LINEAR TECHNOLOGY CORPORATION
 
                           2005 EQUITY INCENTIVE PLAN
 
        1.      Purposes of the Plan. The purposes of this Stock Plan are:
 
                o       to attract and retain the best available personnel for
                        positions of substantial responsibility,
 
                o       to provide incentives to individuals who perform
                        services to the Company, and
 
                o       to promote the success of the Company's business.
 
        Awards granted under the Plan may be Incentive Stock Options,
Nonstatutory Stock Options, Stock Appreciation Rights, Restricted Stock,
Restricted Stock Units, Performance Shares, or Performance Units, as the
Administrator may determine.
 
        2.      Definitions. As used herein, the following definitions will
                apply:
 
                (a)     "Administrator" means the Board or any of its Committees
as will be administering the Plan, in accordance with Section 4 of the Plan.
 
                (b)     "Affiliate" means any corporation or any other entity
(including, but not limited to, partnerships and joint ventures) controlling,
controlled by, or under common control with the Company.
 
                (c)     "Applicable Laws" means the requirements relating to the
administration of equity-based awards or equity compensation programs under U.S.
state corporate laws, U.S. federal and state securities laws, the Code, any
stock exchange or quotation system on which the Common Stock is listed or quoted
and the applicable laws of any foreign country or jurisdiction where Awards are,
or will be, granted under the Plan.
 
                (d)     "Award" means, individually or collectively, a grant
under the Plan of Options, Stock Appreciation Rights, Restricted Stock,
Restricted Stock Units, Performance Shares, or Performance Units.
 
                (e)     "Award Agreement" means the written or electronic
agreement setting forth the terms and provisions applicable to each Award
granted under the Plan. The Award Agreement is subject to the terms and
conditions of the Plan.
 
                (f)     "Award Transfer Program" means any program instituted by
the Administrator which would permit Participants the opportunity to transfer
any outstanding Awards to a financial institution or other person or entity
selected by the Administrator.
 
                (g)     "Board" means the Board of Directors of the Company.
 
                (h)     "Cash Position" means the Company's level of cash and
                        cash equivalents.
 
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                (i)     "Change of Control" means the occurrence of any of the
                        following events:
 
                        (i)     The acquisition by any "person" (as such term is
used in Sections 13(d) and 14(d) of the Exchange Act) (other than the Company or
a person that directly or indirectly controls, is controlled by, or is under
common control with, the Company) of the "beneficial ownership" (as defined in
Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the
Company representing fifty percent (50%) or more of the total voting power
represented by the Company's then outstanding voting securities;
 
                        (ii)    A change in the composition of the Board
occurring within a two-year period, as a result of which fewer than a majority
of the directors are Incumbent Directors. "Incumbent Directors" will mean
Directors who either (A) are Directors as of the date hereof, or (B) are
elected, or nominated for election, to the Board with the affirmative votes of
at least a majority of the Incumbent Directors at the time of such election or
nomination (but will not include an individual not otherwise an Incumbent
Director whose election or nomination is in connection with an actual or
threatened proxy contest relating to the election of directors to the Company);
 
                        (iii)   A merger or  consolidation of the Company with
any other corporation, other than a merger or consolidation which would result
in the voting securities of the Company outstanding immediately prior thereto
continuing to represent (either by remaining outstanding or by being converted
into voting securities of the surviving entity) at least fifty percent (50%) of
the total voting power represented by the voting securities of the Company or
such surviving entity outstanding immediately after such merger or
consolidation; or
 
                        (iv)    The sale of all or  substantially  all of the
assets of the Company determined on a consolidated basis.
 
                (j)     "Code" means the Internal Revenue Code of 1986, as
amended. Any reference to a section of the Code herein will be a reference to
any successor or amended section of the Code.
 
                (k)     "Committee" means a committee of Directors or of other
individuals satisfying Applicable Laws appointed by the Board in accordance with
Section 4 hereof.
 
                (l)     "Common Stock" means the Common Stock of the Company.
 
                (m)     "Company" means Linear Technology Corporation, a
Delaware corporation, or any successor thereto.
 
                (n)     "Consultant" means any person, including an advisor,
engaged by the Company or its Affiliate to render services to such entity.
 
                (o)     "Determination Date" means the latest possible date that
will not jeopardize the qualification of an Award granted under the Plan as
"performance-based compensation" under Section 162(m) of the Code.
 
                (p)     "Director" means a member of the Board.
 
                (q)     "Disability" means total and permanent disability as
defined in Section 22(e)(3) of the Code, provided that in the case of Awards
other than Incentive Stock Options, the Administrator in its
 
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discretion may determine whether a permanent and total disability exists in
accordance with uniform and non-discriminatory standards adopted by the
Administrator from time to time.
 
                (r)     "Earnings Per Share" means as to any Performance Period,
the Company's or a business unit's Net Income, divided by a weighted average
number of common shares outstanding and dilutive common equivalent shares deemed
outstanding, determined in accordance with generally accepted accounting
principles.
 
                (s)     "Employee" means any person, including Officers and
Directors, employed by the Company or its Affiliates. Neither service as a
Director nor payment of a director's fee by the Company will be sufficient to
constitute "employment" by the Company.
 
                (t)     "Exchange Act" means the Securities Exchange Act of
1934, as amended.
 
                (u)     "Fair Market Value" means, as of any date, the value of
Common Stock as the Administrator may determine in good faith by reference to
the price of such stock on any established stock exchange or a national market
system on the day of determination if the Common Stock is so listed on any
established stock exchange or a national market system. If the Common Stock is
not listed on any established stock exchange or a national market system, the
value of the Common Stock as the Administrator may determine in good faith.
 
                (v)     "Fiscal Year" means a fiscal year of the Company.
 
                (w)     "Incentive Stock Option" means an Option that by its
terms qualifies and is otherwise intended to qualify as an incentive stock
option within the meaning of Section 422 of the Code and the regulations
promulgated thereunder.
 
                (x)     "Net Income" means as to any Performance Period, the
income after taxes of the Company for the Performance Period determined in
accordance with generally accepted accounting principles, provided that prior to
the Performance Period, the Administrator will determine whether any significant
item(s) will be included or excluded from the calculation of Net Income with
respect to one or more Participants.
 
