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                                                                    EXHIBIT 10.3

                          QUANTUM EFFECT DEVICES, INC.
                        1999 EMPLOYEE STOCK PURCHASE PLAN

                ADOPTED BY BOARD OF DIRECTORS: SEPTEMBER 1, 1999
                   APPROVED BY STOCKHOLDERS: NOVEMBER 23, 1999
                 EFFECTIVE DATE: DATE OF INITIAL PUBLIC OFFERING
                             TERMINATION DATE: NONE


1.       PURPOSE.

          (a) The purpose of the Plan is to provide a means by which Employees
of the Company and certain designated Affiliates may be given an opportunity to
purchase Shares of the Company.

          (b) The Company, by means of the Plan, seeks to retain the services of
such Employees, to secure and retain the services of new Employees and to
provide incentives for such persons to exert maximum efforts for the success of
the Company and its Affiliates.

          (c) The Company intends that the Rights to purchase Shares granted
under the Plan be considered options issued under an "employee stock purchase
plan," as that term is defined in Section 423(b) of the Code.

2.       DEFINITIONS.

          (a) "AFFILIATE" means any parent corporation or subsidiary
corporation, whether now or hereafter existing, as those terms are defined in
Sections 424(e) and (f), respectively, of the Code.

          (b) "BOARD" means the Board of Directors of the Company.

          (c) "CODE" means the United States Internal Revenue Code of 1986, as
amended.

          (d) "COMMITTEE" means a Committee appointed by the Board in accordance
with subparagraph 3(c) of the Plan.

          (e) "COMPANY" means Quantum Effect Devices, Inc., a Delaware
corporation.

          (f) "DIRECTOR" means a member of the Board.

          (g) "ELIGIBLE EMPLOYEE" means an Employee who meets the requirements
set forth in the Offering for eligibility to participate in the Offering.

          (h) "EMPLOYEE" means any person, including Officers and Directors,
employed by the Company or an Affiliate of the Company. Neither service as a
Director nor payment of a director's fee shall be sufficient to constitute
"employment" by the Company or the Affiliate.


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          (i) "EMPLOYEE STOCK PURCHASE PLAN" means a plan that grants rights
intended to be options issued under an "employee stock purchase plan," as that
term is defined in Section 423(b) of the Code.

          (j) "EXCHANGE ACT" means the United States Securities Exchange Act of
1934, as amended.

          (k) "FAIR MARKET VALUE" means the value of a security, as determined
in good faith by the Board. If the security is listed on any established stock
exchange or traded on the Nasdaq National Market or the Nasdaq SmallCap Market,
then, except as otherwise provided in the Offering, the Fair Market Value of the
security shall be the closing sales price (rounded up where necessary to the
nearest whole cent) for such security (or the closing bid, if no sales were
reported) as quoted on such exchange or market (or the exchange or market with
the greatest volume of trading in the relevant security of the Company) on the
trading day prior to the relevant determination date, as reported in THE WALL
STREET JOURNAL or such other source as the Board deems reliable.

          (l) "NON-EMPLOYEE DIRECTOR" means a Director who either (i) is not a
current Employee or Officer of the Company or its parent or subsidiary, does not
receive compensation (directly or indirectly) from the Company or its parent or
subsidiary for services rendered as a consultant or in any capacity other than
as a Director (except for an amount as to which disclosure would not be required
under Item 404(a) of Regulation S-K promulgated pursuant to the Securities Act
("Regulation S-K")), does not possess an interest in any other transaction as to
which disclosure would be required under Item 404(a) of Regulation S-K, and is
not engaged in a business relationship as to which disclosure would be required
under Item 404(b) of Regulation S-K; or (ii) is otherwise considered a
"non-employee director" for purposes of Rule 16b-3.

          (m) "OFFERING" means the grant of Rights to purchase Shares under the
Plan to Eligible Employees.

          (n) "OFFERING DATE" means a date selected by the Board for an Offering
to commence.

          (o) "OUTSIDE DIRECTOR" means a Director who either (i) is not a
current employee of the Company or an "affiliated corporation" (within the
meaning of the Treasury regulations promulgated under Section 162(m) of the
Code), is not a former employee of the Company or an "affiliated corporation"
receiving compensation for prior services (other than benefits under a tax
qualified pension plan), was not an officer of the Company or an "affiliated
corporation" at any time, and is not currently receiving direct or indirect
remuneration from the Company or an "affiliated corporation" for services in any
capacity other than as a Director, or (ii) is otherwise considered an "outside
director" for purposes of Section 162(m) of the Code.

          (p) "PARTICIPANT" means an Eligible Employee who holds an outstanding
Right granted pursuant to the Plan or, if applicable, such other person who
holds an outstanding Right granted under the Plan.


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          (q) "PLAN" means this 1999 Employee Stock Purchase Plan.

          (r) "PURCHASE DATE" means one or more dates established by the Board
during an Offering on which Rights granted under the Plan shall be exercised and
purchases of Shares carried out in accordance with such Offering.

