Document:

Prepared by R.R. Donnelley Financial -- 1997 Directors' Stock Option Plan

  
 Exhibit 10.5 
  
 APPLIED MICRO CIRCUITS CORPORATION 
 1997 DIRECTORS’ STOCK OPTION PLAN

  
 Amended April 17, 2002 
  
 1.    Purposes of the Plan.    The purposes of this Directors’ Stock Option Plan are to attract and retain the best available personnel
for service as Directors of the Company, to provide additional incentive to the Outside Directors of the Company to serve as Directors, and to encourage their continued service on the Board. 
  
 All options granted hereunder shall be nonstatutory stock options. 
  
 2.    Definitions.    As used herein, the following definitions shall apply: 
  
 (a)    “Board” shall mean the Board of Directors of the Company. 
  
 (b)    “Code” shall mean the Internal Revenue Code of 1986, as amended.

  
 (c)    “Common Stock” shall mean the Common Stock of
the Company. 
  
 (d)    “Company” shall mean Applied
Micro Circuits Corporation, a Delaware corporation. 
  
 (e)    “Continuous Status as a Director” shall mean the absence of any interruption or termination of service as a Director. 
  
 (f)    “Director” shall mean a member of the Board. 
  
 (g)    “Employee” shall mean any person, including any officer or director, employed by the Company or any
Parent or Subsidiary of the Company. The payment of a director’s fee by the Company shall not be sufficient in and of itself to constitute “employment” by the Company. 
  
 (h)    “Exchange Act” shall mean the Securities Exchange Act of 1934, as amended. 
  
 (i)    “Option” shall mean a stock option granted pursuant to the Plan. All
options shall be nonstatutory stock options (i.e., options that are not intended to qualify as incentive stock options under Section 422 of the Code). 
  
 (j)    “Optioned Stock” shall mean the Common Stock subject to an Option. 
  
 (k)    “Optionee” shall mean an Outside Director who receives an Option.

  
 (l)    “Outside Director” shall mean a Director who
is not an Employee. 
  
 (m)    “Parent” shall mean a
“parent corporation,” whether now or hereafter existing, as defined in Section 424(e) of the Code. 
 

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 (n)    “Plan” shall
mean this 1997 Directors’ Stock Option Plan. 
  
 (o)    “Share” shall mean a share of the Common Stock, as adjusted in accordance with Section 11 of the Plan. 
  
 (p)    “Subsidiary” shall mean a “subsidiary corporation,” whether now or hereafter existing, as
defined in Section 424(f) of the Code. 
  
 3.    Stock Subject to the
Plan.    Subject to the provisions of Section 11 of the Plan, the maximum aggregate number of Shares which may be optioned and sold under the Plan is 2,200,000 Shares (the “Pool”) of Common Stock. The
Shares may be authorized, but unissued, or reacquired Common Stock. 
  
 If an Option should expire or become
unexercisable for any reason without having been exercised in full, the unpurchased Shares which were subject thereto shall, unless the Plan shall have been terminated, become available for future grant under the Plan. If Shares which were acquired
upon exercise of an Option are subsequently repurchased by the Company, such Shares shall not in any event be returned to the Plan and shall not become available for future grant under the Plan. 
  

4.    Administration of and Grants of Options under the Plan. 
  
 (a)    Administrator.    Except as otherwise required herein, the Plan shall be administered by
the Board. 
  
 (b)    Procedure for
Grants.    All grants of Options hereunder shall be automatic and nondiscretionary and shall be made strictly in accordance with the following provisions: 
  
 (i)    No person shall have any discretion to select which Outside Directors shall be granted Options or to determine the number
of Shares to be covered by Options granted to Outside Directors. 
  
 (ii)    An Outside Director shall be automatically granted an Option to purchase 100,000 Shares (the “First Option”) on the date on which such person first becomes an Outside Director after
the effective date of the Plan, whether through election by the stockholders of the Company or appointment by the Board of Directors to fill a vacancy. 
  
 (iii)    Each Outside Director shall be automatically granted an Option to purchase 50,000 Shares (a “Subsequent
Option”) on April 1 of each calendar year, provided that, on such date, he or she shall have served on the Board for at least six (6) months prior to the date of such Annual Meeting and, provided further, that a Subsequent Option
shall not be granted to an Outside Director who is an Outside Director on the effective date of the Plan until April 1, 2000. 
  
 (iv)    Notwithstanding the provisions of subsections (ii) and (iii) hereof, in the event that a grant would cause the number of Shares subject to outstanding Options plus
the number of Shares previously purchased upon exercise of Options to exceed the Pool, then each such automatic grant shall be for that number of Shares determined by dividing the total number of Shares remaining available for grant by the number of
Outside Directors receiving an Option on such date on the automatic grant date. Any further grants shall then be deferred until 
 

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such time, if any, as additional Shares become available for grant under the Plan through action of the stockholders to increase the number of Shares which may be issued under the Plan or through
cancellation or expiration of Options previously granted hereunder. 
  
 (v)    Notwithstanding the provisions of subsections (ii) and (iii) hereof, any grant of an Option made before the Company has obtained stockholder approval of the Plan in accordance with Section 17 hereof
shall be conditioned upon obtaining such stockholder approval of the Plan in accordance with Section 17 hereof. 
  
 (vi)    The terms of each First Option granted hereunder shall be as follows: 
  
 (1)    the First Option shall be exercisable only while the Outside Director remains a Director of the Company, except as set forth in Section 9 hereof; 
  
 (2)    the exercise price per Share shall be 100% of the fair market value per Share on the
date of grant of the First Option, determined in accordance with Section 8 hereof; and 
  
 (3)    the First Option shall become exercisable in installments cumulatively as to 1/12th of the Shares subject to the First Option on each monthly anniversary of the date of grant of the Option.

  
 (vii)    The terms of each Subsequent Option granted hereunder shall
be as follows: 
  
 (1)    the Subsequent Option shall be exercisable only
while the Outside Director remains a Director of the Company, except as set forth in Section 9 hereof; 
  
 (2)    the exercise price per Share shall be 100% of the fair market value per Share on the date of grant of the Subsequent Option, determined in accordance with Section 8 hereof; and 

 
 (3)    the Subsequent Option shall become exercisable in installments cumulatively
as to 1/12th of the Shares subject to the Subsequent Option on each monthly anniversary of the date of grant of the Subsequent Option. 
  
 (c)    Powers of the Board.    Subject to the provisions and restrictions of the Plan, the Board shall have the authority, in its
discretion: (i) to determine, upon review of relevant information and in accordance with Section 8(b) of the Plan, the fair market value of the Common Stock; (ii) to determine the exercise price per share of Options to be granted, which exercise
price shall be determined in accordance with Section 8(a) of the Plan; (iii) to interpret the Plan; (iv) to prescribe, amend and rescind rules and regulations relating to the Plan; (v) to authorize any person to execute on behalf of the Company any
instrument required to effectuate the grant of an Option previously granted hereunder; and (vi) to make all other determinations deemed necessary or advisable for the administration of the Plan. 
  

(d)    Effect of Board’s Decision.    All decisions, determinations and
interpretations of the Board shall be final and binding on all Optionees and any other holders of any Options granted under the Plan. 
 

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 (e)    Suspension or Termination
of Option.    If the Chairman of the Board or his or her designee reasonably believes that an Optionee has committed an act of misconduct, the Chairman of the Board may suspend the Optionee’s right to exercise any
Option pending a determination by the Board (excluding any Director accused of the misconduct). If the Board (excluding any Director accused of the misconduct) determines that the Optionee has (i) committed an act of embezzlement, fraud, dishonesty,
nonpayment of an obligation owed to the Company, breach of fiduciary duty or deliberate disregard of the Company rules resulting in loss, damage or injury to the Company, (ii) made an unauthorized disclosure of any Company trade secret or
confidential information, (iii) engaged in any conduct constituting unfair competition, (iv) induced any Company customer to breach a contract with the Company, or (v) induced any principal for whom the Company acts as agent to terminate such agency
relationship, neither the Optionee nor his or her estate or any person who acquired the right to exercise the Option by bequest or inheritance shall be entitled to exercise any Option whatsoever. In making such determination, the Board (excluding
any Director accused of the misconduct) shall act fairly and shall give the Optionee an opportunity to appear and present evidence on Optionee’s behalf at a hearing before the Board or a committee of the Board. 
  
 5.    Eligibility.    Options may be granted only to Outside Directors. All
Options shall be automatically granted in accordance with the terms set forth in Section 4(b) hereof. An Outside Director who has been granted an Option may, if he or she is otherwise eligible, be granted an additional Option or Options in
accordance with such provisions. 
  
 The Plan shall not confer upon any Optionee any right with respect to
continuation of service as a Director or nomination to serve as a Director, nor shall it interfere in any way with any rights which the Director or the Company may have to terminate his or her directorship at any time. 
  
 6.    Term of Plan; Effective Date.    The Plan shall become effective on the
effectiveness of the registration statement under the Securities Act of 1933, as amended, relating to the Company’s initial public offering of securities. It shall continue in effect for a term of ten (10) years unless sooner terminated under
Section 13 of the Plan. 
  
 7.    Term of
Options.    The term of each Option shall be ten (10) years from the date of grant thereof. 
  
 8.    Exercise Price and Consideration. 
  
 (a)    Exercise Price.    The per Share exercise price for the Shares to be issued pursuant to exercise of an Option shall be 100% of the fair market value per Share on the
date of grant of the Option. 
  
 (b)    Fair Market
Value.    The fair market value shall be determined by the Board; provided, however, that where there is a public market for the Common Stock, the fair market value per Share shall be the mean of the bid and asked
prices of the Common Stock in the over-the-counter market on the date of grant, as reported in The Wall Street Journal (or, if not so reported, as otherwise reported by the National Association of Securities Dealers Automated Quotation
(“Nasdaq”) System) or, in the event the Common Stock is traded on the Nasdaq National Market or listed on a stock exchange, the fair market value per Share shall be the closing price on such system or exchange on the date of grant of the
Option (or, in the event that the Common Stock is not traded on such date, on the immediately preceding trading date), as 
 

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reported in The Wall Street Journal. With respect to any Options granted hereunder concurrently with the initial effectiveness of the Plan, the fair market value shall be the Price to
Public as set forth in the final prospectus relating to such initial public offering. 
  
