LeapFrog 2007 Annual Report Download - page 177

• conviction, or entry of a guilty or no contest plea, for any felony involving moral turpitude or
dishonesty;
• commission of an act or failure to commit an act, involving LeapFrog that would amount to willful
misconduct, wanton misconduct, gross negligence or a material breach of Mr. Katz’s employment
agreement and which would result in significant harm to LeapFrog; or
• willful failure to perform the responsibilities and duties set forth in the employment agreement for a
period of ten days following receipt of written notice from LeapFrog regarding such failure.
Under the terms of Mr. Katz’s employment agreement, “good reason” means:
• a substantial reduction in the nature or status of his responsibilities (the requirement that Mr. Katz
assume any position other than the senior-most position upon a change-in-control transaction shall be
deemed a substantial reduction for purposes of triggering termination payments);
• the failure to re-elect, or the removal of, Mr. Katz from our board of directors;
• any reduction in his base salary or target bonus;
• relocation of his place of work to any place more than 35 miles from the office he regularly occupies or
35 miles from Mr. Katz’s residence in Southern California;
• failure by any successor entity following a change-in-control transaction, within ten days of the request
by Mr. Katz, to deliver confirmation of the successor entity’s commitment to honor Mr. Katz’s
employment agreement; or
• the appointment, prior to July 3, 2009, of anyone other than Mr. Katz to serve as successor chairman of
our board of directors upon the resignation or removal of Steven B. Fink from that position.
Change in Control
Under his employment agreement, upon the occurrence of a change in control, we would accelerate the
vesting of any equity awards then held by Mr. Katz such that all of his equity awards would be vested as of the
date of the change in control. Assuming that a change in control occurred on December 31, 2007 and that his
Options were exercised on the same date, because the exercise price of the Options exceeded $6.73, the closing
price of our Class A common stock as reported by the NYSE for December 31, 2007, there would have been no
value related to the additional vesting. In addition, if during the two-year period following a change in control of
LeapFrog, Mr. Katz’s employment is terminated for reasons other than cause or by Mr. Katz for good reason or
due to his death or permanent disability, we would accelerate the vesting of any equity awards then held by
Mr. Katz with the result that all of his equity awards would be vested as of the date of his termination and all of
his vested stock options would remain exercisable for two years after the termination date. Assuming that the
change in control and termination both occurred on December 31, 2007 and that his Options were exercised on
the same date, there would have been no value related to the additional vesting because the exercise price of the
Options exceeded $6.73, the closing price of our Class A common stock as reported by the NYSE for
December 31, 2007. We would also pay to Mr. Katz the Katz Severance Benefits, as applicable. For purposes of
the foregoing discussion, a change-in-control transaction will be deemed to have occurred if any person or entity
acquires at least a majority of the combined voting power of our outstanding securities, or upon our merger or
consolidation, adoption by our stockholders of a plan of dissolution or liquidation or the sale or transfer of
substantially all of our assets.
Non-Solicitation, Non-Competition, Non-Interference, Release
Under his employment agreement, Mr. Katz must refrain from engaging in certain activities that are
competitive with our business for a period of two years after the termination of his employment. Should Mr. Katz
provide any service or assistance in any capacity to a competitive business during this two-year period, his
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