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                                                                    EXHIBIT 10.6

                   INTEGRATED SOFTWARE & DEVICES CORPORATION

                     2000 EXECUTIVE EQUITY INCENTIVE PLAN

                         As Adopted on January 1, 2000

     1.   PURPOSE.  The purpose of this Executive Plan is to provide incentives
          -------
to attract, retain and motivate eligible persons whose present and potential
contributions are important to the success of the Company, its Parent and
Subsidiaries, by offering them an opportunity to participate in the Company's
future performance through awards of Options and Restricted Stock.  Capitalized
terms not defined in the text are defined in Section 22 hereof.

     2.   SHARES SUBJECT TO THE EXECUTIVE PLAN.
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          2.1  Number of Shares Available.  Subject to Sections 2.2 and 17
               --------------------------
hereof, the total number of Shares reserved and available for grant and issuance
pursuant to this Executive Plan will be 4,500,000 Shares or such lesser number
of Shares as permitted under Section 260.140.45 of Title 10 of the California
Code of Regulations.  Subject to Sections 2.2, 5.10 and 17 hereof, Shares
subject to Awards previously granted will again be available for grant and
issuance in connection with future Awards under this Executive Plan to the
extent such Shares:  (i) cease to be subject to issuance upon exercise of an
Option, other than due to exercise of such Option; (ii) are subject to an Award
granted hereunder but the Shares subject to such Award are forfeited or
repurchased by the Company at the original issue price; or (iii) are subject to
an Award that otherwise terminates without Shares being issued.  At all times
the Company will reserve and keep available a sufficient number of Shares as
will be required to satisfy the requirements of all Awards granted and
outstanding under this Executive Plan.

          2.2  Adjustment of Shares.  In the event that the number of
               --------------------
outstanding shares of the Company's Common Stock is changed by a stock dividend,
recapitalization, stock split, reverse stock split, subdivision, combination,
reclassification or similar change in the capital structure of the Company
without consideration, then (i) the number of Shares reserved for issuance under
this Executive Plan, (ii) the Exercise Prices of and number of Shares subject to
outstanding Options and (iii) the Purchase Prices of and number of Shares
subject to other outstanding Awards will be proportionately adjusted, subject to
any required action by the Board or the shareholders of the Company and
compliance with applicable securities laws; provided, however, that fractions of
a Share will not be issued but will either be paid in cash at the Fair Market
Value of such fraction of a Share or will be rounded down to the nearest whole
Share, as determined by the Committee.

     3.   ELIGIBILITY. ISOs (as defined in Section 5 hereof) may be granted only
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to employees (including officers and directors who are also employees and
certain other employees who may be selected for grants in the discretion of the
Committee or the Board) of the Company or of a Parent or Subsidiary of the
Company. NQSOs (as defined in Section 5 hereof) and Restricted Stock Awards may
be granted to officers, directors and in the discretion of the Committee or the
Board, selected employees and selected consultants of the Company or any Parent
or Subsidiary of the Company; provided such consultants render bona fide
services not in connection with the offer and sale of securities in a capital-
raising transaction. A person may be granted more than one Award under this
Executive Plan.

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     4.   ADMINISTRATION.
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          4.1  Committee Authority.  This Executive Plan will be administered by
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the Committee or the Board if no Committee is created by the Board.  Subject to
the general purposes, terms and conditions of this Executive Plan, and to the
direction of the Board, the Committee will have full power to implement and
carry out this Executive Plan.  Without limitation, the Committee will have the
authority to:

          (a)  construe and interpret this Executive Plan, any Award Agreement
               and any other agreement or document executed pursuant to this
               Executive Plan;

          (b)  prescribe, amend and rescind rules and regulations relating to
               this Executive Plan;

          (c)  approve persons to receive Awards;

          (d)  determine the form and terms of Awards;

          (e)  determine the number of Shares or other consideration subject to
               Awards;

          (f)  determine whether Awards will be granted singly, in combination
               with, in tandem with, in replacement of, or as alternatives to,
               other Awards under this Executive Plan or awards under any other
               incentive or compensation plan of the Company or any Parent or
               Subsidiary of the Company;

          (g)  grant waivers of any conditions of this Executive Plan or any
               Award;

          (h)  determine the terms of vesting, exercisability and payment of
               Awards;

          (i)  correct any defect, supply any omission, or reconcile any
               inconsistency in this Executive Plan, any Award, any Award
               Agreement, any Exercise Agreement or any Restricted Stock
               Purchase Agreement;

          (j)  determine whether an Award has been earned;

          (k)  make all other determinations necessary or advisable for the
               administration of this Executive Plan; and

          (l)  extend the vesting period beyond a Participant's Termination
               Date.

          4.2  Committee Discretion.  Unless in contravention of any express
               --------------------
terms of this Executive Plan or Award, any determination made by the Committee
with respect to any Award will be made in its sole discretion either (i) at the
time of grant of the Award, or (ii) subject to Section 5.9 hereof, at any later
time.  Any such determination will be final and binding on the Company and on
all persons having an interest in any Award under this Executive Plan.  The
Committee may delegate to one or more officers of the Company the authority to
grant an Award under this Executive Plan, provided such officer or officers are
members of the Board.

     5.   OPTIONS.  The Committee may grant Options to eligible persons
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described in Section 3 hereof and will determine whether such Options will be
Incentive Stock Options within the meaning of the Code ("ISOs") or Nonqualified
Stock Options ("NQSOs"), the number of

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Shares subject to the Option, the Exercise Price of the Option, the period
during which the Option may be exercised, and all other terms and conditions of
the Option, subject to the following:

          5.1  Form of Option Grant.  Each Option granted under this Executive
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Plan will be evidenced by an Award Agreement which will expressly identify the
Option as Executive an ISO or an NQSO ("Stock Option Agreement"), and will be in
such form and contain such provisions (which need not be the same for each
Participant) as the Committee may from time to time approve, and which will
comply with and be subject to the terms and conditions of this Executive Plan.

          5.2  Date of Grant.  The date of grant of an Option will be the date
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on which the Committee makes the determination to grant such Option, unless a
later date is otherwise specified by the Committee.  The Stock Option Agreement
and a copy of this Executive Plan will be delivered to the Participant within a
reasonable time after the granting of the Option.

          5.3  Exercise Period.  Options may be exercisable immediately but
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subject to repurchase pursuant to Section 11 hereof or may be exercisable within
the times or upon the events determined by the Committee as set forth in the
Stock Option Agreement governing such Option; provided, however, that no Option
will be exercisable after the expiration of ten (10) years from the date the
Option is granted; and provided further that no ISO granted to a person who
directly or by attribution owns more than ten percent (10%) of the total
combined voting power of all classes of stock of the Company or of any Parent or
Subsidiary of the Company ("Ten Percent Shareholder") will be exercisable after
the expiration of five (5) years from the date the ISO is granted.  The
Committee also may provide for Options to become exercisable at one time or from
time to time, periodically or otherwise, in such number of Shares or percentage
of Shares as the Committee determines.  Subject to earlier termination of the
Option as provided herein, each Participant who is not an officer, director or
consultant of the Company or of a Parent or Subsidiary of the Company shall have
the right to exercise an Option granted hereunder at the rate of no less than
twenty percent (20%) per year over five (5) years from the date such Option is
granted.

          5.4  Exercise Price.  The Exercise Price of an Option will be
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determined by the Committee when the Option is granted and may not be less than
eighty-five percent (85%) of the Fair Market Value of the Shares on the date of
grant; provided that (i) the Exercise Price of an ISO will not be less than one
hundred percent (100%) of the Fair Market Value of the Shares on the date of
grant and (ii) the Exercise Price of any Option granted to a Ten Percent
Shareholder will not be less than one hundred ten percent (110%) of the Fair
Market Value of the Shares on the date of grant.  Payment for the Shares
purchased must be made in accordance with Section 7 hereof.

          5.5  Method of Exercise.  Options may be exercised only by delivery to
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the Company of a written stock option exercise agreement (the "Exercise
Agreement") in a form approved by the Committee (which need not be the same for
each Participant).  The Exercise Agreement will state (i) the number of Shares
being purchased, (ii) the restrictions imposed on the Shares purchased under
such Exercise Agreement, if any, and (iii) such representations and agreements
regarding Participant's investment intent and access to information and other
matters, if any, as may be required or desirable by the Company to comply with
applicable securities laws.  Participant shall execute and deliver to the
Company the Exercise Agreement together

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with payment in full of the Exercise Price, and any applicable taxes, for the
number of Shares being purchased.

          5.6  Termination.  Subject to earlier termination pursuant to Sections
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17 and 18 hereof and notwithstanding the exercise periods set forth in the Stock
Option Agreement, exercise of an Option will always be subject to the following:

          (a)  If the Participant is Terminated for any reason other than death,
               Disability or for Cause, then the Participant may exercise such
               Participant's Options only to the extent that such Options are
               exercisable upon the Termination Date or as otherwise determined
               by the Committee.  Such Options must be exercised by the
               Participant, if at all, as to all or some of the Vested Shares
               calculated as of the Termination Date or such other date
               determined by the Committee, within three (3) months after the
               Termination Date (or within such shorter time period, not less
               than thirty (30) days, or within such longer time period, not
               exceeding five (5) years, after the Termination Date as may be
               determined by the Committee, with any exercise beyond three (3)
               months after the Termination Date deemed to be an NQSO) but in
               any event, no later than the expiration date of the Options.

          (b)  If the Participant is Terminated because of Participant's death
               or Disability (or the Participant dies within three (3) months
               after a Termination other than for Cause), then Participant's
               Options may be exercised only to the extent that such Options are
               exercisable by Participant on the Termination Date or as
               otherwise determined by the Committee.  Such options must be
               exercised by Participant (or Participant's legal representative
               or authorized assignee), if at all, as to all or some of the
               Vested Shares calculated as of the Termination Date or such other
               date determined by the Committee, within twelve (12) months after
               the Termination Date (or within such shorter time period, not
               less than six (6) months, or within such longer time period, not
               exceeding five (5) years, after the Termination Date as may be
               determined by the Committee, with any exercise beyond (i) three
               (3) months after the Termination Date when the Termination is for
               any reason other than the Participant's death or disability,
               within the meaning of Section 22(e)(3) of the Code, or (ii)
               twelve (12) months after the Termination Date when the
               Termination is for Participant's disability, within the meaning
               of Section 22(e)(3) of the Code, deemed to be an NQSO) but in any
               event no later than the expiration date of the Options.

          (c)  If the Participant is terminated for Cause, then Participant's
               Options shall expire on such Participant's Termination Date, or
               at such later time and on such conditions as are determined by
               the Committee.

          5.7  Limitations on Exercise.  The Committee may specify a reasonable
               -----------------------
minimum number of Shares that may be purchased on any exercise of an Option,
provided that such minimum number will not prevent Participant from exercising
the Option for the full number of Shares for which it is then exercisable.

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          5.8  Limitations on ISOs.  The aggregate Fair Market Value (determined
               -------------------
as of the date of grant) of Shares with respect to which ISOs are exercisable
for the first time by a Participant during any calendar year (under this
Executive Plan or under any other incentive stock option plan of the Company or
any Parent or Subsidiary of the Company) will not exceed One Hundred Thousand
Dollars ($100,000).  If the Fair Market Value of Shares on the date of grant
with respect to which ISOs are exercisable for the first time by a Participant
during any calendar year exceeds One Hundred Thousand Dollars ($100,000), then
the Options for the first One Hundred Thousand Dollars ($100,000) worth of
Shares to become exercisable in such calendar year will be ISOs and the Options
for the amount in excess of One Hundred Thousand Dollars ($100,000) that become
exercisable in that calendar year will be NQSOs.  In the event that the Code or
the regulations promulgated thereunder are amended after the Effective Date (as
defined in Section 18 hereof) to provide for a different limit on the Fair
Market Value of Shares permitted to be subject to ISOs, then such different
limit will be automatically incorporated herein and will apply to any Options
granted after the effective date of such amendment.

          5.9  Modification, Extension or Renewal.  The Committee may modify,
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extend or renew outstanding Options and authorize the grant of new Options in
substitution therefor, provided that any such action may not, without the
written consent of a Participant, impair any of such Participant's rights under
any Option previously granted.  Any outstanding ISO that is modified, extended,
renewed or otherwise altered will be treated in accordance with Section 424(h)
of the Code.  Subject to Section 5.10 hereof, the Committee may reduce the
Exercise Price of outstanding Options without the consent of Participants by a
written notice to them; provided, however, that the Exercise Price may not be
reduced below the minimum Exercise Price that would be permitted under Section
5.4 hereof for Options granted on the date the action is taken to reduce the
Exercise Price.

          5.10 No Disqualification.  Notwithstanding any other provision in
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this Executive Plan, no term of this Executive Plan relating to ISOs will be
interpreted, amended or altered, nor will any discretion or authority granted
under this Executive Plan be exercised, so as to disqualify this Executive Plan
under Section 422 of the Code or, without the consent of the Participant, to
disqualify any Participant's ISO under Section 422 of the Code.  In no event
shall the total number of Shares issued (counting each reissuance of a Share
that was previously issued and then forfeited or repurchased by the Company as a
separate issuance) under the Executive Plan upon exercise of ISOs exceed
40,000,000 Shares (adjusted in proportion to any adjustments under Section 2.2.
hereof) over the term of the Executive Plan.

     6.   RESTRICTED STOCK.  A Restricted Stock Award is an offer by the Company
          ----------------
to sell to an eligible person Shares that are subject to certain specified
restrictions.  The Committee will determine to whom an offer will be made, the
number of Shares the person may purchase, the Purchase Price, the restrictions
to which the Shares will be subject, and all other terms and conditions of the
Restricted Stock Award, subject to the following:

          6.1  Form of Restricted Stock Award.  All purchases under a Restricted
               ------------------------------
Stock Award made pursuant to this Executive Plan will be evidenced by an Award
Agreement ("Restricted Stock Purchase Agreement") that Executive will be in such
form (which need not be the same for each Participant) as the Committee will
from time to time approve, and will comply with and be subject to the terms and
conditions of this Executive Plan.  The Restricted Stock Award will be accepted
by the Participant's execution and delivery of the Restricted Stock Purchase
Agreement and full payment for the Shares to the Company within thirty (30) days

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from the date the Restricted Stock Purchase Agreement is delivered to the
person. If such person does not execute and deliver the Restricted Stock
Purchase Agreement along with full payment for the Shares to the Company within
such thirty (30) days, then the offer will terminate, unless otherwise
determined by the Committee.

          6.2  Purchase Price.  The Purchase Price of Shares sold pursuant to a
               --------------
Restricted Stock Award will be determined by the Committee and will be at least
eighty-five percent (85%) of the Fair Market Value of the Shares on the date the
Restricted Stock Award is granted or at the time the purchase is consummated,
except in the case of a sale to a Ten Percent Shareholder, in which case the
Purchase Price will be one hundred percent (100%) of the Fair Market Value on
the date the Restricted Stock Award is granted or at the time the purchase is
consummated.  Payment of the Purchase Price must be made in accordance with
Section 7 hereof.

          6.3  Restrictions.  Restricted Stock Awards may be subject to the
               ------------
restrictions set forth in Section 11 hereof or such other restrictions not
inconsistent with Section 25102(f) of the California Corporations Code.

     7.   PAYMENT FOR SHARE PURCHASES.
          ---------------------------

          7.1  Payment.  Payment for Shares purchased pursuant to this Executive
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Plan may be made in cash (by check) or, where expressly approved for the
Participant by the Committee and where permitted by law:

          (a)  by cancellation of indebtedness of the Company owed to the
               Participant;

          (b)  by surrender of shares that:  (i) either (A) have been owned by
               Participant for more than six (6) months and have been paid for
               within the meaning of SEC Rule 144 (and, if such shares were
               purchased from the Company by use of a promissory note, such note
               has been fully paid with respect to such shares) or (B) were
               obtained by Participant in the public market and (ii) are clear
               of all liens, claims, encumbrances or security interests;

          (c)  by tender of a full recourse promissory note having such terms as
               may be approved by the Committee and bearing interest at a rate
               sufficient to avoid imputation of income under Sections 483 and
               1274 of the Code; provided, however, that Participants who are
               not employees or directors of the Company will not be entitled to
               purchase Shares with a promissory note unless the note is
               adequately secured by collateral other than the Shares;

          (d)  by waiver of compensation due or accrued to the Participant from
               the Company for services rendered;

          (e)  with respect only to purchases upon exercise of an Option, and
               provided that a public market for the Company's stock exists:

               (i)  through a "same day sale" commitment from the Participant
                    and a broker-dealer that is a member of the National
                    Association of Securities Dealers (an "NASD Dealer") whereby
                    the Participant irrevocably elects to exercise the Option
                    and to sell a portion of the

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                    Shares so purchased sufficient to pay the total Exercise
                    Price, and whereby the NASD Dealer irrevocably commits upon
                    receipt of such Shares to forward the total Exercise Price
                    directly to the Company; or

               (ii) through a "margin" commitment from the Participant and an
                    NASD Dealer whereby the Participant irrevocably elects to
                    exercise the Option and to pledge the Shares so purchased to
                    the NASD Dealer in a margin account as security for a loan
                    from the NASD Dealer in the amount of the total Exercise
                    Price, and whereby the NASD Dealer irrevocably commits upon
                    receipt of such Shares to forward the total Exercise Price
                    directly to the Company; or

          (f)  by any combination of the foregoing.

          7.2  Loan Guarantees.  The Committee may, in its sole discretion,
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elect to assist the Participant in paying for Shares purchased under this
Executive Plan by authorizing a guarantee by the Company of a third-party loan
to the Participant.

