**Exhibit 10.18**

 

**PROCYTE CORPORATION2004 STOCK OPTION PLAN**

 

**SECTION 1.****                           ****PURPOSE**

 

Thepurpose of this ProCyte Corporation 2004 Stock Option Plan (the “Plan”) is toattract, retain and motivate employees, officers, directors, consultants,agents, advisors and independent contractors of ProCyte Corporation, aWashington corporation (the “Company”) and its Related Companies (individuallyor collectively, “Employer”) by providing them the opportunity to acquire aproprietary interest in the Company and to align their interests and efforts tothe interests of the Company’s shareholders.

 

**SECTION 2.****                           ****DEFINITIONS**

 

Certainterms used in this Plan have the meanings set forth in Appendix I.

 

**SECTION 3.****                           ****ELIGIBILITY**

 

AnAward may be granted to any employee, officer or director of the Company or aRelated Company whom the Plan Administrator from time to time selects.  An Award may also be granted to anyconsultant, agent, advisor or independent contractor for bona fide servicesrendered to the Company or any Related Company that (a) are not in connectionwith the offer and sale of the Company’s securities in a capital-raisingtransaction and (b) do not directly or indirectly promote or maintain a marketfor the Company’s securities.

 

**SECTION 4.****                           ****SHARES SUBJECT TO THE PLAN**

 

**4.1****                              ****Authorized Number of Shares**

 

Subjectto adjustment from time to time as provided in Section 11.1, a maximum of2,000,000 shares of Common Stock shall be available for issuance under thePlan.  Shares issued under the Planshall be drawn from authorized and unissued shares or shares now held orsubsequently acquired by the Company.

 

**4.2****                              ****Limitations**

 

Subjectto adjustment from time to time as provided in Section 11.1, not more than300,000 shares of Common Stock may be made subject to Awards under the Plan toany individual Participant in the aggregate in any one fiscal year of theCompany; except that the Company may make additional one-time grants of up to500,000 shares to any newly hired Participant. The limitation in the preceding sentence shall be applied in a mannerconsistent with the requirements of, and only to the extent required forcompliance with, the exclusion from the limitation on deductibility ofcompensation under Section 162(m) of the Code.

 

Subjectto adjustment as provided in Section 11.1, the maximum number of shares ofCommon Stock that may be issued upon the exercise of Incentive Stock Optionsshall equal the aggregate share number stated in Section 4.1.

 

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**4.3****                              ****Share Usage**

 

Sharesof Common Stock covered by an Award shall not be counted as used unless anduntil they are actually issued and delivered to a Participant.  If any Award lapses, expires, terminates oris canceled prior to the issuance of shares of Common Stock hereunder or if sharesof Common Stock are issued under this Plan to a Participant and thereafter areforfeited to or otherwise reacquired by the Company, the shares of Common Stocksubject to such Awards and the forfeited or reacquired shares of Common Stockshall again be available for issuance under the Plan.  Any shares of Common Stock not issued because they were (i)tendered by a Participant or retained by the Company as full or partial paymentto the Company for the exercise of an Option or to satisfy tax withholding obligationsin connection with an Award or (ii) covered by an Award that is settled in cashor in a manner such that some or all of the shares of Common Stock covered bythe Award are not issued to a Participant shall be available for Awards underthe Plan.

 

ThePlan Administrator may grant Substitute Awards under this Plan.  Substitute Awards shall not reduce thenumber of shares authorized for issuance under the Plan.  In the event that an Acquired Entity hasshares available for awards or grants under one or more preexisting plans notadopted in contemplation of such acquisition or combination, then, to theextent determined by the Board or the Plan Administrator, the shares availablefor grant pursuant to the terms of such preexisting plan (as adjusted, to theextent appropriate, using the exchange ratio or other adjustment or valuationratio or formula used in such acquisition or combination to determine theconsideration payable to holders of common stock of the entities are parties tosuch acquisition or combination) may be used for Awards under the Plan andshall not reduce the number of shares of Common Stock authorized for issuanceunder the Plan; provided, however, that Awards using such available shares ofCommon Stock shall not be made after the date awards or grants could have beenmade under the terms of such preexisting plans, absent the acquisition orcombination, and shall only be made to individuals who were not employees ornon-employee directors of the Employer prior to such acquisition or combination.  In the event that a written agreementbetween the Company and an Acquired Entity pursuant to which a merger orconsolidation is contemplated is approved by the Board and said agreement setsforth the terms and conditions of the substitution for or assumption ofoutstanding awards of the Acquired Entity, said terms and conditions shall bedeemed to be the action of the Plan Administrator without any further action bythe Plan Administrator, except as may be required for compliance with Rule 16b-3under the Exchange Act, and the persons holding such awards shall be deemed tobe Participants.

 

**SECTION 5.****                           ****AWARDS**

 

**5.1****                              ****Form, Grant and Settlementof Awards**

 

ThePlan Administrator shall have the authority, in its sole discretion, todetermine the type or types of Awards to be granted under this Plan.  Such Awards may consist of Incentive StockOptions or Nonqualified Stock Options. Awards may be granted singly or in combination.  Any Award settlement may be subject to suchconditions, restrictions and contingencies, as the Plan Administrator shalldetermine.

