Exhibit 10.15

 

ZUMIEZ INC.

 

2005 EQUITY INCENTIVE PLAN

 

(Effective January 24, 2005, as amended and restated effective May 27, 2009)

 

1.             PURPOSES.

 

(a)           General Purpose.  The Company, by means of the Plan, seeks to
retain the services of Eligible Recipients, to secure and retain the services of
new members of this group and to provide incentives for such persons to exert
maximum efforts for the success of the Company and, if applicable, any of the
Company’s parents and subsidiaries.

 

(b)           Available Stock Awards.  The purpose of the Plan is to provide a
means by which Eligible Recipients may be given an opportunity to benefit from
increases in value of the Common Stock through the granting of the following
Stock Awards:  (i) Incentive Stock Options, (ii) Nonstatutory Stock Options,
(iii) stock bonuses, (iv) Restricted Stock grants, (v) Restricted Stock Unit
grants and (vi) Stock Appreciation Rights.

 

2.             DEFINITIONS.

 

“Affiliate” means any Parent or Subsidiary of the Company, whether now or
hereafter existing.

 

“Annual Increase” has the meaning set forth in Section 4(a) of the Plan.

 

“Board” means the Board of Directors of the Company.

 

“Change in Control” means (i) the consummation of a merger or consolidation of
the Company with or into another entity or any other corporate reorganization,
if more than 50% of the combined voting power of the continuing or surviving
entity’s securities outstanding immediately after such merger, consolidation or
other reorganization is owned by persons who were not shareholders of the
Company immediately prior to such merger, consolidation or other reorganization;
or (ii) the sale, transfer or other disposition of all or substantially all of
the Company’s assets.  A transaction shall not constitute a Change in Control if
its sole purpose is to change the state of the Company’s incorporation or to
create a holding company that will be owned in substantially the same
proportions by the persons who held the Company’s securities immediately before
such transaction.

 

“Code” means the Internal Revenue Code of 1986, as amended.

 

“Committee” means a committee of one or more members of the Board appointed by
the Board in accordance with Section 3(c) of the Plan.

 

“Common Stock” means the common stock of the Company.

 

“Company” means Zumiez Inc., a Washington corporation.

 

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“Consultant” means any person, including an advisor, (i) engaged by the Company
or an Affiliate to render consulting or advisory services and who is compensated
for such services, including members of any advisory board constituted by the
Company, or (ii) who is a member of the Board of Directors of an Affiliate. 
However, the term “Consultant” shall not include either Directors who are not
compensated by the Company for their services as Directors or Directors who are
merely paid a director’s fee by the Company for their services as Directors.

 

“Continuous Service” means, with respect to Employees, service with the Company
or an Affiliate that is not interrupted or terminated.  With respect to
Directors or Consultants, Continuous Service means service with the Company, or
a Parent or Subsidiary of the Company, whether as a Director or Consultant, that
is not interrupted or terminated.  The Board or the chief executive officer of
the Company, in that party’s sole discretion, may determine whether Continuous
Service shall be considered interrupted in the case of any leave of absence
approved by that party, including sick leave, military leave or any other
personal leave.

 

“Covered Employee” means the chief executive officer and the four (4) other
highest compensated officers of the Company for whom total compensation is
required to be reported to shareholders under the Exchange Act, as determined
for purposes of Section 162(m) of the Code and the regulations promulgated
thereunder.

 

“Director” means a member of the Board of Directors of the Company.

 

“Disability” means the permanent and total disability of a person within the
meaning of Section 22(e)(3) of the Code.

 

“Eligible Recipient” means any Employee, Director or Consultant of the Company
or any Employee, Director or Consultant of a Parent or Subsidiary of the
Company.

 

“Employee” means any person employed by the Company or an Affiliate.  Mere
service as a Director or payment of a director’s fee by the Company or an
Affiliate shall not be sufficient to constitute “employment” by the Company or
an Affiliate.

 

“Exchange Act” means the Securities Exchange Act of 1934, as amended.

 

“Executive Officer” means an executive officer within the meaning of NASD
Rule 4350(c), or any successor rule, as in effect from time to time.

 

“Fair Market Value” means, as of any date, the value of the Common Stock
determined as follows:

 

(i)            If the Common Stock is listed on any established stock exchange
or traded on the Nasdaq National Market or the Nasdaq SmallCap Market, the Fair
Market Value of a share of Common Stock shall be the closing sale price for such
stock (or the closing bid, if no sale was reported) as quoted on such exchange
or market (or the exchange or market with the greatest volume of trading in the
Common Stock) on the day of determination, as reported in The Wall Street
Journal or such other source as the Board deems reliable.

 

(ii)           In the absence of such markets for the Common Stock, the Fair
Market Value shall be determined in good faith by the Board using a reasonable
valuation method.

 

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“FAS 123” shall mean Statement of Financial Accounting Standard 123, “Accounting
for Stock-based Compensation,” as promulgated by the Financial Accounting
Standards Board.

 

“Former Plans” shall mean collectively the Zumiez Inc. 1993 Stock Option Plan
and the Zumiez Inc. 2004 Stock Option Plan.

 

“Former Plan Shares” has the meaning set forth in Section 4(b) of the Plan.

 

“Incentive Stock Option” means an Option intended to qualify as an incentive
stock option within the meaning of Section 422 of the Code and the regulations
promulgated thereunder.

 

“Independent Director” means an independent director as defined in NASD
Rule 4200(a)(15), or any successor rule, as in effect from time to time.

 

“Non-Employee Director” means a Director who either (i) is not a current
Employee or Officer of the Company or its parent or a subsidiary, does not
receive compensation (directly or indirectly) from the Company or its parent or
a subsidiary for services rendered as a consultant or in any capacity other than
as a Director (except for an amount as to which disclosure would not be required
under Item 404(a) of Regulation S-K), does not possess an interest in any other
transaction as to which disclosure would be required under Item 404(a) of
Regulation S-K and is not engaged in a business relationship as to which
disclosure would be required under Item 404(b) of Regulation S-K, or (ii) is
otherwise considered a “non-employee director” for purposes of Rule 16b-3.

