Document:

Form of Executive Employment Agreement for Hal Brown

 
EXHIBIT 10.8

 
PACIFIC CONTINENTAL 
EMPLOYMENT AGREEMENT 
 
THIS EMPLOYMENT AGREEMENT (“Agreement”), dated and signed as of December 10, 2002, is entered into between PACIFIC CONTINENTAL BANK
(“Bank”), PACIFIC CONTINENTAL CORPORATION (“Corporation”) and HAL M. BROWN (“Executive”). 
 
RECITALS 
 

	A.	 	Executive currently serves as President and Chief Executive Officer of the Bank and Corporation. 

 

	B.	 	Corporation and Bank desire Executive to continue his employment at the Bank and Corporation under the terms and conditions of this Agreement.

 

	C.	 	Executive desires to continue his employment at the Bank and Corporation under the terms and conditions of this Agreement. 

 

	D.	 	This Agreement supercedes any and all other employment, severance or similar agreements that may currently be in effect for Executive with either the Bank or the
Corporation. 

 
AGREEMENT

 
In consideration of the promises set forth in this Agreement,
the parties agree as follows. 
 

	1.	 	Employment.    The Bank and Corporation agree to employ Executive, and Executive accepts employment by the Bank and Corporation on
the terms and conditions set forth in this Agreement. Executive’s title will be President and Chief Executive Officer of both the Bank and Corporation. During the Term of this Agreement, Executive will serve as a director of both the Bank and
Corporation. 

 

	2.	 	Term.    The term of this Agreement (“Term”) commences from the date hereof and expires on April 30, 2005, unless
sooner terminated in accordance with Section 9 or extended until April 30 of subsequent years in accordance with this Section 2. Notwithstanding any termination or expiration of this Agreement, so long as Executive is employed by the Corporation or
any of its subsidiaries, the provisions of Section 10 shall survive until such time as the Corporation’s Board of Directors specifically terminates Section 10. 

 

	 	a.	 	Each year, commencing in 2003, Executive may include, as an agenda item for consideration by the Boards of Directors of the Corporation and the Bank at their annual
organization meetings, the extension of the Term of this Agreement for an additional one year (the “Extension Notice”). By way of example, if the Term is extended at the annual meetings in 2003, then this Agreement shall expire on April
30, 2006 rather than April 30, 2005, and if the Term is subsequently extended at the annual meetings in 2004, then this Agreement shall accordingly expire on April 30, 2007. 

 

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	 	b.	 	If Executive provides the Extension Notice, then the Term of this Agreement shall be extended for one additional year unless a majority of the Boards of Directors of
both the Corporation and the Bank (excluding Executive) elect not to extend the Term at their annual organization meetings. If the Boards of Directors elect not to extend the Term, written notice of such fact shall be promptly given to Executive.

 

	 	c.	 	If Executive fails provide the Extension Notice, then the Term of this Agreement shall be extended only if a majority of the Boards of Directors of both the
Corporation and the Bank (excluding Executive) elect to extend the Term for one additional year. 

 

	3.	 	Duties.    The Bank and Corporation will employ Executive as its President and Chief Executive Officer. Executive will faithfully
and diligently perform his assigned duties, which are as follows: 

 

	 	a.	 	Bank Performance.    Executive will be responsible for all aspects of the Bank’s performance, including without limitation, directing
that daily operational and managerial matters are performed in a manner consistent with Corporation’s and the Bank’s policies. 

 

	 	b.	 	Development and Preservation of Business.    Executive will be responsible for the development and preservation of banking relationships
and other business development efforts (including appropriate civic and community activities) in the Bank’s market area. 

 

	 	c.	 	Report to Board.    Executive will report directly to the Bank’s and the Corporation’s boards of directors.

 

	4.	 	Extent of Services.    Executive will devote all of his working time, attention and skill to the duties and responsibilities set
forth in Section 3. To the extent that such activities do not interfere with his duties under Section 3, Executive may participate in other businesses as a passive investor, but (a) Executive may not actively participate in the operation or
management of those businesses, and (b) Executive may not, without the Bank’s or the Corporation’s prior written consent, make or maintain any investment in a business with which the Bank and/or Corporation has an existing competitive or
commercial relationship. 

 

	5.	 	Salary.    In addition to normal fees as a member of the Boards of Directors of the Bank and the Corporation, Executive will initially
receive an annual base salary of $175,000, to be paid in accordance with the Bank’s regular payroll schedule. Subsequent salary increases are subject to the Bank’s and Corporation’s annual review of Executive’s compensation and
performance. 

 

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	6.	 	Incentive Compensation.    Each year during the Term, the Bank’s board of directors will determine the amount of bonus to be
paid by the Bank to Executive for that year. Such bonus shall be determined in accordance with the Bank’s 401(k)/bonus formula, as such formula is in effect as of the date of this Agreement and as it may be modified with Executive’s prior
approval. This bonus will be paid to Executive no later than February 15 of the year following the year in which the bonus is earned by Executive.  

 

	7.	 	Income Deferral.    Executive will be eligible to participate in any program available to the Bank’s and Corporation’s
senior management for income deferral, for the purpose of deferring receipt of any or all of the compensation he may become entitled to under this Agreement. 

 

	8.	 	Vacation and Benefits. 

 

	 	a.	 	Vacation and Holidays.    Executive will receive six (6) weeks of paid vacation each year. Each year, Executive may carry over up to three
(3) weeks of unused vacation to the following year. Any unused vacation time in excess of three (3) weeks will not accumulate or carry over from one calendar year to the next. 

 

	 	b.	 	Benefits.    Executive will be entitled to participate in any group life insurance, disability, health and accident insurance plans,
profit sharing and pension plans and in other employee fringe benefit programs the Bank or Corporation may have in effect from time to time for its similarly situated employees, in accordance with and subject to any policies adopted by the
Bank’s or Corporation’s board of directors with respect to the plans or programs, including without limitation, any incentive or employee stock option plan, deferred compensation plan, 401(k) plan (including matching or profit plan), and
Supplemental Executive Retirement Plan (SERP). Neither the Bank nor Corporation through this Agreement obligates itself to make any particular benefits available to its employees. 

