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Exhibit 10.4

As Adopted by the Board of Directors on
June 1, 1998, and amended on April 1, 2001
and October 17, 2001

ACTIVISION, INC.
1998 INCENTIVE PLAN

    ACTIVISION, INC., a corporation formed under the laws of the State of
Delaware (the "Company"), hereby establishes and adopts the following 1998
Incentive Plan (the "Plan").

RECITALS

    WHEREAS, the Company desires to encourage high levels of performance by
those individuals who are key to the success of the Company, to attract new
individuals who are highly motivated and who will contribute to the success of
the Company and to encourage such individuals to remain as directors and/or
employees of the Company and its subsidiaries by increasing their proprietary
interest in the Company's growth and success.

    WHEREAS, to attain these ends, the Company has formulated the Plan embodied
herein to authorize the granting of incentive awards through grants of share
options ("Options"), grants of share appreciation rights, grants of Share
Purchase Awards (hereafter defined), grants of Restricted Share Awards
(hereafter defined) and grants of Performance-Based Awards (hereafter defined)
to those individuals whose judgment, initiative and efforts are or have been
responsible for the success of the Company.

    NOW, THEREFORE, the Company hereby constitutes, establishes and adopts the
following Plan and agrees to the following provisions:

ARTICLE 1.

PURPOSE OF THE PLAN

    1.1.  Purpose.  The purpose of the Plan is to assist the Company and its
subsidiaries in attracting and retaining selected individuals to serve as
directors, officers, consultants, advisors and other key employees of the
Company and its subsidiaries who will contribute to the Company's success and to
achieve long-term objectives which will inure to the benefit of all shareholders
of the Company through the additional incentive inherent in the ownership or
increased ownership of the Company's shares of common stock ("Shares"). Options
granted under the Plan will be either "incentive share options," intended to
qualify as such under the provisions of section 422 of the Internal Revenue Code
of 1986, as from time to time amended (the "Code"), or "nonqualified share
options." For purposes of the Plan, the term "subsidiary" shall mean "subsidiary
corporation," as such term is defined in section 424(f) of the Code, and
"affiliate" shall have the meaning set forth in Rule 12b-2 of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"). For purposes of the Plan,
the term "Award" shall mean a grant of an Option, a grant of a share
appreciation right, a grant of a Share Purchase Award, a grant of a Restricted
Share Award, or any other award made under the terms of the Plan.

ARTICLE 2.

SHARES SUBJECT TO AWARDS

    2.1.  Number of Shares.  Subject to the adjustment provisions of
Section 9.10 hereof, the aggregate number of Shares which may be issued under
Awards under the Plan, whether pursuant to Options, share appreciation rights,
Share Purchase Awards, Restricted Share Awards or Performance-Based Awards shall
not exceed 3,000,000. No Options to purchase fractional Shares shall be granted
or

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issued under the Plan. For purposes of this Section 2.1, the Shares that shall
be counted toward such limitation shall include all Shares:

(1)issued or issuable pursuant to Options that have been or may be exercised;
(2)issued or issuable pursuant to Share Purchase Awards; and (3)issued as, or
subject to issuance as a Restricted Share Award.

    2.2.  Shares Subject to Terminated Awards.  The Shares covered by any
unexercised portions of terminated Options granted under Articles 4 and 6,
Shares forfeited as provided in Section 8.2(a) and Shares subject to any Awards
which are otherwise surrendered by the Participant without receiving any payment
or other benefit with respect thereto may again be subject to new Awards under
the Plan. In the event the purchase price of an Option is paid in whole or in
part through the delivery of Shares, the number of Shares issuable in connection
with the exercise of the Option shall not again be available for the grant of
Awards under the Plan. Shares subject to Options, or portions thereof, which
have been surrendered in connection with the exercise of share appreciation
rights shall not again be available for the grant of Awards under the Plan.

    2.3.  Character of Shares.  Shares delivered under the Plan may be
authorized and unissued Shares or Shares acquired by the Company, or both.

    2.4.  Limitations on Grants to Individual Participant.  Subject to
adjustments pursuant to the provisions of Section 10.10 hereof, the maximum
number of Shares with respect to which Options or stock appreciation rights may
be granted hereunder to any employee during any fiscal year shall be 500,000
Shares (the "Limitation"). If an Option is cancelled, the cancelled Option shall
continue to be counted toward the Limitation for the year granted. An Option (or
a stock appreciation right) that is repriced during any fiscal year is treated
as the cancellation of the Option (or stock appreciation right) and a grant of a
new Option (or stock appreciation right) for purposes of the Limitation for that
fiscal year.

ARTICLE 3.

ELIGIBILITY AND ADMINISTRATION

    3.1.  Awards to Employees and Directors.  (a) Participants who receive
(i) Options under Articles 4 and 6 hereof or share appreciation rights under
Article 5 ("Optionees"), and (ii) Share Purchase Awards under Article 7 or
Restricted Share Awards under Article 8 (in either case, a "Participant"), shall
consist of such officers, key employees, consultants, representatives and other
contractors and agents and Directors (hereinafter defined) of the Company or any
of its subsidiaries or affiliates as the Committee shall select from time to
time, provided, however, that an Option that is intended to qualify as an
"incentive share option" may be granted only to an individual that is an
employee of the Company or any of its subsidiaries. The Committee's designation
of an Optionee or Participant in any year shall not require the Committee to
designate such person to receive Awards or grants in any other year. The
designation of an Optionee or Participant to receive Awards or grants under one
portion of the Plan shall not require the Committee to include such Optionee or
Participant under other portions of the Plan.

(b)No Option which is intended to qualify as an "incentive share option" may be
granted to any employee or Director who, at the time of such grant, owns,
directly or indirectly (within the meaning of sections 422(b)(6) and 424(d) of
the Code), shares possessing more than 10% of the total combined voting power of
all classes of shares of the Company or any of its subsidiaries or affiliates,
unless at the time of such grant, (i) the option price is fixed at not less than
110% of the Fair Market Value (as defined below) of the Shares subject to such
Option, determined on the date of the grant, and (ii) the exercise of such
Option is prohibited by its terms after the expiration of five years from the
date such Option is granted.

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    3.2.  Administration.  (a) The Plan shall be administered by a committee
(the "Committee") consisting of not fewer than two Directors of the Company (the
directors of the Company being hereinafter referred to as the "Directors"), as
designated by the Directors. The Directors may remove from, add members to, or
fill vacancies in the Committee. Unless otherwise determined by the Directors,
each member of the Committee will be a "non-employee director" within the
meaning of Rule 16b-3 (or any successor rule) of the Exchange Act and an
"outside director" within the meaning of Section 162(m)(4)(C)(i) of the Code and
the regulations thereunder.

    Notwithstanding any other provision of this Plan, any Award to a member of
the Committee must be approved by the Board of Directors of the Company
(excluding Directors who are also members of the Committee) to be effective.

(b)The Committee is authorized, subject to the provisions of the Plan, to
establish such rules and regulations as it may deem appropriate for the conduct
of meetings and proper administration of the Plan. All actions of the Committee
shall be taken by majority vote of its members.

(c)Subject to the provisions of the Plan, the Committee shall have authority, in
its sole discretion, to grant Awards under the Plan, to interpret the provisions
of the Plan and, subject to the requirements of applicable law, including
Rule 16b-3 of the Exchange Act, to prescribe, amend, and rescind rules and
regulations relating to the Plan or any Award thereunder as it may deem
necessary or advisable. All decisions made by the Committee pursuant to the
provisions of the Plan shall be final, conclusive and binding on all persons,
including the Company, its shareholders, Directors and employees, and other Plan
participants.

ARTICLE 4.

OPTIONS

    4.1.  Grant of Options.  Directors, Officers and Other Key Employees. The
Committee shall determine, within the limitations of the Plan, those Directors,
officers and other key employees of the Company and its subsidiaries and
affiliates to whom Options are to be granted under the Plan, the number of
Shares that may be purchased under each such Option and the option price, and
shall designate such Options at the time of the grant as either "incentive share
options" or "nonqualified share options"; provided, however, that Options
granted to employees of an affiliate (that is not also a subsidiary) or to
non-employees of the Company may only be "nonqualified share options."

    4.2.  Share Option Agreements; etc.  All Options granted pursuant to
Article 4 and Article 6 herein (a) shall be authorized by the Committee and
(b) shall be evidenced in writing by share option agreements ("Share Option
Agreements") in such form and containing such terms and conditions as the
Committee shall determine which are not inconsistent with the provisions of the
Plan, and, with respect to any Share Option Agreement granting Options which are
intended to qualify as "incentive share options," are not inconsistent with
Section 422 of the Code. Granting of an Option pursuant to the Plan shall impose
no obligation on the recipient to exercise such option. Any individual who is
granted an Option pursuant to this Article 4 and Article 6 herein may hold more
than one Option granted pursuant to such Articles at the same time and may hold
both "incentive share options" and "nonqualified share options" at the same
time. To the extent that any Option does not qualify as an "incentive share
option" (whether because of its provisions, the time or manner of its exercise
or otherwise) such Option or the portion thereof which does not so qualify shall
constitute a separate "nonqualified share option."

