LeapFrog 2009 Annual Report Download - page 151

Award Timing
The timing of equity awards has been determined by the compensation committee based on the committee’s
view from time to time regarding the sufficiency of executive equity holdings for purposes of retention and
motivation. In 2009, the compensation committee granted equity awards to our named executive officers in
April. In addition, in October 2009 Mr. Dodd was granted a stock option at the time of the general fall stock
option award to all employees. Consistent with our equity award grant policy (described below), these equity
awards became effective and were priced in mid-May and mid-November, respectively. In addition, all of our
named executive officers participated in our August 2009 stock option exchange program, as described below.
Generally, we do not seek to time or select the grant dates for our equity awards in coordination with the
release of material non-public information, and we do not have any program, plan, or practice to do so. Our
policy regarding equity award grant dates provides that the grant date is to be the 15th day of the month
subsequent to the month in which the performance compensation award subcommittee approves an award (or, if
not a business day, the next succeeding business day). In the case of new hire awards, the grant date is to be the
15th day of the month subsequent to the month in which the employee commences work if it is later than the
month in which the relevant award is approved (or, if not a business day, the next succeeding business day).
Accordingly, we generally have 12 pre-established grant dates during any calendar year. This policy also
provides that the exercise price of each stock option is to be equal to the closing market price of our Class A
common stock on the trading day immediately preceding the date of grant.
2009 Stock Option Awards
In April 2009, the board and compensation committee approved stock option grants for senior management
and other key contributors, including the named executive officers. These awards were made to enhance the
equity compensation packages of senior management and other key contributors in order to maintain our
executive equity compensation at competitive levels based on a study performed by Compensia. In accordance
with our equity award grant policy, these options were granted as of May 15, 2009. They had an exercise price of
$2.75 per share and a four-year vesting schedule. In addition, to provide appropriate incentives to enhance
stockholder value, these options were not exercisable unless and until the average closing market price of our
Class A common stock across all trading days during a consecutive 90-day period during the options’ term
equaled or exceeded $4.00 per share. (This price condition to exercisability was satisfied in March 2010.) The
stock option awards for the named executive officers were as follows:
Mr. Katz ............................................ 929,400 shares
Mr. Chiasson ......................................... 252,900 shares
Mr. Campbell ........................................ 165,700 shares
Mr. Dodd ............................................ 232,100 shares
Ms. MacIntyre ........................................ 200,000 shares
Mr. Wong ........................................... 93,900 shares
The sizes of these awards, which exceeded the levels specified in our guidelines for annual equity awards
adopted by the compensation committee in February 2009, were determined based on assessments of the
projected value of each individual’s equity holdings before the grant and after the grant, and were designed to
raise the unvested equity retention value of their holdings to a specified multiple of target total cash
compensation, while maintaining sufficient stock in the 2002 Equity Incentive Plan pool for anticipated future
usage. The award sizes were generally designed to restore the retention value of outstanding equity awards held
by such individuals to levels that existed before significant declines in value of our stock from October 2008
through February 2009. The $4.00-average price condition for vesting of these awards, as described above, was
chosen based on the implied value of LeapFrog at such price, which the compensation committee believed would
reasonably reflect sustained improvement in our results of operations during a challenging year.
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