 (c)    Form of Consideration.    The consideration to be paid for the Shares to be issued upon exercise of an Option shall consist entirely of cash, check, other Shares of
Common Stock having a fair market value on the date of surrender equal to the aggregate exercise price of the Shares as to which said Option shall be exercised (which, if acquired from the Company, shall have been held for at least six months), by
delivery of a properly executed exercise notice together with such other documentation as the Administrator and the broker, if applicable, shall require to effect an exercise of the Option and delivery to the Company of the sale or loan proceeds
required to pay the exercise price, or any combination of such methods of payment and/or any other consideration or method of payment as shall be permitted under applicable corporate law. 
  
 9.    Exercise of Option. 
  
 (a)    Procedure for Exercise; Rights as a Stockholder.    Any Option granted hereunder shall
be exercisable at such times as are set forth in Section 4(b) hereof; provided, however, that no Options shall be exercisable prior to stockholder approval of the Plan in accordance with Section 17 hereof has been obtained. 

 
 An Option may not be exercised for a fraction of a Share. 
  

An Option shall be deemed to be exercised when written notice of such exercise has been given to the Company in accordance with the terms of the Option
by the person entitled to exercise the Option and full payment for the Shares with respect to which the Option is exercised has been received by the Company. Full payment may consist of any consideration and method of payment allowable under Section
8(c) of the Plan. Until the issuance (as evidenced by the appropriate entry on the books of the Company or of a duly authorized transfer agent of the Company) of the stock certificate evidencing such Shares, no right to vote or receive dividends or
any other rights as a stockholder shall exist with respect to the Optioned Stock, notwithstanding the exercise of the Option. A share certificate for the number of Shares so acquired shall be issued to the Optionee as soon as practicable after
exercise of the Option. No adjustment will be made for a dividend or other right for which the record date is prior to the date the stock certificate is issued, except as provided in Section 11 of the Plan. 
  
 Exercise of an Option in any manner shall result in a decrease in the number of Shares which thereafter may be available,
both for purposes of the Plan and for sale under the Option, by the number of Shares as to which the Option is exercised. 
  
 (b)    Termination of Status as a Director.    If an Outside Director ceases to serve as a Director, he or she may, but only within ninety (90) days after the date
he or she ceases to be a Director (or such other period of time as is determined by the Board) exercise his or her Option to the extent that he or she was entitled to exercise it at the date of such termination. Notwithstanding the foregoing, in no
event may the Option be exercised after its term set forth in Section 7 has expired. To the extent that such Outside Director was not entitled to exercise an Option at the date of such termination, or does not exercise such Option (which he or she
was entitled to exercise) within the time specified herein, the Option shall terminate. 
 

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 (c)    Disability of
Optionee.    Notwithstanding Section 9(b) above, in the event a Director is unable to continue his or her service as a Director with the Company as a result of his or her total and permanent disability (as defined in
Section 22(e)(3) of the Code), he or she may, but only within six (6) months (or such other period of time as is determined by the Board) from the date of such termination, exercise his or her Option to the extent he or she was entitled to exercise
it at the date of such termination. Notwithstanding the foregoing, in no event may the Option be exercised after its term set forth in Section 7 has expired. To the extent that he or she was not entitled to exercise the Option at the date of
termination, or if he or she does not exercise such Option (which he or she was entitled to exercise) within the time specified herein, the Option shall terminate. 
  
 (d)    Death of Optionee.    In the event of the death of an Optionee, the Option may be
exercised, at any time within six (6) months (or such other period of time as is determined by the Board) following the date of death, by the Optionee’s estate or by a person who acquired the right to exercise the Option by bequest or
inheritance, but only to the extent of the right to exercise that would have accrued had the Optionee continued living and remained in Continuous Status as Director for six (6) months (or such other period of time as is determined by the Board)
after the date of death. Notwithstanding the foregoing, in no event may the Option be exercised after its term set forth in Section 7 has expired. 
  
 10.    Nontransferability of Options.    The Option may not be sold, pledged, assigned, hypothecated, transferred, or disposed of in any
manner other than by will or by the laws of descent or distribution or pursuant to a domestic relations order (as defined by the Code or the rules thereunder). The designation of a beneficiary by an Optionee does not constitute a transfer. An Option
may be exercised during the lifetime of an Optionee only by the Optionee or a transferee permitted by this Section. 
  
 11.    Adjustments Upon Changes in Capitalization; Corporate Transactions. 
  
 (a)    Adjustment.    Subject to any required action by the stockholders of the Company, the number of shares of Common Stock covered by
each outstanding Option, and the number of shares of Common Stock which have been authorized for issuance under the Plan but as to which no Options have yet been granted or which have been returned to the Plan upon cancellation or expiration of an
Option, as well as the price per share of Common Stock covered by each such outstanding Option, shall be proportionately adjusted for any increase or decrease in the number of issued shares of Common Stock resulting from a stock split, reverse stock
split, stock dividend, combination or reclassification of the Common Stock, or any other increase or decrease in the number of issued shares of Common Stock effected without receipt of consideration by the Company; provided, however, that
conversion of any convertible securities of the Company shall not be deemed to have been “effected without receipt of consideration.” Such adjustment shall be made by the Board, whose determination in that respect shall be final, binding
and conclusive. Except as expressly provided herein, no issuance by the Company of shares of stock of any class, or securities convertible into shares of stock of any class, shall affect, and no adjustment by reason thereof shall be made with
respect to, the number or price of shares of Common Stock subject to an Option. 
  
 (b)    Corporate Transactions.    In the event of (i) a dissolution or liquidation of the Company, (ii) a sale of all or substantially all of the Company’s assets,
(iii) a merger or consolidation in which the Company is not the surviving corporation, or (iv) any other capital reorganization in which more than fifty percent (50%) of the shares of the Company entitled to 
 

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vote are exchanged, the Company shall give to the Eligible Director, at the time of adoption of the plan for liquidation, dissolution, sale, merger, consolidation or reorganization, either a
reasonable time thereafter within which to exercise the Option, including Shares as to which the Option would not be otherwise exercisable, prior to the effectiveness of such liquidation, dissolution, sale, merger, consolidation or reorganization,
at the end of which time the Option shall terminate, or the right to exercise the Option, including Shares as to which the Option would not be otherwise exercisable (or receive a substitute option with comparable terms), as to an equivalent number
of shares of stock of the corporation succeeding the Company or acquiring its business by reason of such liquidation, dissolution, sale, merger, consolidation or reorganization. 
  
 12.    Time of Granting Options.    The date of grant of an Option shall, for all purposes, be the date
determined in accordance with Section 4(b) hereof. Notice of the determination shall be given to each Outside Director to whom an Option is so granted within a reasonable time after the date of such grant. 
  
 13.    Amendment and Termination of the Plan. 
  
 (a)    Amendment and Termination.    The Board may amend or
terminate the Plan from time to time in such respects as the Board may deem advisable; provided that, to the extent necessary and desirable to comply with Rule 16b-3 under the Exchange Act (or any other applicable law or regulation), the
Company shall obtain approval of the stockholders of the Company to Plan amendments to the extent and in the manner required by such law or regulation. Notwithstanding the foregoing, the provisions set forth in Section 4 of this Plan (and any other
Sections of this Plan that affect the formula award terms required to be specified in this Plan by Rule 16b-3) shall not be amended more than once every six months, other than to comport with changes in the Code, the Employee Retirement Income
Security Act of 1974, as amended, or the rules thereunder. 
  
 (b)    Effect of Amendment or Termination.    Any such amendment or termination of the Plan that would impair the rights of any Optionee shall not affect Options already
granted to such Optionee and such Options shall remain in full force and effect as if this Plan had not been amended or terminated, unless mutually agreed otherwise between the Optionee and the Board, which agreement must be in writing and signed by
the Optionee and the Company. 
  
 14.    Conditions Upon Issuance of
Shares.    Shares shall not be issued pursuant to the exercise of an Option unless the exercise of such Option and the issuance and delivery of such Shares pursuant thereto shall comply with all relevant provisions of
law, including, without limitation, the Securities Act of 1933, as amended, the Exchange Act, the rules and regulations promulgated thereunder, state securities laws, and the requirements of any stock exchange upon which the Shares may then be
listed, and shall be further subject to the approval of counsel for the Company with respect to such compliance. As a condition to the exercise of an Option, the Company may require the person exercising such Option to represent and warrant at the
time of any such exercise that the Shares are being purchased only for investment and without any present intention to sell or distribute such Shares, if, in the opinion of counsel for the Company, such a representation is required by any of the
aforementioned relevant provisions of law. 
  
 15.    Reservation of
Shares.    The Company, during the term of this Plan, will at all times reserve and keep available such number of Shares as shall be sufficient to satisfy the 
 

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requirements of the Plan. Inability of the Company to obtain authority from any regulatory body having jurisdiction, which authority is deemed by the Company’s counsel to be necessary to the
lawful issuance and sale of any Shares hereunder, shall relieve the Company of any liability in respect of the failure to issue or sell such Shares as to which such requisite authority shall not have been obtained. 
  
 16.    Option Agreement.    Options shall be evidenced by written option
agreements in such form as the Board shall approve. 
  
 17.    Stockholder
Approval.    Continuance of the Plan shall be subject to approval by the stockholders of the Company at or prior to the first annual meeting of stockholders held subsequent to the granting of an Option hereunder. If such
stockholder approval is obtained at a duly held stockholders’ meeting, it may be obtained by the affirmative vote of the holders of a majority of the outstanding shares of the Company present or represented and entitled to vote thereon. If such
stockholder approval is obtained by written consent, it may be obtained by the written consent of the holders of a majority of the outstanding shares of the Company. Options may be granted, but not exercised, before such stockholder approval.

