**EXHIBIT10.42**

 

**POOREBROTHERS, INC.**

 

**NONSTATUTORYSTOCK OPTION AGREEMENT**

 

**THIS AGREEMENT** isdated as of this      day of                          ,       (the “Grant Date”), by and betweenPoore Brothers, Inc., a Delaware corporation (the “Company”), and                                            (the “Optionee”).

 

**W I T N ES S E T H:**

 

**WHEREAS**, inrecognition of the Optionee’s service as an officer of the Company and in orderto provide a further incentive to the Optionee to assist the Company in the furtheranceof its strategic objectives, the Board of Directors has deemed it appropriateto grant the Optionee an option to purchase shares of the Company’s CommonStock, $.01 par value per share (the “Common Stock”); and

 

**WHEREAS**, the partiesdeem it appropriate to memorialize the grant of such option.

 

**NOW, THEREFORE**, inconsideration of the premises and of the covenants and agreements hereinafterset forth, the parties hereto mutually covenant and agree as follows:

 

1.             **Grant of Option**.  Subject to the terms and conditions of thisAgreement (including any adjustments as contemplated by Paragraph 9 hereof),the Company hereby grants to the Optionee an option (the “Option”) to purchasefrom the Company all or any part of the aggregate amount of                  sharesof Common Stock (the “Optioned Shares”). The Option is intended to constitute a nonstatutory stock option andshall not be treated as an incentive stock option within the meaning of Section 422of the Internal Revenue Code of 1986, as amended (the “Code”).

 

2.             **Option Price**.  The price to be paid for the Optioned Sharesshall be $           pershare, subject to adjustment in the manner contemplated by Paragraph 9 hereof.

 

3.             **Exercisability and Termination of Option**.  Provided that the Optionee is an employee ofthe Company or any successor thereto at the time, the Option shall vest andbecome exercisable on:

 

                       asto                shares,

 

                       asto                shares, and

 

                       asto                shares.

 

Nothwithstanding the foregoing, all of the options granted to Optioneehereunder shall immediately, and without further action by any party vest uponthe earlier of (i) the twenty first consecutive trading day that theclosing best bid price for the Common Stock, as reported on the Nasdaq SmallCapMarket (or on such other market or exchange on which the Common Stock shallthen be listed), shall equal or exceed one hundred and sixty seven (167)percent of the Option Price per share (subject to adjustment in the mannercontemplated by Paragraph 9 hereof), and (ii) the date on which a Changein Control of the Company shall have occurred. For purposes hereof, a “Change in Control” shall have occurred if andwhen:

 

(i)            anyperson (other than (A) the Company or any of its subsidiaries, (B) atrustee or other fiduciaries holding securities under any employee benefit planof the Company or any of its subsidiaries, (C) an underwriter temporarilyholding securities pursuant to an offering of such securities, or (D) acorporation owned, directly or indirectly, by the shareholders of the Companyin substantially the same proportions as their ownership of the stock of theCompany (together, “Excluded Persons”)) is or becomes the “beneficial owner”(as such term is defined in Rule 13d-3 under the Securities Exchange Actof 1934, as amended (the “Exchange Act”)), directly or indirectly, ofsecurities of the Company representing 25% or more of the combined voting powerof the Company’s then outstanding voting securities; or

 

(ii)           thefollowing individuals cease, for any reason, to constitute a majority of thenumber of directors then serving on the Company’s Board of Directors:individuals who, on the Grant Date, constituted the

 

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Board of Directors of the Company and any newdirectors (other than a director whose initial assumption of office is inconnection with an actual or threatened election contest, including but notlimited to a consent solicitation, relating to the election of directors of theCompany, as such terms are used in Rule 14a-11 under the Exchange Act)whose appointment or election by the Board of Directors or nomination forelection by the Company’s shareholders was approved by a vote of at leasttwo-thirds (2/3) of the directors then still in office who either weredirectors on the Grant Date or whose appointment, election or nomination forelection was previously so approved; or

 

(iii)          theshareholders of the Company approve a merger, consolidation or share exchangeof the Company with any other corporation or approve the issuance of votingsecurities of the Company in connection with a merger, consolidation or shareexchange of the Company (or any direct or indirect subsidiary of the Company),other than (A) a merger, consolidation or share exchange that would resultin the voting securities of the Company outstanding immediately prior to suchmerger, consolidation or share exchange continuing to represent (either byremaining outstanding or by being converted into voting securities of thesurviving entity or any parent thereof) at least 50% of the combined votingpower of the voting securities of the Company or of such surviving entity orany parent thereof outstanding immediately after such merger, consolidation orshare exchange, or (B) a merger, consolidation or share exchange effectedto implement a recapitalization of the Company (or similar transaction) inwhich no person (other than an Excluded Person) is or becomes the beneficialowner, directly or indirectly, of securities of the Company (not including inthe securities beneficially owned by such person any securities acquireddirectly from the Company or its affiliates after the Grant Date pursuant toexpress authorization by the Board of Directors of the Company that refers tothis exception) representing 25% or more of the Company’s then outstandingvoting securities; or

