Exhibit
      4.2

     

    
      

    

    


    SMF
      ENERGY CORPORATION

    STOCK
      OPTION PLAN

     

    
      

    

     

    1. Purpose.
      The
      purpose of this Plan is to advance the interests of SMF Energy Corporation,
      a
      Delaware corporation (the “Company”), by providing an additional incentive to
      attract and retain qualified and competent persons who are key employees of
      the
      Company, directors and officers (whether or not employees) and consultants
      to
      the Company and upon whose efforts and judgment the success of the Company
      is
      largely dependent, through the encouragement of stock ownership in the Company
      by such persons.

     

    2. Definitions.
      As used
      herein, the following terms shall have the meaning indicated:

     

    (a) “Board”
      shall mean the Board of Directors of the Company.

     

    (b) “Committee”
      shall mean the stock option committee appointed by the Board pursuant to Section
      13 hereof or, if not appointed, the Board.

     

    (c) “Common
      Stock” shall mean the Company’s no par value Common Stock.

     

    (d) “Director”
      shall mean a member of the Board.

     

    (e) “Disinterested
      Person” shall mean a Director who is not, during the one year prior to his or
      her service as an administrator of this Plan, or during such service, granted
      or
      awarded equity securities pursuant to this Plan or any other plan of the Company
      or any of its affiliates, except that:

     

    (i) participation
      in a formula plan meeting the conditions in paragraph (c)(2)(ii) of Rule 16b
      3
      promulgated under the Securities Exchange Act shall not disqualify a Director
      from being a Disinterested Person;

     

    (ii) participation
      in an ongoing securities acquisition plan meeting the conditions in paragraph
      (d)(2)(i) of Rule 16b 3 promulgated under the Securities Exchange Act shall
      not
      disqualify a Director from being a Disinterested Person; and

     

    (iii) an
      election to receive an annual retainer fee in either cash or an equivalent
      amount of securities, or partly in cash and partly in securities, shall not
      disqualify a Director from being a Disinterested Person.

     

    (f) “Fair
      Market Value” of a Share on any date of reference shall be the “Closing Price”
(as defined below) of the Common Stock on the business day immediately preceding
      such date, unless the Committee in its sole discretion shall determine otherwise
      in a fair and uniform manner. For the purpose of determining Fair Market Value,
      the “Closing Price” of the Common Stock on any business day shall be (i) if the
      Common Stock is listed or admitted for trading on any United States national
      securities exchange, or if actual transactions are otherwise reported on a
      consolidated transaction reporting system, the last reported sale price of
      Common Stock on such exchange or reporting system, as reported in any newspaper
      of general circulation, (ii) if the Common Stock is quoted on the National
      Association of Securities Dealers Automated Quotations System (“NASDAQ”), or any
      similar system of automated dissemination of quotations of securities prices
      in
      common use, the mean between the closing high bid and low asked quotations
      for
      such day of Common Stock on such system, or (iii) if neither clause (i) or
      (ii)
      is applicable, the mean between the high bid and low asked quotations for the
      Common Stock as reported by the National Quotation Bureau, Incorporated if
      at
      least two securities dealers have inserted both bid and asked quotations for
      Common Stock on at least five of the ten preceding days.

     

    
      
        
        

      

      
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    (g) “Incentive
      Stock Option” shall mean an incentive stock option as defined in Section 422 of
      the Internal Revenue Code.

     

    (h) “Internal
      Revenue Code” shall mean the Internal Revenue Code of 1986, as amended from time
      to time.

     

    (i) “Non-Statutory
      Stock Option” shall mean an Option which is not an Incentive Stock
      Option.

     

    (j) “Officer”
      shall mean the Company’s president, principal financial officer, principal
      accounting officer and any other person who the Company identifies as an
“executive officer” for purposes of reports or proxy materials filed by the
      Company pursuant to the Securities Exchange Act.

     

    (k) “Option”
      (when capitalized) shall mean any option granted under this Plan.

