Exhibit 4.2



 




Exhibit 4.2


ARS NETWORKS, INCORPORATED 

NON-EMPLOYEE DIRECTORS AND CONSULTANTS RETAINER STOCK PLAN FOR THE

YEAR 2004 NO.1






1.                   
Introduction.  This Plan shall be known as the "ARS Networks,
Incorporated Non-Employee Directors and Consultants Retainer Stock Plan for the
Year 2004 No.1," and is hereinafter referred to as the "Plan."  The purposes of
this Plan are to enable ARS Networks, Incorporated, a New Hampshire corporation
(the "Company"), to promote the interests of the Company and its stockholders
by attracting and retaining non-employee Directors and Consultants capable of
furthering the future success of the Company and by aligning their economic
interests more closely with those of the Company's stockholders, by paying
their retainer or fees in the form of shares of the Company's common stock, par
value $0.0001 per share (the "Common Stock").


2.                   
Definitions.  The following terms shall have the meanings set
forth below:


"Board" means the Board of Directors of the
Company.


"Change of Control" has the meaning set forth
in Paragraph 12(d) hereof.


"Code" means the Internal Revenue Code of 1986,
as amended, and the rules and regulations thereunder. References to any
provision of the Code or rule or regulation thereunder shall be deemed to
include any amended or successor provision, rule or regulation.


"Committee" means the committee that
administers this Plan, as more fully defined in Paragraph 13 hereof.


"Common Stock" has the meaning set forth in
Paragraph 1 hereof.


"Company" has the meaning set forth in
Paragraph 1 hereof.


"Deferral Election" has the meaning set forth
in Paragraph 6 hereof.


"Deferred Stock Account" means a bookkeeping
account maintained by the Company for a Participant representing the
Participant's interest in the shares credited to such Deferred Stock Account pursuant
to Paragraph 7 hereof.


"Delivery Date" has the meaning set forth in
Paragraph 6 hereof.


"Director" means an individual who is a member
of the Board of Directors of the Company.


"Dividend Equivalent" for a given dividend or
other distribution means a number of shares of the Common Stock having a Fair
Market Value, as of the record date for such dividend or distribution, equal to
the amount of cash, plus the Fair Market Value on the date of distribution of
any property, that is distributed with respect to one share of the Common Stock
pursuant to such dividend or distribution; such Fair Market Value to be
determined by the Committee in good faith.


"Effective Date" has the meaning set forth in
Paragraph 3 hereof.


"Exchange Act" has the meaning set forth in
Paragraph 12(d) hereof.


 


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"Fair Market Value" means the mean between the
highest and lowest reported sales prices of the Common Stock on the New York
Stock Exchange Composite Tape or, if not listed on such exchange, on any other
national securities exchange on which the Common Stock is listed or on The
Nasdaq Stock Market, or, if not so listed on any other national securities
exchange or The Nasdaq Stock Market, then the
average of the bid price of the Common Stock during the last five trading days
on the OTC Bulletin Board immediately
preceding the last trading day prior to the date with respect to which
the Fair Market Value is to be determined.  If the Common Stock is not then
publicly traded, then the Fair Market Value of the Common Stock shall be the
book value of the Company per share as determined on the last day of March,
June, September, or December in any year closest to the date when the
determination is to be made.  For the purpose of determining book value
hereunder, book value shall be determined by adding as of the applicable date
called for herein the capital, surplus, and undivided profits of the Company,
and after having deducted any reserves theretofore established; the sum of
these items shall be divided by the number of shares of the Common Stock
outstanding as of said date, and the quotient thus obtained shall represent the
book value of each share of the Common Stock of the Company.


"Participant" has the meaning set forth in
Paragraph 4 hereof.


"Payment Time" means the time when a Stock
Retainer is payable to a Participant pursuant to Paragraph 5 hereof (without
regard to the effect of any Deferral Election).


"Stock Retainer" has the meaning set forth in
Paragraph 5 hereof.


"Third Anniversary" has the meaning set forth
in Paragraph 6 hereof.


3.                     
Effective Date of the Plan.  This Plan was adopted by the Board
effective January 26, 2004 (the "Effective Date").


