Exhibit 10.2




 




ACTIVISION, INC.




 




2003 INCENTIVE PLAN




 




ACTIVISION, INC., a corporation formed under the laws of the State of

Delaware (the “Company”), hereby establishes and adopts the following 2003

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, officers

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), grants of Performance-Based Awards (hereafter defined), or

any other award made under the Plan to those persons (each such person, a

“Participant”) whose judgment, initiative and efforts are or have been or will

be 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 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, par value $.000001 per share

(“Shares”).  For purposes of the Plan,

the term “subsidiary” shall mean “subsidiary corporation,” as such term is

defined in Section 424(f) of the Internal Revenue Code of 1986, as amended (the

“Code”), and “affiliate” shall have the meaning set forth in Rule 12b-2 of the

Securities and Exchange Commission (“SEC”), promulgated under 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 8.6 hereof,

the aggregate number of Shares which may be issued under Awards under the Plan shall

not exceed [9,000,000].  No Options to

purchase fractional Shares shall be granted or issued under the Plan.  For purposes of this Section 2.1, the Shares

that shall be counted toward such limitation shall include all Shares issued or

issuable under any Award granted under the terms of the Plan.




 




2.2.                            Shares Subject to Terminated Awards.  The Shares covered by any

unexercised portions of terminated Options, Shares forfeited as provided in

Section 6.1(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, other than grants of

Options intended to qualify as incentive share options.  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 a Related SAR (as defined in

Article 5, below) 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 8.6 hereof, the maximum number of Shares with

respect to which Options or share appreciation rights may be granted hereunder

to any employee during any fiscal year of the Company shall be [750,000] Shares

(the “Limitation”).  If an Option is

cancelled, the cancelled Option shall continue to be counted toward the

Limitation for the fiscal year in which it was granted.  An Option (or a share appreciation right)

that is repriced during any fiscal year is treated as the cancellation of the

Option (or share appreciation right) and a grant of a new Option (or share appreciation

right) for purposes of the Limitation for that fiscal year.




 




ARTICLE 3.




 




ELIGIBILITY

AND ADMINISTRATION




 




3.1.                            Awards to Employees, Directors and Others.  Participants who receive (i)

Options under Article 4 hereof or share appreciation rights under Article 5

(“Optionees”), and (ii) any other Awards granted under the Plan shall consist

of such officers, employees,  consultants, advisors, and directors

(“Directors”)  of the Company or any of

its subsidiaries or affiliates as the Committee (as defined in Section 3.2

below) shall select from time to time in its sole and absolute discretion.




 




3.2.                            Administration. 

(a) The Plan

shall be administered by a committee or committees (the “Committee”) consisting

of not fewer than two Directors as designated by the Directors.  The Directors may remove from, add members

to, or fill vacancies in the Committee. 

In




 




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determining the composition of

any committee or subcommittee, the Directors or the Committee, as the case may

be, shall consider the desirability of compliance with the compositional

requirements of (i) Rule 16b-3 of the SEC with respect to award holders who are

subject to the trading restrictions of Section 16(b) of the Exchange Act with

respect to securities of the Company and (ii) Section 162(m) of the Code, but

shall not be bound by such compliance.




 




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.




 




(c)                                  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.




 




(d)                                  Subject

to the provisions of the Plan, the Committee shall have authority, in its sole

discretion, to grant Awards under the Plan, to determine the amount and/or

number of Shares subject to an Award, to determine the terms of such Award

(which terms need not be identical), to interpret the provisions of the Plan

and, subject to the requirements of applicable law, 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. 

The Committee shall determine, within the limitations of the

Plan, those Participants 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, the time or times at which Options are exercisable, and all other

terms of the Options, and shall designate such Options at the time of the grant

as either incentive share options (“ISOs”) that satisfy the requirements of

Section 422 of the Code or nonqualified share options (“NQOs”) not

intended to satisfy those requirements; 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 NQOs.




