EXHIBIT 10.1

 

PIXAR

2004 EQUITY INCENTIVE PLAN

STOCK OPTION AGREEMENT

 

Grant #             

 

Pixar (the “Company”) hereby grants you, [NAME OF EMPLOYEE] (the “Employee”), an
Incentive Stock Option1 under the Company’s 2004 Equity Incentive Plan (the
“Plan”), to purchase shares of common stock of the Company (“Shares”). The date
of this Agreement is [DATE] (the “Grant Date”). In general, the latest date this
option will expire is [DATE 10 YEARS AFTER GRANT DATE] (the “Expiration Date”).
However, as provided in Appendix A (attached hereto), this option may expire
earlier than the Expiration Date. Subject to the provisions of Appendix A and of
the Plan, the principal features of this option are as follows:

 

Maximum Number of Shares Purchasable with this Option: [NUMBER A]

Purchase Price per Share: $[NUMBER B]

 

Scheduled Vesting Dates:

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Number of Shares:

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Vesting Commencement Date

   [ENTER DATE]

Each annual anniversary of the Vesting Commencement Date

   [25% OF NUMBER A]

 

Event Triggering

Termination of Option:

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   Maximum Time to Exercise
After Triggering Event*:

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Termination of Service within 1 year of Vesting Commencement Date

   None

Termination of Service due to Disability

   1 year

Termination of Service due to death

   1 year

All other Terminations of Service

   90 days

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* However, in no event may this option be exercised after the Expiration Date.

 

Your signature below indicates your agreement and understanding that this option
is subject to all of the terms and conditions contained in Appendix A and the
Plan. For example, important additional information on vesting and termination
of this option is contained in Paragraphs 3 through 5 of Appendix A.
ACCORDINGLY, PLEASE BE SURE TO READ ALL OF APPENDIX A, WHICH CONTAINS THE
SPECIFIC TERMS AND CONDITIONS OF THIS OPTION.

 

PIXAR       EMPLOYEE By:                

Title:

     

[NAME]

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1 This option is intended to qualify as an incentive stock option under
Section 422 of the Code. However, to the extent that it exceeds the $100,000
rule of Code Section 422(d) it shall be treated as a nonqualified stock option.

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APPENDIX A

 

TERMS AND CONDITIONS OF STOCK OPTION

 

1. Grant of Option. The Company hereby grants to the Employee under the Plan, as
a separate incentive in connection with his or her service and not in lieu of or
other compensation for his or her services, a stock option to purchase, on the
terms and conditions set forth in this Agreement and the Plan, all or any part
of an aggregate of the maximum number of Shares set forth on the Notice of
Grant.

 

2. Exercise Price. The purchase price per Share for this option (the “Exercise
Price”) shall be equal to the Exercise Price set forth on the Notice of Grant.

 

3. Vesting Schedule. Except as otherwise provided in this Agreement, the right
to exercise this option will vest in the amounts and on the dates shown on the
Notice of Grant. Except to the limited extent provided in paragraph 12, Shares
scheduled to vest on any such date actually will vest only if the Employee has
not incurred a Termination of Service prior to such date. Notwithstanding the
preceding sentence, if the Employee has incurred a Termination of Service prior
to such date but immediately continues as a Director or Consultant, the
Committee in its discretion may continue the vesting of this option; provided,
however, that this option will become a nonqualified stock option (i.e., an
option that is not qualified under section 422 of the Code) beginning on the
ninety-first (91st) day following the Termination of Service. Unless otherwise
determined by the Committee in its discretion or required by law, vesting of
stock options will continue during any leave of absence authorized by the
Company that is taken by an Employee that will have a duration of up to 90
calendar days, but vesting will suspend on the first day of any leave of absence
that will have a duration of greater than 90 calendar days. If the Employee
takes a leave of absence which continues for more than ninety (90) days, then
this option will become a nonqualified stock option beginning on the
ninety-first (91st) day of the leave, unless the Employee’s reemployment rights
are guaranteed by statute or by written agreement.

 

4. Termination of Option. If the Employee incurs a Termination of Service for a
reason other than death or Disability, the Employee may, within ninety (90) days
after the date of such Termination of Service, or prior to the Expiration Date,
whichever shall first occur, exercise any vested but unexercised portion of this
option. If the Employee incurs a Termination of Service due to the Employee’s
Disability, the Employee may, within twelve (12) months after the date of such
Termination or Service, or prior to the Expiration Date, whichever shall first
occur, exercise any vested but unexercised portion of this option. Upon the
Employee’s Termination of Service, any unvested portion of this option (after
applying the rules of Paragraph 12) shall terminate immediately. Notwithstanding
any other provision of this Section 4, if the Employee has incurred a
Termination of Service but immediately continues as a Director or Consultant,
the Committee in its discretion may provide for the exercise of any vested but
unexercised portion of this option prior to the earlier of the Expiration Date
or another date specified by the Committee.

 

5. Death of Employee. In the event that the Employee dies while an employee or
during the periods described in paragraph 4, the Employee’s designated
beneficiary (if beneficiary designations are permitted by the Company in its
discretion), or if no such beneficiary survives the Employee, the administrator
or executor of the Employee’s estate, may exercise any vested but unexercised
portion of the option within twelve (12) months after the date of the Employee’s
death, or prior to the Expiration Date, whichever shall first occur. Any such
transferee must furnish the Company (a) written notice of his or her status as a
transferee, (b) evidence satisfactory to the Company to establish the validity
of the transfer of this option and compliance with any laws or regulations
pertaining to such transfer, and (c) written acceptance of the terms and
conditions of this option as set forth in this Agreement.

 

6. Persons Eligible to Exercise Option. Except as provided in Paragraph 5 above
or as otherwise determined by the Committee in its discretion, this option shall
be exercisable during the Employee’s lifetime only by the Employee.

 

7. Option is Not Transferable. Except as otherwise expressly provided herein,
this option and the rights and privileges conferred hereby may not be
transferred, pledged, assigned, or otherwise hypothecated in any way (whether by
operation of law or otherwise) other than by will or by the laws of descent and
distribution.

 

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Furthermore, this option shall not be subject to sale under execution,
attachment, or similar process. Upon any attempt to transfer, pledge, assign,
hypothecate, or otherwise dispose of this option, or of any right or privilege
conferred hereby, (other than as permitted hereby) or upon any attempted sale
under any execution, attachment, or similar process, this option and the rights
and privileges conferred hereby immediately shall become null and void.

 

8. Exercise of Option. The Employee acknowledges that the exercise of this
option and the disposition of shares acquired upon exercise of this option must
comply with the terms of the Company’s securities trading policy, as it may
exist from time to time. This option may be exercised by the person then
entitled to do so as to any Shares which may then be purchased (a) by giving
notice of exercise in such form or manner as the Company may designate,
(b) providing full payment of the Exercise Price (and the amount of any income
and employment taxes and applicable fees, if any, the Company determines is
required to be withheld by reason of the exercise of this option or as is
otherwise required under Paragraph 10 below), and (c) giving satisfactory
assurances in the form or manner requested by the Company that the shares to be
purchased upon the exercise of this option are being purchased for investment
and not with a view to the distribution thereof. Exercise of this option, other
than through a stock broker-assisted transaction, will be permitted only during
the regular business hours of the Company in Emeryville, CA. Notwithstanding any
contrary provision of this Agreement, if the expiration date of this option
falls on a Saturday, Sunday or holiday, the Employee may exercise any vested but
unexercised portion of this option at any time prior to the close of business on
the first business day following that Saturday, Sunday or holiday. In addition,
if the option is to be exercised through a stock broker-assisted transaction,
the option must be exercised while the applicable stock market is open for
trading and before the option otherwise expires.