 

“Nonstatutory Stock Option” means an Option not intended to qualify as an
Incentive Stock Option.

 

“Officer” means a person who is an officer of the Company within the meaning of
Section 16 of the Exchange Act and the rules and regulations promulgated
thereunder.

 

“Option” means a stock option granted pursuant to Section 6 of the Plan.

 

“Option Agreement” means a written agreement between the Company and an
Optionholder evidencing the terms and conditions of an individual Option grant. 
Each Option Agreement shall be subject to the terms and conditions of the Plan.

 

“Optionholder” means a person to whom an Option is granted pursuant to the Plan
or, if applicable, such other person who holds an outstanding Option.

 

“Outside Director” means a Director who either (i) is not a current employee of
the Company or an “affiliated corporation” (within the meaning of Treasury
Regulations promulgated under Section 162(m) of the Code), is not a former
employee of the Company or an “affiliated corporation” receiving compensation
for prior services (other than benefits under a tax qualified pension plan), was
not an officer of the Company or an “affiliated corporation” at any time and is
not currently receiving direct or indirect remuneration from the Company or an
“affiliated corporation” for services in any capacity other than as a Director,
or (ii) is otherwise considered an “outside director” for purposes of
Section 162(m) of the Code.

 

“Parent” means a “parent corporation,” whether now or hereafter existing, as
defined in Section 424(e) of the Code.

 

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“Participant” means a person to whom a Stock Award is granted pursuant to the
Plan or, if applicable, such other person who holds an outstanding Stock Award.

 

“Performance Criteria” shall have the meaning set forth in Section 7(b)(iii) of
the Plan.

 

“Plan” means this 2005 Equity Incentive Plan, as amended from time to time.

 

“Regulation S-K” means Regulation S-K promulgated pursuant to the Securities
Act, as in effect from time to time.

 

“Re-Load Option”  has the meaning set forth in Section 6(m) of the Plan.

 

“Repurchase Blackout Period” means six (6) months from the date the Common Stock
relating to a Stock Award is issued to the Participant or, in the case of a
Stock Award with vesting restrictions, six (6) months from the vesting date or,
in any case, such longer or shorter period of time as required to avoid a
variable charge to earnings for financial accounting purposes.

 

“Restricted Stock” shall mean a grant of shares of Common Stock pursuant to
Section 7(b) of the Plan.

 

“Restricted Stock Units” shall mean a grant of the right to receive shares of
Common Stock in the future or their cash equivalent (or both) pursuant to
Section 7(b) of the Plan.

 

“Rule 16b-3” means Rule 16b-3 promulgated under the Exchange Act or any
successor to Rule 16b-3, as in effect from time to time.

 

“Securities Act” means the Securities Act of 1933, as amended.

 

“Stand-Alone Stock Appreciation Right” has the meaning set forth in
Section 7(c) of the Plan.

 

“Stock Appreciation Right” means the right to receive appreciation in the Common
Stock pursuant to the provisions of Section 7(c) of the Plan.

 

“Stock Award” means any right granted under the Plan, including an Option, a
stock bonus, a Stock Appreciation Right, a Restricted Stock grant and a
Restricted Stock Unit grant.

 

“Stock Award Agreement” means a written agreement between the Company and a
holder of a Stock Award evidencing the terms and conditions of an individual
Stock Award grant.  Each Stock Award Agreement shall be subject to the terms and
conditions of the Plan.

 

“Subsidiary” means (1) in the case of an Incentive Stock Option, a “subsidiary
corporation,” whether now or hereafter existing, as defined in Section 424(f) of
the Code, and (2) in the case of any other Stock Award, in addition to a
subsidiary corporation as defined in clause (1), (A) a limited liability
company, partnership or other entity in which the Company controls fifty percent
(50%) or more of the voting power or equity interests, or (B) an entity with
respect to which the Company possesses the power, directly or indirectly, to
direct or cause the direction of the management and policies, whether through
the Company’s ownership of voting securities, by contract or otherwise.

 

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“Tandem Stock Appreciation Right” has the meaning set forth in Section 7(c) of
the Plan.

 

“Ten Percent Shareholder” means a person who owns (or is deemed to own pursuant
to Section 424(d) of the Code) stock comprising more than ten percent (10%) of
the total combined voting power of all classes of stock of the Company or of any
of its Affiliates.

 

3.             ADMINISTRATION.

 

(a)           Administration by Board.  The Board shall administer the Plan
unless and until the Board delegates administration to a Committee, as provided
in Section 3(c).  Whether or not the Board has delegated administration, the
Board shall have the final power to determine all questions of policy and
expediency that may arise in the administration of the Plan.

 

(b)           Powers of Board.  The Board (or the Committee) shall have the
power, subject to, and within the limitations of, the express provisions of the
Plan:

 

(i)            To determine from time to time which of the persons eligible
under the Plan shall be granted Stock Awards; when and how each Stock Award
shall be granted; what type or combination of types of Stock Award shall be
granted; the provisions of each Stock Award granted (which need not be
identical), including the time or times when a person shall be permitted to
receive Common Stock pursuant to a Stock Award; and the number of shares of
Common Stock with respect to which a Stock Award shall be granted to each such
person.

 

(ii)           To construe and interpret the Plan and Stock Awards granted under
it, and to establish, amend and revoke rules and regulations for its
administration.  The Board, in the exercise of this power, may correct any
defect, omission or inconsistency in the Plan or in any Stock Award Agreement,
in a manner and to the extent it shall deem necessary or expedient to make the
Plan fully effective.

 

(iii)         To amend the Plan or a Stock Award as provided in Section 13.

 

(iv)          Generally, to exercise such powers and to perform such acts as the
Board deems necessary or expedient to promote the best interests of the Company
that are not in conflict with the provisions of the Plan.

