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                                                                    EXHIBIT 10.7

                             SYNAPTICS INCORPORATED

                        2001 EMPLOYEE STOCK PURCHASE PLAN
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                             SYNAPTICS INCORPORATED

<TABLE>
<CAPTION>
                        2001 EMPLOYEE STOCK PURCHASE PLAN
<S>   <C>                                                                                     <C>
1.    Purpose................................................................................   1
2.    Definitions............................................................................   1
3.    Eligibility............................................................................   3
4.    Offering Periods.......................................................................   3
5.    Election to Participate................................................................   4
6.    Participant Contributions..............................................................   4
7.    Grant of Option........................................................................   5
8.    Exercise Price.........................................................................   6
9.    Exercise of Options....................................................................   6
10.   Delivery...............................................................................   6
11.   Withdrawal; Termination of Employment..................................................   7
12.   Stock..................................................................................   7
13.   Administration.........................................................................   8
14.   Designation of Beneficiary.............................................................   8
15.   Transferability........................................................................   8
16.   Participant Accounts...................................................................   8
17.   Adjustments Upon Changes in Capitalization; Corporate Transactions.....................   9
18.   Amendment of the Plan..................................................................   9
19.   Termination of the Plan................................................................  10
20.   Notices................................................................................  10
21.   Effective Date.........................................................................  10
22.   Conditions Upon Issuance of Shares.....................................................  10
23.   Expenses of the Plan...................................................................  10
24.   No Employment Rights...................................................................  11
25.   Applicable Law.........................................................................  11
26.   Additional Restrictions of Rule 16b-3..................................................  11
</TABLE>
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                             SYNAPTICS INCORPORATED

                        2001 EMPLOYEE STOCK PURCHASE PLAN

      1.    Purpose. The purpose of the Plan is to provide incentive for present
and future employees of the Company and any Designated Subsidiary to acquire a
proprietary interest (or increase an existing proprietary interest) in the
Company through the purchase of Common Stock. It is the Company's intention that
the Plan qualify as an "employee stock purchase plan" under Section 423 of the
Code. Accordingly, the provisions of the Plan shall be administered, interpreted
and construed in a manner consistent with the requirements of that section of
the Code.

      2.    Definitions.

            (a) "Applicable Percentage" means the percentage specified in
Section 8, subject to adjustment by the Committee as provided in Section 8.

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

            (c) "Code" means the Internal Revenue Code of 1986, as amended, and
any successor thereto.

            (d) "Committee" means the committee appointed by the Board to
administer the Plan as described in Section 13 of the Plan or, if no such
Committee is appointed, the Board.

            (e) "Common Stock" means the Company's common stock, par value $.001
per share.

            (f) "Company" means Synaptics Incorporated, a California
corporation.

            (g) "Compensation" means, with respect to each Participant for each
pay period, the full base salary and overtime paid to such Participant by the
Company or a Designated Subsidiary. Except as otherwise determined by the
Committee, "Compensation" does not include: (i) bonuses or commissions; (ii) any
amounts contributed by the Company or a Designated Subsidiary to any pension
plan; (iii) any automobile or relocation allowances (or reimbursement for any
such expenses); (iv) any amounts paid as a starting bonus or finder's fee; (v)
any amounts realized from the exercise of any stock options or incentive awards;
(vi) any amounts paid by the Company or a Designated Subsidiary for other fringe
benefits, such as health and welfare, hospitalization and group life insurance
benefits, or perquisites, or paid in lieu of such benefits, or; (vii) other
similar forms of extraordinary compensation.

            (h) "Continuous Status as an Employee" means the absence of any
interruption or termination of service as an Employee. Continuous Status as an
Employee shall not be considered interrupted in the case of a leave of absence
agreed to in writing by the Company or the Designated Subsidiary that employs
the Employee, provided that such leave is for a period of not more than 90 days
or reemployment upon the expiration of such leave is guaranteed by contract or
statute.
<PAGE>   4
            (i) "Designated Subsidiaries" means the Subsidiaries that have been
designated by the Board from time to time in its sole discretion as eligible to
participate in the Plan.

            (j) "Employee" means any person, including an Officer, whose
customary employment with the Company or one of its Designated Subsidiaries is
at least twenty (20) hours per week and more than five (5) months in any
calendar year.