 

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 APPLIED MICRO CIRCUITS CORPORATION 
 1992 STOCK OPTION PLAN 
  
 FORM OF NOTICE
OF GRANT, STOCK OPTION AGREEMENT AND NOTICE OF EXERCISE 
  

[GRAPHIC] 
  
 Applied Micro
Circuits Corporation 
 6290 Sequence Drive 
 San Diego, CA
92121 
 ID: 94-2586591 
  
 
	 «First_Name» «Middle_Name» «Last_Name»
 	  	 Option Number: «Number»
 
	 «Address_Line_1» «Address_Line_2»
 	  	 Plan: «Plan»
 
	 «City» «State» «Country» «Zip_Code»
 	  	 ID: «ID»
 

 
  
 Effective «Option_Date», you have been granted a «Long_Type» to
buy «Shares_Granted» shares of Applied Micro Circuits Corporation (AMCC) common stock at $«Option_Price» per share. 
  
 The total option price of the shares granted is «Total_Option_Price». 
  
 Your shares become exercisable as
follows: 
  
 
	 Shares
 
	  	 Vest Type
 
	  	 Full Vest
 
	  	 Expiration
 

	 «Shares_Period_1»
 	  	 «Vest_Type_Period_1»
 	  	 «Vest_Date_Period_1»
 	  	 «Expiration_Date_Period_1»
 
	 «Shares_Period_2»
 	  	 «Vest_Type_Period_2»
 	  	 «Vest_Date_Period_2»
 	  	 «Expiration_Date_Period_2»
 

 
  
 If you have any questions, please contact Stock Administration at x 3462. 

 
 By your signature and the signature of David M. Rickey below, you and AMCC agree that these options are granted under and governed by the terms and
conditions of AMCC’s 1992 Stock Option Plan and this Option Agreement. You acknowledge that you have reviewed the 1992 Stock Option Plan and this Option Agreement in their entirety, have had an opportunity to obtain the advice of counsel prior
to executing this Option Agreement and fully understands all provisions of the Option. You also agree to accept as binding, conclusive and final all decisions or interpretations of the AMCC Board of Directors upon any questions arising under the
1992 Stock Option Plan and this Option Agreement. 
  
 Your option will not become exercisable until a signed copy of this Option Agreement
is received by Stock Administration. 
  
 
David M. Rickey,
Chairman and
CEO                                        
                                 Date 
  
 
«First_Name» «Middle_Name»
«Last_Name»                                    
                        Date 
 

 9 

 APPLIED MICRO CIRCUITS CORPORATION 
 1997 DIRECTORS’ STOCK OPTION PLAN 
  
 1.    Grant of
Option.    The Board of Directors of the Company hereby grants to the Optionee named in the Notice of Grant attached hereto (the “Optionee”), an option (the “Option”) to purchase a number
of Shares, as set forth in the Notice of Grant, at the exercise price per share set forth in the Notice of Grant (the “Exercise Price”), subject to the terms and conditions of the 1997 Directors’ Stock Option Plan (the
“Plan”), which is incorporated herein by reference. Capitalized terms not defined herein shall have the meanings ascribed to such terms in the Plan. In the event of a conflict between the terms and conditions of the Plan and the
terms and conditions of this Option Agreement, the terms and conditions of the Plan shall prevail. 
  
 2.    Exercise of Option. 
  
 (a)    Right to Exercise.    This Option is exercisable during its term in accordance with the Vesting Schedule set out in the Notice of Grant and the applicable provisions of the
Plan and this Option Agreement. In the event of Optionee’s death, disability or other termination of Optionee’s employment or consulting relationship, the exercisability of the Option is governed by the applicable provisions of the Plan
and this Option Agreement. 
  
 (b)    Methods of
Exercise.    This Option shall be exercisable by any of the following methods: (i) execution of the Notice of Exercise in the form attached hereto and delivery of such Notice of Exercise in person to Stock Administration,
(ii) online exercise through a captive broker designated by the Company (a “Captive Broker”), (iii) telephonic exercise communicated to a representative of a Captive Broker, (iv) telephonic exercise through a voice response system
designated by the Company or (v) such other method or methods of exercise as may be designated by the Company from time to time. Any such method of exercise shall require Optionee to notify the Company of Optionee’s election to exercise the
Option and the number of Shares in respect of which the Option is being exercised (the “Exercised Shares”), and may require Optionee to make such other representations and agreements as to Optionee’s investment intent with
respect to such Exercised Shares as may be required by the Company pursuant to the provisions of the Plan (collectively, an “Exercise Notice”). This Option shall be deemed to be exercised upon receipt by the Company or Captive
Broker, as applicable, of such Exercise Notice and receipt by the Company of the exercise price for the Exercised Shares. 
  
 No Shares will be issued pursuant to the exercise of this Option unless such issuance and such exercise complies with all relevant provisions of law and the requirements of any stock exchange or quotation service upon which the
Shares are then listed. Assuming such compliance, for income tax purposes the Exercised Shares shall be considered transferred to Optionee on the date the Option is exercised with respect to such Exercised Shares. 
  
 3.    Method of Payment.    Payment of the aggregate Exercise Price shall be by any
of the following, or a combination thereof, at the election of Optionee: 
  
 (a)    cash; 
 

 10 

  
 (b)    check; 
  
 (c)    delivery of a properly executed Notice of Exercise together with such other documentation as
the Administrator and the broker, if applicable, shall require to effect an exercise of the Option and delivery to the Company of the sale or loan proceeds required to pay the exercise price; or 
  

(d)    delivery of other shares of Common Stock of the Company which (x) have been owned by Optionee for the period required to
avoid a charge to the Company’s reported earnings (generally six months) or that Optionee did not acquire, directly or indirectly, from the Company, (y) are owned free and clear of any liens, claims, encumbrances or security interests and (z)
have a Fair Market Value on the date of delivery equal to the aggregate Exercise Price of the Exercised Shares. “Delivery” for these purposes, in the sole discretion of the Company at the time Optionee exercises the Option,
shall include delivery to the Company of Optionee’s attestation of ownership of such shares of Common Stock in a form approved by the Company. Notwithstanding the foregoing, Optionee may not exercise an Option by tender to the Company of Common
Stock to the extent such tender would violate the provisions of any law, regulation or agreement restricting the redemption of the Company’s stock. 
  
 4.    TERMINATION OF STATUS AS A DIRECTOR.    IN THE EVENT OF TERMINATION OF OPTIONEE’S CONTINUOUS STATUS AS A DIRECTOR FOR ANY
REASON, OTHER THAN AS A RESULT OF THE DEATH OF OPTIONEE, OPTIONEE MAY EXERCISE THIS OPTION NO LATER THAN THE DATE OF EXPIRATION OF THE TERM OF THIS OPTION AS SET FORTH IN SECTION 8 BELOW, BUT ONLY TO THE EXTENT EXERCISABLE AT THE DATE OF SUCH
TERMINATION. TO THE EXTENT THIS OPTION WAS NOT EXERCISABLE AT THE DATE OF SUCH TERMINATION OR IF OPTIONEE DOES NOT EXERCISE THIS OPTION WITHIN THE TIME SPECIFIED HEREIN, THE OPTION SHALL TERMINATE. 
  
 5.    DEATH OF OPTIONEE. 
  
 (A)    IN THE EVENT OF THE DEATH OF OPTIONEE DURING THE TERM OF THIS OPTION AND WHILE A DIRECTOR OF THE COMPANY AND HAVING BEEN IN
CONTINUOUS STATUS AS A DIRECTOR SINCE THE DATE OF GRANT OF THE OPTION, THE OPTION MAY BE EXERCISED AT ANY TIME WITHIN FIFTEEN (15) MONTHS FOLLOWING THE DATE OF DEATH (BUT IN NO EVENT LATER THAN THE DATE OF EXPIRATION OF THE TERM OF THIS OPTION AS
SET FORTH IN SECTION 8 BELOW) BY OPTIONEE’S ESTATE OR BY A PERSON WHO ACQUIRED THE RIGHT TO EXERCISE THE OPTION BY BEQUEST OR INHERITANCE BUT ONLY TO THE EXTENT EXERCISABLE AT THE DATE OF DEATH. 
  
 (b)    In the event of the death of Optionee during the term of this Option but after the date of
termination of Optionee’s Continuous Status as a Director, the Option may be exercised by Optionee’s estate or by a person who acquired the right to exercise the Option by 
 

 11 

 
bequest or inheritance at any time no later than the date of expiration of the term of this Option as set forth in Section 8 below, but only to the extent exercisable at the date of termination
of Optionee’s Continuous Status as a Director. To the extent this Option was not exercisable at the date of termination Optionee’s Continuous Status as a Director or if Optionee’s estate or such other person does not exercise this
Option within the time specified herein, the Option shall terminate. 
  
 6.    SUSPENSION OR TERMINATION OF OPTION.    IF THE CHAIRMAN OF THE BOARD OR HIS OR HER DESIGNEE REASONABLY BELIEVES THAT OPTIONEE HAS COMMITTED AN ACT OF MISCONDUCT,
THE CHAIRMAN OF THE BOARD MAY SUSPEND OPTIONEE’S RIGHT TO EXERCISE THIS OPTION PENDING A DETERMINATION BY THE BOARD (EXCLUDING ANY DIRECTOR ACCUSED OF THE MISCONDUCT). IF THE BOARD (EXCLUDING ANY DIRECTOR ACCUSED OF THE MISCONDUCT) DETERMINES
THAT OPTIONEE HAS (I) COMMITTED AN ACT OF EMBEZZLEMENT, FRAUD, DISHONESTY, NONPAYMENT OF AN OBLIGATION OWED TO THE COMPANY, BREACH OF FIDUCIARY DUTY OR DELIBERATE DISREGARD OF THE COMPANY RULES RESULTING IN LOSS, DAMAGE OR INJURY TO THE COMPANY,
(II) MADE AN UNAUTHORIZED DISCLOSURE OF ANY COMPANY TRADE SECRET OR CONFIDENTIAL INFORMATION, (III) ENGAGED IN ANY CONDUCT CONSTITUTING UNFAIR COMPETITION, (IV) INDUCED ANY COMPANY CUSTOMER TO BREACH A CONTRACT WITH THE COMPANY, OR (V) INDUCED ANY
PRINCIPAL FOR WHOM THE COMPANY ACTS AS AGENT TO TERMINATE SUCH AGENCY RELATIONSHIP, NEITHER OPTIONEE NOR HIS OR HER ESTATE OR ANY PERSON WHO ACQUIRED THE RIGHT TO EXERCISE THIS OPTION BY BEQUEST OR INHERITANCE SHALL BE ENTITLED TO EXERCISE THE
OPTION. IN MAKING SUCH DETERMINATION, THE BOARD (EXCLUDING ANY DIRECTOR ACCUSED OF THE MISCONDUCT) SHALL ACT FAIRLY AND SHALL GIVE OPTIONEE AN OPPORTUNITY TO APPEAR AND PRESENT EVIDENCE ON OPTIONEE’S BEHALF AT A HEARING BEFORE THE BOARD OR A
COMMITTEE OF THE BOARD. 
  