4.                    
Eligibility.  Each individual who is a Director or Consultant on
the Effective Date and each individual who becomes a Director or Consultant
thereafter during the term of this Plan, shall be a participant (the
"Participant") in this Plan, in each case during such period as such individual
remains a Director or Consultant and is not an employee of the Company or any
of its subsidiaries.  Each credit of shares of the Common Stock pursuant to
this Plan shall be evidenced by a written agreement duly executed and delivered
by or on behalf of the Company and a Participant, if such an agreement is
required by the Company to assure compliance with all applicable laws and
regulations.  


5.                   
Grants of Shares.  Commencing on the Effective Date, the amount
of compensation for service to directors or consultants shall be payable in
shares of the Common Stock (the "Stock Retainer") pursuant to this Plan at the
deemed issuance price of $0.0065 per Share.


6.                    
Deferral Option.  From and after the Effective Date, a
Participant may make an election (a "Deferral Election") on an annual basis to
defer delivery of the Stock Retainer specifying which one of the following ways
the Stock Retainer is to be delivered (a) on the date which is three years
after the Effective Date for which it was originally payable (the "Third
Anniversary"), (b) on the date upon which the Participant ceases to be a
Director or Consultant for any reason (the "Departure Date") or (c) in five
equal annual installments commencing on the Departure Date (the "Third
Anniversary" and "Departure Date" each being referred to herein as a "Delivery
Date").  Such Deferral Election shall remain in effect for each Subsequent Year
unless changed, provided that, any Deferral Election with respect to a
particular Year may not be changed less than six months prior to the beginning
of such Year, and provided, further, that no more than one Deferral Election or
change thereof may be made in any Year.


Any Deferral Election and any change or
revocation thereof shall be made by delivering written notice thereof to the
Committee no later than six months prior to the beginning of the Year in which
it is to be effected; provided that, with respect to the Year beginning on the
Effective Date, any Deferral Election or revocation thereof must be delivered
no later than the close of business on the 30th day after the Effective Date.


7.                   
Deferred Stock Accounts.  The Company shall maintain a Deferred
Stock Account for each Participant who makes a Deferral Election to which shall
be credited, as of the applicable Payment Time, the number of shares of the
Common Stock payable pursuant to the Stock Retainer to which the Deferral
Election relates.  So long as any amounts in such Deferred Stock Account have
not been delivered to the Participant under Paragraph 8 hereof, each Deferred
Stock Account shall be credited as of the payment date for any dividend paid or
other distribution made with respect to the Common Stock, with a number of
shares of the Common Stock equal to (a) the number of shares of the Common
Stock shown in such Deferred Stock Account on the record date for such dividend
or distribution multiplied by (b) the Dividend Equivalent for such dividend or
distribution.


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8.                   
Delivery of Shares.


(a)           The shares of the Common Stock in
a Participant's Deferred Stock Account with respect to any Stock Retainer for
which a Deferral Election has been made (together with dividends attributable
to such shares credited to such Deferred Stock Account) shall be delivered in
accordance with this Paragraph 8 as soon as practicable after the applicable
Delivery Date.  Except with respect to a Deferral Election pursuant to
Paragraph 6 hereof, or other agreement between the parties, such shares shall
be delivered at one time; provided that, if the number of shares so delivered
includes a fractional share, such number shall be rounded to the nearest whole
number of shares.  If the Participant has in effect a Deferral Election
pursuant to Paragraph 6 hereof, then such shares shall be delivered in five
equal annual installments (together with dividends attributable to such shares
credited to such Deferred Stock Account), with the first such installment being
delivered on the first anniversary of the Delivery Date; provided that, if in
order to equalize such installments, fractional shares would have to be
delivered, such installments shall be adjusted by rounding to the nearest whole
share.  If any such shares are to be delivered after the Participant has died
or become legally incompetent, they shall be delivered to the Participant's
estate or legal guardian, as the case may be, in accordance with the foregoing;
provided that, if the Participant dies with a Deferral Election pursuant to
Paragraph 6 hereof in effect, the Committee shall deliver all remaining
undelivered shares to the Participant's estate immediately.  References to a
Participant in this Plan shall be deemed to refer to the Participant's estate
or legal guardian, where appropriate.


(b)           The Company may, but shall not be
required to, create a grantor trust or utilize an existing grantor trust (in
either case, "Trust") to assist it in accumulating the shares of the Common
Stock needed to fulfill its obligations under this Paragraph 8.  However,
Participants shall have no beneficial or other interest in the Trust and the
assets thereof, and their rights under this Plan shall be as general creditors
of the Company, unaffected by the existence or nonexistence of the Trust,
except that deliveries of Stock Retainers to Participants from the Trust shall,
to the extent thereof, be treated as satisfying the Company's obligations under
this Paragraph 8.