 

	 	c.	 	Business Expenses.    The Bank will reimburse Executive for ordinary and necessary expenses which are consistent with past practice at the
Bank (including, without limitation, travel, entertainment, and similar expenses) and which are incurred in performing and promoting the Bank’s business. Executive will present on a monthly basis itemized accounts of these expenses, subject to
any limits of Bank policy or the rules and regulations of the Internal Revenue Service. 

 

	9.	 	Termination of Employment. 

 

	 	a.	 	Termination By Bank for Cause.    If, during the Term, the Bank terminates Executive’s employment for Cause (defined below), the Bank
will pay Executive the salary earned and expenses reimbursable under this Agreement incurred through the date of his termination. Executive will have no right to receive compensation or other benefits for any period after termination under this
Section 9. 

 

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	 	b.	 	Other Termination By Bank.    If, during the Term, the Bank terminates Executive’s employment without Cause, or Executive terminates
his employment for Good Reason (defined below), the Bank will pay Executive the compensation (including the bonus described in Section 6) and other benefits (described in Section 8) he would have been entitled to if his employment had not terminated
(the “Termination Payment”), for a period of twelve months. In the event of a termination related to a Change in Control pursuant to Section 10, the provisions of Section 10 shall supersede this section. 

 

	 	c.	 	Death or Disability.    This Agreement terminates (1) if Executive dies or (2) if Executive is unable to perform his duties and
obligations under this Agreement for a period of 90 days as a result of a physical or mental disability (such inability being, a “Disability”), unless with reasonable accommodation Executive could continue to perform his duties
under this Agreement and making these accommodations would not pose an undue hardship on the Bank. If termination occurs under this Section 9(c), Executive or his estate will be entitled to receive all compensation and benefits earned and expenses
reimbursable through the date Executive’s employment terminated. 

 

	 	d.	 	Return of Bank Property.    If and when Executive ceases, for any reason, to be employed by the Bank or the Corporation, Executive must
return to the Bank all keys, pass cards, identification cards and any other property of the Bank or Corporation. At the same time, Executive also must return to the Bank all originals and copies (whether in hard copy, electronic or other form) of
any documents, drawings, notes, memoranda, designs, devices, diskettes, tapes, manuals, and specifications which constitute proprietary information or material of the Bank or Corporation. The obligations in this paragraph include the return of
documents and other materials which may be in his desk at work, in his car, in place of residence, or in any other location under his control. 

 

	 	e.	 	Cause.    “Cause” means any one or more of the following: 

 

	 	(1)	 	Willful misfeasance or gross negligence in the performance of Executive’s duties; 

 

	 	(2)	 	Conviction of a crime in connection with his duties; or 

 

	 	(3)	 	Conduct demonstrably and significantly harmful to the Bank, as reasonably determined on the advice of legal counsel by the Bank’s board of directors.

 

	 	f.	 	Good Reason.    “Good Reason” means only any one or more of the following: 

 

	 	(1)	 	Reduction of Executive’s salary or reduction or elimination of any significant compensation or benefit plan benefiting Executive, unless the reduction or
elimination is generally applicable to substantially all Bank employees (or employees of a successor or controlling entity of the Bank) formerly benefited; 

 

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	 	(2)	 	The assignment to Executive without his consent of any authority or duties materially inconsistent with Executive’s position as of the date of this Agreement;
or 

 

	 	(3)	 	A relocation or transfer of Executive’s principal place of employment that would require Executive to commute on a regular basis more than 50 miles each way
from his present place of employment. 

 

	 	g.	 	Change in Control.    ”Change in Control” means a change “in the ownership or effective control” or “in the
ownership of a substantial portion of the assets” of the Bank, within the meaning of section 280G of the Internal Revenue Code. 

 

	10.	 	Payment Related to a Change in Control. 

 

	 	a.	 	Payment Triggers.    Upon the occurrence of any of the following, each of which is a “Triggering Event,” Executive will
be entitled to receive the payment and benefits described in Section 10(b): 

 

	 	(1)	 	A Change in Control of the Bank and/or the Corporation is consummated while Executive is employed by the Bank, and Executive is not offered a Comparable Position (as
defined below) with the acquiring company; 

 

	 	(2)	 	Within one year after accepting a Comparable Position with the acquiring company, Executive’s employment ceases for any reason other than termination for Cause;
or 

 

	 	(3)	 	The Bank terminates Executive’s employment without Cause or Executive resigns for Good Reason, and within one year thereafter the Bank and/or the Corporation
enters into an agreement for a Change in Control or any party announces or is required by law to announce a prospective Change in Control of the Bank and/or the Corporation. 

 

	 	(4)	 	A “Comparable Position” means the position of CEO of the acquiring company, on financial terms in the aggregate no less favorable than this
Agreement. 

 

	 	b.	 	Payment Amount.    If a Triggering Event occurs, the Bank will pay Executive, upon the closing of the Change in Control or termination of
Executive’s employment, whichever is applicable, a single payment in an amount equal to two and one-half (2.5) times the highest compensation (as reportable on Executive’s IRS W-2 form) received by Executive from the Bank and/or the
Corporation during any of the most recent three (3) calendar years ending before, or simultaneously with, the date on which the Change in Control occurs or the termination of Executive’s employment, as applicable, less the amount of any
Termination Payments that may have been paid to Executive pursuant to Section 9(b). If Executive’s employment is terminated pursuant to Section 10(a), the Bank will also maintain and provide for one-year following Executive’s termination
or the closing of the Change in Control, whichever is later, at no cost to Executive, the benefits described in Section 8(b) to which Executive is entitled (determined as of the day before the date of such termination); but if Executive’s
participation in any such benefit is thereafter barred or not feasible, or discontinued or materially reduced, the Bank will arrange to provide Executive with either benefits substantially similar to those benefits or a cash payment of substantially
similar value in lieu of the benefits. 

