LeapFrog 2009 Annual Report Download - page 168

Potential Payments Upon Termination or Change in Control
Our Executive Management Severance and Change-in-Control Plan, or the Severance Plan, was approved
by our compensation committee in 2007. Under the Severance Plan, our named executive officers may receive
benefits in the event of termination of employment under specified circumstances, including a change in control
of LeapFrog. Mr. Katz, however, was not eligible to participate in the Severance Plan, but instead was eligible to
receive benefits under the terms of the severance and change-in-control provisions in his employment agreement.
The specific terms of these arrangements, as well as amounts paid to the named executive officers who departed
from LeapFrog in the first quarter of 2010, and an estimate of the compensation that would have been payable to
the other named executive officers had the benefits provisions been triggered as of the end of 2009, are described
in detail below.
Mr. Katz resigned as our CEO in February 2010 and became Executive Chairman of our board of directors.
His February 2010 transition agreement superseded all of the benefits described below for Mr. Katz. In addition,
Mr. Chiasson became our CEO in March 2010 and entered into an employment agreement that terminated his
eligibility for benefits under Severance Plan and provided the termination and change-in-control benefits
described below. Mr. Katz’s transition agreement and Mr. Chiasson’s new employment agreement are described
above under “Notes Regarding Summary Compensation Table and Grants of Plan-Based Awards Table.”
With respect to Ms. MacIntyre and Mr. Wong, the amounts shown below are amounts actually paid or to be
paid to them in connection with their departures, both under the Severance Plan and as separately negotiated with
them. The estimates for the remaining officers are based on the assumption that a triggering event occurred on
December 31, 2009 and assume a price per share of our Class A common stock of $3.91, which was the price of
our Class A common stock reported by the NYSE at the close of market on December 31, 2009. With respect to
the estimated or potential value of options that are accelerated and/or have extended exercise periods in
connection with a named executive officer’s termination or a change in control of LeapFrog, the actual value of
the options realized, if any, will depend upon the extent to which the market value of our Class A common stock
exceeds the exercise price on the date the option is exercised. Due to the number of factors that affect the nature
and amounts of compensation and benefits provided upon the events discussed below, the amounts paid or
distributed upon the actual occurrence of a triggering event may be different from the amounts set forth below.
Jeffrey G. Katz
Termination
In July 2006, we entered into an employment agreement with Mr. Katz that provided he would be entitled to
certain benefits if his employment is terminated by us for reasons other than cause or by Mr. Katz for good
reason or due to his death or permanent disability. Upon such a termination, Mr. Katz (or his estate), would have
been entitled to receive (a) on our customary bonus payment date, a prorated portion of his target bonus for the
year in which his termination occurred, and (b) vesting for 12 additional months of any stock options held by
Mr. Katz (the “Options”). In addition, all vested Options would have remained exercisable for two years
following the termination date. Assuming, for the purposes of illustration, a termination date of December 31,
2009 and exercise of the Options on the same date, the bonus payment would have been $607,800 and, based on
exercise price of the Options of $3.91, the closing price of our Class A common stock as reported by the NYSE
for December 31, 2009, the potential realizable value of the additional vested options would have been $426,749.
In addition, if Mr. Katz’s employment were terminated other than by us for cause or by Mr. Katz for good reason
or due to his death or permanent disability, we agreed to hire Mr. Katz as a consultant for a period of two years
following his termination. During this two-year consulting period, we would have been required to pay Mr. Katz
an annual consulting fee equal to the sum of (a) his base salary at the time of his termination, (b) the higher of his
target bonus at the time of his termination and the average annual bonus amount paid to Mr. Katz for the two
fiscal years preceding his termination and (c) one-third of all self-employment taxes paid by Mr. Katz on the
consulting fees. The consulting fees would have been paid to Mr. Katz in equal semi-monthly installments. We
also agreed to pay all health insurance continuation payments to maintain Mr. Katz’s group health insurance
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