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Exhibit 10.3  

As
Adopted by the Board of Directors

on April 4, 2002, and amended on

July 22, 2002 

 
 

ACTIVISION, INC.
  
  
  2002 INCENTIVE PLAN    
  

        ACTIVISION, INC., a corporation formed under the laws of the State of Delaware (the "Company"), hereby establishes and adopts the following 2002 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 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 officers (other than executive officers), consultants, advisors and other key employees of the Company and its subsidiaries who will
contribute to the Company's success and to achieve long-term objectives which will inure to the benefit of all shareholders of the Company through the additional incentive inherent in the
ownership or increased ownership of the Company's shares of common stock ("Shares"). Options granted under the Plan will be either "incentive share options," intended to qualify as such under the
provisions of Section 422 of the Internal Revenue Code of 1986, as amended from time to time (the "Code"), or "nonqualified share options." For purposes of the Plan, the term "subsidiary" shall
mean "subsidiary corporation," as such term is defined in Section 424(f) of the Code, and "affiliate" shall have the meaning set forth in Rule 12b-2 of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"). For purposes of the Plan, the term "Award" shall mean a grant of an Option, a grant of a share appreciation right, a grant of a Share Purchase
Award, a grant of a Restricted Share Award, or any other award made under the terms of the Plan. 

ARTICLE 2.

SHARES SUBJECT TO AWARDS  

        2.1.    Number of Shares.    Subject to the adjustment provisions of Section 10.9
hereof, the aggregate number of Shares which may be issued under Awards under the Plan, whether pursuant to Options, share appreciation rights, Share Purchase Awards, Restricted Share Awards or
Performance-Based Awards shall not exceed 2,350,000. 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: 

	(1)
	issued
or issuable pursuant to Options that have been or may be exercised;

	(2)
	issued
or issuable pursuant to Share Purchase Awards;

	(3)
	issued
as, or subject to issuance as a Restricted Share Award; and

	(4)
	issued
or issuable under any other 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 granted under Articles 4 and 6, Shares forfeited as provided in Section 8.2(a) and Shares subject to any Awards which are otherwise surrendered by the Participant without
receiving any payment or other benefit with respect thereto may again be subject to new Awards under the Plan, 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 share appreciation rights shall not again be
available for the grant of Awards under the Plan. 

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

        2.4.    Limitations on Grants to Individual Participant.    Subject to adjustments pursuant to
the provisions of Section 10.9 hereof, the maximum number of Shares with respect to which Options or stock appreciation rights may be granted hereunder to any employee during any fiscal year of
the Company shall be 500,000 Shares (the "Limitation"). If an Option is cancelled, the cancelled Option shall continue to be counted toward the Limitation for the year granted. An Option (or a stock
appreciation right) that is repriced during any fiscal year is treated as the cancellation of the Option (or stock appreciation right) and a grant of a new Option (or stock appreciation right) for
purposes of the Limitation for that fiscal year. 

ARTICLE 3.

ELIGIBILITY AND ADMINISTRATION  

        3.1.    Awards to Employees and
Others.    (a)    Participants who receive (i) Options under Articles 4 and 6 hereof or share
appreciation rights under Article 5 ("Optionees"), and (ii) Share Purchase Awards under Article 7, Restricted Share Awards under Article 8, Deferred Share Awards (as
defined herein) under Article 9, Performance-Based Awards under Article 11, or any other Award granted under the Plan shall consist of such officers (other than executive officers), key
employees, consultants and advisors 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. Executive officers
and Directors (as defined in Section 3.2 below) of the Company shall not be eligible to receive Awards under the Plan. The Committee's designation of an Optionee or Participant in any year
shall not require the Committee to designate such person to receive Awards or grants in any other year. The designation of an Optionee or Participant to receive Awards or grants under one portion of
the Plan shall not require the Committee to include such Optionee or Participant under other portions of the Plan. 

        (b)  No Option that is intended to qualify as an "incentive share option" may be granted (x) to any individual that is
not an employee of the Company or any subsidiary thereof, or (y) to any employee who, at the time of such grant, owns, directly or indirectly (within the meaning of Sections 422(b)(6) and
424(d) of the Code), shares possessing more than 10% of the total combined voting power of all classes of shares of the Company or any of its subsidiaries or 

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affiliates, unless at the time of such grant, (i) the option price is fixed at not less than 110% of the Fair Market Value (as defined in Section 10.2 below) of the Shares subject to
such Option, determined on the date of the grant, and (ii) the exercise of such Option is prohibited by its terms after the expiration of five years from the date such Option is granted. 

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

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

        (c)  Subject to the provisions of the Plan, the Committee shall have authority, in its sole discretion, to grant Awards under
the Plan, to interpret the provisions of the Plan and, subject to the requirements of applicable law, including Rule 16b-3 of the Exchange Act, to prescribe, amend, and rescind
rules and regulations relating to the Plan or any Award thereunder as it may deem necessary or advisable. The Committee shall have no authority to reduce the exercise price of any Options or share
appreciation rights granted under the Plan (except in connection with adjustments pursuant to Section 10.9 below). 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 officers (other than executive officers), key employees, consultants and advisors of the Company and its subsidiaries and affiliates to whom Options are to be granted under the Plan, the
number of Shares that may be purchased under each such Option and the option price, and shall designate such Options at the time of the grant as either "incentive share options" or "nonqualified share
options"; provided, however, that Options granted to employees of an affiliate (that is not also a subsidiary) or to non-employees of the
Company may only be "nonqualified share options." 

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

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        4.3.    Option Price.    Subject to Section 3.1(b), the option exercise price per each
Share purchasable under any "incentive share option" granted pursuant to this Article 4, any "nonqualified share option" granted
pursuant to Article 6, and Options intended to be performance-based under Section 162(m) of the Code shall not be less than 100% of the Fair Market Value of such Share on the date of the
grant of such Option. The option exercise price per share of each Share purchasable under any "nonqualified share option" that is not intended to be performance-based under Section 162(m) of
the Code and is granted pursuant to this Article 4 shall be determined by the Committee at the time of the grant of such Option, but shall not be less than 85% of the Fair Market Value of such
Share on the date of the grant of such Option. 

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

ARTICLE 5.

SHARE APPRECIATION RIGHTS  

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

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

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

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

4

 

        (c)  Upon the exercise of a share appreciation right, the Option or part thereof to which such share appreciation right is
related shall be deemed to have been exercised for the purpose of the limitation of the number of Shares to be issued under the Plan, as set forth in Section 2.1 of the Plan. 

        (d)  With respect to share appreciation rights granted in connection with an Option that is intended to be an "incentive share
option," the following shall apply: 

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

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

ARTICLE 6.