          (s) "RIGHT" means an option to purchase Shares granted pursuant to the
Plan.

          (t) "RULE 16B-3" means Rule 16b-3 of the Exchange Act or any successor
to Rule 16b-3 as in effect with respect to the Company at the time discretion is
being exercised regarding the Plan.

          (u) "SECURITIES ACT" means the United States Securities Act of 1933,
as amended.

          (v) "SHARE" means a share of the common stock of the Company.

3.       ADMINISTRATION.

          (a) The Board shall administer the Plan unless and until the Board
delegates administration to a Committee, as provided in subparagraph 3(c).
Whether or not the Board has delegated administration, the Board shall have the
final power to determine all questions of policy and expediency that may arise
in the administration of the Plan.

          (b) The Board (or the Committee) shall have the power, subject to, and
within the limitations of, the express provisions of the Plan:

               (i) To determine when and how Rights to purchase Shares shall be
granted and the provisions of each Offering of such Rights (which need not be
identical).

               (ii) To designate from time to time which Affiliates of the
Company shall be eligible to participate in the Plan.

               (iii) To construe and interpret the Plan and Rights granted under
it, and to establish, amend and revoke rules and regulations for its
administration. The Board, in the exercise of this power, may correct any
defect, omission or inconsistency in the Plan, in a manner and to the extent it
shall deem necessary or expedient to make the Plan fully effective.

               (iv) To amend the Plan as provided in paragraph 14.

               (v) Generally, to exercise such powers and to perform such acts
as it deems necessary or expedient to promote the best interests of the Company
and its Affiliates and to carry out the intent that the Plan be treated as an
Employee Stock Purchase Plan.

          (c) The Board may delegate administration of the Plan to a Committee
of the Board composed of two (2) or more members, all of the members of which
Committee may be, in the discretion of the Board, Non-Employee Directors and/or
Outside Directors. If administration is delegated to a Committee, the Committee
shall have, in connection with the administration of the


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Plan, the powers theretofore possessed by the Board, including the power to
delegate to a subcommittee of two (2) or more Outside Directors any of the
administrative powers the Committee is authorized to exercise (and references in
this Plan to the Board shall thereafter be to the Committee or such a
subcommittee), subject, however, to such resolutions, not inconsistent with the
provisions of the Plan, as may be adopted from time to time by the Board. The
Board may abolish the Committee at any time and revest in the Board the
administration of the Plan.

4.       SHARES SUBJECT TO THE PLAN.

          (a) Subject to the provisions of paragraph 13 relating to adjustments
upon changes in securities, the Shares that may be sold pursuant to Rights
granted under the Plan shall not exceed in the aggregate three hundred thousand
(300,000) Shares. If any Right granted under the Plan shall for any reason
terminate without having been exercised, the Shares not purchased under such
Right shall again become available for the Plan.

          (b) The aggregate number of Shares that may be sold pursuant to Rights
granted under the Plan as specified in paragraph 4(a) hereof automatically shall
be increased as follows:

               (i) For a period of ten (10) years, on each November 1 (the
"Calculation Date"), commencing on November 1, 2000, the aggregate number of
Shares specified in paragraph 4(a) hereof shall be increased by the greater of
(1) that number of Shares equal to one percent (1%) of the Diluted Shares
Outstanding or (2) that number of Shares that have been sold pursuant to Rights
granted under the Plan in the prior 12-month period; provided, however, that the
maximum aggregate number of Shares that may be sold pursuant to Rights granted
under the Plan shall not increase by more than Three Million (3,000,000) Shares
during said 10-year period.

               (ii) For purposes of paragraph 4(b)(i) hereof, "Diluted Shares
Outstanding" shall mean, as of any date, (1) the number of outstanding Shares on
such Calculation Date, plus (2) the number of Shares issuable upon such
Calculation Date assuming the conversion of all outstanding Preferred Stock and
convertible notes, plus (3) the additional number of dilutive Common Stock
equivalent shares outstanding as the result of any options or warrants
outstanding during the fiscal year, calculated using the treasury stock method.

          (c) The Shares subject to the Plan may be unissued Shares or Shares
that have been bought on the open market at prevailing market prices or
otherwise.

5.       GRANT OF RIGHTS; OFFERING.

          (a) The Board may from time to time grant or provide for the grant of
Rights to purchase Shares of the Company under the Plan to Eligible Employees in
an Offering on an Offering Date or Dates selected by the Board. Each Offering
shall be in such form and shall contain such terms and conditions as the Board
shall deem appropriate, which shall comply with the requirements of Section
423(b)(5) of the Code that all Employees granted Rights to purchase Shares under
the Plan shall have the same rights and privileges. The terms and conditions of
an


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Offering shall be incorporated by reference into the Plan and treated as part of
the Plan. The provisions of separate Offerings need not be identical, but each
Offering shall include (through incorporation of the provisions of this Plan by
reference in the document comprising the Offering or otherwise) the period
during which the Offering shall be effective, which period shall not exceed
twenty-seven (27) months beginning with the Offering Date, and the substance of
the provisions contained in paragraphs 6 through 9, inclusive.