                (y)     "Non-Employee Director" means a Director who is not
employed by the Company or its Parent or a Subsidiary.
 
                (z)     "Nonstatutory Stock Option" means an Option that by its
terms does not qualify or is not intended to qualify as an Incentive Stock
Option.
 
                (aa)    "Officer" means a person who is an officer of the
Company within the meaning of Section 16 of the Exchange Act and the rules and
regulations promulgated thereunder.
 
                (bb)"Old Plan" means the Company's 1996 Incentive Stock Option
Plan, as amended.
 
                (cc)    "Operating Cash Flow" means the Company's or a business
unit's sum of Net Income plus depreciation, amortization and other non-cash
debits or credits to Net Income (such as expenses relating to equity
compensation) less capital expenditures plus changes in working capital.
 
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                (dd)    "Operating Income" means the Company's or a business
unit's income from operations but excluding any unusual items, determined in
accordance with generally accepted accounting principles.
 
                (ee)    "Option" means a stock option granted pursuant to the
Plan.
 
                (ff)    "Parent" means a "parent corporation", whether now or
hereafter existing, as defined in Section 424(e) of the Code.
 
                (gg)    "Participant" means the holder of an outstanding Award
granted under the Plan.
 
                (hh)    "Performance Period" means any Fiscal Year of the
Company or such other period as determined by the Administrator in its sole
discretion.
 
                (ii)    "Performance Goals" means the goal(s) (or combined
goal(s)) determined by the Administrator (in its discretion) to be applicable to
a Participant with respect to an Award. As determined by the Administrator, the
Performance Goals applicable to an Award may provide for a targeted level or
levels of achievement using one or more of the following measures: (a) Cash
Position, (b) Earnings Per Share, (c) Net Income, (d) Operating Cash Flow, (e)
Operating Income, (f) Return on Assets, (g) Return on Equity, (h) Return on
Sales, (i) Revenue and (j) Total Stockholder Return. The Performance Goals may
differ from Participant to Participant and from Award to Award. Any criteria
used may be measured, as applicable, (i) in absolute terms, (ii) in relative
terms (including, but not limited to, passage of time and/or against another
company or companies), (iii) on a per-share basis, (iv) against the performance
of the Company as a whole or a segment of the Company, and (v) on a pre-tax or
after-tax basis.
 
                (jj)    "Performance Share" means an Award denominated in Shares
which may be earned in whole or in part upon attainment of Performance Goals or
other vesting criteria as the Administrator may determine pursuant to Section
10.
 
                (kk)    "Performance Unit" means an Award which may be earned in
whole or in part upon attainment of Performance Goals or other vesting criteria
as the Administrator may determine and which may be settled for cash, Shares or
other securities or a combination of the foregoing pursuant to Section 10.
 
                (ll)    "Period of Restriction" means the period during which
the transfer of Shares of Restricted Stock are subject to restrictions and
therefore, the Shares are subject to a substantial risk of forfeiture. Such
restrictions may be based on the passage of time, the achievement of target
levels of performance, or the occurrence of other events as determined by the
Administrator.
 
                (mm)    "Plan" means this 2005 Equity Incentive Plan.
 
                (nn)    "Restricted Stock" means Shares issued pursuant to a
Restricted Stock award under Section 8 of the Plan, or issued pursuant to the
early exercise of an Option.
 
                (oo)    "Restricted Stock Unit" means a bookkeeping entry
representing an amount equal to the Fair Market Value of one Share, granted
pursuant to Section 9. Each Restricted Stock Unit represents an unfunded and
unsecured obligation of the Company.
 
                (pp)    "Return on Assets" means the percentage equal to the
Company's or a business unit's Operating Income before incentive compensation,
divided by average net Company or business unit, as applicable, assets,
determined in accordance with generally accepted accounting principles.
 
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                (qq)    "Return on Equity" means the percentage equal to the
Company's Net Income divided by average shareholder's equity, determined in
accordance with generally accepted accounting principles.
 
                (rr)    "Return on Sales" means the percentage equal to the
Company's or a business unit's Operating Income before incentive compensation,
divided by the Company's or the business unit's revenue, determined in
accordance with generally accepted accounting principles.
 
                (ss)    "Revenue" means the Company's or a business unit's net
sales for a Performance Period, determined in accordance with generally accepted
accounting principles; provided, however, that prior to the Performance Period,
the Administrator will determine whether any significant item(s) will be
excluded or included from the calculation of Annual Revenue with respect to one
or more Participants.
 
                (tt)    "Rule 16b-3" means Rule 16b-3 of the Exchange Act or any
successor to Rule 16b-3, as in effect when discretion is being exercised with
respect to the Plan.
 
                (uu)    "Section 16(b)" means Section 16(b) of the Securities
Exchange Act of 1934, as amended.
 
                (vv)    "Service Provider" means an Employee, Director or
Consultant.
 
                (ww)    "Share" means a share of the Common Stock, as adjusted
in accordance with Section 13 of the Plan.
 
                (xx)    "Stock Appreciation Right" means an Award granted
pursuant to Section 7 hereof.
 
                (yy)    "Subsidiary" means a "subsidiary corporation", whether
now or hereafter existing, as defined in Section 424(f) of the Code.
 
                (zz)    "Total Stockholder Return" means the total return
(change in share price plus reinvestment of any dividends) of a Share.
 
        3.      Stock Subject to the Plan.
 
                (a)     Stock Subject to the Plan. Subject to the provisions of
Section 13 of the Plan, the maximum aggregate number of Shares which may be
issued under the Plan is 2,500,000 Shares plus any Shares remaining available
for issuance pursuant to the Company's Old Plan as of the date upon which this
Plan is approved by stockholders together with any Shares that would otherwise
return to the Old Plan as a result of termination of options or repurchase of
Shares issued under the Old Plan. The Shares may be authorized, but unissued, or
reacquired Common Stock.
 
