PMC-SIERRA, INC.

 

                            1994 INCENTIVE STOCK PLAN

 

 

         The following  constitute the provisions of the  PMC-Sierra,  Inc. 1994

Incentive Stock 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   additional   incentive  to  Employees,   Consultants  and

         Directors, and

 

o        to promote the success of the Company's business.

 

 

         Options  granted  under  the Plan may be  Incentive  Stock  Options  or

Nonstatutory  Stock Options,  as determined by the  Administrator at the time of

grant. Stock Purchase Rights may also be granted under the Plan.

 

 

2.       Definitions.  As used herein, the following definitions shall apply:

 

         (a)  "Administrator"  means the Board or any of its Committees as shall

be administering the Plan, in accordance with Section 4 of the Plan.

 

         (b)  "Applicable  Laws"  means the legal  requirements  relating to the

administration  of stock option plans under state  corporate and securities laws

and the Code.

 

         (c) "Board" means the Board of Directors of the Company.

 

         (d) "Code" means the Internal Revenue Code of 1986, as amended.

 

         (e) "Committee" means a Committee  appointed by the Board in accordance

with Section 4 of the Plan.

 

         (f) "Common Stock" means the Common Stock of the Company.

 

         (g) "Company" means PMC-Sierra, Inc., a Delaware corporation.

 

         (h)  "Consultant"  means  any  person,   including  an  advisor,  Sales

Representative  or Distributor  engaged by the Company or a Parent or Subsidiary

to render services and who is compensated  for such services,  provided that the

term "Consultant" shall not include Directors who are paid only a director's fee

by the Company or who are not  compensated  by the Company for their services as

Directors.

 

         (i)  "Continuous  Status as an Employee,  Consultant or Director" means

that the employment, consulting or director relationship with the Company or any

Parent or Subsidiary is not interrupted or terminated.  Continuous  Status as an

Employee, Consultant or Director shall not be considered interrupted in the case

of: (i) any leave of absence  approved  by the  Company,  including  sick leave,

military  leave,  or any  other  personal  leave;  provided,  however,  that for

purposes of Incentive Stock Options,  no such leave may exceed ninety (90) days,

unless  reemployment upon the expiration of such leave is guaranteed by contract

(including certain Company policies) or statute; provided,  further, that on the

ninety-first  (91st) day of any such leave (where reemployment is not guaranteed

by contract or statute) the Optionee's  Incentive Stock Option shall cease to be

treated as an  Incentive  Stock Option and will be treated for tax purposes as a

Nonstatutory Stock Option; or (ii) transfers between locations of the Company or

between the Company, its Parent, its Subsidiaries or its successor.

 

         (j) "Director"  means a member of the Board or a member of the board of

directors of any Parent or Subsidiary of Company.

 

         (k)  "Disability"  means total and  permanent  disability as defined in

Section 22(e)(3) of the Code.

 

         (l) "Distributor" means any person, whether an individual or an entity,

serving as a distributor  for the Company or any  Subsidiary  who (whether as an

individual or an entity or through the  individual  fulfilling the duties of the

chief  executive  officer  of the  entity)  (i) has five years  experience  as a

distributor, (ii) is experienced in representing semiconductor manufacturers and

(iii) sold at least $3,000,000 of the products it distributes  during the fiscal

year  immediately  prior to the year in which stock is being purchased under the

Plan (or $3,000,000 during the current fiscal year to date).

 

         (m)  "Employee"  means any person,  including  Officers and  Directors,

employed  by the Company or any Parent or  Subsidiary  of the  Company.  Neither

service as a Director  nor payment of a director's  fee by the Company  shall be

sufficient to constitute "employment" by the Company.

 

         (n)  "Exchange  Act"  means the  Securities  Exchange  Act of 1934,  as

amended.

