LeapFrog 2003 Annual Report Download - page 140

Automatic Grants. Pursuant to the terms of the Director Plan, on July 2, 2002, each non-employee
director automatically was granted an option to purchase 25,000 shares of Class A common stock, the Initial
Grant. Any individual who becomes a non-employee director after July 2, 2002 automatically will be granted the
Initial Grant upon being elected to the board of directors. The Director Plan, as amended, provides that non-
employee directors will receive an initial grant of 30,000 shares of our Class A common stock, a [5,000] share
increase over the amount set forth in the Director Plan when it was initially approved by our stockholders.
Any individual who is a non-employee director on July 1, 2004 and any individual who becomes a non-
employee director thereafter automatically will be granted an option to purchase 10,000 shares of Class A
common stock, the Annual Grant, on such date (or on a subsequent July 1, if the individual becomes a non-
employee director after this date) and on each anniversary thereafter during his or her service as a non-employee
director. The number of shares covered by the Annual Grant will be reduced, on a pro rata basis, for each month
an individual did not serve as a non-employee director during the preceding 12-month period. The Director Plan,
as amended, (a) increases the amount of shares of Class A common stock covered by the Annual Grant to
15,000 shares, a 5,000 share increase over the amount set forth in the Director Plan when it was initially
approved by our stockholder, and (b) provides that if a non-employee director is also Chairman of our board at
the time of the Annual Grant, such non-employee director will instead receive an Annual Grant to purchase
25,000 shares of our Class A common stock.
Initial and Annual Grants vest in monthly installments over a three-year period from the date of grant.
An option granted to a non-employee director may provide for an early exercise feature pursuant to which
the option may be exercised prior to full vesting, resulting in unvested shares of Class A common stock being
subject to repurchase by us in the event of the non-employee director’s cessation of service prior to the vesting of
the shares.
The exercise price of the options granted under the Director Plan will be equal to the fair market value of the
Class A common stock on the date of grant. Class A common stock issued pursuant to options granted under the
Director Plan may be paid for in cash, in shares of Class A common stock previously owned by the optionee or
pursuant to a “cashless” exercise program.
No option granted under the Director Plan may be exercised after the expiration of 10 years from the date it
was granted. Options granted under the Director Plan are not transferable other than by will or by the laws of
descent and distribution and are exercisable during the life of the optionee only by the optionee, unless otherwise
provided by the board of directors. However, an optionee may designate a beneficiary who may exercise the
option following the optionee’s death. An optionee whose service relationship with LeapFrog or a subsidiary
(whether as a non-employee director of LeapFrog or subsequently as an employee, director or consultant of either
LeapFrog or a subsidiary) ceases for any reason may exercise vested options for the term provided in the option
agreement (three months generally, six months if the service relationship ends on account of disability or death).
Adjustments to the Director Plan. If any change is made in the Class A common stock subject to the
Director Plan or subject to any option without receipt of consideration by LeapFrog (through merger,
consolidation, reorganization, recapitalization, stock dividend, dividend in property other than cash, stock split,
liquidating dividend, combination of shares, exchange of shares, change in corporate structure or otherwise), the
class(es) and maximum number of shares subject to the Director Plan, the options automatically granted under
the Director Plan, and the class(es) and number of shares and price per share of stock subject to outstanding
options will be appropriately adjusted.
Change in Control. If the service of a non-employee director is terminated within 12 months following a
Change in Control (as defined in the Director Plan), the unvested portion of the non-employee director’s option
automatically will become fully vested and immediately exercisable, unless the termination was a result of the
non-employee director’s resignation (other than any resignation contemplated by the terms of the Change in
Control or required by us or the acquiring entity pursuant to the Change in Control). However, in the event that
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