 

**5.2****                              ****Evidence of Awards**

 

Awardsgranted under the Plan shall be evidenced by a written (including electronic)instrument that shall contain such terms, conditions, limitations andrestrictions as the Plan Administrator shall deem advisable and that are notinconsistent with this Plan.

 

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**SECTION 6.****                           ****OPTIONS**

 

**6.1****                              ****Grant of Options**

 

ThePlan Administrator may grant Options designated as Incentive Stock Options orNonqualified Stock Options.

 

**6.2****                              ****Option Exercise Price**

 

Theexercise price for shares purchased under an Option shall be as determined bythe Plan Administrator, but shall not be less than 100% of the Fair MarketValue of the Common Stock on the Grant Date with respect to Incentive StockOptions and not less than 85% of the Fair Market Value of the Common Stock onthe Grant Date with respect to Nonqualified Stock Options, except in the caseof Substitute Awards.  With respect toIncentive Stock Options granted to a Ten Percent Shareholder, the exerciseprice shall be as required by Section 7.3.

 

**6.3****                              ****Term of Options**

 

Subjectto earlier termination in accordance with the terms of the Plan and theinstrument evidencing the Option, the maximum term of an Option shall be asestablished for that Option by the Plan Administrator or, if not soestablished, shall be ten years from the Grant Date.  For Incentive Stock Options, the Option Term shall be asspecified in Section 7.4.

 

**6.4****                              ****Exercise of Options**

 

ThePlan Administrator shall establish and set forth in each instrument thatevidences an Option the time at which, or the installments in which, the Optionshall vest and become exercisable, any of which provisions may be waived ormodified by the Plan Administrator at any time.  If not so established in the instrument evidencing the Option,the Option will become exercisable according to the following schedule, whichmay be waived or modified by the Plan Administrator at any time: 

 
| **Period of Participant’s Continuous  Employment or  Service With the  Company or Its Related Companies  From the Option Grant Date** |   | **Percent of Total Option  That Is Exercisable** |
|--------------------------------------------------------------------------------------------------------------------------------------------|--------|--------------------------------------------------|
|                                                                                                                                       |   |                                             |
| After 1 year                                                                                                                               |   | 1/3                                              |
| After 2 years                                                                                                                              |   | 2/3                                              |
| After 3 years                                                                                                                              |   | 100%                                             |

 

Unlessthe Plan Administrator determines otherwise, the vesting schedule of anOption shall be adjusted proportionately to the extent the Participant worksless than “full time” as that term is defined by the Plan Administrator.

 

Tothe extent an Option has vested and becomes exercisable, the Option may beexercised in whole or from time to time in part by delivery to the Company of aproperly executed stock option exercise agreement or notice, in a form and inaccordance with procedures established by the Plan Administrator, setting forththe number of shares with respect to which the Option is being exercised, suchrepresentations and agreements as may be required by the Plan Administrator andaccompanied by

 

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paymentas described in Section 6.5.  AnOption may be exercised only for whole shares and may not be exercised for lessthan a reasonable number of shares at any one time, as determined by the PlanAdministrator.

 

**6.5****                              ****Payment of Exercise Price**

 

Theexercise price for shares purchased under an Option shall be paid in full tothe Company by delivery of consideration equal to the product of the Optionexercise price and the number of shares purchased.  Such consideration must be in a form or a combination of formsacceptable to the Plan Administrator for that purchase, which forms mayinclude: (a) cash; (b) check or wire transfer; (c) tendering (either actuallyor, if and so long as the Common Stock is registered under Section 12(b)or 12(g) of the Exchange Act, by attestation) shares of Common Stock alreadyowned by the Participant, which have a Fair Market Value equal to the aggregateexercise price of the shares being purchased under the Option (such shares musthave been owned by the Participant for at least six months or such other periodestablished by generally accepted accounting principles necessary to avoidadverse accounting consequences); (d) if and as long as the Common Stock isregistered under Section 12(b) or 12(g) of the Exchange Act, and to theextent permitted by law, delivery of a properly executed exercise agreement ornotice, together with irrevocable instructions to a brokerage firm designatedor approved by the Company to deliver promptly to the Company the amount ofproceeds to pay the Option exercise price and withholding tax obligations thatmay arise in connection with the exercise, all in accordance with theregulations of the Federal Reserve Board; or (e) such other consideration asthe Plan Administrator may permit.

 

**6.6****                              ****Effect of Termination ofService**

 

ThePlan Administrator shall establish and set forth in each instrument thatevidences an Option whether the Option shall continue to be exercisable, andthe terms and conditions of such exercise, after a Termination of Service, anyof which provisions may be waived or modified by the Plan Administrator at anytime.  If not so established in theinstrument evidencing the Option, the Option shall be exercisable according tothe following terms and conditions, which may be waived or modified by the PlanAdministrator at any time:

 

(a)                                  Any portion of an Option that is not vestedand exercisable on the date of a Participant’s Termination of Service shallexpire on such date.

