<PAGE>
As filed with the Securities and Exchange Commission on April 2, 1997
Registration No. 333-
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------------
FORM S-8
REGISTRATION STATEMENT
Under
The Securities Act of 1933
THE LEAP GROUP, INC.
(Exact name of registrant as specified in its charter)
Delaware 36-4079500
(State or other jurisdiction (IRS Employer Identification
of incorporation or organization) Number)
22 West Hubbard Street, Chicago, Illinois 60610, (312) 494-0300
(Address, including zip code, and telephone number, including area code,
of registrant's principal executive office)
The Leap Group, Inc. Amended and Restated 1996 Stock Option Plan
The Leap Group, Inc. Non-employee Directors' Stock Option Plan
The Leap Group, Inc. Employee Incentive Compensation Plan
The Leap Group, Inc. Employee Stock Purchase Plan
(Full title of plans)
R. Steven Lutterbach
Chief Executive Officer
The Leap Group, Inc.
22 West Hubbard Street, Chicago, Illinois 60610, (312) 494-0300
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
Copies to
Matthew S. Brown, Esq.
Marguerite M. Elias, Esq.
Katten Muchin & Zavis
525 West Monroe, Suite 1600
Chicago, Illinois 60661-3693
----------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
===================================================================================================================================
Title of securities Amount to be Proposed maximum offering Proposed maximum Amount of
to be registered registered(1) price per share aggregate offering price(2) registration fee
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, $.01 par value 5,004,000 Shares(3) See Footnote(2) below $27,935,800 $8,465.40
===================================================================================================================================
</TABLE>
(1) Includes an indeterminate number of shares of The Leap Group, Inc. Common
Stock that may be issuable by reason of stock splits, stock dividends or
similar transactions.
(2) The amount is based upon the exercise of options for 2,630,000 shares, at
a weighted average exercise price of $6.56 per share; and the high and low
sales prices of The Leap Group, Inc. Common Stock as reported on the Nasdaq
National Market on March 31, 1997 with respect to the exercise of options
for 2,374,000 shares, and is used solely for the purpose of calculating
the registration fee pursuant to Rule 457(c) under the Securities Act of
1933.
(3) Includes 2,304,000 shares under The Leap Group, Inc. Amended and Restated
1996 Stock Option Plan, 200,000 shares under The Leap Group, Inc. Non-
Employee Directors' Stock Option Plan, 2,000,000 shares under The Leap
Group, Inc. Employee Incentive Compensation Plan and 500,000 shares under
The Leap Group, Inc. Employee Stock Purchase Plan.
================================================================================
<PAGE>
PART I
INFORMATION REQUIRED IN THE PROSPECTUS
The information called for in Part I of Form S-8 is currently included in
the prospectuses for The Leap Group, Inc. Amended and Restated 1996 Stock Option
Plan, The Leap Group, Inc. Non-employee Directors' Stock Option Plan, The Leap
Group, Inc. Employee Incentive Compensation Plan and The Leap Group, Inc.
Employee Stock Purchase Plan (collectively, the "Plans") and is not being filed
with or included in this Form S-8 (by incorporation by reference or otherwise)
in accordance with the rules and regulations of the Securities and Exchange
Commission (the "Commission").
I-1
<PAGE>
PART II
INFORMATION REQUIRED IN THE REGISTRATION STATEMENT
Item 3. Incorporation of Documents by Reference.
The following documents have been filed by the Company with the Commission
under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and
are incorporated in this Registration Statement by reference:
1. The Prospectus dated September 27, 1996, filed with the Commission
pursuant to Rule 424(b) under the Securities Act in connection with the
Company's Registration Statement on Form S-1, as amended (File No. 333-
05051).
2. The Company's Quarterly Report on Form 10-Q for the quarter ended
October 31, 1996.
3. The description of the Common Stock contained in the Company's
Registration Statement on Form 8-A filed September 4, 1996 pursuant to
Section 12 of the Exchange Act and all amendments thereto and reports
filed for the purpose of updating such description.
In addition, all documents filed by the Company pursuant to Sections 13(a),
13(c), 14 or 15(d) of the Exchange Act, subsequent to the date hereof and prior
to the filing of a post-effective amendment indicating that all securities offer
ed pursuant to this Registration Statement have been sold or deregistering all
such securities then remaining unsold, shall be deemed to be incorporated by
reference herein and to be part hereof from the date of filing such documents.
Any statement contained in a document incorporated or deemed to be incorporated
by reference herein shall be deemed to be this Registration Statement to the
extent that a statement contained herein or in any subsequently filed document
which also is or is deemed to be incorporated by reference herein modifies or
supersedes such statement.
Item 4. Description of Securities.
Not Applicable.
Item 5. Interests of Named Experts and Counsel.
Not Applicable.
Item 6. Limitation of Liability and Indemnification of Directors and Officers.
Article VIII of the Company's Amended and Restated Certificate of
Incorporation provides that the Company shall indemnify its officers and
directors to the fullest extent permitted by the Delaware General Corporation
Law including those circumstances in which indemnification would otherwise be
discretionary, except that the Company shall not be obligated to indemnify any
such person (i) with respect to proceedings, claims or actions initiated or
brought voluntarily by any such person and not by way of defense or (ii) for any
amounts paid in settlement of an action indemnified against by the Company
without the prior written consent of the Company. The Company has entered into
indemnity agreements with each of its directors and certain of its officers.
These agreements may require the Company, among other things, to indemnify such
officers and directors against certain liabilities that may arise by reason of
their status or service as directors or officers, to advance expenses to them as
they are incurred, provided that they undertake to repay the amount advanced if
it is ultimately determined by a court that they are not entitled to
indemnification, and to obtain directors' and officers' liability insurance if
available on reasonable terms.
In addition, Article IX of the Company's Amended and Restated Certificate
of Incorporation provides that no director of the Company shall be personally
liable to the Company or its stockholders for monetary damages for breach of his
or her fiduciary duty as a director, except for liability (i) for any breach of
the director's duty of loyalty to the Company or its stockholders, (ii) for acts
or omissions not
II-1
<PAGE>
in good faith or which involve international misconduct or a knowing violation
of law, (iii) under Section 174 of the General Corporation Law of the State of
Delaware, or (iv) for any transaction from which the director derives an
improper personal benefit.
Reference is made to Section 145 of the General Corporation Law of the
State of Delaware which provides for indemnification of directors and officers
in certain circumstances.
Under a policy of insurance, the Company is entitled to be reimbursed for
certain indemnity payments it is required or permitted to make to its directors
and officers.
Item 7. Exemption from Registration Claimed.
Not Applicable.
Item 8. Exhibits.
4.1* Amended and Restated Certificate of Incorporation of the
Company, incorporated herein by reference to Exhibit 3.1 to the
Company's Registration Statement on Form S-1, as amended,
Registration No. 333-05051 (the "IPO Registration Statement").
4.2* Bylaws of the Company, incorporated by reference to Exhibit 3.2
to the IPO Registration Statement.
4.3 The Leap Group, Inc. Amended and Restated 1996 Stock Option
Plan.
4.4 The Leap Group, Inc. Non-employee Directors' Stock Option Plan.
4.5 The Leap Group, Inc. Employee Incentive Compensation Plan.
4.6 The Leap Group, Inc. Employee Stock Purchase Plan.
5 Opinion of Katten Muchin & Zavis as to legality of the shares of
Common Stock being offered under the Plans.
23.1 Consent of Independent Auditors, Arthur Andersen LLP.
23.2 Consent of Katten Muchin & Zavis (included in their opinion
filed as Exhibit 5 herein).
24 Power of Attorney (included on the signature page of this
Registration Statement).
- ------------------------
*Incorporated herein by reference.
Item 9. Undertakings.
1. The Company hereby undertakes:
(a) To file, during any period in which offers or sales are being
made, a post-effective amendment to this Registration Statement.
(i) To include any prospectus required by Section 10(a)(3) of
the Securities Act of 1933;
II-2
<PAGE>
(ii) To reflect in the prospectus any facts or events arising
after the effective date of the Registration Statement (or the most
recent post-effective amendment thereof) which, individually, or in
the aggregate, represent a fundamental change in the information set
forth in the Registration Statement. Notwithstanding the foregoing,
any increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the
estimated maximum offering range may be reflected in the form of
prospectus filed with the Commission pursuant to Rule 424(b) if, in
the aggregate, the changes in volume and price represent no more than
20 percent change in the maximum aggregate offering price set forth in
the "Calculation of Registration Fee" table in the effective
registration statement;
(iii) To include any material information with respect to the
plan of distribution not previously disclosed in the Registration
Statement or any material change to such information in the
Registration Statement;
provided, however, that paragraphs (a)(i) and (a)(ii) do not apply if the
information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed with or furnished to the
Commission by the Company pursuant to Section 13 or Section 15(d) of the
Exchange Act that are incorporated by reference in the Registration
Statement.
(b) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
(c) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at the
termination of the offering.
2. The Company hereby undertakes that, for the purpose of determining any
liability under the Securities Act of 1933, each filing of the Company's annual
report pursuant to Section 13(a) or Section 15(d) of the Exchange Act that is
incorporated by reference in the Registration Statement shall be deemed to be a
new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
3. Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the Company and affiliated companies pursuant to the provisions described in
Item 6 above, or otherwise, the Company has been informed that in the opinion of
the Commission such indemnification is against public policy as expressed in the
Securities Act of 1933 and is therefore unenforceable. In the event that a claim
for indemnification against such liabilities (other than the payment by the
Company of expenses incurred or paid by a director, officer or controlling
person of the Company in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Company will, unless in the
opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Securities
Act of 1933 and will be governed by the final adjudication of such issue.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Company
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-8 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Chicago, State of Illinois, on this 1st day of
April, 1997.
THE LEAP GROUP
By:/s/ R. STEVEN LUTTERBACH
-----------------------------------------
R. Steven Lutterbach
Chairman and Chief Executive Officer
POWER OF ATTORNEY
Each person whose signature appears below hereby constitutes and appoints
Robert C. Bramlette and Peter Vezmar, and each of them, his true and lawful
attorneys-in-fact and agents, with full power of substitution, to sign on his
behalf, individually and in each capacity stated below, all amendments and
post-effective amendments to this Registration Statement on Form S-8 and to file
the same, with all exhibits thereto and any other documents in connection
therewith, with the Securities and Exchange Commission under the Securities Act
of 1933, granting unto said attorneys-in-fact and agents full power and
authority to do and perform each and every act and thing requisite and necessary
to be done in and about the premises, as fully and to all intents and purposes
as each might or could do in person, hereby ratifying and confirming each act
that said attorneys-in-fact and agents may lawfully do or cause to be done by
virtue thereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities indicated on April 1, 1997.
Signature Title
- ----------------------------------------- -------------------------------------
/s/ R. STEVEN LUTTERBACH Chief Executive Officer and Director
- ----------------------------------------- (principal executive officer)
R. Steven Lutterbach
/s/ PETER VEZMAR Chief Financial Officer (principal
- ----------------------------------------- financial and accounting officer)
Peter Vezmar
/s/ FREDERICK SMITH Chief Operating Officer and Director
- -----------------------------------------
Frederick Smith
/s/ THOMAS R. SHARBAUGH President and Director
- -----------------------------------------
Thomas R. Sharbaugh
/s/ GEORGE GIER Executive Vice President, Chief
- ----------------------------------------- Marketing and Information Officer
George Gier and Director
/s/ JOSEPH A. SCIAROTTA Executive Vice President, Chief
- ----------------------------------------- Creative Officer and Director
Joseph A. Sciarotta
/s/ GUY DAY Director
- -----------------------------------------
Guy Day
/s/ JOHN KEANE Director
- -----------------------------------------
John Keane
/s/ THOMAS MCELLIGOTT Director
- -----------------------------------------
Thomas McElligott
II-4
<PAGE>
INDEX TO EXHIBITS
4.1* Amended and Restated Certificate of Incorporation of the Company,
incorporated herein by reference to Exhibit 3.1 to the Company's
Registrant Statement on Form S-1, as amended, Registration No.
333-05051 (the "IPO Registration Statement").
4.2* Bylaws of the Company, incorporated by reference to Exhibit 3.2 to
the IPO Registration Statement.
4.3 The Leap Group, Inc. Amended and Restated 1996 Stock Option Plan.
4.4 The Leap Group, Inc. Non-employee Directors' Plan.
4.5 The Leap Group, Inc. Employee Incentive Compensation Plan.
4.6 The Leap Group, Inc. Employee Stock Purchase Plan.
5 Opinion of Katten Muchin & Zavis as to legality of the shares of
Common Stock being offered under the Plans.
23.1 Consent of Independent Auditors, Arthur Andersen LLP.
23.2 Consent of Katten Muchin & Zavis (included in their opinion filed as
Exhibit 5 herein).
24 Power of Attorney (included on the signature page of this
Registration Statement).
- --------------------------
* Incorporated herein by reference.
<PAGE>
Exhibit 4.3
THE LEAP GROUP, INC.
AMENDED AND RESTATED
1996 STOCK OPTION PLAN
<PAGE>
Article I
---------
Introduction
------------
<TABLE>
<CAPTION>
Page
----
<S> <C>
1. Purpose of Plan 1
2. Administration 1
3. Shares Subject to the Plan 2
4. Eligible Persons 2
5. Granting of Options to Employees 2
6. Effective Date 3
7. Miscellaneous 3
8. Rule 16b-3 Compliance 3
Article II Non-qualified Stock Options
- ---------- ---------------------------
1. Eligible Employees 3
2. Calculation of Exercise Price 3
3. Terms and Conditions of Options 4
4. Withholding Taxes 4
Article III Incentive Options
- ----------- -----------------
1. Eligible Employees 4
2. Calculation of Exercise Price 4
3. Terms and Conditions of Options 5
Article IV Termination of Employment and Death 6
- ---------- -----------------------------------
Article V Manner of Exercise 7
- --------- ------------------
Article VI Options Not Transferable 8
- ---------- ------------------------
Article VII Adjustment of Shares 8
- ----------- --------------------
Article VIII Listing and Registration of Shares 9
- ------------ ----------------------------------
Article IX Amendment 9
- ---------- ---------
Article X Other Provisions 10
- --------- ----------------
</TABLE>
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<PAGE>
THE LEAP GROUP, INC.
1996 AMENDED AND RESTATED STOCK OPTION PLAN
ARTICLE I
INTRODUCTION
WHEREAS, pursuant to a stock exchange agreement between, among others,
The Leap Group, Inc., a Delaware corporation ("Leap" or the "Company") and The
Leap Partnership, Inc., an Illinois corporation ("Partnership"), Leap is
presently the parent company of Partnership. Pursuant to the approval and
authorization of the Board of Directors and the Shareholders of the Partnership
on January 3, 1996 and the Board of Directors and stockholders of Leap, is the
successor in interest to this 1996 Stock Option Plan and restates and amends in
its entirety as follows:
1. Purpose of Plan. The purpose of this 1996 Amended and Restated Stock
Option Plan (the "Plan") is to promote the interests of The Leap Group, Inc., a
Delaware corporation ("the Company"), and its stockholders by providing key
employees of the Company, its subsidiaries, and affiliated entities with
opportunities to acquire or increase their proprietary interest in the Company
and thereby participate in the growth of the Company generated by their efforts.
In addition, the opportunity to acquire a proprietary interest in the Company
will aid in attracting and retaining key personnel of outstanding ability. The
stock options offered pursuant to this Plan ("Options") are a matter of separate
inducement and are not in lieu of any salary or other compensation for the
services of any key employee.
The Options granted under the Plan are intended to be either Incentive
Options ("Incentive Options") within the meaning of Section 422 of the Internal
Revenue Code of 1986, as amended (the "Code"), or Options that do not meet the
requirements of Section 422 of the Code ("Non-qualified Options"), but the
Company makes no warranty as to the qualification of any Option as an Incentive
Option.
2. Administration. The Plan shall be administered by an Option Committee
(herein called the "Committee") of not less than three (3) Directors of the
Company who shall be appointed, from time to time, by the Board of Directors of
the Company or by the Board of Directors as a whole. No person who shall have
been or is a member of the Committee shall be eligible to receive an Option
under the Plan. No person shall be eligible to serve on the Committee unless
that person is then a "disinterested person" within the meaning of Paragraph
3(d) of Rule 16b-3 of the Securities and Exchange Commission ("Rule 16b-3")
promulgated under the Securities Exchange Act of 1934, as amended (the "Act"),
if and as Rule 16b-3 is then in effect. The Committee is authorized to interpret
the Plan, to prescribe, amend and rescind rules and regulations relating to the
Plan, to determine the form and content of Options or rights to be issued under
the Plan, to determine whether an Option shall be a Non-qualified Option or an
Incentive Option, to determine any and all vesting rights of Options, to permit
or require the acceleration of the exercise of such Options and rights, and to
make all other determinations
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<PAGE>
necessary or advisable for the administration of the Plan but only to the extent
not contrary to the express provisions of the Plan. The Plan and the Options as
may be granted hereunder and all related matters shall be governed by, and
construed and enforced in accordance with, the laws of the State of Delaware.
The act or the act or determination of the Committee and any action taken or
determination so made pursuant to this and the other paragraphs of the Plan
shall be conclusive on all parties.
The Committee also shall have the authority to require, in its
discretion, that the employee agree, promptly after the grant of an Option, not
to sell or otherwise dispose of shares of the Company's common stock, .01 par
value, acquired pursuant to the exercise of an Option granted under the Plan
("Shares", a "Share" or "Common Stock") for a period following the date of
acquisition. The determination of the Committee on matters referred to in this
Article I shall be conclusive.
Notwithstanding anything to the contrary contained herein, any or all
powers and functions of the Committee may at any time and from time to time be
exercised by the Board of Directors or an executive committee thereof and
references herein to the "Committee" shall also be deemed to refer to the Board
of Directors or an executive committee thereof unless the context otherwise
requires; provided, however, that, with respect to the participation in the Plan
of employees who are members of the Board of Directors or of the executive
committee, as the case may be, Board of Directors or the executive committee
only if, at the time of such exercise, a majority of the members of the entire
Board of Directors and a majority of the directors acting in the particular
matter, or all the members of the executive committee, as the case may be, are
"disinterested persons" within the meaning of Rule 16b-3 (or any successor rule
or regulation) promulgated under the Act.
The Committee may employ such legal counsel, consultants and agents as
it may deem desirable for the administration of the Plan and may rely upon any
opinion received from any such counsel or consultant and any computation
received from any such consultant or agent. Expenses incurred by the Board of
Directors or the Committee in the engagement of such counsel, consultant or
agent shall be paid by the Company. No member or former member of the Committee,
the Board of Directors or an executive committee thereof shall be liable for any
action or determination made in good faith with respect to the Plan or any
Option granted hereunder.
3. Shares Subject to the Plan. Subject to adjustment as provided by
Article VII hereof, the aggregate number of Shares subject to Options which may
be granted under the Plan shall not exceed three million (3,000,000) Shares.
Options granted under this Plan will be either Incentive Options or non-
qualified stock Options. In the event the number of Shares to be delivered upon
the exercise in full of any Option granted under the Plan is reduced for any
reason whatsoever or in the event any Option granted under this Plan lapses or
terminates for any reason before being completely exercised, the Shares covered
by the unexercised portion of such Option shall be released and may again be
made subject to Options granted under the Plan. Shares of Common Stock of the
Company shall be delivered unless Article VII shall be applicable. Common Stock
issued pursuant to the exercise of Options granted under the Plan shall be fully
paid and non-assessable. In no event shall an Option granted hereunder be
exercised for a fraction of a share.
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<PAGE>
Shares which may be acquired under the Plan may be either authorized but
unissued Shares, Shares of issued stock held in the Company's treasury, or both,
at the discretion of the Company. If and to the extent that Options granted
under the Plan expire or terminate without having been exercised, new Options
may be granted with respect to the Shares covered by such expired or terminated
Options, provided that the grant and the terms of such new Options shall in all
respects comply with the provisions of the Plan.
Except as may be provided otherwise in the Plan, the Company may, from
time to time during the period beginning March 11, 1996 (the "Effective Date")
and ending at the close of business on March 10, 2006 (the "Termination Date"),
grant Options to certain key employees of the Company, or of any subsidiary
corporation or parent corporation of the Company now existing or hereafter
formed or acquired, under the terms hereinafter set forth.
As used in the Plan, the terms "subsidiary corporation" and "parent
corporation" shall mean, respectively, a corporation coming within the
definition of such terms contained in Section 425 of the Code.
4. Eligible Persons. Options may be granted under the Plan to any key
employee of the Company or any subsidiary thereof, including any such employee
who is also an officer or director of the Company or a subsidiary ("Employee
Optionees", or "Optionees"). Except as otherwise provided herein, no Option may
be granted under the Plan to any person who is or has been a member of the
Committee.
Any person who shall have retired from the active employment by the
Company, although such person shall have entered into a consulting contract with
the Company, shall not be eligible to receive an Option.
5. Granting of Options to Employees. Subject to the terms and conditions
of the Plan, the Committee shall have authority to grant, from time to time and
as of any date or dates prior to the close of business on March 10, 2006 as
shall be specified by the Committee, to such eligible employees, Options to
purchase such number of authorized but unissued, or reacquired Shares of Common
Stock of the Company on such terms and conditions whether pursuant to or as set
forth in Articles II and III as the Committee may determine. More than one
Option may be granted to the same employee. In selecting Employee Optionees, and
in determining the number of Shares to be covered by each Option granted to
Employee Optionees the Committee may consider the office or position held by the
Employee Optionee, the Employee Optionee's degree of responsibility for and
contribution to the growth and success of the Company, the Employee Optionee's
length of service, age, promotions, potential and any other factors which it may
consider relevant.
6. Effective Period of Plan. The Plan shall become effective as of the
Effective Date and shall expire on the Termination Date and has been approved by
the stockholders of The Leap Group, Inc. and The Leap Partnership, Inc.
7. Miscellaneous. All references in the Plan to "Articles", "Paragraphs",
and other subdivisions refer to the corresponding Articles, Paragraphs, and
subdivisions of the Plan.
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<PAGE>
8. Rule 16b-3 Compliance. The Company intends:
a. that the Plan meet the requirements of Rule 16b-3;
b. that transactions of the type specified in the first paragraph
of Rule 16b-3 by officers of the Company (whether or not they are directors)
pursuant to the Plan will be exempt from the operation of Section 16(b) of the
Act.
In all cases, the terms, provisions, conditions and limitations of the
Plan shall be construed and interpreted consistent with the Company's intent as
stated in this Article I, Paragraph 8.
ARTICLE II
NON-QUALIFIED STOCK OPTIONS
1. Eligible Employees. Key employees and officers (whether or not they are
directors) of the Company, its subsidiaries and affiliated entities shall be
eligible to receive Non-qualified Options under this Article II.
2. Calculation of Exercise Price. The exercise price to be paid for each
share of Common Stock deliverable upon exercise of each Non-qualified Option
granted under Article II shall be equal to the fair market value per share of
Common Stock at the time of grant as determined by the Committee. In the
absence of a public market price for the Common Stock, the Committee may, but
need not, obtain an appraisal to determine the fair market value and shall be
entitled to rely upon the fair market value as determined by such appraisal.
The exercise price for each Non-qualified Option granted under Article II shall
be subject to adjustment as provided in Article VII.
If the Shares are listed on a national securities exchange in the United
States on the date any Option is granted, the fair market value per Share shall
be deemed to be the closing quotation at which such Shares are sold on such
national securities exchange on the date immediately prior to the date such
Option is granted. If the Shares are listed on a national securities exchange
in the United States on such date but the Shares are not traded on such date,
or such national securities exchange is not open for business on such date, the
fair market value per Share shall be determined as of the closest preceding
date on which such exchange shall have been open for business and the Shares
were traded. If the Shares are listed on more than one national securities
exchange in the United States on the date any such Option is granted, the
Committee shall determine which national securities exchange shall be used for
the purpose of determining the fair market value per Share.