 7.    Non-Transferability of
Option.    This Option may not be transferred in any manner otherwise than by will or by the laws of descent or distribution or pursuant to a domestic relations order (as defined by the Code or the rules
thereunder) and may be exercised during the lifetime of Optionee only by Optionee or a transferee permitted by Section 10 of the Plan. The terms of the Plan and this Option Agreement shall be binding upon the executors, administrators, heirs,
successors and assigns of Optionee. 
  
 8.    Term of
Option.    This Option may be exercised only within the term set out in the Notice of Grant, and may be exercised during such term only in accordance with the Plan and the terms of this Option Agreement.

  
 9.    Withholding and Employment Taxes Upon Exercise of
Option.    Optionee understands that, upon exercise of this Option, Optionee will recognize income for tax purposes in an amount equal to the excess of the then fair market value of the shares over the exercise
price. The Company will be required to withhold tax from Optionee’s current compensation with
 
 

 12 

 
respect to such income; to the extent that Optionee’s current compensation is insufficient to satisfy the withholding tax liability, the Company may require Optionee to make a cash payment
to cover such liability as a condition of exercise of this Option. To the extent authorized by the Board in its sole discretion, Optionee may make an election, by means of a form of election to be prescribed by the Board, to have shares of Common
Stock or other securities of the Company that are acquired upon exercise of the Option withheld by the Company or to tender other shares of Common Stock or other securities of the Company owned by Optionee to the Company at the time of exercise of
the Option to pay the amount of tax that would otherwise be required by law to be withheld by the Company as a result of any exercise of the Option from amounts payable to such person, subject to the following limitations: 
  
 (I)    SUCH ELECTION SHALL BE IRREVOCABLE; 
  
 (ii)    such election shall be subject to the disapproval of the Board at any time; 

 
 (iii)    such election may not be made within six months of the date of grant of the Option
(except that this limitation shall not apply in the event of death or disability of such person occurring prior to the expiration of the six-month period); and 
  
 (iv)    such election must be made either (A) six months prior to the date that the amount of tax to be withheld upon such exercise is
determined or (B) in any ten-day period beginning on the third business day following the date of release by the Company for publication of quarterly or annual summary statements of sales or earnings of the Company. 
  
 Any securities so withheld or tendered will be valued by the Company as of the date of exercise. 
 

 13 

  
 CONSENT OF SPOUSE 
  

The undersigned spouse of Optionee has read and hereby approves the terms and conditions of the Plan and this Option Agreement. In consideration of the Company’s
granting his or her spouse the right to purchase Shares as set forth in the Plan and this Option Agreement, the undersigned hereby agrees to be irrevocably bound by the terms and conditions of the Plan and this Option Agreement and further agrees
that any community property interest shall be similarly bound. The undersigned hereby appoints the undersigned’s spouse as attorney-in-fact for the undersigned with respect to any amendment or exercise of rights under the Plan or this Option
Agreement. 
  
 
	                                      
                                        
                       
 
	 Spouse of Optionee
 

 
  
 NOTICE OF EXERCISE 
  
 
	 To:
 	  	 Applied Micro Circuits Corporation
 
	 Attn:
 	  	 Stock Option Administrator
 
	 Subject:
 	  	 Notice of Intention to Exercise Stock Option
 

 
  
 This is official notice that the undersigned
(“Optionee”) intends to exercise Optionee’s option to purchase              shares of Applied Micro Circuits Corporation Common Stock, under and pursuant to the
Company’s 1997 Directors’ Stock Option Plan and the Option Agreement dated                     , as follows: 

 
 
	 Grant Number:
 	 	                                      
                                        
                                      
 
 
	 Date of Purchase:
 	 	                                      
                                        
                                      
 
 
	 Number of Shares:
 	 	                                      
                                        
                                      
 
 
	 Purchase Price:
 	 	                                      
                                        
                                      
 
 
	 Method of Payment of
 	 	  
	 Purchase Price:
 	 	                                      
                                        
                                      
 
 
	 Social Security No.:
 	 	                                      
                                        
                                      
 
 

 
  
 The shares should be issued as follows: 
  
 Name:                                    
                                        
         
 

 14 

  
  
 
	 
	 Address:    
 	 	                                      
                                        
         
 	 	  
	 
	  	 	                                      
                                        
         
 	 	  
	 
	  	 	                                      
                                        
         
 	 	  
	 
	 Signed:
 	 	                                      
                                        
         
 	 	  
	 
	 Date:
 	 	                                      
                                        
         
 	 	  

 
 

 15Prepared by R.R. Donnelley Financial -- 1998 Stock Incentive Plan

  
 Exhibit 10.26 
  
 APPLIED MICRO CIRCUITS CORPORATION 
 1998 STOCK INCENTIVE PLAN 

 
 1.    PURPOSES OF THE
PLAN.    The purposes of this 1998 Stock Incentive Plan are to attract and retain the best available personnel for positions of substantial responsibility, to provide additional incentive to Employees and
Consultants of the Company and its Subsidiaries and to promote the success of the Company’s business. Options granted under the Plan shall be nonstatutory stock options. 
  
 2.    DEFINITIONS.    As used herein, the following definitions shall apply:

  
 (a)    “Administrator” means the Board or any
of its Committees appointed pursuant to Section 4 of the Plan. 
  
 (b)    “Board” means the Board of Directors of the Company. 
  
 (c)    “Code” means the Internal Revenue Code of 1986, as amended. 
  
 (d)    “Committee” means the Committee appointed by the Board of Directors in accordance with paragraph
(a) of Section 4 of the Plan. 
  
 (e)    “Common Stock”
means the Common Stock of the Company. 
  
 (f)    “Company” means Applied Micro Circuits Corporation, a Delaware corporation. 
  
 (g)    “Consultant” means any person, including an advisor, who is engaged by the Company or any Parent
or Subsidiary to render services and is compensated for such services. 
  
 (h)    “Continuous Status as an Employee or Consultant” means the absence of any interruption or termination of service as an Employee or Consultant. Continuous Status as an Employee
or Consultant shall not be considered in the case of: (i) sick leave; (ii) military leave; (iii) any other leave of absence approved by the Board, provided that such leave is for a period of not more than ninety (90) days, unless reemployment upon
the expiration of such leave is guaranteed by contract or statute, or unless provided otherwise pursuant to Company policy adopted from time to time; or (iv) in the case of transfers between locations of the Company or between the Company, its
Subsidiaries or its successor. 
  
 (i)    “Employee”
means any person employed by the Company or any Parent or Subsidiary of the Company. The term “Employee” shall not include officers of the Company unless an award granted under the Plan is an essential inducement to such
person’s first entering into an employment relationship with the Company. The payment of a director’s fee by the Company shall not be sufficient to constitute “employment” by the Company. 
  
 (j)    “Exchange Act” means the Securities Exchange Act of 1934, as
amended. 
 

 1 

  
 (k)     “Executive
Officer” means any person who has been expressly designated an executive officer of the Company by the Board, without regard to whether such person meets the criteria for an executive officer as set forth in Rule 405 under the
Securities Act of 1933, as amended. 
  
 (l)    “Fair Market
Value” means, as of any date, the value of Common Stock determined as follows: 
  
 (i)    If the Common Stock is listed on any established stock exchange or a national market system including without limitation the National Market of the National Association of Securities Dealers, Inc.
Automated Quotation (“NASDAQ”) System, its Fair Market Value shall be the closing sales price for such stock (or the closing bid, if no sales were reported, as quoted on such system or exchange, or the exchange with the greatest volume of
trading in Common Stock, for the last market trading day prior to the time of determination) as reported in The Wall Street Journal or such other source as the Administrator deems reliable; 
  
 (ii)    If the Common Stock is quoted on the NASDAQ System (but not on the National Market thereof) or regularly quoted by a
recognized securities dealer but selling prices are not reported, its Fair Market Value shall be the mean between the high bid and low asked prices for the Common Stock or; 
  
 (iii)    In the absence of an established market for the Common Stock, the Fair Market Value thereof shall be determined in good
faith by the Administrator. 
  
 (m)    “Nonstatutory Stock
Option” means an Option not intended to qualify as an incentive stock option under Section 422 of the Code. 
  
 (n)    “Option” means a stock option granted pursuant to the Plan. 
  
 (o)    “Optioned Stock” means the Common Stock subject to an Option. 
  
 (p)    “Optionee” means an Employee or Consultant who receives an Option. 
  
 (q)    “Parent” means a “parent corporation,” whether now or
hereafter existing, as defined in Section 424(e) of the Code. 
  
 (r)    “Plan” means this 1998 Stock Incentive Plan (formerly known as the Cimaron Communications Corporation 1998 Stock Incentive Plan). 
  
 (s)    “Retirement” means the termination of an Optionee’s
Continuous Status as an Employee or Consultant by retirement as determined in accordance with the Company’s then current employment policies and guidelines. 
  
 (t)    “Share” means a share of the Common Stock, as adjusted in accordance with Section 12 of the Plan.

  
 (u)    “Subsidiary” means a “subsidiary
corporation,” whether now or hereafter existing, as defined in Section 424(f) of the Code. 
  
 (v)    “Total Service” means the sum of all of an Optionee’s periods of Continuous Status as an Employee or Consultant. 
 

 2 

  
 3.    STOCK SUBJECT
TO THE PLAN.    Subject to the provisions of Section 12 of the Plan, the maximum aggregate number of shares which may be optioned and sold under the Plan is
8,130,920 shares of Common Stock. The shares may be authorized, but unissued, or reacquired Common Stock. 
  
 If an
Option should expire or become unexercisable for any reason without having been exercised in full, the unpurchased Shares which were subject thereto shall, unless the Plan shall have been terminated, become available for future grant under the Plan.

  
 4.    ADMINISTRATION OF THE
PLAN. 
  
 (a)    Procedure. 

