**Exhibit 10.2**

 

**CYANOTECH CORPORATION**

 

**2005 Stock Option Plan**

**Restated November 5, 2010**

 

**I.****                                       ****PURPOSEOF THE PLAN; DEFINITIONS**

 

A.            This 2005 Stock Option Plan (the “Plan”) is intended topromote the interests of Cyanotech Corporation, a Nevada corporation (the “Corporation”),by providing (i) key employees (including officers) of the Corporation (orits subsidiary corporations) and (ii) consultants and other independentcontractors who provide valuable services to the Corporation (or its subsidiarycorporations) with the opportunity to acquire, or increase their proprietaryinterest in the Corporation as an incentive for them to join or remain in theservice of the Corporation (or its subsidiary corporations).

 

B.            The Plan becomes effective immediately upon approval ofthe Corporation’s stockholders at the 2005 Annual Stockholders Meeting to beheld on August 22, 2005.  Such dateis hereby designated as the Effective Date of the Plan.  **[revised by reverse stocksplit effective November 3, 2006 (“2006 Split”); amended by stockholdersto increase amount of Stock Subject to Plan on September 9, 2008 (“2008Amendment”)]**

 

C.            For purposes of the Plan, the following definitionsapply:

 

Board:  the Corporation’s Board of Directors.

 

Committee:  The Committee of the Corporation’s Board ofDirectors appointed by the Board to administer the plan.

 

CommonStock:  shares of the Corporation’scommon stock, par value $0.02 per share. * ***[2006 Split]**

 

Changein Control:  a change inownership or control of the Corporation effected through either of thefollowing transactions:

 

(i)            any person or related group of persons (other than theCorporation or a person that directly or indirectly controls, is controlled by,or is under common control with, the Corporation) directly or indirectlyacquires beneficial ownership (within the meaning of Rule 13d-3 of theSecurities Exchange Act of 1934, as amended, “1934 Act”) of stock possessingmore than fifty percent (50%) of the total combined voting power of theCorporation’s outstanding stock pursuant to a tender or exchange offer madedirectly to the Corporation’s stockholders which the Board does not recommendsuch stockholders accept; or

 

(ii)           there is a change in the composition of the Board over aperiod of thirty-six (36) consecutive months or less such that a majority ofthe Board members (rounded up to the next whole number) ceases, by reason ofone or more proxy contests for the election of Board members, to be comprisedof persons who either (A) have been Board members continuously since thebeginning of such period or (B) have been elected or nominated forelection as Board members during such period by at least a majority of theBoard members described in clause (A) who were still in office at the timesuch election or nomination was approved by the Board.

 

CorporateTransaction:  any of thefollowing stockholder-approved transactions to which the Corporation is aparty:

 

(i)            a merger or consolidation in which the Corporation is notthe surviving entity, except for a transaction the principal purpose of whichis to change the State in which the Corporation is incorporated,

 

(ii)           the sale, transfer or other disposition of all orsubstantially all of the assets of the Corporation in complete liquidation ordissolution of the Corporation, or

 

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(iii)          any reverse merger in which the Corporation is thesurviving entity but in which stock possessing more than fifty percent (50%) ofthe total combined voting power of the Corporation’s outstanding stock aretransferred to person or persons different from those who held such stockimmediately prior to such merger.

 

Employee:  a person who performs services while in theemploy of the Corporation or one or more subsidiary corporations, subject tothe control and direction of the employer entity not only as to the work to beperformed but also as to the manner and method of performance.

 

MarketValue:  the last reported price pershare of the Common Stock on the day in question on the NASDAQ Small-CapMarket, or if the Common Stock is regularly traded in some other market or onan exchange the closing selling price per share of the Common Stock on the datein question, as such price is officially quoted by a national reportingservice.  If there is no such reportedprice on the date in question, then the fair market value is the price on thelast preceding date for which such quotation exists.

