Exhibit 10.1


 


CYANOTECH CORPORATION


 


2004 INDEPENDENT DIRECTOR STOCK OPTION AND RESTRICTED STOCK GRANT PLAN


Amended, Reformed and Restated November 5, 2010


 


I.                                        Purposes


 


The
purposes of this 2004 Independent Director Stock Option and Restricted Stock
Grant Plan (the “2004 Plan”) are: i) to provide additional incentive for
securing and retaining qualified non-employee persons to serve on the Board of
Directors of Cyanotech Corporation (“Cyanotech” or the “Company”); and ii) to
enhance the future growth of the Company by further aligning the independent
directors interests with the interests of the Company and its stockholders.. It
is intended that all Stock Options granted under the 2004 Plan will be Non-
Qualified Stock Options.


 


II.                                   Definitions


 


(a)                                 In the 2004
Plan, except where the context otherwise indicates, the following definitions
apply:


 


(1)                                 “Company” or “Cyanotech”
means Cyanotech Corporation, a Nevada corporation.


 


(2)                                 “Board” means
the Board of Directors of the Company.


 


(3)                                 “Independent
Director” means a person who as of any applicable date is a member of the
Company’s Board and is considered “independent” under Nasdaq Rule 4200A.


 


(4)                                 “Share” means a
share of Stock that has been previously: (i) authorized but unissued; or (ii) issued
and reacquired by the Company.


 


(5)                                 “Stock” or “Common
Stock” means the common stock, $0.02 par value per share, of the Company,
authorized or outstanding on the Effective Date, or any common stock or equity
securities that may be issued in respect of such Common Stock in the even of
any stock split, combination of Shares, recapitalization or other change in the
Company’s then outstanding Common Stock. 
[adjusted by reverse stock split on November 3,
2006]


 


(6)                                 “Stock Option”
or “Option” means an option to purchase Shares issued hereunder.


 


(7)                                 “Code” means
the Internal Revenue Code of 1986, as amended. References herein to any section
of the Code shall include any successor section of the Code or its successor.


 


(8)                                 “Non-Qualified
Stock Option” means an option which does not meet the requirements of Section 422A(b) of
the Code.


 


(9)                                 “Participant”
means any Independent Director of the Company who is granted a Stock Option or
Stock hereunder.


 


(10)                          “Securities Act”
means the Securities Act of 1933, as now in effect or as hereafter amended.


 


(11)                          “Disability”
means the Participant so affected is unable to engage in substantial gainful
activity by reason of any medically determinable physical or mental impairment
which can be expected to result in death or which has lasted or can be expected
to last for a continuous period of not less than 12 months. A determination by
a majority of the Board, other than the Participant, as to whether the
Participant has incurred a Disability shall be final and conclusive as to all
interested parties.


 

















 


(12)                          “Designated
Beneficiary” means the person designated to be entitled, on the death of a
Participant, to any remaining rights arising out of a Stock Option grant. If no
such designation has been made by the Participant, or if the Designated
Beneficiary should pre-decease the Participant, any remaining rights arising
out of a Stock Option grant shall inure to the executor or administrator of the
Participant’s estate or to his/her heirs at law if there is no administration
for the Participant’s estate.


 


(13)                          “Effective Date”
means the date on which the 2004 Plan is approved by the stockholders of the
Company.


 


(14)                          “Fair Market
Value” means, with respect to valuation of a share of the Company’s Common
Stock on any date herein specified, the closing sale price for such date (on
which trades have occurred) as quoted by the Nasdaq Small-Cap Market List, or
if the Company’s Common Stock is listed on an alternate national securities
exchange as of such date, the closing sale price reported by such national
securities exchange for such date. If the Common Stock is not included in the
Nasdaq Small-Cap Market List or is not listed on an alternate national
securities exchange as of such date, “Fair Market Value” shall mean the closing
sale price quoted by an established quotation service for over-the-counter
securities. In the event the Common Stock is not publicly traded at the time a
determination of its Fair Market Value is required to be made hereunder, the
determination of Fair Market Value shall be made by the Board in good faith in
such manner as it deems appropriate. In no event shall the “Fair Market Value”
be lower than the par value per share of the Company’s Common Stock.