 

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(c)           Delegation to Committee. The Board may delegate administration of
the Plan to a Committee of two (2) or more members of the Board, each of whom
must qualify as a Non-Employee Director, Outside Director, and Independent
Director.  If administration is delegated to such a Committee, the Committee
shall have, in connection with the administration of the Plan, the powers
theretofore possessed by the Board, including the power to delegate to a
subcommittee any of the administrative powers the Committee is authorized to
exercise (and references in this Plan to the Board shall thereafter be deemed to
be to the Committee or subcommittee, as appropriate), subject, however, to such
resolutions, not inconsistent with the provisions of the Plan, as may be adopted
from time to time by the Board.  Notwithstanding the foregoing, only a Committee
may grant Stock Awards to (i) senior executives of the Company who are subject
to Section 16 of the Exchange Act, (ii) Covered Employees, or (iii) the chief
executive officer or any other Executive Officer.  The Board may abolish the
Committee, or any subcommittee, at any time and revest in the Board the
administration of the Plan.

 

(d)           Effect of Board’s Decision. All determinations, interpretations
and constructions made by the Board in good faith shall not be subject to review
by any person and shall be final, binding and conclusive on all persons.

 

4.             SHARES SUBJECT TO THE PLAN.

 

(a)           Share Reserve. Subject to the provisions of Section 12 relating to
adjustments upon changes in Common Stock, the Common Stock that may be issued
pursuant to Stock Awards shall not exceed in the aggregate 5,850,000 shares of
Common Stock plus (i) the number of Former Plan Shares (as defined below) and
(ii) such number of additional shares determined in accordance with the next
sentence.  There shall be an annual increase to the number of shares available
for Stock Awards effective on the first business day of each fiscal year of the
Company, commencing on January 30, 2006, such that the total number of shares
available for issuance hereunder shall equal fifteen percent (15%) of the total
number of shares of Common Stock outstanding on such business day (the “Annual
Increase”); provided, however, that in no event will the aggregate number of
shares available for award hereunder exceed 8,775,000.  Notwithstanding the
foregoing, the Board may designate, in any fiscal year, that the Annual Increase
be less than the maximum number of shares available for such increase or that
there be no Annual Increase during such fiscal year.  The shares that may be
issuable under Incentive Stock Options shall be limited to the above maximum
number of shares reserved under the Plan.

 

(b)           Reversion of Shares and Availability of Shares to the Share
Reserve.  If any Stock Award granted under the Plan or under the Former Plans
shall for any reason expire or otherwise terminate, in whole or in part, without
having been exercised in full, or if any shares of Common Stock issued to a
Participant pursuant to a Stock Award granted under the Plan or under the Former
Plans are forfeited back to or repurchased by the Company, including, but not
limited to, any repurchase or forfeiture caused by the failure to meet a
contingency or condition required for the vesting or exercise of such shares,
then the shares of Common Stock not acquired under such Stock Award (the “Former
Plan Shares”), shall become available for issuance under the Plan.  Former Plan
Shares shall include reserved shares of Common Stock that are not subject to a
grant under the Former Plans.  Former Plan Shares shall not include reserved
shares of Common Stock that are subject to Options granted under the Plan that
are cancelled and exchanged for new Options pursuant to a one-time option
exchange offer as provided for in Section 6(o).  The number of shares of Common
Stock underlying a Stock Award not issued as a result of any of the following
actions shall again be available for issuance under the Plan:  (i) a payout of a
Stand-Alone Stock Appreciation Right, or a performance-based award of Restricted
Stock or Restricted Stock Units in the form of cash; (ii) a cancellation,
termination, expiration, forfeiture, or lapse for

 

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any reason (with the exception of the termination of a Tandem Stock Appreciation
Right upon exercise of the related Options, or the termination of a related
Option upon exercise of the corresponding Tandem Stock Appreciation Right) of
any Stock Award; or (iii) payment of the Option exercise price and/or payment of
any taxes arising upon exercise of the Option by withholding shares of Common
Stock which otherwise would be acquired on exercise or issued upon such payout.

 

(c)           Source of Shares.  The shares of Common Stock subject to the Plan
may be unissued shares or reacquired shares, bought on the market or otherwise.

 

5.             ELIGIBILITY.

 

(a)           Eligibility for Specific Stock Awards.  Incentive Stock Options
may be granted only to Employees.  Stock Awards other than Incentive Stock
Options may be granted to Eligible Recipients.

 

(b)           Ten Percent Shareholders.  A Ten Percent Shareholder shall not be
granted an Incentive Stock Option unless the exercise price of such Option is at
least one hundred ten percent (110%) of the Fair Market Value of the Common
Stock at the date of grant and the Option is not exercisable after the
expiration of five (5) years from the date of grant.

 

(c)           Consultants.  A Consultant shall not be eligible for the grant of
a Stock Award if, at the time of grant, a Form S-8 Registration Statement under
the Securities Act (“Form S-8”) is not available to register either the offer or
the sale of the Company’s securities to such Consultant because of the nature of
the services that the Consultant is providing to the Company, or because the
Consultant is not a natural person, or as otherwise provided by the
rules governing the use of Form S-8, unless the Company determines both (i) that
such grant (A) shall be registered in another manner under the Securities Act
(e.g., on a Form S-3 Registration Statement) or (B) does not require
registration under the Securities Act in order to comply with the requirements
of the Securities Act, if applicable, and (ii) that such grant complies with the
securities laws of all other relevant jurisdictions.  Form S-8 generally is
available to consultants and advisors only if (i) they are natural persons,
(ii) they provide bona fide services to the issuer, its parents, its
majority-owned subsidiaries or majority-owned subsidiaries of the issuer’s
parent, and (iii) the services are not in connection with the offer or sale of
securities in a capital-raising transaction, and do not directly or indirectly
promote or maintain a market for the issuer’s securities.

 

(d)           Foreign Participants.  Notwithstanding any provision of the Plan
to the contrary, in order to comply with the laws in other countries in which
the Company and its subsidiaries operate or have Employees, Directors or
Consultants, the Board, in its sole discretion, shall have the power and
authority to: (i) determine which subsidiaries shall be covered by the Plan;
(ii) determine which Employees, Directors or Consultants outside the United
States are eligible to participate in the Plan; (iii) modify the terms and
conditions of any Stock Award granted to Employees, Directors or Consultants
outside the United States to comply with applicable foreign laws; (iv) establish
subplans and modify exercise procedures and other terms and procedures, to the
extent such actions may be necessary or advisable (any such subplans and/or
modifications shall be attached to this subplan as appendices); provided,
however, that no such subplans and/or modifications shall increase the number of
shares reserved for the Plan as set forth in Section 4 of the Plan; and (v) take
any action, before or after a Stock Award is made, that it deems advisable to
obtain approval or comply with any applicable foreign laws.