            (k) "Entry Date" means the first day of each Exercise Period.

            (l) "Exchange Act" means the Securities Exchange Act of 1934, as
amended.

            (m) "Exercise Date" means the last Trading Day ending on or before
December 31, 2001, and the last Trading Day ending on or before each June 30 and
December 31 thereafter, except that if the first Offering Period proceeds as
scheduled without adjustment pursuant to Section 4 hereof, there shall be an
additional Exercise Date on the last Trading Day of the first Offering Period,
and there shall be no Exercise Date on the last trading day of December, 2003.

            (n) "Exercise Period" means, for any Offering Period, each period
commencing on the Offering Date and on the day after each Exercise Date, and
terminating on the immediately following Exercise Date.

            (o) "Exercise Price" means the price per share of Common Stock
offered in a given Offering Period determined as provided in Section 8.

            (p) "Fair Market Value" means, with respect to a share of Common
Stock, the Fair Market Value as determined under Section 7(b).

            (q) "First Offering Date" means the commencement date of the initial
public offering contemplated by the Registration Statement on Form S-1 filed by
the Company with the Securities and Exchange Commission.

            (r) "Offering Date" means the first Trading Day of each Offering
Period; provided, that in the case of an individual who becomes eligible to
become a Participant under Section 3 after the first Trading Day of an Offering
Period, the term "Offering Date" shall mean the first Trading Day of the
Exercise Period coinciding with or next succeeding the day on which that
individual becomes eligible to become a Participant. Options granted after the
first day of an Offering Period will be subject to the same terms as the options
granted on the first Trading Day of such Offering Period except that they will
have a different grant date (thus, potentially, a different exercise price) and,
because they expire at the same time as the options granted on the first Trading
Day of such Offering Period, a shorter term.

            (s) "Offering Period" means, subject to adjustment as provided in
Section 4, (i) with respect to the first Offering Period, the period beginning
on the First Offering Date and ending on November 30, 2003, (ii) with respect to
the second Offering Period, the period beginning December 1, 2003 and ending
December 31, 2005, and (iii) with respect to each Offering Period thereafter,
the period beginning on the January 1 immediately following the end of the
previous Offering Period and ending on the December 31 which is 24 months
thereafter.


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<PAGE>   5
            (t) "Officer" means a person who is an officer of the Company within
the meaning of Section 16 under the Exchange Act and the rules and regulations
promulgated thereunder.

            (u) "Participant" means an Employee who has elected to participate
in the Plan by filing an enrollment agreement with the Company as provided in
Section 5 of the Plan.

            (v) "Plan" shall mean this 2001 Employee Stock Purchase Plan.

            (w) "Plan Contributions" means, with respect to each Participant,
the after-tax payroll deductions withheld from the Compensation of the
Participant and contributed to the Plan for the Participant as provided in
Section 6 of the Plan and any other amounts contributed to the Plan for the
Participant in accordance with the terms of the Plan.

            (x) "Subsidiary" shall mean any corporation, domestic or foreign, of
which the Company owns, directly or indirectly, 50% or more of the total
combined voting power of all classes of stock, and that otherwise qualifies as a
"subsidiary corporation" within the meaning of Section 424(f) of the Code.

            (y) "Trading Day" shall mean a day on which the national stock
exchanges and the Nasdaq system are open for trading.

      3.    Eligibility.

            (a) Any Employee who has completed at least three (3) months of
employment with the Company or any Subsidiary and who is an Employee as of the
Offering Date of a given Offering Period shall be eligible to become a
Participant as of any Entry Date within that Offering Period under the Plan,
subject to the requirements of Section 5(a) and the limitations imposed by
Section 423(b) of the Code; provided, however, that any Employee who is an
Employee as of the First Offering Date shall be eligible to become a Participant
as of such First Offering Date.

