LeapFrog 2015 Annual Report Download

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2015
ANNUAL
REPORT
HELPING
CHILDREN
ACHIEVE THEIR
POTENTIAL
Ahead.

Table of contents

  • Page 1
    H E LPI NG CHILDREN AC H I E V E T H E I R POTENTIAL 2015 ANNUAL REPORT Ahead.

  • Page 2
    c b A2 3 1 I CAN DO THAT! years s over 140 ol d TOYS aro MILLION l or und the w What started with one child has changed the lives of millions. d. S

  • Page 3
    ... globally, including 140 million toys, 104 million books, over 64 million learning platforms, 10 million DVDs, and over 14 million Scout and Violet learning toys. Our life-changing products have been recognized with more than 1,300 awards globally. Created by our in-house learning team of PhDs, our...

  • Page 4
    ... play for children around the world. Sincerely, William B. Chiasson Chairman This letter to stockholders contains forward-looking statements, including statements about our focus, new products and services, our ability to operate our business more cost effectively, the opportunity for our brand...

  • Page 5
    ... No à š The aggregate market value of the common stock held by non-affiliates of the registrant as of September 30, 2014, calculated using the closing sale price as of that day, was approximately $270.1 million. Shares of common stock held by each executive officer and director of the registrant and...

  • Page 6
    ... On May 13, 2014, our board of directors approved a change in our fiscal year end from December 31 to March 31. In connection with this change, this Annual Report on Form 10-K presents information regarding LeapFrog's performance during the fiscal year ended March 31, 2015 (our first full fiscal...

  • Page 7
    ...Directors, Executive Officers and Corporate Governance ...Executive Compensation ...Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters ...Certain Relationships and Related Transactions, and Director Independence ...Principal Accounting Fees and Services...

  • Page 8
    ... retailers, distributors and directly to consumers via the LeapFrog App Center (''App Center''). LeapFrog is headquartered in Emeryville, California. On May 31, 2014, our board of directors approved a change in our fiscal year-end from December 31 to March 31 in order to better align our business...

  • Page 9
    ..., through distributors in various markets such as Australia, South Africa, Mexico and Spain, and directly to consumers via the App Center. The International segment represented approximately 31%, 31%, 30% and 27% of our consolidated net sales for the year ended March 31, 2015, the three months ended...

  • Page 10
    ... children through their learn-to-read journey, from their early exploration of board books with LeapReader Junior through LeapReader adventures that bring reading skills to life. Our content features proprietary LeapFrog characters such as Scout and Violet, the LeapFrog Frogs, Mr. Pencil, Pet Pals...

  • Page 11
    ... own personalized virtual pets. Online Services: • LeapFrog App Center: The App Center is a web-based store, through which customers can purchase and download digital content for their LeapTV, LeapPad, Leapster and LeapReader products. The App Center sells a wide variety of learning games, videos...

  • Page 12
    ...Nintendo handheld gaming systems. For information on how competition could affect our business, see Part I, Item 1A. - Risk Factors - ''If we are unable to compete effectively with existing or new competitors, our sales and market share could decline.'' Our products also compete for the leisure time...

  • Page 13
    ...Learning Path and the App Center, are developed through a combination of in-house team members and third-party resources. Many members of our development and production team have prior experience in online engineering and design. Our online services are based on a combination of internally-developed...

  • Page 14
    Retailers and distributors purchase our products in advance, for pickup from our manufacturers in Asia, or through orders placed to our U.S. or international warehouses where we maintain inventories to meet expected short-term demand. Products are generally shipped through free-on-board terms, and ...

  • Page 15
    ... Marketing Officer Senior Vice President of Sales Chief International Officer John Barbour has served as our Chief Executive Officer and as a board member since March 2011. Prior to joining LeapFrog, he served as President of the GameHouse Division of RealNetworks, Inc., a digital media company...

  • Page 16
    ... channels and business development at Hasbro, Inc., a toy and board game company. Mr. Adams' previous roles with Hasbro, Inc. included Vice President, Team Lead for Target and Vice President, Team Lead for Toys ''R'' US. Antony Hicks has served as our Chief International Officer since October...

  • Page 17
    ...in some cases lasting over a year, it can be difficult to correctly predict changing consumer preferences and accurately forecast optimal production and sales targets for these products. If we are unable to correctly predict consumer preferences, successfully integrate popular third-party media with...

  • Page 18
    ...spectrum of advertising and promotional programs. Our ability to sell our products and services is dependent in part upon the success of these programs. Additionally, given the importance of sales during the year-end holiday season, our marketing efforts tend to be concentrated in the quarter ending...

  • Page 19
    ... our advertising and make necessary adjustments, our business and operating results could be materially affected. If we are unable to compete effectively with existing or new competitors, our sales and market share could decline. We currently compete in the learning toy and electronic learning-aids...

  • Page 20
    ... a material adverse effect on our financial condition and results of operations. Our business is highly seasonal, and our annual operating results depend, in large part, on sales relating to the brief holiday season. Sales of consumer electronics and toy products in the retail channel are highly...

  • Page 21
    ... on our App Center, website, internal computer systems, or those of our third-party service providers, or malfunctions related to transaction processing on our content management systems, could result in a loss of potential or existing customers and sales. Although our systems have been designed...

  • Page 22
    ... to additional risks associated with conducting business internationally, including the appeal of our products in international markets; difficulties managing and maintaining relationships with vendors, customers, retailers, distributors and other commercial partners; increased investment and...

  • Page 23
    ...privacy regulations in the U.S. or Europe could have a significant impact on our business, as a growing percentage of our sales come from our digital multimedia learning platforms and related content. As we focus on digital products and direct marketing to consumers through the Internet, regulatory...

  • Page 24
    ... future. See also ''System failures in our online services or web store could harm our business'' above. Although it is impossible to predict the consequences of any such events, they could result in a decrease in demand for our product or create delay or inefficiencies in our supply chain by making...

  • Page 25
    ...to experience substantial price volatility. Our future success depends partly on the continued contribution of our key executives and technical, sales, marketing, manufacturing and administrative personnel. Part of our compensation package is equity based. To the extent our stock performs poorly, it...

  • Page 26
    ... low sales prices per share of our Class A common stock on the NYSE in each quarter during the last two completed fiscal years. The values stated below are actual high and low sales prices, inclusive of intra-day trading. High Low Year ended March 31, 2015 Fourth quarter ...Third quarter ...Second...

  • Page 27
    ... 69.4 68.4 70.4 67.1 69.7 65.4 66.3 Weighted-average shares outstanding of Class A and Class B common stock March 31, 2015 2014 2013 (In millions) December 31, 2012 2011 Consolidated Balance Sheet Data: Cash and cash equivalents ...Working capital** ...Total assets ...Total stockholders' equity...

  • Page 28
    ...information. During the year ended March 31, 2015, decreased consumer demand for our LeapPad line of children's tablets and associated content, lower than anticipated demand for our new LeapTV educational video game system and associated content, and decreased demand for our LeapReader learn-to-read...

  • Page 29
    ... our LeapPad line of children's tablets and associated content, as holiday sales in the overall children's tablet market declined, lower than anticipated demand for our new LeapTV educational video game system and associated content, decreased demand for our LeapReader learn-to-read system, higher...

