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                                                                    EXHIBIT 10.7
 
                             VLSI TECHNOLOGY, INC.
 
                                1992 STOCK PLAN
 
     (As adopted by the Board of Directors on May 1, 1992 and as amended on
November 17, 1994 and March 12, 1996, and approved by the stockholders on August
20, 1992 and April 27, 1995 and subject to stockholder approval at the 1996
Annual Meeting of Stockholders)
 
     Purposes of the Plan. The purpose of this 1992 Stock Plan is to enable the
Company to provide an incentive to Employees and Consultants whose present and
potential contributions are important to the continued success of the Company,
to afford these individuals the opportunity to acquire a proprietary interest in
the Company, and to enable the Company to enlist and retain the best available
talent for positions of substantial responsibility. It is intended that this
purpose will be effected through the granting of Incentive Stock Options,
Nonstatutory Stock Options, Stock Appreciation Rights, Stock Purchase Rights,
Stock Bonus Awards and Long-Term Performance Awards.
 
     Definitions. As used herein, the following definitions shall apply:
 
          "Administrator" means the Board or any of its Committees as shall be
     administering the Plan, in accordance with Section 4 of the Plan.
 
          "Affiliated Company" means a corporation, whether now or hereafter
     existing, which is not a Subsidiary but with respect to which the Company
     owns, directly or indirectly through one or more Subsidiaries, at least 20%
     of the total voting power of all classes of stock.
 
          "Applicable Laws" means the legal requirements relating to the
     administration of stock option and equity incentive plans under applicable
     state corporate and securities laws and under the Code.
 
          "Board" means the Board of Directors of the Company.
 
          "Code" means the Internal Revenue Code of 1986, as amended.
 
          "Committee" means a Committee appointed by the Board in accordance
     with Section 4 of the Plan.
 
          "Common Stock" means the Common Stock of the Company.
 
          "Company" means VLSI Technology, Inc., a Delaware corporation.
 
          "Consultant" means (i) any person, including an advisor, who is
     engaged by the Company or by a Parent or Subsidiary of the Company to
     render consulting services to it and who is compensated for such services,
     provided that the term "Consultant" shall not include Directors who are
     compensated, through a director's fee or other standard director
     compensation, only for their services as Directors of the Company, (ii) any
     currently authorized manufacturer's representative or sales representative
     firm which sells products of the Company or of a Parent or Subsidiary of
     the Company, as designated by the Company in its sole discretion (which
     designation shall be subject to withdrawal at any time for any or no
     reason), whether compensated by the Company for service as such or not, or
     (iii) any individual who is employed by such a manufacturer's
     representative or sales representative firm to perform services which
     include the sale of products of the Company or of a Parent or Subsidiary of
     the Company, whether compensated by the Company for such services or not.
 
          "Continuous Status as an Employee or Consultant" means the absence of
     any interruption or termination of service as an Employee or Consultant,
     provided, however, that Continuous Status as an Employee or Consultant
     shall not be considered interrupted in the case of: (i) any leave of
     absence approved by the Administrator, including sick leave, military
     leave, or any other personal leave; provided, however, that for purposes of
     Incentive Stock Options, any such leave may not exceed ninety (90) days,
     unless reemployment upon the expiration of such leave is guaranteed by
     contract (including certain Company policies) or statute; or (ii) transfers
     between locations of the Company or between the
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     Company, its Parent, its Subsidiaries, its Affiliated Companies or its
     successor. In the case of a leave of absence which extends for more than
     ninety (90) days and after which there is no contractual or statutory
     guaranty of reemployment, the Employee's employment or Consultant's service
     as such shall be deemed to have terminated on the ninety-first (91st) day
     of such leave of absence.
 
          "Director" means a member of the Board.
 
          "Disability" means total and permanent disability, as defined in
     Section 22(e)(3) of the Code.
 
          "Employee" means any person, including Officers and Directors,
     employed by the Company or by any Parent or Subsidiary of the Company, as
     such term is defined under common law and interpreted by the rules and
     regulations under the Code. Neither service as a Director nor the payment
     of a director's fee by the Company shall be sufficient to constitute
     "employment" by the Company.
 
          "Exchange Act" means the Securities Exchange Act of 1934, as amended.
 
          "Fair Market Value" means, as of a specified date, the value of Common
     Stock determined by the Administrator as follows:
 
             If the Common Stock is listed on any established stock exchange or
        quoted on 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 exchange (or, if listed on more than one exchange, the exchange
        with the greatest volume of trading in Common Stock) or system on the
        last market trading day prior to the day of determination, as reported
        in the Wall Street Journal or such other source as the Administrator
        deems reliable; or
 
             If the Common Stock is quoted on the NASDAQ System (but is not
        included 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 closing bid and closing asked prices for the Common Stock on
        the last market trading day prior to the day of determination, as
        reported in the Wall Street Journal or such other source as the
        Administrator deems reliable; or
 
             In the absence of an established market for the Common Stock, the
        Fair Market Value thereof shall be determined in good faith by the
        Administrator.
 
          "Incentive Stock Option" means an Option that satisfies the provisions
     of Section 422 of the Code.
 
          "Insider" means an Officer or Director.
 
          "Long-Term Performance Award" means an award granted pursuant to
     Section 10 of the Plan.
 
          "Nonstatutory Stock Option" means an Option that is not an Incentive
     Stock Option.
 
          "Notice of Grant" means a written notice evidencing certain terms and
     conditions of an individual Option, Stock Purchase Right, SAR, Long-Term
     Performance Award or Stock Bonus Award grant. The Notice of Grant is part
     of the Option Agreement, the Restricted Stock Purchase Agreement, the SAR
     Agreement, the Long-Term Performance Award agreement or the Stock Bonus
     Award agreement, as the case may be.
 