 


(15)                          “Terminate”
means to cease to be a Director of the Company.


 


(16)                          “Termination of
Directorship” means the cessation of any Participant to be a Director for any
reason whatsoever, voluntarily or involuntarily. A Termination of Directorship
shall be deemed to occur on the actual date of such termination (by death,
disability, retirement, resignation, non election or otherwise)


 


III.                              Grants
of Stock Options and Restricted Stock


 


(a)                                 Options     Options will be granted to persons who are
newly elected Independent Directors of the Company. On the Effective Date, each
newly elected Independent Director shall receive without the exercise of the
discretion of any person or persons, 10-year Options exercisable for 1,000
shares. Thereafter, as of the date of the annual meeting of stockholders in
each year after 2004 that the 2004 Plan is in effect, as provided in Section V
hereof; each Independent Director then elected or continuing in office who did
not previously receive a grant of Options hereunder shall receive, without the
exercise of the discretion of any person or persons, 10-year Options
exercisable for 1,000 Shares. If, as of such annual meeting date, there are not
sufficient Shares available under the 2004 Plan to allow for the grant to each
eligible Independent Director of Options of Shares pursuant to Section III
(d) for the number of Shares provided herein, each eligible Independent
Director shall receive Options or Shares for a pro rata share of the total
number of Shares available under the 2004 Plan. All Options granted under the
2004 Plan shall be (i) at the Option price set forth in subsection (b) of
this Section III, (ii) subject to the exercise restriction set forth
in subsection (c) of this Section III, and (iii) subject to
adjustment as provided in Section VII and to the terms and conditions set
forth in Section VIII.  [adjusted for reverse stock split, November 3, 2006]


 


(b)                                 Purchase
Price     The purchase
price of Shares issued under each Option (sometimes also referred to as the
exercise price) shall be at the Fair Market Value of Shares subject to the
Option on the date the Option is granted.


 


(c)                                  Vesting     All Options granted hereunder shall vest
and become exercisable six months from the date of grant.


 


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(d)                                 Restricted
Stock Grants     As of the
date of the annual meeting of stockholders in each year after 2004 that the
2004 Plan is in effect, as provided in Section V, each Independent
Director then elected or continuing in office who had previously received a
stock option grant pursuant to Section III (a) will be issued,
without the exercise of the discretion of any person or persons and without
payment, 875 Shares of the Company’s fully paid and non-assessable Shares of
Common Stock; provided, however, for independent directors elected since the September 2009
annual stockholders meeting, the annual grant is increased to 2,000 shares for
each independent director other than the Chairman and in the case of the
independent director designated as Chairman, the annual grant shall be 4,000
shares; provided further, that for fiscal year 2010, the grant for independent
directors shall be adjusted to one-half of the 875 share annual grant
heretofore plus one-half of the new independent director annual grant of 2,000
shares, and in the case of the Chairman of the Board one-half of the new annual
grant of 4,000 shares.  For the avoidance
of any ambiguity, such grants shall be adjusted as of March 24, 2010, net
of the grants issued as of September 9, 2009, and result in additional
grants for fiscal year 2010 to the Chairman of 1,563 shares of the Company’s
Common Stock and to the other independent director members of the Board of 563
shares of such Common Stock, in each case to be valued at the closing price on
NASDAQ on March 24, 2010. 
Thereafter, so long as the total number of shares reserved for issuance
under the 2004 Director Stock Plan have not been exhausted, restricted stock
grants shall be made on the date of the annual stockholders meeting without
further adjustment.  If, as of such
annual meeting date there are not sufficient Shares available under the 2004
Plan to allow the grant to each eligible Independent Director of Shares or
Options pursuant to Section III (a) for the number of shares provided
herein, each eligible Independent Director will receive Shares or Options for a
pro rata share of the total number of Shares available under the 2004 Plan. All
Shares granted under this Section III(d) are non-transferable for six
months following the grant date.  [amended March 24, 2010]


 


(e)                                  No Independent
Director shall be required to forfeit or otherwise return to the Company any
Shares of Common Stock issued to him or her as a grant pursuant to the 2004
Plan notwithstanding any change in status of such Independent Director which
renders him or her ineligible to continue as a Participant in the 2004 Plan.
Any person who is an Independent Director immediately following the date of the
Company’s Annual Meeting of Stockholders shall be entitled to receive an Option
or Stock grant notwithstanding any change in status of such Independent
Director which renders such Director ineligible to continue participation in
the 2004 Plan prior to delivery of certificates evidencing Shares of Common
Stock.


