Document:

Exhibit 10.3

                        MICROCHIP TECHNOLOGY INCORPORATED
                       1997 NONSTATUTORY STOCK OPTION PLAN

                       AS AMENDED THROUGH AUGUST 18, 2000

                                    ARTICLE I

     1.1. PURPOSES OF THE PLAN. The purposes of this  Nonstatutory  Stock Option
Plan are:

          *    to attract and retain the best available  personnel for positions
               of substantial responsibility;

          *    to provide additional incentive to Employees and Consultants, and

          *    to promote the success of the Company's business.

          Options granted under the Plan will be Nonstatutory Stock Options.

     1.2. DEFINITIONS. As used herein, the following definitions shall apply:

          (a) "ADMINISTRATOR" means the Board or the Employee Committee as shall
     be administering the Plan, in accordance with Section 1.4 of the Plan.

          (b)  "APPLICABLE   LAWS"  means  the  requirements   relating  to  the
     administration  of stock option plans under U.S. state corporate laws, U.S.
     federal  and state  securities  laws,  the  Code,  any  stock  exchange  or
     quotation  system on which  the  Common  Stock is listed or quoted  and the
     applicable laws of any foreign  country or jurisdiction  where Options are,
     or will be, granted under the Plan.

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

          (d) "CODE" means the Internal Revenue Code of 1986, as amended.

          (e) COMMON STOCK" means the common stock,  par value $0.001 per share,
     of the Company.

          (f) "COMPANY"  means  Microchip  Technology  Incorporated,  a Delaware
     corporation.

          (g)  "CONSULTANT"  means any  person,  including  an  advisor  but not
     including  Directors,  engaged by the Company or a Parent or  Subsidiary to
     render services to such entity.

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

          (i)  "DISABILITY"  means total or permanent  disability  as defined in
     Code Section 22(e)(3).

          (j)  "EMPLOYEE"  means any person,  excluding  Officers and Directors,
     employed  by the  Company or any Parent or  Subsidiary  of the  Company.  A
     Service  Provider  shall not cease to be an Employee in the case of (i) any
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     leave  of  absence  approved  by the  Company  or  (ii)  transfers  between
     locations  of  the  Company  or  between  the  Company,   its  Parent,  any
     Subsidiary, or any successor.  Neither service as a Director nor payment of
     a  director's  fee  by  the  Company  shall  be  sufficient  to  constitute
     "employment" by the Company.

          (k) "EMPLOYEE  COMMITTEE" means a committee of Directors  appointed by
     the Board in accordance with Section 1.4 of the Plan.

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

          (m) "FAIR MARKET  VALUE"  means,  as of any date,  the value of Common
     Stock determined as follows:

               (i)    If the  Common  Stock is listed on any  established  stock
                      exchange or a national  market system,  including  without
                      limitation  the  Nasdaq  National  Market  or  The  Nasdaq
                      SmallCap  Market  of The  Nasdaq  Stock  Market,  its Fair
                      Market  Value  shall be the  closing  sales price for such
                      stock (or the closing  bid, if no sales were  reported) as
                      quoted on such  exchange or system for the market  trading
                      day on the  date of  determination  or the  closing  sales
                      price on the last market  trading day prior to the date of
                      determination  if there is no reported closing sales price
                      on the  date of  determination,  as  reported  in THE WALL
                      STREET  JOURNAL or such other source as the  Administrator
                      deems reliable;

               (ii)   If the Common  Stock is  regularly  quoted by a recognized
                      securities dealer but selling prices are not reported, the
                      Fair Market  Value of a Share of Common Stock shall be the
                      mean  between  the high bid and low asked  prices  for the
                      Common  Stock on the last market  trading day prior to the
                      day of  determination,  as  reported  in THE  WALL  STREET
                      JOURNAL or such other  source as the  Administrator  deems
                      reliable;

               (iii)  In the  absence  of an  established  market for the Common
                      Stock,  the Fair Market Value shall be  determined in good
                      faith by the Administrator.

          (n) "NOTICE OF GRANT" means a written or electronic  notice evidencing
     certain terms and conditions of an individual  Option grant.  The Notice of
     Grant is part of the Option Agreement.

          (o) "OFFICER"  means a person who is an officer of the Company  within
     the meaning of Section 16 of the Exchange Act and the rules and regulations
     promulgated  thereunder or who is otherwise  considered an "officer"  under
     applicable NASD or stock exchange rules.

          (p) "OPTION" means a nonstatutory stock option granted pursuant to the
     Plan,  that is not intended to qualify as an incentive  stock option within
     the meaning of Code Section 422 and the regulations promulgated thereunder.

          (q) "OPTION  AGREEMENT" means an agreement  between the Company and an
     Optionee evidencing the terms and conditions of an individual Option grant.
     The Option Agreement is subject to the terms and conditions of the Plan.

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          (r) "OPTIONED STOCK" means the Common Stock subject to an Option.

          (s) "OPTIONEE" means the holder of an outstanding Option granted under
     the Plan.

          (t)  "PARENT"  means  "parent  corporation,"  whether now or hereafter
     existing, as defined in Code Section 424(e).

          (u) "PLAN" means this 1997 Nonstatutory Stock Option Plan.

          (v) "SERVICE PROVIDER" means an Employee or Consultant.

          (w)  "SHARE"  means  a share  of the  Common  Stock,  as  adjusted  in
     accordance with Section 1.3(b), 2.2 and 2.3 of the Plan.

          (x)  "SUBSIDIARY"  means a  "subsidiary  corporation,"  whether now or
     hereafter existing, as defined in Code Section 424(f).

     1.3. STOCK SUBJECT TO THE PLAN.

          (a)  RESERVATION  OF  SHARES;   UNPURCHASED  SHARES.  Subject  to  the
     provisions  of  Sections  1.3(b),  2.2 and  2.3 of the  Plan,  the  maximum
     aggregate number of Shares which may be optioned and sold under the Plan is
     10,750,000  Shares.  The  Shares  may  be  authorized,   but  unissued,  or
     reacquired Common Stock including shares  repurchased by the Company on the
     open market.

          If an Option  expires or becomes  unexercisable  without  having  been
     exercised in full, the unpurchased  Shares which were subject thereto shall
     become  available  for future grant or sale under the Plan (unless the Plan
     has terminated).

          If  Shares  otherwise  issuable  under  the Plan are  withheld  by the
     Company in  satisfaction  of the  withholding  taxes incurred in connection
     with the  exercise  of an  outstanding  Option,  then the  number of Shares
     available  for issuance  shall be reduced by the gross number of Shares for
     which the Option is exercised, and not by the net number of Shares actually
     issued to the Optionee.

          (b) ADJUSTMENTS FOR ORGANIC CHANGES.  Should any change be made to the
     Common Stock  issuable  under the Plan 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
     Company's receipt of consideration,  then appropriate  adjustments shall be
     made to (i) the maximum  number and/or class of securities  issuable  under
     the Plan,  and (ii) the number  and/or  class of  securities  and price per
     share in  effect  under  each  Option  outstanding  under  the  Plan.  Such
     adjustments to the outstanding Options are to be effected in a manner which
     shall  preclude the  enlargement  or dilution of rights and benefits  under
     such  Options.  The  adjustments  determined  by the Board  shall be final,
     binding and conclusive.

     1.4. ADMINISTRATION OF THE PLAN.

          (a)  ADMINISTRATION OF THE PLAN. The Plan shall be administered by the
     Board.  The  Board,  however,  may at any time  appoint  a  committee  (the
     "Employee  Committee")  of one or more persons who are members of the Board

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     and delegate to such Employee  Committee the power, in whole or in part, to
     administer the Plan.  Unless  otherwise  required by law,  decisions  among
     members of an Administrator shall be by majority vote.

          (b) TERM ON COMMITTEE.  Members of the Employee  Committee shall serve
     for such period of time as the Board may  determine and shall be subject to
     removal by the Board at any time.  The Board at any time may  terminate the
     functions of the Employee  Committee  and reassume all powers and authority
     previously delegated to the Employee Committee.

          (c)  POWERS OF THE  ADMINISTRATOR.  Subject to the  provisions  of the
     Plan, the Administrator shall have the authority, in its discretion:

               (i)    to determine the Fair Market Value of the Common Stock;

               (ii)   to select the  Service  Providers  to whom  Options may be
                      granted hereunder;

               (iii)  to  determine  whether  and to  what  extent  Options  are
                      granted hereunder;

               (iv)   to  determine  the number of shares of Common  Stock to be
                      covered by each Option granted hereunder;

               (v)    to approve forms of agreement for use under the Plan;

               (vi)   to determine the terms and  conditions,  not  inconsistent
                      with  the  terms  of  the  Plan,   of  any  award  granted
                      hereunder.  Such terms and conditions include, but are not
                      limited  to, the  exercise  price,  the time or times when
                      Options   may  be   exercised   (which  may  be  based  on
                      performance criteria),  any vesting acceleration or waiver
                      of  forfeiture   restrictions,   and  any  restriction  or
                      limitation  regarding  any  Option or the shares of Common
                      Stock relating thereto, based in each case on such factors
                      as  the  Administrator,  in  its  sole  discretion,  shall
                      determine;

               (vii)  to reduce  the  exercise  price of any  Option to the then
                      current  Fair Market Value if the Fair Market Value of the
                      Common Stock  covered by such Option  shall have  declined
                      since the date the Option was granted;

               (viii) to construe and interpret the terms of the Plan and awards
                      granted pursuant to the Plan;

               (ix)   to  prescribe,  amend and  rescind  rules and  regulations
                      relating  to the Plan,  including  rules  and  regulations
                      relating  to  sub-plans  established  for the  purpose  of
                      qualifying  for preferred tax treatment  under foreign tax
                      laws;

               (x)    to modify or amend each Option  (subject to Section 3.1(b)
                      of the Plan),  including  the  discretionary  authority to
                      extend  the  post-termination   exercisability  period  of
                      Options longer than is otherwise  provided for in the Plan
                      as provided in Section 2.1(g);

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               (xi)   to  authorize  any  person  to  execute  on  behalf of the
                      Company any instrument  required to effect the grant of an
                      Option or previously granted by the Administrator;

               (xii)  to  determine  the terms and  restrictions  applicable  to
                      Options;

               (xiii) to allow Optionees to satisfy  withholding tax obligations
                      as provided in Section 3.2; and

               (xiv)  to make  all  other  determinations  deemed  necessary  or
                      advisable for administering the Plan.

          (d) EFFECT OF ADMINISTRATOR'S DECISION. The Administrator's decisions,
     determinations  and  interpretations  shall be  final  and  binding  on all
     Optionees and any other holders of Options.

          (e)   INDEMNIFICATION.   In   addition   to  such   other   rights  of
     indemnification as they may have, the members of each  Administrator  shall
     be  indemnified  and held  harmless by the Company to the extent  permitted
     under  applicable  law,  for,  from and  against  all  costs  and  expenses
     reasonably incurred by them in connection with any action, legal proceeding
     to which any such  member  thereof  may be party,  by reason of any  action
     taken or failed to be taken,  under or in  connection  with the Plan or any
     rights  granted  thereunder,  and  against  all  amounts  paid  by  them in
     settlement  thereof or paid by them in  satisfaction  of a judgment  of any
     such action, suit or proceeding,  except a judgment based upon a finding of
     bad faith.

