Document:

EXHIBIT 4.4

    

      

       

      

       

      

       

      THIS
        WARRANT AND THE SHARES ISSUABLE UPON THE EXERCISE OF THIS WARRANT HAVE NOT
        BEEN
        REGIS-TERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. EXCEPT AS OTHERWISE
        SET FORTH HEREIN OR IN A SECURITIES PURCHASE AGREEMENT DATED AS OF MAY 7,
        2007,
        NEITHER THIS WARRANT NOR ANY OF SUCH SHARES MAY BE SOLD, TRANSFERRED OR ASSIGNED
        IN THE ABSENCE OF AN EFFECTIVE REGISTRA-TION STATEMENT FOR SUCH SECURITIES
        UNDER
        SAID ACT OR, AN OPINION OF COUNSEL, IN FORM, SUBSTANCE AND SCOPE, CUSTOMARY
        FOR
        OPINIONS OF COUNSEL IN COMPARABLE TRANSACTIONS, THAT REGISTRATION IS NOT
        REQUIRED UNDER SUCH ACT OR UNLESS SOLD PURSUANT TO RULE 144 OR REGULATION
        S
        UNDER SUCH ACT.

       

      Right
        to
        Purchase 500,000 Shares of Common Stock, par value $.01 per share

       

      STOCK
        PURCHASE WARRANT

       

      THIS
        CERTIFIES THAT,
        for
        value received, AJW Partners, LLC or its registered assigns, is entitled
        to
        purchase from Avitar
        Inc.,
        a
        Delaware corporation (the “Company”), at any time or from time to time during
        the period specified in Paragraph 2 hereof, 500,000 fully paid and
        nonassessable shares of the Company’s Common Stock, par value $.01 per share
        (the “Common Stock”), at an exercise price per share equal to $.01 (the
“Exercise Price”). The term “Warrant Shares,” as used herein, refers to the
        shares of Common Stock purchasable hereunder. The Warrant Shares and the
        Exercise Price are subject to adjustment as provided in Paragraph 4 hereof.
        The
        term “Warrants” means this Warrant and the other warrants issued pursuant to
        that certain Securities Purchase Agreement, dated May 7, 2007, by and among
        the
        Company and the Buyers listed on the execution page thereof (the “Securities
        Purchase Agreement”). 

       

      This
        Warrant is subject to the following terms, provisions, and conditions:

       

      1.  Manner
        of Exercise; Issuance of Certificates; Payment for Shares.

       

      Subject
        to the provisions hereof, this Warrant may be exercised by the holder hereof,
        in
        whole or in part, by the surrender of this Warrant, together with a completed
        exercise agreement in the form attached hereto (the “Exercise Agreement”), to
        the Company during normal business hours on any business day at the Company’s
        principal executive offices (or such other office or agency of the Company
        as it
        may designate by notice to the holder hereof), and upon (i) payment to the
        Company in cash, by certified or offi-cial bank check or by wire transfer
        for
        the account of the Company of the Exercise Price for the Warrant Shares
        specified in the Exercise Agreement or (ii) if the resale of the Warrant
        Shares
        by the holder is not then registered pursuant to an effective registration
        statement under the Securities Act of 1933, as amended (the “Securities Act”),
        delivery to the Company of a written notice of an election to effect a “Cashless
        Exercise” (as defined in Section 11(c) below) for the Warrant Shares specified
        in the Exercise Agreement. The Warrant Shares so purchased shall be deemed
        to be
        issued to the holder hereof or such holder’s designee, as the record owner of
        such shares, as of the close of business on the date on which this Warrant
        shall
        have been surrendered, the completed Exercise Agreement shall have been
        deliv-ered, and payment shall have been made for such shares as set forth
        above.
        Certifi-cates for the Warrant Shares so purchased, representing the aggregate
        number of shares specified in the Exercise Agreement, shall be delivered
        to the
        holder hereof within a reasonable time, not exceeding five (5) business days,
        after this Warrant shall have been so exercised. The certificates so delivered
        shall be in such denominations as may be requested by the holder hereof and
        shall be registered in the name of such holder or such other name as shall
        be
        designated by such holder. If this Warrant shall have been exercised only
        in
        part, then, unless this Warrant has expired, the Company shall, at its expense,
        at the time of delivery of such certificates, deliver to the holder a new
        Warrant representing the number of shares with respect to which this Warrant
        shall not then have been exercised. In addition to all other available remedies
        at law or in equity, if the Company fails to deliver certificates for the
        Warrant Shares within five (5) business days after this Warrant is exercised,
        then the Company shall pay to the holder in cash a penalty (the “Penalty”) equal
        to 2% of the number of Warrant Shares that the holder is entitled to multiplied
        by the Market Price (as hereinafter defined) for each day that the Company
        fails
        to deliver certificates for the Warrant Shares. For example, if the holder
        is
        entitled to 100,000 Warrant Shares and the Market Price is $2.00, then the
        Company shall pay to the holder $4,000 for each day that the Company fails
        to
        deliver certificates for the Warrant Shares. The Penalty shall be paid to
        the
        holder by the fifth day of the month following the month in which it has
        accrued.

       

      Notwithstanding
        anything in this Warrant to the contrary, in no event shall the holder of
        this
        Warrant be entitled to exercise a number of Warrants (or portions thereof)
        in
        excess of the number of Warrants (or portions thereof) upon exercise of which
        the sum of (i) the number of shares of Common Stock beneficially owned by
        the
        holder and its affiliates (other than shares of Common Stock which may be
        deemed
        beneficially owned through the ownership of the unexercised Warrants and
        the
        unexercised or unconverted portion of any other securities of the Company
        (including the Notes (as defined in the Securities Purchase Agreement)) subject
        to a limitation on conversion or exercise analogous to the limitation contained
        herein) and (ii) the number of shares of Common Stock issuable upon exercise
        of
        the Warrants (or portions thereof) with respect to which the determination
        described herein is being made, would result in beneficial ownership by the
        holder and its affiliates of more than 4.9% of the outstanding shares of
        Common
        Stock. 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-G thereunder, except as otherwise
        provided in clause (i) of the preceding sentence. Notwithstanding anything
        to
        the contrary contained herein, the limitation on exercise of this Warrant
        set
        forth herein may not be amended without (i) the written consent of the holder
        hereof and the Company and (ii) the approval of a majority of shareholders
        of
        the Company.

       

      2.  Period
        of Exercise.

       

       This
        Warrant is exercisable at any time or from time to time on or after the date
        on
        which this Warrant is issued and delivered pursuant to the terms of the
        Securities Purchase Agreement and before 6:00 p.m., New York, New York time
        on
        the seventh (7th)
        anniversary of the date of issuance (the “Exercise Period”).

       

      3.  Certain
        Agreements of the Company.

       

      The
        Company hereby covenants and agrees as follows:

       

      (a)  Shares
        to be Fully Paid.
        All
        Warrant Shares will, upon issuance in accordance with the terms of this Warrant,
        be validly issued, fully paid, and nonassessable and free from all taxes,
        liens,
        and charges with respect to the issue thereof.

       

      (b)  Reservation
        of Shares.
        During
        the Exercise Period, the Company shall at all times have authorized, and
        reserved for the purpose of issuance upon exercise of this Warrant, a
        suf-ficient number of shares of Common Stock to provide for the exercise
        of this
        Warrant.

