Document:

Exhibit 10.68 (a)

                               FIRST AMENDMENT TO
                     REVOLVING CREDIT, TERM LOAN, EQUIPMENT
                  ACQUISITION TERM LOAN AND SECURITY AGREEMENT
                  --------------------------------------------

         THIS FIRST AMENDMENT TO REVOLVING CREDIT, TERM LOAN, EQUIPMENT
ACQUISITION TERM LOAN AND SECURITY AGREEMENT (the "Amendment") is entered into
as of December 31, 2003 to be effective as of the Effective Date (as defined
herein) by and between CAPITALSOURCE FINANCE LLC, a Delaware limited liability
company ("Agent"), the Lenders party thereto and each of ADVANCED
NUTRACEUTICALS, INC., a Texas corporation ("Parent"), BACTOLAC PHARMACEUTICAL
INC., a Delaware corporation ("Bactolac"), and ANI PHARMACEUTICALS, INC., a
Mississippi corporation ("ANIP") and together with Parent and Bactolac, each a
"Borrower" and collectively, the "Borrowers"). Capitalized terms used and not
defined herein shall have the meanings assigned to such terms in the Agreement.

         A. WHEREAS, Agent, Lenders and Borrowers are parties to that certain
Revolving Credit, Term Loan, Equipment Acquisition Term Loan and Security
Agreement dated as of March 21, 2003 (as heretofore and hereafter amended,
supplemented, modified and/or restated from time to time, the "Agreement"),
pursuant to which the Lenders made Advances and Loans to the Borrowers;

         B. WHEREAS, Borrowers have requested that Agent and Lenders agree to
amend the Tangible Net Worth covenant set forth in Section 1 to Annex I to the
Agreement;

         NOW, THEREFORE, in consideration of the terms and conditions, premises
and the other mutual covenants contained herein, and other good and valuable
consideration, the receipt and sufficiency are hereby acknowledged, the parties
hereto agree as follows:

         SECTION 1. Amendments. The sections, definitions, schedules, annexes
and exhibits, as applicable, of and to the Agreement referenced and/or set forth
below are hereby amended as follows:

                  (a) Amendment to Annex I. Section 1 to Annex I of the
Agreement is hereby deleted and replaced in its entirety to read as follows:

                             "1) Tangible Net Worth

     As measured on the last day of each fiscal year of Borrowers, the Tangible
Net Worth shall not be less than the following:

                         Test Date:               Minimum
                                                  Tangible Net
                                                  Worth:
                         September                $4,000,000
                         30, 2003                 $4,500,000
                         September                $5,000,000"
                         30, 2004
                         September
                         30, 2005

                                      -54-
<PAGE>

     SECTION 2. Effective Date.
                ---------------
     Upon receipt by Agent of a duly executed copy of this Amendment by each
Borrower, this Amendment shall be deemed to be effective as of September 30,
2003 (the "Effective Date").

     SECTION 3. Agreement in Full Force and Effect as Amended.
                ----------------------------------------------
     Except as specifically amended hereby, the Agreement and other Loan
Documents shall remain in full force and effect and hereby are ratified and
confirmed as so amended. This Amendment shall not constitute a novation,
satisfaction and accord, cure, release and/or satisfaction of the Agreement
and/or other Loan Documents, but shall constitute an amendment thereof. The
parties hereto agree to be bound by the terms and conditions of the Agreement
and Loan Documents as amended by this Amendment, as though such terms and
conditions were set forth herein and therein in full. Each reference in the
Agreement to "this Agreement," "hereunder," "hereof," "herein" or words of
similar import shall mean and be a reference to the Agreement as amended by this
Amendment, and each reference herein or in any other Loan Document or any other
document or instrument to the Agreement shall mean and be a reference to the
Agreement as amended and modified by this Amendment. Each reference in the
Agreement and/or other Loan Documents or any other document or instrument to any
Loan Documents or words of similar import shall mean and be a reference to the
Loan Documents as amended hereby