 

9. Conditions to Exercise. Except as provided in Paragraph 8 above or as
otherwise required as a matter of law, the Exercise Price for this option may be
paid in one (1) (or a combination of two (2) or more) of the following forms:

 

(a) Personal check, a cashier’s check or a money order.

 

(b) If permitted by the Committee, irrevocable directions to a securities broker
approved by the Company to sell all or part of the option shares and to deliver
to the Company from the sale proceeds an amount sufficient to pay the Exercise
Price and any required withholding taxes. (The balance of the sale proceeds, if
any, will be delivered to the Employee.)

 

(c) In another form permitted by the Committee in accordance with the terms of
the Plan.

 

10. Tax Withholding and Payment Obligations. The Company will assess its
requirements regarding tax, social insurance and any other payroll tax
withholding and reporting in connection with this option, including the grant,
vesting or exercise of this option or sale of shares acquired pursuant to the
exercise of this option (“tax-related items”). These requirements may change
from time to time as laws or interpretations change. Regardless of the Company’s
actions in this regard, the Employee hereby acknowledges and agrees that the
ultimate liability for any and all tax-related items is and remains his or her
responsibility and liability and that the Company (a) makes no representations
or undertaking regarding treatment of any tax-related items in connection with
any aspect of this option grant, including the grant, vesting or exercise of
this option and the subsequent sale of shares acquired pursuant to the exercise
of this option; and (b) does not commit to structure the terms of the grant or
any aspect of this option to reduce or eliminate the Employee’s liability
regarding tax-related items. In the event the Company determines that it and/or
an Affiliate must withhold any tax-related items as a result of the Employee’s
participation in the Plan, the Employee agrees as a condition of the grant of
this option to make arrangements satisfactory to the Company to enable it to
satisfy all withholding requirements. The Employee authorizes the Company and/or
an Affiliate to withhold all applicable withholding taxes from any cash
compensation due to the Employee. Furthermore, the Employee agrees to pay the
Company and/or an Affiliate any amount of taxes the Company and/or an Affiliate
may be required to withhold as a result of the Employee’s participation in the
Plan that cannot be satisfied by deduction from cash compensation due to the
Employee. The Employee acknowledges that he or she may not exercise this option
unless the tax withholding obligations of the Company and/or any Affiliate are
satisfied.

 

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11. Suspension of Exercisability. If at any time the Company shall determine, in
its discretion, that the listing, registration or qualification of the Shares
upon any securities exchange or under any state or federal law, or the consent
or approval of any governmental regulatory authority, is necessary or desirable
as a condition of the purchase of Shares hereunder, this option may not be
exercised, in whole or in part, unless and until such listing, registration,
qualification, consent, or approval shall have been effected or obtained free of
any conditions not acceptable to the Company. The Company shall make reasonable
efforts to meet the requirements of any such state or federal law or securities
exchange and to obtain any such consent or approval of any such governmental
authority.

 

12. Change in Control. In the event of a Change in Control, this option shall be
subject to the definitive agreement governing such Change in Control. Such
agreement, without the Employee’s consent and notwithstanding any provision to
the contrary in this Agreement or the Plan, must provide for one of the
following: (a) the assumption of this option by the surviving corporation or its
parent; (b) the substitution by the surviving corporation or its parent of
options with substantially the same terms as this option; (c) the conversion of
this option into an option to purchase the consideration received by the
stockholders of the Company in the Change in Control; (d) the termination of
this option after the Company shall have provided the Employee with the ability
to exercise this option as to all Shares, including Shares which otherwise would
not be then exercisable, for a period of fifteen (15) days or less before the
consummation of the Change in Control; or (e) the cancellation of this option
after payment to the Employee of an amount in cash or cash equivalents equal to
(A) the fair market value of the Shares subject to this option at the time of
the Change in Control minus (B) the Exercise Price of the Shares subject to this
option at the time of the Change in Control. In the event the definitive
agreement does not provide for one of the foregoing alternatives with respect to
the treatment of this option, this option shall have the treatment specified in
clause (d) of the preceding sentence. The Committee may, in its sole discretion,
accelerate the exercisability and vesting of this option in connection with any
of the foregoing alternatives. For purposes of this Agreement, “Change in
Control” means the occurrence of any of the following events: (a) any “person”
(as such term is used in Sections 13(d) and 14(d) of the 1934 Act), other than
any combination of Steve Jobs, members of his immediate family, and any entities
holding Shares for the benefit of Steve Jobs or members of his immediate family,
becomes the “beneficial owner” (as defined in Rule 13d-3 of the 1934 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; (b) the consummation of the sale or disposition
by the Company of all or substantially all of the Company’s assets; (c) 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; or
(d) the consummation of 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 or its parent) at least fifty
percent (50%) of the total voting power represented by the voting securities of
the Company or such surviving entity or its parent outstanding immediately after
such merger or consolidation. “Incumbent Directors” means directors who either
(A) are Directors as of the effective date of the Plan, or (B) are elected, or
nominated for election, to the Board with the affirmative votes of at least a
majority of the Directors at the time of such election or nomination (but will
not include an individual whose election or nomination is in connection with an
actual or threatened proxy contest relating to the election of directors to the
Company).

 

13. No Rights of Stockholder. Neither the Employee (nor any transferee) shall be
or have any of the rights or privileges of a stockholder of the Company in
respect of any of the Shares issuable pursuant to the exercise of this option,
unless and until certificates representing such Shares shall have been issued
and recorded on the records of the Company or its transfer agents or registrars
and delivered to the Employee (or transferee).

 

14. Address for Notices. Any notice to be given to the Company under the terms
of this Agreement shall be addressed to the Company, in care of its Secretary,
at 1200 Park Avenue, Emeryville, California 94608, or at such other address as
the Company may hereafter designate in writing.

 

15. Maximum Term of Option. In no event may this option be exercised after the
Expiration Date.

 

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16. Binding Agreement. Subject to the limitation on the transferability of this
option contained herein, this Agreement shall be binding upon and inure to the
benefit of the heirs, legatees, legal representatives, successors and assigns of
the parties hereto.

 

17. Plan Governs. This Agreement is subject to all of the terms and provisions
of the Plan. In the event of a conflict between one or more provisions of this
Agreement and one or more provisions of the Plan, the provisions of the Plan
shall govern. Capitalized terms and phrases used and not defined in this
Agreement shall have the meaning set forth in the Plan. The Company may, in its
discretion, issue newly issued shares or treasury shares pursuant to this
option.

 

18. Incentive Stock Option Rules. If this option is exercised more than three
(3) months after the Employee’s Termination of Service for any reason other than
Disability or death, this option no longer will be an incentive stock option and
instead will be deemed to be a nonqualified stock option (unless the Employee
dies within such three-month period). If this option is exercised more than one
(1) year after the Participant’s Termination of Service on account of
Disability, this option no longer will be an incentive stock option and instead
will be deemed to be a nonqualified stock option (unless the Employee dies
within such one-year period). If the fair market value (determined on the
applicable grant date of the option) of the shares with respect to which
incentive stock options are exercisable for the first time by the Employee
during any calendar year (under all incentive stock options granted to Employee
under all plans of the Company and its Subsidiaries) exceeds $100,000, the
portion of the option shares in excess of $100,000 instead shall be deemed to be
shares under a nonqualified stock option (rather than under an incentive stock
option).