 

         (o) "Fair  Market  Value"  means,  as of any date,  the value of Common

Stock determined as follows:

 

              (i) If the  Common  Stock  is  listed  on  any  established  stock

exchange or a national market system,  including without limitation the National

Market System of the National Association of Securities Dealers,  Inc. Automated

Quotation  ("NASDAQ")  System,  the Fair Market Value of a Share of Common Stock

shall be the closing sales price for such stock (or the closing bid, if no sales

were  reported) as quoted on such system or exchange  (or the exchange  with the

greatest  volume of trading  in Common  Stock) on the day of  determination,  as

reported in The Wall Street  Journal or such other  source as the  Administrator

deems reliable;

 

              (ii) If the Common  Stock is quoted on the NASDAQ  System (but not

on the National  Market System  thereof) or is regularly  quoted by a recognized

securities dealer but selling prices are not reported,  the Fair Market Value of

a Share of Common  Stock  shall be the mean  between  the high bid and low asked

prices for the Common Stock on the day of determination, as reported in The Wall

Street Journal or such other source as the Administrator deems reliable; or

 

              (iii) In the  absence  of an  established  market  for the  Common

Stock,  the  Fair  Market  Value  shall  be  determined  in  good  faith  by the

Administrator.

 

         (p) "Incentive  Stock Option" means an Option intended to qualify as an

incentive  stock  option  within the  meaning of Section 422 of the Code and the

regulations promulgated thereunder.

 

 

         (q) "Nonstatutory Stock Option" means an Option not intended to qualify

as an Incentive Stock Option.

 

         (r) "Notice of Grant" means a written notice  evidencing  certain terms

and conditions of an individual Option or Stock Purchase Right grant. The Notice

of Grant is part of the Option Agreement.

 

         (s)  "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.

 

         (t) "Option" means a stock option granted pursuant to the Plan.

 

         (u) "Option  Agreement" means a written  agreement  between the Company

and an Optionee  evidencing  the terms and  conditions of an  individual  Option

grant. The Option Agreement is subject to the terms and conditions of the Plan.

 

         (v)  "Option  Exchange  Program"  means a program  whereby  outstanding

options are surrendered in exchange for options with a lower exercise price.

 

         (w)  "Optioned  Stock" means the Common  Stock  subject to an Option or

Stock Purchase Right.

 

         (x) "Optionee"  means an Employee,  Consultant or Director who holds an

outstanding Option or Stock Purchase Right.

 

         (y)  "Director"  shall mean a Director  who is not an  Employee  of the

Company.

 

         (z)  "Parent"  means a "parent  corporation,"  whether now or hereafter

existing, as defined in Section 424(e) of the Code.

 

         (aa) "Plan" means this 1994 Incentive Stock Plan.

 

         (bb) "Restricted  Stock" means shares of Common Stock acquired pursuant

to a grant of Stock Purchase Rights under Section 11 below.

 

         (cc) "Restricted  Stock Purchase  Agreement" means a written  agreement

between the  Company  and the  Optionee  evidencing  the terms and  restrictions

applying to stock purchased under a Stock Purchase Right.  The Restricted  Stock

Purchase  Agreement is subject to the terms and  conditions  of the Plan and the

Notice of Grant.

 

         (dd) "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.

 

         (ee) "Sales  Representative" means any person, whether an individual or

an entity,  serving as a sales  representative for the Company or any Subsidiary

who (whether as an individual or an entity or through the individual  fulfilling

the  duties of the chief  executive  officer of the  entity)  (i) has five years

experience  as a sales  representative,  (ii)  is  experienced  in  representing

semiconductor  manufacturers  and (iii) sold at least $3,000,000 of the products

of the  manufacturers it represents  during the fiscal year immediately prior to

the year in which stock is being purchased under the Plan (or $3,000,000  during

the current fiscal year to date).

 

         (ff)  "Share"  means  a share  of the  Common  Stock,  as  adjusted  in

accordance with Section 13 of the Plan.

 

         (gg) "Stock  Purchase  Right" means the right to purchase  Common Stock

pursuant to Section 11 of the Plan, as evidenced by a Notice of Grant.

 

         (hh)  "Subsidiary"  means a  "subsidiary  corporation",  whether now or

hereafter existing, as defined in Section 424(f) of the Code.

