LeapFrog 2009 Annual Report Download - page 146

• Equity incentive awards
• Severance benefits
• Other benefits and perquisites
Base Salary
The compensation committee reviews and adjusts, as necessary or appropriate, the base salaries of our
executives on an annual basis, and makes decisions with respect to the base salaries of new executives at the time
of hire. In making its determinations, the compensation committee considers several factors, including our
overall financial performance, individual performance, the executive’s potential to contribute to our long-term
strategic goals, his or her scope of responsibilities and experience, and competitive market practices for base
salary.
As a result of the challenging business conditions, including the global economic recession and the
uncertainty surrounding our 2009 revenue expectations, and based on our overall performance in 2008, in
February 2009 the compensation committee determined not to increase the base salaries of our named executive
officers for 2009. For similar reasons, in February 2010 the compensation committee decided not to increase the
base salaries of our named executive officers, with the exception of a 44% increase for Mr. Chiasson (from
$312,800 to $450,000) based on his new role as CEO in 2010, a 16% increase for Mr. Dodd (from $292,200 to
$340,000) based on his new role as Chief Operating Officer for 2010, and a 23% increase for Mr. Campbell
(from $244,050 to $300,000) based on his new role as President of Sales and Marketing.
Performance-Based Bonuses
We use performance-based bonuses to motivate our executives to achieve our short-term financial and
operational goals and to reward exceptional company and individual performance. In 2009, our bonus plan was
designed to encourage responsible cash flow management and improve our operating income results.
Target Bonus Opportunity
For 2009, the target bonus opportunity for our CEO was equal to 100% of his 2009 base salary and for our
other named executive officers was equal to 50% of their 2009 base salaries (in each case subject to variation in
the discretion of the board or compensation committee as described below under “Bonus Award Decisions”).
Eighty percent of each executive’s target bonus opportunity was allocated to a company performance component
of the bonus pool and 20% was allocated to an individual performance component. Typically, these target bonus
opportunities were established in each executive’s employment offer letter or employment terms, and were based
on competitive market practices for each individual’s position. The allocation between company and individual
performance for executives was based on the compensation committee’s evaluation of competitive market
practices and its assessment of the amount of compensation that should be based on company performance versus
individual performance. The target bonuses determine the aggregate potential bonus pool for the bonus plan as
described below under “Bonus Pool Funding.”
Bonus Pool Funding
For 2009, bonuses were to be paid from a bonus pool funded based on the aggregate target bonuses across
the relevant employee population. As noted above, the target bonuses, and therefore funding of the bonus pool,
include an individual performance component and a company performance component. The amount of the
company performance component was to be calculated by assessing our 2009 performance against the
pre-determined financial measures described below. For 2009, the individual component was to be funded only if
the threshold end-of-year company operating income or loss performance goal was met. After the bonus pool was
calculated, the funded pool was then to be awarded to employees, including our executives, based on individual
performance, using a multiplier applied to their allocated portion of the bonus pool.
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