Exhibit 10.2

PMC-SIERRA, INC.

1994 INCENTIVE STOCK PLAN

(As Amended and Restated Effective as of February 1, 2007)

The following constitute the provisions of the PMC-Sierra, Inc. 1994 Incentive
Stock Plan, as amended and restated effective as of February 1, 2007:

1. Purposes of the Plan. The purposes of this Plan are:

 

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to attract and retain the best available personnel for positions of substantial
responsibility,

 

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to provide additional incentive to Employees, Consultants and Directors, and

 

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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 and Restricted Stock Units 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 requirements relating to the administration of
equity-based awards under U.S. state corporate laws, U.S. federal and state
securities laws, the Code, any stock exchange or quotation system on which the
Common Stock is listed or quoted and the applicable laws of any foreign country
or jurisdiction where Options, Stock Purchase Rights or Restricted Stock Units
are, or will be, granted under the Plan.

(c) “Board” means the Board of Directors of the Company.

(d) “Change of Control” means the occurrence of any of the following events:

(i) Any “person” (as such term is used in Sections 13(d) and 14(d) of the
Exchange Act) becomes the “beneficial owner” (as defined in Rule 13d-3 of the
Exchange Act), directly or indirectly, of securities of the Company representing
fifty percent (50%) or more of the total voting power represented by the
Company’s then outstanding voting securities;

(ii) The consummation of the sale or disposition by the Company of all or
substantially all of the Company’s assets;

(iii) A change in the composition of the Board occurring within a two (2)-year
period, as a result of which fewer than a majority of the directors are
Incumbent Directors. “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

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a majority of the Incumbent Directors at the time of such election, to the Board
with the affirmative votes of at least a majority of the Incumbent Directors at
the time of such election or nomination (but will not include an individual
whose election or nomination is in connection with an actual or threatened proxy
contest relating to the election of directors to the Company); or

(iv) 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.

(e) “Code” means the Internal Revenue Code of 1986, as amended. Any reference to
a section of the Code herein will be a reference to any successor or amended
section of the Code.

(f) “Committee” means a committee of Directors or of other individuals
satisfying Applicable Laws appointed by the Board in accordance with Section 4
of the Plan.

(g) “Common Stock” means the Common Stock of the Company.

(h) “Company” means PMC-Sierra, Inc., a Delaware corporation.

(i) “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.

(j) “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.
Notwithstanding the foregoing, the Administrator may determine that other
interruptions or terminations in the employment, consulting or director
relationship with the Company or any Parent or Subsidiary not specified in this
Section shall not constitute an interruption in the Continuous Status as an
Employee, Consultant or Director.

(k) “Director” means a member of the Board or a member of the board of directors
of any Parent or Subsidiary of Company.

 

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(l) “Disability” means total and permanent disability as defined in
Section 22(e)(3) of the Code, provided that in the case of Nonstatutory Stock
Options, Stock Purchase Rights and Restricted Stock Units, the Administrator in
its discretion may determine whether a permanent and total disability exists in
accordance with uniform and non-discretionary standards adopted by the
Administrator from time to time.

(m) “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).

(n) “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.

(o) “Exchange Act” means the Securities Exchange Act of 1934, as amended.

(p) “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 date of determination (or,
if no closing sales price or closing bid, as applicable, was reported on that
date, on the next trading date such closing sales price or closing bid was
reported)], 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 date of determination (or, if no such prices were reported on that
date, on the next date such prices were reported)], 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.

(q) “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.

 

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(r) “Nonstatutory Stock Option” means an Option not intended to qualify as an
Incentive Stock Option.

(s) “Notice of Grant” means a written notice evidencing certain terms and
conditions of an individual Option, Stock Purchase Right or Restricted Stock
Unit grant. The Notice of Grant is part of the Option Agreement.

(t) “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.

(u) “Option” means a stock option granted pursuant to the Plan.

(v) “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.

(w) “Option Exchange Program” means a program whereby outstanding options are
surrendered in exchange for options with a lower exercise price.

(x) “Optioned Stock” means the Common Stock subject to an Option, Stock Purchase
Right or Restricted Stock Unit.

(y) “Optionee” means an Employee, Consultant or Director who holds an
outstanding Option, Stock Purchase Right or Restricted Stock Unit.

(z) “Outside Director” shall mean a Director who is not an Employee of the
Company.

(aa) “Parent” means a “parent corporation,” whether now or hereafter existing,
as defined in Section 424(e) of the Code.