 

HostileTake-Over:  a change inownership of the Corporation through the following transaction:

 

(i)            any person or related group of persons (other than theCorporation or a person that directly or indirectly controls, is controlled by,or is under common control with, the Corporation) directly or indirectlyacquires beneficial ownership (within the meaning of Rule 13d-3 of theSecurities Exchange Act of 1934, as swing profit restrictions of Section 16of the 1934 Act.

 

Service: theperformance of services on a periodic basis to the Corporation (or anysubsidiary corporation) in the capacity of an Employee or from time to time asan independent consultant, except to the extent otherwise specifically providedin the applicable stock option agreement.

 

Take-OverPrice: the greater of (a) the Fair Market Value per share of CommonStock on the date the option is surrendered to the Corporation in connectionwith a Hostile Take-Over or (b) the highest reported price per share ofCommon Stock paid by the tender offeror in effecting such HostileTake-Over.  However, if the surrenderedoption is an Incentive Option, as defined in Section IV (C) of this Article One,the Take-Over Price shall not exceed the clause (a) price per share.

 

D.            The following provisions shall be applicable indetermining the subsidiary corporations of the Corporation:

 

Eachcorporation (other than the Corporation) in an unbroken chain of corporations beginningwith the Corporation shall be considered to be a subsidiary of the Corporation,provided each such corporation (other than the last corporation) in theunbroken chain owns, at the time of the determination, stock possessing fiftypercent (50%) or more of the total combined voting power of all classes ofstock in any other corporation in such chain.

 

**II.****                                  ****ADMINISTRATIONOF THE PLAN**

 

A.            Except as otherwise determined by the Board, the Planshall be administered by the Board of Directors or by the Stock Option andCompensation Committee of the Board (“Committee”) or other named Committee ofthe Board designated by the Board of Directors subject to the requirements of1934 Act Rule 16b-3:

 

(i)            The Committee of three (3) or more non-employeeBoard members shall be appointed by the Board to administer the Plan. No Boardmember is eligible to serve on the Committee unless such person qualifies as a “Non-EmployeeDirector” as permitted by 1934 Act Rule 16b-3.

 

(ii)           Members of the Committee serve for such term as the Boardmay determine and are subject to removal by the Board at any time.

 

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B.            The Committee by majority action thereof has the powerand authority (subject to the express provisions of the Plan) to establish suchrules and regulations as it may deem appropriate for the proper administrationof the Plan and to make such determinations under, and issue suchinterpretations of, the provisions of the Plan and any outstanding optiongrants thereunder as it may deem necessary or advisable.  All decisions of the Committee within thescope of its administrative functions under the Plan are final and binding onall parties.

 

C.            Service on the Committee is service as a Board member,and members of the Committee **[typo corrected]**areentitled to full indemnification and reimbursement as Board members for theirservice on the Committee.  No member ofthe Committee is liable for any act or omission made in good faith with respectto the Plan or any option grant under the Plan.

 

**III.****                             ****ELIGIBILITY**

 

A.            The persons eligible to participate in the Plan (“Optionees”)are as follows:

 

(i)            officers and other employees of the Corporation (or itssubsidiary corporations) who render services which contribute to themanagement, growth and financial success of the Corporation (or its subsidiarycorporations); and

 

(ii)           those consultants or other independent contractors whoprovide valuable services to the Corporation (or its subsidiary corporations).

 

B.            Non-employee Board members are not eligible toparticipate in the Plan.

 

C.            The Committee by majority action thereof has the powerand authority to determine which eligible persons are to receive option grants,the number of shares to be covered by each such grant, the status of thegranted option as either an incentive stock option (“Incentive Option”) whichsatisfies the requirements of Section 422 of the Internal Revenue Code ora non-qualified option not intended to meet such requirements, the time ortimes at which each granted option is to become exercisable, the maximum termfor which the Option may remain outstanding and the terms and provisions of theStock Option Agreement evidencing the Option.