 

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	 	c.	 	Limitations on Payments Related to Change in Control.    The following apply notwithstanding any other provision of this Agreement:

 

	 	(1)	 	If the total of the payments and benefits described in Section 10(b) will be an amount that would cause them to be a “parachute payment” within the meaning
of Section 280G(b)(2)(A) of the Internal Revenue Code (a “Parachute Payment Amount”), then such payment(s) shall be reduced so that the total amount thereof is $1 less than the Parachute Payment Amount; and

 

	 	(2)	 	Executive’s right to receive the payments and benefits described in Section 10(b) terminates immediately if before the Change in Control transaction closes,
Executive terminates his employment without Good Reason or the Bank terminates Executive’s employment for Cause. 

 

	 	d.	 	Survival.    The provisions of this Section 10 will survive any termination or expiration of this Agreement until such time as the
Corporation’s Board of Directors specifically terminates this Section 10. 

 

	11.	 	Confidentiality.    Executive will not, after the date this Agreement is signed, including during and after its Term, use for his
own purposes or disclose to any other person or entity any confidential business information concerning the Bank or Corporation or their business operations, unless (1) the Bank or Corporation consents to the use or disclosure of their respective
confidential information; (2) the use or disclosure is consistent with Executive’s duties under this Agreement or (3) disclosure is required by law or court order. For purposes of this Agreement, confidential business information includes,
without limitation, trade secrets, various confidential information concerning all aspects of current and future operations, nonpublic information on investment management practices, marketing plans, pricing structure and technology of either the
Bank or Corporation. Executive will also treat the terms of this Agreement as confidential business information. 

 

	12.	 	Nonsolicitation.    For two years after Executive’s employment under this Agreement terminates, Executive will not, directly or
indirectly, persuade or entice, or attempt to persuade or entice, (i) any employee of the Bank or Corporation to terminate his/her employment with the Bank or Corporation, or (ii) any customer of the Bank or Corporation to terminate his/her
relationship with the Bank or Corporation or to otherwise direct any portion of his/her business away from the Bank or Corporation. 

 

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	13.	 	Enforcement. 

 

	 	a.	 	The Bank and Executive stipulate that, in light of all of the facts and circumstances of the relationship between Executive and the Bank, the agreements referred to
in Sections 11 and 12 are fair and reasonably necessary for the protection of the Bank’s and Corporation’s confidential information, goodwill and other protectable interests. If a court of competent jurisdiction should decline to enforce
any of those covenants and agreements, Executive and the Bank request the court to reform these provisions to restrict Executive’s use of confidential information and Executive’s ability to solicit employees to the maximum extent, in time
and scope, the court finds enforceable. 

 

	 	b.	 	Executive acknowledges the Bank and Corporation will suffer immediate and irreparable harm that will not be compensable by damages alone if Executive repudiates or
breaches any of the provisions of Sections 11 and 12 or threatens or attempts to do so. For this reason, under these circumstances, the Bank, in addition to and without limitation of any other rights, remedies or damages available to it at law or in
equity, will be entitled to obtain temporary, preliminary and permanent injunctions in order to prevent or restrain the breach, and the Bank will not be required to post a bond as a condition for the granting of this relief.

 

	14.	 	Covenants.    Executive specifically acknowledges the receipt of adequate consideration for the covenants contained in Sections 11
and 12 and that the Bank is entitled to require him to comply with these Sections. These Sections will survive termination of this Agreement.  

 

	15.	 	Arbitration.  

 

	 	a.	 	Arbitration.    At either party’s request, the parties must submit any dispute, controversy or claim arising out of or in connection
with, or relating to, this Agreement or any breach or alleged breach of this Agreement, to arbitration under the American Arbitration Association’s rules then in effect (or under any other form of arbitration mutually acceptable to the
parties). A single arbitrator agreed on by the parties will conduct the arbitration. If the parties cannot agree on a single arbitrator, each party must select one arbitrator and those two arbitrators will select a third arbitrator. This third
arbitrator will hear the dispute. The arbitrator’s decision is final (except as otherwise specifically provided by law) and binds the parties, and either party may request any court having jurisdiction to enter a judgment and to enforce the
arbitrator’s decision. The arbitrator will provide the parties with a written decision naming the substantially prevailing party in the action. This prevailing party is entitled to reimbursement from the other party for its costs and expenses,
including reasonable attorneys’ fees. 

 

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	 	b.	 	Governing Law.    All proceedings will be held at a place designated by the arbitrator in Lane County, Oregon. 

 

	 	c.	 	Exception to Arbitration.    Notwithstanding the above, if Executive violates Section 11 or 12, the Bank and/or Corporation will have the
right to initiate the court proceedings described in Section 13b), in lieu of an arbitration proceeding under this Section 15. 

 

	16.	 	Miscellaneous Provisions. 

 

	 	a.	 	Entire Agreement.    This Agreement constitutes the entire understanding and agreement between the parties concerning its subject matter
and supersedes all prior agreements, correspondence, representations, or understandings between the parties relating to its subject matter. 

 

	 	b.	 	Binding Effect.    This Agreement will bind and inure to the benefit of the Bank’s, Corporation’s and Executive’s heirs,
legal representatives, successors and assigns. 

 

	 	c.	 	Litigation Expenses.    If either party successfully seeks to enforce any provision of this Agreement or to collect any amount claimed to
be due under it, this party will be entitled to reimbursement from the other party for any and all of its out-of-pocket expenses and costs including, without limitation, reasonable attorneys’ fees and costs incurred in connection with the
enforcement or collection. 

 

	 	d.	 	Waiver.    Any waiver by a party of its rights under this Agreement must be written and signed by the party waiving its rights. A
party’s waiver of the other party’s breach of any provision of this Agreement will not operate as a waiver of any other breach by the breaching party. 

 

	 	e.	 	Assignment.    The services to be rendered by Executive under this Agreement are unique and personal. Accordingly, Executive may not
assign any of his rights or duties under this Agreement. 

 

	 	f.	 	Amendment.    This Agreement may be modified only through a written instrument signed by both parties. 

 

	 	g.	 	Severability.    The provisions of this Agreement are severable. The invalidity of any provision will not affect the validity of other
provisions of this Agreement. 

 

	 	h.	 	Governing Law and Venue.    This Agreement will be governed by and construed in accordance with Oregon law, except to the extent that
certain matters may be governed by federal law. The parties must bring any legal proceeding arising out of this Agreement in Lane County, Oregon. 