 

         3. Stock Subject to the Plan.  Subject to the  provisions of Section 13

of the Plan,  the maximum  aggregate  number of Shares which may be optioned and

sold under the Plan is 47,693,773  Shares plus an annual increase to be added on

January 1 of each year,  beginning on January 1, 2001  through  January 1, 2004,

equal to the  lesser  of (i) 5% of the  outstanding  shares on such  date,  (ii)

45,000,000  shares, or (iii) a lesser amount determined by the Board. The Shares

may be authorized, but unissued, or reacquired Common Stock. However, should the

Company reacquire Shares which were issued pursuant to the exercise of an Option

or Stock Purchase Right, such Shares shall not become available for future grant

under the Plan.

 

         If an Option or Stock Purchase  Right expires or becomes  unexercisable

without having been  exercised in full, or is surrendered  pursuant to an Option

Exchange Program, the unpurchased Shares which were subject thereto shall become

available  for  future  grant  or sale  under  the  Plan  (unless  the  Plan has

terminated); provided, however, that Shares that have actually been issued under

the Plan,  whether upon exercise of an Option or Right, shall not be returned to

the Plan and shall not become available for future  distribution under the Plan,

except  that if Shares of  Restricted  Stock are  repurchased  by the Company at

their original purchase price, and the original purchaser of such Shares did not

receive any  benefits of  ownership  of such  Shares,  such Shares  shall become

available  for  future  grant  under the Plan.  For  purposes  of the  preceding

sentence, voting rights shall not be considered a benefit of Share ownership.

 

         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 Directors,  Officers

and Employees.

 

              (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 shall be administered  by a Committee of two or more  "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

shall be structured to satisfy the requirements for exemption under Rule 16b-3.

 

              (iv) Other Administration.  Other than as provided above, the Plan

shall be administered by (A) the Board or (B) a Committee, which committee shall

be constituted to satisfy Applicable Laws.

 

         (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  shall have the authority,  in its

discretion:

 

              (i) to  determine  the Fair Market Value of the Common  Stock,  in

accordance with Section 2(o) of the Plan;

 

              (ii) to select the  Consultants,  Directors  and Employees to whom

Options and Stock Purchase Rights may be granted hereunder;

 

              (iii) to  determine  whether and to what extent  Options and Stock

Purchase Rights or any combination thereof, are granted hereunder;

 

              (iv) to  determine  the  number of  shares  of Common  Stock to be

covered by each Option and Stock Purchase Right granted hereunder;

 

              (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  Purchase  Rights  may be  exercised  (which  may be based on

performance  criteria),   any  vesting  acceleration  or  waiver  of  forfeiture

restrictions,  and any  restriction or limitation  regarding any Option or Stock

Purchase  Right or the shares of Common Stock  relating  thereto,  based in each

case on  such  factors  as the  Administrator,  in its  sole  discretion,  shall

determine;

 

              (vii) to reduce the exercise price of any Option or Stock Purchase

Right to the then  current  Fair Market  Value if the Fair  Market  Value of the

Common Stock covered by such Option or Stock  Purchase Right shall have declined

since  the date the  Option  or Stock  Purchase  Right  was  granted  (provided,

however,  that the exercise  price of any Option or Stock Purchase Right granted

to Directors or Officers of the Company may not be so reduced);

 

              (viii) to construe and  interpret the terms of the Plan and awards

granted pursuant to the Plan;

 

              (ix)  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;

 

              (x) to  modify  or  amend  each  Option  or Stock  Purchase  Right

(subject to Section 15(c) of the Plan);

 

              (xi) to  authorize  any person to execute on behalf of the Company

any instrument required to effect the grant of an Option or Stock Purchase Right

previously granted by the Administrator;

 

              (xii) to institute an Option Exchange Program;

 

              (xiii)  to  determine  the terms and  restrictions  applicable  to

Options and Stock Purchase Rights and any Restricted Stock; and

 

              (xiv)  to  make  all  other  determinations  deemed  necessary  or

advisable for administering the Plan.

