Broad Based Equity Incentive Plan - FreeMarkets Inc.
FREEMARKETS, INC.
BROAD BASED EQUITY INCENTIVE PLAN
1. PURPOSE OF THE PLAN.
The purpose of the FreeMarkets, Inc. Broad Based Equity Incentive Plan
(the "Plan") is to promote the interests of FreeMarkets, Inc. (the "Company"),
its subsidiaries and its stockholders by (i) attracting and retaining employees
of outstanding ability, (ii) motivating such persons, by means of
performance-related incentives, to achieve long-range performance goals, and
(iii) enabling such persons to participate in the long-term growth and financial
success of the Company and its subsidiaries. The original effective date of the
Plan is May 16, 2001 ("Effective Date").
2. ADMINISTRATION.
Subject to the following paragraphs, the Plan shall be administered by
the Company's Board of Directors (the "Board") or by a Compensation Committee of
the Board (the "Compensation Committee"). If the Board delegates to the
Compensation Committee the authority to administer the Plan, the Compensation
Committee shall be empowered to take all actions reserved to the Board under the
Plan. The Board is authorized to interpret the Plan, to prescribe, amend and
rescind rules and regulations to further the purposes of the Plan, and to make
all other determinations necessary for the administration of the Plan. All such
actions by the Board shall be conclusive, final and binding on all recipients of
grants hereunder ("participants").Notwithstanding the foregoing, the Board may,
subject to any limitations or restrictions the Board may impose from time to
time, delegate to the Chief Executive Officer the authority to administer the
Plan, including the authority to grant Options (as hereinafter defined) to
employees of the Company and its subsidiaries.
3. GRANTS.
Grants under the Plan shall be in the form of nonqualified options
("Options"), and stock which is subject to certain forfeiture risks and
restrictions on transferability ("Restricted Stock").
4. SHARES SUBJECT TO THE PLAN.
Subject to adjustment as provided in Section 9, the maximum aggregate
number of shares of Common Stock that may be subject to grants made under the
Plan is 2,000,000 shares, plus an automatic annual increase on the first day of
each fiscal year of the Company beginning on or after January 1, 2002 and ending
on or before December 31, 2010 equal to the lesser of (i) 250,000 shares, (ii)
1% of the shares outstanding on the last day of the immediately preceding fiscal
year, or (iii) such lesser number of shares as is determined by the Board. The
Common Stock to be offered under the Plan shall be authorized and unissued
Common Stock or issued Common Stock which shall have been reacquired by the
Company and held in its treasury. The Common Stock covered by any unexercised
portion of
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terminated stock options granted under the Plan, or by any grant of Restricted
Stock which is forfeited, may again be subject to new grants under the Plan. In
the event the purchase price of an Option is paid in whole or in part through
the delivery of Common Stock, only the net number of shares of Common Stock
issuable in connection with the exercise of the Option shall be counted against
the number of shares remaining available for grant under the Plan.
5. PARTICIPANTS.
The Board shall determine and designate from time to time those
employees of the Company or its subsidiaries who shall be granted Options or
Restricted Stock under the Plan and the number of shares of Common Stock to be
covered by each such Option or Restricted Stock grant; provided, that employees
who are directors or officers (as defined in Rule 16a-1(f) under the Securities
Exchange Act of 1934, as amended) of the Company shall not be eligible to be
granted Options or Restricted Stock under the Plan. In making its
determinations, the Board shall take into account the present and potential
contributions of the respective individuals to the success of the Company and
its subsidiaries and such other factors as the Board shall deem relevant in
connection with accomplishing the purposes of the Plan. Each grant shall be
evidenced by a written Option or Restricted Stock agreement or grant form
("Grant Instrument") as the Board shall approve from time to time.
