Document:

Exhibit
      4.2

    

    

    

    

    
      
        

      

    

     

    SMF
      ENERGY CORPORATION

    2001
      DIRECTOR STOCK OPTION PLAN

     

    
      

    

     

    1.  Purpose.
      The
      purpose of this Plan is to advance the interests of SMF Energy Corporation.,
      a
      Delaware (the “Company”), and its Subsidiaries by providing an additional
      incentive to attract and retain qualified and competent directors whose efforts
      and judgment are important to the success of the Company and its Subsidiaries,
      through the encouragement of stock ownership in the Company by such
      persons.

     

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

     

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

     

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

     

    (c)  “Common
      Stock” shall mean the Company’s Common Stock, par value $0.01 per
      share.

     

    (d)  “Company”
      shall mean SMF Energy Corporation, a Delaware corporation.

     

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

     

    (f)  “Effective
      Date” shall mean May 10, 2001.

     

    (g)  “Eligible
      Director” shall mean any person who is a member of the Board and who is not an
      employee, full time or part time, of the Company or any Subsidiary.

     

    (h)  “Fair
      Market Value” of a Share on any date of reference shall mean the “Closing Price”
(as defined below) of the Common Stock on the business day immediately preceding
      the date of reference unless the Board in its 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 last reported sale price of Common Stock
      on
      such system or, if sales prices are not reported, the mean between the closing
      high bid and low asked quotations for such day of Common Stock on such system,
      as reported in any newspaper of general circulation 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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    (i)  “Initial
      Election Date” shall mean, with respect to an individual who becomes an Eligible
      Director on or after the Effective Date of the Plan, the date on which such
      individual is elected as a member of the Board.

     

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

     

    (k)  “Option
      Agreement” means the agreement between the Company and the Optionee for the
      grant of an option.

     

    (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 2001 Director Stock Option Plan for the Company.

     

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

     

    (o)  “Share”
      shall mean a share of Common Stock.

     

    (p)  “Subsidiary”
      shall mean any corporation (other than the Company) in any unbroken chain of
      corporations beginning with the Company if, at the time of the granting of
      the
      Option, each of the corporations other than the last corporation in the unbroken
      chain owns stock possessing 50 percent or more of the total combined voting
      power of all classes of stock in one of the other corporations in such
      chain.

     

    3.  Shares
      Available for Option Grants.
      The
      Committee or the Board may grant to Optionees from time to time Options to
      purchase an aggregate of up to Two Hundred and Fifty Thousand (250,000) Shares
      from the Company’s 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.

     

    4.  Grants
      of Options.

     

    
      
        
        

      

      
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    (a)  Each
      individual who is an Eligible Director on the Effective Date shall be granted
      on
      the Effective Date an Option to purchase 20,000 Shares. Each individual who
      becomes an Eligible Director after the Effective Date shall receive a grant
      of
      an Option to purchase 20,000 Shares on his or her Initial Election
      Date.

     

    (b)  On
      the
      last day of each fiscal quarter of the Company while this Plan is in effect,
      each then Eligible Director shall receive a grant of an Option to purchase
      625 Shares.

     

    (c)  The
      Board, in its sole discretion, may from time to time grant additional Options
      to
      Eligible Directors to purchase Shares pursuant to the terms of the
      Plan.

     

    (d)  Upon
      the
      grant of each Option under this Plan, the Company and the Eligible Director
      shall enter into an Option Agreement, which shall specify the grant date, the
      number of Shares subject to the Option, and the exercise price and shall include
      or incorporate by reference the substance of this Plan and such other terms
      and
      provisions consistent with this Plan as the Board may determine.

     

    5.  Exercise
      Price.
      The
      exercise price per Share of any Option granted pursuant to Sections 4(a)
      and (b) hereof shall be the Fair Market Value of a Share on the date such Option
      is granted. The exercise price per Share of any other Option granted under
      the
      Plan shall be any price determined by the Board, but shall not be less than
      the
      par value per Share.

     

    6.  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 and
      (ii) full payment of the aggregate option price of the Shares as to which
      the Option is exercised has been made. The consideration to be paid for the
      Shares to be issued upon exercise of an Option as well as the method of payment
      of the exercise price shall be determined by the Board and may in the discretion
      of the Board consist of: (1) cash, (2) certified or official bank
      check, (3) money order, (4) Shares that have been held by the Optionee
      for at least six (6) months (or such other Shares as the Company determines
      will
      not cause the Company to recognize for financial accounting purposes a charge
      for compensation expense), (5) the withholding of Shares issuable upon
      exercise of the Option, (6) pursuant to a “cashless exercise” procedure, by
      delivery of a properly executed exercise notice together with such other
      documentation, and subject to such guidelines, as the Board shall require to
      effect an exercise of the Option and delivery to the Company by a licensed
      broker acceptable to the Company of proceeds from the sale of Shares or a margin
      loan sufficient to pay the exercise price and any applicable income or
      employment taxes, or (7) in such other consideration as the Board deems
      appropriate, or by a combination of the above. The Board 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, or through the
      withholding of Shares issuable upon exercise of the Option, the value of the
      Shares surrendered or withheld shall be their Fair Market Value on the date
      the
      Option is exercised. The Board in its sole discretion may, on an individual
      basis or pursuant to a general program established in connection with this
      Plan,
      cause the Company to lend money to an Optionee, guarantee a loan to an Optionee,
      or otherwise assist an Optionee to obtain the cash necessary to exercise all
      or
      a portion of an Option granted hereunder or to pay any tax liability of the
      Optionee attributable to such exercise. 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 the prime rate of the Company’s principal lender, and
      (iv) contain such other terms as the Board in its sole discretion shall
      reasonably 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
      those 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 the stock certificate is issued, except
      as
      expressly provided in Section 9 hereof. 