                (b)     Lapsed Awards. If an Award expires or becomes
unexercisable without having been exercised in full, or, with respect to
Restricted Stock, Restricted Stock Units, Performance Shares or Performance
Units, is forfeited to or repurchased by the Company, the unpurchased Shares (or
for Awards other than Options and Stock Appreciation Rights, the forfeited or
repurchased shares) which were subject thereto will become available for future
grant or sale under the Plan (unless the Plan has terminated). With respect to
Stock Appreciation Rights, only Shares actually issued pursuant to a Stock
Appreciation Right will cease to be available under the Plan; all remaining
Shares under Stock Appreciation Rights will remain available for future grant or
sale under the Plan (unless the Plan has terminated). Shares that have actually
been issued under the Plan under any Award will not be returned to the Plan and
will not become available for
 
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future distribution under the Plan; provided, however, that if Shares of
Restricted Stock, Restricted Stock Units, Performance Shares or Performance
Units are repurchased by the Company or are forfeited to the Company, such
Shares will become available for future grant under the Plan. Shares used to pay
the withholding tax and exercise price associated with an Award will become
available for future grant or sale under the Plan. To the extent an Award under
the Plan is paid out in cash rather than Shares, such cash payment will not
reduce the number of Shares available for issuance under the Plan.
Notwithstanding the foregoing and, subject to adjustment provided in Section 13,
the maximum number of Shares that may be issued upon the exercise of Incentive
Stock Options will equal the aggregate Share number stated in Section 3(a),
plus, to the extent allowable under Section 422 of the Code, any Shares that
become available for issuance under the Plan under this Section 3(b).
 
        4.      Administration of the Plan.
 
                (a)     Procedure.
 
                        (i)     Multiple Administrative Bodies. The Plan may be
administered by different Committees with respect to different groups of Service
Providers.
 
                        (ii)    Section 162(m). To the extent that the
Administrator determines it to be desirable to qualify Options granted hereunder
as "performance-based compensation" within the meaning of Section 162(m) of the
Code, the Plan will be administered by a Committee of two or more "outside
directors" within the meaning of Section 162(m) of the Code.
 
                        (iii)   Rule 16b-3. To the extent desirable to qualify
transactions hereunder as exempt under Rule 16b-3, the transactions contemplated
hereunder will be structured to satisfy the requirements for exemption under
Rule 16b-3.
 
                        (iv)    Other Administration. Other than as provided
above, the Plan will be administered by (A) the Board or (B) a Committee, which
committee will be constituted to satisfy Applicable Laws.
 
                        (v)     Delegation of Authority for Day-to-Day
Administration. Except to the extent prohibited by Applicable Law, the
Administrator may delegate to one or more individuals the day-to-day
administration of the Plan and any of the functions assigned to it in this Plan.
Such delegation may be revoked at any time.
 
                (b)     Powers of the Administrator. Subject to the provisions
of the Plan, and in the case of a Committee, subject to the specific duties
delegated by the Board to such Committee, the Administrator will have the
authority, in its discretion:
 
                        (i)     to determine the Fair Market Value of the Common
Stock;
 
                        (ii)    to select the Service Providers to whom Awards
may be granted hereunder;
 
                        (iii)   to determine whether and to what extent Awards
or any combination thereof, are granted hereunder;
 
                        (iv)    to determine the number of Shares to be covered
by each Award granted hereunder;
 
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                        (v)     to approve forms of agreement for use under the
Plan;
 
                        (vi)    to determine the terms and conditions, not
inconsistent with the terms of the Plan, of any Award granted hereunder. Such
terms and conditions include, but are not limited to, the exercise price, the
time or times when Options or Stock Appreciation Rights may be exercised or
other Awards vest (which may be based on performance criteria), any vesting
acceleration or waiver of forfeiture or repurchase restrictions, and any
restriction or limitation regarding any Award or the Shares relating thereto,
based in each case on such factors as the Administrator, in its sole discretion,
will determine;
 
                        (vii)   to construe and interpret the terms of the Plan
and Awards granted pursuant to the Plan;
 
                        (viii)  to prescribe, amend and rescind rules and
regulations relating to the Plan, including rules and regulations relating to
sub-plans established for the purpose of qualifying for preferred tax treatment
under foreign tax laws;
 
                        (ix)    to modify or amend each Award (subject to
Section 18(c) of the Plan), including the discretionary authority to extend the
post-termination exercisability period of Awards longer than is otherwise
provided for in the Plan. Notwithstanding the previous sentence, the
Administrator may not modify or amend an Option or Stock Appreciation Right to
reduce the exercise price of such Option or Stock Appreciation Right after it
has been granted (except for adjustments made pursuant to Section 13) nor may
the Administrator cancel any outstanding Option or Stock Appreciation Right and
replace it with a new Option or Stock Appreciation Right with a lower exercise
price, unless, in either case, such action is approved by the Company's
stockholders;
 
                        (x)     to authorize any person to execute on behalf of
the Company any instrument required to effect the grant of an Award previously
granted by the Administrator;
 
                        (xi)    to allow a Participant to defer the receipt of
the payment of cash or the delivery of Shares that would otherwise be due to
such Participant under an Award pursuant to such procedures as the Administrator
may determine;
 
                        (xii)   to determine whether Awards will be settled in
Shares, cash or in any combination thereof;
 
                        (xiii)  to establish a program whereby Service Providers
designated by the Administrator can reduce compensation otherwise payable in
cash in exchange for Awards under the Plan;
 
                        (xiv)   to implement an Award Transfer Program;
 
                        (xv)    to impose such restrictions, conditions or
limitations as it determines appropriate as to the timing and manner of any
resales by a Participant or other subsequent transfers by the Participant of any
Shares issued as a result of or under an Award, including without limitation,
(A) restrictions under an insider trading policy, and (B) restrictions as to the
use of a specified brokerage firm for such resales or other transfers; and
 
                        (xvi)   to make all other determinations deemed
necessary or advisable for administering the Plan.
 
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                (c)     Effect of Administrator's Decision. The Administrator's
decisions, determinations and interpretations will be final and binding on all
Participants and any other holders of Awards.
 
