LeapFrog 2012 Annual Report Download - page 117

Under the policy, where a transaction has been identified as a related-person transaction, management
must present information regarding the proposed related-person transaction to our board of directors for
consideration and approval or ratification. The presentation must include a description of, among other things,
the material facts, the interests, direct and indirect, of the related persons, the benefits to LeapFrog of the
transaction and whether any alternative transactions were available. In considering related-person transactions,
the board takes into account the relevant available facts and circumstances including, but not limited to (a) the
risks, costs and benefits to LeapFrog, (b) the impact on a director’s independence if the related person is a
director, immediate family member of a director or an entity with which a director is affiliated, (c) the terms
of the transaction, (d) the availability of other sources for comparable services or products and (e) the terms
available to or from, as the case may be, unrelated third parties or to or from employees generally. If a
director has an interest in the proposed transaction, the director must recuse himself or herself from the
deliberations and approval. The policy requires that, in determining whether to approve, ratify or reject a
related-person transaction, the board of directors must look at, in light of known circumstances, whether the
transaction is in, or is not inconsistent with, the best interests of LeapFrog and its stockholders, as the board
of directors determines in the good-faith exercise of its discretion.
Certain Related-Person Transactions
In 2012, we purchased software products and support services from Oracle Corporation and its affiliated
entities totaling approximately $2.9 million. According to a Schedule 13G filed with the SEC on February 14,
2013, Lawrence J. Ellison, Chief Executive Officer of Oracle Corporation, beneficially owned as of that date
approximately 23.9% of Oracle Corporation’s outstanding common stock. Mollusk Holdings is an entity
controlled by Mr. Ellison. As of March 31, 2013, Mr. Ellison may be deemed to have had or shared the power
to direct the voting and disposition and, therefore, to have beneficial ownership, of 1,167,893 shares of our
Class A common stock, which represents approximately 1.1% of the combined voting power of our Class A
common stock and Class B common stock and would, therefore, not be considered a ‘‘related person’’ under
SEC rules. During 2012, however, and at the time that certain of the transactions described above occurred,
Mr. Ellison’s beneficial ownership was as high as 3,750,000 shares of our Class A common stock and
6,717,893 shares of our Class B common stock, which represented at such time approximately 42.72% of the
combined voting power of our Class A common stock and Class B common stock, thus making him a
‘‘related person’’ under SEC rules.
STOCKHOLDER COMMUNICATION WITH DIRECTORS
LeapFrog’s board of directors has adopted a formal process by which stockholders may communicate
with the board of directors or any of its directors, including the Chairman, or to the non-management or
independent directors generally. Stockholders and other interested parties who wish to communicate with 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. The board of directors has
directed that all communications will be compiled by our Corporate Secretary and submitted to the board of
directors or the individual directors on a periodic basis. These communications will be reviewed by our
Corporate Secretary, who will determine whether they should be presented to the board of directors. The
purpose of this screening is to allow the board of directors to avoid having to consider irrelevant or
inappropriate communications (such as advertisements and solicitations). The screening procedures have been
approved by a majority of the non-management directors of the board of directors. Directors may at any time
request that we forward to them immediately all communications received by us. All communications directed
to the audit committee in accordance with the procedures set forth in this paragraph that relate to accounting,
internal accounting controls or auditing matters involving LeapFrog will be promptly and directly forwarded
to the audit committee. A summary of these communication procedures is posted on our website at
www.leapfroginvestor.com under the heading ‘‘Corporate Governance.’’
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