Exhibit 4.2
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AMERICAN FIRE RETARDANT CORP.
(A Nevada Corporation)
NON-QUALIFIED STOCK OPTION AGREEMENT
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This Agreement, effective as of ___________, 200_ (the "Grant Date"), is
between American Fire Retardant Corp., a Nevada corporation ("the Company"), and
_______________, an individual and member of the advisory board of the Company,
who, for the purposes of this Agreement only shall be referred to as "Optionee".
This Agreement is made pursuant to the terms and conditions of the 2001 Stock
Option Plan, as amended ("the Plan"), a copy of which shall be provided to the
Optionee with the delivery of this Agreement.
1. Grant of Option. The Company grants to Optionee an option to purchase
_______________ (______) shares of the Common Stock of the Company, $0.001 par
value, (the "Shares"), on the terms and conditions set forth in the Plan and in
this Agreement.
2. Purchase Price. The Purchase Price of the Shares to be purchased
pursuant to this option shall be _________ dollars ($______) per Share, which is
one hundred percent (100%) of the fair market value of the Shares on the date of
grant.
3. Vesting. Optionee's right to exercise the option granted in this
Agreement shall vest and become exercisable with respect to twenty-five percent
(25.0%) of the shares subject to this Option at the end of each fiscal quarter
as follows:
Vesting Date Options Vested Percent of Options
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December 31, 200_ ______ shares 25%
March 31, 200_ ______ shares 25%
June 30, 200_ ______ shares 25%
September 30, 200_ ______ shares 25%
Notwithstanding the preceding sentence, the option shall immediately become
exercisable in full in the event that (i) the shareholders of the Company
approve a dissolution or liquidation of the Company or a sale of all or
substantially all of the Company's assets to another entity; (ii) a tender
within the meaning of Section 14 of the Securities Exchange Act of 1934, as
amended, is made for five percent (5%) or more of the Company's outstanding
capital stock by any person other than the Company or an affiliate; or (iii) the
Company effects an underwritten public offering of its securities pursuant to a
registration statement filed under the Securities Act of 1933. This option shall
be subject to termination before its date of expiration as provided in Section
7.2.
4. The Plan. This option is granted pursuant to the Plan, the provisions of
which are incorporated into this Agreement by reference, and in the event of any
conflict between this Agreement and the Plan, the terms of the Plan shall
govern.
5. No Transfer or Assignment of Option. Except as otherwise provided in
this Agreement, this option and the rights and privileges conferred hereby shall
not be transferred, assigned, pledged, or hypothecated in any way (whether by
operation of law or otherwise) and shall not be subject to sale under execution,
attachment, or similar process. Upon any attempt to transfer, assign, pledge,
hypothecate, or otherwise dispose of this option, or of any right or privilege
conferred hereby, contrary to the provisions of this Agreement, or upon any
attempted sale under any execution, attachment, or similar process upon the
rights and privileges conferred hereby, this option and the rights and
privileges conferred hereby shall immediately become null and void.
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6. Method of Exercise.
6.1 Notice. Optionee may exercise this option by giving written notice to
the Company pursuant to Section 10.9 by delivery of an Exercise Notice in the
form attached hereto as Exhibit A (the "Exercise Notice"), which shall specify
the election to exercise this option and the number of Shares for which it is
being exercised; provided, however, that no exercise for fractional Shares shall
be permitted, and Optionee may not exercise options to acquire more than one
hundred thousand (100,000) Shares during any calendar year. The notice shall be
signed by Optionee.
6.2 Forms of Payment Authorized. Optionee shall deliver to the Company, at
the time of giving the notice one of the following:
(a) Cash. Payment in Cash, by check or via wire transfer in U.S.
Dollars in the full amount of the Purchase Price; or
(b) Delivery of Company Shares Already Owned. Optionee may also pay
the Purchase Price by delivering and surrendering to the Company Shares
which:
(i) have been owned by Optionee for at least six (6) months; and
(ii) have an aggregate fair market value on the date of surrender
equal to the Purchase Price.