        5.      Eligibility. Nonstatutory Stock Options, Restricted Stock,
Restricted Stock Units, Stock Appreciation Rights, Performance Units and
Performance Shares may be granted to Service Providers. Incentive Stock Options
may be granted only to Employees of the Company or any Parent or Subsidiary of
the Company. A Service Provider who has been granted an Award may, if otherwise
eligible, be granted additional Awards.
 
        6.      Stock Options.
 
                (a)     Limitations.
 
                        (i)     Each Option will be  designated  in the Award
Agreement as either an Incentive Stock Option or a Nonstatutory Stock Option.
However, notwithstanding such designation, to the extent that the aggregate Fair
Market Value of the Shares with respect to which Incentive Stock Options are
exercisable for the first time by the Participant during any calendar year
(under all plans of the Company and any Parent or Subsidiary) exceeds $100,000,
such Options will be treated as Nonstatutory Stock Options. For purposes of this
Section 6(a), Incentive Stock Options will be taken into account in the order in
which they were granted. The Fair Market Value of the Shares will be determined
as of the time the Option with respect to such Shares is granted.
 
                        (ii)    The following limitations will apply to grants
of Options:
 
                                (1)     No Service Provider will be granted, in
any Fiscal Year, Options to purchase more than 5,000,000 Shares.
 
                                (2)     In connection with his or her initial
service as an Employee, a Service Provider may be granted Options to purchase up
to an additional 5,000,000 Shares, which will not count against the limit set
forth in Section 6(a)(ii)(A) above.
 
                                (3)     The foregoing limitations will be
adjusted proportionately in connection with any change in the Company's
capitalization as described in Section 13.
 
                                (4)     If an Option is cancelled in the same
Fiscal Year in which it was granted (other than in connection with a transaction
described in Section 13), the cancelled Option will be counted against the
limits set forth in subsections (A) and (B) above. For this purpose, if the
exercise price of an Option is reduced, the transaction will be treated as a
cancellation of the Option and the grant of a new Option.
 
                (b)     Term of Option. The Administrator will determine the
term of each Option in its sole discretion; provided, however, that the term
will be ten (10) years from the date of grant or such shorter term as may be
provided in the Award Agreement. Moreover, in the case of an Incentive Stock
Option granted to a Participant who, at the time the Incentive Stock Option is
granted, owns stock representing more than ten percent (10%) of the total
combined voting power of all classes of stock of the Company or any Parent or
Subsidiary, the term of the Incentive Stock Option will be five (5) years from
the date of grant or such shorter term as may be provided in the Award
Agreement.
 
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                (c)     Option Exercise Price and Consideration.
 
                        (i)     Exercise Price. The per share exercise price for
the Shares to be issued pursuant to exercise of an Option will be determined by
the Administrator, subject to the following:
 
                                (1)     In the case of an Incentive Stock Option
 
                                        a)      granted to an Employee who, at
the time the Incentive Stock Option is granted, owns stock representing more
than ten percent (10%) of the voting power of all classes of stock of the
Company or any Parent or Subsidiary, the per Share exercise price will be no
less than 110% of the Fair Market Value per Share on the date of grant.
 
                                        b)      granted  to any  Employee  other
than an Employee described in paragraph (A) immediately above, the per Share
exercise price will be no less than 100% of the Fair Market Value per Share on
the date of grant.
 
                                (2)     In the  case  of a  Nonstatutory  Stock
Option, the per Share exercise price will be determined by the Administrator,
but will be no less than 100% of the Fair Market Value per Share on the date of
grant.
 
                                (3)     Notwithstanding  the  foregoing,
Options may be granted with a per Share exercise price of less than 100% of the
Fair Market Value per Share on the date of grant pursuant to a transaction
described in, and in a manner consistent with, Section 424(a) of the Code.
 
                        (ii)    Waiting Period and Exercise Dates.  At the time
an Option is granted, the Administrator will fix the period within which the
Option may be exercised and will determine any conditions that must be satisfied
before the Option may be exercised.
 
                        (iii)   Form  of  Consideration.  The  Administrator
will determine the acceptable form(s) of consideration for exercising an Option,
including the method of payment, to the extent permitted by Applicable Laws.
 
                (d)     Exercise of Option.
 
                        (i)     Procedure for Exercise; Rights as a Stockholder.
Any Option granted hereunder will be exercisable according to the terms of the
Plan and at such times and under such conditions as determined by the
Administrator and set forth in the Award Agreement. An Option may not be
exercised for a fraction of a Share.
 
                        An Option will be deemed exercised when the Company
receives: (i) notice of exercise (in such form as the Administrator specify from
time to time) from the person entitled to exercise the Option, and (ii) full
payment for the Shares with respect to which the Option is exercised (together
with an applicable withholding taxes). No adjustment will be made for a dividend
or other right for which the record date is prior to the date the Shares are
issued, except as provided in Section 13 of the Plan.
 
                        (ii)    Termination  of  Relationship  as a  Service
Provider. If a Participant ceases to be a Service Provider, other than upon the
Participant's death, Disability or Retirement, the Participant may exercise his
or her Option within such period of time as is specified in the Award Agreement
to the extent that the Option is vested on the date of termination (but in no
event later than the expiration of the term of such Option as set forth in the
Award Agreement). In the absence of a specified time in the Award Agreement, the
 
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Option will remain exercisable for three (3) months following the Participant's
termination. Unless otherwise provided by the Administrator, if on the date of
termination the Participant is not vested as to his or her entire Option, the
Shares covered by the unvested portion of the Option will revert to the Plan. If
after termination the Participant does not exercise his or her Option within the
time specified by the Administrator, the Option will terminate, and the Shares
covered by such Option will revert to the Plan.
 
                        (iii)   Disability of Participant. If a Participant
ceases to be a Service Provider as a result of the Participant's Disability, the
Participant may exercise his or her Option within such period of time as is
specified in the Award Agreement to the extent the Option is vested on the date
of termination (but in no event later than the expiration of the term of such
Option as set forth in the Award Agreement). In the absence of a specified time
in the Award Agreement, the Option will remain exercisable for six (6) months
following the Participant's termination. Unless otherwise provided by the
Administrator, if on the date of termination the Participant is not vested as to
his or her entire Option, the Shares covered by the unvested portion of the
Option will revert to the Plan. If after termination the Participant does not
exercise his or her Option within the time specified herein, the Option will
terminate, and the Shares covered by such Option will revert to the Plan.
 