          "Officer" means an officer of the Company within the meaning of
     Section 16 of the Exchange Act and the rules and regulations promulgated
     thereunder.
 
          "Option" means a stock option granted pursuant to the Plan.
 
          "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 and the Notice of Grant.
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          "Optioned Stock" means the Common Stock subject to an Option or Right.
 
          "Optionee" means an Employee or Consultant who holds an outstanding
     Option or Right.
 
          "Option Exchange Program" means a program whereby outstanding options
     (whether originally granted under this Plan or under other plans of the
     Company) are surrendered in exchange for Options with a lower exercise
     price.
 
          "Outside Director" shall mean a Director who is not an Employee.
 
          "Parent" means a "parent corporation", whether now or hereafter
     existing, as defined in Section 424(e) of the Code.
 
          "Plan" means this 1992 Stock Plan.
 
          "Restricted Stock" means shares of Common Stock purchased pursuant to
     Stock Purchase Rights granted under Section 8 of the Plan.
 
          "Restricted Stock Purchase Agreement" means a written agreement
     between the Company and an 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.
 
          "Right" means and includes SARs, Long-Term Performance Awards, Stock
     Purchase Rights and Stock Bonus Awards granted pursuant to the Plan.
 
          "Rule 16b-3" means Rule 16b-3 promulgated under the Exchange Act (or
     any successor to Rule 16b3), as in effect when discretion is being
     exercised with respect to the Plan.
 
          "SAR" means a stock appreciation right granted pursuant to Section 7
     of the Plan.
 
          "SAR Agreement" means a written agreement between the Company and an
     Optionee evidencing the terms and conditions of an individual Option grant.
     The SAR Agreement is subject to the terms and conditions of the Plan and
     the Notice of Grant.
 
          "Share" means a share of the Common Stock, as adjusted in accordance
     with Section 12 of the Plan.
 
          "Stock Bonus Award" means an award granted pursuant to Section 9 of
     the Plan.
 
          "Stock Purchase Right" means a right to purchase Common Stock granted
     pursuant to Section 8 of the Plan.
 
          "Subsidiary" means a "subsidiary corporation", whether now or
     hereafter existing, as defined in Section 424(f) of the Code.
 
     In addition, the term "waiting period", the term "Performance Period", the
terms "Change in Control" and "Incumbent Directors" and the term "Tax Date"
shall have the meanings set forth in Sections 7, 10, 12 and 13 of the Plan,
respectively.
 
     Stock Subject to the Plan.  Subject to the provisions of Section 12 of the
Plan, the total number of Shares reserved and available for distribution
pursuant to awards made under the Plan shall be 9,500,000, of which 5,000,000
shares are subject to stockholder approval at the 1996 Annual Meeting of
Stockholders. The Shares may be authorized but unissued or reacquired stock.
 
     If an Option or Right should expire or become unexercisable for any reason
without having been exercised in full, the unpurchased Shares which were subject
thereto shall, unless the Plan shall have been terminated, become available for
other Options or Rights granted under the Plan.
 
     Notwithstanding any other provision of the Plan, Shares issued upon
exercise of Options or Rights under the Plan and later repurchased by the
Company shall not become available for future grant or sale under the Plan.
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     Administration of the Plan.
 
          Multiple Administrative Bodies.  If permitted by Rule 16b-3, the Plan
     may be administered by different bodies with respect to Outside Directors,
     Directors who are Employees, Officers who are not Directors, and Employees
     and Consultants who are neither Directors nor Officers.
 
          Administration With Respect to Directors and Officers.  With respect
     to grants of Options or Rights to Employees or Consultants who are also
     Officers or Directors, the Plan shall be administered by (A) the Board, if
     the Board may administer the Plan in compliance with the rules governing a
     plan intended to qualify as a discretionary grant or award plan under Rule
     16b-3, or (B) a Committee designated by the Board to administer the Plan,
     which Committee shall be constituted (I) in such a manner as to permit the
     Plan to comply with the rules governing a plan intended to qualify as a
     discretionary grant or award plan under Rule 16b-3 and (II) in such a
     manner as to satisfy the Applicable Laws.
 
          Administration With Respect to Other Persons. With respect to grants
     of Options or Rights or to Employees or Consultants who are neither
     Directors nor Officers, the Plan shall be administered by (A) the Board or
     (B) a Committee designated by the Board, which Committee shall be
     constituted in such a manner as to satisfy the Applicable Laws.
 
          Committee Composition. Once a Committee has been appointed pursuant to
     subsection (b) or (c) of this Section 4, such Committee shall continue to
     serve in its designated capacity until otherwise directed by the Board.
     From time to time the Board may increase the size of any Committee and
     appoint additional members thereof, remove members (with or without cause)
     and appoint new members in substitution therefor, fill vacancies (however
     caused) or remove all members of the Committee and thereafter directly
     administer the Plan, all to the extent permitted by the Applicable Laws
     and, in the case of a Committee appointed under subsection (b), to the
     extent permitted by Rule 16b-3 as it applies to a plan intended to qualify
     thereunder as a discretionary grant or award plan.
 