     

    
      
        
        

      

      
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    7.  Exercisability
      of Options.
      Each
      Option granted under Section 4(a) and (b) hereof shall be immediately
      exercisable. Each Option granted under Section 4c hereof shall become
      exercisable in such amounts, at such intervals and upon such terms as the Board
      shall provide in an Option Agreement. The expiration date of an Option granted
      under Section 4(a) and (b) hereof shall be 10 years from the date of grant
      of the Option. The expiration date of an Option granted pursuant to
      Section 4c hereof shall be determined by the Board 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.

     

    8.  Termination
      of Option Period.

     

    (a)  Unless
      otherwise provided in any Option Agreement, the unexercised portion of any
      Option shall automatically and without notice terminate and become null and
      void
      at the time of the earliest to occur of the following:

     

    (i)  immediately
      upon the removal of the Optionee as a director for Cause which, for purposes
      of
      this Plan, shall mean the removal of the Optionee as a director by reason of
      any
      act by the Optionee of (x) fraud or intentional misrepresentation,
      (y) embezzlement, misappropriation, or conversion of assets or
      opportunities of the Company or any Subsidiary or (z) willful misconduct or
      gross negligence;

     

    (ii)  immediately
      in the event that the Optionee shall file any lawsuit or arbitration claim
      against the Company or any Subsidiary, or any of their respective officers,
      directors or shareholders, other than a claim for indemnification, whether
      by
      contract or under applicable law; or

     

    (iii)  ten
      (10)
      years from the date of grant of the Option.

     

    (b)  The
      Board
      in its sole discretion may by written notice (“Cancellation Notice”) cancel any
      Option that remains unexercised on the date of any of the following corporate
      transactions:

     

    (i)  if
      the
      shareholders 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 

     

    
      
        
        

      

      
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    (ii)  if
      the
      shareholders 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).

     

    The
      Cancellation Notice shall be given to the Optionees a reasonable period of
      time
      prior to the proposed date of such cancellation and may be given either before
      or after shareholder approval of such corporate transaction.

     

    9.  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
      adjustments 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, and appropriate adjustment
      shall be made in the number of Shares with respect to which Options are required
      to be granted pursuant to Section 4(a) and (b) hereof.

     

    (b)  Unless
      otherwise provided in any Option, the Board may change the terms of Options
      outstanding under this Plan, with respect to the exercise price or the number
      of
      Shares subject to the Options, or both, when, in the Board’s sole discretion,
      such adjustments become appropriate so as to preserve but not increase benefits
      under the Plan.

     

    (c)  In
      the
      event of a proposed sale of all or substantially all of the Company’s assets or
      any reorganization, merger, consolidation or other form of corporate transaction
      in which the Company does not survive, where the securities of the successor
      corporation, or its parent company, are issued to the Company’s shareholders,
      then the successor corporation or a parent of the successor corporation may,
      with the consent of the Committee or the Board, assume each outstanding Option
      or substitute an equivalent option or right. If the successor corporation,
      or
      its parent, does not cause such an assumption or substitution to occur, or
      the
      Committee or the Board does not consent to such an assumption or substitution,
      then each Option shall terminate pursuant to Section 8(b) hereof upon the
      consummation of sale, merger, consolidation or other corporate
      transaction.

     

    (d)  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 a 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 to, the
      number of or exercise price for Shares then subject to outstanding Options
      granted under the Plan.

     

    
      
        
        

      

      
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    (e)  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.

     

    10.  Transferability
      of Options.
      Unless
      the prior written consent of the Board is obtained (which consent may be
      withheld for any reason) and the transaction does not violate the requirements
      of Rule 16b-3 promulgated under the Securities Exchange Act, no Option
      shall be subject to alienation, assignment, pledge, charge or other transfer
      other than by the Optionee by will or the laws of descent and distribution,
      and
      any attempt to make any such prohibited transfer shall be void. Each Option
      shall be exercisable during the Optionee’s lifetime only by the Optionee, or in
      the case of an Option that has been assigned or transferred with the prior
      written consent of the Board, only by the permitted assignee.

