EXHIBIT 4.2
FREESTAR TECHNOLOGY CORPORATION
AMENDED AND RESTATED
STOCK INCENTIVE PLAN
(AMENDMENT NO. 3)
1. GENERAL PROVISIONS.
1.1 PURPOSE.
The FreeStar Technology Corporation Amended and Restated Stock
Incentive Plan (Amendment No. 3) ("Plan") is intended to allow designated
directors, officers, employees, and certain non-employees (all of whom are
sometimes collectively referred to herein as "Employees") of FreeStar Technology
Corporation, a Nevada corporation ("FreeStar") and its Subsidiaries (as that
term is defined below) which it may have from time to time (FreeStar and such
Subsidiaries are referred to herein as the "Company") to receive certain options
("Stock Options") to purchase FreeStar's common stock, one tenth of one cent
($0.001) par value ("Common Stock"), and to receive grants of Common Stock
subject to certain restrictions ("Awards"). As used in this Plan, the term
"Subsidiary" shall mean each corporation which is a "subsidiary corporation" of
FreeStar within the meaning of Section 424(f) of the Internal Revenue Code of
1986, as amended (the "Code"). The purpose of this Plan is to provide Employees
with equity-based compensation incentives to make significant and extraordinary
contributions to the long-term performance and growth of the Company, and to
attract and retain Employees of exceptional ability.
1.2 ADMINISTRATION.
1.2.1 The Plan shall be administered by the Compensation Committee (the
"Committee") of, or appointed by, the Board of Directors of FreeStar (the
"Board"). The Committee shall select one of its members as Chairman and shall
act by vote of a majority of a quorum, or by unanimous written
1
consent. A majority of its members shall constitute a quorum. The Committee
shall be governed by the provisions of FreeStar's Bylaws and of Nevada law
applicable to the Board, except as otherwise provided herein or determined by
the Board.
1.2.2 The Committee shall have full and complete authority, in its
discretion, but subject to the express provisions of the Plan: to approve the
Employees nominated by the management of the Company to be granted Awards or
Stock Options; to determine the number of Awards or Stock Options to be granted
to an Employee; to determine the time or times at which Awards or Stock Options
shall be granted; to establish the terms and conditions upon which Awards or
Stock Options may be exercised; to remove or adjust any restrictions and
conditions upon Awards or Stock Options; to specify, at the time of grant,
provisions relating to exercisability of Stock Options and to accelerate or
otherwise modify the exercisability of any Stock Options; and to adopt such
rules and regulations and to make all other determinations deemed necessary or
desirable for the administration of the Plan. All interpretations and
constructions of the Plan by the Committee, and all of its actions hereunder,
shall be binding and conclusive on all persons for all purposes.
1.2.3 The Company hereby agrees to indemnify and hold harmless each
Committee member and each Employee of the Company, and the estate and heirs of
such Committee member or Employee, against all claims, liabilities, expenses,
penalties, damages or other pecuniary losses, including legal fees, which such
Committee member or Employee, his or her estate or heirs may suffer as a result
of his or her responsibilities, obligations or duties in connection with the
Plan, to the extent that insurance, if any, does not cover the payment of such
items. No member of the Committee or the Board shall be liable for any action or
determination made in good faith with respect to the Plan or any Award or Stock
Option granted pursuant to the Plan.
1.3 ELIGIBILITY AND PARTICIPATION.
Employees eligible under the Plan shall be approved by the Committee
from those Employees who, in the opinion of the management of the Company, are
in positions which enable them to make significant and extraordinary
contributions to the long-term performance and growth of the Company. In
selecting Employees to whom Stock Options or Awards may be granted,
consideration shall be given to factors such as employment position, duties and
responsibilities, ability, productivity, length of service, morale, interest in
the Company and recommendations of supervisors.
1.4 SHARES SUBJECT TO THE PLAN.
The maximum number of shares of Common Stock that may be issued
pursuant to the Plan shall be Seventy Million (70,000,000) subject to adjustment
pursuant to the provisions of paragraph 4.1. If shares of Common Stock awarded
or issued under the Plan are reacquired by the Company due to a forfeiture or
for any other reason, such shares shall be cancelled and thereafter shall again
be available for purposes of the Plan. If a Stock Option expires, terminates or
is cancelled for any reason without having been exercised in full, the shares of
Common Stock not purchased thereunder shall again be available for purposes of
the Plan.