            (b) Notwithstanding any provision of the Plan to the contrary, no
Participant shall be granted an option under the Plan (i) to the extent that if,
immediately after the grant, such Employee (or any other person whose stock
would be attributed to such Employee pursuant to Section 424(d) of the Code)
would own stock and/or hold outstanding options to purchase stock possessing 5%
or more of the total combined voting power or value of all classes of stock of
the Company or of any Subsidiary of the Company, or (ii) to the extent that his
or her rights to purchase stock under all employee stock purchase plans of the
Company and its Subsidiaries intended to qualify under Section 423 of the Code
to accrue at a rate which exceeds $25,000 of fair market value of stock
(determined at the time such option is granted) for each calendar year in which
such option is outstanding at any time.

      4.    Offering Periods. The Plan shall generally be implemented by a
series of Offering Periods. The first Offering Period shall commence on the
First Offering Date and end on November 30, 2003, the second Offering Period
shall commence on December 1, 2003 and end on December 31, 2005, and succeeding
Offering Periods shall commence on the January 1 immediately following the end
of the previous Offering Period and end on the December 31 which is 24 months
thereafter.


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<PAGE>   6
If, however, the Fair Market Value of a share of Common Stock on any Exercise
Date (except the final scheduled Exercise Date of any Offering Period) is lower
than the Fair Market Value of a share of Common Stock on the Offering Date, then
the Offering Period in progress shall end immediately following the close of
trading on such Exercise Date, and a new Offering Period shall begin on the next
subsequent January 1 or July 1, as applicable, and shall extend for a 24 month
period ending on December 31 or June 30, as applicable. Subsequent Offering
Periods shall commence on the January 1 or July 1, as applicable, immediately
following the end of the previous Offering Period and shall extend for a 24
month period ending on December 31 or June 30, as applicable. The Committee
shall have the power to make other changes to the duration and/or the frequency
of Offering Periods with respect to future offerings if such change is announced
at least five (5) days prior to the scheduled beginning of the first Offering
Period to be affected.

      5.    Election to Participate.

            (a) An eligible Employee may elect to participate in the Plan
commencing on any Entry Date by completing an enrollment agreement on the form
provided by the Company and filing the enrollment agreement with the Company on
or prior to such Entry Date, unless a later time for filing the enrollment
agreement is set by the Committee for all eligible Employees with respect to a
given offering. The enrollment agreement shall set forth the percentage of the
Participant's Compensation that is to be withheld by payroll deduction pursuant
to the Plan.

            (b) Except as otherwise determined by the Committee under rules
applicable to all Participants, payroll deductions for a Participant shall
commence on the first payroll following the Entry Date on which the Participant
elects to participate in accordance with Section 5(a) and shall end on the last
payroll in the Offering Period, unless sooner terminated by the Participant as
provided in Section 11.

            (c) Unless a Participant elects otherwise prior to the last Exercise
Date of an Offering Period, including the last Exercise Date prior to
termination in the case of an Offering Period terminated by operation of the
rule contained in Section 4 hereof, such Participant shall be deemed (i) to have
elected to participate in the immediately succeeding Offering Period (and, for
purposes of such Offering Period such Participant's "Entry Date" shall be deemed
to be the first day of such Offering Period) and (ii) to have authorized the
same payroll deduction for such immediately succeeding Offering Period as was in
effect for such Participant immediately prior to the commencement of such
succeeding Offering Period.

      6.    Participant Contributions.

            (a) Except as otherwise authorized by the Committee pursuant to
Section 6(d) below, all Participant contributions to the Plan shall be made only
by payroll deductions. At the time a Participant files the enrollment agreement
with respect to an Offering Period, the Participant may authorize payroll
deductions to be made on each payroll date during the portion of the Offering
Period that he or she is a Participant in an amount not less than 1% and not
more than 15% of the Participant's Compensation on each payroll date during the
portion of the Offering Period that he or she is a Participant (or subsequent
Offering Periods as provided in Section 5(c)). The amount of


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<PAGE>   7
payroll deductions shall be a whole percentage (i.e., 1%, 2%, 3%, etc.) of the
Participant's Compensation.

            (b) A Participant may discontinue his or her participation in the
Plan as provided in Section 11, or may decrease or increase the rate or amount
of his or her payroll deductions during such Offering Period (within the
limitations of Section 6(a) above) by completing and filing with the Company a
new enrollment agreement authorizing a change in the rate or amount of payroll
deductions; provided, that a Participant may not change the rate or amount of
his or her payroll deductions more than once in any Exercise Period. The change
in rate or amount shall be effective with the first full payroll period
following ten (10) business days after the Company's receipt of the new
enrollment agreement.