  • Page 30
    ... offset by lower spending on cooperative advertising and content development, the timing of capitalization of non-content related website system costs, and a decrease in incentive compensation expense. Income (loss) from operations for the year ended March 31, 2015 worsened by $161.5 million as...

  • Page 31
    ...employee benefits, including stock-based compensation expense and other headcount-related expenses, associated with content development, product development, product engineering, third-party development and programming, and localization costs to translate and adapt content for international markets...

  • Page 32
    ... to support our strategic initiatives. Advertising Expenses Advertising expense consists of costs associated with marketing, advertising and promoting our products, including customer-related discounts and promotional allowances. Year Ended March 31, 2014 2015 (unaudited) Year Ended December...

  • Page 33
    ... in this Annual Report on Form 10-K for additional information on our impairment testing for our long-lived assets. Depreciation and Amortization Expenses Year Ended March 31, 2014 2015 (unaudited) Year Ended December 31, 2013 2012 (Dollars in millions) % Change 2015 vs. 2014 % Change 2013 vs. 2012...

  • Page 34
    ..., our domestic loss was excluded from the computation of our effective tax rates for the year ended March 31, 2015, and our subsidiary in Mexico was excluded from the computation of our effective tax rates for all the periods presented. Our effective tax rates and income tax provisions for the...

  • Page 35
    ... and the underperformance of products and product lines newly introduced to the market had a considerable impact on our projections of future taxable income. Consequently, we anticipated a three year cumulative domestic loss position within the current fiscal year. In determining if sufficient...

  • Page 36
    ...market and specialty retailers, other retail stores, distributors, resellers, and online channels including our App Center. Certain corporate-level operating expenses associated with sales and marketing, product support, human resources, legal, finance, information technology, corporate development...

  • Page 37
    ...and through distributors in markets such as Australia, Mexico, South Africa and Spain, as well as through our App Centers directed to certain international jurisdictions. Certain corporate-level operating expenses associated with sales and marketing, product support, human resources, legal, finance...

  • Page 38
    ... for our LeapPad line of children's tablets and associated content, lower than anticipated demand for our new LeapTV educational video game system and associated content, higher than desired inventory levels at retail entering the fiscal year which reduced retailer replenishment orders, as well...

  • Page 39
    ...expenditures are primarily planned for new product development and purchases related to the upgrading of our information technology capabilities. We expect capital expenditures for the year ending March 31, 2016, including those for capitalized content costs, to be in the range of $20 million to $30...

  • Page 40
    ...in investments to upgrade our internal business systems and to develop more complex new products. Net cash provided by financing activities for the year ended March 31, 2015 decreased $3.2 million as compared to the year ended March 31, 2014 primarily due to a decrease in proceeds from stock option...

  • Page 41
    ...majority of our accounts receivable booked in the quarter ending December 31 of the year. In 2013 and 2014, an increase in earlier sales to retailers during the quarters ended September 30 and December 31 and credit card-based sales through our App Center in the quarter ended December 31 resulted in...

  • Page 42
    ... from the initial sale of the card to deferred revenue, which are then recognized into revenue when the right to download content is granted to the customer upon redemption of the card. For content purchased by the customer with a personal credit card directly through our App Center, we recognize...

  • Page 43
    ...-performing titles during the three months ended March 31, 2014 and the year ended December 31, 2013. We also capitalize external Learning Path development costs, which primarily include third-party costs related to developing applications that are integral components of certain products we market...

  • Page 44
    ... our Learning Path development costs prospectively over that revised remaining useful life. Our evaluations of capitalized content costs require us to make complex and subjective judgments, using currently available data as well as projections about the potential impact of possible future events and...

  • Page 45
    ..., which included the underperformance of products and product lines newly introduced to the market, and the continuing decrease in trading values of the our Class A common stock and corresponding decline in our market capitalization. As a result, we performed step one of the impairment test...

  • Page 46
    ... an orderly transaction between market participants as of the valuation date. Based on the results of this study, we concluded that the carrying value of our property and equipment assets, including primarily our recent investments in our internal business systems and the non-content related website...

  • Page 47
    ...2015, which would result in decreases in associated depreciation expenses in future periods. Meanwhile, we will continue to review the recoverability of our remaining long-lived assets on a quarterly basis, which may result in additional... using enacted tax rates in effect for the year in which the ...

  • Page 48
    ... entity's contracts with customers. For public entities, this guidance will be effective for annual reporting periods beginning after December 15, 2016, including interim periods within that reporting period, i.e. the first quarter of our fiscal year 2018. Early application is not permitted. This...

  • Page 49
    ...the foreign currency exchange gain or loss reported in our financial statements, but the program, when properly executed, may not always eliminate our exposure to movements of currency exchange rates. The results of our hedging program for the year ended March 31, 2015, the three months ended March...

  • Page 50
    ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA LEAPFROG ENTERPRISES, INC. FORM 10-K Index to Consolidated Financial Statements For the Fiscal Year Ended March 31, 2015 Page Report of PricewaterhouseCoopers LLP, Independent Registered Public Accounting Firm ...Report of Ernst & Young LLP, ...

  • Page 51
    ... when read in conjunction with the related consolidated financial statements. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of March 31, 2015 based on criteria established in Internal Control - Integrated Framework...

  • Page 52
    Report of Independent Registered Public Accounting Firm The Board of Directors and Stockholders of LeapFrog Enterprises, Inc. We have audited the accompanying consolidated balance sheet of LeapFrog Enterprises, Inc. as of December 31, 2012, and the related consolidated statements of operations, ...

  • Page 53
    ... par value $0.0001; Authorized âˆ' 139,500 shares; Outstanding: 66,084 and 65,229, respectively ...Class B Common Stock, par value $0.0001; Authorized âˆ' 40,500 shares; Outstanding: 4,394 and 4,396, respectively ...Treasury stock ...Additional paid-in capital ...Accumulated other comprehensive loss...

  • Page 54
    ...In thousands, except per share data) Year Ended March 31, 2015 Three Months Ended March 31, 2014 Years Ended December 31, 2013 2012 Net sales ...Cost of sales ...Gross profit ...Operating expenses: Selling, general and administrative . Research and development ...Advertising ...Goodwill impairment...

  • Page 55
    ...) (In thousands) Year Ended March 31, 2015 Three Months Ended March 31, 2014 Years Ended December 31, 2013 2012 Net income (loss) ...Other comprehensive income (loss), before tax: Currency translation adjustments ...Transfer of temporary gain on long-term investments ...Total other comprehensive...

  • Page 56
    ... of temporary gain on long-term investments, net of tax Net income ...Balance, December 31, 2012 ...Conversion of Class B shares to Class A shares ...Class A common shares issued upon exercise of employee stock-based awards and purchases made under the employee purchase plan ...Net cash paid for...

  • Page 57
    ... and equipment and other intangible assets ...Capitalization of content and website development costs ...Sales of investments ...Net cash used in investing activities ...Financing activities: Proceeds from stock option exercises and employee stock purchase plan ...Cash paid for payroll taxes on...