2. PROVISIONS RELATING TO STOCK OPTIONS.
2
2.1 GRANTS OF STOCK OPTIONS.
The Committee may grant Stock Options in such amounts, at such times,
and to such Employees nominated by the management of the Company as the
Committee, in its discretion, may determine. Stock Options granted under the
Plan shall constitute "incentive stock options" within the meaning of Section
422 of the Code, if so designated by the Committee on the date of grant. The
Committee shall also have the discretion to grant Stock Options which do not
constitute incentive stock options, and any such Stock Options shall be
designated non-statutory stock options by the Committee on the date of grant.
The aggregate fair market value (determined as of the time an incentive stock
option is granted) of the Common Stock with respect to which incentive stock
options are exercisable for the first time by any Employee during any one
calendar year (under all plans of the Company and any parent or subsidiary of
the Company) may not exceed the maximum amount permitted under Section 422 of
the Code (currently one hundred thousand dollars ($100,000.00)). Non-statutory
stock options shall not be subject to the limitations relating to incentive
stock options contained in the preceding sentence. Each Stock Option shall be
evidenced by a written agreement (the "Option Agreement") in a form approved by
the Committee, which shall be executed on behalf of the Company and by the
Employee to whom the Stock Option is granted, and which shall be subject to the
terms and conditions of this Plan. In the discretion of the Committee, Stock
Options may include provisions (which need not be uniform), authorized by the
Committee in its discretion, that accelerate an Employee's rights to exercise
Stock Options following a "Change in Control," as such term is defined in
paragraph 3.1 hereof. The holder of a Stock Option shall not be entitled to the
privileges of stock ownership as to any shares of Common Stock not actually
issued to such holder.
2.2 PURCHASE PRICE.
The purchase price (the "Exercise Price") of shares of Common Stock
subject to each non-statutory Stock Option ("Option Shares") shall be equal to
whatever price is established by the Committee, in its sole discretion, on the
date of the grant. The Exercise Price of incentive Stock Options shall be the
fair market value of the options on the date of the grant thereof. For an
Employee holding stock possessing more than ten percent (10%) percent of the
total combined voting power of all classes of stock of the Company, the Exercise
Price of an incentive Stock Option shall be at least one hundred ten percent
(110%) of the fair market value of the Common Stock and such option.
2.3 OPTION PERIOD.
The Stock Option period (the "Term") shall commence on the date of
grant of the incentive Stock Option and shall be ten (10) years or such shorter
period as is determined by the Committee; the Term for an incentive Stock Option
granted to an Employee holding stock possessing more than ten percent (10%) of
the total combined voting power of all classes of stock of the Company shall be
five (5) years from the date such option is granted. The Term for Non-statutory
Stock Options shall be whatever period, if any, is set by the Board. Each Stock
Option shall provide that it is exercisable over its term in such periodic
installments as the Committee in its sole discretion may determine. Such
provisions need not be uniform. Notwithstanding the foregoing, but subject to
the provisions of paragraphs 1.2.2 and 2.1, Stock Options granted to Employees
who are subject to the reporting
3
requirements of Section 16(a) of the Exchange Act ("Section 16 Reporting
Persons") shall not be exercisable until at least six (6) months and one day
from the date the Stock Option is granted.
2.4 EXERCISE OF OPTIONS.
2.4.1 Each Stock Option may be exercised in whole or in part (but not
as to fractional shares) by delivering it for surrender or endorsement to the
Company, attention of the Corporate Secretary, at the principal office of the
Company, together with payment of the Exercise Price and an executed Notice and
Agreement of Exercise in the form prescribed by paragraph 2.4.2. Payment may be
made (i) in cash, (ii) by cashier's or certified check, (iii) by surrender of
previously owned shares of the Company's Common Stock valued pursuant to
paragraph 2.2 (if the Committee authorizes payment in stock in its discretion),
(iv) by withholding from the Option Shares which would otherwise be issuable
upon the exercise of the Stock Option that number of Option Shares equal to the
exercise price of the Stock Option, if such withholding is authorized by the
Committee in its discretion, (v) in the discretion of the Committee, by the
delivery to the Company of the optionee's promissory note secured by the Option
Shares, bearing interest at a rate sufficient to prevent the imputation of
interest under Sections 483 or 1274 of the Code, and having such other terms and
conditions as may be satisfactory to the Committee, or (vi) cashless exercise
program as established by FreeStar.
