SIGMA LABS, INC.

INCENTIVE STOCK OPTION AGREEMENT


 


THIS INCENTIVE STOCK OPTION AGREEMENT (this
“Agreement”) is made as of the __ day of -___________, 201__ by and between Sigma Labs, Inc., a Nevada corporation
(the “Company”), and ________ _________ (“Optionee”).


 


RECITAL


 


The action of the Board of Directors of
the Company (the “Board”) has authorized the granting to Optionee as an employee of the Company of an incentive stock
option, pursuant to the Company’s 2013 Equity Incentive Plan (the “Plan”), to purchase the number of shares of
common stock of the Company specified in Section 1 hereof, at the price specified therein, such option to be for the term and upon
the terms and conditions hereinafter stated.


 


AGREEMENT


 


NOW, THEREFORE, in consideration of the
premises and of the undertakings of the parties hereto contained herein, it is hereby agreed:


 


1.                 
Number of Shares; Option Price. Pursuant to said action of the Board, the Company hereby grants to Optionee the option
(“Option”) to purchase, upon and subject to the terms and conditions of the Plan, __________ shares of common stock
of the Company (“Shares”) at the price of $______ per Share (which price shall be no less than the fair market value
of a Share on the date of grant of this Option).


 


2.                 
Term. This Option shall expire on the day before the ______ anniversary of the date of grant of the Option (the “Expiration
Date”), unless such Option shall have been terminated prior to that date in accordance with the provisions of this Agreement.


 


3.                 
Shares Subject to Exercise. This Option shall be exercisable in installments as to ___________ of the number of Shares
on the first ______ anniversary of the date hereof, as to ___________ of the number of Shares on the second ______ anniversary
of the date hereof, and as to ___________ of the number of Shares on the third ______ anniversary of the date hereof provided,
however, that an installment shall not become exercisable if the Optionee is not employed as an employee of the Company,
or any of its subsidiaries, as of such anniversary date. Once exercisable, the Option shall thereafter remain exercisable as to
such Shares for the term specified in Section 2 hereof, unless Optionee’s employment is terminated pursuant to Section 6
hereof or the Option is terminated pursuant to a Corporate Transaction (as defined in the Plan).


 


4.                 
Method and Time of Exercise. The Option may be exercised by written notice delivered to the Company at its principal
executive office stating (i) that Optionee has no plan to violate Section 16 in the future, (ii) that Optionee agrees to notify
the Company within ten (10) days of a violation of Section 16 hereof, and (iii) the number of shares with respect to which the
Option is being exercised, together with:


 






    	 



    	 



    

 


(A)            
a check or money order made payable to the Company in the amount of the exercise price and any withholding tax, as provided
under Section 5 hereof; or


 


(B)             
if expressly authorized in writing by the Board, in its sole discretion, at the time of the Option exercise, the tender
to the Company of shares of the Company’s common stock owned by Optionee having a fair market value not less than the exercise
price; or


 


(C)             
if expressly authorized in writing by the Board, subject to the Sarbanes-Oxley Act of 2002, in its sole discretion, at the
time of the Option exercise, the Optionee’s full recourse promissory note in a form approved by the Company; or


 


(D)            
if any other method such as cashless exercise is expressly authorized in writing by the Board, in its sole discretion, at
the time of the Option exercise, the tender of such consideration having a fair market value not less than the exercise price.


 


Only whole shares may be purchased.


 


5.                 
Tax Withholding. In general, no tax withholding is required with respect to this Option or its exercise. If, however,
for any reason all or part of this Option is considered to be a non-qualified stock option, rather than an incentive stock option,
then, as a condition to exercise of such portion of this Option, the Company may require Optionee to pay over to the Company all
applicable federal, state and local taxes which the Company is required to withhold with respect to the exercise of this Option
in that connection. At the discretion of the Board and upon the request of Optionee, the minimum statutory withholding tax requirements
may be satisfied by the withholding of Shares otherwise issuable to Optionee upon the exercise of this Option.


 


6.                 
Exercise on Termination of Employment. If for any reason Optionee ceases to be employed by the Company or any of
its subsidiaries (such event being called a “Termination”), this Option (to the extent then exercisable) may be exercised
in whole or in part at any time, except with respect to a Termination For Cause, only within 90 days of the date of such Termination,
but in no event after the earlier of the Expiration Date or a Corporate Transaction which terminates the Option pursuant to Section
15 hereof. For purposes of this Agreement, “employment” means service as an employee. For purposes of this Agreement,
Optionee’s employment shall not be deemed to terminate by reason of a transfer to or from the Company or its subsidiary or
among such entities, or sick leave, military leave or other leave of absence approved by the Board, if the period of any such leave
does not exceed ninety (90) days or, if longer, if Optionee’s right to reemployment by the Company or any Affiliate is guaranteed
either contractually or by statute. For purposes of this Agreement, “Termination For Cause” shall mean Optionee’s
loss of employment by the Company or any of its subsidiaries due to Optionee’s (a) willful breach or habitual neglect or
continued incapacity to perform Optionee’s required duties, (b) commission of acts of dishonesty, fraud, misrepresentation
or other acts of moral turpitude as would prevent the effective performance of Optionee’s duties or (c) termination for cause
under any employment agreement between the Company and Optionee (as defined therein). In the event Optionee’s employment
by the Company or any of its subsidiaries is Terminated For Cause, then the Option shall cease to be exercisable as of the date
of such Termination.


 






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7.                 
Non-Transferability. This Option may not be assigned or transferred except by will or by the laws of descent and
distribution, and may be exercised only by Optionee during the Optionee’s lifetime and after the Optionee’s death,
by the Optionee’s personal representative or by the person entitled thereto under the Optionee’s will or the laws of
intestate succession.