  • Page 58
    ... and related content and learning toys. LeapFrog has developed a number of learning platforms, including the LeapPad family of learning tablets, the LeapTV educational video game system, the Leapster family of handheld learning game systems, and the LeapReader reading and writing systems, which...

  • Page 59
    ...the initial sale of the card to deferred revenue, which are then recognized into revenue when the right to download content is granted to the customer upon redemption of the card. For content purchased by the customer with a personal credit card directly through the Company's App Center, the Company...

  • Page 60
    ... external Learning Path development costs, which primarily include third-party costs related to developing applications that are an integral component of certain products the Company markets. Learning Path development costs are generally amortized on a straight-line basis over two years. The Company...

  • Page 61
    ... limited to: macroeconomic conditions, industry and market considerations, cost factors, overall financial performance, LeapFrog-specific events and share price trends. Additional judgment is required to determine relative importance and impact of each factor. Application of the two-step goodwill...

  • Page 62
    ... Company's direct costs of advertising, in-store displays and promotion programs are expensed as incurred. Under arrangements with certain of its customers, the Company reduces the net selling price of its products as an incentive (sales allowance) for the customers to independently promote LeapFrog...

  • Page 63
    ..., the risks of counterparty nonperformance associated with these contracts are not considered to be significant. The Company updates its evaluation of the creditworthiness of its counterparties on a quarterly basis. Notwithstanding the Company's efforts to manage foreign exchange risk, there can be...

  • Page 64
    ... to the effective tax rate in the year of resolution. Stock-based Compensation The Company issues stock options and restricted stock units (''RSUs'') to its employees, directors and occasionally to non-employee service providers, to purchase shares of the Company's Class A common stock pursuant to...

  • Page 65
    ... entity's contracts with customers. For public entities, this guidance will be effective for annual reporting periods beginning after December 15, 2016, including interim periods within that reporting period, i.e. the first quarter of our fiscal year 2018. Early application is not permitted. This...

  • Page 66
    ... Credit Agreement'' for additional information on the the revoling credit facility. 4. Inventories The Company's inventories, stated on a first-in, first-out basis at the lower of cost or market as of March 31, 2015 and 2014, were as follows: March 31, 2015 2014 Raw materials ...Finished goods...

  • Page 67
    ..., including primarily the Company's recent investments in its internal business systems and the non-content related website systems costs under its computer and software category. Refer to Note 9 - ''Impairment of Long-lived Assets'' below for detailed information on the Company's impairment testing...

  • Page 68
    ... months ended March 31, 2014 and the years ended December 31, 2013 and 2012, respectively. The Company performs a periodic evaluation of capitalized content development costs. For the years ended March 31, 2015 and December 31, 2012, the Company's evaluation identified capitalized costs related...

  • Page 69
    ...$1,600, $1,600 and $253 for the years ending March 31, 2016, 2017 and 2018, respectively. During the quarter ended March 31, 2015, the Company performed an impairment review of its long-lived assets, including its property and equipment, capitalized content costs and other intangible assets, and 62

  • Page 70
    ...cant decline of the trading value of the Company's Class A common stock and the corresponding market capitalization during the fourth quarter of fiscal 2015. The Company's long-lived assets were not considered impaired in its International reporting unit as of March 31, 2015 as their carrying value...

  • Page 71
    ... of its long-lived assets exceeds their estimated fair values. 10. Accrued Liabilities The Company's accrued liabilities as of March 31, 2015 and 2014 were as follows: March 31, 2015 2014 Employee-related expenses ...Advertising and promotion ...Royalties payable ...Marketing, consulting and web...

  • Page 72
    ...the provision for (benefit from) income taxes were as follows: Year Ended March 31, 2015 Three Months Ended March 31, 2014 Years Ended December 31, 2013 2012 Current: Federal ...State ...Foreign ...Total current Deferred: Federal ...State ...Foreign ...Total deferred Grand total Effective Tax Rate...

  • Page 73
    ... tax assets, primarily relating to net operating losses incurred subsequent to the establishment of the valuation allowance in the quarter ended December 31, 2014 of fiscal 2015, and therefore did not impact the Company's effective tax rate. The tax benefit for the three months ended March 31...

  • Page 74
    ... 2015 and will expire in years 2016 through 2035. Section 382 of the Internal Revenue Code limits net operating loss carryforwards when an ownership change of more than fifty percent of the value of the stock in a loss corporation occurs with a three-year period. Sales of the Company's common stock...

  • Page 75
    ... of products and product lines newly introduced to the market had a considerable impact on its projections of future taxable income. Consequently, the Company anticipated a three year cumulative domestic loss position within the current fiscal year. In determining if sufficient projected future...

  • Page 76
    ... the effective tax rate due to the full valuation allowance recorded against the Company's domestic deferred tax assets. The Company recognizes interest and penalties related to uncertain tax positions in income tax expense. Income tax expense for the year ended March 31, 2015, three months ended...

  • Page 77
    ... 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...

  • Page 78
    ... 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 acquire shares of the Company's Class A common stock, are exercisable or convertible, as applicable, over a period not to exceed ten years, and...

  • Page 79
    ... grants and 3.1% for non-employee director grants. Stock-based compensation expense related to RSUs is calculated based on the market price of the Company's common stock on the grant date. The total market value of RSUs granted for the year ended March 31, 2015, the three months ended March 31, 2014...

  • Page 80
    ... market value of such stock, which results in stock-based compensation expense due to departure from the IRS safe harbor. Stock-based compensation expense related to the ESPP is estimated using the Black-Scholes option pricing model with the following assumptions for the year ended March 31, 2015...

  • Page 81
    .... Stock-based Compensation âˆ' (continued) Stock Plan Activity Stock Options The activity in the Company's stock option plan for the year ended March 31, 2015 and the three months ended March 31, 2014 was as follows: Number of Shares Weighted-Average Exercise Price Average Remaining Contractual Life...

  • Page 82
    ... and management has no plans at this time to pay dividends in the foreseeable future. In the event of liquidation, Class A and B common stockholders are equally entitled to all assets of the Company available for distribution. On February 10, 2014, the Company's board of directors approved a stock...

  • Page 83
    ... as the effect would have been antidilutive. 18. Related Party Transactions Our Chief Executive Officer, John Barbour, has served on the board of directors of the Toy Industry Association, Inc. (''TIA'') a not-for-profit trade association that represents toy and youth entertainment companies, since...

  • Page 84
    ... per share data) 18. Related Party Transactions âˆ' (continued) For the quarter ended March 31, 2013 and the year ended December 31, 2012, the Company purchased software products and support services totaling $1,146 and $2,912, respectively, from Oracle Corporation on terms the Company believes...

  • Page 85
    ...for total rent expense under the leases on a straight-line basis over the lease terms. The Company had a deferred rent liability relating to rent escalation costs net of tenant incentives for its Emeryville, California headquarters. As of March 31, 2015 and 2014, the deferred rent liability was $360...

  • Page 86
    ...as amended (the ''Exchange Act''), and SEC Rule 10b-5, by making materially false or misleading statements regarding the Company's financial projections, performance, and development of new products between May 5, 2014 and January 22, 2015. The plaintiffs also allege that Messrs. Barbour and Arthur...