RELOAD OPTIONS  

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

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

        6.3.    Reload Option Price.    The option exercise price per Share payable upon the exercise
of a Reload Option shall be the Fair Market Value of a Share on the date the corresponding Underlying Option is exercised. 

        6.4.    Term and Exercise.    Except as otherwise determined by the Committee, each Reload
Option vests and is fully exercisable six months after its grant (i.e., six months after the corresponding Underlying Option is exercised). The term of each Reload Option shall be equal to the
remaining option term of the Underlying Option. 

        6.5.    Termination of Employment.    No additional Reload Options shall be granted to
Optionees when Options and/or Reload Options are exercised pursuant to the terms of this Plan following 

5

 

termination of the Optionee's employment unless the Committee, in its sole discretion, shall determine otherwise. 

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

ARTICLE 7.

SHARE PURCHASE AWARDS  

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

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

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

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

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

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

        (c)  Release and Delivery of Share Certificates Upon Repayment of the Purchase Loan.    The
Company shall release and deliver to each Participant certificates for the Shares purchased by the 

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

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

        7.4.    Termination of
Employment.    (a)    Termination of Employment by Death, Disability or by the Company Without Cause; Change
of Control.    In the event of a Participant's termination of employment or separation from service by reason of death, "disability" or by the Company without
"cause," or in the event of a "change of control," the Committee shall have the right (but shall not be required) to forgive the remaining unpaid amount (principal and interest) of the Purchase Loan
in whole or in part as of the date of such occurrence. "Change of Control," "disability" and "cause" shall have the respective meanings as set forth in the promissory note evidencing the Purchase
Loan. 

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

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

ARTICLE 8.

RESTRICTED SHARE AWARDS  

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

        (b)  Issuance of Restricted Shares.    As soon as practicable after the date of grant of a
Restricted Share Award by the Committee, the Company shall cause to be transferred on the books of the Company, Shares registered in the name of the Company, as nominee for the Participant, evidencing
the Restricted Shares covered by the Award; provided, however, such Shares shall be subject to forfeiture to the Company retroactive to the date of grant, if a Restricted Share Agreement delivered to
the Participant by the Company with respect to the Restricted Shares covered by the Award is not duly executed by the Participant and timely returned to the Company. All Restricted Shares covered by
Awards under this Article 8 shall be 

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subject to the restrictions, terms and conditions contained in the Plan and the Restricted Share Agreement entered into by and between the Company and the Participant. Until the lapse or release of
all restrictions applicable to an Award of Restricted Shares, the share certificates representing such Restricted Shares shall be held in custody by the Company or its designee. 

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

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

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

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

        (b)  Waiver of Forfeiture Period.    Notwithstanding anything contained in this
Article 8 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 Shares) as the Committee shall deem appropriate. 

ARTICLE 9.

DEFERRED SHARE AWARDS  

        9.1.    Shares and Administration.    Awards of the right to receive Shares that are not to be
distributed to the Participant until after a specified deferral period (such Award and the deferred Shares delivered thereunder hereinafter as the context shall require, the "Deferred Shares") may be 

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made either alone or in addition to share Options, share appreciation rights, or Restricted Share Awards, or Other Share-based Awards (hereafter defined) granted under the Plan. The Committee shall
determine the officers (other than executive officers), employees, consultants and advisors of the Company and its subsidiaries to whom and the time or times at which Deferred Shares shall be
awarded, the number of Deferred Shares to be awarded to any Participant, the duration of the period (the "Deferral Period") during which, and the conditions under which, receipt of the Shares will be
deferred, and the terms and conditions of the award in addition to those contained in Section 9.2. In its sole discretion, the Committee may provide for a minimum payment at the end of the
applicable Deferral Period based on a stated percentage of the Fair Market Value on the date of grant of the number of Shares covered by a Deferred Share award. The Committee may also provide for the
grant of Deferred Shares upon the completion of a specified performance period. The provisions of Deferred Share awards need not be the same with respect to each recipient. 

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

        (a)  Subject to the provisions of the Plan, the Shares to be issued pursuant to a Deferred Share award may not be sold,
assigned, transferred, pledged or otherwise encumbered during the Deferral Period or Elective Deferral Period (defined below), where applicable, and may be subject to a risk of forfeiture during all
or such portion of the Deferral Period as shall be specified by the Committee. At the expiration of the Deferral Period and Elective Deferral Period, share certificates shall be delivered to the
Participant, or the Participant's legal representative, in a number equal to the number of shares covered by the Deferred Share award. 

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

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

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

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

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

ARTICLE 10.

GENERALLY APPLICABLE PROVISIONS  

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

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Committee may prescribe a period in excess of ten years. After the Option is granted, the option period may not be reduced, subject to expiration due to termination of employment or otherwise. 

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

        10.3.    Exercise of Options.    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 10.6 and 10.7 hereof) as to all or part of the
Shares covered thereby, by the giving of written notice of exercise to the Company, specifying the number of Shares to be purchased, accompanied by payment of the full purchase price for the Shares
being purchased. Full payment of such purchase price shall be made 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 delivery of a promissory note in favor of the Company upon such terms and conditions as determined by the Committee,
(iii) with the consent of Committee, by tendering previously acquired Shares (valued at its Fair Market Value, as determined by the Committee as of the date of tender) 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), (iv) if Shares are traded on a national securities exchange, the Nasdaq Stock
Market, Inc. 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 (v) with the consent of the Committee,
any combination of (i), (ii), (iii) and (iv). In connection with a tender of previously acquired Shares pursuant to clause (iii) above, the Committee, in its sole discretion, may permit
the Optionee to constructively exchange Shares already owned by the Optionee in lieu of actually tendering such Shares to the Company, provided that adequate documentation concerning the ownership of
the Shares to be constructively tendered is furnished in form satisfactory to the Committee. The notice of exercise, accompanied by such payment, shall be delivered to the Company at its principal
business office or
such other office as the Committee may from time to time direct, and shall be in such form, containing such further provisions consistent with the provisions of the Plan, as the Committee may from
time to time prescribe. In no event may any Option granted hereunder be exercised for a fraction of a Share. The Company shall, subject to Section 10.4 herein, effect the transfer of Shares
purchased pursuant to an Option as soon as practicable, and, within a reasonable time thereafter, such transfer shall be evidenced on the books of the Company. No person exercising an Option shall
have any of the rights of a holder of Shares subject to an Option until certificates for such Shares shall have been issued following the exercise of such Option. No adjustment shall be made for cash
dividends or other rights for which the record date is prior to the date of such issuance. 

        10.4.    Transferability.    No Option that is intended to qualify as an "incentive stock
option" under Section 422 of the Code shall be assignable or transferable by the Optionee, other than by will or the laws of descent and distribution, and such Option may be exercised during
the life of the Optionee only by the Optionee or his guardian or legal representative. 