 




4.2.                            Share Option Agreements; etc.  All Options granted pursuant to

this Article 4 (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 that are not inconsistent with the provisions of the Plan, and, with

respect to any Share Option Agreement granting Options that are intended to qualify

as ISOs, 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.  To the extent that any Option does not

qualify as an ISO (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 NQO.




 




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4.3.                            Option Price.  Except as otherwise provided herein, and subject to Section 4.5,

the option exercise price per each Share purchasable under any Option for all

(i) ISOs, (ii) NQOs that are Performance-Based Awards (as defined in Article 9,

below) and (iii) Options granted under Section 4.4, below shall not be less

than 100% of the Fair Market Value of such Share on the date of the grant of

such Option.  Except as otherwise

provided herein, the Option exercise price per share of each Share purchasable

under any NQO that is not intended to be performance-based under Section 162(m)

of the Code shall be determined by the Committee at the time of the grant of

such Option.




 




4.4.                            Reload Options.  An Option may provide, subject to such terms as the Committee

shall authorize, that upon the exercise of the Option, the holder will

automatically be granted a new Option covering that number of Shares equal to

(i) the number of Shares delivered to the Company by the holder, or withheld

from Shares otherwise issuable to the holder upon exercise, in payment of the exercise

price of the Option or the tax withholding obligations attributable thereto

and/or (ii) that number of Shares with a then Fair Market Value equal to the

amount of the withholding obligations paid in cash by the holder.




 




4.5.                            Incentive Options.  Options granted under the Plan that are

intended to be ISOs will be subject to the following additional terms:




 




(a)                                  Dollar

limit.  To the extent that the

aggregate Fair Market Value (determined as of the respective date or dates of

grant) of Shares with respect to which Options that would otherwise be ISOs are

exercisable for the first time by an individual during any calendar year under

the Plan (and any other plan of the Company, a parent or subsidiary corporation

or predecessor thereof) exceeds the sum of $100,000 (or other amount allowed

under Section 422 of the Code or the regulations promulgated thereunder),

whether by reason of acceleration or otherwise, those Options will not be

treated as ISOs.  In making this determination,

Options will be taken into account in the order in which they were granted.




 




(b)                                  10%

Shareholder.  If any employee to

whom an ISO is to be granted is, on the date of grant, the owner of Shares

(determined using the attribution rules of Section 424(d) of the Code)

possessing more than 10% of the total combined voting power of all classes of

stock of his or her employer corporation or of its parent or subsidiary, then

the following special provisions will apply to the option granted to that

employee:




 




(i)                                     The

Option price per Share of the stock subject to that ISO will not be less than

110% of the Fair Market Value of the Option Shares on the date of grant; and




 




(ii)                                  The

Option will not have a term in excess of 5 years from the date of grant.




 




(c)                                  Term.  In no event will an ISO be exercisable after

the expiration of 10 years from the date of grant of such Option.




 




(d)                                  Employees.  The class of employees eligible to receive

ISOs is all employees of the Company or a parent or subsidiary.  ISOs may only be granted to employees of the

Company or a parent or subsidiary.  For

purposes of this Plan, “parent” has the meaning attributed to such term for

purposes of Section 422(b) of the Code.




 




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(e)                                  Transferability.  An ISO is not transferable by the employee

to whom it is granted, other than by will or the laws of descent and

distribution, and is exercisable, during his lifetime, only by such employee.




 




4.6.                            Other Provisions. 

Options granted pursuant to this Article 4 shall be made in

accordance with the terms and provisions of Article 8 hereof and any other

applicable terms and provisions of the Plan.




 




ARTICLE 5.




 




SHARE

APPRECIATION RIGHTS




 




5.1.                            Grant and Exercise.  The Committee may provide share appreciation

rights (i) in conjunction with all or part of any Option granted under the Plan

or at any subsequent time during the term of such Option (a “Related SAR”) or

(ii) without regard to any Option or other Award (a “Freestanding SAR”;  Related SARs and Freestanding SARs are

referred to collectively herein as “share appreciation rights”), in each case

upon such terms and conditions as the Committee may establish, subject to

Section 5.3, below, including the right to receive up to, but no more than, an

amount in cash or Shares (or part cash, part Shares) as determined by the

Committee in its sole discretion.