 

19. Committee Authority. The Committee shall have all discretion, power, and
authority to interpret the Plan and this Agreement and to adopt such rules for
the administration, interpretation and application of the Plan as are consistent
therewith. All actions taken and all interpretations and determinations made by
the Committee in good faith shall be final and binding upon the Employee, the
Company and all other interested persons, and shall be given the maximum
deference permitted by law. No member of the Committee shall be personally
liable for any action, determination or interpretation made in good faith with
respect to the Plan or this Agreement.

 

20. Captions. The captions provided herein are for convenience only and are not
to serve as a basis for the interpretation or construction of this Agreement.

 

21. Agreement Severable. In the event that any provision in this Agreement shall
be held invalid or unenforceable, such provision shall be severable from, and
such invalidity or unenforceability shall not be construed to have any effect
on, the remaining provisions of this Agreement.

 

22. Modifications to the Agreement. This Agreement constitutes the entire
understanding of the parties on the subjects covered. The Employee expressly
warrants that he or she is not executing this Agreement in reliance on any
promises, representations, or inducements other than those contained herein.
Except as otherwise provided herein, modifications to this Agreement or the Plan
can be made only in an express written contract executed by a duly authorized
officer of the Company.

 

23. Amendment, Suspension, Termination. By accepting this option, the Employee
expressly warrants that he or she has received an option to purchase stock under
the Plan, and has received, read and understood the prospectus for the Plan. The
Employee understands that the Plan is discretionary in nature and may be
modified, suspended or terminated by the Company at any time.

 

o 0 o

 

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PIXAR

2004 EQUITY INCENTIVE PLAN

STOCK OPTION AGREEMENT

 

Grant #             

 

Pixar (the “Company”) hereby grants you, [NAME OF EMPLOYEE] (the “Employee”), a
Nonqualified Stock Option under the Company’s 2004 Equity Incentive Plan (the
“Plan”), to purchase shares of common stock of the Company (“Shares”). The date
of this Agreement is [DATE] (the “Grant Date”). In general, the latest date this
option will expire is [DATE 10 YEARS AFTER GRANT DATE] (the “Expiration Date”).
However, as provided in Appendix A (attached hereto), this option may expire
earlier than the Expiration Date. Subject to the provisions of Appendix A and of
the Plan, the principal features of this option are as follows:

 

Maximum Number of Shares Purchasable with this Option: [NUMBER A]

Purchase Price per Share: $[NUMBER B]

 

Scheduled Vesting Dates:

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Number of Shares:

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Vesting Commencement Date

  

[ENTER DATE]

Each annual anniversary of the Vesting Commencement Date

  

[25% OF NUMBER A]

 

Event Triggering

Termination of Option:

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Maximum Time to Exercise

After Triggering Event*:

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Termination of Service within 1 year of Vesting Commencement Date

   None

Termination of Service due to Disability

   1 year

Termination of Service due to death

   1 year

All other Terminations of Service

   90 days

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* However, except in the event of death, this option may not be exercised after
the Expiration Date.

 

Your signature below indicates your agreement and understanding that this option
is subject to all of the terms and conditions contained in Appendix A and the
Plan. For example, important additional information on vesting and termination
of this option is contained in Paragraphs 3 through 5 of Appendix A.
ACCORDINGLY, PLEASE BE SURE TO READ ALL OF APPENDIX A, WHICH CONTAINS THE
SPECIFIC TERMS AND CONDITIONS OF THIS OPTION.

 

PIXAR

 

EMPLOYEE

By

 

 

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Title:

 

[NAME]

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APPENDIX A

 

TERMS AND CONDITIONS OF STOCK OPTION

 

1. Grant of Option. The Company hereby grants to the Employee under the Plan, as
a separate incentive in connection with his or her service and not in lieu of or
other compensation for his or her services, a stock option to purchase, on the
terms and conditions set forth in this Agreement and the Plan, all or any part
of an aggregate of the maximum number of Shares set forth on the Notice of
Grant.

 

2. Exercise Price. The purchase price per Share for this option (the “Exercise
Price”) shall be equal to the Exercise Price set forth on the Notice of Grant.

 

3. Vesting Schedule. Except as otherwise provided in this Agreement, the right
to exercise this option will vest in the amounts and on the dates shown on the
Notice of Grant. Except to the limited extent provided in paragraph 12, Shares
scheduled to vest on any such date actually will vest only if the Employee has
not incurred a Termination of Service prior to such date. Notwithstanding the
preceding sentence, if the Employee has incurred a Termination of Service prior
to such date but immediately continues as a Director or Consultant, the
Committee in its discretion may continue the vesting of this option. Unless
otherwise determined by the Committee in its discretion or required by law,
vesting of stock options will continue during any leave of absence authorized by
the Company that is taken by an Employee that will have a duration of up to 90
calendar days, but vesting will suspend on the first day of any leave of absence
that will have a duration of greater than 90 calendar days.

 

4. Termination of Option. If the Employee incurs a Termination of Service for a
reason other than death or Disability, the Employee may, within ninety (90) days
after the date of such Termination of Service, or prior to the Expiration Date,
whichever shall first occur, exercise any vested but unexercised portion of this
option. If the Employee incurs a Termination of Service due to the Employee’s
Disability, the Employee may, within twelve (12) months after the date of such
Termination or Service, or prior to the Expiration Date, whichever shall first
occur, exercise any vested but unexercised portion of this option. Upon the
Employee’s Termination of Service, any unvested portion of this option (after
applying the rules of Paragraph 12) shall terminate immediately. Notwithstanding
any other provision of this Section 4, if the Employee has incurred a
Termination of Service but immediately continues as a Director or Consultant,
the Committee in its discretion may provide for the exercise of any vested but
unexercised portion of this option prior to the earlier of the Expiration Date
or another date specified by the Committee.

 

5. Death of Employee. In the event that the Employee dies while an employee or
during the periods described in paragraph 4, the Employee’s designated
beneficiary (if beneficiary designations are permitted by the Company in its
discretion), or if no such beneficiary survives the Employee, the administrator
or executor of the Employee’s estate, may exercise any vested but unexercised
portion of the option within twelve (12) months after the date of the Employee’s
death. Any such transferee must furnish the Company (a) written notice of his or
her status as a transferee, (b) evidence satisfactory to the Company to
establish the validity of the transfer of this option and compliance with any
laws or regulations pertaining to such transfer, and (c) written acceptance of
the terms and conditions of this option as set forth in this Agreement.

 

6. Persons Eligible to Exercise Option. Except as provided in Paragraph 5 above
or as otherwise determined by the Committee in its discretion, this option shall
be exercisable during the Employee’s lifetime only by the Employee.

 

7. Option is Not Transferable. Except as otherwise expressly provided herein,
this option and the rights and privileges conferred hereby may not be
transferred, pledged, assigned, or otherwise hypothecated in any way (whether by
operation of law or otherwise) other than by will or by the laws of descent and
distribution. Furthermore, this option shall not be subject to sale under
execution, attachment, or similar process. Upon any attempt to transfer, pledge,
assign, hypothecate, or otherwise dispose of this option, or of any right or
privilege conferred hereby,

 

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(other than as permitted hereby) or upon any attempted sale under any execution,
attachment, or similar process, this option and the rights and privileges
conferred hereby immediately shall become null and void.

