LeapFrog 2012 Annual Report Download - page 63

LEAPFROG ENTERPRISES, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except per share data)
Earnings Before Interest, Taxes, Depreciation and Amortization (‘‘EBITDA’’), to fixed charges (the ‘‘Fixed
Charge Coverage Ratio’’) to 1.0:1.0 from 1.1:1.0 and changed the applicable periods when such ratio is to be
maintained, and (vi) permitted additional dividends, stock repurchases and acquisitions upon compliance with
certain Fixed Charge Coverage Ratio and availability requirements.
The revolving credit facility contains customary events of default including for: payment failures; failure to
comply with covenants; failure to satisfy other obligations under the revolving credit facility or related
documents; defaults in respect of other indebtedness; bankruptcy, insolvency and inability to pay debts when
due; change-in-control provisions; and the invalidity of guaranty or security agreements. If any event of
default occurs, the lenders may terminate their respective commitments, declare immediately due all
borrowings under the revolving credit facility and foreclose on the collateral. A cross-default provision applies
if a default occurs on other indebtedness in excess of $5,000 and the applicable grace period in respect of the
indebtedness has expired, such that the lender of, or trustee for, the defaulted indebtedness has the right to
accelerate. The Company is also required to maintain a Fixed Charge Coverage Ratio, during a trigger period
as defined under the revolving credit facility when certain borrowing availability thresholds are not met.
Borrowing availability under the revolving credit facility was $75,000 as of December 31, 2012. The
Company did not borrow any amount against the revolving credit facility during the year and had no
borrowings outstanding under the revolving credit facility at December 31, 2012.
12. Employee Benefit Plan
LeapFrog sponsors a defined contribution plan under Section 401(k) of the Internal Revenue Code. The 401(k)
plan allows employees to defer up to 100% of their eligible compensation, not to exceed the Internal Revenue
Service (the ‘‘IRS’’) maximum contribution limit. The Company provides a matching opportunity of 100% of
eligible contributions up to a maximum of $3.5 per year per employee, which vests over three years. For the
year ended December 31, 2012, the Company recorded total compensation expense of $1,189 related to the
defined contribution plan. The Company suspended its matching program from 2010 through 2011 and
therefore did not incur any related compensation expense in those years.
13. Stock-based Compensation
Stock-based Compensation Arrangements
In 2011, the Company adopted the 2011 EIP, which replaced the 2002 EIP in advance of its expiration as the
sole plan for providing stock-based incentive compensation to eligible employees and consultants.
On the effective date of the 2011 EIP, a total of 6,000 newly approved shares of Class A common stock
became available for grant under the 2011 EIP and any shares remaining available for new grants under the
2002 EIP on the effective date of the 2011 EIP became available for issuance under the 2011 EIP. In addition,
any shares subject to outstanding stock awards granted under the 2002 EIP that expired or terminated for any
reason prior to exercise or settlement, were forfeited because of the failure to meet a contingency or condition
required to vest such shares, or were reacquired or withheld by the Company to satisfy a tax withholding
obligation or as consideration for the exercise of a stock option became available for issuance pursuant to
awards granted under the 2011 EIP. All outstanding stock awards granted under the 2002 EIP continue to be
subject to the terms and conditions as set forth in the agreements evidencing such stock awards and the terms
of the 2002 EIP. On June 5, 2012, the 2011 EIP was amended.
The Company used its NEDSAP as its primary plan to issue stock-based incentive compensation to the
Company’s non-employee directors until 2012. Upon depletion of the share reserve in June 2012, the
NEDSAP was suspended and no new equity awards were granted thereunder. The board of directors resolved
that all future equity awards to members of the board of directors would be made under the Company’s
2011 EIP.
The Company currently has outstanding two types of stock-based compensation awards to its employees,
directors and certain consultants: stock options and RSUs. Both stock options and RSUs can be used to
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