6. FAIR MARKET VALUE.
For all purposes under the Plan, the term "Fair Market Value" shall
mean, as of any applicable date, (i) if the principal securities market on which
the Common Stock is traded is a national securities exchange or The Nasdaq
National Market ("NNM"), the closing price of the Common Stock on such exchange
or NNM, as the case may be, or if no sale of the Common Stock shall have
occurred on such date, on the next preceding date on which there was a reported
sale; (ii) if the Common Stock is not traded on a national securities exchange
or NNM, the closing price on such date as reported by The Nasdaq SmallCap
Market, or if no sale of the Common Stock shall have occurred on such date, on
the next preceding date on which there was a reported sale; (iii) if the
principal securities market on which the Common Stock is traded is not a
national securities exchange, NNM or The Nasdaq SmallCap Market, the average of
the bid and asked prices reported by the National Quotation Bureau, Inc.; or
(iv) if the price of the Common Stock is not so reported, the Fair Market Value
of the Common Stock as determined in good faith by the Board.
7. GRANTS OF OPTIONS.
(a) Exercise Price of Options. Options shall be granted at an exercise
price as determined in each case by the Board.
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(b) Term and Termination of Options.
(1) The Board shall determine the term within which each
Option may be exercised, in whole or in part, provided that such term shall not
exceed 10 years from the date of grant.
(2) Unless otherwise determined by the Board, all rights to
exercise Options shall terminate on the first to occur of (i) the scheduled
expiration date as set forth in the applicable Grant Instrument, (ii) 60 days
following the date of termination of employment for any reason other than the
participant?s death or permanent disability (as defined in Code Section
22(e)(3)), (iii) 1 year following the date of termination of employment by
reason of the participant's death or permanent disability (as defined in Code
Section 22(e)(3)), or (iv) as may be otherwise provided in the event of a Change
of Control as defined in Section 10; provided, however, that in the event that a
participant ceases to be employed by the Company and its subsidiaries due to a
termination for "cause" (as defined in Section 7(b)(3)), all rights to exercise
Options held by such participant shall terminate immediately as of the date such
participant ceases to be employed by the Company or its subsidiaries.
(3) As used in this Plan, the term "cause" shall mean a
finding by the Board that the participant has engaged in conduct that is
fraudulent, disloyal, criminal or injurious to the Company or its subsidiaries,
including, without limitation, embezzlement, theft, commission of a felony or
dishonesty in the course of his or her employment or service, or the disclosure
of trade secrets or confidential information of the Company or its subsidiaries
to persons not entitled to receive such information.
(c) Payment for Shares. Full payment for shares purchased upon exercise
of Options granted under the Plan shall be made at the time the Options are
exercised in whole or in part. Payment of the purchase price shall be made in
cash or in such other form as the Board may approve, including, without
limitation, (i) by the participant's delivery to the Company of a promissory
note containing such terms as the Board may determine, (ii) by the participant's
delivery to the Company of shares of Common Stock that have been held by the
participant for at least six months prior to exercise of the Options, valued at
the Fair Market Value of such shares on the date of exercise, or (iii) if the
Common Stock is publicly traded, pursuant to a cashless exercise arrangement
with a broker on such terms as the Board may determine; provided, however, that
if payment is made pursuant to clause (i), the then par value of the purchased
shares shall be paid in cash. No shares of Common Stock shall be issued to the
participant until such payment has been made, and a participant shall have none
of the rights of a stockholder with respect to Options held by such participant.
(d) Other Terms and Conditions. The Board shall have the discretion to
determine terms and conditions, consistent with the Plan, that will be
applicable to Options, including, without limitation, performance-based criteria
for acceleration of the date on which certain Options shall become exercisable.
Options granted to the same or different participants, or at the same or
different times, need not contain similar provisions.
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(e) Substitution of Options. Options may be granted under the Plan from
time to time in substitution for stock options of other entities ("Acquired
Companies") in connection with the merger or consolidation of the Acquired
Company with the Company or its subsidiaries, the acquisition by the Company or
by its subsidiaries of all or a portion of the assets of the Acquired Company,
or the acquisition of stock of the Acquired Company such that the Acquired
Company becomes a subsidiary of the Company.