 

**IV.****                              ****STOCKSUBJECT TO THE PLAN**

 

A.            Shares of the Corporation’s Common Stock available forissuance under the Plan shall be drawn from either the Corporation’s authorizedbut unissued shares of Common Stock or from reacquired shares of Common Stock,including shares repurchased by the Corporation on the open market.  The maximum number of shares of Common Stockwhich may be issued over the term of the Plan shall not exceed 700,000 shares,subject to adjustment from time to time in accordance with the provisions ofthis Section IV.  **[the 2006 Split reduced maximum Plan shares to 200,000; the 2008Amendment increased maximum Plan shares to 700,000]**

 

B.            If one or more outstanding options under this Plan expireor terminate for any reason prior to exercise in full then the shares subjectto the portion of each option not so exercised shall be available forsubsequent option grant under the Plan. All share issuances under the Plan reduce on a share-for-share basis thenumber of shares of Common Stock available for subsequent option grants underthe Plan.  In addition, if the exerciseprice of an outstanding option under the Plan is paid with shares of CommonStock or shares of Common Stock otherwise issuable under the Plan are withheldby the Corporation in satisfaction of the withholding taxes incurred inconnection with the exercise of an outstanding option under the Plan, then thenumber of shares of Common Stock available for issuance under the Plan isreduced by the gross number of shares for which the option is exercised, andnot by the net number of shares of Common Stock actually issued to the optionholder.

 

C.            If any change is made to the Common Stock issuable underthe Plan by reason of any stock split, stock dividend, recapitalization,combination of shares, exchange of shares or other change affecting theoutstanding Common Stock as a class without the Corporation’s receipt ofconsideration, then appropriate adjustments shall be made to (i) themaximum number and/or class of stock issuable under the Plan and (ii) thenumber and/or class of stock and price per share in effect under each optionoutstanding under the Plan.  Suchadjustments to the outstanding options are to be effected in a manner whichprecludes the enlargement or dilution of rights and benefits under suchoptions.  Such adjustments made by theCommittee are final, binding and conclusive.

 

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**V.****                                   ****TERMSAND CONDITIONS OF OPTIONS**

 

Optionsunder the Plan are granted by action of the Committee and may, at the Committee’sdiscretion, be either Incentive Options or non-qualified options. Persons whoare not Employees of the Corporation may only be granted non-qualified options.Each granted option shall be evidenced by a Stock Option Agreement in the formapproved by the Committee; provided, however, that each such agreement complieswith the terms and conditions specified herein. Each Stock Option Agreementevidencing an Incentive Option shall, in addition, be subject to the applicableprovisions of Section VI hereof.

 

A.            Option Price.

 

1.             The option price per share is determined by theCommittee in accordance with the following provisions:

 

(i)            The option price per share of the Common Stock subject toan Incentive Option must in no event be less than one hundred percent (100%) ofthe Market Value of such Common Stock on the grant date.

 

(ii)           The option price per share of the Common Stock subject toa non-qualified stock option is the amount determined by the Committee at thetime of grant and may be less than, equal to or more than the Market Value ofsuch Common Stock on the grant date.

 

2.             The option price is immediately due upon exercise of theoption and payable in one of the alternative forms specified below;

 

(i)            full payment in cash or check made payable to theCorporation’s order:

 

(ii)           full payment in shares of Common Stock held for therequisite period necessary to avoid a charge to the Corporation’s earnings forfinancial reporting purposes and valued at Market Value on the Exercise Date;

 

(iii)          full payment in a combination of shares of Common Stockheld for the requisite period necessary to avoid a charge to the Corporation’sreported earnings and valued at Market Value on the Exercise Date and cash orcheck payable to the Corporation’s order; or

 

(iv)          full payment through a broker-dealer sale and remittanceprocedure pursuant to which the Optionee (a) provides irrevocable writteninstructions to a designated brokerage firm to effect the immediate sale of thepurchased shares and remit to the Corporation, out of the sale proceedsavailable on the settlement date, sufficient funds to cover the aggregateoption price payable for the purchased shares plus all applicable Federal andState income and employment taxes required to be withheld by the Corporation inconnection with such purchase and (b) provides written directives to theCorporation to deliver the certificates for the purchased shares directly tosuch brokerage firm in order to complete the sale transaction.