     1.5.  ELIGIBLE  PERSONS UNDER THE PLAN. The persons eligible to participate
in the Plan are Employees and Consultants.

                                   ARTICLE II
                                  OPTION GRANTS

     2.1. TERMS AND CONDITIONS OF OPTIONS.

          (a) GENERAL.  Options granted to eligible persons pursuant to the Plan
     shall be authorized  by action of the  Administrator.  Each granted  Option
     shall be evidenced by one or more  instruments  in the form approved by the
     Administrator;  provided,  however,  that each such instrument shall comply
     with the terms and conditions specified below.

          (b) OPTION  PRICE.  The Option  price per Share  shall be fixed by the
     Administrator and shall in no event be less than one hundred percent (100%)
     of the Fair Market Value of such Common Stock on the grant date.

          (c) PAYMENT OF OPTION PRICE. The Option price shall become immediately
     due  upon  exercise  of the  Option  and  shall  be  payable  in one of the
     following alternative forms specified below:

               (i)    full  payment  in cash or  check  drawn  to the  Company's
                      order;

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               (ii)   full payment through a  broker-dealer  sale and remittance
                      procedure pursuant to which the Optionee (A) shall provide
                      irrevocable written instructions to a designated brokerage
                      firm to effect the immediate sale of the purchased  Shares
                      and  remit  to  the  Company,  out of  the  sale  proceeds
                      available  on the  settlement  date,  sufficient  funds to
                      cover the aggregate Option price payable for the purchased
                      Shares plus all  applicable  Federal and State  income and
                      employment taxes required to be withheld by the Company in
                      connection  with  such  purchase  and  (B)  shall  provide
                      written   directives   to  the   Company  to  deliver  the
                      certificates  for the  purchased  Shares  directly to such
                      brokerage firm in order to complete the sale transaction.

                      For  purposes  of  this  Section 2.1(c), the Exercise Date
                      shall  be  the  date on which written notice of the Option
                      exercise is delivered to the Company. Except to the extent
                      the   sale  and   remittance   procedure  is  utilized  in
                      connection with the exercise of the Option, payment of the
                      Option price for the purchased Shares must accompany such
                      notice.

          (d) TERM AND EXERCISE OF OPTIONS.  Each Option  granted under the Plan
     shall be  exercisable  at any time or times and  during  such  period as is
     determined by the Administrator and set forth in the instrument  evidencing
     the grant. No such Option,  however, shall have a maximum term in excess of
     ten (10) years from the grant date.  During the  lifetime of the  Optionee,
     the  Option  shall be  exercisable  only by the  Optionee  and shall not be
     assignable  or  transferable  by the Optionee  other than by will or by the
     laws of descent and distribution following the Optionee's death.

          (e) TERMINATION OF SERVICE.  The following provisions shall govern the
     exercise period applicable to any outstanding  Options held by the Optionee
     at the time of cessation of Service or death:

               (i)    Should an Optionee cease Service for any reason (including
                      Disability  but not including  death) while holding one or
                      more  outstanding  Options  under the  Plan,  then none of
                      those  Options  shall  (except  to  the  extent  otherwise
                      provided   pursuant  to  Section   2.1(f)   below)  remain
                      exercisable  for more than a ninety  (90) day  period  (or
                      such   shorter  or  longer   period   determined   by  the
                      Administrator  and set forth in the instrument  evidencing
                      the grant,  but not to exceed twelve (12) months) measured
                      from the date of such cessation of Service.

               (ii)   Any  Option  held  by the  Optionee  under  the  Plan  and
                      exercisable  in  whole  or in  part  on the  date  of said
                      Optionee's  death  may be  subsequently  exercised  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.  Such exercise, however,
                      must occur  prior to the  earlier of six months  following
                      the date of Optionee's  death or the specified  expiration
                      date  of the  Option  term.  Upon  the  occurrence  of the
                      earlier event,  the Option shall terminate and cease to be
                      outstanding.

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               (iii)  Under no circumstances,  however, shall any such Option be
                      exercisable  after the  specified  expiration  date on the
                      Option term.

               (iv)   During the applicable  post-Service  exercise period,  the
                      Option shall not be  exercisable  for more than the number
                      of shares (if any) in which the  Optionee is vested at the
                      time of  Optionee's  cessation of Service (less any Option
                      Shares  subsequently  purchased by the  Optionee  prior to
                      death).  Upon the  expiration of the limited  post-Service
                      exercise   period  or  (if  earlier)  upon  the  specified
                      expiration date of the Option term, each such Option shall
                      terminate and cease to be outstanding  with respect to any
                      vested shares for which the Option has not otherwise  been
                      exercised.   However,   each   outstanding   Option  shall
                      immediately terminate and cease to be outstanding,  at the
                      time of the Optionee's cessation of Service,  with respect
                      to any  shares for which the  Option is not  otherwise  at
                      that  time  exercisable  or in which the  Optionee  is not
                      otherwise at that time vested.

               (v)    Should  (A)  the  Optionee's  service  be  terminated  for
                      misconduct  (including,  but not  limited  to,  any act of
                      dishonesty,  willful misconduct, fraud or embezzlement) or
                      (B) the Optionee make any  unauthorized  use or disclosure
                      of  confidential  information  or  trade  secrets  of  the
                      Company  or any  Parent  or  Subsidiary,  then in any such
                      event all  outstanding  Options held by the Optionee under
                      the  Plan  shall  terminate  immediately  and  cease to be
                      outstanding.

          (f) DISCRETION TO ACCELERATE  VESTING.  The  Administrator  shall have
     complete  discretion,  exercisable either at the time the Option is granted
     or at any time while the Option remains outstanding,  to permit one or more
     Options held by the Optionee  under this Plan to be  exercised,  during the
     limited post-Service exercise period applicable under Section 2.1(e) above,
     not only with  respect to the number of vested  shares of Common  Stock for
     which  each  such  Option  is  exercisable  at the  time of the  Optionee's
     cessation  of  Service  but also  with  respect  to one or more  subsequent
     installments  of vested  shares for which the Option would  otherwise  have
     become exercisable had such cessation of Service not occurred.

          (g) DISCRETION TO EXTEND EXERCISE PERIOD. The Administrator shall also
     have full  power and  authority  to extend the period of time for which the
     Option is to remain  exercisable  following  the  Optionee's  cessation  of
     Service or death from the limited  period in effect  under  Section  2.1(e)
     above  to such  greater  period  of time as the  Administrator  shall  deem
     appropriate.  In no event, however,  shall such Option be exercisable after
     the specified expiration date of the Option term.

          (h)  DEFINITIONS.  For purposes of the  foregoing  provisions  of this
     Section 2.1 and for all other purposes under the Plan:

               (i)    The  Optionee  shall  (except  to  the  extent   otherwise
                      specifically  provided in the applicable Option Agreement)
                      be  deemed  to  remain  in  SERVICE  for so  long  as such
                      individual  renders  services  on a periodic  basis to the
                      Company (or any Parent or  Subsidiary)  in the capacity of
                      an Employee or a Consultant.

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               (ii)   The Optionee  shall be considered to be an Employee for so
                      long as  Optionee  remains in the employ of the Company or
                      one or more Parent or Subsidiary corporations,  subject to
                      the control and direction of the employer  entity not only
                      as to the work to be  performed  but also as to the manner
                      and method of performance.

          (i) STOCKHOLDER  RIGHTS. An Optionee shall have no stockholder  rights
     with  respect to any Shares  covered  by the Option  until such  individual
     shall have exercised the Option and paid the Option price for the purchased
     Shares.

     2.2. CORPORATE TRANSACTIONS.

          (a)  DEFINITION.  For  purposes  of this  Plan,  any of the  following
     stockholder approved  transactions to which the Company is a party shall be
     considered a "Corporate Transaction":

               (i)    a merger or  consolidation in which the Company is not the
                      surviving  entity,  except for a transaction the principal
                      purpose  of  which is to  change  the  State in which  the
                      Company is incorporated,

               (ii)   the  sale,   transfer  or  other  disposition  of  all  or
                      substantially all of the assets of the Company in complete
                      liquidation or dissolution of the Company, or

               (iii)  any reverse  merger in which the Company is the  surviving
                      entity but in which securities  possessing more than fifty
                      percent  (50%) of the total  combined  voting power of the
                      Company's outstanding securities are transferred to person
                      or persons  different from those who held such  securities
                      immediately prior to such merger.

          (b)  ACCELERATION  OF  OPTION.  Upon  the  stockholder  approval  of a
     Corporate  Transaction,  each Option which is at the time outstanding under
     the Plan shall  automatically  accelerate  so that each such Option  shall,
     immediately  prior  to the  specified  effective  date  for  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 all or any portion of such shares.  However,  an  outstanding
     Option  under the Plan shall not so  accelerate  if and to the extent:  (A)
     such Option is, in connection with the Corporate Transaction,  either to be
     assumed by the successor  corporation  or parent  thereof or to be replaced
     with a  comparable  option to purchase  shares of the capital  stock of the
     successor  corporation or parent thereof, (B) such Option is to be replaced
     with a cash incentive program of the successor  corporation which preserves
     the option  spread  existing at the time of the Corporate  Transaction  and
     provides for subsequent payout in accordance with the same vesting schedule
     applicable  to such  Option,  or (C) the  acceleration  of such  Option  is
     subject to other  limitations  imposed by the  Administrator at the time of
     the option grant. The  determination of option  comparability  under clause
     (A) above shall be made by the Administrator,  and its determination  shall
     be final, binding and conclusive.

          (c) TERMINATION OF OPERATIONS.  Upon the consummation of the Corporate
     Transaction,  all  outstanding  options under the Plan shall  terminate and
     cease to be  outstanding,  except to the extent  assumed  by the  successor
     corporation or its parent company.

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          (d) ADJUSTMENTS ON ASSUMPTION OR CONTINUATION. Each outstanding Option
     under  the  Plan  which  is  assumed  in  connection   with  the  Corporate
     Transaction  or is otherwise  to continue in effect shall be  appropriately
     adjusted,  immediately  after  such  Corporate  Transaction,  to apply  and
     pertain to the number and class of securities  which would have been issued
     to the Option holder,  in consummation of such Corporate  Transaction,  had
     such  person  exercised  the  Option  immediately  prior to such  Corporate
     Transaction. Appropriate adjustments shall also be made to the Option price
     payable per share,  provided the  aggregate  Option price  payable for such
     securities  shall  remain the same.  In  addition,  the class and number of
     securities available for issuance under the Plan following the consummation
     of the Corporate Transaction shall be appropriately adjusted.

