LeapFrog 2005 Annual Report Download - page 175

(iii) by delivery to the Company (either by actual delivery or attestation) of shares of Class A Common
Stock;
(iv) by a “net exercise” arrangement pursuant to which the Company will reduce the number of shares
of Class A Common Stock issued upon exercise by the largest whole number of shares with a Fair Market
Value that does not exceed the aggregate exercise price; provided, however, that the Company shall accept a
cash or other payment from the Participant to the extent of any remaining balance of the aggregate exercise
price not satisfied by such reduction in the number of whole shares to be issued; provided, further, that
shares of Class A Common Stock will no longer be outstanding under an Option and will not be exercisable
thereafter to the extent that (A) shares are used to pay the exercise price pursuant to the “net exercise,”
(B) shares are delivered to the Participant as a result of such exercise, and (C) shares are withheld to satisfy
tax withholding obligations; or
(v) in any other form of legal consideration that may be acceptable to the Board.
Unless otherwise specifically provided in the Option, the purchase price of Class A Common Stock acquired
pursuant to an Option that is paid by delivery to the Company of other Class A Common Stock acquired, directly
or indirectly from the Company, shall be paid only by shares of the Class A Common Stock of the Company that
have been held for more than six (6) months (or such longer or shorter period of time required to avoid a charge
to earnings for financial accounting purposes). At any time that the Company is incorporated in Delaware,
payment of the Class A Common Stock’s “par value,” as defined in the Delaware General Corporation Law, shall
not be made by deferred payment.
(d) Transferability. An Option is transferable by will or by the laws of descent and distribution. An
Option also may be transferable upon written consent of the Company if, at the time of transfer, a Form S-8
registration statement under the Securities Act is available for the exercise of the Option and the subsequent
resale of the underlying securities. In addition, an Optionholder may, by delivering written notice to the
Company, in a form satisfactory to the Company, designate a third party who, in the event of the death of the
Optionholder, shall thereafter be entitled to exercise the Option.
(e) Vesting. Options shall vest as follows:
(i) Initial Grants: 1/36th of the shares of Class A Common Stock covered by an Initial Grant shall vest
monthly over thirty-six (36) months.
(ii) Annual Grants: 1/36th of the shares of Class A Common Stock covered by an Annual Grant shall
vest monthly over thirty-six (36) months.
(f) Early Exercise. The Option may, but need not, include a provision whereby the Optionholder may
elect at any time before the Optionholder’s Continuous Service terminates to exercise the Option as to any part or
all of the shares of Class A Common Stock subject to the Option prior to the full vesting of the Option. Any
unvested shares of Class A Common Stock so purchased may be subject to a repurchase option in favor of the
Company or to any other restriction the Board determines to be appropriate.
(g) Termination of Continuous Service. In the event an Optionholder’s Continuous Service terminates
(other than upon the Optionholder’s death or Disability), the Optionholder may exercise his or her Option (to the
extent that the Optionholder was entitled to exercise it as of the date of termination) but only within such period
of time ending on the earlier of (i) the date three (3) months following the termination of the Optionholder’s
Continuous Service, or (ii) the expiration of the term of the Option as set forth in the Option Agreement. If, after
termination, the Optionholder does not exercise his or her Option within the time specified in the Option
Agreement, the Option shall terminate.
(h) Extension of Termination Date. If the exercise of the Option following the termination of the
Optionholder’s Continuous Service (other than upon the Optionholder’s death or Disability) would be prohibited
B-8