       

      (c)  Listing.
        The
        Company shall promptly secure the listing of the shares of Common Stock issuable
        upon exercise of the Warrant upon each national securities exchange or automated
        quotation system, if any, upon which shares of Common Stock are then listed
        (subject to official notice of issuance upon exercise of this Warrant) and
        shall
        maintain, so long as any other shares of Common Stock shall be so listed,
        such
        listing of all shares of Common Stock from time to time issuable upon the
        exercise of this Warrant; and the Company shall so list on each national
        securities exchange or automated quotation system, as the case may be, and
        shall
        maintain such listing of, any other shares of capital stock of the Company
        issuable upon the exercise of this Warrant if and so long as any shares of
        the
        same class shall be listed on such national securities exchange or automated
        quotation system.

       

      (d)  Certain
        Actions Prohibited.
        The
        Company will not, by amendment of its charter or through any re-organi-zation,
        transfer of assets, consolidation, mer-ger, dissolution, issue or sale of
        securities, or any other voluntary action, avoid or seek to avoid the observance
        or performance of any of the terms to be observed or performed by it hereunder,
        but will at all times in good faith assist in the carrying out of all the
        provisions of this Warrant and in the taking of all such action as may
        reasonably be requested by the holder of this Warrant in order to protect
        the
        exercise privilege of the holder of this Warrant against dilu-tion or other
        impairment, consistent with the tenor and purpose of this Warrant. Without
        limiting the general-ity of the foregoing, the Company (i) will not increase
        the
        par value of any shares of Common Stock receivable upon the exercise of this
        Warrant above the Exercise Price then in effect, and (ii) will take all such
        actions as may be necessary or appropriate in order that the Company may
        validly
        and legally issue fully paid and nonassessable shares of Common Stock upon
        the
        exercise of this Warrant.

       

      (e)  Successors
        and Assigns.
        This
        Warrant will be binding upon any entity succeeding to the Company by merger,
        consolidation, or acquisition of all or sub-stantially all the Company’s
        assets.

       

      4.  Antidilution
        Provisions.
        

       

      During
        the Exercise Period, the Exercise Price and the number of Warrant Shares
        shall
        be subject to adjustment from time to time as provided in this Paragraph
        4.

       

      In
        the
        event that any adjustment of the Exercise Price as required herein results
        in a
        fraction of a cent, such Exercise Price shall be rounded up to the nearest
        cent.

       

      (a)  Adjustment
        of Exercise Price and Number of Shares upon Issuance of Common
        Stock.
        Except
        as otherwise provided in Paragraphs 4(c) and 4(e) hereof, if and whenever
        on or
        after the date of issuance of this Warrant, the Company issues or sells,
        or in
        accordance with Paragraph 4(b) hereof is deemed to have issued or sold, any
        shares of Common Stock for no consideration or for a consideration per share
        (before deduction of reasonable expenses or commissions or underwriting
        discounts or allowances in connection therewith) less than the Market Price
        on
        the date of issuance (a “Dilutive Issuance”), then immediately upon the Dilutive
        Issuance, the Exercise Price will be reduced to a price determined by
        multiplying the Exercise Price in effect immediately prior to the Dilutive
        Issuance by a fraction, (i) the numerator of which is an amount equal to
        the sum
        of (x) the number of shares of Common Stock actually outstanding immediately
        prior to the Dilutive Issuance, plus (y) the quotient of the aggregate
        consideration, calculated as set forth in Paragraph 4(b) hereof, received
        by the
        Company upon such Dilutive Issuance divided by the Market Price in effect
        immediately prior to the Dilutive Issuance, and (ii) the denominator of which
        is
        the total number of shares of Common Stock Deemed Outstanding (as defined
        below)
        immediately after the Dilutive Issuance. 

       

      (b)  Effect
        on Exercise Price of Certain Events.
        For
        purposes of determining the adjusted Exercise Price under Paragraph 4(a)
        hereof,
        the following will be applicable:

       

      (i)  Issuance
        of Rights or Options.
        If the
        Company in any manner issues or grants any warrants, rights or options, whether
        or not immediately exercisable, to subscribe for or to purchase Common Stock
        or
        other securities convertible into or exchangeable for Common Stock (“Convertible
        Securities”) (such warrants, rights and options to purchase Common Stock or
        Convertible Securities are hereinafter referred to as “Options”) and the price
        per share for which Common Stock is issuable upon the exercise of such Options
        is less than the Market Price on the date of issuance or grant of such Options,
        then the maximum total number of shares of Common Stock issuable upon the
        exercise of all such Options will, as of the date of the issuance or grant
        of
        such Options, be deemed to be outstanding and to have been issued and sold
        by
        the Company for such price per share. For purposes of the preceding sentence,
        the “price per share for which Common Stock is issuable upon the exercise of
        such Options” is determined by dividing (i) the total amount, if any, received
        or receivable by the Company as consideration for the issuance or granting
        of
        all such Options, plus the minimum aggregate amount of additional consideration,
        if any, payable to the Company upon the exercise of all such Options, plus,
        in
        the case of Convertible Securities issuable upon the exercise of such Options,
        the minimum aggregate amount of additional consideration payable upon the
        conversion or exchange thereof at the time such Convertible Securities first
        become convertible or exchangeable, by (ii) the maximum total number of shares
        of Common Stock issuable upon the exercise of all such Options (assuming
        full
        conversion of Convertible Securities, if applicable). No further adjustment
        to
        the Exercise Price will be made upon the actual issuance of such Common Stock
        upon the exercise of such Options or upon the conversion or exchange of
        Convertible Securities issuable upon exercise of such Options.

       

      (ii)  Issuance
        of Convertible Securities.
        If the
        Company in any manner issues or sells any Convertible Securities, whether
        or not
        immediately convertible (other than where the same are issuable upon the
        exercise of Options) and the price per share for which Common Stock is issuable
        upon such conversion or exchange is less than the Market Price on the date
        of
        issuance, then the maximum total number of shares of Common Stock issuable
        upon
        the conversion or exchange of all such Convertible Securities will, as of
        the
        date of the issuance of such Convertible Securities, be deemed to be outstanding
        and to have been issued and sold by the Company for such price per share.
        For
        the purposes of the preceding sentence, the “price per share for which Common
        Stock is issuable upon such conversion or exchange” is determined by dividing
        (i) the total amount, if any, received or receivable by the Company as
        consideration for the issuance or sale of all such Convertible Securities,
        plus
        the minimum aggregate amount of additional consideration, if any, payable
        to the
        Company upon the conversion or exchange thereof at the time such Convertible
        Securities first become convertible or exchangeable, by (ii) the maximum
        total
        number of shares of Common Stock issuable upon the conversion or exchange
        of all
        such Convertible Securities. No further adjustment to the Exercise Price
        will be
        made upon the actual issuance of such Common Stock upon conversion or exchange
        of such Convertible Securities.

       

      (iii)  Change
        in Option Price or Conversion Rate.
        If there
        is a change at any time in (i) the amount of additional consideration payable
        to
        the Company upon the exercise of any Options; (ii) the amount of additional
        consideration, if any, payable to the Company upon the conversion or exchange
        of
        any Convertible Securities; or (iii) the rate at which any Convertible
        Securities are convertible into or exchangeable for Common Stock (other than
        under or by reason of provisions designed to protect against dilution), the
        Exercise Price in effect at the time of such change will be readjusted to
        the
        Exercise Price which would have been in effect at such time had such Options
        or
        Convertible Securities still outstanding provided for such changed additional
        consideration or changed conversion rate, as the case may be, at the time
        initially granted, issued or sold.

