CYBERONICS, INC. 2004 STOCK PLAN

      Purposes of the Plan. The purposes of this Plan are:

 

 

 

 

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to attract and retain the best available personnel for positions of substantial responsibility,

 

 

 

 

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to provide additional stock incentives to Employees, Directors and Consultants, and

 

 

 

 

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to promote the success of the Company.

      Options granted under the Plan may be Incentive Stock Options or Nonstatutory Stock Options, as determined by the Administrator at the time of grant. Stock Appreciation Rights and Restricted Stock awards may also be granted under the Plan.

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

      “Administrator” means the Board or any of its Committees as shall be appointed to administer the Plan.

      “Applicable Laws” means the requirements relating to the administration of stock plans under U.S. state corporate laws, U.S. federal and state securities laws, the Code, any stock exchange or quotation system on which the Common Stock is listed or quoted and the applicable laws of any foreign country or jurisdiction where Awards are, or will be, granted under the Plan.

      “Award” means a Stock Option, Stock Appreciation Right or Restricted Stock grant made under the Plan.

      “Award Agreement” means an agreement between the Company and a Participant evidencing the terms and conditions of an Award. The Award Agreement is subject to the terms and conditions of the Plan.

      “Board” means the Board of Directors of the Company.

      “Code” means the Internal Revenue Code of 1986, as amended.

      “Committee” means a committee of Directors appointed by the Board to administer the Plan.

      “Common Stock” means the common stock of the Company.

      “Company” means Cyberonics, Inc., a Delaware corporation.

      “Consultant” means any person who is not a member of the Board and is engaged by the Company or a Parent or Subsidiary to render consulting or advisory services to such entity.

      “Director” means a member of the Board who is not an Employee.

      “Disability” means total and permanent disability as defined in Section 22(e)(3) of the Code.

      “Employee” means any person who is a common law employee of the Company or any Parent or Subsidiary of the Company.

      “Fair Market Value” means, as of any date, the value of Common Stock determined as follows:

 

 

 

      .1.1     If the Common Stock is listed on any established stock exchange or a national market system, its Fair Market Value shall be the closing sales price for such stock (or the closing bid, if no sales were reported) as quoted on such exchange or system for the last market trading day prior to the time of determination, as reported in The Wall Street Journal or such other source as the Administrator selects;

 

 

 

      .1.2     If the Common Stock is regularly quoted by a recognized securities dealer but selling prices are not reported, the Fair Market Value of a Share of Common Stock shall be the mean between the high bid and low asked prices for the Common Stock on the last market trading day prior to the day of determination, as reported in The Wall Street Journal or such other source as the Administrator selects; or

 

 

 

 

      .1.3     In the absence of an established market for the Common Stock, the Fair Market Value shall be determined in good faith by the Administrator.

      “Incentive Stock Option” means an Option intended to qualify as an incentive stock option within the meaning of Section 422 of the Code and the regulations promulgated thereunder.

      “Nonstatutory Stock Option” means an Option not intended to qualify as an Incentive Stock Option.

      “Notice of Grant” means a written or electronic notice evidencing certain terms and conditions of an individual Award.

      “Option” means a stock option granted pursuant to the Plan.

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

      “Participant” means a person who has been granted an Award under the Plan.

      “Plan” means the Cyberonics, Inc. 2004 Stock Plan.

      “Restricted Stock” means a Share of Common Stock granted under Section 11 of the Plan that is subject to vesting and other restrictions.

      “Service Provider” means an Employee, Director or Consultant. A Service Provider shall not cease to be a Service Provider in the case of (i) any leave of absence approved by the Company, Parent or Subsidiary or (ii) transfers between locations of the Company or between the Company, its Parent, any Subsidiary, or any successor. For purposes of Incentive Stock Options, no such leave may exceed 90 days, unless reemployment upon expiration of such leave is guaranteed by statute or contract. If reemployment upon expiration of a leave of absence approved by the Company is not so guaranteed, on the 91st day of such leave any Incentive Stock Option held by the Optionee shall cease to be treated as an Incentive Stock Option and shall be treated for tax purposes as a Nonstatutory Stock Option. A change in status between being an Employee, Director or Consultant shall not terminate a Participant’s status as a Service Provider. If an Employee’s or Consultant’s employer ceases to be a Subsidiary of the Company or its Parent, such Participant shall cease to be a Service Provider on such date.

