Exhibit 10.13

 

EMPLOYMENT AGREEMENT

 

THIS EMPLOYMENT AGREEMENT, entered into as of April 20, 2004 (“Agreement”), is
made between LeapFrog Enterprises, Inc., a Delaware corporation (the “Company”),
and Thomas J. Kalinske (“Executive”) (collectively with the Company, the
“Parties”).

 

RECITALS:

 

WHEREAS, the Parties entered into that certain Employment Agreement dated April
1, 2002 (the “ 2002 Employment Agreement”); and

 

WHEREAS, the Parties mutually wish to replace the 2002 Employment Agreement with
this Agreement and to continue Executive’s employment with the Company under the
terms and conditions hereinafter set forth.

 

AGREEMENT:

 

NOW, THEREFORE, in consideration of the mutual promises and subject to the terms
and conditions set forth herein, the Parties agree as follows:

 

SECTION 1. EMPLOYMENT

 

1.1 Position, Duties, Responsibilities, Authority. The Company hereby employs
Executive as the Chief Executive Officer of the Company for the Employment Term
(as defined below) and on the terms and conditions hereinafter set forth. In
such capacity, Executive shall have such duties and authority as are customary
for, and commensurate with such position, and such duties as the Company’s Board
of Directors (the “Board”) may prescribe. Executive shall, to the best of
Executive’s ability, carry out such responsibilities and duties in an efficient,
trustworthy, ethical, effective and businesslike manner. Executive’s performance
of services under this Agreement shall be rendered in the San Francisco/Oakland
Bay Area or at any other location or locations as Executive and the Board shall
agree from time to time. Executive shall perform Executive’s responsibilities
hereunder for the Company and/or such affiliates of the Company as the Board may
designate from time to time.

 

1.2 Exclusive Employment. During the Employment Term, Executive shall devote all
of his business time to his duties and responsibilities set forth in this
Section 1. Without limiting the generality of the foregoing, during the
Employment Term, Executive shall not, without the prior written approval of the
Board, render services of a business, professional or commercial nature to any
other person, firm or corporation, whether for compensation or otherwise, except
that Executive may engage in civic, philanthropic and community service
activities so long as such activities do not interfere with Executive’s ability
to comply with this Agreement and are not otherwise in conflict with the
policies or interest of the Company, and Executive may serve on the Board of
Directors of any or all of the companies on which he held a seat prior to the
date of this agreement and any other company approved by the Board.

--------------------------------------------------------------------------------

SECTION 2. COMPENSATION AND OTHER BENEFITS.

 

In consideration of Executive’s employment, and except as otherwise provided
herein, Executive shall receive from the Company the compensation and benefits
described in this Section 2. Except as otherwise specified in this Agreement,
the compensation and employee benefits payable to Executive pursuant to this
Agreement may be changed only by the written agreement of the parties. Executive
authorizes the Company to deduct and withhold from all compensation to be paid
to him any and all sums required to be deducted or withheld by the Company
pursuant to the provisions of any federal, state, or local law, regulation,
ruling, or ordinance, including, but not limited to, income tax withholding and
payroll taxes.

 

2.1 Base Compensation and Bonus. During the Employment Term, the Company shall
pay to Executive, and Executive shall be entitled to receive from the Company,
as a base salary for the full-time employment referred to in Section 1 hereof,
compensation (“Base Compensation”) at the rate of Forty-One Thousand Two Hundred
and Fifty Dollars ($41,250) per calendar month (a rate equivalent to $495,000
per annum), less standard payroll deductions and tax withholdings. Said Base
Compensation shall be payable in intervals not less than twice a month in
accordance with Company payment policy for executives in effect from time to
time. Executive’s Base Compensation will be subject to adjustment from time to
time as determined by the Board.

 

2.2 Bonuses.

 

2.2.1 Guaranteed Bonus. Executive shall receive an annual guaranteed bonus in
the amount of Sixty-Seven Thousand Five Hundred Dollars ($67,500) (the
“Guaranteed Bonus”), less standard payroll deductions and tax withholdings, so
long as he is an active employee of the Company as of December 31 of the bonus
year. Except as provided in Sections 3.6 and 3.7 below, if Executive is not
employed by the Company, for any reason whatsoever, as of December 31 of the
bonus year, he will not have earned the Guaranteed Bonus, or any pro-rata
portion of the Guaranteed Bonus for that year. The Company shall pay the
Guaranteed Bonus to Executive on or before February 15 of the year following the
year in which the Guaranteed Bonus was earned.

 

2.2.2 Incentive Bonus. Executive is eligible to receive an annual discretionary
bonus of up to 100% of Executive’s then-current annual Base Compensation (the
“Incentive Bonus”) less $67,500, based on the Company’s performance and
Executive’s achievement of performance objectives established in writing by the
Company’s Board of Directors (the “Board”) in consultation with Executive, which
achievement shall be determined by the Board in its sole good faith discretion.
Except as provided in Sections 3.6 and 3.7 below, if Executive is not employed
by the Company, for any reason whatsoever, as of December 31 of the bonus year,
he will not have earned the Incentive Bonus, or any pro-rata portion of the
Incentive Bonus for that year. Payment of the Incentive Bonus shall be subject
to standard payroll deductions and tax withholdings. The Company shall pay the
Incentive Bonus to Executive within ten (10) days after the date the amount of
the Incentive Bonus is calculated, but in any case, not later than February 15
of the year following the year in which the Incentive Bonus was earned.

 

2

--------------------------------------------------------------------------------

2.3 Other Benefits. Executive shall be entitled to standard Company employee
benefits for senior management, including group medical and dental insurance
coverage for Executive, Executive’s spouse and dependent children, disability
insurance coverage and sick leave, pursuant to the Company’s benefits plans,
policies and guidelines, including but not limited to contribution requirements
for dependent coverage, as approved by the Board from time to time. In addition,
Executive shall be entitled to receive:

 

(i) Automobile Allowance. During the Employment Term, Executive shall be
entitled to receive an automobile allowance of $600 per month, less standard
payroll deductions and tax withholdings.

