Exhibit 10.33

 

November 11, 2004

 

William Chiasson

[address omitted]

 

Dear Bill:

 

We are pleased to offer you a full-time exempt position as Chief Financial
Officer for LeapFrog Enterprises Inc. (“LeapFrog” or the “Company”), effective
November 11, 2004. You will be based out of our Emeryville office at 6401 Hollis
Street, Suite 150, and you will report to Tom Kalinske, Chief Executive Officer.

 

LeapFrog offers an exciting challenge for professional and personal growth in a
company with a demonstrated commitment to market leadership and excellence.
LeapFrog offers a compensation package to reflect our belief in rewarding
performance appropriately. Your base compensation will be $290,000 on an
annualized basis, less standard deductions and withholdings.

 

In addition, you will become eligible for the following benefits in accordance
with Company policy as in effect from time to time:

 

  •   Bonus: As per the Executive Bonus Plan, your annual bonus potential at the
target bonus opportunity level is 50% of annual base compensation and up to a
maximum 83.5% of base compensation, based on the Company’s attainment of
established financial goals and your achievement of individual goals and
objectives. You will be eligible to participate in the 2005 Executive Bonus Plan

 

  •   Car Allowance: You will receive a monthly car allowance of $650, less
standard payroll deductions and tax withholdings, paid in semi-monthly
installments through the normal payroll process.

 

  •   Group Health and 401(k) Benefits: You will be eligible for medical,
dental, life, disability and AD&D insurance, and participation in the 401(k)
Plan, on the first day of the month following your first 30 days of service.

 

  •   Vacation Time: You will accrue four weeks of vacation per year.

 

  •  

Severance: If we terminate your employment without Cause, or if you terminate
your employment for Good Reason (as such terms are defined below), you will be
entitled to receive all of your accrued and unused vacation and unpaid base
compensation earned through your last day of employment (the “Separation Date”),
and any bonus earned but unpaid as of the Separation Date (i.e., in the event
that you have worked through December 31 of the previous year and earned a
bonus, but such bonus has not been paid

 

LeapFrog is proud to be an Equal Opportunity Employer.

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as of the Separation Date). If the termination does not occur during the Change
in Control Period (defined below), you will also be entitled to receive the
following severance benefits (collectively, the “Severance Benefits”), provided
that you comply with the Release obligation described below:

 

(i) Cash Severance. The Company will pay you: (a) a lump-sum payment equal to
nine (9) months of your then current base salary, less all required payroll
deductions and withholdings, and (b) a pro rata portion of any bonus that you
would, but for the termination, otherwise have earned in the year of the
Separation Date, subject to required payroll deductions and withholdings, as and
when otherwise payable under the applicable bonus plan. For purpose of further
clarification of this benefit, to the extent that the earning of such bonus is
based on your achievement of objectives and/or Company performance during a
certain bonus period (the “Bonus Period”), your right to receive a bonus
pursuant to this section shall be based on the results from the entire Bonus
Period, and you shall be entitled to receive a pro-rata portion of such bonus
based on the percentage of the Bonus Period during which you were employed.

 

(ii) COBRA Premiums. If you timely elect to continue your Company-provided group
health insurance coverage pursuant to federal COBRA law and, if applicable,
state insurance laws, the Company shall also reimburse you for the cost of the
COBRA premiums for you and your dependents (if applicable) in effect as of the
Separation Date for a period of nine (9) months after the Separation Date. Your
entitlement to such reimbursement shall cease before the end of such period if
and when you become eligible for group health insurance with a subsequent
employer. You shall notify the Company’s Vice President of Human Resources in
writing immediately upon becoming eligible for health insurance with a
subsequent employer.

 

(iii) Stock Option Acceleration. All unvested options held by you shall
accelerate vesting such that the number of shares that would otherwise vest
within a twelve-month period under each option grant shall become fully
exercisable as of the Separation Date and shall be exercisable for that specific
period following the Separation Date as provided under the applicable stock
option agreements in the case of termination of employment.

 

As a precondition of giving you the Severance Benefits or the Change in Control
Severance Benefits (described below), the Company must first receive from you a
signed general release of claims in the form required by the Company (the
“Release”) and you must allow the Release to become effective.

 

  •   Severance for Termination in Connection with a Change in Control. If the
Company terminates your employment without Cause within ninety (90) days prior
to or within twelve (12) months following a Change in Control (as such term is
defined below) of the Company (the “Change in Control Period”), or if you resign
for Good Reason during the Change in Control Period, and you provide the Company
with the Release described above and you allow the Release to become effective,
the Company will pay you the following Change in Control Severance Benefits:

 

LeapFrog is proud to be an Equal Opportunity Employer.