(iii) If the number of shares evidenced by the certificates
delivered exceeds the number required, the Company will deliver
the balance of any excessive whole shares back to the Optionee
and shall reimburse the differential of any fractional shares
through a payment to the Optionee by check.
(c) Fair Market Value.
(i) If the Common Stock is listed on a national securities
exchange or admitted to unlisted trading privileges on such
exchange or listed for trading on the Nasdaq National Market, the
current fair market value shall be the last reported sale price
of the Common Stock on such exchange or market on the last
business day prior to the date of exercise of this Option, or if
no such sale is made on such day, the average closing bid and
asked prices for such day on such exchange or market; or
(ii) If the Common Stock is not so listed or admitted to unlisted
trading privileges, but is traded on the Nasdaq SmallCap Market,
the current market value shall be the average of the closing bid
and asked prices for such day on such market, and if the Common
Stock is not so traded, the current market value shall be the
mean of the last reported bid and asked prices reported by the
National Quotation Bureau, Inc. on the last business day prior to
the date of the exercise of this Option; or
(iii) If the Common Stock is not so listed, or admitted to
unlisted trading privileges, and bid and asked prices are not so
reported, the current fair market value shall be an amount, not
less than book value thereof as at the end of the most recent
fiscal year of the Company ending prior to the date of the
exercise of the Option, determined in such reasonable manner as
may be prescribed by the Board of Directors of the Corporation.
6.3 Issuance of Shares. After receiving a proper notice of
exercise, the Company shall issue a certificate or certificates
for the Shares to Optionee, registered in Optionee's name (or in
Optionee's name and the name of Optionee's spouse as community
property or as joint tenants with a right of survivorship).
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7. Term and Expiration.
7.1 Term. This option, if it has not expired earlier under the provisions
of Section 7.2, shall expire in all events on the seventh (7th) anniversary of
the effective date of this Agreement.
7.2 Termination of Option. The option granted under this Agreement, to the
extent that it has not been exercised, shall terminate at the following times:
In the event of Optionee's death, the option shall terminate six (6) months
after the date of death. If Optionee's affiliation with the Company ends because
Optionee becomes disabled, the option shall terminate six (6) months after the
date on which Optionee's affiliation ends. If Optionee voluntarily resigns from
their position, the option shall terminate one (1) month after the date of
resignation. If Optionee's affiliation with the Company is terminated by the
Company for reasons other than cause, the option shall terminate one (1) month
after the date of said termination. If Optionee's affiliation with the Company
is terminated by the Company for cause, the option shall terminate one (1) month
after the date of said termination. If the Optionee is receiving the option due
to their affiliation with a subsidiary of the Company, which ceases to be a
subsidiary of the Company for any reason, the option shall terminate one (1)
month after the date on which the subsidiary ceases to be a subsidiary of the
Company.
8. Legality of Initial Issuance.
8.1 Compliance with Securities Laws. No Shares shall be issued upon the
exercise of this option unless and until the Company has determined that all
applicable provisions of state and federal securities laws have been satisfied.
8.2 Optionee's Representations. In the event that the Shares have not been
registered under the Securities Act of 1933, as amended, at the time this Option
is exercised, the Optionee shall, if required by the Company, concurrently with
the exercise of all or any portion of this Option, deliver to the Company his or
her Investment Representation Statement in the form satisfactory to the Company.
9. Capital Adjustments.
9.1 The Company's Freedom to Act. The existence of this Agreement shall not
affect in any way the right or power of the Company or its shareholders to make
or authorize any or all adjustments, recapitalizations, reorganizations, or
other changes in the Company's capital structure or its business, or any merger
or consolidation of the Company or any issue of bonds, debentures, or preferred
or preference stocks affecting the Shares or the rights thereof, or of any
rights, options, or warrants to purchase any capital stock of the Company, or
the dissolution or liquidation of the Company, any sale or transfer of all or
any part of its assets or business, or any other corporate act or proceedings of
the Company, whether of a similar character or otherwise.