 

(b)                                 Any portion of an Option that is vested andexercisable on the date of a Participant’s Termination of Service shall expireon the earliest to occur of:

 

(a)                                  if the Participant’s Termination of Serviceoccurs for reasons other than Cause, Disability or death, the date that isthree months after such Termination of Service;

(b)                                 if the Participant’s Termination of Serviceoccurs by reason of Disability or death, the one-year anniversary of suchTermination of Service; and

(c)                                  the last day of the Option Term.

 

Notwithstandingthe foregoing, if a Participant dies after the Participant’s Termination ofService but while an Option is otherwise exercisable, the portion of the Optionthat is vested and exercisable on the date of such Termination of Service shallexpire upon the earlier to occur of (a) the Option Expiration Date and (b) theone-year anniversary of the date of death, unless the Plan Administratordetermines otherwise.

 

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Alsonotwithstanding the foregoing, in case a Participant’s Termination of Serviceoccurs for Cause, all Options granted to the Participant shall automaticallyexpire upon first notification to the Participant of such termination, unlessthe Plan Administrator determines otherwise. If a Participant’s employment or service relationship with the Companyis suspended pending an investigation of whether the Participant shall beterminated for Cause, all the Participant’s rights under any Option shalllikewise be suspended during the period of investigation.  If any facts that would constitute terminationfor Cause are discovered after a Participant’s Termination of Service, anyOption then held by the Participant may be immediately terminated by the PlanAdministrator, in its sole discretion.

 

Anychange of relationship with the Employer shall not constitute a termination ofthe Participant’s relationship with the Employer for purposes of**this Section 6.6 so long as theParticipant continues to be an employee, officer, director or, pursuant to awritten agreement with the Employer, an agent, consultant, advisor orindependent contractor of the Employer. The Plan Administrator, in its absolute discretion, may determine allquestions of whether particular leaves of absence constitute a termination ofservices; provided, however, that with respect to Incentive Stock Options, suchdetermination shall be subject to any requirements contained in the Code.  The foregoing notwithstanding, with respectto Incentive Stock Options, employment shall not be deemed to continue beyondthe first 90 days of such leave, unless the Participant’s reemployment rightsare guaranteed by statute or by contract.

 

**SECTION 7.****                           ****INCENTIVE STOCK OPTIONLIMITATIONS**

 

Notwithstandingany other provisions of the Plan, to the extent required by Section 422 ofthe Code, Incentive Stock Options shall be subject to the following additionalterms and conditions:

 

**7.1****                              ****Dollar Limitation**

 

Tothe extent the aggregate fair market value (determined as of the Grant Date) ofCommon Stock with respect to which a Participant’s Incentive Stock Optionsbecome exercisable for the first time during any calendar year (under the Planand all other stock option plans of the Company and its parent and subsidiarycorporations) exceeds $100,000, such portion in excess of $100,000 shall betreated as a Nonqualified Stock Option. In the event the Participant holds two or more such Options that becomeexercisable for the first time in the same calendar year, such limitation shallbe applied on the basis of the order in which such Options are granted.

 

**7.2****                              ****Eligible Employees**

 

Individualswho are not employees of the Company or one of its parent or subsidiarycorporations may not be granted Incentive Stock Options.

 

**7.3****                              ****Exercise Price**

 

Theexercise price of an Incentive Stock Option shall be at least 100% of the fairmarket value of the Common Stock on the grant date, and in the case of anIncentive Stock Option granted to a Ten Percent Stockholder, shall not be lessthan 110% of the fair market value of the Common Stock on the grant date.

 

**7.4****                              ****Option Term**

 

Subjectto earlier termination in accordance with the terms of the Plan and theinstrument evidencing the Option, the maximum term of an Incentive Stock Optionshall not exceed ten years, and in the case of an Incentive Stock Optiongranted to a Ten Percent Stockholder, shall not exceed five years.

 

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**7.5****                              ****Exercisability**

 

AnOption designated as an Incentive Stock Option shall cease to qualify forfavorable tax treatment as an Incentive Stock Option to the extent it isexercised (if permitted by the terms of the Option) (a) more than three monthsafter the date of a Participant’s Termination of Service if termination was forreasons other than death or Disability, (b) more than one year after the dateof a Participant’s Termination of Service if termination was by reason ofDisability, or (c) after the Participant has been on leave of absence for morethan 90 days, unless the Participant’s reemployment rights are guaranteed bystatute or contract.

 

**7.6****                              ****Holding Periods and Taxationof Incentive Stock Options**

 

Inorder to obtain certain tax benefits afforded to Incentive Stock Options underSection 422 of the Code, the Participant must hold the shares acquiredupon the exercise of an Incentive Stock Option for two years after the GrantDate and one year after the date of exercise. The Participant shall give the Company prompt notice of any dispositionof shares acquired on the exercise of an Incentive Stock Option prior to theexpiration of such holding periods.

 

**7.7****                              ****Compliance with Laws andRegulations**

 

Ininterpreting and applying the provisions of the Plan, any Option granted as anIncentive Stock Option pursuant to the Plan shall, to the extent permitted bylaw, be construed as an “incentive stock option” within the meaning ofSection 422 of the Code.  Forpurposes of this Section 7, “disability,” “parent corporation” and“subsidiary corporations” shall have the meanings attributed to those terms forpurposes of Section 422 of the Code.

