LeapFrog 2011 Annual Report Download - page 142

• Each non-employee director who served as a member of the nominating and corporate governance
committee received an annual retainer of $5,000, except the Chair of the nominating and corporate
governance committee who received an annual retainer of $10,000.
Retainers are paid out in quarterly installments in arrears, such that each director received three prorated
retainer payments under the previous structure (for the fourth quarter 2010, the first quarter 2011 and the
second quarter 2011) and one prorated payment under the current structure (for the third quarter 2011) during
2011. Under both arrangements, in cases where a director served for a part of the year in a capacity entitling
him to a retainer, the retainer was pro-rated to reflect his period of service in that capacity.
In the fiscal year ended December 31, 2011, the total cash compensation paid to non-employee directors
was $516,162 (including payments made to William B. Chiasson in his capacity as a non-employee director,
which payments are described in detail below under Executive Compensation — Summary Compensation
Table, due to his service as our CEO until March 2011). The members of our board of directors are also
eligible for reimbursement of their expenses incurred in attending board meetings.
The NEDSAP provides both for automatic annual stock option grants to our non-employee directors as
well as discretionary equity awards. The NEDSAP provides for an initial stock award upon being elected to
our board of directors and annual stock awards on the first day of the month following the annual
stockholders meeting of each year (or the next business day if that date is a legal holiday or falls on a
weekend day) in amounts to be determined by board resolution. On June 29, 2011, our board of directors
passed a resolution providing that the initial awards for non-employee directors would have an accounting
value of $200,000 and that the annual awards for non-employee directors would have an accounting value of
$75,000, except that the accounting value of the annual award to the Chairman of the board of directors is
$100,000. For both the initial and the annual award, 50% of the value of such award is granted in the form of
a nonstatutory stock option and 50% of such award is granted in the form of a restricted stock unit award.
The accounting value of these stock awards is calculated using the same methodology as is applied by the
Company for purposes of determining the accounting charge associated with similar awards currently in effect.
The exercise price of stock options granted under the NEDSAP is 100% of the fair market value of the
Class A common stock subject to the option on the date of the option grant. Nonstatutory stock options
awards granted pursuant to initial awards under the NEDSAP vest in equal monthly installments over a three-
year period in accordance with their terms. Restricted stock unit awards granted pursuant to initial awards
under the NEDSAP vest as to one-third of the shares subject such awards on each annual anniversary of the
grant over a three-year period in accordance with their terms. Stock awards granted pursuant to annual awards
under the NEDSAP vest on the last day of the month prior to the month in which the annual meeting of
stockholders occurs on the year following the year of such annual grant. For example, stock awards granted
pursuant to the annual grant in 2011 will vest on May 31, 2012.
The term of NEDSAP options is 10 years unless earlier terminated based on termination of
continuous service or other conditions. In the event of a merger of LeapFrog with or into another
corporation or a consolidation, acquisition of assets or other change-in-control transaction, the vesting of
options and stock awards granted under the NEDSAP will accelerate and become fully vested and
immediately exercisable, if, as of the completion of the change-in-control transaction or within 12 months of
such transaction, the non-employee director’s service terminates; provided that such acceleration will not
occur if the termination was a result of the non-employee director’s resignation (other than any resignation
contemplated by the terms of the change-in-control transaction or required by LeapFrog or the acquiring entity
pursuant to the change in control).
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