LeapFrog 2010 Annual Report Download - page 183

4. E LIGIBILITY .
(a) Eligibility for Specific Stock Awards. Incentive Stock Options may be granted only to employees of
the Company or a “parent corporation” or “subsidiary corporation” thereof (as such terms are defined in Sections
424(e) and (f) of the Code). Stock Awards other than Incentive Stock Options may be granted to Employees,
Directors and Consultants; provided, however, Nonstatutory Stock Options and SARs may not be granted to
Employees, Directors and Consultants who are providing Continuous Service only to any “parent” of the
Company, as such term is defined in Rule 405 promulgated under the Securities Act, unless the stock underlying
such Stock Awards is treated as “service recipient stock” under Section 409A of the Code because the Stock
Awards are granted pursuant to a corporate transaction (such as a spin off transaction) or unless such Stock
Awards comply with the distribution requirements of Section 409A of the Code.
(b) Ten Percent Stockholders. A Ten Percent Stockholder shall not be granted an Incentive Stock Option
unless the exercise price of such Option is at least one hundred ten percent (110%) of the Fair Market Value on
the date of grant and the Option is not exercisable after the expiration of five (5) years from the date of grant.
5. P ROVISIONS RELATING TO O PTIONS AND S TOCK A PPRECIATION R IGHTS .
Each Option or SAR shall be in such form and shall contain such terms and conditions as the Board shall
deem appropriate. All Options shall be separately designated Incentive Stock Options or Nonstatutory Stock
Options at the time of grant, and, if certificates are issued, a separate certificate or certificates shall be issued for
shares of Class A Common Stock purchased on exercise of each type of Option. If an Option is not specifically
designated as an Incentive Stock Option, then the Option shall be a Nonstatutory Stock Option. The provisions of
separate Options or SARs need not be identical; provided, however, that each Option Agreement or Stock
Appreciation Right Agreement shall conform to (through incorporation of provisions hereof by reference in the
applicable Award Agreement or otherwise) the substance of each of the following provisions:
(a) Term. Subject to the provisions of Section 4(b) regarding Ten Percent Stockholders, no Option or
SAR shall be exercisable after the expiration of ten (10) years from the date of its grant or such shorter period
specified in the Award Agreement.
(b) Exercise Price. Subject to the provisions of Section 4(b) regarding Ten Percent Stockholders, the
exercise price (or strike price) of each Option or SAR shall be not less than one hundred percent (100%) of the
Fair Market Value of the Class A Common Stock subject to the Option or SAR on the date the Option or SAR is
granted. Notwithstanding the foregoing, an Option or SAR may be granted with an exercise price (or strike price)
lower than one hundred percent (100%) of the Fair Market Value of the Class A Common Stock subject to the
Option or SAR if such Option or SAR is granted pursuant to an assumption of or substitution for another option
or stock appreciation right pursuant to a Corporate Transaction and in a manner consistent with the provisions of
Sections 409A and, if applicable, 424(a) of the Code. Each SAR will be denominated in shares of Class A
Common Stock equivalents.
(c) Purchase Price for Options. The purchase price of Class A Common Stock acquired pursuant to the
exercise of an Option shall be paid, to the extent permitted by applicable law and as determined by the Board in
its sole discretion, by any combination of the methods of payment set forth below. The Board shall have the
authority to grant Options that do not permit all of the following methods of payment (or otherwise restrict the
ability to use certain methods) and to grant Options that require the consent of the Company to utilize a particular
method of payment. The permitted methods of payment are as follows:
(i) by cash, check, bank draft or money order payable to the Company;
(ii) pursuant to a program developed under Regulation T as promulgated by the Federal Reserve Board
that, prior to the issuance of the stock subject to the Option, results in either the receipt of cash (or check) by the
Company or the receipt of irrevocable instructions to pay the aggregate exercise price to the Company from the
sales proceeds;
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