      “Share” means a share of the Common Stock, as adjusted in accordance with Section 13 of the Plan.

      “Stock Appreciation Right” or “SAR” means a right to acquire upon exercise of the SAR, Common Stock and/or, in the sole discretion of the Administrator, cash having an aggregate value equal to the then excess of the Fair Market Value of a Share over the exercise price of such SAR.

      “Subsidiary” means a “subsidiary corporation”, whether now or hereafter existing, as defined in Section 424(f) of the Code and, other than for determining an individual’s status as an Employee for Incentive Stock Option purposes, shall include any non-corporate entity that is controlled, directly or indirectly, by the Company or its Parent.

      Stock Subject to the Plan. Subject to the provisions of Section 13 of the Plan and the following provisions of this Section, the maximum aggregate number of Shares which may be delivered pursuant to Awards under the Plan is 500,000. The Shares may be authorized, but unissued, or reacquired Common Stock.

If an Award expires, is forfeited or cancelled without having been exercised (if an Option or Stock Appreciation Right) or vested (if a Restricted Stock award) in full, the Shares then subject to such Award shall become available for future grants under the Plan (unless the Plan was terminated); provided, however, that Shares that have been issued (actually or constructively) under the Plan upon the exercise or vesting of an Award, or withheld from an Award upon its exercise or vesting for the payment of the exercise price or tax withholding obligations with respect to such Award, shall not be returned to the Plan and shall not again become available for future grants under the Plan. Notwithstanding the foregoing, to the extent a SAR is paid in cash upon its exercise in lieu of Common Stock, such cash payment shall not reduce the number of Shares available for future grants under the Plan.

 

      Administration of the Plan.

 

 

 

      .1     Administration. The Plan shall be administered by the Committee or, if none is appointed, by the Board.

 

 

 

      .2     Powers of the Administrator. Subject to the further provisions of the Plan, and in the case of a Committee, subject to any specific limitations on its duties imposed by the Board on such Committee, the Administrator shall have the authority, in its discretion:

 

 

 

 

      .2.1     to determine the Fair Market Value;

 

 

 

      .2.2     to select the Service Providers to whom Awards may be granted hereunder;

 

 

 

      .2.3     to determine the number of shares of Common Stock to be covered by each Award granted hereunder;

 

 

 

      .2.4     to approve forms of agreement for use under the Plan;

 

 

 

      .2.5     to determine the terms and conditions, not inconsistent with the terms of the Plan, of any Award granted hereunder. Such terms and conditions include, but are not limited to, the exercise price, the time or times when Awards may be exercised or become vested (which may be based on performance criteria), and vesting acceleration or waiver of forfeiture restrictions, and any restriction or limitation regarding any Award, based in each case on such factors as the Administrator, in its sole discretion, shall determine;

 

 

 

      .2.6     to construe and interpret the terms of the Plan and Awards granted pursuant to the Plan;

 

 

 

      .2.7     to prescribe, amend and rescind rules and regulations relating to the administration of the Plan;

 

 

 

      .2.8     to allow Participants to satisfy the withholding tax obligations of the Company by electing with Company approval to have the Company withhold from the Shares to be issued upon exercise or vesting of an Award that number of Shares having a Fair Market Value equal to the tax amount required to be withheld or such greater amount as the Administrator may approve. The Fair Market Value of the Shares to be withheld shall be determined on the date that the amount of tax to be withheld is to be determined. All elections by a Participant to have Shares withheld for this purpose shall be made in such form and under such conditions as the Administrator may deem necessary or advisable. Notwithstanding the foregoing, a Participant who is subject to Section 16b of the Securities Act of 1933, as amended, may, withhold Company approval, direct the Company to withhold Shares upon the exercise or vesting of an Award to satisfy the Company’s tax withholding obligations with respect to such Award; and

 

 

 

      .2.9     to make all other determinations deemed necessary or advisable for administering the Plan.