 

         (c) Effect of Administrator's Decision. The Administrator's  decisions,

determinations and  interpretations  shall be final and binding on all Optionees

and any other holders of Options or Stock Purchase Rights.

 

         5.  Eligibility.  Nonstatutory  Stock Options and Stock Purchase Rights

may be granted to Employees, Directors and Consultants.  Incentive Stock Options

may be granted only to  Employees.  If otherwise  eligible,  an Optionee who has

been granted an Option or Stock Purchase Right may be granted additional Options

or Stock Purchase Rights.

 

         6. Limitations.

 

         (a) Each Option shall be designated in the Notice of Grant as either an

Incentive Stock Option or a Nonstatutory Stock Option. However,  notwithstanding

such designations,  to the extent that the aggregate Fair Market Value of Shares

subject to an Optionee's  incentive  stock options  granted by the Company,  any

Parent or  Subsidiary,  which become  exercisable  for the first time during any

calendar  year  (under all plans of the  Company  or any  Parent or  Subsidiary)

exceeds  $100,000,  such excess Options shall be treated as  Nonstatutory  Stock

Options.  For purposes of this Section  6(a),  Incentive  Stock Options shall be

taken into account in the order in which they were granted,  and the Fair Market

Value of the Shares shall be determined as of the time of grant.

 

         (b)  Neither  the Plan nor any  Option or Stock  Purchase  Right  shall

confer upon an Optionee  any right with  respect to  continuing  the  Optionee's

employment or consulting relationship with the Company, nor shall they interfere

in any way with the  Optionee's  right or the Company's  right to terminate such

employment or consulting relationship at any time, with or without cause.

 

         (c) The  following  limitations  shall  apply to grants of Options  and

Stock Purchase Rights to Employees:

 

              (i) No  Employee  shall  be  granted,  in any  fiscal  year of the

Company,  Options  and Stock  Purchase  Rights to purchase  more than  3,200,000

Shares (as adjusted automatically for previous stock splits).

 

              (ii) The foregoing limitation shall be adjusted proportionately in

connection  with any change in the  Company's  capitalization  as  described  in

Section 13(a).

 

         (iii) If an Option or Stock Purchase  Right is canceled  (other than in

connection  with a transaction  described in Section 13), the canceled Option or

Stock  Purchase  Right  will be counted  against  the limit set forth in Section

6(c)(i).  For this purpose, if the exercise price of an Option or Stock Purchase

Right is  reduced,  the  transaction  will be treated as a  cancellation  of the

Option or Stock  Purchase  Right and the grant of a new Option or Stock Purchase

Right.

 

         7. Term of Plan.  The Plan shall  continue in effect until  January 25,

2009, unless terminated earlier under Section 15 of the Plan.  However,  without

further stockholder approval, no Incentive Stock Option may be granted under the

Plan after January 25, 2004.

 

         8.  Term of  Option.  The term of each  Option  shall be  stated in the

Notice of  Grant;  provided,  however,  that in the case of an  Incentive  Stock

Option,  the term shall be ten (10) years from the date of grant or such shorter

term as may be  provided  in the  Notice of Grant.  Moreover,  in the case of an

Incentive  Stock Option  granted to an Optionee  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 term of the Incentive Stock Option shall be five (5) years from

the date of grant or such  shorter  term as may be  provided  in the  Notice  of

Grant.

 

         9. Option Exercise Price and Consideration.

 

         (a) Exercise  Price.  The per share exercise price for the Shares to be

issued   pursuant  to  exercise  of  an  Option  shall  be   determined  by  the

Administrator, subject to the following:

 

              (i) In the case of an Incentive Stock Option

 

                   (1)  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 shall be no less than 110% of the Fair

Market Value per Share on the date of grant.

 

                   (2) granted to any Employee other than an Employee  described

in paragraph (A)  immediately  above,  the per Share  exercise price shall be no

less than 100% of the Fair Market Value per Share on the date of grant.

