Exhibit 10.1


 


ACTIVISION, INC.


 


AMENDED AND RESTATED 2003 INCENTIVE PLAN


(Effective as of July 26, 2005)


 


ACTIVISION, INC., a corporation formed under the laws of the State of
Delaware (the “Company”), hereby establishes and adopts the following Amended
and Restated 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
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.


 


WHEREAS, the Activision, Inc. 2003 Incentive Plan (the “Original
Plan”) was initially adopted by the Board of Directors on, and was effective
on, April 29, 2003, but was not approved by the Company’s
stockholders.  Although the Plan
contemplates the issuance of “incentive stock options” as described below, because
the Original Plan was not timely approved by the Company’s stockholders no such
options will be issued under this Plan, and any purported grant of incentive
stock options under this Plan will instead constitute a grant of nonqualified
stock options (hereafter defined).


 


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 or affiliates in
attracting and retaining selected individuals to serve as directors, officers,
consultants, advisors and other employees of the Company and its subsidiaries
or affiliates 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 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 18,000,000.  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. 
Shares covered by an Award shall only be counted as used to
the extent they are actually issued. Any Shares related to Awards which
terminate by expiration, forfeiture, cancellation, or otherwise without the
issuance of such Shares, are settled in cash in lieu of Shares, or are
exchanged with the Committee’s permission, prior to the issuance of Shares, for
Awards not involving Shares, shall be available again for grant 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 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 7.6 hereof, and unless and until the Committee
determines that an Award to a Covered Employee shall not be designed to qualify
as a Performance-Based Award (as defined in Article 8, below), the
following limits (each an “Annual Award Limit” and, collectively, “Annual Award
Limits”) shall apply to grants of such Awards under the Plan:


 


(a)           Options: The maximum
aggregate number of Shares subject to Options granted in any one fiscal year of
the Company (a “Fiscal Year”) to any one Participant shall be 1,500,000 Shares.


 


(b)           SARs: The maximum
number of Shares subject to share appreciation rights granted in any one Fiscal
Year to any one Participant shall be 1,500,000 Shares.


 


(c)           Restricted Shares or
Restricted Share Units: The maximum aggregate grant with respect to Awards of
Restricted Shares or Restricted Share Units in any one Fiscal Year to any one
Participant shall be 1,500,000.


 


(d)           Performance-Based
Awards:  The maximum aggregate Award of Performance-Based
Awards (other than Options or share appreciation rights) that any one 


 


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Participant may receive in any one Fiscal Year shall be 1,500,000
Shares (if such Award is payable in Shares), or equal to the value of 1,500,000
Shares.  For this purpose, to the extent
an Award is payable in cash or property other than Shares, then such Award
shall be treated as payable in such number of Shares having a value equal to
the value of the cash or property (other than Shares) payable under such Award,
determined as of the earlier of the date of vesting or payout.


 


The above Annual Award Limits are intended to comply with Code Section 162(m)
and the Treasury Regulations thereunder, and shall be applied and/or construed
in such a way to ensure compliance with Code Section 162(m) and the
Treasury Regulations thereunder.


 


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 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, (ii) Section 162(m)
of the Code and (iii) the rules and regulations of the NASDAQ Stock
Market (“NASDAQ”), but shall not be bound by such compliance.


 


(b)           Notwithstanding
any other provision of this Plan, any Award to a member of the Committee must
be approved by the Board of Directors (the “Board”) 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 


 


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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.


 


4.3.         Option Price.  Except
as otherwise provided herein, and subject to Section 4.4, the option
exercise price per each Share purchasable under any Option shall not be less
than 100% of the Fair Market Value of such Share on the date of the grant of
such Option.


 


4.4.         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 


 


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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.


 


(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.


 


4.5.         Other Provisions.  Options
granted pursuant to this Article 4 shall be made in accordance with the
terms and provisions of Article 7 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 Shares as determined by the Committee in
its sole discretion.  Subject to Section 9.13
below, (i) share appreciation rights may be granted only if Shares are
traded on an established securities market at the date of grant, and (ii) share
appreciation rights granted under this Plan shall be payable only in Shares.


 


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.         Notwithstanding
any other provision of this Plan to the contrary, with respect to a Related SAR
granted in connection with an ISO: (a) the Related SAR will expire no later
than the expiration of the underlying ISO; (b) the exercise of the Related
SAR may not have economic and tax consequences more favorable than the exercise
of the ISO followed by an 


 


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immediate sale of the underlying Shares, and the value of the payout
with respect to the Related SAR may be for no more than  100% of the
excess of the Fair Market Value of the Shares subject to the underlying ISO at
the time the Related SAR is exercised over the Option Price of the underlying
ISO; (c) the Related SAR may be exercised only when the Fair Market Value
of the Shares subject to the ISO exceeds the Option exercise price of the ISO; (d) the
Related SAR may be exercised only when the underlying ISO is eligible to be
exercised; and (e) the Related SAR is transferable only when the
underlying ISO is transferable, and under the same conditions.


 


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,
subject to the provisions of Section 409A of the Code, if applicable)
(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. 
Subject to Section 9.13 below, delivery of Shares pursuant to an
Award of Restricted Share Units (or an Award of Restricted Shares) shall be
made no later than 2-1/2 months after the close of the Company’s first taxable
year in which such Shares are no longer subject to a risk of forfeiture (within
the meaning of Section 409A of the Code).