If at the date an Option is granted a public market exists for the
Shares but the Shares are not listed on a national securities exchange in the
United States, the fair market value per Share shall be deemed to be the mean
between the closing bid and asked quotations in the over-the-
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<PAGE>
counter market for such Shares in the United States on the date such Option is
granted. If there are no bid and asked quotations for such Shares on such date,
the fair market value per Share shall be deemed to be the mean between the
closing bid and asked quotations in the over-the-counter market in the United
States for such Shares on the closest date preceding the date such Option is
granted for which such quotations are available.
3. Terms and Conditions of Options. Non-qualified Options granted under
Article II shall be in such form as the Committee may from time to time
approve. Options granted under Article II shall be subject to the following
terms and conditions and may contain such additional terms and conditions, not
inconsistent with Article II and other pertinent Articles contained herein, as
the Committee shall deem desirable.
Subject to Article IX, no Non-qualified Option granted under Article II
shall be exercisable with respect to any of the Shares subject to the Option
earlier than the date which is one year from the date of grant nor later than
the date which is ten years after the date of grant (the "Non-qualified Option
Expiration Date"). To the extent not prohibited by other provisions of the
Plan, each Non-qualified Option granted under Article II shall be exercisable
at such time or times as the Committee in its discretion may determine at or
prior to the time such Option is granted; provided, however, that unless the
Committee determines otherwise, each Non-qualified Option granted under Article
II shall be exercisable from time to time, in whole or in part, at any time
after one year from the date of grant and prior to the Non-qualified Option
Expiration Date.
4. Withholding Taxes. The Company may require an employee exercising a
Non-qualified Option granted hereunder, or disposing of Shares acquired
pursuant to the exercise of an Incentive Option in a disqualifying disposition
(within the meaning of Section 421(b) of the Code), to reimburse the
corporation that employs such employee for any taxes required by any government
to be withheld or otherwise deducted and paid by such corporation in respect of
the issuance or disposition of Shares. In lieu thereof, the corporation that
employs such employee shall have the right to withhold the amount of such taxes
from any other sums due or to become due from such corporation to the employee
upon such terms and conditions as the Committee shall prescribe.
ARTICLE III
INCENTIVE OPTIONS
1. Eligible Employees. Key employees and officers (whether or not they are
directors) of the Company, its subsidiaries and affiliated entities shall be
eligible to receive Incentive Options under this Article III.
An Incentive Option shall not be granted to any person who, at the time
such Option is granted, owns stock of the Company or any subsidiary corporation
or parent corporation of the Company possessing more than ten percent (10%) of
the total combined voting power of all classes of stock of the Company or of
any subsidiary corporation or parent corporation of the Company, unless (i) the
exercise price per Share is not less than one hundred ten percent (110%)
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of the fair market value per Share on the date such Option is granted and (ii)
such Option by its terms is not exercisable after the expiration of ten (10)
years from the date such Option is granted. In determining stock ownership of an
employee, the rules of Section 425(d) of the Code shall be applied, and the
Committee may rely on representations of fact made to it by the employee and
believed by it to be true.
2. Calculation of Exercise Price. Subject to the limitation in paragraph 1
above, the exercise price to be paid for each share of Common Stock deliverable
upon exercise of each Incentive Option granted under Article III shall be equal
to the fair market value per share of Common Stock at the time of grant as
determined by the Committee. In the absence of a public market price for the
Common Stock, the Committee shall make a determination of fair market value in
accordance with Section 422 of the Code and may, but need not, obtain an
appraisal to determine the fair market value and shall be entitled to rely upon
the fair market value as determined by such appraisal. The exercise price for
each Incentive Option granted under Article II shall be subject to adjustment
as provided in Article VII.
If the Shares are listed on a national securities exchange in the United
States on the date any Option is granted, the fair market value per Share shall
be deemed to be the closing quotation at which such Shares are sold on such
national securities exchange on the date immediately prior to the date such
Option is granted. If the Shares are listed on a national securities exchange
in the United States on such date but the Shares are not traded on such date,
or such national securities exchange is not open for business on such date, the
fair market value per Share shall be determined as of the closest preceding
date on which such exchange shall have been open for business and the Shares
were traded. If the Shares are listed on more than one national securities
exchange in the United States on the date any such Option is granted, the
Committee shall determine which national securities exchange shall be used for
the purpose of determining the fair market value per Share.
If at the date an Option is granted a public market exists for the
Shares but the Shares are not listed on a national securities exchange in the
United States, the fair market value per Share shall be deemed to be the mean
between the closing bid and asked quotations in the over-the-counter market for
such Shares in the United States on the date such Option is granted. If there
are no bid and asked quotations for such Shares on such date, the fair market
value per Share shall be deemed to be the mean between the closing bid and asked
quotations in the over-the-counter market in the United States for such Shares
on the closest date preceding the date such Option is granted for which such
quotations are available.
The exercise price for each Incentive Option shall be subject to
adjustment as provided in Article VII.
3. Terms and Conditions of Options. Incentive Options granted under Article
III shall be in such form as the Committee may from time to time approve.
Options granted under Article III shall be subject to the following terms and
conditions and may contain such additional terms and conditions, not
inconsistent with Article III and other pertinent Articles contained herein, as
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the Committee shall deem desirable:
a. Option Period and Conditions and Limitations on Exercise.
Subject to Article IX, no Incentive Option granted under Article III shall be
exercisable with respect to any of the Shares subject to such Option earlier
than the date which is one year from the date of grant nor later than the date
which is ten years after the date of grant; provided, however, that in the case
of an Employee Optionee who, at the time such Option is granted, owns (within
the meaning of Section 425(d) of the Code) more than 10% of the total combined
voting power of all classes of stock of the Company or of its Parent Corporation
or any Subsidiary Corporation, then such Option shall not be exercisable with
respect to any of the Shares subject to such Option later than five years after
the date of grant. The date on which an Incentive Option ultimately becomes
unexercisable under the previous sentence is hereinafter referred to as the "ISO
Expiration Date". To the extent not prohibited by other provisions of the Plan,
each Incentive Option granted under Article III shall be exercisable at such
time or times as the Committee in its discretion may determine at or prior to
the time such Option is granted; provided, however, that unless the Committee
determines otherwise, each Incentive Option granted under this Article III shall
be exercisable from time to time, in whole or in part, subject to the dollar
limitations set forth in Article III, Paragraph 3(b), at any time after one year
from the date of grant and prior to the ISO Expiration Date.
b. Limitation on Amount. Notwithstanding any other provision of the
Plan, the aggregate fair market value (determined as of the time the Incentive
Option is granted) of the Common Stock with respect to which Incentive Options
are exercisable for the first time by an Employee Optionee during any calendar
year cannot exceed $100,000 as provided under Section 422A(b)(7) of the Code.
ARTICLE IV
TERMINATION
1. Determination of Employment Termination Date. Unless otherwise specified
by the Committee, an Employee Optionee's employment shall be deemed to have
terminated at the close of business on the day preceding the first date on
which he is no longer for any reason whatsoever (including his death) employed
by the Company or a subsidiary or affiliated entity of the Company.
2. Voluntary Termination or Termination For Cause. If an Employee
Optionee's employment is voluntarily terminated (understood not to include
retirement, disability or death) or is terminated for cause, as hereafter
defined, each Option granted to him under Articles II and III, and all rights
thereunder, shall wholly and completely terminate thirty (30) days after the
date of employment termination.
"For cause" shall mean: (i) with respect to an employee who is a party
to a written employment agreement with, or, alternatively, participates in a
compensation or benefit plan of,
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the Company or a subsidiary corporation or parent corporation of the Company,
which agreement or plan contains a definition of "for cause" or "cause" (or
words of like import) for purposes of termination of employment thereunder by
the Company or such subsidiary corporation or parent corporation of the Company,
"for cause" or "cause" as defined therein; provided, however, in the event that
an employee is a participant in a compensation or benefit plan of the Company
and is also a party to a written employment agreement with the Company, the
termination provisions of the written employment agreement shall control; or
(ii) in all other cases, as determined by the Committee or the Board of
Directors in its sole discretion, (a) the willful commission by an employee of
an act that causes or may cause substantial damage to the Company or a
subsidiary corporation or parent corporation of the Company; (b) the commission
by an employee of an act of fraud in the performance of such employee's duties
on behalf of the Company or a subsidiary corporation or parent corporation of
the Company; (c) the commission of the employee of a felony in connection with
the performance of the duties of such employee on behalf of the Company or a
subsidiary corporation or parent corporation of the Company; or (d) the
continuing failure of an employee to perform the duties of such employee to the
Company or a subsidiary corporation or parent corporation of the Company after
written notice thereof and a reasonable opportunity to cure such failure are
given to the employee by the Board of Directors or the Committee.
3. Termination Due to Death, Disability. If an Employee Optionee's
employment is terminated due to death, disability, retirement or for reason or
reasons that do not constitute "for cause", each Option granted to him under
Articles II and III, and all rights thereunder, shall terminate, subject to
Article IX, as of the original date of termination as stated in the respective
Option grant.
In the event and to the extent that an Incentive Option granted under
Article III is not exercised (i) within three months after the Employee
Optionee's employment is terminated because of retirement or disability not
within the meaning of Section 22(e)(3) of the Code or (ii) within one year
after the Employee Optionee's employment is terminated because of disability
within the meaning of Section 22(e)(3) of the Code, such Option shall be taxed
as a Non-qualified Option and shall be subject to the manner of exercise
provisions described in Article VI.
ARTICLE V
MANNER OF EXERCISE
Options granted under the Plan shall be exercised by the Optionee as to
all or part of the Shares covered thereby by the giving of written notice of the
exercise thereof to the corporate secretary or other appropriate officer of the
Company at the principal business office of the Company, specifying the number
of Shares to be purchased and accompanied by payment of the purchase price.
Upon the exercise of an Option granted hereunder, the Company shall
cause the purchased
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Shares to be issued only when it shall have received the full purchase price for
the Shares in cash; provided, however, that in lieu of cash, the holder of an
Option may, if the terms of such Option so provide and to the extent permitted
by applicable law, exercise his Option, (a) in whole or in part, by delivering
to the Company common stock of the Company (in proper form for transfer and
accompanied by all requisite stock transfer tax stamps or cash in lieu thereof)
owned by such holder having a fair market value equal to the cash exercise price
applicable to that portion of the Option being exercised by the delivery of such
stock, the fair market value of the stock so delivered to be determined as of
the date immediately preceding the date on which the Option is exercised, or as
may be required in order to comply with or to conform to the requirements of any
applicable laws or regulations, or (b) in part, by delivering to the Company an
executed promissory note on such terms and conditions as the Committee shall
determine, at the time of grant, in its sole discretion; provided, however, that
the principal amount of such note shall not exceed ninety percent (90%) (or such
lesser percentage as would be permitted by applicable margin regulations) of the
aggregate purchase price of the Shares then being purchased pursuant to the
exercise of such Option.
If the Committee so requires and if necessary, such person or persons
shall also deliver a written representation that all Shares being purchased are
being acquired for investment and not with a view to, or for resale in
connection with, any distribution of such Shares.
ARTICLE VI
OPTIONS NOT TRANSFERABLE
No Option granted pursuant to this Plan shall be transferable otherwise
than by will or by the laws of descent and distribution and, during the
lifetime of the Optionee to whom any such Option is granted, it shall be
exercisable only by the Optionee (or an Optionee's lawfully appointed
guardian). Any attempt to transfer, assign, pledge, hypothecate or otherwise
dispose of, or to subject to execution, attachment or similar process, any
Option granted pursuant to this Plan, or any right thereunder, contrary to the
provisions hereof, shall be void and ineffective, shall give no right to the
purported transferee, and shall, at the sole discretion of the Committee,
result in forfeiture of the Option with respect to the Shares involved in such
attempt.
ARTICLE VII
ADJUSTMENT OF SHARES
In the event that at any time after the effective date of the Plan the
outstanding Shares of Common Stock are changed into or exchanged for a
different number or kind of Shares of the Company or other securities of the
Company by reason of merger, consolidation, reorganization, recapitalization,
reclassification, stock split, stock dividend, split-up, split-off, spin-off,
or combination of Shares, the Committee shall make an appropriate and equitable
adjustment in the number and kind of Shares subject to this Plan (including
Shares as to which all outstanding Options granted or portions thereof then
unexercised, shall be exercisable), to the end that after
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such event the Shares subject to this Plan and each Optionee's proportionate
interest shall be maintained as before the occurrence of such event. Such
adjustment in an outstanding Option shall be made without change in the total
price applicable to the Option or the unexercised portion of the Option (except
for any change in the aggregate price resulting from rounding-off of share
quantities or prices) and with any necessary corresponding adjustment in
exercise price per share. Any such adjustment made by the Committee shall be
final and binding upon all Optionees, the Company and all other interested
persons. Any adjustment of an Incentive Option under this Paragraph shall be
made in such manner as not to constitute a "modification" within the meaning of
Section 425(h)(3) of the Code.
ARTICLE VIII
LISTING AND REGISTRATION OF SHARES
Each Option granted pursuant to this Plan shall be subject to the
requirement that if at any time the Committee determines, in its discretion,
that the listing, registration, or qualification of the Shares subject to such
Option under any securities exchange or under any state or Federal law, or the
consent of approval of any governmental regulatory body, is necessary or
desirable as a condition of, or in connection with, the issue or purchase of
Shares thereunder, such Option may not be exercised in whole or in part unless
such listing, registration, qualification, consent or approval shall have been
effected or obtained and the same shall have been free of any conditions not
acceptable to the Committee.
Upon any exercise of an Option which may be granted hereunder and
payment of the purchase price, a certificate or certificates for the Shares as
to which the Option has been exercised shall be issued by the Company in the
name of the person exercising the Option and shall be delivered to or upon the
order of such person or persons.
The Company may endorse such legend or legends upon the certificates for
Shares issued upon exercise of an Option granted hereunder, and the Committee
may issue such "stop transfer" instructions to its transfer agent in respect of
such Shares, as the Committee, in its discretion, determines to be necessary or
appropriate to (i) prevent a violation of, or to perfect an exemption from, the
registration requirements of the Securities Act of 1933, as amended (the
"Securities Act"), (ii) implement the provisions of any agreement between the
Company and the Optionee with respect to such Shares, or (iii) permit the
Company to determine the occurrence of a disqualifying disposition, as
described in Section 421(b) of the Code, of Shares transferred upon exercise of
an Incentive Option granted under the Plan.
The Company shall pay all issue or transfer taxes with respect to the
issuance or transfer of Shares, as well as all fees and expenses necessarily
incurred by the Company in connection with such issuance or transfer, except
fees and expenses which may be necessitated by the filing or amending of a
Registration Statement under the Securities Act, which fees and expenses shall
be borne by the recipient of the Shares unless such Registration Statement has
been filed by the Company for its own corporate purposes (and the Company so
states) in which event the recipient of the Shares shall bear only such fees
and expenses as are attributable solely to the inclusion of such Shares in the
Registration Statement.
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ARTICLE IX
AMENDMENT
The Committee may, with the consent of the person or persons entitled to
exercise any outstanding Option granted pursuant to this Plan, amend such
Option; provided, however, that any such amendment increasing the number of
Shares of Common Stock subject to such Option (except as provided in Article
VII) or reducing the exercise price per share of such Option (except as
provided in Article VII or in this Article IX) shall in each case be subject to
approval by the stockholders of the Company. The Committee may at any time or
from time to time, in its discretion, in the case of any Option previously
granted pursuant to this Plan which is not then immediately exercisable in
full, accelerate the time or times at which such Option may be exercised to any
earlier time or times except that any acceleration of an Incentive Option shall
be subject to Article III, Paragraph 3(b). The Committee, in its absolute
discretion, may grant to holders of outstanding Options granted pursuant to
this Plan, in exchange for the surrender and cancellation of such Options, new
Options having exercise prices lower (or higher) than the exercise price
provided in the Options so surrendered and cancelled and containing such other
terms and conditions as the Committee may deem appropriate.
ARTICLE X
OTHER PROVISIONS
1. Stockholder Rights. The person or persons entitled to exercise, or who
have exercised an Option granted pursuant to this Plan shall not be entitled to
any rights as a stockholder of the Company with respect to any Shares subject
to such Option until he shall have become the holder of record of such Shares.
2. Company's Right to Terminate Employment. No Option granted pursuant to
this Plan shall be construed as limiting any right which the Company or any
subsidiary or affiliated entity of the Company may have to terminate at any
time, with or without cause, the employment of any person or require
re-election as a director or a directors removal with or without cause to whom
an Option has been granted.
3. Compliance with Laws and Regulations. Notwithstanding any provision of
the Plan or the terms of any Option granted pursuant to this Plan, the Company
shall not be required to issue any Shares hereunder if such issuance would, in
the judgment of the Committee, constitute a violation of any state or Federal
law or of the rules or regulations of any governmental regulatory body.
4. Notice of Disposition. The Committee may require any person who
exercises an Incentive Option to give prompt notice to the Company of any
disposition of Shares of Common Stock acquired upon exercise of an Incentive
Option within one year after such exercise.
5. Use of Proceeds. The cash proceeds of the sale of Shares subject to the
Options granted
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hereunder are to be added to the general funds of the Company and used for its
general corporate purposes or such other appropriate purposes as the Board of
Directors shall determine.
6. Securities Act. Except as hereafter provided, the holder of an Option
granted hereunder, upon any exercise thereof, shall execute and deliver to the
Company a written statement, in form satisfactory to the Company, in which such
holder represents and warrants that such holder is purchasing or acquiring the
Shares acquired thereunder for such holder's own account, for investment only
and not with a view to the resale or distribution thereof, and agrees that any
subsequent resale or distribution of any of such Shares shall be made only
pursuant to either (a) a Registration Statement on an appropriate form under
the Securities Act, which Registration Statement has become effective and is
current with regard to the Shares being sold, or (b) a specific exemption from
the registration requirements of the Securities Act, but in claiming such
exemption the holder shall, prior to any offer of sale or sale of such Shares,
obtain a prior favorable written opinion, in form and substance satisfactory to
the Company, from counsel for or approved by the Company, as to the application
of such exemption thereto. The foregoing restriction shall not apply to (i)
issuances by the Company so long as the Shares being issued are registered
under the Securities Act and a prospectus in respect thereof is current or (ii)
reofferings of Shares by affiliates of the Company (as defined in Rule 405 or
any successor rule or regulation promulgated under the Securities Act) if the
Shares being reoffered are registered under the Securities Act and a
prospectus in respect thereof is current.
Executed this 12th day of March, 1996, effective March 12, 1996.
The Leap Group, Inc.
By: /s/ R. Steven Lutterbach
---------------------------
Title: Chief Executive Officer
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EXHIBIT 4.4
THE LEAP GROUP, INC.
NON-EMPLOYEE DIRECTORS' STOCK OPTION PLAN
ARTICLE I
---------
ESTABLISHMENT
-------------
1.1 Purpose. The Leap Group, Inc. Non-employee Directors' Stock Option
Plan ("Plan") is hereby established by The Leap Group, Inc. ("Company"),
effective May 29, 1996 ("Effective Date"). The purpose of the Plan is to promote
the overall financial objectives of the Company and its stockholders by
motivating directors of the Company who are not employees, to further align the
interests of such directors with those of the stockholders of the Company and to
achieve long-term growth and performance of the Company. The Plan and the grant
of Options hereunder are expressly conditioned upon the Plan's approval by the
stockholders of the Company. If such approval is not obtained, then the Plan and
all Options granted thereunder shall be null and void ab initio.
ARTICLE II
----------
DEFINITIONS
-----------
For purposes of the Plan, the following terms are defined as set forth
below:
2.1 "Affiliate" means any individual, corporation, partnership, limited
liability company, association, joint-stock company, trust, unincorporated
association or other entity (other than the Company) that directly, or
indirectly through one or more intermediaries, controls, is controlled by, or is
under common control with, the Company, including, without limitation, any
member of an affiliated group of which the Company is a common parent
corporation as provided in Section 1504 of the Code.
2.2 "Agreement" or "Option Agreement" means, individually or collectively,
any agreement entered into pursuant to this Plan pursuant to which an Option is
granted to a Participant.
2.3 "Board of Directors" or "Board" means the Board of Directors of the
Company.
2.4 "Change in Control" means the happening of any of the following events
following a Public Offering: (a) any corporation, person or other entity (other
than the Company, a majority-owned subsidiary of the Company or any of its
subsidiaries, or an employee benefit plan (or related trust) sponsored or
maintained by the Company), including a "group" as defined in Section 13(d)(3)
of the Exchange Act, becomes the
<PAGE>
beneficial owner of stock representing more than the greater of (i) fifty
percent (50%) of the combined voting power of the Company's then outstanding
securities or (ii) the percentage of the combined voting power of the Company's
then outstanding securities which equals (A) ten percent (10%) plus (B) the
percentage of the combined voting power of the Company's outstanding securities
held by such corporation, person or entity on the Effective Date; (b)(i) the
stockholders of the Company approve a definitive agreement to merge or
consolidate the Company with or into another corporation other than a majority-
owned subsidiary of the Company, or to sell or otherwise dispose of all or
substantially all of the Company's assets, and (ii) the persons who were the
members of the Board of Directors prior to such approval do not represent a
majority of the directors of the surviving, resulting or acquiring entity or the
parent thereof; (c) the stockholders of the Company approve a plan of
liquidation of the Company; or (d) within any period of 24 consecutive months,
persons who were members of the Board of Directors immediately prior to such 24-
month period, together with any persons who were first elected as directors
(other than as a result of any settlement of a proxy or consent solicitation
contest or any action taken to avoid such a contest) during such 24-month period
by or upon the recommendation of persons who were members of the Board of
Directors of the Company immediately prior to such 24-month period and who
constituted a majority of the Board of Directors at the time of such election,
cease to constitute a majority of the Board.
2.5 "Code" or "Internal Revenue Code" means the Internal Revenue Code of
1986, as amended, Treasury Regulations (including proposed regulations)
thereunder and any subsequent Internal Revenue Code.
2.6 "Commission" means the Securities and Exchange Commission or any
successor agency.
2.7 "Committee" means the person or persons appointed by the Board of
Directors to administer the Plan, as further described in the Plan.
2.8 "Common Stock" means the shares of the common stock, par value $.01
per share, of the Company, whether presently or hereafter issued, and any other
stock or security resulting from adjustment thereof as described hereinafter or
the common stock of any successor to the Company which is designated for the
purpose of the Plan.
2.9 "Company" means The Leap Group, Inc., a Delaware corporation, and
includes any successor or assignee corporation or corporations into which the
Company may be merged, changed or consolidated; any corporation for whose
securities all or substantially all of the securities of the Company shall be
exchanged; and any assignee of or successor to all or substantially all of the
assets of the Company.
2.10 "Director" means each and any director who serves on the Board and who
is not an officer or employee of the Company or any of its Affiliates.
2
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2.11 "Disability" means a mental or physical illness that renders a
Participant totally and permanently incapable of performing the Participant's
duties for the Company or an Affiliate. Notwithstanding the foregoing, a
Disability shall not qualify under the Plan if it is the result of (i) a
willfully self-inflicted injury or willfully self-induced sickness; or (ii) an
injury or disease contracted, suffered, or incurred, while participating in a
criminal offense. The determination of Disability shall be made by the
Committee. The determination of Disability for purposes of the Plan shall not
be construed to be an admission of disability for any other purpose.
2.12 "Effective Date" means May 29, 1996.
2.13 "Exchange Act" means the Securities Exchange Act of 1934, as amended,
and the rules and regulations promulgated thereunder.
