Prepared by MERRILL CORPORATION




Exhibit 4.1  


 POLYCOM, INC. 1996 STOCK INCENTIVE PLAN

(AS AMENDED THROUGH MARCH 28, 2001)  


    The
following constitute the provisions of the 1996 Stock Incentive Plan (herein called the "Plan") of Polycom, Inc. (herein called the "Corporation"). 


ARTICLE ONE

GENERAL PROVISIONS  


	I.
	PURPOSE
OF THE PLAN 



    This
1996 Stock Incentive Plan is intended to promote the interests of Polycom, Inc., a Delaware corporation, by providing eligible persons with the opportunity to acquire a
proprietary interest, or otherwise increase their proprietary interest, in the Corporation as an incentive for them to remain in the service of the Corporation. 



    Capitalized
terms shall have the meanings assigned to such terms in the attached Appendix. 


	II.
	STRUCTURE
OF THE PLAN 



    A.  The
Plan shall be divided into three (3) separate equity programs: 



    (i)  the
Discretionary Option Grant Program under which eligible persons may, at the discretion of the Plan Administrator, be granted options to purchase shares of
Common Stock, 


    (ii) the
Stock Issuance Program under which eligible persons may, at the discretion of the Plan Administrator, be issued shares of Common Stock directly, either through
the immediate purchase of such shares or as a bonus for services rendered the Corporation (or any Parent or Subsidiary), and 


    (iii) the
Automatic Option Grant Program under which Eligible Directors shall automatically receive option grants at periodic intervals to purchase shares of Common
Stock. 




    B.  The
Discretionary Option Grant and Stock Issuance Programs became effective immediately upon the Plan Effective Date, and the Automatic Option Grant Program became
effective upon the Underwriting Date. 


    C.  The
provisions of Articles One and Five shall apply to all equity programs under the Plan and shall accordingly govern the interests of all persons under the Plan. 


	III.
	ADMINISTRATION
OF THE PLAN 



    A.  Prior
to the Section 12(g) Registration Date, the Discretionary Option Grant and Stock Issuance Programs were administered by the Board. Beginning with the
Section 12(g) Registration Date, the Primary Committee shall have sole and exclusive authority to administer the Discretionary Option Grant and Stock Issuance Programs with respect to
Section 16 Insiders. 


    B.  Administration
of the Discretionary Option Grant and Stock Issuance Programs with respect to all other persons eligible to participate in those programs may, at the
Board's discretion, be vested in the Primary Committee or a Secondary Committee, or the Board may retain the power to administer those programs with respect to all such persons. The members of the
Secondary Committee may be Board members who are also Employees. 


    C.  Members
of the Primary Committee or any Secondary Committee shall serve for such period of time as the Board may determine and may be removed by the Board at any
time. The Board may also at any time terminate the functions of any Secondary Committee and reassume all powers and authority previously delegated to such committee. 





 


    D.  Each Plan Administrator shall, within the scope of its administrative functions under the Plan, have full power and authority to establish such rules and
regulations as it may deem appropriate for proper administration of the Discretionary Option Grant and Stock Issuance Programs and to make such determinations under, and issue such interpretations of,
the provisions of such programs and any outstanding options or stock issuances thereunder as it may deem necessary or advisable. Decisions of the Plan Administrator within the scope of its
administrative functions under the Plan shall be final and binding on all parties who have an interest in the Discretionary Option Grant or Stock Issuance Program under its jurisdiction or any stock
option or stock issuance thereunder. 


    E.  Service
on the Primary Committee or the Secondary Committee shall constitute service as a Board member, and members of each such committee shall accordingly be
entitled to full indemnification and reimbursement as Board members for their service on such committee. No member of the Primary Committee or the Secondary Committee shall be liable for any act or
omission made in good faith with respect to the Plan or any option grants or stock issuances under the Plan. 


    F.  Administration
of the Automatic Option Grant Program shall be self-executing in accordance with the terms of that program, and no Plan Administrator
shall exercise any discretionary functions with respect to option grants made thereunder. 


	IV.
	ELIGIBILITY




    A.  The
persons eligible to participate in the Discretionary Option Grant and Stock Issuance Programs are as follows: 



    1.  Employees, 


    2.  non-employee
members of the Board or the board of directors of any Parent or Subsidiary, and 


    3.  consultants
and other independent advisors who provide services to the Corporation (or any Parent or Subsidiary). 




    B.  Each
Plan Administrator shall, within the scope of its administrative jurisdiction under the Plan, have full authority (subject to the provisions of the Plan) to
determine, (i) with respect to the option grants under the Discretionary Option Grant Program, which eligible persons are to receive option grants, the time or times when such option grants are
to be made, the number of shares to be covered by each such grant, the status of the granted option as either an Incentive Option or a Non-Statutory Option, the time or times at which each
option is to become exercisable, the vesting schedule (if any) applicable to the option shares and the maximum term for which the option is to remain outstanding and (ii) with respect to stock
issuances under the Stock Issuance Program, which eligible persons are to receive stock issuances, the time or times when such issuances are to be made, the number of shares to be issued to each
Participant, the vesting schedule (if any) applicable to the issued shares and the consideration to be paid for such shares. 



    C.  The
Plan Administrator shall have the absolute discretion either to grant options in accordance with the Discretionary Option Grant Program or to effect stock
issuances in accordance with the Stock Issuance Program. 


    D.  The
individuals eligible to participate in the Automatic Option Grant Program shall be limited to (i) those individuals serving as non-employee
Board members on the Underwriting Date, (ii) those individuals who first become non-employee Board members after the Underwriting Date, whether through appointment by the Board or
election by the Corporation's stockholders, and (iii) those individuals who continue to serve as non-employee Board members through one or more Annual Stockholders Meetings held
after the Underwriting Date. A non-employee Board member shall not be eligible to receive an initial option grant under the Automatic Option Grant Program on the Underwriting Date if such
individual has previously been in the employ of the Corporation (or any 


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Parent or Subsidiary) or has otherwise received a prior stock option grant from the Corporation. A non-employee Board member who first joins the Board after the Underwriting Date shall not
be eligible to receive an initial option grant under the Automatic Option Grant Program if such individual has previously been in the employ of the Corporation (or any Parent or Subsidiary).
Non-employee Board members who have previously been in the employ of the Corporation (or any Parent or Subsidiary) or who have previously received a stock option grant from the Corporation
shall, however, be eligible to receive one or more annual option grants under the Automatic Option Grant Program over their period of continued Board service. 


	V.
	STOCK
SUBJECT TO THE PLAN 



    A.  The
stock issuable under the Plan shall be shares of authorized but unissued or reacquired Common Stock, including shares repurchased by the Corporation on the open
market. The maximum number of shares of Common Stock which may be issued over the term of the Plan shall not exceed approximately 17,250,000 shares. 



    B.  No
one person participating in the Plan may receive options, separately exercisable stock appreciation rights and direct stock issuances for more than 600,000
shares of Common Stock in the aggregate per calendar year, beginning with the 1996 calendar year. 


