PROCYTE
CORPORATION

 

2004
STOCK OPTION PLAN

 

SECTION
1. PURPOSE

 

The
purpose of this ProCyte Corporation 2004 Stock Option Plan (the “Plan”) is to
attract, retain and motivate employees, officers, directors, consultants,
agents, advisors and independent contractors of ProCyte Corporation, a
Washington corporation (the “Company”) and its Related Companies (individually
or collectively, “Employer”) by providing them the opportunity to acquire a
proprietary interest in the Company and to align their interests and efforts to
the interests of the Company’s shareholders.

 

SECTION
2.  DEFINITIONS

 

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

 

SECTION
3. ELIGIBILITY

 

An Award
may be granted to any employee, officer or director of the Company or a Related
Company whom the Plan Administrator from time to time selects. An Award may also
be granted to any consultant, agent, advisor or independent contractor for bona
fide services rendered to the Company or any Related Company that (a) are not in
connection with the offer and sale of the Company’s securities in a
capital-raising transaction and (b) do not directly or indirectly promote or
maintain a market for the Company’s securities.

 

SECTION
4. SHARES
SUBJECT TO THE PLAN

 

4.1 Authorized
Number of Shares

 

Subject
to adjustment from time to time as provided in Section 11.1, a maximum of
2,000,000 shares of Common Stock shall be available for issuance under the Plan.
Shares issued under the Plan shall be drawn from authorized and unissued shares
or shares now held or subsequently acquired by the Company.

 

4.2 Limitations

 

Subject
to adjustment from time to time as provided in Section 11.1, not more than
300,000 shares of Common Stock may be made subject to Awards under the Plan to
any individual Participant in the aggregate in any one fiscal year of the
Company; except that the Company may make additional one-time grants of up to
500,000 shares to any newly hired Participant. The limitation in the preceding
sentence shall be applied in a manner consistent with the requirements of, and
only to the extent required for compliance with, the exclusion from the
limitation on deductibility of compensation under Section 162(m) of the Code.


 

Subject
to adjustment as provided in Section 11.1, the maximum number of shares of
Common Stock that may be issued upon the exercise of Incentive Stock Options
shall equal the aggregate share number stated in Section 4.1.

 







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4.3 Share
Usage

 

Shares of
Common Stock covered by an Award shall not be counted as used unless and until
they are actually issued and delivered to a Participant. If any Award lapses,
expires, terminates or is canceled prior to the issuance of shares of Common
Stock hereunder or if shares of Common Stock are issued under this Plan to a
Participant and thereafter are forfeited to or otherwise reacquired by the
Company, the shares of Common Stock subject to such Awards and the forfeited or
reacquired shares of Common Stock shall 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 payment to the
Company for the exercise of an Option or to satisfy tax withholding obligations
in connection with an Award or (ii) covered by an Award that is settled in
cash or in a manner such that some or all of the shares of Common Stock covered
by the Award are not issued to a Participant shall be available for Awards under
the Plan. 

 

The Plan
Administrator may grant Substitute Awards under this Plan. Substitute Awards
shall not reduce the number of shares authorized for issuance under the Plan. In
the event that an Acquired Entity has shares available for awards or grants
under one or more preexisting plans not adopted in contemplation of such
acquisition or combination, then, to the extent determined by the Board or the
Plan Administrator, the shares available for grant pursuant to the terms of such
preexisting plan (as adjusted, to the extent appropriate, using the exchange
ratio or other adjustment or valuation ratio or formula used in such acquisition
or combination to determine the consideration payable to holders of common stock
of the entities are parties to such acquisition or combination) may be used for
Awards under the Plan and shall not reduce the number of shares of Common Stock
authorized for issuance under the Plan; provided, however, that Awards using
such available shares of Common Stock shall not be made after the date awards or
grants could have been made under the terms of such preexisting plans, absent
the acquisition or combination, and shall only be made to individuals who were
not employees or non-employee directors of the Employer prior to such
acquisition or combination. In the event that a written agreement between the
Company and an Acquired Entity pursuant to which a merger or consolidation is
contemplated is approved by the Board and said agreement sets forth the terms
and conditions of the substitution for or assumption of outstanding awards of
the Acquired Entity, said terms and conditions shall be deemed to be the action
of the Plan Administrator without any further action by the Plan Administrator,
except as may be required for compliance with Rule 16b-3 under the Exchange Act,
and the persons holding such awards shall be deemed to be
Participants.