       

      (iv)  Treatment
        of Expired Options and Unexercised Convertible
        Securities.
        If, in
        any case, the total number of shares of Common Stock issuable upon exercise
        of
        any Option or upon conversion or exchange of any Convertible Securities is
        not,
        in fact, issued and the rights to exercise such Option or to convert or exchange
        such Convertible Securities shall have expired or terminated, the Exercise
        Price
        then in effect will be readjusted to the Exercise Price which would have
        been in
        effect at the time of such expiration or termination had such Option or
        Convertible Securities, to the extent outstanding immediately prior to such
        expiration or termination (other than in respect of the actual number of
        shares
        of Common Stock issued upon exercise or conversion thereof), never been
        issued.

       

      (v)  Calculation
        of Consideration Received.
        If any
        Common Stock, Options or Convertible Securities are issued, granted or sold
        for
        cash, the consideration received therefor for purposes of this Warrant will
        be
        the amount received by the Company therefor, before deduction of reasonable
        commissions, underwriting discounts or allowances or other reasonable expenses
        paid or incurred by the Company in connection with such issuance, grant or
        sale.
        In case any Common Stock, Options or Convertible Securities are issued or
        sold
        for a consideration part or all of which shall be other than cash, the amount
        of
        the consideration other than cash received by the Company will be the fair
        value
        of such consideration, except where such consideration consists of securities,
        in which case the amount of consideration received by the Company will be
        the
        Market Price thereof as of the date of receipt. In case any Common Stock,
        Options or Convertible Securities are issued in connection with any acquisition,
        merger or consolidation in which the Company is the surviving corporation,
        the
        amount of consideration therefor will be deemed to be the fair value of such
        portion of the net assets and business of the non-surviving corporation as
        is
        attributable to such Common Stock, Options or Convertible Securities, as
        the
        case may be. The fair value of any consideration other than cash or securities
        will be determined in good faith by the Board of Directors of the
        Company.

       

      (vi)  Exceptions
        to Adjustment of Exercise Price.
        No
        adjustment to the Exercise Price will be made (i) upon the exercise of any
        warrants, options or convertible securities granted, issued and outstanding
        on
        the date of issuance of this Warrant; (ii) upon the grant or exercise of
        any
        stock or options which may hereafter be granted or exercised under any employee
        benefit plan, stock option plan or restricted stock plan of the Company now
        existing or to be implemented in the future, so long as the issuance of such
        stock or options is approved by a majority of the independent members of
        the
        Board of Directors of the Company or a majority of the members of a committee
        of
        independent directors established for such purpose; or (iii) upon the exercise
        of the Warrants.

       

      (c)  Subdivision
        or Combination of Common Stock.
        If the
        Company at any time subdivides (by any stock split, stock dividend,
        recapitalization, reorganization, reclassification or otherwise) the shares
        of
        Common Stock acquirable hereunder into a greater number of shares, then,
        after
        the date of record for effecting such subdivision, the Exercise Price in
        effect
        immediately prior to such subdivision will be proportionately reduced. If
        the
        Company at any time combines (by reverse stock split, recapitalization,
        reorganization, reclassification or otherwise) the shares of Common Stock
        acquirable hereunder into a smaller number of shares, then, after the date
        of
        record for effecting such combination, the Exercise Price in effect immediately
        prior to such combination will be proportionately increased.

       

      (d)  Adjustment
        in Number of Shares.
        Upon
        each adjustment of the Exercise Price pursuant to the provisions of this
        Paragraph 4, the number of shares of Common Stock issuable upon exercise
        of this
        Warrant shall be adjusted by multiplying a number equal to the Exercise Price
        in
        effect immediately prior to such adjustment by the number of shares of Common
        Stock issuable upon exercise of this Warrant immediately prior to such
        adjustment and dividing the product so obtained by the adjusted Exercise
        Price.

       

      (e)  Consolidation,
        Merger or Sale.
        In case
        of any consolidation of the Company with, or merger of the Company into any
        other corporation, or in case of any sale or conveyance of all or substantially
        all of the assets of the Company other than in connection with a plan of
        complete liquidation of the Company, then as a condition of such consolidation,
        merger or sale or conveyance, adequate provision will be made whereby the
        holder
        of this Warrant will have the right to acquire and receive upon exercise
        of this
        Warrant in lieu of the shares of Common Stock immediately theretofore acquirable
        upon the exercise of this Warrant, such shares of stock, securities or assets
        as
        may be issued or payable with respect to or in exchange for the number of
        shares
        of Common Stock immediately theretofore acquirable and receivable upon exercise
        of this Warrant had such consolidation, merger or sale or conveyance not
        taken
        place. In any such case, the Company will make appropriate provision to insure
        that the provisions of this Paragraph 4 hereof will thereafter be applicable
        as
        nearly as may be in relation to any shares of stock or securities thereafter
        deliverable upon the exercise of this Warrant. The Company will not effect
        any
        consolidation, merger or sale or conveyance unless prior to the consummation
        thereof, the successor corporation (if other than the Company) assumes by
        written instrument the obligations under this Paragraph 4 and the obligations
        to
        deliver to the holder of this Warrant such shares of stock, securities or
        assets
        as, in accordance with the foregoing provisions, the holder may be entitled
        to
        acquire.

       

      (f)  Distribution
        of Assets.
        In case
        the Company shall declare or make any distribution of its assets (including
        cash) to holders of Common Stock as a partial liquidating dividend, by way
        of
        return of capital or otherwise, then, after the date of record for determining
        shareholders entitled to such distribution, but prior to the date of
        distribution, the holder of this Warrant shall be entitled upon exercise
        of this
        Warrant for the purchase of any or all of the shares of Common Stock subject
        hereto, to receive the amount of such assets which would have been payable
        to
        the holder had such holder been the holder of such shares of Common Stock
        on the
        record date for the determination of shareholders entitled to such
        distribution.

       

      (g)  Notice
        of Adjustment.
        Upon the
        occurrence of any event which requires any adjustment of the Exercise Price,
        then, and in each such case, the Company shall give notice thereof to the
        holder
        of this Warrant, which notice shall state the Exercise Price resulting from
        such
        adjustment and the increase or decrease in the number of Warrant Shares
        purchasable at such price upon exercise, setting forth in reasonable detail
        the
        method of calculation and the facts upon which such calculation is based.
        Such
        calculation shall be certified by the Chief Financial Officer of the
        Company.

       

      (h)  Minimum
        Adjustment of Exercise Price.
        No
        adjustment of the Exercise Price shall be made in an amount of less than
        1% of
        the Exercise Price in effect at the time such adjustment is otherwise required
        to be made, but any such lesser adjustment shall be carried forward and shall
        be
        made at the time and together with the next subsequent adjustment which,
        together with any adjustments so carried forward, shall amount to not less
        than
        1% of such Exercise Price.

       

      (i)  No
        Fractional Shares.
        No
        fractional shares of Common Stock are to be issued upon the exercise of this
        Warrant, but the Company shall pay a cash adjustment in respect of any
        fractional share which would otherwise be issuable in an amount equal to
        the
        same fraction of the Market Price of a share of Common Stock on the date
        of such
        exercise.