 

Forpurposes of this subparagraph 2, the Exercise Date is the date on which writtennotice of the option exercise is delivered to the Corporation.  Except to the extent the sale and remittanceprocedure is utilized in connection with the exercise of the option, payment ofthe option price for the purchased shares must accompany such notice.

 

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B.            Term and Exercise of Options.

 

Eachoption granted hereunder is exercisable at such time or times, and excludingall specified vesting periods during the specified term period, and for suchnumber of shares as is determined by the Committee and set forth in the StockOption Agreement evidencing such option. No granted option shall, however, have a term in excess of ten (10) years.  Subject to Paragraph E of this Section V,during the lifetime of the Optionee, the option is exercisable only by theOptionee and shall not be assignable or transferable other than by transfer ofthe option effected by will or by the laws of descent and distributionfollowing the Optionee’s death, or pursuant to a qualified domestic relationsorder as defined by the Internal Revenue Code of 1986, as amended, or Title Iof the Employment Retirement Income Security Act, or the rules thereunder.

 

C.            Termination of Service.

 

1.             If the Optionee ceases Service while holding one or moreoptions hereunder, each such option will not remain exercisable beyond thelimited post-Service exercise period specified by the Committee in the StockOption Agreement evidencing the grant, unless the Committee otherwise extendssuch period in accordance with subparagraph C.5 below.

 

2.             During the post-Service exercise period, the option maynot be exercised for more than the number of option shares (if any) in whichthe Optionee is vested at the time of cessation of Service.  Upon the expiration of such post-Serviceexercise period or (if earlier) upon the expiration of the option term, theoption shall terminate and cease to be outstanding.  In any case, each option terminates andceases to be outstanding, at the time of the Optionee’s cessation of Servicewith respect to any option shares for which such option is not otherwise at thetime exercisable.

 

3.             If the Optionee dies while holding one or moreoutstanding options hereunder, each such option may be exercised, subject tothe limitations of subparagraph 2 above, by the personal representative of theOptionee’s estate or by the person or persons to whom the option is transferredpursuant to the Optionee’s will or the laws of descent and distribution or asotherwise permitted herein.

 

4.             If (i) the Optionee’s Service is terminated formisconduct (including, but not limited to, any act of dishonesty, willfulmisconduct, fraud or embezzlement) or (ii) the Optionee makes anyunauthorized use or disclosure of confidential information or trade secrets ofthe Corporation or its subsidiaries, then in any such event all outstandingoptions held by the Optionee hereunder terminate immediately and cease to beoutstanding.

 

5.             Except as otherwise determined by the Board theCommittee has full power and authority to extend the period of time for whichthe option is to remain exercisable following the Optionee’s cessation ofService or death from the limited period specified in the instrument evidencingsuch grant to such greater period of time as the Committee deems appropriateunder the circumstances.  In no event,however, shall such option be exercisable after the specified expiration dateof the option term.

 

6.             The Committee has complete discretion, exercisableeither at the time the option is granted or at any time the option remainsoutstanding, to permit one or more options granted hereunder to be exercisednot only for the number of shares for which each such option is exercisable atthe time of the Optionee’s cessation of Service but also for one or moresubsequent installments of purchasable shares for which the option wouldotherwise have become exercisable had such cessation of Service not occurred.

 

D.            Stockholder Rights.

 

AnOptionee has none of the rights of a stockholder with respect to any optionshares until such person or its nominee, guardian or legal representative hasexercised the option and paid the option price for the purchased shares.