    4.3.  Option Price.  Subject to Section 3.1(b), the option price per each
Share purchasable under any "incentive share option" granted pursuant to this
Article 4 and any "nonqualified share option" granted pursuant to Article 6
herein shall be determined by the Committee, but in the case of an "incentive
share option" shall not be less than 100% of the Fair Market Value (as
hereinafter defined) of such Share on the date of the grant of such Option. The
option price per share of each Share

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purchasable under any "nonqualified share option" granted pursuant to this
Article 4 shall be determined by the Committee at the time of the grant of such
Option, but shall not be less than 85% of the Fair Market Value of such Share on
the date of the grant of such Option.

    4.4.  Other Provisions.  Options granted pursuant to this Article 4 shall be
made in accordance with the terms and provisions of Article 10 hereof and any
other applicable terms and provisions of the Plan.

ARTICLE 5.

SHARE APPRECIATION RIGHTS

    5.1.  Grant and Exercise.  Share appreciation rights may be granted in
conjunction with all or part of any Option granted under the Plan, as follows:
(i) in the case of a nonqualified share option, such rights may be granted
either at the time of the grant of such option or at any subsequent time during
the term of the option; and (ii) in the case of an incentive share option, such
rights may be granted only at the time of the grant of such option. A "share
appreciation right" is a right to receive cash or Shares, as provided in this
Article 5, in lieu of the purchase of a Share under a related Option. A share
appreciation right or applicable portion thereof shall terminate and no longer
be exercisable upon the termination or exercise of the related Option, and a
share appreciation right granted with respect to less than the full number of
Shares covered by a related Option shall not be reduced until, and then only to
the extent that, the exercise or termination of the related Option exceeds the
number of Shares not covered by the share appreciation right. A share
appreciation right may be exercised by the holder thereof (the "Holder"), in
accordance with Section 5.2 of this Article 5, by giving written notice thereof
to the Company and surrendering the applicable portion of the related Option.
Upon giving such notice and surrender, the Holder shall be entitled to receive
an amount determined in the manner prescribed in Section 5.2 of this Article 5.
Options which have been so surrendered, in whole or in part, shall no longer be
exercisable to the extent the related share appreciation rights have been
exercised.

    5.2.  Terms and Conditions.  Share appreciation rights shall be subject to
such terms and conditions, not inconsistent with the provisions of the Plan, as
shall be determined from time to time by the Committee, including the following:

(a)Share appreciation rights shall be exercisable only at such time or times and
to the extent that the Options to which they relate shall be exercisable in
accordance with the provisions of the Plan.

(b)Upon the exercise of a share appreciation right, a Holder shall be entitled
to receive up to, but no more than, an amount in cash or whole Shares as
determined by the Committee in its sole discretion equal to the excess of the
then Fair Market Value of one Share over the option price per Share specified in
the related Option multiplied by the number of Shares in respect of which the
share appreciation right shall have been exercised. The Holder shall specify in
his written notice of exercise, whether payment shall be made in cash or in
whole Shares. Each share appreciation right may be exercised only at the time
and so long as a related Option, if any, would be exercisable or as otherwise
permitted by applicable law.

(c)Upon the exercise of a share appreciation right, the Option or part thereof
to which such share appreciation right is related shall be deemed to have been
exercised for the purpose of the limitation of the number of Shares to be issued
under the Plan, as set forth in Section 2.1 of the Plan.
(d)With respect to share appreciation rights granted in connection with an
Option that is intended to be an "incentive share option," the following shall
apply:

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(i)No share appreciation right shall be transferable by a Holder otherwise than
by will or by the laws of descent and distribution, and share appreciation
rights shall be exercisable, during the Holder's lifetime, only by the Holder.

(ii)Share appreciation rights granted in connection with an Option may be
exercised only when the Fair Market Value of the Shares subject to the Option
exceeds the option price at which Shares can be acquired pursuant to the Option.

ARTICLE 6.

RELOAD OPTIONS

    6.1.  Authorization of Reload Options.  Concurrently with the award of any
Option (such Option hereinafter referred to as the "Underlying Option") to any
participant in the Plan, the Committee may grant one or more reload options
(each, a "Reload Option") to such participant to purchase for cash or Shares a
number of Shares as specified below. A Reload Option shall be exercisable for an
amount of Shares equal to (i) the number of Shares delivered by the Optionee to
the Company to exercise the Underlying Option, and (ii) to the extent authorized
by the Committee, the number of Shares used to satisfy any tax withholding
requirement incident to the exercise of the Underlying Option, subject to the
availability of Shares under the Plan at the time of such exercise. Any Reload
Option may provide for the grant, when exercised, of subsequent Reload Options
to the extent and upon such terms and conditions consistent with this Article 6,
as the Committee in its sole discretion shall specify at or after the time of
grant of such Reload Option. The grant of a Reload Option will become effective
upon the exercise of an Underlying Option or Reload Option by the Optionee
delivering to the Company Shares owned by the Optionee in payment of the
exercise price and/or tax withholding obligations. Notwithstanding the fact that
the Underlying Option may be an "incentive share option," a Reload Option is not
intended to qualify as an "incentive share option" under Section 422 of the
Code.

    6.2.  Reload Option Amendment.  Each Share Option Agreement shall state
whether the Committee has authorized Reload Options with respect to the
Underlying Option. Upon the exercise of an Underlying Option or other Reload
Option, the Reload Option will be evidenced by an amendment to the underlying
Share Option Agreement.

    6.3.  Reload Option Price.  The option price per Share payable upon the
exercise of a Reload Option shall be the Fair Market Value of a Share on the
date the grant of the Reload Option becomes effective.

    6.4.  Term and Exercise.  Each Reload Option is fully exercisable
immediately from the effective date of grant. The term of each Reload Option
shall be equal to the remaining option term of the Underlying Option.

    6.5.  Termination of Employment.  No additional Reload Options shall be
granted to Optionees when Options and/or Reload Options are exercised pursuant
to the terms of this Plan following termination of the Optionee's employment
unless the Committee, in its sole discretion, shall determine otherwise.

    6.6.  Applicability of Other Sections.  Except as otherwise provided in this
Article 6, the provisions of Article 9 applicable to Options shall apply equally
to Reload Options.

ARTICLE 7.

SHARE PURCHASE AWARDS

    7.1.  Grant of Share Purchase Award.  The term "Share Purchase Award" means
the right to purchase Shares of the Company and to pay for such Shares through a
loan made by the Company to an employee (a "Purchase Loan") as set forth in this
Article 7.

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    7.2.  Terms of Purchase Loans.  (a) Purchase Loan. Each Purchase Loan shall
be evidenced by a promissory note. The term of the Purchase Loan shall be a
period of years, as determined by the Committee, and the proceeds of the
Purchase Loan shall be used exclusively by the Participant for purchase of
Shares from the Company at a purchase price equal to the Fair Market Value on
the date of the Share Purchase Award.

(b)Interest on Purchase Loan. A Purchase Loan shall be non-interest bearing or
shall bear interest at whatever rate the Committee shall determine (but not in
excess of the maximum rate permissible under applicable law), payable in a
manner and at such times as the Committee shall determine. Those terms and
provisions as the Committee shall determine shall be incorporated into the
promissory note evidencing the Purchase Loan.

(c)Forgiveness of Purchase Loan. Subject to Section 7.4 hereof, the Company may
forgive the repayment of up to 100% of the principal amount of the Purchase
Loan, subject to such terms and conditions as the Committee shall determine and
set forth in the promissory note evidencing the Purchase Loan. A Participant's
Purchase Loan can be prepaid at any time, and from time to time, without
penalty.

    7.3.  Security for Loans. (a) Stock Power and Pledge. Purchase Loans granted
to Participants shall be secured by a pledge of the Shares acquired pursuant to
the Share Purchase Award. Such pledge shall be evidenced by a pledge agreement
(the "Pledge Agreement") containing such terms and conditions as the Committee
shall determine. Purchase Loans shall be recourse or non-recourse with respect
to a Participant, as determined from time to time by the Committee. The share
certificates for the Shares purchased by a Participant pursuant to a Share
Purchase Award shall be issued in the Participant's name, but shall be held by
the Company as security for repayment of the Participant's Purchase Loan
together with a stock power executed in blank by the Participant (the execution
and delivery of which by the Participant shall be a condition to the issuance of
the Share Purchase Award). The Participant shall be entitled to exercise all
rights applicable to such Shares, including, but not limited to, the right to
vote such Shares and the right to receive dividends and other distributions made
with respect to such Shares. When the Purchase Loan and any accrued but unpaid
interest thereon has been repaid or otherwise satisfied in full, the Company
shall deliver to the Participant the share certificates for the Shares purchased
by a Participant under the Share Purchase Award.

