LeapFrog 2007 Annual Report Download - page 163

employee talent. Mr. Chiasson was awarded a 2007 bonus at 84% of his target bonus (i.e., 100% of the level at
which the bonus pool was funded relative to target) based on a performance assessment that included his
performance in the improvement of our financial controls, his performance in managing new product
development with respect to improved margin targets, his direction of work leading to improvements in our 2007
gross margin and his strong balance sheet management, including the production of a year-end cash balance that
was better than expected despite lower net sales. Mr. Dodd was awarded a bonus at 110% of his target bonus
based on a performance assessment that included his role in leading our improvement in product gross margins,
particularly with respect to improvements in supply chain management and processes, his management of work
leading to significant improvements to our retailer customer scorecard performance and his contributions to our
better-than-target improvements in year-end inventory balances for our retailer customers and for us.
Ms. MacIntyre was awarded a bonus at 120% of her target bonus based on a performance assessment that
included her role in leading the product marketing and research and development functions in launching the
largest library in our history of Leapster titles in 2007, the development of our 2008 product line in a manner
exceeding targets, and her leadership related to our 2007 marketing performance, which led to better-than-target
sell-through performance and retail inventory reductions, as well as significant improvements to our web
capabilities. Ms. Macintyre also was recognized for having strengthened our management team in a manner that
was important for our continuing performance improvement, particularly in strategically critical areas such as
game development, marketing, and web commerce. Mr. Pidel was awarded a bonus at 61% of his target bonus
based on a performance assessment that included his role in implementing improvements to our international
product planning process, particularly with respect to the our new Tag reading system, which will launch in eight
countries in 2008, the most for a LeapFrog major product launch in our history. Mr. Pidel was also recognized
for overseeing improvements in our 2007 performance in the United Kingdom and Mexico, despite an overall
2007 sales performance of our International segment that was below target.
In January 2007, as part of Mr. Pidel’s new-hire compensation package, we paid him bonuses totaling
$137,500 in order to replace a bonus that he would have received from his former employer related to his
performance in 2006, as well as certain unvested stock awards, that Mr. Pidel was forfeiting in order to join us. In
February 2007, we paid Ms. MacIntyre a signing bonus of $75,000, which was intended to replace a 2006 bonus
from her previous employer, which she was forfeiting to join us. Also, as part of her initial compensation
package, Ms. MacIntyre was guaranteed a minimum bonus of $68,500 for her performance in 2007. As described
above, her actual bonus for her 2007 performance exceeded that minimum amount.
Equity Incentive Awards. We believe that granting equity incentive awards to our key employees is a
critical way to meet the objectives of our compensation philosophy of attracting and retaining talented
executives, motivating and rewarding outstanding company and individual performance, and aligning the
interests of our executive officers and those of our stockholders. LeapFrog employees are granted equity
incentive awards on the basis of performance against short- and long-term goals, the employee’s then-current
equity holdings and our assessment of the potential of the employee to provide long-term value to the company.
We grant a combination of equity awards to our executives and other key employees, including time-vested
restricted stock units, or RSUs, and time-vested stock options, and we refer to them collectively as “stock awards.”
In general, we make grants of stock awards to our executive officers as part of their initial compensation packages,
and we make subsequent grants of stock awards on an annual basis. Historically, these annual grants of stock
awards have not been made at a set time of the year. In 2007, the compensation committee approved grants to our
executive officers, including our named executive officers, in August 2007. Consistent with our stock award
granting policy (described below), the grants of those stock awards became effective and were priced in
mid-September 2007. Guidelines for the size of equity awards granted to each level of employee are reviewed
annually and benchmarked against our peer compensation group companies by Towers Perrin. This review and
analysis serves to evaluate the competitiveness of the prospective value of grants awarded by us to our employees
and to monitor our equity usage levels relative to our compensation peer group companies and in relation to the
published guidelines of proxy-voting advisory firms such as RiskMetrics Group’s ISS Governance Services.
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