 

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	 	i.	 	Counterparts.    This Agreement may be executed in one or more counterparts, each of which will be deemed an original, but all of which
taken together will constitute one and the same document. 

 
Signed as of: December 10, 2002: 
 

	 EXECUTIVE:

	
	 /s/    Hal M. Brown

	 Hal M. Brown

 

	 PACIFIC CONTINENTAL BANK:

	
	 By
	 	 /s/    Robert Ballin

	 Robert Ballin
 Its: Chairman of the Board

 

	 PACIFIC CONTINENTAL CORPORATION

	
	 By
	 	  

	 Robert Ballin
 Its: Chairman of the Board

 

9Exhibit
10.2

POLYCOM, INC. 1996 STOCK INCENTIVE PLAN

(AS AMENDED THROUGH
AUGUST 1, 2002)

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

ARTICLE
ONE

GENERAL PROVISIONS

I.              PURPOSE
OF THE PLAN

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

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

II.            STRUCTURE
OF THE PLAN

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

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

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

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

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

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

III.           ADMINISTRATION
OF THE PLAN

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

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

 

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

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

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

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

IV.           ELIGIBILITY

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

(i)    Employees,

(ii)   non-employee members of the Board or the
board of directors of any Parent or Subsidiary, and

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

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

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

D.    The individuals
eligible to participate in the Automatic Option Grant Program shall be limited
to (i) those individuals serving as non-employee Board members on the
Underwriting Date, (ii) those individuals who first become non-employee
Board members after the Underwriting Date, whether through appointment by the
Board or election by the Corporation’s stockholders, and (iii) those
individuals who continue to serve as non-employee Board members through one or
more Annual Stockholders Meetings held after the Underwriting Date. A
non-employee 

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

V.            STOCK
SUBJECT TO THE PLAN

A.    The
stock issuable under the Plan shall be shares of authorized but unissued or
reacquired Common Stock, including shares repurchased by the Corporation on the
open market. The maximum number of shares of Common Stock which may be issued
over the term of the Plan shall not exceed approximately 21,250,000 shares.

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

C.    No more
than ten percent (10%) of the maximum number of shares which may be issued
under the Plan may be issued pursuant to the Stock Issuance Program.

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

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

-3-

ARTICLE TWO

DISCRETIONARY OPTION GRANT PROGRAM

I.              OPTION TERMS

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

A.    EXERCISE
PRICE.

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

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

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

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

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

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

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

C.    EFFECT OF
TERMINATION OF SERVICE.

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

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

(2)   Any option exercisable in whole or in part by
the Optionee at the time of death may be exercised subsequently by the personal
representative of the Optionee’s estate or by the person or persons to whom the
option is transferred pursuant to the Optionee’s will or in accordance with the
laws of descent and distribution.

-4-

 

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

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

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

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

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

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

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

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

II.            INCENTIVE OPTIONS

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

 

-5-

 

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

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

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

III.           CORPORATE TRANSACTION/CHANGE IN
CONTROL

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

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

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

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

E.     Each
option which is assumed in connection with a Corporate Transaction shall be
appropriately adjusted, immediately after such Corporate Transaction, to apply
to the number and class of securities which would have been issuable to the
Optionee in consummation of such Corporate Transaction had the option been
exercised immediately prior to such Corporate Transaction. Appropriate
adjustments shall also be made to (i) the number and class of securities
available for issuance under the Plan following the consummation of such
Corporate Transaction, (ii) the exercise price payable per share under
each outstanding option, provided the aggregate exercise price payable for such
securities shall remain the same and (iii) the maximum number and/or class
of securities for which any one person may be granted stock options, separately
exercisable stock appreciation rights and direct stock issuances under the Plan
per calendar year.

-6-

 

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

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

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

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

IV.           CANCELLATION AND REGRANT OF OPTIONS

The Plan Administrator shall have the authority to
effect, at any time, and from time to time, with the consent of the affected
option holders the cancellation of any or all outstanding options under the
Discretionary Option Grant Program (including outstanding options incorporated
from the Predecessor Plan) and to grant in substitution new options covering
the same or different number of shares of Common Stock but with an exercise
price per share based on the Fair Market Value per share of Common Stock on the
new grant date.  However, any repricing
of stock options, effected either by reducing the exercise price of outstanding
options or canceling outstanding options and granting replacement options with
a lower exercise price, shall require the approval of the holders of a majority
of the Corporation’s voting shares, with the sole exception of that certain
exchange offer to be commenced as soon as is reasonably practicable following
May 17, 2001, pursuant to which holders of options to purchase a maximum of
6,500,000 shares of the Corporation’s Common Stock, shall be offered the
opportunity to elect to cancel such options (the “Cancelled Options”), in
exchange for the grant of replacement options to purchase 0.85 shares of the
Corporation’s Common Stock for each share under the Cancelled Options (the
“Replacement Options”), with such Replacement Options to be granted no less
than six months and one day following the cancellation of the Cancelled
Options, at a price equal to the fair market value of the Corporation’s Common
Stock on such date of grant. Each Replacement Option will have a term equal to
the lesser of (i) the remaining term of the Cancelled Option, or
(ii) seven (7) years. The vesting commencement date and vesting
schedule for each Replacement Option will be the same as for the Cancelled
Option which it replaces, subject to adjustment for any shares previously
exercised. Executive Officers and Directors of the Corporation shall not
participate in this exchange offer, and this exchange offer will be structured
so that the Corporation avoids incurring financial accounting charges.

-7-

 

V.            STOCK APPRECIATION RIGHTS

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

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

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

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

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

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

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

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

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

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

-8-

 

ARTICLE
THREE

STOCK ISSUANCE PROGRAM

I.              STOCK ISSUANCE TERMS

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

A.    PURCHASE
PRICE.

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

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

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

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

B.    VESTING
PROVISIONS.

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

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

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

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

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

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

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

-9-

 

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

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

II.            CORPORATE
TRANSACTION/CHANGE IN CONTROL

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

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

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

III.           SHARE ESCROW/LEGENDS

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

-10-

ARTICLE FOUR

AUTOMATIC OPTION GRANT PROGRAM

I.              OPTION TERMS

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

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

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

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

B.    EXERCISE
PRICE.

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

(ii)   The exercise price shall be payable in one or
more of the alternative forms authorized under the Discretionary Option Grant
Program. Except to the extent the sale and remittance procedure specified
thereunder is utilized, payment of the exercise price for the purchased shares
must be made on the Exercise Date.