       

      (j)  Other
        Notices.
        In case
        at any time:

       

      (i)  the
        Company shall declare any dividend upon the Common Stock payable in shares
        of
        stock of any class or make any other distribution (including dividends or
        distributions payable in cash out of retained earnings) to the holders of
        the
        Common Stock;

       

      (ii)  the
        Company shall offer for subscription pro rata to the holders of the Common
        Stock
        any additional shares of stock of any class or other rights;

       

      (iii)  there
        shall be any capital reorganiza-tion of the Company, or reclassification
        of the
        Common Stock, or consolidation or merger of the Company with or into, or
        sale of
        all or substan-tially all its assets to, another corporation or entity;
        or

       

      (iv)  there
        shall be a voluntary or involun-tary dissolution, liquidation or winding
        up of
        the Company;

       

      then,
        in
        each such case, the Company shall give to the holder of this Warrant (a)
        notice
        of the date on which the books of the Company shall close or a record shall
        be
        taken for determining the holders of Common Stock entitled to receive any
        such
        divi-dend, distribution, or subscription rights or for determining the holders
        of Common Stock entitled to vote in respect of any such reorganization,
        reclassification, consolidation, merger, sale, dissolution, liquidation or
        winding-up and (b) in the case of any such reorganization, reclassification,
        consolidation, merger, sale, dissolution, liquidation or winding-up, notice
        of
        the date (or, if not then known, a reasonable approximation thereof by the
        Company) when the same shall take place. Such notice shall also specify the
        date
        on which the holders of Common Stock shall be entitled to receive such dividend,
        distribution, or subscription rights or to exchange their Common Stock for
        stock
        or other securities or property deliverable upon such reorganization,
        re-classification, consolidation, merger, sale, dissolution, liquidation,
        or
        winding-up, as the case may be. Such notice shall be given at least 30 days
        prior to the record date or the date on which the Company’s books are closed in
        respect thereto. Failure to give any such notice or any defect therein shall
        not
        affect the validity of the proceedings referred to in clauses (i), (ii),
        (iii)
        and (iv) above.

       

      (k)  Certain
        Events.
        If any
        event occurs of the type contemplated by the adjustment provisions of this
        Paragraph 4 but not expressly provided for by such provisions, the Company
        will
        give notice of such event as provided in Paragraph 4(g) hereof, and the
        Company’s Board of Directors will make an appropriate adjustment in the Exercise
        Price and the number of shares of Common Stock acquirable upon exercise of
        this
        Warrant so that the rights of the holder shall be neither enhanced nor
        diminished by such event.

       

      (l)  Certain
        Definitions. 

       

      (i)  “Common
        Stock Deemed Outstanding”
        shall
        mean the number of shares of Common Stock actually outstanding (not including
        shares of Common Stock held in the treasury of the Company), plus (x) pursuant
        to Paragraph 4(b)(i) hereof, the maximum total number of shares of Common
        Stock
        issuable upon the exercise of Options, as of the date of such issuance or
        grant
        of such Options, if any, and (y) pursuant to Paragraph 4(b)(ii) hereof, the
        maximum total number of shares of Common Stock issuable upon conversion or
        exchange of Convertible Securities, as of the date of issuance of such
        Convertible Securities, if any. 

       

      (ii)  “Market
        Price,”
        as of
        any date, (i) means the average of the last reported sale prices for the
        shares
        of Common Stock on the OTCBB for the five (5) Trading Days immediately preceding
        such date as reported by Bloomberg, or (ii) if the OTCBB is not the principal
        trading market for the shares of Common Stock, the average of the last reported
        sale prices on the principal trading market for the Common Stock during the
        same
        period as reported by Bloomberg, or (iii) if market value cannot be calculated
        as of such date on any of the foregoing bases, the Market Price shall be
        the
        fair market value as reasonably determined in good faith by (a) the Board
        of
        Directors of the Company or, at the option of a majority-in-interest of the
        holders of the outstanding Warrants by (b) an independent investment bank
        of
        nationally recognized standing in the valuation of businesses similar to
        the
        business of the corporation. The manner of determining the Market Price of
        the
        Common Stock set forth in the foregoing definition shall apply with respect
        to
        any other security in respect of which a determination as to market value
        must
        be made hereunder.

       

      (iii)  “Common
        Stock,”
        for
        purposes of this Paragraph 4, includes the Common Stock, par value $.01 per
        share, and any additional class of stock of the Company having no preference
        as
        to dividends or distributions on liquidation, provided that the shares
        purchasable pursuant to this Warrant shall include only shares of Common
        Stock,
        par value $.01 per share, in respect of which this Warrant is exercisable,
        or
        shares resulting from any subdivision or combination of such Common Stock,
        or in
        the case of any reorganization, reclassification, consolidation, merger,
        or sale
        of the character referred to in Paragraph 4(e) hereof, the stock or other
        securities or property provided for in such Paragraph.

       

      5.  Issue
        Tax.

       

      The
        issuance of certificates for Warrant Shares upon the exercise of this Warrant
        shall be made without charge to the holder of this Warrant or such shares
        for
        any issuance tax or other costs in respect thereof, provided that the Company
        shall not be required to pay any tax which may be payable in respect of any
        transfer involved in the issuance and delivery of any certificate in a name
        other than the holder of this Warrant.

       

      6.  No
        Rights or Liabilities as a Shareholder.

       

      This
        Warrant shall not entitle the holder hereof to any voting rights or other
        rights
        as a shareholder of the Company. No provision of this Warrant, in the absence
        of
        affirmative action by the holder hereof to purchase Warrant Shares, and no
        mere
        enumeration herein of the rights or privileges of the holder hereof, shall
        give
        rise to any liability of such holder for the Exercise Price or as a shareholder
        of the Company, whether such liability is asserted by the Company or by
        creditors of the Company.

       

      7.  Transfer,
        Exchange, and Replacement of Warrant.

       

      (a)  Restriction
        on Transfer.
        This
        Warrant and the rights granted to the holder hereof are transferable, in
        whole
        or in part, upon surrender of this Warrant, together with a properly executed
        assignment in the form attached hereto, at the office or agency of the Company
        referred to in Paragraph 7(e) below, pro-vided, however, that any transfer
        or assignment shall be subject to the conditions set forth in Paragraph 7(f)
        hereof and to the applicable provisions of the Securities Purchase Agreement.
        Until due presentment for registration of transfer on the books of the Company,
        the Company may treat the registered holder hereof as the owner and holder
        hereof for all purposes, and the Company shall not be affected by any notice
        to
        the con-trary. Notwithstanding anything to the contrary contained herein,
        the
        registration rights described in Paragraph 8 are assignable only in accordance
        with the provisions of that certain Registration Rights Agreement, dated
        May 7,
        2007, by and among the Company and the other signatories thereto (the
“Registration Rights Agreement”).

       

      (b)  Warrant
        Exchangeable for Different Denomina-tions.
        This
        Warrant is exchange-able, upon the surrender hereof by the holder hereof
        at the
        office or agency of the Company referred to in Paragraph 7(e) below, for
        new
        Warrants of like tenor representing in the aggregate the right to purchase
        the
        number of shares of Common Stock which may be purchased hereunder, each of
        such
        new Warrants to represent the right to purchase such number of shares as
        shall
        be designated by the holder hereof at the time of such surrender.