 

SECTION
5. AWARDS

 

5.1 Form,
Grant and Settlement of Awards

 

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

 







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5.2 Evidence
of Awards

 

Awards
granted under the Plan shall be evidenced by a written (including electronic)
instrument that shall contain such terms, conditions, limitations and
restrictions as the Plan Administrator shall deem advisable and that are not
inconsistent with this Plan.

 

SECTION
6. OPTIONS

 

6.1 Grant
of Options

 

The Plan
Administrator may grant Options designated as Incentive Stock Options or
Nonqualified Stock Options.

 

6.2 Option
Exercise Price

 

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


 

6.3 Term
of Options

 

Subject
to earlier termination in accordance with the terms of the Plan and the
instrument evidencing the Option, the maximum term of an Option shall be as
established for that Option by the Plan Administrator or, if not so established,
shall be ten years from the Grant Date. For Incentive Stock Options, the Option
Term shall be as specified in Section 7.4.

 

6.4 Exercise
of Options

 

The Plan
Administrator shall establish and set forth in each instrument that evidences an
Option the time at which, or the installments in which, the Option shall vest
and become exercisable, any of which provisions may be waived or modified 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, which may 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%




 







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Unless
the Plan Administrator determines otherwise, the vesting schedule of an Option
shall be adjusted proportionately to the extent the Participant works less than
"full time" as that term is defined by the Plan Administrator. 

 

To the
extent an Option has vested and becomes exercisable, the Option may be exercised
in whole or from time to time in part by delivery to the Company of a properly
executed stock option exercise agreement or notice, in a form and in accordance
with procedures established by the Plan Administrator, setting forth the number
of shares with respect to which the Option is being exercised, such
representations and agreements as may be required by the Plan Administrator and
accompanied by payment as described in Section 6.5. An Option may be exercised
only for whole shares and may not be exercised for less than a reasonable number
of shares at any one time, as determined by the Plan Administrator.

 

6.5 Payment
of Exercise Price

 

The
exercise price for shares purchased under an Option shall be paid in full to the
Company by delivery of consideration equal to the product of the Option exercise
price and the number of shares purchased. Such consideration must be in a form
or a combination of forms acceptable to the Plan Administrator for that
purchase, which forms may include: (a) cash; (b) check or wire transfer; (c)
tendering (either actually or, 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 already owned by the Participant, which have a Fair Market Value
equal to the aggregate exercise price of the shares being purchased under the
Option (such shares must have been owned by the Participant for at least six
months or such other period established by generally accepted accounting
principles necessary to avoid adverse accounting consequences); (d) if and as
long as the Common Stock is registered under Section 12(b) or 12(g) of the
Exchange Act, and to the extent permitted by law, delivery of a properly
executed exercise agreement or notice, together with irrevocable instructions to
a brokerage firm designated or approved by the Company to deliver promptly to
the Company the amount of proceeds to pay the Option exercise price and
withholding tax obligations that may arise in connection with the exercise, all
in accordance with the regulations of the Federal Reserve Board; or (e) such
other consideration as the Plan Administrator may permit.

 

6.6 Effect
of Termination of Service

 

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

 







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	(a)  	
      Any
      portion of an Option that is not vested and exercisable on the date of a
      Participant’s Termination of Service shall expire on such
      date.




 


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




 


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




 


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




 


	(c)  	
      the
      last day of the Option Term.




 

Notwithstanding
the foregoing, if a Participant dies after the Participant’s Termination of
Service but while an Option is otherwise exercisable, the portion of the Option
that is vested and exercisable on the date of such Termination of Service shall
expire upon the earlier to occur of (a) the Option Expiration Date and (b) the
one-year anniversary of the date of death, unless the Plan Administrator
determines otherwise.