     8.   WITHHOLDING TAXES.
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          8.1  Withholding Generally.  Whenever Shares are to be issued in
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satisfaction of Awards granted under this Executive Plan, the Company may
require the Participant to remit to the Company an amount sufficient to satisfy
federal, state and local withholding tax requirements prior to the delivery of
any certificate or certificates for such Shares.  Whenever, under this Executive
Plan, payments in satisfaction of Awards are to be made in cash by the Company,
such payment will be net of an amount sufficient to satisfy federal, state, and
local withholding tax requirements.

          8.2  Stock Withholding.  When, under applicable tax laws, a
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Participant incurs tax liability in connection with the exercise or vesting of
any Award that is subject to tax withholding and the Participant is obligated to
pay the Company the amount required to be withheld, the Committee may in its
sole discretion allow the Participant to satisfy the minimum withholding tax
obligation by electing to have the Company withhold from the Shares to be issued
that number of Shares having a Fair Market Value equal to the minimum amount
required to be withheld, determined on the date that the amount of tax to be
withheld is to be determined.  All elections by a Participant to have Shares
withheld for this purpose will be made in accordance with the requirements
established by the Committee for such elections and be in writing in a form
acceptable to the Committee.

     9.   PRIVILEGES OF STOCK OWNERSHIP.
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          9.1  Voting and Dividends.  No Participant will have any of the rights
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of a shareholder with respect to any Shares until the Shares are issued to the
Participant.  After Shares are issued to the Participant, the Participant will
be a shareholder and have all the rights of a shareholder with respect to such
Shares, including the right to vote and receive all dividends or other
distributions made or paid with respect to such Shares; provided, that if such
Shares are Restricted Stock, then any new, additional or different securities
the Participant may become entitled to receive with respect to such Shares by
virtue of a stock dividend, stock split or any

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other change in the corporate or capital structure of the Company will be
subject to the same restrictions as the Restricted Stock. The Participant will
have no right to retain such stock dividends or stock distributions with respect
to Unvested Shares that are repurchased pursuant to Section 11 hereof. The
Company will comply with Section 260.140.1 of Title 10 of the California Code of
Regulations with respect to the voting rights of Common Stock.

          9.2  Financial Statements.  The Company will provide financial
               --------------------
statements to each Participant annually during the period such Participant has
Awards outstanding, or as otherwise required under Section 260.140.46 of Title
10 of the California Code of Regulations.  Notwithstanding the foregoing, the
Company will not be required to provide such financial statements to
Participants when issuance is limited to key employees whose services in
connection with the Company assure them access to equivalent information.

     10.  TRANSFERABILITY.  Awards granted under this Executive Plan, and any
          ---------------
interest therein, will not be transferable or assignable by Participant, other
than by will or by the laws of descent and distribution, and may not be made
subject to execution, attachment or similar process.  During the lifetime of the
Participant an Award will be exercisable only by the Participant or
Participant's legal representative and any elections with respect to an Award
may be made only by the Participant or Participant's legal representative.

     11.  RESTRICTIONS ON SHARES.
          ----------------------

          11.1  Right of First Refusal.  At the discretion of the Committee, the
                ----------------------
Company may reserve to itself and/or its assignee(s) in the Award Agreement a
right of first refusal to purchase all Shares that a Participant (or a
subsequent transferee) may propose to transfer to a third party, unless
otherwise not permitted by Section 25102(f) of the California Corporations Code,
provided that such right of first refusal terminates upon the Company's initial
public offering of Common Stock pursuant to an effective registration statement
filed under the Securities Act.

          11.2  Right of Repurchase.  At the discretion of the Committee, the
                -------------------
Company may reserve to itself and/or its assignee(s) in the Award Agreement a
right to repurchase Unvested Shares held by a Participant for cash and/or
cancellation of purchase money indebtedness owed to the Company by the
Participant following such Participant's Termination at any time within the
later of ninety (90) days after the Participant's Termination Date and the date
the Participant purchases Shares under the Executive Plan at the Participant's
Exercise Price or Purchase Price, as the case may be, provided that, unless the
Participant is an officer, director or consultant of the Company or of a Parent
or Subsidiary of the Company, such right of repurchase lapses at the rate of no
less than twenty percent (20%) per year over five (5) years from:  (a) the date
of grant of the Option or (b) in the case of Restricted Stock, the date the
Participant purchases the Shares.

     12.  CERTIFICATES.  All certificates for Shares or other securities
          ------------
delivered under this Executive Plan will be subject to such stock transfer
orders, legends and other restrictions as the Committee may deem necessary or
advisable, including restrictions under any applicable federal, state or foreign
securities law, or any rules, regulations and other requirements of the SEC or
any stock exchange or automated quotation system upon which the Shares may be
listed or quoted.

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     13.  ESCROW; PLEDGE OF SHARES.  To enforce any restrictions on a
          ------------------------
Participant's Shares set forth in Section 11 hereof, the Committee may require
the Participant to deposit all certificates representing Shares, together with
stock powers or other instruments of transfer approved by the Committee,
appropriately endorsed in blank, with the Company or an agent designated by the
Company to hold in escrow until such restrictions have lapsed or terminated.
The Committee may cause a legend or legends referencing such restrictions to be
placed on the certificates.  Any Participant who is permitted to execute a
promissory note as partial or full consideration for the purchase of Shares
under this Executive Plan will be required to pledge and deposit with the
Company all or part of the Shares so purchased as collateral to secure the
payment of Participant's obligation to the Company under the promissory note;
provided, however, that the Committee may require or accept other or additional
forms of collateral to secure the payment of such obligation and, in any event,
the Company will have full recourse against the Participant under the promissory
note notwithstanding any pledge of the Participant's Shares or other collateral.
In connection with any pledge of the Shares, Participant will be required to
execute and deliver a written pledge agreement in such form as the Committee
will from time to time approve.

     14.  EXCHANGE AND BUYOUT OF AWARDS.  The Committee may, at any time or from
          -----------------------------
time to time, authorize the Company, with the consent of the respective
Participants, to issue new Awards in exchange for the surrender and cancellation
of any or all outstanding Awards.  The Committee may at any time buy from a
Participant an Award previously granted with payment in cash, shares of Common
Stock of the Company (including Restricted Stock) or other consideration, based
on such terms and conditions as the Committee and the Participant may agree.

     15.  SECURITIES LAW AND OTHER REGULATORY COMPLIANCE.  This Executive Plan
          ----------------------------------------------
is intended to comply with Section 25102(f) of the California Corporations Code.
Any provision of this Executive Plan which is inconsistent with Section 25102(f)
shall, without further act or amendment by the Company or the Board, be reformed
to comply with the requirements of Section 25102(f).  An Award will not be
effective unless such Award is in compliance with all applicable federal and
state securities laws, rules and regulations of any governmental body, and the
requirements of any stock exchange or automated quotation system upon which the
Shares may then be listed or quoted, as they are in effect on the date of grant
of the Award and also on the date of exercise or other issuance.
Notwithstanding any other provision in this Executive Plan, the Company will
have no obligation to issue or deliver certificates for Shares under this
Executive Plan prior to (i) obtaining any approvals from governmental agencies
that the Company determines are necessary or advisable, and/or (ii) compliance
with any exemption, completion of any registration or other qualification of
such Shares under any state or federal law or ruling of any governmental body
that the Company determines to be necessary or advisable.  The Company will be
under no obligation to register the Shares with the SEC or to effect compliance
with the exemption, registration, qualification or listing requirements of any
state securities laws, stock exchange or automated quotation system, and the
Company will have no liability for any inability or failure to do so.

     16.  NO OBLIGATION TO EMPLOY.  Nothing in this Executive Plan or any Award
          -----------------------
granted under this Executive Plan will confer or be deemed to confer on any
Participant any right to continue in the employ of, or to continue any other
relationship with, the Company or any Parent or Subsidiary of the Company or
limit in any way the right of the Company or any

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Parent or Subsidiary of the Company to terminate Participant's employment or
other relationship at any time, with or without Cause.

     17.  CORPORATE TRANSACTIONS.
          ----------------------

          17.1  Assumption or Replacement of Awards by Successor or Acquiring
                -------------------------------------------------------------
Company.  In the event of (i) a dissolution or liquidation of the Company, (ii)
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a merger or consolidation in which the Company is not the surviving corporation,
(iii) a merger in which the Company is the surviving corporation but after which
the shareholders of the Company immediately prior to such merger (other than any
shareholder which merges with the Company in such merger, or which owns or
controls another corporation which merges with the Company in such merger) cease
to own their shares or other equity interests in the Company, or (iv) the sale
of all or substantially all of the assets of the Company, any or all outstanding
Awards may be assumed, converted or replaced by the successor or acquiring
corporation (if any), which assumption, conversion or replacement will be
binding on all Participants.  In the alternative, the successor or acquiring
corporation may substitute equivalent Awards or provide substantially similar
consideration to Participants as was provided to shareholders (after taking into
account the existing provisions of the Awards).  The successor or acquiring
corporation may also substitute by issuing, in place of outstanding Shares of
the Company held by the Participant, substantially similar shares or other
property subject to repurchase restrictions and other provisions no less
favorable to the Participant than those which applied to such outstanding Shares
immediately prior to such transaction described in this Section 17.1.  In the
event such successor or acquiring corporation (if any) refuses to assume,
convert, replace or substitute Awards, as provided above, pursuant to a
transaction described in this Section 17.1, then notwithstanding any other
provision in this Executive Plan to the contrary, such Awards will expire on
such transaction at such time and on such conditions as the Board will
determine.

          17.2  Other Treatment of Awards.  Subject to any greater rights
                -------------------------
granted to Participants under the foregoing provisions of this Section 17, in
the event of the occurrence of any transaction described in Section 17.1 hereof,
any outstanding Awards will be treated as provided in the applicable agreement
or plan of merger, consolidation, dissolution, liquidation or sale of assets.

          17.3  Assumption of Awards by the Company.  The Company, from time to
                -----------------------------------
time, also may substitute or assume outstanding awards granted by another
company, whether in connection with an acquisition of such other company or
otherwise, by either (i) granting an Award under this Executive Plan in
substitution of such other company's award or (ii) assuming such award as if it
had been granted under this Executive Plan if the terms of such assumed award
could be applied to an Award granted under this Executive Plan.  Such
substitution or assumption will be permissible if the holder of the substituted
or assumed award would have been eligible to be granted an Award under this
Executive Plan if the other company had applied the rules of this Executive Plan
to such grant.  In the event the Company assumes an award granted by another
company, the terms and conditions of such award will remain unchanged (except
that the exercise price and the number and nature of shares issuable upon
exercise of any such option will be adjusted appropriately pursuant to Section
424(a) of the Code).  In the event the Company elects to grant a new Option
rather than assuming an existing option, such new Option may be granted with a
similarly adjusted Exercise Price.

                                       10
<PAGE>

     18.  ADOPTION AND SHAREHOLDER APPROVAL.  This Executive Plan will become
          ---------------------------------
effective on the date that it is adopted by the Board (the "Effective Date").
This Executive Plan will be approved by the shareholders of the Company
(excluding Shares issued pursuant to this Executive Plan), consistent with
applicable laws, within twelve (12) months before or after the Effective Date.
Upon the Effective Date, the Board may grant Awards pursuant to this Executive
Plan; provided, however, that:  (i) no Option may be exercised prior to initial
shareholder approval of this Executive Plan; (ii) no Option granted pursuant to
an increase in the number of Shares approved by the Board shall be exercised
prior to the time such increase has been approved by the shareholders of the
Company; (iii) in the event that initial shareholder approval is not obtained
within the time period provided herein, all Awards granted hereunder shall be
canceled, any Shares issued pursuant to any Award shall be canceled and any
purchase of Shares issued hereunder shall be rescinded; and (iv) Awards granted
pursuant to an increase in the number of Shares approved by the Board which
increase is not timely approved by shareholders shall be canceled, any Shares
issued pursuant to any such Awards shall be canceled, and any purchase of Shares
subject to any such Award shall be rescinded.

     19.  TERM OF EXECUTIVE PLAN/GOVERNING LAW.  Unless earlier terminated as
          ------------------------------------
provided herein, this Executive Plan will terminate ten (10) years from the
Effective Date or, if earlier, the date of shareholder approval.  This Executive
Plan and all agreements hereunder shall be governed by and construed in
accordance with the laws of the State of California.

     20.  AMENDMENT OR TERMINATION OF EXECUTIVE PLAN.  Subject to Section 5.9
          -------------------------------------------
hereof, the Board may at any time terminate or amend this Executive Plan in any
respect, including without limitation amendment of any form of Award Agreement
or instrument to be executed pursuant to this Executive Plan; provided, however,
that the Board will not, without the approval of the shareholders of the
Company, amend this Executive Plan in any manner that requires such shareholder
approval pursuant to the California Corporations Code or the Code or the
regulations promulgated thereunder as such provisions apply to ISO plans.

     21.  NONEXCLUSIVITY OF THE EXECUTIVE PLAN.  Neither the adoption of this
          ------------------------------------
Executive Plan by the Board, the submission of this Executive Plan to the
shareholders of the Company for approval, nor any provision of this Executive
Plan will be construed as creating any limitations on the power of the Board to
adopt such additional compensation arrangements as it may deem desirable,
including, without limitation, the granting of stock options and other equity
awards otherwise than under this Executive Plan, and such arrangements may be
either generally applicable or applicable only in specific cases.

     22.  DEFINITIONS.  As used in this Executive Plan, the following terms will
          -----------
have the following meanings:

          "Award" means any award under this Executive Plan, including any
Option or Restricted Stock Award.

          "Award Agreement" means, with respect to each Award, the signed
written agreement between the Company and the Participant setting forth the
terms and conditions of the Award, including the Stock Option Agreement and
Restricted Stock Agreement.

          "Board" means the Board of Directors of the Company.

                                       11
<PAGE>

          "Cause" means Termination because of (i) any willful, material
violation by the Participant of any law or regulation applicable to the business
of the Company or a Parent or Subsidiary of the Company, the Participant's
conviction for, or guilty plea to, a felony or a crime involving moral
turpitude, or any willful perpetration by the Participant of a common law fraud,
(ii) the Participant's commission of an act of personal dishonesty which
involves personal profit in connection with the Company or any other entity
having a business relationship with the Company, (iii) any material breach by
the Participant of any provision of any agreement or understanding between the
Company or any Parent or Subsidiary of the Company and the Participant regarding
the terms of the Participant's service as an employee, officer, director or
consultant to the Company or a Parent or Subsidiary of the Company, including
without limitation, the willful and continued failure or refusal of the
Participant to perform the material duties required of such Participant as an
employee, officer, director or consultant of the Company or a Parent or
Subsidiary of the Company, other than as a result of having a Disability, or a
breach of any applicable invention assignment and confidentiality agreement or
similar agreement between the Company or a Parent or Subsidiary of the Company
and the Participant, (iv) Participant's disregard of the policies of the Company
or any Parent or Subsidiary of the Company so as to cause loss, damage or injury
to the property, reputation or employees of the Company or a Parent or
Subsidiary of the Company, or (v) any other misconduct by the Participant which
is materially injurious to the financial condition or business reputation of, or
is otherwise materially injurious to, the Company or a Parent or Subsidiary of
the Company.

          "Code" means the Internal Revenue Code of 1986, as amended.

          "Committee" means the committee created and appointed by the Board to
administer this Executive Plan, or if no committee is created and appointed, the
Board.

          "Company" means Integrated Software & Devices Corporation, or any
successor corporation.

          "Disability" means a disability, whether temporary or permanent,
partial or total, as determined by the Committee.

          "Executive Plan" means this Integrated Software & Devices 2000
Executive Equity Incentive Plan, as amended from time to time.

          "Exercise Price" means the price at which a holder of an Option may
purchase the Shares issuable upon exercise of the Option.

          "Fair Market Value" means, as of any date, the value of a share of the
Company's Common Stock determined as follows:

          (a)  if such Common Stock is then quoted on the Nasdaq National
               Market, its closing price on the Nasdaq National Market on the
               date of determination as reported in The Wall Street Journal;
                                                    -----------------------

          (b)  if such Common Stock is publicly traded and is then listed on a
               national securities exchange, its closing price on the date of
               determination on the principal national securities exchange on
               which the Common Stock is listed or admitted to trading as
               reported in The Wall Street Journal;
                           -----------------------

                                       12
<PAGE>

          (c)  if such Common Stock is publicly traded but is not quoted on the
               Nasdaq National Market nor listed or admitted to trading on a
               national securities exchange, the average of the closing bid and
               asked prices on the date of determination as reported by The Wall
                                                                        --------
               Street Journal (or, if not so reported, as otherwise reported by
               --------------
               any newspaper or other source as the Board may determine); or

          (d)  if none of the foregoing is applicable, by the Committee in good
               faith.

          "Option" means an award of an option to purchase Shares pursuant to
Section 5 hereof.

          "Parent" means any corporation (other than the Company) in an unbroken
chain of corporations ending with the Company if each of such corporations other
than the Company owns stock representing 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.

          "Participant" means a person who receives an Award under this
          Executive Plan.

          "Purchase Price" means the price at which a Participant may purchase
          Restricted Stock.

          "Restricted Stock" means Shares purchased pursuant to a Restricted
          Stock Award.

          "Restricted Stock Award" means an award of Shares pursuant to Section
          6 hereof.

          "SEC" means the Securities and Exchange Commission.

          "Securities Act" means the Securities Act of 1933, as amended.

          "Shares" means shares of the Company's Common Stock reserved for
issuance under this Executive Plan, as adjusted pursuant to Sections 2 and 17
hereof, and any successor security.

          "Subsidiary" means any corporation (other than the Company) in an
unbroken chain of corporations beginning with the Company if each of the
corporations other than the last corporation in the unbroken chain owns stock
representing 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.

