LeapFrog 2005 Annual Report Download - page 153

credited with respect to shares covered by a restricted stock unit award. However, LeapFrog does not anticipate
paying cash dividends on its Class A common stock for the foreseeable future. Except as otherwise provided in
the applicable restricted stock unit award agreement, restricted stock units that have not vested will be forfeited
upon the non-employee director’s termination of service.
Stock Appreciation Rights. Stock appreciation rights may be granted under the Director Plan pursuant to
stock appreciation rights agreements.
Each stock appreciation right is denominated in shares of common stock equivalents. Upon exercise of a
stock appreciation right, LeapFrog will pay the non-employee director an amount equal to the excess of (i) the
aggregate fair market value of Class A common stock on the date of exercise, over (ii) the strike price determined
by the board on the date of grant. The appreciation distribution upon exercise of a stock appreciation right may
be paid in cash, shares of Class A common stock, or any other form of consideration determined by the board.
Stock appreciation rights vest and become exercisable at the rate specified in the stock appreciation right
agreement as determined by the board. Upon termination of a non-employee director’s service, the non-employee
director generally may exercise any vested stock appreciation right for three months (or such longer or shorter
period specified in the stock appreciation right agreement) after the date such service relationship ends. In no
event may a stock appreciation right be exercised beyond the expiration of its term.
Performance Stock Awards. Under the Director Plan, a stock award may be granted, vest or be exercised
based upon certain service conditions or upon the attainment during a certain period of time of certain
performance goals. Such performance goals may be determined by the board in its sole discretion or may be
based on the performance goals selected by the compensation committee of the board under LeapFrog’s 2002
Equity Incentive Plan. The length of any performance period, the performance goals to be achieved during such
performance period, and the measure of whether and to what degree such performance goals have been attained
shall be conclusively determined by the board in its sole discretion. In addition, to the extent permitted by
applicable law and the applicable award agreement, the board may determine that cash may be used in payment
of performance stock awards.
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 stock award 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 stock awards automatically granted
under the Director Plan, and the class(es) and number of shares and price per share of stock subject to
outstanding stock awards 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 stock
award automatically will become fully vested and immediately exercisable (if applicable), 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, if
the vesting acceleration of a stock award granted to a non-employee director results in the imposition of the
“golden parachute” excise tax under Section 4999 of the Internal Revenue Code, then the “golden parachute”
payment will be reduced to the extent necessary to avoid the imposition of the excise tax, but only if the
reduction in vesting acceleration would result in a greater total payment for the non-employee director taking into
account all applicable taxes, including the excise tax.
Amendments to the Director Plan. The board of directors has the authority to amend the Director Plan,
so long as such action does not impair any stock award previously granted under the Director Plan, unless
consented to in writing by the non-employee director. In addition, no amendment will be effective unless
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