EXHIBIT 10.2


THIS OPTION AND THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE OF
THIS OPTION HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR ANY STATE SECURITIES LAWS. THIS OPTION AND THE COMMON STOCK
ISSUABLE UPON EXERCISE OF THIS OPTION MAY NOT BE SOLD, OFFERED FOR SALE,
PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT
AS TO THIS OPTION UNDER SAID ACT AND ANY APPLICABLE STATE SECURITIES LAWS OR AN
OPINION OF COUNSEL REASONABLY SATISFACTORY TO FORCE PROTECTION, INC. THAT SUCH
REGISTRATION IS NOT REQUIRED.


Right to Purchase
up to 1,000,000 Shares of Common Stock of

FORCE PROTECTION, INC. 

(subject to adjustment as provided herein)


COMMON STOCK PURCHASE OPTION


	
  No. 2006 – 1

  	
   

  	
  Issue Date: January 10, 2006

  



 


FORCE PROTECTION, INC., a corporation organized under the laws of the
State of Nevada (the “Company”), hereby certifies that, for value received, GORDON
MCGILTON (the “Holder”), is entitled, subject to the terms set forth below, to
purchase from the Company from and after January 1, 2007 (the “Vesting Date”)
and at any time or from time to time before 5:00 p.m., New York time, through
the earlier of, the close of business on January 1, 2011 or 120 calendar days after
the date Mr. McGilton terminates employment with the Company (the “Expiration
Date”), up to 1,000,000 fully paid and nonassessable shares of Common Stock (as
hereinafter defined), $0.001 par value per share at the applicable Exercise
Price.  The Exercise Price per share under
this Option shall be $0.72.  The Options
can not be exercised until they vest. 
The number and character of such shares of Common Stock and the
applicable Exercise Price per share are subject to adjustment as provided
herein.


As used herein the following terms, unless the context otherwise
requires, have the following respective meanings:


(a)           The term “Company”
shall include Force Protection, Inc. and any person or entity which shall
succeed, or assume the obligations of, Force Protection, Inc. hereunder.


(b)           The term “Common Stock”
includes (i) the Company’s Common Stock, par value $0.001 per share; and (ii)
any other securities into which or for which any of the securities described in
the preceding clause (i) may be converted or exchanged pursuant to a plan of
recapitalization, reorganization, merger, sale of assets or otherwise.


(c)           The
term “Other Securities” refers to any stock (other than Common Stock) and other
securities of the Company or any other person (corporate or otherwise) which
the holder of the Option at any time shall be entitled to receive, or shall
have 









 



received, on the exercise of the Option, in lieu of or
in addition to Common Stock, or which at any time shall be issuable or shall
have been issued in exchange for or in replacement of Common Stock or Other
Securities pursuant to Section 4 or otherwise.


1.             Exercise
of Option.


1.1   Number
of Shares Issuable upon Exercise. 
From and after the date hereof through and including the Expiration
Date, the Holder shall be entitled to receive, upon exercise of this Option in
whole or in part, by delivery of an original or fax copy of an exercise notice
in the form attached hereto as Exhibit A (the “Exercise Notice”), shares of Common
Stock of the Company, subject to adjustment pursuant to Section 4.


1.2   Company
Acknowledgment.  The Company will, at
the time of the exercise of this Option, upon the request of the holder hereof
acknowledge in writing its continuing obligation to afford to such holder any
rights to which such holder shall continue to be entitled after such exercise
in accordance with the provisions of this Option. If the holder shall fail to
make any such request, such failure shall not affect the continuing obligation
of the Company to afford to such holder any such rights.


1.3   Trustee
for Option Holder.  In the event that
a bank or trust company shall have been appointed as trustee for the holder of
this Option pursuant to Subsection 3.2, such bank or trust company shall have
all the powers and duties of a option agent (as hereinafter described) and
shall accept, in its own name for the account of the Company or such successor
person as may be entitled thereto, all amounts otherwise payable to the Company
or such successor, as the case may be, on exercise of this Option pursuant to
this Section 1.


2.             Procedure
for Exercise.


2.1   Delivery
of Stock Certificates, Etc., on Exercise. 
The Company agrees that the shares of Common Stock purchased upon
exercise of this Option shall be deemed to be issued to the Holder as the
record owner of such shares as of the close of business on the date on which
this Option shall have been surrendered and payment made for such shares in
accordance herewith.  As soon as
practicable after the exercise of this Option in full or in part, and in any
event within three (3) business days thereafter, the Company at its expense
(including the payment by it of any applicable issue taxes) will cause to be
issued in the name of and delivered to the Holder, or as such Holder (upon
payment by such Holder of any applicable transfer taxes) may direct in
compliance with applicable securities laws, a certificate or certificates for
the number of duly and validly issued, fully paid and nonassessable shares of
Common Stock (or Other Securities) to which such Holder shall be entitled on
such exercise pursuant to Section 1 or otherwise.