(b)Release and Delivery of Share Certificates During the Term of the Purchase
Loan. The Company shall release and deliver to each Participant certificates for
Shares purchased by a Participant pursuant to a Share Purchase Award, in such
amounts and on such terms and conditions as the Committee shall determine, which
shall be set forth in the Pledge Agreement.

(c)Release and Delivery of Share Certificates Upon Repayment of the Purchase
Loan. The Company shall release and deliver to each Participant certificates for
the Shares purchased by the Participant under the Share Purchase Award and then
held by the Company, provided the Participant has paid or otherwise satisfied in
full the balance of the Purchase Loan and any accrued but unpaid interest
thereon. In the event the balance of the Purchase Loan is not repaid, forgiven
or otherwise satisfied within 90 days after (i) the date repayment of the
Purchase Loan is due (whether in accordance with its term, by reason of
acceleration or otherwise), or (ii) such longer time as the Committee, in its
discretion, shall provide for repayment or satisfaction, the Company shall
retain those Shares then held by the Company in accordance with the Pledge
Agreement.

(d)Recourse Purchase Loans. Notwithstanding Sections 7.3(a), (b) and (c) above,
in the case of a recourse Purchase Loan, the Committee may make such Purchase
Loan on such terms as it determines, including without limitation, not requiring
a pledge of the acquired Shares.

    7.4.  Termination of Employment.  (a) Termination of Employment by Death,
Disability or by the Company Without Cause; Change of Control. In the event of a
Participant's termination of employment

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by reason of death, "disability" or by the Company without "cause," or in the
event of a "change of control," the Committee shall have the right (but shall
not be required) to forgive the remaining unpaid amount (principal and interest)
of the Purchase Loan in whole or in part as of the date of such occurrence.
"Change of Control," "disability" and "cause" shall have the respective meanings
as set forth in the promissory note evidencing the Purchase Loan.

(b)Other Termination of Employment. Subject to Section 7.4(a) above, in the
event of a Participant's termination of employment for any reason, the
Participant shall repay to the Company the entire balance of the Purchase Loan
and any accrued but unpaid interest thereon, which amounts shall become
immediately due and payable, unless otherwise determined by the Committee.

    7.5.  Restrictions on Transfer.  No Share Purchase Award or Shares purchased
through such an Award and pledged to the Company as collateral security for the
Participant's Purchase Loan (and accrued and unpaid interest thereon) may be
otherwise pledged, sold, assigned or transferred (other than by will or by the
laws of descent and distribution).

ARTICLE 8.

RESTRICTED AWARDS

    8.1.  Restricted Share Awards.  (a) Grant. A grant of Shares made pursuant
to this Article 8 is referred to as a "Restricted Share Award." The Committee
may grant to any employee an amount of Shares in such manner, and subject to
such terms and conditions relating to vesting, forfeitability and restrictions
on delivery and transfer (whether based on performance standards, periods of
service or otherwise) as the Committee shall establish (such Shares, "Restricted
Shares"). The terms of any Restricted Share Award granted under this Plan shall
be set forth in a written agreement (a "Restricted Share Agreement") which shall
contain provisions determined by the Committee and not inconsistent with this
Plan. The provisions of Restricted Share Awards need not be the same for each
Participant receiving such Awards.

(b)Issuance of Restricted Shares. As soon as practicable after the date of grant
of a Restricted Share Award by the Committee, the Company shall cause to be
transferred on the books of the Company, Shares registered in the name of the
Company, as nominee for the Participant, evidencing the Restricted Shares
covered by the Award; provided, however, such Shares shall be subject to
forfeiture to the Company retroactive to the date of grant, if a Restricted
Share Agreement delivered to the Participant by the Company with respect to the
Restricted Shares covered by the Award is not duly executed by the Participant
and timely returned to the Company. All Restricted Shares covered by Awards
under this Article 8 shall be subject to the restrictions, terms and conditions
contained in the Plan and the Restricted Share Agreement entered into by and
between the Company and the Participant. Until the lapse or release of all
restrictions applicable to an Award of Restricted Shares, the share certificates
representing such Restricted Shares shall be held in custody by the Company or
its designee.

(c)Shareholder Rights. Beginning on the date of grant of the Restricted Share
Award and subject to execution of the Restricted Share Agreement as provided in
Sections 8.1(a) and (b), the Participant shall become a shareholder of the
Company with respect to all Shares subject to the Restricted Share Agreement and
shall have all of the rights of a shareholder, including, but not limited to,
the right to vote such Shares and the right to receive distributions made with
respect to such Shares; provided, however, that any Shares distributed as a
dividend or otherwise with respect to any Restricted Shares as to which the
restrictions have not yet lapsed shall be subject to the same restrictions as
such Restricted Shares and shall be represented by book entry and held as
prescribed in Section 8.1(b).

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(d)Restriction on Transferability. None of the Restricted Shares may be assigned
or transferred (other than by will or the laws of descent and distribution),
pledged or sold prior to lapse or release of the restrictions applicable
thereto.

(e)Delivery of Shares Upon Release of Restrictions. Upon expiration or earlier
termination of the forfeiture period without a forfeiture and the satisfaction
of or release from any other conditions prescribed by the Committee, the
restrictions applicable to the Restricted Shares shall lapse. As promptly as
administratively feasible thereafter, subject to the requirements of
Section 12.1, the Company shall deliver to the Participant or, in case of the
Participant's death, to the Participant's beneficiary, one or more stock
certificates for the appropriate number of Shares, free of all such
restrictions, except for any restrictions that may be imposed by law.

    8.2.  Terms of Restricted Shares.  (a) Forfeiture of Restricted Shares.
Subject to Section 8.2(b), all Restricted Shares shall be forfeited and returned
to the Company and all rights of the Participant with respect to such Restricted
Shares shall terminate unless the Participant continues in the service of the
Company as an employee until the expiration of the forfeiture period for such
Restricted Shares and satisfies any and all other conditions set forth in the
Restricted Share Agreement. The Committee in its sole discretion, shall
determine the forfeiture period (which may, but need not, lapse in installments)
and any other terms and conditions applicable with respect to any Restricted
Share Award.

(b)Waiver of Forfeiture Period. Notwithstanding anything contained in this
Article 8 to the contrary, the Committee may, in its sole discretion, waive the
forfeiture period and any other conditions set forth in any Restricted Share
Agreement under appropriate circumstances (including the death, disability or
retirement of the Participant or a material change in circumstances arising
after the date of an Award) and subject to such terms and conditions (including
forfeiture of a proportionate number of the Restricted Shares) as the Committee
shall deem appropriate.

ARTICLE 9.

DEFERRED SHARE AWARDS

    9.1.  Shares and Administration.  Awards of the right to receive Shares that
are not to be distributed to the Participant until after a specified deferral
period (such Award and the deferred Shares delivered thereunder hereinafter as
the context shall require, the "Deferred Shares") may be made either alone or in
addition to share options, share appreciation rights, or Restricted Share
Awards, or Other Share-based Awards (hereafter defined) granted under the Plan.
The Committee shall determine the Directors, officers and other key employees of
the Company and its subsidiaries to whom and the time or times at which Deferred
Shares shall be awarded, the number of Deferred Shares to be awarded to any
Participant, the duration of the period (the "Deferral Period") during which,
and the conditions under which, receipt of the Shares will be deferred, and the
terms and conditions of the award in addition to those contained in Section 9.2.
In its sole discretion, the Committee may provide for a minimum payment at the
end of the applicable Deferral Period based on a stated percentage of the Fair
Market Value on the date of grant of the number of Shares covered by a Deferred
Share award. The Committee may also provide for the grant of Deferred Shares
upon the completion of a specified performance period. The provisions of
Deferred Share awards need not be the same with respect to each recipient.

    9.2.  Terms and Conditions.  Deferred Share awards made pursuant to this
Article 9 shall be subject to the following terms and conditions:

(a)Subject to the provisions of the Plan, the Shares to be issued pursuant to a
Deferred Share award may not be sold, assigned, transferred, pledged or
otherwise encumbered during the Deferral Period or Elective Deferral Period
(defined below), where applicable, and may be

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subject to a risk of forfeiture during all or such portion of the Deferral
Period as shall be specified by the Committee. At the expiration of the Deferral
Period and Elective Deferral Period, share certificates shall be delivered to
the Participant, or the Participant's legal representative, in a number equal to
the number of shares covered by the Deferred Share award.