          "Termination" or "Terminated" means, for purposes of this Executive
Plan with respect to a Participant, that the Participant has for any reason
ceased to provide services as an employee, officer, director or consultant to
the Company or a Parent or Subsidiary of the Company. A Participant will not be
deemed to have ceased to provide services in the case of (i) sick leave, (ii)
military leave, or (iii) any other leave of absence approved by the Committee,
provided that such leave is for a period of not more than ninety (90) days (a)
unless reinstatement (or, in the case of an employee with an ISO, reemployment)
upon the expiration of such leave is guaranteed by contract or statute, or (b)
unless provided otherwise pursuant to formal policy adopted from time to time by
the Company's Board and issued and promulgated in writing. In the case of any
Participant on (i) sick leave, (ii) military leave or (iii) an approved leave of
absence, the Committee may make such provisions respecting suspension of vesting
of the

                                       13
<PAGE>

Award while on leave from the Company or a Parent or Subsidiary of the Company
as it may deem appropriate, except that in no event may an Option be exercised
after the expiration of the term set forth in the Stock Option Agreement. The
Committee will have sole discretion to determine whether a Participant has
ceased to provide services and the effective date on which the Participant
ceased to provide services (the "Termination Date").

               "Unvested Shares" means "Unvested Shares" as defined in the Award
               Agreement.

               "Vested Shares" means "Vested Shares" as defined in the Award
               Agreement.

                                       14
<PAGE>

                                    FORM OF
                                                                     No. _______
                   INTEGRATED SOFTWARE & DEVICES CORPORATION

                     2000 EXECUTIVE EQUITY INCENTIVE PLAN

                            STOCK OPTION AGREEMENT

          This Stock Option Agreement (the "Agreement") is made and entered into
as of the date of grant set forth below (the "Date of Grant") by and between
Integrated Software & Devices Corporation, a California corporation (the
"Company"), and the participant named below (the "Participant").  Capitalized
terms not defined herein shall have the meaning ascribed to them in the
Company's 2000 Executive Equity Incentive Plan (the "Executive Plan").

Participant:                  _______________________________________
Social Security Number:       _______________________________________
Address:                      _______________________________________
                              _______________________________________
Total Option Shares:          _______________________________________
Exercise Price Per Share:     _______________________________________
Date of Grant:                _______________________________________
First Vesting Date:           _______________________________________

Expiration Date:              _______________________________________
                              (unless earlier terminated under Section 5.6 of
                              the Executive Plan)
Type of Stock Option

(Check-one):                  [  ] Incentive Stock Option
                              [  ] Nonqualified Stock Option

     1.   Grant of Option. The Company hereby grants to Participant an option
          -----------------
(this "Option") to purchase the total number of shares of Common Stock of the
Company set forth above as Total Option Shares (the "Shares") at the Exercise
Price Per Share set forth above (the "Exercise Price"), subject to all of the
terms and conditions of this Agreement and the Executive Plan. If designated as
an Incentive Stock Option above, the Option is intended to qualify as an
"incentive stock option" (the "ISO") within the meaning of Section 422 of the
Internal Revenue Code of 1986, as amended (the "Code").

     2.   Exercise Period.
          ----------------

          2.1  Exercise Period of Option.  This Option is immediately
               -------------------------
exercisable although the Shares issued upon exercise of the Option will be
subject to the restrictions on transfer and Repurchase Options set forth in
Sections 7, 8 and 9 below.  Provided Participant
<PAGE>

continues to provide services to the Company or to any Parent or Subsidiary of
the Company, the Shares issuable upon exercise of this Option will become vested
with respect to twenty-five percent (25%) of the Shares on the First Vesting
Date set forth on the first page of this Agreement (the "First Vesting Date")
and thereafter at the end of each full succeeding month after the First Vesting
Date an additional 2.08333% of the Shares will become vested until the Shares
are vested with respect to one hundred percent (100%) of the Shares. If
application of the vesting percentage causes a fractional share, such share
shall be rounded down to the nearest whole share for each month except for the
last month in such vesting period, at the end of which last month this Option
shall become vested for the full remainder of the Shares. Unvested Shares may
not be sold or otherwise transferred by Participant without the Company's prior
written consent. Notwithstanding any provision in the Executive Plan or this
Agreement to the contrary, Options for Unvested Shares (as defined in Section
2.2 of this Agreement) will not be exercisable on or after Participant's
Termination Date.

          2.2  Vesting of Options.  Shares that are vested pursuant to the
               ------------------
schedule set forth in Section 2.1 are "Vested Shares."  Shares that are not
vested pursuant to the schedule set forth in Section 2.1 are "Unvested Shares."

          2.3  Expiration.  The Option shall expire on the Expiration Date set
               ----------
forth above or earlier as provided in Section 3 below or pursuant to Section 5.6
of the Executive Plan.

     3.   Termination.
          -----------

          3.1  Termination for Any Reason Except Death, Disability or Cause.  If
               ------------------------------------------------------------
Participant is Terminated for any reason, except death, Disability or for Cause,
the Option, to the extent (and only to the extent) that it would have been
exercisable by Participant on the Termination Date, may be exercised by
Participant no later than three (3) months after the Termination Date, but in
any event no later than the Expiration Date.  Any exercise beyond three (3)
months is an NQSO.

          3.2  Termination Because of Death or Disability.  If Participant is
               ------------------------------------------
Terminated because of death or Disability of Participant (or Participant dies
within three (3) months of Termination when Termination is for any reason other
than Participant's Disability or for Cause), the Option, to the extent that it
is exercisable by Participant on the Termination Date, may be exercised by
Participant (or Participant's legal representative) no later than twelve (12)
months after the Termination Date, but in any event no later than the Expiration
Date. Any exercise beyond (i) three (3) months after the Termination Date when
the Termination is for any reason other than the Participant's death or
disability, within the meaning of Section 22(e)(3) of the Code; or (ii) twelve
(12) months after the Termination Date when the termination is for Participant's
disability, within the meaning of Section 22(e)(3) of the Code, is deemed to be
an NQSO.

          3.3  Termination for Cause.  If Participant is Terminated for Cause,
               ---------------------
then the Option will expire on Participant's Termination Date, or at such later
time and on such conditions as are determined by the Committee.

                                       2
<PAGE>

          3.4  No Obligation to Employ.  Nothing in the Executive Plan or this
               -----------------------
Agreement shall confer on Participant any right to continue in the employ of, or
other relationship with, the Company or any Parent or Subsidiary of the Company,
or limit in any way the right of the Company or any Parent or Subsidiary of the
Company to terminate Participant's employment or other relationship at any time,
with or without Cause.

     4.   Manner of Exercise.
          ------------------

          4.1  Stock Option Exercise Agreement.  To exercise this Option,
               -------------------------------
Participant (or in the case of exercise after Participant's death or incapacity,
Participant's executor, administrator, heir or legatee, as the case may be) must
deliver to the Company an executed stock option exercise agreement in the form
attached hereto as Exhibit , or in such other form as may be approved by the
                   --------
Committee from time to time (the "Exercise Agreement"), which shall set forth,

inter alia, (i) Participant's election to exercise the Option, (ii) the number
----- ----
of Shares being purchased, (iii) any restrictions imposed on the Shares and (iv)
any representations, warranties and agreements regarding Participant's
investment intent and access to information as may be required by the Company to
comply with applicable securities laws. If someone other than Participant
exercises the Option, then such person must submit documentation reasonably
acceptable to the Company verifying that such person has the legal right to
exercise the Option.

          4.2  Limitations on Exercise.  The Option may not be exercised unless
               -----------------------
such exercise is in compliance with all applicable federal and state securities
laws, as they are in effect on the date of exercise. The Option may not be
exercised as to fewer than one hundred (100) Shares unless it is exercised as to
all Shares as to which the Option is then exercisable.

          4.3  Payment.  The Exercise Agreement shall be accompanied by full
               -------
payment of the Exercise Price for the shares being purchased in cash (by check),
or where permitted by law:

               (a)  by cancellation of indebtedness of the Company to the
                    Participant;

               (b)  by surrender of shares of the Company's Common Stock that
                    (i) either (A) have been owned by Participant for more than
                    six (6) months and have been paid for within the meaning of
                    SEC Rule 144 (and, if such shares were purchased from the
                    Company by use of a promissory note, such note has been
                    fully paid with respect to such shares); or (B) were
                    obtained by Participant in the open public market; and (ii)
                    are clear of all liens, claims, encumbrances or security
                    interests;

               (c)  by waiver of compensation due or accrued to Participant for
                    services rendered;

               (d)  provided that a public market for the Company's stock
                    exists: (i) through a "same day sale" commitment from
                    Participant and a broker-dealer that is a member of the
                    National Association of Securities Dealers (an "NASD
                    Dealer") whereby Participant

                                       3
<PAGE>

                    irrevocably elects to exercise the Option and to sell a
                    portion of the Shares so purchased sufficient to pay for the
                    total Exercise Price and whereby the NASD Dealer irrevocably
                    commits upon receipt of such Shares to forward the total
                    Exercise Price directly to the Company, or (ii) through a
                    "margin" commitment from Participant and an NASD Dealer
                    whereby Participant irrevocably elects to exercise the
                    Option and to pledge the Shares so purchased to the NASD
                    Dealer in a margin account as security for a loan from the
                    NASD Dealer in the amount of the total Exercise Price, and
                    whereby the NASD Dealer irrevocably commits upon receipt of
                    such Shares to forward the total Exercise Price directly to
                    the Company; or

               (e)  by tender of a full recourse promissory note having such
                    terms as may be approved by the Committee and bearing
                    interest at a rate sufficient to avoid imputation of income
                    under Sections 483 and 1274 of the Code; provided, however,
                    that Participants who are not employees or directors of the
                    Company shall not be entitled to purchase Shares with a
                    promissory note unless the note is adequately secured by
                    collateral other than the Shares;

               (f)  any other form of consideration approved by the Committee;
                    or

               (g)  by any combination of the foregoing.

          4.4  Tax Withholding.  Prior to the issuance of the Shares upon
               ---------------
exercise of the Option, Participant must pay or provide for any applicable
federal, state and local withholding obligations of the Company. If the
Committee permits, Participant may provide for payment of withholding taxes upon
exercise of the Option by requesting that the Company retain the minimum number
of Shares with a Fair Market Value equal to the minimum amount of taxes required
to be withheld; but in no event will the Company withhold Shares if such
withholding would result in adverse accounting consequences to the Company. In
such case, the Company shall issue the net number of Shares to the Participant
by deducting the Shares retained from the Shares issuable upon exercise.

          4.5  Issuance of Shares.  Provided that the Exercise Agreement and
               ------------------
payment are in form and substance satisfactory to counsel for the Company, the
Company shall issue the Shares registered in the name of Participant,
Participant's authorized assignee, or Participant's legal representative, and
shall deliver certificates representing the Shares with the appropriate legends
affixed thereto.

     5.   Notice of Disqualifying Disposition of ISO Shares. If the Option is an
          -------------------------------------------------
ISO, and if Participant sells or otherwise disposes of any of the Shares
acquired pursuant to the ISO on or before the later of (i) the date two (2)
years after the Date of Grant, and (ii) the date one (1) year after transfer of
such Shares to Participant upon exercise of the Option, Participant shall
immediately notify the Company in writing of such disposition. Participant
agrees that Participant may be subject to income tax withholding by the Company
on the compensation

                                       4
<PAGE>

income recognized by Participant from the early disposition by payment in cash
or out of the current wages or other compensation payable to Participant.

     6.   Compliance with Laws and Regulations.  The Executive Plan and this
          ------------------------------------
Agreement are intended to comply with Section 25102(f) of the California
Corporations Code and any regulations relating thereto. Any provision of this
Agreement which is inconsistent with Section 25102(f) or any regulations
relating thereto shall, without further act or amendment by the Company or the
Board, be reformed to comply with the requirements of Section 25102(f) and any
regulations relating thereto. The exercise of the Option and the issuance and
transfer of Shares shall be subject to compliance by the Company and Participant
with all applicable requirements of federal and state securities laws and with
all applicable requirements of any stock exchange on which the Company's Common
Stock may be listed at the time of such issuance or transfer. Participant
understands that the Company is under no obligation to register or qualify the
Shares with the SEC, any state securities commission or any stock exchange to
effect such compliance.

     7.   Nontransferability of Option. The Option may not be transferred in any
          ----------------------------
manner other than by will or by the laws of descent and distribution and may be
exercised during the lifetime of Participant only by Participant or in the event
of Participant's incapacity, by Participant's legal representative. The terms of
the Option shall be binding upon the executors, administrators, successors and
assigns of Participant.

     8.   Company's Repurchase Option for Unvested Shares.  The Company, or its
          -----------------------------------------------
assignee, shall have the option to repurchase Participant's Unvested Shares (as
defined in Section 2.2 of this Agreement) on the terms and conditions set forth
in the Exercise Agreement (the "Repurchase Option") if Participant is Terminated
(as defined in the Executive Plan) for any reason, or no reason, including
without limitation Participant's death, Disability (as defined in the Executive
Plan), voluntary resignation or termination by the Company with or without
Cause.  Notwithstanding the foregoing, the Company shall retain the Repurchase
Option for Unvested Shares only as to that number of Unvested Shares (whether or
not exercised) that exceeds the number of shares which remain unexercised.

     9.   Company's Right of First Refusal.  Unvested Shares may not be sold or
          --------------------------------
otherwise transferred by Participant without the Company's prior written
consent.  Before any Vested Shares held by Participant or any transferee of such
Vested Shares may be sold or otherwise transferred (including without limitation
a transfer by gift or operation of law), the Company and/or its assignee(s)
shall have an assignable right of first refusal to purchase the Vested Shares to
be sold or transferred on the terms and conditions set forth in the Exercise
Agreement (the "Right of First Refusal"). The Company's Right of First Refusal
will terminate when the Company's securities become publicly traded.

     10.  Tax Consequences.  Set forth below is a brief summary as of the
          ----------------
Effective Date of the Executive Plan of some of the federal and California tax
consequences of exercise of the Option and disposition of the Shares. THIS
SUMMARY IS NECESSARILY INCOMPLETE, AND THE TAX LAWS AND REGULATIONS ARE SUBJECT
TO CHANGE.

                                       5
<PAGE>

PARTICIPANT SHOULD CONSULT A TAX ADVISER BEFORE EXERCISING THE OPTION OR
DISPOSING OF THE SHARES.

          10.1   Exercise of ISO. If the Option qualifies as an ISO, there will
                 ---------------
be no regular federal or California income tax liability upon the exercise of
the Option, although the excess, if any, of the Fair Market Value of the Shares
on the date of exercise over the Exercise Price will be treated as a tax
preference item for federal alternative minimum tax purposes and may subject the
Participant to the alternative minimum tax in the year of exercise.

          10.2   Exercise of Nonqualified Stock Option.  If the Option does not
                 -------------------------------------
qualify as an ISO, there may be a regular federal and California income tax
liability upon the exercise of the Option. Participant will be treated as having
received compensation income (taxable at ordinary income tax rates) equal to the
excess, if any, of the Fair Market Value of the Shares on the date of exercise
over the Exercise Price. If Participant is a current or former employee of the
Company, the Company may be required to withhold from Participant's compensation
or collect from Participant and pay to the applicable taxing authorities an
amount equal to a percentage of this compensation income at the time of
exercise.

          10.3   Disposition of Shares. The following tax consequences may apply
                 ---------------------
upon disposition of the Shares.

                 (a)  Incentive Stock Options. If the Shares are held for more
                      -----------------------
than twelve (12) months after the date of the transfer of the Shares pursuant to
the exercise of an ISO and are disposed of more than two (2) years after the
Date of Grant, any gain realized on disposition of the Shares will be treated as
long term capital gain for federal and California income tax purposes. If Shares
purchased under an ISO are disposed of within the applicable one (1) year or two
(2) year period, any gain realized on such disposition will be treated as
compensation income (taxable at ordinary income rates) to the extent of the
excess, if any, of the Fair Market Value of the Shares on the date of exercise
over the Exercise Price.

                 (b)  Nonqualified Stock Options. If the Shares are held for
                      --------------------------
more than twelve (12) months after the date of the transfer of the Shares
pursuant to the exercise of an NQSO, any gain realized on disposition of the
Shares will be treated as long term capital gain.

                 (c)  Withholding. The Company may be required to withhold from
                      -----------
the Participant's compensation or collect from the Participant and pay to the
applicable taxing authorities an amount equal to a percentage of this
compensation income.

          10.4.  Section 83(b) Election for Unvested Shares.  With respect to
                 ------------------------------------------
Unvested Shares which are subject to the Repurchase Option, unless an election
is filed by the Participant with the Internal Revenue Service (and, if
necessary, the proper state taxing authorities), within 30 days of the purchase
                                                 --------------
of the Unvested Shares, electing pursuant to Section 83(b) of the Code (and
similar state tax provisions, if applicable) to be taxed currently on any
difference between the Exercise Price of the Unvested Shares and their Fair
Market Value on the date of purchase, there may be a recognition of taxable
income (including, where applicable, alternative minimum taxable income) to the
Participant, measured by the excess, if any, of the Fair Market Value of the
Unvested Shares at the time they cease to be Unvested Shares, over the Exercise
Price of the

                                       6
<PAGE>

Unvested Shares.

     11.  Privileges of Stock Ownership.  Participant shall not have any of the
          -----------------------------
rights of a shareholder with respect to any Shares until the Shares are issued
to Participant.

     12.  Interpretation.  Any dispute regarding the interpretation of this
          --------------
Agreement shall be submitted by Participant or the Company to the Committee for
review. The resolution of such a dispute by the Committee shall be final and
binding on the Company and Participant.

     13.  Entire Agreement.  The Executive Plan is incorporated herein by
          ----------------
reference. This Agreement and the Executive Plan constitute the entire agreement
of the parties and supersede all prior undertakings and agreements with respect
to the subject matter hereof.