          (e)  DISCRETION  TO  ACCELERATE.  The  Administrator  shall  have  the
     discretion,  exercisable  either  in  advance  of any  actually-anticipated
     Corporate Transaction or at the time of an actual Corporate Transaction, to
     provide  (upon such  terms as it may deem  appropriate)  for the  automatic
     acceleration  of one or more  outstanding  Options  granted  under the Plan
     which are  assumed or  replaced  in the  Corporate  Transaction  and do not
     otherwise  accelerate  at the time,  in the event  the  Optionee's  Service
     should  subsequently  terminate  within a designated  period  following the
     effective date of such Corporate Transaction.

          (f) PLAN NOT TO AFFECT  COMPANY.  The grant of Options  under the Plan
     shall in no way  affect the right of the  Company  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.

     2.3. CHANGE IN CONTROL.

          (a)  DEFINITION.  For purposes of this Plan, a Change in Control shall
     be deemed to occur in the event:

               (i)    any person or related  group of  persons  (other  than the
                      Company or a person that directly or indirectly  controls,
                      is controlled  by, or is under common  control  with,  the
                      Company)  directly  or  indirectly   acquires   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 Company's
                      outstanding  securities  pursuant  to a tender or exchange
                      offer made  directly to the Company's  stockholders  which
                      the Board does not recommend such  stockholders to accept;
                      or

               (ii)   there is a change in the  composition  of the Board over a
                      period of twenty-four (24) consecutive months or less such
                      that a majority  of the Board  members  (rounded up to the
                      next whole number) ceases,  by reason of one or more proxy
                      contests  for  the  election  of  Board  members,   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  such  election  or  nomination  was
                      approved by the Board.

          (b)  DISCRETION  TO  ACCELERATE.  The  Administrator  shall  have  the
     discretionary  authority,  exercisable  either in advance  of any  actually
     anticipated  Change  in  Control  or at the  time of an  actual  Change  in
     Control,  to  provide  for  the  automatic  acceleration  of  one  or  more
     outstanding  Options  under the Plan upon the  occurrence  of the Change in

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     Control.  The  Administrator  shall also have full power and  authority  to
     condition any such option  acceleration upon the subsequent  termination of
     the Optionee's  Service within a specified  period  following the Change in
     Control.

          (c) EXERCISE  RIGHTS.  Any Options  accelerated in connection with the
     Change in Control shall remain fully  exercisable  until the  expiration or
     sooner termination of the Option term.

                                   ARTICLE III
                                  MISCELLANEOUS

     3.1. AMENDMENT AND TERMINATION OF THE PLAN.

          (a) AMENDMENT AND TERMINATION. The Board may at any time amend, alter,
     suspend or terminate the Plan.

          (b) EFFECT OF  AMENDMENT OR  TERMINATION.  No  amendment,  alteration,
     suspension  or  termination  of the Plan  shall  impair  the  rights of any
     Optionee,  unless  mutually agreed  otherwise  between the Optionee and the
     Administrator,  which  agreement  must  be in  writing  and  signed  by the
     Optionee  and the  Company.  Termination  of the Plan  shall not affect the
     Administrator's ability to exercise the powers granted to it hereunder with
     respect  to  Options  granted  under  the  Plan  prior  to the date of such
     termination.

     3.2 TAX WITHHOLDING.

          (a) GENERAL.  The  Company's  obligation  to deliver  Shares of Common
     Stock upon the  exercise of Options for such Shares under the Plan shall be
     subject to the  satisfaction  of all  applicable  Federal,  State and local
     income tax and employment tax withholding requirements.

          (b)  SHARES  TO PAY FOR  WITHHOLDING.  An  Administrator  may,  in its
     discretion and in accordance with the provisions of this Section 3.2(b) and
     such  supplemental  rules as the Administrator may from time to time adopt,
     provide any or all holders of Options  under the Plan with the right to use
     Shares  in  satisfaction  of all or part of the  Federal,  State  and local
     income tax and  employment  tax  liabilities  incurred by such Optionees in
     connection with the exercise of their Options (the "Taxes"). Such right may
     be  provided  to any  such  Optionee  in  either  or both of the  following
     formats:

               (i)    STOCK  WITHHOLDING.  The Optionee may be provided with the
                      election  to have the  Company  withhold,  from the Shares
                      otherwise  issuable  upon the exercise of such  Option,  a
                      portion of these  Shares  with an  aggregate  Fair  Market
                      Value equal to the percentage of the applicable Taxes (not
                      to exceed one hundred  percent  (100%))  designated by the
                      holder.

               (ii)   STOCK DELIVERY.  The Administrator may, in its discretion,
                      provide the  Optionee  with the election to deliver to the
                      Company, at the time the Option is exercised,  one or more
                      Shares previously  acquired by such individual (other than
                      pursuant to the transaction  triggering the Taxes) with an
                      aggregate Fair Market Value equal to the percentage of the

                                       10
<PAGE>
                      Taxes  incurred in  connection  with such Option  exercise
                      (not to exceed one hundred percent  (100%))  designated by
                      the Optionee.

     3.3 EFFECTIVE  DATE AND TERM OF PLAN.  The Plan is effective as of November
10, 1997 (the "Effective Date"). It shall continue in effect for ten (10) years,
unless sooner terminated under Section 3.1 of the Plan.

     3.4. USE OF PROCEEDS.  Any cash  proceeds  received by the Company from the
sale of Shares  pursuant  to  Option  grants  under  the Plan  shall be used for
general corporate purposes.

     3.5. CONDITIONS UPON ISSUANCE OF SHARES.

          (a) LEGAL  COMPLIANCE.  Shares  shall not be  issued  pursuant  to the
     exercise of an Option  unless the  exercise of such Option and the issuance
     and delivery of such Shares shall comply with  Applicable Laws and shall be
     further  subject to the approval of counsel for the Company with respect to
     such compliance.

          (b) INVESTMENT  REPRESENTATIONS.  As a condition to the exercise of an
     Option,  the  Company  may  require  the person  exercising  such Option to
     represent  and warrant at the time of any such exercise that the Shares are
     being  purchased only for  investment and without any present  intention to
     sell or  distribute  such  Shares if, in the  opinion  of  counsel  for the
     Company, such a representation is required.

          (c) SECURITIES REGISTRATION. No shares of Common Stock or other assets
     shall be issued or  delivered  under this 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 securities exchange on
     which stock of the same class is then listed.

          (d)  INABILITY TO OBTAIN  AUTHORITY.  The  inability of the Company to
     obtain  authority  from any  regulatory  body  having  jurisdiction,  which
     authority is deemed by the Company's  counsel to be necessary to the lawful
     issuance and sale of any Shares hereunder, shall relieve the Company of any
     liability  in  respect to the  failure  to issue or sell such  Shares as to
     which such requisite authority shall not have been obtained.

     3.6.  NO  EMPLOYMENT/SERVICE  RIGHTS.  Neither the action of the Company in
establishing the Plan, nor any action taken by the Administrator  hereunder, nor
any provision of the Plan shall be construed so as to grant any  individual  the
right to remain in the  employ  or  service  of the  Company  (or any  Parent or
Subsidiary) for any period of specific duration,  and the Company (or any Parent
or Subsidiary  retaining  the services of such  individual)  may terminate  such
individual's  employment  or  service  at any time and for any  reason,  with or
without cause.

     3.7. MISCELLANEOUS PROVISIONS.

          (a)  ASSIGNMENT.  The right to acquire  Common  Stock or other  assets
     under the Plan may not be assigned,  encumbered or otherwise transferred by
     any Optionee or other Option holder. The provisions of the Plan shall inure
     to the benefit of, and be binding upon,  the Company and its  successors or

                                       11
<PAGE>
     assigns,  whether by Corporate Transaction or otherwise, and the Optionees,
     the legal  representatives  of their respective  estates,  their respective
     heirs or legatees and their permitted assignees.

          (b) CHOICE OF LAW. The provisions of the Plan relating to the exercise
     of options and the  vesting of shares  shall be governed by the laws of the
     State of Arizona,  as such laws are applied to  contracts  entered into and
     performed in such State.

          (c) PLAN NOT EXCLUSIVE.  This Plan is not intended to be the exclusive
     means by which the  Company  may issue  options or  warrants to acquire its
     shares of Common  Stock,  stock awards or  issuances,  or any other type of
     award or  issuance.  To the extent  permitted by  applicable  law, any such
     other option,  warrants,  issuance,  or awards may be issued by the Company
     other than pursuant to this Plan, without shareholder approval.

          EXECUTED as of the 18th day of August, 2000.

                                        MICROCHIP TECHNOLOGY INCORPORATED,
                                        a Delaware corporation

                                        By /s/ Steve Sanghi
                                           -------------------------------------
                                           Steve Sanghi

                                           Its: Chairman of the Board, President
                                                and Chief Executive Officer

Attested by:

/s/ Mary K. Simmons
-----------------------------
Mary K. Simmons
Secretary

                                       12Exhibit 10.4

================================================================================

                        MICROCHIP TECHNOLOGY INCORPORATED

                             1993 STOCK OPTION PLAN

                         AMENDED THROUGH AUGUST 18, 2000

================================================================================
<PAGE>
                                TABLE OF CONTENTS

                                                                            Page
                                                                            ----
                                    ARTICLE I
                                     GENERAL

1.1  PURPOSE OF THE PLAN....................................................   1
     (a)  Amendment.........................................................   1
     (b)  Purpose...........................................................   1
     (c)  Effective Date....................................................   2
     (d)  Successor to 1989 Plan............................................   2
     (e)  Parent/Subsidiaries...............................................   2

1.2  STRUCTURE OF THE PLAN..................................................   3
     (a)  Stock Programs....................................................   3
     (b)  General Provisions................................................   3

1.3  ADMINISTRATION OF THE PLAN.............................................   3
     (a)  Bifurcation of Administration.....................................   3
     (b)  Affiliate Administration..........................................   4
     (c)  Non-Affiliate Administration......................................   4
     (d)  Term on Committee.................................................   4
     (e)  Authority of Plan Administrators..................................   4
     (f)  Indemnification...................................................   5

1.4  ELIGIBLE PERSONS UNDER THE PLAN........................................   5
     (a)  Discretionary Option Grant........................................   5
     (b)  Automatic Option Grant Program....................................   6

1.5  STOCK SUBJECT TO THE PLAN..............................................   6
     (a)  Amendment.........................................................   6
     (b)  Available Shares..................................................   6
     (c)  Adjustments for Issuances.........................................   7
     (d)  Adjustments for Organic Changes...................................   7
     (e)  Limitation on Grants to Employees.................................   8

                                   ARTICLE II
                       DISCRETIONARY OPTION GRANT PROGRAM

2.1  TERMS AND CONDITIONS OF OPTIONS........................................   8
     (a)  General...........................................................   8
     (b)  Option Price......................................................   9
     (c)  Payment of Option Price...........................................   9
     (d)  Fair Market Value.................................................   9
     (e)  Term and Exercise of Options......................................  10
     (f)  Termination of Service............................................  10

                                        i
<PAGE>
                                TABLE OF CONTENTS
                                    continued

                                                                            Page
                                                                            ----