 

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6.             OPTION PROVISIONS.

 

Each Option shall be in such form and shall contain such terms and conditions as
the Board shall deem appropriate.  All Options shall be separately designated
Incentive Stock Options or Nonstatutory Stock Options at the time of grant, and,
if certificates are issued, a separate certificate or certificates will be
issued for shares of Common Stock purchased on exercise of each type of Option. 
The provisions of separate Options need not be identical, but each Option shall
include (through incorporation of provisions hereof by reference in the Option
Agreement or otherwise) the substance of each of the following provisions:

 

(a)           Term.  Subject to the provisions of Section 5(b) regarding Ten
Percent Shareholders, no Option shall be exercisable after the expiration of ten
(10) years from the date it was granted.

 

(b)           Exercise Price of an Incentive Stock Option.  Subject to the
provisions of Section 5(b) regarding Ten Percent Shareholders, the exercise
price of each Incentive Stock Option shall be not less than one hundred percent
(100%) of the Fair Market Value of the Common Stock subject to the Option on the
date the Option is granted.  Notwithstanding the foregoing, an Incentive Stock
Option may be granted with an exercise price lower than that set forth in the
preceding sentence if such Option is granted pursuant to an assumption or
substitution for another option in a manner satisfying the provisions of
Section 424(a) of the Code.

 

(c)           Exercise Price of a Nonstatutory Stock Option.  The exercise price
of Nonstatutory Stock Options shall be determined by the Board.  However, the
exercise price of each Nonstatutory Stock Option that is intended to qualify as
performance-based compensation within the meaning of the Treasury Regulations
promulgated under Section 162(m) of the Code shall be not less than one hundred
percent (100%) of the Fair Market Value of the Common Stock subject to the
Option on the date the Option is granted.

 

(d)           Consideration.  The purchase price of Common Stock acquired
pursuant to an Option shall be paid, to the extent permitted by applicable
statutes and regulations, either (i) in cash at the time the Option is
exercised, or (ii) at the discretion of the Board at the time of the grant of
the Option (or subsequently in the case of a Nonstatutory Stock Option) (A) by
delivery to the Company of other Common Stock, (B) according to a deferred
payment or other similar arrangement with the Optionholder, (C) pursuant to a
cashless exercise program implemented by the Company in connection with the
Plan, or (D) in any other form of legal consideration that may be acceptable to
the Board.  Unless otherwise specifically provided in the Option Agreement, the
purchase price of Common Stock acquired pursuant to an Option that is paid by
delivery to the Company of other Common Stock acquired, directly or indirectly
from the Company, shall be paid only by shares of the Common Stock of the
Company that have been held for more than six (6) months (or such longer or
shorter period of time required to avoid a charge to earnings for financial
accounting purposes).

 

In the case of any deferred payment arrangement, interest shall be compounded at
least annually and shall be charged at the minimum rate of interest necessary to
avoid the treatment as interest, under any applicable provisions of the Code, of
any amounts other than amounts stated to be interest under the deferred payment
arrangement.

 

(e)           Transferability of an Incentive Stock Option.  An Incentive Stock
Option shall not be transferable except by will or by the laws of descent and
distribution and shall be

 

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exercisable during the lifetime of the Optionholder only by the Optionholder. 
Notwithstanding the foregoing, the Optionholder may, by delivering written
notice to the Company, in a form satisfactory to the Company, designate a third
party who, in the event of the death of the Optionholder, shall thereafter be
entitled to exercise the Option.

 

(f)            Transferability of a Nonstatutory Stock Option.  A Nonstatutory
Stock Option shall be transferable only to the extent provided in the Option
Agreement (subject to applicable securities laws).  Notwithstanding the
foregoing, the Optionholder may, by delivering written notice to the Company, in
a form satisfactory to the Company, designate a third party who, in the event of
the death of the Optionholder, shall thereafter be entitled to exercise the
Option.

 

(g)           Vesting Generally.  The total number of shares of Common Stock
subject to an Option may, but need not, vest and therefore become exercisable in
periodic installments that may, but need not, be equal.  The Option may be
subject to such other terms and conditions on the time or times when it may be
exercised (which may be based on performance or other criteria) as the Board may
deem appropriate.  The vesting provisions of individual Options may vary.  The
provisions of this Section 6(g) are subject to any Option provisions governing
the minimum number of shares of Common Stock as to which an Option may be
exercised.

 

(h)           Termination of Continuous Service.  In the event an Optionholder’s
Continuous Service terminates (other than upon the Optionholder’s death or
Disability), the Optionholder may exercise his or her Option (to the extent that
the Optionholder was entitled to exercise such Option as of the date of
termination) but only within such period of time ending on the earlier of
(i) the date three (3) months following the termination of the Optionholder’s
Continuous Service (or, except with respect to Incentive Stock Options, such
longer or shorter period specified in the Option Agreement), or (ii) the
expiration of the term of the Option as set forth in the Option Agreement.  If,
after termination, the Optionholder does not exercise his or her Option within
the time specified in the Option Agreement, the Option shall terminate.

 

(i)            Extension of Termination Date.  Except with respect to Incentive
Stock Options, an Optionholder’s Option Agreement may also provide that if the
exercise of the Option following the termination of the Optionholder’s
Continuous Service (other than upon the Optionholder’s death or Disability)
would be prohibited at any time solely because the issuance of shares of Common
Stock would violate the registration requirements under the Securities Act, then
the Option shall terminate on the earlier of (i) the expiration of the term of
the Option set forth in Section 6(a), or (ii) the expiration of a period of
three (3) months after the termination of the Optionholder’s Continuous Service
during which the exercise of the Option would not be in violation of such
registration requirements.