 

**SECTION 8.****                           ****ADMINISTRATION**

 

**8.1****                              ****Plan Administration**

 

ThisPlan shall be administered by the Board or a committee or committees (whichterm includes subcommittees) appointed by, and consisting of two or moremembers of, the Board.  If and so longas the Common Stock is registered under Section 12(b) or 12(g) of theExchange Act, the Board shall consider, in selecting the Plan Administrator andthe membership of any committee acting as Plan Administrator of this Plan withrespect to any persons subject or likely to become subject to Section 16under the Exchange Act, the provisions regarding (a) “outside directors,” ascontemplated by Section 162(m) of the Code, and (b) “nonemployeedirectors,” as contemplated by Rule 16b-3 under the Exchange Act.  The Board may delegate the responsibilityfor administering this Plan with respect to designated classes of eligibleparticipants to different committees, subject to such limitations as the Boarddeems appropriate.  Committee membersshall serve for such term as the Board may determine, subject to removal by theBoard at any time.  To the extent consistentwith applicable law, the Board may authorize one or more senior executiveofficers of the Company to grant Awards, within limits specifically prescribedby the Board.

 

**8.2****                              ****Procedures**

 

TheBoard shall designate one of the members of the Plan Administrator aschairman.  The Plan Administrator mayhold meetings at such times and places as it shall determine.  The acts of a majority of the members of thePlan Administrator present at meetings at which a quorum exists, or actsreduced to or approved in writing by all Plan Administrator members, shall bevalid acts of the Plan Administrator.

 

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**8.3****                              ****Administration andInterpretation by the Plan Administrator**

 

Exceptfor the terms and conditions explicitly set forth in the Plan, the PlanAdministrator shall have exclusive authority, in its discretion, to determineall matters relating to Awards under the Plan, including the selection ofindividuals to be granted Awards, the type of Awards, the number of shares ofCommon Stock subject to an Award, all terms, conditions, restrictions andlimitations, if any, of an Award and the terms of any instrument that evidencesthe Award. The Plan Administrator shall also have exclusive authority tointerpret the Plan and may from time to time adopt, and change, rules andregulations of general application for the Plan’s administration. The PlanAdministrator’s interpretation of the Plan and its rules and regulations, andall actions taken and determinations made by the Plan Administrator pursuant tothe Plan, shall be conclusive and binding on all parties involved or affected.

 

**SECTION 9.****                           ****WITHHOLDING**

 

TheEmployer may require the Participant to pay to the Employer the amount of (a)any taxes that the Employer is required by applicable federal, state, local orforeign law to withhold with respect to the grant, vesting or exercise of anAward (“tax withholding obligations”) and (b) any amounts due from theParticipant to the Employer (“other obligations”).  The Company shall not be required to issue any shares of CommonStock or otherwise settle an Award under the Plan until such tax withholdingobligations and other obligations are satisfied.

 

ThePlan Administrator may permit or require a Participant to satisfy all or part ofthe Participant’s tax withholding obligations and other obligations by (a)paying cash to the Employer, (b) having the Employer withhold an amount fromany cash amounts otherwise due or to become due from the Employer to theParticipant, (c) having the Employer withhold a number of shares of CommonStock that would otherwise be issued to the Participant (or become vested inthe case of Restricted Stock) having a Fair Market Value equal to the taxwithholding obligations and other obligations, or (d) surrendering a number ofshares of Common Stock the Participant already owns having a value equal to thetax withholding obligations and other obligations.  The value of the shares of Common Stock so withheld may not exceedthe employer’s minimum required tax withholding obligation, and the value ofthe shares of Common Stock so tendered may not exceed such obligation to theextent the Participant has owned the tendered shares for less than six monthsif such limitation is necessary to avoid a charge to the Company for financialreporting purposes.

 

**SECTION 10.****                    ****ASSIGNABILITY**

 

NoAward or interest in an Award may be sold, assigned, pledged (as collateral fora loan or as security for the performance of an obligation or for any otherpurpose) or transferred by a Participant or made subject to attachment orsimilar proceedings otherwise than by will or by the applicable laws of descentand distribution, except to the extent the Participant designates one or morebeneficiaries on a Company-approved form who may exercise the Award or receivepayment under the Award after the Participant’s death.  During a Participant’s lifetime, an Awardmay be exercised only by the Participant. Notwithstanding the foregoing and to the extent permitted bySection 422 of the Code, the Plan Administrator, in its sole discretion,may permit a Participant to assign or transfer an Award; provided, however,that any Award so assigned or transferred shall be subject to all the terms andconditions of the Plan and the instrument evidencing the Award.