 

8. Exercise of Option. The Employee acknowledges that the exercise of this
option and the disposition of shares acquired upon exercise of this option must
comply with the terms of the Company’s securities trading policy, as it may
exist from time to time. This option may be exercised by the person then
entitled to do so as to any Shares which may then be purchased (a) by giving
notice of exercise in such form or manner as the Company may designate,
(b) providing full payment of the Exercise Price (and the amount of any income
and employment taxes and applicable fees, if any, the Company determines is
required to be withheld by reason of the exercise of this option or as is
otherwise required under Paragraph 10 below), and (c) giving satisfactory
assurances in the form or manner requested by the Company that the shares to be
purchased upon the exercise of this option are being purchased for investment
and not with a view to the distribution thereof. Exercise of this option, other
than through a stock broker-assisted transaction, will be permitted only during
the regular business hours of the Company in Emeryville, CA. Notwithstanding any
contrary provision of this Agreement, if the expiration date of this option
falls on a Saturday, Sunday or holiday, the Employee may exercise any vested but
unexercised portion of this option at any time prior to the close of business on
the first business day following that Saturday, Sunday or holiday. In addition,
if the option is to be exercised through a stock broker-assisted transaction,
the option must be exercised while the applicable stock market is open for
trading and before the option otherwise expires.

 

9. Conditions to Exercise. Except as provided in Paragraph 8 above or as
otherwise required as a matter of law, the Exercise Price for this option may be
paid in one (1) (or a combination of two (2) or more) of the following forms:

 

(a) Personal check, a cashier’s check or a money order.

 

(b) If permitted by the Committee, irrevocable directions to a securities broker
approved by the Company to sell all or part of the option shares and to deliver
to the Company from the sale proceeds an amount sufficient to pay the Exercise
Price and any required withholding taxes. (The balance of the sale proceeds, if
any, will be delivered to the Employee.)

 

(c) In another form permitted by the Committee in accordance with the terms of
the Plan.

 

10. Tax Withholding and Payment Obligations. The Company will assess its
requirements regarding tax, social insurance and any other payroll tax
withholding and reporting in connection with this option, including the grant,
vesting or exercise of this option or sale of shares acquired pursuant to the
exercise of this option (“tax-related items”). These requirements may change
from time to time as laws or interpretations change. Regardless of the Company’s
actions in this regard, the Employee hereby acknowledges and agrees that the
ultimate liability for any and all tax-related items is and remains his or her
responsibility and liability and that the Company (a) makes no representations
or undertaking regarding treatment of any tax-related items in connection with
any aspect of this option grant, including the grant, vesting or exercise of
this option and the subsequent sale of shares acquired pursuant to the exercise
of this option; and (b) does not commit to structure the terms of the grant or
any aspect of this option to reduce or eliminate the Employee’s liability
regarding tax-related items. In the event the Company determines that it and/or
an Affiliate must withhold any tax-related items as a result of the Employee’s
participation in the Plan, the Employee agrees as a condition of the grant of
this option to make arrangements satisfactory to the Company to enable it to
satisfy all withholding requirements. The Employee authorizes the Company and/or
an Affiliate to withhold all applicable withholding taxes from any cash
compensation due to the Employee. Furthermore, the Employee agrees to pay the
Company and/or an Affiliate any amount of taxes the Company and/or an Affiliate
may be required to withhold as a result of the Employee’s participation in the
Plan that cannot be satisfied by deduction from cash compensation due to the
Employee. The Employee acknowledges that he or she may not exercise this option
unless the tax withholding obligations of the Company and/or any Affiliate are
satisfied.

 

11. Suspension of Exercisability. If at any time the Company shall determine, in
its discretion, that the listing, registration or qualification of the Shares
upon any securities exchange or under any state or federal law, or the consent
or approval of any governmental regulatory authority, is necessary or desirable
as a condition of the

 

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purchase of Shares hereunder, this option may not be exercised, in whole or in
part, unless and until such listing, registration, qualification, consent, or
approval shall have been effected or obtained free of any conditions not
acceptable to the Company. The Company shall make reasonable efforts to meet the
requirements of any such state or federal law or securities exchange and to
obtain any such consent or approval of any such governmental authority.

 

12. Change in Control. In the event of a Change in Control, this option shall be
subject to the definitive agreement governing such Change in Control. Such
agreement, without the Employee’s consent and notwithstanding any provision to
the contrary in this Agreement or the Plan, must provide for one of the
following: (a) the assumption of this option by the surviving corporation or its
parent; (b) the substitution by the surviving corporation or its parent of
options with substantially the same terms as this option; (c) the conversion of
this option into an option to purchase the consideration received by the
stockholders of the Company in the Change in Control; (d) the termination of
this option after the Company shall have provided the Employee with the ability
to exercise this option as to all Shares, including Shares which otherwise would
not be then exercisable, for a period of fifteen (15) days or less before the
consummation of the Change in Control; or (e) the cancellation of this option
after payment to the Employee of an amount in cash or cash equivalents equal to
(A) the fair market value of the Shares subject to this option at the time of
the Change in Control minus (B) the Exercise Price of the Shares subject to this
option at the time of the Change in Control. In the event the definitive
agreement does not provide for one of the foregoing alternatives with respect to
the treatment of this option, this option shall have the treatment specified in
clause (d) of the preceding sentence. The Committee may, in its sole discretion,
accelerate the exercisability and vesting of this option in connection with any
of the foregoing alternatives. For purposes of this Agreement, “Change in
Control” means the occurrence of any of the following events: (a) any “person”
(as such term is used in Sections 13(d) and 14(d) of the 1934 Act), other than
any combination of Steve Jobs, members of his immediate family, and any entities
holding Shares for the benefit of Steve Jobs or members of his immediate family,
becomes the “beneficial owner” (as defined in Rule 13d-3 of the 1934 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; (b) the consummation of the sale or disposition
by the Company of all or substantially all of the Company’s assets; (c) 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; or
(d) the consummation of 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 or its parent) at least fifty
percent (50%) of the total voting power represented by the voting securities of
the Company or such surviving entity or its parent outstanding immediately after
such merger or consolidation. “Incumbent Directors” means directors who either
(A) are Directors as of the effective date of the Plan, or (B) are elected, or
nominated for election, to the Board with the affirmative votes of at least a
majority of the Directors at the time of such election or nomination (but will
not include an individual whose election or nomination is in connection with an
actual or threatened proxy contest relating to the election of directors to the
Company).

 

13. No Rights of Stockholder. Neither the Employee (nor any transferee) shall be
or have any of the rights or privileges of a stockholder of the Company in
respect of any of the Shares issuable pursuant to the exercise of this option,
unless and until certificates representing such Shares shall have been issued
and recorded on the records of the Company or its transfer agents or registrars
and delivered to the Employee (or transferee).

 

14. Address for Notices. Any notice to be given to the Company under the terms
of this Agreement shall be addressed to the Company, in care of its Secretary,
at 1200 Park Avenue, Emeryville, California 94608, or at such other address as
the Company may hereafter designate in writing.

 

15. Maximum Term of Option. Except to the limited extent provided in paragraph 5
above, this option is not exercisable after the Expiration Date.

 

16. Binding Agreement. Subject to the limitation on the transferability of this
option contained herein, this Agreement shall be binding upon and inure to the
benefit of the heirs, legatees, legal representatives, successors and assigns of
the parties hereto.

 

-4-

--------------------------------------------------------------------------------

17. Plan Governs. This Agreement is subject to all of the terms and provisions
of the Plan. In the event of a conflict between one or more provisions of this
Agreement and one or more provisions of the Plan, the provisions of the Plan
shall govern. Capitalized terms and phrases used and not defined in this
Agreement shall have the meaning set forth in the Plan. The Company may, in its
discretion, issue newly issued shares or treasury shares pursuant to this
option.