2.4.2 Exercise of each Stock Option is conditioned upon the agreement
of the Employee to the terms and conditions of this Plan and of such Stock
Option as evidenced by the Employee's execution and delivery of a Notice and
Agreement of Exercise in a form to be determined by the Committee in its
discretion. Such Notice and Agreement of Exercise shall set forth the agreement
of the Employee that: (a) no Option Shares will be sold or otherwise distributed
in violation of the Securities Act of 1933 (the "Securities Act") or any other
applicable federal or state securities laws, (b) each Option Share certificate
may be imprinted with legends reflecting any applicable federal and state
securities law restrictions and conditions, (c) the Company may comply with said
securities law restrictions and issue "stop transfer" instructions to its
Transfer Agent and Registrar without liability, (d) if the Employee is a Section
16 Reporting Person, the Employee will furnish to the Company a copy of each
Form 4 or Form 5 filed by said Employee and will timely file all reports
required under federal securities laws, and (e) the Employee will report all
sales of Option Shares to the Company in writing on a form prescribed by the
Company.
2.4.3 No Stock Option shall be exercisable unless and until any
applicable registration or qualification requirements of federal and state
securities laws, and all other legal requirements, have been fully complied
with. The Company will use reasonable efforts to maintain the effectiveness of a
Registration Statement under the Securities Act for the issuance of Stock
Options and shares acquired thereunder, but there may be times when no such
Registration Statement will be currently effective. The exercise of Stock
Options may be temporarily suspended without liability to the Company during
times when no such Registration Statement is currently effective, or during
times when, in the reasonable opinion of the Committee, such suspension is
necessary to preclude violation of any requirements of applicable law or
regulatory bodies having jurisdiction over the Company. If any Stock Option
would expire for any reason except the end of its term during such a suspension,
then if exercise of such Stock Option is duly tendered before its expiration,
such Stock Option shall be exercisable and exercised (unless the attempted
exercise is withdrawn) as of the first day after the end
4
of such suspension. The Company shall have no obligation to file any
Registration Statement covering resales of Option Shares.
2.5 RESTRICTIONS ON TRANSFER.
Each Stock Option granted under this Plan shall be transferable only by
will or the laws of descent and distribution. No interest of any Employee under
the Plan shall be subject to attachment, execution, garnishment, sequestration,
the laws of bankruptcy or any other legal or equitable process. Each Stock
Option granted under this Plan shall be exercisable during an Employee's
lifetime only by such Employee or by such Employee's legal representative.
3. PROVISIONS RELATING TO AWARDS.
3.1 GRANT OF AWARDS.
Subject to the provisions of the Plan, the Committee shall have full
and complete authority, in its discretion, but subject to the express provisions
of this Plan, to (i) grant Awards pursuant to the Plan, (ii) determine the
number of shares of Common Stock subject to each Award ("Award Shares"), (iii)
determine the terms and conditions (which need not be identical) of each Award,
including the consideration (if any) to be paid by the Employee for such Common
Stock, which may, in the Committee's discretion, consist of the delivery of the
Employee's promissory note meeting the requirements of paragraph 2.4.1, (iv)
establish and modify performance criteria for Awards, and (v) make all of the
determinations necessary or advisable with respect to Awards under the Plan.
Each award under the Plan shall consist of a grant of shares of Common Stock
subject to a restriction period (after which the restrictions shall lapse),
which shall be a period commencing on the date the award is granted and ending
on such date as the Committee shall determine (the "Restriction Period"). The
Committee may provide for the lapse of restrictions in installments, for
acceleration of the lapse of restrictions upon the satisfaction of such
performance or other criteria or upon the occurrence of such events as the
Committee shall determine.
3.2 INCENTIVE AGREEMENTS.
Each Award granted under the Plan shall be evidenced by a written
agreement (an "Incentive Agreement") in a form approved by the Committee and
executed by the Company and the Employee to whom the Award is granted. Each
Incentive Agreement shall be subject to the terms and conditions of the Plan and
other such terms and conditions as the Committee may specify.
3.3 WAIVER OF RESTRICTIONS.
The Committee may modify or amend any Award under the Plan or waive any
restrictions or conditions applicable to such Awards; provided, however, that
the Committee may not undertake any such modifications, amendments or waivers if
the effect thereof materially increases the benefits to any Employee, or
adversely affects the rights of any Employee without his or her consent.
3.4 TERMS AND CONDITIONS OF AWARDS.
5
3.4.1 Upon receipt of an Award of shares of Common Stock under the
Plan, even during the Restriction Period, an Employee shall be the holder of
record of the shares and shall have all the rights of a shareholder with respect
to such shares, subject to the terms and conditions of the Plan and the Award.
3.4.2 Except as otherwise provided in this paragraph 3.4, no shares of
Common Stock received pursuant to the Plan shall be sold, exchanged,
transferred, pledged, hypothecated or otherwise disposed of during the
Restriction Period applicable to such shares. Any purported disposition of such
Common Stock in violation of this paragraph 3.4.2 shall be null and void.