    C.  Shares
of Common Stock subject to outstanding options shall be available for subsequent issuance under the Plan to the extent (i) the options (including any
options incorporated from the Predecessor Plan) expire or terminate for any reason prior to exercise in full or (ii) the options are canceled in accordance with the cancellation-regrant
provisions of Article Two. In addition, any unvested shares issued under the Plan and subsequently repurchased by the Corporation, at the option exercise or direct issue price paid per share, pursuant
to the Corporation's repurchase rights under the Plan shall be added back to the number of shares of Common Stock reserved for issuance under the Plan and shall accordingly be available for reissuance
through one or more subsequent option grants or direct stock issuances under the Plan. However, should the exercise price of an option under the Plan (including any option incorporated from the
Predecessor Plan) be paid with shares of Common Stock or should shares of Common Stock otherwise issuable under the Plan be withheld by the Corporation in satisfaction of the withholding taxes
incurred in connection with the exercise of an option or the vesting of a stock issuance under the Plan, then the number of shares of Common Stock available for issuance under the Plan shall be
reduced by the gross number of shares for which the option is exercised or which vest under the stock issuance, and not by the net number of shares of Common Stock issued to the holder of such option
or stock issuance. 


    D.  Should
any change be made to the Common Stock by reason of any stock split, stock dividend, recapitalization, combination of shares, exchange of shares or other
change affecting the outstanding Common Stock as a class without the Corporation's receipt of consideration, appropriate adjustments shall be made to (i) the maximum number and/or class of
securities issuable under the Plan, (ii) the maximum number and/or class of securities for which any one person may be granted options, separately exercisable stock appreciation rights and
direct stock issuances per calendar year, (iii) the number and/or class of securities for which automatic option grants are to be made subsequently per Eligible Director under the Automatic
Option Grant Program and (iv) the number and/or class of securities and the exercise price per share in effect under each outstanding option (including any option incorporated from the
Predecessor Plan) in order to prevent the dilution or enlargement of benefits thereunder. The adjustments determined by the Plan Administrator shall be final, binding and conclusive. 


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ARTICLE TWO

DISCRETIONARY OPTION GRANT PROGRAM  


	I.
	OPTION
TERMS 



    Each
option shall be evidenced by one or more documents in the form approved by the Plan Administrator; provided, however, that each such document shall comply with the terms
specified below. Each document evidencing an Incentive Option shall, in addition, be subject to the provisions of the Plan applicable to such options. 


    A.  EXERCISE
PRICE. 



	1.
	The
exercise price per share shall be fixed by the Plan Administrator but shall not be less than one hundred percent (100%) of the Fair Market Value per share of Common Stock on the
option grant date.



	2.
	The
exercise price shall become immediately due upon exercise of the option and shall, subject to the provisions of Section I of Article Five and the documents evidencing the
option, be payable in one or more of the forms specified below: 



    (i)  cash
or check made payable to the Corporation, 


    (ii) shares
of Common Stock held for the requisite period necessary to avoid a charge to the Corporation's earnings for financial reporting purposes and valued at Fair
Market Value on the Exercise Date, or 


    (iii) to
the extent the option is exercised for vested shares, through a special sale and remittance procedure pursuant to which the Optionee shall concurrently provide
irrevocable written instructions to (a) a Corporation-designated brokerage firm to effect the immediate sale of the purchased shares and remit to the Corporation, out of the sale proceeds
available on the settlement date, sufficient funds to cover the aggregate exercise price payable for the purchased shares plus all applicable Federal, state and local income and employment taxes
required to be withheld by the Corporation by reason of such exercise and (b) the Corporation to deliver the certificates for the purchased shares directly to such brokerage firm in order to
complete the sale transaction. 





    Except
to the extent such sale and remittance procedure is utilized, payment of the exercise price for the purchased shares must be made on the Exercise Date. 


    B.  EXERCISE
AND TERM OF OPTIONS. Each option shall be exercisable at such time or times, during such period and for such number of shares as shall be determined by the
Plan Administrator and set forth in the documents evidencing the option. However, no option shall have a term in excess of seven (7) years measured from the option grant date. 


    C.  EFFECT
OF TERMINATION OF SERVICE. 



    1.  The
following provisions shall govern the exercise of any options held by the Optionee at the time of cessation of Service or death: 



    (i)  Any
option outstanding at the time of the Optionee's cessation of Service for any reason shall remain exercisable for such period of time thereafter as shall be
determined by the Plan Administrator and set forth in the documents evidencing the option, but no such option shall be exercisable after the expiration of the option term. 


    (ii) Any
option exercisable in whole or in part by the Optionee at the time of death may be exercised subsequently by the personal representative of the Optionee's
estate or by the 




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person or persons to whom the option is transferred pursuant to the Optionee's will or in accordance with the laws of descent and distribution. 



    (iii) During
the applicable post-Service exercise period, the option may not be exercised in the aggregate for more than the number of vested shares for
which the option is exercisable on the date of the Optionee's cessation of Service. Upon the expiration of the applicable exercise period or (if earlier) upon the expiration of the option term, the
option shall terminate and cease to be outstanding for any vested shares for which the option has not been exercised. However, the option shall, immediately upon the Optionee's cessation of Service,
terminate and cease to be outstanding to the extent the option is not otherwise at that time exercisable for vested shares. 



    (iv) Should
the Optionee's Service be terminated for Misconduct, then all outstanding options held by the Optionee shall terminate immediately and cease to be
outstanding. 




    2.  The
Plan Administrator shall have the discretion, exercisable either at the time an option is granted or at any time while the option remains outstanding, to: 



    (i)  extend
the period of time for which the option is to remain exercisable following the Optionee's cessation of Service from the period otherwise in effect for that
option to such greater period of time as the Plan Administrator shall deem appropriate, but in no event beyond the expiration date of the option term, and/or 



    (ii) permit
the option to be exercised, during the applicable post-Service exercise period, not only with respect to the number of vested shares of Common
Stock for which such option is exercisable at the time of the Optionee's cessation of Service but also with respect to one or more additional installments in which the Optionee would have vested under
the option had the Optionee continued in Service. 





    D.  STOCKHOLDER
RIGHTS. The holder of an option shall have no stockholder rights with respect to the shares subject to the option until such person shall have exercised
the option, paid the exercise price and become a holder of record of the purchased shares. 


    E.  REPURCHASE
RIGHTS. The Plan Administrator shall have the discretion to grant options which are exercisable for unvested shares of Common Stock. Should the Optionee
cease Service while holding such unvested shares, the Corporation shall have the right to repurchase, at the exercise price paid per share, any or all of those unvested shares. The terms upon which
such repurchase right shall be exercisable (including the period and procedure for exercise and the appropriate vesting schedule for the purchased shares) shall be established by the Plan
Administrator and set forth in the document evidencing such repurchase right. 


    F.  LIMITED
TRANSFERABILITY OF OPTIONS. During the lifetime of the Optionee, Incentive Options shall be exercisable only by the Optionee and shall not be assignable or
transferable other than by will or by the laws of descent and distribution following the Optionee's death. However, Non-Statutory Options may, in connection with the Optionee's estate
plan, be assigned in whole or in part during the Optionee's lifetime to one or more members of the Optionee's immediate family or to a trust established exclusively for one or more such family
members; provided, however, that unless the Plan Administrator determines otherwise in a stock option agreement, Non-Statutory Options provided to Optionees employed by the Company's
European subsidiaries are not so transferable. The assigned portion may only be exercised by the person or persons who acquire a proprietary interest in the option pursuant to the assignment. The
terms applicable to the assigned portion shall be the same as those in effect for the option immediately prior to such assignment and shall be set forth in such documents issued to the assignee as the
Plan Administrator may deem appropriate. 


