EX-10
OPTION AGREEMENT
OPTION TO PURCHASE 10,000,000
SHARES OF COMMON STOCK
Exercisable Commencing April 24, 2003;
Void after April 24, 2006
THIS CERTIFIES that, for value received, Phaeton Investments
Limited or its registered assigns ("Optionholder"), is entitled,
subject to the terms and conditions set forth in this option
("Option"), to purchase from FreeStar Technology Corporation, a
Nevada corporation ("Company"), Ten Million (10,000,000) fully paid,
duly authorized and nonassessable shares of restricted common stock
("Shares"), $0.001 par value per share, of the Company ("Common
Stock"), at any time commencing as follows: From April 24, 2003 and
continuing up to 5:00 p.m. Atlantic Standard Time on April 24, 2006
("Exercise Period") at an exercise price of Ten Cents ($0.10) per
Share, subject to adjustment pursuant to Section 8 hereof.
This Option is subject to the following provisions, terms and
conditions:
1. Holding of Shares; Transfer.
1.1 Transfer. This Option shall be transferable only on the
books of the Company maintained at its principal executive offices
upon surrender thereof for registration of transfer duly endorsed by
the Optionholder or by its duly authorized attorney or
representative, or accompanied by proper evidence of succession,
assignment or authority to transfer. Upon any registration of
transfer, the Company shall execute and deliver a new Option or
Options in appropriate denominations to the person or persons
entitled thereto.
1.2 Common Stock to be Issued. Upon the exercise of any
Options and upon receipt by the Company of a facsimile or original of
Optionholder's signed Election to Exercise Option (See Exhibit A),
Company shall instruct its transfer agent to issue stock certificates
in the name of Optionholder (or its nominee) and in such denominations
to be specified by Optionholder representing the number of shares of
Common Stock issuable upon such exercise, as applicable. The Company
warrants that no instructions, other than these instructions, have been
given or will be given to the transfer agent and that the Common Stock
shall otherwise be freely transferable on the books and records of the
Company. It shall be the Company's responsibility to take all
necessary actions and to bear all such costs to issue the certificate
of Common Stock as provided herein, including the responsibility and
cost for delivery of an opinion letter to the transfer agent, if so
required. The person in whose name the certificate of Common Stock
is to be registered shall be treated as a shareholder of record on
and after the exercise date. Upon surrender of any Option that is to
be converted in part, the Company shall issue to the Optionholder a
new Option equal to the unconverted amount, if so requested by
Purchaser:
2. Terms of Options: Exercise of Options.
2.1. Option Exercise. Subject to the terms of this Option, the
Optionholder shall have the right, at any time from April 24, 2003
and continuing up to 5:00 p.m. Atlantic Standard Time on April 24,
2006 ("Expiration Time"), to purchase from the Company up to the
number of Shares which the Optionholder may at the time be entitled
to purchase pursuant to the terms of this Option, upon surrender to
the Company at its principal executive office the attached Election
to Exercise Option form duly filled in and signed, and upon payment
to the Company of the Option Price (as defined in and determined in
accordance with the provisions of Section 5 hereof) or as provided in
Section 3(a)(i) hereof, for the number of Shares with respect to
which such Option is then exercised.
2.2. Common Stock Certificates. Subject to the terms of this
Option, upon such surrender of this Option and payment of such Option
Price as aforesaid, the Company shall promptly issue and cause to be
delivered to the Optionholder or to such person or persons as the
Optionholder may designate in writing, a certificate or certificates
(in such name or names as the Optionholder may designate in writing)
for the number of duly authorized, fully paid and non-assessable
whole Shares to be purchased upon the exercise of this Option, and
shall deliver to the Optionholder Common Stock or cash, to the extent
provided in Section 9 hereof, with respect to any fractional Shares
otherwise issuable upon such surrender. Such certificate or
certificates shall be deemed to have been issued and any person so
designated to be named therein shall be deemed to have become a
holder of such Shares as of the close of business on the date of the
surrender of this Option and payment of the Option Price,
notwithstanding that the certificates representing such Shares shall
not actually have been delivered or that the Share and Option
transfer books of the Company shall then be closed. This Option
shall be exercisable, at the sole election of the Optionholder,
either in full or from time to time in part and, in the event that
any certificate evidencing this Option (or any portion thereof) is
exercised prior to the Termination Date with respect to less than all
of the Shares specified therein at any time prior to the Termination
Date, a new certificate of like tenor evidencing the remaining
portion of this Option shall be issued by the Company, if so
requested by the Optionholder.