 

18. Committee Authority. The Committee shall have all discretion, power, and
authority to interpret the Plan and this Agreement and to adopt such rules for
the administration, interpretation and application of the Plan as are consistent
therewith. All actions taken and all interpretations and determinations made by
the Committee in good faith shall be final and binding upon the Employee, the
Company and all other interested persons, and shall be given the maximum
deference permitted by law. No member of the Committee shall be personally
liable for any action, determination or interpretation made in good faith with
respect to the Plan or this Agreement.

 

19. Captions. The captions provided herein are for convenience only and are not
to serve as a basis for the interpretation or construction of this Agreement.

 

20. Agreement Severable. In the event that any provision in this Agreement shall
be held invalid or unenforceable, such provision shall be severable from, and
such invalidity or unenforceability shall not be construed to have any effect
on, the remaining provisions of this Agreement.

 

21. Modifications to the Agreement. This Agreement constitutes the entire
understanding of the parties on the subjects covered. The Employee expressly
warrants that he or she is not executing this Agreement in reliance on any
promises, representations, or inducements other than those contained herein.
Except as otherwise provided herein, modifications to this Agreement or the Plan
can be made only in an express written contract executed by a duly authorized
officer of the Company.

 

22. Amendment, Suspension, Termination. By accepting this option, the Employee
expressly warrants that he or she has received an option to purchase stock under
the Plan, and has received, read and understood the prospectus for the Plan. The
Employee understands that the Plan is discretionary in nature and may be
modified, suspended or terminated by the Company at any time.

 

o 0 o

 

-5-

--------------------------------------------------------------------------------

PIXAR

2004 EQUITY INCENTIVE PLAN

STOCK OPTION AGREEMENT

 

Grant #             

 

Pixar (the “Company”) hereby grants you, [NAME OF DIRECTOR] (the “Director”), a
Nonqualified Stock Option under the Company’s 2004 Equity Incentive Plan (the
“Plan”), to purchase shares of common stock of the Company (“Shares”). The date
of this Agreement is [DATE] (the “Grant Date”). In general, the latest date this
option will expire is [DATE 10 YEARS AFTER GRANT DATE] (the “Expiration Date”).
However, as provided in Appendix A (attached hereto), this option may expire
earlier than the Expiration Date. Subject to the provisions of Appendix A and of
the Plan, the principal features of this option are as follows:

 

Maximum Number of Shares Purchasable with this Option: 60,000 Shares

Purchase Price per Share: $[PRICE]

 

Scheduled Vesting Dates:    Number of Shares:

Vesting Commencement Date

  

[ENTER DATE]

Each annual anniversary of the Vesting Commencement Date

  

20,000

 

Event Triggering

Termination of Option:

  

Maximum Time to Exercise

After Triggering Event*:

Termination of Service within 1 year of Vesting Commencement Date

  

None

All other Terminations of Service

  

1 year

--------------------------------------------------------------------------------

* However, except in the event of death, this option may not be exercised after
the Expiration Date.

 

Your signature below indicates your agreement and understanding that this option
is subject to all of the terms and conditions contained in Appendix A and the
Plan. For example, important additional information on vesting and termination
of this option is contained in Paragraphs 3 through 5 of Appendix A.
ACCORDINGLY, PLEASE BE SURE TO READ ALL OF APPENDIX A, WHICH CONTAINS THE
SPECIFIC TERMS AND CONDITIONS OF THIS OPTION.

 

PIXAR

 

DIRECTOR

By

 

 

--------------------------------------------------------------------------------

 

 

--------------------------------------------------------------------------------

   

Title:

 

[NAME]

 

1

--------------------------------------------------------------------------------

APPENDIX A

 

TERMS AND CONDITIONS OF STOCK OPTION

 

1. Grant of Option. The Company hereby grants to the Director under the Plan, as
a separate incentive in connection with his or her service and not in lieu of or
other compensation for his or her services, a stock option to purchase, on the
terms and conditions set forth in this Agreement and the Plan, all or any part
of an aggregate of the maximum number of Shares set forth on the Notice of Grant

 

2. Exercise Price. The purchase price per Share for this option (the “Exercise
Price”) shall be equal to the Exercise Price set forth on the Notice of Grant.

 

3. Vesting Schedule. Except as otherwise provided in this Agreement, the right
to exercise this option will vest in the amounts and on the dates shown on the
Notice of Grant. In addition, in the event of the Director’s Termination of
Service due to death or Disability, this option will vest as to all of the
covered shares. Except to the limited extent provided in paragraph 12 and in the
preceding sentence, Shares scheduled to vest on any such date actually will vest
only if the Director has not incurred a Termination of Service prior to such
date.

 

4. Termination of Option. If the Director incurs a Termination of Service for
any reason, the Director may, within twelve (12) months after the date of such
Termination of Service, or prior to the Expiration Date, whichever shall first
occur, exercise any vested but unexercised portion of this option. Upon the
Director’s Termination of Service, any unvested portion of this option (after
applying the rules of Paragraph 12) shall terminate immediately.

 

5. Death of Director. In the event that the Director dies while a Director or
during the periods described in paragraph 4, the Director’s designated
beneficiary (if beneficiary designations are permitted by the Company in its
discretion), or if no such beneficiary survives the Director, the administrator
or executor of the Director’s estate, may exercise any vested but unexercised
portion of the option within twelve (12) months after the date of the Director’s
death. Any such transferee must furnish the Company (a) written notice of his or
her status as a transferee, (b) evidence satisfactory to the Company to
establish the validity of the transfer of this option and compliance with any
laws or regulations pertaining to such transfer, and (c) written acceptance of
the terms and conditions of this option as set forth in this Agreement.

 

6. Persons Eligible to Exercise Option. Except as provided in Paragraph 5 above
or as otherwise determined by the Committee in its discretion, this option shall
be exercisable during the Director’s lifetime only by the Director.

 

7. Option is Not Transferable. Except as otherwise expressly provided herein,
this option and the rights and privileges conferred hereby may not be
transferred, pledged, assigned, or otherwise hypothecated in any way (whether by
operation of law or otherwise) other than by will or by the laws of descent and
distribution. Furthermore, this option shall not be subject to sale under
execution, attachment, or similar process. Upon any attempt to transfer, pledge,
assign, hypothecate, or otherwise dispose of this option, or of any right or
privilege conferred hereby, (other than as permitted hereby) or upon any
attempted sale under any execution, attachment, or similar process, this option
and the rights and privileges conferred hereby immediately shall become null and
void.

 

8. Exercise of Option. The Director acknowledges that the exercise of this
option and the disposition of shares acquired upon exercise of this option must
comply with the terms of the Company’s securities trading policy, as it may
exist from time to time. This option may be exercised by the person then
entitled to do so as to any Shares which may then be purchased (a) by giving
notice of exercise in such form or manner as the Company may designate, (b)
providing full payment of the Exercise Price (and the amount of any income and
employment taxes and applicable fees, if any, the Company determines is required
to be withheld by reason of the exercise of this option or as is otherwise
required under Paragraph 10 below), and (c) giving satisfactory assurances in
the form or

 

2

--------------------------------------------------------------------------------

manner requested by the Company that the shares to be purchased upon the
exercise of this option are being purchased for investment and not with a view
to the distribution thereof. Exercise of this option, other than through a stock
broker-assisted transaction, will be permitted only during the regular business
hours of the Company in Emeryville, CA. Notwithstanding any contrary provision
of this Agreement, if the expiration date of this option falls on a Saturday,
Sunday or holiday, the Director may exercise any vested but unexercised portion
of this option at any time prior to the close of business on the first business
day following that Saturday, Sunday or holiday. In addition, if the option is to
be exercised through a stock broker-assisted transaction, the option must be
exercised while the applicable stock market is open for trading and before the
option otherwise expires.

