LeapFrog 2005 Annual Report Download - page 149
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CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
Since April 2004, we have been a subsidiary of Mollusk Holdings, LLC, an entity controlled by Lawrence J.
Ellison, which owns a majority of our voting shares. In August 2005, we entered into a software capital lease
agreement with Oracle Corporation for a new enterprise resource planning (ERP) system, Oracle 11i. The total
commitment of the lease, which expires on December 31, 2007, is $1,566,000. As of December 31, 2005,
Lawrence J. Ellison, the Chief Executive Office of Oracle Corporation, may be deemed to have or share the
power to direct the voting and disposition, and therefore to have beneficial ownership of approximately
16,500,000 shares of our Class B common stock, which represents approximately 53% of the combined voting
power of our Class A common stock and Class B common stock. For a more complete discussion of Mr.
Ellison’s beneficial ownership of our common stock, see “Security Ownership of Certain Beneficial Owners and
Management.” Jeffrey Berg, a former member of our board of directors who resigned in February 2005, serves
on the board of directors of Oracle Corporation.
In 2005, LeapFrog paid Pillar Data Systems, Inc. a total of $155,000 in equipment fees. Mr. Ellison is the
majority stockholder in Pillar Data Systems, Inc.
In 2005, LeapFrog paid the Milken Institute a total of $125,000 in conference registration and sponsorship
fees in 2005.
We are currently involved in a dispute with Mounte LLC arising out of a 2002 tax sharing agreement
between LeapFrog and Knowledge Universe, Inc., the predecessor in interest of Mounte LLC. We are claiming a
$635,000 refund of amounts we previously paid under the agreement, while Mounte LLC is claiming we owe it
an additional payment of approximately $1,200,000. Mounte LLC is indirectly controlled by Michael R. Milken,
Lowell J. Milken and Lawrence J. Ellison, who own a majority of our voting shares.
We believe that our board of directors will take such action as is necessary to comply with applicable
corporate law in connection with any transactions with affiliates, including in appropriate cases obtaining
approval by our independent directors.
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