8. GRANTS OF RESTRICTED STOCK.
The Board may issue or transfer shares of Common Stock to employees
under a grant of Restricted Stock, upon such terms as the Board deems
applicable, including the provisions set forth below:
(a) General Requirements. Shares of Common Stock issued or transferred
pursuant to Restricted Stock grants may be issued or transferred for
consideration or for no consideration, and subject to restrictions or no
restrictions, as determined by the Board. The Board may establish conditions
under which restrictions on shares of Restricted Stock shall lapse over a period
of time or according to such other criteria (including performance-based
criteria) as the Board deems appropriate. The period of time during which the
Restricted Stock will remain subject to restrictions will be designated in the
Grant Instrument as the "Restriction Period."
(b) Number of Shares. The Board shall determine the number of shares of
Common Stock to be issued or transferred pursuant to a Restricted Stock grant
and the restrictions applicable to such shares.
(c) Requirement of Employment. If a participant who has received a
Restricted Stock grant ceases to be employed by the Company and its subsidiaries
during the Restriction Period, or if other specified conditions are not met, the
Restricted Stock grant shall terminate as to all shares covered by the grant as
to which the restrictions have not lapsed, and those shares of Common Stock
shall be canceled in exchange for the purchase price, if any, paid by the
participant for such shares. The Board may provide, however, for complete or
partial exceptions to this requirement as it deems appropriate.
(d) Restrictions on Transfer and Legend on Stock Certificate. During
the Restriction Period, a participant may not sell, assign, transfer, donate,
pledge or otherwise dispose of the shares of Restricted Stock. Each certificate
for a share of Restricted Stock shall contain a legend giving appropriate notice
of the applicable restrictions. The participant shall be entitled to have the
legend removed from the stock certificate covering the shares of Restricted
Stock subject to restrictions when all restrictions on such shares lapse. The
Board may determine that the Company will not issue certificates for shares of
Restricted Stock until all restrictions on such shares lapse, or that the
Company will retain possession of certificates for shares of Restricted Stock
until all restrictions on such shares lapse.
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(e) Right to Vote and to Receive Dividends. During the Restriction
Period, the participant shall have the right to vote shares of Restricted Stock
and to receive any dividends or other distributions paid on such shares, subject
to any restrictions deemed appropriate by the Board.
(f) Lapse of Restrictions. All restrictions imposed on Restricted Stock
shall lapse upon the expiration of the applicable Restriction Period and the
satisfaction of all conditions imposed by the Board. The Board may determine, as
to any or all Restricted Stock grants, that the restrictions shall lapse without
regard to any Restriction Period.
9. ADJUSTMENTS TO REFLECT CAPITAL CHANGES.
The number and kind of shares subject to outstanding grants, the
exercise price applicable to Options previously granted, and the number and kind
of shares available subsequently to be granted under the Plan shall be
appropriately adjusted to reflect any stock dividend, stock split, combination
or exchange of shares or other change in capitalization with a similar
substantive effect upon the Plan or grants under the Plan. The Board shall have
the power and sole discretion to determine the nature and amount of the
adjustment to be made in each case. The adjustment so made shall be final and
binding on all participants.
