EXHIBIT 4.2
APPLIED DIGITAL SOLUTIONS, INC.
1999 FLEXIBLE STOCK PLAN
(AS AMENDED THROUGH JUNE 8, 2002)
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1. NAME AND PURPOSE
1.1.
Name.............................................................1
1.2.
Purpose..........................................................1
2. DEFINITIONS OF TERMS AND RULES OF
CONSTRUCTION
2.1. General Definitions.
2.1.1. Affiliate.............................................1
2.1.2. Agreement.............................................1
2.1.3. Benefit...............................................1
2.1.4. Board.................................................1
2.1.5. Cash Award............................................1
2.1.6. Change of Control.....................................1
2.1.7. Code..................................................3
2.1.8. Company...............................................3
2.1.9. Committee.............................................3
2.1.10.
Common Stock.........................................3
2.1.11. Effective Date.......................................3
2.1.12. Employee.............................................3
2.1.13. Employer.............................................4
2.1.14. Exchange Act.........................................4
2.1.15. Fair Market Value....................................4
2.1.16. Fiscal Year..........................................4
2.1.17. ISO..................................................4
2.1.18. NQSO.................................................4
2.1.19. Option...............................................4
2.1.20. Other Stock Based Award..............................4
2.1.21. Parent...............................................4
2.1.22. Participant..........................................4
2.1.23. Performance Based Compensation.......................4
2.1.24. Performance Share....................................5
2.1.25. Plan.................................................5
2.1.26. Reload Option........................................5
2.1.27. Restricted Stock.....................................5
2.1.28. Rule 16b-3...........................................5
2.1.29. SEC..................................................5
2.1.30. Share................................................5
2.1.31. SAR..................................................5
2.1.32. Subsidiary...........................................5
2.2. Other
Definitions................................................5
2.3.
Conflicts........................................................6
3. COMMON STOCK
3.1. Number of
Shares.................................................6
3.2.
Reusage..........................................................7
3.3.
Adjustments......................................................7
4. ELIGIBILITY
4.1. Determined By
Committee..........................................7
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5. ADMINISTRATION
5.1.
Committee........................................................7
5.2.
Authority........................................................7
5.3.
Delegation.......................................................8
5.4.
Determination....................................................8
6. AMENDMENT
6.1. Power of
Board...................................................8
6.2.
Limitation.......................................................9
7. TERM AND TERMINATION
7.1.
Term.............................................................9
7.2.
Termination......................................................9
8. MODIFICATION OR TERMINATION OF
BENEFITS
8.1.
General..........................................................9
8.2. Committee's
Right................................................9
9. CHANGE OF CONTROL
9.1.
Vesting and
Payment..............................................9
9.2. Other
Action....................................................10
10. AGREEMENTS AND CERTAIN BENEFITS
10.1. Grant Evidenced by
Agreement...................................10
10.2. Provisions of
Agreement........................................10
10.3.
Transferability................................................11
11. REPLACEMENT AND TANDEM AWARDS
11.1.
Replacement....................................................11
11.2. Tandem
Awards..................................................11
12. PAYMENT, DIVIDENDS, DEFERRAL AND
WITHHOLDING
12.1.
Payment........................................................11
12.2. Dividend
Equivalents...........................................12
12.3.
Deferral.......................................................12
12.4.
Withholding....................................................12
13. OPTIONS
13.1. Types of
Options...............................................12
13.2. Grant of ISOs and Option
Price.................................12
13.3. Other Requirements for
ISOs....................................12
13.4.
NQSOs..........................................................12
13.5. Determination by
Committee.....................................12
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14. SARS
14.1. Grant and
Payment..............................................13
14.2. Grant of Tandem
Award..........................................13
14.3. ISO Tandem
Award...............................................13
14.4. Payment of
Award...............................................13
15. ANNUAL LIMITATIONS
15.1. Limitation on Options and
SARs.................................13
15.2.
Computations...................................................13
16. RESTRICTED STOCK AND PERFORMANCE
SHARES
16.1. Restricted
Stock...............................................13
16.2. Cost of Restricted
Stock.......................................14
16.3.
Non-Transferability............................................14
16.4. Performance
Shares.............................................14
16.5.
Grant..........................................................14
17. CASH AWARDS
17.1.
Grant..........................................................14
17.2. Rule
16b-3.....................................................14
17.3.
Restrictions...................................................14
18. OTHER STOCK BASED AWARDS AND OTHER
BENEFITS
18.1. Other Stock Based
Awards.......................................14
18.2.