2.2   Exercise.


(a)           Payment may be made in
cash or by certified or official bank check payable to the order of the Company
or other immediate funds equal to the applicable aggregate Exercise Price, for
the number of Common Shares specified in such Exercise Notice (as such exercise
number shall be adjusted to reflect any adjustment in the total number of
shares of Common Stock issuable to the Holder per the terms of this Option) 









 



and the Holder shall thereupon be entitled to receive the number of
duly authorized, validly issued, fully-paid and non-assessable shares of Common
Stock (or Other Securities) determined as provided herein.


3.             Effect
of Reorganization, Etc.; Adjustment of Exercise Price.


3.1   Reorganization,
Consolidation, Merger, Etc In case at any time or from time to time, the
Company shall (a) effect a reorganization, (b) consolidate with or merge into
any other person, or (c) transfer all or substantially all of its properties or
assets to any other person under any plan or arrangement contemplating the
dissolution of the Company, then, in each such case,  as a condition to the consummation of such a
transaction, proper and adequate provision shall be made by the Company whereby
the Holder, on the exercise hereof as provided in Section 1 at any time after
the consummation of such reorganization, consolidation or merger or the
effective date of such dissolution, as the case may be, shall receive, in lieu
of the Common Stock (or Other Securities) issuable on such exercise prior to
such consummation or such effective date, the stock and other securities and
property (including cash) to which such Holder would have been entitled upon
such consummation or in connection with such dissolution, as the case may be,
if such Holder had so exercised this Option, immediately prior thereto, all
subject to further adjustment thereafter as provided in Section 4.


3.2   Dissolution.  In the event of any dissolution of the
Company following the transfer of all or substantially all of its properties or
assets, the Company, concurrently with any distributions made to holders of its
Common Stock, shall at its expense deliver or cause to be delivered to the
Holder the stock and other securities and property (including cash, where
applicable) receivable by the Holder pursuant to Section 3.1, or, if the Holder
shall so instruct the Company, to a bank or trust company specified by the
Holder as trustee for the Holder.


3.3   Continuation
of Terms.  Upon any reorganization,
consolidation, merger or transfer (and any dissolution following any transfer)
referred to in this Section 3, this Option shall continue in full force and
effect and the terms hereof shall be applicable to the shares of stock and other
securities and property receivable on the exercise of this Option after the
consummation of such reorganization, consolidation or merger or the effective
date of dissolution following any such transfer, as the case may be, and shall
be binding upon the issuer of any such stock or other securities, including, in
the case of any such transfer, the person acquiring all or substantially all of
the properties or assets of the Company, whether or not such person shall have
expressly assumed the terms of this Option as provided in Section 4.  In the event this Option does not continue in
full force and effect after the consummation of the transactions described in
this Section 3, then the Company’s securities and property (including cash,
where applicable) receivable by the Holder will be delivered to the Holder or
the Trustee as contemplated by Section 3.2.









 



4.             Extraordinary
Events Regarding Common Stock.  In
the event that the Company shall (a) issue additional shares of the Common
Stock as a dividend or other distribution on outstanding Common Stock, (b)
subdivide its outstanding shares of Common Stock, (c) combine its outstanding
shares of the Common Stock into a smaller number of shares of the Common Stock,
then, in each such event, the Exercise Price shall, simultaneously with the
happening of such event, be adjusted by multiplying the then Exercise Price by
a fraction, the numerator of which shall be the number of shares of Common
Stock outstanding immediately prior to such event and the denominator of which
shall be the number of shares of Common Stock outstanding immediately after
such event, and the product so obtained shall thereafter be the Exercise Price
then in effect. The Exercise Price, as so adjusted, shall be readjusted in the
same manner upon the happening of any successive event or events described
herein in this Section 4.  The number of
shares of Common Stock that the holder shall thereafter, on the exercise hereof
as provided in Section 1, be entitled to receive shall be adjusted to a number
determined by multiplying the number of shares of Common Stock that would
otherwise (but for the provisions of this Section 4) be issuable on such
exercise by a fraction of which (a) the numerator is the Exercise Price that
would otherwise (but for the provisions of this Section 4) be in effect, and
(b) the denominator is the Exercise Price in effect on the date of such
exercise (taking into account the provisions of this Section 4).


