LeapFrog 2013 Annual Report Download - page 68
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Please find page 68 of the 2013 LeapFrog annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.LEAPFROG ENTERPRISES, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except per share data)
11. Borrowings under Credit Agreements − (continued)
The borrowing availability varies according to the levels of the Company’s accounts receivable and cash and
investment securities deposited in secured accounts with the lenders. Subject to the level of this borrowing
base, the Company may make and repay borrowings from time to time until the maturity of the revolving
credit facility. The interest rate is, at the Company’s election, Bank of America, N.A.’s prime rate (or base
rate) or a LIBOR rate defined in the revolving credit facility, 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.
On May 1, 2012, the Company entered into an amendment to the revolving credit facility that, among other
things: (i) reduced the lenders’ commitment under the revolving credit facility to $50,000 during the seasonal
period of January through August of each year, (ii) extended the maturity date from August 13, 2013 to
May 1, 2017, (iii) lowered the borrowing availability levels at lower applicable interest rate margins,
(iv) reduced the applicable interest rate margins to a range of 1.50% to 2.00% above the applicable LIBOR
rate for LIBOR rate loans, depending on the Company’s borrowing availability, (v) reduced the ratio of
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, 2013. 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, 2013.
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
years ended December 31, 2013 and 2012, the Company recorded total compensation expense of $1,435 and
$1,189, respectively, related to the defined contribution plan. In 2011, the Company did not incur any related
compensation expense since the matching program had been suspended.
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
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