          Powers of the Administrator. Subject to the provisions of the Plan
     and, in the case of a Committee, the specific duties delegated by the Board
     to such Committee, the Administrator shall have the authority, in its
     discretion:
 
             to grant Incentive Stock Options, Nonstatutory Stock Options, SARs,
        Stock Purchase Rights, Stock Bonus Awards and Long-Term Performance
        Awards;
 
             to determine the Fair Market Value of the Common Stock, in
        accordance with Section 2(o) of the Plan;
 
             to select the Employees and Consultants to whom Options and Rights
        may from time to time be granted hereunder;
 
             to determine whether and to what extent Options and Rights, or any
        combination thereof, are granted hereunder;
 
             to determine the number of shares of Common Stock to be covered by
        each such award granted hereunder;
 
             to approve forms of agreements for use under the Plan;
 
             to determine the terms and conditions, not inconsistent with the
        terms of the Plan, of any award granted hereunder and of the Options or
        Rights so awarded (including, but not limited to, the exercise or
        purchase price and any restriction or limitation regarding any Option or
        Right and/or the shares of Common Stock relating thereto, based in each
        case on such factors as the Administrator shall determine, in its sole
        discretion);
 
             to determine whether and under what circumstances an Option or
        Right may be settled in cash instead of Common Stock;
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             to reduce the exercise price of any Option or Right to the then
        current Fair Market Value if the Fair Market Value of the Common Stock
        covered by such Option or Right shall have declined since the date the
        Option was granted;
 
             to modify or amend the terms and conditions of any Option or Right,
        subject to Section 15 of the Plan (including, but not limited to,
        accelerating vesting or waiving forfeiture restrictions);
 
             to institute an Option Exchange Program;
 
             to authorize any person to execute on behalf of the Company any
        instrument required to effect the grant of an Option or Right previously
        granted by the Administrator;
 
             to interpret the Plan and to prescribe, amend and rescind rules and
        regulations relating to the Plan; and
 
             to make all other determinations deemed necessary or advisable for
        administering the Plan.
 
     Effect of Administrator's Decision. All decisions, determinations and
interpretations of the Administrator shall be final and binding.
 
     Suspension or Termination of Option or Right. If the Chief Executive
Officer or his or her designee reasonably believes that an Optionee has
committed an act of misconduct, the Chief Executive Officer may suspend the
Optionee's right to exercise any Option or Right or to receive any benefits
relating thereto pending a determination by the Administrator. If the
Administrator determines that an Optionee has committed an act of embezzlement,
fraud, dishonesty, nonpayment of an obligation owed to the Company, breach of
fiduciary duty or deliberate disregard of the Company's rules resulting in loss,
damage or injury to the Company, or if an Optionee makes an unauthorized
disclosure of any Company trade secret or confidential information, engages in
any conduct constituting unfair competition, induces any Company customer to
breach a contract with the Company or induces any principal for whom the Company
acts as agent to terminate such agency relationship, neither the Optionee nor
his or her estate shall be entitled to exercise any Option or Right or to
receive any benefits relating to Options or Rights whatsoever. In making such
determination, the Administrator shall act fairly and shall give the Optionee an
opportunity to appear and present evidence on Optionee's behalf at a hearing
before the Administrator.
 
     Eligibility. Nonstatutory Stock Options and Rights may be granted to
Employees and Consultants. Incentive Stock Options may be granted only to
Employees. An Employee or Consultant who has been granted an Option or Right
may, if he or she is otherwise eligible, be granted additional Options or
Rights.
 
     Term of Plan. Subject to Section 19 of the Plan, the Plan shall become
effective upon the earlier to occur of its adoption by the Board or its approval
by the stockholders of the Company as described in Section 19. It shall continue
in effect for a term of ten (10) years unless sooner terminated under Section 15
of the Plan.
 
     Options and SARs.
 
          Options. The Administrator, in its discretion, may grant Options to
     eligible participants and shall determine whether such Options shall be
     Incentive Stock Options or Nonstatutory Stock Options. Each Option shall be
     evidenced by a Notice of Grant, which shall expressly identify the Options
     as either Incentive Stock Options or as Nonstatutory Stock Options and
     which shall be in such form and contain such provisions as the
     Administrator shall from time to time deem appropriate. Without limiting
     the foregoing, the Administrator may, at any time, or from time to time,
     authorize the Company, with the consent of the respective holders of
     outstanding options or rights, to issue Options or Rights in exchange for
     the surrender and cancellation of any or all outstanding options or rights
     held by such person. Option agreements shall contain the following terms
     and conditions:
 
          Exercise Price; Number of Shares. The Notice of Grant shall specify
     the per Share exercise price for the Shares issuable pursuant to an Option,
     which shall be such price as is determined by the Administrator. The Notice
     of Grant shall also specify the number of Shares which are subject to the
     Option.
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          Waiting Period, Exercise Dates and Term. At the time an Option is
     granted, the Administrator will determine the terms and conditions to be
     satisfied before Shares may be purchased upon exercise of the Option,
     including the date or dates on which Shares subject to the Option first
     become available for purchase. The Administrator may specify that an Option
     may not be exercised until the completion of a specified service period or
     until certain Company, Subsidiary, Affiliated Company or individual
     performance objectives are met. Any such period is referred to herein as
     the "waiting period". At the time an Option is granted, the Administrator
     shall fix the period within which the Option may be exercised, which shall
     not be earlier than the end of the waiting period, if any, nor, in the case
     of an Incentive Stock Option, later than ten (10) years, from the date of
     grant. The Notice of Grant shall specify the term of the Option.
 
          Form of Payment. The form of payment acceptable to the Company in
     payment by an Optionee of the exercise price of Shares to be issued upon
     exercise of an Option shall be determined by the Administrator (and, in the
     case of an Incentive Stock Option, shall be determined at the time of
     grant) and, subject to compliance with the Delaware General Corporation
     Law, may consist entirely of:
 
           cash;
 
             check (personal, cashier's or certified) or money order;
 
             promissory note;
 
             other Shares which (I) in the case of Shares acquired upon exercise
        of an option, have been owned by the Optionee for more than six months
        on the date of surrender and (II) have a Fair Market Value on the date
        of surrender equal to the aggregate exercise price of the Shares as to
        which the Option is being exercised;
 
             delivery to the Company of (I) a properly executed exercise notice,
        (II) irrevocable instructions to a broker to sell a sufficient number of
        the Shares being exercised to cover the exercise price and to promptly
        deliver to the Company the amount of sale proceeds required to pay the
        exercise price and any required tax withholding relating to the
        exercise, and (III) such other documentation as the Administrator and
        the broker shall require to effect a same-day exercise and sale;
 
             delivery to the Company of (I) a properly executed exercise notice,
        (II) irrevocable instructions to a broker or other third party
        acceptable to the Company to hold the Shares being exercised as
        collateral for a loan to the Optionee of an amount sufficient to cover
        the exercise price and to promptly deliver to the Company the amount of
        loan proceeds required to pay the exercise price and any required tax
        withholding relating to the exercise and (III) such other documentation
        as the Administrator and the broker or other third party shall require
        to effect the transaction;
 
             delivery of an irrevocable subscription agreement for the Shares
        which irrevocably obligates the Optionee to take and pay for the Shares
        not more than twelve months after the date of delivery of such
        subscription agreement;
 
             any combination of the foregoing methods of payment; or
 
             such other method of payment for the issuance of Shares as is
        permitted by the Applicable Laws.
 
