LeapFrog 2011 Annual Report Download - page 168

William B. Chiasson
Mr. Chiasson was our CEO until his resignation in March 2011. Mr. Chiasson’s employment agreement
with us provided he would be entitled to certain payments and benefits if his employment was terminated by
us without cause or by Mr. Chiasson for good reason. Upon such a termination of employment, Mr. Chiasson,
would have been entitled to receive (i) 12 months of base salary and (ii) a payment equal to his target bonus
opportunity for the calendar year in which the termination occurred. In addition, all vested stock options held
by Mr. Chiasson, or the Chiasson Options, would have remained exercisable for one year following the
termination date.
Under the terms of Mr. Chiasson’s employment agreement, the term ‘‘cause’’ meant:
• commission of an act of fraud, embezzlement or misappropriation against or involving
the Company;
• 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 the Company that would amount to
willful misconduct, wanton misconduct, gross negligence or a material breach of Mr. Chiasson’s
employment agreement and which would result in significant harm to the Company; 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 the Company regarding such failure.
Under the terms of Mr. Chiasson’s employment agreement, ‘‘good reason’’ meant:
• a material diminution in his authority, duties or responsibilities (the requirement that Mr. Chiasson
assume any position other than the senior-most position in his functional area in the surviving top-
most parent company, reporting directly to the chief executive officer, upon a change-in-control
transaction shall be deemed a substantial reduction for purposes of triggering termination payments);
• a greater than 10% reduction in his base salary, unless the base salaries of other senior executive
employees are also reduced by the same percentage; or
• a change in the geographic location of his workplace by more than 50 miles.
Under his employment agreement, upon the occurrence of a change in control of the Company, we would
have been required to accelerate the vesting of any outstanding equity awards then held by Mr. Chiasson such
that all of his equity awards would be vested as of the date of the change in control. In addition, if during the
two-year period following a change in control of the Company, Mr. Chiasson’s employment were terminated
without cause or by Mr. Chiasson for ‘‘good reason,’’ all of his equity awards would remain exercisable for a
period of two years after the termination date. We would also have been required to pay to Mr. Chiasson:
(a) 24 months of base salary and (ii) a payment equal to two times his target bonus opportunity for the
calendar year in which the termination occurred. For purposes of the foregoing discussion, a change-in-control
transaction will be deemed to have occurred if any person or entity acquires at least a majority of the
combined voting power of our outstanding securities, or upon our merger or consolidation, adoption by our
stockholders of a plan of dissolution or liquidation or the sale or transfer of substantially all of our assets.
After the execution of the Transition Agreement in connection with his resignation in March 2011,
Mr. Chiasson was no longer eligible to receive payments upon a termination of employment or a change in
control of the Company. He received payment of $590,625 in exchange for releasing certain claims against us.
He was not eligible for any of the payments or benefits described above upon a termination of employment or
change in control of the Company as of December 31, 2011. However, as a director, he is entitled to
acceleration of vesting on his equity awards in the event of a change in control (but not in the event of a
termination). Assuming that a change in control of the Company occurred on December 31, 2011 and that all
of Mr. Chiasson’s outstanding stock options were exercised and his RSUs vested on the same date, based on
exercise price of $5.59 per share, the closing market price of our Class A common stock as reported by the
NYSE for December 30, 2011, the potential realizable value of the additional options which would have
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