(bb) “Plan” means this 1994 Incentive Stock Plan.

(cc) “Restricted Stock” means shares of Common Stock acquired pursuant to a
grant of Stock Purchase Rights under Section 11 below.

(dd) “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.

(ee) “Restricted Stock Unit” means a bookkeeping entry representing an amount
equal to the Fair Market Value of one Share, granted pursuant to Section 12.
Each Restricted Stock Unit represents an unfunded and unsecured obligation of
the Company.

(ff) “Restricted Stock Unit Agreement” means a written agreement between the
Company and the Optionee evidencing the terms and restrictions applying to
individual grant of Restricted Stock Units. The Restricted Stock Unit Agreement
is subject to the terms and conditions of the Plan and the Notice of Grant.

 

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(gg) “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.

(hh) “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).

(ii) “Share” means a share of the Common Stock, as adjusted in accordance with
Section 14 of the Plan.

(jj) “Stock Purchase Right” means the right to purchase Common Stock pursuant to
Section 11 of the Plan, as evidenced by a Notice of Grant.

(kk) “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 14 of the
Plan, the maximum aggregate number of Shares which may be optioned and sold
under the Plan is 64,782,780 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, or, with respect to Restricted Stock Units, is forfeited to the Company
due to failure to vest, the unpurchased Shares (or for Restricted Stock Units
the forfeited 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 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 or Restricted Stock
Units 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. Notwithstanding the foregoing and subject to
adjustment as provided in Section 14, the maximum number of Shares that may be
issued upon the exercise of Incentive Stock Options shall equal the aggregate
share number stated in this Section, plus, to the extent allocable under
Section 422 of the Code and the Treasury Regulations promulgated thereunder, any
Shares that become available for issuance under the Plan pursuant to this
Section.

 

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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 “outside directors” within the
meaning of Section 162(m) of the Code.

(iii) Rule 16b-3. To the extent desirable to qualify transactions hereunder as
exempt under Rule 16b-3, the transactions contemplated hereunder 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(p) of the Plan;

(ii) to select the Consultants, Directors and Employees to whom Options, Stock
Purchase Rights and Restricted Stock Units may be granted hereunder;

(iii) to determine whether and to what extent Options, Stock Purchase Rights and
Restricted Stock Units or any combination thereof, are granted hereunder;

(iv) to determine the number of shares of Common Stock to be covered by each
Option, Stock Purchase Right or Restricted Stock Unit 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, Stock Purchase Right or
Restricted Stock Unit 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);

 

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(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, Stock Purchase Right or Restricted Stock
Unit (subject to Section 17(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, Stock Purchase Right or Restricted
Stock Unit 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 Restricted Stock Units; 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, Stock Purchase Rights or Restricted Stock
Units.

5. Eligibility. Nonstatutory Stock Options, Stock Purchase Rights and Restricted
Stock Units 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, Stock Purchase Right or Restricted
Stock Unit may be granted additional Options, Stock Purchase Rights or
Restricted Stock Units.

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, Stock Purchase Right or Restricted Stock
Unit 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.

 

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(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 14(a).

(iii) If an Option or Stock Purchase Right is canceled (other than in connection
with a transaction described in Section 14), 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 17 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.

 

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(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) meet the requirements and conditions established by
the Administrator in order to avoid any unfavorable financial accounting
consequences (as determined by the Administrator) 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 will 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.

 

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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 14 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.

 

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(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 14 of the Plan.

12. Restricted Stock Units.

(a) Grant. Restricted Stock Units may be granted at any time and from time to
time as determined by the Administrator. After the Administrator determines that
it will grant Restricted Stock Units under the Plan, it shall advise the
Optionee in a Restricted Stock Unit Agreement of the terms, conditions, and
restrictions related to the grant, including the number of Restricted Stock
Units.

 

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(b) Vesting Criteria and Other Terms. The Administrator shall set vesting
criteria in its discretion, which, depending on the extent to which the criteria
are met, will determine the number of Restricted Stock Units that will be paid
out to the Optionee. The Administrator may set vesting criteria based upon the
achievement of Company-wide, business unit, or individual goals (including, but
not limited to, continued employment), or any other basis determined by the
Administrator in its discretion.

(c) Earning Restricted Stock Units. Upon meeting the applicable vesting
criteria, the Optionee shall be entitled to receive a payout as determined by
the Administrator. Notwithstanding the foregoing, at any time after the grant of
Restricted Stock Units, the Administrator, in its sole discretion, may reduce or
waive any vesting criteria that must be met to receive a payout.