 


IV.                               Administration


 


(a)                                 The 2004 Plan
shall be administered by the Company’s Chief Executive Officer and Chief
Financial Officer (“Administrators”). The Administrators are responsible for
administering the 2004 Plan. The Administrators have authority to adopt rules as
they may deem appropriate to carry out the purposes of the 2004 Plan, have
authority to interpret and construe the provisions of the 2004 Plan and any
agreements and notices under the 2004 Plan and to make determinations pursuant
to any 2004 Plan Provision. Each interpretation, determination or order or
action made or taken by the Administrators pursuant to the 2004 Plan is final
and binding on all persons. The Administrators are not liable for any action or
determinations made in good faith, and are entitled to indemnification and
reimbursement in the manner provided in the Company Articles of Incorporation
and By-Laws as such documents may be amended from time to time.


 


(b)                                 The
Administrators may, in their discretion, delegate duties to an officer or
employee or a committee composed of officers or employees of the Company, but
it may not delegate its authority to apply and interpret this 2004 Plan.


 


V.                                    Term


 


The
term of this 2004 Plan commences on the Effective Date and will terminate at
11:59 PM (Hawaii Standard Time) on the date of the annual meeting of
stockholders in the year 2014. This 2004 Plan shall remain in effect for the
purposes administration of any Stock Options granted pursuant to its provisions
and no such Stock Option granted during the term of this 2004 Plan shall be
affected adversely by the termination of the 2004 Plan.


 


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VI.                               Shares
Reserved; Options Grantable and Exercisable


 


(a)                                 Subject to
adjustment as provided in Section VII hereof, a total of 75,000 Shares
shall be subject to issuance under the 2004 Plan. The Shares subject to the
2004 Plan shall be and are hereby reserved for issuance pursuant to the 2004
Plan. Any of the Shares that are not subject to outstanding Options at the
termination of the 2004 Plan shall cease to be reserved for the purposes of the
2004 Plan. If any Option expires or is cancelled prior to its exercise in full,
the Shares theretofore subject to such Option will return to the pool of
available Shares may again be granted by an Option or Stock Grant under the
2004 Plan.  [reformed March 24,
2010 to correct number of shares reserved by original stockholder vote in 2004,
and further adjusted by November 3, 2006 reverse stock split]


 


(b)                                 As to a
Participant, an Option ceases to be exercisable, as to any Share, when the
Participant purchases the Shares or when the Option lapses.


 


VII.                          Adjustments


 


(a)                                 The existence
of outstanding Stock Options shall not affect in any way the right or power of
the Company or its stockholders to make or authorize any or all adjustments,
recapitalizations, reorganizations or other changes in the Company’s capital
structure or its business, or any merger or consolidation of the Company, or
any issue of bonds, debentures, preferred or prior preference stock ahead of,
or affecting, the Common Stock or the rights thereof, or the dissolution or
liquidation of the Company, or any sale or transfer of all or any part of its
assets of business, or any other corporate act or proceeding, whether of a
similar character or otherwise.


 


(b)                                 If the Company
shall effect a subdivision or consolidation of shares or other capital
readjustment, the payment of a stock dividend, or other increase or reduction
of the number of shares of Common Stock outstanding, without receiving
compensation therefor in money, services or property, then: (i) the number
and per share price of shares of Common Stock subject to outstanding Stock
Options hereunder shall be appropriately adjusted in such a manner as to
entitle a Participant to receive upon exercise of a Stock Option, for the same
aggregate cash consideration, the same total number and class or classes of
Shares as the Participant would have received had he or she exercised his or
her Stock Option in full immediately prior to the event requiring the
adjustment; and (ii) the number and class or classes of shares then
reserved for issuance under the 2004 Plan shall be adjusted by substituting for
the total number of Shares of Common Stock then reserved that number and class
or classes of Shares of Common Stock that would have been received by the owner
of an equal number of outstanding Shares of Common Stock as the result of the
event requiring the adjustment.