 

(j)            Disability of Optionholder.  In the event that an Optionholder’s
Continuous Service terminates as a result of the Optionholder’s Disability, the
Optionholder may exercise his or her Option (to the extent that the Optionholder
was entitled to exercise such Option as of the date of termination), but only
within such period of time ending on the earlier of (i) the date twelve (12)
months following such termination (or, except with respect to Incentive Stock
Options, such longer or shorter period specified in the Option Agreement) or
(ii) the expiration of the term of the Option as set forth in the Option
Agreement.  If, after termination, the Optionholder does not exercise his or her
Option within the time specified herein, the Option shall terminate.

 

(k)           Death of Optionholder.  In the event (i) an Optionholder’s
Continuous Service terminates as a result of the Optionholder’s death or
(ii) the Optionholder dies within the period

 

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(if any) specified in the Option Agreement after the termination of the
Optionholder’s Continuous Service for a reason other than death, then the Option
may be exercised (to the extent the Optionholder was entitled to exercise such
Option as of the date of death) by the Optionholder’s estate, by a person who
acquired the right to exercise the Option by bequest or inheritance or by a
person designated to exercise the option upon the Optionholder’s death pursuant
to Section 6(e) or 6(f), but only within the period ending on the earlier of
(A) the date eighteen (18) months following the date of death (or, except with
respect to Incentive Stock Options, such longer or shorter period specified in
the Option Agreement) or (B) the expiration of the term of such Option as set
forth in the Option Agreement.  If, after death, the Option is not exercised
within the time specified herein, the Option shall terminate.

 

(l)            Early Exercise.  The Option may, but need not, include a
provision whereby the Optionholder may elect at any time before the
Optionholder’s Continuous Service terminates to exercise the Option as to any
part or all of the shares of Common Stock subject to the Option prior to the
full vesting of the Option.  The early purchase of any unvested shares of Common
Stock will be pursuant to an early exercise provision in the Option Agreement
which may provide for a repurchase option in favor of the Company and other
restrictions the Board determines to be appropriate.  Any repurchase option so
provided for will be subject to the repurchase provisions set forth in
Section 11(h) herein.

 

(m)          Substitution of Stock Appreciation Rights for Options.  If the
Company is required to or elects to expense the cost of Options pursuant to FAS
123 (or a successor or other standard), the Board shall have the sole discretion
to substitute without receiving Participants’ permission, Stock Appreciation
Rights paid only in stock for outstanding Options; provided, the terms of the
substituted Stock Appreciation Rights are substantially the same as the terms of
the Options, the number of shares underlying the number of Stock Appreciation
Rights equals the number of shares underlying the Options and the difference
between the Fair Market Value of the underlying shares of Common Stock and the
grant price of the Stock Appreciation Rights is equivalent to the difference
between the Fair Market Value of the underlying shares of Common Stock and the
exercise price of the Options.

 

(n)           Re-Load Options.

 

(i)            Without in any way limiting the authority of the Board to make or
not to make grants of Options hereunder, the Board shall have the authority (but
not an obligation) to include as part of any Option Agreement a provision
entitling the Optionholder to a further Option (a “Re-Load Option”) in the event
the Optionholder exercises the Option evidenced by the Option Agreement, in
whole or in part, by surrendering other shares of Common Stock in accordance
with this Plan and the terms and conditions of the Option Agreement. Unless
otherwise specifically provided in the Option Agreement, the Optionholder shall
not surrender shares of Common Stock acquired, directly or indirectly from the
Company, unless such shares have been held for more than six (6) months (or such
longer or shorter period of time required to avoid a charge to earnings for
financial accounting purposes).

 

(ii)           Any such Re-Load Option shall (i) provide for a number of shares
of Common Stock equal to the number of shares of Common Stock surrendered as
part or all of the exercise price of such Option, (ii) have an expiration date
which is the same as the expiration date of the Option the exercise of which
gave rise to such Re-Load Option, and (iii) have an exercise price which is
equal to one hundred percent (100%) of the Fair Market Value of the Common Stock
subject to the Re-Load Option on the date of exercise of the original Option.

 

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Notwithstanding the foregoing, a Re-Load Option shall be subject to the same
exercise price and term provisions heretofore described for Options under the
Plan.

 

Any such Re-Load Option may be an Incentive Stock Option or a Nonstatutory Stock
Option, as the Board may designate at the time of the grant of the original
Option; provided, however, that the designation of any Re-Load Option as an
Incentive Stock Option shall be subject to the one hundred thousand dollar
($100,000) annual limitation on the exercisability of Incentive Stock Options
described in Section 11(d) of the Plan and in Section 422(d) of the Code.  There
shall be no Re-Load Options on a Re-Load Option.  Any such Re-Load Option shall
be subject to the availability of sufficient shares of Common Stock under
Section 4(a) and shall be subject to such other terms and conditions as the
Board may determine that are not inconsistent with the express provisions of the
Plan regarding the terms of Options.

 

(o)           One-Time Option Exchange Offer.  Notwithstanding any other
provision of the Plan to the contrary, upon approval of the Company’s
shareholders, the Board (or the Committee) may provide for, and the Company may
implement, a one-time-only option exchange offer, pursuant to which certain
outstanding Options could, at the election of the person holding such Option, be
tendered to the Company for cancellation in exchange for the issuance of a
lesser amount of Options with a lower exercise price, provided that such
one-time-only option exchange offer is commenced within six months of the date
of such shareholder approval.

 

7.             PROVISIONS OF STOCK AWARDS OTHER THAN OPTIONS.

 

(a)           Stock Bonus Awards.  Grants of stock bonus awards shall be
pursuant to a Stock Award Agreement, which shall be in such form and shall
contain such terms and conditions as the Board shall deem appropriate.  The
terms and conditions of each grant of a stock bonus award shall include (through
incorporation of provisions hereof by reference in the Stock Award Agreement or
otherwise) the substance of each of the following provisions:

 

(i)            Consideration.  A stock bonus may be awarded in consideration for
past services rendered to the Company or an Affiliate for its benefit.

 

(ii)           Vesting; Right of Repurchase.  Shares of Common Stock awarded
under the Stock Award Agreement may, but need not, be subject to a share
repurchase option in favor of the Company in accordance with a vesting schedule
to be determined by the Board.  Such repurchase option is subject to the
repurchase provisions set forth in Section 11(h).