 

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**SECTION 11.****                    ****ADJUSTMENTS**

 

**11.1****                       ****Adjustment of Shares**

 

Inthe event, at any time or from time to time, a stock dividend, stock split,spin-off, combination or exchange of shares, recapitalization, merger,consolidation, distribution to stockholders other than a normal cash dividend,or other change in the Company’s corporate or capital structure results in (a)the outstanding shares of Common Stock, or any securities exchanged thereforeor received in their place, being exchanged for a different number or kind ofsecurities of the Company or any other company or (b) new, different oradditional securities of the Company or any other company being received by theParticipants of shares of Common Stock, then the Plan Administrator, in itssole discretion, shall make such adjustments as it shall deem appropriate inthe circumstances in (i) the maximum number and kind of securities availablefor issuance under the Plan; (ii) the maximum number and kind of securitiesthat may be made subject to Awards to any individual Participant or issuable asIncentive Stock Options as set forth in Section 4.2; and (iii) the numberand kind of securities that are subject to any outstanding Award and the pershare price of such securities, without any change in the aggregate price to bepaid therefore.  The determination bythe Plan Administrator as to the terms of any of the foregoing adjustmentsshall be conclusive and binding.

 

Notwithstandingthe foregoing, the issuance by the Company of shares of stock of any class, orsecurities convertible into shares of stock of any class, for cash or property,or for labor or services rendered, or for other valid consideration, eitherupon direct sale or upon the exercise of rights or warrants to subscribetherefore, or upon conversion of shares or obligations of the Companyconvertible into such shares or other securities, shall not affect, and noadjustment by reason thereof shall be made with respect to, outstanding Awards.  Also notwithstanding the foregoing, adissolution or liquidation of the Company shall not be governed by thisSection 11.1 but shall be governed by the remaining provisions of thisSection 11.

 

**11.2****                       ****Corporate Transaction**

 

Exceptas otherwise provided in the instrument that evidences the Award, in the eventof any Corporate Transaction, each Award that is at the time outstanding shallautomatically accelerate so that each such Award shall, immediately prior tothe specified effective date for the Corporate Transaction, become 100%vested.  Such Award shall not soaccelerate, however, if and to the extent that (a) such Award is, in connectionwith the Corporate Transaction, either to be assumed by the successor entity orparent thereof (the “Successor Corporation”) or to be replaced with acomparable award for the purchase of shares of the capital stock or equity ofthe Successor Corporation or (b) such Award is to be replaced with a cashincentive program of the Successor Corporation that preserves the spread existingat the time of the Corporate Transaction and provides for subsequent payout inaccordance with the same vesting schedule applicable to such Award. Thedetermination of Award comparability under clause (a) above shall be made bythe Plan Administrator, and its determination shall be conclusive and binding.All such Awards shall terminate and cease to remain outstanding immediatelyfollowing the consummation of the Corporate Transaction, except to the extentassumed by the Successor Corporation. Any such Awards that are assumed orreplaced in the Corporate Transaction and do not otherwise accelerate at thattime shall be accelerated in the event the Participant’s employment or servicesshould subsequently terminate within two years following such Corporate Transaction,unless such employment or services are terminated by the Successor Corporationfor Cause or by the Participant voluntarily without Good Reason.

 

Withoutlimitation on the foregoing, the Plan Administrator may, but shall not beobligated to, make provision in connection with a Corporate Transaction for acash payment to each holder of Awards

 

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inconsideration for the cancellation of such Awards which may equal the excess,if any, of the value of the consideration to be paid in the transaction toholders of the same number of shares of Common Stock subject to such Awards (orif no consideration is paid in any such transaction, the fair market value ofshares of Common Stock subject to such Awards) over the aggregate Optionexercise price, if any, of such Awards.

 

**11.3****                       ****Dissolution or Liquidation**

 

Tothe extent not previously exercised or settled, and unless otherwise determinedby the Plan Administrator in its sole discretion, Options, shall terminateimmediately prior to the dissolution or liquidation of the Company.

 

**11.4****                       ****Further Adjustment of Awards**

 

Subjectto Section 11.2, the Plan Administrator shall have the discretion,exercisable at any time before a sale, merger, consolidation, reorganization,liquidation, dissolution or change in control of the Company, as defined by thePlan Administrator, to take such further action as it determines to benecessary or advisable with respect to Awards. Such authorized action may include (but shall not be limited to)establishing, amending or waiving the type, terms, conditions or duration of,or restrictions on, Awards so as to provide for earlier, later, extended oradditional time for exercise, lifting restrictions and other modifications, andthe Plan Administrator may take such actions with respect to all Participants,to certain categories of Participants or only to individual Participants.  The Plan Administrator may take such actionbefore or after granting Awards to which the action relates and before or afterany public announcement with respect to such sale, merger, consolidation,reorganization, liquidation, dissolution or change in control that is thereason for such action.

 

**11.5****                       ****No Limitations**

 

Thegrant of Awards shall in no way affect the Company’s right to adjust,reclassify, reorganize or otherwise change its capital or business structure orto merge, consolidate, dissolve, liquidate or sell or transfer all or any partof its business or assets.

 

**SECTION 12.****                    ****AMENDMENT AND TERMINATION**

 

**12.1****                       ****Amendment, Suspension or Termination**

 

Subjectto Section 12.3 The Board may amend, suspend or terminate the Plan or anyportion of the Plan at any time and in such respects as it shall deemadvisable; provided, however, that, to the extent required for compliance withSection 422 of the Code or by applicable law, regulation or stock exchangerule, stockholder approval shall be required for any amendment to thePlan.  Subject to Section 12.3, theBoard may amend the terms of any outstanding Award, prospectively orretroactively.