            (c) Notwithstanding the foregoing, to the extent necessary to comply
with Section 423(b)(8) of the Code and Section 3(b) hereof, a Participant's
payroll deductions may be decreased to 0% at such time during any Exercise
Period which is scheduled to end during the current calendar year that the
aggregate of all payroll deductions accumulated with respect to such Exercise
Period and any other Exercise Period ending within the same calendar year are
equal to the product of $25,000 multiplied by the Applicable Percentage for the
calendar year. Payroll deductions shall recommence at the rate provided in the
Participant's enrollment agreement at the beginning of the following Exercise
Period which is scheduled to end in the following calendar year, unless
terminated by the Participant as provided in Section 11.

            (d) Notwithstanding anything to the contrary in the foregoing, but
subject to the limitations set forth in Section 3(b), the Committee may permit
Participants to make after-tax contributions to the Plan at such times and
subject to such terms and conditions as the Committee may in its discretion
determine. All such additional contributions shall be made in a manner
consistent with the provisions of Section 423 of the Code or any successor
thereto, and shall be held in Participants' accounts and applied to the purchase
of shares of Common Stock pursuant to options granted under this Plan in the
same manner as payroll deductions contributed to the Plan as provided above.

            (e) All Plan Contributions made for a Participant shall be deposited
in the Company's general corporate account and shall be credited to the
Participant's account under the Plan. No interest shall accrue or be credited
with respect to a Participant's Plan Contributions. All Plan Contributions
received or held by the Company may be used by the Company for any corporate
purpose, and the Company shall not be obligated to segregate or otherwise set
apart such Plan Contributions from any other corporate funds.

      7.    Grant of Option.

            (a) On a Participant's Entry Date, subject to the limitations set
forth in Sections 3(b) and 12(a), the Participant shall be granted an option to
purchase on each subsequent Exercise Date during the Offering Period in which
such Entry Date occurs (at the Exercise Price determined as provided in Section
8 below) up to a number of shares of Common Stock determined by dividing such
Participant's Plan Contributions accumulated prior to such Exercise Date and
retained in the Participant's account as of such Exercise Date by the Exercise
Price; provided, that the maximum


                                       5
<PAGE>   8
number of shares an Employee may purchase during any Exercise Period shall be
One Thousand Five Hundred (1,500) shares. The Fair Market Value of a share of
Common Stock shall be determined as provided in Section 7(b).

            (b) The Fair Market Value of a share of Common Stock on a given date
shall be determined by the Committee in its discretion; provided, that if there
is a public market for the Common Stock, the Fair Market Value per share shall
be either (i) the closing price of the Common Stock on such date (or, in the
event that the Common Stock is not traded on such date, on the immediately
preceding trading date), as reported by the National Association of Securities
Dealers Automated Quotation (Nasdaq) National Market System, (ii) if such price
is not reported, the average of the bid and asked prices for the Common Stock on
such date (or, in the event that the Common Stock is not traded on such date, on
the immediately preceding trading date), as reported by Nasdaq, (iii) in the
event the Common Stock is listed on a stock exchange, the closing price of the
Common Stock on such exchange on such date (or, in the event that the Common
Stock is not traded on such date, on the immediately preceding trading date), as
reported in The Wall Street Journal, or (iv) if no such quotations are available
for a date within a reasonable time prior to the valuation date, the value of
the Common Stock as determined by the Committee using any reasonable means. For
purposes of the First Offering Date, the Fair Market Value of a share of Common
Stock shall be the Price to Public as set forth in the final prospectus filed by
the Company with the Securities and Exchange Commission pursuant to Rule 424
under the Securities Act of 1933, as amended.