 

Also
notwithstanding the foregoing, in case a Participant’s Termination of Service
occurs for Cause, all Options granted to the Participant shall automatically
expire upon first notification to the Participant of such termination, unless
the Plan Administrator determines otherwise. If a Participant’s employment or
service relationship with the Company is suspended pending an investigation of
whether the Participant shall be terminated for Cause, all the Participant’s
rights under any Option shall likewise be suspended during the period of
investigation. If any facts that would constitute termination for Cause are
discovered after a Participant’s Termination of Service, any Option then held by
the Participant may be immediately terminated by the Plan Administrator, in its
sole discretion.

 

Any
change of relationship with the Employer shall not constitute a termination of
the Participant's relationship with the Employer for purposes of this
Section 6.6 so long as the Participant continues to be an employee, officer,
director or, pursuant to a written agreement with the Employer, an agent,
consultant, advisor or independent contractor of the Employer. The Plan
Administrator, in its absolute discretion, may determine all questions of
whether particular leaves of absence constitute a termination of services;
provided, however, that with respect to Incentive Stock Options, such
determination shall be subject to any requirements contained in the Code. The
foregoing notwithstanding, with respect to Incentive Stock Options, employment
shall not be deemed to continue beyond the first 90 days of such leave, unless
the Participant's reemployment rights are guaranteed by statute or by
contract.

 

SECTION
7. INCENTIVE
STOCK OPTION LIMITATIONS

 

Notwithstanding
any other provisions of the Plan, to the extent required by Section 422 of the
Code, Incentive Stock Options shall be subject to the following additional terms
and conditions:

 







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7.1 Dollar
Limitation

 

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

 

7.2 Eligible
Employees

 

Individuals
who are not employees of the Company or one of its parent or subsidiary
corporations may not be granted Incentive Stock Options.

 

7.3 Exercise
Price

 

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

 

7.4 Option
Term

 

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

 

7.5 Exercisability

 

An Option
designated as an Incentive Stock Option shall cease to qualify for favorable tax
treatment as an Incentive Stock Option to the extent it is exercised (if
permitted by the terms of the Option) (a) more than three months after the date
of a Participant’s Termination of Service if termination was for reasons other
than death or Disability, (b) more than one year after the date of a
Participant’s Termination of Service if termination was by reason of Disability,
or (c) after the Participant has been on leave of absence for more than 90 days,
unless the Participant’s reemployment rights are guaranteed by statute or
contract.

 

7.6 Holding
Periods and Taxation of Incentive Stock Options

 

In order
to obtain certain tax benefits afforded to Incentive Stock Options under Section
422 of the Code, the Participant must hold the shares acquired upon the exercise
of an Incentive Stock Option for two years after the Grant Date and one year
after the date of exercise. The Participant shall give the Company prompt notice
of any disposition of shares acquired on the exercise of an Incentive Stock
Option prior to the expiration of such holding periods.

 







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7.7 Compliance
with Laws and Regulations

 

In
interpreting and applying the provisions of the Plan, any Option granted as an
Incentive Stock Option pursuant to the Plan shall, to the extent permitted by
law, be construed as an “incentive stock option” within the meaning of Section
422 of the Code. For purposes of this Section 7, “disability,” “parent
corporation” and “subsidiary corporations” shall have the meanings attributed to
those terms for purposes of Section 422 of the Code.

 

SECTION
8. ADMINISTRATION

 

8.1 Plan
Administration

 

This Plan
shall be administered by the Board or a committee or committees (which term
includes subcommittees) appointed by, and consisting of two or more members of,
the Board. If and so long as the Common Stock is registered under Section 12(b)
or 12(g) of the Exchange Act, the Board shall consider, in selecting the Plan
Administrator and the membership of any committee acting as Plan Administrator
of this Plan with respect to any persons subject or likely to become subject to
Section 16 under the Exchange Act, the provisions regarding (a) "outside
directors," as contemplated by Section 162(m) of the Code, and (b) "nonemployee
directors," as contemplated by Rule 16b-3 under the Exchange Act. The Board may
delegate the responsibility for administering this Plan with respect to
designated classes of eligible participants to different committees, subject to
such limitations as the Board deems appropriate. Committee members shall serve
for such term as the Board may determine, subject to removal by the Board at any
time. To the extent consistent with applicable law, the Board may authorize one
or more senior executive officers of the Company to grant Awards, within limits
specifically prescribed by the Board. 