                        (iv)    Death of Participant. If a Participant dies
while a Service Provider, the Option may be exercised following the
Participant's death within such period of time as is specified in the Award
Agreement to the extent that the Option is vested on the date of death (but in
no event may the option be exercised later than the expiration of the term of
such Option as set forth in the Award Agreement), by the Participant's
designated beneficiary, provided such beneficiary has been designated prior to
Participant's death in a form acceptable to the Administrator. If no such
beneficiary has been designated by the Participant, then such Option may be
exercised by the personal representative of the Participant's estate or by the
person(s) to whom the Option is transferred pursuant to the Participant's will
or in accordance with the laws of descent and distribution. In the absence of a
specified time in the Award Agreement, the Option will remain exercisable for
six (6) months following Participant's death. Unless otherwise provided by the
Administrator, if at the time of death Participant is not vested as to his or
her entire Option, the Shares covered by the unvested portion of the Option will
immediately revert to the Plan. If the Option is not so exercised within the
time specified herein, the Option will terminate, and the Shares covered by such
Option will revert to the Plan.
 
        7.      Stock Appreciation Rights.
 
                (a)     Grant of Stock  Appreciation  Rights.  Subject to the
terms and conditions of the Plan, a Stock Appreciation Right may be granted to
Service Providers at any time and from time to time as will be determined by the
Administrator, in its sole discretion.
 
                (b)     Number of Shares. The Administrator will have complete
discretion to determine the number of Stock Appreciation Rights granted to any
Participant, provided that during any Fiscal Year, no Participant will be
granted Stock Appreciation Rights covering more than 5,000,000 Shares.
Notwithstanding the foregoing limitation, in connection with a Participant's
initial service as an Employee, an Employee may be granted Stock Appreciation
Rights covering up to an additional 5,000,000 Shares.
 
                (c)     Exercise Price and Other Terms. The Administrator,
subject to the provisions of the Plan, will have complete discretion to
determine the terms and conditions of Stock Appreciation Rights granted under
the Plan, provided, however, that the exercise price will be not less than one
hundred percent (100%) of the Fair Market Value of a Share on the date of grant.
 
                                      A-10
<PAGE>
 
                (d)     Stock Appreciation Right Agreement. Each Stock
Appreciation Right grant will be evidenced by an Award Agreement that will
specify the exercise price, the term of the Stock Appreciation Right, the
conditions of exercise, and such other terms and conditions as the
Administrator, in its sole discretion, will determine.
 
                (e)     Expiration of Stock Appreciation Rights. A Stock
Appreciation Right granted under the Plan will expire upon the date determined
by the Administrator, in its sole discretion, and set forth in the Award
Agreement. Notwithstanding the foregoing, the rules of Section 6(d) also will
apply to Stock Appreciation Rights.
 
                (f)     Payment of Stock  Appreciation  Right Amount.  Upon
exercise of a Stock Appreciation Right, a Participant will be entitled to
receive payment from the Company in an amount determined by multiplying:
 
                        (i)     The  difference  between the Fair Market Value
of a Share on the date of exercise over the exercise price; times
 
                        (ii)    The number of Shares with respect to which
the Stock Appreciation Right is exercised.
 
At the discretion of the Administrator, the payment upon Stock Appreciation
Right exercise may be in cash, in Shares of equivalent value, or in some
combination thereof.
 
        8.      Restricted Stock.
 
                (a)     Grant of Restricted Stock. Subject to the terms and
provisions of the Plan, the Administrator, at any time and from time to time,
may grant Shares of Restricted Stock to Service Providers in such amounts as the
Administrator, in its sole discretion, will determine.
 
                (b)     Restricted Stock Agreement. Each Award of Restricted
Stock will be evidenced by an Award Agreement that will specify the Period of
Restriction, the number of Shares granted, and such other terms and conditions
as the Administrator, in its sole discretion, will determine. Notwithstanding
the foregoing, during any Fiscal Year no Participant will receive more than an
aggregate of 1,500,000 Shares of Restricted Stock; provided, however, that in
connection with a Participant's initial service as an Employee, an Employee may
be granted an aggregate of up to an additional 1,500,000 Shares of Restricted
Stock. Unless the Administrator determines otherwise, Shares of Restricted Stock
will be held by the Company as escrow agent until the restrictions on such
Shares have lapsed.
 
                (c)     Transferability. Except as provided in this Section 8,
Shares of Restricted Stock may not be sold, transferred, pledged, assigned, or
otherwise alienated or hypothecated until the end of the applicable Period of
Restriction.
 
                (d)     Other Restrictions. The Administrator, in its sole
discretion, may impose such other restrictions on Shares of Restricted Stock as
it may deem advisable or appropriate.
 
                (e)     Removal of Restrictions.
 
                        (i)     General. Except as otherwise provided in this
Section 8, Shares of Restricted Stock covered by each Restricted Stock grant
made under the Plan will be released from escrow as soon as practicable after
the last day of the Period of Restriction. The restrictions will lapse at a rate
determined by
 
                                      A-11
<PAGE>
 
the Administrator. After the grant of Restricted Stock, the Administrator, in
its sole discretion, may reduce or waive any restrictions for such Restricted
Stock.
 
                        (ii)    Section 162(m) Performance Restrictions. For
purposes of qualifying Awards of Restricted Stock as "performance-based
compensation" under Section 162(m) of the Code, the Administrator, in its
discretion, may set restrictions based upon the achievement of Performance
Goals, which shall be set by the Administrator on or before the Determination
Date. In this connection, the Administrator shall follow any procedures
determined by it from time to time to be necessary or appropriate to ensure
qualification of the Stock Purchase Right under Section 162(m) of the Code
(e.g., in determining the Performance Goals).
 
                (f)     Voting Rights. During the Period of Restriction, Service
Providers holding Shares of Restricted Stock granted hereunder may exercise full
voting rights with respect to those Shares, unless the Administrator determines
otherwise.
 