 

 

 

 

      .3     Effect of Administrator’s Decision. The Administrator’s decisions, determinations and interpretations shall be final and binding on all persons, including holders of Awards.

      Eligibility. Awards may be granted to Service Providers except that Incentive Stock Options may be granted only to Employees.

      Limitations.

 

 

 

      .1     Each Option shall be designated in the Award Agreement as either an Incentive Stock Option or a Nonstatutory Stock Option. However, notwithstanding such designation, to the extent that the aggregate Fair Market Value of the Shares with respect to which Incentive Stock Options are exercisable for the first time by the optionee during any calendar year (under all plans of the Company and any Parent or Subsidiary) exceeds $100,000, such Options shall be treated as Nonstatutory Stock Options. For purposes of this Section 6(a), Incentive Stock Options shall be taken into account in the order in

 

 

 

 

which they were granted. The Fair Market Value of the Shares shall be determined as of the time the Option with respect to such Shares is granted.

 

 

 

      .2     Neither the Plan nor any Award shall confer upon a Participant any right with respect to continuing the Participant’s relationship as a Service Provider, nor shall they interfere in any way with the Participant’s right or the Company’s right to terminate such relationship at any time, with or without cause.

 

 

 

      .3     The following limitations shall apply to grants of Awards:

 

 

 

 

      .3.1     No Service Provider shall be granted, in any fiscal year of the Company, Options with respect to more than 500,000 Shares or SARs with respect to more than 500,000 Shares.

 

 

 

      .3.2     No Service Provider may be granted, in any fiscal year of the Company, Restricted Stock awards with respect to more than 250,000 Shares.

 

 

 

      .3.3     The foregoing limitations shall be adjusted proportionately in connection with any change in the Company’s capitalization as described in Section 13.

      Term of Plan. The Plan shall become effective upon its adoption by the Board, subject to its approval by the shareholders of the Company as provided in Section 19. It shall continue in effect for a term of 10 years from such date of adoption unless terminated earlier under Section 15 of the Plan.

      Term of Options and Stock Appreciation Rights. The term of each Option and Stock Appreciation Right shall be stated in the Award Agreement. In the case of a Nonstatutory Stock Option, if the Award Agreement does not provide for a term, such term shall be 10 years from the date of grant. In the case of an Incentive Stock Option, the term shall be 10 years from the date of grant or such shorter term as may be provided in the Award Agreement. Moreover, in the case of an Incentive Stock Option granted to an optionee who, at the time the Incentive Stock Option is granted, owns stock representing more than 10% of the total combined voting power of all classes of stock of the Company or any Parent or Subsidiary, the term of the Incentive Stock Option shall be five years from the date of grant or such shorter term as may be provided in the Award Agreement.

      Option and Stock Appreciation Right Exercise Price and Consideration.

 

 

 

      .1     Exercise Price. The per share exercise price for the Shares to be issued pursuant to exercise of an Option or Stock Appreciation Right (or cash payment in lieu of Shares) shall be determined by the Administrator, subject to the following:

 

 

 

 

      .1.1     In the case of an Incentive Stock Option

 

 

 

 

      .1.1.1     granted to an Employee who, at the time the Incentive Stock Option is granted, owns stock representing more than 10% of the voting power of all classes of stock of the Company or any Parent or Subsidiary, the per Share exercise price shall be no less than 110% of the Fair Market Value per Share on the date of grant.

 

 

 

      .1.1.2     granted to any Employee other than an Employee described in paragraph (A) immediately above, the per Share exercise price shall be no less than 100% of the Fair Market Value per Share on the date of grant.