8.2 Procedures

 

The Board
shall designate one of the members of the Plan Administrator as chairman. The
Plan Administrator may hold meetings at such times and places as it shall
determine. The acts of a majority of the members of the Plan Administrator
present at meetings at which a quorum exists, or acts reduced to or approved in
writing by all Plan Administrator members, shall be valid acts of the Plan
Administrator.

 

8.3 Administration
and Interpretation by the Plan Administrator 

 

Except
for the terms and conditions explicitly set forth in the Plan, the Plan
Administrator shall have exclusive authority, in its discretion, to determine
all matters relating to Awards under the Plan, including the selection of
individuals to be granted Awards, the type of Awards, the number of shares of
Common Stock subject to an Award, all terms, conditions, restrictions and
limitations, if any, of an Award and the terms of any instrument that evidences
the Award. The Plan Administrator shall also have exclusive authority to
interpret the Plan and may from time to time adopt, and change, rules and
regulations of general application for the Plan's administration. The Plan
Administrator's interpretation of the Plan and its rules and regulations, and
all actions taken and determinations made by the Plan Administrator pursuant to
the Plan, shall be conclusive and binding on all parties involved or affected.


 







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SECTION
9. WITHHOLDING

 

The
Employer 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 or
foreign law to withhold with respect to the grant, vesting or exercise of an
Award (“tax withholding obligations”) and (b) any amounts due from the
Participant to the Employer (“other obligations”). The Company shall not be
required to issue any shares of Common Stock or otherwise settle an Award under
the Plan until such tax withholding obligations and other obligations are
satisfied.

 

The Plan
Administrator may permit or require a Participant to satisfy all or part of the
Participant’s tax withholding obligations and other obligations by
(a) paying cash to the Employer, (b) having the Employer withhold an
amount from any cash amounts otherwise due or to become due from the Employer to
the Participant, (c) having the Employer withhold a number of shares of
Common Stock that would otherwise be issued to the Participant (or become vested
in the case of Restricted Stock) having a Fair Market Value equal to the tax
withholding obligations and other obligations, or (d) surrendering a number
of shares of Common Stock the Participant already owns having a value equal to
the tax withholding obligations and other obligations. The value of the shares
of Common Stock so withheld may not exceed the employer’s minimum required tax
withholding obligation, and the value of the shares of Common Stock so tendered
may not exceed such obligation to the extent the Participant has owned the
tendered shares for less than six months if such limitation is necessary to
avoid a charge to the Company for financial reporting purposes.

 

SECTION
10. ASSIGNABILITY

 

No Award
or interest in an Award may be sold, assigned, pledged (as collateral for a loan
or as security for the performance of an obligation or for any other purpose) or
transferred by a Participant or made subject to attachment or similar
proceedings otherwise than by will or by the applicable laws of descent and
distribution, except to the extent the Participant designates one or more
beneficiaries on a Company-approved form who may exercise the Award or receive
payment under the Award after the Participant’s death. During a Participant’s
lifetime, an Award may be exercised only by the Participant. Notwithstanding the
foregoing and to the extent permitted by Section 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 and conditions of the Plan and the instrument
evidencing the Award.

 

SECTION
11. ADJUSTMENTS

 

11.1 Adjustment
of Shares

 

In the
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 therefore or
received in their place, being exchanged for a different number or kind of
securities of the Company or any other company or (b) new, different or
additional securities of the Company or any other company being received by the
Participants of shares of Common 

 







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Stock,
then the Plan Administrator, in its sole discretion, shall make such adjustments
as it shall deem appropriate in the circumstances in (i) the maximum number and
kind of securities available for issuance under the Plan; (ii) the maximum
number and kind of securities that may be made subject to Awards to any
individual Participant or issuable as Incentive Stock Options as set forth in
Section 4.2; and (iii) the number and kind of securities that are subject to any
outstanding Award and the per share price of such securities, without any change
in the aggregate price to be paid therefore. The determination by the Plan
Administrator as to the terms of any of the foregoing adjustments shall be
conclusive and binding.

