LeapFrog 2011 Annual Report Download - page 73

LEAPFROG ENTERPRISES, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except per share data)
and Amortization, or EBITDA, to fixed charges, as defined in the revolving credit facility, of at least 1.1 to
1.0 when the covenant is required to be tested. The ratio is measured only if certain borrowing-availability
thresholds are not met.
On January 31, 2011, the Company entered into an amendment to the revolving credit facility that, among
other things: (i) extends the maturity date to August 13, 2013, (ii) reduces, starting January 1, 2011, the
applicable interest rate margins to a range of 0.50% to 1.00% above the applicable base rate for base rate
loans, as compared to 3.00% above the applicable base rate in the original agreement, and 2.25% to 2.75%
above the applicable LIBOR rate for LIBOR rate loans, as compared to 4.00% above the applicable LIBOR
rate in the original agreement, in each case depending on the Company’s borrowing availability, and
(iii) reduces, starting January 1, 2011, the unused line fee to 0.375% per year if utilization of the line is
greater than or equal to 50%, and to 0.50% per year if utilization of the line is less than 50%, as compared to
1.00% per year in the original agreement.
During the fourth quarter of 2011, the Company drew down $35,000 on the revolving credit facility. This
borrowing was a LIBOR rate loan, with an initial interest rate per annum of 2.5%, provided that, in
accordance with the loan agreement, such rate may adjust on a monthly basis. The Company repaid the full
amount during the same quarter from cash provided by operations and had no borrowings outstanding under
this agreement at December 31, 2011.
12. Employee Benefit Plan
LeapFrog sponsors a defined contribution plan under Section 401(k) of the Internal Revenue Code. The 401(k)
plan provides that employees may defer up to 100% of their annual compensation, not to exceed the Internal
Revenue Service (‘‘IRS’’) maximum contribution limit. In 2009, LeapFrog matched 50% of employee
contributions up to the lesser of $2 or 6% of the participant’s compensation per plan year, which vests over
three years. During 2009, the Company recorded total compensation expense of $578, related to the defined
contribution plan. The Company discontinued its matching program in 2010 and therefore did not incur any
related compensation expense in 2010 and 2011.
13. Stock-Based Compensation
Stock-based compensation arrangements
On March 17, 2011, the board of directors of the Company adopted the 2011 EIP that became effective upon
stockholder approval on June 2, 2011, and replaced the 2002 EIP in advance of its expiration as the sole plan
for providing stock-based incentive compensation to eligible employees and consultants.
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 the effective date
of the 2011 EIP, a total of six million 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 expire or terminate for any reason prior
to exercise or settlement or are forfeited because of the failure to meet a contingency or condition required to
vest such shares or are reacquired or withheld by the Company to satisfy a tax withholding obligation or as
consideration for the exercise of a stock option shall become available for issuance pursuant to awards granted
under the 2011 EIP.
The Company’s 2002 Non-Employee Plan, as amended and restated to date, was unaffected by the adoption of
the 2011 EIP and remains the primary plan pursuant to which stock-based incentive compensation is granted
to the Company’s non-employee directors.
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