     (g)  Discretion to Accelerate Vesting..................................  11
     (h)  Discretion to Extend Exercise Period..............................  12
     (i)  Definitions.......................................................  12
     (j)  Stockholder Rights................................................  12
     (k)  Repurchase Rights.................................................  12

2.2  INCENTIVE OPTIONS......................................................  13
     (a)  General...........................................................  13
     (b)  Dollar Limitation.................................................  13
     (c)  10% Stockholder...................................................  14
     (d)  Application.......................................................  14
     (e)  No Incentive Options After August 18, 2000........................  14

2.3  CORPORATE TRANSACTIONS.................................................  14
     (a)  Definition........................................................  14
     (b)  Acceleration of Option............................................  15
     (c)  Termination and Options...........................................  15
     (d)  Adjustments on Assumption or Continuation.........................  15
     (e)  Discretion to Accelerate..........................................  16
     (f)  Plan Not to Affect Corporation....................................  16

2.4  CHANGE IN CONTROL......................................................  16
     (a)  Definition........................................................  16
     (b)  Discretion to Accelerate..........................................  17
     (c)  Exercise Rights...................................................  17

2.5  INCENTIVE OPTIONS......................................................  17

                                   ARTICLE III
                                    RESERVED

                                   ARTICLE IV
                         AUTOMATIC OPTION GRANT PROGRAM

4.1  TERMS AND CONDITIONS OF AUTOMATIC OPTION GRANTS........................  17
     (a)  Amount and Date of Grant..........................................  17
     (b)  Exercise Price....................................................  18
     (c)  Method of Exercise................................................  18
     (d)  Payment Price.....................................................  19
     (e)  Exercise Date.....................................................  19
     (f)  Term of Option....................................................  19
     (g)  Vesting...........................................................  20
     (h)  Limited Transferability...........................................  20

4.2  CORPORATE TRANSACTION..................................................  20

                                       ii
<PAGE>
                                TABLE OF CONTENTS
                                    continued

                                                                            Page
                                                                            ----

4.3  CHANGE IN CONTROL......................................................  21

4.4  MISCELLANEOUS PROVISIONS...............................................  21
     (a)  Corporation Rights................................................  21
     (b)  Privilege of Stock Ownership......................................  21

                                    ARTICLE V
                                  MISCELLANEOUS

5.1  AMENDMENT OF THE PLAN AND AWARDS.......................................  21
     (a)  Board Authority...................................................  21
     (b)  Options Issued Prior to Stockholder Approval......................  22
     (c)  Rule 16b-3 Plan...................................................  22

5.2  TAX WITHHOLDING........................................................  22
     (a)  General...........................................................  22
     (b)  Shares to Pay for Withholding.....................................  22
          (i)  Stock Withholding............................................  23
          (ii) Stock Delivery...............................................  23

5.3  EFFECTIVE DATE AND TERM OF PLAN........................................  23
     (a)  Effective Date....................................................  23
     (b)  Incorporation of 1989 Plan........................................  23
     (c)  Discretion........................................................  23
     (d)  Termination of Plan...............................................  24

5.4  USE OF PROCEEDS........................................................  24

5.5  REGULATORY APPROVALS...................................................  24
     (a)  General...........................................................  24
     (b)  Securities Registration...........................................  24

5.6  NO EMPLOYMENT/SERVICE RIGHTS...........................................  24

5.7  MISCELLANEOUS PROVISIONS...............................................  25
     (a)  Assignment........................................................  25
     (b)  Choice of Law.....................................................  25
     (c)  Plan Not Exclusive................................................  25

                                       iii
<PAGE>
                        MICROCHIP TECHNOLOGY INCORPORATED
                             1993 STOCK OPTION PLAN

                         AMENDED THROUGH AUGUST 18, 2000

                                    ARTICLE I
                                     GENERAL

     1.1 PURPOSE OF THE PLAN

          (a)  AMENDMENT.  On January  19,  1993,  the Board of  Directors  (the
"Board") of  Microchip  Technology  Incorporated,  a Delaware  corporation  (the
"Corporation")  adopted the 1993 Stock Option/Stock  Issuance Plan. On April 23,
1993 and September 14, 1993, the Board amended the Plan  authorizing  additional
available  shares of Common  Stock.  On October 7, 1993,  the Board  amended and
restated the Plan as stated  herein.  On April 18, 1994,  the Board  amended the
Plan  authorizing  additional  available  shares of  Common  Stock,  subject  to
stockholder  approval.  On January 20, and April 26, 1995, the Board amended the
Plan  authorizing,  among other matters,  additional  available shares of Common
Stock, subject to stockholder approval and the elimination of the stock issuance
portion  of the  Plan.  Any  options  outstanding  under  the Plan  before  this
amendment shall remain valid and unchanged. On April 25, 1997, the Board amended
the Plan authorizing, among other matters, additional available shares of Common
Stock,  subject to  stockholder  approval.  On August 18, 2000 the  stockholders
approved  an  amendment  to the Plan  (which was  adopted by the Board on May 5,
2000) to extend its term as set forth in Section 5.3(d)  hereof.  The Board also
amended the Plan to provide that,  following the approval by the stockholders of
the  extension  of the term o the  Plan,  Incentive  Options  could no longer be
granted (see Section 2.2(e)).

          (b) PURPOSE.  This 1993 Stock Option Plan,  amended through August 18,
2000  ("Plan")  is  intended  to promote the  interests  of the  Corporation  by
providing  (i) key employees  (including  officers) of the  Corporation  (or its
parent or  subsidiary  corporations)  who are  responsible  for the  management,
growth and  financial  success of the  Corporation  (or its parent or subsidiary
corporations), (ii) non-employee members of the Corporation's Board of Directors
(the "Board") and (ii) consultants and other independent contractors who provide
valuable services to the Corporation (or its parent or subsidiary  corporations)
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 (or its parent or subsidiary corporations).

                                       1
<PAGE>
          (c)  EFFECTIVE  DATE.  The Plan became  effective on the first date on
which the shares of the Corporation's  common stock are registered under Section
12(g) of the Securities  Exchange Act of 1934, as amended (the "1934 Act"). Such
date is hereby  designated as the Effective Date of the Plan. The effective date
of any  amendments  to the  Plan  shall  be as of the  date of  Board  approval.
Notwithstanding  the foregoing,  certain  amendments  referenced  herein must be
approved by the stockholders of the Corporation.

          (d) SUCCESSOR TO 1989 PLAN.  This Plan shall serve as the successor to
the  Corporation's  1989 Stock  Option  Plan (the "1989  Plan"),  and no further
option  grants  or stock  issuances  shall be made  under the 1989 Plan from and
after the Effective  Date of this Plan. All options  outstanding  under the 1989
Plan on such  Effective  Date are hereby  incorporated  into this Plan and shall
accordingly be treated as  outstanding  options under this Plan.  However,  each
outstanding  option so incorporated  shall continue to be governed solely by the
express terms and conditions of the  instrument  evidencing  such grant,  and no
provision of this 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  the  Corporation's  common  stock  thereunder.  All
outstanding  unvested share  issuances  under the 1989 Plan shall continue to be
governed  solely  by  the  express  terms  and  conditions  of  the  instruments
evidencing  such  issuances,  and no  provision  of this Plan shall be deemed to
affect or  otherwise  modify the rights or  obligations  of the  holders of such
unvested shares.

          (e)  PARENT/SUBSIDIARIES.  For  purposes  of the Plan,  the  following
provisions  shall  be  applicable  in  determining  the  parent  and  subsidiary
corporations of the Corporation:

               (i) Any corporation  (other than the  Corporation) in an unbroken
chain of corporations  ending with the  Corporation  shall be considered to be a
parent of the corporation,  provided each such 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 any other corporation in such chain.

               (ii) Each corporation (other than the Corporation) in an unbroken
chain of corporations beginning with the Corporation shall be considered to be a
subsidiary of the Corporation,  provided each such  corporation  (other than the

                                       2
<PAGE>
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 any other corporation in such chain.

          (f) All  references  herein to number of shares of Common  Stock  have
been restated to reflect a 2-for-1  stock split of the Common Stock  effected on
September 14, 1993, a 3-for-2 stock split of the Common Stock  effected on April
4, 1994,  a 3-for-2  split of the Common  Stock  effected on November 8, 1994, a
3-for-2  split of the Common  Stock  effected on January 6, 1997,  and a 3-for-2
split of the Common Stock effected on February 7, 2000.

     1.2 STRUCTURE OF THE PLAN

          (a)  STOCK  PROGRAMS.  The Plan  shall be  divided  into two  separate
components:  the Discretionary  Option Grant Program specified in Article II and
the  Automatic  Option  Grant  Program   specified  in  Article  IV.  Under  the
Discretionary Option Grant Program,  eligible individuals may, at the discretion
of the Plan Administrator, be granted options to purchase shares of Common Stock
in accordance  with the  provisions  of Article II. Under the  Automatic  Option
Grant Program,  non-employee members of the Board will be automatically  granted
options to purchase shares of the Common Stock in accordance with the provisions
of Article IV.

          (b)  GENERAL   PROVISIONS.   Unless  the  context  clearly   indicates
otherwise,  the provisions of Articles I and V shall apply to the  Discretionary
Option  Grant  Program  and  the  Automatic  Stock  Grant  Program,   and  shall
accordingly govern the interests of all individuals under the Plan.

     1.3 ADMINISTRATION OF THE PLAN

          (a)  BIFURCATION  OF  ADMINISTRATION.  The eligible  persons under the
Discretionary  Option Grant  Program  shall be divided into two groups and there
shall be a separate  administrator  for each group. One group shall be comprised
of eligible  persons that are  "Affiliates."  For purposes of the Plan, the term
"Affiliates" shall mean (i) all "executive  officers" as that term is defined in
Rule  16a-1(f)  promulgated  under the  Securities  and  Exchange Act of 1934 as
amended (the "1934  Act"),  (ii) all  directors  of the  Company,  and (iii) all
persons  who own 10% or more of the  Company's  issued  and  outstanding  common
stock. The other group shall be comprised of all eligible persons under the Plan
that are not Affiliates ("Non-Affiliates").

                                       3
<PAGE>
          (b)   AFFILIATE   ADMINISTRATION.   The   power  to   administer   the
Discretionary  Option Grant  Program  with respect to eligible  persons that are
Affiliates shall be vested with a committee (the "Senior  Committee") of two (2)
or more non-employee Board members appointed by the Board. No Board member shall
be eligible to serve on the Senior  Committee if such individual has, within the
relevant  period  designated  below,  received an option  grant or direct  stock
issuance  under this Plan (not  including any option grants made pursuant to the
Automatic  Option Grant Program set forth in Article IV) or any other stock plan
of the Corporation (or any parent or subsidiary corporation):

               (i) for each of the initial members of the Committee,  the period
commencing  with the Effective  Date of the Plan and ending with the date of his
or her appointment to the Senior Committee, or

               (ii) for any successor or  substitute  member,  the  twelve-month
period  immediately  preceding the date of his or her  appointment to the Senior
Committee or (if shorter) the period  commencing  with the Effective Date of the
Plan and ending with the date of his or her appointment to the Senior Committee.