 




5.2.                            Upon

the exercise of a Related SAR, the Option or part thereof to which such Related

SAR 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.




 




5.3.                            With

respect to a Related SAR granted in connection with an Option that is intended

to be an ISO, the following shall apply:




 




(a)                                  Such

Related SAR shall be granted only at the time of the grant of such ISO.




 




(b)                                  No

Related SAR shall be transferable by a Holder otherwise than by will or by the

laws of descent and distribution, and such Related SAR shall be exercisable,

during the Holder’s lifetime, only by the Holder.




 




(c)                                  A

Related SAR 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

exercise price at which Shares can be acquired pursuant to the Option.




 




(d)                                  The

right to receive up to, but no more than, an amount in cash or Shares (or part

cash, part Shares) with respect to such Related SAR may not exceed the excess

of the then Fair Market Value of one Share over the Option exercise price per

Share specified in the related Option multiplied by the number of Shares into

which the Related SAR is exercisable.




 




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ARTICLE 6.




 




RESTRICTED

SHARES AND RESTRICTED SHARE UNITS




 




6.1.                            Restricted Share Awards.  (a) Grant. 

The Committee may grant to any Participant (i) Shares (together with

cash dividend equivalents if so determined by the Committee) (such Shares,

“Restricted Shares”) and/or units which represent a conditional right to

receive Shares, cash or a combination of Shares and cash in the future (such

units, “Restricted Share Units”) in such amount and 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.  A grant of Restricted Shares and/or

Restricted Share Units made pursuant to this Article 6 is referred to as a  “Restricted Share Award.”  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.  The

Committee has absolute discretion to determine whether any consideration (other

than services) is to be received by the Company or its affiliates as a

condition precedent to the issuance of restricted stock.




 




(b)                                  Rights of

Holders of Restricted Shares.  Beginning

on the date of grant of the Restricted Shares and subject to execution of the

Restricted Share Agreement, 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 or any

other property (other than cash) 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.




 




(c)                                  Rights of

Holders of Restricted Share Units. 

Unless the Committee otherwise provides in a Restricted Share Agreement,

any Participant holding Restricted Share Units shall have no rights as a

shareholder of the Company with respect to such Restricted Share Units.  The Committee may provide in the Restricted Share

Agreement evidencing a grant of Restricted Share Units that the Participant

holding such Restricted Share Units shall be credited with additional

Restricted Share Units on account of any dividends paid after the date of the

Restricted Share Agreement and prior to delivery of Shares or cash pursuant to

such Restricted Share Agreement, in a manner determined by the Committee in its

sole discretion.




 




(d)                                  Waiver of

Forfeiture Period.  Notwithstanding

anything contained in this Article 6 to the contrary, the Committee may, in its

sole discretion and subject to the limitations imposed under Section 162(m) of

the Code and the Treasury Regulations thereunder in the case of a Restricted

Share Award intended to comply with the performance-based exception under Code

Section 162(m), 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

Share and/or Restricted Share Units) as the Committee shall deem appropriate.




 




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ARTICLE 7.




 




DEFERRED SHARE

AWARDS




 




7.1.                            Shares and Administration.  (a)  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 on such terms,

conditions and restrictions as the Committee shall determine, including the

time or times at which Deferred Shares shall be awarded, the number of Deferred

Shares to be awarded to any Participant, and the duration of the period (the

“Deferral Period”) during which, and the conditions under which, receipt of the

Shares will be deferred.




 




(b)                                  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.




 




(c)                                  Each

Award shall be confirmed by a Deferred Share agreement or other instrument

executed by the Company and 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.




 




ARTICLE 8.




 




GENERALLY

APPLICABLE PROVISIONS




 




8.1.                            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.




