Exhibit 10.18


 


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.


 


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.


 


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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%

  



 


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


 


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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:


 


(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.


 


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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:


 


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.


 


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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.


 


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.


 


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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.


 


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.


 


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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 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


 


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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 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 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 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.


 


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


 


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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 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.


 


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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.


 


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.


 


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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.


 


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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;


 


(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.


 


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“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 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.


 


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“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.


 


“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.


 


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