          (c)  NON-AFFILIATE   ADMINISTRATION.   The  power  to  administer  the
Discretionary Option Grant Program with respect to eligible persons that are not
Non-Affiliates  shall be vested with the Board. The Board,  however,  may at any
time appoint a committee (the  "Employee  Committee") of one or more persons who
are members of the Board and delegate to such Employee  Committee the power,  in
whole or in part, to  administer  the  Discretionary  Stock Option Grant Program
with respect to the Non-Affiliates.

          (d)  TERM  ON  COMMITTEE.  Members  of the  Senior  Committee  and the
Employee  Committee  shall  serve  for  such  period  of time as the  Board  may
determine and shall be subject to removal by the Board at any time. The Board at
any time may terminate the functions of the Employee  Committee and reassume all
powers and authority previously delegated to such Committee.

          (e)  AUTHORITY  OF  PLAN  ADMINISTRATORS.   The  Board,  the  Employee
Committee,  and the Senior  Committee,  whichever is  applicable,  shall each be
referred to herein as a "Plan Administrator." Each Plan Administrator shall have
the authority and discretion,  with respect to its administered group, to select
which eligible persons shall participate in the Plan. Unless otherwise  required
by law,  decisions  among members of a Plan  Administrator  shall be by majority
vote. With respect to each administered group, the applicable Plan Administrator
shall have full power and  authority  (subject to the express  provisions of the

                                       4
<PAGE>
Plan) to establish such rules and regulations as it may deem appropriate for the
proper administration of the Discretionary Option Grant Program and to make such
determinations  under, and issue such interpretations of, the provisions of such
programs and any outstanding  option grants or stock issuances  thereunder as it
may deem  necessary or  advisable.  All decisions  made by a Plan  Administrator
shall be final and binding on all parties in its administered  group who have an
interest in the  Discretionary  Option Grant Program or any  outstanding  option
thereunder.  The Plan Administrator shall also have full authority to determine,
with respect to the option grants made under the  Discretionary  Option Program,
the number of shares to be covered by each such grant, the status of the granted
option as either an incentive stock option ("Incentive  option") which satisfies
the  requirements of Section 422 of the Internal Revenue Code or a non-statutory
option not intended to meet such  requirements,  the time or times at which each
granted  option  is to become  exercisable  and the  maximum  term for which the
option may remain outstanding.

          (f)   INDEMNIFICATION.   In   addition   to  such   other   rights  of
indemnification as they may have, the members of each Plan  Administrator  shall
be indemnified and held harmless by the Company,  to the extent  permitted under
applicable law, for, from and against all costs and expenses reasonably incurred
by them in connection with any action, legal proceeding to which any such member
thereof  may be a party,  by reason of any  action  taken or failed to be taken,
under or in  connection  with the Plan or any  rights  granted  thereunder,  and
against  all  amounts  paid  by them in  settlement  thereof  or paid by them in
satisfaction  of a judgment of any such  action,  suit or  proceeding,  except a
judgment based upon a finding of bad faith.

     1.4 ELIGIBLE PERSONS UNDER THE PLAN

          (a)  DISCRETIONARY  OPTION  GRANT  PROGRAM.  The  persons  eligible to
participate  in the  Discretionary  Option Grant Program under Article II are as
follows:

               (i) officers and other key employees of the  Corporation  (or its
parent or subsidiary  corporations)  who render services which contribute to the
management,  growth and financial  success of the  Corporation (or its parent or
subsidiary corporations);

               (ii)  non-employee  members of the Board (excluding those current
members of the Senior Committee); and

                                       5
<PAGE>
               (iii) those  consultants  or other  independent  contractors  who
provide  valuable  services  to the  Corporation  (or its  parent or  subsidiary
corporations).

          (b)  AUTOMATIC   OPTION  GRANT  PROGRAM.   The  persons   eligible  to
participate  in  the  Automatic   Option  Grant  Program  shall  be  limited  to
non-employee Board members. A non-employee Board member shall not be eligible to
participate in the Automatic Option Grant Program,  however,  if such individual
has at any time been in the prior  employ of the  Corporation  (or any parent or
subsidiary corporation).  Unless otherwise provided in the Plan, persons who are
eligible  under the  Automatic  Option  Grant  Program  may also be  eligible to
receive  option  grants under the  Discretionary  Option Grant Program in effect
under this Plan.

     1.5 STOCK SUBJECT TO THE PLAN

          (a)  AMENDMENT(1).  Under the Plan,  9,108,341  shares were originally
authorized to be issued under the Plan (constituting 8,348,966 authorized shares
under the 1989 Plan and  rolled  over  into  this Plan plus  759,375  additional
shares  authorized  by the Board on January 19,  1993).  On April 23,  1993,  an
additional 3,290,625 shares were authorized by the Board, subject to stockholder
approval at the next stockholders'  meeting.  At that point, the total available
authorized  shares was 12,398,966.  On September 14, 1993, the Board  authorized
the number of shares of Common Stock  issuable under the Plan to be increased by
3,422,250  shares.  On April 18, 1994, the Board authorized the number of shares
of Common Stock issuable under the Plan to be increased by 4,387,500  shares. On
January 20, 1995 and April 25, 1997,  the Board  authorized the number of shares
of  Common  Stock  issuable  under the Plan to be  increased  by  2,137,500  and
3,000,000 shares,  respectively,  subject to Stockholder approval, such that the
maximum number of shares issuable for the term of the Plan shall be as set forth
in Section 1.5(b) below.

          (b) AVAILABLE SHARES.  Shares of the  Corporation's  common stock (the
"Common  Stock")  shall be available  for  issuance  under the Plan and shall be
drawn from either the  Corporation's  authorized  but unissued  shares of Common
Stock or from reacquired shares of 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  25,346,216
shares,  subject  to  adjustment  from  time  to  time in  accordance  with  the

----------
(1)  All number are as adjusted  for stock splits  which have  occurred  through
     February 2000.

                                       6
<PAGE>
provisions  of this Section 1.5. To the extent one or more  outstanding  options
under the 1989 Plan which have been incorporated into this Plan (as adjusted for
the 1993 Stock Dividend) are subsequently exercised, the number of shares issued
with respect to each such option shall reduce, on a  share-for-share  basis, the
number of shares available for issuance under this Plan.

          (c) ADJUSTMENTS FOR ISSUANCES.  Should one or more outstanding options
under this Plan (including  outstanding options under the 1989 Plan incorporated
into this Plan)  expire or  terminate  for any reason prior to exercise in full,
then the shares subject to the portion of each option not so exercised  shall be
available for subsequent  option grant under the Plan. All share issuances under
the  Plan,  whether  or not  the  shares  are  subsequently  repurchased  by the
Corporation  pursuant to its repurchase rights under the Plan, shall reduce on a
share-for-share  basis  the  number of shares  of  Common  Stock  available  for
subsequent option grants under the Plan. In addition,  should the exercise price
of an outstanding option under the Plan (including any option  incorporated from
the 1989 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  outstanding  option  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, and not by the net number of shares
of Common Stock actually issued to the option holder.

          (d) ADJUSTMENTS FOR ORGANIC CHANGES.  Should any change be made to the
Common  Stock  issuable  under  the Plan 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,  then appropriate  adjustments shall be
made to (i) the maximum  number  and/or class of securities  issuable  under the
Plan,  (ii) the number and/or class of securities  and price per share in effect
under each  option  outstanding  under  either the  Discretionary  Option  Grant
Program or the Automatic  Option Grant Program and (iii) the number and/or class
of  securities  and  price per share in effect  under  each  outstanding  option
incorporated  into  this  Plan  from  the 1989  Plan.  Such  adjustments  to the
outstanding  options  are to be effected in a manner  which shall  preclude  the
enlargement  or  dilution  of  rights  and  benefits  under  such  options.  The
adjustments determined by the Board shall be final, binding and conclusive.  The
amount of options granted automatically under the Automatic Option Grant Program

                                       7
<PAGE>
on the Annual Automatic Grant Date and on the Initial Automatic Grant Date shall
not be adjusted  regardless  of any  organic  changes  made to the Common  Stock
issuable under the Plan.

          (e)  LIMITATIONS  ON GRANTS TO  EMPLOYEES.  Notwithstanding  any other
provision  herein to the  contrary,  the  following  limitations  shall apply to
grants of options to Employees:

               (i) No  employee  shall be  granted,  in any  fiscal  year of the
Corporation,  options to purchase  more than six hundred  seventy-five  thousand
(675,000) shares.

               (ii)  In  connection  with  his or  her  initial  employment,  an
Employee may be granted  options to purchase up to an additional one million one
hundred  twenty-five  thousand 1, 125,000)  shares which shall not count against
the limit set forth in subsection (i) above.

               (iii) The foregoing limitations shall be adjusted proportionately
in connection with any change in the  Corporation's  capitalization as described
in Section 1.5(d).

               (iv) If an option is  cancelled  in the same  fiscal  year of the
Corporation  in which such option was granted  (other than in connection  with a
transaction  described in Section 1.5(d)),  the cancelled option will be counted
against  the limit set forth in  Section  1.5(e)(i).  For this  purpose,  if the
exercise  price of an option is reduced,  the  transaction  will be treated as a
cancellation of the option and the grant of a new option.

                                   ARTICLE II
                       DISCRETIONARY OPTION GRANT PROGRAM

     2.1 TERMS AND CONDITIONS OF OPTIONS

          (a)  GENERAL.   Options  granted  to  eligible  persons  ("Optionees")
pursuant to the Discretionary  Option Grant Program set forth in this Article II
shall be  authorized  by  action  of the  Plan  Administrator  and,  at the Plan
Administrator's  discretion,  may be either  Incentive  Options or non-statutory
options.  Individuals  who are not Employees of the Corporation or its parent or
subsidiary  corporations may only be granted non-statutory options. Each granted
option shall be evidenced by one or more instruments in the form approved by the
Plan Administrator;  provided,  however,  that each such instrument shall comply
with the terms and conditions  specified  below.  Each instrument  evidencing an
Incentive Option shall, in addition,  be subject to the applicable provisions of
Section 2.2 hereof.

                                       8
<PAGE>
          (b) OPTION  PRICE.  The option  price per share  shall be fixed by the
Plan Administrator in accordance with the following provisions:

               (i) The option price per share of the Common Stock  subject to an
Incentive  Option shall in no event be less than one hundred  percent  (100%) of
the fair market value of such Common Stock on the grant date; and

               (ii) The option price per share of the Common Stock  subject to a
non-statutory  stock option  shall in no event be less than one hundred  percent
(100%) of the fair market value of such Common Stock on the grant date.