5.             Certificate
as to Adjustments.  In each case of
any adjustment or readjustment in the shares of Common Stock (or Other
Securities) issuable on the exercise of this Option, the Company at its expense
will promptly cause its Chief Financial Officer or other appropriate designee
to compute such adjustment or readjustment in accordance with the terms of this
Option and prepare a certificate setting forth such adjustment or readjustment
and showing in detail the facts upon which such adjustment or readjustment is
based, including a statement of (a) the consideration received or receivable by
the Company for any additional shares of Common Stock (or Other Securities)
issued or sold or deemed to have been issued or sold, (b) the number of shares
of Common Stock (or Other Securities) outstanding or deemed to be outstanding,
and (c) the Exercise Price and the number of shares of Common Stock to be
received upon exercise of this Option, in effect immediately prior to such
adjustment or readjustment and as adjusted or readjusted as provided in this Option.  The Company will forthwith mail a copy of
each such certificate to the Holder and any Option agent of the Company
(appointed pursuant to Section 12 hereof).


6.             Reservation
of Stock, Etc., Issuable on Exercise of Option.  The Company will at all times reserve and
keep available, solely for issuance and delivery on the exercise of this Option,
shares of Common Stock (or Other Securities) from time to time issuable on the
exercise of this Option.


7.             Assignment;
Exchange of Option.  Subject to
compliance with applicable securities laws, this Option, and the rights
evidenced hereby, may be transferred by any registered holder hereof (a “Transferor”)
in whole or in part.  On the surrender
for exchange of this Option, with the Transferor’s endorsement in the form of
Exhibit B attached hereto (the “Transferor Endorsement Form”) and together with
evidence reasonably satisfactory to the Company demonstrating compliance with
applicable securities laws, which shall include, 









 



without
limitation, a legal opinion from the Transferor’s counsel (at the Company’s
expense) that such transfer is exempt from the registration requirements of
applicable securities laws, the Company at its expense (but with payment by the
Transferor of any applicable transfer taxes) will issue and deliver to or on
the order of the Transferor thereof a new Option of like tenor, in the name of
the Transferor and/or the transferee(s) specified in such Transferor
Endorsement Form (each a “Transferee”), calling in the aggregate on the face or
faces thereof for the number of shares of Common Stock called for on the face
or faces of the Option so surrendered by the Transferor.


8.             Replacement
of Option. On receipt of evidence reasonably satisfactory to the Company of
loss, theft, destruction or mutilation of this Option and, in the case of any
such loss, theft or destruction of this Option, on delivery of an indemnity
agreement or security reasonably satisfactory in form and amount to the Company
or, in the case of any such mutilation, on surrender and cancellation of this
Option, the Company at its expense will execute and deliver, in lieu thereof, a
new Option of like tenor.


9.             Registration
Rights.  The Holder has been granted
certain registration rights by the Company. 
The shares of common stock issuable upon exercise of the options will be
registered on a Form S-8 registration statement at a time that the Board of
Directors believes is in the best interest of the Company prior to January 31,
2007.


10.           Termination
of Employment.  In the event that the
Holder’s employment at the Company terminates before the Vesting Date, 500,000
of the options will become immediately exercisable, if not already vested,
unless such termination is the result of resignation or for good cause shown,
in which case none of the unvested options will be exercisable, all subject to
adjustment as provided in Section 4.


11.           Maximum Exercise.  Notwithstanding anything contained herein to
the contrary, the Holder shall not be entitled to exercise this Option in
connection with that number of shares of Common Stock which would exceed the
difference between (i) 4.99% of the issued and outstanding shares of Common
Stock and (ii) the number of shares of Common Stock beneficially owned by the
Holder.  For purposes of the immediately
preceding sentence, beneficial ownership shall be determined in accordance with
Section 13(d) of the Securities Exchange Act of 1934, as amended, and
Regulation 13d-3 thereunder.  The
limitation described in the first sentence of this Section 11 shall
automatically become null and void following notice to the Company upon the
occurrence and during the continuance of an Event of Default (as defined in the
Security and Purchase Agreement dated as of the date hereof among the Holder,
the Company and various subsidiaries of the Company, as amended, modified,
restated and/or supplemented from time to time), or upon 75 days prior notice
to the Company.  The Holder shall be
solely responsible for determining its ownership pursuant to this Section 11.  If the Holder delivers a notice to exercise
its options, in whole or in part, to the Company, that notice shall be deemed a
waiver of this Section 11. The Holder shall be solely responsible for
determining its ownership pursuant to this Section 11.


12.           Option
Agent.  The Company may appoint an
agent for the purpose of issuing Common Stock (or Other Securities) on the
exercise of this Option pursuant to Section 1, exchanging this Option pursuant
to Section 7, and replacing this Option pursuant to Section 8, or 









 



any of the foregoing, and
thereafter any such issuance, exchange or replacement, as the case may be,
shall be made at such office by such agent.