 

**12.2****                       ****Term of the Plan**

 

Unlesssooner terminated by the Board, this Plan shall terminate ten years from thedate on which this Plan is adopted by the Board.  No Award may be granted after such termination or during anysuspension of this Plan.

 

**12.3****                       ****Consent of Participant**

 

Theamendment, suspension or termination of the Plan or a portion thereof or theamendment of an outstanding Award shall not, without the Participant’s consent,materially adversely affect any rights under any Award theretofore granted tothe Participant under the Plan.  Anychange or adjustment to an outstanding Incentive Stock Option shall not,without the consent of the Participant, be made in a manner

 

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soas to constitute a “modification” that would cause such Incentive Stock Optionto fail to continue to qualify as an Incentive Stock Option.  Notwithstanding the foregoing, anyadjustments made pursuant to Sections 11.2 and 11.3 shall not be subject tothese restrictions.

 

**SECTION 13.****                    ****GENERAL**

 

**13.1****                       ****No Individual Rights**

 

Noindividual or Participant shall have any claim to be granted any Award underthe Plan, and the Company has no obligation for uniformity of treatment ofParticipants under the Plan.

 

Furthermore,nothing in the Plan or any Award granted under the Plan shall be deemed toconstitute an employment contract or confer or be deemed to confer on anyParticipant any right to continue in the employ of, or to continue any otherrelationship with, the Company or any Related Company or limit in any way theright of the Company or any Related Company to terminate a Participant’semployment or other relationship at any time, with or without cause.

 

**13.2****                       ****Issuance of Shares**

 

Notwithstandingany other provision of the Plan, the Company shall have no obligation to issueor deliver any shares of Common Stock under the Plan or make any otherdistribution of benefits under the Plan unless, in the opinion of the Company’scounsel, such issuance, delivery or distribution would comply with allapplicable laws (including, without limitation, the requirements of theSecurities Act or the laws of any state or foreign jurisdiction) and theapplicable requirements of any securities exchange or similar entity.

 

TheCompany shall be under no obligation to any Participant to register foroffering or resale or to qualify for exemption under the Securities Act, or toregister or qualify under the laws of any state or foreign jurisdiction, anyshares of Common Stock, security or interest in a security paid or issuedunder, or created by, the Plan, or to continue in effect any such registrationsor qualifications if made.

 

Asa condition to the exercise of an Option or any other receipt of Common Stockpursuant to an Award under the Plan, the Company may require (a) theParticipant to represent and warrant at the time of any such exercise orreceipt that such shares are being purchased or received only for theParticipant’s own account and without any present intention to sell or distributesuch shares and (b) such other action or agreement by the Participant as mayfrom time to time be necessary to comply with the federal, state and foreignsecurities laws.  At the option of theCompany, a stop-transfer order against any such shares may be placed on theofficial stock books and records of the Company, and a legend indicating thatsuch shares may not be pledged, sold or otherwise transferred, unless anopinion of counsel is provided (concurred in by counsel for the Company)stating that such transfer is not in violation of any applicable law orregulation, may be stamped on stock certificates to ensure exemption fromregistration.  The Plan Administratormay also require the Participant to execute and deliver to the Company apurchase agreement or such other agreement as may be in use by the Company atsuch time that describes certain terms and conditions applicable to the shares.

 

Tothe extent the Plan or any instrument evidencing an Award provides for issuanceof stock certificates to reflect the issuance of shares of Common Stock, theissuance may be effected on a noncertificated basis, to the extent notprohibited by applicable law or the applicable rules of any stock exchange.

 

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**13.3****                       ****Indemnification**

 

Eachperson who is or shall have been a member of the Board, or a committeeappointed by the Board to whom authority was delegated in accordance withSection 8 shall be indemnified and held harmless by the Company againstand from any loss, cost, liability or expense that may be imposed upon orreasonably incurred by such person in connection with or resulting from anyclaim, action, suit or proceeding to which such person may be a party or inwhich such person may be involved by reason of any action taken or failure toact under the Plan and against and from any and all amounts paid by such personin settlement thereof, with the Company’s approval, or paid by such person insatisfaction of any judgment in any such claim, action, suit or proceedingagainst such person; provided, however, that such person shall give the Companyan opportunity, at its own expense, to handle and defend the same before suchperson undertakes to handle and defend it on such person’s own behalf, unlesssuch loss, cost, liability or expense is a result of such person’s own willfulmisconduct or except as expressly provided by statute.

 

Theforegoing right of indemnification shall not be exclusive of any other rightsof indemnification to which such person may be entitled under the Company’scertificate of incorporation or bylaws, as a matter of law, or otherwise, or ofany power that the Company may have to indemnify such person or hold suchperson harmless.

 

**13.4****                       ****No Rights as a Stockholder**

 

NoAward shall entitle the Participant to any dividend, voting or other right of astockholder unless and until the date of issuance under the Plan of the sharesthat are the subject of such Award, free of all applicable restrictions.

 

**13.5****                       ****Compliance with Laws and Regulations**

 

Thegranting of Awards and the issuance of shares of Common Stock under the Plan issubject to all applicable laws, rules and regulations, and to such approvals byany governmental agencies or national securities exchanges as may be required.