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

D.    EXERCISE
AND VESTING OF OPTIONS.  Automatic
option grants made on the date of each Annual Stockholders Meeting held on or
after May 17, 2001 shall vest and become exercisable in a series of four
(4) successive equal annual installments over the Optionee’s period of continued
service as a Board member, with the first such installment to vest upon the
Optionee’s completion of one (1) year of Board service measured from the option
grant date.  Automatic option grants
made on the date of each Annual Stockholders Meeting held on or after
October 26, 1999 and prior to May 17, 2001 shall vest and become
exercisable on the first anniversary of their grant 

-11-

 

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

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

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

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

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

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

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

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

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

-12-

 

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

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

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

III.           REMAINING TERMS

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

ARTICLE
FIVE

MISCELLANEOUS

I.              FINANCING

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

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

II.            TAX WITHHOLDING

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

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

-13-

 

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

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

III.           EFFECTIVE DATE AND TERM OF THE PLAN

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

B.    The Plan
shall serve as the successor to the Predecessor Plan, and no further option
grants or direct stock issuances shall be made under the Predecessor Plan after
the Plan Effective Date. All options outstanding under the Predecessor Plan as
of such date shall be incorporated into the Plan at that time and shall be
treated as outstanding options under the Plan.

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

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

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

IV.           AMENDMENT OF THE PLAN

A.    The Board
shall have complete and exclusive power and authority to amend or modify the
Plan in any or all respects. However, no such amendment or modification shall
adversely affect any rights and obligations with respect to options, stock
appreciation rights or unvested stock issuances at the time outstanding under
the Plan unless the Optionee or the Participant consents to such amendment or
modification. In addition, certain amendments may require stockholder approval
pursuant to applicable laws or regulations. 
Notwithstanding the foregoing, the approval of the holders of not less
than a majority of the outstanding common stock of the Corporation entitled to
vote shall be required to take the following actions:

(i)    amend the Plan to materially modify the
requirements for eligibility under the Plan;

(ii)   amend the Plan to materially increase the
number of shares of Common Stock which may be issued over the term of the Plan;
or

-14-

 

(iii)  amend the Plan to materially increase the
benefits accruing to participants under the Plan as such benefits are currently
set forth in the Plan.

B.    Options to
purchase shares of Common Stock may be granted under the Discretionary Option
Grant Program and shares of Common Stock may be issued under the Stock Issuance

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

V.            USE OF PROCEEDS

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

VI.           REGULATORY APPROVALS

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

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

VII.          NO EMPLOYMENT/SERVICE RIGHTS

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

-15-

 

APPENDIX

The following
definitions shall be in effect under the Plan:

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

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

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

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

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

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

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

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

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

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

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

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

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

-16-

 

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

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

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

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

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

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

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

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

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

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

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

(ii)           such
individual’s voluntary resignation following (A) a change in his or her
position with the Corporation which materially reduces his or her level of
responsibility, (B) a reduction in his or her level of compensation
(including base salary, fringe benefits and participation in
corporate-performance based bonus or incentive programs) by more than fifteen
percent (15%) or (C) a relocation of such individual’s place of employment
by more than fifty (50) miles, provided and 

-17-

 

only if such change, reduction or relocation is
effected by the Corporation without the individual’s consent.

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

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

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

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

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

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

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

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

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

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

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

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

-18-

 

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

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

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

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

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

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

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

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

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

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

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

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

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

-19-

 

POLYCOM, INC.

 

1996 STOCK
INCENTIVE PLAN

 

STOCK OPTION
AGREEMENT

 

RECITALS

 

                A.            The Board has adopted the Plan for
the purpose of retaining the services of selected Employees, non-employee
members of the Board or of the board of directors of any Parent or Subsidiary
and consultants and other independent advisors who provide services to the
Corporation (or any Parent or Subsidiary).

 

                B.            Optionee is to render valuable
services to the Corporation (or a Parent or Subsidiary), and this Agreement is
executed pursuant to, and is intended to carry out the purposes of, the Plan in
connection with the Corporation’s grant of an option to Optionee.

 

                C.            All capitalized terms in this
Agreement shall have the meaning assigned to them in the attached Appendix.

 

                                NOW, THEREFORE, it is hereby
agreed as follows:

 

                                1.             Grant of Option.  The Corporation hereby grants to Optionee,
as of the Grant Date, an option to purchase up to the number of Option Shares
specified in the Grant Notice.  The
Option Shares shall be purchasable from time to time during the option term
specified in Paragraph 2 at the Exercise Price.

 

                                2.             Option Term.  This option shall have a term of seven (7)
years measured from the Grant Date and shall accordingly expire at the close of
business on the Expiration Date, unless sooner terminated in accordance with
Paragraph 5 or 6.

 

                                3.             Limited Transferability.  This option shall be neither transferable
nor assignable by Optionee other than by will or by the laws of descent and
distribution following Optionee’s death and may be exercised, during Optionee’s
lifetime, only by Optionee.  However, if
this option is designated a Non-Statutory Option in the Grant Notice, then this
option may also be assigned in whole or in part during Optionee’s lifetime in
accordance with the terms of a Qualified Domestic Relations Order; provided,
however, that if Optionee is employed by any of the Corporation’s European
Subsidiaries, this option may not be so assigned.  The assigned portion shall be exercisable only by the person or
persons who acquire a proprietary interest in the option pursuant to such
Qualified Domestic Relations Order.  The
terms applicable to the assigned portion shall be the same as those in effect
for this option immediately prior to such assignment and shall be set forth in
such documents issued to the assignee as the Plan Administrator may deem
appropriate.

 

                                4.             Dates of Exercise.  This option shall become exercisable for the
Option Shares in one or more installments as specified in the Grant
Notice.  As the option becomes
exercisable for such installments, those installments shall accumulate and the
option shall remain exercisable for the accumulated installments until the
Expiration Date or sooner termination of the option term under Paragraph 5 or
6.