2.14 "Fair Market Value" means:
(a) prior to a Public Offering, the value determined on the basis of the
good faith determination of the Committee and without regard to whether the
Common Stock is restricted, illiquid or represents a minority interest, unless
expressly provided otherwise in an Agreement;
(b) on the date of a Public Offering, the initial price to the public; and
(c) on or after a Public Offering, the value determined on the basis of the
good faith determination of the Committee, without regard to whether the Common
Stock is restricted or represents a minority interest, pursuant to the
applicable method described below:
(i) if the Common Stock is listed on a national securities exchange
or quoted on NASDAQ, the closing price of the Common Stock on the relevant
date (or, if such date is not a business day or a day on which quotations
are reported, then on the immediately preceding date on which quotations
were reported), as reported by the principal national exchange on which
such shares are traded (in the case of an exchange) or by NASDAQ, as the
case may be;
(ii) if the Common Stock is not listed on a national securities
exchange or quoted on NASDAQ, but is actively traded in the over-the-
counter market, the average of the closing bid and asked prices for the
Common Stock on the relevant date (or, if such date is not a business day
or a day on which quotations are reported, then on the immediately
preceding date on which quotations were reported), or the most recent
preceding date for which such quotations are reported; and
(iii) if, on the relevant date, the Common Stock is not publicly
traded or reported as described in (i) or (ii), the value determined in
good faith by the Committee.
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2.15 "Grant Date" means the date as of which an Option is granted pursuant
to the Plan.
2.16 "NASDAQ" means The Nasdaq Stock Market, including the Nasdaq National
Market.
2.17 "Option" means the right to purchase the number of shares of Common
Stock specified by the Plan at a price and for a term fixed by the Plan, and
subject to such other limitations and restrictions as the Plan and the Committee
imposes.
2.18 "Option Period" means the period during which the Option shall be
exercisable in accordance with the Agreement and Article V.
2.19 "Option Price" means the price at which the Common Stock may be
purchased under an Option as provided in Section 5.3.
2.20 "Participant" means a Director to whom an Option has been granted
under the Plan, and in the event a Representative is appointed for a Participant
or another person becomes a Representative, then the term "Participant" shall
mean such appointed Representative. The term shall also include a trust for the
benefit of the Participant, the Participant's parents, spouse or descendants; a
partnership the interests in which are for the benefit of the Participant, the
Participant's parents, spouse or descendants; or a custodian under a uniform
gifts to minors act or similar statute for the benefit of the Participant's
descendants, to the extent permitted by the Committee and not inconsistent with
an application of Rule 16b-3. Notwithstanding the foregoing, the term
"Termination of Directorship" shall mean the Termination of Directorship of the
Director.
2.21 "Plan" means The Leap Group, Inc. Non-employee Directors' Stock Option
Plan, as herein set forth and as may be amended from time to time.
2.22 "Public Offering" means the initial public offering of shares of
Common Stock under the Securities Act.
2.23 "Representative" means (a) the person or entity acting as the executor
or administrator of a Participant's estate pursuant to the last will and
testament of a Participant or pursuant to the laws of the jurisdiction in which
the Participant had the Participant's primary residence at the date of the
Participant's death; (b) the person or entity acting as the guardian or
temporary guardian of a Participant; (c) the person or entity which is the
beneficiary of the Participant upon or following the Participant's death; or (d)
any person to whom an Option has been transferred permissibly by the Committee
or by operation of law; provided that only one of the foregoing shall be the
Representative at any point in time as determined under applicable law and
recognized by the Committee.
2.24 "Rule 16b-3" or "Rule 16a-1(c)(3)" mean Rule 16b-3 and Rule 16a-
1(c)(3), as promulgated under the Exchange Act, as amended from time to time, or
any successor thereto, in effect and applicable to the Plan and Participants.
4
<PAGE>
2.25 "Securities Act" means the Securities Act of 1933, as amended, and
the rules and regulations promulgated thereunder.
In addition, certain other terms used herein have definitions given to them
in the first place in which they are used.
ARTICLE III
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ADMINISTRATION
--------------
3.1 Committee Structure and Authority. The Plan shall be administered by
the Committee which shall be comprised of one or more persons. The Committee
shall be the Compensation Committee of the Board of Directors, unless such
committee does not exist or the Board establishes another committee whose
purpose is the administration of the Plan. In the absence of an appointment, the
Board shall be the Committee; provided that only those members of the
Compensation Committee of the Board who participate in the decision relative to
Options under the Plan shall be deemed to be part of the "Committee" for
purposes of the Plan. A majority of the Committee shall constitute a quorum at
any meeting thereof (including telephone conference) and the acts of a majority
of the members present, or acts approved in writing by a majority of the entire
Committee without a meeting, shall be the acts of the Committee for purposes of
the Plan. The Committee may authorize any one or more of its members or an
officer of the Company to execute and deliver documents on behalf of the
Committee. A member of the Committee shall not exercise any discretion
respecting himself or herself under the Plan. The Board shall have the authority
to remove, replace or fill any vacancy of any member of the Committee upon
notice to the Committee and the affected member. Any member of the Committee may
resign upon notice to the Board. The Committee may allocate among one or more of
its members, or may delegate to one or more of its agents, such duties and
responsibilities as it determines.
Among other things, the Committee shall have the authority, subject to the
terms of the Plan and the limitation of section (c)(2)(ii) of Rule 16b-3 so that
the Plan is described in that section:
(a) to determine the terms and conditions of any Option hereunder
(including, but not limited to, the Option Period, any exercise restriction
or limitation and any exercise acceleration or forfeiture waiver regarding
any Option and the shares of Common Stock relating thereto);
(b) to adjust the terms and conditions, at any time or from time to
time, of any Option, subject to the limitations of Section 6.1;
(c) to provide for the forms of Agreement to be utilized in
connection with the Plan;
(d) to determine whether a Participant has a Disability or a
retirement;
(e) to determine what securities law requirements are applicable to
the Plan, Options, and the issuance of shares of Common Stock and to
require of a Participant that appropriate action be taken with respect to
such requirements;
(f) to cancel, with the consent of the Participant or as otherwise
provided in the Plan or an Agreement, outstanding Options;
(g) to require as a condition of the exercise of an Option or the
issuance or transfer of a certificate of Common Stock, the withholding from
a Participant of the amount of any federal, state or local taxes as may be
necessary in order for the Company or any other employer to obtain a
deduction or as may be otherwise required by law;
(h) to determine whether and with what effect an individual has
ceased to be a Director;
(i) to determine whether the Company or any other person has a right
or obligation to purchase Common Stock from a Participant and, if so, the
terms and conditions on which such Common Stock is to be purchased;
(j) to determine the restrictions or limitations on the transfer of
Common Stock;
(k) to determine whether an Option is to be adjusted, modified or
purchased or is to become fully exercisable, under the Plan or the terms of
an Agreement;
(l) to interpret and make a final determination with respect to the
remaining number of shares of Common Stock available under the Plan;
(m) to determine the permissible methods of Option exercise and
payment, including cashless exercise arrangements;
(n) to adopt, amend and rescind such rules and regulations as, in its
opinion, may be advisable in the administration of the Plan; and
(o) to appoint and compensate agents, counsel, auditors or other
specialists to aid it in the discharge of its duties.
The Committee shall have the authority, subject to (i) the terms of the
Plan and (ii) relevant law, to adopt, alter and repeal such administrative
rules, guidelines and practices governing the Plan as it shall, from time to
time, deem advisable, to interpret the terms and provisions of the Plan and any
Option issued under the Plan and to otherwise supervise the administration of
the Plan. The Committee's policies and procedures may differ with respect to
Options granted at different times or to different Participants.
Any determination made by the Committee pursuant to the provisions of the
Plan shall be made in its sole discretion. All decisions made by the Committee
pursuant to the provisions of the Plan shall be final and binding on all
persons, including the Company and Participants. Any determination shall not be
subject to de novo review if challenged in court.
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<PAGE>
ARTICLE IV
----------
STOCK SUBJECT TO PLAN
---------------------
4.1 Number of Shares. Subject to the adjustment under Section 4.5, the
total number of shares of Common Stock reserved and available for issuance
pursuant to Options under the Plan shall be two hundred thousand (200,000)
shares of Common Stock authorized for issuance on the Effective Date. Such
shares may consist, in whole or in part, of authorized and unissued shares or
treasury shares.
4.2 Release of Shares. The Committee shall have full authority to
determine the number of shares of Common Stock available for Stock Options, and
in its discretion may include (without limitation) as available for distribution
any shares of Common Stock that have ceased to be subject to Stock Options, any
shares of Common Stock subject to any Stock Options that are forfeited, any
Stock Options that otherwise terminate without issuance of shares of Common
Stock being made to the Participant, or any shares (whether or not restricted)
of Common Stock that are received by the Company in connection with the exercise
of a Stock Option, including the satisfaction of any tax liability or the
satisfaction of a tax withholding obligation. If any shares could not again be
available for Options to a particular Participant under applicable law, such
shares shall be available exclusively for Options to Participants who are not
subject to such limitations.
4.3 Restrictions on Shares. Shares of Common Stock issued upon exercise of
an Option shall be subject to the terms and conditions specified herein and to
such other terms, conditions and restrictions as the Committee in its discretion
may determine or provide in the Option Agreement. The Company shall not be
required to issue or deliver any certificates for shares of Common Stock, cash
or other property prior to (i) the listing of such shares on any stock exchange,
NASDAQ or other public market on which the Common Stock may then be listed (or
regularly traded), (ii) the completion of any registration or qualification of
such shares under federal or state law, or any ruling or regulation of any
government body which the Committee determines to be necessary or advisable, and
(iii) the satisfaction of any applicable withholding obligation in order for the
Company or an Affiliate to obtain a deduction with respect to the exercise of an
Option. The Company may cause any certificate for any share of Common Stock to
be delivered to be properly marked with a legend or other notation reflecting
the limitations on transfer of such Common Stock as provided in the Plan or as
the Committee may otherwise require. The Committee may require any person
exercising an Option to make such representations and furnish such information
as it may consider appropriate in connection with the issuance or delivery of
the shares of Common Stock in compliance with applicable law or otherwise.
Fractional shares shall not be delivered, but shall be rounded to the next lower
whole number of shares.
4.4 Reasonable Efforts To Register. If there has been a Public Offering,
the Company will register under the Securities Act the Common Stock delivered or
deliverable pursuant to Options on Commission Form S-8 if available to the
Company for this purpose (or any successor or alternate form that is
substantially similar to that
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form to the extent available to effect such registration), in accordance with
the rules and regulations governing such forms, as soon as such forms are
available for registration to the Company for this purpose. The Company will
use its reasonable efforts to cause the registration statement to become
effective as soon as possible and will file such supplements and amendments to
the registration statement as may be necessary to keep the registration
statement in effect until the earliest of (a) one year following the expiration
of the Option Period of the last Option outstanding, (b) the date the Company is
no longer a reporting company under the Exchange Act and (c) the date all
Participants have disposed of all shares delivered pursuant to any Option. The
Company may delay the foregoing obligation if the Committee reasonably
determines that any such registration would materially and adversely affect the
Company's interests or if there is no material benefit to Participants.
4.5 Stockholder Rights. No person shall have any rights of a stockholder
as to shares of Common Stock subject to an Option until, after proper exercise
of the Option or other action required, such shares shall have been recorded on
the Company's official stockholder records as having been issued and
transferred. Upon exercise of the Option or any portion thereof, the Company
will have a reasonable time in which to issue the shares, and the Participant
will not be treated as a stockholder for any purpose whatsoever prior to such
issuance. No adjustment shall be made for dividends or other rights for which
the record date is prior to the date such shares are recorded as issued and
transferred in the Company's official stockholder records, except as provided
herein or in an Agreement.
ARTICLE V
---------
OPTIONS
-------
5.1 Eligibility. Each Director shall be granted Options to purchase
shares of Common Stock as provided herein.
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<PAGE>
5.2 Grant and Exercise. Each person who is a Director on the effective
date of the initial Public Offering shall become a Participant and shall be
granted an Option on the effective date of the initial Public Offering to
purchase twenty thousand (20,000) shares of Common Stock without further action
by the Board or the Committee. Subsequent to a Public Offering, each person
other than a person who is a Director on the effective date of the Company's
initial Public Offering who is subsequently elected as a Director shall become a
Participant and shall, on his or her date of election and on each anniversary
thereof for as long as such person remains a Director, without further action by
the Board or the Committee, be granted an option to purchase five thousand
(5,000) shares of Common Stock. If the number of shares of Common Stock
available to grant under the Plan on a scheduled date of grant is insufficient
to make all automatic grants required to be made pursuant to the Plan on such
date, then each eligible Director shall receive an Option to purchase a pro rata
number of the remaining shares of Common Stock available under the Plan;
provided further, however, that if such proration results in fractional shares
of Common Stock, then such Option shall be rounded down to the nearest number of
whole shares of Common Stock. If there is no whole number of shares remaining to
be granted, then no grants shall be made under the Plan. Each Option granted
under the Plan shall be evidenced by an Agreement, in a form approved by the
Committee, which shall embody the terms and conditions of such Option and which
shall be subject to the express terms and conditions set forth in the Plan. Such
Agreement shall become effective upon execution by the Participant.
5.3 Terms and Conditions. Options shall be subject to such terms and
conditions as shall be determined by the Committee, including in each case the
following:
(a) Option Period. The Option Period of each Option shall be five (5)
years.
(b) Option Price. The Option Price per share of the Common Stock
purchasable under an Option shall be (1) with respect to persons who are
Participants on the date of the initial Public Offering, the Fair Market Value
and (2) with respect to all other Participants, unless the Committee determines
otherwise, the lower of (i) the average Fair Market Value of the Common Stock
(per share) on the twenty (20) consecutive trading days ending coincident with
the Grant Date (or if the Grant Date is not a trading date, then ending
coincident with the last trading date preceding a Grant Date) and (ii) the Fair
Market Value per share on the Grant Date.
(c) Exercisability. Unless an earlier time is specified in an Agreement,
and subject to the provisions of Section 6.3, Options granted on the Effective
Date of a Public Offering shall become fully exercisable upon the Grant Date and
Options granted thereafter shall become exercisable on the first anniversary of
the Grant Date. An Option only shall be exercisable during the Option Period.
(d) Method of Exercise. Subject to the provisions of this Article V, a
Participant may exercise Stock Options, in whole or in part, at any time during
the Option Period by the Participant's giving written notice of exercise on a
form provided by the Committee (if available) to the Company specifying the
number of shares of Common Stock subject to the Stock Option to be purchased.
Except when waived by the Committee, such notice shall be accompanied by payment
in full of the purchase price by cash or check or such other form of payment as
the Company may accept. If approved by the Committee (including approval at the
time of exercise), payment in full or in part may also be made (i) by delivering
Common Stock already owned by the Participant having a total Fair Market Value
on the date of such delivery equal to the Option Price; (ii) by the execution
and delivery of a note or other
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evidence of indebtedness (and any security agreement thereunder) satisfactory to
the Committee and permitted in accordance with Section 5.3(e); (iii) by
authorizing the Company to retain shares of Common Stock which would otherwise
be issuable upon exercise of the Option having a total Fair Market Value on the
date of delivery equal to the Option Price; (iv) by the delivery of cash or the
extension of credit by a broker-dealer to whom the Participant has submitted a
notice of exercise or otherwise indicated an intent to exercise an Option (in
accordance with Part 220, Chapter II, Title 12 of the Code of Federal
Regulations, so-called "cashless" exercise); (v) by certifying ownership of
shares of Common Stock owned by the Participant to the satisfaction of the
Committee for later delivery to the Company as specified by the Committee; (vi)
by certifying ownership of shares of Common Stock by the Participant to the
satisfaction of the Committee for later delivery to the company as specified by
the committee; or (vii) by any combination of the foregoing or by any other
method permitted by the Committee.
(e) Nontransferability of Options. Except as provided herein or in an
Agreement, no Option or interest therein shall be transferable by the
Participant other than by will or by the laws of descent and distribution, and
all Options shall be exercisable during the Participant's lifetime only by the
Participant. If and to the extent transferability is permitted by Rule 16b-3
and except as otherwise provided herein or by an Agreement, every Option granted
hereunder shall be freely transferable, but only if such transfer does not
result in liability under Section 16 of the Exchange Act to the Participant or
other Participants and is consistent with registration of the Option and sale of
Common Stock on Form S-8 (or a successor form) or the Committee's waiver of such
condition.
5.4 Termination. Unless otherwise provided in an Agreement or determined by
the Committee, if a Participant ceases to be a Director due to death, any
unexpired and unexercised Stock Option held by such Participant shall thereafter
be fully exercisable for a period of one (1) year following the date of the
appointment of a Representative (or such other period or no period as the
Committee may specify) or until the expiration of the Option Period, whichever
period is the shorter. Unless otherwise provided in an Agreement or determined
by the Committee, if a Participant ceases to be a Director due to a Disability,
any unexpired and unexercised Stock Option held by such Participant shall
thereafter be fully exercisable by the Participant for the period of one (1)
year (or such other period or no period as the Committee may specify)
immediately following the date the Participant ceases to be a Director or until
the expiration of the Option Period, whichever period is shorter, and the
Participant's death at any time following the date the Participant ceases to be
a Director due to Disability shall not affect the foregoing.
Unless otherwise provided in an Agreement or determined by the Committee, if
a Participant's directorship is terminated for any reason other than due to the
Participant's death or Disability, any Option held by such Participant shall
terminate ninety (90) days after the date such person ceases to be a Director.
Unless otherwise provided in an Agreement, the death or Disability of a
Participant after a termination of Directorship otherwise provided herein shall
not extend the exercisability of the time permitted to exercise an Option.
ARTICLE VI
----------
MISCELLANEOUS
-------------
6.1 Amendments and Termination.
The Board may amend, alter or discontinue the Plan at any time, but no
amendment, alteration or discontinuation shall be made which would (a) impair
the rights of a Participant under a Stock Option, theretofore granted without
the Participant's consent, except such an amendment (a) made to avoid an expense
charge to the Company or an Affiliate, (b) made to cause the Plan to qualify for
the exemption provided by Rule 16b-3, (c) to prevent the Plan from being
disqualified from the exemption provided by Rule 16b-3, or (d) made to permit
the Company a deduction under the Code. In addition, no such amendment shall be
made without the approval of the Company's stockholders to the extent such
approval is required by law or agreement.
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Notwithstanding the foregoing, the Plan may not be amended more often than
permitted to comply with Rule 16b-3, other than to comport with changes in the
Code or Rule 16b-3.
The Committee may amend the Plan at any time subject to the same
limitations (and exceptions to limitations) as applied to the Board and further
subject to any approval or limitations the Board may impose.
The Committee may amend the terms of any Stock Option theretofore granted,
prospectively or retroactively, but no such amendment shall impair the rights of
any Participant without the Participant's consent or reduce an Option Price,
except such an amendment made to cause the Plan or Award to qualify for the
exemption provided by Rule 16b-3, avoid an expense charge to the Company or an
Affiliate or qualify for a deduction. The Committee's discretion to amend the
Plan or Agreement shall be consistent with Rule 16b-3.
Subject to the above provisions, the Board shall have authority to amend
the Plan, to take into account changes in law and tax and accounting rules, as
well as other developments, and to grant Stock Options which qualify for
beneficial treatment under such rules without stockholder approval.
Notwithstanding anything in the Plan to the contrary, if any right under this
Plan would cause a transaction to be ineligible for pooling of interest
accounting that would, but for the right hereunder, be eligible for such
accounting treatment, the Committee may modify or adjust the right so that
pooling of interest accounting is available.
6.2 General Provisions.
(a) Representation. The Committee may require each person purchasing or
receiving shares pursuant to an Option to represent to and agree with the
Company in writing that such person is acquiring the shares without a view to
the distribution thereof in violation of the Securities Act. The certificates
for such shares may include any legend which the Committee deems appropriate to
reflect any restrictions on transfer.
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<PAGE>
(b) Withholding. If determined to be required to protect the Company, no
later than the date as of which an amount first becomes includable in the gross
income of the Participant for Federal income tax purposes with respect to any
Option, the Participant shall pay to the Company (or other entity identified by
the Committee), or make arrangements satisfactory to the Company or other entity
identified by the Committee regarding the payment of, any Federal, state, local
or foreign taxes of any kind required by law to be withheld with respect to such
amount. Unless otherwise determined by the Committee, withholding obligations
may be settled with Common Stock, including Common Stock that is part of the
Option that gives rise to the withholding requirement, provided that any
applicable requirements under Section 16 of the Exchange Act are satisfied. The
obligations of the Company under the Plan shall be conditional on such payment
or arrangements, and the Company and its Affiliates shall, to the extent
permitted by law, have the right to deduct any such taxes from any payment
otherwise due to the Participant.
(c) Controlling Law. The Plan and all Options made and actions taken
thereunder shall be governed by and construed in accordance with the laws of the
State of Illinois (other than its law respecting choice of law) except to the
extent the General Corporation Law of the State of Delaware would be mandatorily
applicable. The Plan shall be construed to comply with all applicable law, and
to avoid liability to the Company, an Affiliate or a Participant, including,
without limitation, liability under Section 16(b) of the Exchange Act.
(d) Offset. Any amounts owed to the Company or an Affiliate by the
Participant of whatever nature may be offset by the Company from the value of
any shares of Common Stock, cash or other thing of value under the Plan or an
Agreement to be transferred to the Participant, and no shares of Common Stock,
cash or other thing of value under the Plan or an Agreement shall be transferred
unless and until all disputes between the Company and the Participant have been
fully and finally resolved and the Participant has waived all claims to such
against the Company or an Affiliate.
(e) Fail-Safe. With respect to persons subject to Section 16 of the
Exchange Act, transactions under this Plan are intended to comply with all
applicable conditions of Rule 16b-3 or Rule 16a-1(c)(3). To the extent 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. Moreover, in the event the Plan does not include a provision
required by Rule 16b-3 or Rule 16a-1(c)(3) to be stated therein, such provision
(other than one relating to eligibility requirements, or the price and amount of
Options) shall be deemed to be incorporated by reference into the Plan with
respect to Participants subject to Section 16.
(f) Capitalization. The grant of an Award shall in no way affect the right
of the Company to adjust, reclassify, reorganize or otherwise change its capital
or business structure or to merge, consolidate, dissolve, liquidate or sell or
transfer all or any part of its business or assets.
6.3 Special Provisions Regarding a Change in Control.
Notwithstanding any other provision of the Plan to the contrary, unless
otherwise provided in an Agreement, in the event of a Change in Control:
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(a) Any Stock Options outstanding as of the date of such Change in Control
and not then exercisable shall become fully exercisable to the full extent of
the original grant;
(b) The Committee shall have full discretion, notwithstanding anything
herein or in an Option Agreement to the contrary, to do any or all of the
following with respect to an outstanding Stock Option;
(1) To cause any Stock Option to be cancelled, provided notice of at
least 15 days thereof is provided before the date of cancellation;
(2) To provide that the securities of another entity be substituted
hereunder for the Common Stock and to make equitable adjustment
with respect thereto;
(3) To grant the Participant by giving notice during a pre-set period
to surrender all or part of a Stock Option to the Company and to
receive cash in an amount equal to the amount by which the "Change
in Control Price" (as defined in Section 6.3(c)) per share of
Common Stock on the date of such election shall exceed the amount
which the Participant must pay to exercise the Option per share of
Common Stock, under the Option (the "Spread") multiplied by the
number of shares of Common Stock granted under the Option;
(4) To require the assumption of the obligation of the Company under
the Plan subject to appropriate adjustment; and
(5) To take any other action the Committee determines to take.
(c) For purposes of this Section, "Change in Control Price" means the
higher of (i) the highest reported sales price of a share of Common Stock in any
transaction reported on the principal exchange on which such shares are listed
or on NASDAQ during the sixty (60)-day period prior to and including the date of
a Change in Control, or (ii) if the Change in Control is the result of a
corporate transaction, the highest price per share of Common Stock paid in such
tender or exchange offer or a corporate transaction. To the extent that the
consideration paid in any such transaction described above consists all or in
part of securities or other non-cash consideration, the value of such securities
or other non-cash consideration shall be determined in the sole discretion of
the Committee.
6.4 Delay. If at the time, the Participant is subject to "short-swing"
liability under Section 16 of the Exchange Act, any time period provided for
under the Plan, to the extent necessary to avoid the imposition of liability,
shall be suspended and delayed during the period the Participant would be
subject to such liability.