 

9. Conditions to Exercise. Except as provided in Paragraph 8 above or as
otherwise required as a matter of law, the Exercise Price for this option may be
paid in one (1) (or a combination of two (2) or more) of the following forms:

 

(a) Personal check, a cashier’s check or a money order.

 

(b) If permitted by the Committee, irrevocable directions to a securities broker
approved by the Company to sell all or part of the option shares and to deliver
to the Company from the sale proceeds an amount sufficient to pay the Exercise
Price and any required withholding taxes. (The balance of the sale proceeds, if
any, will be delivered to the Director.)

 

(c) In another form permitted by the Committee in accordance with the terms of
the Plan.

 

10. Tax Withholding and Payment Obligations. The Company will assess its
requirements regarding tax, social insurance and any other payroll tax
withholding and reporting in connection with this option, including the grant,
vesting or exercise of this option or sale of shares acquired pursuant to the
exercise of this option (“tax-related items”). These requirements may change
from time to time as laws or interpretations change. Regardless of the Company’s
actions in this regard, the Director hereby acknowledges and agrees that the
ultimate liability for any and all tax-related items is and remains his or her
responsibility and liability and that the Company (a) makes no representations
or undertaking regarding treatment of any tax-related items in connection with
any aspect of this option grant, including the grant, vesting or exercise of
this option and the subsequent sale of shares acquired pursuant to the exercise
of this option; and (b) does not commit to structure the terms of the grant or
any aspect of this option to reduce or eliminate the Director’s liability
regarding tax-related items. In the event the Company determines that it and/or
an Affiliate must withhold any tax-related items as a result of the Director’s
participation in the Plan, the Director agrees as a condition of the grant of
this option to make arrangements satisfactory to the Company to enable it to
satisfy all withholding requirements. The Director authorizes the Company and/or
an Affiliate to withhold all applicable withholding taxes from any cash
compensation due to the Director. Furthermore, the Director agrees to pay the
Company and/or an Affiliate any amount of taxes the Company and/or an Affiliate
may be required to withhold as a result of the Director’s participation in the
Plan that cannot be satisfied by deduction from cash compensation due to the
Director. The Director acknowledges that he or she may not exercise this option
unless the tax withholding obligations of the Company and/or any Affiliate are
satisfied.

 

11. Suspension of Exercisability. If at any time the Company shall determine, in
its discretion, that the listing, registration or qualification of the Shares
upon any securities exchange or under any state or federal law, or the consent
or approval of any governmental regulatory authority, is necessary or desirable
as a condition of the purchase of Shares hereunder, this option may not be
exercised, in whole or in part, unless and until such listing, registration,
qualification, consent, or approval shall have been effected or obtained free of
any conditions not acceptable to the Company. The Company shall make reasonable
efforts to meet the requirements of any such state or federal law or securities
exchange and to obtain any such consent or approval of any such governmental
authority.

 

12. Change in Control. In the event of a Change in Control, this option shall be
subject to the definitive agreement governing such Change in Control. Such
agreement, without the Director’s consent and notwithstanding any provision to
the contrary in this Agreement or the Plan, must provide for one of the
following:

 

3

--------------------------------------------------------------------------------

(a) the assumption of this option by the surviving corporation or its parent;
(b) the substitution by the surviving corporation or its parent of options with
substantially the same terms as this option; (c) the conversion of this option
into an option to purchase the consideration received by the stockholders of the
Company in the Change in Control; (d) the termination of this option after the
Company shall have provided the Director with the ability to exercise this
option as to all Shares, including Shares which otherwise would not be then
exercisable, for a period of fifteen (15) days or less before the consummation
of the Change in Control; or (e) the cancellation of this option after payment
to the Director of an amount in cash or cash equivalents equal to (A) the fair
market value of the Shares subject to this option at the time of the Change in
Control minus (B) the Exercise Price of the Shares subject to this option at the
time of the Change in Control. In the event the definitive agreement does not
provide for one of the foregoing alternatives with respect to the treatment of
this option, this option shall have the treatment specified in clause (d) of the
preceding sentence. The Committee may, in its sole discretion, accelerate the
exercisability and vesting of this option in connection with any of the
foregoing alternatives. For purposes of this Agreement, “Change in Control”
means the occurrence of any of the following events: (a) any “person” (as such
term is used in Sections 13(d) and 14(d) of the 1934 Act), other than any
combination of Steve Jobs, members of his immediate family, and any entities
holding Shares for the benefit of Steve Jobs or members of his immediate family,
becomes the “beneficial owner” (as defined in Rule 13d-3 of the 1934 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; (b) the consummation of the sale or disposition
by the Company of all or substantially all of the Company’s assets; (c) 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; or (d)
the consummation of 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 or its parent) at least fifty
percent (50%) of the total voting power represented by the voting securities of
the Company or such surviving entity or its parent outstanding immediately after
such merger or consolidation. “Incumbent Directors” means directors who either
(A) are Directors as of the effective date of the Plan, or (B) are elected, or
nominated for election, to the Board with the affirmative votes of at least a
majority of the Directors at the time of such election or nomination (but will
not include an individual whose election or nomination is in connection with an
actual or threatened proxy contest relating to the election of directors to the
Company).

 

13. No Rights of Stockholder. Neither the Director (nor any transferee) shall be
or have any of the rights or privileges of a stockholder of the Company in
respect of any of the Shares issuable pursuant to the exercise of this option,
unless and until certificates representing such Shares shall have been issued
and recorded on the records of the Company or its transfer agents or registrars
and delivered to the Director (or transferee).

 

14. Address for Notices. Any notice to be given to the Company under the terms
of this Agreement shall be addressed to the Company, in care of its Secretary,
at 1200 Park Avenue, Emeryville, California 94608, or at such other address as
the Company may hereafter designate in writing.

 

15. Maximum Term of Option. Except to the limited extent provided in paragraph 5
above, this option is not exercisable after the Expiration Date.

 

16. Binding Agreement. Subject to the limitation on the transferability of this
option contained herein, this Agreement shall be binding upon and inure to the
benefit of the heirs, legatees, legal representatives, successors and assigns of
the parties hereto.

 

17. Plan Governs. This Agreement is subject to all of the terms and provisions
of the Plan. In the event of a conflict between one or more provisions of this
Agreement and one or more provisions of the Plan, the provisions of the Plan
shall govern. Capitalized terms and phrases used and not defined in this
Agreement shall have the meaning set forth in the Plan. The Company may, in its
discretion, issue newly issued shares or treasury shares pursuant to this
option.

 

18. Committee Authority. The Committee shall have all discretion, power, and
authority to interpret the Plan and this Agreement and to adopt such rules for
the administration, interpretation and application of

 

4

--------------------------------------------------------------------------------

the Plan as are consistent therewith. All actions taken and all interpretations
and determinations made by the Committee in good faith shall be final and
binding upon the Director, the Company and all other interested persons, and
shall be given the maximum deference permitted by law. No member of the
Committee shall be personally liable for any action, determination or
interpretation made in good faith with respect to the Plan or this Agreement.

 

19. Captions. The captions provided herein are for convenience only and are not
to serve as a basis for the interpretation or construction of this Agreement.

 

20. Agreement Severable. In the event that any provision in this Agreement shall
be held invalid or unenforceable, such provision shall be severable from, and
such invalidity or unenforceability shall not be construed to have any effect
on, the remaining provisions of this Agreement.