          (b) If a Participant has more than one Right outstanding under the
Plan, unless he or she otherwise indicates in agreements or notices delivered
hereunder: (i) each agreement or notice delivered by that Participant will be
deemed to apply to all of his or her Rights under the Plan, and (ii) an
earlier-granted Right (or a Right with a lower exercise price, if two Rights
have identical grant dates) will be exercised to the fullest possible extent
before a later-granted Right (or a Right with a higher exercise price if two
Rights have identical grant dates) will be exercised.

6.       ELIGIBILITY.

          (a) Rights may be granted only to Employees of the Company or, as the
Board may designated as provided in subparagraph 3(b), to Employees of an
Affiliate. Except as provided in subparagraph 6(b), an Employee shall not be
eligible to be granted Rights under the Plan unless, on the Offering Date, such
Employee has been in the employ of the Company or the Affiliate, as the case may
be, for such continuous period preceding such grant as the Board may require,
but in no event shall the required period of continuous employment be equal to
or greater than two (2) years.

          (b) The Board may provide that each person who, during the course of
an Offering, first becomes an Eligible Employee will, on a date or dates
specified in the Offering which coincides with the day on which such person
becomes an Eligible Employee or which occurs thereafter, receive a Right under
that Offering, which Right shall thereafter be deemed to be a part of that
Offering. Such Right shall have the same characteristics as any Rights
originally granted under that Offering, as described herein, except that:

               (i) the date on which such Right is granted shall be the
"Offering Date" of such Right for all purposes, including determination of the
exercise price of such Right;

               (ii) the period of the Offering with respect to such Right shall
begin on its Offering Date and end coincident with the end of such Offering; and

               (iii) the Board may provide that if such person first becomes an
Eligible Employee within a specified period of time before the end of the
Offering, he or she will not receive any Right under that Offering.

          (c) No Employee shall be eligible for the grant of any Rights under
the Plan if, immediately after any such Rights are granted, such Employee owns
stock possessing five percent (5%) or more of the total combined voting power or
value of all classes of stock of the Company or of any Affiliate. For purposes
of this subparagraph 6(c), the rules of Section 424(d)


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of the Code shall apply in determining the stock ownership of any Employee, and
stock which such Employee may purchase under all outstanding rights and options
shall be treated as stock owned by such Employee.

          (d) An Eligible Employee may be granted Rights under the Plan only if
such Rights, together with any other Rights granted under all Employee Stock
Purchase Plans of the Company and any Affiliates, as specified by Section
423(b)(8) of the Code, do not permit such Eligible Employee's rights to purchase
Shares of the Company or any Affiliate to accrue at a rate which exceeds twenty
five thousand dollars ($25,000) of the fair market value of such Shares
(determined at the time such Rights are granted) for each calendar year in which
such Rights are outstanding at any time.

          (e) The Board may provide in an Offering that Employees who are highly
compensated Employees within the meaning of Section 423(b)(4)(D) of the Code
shall not be eligible to participate.

7.       RIGHTS; PURCHASE PRICE.

          (a) On each Offering Date, each Eligible Employee, pursuant to an
Offering made under the Plan, shall be granted the Right to purchase up to the
number of Shares purchasable either:

               (i) with a percentage designated by the Board not exceeding ten
percent (10%) of such Employee's Earnings (as defined by the Board in each
Offering) during the period which begins on the Offering Date (or such later
date as the Board determines for a particular Offering) and ends on the date
stated in the Offering, which date shall be no later than the end of the
Offering; or

               (ii) with a maximum dollar amount designated by the Board that,
as the Board determines for a particular Offering, (1) shall be withheld, in
whole or in part, from such Employee's Earnings (as defined by the Board in each
Offering) during the period which begins on the Offering Date (or such later
date as the Board determines for a particular Offering) and ends on the date
stated in the Offering, which date shall be no later than the end of the
Offering and/or (2) shall be contributed, in whole or in part, by such Employee
during such period.

          (b) The Board shall establish one or more Purchase Dates during an
Offering on which Rights granted under the Plan shall be exercised and purchases
of Shares carried out in accordance with such Offering.

          (c) In connection with each Offering made under the Plan, the Board
may specify a maximum amount of Shares that may be purchased by any Participant
as well as a maximum aggregate amount of Shares that may be purchased by all
Participants pursuant to such Offering. In addition, in connection with each
Offering that contains more than one Purchase Date, the Board may specify a
maximum aggregate amount of Shares which may be purchased by all Participants on
any given Purchase Date under the Offering. If the aggregate purchase of Shares
upon exercise of Rights granted under the Offering would exceed any such maximum
aggregate


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amount, the Board shall make a pro rata allocation of the Shares available in as
nearly a uniform manner as shall be practicable and as it shall deem to be
equitable.