 

(ii) Vacation. Executive shall be entitled to four (4) weeks paid vacation per
calendar year, accrued in equal semi-monthly increments of 6.67 hours, with the
total accrued and unused vacation balance (including accrued vacation carried
over from previous years) capped at seven (7) weeks. Vacation accrual will cease
when the maximum seven (7) week vacation balance is reached and will resume when
the balance falls below the maximum amount. Executive shall plan and take
vacation consistent with Executive’s duties and obligations hereunder and in
accordance with Company vacation and leave policies.

 

(iii) Life Insurance. The Company shall contribute up to twenty thousand dollars
($20,000) each year during Executive’s employment for the cost of premiums to
obtain and maintain during the Employment Term one or more policies of term life
insurance providing an aggregate benefit in the amount of $2,000,000. Executive
shall have the right to designate the beneficiary or beneficiaries of the
benefit payable upon death pursuant to such policy or policies and may transfer
ownership of such policy or policies to any life insurance trust, family trust
or other trust.

 

2.4 Stock Options. The Parties acknowledge that by grant dated April, 11, 2002,
the Company granted Executive a non-qualified stock option to purchase 250,000
shares of Company common stock at an exercise price of $12.50 per share (the
“First Option”), pursuant to the terms of the Company’s 2002 Equity Incentive
Plan (the “Plan”). As of the date of this Agreement, 152,777 shares of the First
Option are vested and have been exercised; 20,834 shares of the First Option are
vested and exercisable; and 76,389 shares of the First Option are unvested.
These remaining unvested First Option shares shall continue to vest at the rate
of 6,944 shares per month until either: (1) the First Option becomes fully
vested or (2) the First Option ceases to vest pursuant to the terms of the Plan.

 

The Parties further acknowledge that by grants dated April 20, 2004, the Company
granted Executive two options to purchase a total of 190,000 shares of the
Company’s common stock at an exercise price of $22.25 per share (the “Second and
Third Options”), pursuant to the terms of the Plan. The Second and Third Options
shall vest over a four-year period, with 1/48th of the options vesting monthly
for Forty Eight (48) months, commencing on April 6, 2004 The Second and Third
Options shares shall continue to vest until either (1) the Second and Third
Options become fully vested or (2) the Second and Third Options cease vesting
pursuant to the terms of the Plan. The First, and Second and Third Options shall
be subject to the terms and conditions of the Plan and the corresponding stock
option grant notices and stock option agreements.

 

3

--------------------------------------------------------------------------------

SECTION 3. EMPLOYMENT TERM AND TERMINATION.

 

3.1 Term. Executive’s term of employment under this Employment Agreement shall
commence as of the date hereof and shall terminate on April 20, 2008, unless
terminated earlier pursuant to Sections 3.2, 3.3, 3.4 or 3.5 hereof (“Employment
Term”).

 

3.2 Termination by Death. Executive’s term of employment will terminate upon the
death of Executive; provided that the Company shall pay to the estate of the
Executive any unpaid Base Compensation or Bonus to the extent earned at the date
of death, and any amounts payable pursuant to the Company’s employee benefit
plans in accordance with such plans.

 

3.3 Termination Upon Permanent Disability. Executive’s term of employment shall
terminate upon the “permanent disability” of Executive. As used herein, the term
“permanent disability” shall mean a physical or mental disability that renders
Executive unable to perform his normal duties for the Company for a period of
120 consecutive days as determined by a licensed physician. The Company and
Executive or his legal representative shall use their best efforts to agree on
the physician to determine permanent disability. If they cannot agree within ten
(10) days after the first party makes a written proposal stating the name of a
physician, then the other party shall select a physician within ten (10) days
and within ten (10) days thereafter the two physicians shall select a third
physician. All such physicians must be board certified in the medical area
giving rise to the alleged disability. The determination of the third physician
shall be final and binding. If one party fails to select a physician within said
ten (10) day period, the physician named by the other party shall make the
determination of permanent disability. Upon termination of Executive for
permanent disability, the Company shall pay to Executive any unpaid Base
Compensation or Bonus to the extent earned at the date of termination for
permanent disability, any amounts payable by the Company at the date of
termination for permanent disability under the Company’s disability policies,
and any amounts payable by the Company pursuant to the Company’s other employee
benefit plans in accordance with such plans.

 

3.4 Termination By Executive. Executive shall have the right to terminate his
employment with the Company, with or without Good Reason, at any time by
providing notice to the Company.

 

3.5 Termination By the Company for Cause. The Company shall have the right to
terminate the employment of Executive with or without Cause. Before terminating
Executive’s employment for Cause, it must first deliver to him a written notice
specifying such Cause. Executive shall be entitled to at least ten (10) days’
prior written notice of the Company’s intention to terminate his employment for
any Cause, specifying the grounds for such termination. If the Company exercises
such right, its obligation under this Agreement to make any further payments to
Executive, other than as set forth in Section 3.6 below, shall thereupon cease
and terminate. For purposes of this Agreement, a termination shall be for
“Cause” if the Executive shall: (i) commit an act of fraud, embezzlement or
misappropriation involving the Company; (ii) be convicted by a court of
competent jurisdiction of, or enter a plea of guilty or no

 

4

--------------------------------------------------------------------------------

contest to, any felony involving moral turpitude or dishonesty; (iii) commit an
act, or fail to commit an act, involving the Company which amounts to, or with
the passage of time would amount to, willful misconduct, wanton misconduct,
gross negligence or a breach of this Agreement and which results or will result
in significant harm to the Company; or (iv) willfully fail to perform the
responsibilities and duties specified herein for a period of ten (10) days
following receipt of written notice from the Company which specifically
describes past instances of willful failure of performance; provided that in the
case of (iv) above, during the ten (10) day period following receipt of such
notice, Executive shall be given the opportunity to take reasonable steps to
cure any such claimed past failure of performance.

 

3.6 Compensation and Benefits Upon Termination. In the event that Executive’s
employment with the Company terminates for any reason, the Company shall pay to
Executive: (1) all of his accrued and unused vacation and unpaid Base
Compensation earned through the last day of employment (the “Separation Date”),
and (2) any bonus earned but unpaid as of the Separation Date (i.e., in the
event that Executive has worked through December 31 of the previous year and
earned a bonus, but such bonus has not been paid as of the Separation Date).