2.3. Transfer Agent. Upon the Company's receipt of a facsimile or
original of Optionholder's signed Election to Exercise Option, the
Company shall instruct its transfer agent to issue one or more stock
Certificates representing that number of shares of Common Stock which
the Optionholder is entitled to purchase in accordance with the terms
and conditions of this Option and the Election to Exercise Option
attached hereto. The transfer agent for the Company shall act as
registrar and shall maintain an appropriate ledger containing the
necessary information with respect to each Option.
2.4. Election to Exercise. Such exercise shall be effectuated
by surrendering to the Company, or its attorney, the Options to be
converted together with a facsimile or original of the signed Election
to Exercise Option which evidences Optionholder's intention to exercise
those Options indicated. The date on which the Election to Exercise
Option is effective ("Exercise Date") shall be deemed to be the date on
which the Optionholder has delivered to the Company a facsimile or
original of the signed Election to Exercise Option, as long as the
original Options to be exercised are received by the Company or its
designated attorney within five (5) business days thereafter. As long
as the Options to be exercised are received by the Company within five
(5) business days after it receives a facsimile or original of the
signed Election to Exercise Option, the Company shall deliver to the
Optionholder, or per the Optionholder's instructions, the shares of
Common Stock within three (3) business days of receipt of the Options
to be converted.
2.5. Payment of Interest. Nothing contained in this Option
shall be deemed to establish or require the payment of interest to the
Optionholder at a rate in excess of the maximum rate permitted by
governing law. In the event that the rate of interest required to be
paid exceeds the maximum rate permitted by governing law, the rate of
interest required to be paid thereunder shall be automatically reduced
to the maximum rate permitted under the governing law and such excess
shall be returned with reasonable promptness by the Optionholder to the
Company.
2.6. Issuance of Common Stock. It shall be the Company's
responsibility to take all necessary actions and to bear all such
costs to issue the Certificate of Common Stock as provided herein,
including the responsibility and cost for delivery of an opinion
letter to the transfer agent, if so required. The person in whose
name the certificate of Common Stock is to be registered shall be
treated as a shareholder of record on and after the exercise date.
Upon surrender of any Options that are to be converted in part, the
Company shall issue to the Optionholder new Options equal to the
unconverted amount, if so requested by Optionholder.
2.7 Exercise Default. The Company shall at all times reserve
and have available all Common Stock necessary to meet exercise of the
Options by all Optionholders of the entire amount of Options then
outstanding. If, at any time Optionholder submits an Election to
Exercise Option and the Company does not have sufficient authorized
but unissued shares of Common Stock available to effect, in full, a
exercise of the Options (a "Exercise Default", the date of such
default being referred to herein as the "Exercise Default Date"), the
Company shall issue to the Optionholder all of the shares of Common
Stock which are available, and the Election to Exercise Option as to
any Options requested to be converted but not converted (the
"Unconverted Options"), upon Optionholder's sole option, may be
deemed null and void. The Company shall provide notice of such
Exercise Default ("Notice of Exercise Default") to all existing
Optionholders of outstanding Options, by facsimile, within one (1)
business day of such default (with the original delivered by
overnight or two day courier), and the Optionholder shall give notice
to the Company by facsimile within five (5) business days of receipt
of the original Notice of Exercise Default (with the original
delivered by overnight or two day courier) of its election to either
nullify or confirm the Election to Exercise Option.
2.8. Shareholder of Record. Each person in whose name any
certificate for shares of Common Stock shall be issued shall for all
purposes be deemed to have become the holder of record of the Common
Stock represented thereby on the date on which the Option was
surrendered and payment of the purchase price and any applicable
taxes was made, irrespective of date of issue or delivery of such
certificate, except that if the date of such surrender and payment is
a date when the Shares transfer books of the Company are closed, such
person shall be deemed to have become the holder of such Shares on
the next succeeding date on which such Share transfer books are open.