 

              (ii) In the case of a  Nonstatutory  Stock  Option,  the per Share

exercise  price  shall  be  determined  by the  Administrator.  In the case of a

Nonstatutory   Stock   Option   intended   to  qualify   as   "performance-based

compensation"  within the meaning of Section  162(m) of the Code,  the per Share

exercise  price shall be no less than 100% of the Fair Market Value per Share on

the date of grant.

 

         (b)  Waiting  Period  and  Exercise  Dates.  At the time an  Option  is

granted,  the Administrator  shall fix the period within which the Option may be

exercised and shall determine any conditions  which must be satisfied before the

Option may be  exercised.  In so doing,  the  Administrator  may specify that an

Option may not be exercised until the completion of a service period.

 

         (c)  Form of  Consideration.  The  Administrator  shall  determine  the

acceptable form of consideration for exercising an Option,  including the method

of payment.  In the case of an Incentive Stock Option,  the Administrator  shall

determine  the  acceptable  form of  consideration  at the time of  grant.  Such

consideration may consist entirely of:

 

              (i) cash;

 

              (ii) check;

 

              (iii) promissory note;

 

              (iv) other  Shares which (A) in the case of Shares  acquired  upon

exercise of an option,  have been owned by the Optionee for more than six months

on the  date of  surrender,  and (B)  have a Fair  Market  Value  on the date of

surrender  equal to the aggregate  exercise price of the Shares as to which said

Option shall be exercised;

 

              (v) delivery of a properly  executed exercise notice together with

such other  documentation as the  Administrator  and the broker,  if applicable,

shall require to effect an exercise of the Option and delivery to the Company of

the sale or loan proceeds required to pay the exercise price;

 

              (vi) a  reduction  in the amount of any Company  liability  to the

Optionee,  including any liability attributable to the Optionee's  participation

in any Company-sponsored deferred compensation program or arrangement;

 

              (vii) any combination of the foregoing methods of payment; or

 

              (viii)  such other  consideration  and  method of payment  for the

issuance of Shares to the extent permitted by Applicable Laws.

 

         10. Exercise of Option.

 

         (a) Procedure for Exercise; Rights as a Stockholder. Any Option granted

hereunder  shall 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 Option Agreement.

 

         An Option may not be exercised for a fraction of a Share.

 

         An Option  shall be deemed  exercised  when the Company  receives:  (i)

written notice of exercise (in accordance  with the Option  Agreement)  from the

person  entitled to exercise  the Option,  and (ii) full  payment for the Shares

with respect to which the Option is  exercised.  Full payment may consist of any

consideration  and  method  of  payment  authorized  by  the  Administrator  and

permitted by the Option  Agreement and the Plan.  Shares issued upon exercise of

an Option  shall be issued in the name of the  Optionee  or, if requested by the

Optionee,  in the name of the  Optionee  and his or her spouse.  Until the stock

certificate  evidencing  such Shares is issued (as evidenced by the  appropriate

entry on the books of the Company or of a duly authorized  transfer agent of the

Company),  no  right to vote or  receive  dividends  or any  other  rights  as a

stockholder shall exist with respect to the Optioned Stock,  notwithstanding the

exercise of the Option.  The  Company  shall issue (or cause to be issued)  such

stock certificate promptly after the Option is exercised.  No adjustment will be

made for a dividend  or other  right for which the  record  date is prior to the

date the stock  certificate  is issued,  except as provided in Section 13 of the

Plan.

 

         Exercising an Option in any manner shall  decrease the number of Shares

thereafter  available,  both for  purposes  of the Plan and for sale  under  the

Option, by the number of Shares as to which the Option is exercised.

 

         (b)  Termination  of Employment,  Consulting or Director  Relationship.