       

      (c)  Replacement
        of Warrant.
        Upon
        receipt of evi-dence reasonably satisfactory to the Company of the loss,
        theft,
        destruction, or mutilation of this Warrant and, in the case of any such loss,
        theft, or destruc-tion, upon delivery of an indemnity agreement reason-ably
        satisfactory in form and amount to the Company, or, in the case of any such
        mutilation, upon surrender and cancellation of this Warrant, the Company,
        at its
        expense, will execute and deliver, in lieu thereof, a new Warrant of like
        tenor.

       

      (d)  Cancellation;
        Payment of Expenses.
        Upon the
        surrender of this Warrant in connection with any trans-fer, exchange, or
        replacement as provided in this Paragraph 7, this Warrant shall be promptly
        canceled by the Company. The Company shall pay all taxes (other than securities
        transfer taxes) and all other expenses (other than legal expenses, if any,
        incurred by the holder or transferees) and charges payable in connection
        with
        the preparation, execution, and delivery of Warrants pursuant to this Paragraph
        7.

       

      (e)  Register.
        The
        Company shall maintain, at its principal executive offices (or such other
        office
        or agency of the Company as it may designate by notice to the holder hereof),
        a
        register for this Warrant, in which the Company shall record the name and
        address of the person in whose name this Warrant has been issued, as well
        as the
        name and address of each transferee and each prior owner of this
        Warrant.

       

      (f)  Exercise
        or Transfer Without Registration.
        If, at
        the time of the surrender of this Warrant in connection with any exercise,
        transfer, or exchange of this Warrant, this Warrant (or, in the case of any
        exercise, the Warrant Shares issuable hereunder), shall not be registered
        under
        the Securities Act of 1933, as amended (the “Securities Act”) and under
        applicable state securities or blue sky laws, the Company may require, as
        a
        condition of allowing such exercise, transfer, or exchange, (i) that the
        holder
        or transferee of this Warrant, as the case may be, furnish to the Company
        a
        written opinion of counsel, which opinion and counsel are acceptable to the
        Company, to the effect that such exercise, transfer, or exchange may be made
        without registration under said Act and under applicable state securities
        or
        blue sky laws, (ii) that the holder or transferee execute and deliver to
        the
        Company an investment letter in form and substance acceptable to the Company
        and
        (iii) that the transferee be an “accredited investor” as defined in Rule 501(a)
        promulgated under the Securities Act; provided that no such opinion, letter
        or
        status as an “accredited investor” shall be required in connection with a
        transfer pursuant to Rule 144 under the Securities Act. The first holder
        of this
        Warrant, by taking and holding the same, represents to the Company that such
        holder is acquiring this Warrant for investment and not with a view to the
        distribution thereof. 

       

      8.  Registration
        Rights.
        

       

      The
        initial holder of this Warrant (and certain assignees thereof) is entitled
        to
        the benefit of such registration rights in respect of the Warrant Shares
        as are
        set forth in Section 2 of the Registration Rights Agreement.

       

      9.  Notices.

       

      All
        notices, requests, and other communications required or permitted to be given
        or
        delivered hereunder to the holder of this Warrant shall be in writing, and
        shall
        be personally delivered, or shall be sent by certified or registered mail
        or by
        recognized overnight mail courier, postage prepaid and addressed, to such
        holder
        at the address shown for such holder on the books of the Company, or at such
        other address as shall have been furnished to the Company by notice from
        such
        holder. All notices, requests, and other communications required or permitted
        to
        be given or delivered hereunder to the Company shall be in writing, and shall
        be
        personally delivered, or shall be sent by certified or registered mail or
        by
        recognized overnight mail courier, postage prepaid and addressed, to the
        office
        of the Company at 65 Dan Road, Canton, MA 02021, Attention: Chief Executive
        Officer, or at such other address as shall have been furnished to the holder
        of
        this Warrant by notice from the Company. Any such notice, request, or other
        communication may be sent by facsimile, but shall in such case be subsequently
        confirmed by a writing personally delivered or sent by certified or registered
        mail or by recognized overnight mail courier as provided above. All notices,
        requests, and other communications shall be deemed to have been given either
        at
        the time of the receipt thereof by the person entitled to re-ceive such notice
        at the address of such person for purposes of this Paragraph 9, or, if mailed
        by
        registered or certified mail or with a recognized overnight mail courier
        upon
        deposit with the United States Post Office or such overnight mail courier,
        if
        postage is prepaid and the mailing is properly addressed, as the case may
        be.

       

      10.  Governing
        Law.

       

      THIS
        WARRANT SHALL BE ENFORCED, GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
        LAWS
        OF THE STATE OF NEW YORK APPLICABLE TO AGREEMENTS MADE AND TO BE PERFORMED
        ENTIRELY WITHIN SUCH STATE, WITHOUT REGARD TO THE PRINCIPLES OF CONFLICT
        OF
        LAWS. THE PARTIES HERETO HEREBY SUBMIT TO THE EXCLUSIVE JURISDICTION OF THE
        UNITED STATES FEDERAL COURTS LOCATED IN NEW YORK, NEW YORK WITH RESPECT TO
        ANY
        DISPUTE ARISING UNDER THIS WARRANT, THE AGREEMENTS ENTERED INTO IN CONNECTION
        HEREWITH OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY. BOTH PARTIES
        IRREVOCABLY WAIVE THE DEFENSE OF AN INCONVENIENT FORUM TO THE MAINTENANCE
        OF
        SUCH SUIT OR PROCEEDING. BOTH PARTIES FURTHER AGREE THAT SERVICE OF PROCESS
        UPON
        A PARTY MAILED BY FIRST CLASS MAIL SHALL BE DEEMED IN EVERY RESPECT EFFECTIVE
        SERVICE OF PROCESS UPON THE PARTY IN ANY SUCH SUIT OR PROCEEDING. NOTHING
        HEREIN
        SHALL AFFECT EITHER PARTY’S RIGHT TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED
        BY LAW. BOTH PARTIES AGREE THAT A FINAL NON-APPEALABLE JUDGMENT IN ANY SUCH
        SUIT
        OR PROCEEDING SHALL BE CONCLUSIVE AND MAY BE ENFORCED IN OTHER JURISDICTIONS
        BY
        SUIT ON SUCH JUDGMENT OR IN ANY OTHER LAWFUL MANNER. THE PARTY WHICH DOES
        NOT
        PREVAIL IN ANY DISPUTE ARISING UNDER THIS WARRANT SHALL BE RESPONSIBLE FOR
        ALL
        FEES AND EXPENSES, INCLUDING ATTORNEYS’ FEES, INCURRED BY THE PREVAILING PARTY
        IN CONNECTION WITH SUCH DISPUTE.

       

      11.  Miscellaneous.

       

      (a)  Amendments.
        This
        Warrant and any provision hereof may only be amended by an instrument in
        writing
        signed by the Company and the holder hereof.

       

      (b)  Descriptive
        Headings.
        The
        descriptive headings of the several paragraphs of this Warrant are in-serted
        for
        purposes of reference only, and shall not affect the meaning or construction
        of
        any of the provisions hereof.

