LeapFrog 2009 Annual Report Download - page 46

This new credit facility supersedes and replaces our previous $100.0 million credit facility dated November 8,
2005 which would have otherwise expired in November 2010 and was terminated as of August 13, 2009 in
connection with signing of the Loan Agreement.
The Loan Agreement includes the following terms, which are substantially similar to those of the Terminated
Agreement:
• The borrowing availability varies according to the levels of our accounts receivable, inventory, and cash
and investment securities deposited in secured accounts with the Agent or other Lenders. Subject to the
level of this borrowing base, we may make and repay borrowings from time to time until the maturity of
the facility.
• The interest rate is, at our election, the Agent’s prime rate (or base rate) or a LIBOR rate defined in the
Loan Agreement, plus, in each case, an applicable margin. The applicable margin for a loan depends on
the average daily availability for the most recent fiscal quarter and the type of loan
• The Loan Agreement contains customary events of default, including payment failures; failure to
comply with covenants; failure to satisfy other obligations under the credit agreements or related
documents; defaults in respect of other indebtedness; bankruptcy, insolvency and inability to pay debts
when due; material judgments; change-in-control provisions and the invalidity of the guaranty or
security agreements. If any event of default under the Loan Agreement occurs, the Agent or the other
Lenders may terminate their respective commitments, declare immediately due all borrowings under the
facility and foreclose on the collateral. A cross-default provision applies if a default occurs on other
indebtedness in excess of $5.0 million 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.
• We have granted a security interest in substantially all of our assets to the Agent as security for its
obligations under the facility.
• We are required to maintain a ratio of EBITDA to fixed charges, each as defined in the Loan
Agreement, of at least 1.1 to 1.0 when the covenant is required to be tested (compared to 1.0 to 1.0
under the Terminated Agreement). As with the Terminated Agreement, the ratio is measured only if
certain borrowing-availability thresholds are not met.
Under the Loan Agreement for the new credit facility, the interest rate is, initially, for LIBOR rate loans, 4.00%
over the LIBOR rate or, for base rate loans, 3.00% over the Agent’s prime rate. After six months, the interest rate
will vary based on borrowing availability.
Contractual Obligations and Commitments
We have no off-balance sheet arrangements.
We conduct our corporate operations from leased facilities and rent equipment under operating leases. Generally,
these have initial lease periods of three to twelve years and contain provisions for renewal options of five years at
market rates. We account for rent expense on a straight-line basis over the term of the lease. The following table
summarizes our outstanding long-term contractual obligations at December 31, 2009.
Contractual Obligations at December 31, 2009
Payments Due by Period
(Dollars in millions)
Total
Less Than
1 Year 1-3 Years 3-5 Years
More Than
5 Years
Operating leases ................................... $29.4 $ 8.0 $12.5 $ 3.9 $ 5.0
Royalty guarantees ................................. 19.0 7.2 11.8 — —
Total ........................................ $48.4 $15.2 $24.3 $ 3.9 $ 5.0
36