        10.5.    Termination of Employment.    Unless the Committee determines otherwise, in the event
of the termination of employment of an Optionee or the termination or separation from service of an advisor or consultant for any reason (other than death or disability as provided below), any
Option(s) held by such Optionee (or Permitted Assignee) under this Plan and not previously exercised or expired shall be deemed cancelled and terminated on the day of such termination or separation,  provided,
however, that in no instance may the term of the Option, if extended by the Committee, exceed the maximum term established pursuant to
Section 3.1(b)(ii) or 10.1 above. Notwithstanding the foregoing, in the event of the termination or separation from service of an Optionee for any reason other than 

10

 

death or disability, under conditions satisfactory to the Company, the Committee may, in its sole discretion, allow any "nonqualified share options" granted to such Optionee under the Plan and not
previously exercised or expired to be exercisable for a period of time to be specified by the Committee, provided, however, that in no instance may the
term of the Option, as so extended, exceed the maximum term established pursuant to Section 10.1 above. 

        10.6.    Death.    In the event an Optionee dies while employed by the Company or any of its
subsidiaries or affiliates or during his term as an advisor or consultant of the Company or any of its subsidiaries or affiliates, as the case may be, any Option(s) held by such Optionee (or his
Permitted Assignee) and not previously expired or exercised shall, to the extent exercisable on the date of death, be exercisable by the estate of such Optionee or by any person who acquired such
Option by bequest or inheritance, or by the Permitted Assignee at any time within one year after the death of the Optionee, unless earlier terminated pursuant to its terms,  provided, however, that if
the term of such Option would expire by its terms within six months after the Optionee's death, the term of such Option shall
be extended until six months after the Optionee's death, provided further, however, that in no instance may the term of the Option, as so extended,
exceed the maximum term established pursuant to Section 3.1(b)(ii) or 10.1 above. 

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

        10.8.    Amendment and Modification of the Plan.    The 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 no amendments to, or termination of, the Plan shall in any way impair the rights of an Optionee or a Participant (or a Permitted Assignee
thereof) under any Award previously granted without such Optionee's or Participant's consent. 

        10.9.    Adjustments.    In the event that the Committee shall determine that any dividend or
other distribution (whether in the form of cash, Shares, other securities, or other property), recapitalization, stock split, reverse stock split, reorganization, merger, consolidation,
split-up, spin-off, combination, repurchase, or exchange of Shares or other securities, the issuance of warrants or other rights to purchase Shares or other securities, or
other similar corporate transaction or event affects the Shares with respect to which 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 share appreciation rights, 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 "incentive stock options," no such adjustment shall be authorized to the extent that such adjustment would cause such options to
violate Section 422(b) of the Code or any successor provision; and provided further, that the 

11

 

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. 

        10.10.    Change of Control.    The terms of any Award may provide in the Share Option
Agreement, Restricted Share Agreement, Purchase Loan or other document evidencing the Award, that upon a
"Change 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, (iii) Purchase Loans are forgiven in whole or in part, and (iv) 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 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. 

        10.11.    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 10.11 shall apply to the Option if the Optionee is or shall become subject to an employment agreement with the Company. 

12

  

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

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

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

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

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

13

 

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

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

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

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

        10.13.    Terms of Option Grant.    Notwithstanding anything in Section 10.4, 10.5,
10.6, 10.7, 10.10 and 10.11 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 the Option, as so granted, exceed the
maximum term established pursuant to Section 10.1 above, provided further that in no instance may the exercise price of the Option be reduced
after the date of grant (except in connection with adjustments pursuant to Section 10.9 hereof). 

ARTICLE 11.

PERFORMANCE-BASED AWARDS.  

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

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

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

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

14

 

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

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

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

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

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

ARTICLE 12.

MISCELLANEOUS  

        12.1.    Tax Withholding.    The Company shall have the right to make all payments or
distributions pursuant to the Plan to an Optionee or Participant (or a Permitted Assignee thereof) net of any applicable Federal, State and local taxes required to be paid as a result of the grant of
any Award, exercise of an Option or share appreciation rights or any other event occurring pursuant to this Plan. The Company or any subsidiary or affiliate thereof shall have the right to withhold
from wages or other amounts otherwise payable to such Optionee or Participant (or a Permitted Assignee thereof) such withholding taxes as may be required by law, or to otherwise require the Optionee
or Participant (or a Permitted
Assignee thereof) to pay such withholding taxes. If the Optionee or Participant (or a Permitted Assignee thereof) shall fail to make such tax payments as are required, the Company or its subsidiaries
or affiliates shall, to the extent permitted by law, have the right to deduct any such taxes from any payment of any kind otherwise due to such Optionee or Participant or to take such other action as
may be necessary to satisfy such withholding obligations. In satisfaction of the requirement to pay withholding taxes, the Optionee or Participant (or Permitted Assignee) 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 Optionee (or Permitted Assignee) pursuant to the Plan having an
aggregate Fair Market Value equal to the withholding taxes. 

        12.2.    Right of Discharge Reserved.    Nothing in the Plan nor the grant of an Award
hereunder shall confer upon any employee 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 

15

 

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 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, advisor or
consultant. 

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

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

        12.5.    Severability.    If any provision of the Plan shall be held unlawful or otherwise
invalid or unenforceable in whole or in part, such unlawfulness, invalidity or unenforceability shall not affect any other provision of the Plan or part thereof, each of which remain in full force and
effect. If the making of any payment or the provision of any other benefit required under the Plan shall be held unlawful or otherwise invalid or unenforceable, such unlawfulness, invalidity or
unenforceability shall not prevent any other
payment or benefit from being made or provided under the Plan, and if the making of any payment in full or the provision of any other benefit required under the Plan in full would be unlawful or
otherwise invalid or unenforceable, then such unlawfulness, invalidity or unenforceability shall not prevent such payment or benefit from being made or provided in part, to the extent that it would
not be unlawful, invalid or unenforceable, and the maximum payment or benefit that would not be unlawful, invalid or unenforceable shall be made or provided under the Plan. 

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

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

        12.8.    Effective Date of Plan; Termination of Plan.    The Plan shall be effective on the
date of the approval of the Plan by the Board of Directors. Notwithstanding the foregoing, no Option intended to qualify as an incentive share option shall be granted hereunder until the Plan shall be
approved by the holders of a majority of the shares entitled to vote thereon, provided such approval is obtained within 12 months after the date of adoption of the Plan by the Board of
Directors. Awards may be granted under the Plan at any time and from time to time prior to April 3, 2012, on which date the Plan will expire except as to Awards and related share appreciation
rights then outstanding under the Plan. Such 

16

 

outstanding Awards and share appreciation rights shall remain in effect until they have been exercised or terminated, or have expired. 

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

        12.10.    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. 

        12.11.    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. 