 




8.2.                            Exercise of Options. 

Vested Options granted under the Plan shall be exercised by

the Optionee or by a Permitted Assignee thereof (or by his or her executors,

administrators, guardian or legal representative, as provided in Sections 9.5

and 9.6 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 at the time of exercise and shall be made (i)

in cash or by certified check or bank check or wire transfer of immediately

available funds, (ii) with the consent of the Committee, by tendering

previously acquired Shares (valued at their then Fair Market Value, as

determined by the Committee as of the date of tender) that have been owned for

a period of at least six months (or such other period to avoid accounting

charges against the Company’s earnings), (iii) if Shares are traded on a

national securities exchange, the Nasdaq Stock Market, Inc., or quoted on a

national quotation




 




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system sponsored by the National Association of Securities Dealers,

Inc., and the Committee authorizes this method of exercise, through the

delivery of irrevocable instructions to a broker approved by the Committee to

deliver promptly to the Company an amount equal to the purchase price, or (iv)

through any other method specified in the Share Option Agreement, or 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 (ii) above, the Committee, in its sole

discretion, may permit the Optionee to constructively exchange Shares already

owned by the Optionee in lieu of 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. 

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.




 




8.3.                            Transferability.  Except as provided below, and except as otherwise authorized by

the Committee in a Share Option Agreement with respect to an Optionee, no

Option 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.   NQOs and any Related

SARs granted in tandem therewith are transferable (together and not separately)

with the consent of the Committee by the Optionee or holder of such Related SAR

(“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 8.3.




 




8.4.                            Termination of Employment.  The Committee will determine and set forth

in each Share Option Agreement whether the Options granted in such Share Option

Agreement will continue to be exercisable, and the terms of such exercise, on

and after the date that an Optionee ceases to be employed by or to provide

services to the Company or an affiliate, whether by reason of death,

disability, voluntary or involuntary termination of employment or services, or




 




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otherwise.  The date of

termination of an Optionee’s employment or services will be determined by the

Committee, which determination will be final.




 




8.5.                            Amendment and Modification of the Plan.  The Committee 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 the 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 8.6 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.




 




8.6.                            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 Awards have been or may be

issued under the Plan, such that an adjustment is determined in good faith 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 Awards, (ii) the number and type of

Shares subject to outstanding Awards, and (iii) the grant or exercise price

with respect to any Award, or, if deemed appropriate, make provision for a cash

payment to the holder of any outstanding Award; provided, in each case, that

with respect to ISOs, 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 Award 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 Committee or the Board of

Directors of the Company may cause any Award outstanding as of the effective

date of the Reorganization to be cancelled in consideration of a cash payment

or alternate Award (whether from the Company or another entity that is a party

to the Reorganization) or a combination thereof made to the holder of such

cancelled Award substantially equivalent in value to the fair market value of

such cancelled Award.  The determination

of fair market value shall be made by the Committee or the Board of Directors,

as the case may be, in their sole discretion.




 




8.7.                            Change of Control. 

The terms of any Award may provide in the Share Option

Agreement, Restricted Share Agreement, or other document evidencing the Award,

that upon a “Change of Control” of the Company (as that term may be defined

therein), (i) Options (and share appreciation rights) immediately vest and

become fully exercisable, (ii) restrictions on Restricted Shares lapse and

the shares become fully vested, and (iii) such other additional benefits as the

Committee deems appropriate shall apply, subject in each case to any terms and

conditions contained in the applicable document evidencing such Award.  For purposes of this Plan, a “Change of

Control” shall mean an event described in the applicable document 




 




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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 of 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 Share immediately prior to the occurrence of such Change of

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.




 




8.8.                            Employment Violation.  Each Share Option Agreement evidencing an Option

granted hereunder shall include and be subject to the following terms:




 




(a)                                  The

terms of this Section 8.8 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 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 Section

8.8, or (3) the 




 




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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 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 8.8.




 




8.9.                            Other Provisions. 

(a) 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.




 




(b)                                  A

Participant shall have no right as a shareholder until he or she becomes the

holder of record.




 




(c)                                  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.




 




8.10.                     Terms of Option Grant.  Notwithstanding anything in this Plan to the

contrary, the Committee may grant an Option under such terms and conditions as

may be provided in the Share Option Agreement given to the Optionee and the

Committee has the discretion to modify the terms and conditions of an Option

after grant as long as the rights of the Optionee are not impaired unless the

Optionee otherwise consents, provided,

however, that in no instance may the term of an ISO exceed the

maximum term established pursuant to Section 4.5 above.