                (g)     Dividends and Other Distributions. During the Period of
Restriction, Service Providers holding Shares of Restricted Stock will be
entitled to receive all dividends and other distributions paid with respect to
such Shares unless otherwise provided in the Award Agreement. If any such
dividends or distributions are paid in Shares, the Shares will be subject to the
same restrictions on transferability and forfeitability as the Shares of
Restricted Stock with respect to which they were paid.
 
                (h)     Return of Restricted Stock to Company. On the date set
forth in the Award Agreement, the Restricted Stock for which restrictions have
not lapsed will revert to the Company and again will become available for grant
under the Plan.
 
        9.      Restricted Stock Units.
 
                (a)     Grant. Restricted Stock Units may be granted at any time
and from time to time as determined by the Administrator. Each Restricted Stock
Unit grant will be evidenced by an Award Agreement that will specify such other
terms and conditions as the Administrator, in its sole discretion, will
determine, including all terms, conditions, and restrictions related to the
grant, the number of Restricted Stock Units and the form of payout, which,
subject to Section 9(d), may be left to the discretion of the Administrator.
Notwithstanding the anything to the contrary in this subsection (a), during any
fiscal year of the Company, no Participant will receive more than an aggregate
of 1,500,000 Restricted Stock Units; provided, however, that in connection with
a Participant's initial service as an Employee, an Employee may be granted an
aggregate of up to an additional 1,500,000 Restricted Stock Units.
 
                (b)     Vesting Criteria and Other Terms.
 
                        (i)     General. The Administrator will set vesting
criteria in its discretion, which, depending on the extent to which the criteria
are met, will determine the number of Restricted Stock Units that will be paid
out to the Participant. After the grant of Restricted Stock Units, the
Administrator, in its sole discretion, may reduce or waive any restrictions for
such Restricted Stock Units upon or in connection with a Change in Control or
upon or in connection with a Participant's termination of service, including,
without limitation, due to death or Disability.
 
                        (ii)    Section 162(m) Performance Restrictions. For
purposes of qualifying Restricted Stock Units as "performance-based
compensation" under Section 162(m) of the Code, the Administrator, in its
discretion, may set restrictions based upon the achievement of Performance
Goals, which shall be set by the Administrator on or before the Determination
Date. In this connection, the Administrator
 
                                      A-12
<PAGE>
 
shall follow any procedures determined by it from time to time to be necessary
or appropriate to ensure qualification of the Stock Purchase Right under
Section 162(m) of the Code (e.g., in determining the Performance Goals).
 
                (c)     Earning Restricted Stock Units. Upon meeting the
applicable vesting criteria, the Participant will be entitled to receive a
payout as specified in the Award Agreement. Notwithstanding the foregoing, at
any time after the grant of Restricted Stock Units, the Administrator, in its
sole discretion, may reduce or waive any vesting criteria that must be met to
receive a payout.
 
                (d)     Form and Timing of Payment. Payment of earned Restricted
Stock Units will be made as soon as practicable after the date(s) set forth in
the Award Agreement. The Administrator, in its sole discretion, may pay earned
Restricted Stock Units in cash, Shares, or a combination thereof. Shares
represented by Restricted Stock Units that are fully paid in cash again will be
available for grant under the Plan.
 
                (e)     Cancellation. On the date set forth in the Award
Agreement, all unearned Restricted Stock Units will be forfeited to the Company.
 
        10.     Performance Units and Performance Shares.
 
                (a)     Grant of Performance Units/Shares. Performance Units and
Performance Shares may be granted to Service Providers at any time and from time
to time, as will be determined by the Administrator, in its sole discretion. The
Administrator will have complete discretion in determining the number of
Performance Units/Shares granted to each Participant provided that during any
Fiscal Year no Participant will receive more than 1,500,000 Performance Shares
or Performance Units. Notwithstanding the foregoing limitation, in connection
with a Participant's initial service as an Employee, an Employee may be granted
up to an additional 1,500,000 Performance Shares or Performance Units.
 
                (b)     Value of Performance Units/Shares. Each Performance Unit
will be a bookkeeping entry representing an amount equal to the Fair Market
Value of one Share and will represent an unfunded and unsecured obligation of
the Company. Each Performance Share will have an initial value equal to the Fair
Market Value of a Share on the date of grant.
 
                (c)     Performance Objectives and Other Terms.
 
                        (i)     General. The Administrator will set performance
objectives or other vesting provisions (including, without limitation, continued
status as a Service Provider) in its discretion which, depending on the extent
to which they are met, will determine the number or value of Performance
Units/Shares that will be paid out to the Participant. Each Award of Performance
Units/Shares will be evidenced by an Award Agreement that will specify the
Performance Period, and such other terms and conditions as the Administrator, in
its sole discretion, will determine.
 
                        (ii)    Section 162(m) Performance Objectives. For
purposes of qualifying grants of Performance Units/Shares as "performance-based
compensation" under Section 162(m) of the Code, the Administrator, in its
discretion, may determine that the performance objectives applicable to
Performance Units/Shares will be based on the achievement of Performance Goals.
The Administrator will set the Performance Goals on or before the Determination
Date. In granting Performance Units/Shares which are intended to qualify under
Section 162(m) of the Code, the Administrator will follow any procedures
determined by it from time to time to be necessary or appropriate to ensure
qualification of the Performance Units/Shares under Section 162(m) of the Code
(e.g., in determining the Performance Goals).
 
                                      A-13
<PAGE>
 
                (d)     Earning of Performance Units/Shares. After the
applicable Performance Period has ended, the holder of Performance Units/Shares
will be entitled to receive a payout of the number of Performance Units/Shares
earned by the Participant over the Performance Period, to be determined as a
function of the extent to which the corresponding performance objectives or
other vesting provisions have been achieved. After the grant of a Performance
Unit/Share, the Administrator, in its sole discretion, may reduce or waive any
performance objectives or other vesting provisions for such Performance
Unit/Share.
 