          (c) PAYMENT OF OPTION PRICE. The option price shall become immediately
due upon  exercise  of the option  and shall be payable in one of the  following
alternative forms specified below:

               (i)  full  payment  in cash or check  drawn to the  Corporation's
order;

               (ii) full payment  through a  broker-dealer  sale and  remittance
procedure pursuant to which the Optionee (A) shall provide  irrevocable  written
instructions to a 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 option
price payable for the  purchased  shares plus all  applicable  Federal and State
income and  employment  taxes  required  to be withheld  by the  Corporation  in
connection  with such purchase and (B) shall provide  written  directives to the
Corporation to deliver the  certificates  for the purchased  shares  directly to
such brokerage firm in order to complete the sale transaction.

For purposes of this  Section  2.1(c),  the  Exercise  Date shall be the date on
which  written  notice of the option  exercise is delivered to the  Corporation.
Except to the extent the sale and remittance procedure is utilized in connection
with the exercise of the option,  payment of the option price for the  purchased
shares must accompany such notice.

          (d) FAIR MARKET VALUE. The fair market value per share of Common Stock
shall be determined in accordance with the following provisions:

               (i) If the Common  Stock is not at the time listed or admitted to
trading on any  national  stock  exchange  but is traded on the NASDAQ  National

                                       9
<PAGE>
Market System, the fair market value shall be the closing price per share on the
date in  question,  as such price is reported  by the  National  Association  of
Securities  Dealers  through the NASDAQ  National Market System or any successor
system.  If there is no reported  closing  selling price for the Common Stock on
the date in question,  then the closing selling price on the last preceding date
for which such quotation exists shall be determinative of fair market value.

               (ii) If the Common  Stock is at the time  listed or  admitted  to
trading on any national stock exchange,  then the fair market value shall be the
closing  selling  price  per  share  on the  date in  question  on the  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 reported sale of Common Stock on such exchange
on the date in question, then the fair market value shall be the closing selling
price on the  exchange  on the last  preceding  date for  which  such  quotation
exists.

          (e) TERM AND  EXERCISE OF  OPTIONS.  Each  option  granted  under this
Discretionary  Option Grant Program shall be  exercisable  at such time or times
and during such period as is determined by the Plan  Administrator and set forth
in the instrument  evidencing the grant. No such option,  however,  shall have a
maximum  term in  excess  of ten (10)  years  from the grant  date.  During  the
lifetime of the Optionee,  the option shall be exercisable  only by the Optionee
and shall not be assignable or  transferable  by the Optionee other than by will
or by the laws of descent and distribution following the Optionee's death.

          (f) TERMINATION OF SERVICE.  The following provisions shall govern the
exercise period  applicable to any  outstanding  options held by the Optionee at
the time of cessation of Service or death:

               (i) Should an Optionee  cease  Service for any reason  (including
permanent disability as defined in Section 22(e)(3) of the Internal Revenue Code
but not  including  death) while holding one or more  outstanding  options under
this  Article  II,  then  none of those  options  shall  (except  to the  extent
otherwise provided pursuant to Section 2.1(g) below) remain exercisable for more
than a ninety (90) day period (or such shorter or longer  period  determined  by
the Plan Administrator and set forth in the instrument evidencing the grant, but
not to exceed twelve (12) months)  measured  from the date of such  cessation of
Service.

                                       10
<PAGE>
               (ii) Any option held by the  Optionee  under this  Article II and
exercisable  in  whole  or in  part  on the  date  of his  or her  death  may be
subsequently  exercised 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. Such
exercise,  however,  must occur prior to the earlier of (x) six months following
the date of Optionee's death or (y) the specified  expiration date of the option
term.  Upon the occurrence of the earlier event,  the option shall terminate and
cease to be outstanding.

               (iii) Under no circumstances,  however,  shall any such option be
exercisable after the specified expiration date of the option term.

               (iv) During the  applicable  post-Service  exercise  period,  the
option shall not be  exercisable  for more than the number of shares (if any) in
which the  Optionee  is vested at the time of his or her  cessation  of  Service
(less any option shares subsequently  purchased by the Optionee prior to death).
Upon the expiration of the limited post-Service  exercise period or (if earlier)
upon the specified  expiration  date of the option term,  each such option shall
terminate  and cease to be  outstanding  with  respect to any vested  shares for
which the option has not otherwise been  exercised.  However,  each  outstanding
option shall immediately  terminate and cease to be outstanding,  at the time of
the  Optionee's  cessation of Service,  with respect to any shares for which the
option is not otherwise at that time exercisable or in which the Optionee is not
otherwise at that time vested.

               (v)  Should  (A)  the   Optionee's   service  be  terminated  for
misconduct  (including,  but not  limited  to,  any act of  dishonesty,  willful
misconduct, fraud or embezzlement) or (B) the Optionee make any unauthorized use
or disclosure of confidential information or trade secrets of the Corporation or
its parent or subsidiary  corporations,  then in any such event all  outstanding
options held by the Optionee under this Article II shall  terminate  immediately
and cease to be outstanding.

          (g) DISCRETION TO ACCELERATE  VESTING.  The Plan  Administrator  shall
have complete  discretion,  exercisable either at the time the option is granted
or at any time  while the  option  remains  outstanding,  to permit  one or more
options held by the Optionee  under this Article II to be exercised,  during the
limited post-Service  exercise period applicable under Section 2.1(f) above, not
only with respect to the number of vested  shares of Common Stock for which each
such option is exercisable  at the time of the  Optionee's  cessation of Service

                                       11
<PAGE>
but also with respect to one or more  subsequent  installments  of vested shares
for which the option would otherwise have become  exercisable had such cessation
of Service not occurred.

          (h) DISCRETION TO EXTEND EXERCISE PERIOD. The Plan Administrator shall
also have full  power and  authority  to extend the period of time for which the
option is to remain exercisable following the Optionee's cessation of Service or
death from the  limited  period in effect  under  Section  2.1(f)  above to such
greater period of time as the Plan Administrator  shall deem appropriate.  In no
event, however,  shall such option be exercisable after the specified expiration
date of the option term.

          (i)  DEFINITIONS.  For purposes of the  foregoing  provisions  of this
Section 2.1 (and for all other  purposes  under the  Discretionary  Option Grant
Program):

               (i)  The  Optionee   shall   (except  to  the  extent   otherwise
specifically  provided in the  applicable  stock option  agreement) be deemed to
remain in SERVICE for so long as such individual  renders services on a periodic
basis to the  Corporation  (or any  parent  or  subsidiary  corporation)  in the
capacity of an Employee,  a  non-employee  member of the Board or an independent
consultant or advisor.

               (ii) The Optionee  shall be  considered  to be an EMPLOYEE for so
long as he or she remains in the employ of the Corporation or one or more parent
or subsidiary corporations, subject to the control and direction of the employer
entity  not only as to the work to be  performed  but also as to the  manner and
method of performance.

          (j) STOCKHOLDER  RIGHTS. An Optionee shall have no stockholder  rights
with  respect to any shares  covered by the option until such  individual  shall
have exercised the option and paid the option price for the purchased shares.

          (k)  REPURCHASE  RIGHTS.  The shares of Common Stock acquired upon the
exercise  of any  Article II option  grant may be subject to  repurchase  by the
Corporation in accordance with the following provisions:

               (i) The Plan Administrator shall have the discretion to authorize
the issuance of unvested  shares of Common  Stock under this Article II.  Should
the Optionee cease Service while holding such unvested  shares,  the Corporation
shall have the right to repurchase  any or all of those  unvested  shares at the

                                       12
<PAGE>
option price paid per share. The terms and conditions 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  instrument  evidencing  such
repurchase right.

               (ii) All of the Corporation's outstanding repurchase rights under
this Article II shall  automatically  terminate,  and all shares subject to such
terminated  rights shall  immediately  vest in full,  upon the occurrence of any
Corporate  Transaction under Section 2.3 hereof,  except to the extent:  (A) any
such  repurchase  right is expressly  assigned to the successor  corporation (or
parent  thereof)  in  connection  with  the  Corporate  Transaction  or (B) such
accelerated  vesting  is  precluded  by other  limitations  imposed  by the Plan
Administrator at the time the repurchase right is issued.

               (iii)  The  Plan  Administrator   shall  have  the  discretionary
authority,  exercisable  either  before or after  the  Optionee's  cessation  of
Service, to cancel the Corporation's  outstanding repurchase rights with respect
to one or more  shares  purchased  or  purchasable  by the  Optionee  under this
Discretionary  Option Grant Program and thereby  accelerate  the vesting of such
shares in whole or in part at any time.

     2.2 INCENTIVE OPTIONS

          (a)  GENERAL.  The  terms  and  conditions  specified  below  shall be
applicable to all incentive  options  ("Incentive  Options")  granted under this
Article II pursuant  to Section 422 of the  Internal  Revenue  Code of 1986,  as
amended (the "Code").  Incentive  Options may only be granted to individuals who
are employees of the Corporation.  Options which are specifically  designated as
"non-statutory"  options when issued under the Plan shall NOT be subject to such
terms and conditions.

          (b) DOLLAR LIMITATION.  The aggregate fair market value (determined as
of the  respective  date or dates of grant) of the Common Stock for which one or
more  Incentive  Options  granted to any Employee  under this Plan (or any other
option plan of the Corporation or its parent or subsidiary corporations) may for
the first time become  exercisable during any one calendar year shall not exceed
the sum of One Hundred Thousand Dollars  ($100,000).  To the extent the Employee
holds two or more such Incentive 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 under the federal tax laws shall be applied
on the basis of the order in which such  Incentive  Options are granted.  Should

                                       13
<PAGE>
the  number  of shares of Common  Stock  for which any  Incentive  Option  first
becomes  exercisable  in any  calendar  year exceed the  applicable  One Hundred
Thousand  Dollar  ($100,000)  limitation,  then that option may  nevertheless be
exercised  in  that  calendar  year  for  the  excess  number  of  shares  as  a
non-statutory option under the federal tax laws.

          (c) 10% STOCKHOLDER.  If any individual to whom an Incentive Option is
granted  is the  owner  of stock  (as  determined  under  Code  Section  424(d))
possessing ten percent (10%) or more of the total  combined  voting power of all
classes  of stock of the  Corporation  or any one of its  parent  or  subsidiary
corporations, then the option price per share shall not be less than one hundred
and ten percent (110%) of the fair market value per share of Common Stock on the
grant date,  and the option term shall not exceed five years,  measured from the
grant date.

          (d)  APPLICATION.  Except as modified by the  preceding  provisions of
this Section 2.2, the provisions of Articles I, II and V of the Plan shall apply
to all Incentive Options granted hereunder.

          (e) NO INVENTIVE  OPTIONS AFTER AUGUST 18, 2000. From and after August
18, 2000, no Incentive Options shall be granted under the Plan.

     2.3 CORPORATE TRANSACTIONS

          (a)  DEFINITION.  For  purposes  of this  Plan,  any of the  following
stockholder  approved  transactions to which the Corporation is a party shall be
considered a "Corporate Transaction":

               (i) a merger or consolidation in which the corporation is not the
surviving entity,  except for a transaction the principal purpose of which is to
change the State in which the Corporation is incorporated,

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

               (iii)  any  reverse  merger  in  which  the  Corporation  is  the
surviving  entity but in which  securities  possessing  more than fifty  percent
(50%)  of the  total  combined  voting  power of the  Corporation's  outstanding
securities are  transferred  to person or persons  different from those who held
such securities immediately prior to such merger.