(b)Amounts equal to any dividends declared during the Deferral Period with
respect to the number of Shares covered by a Deferred Share award will be paid
to the Participant currently, or deferred and deemed to be reinvested in
additional deferred Shares or otherwise reinvested, as determined at the time of
the award by the Committee, in its sole discretion.

(c)Subject to the provisions of paragraph 9.2(d) of this Article 9, upon
termination of employment for any reason during the Deferral Period for a given
award, the Deferred Shares in question shall be forfeited by the Participant.

(d)In the event of the Participant's death or permanent disability during the
Deferral Period (or Elective Deferral Period, where applicable), or in cases of
special circumstances, the Committee may, in its sole discretion, when it finds
that a waiver would be in the best interests of the Company, waive in whole or
in part any or all of the remaining deferral limitations imposed hereunder with
respect to any or all of the Participant's Deferred Shares.

(e)Prior to completion of the Deferral Period, a Participant may elect to
further defer receipt of the award for a specified period or until a specified
event (the "Elective Deferral Period"), subject in each case to the approval of
the Committee and under such terms as are determined by the Committee, all in
its sole discretion.

(f)Each award shall be confirmed by a Deferred Share agreement or other
instrument executed by the Company and the Participant.

ARTICLE 10.

GENERALLY APPLICABLE PROVISIONS

    10.1.  Option Period.  Subject to Section 3.1(b), the period for which an
Option is exercisable shall not exceed ten years from the date such Option is
granted, provided, however, in the case of an Option that is not intended to be
an "incentive share option," the Committee may prescribe a period in excess of
ten years. After the Option is granted, the option period may not be reduced.

    10.2.  Fair Market Value.  The "Fair Market Value" of a Share shall be
determined in good faith by the Committee in its sole discretion from time to
time. In no case shall Fair Market Value be less than the par value of a Share.
An Option shall be considered granted on the date the Committee acts to grant
the Option or such later date as the Committee shall specify.

    10.3.  Exercise of Options.  Options granted under the Plan shall be
exercised by the Optionee or by a Permitted Assignee thereof (or by his
executors, administrators, guardian or legal representative, as provided in
Sections 10.6 and 10.7 hereof) as to all or part of the Shares covered thereby,
by the giving of written notice of exercise to the Company, specifying the
number of Shares to be purchased, accompanied by payment of the full purchase
price for the Shares being purchased. Full payment of such purchase price shall
be made within five business days following the date of exercise and shall be
made (i) in cash or by certified check or bank check, (ii) with the consent of
the Committee, by delivery of a promissory note in favor of the Company upon
such terms and conditions as determined by the Committee, (iii) with the consent
of Committee, by tendering previously acquired Shares (valued at its Fair Market
Value, as determined by the Committee as of the date of tender), or (iv) with
the consent of the Committee, any combination of (i), (ii) and (iii). In
connection with a tender of previously acquired Shares pursuant to clause (iii)
above, the Committee, in its sole discretion, may permit the Optionee to
constructively exchange Shares already owned by the Optionee in lieu of

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actually tendering such Shares to the Company, provided that adequate
documentation concerning the ownership of the Shares to be constructively
tendered is furnished in form satisfactory to the Committee. The notice of
exercise, accompanied by such payment, shall be delivered to the Company at its
principal business office or such other office as the Committee may from time to
time direct, and shall be in such form, containing such further provisions
consistent with the provisions of the Plan, as the Committee may from time to
time prescribe. In no event may any Option granted hereunder be exercised for a
fraction of a Share. The Company shall effect the transfer of Shares purchased
pursuant to an Option as soon as practicable, and, within a reasonable time
thereafter, such transfer shall be evidenced on the books of the Company. No
person exercising an Option shall have any of the rights of a holder of Shares
subject to an Option until certificates for such Shares shall have been issued
following the exercise of such Option. No adjustment shall be made for cash
dividends or other rights for which the record date is prior to the date of such
issuance.

    10.4.  Transferability.  No Option that is intended to qualify as an
"incentive stock option" under Section 422 of the Code shall be assignable or
transferable by the Optionee, other than by will or the laws of descent and
distribution, and such Option may be exercised during the life of the Optionee
only by the Optionee or his guardian or legal representative. "Non-qualified
share options" and any share appreciation rights granted in tandem therewith are
transferable (together and not separately) with the consent of the Committee by
the Optionee or Holder, as the case may be, to any one or more of the following
persons (each, a "Permitted Assignee"): (i) the spouse, parent, issue, spouse of
issue, or issue of spouse ("issue" shall include all descendants whether natural
or adopted) of such Optionee or Holder, as the case may be; (ii) a trust for the
benefit of one or more of those persons described in clause (i) above or for the
benefit of such Optionee or Holder, as the case may be; (iii) an entity in which
the Optionee or Holder or any Permitted Assignee thereof is a beneficial owner;
or (iv) in the case of a transfer by an Optionee who is a non-employee director,
another non-employee director of the Company; provided that such Permitted
Assignee shall be bound by and subject to all of the terms and conditions of
this Plan and the Share Option Agreement relating to the transferred Option and
shall execute an agreement satisfactory to the Company evidencing such
obligations; and provided further that such Optionee or Holder shall remain
bound by the terms and conditions of this Plan. In the case of a transfer by a
non-employee director to another non-employee director, the vesting and
exercisability shall after such transfer be determined by reference to the
service of the assignee, rather than the assignor. The Company shall cooperate
with any Permitted Assignee and the Company's transfer agent in effectuating any
transfer permitted under this Section 10.4.

    10.5.  Termination of Employment.  In the event of the termination of
employment of an Optionee or the termination or separation from service of an
advisor or consultant or a Director (who is an Optionee) for any reason (other
than death or disability as provided below), any Option(s) granted to such
Optionee under this Plan and not previously exercised or expired shall be deemed
cancelled and terminated on the day of such termination or separation, unless
the Committee decides, in its sole discretion, to extend the term of the Option
for a period not to exceed three months after the date of such termination or
separation, provided, however, that in no instance may the term of the Option,
as so extended, exceed the maximum term established pursuant to
Section 3.1(b)(ii) or 10.1 above. Notwithstanding the foregoing, in the event of
the termination or separation from service of an Optionee for any reason other
than death or disability, under conditions satisfactory to the Company, the
Committee may, in its sole discretion, allow any "nonqualified share options"
granted to such Optionee under the Plan and not previously exercised or expired
to be exercisable for a period of time to be specified by the Committee,
provided, however, that in no instance may the term of the Option, as so
extended, exceed the maximum term established pursuant to Section 10.1 above.

    10.6.  Death.  In the event an Optionee dies while employed by the Company
or any of its subsidiaries or affiliates or during his term as a Director of the
Company or any of its subsidiaries or affiliates, as the case may be, any
Option(s) granted to him (or his Permitted Assignee) and not

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previously expired or exercised shall, to the extent exercisable on the date of
death, be exercisable by the estate of such Optionee or by any person who
acquired such Option by bequest or inheritance, or by the Permitted Assignee at
any time within one year after the death of the Optionee, unless earlier
terminated pursuant to its terms, provided, however, that if the term of such
Option would expire by its terms within six months after the Optionee's death,
the term of such Option shall be extended until six months after the Optionee's
death, provided further, however, that in no instance may the term of the
Option, as so extended, exceed the maximum term established pursuant to
Section 3.1(b)(ii) or 10.1 above.

    10.7.  Disability.  In the event of the termination of employment of an
Optionee or the separation from service of a Director (who is an Optionee) due
to total disability, the Optionee, or his guardian or legal representative, or a
Permitted Assignee shall have the unqualified right to exercise any Option(s)
which have not been previously exercised or expired and which the Optionee was
eligible to exercise as of the first date of total disability (as determined by
the Committee), at any time within one year after such termination or
separation, unless earlier terminated pursuant to its terms, provided, however,
that if the term of such Option would expire by its terms within six months
after such termination or separation, the term of such Option shall be extended
until six months after such termination or separation, provided further,
however, that in no instance may the term of the Option, as so extended, exceed
the maximum term established pursuant to Section 3.1(b)(ii) or 10.1 above. The
term "total disability" shall, for purposes of this Plan, be defined in the same
manner as such term is defined in Section 22(e)(3) of the Code.