      8.    Exercise Price. The Exercise Price per share of Common Stock offered
to each Participant in a given Offering Period shall be the lower of: (i) the
Applicable Percentage of the greater of (A) the Fair Market Value of a share of
Common Stock on the Offering Date or (B) the Fair Market Value of a share of
Common Stock on the Entry Date on which the Employee elects to become a
Participant within the Offering Period or (ii) the Applicable Percentage of the
Fair Market Value of a share of Common Stock on the Exercise Date. The
Applicable Percentage with respect to each Offering Period shall be 85%, unless
and until such Applicable Percentage is increased by the Committee, in its sole
discretion, provided that any such increase in the Applicable Percentage with
respect to a given Offering Period must be established not less than fifteen
(15) days prior to the Offering Date thereof.

      9.    Exercise of Options. Unless the Participant withdraws from the Plan
as provided in Section 11, the Participant's option for the purchase of shares
will be exercised automatically on each Exercise Date, and the maximum number of
full shares subject to such option shall be purchased for the Participant at the
applicable Exercise Price with the accumulated Plan Contributions then credited
the Participant's account under the Plan. During a Participant's lifetime, a
Participant's option to purchase shares hereunder is exercisable only by the
Participant.

      10.   Delivery. As promptly as practicable after each Exercise Date, the
Company shall arrange for the delivery to each Participant (or the Participant's
beneficiary), as appropriate, or to a custodial account for the benefit of each
Participant (or the Participant's beneficiary) as appropriate, of a certificate
representing the shares purchased upon exercise of such Participant's option.
Any amount remaining to the credit of a Participant's account after the purchase
of shares by such Participant on an Exercise Date, or which is insufficient to
purchase a full share of Common Stock,


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<PAGE>   9
shall be carried over to the next Exercise Period if the Participant continues
to participate in the Plan or, if the Participant does not continue to
participate, shall be returned to the Participant.

      11.   Withdrawal; Termination of Employment.

            (a) A Participant may withdraw from the Plan at any time by giving
written notice to the Company. All of the Plan Contributions credited to the
Participant's account and not yet invested in Common Stock will be paid to the
Participant as soon as administratively practicable after receipt of the
Participant's notice of withdrawal, the Participant's option to purchase shares
pursuant to the Plan automatically will be terminated, and no further payroll
deductions for the purchase of shares will be made for the Participant's
account. Payroll deductions will not resume on behalf of a Participant who has
withdrawn from the Plan (a "Former Participant") unless the Former Participant
enrolls in a subsequent Offering Period in accordance with Section 5(a).

            (b) Upon termination of the Participant's Continuous Status as an
Employee prior to any Exercise Date for any reason, including retirement or
death, the Plan Contributions credited to the Participant's account and not yet
invested in Common Stock will be returned to the Participant or, in the case of
death, to the Participant's beneficiary as determined pursuant to Section 14,
and the Participant's option to purchase shares under the Plan will
automatically terminate.

            (c) A Participant's withdrawal from an Offering Period will not have
any effect upon the Participant's eligibility to participate in succeeding
Offering Periods or in any similar plan which may hereafter be adopted by the
Company.

      12.   Stock.

            (a) Subject to adjustment as provided in Section 17, the maximum
number of shares of the Company's Common Stock that shall be made available for
sale under the Plan shall be One Million (1,0000,000) shares, plus an automatic
annual increase on the first day of each of the Company's fiscal years beginning
in 2002 and ending in 2011 equal to the lesser of (i) Five Hundred Thousand
(500,000) shares, (ii) 1% of all shares of Common Stock outstanding on the last
day of the immediately preceding fiscal year, or (iii) a lesser amount
determined by the Board. Shares of Common Stock subject to the Plan may be newly
issued shares or shares reacquired in private transactions or open market
purchases. If and to the extent that any right to purchase reserved shares shall
not be exercised by any Participant for any reason or if such right to purchase
shall terminate as provided herein, shares that have not been so purchased
hereunder shall again become available for the purpose of the Plan unless the
Plan shall have been terminated, but all shares sold under the Plan, regardless
of source, shall be counted against the limitation set forth above.

            (b) A Participant will have no interest or voting right in shares
covered by his option until such option has been exercised.

            (c) Shares to be delivered to a Participant under the Plan will be
registered in the name of the Participant or in the name of the Participant and
his or her spouse, as requested by the Participant.


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<PAGE>   10
      13.   Administration.