 

If the Company terminates Executive’s employment for any reason other than the
death or permanent disability of Executive, or Cause, or if Executive resigns
for Good Reason, and Section 3.7 hereof is not applicable to such termination or
resignation, and Executive provides the Company with an effective general
release of claims against the Company and its officers, directors, employees,
shareholders, agents, and affiliated entities, in a form required by the Company
(the “Release”), the Company shall provide Executive with the following
severance benefits:

 

(i) Cash Severance. The Company shall pay Executive, in a lump sum within thirty
(30) days after the Separation Date, an amount equivalent to (a) his annual Base
Compensation in effect on the Separation Date, (b) his annual Guaranteed Bonus
and (c) a pro rata portion of the Incentive Bonus Executive would, but for the
termination, otherwise have been entitled to receive in the year of the
Separation Date (the “Severance Payment”). The Severance Payment shall be
subject to required payroll deductions and withholdings.

 

(ii) COBRA Premiums. If Executive timely elects to continue his Company-provided
group health insurance coverage pursuant to federal COBRA law and, if
applicable, state insurance laws, the Company shall also reimburse Executive for
the cost of the COBRA premiums for him and his dependents (if applicable) to
continue health insurance coverage at the same level of coverage for him and his
dependents (if applicable) in effect as of the Separation Date for a period of
twelve (12) months after the Separation Date. Executive’s entitlement to such
reimbursement shall cease before the end of the twelve-month post-employment
period if and when Executive becomes eligible for group health insurance with a
subsequent employer. Executive shall notify the Company’s vice president of
Human Resources in writing immediately upon becoming eligible for health
insurance coverage with a subsequent employer.

 

(iii) Stock Option Acceleration. All unvested stock options held by Executive
shall accelerate vesting such that the number of shares that would otherwise
vest within a twelve-month period under each option grant shall become fully
exercisable as of the Separation Date and shall be exercisable for that specific
period following the end of the Severance Period as provided under the
applicable stock option agreements in the case of termination of employment.

 

5

--------------------------------------------------------------------------------

In addition, if Executive’s employment with the Company under this Agreement is
terminated for any reason other than the death or permanent disability of
Executive, or Cause, and if the Executive has satisfactorily performed his
duties and responsibilities under this Agreement, the Company will negotiate in
good faith with Executive regarding a subsequent consulting or other
relationship with the Company, which, if mutually agreed upon, would allow
Executive to continue to vest under the terms of the First Option, and Second
and Third Options.

 

3.7 Compensation Payable in the Event of a Change of Control. If, in connection
with a Change of Control transaction as defined below, either the employment of
Executive is terminated by the Company for any reason other than the death or
permanent disability of Executive or Cause, within ninety (90) days prior to or
within twelve (12) months after a Change of Control transaction or Executive
resigns for Good Reason within such period, and Executive provides the Company
with the Release described in Section 3.6 above, the Company shall pay to
Executive, within five (5) business days following the consummation of a Change
of Control transaction, an amount equal to 1.5 times Executive’s Base
Compensation and Guaranteed and Incentive Bonuses paid for the immediately
preceding fiscal year of the Company. Executive also shall receive COBRA
premiums as provided in Section 3.6(ii). In addition, notwithstanding anything
to the contrary contained herein or in any stock option or similar agreement to
which Executive is a party, upon the occurrence of a Change of Control,
regardless of whether Executive’s employment is terminated, all of Executive’s
unvested stock options shall immediately vest and become exercisable in full
(or, if applicable, all repurchase obligations of the Company shall immediately
lapse) and such options shall remain exercisable for the period specified in the
applicable option agreement. For purposes of this Agreement, a “Change of
Control” of the Company shall mean (i) any “person” (as such term is used in
Section 13(d) of the Securities Exchange Act of 1934, as amended, the “Exchange
Act”) other than an Affiliated Purchaser becomes the “beneficial owner” (as
defined in Rule 13d-3 under the Exchange Act) after the date of this Agreement
of securities of the Company representing at least a majority of the combined
voting power of the Company’s outstanding securities ordinarily having the right
to vote at elections of directors; (ii) the Company is merged or consolidated
with any person other than an Affiliated Purchaser and as a result of such
merger or consolidation the beneficial owners of securities of the Company
before such merger or consolidation hold immediately after such merger or
consolidation less than a majority of the combined voting power of the
outstanding securities of the surviving or resulting company ordinarily having
the right to vote at elections of directors, or (iii) the Company sells or
transfers all or substantially all of its assets to a person other than an
Affiliated Purchaser. For purposes of the foregoing, an “Affiliated Purchaser”
means (i) any person that is a beneficial owner of securities of the Company on
or before the date of this Agreement and/or any affiliate thereof (including,
without limitation, the members of Frogpond, LLC), and/or (ii) any employee
benefit plan, sponsored or maintained by the Company or any affiliate, or any
group of persons which includes such a plan.

 

3.8 Definition of Good Reason. For purposes of this Agreement, Executive’s
termination of employment with the Company shall be deemed for “Good Reason” if
any of the

 

6

--------------------------------------------------------------------------------

following events occur without Executive’s express written consent and Executive
resigns within six months after such event occurring, but only if Executive
provides the Company with written notice of his belief that any one of the
following specific events has occurred and during the thirty (30) day period
following receipt of such notice, the Company fails to cure any such event:

 

(a) The assignment to Executive by the Company of duties inconsistent with, or a
substantial alteration in the nature or status of, Executive’s responsibilities
as provided in Section 1.1, other than the assignment of more senior duties, or
the failure to elect or re-elect Executive as a director of the Company or the
removal of him from any such positions;

 

(b) A reduction by the Company in Executive’s cash compensation pursuant to
Section 2.1 or as such compensation may have been increased during the
Employment Term;

 

(c) Any failure by the Company to continue in effect without substantial adverse
change any compensation, incentive, welfare or benefit plan or arrangement, in
which Executive is participating at the time of a Change of Control (or any
other plans providing Executive with substantially similar benefits)
(hereinafter referred to as “Benefit Plans”), or the taking of any action by the
Company which would adversely affect, either as to the past or prospectively,
Executive’s participation in or materially reduce or deprive Executive of his
benefits that were provided under any such Benefit Plan at the time of a Change
of Control; unless an equitable substitute arrangement (embodied in an ongoing
substitute or alternative Benefit Plan) has been made for the benefit of
Executive with respect to the Benefit Plan in question;

 

(d) Relocation to any place more than 25 miles from the office regularly
occupied by Executive, except for required travel by Executive on the Company’s
business to an extent substantially consistent with past practice;

 

(e) Any material breach by the Company of any provision of this Agreement or the
failure by the Company or by any successor or assign of the Company (whether by
operation of law or otherwise, including any surviving company in a merger or
similar transaction involving the Company), within ten (10) business days after
written request to the Company or any successor or assign of the Company by
Executive following a Change of Control to deliver to Executive an agreement
expressly reaffirming its obligations under or agreeing to assume and comply
with the obligations of the Company under this Agreement.