10. DEFINITION OF CHANGE OF CONTROL.
For purposes of this Plan, a "Change of Control" shall mean the
occurrence of any of the following events:
(a) the acquisition, other than from the Company, by any individual,
entity or group (within the meaning of Section 13(d)(3) or Section 14(d)(2) of
the Exchange Act), other than the Company or an employee benefit plan of the
Company, of beneficial ownership (within the meaning of Rule 13d-3 promulgated
under the Exchange Act) of more than 50% of the combined voting power of the
then outstanding voting securities of the Company entitled to vote generally in
the election of directors (the "Voting Securities"); or
(b) the approval by the Company's stockholders of a reorganization,
merger, consolidation or recapitalization of the Company (a "Business
Combination"), other than a Business Combination in which more than 50% of the
combined voting power of the outstanding voting securities of the surviving or
resulting entity immediately following the Business Combination is held by the
persons who, immediately prior to the Business Combination, were the holders of
the Voting Securities; or
(c) the approval by the Company's stockholders of a complete
liquidation or dissolution of the Company, or a sale of all or substantially all
of the Company's assets; or
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(d) individuals who, as of the Effective Date, constitute the Board
(the "Incumbent Board") cease for any reason to constitute at least a majority
of the Board; provided, that any individual becoming a director subsequent to
such date whose election or nomination for election by the Company's
stockholders was approved by a vote of at least a majority of the directors then
comprising the Incumbent Board shall be considered as though such individual
were a member of the Incumbent Board.
11. CONSEQUENCES OF A CHANGE OF CONTROL.
(a) Unless otherwise determined by the Board, upon a Change of Control,
(i) each outstanding Option shall be assumed by the Acquiring Corporation (as
defined below) or parent thereof or replaced with a comparable option or right
to purchase shares of the capital stock, or equity equivalent instrument, of the
Acquiring Corporation or parent thereof, or other comparable rights (such
assumed and comparable options and rights, together, the "Replacement Options")
and (ii) each share of Restricted Stock shall be converted to a comparable
restricted grant of capital stock, or equity equivalent instrument, of the
Acquiring Corporation or parent thereof or other comparable restricted property
(such assumed and comparable restricted grants, together, the "Replacement
Restricted Stock"); provided, however, that if the Acquiring Corporation or
parent thereof does not grant Replacement Options and Replacement Restricted
Stock, then all outstanding Options which have been granted under the Plan and
which are not exercisable as of the effective date of the Change of Control
shall automatically accelerate and become exercisable immediately prior to the
effective date of the Change of Control, and all restrictions and conditions on
any Restricted Stock shall lapse upon the effective date of the Change of
Control. The term "Acquiring Corporation" means the surviving, continuing,
successor or purchasing corporation, as the case may be. Notwithstanding
anything in the Plan to the contrary, the Board shall have discretion, in the
applicable Grant Instrument or an amendment thereof, to provide for the
acceleration of Options and the elimination of restrictions on Restricted Stock
upon a Change of Control. The Board may determine in its discretion (but shall
not be obligated to do so) that in lieu of the issuance of Replacement Options,
all holders of outstanding Options which are exercisable immediately prior to a
Change of Control (including those that become exercisable under this Section
11(a)) will be required to surrender them in exchange for a payment, in cash or
Common Stock as determined by the Board, of an amount equal to the amount (if
any) by which the then Fair Market Value of Common Stock subject to unexercised
Options exceeds the exercise price of those Options, with such payment to take
place as of the date of the Change of Control or such other date as the Board
may prescribe.
(b) Any Options that are not assumed or replaced by Replacement
Options, exercised or cashed out prior to or concurrent with a Change of Control
will terminate effective upon the Change of Control or at such other time as the
Board deems appropriate.
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(c) Notwithstanding anything in the Plan to the contrary, in the event
of a Change of Control, no action described in the Plan shall be taken
(including, without limitation, actions described in subsections (a) and (b)
above) if such actions would make the Change of Control ineligible for "pooling
of interests" accounting treatment or would make the Change of Control
ineligible for desired tax treatment if, in the absence of such actions, the
Change of Control would qualify for such treatment and the Company intends to
use such treatment with respect to such Change of Control.
12. TRANSFERABILITY OF OPTIONS.
Unless otherwise determined by the Board, Options granted under the
Plan shall not be transferable other than by will or the laws of descent and
distribution and are exercisable during a participant's lifetime only by the
participant.