            (a) The Plan shall be administered by the Committee. The Committee
shall have the authority to interpret the Plan, to prescribe, amend and rescind
rules and regulations relating to the Plan, and to make all other determinations
necessary or advisable for the administration of the Plan. The administration,
interpretation, or application of the Plan by the Committee shall be final,
conclusive and binding upon all persons.

            (b) Notwithstanding the provisions of Subsection (a) of this Section
13, in the event that Rule 16b-3 promulgated under the Exchange Act or any
successor provision thereto ("Rule 16b-3") provides specific requirements for
the administrators of plans of this type, the Plan shall only be administered by
such body and in such a manner as shall comply with the applicable requirements
of Rule 16b-3. Unless permitted by Rule 16b-3, no discretion concerning
decisions regarding the Plan shall be afforded to any person that is not
"disinterested" as that term is used in Rule 16b-3.

      14.   Designation of Beneficiary.

            (a) A Participant may file a written designation of a beneficiary
who is to receive any shares and cash, if any, from the Participant's account
under the Plan in the event of the Participant's death subsequent to an Exercise
Date on which the Participant's option hereunder is exercised but prior to
delivery to the Participant of such shares and cash. In addition, a Participant
may file a written designation of a beneficiary who is to receive any cash from
the Participant's account under the Plan in the event of the Participant's death
prior to the exercise of the option.

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

      15.   Transferability. Neither Plan Contributions credited to a
Participant's account nor any rights to exercise any option or receive shares of
Common Stock under the Plan may be assigned, transferred, pledged or otherwise
disposed of in any way (other than by will or the laws of descent and
distribution, or as provided in Section 14). Any attempted assignment, transfer,
pledge or other distribution shall be without effect, except that the Company
may treat such act as an election to withdraw funds in accordance with Section
11.

      16.   Participant Accounts. Individual accounts will be maintained for
each Participant in the Plan to account for the balance of his Plan
Contributions and options issued and shares purchased under the Plan. Statements
of account will be given to Participants semi-annually in due course following
each Exercise Date, which statements will set forth the amounts of payroll
deductions, the per share purchase price, the number of shares purchased and the
remaining cash balance, if any.

      17.   Adjustments Upon Changes in Capitalization; Corporate Transactions.


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<PAGE>   11
            (a) If the outstanding shares of Common Stock are increased or
decreased, or are changed into or are exchanged for a different number or kind
of shares, as a result of one or more reorganizations, restructurings,
recapitalizations, reclassifications, stock splits, reverse stock splits, stock
dividends or the like, upon authorization of the Committee, appropriate
adjustments shall be made in the number and/or kind of shares, and the per-share
option price thereof, which may be issued in the aggregate and to any
Participant upon exercise of options granted under the Plan.

            (b) In the event of the proposed dissolution or liquidation of the
Company, the Offering Period will terminate immediately prior to the
consummation of such proposed action, unless otherwise provided by the
Committee. In the event of a proposed sale of all or substantially all of the
Company's assets, or the merger of the Company with or into another corporation
(each, a "Sale Transaction"), each option under the Plan shall be assumed or an
equivalent option shall be substituted by such successor corporation or a parent
or subsidiary of such successor corporation, unless the Committee determines, in
the exercise of its sole discretion and in lieu of such assumption or
substitution, to shorten the Exercise Period then in progress by setting a new
Exercise Date (the "New Exercise Date"). If the Committee shortens the Exercise
Period then in progress in lieu of assumption or substitution in the event of a
Sale Transaction, the Committee shall notify each Participant in writing, at
least ten (10) days prior to the New Exercise Date, that the exercise date for
such Participant's option has been changed to the New Exercise Date and that
such Participant's option will be exercised automatically on the New Exercise
Date, unless prior to such date the Participant has withdrawn from the Plan as
provided in Section 11. For purposes of this Section 17(b), an option granted
under the Plan shall be deemed to have been assumed if, following the Sale
Transaction, the option confers the right to purchase, for each share of option
stock subject to the option immediately prior to the Sale Transaction, the
consideration (whether stock, cash or other securities or property) received in
the Sale Transaction by holders of Common Stock for each share of Common Stock
held on the effective date of the Sale 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 of Common Stock); provided, that
if the consideration received in the Sale Transaction was not solely common
stock of the successor corporation or its parent (as defined in Section 424(e)
of the Code), the Committee may, with the consent of the successor corporation
and the Participant, provide for the consideration to be received upon exercise
of the option to be solely common stock of the successor corporation or its
parent equal in fair market value to the per share consideration received by the
holders of Common Stock in the Sale Transaction.