 

3.9 Limitation on Payments. If any payment or benefit Executive would receive
pursuant to this Agreement (“Payment”) would (i) constitute a “parachute
payment” within the meaning of Section 280G of the Internal Revenue Code of
1986, as amended (the “Code”), and (ii) but for this sentence, be subject to the
excise tax imposed by Section 4999 of the Code (the “Excise Tax”), then such
Payment shall be reduced to the Reduced Amount. The “Reduced Amount” shall be
either (x) the largest portion of the Payment that would result in no portion of
the Payment being subject to the Excise Tax or (y) the largest portion, up to
and including the total, of the Payment, whichever amount, after taking into
account all applicable federal, state

 

7

--------------------------------------------------------------------------------

and local employment taxes, income taxes, and the Excise Tax (all computed at
the highest applicable marginal rate), results in the Executive’s receipt, on an
after-tax basis, of the greater amount of the Payment. If a reduction in
payments or benefits constituting “parachute payments” is necessary so that the
Payment equals the Reduced Amount, reduction shall occur in the following order
unless Executive elects in writing a different order (provided, however, that
such election shall be subject to Company approval if made on or after the date
on which the event that triggers the Payment occurs): reduction of cash
payments; cancellation of accelerated vesting of stock options; reduction of
employee benefits. In the event that acceleration of vesting of stock option
compensation is to be reduced, such acceleration of vesting shall be cancelled
in the reverse order of the date of grant of Executive’s stock options unless
Executive elects in writing a different order for cancellation

 

The accounting firm engaged by the Company for general audit purposes as of the
day prior to the Separation Date shall perform the foregoing calculations. The
Company shall bear all expenses with respect to the determinations by such
accounting firm required to be made hereunder.

 

The accounting firm engaged to make the determinations hereunder shall provide
its calculations, together with detailed supporting documentation, to the
Company and Executive within fifteen (15) calendar days after the date on which
Executive’s right to a Payment is triggered (if requested at that time by the
Company or Executive) or such other time as requested by the Company or
Executive. If the accounting firm determines that no Excise Tax is payable with
respect to a Payment, either before or after the application of the Reduced
Amount, it shall furnish the Company and Executive with an opinion reasonably
acceptable to Executive that no Excise Tax will be imposed with respect to such
Payment. Any good faith determinations of the accounting firm made hereunder
shall be final, binding and conclusive upon the Company and Executive.

 

SECTION 4. BUSINESS EXPENSES.

 

The Company shall pay for or reimburse Executive for all reasonable business
expenses incurred by Executive in the performance of his duties hereunder, upon
submission to the Company in accordance with Company policy of a written
accounting of such expenses, which accounting shall include an itemized list of
all expenses incurred, the business purposes for which such expenses were
incurred, and such receipts as Executive reasonably has been able to obtain.

 

SECTION 5. PROPRIETARY INFORMATION AND INVENTIONS AGREEMENT.

 

Employee shall execute and abide by the Company’s Proprietary Information and
Inventions Agreement attached hereto as Exhibit A (“Proprietary Information
Agreement”). Employee acknowledges that his obligations under the Proprietary
Information Agreement shall survive the termination of his employment with the
Company.

 

8

--------------------------------------------------------------------------------

SECTION 6. COVENANTS OF EXECUTIVE. Executive agrees as follows:

 

6.1 Company Policies. That at all times during his employment hereunder, he
shall comply with the Company’s employee manual and other policies and
procedures reasonably established by the Company from time to time concerning
various matters, including but not limited to management, supervision,
recruiting, diversity, and sexual harassment.

 

6.2 Non-competition. That during his employment hereunder, he shall not directly
or indirectly, individually or together or through any affiliate or other
person, firm, corporation or entity engage in any other business activity which
would materially interfere with the performance of his duties hereunder
including, but not limited to, engaging in any Competitive Business with that
conducted by Company. For purposes of this Section 6.2, “Competitive Business”
shall mean the toy/game and children’s educational and entertainment products
business as conducted or contemplated to be conducted by the Company during the
Employment Term.

 

6.3 Non-solicitation. That for a period of one year following a termination of
employment other than following a Change of Control, he shall not, directly or
indirectly, individually, or together through any other person, firm,
corporation or entity, (i) approach, counsel, solicit or attempt to induce any
member of senior management of the Company (defined as an officer with a title
of vice president or higher) who is then in the employ of the Company, to leave
their employ, or employ or attempt to employ any such person, or (ii) aid or
counsel any other person, firm, corporation or entity to do any of the above.
And that for a period of one year following a termination of employment other
than following a Change of Control, he shall not, directly or indirectly,
individually, or together through any other person, firm, corporation or entity,
(i) enter into a business relationship with any material customer of the Company
relating to the children’s educational and entertainment products business in
which the Company is engaged at the time of termination of employment or (ii)
discourage any person or entity which is a customer of the Company from
continuing its business relationship with the Company.

 

6.4 Cooperation. That, for a period of three years following his termination of
employment under this Agreement, he shall, upon Company’s reasonable request and
in good faith and with his best efforts, subject to his reasonable availability,
cooperate with and voluntarily (without subpoena or other legal compulsion)
provide complete and accurate information to the Company in any dispute,
controversy, or litigation in which Company may be involved and with respect to
which Executive obtained knowledge while employed by the Company or any of its
affiliates, successors, or assigns, including, but not limited to, his
participation in any court or arbitration proceedings, giving of testimony,
signing of truthful affidavits, or such other personal cooperation as counsel
for the Company shall request. Any such activities shall be scheduled, to the
extent reasonably possible, to accommodate Executive’s business and personal
obligations at the time. The Company shall pay Executive’s reasonable travel and
incidental out-of-pocket expenses incurred in connection with any such
cooperation, as well as the reasonable costs of an attorney Executive engages to
advise him in connection with the foregoing.