(d) Form and Timing of Payment. Payment of earned Restricted Stock Units shall
be made as soon as practicable after the date(s) determined by the Administrator
and set forth in the Restricted Stock Unit Agreement. The Administrator, in its
sole discretion, may only settle earned Restricted Stock Units in cash, Shares,
or a combination of both.

(e) Cancellation. On the date set forth in the Restricted Stock Unit Agreement,
all unearned Restricted Stock Units shall be forfeited to the Company.

13. Non-Transferability of Options, Stock Purchase Rights and Restricted Stock
Units. An Option, Stock Purchase Right or Restricted Stock Unit 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.

14. 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, Stock Purchase Right and Restricted Stock Unit, and the
number of shares of Common Stock which have been authorized for issuance under
the Plan but as to which no Options, Stock Purchase Rights or Restricted Stock
Units have yet been granted, which have been returned to the Plan upon
cancellation, expiration, repurchase or forfeiture of an Option, Stock Purchase
Right or Restricted Stock Unit, and the number of shares that may be added
annually to the shares reserved under the Plan (pursuant to Section 3) as well
as the price per share of Common Stock covered by each such outstanding Option,
Stock Purchase Right or Restricted Stock Unit, 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

 

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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, Stock Purchase Right or Restricted Stock Unit.

(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 or all restrictions on a Restricted Stock Unit
have not lapsed, 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 Change of Control. In the event of a merger or Change of Control,
each outstanding Option, Stock Purchase Right and Restricted Stock Unit will be
treated as the Administrator determines, including, without limitation, that
each outstanding Option, Stock Purchase Right and Restricted Stock Unit 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. The
Administrator shall not be required to treat Options, Stock Purchase Rights and
Restricted Stock Units similarly in the transaction. With respect to the
assumption or substitution of Options granted to Outside 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, and that all restrictions on Restricted Stock
Units will lapse. If the Administrator makes an Option or Stock Purchase Right
exercisable in lieu of assumption or substitution in the event of a Change of
Control, 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 Section, an Option, Stock Purchase Right or Restricted
Stock Unit shall be considered assumed if, following the Change of Control, the
option or right confers the right to purchase or receive, for each Share of
Optioned Stock subject to the Option, Stock Purchase Right or Restricted Stock
Unit immediately prior to the Change of Control, the consideration (whether
stock, cash, or other securities or property) received in the Change of Control
by holders of Common Stock for each Share held on the effective date of the
transaction (and if holders were offered a choice of consideration, the type of
consideration chosen by the holders of a majority of the outstanding Shares);
provided, however, that if such consideration received in the Change of Control
is not solely common stock of the successor corporation or its Parent, the
Administrator may, with the consent of the successor corporation, provide for
the consideration to be received upon the exercise of an Option or Stock
Purchase Right or upon the payout of a Restricted Stock Unit, for each Share of
Optioned Stock subject to the Option, Stock Purchase Right or Restricted Stock
Unit, to be solely common stock of the successor corporation or its Parent equal
in fair market value to the per share consideration received by holders of
Common Stock in the Change of Control.

 

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15. Tax Withholding.

(a) Withholding Requirements. Prior to the delivery of any Shares or cash
pursuant to an Option, Stock Purchase Right or Restricted Stock Unit (or
exercise thereof), the Company will have the power and the right to deduct or
withhold, or require an Optionee to remit to the Company, an amount sufficient
to satisfy federal, state, local, foreign or other taxes (including the
Optionee’s FICA obligation) required to be withheld with respect to such Option,
Stock Purchase Right or Restricted Stock Unit.

(b) Withholding Arrangements. The Administrator, in its sole discretion and
pursuant to such procedures as it may specify from time to time, may permit an
Optionee to satisfy such tax withholding obligation, in whole or in part by
(without limitation) (a) paying cash, (b) electing to have the Company withhold
otherwise deliverable cash or Shares having a Fair Market Value equal to the
minimum statutory amount required to be withheld, or (c) delivering to the
Company already-owned Shares having a Fair Market Value equal to the minimum
statutory amount required to be withheld. The Fair Market Value of the Shares to
be withheld or delivered will be determined as of the date that the taxes are
required to be withheld.

16. Date of Grant. The date of grant of an Option, Stock Purchase Right or
Restricted Stock Unit shall be, for all purposes, the date on which the
Administrator makes the determination granting such Option, Stock Purchase Right
or Restricted Stock Unit, 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.