 
 (i)    Administration With Respect to Directors and
Officers.    With respect to grants of Options to Employees who are also officers of the Company, grants under the Plan shall be made by (A) the Board if the Board may make grants under the Plan in compliance with Rule 16b-3
promulgated under the Exchange Act or any successor thereto (“Rule 16b-3”), or (B) a Committee designated by the Board to make grants under the Plan, which Committee shall be constituted in such a manner as to permit grants under the Plan
to comply with Rule 16b-3 and otherwise so as to satisfy legal requirements relating to the administration of stock option plans, if any, of state corporate and state and federal securities laws and of the Code (the “Applicable Laws”).
Once appointed, such Committee shall continue to serve in its designated capacity until otherwise directed by the Board. From time to time the Board may increase the size of the Committee and appoint additional members thereof, remove members (with
or without cause) and appoint new members in substitution therefor, fill vacancies, however caused, and remove all members of the Committee and thereafter directly administer the Plan, all to the extent permitted by Rule 16b-3. 

 
 (ii)    Multiple Administrative Bodies.    If permitted
by Rule 16b-3, the Plan may be administered by different bodies with respect to directors, non-director officers and Employees who are neither directors nor officers. 
  
 (iii)    Administration With Respect to Consultants and Other Employees.    With respect to grants of
Options to Employees or Consultants who are not officers of the Company, the Plan shall be administered by (A) the Board or (B) a Committee designated by the Board, which committee shall be constituted in such a manner as to satisfy the Applicable
Laws. Once appointed, such Committee shall continue to serve in its designated capacity until otherwise directed by the Board. From time to time the Board may increase the size of the Committee and appoint additional members thereof, remove members
(with or without cause) and appoint new members in substitution therefor, fill vacancies, however caused, and remove all members of the Committee and thereafter directly administer the Plan, all to the extent permitted by the Applicable Laws.

  
 (b)    Powers of the
Administrator.    Subject to the provisions of the Plan and in the case of a Committee, the specific duties delegated by the Board to such Committee, the Administrator shall have the authority, in its discretion:

  
 (i)    to determine the Fair Market Value of the Common Stock, in
accordance with Section 2(l) of the Plan; 
 

 3 

  
 (ii)    to select the Consultants and
Employees to whom Options may from time to time be granted hereunder; 
  
 (iii)    to determine whether and to what extent Options are granted hereunder; 
  
 (iv)    to determine the number of shares of Common Stock to be covered by each such award granted hereunder; 
  
 (v)    to approve forms of agreement (including electronic forms of agreement) for use under the Plan (each an “Option
Agreement”); 
  
 (vi)    to determine the terms and conditions, not
inconsistent with the terms of the Plan, of any award granted hereunder; 
  
 (vii)    to reduce the exercise price of any Option to the then current Fair Market Value if the Fair Market Value of the Common Stock covered by such Option shall have declined since the date the Option
was granted. 
  
 (c)    Effect of Administrator’s
Decision.    All decisions, determinations and interpretations of the Administrator shall be final and binding on all Optionees and any other holders of any Options. 
  
 5.    ELIGIBILITY. 
  
 (a)    Nonstatutory Stock Options may be granted to Employees and Consultants. An Employee or Consultant who has been granted an
Option may, if such Optionee is otherwise eligible, be granted an additional Option or Options. 
  
 (b)    The Plan shall not confer upon any Optionee any right with respect to continuation of employment or consulting relationship with the Company, nor shall it interfere in any way with such
Optionee’s right or the Company’s right to terminate such Optionee’s employment or consulting relationship at any time, with or without cause. 
  
 6.    TERM OF PLAN.    The Plan shall become effective upon its adoption by the Board
of Directors of Cimaron Communications Corporation (a corporation to which the Company is a successor) and shall continue in effect for a term of ten (10) years from such date unless sooner terminated under Section 16 of the Plan. 

 
 7.    TERM OF
OPTION.    The term of each Option shall be the term stated in the Option Agreement; provided, however, that the term shall be no more than ten (10) years from the date of grant thereof or such
shorter term as may be provided in the Option Agreement. 
  
 8.    OPTION EXERCISE PRICE AND CONSIDERATION. 
  
 (a)    The per share exercise price for the Shares to be issued pursuant to exercise of an Option shall be such price as is
determined by the Board. 
  
 (b)    The consideration to be paid for the
Shares to be issued upon exercise of an Option, including the method of payment, shall be determined by the Administrator and may consist entirely of (1) cash, (2) check, (3) promissory note, (4) other Shares which (x) in the case 

 4 

 of Shares acquired upon exercise of an Option have been owned by the Optionee for more than six months on the date of
surrender, and (y) have a Fair Market Value on the date of surrender equal to the aggregate exercise price of the Shares as to which said Option shall be exercised, (5) delivery of a properly executed exercise notice together with such documentation
as the Administrator and the broker, if applicable, shall require to effect an exercise of the Option and delivery to the Company of the sale or loan proceeds required to pay the exercise price (6) by delivering an irrevocable subscription agreement
for the Shares which irrevocably obligates the option holder to take and pay for the Shares not more than twelve months after the date of delivery of the subscription agreement, (7) any combination of the foregoing methods of payment, (8) or such
other consideration and method of payment for the issuance of Shares to the extent permitted under Applicable Laws. In making its determination as to the type of consideration to accept, the Board shall consider if acceptance of such consideration
may be reasonably expected to benefit the Company. 
  
 9.    EXERCISE
OF OPTION. 
  
 (a)    Procedure for
Exercise; Rights as a Stockholder.    Any Option granted hereunder shall be exercisable at such times and under such conditions as determined by the Board, including performance criteria with respect to the Company and/or the
Optionee, and as shall be permissible under the terms of the Plan. 
  
 An Option may not be exercised
for a fraction of a Share. 
  
 An Option shall be deemed to be exercised when notice of such exercise
has been provided in accordance with the terms of the Option by the person entitled to exercise the Option and full payment for the Shares with respect to which the Option is exercised has been received by the Company. Full payment may, as
authorized by the Board, consist of any consideration and method of payment allowable under Section 8(b) of the Plan. The Company shall issue (or cause to be issued) such stock certificate promptly upon exercise of the Option. 

 
 Exercise of an Option in any manner shall result in a decrease in the number of Shares which thereafter may be
available, both for purposes of the Plan and for sale under the Option, by the number of Shares as to which the Option is exercised. 
  
 (b)    Termination of Employment.    In the event of termination of an Optionee’s Continuous Status as an Employee or Consultant with the
Company (as the case may be), such Optionee may, but only within thirty (30) days (or such other period of time as is determined by the Board but in no event later than the expiration date of the term of such Option as set forth in the Option
Agreement), exercise such Optionee’s Option to the extent that Optionee was entitled to exercise it at the date of such termination. To the extent that Optionee was not entitled to exercise the Option at the date of such termination, or if
Optionee does not exercise such Option to the extent so entitled within the time specified herein, the Option shall terminate. 
  
 (c)    Disability of Optionee.    Notwithstanding the provisions of Section 9(b) above, in the event of termination of an Optionee’s
Continuous Status as an Employee or Consultant as a result of such Optionee’s total and permanent disability (as defined in Section 22(e)(3) of the Code), Optionee may, but only within twelve (12) months from the date of such termination (or
such other period of time as is determined by the Board but in no event later than the expiration date of the term of such Option as set forth in the Option Agreement), exercise the 
 

 5 

 Option to the extent otherwise entitled to exercise it at the date of such termination. To the extent that Optionee was
not entitled to exercise the Option at the date of termination, or if Optionee does not exercise such Option to the extent so entitled within the time specified herein, the Option shall terminate. 
  
 (d)    Death of Optionee.    In the event of the death of an
Optionee, the Option may be exercised at any time within twelve (12) months following the date of death (or such other period of time as is determined by the Board but in no event later than the expiration date of the term of such Option as set
forth in the Option Agreement), by the Optionee’s estate or by a person who acquired the right to exercise the Option by bequest or inheritance, but only to the extent the Optionee was entitled to exercise the Option at the date of death. To
the extent that Optionee was not entitled to exercise the Option at the date of termination, or if Optionee does not exercise such Option to the extent so entitled within the time specified herein, the Option shall terminate. 

 
 (e)    Rule 16b-3.    Options granted to persons subject
to Section 16(b) of the Exchange Act must comply with Rule 16b-3 and shall contain such additional conditions or restrictions as may be required thereunder to qualify for the maximum exemption from Section 16 of the Exchange Act with respect to Plan
transactions. 
  
 10.    NON-TRANSFERABILITY
OF OPTIONS.    An Option may not be sold, pledged, assigned, hypothecated, transferred, or disposed of in any manner other than by will or by the laws of descent or distribution or, in the case
of a Nonstatutory Stock Option only, pursuant to a domestic relations order (as defined by the Code or the rules thereunder) and may be exercised, during the lifetime of the Optionee, only by the Optionee or a transferee permitted by this Section.
Notwithstanding the foregoing, the Optionee may by delivering notice to the Company in a form satisfactory to the Company designate a third party who in the event of the death of the Optionee shall thereafter be entitled to exercise the Option.

  
 11.    STOCK WITHHOLDING TO
SATISFY WITHHOLDING TAX OBLIGATIONS.    At the discretion of the Administrator, Optionees may satisfy withholding obligations as provided in this
paragraph. When an Optionee incurs tax liability in connection with an Option, which tax liability is subject to tax withholding under applicable tax laws, and the Optionee is obligated to pay the Company an amount required to be withheld under
applicable tax laws, the Optionee may satisfy the withholding tax obligation by one or some combination of the following methods: (i) by cash payment, or (ii) out of Optionee’s current compensation, or (iii) if permitted by the Administrator,
in its discretion, by surrendering to the Company Shares which (a) in the case of Shares previously acquired from the Company, have been owned by the Optionee for more than six months on the date of surrender, and (b) have a fair market value on the
date of surrender equal to or less than the applicable withholding taxes, (iv) by electing to have the Company withhold from the Shares to be issued upon exercise of the Option that number of Shares having a fair market value equal to the amount
required to be withheld. For this purpose, the fair market value of the Shares to be withheld shall be determined on the date that the amount of tax to be withheld is to be determined (the “Tax Date”). 
  