     14.  Notices.  Any notice required to be given or delivered to the Company
          -------
under the terms of this Agreement shall be in writing and addressed to the
Corporate Secretary of the Company at its principal corporate offices. Any
notice required to be given or delivered to Participant shall be in writing and
addressed to Participant at the address indicated above or to such other address
as such party may designate in writing from time to time to the Company. All
notices shall be deemed to have been given or delivered upon: (i) personal
delivery; (ii) three (3) days after deposit in the United States mail by
certified or registered mail (return receipt requested); (iii) one (1) business
day after deposit with any return receipt express courier (prepaid); or (iv) one
(1) business day after transmission by facsimile, rapifax or telecopier.

     15.  Successors and Assigns.  The Company may assign any of its rights
          ----------------------
under this Agreement, including its rights to purchase Shares under the
Repurchase Option and the Right of First Refusal. This Agreement shall be
binding upon and inure to the benefit of the successors and assigns of the
Company. Subject to the restrictions on transfer set forth herein, this
Agreement shall be binding upon Participant and Participant's heirs, executors,
administrators, legal representatives, successors and assigns.

     16.  Governing Law.  This Agreement shall be governed by and construed
          -------------
in accordance with the laws of the State of California as such laws are applied
to agreements between California residents entered into and to be performed
entirely within California.  If any provision of this Agreement is determined by
a court of law to be illegal or unenforceable, then such provision will be
enforced to the maximum extent possible and the other provisions will remain
fully effective and enforceable.

     17.  Acceptance.  Participant hereby acknowledges receipt of a copy of
          ----------
the Executive Plan and this Agreement.  Participant has read and understands the
terms and provisions thereof, and accepts the Option subject to all the terms
and conditions of the Executive Plan and this Agreement.  Participant
acknowledges that there may be adverse tax consequences upon exercise of the
Option or disposition of the Shares and that Participant should consult a tax
adviser prior to such exercise or disposition.

                                       7
<PAGE>

          IN WITNESS WHEREOF, the Company has caused this Agreement to be
executed in triplicate by its duly authorized representative and Participant has
executed this Agreement in triplicate, effective as of the Date of Grant.

INTEGRATED SOFTWARE &                        PARTICIPANT
DEVICES CORPORATION

By: __________________________               ______________________________
                                             (Signature)

______________________________               ______________________________
(Please print name)                          (Please print name)

______________________________               ______________________________
(Please print title)
<PAGE>

                                   EXHIBIT A
                                   ---------

                    FORM OF STOCK OPTION EXERCISE AGREEMENT
<PAGE>

                                    FORM OF

                                                                     No.________

                   INTEGRATED SOFTWARE & DEVICES CORPORATION

                     2000 EXECUTIVE EQUITY INCENTIVE PLAN

                        STOCK OPTION EXERCISE AGREEMENT

     This Stock Option Exercise Agreement (the "Exercise Agreement") is made and
entered into as of _________________________ (the "Effective Date") by and
between Integrated Software & Devices Corporation, a California corporation (the
"Company"), and the purchaser named below (the "Purchaser").  Capitalized terms
not defined herein shall have the meanings ascribed to them in the Company's
2000 Executive Equity Incentive Plan (the "Executive Plan").

Purchaser:                    ____________________________________

                              ____________________________________

Social Security Number:       ____________________________________

Address:                      ____________________________________

Total Number of Shares:       ____________________________________

Exercise Price Per Share:     ____________________________________

Date of Grant:                ____________________________________

First Vesting Date:           ____________________________________

Expiration Date:              ____________________________________
                              (Unless earlier terminated under
                              Section 5.6 of the Executive Plan)

Type of Stock Option
(Check one):                  [ ] Incentive Stock Option
                              [ ] Nonqualified Stock Option

     1.   Exercise of Option.
          ------------------

          1.1  Exercise.  Pursuant to exercise of that certain option (the
               --------
"Option") granted to Purchaser under the Executive Plan and subject to the terms
and conditions of this Exercise Agreement, Purchaser hereby purchases from the
Company, and the Company hereby
<PAGE>

sells to Purchaser, the Total Number of Shares set forth above (the "Shares")
of the Company's Common Stock at the Exercise Price Per Share set forth above
(the "Exercise Price"). As used in this Exercise Agreement, the term "Shares"
refers to the Shares purchased under this Exercise Agreement and includes all
securities received (i) in replacement of the Shares, (ii) as a result of stock
dividends or stock splits with respect to the Shares, and (iii) all securities
received in replacement of the Shares in a merger, recapitalization,
reorganization or similar corporate transaction.

          1.2  Title to Shares.  The exact spelling of the name(s) under which
               ---------------
Purchaser will take title to the Shares is:

               _________________________________________________________________
               _________________________________________________________________

          Purchaser desires to take title to the Shares as follows:

               [ ]  Individual, as separate property

               [ ]  Husband and wife, as community property

               [ ]  Joint Tenants

               [ ]  Other; please specify:

          To assign the Shares to a trust, a stock transfer agreement must be
completed and executed.

          1.3  Payment.  Purchaser hereby delivers payment of the Exercise
               -------
Price in the manner permitted in the Stock Option Agreement as follows (check
and complete as appropriate):

               [ ]  in cash (by check) in the amount of $____________, receipt
                    of which is acknowledged by the Company;

               [ ]  by cancellation of indebtedness of the Company owed to
                    Purchaser in the amount of $_______________;

               [ ]  by delivery of _________ fully-paid, nonassessable and
                    vested shares of the Common Stock of the Company owned by
                    Purchaser for at least six (6) months prior to the date
                    hereof which have been paid for within the meaning of SEC
                    Rule 144, (if purchased by use of a promissory note, such
                    note has been fully paid with respect to such vested
                    shares), or obtained by Purchaser in the open public market,
                    and owned free and clear of all liens, claims, encumbrances
                    or security interests, valued at the current Fair Market
                    Value of $___________ per share;

               [ ]  by the waiver hereby of compensation due or accrued for
                    services rendered in the amount of $_________.

                                       2
<PAGE>

               [ ]  by tender of a Full Recourse Promissory Note in the
                    principal amount of $__________, having such terms as may be
                    approved by the Committee and bearing interest at a rate
                    sufficient to avoid imputation of income under Sections 483
                    and 1274 of the Code and secured by a Pledge Agreement
                    herewith; provided, however, that Purchasers who are not
                    employees or directors of the Company shall not be entitled
                    to purchase Shares with a promissory note unless the note is
                    adequately secured by collateral other than the Shares;

     2.   Delivery.
          --------

          2.1  Deliveries by Purchaser.  Purchaser hereby delivers to the
               -----------------------
Company (i) this Exercise Agreement, (ii) two (2) copies of a blank Stock Power
and Assignment Separate from Stock Certificate in the form of Exhibit 1 attached
                                                              ---------
hereto (the "Stock Powers"), both executed by Purchaser (and Purchaser's spouse,
if any), (iii) if Purchaser is married, a Consent of Spouse in the form of
Exhibit 2 attached hereto (the "Spouse Consent") executed by Purchaser's spouse,
---------
(iv) the Exercise Price and payment or other provision for any applicable tax
obligations in the form of a check, a copy of which is attached hereto as
Exhibit 3 and/or a Secured Full Recourse Promissory Note in the form attached
---------
hereto as Exhibit 3 and a Stock Pledge Agreement in the form attached hereto as
          ---------
Exhibit 4 executed by Purchaser (the "Pledge Agreement").
---------

          2.2  Deliveries by the Company.  Upon its receipt of the Exercise
               -------------------------
Price, payment or other provision for any applicable tax obligations and all the
documents to be executed and delivered by Purchaser to the Company under Section
2.1, the Company will issue a duly executed stock certificate evidencing the
Shares in the name of Purchaser to be placed in escrow as provided in Section 11
to secure payment of Purchaser's obligation to the Company under the promissory
note and until expiration or termination of the Company's Repurchase Option and
Right of First Refusal described in Sections 8 and 9.

     3.   Representations and Warranties of Purchaser.  Purchaser represents and
          -------------------------------------------
warrants to the Company that:

          3.1  Agrees to Terms of the Executive Plan.  Purchaser has received a
               -------------------------------------
copy of the Executive Plan and the Stock Option Agreement, has read and
understands the terms of the Executive Plan, the Stock Option Agreement and this
Exercise Agreement, and agrees to be bound by their terms and conditions.
Purchaser acknowledges that there may be adverse tax consequences upon exercise
of the Option or disposition of the Shares, and that Purchaser should consult a
tax adviser prior to such exercise or disposition.

          3.2  Purchase for Own Account for Investment.  Purchaser is purchasing
               ---------------------------------------
the Shares for Purchaser's own account for investment purposes only and not with
a view to, or for sale in connection with, a distribution of the Shares within
the meaning of the Securities Act. Purchaser has no present intention of selling
or otherwise disposing of all or any portion of the Shares and no one other than
Purchaser has any beneficial ownership of any of the Shares.

                                       3
<PAGE>

          3.3  Access to Information.  Purchaser has had access to all
               ---------------------
information regarding the Company and its present and prospective business,
assets, liabilities and financial condition that Purchaser reasonably considers
important in making the decision to purchase the Shares, and Purchaser has had
ample opportunity to ask questions of the Company's representatives concerning
such matters and this investment.

          3.4  Understanding of Risks.  Purchaser is fully aware of:  (i) the
               ----------------------
highly speculative nature of the investment in the Shares; (ii) the financial
hazards involved; (iii) the lack of liquidity of the Shares and the restrictions
on transferability of the Shares (e.g., that Purchaser may not be able to sell
                                  ----
or dispose of the Shares or use them as collateral for loans); (iv) the
qualifications and backgrounds of the management of the Company; and (v) the tax
consequences of investment in the Shares.  Purchaser is capable of evaluating
the merits and risks of this investment, has the ability to protect Purchaser's
own interests in this transaction and is financially capable of bearing a total
loss of this investment.

          3.5  No General Solicitation.  At no time was Purchaser presented with
               -----------------------
or solicited by any publicly issued or circulated newspaper, mail, radio,
television or other form of general advertising or solicitation in connection
with the offer, sale and purchase of the Shares.

     4.   Compliance with Securities Laws.
          -------------------------------

          4.1  Compliance with U.S. Federal Securities Laws.  Purchaser
               --------------------------------------------
understands and acknowledges that the Shares have not been registered with the
SEC under the Securities Act and that, notwithstanding any other provision of
the Stock Option Agreement to the contrary, the exercise of any rights to
purchase any Shares is expressly conditioned upon compliance with the Securities
Act and all applicable state securities laws.  Purchaser agrees to cooperate
with the Company to ensure compliance with such laws.

          4.2  Compliance with California Securities Laws.  THE EXECUTIVE PLAN,
               ------------------------------------------
THE STOCK OPTION AGREEMENT, AND THIS EXERCISE AGREEMENT ARE INTENDED TO COMPLY
WITH SECTION 25102(F) OF THE CALIFORNIA CORPORATIONS CODE AND ANY RULES
(INCLUDING COMMISSIONER RULES, IF APPLICABLE) OR REGULATIONS PROMULGATED
THEREUNDER BY THE CALIFORNIA DEPARTMENT OF CORPORATIONS (THE "REGULATIONS"). ANY
PROVISION OF THIS EXERCISE AGREEMENT WHICH IS INCONSISTENT WITH SECTION 25102(F)
SHALL, WITHOUT FURTHER ACT OR AMENDMENT BY THE COMPANY OR THE BOARD, BE REFORMED
TO COMPLY WITH THE REQUIREMENTS OF SECTION 25102(f). THE SALE OF THE SECURITIES
THAT ARE THE SUBJECT OF THIS EXERCISE AGREEMENT, IF NOT YET QUALIFIED WITH THE
CALIFORNIA COMMISSIONER OF CORPORATIONS AND NOT EXEMPT FROM SUCH QUALIFICATION,
IS SUBJECT TO SUCH QUALIFICATION, AND THE ISSUANCE OF SUCH SECURITIES, AND THE
RECEIPT OF ANY PART OF THE CONSIDERATION THEREFOR PRIOR TO SUCH QUALIFICATION IS
UNLAWFUL UNLESS THE SALE IS EXEMPT. THE RIGHTS OF THE PARTIES TO THIS EXERCISE
AGREEMENT ARE EXPRESSLY CONDITIONED UPON SUCH QUALIFICATION BEING OBTAINED OR AN
EXEMPTION BEING AVAILABLE.

                                       4
<PAGE>

     5.   Restricted Securities.
          ---------------------

          5.1  No Transfer Unless Registered or Exempt.  Purchaser understands
               ---------------------------------------
that Purchaser may not transfer any Shares unless such Shares are registered
under the Securities Act or qualified under applicable state securities laws or
unless, in the opinion of counsel to the Company, exemptions from such
registration and qualification requirements are available. Purchaser understands
that only the Company may file a registration statement with the SEC and that
the Company is under no obligation to do so with respect to the Shares.
Purchaser has also been advised that exemptions from registration and
qualification may not be available or may not permit Purchaser to transfer all
or any of the Shares in the amounts or at the times proposed by Purchaser.

          5.2  SEC Rule 144.  In addition, Purchaser has been advised that SEC
               ------------
Rule 144 promulgated under the Securities Act, which permits certain limited
sales of unregistered securities, is not presently available with respect to the
Shares and, in any event, requires that the Shares be held for a minimum of one
(1) year, and in certain cases two (2) years, after they have been purchased and
                                                                             ---
paid for (within the meaning of Rule 144).  Purchaser understands that Shares
--------
paid for with a promissory note may not be deemed to be fully "paid for" within
the meaning of Rule 144 unless certain conditions are met and that, accordingly,
the Rule 144 holding period of such share may not begin to run until such Shares
are fully paid for within the meaning of Rule 144.  Purchaser understands that
Rule 144 may indefinitely restrict transfer of the Shares so long as Purchaser
remains an "affiliate" of the Company or if "current public information" about
the Company (as defined in Rule 144) is not publicly available.

     6.   Restrictions on Transfers.
          -------------------------

          6.1  Disposition of Shares.  Purchaser hereby agrees that Purchaser
               ---------------------
shall make no disposition of the Shares (other than as permitted by this
Exercise Agreement) unless and until:

               (a)  Purchaser shall have notified the Company of the proposed
disposition and provided a written summary of the terms and conditions of the
proposed disposition;

               (b)  Purchaser shall have complied with all requirements of this
Exercise Agreement applicable to the disposition of the Shares;

               (c)  Purchaser shall have provided the Company with written
assurances, in form and substance satisfactory to counsel for the Company, that
(i) the proposed disposition does not require registration of the Shares under
the Securities Act or (ii) all appropriate actions necessary for compliance with
the registration requirements of the Securities Act or of any exemption from
registration available under the Securities Act (including Rule 144) have been
taken; and

               (d)  Purchaser shall have provided the Company with written
assurances, in form and substance satisfactory to the Company, that the proposed
disposition will

                                       5
<PAGE>

not result in the contravention of any transfer restrictions applicable to
the Shares pursuant to the provisions of the Regulations referred to in Section
4.2 hereof.

          6.2  Restriction on Transfer.  Purchaser shall not transfer, assign,
               -----------------------
grant a lien or security interest in, pledge, hypothecate, encumber or otherwise
dispose of any of the which are subject to the Company's Right of First Refusal
or the Company's Repurchase Option described below, except as permitted by this
Exercise Agreement.

          6.3  Transferee Obligations.  Each person (other than the Company) to
               ----------------------
whom the Shares are transferred by means of one of the permitted transfers
specified in this Exercise Agreement must, as a condition precedent to the
validity of such transfer, acknowledge in writing to the Company that such
person is bound by the provisions of this Exercise Agreement and that the
transferred Shares are subject to (i) both the Company's Right of First Refusal
and the Company's Repurchase Option granted hereunder and (ii) the market stand-
off provisions of Section 7 hereof, to the same extent such Shares would be so
subject if retained by the Purchaser.

     7.   Market Standoff Agreement.  Purchaser agrees in connection with any
          -------------------------
registration of the Company's securities that, upon the request of the Company
or the underwriters managing any public offering of the Company's securities,
Purchaser will not sell or otherwise dispose of any Shares without the prior
written consent of the Company or such underwriters, as the case may be, for
such period of time (not to exceed one hundred eighty (180) days) after the
effective date of such registration requested by such managing underwriters and
subject to all restrictions as the Company or the underwriters may specify.
Purchaser further agrees to enter into any agreement reasonably required by the
underwriters to implement the foregoing.

     8.   Company's Repurchase Option for Unvested Shares.  The Company, or its
          -----------------------------------------------
assignee, shall have the option to repurchase all or a portion of the
Purchaser's Unvested Shares (as defined in Section 2.2 of the Stock Option
Agreement) on the terms and conditions set forth in this Section (the
"Repurchase Option") if Purchaser is Terminated (as defined in the Executive
Plan) for any reason, or no reason, including without limitation, Purchaser's
death, Disability (as defined in the Executive Plan), voluntary resignation or
termination by the Company with or without Cause. Notwithstanding the foregoing,
the Company shall retain the Repurchase Option for Unvested Shares only as to
that number of Unvested Shares (whether or not exercised) that exceeds the
number of shares which remain unexercised.

          8.1  Termination and Termination Date.  In case of any dispute as to
               --------------------------------
whether Purchaser is Terminated, the Committee shall have discretion to
determine whether Purchaser has been Terminated and the effective date of such
Termination (the "Termination Date").

          8.2  Exercise of Repurchase Option.  At any time within ninety (90)
               -----------------------------
days after the Purchaser's Termination Date (or, in the case of securities
issued upon exercise of an Option after the Purchaser's Termination Date, within
ninety (90) days after the date of such exercise), the Company, or its assignee,
may elect to repurchase any or all the Purchaser's Unvested Shares by giving
Purchaser written notice of exercise of the Repurchase Option.

                                       6
<PAGE>

          8.3  Calculation of Repurchase Price for Unvested Shares.  The Company
               ---------------------------------------------------
or its assignee shall have the option to repurchase from Purchaser (or from
Purchaser's personal representative as the case may be) the Unvested Shares at
the Purchaser's Exercise Price, proportionately adjusted for any stock split or
similar change in the capital structure of the Company as set forth in Section
2.2 of the Executive Plan (the "Repurchase Price").