          (d) The purchase price of Shares acquired pursuant to Rights granted
under the Plan shall be not less than the lesser of:

               (i) an amount equal to eighty-five percent (85%) of the fair
market value of the Shares on the Offering Date; or

               (ii) an amount equal to eighty-five percent (85%) of the fair
market value of the Shares on the Purchase Date.

8.       PARTICIPATION; WITHDRAWAL; TERMINATION.

          (a) An Eligible Employee may become a Participant in the Plan pursuant
to an Offering by delivering a participation agreement to the Company within the
time specified in the Offering, in such form as the Company provides. Each such
agreement shall authorize payroll deductions of up to the maximum percentage
specified by the Board of such Employee's Earnings during the Offering (as
defined in each Offering). The payroll deductions made for each Participant
shall be credited to a bookkeeping account for such Participant under the Plan
and either may be deposited with the general funds of the Company or may be
deposited in a separate account in the name of, and for the benefit of, such
Participant with a financial institution designated by the Company. To the
extent provided in the Offering, a Participant may reduce (including to zero) or
increase such payroll deductions. To the extent provided in the Offering, a
Participant may begin such payroll deductions after the beginning of the
Offering. A Participant may make additional payments into his or her account
only if specifically provided for in the Offering and only if the Participant
has not already had the maximum permitted amount withheld during the Offering.

          (b) At any time during an Offering, a Participant may terminate his or
her payroll deductions under the Plan and withdraw from the Offering by
delivering to the Company a notice of withdrawal in such form as the Company
provides. Such withdrawal may be elected at any time prior to the end of the
Offering except as provided by the Board in the Offering. Upon such withdrawal
from the Offering by a Participant, the Company shall distribute to such
Participant all of his or her accumulated payroll deductions (reduced to the
extent, if any, such deductions have been used to acquire Shares for the
Participant) under the Offering, without interest unless otherwise specified in
the Offering, and such Participant's interest in that Offering shall be
automatically terminated. A Participant's withdrawal from an Offering will have
no effect upon such Participant's eligibility to participate in any other
Offerings under the Plan but such Participant will be required to deliver a new
participation agreement in order to participate in subsequent Offerings under
the Plan.

          (c) Rights granted pursuant to any Offering under the Plan shall
terminate immediately upon cessation of any participating Employee's employment
with the Company or a designated Affiliate for any reason (subject to any
post-employment participation period required by law) or other lack of
eligibility. The Company shall distribute to such terminated Employee


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all of his or her accumulated payroll deductions (reduced to the extent, if any,
such deductions have been used to acquire Shares for the terminated Employee)
under the Offering, without interest unless otherwise specified in the Offering.
If the accumulated payroll deductions have been deposited with the Company's
general funds, then the distribution shall be made from the general funds of the
Company, without interest. If the accumulated payroll deductions have been
deposited in a separate account with a financial institution as provided in
subparagraph 8(a), then the distribution shall be made from the separate
account, without interest unless otherwise specified in the Offering.

          (d) Rights granted under the Plan shall not be transferable by a
Participant otherwise than by will or the laws of descent and distribution, or
by a beneficiary designation as provided in paragraph 15 and, otherwise during
his or her lifetime, shall be exercisable only by the person to whom such Rights
are granted.

9.       EXERCISE.

          (a) On each Purchase Date specified therefor in the relevant Offering,
each Participant's accumulated payroll deductions and other additional payments
specifically provided for in the Offering (without any increase for interest)
will be applied to the purchase of Shares up to the maximum amount of Shares
permitted pursuant to the terms of the Plan and the applicable Offering, at the
purchase price specified in the Offering. No fractional Shares shall be issued
upon the exercise of Rights granted under the Plan unless specifically provided
for in the Offering.

          (b) Unless otherwise specifically provided in the Offering, the
amount, if any, of accumulated payroll deductions remaining in any Participant's
account after the purchase of Shares that is equal to the amount required to
purchase one or more whole Shares on the final Purchase Date of the Offering
shall be distributed in full to the Participant at the end of the Offering,
without interest. If the accumulated payroll deductions have been deposited with
the Company's general funds, then the distribution shall be made from the
general funds of the Company, without interest. If the accumulated payroll
deductions have been deposited in a separate account with a financial
institution as provided in subparagraph 8(a), then the distribution shall be
made from the separate account, without interest unless otherwise specified in
the Offering.