 

Notwithstanding
the foregoing, the issuance by the Company of shares of stock of any class, or
securities convertible into shares of stock of any class, for cash or property,
or for labor or services rendered, or for other valid consideration, either upon
direct sale or upon the exercise of rights or warrants to subscribe therefore,
or upon conversion of shares or obligations of the Company convertible into such
shares or other securities, shall not affect, and no adjustment by reason
thereof shall be made with respect to, outstanding Awards. Also notwithstanding
the foregoing, a dissolution or liquidation of the Company shall not be governed
by this Section 11.1 but shall be governed by the remaining provisions of this
Section 11.

 

11.2 Corporate
Transaction

 

Except as
otherwise provided in the instrument that evidences the Award, in the event of
any Corporate Transaction, each Award that is at the time outstanding shall
automatically accelerate so that each such Award shall, immediately prior to the
specified effective date for the Corporate Transaction, become 100% vested. Such
Award shall not so accelerate, however, if and to the extent that (a) such Award
is, in connection with the Corporate Transaction, either to be assumed by the
successor entity or parent thereof (the "Successor Corporation") or to be
replaced with a comparable award for the purchase of shares of the capital stock
or equity of the Successor Corporation or (b) such Award is to be replaced with
a cash incentive program of the Successor Corporation that preserves the spread
existing at the time of the Corporate Transaction and provides for subsequent
payout in accordance with the same vesting schedule applicable to such Award.
The determination of Award comparability under clause (a) above shall be made by
the Plan Administrator, and its determination shall be conclusive and binding.
All such Awards shall terminate and cease to remain outstanding immediately
following the consummation of the Corporate Transaction, except to the extent
assumed by the Successor Corporation. Any such Awards that are assumed or
replaced in the Corporate Transaction and do not otherwise accelerate at that
time shall be accelerated in the event the Participant's employment or services
should subsequently terminate within two years following such Corporate
Transaction, unless such employment or services are terminated by the Successor
Corporation for Cause or by the Participant voluntarily without Good Reason.


 

Without
limitation on the foregoing, the Plan Administrator may, but shall not be
obligated to, make provision in connection with a Corporate Transaction for a
cash payment to each holder of Awards in consideration 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 to holders of the same number of
shares of Common Stock subject to such Awards (or if no consideration is paid


 







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in any
such transaction, the fair market value of shares of Common Stock subject to
such Awards) over the aggregate Option exercise price, if any, of such
Awards.

 

11.3 Dissolution
or Liquidation

 

To the
extent not previously exercised or settled, and unless otherwise determined by
the Plan Administrator in its sole discretion, Options, shall terminate
immediately prior to the dissolution or liquidation of the Company.


 

11.4 Further
Adjustment of Awards

 

Subject
to Sections 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 the Plan
Administrator, to take such further action as it determines to be necessary 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 or additional time for exercise, lifting restrictions and other
modifications, and the 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 action before or after
granting Awards to which the action relates and before or after any public
announcement with respect to such sale, merger, consolidation, reorganization,
liquidation, dissolution or change in control that is the reason for such
action.

 

11.5 No
Limitations

 

The grant
of Awards shall 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.

 

SECTION
12. AMENDMENT
AND TERMINATION

 

12.1 Amendment,
Suspension or Termination

 

Subject
to section 12.3 The Board may amend, suspend or terminate the Plan or any
portion of the Plan at any time and in such respects as it shall deem advisable;
provided, however, that, to the extent required for compliance with Section 422
of the Code or by applicable law, regulation or stock exchange rule, stockholder
approval shall be required for any amendment to the Plan. Subject to Section
12.3, the Board may amend the terms of any outstanding Award, prospectively or
retroactively.

 

12.2 Term
of the Plan

 

Unless
sooner terminated by the Board, this Plan shall terminate ten years from the
date on which this Plan is adopted by the Board. No Award may be granted after
such termination or during any suspension of this Plan. 