The Company shall not close such Share transfer books at any one time
for a period longer than seven (7) days.
2.9. Payment of Exercise Price. This Option is exercisable in
whole or in part at the Exercise Price per share of Common Stock (as
defined hereafter) payable hereunder, payable in cash, wire transfer
or by cashier's check or any combination thereof, or by "cashless
exercise." Upon surrender of the annexed Notice of Exercise duly
executed, together with payment of the Exercise Price for the shares
of Common Stock purchased, the Holder shall be entitled to receive a
certificate or certificates for the shares of Common Stock so
purchased.
3. Payment of Taxes.
The Company shall pay all documentary stamp taxes, if any,
attributable to the initial issuance of the Shares; provided,
however, that the Company shall not be required to pay any tax or
taxes which may be payable, (a) with respect to any secondary
transfer of this Option or the Shares or (b) as a result of the
issuance of the Shares to any person other than the Optionholder, and
the Company shall not be required to issue or deliver any certificate
for any Shares unless and until the person requesting the issuance
thereof shall have paid to the Company the amount of such tax or
shall have produced evidence that such tax has been paid to the
appropriate taxing authority.
4. Reservation of Shares.
The issuance of the Options have been duly authorized by all
required corporate action on the part of the Company and when issued
and delivered in accordance with the terms hereof and thereof for the
consideration expressed herein and therein, will be duly and validly
issued, fully paid, and non-assessable and enforceable in accordance
with their terms, subject to the laws of bankruptcy and creditors'
rights generally. The Company shall pay all taxes in respect of the
issue thereof. As a condition precedent to the taking of any action
that would result in the effective purchase price per share of Common
Stock upon the exercise of this Option being less than the par value
per share (if such shares of Common Stock then have a par value), the
Company will take such corporate action as may, in the opinion of its
counsel, be necessary in order that the Company may comply with all
its obligations under this Agreement with regard to the exercise of
this Option.
5. Option Price.
During the Exercise Period, the price per Share at which Shares
shall be purchasable upon the exercise of this Option shall be Ten
Cents ($0.10) ("Option Price"), subject to adjustment pursuant to
Section 6 hereof ("Exercise Price").
6. Adjustment of Option Price and Number of Shares.
The number and kind of securities purchasable upon the exercise
of this Option and the Option Price shall be subject to adjustment
from time to time after the date hereof upon the happening of certain
events, as follows:
6.1 Adjustments. The number of Shares purchasable upon the
exercise of this Option shall be subject to adjustments as follows:
(a) In case the Company shall (i) pay a dividend on Common
Stock in Common Stock or securities convertible into, exchangeable
for or otherwise entitling a holder thereof to receive Common Stock,
(ii) declare a dividend payable in cash on its Common Stock and at
substantially the same time offer its shareholders a right to
purchase new Common Stock (or securities convertible into,
exchangeable for or other entitling a holder thereof to receive
Common Stock) from the proceeds of such dividend (all Common Stock so
issued shall be deemed to have been issued as a stock dividend),
(iii) subdivide its outstanding shares of Common Stock into a greater
number of shares of Common Stock, (iv) combine its outstanding shares
of Common Stock into a smaller number of shares of Common Stock, or
(v) issue by reclassification of its Common Stock any shares of
Common Stock of the Company, the number of shares of Common Stock
issuable upon exercise of the Options immediately prior thereto shall
be adjusted so that the holders of the Options shall be entitled to
receive after the happening of any of the events described above that
number and kind of shares as the holders would have received had such
Options been converted immediately prior to the happening of such
event or any record date with respect thereto. Any adjustment made
pursuant to this subdivision shall become effective immediately after
the close of business on the record date in the case of a stock
dividend and shall become effective immediately after the close of
business on the effective date in the case of a stock split,
subdivision, combination or reclassification.