	II.
	INCENTIVE
OPTIONS 


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    The
terms specified below shall be applicable to all Incentive Options. Except as modified by the provisions of this Section II, all the provisions of Articles One, Two and
Five shall be applicable to Incentive Options. Options which are specifically designated as Non-Statutory Options when issued under the Plan shall NOT be subject to the terms of this
Section II. 


    A.  ELIGIBILITY.
Incentive Options may only be granted to Employees. 


    B.  DOLLAR
LIMITATION. The aggregate Fair Market Value of the shares of Common Stock (determined as of the respective date or dates of grant) for which one or more
options granted to any Employee under the Plan (or any other option plan of the Corporation or any Parent or Subsidiary) may for the first time become exercisable as Incentive Options during any one
(1) calendar year shall not exceed the sum of One Hundred Thousand Dollars ($100,000). To the extent the Employee holds two (2) or more such options which become exercisable for the
first time in the same calendar year, the foregoing limitation on the exercisability of such options as Incentive Options shall be applied on the basis of the order in which such options are granted. 


    C.  10%
STOCKHOLDER. If any Employee to whom an Incentive Option is granted is a 10% Stockholder, then the exercise price per share shall not be less than one hundred
ten percent (110%) of the Fair Market Value per share of Common Stock on the option grant date, and the option term shall not exceed five (5) years measured from the option grant date. 


	III.
	CORPORATE
TRANSACTION/CHANGE IN CONTROL 



    A.  In
the event of any Corporate Transaction, each outstanding option shall automatically accelerate so that each such option shall, immediately prior to the effective
date of the Corporate Transaction, become fully exercisable with respect to the total number of shares of Common Stock at the time subject to such option and may be exercised for any or all of those
shares as fully-vested shares of Common Stock. However, an outstanding option shall not so accelerate if and to the extent: (i) such option is, in connection with the Corporate Transaction, to
be assumed by the successor corporation (or parent thereof) or (ii) such option is to be replaced with a cash incentive program of the successor corporation which preserves the spread existing
on the unvested option shares at the time of the Corporate Transaction and provides for subsequent payout in accordance with the same vesting schedule applicable to such option. 


    B.  All
outstanding repurchase rights shall also terminate automatically, and the shares of Common Stock subject to those terminated rights shall immediately vest in
full, in the event of any Corporate
Transaction, except to the extent those repurchase rights are to be assigned to the successor corporation (or parent thereof) in connection with such Corporate Transaction. 



    C.  The
Plan Administrator shall have the discretion, exercisable either at the time the option is granted or at any time while the option remains outstanding, to
provide for the automatic acceleration of one or more outstanding options (and the automatic termination of one or more outstanding repurchase rights with the immediate vesting of the shares of Common
Stock subject to those rights) upon the occurrence of a Corporate Transaction, whether or not those options are to be assumed (or those repurchase rights are to be assigned) in the Corporate
Transaction. 


    D.  Immediately
following the consummation of the Corporate Transaction, all outstanding options shall terminate and cease to be outstanding, except to the extent
assumed by the successor corporation (or parent thereof). 


    E.  Each
option which is assumed in connection with a Corporate Transaction shall be appropriately adjusted, immediately after such Corporate Transaction, to apply to
the number and class of securities which would have been issuable to the Optionee in consummation of such Corporate Transaction had the option been exercised immediately prior to such Corporate
Transaction. Appropriate adjustments shall also be made to (i) the number and class of securities available for 


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issuance under the Plan following the consummation of such Corporate Transaction, (ii) the exercise price payable per share under each outstanding option, provided the aggregate exercise price
payable for such securities shall remain the same and (iii) the maximum number and/or class of securities for which any one person may be granted stock options, separately exercisable stock
appreciation rights and direct stock issuances under the Plan per calendar year. 


    F.  The
Plan Administrator shall have full power and authority to grant options under the Discretionary Option Grant Program which will automatically accelerate in
whole or in part should the Optionee's Service subsequently terminate by reason of an Involuntary Termination within a designated period (not to exceed twelve (12) months) following the
effective date of any Corporate Transaction in which those options are assumed or replaced and do not otherwise accelerate. Any options so accelerated shall remain exercisable for fully-vested shares
until the EARLIER of (i) the expiration of the option term or (ii) the expiration of the one (1)-year period measured from the effective date of the Involuntary Termination.
In addition, the Plan Administrator may provide that one or more of the Corporation's outstanding repurchase rights with respect to shares held by the Optionee at the time of such Involuntary
Termination shall immediately terminate in whole or in part, and the shares subject to those terminated rights shall accordingly vest. 


    G.  The
Plan Administrator shall have full power and authority to grant options under the Discretionary Option Grant Program which will automatically accelerate in
whole or in part should the Optionee's Service subsequently terminate by reason of an Involuntary Termination within a designated period (not to exceed twelve (12) months) following the
effective date of any Change in Control. Each option so accelerated shall remain exercisable for fully-vested shares until the EARLIER of (i) the expiration of the option term or
(ii) the expiration of the one (1)-year period measured from the effective date of the Involuntary Termination. In addition, the Plan Administrator may provide that one or more of
the Corporation's outstanding repurchase rights with respect to shares held by the Optionee at the time of such Involuntary Termination shall immediately terminate in whole or in part, and the shares
subject to those terminated rights shall accordingly vest. 


    H.  The
portion of any Incentive Option accelerated in connection with a Corporate Transaction or Change in Control shall remain exercisable as an Incentive Option only
to the extent the applicable One Hundred Thousand Dollar ($100,000) limitation is not exceeded. To the extent such dollar limitation is exceeded, the accelerated portion of such option shall be
exercisable as a Non-Statutory Option under the Federal tax laws. 


    I.  The
grant of options under the Discretionary Option Grant Program shall in no way affect the right of the Corporation to adjust, reclassify, reorganize or otherwise
change its capital or business structure or to merge, consolidate, dissolve, liquidate or sell or transfer all or any part of its business or assets. 


	IV.
	CANCELLATION
AND REGRANT OF OPTIONS 



    The
Plan Administrator shall have the authority to effect, at any time, and from time to time, with the consent of the affected option holders the cancellation of any or all
outstanding options under the Discretionary Option Grant Program (including outstanding options incorporated from the Predecessor Plan) and to grant in substitution new options covering the same or
different number of shares of Common Stock but with an exercise price per share based on the Fair Market Value per share of Common Stock on the new grant date. However, any repricing of stock options,
effected either by reducing the exercise price of outstanding options or canceling outstanding options and granting replacement options with a lower exercise price, shall require the approval of the
holders of a majority of the Corporation's voting shares, with the sole exception of that certain exchange offer to be commenced as soon as is reasonably practicable following May 17, 2001,
pursuant to which holders of options to purchase a maximum of 6,500,000 shares of the Corporation's Common Stock, shall be offered the opportunity to elect to cancel such options (the "Cancelled
Options"), in exchange for the 


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grant of replacement options to purchase 0.85 shares of the Corporation's Common Stock for each share under the Cancelled Options (the "Replacement Options"), with such Replacement Options to be
granted no less than six months and one day following the cancellation of the Cancelled Options, at a price equal to the fair market value of the Corporation's Common Stock on such date of grant. Each
Replacement Option will have a term equal to the lesser of (i) the remaining term of the Cancelled
Option, or (ii) seven (7) years. The vesting commencement date and vesting schedule for each Replacement Option will be the same as for the Cancelled Option which it replaces, subject to
adjustment for any shares previously exercised. Executive Officers and Directors of the Corporation shall not participate in this exchange offer, and this exchange offer will be structured so that the
Corporation avoids incurring financial accounting charges. 