 

                                5.             Cessation of Service.  The option term specified in Paragraph 2
shall terminate (and this option shall cease to be outstanding) prior to the
Expiration Date should any of the following provisions become applicable:

 

                                                                                            (i)                Should Optionee cease to remain
in Service for any reason (other than death, Permanent Disability or
Misconduct) while this option is outstanding, then Optionee shall have a period
of three (3) months (commencing with the date of such cessation of Service)
during which to exercise this option, but in no event shall this option be
exercisable at any time after the Expiration Date.

 

-1-

 

                                                                                           (ii)                Should Optionee die while this
option is outstanding, then the personal representative of Optionee’s estate or
the person or persons to whom the option is transferred pursuant to Optionee’s
will or in accordance with the laws of descent and distribution shall have the
right to exercise this option.  Such
right shall lapse, and this option shall cease to be outstanding, upon the earlier
of (A) the expiration of the twelve (12)- month period measured from the date
of Optionee’s death or (B) the Expiration Date.

 

                                                                                          (iii)                Should Optionee cease Service by
reason of Permanent Disability while this option is outstanding, then Optionee
shall have a period of twelve (12) months (commencing with the date of such
cessation of Service) during which to exercise this option.  In no event shall this option be exercisable
at any time after the Expiration Date.

 

                                                                                          (iv)                During the limited period of
post-Service exercisability, this option may not be exercised in the aggregate
for more than the number of vested Option Shares for which the option is
exercisable at the time of Optionee’s cessation of Service.  Upon the expiration of such limited exercise
period or (if earlier) upon the Expiration Date, this option shall terminate
and cease to be outstanding for any vested Option Shares for which the option
has not been exercised.  However, this
option shall, immediately upon Optionee’s cessation of Service for any reason,
terminate and cease to be outstanding with respect to Option Shares in which
Optionee is not otherwise at that time vested or for which this option is not
otherwise at that time exercisable.

 

                                                                                           (v)                Should Optionee’s Service be
terminated for Misconduct, then this option shall terminate immediately and
cease to remain outstanding.

 

                                6.             Special Acceleration of Option.

 

                                                (a)           This option, to the extent
outstanding at the time of a Corporate Transaction but not otherwise fully
exercisable, shall automatically accelerate so that this option shall,
immediately prior to the effective date of the Corporate Transaction, become
exercisable for all of the Option Shares at the time subject to this option and
may be exercised for any or all of those Option Shares as fully-vested shares
of Common Stock.  No such acceleration
of this option, however, shall occur if and to the extent: (i) this 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) or (ii) this option is to be replaced with a cash
incentive program of the successor corporation which preserves the spread
existing on the Option Shares at the time of the Corporate Transaction (the
excess of the Fair Market Value of those Option Shares over the aggregate
Exercise Price payable for such shares) and provides for subsequent pay-out in
accordance with the option exercise schedule set forth in the Grant Notice.  The determination of option comparability
under clause (i) shall be made by the Plan Administrator, and such
determination shall be final, binding and conclusive.

 

                                                (b)           Immediately following the Corporate
Transaction, this option shall terminate and cease to be outstanding,
except  to the extent assumed by the
successor corporation (or parent thereof) in connection with the Corporate
Transaction.

 

                                                (c)           If this option is assumed in
connection with a Corporate Transaction, then this option shall be
appropriately adjusted, immediately after such Corporate Transaction, to apply
to the number and class of securities which would have been issuable to
Optionee in consummation of such Corporate Transaction had the option been
exercised immediately prior to such Corporate Transaction, and appropriate
adjustments shall also be made to the Exercise Price, provided the
aggregate Exercise Price shall remain the same.

 

                                                (d)           This Agreement shall not in any 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.

 

                                7.             Adjustment in Option Shares.  Should any change be made to the Common
Stock by reason of any stock split, stock dividend, recapitalization,
combination of shares, exchange of shares or other change 

 

-2-

 

affecting the outstanding Common
Stock as a class without the Corporation’s receipt of consideration,
appropriate adjustments shall be made to (i) the total number and/or class
of securities subject to this option and (ii) the Exercise Price in order
to reflect such change and thereby preclude a dilution or enlargement of benefits
hereunder.

 

                                8.             Stockholder Rights.  The holder of this option shall not have any
stockholder rights with respect to the Option Shares until such person shall
have exercised the option, paid the Exercise Price and become a holder of
record of the purchased shares.

 

                                9.             Manner of Exercising Option.

 

                                                (a)           In order to exercise this option with
respect to all or any part of the Option Shares for which this option is at the
time exercisable, Optionee (or any other person or persons exercising the option)
must take the following actions:

 

                                                                                                            (i)                Execute and deliver to the
Corporation a Notice of Exercise for the Option Shares for which the option is
exercised.

 

                                                                                                           (ii)                Pay the aggregate Exercise Price
for the purchased shares in one or more of the following forms:

 

                                                                                                                (A)          cash or check made payable to the
Corporation;

 

                                                                                                                (B)           a promissory note payable to the
Corporation, but only to the extent authorized by the Plan Administrator in
accordance with Paragraph 13;

 

                                                                                                                (C)           shares of Common Stock held by
Optionee (or any other person or persons exercising the option) for the
requisite period necessary to avoid a charge to the Corporation’s earnings for
financial reporting purposes and valued at Fair Market Value on the Exercise
Date; or

 

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

 

                                                                                Except to the
extent the sale and remittance procedure is utilized in connection with the
option exercise, payment of the Exercise Price must accompany the Notice of
Exercise delivered to the Corporation in connection with the option exercise.

 

                                                                                                          (iii)                Furnish to the Corporation
appropriate documentation that the person or persons exercising the option (if
other than Optionee) have the right to exercise this option.

 

                                                                                                          (iv)                Make appropriate arrangements
with the Corporation (or Parent or Subsidiary employing or retaining Optionee)
for the satisfaction of all Federal, state and local income and employment tax
withholding requirements applicable to the option exercise.

 

-3-

 

                                                (b)           As soon as practical after the
Exercise Date, the Corporation shall issue to or on behalf of Optionee (or any
other person or persons exercising this option) a certificate for the purchased
Option Shares, with the appropriate legends affixed thereto.

