LeapFrog 2008 Annual Report Download - page 145

addition, the compensation committee took into account the multi-year nature of our turnaround plan and the
historic and anticipated continued volatility of our stock price and operating results. In 2007, the compensation
committee engaged Towers Perrin to review the severance plans and to benchmark the benefits against
compensation peer group practices and overall market practices. The plans were intended to replace previously
negotiated severance benefits set forth in employment offer letters or to provide benefits for those executive
officers and senior management who had no benefits in place. In order to determine an appropriate level of
severance and change-in-control benefits, Towers Perrin reviewed data from three general industry surveys and
conducted a review of the severance practices employed by our compensation peer group companies.
Under the terms of the Executive Management Severance Plan, the named executive officers other than
Mr. Katz are eligible to receive the benefits described in the Severance Plan if the executive is terminated
“without cause” or resigns for “good reason.” Our Severance Plan excludes performance-based terminations
from severance protection. For more discussion regarding the definition of “without cause” and “good reason”
under the Severance Plan, please see the section in this proxy statement entitled “Potential Payments Upon
Termination or Change in Control” below.
In general, if any of the named executive officers is terminated without cause or voluntarily terminates for
good reason, the Severance Plan provides for the payment of 12 months of base salary paid in semi-monthly
installments and 12 months of COBRA benefits. If the termination occurs during the period beginning three
months before and ending 12 months after a change in control of LeapFrog, the Severance Plan provides for 24
months of base salary paid in a lump sum, payment of 200% of the named executive officer’s target bonus, 24
months of COBRA benefits and acceleration of vesting of all stock awards held by the named executive officer.
Additional information regarding the severance benefits for which our named executive officers are eligible is
provided below under the heading “Potential Payments Upon Termination or Change in Control.” None of the
executive officers is entitled to any tax gross-up benefits under the Severance Plan.
Mr. Katz is eligible to receive severance benefits under his employment agreement, the terms of which were
reviewed and approved by our board upon the hiring of Mr. Katz as our CEO and President in July 2006. The
terms of Mr. Katz’s severance benefits are described below under the heading “Potential Payments Upon
Termination or Change in Control.”
As part of our November 2008 reduction in force, Messrs. Moon and Pidel left the company in December
2008. Both Messrs. Moon and Pidel were eligible to receive severance benefits under the Severance Plan. In
addition, given the significant remaining term for Mr. Pidel’s mortgage assistance if he remained with LeapFrog,
the compensation committee approved a payment of $45,000 to Mr. Pidel representing an extension of his
mortgage interest assistance payments under his offer letter with us. More information concerning the severance
benefits paid to Messrs. Moon and Pidel is provided below under the heading “Potential Payments Upon
Termination or Change in Control.”
Other Benefits and Perquisites
While the compensation committee seeks to offer benefits that are competitive with companies with which
we compete for talent, it also seeks to limit, in a reasonable and responsible manner, the level of perquisites
offered. The compensation committee reviews and approves any benefits we provide to our executive officers.
Employee benefits include healthcare coverage and opportunity to participate in our 401(k) plan and our
employee stock purchase plan. These benefits are generally available to all full-time employees, with no
additional elements for our executive officers other than an additional week of vacation. We do not offer
guaranteed retirement or pension plan benefits.
In addition, in light of the high cost of housing in the San Francisco Bay Area relative to other parts of the
country, we have offered relocation reimbursements and mortgage interest differential payments for newly hired
executives who need to relocate to the area from lower cost locations. The amount and duration of the payment is
typically negotiated and set in the offer letter or employment agreement for the relevant executive, and has
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