     SECTION 4. Representations.
                ----------------

     Each Borrower hereby represents and warrants to Agent as follows as of the
date hereof and as of the Effective Date: (i) it is duly incorporated, validly
existing and in good standing under the laws of its jurisdiction of
organization; (ii) the execution, delivery and performance by it of this
Amendment to which it is a party are within its powers, have been duly
authorized, and do not contravene (A) its articles of incorporation or other
organizational documents, or (B) any applicable law; (iii) no consent, license,
permit, approval or authorization of, or registration, filing or declaration
with any Governmental Authority or other Person is required in connection with
the execution, delivery, performance, validity or enforceability of this
Amendment by or against it; (iv) this Amendment has been duly executed and
delivered by it; (v) this Amendment constitutes its legal, valid and binding
obligations enforceable against it in accordance with its terms, except as
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the enforcement of
creditors' rights generally or by general principles of equity; (vi) it is in
compliance with all covenants and agreements in the Loan Documents and it is not
in default under the Agreement or any other Loan Document and no Default or
Event of Default exists, has occurred and is continuing or would result by the
execution, delivery or performance of this Amendment, including, without
limitation, any violation or breach of or Event of Default with respect to Annex
I of the Agreement, and (vii) the representations and warranties contained in
the Loan Documents are true and correct in all material respects as of the date
hereof and as of the Effective Date as if made on the date hereof, except for
such representations and warranties limited by their terms to a specific date.

     SECTION 5. Miscellaneous.
                --------------
     (a) The execution, delivery and effectiveness of this Amendment shall not,
except as expressly provided herein, be deemed to be an amendment or
modification of, or operate as a waiver of, any provision of the Agreement or
any other Loan Document or any right, power or remedy of Agent, nor constitute a
waiver of any provision of the Agreement or any other Loan Document, or any
other document, instrument and/or agreement executed or delivered in connection
therewith or of any Default or Event of Default under any of the foregoing, in
each case whether arising before or after the date hereof or as a result of
performance hereunder or thereunder. This Amendment shall not preclude the
future exercise of any right, remedy, power or privilege available to Agent
whether under the Agreement, other Loan Documents, at law or otherwise.

<PAGE>
     (b) This Amendment may be executed in any number of counterparts (including
by facsimile), and by the different parties hereto or thereto on the same or
separate counterparts, each of which shall be deemed to be an original
instrument but all of which together shall constitute one and the same
agreement. Each party agrees that it will be bound by its own facsimile
signature and that it accepts the facsimile signature of each other party. The
descriptive headings of the various sections of this Amendment are inserted for
convenience of reference only and shall not be deemed to affect the meaning or
construction of any of the provisions hereof or thereof. Whenever the context
and construction so require, all words herein in the singular number herein
shall be deemed to have been used in the plural, and vice versa, and the
masculine gender shall include the feminine and neuter and the neuter shall
include the masculine and feminine.

     (c) This Amendment may not be changed, amended, restated, waived,
supplemented, discharged, canceled, terminated or otherwise modified orally or
by any course of dealing or in any manner other than as provided in the
Agreement or the applicable Loan Document. This Amendment shall be considered
part of the Agreement and shall be a Loan Document for all purposes under the
Agreement and other Loan Documents.

     (d) This Amendment, the Agreement, and the Loan Documents constitute the
final, entire agreement and understanding between the parties with respect to
the subject matter hereof and thereof and may not be contradicted by evidence of
prior, contemporaneous or subsequent oral agreements between the parties, and
shall be binding upon and inure to the benefit of the successors and assigns of
the parties hereto and thereto. There are no unwritten oral agreements between
the parties with respect to the subject matter hereof and thereof. If any
provision of this Amendment is adjudicated to be invalid under applicable laws
or regulations, such provision shall be inapplicable to the extent of such
invalidity without affecting the validity or enforceability of the remainder of
this Amendment which shall be given effect so far as possible.