17

 
STOCK OPTION AGREEMENT

(Non-Transferable)  

	Stock Option #                        	 	For            Shares

Issued Pursuant to the

2002 Incentive Plan of

ACTIVISION, INC.  

        THIS CERTIFIES that on                        (the "Issuance
Date")                        (the "Holder") was granted an option (the "Option") to purchase at the option price
of $            per share, all or any part
of                        fully paid and non-assessable shares ("Shares") of common stock, par value $.000001 per share, of
ACTIVISION, INC.,
a Delaware corporation (the "Company"), upon and subject to the following terms and conditions: 

        a.    Terms of the Plan.    The Option is granted pursuant to, and is subject to the terms and
conditions of, the Company's 2002 Incentive Plan (the "Plan"), the terms, conditions and definitions of which are hereby incorporated herein as though set forth at length, and the receipt of a copy of
which the Holder hereby acknowledges by his signature below. Capitalized terms used herein shall have the meanings set forth in the Plan, unless otherwise defined herein. 

        [The
Company intends that this Option qualify as an "incentive" share option within the meaning of Section 422 of the Internal Revenue Code to the maximum extent
permissible under the Internal Revenue Code. To the extent that the Option does not qualify as an incentive share option, the Option or the portion thereof which does not so qualify shall constitute a
separate "nonqualified" share option.] 

        b.    Expiration.    This Option shall expire on [ten (10) years less one
day from date of issuance], unless extended or earlier terminated in accordance herewith. 

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

        This
Option shall vest and be exercisable as follows: 

	Vesting Date
	 	Shares Vested at Vesting Date
	 	Cumulative Shares

Vested at Vesting Date

	 	 	 	 	 
	[vesting schedule]

18

 

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

        (d)    Termination of Employment.    In the event of the termination of employment or
separation from service of the Holder for any reason (other than death or disability as provided below), this Option, to the extent not previously exercised or expired, shall be deemed cancelled and
terminated on the day of such termination or separation, unless the Company decides, in its sole discretion, to extend the term of this Option, subject to the terms of the Plan. 

        (e)    Death.    In the event the Holder dies while employed by the Company or any of its
subsidiaries or affiliates, or during his term as a Director of the Company or any of its subsidiaries or affiliates, as the case may be, this Option, to the extent not previously expired or
exercised, shall, to the extent exercisable on the date of death, be exercisable by the estate of the Holder or by any person who acquired this Option by bequest or inheritance, at any time within one
year after the death of the Holder, provided, however, that if the term of such Option would expire by its terms within six months after the Optionee's
death, the term of such Option shall be extended until six months after the Optionee's death, provided further, however, that in no instance may the
term of the Option, as so extended, exceed the maximum term established pursuant to Sections 3.1(b)(ii) or 10.1 of the Plan. 

        (f)    Disability.    In the event of the termination of employment of the Holder or the
separation from service of the Holder due to total disability, the Holder, or her guardian or legal representative, shall have the unqualified right to exercise any portion of this Option which has
not been previously exercised or expired and which the Holder was eligible to exercise as of the first date of total disability (as determined by the Company), at any time within one year after such
termination or separation, provided, however, that if the term of such Option would expire by its terms within six months after such termination or
separation, the term of such Option shall be extended until six months after such termination or separation, provided further, however, that in no
instance may the term of the Option, as so extended, exceed the maximum term established pursuant to Section 3.1(b)(ii) or 10.1 of the Plan. The term "total disability" shall, for
purposes of this Share Option Agreement, be defined in the same manner as such term is defined in Section 22(e)(3) of the Internal Revenue Code of 1986, as amended. 

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

19

 

termination, for a period of 30 days thereafter, or such longer period as the Committee may determine. For purposes of this Option, a "Change of Control" of the Company shall be deemed to
occur if: 

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

        (ii)  the
Company merges or consolidates with, or sells all or substantially all of its assets to, another company (each, a "Transaction"), provided, however, that a
Transaction shall not be deemed to result in a Change of Control of the Company if (a) immediately prior thereto the circumstances in (i)(a) or (i)(b) above exist, or (b) (1) the
shareholders of the Company, immediately before such Transaction own, directly or indirectly, immediately following such Transaction in excess of fifty percent (50%) of the combined voting power of
the outstanding voting securities of the corporation or other entity resulting from such Transaction (the "Surviving Corporation") in substantially the same proportion as their ownership of the voting
securities of the Company immediately before such Transaction and (2) the individuals who were members of the Company's Board of Directors immediately prior to the execution of the agreement
providing for such Transaction constitute at least a majority of the members of the board of directors or the board of trustees, as the case may be, of the Surviving Corporation, or of a corporation
or other entity beneficially directly or indirectly owning a majority of the outstanding voting securities of the Surviving Corporation; or 

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

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

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

20

 

failure to the Company's reasonable satisfaction within five (5) days after receiving such written notice; 

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

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

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

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

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

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

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

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

21

 

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

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

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

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

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

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

        (o)    Registration; Legend.    The Company may postpone the issuance and delivery of Shares
upon any exercise of this Option until (a) the admission of such Shares to listing on any stock exchange or 

22

 

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

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

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

        (p)    Amendment.    The Company may at any time or from time to time amend the terms of the
Plan, and may, with the consent of the Holder, at any time or from time to time amend the terms and conditions of this Option, provided, however, that
in no instance may the exercise price of this Option be reduced after the date of grant (except in connection with adjustments pursuant to Section 10.9 of the Plan). 

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

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

23

 

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

	 	 	ACTIVISION, INC.
	

 	
 	

By:	

 
	 	 	 	
 Name:

Title:
	

 	
 	

Date:	

 
	 	 	 	

	

 	
 	

Attest:	

 
	 	 	 	

	 	 	 	 

	ACCEPTED:	 	 
	

 Option Holder	
 	

 
	

 Address	
 	

 
	

	
 	

 
	City	 	State	 	Zip Code	 	 
	

 Social Security Number	
 	

 

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QuickLinks

ACTIVISION, INC. 2002 INCENTIVE PLANExhibit 10.6  

        As of July 22, 2002 

Ron
Doornink

872 9th Street

Manhattan Beach, CA 90266 

Dear
Mr. Doornink 

        This
letter (the "Agreement") confirms the terms of your employment by Activision Publishing, Inc. ("Employer"), on the terms and conditions set forth below. This Agreement
supercedes the terms of the employment agreement dated October 19, 1998, as amended April 30, 1999 (the "1998 Employment Agreement") previously entered into between you and Employer. 

1.    Term  

        The term of your employment under this Agreement shall commence on July 22, 2002 (the "Effective Date") and terminate on March 31, 2005 (the
"Expiration Date"). For purposes of this Agreement, the period of time from the Effective Date through the Expiration Date shall be defined as the "Employment Period". Notwithstanding anything
contained herein to the contrary, your employment pursuant to the terms of this Agreement is subject to termination pursuant to Paragraph 9 below. 

