LeapFrog 2011 Annual Report Download - page 151

after taking into consideration our overall performance against short-term and long-term financial and strategic
goals, the executive’s then-current equity holdings, his or her anticipated future contributions to our success,
its assessment of the executive’s potential to contribute to the long-term value of our company and an analysis
of the equity awards practices of the Peer Group.
Award Mix
Typically, we grant a mix of stock options and restricted stock unit awards, or RSUs, to our executives as
part of their initial compensation packages at the time of hire and, thereafter, on an annual basis. These
awards are generally subject to time-based vesting requirements.
Stock Options. The compensation committee believes that stock options provide our executives with a
strong incentive to ensure long-term corporate performance and the creation of stockholder value. Option
grants made to our executive officers have an exercise price equal to 100% of the fair market value on the
date of grant of the underlying Class A common stock, as defined under our 2011 EIP.
Restricted Stock Units (RSUs). RSUs represent full-value shares of Class A common stock. Our
practice is to grant fewer shares under RSUs as compared to options since RSUs have a greater fair value
per share than options. Shares of our Class A common stock are not issued when an RSU award is granted.
Instead, once an RSU award vests, one share of our Class A common stock is issued for each vested RSU.
During 2011, under our 2011 EIP, when we granted RSUs, we deducted from the pool of shares available for
issuance under the plan two shares for each RSU granted, compared to one share deducted for each
option share granted.
Award Timing
The timing of equity awards is determined by the compensation committee based on its view, from time
to time, regarding the sufficiency of executive equity holdings for purposes of retention and motivation. When
granting equity awards, 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 15
th
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 date of grant.
2011 Equity Awards
In March 2011, Mr. Barbour was granted a nonstatutory stock option and an RSU award in connection
with his appointment as the chief executive officer of the Company. Mr. Barbour’s stock option vests over
four years, with 25% of the option vesting on the one-year anniversary of his hire date and the remaining
options vesting in 36 equal monthly installments. His RSU awards vest over four years, with 25% of the units
vesting on the one-year anniversary of his hire date and the remaining units vesting in 36 equal monthly
installments. After considering their outstanding equity awards and the awards granted in 2010, no other
equity awards were granted to the other executive officers in 2011; the compensation committee believed that
the existing equity grants were already above the 50
th
percentile for the peer groups and therefore no
additional grants were necessary.
Severance Benefits
Our named executive officers, with the exception of Messrs. Chiasson and Barbour, were eligible to
receive payments and benefits under our Executive Management Severance and Change-in-Control Plan, or
the Severance Plan.
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