 

(iii)         Termination of Participant’s Continuous Service.  In the event a
Participant’s Continuous Service terminates, the Company may reacquire any or
all of the shares of Common Stock held by the Participant which have not vested
as of the date of termination under the terms of the Stock Award Agreement.  In
such event, the Company shall not reaquire the Common Stock until after the
Repurchase Blackout Period.

 

(iv)          Transferability.  Rights to acquire shares of Common Stock under
the Stock Award Agreement shall be transferable by the Participant only upon
such terms and conditions as are set forth in the Stock Award Agreement, as the
Board shall determine in its discretion, so long as Common Stock awarded under
the Stock Award Agreement remains subject to the terms of the Stock Award
Agreement.

 

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(b)           Restricted Stock and Restricted Stock Units.

 

(i)            Designation.  Restricted Stock or Restricted Stock Units may be
granted under the Plan.  Restricted Stock or Restricted Stock Units may include
a dividend equivalent right, as permitted by Section 12(a).  After the Board
determines that it will offer Restricted Stock or Restricted Stock Units, it
will advise the Participant in writing or electronically, by means of a Stock
Award Agreement, of the terms, conditions and restrictions, including vesting,
if any, related to the offer, including the number of shares of Common Stock
that the Participant shall be entitled to receive or purchase, the price to be
paid, if any, and, if applicable, the time within which the Participant must
accept the offer.  The offer shall be accepted by execution of a Stock Award
Agreement or as otherwise directed by the Board.  The term of each award of
Restricted Stock or Restricted Stock Units shall be at the discretion of the
Board.

 

(ii)           Restrictions.  Subject to Section 8(b)(iii), the Board may impose
such conditions or restrictions on the Restricted Stock or Restricted Stock
Units granted pursuant to the Plan as it may determine advisable, including the
achievement of specific performance goals, time based restrictions on vesting,
or others.  If the Board established performance goals, the Board shall
determine whether a Participant has satisfied the performance goals.

 

(iii)         Performance Criteria.  Restricted Stock and Restricted Stock Units
granted pursuant to the Plan that are intended to qualify as “performance based
compensation” under Section 162(m) of the Code shall be subject to the
attainment of performance goals relating to the Performance Criteria selected by
the Board and specified at the time such Restricted Stock and Restricted Stock
Units are granted.  For purposes of this Plan, “Performance Criteria” means one
or more of the following (as selected by the Board and as such list to be
amended or supplemented from time to time by the Plan Administrator): (1) cash
flow; (2) earnings per share; (3) earnings before interest, taxes, and
amortization; (4) return on equity; (5) total shareholder return; (6) share
price performance; (7) return on capital; (8) return on assets or net assets;
(9) revenue; (10) revenue growth; (11) earnings growth; (12) operating income;
(13) operating profit; (14) profit margin; (15) return on operating revenue;
(16) return on invested capital; (17) market price; (18) brand recognition; (19)
customer satisfaction; (20) operating efficiency; or (21) productivity.  Any of
these Performance Criteria may be used to measure the performance of the Company
as a whole or any business unit or division of the Company.

 

(iv)          Transferability.  Restricted Stock and Restricted Stock Units
shall be transferable by the Participant only upon such terms and conditions as
are set forth in the Stock Award Agreement, as the Board shall determine in its
discretion.

 

(v)            Vesting.  Unless the Board determines otherwise, the Stock Award
Agreement shall provide for the forfeiture of the non-vested shares of Common
Stock underlying Restricted Stock or the termination of unvested Restricted
Stock Units upon termination of a Participant’s Continuous Service.  To the
extent that the Participant purchased the shares of Common Stock granted under
any such Restricted Stock award and any such shares of Common Stock remain
non-vested at the time of termination of a Participant’s Continuous Service, the
termination of Participant’s Continuous Service shall cause an immediate sale of
such non-vested shares of Common Stock to the Company at the original price per
share of Common Stock paid by the Participant.

 

(c)           Stock Appreciation Rights.  Grants of Stock Appreciation Rights
shall be pursuant to a Stock Award Agreement, which shall be in such form and
shall contain such terms and conditions, as the Board shall deem appropriate. 
The Board may grant Stock Appreciation

 

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Rights in connection with all or any part of an Option (“Tandem Stock
Appreciation Rights”) to a Participant or in a stand-alone grant (“Stand-Alone
Stock Appreciation Rights”). The terms and conditions of a Stock Appreciation
Right shall include (through incorporation of the provisions hereof by reference
in the Stock Award Agreement or otherwise) the substance of each of the
following provisions:

 

(i)            Calculation of Appreciation.  Each Stock Appreciation Right will
be denominated in shares of Common Stock equivalents. The appreciation
distribution payable on the exercise of a Stock Appreciation Right will be not
greater than an amount equal to the excess of (A) the aggregate Fair Market
Value (on the date of the exercise of the Stock Appreciation Right) of a number
of shares of Common Stock equal to the number of share of Common Stock
equivalents in which the Participant is vested under such Stock Appreciation
Right and with respect to which the Participant is exercising the Stock
Appreciation Right on such date, over (B) an amount that will be determined by
the Board at the time of grant of the Stock Appreciation Right (which amount, in
the case of Stock Appreciation Rights intended to qualify as performance-based
compensation within the meaning of the Treasury Regulations under
Section 162(m) of the Code, shall be not less than the Fair Market Value of such
shares of Common Stock at the time of grant of the Common Stock equivalents).

 

(ii)           Vesting.  At the time of the grant of a Stock Appreciation Right,
the Board may impose such restrictions or conditions to the vesting of such
Stock Appreciation Right as it deems appropriate.

 

(iii)         Exercise.  To exercise any outstanding Stock Appreciation Right,
the Participant must provide written notice of exercise to the Company in
compliance with the provisions of the Stock Award Agreement evidencing such
Stock Appreciation Right.

 

(iv)          Payment. The appreciation distribution in respect of a Stock
Appreciation Right may be paid in Common Stock, in cash, or any combination of
the two, as the Board deems appropriate.

 

(v)            Termination of Continuous Service.  If a Participant’s Continuous
Service terminates for any reason, any unvested Stock Appreciation Rights shall
be forfeited and any vested Stock Appreciation Rights shall be automatically
redeemed.