  • Page 87
    ... other outlets through the Company's offices outside of the U.S., through distributors in various international markets, and directly to consumers via the App Center. • The table below shows certain information by segment for the year ended March 31, 2015, the three months ended March 31, 2014...

  • Page 88
    ..., except per share data) 21. Segment Reporting âˆ' (continued) For the year ended March 31, 2015, the three months ended March 31, 2014 and the year ended December 31, 2013, the United Kingdom accounted for $39,806, $5,743 and $62,250, respectively of LeapFrog's consolidated net sales, and no...

  • Page 89
    ... 29,300 $ 32,619 International: Net sales ...Cost of sales ...Gross Profit ...Operating expenses ...Income from operations Statements of Cash Flows Data: Net cash provided by (used in): Operating activities ...Investing activities ...Financing activities ...Effect of exchange rate changes on cash...

  • Page 90
    LEAPFROG ENTERPRISES, INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (In thousands, except per share data) 23. Selected Unaudited Quarterly Financial Information Unaudited selected financial information by quarter for the years ended March 31, 2015 and 2014 is presented below: June 30, 2014 ...

  • Page 91
    ... to allow timely decisions regarding required disclosure. Based upon their evaluation, our CEO and CFO have concluded that our disclosure controls and procedures were effective as of March 31, 2015. Management's Annual Report on Internal Control over Financial Reporting Our management is responsible...

  • Page 92
    ... period of time to support the conclusion that the above material weakness over our process for establishing reserves for customer-related discounts and promotional allowances has been remediated as of March 31, 2015. Inherent Limitations on Effectiveness of Controls A control system, no matter...

  • Page 93
    ... to Regulation 14A of the Securities Exchange Act of 1934, as amended, also referred to in this Annual Report on Form 10-K as our 2015 Proxy Statement, which we expect to file with the SEC no later than July 29, 2015. ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE The information...

  • Page 94
    ... Board of Directors and Corporate Governance - Transactions with Related Persons'' ''Board of Directors and Corporate Governance - Director Independence'' ''Board of Directors and Corporate Governance - Committees of the Board'' ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES The information...

  • Page 95
    ...following are filed as a part of Item 8 of this Annual Report on Form 10-K: Page Report of PricewaterhouseCoopers LLP, Independent Registered Public Accounting Firm ...44 Report of Ernst & Young LLP, Independent Registered Public Accounting Firm ...45 Consolidated Balance Sheets ...46 Consolidated...

  • Page 96
    ..., the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. LEAPFROG ENTERPRISES, INC. By: /s/ Raymond L. Arthur Raymond L. Arthur Chief Financial Officer, Principal Financial Officer and Principal Accounting Officer Date: June 15, 2015 89

  • Page 97
    ... the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. Signatures Title Date /s/ JOHN BARBOUR John Barbour /s/ RAYMOND L. ARTHUR Raymond L. Arthur /s/ WILLIAM...

  • Page 98
    ... named therein Form of Indemnification Agreement entered into by LeapFrog Enterprises, Inc. with certain of its directors and executive officers Net Lease, dated November 14, 2000, between Hollis Street Investors, L.L.C. and LeapFrog Enterprises, Inc., as amended Fifth Amendment to Lease, dated...

  • Page 99
    ... Hawaii Investor LLC, and LeapFrog Enterprises, Inc. dated as of April 1, 2014 Amended and Restated 2002 Employee Stock Purchase Plan Amended and Restated 2002 Equity Incentive Plan Form of Stock Option Agreement under the 2002 Equity Incentive Plan Form of Restricted Stock Unit Award Agreement...

  • Page 100
    ...25* Certain Compensation Arrangements with Named Executive Officers†10.26* Compensation Arrangements between LeapFrog Enterprises, Inc. and its Board of Directors††10.27* Employment Agreement, dated as of February 27, 2011, between LeapFrog Enterprises, Inc. and John Barbour 10.28* Amendment...

  • Page 101
    Incorporated by Reference Exhibit Number Original Exhibit Number Filed Herewith Exhibit Description Form File No. Filing Date 10.33 Amendment No. 1 to Technology License Agreement by and between LeapFrog Enterprises, Inc. and Anoto AB, among other parties, dated December 7, 2004** Amendment No...

  • Page 102
    ... of the Chief Executive Officer and the Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 The following materials from the registrant's Annual Report on Form 10-K for the fiscal year ended March 31, 2015, formatted in Extensible Business Reporting Language (XBRL...

  • Page 103
    ...heading ''Executive Compensation'' in the definitive proxy materials filed by LeapFrog Enterprises, Inc. with the Securities and Exchange Commission...heading ''Director Compensation'' in the definitive proxy materials filed by LeapFrog Enterprises, Inc. with the Securities and Exchange Commission ...

  • Page 104
    ...Allowance for defective products Year Ended March 31, 2015 ...Three month ended March 31, 2014 Year Ended December 31, 2013 ...Year Ended December 31, 2012 ...Allowance for sales returns Year Ended March 31, 2015 ...Three month ended March 31, 2014 Year Ended December 31, 2013 ...Year Ended December...

  • Page 105
    ...summarize and report financial information; and Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. /s/ John Barbour John Barbour Chief Executive Officer b) Date: June 15, 2015

  • Page 106
    ...and report financial information; and Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. /s/ Raymond L. Arthur Raymond L. Arthur Chief Financial Officer b) Date: June 15, 2015

  • Page 107
    ... covered in the financial statements in the Annual Report. 2. Dated: June 15, 2015 /s/ John Barbour John Barbour Chief Executive Officer Note: /s/ Raymond L. Arthur Raymond L. Arthur Chief Financial Officer This certification accompanies the Annual Report pursuant to 18 U.S.C. Section 1350 and...

  • Page 108
    ... attend the 2015 annual meeting of stockholders of LeapFrog Enterprises, Inc. (the ''Annual Meeting''). The Annual Meeting will be held on Thursday, August 13, 2015 at 9:00 a.m. Pacific Daylight Time at our headquarters located at 6401 Hollis Street, Suite 100, Emeryville, California. Proposals to...

  • Page 109
    ... Equity Compensation Plan Information ...Required Vote ...Recommendation ...SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT ...Beneficial Ownership of Our Common Stock ...Section 16(A) Beneficial Ownership Reporting Compliance ...BOARD OF DIRECTORS AND CORPORATE GOVERNANCE ...Board...

  • Page 110
    Board Meetings and Executive Sessions ...Role of Board in Risk Oversight ...Committees of the Board ...Corporate Governance ...Transactions With Related Persons ...Communication with Directors ...DIRECTOR COMPENSATION ...Director Compensation for Fiscal Year 2015 and the Transition Period ......

  • Page 111
    ... Finance/Marketing/Education Leadership/Game and Toy Industries Finance/Retail/Consumer Products Digital Media/Entertainment No Yes Yes Yes Yes Yes Yes Yes Yes 0 1 1 0 1 1 0 0 0 HIGHLIGHTS FROM THE COMPENSATION DISCUSSION & ANALYSIS Financial Results Key Compensation Decisions Net sales of...