	V.
	STOCK
APPRECIATION RIGHTS 



    A.  The
Plan Administrator shall have full power and authority to grant to selected Optionees tandem stock appreciation rights and/or limited stock appreciation rights. 


    B.  The
following terms shall govern the grant and exercise of tandem stock appreciation rights: 



    (i)  One
or more Optionees may be granted the right, exercisable upon such terms as the Plan Administrator may establish, to elect between the exercise of the
underlying option for shares of Common Stock and the surrender of that option in exchange for a distribution from the Corporation in an amount equal to the excess of (a) the Fair Market Value
(on the option surrender date) of the number of shares in which the Optionee is at the time vested under the surrendered option (or surrendered portion thereof) over (b) the aggregate exercise
price payable for such shares. 


    (ii) No
such option surrender shall be effective unless it is approved by the Plan Administrator. If the surrender is so approved, then the distribution to which the
Optionee shall be entitled may be made in shares of Common Stock valued at Fair Market Value on the option surrender date, in cash, or partly in shares and partly in cash, as the Plan Administrator
shall in its sole discretion deem appropriate. 


    (iii) If
the surrender of an option is rejected by the Plan Administrator, then the Optionee shall retain whatever rights the Optionee had under the surrendered option
(or surrendered portion thereof) on the option surrender date and may exercise such rights at any time prior to the LATER of (a) five (5) business days after the receipt of the rejection
notice or (b) the last day on which the option is otherwise exercisable in accordance with the terms of the documents evidencing such option, but in no event may such rights be exercised more
than ten (10) years after the option grant date. 




    C.  The
following terms shall govern the grant and exercise of limited stock appreciation rights: 



    (i)  One
or more Section 16 Insiders may be granted limited stock appreciation rights with respect to their outstanding options. 


    (ii) Upon
the occurrence of a Hostile Take-Over, each individual holding one or more options with such a limited stock appreciation right shall have the
unconditional right (exercisable for a thirty (30)-day period following such Hostile Take-Over) to surrender each such option to the Corporation, to the extent the option is at
the time exercisable for vested shares of Common Stock. In return for the surrendered option, the Optionee shall receive a cash distribution from the Corporation in an amount equal to the excess of
(A) the Take-Over Price of the shares of Common Stock which are at the time vested under each surrendered option (or surrendered portion thereof) over (B) the aggregate
exercise price payable for such shares. Such cash distribution shall be paid within five (5) days following the option surrender date. 



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    (iii) The Plan Administrator shall pre-approve, at the time the limited stock appreciation right is granted, the subsequent exercise of that right in
accordance with the terms of the grant and the provisions of this Section V.C. No additional approval of the Plan Administrator or the Board shall be required at the time of the actual option
surrender and cash distribution. 


    (iv) The
balance of the option (if any) shall continue in full force and effect in accordance with the documents evidencing such option. 



ARTICLE THREE

STOCK ISSUANCE PROGRAM  


	I.
	STOCK
ISSUANCE TERMS 



    Shares
of Common Stock may be issued under the Stock Issuance Program through direct and immediate issuances without any intervening option grants. Each such stock issuance shall be
evidenced by a Stock Issuance Agreement which complies with the terms specified below. 



    A.  PURCHASE
PRICE. 



    1.  The
purchase price per share shall be fixed by the Plan Administrator, but shall not be less than one hundred percent (100%) of the Fair Market Value per share of
Common Stock on the issuance date. 


    2.  Subject
to the provisions of Section I of Article Five, shares of Common Stock may be issued under the Stock Issuance Program for any of the following items
of consideration which the Plan Administrator may deem appropriate in each individual instance: 



    (i)  cash
or check made payable to the Corporation, or 


    (ii) past
services rendered to the Corporation (or any Parent or Subsidiary). 





    B.  VESTING
PROVISIONS. 



    1.  Shares
of Common Stock issued under the Stock Issuance Program may, in the discretion of the Plan Administrator, be fully and immediately vested upon issuance or
may vest in one or more installments over the Participant's period of Service or upon attainment of specified performance objectives. The elements of the vesting schedule applicable to any unvested
shares of Common Stock issued under the Stock Issuance Program, namely: 



    (i)  the
Service period to be completed by the Participant or the performance objectives to be attained, 


    (ii) the
number of installments in which the shares are to vest, 


    (iii) the
interval or intervals (if any) which are to lapse between installments, and 


    (iv) the
effect which death, Permanent Disability or other event designated by the Plan Administrator is to have upon the vesting schedule, shall be determined by the
Plan Administrator and incorporated into the Stock Issuance Agreement. 




    2.  Any
new, substituted or additional securities or other property including money paid other than as a regular cash dividend) which the Participant may have the right
to receive with respect to the Participant's unvested shares of Common Stock by reason of any stock dividend, stock split, recapitalization, combination of shares, exchange of shares or other change
affecting the outstanding Common Stock as a class without the Corporation's receipt of consideration shall be issued subject to
(i) the same vesting requirements applicable to the Participant's unvested shares of Common Stock and (ii) such escrow arrangements as the Plan Administrator shall deem appropriate. 



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    3.  The Participant shall have full stockholder rights with respect to any shares of Common Stock issued to the Participant under the Stock Issuance Program, whether or
not the Participant's interest in those shares is vested. Accordingly, the Participant shall have the right to vote such shares and to receive any regular cash dividends paid on such shares. 


    4.  Should
the Participant cease to remain in Service while holding one or more unvested shares of Common Stock issued under the Stock Issuance Program or should the
performance objectives not be attained with respect to one or more such unvested shares of Common Stock, then those shares shall be immediately surrendered to the Corporation for cancellation, and the
Participant shall have no further stockholder rights with respect to those shares. To the extent the surrendered shares were previously issued to the Participant for consideration paid in cash or cash
equivalent (including the Participant's purchase-money indebtedness), the Corporation shall repay to the Participant the cash consideration paid for the surrendered shares and shall cancel the unpaid
principal balance of any outstanding purchase-money note of the Participant attributable to the surrendered shares. 


    5.  The
Plan Administrator may in its discretion waive the surrender and cancellation of one or more unvested shares of Common Stock (or other assets attributable
thereto) which would otherwise occur upon the cessation of the Participant's Service or the non-attainment of the performance objectives applicable to those shares. Such waiver shall
result in the immediate vesting of the Participant's interest in the shares of Common Stock as to which the waiver applies. Such waiver may be effected at any time, whether before or after the
Participant's cessation of Service or the attainment or non-attainment of the applicable performance objectives. 



	II.
	CORPORATE
TRANSACTION/CHANGE IN CONTROL 



    A.  All
of the Corporation's outstanding repurchase/cancellation rights under the Stock Issuance Program shall terminate automatically, and all the shares of Common
Stock subject to those terminated rights shall immediately vest in full, in the event of any Corporate Transaction, except to the extent those repurchase/cancellation rights are to be assigned to the
successor corporation (or parent thereof) in connection with such Corporate Transaction. 