 


(c)                                  If, while
unexercised Stock Options remain outstanding under the 2004 Plan: (i) the
Company is merged into or consolidated with another corporation under
circumstances where the Company is not the surviving corporation or the Common
Stock is converted into other securities, cash or other property in connection
with such merger or consolidation; (ii) the Company sells or otherwise disposes
of substantially all its assets to another person, corporation or entity; (iii) the
Company is liquidated or dissolved; (iv) over 50 percent of the
outstanding Common Stock is acquired by another corporation in exchange for
stock (or stock and other securities) of such corporation; or (v) over 50
percent of the then outstanding Common Stock is acquired in a single
transaction or a series of related transactions, then after the effective date
of such merger, consolidation, exchange, liquidation, sale or acquisition, as
the case may be, each holder of an outstanding Stock Option shall be entitled,
upon exercise of such Stock Option, to receive, in lieu of shares of Common
Stock, shares of such stock or other securities of the Company or the surviving
or acquiring corporation or such other property at the same rate per share as
the holders of shares of Common Stock received pursuant to the terms of the
merger, consolidation, exchange liquidation, sale or acquisition.


 


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(d)                                 Except as
expressly provided herein, the issuance by the Company of shares of stock of
any class, or securities convertible into shares or stock of any class, for
cash, property, labor, or services, either upon direct sale, exercise of tights
of warrants to subscribe therefor, or 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, the number,
class or price of Shares of Common Stock then subject to outstanding Stock
Options.


 


VIII.                     Terms
and Conditions of Stock Options


 


(a)                                 During the
Participant’s life, the Stock Option is exercisable only by the Participant or
by his or her guardian or legal representative.


 


(b)                                 A Stock Option
under this 2004 Plan is not assignable or transferable, except by will or by
the laws of descent and distribution or pursuant to a qualified domestic
relations order (as defined in the Code), and is not subject, in whole or in
part, to attachment, execution or levy of any kind.


 


(c)                                  Any Stock
Option or portion thereof that is exercisable shall be exercisable for the full
amount or for any part thereof.


 


(d)                                 Stock Options
shall be exercised by the delivery of written notice to the Company setting
forth the number of Shares of Common Stock with respect to which the Stock
Option is to be exercised and, subject to the provisions hereof, the address to
which the certificates representing shares issuable upon the exercise of such
Stock Option shall be mailed. In order to be effective, such written notice
shall be accompanied at the time of its delivery to the Company by payment of
the exercise price of such Shares, which payment shall be made in cash or by
check, bank draft, or postal or express money order payable to the order of the
Company in an amount (in United States dollars) equal to the exercise price of
such Shares or as provided in subsection (e) below. Such notice shall be
delivered in person to the Secretary of the Company, or shall be sent by
registered mail, return receipt requested, to the secretary of the Company, in
which case, delivery shall be deemed made on the date such notice is deposited
in the mail. When Shares are to be issued or delivered pursuant to the 2004
Plan, but only to the extent that the Company determines that tax withholding
is required pursuant to applicable law or regulation, the Company shall require
the Participant to remit to the Company an amount sufficient to satisfy
federal, state and local withholding tax requirements prior to the delivery of
any certificate or certificates for such Shares, which payment may be made in
the manner set forth above or in the manner permitted by clause (c) below.


 


(e)                                  Alternatively,
payment of the exercise price may be made, in whole or in part, by delivery of
Shares previously issued to the Participant. Unless otherwise permitted by the
Board, payment of the exercise price in Shares shall be made only with Shares
owned by the Participant for at least six (6) months. If payment is made
in whole or in part in Shares owned by the Participant, then the Participant
shall deliver to the Company, exercised: (i) certificates registered in
the name of such Participant, free of all liens, claims and encumbrances of
every kind and having a Fair Market Value as of the date of delivery of such
notice that is not greater than the exercise price of the Shares of Common
Stock with respect to which such Stock Option is to be exercised plus any
applicable tax required to be withheld by the Company, such certificates to be
accompanied by stock powers duly endorsed in blank by the record holder of the
Shares represented by such certificates; and (ii) if the exercise price of
the Shares with respect to which such Stock Option is to be exercised exceeds
such Fair Market Value, cash or check, bank draft or postal or express money
order payable to the order of the Company in an amount (in United States
dollars) equal to the amount of such excess.