                                       14
<PAGE>
          (b)  ACCELERATION  OF  OPTION.  Upon  the  stockholder  approval  of a
Corporate  Transaction,  each option which is at the time outstanding under this
Article  II shall  automatically  accelerate  so that  each such  option  shall,
immediately prior to the specified effective date for 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 all or any
portion of such shares.  However,  an  outstanding  option under this Article II
shall not so accelerate if and to the extent:  (A) such option is, in connection
with  the  Corporate  Transaction,   either  to  be  assumed  by  the  successor
corporation  or parent  thereof or to be replaced  with a  comparable  option to
purchase  shares of the capital  stock of the  successor  corporation  or parent
thereof,  (B) such option is to be replaced with a cash incentive program of the
successor  corporation which preserves the option spread existing at the time of
the Corporate  Transaction and provides for subsequent payout in accordance with
the same vesting schedule  applicable to such option, or (C) the acceleration of
such option is subject to other limitations imposed by the Plan Administrator at
the time of the option grant. The  determination of option  comparability  under
clause (A) above shall be made by the Plan Administrator,  and its determination
shall be final, binding and conclusive.

          (c)  TERMINATION OF OPTIONS.  Upon the  consummation  of the Corporate
Transaction,  all outstanding  options under this Article II shall terminate and
cease  to be  outstanding,  except  to  the  extent  assumed  by  the  successor
corporation or its parent company.

          (d) ADJUSTMENTS ON ASSUMPTION OR CONTINUATION. Each outstanding option
under  this  Article  II which  is  assumed  in  connection  with the  Corporate
Transaction  or is  otherwise  to  continue  in  effect  shall be  appropriately
adjusted,  immediately after such Corporate Transaction, to apply and pertain to
the number and class of  securities  which  would have been issued to the option
holder, in consummation of such Corporate Transaction, had such person exercised
the  option  immediately  prior  to  such  Corporate  Transaction.   Appropriate
adjustments  shall also be made to the option price payable per share,  provided
the aggregate option price payable for such securities shall remain the same. In
addition,  the class and number of securities  available for issuance  under the
Plan  following  the  consummation  of  the  Corporate   Transaction   shall  be
appropriately adjusted.

                                       15
<PAGE>
          (e) DISCRETION TO ACCELERATE.  The Plan  Administrator  shall have the
discretion,  exercisable either in advance of any actually-anticipated Corporate
Transaction or at the time of an actual Corporate Transaction,  to provide (upon
such terms as it may deem appropriate) for the automatic  acceleration of one or
more outstanding options granted under the Plan which are assumed or replaced in
the Corporate  Transaction and do not otherwise  accelerate at that time, in the
event the Optionee's Service should  subsequently  terminate within a designated
period following the effective date of such Corporate Transaction.

          (f) PLAN NOT TO AFFECT  CORPORATION.  The grant of options  under this
Article  II 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.

     2.4 CHANGE IN CONTROL

          (a)  DEFINITION.  For purposes of this Plan, a Change in Control shall
be deemed to occur in the event:

               (i) 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)  directly  or  indirectly
acquires 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; or

               (ii)  there is a change in the  composition  of the Board  over a
period of twenty-four  (24)  consecutive  months or less such that a majority of
the Board members (rounded up to the next whole number) ceases, by reason of one
or more proxy  contests  for the election of Board  members,  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 such  election  or
nomination was approved by the Board.

          (b) DISCRETION TO ACCELERATE.  The Plan  Administrator  shall have the
discretionary   authority,   exercisable  either  in  advance  of  any  actually
anticipated Change in Control or at the time of an actual Change in Control,  to

                                       16
<PAGE>
provide for the automatic  acceleration of one or more outstanding options under
this  Article  II (and  the  termination  of one or  more  of the  Corporation's
outstanding  repurchase rights under this Article II) upon the occurrence of the
Change in  Control.  The Plan  Administrator  shall  also  have  full  power and
authority to condition any such option  acceleration (and the termination of any
outstanding repurchase rights) upon the subsequent termination of the Optionee's
Service within a specified period following the Change in control.

          (c) EXERCISE  RIGHTS.  Any options  accelerated in connection with the
Change in Control shall remain fully  exercisable until the expiration or sooner
termination of the option term.

     2.5 INCENTIVE OPTIONS.

          The  exercisability  as Incentive  Options of any options  accelerated
under Sections 2.3 or 2.4 hereof in connection  with a Corporate  Transaction or
Change in Control shall remain  subject to the dollar  limitation of Section 2.2
hereof.

                                   ARTICLE III
                                    RESERVED

                                   ARTICLE IV
                         AUTOMATIC OPTION GRANT PROGRAM

     4.1 TERMS AND CONDITIONS OF AUTOMATIC OPTION GRANTS.

          (a) AMOUNT AND DATE OF GRANT. During the term of this Plan,  automatic
option  grants (the  "Automatic  Option  Grant")  shall be made to each eligible
non-employee member of the Board ("Optionee") as follows:

               (i) Each year on the  Annual  Automatic  Grant  Date an option to
acquire 5,000 shares of Common Stock ("Option  Shares") shall be granted to each
eligible  non-employee  member of the  Board for so long as there are  shares of
Common Stock  available  under Section 1.5 hereof.  The "Annual  Automatic Grant
Date"  shall  be as of the  first  business  day  of  the  month  in  which  the
Corporation's   Annual  Stockholders   Meeting  is  held.   Notwithstanding  the
foregoing,  (1) any non-Employee Member of the Board whose term ended as of such
Automatic  Grant Date shall not be  eligible  to receive  any  automatic  option
grants on that Annual  Automatic Grant Date and (2) any  non-Employee  Member of
the Board who has received an Automatic Grant pursuant to Section  4.1(a)(ii) on

                                       17
<PAGE>
the same  date as the  Annual  Automatic  Grant  Date or  within  30 days  prior
thereto,  shall not be eligible  to receive an  Automatic  Option  Grant on that
Annual Automatic Grant Date.

               (ii) On the Initial Automatic Grant Date, every new member of the
Board who is an eligible  non-Employee  and has not previously  been a member of
the Board shall be granted an option to acquire  10,000  shares of Common  Stock
("Option  Shares") as long as there are shares of Common Stock  available  under
Section 1.5 hereof.  The "Initial  Automatic Grant Date" shall be as of the date
that the Optionee was first appointed or elected to the Board.

          (b)  EXERCISE  PRICE.  The  exercise  price per share of Common  Stock
subject to each automatic option grant made under this Article IV shall be equal
to 100% of the fair market value per share of the Common Stock on the applicable
Automatic Grant Date, as determined in accordance with the valuation  provisions
of Section 2.1(d) hereof.

          (c) METHOD OF EXERCISE. In order to exercise an option with respect to
any Option  Shares for which an  Automatic  Option Grant is  exercisable  at the
time, Optionee (or in the case of an exercise after Optionee's death, Optionee's
executor,  administrator,  heir or  legatee,  as the case may be) must  take the
following action:

               (i) execute and deliver to the Secretary of the Company a written
notice of exercise;

               (ii) pay the aggregate Option Price in one of the alternate forms
as set forth in Section 4.1(d) below; and

               (iii)  furnish  appropriate  documentation  that  the  person  or
persons  exercising  the option (if other  than the  Optionee)  has the right to
exercise  such option.  As soon after the  Exercise  Date (as defined in Section
4.1(e) hereof), as practical,  the Company shall mail or deliver to or on behalf
of the  Optionee  (or any other  person or  persons  exercising  this  option in
accordance  herewith) a certificate or certificates  representing the shares for
which the option has been  exercised in accordance  with the  provisions of this
Plan. In no event may any option be exercised for any fractional shares.

          (d) PAYMENT  PRICE.  The exercise price shall be payable in one of the
alternative forms specific below:

                                       18
<PAGE>
               (i)  full   payment  in  cash  or  check  made   payable  to  the
Corporation's order; or

               (ii)  full  payment  through  a  sale  and  remittance  procedure
pursuant to which the  non-employee  Board member (A) shall provide  irrevocable
written instructions to a 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 and shall (B)  concurrently
provide written  directives to the Corporation to deliver the  certificates  for
the purchased  shares  directly to such  brokerage firm in order to complete the
sale transaction.

          (e) EXERCISE  DATE. For purposes of this Article IV, the Exercise Date
shall be the date on which written notice of the option exercise is delivered to
the  Corporation,  and the fair  market  value per share of Common  Stock on any
relevant date under this Article IV shall be  determined in accordance  with the
provisions  of  Section  2.1(d)  hereof.  Except  to the  extent  the  sale  and
remittance procedure specified above is utilized for the exercise of the potion,
payment of the option price for the purchased shares must accompany the exercise
notice.

          (f) TERM OF OPTION.  Each automatic option grant under this Article IV
shall have a maximum term of ten (10) years  measured from the  Automatic  Grant
Date. Should Optionee's  service as a Board member cease for any reason while an
option  remains  outstanding  and  unexercised,   then  the  option  term  shall
immediately  terminate and the option shall cease to be outstanding prior to the
Expiration Date in accordance with the following provisions:

               (i) The  option  shall  immediately  terminate  and  cease  to be
outstanding  for any  shares of  Common  Stock  for  which  the  option  was not
otherwise exercisable at the time of Optionee's cessation of Board service.

               (ii) Should Optionee  cease,  for any reason other than death, to
serve as a member of the Board,  then  Optionee  shall have a  six-month  period
measured  from the date of such  cessation of Board service in which to exercise
the options which vested prior to the time of such  cessation of Board  service.
In no event,  however,  may any option be exercised after the Expiration Date of
such option.

               (iii)  Should  Optionee  die while  serving as a Board  member or
within  six  months  after  cessation  of  Board  service,   then  the  personal
representative  of the  Optionee's  estate (or the person or persons to whom the

                                       19
<PAGE>
option is transferred  pursuant to the Optionee's will or in accordance with the
laws of descent and  distribution)  shall have the right to exercise  any option
for any or all of the  shares of  Common  Stock  for  which  the  option  is, in
accordance  with the  provisions  of this Plan,  exercisable  at the time of the
Optionee's cessation of Board service, less any shares subsequently purchased by
the Optionee pursuant to the option prior to death. Such right shall cease to be
exercisable  and the option  shall  accordingly  terminate  with  respect to all
Common Stock available under such option by the earlier of (A) the expiration of
the  twelve-month  period measured from the date of Optionee's  death or (B) the
Expiration Date.

          (g) VESTING.  Each  Automatic  Option  Grant made  pursuant to Section
4.1(a)(i) shall become exercisable and vest in a series of twelve (12) equal and
successive  monthly  installments,  with the first  such  installment  to become
exercisable  one month after the Annual  Automatic  Grant Date.  Each  Automatic
Option Grant made pursuant to Section  4.1(a)(ii)  shall become  exercisable and
vest in a series of 36 equal and successive monthly installments, with the first
such  installment to become  exercisable  one month after the Initial  Automatic
Grant Date. Each installment of an option shall only vest and become exercisable
if the Optionee has not ceased serving as a Board member as of such  installment
date.

