LeapFrog 2003 Annual Report Download - page 132

PROPOSAL 2
AMENDMENT OF 2002 EQUITY INCENTIVE PLAN
LeapFrog’s board of directors adopted on May 24, 2002 our 2002 Equity Incentive Plan, or Equity Plan,
which was approved by our stockholders on July 19, 2002. A total of 16,500,000 shares of our Class A common
stock were reserved for issuance under the Equity Plan. In April 2004, the Compensation Committee of our board
of directors approved an amendment to our Equity Plan to increase the aggregate number of shares of our Class
Acommon stock authorized for issuance under the Equity Plan by 2,500,000 shares and to allow for
performance-based stock awards to be granted under the Equity Plan. We are seeking stockholder approval of the
amendment to the Equity Plan approved by the Compensation Committee of our board of directors in April 2004.
The amendment to the Equity Plan approved by the Compensation Committee in April 2004 increases the total
number of shares of our Class A common stock reserved for issuance under the Equity Plan from 16,500,000 to
19,000,000 and provides a mechanism for the Compensation Committee to grant performance-based stock
awards. As of April 8, 2004, options (net of canceled or expired options) covering 6,680,896 shares of our Class
Acommon stock had been granted pursuant to the Equity Plan, and 2,787,859 shares of Class A common stock
(plus any shares that might in the future be returned to the Equity Plan as a result of reacquisition of unvested
options, or as a result of cancellations or expirations) remained available for future grant under the Equity Plan.
In the event that this proposal is not approved by the stockholders at our 2004 annual meeting of
stockholders, the Equity Plan will remain in full force and effect, but we will not grant any stock awards to our
“covered employees” within the meaning of Section 162(m) of the Internal Revenue Code.
Ageneral description of the Equity Plan is set forth below, but such description is qualified in its entirety by
reference to the full text of the Equity Plan, a copy of which is attached as Appendix A, which reflects the
amendments to the Equity Plan approved by our Compensation Committee in April 2004.
DESCRIPTION OF EQUITY PLAN
The purpose of the Equity Plan is to enable LeapFrog to attract and retain talented employees, key
consultants and directors by providing an incentive to such individuals through equity participation in LeapFrog,
and by rewarding employees, key consultants and directors who contribute to the achievement of LeapFrog’s
long-term economic objectives.
The Equity Plan automatically will terminate ten years after its adoption, unless it is terminated earlier by
the board of directors.
Eligibility. The Equity Plan provides for the following types of stock awards to the following persons:
•Incentive stock options, as defined under the Internal Revenue Code of 1986, as amended (the “Code”),
which may be granted solely to employees (including officers); and
•Nonstatutory stock options, restricted stock awards and stock bonus awards, all of which may be granted
to employees (including officers), directors and consultants.
As of April 8, 2004, we had approximately 890 employees eligible to participate in the Equity Plan.
Administration. Pursuant to the terms of the Equity Plan, the board of directors has delegated
administration of the Equity Plan to the Compensation Committee of the board of directors (the “Committee”);
provided, however,that in the case of stock awards intended to qualify as “performance-based compensation”
within the meaning of Section 162(m) of the Code, or that are made to persons who are subject to Section 16 of
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