                (e)     Form and Timing of Payment of Performance Units/Shares.
Payment of earned Performance Units/Shares will be made as soon as practicable
after the expiration of the applicable Performance Period. The Administrator, in
its sole discretion, may pay earned Performance Units/Shares in the form of
cash, in Shares (which have an aggregate Fair Market Value equal to the value of
the earned Performance Units/Shares at the close of the applicable Performance
Period) or in a combination thereof.
 
                (f)     Cancellation of Performance Units/Shares. On the date
set forth in the Award Agreement, all unearned or unvested Performance
Units/Shares will be forfeited to the Company, and again will be available for
grant under the Plan.
 
        11.     Leaves of Absence. Unless the Administrator provides otherwise,
vesting of Awards granted hereunder will be suspended during any unpaid leave of
absence. A Service Provider will not cease to be an Employee in the case of (i)
any leave of absence approved by the Company or (ii) transfers between locations
of the Company or between the Company, its Parent, or any Subsidiary. For
purposes of Incentive Stock Options, no such leave may exceed ninety (90) days,
unless reemployment upon expiration of such leave is guaranteed by statute or
contract. If reemployment upon expiration of a leave of absence approved by the
Company is not so guaranteed, then three (3) months following the 91st day of
such leave any Incentive Stock Option held by the Participant will cease to be
treated as an Incentive Stock Option and will be treated for tax purposes as a
Nonstatutory Stock Option.
 
        12.     Non-Transferability of Awards. Unless determined otherwise by
the Administrator, an Award may not be sold, pledged, assigned, hypothecated,
transferred, or disposed of in any manner other than by will or by the laws of
descent or distribution and may be exercised, during the lifetime of the
recipient, only by the recipient. If the Administrator makes an Award
transferable, such Award will contain such additional terms and conditions as
the Administrator deems appropriate.
 
        13.     Adjustments; Dissolution or Liquidation; Merger or Change in
Control.
 
                (a)     Adjustments. In the event 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 of the Company, or other change in the corporate
structure of the Company affecting the Shares occurs, the Administrator, in
order to prevent diminution or enlargement of the benefits or potential benefits
intended to be made available under the Plan, may (in its sole discretion)
adjust the number and class of Shares that may be delivered under the Plan
and/or the number, class, and price of Shares covered by each outstanding Award,
and the numerical Share limits set forth in Sections 3, 6, 7, 8, 9 and 10.
 
                (b)     Dissolution or Liquidation. In the event of the proposed
dissolution or liquidation of the Company, the Administrator will notify each
Participant as soon as practicable prior to the effective date of such proposed
transaction. The Administrator in its discretion may provide for a Participant
to have the right to exercise his or her Award, to the extent applicable, until
ten (10) days prior to such transaction as to all of the Awarded Stock covered
thereby, including Shares as to which the Award would not otherwise be
exercisable. In addition, the Administrator may provide that any Company
repurchase option or forfeiture
 
                                      A-14
<PAGE>
 
rights applicable to any Award will lapse 100%, and that any Award vesting will
accelerate 100%, provided the proposed dissolution or liquidation takes place at
the time and in the manner contemplated. To the extent it has not been
previously exercised or vested, an Award will terminate immediately prior to the
consummation of such proposed action.
 
                (c)     Change in Control. In the event of a Change in Control,
each outstanding Award will be treated as the Administrator determines,
including, without limitation, that each Award be assumed or an equivalent
option or right substituted by the successor corporation or a Parent or
Subsidiary of the successor corporation. The Administrator will not be required
to treat all Awards similarly in the transaction.
 
                        In the event that the successor corporation does not
assume or substitute for the Award, unless the Administrator provides otherwise,
the Participant will fully vest in and have the right to exercise all of his or
her outstanding Options and Stock Appreciation Rights, including Shares as to
which such Awards would not otherwise be vested or exercisable, all restrictions
on Restricted Stock will lapse, and, with respect to Restricted Stock Units,
Performance Shares and Performance Units, all Performance Goals or other vesting
criteria will be deemed achieved at target levels and all other terms and
conditions met. In addition, if an Option or Stock Appreciation Right is not
assumed or substituted in the event of a Change in Control, the Administrator
will notify the Participant in writing or electronically that the Option or
Stock Appreciation Right will be exercisable for a period of time determined by
the Administrator in its sole discretion, and the Option or Stock Appreciation
Right will terminate upon the expiration of such period.
 
                        With respect to Awards granted to  non-employee
Directors that are assumed or substituted for, if on the date of or following
such assumption or substitution the Participant's status as a Director or a
director of the successor corporation, as applicable, is terminated other than
upon a voluntary resignation by the Participant, then the Participant will fully
vest in and have the right to exercise Options and/or Stock Appreciation Rights
as to all of the Shares subject thereto, including Shares as to which such
Awards would not otherwise be vested or exercisable, all restrictions on
Restricted Stock will lapse, and, with respect to Restricted Stock Units,
Performance Shares and Performance Units, all Performance Goals or other vesting
criteria will be deemed achieved at target levels and all other terms and
conditions met.
 
                        For the purposes of this  subsection  (c), an Award
will be considered assumed if, following the Change in Control, the Award
confers the right to purchase or receive, for each Share subject to the Award
immediately prior to the Change in Control, the consideration (whether stock,
cash, or other securities or property) or, in the case of a Stock Appreciation
Right upon the exercise of which the Administrator determines to pay cash or a
Restricted Stock Unit, Performance Share or Performance Unit which the
Administrator can determine to pay in cash, the fair market value of the
consideration received in the merger or Change in Control by holders of Common
Stock for each Share held on the effective date of the transaction (and if
holders were offered a choice of consideration, the type of consideration chosen
by the holders of a majority of the outstanding Shares); provided, however, that
if such consideration received in the Change in Control is not solely common
stock of the successor corporation or its Parent, the Administrator may, with
the consent of the successor corporation, provide for the consideration to be
received upon the exercise of an Option or Stock Appreciation Right or upon the
payout of a Restricted Stock Unit, Performance Share or Performance Unit, for
each Share subject to such Award (or in the case of Restricted Stock Units and
Performance Units, the number of implied Shares determined by dividing the value
of the Restricted Stock Units or Performance Units, as applicable, by the per
share consideration received by holders of Common Stock in the Change in
Control), to be solely common stock of the successor corporation or its Parent
equal in fair market value to the per share consideration received by holders of
Common Stock in the Change in Control.
 