            (c) In all cases, the Committee shall have sole discretion to
exercise any of the powers and authority provided under this Section 17, and the
Committee's actions hereunder shall be final and binding on all Participants. No
fractional shares of stock shall be issued under the Plan pursuant to any
adjustment authorized under the provisions of this Section 17.

      18.   Amendment of the Plan. The Board or the Committee may at any time,
or from time to time, amend the Plan in any respect; provided, that (i) no such
amendment may make any change in any option theretofore granted which adversely
affects the rights of any Participant and (ii) the Plan may not be amended in
any way that will cause rights issued under the Plan to fail to meet the
requirements for employee stock purchase plans as defined in Section 423 of the
Code or any successor thereto. To the extent necessary to comply with Rule 16b-3
under the Exchange Act,


                                       9
<PAGE>   12
Section 423 of the Code, or any other applicable law or regulation), the Company
shall obtain shareholder approval of any such amendment.

      19.   Termination of the Plan.

      The Plan and all rights of Employees hereunder shall terminate on the
earliest of:

            (a) the Exercise Date that Participants become entitled to purchase
a number of shares greater than the number of reserved shares remaining
available for purchase under the Plan;

            (b) such date as is determined by the Board in its discretion; or

            (c) the last Exercise Date immediately preceding the tenth (10th)
anniversary of the Plan's effective date.

      In the event that the Plan terminates under circumstances described in
Section 19(a) above, reserved shares remaining as of the termination date shall
be sold to Participants on a pro rata basis.

      20.   Notices. All notices or other communications by a Participant to the
Company under or in connection with the Plan shall be deemed to have been duly
given when received in the form specified by the Company at the location, or by
the person, designated by the Company for the receipt thereof.

      21.   Effective Date. Subject to adoption of the Plan by the Board, the
Plan shall become effective on the First Offering Date. The Board shall submit
the Plan to the shareholders of the Company for approval within twelve months
after the date the Plan is adopted by the Board.

      22.   Conditions Upon Issuance of Shares.

            (a) The Plan, the grant and exercise of options to purchase shares
under the Plan, and the Company's obligation to sell and deliver shares upon the
exercise of options to purchase shares shall be subject to compliance with all
applicable federal, state and foreign laws, rules and regulations and the
requirements of any stock exchange on which the shares may then be listed.

            (b) The Company may make such provisions as it deems appropriate for
withholding by the Company pursuant to federal or state tax laws of such amounts
as the Company determines it is required to withhold in connection with the
purchase or sale by a Participant of any Common Stock acquired pursuant to the
Plan. The Company may require a Participant to satisfy any relevant tax
requirements before authorizing any issuance of Common Stock to such
Participant.

      23.   Expenses of the Plan. All costs and expenses incurred in
administering the Plan shall be paid by the Company, except that any stamp
duties or transfer taxes applicable to participation in the Plan may be charged
to the account of such Participant by the Company.

      24.   No Employment Rights. The Plan does not, directly or indirectly,
create any right for the benefit of any employee or class of employees to
purchase any shares under the Plan, or create in any employee or class of
employees any right with respect to continuation of employment by the


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Company, and it shall not be deemed to interfere in any way with the Company's
right to terminate, or otherwise modify, an employee's employment at any time.

      25.   Applicable Law. The laws of the State of California shall govern all
matter relating to this Plan except to the extent (if any) superseded by the
laws of the United States.

      26.   Additional Restrictions of Rule 16b-3. The terms and conditions of
options granted hereunder to, and the purchase of shares by, persons subject to
Section 16 of the Exchange Act shall comply with the applicable provisions of
Rule 16b-3. This Plan shall be deemed to contain, and such options shall
contain, and the shares issued upon exercise thereof shall be subject to, such
additional conditions and restrictions as may be required by Rule 16b-3 to
qualify for the maximum exemption from Section 16 of the Exchange Act with
respect to Plan transactions.


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