          8.4  Payment of Repurchase Price.  The Repurchase Price shall be
               ---------------------------
payable, at the option of the Company or its assignee, by check or by
cancellation of all or a portion of any outstanding indebtedness owed by
Purchaser to the Company or such assignee, or by any combination thereof. The
Repurchase Price shall be paid without interest within sixty (60) days after
exercise of the Repurchase Option.

          8.5  Right of Termination Unaffected.  Nothing in this Exercise
               -------------------------------
Agreement shall be construed to limit or otherwise affect in any manner
whatsoever the right or power of the Company (or any Parent or Subsidiary of the
Company) to terminate Purchaser's employment or other relationship with Company
(or the Parent or Subsidiary of the Company) at any time, for any reason or no
reason, with or without Cause.

     9.   Company's Right of First Refusal.  Unvested Shares may not be sold or
          --------------------------------
otherwise transferred by Purchaser without the Company's prior written consent.
Before any Vested Shares held by Purchaser or any transferee of such Vested
Shares (either sometimes referred to herein as the "Holder") may be sold or
otherwise transferred (including, without limitation, a transfer by gift or
operation of law), the Company and/or its assignee(s) will have a right of first
refusal to purchase the Vested Shares to be sold or transferred (the "Offered
Shares") on the terms and conditions set forth in this Section (the "Right of
First Refusal").

          9.1  Notice of Proposed Transfer.  The Holder of the Offered Shares
               ---------------------------
will deliver to the Company a written notice (the "Notice") stating:  (i) the
Holder's bona fide intention to sell or otherwise transfer the Offered Shares;
(ii) the name and address of each proposed purchaser or other transferee (the
"Proposed Transferee"); (iii) the number of Offered Shares to be transferred to
each Proposed Transferee; (iv) the bona fide cash price or other consideration
for which the Holder proposes to transfer the Offered Shares (the "Offered
Price"); and (v) that the Holder acknowledges this Notice is an offer to sell
the Offered Shares to the Company and/or its assignee(s) pursuant to the
Company's Right of First Refusal at the Offered Price as provided for in this
Exercise Agreement.

          9.2  Exercise of Right of First Refusal.  At any time within thirty
               ----------------------------------
(30) days after the date of the Notice, the Company and/or its assignee(s) may,
by giving written notice to the Holder, elect to purchase all (or, with the
consent of the Holder, less than all) the Offered Shares proposed to be
transferred to any one or more of the Proposed Transferees named in the Notice,
at the purchase price, determined as specified below.

          9.3  Purchase Price.  The purchase price for the Offered Shares
               --------------
purchased under this Section will be the Offered Price, provided that if the
Offered Price consists of no legal consideration (as, for example, in the case
of a transfer by gift) the purchase price will be the fair market value of the
Offered Shares as determined in good faith by the Company's Board of Directors.
If the Offered Price includes consideration other than cash, then the value of
the non-cash consideration, as determined in good faith by the Company's Board

                                       7
<PAGE>

of Directors. If the Offered Price includes consideration other than cash, then
the value of the non-cash consideration, as determined in good faith by the
Company's Board of Directors, will conclusively be deemed to be the cash
equivalent value of such non-cash consideration.

          9.4  Payment.  Payment of the purchase price for the Offered Shares
               -------
will be payable, at the option of the Company and/or its assignee(s) (as
applicable), by check or by cancellation of all or a portion of any outstanding
indebtedness owed by the Holder to the Company (or to such assignee, in the case
of a purchase of Offered Shares by such assignee) or by any combination thereof.
The purchase price will be paid without interest within sixty (60) days after
the Company's receipt of the Notice, or, at the option of the Company and/or its
assignee(s), in the manner and at the time(s) set forth in the Notice.

          9.5  Holder's Right to Transfer.  If all of the Offered Shares
               --------------------------
proposed in the Notice to be transferred to a given Proposed Transferee are not
purchased by the Company and/or its assignee(s) as provided in this Section,
then the Holder may sell or otherwise transfer such Offered Shares to each
Proposed Transferee at the Offered Price or at a higher price, provided that (i)
                                                               --------
such sale or other transfer is consummated within one hundred twenty (120) days
after the date of the Notice, (ii) any such sale or other transfer is effected
in compliance with all applicable securities laws, and (iii) each Proposed
Transferee agrees in writing that the provisions of this Section will continue
to apply to the Offered Shares in the hands of such Proposed Transferee.  If the
Offered Shares described in the Notice are not transferred to each Proposed
Transferee within such one hundred twenty (120) day period, then a new Notice
must be given to the Company pursuant to which the Company will again be offered
the Right of First Refusal before any Shares held by the Holder may be sold or
otherwise transferred.

          9.6  Exempt Transfers.  Notwithstanding anything to the contrary in
               ----------------
this Section, the following transfers of Vested Shares will be exempt from the
Right of First Refusal: (i) the transfer of any or all of the Vested Shares
during Purchaser's lifetime by gift or on Purchaser's death by will or intestacy
to Purchaser's "Immediate Family" (as defined below) or to a trust for the
benefit of Purchaser or Purchaser's Immediate Family, provided that each
transferee or other recipient agrees in a writing satisfactory to the Company
that the provisions of this Section will continue to apply to the transferred
Vested Shares in the hands of such transferee or other recipient; (ii) any
transfer of Vested Shares made pursuant to a statutory merger or statutory
consolidation of the Company with or into another corporation or corporations
(except that the Right of First Refusal will continue to apply thereafter to
such Vested Shares, in which case the surviving corporation of such merger or
consolidation shall succeed to the rights of the Company under this Section
unless the agreement of merger or consolidation expressly otherwise provides);
or (iii) any transfer of Vested Shares pursuant to the winding up and
dissolution of the Company.  As used herein, the term "Immediate Family" will
mean Purchaser's spouse, the lineal descendant or antecedent, father, mother,
brother or sister, child, adopted child, grandchild or adopted grandchild of the
Purchaser or the Purchaser's spouse, or the spouse of any child, adopted child,
grandchild or adopted grandchild of Purchaser or the Purchaser's spouse or
Spousal Equivalent, as defined herein.  As used herein, a person is deemed to be
a "Spousal Equivalent" provided the following circumstances are true:  (i)
irrespective of whether or not the Participant and the Spousal Equivalent are
the same sex, they are the sole spousal equivalent of the other for the last
twelve (12) months, (ii) they intend to remain so

                                       8
<PAGE>

indefinitely, (iii) neither are married to anyone else, (iv) both are at least
18 years of age and mentally competent to consent to contract, (v) they are not
related by blood to a degree of closeness that which would prohibit legal
marriage in the state in which they legally reside, (vi) they are jointly
responsible for each other's common welfare and financial obligations, and (vii)
they reside together in the same residence for the last twelve (12) months and
intend to do so indefinitely.

          9.7  Termination of Right of First Refusal.  The Right of First
               -------------------------------------
Refusal will terminate as to all Shares on the effective date of the first sale
of Common Stock of the Company to the general public pursuant to a registration
statement filed with and declared effective by the SEC under the Securities Act
(other than a registration statement relating solely to the issuance of Common
Stock pursuant to a business combination or an employee incentive or benefit
plan).

          9.8  Encumbrances on Vested Shares.  Purchaser may grant a lien or
               -----------------------------
security interest in, or pledge, hypothecate or encumber Vested Shares only if
each party to whom such lien or security interest is granted, or to whom such
pledge, hypothecation or other encumbrance is made, agrees in a writing
satisfactory to the Company that:  (i) such lien, security interest, pledge,
hypothecation or encumbrance will not apply to such Vested Shares after they are
acquired by the Company and/or its assignees under this Section; and (ii) the
provisions of this Section will continue to apply to such Vested Shares in the
hands of such party and any transferee of such party.  Purchaser may not grant a
lien or security interest in, or pledge, hypothecate or encumber, any Unvested
Shares.

     10.  Rights as a Shareholder.  Subject to the terms and conditions of this
          -----------------------
Exercise Agreement, Purchaser will have all of the rights of a shareholder of
the Company with respect to the Shares from and after the date that Shares are
issued to Purchaser until such time as Purchaser disposes of the Shares or the
Company and/or its assignee(s) exercise(s) the Right of First Refusal) or the
Repurchase Option. Upon an exercise of the Right of First Refusal) or the
Repurchase Option, Purchaser will have no further rights as a holder of the
Shares so purchased upon such exercise, other than the right to receive payment
for the Shares so purchased in accordance with the provisions of this Exercise
Agreement, and Purchaser will promptly surrender the stock certificate(s)
evidencing the Shares so purchased to the Company for transfer or cancellation.

     11.  Escrow.  As security for Purchaser's faithful performance of this
          ------
Exercise Agreement, Purchaser agrees, immediately upon receipt of the stock
certificate(s) evidencing the Shares, to deliver such certificate(s), together
with the Stock Powers executed by Purchaser and by Purchaser's spouse, if any
(with the date and number of Shares left blank), to the Secretary of the Company
or other designee of the Company (the "Escrow Holder"), who is hereby appointed
to hold such certificate(s) and Stock Powers in escrow and to take all such
actions and to effectuate all such transfers and/or releases of such Shares as
are in accordance with the terms of this Exercise Agreement. Purchaser and the
Company agree that Escrow Holder will not be liable to any party to this
Exercise Agreement (or to any other party) for any actions or omissions unless
Escrow Holder is grossly negligent or intentionally fraudulent in carrying out
the duties of Escrow Holder under this Exercise Agreement. Escrow Holder may
rely upon any letter, notice or other document executed with any signature
purported to be genuine and may rely on the

                                       9
<PAGE>

advice of counsel and obey any order of any court with respect to the
transactions contemplated by this Exercise Agreement. The Shares will be
released from escrow upon termination of both the Right of First Refusal and the
Repurchase Option, provided, however, that the Shares will remain in escrow so
                   --------  -------
long as they are subject to the Pledge Agreement.

     12.  Restrictive Legends and Stop-Transfer Orders.
          --------------------------------------------

          12.1 Legends.  Purchaser understands and agrees that the Company will
               -------
place the legends set forth below or similar legends on any stock certificate(s)
evidencing the Shares, together with any other legends that may be required by
state or U.S. Federal securities laws, the Company's Articles of Incorporation
or Bylaws, any other agreement between Purchaser and the Company or any
agreement between Purchaser and any third party:

          THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
          SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR UNDER
          THE SECURITIES LAWS OF CERTAIN STATES.  THESE SECURITIES ARE SUBJECT
          TO RESTRICTIONS ON TRANSFERABILITY AND RESALE AND MAY NOT BE
          TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER THE SECURITIES ACT AND
          APPLICABLE STATE SECURITIES LAWS, PURSUANT TO REGISTRATION OR
          EXEMPTION THEREFROM.  INVESTORS SHOULD BE AWARE THAT THEY MAY BE
          REQUIRED TO BEAR THE FINANCIAL RISKS OF THIS INVESTMENT FOR AN
          INDEFINITE PERIOD OF TIME.  THE ISSUER OF THESE SECURITIES MAY REQUIRE
          AN OPINION OF COUNSEL IN FORM AND SUBSTANCE SATISFACTORY TO THE ISSUER
          TO THE EFFECT THAT ANY PROPOSED TRANSFER OR RESALE IS IN COMPLIANCE
          WITH THE SECURITIES ACT AND ANY APPLICABLE STATE SECURITIES LAWS.

          THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN
          RESTRICTIONS ON PUBLIC RESALE AND TRANSFER, INCLUDING THE RIGHT OF
          FIRST REFUSAL OPTIONS HELD BY THE ISSUER AND/OR ITS ASSIGNEE(S) AS SET
          FORTH IN A STOCK OPTION EXERCISE AGREEMENT BETWEEN THE ISSUER AND THE
          ORIGINAL HOLDER OF THESE SHARES, A COPY OF WHICH MAY BE OBTAINED AT
          THE PRINCIPAL OFFICE OF THE ISSUER.  SUCH PUBLIC SALE AND TRANSFER
          RESTRICTIONS INCLUDING THE RIGHT OF FIRST REFUSAL ARE BINDING ON
          TRANSFEREES OF THESE SHARES.

          THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO A 180 DAY
          MARKET STANDOFF RESTRICTION AS SET FORTH IN A CERTAIN AGREEMENT
          BETWEEN THE ISSUER AND THE ORIGINAL HOLDER OF THESE SHARES, A COPY OF
          WHICH MAY BE OBTAINED AT THE PRINCIPAL OFFICE OF THE ISSUER.  AS A
          RESULT OF SUCH AGREEMENT, THESE SHARES MAY NOT BE TRADED PRIOR TO 180
          DAYS AFTER THE EFFECTIVE DATE OF THE INITIAL PUBLIC OFFERING OF THE
          COMMON STOCK OF THE ISSUER HEREOF.

                                      10
<PAGE>

          SUCH RESTRICTION IS BINDING ON TRANSFEREES OF THESE SHARES.

          12.2 Stop-Transfer Instructions.  Purchaser agrees that, to ensure
               --------------------------
compliance with the restrictions imposed by this Exercise Agreement, the Company
may issue appropriate "stop-transfer" instructions to its transfer agent, if
any, and if the Company transfers its own securities, it may make appropriate
notations to the same effect in its own records.

          12.3 Refusal to Transfer.  The Company will not be required (i) to
               -------------------
transfer on its books any Shares that have been sold or otherwise transferred in
violation of any of the provisions of this Exercise Agreement or (ii) to treat
as owner of such Shares, or to accord the right to vote or pay dividends to any
purchaser or other transferee to whom such Shares have been so transferred.

     13.  Tax Consequences.  PURCHASER UNDERSTANDS THAT PURCHASER MAY SUFFER
          ----------------
ADVERSE TAX CONSEQUENCES AS A RESULT OF PURCHASER'S PURCHASE OR DISPOSITION OF
THE SHARES. PURCHASER REPRESENTS: (i) THAT PURCHASER HAS CONSULTED WITH ANY TAX
ADVISER THAT PURCHASER DEEMS ADVISABLE IN CONNECTION WITH THE PURCHASE OR
DISPOSITION OF THE SHARES AND (ii) THAT PURCHASER IS NOT RELYING ON THE COMPANY
FOR ANY TAX ADVICE. IN PARTICULAR, IF UNVESTED SHARES ARE SUBJECT TO REPURCHASE
BY THE COMPANY, PURCHASER REPRESENTS THAT PURCHASER HAS CONSULTED WITH
PURCHASER'S OWN TAX ADVISER CONCERNING THE ADVISABILITY OF FILING AN 83(b)
ELECTION WITH THE INTERNAL REVENUE SERVICE WHICH MUT BE FILED WITHIN THIRTY (30)
DAYS OF THE PURCHASE OF SHARES TO BE EFFECTIVE. Set forth below is a brief
summary as of the date the Executive Plan was adopted by the Board of some of
the U.S. Federal and California tax consequences of exercise of the Option and
disposition of the Shares. THIS SUMMARY IS NECESSARILY INCOMPLETE, AND THE TAX
LAWS AND REGULATIONS ARE SUBJECT TO CHANGE. PURCHASER SHOULD CONSULT HIS OR HER
OWN TAX ADVISER BEFORE EXERCISING THIS OPTION OR DISPOSING OF THE SHARES.

                                      11
<PAGE>

          13.1 Exercise of Incentive Stock Option.  If the Option qualifies as
               ----------------------------------
an ISO, there will be no regular U.S. Federal income tax liability or California
income tax liability upon the exercise of the Option, although the excess, if
any, of the Fair Market Value of the Shares on the date of exercise over the
Exercise Price will be treated as a tax preference item for U.S. Federal
alternative minimum tax purposes and may subject Purchaser to the alternative
minimum tax in the year of exercise.

          13.2 Exercise of Nonqualified Stock Option.  If the Option does not
               -------------------------------------
qualify as an ISO, there may be a regular U.S. Federal income tax liability and
a California income tax liability upon the exercise of the Option.  Purchaser
will be treated as having received compensation income (taxable at ordinary
income tax rates) equal to the excess, if any, of the Fair Market Value of the
Shares on the date of exercise over the Exercise Price.  If Purchaser is or was
an employee of the Company, the Company may be required to withhold from
Purchaser's compensation or collect from Purchaser and pay to the applicable
taxing authorities an amount equal to a percentage of this compensation income
at the time of exercise.

          13.3 Disposition of Shares. The following tax consequences may
               ---------------------
apply upon disposition of the Shares.

               (a)  Incentive Stock Options.  If the Shares are held for more
                    -----------------------
than twelve (12) months after the date of the transfer of the Shares pursuant to
the exercise of an ISO and are disposed of more than two (2) years after the
Date of Grant, any gain realized on disposition of the Shares will be treated as
long term capital gain for federal and California income tax purposes. If Shares
purchased under an ISO are disposed of within the applicable one (1) year or two
(2) year period, any gain realized on such disposition will be treated as
compensation income (taxable at ordinary income rates) to the extent of the
excess, if any, of the Fair Market Value of the Shares on the date of exercise
over the Exercise Price.

               (b)  Nonqualified Stock Options.  If the Shares are held for more
                    --------------------------
than twelve (12) months after the date of the transfer of the Shares pursuant to
the exercise of an NQSO, any gain realized on disposition of the Shares will be
treated as long term capital gain.

               (c)  Withholding.  The Company may be required to withhold from
                    -----------
the Purchaser's compensation or collect from the Purchaser and pay to the
applicable taxing authorities an amount equal to a percentage of this
compensation income.