17. 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. Termination of
the Plan will not affect the Administrator’s ability to exercise the powers
granted to it hereunder with respect to Options, Stock Purchase Rights and
Restricted Stock Units granted under the Plan prior to the date of such
termination.

18. 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

 

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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.

19. 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, Stock Purchase Right or Restricted Stock Unit exceeds, as of the date of
grant, the number of Shares which may be issued under the Plan without
additional stockholder approval, such Option, Stock Purchase Right or Restricted
Stock Unit 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 17(b)
of the Plan.

20. 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.

 

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Appendix A

Israeli Sub-Plan

 

  1. Special Provisions for Israeli Tax Payers

1.1 This Appendix (the “Appendix”) to the PMC - Sierra, Inc. - 1994 Incentive
Stock Plan, as amended and restated effective as of February 4, 2003 (the
“Plan”) is effective as of             , 2006 (the “Effective Date”).

1.2 The provisions specified hereunder apply only to persons who are deemed to
be residents of the State of Israel for tax purposes, or are otherwise subject
to taxation in Israel with respect to Awards.

1.3 This Appendix applies with respect to grants of Options or Stock Purchase
Rights under the Plan. The purpose of this Appendix is to establish certain
rules and limitations applicable to Options and Shares that may be granted or
issued under the Plan from time to time, in compliance with the securities and
other applicable laws currently in force in the State of Israel. Except as
otherwise provided by this Appendix, all grants made pursuant to this Appendix
shall be governed by the terms of the Plan. This Appendix is applicable only to
grants made after the Effective Date. This Appendix complies with, and is
subject to the ITO and Section 102.

1.4 The Plan and this Appendix shall be read together. In any case of
contradiction, whether explicit or implied, between the provisions of this
Appendix and the Plan, the provisions of this Appendix shall govern.

2. Definitions

Capitalized terms not otherwise defined herein shall have the meaning assigned
to them in the Plan. The following additional definitions will apply to grants
made pursuant to this Appendix:

“3(i) Option” means an Option which is subject to taxation pursuant to
Section 3(i) of the ITO which has been granted to any person who is not an
Eligible 102 Optionee.

“102 Capital Gains Track” means the tax alternative set forth in
Section 102(b)(2) of the ITO pursuant to which income resulting from the sale of
Shares derived from Options is taxed as a capital gain.

“102 Capital Gains Track Grant” means a 102 Trustee Grant qualifying for the
special tax treatment under the 102 Capital Gains Track.

“102 Ordinary Income Track” means the tax alternative set forth in
Section 102(b)(1) of the ITO pursuant to which income resulting from the sale of
Stock derived from Options is taxed as ordinary income.

 

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“102 Ordinary Income Track Grant” means a 102 Trustee Grant qualifying for the
ordinary income tax treatment under the 102 Ordinary Income Track.

“102 Trustee Grant” means an award of Options or Stock Purchase Rights granted
pursuant to Section 102(b) of the ITO and held in trust by a Trustee for the
benefit of the Optionee, and includes both 102 Capital Gains Track Grants and
102 Ordinary Income Track Grants.

“Affiliate” means any “employing company” within the meaning of Section 102(a)
of the ITO.

“Controlling Shareholder” as defined under Section 32(9) of the Ordinance, means
an employee who prior to the grant or as a result of the exercise of any Option,
holds or would hold, directly or indirectly, in his name or with a relative (as
defined in the Ordinance) (i) 10% of the outstanding shares of the Company,
(ii) 10% of the voting power of the Company, (iii) the right to hold or purchase
10% of the outstanding equity or voting power, (iv) the right to obtain 10% of
the “profit” of the Company (as defined in the Ordinance), or (v) the right to
appoint a director of the Company.

“Election” means the Company’s choice of the type (as between capital gains
track or ordinary income track) of 102 Trustee Grants it will make under the
Plan, as filed with the ITA.

“Eligible 102 Optionee” means a person who is employed by the Company or its
Affiliates, including an individual who is serving as a director or an office
holder, who is not a Controlling Shareholder.

“Fair Market Value” shall mean with respect to 102 Capital Gains Track Grants
only, for the sole purpose of determining tax liability pursuant to
Section 102(b)(3) of the ITO, if at the date of grant the Company’s shares are
listed on any established stock exchange or a national market system or if the
Company’s shares will be registered for trading within ninety (90) days
following the date of grant, the fair market value of the Shares at the date of
grant shall be determined in accordancewith the average value of the Company’s
shares on the thirty (30) trading days preceding the date of grant or on the
thirty (30) trading days following the date of registration for trading, as the
case may be.