 

(iv)          theshareholders of the Company approve a plan of complete liquidation ordissolution of the Company or an agreement for the sale or disposition by theCompany of all or substantially all of the Company’s assets (in one transactionor a series of related transactions within any period of 24 consecutivemonths), other than a sale or disposition by the Company of all orsubstantially all of the Company’s assets to an entity at least 75% of thecombined voting power of which is owned by persons in substantially the sameproportions as their ownership of the Company immediately prior to such sale.

 

Notwithstanding the foregoing, no “Change inControl” shall be deemed to have occurred if there is consummated anytransaction or series of transactions immediately following which the recordholders of the Common Stock immediately prior to such transaction or series oftransactions continue to have substantially the same proportionate ownership inan entity that owns all or substantially all of the assets or voting securitiesof the Company immediately following such transaction or series oftransactions.

 

Whether or not theretofore exercisable, theOption shall terminate on the earlier of (i) the fifth anniversary of thedate hereof, or (ii) the date one hundred and twenty (120) days (unlessextended by action of the Board of Directors) after the Optionee ceases, forany reason, to be an employee of the Company (or any successor thereto);provided, however, that, in the event that the Optionee ceases to be anemployee of the Company by virtue of his death or incapacity, the Optionee’sestate or legal representative may exercise the Option (but only to the extentexercisable at the time of the Optionee’s cessation of employment), until theearlier of (a) the fifth anniversary of the date hereof, and (b) thedate six (6) months after such cessation of employment.

 

4.             **Manner of Exercise and Payment**.  Subject to the provisions of Paragraph 3hereof, the Option may be exercised in full at any time or in part from time totime by delivery to the Secretary of the Company, at the Company’s principaloffice in Goodyear, Arizona, of a written notice of exercise specifying thenumber of shares with respect to which the Option is being exercised.  The notice of exercise must be accompanied byfull payment of the option price for the shares being purchased:  (i) in cash or its equivalent; (ii) bytendering previously acquired shares of Common Stock (valued at their fairmarket value as of the date of exercise as determined in a manner provided bythe Board of Directors of the Company); (iii) if approved by the Board ofDirectors, by tendering a promissory note of the Optionee; (iv) in suchother form of consideration as may be acceptable to the Board of Directors andadequate under applicable law; or (v) by any combination of the means ofpayment set forth in subparagraphs (i) through (iv). No Optioned Sharesshall be issued until full payment therefor has been made.

 

5.             **Limits on Transferability of the Option**.  Subject to the limitations of this Paragraph5, the Option shall be transferable, in whole or in part, upon the surrender ofthe Option by the Optionee to the Company for one or more new options of liketenor representing, in the aggregate, the right to purchase the OptionedShares, each of such new options to

 

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represent the right to purchase such number of Optioned Shares as shallbe designated by the Optionee at the time of such surrender, subject to theterms and conditions of this Option. This Option may only be transferred by will or by the laws of descent ordistribution, or to any member of the Optionee’s “immediate family,” as suchterm is defined in Rule 16a-1(e) under the Exchange Act or to trusts,partnerships or other entities established solely for the benefit of members ofthe Optionee’s immediate family; provided, however, that (i) there may beno consideration for any such transfer, (ii) subsequent transfers of anyportion of this Option must also be in compliance with this Paragraph 5 and (iii) promptlyafter making any such transfer, the Optionee shall provide to the Company anotice of transfer satisfactory to the Company. In the event of such a permitted transfer of this Option, the transfereeshall have all of the rights of the Optionee under this Option, as if theOptionee had retained this Option.  Theterms of this Option shall be binding upon the permitted transferees,executors, administrators, heirs and successors of the Optionee.

 

6.             **Piggyback Registration Rights. **

 

(a)           Ifthe Company determines to file a registration statement under the SecuritiesAct of 1933, as amended (the “Securities Act”), relating to a proposed sale tothe public by the Company of shares of the Common Stock (but excluding anyregistration on Form S-4 or Form S-8 or similar forms hereafter ineffect), the Company shall:

 

(i)            givethe Optionee notice thereof (which shall include a list of the jurisdictions inwhich the Company intends to attempt to qualify such securities under theapplicable blue sky or other state securities laws, the proposed offering priceand the plan of distribution);

 

