Amd. & Restated Incentive Stock Option Plan

Exhibit 10.1


AMENDED AND RESTATED INCENTIVE STOCK OPTION PLAN OF
7TH LEVEL, INC.
A DELAWARE CORPORATION


I. Purpose of Plan


The purpose of this Amended and Restated Incentive Stock Option Plan (this "Plan") is to strengthen 7th Level, Inc. a Delaware corporation (the "Corporation"), and its subsidiaries, if any, by providing stock options as a means to attract, retain and motivate corporate personnel.


II. Administration


This Plan shall be administered by a committee (the "Committee") composed of members selected by, and serving at the pleasure of, the Board of Directors of the Corporation (the "Board"). The Committee shall be constituted so as to permit the Plan to comply with Rule 16b-3, as currently in effect or as hereinafter modified or amended ("Rule 16b-3"), promulgated under the Securities Exchange Act of 1934, as amended (the "1934 Act"). The Committee shall have the sole authority to select the employees entitled to receive Options (as defined below) from among those eligible hereunder (the "Optionees") and to establish the number of shares that may be issued under each Option to such employees; provided, however, that, notwithstanding any provision in this Plan to the contrary, the maximum number of shares of common stock, $.01 par value per share of the Corporation (the "Common Stock") that may be subject to Options granted under the Plan to an individual Optionee during any calendar year may not exceed 250,000 (subject to adjustment in the same manner as provided in Article IX hereof to prevent dilution.) The limitation set forth in the preceding sentence shall be applied in a manner which will permit compensation generated under the Plan to constitute "performance-based" compensation for purposes of section 162(m) of the Internal Revenue Code of 1986, as amended (the "Code"), including, without limitation, counting against such maximum number of shares, to the extent required under section 162(m) of the Code and applicable interpretive authority thereunder, any shares subject to Options that are canceled or repriced. The Committee shall have the power to make all determinations necessary for the administration of the Plan, subject to the restrictions on committee power set forth in Delaware law.


III. Grant of Options


The Corporation is authorized to grant incentive stock options ("Incentive Stock Options") as defined in section 422 of the Code and options that are not intended to be Incentive Stock Options (hereafter "Non-Qualified Stock Options" and, together with Incentive Stock Options, the "Options"). Any Option granted under this Plan shall be granted within 10 years from the date this Plan is adopted, or the date this Plan is approved by the stockholders pursuant to Article X, whichever is earlier. No Option granted under this Plan shall be exercisable by its terms after the expiration of 10 years from the grant of the Option. Options may be granted only to individuals who are employees (including officers and directors who are also employees) of the Corporation or any parent or subsidiary corporation (as defined in section 424 of the Code) of the Corporation at the time the Option is granted. Options may be granted to the same individual on more than one occasion.


Incentive Stock Options may not be granted to employees who own stock possessing more than 10 percent of the total combined voting power of all classes of stock of the Corporation, or of its parent or subsidiary, if any, within the meaning of section 422(b)(6) of the Code, unless (i) at the time such Option is granted the option price is at least 110% of the fair market value of the Common Stock subject to such Option and (ii) such Option by its terms is not exercisable after the expiration of five years from the date of the grant.


To the extent that the aggregate fair market value of Common Stock (as determined in good faith by the Committee at the time the Incentive Stock Option is granted), with respect to which Incentive Stock Options are exercisable for the first time by an individual during any calen ...