 

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E.            Assignment; Limited Transferability of Stock Options

 

Nooption granted under the Plan may be sold, transferred, pledged, assigned, orotherwise alienated or hypothecated, otherwise than by will, by the laws ofdecent and distribution or by a qualified domestic relations order as providedin Section V, Paragraph B. Notwithstanding the foregoing, the Committee may, in its discretion,authorize all or a portion of the options granted to be on terms that permittransfer to:

 

(i)            the spouse, children or grandchildren of the Optionee (“ImmediateFamily Members”);

 

(ii)           a trust or trusts for the exclusive benefit of suchImmediate Family Members, or;

 

(iii)          a partnership in which such Immediate Family Members arethe only partners, provided that:

 

(A)                               there may be noconsideration for any such transfer;

 

(B)                               the StockOption Agreement pursuant to which such Options are granted expressly providesfor transferability in a manner consistent with this Section V, ParagraphE; and

 

(C)                               subsequenttransfers of transferred Options shall be prohibited except those in accordancewith this Section V, Paragraph E.

 

Followingtransfer, any such options continue to be subject to the same terms andconditions as were applicable immediately prior to transfer, provided that forpurposes of this Section V, Paragraph E the term Optionee shall be deemedto refer to the transferee.  Theprovisions of the option relating to the period of exercisability andexpiration of the Option continue to apply with respect to the originalOptionee, and the Options exercisable or received by the transferee only to theextent, and for the periods, set forth in said option.

 

**VI.****                              ****INCENTIVEOPTIONS**

 

Theterms and conditions specified in this Section VI are applicable to allIncentive Options granted hereunder.  TheStock Option Agreement relating to Incentive Options must be in accordance withSection 422(b) of the Internal Revenue Code or a succession Section thereof.  Incentive Options may only be granted topersons who are Employees of the Corporation. Options which are specifically designated as “non-qualified” options whenissued under the Plan are not subject to this Section VI.

 

A.            Dollar Limitation.

 

Theaggregate Market Value (determined as of the respective date of dates of grantof the Common Stock) **[typo corrected]**forwhich one or more options granted to any Employee under this Plan (or any otheroption Plan of the Corporation or its subsidiary corporations) may for thefirst time become exercisable as incentive stock options under the Federal taxlaws during any one calendar year shall not exceed the sum of One HundredThousand dollars ($100,000).  To theextent the Employee holds two (2) or more such options which becomeexercisable for the first time in the same calendar year, the foregoinglimitation on the exercisability of such options as incentive stock optionsunder the federal tax laws shall be applied on the basis of the order in whichsuch options are granted.  If the sharesof Common Stock for which any Incentive Option first becomes exercisable in anycalendar year exceed the applicable one hundred thousand dollar ($100,000)limitation, then the option may nevertheless be exercised in that calendar yearfor the excess number of shares as a non-qualified option under the Federal taxlaws.

 

B.            10% Stockholder.

 

Ifany person to whom an Incentive Option is granted is the owner of stock (asdetermined under Section 424(d) of the Internal Revenue Code)possessing ten percent (10%) or more of the total combined voting power of allclasses of stock of the corporation, the option price per share must not beless than one hundred and ten percent (110%) of the fair market value per shareof Common Stock on the grant date, and the option term must not exceed five (5) years,measured from the grant date.

 

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Exceptas modified by the preceding provisions of this Section VI, the provisionsof the Plan apply to all Incentive Options granted hereunder.

 

**VII.****                         ****CORPORATETRANSACTIONS / CHANGES IN CONTROL**

 

