LeapFrog 2012 Annual Report Download - page 126

Performance Objectives and the Performance Multiplier
The Performance Multiplier is calculated by adding the level of achievement of the different components
of the performance-based bonus objectives. For each named executive officer, the bonus objectives consisted
of a Company performance component and an individual performance component. The allocation between
Company and individual performance is determined by the compensation committee based on its evaluation of
competitive market practices, its assessment of the amount of compensation that should be based on Company
performance versus individual performance and our philosophy of mitigating excessive risk-taking. The
Company performance component was further divided into two financial measures, a Net Sales component
and an Operating Income component.
The allocation of the Company and individual performance objectives for each named executive officer is
set forth below.
Name
Individual
Component + Company Component =
Total
Performance
Objectives
Net Sales +
Operating
Income
Mr. Barbour .................. 20% + 32% + 48% = 100%
Mr. Arthur ................... 30% + 28% + 42% = 100%
Mr. Etnyre ................... 30% + 28% + 42% = 100%
Mr. Ahearn ................... 30% + 28% + 42% = 100%
Mr. Dodd .................... 30% + 28% + 42% = 100%
Mr. Spalding .................. 30% + 28% + 42% = 100%
To calculate the Performance Multiplier, the percentage weight of each component is multiplied by the
level of achievement of that component, as determined by the compensation committee based on its evaluation
of Company and individual performance. The maximum (cap) for the Performance Multipliers is 150%
(in other words, any result in the formula above 150% would still yield a Performance Multiplier of 150%).
Performance
Multiplier
(0-150%)
=
Individual
Component
Weight %
×
Level of
Achievement
%
+
Net Sales
Component
Weight %
×
Level of
Achievement
%
+
Operating
Income
Component
Weight %
×
Level of
Achievement
%
Individual Performance Component. Executives were eligible for this portion of their target bonus,
based on their individual performance against individual goals, if the Company achieved at least $30 million
of operating income on a post-bonus basis. Each executive’s individual goals were recommended by the CEO
and approved by the compensation committee.
Individual performance goals for the executives were divided into three categories: (i) achievement of
financial goals relevant to each executive’s department; (ii) successful execution of specific projects relevant to
each executive’s department and (iii) successful execution of employee-related goals.
The compensation committee conducted an evaluation of the individual performance of each named
executive officer with input from our CEO and assigned a goal completion score for each executive from
0 − 100%. The level of achievement of the individual performance goals was eligible to scale above 100%
proportionally as the Achievement Level of the Company component scaled above 100%, up to a maximum
of 150%. The analysis was primarily focused on overall achievement of his respective performance goals for
the year, while also taking into consideration any exceptional contributions and impact that his area of
responsibility had on the performance of the Company.
The Company achieved operating income in excess of $30 million after the proposed payment of this
portion of the bonuses and, as a result, the executives were eligible to receive this portion of their target
bonus. In addition, since the Achievement Level of the Company component was 150% (as described below),
each executive’s individual goal completion score was multiplied by 150% to determine the level of
achievement percentage used in determining the Performance Multiplier. Based on this analysis and input
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