 







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12.3 Consent
of Participant

 

The
amendment, suspension or termination of the Plan or a portion thereof or the
amendment of an outstanding Award shall not, without the Participant’s consent,
materially adversely affect any rights under any Award theretofore granted to
the Participant under the Plan. Any change or adjustment to an outstanding
Incentive Stock Option shall not, without the consent of the Participant, be
made in a manner so as to constitute a “modification” that would cause such
Incentive Stock Option to fail to continue to qualify as an Incentive Stock
Option. Notwithstanding the foregoing, any adjustments made pursuant to Sections
11.2 and 11.3 shall not be subject to these restrictions.

 

SECTION
13. GENERAL

 

13.1 No
Individual Rights

 

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

 

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

 

13.2 Issuance
of Shares

 

Notwithstanding
any other provision of the Plan, the Company shall have no obligation to issue
or deliver any shares of Common Stock under the Plan or make any other
distribution of benefits under the Plan unless, in the opinion of the Company’s
counsel, such issuance, delivery or distribution would comply with all
applicable laws (including, without limitation, the requirements of the
Securities Act or the laws of any state or foreign jurisdiction) and the
applicable requirements of any securities exchange or similar
entity.

 

The
Company shall be under no obligation to any Participant to register for offering
or resale or to qualify for exemption under the Securities Act, or to register
or qualify under the laws of any state or foreign jurisdiction, any shares of
Common Stock, security or interest in a security paid or issued under, or
created by, the Plan, or to continue in effect any such registrations or
qualifications if made.

 

As a
condition to the exercise of an Option or any other receipt of Common Stock
pursuant to an Award under the Plan, the Company may require (a) the Participant
to represent and warrant at the time of any such exercise or receipt that such
shares are being purchased or received only for the Participant’s own account
and without any present intention to sell or distribute such shares and (b) such
other action or agreement by the Participant as may from time to time be
necessary to comply with the federal, state and foreign securities laws. At the
option of the Company, a stop-transfer order against any such shares may be
placed on the official stock books and records of the Company, and a legend
indicating that such shares may not be pledged, sold or otherwise transferred,
unless an opinion of counsel is provided (concurred in by counsel 

 







11












 

for the
Company) stating that such transfer is not in violation of any applicable law or
regulation, may be stamped on stock certificates to ensure exemption from
registration. The Plan Administrator may also require the Participant to execute
and deliver to the Company a purchase agreement or such other agreement as may
be in use by the Company at such time that describes certain terms and
conditions applicable to the shares.

 

To the
extent the Plan or any instrument evidencing an Award provides for issuance of
stock certificates to reflect the issuance of shares of Common Stock, the
issuance may be effected on a noncertificated basis, to the extent not
prohibited by applicable law or the applicable rules of any stock
exchange.

 

13.3 Indemnification

 

Each
person who is or shall have been a member of the Board, or a committee appointed
by the Board to whom authority was delegated in accordance with Section 8 shall
be indemnified and held harmless by the Company against and from any loss, cost,
liability or expense that may be imposed upon or reasonably incurred by such
person in connection with or resulting from any claim, action, suit or
proceeding to which such person may be a party or in which such person may be
involved by reason of any action taken or failure to act under the Plan and
against and from any and all amounts paid by such person in settlement thereof,
with the Company’s approval, or paid by such person in satisfaction of any
judgment in any such claim, action, suit or proceeding against such person;
provided, however, that such person shall give the Company an opportunity, at
its own expense, to handle and defend the same before such person undertakes to
handle and defend it on such person’s own behalf, unless such loss, cost,
liability or expense is a result of such person’s own willful misconduct or
except as expressly provided by statute.

 

The
foregoing right of indemnification shall not be exclusive of any other rights of
indemnification to which such person may be entitled under the Company’s
certificate of incorporation or bylaws, as a matter of law, or otherwise, or of
any power that the Company may have to indemnify such person or hold such person
harmless.

 

13.4 No
Rights as a Stockholder

 

No Award
shall entitle the Participant to any dividend, voting or other right of a
stockholder unless and until the date of issuance under the Plan of the shares
that are the subject of such Award, free of all applicable
restrictions.