     (e) THIS AMENDMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER
AND THEREUNDER SHALL BE GOVERNED BY AND CONSTRUED AND INTERPRETED IN ACCORDANCE
WITH THE CHOICE OF LAW PROVISIONS SET FORTH IN THE AGREEMENT AND SHALL BE
SUBJECT TO THE WAIVER OF JURY TRIAL AND NOTICE PROVISIONS OF THE AGREEMENT.

     (f) No Borrower may assign, delegate or transfer this Amendment or any of
its rights or obligations hereunder or thereunder and any delegation, transfer
or assignment in violation hereof shall be null and void. No rights are intended
to be created under this Amendment for the benefit of any third party donee,
creditor or incidental beneficiary of any Borrower or any other Person other
than Agent and each Lender. Nothing contained in this Amendment shall be
construed as a delegation to Agent of Borrowers' duties of performance,
including, without limitation, any duties under any account or contract in which
Agent has a security interest or Lien. This Amendment shall be binding upon
Borrowers and Agent and Lenders and their respective successors and permitted
assigns. Agent's and Lenders' ability to assign, sell or transfer all of any
part of this Amendment and shall be governed by the Agreement.

     (g) Each Borrower hereby (i) consents to the execution and delivery of this
Amendment by the other Borrowers, (ii) agrees that this Amendment and shall not
limit or diminish the obligations of the subject Borrower under the Loan
Documents, (iii) reaffirms its obligations under each of the Loan Documents to
which it is a party, and (iv) agrees that each of such Loan Documents remain in
full force and effect and are hereby ratified and confirmed. All representations
and warranties made in this Amendment and shall survive the execution and
delivery of this Amendment and no investigation by Agent shall affect such
representations or warranties or the right of Agent to rely upon them.

<PAGE>
     (h) Each Borrower shall execute and deliver such other documents,
certificates and/or instruments and take such other actions as Agent may
reasonably request in order more effectively to consummate the transactions
contemplated hereby.

                      [SIGNATURES APPEAR ON FOLLOWING PAGE]

<PAGE>

                                SIGNATURE PAGE TO
            FIRST AMENDMENT TO REVOLVING CREDIT, TERM LOAN, EQUIPMENT
                  ACQUISITION TERM LOAN AND SECURITY AGREEMENT

     IN WITNESS WHEREOF, the parties have caused this First Amendment To
Revolving Credit, Term Loan, Equipment Acquisition Term Loan And Security
Agreement to be executed by their respective officers thereunto duly authorized,
as of the date first written above to be effective on and as of the Effective
Date.

BORROWERS:                  ADVANCED NUTRACEUTICALS, INC.,
                            a Texas corporation

                            By:_________________________________
                            Name:
                            Title:

                            BACTOLAC PHARMACEUTICAL, INC.,
                            a Delaware corporation

                            By:_________________________________
                            Name:
                            Title:

                            ANI PHARMACEUTICALS, INC.,
                            a Mississippi corporation

                            By:_________________________________
                            Name:
                            Title:

AGENT AND LENDER:           CAPITALSOURCE FINANCE LLC

                               ---------------------------------------
                            Name:
                                 -------------------------------------
                            Title:
                                 -------------------------------------

<PAGE>Exhibit
10.53

 

LANDEC CORPORATION

 

1995 DIRECTORS’ STOCK OPTION PLAN

 

(as amended October 2003)

 

1.             Purposes
of the Plan.  The purposes of this
Directors’ Stock Option Plan are to attract and retain the best available
personnel for service as Directors of the Company, to provide additional
incentive to the Outside Directors of the Company to serve as Directors, and to
encourage their continued service on the Board.

 

All options granted hereunder shall be “nonstatutory
stock options”.

 

2.             Definitions.  As used herein, the following definitions
shall apply:

 

(a)           “Board”
shall mean the Board of Directors of the Company.

 

(b)           “Code”
shall mean the Internal Revenue Code of 1986, as amended.

 

(c)           “Common
Stock”  shall mean the Common Stock
of the Company.

 

(d)           “Company”  shall mean Landec Corporation, a California
corporation.

