LeapFrog 2006 Annual Report Download - page 168

(ee) “Performance Criteria” means the one or more criteria that the Committee shall select for purposes of
establishing the Performance Goal(s) for a Performance Period. The Performance Criteria that will be used to
establish such Performance Goal(s) may be based on any one of, or combination of, the following: (i) earnings
per share; (ii) earnings before interest, taxes and depreciation; (iii) earnings before interest, taxes, depreciation
and amortization (EBITDA); (iv) net earnings; (v) total shareholder return; (vi) return on equity; (vii) return on
assets; (viii) return on investment; (ix) return on capital employed; (x) operating margin (xi) gross margin;
(xii) operating income; (xiii) net income; (xiv) net operating income; (xv) net operating income after tax;
(xvi) pre- and after-tax income; (xvii) pre-tax profit; (xviii) operating cash flow; (xix) revenue; (xx) revenue
growth; (xxi) expenses; (xxii) improvement in or attainment of expense levels; (xxiii) improvement in or
attainment of working capital levels; (xxiv) economic value added; (xxv) market share; (xxvi) cash flow;
(xxvii) cash flow per share; (xxviii) economic value added (or an equivalent metric); (xxix) share price
performance; (xxx) debt reduction; and (xxxi) other measures of performance selected by the Committee. Partial
achievement of the specified criteria may result in the payment or vesting corresponding to the degree of
achievement as specified in the Award Agreement. The Committee shall, within the time period required by
Section 162(m) of the Code (generally, the first 90 days of the Performance Period), define in an objective
fashion the manner of calculating the Performance Criteria it selects to use for such Performance Period.
(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.
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