Exhibit 10.34

 

February 4, 2005

 

Robert L. Moon

[address omitted]

 

Dear Rob,

 

We are pleased to offer you a full-time exempt position as Senior Vice President
and Chief Information Officer for LeapFrog Enterprises Inc. (the “Company”),
effective on a date to be agreed upon by you and the Company. You will be based
out of our Emeryville office at 6401 Hollis Street, Suite 150. You will report
directly to Thomas Kalinske, Chief Executive Officer of LeapFrog. You will have
such duties and authorities as consistent with your title.

 

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 salary will be $250,000 on an annualized
basis, less standard payroll deductions and tax withholdings, payable in
accordance with LeapFrog’s payroll policies applicable to executives. The
Company will review your compensation annually and consider raising your base
salary, based in part on your performance.

 

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

 

  •   Signing Bonus: Signing bonus of $50,000, less standard payroll deductions
and tax withholdings, payable through normal payroll process on first paycheck,
and to be returned, net of the standard payroll deductions and tax withholdings,
to LeapFrog on a pro-rata basis in the event you voluntarily resign within the
first twelve months of your employment with the Company.

 

  •   Executive Bonus Plan: As per the 2005 Executive Bonus Plan, your annual
bonus potential at the target bonus opportunity level is 30% of annual base
salary and at maximum 50% of annual base salary, based upon the Company’s
attainment of established financial goals and your achievement of individual
goals and objectives determined by you and the CEO and set forth in writing as
soon as practicable.

 

  •   Enhanced Bonus: You will also be eligible to receive an annual bonus of up
to 15% of annual base salary, less standard payroll deductions and tax
withholdings, based on your achievement of performance objectives that will be
determined by you and the CEO, and set forth in writing as soon as practicable.

 

  •   Car Allowance: Monthly car allowance of $600, less required payroll
deductions and tax withholdings, paid in semi-monthly installments through the
normal payroll process.

 

  •   Group Health and 401(k) Benefits: Effective date for medical, dental,
life, disability and AD&D insurance, and the 401(k), is the first of the month
following 30 days of service.

 

LeapFrog is proud to be an Equal Opportunity Employer.

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  •   Reimbursement of Attorneys Fees: You will be reimbursed by LeapFrog for
attorneys fees to negotiate this agreement, up to $5,000.

 

  •   Vacation Time: Accrual of four weeks of vacation per year, in accordance
with LeapFrog’s vacation policy.

 

  •   Expense Reimbursement: During your employment, you will be reimbursed by
LeapFrog for ordinary and normal out-of-pocket expenses incurred in the course
of your employment, in accordance with LeapFrog’s expense reimbursement policy
and practice.

 

  •   Severance: In the event your employment is terminated by LeapFrog without
Cause (as defined below), you will receive: (a) a lump-sum payment equal to nine
(9) months of your then current base salary, less required payroll deductions
and tax withholdings (b) reimbursement for any COBRA payments for medical and/or
dental coverage made by you for a period of nine (9) months following
termination of employment, (c) a pro rata portion of any bonus that you would,
but for the termination, otherwise have earned in the year of your last day of
employment, less required payroll deductions and tax withholdings, as and when
otherwise payable under the applicable bonus plan or program and (d) all
unvested stock options held by you will accelerate vesting such that the number
of shares that would otherwise vest within a twelve-month period under each
option grant will become fully exercisable as of your last day of employment
(the “Severance Benefits”). As a precondition of giving you the Severance
Benefits, 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.

 

In the event that your employment is terminated by LeapFrog without Cause or you
resign for Good Reason (as defined below) within twelve (12) months following a
Change in Control, you will receive the Severance Benefit described above
provided that you sign and return to the Company the Release described above and
the Release becomes effective.

 

  •   For purposes of this Agreement, “Cause” shall mean the occurrence of one
or more of the following: (a) your conviction of any felony crime involving
moral turpitude or dishonesty; (b) your participation in any fraud against the
Company or its successor; (c) material breach of your duties to the Company or
its successor and your failure to cure the breach within thirty (30) days
written notice thereof including, without limitation, persistent unsatisfactory
performance of job duties; (d) intentional material damage to any property of
the Company or its successor; (e) willful misconduct that is demonstrably
injurious to the Company or its successor, monetarily or otherwise; or (f)
material breach of any agreement with the Company or its successor, including
(without limitation) your Proprietary Information and Inventions Agreement.
Physical or mental disability or death shall not constitute Cause.

 

  •  

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

 

LeapFrog is proud to be an Equal Opportunity Employer.

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the following events without your consent: (i) a removal of you from your
position as Senior Vice President and Chief Information 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 the operations that are
substantially identical to the Company’s previous operations as an independent
entity; (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 the
operations that are substantially identical to the Company’s previous operations
as an independent entity; (iii) reduction of your 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; (vi) a change in your reporting
requirements, unless such change is as a result of a merger into a larger
entity, or (vii) a material breach of this Agreement by Company. In the event
you intend to assert that you have grounds for terminating your employment for
Good Reason, you shall give the Company at least thirty (30) days’ written
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) 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

 

LeapFrog is proud to be an Equal Opportunity Employer.