(ii)           useits best efforts to include in such registration (and any related qualificationunder blue sky laws), and in any underwriting involved therein, all of theshares of Common Stock issued or issuable upon the exercise of this Optionspecified in notice given to the Company by the Optionee and to cause themanaging underwriter or underwriters of such proposed underwritten offering topermit the shares of Common Stock requested to be included in the registrationstatement for such offering to be included on the same terms and conditions asany similar securities of the Company included therein.  Notwithstanding the foregoing, if the managingunderwriter or underwriters of such offering deliver a written opinion to theOptionee that marketing considerations require a limitation in the number ofshares of Common Stock offered pursuant to the registration statement, then,subject to the advice of said managing underwriter or underwriters as to thesize and composition of the offering, such limitation shall be imposed upon andreduce the shares of Common Stock to be included in the registration statementpursuant to this Paragraph 6(a) and shall not reduce the shares of CommonStock to be sold to the public by the Company.

 

(b)           TheOptionee agrees, if requested in writing by the managing underwriter orunderwriters in an underwritten offering, not to effect any public sale ordistribution of securities of the Company of the same class as the securitiesincluded in any registration statement, including a sale pursuant to Rule 144under the Securities Act (except as part of such underwritten registration),during the seven-day period prior to, and during the 120-day period following,the effective date of the registration statement for each underwritten offeringmade pursuant to such registration statement, to the extent timely notified inwriting by the Company or the managing underwriter or underwriters.

 

This Paragraph 6(b) shall not apply tothe Optionee if he is prevented by applicable statute or regulation fromentering into any such agreement; provided that the Optionee shall undertake,in his request to participate in any such offering, not to effect any publicsale or distribution of Common Stock commencing on the date of sale of suchCommon Stock unless he has provided 45 days’ prior written notice of such saleor distribution to the underwriter or underwriters.

 

(c)           Inconnection with the Company’s registration obligations pursuant to thisParagraph 6, the Company shall use all reasonable efforts to effect suchregistration to permit the sale of such shares of Common Stock in accordancewith the intended method or methods of disposition thereof.

 

(d)           TheOptionee shall furnish to the Company such information regarding the Optioneeand the distribution of the shares of Common Stock issued or issuable pursuantto this Option as the Company may from time to time reasonably request inwriting.

 

(e)           Allexpenses incident to the Company’s performance of or compliance with theregistration provisions contained in this Paragraph 6 shall be borne by theCompany (other than expenses of counsel to the Optionee and underwriters’discounts or commissions), regardless of whether such registration statementbecomes effective.

 

(f)            TheOptionee agrees that he will execute such documents and other papers and takesuch further actions as the Company may reasonably request including, withoutlimitation, agreements providing for cross-indemnification

 

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by the Optionee and the Company, in such form as is customarily used ina registration such as that contemplated by this Paragraph 6.

 

7.             **Tax Withholding**.  The Company may deduct and withhold, from anycash otherwise payable to the Optionee, such amount as may be required for thepurpose of satisfying any obligation the Company may have to withhold Federal,state or local taxes.  Further, in theevent the amount so withheld is insufficient for such purpose, the Company mayrequire that the Optionee pay to the Company, upon its demand, or otherwisemake arrangements satisfactory to the Company for payment of such amount as maybe requested by the Company in order to satisfy its obligation to withhold anysuch taxes.

 

8.             **Capital Adjustments Affecting the Common Stock;Merger**.  In the event of acapital adjustment resulting from a stock dividend (other than a stock dividendin lieu of an ordinary cash dividend), stock split, reorganization, spin-off,split-up or distribution of assets to shareholders, recapitalization, merger,consolidation, combination or exchange of shares or the like, the number ofshares of Common Stock subject to the Option and the per share price at whichthe Option becomes exercisable as provided in Paragraph 3 hereof shall beadjusted in a manner consistent with such capital adjustment; provided,however, that no such adjustment shall require the Company to sell anyfractional shares and the adjustment shall be limited accordingly.  The price of any shares under the Optionshall be adjusted so that there will be no change in the aggregate purchaseprice payable upon exercise of the Option.

 

In the event that a share exchange iseffected or the Company is merged or consolidated with another entity and theshares of Common Stock are exchanged, pursuant to such transaction, intosecurities of the acquiring or surviving entity or its parent, then theOptionee shall elect either to (i) purchase the Option from the Optioneefor cash in an amount equal to the net amount that the Optionee could havereceived upon the exercise of the Option and the sale of the Optioned Shares,or (ii) cause the Option to be assumed by such acquiring or survivingentity or its parent, with appropriate adjustments, consistent with theagreement and plan of share exchange, merger or consolidation, as to theexercise price and the number and kind of securities covered by the Option.