“ITA” means the Israeli Tax Authorities.

“ITO” means the Israeli Income Tax Ordinance (New Version) 1961 and the rules,
regulations, orders or procedures promulgated thereunder and any amendments
thereto, including specifically the Rules, all as may be amended from time to
time.

“Non-Trustee Grant” means an Award granted to an Eligible 102 Optionee pursuant
to Section 102(c) of the ITO and not held in trust by a Trustee.

“Option” means a Option granted pursuant to the terms and conditions of the Plan
and the Appendix.

“Required Holding Period” means the requisite period prescribed by the ITO and
the Rules, or such other period as may be required by the ITA, with respect to
102 Trustee Grants, during

 

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which Options or Shares granted by the Company must be held by the Trustee for
the benefit of the person to whom it was granted. Currently, the Required
Holding Period for 102 Capital Gains Track Grants is 24 months from the date of
grant of the Options.

“Rules” means the Income Tax Rules (Tax benefits in Stock Issuance to Employees)
5763-2003.

“Section 102” shall mean the provisions of Section 102 of the ITO, as amended
from time to time, including by the Law Amending the Income Tax Ordinance
(Number 132), 2002, effective as of January 1, 2003 and by the Law Amending the
Income Tax Ordinance (Number 147), 2005.

“Trustee” means a person or entity designated by the Board to serve as a trustee
and approved by the ITA in accordance with the provisions of Section 102(a) of
the ITO.

3. Types of Awards and Section 102 Election

3.1 102 Trustee Grants whether made as grants of Options or Stock Purchase
Rights, shall be made pursuant to either (a) Section 102(b)(2) of the ITO as 102
Capial Gains Track Grants or (b) Section 102(b)(1) of the ITO as 102 Ordinary
Income Track Grants. The Company’s Election regarding the type of 102 Trustee
Grant it chooses to make shall be filed with the ITA. Once the Company has filed
such Election, it may change the type of 102 Trustee Grant that it chooses to
make only after the passage of at least 12 months from the end of the calendar
year in which the first grant was made in accordance with the previous Election,
in accordance with Section 102. For the avoidance of doubt, such Election shall
not prevent the Company from granting Non-Trustee Grants to Eligible 102
Optionees at any time.

3.2 Eligible 102 Optionees may receive only 102 Trustee Grants or Non-Trustee
Grants under this Appendix. Optionees who are not Eligible 102 Optionees may be
granted only 3(i) Options under this Appendix.

3.3 No 102 Trustee Grants may be made effective pursuant to this Appendix until
30 days after the requisite filings required by the ITO and the Rules have been
made with the ITA.

3.4 The Option Agreement, Restricted Stock Purchase Agreement or other documents
evidencing the Options granted or Shares issued pursuant to the Plan and this
Appendix shall indicate whether the grant is a 102 Trustee Grant, a Non-Trustee
Grant or a 3(i) Grant; and, if the grant is a 102 Trustee Grant, whether it is a
102 Capital Gains Track Grant or a 102 Ordinary Income Track Grant.

4. Terms And Conditions Of 102 Trustee Options

4.1 Each 102 Trustee Grant will be deemed granted on the date stated in a
written notice by the Company, provided that effective as of such date (i) the
Company has provided such notice to the Trustee and (ii) the Optionee has signed
all documents required pursuant to this Section 4.

4.2 Each 102 Trustee Grant granted to an Eligible 102 Optionee and each
certificate for Shares acquired pursuant to the exercise of a Option or issued
directly as Shares shall be issued to and registered in the name of a Trustee
and shall be held in trust for the benefit of the Optionee for

 

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the Required Holding Period. After termination of the Required Holding Period,
the Trustee may release such Option and any such Shares, provided that (i) the
Trustee has received an acknowledgment from the ITA that the Eligible 102
Optionee has paid any applicable tax due pursuant to the ITO or (ii) the Trustee
and/or the Company or its Affiliate withholds any applicable tax due pursuant to
the ITO. The Trustee shall not release any 102 Trustee Options or shares issued
upon exercise of such Option prior to the full payment of the Eligible 102
Optionee’s tax liabilities.

