LeapFrog 2006 Annual Report Download - page 131
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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 2006 we purchased software products and support
services from Oracle Corporation totaling $390,693. As of December 31, 2006, 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 16,750,000 shares of our Class B
common stock, which represents approximately 26.3% 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.”
In 2006, we paid Pillar Data Systems, Inc. a total of $302,988 in equipment fees. Mr. Ellison is the majority
stockholder of Pillar Data Systems, Inc.
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 beneficially own a majority of our voting shares. The parties are
awaiting the results of a California state audit of Mounte LLC before proceeding with discussions.
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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