          13.4 Section 83(b) Election for Unvested Shares.  With respect to
               ------------------------------------------
Unvested Shares, which are subject to the Repurchase Option, unless an election
is filed by the Purchaser with the Internal Revenue Service (and, if necessary,
the proper state taxing authorities), within 30 days of the purchase of the
                                      ------------------------------
Unvested Shares, electing pursuant to Section 83(b) of the Code (and similar
state tax provisions, if applicable) to be taxed currently on any difference
between the Exercise Price of the Unvested Shares and their Fair Market Value on
the date of purchase, there may be a recognition of taxable income (including,
where applicable, alternative minimum taxable income) to the Purchaser, measured
by the excess, if any, of the Fair Market Value of the Unvested Shares at the
time they cease to be Unvested Shares, over the Exercise Price of the

                                      12
<PAGE>

Unvested Shares. A form of Election under Section 83(b) is attached hereto as
Exhibit 5 for reference.

   14.  Compliance with Laws and Regulations.  The issuance and transfer of the
        ------------------------------------
Shares will be subject to and conditioned upon compliance by the Company and
Purchaser with all applicable state and U.S. Federal laws and regulations and
with all applicable requirements of any stock exchange or automated quotation
system on which the Company's Common Stock may be listed or quoted at the time
of such issuance or transfer.

   15.  Successors and Assigns.  The Company may assign any of its rights under
        ----------------------
this Exercise Agreement, including its rights to purchase Shares under the
Repurchase Option and the Right of First Refusal.  This Exercise Agreement shall
be binding upon and inure to the benefit of the successors and assigns of the
Company.  Subject to the restrictions on transfer herein set forth, this
Exercise Agreement will be binding upon Purchaser and Purchaser's heirs,
executors, administrators, legal representatives, successors and assigns.

   16.  Governing Law; Severability.  This Exercise Agreement shall be governed
        ---------------------------
by and construed in accordance with the internal laws of the State of California
as such laws are applied to agreements between California residents entered into
and to be performed entirely within California.  If any provision of this
Exercise Agreement is determined by a court of law to be illegal or
unenforceable, then such provision will be enforced to the maximum extent
possible and the other provisions will remain fully effective and enforceable.

   17.  Notices.  Any notice required to be given or delivered to the Company
        -------
shall be in writing and addressed to the Corporate Secretary of the Company at
its principal corporate offices.  Any notice required to be given or delivered
to Purchaser shall be in writing and addressed to Purchaser at the address
indicated above or to such other address as Purchaser may designate in writing
from time to time to the Company.  All notices shall be deemed effectively given
upon personal delivery, (i) three (3) days after deposit in the United States
mail by certified or registered mail (return receipt requested), (ii) one (1)
business day after its deposit with any return receipt express courier
(prepaid), or (iii) one (1) business day after transmission by rapifax or
telecopier.

   18.  Further Instruments.  The parties agree to execute such further
        -------------------
instruments and to take such further action as may be reasonably necessary to
carry out the purposes and intent of this Exercise Agreement.

   19.  Headings.  The captions and headings of this Exercise Agreement are
        --------
included for ease of reference only and will be disregarded in interpreting or
construing this Exercise Agreement.  All references herein to Sections will
refer to Sections of this Exercise Agreement.

   20.  Entire Agreement.  The Executive Plan, the Stock Option Agreement and
        ----------------
this Exercise Agreement, together with all Exhibits thereto, constitute the
entire agreement and understanding of the parties with respect to the subject
matter of this Exercise Agreement, and supersede all prior understandings and
agreements, whether oral or written, between the parties hereto with respect to
the specific subject matter hereof.

                                      13
<PAGE>

   IN WITNESS WHEREOF, the Company has caused this Exercise Agreement to be
executed in triplicate by its duly authorized representative and Purchaser has
executed this Exercise Agreement in triplicate as of the Effective Date,
indicated above.

INTEGRATED SOFTWARE & DEVICES           PURCHASER

CORPORATION

By:_____________________                ____________________
                                        (Signature)

________________________                _____________________
(Please print name)                     (Please print name)

________________________
(Please print title)
<PAGE>

                               LIST OF EXHIBITS
                               ----------------

Exhibit 1:  Stock Power and Assignment Separate from Stock Certificate

Exhibit 2:  Spouse Consent

Exhibit 3:  Copy of Purchaser's Check and/or Secured Full Recourse Promissory
            Note

Exhibit 4:  Stock Pledge Agreement (if applicable)

Exhibit 5:  Section 83(b) Election
<PAGE>

                                   EXHIBIT 1
                                   ---------

                          STOCK POWER AND ASSIGNMENT
                          --------------------------
                        SEPARATE FROM STOCK CERTIFICATE
                        -------------------------------
<PAGE>

                          Stock Power and Assignment
                          --------------------------
                        Separate from Stock Certificate
                        -------------------------------

     FOR VALUE RECEIVED and pursuant to that certain Stock Option Exercise
Agreement No. ________ dated as of _______________, _____, (the "Agreement"),
the undersigned hereby sells, assigns and transfers unto
_______________________________, __________ shares of the Common Stock of
Integrated Software & Devices Corporation, a California corporation (the
"Company"), standing in the undersigned's name on the books of the Company
represented by Certificate No(s).  ______ delivered herewith, and does hereby
irrevocably constitute and appoint the Secretary of the Company as the
undersigned's attorney-in-fact, with full power of substitution, to transfer
said stock on the books of the Company.  THIS ASSIGNMENT MAY ONLY BE USED AS
AUTHORIZED BY THE AGREEMENT AND ANY EXHIBITS THERETO.

Dated:  _______________, _____

                                   PURCHASER

                                   ____________________________
                                   (Signature)

                                   ____________________________
                                   (Please Print Name)

                                   ____________________________
                                   (Spouse's Signature, if any)

                                   ____________________________
                                   (Please Print Spouse's Name)

Instructions to Purchaser:  Please do not fill in any blanks other than the
-------------------------
signature line.  The purpose of this Stock Power and Assignment is to enable the
Company to acquire the shares  pursuant to its "Repurchase Option" and/or "Right
of First Refusal" set forth in the Exercise Agreement without requiring
additional signatures on the part of the Purchaser or Purchaser's Spouse.
<PAGE>

                                   EXHIBIT 2
                                   ---------

                                SPOUSE CONSENT
                                --------------
<PAGE>

                                Spouse Consent
                                --------------

     The undersigned spouse of ______________________________ (the "Purchaser")
has read, understands, and hereby approves the Stock Option Exercise Agreement
between Purchaser and the Company (the "Agreement").  In consideration of the
Company's granting my spouse the right to purchase the Shares as set forth in
the Agreement, the undersigned hereby agrees to be irrevocably bound by the
Agreement and further agrees that any community property interest I may have in
the Shares shall similarly be bound by the Agreement.  The undersigned hereby
appoints Purchaser as my attorney-in-fact with respect to any amendment or
exercise of any rights under the Agreement.

Date: ___________________

                                        ________________________________________
                                        Print Name of Purchaser's Spouse

                                        ________________________________________
                                        Signature of Purchaser's Spouse

                              Address:  ________________________________________

                                        ________________________________________

                                        ________________________________________

[_]  Please check this box if you do not have a spouse.
<PAGE>

                                   EXHIBIT 3
                                   ---------

                       COPY OF PURCHASER'S CHECK AND/OR
                       --------------------------------
                     SECURED FULL RECOURSE PROMISSORY NOTE
                     -------------------------------------
<PAGE>

                     Secured Full Recourse Promissory Note
                     -------------------------------------

                             San Jose, California

$____________________                                  __________________, 200__

          Reference is made to that certain Stock Option Exercise Agreement (the
"Purchase Agreement") of even date herewith, by and between the undersigned (the
"Purchaser") and Integrated Software & Devices Corporation, a California
corporation (the "Company"), issued to Purchaser under the Company's 2000
Executive Equity Incentive Plan (the "Executive Plan").  This Secured Full
Recourse Promissory Note (the "Note") is being tendered by Purchaser to the
Company as the total purchase price of the Shares (as defined below) pursuant to
the Purchase Agreement.

          1.   Obligation.  In exchange for the issuance to the Purchaser
               ----------
pursuant to the Purchase Agreement of ______________ shares of the Company's
Common Stock (the "Shares"), receipt of which is hereby acknowledged, Purchaser
hereby promises to pay to the order of the Company on or before _______________,
200___, at the Company's principal place of business located at 2160 Lundy
Avenue, San Jose, California 95131, or at such other place as the Company may
direct, the principal sum of ________________________ Dollars ($__________)
together with interest compounded semi-annually on the unpaid principal at the
rate of _________ percent, (_____%) which rate is not less than the minimum rate
established pursuant to Section 1274(d) of the Internal Revenue Code of 1986, as
amended, on the earliest date on which there was a binding contract in writing
for the purchase of the Shares; provided, however, that the rate at which
                                --------  -------
interest will accrue on unpaid principal under this Note will not exceed the
highest rate permitted by applicable law.  All payments hereunder shall be made
in lawful tender of the United States.

          2.   Security.  Performance of Purchaser's obligations under this Note
               --------
is secured by a security interest in the Shares granted to the Company by
Purchaser under a Stock Pledge Agreement dated of even date herewith between the
Company and Purchaser (the "Pledge Agreement").

          3.   Events of Default.  Purchaser will be deemed to be in default
               -----------------
under this Note upon the occurrence of any of the following events (each an
"Event of Default"):  (i) upon Purchaser's failure to make any payment when due
under this Note; (ii) Purchaser is Terminated (as defined in the Executive Plan)
for any reason; (iii) the failure of any representation or warranty in the
Pledge Agreement to have been true, the failure of Purchaser to perform any
obligation under the Pledge Agreement, or upon any other material breach by the
Purchaser of the Pledge Agreement; (iv) any voluntary or involuntary transfer of
any of the Shares or any interest therein (except a transfer to the Company);
(v) upon the filing regarding the Purchaser of any voluntary or involuntary
petition for relief under the United States Bankruptcy Code or the
<PAGE>

initiation of any proceeding under federal law or law of any other jurisdiction
for the general relief of debtors; or (vi) upon the execution by Purchaser of an
assignment for the benefit of creditors or the appointment of a receiver,
custodian, trustee or similar party to take possession of Purchaser's assets or
property.

          4.   Acceleration; Remedies On Default.  Upon the occurrence of any
               ---------------------------------
Event of Default, at the option of the Company, all principal and other amounts
owed under this Note shall become immediately due and payable without notice or
demand on the part of the Company, and the Company will have, in addition to its
rights and remedies under this Note, the Pledge Agreement, full recourse against
any real, personal, tangible or intangible assets of Purchaser, and may pursue
any legal or equitable remedies that are available to it.

          5.   Rule 144 Holding Period.  PURCHASER UNDERSTANDS THAT THE HOLDING
               -----------------------
PERIOD SPECIFIED UNDER RULE 144(d) OF THE SECURITIES AND EXCHANGE COMMISSION
WILL NOT BEGIN TO RUN WITH RESPECT TO SHARES PURCHASED WITH THIS NOTE UNTIL
EITHER (i) THE EXERCISE PRICE OF SUCH SHARES IS PAID IN FULL IN CASH OR BY OTHER
PROPERTY ACCEPTED BY THE COMPANY, OR (ii) THIS NOTE IS SECURED BY COLLATERAL,
OTHER THAN THE SHARES THAT HAVE NOT BEEN FULLY PAID FOR IN CASH, HAVING A FAIR
MARKET VALUE AT LEAST EQUAL TO THE AMOUNT OF PURCHASER'S THEN OUTSTANDING
OBLIGATION UNDER THIS NOTE (INCLUDING ACCRUED INTEREST).

          6.   Prepayment.  Prepayment of principal and/or other amounts owed
               ----------
under this Note may be made at any time without penalty.  Unless otherwise
agreed in writing by the Company, each payment will be applied to the extent of
available funds from such payment in the following order:  (i) first to the
accrued and unpaid costs and expenses under the Note or the Pledge Agreement,
(ii) then to accrued but unpaid interest, and (iii) lastly to the outstanding
principal.

          7.   Governing Law; Waiver.  The validity, construction and
               ---------------------
performance of this Note will be governed by the internal laws of the State of
California, excluding that body of law pertaining to conflicts of law.
Purchaser hereby waives presentment, notice of non-payment, notice of dishonor,
protest, demand and diligence.

          8.   Attorneys' Fees.  If suit is brought for collection of this Note,
               ---------------
Purchaser agrees to pay all reasonable expenses, including attorneys' fees,
incurred by the holder in connection therewith whether or not such suit is
prosecuted to judgment.

                                       2
<PAGE>

          IN WITNESS WHEREOF, Purchaser has executed this Note as of the date
and year first above written.

_______________________________________      ___________________________________
Purchaser's Name [type or print]             Purchaser's Signature

   Signature Page to Integrated Software & Devices Corporation Secured Full
                           Recourse Promissory Note

                                       3
<PAGE>

                                   EXHIBIT 4
                                   ---------

                            STOCK PLEDGE AGREEMENT
                            ----------------------
<PAGE>

                            Stock Pledge Agreement
                            ----------------------

          This Stock Pledge Agreement (the "Pledge Agreement") is made and
entered into as of _______________, 200__ between Integrated Software & Devices
Corporation, a California corporation (the "Company"), and __________________
(the "Pledgor"). Capitalized terms that are not defined herein shall have the
meanings ascribed to them in the Secured Full Recourse Promissory Note of even
date herewith delivered by Pledgor to the Company (the "Note").

                                R E C I T A L S
                                - - - - - - - -

          A.   In exchange for delivery of the Note to the Company, the Company
has issued and sold to Pledgor __________ shares of its Common (the "Shares")
pursuant to the terms and conditions of that Stock Option Exercise Agreement
between the Company and Pledgor of even date herewith (the "Purchase
Agreement").

          B.   Pledgor has agreed that repayment of the Note will be secured by
the pledge of the Shares pursuant to this Pledge Agreement.

          NOW, THEREFORE, the parties agree as follows:

          1.   Creation of Security Interest.  Pursuant to the provisions of the
               -----------------------------
California Commercial Code, Pledgor hereby grants to the Company, and the
Company hereby accepts, a first and present security interest in (i) the Shares
and (ii) all Dividends (as defined in Section 5 hereof), to secure payment of
the Note and performance of all Pledgor's obligations under this Pledge
Agreement.  Pledgor herewith delivers to the Company Common Stock certificate(s)
No(s). __________, representing all the Shares, together with one or more stock
power(s) for each certificate so delivered in the form attached as an Exhibit to
the Purchase Agreement, duly executed (with the date and number of shares left
blank) by Pledgor and Pledgor's spouse, if any.  For purposes of this Pledge
Agreement, the Shares and all Dividends will hereinafter be collectively
referred to as the "Collateral."  Pledgor agrees that the Collateral will be
deposited with and held by the Escrow Holder (as defined in the Purchase
Agreement) and that, notwithstanding anything to the contrary in the Purchase
Agreement, for purposes of carrying out the provisions of this Pledge Agreement,
Escrow Holder will act solely for the Company as its agent.

          2.   Representations and Warranties and Covenants Regarding
               ------------------------------------------------------
Collateral.  Pledgor hereby represents and warrants to the Company that Pledgor
has good title (both record and beneficial) to the Collateral, free and clear of
all claims, pledges, security interests, liens or encumbrances of every nature
whatsoever, and that Pledgor has the right to pledge and grant the Company the
security interest in the Collateral granted under this Pledge Agreement.
Pledgor further agrees that, until all sums due under the Note have been paid in
full, and all of Purchaser's obligations under this Pledge Agreement have been
performed, Purchaser will not, without the Company's prior written consent, (i)
sell, assign or transfer, or attempt to sell, assign or transfer,
<PAGE>

any of the Collateral, or (ii) grant or create, or attempt to grant or create,
any security interest, lien, pledge, claim or other encumbrance with respect to
any of the Collateral or (iii) suffer or permit to continue upon any of the
Collateral during the term of this Pledge Agreement, an attachment, levy,
execution or statutory lien.

          3.   Rights on Default.  Upon an occurrence of an Event of Default
               -----------------
under the Note, the Company will have full power to sell, assign and deliver or
otherwise dispose the whole or any part of the Collateral at any broker's
exchange or elsewhere, at public or private sale, at the option of the Company,
in order to satisfy any part of the obligations of Pledgor now existing or
hereinafter arising under the Note or under this Pledge Agreement.  On any such
sale, the Company or its assigns may purchase all or any part of the Collateral.
In addition, at its sole option, the Company may elect to retain all the
Collateral in full satisfaction of Pledgor's obligation under the Note, in
accordance with the provisions and procedures set forth in the California
Uniform Commercial Code.  Pledgor agrees at the Company's request, to cooperate
with the Company in connection with the disposition of any and all of the
Collateral and to execute and deliver any documents which the Company shall
reasonably request to permit disposition of the Collateral.

          4.   Additional Remedies.  The rights and remedies granted to the
               -------------------
Company herein upon an Event of Default will be in addition to all the rights,
powers and remedies of the Company under the California Uniform Commercial Code
and applicable law and such rights, powers and remedies will be exercisable by
the Company with respect to all of the Collateral.  Pledgor agrees that the
Company's reasonable expenses of holding the Collateral, preparing it for resale
or other disposition, and selling or otherwise disposing of the Collateral,
including attorneys' fees and other legal expenses, will be deducted from the
proceeds of any sale or other disposition and will be included in the amounts
Pledgor must tender to redeem the Collateral.  All rights, powers and remedies
of the Company will be cumulative and not alternative.  Any forbearance or
failure or delay by the Company in exercising any right, power or remedy
hereunder will not be deemed to be a waiver of any such right, power or remedy
and any single or partial exercise of any such right, power or remedy hereunder
will not preclude the further exercise thereof.

          5.   Dividends; Voting.  All dividends hereinafter declared on or
               -----------------
payable with respect to any Collateral during the term of this Pledge Agreement
(excluding only ordinary cash dividends, which will be payable to Pledgor so
long as no Event of Default has occurred under the Note) (the "Dividends") will
be immediately delivered to the Company to be held in pledge under this Pledge
Agreement.  Notwithstanding this Pledge Agreement, so long as Pledgor owns the
Shares and no Event of Default has occurred under the Note, Pledgor will be
entitled to vote any shares comprising the Collateral, subject to any proxies
granted by Pledgor.