       

      (c)  Cashless
        Exercise.
        Notwithstanding anything to the contrary contained in this Warrant, if the
        resale of the Warrant Shares by the holder is not then registered pursuant
        to an
        effective registration statement under the Securities Act, this Warrant may
        be
        exercised by presentation and surrender of this Warrant to the Company at
        its
        principal executive offices with a written notice of the holder’s intention to
        effect a cashless exercise, including a calculation of the number of shares
        of
        Common Stock to be issued upon such exercise in accordance with the terms
        hereof
        (a “Cashless Exercise”). In the event of a Cashless Exercise, in lieu of paying
        the Exercise Price in cash, the holder shall surrender this Warrant for that
        number of shares of Common Stock determined by multiplying the number of
        Warrant
        Shares to which it would otherwise be entitled by a fraction, the numerator
        of
        which shall be the difference between the then current Market Price per share
        of
        the Common Stock and the Exercise Price, and the denominator of which shall
        be
        the then current Market Price per share of Common Stock. For example, if
        the
        holder is exercising 100,000 Warrants with a per Warrant exercise price of
        $0.75
        per share through a cashless exercise when the Common Stock’s current Market
        Price per share is $2.00 per share, then upon such Cashless Exercise the
        holder
        will receive 62,500 shares of Common Stock.

       

      (d)  Remedies.
        The
        Company acknowledges that a breach by it of its obligations hereunder will
        cause
        irreparable harm to the holder, by vitiating the intent and purpose of the
        transaction contemplated hereby. Accordingly, the Company acknowledges that
        the
        remedy at law for a breach of its obligations under this Warrant will be
        inadequate and agrees, in the event of a breach or threatened breach by the
        Company of the provisions of this Warrant, that the holder shall be entitled,
        in
        addition to all other available remedies at law or in equity, and in addition
        to
        the penalties assessable herein, to an injunction or injunctions restraining,
        preventing or curing any breach of this Warrant and to enforce specifically
        the
        terms and provisions thereof, without the necessity of showing economic loss
        and
        without any bond or other security being required.

       

      

       

      

       

      

       

      

       

      

       

      

       

      [REMAINDER
        OF PAGE INTENTIONALLY LEFT BLANK]

       

      

       

      
        
           

        

        
           

          
            

          

        

        
           

        

      

      IN
        WITNESS WHEREOF,
        the
        Company has caused this Warrant to be signed by its duly authorized
        officer.

       

      AVITAR
        INC.

      

      

      

      By:
        _______________________________

      Peter
        Phildius

      Chief
        Executive Officer

      

       

      Dated
        as
        of May 7, 2007

       

      

       

      
        
           

        

        
           

          
            

          

        

        
           

        

      

      FORM
        OF EXERCISE AGREEMENT

       

      

       

      Dated:
        ________ __, 200_

       

      

       

      To: ______________________

       

      

       

      

       

      The
        undersigned, pursuant to the provisions set forth in the within Warrant,
        hereby
        agrees to purchase ________ shares of Common Stock covered by such Warrant,
        and
        makes pay-ment herewith in full therefor at the price per share provided
        by such
        Warrant in cash or by certified or official bank check in the amount of,
        or, if
        the resale of such Common Stock by the undersigned is not currently registered
        pursuant to an effective registration statement under the Securities Act
        of
        1933, as amended, by surrender of securities issued by the Company (including
        a
        portion of the Warrant) having a market value (in the case of a portion of
        this
        Warrant, determined in accordance with Section 11(c) of the Warrant) equal
        to
        $_________. Please issue a certificate or certifi-cates for such shares of
        Common Stock in the name of and pay any cash for any fractional share
        to:

       

      

       

      Name:
         ______________________________

      

      

      Signature: 

      Address:____________________________

      _____________________________

      

      

      Note: The
        above
        signature should correspond exactly with the name on the face of the within
        Warrant, if applicable.

      

       

      and,
        if
        said number of shares of Common Stock shall not be all the shares purchasable
        under the within Warrant, a new Warrant is to be issued in the name of said
        undersigned covering the balance of the shares purchasable thereunder less
        any
        frac-tion of a share paid in cash.

       

      

       

      
        
          
            

          

           

        

        
           

          
            

          

        

        
           

          
          

        

      

      FORM
        OF ASSIGNMENT

       

      

       

      

       

      FOR
        VALUE RECEIVED,
        the
        undersigned hereby sells, assigns, and transfers all the rights of the
        undersigned under the within Warrant, with respect to the number of shares
        of
        Common Stock covered thereby set forth hereinbelow, to:

      

       

      Name
        of Assignee   Address     No
        of
        Shares

       

      

       

      

       

      

       

      ,
        and
        hereby irrevocably constitutes and appoints ___________________________________
        as agent and attorney-in-fact to trans-fer said Warrant on the books of the
        within-named corporation, with full power of substitution in the
        premises.

       

      

       

      Dated: ________
        __, 200_

       

      

       

      In
        the
        presence of:    
        ______________________________

       

      Name:______________________________

      

       

      Signature:_________________________

      Title
        of
        Signing Officer or Agent (if any):

      ______________________________

      Address: ______________________________

      ______________________________

      

      

      
        	 	
                Note:

              	
                The
                  above signature should correspond exactly with the name on the
                  face of the
                  within Warrant, if
                  applicable.Form of Stock Option Agreement

 

EXHIBIT 10.9(a)

FORM OF STOCK OPTION AGREEMENT UNDER 2003 OMNIBUS INCENTIVE PLAN

INTERNATIONAL ABSORBENTS INC.

2003 OMNIBUS INCENTIVE PLAN

STOCK OPTION GRANT AGREEMENT

     This Grant Agreement (the “Agreement”) is entered into this       day of                     ,           , by and
between International Absorbents, Inc., a British Columbia Corporation (the “Corporation”)
and                           (Grantee”) of                          .

     Grantee and the Corporation agree that, until such time as securities issuable pursuant to the
Plan become registered under the Securities Act of 1933, the grant of options hereunder and the
purchase and sale of Common Stock upon exercise thereof are intended to comply with the exemption
from registration provided by Rule 701 of the Securities Act of 1933 and each party hereto shall
use his or its best efforts to comply with such Rule 701. To the extent that an exemption from
registration under the Securities Act provided by Rule 701 is unavailable, the grant of options
hereunder and the sale of Common Stock upon exercise thereof are intended to be exempt from
registration under the Securities Act in reliance upon the private offering exemption contained in
Section 4(2) of the Securities Act, or other available exemption.

ARTICLE 1

GRANT OF OPTION

     Section 1.1 Grant of Options. Subject to the provisions of the Agreement, and
pursuant to the provisions of the INTERNATIONAL ABSORBENTS INC. 2003 OMNIBUS INCENTIVE PLAN (the
“Plan”), the Corporation hereby grants to Grantee, as of the Grant Date specified in Attachment A,
a Stock Option (the “Option”) of the type stated in Attachment A to purchase all or any part of the
number and shares of Common Stock set forth on Attachment A at the exercise price per share
(“Option Price”) set forth on Attachment A.