    B.  The
Plan Administrator shall have the discretionary authority, exercisable either at the time the unvested shares are issued or any time while the Corporation's
repurchase/cancellation rights remain outstanding under the Stock Issuance Program, to provide that those rights shall automatically
terminate in whole or in part, and the shares of Common Stock subject to those terminated rights shall immediately vest, in the event the Participant's Service should subsequently terminate by reason
of an Involuntary Termination within a designated period (not to exceed twelve (12) months) following the effective date of any Corporate Transaction in which those repurchase/cancellation
rights are assigned to the successor corporation (or parent thereof). 


    C.  The
Plan Administrator shall have the discretionary authority, exercisable either at the time the unvested shares are issued or any time while the Corporation's
repurchase/cancellation rights remain outstanding under the Stock Issuance Program, to provide that those rights shall automatically terminate in whole or in part, and the shares of Common Stock
subject to those terminated rights shall immediately vest, in the event the Participant's Service should subsequently terminate by reason of an Involuntary Termination within a designated period (not
to exceed twelve (12) months) following the effective date of any Change in Control. 


	III.
	SHARE
ESCROW/LEGENDS 



    Unvested
shares may, in the Plan Administrator's discretion, be held in escrow by the Corporation until the Participant's interest in such shares vests or may be issued directly to
the Participant with restrictive legends on the certificates evidencing those unvested shares. 


10





 
ARTICLE FOUR

AUTOMATIC OPTION GRANT PROGRAM  


	I.
	OPTION
TERMS 



    A.  GRANT
DATES. Option grants shall be made on the dates specified below: 



    1.  On
the date of each Annual Stockholders Meeting held after October 26, 1999, each non-employee member of the Board who is to continue to serve on
the Board (an "Eligible Director"), whether or not that Eligible Director is standing for re-election to the Board at that particular Annual Meeting, shall automatically be granted a
Non-Statutory Option to purchase an amount equal to 30,000 shares of
Common Stock. There shall be no limit on the number of such option grants any one Eligible Director may receive over his or her period of Board service, and Eligible Directors who have previously been
in the employ of the Corporation (or any Parent or Subsidiary) or who have otherwise received a stock option grant from the Corporation shall be eligible to receive such option grants over their
period of continued Board service. Each individual serving as a non-employee Board member shall, upon the date such individual joins the Board of Directors, be automatically granted on
such date a non-statutory option to purchase 30,000 shares if joining between January 27, 1999 and May 17, 2001 or 60,000 shares if joining on or after May 17, 2001 (a
"Primary Grant"), provided such individual (i) had not previously been in the employ of the Corporation (or any parent or Subsidiary) and (ii) had not otherwise received a prior stock
option grant from the Corporation. 


    2.  Each
Eligible Director on October 26, 1999 shall automatically be granted a Non-Statutory Option to purchase a number of shares of Common Stock
equal to (x) 30,000 minus (y) the number of shares of Common Stock Options granted to such individual since the prior Annual Stockholders Meeting and including the grant at such meeting
(the "Interim Option"). 


    3.  Each
individual serving as a non-employee Board member on the Underwriting Date and each Eligible Director elected to the Board prior to
January 26, 1999 was automatically granted, on such date, a Non-Statutory Option to purchase 40,000 shares of Common Stock (an "Initial Grant"), provided such individual
(i) had not previously been in the employ of the Corporation (or any Parent or Subsidiary) and (ii) had not otherwise received a prior stock option grant from the Corporation, except
that prior to the 1998 Annual Meeting such Initial grant was for 32,000 shares instead of 40,000. On every Annual Shareholder Meeting after the Underwriting Date but on or prior to January 26,
1999, each Eligible Director was granted a Non-Statutory Option for 10,000 shares of Common Stock, provided such individual was an Eligible Director for at least six (6) months,
except that prior to the 1998 Annual Meeting, such option was to purchase 8,000 shares, not 10,000. After January 26, 1999 and prior to October 26, 1999, Eligible Directors were granted
a Non-Statutory Option to purchase 7,500 shares of Common Stock on the date of each Annual Shareholders Meeting and grants of Non-Statutory Options to purchase 7,500 shares of
Common Stock on the next three (3) three (3) month anniversaries following each applicable Annual Shareholders Meeting. The automatic annual grant of 30,000 shares of Common Stock is
intended to replace these previous automatic quarterly grants. 




    B.  EXERCISE
PRICE. 



    1.  The
exercise price per share for any option grant under this Article Four shall be equal to one hundred percent (100%) of the Fair Market Value per share of Common
Stock on the option grant date. 


    2.  The
exercise price shall be payable in one or more of the alternative forms authorized under the Discretionary Option Grant Program. Except to the extent the sale
and remittance 



11





 


procedure specified thereunder is utilized, payment of the exercise price for the purchased shares must be made on the Exercise Date. 




    C.  OPTION
TERM. Each option granted on or after May 17, 2001 shall have a term of seven (7) years measured from the grant date. Each option granted
between October 26, 1999 and May 17, 2001 shall have a term of five (5) years measured from the grant date. The Interim Option shall have a term of five (5) years from the
date of the 1999 Annual Stockholders Meeting. Each option granted on or after January 26, 1999 and on or before October 26, 1999 shall have a term of two (2) years measured from
the option grant date. Each option granted prior to January 26, 1999 shall have a term of ten (10) years from its date of grant. 


    D.  EXERCISE
AND VESTING OF OPTIONS. Automatic option grants made on the date of each Annual Stockholders Meeting held on or after May 17, 2001 shall vest and
become exercisable in a series of four (4) successive equal annual installments over the Optionee's period of continued service as a Board member, with the first such installment to vest upon
the Optionee's completion of one (1) year of Board service measured from the option grant date. Automatic option grants made on the date of each Annual Stockholders Meeting held on or after
October 26, 1999 and prior to May 17, 2001 shall vest and become exercisable on the first anniversary of their grant date, provided the Optionee remains a Board member on such date. Each
Interim Option shall vest and become exercisable on the first anniversary of the 1999 Annual Shareholders Meeting, provided the Optionee remains a Board member on such date. Each option granted on or
after January 26, 1999 and on or before October 26, 1999 shall be fully vested and immediately exercisable on the option grant date for any or all of the option shares. Any shares
purchased under an option granted prior to January 26, 1999 shall be subject to repurchase by the Corporation, at the exercise price paid per share, upon the Optionee's cessation of Board
service prior to vesting in those shares. Each Initial Grant and each Primary Grant shall vest, and the Corporation's repurchase right shall lapse, in a series of four (4) successive equal
annual installments over the Optionee's period of continued service as a Board member, with the first such installment to vest upon the Optionee's completion of one (1) year of Board service
measured from the option grant date. With respect to annual share grants made prior to January 26, 1999, such options shall vest, and the Corporation's repurchase right shall lapse, in two
(2) successive equal annual installments over the Optionee's period of continued service as a Board member, with the first such installment to vest upon the Optionee's completion of one
(1) year of Board service measured from the option grant date. 