  • Page 112
    ...majority of the target total direct compensation opportunity for each of our executive officers is performance-based. We maintain specific corporate governance and compensation practices to ensure consistency with the Company's short-term and long-term goals. Say-on-Pay Votes In the 2014 calendar...

  • Page 113
    ...the Company, we or us) at the close of business on June 18, 2015, the record date, will be entitled to vote at the 2015 annual meeting of stockholders of LeapFrog (the ''Annual Meeting''). On the record date, there were 66,328,506 shares of Class A common stock and 4,394,354 shares of Class B common...

  • Page 114
    ...if at the meeting there is present in person, by remote communication or represented by proxy the holders of stock representing a majority of the voting power of all outstanding shares of stock entitled to vote. On the record date, there were 66,328,506 shares of Class A common stock outstanding and...

  • Page 115
    ...the Annual Meeting. We are paying for the entire cost of soliciting proxies. In addition to these proxy materials, our directors and employees may also solicit proxies in person, by telephone or by other means of communication. Directors and employees will not be paid any additional compensation for...

  • Page 116
    ... therein. We make our Annual Report on Form 10-K, our Quarterly Reports on Form 10-Q, as well as our other SEC filings, available free of charge through the investor relations section of our website located at www.leapfroginvestor.com under ''Financial Information - SEC Filings'' as soon as...

  • Page 117
    ... from the views of other members. John Barbour has served as our Chief Executive Officer and as a member of our board of directors since March 2011. Prior to joining LeapFrog, he served as President of the GameHouse division of RealNetworks, Inc., a digital media company, from October 2008 to August...

  • Page 118
    ... on building leading companies in areas relating to education, technology and career management and the improvement of individual and corporate performance. From 1990 to 1996, he served as President and Chief Executive Officer of Sega of America, a leading video game and entertainment company. Prior...

  • Page 119
    ...-based learning solutions for at-risk and special student populations, since February 2010. Mr. Kalinske also serves on the board of directors of Gazillion, an online video game company, Genyous, a cancer drug development company and the Wisconsin Center for Educational Products and Services, a non...

  • Page 120
    ... in the electronic game business, including both content development and retail distribution oversight, has direct applicability to LeapFrog's business. His work at Electronic Arts and his service on the boards of directors of several companies give him broad-based knowledge in corporate governance...

  • Page 121
    ... deep experience in manufacturing and marketing branded children's products, including 20 years' experience as chief executive officer of Tiger Electronics, Inc. His long service within the toy industry gives him extensive knowledge of and experience with business operations and strategy, including...

  • Page 122
    ... believe his experience in building leading children's entertainment media will benefit LeapFrog as we invest in growing our content portfolio and diversifying our business with new media delivery platforms. Mr. Youngwood was recommended to our board of directors by Mr. Barbour. Mr. Youngwood is an...

  • Page 123
    ... independence. The audit committee has directed that management submit the selection of PwC as the Company's independent registered public accounting firm for the fiscal year ending March 31, 2016 for ratification by the stockholders at the Annual Meeting. Neither our bylaws nor other governing...

  • Page 124
    ...paid to PwC for consulting fees related to our enterprise resource planning system implementation. All services provided by our independent registered public accounting firms for the fiscal years ended December 31, 2013, March 31, 2015 and the Transition Period were approved by the audit committee...

  • Page 125
    ... on the review and discussions referred to above, the audit committee recommended to the board that the audited consolidated financial statements be included in the company's Annual Report on Form 10-K for the fiscal year ended March 31, 2015 for filing with the Securities and Exchange Commission...

  • Page 126
    ... federal court located within the state of Delaware, in all cases subject to the court's having personal jurisdiction over the indispensable parties named as defendants. Any person or entity purchasing or otherwise acquiring any interest in shares of capital stock of the Corporation shall be deemed...

  • Page 127
    ...either in person or by proxy on the proposal in order to be approved. Abstentions will be counted toward the tabulation of votes cast on proposals presented to the stockholders and will have the same effect as ''Against'' votes. Under the rules of the NYSE, brokers are prohibited from giving proxies...

  • Page 128
    ...and the rules and regulations promulgated under Section 162(m) are complicated and subject to change from time to time. Accordingly, it is possible that awards intended to qualify as performance-based compensation could be determined by the Internal Revenue Service not to so qualify. In addition, we...

  • Page 129
    ... stock performance, which usage could be 3.5 million shares or higher. Thus, we may not currently have sufficient shares to satisfy our compensation needs prior to the calendar 2016 annual meeting and believe it is prudent to increase the share reserve at this time. Gross share usage in Fiscal 2015...

  • Page 130
    ...The compensation committee reviewed SVT calculated using an assumed $1.50 share price based on the trading history of our Class A common stock beginning on June 12, 2015. If stockholders approve Proposal Four, SVT, including outstanding and available shares and based on our current share price, will...

  • Page 131
    ... May 31, 2015 (without giving effect to approval of the proposed amendment and restatement of the 2011 EIP): Other LeapFrog Equity Award Plans All LeapFrog Equity Award Plans** 2011 EIP* Total shares of Class A common stock underlying outstanding stock options ...Weighted average exercise price of...

  • Page 132
    ... in revenue or product revenue; (xvi) expenses and cost reduction goals; (xvii) improvement in or attainment of working capital levels; (xiii) economic value added (or an equivalent metric); (xix) market share; (xx) cash ï¬,ow; (xxi) cash ï¬,ow per share; (xxii) share price performance; (xxiii...

  • Page 133
    ... set forth in the 2011 EIP, the number and kind of shares subject to outstanding awards under the 2011 EIP, and the exercise or settlement price of outstanding stock options and of other awards. In the event of a corporate transaction, the board of directors may arrange for the assumption of the...

  • Page 134
    ...ordinary income in the year of the disqualifying disposition equal to the excess, if any, of the fair market value of the share on the date the incentive stock option was exercised over the exercise price. However, if the sales proceeds are less than the fair market value of the share on the date of...

  • Page 135
    ... this time. Similarly, the benefits or amounts which would have been received by or allocated to executive officers and our other employees for the last completed fiscal year if this amendment to the 2011 EIP had been in effect cannot be determined. Information about awards granted in Fiscal 2015...

  • Page 136
    ... 2002 Non-Employee Directors' Stock Award Plan. REQUIRED VOTE Approval of the amendment to the 2011 EIP requires affirmative ''For'' vote from a majority of the voting power present and entitled to vote either in person or by proxy on this Proposal Four at the Annual Meeting. Abstentions will...

  • Page 137
    ... into Class A common stock) as of May 31, 2015, by: (i) each director; (ii) each of the executive officers named in the Summary Compensation Table later in this proxy statement; (iii) all executive officers and directors of LeapFrog as a group; and (iv) all those known by the Company to be...

  • Page 138
    ... managers that are direct and indirect subsidiaries of Franklin Resources, Inc. Charles B. Johnson and Rupert H. Johnson, Jr. each own in excess of 10% of the outstanding common stock, and are the principal stockholders of Franklin Resources, Inc. Under SEC rules and regulations, Franklin Resources...