4.3 Each 102 Trustee Grant (whether a 102 Capital Gains Track Grant or a 102
Ordinary Income Track Grant, as applicable) shall be subject to the relevant
terms of Section 102 and the ITO, which shall be deemed an integral part of the
102 Trustee Grant and shall prevail over any term contained in the Plan, this
Appendix or any agreement that is not consistent therewith. Any provision of the
ITO and any additional terms required by the ITA not expressly specified in this
Appendix or the Option Agreement or Restricted Stock Purchase Agreement, as
applicable, which are necessary to receive or maintain any tax benefit pursuant
to the Section 102 shall be binding on the Eligible 102 Optionee. The Trustee
and the Eligible 102 Optionee granted a 102 Trustee Grant shall comply with the
ITO, and the terms and conditions of the Trust Agreement entered into between
the Company and the Trustee. For avoidance of doubt, it is reiterated that
compliance with the ITO specifically includes compliance with the Rules.
Further, the Eligible 102 Optionee agrees to execute any and all documents which
the Company or the Trustee may reasonably determine to be necessary in order to
comply with the provision of any applicable law, and, particularly, Section 102.

4.4 During the Required Holding Period, the Eligible 102 Optionee shall not
require the Trustee to release or sell the Options or Shares and other shares
received subsequently following any realization of rights derived from Shares or
Options (including stock dividends) to the Eligible 102 Optionee or to a third
party, unless permitted to do so by applicable law. Notwithstanding the
foregoing, the Trustee may, pursuant to a written request and subject to
applicable law, release and transfer such Shares to a designated third party,
provided that both of the following conditions have been fulfilled prior to such
transfer: (i) all taxes required to be paid upon the release and transfer of the
Shares have been withheld for Transfer to the tax authorities and (ii) the
Trustee has received written confirmation from the Company that all requirements
for such release and transfer have been fulfilled according to the terms of the
Company’s corporate documents, the Plan, any applicable agreement and any
applicable law. To avoid doubt such sale or release during the Required Holding
Period will result in different tax ramifications to the Eligible 102 Optionee
under Section 102 of the ITO and the Rules and/or any other regulations or
orders or procedures promulgated thereunder, which shall apply to and shall be
borne solely by such Eligible 102 Optionee.

4.5 In the event a stock dividend is declared and/or additional rights are
granted with respect to Shares which derive from 102 Trustee Grants, such
dividend and/or rights shall also be subject to the provisions of this Section 4
and the Required Holding Period for such shares and/or rights shall be measured
from the commencement of the Required Holding Period for the Options or Shares
with respect to which the dividend was declared and/or rights granted. In the
event of a cash dividend on Shares, the Trustee shall transfer the dividend
proceeds to the Eligible 102 Optionee after deduction of taxes and mandatory
payments in compliance with applicable withholding requirements.

4.6 If an Option granted as a 102 Trustee Grant is exercised during the Required
Holding Period, the Shares issued upon such exercise shall be issued in the name
of the Trustee for the benefit of the Eligible 102 Optionee. If such an Option
is exercised after the Required Holding

 

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Period ends, the Shares issued upon such exercise shall, at the election of the
Eligible 102 Optionee, either (i) be issued in the name of the Trustee, or
(ii) be transferred to the Eligible 102 Optionee directly, provided that the
Optionee first complies with all applicable provisions of the Plan.

5. Assignability

As long as Options or Shares are held by the Trustee on behalf of the Eligible
102 Optionee, all rights of the Eligible 102 Optionee over the shares are
personal, can not be transferred, assigned, pledged or mortgaged, other than by
will or laws of descent and distribution.

6. Tax Consequences

6.1 Any tax consequences arising from the grant, vesting or exercise of any
Options and/or Stock Purchase Right, from the payment for Shares covered
thereby, or from any other event or act (of the Company and/or its affiliates
and/or the Trustee and/or the Optionee), hereunder, shall be borne solely by the
Optionee. The Company and/or its affiliates and/or the Trustee shall withhold
taxes according to the requirements under the applicable laws, rules, and
regulations, including withholding taxes at source. Furthermore, the Optionee
shall agree to indemnify the Company and/or its affiliates and/or the Trustee
and hold them harmless against and from any and all liability for any such tax
or interest or penalty thereon, including without limitation, liabilities
relating to the necessity to withhold, or to have withheld, any such tax from
any payment made to the Optionee. The Company and/or any of its affiliates
and/or the Trustee may make such provisions and take such steps as it may deem
necessary or appropriate for the withholding of all taxes required by law to be
withheld with respect to grants under the Plan and the exercise and/or sale or
other disposition thereof, including, but not limited, to (i) deducting the
amount so required to be withheld from any other amount (or Shares issuable)
then or thereafter to be provided to the Optionee, including by deducting any
such amount from a Optionee’s salary or other amounts payable to the Optionee,
to the maximum extent permitted under law and/or (ii) requiring the Optionee to
pay to the Company or any of its affiliates the amount so required to be
withheld as a condition of the issuance, delivery, distribution or release of
any Shares and/or (iii) by causing the exercise and sale or disposition of any
Options or Shares held by on behalf of the Optionee to cover such liability. In
addition, the Optionee will be required to pay any amount due in excess of the
tax withheld and transferred to the tax authorities, pursuant to applicable tax
laws, regulations and rules.