 

6.5 Remedies. Employee agrees that the Company would be irreparably harmed in
the event that Subsections 6.2 or 6.3 of the Agreement are violated and,
therefore, in the event of any actual or threatened violation of either of these
Subsections, the Company will be entitled in addition to any other remedies to
which it may be entitled, at law or in equity, to a temporary restraining order
and preliminary and permanent injunctive relief and to specifically enforce the
terms and provisions hereof without the necessity of posting bond or proving
damages.

 

9

--------------------------------------------------------------------------------

SECTION 7. REPRESENTATIONS BY EXECUTIVE.

 

Executive represents and warrants that he is free to enter into and perform each
of the terms and conditions of this Agreement; and that his execution and/or
performance of all his obligations under this Agreement does not and will not
violate or breach any other agreement between Executive and any other person or
entity. Executive acknowledges that but for this representation and warranty,
the Company would not agree to enter into this Agreement.

 

SECTION 8. ASSIGNABILITY.

 

This Agreement is binding upon and inures to the benefit of the parties and
their respective heirs, executors, administrators, personal representatives,
successors and assigns. The Company may assign its rights or delegate its duties
under this Agreement at any time and from time to time. However, the parties
acknowledge that the availability of Executive to perform services and the
covenants provided by Executive hereunder have been a material consideration for
the Company to enter into this Agreement. Accordingly, Executive may not assign
any of his rights or delegate any of his duties under this Agreement, either
voluntarily or by operation of law, without the prior written consent of the
Company, which may be given or withheld by the Company in its sole and absolute
discretion.

 

SECTION 9. NOTICES.

 

All notices, requests, demands or other communications hereunder shall be deemed
to have been duly given when delivered, addressed as follows (or at such other
address is the addressed party may have substituted by notice pursuant to this
Section 9):

 

If to Executive:

   Thomas J. Kalinske      175 Fair Oaks Lane      Atherton, CA 94027     
George Short      Hatch & Parent, A Law Corporation      21 East Carrillo Street
     Santa Barbara, CA 93101

If to the Company:

   Leapfrog Enterprises, Inc.      6401 Hollis Street, Suite 150     
Emeryville, CA 94608      Attn: Legal Department

 

10

--------------------------------------------------------------------------------

SECTION 10. ARBITRATION.

 

To ensure the timely and economical resolution of disputes that arise in
connection with Executive’s employment with the Company, Executive and the
Company agree that any and all disputes, claims, or causes of action arising
from or relating to the enforcement, breach, performance, negotiation,
execution, or interpretation of this Agreement, Executive’s employment, or the
termination of Executive’s employment, shall be resolved to the fullest extent
permitted by law by final, binding and confidential arbitration, by a single
arbitrator, in San Francisco, California, conducted by Judicial Arbitration and
Mediation Services, Inc. (“JAMS”) under the then applicable JAMS employment
rules. By agreeing to this arbitration procedure, both Executive and the Company
waive the right to resolve any such dispute through a trial by jury or judge or
administrative proceeding. The arbitrator shall: (a) have the authority to
compel adequate discovery for the resolution of the dispute and to award such
relief as would otherwise be permitted by law; and (b) issue a written
arbitration decision, to include the arbitrator’s essential findings and
conclusions and a statement of the award. The arbitrator shall be authorized to
award any or all remedies that Executive or the Company would be entitled to
seek in a court of law. The Company shall pay all JAMS’ arbitration fees in
excess of the amount of court fees that would be required if the dispute were
decided in a court of law. Nothing in this Agreement is intended to prevent
either Executive or the Company from obtaining injunctive relief in court to
prevent irreparable harm pending the conclusion of any such arbitration.
Notwithstanding the foregoing, Executive and the Company shall each have the
right to resolve any issue or dispute involving Company trade secrets or
proprietary information or the Company’s or Executive’s intellectual property
rights by court action instead of arbitration.

 

SECTION 11. MISCELLANEOUS.

 

11.1 Entire Agreement. This Agreement contains the full, complete, and exclusive
embodiment of the entire agreement of the parties with regard to the subject
matter hereof and supersedes all prior communications, representations, or
agreements, oral or written, including (without limitation) the 2002 Employment
Agreement, and all negotiations, conversations or discussions between or among
the Parties relating to this Agreement and all past course of dealing or
industry custom. Employee has not entered into this Agreement or employment
relationship in reliance on any representations, written or oral, other than
those contained herein.

 

11.2 Amendment. This Agreement may not be amended except by an instrument in
writing duly executed by the parties hereto.

 

11.3 Applicable Law; Choice of Forum. This Agreement has been made and executed
under, and will be construed and interpreted in accordance with, the laws of the
State of California.

 

11.4 Attorneys’ Fees. In any action or proceeding to enforce or interpret this
Agreement, or arising out of this Agreement, the prevailing party or parties are
entitled to recover a reasonable allowance for fees and disbursements of counsel
and costs of arbitration or suit, to be determined by the court in which the
action or proceeding is brought.

 

11

--------------------------------------------------------------------------------

11.5 Provisions Severable. Every provision of this Agreement is intended to be
severable from every other provision of this Agreement. If any provision of this
Agreement is held to be invalid, illegal or unenforceable, in whole or in part,
such invalidity, illegality or unenforceability shall not affect the other
provisions of this Agreement; and this Agreement shall be construed as if such
invalid, illegal or unenforceable provision had never been contained herein
except to the extent that such provision may be construed and modified so as to
render it valid, lawful, and enforceable in a manner consistent with the intent
of the parties to the extent compatible with the applicable law as it shall then
appear.

 

11.6 Non-Waiver of Rights and Breaches. Any waiver by a party of any breach of
any provision of this Agreement will not be deemed to be a waiver unless it is
in writing, and it shall not be deemed to be a waiver of any subsequent breach
of that provision. or of any breach of any other provision of this Agreement. No
failure or delay in exercising any right, power, or privilege granted to a party
under any provision of this Agreement will be deemed a waiver of that or any,
other right, power or privilege. No single or partial exercise of any right,
power or privilege granted to a party under any provision of this Agreement will
preclude any other or further exercise of that or any other right, power or
privilege.

 

11.7 Gender and Number. Concerning the words used in this Agreement, the
singular form shall include the plural form, the masculine gender shall include
the feminine or neuter gender, and vice versa, as the context requires, and the
word ‘person’ shall include any natural person partnership, corporation,
association, trust, estate or other legal entity.