 


(f)                                   Stock Options
granted to any Participant under this 2004 Plan shall be subject to the
following conditions:


 


(1)                                 The price per
share shall be as set forth in Section III.


 


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(2)                                 Except as
otherwise provided in paragraph (3) below, each Stock Option shall have a
term of ten (10) years from the date such Option is granted and shall vest
in accordance with Section III(c) hereof.


 


(3)                                 A Stock Option
shall lapse and expire in the following situations:


 


(i)                   If a Termination of
Directorship occurs with respect to any Participant, for any reason other than
death or Disability, any and all unexercised and vested Stock Options held by
such Participant shall expire: (A) as of 12:01 AM (Hawaii Standard Time)
on the date which is three (3) months after the date of such Termination
of Directorship; or (B) on the expiration date of the term of the Stock
Option, whichever date is earlier.


 


(ii)                If a Termination of
Directorship occurs with respect to any Participant by reason of the death or
Disability of such Participant, any and all unexercised and vested Stock
Options shall expire: (A) as of 12:01 AM (Hawaii Standard Time) on the
date which is one (1) year from the date of the Termination of
Directorship due to such death or Disability; or (B) on the expiration
date of the term of the Stock Option, whichever date is earlier. Any such
vested and unexercised Stock Option may be exercised by the Designated
Beneficiary of a deceased Participant, or the legal guardian of a disabled
Participant, subject to all applicable provisions of the 2004 Plan.


 


(iii)             In the event of Participant’s
Termination of Directorship for any reason other than not being re-elected at
an annual meeting of stockholders, including death or disability, any portion
of a previously granted Stock Option that was not exercisable on the date of
such Termination of Directorship shall automatically expire as of 12:01 AM
(Hawaii Standard Time) on the date of Termination of Directorship, and no
further vesting of such Stock Option shall occur.


 


IX.                              Power
to Amend


 


The
Board of Directors may modify, revise or terminate the 2004 Plan at any time
and from time to time; provided, however, that the 2004 Plan shall not be
amended more than once every six (6) months, other than to comport with
changes in the Code, or the regulations thereunder, or the Employee Retirement
Income Security Act of 1974, as amended, or the regulations thereunder; and
provided, further, that without the approval of the holders of at least a
majority of the outstanding Shares of the Company’s voting stock, the Board of
Directors may not (i) materially increase the benefits accruing to
Participants under the 2004 Plan; (ii) change the aggregate number of
Shares which may be issued under the 2004 Plan; (iii) reduce the Option
price at which Options have been granted; or (iv) change the class of
persons eligible to receive Options. However, no termination or amendment of
the 2004 Plan may, without the consent of the holder of any Option then
outstanding adversely affect the rights of such holder under the Option.


 


X.                                   Exercise
of Options; No Registration


 


The
Company shall not be required to sell or issue any shares of Common Stock under
any Stock Option or grant Shares if the issuance of such shares shall
constitute a violation by the Participant or the Company of any provision of
any law, statute, or regulation of any governmental authority whether it be
Federal or State. Specifically, in connection with the Securities Act, upon
grant of Shares or exercise of any Stock Option, unless a registration statement
under the Securities Act is in effect with respect thereto, the Company shall
not be required to issue such shares unless the Board has received evidence
satisfactory to it to the effect that the holder is acquiring such shares of
Common Stock for investment and not with a view to the distribution thereof,
and that such shares of Common Stock may otherwise be issued without
registration under the Securities Act or state securities laws. Any
determination in this connection by the Board shall be final, binding and
conclusive. The Company may, but shall in no event be obligated to, register
any securities covered hereby pursuant to the Securities Act. The Company shall
not be obligated to take any affirmative action in order to cause the exercise
of a Stock Option, or the issuance of shares pursuant thereto, to comply with
any law or regulation of any governmental authority. Certificates for Stock issued
under the 2004 Plan are subject to such legends, stock transfer orders and
other restrictions as the Company may consider necessary or advisable.