6.2 With respect to Non-Trustee Grants, if the Optionee ceases to be employed by
the Company or any Affiliate, the Eligible 102 Optionee shall extend to the
Company and/or its Affiliate a security or guarantee for the payment of tax due
at the time of sale of Shares to the satisfaction of the Company, all in
accordance with the provisions of Section 102 of the ITO and the Rules.

7. Governing Law and Jurisdiction

Notwithstanding any other provision of the Plan, with respect to Optionees
subject to this Appendix, the Plan and all instruments issued thereunder or in
connection therewith shall be governed by, and interpreted in accordance with,
the laws of the State of Israel applicable to contracts made and to be performed
therein.

 

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Appendix B

India Sub-Plan

Additional Terms and Conditions for Employees in India

The additional terms and conditions detailed below are to be read in conjunction
with the Plan and the agreement memorializing an Option (the “Option
Agreement”). Any terms and provisions not specifically defined below for
Employees subject to the laws of India will have the same meaning as defined in
the Plan and the Option Agreement.

1. Definitions. Notwithstanding the provisions of the Plan, the following
definitions shall have the meaning given to them for Options granted to
Employees in India.

(a) “Applicable India Law” includes any statute, law, rule, regulation, judgment
of a court or other statutory authority, order or any document or instrument
that has the force of law in India.

(b) “Employee” means any person permanently employed by the Company or any
Parent or Indian Subsidiary of the Company or a director, whether whole-time or
not, of the Company or any Parent or Indian Subsidiary of the Company, within
the meaning of the Employees’ Stock Option Plan or Scheme Guidelines issued by
the Ministry of Finance of the Government of India on October 11, 2001. The term
“Employee”, however, shall not include an individual who is a Promoter (or
belongs to the Promoter Group) or a director of the Company or any Parent or
Indian Subsidiary of the Company who either by himself or through his Relative
or through a corporate entity, holds, directly or indirectly, more than 10% of
the equity of the Company.

(c) “FEMA” means the Foreign Exchange Management Act, 1999 of India, the rules
and regulations notified thereunder and any amendments thereto. The restrictions
under FEMA, as referred to in this Appendix B and as existing on the effective
date of this Appendix B, shall be read to include the amendments made to FEMA
subsequent to the effective date of this Appendix B and will be deemed to have
always included such amendments.

(d) “Indian Subsidiary” for the purpose of this Appendix B, means PMC-Sierra
India Private Limited for so as the holding-subsidiary relationship exits
between the Company and PMC-Sierra India Private Limited , as per the provisions
of the Indian Companies Act, 1956.

(e) “Promoter” the person or persons who are in over-all control of the Indian
Subsidiary, who are instrumental in the formation of the Indian Subsidiary or
program pursuant to which the shares were offered to the public, or the person
or persons named in the offer document as promoter(s), provided that a director
or officer of the Indian Subsidiary, if he is acting as such only in his
professional capacity, will not be deemed to be a Promoter. Where a Promoter of
the Indian Subsidiary is a body corporate, the promoters of that body corporate
shall also be deemed to be Promoters of the Indian Subsidiary.

 

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(f) “Promoter Group” means a Relative of the Promoter, persons whose
shareholding is aggregated for the purpose of disclosing in the offer document
“shareholding of the promoter group.

(g) “Relative” means immediate relative, namely one’s spouse, parent, brother,
sister or child of the person or spouse.

Words and expressions used, but not defined herein, shall have the same meanings
as is ascribed to them in the notification (Notification No.
F/No.142/48/2001-TPL) issued by the Government of India, Ministry of Finance in
exercise of the powers conferred by the proviso to sub-clause (iii) of clause
(2) of Section 17 of the Income Tax Act, 1961 of India and the Plan.