 

11.8 Headings. The headings of the Sections and Paragraphs of this Agreement am
inserted for ease of reference only, and will have no effect in the construction
or interpretation of this Agreement.

 

11.9 Counterparts. This Agreement and any amendment or supplement to this
Agreement may be executed in two or more counterparts, each of which will
constitute an original but all of which will together constitute a single
instrument. Transmission by facsimile of an executed counterpart signature page
hereof by a party hereto shall constitute due execution and delivery of this
Agreement by such party.

 

11.10 No Mitigation; Payment Obligations Absolute. Executive shall not be
required to mitigate damages or the amount of any payment provided for under
this Agreement by seeking other employment or otherwise, nor shall the amount of
any payment provided for under this Agreement be reduced by any compensation
earned by Executive as a result of employment by another employer. The Company’s
obligations to pay Executive the amounts provided hereunder shall be absolute
and unconditional and shall not be affected by any circumstances, including,
without limitation, any set-off, counterclaim, recoupment, defense or other
right the Company may have against Executive, any of which may be asserted
against Executive in a separate proceeding.

 

12

--------------------------------------------------------------------------------

IN WITNESS WHEREOF, the parties have executed this Agreement effective as of the
date first above written.

 

EXECUTIVE:

/s/ Thomas J. Kalinske

--------------------------------------------------------------------------------

THOMAS J. KALINSKE

COMPANY:

LEAPFROG ENTERPRISES, INC.

By:

 

/s/ Steven B. Fink

--------------------------------------------------------------------------------

Name:

  Steven B. Fink

Title

  Chairman

 

13

--------------------------------------------------------------------------------

EXHIBIT A

 

PROPRIETARY INFORMATION AND INVENTIONS AGREEMENT

 

LEAPFROG ENTERPRISES, INC.

 

EMPLOYEE PROPRIETARY INFORMATION

AND INVENTIONS AGREEMENT

 

In consideration of my employment or continued employment by LEAPFROG
ENTERPRISES, INC. (the “Company”), and the compensation now and hereafter paid
to me, I hereby agree as follows:

 

1. NONDISCLOSURE.

 

1.1 Recognition of Company’s Rights; Nondisclosure. At all times during my
employment and thereafter, I will hold in strictest confidence and will not
disclose, use, lecture upon or publish any of the Company’s Proprietary
Information (defined below), except as such disclosure, use or publication may
be required in connection with my work for the Company, or unless an officer of
the Company expressly authorizes such in writing. I will obtain Company’s
written approval before publishing or submitting for publication any material
(written, verbal, or otherwise) that relates to my work at Company and/or
incorporates any Proprietary Information. I hereby assign to the Company any
rights I may have or acquire in such Proprietary Information and recognize that
all Proprietary Information shall be the sole property of the Company and its
assigns.

 

1.2 Proprietary Information. The term “Proprietary Information” shall mean any
and all confidential and/or proprietary knowledge, data or information of the
Company. By way of illustration but not limitation, “Proprietary Information”
includes (a) trade secrets, inventions, mask works, ideas, processes, formulas,
source and object codes, data, programs, other works of authorship, know-how,
improvements, discoveries, developments, designs and techniques (hereinafter
collectively referred to as “Inventions”); and (b) information regarding plans
for research, development, new products, training, marketing and selling,
business plans, budgets and unpublished financial statements, licenses, prices
and costs, suppliers and customers; and (c) information regarding the skills and
compensation of other employees of the Company.

 

1.3 Third Party Information. I understand, in addition, that the Company has
received and in the future will receive from third parties confidential or
proprietary information (“Third Party Information”) subject to a duty on the
Company’s part to maintain the confidentiality of such information and to use it
only for certain limited purposes. During the term of my employment and
thereafter, I will hold Third Party Information in the strictest confidence and
will not disclose to anyone (other than Company personnel who need to know such
information in connection with their work for the Company) or use, except in
connection with my work for the Company, Third Party Information unless
expressly authorized by an officer of the Company in writing.

 

1.4 No Improper Use of Information of Prior Employers and Others. During my
employment by the Company I will not improperly use or disclose any confidential
information or trade secrets, if any, of any former employer or any other third
party to whom I have an obligation of confidentiality, and I will not bring onto
the premises of the Company any unpublished documents or any property belonging
to any former employer or any other third party to whom I have an obligation of
confidentiality unless consented to in writing by that former employer or
person. I will use in the performance of my duties only information which is
generally known and used by persons with training and experience comparable to
my own, which is common knowledge in the industry or otherwise legally in the
public domain, or which is otherwise provided or developed by the Company.

 

2. ASSIGNMENT OF INVENTIONS.

 

2.1 Proprietary Rights. The term “Proprietary Rights” shall mean all trade
secret, patent, copyright, mask work and other intellectual property rights
throughout the world.

 

2.2 Prior Inventions. Inventions, if any, patented or unpatented, which I made
prior to the commencement of my employment with the Company are excluded from
the scope of this Agreement. To preclude any possible uncertainty, I have set
forth on Exhibit B (Previous Inventions) attached hereto a complete list of all

 

1.

--------------------------------------------------------------------------------

Inventions that I have, alone or jointly with others, conceived, developed or
reduced to practice or caused to be conceived, developed or reduced to practice
prior to the commencement of my employment with the Company, that I consider to
be my property or the property of third parties and that I wish to have excluded
from the scope of this Agreement (collectively referred to as “Prior
Inventions”). If disclosure of any such Prior Invention would cause me to
violate any prior confidentiality agreement, I understand that I am not to list
such Prior Inventions in Exhibit B but am only to disclose a cursory name for
each such invention, a listing of the party(ies) to whom it belongs and the fact
that full disclosure as to such inventions has not been made for that reason. A
space is provided on Exhibit B for such purpose. If no such disclosure is
attached, I represent that there are no Prior Inventions. If, in the course of
my employment with the Company, I incorporate a Prior Invention into a Company
product, process or machine, the Company is hereby granted and shall have a
nonexclusive, royalty-free, irrevocable, perpetual, worldwide license (with
rights to sublicense through multiple tiers of sublicensees) to make, have made,
modify, use and sell such Prior Invention. Notwithstanding the foregoing, I
agree that I will not incorporate, or permit to be incorporated, Prior
Inventions in any Company Inventions without the Company’s prior written
consent.