 

(vi)          Transferability.  Stock Appreciation Rights shall be transferable
by the Participant only upon such terms and conditions as are set forth in the
Stock Award Agreement, as the Board shall determine in its discretion.

 

(vii)         Tandem Stock Appreciation Rights.  A Tandem Stock Appreciation
Right shall be exercisable only to the extent that the related Option is
exercisable and a Tandem Stock Appreciation Right shall expire no later than the
date on which the related Option expires.

 

8.             COVENANTS OF THE COMPANY.

 

(a)           Availability of Shares.  During the terms of the Stock Awards, the
Company shall keep available at all times the number of shares of Common Stock
required to satisfy such Stock Awards.

 

(b)           Securities Law Compliance.  The Company shall seek to obtain from
each regulatory commission or agency having jurisdiction over the Plan such
authority as may be

 

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required to grant Stock Awards and to issue and sell shares of Common Stock upon
exercise of the Stock Awards; provided, however, that this undertaking shall not
require the Company to register under the Securities Act the Plan, any Stock
Award or any Common Stock issued or issuable pursuant to any such Stock Award. 
If, after reasonable efforts, the Company is unable to obtain from any such
regulatory commission or agency the authority which counsel for the Company
deems necessary for the lawful issuance and sale of Common Stock under the Plan,
the Company shall be relieved from any liability for failure to issue and sell
Common Stock upon exercise of such Stock Awards unless and until such authority
is obtained.

 

9.             USE OF PROCEEDS FROM STOCK.

 

Proceeds from the sale of Common Stock pursuant to Stock Awards shall constitute
general funds of the Company.

 

10.          EFFECTIVE DATE OF PLAN.

 

The Plan shall become effective as determined by the Board, but no Stock Award
shall be exercised (or, in the case of a stock bonus, shall be granted) unless
and until the Plan has been approved by the shareholders of the Company, which
approval shall be within twelve (12) months before or after the date the Plan is
adopted by the Board.

 

11.          MISCELLANEOUS.

 

(a)           Acceleration of Exercisability and Vesting.  The Board shall have
the power to accelerate the time at which a Stock Award may first be exercised
or the time during which a Stock Award or any part thereof will vest in
accordance with the Plan, notwithstanding the provisions in the Stock Award
stating the time at which it may first be exercised or the time during which it
will vest.

 

(b)           Shareholder Rights.  No Participant shall be deemed to be the
holder of, or to have any of the rights of a holder with respect to, any shares
of Common Stock subject to such Stock Award unless and until such Participant
has satisfied all requirements for exercise of the Stock Award pursuant to its
terms.

 

(c)           No Employment or other Service Rights.  Nothing in the Plan or any
instrument executed or Stock Award granted pursuant thereto shall confer upon
any Participant any right to continue to serve the Company or an Affiliate in
the capacity in effect at the time the Stock Award was granted or shall affect
the right of the Company or an Affiliate to terminate (i) the employment of an
Employee with or without notice and with or without cause, (ii) the service of a
Consultant pursuant to the terms of such Consultant’s agreement with the Company
or an Affiliate, or (iii) the service of a Director pursuant to the Bylaws of
the Company or an Affiliate, and any applicable provisions of the corporate law
of the state in which the Company or the Affiliate is incorporated, as the case
may be.

 

(d)           Incentive Stock Option $100,000 Limitation.  To the extent that
the aggregate Fair Market Value (determined at the time of grant) of Common
Stock with respect to which Incentive Stock Options are exercisable for the
first time by any Optionholder during any calendar year (under all plans of the
Company and its Affiliates) exceeds one hundred thousand dollars ($100,000), the
Options or portions thereof which exceed such limit (according to the order in
which they were granted) shall be treated as Nonstatutory Stock Options.

 

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(e)           Maximum Award Amounts.  In no event shall a Participant receive a
Stock Award or Stock Awards during any one (1) calendar year covering in the
aggregate more than 1,000,000 shares of Common Stock.

 

(f)            Investment Assurances.  The Company may require a Participant, as
a condition of exercising or acquiring Common Stock under any Stock Award (i) to
give written assurances satisfactory to the Company as to the Participant’s
knowledge and experience in financial and business matters and/or to employ a
purchaser representative reasonably satisfactory to the Company who is
knowledgeable and experienced in financial and business matters and that he or
she is capable of evaluating, alone or together with the purchaser
representative, the merits and risks of exercising the Stock Award, and (ii) to
give written assurances satisfactory to the Company stating that the Participant
is acquiring Common Stock subject to the Stock Award for the Participant’s own
account and not with any present intention of selling or otherwise distributing
the Common Stock.  The foregoing requirements, and any assurances given pursuant
to such requirements, shall be inoperative if (1) the issuance of the shares of
Common Stock upon the exercise or acquisition of Common Stock under the Stock
Award has been registered under a then currently effective registration
statement under the Securities Act, or (2) as to any particular requirement, a
determination is made by counsel for the Company that such requirement need not
be met in the circumstances under the then applicable securities laws.  The
Company may, upon advice of counsel to the Company, place legends on stock
certificates issued under the Plan as such counsel deems necessary or
appropriate in order to comply with applicable securities laws, including, but
not limited to, legends restricting the transfer of the Common Stock.

 

(g)           Withholding Obligations.  To the extent provided by the terms of a
Stock Award Agreement, the Participant may satisfy any federal, state or local
tax withholding obligation relating to the exercise or acquisition of Common
Stock under a Stock Award by any of the following means (in addition to the
Company’s right to withhold from any compensation paid to the Participant by the
Company) or by a combination of such means:  (i) tendering a cash payment,
(ii) authorizing the Company to withhold shares of Common Stock from the shares
of Common Stock otherwise issuable to the Participant as a result of the
exercise or acquisition of Common Stock under the Stock Award, provided,
however, that no shares of Common Stock are withheld with a value exceeding the
minimum amount of tax required to be withheld by law, or (iii) delivering to the
Company owned and unencumbered shares of Common Stock.