  • Page 139
    ...Exchange Act requires our directors and executive officers, and persons who own more than ten percent of a registered class of our equity securities, to file with the SEC initial reports of ownership and reports of changes in ownership of Class A common stock and other equity securities of LeapFrog...

  • Page 140
    ... the Company's chief executive officer and chief financial officer, provides insight to the Company's strategic and operational plans and also enables him to effectively consult with senior management and members of the board of directors to facilitate regular, open and direct communication between...

  • Page 141
    ... • The board of directors monitors and evaluates the effectiveness of the Company's internal controls and the enterprise risk management program at least annually and the audit committee does so at least quarterly. At audit committee meetings, the committee reviews our risk management policies and...

  • Page 142
    ... audit committee members, internal audit representatives and external auditors during executive sessions of the audit committee. • Our compensation committee reviews our compensation philosophy and programs with our management and external compensation consultants, and, in approving such programs...

  • Page 143
    ...overall compensation strategy and policies for LeapFrog. This role includes review and approval of corporate performance goals and objectives relevant to the compensation of our executive officers and other senior management, and the compensation and other terms of employment of our CEO. In addition...

  • Page 144
    ... the Company's business operations and strategy, key performance measures and target goals and the labor markets in which we compete. Compensia provided peer and market compensation data that were reviewed and considered as part of the pay decisions made by the compensation committee for the 2015...

  • Page 145
    ... of the board of directors, assessing the performance of the board of directors, reviewing the compensation paid to non-employee directors for their service on our board of directors and its committees, and developing our corporate governance principles. When searching for new board members, the...

  • Page 146
    ... establish that members of the board of directors have complete and open access to the Company's management and employees. The guidelines also provide for an annual review of the chief executive officer's performance, as well as for the establishment of plans and policies for succession. The...

  • Page 147
    .... Transactions involving compensation for services provided to LeapFrog as an employee, director, consultant or similar capacity by a related person are not covered by this policy. A related person is any executive officer, director, or holder of more than 5% of the stock of LeapFrog (as determined...

  • Page 148
    ... the board of directors or any of the directors may do so by sending written communications addressed to the Corporate Secretary of LeapFrog at 6401 Hollis Street, Suite 100, Emeryville, California 94608. The board of directors has established procedures to deal with all direct communications. All...

  • Page 149
    ... in our Annual Report on Form 10-K for the fiscal year ended March 31, 2015 which was filed with the SEC on June 15, 2015. (4) In July 2014, each of our non-employee directors elected at our 2014 annual meeting of stockholders was automatically granted an annual RSU award and stock option pursuant...

  • Page 150
    ...executive officers and other employees. The exercise price of stock options granted to our non-employee directors is 100% of the fair market value of the Class A common stock subject to the option on the date of grant. Stock options granted pursuant to initial equity awards to non-employee directors...

  • Page 151
    ... to the annual equity grant in 2014 will vest on July 31, 2015. The term of stock options granted to non-employee directors is 10 years unless earlier terminated based on termination of continuous service or other conditions. In the event of a merger of LeapFrog with or into another corporation or...

  • Page 152
    ... reviews for Fiscal 2015. This compensation consultant performed no consulting or other services for the Company. Annual Executive Compensation Review. The compensation committee conducts an annual review and approval of our compensation strategy, including a review of our compensation peer group...

  • Page 153
    ... our board of directors will next hold an advisory vote on the compensation of our named executive officers in 2017. In addition, pursuant to SEC regulations, our board of directors currently plans to hold its next vote on the preferred frequency of future say-on-pay votes at the 2017 Annual Meeting...

  • Page 154
    ...our overall performance and secondarily to his or her achievement of short-term and long-term individual goals; Pay base salaries that are competitive with the salaries in effect at companies with which we compete for talent; Provide annual bonus opportunities that motivate our executive officers to...

  • Page 155
    ... achieving his or her individual goals, and input from the compensation consultant retained by the compensation committee to provide information on competitive market practices. The compensation committee's decisions regarding our Chief Executive Officer's compensation are based on its assessment...

  • Page 156
    ... Each year, the compensation committee evaluates the total compensation of our executive officers with respect to our overall Company performance, individual performance, changes in scope of responsibility and any changes in the competitive market for each position. The compensation committee does...

  • Page 157
    ... base salary increases were approved by the compensation committee as part of a company-wide annual review process undertaken in February and March 2014. The annual review process included an increase in employee salaries in view of the competitive market for talent. Performance-Based Bonuses We use...

  • Page 158
    ... each executive officer's employment agreement or offer letter (or subsequent amendment) and are based on competitive market practices for each individual's position. The Bonus Factor is calculated each year by the compensation committee based on the level of achievement of the Company's performance...

  • Page 159
    ...of their target bonus opportunity, based on their actual performance against their individual goals, but only if the Company had positive operating income for the 2014 calendar year. Each named executive officer's individual goals, except those of our chief executive officer, were developed with and...

  • Page 160
    ... data regarding our financial results and business expectations as of that time, including toy industry and technology company financial benchmarks for product margin, operating expenses and operating income as a percentage of net sales, and Company resources and capabilities. In addition, these...

  • Page 161
    ... consideration of a competitive market analysis of the Peer Group. Award Mix Typically, we grant a mix of stock options and RSUs to our executive officers as part of their initial compensation packages at the time of hire and, thereafter, on an annual basis. The compensation committee believes that...

  • Page 162
    ...be equal to the closing market price of our Class A common stock on the date of grant. Our policy is that we will not time or select the grant dates for any stock options or other stock awards in coordination with our release of material non-public information. In addition, we have specific written...

  • Page 163
    ...coverage and the opportunity to participate in our Section 401(k) plan and employee stock purchase plan, on the same general terms and conditions as are made available to all our regular, full-time employees. We do not offer our U.S. executive officers, or other U.S. employees, guaranteed retirement...

  • Page 164
    ... compensation awards. ASC 718 requires companies to measure the compensation expense for all share-based payment awards made to employees, including our executive officers, and directors, including stock options, based on the grant date ''fair value'' of these awards. This calculation is performed...

  • Page 165
    ... Position John Barbour Chief Executive Officer Fiscal Year 2015 TP 2013 2012 2015 TP 2013 2012 Bonus ($)* - - - 230,000 - - - 456,914 468,398 160,989 Raymond L. Arthur(7) Chief Financial Officer Kenneth A. Adams(12) 2015 Senior Vice President, Sales TP 2013 Gregory B. Ahearn(14) Chief Marketing...

  • Page 166
    ...24,273 in new home closing expenses, (v) $34,912 in household goods moving expenses, (vi) $6,088 in miscellaneous other moving expenses and (vii) $71,214 in tax assistance (gross up). (18) Mr. Hicks was appointed our Chief International Officer in September 2014. (19) The amount reported consists of...

  • Page 167
    ... in the 2011 EIP, we grant options to purchase shares of our Class A common stock at an exercise price equal to the closing market price of our Class A common stock on the date of grant. (2) Represents the full fair value of the option or stock award computed as of the grant date in accordance...