 

(e)           “Continuous Status as
a Director” shall mean the absence of any interruption or termination of
service as a Director.

 

(f)            “Director”
shall mean a member of the Board.

 

(g)           “Employee”
shall mean any person, including officers and directors, employed by the
Company or any Parent or Subsidiary of the Company.  The payment of a director’s fee by the Company shall not be
sufficient in and of itself to constitute “employment” by the Company.

 

(h)           “Exchange
Act” shall mean the Securities Exchange Act of 1934, as amended.

 

(i)            “Option”  shall mean a stock option granted pursuant
to the Plan.  All options shall be
nonstatutory stock options (i.e., options that are not intended to qualify as
incentive stock options under Section 422 of the Code).

 

(j)            “Optioned Stock”  shall mean the Common Stock subject to an
Option.

 

(k)           “Optionee”  shall mean an Outside Director who receives
an Option.

 

(l)            “Outside
Director” shall mean a Director who is not an Employee.

 

 

(m)          “Parent”  shall mean a “parent corporation”, whether
now or hereafter existing, as defined in Section 424(e) of the Code.

 

(n)           “Plan”  shall mean this 1995 Directors’ Stock Option
Plan.

 

(o)           “Share”  shall mean a share of the Common Stock, as
adjusted in accordance with Section 11 of the Plan.

 

(p)           “Subsidiary”  shall mean a “subsidiary corporation”,
whether now or hereafter existing, as defined in Section 424(f) of the
Code.

 

3.             Stock
Subject to the Plan.  Subject to the
provisions of Section 11 of the Plan, the maximum aggregate number of
Shares which may be optioned and sold under the Plan is 800,000 Shares (the
“Pool”) of Common Stock.  The Shares may
be authorized, but unissued, or reacquired Common Stock.

 

If an Option should expire or become unexercisable for
any reason without having been exercised in full, the unpurchased Shares which
were subject thereto shall, unless the Plan shall have been terminated, become
available for future grant under the Plan. If Shares which were acquired upon
exercise of an Option are subsequently repurchased by the Company, such Shares
shall not in any event be returned to the Plan and shall not become available
for future grant under the Plan.

 

4.             Administration
of and Grants of Options under the Plan.

 

(a)           Administrator.  Except as otherwise required herein, the
Plan shall be administered by the Board.

 

(b)           Procedure
for Grants.  All grants of Options
hereunder shall be automatic and nondiscretionary and shall be made strictly in
accordance with the following provisions:

 

(i)               No person shall
have any discretion to select which Outside Directors shall be granted Options
or to determine the number of Shares to be covered by Options granted to
Outside Directors.

 

(ii)               Each person who
becomes an Outside Director after the effective date of the Plan, other than
any person who has previously been granted an equivalent option by the Company
to purchase shares under any stock option plan of the Company, shall be
automatically granted an Option to purchase 20,000 Shares (the “First Option”)
on the date on which such person first becomes an Outside Director, whether
through election by the shareholders of the Company or appointment by the Board
of Directors to fill a vacancy.

 

(iii)              Each Outside
Director shall automatically be granted (i) with respect to the Annual
Meeting of the Company’s shareholders taking place in March 1997, an
Option to purchase 5,000 Shares on the date of such meeting provided that, as
of such date, such Outside Director shall have served on the Board for at least
six (6) months, and (ii) with respect to all subsequent Annual Meetings of
the Company’s shareholders, an Option to purchase 10,000

 

 

Shares (a “Subsequent Option”) on the date of
each such Annual Meeting of the Company’s shareholders immediately following
which such Outside Director is serving on the Board, provided that, on such
date, he or she shall have served on the Board for at least six (6) months
prior to the date of such Annual Meeting.