13. WITHHOLDING.
The Company shall have the right to deduct any taxes required by law to
be withheld in respect of grants under the Plan from amounts paid to a
participant in cash as salary, bonus or other compensation. In the Board's
discretion, a participant may be permitted to elect to have withheld from the
shares otherwise issuable to the participant, or to tender to the Company, a
number of shares of Common Stock the aggregate Fair Market Value of which does
not exceed the applicable withholding rate for federal (including FICA), state
and local tax liabilities. Any such election must be in a form and manner
prescribed by the Board.
14. CONSTRUCTION OF THE PLAN.
The validity, construction, interpretation, administration and effect
of the Plan and of its rules and regulations, and rights relating to the Plan,
shall be determined solely by the Board. Any determination by the Board shall be
final and binding on all participants. The Plan shall be governed in accordance
with the laws of the State of Delaware, without regard to the conflict of law
provisions of such laws.
15. NO RIGHT TO GRANT; NO RIGHT TO EMPLOYMENT.
No person shall have any claim of right to be granted an Option or
Restricted Stock under the Plan. Neither the Plan nor any action taken hereunder
shall be construed as giving any employee any right to be retained in the employ
of the Company or any of its subsidiaries.
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16. GRANTS NOT INCLUDABLE FOR BENEFIT PURPOSES.
Income recognized by a participant pursuant to the provisions of the
Plan shall not be included in the determination of benefits under any employee
pension benefit plan (as such term is defined in Section 3(2) of the Employee
Retirement Income Security Act of 1974) or group insurance or other benefit
plans applicable to the participant which are maintained by the Company or any
of its subsidiaries, except as may be provided under the terms of such plans or
determined by resolution of the Board.
17. NO STRICT CONSTRUCTION.
No rule of strict construction shall be implied against the Company,
the Board or any other person in the interpretation of any of the terms of the
Plan, any grant made under the Plan or any rule or procedure established by the
Board.
18. CAPTIONS.
All Section headings used in the Plan are for convenience only, do not
constitute a part of the Plan, and shall not be deemed to limit, characterize or
affect in any way any provisions of the Plan, and all provisions of the Plan
shall be construed as if no captions had been used in the Plan.
19. SEVERABILITY.
Whenever possible, each provision in the Plan and every grant under the
Plan shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of the Plan or any grant under the Plan
shall be held to be prohibited by or invalid under applicable law, then such
provision shall be deemed amended to accomplish the objectives of the provision
as originally written to the fullest extent permitted by law, and all other
provisions of the Plan and every other grant under the Plan shall remain in full
force and effect.
20. LEGENDS.
All certificates for Common Stock delivered under the Plan shall be
subject to such transfer and other restrictions as the Board may deem advisable
under the rules, regulations and other requirements of the Securities and
Exchange Commission, any stock exchange or quotation system upon which the
Common Stock is then listed or quoted and any applicable federal or state
securities laws, and the Board may cause a legend or legends to be put on any
such certificates to make appropriate references to such restrictions.
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21. AMENDMENT.
The Board may, by resolution, amend or revise the Plan. The Board may
not modify any Options previously granted under the Plan in a manner adverse to
the holders thereof without the consent of such holders, except in accordance
with the provisions of Sections 9, 11 or 22.
22. MODIFICATION FOR GRANTS OUTSIDE THE U.S.
The Board may, without amending the Plan, determine the terms and
conditions applicable to grants of Options or Restricted Stock to participants
who are foreign nationals or employed outside the United States in a manner
otherwise inconsistent with the Plan if the Board deems such terms and
conditions necessary in order to recognize differences in local law or
regulations, tax policies or customs.
23. EFFECTIVE DATE; TERMINATION OF PLAN.
The Plan is effective on May 16, 2001. The Plan shall terminate on May
15, 2011, unless it is earlier terminated by the Board. Termination of the Plan
shall not affect previous grants under the Plan.
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