LeapFrog 2003 Annual Report Download - page 124
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The Board of Directors is requesting stockholder approval of the amended 2002 Equity Incentive Plan in
this proxy. Included in the amendments are certain provisions that will allow the company to qualify
performance share grants as “performance-based” compensation under Section 162. In addition, grants of stock
options will qualify, provided that such grants have exercise prices of no less than 100% of fair market value on
the date of grant and do not exceed a calendar year limit for the executive officer that is set forth in the 2002
Equity Incentive Plan.
LeapFrog generally intends to grant stock options and performance shares to its executive officers in a
manner that satisfies the requirements for qualified performance-based compensation to avoid any disallowance
of deductions under Section 162(m).
Mr. Kalinske has a new total cash compensation package in 2004, associated with his job change to the role
of Chief Executive Officer. While the target total cash compensation for Mr. Kalinske and the other covered
officers does not exceed $1.0 million for any executive in 2004, the Committee believes it is appropriate for the
company to retain the flexibility to pay actual total cash compensation above $1.0 million if warranted based on
exceptional company and individual performance, and thus from time to time the company may pay
compensation to covered officers that is not deductible.
Conclusion
Through the plans described above, a significant portion of LeapFrog’s compensation program and
Mr. Wood’s compensation are contingent on company performance, and realization of benefits is closely linked
to increases in long-term stockholder value. LeapFrog remains committed to this philosophy of pay for
performance, recognizing that the competitive market for talented executives and the volatility of the LeapFrog’s
business may result in highly variable compensation for a particular time period.
Compensation Committee:
Barry Munitz (Chairman)
Jeffrey Berg
Stewart Resnick
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