 If the Optionee is subject to Section 16 of the Exchange Act (an “Insider”), any surrender of previously owned Shares to satisfy
tax withholding obligations arising upon exercise of this Option must comply with the applicable provisions of Rule 16b-3 promulgated under the Exchange Act (“Rule 16b-3”). 
 

 6 

  
 All elections by an Optionee to have Shares withheld to satisfy tax withholding
obligations shall be made in a form acceptable to the Administrator and shall be subject to the following restrictions: 
  
 (a)    the election must be made on or prior to the applicable Tax Date; 
  
 (b)    once made, the election shall be irrevocable as to the particular Shares of the Option as to which the election is made; and 
  
 (c)    all elections shall be subject to the consent or disapproval of the Administrator.

  
 In the event the election to have Shares withheld is made by an Optionee and the Tax Date is deferred under
Section 83 of the Code because no election is filed under Section 83(b) of the Code, the Optionee shall receive the full number of Shares with respect to which the Option is exercised but such Optionee shall be unconditionally obligated to tender
back to the Company the proper number of Shares on the Tax Date. 
  
 12.    ADJUSTMENTS UPON CHANGES IN CAPITALIZATION; CORPORATE TRANSACTIONS. 

 
 (a)    Changes in Capitalization.    Subject to any
required action by the stockholders of the Company, the number of shares of Common Stock covered by each outstanding Option, the number of shares of Common Stock which have been authorized for issuance under the Plan but as to which no Options have
yet been granted or which have been returned to the Plan upon cancellation or expiration of an Option, as well as the price per share of Common Stock covered by each such outstanding Option, shall be proportionately adjusted for any increase or
decrease in the number of issued shares of Common Stock resulting from a stock split, reverse stock split, stock dividend, combination or reclassification of the Common Stock, or any other increase or decrease in the number of issued shares of
Common Stock effected without receipt of consideration by the Company; provided, however, that conversion of any convertible securities of the Company shall not be deemed to have been “effected without receipt of consideration.” Such
adjustment shall be made by the Board, whose determination in that respect shall be final, binding and conclusive. Except as expressly provided herein, no issuance by the Company of shares of stock of any class, or securities convertible into shares
of stock of any class, shall affect, and no adjustment by reason thereof shall be made with respect to, the number or price of shares of Common Stock subject to an Option. 
  
 (b)    Corporate Transactions.    In the event of the proposed dissolution or liquidation of the
Company, the Option will terminate immediately prior to the consummation of such proposed action, unless otherwise provided by the Administrator. The Administrator may, in the exercise of its sole discretion in such instances, declare that any
Option shall terminate as of a date fixed by the Administrator and give each Optionee the right to exercise his or her Option as to all or any part of the Optioned Stock, including Shares as to which the Option would not otherwise be exercisable. In
the event of a sale of all or substantially all of the assets of the Company, or the merger of the Company with or into another corporation, in which the Company is not the surviving corporation the Option shall vest and become immediately
exercisable for the number of Shares that would otherwise be vested and exercisable under the terms of the Option one (1) year after the date of the Corporate Transaction. Thereafter, the Option shall be assumed or an equivalent option shall be
substituted by such successor 
 

 7 

 corporation or a parent or subsidiary of such successor corporation, unless the Administrator determines, in the exercise
of its sole discretion and in lieu of such assumption or substitution, that the Option shall vest and the Optionee shall have the right to exercise the Option as to some or all of the Optioned Stock, including Shares as to which the Option would not
otherwise be vested and exercisable. If the Administrator makes an Option vested and exercisable in lieu of assumption or substitution in the event of a merger or sale of assets, the Administrator shall notify the Optionee that the Option shall be
vested and exercisable for a period of fifteen (15) days from the date of such notice, and the Option will terminate upon the expiration of such period. 
  
 13.    TIME OF GRANTING OPTIONS.    The date of grant of an Option
shall, for all purposes, be the date on which the Administrator makes the determination granting such Option, or such other date as is determined by the Board. Notice of the determination shall be given to each Employee or Consultant to whom an
Option is so granted within a reasonable time after the date of such grant. 
  
 14.    AMENDMENT AND TERMINATION OF THE PLAN. 
  
 (a)    Amendment and Termination.    The Board may at any time amend, alter, suspend or discontinue
the Plan, but no amendment, alteration, suspension or discontinuation shall be made which would impair the rights of any Optionee under any grant theretofore made, without such Optionee’s consent. 
  
 (b)    Effect of Amendment or Termination.    Any such amendment or
termination of the Plan shall not affect Options already granted and such Options shall remain in full force and effect as if this Plan had not been amended or terminated, unless mutually agreed otherwise between the Optionee and the Board, which
agreement must be executed by the Optionee and the Company. 
  
 15.    CONDITIONS UPON ISSUANCE OF SHARES.    Shares shall not be issued pursuant to the
exercise of an Option unless the exercise of such Option and the issuance and delivery of such Shares pursuant thereto shall comply with all relevant provisions of law, including, without limitation, the Securities Act of 1933, as amended, the
Exchange Act, the rules and regulations promulgated thereunder, and the requirements of any stock exchange upon which the Shares may then be listed, and shall be further subject to the approval of counsel for the Company with respect to such
compliance. 
  
 As a condition to the exercise of an Option, the Company may require the person exercising such
Option to represent and warrant at the time of any such exercise that the Shares are being purchased only for investment and without any present intention to sell or distribute such Shares if, in the opinion of counsel for the Company, such a
representation is required by any of the aforementioned relevant provisions of law. 
  
 16.    RESERVATION OF SHARES.    The Company, during the term of this Plan, will at all times reserve and keep
available such number of Shares as shall be sufficient to satisfy the requirements of the Plan. 
  
 The inability of
the Company to obtain authority from any regulatory body having jurisdiction, which authority is deemed by the Company’s counsel to be necessary to the lawful issuance and sale of any Shares hereunder, shall relieve the Company of any liability
in respect 
 

 8 

 of the failure to issue or sell such Shares as to which such requisite authority shall not have been obtained. 
  
 17.    AGREEMENTS.    Options shall be evidenced by
agreements in such form (including electronic form) as the Board shall approve from time to time. 
 

 9 

  
 APPLIED MICRO CIRCUITS CORPORATION 
 1998 STOCK INCENTIVE PLAN 
  
 FORM OF
NOTICE OF GRANT, STOCK OPTION AGREEMENT AND NOTICE OF EXERCISE 
  
 [GRAPHIC] 
 Applied Micro Circuits Corporation 

6290 Sequence Drive 
 San Diego, CA 92121 
 ID: 94-2586591 
  
 
	 «First_Name» «Middle_Name» «Last_Name»
 	  	 Option Number: «Number»
 
	 «Address_Line_1» «Address_Line_2»
 	  	 Plan: «Plan»
 
	 «City» «State» «Country» «Zip_Code»
 	  	 ID: «ID»
 

 
  
 Effective «Option_Date», you have been granted a «Long_Type» to
buy «Shares_Granted» shares of Applied Micro Circuits Corporation (AMCC) common stock at $«Option_Price» per share. 
  
 The total option price of the shares granted is «Total_Option_Price». 
  
 Your shares become exercisable as
follows: 
  
 
	 Shares
 
	  	 Vest Type
 
	  	 Full Vest
 
	  	 Expiration
 

	 «Shares_Period_1»
 	  	 «Vest_Type_Period_1»
 	  	 «Vest_Date_Period_1»
 	  	 «Expiration_Date_Period_1»
 
	 «Shares_Period_2»
 	  	 «Vest_Type_Period_2»
 	  	 «Vest_Date_Period_2»
 	  	 «Expiration_Date_Period_2»
 

 
  
 If you have any questions, please contact Stock Administration at x 3462. 

 
 By your signature and the signature of David M. Rickey below, you and AMCC agree that these options are granted under and governed by the terms and
conditions of AMCC’s 1998 Stock Incentive Plan and this Option Agreement. You acknowledge that you have reviewed the 1998 Stock Incentive Plan and this Option Agreement in their entirety, have had an opportunity to obtain the advice of counsel
prior to executing this Option Agreement and fully understands all provisions of the Option. You also agree to accept as binding, conclusive and final all decisions or interpretations of the AMCC Board of Directors upon any questions arising under
the 1998 Stock Incentive Plan and this Option Agreement. 
  
 Your option will not become exercisable until a signed copy of this Option
Agreement is received by Stock Administration. 
  
 

	 David M. Rickey, Chairman and CEO
 	  	 Date
 

 
  
 

	 «First_Name» «Middle_Name» «Last_Name»
 	  	 Date
 

 
 

 10 

  
 APPLIED MICRO CIRCUITS CORPORATION 
 1998 STOCK INCENTIVE PLAN 
  
 Applied Micro Circuits
Corporation, a Delaware corporation (the “Company”), has granted to «First_Name» «Middle_Name» «Last_Name» (the “Optionee”), an option (the “Option”) to purchase the total number of
shares of Common Stock of the Company (the “Shares”) set forth in the attached Notice of Grant effective «Option_Date» (the “Notice of Grant”), at the price as set forth in the Notice of Grant (the “Exercise
Price”), subject in all respects to the terms, definitions and provisions of the 1998 Stock Incentive Plan (the “Plan”) adopted by the Company, which is incorporated herein by reference. Unless otherwise defined herein, the terms
defined in the Plan shall have the same defined meanings herein. 
  
 NATURE OF THE
OPTION.    THIS OPTION IS INTENDED BY THE COMPANY AND THE OPTIONEE TO BE A NONSTATUTORY STOCK OPTION, AND DOES NOT QUALIFY FOR ANY SPECIAL TAX BENEFITS TO THE OPTIONEE. THIS OPTION IS NOT AN INCENTIVE STOCK OPTION.

  
 EXERCISE PRICE.    THE EXERCISE PRICE FOR EACH SHARE OF
COMMON STOCK IS SET FORTH IN THE NOTICE OF GRANT AND IS NOT LESS THAN THE FAIR MARKET VALUE PER SHARE OF THE COMMON STOCK ON THE DATE OF GRANT. 
  
