LeapFrog 2007 Annual Report Download - page 171

The actual cash incentive award payout is determined using multiple financial and non-financial metrics.
The threshold payment amount is 80% of the target amount, if all incentive plan metrics are achieved at the
threshold performance level. If performance against all incentive plan metrics is below the threshold, the
payout may be zero. The maximum payment is 200% of the target amount. The actual cash incentive award
payouts, which were approved by the compensation committee, and in the case of our CEO, the board of
directors, based upon their review of corporate and individual performance goals and achievements for
2007, were paid in February 2008 and are shown in the “Non-Equity Incentive Plan Compensation” column
of the Summary Compensation Table above.
(3) Restricted stock units are granted under our 2002 Equity Incentive Plan and, consistent with the grants to the
other employees, vest at the rate of 25% of the shares subject to the award on each of the four subsequent
anniversaries of the vesting commencement date.
(4) Except for the option shares listed for Mr. Pidel and Ms. MacIntyre, options vest over a four-year period in
forty-eight equal monthly installments, consistent with grants to other employees.
The options shares listed for Mr. Pidel and Ms. MacIntyre were granted to them upon their joining LeapFrog
and, consistent with new hire grants made to other LeapFrog employees, vest over a four-year period, with
25% of the shares subject to the option vesting one year after the vesting commencement date and the
remainder vesting in thirty-six equal monthly installments thereafter.
(5) As provided in our 2002 Equity Incentive Plan, we grant options to purchase our common stock at an
exercise price equal to the closing market price of our Class A common stock on the trading day
immediately preceding the date of grant.
(6) Represents the full grant date fair value of the option or award pursuant to FAS 123R. See Note 16, “Stock-
Based Compensation,” of Notes to Financial Statements included in our Annual Report on Form 10-K for
the year ended December 31, 2007, for a discussion of assumptions made in determining the grant date fair
value and compensation expense of equity awards.
Both the Summary Compensation Table and the Grants of Plan-Based Awards Table reflect the terms
contained in the employment agreement that LeapFrog entered into with our President and CEO, Jeffrey G. Katz,
who began employment with LeapFrog on July 3, 2006. The following is a brief description of the materials
terms and conditions of that agreement.
Mr. Katz’s employment agreement provides for an annual base salary of $600,000 and a sign-on bonus of
$300,000. Mr. Katz is eligible to receive an annual bonus based on his achievement of certain individual
objectives and LeapFrog financial performance measures established by the board, at the target bonus
opportunity level of 100% of Mr. Katz’s annual base salary and at a maximum 200% of his annual base salary for
exemplary performance pursuant to stretch-level objectives. Mr. Katz must be an active employee of LeapFrog
through and as of the last day of each bonus year in order to be eligible to receive a bonus for that year. Mr. Katz
was eligible to and did receive a bonus for performance in 2006, prorated for his partial year of service in 2006.
For the first year of Mr. Katz’s employment, until Mr. Katz established a permanent residency in the San
Francisco Bay area, we reimbursed him for reasonable expenses incurred in commuting between the San
Francisco and Los Angeles areas.
Effective on July 6, 2006, Mr. Katz was granted the following awards of nonstatutory stock options (the
“Options”) to purchase shares of LeapFrog’s Class A common stock (“Common Stock”): (1) an option, pursuant
to our 2002 Equity Incentive Plan (the “Plan”), to purchase 1,200,000 shares of Common Stock at a per-share
exercise price of $10.30, which price was equal to the fair market value (as defined under the Plan) of a share of
Common Stock on the grant date; (2) an option pursuant to the Plan to purchase 800,000 shares of Common
Stock at a per-share exercise price of $13.33; (3) an option in the form of a special inducement grant outside the
Plan to purchase 150,000 shares of Common Stock at a per-share exercise price of $13.33; and (4) an option in
the form of a special inducement grant outside the Plan to purchase 500,000 shares of Common Stock at a
per-share exercise price of $16.67. Each of the options has a ten-year term and vests over a four-year period with
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