          (c) No Rights granted under the Plan may be exercised to any extent
unless the Shares to be issued upon such exercise under the Plan (including
Rights granted thereunder) are covered by an effective registration statement
pursuant to the Securities Act and the Plan is in material compliance with all
applicable state, foreign and other securities and other laws applicable to the
Plan. If on a Purchase Date in any Offering hereunder the Plan is not so
registered or in such compliance, no Rights granted under the Plan or any
Offering shall be exercised on such Purchase Date, and the Purchase Date shall
be delayed until the Plan is subject to such an effective registration statement
and such compliance, except that the Purchase Date shall not be delayed more
than twelve (12) months and the Purchase Date shall in no event be more than
twenty-seven (27) months from the Offering Date. If, on the Purchase Date of any
Offering hereunder, as delayed to the maximum extent permissible, the Plan is
not registered and


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in such compliance, no Rights granted under the Plan or any Offering shall be
exercised and all payroll deductions accumulated during the Offering (reduced to
the extent, if any, such deductions have been used to acquire Shares) shall be
distributed to the Participants, without interest unless otherwise specified in
the Offering. If the accumulated payroll deductions have been deposited with the
Company's general funds, then the distribution shall be made from the general
funds of the Company, without interest. If the accumulated payroll deductions
have been deposited in a separate account with a financial institution as
provided in subparagraph 8(a), then the distribution shall be made from the
separate account, without interest unless otherwise specified in the Offering.

10.      COVENANTS OF THE COMPANY.

          (a) During the terms of the Rights granted under the Plan, the Company
shall ensure that the amount of Shares required to satisfy such Rights are
available.

          (b) The Company shall seek to obtain from each federal, state, foreign
or other regulatory commission or agency having jurisdiction over the Plan such
authority as may be required to issue and sell Shares upon exercise of the
Rights granted under the Plan. If, after reasonable efforts, the Company is
unable to obtain from any such regulatory commission or agency the authority
which counsel for the Company deems necessary for the lawful issuance and sale
of Shares under the Plan, the Company shall be relieved from any liability for
failure to issue and sell Shares upon exercise of such Rights unless and until
such authority is obtained.

11.      USE OF PROCEEDS FROM SHARES.

         Proceeds from the sale of Shares pursuant to Rights granted under the
Plan shall constitute general funds of the Company.

12.      RIGHTS AS A STOCKHOLDER.

         A Participant shall not be deemed to be the holder of, or to have any
of the rights of a holder with respect to, Shares subject to Rights granted
under the Plan unless and until the Participant's Shares acquired upon exercise
of Rights under the Plan are recorded in the books of the Company.

13.      ADJUSTMENTS UPON CHANGES IN SECURITIES.

          (a) If any change is made in the Shares subject to the Plan, or
subject to any Right, without the receipt of consideration by the Company
(through merger, consolidation, reorganization, recapitalization,
reincorporation, stock dividend, dividend in property other than cash, stock
split, liquidating dividend, combination of shares, exchange of shares, change
in corporate structure or other transaction not involving the receipt of
consideration by the Company), the Plan will be appropriately adjusted in the
class(es) and maximum number of Shares subject to the Plan pursuant to
subparagraph 4(a), and the outstanding Rights will be appropriately adjusted in
the class(es), number of Shares and purchase limits of such outstanding Rights.
The Board shall make such adjustments, and its determination shall be final,
binding and


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conclusive. (The conversion of any convertible securities of the Company shall
not be treated as a transaction that does not involve the receipt of
consideration by the Company.)

          (b) In the event of: (i) a dissolution, liquidation, or sale of all or
substantially all of the assets of the Company; (ii) a merger or consolidation
in which the Company is not the surviving corporation; or (iii) a reverse merger
in which the Company is the surviving corporation but the Shares outstanding
immediately preceding the merger are converted by virtue of the merger into
other property, whether in the form of securities, cash or otherwise, then: (1)
any surviving or acquiring corporation shall assume Rights outstanding under the
Plan or shall substitute similar rights (including a right to acquire the same
consideration paid to Stockholders in the transaction described in this
subparagraph 13(b)) for those outstanding under the Plan, or (2) in the event
any surviving or acquiring corporation refuses to assume such Rights or to
substitute similar rights for those outstanding under the Plan, then, as
determined by the Board in its sole discretion such Rights may continue in full
force and effect or the Participants' accumulated payroll deductions (exclusive
of any accumulated interest which cannot be applied toward the purchase of
Shares under the terms of the Offering) may be used to purchase Shares
immediately prior to the transaction described above under the ongoing Offering
and the Participants' Rights under the ongoing Offering thereafter terminated.

14.      AMENDMENT OF THE PLAN.

          (a) The Board at any time, and from time to time, may amend the Plan.
However, except as provided in paragraph 13 relating to adjustments upon changes
in securities and except as to minor amendments to benefit the administration of
the Plan, to take account of a change in legislation or to obtain or maintain
favorable tax, exchange control or regulatory treatment for Participants or the
Company or any Affiliate, no amendment shall be effective unless approved by the
stockholders of the Company to the extent stockholder approval is necessary for
the Plan to satisfy the requirements of Section 423 of the Code, Rule 16b-3
under the Exchange Act and any Nasdaq or other securities exchange listing
requirements. Currently under the Code, stockholder approval within twelve (12)
months before or after the adoption of the amendment is required where the
amendment will:

               (i) Increase the amount of Shares reserved for Rights under the
Plan;

               (ii) Modify the provisions as to eligibility for participation in
the Plan to the extent such modification requires stockholder approval in order
for the Plan to obtain employee stock purchase plan treatment under Section 423
of the Code or to comply with the requirements of Rule 16b-3; or

               (iii) Modify the Plan in any other way if such modification
requires stockholder approval in order for the Plan to obtain employee stock
purchase plan treatment under Section 423 of the Code or to comply with the
requirements of Rule 16b-3.