 EXERCISE OF OPTION.    THIS OPTION SHALL BE EXERCISABLE DURING ITS TERM IN ACCORDANCE WITH THE EXERCISE SCHEDULE SET
OUT IN THE NOTICE OF GRANT AND WITH THE PROVISIONS OF SECTION 9 OF THE PLAN AS FOLLOWS: 
  
 Right to Exercise. 
  
 The Vesting Schedule set forth in the Notice of
Grant shall temporarily cease during any period of time that Optionee’s employment is subject to an approved leave of absence as set forth in Section 2(h) of the Plan and shall recommence upon Optionee’s return to the employ of the
Company. 
  
 This Option may not be exercised for a fraction of a share or for an amount less than
100 shares. 
  
 In the event of Optionee’s death, disability or other termination of employment
or consultancy, the exercisability of the Option is governed by Sections 7, 8 and 9 below, subject to the limitations contained in subsection 3(i)(d). 
  
 In no event may this Option be exercised after the date of expiration of the term of this Option as set forth in Section 11 below. 
 

 11 

  
 Methods of
Exercise.    This Option shall be exercisable by any of the following methods: (i) online exercise through a captive broker designated by the Company (a “Captive Broker”), (ii) telephonic exercise
communicated to a representative of a Captive Broker, (iii) telephonic exercise through a voice response system designated by the Company or (iv) such other method or methods of exercise as may be designated by the Company from time to time. Any
such method of exercise shall require the Optionee to notify the Company of the Optionee’s election to exercise the Option and the number of Shares in respect of which the Option is being exercised, and may require the Optionee to make such
other representations and agreements as to the Optionee’s investment intent with respect to such Shares of Common Stock as may be required by the Company pursuant to the provisions of the Plan (collectively, an “Exercise Notice”).
This Option shall be deemed to be exercised upon receipt by the Company or Captive Broker, as applicable, of such Exercise Notice and receipt by the Company of the exercise price for the Shares in respect of which the Option is being exercised.

  
 No Shares will be issued pursuant to the exercise of an Option unless such issuance and such exercise shall
comply with all relevant provisions of law and the requirements of any stock exchange upon which the Shares may then be listed. Assuming such compliance, for income tax purposes the Shares shall be considered transferred to the Optionee on the date
on which the Option is exercised with respect to such Shares. 
  
 OPTIONEE’S
REPRESENTATIONS; “AT-WILL” EMPLOYMENT RELATIONSHIP.    IN THE EVENT THIS OPTION AND THE SHARES PURCHASABLE PURSUANT TO THE EXERCISE OF THIS OPTION HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, AT THE TIME THIS OPTION IS EXERCISED, OPTIONEE SHALL, IF REQUIRED BY THE COMPANY CONCURRENTLY WITH THE EXERCISE OF ALL OR ANY PORTION OF THIS OPTION, DELIVER TO THE COMPANY AN INVESTMENT REPRESENTATION STATEMENT IN THE CUSTOMARY FORM, A
COPY OF WHICH IS AVAILABLE FOR OPTIONEE’S REVIEW FROM THE COMPANY UPON REQUEST. 
  
 IF
OPTIONEE IS AN EMPLOYEE, OPTIONEE’S EMPLOYMENT RELATIONSHIP WITH THE COMPANY IS AN “AT-WILL” EMPLOYMENT RELATIONSHIP UNLESS THE COMPANY AND OPTIONEE HAVE ENTERED INTO AN EXPRESS WRITTEN AGREEMENT THAT SETS FORTH A DIFFERENT EMPLOYMENT
RELATIONSHIP.  
  
 METHOD OF PAYMENT.    PAYMENT
OF THE EXERCISE PRICE SHALL BE BY ANY OF THE FOLLOWING, OR A COMBINATION THEREOF, AT THE ELECTION OF THE BOARD, IN ITS SOLE DISCRETION: 
  
 (i)    cash; 
  
 (ii)    check; 
  
 (iii)    delivery of other
shares of Common Stock of the Company which (x) have been owned by Optionee for the period required to avoid a charge to the Company’s reported earnings (generally six months) or that Optionee did not acquire, directly or indirectly, from the
Company, (y) are owned free and clear of any liens, claims, encumbrances or security interests 
 

 12 

 and (z) have a Fair Market Value on the date of delivery equal to the exercise price of the Shares as to which the Option
is being exercised. “Delivery” for these purposes, in the sole discretion of the Company at the time Optionee exercises an Option, shall include delivery to the Company of Optionee’s attestation of ownership of such shares of Common
Stock in a form approved by the Company. Notwithstanding the foregoing, Optionee may not exercise an Option by tender to the Company of Common Stock to the extent such tender would violate the provisions of any law, regulation or agreement
restricting the redemption of the Company’s stock; or 
  
 (iv) delivery of a properly executed
Exercise Notice together with such documentation as the Administrator or Captive Broker, as applicable, shall require to effect an exercise of the Option and delivery to the Company of the sale or loan proceeds required to pay the exercise price.

  
 RESTRICTIONS ON EXERCISE.    THIS OPTION MAY NOT BE
EXERCISED UNTIL SUCH TIME AS THE PLAN HAS BEEN APPROVED BY THE STOCKHOLDERS OF THE COMPANY, OR IF THE ISSUANCE OF SUCH SHARES UPON SUCH EXERCISE OR THE METHOD OF PAYMENT OF CONSIDERATION FOR SUCH SHARES WOULD CONSTITUTE A VIOLATION OF ANY APPLICABLE
FEDERAL OR STATE SECURITIES OR OTHER LAW OR REGULATION, INCLUDING ANY RULE UNDER PART 207 OF TITLE 12 OF THE CODE OF FEDERAL REGULATIONS (“REGULATION G”) AS PROMULGATED BY THE FEDERAL RESERVE BOARD. AS A CONDITION TO THE EXERCISE OF THIS
OPTION, THE COMPANY MAY REQUIRE OPTIONEE TO MAKE ANY REPRESENTATION AND WARRANTY TO THE COMPANY AS MAY BE REQUIRED BY ANY APPLICABLE LAW OR REGULATION. 
 

 13 

  
 TERMINATION OF STATUS AS AN EMPLOYEE OR
CONSULTANT.    IN THE EVENT OF TERMINATION OF OPTIONEE’S CONTINUOUS STATUS AS AN EMPLOYEE OR CONSULTANT, THE OPTIONEE MAY, BUT ONLY WITHIN NINETY (90) DAYS AFTER THE DATE
OF SUCH TERMINATION (BUT IN NO EVENT LATER THAN THE DATE OF EXPIRATION OF THE TERM OF THIS OPTION AS SET FORTH IN SECTION 11 BELOW), EXERCISE THIS OPTION TO THE EXTENT EXERCISABLE AT THE DATE OF SUCH TERMINATION; PROVIDED, HOWEVER, THAT IF
OPTIONEE WAS AN EXECUTIVE OFFICER ON THE DATE OF GRANT OF THIS OPTION OR AT ANY TIME PRIOR TO THE DATE OF GRANT OF THIS OPTION AND THE TERMINATION OF OPTIONEE’S CONTINUOUS STATUS AS AN EMPLOYEE OR CONSULTANT IS DUE TO
OPTIONEE’S RETIREMENT, SUCH PERIOD OF EXERCISE AFTER THE DATE OF TERMINATION SHALL BE FIFTEEN (15) MONTHS OR, IF OPTIONEE’S TOTAL SERVICE WAS MORE THAN SEVEN (7) YEARS AT THE DATE OPTIONEE’S RETIREMENT COMMENCES, TWENTY-FOUR (24)
MONTHS (BUT IN NO EVENT LATER THAN THE DATE OF EXPIRATION OF THE TERM OF THIS OPTION AS SET FORTH IN SECTION 11). IF AN EMPLOYEE OF THE COMPANY, OPTIONEE’S EMPLOYMENT SHALL BE DEEMED TERMINATED ON SUCH DATE, IF
ANY, AS OPTIONEE BECOMES A PART-TIME EMPLOYEE, AS DEFINED IN THE COMPANY’S THEN CURRENT EMPLOYMENT GUIDELINES. TO THE EXTENT THIS OPTION WAS NOT EXERCISABLE AT THE DATE OF SUCH TERMINATION, OR IF THE OPTIONEE DOES NOT EXERCISE THIS OPTION
WITHIN THE TIME SPECIFIED HEREIN, THE OPTION SHALL TERMINATE. NOTWITHSTANDING THE FOREGOING, UNLESS AN OPTIONEE QUALIFIES AS AN EXEMPT EMPLOYEE UNDER STATE AND FEDERAL WAGE AND HOUR LAWS OR IS A RESIDENT OUTSIDE THE UNITED STATES, SUCH OPTIONEE MAY
NOT EXERCISE THIS OPTION WITHIN SIX (6) MONTHS OF THE DATE OF GRANT, EVEN IF THIS OPTION IS VESTED AT THAT TIME; PROVIDED, HOWEVER, THAT AN OPTIONEE MAY EXERCISE THIS OPTION WITHIN THE SIX-MONTH PERIOD FOLLOWING THE DATE OF GRANT IF SUCH
OPTIONEE’S CONTINUOUS STATUS AS AN EMPLOYEE OR CONSULTANT IS TERMINATED DUE TO DEATH OR DISABILITY OR DUE TO SUCH OTHER CIRCUMSTANCE(S) THAT WOULD ENTITLE THE INCOME DERIVED FROM SUCH OPTION EXERCISE TO BE EXEMPTED FROM THE OPTIONEE’S
REGULAR RATE UNDER THE FAIR LABOR STANDARDS ACT OF 1938 BY REASON OF THE WORKER ECONOMIC OPPORTUNITY ACT. IN ADDITION, UNLESS AN OPTIONEE QUALIFIES AS AN EXEMPT EMPLOYEE UNDER STATE AND FEDERAL WAGE AND HOUR LAWS OR IS RESIDENT OUTSIDE THE UNITED
STATES, IN THE EVENT THAT THE TERMINATION OF THE OPTIONEE’S CONTINUOUS STATUS AS AN EMPLOYEE OR CONSULTANT FOR ANY REASON OTHER THAN THE OPTIONEE’S DISABILITY OR DEATH OCCURS WITHIN THE SIX-MONTH PERIOD FOLLOWING THE DATE ON WHICH THIS
OPTION WAS GRANTED, THEN THIS OPTION SHALL EXPIRE NINETY (90) DAYS AFTER THE END OF SUCH SIX-MONTH PERIOD. 
 