     

    (l) “Optionee”
      shall mean a person to whom a stock option is granted under this Plan or any
      person who succeeds to the rights of such person under this Plan by reason
      of
      the death of such person.

     

    (m) “Plan”
      shall mean this Stock Option Plan for the Company.

     

    (n) “Securities
      Exchange Act” shall mean the Securities Exchange Act of 1934, as
      amended.

     

    (o) “Share(s)”
      shall mean a share or shares of the Common Stock.

     

    3. Shares
      and Options.
      The
      Company may grant to Optionees from time to time Options to purchase an
      aggregate of up to One Hundred Thousand (100,000) Shares from Shares held in
      the
      Company’s treasury or from authorized and unissued Shares. If any Option granted
      under the Plan shall terminate, expire, or be canceled or surrendered as to
      any
      Shares, new Options may thereafter be granted covering such Shares. An Option
      granted hereunder shall be either an Incentive Stock Option or a Non-Statutory
      Stock Option as determined by the Committee at the time of grant of such Option
      and shall clearly state whether it is an Incentive Stock Option or Non-Statutory
      Stock Option. All Incentive Stock Options shall be granted within 10 years
      from
      the effective date of this Plan.

     

    4. Dollar
      Limitation.
      Options
      otherwise qualifying as Incentive Stock Options hereunder will not be treated
      as
      Incentive Stock Options to the extent that the aggregate fair market value
      (determined at the time the Option is granted) of the Shares, with respect
      to
      which Options meeting the requirements of Internal Revenue Code Section 422(b)
      are exercisable for the first time by any individual during any calendar year
      (under all plans of the Company), exceeds $100,000.

     

    5. Conditions
      for Grant of Options.

     

    (a) Each
      Option shall be evidenced by an option agreement that may contain any term
      deemed necessary or desirable by the Committee, provided such terms are not
      inconsistent with this Plan or any applicable law. Optionees shall be those
      persons selected by the Committee which may include employees, directors and
      officers (whether or not employees) and consultants to the Company. Any person
      who files with the Committee, in a form satisfactory to the Committee, a written
      waiver of eligibility to receive any Option under this Plan shall not be
      eligible to receive any Option under this Plan for the duration of such
      waiver.

     

    
      
        
        

      

      
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    (b) In
      granting Options, the Committee may take into consideration the contribution
      the
      person has made to the success of the Company and such other factors as the
      Committee shall determine. The Committee shall also have the authority to
      consult with and receive recommendations from officers and other personnel
      of
      the Company with regard to these matters. The Committee may from time to time
      in
      granting Options under the Plan prescribe such other terms and conditions
      concerning such Options as it deems appropriate, including, without limitation,
      (i) prescribing the date or dates on which the Option becomes exercisable,
      (ii)
      providing that the Option rights accrue or become exercisable in installments
      over a period of years, or upon the attainment of stated goals or both, or
      (iii)
      relating an Option to the continued employment of the Optionee for a specified
      period of time, provided that such terms and conditions are not more favorable
      to an Optionee than those expressly permitted herein.

     

    (c) The
      Options granted to employees under this Plan shall be in addition to regular
      salaries, pension, life insurance or other benefits related to their employment
      with the Company. Neither the Plan nor any Option granted under the Plan shall
      confer upon any person any right to employment or continuance of employment
      by
      the Company.

     

    (d) Notwithstanding
      any other provision of this Plan, and in addition to any other requirements
      of
      this Plan, Options may not be granted to a Director or Officer unless the grant
      of such Options is authorized by, and all of the terms of such Options are
      determined by, a Committee that is appointed in accordance with Section 13
      of
      this Plan and all of whose members are Disinterested Persons.

     

    6. Option
      Price.
      The
      option price per Share of any Option shall be any price determined by the
      Committee but shall not be less than the par value per Share; provided, however,
      that in no event shall the option price per Share of any Incentive Stock Option
      be less than the Fair Market Value of the Shares underlying such Option on
      the
      date such Option is granted.