6.5 Headings. The headings contained in the Plan are for reference
purposes only and shall not affect the meaning or interpretation of the Plan.
6.6 Severability. If any provision of the Plan shall for any reason be
held to be invalid or unenforceable, such invalidity or unenforceability shall
not effect any other provision hereby, and the Plan shall be construed as if
such invalid or unenforceable provision were omitted.
6.7 Successors and Assigns. The Plan shall inure to the benefit of and be
binding upon each successor and assign of the Company. All obligations imposed
upon a Participant, and all rights granted to the Company hereunder, shall be
binding upon the Participant's heirs, legal representatives and successors.
6.8 Entire Agreement. The Plan and the Agreement constitute the entire
agreement with respect to the subject matter hereof and thereof, provided that
in the event of any inconsistency between the Plan and the Agreement, the terms
and conditions of the Plan shall control.
12
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Executed effective as of the 29th day of May, 1996.
THE LEAP GROUP, INC.
By: /s/ R. Steven Lutterbach
-----------------------------
R. Steven Lutterbach
Chief Executive Officer
13
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Exhibit 4.5
THE LEAP GROUP, INC.
EMPLOYEE INCENTIVE COMPENSATION PLAN
ARTICLE I
---------
ESTABLISHMENT
-------------
1.1 Purpose.
-------
The Leap Group, Inc. Employee Incentive Compensation Plan ("Plan") is
hereby established by The Leap Group, Inc. ("Company"), effective May 29, 1996.
The purpose of the Plan is to promote the overall financial objectives of the
Company and its stockholders by motivating those persons selected to participate
in the Plan to achieve long-term growth in stockholder equity in the Company and
by retaining the association of those individuals who are instrumental in
achieving this growth. The Plan and the grant of awards thereunder are expressly
conditioned upon the Plan's approval by the stockholders of the Company. If such
approval is not obtained, then this Plan and all Awards (as defined herein)
shall be null and void ab initio.
ARTICLE II
----------
DEFINITIONS
-----------
For purposes of the Plan, the following terms are defined as set forth
below:
2.1 "Affiliate" means any individual, corporation, partnership,
association, limited liability company, joint-stock company, trust,
unincorporated association or other entity (other than the Company) that
directly, or indirectly through one or more intermediaries, controls, is
controlled by, or is under common control with, the Company including, without
limitation, any member of an affiliated group of which the Company is a common
parent corporation as provided in Section 1504 of the Code.
2.2 "Agreement" or "Award Agreement" means, individually or
collectively, any agreement entered into pursuant to the Plan pursuant to which
an Award is granted to a Participant.
2.3 "Award" means any Option, SAR, Restricted Stock, Deferred Stock,
Stock, Dividend Equivalent, Other Stock-Based Award, Performance Award or Cash
Incentive Award, together with any other right or interest granted to a
Participant under the Plan.
<PAGE>
2.4 "Beneficiary" means the person, persons, trust or trusts which have
been designated by a Participant in his or her most recent written beneficiary
designation filed with the Committee to receive the benefits specified under the
Plan upon such Participant's death or to which Awards or other rights are
transferred if and to the extent permitted hereunder. If, upon a Participant's
death, there is no designated Beneficiary or surviving designated Beneficiary,
then the term Beneficiary means the person, persons, trust or trusts entitled by
will or the laws of descent and distribution to receive such benefits.
2.5 "Board of Directors" or "Board" means the Board of Directors of the
Company.
2.6 "Cash Incentive Award" means a conditional right granted to a
Participant under Section 10.4(c) hereof to receive a cash payment, unless
otherwise determined by the Committee, after the end of a specified period.
2.7 "Cause" shall mean, for purposes of whether and when a Participant
has incurred a Termination of Employment for Cause, any act or omission which
permits the Company to terminate the written agreement or arrangement between
the Participant and the Company or an Affiliate for "cause" as defined in such
agreement or arrangement, or in the event there is no such agreement or
arrangement or the agreement or arrangement does not define the term "cause" or
a substantially equivalent term, then Cause shall consist of the following:
Participant's conviction on a felony charge or Participant's commission of any
crime involving moral turpitude; Participant's dishonesty or fraud resulting in
damage to the business of the Company or an Affiliate; Participant's
embezzlement or theft of assets from the Company or an Affiliate; in the sole
discretion of the Company, Participant's grossly negligent conduct,
Participant's course of personal conduct of an illegal or unethical nature which
tends to place the Company or an Affiliate in disrepute, or otherwise negatively
affects the ability of the Company or an Affiliate to conduct its business;
Participant's competition with the Company or aid to a competitor of the Company
to the detriment of the Company; or a breach of this Agreement by Participant,
including failure to perform duties and services to the Company or an Affiliate.
In the event Participant is arrested for any of the types of matters above, the
Company may place Participant on suspension without pay until such matter is
dismissed or Participant is convicted.
2.8 "Change in Control" and "Change in Control Price" have the meanings
set forth in Sections 12.2 and 12.3, respectively.
2.9 "Code" or "Internal Revenue Code" means the Internal Revenue Code of
1986, as amended, Treasury Regulations (including proposed regulations)
thereunder and any subsequent Internal Revenue Code.
2.10 "Commission" means the Securities and Exchange Commission or any
successor agency.
2.11 "Committee" means the person or persons appointed to administer this
Plan, as further described herein.
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2.12 "Common Stock" means the shares of the regular voting Common Stock,
$.01 par value, whether presently or hereafter issued, and any other stock or
security resulting from adjustment thereof as described hereinafter or the
common stock of any successor to the Company which is designated for the purpose
of the Plan.
2.13 "Company" means The Leap Group, Inc., a Delaware corporation, and
includes any successor or assignee corporation or corporations into which the
Company may be merged, changed or consolidated; any corporation for whose
securities all or substantially all of the securities of the Company shall be
exchanged; and any assignee of or successor to substantially all of the assets
of the Company.
2.14 "Covered Employee" means a Participant who is a "covered employee"
within the meaning of Section 162(m) of the Code.
2.15 "Deferred Stock" means a right, granted to a Participant under
Section 9.1 hereof, to receive Common Stock, cash or a combination thereof at
the end of a specified deferral period.
2.16 "Disability" means a mental or physical illness that entitles the
Participant to receive benefits under the long-term disability plan of the
Company or an Affiliate, or if the Participant is not covered by such a plan or
the Participant is not an employee of the Company or an Affiliate or a long-term
disability plan has not been adopted by the Company or an Affiliate, a mental or
physical illness that renders a Participant totally and permanently incapable of
performing the Participant's duties for the Company or an Affiliate.
Notwithstanding the foregoing, a Disability shall not qualify under this Plan if
it is the result of (i) a willfully self-inflicted injury or willfully self-
induced sickness; or (ii) an injury or disease contracted, suffered, or incurred
while participating in a criminal offense. The determination of Disability shall
be made by the Committee. The determination of Disability for purposes of this
Plan shall not be construed to be an admission of disability for any other
purpose.
2.17 "Disinterested Person" shall have the meaning set forth in Rule 16b-
3, or any successor definition adopted by the Commission, and shall mean a
person who is also an "outside director" under Section 162(m) of the Code.
2.18 "Dividend Equivalent" means a right, granted to a Participant under
Section 10.2, to receive cash, Common Stock, other Awards or other property
equal in value to dividends paid with respect to a specified number of shares of
Common Stock.
2.19 "Effective Date" means May 29, 1996.
2.20 "Exchange Act" means the Securities Exchange Act of 1934, as amended,
and the rules and regulations promulgated thereunder.
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2.21 "Fair Market Value" means the fair market value of Common Stock,
Awards, or other property as determined by the Committee or under procedures
established by the Committee. Unless otherwise determined by the Committee, the
Fair Market Value per share of Common Stock as of any given date shall be the
closing sale price per share reported on a consolidated basis for stock listed
on the principal stock exchange or market on which Common Stock is traded on the
date as of which such value is being determined or, if there is no sale on that
date, then on the last previous day on which a sale was reported.
2.22 "Grant Date" means the date as of which an Award is granted pursuant
to the Plan.
2.23 "Incentive Stock Option" means any Stock Option intended to be and
designated as an "incentive stock option" within the meaning of Section 422 of
the Code.
2.24 "NASDAQ" means The Nasdaq Stock Market, including the Nasdaq National
Market.
2.25 "Non-Qualified Stock Option" means an Option to purchase Common Stock
in the Company granted under the Plan, the taxation of which is pursuant to
Section 83 of the Code.
2.26 "Option" or "Stock Option" means a right, granted to a Participant
under Section 6.1 hereof, to purchase Common Stock or other Awards at a
specified price during specified time periods.
2.27 "Option Period" means the period during which an Option shall be
exercisable in accordance with the related Agreement and Article VI.
2.28 "Option Price" means the price at which the Common Stock may be
purchased under an Option as provided in Section 6.3(b).
2.29 "Other Stock Based Awards" means Awards granted to a Participant
under Section 10.3 hereof.
2.30 "Participant" means a person who satisfies the eligibility conditions
of Article V and to whom an Award has been granted by the Committee under the
Plan, and in the event a Representative is appointed for a Participant or
another person becomes a Representative, then the term "Participant" shall mean
such Representative. The term shall also include a trust for the benefit of the
Participant, a partnership the interest of which is held by or for the benefit
of the Participant, the Participant's parents, spouse or descendants, or a
custodian under a uniform gifts to
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minors act or similar statute for the benefit of the Participant's descendants,
to the extent permitted by the Committee and not inconsistent with Rule 16b-3 or
the status of the Option as an Incentive Stock Option, to the extent intended.
Notwithstanding the foregoing, the term "Termination of Employment" shall mean
the Termination of Employment of the person to whom the Award was originally
granted.
2.31 "Performance Award" means a right, granted to a Participant under
Section 10.4 hereof, to receive Awards based upon performance criteria specified
by the Committee.
2.32 "Plan" means The Leap Group Inc. Employee Incentive Compensation
Plan, as herein set forth and as amended from time to time.
2.33 "Representative" means (a) the person or entity acting as the
executor or administrator of a Participant's estate pursuant to the last will
and testament of a Participant or pursuant to the laws of the jurisdiction in
which the Participant had the Participant's primary residence at the date of the
Participant's death; (b) the person or entity acting as the guardian or
temporary guardian of a Participant; (c) the person or entity which is the
Beneficiary of the Participant upon or following the Participant's death; or (d)
any person to whom an Option has been transferred with the permission of the
Committee or by operation of law; provided that only one of the foregoing shall
be the Representative at any point in time as determined under applicable law
and recognized by the Committee.
2.34 "Restricted Stock" means Common Stock granted to a Participant under
Section 8.1 hereof, that is subject to certain restrictions and to a risk of
forfeiture.
2.35 "Retirement" means the Participant's Termination of Employment after
attaining either the normal retirement age or the early retirement age as
defined in the principal (as determined by the Committee) tax-qualified plan of
the Company or an Affiliate, if the Participant is covered by such a plan, or if
the Participant is not covered by such a plan, then age 65, or age 55 with the
accrual of 10 years of service.
2.36 "Rule 16b-3" and "Rule 16a-1(c)(3)" mean Rule 16b-3 and Rule
16a-1(c)(3), as from time to time in effect and applicable to the Plan and
Participants, promulgated by the Securities and Exchange Commission under
Section 16 of the Exchange Act.
2.37 "Securities Act" means the Securities Act of 1933, as amended, and
the rules and regulations promulgated thereunder.
2.38 "Stock Appreciation Right" means a right granted under Article VII.
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2.39 "Termination of Employment" means the occurrence of any act or event,
whether pursuant to an employment agreement or otherwise, that actually or
effectively causes or results in the person's ceasing, for whatever reason, to
be an officer, independent contractor, director or employee of the Company or of
any Affiliate of the Company, or ceasing to be an officer, independent
contractor, director or employee of any entity that provides services to the
Company or a Affiliate of the Company, including, without limitation, death,
Disability, dismissal, severance at the election of the Participant, Retirement,
or severance as a result of the discontinuance, liquidation, sale or transfer by
the Company or its Affiliates of all businesses owned or operated by the Company
or its Affiliates. With respect to any person who is not an employee with
respect to the Company or a Affiliate of the Company, the Agreement shall
establish what act or event shall constitute a Termination of Employment for
purposes of the Plan. A transfer of employment from the Company to a Affiliate,
or from a Affiliate to the Company, will not be a Termination of Employment,
unless expressly determined by the Committee. A Termination of Employment shall
occur for an employee who is employed by a Affiliate of the company if the
Affiliate shall cease to be a Affiliate and the Participant shall not
immediately thereafter become an employee of the Company or a Affiliate of the
Company.
In addition, certain other terms used herein have definitions given to them
in the first place in which they are used.
ARTICLE III
-----------
ADMINISTRATION
--------------
3.1 Committee Structure and Authority. Prior to the date of the first
registration of an equity security of the Company under the Exchange Act (the
"Registration Date"), the Plan shall be administered by one or more members of
the Board of Directors (which shall constitute the Committee for purposes of the
Plan). From and after the Registration Date, the Plan shall be administered by
the Committee which shall be comprised of one or more persons. The Committee
shall be the Compensation Committee of the Board of Directors, unless such
committee does not exist or the Board establishes or identifies another
committee whose purpose is the administration of this Plan; provided that only
those members of the Compensation Committee who participate in the decision
relative to Awards under this Plan shall be deemed to be the "Committee" for
purposes of this Plan. The Committee shall be comprised of such number of
Disinterested Persons as is required for application of Rule 16b-3 and the
deduction of compensation under Section 162(m) of the Code, if applicable. In
the absence of an appointment, the Board or the portion thereof that is a
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Disinterested Person shall be the Committee. A majority of the Committee shall
constitute a quorum at any meeting thereof (including by telephone conference)
and the acts of a majority of the members present, or acts approved in writing
by a majority of the entire Committee without a meeting, shall be the acts of
the Committee for purposes of this Plan. The Committee may authorize any one or
more of its members or an officer of the Company to execute and deliver
documents on behalf of the Committee. A member of the Committee shall not
exercise any discretion respecting himself or herself under the Plan. The Board
shall have the authority to remove, replace or fill any vacancy of any member of
the Committee upon notice to the Committee and the affected member. Any member
of the Committee may resign upon notice to the Board. The Committee may
allocate among one or more of its members, or may delegate to one or more of its
agents, such duties and responsibilities as it determines.
Among other things, the Committee shall have the authority, subject to the
terms of the Plan and the limitation of section (c)(2)(ii) of Rule 16b-3 so that
the Plan is described in that section:
(a) to select those persons to whom Awards may be granted from time to
time;
(b) to determine whether and to what extent Awards or any combination
thereof are to be granted hereunder;
(c) to determine the number of shares of Common Stock to be covered by
each stock-based Award granted hereunder;
(d) to determine the terms and conditions of any Award granted
hereunder (including, but not limited to, the Option Price, the Option
Period, any exercise restriction or limitation and any exercise
acceleration, forfeiture or waiver regarding any Award, any shares of
Common Stock relating thereto, any performance criteria and the
satisfaction of each criteria);
(e) to adjust the terms and conditions, at any time or from time to
time, of any Award, subject to the limitations of Section 13.1;
(f) to determine to what extent and under what circumstances Common
Stock and other amounts payable with respect to an Award shall be deferred;
(g) to determine under what circumstances an Award may be settled in
cash or Common Stock;
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(h) to provide for the forms of Agreements to be utilized in
connection with the Plan;
(i) to determine whether a Participant has a Disability or a
Retirement;
(j) to determine what securities law requirements are applicable to
the Plan, Awards and the issuance of shares of Common Stock under the Plan
and to require of a Participant that appropriate action be taken with
respect to such requirements;
(k) to cancel, with the consent of the Participant or as otherwise
provided in the Plan or an Agreement, outstanding Awards;
(l) to interpret and make final determinations with respect to the
remaining number of shares of Common Stock available under this Plan;
(m) to require, as a condition of the exercise of an Award or the
issuance or transfer of a certificate of Common Stock, the withholding from
a Participant of the amount of any Federal, state or local taxes as may be
necessary in order for the Company or any other employer to obtain a
deduction or as may be otherwise required by law;
(n) to determine whether and with what effect a Participant has
incurred a Termination of Employment;
(o) to determine whether the Company or any other person has a right
or obligation to purchase Common Stock from a Participant and, if so, the
terms and conditions on which such Common Stock is to be purchased;
(p) to determine the restrictions or limitations on the transfer of
Common Stock;
(q) to determine whether an Award is to be adjusted, modified or
purchased, or is to become fully exercisable, under the Plan or the terms
of an Agreement;
(r) to determine the permissible methods of Award exercise and
payment, including cashless exercise arrangements;
(s) to adopt, amend and rescind such rules and regulations as, in its
opinion, may be advisable in the administration of the Plan; and
(t) to appoint and compensate agents, counsel, auditors or other
specialists to aid it in the discharge of its duties.
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The Committee shall have the authority to adopt, alter and repeal such
administrative rules, guidelines and practices governing the Plan as it shall,
from time to time, deem advisable, to interpret the terms and provisions of the
Plan and any Award issued under the Plan (and any Agreement) and to otherwise
supervise the administration of the Plan. The Committee's policies and
procedures may differ with respect to Awards granted at different times or to
different Participants.
Any determination made by the Committee pursuant to the provisions of the
Plan shall be made in its sole discretion, and in the case of any determination
relating to an Award, may be made at the time of the grant of the Award or,
unless in contravention of any express term of the Plan or an Agreement, at any
time thereafter. All decisions made by the Committee pursuant to the provisions
of the Plan shall be final and binding on all persons, including the Company and
Participants. No determination shall be subject to de novo review if challenged
in court.
ARTICLE IV
----------
STOCK SUBJECT TO PLAN
---------------------
4.1 Number of Shares. Subject to the adjustment under Section 4.6, the
total number of shares of Common Stock reserved and available for distribution
pursuant to Awards under the Plan shall be 2,000,000 shares of Common Stock
authorized for issuance on the Effective Date. Such shares may consist, in
whole or in part, of authorized and unissued shares or treasury shares.
4.2 Release of Shares. The Committee shall have full authority to determine
the number of shares of Common Stock available for Award, and in its discretion
may include (without limitation) as available for distribution any shares of
Common Stock that have ceased to be subject to an Award, any shares of Common
Stock subject to any Award that are forfeited, any Award that otherwise
terminates without issuance of shares of Common Stock being made to the
Participant, or any shares (whether or not restricted) of Common Stock that are
received by the Company in connection with the exercise of an Award, including
the satisfaction of any tax liability or the satisfaction of a tax withholding
obligation. If any shares could not again be available for Options to a
particular Participant under applicable law, such shares shall be available
exclusively for Options to Participants who are not subject to such limitations.
4.3 Restrictions on Shares. Shares of Common Stock issued as or in
conjunction with an Award shall be subject to the terms and conditions specified
herein and to such other terms, conditions and restrictions as the Committee in
its discretion may determine or provide in an Award Agreement. The Company shall
not be required to issue or deliver any certificates for shares of Common Stock,
cash or
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other property prior to (i) the listing of such shares on any stock exchange or
NASDAQ (or other public market) on which the Common Stock may then be listed (or
regularly traded), (ii) the completion of any registration or qualification of
such shares under Federal or state law, or any ruling or regulation of any
government body which the Committee determines to be necessary or advisable, and
(iii) the satisfaction of any applicable withholding obligation in order for the
Company or an Affiliate to obtain a deduction with respect to the exercise of an
Award. The Company may cause any certificate for any share of Common Stock to be
delivered to be properly marked with a legend or other notation reflecting the
limitations on transfer of such Common Stock as provided in this Plan or as the
Committee may otherwise require. The Committee may require any person exercising
an Award to make such representations and furnish such information as it may
consider appropriate in connection with the issuance or delivery of the shares
of Common Stock in compliance with applicable law or otherwise. Fractional
shares shall not be delivered, but shall be rounded to the next lower whole
number of shares.
4.4 Stockholder Rights. No person shall have any rights of a stockholder as
to shares of Common Stock subject to an Award until, after proper exercise of
the Award or other action required, such shares shall have been recorded on the
Company's official stockholder records as having been issued and transferred.
Upon exercise of the Award or any portion thereof, the Company will have a
reasonable time in which to issue the shares, and the Participant will not be
treated as a stockholder for any purpose whatsoever prior to such issuance. No
adjustment shall be made for cash dividends or other rights for which the record
date is prior to the date such shares are recorded as issued and transferred in
the Company's official stockholder records, except as provided herein or in an
Agreement.
4.5 Best Efforts To Register. After the initial public offering of
shares of Common Stock under the Securities Act, the Company will register
under the Securities Act the Common Stock delivered or deliverable pursuant to
Awards on Commission Form S-8 if available to the Company for this purpose (or
any successor or alternate form that is substantially similar to that form to
the extent available to effect such registration), in accordance with the rules
and regulations governing such forms, as soon after stockholder approval of the
Plan as the Committee, in its sole discretion, shall deem such registration
appropriate. The Company will use its best efforts to cause the registration
statement to become effective and will file such supplements and amendments to
the registration statement as may be necessary to keep the registration
statement in effect until the earliest of (a) one year following the expiration
of the Option Period of the last Option outstanding, (b) the date the Company is
no longer a reporting company under the Exchange Act and (c) the date all
Participants have disposed of all shares delivered pursuant to any Award.
4.6 Anti-Dilution. In the event of any Company stock dividend, stock split,
reverse stock split, combination or exchange of shares, recapitalization or
other change in the capital structure of the Company, corporate separation or
division of the
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Company (including, but not limited to, a split-up, spin-off, split-off or
distribution to Company stockholders other than a normal cash dividend), sale by
the Company of all or a substantial portion of its assets (measured on either a
stand-alone or consolidated basis), reorganization, rights offering, a partial
or complete liquidation, or any other corporate transaction, Company stock
offering or event involving the Company and having an effect similar to any of
the foregoing, then the Committee may adjust or substitute, as the case may
be, the number of shares of Common Stock available for Awards under the Plan,
the number of shares of Common Stock covered by outstanding Awards, the maximum
number of Awards available for grant to any Participant for a stated period of
time (including the maximum number of Stock Appreciation Rights), the exercise
price per share of outstanding Awards, and performance conditions and any other
characteristics or terms of the Awards as the Committee shall deem necessary or
appropriate to reflect equitably the effects of such changes to the
Participants; provided, however, that the Committee may limit any such
adjustment so as to maintain the deductibility of the Awards under Section
162(m) of the Code, if applicable, and that any fractional shares resulting from
such adjustment shall be eliminated by rounding to the next lower whole number
of shares with appropriate payment for such fractional shares as shall
reasonably be determined by the Committee.
ARTICLE V
ELIGIBILITY
5.1 Eligibility. Except as herein provided, the persons who shall be
eligible to participate in the Plan and be granted Awards shall be those persons
who are directors, officers, employees and consultants of the Company or any
subsidiary of the Company, who shall be in a position, in the opinion of the
Committee, to make contributions to the growth, management, protection and
success of the Company and its subsidiaries. Of those persons described in the
preceding sentence, the Committee may, from time to time, select persons to be
granted Awards and shall determine the terms and conditions with respect
thereto. In making any such selection and in determining the form of the Award
with respect to Participants, the Committee may give consideration to the
person's functions and responsibilities, the person's contributions to the
Company and its subsidiaries, the value of the individual's service to the
Company and its subsidiaries and such other factors deemed relevant by the
Committee. The Committee may designate in writing any person who is not eligible
to participate in the Plan if such person would otherwise be eligible to
participate in this Plan (and members of the Committee are expressly excluded to
the extent such persons are intended to be Disinterested Persons).
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ARTICLE VI
----------
STOCK OPTIONS
-------------
6.1 General. The Committee shall have authority to grant Stock
Options under the Plan at any time or from time to time. Stock Options may be
granted alone or in addition to other Awards and may be either Incentive Stock
Options or Non-Qualified Stock Options. An Option shall entitle the Participant
to receive shares of Common Stock upon exercise of such Option, subject to the
Participant's satisfaction in full of any conditions, restrictions or
limitations imposed in accordance with the Plan or an Agreement (the terms and
provisions of which may differ from other Agreements), including, without
limitation, payment of the Option Price. During any calendar year, Options to
purchase no more than 500,000 shares of Common Stock shall be granted to any
Participant.