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(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: I will recommend that the Compensation Committee of the
Board of Directors approve the grant of an incentive stock option to you in 2005
for the purchase of 50,000 shares of the company’s Class A Common Stock. All
stock options are subject to approval by the Compensation Committee and/or the
Board of Directors, the terms of the equity plan, stock option agreement and the
individual grant notice. The option shall have an exercise price equal to the
fair market value of the Common Stock as determined on the date of the grant.
The option shall vest over a four-year period, or until your employment ends, as
follows:

 

  •   Twenty-five percent (25%) of the shares subject to the option at twelve
(12) months after the hire date, and

 

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

 

  •   Restricted Stock: I will recommend that the Compensation Committee of the
Board of Directors approve the grant in 2005 of 25,000 shares of restricted
stock. All stock grants are subject to approval by the Compensation Committee
and/or the Board of Directors, the terms of the equity plan and the individual
grant. The restricted stock shall vest over a three year period, or until your
employment ends, as follows:

 

  •   8,334 shares shall vest on the first anniversary of your hire date,

 

  •   8,333 shares shall vest on the second anniversary of your hire date, and

 

  •   8,333 shares shall vest on the third anniversary of your hire date.

 

  •   Annual Stock Option Program: Eligible to participate in the annual stock
option program as of April 2006, at the executive officer level.

 

  •   Executive Performance Share Program: Eligible to participate in the annual
Executive Performance Share Program as of January 2006, under the January 2006 –
December 2008 plan.

 

  •   Discretionary Stock Option Grant: After you complete six months of service
with the Company, the CEO will consider, at his sole discretion, recommending
that the Board of Directors grant you an additional stock option.

 

LeapFrog is proud to be an Equal Opportunity Employer.

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  •   Relocation: You will also receive a relocation package through our
relocation vendor, AmeriCorp, including the following:

 

Travel: Reimbursement for you or the person making three house hunting trips on
your behalf to the San Francisco/Bay Area. Hotel expenses, coach airfare from
southern California, meals and transportation, within reason, will be
reimbursed. Please keep receipts, as you will need to submit them with an
expense report. You will also be reimbursed for coach airfare for twelve (12)
round trips within the first year between the Bay Area and Palm Springs, Ca.

 

Shipment of Goods: Your household goods in Los Angeles and Palm Springs plus one
car will be packed, loaded and transported to the SF/Bay Area via our standard
carrier, North American Van Lines. You will also be reimbursed mileage at
standard LeapFrog rate for driving one car from the Los Angeles area to San
Francisco. You will also be provided with up to ninety days of storage of the
shipped goods, if needed. LeapFrog will be billed directly for these services.

 

Rental Assistance: You will be reimbursed for the cost of registration with one
Bay Area apartment locator company. In addition, temporary housing in a
furnished corporate one-bedroom apartment or approved hotel will be provided for
up to six months, at a location to be reasonably determined by the Company.
LeapFrog will be billed directly for the temporary housing.

 

Closing Costs: LeapFrog will pay standard closing costs on the sale of your
condominium in Southern California, including any customary real estate broker
commissions. LeapFrog will also pay the standard closing costs, including any
customary real estate broker commissions and up to two (2) discount points, on
the purchase of a residence (apartment or house) in the San Francisco Bay Area.

 

You will also receive a monthly amount sufficient to gross up your tax on any
Company reimbursement of or payment for the relocation benefits described above.

 

Mortgage Interest Differential: Upon your purchase of a residence in the Bay
Area, LeapFrog shall pay you a monthly reimbursement equal to the Mortgage
Interest Payments (as hereinafter defined) until the Company’s obligation to
make such payments terminates as provided below. As used herein, the term
“Mortgage Interest Payments” shall mean the lower of: (a) the amount of your
monthly interest portion of the Stipulated Mortgage Amount after offsetting the
value of any tax deduction that you would receive for such interest payments,
and (b) the amount resulting from the calculation in clause (a) above, assuming
that your mortgage interest rate is 4.5% per annum. The Mortgage Interest
Payments shall continue until and then terminate on the earliest to occur of (A)
the termination of your employment with the Company, (B) your no longer making
payments on a mortgage on your primary residence in the Bay Area, or (C) the
third anniversary of the first day of your employment with the Company. If you
refinance and/or sell one Bay Area residence and purchase another in the Bay
Area, the amount of the Mortgage Interest Payments shall not be recalculated,
but shall continue unaffected by such transaction.

 

LeapFrog is proud to be an Equal Opportunity Employer.

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As used herein, the following terms shall have the following meanings:
“Stipulated Mortgage Amount” shall mean a mortgage principal amount equal to the
lesser of: (a) difference between the Purchase Price and the Net Sales Proceeds;
or (b) $750,000. “Purchase Price” shall mean the purchase price of your Bay Area
residence and “Net Sales Proceeds” shall mean the net sales proceeds from the
sale of your primary residence in Southern California.

 

In the event that you choose to voluntarily resign your position prior to your
one-year anniversary date, you will be required to reimburse the Company for all
moving and relocation expenses pro rata based on the months you have been
employed.

 

The compensation and insurance benefits programs outlined in this letter may be
modified by the Company at its discretion from time to time, and acceptance of
this offer does not create a contractual obligation to continue your employment
in the future. The Company may also change your position, duties and work
location at its discretion from time to time as it deems necessary. 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 employment at-will relationship may not be
modified except in writing signed by the President of the Company.

 

As a LeapFrog employee, you will be expected to abide by all Company rules and
regulations and, as a condition of employment, 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 a signed 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 please bring a voided check if you would like direct deposit
for your paycheck.

 

This offer is valid through February 8, 2005, 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, 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 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 the Company.

 

LeapFrog is proud to be an Equal Opportunity Employer.

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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 a date to be
determined in 2005. In addition, you represent that you are not subject to any
agreement, judgment, order, or restriction which 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/ Robert L. Moon

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Print Name:  

Robert L. Moon

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Date:  

February 4, 2005

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LeapFrog is proud to be an Equal Opportunity Employer.