 14 

  
 DISABILITY OF
OPTIONEE.    NOTWITHSTANDING THE PROVISIONS OF SECTION 7 ABOVE, IN THE EVENT OF TERMINATION OF OPTIONEE’S CONTINUOUS STATUS AS AN EMPLOYEE OR CONSULTANT AS A RESULT OF SUCH OPTIONEE’S TOTAL AND PERMANENT
DISABILITY (AS DEFINED IN SECTION 22(E)(3) OF THE CODE), THE OPTIONEE MAY, BUT ONLY WITHIN FIFTEEN (15) MONTHS FROM THE DATE OF SUCH TERMINATION (BUT IN NO EVENT LATER THAN THE DATE OF EXPIRATION OF THE TERM
OF THIS OPTION AS SET FORTH IN SECTION 11 BELOW), EXERCISE THIS OPTION TO THE EXTENT EXERCISABLE AT THE DATE OF SUCH TERMINATION. TO THE EXTENT THAT THE OPTION WAS NOT EXERCISABLE AT THE DATE OF TERMINATION, OR IF THE OPTIONEE DOES NOT EXERCISE SUCH
OPTION WITHIN THE TIME SPECIFIED HEREIN, THE OPTION SHALL TERMINATE. 
  
 DEATH OF
OPTIONEE.    IN THE EVENT OF THE DEATH OF OPTIONEE DURING THE TERM OF THIS OPTION AND WHILE AN EMPLOYEE OR CONSULTANT OF THE COMPANY AND HAVING BEEN IN CONTINUOUS STATUS AS AN EMPLOYEE OR ZCONSULTANT SINCE THE DATE OF
GRANT OF THE OPTION, THE OPTION MAY BE EXERCISED, AT ANY TIME WITHIN FIFTEEN (15) MONTHS FOLLOWING THE DATE OF DEATH (BUT IN NO EVENT LATER THAN THE DATE OF EXPIRATION OF THE TERM OF THIS OPTION AS SET FORTH
IN SECTION 11 BELOW), BY OPTIONEE’S ESTATE OR BY A PERSON WHO ACQUIRED THE RIGHT TO EXERCISE THE OPTION BY BEQUEST OR INHERITANCE, BUT ONLY TO THE EXTENT EXERCISABLE AT THE DATE OF DEATH. 
  
 NON-TRANSFERABILITY OF OPTION.    THIS OPTION MAY NOT BE TRANSFERRED IN ANY
MANNER OTHERWISE THAN BY WILL OR BY THE LAWS OF DESCENT OR DISTRIBUTION OR, IN THE CASE OF A NONSTATUTORY STOCK OPTION ONLY, PURSUANT TO A DOMESTIC RELATIONS ORDER (AS DEFINED BY THE CODE OR THE RULES THEREUNDER) AND MAY BE
EXERCISED DURING THE LIFETIME OF OPTIONEE ONLY BY HIM OR A TRANSFEREE PERMITTED BY THIS SECTION. THE TERMS OF THIS OPTION SHALL BE BINDING UPON THE EXECUTORS, ADMINISTRATORS, HEIRS, SUCCESSORS AND ASSIGNS OF THE OPTIONEE.

  
 TERM OF OPTION.    THIS OPTION MAY BE EXERCISED
ON OR BEFORE THE EXPIRATION DATE SET FORTH IN THE NOTICE OF GRANT AND MAY BE EXERCISED DURING SUCH TERM ONLY IN ACCORDANCE WITH THE PLAN AND THE TERMS OF THIS OPTION. 
 

 15 

  
 WITHHOLDING AND EMPLOYMENT TAXES UPON EXERCISE OF
OPTION.    OPTIONEE UNDERSTANDS THAT, UPON EXERCISE OF THIS OPTION, SUCH OPTIONEE WILL RECOGNIZE INCOME FOR TAX PURPOSES IN AN AMOUNT EQUAL TO THE EXCESS OF THE THEN FAIR MARKET VALUE OF THE SHARES OVER THE EXERCISE
PRICE. THE COMPANY WILL BE REQUIRED TO WITHHOLD TAX FROM OPTIONEE’S CURRENT COMPENSATION WITH RESPECT TO SUCH INCOME; TO THE EXTENT THAT OPTIONEE’S CURRENT COMPENSATION IS INSUFFICIENT TO SATISFY THE WITHHOLDING TAX LIABILITY, THE COMPANY
MAY REQUIRE THE OPTIONEE TO MAKE A CASH PAYMENT TO COVER SUCH LIABILITY AS A CONDITION OF EXERCISE OF THIS OPTION. TO THE EXTENT AUTHORIZED BY THE BOARD IN ITS SOLE DISCRETION, OPTIONEE MAY MAKE AN ELECTION, BY MEANS OF A FORM OF ELECTION TO BE
PRESCRIBED BY THE BOARD, TO HAVE SHARES OF COMMON STOCK OR OTHER SECURITIES OF THE COMPANY THAT ARE ACQUIRED UPON EXERCISE OF THE OPTION WITHHELD BY THE COMPANY OR TO TENDER OTHER SHARES OF COMMON STOCK OR OTHER SECURITIES OF THE COMPANY OWNED BY
OPTIONEE TO THE COMPANY AT THE TIME OF EXERCISE OF THE OPTION TO PAY THE AMOUNT OF TAX THAT WOULD OTHERWISE BE REQUIRED BY LAW TO BE WITHHELD BY THE COMPANY AS A RESULT OF ANY EXERCISE OF THE OPTION FROM AMOUNTS PAYABLE TO SUCH PERSON, SUBJECT TO
THE FOLLOWING LIMITATIONS: 
  
 (i)    such election shall be irrevocable;

  
 (ii)    such election shall be subject to the disapproval of the Board at any
time; 
  
 (iii)    such election may not be made within six months of the date of
grant of the Option (except that this limitation shall not apply in the event of death or disability of such person occurring prior to the expiration of the six-month period); and 
  
 (iv)    such election must be made either (A) six months prior to the date that the amount of tax to be withheld upon such exercise is
determined or (B) in any ten-day period beginning on the third business day following the date of release by the Company for publication of quarterly or annual summary statements of sales or earnings of the Company. 
  
 Any securities so withheld or tendered will be valued by the Company as of the date of exercise. 
  
 THIS SPACE INTENTIONALLY 
 LEFT BLANK—SIGNATURE OF 
 OPTIONEE ON FOLLOWING PAGE 
 

 16 

  
 OPTIONEE ACKNOWLEDGES AND AGREES THAT THE VESTING OF SHARES PURSUANT TO THE
NOTICE OF GRANT AND SECTION 3 HEREOF IS EARNED ONLY BY CONTINUING SERVICE AS AN EMPLOYEE OR CONSULTANT AT THE WILL OF THE COMPANY (NOT THROUGH THE ACT OF BEING HIRED, BEING GRANTED THIS OPTION OR ACQUIRING SHARES HEREUNDER). OPTIONEE FURTHER
ACKNOWLEDGES AND AGREES THAT NOTHING IN THIS AGREEMENT, NOR IN THE COMPANY’S STOCK OPTION PLAN WHICH IS INCORPORATED HEREIN BY REFERENCE, SHALL CONFER UPON OPTIONEE ANY RIGHT WITH RESPECT TO CONTINUATION OF EMPLOYMENT OR CONSULTANCY BY THE
COMPANY, NOR SHALL IT INTERFERE IN ANY WAY WITH SUCH OPTIONEE’S RIGHT OR THE COMPANY’S RIGHT TO TERMINATE SUCH OPTIONEE’S EMPLOYMENT OR CONSULTANCY AT ANY TIME, WITH OR WITHOUT CAUSE. 
  
 Dated: 

	 	

  
 
«First_Name» «Middle_Name» «Last_Name» 
  
 Residence Address: 
  
 «Address_Line_1» 
 «Address_Line_2» 
 «City» «State» «Country» «Zip_Code» 
 

 17 

  
 NOTICE OF EXERCISE 
  
 
	 To:
 	 	 Applied Micro Circuits Corporation
 
	 Attn:
 	 	 Stock Option Administrator
 
	 Subject:
 	 	 Notice of Intention to Exercise Stock Option
 

 
  
 This is official notice that the undersigned
(“Optionee”) intends to exercise Optionee’s option to purchase Shares of Applied Micro Circuits Corporation Common Stock, all of which are vested, as follows: 
  
 
	 Option Number
 
	  	 Option Date
 
	  	 Type of Option ISO/NQ
 
	    	 Number of Shares Being Purchased
 
	  	 Option Price (Per Share)
 
	    	 Tax Due*
 (if
applicable)
 
	  	 Total Amount Due AMCC
 

	  	  	  	  	  	    	  	  	  	    	  	  	  
	  	  	  	  	  	    	  	  	  	    	  	  	  
	  	  	  	  	  	    	  	  	  	    	  	  	  
	  	  	  	  	  	    	  	  	  	    	  	  	  

 
 

	*
	 
	AMCC is required to withhold taxes when employees exercise an NQO. Under current law, U.S. income tax withholding is not required when exercising an ISO.

 

  
 I am paying the cost to exercise as specified below by method a, b or c (circle one below)

  
 18.    Cash Payment:    Enclosed is my check #
                       in the amount of
$                    . 
  
 b.    Cashless Exercise and Same-Day Sale:    I will call my stockbroker (complete broker info below) to authorize them to issue a check payable to
AMCC from my account #
                                        .

  
 Broker Name and
Contact:                                      
                                      
             
 Broker Telephone No.:    
                                        
                                        
       
  
 c.    Surrender or Swap Shares
Owned:    (Shares must have been held for at least six months.) 
  
 I certify that the stock purchased
through the exercise of these options will not be sold in a manner that would violate the Company’s policy on Insider Trading. 
  
 Optionee’s
Signature:                                      
                                        
                                  
 Print
Name:                                       
                                        
                                        
       
 Social Security
Number:                                       
                                        
                             
  
 Send shares to: 
  
 Broker
Name                                       
                                        
                                        
    
  
 Account
No.                                       
                                        
                                        
     
  
 My home
address                                       
                                        
                                      
 

 18

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