 

(iv)              Notwithstanding the
provisions of subsections (ii) and (iii) hereof, in the event that a grant
would cause the number of Shares subject to outstanding Options plus the number
of Shares previously purchased upon exercise of Options to exceed the Pool,
then each such automatic grant shall be for that number of Shares determined by
dividing the total number of Shares remaining available for grant by the number
of Outside Directors receiving an Option on such date on the automatic grant
date.  Any further grants shall then be
deferred until such time, if any, as additional Shares become available for
grant under the Plan through action of the shareholders to increase the number
of Shares which may be issued under the Plan or through cancellation or
expiration of Options previously granted hereunder.

 

(v)               Notwithstanding the
provisions of subsections (ii) and (iii) hereof, any grant of an Option
made before the Company has obtained shareholder approval of the Plan in
accordance with Section 17 hereof shall be conditioned upon obtaining such
shareholder approval of the Plan in accordance with Section 17 hereof.

 

(vi)              The terms of each
First Option granted hereunder shall be as follows:

 

(1)           the
First Option shall be exercisable only while the Outside Director remains a
Director of the Company, except as set forth in Section 9 hereof.

 

(2)           the
exercise price per Share shall be 100% of the fair market value per Share on
the date of grant of the First Option, determined in accordance with
Section 8 hereof.

 

(3)           the
First Option shall be exercisable in full on the date of grant of the Option.

 

(vii)             The terms of each
Subsequent Option granted hereunder shall be as follows:

 

(1)           the
Subsequent Option shall be exercisable only while the Outside Director remains
a Director of the Company, except as set forth in Section 9 hereof.

 

(2)           the
exercise price per Share shall be 100% of the fair market value per Share on
the date of grant of the Subsequent Option, determined in accordance with
Section 8 hereof.

 

(3)           the
Subsequent Option shall be exercisable in full on the date of grant of the
Subsequent Option.

 

 

(c)           Powers
of the Board.  Subject to the
provisions and restrictions of the Plan, the Board shall have the authority, in
its discretion:  (i) to determine,
upon review of relevant information and in accordance with Section 8(b) of
the Plan, the fair market value of the Common Stock; (ii) to determine the
exercise price per share of Options to be granted, which exercise price shall
be determined in accordance with Section 8(a) of the Plan; (iii) to
interpret the Plan; (iv) to prescribe, amend and rescind rules and
regulations relating to the Plan; (v) to authorize any person to execute
on behalf of the Company any instrument required to effectuate the grant of an
Option previously granted hereunder; and (vi) to make all other
determinations deemed necessary or advisable for the administration of the
Plan.

 

(d)           Effect
of Board’s Decision.  All decisions,
determinations and interpretations of the Board shall be final and binding on
all Optionees and any other holders of any Options granted under the Plan.

 

(e)           Suspension
or Termination of Option.  If the
President or his or her designee reasonably believes that an Optionee has
committed an act of misconduct, the President may suspend the Optionee’s right
to exercise any option pending a determination by the Board of Directors
(excluding the Outside Director accused of such misconduct).  If the Board of Directors (excluding the
Outside Director accused of such misconduct) determines an Optionee has
committed an act of embezzlement, fraud, dishonesty, nonpayment of an
obligation owed to the Company, breach of fiduciary duty or deliberate
disregard of the Company rules resulting in loss, damage or injury to the
Company, or if an Optionee makes an unauthorized disclosure of any Company
trade secret or confidential information, engages in any conduct constituting
unfair competition, induces any Company customer to breach a contract with the
Company or induces any principal for whom the Company acts as agent to terminate
such agency relationship, neither the Optionee nor his or her estate shall be
entitled to exercise any option whatsoever. 
In making such determination, the Board of Directors (excluding the
Outside Director accused of such misconduct) shall act fairly and shall give
the Optionee an opportunity to appear and present evidence on Optionee’s behalf
at a hearing before the Board or a committee of the Board.

 

5.             Eligibility.  Options may be granted only to Outside
Directors.  All Options shall be
automatically granted in accordance with the terms set forth in
Section 4(b) hereof.  An Outside
Director who has been granted an Option may, if he or she is otherwise
eligible, be granted an additional Option or Options in accordance with such
provisions.

