LeapFrog 2005 Annual Report Download - page 100

LEAPFROG ENTERPRISES, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except per share and percent data)
Dividends
Class A and B stockholders shall be entitled to dividends when and as declared by the Board out of funds
legally available. When dividends are declared, such dividends shall be paid in equal amounts per share on all
shares of Class A and Class B common stock.
Voting
The Class A stockholders are entitled to one vote per share and the Class B stockholders are entitled to ten
votes per share.
Liquidation
Class A and B common stockholders are equally entitled to all assets of the Company available for
distribution.
Conversion of Stock Appreciation Rights
Prior to its initial public offering, the Company granted stock appreciation rights under its Amended and
Restated Employee Equity Participation Plan. Concurrent with the initial public offering of the Company’s
Class A common stock, the Company stopped granting stock appreciation rights under the Employee Equity
Participation Plan.
During the year ended December 31, 2002, the Company converted 1,924 stock appreciation rights into
options to purchase an aggregate of 1,924 shares of Class A common stock. Deferred compensation of $4,901
related to the unvested rights has been recognized over the remaining vesting period of the options into which the
unvested rights were converted.
Stock Compensation Plans
Under the Company’s stock compensation plans, which include stock awards, restricted stock units,
performance based equity awards and stock options, employees, outside directors and consultants are able to
participate in the Company’s future performance through awards of incentive stock options and nonqualified
stock options.
Stock Option Plan
In May 2002, the Board of Directors adopted the 2002 Equity Incentive Plan (the “Plan”), which amends
and restates the previous stock option plan. Each stock option under the Plan is exercisable pursuant to the
vesting schedule set forth in the stock option agreement granting such stock option. Unless a different period is
provided for by the Board or a stock option agreement, each stock option is generally exercisable for a period of
ten years from the date of grant. The exercise price of the option shall be 100% of the fair market value of a share
of Class A common stock on the date the stock option is granted.
In April 2004, the Board of Directors approved an amendment to the Plan to increase the aggregate number
of shares of the Company’s Class A common stock authorized for issuance under all stock compensation plans to
19,000, and to allow for performance based stock awards to be granted under the Plan. Within the maximum
number of 19,000 shares authorized to be issued under the Plan, no more than 4,750 shares of Class A common
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