    E.  EFFECT
OF TERMINATION OF BOARD SERVICE. The following provisions shall govern the exercise of any options held by the Optionee at the time the Optionee ceases to
serve as a Board member: 




    (i)  The
Optionee (or, in the event of Optionee's death, the personal representative of the Optionee's estate or the person or persons to whom the option is transferred
pursuant to the Optionee's will or in accordance with the laws of descent and distribution) shall have a twelve (12)-month period following the date of such cessation of Board service in which to
exercise each such option; provided, however, in no event shall the option be exercised later than the option term provided in such option. 


    (ii) During
the twelve (12)-month exercise period, the option may not be exercised in the aggregate for more than the number of vested shares of Common Stock for which
the option is exercisable at the time of the Optionee's cessation of Board service. 


    (iii) Should
the Optionee cease to serve as a Board member by reason of death or Permanent Disability, then all shares at the time subject to the option shall
immediately vest so that such option may, during the twelve (12)-month exercise period following such cessation of Board service, be exercised for all or any portion of those shares as fully-vested
shares of Common Stock. 




12





 



    (iv) In no event shall the option remain exercisable after the expiration of the option term. Upon the expiration of the twelve (12)-month exercise period or (if
earlier) upon the expiration of the option term, the option shall terminate and cease to be outstanding for any vested shares for which the option has not been exercised. However, the option shall,
immediately upon the Optionee's cessation of Board service for any reason other than death or Permanent Disability, terminate and cease to be outstanding to the extent the option is not otherwise at
that time exercisable for vested shares. 




	II.
	CORPORATE
TRANSACTION/CHANGE IN CONTROL/HOSTILE TAKE-OVER 



    A.  In
the event of any Corporate Transaction, the shares of Common Stock at the time subject to each outstanding option but not otherwise vested shall automatically
vest in full so that each such option shall, immediately prior to the effective date of the Corporate Transaction, become fully exercisable for all of the shares of Common Stock at the time subject to
such option and may be exercised for all or any portion of those shares as fully-vested shares of Common Stock. Immediately following the consummation of the Corporate Transaction, each automatic
option grant shall terminate and cease to be outstanding, except to the extent assumed by the successor corporation (or parent thereof). 


    B.  In
connection with any Change in Control, the shares of Common Stock at the time subject to each outstanding option but not otherwise vested shall automatically
vest in full so that each such option shall, immediately prior to the effective date of the Change in Control, become fully exercisable for all of the shares of Common Stock at the time subject to
such option and may be exercised for all or any portion of those shares as fully-vested shares of Common Stock. Each such option shall remain exercisable for such fully-vested option shares until the
expiration or sooner termination of the option term or the surrender of the option in connection with a Hostile Take-Over. 


    C.  Upon
the occurrence of a Hostile Take-Over, the Optionee shall have a thirty (30)-day period in which to surrender to the Corporation each
automatic option held by him or her. The Optionee shall in return be entitled to a cash distribution from the Corporation in an amount equal to the excess of (i) the Take-Over Price
of the shares of Common Stock at the time subject to the surrendered option (whether or not the Optionee is otherwise at the time vested in those shares) over (ii) the aggregate exercise price
payable for such shares. Such cash distribution shall be paid within five (5) days following the surrender of the option to the Corporation. 


    D.  Each
option which is assumed in connection with a Corporate Transaction shall be appropriately adjusted, immediately after such Corporate Transaction, to apply to
the number and class of securities which would have been issuable to the Optionee in consummation of such Corporate Transaction had the option been exercised immediately prior to such Corporate
Transaction. Appropriate adjustments shall also be made to the exercise price payable per share under each outstanding option, provided the aggregate exercise price payable for such securities shall
remain the same. 


    E.  The
grant of options under the Automatic Option Grant Program shall in no way affect the right of the Corporation to adjust, reclassify, reorganize or otherwise
change its capital or business structure or to merge, consolidate, dissolve, liquidate or sell or transfer all or any part of its business or assets. 


	III.
	REMAINING
TERMS 



    The
remaining terms of each option granted under the Automatic Option Grant Program shall be the same as the terms in effect for option grants made under the Discretionary Option
Grant Program. 


13





 
ARTICLE FIVE

MISCELLANEOUS  


	I.
	FINANCING




    A.  The
Plan Administrator may permit any Optionee or Participant to pay the option exercise price under the Discretionary Option Grant Program or the purchase price of
shares issued under the Stock
Issuance Program by delivering a promissory note payable in one or more installments. The terms of any such promissory note (including the interest rate and the terms of repayment) shall be
established by the Plan Administrator in its sole discretion. Promissory notes may be authorized with or without security or collateral. In all events, the maximum credit available to the Optionee or
Participant may not exceed the sum of (i) the aggregate option exercise price or purchase price payable for the purchased shares plus (ii) any Federal, state and local income and
employment tax liability incurred by the Optionee or the Participant in connection with the option exercise or share purchase. 


    B.  The
Plan Administrator may, in its discretion, determine that one or more such promissory notes shall be subject to forgiveness by the Corporation in whole or in
part upon such terms as the Plan Administrator may deem appropriate. 


	II.
	TAX
WITHHOLDING 



    A.  The
Corporation's obligation to deliver shares of Common Stock upon the exercise of stock options or stock appreciation rights or upon the issuance or vesting of
such shares under the Plan shall be subject to the satisfaction of all applicable Federal, state and local income and employment tax withholding requirements. 


    B.  The
Plan Administrator may, in its discretion, provide any or all holders of Non-Statutory Options or unvested shares of Common Stock under the Plan
(other than the options granted or the shares issued under the Automatic Option Grant Program) with the right to use shares of Common Stock in satisfaction of all or part of the Taxes incurred by such
holders in connection with the exercise of their options or the vesting of their shares. Such right may be provided to any such holder in either or both of the following formats: 



    (i)  STOCK
WITHHOLDING: The election to have the Corporation withhold, from the shares of Common Stock otherwise issuable upon the exercise of such
Non-Statutory Option or the vesting of such shares, a portion of those shares with an aggregate Fair Market Value equal to the percentage of the Taxes (not to exceed one hundred percent
(100%)) designated by the holder. 


    (ii) STOCK
DELIVERY: The election to deliver to the Corporation, at the time the Non-Statutory Option is exercised or the shares vest, one or more shares of
Common Stock previously acquired by such holder (other than in connection with the option exercise or share vesting triggering the Taxes) with an aggregate Fair Market Value equal to the percentage of
the Taxes (not to exceed one hundred percent (100%)) designated by the holder. 



	III.
	EFFECTIVE
DATE AND TERM OF THE PLAN 





    A.  The
Plan became effective with respect to the Discretionary Option Grant and the Stock Issuance Programs immediately upon the Plan Effective Date. The Automatic
Option Grant Program under the Plan became effective on the Underwriting Date. Options may be granted under the Discretionary Option Grant Program at any time on or after the Plan Effective Date. In
addition, the initial option grants under the Automatic Option Grant Program were made on the Underwriting Date to each Eligible Director at that time. 


    B.  The
Plan shall serve as the successor to the Predecessor Plan, and no further option grants or direct stock issuances shall be made under the Predecessor Plan after
the Plan Effective Date. All 


14





 


options outstanding under the Predecessor Plan as of such date shall be incorporated into the Plan at that time and shall be treated as outstanding options under the Plan. 



    However,
each outstanding option so incorporated shall continue to be governed solely by the terms of the documents evidencing such option, and no provision of the Plan shall be
deemed to affect or otherwise modify the rights or obligations of the holders of such incorporated options with respect to their acquisition of shares of Common Stock. 