 

2.3 Assignment of Inventions. Subject to Sections 2.4, and 2.6, I hereby assign
and agree to assign in the future (when any such Inventions or Proprietary
Rights are first reduced to practice or first fixed in a tangible medium, as
applicable) to the Company all my right, title and interest in and to any and
all Inventions (and all Proprietary Rights with respect thereto) whether or not
patentable or registrable under copyright or similar statutes, made or conceived
or reduced to practice or learned by me, either alone or jointly with others,
during the period of my employment with the Company. Inventions assigned to the
Company, or to a third party as directed by the Company pursuant to this Section
2, are hereinafter referred to as “Company Inventions.”

 

2.4 Nonassignable Inventions. This Agreement does not apply to an Invention
which qualifies fully as a nonassignable Invention under Section 2870 of the
California Labor Code (hereinafter “Section 2870”). I have reviewed the
notification on Exhibit A (Limited Exclusion Notification) and agree that my
signature acknowledges receipt of the notification.

 

2.5 Obligation to Keep Company Informed. During the period of my employment and
for six (6) months after termination of my employment with the Company, I will
promptly disclose to the Company fully and in writing all Inventions authored,
conceived or reduced to practice by me, either alone or jointly with others. In
addition, I will promptly disclose to the Company all patent applications filed
by me or on my behalf within a year after termination of employment. At the time
of each such disclosure, I will advise the Company in writing of any Inventions
that I believe fully qualify for protection under Section 2870; and I will at
that time provide to the Company in writing all evidence necessary to
substantiate that belief. The Company will keep in confidence and will not use
for any purpose or disclose to third parties without my consent any confidential
information disclosed in writing to the Company pursuant to this Agreement
relating to Inventions that qualify fully for protection under the provisions of
Section 2870. I will preserve the confidentiality of any Invention that does not
fully qualify for protection under Section 2870.

 

2.6 Government or Third Party. I also agree to assign all my right, title and
interest in and to any particular Company Invention to a third party, including
without limitation the United States, as directed by the Company.

 

2.7 Works for Hire. I acknowledge that all original works of authorship which
are made by me (solely or jointly with others) within the scope of my employment
and which are protectable by copyright are “works made for hire,” pursuant to
United States Copyright Act (17 U.S.C., Section 101).

 

2.8 Enforcement of Proprietary Rights. I will assist the Company in every proper
way to obtain, and from time to time enforce, United States and foreign
Proprietary Rights relating to Company Inventions in any and all countries. To
that end I will execute, verify and deliver such documents and perform such
other acts (including appearances as a witness) as the Company may reasonably
request for use in applying for, obtaining, perfecting, evidencing, sustaining
and enforcing such Proprietary Rights and the assignment thereof. In addition, I
will execute, verify and deliver assignments of such Proprietary Rights to the
Company or its designee. My obligation to assist the Company with respect to
Proprietary Rights relating to such Company Inventions in any and all countries
shall continue beyond the termination of my employment, but the Company shall
compensate me at a reasonable rate after my termination for the time actually
spent by me at the Company’s request on such assistance.

 

In the event the Company is unable for any reason, after reasonable effort, to
secure my signature on any document needed in connection with the actions
specified in the preceding paragraph, I hereby irrevocably designate and appoint
the Company and its duly authorized officers and

 

2.

--------------------------------------------------------------------------------

agents as my agent and attorney in fact, which appointment is coupled with an
interest, to act for and in my behalf to execute, verify and file any such
documents and to do all other lawfully permitted acts to further the purposes of
the preceding paragraph with the same legal force and effect as if executed by
me. I hereby waive and quitclaim to the Company any and all claims, of any
nature whatsoever, which I now or may hereafter have for infringement of any
Proprietary Rights assigned hereunder to the Company.

 

3. RECORDS. I agree to keep and maintain adequate and current records (in the
form of notes, sketches, drawings and in any other form that may be required by
the Company) of all Proprietary Information developed by me and all Inventions
made by me during the period of my employment at the Company, which records
shall be available to and remain the sole property of the Company at all times.

 

4. ADDITIONAL ACTIVITIES. I agree that during the period of my employment by the
Company I will not, without the Company’s express written consent, engage in any
employment or business activity which is competitive with, or would otherwise
conflict with, my employment by the Company. I agree further that for the period
of my employment by the Company and for one (l) year after the date of
termination of my employment by the Company I will not, either directly or
through others, solicit or attempt to solicit any employee, independent
contractor or consultant of the company to terminate his or her relationship
with the Company in order to become an employee, consultant or independent
contractor to or for any other person or entity. I agree further that for the
period of my employment with the Company and for one (1) year after the date of
termination of my employment with the Company I will not in any manner
discourage any client or customer of the Company from continuing its business
relationship with the Company.

 

5. NO CONFLICTING OBLIGATION. I represent that my performance of all the terms
of this Agreement and as an employee of the Company does not and will not breach
any agreement to keep in confidence information acquired by me in confidence or
in trust prior to my employment by the Company. I have not entered into, and I
agree I will not enter into, any agreement either written or oral in conflict
herewith.

 

6. RETURN OF COMPANY DOCUMENTS. When I leave the employ of the Company, I will
deliver to the Company any and all drawings, notes, memoranda, specifications,
devices, formulas, and documents, together with all copies thereof, and any
other material containing or disclosing any Company Inventions, Third Party
Information or Proprietary Information of the Company. I further agree that any
property situated on the Company’s premises and owned by the Company, including
disks and other storage media, filing cabinets or other work areas, is subject
to inspection by Company personnel at any time with or without notice.

 

7. LEGAL AND EQUITABLE REMEDIES. Because my services are personal and unique and
because I may have access to and become acquainted with the Proprietary
Information of the Company, the Company shall have the right to enforce this
Agreement and any of its provisions by injunction, specific performance or other
equitable relief, without bond and without prejudice to any other rights and
remedies that the Company may have for a breach of this Agreement.

 

8. NOTICES. Any notices required or permitted hereunder shall be given to the
appropriate party at the address specified below or at such other address as the
party shall specify in writing. Such notice shall be deemed given upon personal
delivery, or express mail (e.g., Federal Express) delivery, to the appropriate
address or if sent by certified or registered mail, three (3) days after the
date of mailing.