     Section 1.2 Term of Options. Unless the Option granted pursuant to Section 1.1
terminates earlier pursuant to other provisions of the Agreement, the Option shall expire at 5:00
p.m. Pacific Standard Time on the expiration date specified in Attachment A. If earlier, the
Option shall terminate on the date specified in Article 4 following the termination of Grantee’s
employment or affiliation (as a consultant or director) with the Corporation. In no event will the
Option expire later than the day prior to the tenth (10th) anniversary of its Grant Date.
Moreover, no Option granted to a Grantee who is subject to Section 16 of the Exchange Act shall be
exercisable prior to seven (7) months after the Grant Date of the Option; and an Option granted to
a Grantee who is not subject to Section 16 of the Exchange Act shall not be exercisable prior to
ninety (90) days after the Grant Date of the Option.

ARTICLE 2

VESTING

     Section 2.1 Vesting Schedule. Unless the Option has earlier terminated pursuant to
the provisions of this Agreement, the Option shall become vested on the dates specified on
Attachment A for a portion of the Option with respect to a percentage or number of the underlying
shares in accordance with the vesting schedule specified on Attachment A; provided that Grantee
shall have been in the continuous employ of or affiliation (as a consultant or director) with the
Corporation from the Grant Date through any such date.

     Section 2.2 Acceleration of Vesting. Upon the closing of a “change in control”, as
defined in the Plan, if the Grantee will no longer be employed at the Corporation or the successor
corporation (or parent thereof) in a substantially comparable position following such closing, the
vesting of this Option shall, without further act by Grantee, accelerate immediately prior to but
effective only upon the closing of such change in control. Grantee shall be given reasonable notice
and an opportunity to exercise this Option prior to the closing of such change in control.
Notwithstanding the foregoing, the vesting of each outstanding Option shall not be accelerated
prior to the consummation of a change of control if and to the extent: (A) such Option is either
to be assumed by the successor corporation (or parent thereof) at the closing of the change of
control or be replaced with a comparable option to purchase shares of the capital stock of the
successor corporation (or parent thereof) at the closing of the change of control, (B) such Option
is to be replaced by a comparable cash incentive program of the successor corporation based on the
value of the Option at the time of the consummation of the change of control or (C) the
acceleration of such Option is subject to other limitations imposed by the Committee at the time of
the Option grant. The determination of option comparability shall be made by the Board, and its
determination shall be conclusive and binding.
Immediately following the consummation of the change in control, all outstanding Options shall
terminate and cease to be outstanding, except to the extent assumed by the successor corporation
(or parent thereof).

 

 

ARTICLE 3

EXERCISE OF OPTION

     Section 3.1 Exercisability of Option. No portion of the Option granted to Grantee
shall be exercisable by Grantee prior to the time such portion of the Option has vested.

     Section 3.2 Manner of Exercise. The vested portion of the Option may be exercised,
in whole or in part, by delivering written notice to the Committee in the form attached hereto as
Attachment B or in such other form as the Committee may require from time to time. Such notice
shall specify the number of shares of Common Stock subject to the Option as to which the Option is
being exercised, and shall be accompanied by full payment of the Option Price of the shares of
Common Stock as to which the Option is being exercised. Payment of the Option Price may be made in
cash (or cash equivalents acceptable to the Committee) or, if approved by the Committee, in shares
of Common Stock or a combination of cash and shares of Common Stock, or by such other means as the
Committee may prescribe. The Fair Market Value of shares of Common Stock delivered on exercise of
the Option shall be determined as of the date of exercise. Shares of Common Stock delivered in
payment of the Option Price may be previously owned shares (provided that, unless approved by the
Committee, shares that were acquired directly from the Corporation must have been owned by the
Grantee for more than six (6) months on the date of surrender) or, if approved by the Committee,
shares acquired upon exercise of the Option. If approved by the Board of Directors, subject to
applicable rules and regulations and the Corporation’s charter documents, the Corporation may make
or guarantee loans to the Grantee to assist the Grantee in exercising the Option and satisfying any
related withholding tax obligations. In addition, if and to the extent authorized by the Board of
Directors, the Grantee may make all or any portion of any payment due to the Corporation upon
exercise of the Option by rendering bona fide services to the Corporation or by the delivery of any
property other than cash, so long as such services or property constitutes valid consideration for
the stock under applicable laws of British Columbia, Canada and the United States and the services
or property has a readily ascertainable fair market value. The Option may be exercised only in
multiples of whole shares and no partial shares shall be issued. Any fractional share will be paid
in cash.

     If the Common Stock is registered under Section 12(b) or 12(g) of the Exchange Act, the
Committee, subject to such limitations as it may determine, may authorize payment of the exercise
price, in whole or in part, by delivery of a properly executed exercise notice, together with
irrevocable instructions, to: (i) a brokerage firm designated by the Corporation to deliver
promptly to the Corporation the aggregate amount of sale or loan proceeds to pay the exercise price
and any withholding tax obligations that may arise in connection with the exercise, and (ii) the
Corporation to deliver the certificates for such purchased shares directly to such brokerage firm.

     Section 3.3 Issuance of Shares and Payment of Cash upon Exercise. Upon exercise of
the Option, in whole or in part, in accordance with the terms of the Agreement and upon payment of
the Option Price for the shares of Common Stock as to which the Option is exercised, the
Corporation shall issue to Grantee or, in the event of Grantee’s death, to Grantee’s executor,
personal representative or the person to whom the Option shall have been transferred by will or the
laws of descent and distribution, as the case may be, the number of shares of Common Stock so paid
for, in the form of fully paid and nonassessable Common Stock. The stock certificates for any
shares of Common Stock issued hereunder shall, unless such shares are registered or an exemption
from registration is available under applicable federal and state law, bear a legend restricting
transferability of such shares.

     Section 3.4 Lock-Up Period. Grantee hereby agrees that Grantee shall not offer,
pledge, sell, contract to sell, sell any option or contract to purchase, purchase any option or
contract to sell, grant any option, right or warrant to purchase, lend, or otherwise transfer or
dispose of, directly or indirectly, any Common Stock (or other securities) of the Corporation or
enter into any swap, hedging or other arrangement that transfers to another, in whole or in part,
any of the economic consequences of ownership of any Common Stock (or other securities) of the
Corporation held by Grantee (other than those included in the registration) for a period specified
by the representative of the underwriters of Common Stock (or other securities) of the Corporation
not to exceed one hundred eighty (180) days following the effective date of any registration
statement of the Corporation filed under the Securities Act of 1933. Grantee agrees to execute and
deliver such other agreements as may be reasonably requested by the Corporation or the underwriter
which are consistent with the foregoing or which are necessary to give further effect thereto. In
addition, if requested by the Corporation or the representative of the underwriters of Common Stock
(or other securities) of the Corporation, Grantee shall provide, within ten (10) days of such
request, such information as may be required by the Corporation or such representative in
connection with the completion of any public offering of the Corporation’s securities pursuant to a
registration statement filed under the Securities Act of 1933. The obligations described in this
Section 3.4 shall not apply to a registration relating solely to employee benefit plans on Form S-1
or Form S-8 or similar forms that may be promulgated in the future, or a registration relating
solely to a Securities
and Exchange Commission Rule 145 transaction on Form S-4 or similar forms that may be
promulgated in the

 

 

future. The Corporation may impose stop-transfer instructions with respect to
the shares of Common Stock (or other securities) subject to the foregoing restriction until the end
of said one hundred eighty (180) day period. Grantee agrees that this Section 3.4 shall bind any
transferee of the Option or shares acquired pursuant to the exercise of the Option.