(b) In case the Company shall distribute, without receiving
consideration therefor, to all holders of its Common Stock evidences
of its indebtedness or assets (excluding cash dividends other than as
described in Section (8)(a)(ii)), then in such case, the number of
shares of Common Stock thereafter issuable upon exercise of the
Options shall be determined by multiplying the number of shares of
Common Stock theretofore issuable upon exercise of the Options, by a
fraction, of which the numerator shall be the closing bid price per
share of Common Stock on the record date for such distribution, and
of which the denominator shall be the closing bid price of the Common
Stock less the then fair value (as determined by the Board of
Directors of the Company, whose determination shall be conclusive) of
the portion of the assets or evidences of indebtedness so distributed
per share of Common Stock. Such adjustment shall be made whenever
any such distribution is made and shall become effective immediately
after the record date for the determination of stockholders entitled
to receive such distribution.
(c) Any adjustment in the number of shares of Common Stock
issuable hereunder otherwise required to be made by this Section 8
will not have to be adjusted if such adjustment would not require an
increase or decrease in one percent (1%) or more in the number of
shares of Common Stock issuable upon exercise of the Option. No
adjustment in the number of Shares purchasable upon exercise of this
Option will be made for the issuance of shares of capital stock to
directors, employees or independent Optionors pursuant to the
Company's or any of its subsidiaries' stock option, stock ownership
or other benefit plans or arrangements or trusts related thereto or
for issuance of any shares of Common Stock pursuant to any plan
providing for the reinvestment of dividends or interest payable on
securities of the Company and the investment of additional optional
amounts in shares of Common Stock under such plan.
(d) Whenever the number of shares of Common Stock issuable upon
the exercise of the Options is adjusted, as herein provided the
Option Price shall be adjusted (to the nearest cent) by multiplying
such Option Price immediately prior to such adjustment by a fraction,
of which the numerator shall be the number of shares of Common Stock
issuable upon the exercise of each share of the Options immediately
prior to such adjustment, and of which the denominator shall be the
number of shares of Common Stock issuable immediately thereafter.
(e) The Company from time to time by action of its Board of
Directors may decrease the Option Price by any amount for any period
of time if the period is at least twenty (20) days, the decrease is
irrevocable during the period and the Board of Directors of the
Company in its sole discretion shall have made a determination that
such decrease would be in the best interest of the Company, which
determination shall be conclusive. Whenever the Option Price is
decreased pursuant to the preceding sentence, the Company shall mail
to holders of record of the Options a notice of the decrease at least
fifteen (15) days prior to the date the decreased Option Price takes
effect, and such notice shall state the decreased Option Price and
the period it will be in effect.
6.2 Mergers, Etc. In the case of any (i) consolidation or
merger of the Company into any entity (other than a consolidation or
merger that does not result in any reclassification, exercise,
exchange or cancellation of outstanding shares of Common Stock of the
Company), (ii) sale, transfer, lease or conveyance of all or
substantially all of the assets of the Company as an entirety or
substantially as an entirety, or (iii) reclassification, capital
reorganization or change of the Common Stock (other than solely a
change in par value, or from par value to no par value), in each case
as a result of which shares of Common Stock shall be converted into
the right to receive stock, securities or other property (including
cash or any combination thereof), each holder of Options then
outstanding shall have the right thereafter to exercise such Option
only into the kind and amount of securities, cash and other property
receivable upon such consolidation, merger, sale, transfer, capital
reorganization or reclassification by a holder of the number of
shares of Common Stock of the Company into which such Options would
have been converted immediately prior to such consolidation, merger,
sale, transfer, capital reorganization or reclassification, assuming
such holder of Common Stock of the Company (A) is not an entity with
which the Company consolidated or into which the Company merged or
which merged into the Company or to which such sale or transfer was
made, as the case may be ("constituent entity"), or an affiliate of a
constituent entity, and (B) failed to exercise his or her rights of
election, if any, as to the kind or amount of securities, cash and
other property receivable upon such consolidation, merger, sale or
transfer (provided that if the kind or amount of securities, cash and
other property receivable upon such consolidation, merger, sale or
transfer is not the same for each share of Common Stock of the
Company held immediately prior to such consolidation, merger, sale or
transfer by other than a constituent entity or an affiliate thereof
and in respect of which such rights or election shall not have been
exercised ("non-electing share"), then for the purpose of this
Section 8.2 the kind and amount of securities, cash and other
property receivable upon such consolidation, merger, sale or transfer
by each non-electing share shall be deemed to be the kind and amount
so receivable per share by a plurality of the non-electing shares).