Other
Benefits.................................................15
19. MISCELLANEOUS PROVISIONS
19.1. Underscored
References.........................................15
19.2. Number and
Gender..............................................15
19.3. Unfunded Status of
Plan........................................15
19.4. Termination of
Employment......................................15
19.5. Designation of
Beneficiary.....................................15
19.6. Governing
Law..................................................16
19.7. Purchase for
Investment........................................16
19.8. No Employment
Contract.........................................16
19.9. No Effect on Other
Benefits....................................16
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APPLIED DIGITAL SOLUTIONS, INC.
1999 FLEXIBLE STOCK PLAN
1. NAME AND PURPOSE
1.1. Name.
The name of this Plan is the "Applied Digital Solutions, Inc.
1999 Flexible Stock Plan."
1.2. Purpose.
The Company has
established
this Plan to
attract, retain,
motivate and reward Employees and other
individuals, to
encourage ownership
of
the Company's Common Stock by Employees and
other individuals,
and to promote
and further the best interests of the
Company by granting cash and other awards.
This Plan is intended to be "Broadly
Based" (as such term
is used for
purposes
of rules promulgated by The National
Association of Securities Dealers).
2.
DEFINITIONS OF TERMS AND RULES OF CONSTRUCTION
2.1. General Definitions.
The following words and phrases, when used in the Plan, unless
otherwise specifically defined or unless
the context clearly otherwise requires,
shall have the following respective
meanings:
2.1.1. Affiliate.
A Parent or Subsidiary of the Company.
2.1.2. Agreement.
The document which evidences the grant of any Benefit
under the Plan
and which sets forth the Benefit and the terms,
conditions and
provisions
of, and restrictions relating to, such
Benefit.
2.1.3. Benefit.
Any benefit granted to a Participant under the Plan.
2.1.4. Board.
The Board of Directors of the Company.
2.1.5. Cash Award.
A Benefit payable in the form of cash.
2.1.6. Change of Control.
The occurrence of any of the following:
(a) An
acquisition
of any Common Stock or other voting
securities of the Company entitled to vote generally for
the election of directors (the "Voting Securities") by
any "Person"
or "Group" (as each
such term is used for
purposes of Section 13(d) or 14(d) of the Exchange Act),
immediately after
which such
Person or Group,
as the
case may be, has
"Beneficial
Ownership"
(within the
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meaning of Rule 13d-3
promulgated
under the Exchange
Act) of more than 20% of the then outstanding shares of
Common Stock
or the combined voting power of the
Company's then outstanding Voting Securities; provided,
however, that in determining whether a Change of Control
has occurred,
shares
of Common Stock or Voting
Securities that
are acquired in a Non-Control
Acquisition (as
defined below) shall
not constitute an
acquisition which
would cause a Change
of Control.
A
"Non-Control
Acquisition" shall
mean an acquisition by
(i) the Company, (ii) any Subsidiary or (ii) any
employee benefit plan
maintained by the
Company or any
Subsidiary, including
a trust forming part
of any such
plan (an "Employee Benefit Plan");
(b) When, during
any 2-year period,
individuals who, at the
beginning of the
2-year period,
constitute
the Board
(the "Incumbent
Board"), cease for any reason to
constitute at least
50% of the members
of the Board;
provided,
however, that
(i) if the election or
nomination for election by the Company's shareholders of
any new director
was approved by a vote of at least
two-thirds of the
Incumbent Board, such new director
shall, for purposes hereof, be deemed to be a member of
the Incumbent Board;
and (ii) no
individual
shall be
deemed to be a member
of the Incumbent Board if such
individual initially
assumed office as a result of
either an actual or
threatened "Election
Contest" (as
described in Rule 14a-11 promulgated under the Exchange
Act) or other
actual or threatened solicitation of
proxies or consents by or on behalf of a Person or Group
other than the Board (a "Proxy Contest") including by
reason of any
agreement intended to
avoid or settle any
Election Contest or Proxy Contest;
(c) The
consummation of:
(i) a
merger,
consolidation or
reorganization
involving the Company
or any Subsidiary,
unless the merger,
consolidation or reorganization is a Non-Control Transaction.