     

    7. Exercise
      of Options.
      An
      Option shall be deemed exercised when (i) the Company has received written
      notice of such exercise in accordance with the terms of the Option, (ii) full
      payment of the aggregate option price of the Shares as to which the Option
      is
      exercised has been made, and (iii) arrangements that are satisfactory to the
      Committee in its sole discretion have been made for the Optionee’s payment to
      the Company of the amount that is necessary for the Company employing the
      Optionee to withhold in accordance with applicable Federal or state tax
      withholding requirements. Unless further limited by the Committee in any Option,
      the option price of any Shares purchased shall be paid in cash, by certified
      or
      official bank check, by money order, with Shares or by a combination of the
      above; provided further, however, that the Committee in its sole discretion
      may
      accept a personal check in full or partial payment of any Shares. If the
      exercise price is paid in whole or in part with Shares, the value of the Shares
      surrendered shall be their Fair Market Value on the date the Option is
      exercised. The Company in its sole discretion may, on an individual basis or
      pursuant to a general program established by the Committee in connection with
      this Plan, lend money to an Optionee to exercise all or a portion of an Option
      granted hereunder. If the exercise price is paid in whole or part with
      Optionee’s promissory note, such note shall (i) provide for full recourse to the
      maker, (ii) be collateralized by the pledge of the Shares that the Optionee
      purchases upon exercise of such Option, (iii) bear interest at a rate no less
      than the rate of interest payable by the Company to its principal lender, and
      (iv) contain such other terms as the Committee in its sole discretion shall
      require. No Optionee shall be deemed to be a holder of any Shares subject to
      an
      Option unless and until a stock certificate or certificates for such Shares
      are
      issued to such person(s) under the terms of this Plan. No adjustment shall
      be
      made for dividends (ordinary or extraordinary, whether in cash, securities
      or
      other property) or distributions or other rights for which the record date
      is
      prior to the date such stock certificate is issued, except as expressly provided
      in Section 10 hereof.

     

    
      
        
        

      

      
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    8. Exercisability
      of Options.
      Any
      Option shall become exercisable in such amounts, at such intervals and upon
      such
      terms as the Committee shall provide in such Option, except as otherwise
      provided in this Section 8.

     

    (a) The
      expiration date of an Option shall be determined by the Committee at the time
      of
      grant, but in no event shall an Option be exercisable after the expiration
      of 10
      years from the date of grant of the Option.

     

    (b) Unless
      otherwise provided in any Option, each outstanding Option shall become
      immediately fully exercisable:

     

    (i) if
      there
      occurs any transaction (which shall include a series of transactions occurring
      within 60 days or occurring pursuant to a plan), that has the result that
      stockholders of the Company immediately before such transaction cease to own
      at
      least 51 percent of the voting stock of the Company or of any entity that
      results from the participation of the Company in a reorganization,
      consolidation, merger, liquidation or any other form of corporate
      transaction;

     

    (ii) if
      the
      stockholders of the Company shall approve a plan of merger, consolidation,
      reorganization, liquidation or dissolution in which the Company does not survive
      (unless the approved merger, consolidation, reorganization, liquidation or
      dissolution is subsequently abandoned); or

     

    (iii) if
      the
      stockholders of the Company shall approve a plan for the sale, lease, exchange
      or other disposition of all or substantially all the property and assets of
      the
      Company (unless such plan is subsequently abandoned).

     

    (c) The
      Committee may in its sole discretion accelerate the date on which any Option
      may
      be exercised and may accelerate the vesting of any Shares subject to any Option
      or previously acquired by the exercise of any Option.

     

    (d) Options
      granted to Officers and Directors shall not be exercisable until the expiration
      of a period of at least six months following the date of grant.