 

(h)           Repurchase Provisions.  The Company shall exercise any repurchase
option specified in the Stock Award by giving the holder of the Stock Award
written notice of intent to exercise the repurchase option.  Payment may be cash
or cancellation of purchase money indebtedness for the Common Stock.  The terms
of any repurchase option shall be specified in the Stock Award and may be either
at Fair Market Value at the time of repurchase or at not less than the original
purchase price.

 

(i)            Golden Parachute Taxes.  In the event that any amounts paid or
deemed paid to a Participant under the Plan are deemed to constitute “excess
parachute payments” as defined in Section 280G of the Code (taking into account
any other payments made under the Plan and any other compensation paid or deemed
paid to a Participant), or if any Participant is deemed to receive an “excess
parachute payment” by reason of his or her vesting of Options pursuant to
Section 12(c) herein, the amount of such payments or deemed payments shall be
reduced (or, alternatively the provisions of Section 12(c) shall not act to vest
options to such Participant), so that no such payments or deemed payments shall
constitute excess parachute payments.  The determination of whether a payment or
deemed payment constitutes an excess parachute payment shall be in the sole
discretion of the Board.

 

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(j)            Plan Unfunded.  The Plan shall be unfunded.  Except for the
Board’s reservation of a sufficient number of authorized shares to the extent
required by law to meet the requirements of the Plan, the Company shall not be
required to establish any special or separate fund or to make any other
segregation of assets to assure payment of any Stock Award under the Plan.

 

12.          ADJUSTMENTS UPON CHANGES IN STOCK.

 

(a)           Capitalization Adjustments.  In the event that any dividend or
other distribution (whether in the form of cash, shares of the Common Stock,
other securities, or other property), recapitalization, stock split, reverse
stock split, reorganization, merger, consolidation, split-up, spin-off,
combination, repurchase, exchange of Common Stock or other securities of the
Company, or other change in the corporate structure of the Company affecting the
Common Stock occurs, the Board, in order to prevent diminution or enlargement of
the benefits or potential benefits intended to be made available under the Plan,
may, in its sole discretion, adjust the number and class of Common Stock that
may be delivered under the Plan and/or the number, class, and price of Common
Stock covered by each outstanding Stock Award.  In lieu of the payment of a
dividend the Board in its discretion may provide holders of Restricted Stock or
Restricted Stock Units a dividend equivalent right, in the form of additional
shares of Common Stock or units, with respect to the unvested shares of Common
Stock or unvested units the Participant shall be entitled to receive or
purchase.

 

(b)           Dissolution or Liquidation.  In the event of the proposed
dissolution or liquidation of the Company, the Board will notify each
Participant as soon as practicable prior to the effective date of such proposed
transaction.  To the extent it has not been previously exercised, a Stock Award
will terminate immediately prior to the consummation of such proposed action.

 

(c)           Change in Control.  In the event of Change in Control, then, to
the extent permitted by applicable law:  (1) any surviving corporation may
assume any Stock Awards outstanding under the Plan or may substitute similar
stock awards (including an award to acquire the same consideration paid to the
shareholders in the transaction described in this Section 12(c)) for those
outstanding under the Plan, or (2) in the event any surviving corporation does
not assume or continue such Stock Awards, or to substitute similar stock awards
for those outstanding under the Plan in accordance with the preceding clause,
then the time during which such Stock Awards may be exercised automatically will
be accelerated and become fully vested and exercisable immediately prior to the
consummation of such transaction, and the Stock Awards shall automatically
terminate upon consummation of such transaction if not exercised prior to such
event.

 

(d)           No Limitations.  The grant of Stock Awards will in no way affect
the Company’s right to adjust, reclassify, reorganize or otherwise change its
capital or business structure or to merge, consolidate, dissolve, liquidate or
sell or transfer all or any part of its business or assets.

 

13.          AMENDMENT OF THE PLAN AND STOCK AWARDS.

 

(a)           Amendment of Plan.  The Board at any time, and from time to time,
may amend the Plan.  However, except as provided in Section 12 relating to
adjustments upon changes in Common Stock, no amendment shall be effective unless
approved by the shareholders of the Company to the extent shareholder approval
is necessary to satisfy the applicable requirements of Section 422 or 162(m) of
the Code and the Treasury Regulations thereunder, Rule 16b-3 or any Nasdaq or
securities exchange listing requirements.  For purposes of clarity, any increase
in the

 

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number of shares reserved for issuance hereunder in accordance with the
provisions of Section 4(a) hereof shall not be deemed to be an amendment to the
Plan.

 

(b)           Contemplated Amendments.  It is expressly contemplated that the
Board may amend the Plan in any respect the Board deems necessary or advisable
to provide eligible Employees with the maximum benefits provided or to be
provided under the provisions of the Code and the regulations promulgated
thereunder relating to Incentive Stock Options and/or to bring the Plan and/or
Incentive Stock Options granted under it into compliance therewith.

 

(c)           No Impairment of Rights.  Rights under any Stock Award granted
before amendment of the Plan shall not be impaired by any amendment of the Plan
unless (i) the Company requests the consent of the Participant and (ii) the
Participant consents in writing.

 

(d)           Amendment of Stock Awards.  The Board at any time, and from time
to time, may amend the terms of any one or more Stock Awards; provided, however,
that the rights under any Stock Award shall not be impaired by any such
amendment unless (i) the Company requests the consent of the Participant and
(ii) the Participant consents in writing.

 

14.          TERMINATION OR SUSPENSION OF THE PLAN.

 

(a)           Plan Term.  The Board may suspend or terminate the Plan at any
time.  Unless sooner terminated, the Plan shall terminate on the day before the
tenth (10th) anniversary of the date the Plan is adopted by the Board or
approved by the shareholders of the Company, whichever is later.  No Stock
Awards may be granted under the Plan while the Plan is suspended or after it is
terminated.

 

(b)           No Impairment of Rights.  Suspension or termination of the Plan
shall not impair rights and obligations under any Stock Award granted while the
Plan is in effect except with the written consent of the Participant.

 

15.          CHOICE OF LAW.

 

The law of the State of Washington shall govern all questions concerning the
construction, validity and interpretation of this Plan, without regard to such
state’s conflict of laws rules.

 

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