  • Page 168
    ... (1⁄48) of the shares subject to each award vest (and, in the case of the RSUs, be delivered) upon completion of each month of continuous employment service thereafter. Antony Hicks In September 2015, in connection with his appointment as Chief International Officer of LeapFrog, Mr. Hicks entered...

  • Page 169
    ... by multiplying the closing market price of our Class A common stock as reported by the NYSE for March 31, 2015, $2.18 per share, by the number of shares of restricted stock that had not vested as of March 31, 2015. (3) Represents 32,500 RSUs issued under the 2011 EIP that vest at the rate of 25% of...

  • Page 170
    ...of the shares subject to the option vesting on the one-year anniversary of the vesting commencement date, which was July 16, 2012, and in 36 equal monthly installments thereafter. Represents 60,000 RSUs issued under the 2011 EIP that vest at the rate of 25% of the shares subject to the award on each...

  • Page 171
    ...closing market price as reported on the NYSE of our Class A common stock on the last trading day prior to the weekend vesting date of the stock award, or $7.48 per share on March 14, 2014, by the number of shares acquired on vesting. (5) Calculated by multiplying the closing market price as reported...

  • Page 172
    ...closing market price as reported on the NYSE of our Class A common stock on the last trading day prior to the weekend vesting date of the stock award, or $2.66 per share on March 6, 2015, by the number of shares acquired on vesting. (17) Calculated by multiplying the closing market price as reported...

  • Page 173
    ... our named executive officers, are described below and are based on the assumption that a triggering event occurred on March 31, 2015 and assume a price per share of our Class A common stock of $2.18, which was the price of our Class A common stock reported by the NYSE at the close of market on that...

  • Page 174
    ... the vesting of any outstanding equity awards then held by Mr. Barbour such that all of his equity awards would vest as of the date of the change in control. In addition, if during the two-year period following a change in control of LeapFrog, Mr. Barbour's employment were terminated without...

  • Page 175
    ...% of base salary prior to the reduction; the executive's business location moved more than 50 miles beyond current location; or the Company materially breaches the agreement under which the executive is employed. Under the Severance Plan, to resign for ''good reason,'' he must resign within 60 days...

  • Page 176
    ... addition, LeapFrog UK must give Mr. Hicks two (2) months' notice prior to termination of his employment. Mr. Hicks would also be eligible for a pro-rated bonus based on the portion of the then-current financial year he is an employee, subject to the achievement of the applicable performance goals...

  • Page 177
    ... on, the closing market price of our Class A common stock of $2.18, as reported by the NYSE for March 31, 2015. (3) Assumes a conversion rate of Pounds Sterling to U.S. Dollars of 1:1.51. Our named executive officers are required to execute a release of claims against LeapFrog prior to receiving...

  • Page 178
    ... one or more of our named executive officers. We also do not maintain any executive retirement programs such as executive pension plans or supplemental executive retirement plans or other nonqualified deferred compensation plans. By Order of the Board of Directors Robert L. Lattuga Senior Vice...

  • Page 179
    APPENDIX A AMENDED AND RESTATED BYLAWS OF LEAPFROG ENTERPRISES, INC., A DELAWARE CORPORATION

  • Page 180
    ...Joint Owners Of Stock ...List Of Stockholders ...Action Without Meeting ...Organization ...DIRECTORS ...Number And Term Of Office ...Powers ...Board of Directors ...Vacancies ...Resignation ...Removal ...Meetings ...Quorum And Voting ...Action Without Meeting ...Fees And Compensation ...Committees...

  • Page 181
    ... Dates ...Registered Stockholders ...Execution Of Other Securities ...DIVIDENDS ...Declaration Of Dividends ...Dividend Reserve ...FISCAL YEAR ...Fiscal Year ...INDEMNIFICATION ...Indemnification Of Directors, Officers, Employees And Other Agents ...NOTICES ...Notices ...Amendments ...BUSINESS...

  • Page 182
    ... time by the Board of Directors. The Board of Directors may, in its sole discretion, determine that a meeting shall not be held at any place, but may instead be held solely by means of remote communication as provided under the Delaware General Corporation Law (''DGCL''). Section 5. Annual Meetings...

  • Page 183
    ... Associated Person or family member has direct or indirect beneficial ownership of any option, warrant, convertible security, stock appreciation right, or similar right with an exercise or conversion privilege or a settlement payment or mechanism at a price related to any class or series of shares...

  • Page 184
    ... statement pursuant to Rule 14a-8 under the 1934 Act. (e) For purposes of these Bylaws, ''public announcement'' shall mean disclosure in a press release reported by a national news service or in a document publicly filed by the corporation with the Securities and Exchange Commission pursuant to...

  • Page 185
    ... person, by remote communication, if applicable, or by proxy duly authorized, of the holders of stock representing a majority of the voting power of all outstanding shares of stock entitled to vote shall constitute a quorum for the transaction of business. In the absence of a quorum, any meeting of...

  • Page 186
    ... cast of the majority (plurality, in the case of the election of directors) of shares of such class or classes or series present in person, by remote communication, if applicable, or represented by proxy at the meeting shall be the act of such class or classes or series. For purposes of these Bylaws...

  • Page 187
    ... in person or by proxy, shall act as chairman. The Secretary, or, in his or her absence, an Assistant Secretary directed to do so by the chairman of the meeting, shall act as secretary of the meeting. (b) The Board of Directors of the corporation shall be entitled to make such rules or regulations...

  • Page 188
    ...ed. Section 20. Removal. The Board of Directors or any individual director may be removed from office at any time (a) with cause by the affirmative vote of the holders of a majority of the voting power of all the then-outstanding shares of capital stock of the corporation entitled to vote generally...

  • Page 189
    ... called by the Chairman of the Board of Directors, the Chief Executive Officer or any two or more directors. (c) Meetings by Electronic Communications Equipment. Any member of the Board of Directors, or of any committee thereof, may participate in a meeting by means of conference telephone or other...

  • Page 190
    ... or repealing any bylaw of the corporation. (b) Term. The Board of Directors, subject to any requirements of any outstanding series of Preferred Stock and the provisions of subsection (a) of this Section 25, may at any time increase or decrease the number of members of a committee or terminate the...

  • Page 191
    ... of the business and other officers of the corporation. The President shall perform other duties commonly incident to the office and shall also perform such other duties and have such other powers, as the Board of Directors or the Chief Executive Officer shall designate from time to time. (d) Duties...

  • Page 192
    ...resign at any time by giving notice in writing or by electronic transmission to the Board of Directors or to the Chief Executive Officer or, if the Chief Executive Officer has not been appointed or is absent, the President or to the Secretary. Any such resignation shall be effective when received by...

  • Page 193
    ...the Certificate of Incorporation and applicable law. Every holder of stock represented by certificate in the corporation shall be entitled to have a certificate signed by or in the name of the corporation by the Chairman of the Board of Directors, the Chief Executive Officer, the President or any...

  • Page 194
    ... be at the close of business on the day on which the Board of Directors adopts the resolution relating thereto. Section 39.40. Registered Stockholders. The corporation shall be entitled to recognize the exclusive right of a person registered on its books as the owner of shares to receive dividends...