 

 

 

 

      .1.2     In the case of a Nonstatutory Stock Option or Stock Appreciation Right, the per SAR exercise price shall be determined by the Administrator but shall not be less than 100% of the Fair Market Value per Share on the date of grant.

 

 

 

      .1.3     Notwithstanding the foregoing, replacement or substitution Options or Stock Appreciation Rights may be granted with a per Share or per SAR exercise price of less than 100% of the Fair Market Value per Share on the date of grant pursuant to a merger or other corporate transaction.

 

 

 

 

      .2     Waiting Period and Exercise Dates. At the time an Option or Stock Appreciation Right is granted, the Administrator shall fix the period within which the Option or Stock Appreciation Right may be exercised and shall determine any conditions which must be satisfied before the Option or Stock Appreciation Right may be exercised.

 

 

 

      .3     Form of Consideration. The Administrator shall determine the acceptable form of consideration for exercising an Option, including the method of payment. In the case of an Incentive Stock Option, the Administrator shall determine the acceptable form of consideration at the time of grant. Such consideration may consist entirely of:

 

 

 

 

      .3.1     cash;

 

 

 

      .3.2     check;

 

 

 

      .3.3     promissory note;

 

 

 

      .3.4     other Shares which (A) in the case of Shares acquired upon exercise of an option, unless waived by the Administrator, have been owned by the optionee for more than six months on the date of surrender, and (B) have a Fair Market Value on the date of surrender not exceeding the aggregate exercise price of the Shares as to which said Option shall be exercised;

 

 

 

      .3.5     consideration received by the Company under a “cashless-broker” exercise program implemented by the Company in connection with the Plan;

 

 

 

      .3.6     a reduction in the amount of any Company liability to the Optionee, including any liability attributable to the Optionee’s participation in any Company-sponsored non-qualified deferred compensation program or arrangement;

 

 

 

      .3.7     any combination of the foregoing methods of payment; or

 

 

 

      .3.8     such other consideration and method of payment for the issuance of Shares to the extent permitted by applicable Laws.

      Exercise of Options or SARs.

 

 

 

      .1     Procedure for Exercise; Rights as a Shareholder. Any Option or SAR granted hereunder shall be exercisable according to the terms of the Plan and at such times and under such conditions as determined by the Administrator and set forth in the Award Agreement, which may include performance, service and/or other criteria. Unless the Administrator provides otherwise, vesting of Options or SARs granted hereunder shall be tolled during any unpaid leave of absence. An Option or SAR may not be exercised for a fraction of a Share.

      An Option or SAR shall be deemed exercised when the Company receives: (i) written or electronic notice of exercise (in accordance with the procedures established from time to time by the Administrator) from the person entitled to exercise the Option or SAR, (ii) full payment for the Shares with respect to which the Option is exercised, and (iii) making arrangements satisfactory to the Company for the withholding of all applicable taxes engendered by the exercise. Full payment may consist of any consideration and method of payment authorized by the Administrator and permitted by the Plan. Until the Shares are issued (as evidenced by the appropriate entry on the books of the Company or of a duly authorized transfer agent of the Company), no right to vote or receive dividends or any other rights as a shareholder shall exist with respect to the Shares, notwithstanding the exercise of the Option or SAR. The Company shall issue (or cause to be issued) such Shares promptly after the Option or SAR is exercised. No adjustment will be made for a dividend or other right for which the record date is prior to the date the Shares are issued, except as provided in Section 13 of the Plan.