     

    11.  Issuance
      of Shares.

     

    (a)  Notwithstanding
      any other provision of this Plan, the Company shall not be obligated to issue
      any Shares unless it is advised by counsel of its selection that it may do
      so
      without violation of the applicable Federal and State laws pertaining to the
      issuance of securities, and may require any stock so issued to bear a legend,
      may give its transfer agent instructions, and may take such other steps, as
      in
      its judgment are reasonably required to prevent any such violation.

     

    (b)  As
      a
      condition to any sale or issuance of Shares upon exercise of any Option, the
      Board may require such agreements or undertakings as the Board may deem
      necessary or advisable to facilitate compliance with any applicable 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 endorsed
      upon the certificate(s) for such Shares that are, in the opinion of the Board,
      necessary or appropriate to facilitate compliance with the provisions of any
      securities laws deemed by the Board to be applicable to the issuance and
      transfer of such Shares.

     

    12.  Administration
      of the Plan.
      The
      Plan shall be administered by the Board which shall have the authority to adopt
      such rules and regulations, and to make such determinations as are not
      inconsistent with the Plan and as are necessary or desirable for the
      implementation and administration of the Plan. Any and all decisions or
      determinations of the Board shall be made either (i) by a majority vote of
      the members of the Board at a meeting or (ii) without a meeting by the
      unanimous written approval of the members of the Board.

     

    
      
        
        

      

      
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    13.  Interpretation.

     

    (a)  As
      it is
      the intent of the Company that the Plan comply in all respects with
      Rule 16b-3 promulgated under the Securities Exchange Act
      (“Rule 16b-3”), any ambiguities or inconsistencies in construction of the
      Plan shall be interpreted to give effect to such intention, and if any provision
      of the Plan is found not to be in compliance with Rule 16b-3, such
      provision shall be deemed null and void to the extent required to permit the
      Plan to comply with Rule 16b-3. The Board may from time to time adopt rules
      and regulations under, and amend, the Plan in furtherance of the intent of
      the
      foregoing. 

     

    (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.

     

    14.  Amendment
      and Discontinuation of the Plan.
      The
      Board may from time to time amend, suspend or terminate the Plan or any Option;
      provided, however, that, any amendment to the Plan shall be subject to the
      approval of the Company’s shareholders if such shareholder approval is required
      by any federal or state law or regulation (including, without limitation,
      Rule 16b-3 or the rules of any Stock exchange or automated quotation system
      on which the Common Stock may then be listed or granted. Except to the extent
      provided in Sections 8 and 9 hereof, no amendment, suspension or
      termination of the Plan or any Option issued hereunder shall substantially
      impair the rights or benefits of any Optionee pursuant to any Option previously
      granted without the consent of the Optionee.

     

    15.  Termination
      Date.
      The
      Plan shall terminate on the 10th anniversary of the Effective Date.

     

    
      
         

      

      
        7Unassociated Document

    August
      28, 2006

    

    

    AJW
      Partners, LLC

    AJW
      Qualified Partners, LLC

    AJW
      Offshore, Ltd.

    New
      Millennium Capital Partners, II, LLC

    c/o
      NIR
      Group, Inc.

    1044
      Northern Boulevard

    Roslyn,
      New York 11576

    

    Gentlemen:

    

    This
      letter is intended to amend the Registration Rights Agreements (the
“Agreements”) dated July 15, 2005, August 29, 2005, January 26, 2006, February
      17, 2006, and July 31, 2006 by and among Itronics Inc. (the “Company”), AJW
      Qualified Partners LLC (“Qualified”), New Millennium Capital Partners II, LLC
      (“NMC”), AJW Offshore, Ltd. (“Offshore”) and AJW Partners, LLC (“AJW”)
      (Qualified, NMC, Offshore and AJW are collectively referred to as the
“Investors”). The Agreements provide that the Company is required to register
      all of the shares underlying the Warrants as well as a certain percentage of
      shares underlying the Notes. It is hereby agreed that the Company will be
      required to file a registration statement including 75,000,000 shares of common
      stock underlying the Notes and will not be required to register any shares
      issuable upon exercise of the warrants. Further, it is agreed, that provided
      the
      Company complies with the time requirements set forth in the Agreements on
      the
      registration statement for 75,000,000 shares, the Company will not be subject
      to
      liquidated damages. All other terms of the Agreements will remain
      unchanged.

     

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    To
      indicate your acceptance, please sign in the indicated space.

    

    Sincerely,

    Itronics
      Inc.

    

    By:
      \s\
      Dr. John W. Whitney

    Dr.
      John
      W. Whitney, President

    

    

    Agreed
      and Accepted

    

    AJW
      Offshore, Ltd.

    

    By:
      \s\
      Corey Robitsky

    Corey
      Robitsky 

    

    AJW
      Partners, LLC

    

    By:
      \s\
      Corey Robitsky

    Corey
      Robitsky

    

    New
      Millennium Capital Partners II, LLC

    

    By:
      \s\
      Corey Robitsky

    Corey
      Robitsky

    

    

    AJW
      Qualified Partners LLC

    

    By:
      \s\
      Corey Robitsky

    Corey
      Robitsky

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