3.4.3 The Committee may require under such terms and conditions as it
deems appropriate or desirable that (i) the certificates for Common Stock
delivered under the Plan are to be held in custody by the Company or a person or
institution designated by the Company until the Restriction Period expires, (ii)
such certificates shall bear a legend referring to the restrictions on the
Common Stock pursuant to the Plan, and (iii) the Employee shall have delivered
to the Company a stock power endorsed in blank relating to the Common Stock.
4. MISCELLANEOUS PROVISIONS.
4.1 ADJUSTMENTS UPON CHANGE IN CAPITALIZATION.
4.1.1 The number and class of shares subject to each outstanding Stock
Option, the Exercise Price thereof (but not the total price), the maximum number
of Stock Options that may be granted under the Plan, the minimum number of
shares as to which a Stock Option may be exercised at any one time, and the
number and class of shares subject to each outstanding Award, shall be
proportionately adjusted in the event of any increase or decrease in the number
of the issued shares of Common Stock which results from a split-up or
consolidation of shares, payment of a stock dividend or dividends exceeding a
total of five percent (5%) for which the record dates occur in any one fiscal
year, a recapitalization (other than the conversion of convertible securities
according to their terms), a combination of shares or other like capital
adjustment, so that (i) upon exercise of the Stock Option, the Employee shall
receive the number and class of shares such Employee would have received had
such Employee been the holder of the number of shares of Common Stock for which
the Stock Option is being exercised upon the date of such change or increase or
decrease in the number of issued shares of the Company, and (ii) upon the lapse
of restrictions of the Award Shares, the Employee shall receive the number and
class of shares such Employee would have received if the restrictions on the
Award Shares had lapsed on the date of such change or increase or decrease in
the number of issued shares of the Company.
4.1.2 Upon a reorganization, merger or consolidation of the Company
with one or more corporations as a result of which is not the surviving
corporation or in which FreeStar survives as a wholly-owned subsidiary of
another corporation, or upon a sale of all or substantially all of the property
of the Company to another corporation, or any dividend or distribution to
shareholders of more than ten percent (10%) of the Company's assets, adequate
adjustment or other provisions shall be made by the Company or other party to
such transaction so that there shall remain and/or be
6
substituted for the Option Shares and Award Shares provided for herein, the
shares, securities or assets which would have been issuable or payable in
respect of or in exchange for such Option Shares and Award Shares then
remaining, as if the Employee had been the owner of such shares as of the
applicable date. Any securities so substituted shall be subject to similar
successive adjustments.
4.2 WITHHOLDING TAXES.
The Company shall have the right at the time of exercise of any Stock
Option, the grant of an Award, or the lapse of restrictions on Award Shares, to
make adequate provision for any federal, state, local or foreign taxes which it
believes are or may be required by law to be withheld with respect to such
exercise ("Tax Liability"), to ensure the payment of any such Tax Liability. The
Company may provide for the payment of any Tax Liability by any of the following
means or a combination of such means, as determined by the Committee in its sole
and absolute discretion in the particular case: (i) by requiring the Employee to
tender a cash payment to the Company, (ii) by withholding from the Employee's
salary, (iii) by withholding from the Option Shares which would otherwise be
issuable upon exercise of the Stock Option, or from the Award Shares on their
grant or date of lapse of restrictions, that number of Option Shares or Award
Shares having an aggregate fair market value (determined in the manner
prescribed by paragraph 2.2) as of the date the withholding tax obligation
arises in an amount which is equal to the Employee's Tax Liability or (iv) by
any other method deemed appropriate by the Committee. Satisfaction of the Tax
Liability of a Section 16 Reporting Person may be made by the method of payment
specified in clause (iii) above only if the following two conditions are
satisfied:
(a) the withholding of Option Shares or Award Shares and the exercise
of the related Stock Option occur at least six (6) months and one day following
the date of grant of such Stock Option or Award; and
(b) the withholding of Option Shares or Award Shares is made either (i)
pursuant to an irrevocable election ("Withholding Election") made by such
Employee at least six months in advance of the withholding of Options Shares or
Award Shares, or (ii) on a day within a ten (10) day "window period" beginning
on the third business day following the date of release of the Company's
quarterly or annual summary statement of sales and earnings.
Anything herein to the contrary notwithstanding, a Withholding Election may be
disapproved by the Committee at any time.
4.3 RELATIONSHIP TO OTHER EMPLOYEE BENEFIT PLANS.
Stock Options and Awards granted hereunder shall not be deemed to be
salary or other compensation to any Employee for purposes of any pension,
thrift, profit-sharing, stock purchase or any other employee benefit plan now
maintained or hereafter adopted by the Company.