2.    Salary  

        (a)  In
full consideration for all rights and services provided by you under this Agreement, you shall receive an annual base salary (the "Base
Salary") during the Employment Period. Commencing on the Effective Date, your Base Salary for the fiscal year ending March 31, 2003 shall be $425,000. Thereafter, on
April 1 of each year of the Employment Period, beginning on April 1, 2003, your Base Salary shall automatically increase to an amount equal to one hundred ten (110%) percent of the Base
Salary for the prior fiscal year. 

        (b)  In
addition to the Base Salary, upon execution of this Agreement, you shall receive a one-time payment equal to the difference between the Base Salary
payable to you under this Agreement and the base salary payments you had the right to receive pursuant to the 1998 Employment Agreement calculated retroactively to April 1, 2002. 

        (c)  Each
base salary referred to in Paragraph 2(a) shall constitute your minimum base salary during the applicable period, and your base salary may be increased above
the minimum at any time if Employer's Board of Directors (or the Compensation Committee of such Board of Directors), in its sole and absolute discretion, elects to do so. In the event of an increase
in your base salary beyond the applicable minimum base salary for a particular period, such increased base salary shall then constitute your minimum base salary for all subsequent periods under this
Agreement. 

        (d)  The
Base Salary shall be paid in accordance with the then prevailing payroll practices of Employer at regular intervals as Employer may establish from time to time for
its senior executive officers. Employer may withhold from any amounts payable under this Agreement all applicable tax, Social Security and other legally required withholding pursuant to any law or
regulation (the "Withholding"). Any period of less than a full fiscal year for which the Base Salary is calculated shall be pro rata. 

        (e)  In
addition to your Base Salary, you may be eligible to receive an annual discretionary bonus (the "Annual Bonus"). Your
target Annual Bonus during the Employment Period shall be 85% of the then applicable Base Salary, provided that the actual amount of the Annual Bonus, if any, is within the sole and absolute
discretion of the Employer's Board of Directors (or the Compensation Committee of 

1

 

the Board of Directors) and shall be based upon your achievement of certain mutually agreed objectives and goals and/or your contribution to the success of Employer's financial and business
objectives and goals for the fiscal year with respect to which the Annual Bonus is calculated, such determination made by Employer's Board of Directors (or the Compensation Committee of the Board of
Directors) in its discretion. The Annual Bonus shall take the form of, without limitation, cash, shares of common stock of the Company and/or Options (as defined herein), as the case may be.
Employer's overall financial performance will also be considered in determining whether any of the Annual Bonus is awarded and, if so, the amount. The Annual Bonus, if granted, is generally paid to
employees in May. Except as otherwise set forth in this Agreement, you must remain continuously employed by Employer through the date on which the Annual Bonus is paid to be eligible to receive such
Annual Bonus. Any Annual Bonus shall be subject to Withholding 

        (f)    You
are also being granted non-qualified stock options (the "New Options") under the existing or modified
Board-approved stock option plans established by Activision, to purchase shares of common stock of Activision. The New Options will have an exercise price of $22.94 that is the market low of such
common stock on the Effective Date. The New Options are being granted to you on the following terms: 

	i.
	187,500
New Options are granted pursuant to Activision's 2001 Stock Option Plan, with the options vesting in increments of 46,875 options on
April 1, 2003, April 1, 2004, April 1, 2005 and April 1, 2006 respectively;

	ii.
	387,500
New Options are granted pursuant to Activision's 2002 Executive Incentive Plan, with the options vesting in increments of 129,167 options on
April 1, 2003, April 1, 2004 and April 1, 2005 respectively; and

	iii.
	150,000
New Options are granted pursuant to Activision's 2002 Executive Incentive Plan, with all of such New Options vesting in one installment on
April 1, 2007. Notwithstanding the foregoing, the vesting of New Options granted under this Paragraph 2(f)(iii) will accelerate and such options will vest in increments of 50,000
options on April 1, 2003, April 1, 2004 and April 1, 2005, respectively, subject to the achievement of certain acceleration criteria applicable to each specific acceleration date
and related option increment. All applicable acceleration criteria will be agreed in good faith by you and Employer. 

The
New Options will be governed in all other respects by Activision's stock option plans pursuant to which the New Options are issued and the applicable option agreements. The New Options issued
pursuant to this paragraph are in addition to the stock options previously granted to you (the "Existing Options"). The terms of any Existing Options granted to you, whether pursuant to the 1998
Employment Agreement or otherwise, shall not be affected by the execution of this Agreement and shall remain subject to the terms of stock option plans and agreements pursuant to which such Existing
Options were granted. 

        (g)  You
will be eligible for such additional grants of stock options commensurate with your position with Employer as the Board of Directors (or Compensation Committee of
the Board of Directors), in its sole discretion, may award to you from time to time. 

3.    Title  

        You are being employed under this Agreement in the position of President and Chief Executive Officer of Employer and President of Activision. In such capacity,
you shall be responsible for overseeing all of Employer's day-to-day operations. You will report directly to the Board of Directors of Employer. Effective as of April 1,
2004, you shall have the title of Chairman of Employer. 

2

 

4.    Duties  

        You shall personally and diligently perform, on a full-time and exclusive basis, such services as Employer or any of its related or affiliated
entities or divisions may reasonably require. You are also required to read, review and observe all of Employer's existing policies, procedures, rules and regulations as well as those adopted by
Employer during the term of your employment. You will at all times perform all of the duties and obligations required by you under this Agreement in a loyal and conscientious manner and to the best of
your ability and experience. 

5.    Expenses  

        To the extent you incur necessary and reasonable business expenses in the course of your employment, you shall be reimbursed for such expenses, subject to
Employer's then current policies regarding reimbursement of such business expenses. 

6.    Other Benefits  

        You shall be entitled to those benefits, which are standard for persons in similar positions with Employer, including coverage under Employer's health, life
insurance and disability plans, and eligibility to participate in Employer's 401(k) plan. In addition, during the Employment Period, Employer will maintain a term insurance policy or policies for a
period of ten (10) years, covering your life in an amount of $3,000,000 and naming your estate or any other person designated by you as beneficiary of such policy or policies. Nothing paid to
you under any such plans and arrangements (nor any bonus or stock options which Employer's Board of Directors (or the Compensation Committee of such Board of Directors), in its sole and absolute
discretion, shall provide to you)) shall be deemed in lieu, or paid on account, of your base salary. Except as otherwise specifically provided in this Agreement, you expressly agree and acknowledge
that after the expiration or early termination of the term of your employment under this Agreement, you are entitled to no additional benefits, except as specifically provided under the benefit plans
referred to above and those benefit plans in which you subsequently may become a participant, and subject in each case to the terms and conditions of each such plan. Notwithstanding anything to the
contrary set forth above, you shall be entitled to receive those benefits provided by COBRA upon the expiration or earlier termination of this Agreement. 