    10.8.  Amendment and Modification of the Plan.  The Compensation Committee
of the Board of Directors of the Company may, from time to time, alter, amend,
suspend or terminate the Plan as it shall deem advisable, subject to any
requirement for shareholder approval imposed by applicable law or any rule of
any stock exchange or quotation system on which Shares are listed or quoted;
provided that such Compensation Committee may not amend the Plan, without the
approval of the Company's shareholders, to increase the number of Shares that
may be the subject of Options under the Plan (except for adjustments pursuant to
Section 10.9 hereof). In addition, no amendments to, or termination of, the Plan
shall in any way impair the rights of an Optionee or a Participant (or a
Permitted Assignee thereof) under any Award previously granted without such
Optionee's or Participant's consent.

    10.9.  Adjustments.  In the event that the Committee shall determine that
any dividend or other distribution (whether in the form of cash, Shares, other
securities, or other property), recapitalization, stock split, reverse stock
split, reorganization, merger, consolidation, split-up, spin-off, combination,
repurchase, or exchange of Shares or other securities, the issuance of warrants
or other rights to purchase Shares or other securities, or other similar
corporate transaction or event affects the Shares with respect to which Options
have been or may be issued under the Plan, such that an adjustment is determined
by the Committee to be appropriate in order to prevent dilution or enlargement
of the benefits or potential benefits intended to be made available under the
Plan, then the Committee shall, in such manner as the Committee may deem
equitable, adjust any or all of (i) the number and type of Shares that
thereafter may be made the subject of Options, (ii) the number and type of
Shares subject to outstanding Options and share appreciation rights, and
(iii) the grant or exercise price with respect to any Option, or, if deemed
appropriate, make provision for a cash payment to the holder of any outstanding
Option; provided, in each case, that with respect to "incentive stock options,"
no such adjustment shall be authorized to the extent that such adjustment would
cause such options to violate Section 422(b) of the Code or any successor
provision; and provided further, that the number of Shares subject to any Option
denominated in Shares shall always be a whole number. In the event of any
reorganization, merger, consolidation, split-up, spin-off, or other business
combination involving the Company (collectively, a "Reorganization"), the
Compensation Committee of the Board of Directors or the Board of Directors may
cause any Award outstanding as of the effective date of the Reorganization

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to be cancelled in consideration of a cash payment or alternate Award made to
the holder of such cancelled Award equal in value to the fair market value of
such cancelled Award. The determination of fair market value shall be made by
the Compensation Committee of the Board of Directors or the Board of Directors,
as the case may be, in their sole discretion.

    10.10.  Change in Control.  The terms of any Award may provide in the Share
Option Agreement, Restricted Share Agreement, Purchase Loan or other document
evidencing the Award, that upon a "Change in Control" of the Company (as that
term may be defined therein), (i) Options (and share appreciation rights)
accelerate and become fully exercisable, (ii) restrictions on Restricted Shares
lapse and the shares become fully vested, (iii) Purchase Loans are forgiven in
whole or in part, and (iv) such other additional benefits as the Committee deems
appropriate shall apply. For purposes of this Plan, a "Change in Control" shall
mean an event described in the applicable document evidencing the Award or such
other event as determined in the sole discretion of the Board of Directors of
the Company. The Committee, in its discretion, may determine that, upon the
occurrence of a Change in Control of the Company, each Option and share
appreciation right outstanding hereunder shall terminate within a specified
number of days after notice to the Participant or Holder, and such Participant
or Holder shall receive, with respect to each Share subject to such Option or
share appreciation right, an amount equal to the excess of the Fair Market Value
of such Shares immediately prior to the occurrence of such Change in Control
over the exercise price per share of such Option or share appreciation right;
such amount to be payable in cash, in one or more kinds of property (including
the property, if any, payable in the transaction) or in a combination thereof,
as the Committee, in its discretion, shall determine.

    10.11.  Employment Violation.  Each Share Option Agreement evidencing an
Option granted on or after April 1, 2001, shall include and be subject to the
following terms:

(a)The terms of this Section 10.11 shall apply to the Option if the Optionee is
or shall become subject to an employment agreement with the Company.

(b)If the Optionee materially breaches his or her employment agreement (it being
understood that any breach of the post-termination obligations contained therein
shall be deemed to be material) for so long as the terms of such employment
agreement shall apply to the Optionee (each, an "Employment Violation"), the
Company shall have the right to require (i) the termination and cancellation of
the unexercised portion of the Option, if any, whether vested or unvested, and
(ii) payment by the Optionee to the Company of the Recapture Amount (as defined
below). Such termination of unexercised Options and payment of the Recapture
Amount, as the case may be, shall be in addition to, and not in lieu of, any
other right or remedy available to the Company arising out of or in connection
with any such Employment Violation including, without limitation, the right to
terminate Optionee's employment if not already terminated, seek injunctive
relief and additional monetary damages.

(c)"Recapture Amount" shall mean the gross gain realized or unrealized by the
Optionee upon each exercise of his Option during the period beginning on the
date which is twelve (12) months prior to the date of the Optionee's Employment
Violation and ending on the date of computation (the "Look-back Period"), which
gain shall be calculated as the sum of:

(i)if the Optionee has exercised any portion of his Option during the Look-back
Period and sold any of the Shares acquired on exercise thereafter, an amount
equal to the product of (x) the sales price per Share sold minus the exercise
price per Share times (y) the number of Shares as to which the Option was
exercised and which were sold at such sales price; plus

(ii)if the Optionee has exercised any portion of his Option during the Look-back
Period and not sold any of the Shares acquired on exercise thereafter, with
respect to each of such Shares an amount equal to the product of (x) the
greatest of the following: (1) the Fair Market Value per Share on the date of
exercise, (2) the arithmetic average of the per

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Share closing sales prices as reported on NASDAQ for the thirty (30) trading day
period ending on the trading day immediately preceding the date of the Company's
written notice of its exercise of its rights under this clause (h), or (3) the
arithmetic average of the per Share closing sales prices as reported on NASDAQ
for the thirty (30) trading day period ending on the trading day immediately
preceding the date of computation, minus the exercise price per Share times
(y) the number of Shares as to which this Option was exercised and which were
not sold;

provided, however, in lieu of payment by the Optionee to the Company of the
Recapture Amount determined pursuant to subclause (ii) above, the Optionee, in
his or her discretion, may tender to the Company the Shares acquired upon
exercise of this Option during the Look-back Period and not sold and the
Optionee shall not be entitled to receive any consideration from the Company in
exchange therefor.

    With respect to any other Awards granted hereunder, the terms of any
Restricted Share Agreement, share appreciation right, Share Purchase Award or
any other document evidencing an Award under the Plan, may include comparable
provisions to those set forth in this Section 10.11.

    10.12.  Other Provisions.  (a) The Committee may require each Participant
purchasing Shares pursuant to an Award under the Plan to represent to and agree
with the Company in writing that such Participant is acquiring the Shares
without a view to distribution thereof. The certificates for such Shares may
include any legend which the Committee deems appropriate to reflect any
restrictions on transfer.

(b)All certificates for Shares delivered under the Plan pursuant to any Award
shall be subject to such share-transfer orders and other restrictions as the
Committee may deem advisable under the rules, regulations, and other
restrictions of the Securities and Exchange Commission, any stock exchange upon
which the Shares are then listed, and any applicable Federal or state securities
law, and the Committee may cause a legend or legends to be put on any such
certificates to make appropriate reference to such restrictions.

(c)Awards granted under the Plan may, in the discretion of the Committee, be
granted either alone or in addition to, in tandem with, or in substitution for,
any other Awards granted under the Plan. If Awards are granted in substitution
for other Awards, the Committee shall require the surrender of such other Awards
in consideration for the grant of the new Awards. Awards granted in addition to
or in tandem with other Awards may be granted either at the same time as or at a
different time from the grant of such other Awards.

(d)Nothing contained in this Plan shall prevent the Board of Directors from
adopting other or additional compensation arrangements, subject to shareholder
approval if such approval is required; and such arrangements may be either
generally applicable or applicable only in specific cases.

(e)A Participant shall have no right as a shareholder until he or she becomes
the holder of record.

(f)The Company will provide to its shareholders, at least annually, reports
containing financial statements and management's discussion and analysis of
financial conditions and results of operations.

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ARTICLE 11.

PERFORMANCE-BASED AWARDS.

    11.1.  General.  (a) Certain Awards granted under the Plan may be granted in
a manner such that the Awards qualify as "performance-based compensation"(as
such term is used in Section 162(m) of the Code and the regulations thereunder)
and thus be exempt from the deduction limitation imposed by Section 162(m) of
the Code ("Performance-Based Awards"). Awards shall only qualify as
Performance-Based Awards if, among other things, at the time of grant the
Committee is comprised solely of two or more "outside directors" (as such term
is used in Section 162(m) of the Code and the regulations thereunder).