Upon termination of an Optionee's  Continuous Status as an Employee,  Consultant

or  Director  (but not in the  event of a change  of  status  from  Employee  to

Consultant or Director (in which case an Employee's Incentive Stock Option shall

automatically  convert to a Nonstatutory Stock Option on the ninety-first (91st)

day  following  such  change  of  status)  or from  Consultant  or  Director  to

Employee),  other than upon the Optionee's death or Disability, the Optionee may

exercise  his or her Option to the extent  that the  Optionee  was  entitled  to

exercise  it at the  date  of  termination  (but  in no  event  later  than  the

expiration  of the term of such Option as set forth in the Notice of Grant).  In

the absence of a specified time in the Notice of Grant,  the Option shall remain

exercisable  for 90 days  following  the  Optionee's  termination  of Continuous

Status as an Employee, Consultant or Director. In the case of an Incentive Stock

Option,  such period of time shall not exceed  ninety (90) days from the date of

termination.  If, at the date of  termination,  the  Optionee is not entitled to

exercise  his or her  entire  Option,  the Shares  covered by the  unexercisable

portion of the Option  shall  revert to the Plan.  If,  after  termination,  the

Optionee  does not exercise his or her Option  within the time  specified by the

Administrator, the Option shall terminate, and the Shares covered by such Option

shall revert to the Plan.

 

         (c) Disability of Optionee.  In the event that an Optionee's Continuous

Status as an  Employee,  Consultant  or Director  terminates  as a result of the

Optionee's  Disability,  the Optionee may exercise his or her Option at any time

within  twelve (12) months  from the date of such  termination,  but only to the

extent  that  the  Optionee  was  entitled  to  exercise  it at the date of such

termination  (but in no  event  later  than the  expiration  of the term of such

Option as set forth in the Notice of Grant). If, at the date of termination, the

Optionee  is not  entitled  to  exercise  his or her entire  Option,  the Shares

covered by the unexercisable portion of the Option shall revert to the Plan. If,

after  termination,  the Optionee does not exercise his or her Option within the

time specified  herein,  the Option shall  terminate,  and the Shares covered by

such Option shall revert to the Plan.

 

         (d) Death of Optionee.  In the event of the death of an  Optionee,  the

Option may be exercised at any time within twelve (12) months following the date

of death (but in no event later than the  expiration  of the term of such Option

as set forth in the Notice of Grant),  by the  Optionee's  estate or by a person

who  acquired the right to exercise  the Option by bequest or  inheritance,  but

only to the extent that the  Optionee was entitled to exercise the Option at the

date of death.  If, at the time of  death,  the  Optionee  was not  entitled  to

exercise  his or her  entire  Option,  the Shares  covered by the  unexercisable

portion of the Option shall immediately revert to the Plan. If, after death, the

Optionee's  estate or a person who  acquired the right to exercise the Option by

bequest or  inheritance  does not exercise the Option within the time  specified

herein, the Option shall terminate,  and the Shares covered by such Option shall

revert to the Plan.

 

         11. Stock Purchase Rights.

 

         (a) Rights to  Purchase.  Stock  Purchase  Rights may be issued  either

alone,  in addition  to, or in tandem with other awards  granted  under the Plan

and/or cash awards made outside of the Plan. After the Administrator  determines

that it will offer Stock  Purchase  Rights  under the Plan,  it shall advise the

offeree in writing, by means of a Notice of Grant, of the terms,  conditions and

restrictions  related to the  offer,  including  the  number of Shares  that the

offeree shall be entitled to purchase, the price to be paid, and the time within

which the offeree must accept such offer, which shall in no event exceed six (6)

months  from the date upon which the  Administrator  made the  determination  to

grant the Stock  Purchase  Right.  The offer shall be accepted by execution of a

Restricted Stock Purchase Agreement in the form determined by the Administrator.

 

         (b) Repurchase Option.  Unless the Administrator  determines otherwise,

the  Restricted  Stock Purchase  Agreement  shall grant the Company a repurchase

option  exercisable  upon  the  voluntary  or  involuntary  termination  of  the

purchaser's  employment  with the  Company  for any reason  (including  death or

Disability).   The  purchase  price  for  Shares  repurchased  pursuant  to  the

Restricted  Stock  purchase  agreement  shall be the original  price paid by the

purchaser and may be paid by cancellation  of any  indebtedness of the purchaser

to the Company.  The repurchase  option shall lapse at a rate  determined by the

Administrator.