          6.   Adjustments.  In the event that during the term of this Pledge
               -----------
Agreement, any stock dividend, reclassification, readjustment, stock split or
other change is declared or made with respect to the Collateral, or if warrants
or any other rights, options or securities are issued in respect of the
Collateral, (the "Additional Securities") then all new, substituted and/or
additional shares or other securities issued by reason of such change or by
reason of the exercise of such

                                       2
<PAGE>

warrants, rights, options or securities, will be (if delivered to Pledgor,
immediately surrendered to the Company and) pledged to the Company to be held
under the terms of this Pledge Agreement as and in the same manner as the
Collateral is held hereunder.

          7.   Rights Under Purchase Agreement; Setoff.  Pledgor understands and
               ---------------------------------------
agrees that the Company's rights to repurchase the Collateral under the Purchase
Agreement, if any, will continue for the periods and on the terms and conditions
specified in the Purchase Agreement, whether or not the Note has been paid in
full during such period of time, and that to the extent that the Note is not
paid in full during such period of time, the repurchase by the Company of the
Collateral may be made by way of cancellation of all or any part of Pledgor's
indebtedness under the Note.

          8.   Redelivery of Collateral; No Release For Partial Payment.
               --------------------------------------------------------

               (a)  Until all obligations of Pledgor under the Note and under
this Pledge Agreement have been satisfied in full, all Collateral will continue
to be held in pledge under this Pledge Agreement. If Pledgor prepays all or a
portion of the principal amount of the Note, the portion of the Shares for which
such pre-payment would represent the purchase price under the Purchase Agreement
(the "Paid Shares") will be treated as independent collateral for the remaining
balance of the Note for the purpose of commencing the holding period under Rule
144(d) of the Securities and Exchange Commission with respect to other Shares
purchased with the Note.

               (b)  Upon performance of all Pledgor's obligations under the Note
and this Pledge Agreement, and subject to the terms and conditions of the
Purchase Agreement, the Company will immediately redeliver the Collateral to
Pledgor and this Pledge Agreement will terminate; provided, however, that all
                                                  --------  -------
rights of the Company to retain possession of the Shares pursuant to the
Purchase Agreement will survive termination of this Pledge Agreement.

          9.   Further Assurances.  Pledgor shall, at the Company's request,
               ------------------
execute and deliver such further documents and take such further actions as the
Company shall reasonably request to perfect and maintain the Company's security
interest in the Collateral, or in any part thereof.

          10.  Successors and Assigns.  This Pledge Agreement will inure to the
               ----------------------
benefit of the respective heirs, personal representatives, successors and
assigns of the parties hereto.

          11.  Governing Law; Severability.  This Pledge Agreement will be
               ---------------------------
governed by and construed in accordance with the internal laws of the State of
California, excluding that body of law relating to conflicts of law.  Should one
or more of the provisions of this Pledge Agreement be determined by a court of
law to be illegal or unenforceable, the other provisions nevertheless will
remain effective and will be enforceable.

          12.  Modification; Entire Agreement.  This Pledge Agreement will not
               ------------------------------
be amended without the written consent of both parties hereto.  This Pledge
Agreement, together

                                       3
<PAGE>

with the Note, constitute the entire agreement of the parties hereto with
respect to the subject matter hereof and supersedes all prior agreements and
understandings related to such subject matter.

                                       4
<PAGE>

IN WITNESS WHEREOF, the parties hereto have executed this Pledge Agreement as of
the date and year first above written.

INTEGRATED SOFTWARE &               PLEDGOR
DEVICES CORPORATION

By:____________________             ________________________
                                    (Signature)

 ______________________             ________________________
(Please print name)                 (Please print name)

 ______________________
(Please print title)

    Signature Page to Integrated Software & Devices Corporation Stock Pledge
                               Agreement

                                       5
<PAGE>

                                   EXHIBIT 5
                                   ---------

                             SECTION 83(b) ELECTION
                             ----------------------
<PAGE>

           ELECTION UNDER SECTION 83(b) OF THE INTERNAL REVENUE CODE

The undersigned Taxpayer hereby elects, pursuant to Section 83(b) of the
Internal Revenue Code of 1986, as amended, to include the excess, if any, of the
fair market value of the property described below at the time of transfer over
the amount paid for such property, as compensation for services in the
calculation of: (1) regular gross income; (2) alternative minimum taxable income
or (3) disqualifying disposition gross income, as the case may be.

1.   TAXPAYER'S NAME:         _____________________________________

     TAXPAYER'S ADDRESS:      _____________________________________
                              _____________________________________

     SOCIAL SECURITY NUMBER:  _____________________________________

2.   The property with respect to which the election is made is described as
     follows: _______ shares of Common Stock of Integrated Software & Devices
     Corporation, a California corporation (the "Company") which were
     transferred upon exercise of an option by Company, which is Taxpayer's
     employer or the corporation for whom the Taxpayer performs services.

3.   The date on which the shares were purchased pursuant to the exercise of the
     option was _______________, _____ and this election is made for calendar
     year _____.

4.   The shares received upon exercise of the option are subject to the
     following restrictions:  The Company may repurchase all or a portion of the
     shares at the Taxpayer's original purchase price under certain conditions
     at the time of Taxpayer's termination of employment or services.

5.   The fair market value of the shares (without regard to restrictions other
     than restrictions which by their terms will never lapse) was $___ per share
     at the time of exercise of the option.

6.   The amount paid for such shares upon exercise of the option was $___ per
     share.

7.   The Taxpayer has submitted a copy of this statement to the Company.
<PAGE>

THIS ELECTION MUST BE FILED WITH THE INTERNAL REVENUE SERVICE ("IRS"), AT THE
OFFICE WHERE THE TAXPAYER FILES ANNUAL INCOME TAX RETURNS, WITHIN 30 DAYS AFTER
                                                           --------------
THE DATE OF TRANSFER OF THE SHARES, AND MUST ALSO BE FILED WITH THE TAXPAYER'S
INCOME TAX RETURNS FOR THE CALENDAR YEAR.  THE ELECTION CANNOT BE REVOKED
WITHOUT THE CONSENT OF THE IRS.

Dated:___________________      ________________________
                               Taxpayer's Signature<PAGE>

                                                                    Exhibit 10.7

                           LYNUXWORKS, INCORPORATED
                       2000 EMPLOYEE STOCK PURCHASE PLAN

          The following constitute the provisions of the 2000 Employee Stock
Purchase Plan of LynuxWorks, Incorporated.

          1.  Purpose.  The purpose of the Plan is to provide employees of the
              -------
Company and its Designated Subsidiaries with an opportunity to purchase Common
Stock of the Company through accumulated payroll deductions.  It is the
intention of the Company to have the Plan qualify as an "Employee Stock Purchase
Plan" under Section 423 of the Code.  The provisions of the Plan, accordingly,
shall be construed so as to extend and limit participation in a uniform and
nondiscriminatory basis consistent with the requirements of  Section 423.

          2.  Definitions.
              -----------

              (a) "Administrator" shall mean the Board or any Committee
                   -------------
designated by the Board to administer the plan pursuant to Section 14.

              (b) "Board" shall mean the Board of Directors of the Company.
                   -----

              (c) "Code" shall mean the Internal Revenue Code of 1986, as
                   ----
amended.

              (d) "Common Stock" shall mean the common stock of the Company.
                   ------------

              (e) "Company" shall mean LynuxWorks, Incorporated, a Delaware
                   -------
corporation.

              (f) "Compensation" shall mean all base straight time gross
                   ------------
earnings, bonuses and commissions, but exclusive of all other payments,
including but not limited to, overtime, shift premium, and incentive
compensation.

              (g) "Designated Subsidiary" shall mean any Subsidiary selected by
                   ---------------------
the Administrator whose employees are eligible to participate in the Plan.

              (h) "Eligible Employee" shall mean any individual who is a common
                   -----------------
law employee of  the Company or any Designated Subsidiary and whose customary
employment with the Company or Subsidiary is at least twenty (20) hours per week
and more than five (5) months in any calendar year. For purposes of the Plan,
the employment relationship shall be treated as continuing intact while the
individual is on sick leave or other leave of absence approved by the Company.
Where the period of leave exceeds 90 days and the individual's right to
reemployment is not guaranteed either by statute or by contract, the employment
relationship shall be deemed to have terminated on the 91st day of such leave.

              (i) "Enrollment Date" shall mean the first Trading Day of each
                   ---------------
Offering Period.

              (j) "Exercise Date" shall mean the last Trading Day of each
                   -------------
Purchase Period.
<PAGE>

          (k) "Fair Market Value" shall mean, as of any date, the value of
               -----------------
Common Stock determined as follows:

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

               (ii)  If the Common Stock is regularly quoted by a recognized
securities dealer but selling prices are not reported, its Fair Market Value
shall be the mean of the closing bid and asked prices for the Common Stock on
the day of determination, as reported in The Wall Street Journal or such other
source as the Administrator deems reliable;

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

               (iv)  For purposes of the Enrollment Date of the first Offering
Period under the Plan, the Fair Market Value shall be the initial price to the
public as set forth in the final prospectus included within the registration
statement in Form S-1 filed with the Securities and Exchange Commission for the
initial public offering of the Company's Common Stock (the "Registration
Statement").

          (l) "Offering Periods" shall mean the periods of approximately twenty-
               ----------------
four (24) months during which an option granted pursuant to the Plan may be
exercised, commencing on the first Trading Day on or after June 15th and
December 15th of each year and terminating on the last Trading Day in the
periods ending twenty-four months later; provided, however, that the first
Offering Period under the Plan shall commence with the first Trading Day on or
after the date on which the Securities and Exchange Commission declares the
Company's Registration Statement effective and ending on the earlier of (i) the
last Trading Day on or before December 14, 2002, or (ii) the date twenty-seven
months later. If a new Offering Period is established in accordance with Section
24, the new Offering Period shall commence on the last Exercise Date of the
immediately preceding Offering Period following the exercise of options on such
Exercise Date. The duration and timing of Offering Periods may be changed
pursuant to Section 4 of this Plan.

          (m) "Plan" shall mean this 2000 Employee Stock Purchase Plan, as
               ----
amended from time to time.

          (n) "Purchase Period" shall mean the approximately six month period
               ---------------
commencing after one Exercise Date and ending with the next Exercise Date,
except that the first Purchase Period of any Offering Period shall commence on
the Enrollment Date and end with the next Exercise Date.  Except as provided in
Sections 2(l) and 24, the first Purchase Period under the Plan shall end on June
14, 2001 and the second purchase period under the Plan shall begin on June 15,
2001.

                                                                             -2-
<PAGE>

          (o) "Purchase Price" shall mean 85% of the Fair Market Value of a
               --------------
share of Common Stock on the Enrollment Date or on the Exercise Date, whichever
is lower; provided however, that the Purchase Price may be adjusted by the
Administrator pursuant to Section 20.

          (p) "Reserves" shall mean the number of shares of Common Stock covered
               --------
by each option under the Plan which have not yet been exercised and the number
of shares of Common Stock which have been authorized for issuance under the Plan
but not yet placed under option.

          (q) "Subsidiary" shall mean a "subsidiary corporation",  whether now
               ----------
or hereafter existing, as defined in Section 424(f) of the Code.

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

     3.   Eligibility.
          -----------

          (a) Any Eligible Employee who shall be employed by the Company on a
given Enrollment Date shall be eligible to participate in the Plan.

          (b) Any provisions of the Plan to the contrary notwithstanding, no
Employee shall be granted an option under the Plan (i) to the extent that,
immediately after the grant, such Employee (or any other person whose stock
would be attributed to such Employee pursuant to Section 424(d) of the Code)
would own capital stock of the Company and/or hold outstanding options to
purchase such stock possessing five percent (5%) or more of the total combined
voting power or value of all classes of the capital stock of the Company or of
any Subsidiary, or (ii) to the extent that his or her rights to purchase stock
under all employee stock purchase plans of the Company and its subsidiaries
accrues at a rate which exceeds Twenty-Five Thousand Dollars ($25,000) worth of
stock (determined at the fair market value of the shares at the time such option
is granted) for each calendar year in which such option is outstanding at any
time.

     4.   Offering Periods.  The Plan shall be implemented by consecutive,
          ----------------
overlapping Offering Periods with a new Offering Period commencing on the first
Trading Day on or after June 15/th/ and December 15/th/ each year, or on such
other date as the Administrator shall determine, and continuing thereafter until
terminated in accordance with Section 20 hereof; provided, however, that the
first Offering Period under the Plan shall commence with the first Trading Day
on or after the date on which the Securities and Exchange Commission declares
the Company's Registration Statement effective and ending on the earlier of (i)
the last Trading Day on or before December 14, 2002, or (ii) the date twenty-
seven months later. If a new Offering Period is established in accordance with
Section 24, the new Offering Period shall commence on the last Exercise Date of
the immediately preceding Offering Period following the exercise of options on
such Exercise Date.  The Administrator shall have the power to change the
duration of Offering Periods (including the commencement dates thereof) with
respect to future offerings without shareholder approval if such change is
announced prior to the scheduled beginning of the first Offering Period to be
affected thereafter.

                                                                             -3-
<PAGE>

     5.   Participation.
          -------------

          (a) An eligible Employee may become a participant in the Plan by
completing a subscription agreement authorizing payroll deductions in the form
of Exhibit A to this Plan and filing it with the Company's payroll office prior
to the applicable Enrollment Date.

          (b) Payroll deductions for a participant shall commence on the first
payday following the Enrollment Date and shall end on the last payday in the
Offering Period to which such authorization is applicable, unless sooner
terminated by the participant as provided in Section 10 hereof.

     6.   Payroll Deductions.
          ------------------

          (a) At the time a participant files his or her subscription agreement,
he or she shall elect to have payroll deductions made on each pay day during the
Offering Period in an amount not exceeding fifteen (15%) of the Compensation
which he or she receives on each pay day during the Offering Period. In no event
may a participant contribute more than fifteen (15%) of the Compensation which
he or she receives on each pay day to the Plan.  A participant's subscription
agreement shall remain in effect for successive Offering Periods unless
terminated as provided in Section 10 hereof.

          (b) All payroll deductions made for a participant shall be credited to
his or her account under the Plan and shall be withheld in whole percentages
only.  A participant may not make any additional payments into such account.

          (c) A participant may discontinue his or her participation in the Plan
as provided in Section 10 hereof, or may increase or decrease the rate of his or
her payroll deductions twice during each Purchase Period by completing or filing
with the Company a new subscription agreement authorizing a change in payroll
deduction rate.  The Administrator may, in its discretion, change the number of
participation rate changes during any Offering Period.  The change in rate shall
be effective with the first full payroll period following five (5) business days
after the Company's receipt of the new subscription agreement unless the Company
elects to process a given change in participation more quickly.

          (d) Notwithstanding the foregoing, to the extent necessary to comply
with Section 423(b)(8) of the Code and Section 3(b) hereof, a participant's
payroll deductions may be decreased to zero percent (0%) at any time during a
Purchase Period.  Payroll deductions shall recommence at the rate provided in
such participant's subscription agreement at the beginning of the first Purchase
Period which is scheduled to end in the following calendar year, unless
terminated by the participant as provided in Section 10 hereof.

          (e) At the time the option is exercised, in whole or in part, or at
the time some or all of the Company's Common Stock issued under the Plan is
disposed of, the participant must make adequate provision for the Company's
federal, state, or other tax withholding obligations, if any, which arise upon
the exercise of the option or the disposition of the Common Stock.  At any time,
the Company may, but shall not be obligated to, withhold from the participant's
compensation the amount necessary for the Company to meet applicable withholding
obligations, including any

                                                                             -4-
<PAGE>

withholding required to make available to the Company any tax deductions or
benefits attributable to sale or early disposition of Common Stock by the
Employee.

     7.   Grant of Option.  On the Enrollment Date of each Offering Period, each
          ---------------
Eligible Employee participating in such Offering Period shall be granted an
option to purchase on each Exercise Date during such Offering Period (at the
applicable Purchase Price) up to a number of shares of the Company's Common
Stock determined by dividing such Employee's payroll deductions accumulated on
or prior to such Exercise Date and retained in the Participant's account as of
the Exercise Date by the applicable Purchase Price; provided that in no event
shall an Employee be granted an option to purchase during each Purchase Period
more than 10,000 shares of the Company's Common Stock (subject to any adjustment
pursuant to Section 19), and provided further that such purchase shall be
subject to the limitations set forth in Sections 3(b) and 12 hereof.  The
Eligible Employee may accept the grant of such option by turning in a completed
and signed Subscription Agreement (Attached hereto as Exhibit A) to the Company
on or prior to the first day of the Offering Period.  The Administrator may, for
future Offering Periods, increase or decrease, in its absolute discretion, the
maximum number of shares of the Company's Common Stock an Employee may purchase
during each Purchase Period of such Offering Period.  Exercise of the option
shall occur as provided in Section 8 hereof, unless the participant has
withdrawn pursuant to Section 10 hereof.  The option shall expire on the last
day of the Offering Period.

     8.   Exercise of Option.
          ------------------

          (a) Unless a participant withdraws from the Plan as provided in
Section 10 hereof, his or her option for the purchase of shares shall be
exercised automatically on the Exercise Date, and the maximum number of full
shares subject to option shall be purchased for such participant at the
applicable Purchase Price with the accumulated payroll deductions in his or her
account.  No fractional shares shall be purchased; any payroll deductions
accumulated in a participant's account which are not sufficient to purchase a
full share shall be retained in the participant's account for the subsequent
Purchase Period or Offering Period, subject to earlier withdrawal by the
participant as provided in Section 10 hereof.  Any other funds left over in a
participant's account after the Exercise Date shall be returned to the
participant.  During a participant's lifetime, a participant's option to
purchase shares hereunder is exercisable only by him or her.