          (b) It is expressly contemplated that the Board may amend the Plan in
any respect the Board deems necessary or advisable to provide Employees with the
maximum benefits provided or to be provided under the provisions of the Code and
the regulations promulgated thereunder


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<PAGE>

relating to Employee Stock Purchase Plans and/or to bring the Plan and/or Rights
granted under it into compliance therewith.

          (c) Rights and obligations under any Rights granted before amendment
of the Plan shall not be impaired by any amendment of the Plan, except with the
consent of the person to whom such Rights were granted, or except as necessary
to comply with any laws or governmental regulations, or except as necessary to
ensure that the Plan and/or Rights granted under the Plan comply with the
requirements of Section 423 of the Code.

15.      DESIGNATION OF BENEFICIARY.

          (a) A Participant may file a written designation of a beneficiary who
is to receive any Shares and/or cash, if any, from the Participant's account
under the Plan in the event of such Participant's death subsequent to the end of
an Offering but prior to delivery to the Participant of such Shares and cash. In
addition, a Participant may file a written designation of a beneficiary who is
to receive any cash from the Participant's account under the Plan in the event
of such Participant's death during an Offering.

          (b) The Participant may change such designation of beneficiary at any
time by written notice. In the event of the death of a Participant and in the
absence of a beneficiary validly designated under the Plan who is living at the
time of such Participant's death, the Company shall deliver such Shares and/or
cash to the executor or administrator of the estate of the Participant, or if no
such executor or administrator has been appointed (to the knowledge of the
Company), the Company, in its sole discretion, may deliver such Shares and/or
cash to the spouse or to any one or more dependents or relatives of the
Participant, or if no spouse, dependent or relative is known to the Company,
then to such other person as the Company may designate.

16.      TERMINATION OR SUSPENSION OF THE PLAN.

          (a) The Board in its discretion may suspend or terminate the Plan at
any time. Unless sooner terminated, the Plan shall terminate at the time that
all of the Shares subject to the Plan's reserve, as increased and/or adjusted
from time to time, have been issued under the terms of the Plan. No Rights may
be granted under the Plan while the Plan is suspended or after it is terminated.

          (b) Rights and obligations under any Rights granted while the Plan is
in effect shall not be impaired by suspension or termination of the Plan, except
as expressly provided in the Plan or with the consent of the person to whom such
Rights were granted, or except as necessary to comply with any laws or
governmental regulation, or except as necessary to ensure that the Plan and/or
Rights granted under the Plan comply with the requirements of Section 423 of the
Code.


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<PAGE>

17.      EFFECTIVE DATE OF PLAN.

         The Plan shall become effective as determined by the Board, but no
Rights granted under the Plan shall be exercised unless and until the Plan has
been approved by the stockholders of the Company within twelve (12) months
before or after the date the Plan is adopted by the Board, which date may be
prior to the effective date set by the Board.


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<PAGE>

                          QUANTUM EFFECT DEVICES, INC.
                        1999 EMPLOYEE STOCK PURCHASE PLAN
                                    OFFERING

                            ADOPTED SEPTEMBER 1, 1999
                            AMENDED JANUARY 11, 2000


1.       GRANT OF RIGHTS.

          (a) The Board of Directors ("Board") of Quantum Effect Devices, Inc.,
a Delaware corporation (the "Company"), pursuant to the Company's 1999 Employee
Stock Purchase Plan (the "Plan"), hereby authorizes the grant of Rights to
purchase Shares of the Company to all Eligible Employees (an "Offering").
Defined terms not explicitly defined in this Offering but defined in the Plan
shall have the same definitions as in the Plan. In the event of any conflict
between the provisions of an Offering and those of the Plan (including
interpretations, amendments, rules and regulations that may from time to time be
promulgated and adopted pursuant to the Plan), the provisions of the Plan shall
control.

          (b) An "Offering Date" is the first day of an Offering. An Offering
may consist of one purchase period or may be divided into shorter purchase
periods ("Purchase Periods"). A "Purchase Date" is the last day of a Purchase
Period or the Offering, as the case may be.

          (c) The first Offering shall begin on the effective date of the
initial public offering of the Shares and end on February 14, 2002 (the "Initial
Offering"). The Initial Offering will be divided into four (4) shorter Purchase
Periods of approximately six (6) months in duration, with the initial Purchase
Period ending on July 14, 2000, the second Purchase Period ending on February
14, 2001, the third Purchase Period ending on July 14, 2001 and the fourth
Purchase Period ending on February 14, 2002.