    C.  One
or more provisions of the Plan, including (without limitation) the option/vesting acceleration provisions of Article Two relating to Corporate Transactions and
Changes in Control, may, in the Plan Administrator's discretion, be extended to one or more options incorporated from the Predecessor Plan which do not otherwise contain such provisions. 



    D.  The
Plan shall terminate upon the earliest of (i) December 31, 2005, (ii) the date on which all shares available for issuance under the Plan
shall have been issued pursuant to the exercise of the options or the issuance of shares (whether vested or unvested) under the Plan or (iii) the termination of all outstanding options in
connection with a Corporate Transaction. Upon such Plan termination, all outstanding stock options and unvested stock issuances shall continue to have force and effect in accordance with the
provisions of the documents evidencing such options or issuances. 


	IV.
	AMENDMENT
OF THE PLAN 



    A.  The
Board shall have complete and exclusive power and authority to amend or modify the Plan in any or all respects. However, no such amendment or modification shall
adversely affect any rights and obligations with respect to options, stock appreciation rights or unvested stock issuances at the time outstanding under the Plan unless the Optionee or the Participant
consents to such amendment or
modification. In addition, certain amendments may require stockholder approval pursuant to applicable laws or regulations. 


    B.  Options
to purchase shares of Common Stock may be granted under the Discretionary Option Grant Program and shares of Common Stock may be issued under the Stock
Issuance Program that are in each instance in excess of the number of shares then available for issuance under the Plan, provided any excess shares actually issued under those programs are held in
escrow until there is obtained stockholder approval of an amendment sufficiently increasing the number of shares of Common Stock available for issuance under the Plan. If such stockholder approval is
not obtained within twelve (12) months after the date the first such excess grants or issuances are made, then (i) any unexercised options granted on the basis of such excess shares
shall terminate and cease to be outstanding and (ii) the Corporation shall promptly refund to the Optionees and the Participants the exercise or purchase price paid for any excess shares issued
under the Plan and held in escrow, together with interest (at the applicable Short-Term Federal Rate) for the period the shares were held in escrow, and such shares shall thereupon be
automatically canceled and cease to be outstanding. 


	V.
	USE
OF PROCEEDS 



    Any
cash proceeds received by the Corporation from the sale of shares of Common Stock under the Plan shall be used for general corporate purposes. 


	VI.
	REGULATORY
APPROVALS 



    A.  The
implementation of the Plan, the granting of any option or stock appreciation right under the Plan and the issuance of any shares of Common Stock (i) upon
the exercise of any option or stock appreciation right or (ii) under the Stock Issuance Program shall be subject to the Corporation's procurement of all approvals and permits required by
regulatory authorities having jurisdiction over the Plan, the options and stock appreciation rights granted under it and the shares of Common Stock issued pursuant to it. 


15





 


    B.  No shares of Common Stock or other assets shall be issued or delivered under the Plan unless and until there shall have been compliance with all applicable
requirements of Federal and state securities laws, including the filing and effectiveness of the Form S-8 registration statement for the shares of Common Stock issuable under the
Plan, and all applicable listing requirements of any stock exchange (or the Nasdaq National Market, if applicable) on which Common Stock is then listed for trading. 


	VII.
	NO
EMPLOYMENT/SERVICE RIGHTS 



    Nothing
in the Plan shall confer upon the Optionee or the Participant any right to continue in Service for any period of specific duration or interfere with or otherwise restrict in
any way the rights of the Corporation (or any Parent or Subsidiary employing or retaining such person) or of the Optionee or the Participant, which rights are hereby expressly reserved by each, to
terminate such person's Service at any time for any reason, with or without cause. 


16





 
APPENDIX  


    The following definitions shall be in effect under the Plan: 


    A.  AUTOMATIC
OPTION GRANT PROGRAM shall mean the automatic option grant program in effect under the Plan. 


    B.  BOARD
shall mean the Corporation's Board of Directors. 


    C.  CHANGE
IN CONTROL shall mean a change in ownership or control of the Corporation effected through either of the following transactions: 



    (i)  the
acquisition, directly or indirectly, by any person or related group of persons (other than the Corporation or a person that directly or indirectly controls, is
controlled by, or is under common control with, the Corporation), of beneficial ownership (within the meaning of Rule 13d-3 of the 1934 Act) of securities possessing more than fifty
percent (50%) of the total combined voting power of the Corporation's outstanding securities pursuant to a tender or exchange offer made directly to the Corporation's stockholders, or 


    (ii) a
change in the composition of the Board over a period of thirty-six (36) consecutive months or less such that a majority of the Board members
ceases, by reason of one or more contested elections for Board membership, to be comprised of individuals who either (A) have been Board members continuously since the beginning of such period
or (B) have been elected or nominated for election as
Board members during such period by at least a majority of the Board members described in clause (A) who were still in office at the time the Board approved such election or nomination. 




    D.  CODE
shall mean the Internal Revenue Code of 1986, as amended. 


    E.  COMMON
STOCK shall mean the Corporation's common stock. 


    F.  CORPORATE
TRANSACTION shall mean either of the following stockholder-approved transactions to which the Corporation is a party: 



    (i)  a
merger or consolidation in which securities possessing more than fifty percent (50%) of the total combined voting power of the Corporation's outstanding
securities are transferred to a person or persons different from the persons holding those securities immediately prior to such transaction; or 


    (ii) the
sale, transfer or other disposition of all or substantially all of the Corporation's assets in complete liquidation or dissolution of the Corporation. 




    G.  CORPORATION
shall mean Polycom, Inc., a Delaware corporation, and any corporate successor to all or substantially all of the assets or voting stock of
Polycom, Inc. which shall by appropriate action adopt the Plan. 


    H.  DISCRETIONARY
OPTION GRANT PROGRAM shall mean the discretionary option grant program in effect under the Plan. 


    I.  ELIGIBLE
DIRECTOR shall mean a non-employee Board member eligible to participate in the Automatic Option Grant Program in accordance with the
eligibility provisions of Article One. 


    J.  EMPLOYEE
shall mean an individual who is in the employ of the Corporation (or any Parent or Subsidiary), subject to the control and direction of the employer entity
as to both the work to be performed and the manner and method of performance. 


    K.  EXERCISE
DATE shall mean the date on which the Corporation shall have received written notice of the option exercise. 


17





 


    L.  FAIR MARKET VALUE per share of Common Stock on any relevant date shall be determined in accordance with the following provisions: 



    (i)  If
the Common Stock is at the time traded on the Nasdaq National Market, then the Fair Market Value shall be the closing selling price per share of Common Stock on
the date in question, as such price is reported by the National Association of Securities Dealers on the Nasdaq National Market or any successor system. If there is no closing selling price for the
Common Stock on the date in question, then the Fair Market Value shall be the closing selling price on the last preceding date for which such quotation exists. 


    (ii) If
the Common Stock is at the time listed on any Stock Exchange, then the Fair Market Value shall be the closing selling price per share of Common Stock on the
date in question on the Stock Exchange determined by the Plan Administrator to be the primary market for the Common Stock, as such price is officially quoted in the composite tape of transactions on
such exchange. If there is no closing selling price for the Common Stock on the date in question, then the Fair Market Value shall be the closing selling price on the last preceding date for which
such quotation exists. 