7.    Vacation and Paid Holidays  

        (a)  You
will be entitled to paid vacation days in accordance with the normal vacation policies of Employer in effect from time to time, provided that in no event shall you
be entitled to less than twenty (20) days of paid vacation per year. 

        (b)  You
shall be entitled to all paid holidays given by Employer to its full-time employees. 

8.    Protection of Employer's Interests  

        (a)    Duty of Loyalty.    During the Employment Period, you will not compete in any manner,
whether directly or indirectly, as a principal, employee, agent or owner, with Employer, or any affiliate of Employer, except that the foregoing will not prevent you from holding at any time less than
five percent (5%) of the outstanding capital stock of any company whose stock is publicly traded. 

        (b)    Property of Employer.    All rights worldwide with respect to any and all intellectual
or other property of any nature produced, created or suggested by you during the term of your employment or resulting from your services which (i) relate in any manner at the time of conception
or reduction to practice to the actual or demonstrably anticipated business of Employer, (ii) result from or are suggested by any task assigned to you or any work performed by you on behalf of
Employer, or (iii) are based on any property owned or idea conceived by Employer, shall be deemed to be a work made for 

3

 

hire and shall be the sole and exclusive property of Employer. You agree to execute, acknowledge and deliver to Employer, at Employer's request, such further documents, including copyright and patent
assignments, as Employer finds appropriate to evidence Employer's rights in such property. 

        (c)    Confidentiality.    Any confidential and/or proprietary information of Employer or any
affiliate of Employer shall not be used by you or disclosed or made available by you to any person except as required in the course of your employment, and upon expiration or earlier termination of
the term of your employment, you shall return to Employer all such information which exists in written or other physical form (and all copies thereof) under your control. Without limiting the
generality of the foregoing, you acknowledge signing and delivering to Employer the Activision Employee Proprietary Information Agreement and you agree that all terms and conditions contained in such
agreement, and all of your obligations and commitments provided for in such agreement, shall be deemed, and hereby
are, incorporated into this Agreement as if set forth in full herein. The provisions of this paragraph shall survive the expiration or earlier termination of this Agreement. 

        (d)    Covenant Not to Solicit.    After the expiration of the Employment Period of this
Agreement or earlier termination of your employment pursuant to Paragraphs 9(a), (b) or (c) of this Agreement for any reason whatsoever, you shall not, either alone or jointly, with or
on behalf of others, directly or indirectly, whether as principal, partner, agent, shareholder, director, employee, consultant or otherwise, at any time during a period of two (2) years
following such expiration or termination, offer employment to, or directly or indirectly solicit the employment or engagement of, or otherwise entice away from the employment of Employer or any
affiliated entity, either for your own account or for any other person firm or company, any person who was employed by Employer or any such affiliated entity during the term of your employment,
whether or not such person would commit any breach of his or her contract of employment by reason of his or her leaving the service of Employer or any affiliated entity. 

9.    Termination  

        (a)    By Employer.    At any time during the Employment Period, Employer may terminate your
employment under this Agreement for Cause defined as your (i) willful, reckless or gross misconduct, (ii) negligent performance of job responsibilities, and (iii) conviction of a
felony or crime involving dishonesty or moral turpitude. In addition, but subject to the provisions of Paragraph 9(d)(iii) below, Employer may terminate your employment under this
Agreement at any time without Cause. 

        (b)    By Employee.    You may terminate your employment under this Agreement: (i) upon
Employer's material breach of Section 2, or (ii) upon any relocation without your consent of the place at which you primarily are performing your services to Employer to a location which
is outside Los Angeles County. 

        (c)    Death or Disability.    In the event of your death during the term of this Agreement,
this Agreement shall terminate and Employer only shall be obligated to pay your estate or legal representative amounts set forth in Paragraph 9(d)(i) below. In the event you are unable
to perform the services required of you under this Agreement as a result of any disability, and such disability continues for a period of 60 or more consecutive days or an aggregate of 90 or more days
during any 12-month period during the term of this Agreement, then Employer shall have the right, at its option, to terminate your employment under this Agreement, subject to the
provisions of Paragraph 9(d)(ii) below. Unless and until so terminated, during any period of disability during which you are unable to perform the services required of you under this
Agreement, your base salary shall be payable to the extent of, and subject to, Employer's policies and practices then in effect with regard to sick leave and disability benefits. 

4

 

        (d)    Termination of Obligations.    In the event of the termination of your employment under
this Agreement pursuant to Paragraphs 9(a), 9(b) or 9(c), all obligations of Employer to you under this Agreement shall immediately terminate except as follows: 

	i.
	Compensation upon Death.    In the event of this Agreement is terminated as a result of your
death, your heirs, successors or legal representatives shall receive: (i) the Base Salary through the date of termination of this Agreement; (ii) any unpaid Annual Bonus for any prior
fiscal year; (iii) the pro rata portion of the Annual Bonus for the fiscal year in which your termination occurs to the extent such Annual Bonus is earned; (iv) an amount equal to 300%
of the dollar amount of the Base Salary paid or payable to you for Employer's most recent fiscal year immediately prior to your date of death; (v) reimbursement of expenses due to you pursuant
to Paragraph 5; (vi) your then current spouse and minor children, if any, shall receive the same level of health/medical insurance or coverage that was provided to you immediately prior
to you death for a two year period, with the cost of such continued insurance or coverage being borne by Employer. All such payments shall be in addition to any payments your widow, beneficiaries or
estate may be entitled to receive pursuant to any pension or employee benefit plan or life insurance policy maintained by Employer.

	ii.
	Compensation upon Disability.    In the event this Agreement is terminated as a result of your
disability, you shall receive: (i) the Base Salary through the date of your termination; (ii) any unpaid Annual Bonus for any prior fiscal year; (iii) the pro rata portion of the
Annual Bonus for the fiscal year in which your termination occurs to the extent such Annual Bonus is earned; (iv) reimbursement of expenses due to you pursuant to Paragraph 5;
(v) an amount equal to three hundred (300%) percent of the dollar amount of the Base Salary paid or payable to you for Employer's most recent fiscal year immediately prior to your disability
termination, less the amount, if any, of any payments received by you from any Employer-funded disability insurance plan; and (vi) you and your then current spouse and minor children, if any,
shall receive the same level of health/medical insurance or coverage provided immediately prior to such disability termination for a two year period, with the cost of such continued insurance or
coverage being borne by Employer.