          (d) Except as otherwise provided, each Offering hereunder shall be
twenty-four (24) months long and shall be divided into four (4) shorter Purchase
Period approximately six (6) months in length. Offerings shall be concurrent. A
new Offering shall start every six (6) months.

          (e) Commencing on July 15, 2000, a new 24-month Offering shall begin
every July 15 and February 15. Each such Offering shall end on the day prior to
the second anniversary of its Offering Date unless sooner terminated as provided
above.

          (f) An Eligible Employee may enroll in only one Offering at a time.

          (g) If on the first day of any Purchase Period during an Offering
(I.E., July 15 or February 15) the fair market value of the Shares is less than
it was on the Offering Date for that Offering, then the Offering shall
immediately terminate, and the employees who were enrolled in the terminated
Offering shall automatically be enrolled in the new Offering that starts that
day.


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          (h) Prior to the commencement of any Offering, the Board may change
any or all terms of such Offering and any subsequent Offerings. The granting of
Rights pursuant to each Offering hereunder shall occur on each respective
Offering Date unless, prior to such date (i) the Board (or such Committee)
determines that such Offering shall not occur, or (ii) no Shares remain
available for issuance under the Plan in connection with the Offering.

          (i) Notwithstanding any other provisions of an Offering, if the terms
of an Offering as previously established by the Board would, as a result of a
change to applicable accounting standards, generate a charge to earnings, such
Offering shall terminate effective as of the day prior to the date such change
to accounting standards would otherwise first apply to the Offering (the
"Offering Termination Date"), and such Offering Termination Date shall be the
final Purchase Date of such Offering. A subsequent Offering shall commence on
such date and on such terms as shall be provided by the Board.

2.       ELIGIBLE EMPLOYEES.

          (a) All employees of the Company and each of its Affiliates
incorporated in the United States shall be granted Rights to purchase Shares
under each Offering on the Offering Date of such Offering, provided that each
such employee otherwise meets the employment requirements of subparagraph 6(a)
of the Plan and has been continuously employed for at least five (5) days on the
Offering Date of such Offering (an "Eligible Employee"); however, the five-day
eligibility requirement shall be waived with respect to the Initial Offering
only.

          (b) Notwithstanding the foregoing, the following employees shall NOT
be Eligible Employees or be granted Rights under an Offering: (i) part-time or
seasonal employees whose customary employment is less than twenty (20) hours per
week or five (5) months per calendar year or (ii) 5% stockholders (including
ownership through unexercised options) described in subparagraph 6(c) of the
Plan.

3.       RIGHTS.

          (a) Subject to the limitations contained herein and in the Plan, on
each Offering Date each Eligible Employee shall be granted the Right to purchase
the number of Shares purchasable with up to ten percent (10%) of such Eligible
Employee's Earnings paid during such Offering after the Eligible Employee first
commences participation; provided, however, that no employee may purchase Shares
on a particular Purchase Date that would result in more than ten percent (10%)
of such employee's Earnings in the period from the Offering Date to such
Purchase Date having been applied to purchase Shares under all ongoing Offerings
under the Plan and all other Company plans intended to qualify as "employee
stock purchase plans" under Section 423 of the Internal Revenue Code of 1986, as
amended (the "Code").

          (b) For this Offering, "Earnings" means the total compensation paid to
an employee, including all salary, wages (including amounts elected to be
deferred by the employee, that would otherwise have been paid, under any cash or
deferred arrangement established by the Company), overtime pay, commissions,
bonuses, and other remuneration paid directly to the employee, but excluding
profit sharing, the cost of employee benefits paid for by the Company,


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education or tuition reimbursements, imputed income arising under any Company
group insurance or benefit program, traveling expenses, business and moving
expense reimbursements, income received in connection with stock options,
contributions made by the Company under any employee benefit plan, and similar
items of compensation.

          (c) Notwithstanding the foregoing, the maximum number of Shares an
Eligible Employee may purchase on any Purchase Date in an Offering shall be such
number of Shares as has a fair market value (determined as of the Offering Date
for such Offering) equal to (x) $25,000 multiplied by the number of calendar
years in which the Right under such Offering has been outstanding at any time,
minus (y) the fair market value of any other Shares (determined as of the
relevant Offering Date with respect to such Shares) which, for purposes of the
limitation of Section 423(b)(8) of the Code, are attributed to any of such
calendar years in which the Right is outstanding. The amount in clause (y) of
the previous sentence shall be determined in accordance with regulations
applicable under Section 423(b)(8) of the Code based on (i) the number of Shares
previously purchased with respect to such calendar years pursuant to such
Offering or any other Offering under the Plan, or pursuant to any other Company
plans intended to qualify as "employee stock purchase plans" under Section 423
of the Code, and (ii) the number of Shares subject to other Rights outstanding
on the Offering Date for such Offering pursuant to the Plan or any other such
Company plan.