     

    9. Termination
      of Option Period with respect to Employee Grants.

     

    (a) The
      unexercised portion of an Option granted to an employee of the Company shall
      automatically and without notice terminate and become null and void at the
      time
      of the earliest to occur of the following:

     

    (i) three
      months after the date on which the Optionee’s employment is terminated or, in
      the case of a Non-Statutory Stock Option, and unless the Committee shall
      otherwise determine in writing in its sole discretion, the date on which the
      Optionee’s employment is terminated, in either case for any reason other than by
      reason of (A) Cause, which, solely for purposes of this Plan, shall mean the
      termination of the Optionee’s employment by reason of the Optionee’s wilful
      misconduct or gross negligence, (B) a mental or physical disability as
      determined by a medical doctor satisfactory to the Committee, or (C)
      death;

     

    (ii) immediately
      upon the termination of the Optionee’s employment for Cause;


    
      
        
        

      

      
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    (iii) one
      year
      after the date on which the Optionee’s employment is terminated by reason of a
      mental or physical disability (within the meaning of Internal Revenue Code
      Section 22(e)) as determined by a medical doctor satisfactory to the Committee;
      or

     

    (iv) (A)
      twelve months after the date of termination of the Optionee’s employment by
      reason of death of the employee, or (B) three months after the date on which
      the
      Optionee shall die if such death shall occur during the one year period
      specified in Subsection 9(a)(iii) hereof.

     

    (b) The
      Committee in its sole discretion may by giving written notice (“cancellation
      notice”) cancel, effective upon the date of the consummation of any corporate
      transaction described in Subsections 8(b)(ii) or (iii) hereof, any Option that
      remains unexercised on such date. Such cancellation notice shall be given a
      reasonable period of time prior to the proposed date of such cancellation and
      may be given either before or after approval of such corporate
      transaction.

     

    10. Adjustment
      of Shares.

     

    (a) If
      at any
      time while the Plan is in effect or unexercised Options are outstanding, there
      shall be any increase or decrease in the number of issued and outstanding Shares
      through the declaration of a stock dividend or through any recapitalization
      resulting in a stock split-up, combination or exchange of Shares, then and
      in
      such event:

     

    (i) appropriate
      adjustment shall be made in the maximum number of Shares available for grant
      under the Plan, so that the same percentage of the Company’s issued and
      outstanding Shares shall continue to be subject to being so optioned;
      and

     

    (ii) appropriate
      adjustment shall be made in the number of Shares and the exercise price per
      Share thereof then subject to any outstanding Option, so that the same
      percentage of the Company’s issued and outstanding Shares shall remain subject
      to purchase at the same aggregate exercise price.

     

    (b) Subject
      to the specific terms of any Option, the Committee may change the terms of
      Options outstanding under this Plan, with respect to the option price or the
      number of Shares subject to the Options, or both, when, in the Committee’s sole
      discretion, such adjustments become appropriate by reason of a corporate
      transaction described in Subsections 8(b)(ii) or (iii) hereof.

     

    (c) Except
      as
      otherwise expressly provided herein, the issuance by the Company of shares
      of
      its capital stock of any class, or securities convertible into shares of capital
      stock of any class, either in connection with direct sale or upon the exercise
      of rights or warrants to subscribe therefor, or upon conversion of shares or
      obligations of the Company convertible into such shares or other securities,
      shall not affect, and no adjustment by reason thereof shall be made with respect
      to the number of or exercise price of Shares then subject to outstanding Options
      granted under the Plan.

     

    (d) Without
      limiting the generality of the foregoing, the existence of outstanding Options
      granted under the Plan shall not affect in any manner the right or power of
      the
      Company to make, authorize or consummate (i) any or all adjustments,
      recapitalizations, reorganizations or other changes in the Company’s capital
      structure or its business; (ii) any merger or consolidation of the Company;
      (iii) any issue by the Company of debt securities, or preferred or preference
      stock that would rank above the Shares subject to outstanding Options; (iv)
      the
      dissolution or liquidation of the Company; (v) any sale, transfer or assignment
      of all or any part of the assets or business of the Company; or (vi) any other
      corporate act or proceeding, whether of a similar character or
      otherwise.