 

9.             **Representation by the Optionee**.  By execution of this Agreement, the Optioneerepresents to the Company that his acquisition of Optioned Shares upon exerciseof the Option will be for investment purposes only, for his own account and notwith a view to resell or otherwise distribute such shares.  The Optionee acknowledges that the issuanceof Optioned Shares upon exercise of the Option will not be registered under theSecurities Act or under any state securities laws, and that such shares cannotbe resold or otherwise transferred unless registered under said Act and laws orunless an exemption from registration is available.  The Optionee further acknowledges that thecertificate or certificate representing the Optioned Shares acquired uponexercise of the Option shall bear the following legend:

 

“The shares of common stock of Poore Brothers, Inc.represented by this certificate have not been registered under the SecuritiesAct of 1933, as amended, or any state securities laws, and such shares may notbe resold or otherwise transferred unless registered under said Act and laws orunless an exemption from registration is available.”

 

As a condition to the exercise of this Option, the Optionee willdeliver to the Company such signed representations, warranties and agreementsas may be necessary, in the opinion of counsel satisfactory to the Company, forcompliance with applicable federal and state securities laws.

 

10.           **Status of Optionee**.  The Optionee shall have no rights as ashareholder with respect to Optioned Shares covered by the Option until thedate of issuance of stock certificates to the Optionee and only after suchshares are fully paid.  The Option shallnot confer upon the Optionee the right to continue as an employee of theCompany.

 

11.           **Powers of the Company Not Affected**.  Subject to the terms of this Agreement, theexistence of the Option shall not affect in any way the right or power of theCompany or its shareholders to make or authorize any or all adjustments,recapitalizations, reorganizations or other changes in the Company’s capitalstructure or its business, or any merger or consolidation of the Company, orany issue of bonds, debentures, preferred or prior preference stock ahead of oraffecting the Common Stock or the rights thereof, or any dissolution orliquidation of the Company, or any sale or transfer of all or any part of its assetsor business or any other corporate act or proceeding, whether of a similarcharacter or otherwise.

 

12.           **Interpretation by the Board of Directors**.  This Agreement shall be interpreted by theBoard of Directors in good faith.  Anydispute between the Optionee and the Company regarding any interpretation bythe Board of the terms of this Agreement or any determination made by the Boardpursuant to this Agreement shall be resolved by binding arbitration before asingle arbitrator agreeable to each party.  If the parties cannot agree, then each shallselect an arbitrator and the two arbitrators so selected shall agree on anarbitrator to resolve the dispute.

 

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13.           **Reserved Shares**.  The Company has duly reserved for issuance anumber of authorized but unissued shares adequate to fulfill its obligationsunder this Agreement.  During the term ofthis Agreement, the Company shall take such actions as may be necessary tomaintain at all times an adequate number of shares reserved for issuance ortreasury shares to fulfill its obligations hereunder.

 

14.           **Requirements of Law**.  The grant of the Option and the issuance ofOptioned Shares pursuant to this Agreement are subject to all applicable laws,statutes, rules and regulations.

 

15.           **Notice**.  All notices or other communications desiredto be given hereunder shall be in writing and shall be deemed to have been dulygiven upon receipt, if personally delivered, or on the third business dayfollowing mailing by United States first class mail, postage prepaid, and addressedas follows:

 

If to the Company:

Poore Brothers, Inc.

3500 S. La Cometa Drive

Goodyear, AZ 85338

If to the Optionee:

 

 

 

 

Or to such other address as either party shall give to the other in themanner set forth above.

 

16.           **Governing Law**.  This Agreement shall be governed by andconstrued in accordance with the internal laws of the State of Delaware.

 

17.           **Amendment**.  This Agreement may not be amended, modified,terminated or otherwise altered except by the written consent of the partieshereto.

 

18.           **Severability**.  The parties agree that, if any provision ofthis Agreement shall, under any circumstances, be deemed invalid orinoperative, this Agreement shall be construed with the invalid or inoperativeprovision or provisions deleted and the rights and obligations of the partiesshall be construed and enforced accordingly.

 

19.           **Entire Agreement**.  This Agreement evidences the entire agreementbetween the parties hereto with respect to the matters provided for herein andthere are no agreements, representations or warranties with respect to thematters provided herein other than those set forth herein.

 

20.           **Headings**.  The headings for the paragraphs of thisAgreement are inserted for convenience only and shall not constitute a part ofthis Agreement.

 

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**IN WITNESS WHEREOF**,the Company has caused this Agreement to be executed by its duly authorizedofficers and its corporate seal to be hereunto affixed, and the Optionee hashereunto affixed his hand and seal as of the day and year first written above.

 

 
|   | POORE BROTHERS, INC. |
|--------|----------------------|
|   |                 |
|   |                 |
|   | By:                  |   |   |
|   |                 |
|   |                 |
|   | OPTIONEE             |
|   |                 |
|   |                 |
| By:    |                 |   |
|        |                      |  |  |  |

 

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