6.2 Grant and Exercise. The grant of a Stock Option shall occur as
of the date the Committee determines. Each Option granted under this Plan shall
be evidenced by an Agreement, in a form approved by the Committee, which shall
embody the terms and condition of such Option and which shall be subject to the
express terms and conditions set forth in the Plan. Such Agreement shall become
effective upon execution by the Participant. Only a person who is a common-law
employee of the Company, any parent corporation of the Company or a subsidiary
(as such terms are defined in Section 424 of the Code) on the date of grant
shall be eligible to be granted an Option which is intended to be and is an
Incentive Stock Option. To the extent that any Stock Option is not designated
as an Incentive Stock Option or even if so designated does not qualify as an
Incentive Stock Option, it shall constitute a Non-Qualified Stock Option.
6.3 Terms and Conditions. Stock Options shall be subject to such
terms and conditions as shall be determined by the Committee, including the
following:
(a) Option Period. The Option Period of each Stock Option shall be
fixed by the Committee; provided that no Stock Option shall be exercisable
more than ten (10) years after the date the Stock Option is granted. In
the case of an Incentive Stock Option granted to an individual who owns
more than ten percent (10%) of the combined voting power of all classes of
stock of the Company, a corporation which is a parent corporation of the
Company or any subsidiary of the Company (each as defined in Section 424 of
the Code), the Option Period shall not exceed five (5) years from the date
of grant. No Option
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which is intended to be an Incentive Stock Option shall be granted more
than ten (10) years from the date the Plan is adopted by the Company or the
date the Plan is approved by the stockholders of the Company, whichever is
earlier.
(b) Option Price. The Option Price per share of the Common Stock
purchasable under an Option shall be determined by the Committee; provided,
however, that the Option Price of an Incentive Stock Option shall be not
less than the Fair Market Value per share on the date the Option is
granted. If such Option is intended to qualify as an Incentive Stock Option
and is granted to an individual who owns or who is deemed to own stock
possessing more than ten percent (10%) of the combined voting power of all
classes of stock of the Company, a corporation which is a parent
corporation of the Company or any subsidiary of the Company (each as
defined in Section 424 of the Code), the Option Price per share shall not
be less than one hundred ten percent (110%) of such Fair Market Value per
share.
(c) Exercisability. Subject to Section 12.1, Stock Options shall be
exercisable at such time or times and subject to such terms and conditions
as shall be determined by the Committee. If the Committee provides that any
Stock Option is exercisable only in installments, the Committee may at any
time waive such installment exercise provisions, in whole or in part. In
addition, the Committee may at any time accelerate the exercisability of
any Stock Option. If the Committee intends that an Option be an Incentive
Stock Option, the Committee may, in its discretion, provide that the
aggregate Fair Market Value (determined at the Grant Date) of the Common
Stock as to which such Incentive Stock Option is exercisable for the first
time during any calendar year shall not exceed $100,000.
(d) Method of Exercise. Subject to the provisions of this Article VI,
a Participant may exercise Stock Options, in whole or in part, at any time
during the Option Period by the Participant's giving written notice of
exercise on a form provided by the Committee (if available) to the Company
specifying the number of shares of Common Stock subject to the Stock Option
to be purchased. Except when waived by the Committee, such notice shall be
accompanied by payment in full of the purchase price by cash or check or
such other form of payment as the Company may accept. If approved by the
Committee (including approval at the time of exercise), payment in full or
in part may also be made (i) by delivering Common Stock already owned by
the Participant having a total Fair Market Value on the date of such
delivery equal to the Option Price; (ii) by the execution and delivery of a
note or other evidence of indebtedness (and any security agreement
thereunder) satisfactory to the Committee and permitted in accordance with
Section 6.3(e); (iii) by authorizing the Company to retain shares of Common
Stock which would otherwise be issuable upon exercise of the Option having
a total Fair Market
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Value on the date of delivery equal to the Option Price; (iv) by the
delivery of cash or the extension of credit by a broker-dealer to whom the
Participant has submitted a notice of exercise or otherwise indicated an
intent to exercise an Option (in accordance with Part 220, Chapter II,
Title 12 of the Code of Federal Regulations, so-called "cashless"
exercise); or (v) by certifying ownership of shares of Common Stock by the
Participant to the satisfaction of the Committee for later delivery to the
Company as specified by the Committee; or by any combination of the
foregoing or by any other method permitted by the Committee. If payment of
the Option Price of a Stock Option is made in whole or in part in the form
of Restricted Stock or Deferred Stock, the number of shares of Common Stock
to be received upon such exercise that is equal to the number of shares of
Restricted Stock or Deferred Stock used for payment of the Option Price
shall be subject to the same forfeiture restrictions or deferral
limitations to which such Restricted Stock or Deferred Stock was subject,
unless otherwise determined by the Committee. In the case of an Incentive
Stock Option, the right to make a payment in the form of already owned
shares of Common Stock of the same class as the Common Stock subject to the
Stock Option may be authorized only at the time the Stock Option is
granted. No shares of Common Stock shall be issued until full payment
therefor, as determined by the Committee, has been made. Subject to any
forfeiture restrictions or deferral limitations that may apply if a Stock
Option is exercised using Restricted Stock or Deferred Stock, a Participant
shall have all of the rights of a stockholder of the Company holding the
class of Common Stock that is subject to such Stock Option (including, if
applicable, the right to vote the shares and the right to receive
dividends), when the Participant has given written notice of exercise, has
paid in full for such shares and such shares have been recorded on the
Company's official stockholder records as having been issued or
transferred.
(e) Company Loan or Guarantee. Upon the exercise of any Option and
subject to the pertinent Agreement and the discretion of the Committee, the
Company may at the request of the Participant:
(i) lend to the Participant an amount equal to such portion of
the Option Price as the Committee may determine; or
(ii) guarantee a loan obtained by the Participant from a third-
party for the purpose of tendering the Option Price.
The terms and conditions of any loan or guarantee, including the term,
interest rate and any security interest thereunder and whether the loan
shall be with recourse, shall be determined by the Committee, except that
no extension of credit or guarantee shall obligate the Company for an
amount to exceed the lesser of the aggregate Fair Market Value per share of
the Common Stock on
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applicable laws or the regulations and rules of the Federal Reserve Board
and any other governmental agency having jurisdiction.
(f) Non-transferability of Options. Except as provided herein or in
an Agreement and then only consistent with the intent that the Option be an
Incentive Stock Option, no Stock Option or interest therein shall be
transferable by the Participant other than by will or by the laws of
descent and distribution or by a designation of beneficiary effective upon
the death of the Participant, and all Stock Options shall be exercisable
during the Participant's lifetime only by the Participant. If and to the
extent transferability is permitted by Rule 16b-3 or does not result in
liability to any Participant and except as otherwise provided herein or by
an Agreement, every Option granted hereunder shall be freely transferable,
but only if such transfer does not result in liability under Section 16 of
the Exchange Act to the Participant or other Participants and is consistent
with registration of the Option and sale of Common Stock on Form S-8 (or a
successor form) or is consistent with the use of Form S-8 (or the
Committee's waiver of such condition) and consistent with an Award's
intended status as an Incentive Stock Option (as applicable).
6.4 Termination by Reason of Death. Unless otherwise provided in an
Agreement or determined by the Committee, if a Participant incurs a Termination
of Employment due to death, any unexpired and unexercised Stock Option held by
such Participant shall thereafter be fully exercisable for a period of one (1)
year following the date of the appointment of a Representative (or such other
period or no period as the Committee may specify) or until the expiration of the
Option Period, whichever period is the shorter.
6.5 Termination by Reason of Disability. Unless otherwise provided in an
Agreement or determined by the Committee, if a Participant incurs a Termination
of Employment due to a Disability, any unexpired and unexercised Stock Option
held by such Participant shall thereafter be fully exercisable by the
Participant for the period of one (1) year (or such other period or no period as
the Committee may specify) immediately following the date of such Termination of
Employment or until the expiration of the Option Period, whichever period is
shorter, and the Participant's death at any time following such Termination of
Employment due to Disability shall not affect the foregoing. In the event of
Termination of Employment by reason of Disability, if an Incentive Stock Option
is exercised after the expiration of the exercise periods that apply for
purposes of Section 422 of the Code, such Stock Option will thereafter be
treated as a Non-Qualified Stock Option.
6.6 Other Termination. Unless otherwise provided in an Agreement or
determined by the Committee, if a Participant incurs a Termination of Employment
due to Retirement, or the Termination of Employment is involuntary on the part
of the Participant (but is not due to death or Disability or with Cause), any
Stock Option held
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by such Participant shall thereupon terminate, except that such Stock Option, to
the extent then exercisable, may be exercised for the lesser of the ninety (90)
day period commencing with the date of such Termination of Employment or until
the expiration of the Option Period. Unless otherwise provided in an Agreement
or determined by the Committee, if the Participant incurs a Termination of
Employment which is either (a) voluntary on the part of the Participant (and is
not due to Retirement) or (b) with Cause, the Option shall terminate
immediately. Unless otherwise provided in an Agreement or determined by the
Committee, the death or Disability of a Participant after a Termination of
Employment otherwise provided herein shall not extend the time permitted to
exercise an Option.
6.7 Cashing Out of Option. On receipt of written notice of exercise, the
Committee may elect to cash out all or part of the portion of any Stock Option
to be exercised by paying the Participant an amount, in cash or Common Stock,
equal to the excess of the Fair Market Value of the Common Stock that is subject
to the Option over the Option Price times the number of shares of Common Stock
subject to the Option on the effective date of such cash-out. Cash-outs relating
to Options held by Participants who are actually or potentially subject to
Section 16(b) of the Exchange Act shall comply with the provisions of Rule 16b-
3, to the extent applicable.
ARTICLE VII
-----------
STOCK APPRECIATION RIGHTS
-------------------------
7.1 General. The Committee shall have authority to grant Stock
Appreciation Rights under the Plan at any time or from time to time. Subject to
the Participant's satisfaction in full of any conditions, restrictions or
limitations imposed in accordance with the Plan or an Agreement, a Stock
Appreciation Right shall entitle the Participant to surrender to the Company the
Stock Appreciation Right and to be paid therefor in shares of the Common Stock,
cash or a combination thereof as herein provided, the amount described in
Section 7.3(b).
7.2 Grant. Stock Appreciation Rights may be granted in conjunction with
all or part of any Stock Option granted under the Plan, in which case the
exercise of the Stock Appreciation Right shall require the cancellation of a
corresponding portion of the Stock Option, and the exercise of a Stock Option
shall result in the cancellation of a corresponding portion of the Stock
Appreciation Right. In the case of a Non-Qualified Stock Option, such rights
may be granted either at or after the time of grant
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of such Stock Option. In the case of an Incentive Stock Option, such rights may
be granted only at the time of grant of such Stock Option. A Stock Appreciation
Right may also be granted on a stand-alone basis. The grant of a Stock
Appreciation Right shall occur as of the date the Committee determines. Each
Stock Appreciation Right granted under this Plan shall be evidenced by an
Agreement, which shall embody the terms and conditions of such Stock
Appreciation Right and which shall be subject to the terms and conditions set
forth in this Plan. During any calendar year, Stock Appreciation Rights
covering no more than 500,000 shares of Common Stock shall be granted to any
Participant.
7.3 Terms and Conditions. Stock Appreciation Rights shall be subject to
such terms and conditions as shall be determined by the Committee, including the
following:
(a) Period and Exercise. The term of a Stock Appreciation Right shall
be established by the Committee. If granted in conjunction with a Stock
Option, the Stock Appreciation Right shall have a term which is the same as
the Option Period and shall be exercisable only at such time or times and
to the extent the related Stock Options would be exercisable in accordance
with the provisions of Article VI. A Stock Appreciation Right which is
granted on a stand-alone basis shall be for such period and shall be
exercisable at such times and to the extent provided in an Agreement.
Stock Appreciation Rights shall be exercised by the Participant's giving
written notice of exercise on a form provided by the Committee (if
available) to the Company specifying the portion of the Stock Appreciation
Right to be exercised.
(b) Amount. Upon the exercise of a Stock Appreciation Right granted
in conjunction with a Stock Option, a Participant shall be entitled to
receive an amount in cash, shares of Common Stock or both as determined by
the Committee or as otherwise permitted in an Agreement equal in value to
the excess of the Fair Market Value per share of Common Stock over the
Option Price per share of Common Stock specified in the related Agreement
multiplied by the number of shares in respect of which the Stock
Appreciation Right is exercised. In the case of a Stock Appreciation Right
granted on a stand-alone basis, the Agreement shall specify the value to be
used in lieu of the Option Price per share of Common Stock. The aggregate
Fair Market Value per share of the Common Stock shall be determined as of
the date of exercise of such Stock Appreciation Right.
(c) Special Rules. In the case of Stock Appreciation Rights held by
Participants who are actually or potentially subject to Section 16(b) of
the Exchange Act
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the Committee may require that such Stock Appreciation Rights be
exercised only in accordance with the provisions of Rule 16b-3.
(d) Non-transferability of Stock Appreciation Rights. Stock
Appreciation Rights shall be transferable only when and to the extent that
a Stock Option would be transferable under the Plan unless otherwise
provided in an Agreement.
(e) Termination. A Stock Appreciation Right shall terminate at such
time as a Stock Option would terminate under the Plan, unless otherwise
provided in an Agreement.
(f) Effect on Shares Under the Plan. Upon the exercise of a Stock
Appreciation Right, the Committee will equitably determine for the purpose
of the limitation set forth in Section 4.2 the number of shares of Common
Stock covered by the Stock Appreciation Right at the time of exercise.
(g) Incentive Stock Option. A Stock Appreciation Right granted in
tandem with an Incentive Stock Option shall not be exercisable unless the
Fair Market Value of the Common Stock on the date of exercise exceeds the
Option Price. In no event shall any amount paid pursuant to the Stock
Appreciation Right exceed the difference between the Fair Market Value on
the date of exercise and the Option Price.
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ARTICLE VIII
------------
RESTRICTED STOCK
----------------
8.1 General. The Committee shall have authority to grant Restricted
Stock under the Plan at any time or from time to time. Shares of Restricted
Stock may be awarded either alone or in addition to other Awards granted under
the Plan. The Committee shall determine the persons to whom and the time or
times at which grants of Restricted Stock will be awarded, the number of shares
of Restricted Stock to be awarded to any Participant, the time or times within
which such Awards may be subject to forfeiture and any other terms and
conditions of the Awards. Each Award shall be confirmed by, and be subject to
the terms of, an Agreement. The Committee may condition the grant of Restricted
Stock upon the attainment of specified performance goals by the Participant or
by the Company or an Affiliate (including a division or department of the
Company or an Affiliate) for or within which the Participant is primarily
employed or upon such other factors or criteria as the Committee shall
determine. The provisions of Restricted Stock Awards need not be the same with
respect to any Participant.
8.2 Awards and Certificates. Notwithstanding the limitations on
issuance of shares of Common Stock otherwise provided in the Plan, each
Participant receiving an Award of Restricted Stock shall be issued a certificate
in respect of such shares of Restricted Stock. Such certificate shall be
registered in the name of such Participant and shall bear an appropriate legend
referring to the terms, conditions, and restrictions applicable to such Award as
determined by the Committee. The Committee may require that the certificates
evidencing such shares be held in custody by the Company until the restrictions
thereon shall have lapsed and that, as a condition of any Award of Restricted
Stock, the Participant shall have delivered a stock power, endorsed in blank,
relating to the Common Stock covered by such Award.
8.3 Terms and Conditions. Shares of Restricted Stock shall be
subject to the following terms and conditions:
(a) Limitations on Transferability. Subject to the provisions of the
Plan and the Agreement, during a period set by the Committee commencing
with the date of such Award (the "Restriction Period"), the Participant
shall not be permitted to sell, assign, transfer, pledge or otherwise
encumber any interest in shares of Restricted Stock.
(b) Rights. Except as provided in Section 8.3(a), the Participant
shall have, with respect to the shares of Restricted Stock, all of the
rights of a stockholder of the Company holding the class of Common Stock
that is the subject of the Restricted Stock, including, if applicable, the
right to vote the
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shares and the right to receive any dividends. Unless otherwise determined
by the Committee and subject to the Plan, cash dividends on the class of
Common Stock that is the subject of the Restricted Stock shall be
automatically deferred and reinvested in additional Restricted Stock, and
dividends on the class of Common Stock that is the subject of the
Restricted Stock payable in Common Stock shall be paid in the form of
Restricted Stock of the same class as the Common Stock on which such
dividend was paid.
(c) Acceleration. Based on service, performance by the Participant or
by the Company or an Affiliate, including any division or department for
which the Participant is employed, or such other factors or criteria as the
Committee may determine, the Committee may provide for the lapse of
restrictions in installments and may accelerate the vesting of all or any
part of any Award and waive the restrictions for all or any part of such
Award.
(d) Forfeiture. Unless otherwise provided in an Agreement or
determined by the Committee, if the Participant incurs a Termination of
Employment during the Restriction Period due to death or Disability, the
restrictions shall lapse and the Participant shall be fully vested in the
Restricted Stock. Except to the extent otherwise provided in the
applicable Agreement and the Plan, upon a Participant's Termination of
Employment for any reason during the Restriction Period other than death or
Disability, all shares of Restricted Stock still subject to restriction
shall be forfeited by the Participant, except the Committee shall have the
discretion to waive in whole or in part any or all remaining restrictions
with respect to any or all of such Participant's shares of Restricted
Stock.
(e) Delivery. If and when the Restriction Period expires without a
prior forfeiture of the Restricted Stock subject to such Restriction
Period, unlegended certificates for such shares shall be delivered to the
Participant.
(f) Election. A Participant may elect to further defer receipt of the
Restricted Stock for a specified period or until a specified event, subject
in each case to the Committee's approval and to such terms as are
determined by the Committee. Subject to any exceptions adopted by the
Committee, such election must be made one (1) year prior to completion of
the Restriction Period.
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ARTICLE IX
----------
DEFERRED STOCK
--------------
9.1 General. The Committee shall have authority to grant Deferred
Stock under the Plan at any time or from time to time. Shares of Deferred Stock
may be awarded either alone or in addition to other Awards granted under the
Plan. The Committee shall determine the persons to whom and the time or times
at which Deferred Stock will be awarded, the number of shares of Deferred Stock
to be awarded to any Participant, the duration of the period (the "Deferral
Period") prior to which the Common Stock will be delivered, and the conditions
under which receipt of the Common Stock will be deferred and any other terms and
conditions of the Awards. Each Award shall be confirmed by, and be subject to
the terms of, an Agreement. The Committee may condition the grant of Deferred
Stock upon the attainment of specified performance goals by the Participant or
by the Company or an Affiliate, including a division or department of the
Company or an Affiliate for or within which the Participant is primarily
employed, or upon such other factors or criteria as the Committee shall
determine. The provisions of Deferred Stock Awards need not be the same with
respect to any Participant.
9.2 Terms and Conditions. Deferred Stock Awards shall be subject
to the following terms and conditions:
(a) Limitations on Transferability. Subject to the provisions of the
Plan and the Agreement, Deferred Stock Awards, or any interest therein, may
not be sold, assigned, transferred, pledged or otherwise encumbered during
the Deferral Period. At the expiration of the Deferral Period (or Elective
Deferral Period as defined in Section 9.2(e), where applicable), the
Committee may elect to deliver Common Stock, cash equal to the Fair Market
Value of such Common Stock or a combination of cash and Common Stock to the
Participant for the shares covered by the Deferred Stock Award.
(b) Rights. Unless otherwise determined by the Committee and subject
to the Plan, cash dividends on the Common Stock that is the subject of the
Deferred Stock Award shall be automatically deferred and reinvested in
additional Deferred Stock, and dividends on the Common Stock that is the
subject of the Deferred Stock Award payable in Common Stock shall be paid
in the form of Deferred Stock of the same class as the Common Stock on
which such dividend was paid.
(c) Acceleration. Based on service, performance by the Participant or
by the Company or the Affiliate, including any division or department for
which the Participant is employed, or such other factors or criteria as the
Committee may determine, the Committee may provide for the lapse of
deferral limitations
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in installments and may accelerate the vesting of all or any part of any
Award and waive the deferral limitations for all or any part of such Award.
(d) Forfeiture. Unless otherwise provided in an Agreement or
determined by the Committee, if the Participant incurs a Termination of
Employment during the Deferral Period due to death or Disability, the
restrictions shall lapse and the Participant shall be fully vested in the
Deferred Stock. Unless otherwise provided in an Agreement or determined by
the Committee, upon a Participant's Termination of Employment for any
reason during the Deferral Period other than death or Disability, the
rights to the shares still covered by the Award shall be forfeited by the
Participant, except the Committee shall have the discretion to waive in
whole or in part any or all remaining deferral limitations with respect to
any or all of such Participant's Deferred Stock.
(e) Election. A Participant may elect further to defer receipt of the
Deferred Stock payable under an Award (or an installment of an Award) for a
specified period or until a specified event (an "Elective Deferral
Period"), subject in each case to the Committee's approval and to such
terms as are determined by the Committee. Subject to any exceptions
adopted by the Committee, such election must be made at least one (1) year
prior to completion of the Deferral Period for the Award (or of the
applicable installment thereof).
ARTICLE X
---------
OTHER AWARDS
------------
10.1 Bonus Stock and Awards In Lieu of Obligations. The Committee is
authorized to grant Common Stock as a bonus, or to grant Common Stock or other
Awards in lieu of Company obligations to pay cash or deliver other property
under other plans or compensatory arrangements. Common Stock or Awards granted
hereunder shall be subject to such other terms as shall be determined by the
Committee.
10.2 Dividend Equivalents. The Committee is authorized to grant Dividend
Equivalents to a Participant, entitling the Participant to receive cash, Common
Stock, other Awards, or other property equal in value to dividends paid with
respect to a specified number of shares of Common Stock. Dividend Equivalents
may be awarded on a free-standing basis or in connection with another Award.
The Committee may provide that Dividend Equivalents will be paid or distributed
when accrued or will be deemed to have been reinvested in additional Common
Stock, Awards, or other
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investment vehicles, and subject to such restrictions on transferability and
risks of forfeiture, as the Committee may specify.
10.3 Other Stock-Based Awards. The Committee is authorized, subject to
limitations under applicable law, to grant to Participants such other Awards
that may be denominated or payable in, valued in whole or in part by reference
to, or otherwise based on, or related to, Common Stock, as deemed by the
Committee to be consistent with the purposes of the Plan, including, without
limitation, convertible or exchangeable debt securities, other rights
convertible or exchangeable into Common Stock, purchase rights for Common Stock,
Awards with value and payment contingent upon performance of the Company or any
other factors designated by the Committee, and Awards valued by reference to the
book value of Common Stock or the value of securities of or the performance of
specified Subsidiaries. The Committee shall determine the terms and conditions
of such Awards. Common Stock delivered pursuant to an Award in the nature of a
purchase right granted under this Section 10.3 shall be purchased for such
consideration, paid for at such times, by such methods, and in such forms,
including, without limitation, cash, Common Stock, other Awards, or other
property, as the Committee shall determine. Cash awards, as an element of or
supplement to any other Award under the Plan, may also be granted pursuant to
this Section 10.3.
10.4 Performance Awards.
(a) Performance Conditions. The right of a Participant to exercise or
receive a grant or settlement of any Award, and its timing, may be subject
to performance conditions specified by the Committee. The Committee may
use business criteria and other measures of performance it deems
appropriate in establishing any performance conditions, and may exercise
its discretion to reduce or increase the amounts payable under any Award
subject to performance conditions, except as limited under Sections 10.4(b)
and 10.4(c) hereof in the case of a Performance Award intended to qualify
under Code Section 162(m).