9.                   
Share Certificates; Voting and Other Rights.  The certificates for
shares delivered to a Participant pursuant to Paragraph 8 above shall be issued
in the name of the Participant, and from and after the date of such issuance
the Participant shall be entitled to all rights of a stockholder with respect
to the Common Stock for all such shares issued in his name, including the right
to vote the shares, and the Participant shall receive all dividends and other
distributions paid or made with respect thereto.


10.                 
General Restrictions.


                (a)           Notwithstanding
any other provision of this Plan or agreements made pursuant thereto, the
Company shall not be required to issue or deliver any certificate or
certificates for shares of the Common Stock under this Plan prior to
fulfillment of all of the following conditions:  


                                (i)            Listing
or approval for listing upon official notice of issuance of such shares on the
New York Stock Exchange, Inc., or such other securities exchange as may at the
time be a market for the Common Stock;


                                (ii)           Any
registration or other qualification of such shares under any state or federal
law or regulation, or the maintaining in effect of any such registration or
other qualification which the Committee shall, upon the advice of counsel, deem
necessary or advisable; and


                                (iii)          Obtaining
any other consent, approval, or permit from any state or federal governmental
agency which the Committee shall, after receiving the advice of counsel,
determine to be necessary or advisable.


 


 


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                (b)           Nothing contained
in this Plan shall prevent the Company from adopting other or additional
compensation arrangements for the Participants.


11.                
Shares Available.  Subject to Paragraph 12 below, the maximum
number of shares of the Common Stock which may in the aggregate be paid as
Stock Retainers pursuant to this Plan is 10,000,000.  Shares of the Common
Stock issuable under this Plan may be taken from treasury shares of the Company
or purchased on the open market.  In the event that any outstanding Stock
Retainer under this Plan for any reason expires or is terminated, the shares of
Common Stock allocable to the unexercised portion of the Stock Retainer shall
be available for issuance under the ARS Networks, Incorporated Employee Stock
Incentive Plan for the Year 2004 No. 1.


12.                
Adjustments; Change of Control.


                (a)           In the event that
there is, at any time after the Board adopts this Plan, any change in corporate
capitalization, such as a stock split, combination of shares, exchange of
shares, warrants or rights offering to purchase the Common Stock at a price
below its Fair Market Value, reclassification, or recapitalization, or a
corporate transaction, such as any merger, consolidation, separation, including
a spin-off, stock dividend, or other extraordinary distribution of stock or
property of the Company, any reorganization (whether or not such reorganization
comes within the definition of such term in Section 368 of the Code) or any
partial or complete liquidation of the Company (each of the foregoing a
"Transaction"), in each case other than any such Transaction which constitutes
a Change of Control (as defined below), (i) the Deferred Stock Accounts shall
be credited with the amount and kind of shares or other property which would
have been received by a holder of the number of shares of the Common Stock held
in such Deferred Stock Account had such shares of the Common Stock been
outstanding as of the effectiveness of any such Transaction, (ii) the number
and kind of shares or other property subject to this Plan shall likewise be
appropriately adjusted to reflect the effectiveness of any such Transaction,
and (iii) the Committee shall appropriately adjust any other relevant
provisions of this Plan and any such modification by the Committee shall be
binding and conclusive on all persons.


                (b)           If the shares of
the Common Stock credited to the Deferred Stock Accounts are converted pursuant
to Paragraph 12(a) into another form of property, references in this Plan to
the Common Stock shall be deemed, where appropriate, to refer to such other
form of property, with such other modifications as may be required for this
Plan to operate in accordance with its purposes.  Without limiting the
generality of the foregoing, references to delivery of certificates for shares
of the Common Stock shall be deemed to refer to delivery of cash and the
incidents of ownership of any other property held in the Deferred Stock
Accounts.


                (c)           In lieu of the
adjustment contemplated by Paragraph 12(a), in the event of a Change of
Control, the following shall occur on the date of the Change of Control (i) the
shares of the Common Stock held in each Participant's Deferred Stock Account
shall be deemed to be issued and outstanding as of the Change of Control; (ii)
the Company shall forthwith deliver to each Participant who has a Deferred
Stock Account all of the shares of the Common Stock or any other property held
in such Participant's Deferred Stock Account; and (iii) this Plan shall be
terminated.


