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EXHIBIT 10
THE LEARNING COMPANY, INC.
1996 STOCK OPTION PLAN
RESTATED AS OF MARCH 5, 1998
SECTION 1. PURPOSE; DEFINITIONS.
A. PURPOSE. The purpose of this Plan is to enhance the ability of
the Company and its Affiliates (as such terms are defined herein) to retain,
attract and motivate their personnel. Accordingly, this Plan will provide
selected eligible employees, directors and consultants of the Company and its
Affiliates an opportunity to participate in the Company's future by offering
them equity interests in the Company. All employees and directors of the Company
and its Affiliates are eligible to participate in and to receive Awards (as
defined herein) under this Plan. Awards under the Plan will be made by the
Committee (as defined herein).
B. DEFINITIONS. For purposes of this Plan, the following terms have
the following meanings:
1. "AFFILIATE" means a parent or subsidiary corporation, each
as defined in Section 424 of the Code, and their successors.
2. "AWARD" means any award of an Option under this Plan.
3. "AWARD AGREEMENT" means, with respect to each Award, the
signed written agreement between the Company and the Plan
Participant setting forth the terms and conditions of the Award.
4. "BOARD" means the Board of Directors of the Company.
5. "CHANGE IN CONTROL" has the meaning set forth in Section 6.A
of this Plan.
6. "CHANGE IN CONTROL PRICE" has the meaning set forth in
Section 6.C of this Plan.
7. "CODE" means the Internal Revenue Code of 1986, as amended
from time to time, and any successor.
8. "COMMITTEE" means the Committee referred to in Section 2 of
this Plan, or the Board in its capacity as administrator of this
Plan in accordance with Section 2 of this Plan.
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9. "COMPANY" means The Learning Company, Inc., a Delaware
corporation.
10. "COVERED EMPLOYEE" means a covered employee as such term is
defined in Section 162(m)(3) of the Code and the regulations
promulgated thereunder.
11. "DISABILITY" means permanent and total disability as
determined by the Committee.
12. "FAIR MARKET VALUE" means as of any given date:
(a) If the Stock is listed on any established stock
exchange or a national market system, including without
limitation the Nasdaq National Market, the closing sale
price for a share of the Stock or the closing bid, if no
sales are reported, as quoted on such exchange (or the
largest such exchange) or system for the date the value is
to be determined (or if there are no sales for such date,
then for the last preceding business day on which there were
sales), as reported in THE WALL STREET JOURNAL or a similar
publication; or
(b) If the Stock is regularly quoted by a recognized
securities dealer but selling prices are not reported, the
mean between the high bid and low asked prices for a share
of the Stock on the date the value is to be determined (or
if there are no quoted prices for the date of grant, then
for the last preceding business day on which there were
quoted prices); or
(c) In the absence of an established market for the Stock,
the per share value of the Stock, as determined in good
faith by the Committee, with reference to the Company's net
worth, prospective earning power, dividend-paying capacity
and other relevant factors, including the goodwill of the
Company, the economic outlook in the Company's industry, the
Company's position in its industry and its management and
the values of stock of other corporations in the same or a
similar line of business.
13. "OPTION" means an Option granted under Section 5 of this
Plan.
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14. "PLAN" means this The Learning Company, Inc. 1996 Stock
Option Plan, as amended from time to time.
15. "PLAN PARTICIPANT" means any recipient of an Award under
this Plan.
16. "STOCK" means the Common Stock, $0.01 par value, of the
Company, and any successor security.
17. "SUBSIDIARY" as the meaning set forth in Section 424(f) of
the Code, and its successors.
18. "TERMINATION" means, for purposes of this Plan, with respect
to a Plan Participant, that the Plan Participant has ceased to
be, for any reason, with or without cause, an employee, director
or consultant as the case may be, of the Company or an Affiliate
of the Company, such that such Plan Participant is neither an
employee, director or consultant of the Company or any Affiliate.
SECTION 2. ADMINISTRATION.
A. COMMITTEE. The Plan shall be administered by the Board or, upon
delegation by the Board, a committee of the Board comprised of not less than two
members (i) each member of which shall be, to the extent required under Rule
16b-3 promulgated under the Securities Exchange Act of 1934 and unless the
Committee determines that Rule 16b-3 is not applicable to the Plan, a
"non-employee director" (as defined in Rule 16b-3), and (ii) each member of
which shall be, to the extent required under Section 162(m) of the Code and
unless the committee determines that Section 162(m) is not applicable to the
Plan, an "outside director" within the meaning of Section 162(m). The Committee
may act only by a majority of its members, except that the Committee may
authorize any one or more of its members or any officer of the Company to
execute and deliver documents on behalf of the Committee.