(b)Performance-Based Awards may be granted to Participants at any time and from
time to time, as shall be determined by the Committee. The Committee shall have
complete discretion in determining the number, amount and timing of awards
granted to each Participant. Such Performance-Based Awards may take the form of,
without limitation, cash, Shares or any combination thereof.

(c)The Committee shall set performance goals at its discretion which, depending
on the extent to which they are met, will determine the number and/or value of
such Performance-Based Awards that will be paid out to the Participants, and may
attach to such Performance-Based Awards one or more restrictions. The maximum
amount of Performance-Based Awards to be awarded to any employee during any
fiscal year shall be $1,000,000.

    11.2.  Options and Share Appreciation Rights.  Options and share
appreciation rights granted under the Plan with an exercise price at or above
the fair market value of the Shares on the date of grant should qualify as
Performance-Based Awards.

    11.3.  Other Awards.  Either the granting or vesting of Performance-Based
Awards granted under the Plan shall be subject to the achievement of a
performance target or targets, as determined by the Committee in its sole
discretion, based on one or more of the performance measures specified in
Section 11.4 below. With respect to such Performance-Based Awards:

(1)the Committee shall establish in writing (x) the objective performance-based
goals applicable to a given period and (y) the individual employees or class of
employees to which such performance-based goals apply no later than 90 days
after the commencement of such period (but in no event after 25 percent of such
period has elapsed);

(2)no Performance-Based Awards shall be payable to or vest with respect to, as
the case may be, any Participant for a given period until the Committee
certifies in writing that the objective performance goals (and any other
material terms) applicable to such period have been satisfied; and

(3)after the establishment of a performance goal, the Committee shall not revise
such performance goal or increase the amount of compensation payable thereunder
(as determined in accordance with Section 162(m) of the Code) upon the
attainment of such performance goal.

    11.4.  Performance Measures.  The Committee may use the following
performance measures (either individually or in any combination) to set
performance targets with respect to Awards intended to qualify as
Performance-Based Awards: net sales; pretax income before allocation of
corporate overhead and bonus; budget; earnings per share; net income; division,
group or corporate financial goals; return on stockholders' equity; return on
assets; attainment of strategic and operational initiatives; appreciation in
and/or maintenance of the price of the Common Stock or any other publicly-traded
securities of the Company; market share; gross profits; earnings before taxes;
earnings before

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interest and taxes; earnings before interest, taxes, depreciation and
amortization; economic value-added models; comparisons with various stock market
indices; and/or reductions in costs.

ARTICLE 12.

MISCELLANEOUS

    12.1.  Tax Withholding.  The Company shall notify an Optionee or Participant
(or a Permitted Assignee thereof) of any income tax withholding requirements
arising as a result of the grant of any Award, exercise of an Option or share
appreciation rights or any other event occurring pursuant to this Plan. The
Company shall have the right to withhold from such Optionee or Participant (or a
Permitted Assignee thereof) such withholding taxes as may be required by law, or
to otherwise require the Optionee or Participant (or a Permitted Assignee
thereof) to pay such withholding taxes. If the Optionee or Participant (or a
Permitted Assignee thereof) shall fail to make such tax payments as are
required, the Company or its subsidiaries or affiliates shall, to the extent
permitted by law, have the right to deduct any such taxes from any payment of
any kind otherwise due to such Optionee or Participant or to take such other
action as may be necessary to satisfy such withholding obligations. In
satisfaction of the requirement to pay withholding taxes, the Optionee (or
Permitted Assignee) make a written election, which may be accepted or rejected
in the discretion of the Committee, to have withheld a portion of the Shares
then issuable to the Optionee (or Permitted Assignee) pursuant to the Option
having an aggregate Fair Market Value equal to the withholding taxes.

    12.2.  Right of Discharge Reserved.  Nothing in the Plan nor the grant of an
Award hereunder shall confer upon any employee, Director or other individual the
right to continue in the employment or service of the Company or any subsidiary
or affiliate of the Company or affect any right that the Company or any
subsidiary or affiliate of the Company may have to terminate the employment or
service of (or to demote or to exclude from future Options under the Plan) any
such employee, Director or other individual at any time for any reason. Except
as specifically provided by the Committee, the Company shall not be liable for
the loss of existing or potential profit from an Award granted in the event of
termination of an employment or other relationship even if the termination is in
violation of an obligation of the Company or any subsidiary or affiliate of the
Company to the employee or Director.

    12.3.  Nature of Payments.  All Awards made pursuant to the Plan are in
consideration of services performed or to be performed for the Company or any
subsidiary or affiliate of the Company. Any income or gain realized pursuant to
Awards under the Plan and any share appreciation rights constitutes a special
incentive payment to the Optionee, Participant or Holder and shall not be taken
into account, to the extent permissible under applicable law, as compensation
for purposes of any of the employee benefit plans of the Company or any
subsidiary or affiliate of the Company except as may be determined by the
Committee or by the Directors or directors of the applicable subsidiary or
affiliate of the Company.

    12.4.  Unfunded Status of the Plan.  The Plan is intended to constitute an
"unfunded" plan for incentive and deferred compensation. With respect to any
payments not yet made to a Participant or Optionee by the Company, nothing
contained herein shall give any such Participant or Optionee any rights that are
greater than those of a general creditor of the Company. In its sole discretion,
the Committee may authorize the creation of trusts or other arrangements to meet
the obligations created under the Plan to deliver the Shares or payments in lieu
of or with respect to Awards hereunder; provided, however, that the existence of
such trusts or other arrangements is consistent with the unfunded status of the
Plan.

    12.5.  Severability.  If any provision of the Plan shall be held unlawful or
otherwise invalid or unenforceable in whole or in part, such unlawfulness,
invalidity or unenforceability shall not affect any other provision of the Plan
or part thereof, each of which remain in full force and effect. If the making

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of any payment or the provision of any other benefit required under the Plan
shall be held unlawful or otherwise invalid or unenforceable, such unlawfulness,
invalidity or unenforceability shall not prevent any other payment or benefit
from being made or provided under the Plan, and if the making of any payment in
full or the provision of any other benefit required under the Plan in full would
be unlawful or otherwise invalid or unenforceable, then such unlawfulness,
invalidity or unenforceability shall not prevent such payment or benefit from
being made or provided in part, to the extent that it would not be unlawful,
invalid or unenforceable, and the maximum payment or benefit that would not be
unlawful, invalid or unenforceable shall be made or provided under the Plan.

    12.6.  Gender and Number.  In order to shorten and to improve the
understandability of the Plan document by eliminating the repeated usage of such
phrases as "his or her" and any masculine terminology herein shall also include
the feminine, and the definition of any term herein in the singular shall also
include the plural except when otherwise indicated by the context.

    12.7.  Governing Law.  The Plan and all determinations made and actions
taken thereunder, to the extent not otherwise governed by the Code or the laws
of the United States, shall be governed by the laws of the State of Delaware and
construed accordingly.

    12.8.  Effective Date of Plan; Termination of Plan.  The Plan shall be
effective on the date of the approval of the Plan by the Board of Directors.
Notwithstanding the foregoing, no Option intended to qualify as an incentive
share option shall be granted hereunder until the Plan shall be approved by the
holders of a majority of the shares entitled to vote thereon, provided such
approval is obtained within 12 months after the date of adoption of the Plan by
the Board of Directors. Awards may be granted under the Plan at any time and
from time to time prior to May 31, 2008, on which date the Plan will expire
except as to Awards and related share appreciation rights then outstanding under
the Plan. Such outstanding Awards and share appreciation rights shall remain in
effect until they have been exercised or terminated, or have expired.

    12.9.  Captions.  The captions in this Plan are for convenience of reference
only, and are not intended to narrow, limit or affect the substance or
interpretation of the provisions contained herein.

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STOCK OPTION CERTIFICATE
(Non-Transferable)

Stock Option #9800xxxx   For x,xxx Shares

Issued Pursuant to the
1998 Incentive Plan of
ACTIVISION, INC.

    THIS CERTIFIES that on            (the "Issuance Date")            (the
"Holder") was granted an option (the "Option") to purchase at the option price
of $xx.xxx per share, all or any part of      fully paid and non-assessable
shares ("Shares") of the Common Stock (no par value) of ACTIVISION, INC., a
Delaware corporation (the "Company"), upon and subject to the following terms
and conditions:

    1.  Terms of the Plan.  The Option is granted pursuant to, and is subject to
the terms and conditions of, the 1998 Incentive Plan of the Company (the
"Plan"), the terms, conditions and definitions of which are hereby incorporated
herein as though set forth at length, and the receipt of a copy of which the
Holder hereby acknowledges by his signature below. Capitalized terms used herein
shall have the meanings set forth in the Plan, unless otherwise defined herein.