                (d)           For purposes of
this Plan, Change of Control shall mean any of the following events:


                                (i)            The
acquisition by any individual, entity or group (within the meaning of Section
13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act")) (a "Person") of beneficial ownership (within the meaning of
Rule 13d-3 promulgated under the Exchange Act) of 20 percent or more of either
(1) the then outstanding shares of the Common Stock of the Company (the
"Outstanding Company Common Stock"), or (2) the combined voting power of then
outstanding voting securities of the Company entitled to vote generally in the
election of directors (the "Outstanding Company Voting Securities"); provided,
however, that the following acquisitions shall not constitute a Change of
Control (A) any acquisition directly from the Company (excluding an acquisition
by virtue of the exercise of a conversion privilege unless the security being
so converted was itself acquired directly from the Company), (B) any
acquisition by the Company, (C) any acquisition by any employee benefit plan
(or related trust) sponsored or maintained by the Company or any corporation
controlled by the Company or (D) any acquisition by any corporation pursuant to
a reorganization, merger or consolidation, if, following such reorganization,
merger or consolidation, the conditions described in clauses (A), (B) and (C)
of paragraph (iii) of this Paragraph 12(d) are satisfied; or


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                                (ii)           Individuals
who, as of the date hereof, constitute the Board of the Company (as of the date
hereof, "Incumbent Board") cease for any reason to constitute at least a
majority of the Board; provided, however, that any individual becoming a
director subsequent to the date hereof whose election, or nomination for
election by the Company's stockholders, was approved by a vote of at least a
majority of the directors then comprising the Incumbent Board shall be
considered as though such individual were a member of the Incumbent Board, but
excluding, for this purpose, any such individual whose initial assumption of
office occurs as a result of either an actual or threatened election contest
(as such terms are used in Rule 14a-11 of Regulation 14A promulgated under the
Exchange Act) or other actual or threatened solicitation of proxies or consents
by or on behalf of a Person other than the Board; or


                                (iii)          Approval
by the stockholders of the Company of a reorganization, merger, binding share
exchange or consolidation, unless, following such reorganization, merger,
binding share exchange or consolidation (A) more than 60 percent of,
respectively, then outstanding shares of common stock of the corporation
resulting from such reorganization, merger, binding share exchange or
consolidation and the combined voting power of then outstanding voting
securities of such corporation entitled to vote generally in the election of
directors is then beneficially owned, directly or indirectly, by all or
substantially all of the individuals and entities who were the beneficial
owners, respectively, of the Outstanding Company Common Stock and Outstanding
Company Voting Securities immediately prior to such reorganization, merger, binding
share exchange or consolidation in substantially the same proportions as their
ownership, immediately prior to such reorganization, merger, binding share
exchange or consolidation, of the Outstanding Company Common Stock and
Outstanding Company Voting Securities, as the case may be, (B) no Person
(excluding the Company, any employee benefit plan (or related trust) of the
Company or such corporation resulting from such reorganization, merger, binding
share exchange or consolidation and any Person beneficially owning, immediately
prior to such reorganization, merger, binding share exchange or consolidation,
directly or indirectly, 20 percent or more of the Outstanding Company Common
Stock or Outstanding Company Voting Securities, as the case may be) beneficially
owns, directly or indirectly, 20 percent or more of, respectively, then
outstanding shares of common stock of the corporation resulting from such
reorganization, merger, binding share exchange or consolidation or the combined
voting power of then outstanding voting securities of such corporation entitled
to vote generally in the election of directors, and (C) at least a majority of
the members of the board of directors of the corporation resulting from such
reorganization, merger, binding share exchange or consolidation were members of
the Incumbent Board at the time of the execution of the initial agreement
providing for such reorganization, merger, binding share exchange or
consolidation; or  