          (h) LIMITED  TRANSFERABILITY.  Each  Automatic  Option  Grant shall be
exercisable  only by Optionee  during  Optionee's  lifetime and shall be neither
transferable  nor  assignable,  other than by will or by the laws of descent and
distribution following Optionee's death.

     4.2 CORPORATE TRANSACTION

          In the event of stockholder  approval of a Corporate  Transaction  (as
that term is defined in Section  2.3(a)),  then all options granted  pursuant to
this Article IV (to the extent outstanding at such time, but not otherwise fully
exercisable and vested) shall  automatically  accelerate and immediately vest so
that the option shall, immediately prior to the specified effective date for the
Corporate Transaction,  become fully exercisable for all of the Option Shares at
the time subject to the option and may  thereafter  be exercised  for any or all
such Option Shares.  Upon the  consummation  of the Corporate  Transaction,  the
option shall, to the extent not previously exercised,  terminate and cease to be
outstanding.

                                       20
<PAGE>
     4.3 CHANGE IN CONTROL

          All options granted  pursuant to an Automatic  Option  Agreement under
this Article IV (to the extent outstanding,  but not otherwise fully exercisable
and  vested)  shall  automatically  accelerate  in  connection  with a Change in
Control (as that term is defined in Section 2.4(a)),  so that such option shall,
immediately prior to the effective date of such Change in Control,  become fully
exercisable  for all of the Option Shares at the time subject to that option and
may be exercised for any or all of such Option  Shares.  The option shall remain
so  exercisable  until such option has  terminated  in  accordance  with Section
4.1(d) hereof.

     4.4 MISCELLANEOUS PROVISIONS

          (a) CORPORATION  RIGHTS.  The Automatic  Option Grants 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.

          (b) PRIVILEGE OF STOCK  OWNERSHIP.  An Optionee  shall not have any of
the rights of a stockholder  with respect to Option Shares until such individual
shall have exercised the option and paid the option price for the Option Shares.

                                    ARTICLE V
                                  MISCELLANEOUS

     5.1 AMENDMENT OF THE PLAN AND AWARDS

          (a) BOARD  AUTHORITY.  The Board has complete and exclusive  power and
authority to amend or modify the Plan (or any  component  thereof) in any or all
respects  whatsoever.  However, no such amendment or modification shall, without
the consent of the Corporation's stockholders,  disqualify any option previously
granted under the Plan for treatment as an Incentive Option, or adversely affect
rights and obligations with respect to options at the time outstanding under the
Plan,  unless  the  Optionee  or  Participant  consents  to such  amendment.  In
addition,  the  Board  may  not,  without  the  approval  of  the  Corporation's
stockholders,  amend the Plan to (i)  materially  increase the maximum number of
shares issuable under the Plan, except for permissible adjustments under Section
1.5(d) or extend the term of the Plan,  (ii)  materially  modify the eligibility
requirements for plan  participation  or (iii) materially  increase the benefits
accruing to plan participants.

          (b) OPTIONS ISSUED PRIOR TO STOCKHOLDER APPROVAL.  Options to purchase
shares of Common  Stock may be  granted  under the  Discretionary  Option  Grant

                                       21
<PAGE>
Program and the Automatic Option Grant Program prior to any required stockholder
approvals,  provided,  any  shares  actually  issued  under the Plan are held in
escrow until stockholder  approval is obtained.  If such stockholder approval is
not obtained within twelve (12) months of the meeting of the Board approving the
Plan or any  amendments,  then (i) any  unexercised  options shall terminate and
cease to be  exercisable  and (ii) the  Corporation  shall  promptly  refund the
purchase  price paid for any excess  shares  actually  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.

          (c) RULE 16B-3 PLAN.  With respect to persons subject to Section 16 of
the 1934 Act, the Plan is intended to comply with all  applicable  conditions of
Rule 16b-3 (and all subsequent  revisions  thereof)  promulgated  under the 1934
Act. To the extent any revision of the Plan or action by any Plan  Administrator
fails to so comply, it shall be deemed null and void, to the extent permitted by
law and deemed advisable by such Plan Administrator.  In addition, the Board may
amend  the Plan  from  time to time as it deems  necessary  in order to meet the
requirements  of any  amendments  to  Rule  16b-3  without  the  consent  of the
shareholders of the Company.

     5.2 TAX WITHHOLDING

          (a) GENERAL. The Corporation's  obligation to deliver shares of Common
Stock upon the exercise of stock  options for such shares or the vesting of such
shares  under the Plan shall be subject to the  satisfaction  of all  applicable
Federal, State and local income tax and employment tax withholding requirements.

          (b) SHARES TO PAY FOR WITHHOLDING.  A Plan  Administrator  may, in its
discretion and in accordance with the provisions of this Section 5.2(b) and such
supplemental  rules  as the  Plan  Administrator  may  from  time to time  adopt
(including the applicable safe-harbor provisions of SEC Rule 16b-3), provide any
or all holders of  non-statutory  options or unvested shares under the Plan with
the right to use shares of the Corporation's Common Stock in satisfaction of all
or  part  of the  Federal,  State  and  local  income  tax  and  employment  tax
liabilities  incurred by such holders in  connection  with the exercise of their
options or the vesting of their shares (the "Taxes"). Such right may be provided
to any such holder in either or both of the following formats:

               (i) STOCK WITHHOLDING.  The holder of the nonstatutory  option or
unvested  shares  may be  provided  with the  election  to have the  Corporation
withhold,  from the shares of Common Stock otherwise  issuable upon the exercise

                                       22
<PAGE>
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
applicable  Taxes (not to exceed one hundred percent  (100%))  designated by the
holder.

               (ii)  STOCK  DELIVERY.   The  Plan   Administrator  may,  in  its
discretion,  provide  the  holder of the  non-statutory  option or the  unvested
shares  with  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 individual (other than pursuant to the
transaction  triggering  the Taxes) with an aggregate fair market value equal to
the percentage of the taxes incurred in connection  with such option exercise or
share  vesting  (not to exceed one hundred  percent  (100%))  designated  by the
holder.

     5.3 EFFECTIVE DATE AND TERM OF PLAN

          (a) EFFECTIVE DATE. This Plan, as successor to the Corporation's  1989
Stock Option Plan, become effective as of the applicable  Effective Date, and no
further option grants or stock  issuances shall be made under the 1989 Plan from
and after such Effective Date.

          (b)  INCORPORATION  OF 1989 PLAN.  Each option issued and  outstanding
under the 1989 Plan immediately prior to the Effective Date of the Discretionary
Option  Grant  Program  shall be  incorporated  into this Plan and treated as an
outstanding  option under this Plan,  but each such option shall  continue to be
governed  solely by the terms and conditions of the instrument  evidencing  such
grant,  and nothing in this Plan shall be deemed to affect or  otherwise  modify
the rights or  obligations  of the holders of such options with respect to their
acquisition of shares of Common Stock thereunder.

          (c)  DISCRETION.  The option and vesting  acceleration  provisions  of
Article II relating to Corporate Transactions and Changes in Control may, in the
Plan Administrator's  discretion, be extended to one or more stock options which
are outstanding  under the 1989 Plan on the Effective Date of the  Discretionary
Option Grant Program but which do not otherwise provide for such acceleration.

          (d)  TERMINATION OF PLAN. The Plan shall terminate upon the earlier of
(i)  January  19,  2013 2 or (ii) the date on which  all  shares  available  for

----------
(2)  By amendment of the stockholders  approved August 18, 2000, the term of the
     Plan was extended from January 19, 2003 to January 19, 2013.

                                       23
<PAGE>
issuance  under the Plan shall have been  issued  pursuant  to the  exercise  of
options  granted under the Plan. If the date of termination is determined  under
clause  (i)  above,   then  all  option  grants  and  unvested  stock  issuances
outstanding on such date shall  thereafter  continue to have force and effect in
accordance  with the  provisions of the  instruments  evidencing  such grants or
issuances.

     5.4 USE OF PROCEEDS

          Any cash proceeds  received by the Corporation from the sale of shares
pursuant to option  grants  under the Plan shall be used for  general  corporate
purposes.

     5.5 REGULATORY APPROVALS

          (a)  GENERAL.  The  implementation  of the Plan,  the  granting of any
option  under the Plan,  and the  issuance of Common  Stock upon the exercise or
surrender  of  the  option  grants  made  hereunder  shall  be  subject  to  the
Corporation's  procurement  of all approvals and permits  required by regulatory
authorities having jurisdiction over the Plan, the options granted under it, and
the Common Stock issued pursuant to it.

          (b) SECURITIES REGISTRATION. No shares of Common Stock or other assets
shall be issued or  delivered  under this 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 securities exchange on which stock of the
same class is then listed.

     5.6 NO EMPLOYMENT/SERVICE RIGHTS

          Neither the action of the  Corporation in  establishing  the Plan, nor
any action taken by the Plan Administrator  hereunder,  nor any provision of the
Plan shall be construed so as to grant any individual the right to remain in the
employ or service of the Corporation  (or any parent or subsidiary  corporation)
for any  period of  specific  duration,  and the  Corporation  (or any parent or
subsidiary  corporation retaining the services of such individual) may terminate
such individual's  employment or service at any time and for any reason, with or
without cause.

                                       24
<PAGE>
     5.7 MISCELLANEOUS PROVISIONS

          (a)  ASSIGNMENT.  The right to acquire  Common  Stock or other  assets
under the Plan may not be assigned,  encumbered or otherwise  transferred by any
Optionee or  Participant.  The provisions of the Plan shall inure to the benefit
of, and be binding upon, the Corporation and its successors or assigns,  whether
by Corporate Transaction or otherwise,  and the Participants and Optionees,  the
legal  representatives  of their respective  estates,  their respective heirs or
legatees and their permitted assignees.

          (b) CHOICE OF LAW. The provisions of the Plan relating to the exercise
of options and the vesting of shares  shall be governed by the laws of the State
of Arizona,  as such laws are applied to contracts entered into and performed in
such State.

          (c) PLAN NOT EXCLUSIVE.  This Plan is not intended to be the exclusive
means by which the  Corporation  may issue  options or  warrants  to acquire its
shares of Common Stock, stock awards or issuances, or any other type of award or
issuance.  To the extent  permitted by  applicable  law, any such other  option,
warrants,  issuance, or awards may be issued by the Company, other than pursuant
to this Plan, without shareholder approval.

     EXECUTED as of the 18th day of August, 2000.

                                       MICROCHIP TECHNOLOGY CORPORATION,
                                       a Delaware corporation

                                       By: /s/ Steve Sanghi
                                           -------------------------------------
                                           Steve Sanghi

                                           Its: Chairman of the Board, President
                                                and Chief Executive Officer

Attested by:

/s/ Mary K. Simmons
---------------------------
Mary K. Simmons

                                       25

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