 


(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 


 


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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.


 


ARTICLE 7.


 


GENERALLY APPLICABLE PROVISIONS


 


7.1.         Fair Market Value.  The
“Fair Market Value” of a Share shall mean a price that is based on the opening,
closing, actual, high, low, or average selling prices of a Share reported on
the NASDAQ or other established stock exchange (or exchanges) on the applicable
date, the preceding trading day, the next succeeding trading day, or an average
of trading days, as determined by the Committee in its discretion.  Unless the Committee determines otherwise, if
the Shares are traded over the counter at the time a determination of its Fair
Market Value is required to be made hereunder, its Fair Market Value shall be
deemed to be equal to the average between the reported high and low or closing
bid and asked prices of a Share on the most recent date on which Shares were
publicly traded.  In the event Shares are
not publicly traded at the time a determination of their Fair Market Value is
required to be made hereunder, the determination of their Fair Market Value
shall be made by the Committee in such manner as it deems appropriate.


 


7.2.         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 8.5 and 8.6 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, or quoted on a national quotation 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) 


 


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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.


 


7.3.         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 7.3.


 


7.4.         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 otherwise.  The date of termination of an Optionee’s
employment or services will be determined by the Committee, which determination
will be final.


 


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7.5.         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 7.6
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, except to the extent
necessary to avoid the imposition of additional tax and/or interest under Section 409A
of the Code with respect to Awards that are treated as nonqualified deferred
compensation.


 


7.6.         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; provided further, with respect to all
Options, no such adjustment shall be authorized to the extent that such
adjustment would cause such Options to violate the provisions of Section 409A
of the Code; 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.


 


7.7.         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 


 


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Plan, a “Change of 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 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.


 


7.8.         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 7.8 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 


 


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Company’s written notice of its exercise of its rights under this Section 7.8,
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 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 or any other document
evidencing an Award under the Plan, may include comparable provisions to those
set forth in this Section 7.8.


 


7.9.         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.


 


7.10.       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 4.4 above and provided,
further, that no such modification may cause the Option to violate the
provisions of Section 409A of the Code without the consent of the Optionee.


 


7.11.       Repricing of Options and Share Appreciation Rights.  Except as provided in Section 7.6 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.


 


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ARTICLE 8.


 


PERFORMANCE-BASED AWARDS


 


8.1.         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 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.


 


8.2.         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 8.3 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.


 


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8.3.         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 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 9.


 


MISCELLANEOUS


 


9.1.         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.


 


9.2.         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.


 


9.3.         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 


 


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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.


 


9.4.         Unfunded Status of the Plan.  The
Plan is intended to constitute an “unfunded” plan for incentive
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.


 


9.5.         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.


 


9.6.         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.


 


9.7.         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.


 


9.8.         Effective Date of Plan; Termination of Plan.  The Original Plan was originally
adopted by the Board of Directors on, and was effective on, April 29,
2003.  This Plan (as amended and
restated) was adopted by the Board of Directors on July 26, 2005.  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.


 


9.9.         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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9.10.       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.


 


9.11.       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.


 


9.12        Indemnification. Each
individual who is or shall have been a member of the Board, or a committee
appointed by the Board, shall be indemnified and held harmless by the Company
against and from any loss, cost, liability, or expense that may be imposed upon
or reasonably incurred by him in connection with or resulting from any claim,
action, suit, or proceeding to which he may be a party or in which he may be
involved by reason of any action taken or failure to act under the Plan and
against and from any and all amounts paid by him in settlement thereof, with
the Company’s approval, or paid by him in satisfaction of any judgment in any
such action, suit, or proceeding against him, provided he shall give the
Company an opportunity, at its own expense, to handle and defend the same
before he undertakes to handle and defend it on his own behalf, unless such
loss, cost, liability, or expense is a result of his own willful misconduct or
except as expressly provided by statute.


 


The
foregoing right of indemnification shall not be exclusive of any other rights
of indemnification to which such individuals may be entitled under the Company’s
Certificate of Incorporation or Bylaws, as a matter of law, or otherwise, or
any power that the Company may have to indemnify them or hold them harmless.


 


9.13        Amendment to Comply with Applicable Law; Waiver of Code Section 409A
Provisions.  It is intended
that no Award granted under this Plan shall be subject to any interest or
additional tax under Section 409A of the Code.  In the event Code Section 409A is
amended after the date hereof, or regulations or other guidance is promulgated
after the date hereof that would make an Award under the Plan subject to the
provisions of Code Section 409A, then the terms and conditions of this
Plan shall be interpreted and applied, to the extent possible, in a manner to
avoid the imposition of the provisions of Code Section 409A.  Notwithstanding the foregoing and
notwithstanding anything in this Plan to the contrary, with respect to any
Award to any Participant, the Committee may specifically waive any provision of
this Plan that is intended to comply with Code Section 409A, including
without limitation certain restrictions set forth in Sections 4.3, 5.1, 6.1,
7.6 and 7.10 hereof, and may grant Awards hereunder to such Participant that do
not comply with Code Section 409A.


 


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