 


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XI.                              Withholding


 


The
provisions of this section shall apply only to the extent that the Company
determines that tax withholding is required, pursuant to applicable law or
regulation, at the time that Shares are to be issued or delivered pursuant to
the 2004 Plan. If the Company determines that tax withholding is required, the
Company shall require the Participant to remit to the Company and amount
sufficient to satisfy any applicable federal, state and local withholding tax
requirements prior to the delivery of any certificate or certificates for
Shares. The Company shall also have the right to withhold from any fees or
other compensation payable by the Company to the Participant an amount
sufficient to satisfy any applicable federal, state and local withholding tax
requirement.


 


XII.                         Stock
Option Agreement


 


The
Stock Options awarded to a Participant shall be evidenced by a separate written
agreement (the “Stock Option Agreement”) which shall be subject to the terms
and provisions of the 2004 Plan, and which shall be signed by the Participant
and by a duly authorized officer, other than the Participant, in the name of
and on behalf of the Company. In the event of any inconsistency or conflict
between the terms of the 2004 Plan and a Stock Option Agreement, the terms of
the 2004 Plan shall govern.


 


XIII.                    No
Rights as Stockholder


 


A
holder of a Stock Option shall have no rights as a stockholder with respect to
any Shares of Common Stock until the issuance of a certificate for such Shares.
Except as otherwise provided in Section VII, no adjustment shall be made
for dividends (ordinary or extraordinary, whether in cash, securities, or other
property) or distributions or other rights for which the record date is prior
to the date such certificate is issued.


 


XIV.                     No
Right to Reelection


 


Nothing
in the 2004 Plan is to be deemed to create any obligation on the part of the
Board to nominate any of its members for reelection by the Company’s
stockholders, nor confer upon an Independent Director the right to remain a
member of the Board for any period of time, or at any particular rate of
compensation.


 


XV.                          No
Assignment or Allocation of Benefits


 


No
right or benefit under this 2004 Plan shall be subject to anticipation,
alienation, sale assignment, pledge, encumbrance, or charge and any such act
shall be void, except for any transfer pursuant to the Participant’s will or
under the laws of descent and distribution or as otherwise permitted pursuant
to Section VIII hereof. No right or benefit hereunder shall in any manner
be liable for or subject to any debts, contract, liabilities, or torts of the
person entitled to such right or benefit.


 


XVI.                     Gender,
Tense and Headings


 


Whenever
the context so requires, words of the masculine gender used herein shall
include the feminine and neuter, and words used in the singular shall include
the plural. Section headings as used herein are inserted solely for
convenience and reference and constitute no part of the construction of this
2004 Plan. The words, “hereunder,” “herein,” “hereof’ and similar compounds of
the word “here” shall refer to the entire 2004 Plan and not to any particular
section or provision.


 


XVII.                No
Guarantee of Tax Consequences


 


The
Company makes no commitment or guarantee that any federal, state or local tax
treatment will apply or be available to any Non-Employee Director participating
or eligible to participate herein.


 


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XVIII.           Severability


 


In
the event that any provision of this 2004 Plan is held to be illegal, invalid
or unenforceable, such provision shall be fully severable, but shall not affect
the remaining provisions of the 2004 Plan, and the 2004 Plan shall be construed
and enforced as if the illegal, invalid, or unenforceable provision had not
been included herein.


 


XIX.                    Stockholder
Approval


 


Notwithstanding
any other provision of the 2004 Plan, the 2004 Plan must be approved by the
holders of at least a majority of the shares of Stock present, or represented,
and entitled to vote thereon, at a duly held stockholders’ meeting within 12
months after the date of its adoption by the Board, and no Stock Options or no
shares of Common Stock shall be issued under the 2004 Plan until such approval
has been secured.


 


XX.                         Interpretations


 


The
provisions of the 2004 Plan shall be construed, administered, and governed by
the laws of the State of Hawaii, without giving effect to principles of
conflicts of laws, and, to the extent applicable, the laws of the United States
of America and the State of Nevada.


 


XXI.                    Government
Regulations


 


The
2004 Plan, the granting and exercise of Stock Options and Shares thereunder,
and the obligations of the Company to sell and deliver Shares under such Stock
Options, are subject to all applicable laws, rules and regulations, and to
such approvals by any governmental agencies or national securities exchanges as
may be required.


 


* * * * * *


 


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