	iii.
	Compensation upon Termination Without Cause.    In the event your employment under this
Agreement is terminated by Employer without cause, then you shall receive: (i) the Base Salary through the date of your termination; (ii) any unpaid Annual Bonus for any prior fiscal
year; (iii) the pro rata portion of the Annual Bonus for the fiscal year in which your termination occurs to the extent such Annual Bonus is earned; (iv) reimbursement of expenses due
you pursuant to Paragraph 5; (v) 50% of the Base Salary payable to you through the Expiration Date had your employment not been terminated, such Base Salary to be determined in
accordance with the terms of Paragraph 2(a) of this Agreement; and (vi) 100% of the Annual Bonus amount payable to you through the Expiration Date had your employment not been
terminated, which amount shall be deemed to be equal to the product of (1) the Base Salary that would have been in effect during such fiscal year and (2) a fraction, the numerator of
which is the total of the Annual Bonus that was paid to you for Employer's two fiscal years preceding your termination, and the denominator of which is the Base Salary that was paid to you for
Employer's two fiscal years preceding your termination. In addition, all New Options then held by you shall immediately vest and become exercisable until the fifth anniversary of the date of your
termination. Vesting of all Existing Options is governed by the terms of stock option plans and agreements pursuant to which such Existing Options were granted. Upon termination of this Agreement, you
and Employer will also enter into a consulting relationship on the terms set forth in Paragraph 11. 

5

 

10.  Change Of Control.  

        In the event that you are employed by Employer at the moment immediately prior to a Change of Control (as defined herein), you shall be entitled to receive all
benefits described in this Paragraph 10. 

        (a)  For
purposes of this Agreement, a "Change of Control" shall be deemed to occur upon the occurrence of both of the
following events: 

	i.
	Activision
consolidates with, or merges with or into another person or entity or conveys, transfers, leases or otherwise disposes of all or substantially
all of its assets to any person or entity, or any person or entity consolidates with or merges with or into Activision; provided, however that any such transaction shall not constitute a Change of
Control if the shareholders of Activision immediately before such transaction own, directly or indirectly, immediately following such transaction in excess of fifty percent (50%) of the combined
voting power of the outstanding voting securities of the corporation or other person or entity resulting from such transaction in substantially the same proportion as their ownership of the voting
securities of Activision immediately before such transaction; and

	ii.
	Upon
consummation of the transaction described in Paragraph 10(a)(i) above, the individuals who constitute the Board prior to the
consummation of such transaction (the "Incumbent Board") cease to constitute a majority of the Board, for any reason(s); provided, however (1) that if the nomination or election of any new
director of Activision was approved by a majority of the Incumbent Board, such new director shall be deemed a member of the Incumbent Board and (2) that no individual shall be considered a
member of the Incumbent Board if such individual initially assumed office as a result of either an actual or threatened "Election Contest" (as described
in Rule 14a-11 promulgated under the Securities Exchange Act of 1934, as amended) or as a result of a solicitation of proxies or consents by or on behalf of any "person" or "entity"
identified in Paragraph 10(a)(i) above or an affiliate or associate of such "person" or "entity". 

        (b)  In
the event that you are employed by Employer at the moment immediately prior to a Change of Control: 

	i.
	If
your employment is not terminated upon the occurrence of a Change of Control, then certain of the New Options shall then immediately vest as set forth
below and become exercisable for a period of
five (5) years commencing on the date of Change of Control without regard to the terms of any option agreement or option certificate applicable to any New Options:

	a.
	If
Change of Control occurs prior to April 1, 2004, then 50% of all then unvested New Options shall vest and become exercisable immediately;

	b.
	If
Change of Control occurs on or after April 1, 2004 but prior to April 1, 2005, then 75% of all then unvested New Options shall vest and become exercisable immediately;
and

	c.
	If
Change of Control occurs on or after April 1, 2005, then all of then unvested New Options shall vest and become exercisable immediately. 

	ii.
	Notwithstanding
the foregoing, you acknowledge and agree that the vesting of the Existing Options will not occur upon Change in Control in the manner
described in Paragraph 10(b)(i)(a), (b) and (c) above, but instead such options shall vest solely in accordance with the terms of any option plan, option agreement and/or option
certificate applicable to such Existing Options. 

6

 

	iii.
	In
the event that your employment is terminated following the Change in Control at any time during the Employment Period, then applicable provisions of
Paragraph 9(d) shall apply. 

11.  Consulting Agreement.  

        In the event of Employer elects to terminate your employment under this Agreement without cause, you agree that upon the effective date of such termination, you
and Employer shall then enter into a consulting agreement (the "Consulting Agreement") pursuant to which Employer will retain your services as a
consultant of Employer for a period of equal to the remaining Employment Term following such termination and for a period of additional two (2) years through March 31, 2007 (the
"Consulting Period"). The Consulting Agreement shall provide for, among other things: 

	(a)
	payment
of consulting fees to you in the following amounts: (i) until the Expiration Date, the amount equal to 50% of the Base Salary that would have been payable to you had
your employment not been terminated, such Base Salary to be determined in accordance with the terms of Paragraph 2(a) of this Agreement, and (ii) following the Expiration Date, $250,000
per annum. Payment of consulting fees
shall be made in accordance with Employer's standard payroll practices and will be subject to Withholding;

	(b)
	that
you shall continue to receive those benefits described in Paragraph 6 above;

	(c)
	that
you shall not be restricted from engaging (including, without limitation, as an officer, director, shareholder, owner, partner, joint venturer, member or in a managerial
capacity, or as an employee, independent contractor, consultant, advisor or sales representative) in such activities as you deem appropriate to engage in during the Consulting Term, provided that such
activities or activities of any entity to which you are providing services shall not be directly competitive with the activities of Employer or any of its affiliates (regardless of whether Employer
engaged in such activities prior to the commencement of the Consulting Agreement or may commence engaging in such activities at any time during the Consulting Term);

	(d)
	that
you shall maintain an office at Employer's principal business location;

	(e)
	that
you shall be required to provide no less than 20 hours per month in services under the Consulting Agreement in accordance with the directions received from the
Co-Chairmen and the Board of Directors of Activision;

	(f)
	that
you will continue to abide by all of Employer's internal rules, policies and procedures. Without limiting the generality of the foregoing, you will remain subject to the
provisions of Paragraph 8 of this Agreement, including without limitation, your agreement not to engage in solicitations of any employees of Employer and its affiliates for a period of
(2) years following the termination of the Consulting Agreement; and

	(g)
	that
you shall also remain subject to the provisions of the Employee Proprietary Information Agreement previously executed by you. 

In
the event Employer and you fail to execute the Consulting Agreement, then provisions of this Paragraph 11 shall govern the relationship between you and Employer until the expiration of the
Consulting Period. 

12.  Use of Employee's Name  

        Employer shall have the right, but not the obligation, to use your name or likeness for any publicity or advertising purpose. 