 

         (c) Other  Provisions.  The Restricted  Stock Purchase  Agreement shall

contain such other terms,  provisions and conditions not  inconsistent  with the

Plan as may be  determined  by the  Administrator  in its  sole  discretion.  In

addition, the provisions of Restricted Stock Purchase Agreements need not be the

same with respect to each purchaser.

 

         (d)  Rights  as  a  Stockholder.  Once  the  Stock  Purchase  Right  is

exercised,  the  purchaser  shall  have  the  rights  equivalent  to  those of a

stockholder, and shall be a stockholder when his or her purchase is entered upon

the records of the duly authorized  transfer agent of the Company. No adjustment

will be made for a dividend or other right for which the record date is prior to

the date the Stock Purchase Right is exercised, except as provided in Section 13

of the Plan.

 

         12. Non-Transferability of Options and Stock Purchase Rights. An Option

or Stock  Purchase  Right  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

Optionee, only by the Optionee.

 

         13.  Adjustments Upon Changes in Capitalization,  Dissolution,  Merger,

Asset Sale or Change of Control.

 

              (a) Changes in  Capitalization.  Subject to any required action by

the stockholders of the Company, the number of shares of Common Stock covered by

each  outstanding  Option and Stock Purchase Right,  and the number of shares of

Common Stock which have been  authorized  for issuance  under the Plan but as to

which no Options or Stock  Purchase  Rights have yet been  granted or which have

been returned to the Plan upon  cancellation or expiration of an Option or Stock

Purchase  Right,  and the  number of shares  that may be added  annually  to the

shares  reserved  under the Plan  (pursuant  to Section  3(a)(i)) as well as the

price per share of Common Stock covered by each such outstanding Option or Stock

Purchase Right, shall be  proportionately  adjusted for any increase or decrease

in the number of issued  shares of Common  Stock  resulting  from a stock split,

reverse stock split,  stock  dividend,  combination or  reclassification  of the

Common Stock,  or any other  increase or decrease in the number of issued shares

of Common  Stock  effected  without  receipt of  consideration  by the  Company;

provided,  however, that conversion of any convertible securities of the Company

shall not be deemed to have been "effected  without  receipt of  consideration."

Such adjustment shall be made by the Board, whose  determination in that respect

shall be final, binding and conclusive.  Except as expressly provided herein, no

issuance  by the  Company  of  shares  of  stock  of any  class,  or  securities

convertible into shares of stock of any class,  shall affect,  and no adjustment

by reason  thereof  shall be made with respect to, the number or price of shares

of Common Stock subject to an Option or Stock Purchase Right.

 

              (b)  Dissolution  or  Liquidation.  In the  event of the  proposed

dissolution or liquidation of the Company, to the extent that an Option or Stock

Purchase Right has not been previously exercised,  it will terminate immediately

prior to the  consummation  of such  proposed  action.  The  Board  may,  in the

exercise of its sole  discretion in such  instances,  declare that any Option or

Stock  Purchase  Right shall  terminate as of a date fixed by the Board and give

each Optionee the right to exercise his or her Option or Stock Purchase Right as

to all or any part of the  Optioned  Stock,  including  Shares  as to which  the

Option or Stock Purchase Right would not otherwise be exercisable.

 

         (c) Merger or Asset Sale.  In the event of a merger of the Company with

or into another  corporation,  or the sale of substantially all of the assets of

the Company,  each outstanding  Option and Stock Purchase Right shall be assumed

or an  equivalent  option  or  right  shall  be  substituted  by  the  successor

corporation or a Parent or Subsidiary of the successor corporation. With respect

to the assumption or substitution of Options granted to Directors,  if following

such  assumption  or  substitution  the  Optionee's  status as a  Director  or a

director of the successor corporation,  as applicable,  is terminated other than

by voluntary resignation by the Optionee,  then the Optionee shall fully vest in

and have the  right to  exercise  the  option as to all of the  Optioned  Stock,

including  Shares as to which it would not  otherwise be vested or  exercisable.