 

13.5 Compliance
with Laws and Regulations

 

The
granting of Awards and the issuance of shares of Common Stock under the Plan is
subject to all applicable laws, rules and regulations, and to such approvals by
any governmental agencies or national securities exchanges as may be
required.

 

In
interpreting and applying the provisions of the Plan, any Option granted as an
Incentive Stock Option pursuant to the Plan shall, to the extent permitted by
law, be construed as an “incentive stock option” within the meaning of Section
422 of the Code.

 







12












 

13.6 Participants
in Other Countries

 

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

 

13.7 No
Trust or Fund

 

The Plan
is intended to constitute an “unfunded” plan. Nothing contained herein shall
require the Company to segregate any monies or other property, or shares of
Common Stock, or to create any trusts, or to make any special deposits for any
immediate or deferred amounts payable to any Participant, and no Participant
shall have any rights that are greater than those of a general unsecured
creditor of the Company.

 

13.8 Successors

 

All
obligations of the Company under the Plan with respect to Awards shall be
binding on any successor to the Company, whether the existence of such successor
is the result of a direct or indirect purchase, merger, consolidation, or
otherwise, of all or substantially all the business and/or assets of the
Company.

 

13.9 Severability

 

If any
provision of the Plan or any Award is determined to be invalid, illegal or
unenforceable in any jurisdiction, or as to any person, or would disqualify the
Plan or any Award under any law deemed applicable by the Plan Administrator,
such provision shall be construed or deemed amended to conform to applicable
laws, or, if it cannot be so construed or deemed amended without, in the Plan
Administrator’s determination, materially altering the intent of the Plan or the
Award, such provision shall be stricken as to such jurisdiction, person or
Award, and the remainder of the Plan and any such Award shall remain in full
force and effect.

 

13.10 Choice
of Law and Venue

 

The Plan,
all Awards granted thereunder and all determinations made and actions taken
pursuant hereto, to the extent not otherwise governed by the laws of the United
States, shall be governed by the laws of the State of Washington without giving
effect to principles of conflicts of law. Participants irrevocably consent to
the nonexclusive jurisdiction and venue of the state and federal courts located
in the State of Washington.

 

SECTION
14. EFFECTIVE
DATE

 

The
effective date is the date on which the Plan is adopted by the Board. If the
stockholders of the Company do not approve the Plan within 12 months after the
Board’s adoption of the Plan, any Incentive Stock Options granted under the Plan
will be treated as Nonqualified Stock Options.

 







13












 

APPENDIX
I

 

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

 

“Award” means
any award or grant made to a Participant pursuant to the Plan, including awards
or grants of Incentive Stock Options 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 or otherwise
shall have the meaning assigned to such term in any individual Participant’s
written employment service or other agreement with the Company or any Related
Company, and additionally, in any event shall include (or in the absence of any
such written employment arrangement shall mean) dishonesty, fraud, misconduct,
unauthorized use or disclosure of confidential information or trade secrets,
conduct prohibited by criminal law (except minor violations), in each case as
determined by the Company’s chief human resources officer or other person
performing that function or, in the case of directors and executive officers,
the Board, each of whose determination shall be conclusive and
binding.

 

“Code” means
the Internal Revenue Code of 1986, as it 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 date this 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 Washington corporation.

 

“Corporate
Transaction” means
any of the following events: 

 


	(a)  	
      Consummation
      of any merger or consolidation of the Company in which the Company is not
      the continuing or surviving corporation, or pursuant to which shares of
      the Common Stock are converted into cash, securities or other property, if
      following such merger or consolidation the Participants of the Company's
      outstanding voting securities immediately prior to such merger or
      consolidation own less than 66-2/3% of the outstanding voting securities
      of the surviving corporation; 








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













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	(c)  	
      Approval
      by the Participants of the Common Stock of any plan or proposal for the
      liquidation or dissolution of the Company;









	(d)  	
      Acquisition
      by a person, within the meaning of Section 3(a)(9) or of Section 13(d)(3)
      (as in effect on the date of adoption of the Plan) of the Exchange Act of
      a majority or more of the Company's outstanding voting securities (whether
      directly or indirectly, beneficially or of record); or
    








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







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

 

“Employer” means
individually or collectively the Company or its Related Companies.