A "Non-Control Transaction" shall mean a merger, consolidation
or reorganization of the Company or any Subsidiary where:
(A) the
shareholders
of the Company
immediately prior to
the merger,
consolidation
or
reorganization own, directly or indirectly,
immediately following
such merger,
consolidation or
reorganization, at
least 50% of the combined voting
power of the
outstanding voting
securities
of the
corporation resulting from such merger, consolidation
or reorganization
(the "Surviving
Corporation") in
substantially the same
proportion as their ownership
of the Common Stock or Voting Securities, as the case
may be,
immediately
prior to
the merger,
consolidation or reorganization,
(B) the individuals
who were members of the
Incumbent Board immediately prior to the execution of
the agreement providing for the merger, consolidation
or reorganization
constitute at least
two-thirds of
the members
of the board of directors of the
Surviving Corporation,
or a corporation beneficially
owning, directly
or indirectly, a majority of the
voting securities of the Surviving Corporation, and
(C) no Person or Group, other than (1) the
Company, (2) any Subsidiary, (3) any Employee Benefit
Plan or (4) any other Person or Group who,
2
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immediately prior to
the merger,
consolidation
or
reorganization, had
Beneficial Ownership of not less
than 20% of the then outstanding Voting Securities or
Common Stock, has Beneficial Ownership of 20% or more
of the combined voting power of the Surviving
Corporation's then
outstanding voting
securities or
common stock;
(d) A complete
liquidation or dissolution of the Company; or
(e) The sale or
other disposition
of all or substantially
all of the assets of the Company to any Person (other
than a transfer to a Subsidiary).
Notwithstanding the
foregoing, a Change of
Control shall not
be deemed to have occurred solely because any Person or Group (the
"Subject
Person") acquired Beneficial Ownership of more than the
permitted amount of the
then outstanding Voting Securities or
Common Stock of the Company as a result of
an acquisition of Voting Securities or Common Stock by the
Company which,
by
reducing the number of shares of Voting Securities or Common Stock then
outstanding, increases the proportional
number of shares
beneficially owned by
the Subject Person; provided, however, that if a Change of Control would
have
occurred (but for the operation of this
sentence) as a result of the acquisition
of Voting Securities or Common Stock by the
Company, and after
such acquisition
by the Company, the Subject Person becomes the beneficial owner of any
additional shares of Voting Securities or Common Stock, which increases the
percentage of the then outstanding
shares of Voting
Securities or Common
Stock
beneficially owned by the Subject Person, then a Change of Control
shall be
deemed to have occurred.
2.1.7. Code.
The Internal Revenue
Code of 1986, as
amended. Any
reference to the Code includes the regulations promulgated pursuant to
the Code.
2.1.8. Company.
Applied Digital Solutions, Inc.
2.1.9. Committee.
The Committee described in Section y5.1.
2.1.10. Common Stock.
The Company's common
stock which presently has a par
value of $.01 per Share.
2.1.11. Effective Date.
The date that the Plan is approved by the
shareholders of the
Company which must occur within one year before or
after approval
by the Board. Any grants of Benefits prior to the
approval by the
shareholders
of the Company shall be void if such
approval is not obtained.
2.1.12. Employee.
Any person employed by the Employer.
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2.1.13. Employer.
The Company and all Affiliates.
2.1.14. Exchange Act.
The Securities Exchange Act of 1934, as amended.
2.1.15. Fair Market Value.
The closing
price of Shares on the
Nasdaq National
Market on a given
date, or, in the
absence of sales on a
given date,
the closing
price on the
Nasdaq National Market on the last day on
which a sale occurred prior to such date.
2.1.16. Fiscal Year.
The taxable year of the Company which is the calendar
year.
2.1.17. ISO.
An Incentive
Stock Option as
defined in Section 422
of the Code.
2.1.18. NQSO.
A non-qualified stock Option, which is an Option that
does not qualify as an ISO.
2.1.19. Option.
An option to purchase Shares granted under the Plan.
2.1.20. Other Stock Based Award.
An award under Section
18 that is valued in whole or
in part by reference to, or otherwise based on, Common Stock.
2.1.21. Parent.
Any corporation
(other
than the Company or a
Subsidiary) in an
unbroken chain of corporations ending with the
Company, if, at the
time of the grant of
an Option or other
Benefit,
each of the corporations (other than the Company) owns stock
possessing
50% or more of the total combined voting power of all classes of
stock
in one of the other corporations in such chain.
2.1.22. Participant.
An individual
who is granted a Benefit under the
Plan. Benefits may be granted only to Employees, members of the Board,
employees and owners
of entities which are
not Affiliates
but which
have a direct or
indirect ownership interest in an Employer or in which
an Employer has a direct or indirect ownership interest, individuals
who, and employees
and owners of entities
which, are customers and
suppliers of an Employer, individuals who, and employees and
owners of
entities which, render
services to an Employer, and individuals who,
and employees and owners of entities, which have ownership or
business
affiliations with any individual or entity previously
described.
2.1.23. Performance Based Compensation.
Compensation which
meets the requirements of Section
162(m)(4)(C) of the Code.
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2.1.24. Performance Share.
A Share awarded to a Participant under Section y16 of
the Plan.
2.1.25. Plan.
The Applied Digital Solu