                                      A-15
<PAGE>
 
                        Notwithstanding  anything in this Section 13(c) to the
contrary, an Award that vests, is earned or paid-out upon the satisfaction of
one or more Performance Goals will not be considered assumed if the Company or
its successor modifies any of such Performance Goals without the Participant' s
consent; provided, however, a modification to such Performance Goals only to
reflect the successor corporation's post-Change in Control corporate structure
will not be deemed to invalidate an otherwise valid Award assumption.
 
        14.     Tax Withholding
 
                (a)     Withholding Requirements. Prior to the delivery of any
Shares or cash pursuant to an Award (or exercise thereof), the Company will have
the power and the right to deduct or withhold, or require a Participant to remit
to the Company, an amount sufficient to satisfy federal, state, local, foreign
or other taxes (including the Participant's FICA obligation) required to be
withheld with respect to such Award (or exercise thereof).
 
                (b)     Withholding Arrangements. The Administrator, in its sole
discretion and pursuant to such procedures as it may specify from time to time,
may permit a Participant to satisfy such tax withholding obligation, in whole or
in part (without limitation) by (i) paying cash, (ii) electing to have the
Company withhold otherwise deliverable cash or Shares having a Fair Market Value
equal to the amount required to be withheld, (iii) delivering to the Company
already-owned Shares having a Fair Market Value equal to the amount required to
be withheld, or (iv) selling a sufficient number of Shares otherwise deliverable
to the Participant through such means as the Administrator may determine in its
sole discretion (whether through a broker or otherwise) equal to the amount
required to be withheld. The amount of the withholding requirement will be
deemed to include any amount which the Administrator agrees may be withheld at
the time the election is made, not to exceed the amount determined by using the
maximum federal, state or local marginal income tax rates applicable to the
Participant with respect to the Award on the date that the amount of tax to be
withheld is to be determined. The Fair Market Value of the Shares to be withheld
or delivered will be determined as of the date that the taxes are required to be
withheld.
 
        15.     No Effect on Employment or Service. Neither the Plan nor any
Award will confer upon a Participant any right with respect to continuing the
Participant's relationship as a Service Provider with the Company, nor will they
interfere in any way with the Participant's right or the Company's right to
terminate such relationship at any time, with or without cause, to the extent
permitted by Applicable Laws.
 
        16.     Date of an Award. The date of grant of an Award will be, for all
purposes, the date on which the Administrator makes the determination to grant
such Award, or such other date as is determined by the Administrator. Notice of
the grant determination will be given to each Service Provider to whom an Award
is so granted within a reasonable time after the date of such grant.
 
        17.     Term of Plan. Subject to Section 23 of the Plan, the Plan will
become effective upon its adoption by the Board. It will continue in effect for
a term of ten (10) years unless terminated earlier under Section 18 of the Plan.
 
        18.     Amendment and Termination of the Plan.
 
                (a)     Amendment and Termination. The Administrator may at any
time amend, alter, suspend or terminate the Plan.
 
                (b)     Stockholder Approval. The Company will obtain
stockholder approval of any Plan amendment to the extent necessary and desirable
to comply with Applicable Laws.
 
                                      A-16
<PAGE>
 
                (c)     Effect of Amendment or Termination. No amendment,
alteration, suspension or termination of the Plan will impair the rights of any
Participant, unless mutually agreed otherwise between the Participant and the
Administrator, which agreement must be in writing and signed by the Participant
and the Company. Termination of the Plan will not affect the Administrator's
ability to exercise the powers granted to it hereunder with respect to Awards
granted under the Plan prior to the date of such termination.
 
        19.     Conditions Upon Issuance of Shares.
 
                (a)     Legal Compliance. Shares will not be issued pursuant to
the exercise of an Award unless the exercise of the Award or the issuance and
delivery of such Shares (or with respect to Performance Units, the cash
equivalent thereof) will comply with Applicable Laws and will be further subject
to the approval of counsel for the Company with respect to such compliance.
 
                (b)     Investment Representations. As a condition to the
exercise or receipt of an Award, the Company may require the person exercising
or receiving such Award to represent and warrant at the time of any such
exercise or receipt that the Shares are being purchased only for investment and
without any present intention to sell or distribute such Shares if, in the
opinion of counsel for the Company, such a representation is required.
 
        20.     Severability. Notwithstanding any contrary provision of the Plan
or an Award to the contrary, if any one or more of the provisions (or any part
thereof) of this Plan or the Awards will be held invalid, illegal or
unenforceable in any respect, such provision will be modified so as to make it
valid, legal and enforceable, and the validity, legality and enforceability of
the remaining provisions (or any part thereof) of the Plan or Award, as
applicable, will not in any way be affected or impaired thereby.
 
        21.     Liability of Company.
 
                (a)     Inability to Obtain Authority. The inability of the
Company to obtain authority from any regulatory body having jurisdiction, which
authority is deemed by the Company's counsel to be necessary to the lawful
issuance and sale of any Shares hereunder, will relieve the Company of any
liability in respect of the failure to issue or sell such Shares as to which
such requisite authority will not have been obtained.
 
                (b)     Grants Exceeding Allotted Shares. If the Shares covered
by an Award exceed, as of the date of grant, the number of Shares which may be
issued under the Plan without additional stockholder approval, such Award will
be void with respect to such excess Shares, unless stockholder approval of an
amendment sufficiently increasing the number of Shares subject to the Plan is
timely obtained in accordance with Section 18(b) of the Plan.
 
        22.     Reservation of Shares. The Company, during the term of this
Plan, will at all times reserve and keep available such number of Shares as will
be sufficient to satisfy the requirements of the Plan.
 
        23.     Stockholder Approval. The Plan will be subject to approval by
the stockholders of the Company within twelve (12) months after the date the
Plan is adopted. Such stockholder approval will be obtained in the manner and to
the degree required under Applicable Laws.