 

Ininterpreting and applying the provisions of the Plan, any Option granted as anIncentive Stock Option pursuant to the Plan shall, to the extent permitted bylaw, be construed as an “incentive stock option” within the meaning ofSection 422 of the Code.

 

**13.6****                       ****Participants in Other Countries**

 

ThePlan Administrator shall have the authority to adopt such modifications,procedures and subplans as may be necessary or desirable to comply withprovisions of the laws of any countries in which the Company or any RelatedCompany may operate to ensure the viability of the benefits from Awards grantedto Participants employed in such countries, to meet the requirements of locallaw that permit the Plan to operate in a qualified or tax-efficient manner, tocomply with applicable foreign laws and to meet the objectives of the Plan.

 

**13.7****                       ****No Trust or Fund**

 

ThePlan is intended to constitute an “unfunded” plan.  Nothing contained herein shall require the Company to segregateany monies or other property, or shares of Common Stock, or to create anytrusts, or to make any special deposits for any immediate or deferred amountspayable to any Participant, and no Participant shall have any rights that aregreater than those of a general unsecured creditor of the Company.

 

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**13.8****                       ****Successors**

 

Allobligations of the Company under the Plan with respect to Awards shall bebinding on any successor to the Company, whether the existence of suchsuccessor is the result of a direct or indirect purchase, merger,consolidation, or otherwise, of all or substantially all the business and/orassets of the Company.

 

**13.9****                       ****Severability**

 

Ifany provision of the Plan or any Award is determined to be invalid, illegal orunenforceable in any jurisdiction, or as to any person, or would disqualify thePlan or any Award under any law deemed applicable by the Plan Administrator,such provision shall be construed or deemed amended to conform to applicablelaws, or, if it cannot be so construed or deemed amended without, in the PlanAdministrator’s determination, materially altering the intent of the Plan orthe Award, such provision shall be stricken as to such jurisdiction, person orAward, and the remainder of the Plan and any such Award shall remain in fullforce and effect.

 

**13.10****                ****Choice of Law and Venue**

 

ThePlan, all Awards granted thereunder and all determinations made and actionstaken pursuant hereto, to the extent not otherwise governed by the laws of theUnited States, shall be governed by the laws of the State of Washington withoutgiving effect to principles of conflicts of law.  Participants irrevocably consent to the nonexclusive jurisdictionand venue of the state and federal courts located in the State of Washington.

 

**SECTION 14.****                    ****EFFECTIVE DATE**

 

Theeffective date is the date on which the Plan is adopted by the Board.  If the stockholders of the Company do notapprove the Plan within 12 months after the Board’s adoption of the Plan, anyIncentive Stock Options granted under the Plan will be treated as NonqualifiedStock Options.

 

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**APPENDIX I**

 

**“Acquired Entity”** means any entity acquired by the Company ora Related Company or with which the Company or a Related Company merges orcombines.

 

**“Award”** means any award or grant made to aParticipant pursuant to the Plan, including awards or grants of Incentive StockOptions and Nonqualified Stock Options or any combination thereof.

 

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

 

“**Cause”**shall have the meaning defined in the instrument evidencing the Award orotherwise shall have the meaning assigned to such term in any individualParticipant’s written employment service or other agreement with the Company orany Related Company, and additionally, in any event shall include (or in theabsence of any such written employment arrangement shall mean) dishonesty,fraud, misconduct, unauthorized use or disclosure of confidential informationor trade secrets, conduct prohibited by criminal law (except minor violations),in each case as determined by the Company’s chief human resources officer orother person performing that function or, in the case of directors andexecutive officers, the Board, each of whose determination shall be conclusiveand binding.

 

**“Code”** means the Internal Revenue Code of 1986, asit may be amended from time to time.

 

**“Common Stock”** means the common stock of the Company, or,in the event that the outstanding shares of Common Stock are after the datethis Plan is approved by the shareholders of the Company, recapitalized,converted into or exchanged for different stock or securities of the Company,such other stock or securities.

 

**“Company”** means ProCyte Corporation, a Washingtoncorporation.

 

**“Corporate Transaction”** means any of the following events:

 

(a)          Consummationof any merger or consolidation of the Company in which the Company is not thecontinuing or surviving corporation, or pursuant to which shares of the CommonStock are converted into cash, securities or other property, if following suchmerger or consolidation the Participants of the Company’s outstanding votingsecurities immediately prior to such merger or consolidation own less than66-2/3% of the outstanding voting securities of the surviving corporation;

 

(b)         Consummationof any sale, lease, exchange or other transfer in one transaction or a seriesof related transactions of all or substantially all of the Company’s assetsother than a transfer of the Company’s assets to a Related Company;

 

(c)          Approvalby the Participants of the Common Stock of any plan or proposal for theliquidation or dissolution of the Company;

 

(d)         Acquisitionby a person, within the meaning of Section 3(a)(9) or ofSection 13(d)(3) (as in effect on the date of adoption of the Plan) of theExchange Act of a majority or more of the Company’s outstanding votingsecurities (whether directly or indirectly, beneficially or of record); or

 

(e)          Ownershipof voting securities shall take into account and shall include ownership asdetermined by applying Rule 13d-3(d)(1)(i) (as in effect on the date ofadoption of the Plan) pursuant to the Exchange Act.

