LeapFrog 2002 Annual Report Download - page 96

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LEAPFROG ENTERPRISES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(In thousands, except share, per share and percent data)
The Company has also approved nonrecourse loans to employees, upon termination of employment with the
Company, for the exercise of vested stock options. The nonrecourse notes are secured only by the underlying
Class A common stock purchased with the notes. Interest is payable to the Company on a full recourse basis and
accrues at rates ranging from 5.5% to 10.0%. Both principal and accrued interest are due in full on the earlier of
(1) December 31, 2006 and (2) 120 days following an initial public offering (November 22, 2002). At December
31, 2002 and 2001, $-0- and $986, respectively, were outstanding under these nonrecourse notes. The Company
recorded $-0- and $217 of compensation expense for these notes in 2002 and 2001, respectively.
The Company was owed $347 and $424 at December 31, 2002 and 2001, respectively, for accrued interest
under the above stockholder notes.
18. Equity Participation Plan
Effective in March 2000, the Company adopted the 2000 Employee Equity Participation Plan (the “Equity
Plan”) whereby participants were, subject to vesting and forfeiture rules, entitled to receive in cash the
appreciation in value of a vested right. Participants did not own actual shares of the Company. Vesting in the
Equity Plan is generally 25% on the one-year anniversary date and monthly for the remaining three years.
In 2002, all existing, unexercised rights under the Equity Plan were converted into non-qualified stock
options, and the plan was terminated in July 2002. At December 31, 2002 and 2001, there were -0- and 981,872,
rights outstanding, respectively.
The Company recognized $1,341, $1,265 and $0 of compensation expense in connection with the Equity
Plan for the years ended 2002, 2001 and 2000, respectively.
19. Net Income (Loss) Per Share
The Company follows the provisions of SFAS No. 128, Earnings Per Share (“SFAS 128”), which requires
the presentation of basic net income (loss) per common share and diluted net income (loss) per common share.
Basic net income (loss) per common share excludes any dilutive effects of options, warrants and convertible
securities.
F-27