A.            Each option outstanding at the time of a CorporateTransaction automatically accelerates so that each such option shall,immediately prior to the specified effective date for such CorporateTransaction, become fully exercisable with respect to the total number ofshares of Common Stock at the time subject to such option and may be exercisedfor all or any portion of such shares. However, an outstanding option does **[typo corrected]**notso accelerate if and to the extent: (i) such option is, in connection with the Corporate Transaction,either to be assumed by the successor corporation or parent thereof or to bereplaced with a comparable option to purchase shares of the capital stock ofthe successor corporation or parent thereof, (ii) such option is to bereplaced with a cash incentive program of the successor corporation whichpreserves the option spread existing at the time of the Corporate Transactionand provides for subsequent payout in accordance with the same exerciseschedule applicable to such option, or (iii) the acceleration of suchoption is subject to other limitations imposed by the Committee, at the time ofthe option grant. The determination of option comparability by the Committeeunder clause (i) above is final, binding and conclusive.  The Committee also has full power andauthority to grant options under the Plan which are to automatically acceleratein whole or in part immediately prior to the Corporate Transaction or upon thesubsequent termination of the Optionee’s Service, whether or not those optionsare otherwise to be assumed or replaced in connection with the consummation ofsuch Corporate Transaction.

 

B.            Upon the consummation of the Corporate Transaction, alloutstanding options shall terminate and cease to be outstanding, except to theextent assumed by the successor corporation or its parent company.

 

C.            Each outstanding option which is assumed in connectionwith the Corporate Transaction or is otherwise to continue in effect shall beappropriately adjusted, immediately after such Corporate Transaction, to applyand pertain to the number and class of stock which would have been issued tothe option holder, in consummation of such Corporate Transaction, had suchperson exercised the option immediately prior to such CorporateTransaction.  Appropriate adjustments shallalso be made to the Option price payable per share, provided the aggregateoption price payable for such stock shall remain the same.  In addition, the class and number of stockavailable for issuance under the Plan following the consummation of the CorporateTransaction shall be appropriately adjusted.

 

D.            The grant of options shall in no way affects the right ofthe Corporation to adjust, reclassify, reorganize or otherwise change itscapital or business structure or to merge, consolidate, dissolve, liquidate orsell or transfer all or any part of its business or assets.

 

E.            Except as otherwise determined by the Board, theCommittee has the discretionary authority, exercisable either in advance of anyactually-anticipated Change in Control or at the time of an actual Change inControl, to provide for the automatic acceleration of one or more outstandingoptions upon the occurrence of the Change in Control and to condition any suchoption acceleration upon the subsequent termination of the Optionee’s Servicewithin a specified period following the Change in Control.

 

F.             Any options accelerated in connection with the Change inControl remain fully exercisable until the expiration of the option term.

 

G.            The exercisability as incentive stock options under theFederal tax laws of any options accelerated under this Section VII inconnection with a Corporate Transaction or Change in Control remain subject tothe dollar limitation of Section VI, Paragraph A.

 

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**VIII.****                    ****CANCELLATIONAND RE-GRANT OF OPTIONS**

 

Exceptas otherwise determined by the Board, the Committee has the authority toeffect, at any time and from time to time, with the consent of the affectedOptionees, the cancellation of any or all outstanding options hereunder and togrant in substitution new options under the Plan covering the same or differentnumbers of shares of Common Stock but with an option price per share based uponthe Market Value of the Common Stock on the new grant date.

 

**IX.****                             ****AMENDMENTOF THE PLAN AND AWARDS**

 

TheBoard has complete and exclusive power and authority to amend or modify thePlan in any or all respects, provided that no such amendment or modificationshall adversely affect rights and obligations with respect to options at thetime outstanding under the Plan, unless the Optionee consents to suchamendment.  In addition, the Board maynot, without the approval of the Corporation’s stockholders, amend the Plan to (i) materiallyincrease the maximum number of shares issuable under the Plan, except forpermissible adjustments under Section IV Paragraph C, (ii) materiallymodify the eligibility requirements for the Plan participation or (iii) materiallyincrease the benefits accruing to Optionees.

 

**X.****                                  ****TAXWITHHOLDING**

 

A.            The Corporation’s obligation to deliver shares of CommonStock upon exercise of stock options or the vesting of shares acquired uponexercise of such options under the Plan is subject to the satisfaction of allapplicable Federal, State and local income tax and employment tax withholdingrequirements.

