LeapFrog 2012 Annual Report Download - page 129

(1) Mr. Arthur’s annual base salary is $525,000. The amount reported in the column entitled ‘‘Eligible 2012
Base Salary’’ was the base salary earned by Mr. Arthur during his partial year of employment with
LeapFrog in 2012, which began on July 16, 2012. The amounts contained in ‘‘Actual Bonus Award for
2012 Performance’’ above reflect the bonus for Mr. Arthur prorated for the portion of the year during
which he was employed at LeapFrog. Pursuant to the terms of his offer letter, Mr. Arthur was guaranteed
to receive an amount equivalent to his target bonus for the year. Accordingly, $181,731 of the $260,146
2012 performance-based bonus award was guaranteed and therefore is not considered Non-Equity Plan
Incentive Compensation for purposes of the Summary Compensation Table below. In addition, pursuant
to the terms of his offer letter, he was also entitled to receive an amount equal to 75% of his annual base
salary prorated for the portion of 2012 in which he was not employed by the Company. This amount is
listed above under the column entitled ‘‘Guaranteed Bonus.’’
(2) Mr. Etnyre resigned as our Chief Financial Officer in July 2012 and received a severance payment in
connection with his resignation, as described below. Pursuant to the terms of his separation agreement,
Mr. Etnyre was eligible to receive a portion of his annual bonus prorated through August 6, 2012. The
amount reported in the column entitled ‘‘Eligible 2012 Base Salary’’ was Mr. Etnyre’s base salary earned
through August 6, 2012.
(3) Mr. Ahearn’s annual base salary is $525,000. The amount reported in the column entitled ‘‘Eligible 2012
Base Salary’’ was the base salary earned by Mr. Ahearn during his partial year of employment with
LeapFrog in 2012, which began on June 18, 2012. The amounts contained in ‘‘Actual Bonus Award for
2012 Performance’’ above reflect the bonus for Mr. Ahearn prorated for the portion of the year during
which he was employed at LeapFrog. Pursuant to the terms of his offer letter, Mr. Ahearn was entitled to
receive an amount equivalent to his target bonus for the year. Accordingly $212,019 of the $307,445
2012 performance-based bonus award was guaranteed and therefore is not considered Non-Equity Plan
Incentive Compensation for purposes of the Summary Compensation Table below. In addition, pursuant
to the terms of his offer letter, he was also entitled to receive an amount equal to 75% of his annual base
salary prorated for the portion of 2012 in which he was not employed by the Company. This amount is
listed above under the column entitled ‘‘Guaranteed Bonus.’’
Equity Incentive Awards
We believe that equity incentives are an effective way to attract and retain talented executives, to
motivate and reward them for outstanding corporate and individual performance, and to align their interests
with those of our stockholders. The compensation committee considers annual grants of equity awards to our
executive officers, including our named executive officers, 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 award practices of the Peer
Group. In addition, the compensation committee makes initial grants of equity awards upon the initial
employment of our executives, including our named executive officers, based on a variety of factors including
consideration of a competitive market analysis of the Peer Group.
Award Mix
Typically, we grant a mix of stock options and 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 focus on long-term corporate performance and the creation of stockholder value. Option
grants made to our executives 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 Plan.
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 accounting 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.
Until June 2012, under our 2011 Plan, 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
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