B. AUTHORITY. The Committee shall grant Awards to any person
eligible under Section 4 of this Plan. In particular and without limitation,
the Committee, subject to the terms of this Plan, shall:
1. Select the persons to whom Awards may be granted;
2. Determine whether and to what extent Awards are to be
granted under this Plan;
3. Determine the number of shares to be covered by each Award
granted under this Plan; and
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4. Determine the terms and conditions of any Award granted
under this Plan, based upon factors determined by the Committee.
C. COMMITTEE DETERMINATIONS BINDING. The Committee may adopt, alter
and repeal administrative rules, guidelines and practices governing this Plan as
it from time to time shall deem advisable, interpret the terms and provisions of
this Plan, any Award, any Award Agreement and otherwise supervise the
administration of this Plan. Any determination made by the Committee pursuant to
the provisions of this Plan with respect to any Award shall be made in its sole
discretion at the time of the grant of the Award or, unless in contravention of
any express term of this Plan or the Award, at any later time. All decisions
made by the Committee under this Plan shall be binding on all persons, including
the Company and Plan Participants and the Plan Participant's guardian, estate
and heirs.
SECTION 3. STOCK SUBJECT TO PLAN.
A. ISSUABLE SHARES. The aggregate number of shares of Stock which
may be issued under this Plan shall be 7,000,000 shares of Stock; provided that
the shares of Stock issuable pursuant to Awards made to all Covered Employees
and directors shall not exceed 2,000,000 shares of Stock. Shares of Stock
issuable pursuant to Awards under the Plan may consist, in whole or in part, of
authorized and unissued shares or reacquired shares in the Company's treasury.
The determination of whether a person is a Covered Employee or a director for
purposes of the 2,000,000 share limitation shall be made at the time the Award
is made.
B. ADJUSTMENTS. In the event of any merger, reorganization,
consolidation, recapitalization, stock dividend, stock split, spin-off, sale of
substantial assets or other change in corporate structure affecting the Stock,
such substitution or adjustments shall be made in the number, kind and exercise
price of shares subject to outstanding Awards, as may be determined by the
Committee as appropriate or as necessary in order to prevent dilution or
enlargement of the rights of Plan Participants; provided that the adjusted
number of shares subject to any Award shall always be rounded down to the
nearest whole number.
SECTION 4. ELIGIBILITY.
Awards may be granted to any employee, director or consultant of the
Company or an Affiliate (including without limitation employees or consultants
of corporations acquired by the Company) as designated by the Committee.
SECTION 5. STOCK OPTIONS.
A. TYPES. Any Option granted under this Plan shall be in such form
as the Committee may from time to time approve. Options which qualify under
Section 422 of the Code may not be granted under this Plan.
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B. TERMS AND CONDITIONS. Options granted under this Plan shall be
subject to the following terms and conditions:
1. OPTION TERM. The term of each Option shall be fixed by the
Committee and will be stated in the Award Agreement.
2. GRANT DATE. The Company may grant Options under this Plan at
any time and from time to time before this Plan terminates. The
Committee shall specify the date of grant or, if it fails to do
so, the date of grant shall be the date of action taken by the
Committee to grant the Option; provided that no Option may be
exercised prior to execution of the applicable Award Agreement.
However, if an Option is approved in anticipation of employment
or engagement as a consultant, the date of grant shall be the
date the intended optionee is first treated as an employee or
consultant for payroll purposes.
3. EXERCISE PRICE. The exercise price per share of Stock
purchasable under any Option shall be at least equal to 85% of
the Fair Market Value on the date of grant.
4. EXERCISABILITY. Subject to the other provisions of this
Plan, an Option shall be exercisable at such times and in such
amounts as are specified in the Award Agreement evidencing the
Option. The Committee, in its absolute discretion, at any time
may waive any limitations respecting the time at which an Option
first becomes exercisable in whole or in part.
5. METHOD OF EXERCISE; PAYMENT. To the extent the right to
purchase shares of Stock has accrued, Options may be exercised,
in whole or in part, from time to time, by written notice from
the optionee to the Company stating the number of shares of Stock
being purchased, accompanied by payment of the exercise price for
the shares of Stock.