    (iii) For
purposes of any option grants made on the Underwriting Date, the Fair Market Value shall be deemed to be equal to the price per share at which the Common
Stock is to be sold in the initial public offering pursuant to the Underwriting Agreement. 


    (iv) For
purposes of any option grants made prior to the Underwriting Date, the Fair Market Value shall be determined by the Plan Administrator, taking into account
such factors as it deems appropriate. 




    M. HOSTILE
TAKE-OVER shall mean a change in ownership of the Corporation effected through the direct or indirect acquisition by any person or related group
of persons (other than the Corporation or a person that directly or indirectly controls, is controlled by, or is under common control with, the Corporation) of beneficial ownership (within the meaning
of Rule 13d-3 of the 1934 Act) of securities possessing more than fifty percent (50%) of the total combined voting power of the Corporation's outstanding securities pursuant to a
tender or exchange offer made directly to the Corporation's stockholders which the Board does not recommend such stockholders to accept. 



    N.  INCENTIVE
OPTION shall mean an option which satisfies the requirements of Code Section 422. 


    O.  INVOLUNTARY
TERMINATION shall mean the termination of the Service of any individual which occurs by reason of: 



    (i)  such
individual's involuntary dismissal or discharge by the Corporation for reasons other than Misconduct, or 


    (ii) such
individual's voluntary resignation following (A) a change in his or her position with the Corporation which materially reduces his or her level of
responsibility, (B) a reduction in his or her level of compensation (including base salary, fringe benefits and participation in corporate-performance based bonus or incentive programs) by more
than fifteen percent (15%) or (C) a relocation of such individual's place of employment by more than fifty (50) miles, provided and only if such change, reduction or relocation is
effected by the Corporation without the individual's consent. 




    P.  MISCONDUCT
shall mean the commission of any act of fraud, embezzlement or dishonesty by the Optionee or Participant, any unauthorized use or disclosure by such
person of confidential information or trade secrets of the Corporation (or any Parent or Subsidiary), or any other intentional misconduct by such person adversely affecting the business or affairs of
the Corporation (or any Parent or Subsidiary) in a material manner. The foregoing definition shall not be deemed to be inclusive of all 


18





 


the acts or omissions which the Corporation (or any Parent or Subsidiary) may consider as grounds for the dismissal or discharge of any Optionee, Participant or other person in the Service of the
Corporation (or any Parent or Subsidiary). 


    Q.  1934
ACT shall mean the Securities Exchange Act of 1934, as amended. 


    R.  NON-STATUTORY
OPTION shall mean an option not intended to satisfy the requirements of Code Section 422. 


    S.  OPTIONEE
shall mean any person to whom an option is granted under the Discretionary Option Grant or Automatic Option Grant Program. 


    T.  PARENT
shall mean any corporation (other than the Corporation) in an unbroken chain of corporations ending with the Corporation, provided each corporation in the
unbroken chain (other than the Corporation) owns, at the time of the determination, stock possessing fifty percent (50%) or more
of the total combined voting power of all classes of stock in one of the other corporations in such chain. 


    U.  PARTICIPANT
shall mean any person who is issued shares of Common Stock under the Stock Issuance Program. 


    V.  PERMANENT
DISABILITY OR PERMANENTLY DISABLED shall mean the inability of the Optionee or the Participant to engage in any substantial gainful activity by reason of
any medically determinable physical or mental impairment expected to result in death or to be of continuous duration of twelve (12) months or more. However, solely for the purposes of the
Automatic Option Grant Program, Permanent Disability or Permanently Disabled shall mean the inability of the non-employee Board member to perform his or her usual duties as a Board member
by reason of any medically determinable physical or mental impairment expected to result in death or to be of continuous duration of twelve (12) months or more. 


    W.  PLAN
shall mean the Corporation's 1996 Stock Incentive Plan, as set forth in this document. 


    X.  PLAN
ADMINISTRATOR shall mean the particular entity, whether the Board, the Primary Committee or the Secondary Committee, which is authorized to administer the
Discretionary Option Grant and Stock Issuance Programs with respect to one or more classes of eligible persons, to the extent such entity is carrying out its administrative functions under those
programs with respect to the persons under its jurisdiction. 


    Y.  PLAN
EFFECTIVE DATE shall mean March 5, 1996, the date on which the Plan was adopted by the Board. 


    Z.  PREDECESSOR
PLAN shall mean the Corporation's existing 1991 Stock Option Plan. 


    AA. PRIMARY
COMMITTEE shall mean the committee of two (2) or more non-employee Board members appointed by the Board to administer the Discretionary
Option Grant and Stock Issuance Programs with respect to Section 16 Insiders. 



    AB. SECONDARY
COMMITTEE shall mean a committee of at least one (1) Board member appointed by the Board to administer the Discretionary Option Grant and Stock
Issuance Programs with respect to eligible persons other than Section 16 Insiders. 


    AC. SECTION
12(g) REGISTRATION DATE shall mean the date on which the Common Stock was first registered under Section 12(g) of the 1934 Act. 


    AD. SECTION
16 INSIDER shall mean an officer or director of the Corporation subject to the short-swing profit liabilities of Section 16 of the 1934 Act. 


19





 


    AE. SERVICE shall mean the provision of services to the Corporation (or any Parent or Subsidiary) by a person in the capacity of an Employee, a non-employee
member of the board of directors or a consultant or independent advisor, except to the extent otherwise specifically provided in the documents evidencing the option grant or stock issuance. 


    AF. STOCK
EXCHANGE shall mean either the American Stock Exchange or the New York Stock Exchange. 


    AG. STOCK
ISSUANCE AGREEMENT shall mean the agreement entered into by the Corporation and the Participant at the time of issuance of shares of Common Stock under the
Stock Issuance Program. 


    AH. STOCK
ISSUANCE PROGRAM shall mean the stock issuance program in effect under the Plan. 


    AI. SUBSIDIARY
shall mean any corporation (other than the Corporation) in an unbroken chain of corporations beginning with the Corporation, provided each corporation
(other than the last corporation) in the unbroken chain owns, at the time of the determination, stock possessing fifty percent (50%) or more of the total combined voting power of all classes of stock
in one of the other corporations in such chain. 


    AJ. TAKE-OVER
PRICE shall mean the GREATER of (i) the Fair Market Value per share of Common Stock on the date the option is surrendered to the
Corporation in connection with a Hostile Take-Over or (ii) the highest reported price per share of Common Stock paid by the tender offeror in effecting such Hostile
Take-Over. However, if the surrendered option is an Incentive Option, the Take-Over Price shall not exceed the clause (i) price per share. 



    AK. TAXES
shall mean the Federal, state and local income and employment tax liabilities incurred by the holder of Non-Statutory Options or unvested shares
of Common Stock in connection with the exercise of those options or the vesting of those shares. 


    AL. 10%
STOCKHOLDER shall mean the owner of stock (as determined under Code Section 424(d)) possessing more than ten percent (10%) of the total combined voting
power of all classes of stock of the Corporation (or any Parent or Subsidiary). 


    AM. UNDERWRITING
AGREEMENT shall mean the agreement between the Corporation and the underwriter or underwriters managing the initial public offering of the Common
Stock. 


    AN. UNDERWRITING
DATE shall mean April 29, 1996, the date on which the Underwriting Agreement was executed and priced in connection with an initial public
offering of the Common Stock. 


20