          Special Incentive Stock Option Provisions. In addition to the
     foregoing, Options granted under the Plan which are intended to be
     Incentive Stock Options under Section 422 of the Code shall be subject to
     the following terms and conditions:
 
             Exercise Price. The per share exercise price of an Incentive Stock
        Option shall be no less than 100% of the Fair Market Value per Share on
        the date of grant.
 
             Dollar Limitation. If an Option granted hereunder to an Optionee is
        intended to be an Incentive Stock Option, then to the extent that such
        Option, when considered together with all other incentive stock options
        held by Optionee (whether granted hereunder or under other plans of the
<PAGE>   7
 
        Company or its Parent or Subsidiaries), would cause the Fair Market
        Value of all shares of stock of the Company, its Parent and Subsidiaries
        first becoming exercisable by the Optionee during any calendar year to
        exceed $100,000, such Option shall be treated as a Nonstatutory Stock
        Option. For purposes of the preceding sentence, (1) options shall be
        taken into account in the order in which they were granted, and (2) the
        Fair Market Value of the shares subject to the option shall be
        determined as of the time the Option or other incentive stock option is
        granted.
 
             10% Stockholder. If any Optionee to whom an Incentive Stock Option
        is to be granted pursuant to the provisions of the Plan is, on the date
        of grant, the owner (as determined under Section 424(d) of the Code) of
        stock possessing more than 10% of the total combined voting power of all
        classes of stock of the Company or of a Parent or Subsidiary of the
        Company, then the following special provisions shall be applicable to
        the Incentive Stock Option granted to such individual:
 
                The per Share Option price of Shares subject to such Incentive
           Stock Option shall not be less than 110% of the Fair Market Value of
           Common Stock on the date of grant; and
 
                The Option shall not have a term in excess of five (5) years
           from the date of grant.
 
        Except as modified by the preceding provisions of this subsection
        7(a)(iv) and except as otherwise limited by Section 422 of the Code, all
        of the provisions of the Plan shall be applicable to the Incentive Stock
        Options granted hereunder.
 
             Other Provisions. Each Option granted under the Plan may contain
        such other terms, provisions and conditions not inconsistent with the
        Plan as may be determined by the Administrator.
 
             Buy-out Provisions. The Administrator may at any time offer on
        behalf of the Company to buy out, for a payment in cash or Shares, an
        Option previously granted, based on such terms and conditions as the
        Administrator shall establish and communicate to the Optionee at the
        time that such offer is made, provided, however, that buy-out offers
        made to Insiders may only be payable in cash. Any such cash offer made
        to an Officer or Director shall comply with the applicable provisions of
        Rule 16b-3, if any.
 
        SARs.
 
             In Connection with Options. At the sole discretion of the
        Administrator, SARs may be granted in connection with all or any part of
        an Option, either concurrently with the grant of the Option or at any
        time thereafter during the term of the Option. The following provisions
        apply to SARs that are granted in connection with Options:
 
                The SAR shall entitle the Optionee to exercise the SAR by
           surrendering to the Company unexercised a portion of the related
           Option. The Optionee shall receive in exchange from the Company an
           amount equal to the excess of (1) the Fair Market Value, on the date
           of exercise of the SAR, of the Common Stock covered by the
           surrendered portion of the related Option over (2) the exercise price
           of the Common Stock covered by the surrendered portion of the related
           Option. Notwithstanding the foregoing, the Administrator may place
           limits on the amount that may be paid upon exercise of an SAR;
           provided, however, that such limit shall not restrict the
           exercisability of the related Option.
 
                When an SAR is exercised, the related Option, to the extent
           surrendered, shall be canceled and shall cease to be exercisable.
 
                An SAR shall be exercisable only when and to the extent that the
           related Option is exercisable and shall expire no later than the date
           on which the related Option expires.
 
                An SAR may only be exercised at a time when the Fair Market
           Value of the Common Stock covered by the related Option exceeds the
           exercise price of the Common Stock covered by the related Option.
<PAGE>   8
 
             Independent of Options. At the sole discretion of the
        Administrator, SARs may be granted independently without related
        Options. The following provisions apply to SARs that are not granted in
        connection with Options:
 
                The SAR shall entitle the Optionee, by exercising the SAR, to
           receive from the Company an amount equal to the excess of (1) the
           Fair Market Value of the Common Stock covered by the exercised
           portion of the SAR, as of the date of such exercise, over (2) the
           Fair Market Value of the Common Stock covered by the exercised
           portion of the SAR, as of the date on which the SAR was granted;
           provided, however, that the Administrator may place limits on the
           aggregate amount that may be paid upon exercise of an SAR.
 
                To the extent that an SAR is exercised, it shall be canceled and
           shall cease to be exercisable.
 
                SARs shall be exercisable, in whole or in part, at such times as
           the Administrator shall specify in the Optionee's SAR Agreement.
 
                An SAR may only be exercised at a time when the Fair Market
           Value of the Common Stock on the exercise date exceeds the Fair
           Market Value of the Common Stock on the date of grant of the SAR.
 
