LeapFrog 2004 Annual Report Download - page 24

Item 2. Properties.
Our headquarters are located in Emeryville, California, where we occupy approximately 103,000 square feet
of office space under a lease that expires in March 2016. Our headquarters are used for the operation of our three
business segments. We currently lease approximately 19,300 square feet in Los Gatos, California, for our
engineering, research and development operations related to our three business segments under a lease that
expires in April 2007. We have offices in Austin, Texas, which we use for our Education and Training segment,
and we have offices near Toronto, Canada, near London, England, and in and near Paris, France, each of which is
used for our International segment. We also have offices in Hong Kong and in Macau, as well as a trade
showroom in New York City, each of which is used for all three of our business segments. In addition, we lease
600,000 square feet of warehouse space in Fontana, California under a lease that expires in December 2010,
which is primarily used by our U.S. Consumer segment for the receipt, storage and distribution of our products.
We believe that our facilities are adequate for our current needs, and suitable additional or substitute space will
be available in the future to replace our existing facilities, if necessary, or accommodate expansion of our
operations.
Item 3. Legal Proceedings.
Pending Litigation
In the ordinary course of our business, we are from time to time subject to litigation, including the
following:
LeapFrog Enterprises, Inc. v. Fisher-Price, Inc. and Mattel, Inc.
In October 2003, we filed a complaint in the federal district court of Delaware against Fisher-Price, Inc., No.
03-927 GMS, alleging that the Fisher-Price PowerTouch learning system violates United States Patent No.
5,813,861. In September 2004, Mattel, Inc. was joined as a defendant. We are seeking damages and injunctive
relief. Trial by jury is set for May 16, 2005.
LeapFrog Enterprises, Inc. v. Lexington Insurance Co.
On October 21, 2004, we filed a complaint in the Superior Court of the State of California, County of
Alameda, against Lexington Insurance Co., No. RG04181463, alleging breach of contract and bad faith in
denying us coverage for our costs with respect to patent infringement claims filed against us in three prior
litigations. We are seeking approximately $3.5 million in damages to recover our defense fees and indemnity
payments.
In re LeapFrog Enterprises, Inc. Derivative Litigation
In July 2004, the Superior Court of the State of California, County of Alameda, granted our motion to
dismiss with prejudice the consolidated derivative lawsuit, denying plaintiffs’ leave to amend the complaint, and
entered final judgment in the action in favor of us and the individual officers and directors. In September 2004,
the plaintiffs have appealed the dismissal. The dismissed derivative lawsuit was a consolidation of the Santos v.
Michael Wood, et al. complaint, filed in December 2003, and a complaint captioned Capovilla v. Michael Wood,
et al., filed in March 2004. Both complaints alleged causes of action for breach of fiduciary duty, abuse of
control, gross mismanagement, waste of corporate assets, unjust enrichment and violations of the California
Corporations Code, based upon allegations that certain of our officers and directors issued or caused to be issued
alleged false statements and allegedly sold portions of their stock holdings while in the possession of adverse,
non-public information. In April 2004, the Superior Court consolidated both the Santos and Capovilla actions
into a single action captioned In re LeapFrog Enterprises, Inc. Derivative Litigation, No. RG03130947.
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