          (b) If the Administrator determines that, on a given Exercise Date,
the number of shares with respect to which options are to be exercised may
exceed (i) the number of shares of Common Stock that were available for sale
under the Plan on the Enrollment Date of the applicable Offering Period, or (ii)
the number of shares available for sale under the Plan on such Exercise Date,
the Administrator may in its sole discretion (x) provide that the Company shall
make a pro rata allocation of the shares of Common Stock available for purchase
on such Enrollment Date or Exercise Date, as applicable, in as uniform a manner
as shall be practicable and as it shall determine in its sole discretion to be
equitable among all participants exercising options to purchase Common Stock on
such Exercise Date, and continue all Offering Periods then in effect, or (y)
provide that the Company shall make a pro rata allocation of the shares
available for purchase on such Enrollment Date or Exercise Date, as applicable,
in as uniform a manner as shall be practicable and as it shall determine in its
sole discretion to be equitable among all participants exercising options to
purchase Common Stock on such Exercise Date, and terminate any or all Offering
Periods then in effect

                                                                             -5-
<PAGE>

pursuant to Section 20 hereof. The Company may make pro rata allocation of the
shares available on the Enrollment Date of any applicable Offering Period
pursuant to the preceding sentence, notwithstanding any authorization of
additional shares for issuance under the Plan by the Company's shareholders
subsequent to such Enrollment Date.

     9.   Delivery.  As soon as reasonably practicable after each Exercise Date
          --------
on which a purchase of shares occurs, the Company shall arrange the delivery to
each participant,  the shares purchased upon exercise of his or her option in a
form determined by the Administrator.

     10.  Withdrawal.
          ----------

          (a) A participant may withdraw all but not less than all the payroll
deductions credited to his or her account and not yet used to exercise his or
her option under the Plan at any time by giving written notice to the Company in
the form of Exhibit B to this Plan.  All of the participant's payroll deductions
            ---------
credited to his or her account shall be paid to such participant promptly after
receipt of notice of withdrawal and such participant's option for the Offering
Period shall be automatically terminated, and no further payroll deductions for
the purchase of shares shall be made for such Offering Period.  If a participant
withdraws from an Offering Period, payroll deductions shall not resume at the
beginning of the succeeding Offering Period unless the participant delivers to
the Company a new subscription agreement.

          (b) A participant's withdrawal from an Offering Period shall not have
any effect upon his or her eligibility to participate in any similar plan which
may hereafter be adopted by the Company or in succeeding Offering Periods which
commence after the termination of the Offering Period from which the participant
withdraws.

     11.  Termination of Employment.
          -------------------------

          In the event a participant ceases to be an Employee of the Company or
any Designated Subsidiary, as applicable, his or her option shall remain
exercisable for a period of three (3) months from the Optionee's termination.
Upon the expiration of such three (3) month period or a date prior to the
expiration of such three (3) month period if requested by the participant, any
payroll deductions credited to such participant's account during the Offering
Period but not yet used to exercise the option shall be returned to such
participant or, in the case of his or her death, to the person or persons
entitled thereto under Section 15 hereof, and such participant's option shall be
automatically terminated.  The preceding sentence notwithstanding, a participant
who receives payment in lieu of notice of termination of employment shall be
treated as continuing to be an Employee for the participant's customary number
of hours per week of employment during the period in which the participant is
subject to such payment in lieu of notice.

     12.  Interest.  No interest shall accrue on the payroll deductions of a
          --------
participant in the Plan.

     13.  Stock.
          -----

          (a) Subject to adjustment upon changes in capitalization of the
Company as provided in Section 19 hereof, the maximum number of shares of the
Company's Common Stock which shall be made available for sale under the Plan
shall be 1,500,000 shares plus an annual

                                                                             -6-
<PAGE>

increase to be added each year, beginning on January 1, 2002, equal to the
lesser of (i) 1,000,000 shares, (ii) 1.5% of the outstanding shares on such date
or (iii) a lesser amount determined by the Administrator.

          (b) Shares to be delivered to a participant under the Plan shall be
registered in the name of the participant or in the name of the participant and
his or her spouse.

          (c) Until the Shares are issued (as evidenced by the appropriate entry
on the books of the Company or of a duly authorized transfer agent of the
Company), a participant shall only have the rights of an unsecured creditor with
respect to such Shares, and  no right to vote or receive dividends or any other
rights as a shareholder shall exist with respect to such Shares.

     14.  Administration.  The Administrator shall administer the Plan, and
          --------------
shall have full and exclusive discretionary authority to construe, interpret and
apply the terms of the Plan, to determine eligibility and to adjudicate all
disputed claims filed under the Plan.  Every finding, decision and determination
made by the Administrator shall, to the full extent permitted by law, be final
and binding upon all parties.

     15.  Designation of Beneficiary.
          --------------------------

          (a) A participant may file a written designation of a beneficiary who
is to receive any shares and cash, if any, from the participant's account under
the Plan in the event of such participant's death subsequent to an Exercise Date
on which the option is exercised but prior to delivery to such participant of
such shares and cash.  In addition, a participant may file a written designation
of a beneficiary who is to receive any cash from the participant's account under
the Plan in the event of such participant's death prior to exercise of the
option.  If a participant is married and the designated beneficiary is not the
spouse, spousal consent shall be required for such designation to be effective.

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

          (c) All beneficiary designations shall be in such form and manner as
the Company may designate from time to time.

     16.  Transferability.  Neither payroll deductions credited to a
          ---------------
participant's account nor any rights with regard to the exercise of an option or
to receive shares under the Plan may be assigned, transferred, pledged or
otherwise disposed of in any way (other than by will, the laws of descent and
distribution or as provided in Section 15 hereof) by the participant.  Any such
attempt at assignment, transfer, pledge or other disposition shall be without
effect, except that the Company may treat such act as an election to withdraw
funds from an Offering Period in accordance with Section 10 hereof.

                                                                             -7-
<PAGE>

     17.  Use of Funds.  All payroll deductions received or held by the Company
          ------------
under the Plan may be used by the Company for any corporate purpose, and the
Company shall not be obligated to segregate such payroll deductions.

     18.  Reports.  Individual accounts shall be maintained for each participant
          -------
in the Plan.  Statements of account shall be given to participating Employees at
least annually, which statements shall set forth the amounts of payroll
deductions, the Purchase Price, the number of shares purchased and the remaining
cash balance, if any.

     19.  Adjustments Upon Changes in Capitalization, Dissolution, Liquidation,
          ---------------------------------------------------------------------
Merger or Asset Sale.
--------------------

          (a) Changes in Capitalization.  Subject to any required action by the
              -------------------------
shareholders of the Company, the maximum number of shares of the Company's
Common Stock which shall be made available for sale under the Plan (pursuant to
Section 13), the maximum number of shares each participant may purchase each
Purchase Period (pursuant to Section 7), as well as the price per share and the
number of shares of Common Stock covered by each option under the Plan which has
not yet been exercised 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 change in the number of 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 Administrator, 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) Dissolution or Liquidation.  In the event of the proposed
              --------------------------
dissolution or liquidation of the Company, the Offering Period then in progress
shall be shortened by setting a new Exercise Date (the "New Exercise Date"), and
shall terminate immediately prior to the consummation of such proposed
dissolution or liquidation, unless provided otherwise by the Administrator.  The
New Exercise Date shall be before the date of the Company's proposed dissolution
or liquidation.  The Administrator shall notify each participant in writing, at
least ten (10) business days prior to the New Exercise Date, that the Exercise
Date for the participant's option has been changed to the New Exercise Date and
that the participant's option shall be exercised automatically on the New
Exercise Date, unless prior to such date the participant has withdrawn from the
Offering Period as provided in Section 10 hereof.

          (c) Merger or Asset Sale.  In the event of a proposed sale of all or
              --------------------
substantially all of the assets of the Company, or the merger of the Company
with or into another corporation, each outstanding option shall be assumed or an
equivalent option substituted by the successor corporation or a Parent or
Subsidiary of the successor corporation.  In the event that the successor
corporation refuses to assume or substitute for the option, any Purchase Periods
then in progress shall be shortened by setting a new Exercise Date (the "New
Exercise Date") and any Offering Periods then in progress shall end on the New
Exercise Date.  The New Exercise Date shall be before the date of the Company's
proposed sale or merger.  The Board shall notify each participant in writing, at
least

                                                                             -8-
<PAGE>

ten (10) business days prior to the New Exercise Date, that the Exercise Date
for the participant's option has been changed to the New Exercise Date and that
the participant's option shall be exercised automatically on the New Exercise
Date, unless prior to such date the participant has withdrawn from the Offering
Period as provided in Section 10 hereof.

     20.  Amendment or Termination.
          ------------------------

          (a) The Administrator may at any time and for any reason terminate or
amend the Plan.  Except as otherwise provided in the Plan, no such termination
can affect options previously granted, provided that an Offering Period may be
terminated by the Board of Directors on any Exercise Date if the Administrator
determines that the termination of the Offering Period or the Plan is in the
best interests of the Company and its shareholders.  Except as provided in
Section 19 and this Section 20 hereof, no amendment may make any change in any
option theretofore granted which adversely affects the rights of any
participant.  To the extent necessary to comply with Section 423 of the Code (or
any successor rule or provision or any other applicable law, regulation or stock
exchange rule), the Company shall obtain shareholder approval in such a manner
and to such a degree as required.

          (b) Without shareholder consent and without regard to whether any
participant rights may be considered to have been "adversely affected," the
Administrator (or its committee) shall be entitled to change the Offering
Periods, limit the frequency and/or number of changes in the amount withheld
during an Offering Period, establish the exchange ratio applicable to amounts
withheld in a currency other than U.S. dollars, permit payroll withholding in
excess of the amount designated by a participant in order to adjust for delays
or mistakes in the Company's processing of properly completed withholding
elections, establish reasonable waiting and adjustment periods and/or accounting
and crediting procedures to ensure that amounts applied toward the purchase of
Common Stock for each participant properly correspond with amounts withheld from
the participant's Compensation, and establish such other limitations or
procedures as the Administrator (or its committee) determines in its sole
discretion advisable which are consistent with the Plan.

          (c) In the event the Administrator determines that the ongoing
operation of the Plan may result in unfavorable financial accounting
consequences, the Administrator may, in its discretion and, to the extent
necessary or desirable, modify or amend the Plan to reduce or eliminate such
accounting consequence including, but not limited to:

               (i)   increasing the Purchase Price for any Offering Period
including an Offering Period underway at the time of the change in Purchase
Price;

               (ii)  shortening any Offering Period so that Offering Period ends
on a new Exercise Date, including an Offering Period underway at the time of the
Board action; and

               (iii) allocating shares.

          Such modifications or amendments shall not require stockholder
approval or the consent of any Plan participants.

     21.  Notices.  All notices or other communications by a participant to the
          -------
Company under or in connection with the Plan shall be deemed to have been duly
given when received in the form

                                                                             -9-
<PAGE>

and manner specified by the Company at the location, or by the person,
designated by the Company for the receipt thereof.

     22.  Conditions Upon Issuance of Shares.  Shares shall not be issued with
          ----------------------------------
respect to an option unless the exercise of such option and the issuance and
delivery of such shares pursuant thereto shall comply with all applicable
provisions of law, domestic or foreign, including, without limitation, the
Securities Act of 1933, as amended, the Securities Exchange Act of 1934, as
amended, 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 applicable provisions of law.

     23.  Term of Plan.  The Plan shall become effective upon the earlier to
          ------------
occur of its adoption by the Board of Directors or its approval by the
shareholders of the Company.  It shall continue in effect until terminated under
Section 20 hereof.

     24.  Automatic Transfer to Low Price Offering Period.  To the extent
          -----------------------------------------------
permitted by any applicable laws, regulations, or stock exchange rules if the
Fair Market Value of the Common Stock on any Exercise Date in an Offering Period
is lower than the Fair Market Value of the Common Stock on the Enrollment Date
of such Offering Period, then all participants in such Offering Period shall be
automatically withdrawn from such Offering Period immediately after the exercise
of their option on such Exercise Date and automatically re-enrolled in the
immediately following Offering Period as of the first day thereof.

                                                                            -10-
<PAGE>

                                   EXHIBIT A
                                   ---------

                           LYNUXWORKS, INCORPORATED

                       2000 EMPLOYEE STOCK PURCHASE PLAN

                            SUBSCRIPTION AGREEMENT

_____ Original Application                           Enrollment Date:___________
_____ Change in Payroll Deduction Rate
_____ Change of Beneficiary(ies)

1.   ____________________ hereby elects to participate in the LynuxWorks,
     Incorporated Employee Stock Purchase Plan (the "Employee Stock Purchase
     Plan") and subscribes to purchase shares of the Company's Common Stock in
     accordance with this Subscription Agreement and the Employee Stock Purchase
     Plan.

2.   I hereby authorize payroll deductions from each paycheck in the amount of
     ____% of my Compensation on each payday (from 1 to _____%) during the
     Offering Period in accordance with the Employee Stock Purchase Plan.
     (Please note that no fractional percentages are permitted.)

3.   I understand that said payroll deductions shall be accumulated for the
     purchase of shares of Common Stock at the applicable Purchase Price
     determined in accordance with the Employee Stock Purchase Plan.  I
     understand that if I do not withdraw from an Offering Period, any
     accumulated payroll deductions will be used to automatically exercise my
     option.

4.   I have received a copy of the complete Employee Stock Purchase Plan.  I
     understand that my participation in the Employee Stock Purchase Plan is in
     all respects subject to the terms of the Plan.  I understand that my
     ability to exercise the option under this Subscription Agreement is subject
     to shareholder approval of the Employee Stock Purchase Plan.

5.   Shares purchased for me under the Employee Stock Purchase Plan should be
     issued in the name(s) of (Employee or Employee and Spouse only).

6.   I understand that if I dispose of any shares received by me pursuant to the
     Plan within 2 years after the Enrollment Date (the first day of the
     Offering Period during which I purchased such shares) or one year after the
     Exercise Date, I will be treated for federal income tax purposes as having
     received ordinary income at the time of such disposition in an amount equal
     to the excess of the fair market value of the shares at the time such
     shares were purchased by me over the price which I paid for the shares.  I
                                                                              -
     hereby agree to notify the Company in writing within 30 days after the date
     ---------------------------------------------------------------------------
     of any disposition of my shares and I will make adequate provision for
     ----------------------------------------------------------------------
     Federal, state or other tax withholding obligations, if any, which arise
     ------------------------------------------------------------------------
     upon the
     --------
<PAGE>

     disposition of the Common Stock.  The Company may, but will not be
     -------------------------------
     obligated to, withhold from my compensation the amount necessary to meet
     any applicable withholding obligation including any withholding necessary
     to make available to the Company any tax deductions or benefits
     attributable to sale or early disposition of Common Stock by me.  If I
     dispose of such shares at any time after the expiration of the 2-year and
     1-year holding periods, I understand that I will be treated for federal
     income tax purposes as having received income only at the time of such
     disposition, and that such income will be taxed as ordinary income only to
     the extent of an amount equal to the lesser of (1) the excess of the fair
     market value of the shares at the time of such disposition over the
     purchase price which I paid for the shares, or (2) 15% of the fair market
     value of the shares on the first day of the Offering Period.  The remainder
     of the gain, if any, recognized on such disposition will be taxed as
     capital gain.

7.   I hereby agree to be bound by the terms of the Employee Stock Purchase
     Plan.  The effectiveness of this Subscription Agreement is dependent upon
     my eligibility to participate in the Employee Stock Purchase Plan.

8.   In the event of my death, I hereby designate the following as my
     beneficiary(ies) to receive all payments and shares due me under the
     Employee Stock Purchase Plan:

     NAME:  (Please print)_____________________________________________________
                                   (First)         (Middle)       (Last)

     _________________________            _____________________________________
     Relationship

     _________________________            _____________________________________
     Percentage of Benefit                (Address)

     NAME:  (Please print)_____________________________________________________

                                   (First)         (Middle)       (Last)

     _________________________            _____________________________________
     Relationship

     _________________________            _____________________________________
     Percentage of Benefit                (Address)
<PAGE>

     Employee's Social
     Security Number:         ____________________________________

     Employee's Address:      ____________________________________

                              ____________________________________

                              ____________________________________

I UNDERSTAND THAT THIS SUBSCRIPTION AGREEMENT SHALL REMAIN IN EFFECT THROUGHOUT
SUCCESSIVE OFFERING PERIODS UNLESS TERMINATED BY ME.

Dated:_________________________    ____________________________________________
                                   Signature of Employee

                                   ____________________________________________
                                   Spouse's Signature (If beneficiary other than
                                   spouse)
<PAGE>

                                   EXHIBIT B
                                   ---------

                           LYNUXWORKS, INCORPORATED

                       2000 EMPLOYEE STOCK PURCHASE PLAN

                             NOTICE OF WITHDRAWAL

     The undersigned participant in the Offering Period of the LynuxWorks,
Incorporated Employee Stock Purchase Plan which began on ____________, ______
(the "Enrollment Date") hereby notifies the Company that he or she hereby
withdraws from the Offering Period.  He or she hereby directs the Company to pay
to the undersigned as promptly as practicable all the payroll deductions
credited to his or her account with respect to such Offering Period.  The
undersigned understands and agrees that his or her option for such Offering
Period will be automatically terminated.  The undersigned understands further
that no further payroll deductions will be made for the purchase of shares in
the current Offering Period and the undersigned shall be eligible to participate
in succeeding Offering Periods only by delivering to the Company a new
Subscription Agreement.

                                    Name and Address of Participant:

                                    ________________________________

                                    ________________________________

                                    ________________________________

                                    Signature:

                                    ________________________________

                                    Date:____________________________

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