(b) Performance Awards Granted to Designated Covered Employees. If
the Committee determines that a Performance Award to be granted to a person
the Committee regards as likely to be a Covered Employee should qualify as
"performance-based compensation" for purposes of Code Section 162(m), the
grant and/or settlement of such Performance Award shall be contingent upon
achievement of preestablished performance goals and other terms set forth
in this Section 10.4(b).
(i) Performance Goals Generally. The performance goals for such
Performance Awards shall consist of one or more business criteria and
a targeted level or levels of performance with respect to such
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criteria, as specified by the Committee consistent with this Section
10.4(b). Performance goals shall be objective and shall otherwise
meet the requirements of Code Section 162(m), including the
requirement that the level or levels of performance targeted by the
Committee result in the performance goals being "substantially
uncertain." The Committee may determine that more than one
performance goal must be achieved as a condition to settlement of such
Performance Awards. Performance goals may differ for Performance
Awards granted to any one Participant or to different Participants.
(ii) Business Criteria. One or more of the following business
criteria for the Company, on a consolidated basis, and/or for
specified Affiliates or business units of the Company (except with
respect to the total stockholder return and earnings per share
criteria), shall be used exclusively by the Committee in establishing
performance goals for such Performance Awards: (1) total stockholder
return; (2) such total stockholder return as compared to total return
(on a comparable basis) of a publicly available index such as, but not
limited to, the Standard & Poor's 500 or the Nasdaq-U.S. Index; (3)
net income; (4) pre-tax earnings; (5) EBITDA; (6) pre-tax operating
earnings after interest expense and before bonuses, service fees, and
extraordinary or special items; (7) operating margin; (8) earnings per
share; (9) return on equity; (10) return on capital; (11) return on
investment; (12) operating income, before payment of executive
bonuses; and (13) working capital. The foregoing business criteria
shall also be exclusively used in establishing performance goals for
Cash Incentive Awards granted under Section 10.4(c) hereof.
(iii) Performance Period: Timing For Establishing Performance
Goals. Achievement of performance goals in respect of such
Performance Awards shall be measured over such periods as may be
specified by the Committee. Performance goals shall be established on
or before the dates that are required or permitted for "performance-
based compensation" under Code Section 162(m).
(iv) Settlement of Performance Awards; Other Terms. Settlement
of Performance Awards may be in cash or Common Stock, or other Awards,
or other property, in the discretion of the Committee. The Committee
may, in its discretion, reduce the amount of a settlement otherwise to
be made in connection with such Performance Awards, but may not
exercise discretion to increase any such amount payable in respect of
a Performance Award subject to this Section 10.4(b). The Committee
shall specify the circumstances in which such Performance
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Awards shall be forfeited or paid in the event of a Termination of
Employment or a Change in Control prior to the end of a performance
period or settlement of Performance Awards, and other terms relating
to such Performance Awards.
(c) Cash Incentive Awards Granted to Designated Covered Employees.
The Committee may grant Cash Incentive Awards to Participants including
those designated by the Committee as likely to be Covered Employees, which
Awards shall represent a conditional right to receive a payment in cash,
unless otherwise determined by the Committee, after the end of a specified
calendar year or calendar quarter or other period specified by the
Committee, in accordance with this Section 10.6(c). With respect to any
calendar year, the maximum Cash Incentive Award payable to any Participant
shall not exceed 10% of the Company's operating income, before payment of
executive bonuses, for such year.
(i) Cash Incentive Award. The Cash Incentive Award for
Participants the Committee regards as likely to be regarded as Covered
Employees shall be based on achievement of a performance goal or goals
based on one or more of the business criteria set forth in Section
10.4(b), and may be based on such criteria for any other Participant.
The Committee may specify the amount of the individual Cash Incentive
Award as a percentage of any such business criteria, a percentage
thereof in excess of a threshold amount, or another amount which need
not bear a strictly mathematical relationship to such relationship
criteria. The Committee may establish an Cash Incentive Award pool
that includes Participants the Committee regards likely to be regarded
as Covered Employees, which shall be an unfunded pool, for purposes of
measuring Company performance in connection with Cash Incentive
Awards. The amount of the Cash Incentive Award pool shall be based
upon the achievement of a performance goal or goals based on one or
more of the business criteria set forth in Section 10.4(b) hereof in
the given performance period, as specified by the Committee. The
Committee may specify the amount of the Cash Incentive Award pool as a
percentage of any of such business criteria, a percentage thereof in
excess of a threshold amount, or as another amount which need not bear
a strictly mathematical relationship to such business criteria.
(ii) Potential Cash Incentive Awards. Not later than the date
required or permitted for "qualified performance-based compensation"
under Code Section 162(m), the Committee shall determine the
Participants who will potentially receive Cash Incentive Awards for
the specified year, quarter or other period, either as individual Cash
Incentive
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Awards or out of an Cash Incentive Award pool established by such date
and the amount or method for determining the amount of the individual
Cash Incentive Award or the amount of such Participant's portion of
the Cash Incentive Award pool or the individual Cash Incentive Award.
(iii) Payout of Cash Incentive Awards. After the end of the
specified year, quarter or other period, as the case may be, the
Committee shall determine the amount, if any, of potential individual
Cash Incentive Award otherwise payable to a Participant, the Cash
Incentive Award pool and the maximum amount of potential Cash
Incentive Award payable to each Participant in the Cash Incentive
Award pool. The Committee may, in its discretion, determine that the
amount payable to any Participant as a final Cash Incentive Award
shall be increased or reduced from the amount of his or her potential
Cash Incentive Award, including a determination to make no final Award
whatsoever, but may not exercise discretion to increase any such
amount in the case of an Cash Incentive Award intended to qualify
under Code Section 162(m). The Committee shall specify the
circumstances in which an Cash Incentive Award shall be paid or
forfeited in the event of Termination of Employment by the Participant
or a Change in Control prior to the end of the period for measuring
performance or the payout of such Cash Incentive Award, and other
terms relating to such Cash Incentive Award in accordance with the
Plan. Upon the completion of the measuring period and the
determination of the right to payment and the amount, the Committee
shall direct the Committee to make payment.
(d) Written Determinations. All determinations by the Committee as to
the establishment of performance goals and the potential Performance Awards
or Cash Incentive Awards related to such performance goals and as to the
achievement of performance goals relating to such Awards, the amount of any
Cash Incentive Award pool and the amount of final Cash Incentive Awards,
shall be made in writing in the case of any Award intended to qualify under
Code Section 162(m). The Committee may not delegate any responsibility
relating to such Performance Awards or Cash Incentive Awards.
ARTICLE XI
----------
PROVISIONS APPLICABLE TO STOCK ACQUIRED UNDER THE PLAN
------------------------------------------------------
11.1 Limited Transfer During Offering. In the event there is an effective
registration statement under the Securities Act pursuant to which shares of
Common Stock shall be offered for sale in an underwritten offering, a
Participant shall not,
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during the period requested by the underwriters managing the registered public
offering, effect any public sale or distribution of shares received directly or
indirectly pursuant to an exercise of an Award.
11.2 Committee Discretion. The Committee may in its sole discretion
include in any Agreement an obligation that the Company purchase a Participant's
shares of Common Stock received upon the exercise of an Award (including the
purchase of any unexercised Awards which have not expired), or may obligate a
Participant to sell shares of Common Stock to the Company, upon such terms and
conditions as the Committee may determine and set forth in an Agreement. The
provisions of this Article XI shall be construed by the Committee in its sole
discretion, and shall be subject to such other terms and conditions as the
Committee may from time to time determine. Notwithstanding any provision herein
to the contrary, the Company may upon determination by the Committee assign its
right to purchase shares of Common Stock under this Article XI, whereupon the
assignee of such right shall have all the rights, duties and obligations of the
Company with respect to purchase of the shares of Common Stock.
11.3 No Company Obligation. None of the Company, an Affiliate or the
Committee shall have any duty or obligation to disclose affirmatively to a
record or beneficial holder of Common Stock or an Award, and such holder shall
have no right to be advised of, any material information regarding the Company
or any Affiliate at any time prior to, upon or in connection with receipt or the
exercise of an Award or the Company's purchase of Common Stock or an Award from
such holder in accordance with the terms hereof.
ARTICLE XII
-----------
CHANGE IN CONTROL PROVISIONS
----------------------------
12.1 Impact of Event. Notwithstanding any other provision of the Plan to
the contrary, unless otherwise provided in an Agreement, in the event of a
Change in Control (as defined in Section 12.2):
(a) Any Stock Appreciation Rights and Stock Options outstanding as of
the date of such Change in Control and not then exercisable shall become
fully exercisable to the full extent of the original grant;
(b) The restrictions and deferral limitations applicable to any
Restricted Stock, Deferred Stock or other Award shall lapse, and such
Restricted Stock, Deferred Stock or other Award shall become free of all
restrictions and become fully vested and transferable to the full extent of
the original grant.
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(c) The performance goals and other conditions with respect to any
outstanding Performance Award or Cash Incentive Award shall be deemed to
have been satisfied in full, and such Award shall be fully distributable,
if and to the extent provided by the Committee in the Agreement relating to
such Award or otherwise, notwithstanding that the Award may not be fully
deductible to the Company under Section 162(m) of the Code.
(d) The Committee shall have full discretion, notwithstanding anything
herein or in an Award Agreement to the contrary, to do any or all of the
following with respect to an outstanding Award:
(1) To cause any Award to be cancelled, provided notice of at
least 15 days thereof is provided before the date of
cancellation;
(2) To provide that the securities of another entity be
substituted hereunder for the Common Stock and to make
equitable adjustment with respect thereto;
(3) To grant the Participant by giving notice during a pre-set
period to surrender all or part of a stock-based Award to
the Company and to receive cash in an amount equal to the
amount by which the "Change in Control Price" (as defined in
Section 12.3) per share of Common Stock on the date of such
election shall exceed the amount which the Participant must
pay to exercise the Award per share of Common Stock under
the Award (the "Spread") multiplied by the number of shares
of Common Stock granted under the Award;
(4) To require the assumption of the obligation of the Company
under the Plan subject to appropriate adjustment; and
(5) To take any other action the Committee determines to take.
12.2 Definition of Change in Control. For purposes of this Plan, a "Change
in Control" shall be deemed to have occurred if (a) any corporation, person or
other entity (other than the Company, a majority-owned subsidiary of the Company
or any of its subsidiaries, or an employee benefit plan (or related trust)
sponsored or maintained by the Company), including a "group" as defined in
Section 13(d)(3) of the Exchange Act, becomes the beneficial owner of stock
representing more than the greater of (i) fifty percent (50%) of the combined
voting power of the Company's then outstanding securities or (ii) the percentage
of the combined voting power of the Company's then outstanding securities which
equals (A) ten percent
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(10%) plus (B) the percentage of the combined voting power of the Company's
outstanding securities held by such corporation, person or entity on the
Effective Date; (b)(i) the stockholders of the Company approve a definitive
agreement to merge or consolidate the Company with or into another corporation
other than a majority-owned subsidiary of the Company, or to sell or otherwise
dispose of all or substantially all of the Company's assets, and (ii) the
persons who were the members of the Board of Directors of the Company prior to
such approval do not represent a majority of the directors of the surviving,
resulting or acquiring entity or the parent thereof; (c) the stockholders of the
Company approve a plan of liquidation of the Company; or (d) within any period
of 24 consecutive months, persons who were members of the Board of Directors of
the Company immediately prior to such 24-month period, together with any persons
who were first elected as directors (other than as a result of any settlement of
a proxy or consent solicitation contest or any action taken to avoid such a
contest) during such 24-month period by or upon the recommendation of persons
who were members of the Board of Directors of the Company immediately prior to
such 24-month period and who constituted a majority of the Board of Directors of
the Company at the time of such election, cease to constitute a majority of the
Board.
12.3 Change in Control Price. For purposes of the Plan, "Change in Control
Price" means the higher of (a) the highest reported sales price of a share of
Common Stock in any transaction reported on the principal exchange on which such
shares are listed or on NASDAQ during the 60-day period prior to and including
the date of a Change in Control or (b) if the Change in Control is the result of
a tender or exchange offer, merger, consolidation, liquidation or sale of all or
substantially all of the assets of the Company (in each case a "Corporate
Transaction"), the highest price per share of Common Stock paid in such
Corporate Transaction, except that, in the case of Incentive Stock Options and
Stock Appreciation Rights relating to Incentive Stock Options, such price shall
be based only on the Fair Market Value of the Common Stock on the date any such
Incentive Stock Option or Stock Appreciation Right is exercised. To the extent
that the consideration paid in any such Corporate Transaction consists all or in
part of securities or other non-cash consideration, the value of such securities
or other non-cash consideration shall be determined in the sole discretion of
the Committee.
ARTICLE XIII
------------
MISCELLANEOUS
-------------
13.1 Amendments and Termination. The Board may amend, alter or discontinue
the Plan at any time, but no amendment, alteration or discontinuation shall be
made which would (a) impair the rights of a Participant under a Stock Option,
Stock Appreciation Right, Restricted Stock Award or Deferred Stock Award
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theretofore granted without the Participant's consent, except such an amendment
(a) made to avoid an expense charge to the Company or an Affiliate, (b) made to
cause the Plan to qualify for the exemption provided by Rule 16b-3, (c) to
prevent the Plan from being disqualified from the exemption provided by Rule
16b-3, or (d) made to permit the Company or an Affiliate a deduction under the
Code. In addition, no such amendment shall be made without the approval of the
Company's stockholders to the extent such approval is required by law or
agreement.
The Committee may amend the Plan at any time subject to the same
limitations (and exceptions to limitations) as applied to the Board and further
subject to any approval or limitations the Board may impose.
The Committee may amend the terms of any Award or other Award theretofore
granted, prospectively or retroactively, but no such amendment shall impair the
rights of any Participant without the Participant's consent or reduce an Option
Price, except such an amendment made to cause the Plan or Award to qualify for
the exemption provided by Rule 16b-3, avoid an expense charge to the Company or
an Affiliate or qualify for a deduction.
Subject to the above provisions, the Board shall have authority to amend
the Plan to take into account changes in law and tax and accounting rules, as
well as other developments, and to grant Awards which qualify for beneficial
treatment under such rules without stockholder approval. Notwithstanding
anything in the Plan to the contrary, if any right under this Plan would cause a
transaction to be ineligible for pooling of interest accounting that would, but
for the right hereunder, be eligible for such accounting treatment, the
Committee may modify or adjust the right so that pooling of interest accounting
is available.
13.2 Stand-Alone, Additional, Tandem, and Substitute Awards. Awards
granted under the Plan may, in the discretion of the Committee, be granted
either alone or in addition to, in tandem with, or in substitution or exchange
for, any other Award or any award granted under another plan of the Company, any
subsidiary, or
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any business entity to be acquired by the Company or a subsidiary, or any other
right of a Participant to receive payment from the Company or any subsidiary.
Such additional, tandem, and substitute or exchange Awards may be granted at any
time. If an Award is granted in substitution or exchange for another Award or
award, the Committee shall require the surrender of such other Award or award in
consideration for the grant of the new Award. In addition, Awards may be
granted in lieu of cash compensation, including in lieu of cash amounts payable
under other plans of the Company or any subsidiary, in which the Fair Market
Value of Common Stock subject to the Award is equivalent in value to the cash
compensation, or in which the exercise price, grant price or purchase price of
the Award in the nature of a right that may be exercised is equal to the Fair
Market Value of the underlying Common Stock minus the value of the cash
compensation surrendered.
13.3 Form and Timing of Payment Under Awards; Deferrals. Subject to the
terms of the Plan and any applicable Agreement, payments to be made by the
Company or an Affiliate upon the exercise of an Award or settlement of an Award
may be made in such forms as the Committee shall determine, including, without
limitation, cash, Common Stock, other Awards or other property, and may be made
in a single payment or transfer, in installments, or on a deferred basis. The
settlement of any Award may be accelerated, and cash paid in lieu of Common
Stock in connection with such settlement, in the discretion of the Committee or
upon occurrence of one or more specified events (in addition to a Change in
Control). Installment or deferred payments may be required by the Committee
(subject to Section 13.1 of the Plan) or permitted at the election of the
Participant. Payments may include, without limitation, provisions for the
payment or crediting of reasonable interest on installment or deferred payments
or the granting or crediting of Dividend Equivalents in respect of installment
or deferred payments denominated in Common Stock.
13.4 Status of Awards Under Code Section 162(m). On and after the date
Section 162(m) of the Code applies to Awards, it is the intent of the Company
that Awards granted to persons who are Covered Employees within the meaning of
Code Section 162(m) shall constitute "qualified performance-based compensation"
satisfying the requirements of Code Section 162(m). Accordingly, the provisions
of the Plan shall be interpreted in a manner consistent with Code Section
162(m) after the date Section 162(m) is applicable. If any provision of the Plan
or any agreement relating to such an Award does not comply or is inconsistent
with the requirements of Code Section 162(m), such provision shall be construed
or deemed amended to the extent necessary to conform to such requirements.
13.5 Unfunded Status of Plan; Limits on Transferability. It is intended
that the Plan be an "unfunded" plan for incentive and deferred compensation.
The Committee may authorize the creation of trusts or other arrangements to meet
the obligations created under the Plan to deliver Common Stock or make payments;
provided, however, that, unless the Committee otherwise determines, the
existence of such
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trusts or other arrangements is consistent with the "unfunded" status of the
Plan. Unless otherwise provided in this Plan or in an Agreement, no Award shall
be subject to the claims of Participant's creditors and no Award may be
transferred, assigned, alienated or encumbered in any way other than by will or
the laws of descent and distribution or to a Representative upon the death of
the Participant.
13.6 General Provisions.
(a) Representation. The Committee may require each person purchasing
or receiving shares pursuant to an Award to represent to and agree with the
Company in writing that such person is acquiring the shares without a view
to the distribution thereof. The certificates for such shares may include
any legend which the Committee deems appropriate to reflect any
restrictions on transfer.
(b) No Additional Obligation. Nothing contained in the Plan shall
prevent the Company or an Affiliate from adopting other or additional
compensation arrangements for its employees.
(c) Withholding. No later than the date as of which an amount first
becomes includible in the gross income of the Participant for Federal
income tax purposes with respect to any Award, the Participant shall pay to
the Company (or other entity identified by the Committee), or make
arrangements satisfactory to the Company or other entity identified by the
Committee regarding the payment of, any Federal, state, local or foreign
taxes of any kind required by law to be withheld with respect to such
amount required in order for the Company or an Affiliate to obtain a
current deduction. Unless otherwise determined by the Committee,
withholding obligations may be settled with Common Stock, including Common
Stock that is part of the Award that gives rise to the withholding
requirement provided that any applicable requirements under Section 16 of
the Exchange Act are satisfied. The obligations of the Company under this
Plan shall be conditional on such payment or arrangements, and the Company
and its Affiliates shall, to the extent permitted by law, have the right to
deduct any such taxes from any payment otherwise due to the Participant.
If the Participant disposes of shares of Common Stock acquired pursuant to
an Incentive Stock Option in any transaction considered to be a
disqualifying transaction under the Code, the Participant must give written
notice of such transfer and the Company shall have the right to deduct any
taxes required by law to be withheld from any amounts otherwise payable to
the Participant. Unless otherwise determined by the Committee, withholding
obligations may be settled with Common Stock, including Common Stock that
is part of the Award that gives rise to the withholding requirement,
provided that any applicable requirements under Section 16 of the Exchange
Act are satisfied. The obligations of the Company under the Plan shall be
conditional
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on such payment or arrangements, and the Company and its Affiliates shall,
to the extent permitted by law, have the right to deduct any such taxes
from any payment otherwise due to the Participant.
(d) Reinvestment. The reinvestment of dividends in additional
Deferred or Restricted Stock at the time of any dividend payment shall be
permissible only if sufficient shares of Common Stock are available under
the Plan for such reinvestment (taking into account then outstanding
Options and other Awards).
(e) Representation. The Committee shall establish such procedures as
it deems appropriate for a Participant to designate a Representative to
whom any amounts payable in the event of the Participant's death are to be
paid.
(f) Controlling Law. The Plan and all Awards made and actions taken
thereunder shall be governed by and construed in accordance with the laws
of the State of Illinois (other than its law respecting choice of law)
except to the extent the General Corporation Law of the State of Delaware
would be mandatorily applicable. The Plan shall be construed to comply
with all applicable law and to avoid liability to the Company, an Affiliate
or a Participant, including, without limitation, liability under Section
16(b) of the Exchange Act.
(g) Offset. Any amounts owed to the Company or an Affiliate by the
Participant of whatever nature may be offset by the Company from the value
of any shares of Common Stock, cash or other thing of value under this Plan
or an Agreement to be transferred to the Participant, and no shares of
Common Stock, cash or other thing of value under this Plan or an Agreement
shall be transferred unless and until all disputes between the Company and
the Participant have been fully and finally resolved and the Participant
has waived all claims to such against the Company or an Affiliate.
(h) Fail Safe. With respect to persons subject to Section 16 of the
Exchange Act, transactions under this Plan are intended to comply with all
applicable conditions of Rule 16b-3 or Rule 16a-1(c)(3), as applicable. To
the extent 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. Moreover, in the event the Plan
does not include a provision required by Rule 16b-3 or Rule 16a-1(c)(3) to
be stated herein, such provision (other than one relating to eligibility
requirements or the price and amount of Awards) shall be deemed to be
incorporated by reference into the Plan with respect to Participants
subject to Section 16.
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(i) Capitalization. The grant of an Award shall in no way affect the
right of the Company to adjust, reclassify, reorganize or otherwise change
its capital or business structure or to merge, consolidation, dissolve,
liquidate or sell or transfer all or any part of its business or assets.
13.7 Mitigation of Excise Tax. Subject to any agreement with the
Participant, if any payment or right accruing to a Participant under this Plan
(without the application of this Section 13.7), either alone or together with
other payments or rights accruing to the Participant from the Company or an
Affiliate ("Total Payments"), would constitute a "parachute payment" (as defined
in Section 280G of the Code and regulations thereunder), such payment or right
shall be reduced to the largest amount or greatest right that will result in no
portion of the amount payable or right accruing under the Plan being subject to
an excise tax under Section 4999 of the Code or being disallowed as a deduction
under Section 280G of the Code. The determination of whether any reduction in
the rights or payments under this Plan is to apply shall be made by the
Committee in good faith after consultation with the Participant, and such
determination shall be conclusive and binding on the Participant. The
Participant shall cooperate in good faith with the Committee in making such
determination and providing the necessary information for this purpose. The
foregoing provisions of this Section 13.7 shall apply with respect to any person
only if, after reduction for any applicable Federal excise tax imposed by
Section 4999 of the Code and Federal income tax imposed by the Code, the Total
Payments accruing to such person would be less than the amount of the Total
Payments as reduced, if applicable, under the foregoing provisions of the Plan
and after reduction for only Federal income taxes.
13.8 Rights with Respect to Continuance of Employment. Nothing contained
herein shall be deemed to alter the relationship between the Company or an
Affiliate and a Participant, or the contractual relationship between a
Participant and the Company or an Affiliate if there is a written contract
regarding such relationship. Nothing contained herein shall be construed to
constitute a contract of employment between the Company or an Affiliate and a
Participant. The Company or an Affiliate and each of the Participants continue
to have the right to terminate the employment or service relationship at any
time for any reason, except as provided in a written contract. The Company or
an Affiliate shall have no obligation to retain the Participant in its employ or
service as a result of this Plan. There shall be no inference as to the length
of employment or service hereby, and the Company or an Affiliate reserves the
same rights to terminate the Participant's employment or service as existed
prior to the individual's becoming a Participant in this Plan.
13.9 Awards in Substitution for Awards Granted by Other Corporations.
Awards may be granted under the Plan from time to time in substitution for
awards
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in respect of other plans of other entities. The terms and conditions of the
Awards so granted may vary from the terms and conditions set forth in this Plan
at the time of such grant as the Committee may deem appropriate to conform, in
whole or in part, to the provisions of the awards in substitution for which they
are granted.