    2.  Expiration.  This Option shall expire on            , unless extended or
earlier terminated in accordance herewith.

    3.  Exercise.  This Option may be exercised or surrendered during the
Holder's lifetime only by the Holder or his/her guardian or legal
representative. THIS OPTION SHALL NOT BE TRANSFERABLE BY THE HOLDER OTHERWISE
THAN BY WILL OR BY THE LAWS OF DESCENT AND DISTRIBUTION, SUBJECT TO THE TERMS
AND CONDITIONS OF THE PLAN.

    This Option shall vest and be exercisable as follows:

Vesting Date

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  Shares Vested at Vesting Date

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

  Cumulative Shares
Vested at Vesting Date

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

 
 
 
 
           

    This Option shall be exercised by the Holder (or by his or her executors,
administrators, guardian or legal representative) as to all or part of the
Shares, by the giving of written notice of exercise to the Company, specifying
the number of Shares to be purchased, accompanied by payment of the full
purchase price for the Shares being purchased. Full payment of such purchase
price shall be made at the time of exercise and shall be made (i) in cash or by
certified check or bank check, (ii) with the consent of the Company, by
tendering previously acquired Shares (valued at its Fair Market Value (as
defined in the Plan), as determined by the Company as of the date of tender), or
(iii) with the consent of the Company, combination of (i) and (ii). Such notice
of exercise, accompanied by such payment, shall be delivered to the Company at
its principal business office or such other office as the Company may from time
to time direct, and shall be in such form, containing such further provisions as
the Company may from time to time prescribe. In no event may this Option be
exercised for a fraction of a Share. The Company shall effect the transfer of
Shares purchased pursuant to an Option as soon as practicable, and, within a
reasonable time thereafter, such transfer shall be evidenced on the books of the
Company. No person exercising this Option shall have any of the rights of a
holder of Shares subject to this Option until certificates for such Shares shall
have been issued following the exercise of

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such Option. No adjustment shall be made for cash dividends or other rights for
which the record date is prior to the date of such issuance.

    4.  Termination of Employment.  In the event of the termination of
employment or separation from service of the Holder for any reason (other than
death or disability as provided below), this Option, to the extent not
previously exercised or expired, shall be deemed cancelled and terminated
30 days after the day of such termination or separation.

    5.  Death.  In the event the Holder dies while employed by the Company or
any of its subsidiaries or affiliates, or during his term as a Director of the
Company or any of its subsidiaries or affiliates, as the case may be, this
Option, to the extent not previously expired or exercised, shall, to the extent
exercisable on the date of death, be exercisable by the estate of the Holder or
by any person who acquired this Option by bequest or inheritance, at any time
within one year after the death of the Holder, unless earlier terminated
pursuant to its terms, provided, however, that if the term of this Option would
expire by its terms within six months after the Holder's death, the term of this
Option shall be extended until six months after the Holder's death.

    6.  Disability.  In the event of the termination of employment of the Holder
or the separation from service of a Director who is a Holder due to total
disability, the Holder, or his or her guardian or legal representative, shall
have the unqualified right to exercise any portion of this Option which has not
been previously exercised or expired and which the Holder was eligible to
exercise as of the first date of total disability (as determined by the
Company), at any time within one year after such termination or separation,
unless earlier terminated pursuant to its terms, provided, however, that if the
term of such Option would expire by its terms within six months after such
termination or separation, the term of such Option shall be extended until six
months after such termination or separation. The term "total disability" shall,
for purposes of this Option Certificate, be defined in the same manner as such
term is defined in Section 22(e)(3) of the Internal Revenue Code of 1986, as
amended.

    7.  Change of Control.  If the Holder is an active employee of the Company
or any of its subsidiaries at the time there occurs a "Change of Control" of the
Company (as defined below) and the Holder's employment is terminated by the
Company or any of its subsidiaries other than for Cause (as defined below)
within twelve (12) months following such Change of Control, or such longer
period as the Committee may determine, the portion, if any, of this Option with
respect to which the right to exercise has not yet accrued, shall immediately
vest and be exercisable in full, effective upon such termination, for a period
of 30 days thereafter, or such longer period as the Committee may determine. For
purposes of this Option, a "Change of Control" of the Company shall be deemed to
occur if:

(i)there shall have occurred a Change of Control of a nature that would be
required to be reported in response to Item 6(e) of Schedule 14A of
Regulation 14A promulgated under the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), as in effect on the date hereof, whether or not the
Company is then subject to such reporting requirement, provided, however, that
there shall not be deemed to be a Change of Control of the Company if
immediately prior to the occurrence of what would otherwise be a Change of
Control of the Company (a) the Holder is the other party to the transaction (a
"Control Event") that would otherwise result in a Change of Control of the
Company or (b) the Holder is an executive officer, trustee, director or more
than 5% equity holder of the other party to the Control Event or of any entity,
directly or indirectly, controlling such other party;

(ii)the Company merges or consolidates with, or sells all or substantially all
of its assets to, another company (each, a "Transaction"), provided, however,
that a Transaction shall not be deemed to result in a Change of Control of the
Company if (a) immediately prior thereto the circumstances in (i)(a) or (i)(b)
above exist, or (b) (1) the shareholders of the Company, immediately before such
Transaction own, directly or indirectly, immediately

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following such Transaction in excess of fifty percent (50%) of the combined
voting power of the outstanding voting securities of the corporation or other
entity resulting from such Transaction (the "Surviving Corporation") in
substantially the same proportion as their ownership of the voting securities of
the Company immediately before such Transaction and (2) the individuals who were
members of the Company's Board of Directors immediately prior to the execution
of the agreement providing for such Transaction constitute at least a majority
of the members of the board of directors or the board of trustees, as the case
may be, of the Surviving Corporation, or of a corporation or other entity
beneficially directly or indirectly owning a majority of the outstanding voting
securities of the Surviving Corporation; or

(iii)the Company acquires assets of another company or a subsidiary of the
Company merges or consolidates with another company (each, an "Other
Transaction") and (a) the shareholders of the Company, immediately before such
Other Transaction own, directly or indirectly, immediately following such Other
Transaction 50% or less of the combined voting power of the outstanding voting
securities of the corporation or other entity resulting from such Other
Transaction (the "Other Surviving Corporation") in substantially the same
proportion as their ownership of the voting securities of the Company
immediately before such Other Transaction or (b) the individuals who were
members of the Company's Board of Directors immediately prior to the execution
of the agreement providing for such Other Transaction constitute less than a
majority of the members of the board of directors or the board of trustees, as
the case may be, of the Other Surviving Corporation, or of a corporation or
other entity beneficially directly or indirectly owning a majority of the
outstanding voting securities of the Other Surviving Corporation, provided,
however, that an Other Transaction shall not be deemed to result in a Change of
Control of the Company if immediately prior thereto the circumstances in (i)(a)
or (i)(b) above exist.

    For purposes of this Option, "Cause" shall mean (unless a different
definition is used in the Holder's written employment agreement with the
Company, if any, in which case such different definition shall apply to the
Holder) any of the following:

(i)material breach by the Holder of his or her employment agreement, if any, or
material failure by the Holder to perform his or her duties (other than as a
result of incapacity due to physical or mental illness) during his or her
employment with the Company after written notice of such breach or failure and
the Holder failed to cure such breach or failure to the Company's reasonable
satisfaction within five (5) days after receiving such written notice;

(ii)material breach by the Holder of his or her Employee Proprietary Information
Agreement or other similar arrangement entered into by the Holder in connection
with his or her employment by the Company; or

(iii)any act of fraud, misappropriation, misuse, embezzlement or any other
material act of dishonesty in respect of the Company or its funds, properties,
assets or other employees.

    8.  Employment Violation.  In consideration of the granting of this Option,
the Holder hereby agrees that the terms of this paragraph (h) shall apply to the
Option. The Holder acknowledges and agrees that each exercise of this Option and
each written notice of exercise delivered to the Company and executed by the
Holder shall serve as a reaffirmation of and continuing agreement by the Holder
to comply with the terms contained in this paragraph (h).

    The Company and the Holder acknowledge and agree that if the Holder is or
shall become subject to an employment agreement with the Company and the Holder
materially breaches his or her

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employment agreement (it being understood that any breach of the
post-termination obligations contained therein shall be deemed to be material)
for so long as the terms of such employment agreement shall apply to the Holder
(each, an "Employment Violation"), the Company shall have the right to require
(i) the termination and cancellation of the unexercised portion of this Option,
if any, whether vested or unvested, and (ii) payment by the Holder to the
Company of the Recapture Amount (as defined below). The Company and the Holder
further agree that such termination of unexercised Options and payment of the
Recapture Amount, as the case may be, shall be in addition to, and not in lieu
of, any other right or remedy available to the Company arising out of or in
connection with any such Employment Violation including, without limitation, the
right to terminate the Holder's employment if not already terminated, seek
injunctive relief and additional monetary damages.