 




8.11.                     Repricing of Options and Share Appreciation Rights.  Except as provided in Section 8.6 above, the

exercise price of an Option or share appreciation right granted hereunder may

not be reduced after such Option or share appreciation right has been granted

to a Participant.




 




ARTICLE 9.




 




PERFORMANCE-BASED

AWARDS




 




9.1.                            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




 




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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 who are executive officers or key

employees of the Company or a parent or subsidiary (“Key Employees”) 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 Key

Employee.  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 Key Employees, and may

attach to such Performance-Based Awards one or more restrictions.  The maximum amount of Performance-Based

Awards (other than Options or share appreciation rights) to be awarded to any

Key Employee during any fiscal year of the Company shall be $[1,000,000].  The maximum amount of Performance-Based

Awards that are Options or share appreciation rights that may be awarded to any

Key Employee during any fiscal year of the Company is Options or share

appreciation rights covering up to [750,000] Shares.




 




9.2.                            Other Awards. 

Either the granting or vesting of Performance-Based Awards

(other than Options or share appreciation rights) 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 9.3 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 Key Employees or class of Key

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 Key Employee 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.




 




9.3.                            Performance Measures.  The Committee may use the following performance

measures (either individually or in any combination) to set performance targets

with respect to




 




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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 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 10.




 




MISCELLANEOUS




 




10.1.                     Tax Withholding. 

The Company shall have the right to make all payments or

distributions pursuant to the Plan to an Optionee or Participant (or a

Permitted Assignee thereof) (any such person, a “Payee”) net of any applicable

Federal, State and local taxes required to be paid as a result of (i) the grant

of any Award, (ii) the exercise of an Option or share appreciation rights,

(iii) the delivery of shares or cash, or lapse of any restrictions, in

connection with Restricted Share Awards or (iv) any other event occurring

pursuant to this Plan.  The Company or

any subsidiary or affiliate thereof shall have the right to withhold from wages

or other amounts otherwise payable to such Payee such withholding taxes as may

be required by law, or to otherwise require the Payee to pay such withholding

taxes.  If the Payee 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 Payee 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 Payee may 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 Payee pursuant to the Plan having an aggregate

Fair Market Value equal to the withholding taxes.




 




10.2.                     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 with respect to an Award 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, Director, advisor or consultant.




 




10.3.                     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




 




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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.




 




10.4.                     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.




 




10.5.                     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 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.




 




10.6.                     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,” 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.




 




10.7.                     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.




 




10.8.                     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 ISO 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 April 28, 2013, on which date the Plan will expire except as to

Awards then outstanding under the Plan. 

Such outstanding Awards shall remain in effect until they have been

exercised or terminated, or have expired.




 




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10.9.                     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.




 




10.10.              Dissolution or Liquidation.  In the event of the proposed dissolution or

liquidation of the Company, the Committee shall notify each Optionee and

Participant as soon as practicable prior to the effective date of such proposed

transaction.  The Committee in its sole

discretion may permit an Optionee to exercise an Option until ten days prior to

such transaction with respect to all vested and exercisable Shares covered

thereby and with respect to such number of unvested Shares as the Committee

shall determine.  In addition, the

Committee may provide that any forfeiture provision or Company repurchase

option applicable to any Restricted Share Award shall lapse as to such number

of Shares as the Committee shall determine, contingent upon the occurrence of

the proposed dissolution or liquidation at the time and in the manner

contemplated.  To the extent an Option

has not been previously exercised, the Option shall terminate automatically

immediately prior to the consummation of the proposed action.  To the extent a forfeiture provision

applicable to a Restricted Share Award has not been waived by the Committee,

the related Restricted Share Award shall be forfeited automatically immediately

prior to the consummation of the proposed action.




 




10.11.              Successors and Assigns.  This Plan shall be binding upon and inure to the

benefit of the respective successors and permitted assigns of the Company,

Optionees and Participants.




 




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