 

 

 

      .2     Termination of Relationship as a Service Provider. If a Participant ceases to be a Service Provider, other than upon the Participant’s death or Disability, the Participant may exercise his or her Option or SAR within such period of time as is specified in the Award Agreement to the extent that the Option or SAR is vested on the date of termination (but in no event later than the expiration of the term

 

 

 

 

of such Option or SAR as set forth in the Award Agreement). In the absence of a specified time in the Award Agreement, the Option or SAR shall remain exercisable for three months following the Participant’s termination, but in no event later than the expiration of the term of such Option or SAR as set forth in the Notice of Grant. If, on the date of termination, the Participant is not vested as to his or her entire Option or SAR, the Shares covered by the unvested portion of the Option or SAR shall be automatically forfeited on such date and revert to the Plan. If, after termination, the Participant does not exercise his or her Option or SAR within the time specified in the Award Agreement or herein, if applicable, the Option or SAR shall automatically terminate and the Shares covered by such Option or SAR shall revert to the Plan.

 

 

 

      .3     Disability of Participant. If a Participant ceases to be a Service Provider as a result of the Participant’s Disability, the Participant may exercise his or her Option or SAR within such period of time as is specified in the Option agreement to the extent the Option or SAR is vested on the date of termination (but is no event later than the expiration of the term of such Option or SAR as set forth in the Award Agreement). Unless provided otherwise in the grant agreement, Options or SARs shall be fully vested upon the Participant’s ceasing to be a Service Provider due to Disability. In the absence of a specified time in the Award Agreement, the Option or SAR shall remain exercisable for three months following the Participant’s termination, but in no event later than the expiration of the term of such Option or SAR as set forth in the Notice of Grant.

 

 

 

      .4     Death of Participant. If a Participant dies while a Service Provider, the Option or SAR shall become automatically fully exercisable and may be exercised within such period of time as is specified in the Award Agreement (but in no event later than the expiration of the term of such Option or SAR as set forth in the Notice of Grant) by the Participant’s estate or by a person who acquires the right to exercise the Option or SAR by bequest or inheritance.

      Restricted Stock.

 

 

 

      .1     Grant. Restricted Stock may be issued either alone, in addition to, or in tandem with other Awards granted under the Plan and/or cash awards made outside of the Plan. After the Administrator makes a Restricted Stock grant under the Plan, it shall advise the Participant in writing or electronically, by means of a Notice of Grant, of the terms, conditions and restrictions related to the grant, including the number of Shares subject to the grant, and the price to be paid (if any), by the Participant.

 

 

 

      (b) Forfeiture Restrictions To Be Established by the Administrator. Shares of Common Stock that are the subject of a Restricted Stock award shall be subject to restrictions on disposition by the Participant and the automatic forfeiture of the shares to the Company under certain circumstances (the “Forfeiture Restrictions”). The Forfeiture Restrictions shall be determined by the Administrator in its sole discretion, and the Administrator may provide that the Forfeiture Restrictions shall lapse upon (i) the attainment of one or more performance measures or targets established by the Committee at the time of the grant that are based on (1) the price of a share of Common Stock, (2) the Company’s earnings per share, (3) the Company’s sales, (4) the sales of a product or territory designated by the Administrator, (5) the net income (before or after taxes) of the Company or any business unit of the Company designated by the Administrator, (6) the net cash flow of the Company, (7) the earnings before or after interest, taxes, depreciation, and/or amortization of the Company or any business unit of the Company designated by the Administrator, (8) the economic value added, (9) the return on stockholders’ equity achieved by the Company, or (10) the total stockholders’ return achieved by the Company, (ii) the Participant’s continuation as a Service Provider for a specified period of time, (iii) the occurrence of any event or the satisfaction of any other condition specified by the Administrator in its sole discretion, or (iv) a combination of any of the foregoing. The performance measures described in clause (i) of the preceding sentence may be subject to adjustment for changes in accounting standards required by the Financial Accounting Standards Board after the goal is established, specified significant extraordinary items or events, and may be absolute, relative to one or more other companies, or relative to one or more indexes, and may be contingent upon future performance of the Company or any Subsidiary,

 

 

 

 

division, or department thereof. Each Restricted Stock award may have different Forfeiture Restrictions, in the discretion of the Administrator.