13.           Transfer on the Company’s Books.  Until this Option is transferred on the books
of the Company, the Company may treat the registered holder hereof as the
absolute owner hereof for all purposes, notwithstanding any notice to the
contrary.


14.           Notices, Etc.  All notices and other communications from the
Company to the Holder shall be mailed by first class registered or certified
mail, postage prepaid, at such address as may have been furnished to the
Company in writing by such Holder or, until any such Holder furnishes to the
Company an address, then to, and at the address of, the last Holder who has so
furnished an address to the Company.


15.           Miscellaneous.  This Option and any term hereof may be
changed, waived, discharged or terminated only by an instrument in writing
signed by the party against which enforcement of such change, waiver, discharge
or termination is sought. THIS OPTION SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF SOUTH CAROLINA WITHOUT REGARD TO
PRINCIPLES OF CONFLICTS OF LAWS.  The
individuals executing this Option on behalf of the Company agree to submit to
the jurisdiction of such courts and waive trial by jury.  The prevailing party shall be entitled to
recover from the other party its reasonable attorneys’ fees and costs.  In the event that any provision of this Option
is invalid or unenforceable under any applicable statute or rule of law, then
such provision shall be deemed inoperative to the extent that it may conflict
therewith and shall be deemed modified to conform with such statute or rule of
law.  Any such provision which may prove
invalid or unenforceable under any law shall not affect the validity or enforceability
of any other provision of this Option. 
The headings in this Option are for purposes of reference only, and
shall not limit or otherwise affect any of the terms hereof.  The invalidity or unenforceability of any
provision hereof shall in no way affect the validity or enforceability of any
other provision hereof.  The Company
acknowledges that legal counsel participated in the preparation of this Option
and, therefore, stipulates that the rule of construction that ambiguities are
to be resolved against the drafting party shall not be applied in the
interpretation of this Option to favor any party against the other party.


[BALANCE OF PAGE INTENTIONALLY LEFT BLANK;

SIGNATURE PAGE FOLLOWS]









 



IN WITNESS WHEREOF, the Company has executed this Option as of the date
first written above. 


	
  

  	
   

  	
  FORCE
  PROTECTION, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ Frank
  Kavanaugh

  
	
   

  	
   

  	
  Name:

  	
  Frank Kavanaugh

  
	
   

  	
   

  	
  Title:

  	
  Chairman of the
  Board

  
					



 









 



EXHIBIT A


FORM OF SUBSCRIPTION

(To Be Signed Only On Exercise Of Option)


TO:         Force Protection, Inc.

9801 Highway 78, Building 1

Ladson, SC, 29456


Attention:              Chief
Financial Officer


The undersigned, pursuant to the provisions set forth in the attached Option
(No.             ),
hereby irrevocably elects to purchase                 
shares of the common stock covered by such option; or


The undersigned herewith makes payment of the full
Exercise Price for such shares at the price per share provided for in such Option,
which is $                      .


The undersigned requests that the certificates for such shares be
issued in the name of, and delivered to                                                                                          
whose address is                                                                                 
                                                                      .


The undersigned represents and options that all offers and sales by the
undersigned of the securities issuable upon exercise of the within Option shall
be made pursuant to registration of the Common Stock under the Securities Act
of 1933, as amended (the “Securities Act”) or pursuant to an exemption from
registration under the Securities Act.


	
  Dated:

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (Signature must
  conform to name of holder as

  specified on the face of the Option)

  
	
   

  	
   

  	
  Address:

  	
   

  
	
   

  	
   

  	
   

  	
   

  



 









 



EXHIBIT B


FORM OF TRANSFEROR ENDORSEMENT


(To Be Signed Only On Transfer Of Option)


For value received, the undersigned hereby sells,
assigns, and transfers unto the person(s) named below under the heading “Transferees”
the right represented by the within Option to purchase the percentage and
number of shares of Common Stock of Force Protection, Inc. into which the
within Option relates specified under the headings “Percentage Transferred” and
“Number Transferred,” respectively, opposite the name(s) of such person(s) and
appoints each such person Attorney to transfer its respective right on the
books of Force Protection, Inc. with full power of substitution in the
premises.


	
  Transferees

  	
   

  	
  Address

  	
   

  	
  Percentage

  Transferred

  	
   

  	
  Number 

  Transferred

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  



 


 


	
  Dated:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (Signature must conform to name of holder as

  specified on the face of the Option)

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
        Address:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  SIGNED IN THE PRESENCE OF:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (Name)

  



 


ACCEPTED AND AGREED:

[TRANSFEREE]


(Name)