 

The Plan shall not confer upon any Optionee any right
with respect to continuation of service as a Director or nomination to serve as
a Director, nor shall it interfere in any way with any rights which the
Director or the Company may have to terminate his or her directorship at any
time.

 

6.             Term
of Plan; Effective Date.  The Plan
shall become effective on the earlier to occur of its adoption by the Board of
Directors or its approval by the shareholders of the Company.  It shall continue in effect for a term of
fifteen (15) years unless sooner terminated under Section 13 of the Plan.

 

 

7.             Term
of Options.  The term of each Option
shall be ten (10) years from the date of grant thereof.

 

8.             Exercise
Price and Consideration.

 

(a)           Exercise
Price.  The per Share exercise price
for the Shares to be issued pursuant to exercise of an Option shall be 100% of
the fair market value per Share on the date of grant of the Option.

 

(b)           Fair
Market Value.  The fair market value
shall be determined by the Board; provided, however, that where there is a
public market for the Common Stock, the fair market value per Share shall be
the mean of the bid and asked prices of the Common Stock in the
over-the-counter market on the date of grant, as reported in The Wall Street
Journal (or, if not so reported, as otherwise reported by the National
Association of Securities Dealers Automated Quotation (“Nasdaq”) System) or, in
the event the Common Stock is traded on the Nasdaq National Market or listed on
a stock exchange, the fair market value per Share shall be the closing price on
such system or exchange on the date of grant of the Option, as reported in The
Wall Street Journal.  With respect to
any Options granted hereunder concurrently with the initial effectiveness of
the Plan, the fair market value shall be the Price to Public as set forth in
the final prospectus relating to such initial public offering.

 

(c)           Form
of Consideration.  The consideration
to be paid for the Shares to be issued upon exercise of an Option shall consist
entirely of cash, check, other Shares of Common Stock having a fair market
value on the date of surrender equal to the aggregate exercise price of the
Shares as to which said Option shall be exercised (which, if acquired from the
Company, shall have been held for at least six months), or any combination of
such methods of payment and/or any other consideration or method of payment as
shall be permitted under applicable corporate law.

 

9.             Exercise
of Option.

 

(a)           Procedure
for Exercise; Rights as a Shareholder. 
Any Option granted hereunder shall be exercisable at such times as are
set forth in Section 4(b) hereof; provided, however, that no Options shall
be exercisable prior to shareholder approval of the Plan in accordance with
Section 17 hereof has been obtained.

 

An Option may not be exercised for a fraction of a
Share.

 

An Option shall be deemed to be exercised when written
notice of such exercise has been given to the Company in accordance with the
terms of the Option by the person entitled to exercise the Option and full
payment for the Shares with respect to which the Option is exercised has been
received by the Company.  Full payment
may consist of any consideration and method of payment allowable under
Section 8(c) of the Plan.  Until
the issuance (as evidenced by the appropriate entry on the books of the Company
or of a duly authorized transfer agent of the Company) of the stock certificate
evidencing such Shares, no right to vote or receive dividends or any other
rights as a shareholder shall exist with respect to the Optioned Stock,
notwithstanding the exercise of the Option. 
A share certificate for the

 

 

number of Shares so
acquired shall be issued to the Optionee as soon as practicable after exercise
of the Option.  No adjustment will be
made for a dividend or other right for which the record date is prior to the
date the stock certificate is issued, except as provided in Section 11 of
the Plan.

 

Exercise of an Option in any manner shall result in a
decrease in the number of Shares which thereafter may be available, both for
purposes of the Plan and for sale under the Option, by the number of Shares as
to which the Option is exercised.

 

(b)           Termination
of Status as a Director.  If an
Outside Director ceases to serve as a Director, he or she may, but only within
ninety (90) days after the date he or she ceases to be a Director of the
Company, exercise his or her Option to the extent that he or she was entitled
to exercise it at the date of such termination.  Notwithstanding the foregoing, in no event may the Option be
exercised after its term set forth in Section 7 has expired.  To the extent that such Outside Director was
not entitled to exercise an Option at the date of such termination, or does not
exercise such Option (which he or she was entitled to exercise) within the time
specified herein, the Option shall terminate.