 

B.            The Committee may, in its discretion and in accordancewith the provisions of this Section X and such supplemental rules asthe Committee may from time to time adopt (including the applicable safe-harborprovisions of 1934 Act Rule 16b-3), provide any or all holders ofnon-qualified options under the Plan with the right to use shares of CommonStock in satisfaction of all or part of the Federal, State and local income taxand employment tax liabilities incurred by such holders in connection with theexercise of their options. Such right may be provided to any such holder ineither or both of the following formats:

 

(i)            Stock Withholding: The holder of a non-qualified optionmay be provided with the election to have the Corporation withhold, from theshares of Common Stock otherwise issuable upon the exercise of suchnon-qualified option, a portion of those shares with an aggregate Fair MarketValue equal to the percentage of the applicable Taxes (up to one hundred(100%)) as specified by such holder.

 

(ii)           Stock Delivery: The Committee may, in its discretion,provide the holder of a non-qualified option with the election to deliver tothe Corporation, at the time the non-qualified option is exercised, one or moreshares of Common Stock already held by such person with an aggregate MarketValue (100%) as specified by such person) of the Taxes incurred in connectionwith such option exercise.

 

**XI.****                             ****TERM OFTHE PLAN**

 

ThePlan terminates upon the earlier of (i) August 21, 2015 or (ii) thedate on which all shares available for issuance under the Plan have been issuedor canceled pursuant to the exercise of options granted under the Plan.  If the date of termination is determinedunder clause (i) above, then all option grants and unvested stockissuances outstanding on such date continue to have force and effect inaccordance with the provisions of the Stock Option Agreements evidencing suchgrants or issuances.

 

**XII.****                        ****USE OFPROCEEDS**

 

Anycash proceeds received by the Corporation from the sale of shares pursuant to optiongrants under the Plan may be used for general corporate purposes.

 

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**XIII.****                   ****REGULATORYAPPROVALS**

 

A.            The implementation of the Plan, the granting of anyoption under the Plan, and the issuance of Common Stock upon the exercise orsurrender of the option grants made hereunder is subject to the Corporation’sprocurement of all approvals and permits required by regulatory authoritieshaving jurisdiction over the Plan, the options granted under it, and the CommonStock issued pursuant to it.

 

B.            No shares of Common Stock or other assets are to beissued or delivered under the Plan unless and until there is compliance withall applicable requirements of Federal and State securities laws, including thefiling and effectiveness of the Form S-8 registration statement for theshares of Common Stock issuable under the Plan, and all applicable listingrequirements of any securities exchange on which the Common Stock is thenlisted.

 

**XIV.****                    ****NOEMPLOYMENT/SERVICE RIGHTS**

 

Neitherthe action of the Corporation in establishing the Plan, nor any action taken bythe Committee hereunder, nor any provision of the Plan is to be construed so asto grant any person the right to remain in the employ or service of theCorporation (or any subsidiary corporation) for any period of specificduration, and the Corporation (or any subsidiary corporation retaining theservices of such person) may terminate such person’s employment or service atany time and for any reason, with or without cause.

 

**XV.****                         ****MISCELLANEOUSPROVISIONS**

 

A.            The right to acquire Common Stock under the Plan may notbe assigned, encumbered or otherwise transferred by any Optionee, except asspecifically provided in the Plan.

 

B.            The provisions of the Plan relating to the exercise ofoptions and the vesting of shares shall be governed by the laws of the State ofHawaii, as such laws are applied to contracts entered into.

 

C.            The provisions of the Plan shall inure to the benefit of,and be binding upon, the Corporation and its successors or assigns, whether byCorporate Transaction or otherwise, and the Optionees, the legalrepresentatives of their respective estates, their respective heirs or legateesand their permitted assignees.

 

D.            Except to the extent that federal laws or the NevadaCorporate Code **[revised]**control, the Plan andall Stock Option Agreements hereunder are to be construed in accordance withand governed by the law of the State of Hawaii.

 

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