                                (iv)          Approval
by the stockholders of the Company of (1) a complete liquidation or dissolution
of the Company, or (2) the sale or other disposition of all or substantially
all of the assets of the Company, other than to a corporation, with respect to
which following such sale or other disposition, (A) more than 60 percent of,
respectively, then outstanding shares of common stock of such corporation and
the combined voting power of then outstanding voting securities of such
corporation entitled to vote generally in the election of directors is then
beneficially owned, directly or indirectly, by all or substantially all of the
individuals and entities who were the beneficial owners, respectively, of the
Outstanding Company Common Stock and Outstanding Company Voting Securities
immediately prior to such sale or other disposition in substantially the same
proportion as their ownership, immediately prior to such sale or other
disposition, of the Outstanding Company Common Stock and Outstanding Company
Voting Securities, as the case may be, (B) no Person (excluding the Company and
any employee benefit plan (or related trust) of the Company or such corporation
and any Person beneficially owning, immediately prior to such sale or other
disposition, directly or indirectly, 20 percent or more of the Outstanding
Company Common Stock or Outstanding Company Voting Securities, as the case may
be) beneficially owns, directly or indirectly, 20 percent or more of,
respectively, then outstanding shares of common stock of such corporation and
the combined voting power of then outstanding voting securities of such
corporation entitled to vote generally in the election of directors, and (C) at
least a majority of the members of the board of directors of such corporation
were members of the Incumbent Board at the time of the execution of the initial
agreement or action of the Board providing for such sale or other disposition
of assets of the Company.


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13.                
Administration; Amendment and Termination.


                (a)           This Plan shall
be administered by a committee consisting of two members who shall be the current
directors of the Company or senior executive officers or other directors who
are not Participants as may be designated by the Chief Executive Officer (the
"Committee"), which shall have full authority to construe and interpret this
Plan, to establish, amend and rescind rules and regulations relating to this
Plan, and to take all such actions and make all such determinations in
connection with this Plan as it may deem necessary or desirable.


                (b)           The Board may
from time to time make such amendments to this Plan, including to preserve or
come within any exemption from liability under Section 16(b) of the Exchange
Act, as it may deem proper and in the best interest of the Company without
further approval of the Company's stockholders, provided that, to the extent
required under New Hampshire law or to qualify transactions under this Plan for
exemption under Rule 16b-3 promulgated under the Exchange Act, no amendment to
this Plan shall be adopted without further approval of the Company's
stockholders and, provided, further, that if and to the extent required for
this Plan to comply with Rule 16b-3 promulgated under the Exchange Act, no
amendment to this Plan shall be made more than once in any six month period
that would change the amount, price or timing of the grants of the Common Stock
hereunder other than to comport with changes in the Code, the Employee
Retirement Income Security Act of 1974, as amended, or the regulations
thereunder.  The Board may terminate this Plan at any time by a vote of a
majority of the members thereof.  


14.           Restrictions on Transfer. 
Each Stock Option granted under this Plan shall be transferable only by will or
the laws of descent and distribution.  No interest of any Employee under this
Plan shall be subject to attachment, execution, garnishment, sequestration, the
laws of bankruptcy or any other legal or equitable process.  Each Stock Option
granted under this Plan shall be exercisable during an Employee's lifetime only
by the Employee or by the Employee's legal representative.


15.           Term of Plan.  No shares
of the Common Stock shall be issued, unless and until the Directors of the
Company have approved this Plan and all other legal requirements have been
met.  This Plan was adopted by the Board effective January 26, 2004, and shall
expire on January 26, 2014.


16.           Governing Law.  This Plan and all
actions taken thereunder shall be governed by, and construed in accordance
with, the laws of the State of New Hampshire.


17.           Information to Shareholders.  The
Company shall furnish to each of its stockholders financial statements of the
Company at least annually.


18.           Miscellaneous.


                (a)           Nothing in this
Plan shall be deemed to create any obligation on the part of the Board to
nominate any Director for reelection by the Company's stockholders or to limit
the rights of the stockholders to remove any Director.


                (b)           The Company shall
have the right to require, prior to the issuance or delivery of any shares of
the Common Stock pursuant to this Plan, that a Participant make arrangements
satisfactory to the Committee for the withholding of any taxes required by law
to be withheld with respect to the issuance or delivery of such shares,
including, without limitation, by the withholding of shares that would
otherwise be so issued or delivered, by withholding from any other payment due
to the Participant, or by a cash payment to the Company by the Participant.


 


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                 IN WITNESS WHEREOF, this Plan has been executed
effective as of January 26, 2004.




ARS Networks,
Incorporated







By /s/ Sydney Harland                                                        

    Sydney Harland, President




 




 




 




 




 




 




 




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