 

“Effective
Date” has the
meaning set forth in Section 14.

 

“Eligible
Person” means
any person eligible to receive an Award 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 the Common Stock as established in good faith
by the Plan Administrator.

 

“Good
Reason” means
the occurrence of any of the following events or conditions and the failure of
the Successor Corporation to cure such event or condition within 30 days after
receipt of written notice by the Participant: 

 


	(a)  	
      a
      change in the Participant's status, title, position or responsibilities
      (including reporting responsibilities) that, in the Participant's
      reasonable judgment, represents a substantial reduction in the status,
      title, position or responsibilities as in effect immediately prior
      thereto; the assignment to the Participant of any duties or
      responsibilities that, in the Participant's reasonable judgment, are
      materially inconsistent with such status, title, position or
      responsibilities; or any removal of the Participant from or failure to
      reappoint or reelect the Participant to any of such positions, except in
      connection with the termination of the Participant's employment for Cause,
      for Disability or as a result of his or her death, or by the Participant
      other than for Good Reason; 








	(b)  	
      a
      reduction in the Participant's annual base salary;









	(c)  	
      the
      Successor Corporation's requiring the Participant (without the
      Participant's consent) to be based at any place outside a 35-mile radius
      of his or her place of 





 







15












 


	 	employment prior to a Corporate Transaction, except
      for reasonably required travel on the Successor Corporation's business
      that is not materially greater than such travel requirements prior to the
      Corporate Transaction; 








	(d)  	
      the
      Successor Corporation's failure to (i) continue in effect any material
      compensation or benefit plan (or the substantial equivalent thereof) in
      which the Participant was participating at the time of a Corporate
      Transaction, including, but not limited to, the Plan, or (ii) provide the
      Participant with compensation and benefits substantially equivalent (in
      terms of benefit levels and/or reward opportunities) to those provided for
      under each material employee benefit plan, program and practice as in
      effect immediately prior to the Corporate Transaction;
    








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








	(f)  	
      any
      purported termination of the Participant's employment or service for Cause
      by the Successor Corporation that does not comply with the terms of the
      Plan or any substantially equivalent plan of the Successor Corporation.
      







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

 

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

 

“Nonqualified
Stock Option” means an
Option other than an Incentive Stock Option.

 

“Option” means a
right to purchase Common Stock granted under Section 6.

 

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

 

“Option
Term” means
the maximum term of an Option as set forth in Section 6.3.

 

“Participant” means
any Eligible Person to whom an Award is granted.

 

“Plan” means
the ProCyte Corporation 2004 Stock Option Plan.

 

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

 

“Related
Company” means
any entity that, directly or indirectly, is in control of, is controlled by or
is under common control with the Company, or in which the Company has a
significant ownership interest, as determined by the Plan
Administrator.

 







16












 

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

 

“Substitute
Awards” means
Awards granted or shares of Common Stock issued by the Company in assumption of,
or in substitution or exchange for, awards previously granted by an Acquired
Entity.

 

"Successor
Corporation" means an
entity described in Section 11.2.

 

"Ten
Percent Shareholder" means an
employee who owns more than 10% of the total combined voting power of all
classes of stock of the Company or any Related Corporation. The determination of
more than 10% ownership shall be made in accordance with Section 422 of the
Code.

 

“Termination
of Service” means a
termination of employment or service relationship with the Company or a Related
Company for any reason, whether voluntary or involuntary, including by reason of
death or Disability. Any question as to whether and when there has been a
Termination of Service for the purposes of an Award and the cause of such
Termination of Service shall be determined by the Company’s chief human
resources officer or other person performing that function or, in the case of
directors and executive officers, the Board, each of whose determination shall
be conclusive and binding. Transfer of a Participant’s employment or service
relationship between the Company and any Related Company shall not be considered
a Termination of Service for purposes of an Award. Unless the Board determines
otherwise, a Termination of Service shall be deemed to occur if the
Participant’s employment or service relationship is with an entity that has
ceased to be a Related Company.

 








17