ARTICLE 4

TERMINATION OF EMPLOYMENT

     Section 4.1 Unvested Portion. Unless the Option has earlier terminated pursuant to
the provisions of this Agreement, the unvested portion of the Option shall terminate immediately
upon termination of Grantee’s employment or affiliation (as a consultant or director) with the
Corporation for any reason.

     Section 4.2 Termination of Employment or Affiliation. In the event a Grantee’s
employment with the Corporation is terminated, the Grantee’s rights to acquire the Common Stock
under the Option granted under the Plan shall be as set forth below.

          (a) Termination for Other Than Disability, Etc. If a Grantee ceases to be employed by the
Corporation for any reason other than for disability, cause, misconduct, retirement or death, the
vested portion of Grantee’s Option shall terminate three (3) months after the termination date of
the Grantee’s employment. During such three-month period, the Grantee may exercise any vested
portion of the Option. The decision as to whether a termination for a reason other than
disability, cause, misconduct or retirement or death has occurred shall be made by the Committee,
whose decision shall be final and conclusive, except that employment shall not be considered
terminated in the case of sick leave or other bona fide leave of absence approved in writing by the
Corporation;

          (b) Disability. If a Grantee ceases to be employed by the Corporation by reason of
disability, the vested portion of such Grantee’s Option shall terminate twelve (12) months after
the termination date of Grantee’s employment. The decision as to whether a termination by reason
of disability has occurred shall be made by the Committee, whose decision shall be final and
conclusive.

          (c) Termination for Cause and/or Misconduct. If a Grantee’s employment is terminated for
cause and/or misconduct, the vested portion of Grantee’s Option shall terminate immediately
effective as of the date of termination of the Grantee’s employment; provided, however, the
Committee may, in its sole discretion, within thirty (30) days of Grantee’s employment termination,
waive the expiration of the Option by giving written notice of such waiver to the Grantee at the
Grantee’s last known address. If the waiver is given, the Grantee may exercise the vested portion
of the Option only to the extent, during the time, and upon the other terms and conditions
applicable to a Grantee who ceased to be employed by the Corporation for a reason other than
disability, cause, misconduct, retirement or death. The determination of the Committee on whether
a termination is for cause and/or misconduct shall be made in good faith and shall be final and
conclusive.

          (d) Retirement. If prior to the expiration date the Option, a Grantee shall retire with the
consent of the Corporation, the vested portion of the Option may be exercised within three (3)
months of retirement, in the same manner as if the Grantee had continued in the employ of the
Corporation.

          (e) Death of Grantee. If a Grantee dies at any time when he or she is entitled to exercise
the Option, the vested portion of the Option shall not terminate due to his or her death and, prior
to the expiration of the Option by its terms, the Option may be exercised by his or her executor or
administrator or the person or persons to whom the Option is transferred by will or applicable laws
of descent and distribution but only to the extent the Option was exercisable on the date the
Grantee ceased to be employed by the Corporation due to his or her death.

ARTICLE 5

MISCELLANEOUS

     Section 5.1 Non-Guarantee of Employment. Nothing in the Plan or the Agreement shall
be construed as a contract of employment between the Corporation (or an affiliate) and Grantee, or
as a contractual right of Grantee to continue in the employ of the Corporation or an affiliate, or
as a limitation of the right of the Corporation or an affiliate to discharge Grantee at any time.

     Section 5.2 No Rights of Stockholder. Grantee shall not have any of the rights of a
stockholder with respect to the shares of Common Stock that may be issued upon the exercise of the
Option until such shares of Common Stock have been issued to him upon the due exercise of the
Option.

 

 

     Section 5.3 Withholding of Taxes. The Corporation or any affiliate shall have the
right to deduct from any compensation or any other payment of any kind (including, at the
Corporation’s election, withholding the issuance of shares of Common Stock) due Grantee the amount
of any federal, state or local taxes required by law to be withheld as the result of the exercise
of the Option or the disposition (as that term is defined in §424(c) of the Code) of shares of
Common Stock acquired pursuant to the exercise of the Option. In lieu of such deduction, the
Committee may require Grantee to make a cash payment to the Corporation or an affiliate equal to
the amount required to be withheld. If Grantee does not make such payment when requested, the
Corporation may refuse to issue any Common Stock certificate under the Plan until arrangements
satisfactory to the Committee for such payment have been made.

     Section 5.4 Nontransferability of Option. The Option shall be nontransferable
otherwise than by will or the laws of descent and distribution. During the lifetime of Grantee,
the Option may be exercised only by Grantee or, during the period Grantee is under a legal
disability, by Grantee’s guardian or legal representative.

     Section 5.5 Agreement Subject to Memorandum and Articles. This Agreement is subject
to the Memorandum and Articles of the Corporation, and any applicable United States federal laws,
the laws of British Columbia, Canada and the laws of the State of Washington, including without
limitation, any securities laws, rules, and regulations without regard to its conflict of laws,
rules and principals.

     Should there be a conflict between the laws of the Province of British Columbia, Canada and
the United States federal laws or the laws of the State of Washington then the laws of the United
States shall apply to those persons who are residents of the United States and the laws of the
Province of British Columbia shall apply to those persons who are residents of Canada.

     Section 5.6 Gender. As used herein the masculine shall include the feminine as the
circumstances may require.

     Section 5.7 Headings. The headings in the Agreement are for reference purposes only
and shall not affect the meaning or interpretation of the Agreement.

     Section 5.8 Notices. All notices and other communications made or given pursuant to
the Agreement shall be in writing and shall be sufficiently made or given if hand delivered or
mailed by certified mail, addressed to Grantee at the address contained in the records of the
Corporation, or addressed to the Committee, care of the Corporation for the attention of its
Secretary at its principal office or, if the receiving party consents in advance, transmitted and
received via telecopy or via such other electronic transmission mechanism as may be available to
the parties.

     Section 5.9 Entire Agreement; Modification. The Agreement and the Plan contain the
entire agreement between the parties with respect to the subject matter contained herein and may
not be modified, except as provided in the Plan or in a written document signed by each of the
parties hereto.

     Section 5.10 Conformity with Plan. This Agreement is intended to conform in all
respects with, and is subject to all applicable provisions of, the Plan, which is incorporated
herein by reference. Unless stated otherwise herein, capitalized terms in this Agreement shall
have the same meaning as defined in the Plan. Inconsistencies between this Agreement and the Plan
shall be resolved in accordance with the terms of the Plan. In the event of any ambiguity in the
Agreement or any matters as to which the Agreement is silent, the Plan shall govern including,
without limitation, the provisions thereof pursuant to which the Committee has the power, among
others, to (i) interpret the Plan and Grant Agreements related thereto, (ii) prescribe, amend and
rescind rules and regulations relating to the Plan, and (iii) make all other determinations deemed
necessary or advisable for the administration of the Plan. The Grantee acknowledges by signing
this Agreement that he or she has received and reviewed a copy of the Plan.

     IN WITNESS WHEREOF, the parties have executed the Agreement as of the date first above
written.

	 	 	 	 	 
	INTERNATIONAL ABSORBENTS, INC.

 	 	 
	By:  	 	 	 
	 	Gordon L. Ellis 	 	 
	 	Chief Executive Officer and President 	 	 
	 
	 
	GRANTEE

 	 	 
	By:

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