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(i) Cash Severance. The Company will pay you (a) a lump-sum payment equal to
twelve (12) months of your then current base salary, less all required payroll
deductions and withholdings, and (b) any bonus that you would, but for the
termination, otherwise have earned in the year of the Separation Date, subject
to required payroll deductions and withholdings, as and when otherwise payable
under the applicable bonus plan.

 

(ii) COBRA Premiums. If you timely elect to continue your Company-provided group
health insurance coverage pursuant to federal COBRA law and, if applicable,
state insurance laws, the Company shall also reimburse you for the cost of the
COBRA premiums for you and your dependents (if applicable) in effect as of the
Separation Date for a period of twelve (12) months after the Separation Date.
Your entitlement to such reimbursement shall cease before the end of such period
if and when you become eligible for group health insurance with a subsequent
employer. You shall notify the Company’s Vice President of Human Resources in
writing immediately upon becoming eligible for health insurance with a
subsequent employer.

 

For purposes of this agreement, a termination shall be for “Cause” if you shall:
(i) commit an act of fraud, embezzlement or misappropriation involving the
Company; (ii) be convicted by a court of competent jurisdiction of, or enter a
plea of guilty or no contest to, any felony involving moral turpitude or
dishonesty; (iii) commit an act, or fail to commit an act, involving the Company
which amounts to, or with the passage of time would amount to, willful
misconduct, wanton misconduct, gross negligence or a breach of this agreement
and which results or will result in significant harm to the Company; or (iv)
willfully fail to perform the responsibilities and duties of your position for a
period of ten (10) days following receipt of written notice from the Company
which specifically describes past instances of willful failure of performance;
provided that in the case of (iv) above, during the ten (10) day period
following receipt of such notice, you shall be given the opportunity to take
reasonable steps to cure any such claimed past failure of performance.

 

For purposes of this agreement, you shall have “Good Reason” for termination of
your employment if you resign within sixty (60) days after the occurrence of one
of the following events without your consent: (i) a removal of you from your
position as Chief Financial Officer of the Company unless the removal occurs
solely as a result of a merger into a larger entity such that you retain the
same authority for divisional operations that are substantially identical to the
Company’s previous operations as an independent entity including, for example,
Treasury, Investor Relations, and External/Public Reporting; (ii) any material
diminution of your role, responsibilities and authority except to the extent
that your authority is reduced solely as a result of a merger into a larger
entity such that you retain the same authority for divisional operations that
are substantially identical to the Company’s previous operations as an
independent entity; (iii) reduction of your then current base salary in an
amount greater than ten percent (10%) of your initial base salary, unless the
base salary of other senior level executive officers of the Company is
accordingly reduced; (iv) any material reduction in the aggregate level of
benefits to which you are entitled under this agreement or the taking of any
action which would adversely affect your accrued benefits under any such
employee benefit plans, unless a similar reduction is made for other senior
level executive officers of the Company; or (v) a demand by the Company that you
relocate to any place that exceeds a twenty-five (25) mile radius beyond the
primary location of the Company as of the date of this agreement. In the event
you intend to assert that you have

 

LeapFrog is proud to be an Equal Opportunity Employer.

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grounds for terminating your employment for Good Reason, you shall give the
Company at least thirty (30) days’ notice. The Company shall have the
opportunity during the notice period to cure the event which you assert
constitutes Good Reason (provided that this event is not a reoccurrence of the
same or substantially similar event that occurred during the prior six (6)
months) and, if the Company cures the event, then you shall not be entitled to
terminate your employment for Good Reason.

 

For purposes of this Agreement, “Change in Control” means the occurrence in a
single transaction or in a series of related transactions of any one or more of
the following events:

 

(a) any person (within the meaning of Section 13(d) or 14(d) of the Securities
Exchange Act of 1934, as amended) other than Lawrence Ellison, Michael Milken,
Lowell Milken, or any combination of the foregoing, becomes the owner, directly
or indirectly, of securities of the Company representing more than fifty percent
(50%) of the combined voting power of the Company’s then outstanding securities
other than by virtue of a merger, consolidation or similar transaction;

 

(b) there is consummated a merger, consolidation or similar transaction
involving (directly or indirectly) the Company and, immediately after the
consummation of such merger, consolidation or similar transaction, the
stockholders of the Company immediately prior thereto do not own, directly or
indirectly, outstanding voting securities representing more than fifty percent
(50%) of the combined outstanding voting power of the surviving entity in such
merger, consolidation or similar transaction or more than fifty percent (50%) of
the combined outstanding voting power of the parent of the surviving entity in
such merger, consolidation or similar transaction;

 

(c) the stockholders of the Company approve or the Company’s Board of Directors
approves a plan of complete dissolution or liquidation of the Company; or

 

(d) there is consummated a sale, lease, license or other disposition of all or
substantially all of the consolidated assets of the Company and its
subsidiaries, other than a sale, lease, license or other disposition of all or
substantially all of the consolidated assets of the Company and its subsidiaries
to an entity, more than fifty percent (50%) of the combined voting power of the
voting securities of which are owned by stockholders of the Company in
substantially the same proportions as their ownership of the Company immediately
prior to such sale, lease, license or other disposition.

