LeapFrog 2009 Annual Report Download - page 169

coverage, for himself and his covered dependents, while he was providing consulting services to LeapFrog.
Assuming a termination date of December 31, 2009, the total consulting fees to be paid to Mr. Katz would have
been approximately $2,601,000 and the payments to maintain group health insurance coverage for himself and
his covered dependents would have been approximately $27,250.
The benefits described in the preceding two paragraphs are hereinafter referred to as the “Katz Severance
Benefits.”
Under the terms of Mr. Katz’s employment agreement, the term “cause” meant:
• commission of an act of fraud, embezzlement or misappropriation against or involving LeapFrog,
• conviction, or entry of a guilty or no contest plea, for any felony involving moral turpitude or
dishonesty,
• commission of an act or failure to commit an act, involving LeapFrog that would amount to willful
misconduct, wanton misconduct, gross negligence or a material breach of Mr. Katz’s employment
agreement and which would result in significant harm to LeapFrog, or
• willful failure to perform the responsibilities and duties set forth in the employment agreement for a
period of ten days following receipt of written notice from LeapFrog regarding such failure.
Under the terms of Mr. Katz’s employment agreement, “good reason” meant:
• a substantial reduction in the nature or status of his responsibilities (the requirement that Mr. Katz
assume any position other than the senior-most position upon a change-in-control transaction shall be
deemed a substantial reduction for purposes of triggering termination payments),
• the failure to re-elect, or the removal of, Mr. Katz from our board of directors,
• any reduction in his base salary or target bonus,
• relocation of his place of work to any place more than 35 miles from the office he regularly occupies or
35 miles from Mr. Katz’s residence in southern California,
• failure by any successor entity following a change-in-control transaction, within ten days of the request
by Mr. Katz, to deliver confirmation of the successor entity’s commitment to honor Mr. Katz’s
employment agreement, or
• the appointment, prior to July 3, 2009, of anyone other than Mr. Katz to serve as successor chair of our
board of directors upon the resignation or removal of Steven B. Fink from that position.
Change in Control
Under his employment agreement, upon the occurrence of a change in control, we would have been required
to accelerate the vesting of any equity awards then held by Mr. Katz such that all of his equity awards would be
vested as of the date of the change in control. Assuming that a change in control occurred on December 31, 2009
and that his Options were exercised on the same date, 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 $1,078,104.
In addition, if during the two-year period following a change in control of LeapFrog, Mr. Katz’s
employment were terminated for reasons other than cause or by Mr. Katz for good reason or due to his death or
permanent disability, we would have been required to accelerate the vesting of any equity awards then held by
Mr. Katz with the result that all of his equity awards would have been vested as of the date of his termination and
all of his vested stock options would remain exercisable for two years after the termination date. Assuming that a
change in control occurred on December 31, 2009, that Mr. Katz’s employment were terminated in a covered
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