    For purposes of this Option, the "Recapture Amount" shall mean the gross
gain realized or unrealized by the Holder upon each exercise of this Option
during the period beginning on the date which is twelve (12) months prior to the
date of the Holder's Employment Violation and ending on the date of computation
(the "Look-back Period"), which gain shall be calculated as the sum of:

(i)if the Holder has exercised any portion of this Option during the Look-back
Period and sold any of the Shares acquired on exercise thereafter, an amount
equal to the product of (x) the sales price per Share sold less the exercise
price per Share times (y) the number of Shares as to which this Option was
exercised and which were sold at such sales price; plus

(ii)if the Holder has exercised any portion of this Option during the Look-back
Period and not sold any of the Shares acquired on exercise thereafter, with
respect to each of such Shares an amount equal to the product of (x) the
greatest of the following: (1) the Fair Market Value per Share on the date of
exercise, (2) the arithmetic average of the per Share closing sales prices as
reported on NASDAQ for the thirty (30) trading day period ending on the trading
day immediately preceding the date of the Company's written notice of its
exercise of its rights under this paragraph (h), or (3) the arithmetic average
of the per Share closing sales prices as reported on NASDAQ for the thirty
(30) trading day period ending on the trading day immediately preceding the date
of computation, minus the exercise price per Share times (y) the number of
Shares as to which this Option was exercised and which were not sold;

provided, however, in lieu of payment by the Holder to the Company of the
Recapture Amount determined pursuant to clause (ii) above, the Holder, in his or
her discretion, may tender to the Company the Shares acquired upon exercise of
this Option during the Look-back Period and not sold and the Holder shall not be
entitled to receive any consideration from the Company in exchange therefor.

    9.  Adjustments.  In the event that the Company shall determine that any
dividend or other distribution (whether in the form of cash, shares of common
stock of the Company, other securities, or other property), recapitalization,
stock split, reverse stock split, reorganization, merger, consolidation,
split-up, spin-off, combination, repurchase, or exchange of shares of common
stock of the Company or other securities, the issuance of warrants or other
rights to purchase shares of common stock of the Company, or other securities,
or other similar corporate transaction or event affects the Shares, such that an
adjustment is determined by the Company to be appropriate in order to prevent
dilution or enlargement of the benefits or potential benefits intended to be
made available to the Holder, then the Company shall, in such manner as the
Company may deem equitable, adjust any or all of (i) the number and type of
shares of common stock of the Company subject to this Option, and (ii) the grant
or exercise price with respect to this Option, or, if deemed appropriate, make
provision for a cash payment to the Holder.

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    10.  Delivery of Share Certificates.  Within a reasonable time after the
exercise of this Option, the Company shall cause to be delivered to the person
entitled thereto a certificate for the Shares purchased pursuant to the exercise
of this Option. If this Option shall have been exercised with respect to less
than all of the Shares subject to this Option, the Company shall also cause to
be delivered to the person entitled thereto a new Option Certificate in
replacement of this Option Certificate if surrendered at the time of the
exercise of this Option, indicating the number of Shares with respect to which
this Option remains available for exercise, or the Company shall make a notation
in its books and records to reflect the partial exercise of this Option.

    11.  Withholding.  In the event that the Holder elects to exercise this
Option or any part thereof, and if the Company or any subsidiary or affiliate of
the Company shall be required to withhold any amounts by reasons of any federal,
state or local tax laws, rules or regulations in respect of the issuance of
Shares to the Holder pursuant to this Option, the Company or such subsidiary or
affiliate shall be entitled to deduct and withhold such amounts from any
payments to be made to the Holder. In any event, the Holder shall make available
to the Company or such subsidiary or affiliate, promptly when requested by the
Company or such subsidiary or affiliate, sufficient funds to meet the
requirements of such withholding; and the Company or such subsidiary or
affiliate shall be entitled to take and authorize such steps as it may deem
advisable in order to have such funds available to the Company or such
subsidiary or affiliate out of any funds or property due or to become due to the
Holder.

    12.  Reservation of Shares.  The Company hereby agrees that at all times
there shall be reserved for issuance and/or delivery upon exercise of this
Option such number of Shares as shall be required for issuance or delivery upon
exercise hereof.

    13.  Rights of Holder.  Nothing contained herein shall be construed to
confer upon the Holder any right to be continued in the employ of the Company
and/or any subsidiary or affiliate of the Company or derogate from any right of
the Company and/or any subsidiary or affiliate of the Company to retire, request
the resignation of, or discharge the Holder at any time, with or without cause.
The Holder shall not, by virtue hereof, be entitled to any rights of a
shareholder in the Company, either at law or in equity, and the rights of the
Holder are limited to those expressed herein and are not enforceable against the
Company except to the extent set forth herein.

    14.  Exclusion from Pension Computations.  By acceptance of the grant of
this Option, the Holder hereby agrees that any income realized upon the receipt
or exercise hereof, or upon the disposition of the Shares received upon its
exercise, is special incentive compensations and, to the extent permissible
under applicable law, shall not be taken into account as "wages", "salary" or
"compensation" in determining the amount of any payment under any pension,
retirement, incentive, profit sharing, bonus or deferred compensation plan of
the Company or any of its subsidiaries or affiliates.

    15.  Registration; Legend.  The Company may postpone the issuance and
delivery of Shares upon any exercise of this Option until (a) the admission of
such Shares to listing on any stock exchange or exchanges on which Shares of the
Company of the same class are then listed and (b) the completion of such
registration or other qualification of such Shares under any state or federal
law, rule or regulation as the Company shall determine to be necessary or
advisable. The Holder shall make such representations and furnish such
information as may, in the opinion of counsel for the Company, be appropriate to
permit the Company, in light of the then existence or non-existence with respect
to such Shares of an effective Registration Statement under the Securities Act
of 1933, as amended, to issue the Shares in compliance with the provisions of
that or any comparable act.

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    The Company may cause the following or a similar legend to be set forth on
each certificate representing Shares or any other security issued or issuable
upon exercise of this Option unless counsel for the Company is of the opinion as
to any such certificate that such legend is unnecessary:

THE SECURITIES REPRESENTED BY THIS CERTIFICATE MAY NOT BE OFFERED FOR SALE, SOLD
OR OTHERWISE TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR PURSUANT TO AN
EXEMPTION FROM REGISTRATION UNDER THE ACT, THE AVAILABILITY OF WHICH IS
ESTABLISHED BY AN OPINION FROM COUNSEL TO THE COMPANY.

    16.  Amendment.  The Company may, with the consent of the Holder, at any
time or from time to time amend the terms and conditions of this Option, and may
at any time or from time to time amend the terms of this Option.

    17.  Notices.  Any notice which either party hereto may be required or
permitted to give to the other shall be in writing, and may be delivered
personally or by mail, postage prepaid, or overnight courier, addressed as
follows: if to the Company, at its office at 3100 Ocean Park Blvd., Santa
Monica, California 90405, Attn: General Counsel, or at such other address as the
Company by notice to the Holder may designate in writing from time to time; and
if to the Holder, at the address shown below his or her signature on this Option
Certificate, or at such other address as the Holder by notice to the Company may
designate in writing from time to time. Notices shall be effective upon receipt.

    18.  Interpretation.  A determination of the Company as to any questions
which may arise with respect to the interpretation of the provisions of this
Option and of the Plan shall be final and binding. The Company may authorize and
establish such rules, regulations and revisions thereof as it may deem
advisable.

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    IN WITNESS WHEREOF, the parties have executed this Option Certificate as of
the date set forth above.

ACTIVISION, INC.    
By:
 
 

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Dated:
 
 

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Attest:
 
 

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ACCEPTED:
 
 

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  Address    

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  City       State       Zip Code    

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  Social Security Number    

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QuickLinks

ACTIVISION, INC. 1998 INCENTIVE PLAN
RECITALS
ARTICLE 1. PURPOSE OF THE PLAN
ARTICLE 2. SHARES SUBJECT TO AWARDS
ARTICLE 3. ELIGIBILITY AND ADMINISTRATION
ARTICLE 4. OPTIONS
ARTICLE 5. SHARE APPRECIATION RIGHTS
ARTICLE 6. RELOAD OPTIONS
ARTICLE 7. SHARE PURCHASE AWARDS
ARTICLE 8. RESTRICTED AWARDS
ARTICLE 9. DEFERRED SHARE AWARDS
ARTICLE 10. GENERALLY APPLICABLE PROVISIONS
ARTICLE 11. PERFORMANCE-BASED AWARDS.
ARTICLE 12. MISCELLANEOUS
STOCK OPTION CERTIFICATE (Non-Transferable)