9.2 Adjustment of Optioned Shares. The Shares with respect to which this
option is granted are Shares of the Company as presently constituted, but if and
whenever, prior to the delivery by the Company of all of the Shares with respect
to which these options are granted, the Company shall effect a subdivision or
consolidation of the Shares or other capital readjustment, the payment of a
stock dividend, or other increase or reduction in the number of the Shares
outstanding without receiving compensation therefore in money, services, or
property, the number of the Shares then remaining subject to option hereunder
shall (i) in the event of an increase in the number of outstanding Shares, be
proportionately increased, and the cash consideration payable per Share shall be
proportionately reduced; and (ii) in the event of a reduction in the number of
outstanding Shares, be proportionately reduced, and the cash consideration
payable per Share shall be proportionately increased.
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10. Miscellaneous Provisions.
10.1 Withholding Taxes. In the event that the Company determines that it is
required to withhold federal, state, or local tax as a result of the exercise of
this option, Optionee, as a condition to the exercise of this option, shall make
arrangements satisfactory to the Company to enable it to satisfy all withholding
requirements.
10.2 No Rights as a Shareholder. Optionee shall have no rights as a
shareholder with respect to any Shares subject to this option until the Shares
have been issued in the name of Optionee.
10.3 No Employment Rights. Nothing in this Agreement shall be construed as
giving Optionee the right to be retained as an member of the advisory board of
the Company or be construed as any offer of employment or any right thereto.
10.4 Tax Election. Under Section 83 of the Internal Revenue Code of 1986
(the "Code"), as a general rule the excess, if any, of the fair market value of
the Shares on the date the risk of forfeiture lapses ("Vesting"), over the
amount paid for the Shares, is taxed as ordinary income to the optionee.
Optionee acknowledges that to the extent the Shares have not Vested, Optionee
may elect to be taxed at the time the Shares are purchased rather than when the
Shares Vest by filing with the Internal Revenue Service an election under
Section 83(b) of the Code within thirty (30) days of the date of purchase of the
Shares. Assuming the option price is equal to the fair market value of the
Shares at the time of purchase, if the Shares have not Vested, the election may
be desirable in order to avoid potential future adverse tax consequences.
Optionee acknowledges that Optionee's failure to make this filing in a timely
manner may result in Optionee's recognition of ordinary income as the Shares
become Vested, in an amount equal to the excess of the fair market value of the
Shares on the date of Vesting over the option price. OPTIONEE ACKNOWLEDGES THAT
IT IS THEIR SOLE AND EXCLUSIVE RESPONSIBILITY TO FILE IN A TIMELY MANNER ANY
ELECTION UNDER SECTION 83(b), AND THAT THE COMPANY SHALL BEAR NO RESPONSIBILITY
WHATSOEVER FOR THAT FILING. Optionee shall promptly deliver to the Company a
copy of any tax election relating to the treatment of the Shares under the Code.
10.5 Further Assurances. Each party to this Agreement agrees to perform any
and all further acts and to execute and deliver any documents that may
reasonably be necessary to carry out the provisions of this Agreement.
10.6 Attorneys' Fees. In any legal action or other proceeding brought by
either party to enforce or interpret the terms of this Agreement, the prevailing
party shall be entitled to recover reasonable attorneys' fees and costs.
10.7 Confidentiality. Optionee agrees and acknowledges that the terms and
conditions of this Agreement, including without limitation the number of Shares
for which options have been granted, are confidential. Optionee agrees that
Optionee will not disclose these terms and conditions to any third party, except
to Optionee's financial or legal advisors, tax preparer or family members,
unless such disclosure is required by law.
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10.8 Governing Law. The Agreement, and all determinations made and actions
taken pursuant hereto, to the extent not otherwise governed by the Code or the
securities laws of the United States, shall be governed by the law of the State
of California.
10.9 Notices. Any notice or other communication under this Agreement must
be in writing, and shall be effective upon delivery by hand; upon facsimile
transmission to either party at the number provided below for that party, but
only upon receipt by the transmitting party of a written confirmation of
receipt; or three (3) business days after deposit in the United States mail,
postage prepaid, certified or registered, and addressed to the Company or to
Optionee at the corresponding address below. Each party shall be obligated to
notify the other in writing of any change in that party's address. Notice of
change of address shall be effective only when done in accordance with this
Section.
