LeapFrog 2002 Annual Report Download - page 91

LEAPFROG ENTERPRISES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(In thousands, except share, per share and percent data)
Voting
The Class A stockholders are entitled to one vote per share and the Class B stockholders are entitled to ten
votes per share.
Liquidation
Class A and B common stockholders are equally entitled to all assets of the Company available for
distribution.
Initial Public Offering
In July 2002, the Company raised $115.1 million, after offering expenses and underwriters’ commissions, in
its initial public offering of 9,960,000 shares of its Class A common stock at a price to the public of $13.00 per
share. The Company used $34.1 million of the net proceeds to repay the entire balance outstanding under its
revolving credit facility in July 2002.
Conversion of Stock Appreciation Rights
Prior to its initial public offering, the Company granted stock appreciation rights under their Amended and
Restated Employee Equity Participation Plan,
In February 2002, the Company converted 337,500 stock appreciation rights into options to purchase an
aggregate of 337,500 shares of Class A common stock. The Company recognized approximately $820 in expense
through February, 2002 related to the vested portion of these rights. Deferred compensation of $868 related to the
unvested portion will be amortized to expense through the third quarter of 2005 as the options vest.
On July 25, 2002, the Company converted 1,585,580 stock appreciation rights into options to purchase an
aggregate of 1,585,580 shares of Class A common stock. The expense related to the conversion of the vested
stock appreciation rights was $1,562 through July 2002 based on vested rights with respect to 192,361 shares of
Class A common stock outstanding as of July 25, 2002 at the Company’s initial public offering price of $13 per
share. The Company’s deferred compensation expense in connection with the conversion of 1,310,594 unvested
stock appreciation rights held by employees converted to options to purchase 1,310,594 shares of Class A
common stock, was $4,033 The Company will recognize this expense over the remaining vesting period of the
options into which the unvested rights are converted. Deferred compensation related to the unvested portion will
be amortized to expense as the options vest. To the extent any of the unvested options are forfeited, the actual
expense recognized could be lower than currently anticipated. Concurrently with the initial public offering, the
Company stopped granting stock appreciation rights under the Employee Equity Participation Plan.
Stock Option Plans
The Company, with the agreement of its stockholders and directors, began the granting of options to
employees, directors and consultants in 1997. The Company adopted a Stock Option Plan (the “Plan”) in March
1999, which covered the conditions of options previously granted. Under the Plan, employees, outside directors
and consultants are able to participate in the Company’s future performance through awards of incentive stock
options and nonqualified stock options. The number of shares reserved and available for grant and issuance
pursuant to the Plan is 15,000,000 shares.
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