SECTION 6. CHANGE IN CONTROL.
A. DEFINITION OF "CHANGE IN CONTROL". A "Change in Control" means
the occurrence of either of the following:
1. Any "person", as such term is used in Sections 13(d) and
14(d) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), other than the Company, any of its subsidiaries,
any Affiliate of the Company or a Company employee benefit plan,
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including any trustee of such plan acting as trustee, is or
becomes the "beneficial owner" (as defined in Rule 13d-3 under
the Exchange Act), directly or indirectly, of securities of the
Company (or a successor to the Company) representing 35% or more
of the combined voting power of the then outstanding securities
of the Company or such successor; or
2. At any time that the Company has registered shares under the
Exchange Act, at least 40% of the directors of the Company
constitute persons who were not at the time of their first
election to the Board, candidates proposed by a majority of the
Board in office prior to the time of such first election; or
3. Any one of the following events: (w) the dissolution of the
Company or liquidation of more than 50% in value of the Company
or a sale of assets involving 50% or more in value of the assets
of the Company; (x) any merger or reorganization of the Company
whether or not another entity is the survivor; (y) a transaction
pursuant to which the holders, as a group, of all of the shares
of capital stock of the Company outstanding prior to the
transaction hold, as a group, less than 50% of the combined
voting power of the Company or any successor company outstanding
after the transaction; or (z) any other event which the Committee
determines, in its discretion, would materially alter the
structure of the Company or its ownership.
B. IMPACT OF EVENT. Except as expressly provided in any Award
Agreement, in the event of a Change in Control, the following provisions shall
apply:
1. Any Options outstanding as of the date such Change in
Control is determined to have occurred and not then exercisable
and vested shall become fully exercisable and vested; and
2. At the sole discretion of the Committee either (i) the value
(net of any exercise price and required tax withholdings) of all
outstanding Options, unless otherwise determined by the Committee
at or after grant, shall be paid in cash to Plan Participants
holding the same on the basis of the Change in Control Price as
of the date such Change in Control is determined to have occurred
or such other date as the Board may determine prior to the Change
in Control, or (ii) in the event that the Company shall not be
the surviving company, the Options shall be converted into
options to purchase shares of the surviving company or other
entity that such Plan Participant could have acquired upon such
Change of Control had all of the Options been exercised prior to
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the Change of Control, and the exercise price of such Options
shall be equal to the quotient determined by dividing the
exercise price per share of the Options in effect immediately
prior to the Change of Control by the number of shares of the
surviving company or other entity that one share of Stock was
converted into in connection with the Change of Control.
Notwithstanding the foregoing, in the event that anything in this
Section 6.B is determined to prevent any transaction referred to
in Section 6.A.3 from being accounted for as a pooling of
interests, then the value of outstanding Options shall not be
cashed out in accordance with paragraph 2(i) of this Section 6.B
and provisions shall be made to treat outstanding Options as
provided for in paragraph 2(ii) of this Section 6.B.
C. CHANGE IN CONTROL PRICE. "Change in Control Price" means the
highest price per share paid in any transaction reported on any established
stock exchange, national market system or other established market for the
Stock, or paid or offered in any bona fide transaction related to a Change in
Control of the Company at any time during the preceding 60-day period as
determined by the Committee.
SECTION 7. GENERAL PROVISIONS.
A. AWARD GRANTS. Any Award may be granted either alone or in
addition to other Awards granted under this Plan. Subject to the terms and
restrictions set forth elsewhere in this Plan, the Committee shall determine the
consideration, if any, payable by the Plan Participant for any Award and, in
addition to those set forth in this Plan, any other terms and conditions of the
Awards. The Committee may condition the grant or payment of any Award upon the
attainment of performance goals or such other factors or criteria, including
vesting based on continued employment or consulting, as the Committee shall
determine. Performance goals may vary from Plan Participant to Plan Participant
and among groups of Plan Participants and shall be based upon such Company,
subsidiary, group or division factors or criteria as the Committee may deem
appropriate. The other provisions of Awards also need not be the same with
respect to each recipient. Unless otherwise specified in this Plan or by the
Committee, the date of grant of an Award shall be the date of action by the
Committee to grant the Award.
