award intended by the
Committee. This provision shall cease to be effective if and at such time as the
Company no longer accounts for equity compensation under FAS 123R.

 

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  (k) Governing Law; Jurisdiction. The validity, construction, and effect of the
Plan, any rules and regulations relating to the Plan and any Award document
shall be determined in accordance with the laws of the State of Nevada, without
giving effect to principles of conflicts of laws, and applicable provisions of
federal law. With respect to any suit, action or proceeding (a “Proceeding”)
arising out of or relating to the Plan each of the Company, each Eligible Person
and each Participant hereby irrevocably submits to the exclusive jurisdiction of
the courts of the state of Washington and the United States of America, in each
case located in King County, Washington (the “Selected Courts”), and waives any
objection to venue being laid in the Selected Courts whether based on the
grounds of venue, forum non conveniens or otherwise. EACH OF THE FORGOING
PARTIES WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY RIGHT IT MAY HAVE TO
A TRIAL BY JURY IN ANY ACTION, PROCEEDING OR LITIGATION DIRECTLY OR INDIRECTLY
ARISING OUT OF, UNDER OR IN CONNECTION WITH THE PLAN OR ANY AWARD THEREUNDER.  
      (l) Awards to Participants Outside the United States. The Committee may
modify the terms of any Award under the Plan made to or held by a Participant
who is then resident or primarily employed outside of the United States in any
manner deemed by the Committee to be necessary or appropriate in order that such
Award shall conform to laws, regulations, and customs of the country in which
the Participant is then resident or primarily employed, or so that the value and
other benefits of the Award to the Participant, as affected by foreign tax laws
and other restrictions applicable as a result of the Participant’s residence or
employment abroad shall be comparable to the value of such an Award to a
Participant who is resident or primarily employed in the United States. An Award
may be modified under this Section 12(l) in a manner that is inconsistent with
the express terms of the Plan, so long as such modifications will not contravene
any applicable law or regulation.         (m) Limitation on Rights Conferred
under Plan. Neither the Plan nor any action taken hereunder shall be construed
as (i) giving any Eligible Person or Participant the right to continue as an
Eligible Person or Participant or in the employ or service of the Company or a
subsidiary, (ii) interfering in any way with the right of the Company or a
subsidiary to terminate any Eligible Person’s or Participant’s employment or
service at any time, (iii) giving an Eligible Person or Participant any claim to
be granted any Award under the Plan or to be treated uniformly with other
Participants and employees, or (iv) conferring on a Participant any of the
rights of a stockholder of the Company unless and until the Participant is duly
issued or transferred shares of Stock in accordance with the terms of an Award
or an Option is duly exercised. Except as expressly provided in the Plan and an
Award document, neither the Plan nor any Award document shall confer on any
person other than the Company and the Participant any rights or remedies
thereunder.         (n) Severability; Entire Agreement. If any of the provisions
of this Plan or any Award document is finally held to be invalid, illegal or
unenforceable (whether in whole or in part), such provision shall be deemed
modified to the extent, but only to the extent, of such invalidity, illegality
or unenforceability, and the remaining provisions shall not be affected thereby;
provided, that, if any of such provisions is finally held to be invalid,
illegal, or unenforceable because it exceeds the maximum scope determined to be
acceptable to permit such provision to be enforceable, such provision shall be
deemed to be modified to the minimum extent necessary to modify such scope in
order to make such provision enforceable hereunder. The Plan and any Award
documents contain the entire agreement of the parties with respect to the
subject matter thereof and supersede all prior agreements (unless an employment
agreement entered into between the Company and the Participant specifically
provides contradictory terms, in which case the terms of the employment
agreement shall govern), promises, covenants, arrangements, communications,
representations and warranties between them, whether written or oral with
respect to the subject matter thereof. In the event of any conflict between the
terms of this Plan and the terms in an Award Agreement, the terms of the Award
Agreement shall control.         (o) Termination. The Plan is effective as of
the Effective Date. Unless earlier terminated by action of the Board of
Directors, the Plan will remain in effect until such time as no Stock remains
available for delivery under the Plan and the Company has no further rights or
obligations under the Plan with respect to outstanding Awards under the Plan.

 

***

 

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