 

(c)           Disability
of Optionee.  Notwithstanding
Section 9(b) above, in the event a Director is unable to continue his or
her service as a Director with the Company as a result of his or her total and
permanent disability (as defined in Section 22(e)(3) of the Internal
Revenue Code), he or she may, but only within six (6) months (or such other
period of time not exceeding twelve (12) months as is determined by the Board)
from the date of such termination, exercise his or her Option to the extent he
or she was entitled to exercise it at the date of such termination.  Notwithstanding the foregoing, in no event
may the Option be exercised after its term set forth in Section 7 has
expired.  To the extent that he or she
was not entitled to exercise the Option at the date of termination, or if he or
she does not exercise such Option (which he or she was entitled to exercise)
within the time specified herein, the Option shall terminate.

 

(d)           Death
of Optionee.  In the event of the
death of an Optionee:

 

(i)              During the term of
the Option who is, at the time of his or her death, a Director of the Company
and who shall have been in Continuous Status as a Director since the date of
grant of the Option, the Option may be exercised, at any time within
six (6) months following the date of death, by the Optionee’s estate or by
a person who acquired the right to exercise the Option by bequest or
inheritance, but only to the extent of the right to exercise that would have
accrued had the Optionee continued living and remained in Continuous Status as
Director for six (6) months (or such lesser period of time as is
determined by the Board) after the date of death.  Notwithstanding the foregoing, in no event may the Option be
exercised after its term set forth in Section 7 has expired.

 

(ii)             Within three (3)
months after the termination of Continuous Status as a Director, the Option may
be exercised, at any time within six (6) months following the date of death, by
the Optionee’s estate or by a person who acquired the right to exercise the
Option by bequest or inheritance, but only to the extent of the right to
exercise that had accrued at the date

 

 

of termination. 
Notwithstanding the foregoing, in no event may the option be exercised
after its term set forth in Section 7 has expired.

 

10.           Nontransferability
of Options.  The Option may not be
sold, pledged, assigned, hypothecated, transferred, or disposed of in any
manner other than by will or by the laws of descent or distribution or pursuant
to a qualified domestic relations order (as defined by the Code or the rules
thereunder).  The designation of a
beneficiary by an Optionee does not constitute a transfer.  An Option may be exercised during the
lifetime of an Optionee only by the Optionee or a transferee permitted by this
Section.

 

11.           Adjustments
Upon Changes in Capitalization; Corporate Transactions.

 

(a)  Adjustment.  Subject to any required action by the shareholders of the
Company, the number of shares of Common Stock covered by each outstanding
Option, and the number of shares of Common Stock which have been authorized for
issuance under the Plan but as to which no Options have yet been granted or
which have been returned to the Plan upon cancellation or expiration of an
Option, as well as the price per share of Common Stock covered by each such
outstanding Option, shall be proportionately adjusted for any increase or
decrease in the number of issued shares of Common Stock resulting from a stock
split, reverse stock split, stock dividend, combination or reclassification of
the Common Stock, or any other increase or decrease in the number of issued
shares of Common Stock effected without receipt of consideration by the
Company; provided, however, that conversion of any convertible securities of
the Company shall not be deemed to have been “effected without receipt of
consideration.”  Such adjustment shall
be made by the Board, whose determination in that respect shall be final,
binding and conclusive.  Except as expressly
provided herein, no issuance by the Company of shares of stock of any class, or
securities convertible into shares of stock of any class, shall affect, and no
adjustment by reason thereof shall be made with respect to, the number or price
of shares of Common Stock subject to an Option.