The Administrator  may, in lieu of such assumption or substitution,  provide for

the Optionee to have the right to exercise the Option or Stock Purchase Right as

to all or a portion of the Optioned Stock, including Shares as to which it would

not  otherwise be  exercisable.  If the  Administrator  makes an Option or Stock

Purchase Right exercisable in lieu of assumption or substitution in the event of

a merger or sale of assets, the Administrator shall notify the Optionee that the

Option  or Stock  Purchase  Right  shall be fully  exercisable  for a period  of

fifteen (15) days from the date of such notice, and the Option or Stock Purchase

Right will  terminate  upon the  expiration of such period.  For the purposes of

this paragraph,  the Option or Stock Purchase Right shall be considered  assumed

if,  following  the merger or sale of assets,  the option or right  confers  the

right to  purchase,  for each Share of Optioned  Stock  subject to the Option or

Stock  Purchase  Right  immediately  prior to the merger or sale of assets,  the

consideration (whether stock, cash, or other securities or property) received in

the merger or sale of assets 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  merger or sale of assets was 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 the Option or Stock Purchase Right, for each Share of Optioned Stock

subject to the Option or Stock Purchase  Right, 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  merger or sale of

assets.

 

         14.  Date of Grant.  The date of grant of an  Option or Stock  Purchase

Right shall be, for all purposes,  the date on which the Administrator makes the

determination  granting such Option or Stock Purchase Right, or such other later

date as is determined by the Administrator. Notice of the determination shall be

provided to each Optionee within a reasonable time after the date of such grant.

 

         15. Amendment and Termination of the Plan.

 

              (a)  Amendment and  Termination.  The Board may at any time amend,

alter, suspend or terminate the Plan.

 

              (b)  Stockholder  Approval.  The Company shall obtain  stockholder

approval of any Plan  amendment to the extent  necessary and desirable to comply

with Applicable Laws.

 

              (c) Effect of Amendment or Termination. No amendment,  alteration,

suspension or  termination  of the Plan shall impair the rights of any Optionee,

unless mutually  agreed  otherwise  between the Optionee and the  Administrator,

which agreement must be in writing and signed by the Optionee and the Company.

 

         16. Conditions Upon Issuance of Shares.

 

              (a) Legal  Compliance.  Shares shall not be issued pursuant to the

exercise of an Option or Stock Purchase Right unless the exercise of such Option

or Stock  Purchase  Right and the  issuance  and  delivery of such Shares  shall

comply with all relevant provisions of law, including,  without limitation,  the

Securities Act of 1933, as amended,  the Exchange Act, the rules and regulations

promulgated  thereunder,  Applicable  Laws,  and the  requirements  of any stock

exchange or quotation system upon which the Shares may then be listed or quoted,

and shall 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 of

an Option or Stock Purchase Right, the Company may require the person exercising

such Option or Stock  Purchase Right to represent and warrant at the time of any

such  exercise  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.

 

         17. 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,  shall  relieve the Company of any  liability  in

respect of the failure to issue or sell such  Shares as to which such  requisite

authority shall not have been obtained.

 

              (b)  Grants  Exceeding  Allotted  Shares.  If the  Optioned  Stock

covered by an Option or Stock Purchase  Right exceeds,  as of the date of grant,

the  number of Shares  which may be  issued  under the Plan  without  additional

stockholder  approval,  such Option or Stock  Purchase  Right shall be void with

respect  to such  excess  Optioned  Stock,  unless  stockholder  approval  of an

amendment  sufficiently  increasing  the number of Shares subject to the Plan is

timely obtained in accordance with Section 15(b) of the Plan.

 

         18. Reservation of Shares.  The Company,  during the term of this Plan,

will at all times reserve and keep  available  such number of Shares as shall be

sufficient to satisfy the requirements of the Plan.