     

    
      
        
        

      

      
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    11. Transferability
      of Options.
      Each
      Option shall provide that such Option shall not be transferable by the Optionee
      otherwise than by will or the laws of descent and distribution, and each Option
      shall be exercisable during the Optionee’s lifetime only by the
      Optionee.

     

    12. Issuance
      of Shares.
      As a
      condition of any sale or issuance of Shares upon exercise of any Option, the
      Committee may require such agreements or undertakings, if any, as the Committee
      may deem necessary or advisable to assure compliance with any such law or
      regulation including, but not limited to, the following:

     

    (i) a
      representation and warranty by the Optionee to the Company, at the time any
      Option is exercised, that he is acquiring the Shares to be issued to him for
      investment and not with a view to, or for sale in connection with, the
      distribution of any such Shares; and

     

    (ii) a
      representation, warranty and/or agreement to be bound by any legends that are,
      in the opinion of the Committee, necessary or appropriate to comply with the
      provisions of any securities law deemed by the Committee to be applicable to
      the
      issuance of the Shares and are endorsed upon the Share
      certificates.

     

    13. Administration
      of the Plan.

     

    (a) The
      Plan
      shall be administered by the Committee, which shall consist of not less than
      two
      Directors, each of whom shall be Disinterested Persons to the extent required
      by
      Section 5(d) hereof. The Committee shall have all of the powers of the Board
      with respect to the Plan. Any member of the Committee may be removed at any
      time, with or without cause, by resolution of the Board and any vacancy
      occurring in the membership of the Committee may be filled by appointment by
      the
      Board.

     

    (b) The
      Committee, from time to time, may adopt rules and regulations for carrying
      out
      the purposes of the Plan. The Committee’s determinations and its interpretation
      and construction of any provision of the Plan shall be final and
      conclusive.

     

    (c) Any
      and
      all decisions or determinations of the Committee shall be made either (i) by
      a
      majority vote of the members of the Committee at a meeting or (ii) without
      a
      meeting by the unanimous written approval of the members of the
      Committee.

     

    14. Incentive
      Options for 10% Stockholders.
      Notwithstanding any other provisions of the Plan to the contrary, an Incentive
      Stock Option shall not be granted to any person owning directly or indirectly
      (through attribution under Section 424(d) of the Internal Revenue Code) at
      the
      date of grant, stock possessing more than 10% of the total combined voting
      power
      of all classes of stock of the Company (or of its subsidiary [as defined in
      Section 424 of the Internal Revenue Code] at the date of grant) unless the
      option price of such Option is at least 110% of the Fair Market Value of the
      Shares subject to such Option on the date the Option is granted, and such Option
      by its terms is not exercisable after the expiration of five years from the
      date
      such Option is granted.

     

    15. Interpretation.

     

    (a) The
      Plan
      shall be administered and interpreted so that all Incentive Stock Options
      granted under the Plan will qualify as Incentive Stock Options under section
      422
      of the Internal Revenue Code. If any provision of the Plan should be held
      invalid for the granting of Incentive Stock Options or illegal for any reason,
      such determination shall not affect the remaining provisions hereof, but instead
      the Plan shall be construed and enforced as if such provision had never been
      included in the Plan. 

     

    (b) This
      Plan
      shall be governed by the laws of the State of Delaware.


     

    (c) Headings
      contained in this Plan are for convenience only and shall in no manner be
      construed as part of this Plan.

     

    (d) Any
      reference to the masculine, feminine, or neuter gender shall be a reference
      to
      such other gender as is appropriate.

     

    16. Amendment
      and Discontinuation of the Plan.
      Either
      the Board or the Committee may from time to time amend the Plan or any Option.
      

     

    17. Effective
      Date and Termination Date.
      The
      effective date of the Plan is the date on which the Board adopts this Plan,
      and
      the Plan shall terminate on the 10th anniversary of the effective
      date.

     

    
      
        
        

      

      
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