7

 

13.  Assignment  

        Employer may assign this Agreement or all or any part of its rights under this Agreement to (i) any entity which succeeds to all or substantially all of
Employer's assets as a result of the Change in Control subject to provisions of Paragraph 10, or (ii) to any entity which Employer may own substantially, and this Agreement shall inure
to the benefit of such assignee. 

14.  No Conflict with Prior Agreements  

        You represent to Employer that neither your commencement of employment under this Agreement nor the performance of your duties under this Agreement conflicts or
will conflict with any contractual commitment on your part to any third party, nor does it or will it violate or interfere with any rights of any third party. 

15.  General Provisions  

        (a)    Entire Agreement.    This Agreement, including Employment Proprietary Information
Agreement referred to herein, supersedes all prior or contemporaneous agreements and statements, whether written or oral, concerning the terms of your employment with Employer, and no amendment or
modification of this Agreement shall be binding unless it is set forth in a writing signed by both Employer and Employee. To the extent that this Agreement conflicts with any of Employer's policies,
procedures, rules or regulations, this Agreement shall supersede the other policies, procedures, rules or regulations. Without limiting the generality of the foregoing, you acknowledge that this
Agreement supercedes the 1998 Employment Agreement and such agreement is hereby declared terminated and of no further force or effect, except that any Existing Options granted pursuant to such
agreement shall remain valid in all respects and shall be governed by the terms of stock option plans and agreements pursuant to which such Existing Options were granted. 

        (b)    No Broker.    You have given no indication, representation or commitment of any nature
to any broker, finder, agent or other third party to the effect that any fees or commissions of any nature are, or under
any circumstances might be, payable by Employer or any affiliate of Employer in connection with your employment under this Agreement. 

        (c)    Waiver.    No waiver by either party of any breach by the other party of any provision
or condition of this Agreement shall be deemed a waiver of any similar or dissimilar provision or condition at the same or any prior or subsequent time. 

        (d)    Prevailing Law.    Nothing contained in this Agreement shall be construed so as to
require the commission of any act contrary to law and wherever there is any conflict between any provision of this Agreement and any present or future statute, law, ordinance or regulation, the latter
shall prevail, but in such event the provision of this Agreement affected shall be curtailed and limited only to the extent necessary to bring it within legal requirements. 

        (e)    Choice of Law.    This Agreement shall be governed by and construed in accordance with
the laws of the State of California without regard to conflict of law principles. 

        (f)    Immigration.    In accordance with the Immigration Reform and Control Act of 1986,
employment under this Agreement is conditioned upon satisfactory proof of your identity and legal ability to work in the United States. 

        (g)    Venue and Jurisdiction.    The parties agree that all actions or proceedings initiated
by either party hereto arising directly or indirectly out of this Agreement shall be litigated in federal or state court in Los Angeles, California. The parties hereto expressly submit and consent in
advance to such jurisdiction and agree that service of summons and complaint or other process or papers may be made by registered or certified mail addressed to the relevant party at the address set
forth below. The 

8

 

parties hereto waive any claim that a federal or state court in Los Angeles, California, is an inconvenient or an improper forum. 

        (h)    Severability.    If any provision of this Agreement is held to be illegal, invalid or
unenforceable under existing or future laws effective during the term of this Agreement, such provisions shall be fully severable, the Agreement shall be construed and enforced as if such illegal,
invalid or unenforceable provision had never comprised a part of this Agreement, and the remaining provisions of this Agreement shall remain in full force and effect and shall not be affected by the
illegal, invalid or unenforceable provision or by its severance from this Agreement. Furthermore, in lieu of such illegal, invalid or unenforceable provision, there shall be added automatically as
part of this Agreement a provision as similar in terms to such illegal, invalid or unenforceable provision as may be possible and be legal and enforceable. 

        (i)    Legal Counsel.    Employee acknowledges that he has been given the opportunity to
consult with legal counsel of his own choosing regarding this Agreement. Employee understands and agrees that Activision's General Counsel, or any other attorney or member of management who has
discussed any term or condition of this Agreement with him, is only acting on behalf of the company and not on behalf of Employee. 

        (j)    Right to Negotiate.    Employee hereby acknowledges that he has been given the
opportunity to participate in the negotiation of the terms of this Agreement. 

        (k)    Services Unique.    You recognize that the services being performed by you under this
Agreement are of a special, unique, unusual, extraordinary and intellectual character giving them a peculiar value, the loss of which cannot be reasonably or adequately compensated for in damages, and
in the event of a breach of this Agreement by you (particularly, but without limitation, with respect to the provisions hereof relating to the exclusivity of your services and the provisions of
Paragraph 8 of this Agreement). 

        (l)    Injunctive Relief.    In the event of a breach or threatened breach of this Agreement,
you hereby agree that any remedy at law for any breach or threatened breach of this Agreement will be inadequate and, accordingly, each party hereby stipulates that the other is entitled to obtain
injunctive relief for any such breaches or threatened breaches. The injunctive relief provided for in this paragraph is in addition to, and is not in limitation of, any and all other remedies at law
or in equity otherwise available to the applicable party. The parties agree to waive the requirement of posting a bond in connection with a court's issuance of an injunction. 

        (m)    Remedies Cumulative.    The remedies in this paragraph are not exclusive, and the
parties shall have the right to pursue any other legal or equitable remedies to enforce the terms of this Agreement. 

        (n)    Attorneys' Fees And Costs.    If either party brings an action to enforce, interpret or
apply the terms of this Agreement or declare its rights under this Agreement, the prevailing party in such action, including all appeals, shall receive all of its or his attorneys' fees, experts'
fees, and all of its or his costs, in addition to such other relief as may be granted. 

9

 

16.  Notices  

        All notices which either party is required or may desire to give the other shall be in writing and given either personally or by depositing the same in the United
States mail addressed to the party to be given notice as follows: 

	To Employer:	 	3100 Ocean Park Boulevard

Santa Monica, California 90405

Attention: Senior Vice President,

Business Affairs and General Counsel
	

To Employee:	
 	

872 9th Street

Manhattan Beach, CA 90266

        Either party may by written notice designate a different address for giving of notices. The date of mailing of any such notices shall be deemed to be the date on
which such notice is given. 

17.  Headings  

        The headings set forth herein are included solely for the purpose of identification and shall not be used for the purpose of construing the meaning of the
provisions of this Agreement. 

        If
the foregoing accurately reflects our mutual Agreement, please sign where indicated. 

	ACCEPTED AND AGREED TO:	 	 	 
	

Employer	
 	

Employee
	

By:	

 	
 	

By:	

/s/  RON DOORNINK      
	 	
	 	 	
 Ron Doornink
	

Name:	

 	
 	

 	

 
	 	
	 	 	 
	

Title:	

 	
 	

 	

 
	 	
	 	 	 
	

Date:	

 	
 	

Date:	

7/22/02
	 	
	 	 	

10

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