Polycom, Inc. 1996 Stock Incentive Plan (as amended through May 27, 2009)



 Exhibit 10.2 
  
 POLYCOM, INC. 1996 STOCK INCENTIVE PLAN 
  
 (AS AMENDED THROUGH MAY 27, 2009) 
  
 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: 
  
 (i) Employees, 
  
 (ii) non-employee members of the Board or the board of directors of any Parent or Subsidiary, and 
  
 (iii) 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 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 23,150,000 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. No more than ten percent (10%) of the maximum number of shares which may be issued under the Plan may be issued pursuant to the Stock Issuance
Program. 
  
 D. 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. 
  
 E. 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. 







 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. 

  
 (i) 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. 
  
 (ii) 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: 
  
 (iii) cash or
check made payable to the Corporation, 
  
 (iv)
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 
  
 (v) 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. 

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

  
 (1) 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. 
  
 (2) 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 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. 







 (3) 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. 
  
 (4) 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. 
  
 (ii)
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: 
  

(1) 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 
  
 (2) 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 

  
 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 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 

  
 A. 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 20, 2003, pursuant to which holders of options to purchase a maximum of 7,000,000 shares of the Corporation’s Common Stock with an exercise price per share of at
least ten percent (10%) higher than the closing price of a share of the Company’s Common Stock on the Nasdaq National Market on the trading day prior to the commencement of the exchange offer, shall be offered the opportunity to elect to
cancel such options (the “Cancelled Options”), in exchange for the grant of replacement options to purchase 0.80 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 (the “New Grant Date”). Each Replacement Option will have a term equal to the lesser of (i) the remaining term of the Cancelled Option, or (ii) five and one-half (51/2) 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, 








 
except that vesting will be suspended during the period between the cancellation date of the Cancelled Options and the New Grant Date. Further, optionholders
who receive Replacement Options will be prohibited from exercising those Replacement Options for an additional six months following the New Grant Date. 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. 
  
 B. Notwithstanding the foregoing and any other provision set forth in the Plan to the contrary, the Plan Administrator may, in its sole discretion,
institute a single option exchange program, as described in the proxy statement with respect to the Company’s 2009 Annual Meeting of Stockholders, under which outstanding options granted under the Plan may be surrendered or cancelled in
exchange for a lesser number of equity awards granted under the Company’s 2004 Equity Incentive Plan. 
  

	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. 
  
 (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. 

  
 (i) 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. 
  
 (ii) 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: 
  
 (1)
cash or check made payable to the Corporation, or 
  
 (2) past services rendered to the Corporation (or any Parent or Subsidiary). 
  

	 	B.	VESTING PROVISIONS. 

  
 (i) 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: 
  
 (1) the Service period to be completed by the Participant or the performance objectives to be attained, 
  
 (2) the number of installments in which the shares are to vest, 
  
 (3) the interval or intervals (if any) which are to lapse between installments, and 
  
 (4) 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. 
  
 (ii) 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. 
  
 (iii) 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. 







 (iv) 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. 
  
 (v) 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. 







 ARTICLE FOUR 
  
 AUTOMATIC OPTION GRANT PROGRAM 
  

	I.	OPTION TERMS 

  

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

  
 (i) On the date of each Annual Stockholders Meeting held on or after May 20, 2003, 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 25,000 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. 
  
 (ii) 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”). 
  
 (iii) 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. 

  
 (i) 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. 
  
 (ii) 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 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 20, 2003 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. 
  
 (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. 
  
 C. 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. 
  
 D. 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. 
  
 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 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. Notwithstanding the foregoing,
the approval of the holders of not less than a majority of the outstanding common stock of the Corporation entitled to vote shall be required to take the following actions: 
  
 (i) amend the Plan to materially modify the requirements for eligibility under the Plan; 
  
 (ii) amend the Plan to materially increase the number of
shares of Common Stock which may be issued over the term of the Plan; or 
  
 (iii) amend the Plan to materially increase the benefits accruing to participants under the Plan as such benefits are currently set forth in the Plan. 
  
 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. 
  
 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. 







 APPENDIX TO 1996 STOCK INCENTIVE PLAN 
  
 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. 







 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 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. 
  
 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.