If necessary, appropriate adjustment shall be made in the application
of the provision set forth herein with respect to the rights and
interests thereafter of the holder of Options, to the end that the
provisions set forth herein shall thereafter correspondingly be made
applicable, as nearly as may reasonably be, in relation to any shares
of stock or other securities or property thereafter deliverable on
the exercise of the Options. The above provisions shall similarly
apply to successive consolidations, mergers, sales, transfers,
capital reorganizations and reclassifications. The Company shall not
effect any such consolidation, merger, sale or transfer unless prior
to or simultaneously with the consummation thereof the successor
company or entity (if other than the Company) resulting from such
consolidation, merger, sale or transfer assumes, by written
instrument, the obligation to deliver to the holder of Options such
shares of stock, securities or assets as, in accordance with the
foregoing provision, such holder may be entitled to receive under
this Section 8.2.
7. Fractional Shares.
Any fractional shares of Common Stock issuable upon exercise of
the Options shall be rounded to the nearest whole share or, at the
election of the Company, the Company shall pay the holder thereof an
amount in cash equal to the closing bid price thereof. Whether or
not fractional shares are issuable upon exercise shall be determined
on the basis of the total number of Options the holder is at the time
exercising and the number of shares of Common Stock issuable upon
such exercise.
8. No Rights as Stockholders: Notices to Optionholders.
Nothing contained in this Option shall be construed as
conferring upon the Optionholder or its transferees any rights as a
stockholder of the Company, including the right to vote, receive
dividends, consent or receive notices as a stockholder with respect
to any meeting of stockholders for the election of directors of the
Company or any other matter. If, however, at any time prior to the
Expiration Time and prior to the exercise of this Option, any of the
following events shall occur:
(a) any action which would require an adjustment pursuant to
Section 8.1; or
(b) a dissolution, liquidation or winding up of the Company or
any consolidation, merger or sale of its property, assets and
business as an entirety; then in any one or more of said events, the
Company shall give notice in writing of such event to the
Optionholder at least ten (10) days prior to the date fixed as a
record date or the date of closing the transfer books for the
determination of the shareholders entitled to any relevant dividend,
distribution, subscription rights, or other rights or for the
effective date of any dissolution, liquidation of winding up or any
merger, consolidation, or sale of substantially all assets, but
failure to mail or receive such notice or any defect therein or in
the mailing thereof shall not affect the validity of any such action
taken. Such notice shall specify such record date or the effective
date, as the case may be.
9. Miscellaneous.
9.1 Benefits of this Agreement. Nothing in this Option shall
be construed to give to any person or corporation other than the
Company and the Optionholder any legal or equitable right, remedy or
claim under this Option, and this Option shall be for the sole and
exclusive benefit of the Company and the Optionholder.
9.2 Rights Cumulative; Waivers. The rights of each of the
parties under this Option are cumulative. The rights of each of the
parties hereunder shall not be capable of being waived or varied
other than by an express waiver or variation in writing. Any failure
to exercise or any delay in exercising any of such rights shall not
operate as a waiver or variation of that or any other such right.
However, the holders of a majority in principal amount of the Options
may waive a default or rescind the declaration of an Exercise Default
and its consequences except for a default in the exercise into Common
Stock. Any defective or partial exercise of any of such rights shall
not preclude any other or further exercise of that or any other such
right. No act or course of conduct or negotiation on the part of any
party shall in any way preclude such party from exercising any such
right or constitute a suspension or any variation of any such right.
9.3 Benefit; Successors Bound. This Option and the terms,
covenants, conditions, provisions, obligations, undertakings, rights,
and benefits hereof, shall be binding upon, and shall inure to the
benefit of, the parties hereto and their heirs, executors,
administrators, representatives, successors, and permitted assigns.
9.4 Entire Agreement. This Option contains the entire
agreement between the parties with respect to the subject matter
hereof. There are no promises, agreements, conditions, undertakings,
understandings, warranties, covenants or representations, oral or
written, express or implied, between them with respect to this Option
or the matters described in this Option, except as set forth in this
Option. Any such negotiations, promises, or understandings shall not
be used to interpret or constitute this Option.
9.5 Assignment. This Option may be assigned if the Assignment
of Option, attached as Exhibit B to this Option, is properly
completed, executed and delivered to the Company.