B. AWARD AGREEMENT. As soon as practicable after the date of an
Award grant, the Company and the Plan Participant shall enter into a written
Award Agreement specifying the date of grant and the terms and conditions of the
Award. In the case of a conflict between this Plan and an Award Agreement, this
Plan will control.
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C. CERTIFICATES. All certificates for shares of Stock or other
securities delivered under this Plan shall be subject to such stock transfer
orders, legends and other restrictions as the Committee may deem advisable under
the rules, regulations and other requirements of the Securities and Exchange
Commission, any stock exchange upon which the Stock is then listed, any national
market system over which the Stock is then quoted and any applicable federal,
state or foreign securities law.
D. TERMINATION. In the event of Termination for any reason other
than death or Disability or retirement, Options held at the date of Termination
(to the extent then exercisable) may be exercised in whole or in part within 90
days after the date of Termination, or such other period (which may be longer or
shorter than 90 days) which shall be specified in the Award Agreement (but in no
event shall any Option remain exercisable after the expiration date of such
Option as specified under the Award Agreement). If Termination is due to death
or Disability, or a Plan Participant dies or becomes disabled within the period
that the Award remains exercisable or payable, as the case may be, after
Termination, only Awards (including Options) held at the date of death or
Disability (and only to the extent then exercisable or payable, as the case may
be) may be exercised in whole or in part by the Plan Participant in the case of
Disability, by the Plan Participant's personal representative or executor or by
the person to whom the Award is transferred by will or the laws of descent and
distribution, at any time within 18 months after the death or one year after the
Disability, as the case may be, of the Plan Participant (or such other period
which shall be specified in the Award Agreement, but in no event shall any Award
remain exercisable after the expiration of such Award as specified under the
Award Agreement). In the event of Termination by reason of the Plan
Participant's retirement (as determined in the exercise of the Committee's sole
discretion), Awards (including Options) may be exercised in whole or in part at
any time within two years after the date of Termination (or such other period
which shall be specified in the Award Agreement, but in no event shall any Award
remain exercisable after the expiration date of such Award as specified under
the Award Agreement). Notwithstanding anything to the contrary, the Committee
shall have the discretion to accelerate the vesting of or to waive any
forfeiture of any Awards upon termination or otherwise.
E. DELIVERY OF PURCHASE PRICE. Plan Participants shall make all or
any portion of any payment due to the Company with respect to the consideration
payable for, upon exercise of, or for federal, state, local or foreign tax
payable in connection with, an Award by delivery of cash; and if and only to the
extent authorized by the Committee, all or any portion of such payment may be
made by delivery of any property (including without limitation a promissory note
of the Plan Participant or shares of Stock or other securities and surrender of
shares issuable upon exercise of that Option) other than cash, so long as, if
applicable, such property constitutes valid consideration for the Stock under
applicable law.
F. TAX WITHHOLDING. To the extent authorized by the Committee in its
discretion, a person who has received an Award may make an election to deliver
to the
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Company a promissory note of the Plan Participant on the terms set forth in
Section 7.E of this Plan, or to have shares of Stock or other securities of the
Company withheld by the Company or to tender any such securities to the Company
to pay the amount of tax that the Committee in its discretion determines to be
required to be withheld by the Company; provided that (i) such election shall be
irrevocable and (ii) such election shall be subject to the disapproval of the
Committee.
Any shares or other securities so withheld or tendered will be valued
by the Committee as of the date they are withheld or tendered; provided that
Stock shall be valued at the Fair Market Value on such date. The value of the
shares withheld or tendered may not exceed the required federal, state, local
and foreign withholding tax obligations as computed by the Company. Unless the
Committee permits otherwise, the Plan Participant shall pay to the Company in
cash, promptly when the amount of such obligations becomes determinable, all
applicable federal, state, local and foreign withholding taxes that the
Committee in its discretion determines to result from the lapse of restrictions
imposed upon an Award or upon exercise of an Award or from a transfer or other
disposition of shares of Stock acquired upon exercise or payment of an Award or
otherwise related to the Award or the shares acquired in connection with an
Award.
G. NO TRANSFERABILITY. Unless otherwise provided in an Award
Agreement, no Award shall be assignable or otherwise transferable by the Plan
Participant other than by will or by the laws of descent and distribution and,
during the life of a Plan Participant, an Award shall be exercisable, and any
elections with respect to an Award may be made, only by the Plan Participant or
such Plan Participant's guardian or legal representative.