 

9. NOTIFICATION OF NEW EMPLOYER. In the event that I leave the employ of the
Company, I hereby consent to the notification of my new employer of my rights
and obligations under this Agreement.

 

10. GENERAL PROVISIONS.

 

10.1 Governing Law; Consent to Personal Jurisdiction. This Agreement will be
governed by and construed according to the laws of the State of California, as
such laws are applied to agreements entered into and to be performed entirely
within California between California residents. I hereby expressly consent to
the personal jurisdiction of the state and federal courts located in Alameda
County, California for any lawsuit filed there against me by Company arising
from or related to this Agreement.

 

10.2 Severability. In case any one or more of the provisions contained in this
Agreement shall, for any reason, be held to be invalid, illegal or unenforceable
in any respect, such invalidity, illegality or unenforceability shall not affect
the other provisions of this Agreement; this Agreement shall be construed as if
such invalid, illegal or unenforceable provision had never been contained
herein; and such provision shall be construed and modified so as to render it
valid, lawful, and enforceable in a manner consistent with the intent of the
parties to the extent compatible with the applicable law as it shall then
appear.

 

10.3 Successors and Assigns. This Agreement will be binding upon my heirs,
executors,

administrators and other legal representatives and will be for the benefit of
the Company, its successors, and its assigns.

 

3.

--------------------------------------------------------------------------------

10.4 Survival. The provisions of this Agreement shall survive the termination of
my employment and the assignment of this Agreement by the Company to any
successor in interest or other assignee.

 

10.5 Employment. I agree and understand that nothing in this Agreement shall
confer any right with respect to continuation of employment by the Company, nor
shall it interfere in any way with my right or the Company’s right to terminate
my employment at any time, with or without cause or advance notice, which rights
are hereby expressly reserved.

 

10.6 Waiver. No waiver by the Company of any breach of this Agreement shall be a
waiver of any preceding or succeeding breach. No waiver by the Company of any
right under this Agreement shall be construed as a waiver of any other right.
The Company shall not be required to give notice to enforce strict adherence to
all terms of this Agreement.

 

10.7 Entire Agreement. The obligations pursuant to Sections 1 and 2 (except
Section 2.7) of this Agreement shall apply to any time during which I was
previously engaged, or am in the future engaged, by the Company as a consultant
if no other agreement governs nondisclosure and assignment of inventions during
such period. This Agreement is the final, complete and exclusive agreement of
the parties with respect to the subject matter hereof and supersedes and merges
all prior discussions between us. No modification of or amendment to this
Agreement, nor any waiver of any rights under this Agreement, will be effective
unless in writing and signed by the party to be charged. Any subsequent change
or changes in my duties, salary or compensation will not affect the validity or
scope of this Agreement.

 

This Agreement shall be effective as of the first day of my employment with the
Company.

 

I HAVE READ THIS AGREEMENT CAREFULLY, UNDERSTAND ITS TERMS, AND AGREE THERETO. I
HAVE COMPLETELY FILLED OUT EXHIBIT B TO THIS AGREEMENT.

 

Dated:                     

 

--------------------------------------------------------------------------------

(Signature)

 

--------------------------------------------------------------------------------

(Printed Name) ACCEPTED AND AGREED TO: LEAPFROG ENTERPRISES, INC. By:  

 

--------------------------------------------------------------------------------

Title:   VP, Human Resources     6401 Hollis Street, Suite 100     (Address)    
Emeryville, CA 94608 Dated:   May 26, 2004

 

4.

--------------------------------------------------------------------------------

EXHIBIT A

 

LIMITED EXCLUSION NOTIFICATION

 

THIS IS TO NOTIFY you in accordance with Section 2872 of the California Labor
Code that the foregoing Agreement between you and the Company does not require
you to assign or offer to assign to the Company any invention that you developed
entirely on your own time without using the Company’s equipment, supplies,
facilities or trade secret information except for those inventions that either:

 

1. Relate at the time of conception or reduction to practice of the invention to
the Company’s business, or actual or demonstrably anticipated research or
development of the Company; or

 

2. Result from any work performed by you for the Company.

 

To the extent a provision in the foregoing Agreement purports to require you to
assign an invention otherwise excluded from the preceding paragraph, the
provision is against the public policy of this state and is unenforceable.

 

This limited exclusion does not apply to any patent or invention covered by a
contract between the Company and the United States or any of its agencies
requiring full title to such patent or invention to be in the United States.

 

B-1.

--------------------------------------------------------------------------------

EXHIBIT B

 

Instructions: All employees should complete Section 1.

If you have checked “I have”, please complete Sections 2 & 3 of the Exhibit and
sign and date it.

If you have checked “I have not”, you should not complete any remaining
Sections. You should sign and date it.

 

1. Prior to my engagement by LeapFrog Enterprises, Inc. (the “Company”),

 

  ¨ I have

 

  ¨ I have not

 

made, conceived or reduced to practice, either alone or jointly with others,
inventions or improvements relevant to the subject matter of my employment by
the Company.

 

(If you checked “have not”, you should not complete sections 2 & 3 of this
Exhibit. If you checked “have,” please complete the remaining sections of this
memorandum. Please sign and date this as well.)

 

2. Except as listed in Section 3 below, the following is a complete list of all
inventions or improvements relevant to the subject matter of my employment by
the Company that have been made or conceived or first reduced to practice by me
alone or jointly with others prior to my engagement by the Company:

 

            ___________________________________________________________________________________________________________________

 

            ___________________________________________________________________________________________________________________

 

            ___________________________________________________________________________________________________________________

 

¨ Additional sheets attached.

 

3. Due to a prior confidentiality agreement, I cannot complete the disclosure
under Section 2 above with respect to inventions or improvements generally
listed below, the proprietary rights and duty of confidentiality with respect to
which I owe to the following party(ies):

 

    Invention or Improvement   Party(ies)   Relationship 1.  
_____________________   _____________________   _____________________ 2.  
_____________________   _____________________   _____________________ 3.  
_____________________   _____________________   _____________________

 

¨ Additional sheets attached.

 

By:  

 

--------------------------------------------------------------------------------

    (EMPLOYEE SIGNATURE) Printed Name:  

--------------------------------------------------------------------------------

Date:  

--------------------------------------------------------------------------------

 

2.