 


8.                 
Optionee Not a Stockholder. Optionee shall have no rights as a stockholder with respect to the Shares covered by
this Option until the date of issuance of a stock certificate or stock certificates to the Optionee upon exercise of this Option.
No adjustment will be made for dividends or other rights for which the record date is prior to the date such stock certificate
or certificates are issued.


 


9.                 
No Right to Employment. Nothing in the Option granted hereby shall interfere with or limit in any way the right of
the Company or of any of its subsidiaries to terminate Optionee’s employment, consulting or advising at any time, nor confer
upon Optionee any right to continue in the employ of, consult with, or advise the Company or any of its Subsidiaries.


 


10.             
Modification and Waiver. This Option may not be modified except by a writing signed by both parties, except that
either party may waive any right hereunder by an instrument unilaterally signed.


 


11.             
Restrictions on Sale of Shares. Optionee represents and agrees that upon the Optionee’s exercise of this Option,
in whole or in part, unless there is in effect at that time under the Securities Act of 1933 a registration statement relating
to the Shares issued to the Optionee, the Optionee will acquire the Shares issuable upon exercise of this Option for the purpose
of investment and not with a view to their resale or further distribution, and that upon such exercise thereof the Optionee will
furnish to the Company a written statement to such effect, satisfactory to the Company in form and substance. Optionee agrees that
any certificates issued upon exercise of this Option may bear a legend indicating that their transferability is restricted in accordance
with applicable state and federal securities law. Any person or persons entitled to exercise this Option under the provisions of
Sections 6 and 7 hereof shall, upon each exercise of this Option under circumstances in which Optionee would be required to furnish
such a written statement, also furnish to the Company a written statement to the same effect, satisfactory to the Company in form
and substance.


 


12.             
Nevada Law Governs. This Agreement shall be interpreted under the internal laws of the State of Nevada and any action
hereunder shall be brought in the state or federal courts of Nevada.


 






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13.             
Notices. All notices to the Company shall be addressed to the Corporate Secretary at the principal executive office
of the Company at 100 Cienega Street, Suite C, New Mexico 87501, and all notices to Optionee shall be addressed to Optionee at
the address of Optionee on file with the Company, or to such other address as either may designate to the other in writing. A notice
shall be deemed to be duly given if and when enclosed in a properly addressed sealed envelope deposited, postage prepaid, with
the United States Postal Service. In lieu of giving notice by mail as aforesaid, written notices under this Agreement may be given
by personal delivery to Optionee or to the Corporate Secretary (as the case may be).


 


14.             
Sale or Other Disposition. If Optionee at any time contemplates the disposition (whether by sale, gift, exchange,
or other form of transfer) of any Shares acquired by exercise of this Option, the Optionee shall first notify the Company in writing
of such proposed disposition and cooperate with the Company in complying with all applicable requirements of law, which, in the
judgment of the Company, must be satisfied prior to such disposition.


 


15.             
Corporate Transactions. In the event of a Corporate Transaction (as such term is defined in the Plan), the Board
shall notify Optionee at least thirty (30) days prior thereto or as soon as may be practicable. To the extent not previously exercised,
this Option shall terminate immediately prior to the consummation of such Corporate Transaction unless the Board determines otherwise
in its sole discretion; provided, however, that the Board, in its sole discretion, may (i) permit exercise of this
Option prior to its termination, even if this Option would not otherwise have been exercisable, and (ii) provide that this Option
shall be assumed or an equivalent option substituted by an applicable successor corporation or any subsidiary of the successor
corporation


 


16.             
Non-Compete Agreement. Notwithstanding anything to the contrary provided herein, as a condition to the receipt of
Shares pursuant to the exercise of this Option, at any time during which this Option is outstanding and for six (6) months after
any exercise of this Option or the receipt of Shares pursuant to the exercise of this Option, Optionee shall not directly or indirectly,
as agent, employee, consultant, stockholder, partner or in any other capacity, own, operate, manage, control, engage in, invest
in or participate in any manner in, act as a consultant or advisor to, render services for, or otherwise assist any person or entity
that engages in or owns, invests in, operates, manages or controls, any venture or enterprise that directly or indirectly competes
with the Company, provided, however, that nothing contained herein shall be construed to prevent Optionee from investing
in the stock of any competing corporation listed on a national securities exchange or traded in the over-the-counter market, but
only if Optionee is not involved in the business of said corporation and if Optionee (together with Optionee’s spouse, parents,
siblings, and children) does not own more than an aggregate of five percent (5%) of the stock of such corporation. Optionee agrees
to notify the Company within ten (10) days of any violation of this Section 16. Failure to comply with this Section 16 shall cause
such Option and the exercise or issuance of Shares hereunder to be rescinded and the benefit of such exercise or issuance to be
repaid to the Company. Optionee agrees and understands that Optionee’s failure to comply with this Section 16 will subject
Optionee’s benefit from the Option to be forfeited and repaid to the Company, and Optionee agrees to do so within ten (10)
days of notification by the Company.


 






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IN WITNESS WHEREOF, the parties hereto have
executed this Agreement as of the date and year first above written.


 


	 	SIGMA LABS, INC.
	 	 	 
	 	By:	 
	 	 	Name:
	 	 	Title:
	 	 	 
	 	OPTIONEE:
	 	 	 
	 	 	 
	 	 	 
	 	Address:
	 	 	 
	 	 
	 	 
	 	 
	 	 	 
	 	 
	 	Social Security Number


 






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