 

21. Modifications to the Agreement. This Agreement constitutes the entire
understanding of the parties on the subjects covered. The Director expressly
warrants that he or she is not executing this Agreement in reliance on any
promises, representations, or inducements other than those contained herein.
Except as otherwise provided herein, modifications to this Agreement or the Plan
can be made only in an express written contract executed by a duly authorized
officer of the Company.

 

22. Amendment, Suspension, Termination. By accepting this option, the Director
expressly warrants that he or she has received an option to purchase stock under
the Plan, and has received, read and understood the prospectus for the Plan. The
Director understands that the Plan is discretionary in nature and may be
modified, suspended or terminated by the Company at any time.

 

o 0 o

 

5

--------------------------------------------------------------------------------

PIXAR

2004 EQUITY INCENTIVE PLAN

STOCK OPTION AGREEMENT

 

Grant #             

 

Pixar (the “Company”) hereby grants you, [NAME OF DIRECTOR] (the “Director”), a
Nonqualified Stock Option under the Company’s 2004 Equity Incentive Plan (the
“Plan”), to purchase shares of common stock of the Company (“Shares”). The date
of this Agreement is [DATE] (the “Grant Date”). In general, the latest date this
option will expire is [DATE 10 YEARS AFTER GRANT DATE] (the “Expiration Date”).
However, as provided in Appendix A (attached hereto), this option may expire
earlier than the Expiration Date. Subject to the provisions of Appendix A and of
the Plan, the principal features of this option are as follows:

 

Maximum Number of Shares Purchasable with this Option: 20,000 Shares

Purchase Price per Share: $[PRICE]

 

Scheduled Vesting Dates:

--------------------------------------------------------------------------------

  

Number of Shares:

--------------------------------------------------------------------------------

Vesting Commencement Date

   [ENTER DATE]

First annual anniversary of the Vesting Commencement Date

   20,000

 

Event Triggering

Termination of Option:

--------------------------------------------------------------------------------

  

Maximum Time to Exercise

After Triggering Event*:

--------------------------------------------------------------------------------

   Termination of Service within 1 year of Vesting Commencement Date    None All
other Terminations of Service    1 year

--------------------------------------------------------------------------------

* However, except in the event of death, this option may not be exercised after
the Expiration Date.

 

Your signature below indicates your agreement and understanding that this option
is subject to all of the terms and conditions contained in Appendix A and the
Plan. For example, important additional information on vesting and termination
of this option is contained in Paragraphs 3 through 5 of Appendix A.
ACCORDINGLY, PLEASE BE SURE TO READ ALL OF APPENDIX A, WHICH CONTAINS THE
SPECIFIC TERMS AND CONDITIONS OF THIS OPTION.

 

PIXAR

  DIRECTOR

By

 

 

--------------------------------------------------------------------------------

 

--------------------------------------------------------------------------------

   

Title:

 

[NAME]

 

1

--------------------------------------------------------------------------------

APPENDIX A

 

TERMS AND CONDITIONS OF STOCK OPTION

 

1. Grant of Option. The Company hereby grants to the Director under the Plan, as
a separate incentive in connection with his or her service and not in lieu of or
other compensation for his or her services, a stock option to purchase, on the
terms and conditions set forth in this Agreement and the Plan, all or any part
of an aggregate of the maximum number of Shares set forth on the Notice of Grant

 

2. Exercise Price. The purchase price per Share for this option (the “Exercise
Price”) shall be equal to the Exercise Price set forth on the Notice of Grant.

 

3. Vesting Schedule. Except as otherwise provided in this Agreement, the right
to exercise this option will vest in the amounts and on the dates shown on the
Notice of Grant. In addition, in the event of the Director’s Termination of
Service due to death or Disability, this option will vest as to all of the
covered shares. Except to the limited extent provided in paragraph 12 and in the
preceding sentence, Shares scheduled to vest on any such date actually will vest
only if the Director has not incurred a Termination of Service prior to such
date.

 

4. Termination of Option. If the Director incurs a Termination of Service for
any reason, the Director may, within twelve (12) months after the date of such
Termination of Service, or prior to the Expiration Date, whichever shall first
occur, exercise any vested but unexercised portion of this option. Upon the
Director’s Termination of Service, any unvested portion of this option (after
applying the rules of Paragraph 12) shall terminate immediately.

 

5. Death of Director. In the event that the Director dies while a Director or
during the periods described in paragraph 4, the Director’s designated
beneficiary (if beneficiary designations are permitted by the Company in its
discretion), or if no such beneficiary survives the Director, the administrator
or executor of the Director’s estate, may exercise any vested but unexercised
portion of the option within twelve (12) months after the date of the Director’s
death. Any such transferee must furnish the Company (a) written notice of his or
her status as a transferee, (b) evidence satisfactory to the Company to
establish the validity of the transfer of this option and compliance with any
laws or regulations pertaining to such transfer, and (c) written acceptance of
the terms and conditions of this option as set forth in this Agreement.

 

6. Persons Eligible to Exercise Option. Except as provided in Paragraph 5 above
or as otherwise determined by the Committee in its discretion, this option shall
be exercisable during the Director’s lifetime only by the Director.

 

7. Option is Not Transferable. Except as otherwise expressly provided herein,
this option and the rights and privileges conferred hereby may not be
transferred, pledged, assigned, or otherwise hypothecated in any way (whether by
operation of law or otherwise) other than by will or by the laws of descent and
distribution. Furthermore, this option shall not be subject to sale under
execution, attachment, or similar process. Upon any attempt to transfer, pledge,
assign, hypothecate, or otherwise dispose of this option, or of any right or
privilege conferred hereby, (other than as permitted hereby) or upon any
attempted sale under any execution, attachment, or similar process, this option
and the rights and privileges conferred hereby immediately shall become null and
void.

 

8. Exercise of Option. The Director acknowledges that the exercise of this
option and the disposition of shares acquired upon exercise of this option must
comply with the terms of the Company’s securities trading policy, as it may
exist from time to time. This option may be exercised by the person then
entitled to do so as to any Shares which may then be purchased (a) by giving
notice of exercise in such form or manner as the Company may designate, (b)
providing full payment of the Exercise Price (and the amount of any income and
employment taxes and applicable fees, if any, the Company determines is required
to be withheld by reason of the exercise of this option or as is otherwise
required under Paragraph 10 below), and (c) giving satisfactory assurances in
the form or

 

2

--------------------------------------------------------------------------------

manner requested by the Company that the shares to be purchased upon the
exercise of this option are being purchased for investment and not with a view
to the distribution thereof. Exercise of this option, other than through a stock
broker-assisted transaction, will be permitted only during the regular business
hours of the Company in Emeryville, CA. Notwithstanding any contrary provision
of this Agreement, if the expiration date of this option falls on a Saturday,
Sunday or holiday, the Director may exercise any vested but unexercised portion
of this option at any time prior to the close of business on the first business
day following that Saturday, Sunday or holiday. In addition, if the option is to
be exercised through a stock broker-assisted transaction, the option must be
exercised while the applicable stock market is open for trading and before the
option otherwise expires.

 

9. Conditions to Exercise. Except as provided in Paragraph 8 above or as
otherwise required as a matter of law, the Exercise Price for this option may be
paid in one (1) (or a combination of two (2) or more) of the following forms:

 

(a) Personal check, a cashier’s check or a money order.