             Form of Payment. Unless otherwise specified in the SAR Agreement,
        the Company's obligation arising upon the exercise of an SAR may be paid
        in Common Stock or in cash, or in any combination of Common Stock and
        cash, as the Administrator, in its sole discretion, may determine.
        Shares issued upon the exercise of an SAR shall be valued at their Fair
        Market Value as of the date of exercise.
 
             Rule 16b-3. SARs granted to Insiders shall be subject to any
        additional restrictions of Rule 16b-3 applicable to SARs granted to such
        persons. An Insider may only exercise an SAR during such time or times
        as are permitted by Rule 16b-3.
 
        Exercise of Options and SARs.
 
             Right to Exercise. Any Option or SAR granted hereunder shall be
        exercisable at such times and under such conditions as are determined by
        the Administrator and as shall be permissible under the terms of the
        Plan.
 
             No Fractional Shares. An Option or SAR may not be exercised for a
        fraction of a Share.
 
             Procedure for Exercise. An Option or SAR shall be deemed to be
        exercised when written notice of such exercise has been given to the
        Company in accordance with the terms of the Option or SAR by the person
        entitled to exercise the Option or SAR and full payment for the Shares
        with respect to which the Option or SAR is being exercised has been
        received by the Company. Full payment may, as authorized by the
        Administrator (and, in the case of an Incentive Stock Option, determined
        at the time of grant) and permitted by the Option Agreement, consist of
        any consideration and method of payment allowable under the Plan.
 
             Rights as a Stockholder. Until the issuance (as evidenced by the
        appropriate entry on the books of the Company or of a duly authorized
        transfer agent of the Company) of the stock certificate evidencing such
        Shares, 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. 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 12
        of the Plan.
 
             Effect of Exercise. Exercise of an Option in any manner shall
        result in a decrease in the number of Shares which thereafter shall be
        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. Exercise of
        an SAR in any manner shall, to the extent the SAR is exercised, result
        in a decrease in the number of Shares which thereafter shall be
        available for purposes of the Plan, and the SAR (and the related Option,
        if
<PAGE>   9
 
        any) shall cease to be exercisable to the extent it has been exercised.
 
             Leave of Absence. Options and SARs held by an Optionee shall not be
        exercisable during the Optionee's leave of absence from his or her
        employment or consulting relationship with the Company, any Parent or
        Subsidiary or any Affiliated Company, regardless of the length of such
        leave, except as otherwise required by law. With respect to an
        Optionee's leave of absence which is ninety (90) days or less in
        duration, vesting of all Options and SARs held by the Optionee shall
        continue uninterrupted during such leave unless otherwise provided in
        the Option or SAR Agreement. With respect to an Optionee's leave of
        absence which is more than ninety (90) days in duration, vesting of any
        or all Options and SARs held by such Optionee shall be suspended until
        the end of such leave unless (i) otherwise expressly provided in the
        Option or SAR Agreement or (ii) prohibited by an applicable law or
        regulation. The employment of an Optionee who takes a leave of absence
        of more than 90 days after which such Optionee is not guaranteed
        re-employment by contract or statute shall be deemed to have terminated
        for purposes of the Plan on the ninety-first (91st) day of such leave of
        absence.
 
          Rule 16b-3. Options and SARs granted to Insiders must comply with the
     applicable provisions of Rule 16b-3 and shall contain such additional
     conditions or restrictions as may be required thereunder to qualify for the
     maximum exemption from Section 16 of the Exchange Act with respect to Plan
     transactions.
 
          Effect of Termination.
 
             Termination of Employment or Consulting Relationship. In the event
        an Optionee's Continuous Status as an Employee or Consultant terminates
        (other than upon the Optionee's death or Disability), such Optionee may
        exercise his or her Option or SAR, but (A) only to the extent that the
        Optionee was entitled to exercise it at the date of such termination,
        unless otherwise permitted by the Administrator, and (B) only within
        such period of time following the date of such termination not exceeding
        five (5) years as is determined by the Administrator (with such
        determination in the case of an Incentive Stock Option being made at the
        time of grant of the Option and not exceeding three (3) months) and in
        no event later than the expiration of the term of such Option or SAR as
        set forth in the Option or SAR Agreement. To the extent that Optionee
        was not entitled to exercise an Option or SAR at the date of such
        termination, and to the extent that the Optionee does not exercise such
        Option or SAR (to the extent otherwise so entitled) within the time
        specified herein, the Option or SAR shall terminate.
 
             Disability of Optionee. In the event an Optionee's Continuous
        Status as an Employee or Consultant terminates as a result of the
        Optionee's Disability, the Optionee may exercise his or her Option or
        SAR, but (A) only to the extent that the Optionee was entitled to
        exercise it at the date of such termination, unless otherwise permitted
        by the Administrator, and (B) only within such period of time following
        the date of termination due to Disability not exceeding ten (10) years
        as is determined by the Administrator (with such determination being
        made at the time of grant of the Option in the case of an Incentive
        Stock Option and not exceeding one (1) year) and in no event later than
        the expiration of the term of such Option or SAR as set forth in the
        Option or SAR Agreement. To the extent that Optionee was not entitled to
        exercise an Option or SAR at the date of such termination, and to the
        extent that the Optionee does not exercise such Option or SAR (to the
        extent otherwise so entitled) within the time specified herein, the
        Option or SAR shall terminate.
 