 

 

 

      (c) Other Terms and Conditions. Common Stock subject to a Restricted Stock award shall be represented by a stock certificate registered in the name of the Participant. Unless provided otherwise in an Award Agreement, the Participant shall have the right to receive dividends with respect to Common Stock subject to a Restricted Stock award, to vote the Common Stock subject thereto and to enjoy all other stockholder rights, except that (i) the Participant shall not be entitled to delivery of the stock certificate until the Forfeiture Restrictions have expired, (ii) the Company shall retain custody of the stock until the Forfeiture Restrictions have expired, (iii) the Participant may not sell, transfer, pledge, exchange, hypothecate or otherwise dispose of the stock until the Forfeiture Restrictions have expired, and (iv) a breach of the terms and conditions established by the Administrator pursuant to the Restricted Stock Agreement shall cause a forfeiture of the Restricted Stock award.

 

 

 

      (d) Payment for Restricted Stock. The Administrator shall determine the amount and form of any payment to be made by a Participant upon the receipt of a Restricted Stock award, provided that in the absence of such a determination, a Participant shall not be required to make any payment with respect to a Restricted Stock award, except to the extent otherwise required by law.

 

 

 

      (e) Administrator’s Discretion to Accelerate Vesting of Restricted Stock Awards. The Administrator may, in its discretion and as of a date determined by the Administrator, fully vest any or all Common Stock awarded to a Participant pursuant to a Restricted Stock award and, upon such vesting, all restrictions applicable to such Restricted Stock award shall terminate as of such date. Any action by the Administrator pursuant to this paragraph may vary among individual Participants and may vary among the Restricted Stock awards held by any individual Participant. Notwithstanding the preceding provisions of this paragraph, the Administrator may not take any action described in this paragraph with respect to a Restricted Stock award that has been granted to a “covered employee” (within the meaning of Treasury Regulation section 1.162-27(c)(2)) if such Award was intended to be performance-based compensation under section 162(m) of the Code; provided, however, this prohibition shall not apply to an acceleration due to death or disability of the Participant or a Change of Control of the Company.

      Nontransferability of Awards. Unless otherwise expressly permitted by the Administrator, an Award 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 and may be exercised, during the lifetime of the Participant, only by the Participant. If the Administrator makes an Award transferable, such Award shall contain such additional terms and conditions as the Administrator deems appropriate. In no event may an Incentive Stock Option be transferable in a manner that would cause such Option to cease to be an Incentive Stock Option.

      Adjustments upon Changes in Capitalization, Dissolution, Merger or Asset Sale.

 

 

 

      .1     Changes in Capitalization. Subject to any required action by the shareholders of the Company, the number of shares of Common Stock covered by each outstanding Award, and the number of shares of Common Stock which have been authorized for issuance under the Plan but as to which Awards have not been granted or which have been returned to the Plan upon cancellation, expiration or forfeiture of an Award, as well as the price per share of Common Stock covered by each such outstanding Option or SAR, 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 Award.

 

 

 

 

      .2     Change of Control. In the event of a Change of Control (as defined below), each Option, SAR and Restricted Stock award then outstanding shall automatically vest in full and all performance criteria, if any, applicable to any Award shall be deemed to have been met at the maximum level. The Administrator shall notify the Participant in writing or electronically prior to the Change of Control that the Option or SAR shall be fully vested and exercisable for a period of 15 days from the date of such notice, or through the date of the Change of Control, if longer, and, subject to the following, the Option or SAR shall terminate upon the expiration of such period. In addition to, or in lieu of, any other provision of the Plan, the Administrator may provide that all or some of the Options and SARs not exercised immediately prior to the Change of Control shall (x) terminate on such Change of Control, unless such Change of Control is described in clause (iv) below, (y) be assumed by the successor (or a parent thereof) in any such merger or other corporate transaction, or (z) be surrendered in exchange for equivalent substitution options or awards from the successor (or a parent thereof). For purposes of this Plan, a “Change of Control” means the happening of any of the following events:

 

 

 

 

      .2.1     the acquisition by any “person,” as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), other than the Company, a subsidiary of the Company or a Company employee benefit plan, of “beneficial ownership” (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company representing 50% or more of the combined voting power of the Company’s then outstanding securities entitled to vote generally in the election of directors; or

 

 

 

      .2.2     the consummation of a reorganization, merger, consolidation or other form of corporate transaction or series of transactions, in each case, with respect to which persons who were the shareholders of the Company immediately prior to such reorganization, merger or consolidation or other transaction do not, immediately thereafter, own more than 50% of the combined voting power entitled to vote generally in the election of directors of the reorganized, merged or consolidated company’s then outstanding voting securities in substantially the same proportions as their ownership immediately prior to such event; or

 

 

 

      .2.3     the sale or disposition by the Company of all or substantially all the Company’s assets; or

 

 

 

      .2.4     a change in the composition of the Board of Directors of the Company, as a result of which fewer than a majority of the directors are Incumbent Directors. “Incumbent Directors” shall mean directors who either (A) are directors of the Company as of the date the Plan was adopted, or (B) are elected, or nominated for election, thereafter to the Board of Directors of the Company with the affirmative votes of at least a majority of the Incumbent Directors at the time of such election or nomination, but “Incumbent Director” shall not include an individual whose election or nomination is in connection with (i) an actual or threatened election contest (as such terms are used in Rule 14a-11 of Regulation 14A promulgated under the Securities Exchange Act of 1934) or an actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board or (ii) a plan or agreement to replace a majority of the then Incumbent Directors; or

 

 

 

      .2.5     the approval by the Board of Directors or the stockholders of the Company of a complete or substantially complete liquidation or dissolution of the Company.

      Date of Grant. The date of grant of an Award shall be, for all purposes, the date on which the Administrator makes the determination granting such Award, or such other later date as is determined by the Administrator. Notice of the determination shall be provided to each Participant within a reasonable time after the date of such grant.

      Amendment and Termination of the Plan.

 

 

 

      .1     Amendment and Termination. The Board may at any time amend, alter, suspend or terminate the Plan; provided, however, no amendment may reduce the exercise price of outstanding Options or SARs without shareholder approval.

 

 

 

 

      .2     Shareholder Approval. The Company shall obtain shareholder approval of any Plan amendment to the extent necessary and desirable to comply with Applicable Laws.

 

 

 

      .3     Effect of Amendment or Termination. No amendment, alteration, suspension or termination of the Plan shall materially impair the rights of any Participant, unless mutually agreed otherwise between the Participant and the Administrator, which agreement must be in writing and signed by the Participant and the Company. Termination of the Plan shall not affect the Administrator’s ability to exercise the powers granted to it hereunder with respect to Awards granted under the Plan prior to the date of such termination.

      Conditions upon Issuance of Shares

 

 

 

      .1     Legal Compliance. Shares shall not be issued pursuant to the exercise or vesting of an Award unless the exercise or vesting of such Award and the issuance and delivery of such Shares shall comply with Applicable Laws and shall be further subject to the approval of counsel for the Company with respect to such compliance.

 

 

 

      .2     Investment Representations. As a condition to the delivery of Shares, the Company may require the person acquiring such Shares to represent and warrant at the time of any such delivery that the Shares are being acquired only for investment and without any present intention to sell or distribute such Shares if, in the option of counsel for the Company, such a representation is required.

      Inability to Obtain Authority. The 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.

      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.

      Shareholder Approval. The Plan shall be subject to approval by the shareholders of the Company within 12 months after the date the Plan is adopted by the Board. Such shareholder approval shall be obtained in the manner and to the degree required under Applicable Laws. Any Option or SAR granted prior to such shareholder approval may not become exercisable prior to such approval and in the event such approval is not obtained, such Options and SARs shall automatically terminate. No Restricted Stock may be granted under the Plan prior to such shareholder approval.