 

  •   Stock Option: The Compensation Committee of the Board of Directors of the
Company has approved granting an option to you for the purchase of 150,000
shares of the Company’s Class A Common Stock (the “Option”). All stock options
are subject to the terms and conditions of the applicable equity plan and the
corresponding stock option grant notice and stock option agreement. The Option
shall have an exercise price equal to the closing fair market value of the
Common Stock on the date of the grant. The Option shall vest over a four year
period, or until your employment with the Company ends, as follows:

 

LeapFrog is proud to be an Equal Opportunity Employer.

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  •   Twenty-five (25%) of the shares subject to the Option shall vest on the
first anniversary of the date you became employed by the Company (the
“Employment Date”), and

 

  •   1/36 of the remaining shares subject to the Option shall vest each month
thereafter, for thirty-six (36) consecutive months.

 

  •   Change in Control Benefit: In the event of a Change in Control (as defined
above), you shall be entitled to receive the following:

 

  (i) Within First Year. If the Change in Control occurs within one (1) year
after the Employment Date, all unvested options held by you shall accelerate
vesting such that a total of one-half (1/2) of the shares subject to the options
shall be fully exercisable immediately upon the effective date of the Change
Control. The remaining one-half (1/2) of the shares subject to the options shall
continue to vest pursuant to the terms of the Plan and corresponding stock
option grant notices and stock option agreements.

 

  (ii) After First Year. If the Change in Control occurs more than one (1) year
after the Employment Date, one-half (1/2) of the unvested shares subject to the
options held by you shall accelerate vesting and become fully exercisable
immediately upon the effective date of the Change in Control. The remaining
unvested shares subject to the options shall continue to vest pursuant to the
terms of the Plan and corresponding stock option grant notices and stock option
agreements.

 

  •   Annual Stock Option Program: You will be eligible to participate in the
annual stock option program beginning April 2005, at the executive officer
level. The current guideline at target is 21,000 shares.

 

  •   Executive Performance Share Program: You will be eligible to participate
in the annual Executive Performance Share Program starting with the January 2005
– December 2007 plan. The current guideline at target is 10,600 shares.

 

Acceptance of this offer does not create a contractual obligation to continue
your employment in the future. You will be employed “at will” by the Company and
are subject to termination at any time, with or without cause or advance notice.
You will also retain the right to terminate your employment at any time for any
reason, with or without advance notice. Your employment will be subject to all
of the Company policies as in effect from time to time. The at-will employment
relationship may not be modified except in a writing signed by the CEO of the
Company. The Company may change your position, duties, work location,
compensation and benefits from time to time, as it deems necessary.

 

As a LeapFrog employee, you will be expected to abide by all Company rules and
procedures and, as a condition of employment, you will be required to read and
sign an Employee Acknowledgement when you begin your employment with the
Company. This offer of employment is contingent upon your submission and
completion of I-9 documentation and the enclosed Employee Proprietary
Information and Inventions Agreement, along with the successful completion of
any background and reference checks. On your first day, please bring with you
two forms of I-9 acceptable documentation and the Employee Proprietary
Information and Inventions Agreement signed by you. Please also bring a voided
check if you would like direct deposit for your paycheck.

 

LeapFrog is proud to be an Equal Opportunity Employer.

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This offer is valid through November 11, 2004, and a signed copy of this offer
letter must be returned to my office by such date. The additional copy should be
retained for your records. This letter agreement, together with your Employee
Proprietary Information and Inventions Agreement, forms the complete and
exclusive statement of your employment agreement with the Company. The
employment terms in this letter agreement supersede any other agreements or
promises made to you by anyone, whether oral or written. Changes in your
employment terms described in this agreement, other than those changes expressly
reserved to the Company’s discretion, require a written modification signed by
you and the CEO of LeapFrog. If you have any questions regarding our offer,
please contact me directly at 510/596-5435. Confidential Fax: 510/420-5005.

 

We are looking forward to establishing a mutually rewarding relationship with
you and welcome your contribution to our Company.

 

Sincerely,

 

/s/ Laura Dillard

 

Laura Dillard

Vice President, Human Resources

 

By signing below, you represent that you have read and agree to the terms of the
above offer and agree to start your employment with LeapFrog on November 11,
2004. In addition, you represent that you are not subject to any agreement,
judgment, order, or restriction that would be violated by your being employed
with the Company, or that in any way restricts your ability to perform services
for the Company.

 

Signature:  

/s/ William B. Chiasson

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Print Name:  

William B. Chiasson

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Date:  

November 11, 2004

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LeapFrog is proud to be an Equal Opportunity Employer.