             Death of Optionee. In the event of an Optionee's death during the
        term of an Option or SAR, the Optionee's estate or a person who acquired
        the right to exercise the deceased Optionee's Option or SAR by bequest
        or inheritance may exercise the Option or SAR, but (A) only to the
        extent that the Optionee was entitled to exercise it at the date of
        death, unless otherwise permitted by the Administrator and (B) only
        within such period of time following the date of death not exceeding ten
        (10) years as is determined by the Administrator, and in no event later
        than the expiration of the term of such Option or SAR as set forth in
        the Option or SAR Agreement. To the extent that Optionee was not
        entitled to exercise an Option or SAR at the date of death, and to the
        extent that
<PAGE>   10
 
        the Optionee's estate or a person who acquired the right to exercise
        such Option does not exercise such Option or SAR (to the extent
        otherwise so entitled) within the time specified herein, the Option or
        SAR shall terminate.
 
     Stock Purchase Rights.
 
          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
     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 a written 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, the form of
     payment that is acceptable (which may, in the discretion of the
     Administrator, include any form of payment enumerated in Section 7(a)(iii)
     hereof), and the time within which the offeree must accept such offer,
     which shall in no event exceed sixty (60) days 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 and payment of the
     purchase price. Shares purchased pursuant to a Stock Purchase Right shall
     be referred to herein as "Restricted Stock".
 
          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 Continuous Status as an Employee or Consultant for any reason
     (including death or Disability). The purchase price for Shares repurchased
     by the Company pursuant to the provisions of 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,
     whether or not such indebtedness is related to the original purchase of the
     Shares being repurchased by the Company. The repurchase option shall lapse
     at such rate as the Administrator may determine.
 
          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.
     The provisions of Restricted Stock Purchase Agreements need not be the same
     with respect to each purchaser.
 
          Rule 16b-3. Stock Purchase Rights granted to Insiders, and Shares
     purchased by Insiders pursuant to Stock Purchase Rights, shall be subject
     to such additional conditions or restrictions of Rule 16b-3 as may be
     applicable thereto in order to qualify for the maximum exemption from
     Section 16 of the Exchange Act with respect to Plan transactions.
 
          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 12 of the Plan.
 
     Stock Bonus Awards. Stock Bonus Awards may be granted either alone, in
addition to or in tandem with other awards granted under the Plan and/or awards
made outside of the Plan. Stock Bonus Awards shall not require payment by the
Optionee of any consideration for the Shares covered by the Stock Bonus Award.
The Administrator shall determine, in its sole discretion, the terms, conditions
and restrictions relating to each Stock Bonus Award and shall determine any
performance or employment-related factors to be considered in the granting of
Stock Bonus Awards and the extent to which such Stock Bonus Awards have been
earned. Shares issued pursuant to a Stock Bonus Award may be made subject to
various conditions, including vesting or forfeiture provisions. Stock Bonus
Awards may vary from participant to participant and between groups of
participants. Each Stock Bonus Award shall be confirmed by, and be subject to
the terms of, a Stock Bonus Award agreement.
<PAGE>   11
 
     Long-Term Performance Awards.
 
          Awards. Long-Term Performance Awards are cash or stock bonus awards
     that may be granted either alone, in addition to or in tandem with other
     awards granted under the Plan and/or awards made outside of the Plan.
     Long-Term Performance Awards shall not require payment by the Optionee of
     any consideration for the Long-Term Performance Award or for the Shares
     covered by such award. The Administrator shall determine the nature, length
     and starting date of any performance period (the "Performance Period") for
     each Long-Term Performance Award and shall determine the performance or
     employment factors, if any, to be used in the determination of the value of
     Long-Term Performance Awards and the extent to which such Long-Term
     Performance Awards have been earned. Shares issued pursuant to a Long-Term
     Performance Award may be made subject to various conditions, including
     vesting or forfeiture provisions. Long-Term Performance Awards may vary
     from participant to participant and between groups of participants and
     shall be based upon the achievement of Company, Subsidiary, Parent,
     Affiliated Company and/or individual performance factors or upon such other
     criteria as the Administrator may deem appropriate. Performance Periods may
     overlap and participants may participate simultaneously with respect to
     Long-Term Performance Awards that are subject to different Performance
     Periods and different performance factors and criteria. Long-Term
     Performance Awards shall be confirmed by, and be subject to the terms of, a
     Long-Term Performance Award agreement.
 
          Value of Awards. At the beginning of each Performance Period, the
     Administrator may determine for each Long-Term Performance Award subject to
     such Performance Period the range of dollar values and/or numbers of shares
     of Common Stock to be awarded to the participant at the end of the
     Performance Period if and to the extent that the relevant measures of
     performance for such Long-Term Performance Award are met. Such dollar
     values or numbers of shares of Common Stock may be fixed or may vary in
     accordance with such performance or other criteria as may be determined by
     the Administrator.
 
          Adjustment of Awards. Notwithstanding the provisions of Section 15
     hereof, the Administrator may, after the grant of Long-Term Performance
     Awards, adjust the performance factors applicable to such Long-Term
     Performance Awards to take into account changes in the law or in accounting
     or tax rules and to make such adjustments as the Administrator deems
     necessary or appropriate to reflect the inclusion or exclusion of the
     impact of extraordinary or unusual items, events or circumstances in order
     to avoid windfalls or hardships.
 
     Non-Transferability of Options. Options and Rights may not be sold,
pledged, assigned, hypothecated, transferred or disposed of in any manner other
than by will or by the laws of descent and distribution or pursuant to a
qualified domestic relations order as defined by the Code or Title I of the
Employee Retirement Income Security Act, or the rules thereunder. The
designation of a beneficiary by an Optionee does not constitute a transfer. An
Option or Right may be exercised, during the lifetime of the Optionee, only by
the Optionee or by a transferee permitted by this Section 11.
 
     Adjustments Upon Changes in Capitalization, Dissolution, Merger, Asset Sale
or Change of Control.
 