10.10 Entire Agreement. This Agreement and the Plan, together with those
documents that are referenced in the Agreement, are intended to be the final,
complete, and exclusive statement of the terms of the agreement between Optionee
and the Company regarding the subject matter of this Agreement. This Agreement
and the Plan supersede all other prior agreements, communications, and
statements, whether written or oral, express or implied, pertaining to that
subject matter. This Agreement and the Plan may not be contradicted by evidence
of any prior or contemporaneous statements or agreements, oral or written, and
may not be explained or supplemented by evidence of consistent additional terms.
10.11 Amendments. This Agreement may not be amended or modified except in a
writing signed by both parties.
10.12 Successors and Assigns. Optionee agrees that he will not assign,
sell, transfer, delegate, or otherwise dispose of, whether voluntarily or
involuntarily, or by operation of law, any rights or obligations under this
Agreement, except as expressly permitted by this Agreement. Any such purported
assignment, sale, transfer, delegation, or other disposition shall be null and
void. Subject to the limitations set forth in this Agreement, the Agreement
shall be binding on and inure to the benefit of the successors and assigns of
the Company and any successors and permitted assigns of Optionee, including any
of his executors, administrators, or other legal representatives. It shall not
benefit any person or entity other than those specifically enumerated in this
Agreement.
10.13 Severability. If any provision of this Agreement, or its application
to any person, place, or circumstance, is held by an arbitrator or a court of
competent jurisdiction to be invalid, unenforceable, or void, that provision
shall be enforced to the greatest extent permitted by law, and the remainder of
this Agreement and of that provision shall remain in full force and effect as
applied to other persons, places, and circumstances.
10.14 Interpretation. This Agreement shall be construed as a whole,
according to its fair meaning, and not in favor of or against any party. By way
of example and not in limitation, this Agreement shall not be construed in favor
of the party receiving a benefit nor against the party responsible for any
particular language in this Agreement. Captions are used for reference purposes
only, and should be ignored in the interpretation of the Agreement. Unless the
context requires otherwise, all references in this Agreement to Sections are to
the Sections of this Agreement.
10.15 Counterparts. This Agreement may be executed in one or more
counterparts all of which together shall constitute one and the same instrument.
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The parties have duly executed this Agreement effective as of the date first
written above.
AMERICAN FIRE RETARDANT CORP.,
(A Nevada Corporation)
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By: Xxxxxxx X. Xxxxx
Its: President
OPTIONEE
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Resident Address
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City, State, Mail Code and Country
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EXHIBIT A
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AMERICAN FIRE RETARDANT CORP. 2001 STOCK OPTION PLAN
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NOTICE OF STOCK OPTION EXERCISE
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OPTIONEE INFORMATION:
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Name: ____________________________ Social Security No. _______- ____- ______
Address: _______________________________________________________________________
OPTION INFORMATION:
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Date of Grant: ___________________________ Type of Option: Incentive (ISO) or
Nonqualified
Exercise Price per share: $____________________
Total number of shares of the Common stock of American Fire Retardant Corp. (the
"Company") covered by option: ______________ shares
EXERCISE INFORMATION:
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The undersigned, Optionee, hereby irrevocably elects to exercise the purchase
right represented by such Option for, and to purchase hereunder
_______________________ shares of Common Stock of the Company, and:
herewith tenders payment of $__________________ in full payment of the
exercise price for such shares, or
herewith tenders and delivers __________________ shares of the Common Stock
of the Corporation, pursuant to Section 6.2(b), which have been owned by the
Holder for at least six (6) months and have an aggregate fair market value on
the date of surrender equal to the aggregate Exercise Price of
$__________________; or
and requests that the certificate for such shares purchased hereunder be issued
[you must check one]:
in my name only
In the names of my spouse and myself as community property
In the names of my spouse and myself as joint tenants with the right of
survivorship
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Optionee's Name My spouse's name (if applicable)
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Address
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City, State and Zip
Dated: __________________________ __________________________________
Signature of Optionee