13.10 Procedure for Adoption. Any Affiliate of the Company may by
resolution of such Affiliate's board of directors, with the consent of the Board
of Directors and subject to such conditions as may be imposed by the Board of
Directors, adopt the Plan for the benefit of its employees as of the date
specified in the board resolution.
13.11 Procedure for Withdrawal. Any Affiliate ,which has adopted the Plan
may, by resolution of the board of directors of such Affiliate, with the consent
of the Board of Directors and subject to such conditions as may be imposed by
the Board of Directors, terminate its adoption of the Plan.
13.12 Delay. If at the time a Participant accrues a right under the Plan,
the Participant is subject to "short-swing" liability under Section 16 of the
Exchange Act, any time period provided for under the Plan or an Agreement to the
extent necessary to avoid the imposition of liability shall be suspended and
delayed during the period the Participant would be subject to such liability,
but not more than six (6) months and one (1) day and not to exceed the Option
Period, or the period for exercise of a Stock Appreciation Right as provided in
the Agreement, whichever is shorter. The Company shall have the right to
suspend or delay any time period described in the Plan or an Agreement if the
Committee shall determine that the action may constitute a violation of any law
or result in liability under any law to the Company, an Affiliate or a
stockholder of the Company until such time as the action required or permitted
shall not constitute a violation of law or result in liability to the Company,
an Affiliate or a stockholder of the Company. The Committee shall have the
discretion to suspend the application of the provisions of the Plan required
solely to comply with Rule 16b-3 if the Committee shall determine that Rule 16b-
3 does not apply to the Plan or any Participant.
13.13 Headings. The headings contained in this Plan are for reference
purposes only and shall not affect the meaning or interpretation of this Plan.
13.14 Severability. If any provision of this Plan shall for any reason be
held to be invalid or unenforceable, such invalidity or unenforceability shall
not effect any other provision hereby, and this Plan shall be construed as if
such invalid or unenforceable provision were omitted.
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13.15 Successors and Assigns. This Plan shall inure to the benefit of and
be binding upon each successor and assign of the Company. All obligations
imposed upon a Participant, and all rights granted to the Company hereunder,
shall be binding upon the Participant's heirs, legal representatives and
successors.
13.16 Entire Agreement. This Plan and the Agreement constitute the entire
agreement with respect to the subject matter hereof and thereof, provided that
in the event of any inconsistency between the Plan and the Agreement, the terms
and conditions of this Plan shall control.
Executed effective May 29, 1996.
THE LEAP GROUP, INC.
By: /s/ R. Steven Lutterbach
---------------------------
R. Steven Lutterbach
Chief Executive Officer
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EXHIBIT 4.6
THE LEAP GROUP, INC.
EMPLOYEE STOCK PURCHASE PLAN
ARTICLE I
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ESTABLISHMENT
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1.1 Purpose.
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The Leap Group, Inc. Employee Stock Purchase Plan ("Plan") is hereby
established by The Leap Group, Inc. ("Company"). The purpose of the Plan is to
promote the overall financial objectives of the Company's stockholders by
motivating those persons participating in the Plan to achieve long-term growth
in stockholder equity. The Plan and the grant of awards thereunder is expressly
conditioned upon the Plan's approval by the stockholders of the Company, and if
such approval is not obtained then the Plan and any Option granted thereunder
shall be null and void ab initio. The Plan is intended as an "employee stock
purchase plan" within the meaning of Section 423 of the Internal Revenue Code of
1986, as amended, and Options granted hereunder are intended to constitute
options granted under such a plan, and the Plan document and all actions taken
in connection with the Plan shall be constructed consistently with such intent.
The Plan is adopted effective as of May 29, 1996.
ARTICLE II
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DEFINITIONS
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For purposes of the Plan, the following terms are defined as set forth
below:
2.1 "Account" shall mean the bookkeeping account established on behalf of
a Participant to which shall be credited all contributions paid for the purpose
of purchasing Common Stock under the Plan, and to which shall be charged all
purchases of Common Stock pursuant to the Plan. The Company shall have custody
of such Account.
2.2 "Agreement" or "Option Agreement" means, individually or collectively,
any enrollment, subscription and withholding agreement entered into pursuant to
the Plan. An Agreement shall be the authorization of the Company or a
Subsidiary to withhold from payroll amounts to be applied to purchase Common
Stock.
2.3 "Beneficiary" means the person or entity which has been designated by
a Participant in his or her most recent written beneficiary designation filed
with the Committee to receive the benefits specified under the Plan upon such
Participant's death or to which Options or other rights are transferred if and
to the extent permitted hereunder (but only to the extent consistent with the
plan's being described in Section 423 of the Code). If, upon a Participant's
death, there is no designated Beneficiary or surviving designated Beneficiary,
then the term Beneficiary means the person or entity entitled by will or the
laws of descent and distribution to receive such benefits.
<PAGE>
2.4 "Board of Directors" or "Board" means the Board of Directors of the
Company.
2.5 "Cause" shall mean, for purposes of whether and when a Participant has
incurred a Termination of Employment for Cause, any act or omission which
permits the Company to terminate the written agreement or arrangement between
the Participant and the Company or a Subsidiary for "cause" as defined in such
agreement or arrangement, or in the event there is no such agreement or
arrangement or the agreement or arrangement does not define the term "cause" or
a substantially equivalent term, then Cause shall consist of the following:
Participant's conviction on a felony charge or Participant's commission of any
crime involving moral turpitude; Participant's dishonesty or fraud resulting in
damage to the business of the Company or an Affiliate; Participant's
embezzlement or theft of assets of the Company or an Affiliate; in the sole
discretion of the Company, Participant's grossly negligent conduct,
Participant's course of personal conduct of an illegal or unethical nature which
tends to place the Company or an Affiliate in disrepute, or otherwise negatively
affects the ability of the Company or an Affiliate to conduct its business;
Participant's competition with the Company or aid to a competitor of the Company
to the detriment of the Company; or a breach of this Agreement by Participant,
including failure to perform duties and services to the Company or an Affiliate.
In the event Participant is arrested for any of the types of matters above, the
Company may place Participant on suspension without pay until such matter is
dismissed or the Participant is convicted.
2.6 "Change in Control" so shall be deemed to have occurred if (a) any
corporation, person or other entity (other than the Company, a majority-owned
subsidiary of the Company or any of its subsidiaries, or an employee benefit
plan (or related trust) sponsored or maintained by the Company), including a
"group" as defined in Section 13(d)(3) of the Exchange Act, becomes the
beneficial owner of stock representing more than the greater of (i) fifty
percent (50%) of the combined voting power of the Company's then outstanding
securities or (ii) the percentage of the combined voting power of the Company's
then outstanding securities which equals (A) ten percent (10%) plus (B) the
percentage of the combined voting power of the Company's outstanding securities
held by such corporation, person or entity on the Effective Date; (b)(i) the
stockholders of the Company approve a definitive agreement to merge or
consolidate the Company with or into another corporation other than a majority-
owned subsidiary of the Company, or to sell or otherwise dispose of all or
substantially all of the Company's assets, and (ii) the persons who were the
members of the Board of Directors of the Company prior to such approval do not
represent a majority of the directors of the surviving, resulting or acquiring
entity or the parent thereof; (c) the stockholders of the Company approve a plan
of liquidation of the Company; or (d) within any period of 24 consecutive
months, persons who were members of the Board of Directors of the Company
immediately prior to such 24-month period, together with any persons who were
first elected as directors (other than as a result of any settlement of a proxy
or consent solicitation contest or any action taken to avoid such a contest)
during such 24-month period by or upon the recommendation of persons who were
members of the Board of Directors of the Company immediately prior to such 24-
month period and who constituted a majority of the Board of Directors of the
Company at the time of such election, cease to constitute a majority of the
Board.
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<PAGE>
2.7 "Code" or "Internal Revenue Code" means the Internal Revenue Code of
1986, as amended, Treasury Regulations (including proposed regulations)
thereunder and any successor thereto.
2.8 "Commission" means the Securities and Exchange Commission or any
successor agency.
2.9 "Committee" means the Compensation Committee of the Board or such
other Board committee as may be designated by the Board to administer the Plan,
provided that the Committee shall be comprised of only "disinterested persons"
as required for an application of Rule 16b-3.
2.10 "Common Stock" means the shares of the regular voting Common Stock,
$.01 par value per share, of the Company, whether presently or hereafter issued,
and any other stock or security resulting from adjustment thereof as described
hereinafter or the common stock of any successor to the Company which is
designated for the purpose of the Plan.
2.11 "Company" means The Leap Group, Inc., a Delaware corporation, and
includes any successor or assignee corporation or corporations into which the
Company may be merged, changed or consolidated; any corporation for whose
securities all or substantially all of the securities of the Company shall be
exchanged; and any assignee of or successor to all or substantially all of the
assets of the Company.
2.12 "Continuous Service" shall mean, subject to modification by the
Committee, an Eligible Employee's number of full years and completed months of
continuous employment with the Company or a Subsidiary (but only since the date
such entity became a Subsidiary) from the most recent date of hire to the date
of Termination of Employment for any reason. The Committee may provide rules
from time to time regarding the calculation of Continuous Service and the method
for crediting such service.
2.13 "Contribution Rate" means the rate determined under Section 5.5
2.14 "Disability" means a mental or physical injury or illness that
entitles the Participant to receive benefits under the long-term disability plan
of the Company or a Subsidiary of the Company, or if the Participant is not
covered by such a plan, a mental or physical injury or illness that renders a
Participant totally and permanently incapable of performing the Participant's
duties for the Company or a Subsidiary of the Company. Notwithstanding the
foregoing, a Disability shall not qualify under this Plan if it is the result of
(i) a willfully self-inflicted injury or willfully self-induced sickness; or
(ii) an injury or disease contracted, suffered, or incurred while participating
in a criminal offense. The determination of Disability shall be made by
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<PAGE>
the Committee, in its sole discretion. The determination of Disability for
purposes of this Plan shall not be construed to be an admission of disability
for any other purpose.
2.15 "Effective Date" means May 29, 1996.
2.16 "Eligible Employee" means each current, common law employee of the
Company or a Subsidiary (if the Company has extended participation to the
employees of a Subsidiary) on a Grant Date, except that the Committee in its
sole discretion may exclude:
(a) any employee who has accrued less than a minimum period of
Continuous Service established by the Committee (but not to exceed 2
years).
(b) any employee whose customary employment is 20 hours or less per
week;
(c) any employee whose customary employment is for not more than 5
months in any calendar year; and
(d) any employee who is a highly compensated employee of the Company
or Subsidiary within the meaning of Section 414(q) of the Code.
As of the Effective Date and unless and until amended by the Committee,
employees described in Section 2.16(b) and (c) are excluded as Eligible
Employees. Any period of service described in this Section may be decreased in
the discretion of the Committee. Any employee who would directly or indirectly
own or hold (applying the rules of Section 424(d) of the Code to determine stock
ownership) immediately following the grant of an Option hereunder an aggregate
of five percent (5%) or more of the total combined voting power or value of all
outstanding shares of all classes of stock of the Company or any Subsidiary is
excluded as an Eligible Employee.
2.17 "Exercise Date" means such one or more dates determined by the
Committee on which the accumulated value of the Account shall be applied to
purchase Common Stock and unless otherwise specified by the Committee shall be
December 31, 1997 and December 31 of each calendar year thereafter. The
Committee may accelerate an Exercise Date in order to satisfy the employment
period requirement of Section 423(a)(2), and the date of a Change in Control
shall be an Exercise Date.
2.18 "Exchange Act" means the Securities Exchange Act of 1934, as amended,
and the rules and regulations promulgated by the Commission thereunder.
2.19 "Fair Market Value" means the fair market value of Common Stock as
determined by the Committee or under procedures established by the Committee.
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<PAGE>
Unless otherwise determined by the Committee, the Fair Market Value per share of
Common Stock as of any given date shall be the closing sale price per share
reported on a consolidated basis for stock listed on the principal stock
exchange or market on which Common Stock is traded on the date as of which such
value is being determined or, if there is no sale on that date, then on the last
previous day on which a sale was reported.
2.20 "Grant Date" means the date or dates established by the Committee on
which one or more Options are granted pursuant to the Plan. The Committee may
determine for any Plan Year that there shall be no Grant Date, in which case no
Options shall be granted for that Plan Year. The terms and conditions of any
Option granted on a particular Grant Date shall be independent of and have no
effect on the terms and conditions of any Option granted on another Grant Date.
2.21 "Option Period" means the period beginning on the day next following
an Exercise Date and ending on the next following Exercise Date, as determined
by the Committee, subject to the limitations of Section 5.3.
2.22 "Option Price" means the price at which the Common Stock granted as of
a specific Grant Date may be purchased under an Option. The price shall be
subject to the limitation set forth in Section 5.4.
2.23 "Participant" means a person who satisfies the eligibility conditions
of Article V and to whom an Option has been granted by the Committee under the
Plan, and in the event a Representative is appointed for a Participant or
another person becomes a Representative, then the term "Participant" shall mean
such Representative, to the extent consistent with Section 423 of the Code. The
term shall also include a trust for the benefit of the Participant, the
Participant's parents, spouse or descendants, or a custodian under a uniform
gifts to minors act or similar statute for the benefit of the Participant's
descendants, to the extent permitted by the Committee and not inconsistent with
an intended application of Rule 16b-3, the intent to comply with Section 423 of
the Code and the use of Commission Form S-8 (or the Committee's waiver of such).
Notwithstanding the foregoing, the term "Termination of Employment" shall mean
the Termination of Employment of the person to whom the Award was originally
granted.
2.24 "Plan" means The Leap Group, Inc. Employee Stock Purchase Plan, as
herein set forth and as may be amended from time to time.
2.25 "Plan Year" means the period beginning April 1, 1997 and continuing
through December 31, 1997, and each calendar year beginning thereafter. The
Committee may at any time in its discretion designate another period as the Plan
Year.
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<PAGE>
2.26 "Representative" means (a) the person or entity acting as the executor
or administrator of a Participant's estate pursuant to the last will and
testament of a Participant or pursuant to the laws of the jurisdiction in which
the Participant had the Participant's primary residence at the date of the
Participant's death; (b) the person or entity acting as the guardian or
temporary guardian of a Participant; (c) the person or entity which is the
Beneficiary of the Participant upon or following the Participant's death; or (d)
any person to whom an Option or shares of Common Stock have been transferred
with the permission of the Committee or by operation of law; provided that only
one of the foregoing shall be the Representative at any point in time as
determined under applicable law and recognized by the Committee.
2.27 "Retirement" means the Participant's Termination of Employment after
attaining either the normal retirement age or the early retirement age as
defined in the principal (as determined by the Committee) tax-qualified plan of
the Company, if the Participant is covered by such a plan, and if the
Participant is not covered by such a plan, then age sixty-five (65), or age
fifty-five (55) with the accrual of ten (10) years of service.
2.28 "Rule 16a-1(c)(3)" and "Rule 16b-3" mean Rule 16a-1(c)(3) and Rule
16b-3, as from time to time in effect and applicable to the Plan and
Participants, promulgated by the Commission under Section 16 of the Exchange
Act.
2.29 "Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations promulgated thereunder.
2.30 "Stock Option" or "Option" means the right to purchase the number of
shares of Common Stock specified by the Plan at a price and for a term fixed by
the Plan, and subject to such other limitations and restrictions as the Plan and
the Committee may impose.
2.31 "Subsidiary" means any company as currently defined in Section 424(f)
of the Code. Unless otherwise indicated the term "Company" shall hereinafter be
deemed to include all Subsidiaries of the Company having employees to which the
Company has extended participation in the Plan.
2.32 "Termination of Employment" means the occurrence of any act or event,
whether pursuant to an employment agreement or otherwise, that actually or
effectively causes or results in the person's ceasing, for whatever reason, to
be an employee of the Company, including, without limitation, death, Disability,
dismissal, severance at the election of the Participant, Retirement, or
severance as a result of the discontinuance, liquidation, sale or transfer by
the Company of all businesses owned or operated by the Company. A transfer of
employment from the Company to a Subsidiary, or from a Subsidiary to the
Company, will not be a Termination of Employment, unless expressly determined by
the Committee. A Termination of
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<PAGE>
Employment shall occur for an employee who is employed by a Subsidiary of the
Company if the Subsidiary shall cease to be a Subsidiary and the Participant
shall not immediately thereafter become an employee of the Company or a
Subsidiary of the Company.
In addition, certain other terms used herein have definitions given to them
in the first place in which they are used.
ARTICLE III
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ADMINISTRATION
--------------
3.1 Committee Structure and Authority. The Plan shall be administered by
the Committee. A majority of the Committee shall constitute a quorum at any
meeting thereof (including by telephone conference) and the acts of a majority
of the members present, or acts approved in writing by a majority of the entire
Committee without a meeting, shall be the acts of the Committee for purposes of
this Plan. The Committee may authorize any one or more of its members or an
officer of the Company to execute and deliver documents on behalf of the
Committee. A member of the Committee shall not exercise any discretion
respecting himself or herself under the Plan. The Board shall have the
authority to remove, replace or fill any vacancy of any member of the Committee
upon notice to the Committee and the affected member. Any member of the
Committee may resign upon notice to the Board. The Committee may allocate among
one or more of its members, or may delegate to one or more of its agents, such
duties and responsibilities as it determines.
Among other things, the Committee shall have the authority, subject to the
terms of the Plan:
(a) to select those persons to whom Options may be granted from time
to time;
(b) to determine whether and to what extent Options are to be granted
hereunder;
(c) to determine the number of shares of Common Stock available as of
any Grant Date;
(d) to determine any Grant Date, Exercise Date and Option Period, and
provide for all aspects of payroll deduction, suspension or withdrawal;
(e) to determine the number of shares of Common Stock to be covered by
each Option;
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(f) to determine the terms and conditions of any Option granted hereunder
(including, but not limited to, the Option Price, the Option Period, any
exercise restriction or limitation and any exercise acceleration or
forfeiture regarding any Option and the shares of Common Stock relating
thereto);
(g) to adjust the terms and conditions, at any time or from time to
time, of any Option, subject to the limitations of Section 6.1;
(h) to determine to what extent and under what circumstances Common
Stock and other amounts payable with respect to an Option shall be
deferred;
(i) to determine under what circumstances an Option may be settled in
cash or Common Stock;
(j) to provide for the forms of Agreement to be utilized in connection
with this Plan;
(k) to determine whether a Participant has a Disability or reached
Retirement;
(l) to interpret and make a final determination with respect to the
remaining number of shares of Common Stock available under the Plan;
(m) to determine what securities law requirements are applicable to
the Plan, Options and the issuance of shares of Common Stock, and to
require of a Participant that appropriate action be taken with respect to
such requirements;
(n) to cancel, with the consent of the Participant or as otherwise
provided in the Plan or an Agreement, outstanding Options;
(o) to require as a condition of the exercise of an Option or the
issuance or transfer of a certificate of Common Stock, the withholding from
a Participant of the amount of any Federal, state or local taxes as may be
necessary in order for the Company or any other entity to obtain a
deduction or as may be otherwise required by law;
(p) to determine whether and with what effect an individual has
incurred a Termination of Employment;
(q) to determine whether the Company or any other person has a right
or obligation to purchase Common Stock from a Participant and, if so, the
terms and conditions on which such Common Stock is to be purchased;
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(r) to determine the restrictions or limitations on the transfer of
Common Stock or Options;
(s) to determine whether an Option is to be adjusted, modified or
purchased, or is to become fully exercisable, under the Plan or the terms
of an Agreement;
(t) to determine the permissible methods of Option exercise and
payment;
(u) to adopt, amend and rescind such rules and regulations as, in its
opinion, may be advisable in the administration of this Plan; and
(v) to appoint and compensate agents, counsel, auditors or other
specialists to aid it in the discharge of its duties.
The Committee shall have the authority to adopt, alter and repeal such
administrative rules, guidelines and practices governing the Plan as it shall,
from time to time, deem advisable, to interpret the terms and provisions of the
Plan and any Option issued under the Plan (and any Agreement) and to otherwise
supervise the administration of the Plan. The Committee's policies and
procedures may differ with respect to Options granted at different times or to
different Participants. Any determination made by the Committee pursuant to the
provisions of the Plan shall be made in its sole discretion, and in the case of
any determination relating to an Option, may be made at the time of the grant of
the Option or, unless in contravention of any express term of the Plan or an
Agreement, at any time thereafter. All decisions made by the Committee pursuant
to the provisions of the Plan shall be final and binding on all persons,
including the Company and Participants. Any determination shall not be subject
to de novo review if challenged in court.
ARTICLE IV
----------
STOCK SUBJECT TO PLAN
---------------------
4.1 Number of Shares. Subject to the adjustment under Section 4.6, the
total number of shares of Common Stock reserved and available for distribution
pursuant to Options under the Plan shall be 500,000 shares of Common Stock
authorized for issuance on the Effective Date. Such shares shall consist of
authorized and unissued shares.
4.2 Release of Shares. The Committee shall in its sole discretion
determine the number of shares of Common Stock available under the Plan, and may
include, in its sole discretion, any shares of Common Stock that cease to be
subject to an Option
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or are forfeited, any shares subject to an Option that terminates without
issuance of shares of Common Stock being made to a Participant, or any shares
(whether or not restricted) of Common Stock that are received by the Company in
connection with the exercise of an Option, including the satisfaction of tax
withholding.
4.3 Restrictions on Shares. Shares of Common Stock issued upon exercise
of an Option shall be subject to the terms and conditions specified herein and
to such other terms, conditions and restrictions as the Committee in its
discretion may determine or provide in the Option Agreement with respect to such
Option. The Company shall not be required to issue or deliver any certificates
for shares of Common Stock, cash or other property prior to (i) the listing of
such shares on any stock exchange (or other public market) on which the Common
Stock may then be listed (or regularly traded), (ii) the completion of any
registration or qualification of such shares under Federal or state law, or any
ruling or regulation of any government body which the Committee determines to be
necessary or advisable, and (iii) the satisfaction of any applicable withholding
obligation in order for the Company to obtain a deduction with respect to the
exercise of an Option. The Company may cause any certificate for any shares of
Common Stock to be delivered to be properly marked with a legend or other
notation reflecting the limitations on transfer of such Common Stock as provided
in this Plan or as the Committee may otherwise require. The Committee may
require any person exercising an Option to make such representations and furnish
such information as it may consider appropriate in connection with the issuance
or delivery of the shares of Common Stock in compliance with applicable law or
otherwise. Fractional shares shall not be delivered, but shall be rounded to
the next lower whole number of shares.
4.4 Stockholder Rights. No person shall have any rights of a stockholder
as to shares of Common Stock subject to an Option until, after proper exercise
of the Option or other action required, such shares shall have been recorded on
the Company's official stockholder records as having been issued and
transferred. Subject to Section 4.3, upon exercise of the Option or any portion
thereof, the Company shall issue the shares of Common Stock at such time as
determined by the Committee, and the Participant will not be treated as a
stockholder for any purpose whatsoever prior to such issuance. No adjustment
shall be made for cash dividends or other rights for which the record date is
prior to the date such shares are recorded as issued and transferred in the
Company's official stockholder records, except as provided in an Agreement.
4.5 Anti-Dilution. In the event of any Company stock dividend, stock
split, combination or exchange of shares, merger, recapitalization or other
change in the capital structure of the Company, corporate separation or division
of the Company (including, but not limited to, a split-up, spin-off, split-off
or distribution to Company stockholders other than a normal cash dividend), sale
by the Company of all or a substantial portion of its assets (measured on either
a stand-alone or consolidated
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basis), reorganization, reclassification, rights offering, partial or complete
liquidation or any other corporate transaction, Company share offering or other
event involving the Company and having an effect similar to any of the
foregoing, then the Committee may adjust or substitute, as the case may be,
the number of shares of Common Stock available for Options under the Plan, the
number of shares of Common Stock covered by outstanding Options, the exercise
price per share of outstanding Options, the Exercise Date, and any other
characteristics or terms of the Options as the Committee shall deem necessary or
appropriate to reflect equitably the effects of such changes to the
Participants; provided, however, that any fractional share resulting from such
adjustment shall be eliminated by rounding to the next lower whole number of
shares with appropriate payment for such fractional share as shall reasonably be
determined by the Committee.