          Changes in Capitalization. Subject to any required action by the
     stockholders of the Company, the number of shares of Common Stock covered
     by each outstanding Option and Right, and the number of shares of Common
     Stock which have been authorized for issuance under the Plan but as to
     which no Options or Rights have yet been granted or which have been
     returned to the Plan upon cancellation or expiration of an Option or Right,
     as well as the price per share of Common Stock covered by each such
     outstanding Option or Right, shall be proportionately adjusted for any
     increase or decrease in the number of issued shares of Common Stock
     resulting from a stock split, reverse stock split, stock dividend,
     combination or reclassification of the Common Stock, or any other increase
     or decrease in the number of issued shares of Common Stock effected without
     receipt of consideration by the Company; provided, however, that conversion
     of any convertible securities of the Company shall not be deemed to have
     been "effected without receipt of consideration." Such adjustment shall be
     made by the Administrator, whose determination in that respect shall be
     final, binding and conclusive.
<PAGE>   12
 
          Dissolution or Liquidation. In the event of the proposed dissolution
     or liquidation of the Company, to the extent that an Option or Right has
     not been previously exercised, it will terminate immediately prior to the
     consummation of such proposed action. The Administrator may, in the
     exercise of its sole discretion in such instances, declare that all Options
     and Rights shall terminate as of a date fixed by the Administrator and give
     each Optionee the right to exercise his or her Option or Right as to all or
     any part of the Optioned Stock, including Shares as to which the Option or
     Right would not otherwise be exercisable.
 
          Merger or Asset Sale. In the event of a merger of the Company with or
     into another corporation or the sale of substantially all of the assets of
     the Company, each outstanding Option and Right shall be assumed or an
     equivalent option or right substituted by the successor corporation or a
     Parent or Subsidiary of the successor corporation. However, the
     Administrator may, in lieu of such assumption or substitution, provide for
     the Optionee to have the right to exercise the Option or Right in full,
     including Shares as to which such Options or Rights would not otherwise be
     exercisable. If the Administrator makes an Option or Right fully
     exercisable in lieu of assumption or substitution in the event of a merger
     or sale of assets, the Administrator shall notify the Optionee that the
     Option or Right shall be fully exercisable for a period of time determined
     by the Administrator from the date of such notice, and the Option or Right
     will terminate upon the expiration of such period. For the purposes of this
     paragraph, the Option or Right shall be considered assumed if, immediately
     following the merger or sale of assets, the option or right confers the
     right to purchase, for each Share of Optioned Stock subject to the Option
     or Right immediately prior to the merger or sale of assets, the
     consideration (whether stock, cash, or other securities or property)
     received in the merger or sale of assets by holders of Common Stock for
     each Share held on the effective date of the transaction (and, if such
     holders were offered a choice of consideration, the type of consideration
     chosen by the holders of a majority of the outstanding Shares); provided,
     however, that if such consideration received in the merger or sale of
     assets was not solely common stock of the successor corporation or its
     Parent, the Administrator may, with the consent of the successor
     corporation and the participant, provide for the consideration to be
     received upon the exercise of the Option or Right, for each Share of
     Optioned Stock subject to the Option or Right, to be solely common stock of
     the successor corporation or its Parent equal in Fair Market Value to the
     per share consideration received by holders of Common Stock in the merger
     or sale of assets.
 
          Change in Control. In the event of a "Change in Control" of the
     Company, as defined in paragraph (e) below, unless otherwise determined by
     the Administrator prior to the occurrence of such Change in Control, any
     Options and Rights outstanding on the date such Change in Control is
     determined to have occurred that are not yet exercisable and vested on such
     date shall become fully exercisable and vested.
 
          Definition of "Change in Control". For purposes of this Section 12, a
     "Change in Control" means the happening of any of the following:
 
             When any "person", as such term is used in Sections 13(d) and 14(d)
        of the Exchange Act (other than the Company, a Subsidiary or a Company
        employee benefit plan, including any trustee of such plan acting as
        trustee) is or becomes the "beneficial owner" (as defined in Rule 13d-3
        promulgated under the Exchange Act), directly or indirectly, of
        securities of the Company representing fifty percent (50%) or more of
        the combined voting power of the Company's then outstanding securities;
        or
 
             The stockholders of the Company approve a merger or consolidation
        of the Company with any other corporation, other than a merger or
        consolidation which would result in the voting securities of the Company
        outstanding immediately prior thereto continuing to represent (either by
        remaining outstanding or by being converted into voting securities of
        the surviving entity) at least fifty percent (50%) of the total voting
        power represented by the voting securities of the Company or such
        surviving entity outstanding immediately after such merger or
        consolidation, or the stockholders of the Company approve an agreement
        for the sale or disposition by the Company of all or substantially all
        of the Company's assets; or
<PAGE>   13
 
             A change in the composition of the Board of Directors of the
        Company, as a result of which fewer than a majority of the directors in
        office are Incumbent Directors. "Incumbent Directors" shall mean
        directors who either (A) are directors of the Company as of the date the
        Plan is approved by the stockholders, or (B) are elected, or nominated
        for election, to the Board of Directors of the Company with the
        affirmative votes of at least a majority of the Incumbent Directors at
        the time of such election or nomination (but shall 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).
 
          No Other Adjustments. Except as expressly provided or authorized
     herein, no issuance by the Company of shares of stock of any class, or
     securities convertible into or exercisable for shares of stock of any
     class, shall affect, and no adjustment by reason thereof shall be made with
     respect to, the number or price of shares of Common Stock subject to an
     Option or Right.
 
     Stock Withholding to Satisfy Withholding Tax Obligations.
 
