LeapFrog 2009 Annual Report Download - page 159

shares. There were no minimum, target or maximum levels applicable with respect to the satisfaction of the
price condition, so, in accordance with applicable SEC rules, the single estimated payout is included in the
“Target” column under “Estimated Future Payouts Under Equity Incentive Plan Awards.”
(4) All the named executive officers participated in our one-time option exchange program approved by
stockholders on August 26, 2009. New options were granted on August 27, 2009 on a value-for-value basis
with terms and conditions similar to the original grants. See footnotes to the Outstanding Equity Awards at
December 31, 2009 table for more details regarding the exchange program.
(5) As provided in the 2002 Equity Incentive Plan, we grant options to purchase our Class A 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 fair value or, in the case of replacement options granted in our option exchange program,
the incremental fair value, of the option or award computed as of the grant date in accordance with FASB
ASC Topic 718. Where incremental fair value of a grant is shown, the amount is net of the value of options
canceled in exchange for the grant. See Note 11 of Notes to Financial Statements included in our Annual
Report on Form 10-K for the year ended December 31, 2009 for a discussion of assumptions made in
determining the grant date fair value and compensation expense of equity awards.
(7) Option vests over a four-year period in 48 equal monthly installments.
Notes Regarding Summary Compensation Table and Grants of Plan-Based Awards Table
Both the “Summary Compensation” table and the “Grants of Plan-Based Awards in Fiscal 2009” table
reflect terms contained in the employment agreement that LeapFrog entered into with Mr. Katz, who began
employment with LeapFrog on July 3, 2006. Mr. Katz’s employment agreement provided for an annual base
salary of $600,000 and a sign-on bonus of $300,000. Mr. Katz was eligible under the agreement 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 was eligible to receive, and did receive, a bonus for performance in 2006, prorated for his
partial year of service, and in 2007, but no bonuses were paid to named executive officers for 2008 or 2009. 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. For adjustments to his base salary and actual bonuses, please see the “Summary Compensation
Table” and the related footnotes. In addition, Mr. Katz’s employment agreement provided for the severance
benefits described below under the heading “Potential Payments Upon Termination or Change in Control” and
grants of various stock awards described under the “Grants of Plan-Based Awards in Fiscal 2009” table.
In March 2010, Jeffrey G. Katz ceased serving as our CEO and became a non-employee director and
Mr. Chiasson became our new Chief Executive Officer and President. In connection with Mr. Katz’s transition
from employee to non-employee director, we entered into an agreement with Mr. Katz concerning his
compensation, including the treatment of his outstanding equity and the handling of his transition under his
pre-existing severance terms. His transition is treated, for purposes of the severance provisions in his prior
employment agreement, as a resignation without good reason and, accordingly, no severance benefits were
triggered by the transition. As a non-employee director, Mr. Katz will receive the same cash compensation as the
other non-employee directors, but he will not receive the automatic initial stock option ordinarily received by
new non-employee directors under our NEDSAP, nor will he receive any equity award under that plan in respect
of his service as a non-employee director through February 28, 2011.
Under his transition agreement, all of the options previously granted to Mr. Katz (other than his option to
purchase 929,000 shares of our Class A common stock granted May 15, 2009, or the May Option, discussed
below) ceased to continue to vest as of his resignation date on February 28, 2010, and unvested shares subject to
these options were forfeited. Accordingly, as of Mr. Katz’s resignation date, 940,025 shares covered by these
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