 

**“Disability”** means disability as that term is defined forpurposes of Section 22(e)(3) of the Code.

 

**“Employer”** means individually or collectively theCompany or its Related Companies.

 

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**“Effective Date”** has the meaning set forth inSection 14.

 

**“Eligible Person”** means any person eligible to receive anAward as set forth in Section 3.

 

**“Exchange Act”** means the Securities Exchange Act of 1934,as amended from time to time.

 

**“Fair Market Value”** means the per share fair market value of theCommon Stock as established in good faith by the Plan Administrator.

 

**“Good Reason”** means the occurrence of any of the followingevents or conditions and the failure of the Successor Corporation to cure suchevent or condition within 30 days after receipt of written notice by theParticipant:

 

(a)          achange in the Participant’s status, title, position or responsibilities(including reporting responsibilities) that, in the Participant’s reasonablejudgment, represents a substantial reduction in the status, title, position orresponsibilities as in effect immediately prior thereto; the assignment to theParticipant of any duties or responsibilities that, in the Participant’sreasonable judgment, are materially inconsistent with such status, title,position or responsibilities; or any removal of the Participant from or failureto reappoint or reelect the Participant to any of such positions, except in connectionwith the termination of the Participant’s employment for Cause, for Disabilityor as a result of his or her death, or by the Participant other than for GoodReason;

 

(b)         areduction in the Participant’s annual base salary;

 

(c)          theSuccessor Corporation’s requiring the Participant (without the Participant’sconsent) to be based at any place outside a 35-mile radius of his or her placeof employment prior to a Corporate Transaction, except for reasonably requiredtravel on the Successor Corporation’s business that is not materially greaterthan such travel requirements prior to the Corporate Transaction;

 

(d)         theSuccessor Corporation’s failure to (i) continue in effect any materialcompensation or benefit plan (or the substantial equivalent thereof) in whichthe Participant was participating at the time of a Corporate Transaction,including, but not limited to, the Plan, or (ii) provide the Participant withcompensation and benefits substantially equivalent (in terms of benefit levelsand/or reward opportunities) to those provided for under each material employeebenefit plan, program and practice as in effect immediately prior to theCorporate Transaction;

 

(e)          anymaterial breach by the Successor Corporation of its obligations to theParticipant under the Plan or any substantially equivalent plan of theSuccessor Corporation; or

 

(f)            anypurported termination of the Participant’s employment or service for Cause bythe Successor Corporation that does not comply with the terms of the Plan orany substantially equivalent plan of the Successor Corporation.

 

**“Grant Date”** means the later of (a) the date on which thePlan Administrator completes the corporate action authorizing the grant of anAward or such later date specified by the Plan Administrator or (b) the date onwhich all conditions precedent to the Award have been satisfied, provided thatconditions to the exercisability or vesting of Awards shall not defer the GrantDate.

 

**“Incentive Stock Option”** means an Option granted with the intentionthat it qualifies as an “incentive stock option” as that term is defined inSection 422 of the Code or any successor provision.

 

**“Nonqualified Stock Option”** means an Option other than an IncentiveStock Option.

 

**“Option”** means a right to purchase Common Stock grantedunder Section 6.

 

**“Option Expiration Date”** means the last day of the Option Term.

 

**“Option Term”** means the maximum term of an Option as setforth in Section 6.3.

 

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**“Participant”** means any Eligible Person to whom an Awardis granted.

 

**“Plan”** means the ProCyte Corporation 2004 StockOption Plan.

 

**“Plan Administrator”** has the meaning set forth in Section 8.

 

**“Related Company”** means any entity that, directly orindirectly, is in control of, is controlled by or is under common control withthe Company, or in which the Company has a significant ownership interest, asdetermined by the Plan Administrator.

 

**“Securities Act”** means the Securities Act of 1933, as amendedfrom time to time.

 

**“Substitute Awards”** means Awards granted or shares of CommonStock issued by the Company in assumption of, or in substitution or exchangefor, awards previously granted by an Acquired Entity.

 

**“Successor Corporation”**means an entity described inSection 11.2.

 

**“Ten Percent Shareholder”** means an employee who owns more than 10% ofthe total combined voting power of all classes of stock of the Company or anyRelated Corporation.  The determinationof more than 10% ownership shall be made in accordance with Section 422 ofthe Code.

 

**“Termination of Service”** means a termination of employment or servicerelationship with the Company or a Related Company for any reason, whethervoluntary or involuntary, including by reason of death or Disability.  Any question as to whether and when therehas been a Termination of Service for the purposes of an Award and the cause ofsuch Termination of Service shall be determined by the Company’s chief humanresources officer or other person performing that function or, in the case ofdirectors and executive officers, the Board, each of whose determination shallbe conclusive and binding.  Transfer ofa Participant’s employment or service relationship between the Company and anyRelated Company shall not be considered a Termination of Service for purposesof an Award.  Unless the Boarddetermines otherwise, a Termination of Service shall be deemed to occur if theParticipant’s employment or service relationship is with an entity that hasceased to be a Related Company.

 

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