 

                                                (c)           In no event may this option be
exercised for any fractional shares.

 

                                10.           Compliance with Laws and Regulations.

 

                                                (a)           The exercise of this option and the
issuance of the Option Shares upon such exercise shall be subject to compliance
by the Corporation and Optionee with all applicable requirements of law
relating thereto and with all applicable regulations of any stock exchange (or
the Nasdaq National Market, if applicable) on which the Common Stock may be listed
for trading at the time of such exercise and issuance.

 

                                                (b)           The inability of the Corporation to
obtain approval from any regulatory body having authority deemed by the
Corporation to be necessary to the lawful issuance and sale of any Common Stock
pursuant to this option shall relieve the Corporation of any liability with
respect to the non-issuance or sale of the Common Stock as to which such
approval shall not have been obtained. 
The Corporation, however, shall use its best efforts to obtain all such
approvals.

 

                                11.           Successors and Assigns.  Except to the extent otherwise provided in
Paragraphs 3 and 6, the provisions of this Agreement shall inure to the benefit
of, and be binding upon, the Corporation and its successors and assigns and
Optionee, Optionee’s assigns and the legal representatives, heirs and legatees
of Optionee’s estate.

 

                                12.           Notices.  Any notice required to be given or delivered to the Corporation
under the terms of this Agreement shall be in writing and addressed to the
Corporation at its principal corporate offices.  Any notice required to be given or delivered to Optionee shall be
in writing and addressed to Optionee at the address indicated below Optionee’s
signature line on the Grant Notice.  All
notices shall be deemed effective upon personal delivery or upon deposit in the
U.S. mail, postage prepaid and properly addressed to the party to be notified.

 

                                13.           Financing.  The Plan Administrator may, in its absolute discretion and
without any obligation to do so, permit Optionee to pay the Exercise Price for
the purchased Option Shares by delivering a promissory note payable to the
Corporation.  The terms of any such
promissory note (including the interest rate, the requirements for collateral
and the terms of repayment) shall be established by the Plan Administrator in
its sole discretion.

 

                                14.           Construction.  This Agreement and the option evidenced hereby are made and
granted pursuant to the Plan and are in all respects limited by and subject to
the terms of the Plan.  All decisions of
the Plan Administrator with respect to any question or issue arising under the
Plan or this Agreement shall be conclusive and binding on all persons having an
interest in this option.

 

                                15.           Governing Law.  The interpretation, performance and enforcement
of this Agreement shall be governed by the laws of the State of California
without resort to that State’s conflict-of-laws rules.

 

                                16.           Excess Shares.  If the Option Shares covered by this
Agreement exceed, as of the Grant Date, the number of shares of Common Stock
which may without stockholder approval be issued under the Plan, then this
option shall be void with respect to those excess shares, unless stockholder
approval of an amendment sufficiently increasing the number of shares of Common
Stock issuable under the Plan is obtained in accordance with the provisions of
the Plan.

 

                                17.           Additional Terms Applicable to an Incentive Option.  In the event this option is designated an
Incentive Option in the Grant Notice, the following terms and conditions shall
also apply to the grant:

 

                                                                                                            (i)                This option shall cease to
qualify for favorable tax treatment as an Incentive Option if (and to the
extent) this option is exercised for one or more Option 

-4-

 

Shares: (A) more than three (3) months after the date Optionee ceases to
be an Employee for any reason other than death or Permanent Disability or
(B) more than twelve (12) months after the date Optionee ceases to be an
Employee by reason of Permanent Disability.

 

                                                                                                           (ii)                No installment under this option
shall qualify for favorable tax treatment as an Incentive Option if (and to the
extent) the aggregate Fair Market Value (determined at the Grant Date) of the
Common Stock for which such installment first becomes exercisable hereunder
would, when added to the aggregate value (determined as of the respective date
or dates of grant) of the Common Stock or other securities for which this
option or any other Incentive Options granted to Optionee prior to the Grant
Date (whether under the Plan or any other option plan of the Corporation or any
Parent or Subsidiary) first become exercisable during the same calendar year,
exceed One Hundred Thousand Dollars ($100,000) in the aggregate.  Should such One Hundred Thousand Dollar
($100,000) limitation be exceeded in any calendar year, this option shall
nevertheless become exercisable for the excess shares in such calendar year as
a Non-Statutory Option.

 

                                                                                                          (iii)                Should the exercisability of
this option be accelerated upon a Corporate Transaction, then this option shall
qualify for favorable tax treatment as an Incentive Option only to the extent
the aggregate Fair Market Value (determined at the Grant Date) of the Common
Stock for which this option first becomes exercisable in the calendar year in
which the Corporate Transaction occurs does not, when added to the aggregate
value (determined as of the respective date or dates of grant) of the Common
Stock or other securities for which this option or one or more other Incentive
Options granted to Optionee prior to the Grant Date (whether under the Plan or
any other option plan of the Corporation or any Parent or Subsidiary) first
become exercisable during the same calendar year, exceed One Hundred Thousand
Dollars ($100,000) in the aggregate. 
Should the applicable One Hundred Thousand Dollar ($100,000) limitation
be exceeded in the calendar year of such Corporate Transaction, the option may
nevertheless be exercised for the excess shares in such calendar year as a
Non-Statutory Option.

 

                                                                                                          (iv)                Should Optionee hold, in
addition to this option, one or more other options to purchase Common Stock
which become exercisable for the first time in the same calendar year as this
option, then the foregoing limitations on the exercisability of such options as
Incentive Options shall be applied on the basis of the order in which such
options are granted.

 

                                18.           Leave of Absence.  The following provisions shall apply upon
the Optionee’s commencement of an authorized leave of absence:

 

                                                                                (a)           The exercise schedule in effect under
the Grant Notice shall be frozen as of the first day of the authorized leave,
and this option shall not become exercisable for any additional installments of
the Option Shares during the period Optionee remains on such leave.

 

                                                                                (b)           Should Optionee resume active
Employee status within sixty (60) days after the start date of the authorized
leave, Optionee shall, for purposes of the exercise schedule set forth in the
Grant Notice, receive Service credit for the entire period of such leave.  If Optionee does not resume active Employee
status within such sixty (60)-day period, then no Service credit shall be given
for the entire period of such leave.

