LeapFrog 2003 Annual Report Download - page 139

PROPOSAL THREE
AMENDMENT OF 2002 NON-EMPLOYEE DIRECTORS’ STOCK OPTION PLAN
LeapFrog’s 2002 Non-Employee Directors’ Stock Option Plan, or Director Plan, was initially adopted by
our board of directors on July 2, 2002 and approved by the stockholders on July 19, 2002. The Compensation
Committee of our board of directors has approved an amendment to the Director Plan. In the event that this
proposal is not approved by the stockholders at our 2004 annual meeting of stockholders, the proposed
amendment to the Director Plan will not be effected and the Director Plan will remain in full force and effect.
The following summary description of the proposed amendment and the Director Plan, as proposed to be
amended, is qualified in its entirety by reference to the full text of the Director Plan that is attached to this proxy
statement as Appendix B including all changes that this proposal would effect if approved by our stockholders at
the annual meeting.
The Director Plan currently grants to non-employee directors an initial grant of 25,000 shares of our Class A
common stock and annual grants of 10,000 shares of our Class A common stock, with no distinction for a non-
employee director who is appointed or elected Chairman of our board of directors. The proposed amendment to
the Director Plan would also increase the number of shares underlying options granted to non-employee directors
such that a non-employee director would receive an initial grant of 30,000 shares of our Class A common stock
and an annual grant of 15,000 shares of our Class A common stock, and a non-employee director who holds the
position of Chairman of our board of directors at the time of the annual grant will receive an annual grant of
25,000 shares in lieu of an annual grant of 15,000 shares.
This amendment is being proposed in order to reflect among other things the increased responsibilities and
duties of our board of directors, and in particular the Chairman of our board, as a result of the rules and
regulations promulgated under the Sarbanes-Oxley Act and the listing standards adopted by the NYSE in
November 2003, and the need for the company to attract and retain new members of the board of directors.
DESCRIPTION OF DIRECTOR PLAN
The purpose of the Director Plan is to promote the long-term growth and financial success of LeapFrog. The
Director Plan is intended to secure for LeapFrog and it stockholders the benefits of long-term incentives inherent
in increased common stock ownership by members of the board who are not employees of LeapFrog. It is
intended that the Director Plan will induce and encourage highly experienced and qualified individuals to serve
on our board and assist LeapFrog in promoting a greater identity of interest between non-employee directors and
the stockholders of LeapFrog.
General. Our Director Plan provides for the automatic grant of options to purchase shares of Class A
common stock to our seven non-employee directors. The aggregate number of shares of Class A common stock
that may be issued pursuant to options granted under the Director Plan is 750,000 shares. Shares subject to stock
options that have expired or otherwise terminated (or stock that has not become fully vested in the case of any
early exercise of options) under the Director Plan without having been exercised in full (or vested with respect to
options that have been exercised early) again become available for the grant of stock options under the Director
Plan. Shares issued under the Director Plan may be previously unissued shares or reacquired shares bought on the
market or otherwise. As of April 8, 2004, options (net of canceled or expired options) covering 235,000 shares of
Class A common stock had been granted pursuant to the Director Plan, and 515,000 shares of Class A common
stock (plus any shares that might in the future be returned to the Director Plan as a result of reacquisition of
unvested options, or as a result of cancellations or expirations) remained available for future grant under the
Director Plan.
Administration. The board of directors will administer the Director Plan. The board of directors has the
power to construe and interpret the Director Plan and options granted under it, and to establish, amend and
revoke rules and regulations for its administration.
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