H. ADJUSTMENT OF AWARDS; WAIVERS. The Committee may adjust the
performance goals and measurements applicable to Awards (i) to take into account
changes in law and accounting and tax rules, (ii) to make such adjustments as
the Committee deems necessary or appropriate to reflect the inclusion or
exclusion of the impact of extraordinary or unusual items, events or
circumstances in order to avoid windfalls or hardships, (iii) to make such
adjustments as the Committee deems necessary or appropriate to reflect any
material changes in business conditions and (iv) in any other manner determined
in its discretion. In the event of hardship or other special circumstances of a
Plan Participant and otherwise in its discretion, the Committee may waive in
whole or in part any or all restrictions, conditions, vesting or forfeiture with
respect to any Award granted to such Plan Participant.
I. ELECTION TO DEFER PAYMENT. To the extent, if any, permitted by
the Committee, a Plan Participant may elect, at such time as the Committee may
in its discretion specify, to defer payment of all or a portion of an Award.
J. NON-COMPETITION. The Committee may condition the Committee's
discretionary waiver of a forfeiture or vesting acceleration at the time of
Termination of
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a Plan Participant holding any unexercised or unearned Award or the waiver of
restrictions upon any Award upon a requirement that such Plan Participant agree
to and actually (i) not engage in any business or activity competitive with any
business or activity conducted by the Company and (ii) be available, unless such
Plan Participant shall have died, for consultations at the request of the
Company's management, all on such terms and conditions (including conditions in
addition to (i) and (ii)) as the Committee may determine.
K. REGULATORY COMPLIANCE. Each Award under this Plan shall be
subject to the condition that, if at any time the Committee shall determine that
(i) the listing, registration or qualification of the shares of Stock upon any
securities exchange or under any state or federal law, (ii) the consent or
approval of any government or regulatory body or (iii) an agreement or
representations by the Plan Participant with respect thereto, is necessary or
desirable, then the exercise of such Award shall not be consummated in whole or
in part unless such listing, registration, qualification, consent, approval,
agreement or representations shall have been effected or obtained free of any
conditions not acceptable to the Committee.
L. RIGHTS AS STOCKHOLDER. Unless this Plan or the Committee
expressly specifies otherwise, a Plan Participant shall have no rights as a
stockholder with respect to any shares covered by an Award until the Plan
Participant receives such shares. Subject to Section 3.B of this Plan, no
adjustment shall be made for dividends or other rights for which the record date
is prior to the date the certificates are delivered.
M. BENEFICIARY DESIGNATION. The Committee, in its discretion, may
establish procedures for a Plan Participant to designate a beneficiary to whom
any amounts payable in the event of the Plan Participant's death are to be paid.
N. ADDITIONAL PLANS. Nothing contained in this Plan shall prevent
the Company or an Affiliate of the Company from adopting other or additional
compensation arrangements for its employees.
O. NO EMPLOYMENT/ENGAGEMENT RIGHTS. The adoption of this Plan shall
not confer upon any Plan Participant any right to continued employment or
engagement as a consultant nor shall it interfere in any way with the right of
the Company or an Affiliate of the Company to terminate the employment of any
employee or the engagement of any consultant at any time.
P. GOVERNING LAW. This Plan and all Awards shall be governed by and
construed in accordance with the laws of the Commonwealth of Massachusetts.
Q. USE OF PROCEEDS. All cash proceeds to the Company under this Plan
shall constitute general funds of the Company.
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R. UNFUNDED STATUS OF PLAN. This Plan shall constitute an "unfunded"
plan for incentive deferred compensation. The Committee may authorize the
creation of trusts or arrangements to meet the obligations created under this
Plan to deliver Stock or make payments; provided, that unless the Committee
otherwise determines, the existence of such trusts or other arrangements shall
be consistent with the "unfunded" status of this Plan.
S. ASSUMPTION BY SUCCESSOR. The obligations of the Company under
this Plan and under any outstanding Award may be assumed by any successor
corporation, which for purposes of this Plan, shall be included within the
meaning of "Company."
SECTION 8. AMENDMENTS AND TERMINATION.
The Board may amend, alter or discontinue this Plan, but no amendment,
alteration or discontinuance shall be made which would impair the rights of a
Plan Participant under an outstanding Award without the Plan Participant's
consent.
SECTION 9. EFFECTIVE DATE OF PLAN.
This Plan, and any amendments thereto, shall be effective on the date the
same is or are adopted by the Board.
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