2. Consideration. Except as otherwise provided below, payment of the exercise
price for the number of Shares being purchased pursuant to any Option shall be
made (i) in cash, by check or cash equivalent, (ii) pursuant to a cashless
exercise program implemented by the Company in connection with the Plan,
(iii) by such other consideration as may be approved by the Administrator from
time to time to the extent permitted by Applicable Law, or (iv) by any
combination thereof. Notwithstanding the foregoing, the above procedures will be
subject to compliance with the applicable regulations under FEMA.

3. Eligibility. Notwithstanding the provisions of the Plan, Options in the form
of Shares may be granted only to Employees in India. Consultants resident in
India shall not be eligible to receive Options under this Appendix B.

Options may be granted to Employees in accordance with the terms of the Plan and
this Appendix B to the Plan as the Administrator deems appropriate. The number
of Shares that may be granted subject to Options under the Plan and this
Appendix B to an individual Employee of the Indian Subsidiary shall not exceed
the number of Shares authorized under the Plan. The number of Shares currently
authorized under the Plan is 56,065,865 (subject to adjustment as provided in
Section 14(a) of the Plan). These Shares are not specifically reserved for
Employees in India and may be allocated to Employees in other countries, if the
Company decides to do so in keeping with the terms of the U.S. Plan In
determining which Employees may be granted Options and for determining the
quantum of Options to be granted, the Administrator will take into account
whether Options will provide additional incentive to Employees, whether such
Options will promote the success of the Company’s business, the potential for
future contribution to the Company and the Indian Subsidiary, integrity, number
of employment years and any other factor(s) as deemed appropriate by the
Administrator

4. Exercise Price. The per share exercise price for the Shares to be issued upon
exercise of an Option will be such price as is determined by the Administrator
in a manner consistent with Section 9(a) of the Plan.

5. Non-Transferability of Options. Unless determined otherwise by the
Administrator, Options may not be sold, pledged, assigned, hypothecated,
transferred, or disposed of in any manner other than by will or the laws of
descent and distribution, and may be exercised during the lifetime of the
Optionee, only by the Optionee. If the Administrator in its sole discretion
makes an Option or Stock Purchase Right transferable, such Option or Stock
Purchase Right may only be transferred pursuant to the provisions of Section 13
of the Plan.

 

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6. Restrictions on Shares. The Administrator may place restrictions on the
transferability of Shares acquired pursuant to an Option as it deems appropriate
in its sole discretion, including, without limitation, (i) rights to repurchase
upon termination as an Employee, (ii) rights of first refusal, and (iii) market
lock-up provisions.

7. Corporate Transaction. Notwithstanding the provisions of the Plan, if the
successor corporation (or its Parent) in a transaction described in
Section 14(c) of the Plan intends to assume or substitute each outstanding
Option and the rules and regulations governing Options granted to Employees in
India (the “Indian Options”) do not permit assumption or substitution of Indian
Options in the same manner as the other Options then the Administrator, in its
discretion, may provide for the termination of the Indian Options upon the
consummation of the transaction or provide for the assumption or substitution of
the Indian Options in a different manner than the assumption or substitution of
the other Options.

8. Stockholder Approval. The Plan (and therefore the authority of the
Administrator to adopt this Appendix B) will be subject to approval by the
stockholders of the Company as provided in Section 16(b) of the Plan as well as
approval of the Shareholders of the Indian Subsidiary in a Shareholders meeting
immediately following the meeting of the Board of Directors of the Indian
Subsidiary in which this Appendix is adopted.

9. Compliance with Regulatory Provisions of India. This Appendix shall be
subject to Applicable India Law. The Employees shall be bound to comply with
such requirements of law as may be necessary in the opinion of the Indian
Subsidiary. In particular but without prejudice to the generality of the above,
the provisions in the Plan, relating to exercise of Options, payment for the
same, sale of Shares consequent to the exercise of the Options shall be subject
to the provisions of the Foreign Exchange Management Act, 1999 and the Rules and
Regulations made thereunder.

10. Tax Liability. If any tax or other liability arises to the Company or the
Indian Subsidiary on account of the Employee’s participation pursuant under the
India Plan, the Employees shall be liable to reimburse the Company or the Indian
Subsidiary, such amount as may arise to the Company or the Indian Subsidiary on
account of the Employee’s participation. The Indian Subsidiary shall also be
entitled to withhold such amounts from the salary or other amounts due to the
Employee on account of salary, remuneration or otherwise and, if necessary,
remit the same to the Company.

 

11. Effective Date. This Appendix shall be effective from April 1, 2006.

 

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