LeapFrog 2015 Annual Report Download - page 159

The allocation of the Company and individual performance objectives for each named executive officer is
set forth below.
Individual
Component + Company Component =
Total
Performance
Objectives
Name Net Sales +
Operating
Income
Mr. Barbour .................. 20% + 32% + 48% = 100%
Mr. Arthur ................... 25% + 30% + 45% = 100%
Mr. Adams ................... 25% + 30% + 45% = 100%
Mr. Ahearn ................... 25% + 30% + 45% = 100%
Mr. Hicks
(1)
..................
(1) Mr. Hicks was not an employee of the Company when the performance-based bonus awards were
established for the 2014 calendar year. Instead, Mr. Hicks’s employment agreement provided for a
guaranteed bonus, see ‘‘Annual Bonus for Mr. Hicks.’’
To calculate the Bonus Factor, the percentage weight of each component was 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 Bonus Factor for our chief executive
officer was 180% and for our other named executive officers was 175% (in other words, any result in the
formula above 180% or 175%, respectively would still yield the maximum Bonus Factor).
Bonus Factor =
Individual
Component
Weight %
×
Level of
Achievement
%
+
Net Sales
Component
Weight %
×
Level of
Achievement
%
+
Operating
Income
Component
Weight %
×
Level of
Achievement
%
Individual Performance Component. Our named executive officers were eligible for this portion of their
target bonus opportunity, based on their actual performance against their individual goals, but only if the
Company had positive operating income for the 2014 calendar year. Each named executive officer’s individual
goals, except those of our chief executive officer, were developed with and recommended by our chief
executive officer and approved by the compensation committee. Our chief executive officer’s goals were
developed by our compensation committee.
The individual performance goals for our named executive officers were divided into two categories:
(i) achievement of financial goals relevant to each executive officer’s department; and (ii) achievement of
goals related to the Company’s long-term strategic objectives.
Since the Company did not have positive operating income for the 2014 calendar year, the compensation
committee did not assign a goal completion score for the named executive officers.
Company Component — Net Sales. A portion of each named executive officer’s bonus depended upon
achievement of a specified Net Sales result. Several levels of achievement for Net Sales were established by
the compensation committee in March 2014, based on our 2014 operating plan and data regarding our
financial results and business expectations as of that time, including toy industry sales growth projections and
Company resources and capabilities. In addition, these levels were consistent with the relative risk acceptable
to our board of directors in approving the Company’s operating plan.
The compensation committee then established achievement levels of the Net Sales objective for each
potential result. In each instance, net sales achievement between the various achievement levels would result
in a ratable achievement level score for the Net Sales measure.
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