9.6 Amendment. This Option may be amended only by an
instrument in writing executed by the parties hereto.
9.7 Severability. Each part of this Option is intended to be
severable. In the event that any provision of this Option is found
by any court or other authority of competent jurisdiction to be
illegal or unenforceable, such provision shall be severed or modified
to the extent necessary to render it enforceable and as so severed or
modified, this Option shall continue in full force and effect.
9.8 Notices. Notices required or permitted to be given
hereunder shall be in writing and shall be deemed to be sufficiently
given when personally delivered (by hand, by courier, by telephone
line facsimile transmission, receipt confirmed, or other means) or
sent by certified mail, return receipt requested, properly addressed
and with proper postage pre-paid (i) if to the Company, at its
executive office (ii) if to the Optionholder, at such address as the
Optionholder shall have provided in writing to the Company, or at
such other address as each such party furnishes by notice given in
accordance with this section, and shall be effective, when personally
delivered, upon receipt and, when so sent by certified mail, four (4)
business days after deposit with the United States Postal Service.
9.9 Governing Law. This Agreement shall be governed by the
interpreted in accordance with the laws of the State of Nevada
without reference to its conflicts of laws rules or principles.
9.10 Forum Selection and Consent to Jurisdiction. Any
litigation based thereon, or arising out of, under, or in connection
with, this agreement or any course of conduct, course of dealing,
statements (whether oral or written) or actions of the Company or
Optionholder shall be brought and maintained exclusively in the
federal courts of the State of Nevada without reference to its
conflicts of laws rules or principles. The Company hereby expressly
and irrevocably submits to jurisdiction exclusively with the federal
Courts of the State of Nevada for the purpose of any such litigation
as set forth above and irrevocably agrees to be bound by any final
judgment rendered thereby in connection with such litigation. The
Company further irrevocably consents to the service of process by
registered mail, postage prepaid, or by personal service within or
without the State of Nevada. The Company hereby expressly and
irrevocably waives, to the fullest extent permitted by law, any
objection which it may have or hereafter may have to the laying of
venue of any such litigation brought in any such court referred to
above and any claim that any such litigation has been brought in any
inconvenient forum. To the extent that the Company has or hereafter
may acquire any immunity from jurisdiction of any court or from any
legal process (whether through service or notice, attachment prior to
judgment, attachment in aid of execution or otherwise) with respect
to itself or its property. The Company hereby irrevocably waives
such immunity in respect of its obligations under this agreement and
the other loan documents.
9.11 Waiver of Jury Trial. The Optionholder and the Company
hereby knowingly, voluntarily and intentionally waive any rights they
may have to a trial by jury in respect of any litigation based
hereon, or arising out of, under, or in connection with, this
agreement, or any course of conduct, course of dealing, statements
(whether oral or written) or actions of the Optionholder or the
Company. The Company acknowledges and agrees that it has received
full and sufficient consideration for this provision and that this
provision is a material inducement for the Optionholder entering into
this agreement.
9.12 Consents. The person signing this Option on behalf of the
Company hereby represents and warrants that he has the necessary
power, consent and authority to execute and deliver this Option on
behalf of the Company.
9.13 Further Assurances. In addition to the instruments and
documents to be made, executed and delivered pursuant to this Option,
the parties hereto agree to make, execute and deliver or cause to be
made, executed and delivered, to the requesting party such other
instruments and to take such other actions as the requesting party
may reasonably require to carry out the terms of this Option and the
transactions contemplated hereby.
9.14 Section Headings. The Section headings in this Option are
for reference purposes only and shall not affect in any way the
meaning or interpretation of this Option.
9.15 Construction. Unless the context otherwise requires, when
used herein, the singular shall be deemed to include the plural, the
plural shall be deemed to include each of the singular, and pronouns
of one or no gender shall be deemed to include the equivalent pronoun
of the other or no gender.
IN WITNESS WHEREOF, the parties have caused this Option to be
duly executed, all as of the day and year first above written.
COMPANY:
FreeStar Technology Corporation
By: /s/▇▇▇▇ ▇▇▇▇
Name: ▇▇▇▇ ▇▇▇▇
Title: President