4.4 AMENDMENTS AND TERMINATION.
The Board of Directors may at any time suspend, amend or terminate this
Plan. For incentive
7
stock options only, no amendment or modification of this Plan may be adopted,
except subject to stockholder approval, which would: (a) materially increase the
benefits accruing to Employees under this Plan, (b) materially increase the
number of securities which may be issued under this Plan (except for adjustments
pursuant to paragraph 4.1 hereof), or (c) materially modify the requirements as
to eligibility for participation in the Plan.
4.5 SUCCESSORS IN INTEREST.
The provisions of this Plan and the actions of the Committee shall be
binding upon all heirs, successors and assigns of the Company and of Employees.
4.6 OTHER DOCUMENTS.
All documents prepared, executed or delivered in connection with this
Plan (including, without limitation, Option Agreements and Incentive Agreements)
shall be, in substance and form, as established and modified by the Committee;
provided, however, that all such documents shall be subject in every respect to
the provisions of this Plan, and in the event of any conflict between the terms
of any such document and this Plan, the provisions of this Plan shall prevail.
4.7 NO OBLIGATION TO CONTINUE EMPLOYMENT.
This Plan and grants hereunder shall not impose any obligation on the
Company to continue to employ any Employee. Moreover, no provision of this Plan
or any document executed or delivered pursuant to this Plan shall be deemed
modified in any way by any employment contract between an Employee (or other
employee) and the Company.
4.8 MISCONDUCT OF AN EMPLOYEE.
Notwithstanding any other provision of this Plan, if an Employee
commits fraud or dishonesty toward the Company or wrongfully uses or discloses
any trade secret, confidential data or other information proprietary to the
Company, or intentionally takes any other action materially inimical to the best
interests of the Company, as determined by the Committee, in its sole and
absolute discretion, such Employee shall forfeit all rights and benefits under
this Plan.
4.9 TERM OF PLAN.
This Plan was adopted by the Board effective December 20, 2004. No
Stock Options or Awards may be granted under this Plan after December 30, 2014.
4.10 GOVERNING LAW.
This Plan shall be construed in accordance with, and governed by, the
laws of the State of Nevada.
4.11 SHAREHOLDER APPROVAL.
8
No Stock Option shall be exercisable, or Award granted, unless and
until the Directors of the Company have approved this Plan and all other legal
requirements have been fully complied with. In addition, no incentive Stock
Option shall be granted until approved by a majority of the issued and
outstanding Common Stock of FreeStar.
4.12 ASSUMPTION AGREEMENTS.
The Company will require each successor, (direct or indirect, whether
by purchase, merger, consolidation or otherwise), to all or substantially all of
the business or assets of the Company, prior to the consummation of each such
transaction, to assume and agree to perform the terms and provisions remaining
to be performed by the Company under each Incentive Agreement and Stock Option
and to preserve the benefits to the Employees thereunder. Such assumption and
agreement shall be set forth in a written agreement in form and substance
satisfactory to the Committee (an "Assumption Agreement"), and shall include
such adjustments, if any, in the application of the provisions of the Incentive
Agreements and Stock Options and such additional provisions, if any, as the
Committee shall require and approve, in order to preserve such benefits to the
Employees. Without limiting the generality of the foregoing, the Committee may
require an Assumption Agreement to include satisfactory undertakings by a
successor:
(a) to provide liquidity to the Employees at the end of the Restriction
Period applicable to Common Stock awarded to them under the Plan, or on the
exercise of Stock Options;
(b) if the succession occurs before the expiration of any period
specified in the Incentive Agreements for satisfaction of performance criteria
applicable to the Common Stock awarded thereunder, to refrain from interfering
with the Company's ability to satisfy such performance criteria or to agree to
modify such performance criteria and/or waive any criteria that cannot be
satisfied as a result of the succession;
(c) to require any future successor to enter into an Assumption
Agreement; and
(d) to take or refrain from taking such other actions as the Committee
may require and approve, in its discretion.
The Committee referred to in this paragraph 4.12 is the Committee appointed by a
Board of Directors in office prior to the succession then under consideration.
4.13 COMPLIANCE WITH RULE 16B-3.
Transactions under the Plan are intended to comply with all applicable
conditions of Rule 16b-3. To the extent that any provision of the Plan or action
by the Committee fails to so comply, it shall be deemed null and void, to the
extent permitted by law and deemed advisable by the Committee.
IN WITNESS WHEREOF, this Plan has been executed as of the 20th day of
December , 2004.
FREESTAR TECHNOLOGY CORPORATION
By: /S/ PAUL EGAN
------------------------------
Paul Egan, President
9