 

(b) If permitted by the Committee, irrevocable directions to a securities broker
approved by the Company to sell all or part of the option shares and to deliver
to the Company from the sale proceeds an amount sufficient to pay the Exercise
Price and any required withholding taxes. (The balance of the sale proceeds, if
any, will be delivered to the Director.)

 

(c) In another form permitted by the Committee in accordance with the terms of
the Plan.

 

10. Tax Withholding and Payment Obligations. The Company will assess its
requirements regarding tax, social insurance and any other payroll tax
withholding and reporting in connection with this option, including the grant,
vesting or exercise of this option or sale of shares acquired pursuant to the
exercise of this option (“tax-related items”). These requirements may change
from time to time as laws or interpretations change. Regardless of the Company’s
actions in this regard, the Director hereby acknowledges and agrees that the
ultimate liability for any and all tax-related items is and remains his or her
responsibility and liability and that the Company (a) makes no representations
or undertaking regarding treatment of any tax-related items in connection with
any aspect of this option grant, including the grant, vesting or exercise of
this option and the subsequent sale of shares acquired pursuant to the exercise
of this option; and (b) does not commit to structure the terms of the grant or
any aspect of this option to reduce or eliminate the Director’s liability
regarding tax-related items. In the event the Company determines that it and/or
an Affiliate must withhold any tax-related items as a result of the Director’s
participation in the Plan, the Director agrees as a condition of the grant of
this option to make arrangements satisfactory to the Company to enable it to
satisfy all withholding requirements. The Director authorizes the Company and/or
an Affiliate to withhold all applicable withholding taxes from any cash
compensation due to the Director. Furthermore, the Director agrees to pay the
Company and/or an Affiliate any amount of taxes the Company and/or an Affiliate
may be required to withhold as a result of the Director’s participation in the
Plan that cannot be satisfied by deduction from cash compensation due to the
Director. The Director acknowledges that he or she may not exercise this option
unless the tax withholding obligations of the Company and/or any Affiliate are
satisfied.

 

11. Suspension of Exercisability. If at any time the Company shall determine, in
its discretion, that the listing, registration or qualification of the Shares
upon any securities exchange or under any state or federal law, or the consent
or approval of any governmental regulatory authority, is necessary or desirable
as a condition of the purchase of Shares hereunder, this option may not be
exercised, in whole or in part, unless and until such listing, registration,
qualification, consent, or approval shall have been effected or obtained free of
any conditions not acceptable to the Company. The Company shall make reasonable
efforts to meet the requirements of any such state or federal law or securities
exchange and to obtain any such consent or approval of any such governmental
authority.

 

12. Change in Control. In the event of a Change in Control, this option shall be
subject to the definitive agreement governing such Change in Control. Such
agreement, without the Director’s consent and notwithstanding any provision to
the contrary in this Agreement or the Plan, must provide for one of the
following:

 

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(a) the assumption of this option by the surviving corporation or its parent;
(b) the substitution by the surviving corporation or its parent of options with
substantially the same terms as this option; (c) the conversion of this option
into an option to purchase the consideration received by the stockholders of the
Company in the Change in Control; (d) the termination of this option after the
Company shall have provided the Director with the ability to exercise this
option as to all Shares, including Shares which otherwise would not be then
exercisable, for a period of fifteen (15) days or less before the consummation
of the Change in Control; or (e) the cancellation of this option after payment
to the Director of an amount in cash or cash equivalents equal to (A) the fair
market value of the Shares subject to this option at the time of the Change in
Control minus (B) the Exercise Price of the Shares subject to this option at the
time of the Change in Control. In the event the definitive agreement does not
provide for one of the foregoing alternatives with respect to the treatment of
this option, this option shall have the treatment specified in clause (d) of the
preceding sentence. The Committee may, in its sole discretion, accelerate the
exercisability and vesting of this option in connection with any of the
foregoing alternatives. For purposes of this Agreement, “Change in Control”
means the occurrence of any of the following events: (a) any “person” (as such
term is used in Sections 13(d) and 14(d) of the 1934 Act), other than any
combination of Steve Jobs, members of his immediate family, and any entities
holding Shares for the benefit of Steve Jobs or members of his immediate family,
becomes the “beneficial owner” (as defined in Rule 13d-3 of the 1934 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; (b) the consummation of the sale or disposition
by the Company of all or substantially all of the Company’s assets; (c) 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; or (d)
the consummation of 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 or its parent) at least fifty
percent (50%) of the total voting power represented by the voting securities of
the Company or such surviving entity or its parent outstanding immediately after
such merger or consolidation. “Incumbent Directors” means directors who either
(A) are Directors as of the effective date of the Plan, or (B) are elected, or
nominated for election, to the Board with the affirmative votes of at least a
majority of the Directors at the time of such election or nomination (but will
not include an individual whose election or nomination is in connection with an
actual or threatened proxy contest relating to the election of directors to the
Company).

 

13. No Rights of Stockholder. Neither the Director (nor any transferee) shall be
or have any of the rights or privileges of a stockholder of the Company in
respect of any of the Shares issuable pursuant to the exercise of this option,
unless and until certificates representing such Shares shall have been issued
and recorded on the records of the Company or its transfer agents or registrars
and delivered to the Director (or transferee).

 

14. Address for Notices. Any notice to be given to the Company under the terms
of this Agreement shall be addressed to the Company, in care of its Secretary,
at 1200 Park Avenue, Emeryville, California 94608, or at such other address as
the Company may hereafter designate in writing.

 

15. Maximum Term of Option. Except to the limited extent provided in paragraph 5
above, this option is not exercisable after the Expiration Date.

 

16. Binding Agreement. Subject to the limitation on the transferability of this
option contained herein, this Agreement shall be binding upon and inure to the
benefit of the heirs, legatees, legal representatives, successors and assigns of
the parties hereto.

 

17. Plan Governs. This Agreement is subject to all of the terms and provisions
of the Plan. In the event of a conflict between one or more provisions of this
Agreement and one or more provisions of the Plan, the provisions of the Plan
shall govern. Capitalized terms and phrases used and not defined in this
Agreement shall have the meaning set forth in the Plan. The Company may, in its
discretion, issue newly issued shares or treasury shares pursuant to this
option.

 

18. Committee Authority. The Committee shall have all discretion, power, and
authority to interpret the Plan and this Agreement and to adopt such rules for
the administration, interpretation and application of

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the Plan as are consistent therewith. All actions taken and all interpretations
and determinations made by the Committee in good faith shall be final and
binding upon the Director, the Company and all other interested persons, and
shall be given the maximum deference permitted by law. No member of the
Committee shall be personally liable for any action, determination or
interpretation made in good faith with respect to the Plan or this Agreement.

 

19. Captions. The captions provided herein are for convenience only and are not
to serve as a basis for the interpretation or construction of this Agreement.

 

20. Agreement Severable. In the event that any provision in this Agreement shall
be held invalid or unenforceable, such provision shall be severable from, and
such invalidity or unenforceability shall not be construed to have any effect
on, the remaining provisions of this Agreement.

 

21. Modifications to the Agreement. This Agreement constitutes the entire
understanding of the parties on the subjects covered. The Director expressly
warrants that he or she is not executing this Agreement in reliance on any
promises, representations, or inducements other than those contained herein.
Except as otherwise provided herein, modifications to this Agreement or the Plan
can be made only in an express written contract executed by a duly authorized
officer of the Company.

 

22. Amendment, Suspension, Termination. By accepting this option, the Director
expressly warrants that he or she has received an option to purchase stock under
the Plan, and has received, read and understood the prospectus for the Plan. The
Director understands that the Plan is discretionary in nature and may be
modified, suspended or terminated by the Company at any time.

 

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