 

(b)  Corporate Transactions.  In the event of (i) a dissolution or
liquidation of the Company, (ii) a sale of all or substantially all of the
Company’s assets, (iii) a merger or consolidation in which the Company is
not the surviving corporation, or (iv) any other capital reorganization in
which more than fifty percent (50%) of the shares of the Company entitled to
vote are exchanged, the Company shall give to the Eligible Director, at the
time of adoption of the plan for liquidation, dissolution, sale, merger,
consolidation or reorganization, either a reasonable time thereafter within
which to exercise the Option prior to the effectiveness of such liquidation,
dissolution, sale, merger, consolidation or reorganization, at the end of which
time the Option shall terminate, or the right to exercise the Option (or
receive a substitute option with comparable terms) as to an equivalent number
of shares of stock of the corporation succeeding the Company or acquiring its business
by reason of such liquidation, dissolution, sale, merger, consolidation or
reorganization.

 

 

12.           Time
of Granting Options.  The date of
grant of an Option shall, for all purposes, be the date determined in
accordance with Section 4(b) hereof. 
Notice of the determination shall be given to each Outside Director to
whom an Option is so granted within a reasonable time after the date of such
grant.

 

13.           Amendment
and Termination of the Plan.

 

(a)           Amendment
and Termination.  The Board may
amend or terminate the Plan from time to time in such respects as the Board may
deem advisable; provided that, to the extent necessary and desirable to comply
with Rule 16b-3 under the Exchange Act (or any other applicable law or
regulation), the Company shall obtain approval of the shareholders of the
Company to Plan amendments to the extent and in the manner required by such law
or regulation.  Notwithstanding the
foregoing, the provisions set forth in Section 4 of this Plan (and any
other Sections of this Plan that affect the formula award terms required to be
specified in this Plan by Rule 16b-3) shall not be amended more than once every
six months, other than to comport with changes in the Code, the Employee
Retirement Income Security Act of 1974, as amended, or the rules thereunder.

 

(b)           Effect
of Amendment or Termination.  Any
such amendment or termination of the Plan that would impair the rights of any
Optionee shall not affect Options already granted to such Optionee and such
Options shall remain in full force and effect as if this Plan had not been
amended or terminated, unless mutually agreed otherwise between the Optionee
and the Board, which agreement must be in writing and signed by the Optionee
and the Company.

 

14.           Conditions
Upon Issuance of Shares.  Shares
shall not be issued pursuant to the exercise of an Option unless the exercise
of such Option and the issuance and delivery of such Shares pursuant thereto
shall comply with all relevant provisions of law, including, without
limitation, the Securities Act of 1933, as amended, the Exchange Act, the rules
and regulations promulgated thereunder, state securities laws, and the
requirements of any stock exchange upon which the Shares may then be listed,
and shall be further subject to the approval of counsel for the Company with
respect to such compliance. As a condition to the exercise of an Option, the
Company may require the person exercising such Option to represent and warrant
at the time of any such exercise that the Shares are being purchased only for investment
and without any present intention to sell or distribute such Shares, if, in the
opinion of counsel for the Company, such a representation is required by any of
the aforementioned relevant provisions of law.

 

15.           Reservation
of Shares.  The Company, during the
term of this Plan, will at all times reserve and keep available such number of
Shares as shall be sufficient to satisfy the requirements of the Plan.  Inability of the Company to obtain authority
from any regulatory body having jurisdiction, which authority is deemed by the
Company’s counsel to be necessary to the lawful issuance and sale of any Shares
hereunder, shall relieve the Company of any liability in respect of the failure
to issue or sell such Shares as to which such requisite authority shall not
have been obtained.

 

 

16.           Option
Agreement.  Options shall be
evidenced by written option agreements in such form as the Board shall approve.

 

17.           Shareholder Approval.  Continuance of the Plan shall be subject to
approval by the shareholders of the Company at or prior to the first annual
meeting of shareholders held subsequent to the granting of an Option
hereunder.  If such shareholder approval
is obtained at a duly held shareholders’ meeting, it may be obtained by the
affirmative vote of the holders of a majority of the outstanding shares of the
Company present or represented and entitled to vote thereon.  If such shareholder approval is obtained by
written consent, it may be obtained by the written consent of the holders of a
majority of the outstanding shares of the Company.  Options may be granted, but not exercised, before such
shareholder approval.

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