 

                                                                                (c)           If the option is designated as an
Incentive Option in the Grant Notice, then the following additional provision
shall apply:

 

                                                                                                -               If the leave of absence continues
for more than ninety (90) days, then this option shall automatically convert to
a Non-Statutory Option under the Federal tax laws on the ninety-first (91st)
day of such leave, unless the Optionee’s reemployment rights are guaranteed by
statute or by written agreement. 
Following any such conversion of the option, all subsequent exercises of
such option, whether effected before or after Optionee’s return to active
Employee status, shall result in an immediate taxable event, and the 

-5-

 

Corporation shall be required to collect from Optionee the Federal, state and
local income and employment withholding taxes applicable to such exercise.

 

                                                                                (d)           In no event shall this option become
exercisable for any additional Option Shares or otherwise remain outstanding if
Optionee does not resume Employee status prior to the Expiration Date of the
option term.

 

-6-

 

                                                                               EXHIBIT
I

NOTICE OF EXERCISE

 

                I hereby notify
Polycom, Inc. (the “Corporation”) that I elect to purchase                                shares of the Corporation’s Common Stock (the
“Purchased Shares”) at the option exercise price of $                                                per share (the
“Exercise Price”) pursuant to that certain option (the “Option”) granted to me
under one of the Corporation’s Stock Incentive Plan on                                                    ,
199___.

 

                                Concurrently with the delivery of
this Exercise Notice to the Corporation, I shall hereby pay to the Corporation
the Exercise Price for the Purchased Shares in accordance with the provisions
of my agreement with the Corporation (or other documents) evidencing the Option
and shall deliver whatever additional documents may be required by such
agreement as a condition for exercise.

 

	
   

  	
  , 2000

  	
   

  	
   

  
	
  Date

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Optionee

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Address:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Social Security Number:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Print name in exact manner it is to appear

  	
   

  	
   

  
	
  on the stock certificate:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  If shares are
  to be sent to a stock

  	
   

  	
   

  
	
  broker,
  complete the following

  	
   

  	
   

  
	
  (if left
  blank, certificate will be

  	
   

  	
   

  
	
  mailed to the
  address above):

  	
   

  	
   

  
	
  Brokerage Firm Name:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Contact at Brokerage Firm:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Fax #:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Brokerage Account #:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Broker DTC Participation #:

  	
   

  	
   

  

 

 

                                                                              APPENDIX

 

                                The following
definitions shall be in effect under the Agreement:

 

                A.            Agreement shall mean this Stock Option
Agreement.

                B.             Board shall mean the
Corporation’s Board of Directors.

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

                D.            Common Stock shall mean the
Corporation’s common stock.

                E.             Corporate Transaction
shall mean either of the following stockholder-approved transactions to which
the Corporation is a party:

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

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

                F.             Corporation shall
mean Polycom, Inc., a Delaware corporation.

                G.             Domestic Relations Order
shall mean any judgment, decree or order (including approval of a property
settlement agreement) which provides or otherwise conveys, pursuant to
applicable State domestic relations laws (including community property laws),
marital property rights to any spouse or former spouse of the Optionee.

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

                I.              Exercise Date shall
mean the date on which the option shall have been exercised in accordance with
Paragraph 9 of the Agreement.

                J.              Exercise Price shall
mean the exercise price per share as specified in the Grant Notice.

                K.            Expiration Date shall mean the date on
which the option expires as specified in the Grant Notice.

                L.             Fair Market Value per
share of Common Stock on any relevant date shall be determined in accordance
with the following provisions:

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

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

                M.           Grant Date shall mean the date of grant
of the option as specified in the Grant Notice.

                N.            Grant Notice shall
mean the Notice of Grant of Stock Option accompanying the Agreement, pursuant
to which Optionee has been informed of the basic terms of the option evidenced
hereby.

                O.            Incentive Option shall mean an option
which satisfies the requirements of Code Section 422.

                P.             Misconduct shall
mean the commission of any act of fraud, embezzlement or dishonesty by
Optionee, any unauthorized use or disclosure by Optionee of confidential
information or trade secrets of the Corporation (or any Parent or Subsidiary),
or any other intentional misconduct by Optionee adversely affecting the
business or affairs of the Corporation (or any Parent or Subsidiary) in a
material manner.  The foregoing
definition shall not be deemed to be inclusive of all the acts or omissions
which the Corporation (or any Parent or Subsidiary) may consider as grounds for
the dismissal or discharge of Optionee or any other individual in the Service
of the Corporation (or any Parent or Subsidiary).

                Q.            Non-Statutory Option
shall mean an option not intended to satisfy the requirements of Code Section
422.

                R.             Notice of Exercise
shall mean the notice of exercise in the form attached hereto as
Exhibit I.

 

 

                S.             Option Shares shall
mean the number of shares of Common Stock subject to the option as specified in
the Grant Notice.

                T.             Optionee shall mean
the person to whom the option is granted as specified in the Grant Notice.

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

                V.             Permanent Disability
shall mean the inability of Optionee to engage in any substantial gainful
activity by reason of any medically determinable physical or mental impairment
which is expected to result in death or has lasted or can be expected to last
for a continuous period of twelve (12) months or more.

                W.           Plan shall mean the
Corporation’s 1996  Stock Incentive
Plan.

                X.            Plan Administrator shall mean either
the Board or a committee of Board members, to the extent the committee is at
the time responsible for the administration of the Plan.

                Y.             Qualified Domestic Relations Order
shall mean a Domestic Relations Order which substantially complies with the
requirements of Code Section 414(p). 
The Plan Administrator shall have the sole discretion to determine
whether a Domestic Relations Order is a Qualified Domestic Relations Order.

                Z.             Service shall mean the
Optionee’s performance of services for the Corporation (or any Parent or
Subsidiary) in the capacity of an Employee, a non-employee member of the board
of directors or a consultant or independent advisor.

                AA.         Stock Exchange shall mean the American
Stock Exchange or the New York Stock Exchange.

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

 

 

 

 

A-2

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