4.6 Custodian. Shares of Common Stock purchased pursuant to the Plan may
be delivered to and held in the custody of such investment or financial firm as
shall be appointed by the Committee. The custodian may hold in nominee or
street name certificates for shares purchased pursuant to the Plan, and may
commingle shares in its custody pursuant to the Plan in a single account without
identification as to individual Participants. By appropriate instructions to
the custodian on forms to be provided for the purpose, a Participant may from
time to time obtain (a) transfer into the Participant's own name or into the
name of the Participant and another individual of all or part of the whole
shares held by the custodian for the Participant's account; (b) transfer of all
or part of the whole shares held for the Participant's account by the custodian
to a regular individual brokerage account in the Participant's own name or in
the name of the Participant and another individual, either with the firm then
acting as custodian or with another firm, or (c) sell all or part of the
whole shares held by the custodian for the Participant's account at the market
price at the time the order is executed and remittance of the net proceeds of
the sale to the Participant. Upon termination of participation in the Plan, and
upon receipt of instructions from the Participant, the shares held by the
custodian for the account of the Participant will be transferred to the
Participant in accordance with (a) above, transferred to a brokerage account in
accordance with (b) above, or sold in accordance with (c), above.
ARTICLE V
---------
ELIGIBILITY
-----------
5.1 Eligibility. Except as herein provided, the persons who shall be
eligible to participate in the Plan as of any Grant Date shall be those persons
(and only those persons) who are Eligible Employees of the Company or Eligible
Employees of a Subsidiary to whom the Company has extended participation on a
Grant Date.
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5.2 Grant of Options. The Committee shall have authority to grant Options
under the Plan at any time or from time to time to all Eligible Employees as of
a Grant Date. (To the extent an Option is granted to any Eligible Employee of
an entity on a relevant date, all Eligible Employees of the entity shall be
granted an Option to the extent required by law.) An Option shall entitle the
Participant to receive shares of Common Stock at the conclusion of the Option
Period, subject to the Participant's satisfaction in full of any conditions,
restrictions or limitations imposed in accordance with the Plan or an Agreement,
including without limitation, payment of the Option Price. Each Option granted
under this Plan shall be evidenced by an Agreement, in a form approved by the
Committee, which shall embody the terms and conditions of such Option and which
shall be subject to the express terms and conditions set forth in this Plan and
to such other terms and conditions as the Committee may deem appropriate. The
grant and exercise of Options hereunder shall be subject to all applicable
Federal, state and local laws, rules and regulations and to such approvals by
any governmental or regulatory agencies as may be required. As of any Grant
Date, each Eligible Employee shall be granted Options with the same rights and
privileges as the Options granted to each other Eligible Employee on that Grant
Date, except the amount of the Common Stock which may be purchased by any
Participant under any Option may bear a uniform relationship to the total
compensation, or the basic or regular rate of compensation (as determined by the
Committee), of all Eligible Employees on that Grant Date, and the Option may
establish a maximum amount of Common Stock which may be purchased.
5.3 Option Period. Each Agreement shall specify the period for which the
Option thereunder is granted, which shall be determined by the Committee. In no
event shall the Option Period extend beyond the period permitted under Section
423(b)(7) of the Code.
5.4 Option Price. Subject to the limits stated herein, the Option Price
per share at which shares of Common Stock may be acquired upon exercise of an
Option shall be determined by the Committee. Unless otherwise specified by the
Committee, with respect to any Exercise Date, the Option Price shall not be less
than the lesser of (a) eighty-five percent (85%) of the Fair Market Value of a
share of Common Stock (averaged over such period as the Committee may determine
and as permitted by law) on the applicable Grant Date and (b) eighty-five
percent (85%) of the Fair Market Value of a share of Common Stock (averaged over
such period as the Committee may determine and as permitted by law) on the
applicable Exercise Date. The Committee reserves the right to increase the
Option Price by the value of any accretion to the amounts credited to an Account
if the Participant is credited with such accretion regardless of the method of
accounting for such accretion.
5.5 Contribution Rate. If an Eligible Employee elects to participate, the
Participant shall file an Agreement with the Committee within the time period
designated by the Committee. The Committee may provide that the Agreement shall
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<PAGE>
specify the percentage or amount of the Participant's compensation (as defined
by the Committee) determined by the Participant to be deducted each pay period.
Such amount shall be credited to the Account and shall be the Participant's
Contribution Rate. Such deductions shall begin as of the first regularly
scheduled payroll date on or after the later of the Grant Date and the date
specified by the Committee. Unless otherwise determined by the Committee,
participants may not make any separate cash payments outside payroll deductions
under the Plan, except that, in the event of a Change in Control, the Committee
may permit each Participant to make a single sum payment with respect to the
Option before the Exercise Date equal to the amount the Participant would have
contributed as determined by the Committee for the payroll periods remaining to
the Exercise Date. The Committee may establish minimum and maximum percentages
or amount to be contributed and a date by when any Agreement must be filed with
the Committee. Unless otherwise permitted by the Committee, such contributions
will be held in the general funds of the Company, and no interest shall accrue
on any amounts held under this Plan, unless expressly determined by the
Committee, and any separate accounting shall not limit the Company's use of the
funds. If payroll deduction are made by a Subsidiary, that corporation will
promptly remit the amount of the deduction to the Company. A Participant's
Contribution Rate, once established, shall remain in effect until the next
following Grant Date unless and until contributions are suspended or fully
discontinued in order to comply with Section 401(k) of the Code or for such
other reasons as the Committee in its sole discretion may determine, or if the
Participant shall request suspension or discontinuance. If a Participant
requests to suspend payroll deductions the Participant may do so at such times
and in such manner as the Committee may permit, and previously deducted amounts
shall be retained until the Exercise Date. A Participant who has suspended
contributions (1) will receive any shares of Common Stock as of the Exercise
Date and (2) may recommence payroll deductions at such time, if at all, as
determined by the Committee. If a Participant requests to cancel and totally
discontinue payroll deductions, the Participant may do so by providing written
notice to the Committee, and there shall be paid to the Participant the value of
the Participant's Account at such time as the Committee directs and the
Participant shall not receive any shares of Common Stock as of the Exercise
Date.
5.6 Purchase of Shares. Subject to Sections 5.7, 5.8, 5.9, 5.10 and 5.11,
on each Exercise Date, a Participant who has previously executed an Agreement
with respect to a specific Grant Date and made one or more payments described in
Section 5.5 shall be deemed to have exercised the Option to the extent of the
value of the Account, and shall be deemed to have purchased such number of full
shares of Common Stock as equals the value of the Account, subject to the limits
of Sections 423(b)(3) and 423(b)(8) of the Code and the number of shares
available as of the Exercise Date and proportionably allocable to other
Participants for that Grant Date. The number of shares of Common Stock to be
purchased as of any Exercise Date shall be determined by dividing the Option
Price per share of the Common Stock into the Account value and the value of the
shares so purchased shall be charged to the Account. Any value remaining in an
Account of the Participant shall be retained
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<PAGE>
by the Plan as an initial value credited to the Account of the Participant if
there is an effective Agreement respecting the Participant on the Grant Date
immediately following the Exercise Date, or if there is not an effective
Agreement regarding the Participant in the Grant Date immediately following the
Exercise Date, then the remaining value shall be returned at such time as
determined by the Committee to the Participant and not applied to purchase
Common Stock. Certificates of Common Stock purchased hereunder may be held by
the custodian as provided in Section 4.6. The Committee may determine and
designate that any Common Stock issued to the Participant who is subject to
reporting under Section 16 of the Exchange Act must be held for six (6) months
to the extent required by law to avoid liability under the Exchange Act. The
Committee may amend the Plan or any Agreement or provide in operation for
Participants to dispose of shares of Common Stock received upon the Exercise
Date on or immediately thereafter (which time may include any period during
which the Option is held) to the extent such disposition would not result in
liability under Section 16 of the Exchange Act. If the total number of shares
to be purchased as of any Exercise Date by all Participants exceeds the number
of shares authorized and remaining available under this Plan or made available
by the Committee as to any Exercise Date, a pro rata allocation of the available
shares will be made among all Participants authorizing such payroll deductions
based on the amount of their respective payroll deductions through the Exercise
Date. Any cash remaining will be returned to Participants.
5.7 Cancellation of Options. Except as otherwise provided in an
Agreement, an Option shall cease to be exercisable and shall be cancelled on or
after the expiration of the Option Period.
5.8 Terminated Employees. Except as otherwise provided by the Committee
or in an Agreement, any Participant who incurs a Termination of Employment for
any reason, except death, Disability or Retirement, during the Option Period
shall cease to be a Participant, the Option of the Participant shall be null and
void on the date of the Termination of Employment without notice to the
Participant and the balance of the Account of the Participant shall be
distributed to the Participant at such time as the Committee determines.
5.9 Deceased Employees. If a Participant shall die during an Option
Period while an Eligible Employee, no further contributions by deduction from
regularly scheduled payments on behalf of the deceased Participant shall be
made, except that unless otherwise determined by the Committee, the
Representative of such Participant may make a single sum payment with respect
to the Option of the Participant at any time on or before the Exercise Date
equal to the amount the Participant would have contributed as determined by the
Committee for the payroll periods remaining to the Exercise Date. The
Representative of such Participant may at any time prior to the Exercise Date
request a distribution of the Account of the Participant. If the Representative
does not request a distribution, the
14
<PAGE>
balance accumulated in the deceased Participant's Account shall be used to
purchase shares of Common Stock on the Exercise Date.
5.10 Disabled or Retired Employees. If a Participant incurs a Termination
of Employment due to Disability, or if a Participant incurs a Termination of
Employment due to Retirement, during an Option Period, no further contributions
by deduction from regularly scheduled payments on behalf of the disabled or
retired Participant shall be made, except that unless otherwise determined by
the Committee, the Participant may make a single sum payment with respect to the
Option of the Participant at any time on or before the Exercise Date equal to
the amount the Participant would have contributed as determined by the Committee
for the payroll periods remaining to the Exercise Date. The Participant may at
any time prior to the Exercise Date request a distribution of the Account. If
the Participant does not request a distribution of the Account, the balance
accumulated in the disabled or retired Participant's Account shall be used to
purchase shares of Common Stock on the Exercise Date.
5.11 Limitations. Notwithstanding any other provision of this Plan, in no
event may a Participant (i) purchase under the Plan during any Plan Year Common
Stock having a fair market value (determined at the Grant Date) of more than
$25,000 or (ii) receive any rights to purchase stock hereunder if he or she
beneficially owns, immediately after the Option is granted, five percent (5%) or
more of the total voting power or value of all classes of stock of the Company.
Subject to the foregoing, as of any Grant Date a Participant may not receive an
Option to purchase a number of shares of Common Stock in excess of the maximum
number of shares of Common Stock determined by the Committee, and in the absence
of a determination, the maximum number shall be determined by dividing $25,000
by the lowest closing price of the Common Stock as reported on the principal
exchange or market on which the Common Stock was traded during the 12-month
period ending immediately prior to the Grant Date.
5.12 Nonassignability. Except as provided herein or in an Agreement, no
Option or interest therein shall be transferable by a Participant other than by
will or by the laws of descent and distribution, and all Options shall be
exercisable during the Participant's lifetime only by the Participant or, if
consistent with Section 423 of the Code, by designation of a Beneficiary upon
the death of the Participant.
ARTICLE VI
----------
MISCELLANEOUS
-------------
6.1 Amendments and Termination. The Board may amend, alter, or
discontinue the Plan at any time, but no amendment, alteration or
discontinuation shall be made which would (a) impair the rights of a Participant
under an Option theretofore
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granted without the Participant's consent, except such an amendment made to
cause the Plan to qualify for the exemption provided by Rule 16b-3 or as a Plan
described in Section 423 of the Code. In addition, no amendment shall be made
without the approval of the Company's stockholders to the extent such approval
is required by law or agreement.
The Committee may amend the Plan at any time subject to the same
limitations on its right to amend the Plan as apply to the Board as described in
the preceding paragraph, and any such amendment shall be subject to the approval
or rejection of the Board.
The Committee may amend the terms of any Option theretofore granted,
prospectively or retroactively, but no such amendment shall impair the rights of
any Participant without the Participant's consent, except such an amendment made
to cause the Plan or Option to qualify for the exemption provided by Rule 16b-3
or to qualify as an Option under Section 423 of the Code.
Subject to the above provisions, the Board shall have authority to amend
the Plan to take into account changes in law and tax and accounting rules, as
well as other developments and to grant Options which qualify for beneficial
treatment under such rules without stockholder approval. Notwithstanding
anything to the contrary herein, if any right or action under this Plan or an
Agreement would cause a transaction to be ineligible for pooling of interests
accounting that would, but for the right or action, be eligible for such
accounting treatment, the Committee may modify or adjust the right or action so
that pooling of interest accounting is available.
6.2 Unfunded Status of Plan. It is intended that the Plan be an
"unfunded" plan for incentive and deferred compensation. The Committee may
authorize the creation of trusts or other arrangements to meet the obligations
created under the Plan to deliver Common Stock or make payments; provided,
however, that, unless the Committee otherwise determines, the existence of such
trusts or other arrangements is consistent with the "unfunded" status of the
Plan.
6.3 General Provisions.
(a) Representation. The Committee may require each person purchasing
or receiving shares pursuant to an Option to represent to and agree with
the Company in writing that such person is acquiring the shares without a
view to the distribution thereof. The certificates for such shares may
include any legend which the Committee deems appropriate to reflect any
restrictions on transfer.
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(b) Impact on other Compensation. Nothing contained in the Plan shall
prevent the Company from adopting other or additional compensation
arrangements for its employees.
(c) Withholding. No later than the date as of which an amount first
becomes includible in the gross income of the Participant for Federal
income tax purposes with respect to any Option, the Participant shall pay
to the Company (or other entity identified by the Committee), or make
arrangements satisfactory to the Company or other entity identified by the
Committee regarding the payment of, any Federal, state, local or foreign
taxes of any kind required by law to be withheld with respect to such
amount required in order for the Company to obtain a current deduction.
Unless otherwise determined by the Committee, withholding obligations may
be settled with Common Stock, including Common Stock that is part of the
Option that gives rise to the withholding requirement, provided that any
applicable requirements under Section 16 of the Exchange Act are satisfied.
The obligations of the Company under the Plan shall be conditional on such
payment or arrangements, and the Company shall, to the extent permitted by
law, have the right to deduct any such taxes from any payment otherwise due
to the Participant. If the Participant disposes of shares of Common Stock
acquired pursuant to an Option in any transaction considered to be a
disqualifying transaction under the Code, the Participant must give the
Company written notice of such transfer and the Company shall have the
right to deduct any taxes required by law to be withheld from any amounts
otherwise payable to the Participant.
(d) Representative. The Committee shall establish such procedures as
it deems appropriate for a Participant to designate a Representative to
whom any amounts payable in the event of the Participant's death are to be
paid.
(e) Controlling Law. The Plan and all Options made and actions taken
thereunder shall be governed by and construed in accordance with the laws
of the State of Illinois (other than its law respecting choice of law),
except to the extent that the General Corporation Law of the State of
Delaware would be mandatorily applicable. The Plan shall be construed to
comply with all applicable law, and to avoid liability to the Company or a
Participant, including, without limitation, liability under Section 16(b)
of the Exchange Act.
(f) Offset. Any amounts owed to the Company by a Participant of
whatever nature may be offset by the Company from the value of any shares
of Common Stock, cash or other thing of value under the Plan or an
Agreement to be transferred to the Participant, and no shares of Common
Stock, cash or other thing of value under the Plan or an Agreement shall be
transferred unless and until all disputes of any type between the Company
and
17
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the Participant have been fully and finally resolved and the Participant
has waived all claims to such against the Company.
(g) Fail Safe. With respect to persons subject to Section 16 of the
Exchange Act, transactions under this Plan are intended to comply with all
applicable conditions of Rule 16b-3 or Rule 16a-1(c)(3), as applicable. To
the extent 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. Moreover, in the event the Plan
does not include a provision required by Rule 16b-3 or Rule 16a-1(c)(3) to
be stated herein, such provision (other than one relating to eligibility
requirements or the price and amount of Options) shall be deemed to be
incorporated by reference into the Plan with respect to Participants
subject to Section 16.
(h) Capitalization. The grant of an Award shall in no way affect the
right of the Company to adjust, reclassify, reorganize, or otherwise change
its capital or business structure or to merge, consolidate, dissolve,
liquidate or sell or transfer all or any part of its business or assets.
6.4 Mitigation of Excise Tax. Subject to any agreement between the
Participant and the Company, any payment or right accruing to a Participant
under this Plan (without the application of this Section 6.4), either alone or
together with other payments or rights accruing to the Participant from the
Company ("Total Payments") would constitute a "parachute payment" (as defined in
Section 280G of the Code and regulations thereunder), such payment or right
shall be reduced to the largest amount or greatest right that will result in no
portion of the amount payable or right accruing under the Plan being subject to
an excise tax under Section 4999 of the Code or being disallowed as a deduction
under Section 280G of the Code. The determination of whether any reduction in
the rights or payments under this Plan is to apply shall be made by the
Committee in good faith after consultation with the Participant, and such
determination shall be conclusive and binding on the Participant. The
Participant shall cooperate in good faith with the Committee in making such
determination and providing the necessary information for this purpose. The
foregoing provisions of this Section 6.4 shall apply with respect to any person
only if after reduction for any applicable Federal excise tax imposed by Section
4999 of the Code and Federal income tax imposed by the Code, the Total Payments
accruing to such person would be less than the amount of the Total Payments as
reduced, if applicable, under the foregoing provisions of the Plan and after
reduction for only Federal income taxes.
6.5 Rights with Respect to Continuance of Employment. The Plan does not,
directly or indirectly, create any absolute right for the benefit of any
Employee or class of Employees to purchase any Common Stock under the Plan.
Nothing contained herein shall be deemed to alter the relationship between the
Company and a Participant, or the contractual relationship between a Participant
and the Company if there is a written contract regarding such relationship.
Nothing contained herein shall be construed to constitute a contract of
employment between the Company and a Participant. The Company and each of the
Participants continue to have the right to terminate this employment
relationship at any time for any reason, except as provided in a written
contract. The Company shall have no obligation to retain the Participant
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in its employ or service as a result of this Plan. There shall be no inference
as to the length of employment or service hereby, and the Company reserves the
same rights to terminate the Participant's employment or service as existed
prior to the individual becoming a Participant in this Plan.
6.6 Options in Substitution for Options Granted by Other Corporations.
Options may be granted under the Plan from time to time in substitution for
awards in respect of other plans of other entities. The terms and conditions of
the Options so granted may vary from the terms and conditions set forth in this
Plan at the time of such grant as the majority of the members of the Committee
may deem appropriate to conform, in whole or in part, to the provisions of the
awards in substitution for which they are granted.
6.7 Delay. Any time period provided for under the Plan or an Agreement,
to the extent necessary to avoid the imposition of liability, shall be suspended
or delayed during the period a Participant would be subject to liability under
Section 16 of the Exchange Act, but not by more than six (6) months and one (1)
day. The Company shall have the right to suspend or delay any time period for
an action described in the Plan or an Agreement if the Committee shall determine
that the action may constitute a violation of any law or result in liability
under any law to the Company or a stockholder of the Company until such time as
the action required or permitted shall not constitute a violation of law or
result in liability to the Company or a stockholder of the Company. The
Committee shall have the discretion to suspend the application of the provisions
of the Plan required solely to comply with Rule 16b-3 if the Committee shall
determine that Rule 16b-3 does not apply to the Plan and may amend the Plan's
provisions or operations to reduce obligations imposed by Rule 16b-3 if Rule
16b-3 is amended to reduce obligations imposed on the Plan and its operations.
6.8 Headings. The headings contained in the Plan are for reference
purposes only and shall not affect the meaning or interpretation of the Plan.
6.9 Severability. If any provision of the Plan shall for any reason be
held to be invalid or unenforceable, such invalidity or unenforceability shall
not effect any other provision hereby, and the Plan shall be construed as if
such invalid or unenforceable provision were omitted.
6.10 Successors and Assigns. The Plan shall inure to the benefit of and be
binding upon each successor and assign of the Company. All obligations imposed
upon a Participant, and all rights granted to the Company hereunder, shall be
binding
19
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upon or insure to the benefit of the Participant's heirs, legal representatives
and successors.
6.11 Entire Agreement. The Plan and an Agreement constitute the entire
agreement with respect to the subject matter hereof and thereof, provided that
in the event of any inconsistency between the Plan and the Agreement, the terms
and conditions of the Agreement shall control.
Executed effective this 29th day of May, 1996.
THE LEAP GROUP, INC.
By: /s/ R. Steven Lutterbach
---------------------------------
R. Steven Lutterbach
Chief Executive Officer
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Exhibit 5
April 2, 1997
The Leap Group, Inc.
22 West Hubbard Street
Chicago, Illinois 60614
Re: Registration Statement on Form S-8
----------------------------------
Ladies and Gentlemen:
We have acted as counsel for The Leap Group, Inc., a Delaware corporation
(the "Company"), in connection with the preparation and filing of a Registration
Statement on Form S-8 (the "Registration Statement") with the Securities and
Exchange Commission under the Securities Act of 1933, as amended. The
Registration Statement relates to 5,004,000 shares of the Company's Common
Stock, $.01 par value per share (the "Common Stock"), issuable by the Company
upon the exercise of options granted under the following stock option plans: The
Leap Group, Inc. Employee Incentive Compensation Plan, The Leap Group, Inc.
Amended and Restated 1996 Stock Option Plan, The Leap Group, Inc. Non-employee
Directors' Stock Option Plan and The Leap Group, Inc. Employee Stock Purchase
Plan (collectively, the "Plans").
In connection with this opinion, we have relied as to matters of fact,
without investigation, upon certificates of public officials and others and upon
affidavits, certificates and written statements of directors, officers and
employees of, and the accountants for, the Company. We have also examined
originals or copies, certified or otherwise identified to our satisfaction, of
such instruments, documents and records as we have deemed relevant and necessary
to examine for the purpose of this opinion, including (a) the Registration
Statement, (b) the Amended and Restated Certificate of Incorporation of the
Company, (c) the By-laws of the Company, (d) the Plans and (e) resolutions
adopted by the Board of Directors of the Company.
<PAGE>
The Leap Group, Inc.
April 2, 1997
Page 2
In connection with this opinion, we have assumed the accuracy and
completeness of all documents and records that we have reviewed, the genuineness
of all signatures, the due authority of the parties signing such documents, the
authenticity of the documents submitted to us as originals and the conformity to
authentic original documents of all documents submitted to us as certified,
conformed or reproduced copies.
Based upon and subject to the foregoing, it is our opinion that the
5,004,000 shares of Common Stock covered by the Registration Statement, when
issued and sold by the Company and paid for in accordance with the provisions of
the Plans, will be legally issued, fully paid and non-assessable shares of
Common Stock.
Our opinion expressed above is limited to the General Corporation Law of
the State of Delaware, and we do not express any opinion concerning any other
laws. This opinion is given as of the date hereof and we assume no obligation to
advise you of changes that may hereafter be brought to our attention.
We hereby consent to the filing of this opinion as Exhibit 5 to the
Registration Statement.
Very truly yours,
/s/ Katten Muchin & Zavis
---------------------------------
KATTEN MUCHIN & ZAVIS
<PAGE>
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
-----------------------------------------
As independent public accountants, we hereby consent to the incorporation by
reference in this Registration Statement of our reports dated June 7, 1996
included in The Leap Group Inc.'s Registration Statement on Form S-1, as amended
(File No. 333-05051) and to all references to our Firm included in this
Registration Statement.
/s/ Arthur Andersen LLP
-----------------------
ARTHUR ANDERSEN LLP
Chicago, Illinois
April 1, 1997