          (d) The maximum aggregate number of Shares available to be purchased
by all Eligible Employees under an Offering shall be the number of Shares
remaining available under the Plan on the Offering Date. If the aggregate
purchase of Shares upon exercise of Rights granted under the Offering would
exceed the maximum aggregate number of Shares available, the Board shall make a
pro rata allocation of the Shares available in a uniform and equitable manner.

4.       PURCHASE PRICE.

          (a) The purchase price of the Shares under the Offering shall be the
lesser of eighty-five percent (85%) of the fair market value of the Shares on
the Offering Date or eighty-five percent (85%) of the fair market value of the
Shares on the Purchase Date, in each case rounded up to the nearest whole cent
per Share.

          (b) For the Initial Offering, the fair market value of the Shares at
the time when the Offering commences shall be the price per Share at which
Shares are first sold to the public in the Company's initial public offering as
specified in the final prospectus with respect to that offering.

5.       PARTICIPATION.

          (a) An Employee who is an Eligible Employee at the beginning of an
Offering may elect to participate in such Offering at the beginning of the
Offering or at the start of any new Purchase Period during the Offering.


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          (b) A Participant who is enrolled in an Offering automatically will be
enrolled in the next Offering that commences after the current Offering ends.

          (c) An Eligible Employee shall become a Participant in an Offering by
delivering an agreement authorizing payroll deductions. Such deductions must be
in whole percentages, with a minimum percentage of one percent (1%) and a
maximum percentage of ten percent (10%) of Earnings. A Participant may not make
additional payments into his or her account. The agreement shall be made on such
enrollment form as the Company provides, and must be delivered to the Company at
least ten (10) days before the Offering Date, or before such later date
specified in subparagraph 5(a), in advance of the date of participation to be
effective, unless a later time for filing the enrollment form is set by the
Board for all Eligible Employees with respect to a given Offering Date. For the
Initial Offering, the time for filing an enrollment form and commencing
participation for individuals who are Eligible Employees on the Offering Date
for the Initial Offering may be after the Offering Date, as determined by the
Company and communicated to such Eligible Employees.

          (d) If the agreement authorizing payroll deductions is required to be
delivered to the Company or designated Affiliate a specified number of days
before the Offering Date to be effective, then an employee who becomes eligible
during the required delivery period shall not be considered to be an Eligible
Employee at the beginning of the Offering.

6. CHANGING PARTICIPATION LEVEL DURING OFFERING; WITHDRAWAL FROM OFFERING.

          (a) A Participant may not increase his or her deductions during the
course of a Purchase Period. A Participant may increase or decrease his or her
deductions prior to the beginning of a new Purchase Period or a new Offering, to
be effective at the beginning of such new Purchase Period or new Offering. A
Participant shall make a change in his or her participation level by delivering
a notice to the Company in such form and at such time as the Company provides.

          (b) A Participant may reduce (including to zero) his or her deductions
once (and only once) during a Purchase Period, effective as soon as
administratively practicable. A Participant shall make a change in his or her
participation level by delivering a notice to the Company in such form and at
such time as the Company provides.

          (c) Except as otherwise specifically provided herein, a Participant
may not increase or decrease his or her participation level during the course of
an Offering.

          (d) Notwithstanding the foregoing, a Participant may withdraw from an
Offering and receive his or her accumulated payroll deductions from the Offering
(reduced to the extent, if any, such deductions have been used to acquire Shares
for the Participant on any prior Purchase Dates), without interest, or reduce
his or her participation percentage to zero (0), at any time prior to the end of
the Offering, excluding only each five (5) day period immediately preceding a
Purchase Date (or such shorter period of time determined by the Company and
communicated to


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Participants) by delivering a withdrawal notice to the Company in such form as
the Company provides.

7.       PURCHASES.

         Subject to the limitations contained herein, on each Purchase Date,
each Participant's accumulated payroll deductions (without any increase for
interest) shall be applied to the purchase of whole Shares, up to the maximum
number of Shares permitted under the Plan and the Offering.

8.       NOTICES AND AGREEMENTS.

         Any notices or agreements provided for in an Offering or the Plan shall
be given in writing, in a form provided by the Company, and unless specifically
provided for in the Plan or this Offering shall be deemed effectively given upon
receipt or, in the case of notices and agreements delivered by the Company, five
(5) days after deposit in the United States mail, postage prepaid.

9.       EXERCISE CONTINGENT ON STOCKHOLDER APPROVAL.

         The Rights granted under an Offering are subject to the approval of the
Plan by the Shareholders as required for the Plan to obtain treatment as a
tax-qualified employee stock purchase plan under Section 423 of the Code.

10.      OFFERING SUBJECT TO PLAN.

         Each Offering is subject to all the provisions of the Plan, and its
provisions are hereby made a part of the Offering, and is further subject to all
interpretations, amendments, rules and regulations which may from time to time
be promulgated and adopted pursuant to the Plan.


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