LeapFrog 2003 Annual Report Download - page 149

(ff) “Performance Goals” means, for a Performance Period, the one or more goals established by the
Committee for the Performance Period based upon the Performance Criteria. The Committee is authorized at any
time during the time period permitted by Section 162(m) of the Code (generally, prior to the 90th day of a
Performance Period), or at any time thereafter, in its sole and absolute discretion, to adjust or modify the
calculation of a Performance Goal for such Performance Period in order to prevent the dilution or enlargement of
the rights of Participants, (a) in the event of, or in anticipation of, any unusual or extraordinary corporate item,
transaction, event or development; (b) in recognition of, or in anticipation of, any other unusual or nonrecurring
events affecting the Company, or the financial statements of the Company, or in response to, or in anticipation of,
changes in applicable laws, regulations, accounting principles, or business conditions; or (c) in view of the
Committee’s assessment of the business strategy of the Company, performance of comparable organizations,
economic and business conditions, and any other circumstances deemed relevant. Specifically, the Committee is
authorized to make adjustment in the method of calculating attainment of Performance Goals and objectives for a
Performance Period as follows: (i) to exclude the dilutive effects of acquisitions or joint ventures; (ii) to assume
that any business divested by the Company achieved performance objectives at targeted levels during the balance
of a Performance Period following such divestiture; and (iii) to exclude the effect of any change in the
outstanding shares of common stock of the Company by reason of any stock dividend or split, stock repurchase,
reorganization, recapitalization, merger, consolidation, spin-off, combination or exchange of shares or other
similar corporate change, or any distributions to common shareholders other than regular cash dividends. In
addition, with respect to Performance Goals established for Participants who are not Covered Employees, and
who will not be Covered Employees at the time the compensation will be paid, the Committee is authorized to
make adjustment in the method of calculating attainment of Performance Goals and objectives for a Performance
Period as follows: (i) to exclude restructuring and/or other nonrecurring charges; (ii) to exclude change rate
effects, as applicable, for non-U.S. dollar denominated net sales and operating earnings; (iii) to exclude the
effects of changes to generally accepted accounting standards required by the Financial Accounting Standards
Board; (iv) to exclude the effects to any statutory adjustments to corporate tax rates; (v) to exclude the impact of
any “extraordinary items” as determined under generally accepted accounting principles; and (vi) to exclude any
other unusual, non-recurring gain or loss or other extraordinary item.
(gg) “Performance Period” means the one or more periods of time, which may be of varying and
overlapping durations, as the Committee may select, over which the attainment of one or more Performance
Goals will be measured for the purpose of determining a Participant’s right to and the payment of a Performance
Award.
(hh) “Plan” means this amended and restated LeapFrog Enterprises, Inc. 2002 Equity Incentive Plan.
(ii) “Rule 16b-3” means Rule 16b-3 promulgated under the Exchange Act or any successor to Rule 16b-3,
as in effect from time to time.
(jj) “Securities Act” means the Securities Act of 1933, as amended.
(kk) “Stock Award” means any right granted under the Plan, including an Option, a stock bonus and a right
to acquire restricted stock.
(ll) “Stock Award Agreement” means a written agreement between the Company and a holder of a Stock
Award evidencing the terms and conditions of an individual Stock Award grant. Each Stock Award Agreement
shall be subject to the terms and conditions of the Plan.
(mm) “Subsidiary” means, with respect to the Company, (i) any corporation of which more than fifty
percent (50%) of the outstanding capital stock having ordinary voting power to elect a majority of the board of
directors of such corporation (irrespective of whether, at the time, stock of any other class or classes of such
corporation shall have or might have voting power by reason of the happening of any contingency) is at the time,
directly or indirectly, Owned by the Company, and (ii) any partnership in which the Company has a direct or
indirect interest (whether in the form of voting or participation in profits or capital contribution) of more than
fifty percent (50%).
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