          Ability to Use Stock to Satisfy Withholding. At the discretion of the
     Administrator, Optionees may satisfy withholding obligations as provided in
     this Section 13. When an Optionee incurs tax liability in connection with
     the award, vesting or exercise of an Option or Right, which tax liability
     is subject to tax withholding under applicable tax laws (including federal,
     state and local laws), and the Optionee is obligated to pay the Company an
     amount required to be withheld under such applicable tax laws, the Optionee
     may satisfy the withholding tax obligation (up to an amount calculated by
     applying such Optionee's maximum marginal tax rate) by electing to have the
     Company withhold from the Shares to be issued upon award, vesting or
     exercise of the Option or Right that number of Shares, or by delivering to
     the Company that number of previously owned Shares, having a Fair Market
     Value equal to the amount required to be withheld. The Fair Market Value of
     the Shares to be withheld or delivered, as the case may be, shall be
     determined on the date that the amount of tax to be withheld is determined
     (the "Tax Date").
 
          Election to Have Stock Withheld.  All elections by an Optionee to have
     Shares withheld or to deliver previously owned Shares pursuant to this
     Section 13 shall be made in writing in a form acceptable to the
     Administrator and shall be subject to the following restrictions:
 
             the election must be made on or prior to the applicable Tax Date;
 
             all elections shall be subject to the consent or disapproval of the
        Administrator; and
 
             if the Optionee is an Insider, the election must comply with the
        applicable provisions of Rule 16b-3 and shall be subject to such
        additional conditions or restrictions as may be required thereunder to
        qualify for the maximum exemption from Section 16 of the Exchange Act
        with respect to Plan transactions.
 
          Section 83(b) Elections.  In the event that an election to have Shares
     withheld is made by an Optionee, no election is filed under Section 83(b)
     of the Code by such Optionee and the Tax Date is deferred under Section 83
     of the Code, the Optionee shall receive the full number of Shares with
     respect to which the Option or Right has been awarded, has vested or has
     been exercised, as the case may be, but such Optionee shall be
     unconditionally obligated to tender back to the Company the proper number
     of Shares on the Tax Date.
 
     Time of Granting Options and Rights.  The date of grant of an Option or
Right shall, for all purposes, be the date on which the Administrator makes the
determination granting such Option or Right or such future date as is specified
in the resolutions of the Administrator grating such Option or Right. Notice of
the determination shall be given to each Employee or Consultant to whom an
Option or Right is so granted within a reasonable time after the date of such
grant.
<PAGE>   14
 
     Amendment and Termination of the Plan.
 
          Amendment and Termination.  The Board may at any time amend, alter,
     suspend or terminate the Plan, but no amendment, alteration, suspension or
     termination shall be made which would impair the rights of any Optionee
     under any Option or Right theretofore granted without his or her consent.
 
          Stockholder Approval.  The Company shall obtain stockholder approval
     of any Plan amendment to the extent necessary and desirable to comply with
     Rule 16b-3 or with Section 422 of the Code (or any successor statute or
     rule or other applicable law, rule or regulation, including the
     requirements of any exchange or quotation system on which the Common Stock
     is listed or quoted). Such stockholder approval, if required, shall be
     obtained in such a manner and to such a degree as is required by the
     applicable law, rule or regulation.
 
          Effect of Amendment or Termination.  Any such amendment, alteration,
     suspension or termination of the Plan shall not adversely affect Options or
     Rights already granted and such Options and Rights shall remain in full
     force and effect as if this Plan had not been amended, altered, suspended
     or terminated, unless mutually agreed otherwise between the Optionee and
     the Administrator, which agreement must be in writing and signed by the
     Optionee and the Company.
 
     Conditions Upon Issuance of Shares.
 
          Legal Compliance.  Shares shall not be issued pursuant to the award,
     vesting or exercise of an Option or Right unless the award, vesting or
     exercise of such Option or Right, as the case may be, and the issuance and
     delivery of such Shares pursuant thereto shall comply with all relevant
     provisions of law, including, without limitation, the Securities Act of
     1933, as amended, the Exchange Act, the rules and regulations promulgated
     thereunder, applicable state securities 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.
 
          Investment Representation.  As a condition to the receipt of Shares
     upon the award, vesting or exercise of an Option or Right, the Company may
     require the person receiving such Shares to represent and warrant at the
     time of any such award, vesting or exercise that the Shares are being
     acquired 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 by any of the aforementioned relevant
     provisions of law.
 
          Regulatory 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.
 
          Grants Exceeding Allotted Shares.  If the Optioned Stock covered by an
     Option or Right exceeds, as of the date of grant, the number of Shares
     which may be issued under the Plan without additional stockholder approval,
     such Option or Right shall be void with respect to such excess Optioned
     Stock, unless stockholder approval of an amendment sufficiently increasing
     the number of Shares subject to the Plan is timely obtained in accordance
     with Section 15(b) of the Plan.
 
     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.
 
     Agreements. Options and Rights shall be evidenced by written agreements in
such form as the Administrator shall approve from time to time.
 
     Stockholder Approval. Continuance of the Plan shall be subject to approval
by the stockholders of the Company within twelve (12) months before or after the
date the Plan is adopted as provided in Section 6. Such stockholder approval
shall be obtained in the degree and manner required under applicable state and
federal law.
<PAGE>   15
 
     No Employment or Consulting Agreement. Neither the Plan nor any Option or
Right nor any agreement evidencing such awards nor the vesting thereof 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.
 
     21. Performance-Based Plan Limitation. The following limitations shall
apply to grants of Options to Employees:
 
          No Employee shall be granted, in any fiscal year of the Company,
     Options to purchase more than 500,000 Shares.
 
          In connection with his or her initial employment, an Employee may be
     granted Options to purchase up to an additional 500,000 Shares, which shall
     not count against the limit set forth in subsection (i) above.
 
          The foregoing limitations shall be adjusted proportionately in
     connection with any change in the Company's capitalization as described in
     Section 12.
 
          If an Option is canceled in the same fiscal year of the Company in
     which it was granted (other than in connection with a transaction described
     in Section 12), the canceled Option will be counted against the limit set
     forth in this Section 21. For this purpose, if the exercise price of an
     Option is reduced, the transaction will be treated as a cancellation of the
     Option and the grant of a new Option.