  • Page 195
    ...there may be set aside out of any funds of the corporation available for dividends such sum or sums as the Board of Directors from time to time, in their absolute discretion, think proper as a reserve or reserves to meet contingencies, or for equalizing dividends, or for repairing or maintaining any...

  • Page 196
    ... be a director, officer, employee or other agent and shall inure to the benefit of the heirs, executors and administrators of such a person. (g) Insurance. To the fullest extent permitted by the DGCL or any other applicable law, the corporation, upon approval by the Board of Directors, may purchase...

  • Page 197
    ...shall include any service as a director, officer, employee or agent of the corporation which imposes duties on, or involves services by, such director, officer, employee, or agent with respect to an employee benefit plan, its participants, or beneficiaries; and a person who acted in good faith and...

  • Page 198
    ... delivered personally shall be sent to such address or (in the case of electronic communication) such e-mail address, facsimile telephone number or other form of electronic address as such director shall have filed in writing or by electronic communication with the Secretary of the corporation, or...

  • Page 199
    ...voting power of all of the then-outstanding shares of the capital stock of the corporation entitled to vote generally in the election of directors, voting together as a single class. ARTICLE XIVXV. BUSINESS COMBINATIONS Section 47.48. Section 203. The corporation shall not be governed by Section 203...

  • Page 200
    ... the time or times when a person shall be permitted to receive cash or Class A Common Stock pursuant to a Stock Award; (E) the number of shares of Class A Common Stock with respect to which a Stock Award shall be granted to each such person; and (F) the Fair Market Value applicable to a Stock Award...

  • Page 201
    ... the Code regarding the exclusion of performance-based compensation from the limit on corporate deductibility of compensation paid to Covered Employees, (B) Section 422 of the Code regarding incentive stock options or (C) Rule 16b-3. (viii) To approve forms of Award Agreements for use under the Plan...

  • Page 202
    ...an event. Notwithstanding the foregoing, the Board or Committee shall have the authority, without the approval of the Company's stockholders, to cancel outstanding Options or Stock Appreciation Rights that have an exercise price or strike price greater than the current Fair Market Value of the Class...

  • Page 203
    ...of the Code unless such additional Stock Award is approved by the Company's stockholders. (e) Source of Shares. The stock issuable under the Plan shall be shares of authorized but unissued or reacquired Class A Common Stock, including shares repurchased by the Company on the open market or otherwise...

  • Page 204
    ... denominated in shares of Class A Common Stock equivalents. (c) Purchase Price for Options. The purchase price of Class A Common Stock acquired pursuant to the exercise of an Option shall be paid, to the extent permitted by applicable law and as determined by the Board in its sole discretion, by any...

  • Page 205
    ... provisions governing the minimum number of shares of Class A Common Stock as to which an Option or SAR may be exercised. (g) Termination of Continuous Service. Except as otherwise provided in the applicable Award Agreement or other agreement between the Participant and the Company, if a Participant...

  • Page 206
    ...the Participant's Continuous Service during which the sale of the Class A Common Stock received upon exercise of the Option or SAR would not be in violation of the Company's insider trading policy, or (ii) the expiration of the term of the Option or SAR as set forth in the applicable Award Agreement...

  • Page 207
    ... order payable to the Company, (B) past services to the Company or an Affiliate, or (C) any other form of legal consideration (including future services) that may be acceptable to the Board, in its sole discretion, and permissible under applicable law. (ii) Vesting. Shares of Class A Common Stock...

  • Page 208
    ... At the sole discretion of the Board, such dividend equivalents may be converted into additional shares of Class A Common Stock covered by the Restricted Stock Unit Award in such manner as determined by the Board. Any additional shares covered by the Restricted Stock Unit Award credited by reason of...

  • Page 209
    ...Notwithstanding satisfaction of any completion of any Performance Goals, to the extent specified at the time of grant of an Award to ''covered employees'' within the meaning of Section 162(m) of the Code, the number of shares of Class A Common Stock, Options, cash or other benefits granted, issued...

  • Page 210
    ...and any applicable provisions of the corporate law of the state in which the Company or the Affiliate is incorporated, as the case may be. (e) Incentive Stock Option $100,000 Limitation. To the extent that the aggregate Fair Market Value (determined at the time of grant) of Class A Common Stock with...

  • Page 211
    ... Incentive Stock Options pursuant to Section 3(c), (iii) the class(es) and maximum number of securities that may be awarded to any person pursuant to Sections 3(d) and 6(c)(i), and (iv) the class(es) and number of securities and price per share of stock subject to outstanding Stock Awards. The Board...

  • Page 212
    ... the Company as such terms are defined in Rule 405 promulgated under the Securities Act. The Board shall have the authority to determine the time or times at which ''parent'' or ''subsidiary'' status is determined within the foregoing definition. (b) ''Award'' means a Stock Award or a Performance...

  • Page 213
    ... set forth in such an individual written agreement, the foregoing definition shall apply. (h) ''Class A Common Stock'' means the Class A common stock of the Company. (i) ''Code'' means the Internal Revenue Code of 1986, as amended, including any applicable regulations and guidance thereunder. B-14

  • Page 214
    ...means LeapFrog Enterprises, Inc., a Delaware corporation. (l) ''Consultant'' means any person, including an advisor, who is (i) engaged by the Company or an Affiliate to render consulting or advisory services and is compensated for such services, or (ii) serving as a member of the board of directors...

  • Page 215
    ...stock option'' within the meaning of Section 422 of the Code. (y) ''Non-Employee Director'' means a Director who either (i) is not a current employee or officer of the Company or an Affiliate, does not receive compensation, either directly or indirectly, from the Company or an Affiliate for services...

  • Page 216
    ... or shares voting power, which includes the power to vote or to direct the voting, with respect to such securities. (ii) ''Participant'' means a person to whom an Award is granted pursuant to the Plan or, if applicable, such other person who holds an outstanding Stock Award. (jj) ''Performance Cash...

  • Page 217
    ...sole discretion of the Board. (nn) ''Performance Stock Award'' means a Stock Award granted under the terms and conditions of Section 6(c)(i). (oo) ''Plan'' means this LeapFrog Enterprises, Inc. 2011 Equity and Incentive Plan. (pp) ''Restricted Stock Award'' means an award of shares of Class A Common...

  • Page 218
    ...) of more than fifty percent (50%). (aaa) ''Ten Percent Stockholder'' means a person who Owns (or is deemed to Own pursuant to Section 424(d) of the Code) stock possessing more than ten percent (10%) of the total combined voting power of all classes of stock of the Company or any Affiliate. B-19

  • Page 219
    ... 31, 2010 through March 31, 2015 (based on the closing prices of LeapFrog's Class A common stock as reported on the New York Stock Exchange). The stockholder return shown on the graph below is not necessarily indicative of future performance and we do not make or endorse any predictions as to future...

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    ... American Stock Transfer & Trust Company, LLC Brooklyn, New York (800) 937-5449 ANNUAL MEETING The 2015 Annual Meeting of Stockholders will take place at 9:00 a.m. Pacific Daylight Time on Thursday, August 13, 2015, at the company's headquarters in Emeryville, California. INVESTOR RELATIONS LeapFrog...

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