Document:

Prepared by R.R. Donnelley Financial -- 1999 Stock Option Plan

 Exhibit 10.2 
  
 PORTALPLAYER, INC. 
 1999 STOCK OPTION PLAN 
  

	 	1.	ESTABLISHMENT, PURPOSE AND TERM OF PLAN.

  
 1.1 Establishment. The
PortalPlayer, Inc. 1999 Stock Option Plan (the “Plan”) is hereby established effective as of October 4, 1999. 
  
 1.2 Purpose. The purpose of the Plan is to advance the interests of the Participating Company Group and its shareholders by
providing an incentive to attract and retain persons performing services for the Participating Company Group and by motivating such persons to contribute to the growth and profitability of the Participating Company Group. 
  
 1.3 Term of Plan. The Plan shall continue in effect
until the earlier of its termination by the Board or the date on which all of the shares of Stock available for issuance under the Plan have been issued and all restrictions on such shares under the terms of the Plan and the agreements evidencing
Options granted under the Plan have lapsed. However, all Options shall be granted, if at all, within ten (10) years from the earlier of the date the Plan is adopted by the Board or the date the Plan is duly approved by the shareholders of the
Company. 
  

	 	2.	DEFINITIONS AND CONSTRUCTION. 

  
 2.1 Definitions. Whenever used herein, the following
terms shall have their respective meanings set forth below: 
  
 (a) “Board” means the Board of Directors of the Company. If one or more Committees have been appointed by the Board to administer the Plan,
“Board” also means such Committee(s). 
  
 (b) “Code” means the Internal Revenue Code of 1986, as amended, and any applicable regulations promulgated thereunder. 
  
 (c) “Committee” means the
Compensation Committee or other committee of the Board duly appointed to administer the Plan and having such powers as shall be specified by the Board. Unless the powers of the Committee have been specifically limited, the Committee shall have all
of the powers of the Board granted herein, including, without limitation, the power to amend or terminate the Plan at any time, subject to the terms of the Plan and any applicable limitations imposed by law. 
  
 (d) “Company” means PortalPlayer,
Inc., a California corporation, or any successor corporation thereto. 
  
 (e) “Consultant” means a person engaged to provide consulting or advisory services (other than as an Employee or a Director) to a Participating Company, provided that the identity of such
person, the nature of such services or the entity to which such 

  

 
services are provided would not preclude the Company from offering or selling securities to such person pursuant to the Plan in reliance on either the
exemption from registration provided by Rule 701 under the Securities Act or, if the Company is required to file reports pursuant to Section 13 or 15(d) of the Exchange Act, registration on a Form S-8 Registration Statement under the Securities Act.

  
 (f) “Director” means
a member of the Board or of the board of directors of any other Participating Company. 
  
 (g) “Disability” means the inability of the Optionee, in the opinion of a qualified physician acceptable to the
Company, to perform the major duties of the Optionee’s position with the Participating Company Group because of the sickness or injury of the Optionee. 
  
 (h) “Employee” means any person treated as an employee (including an officer or a Director who is also treated as
an employee) in the records of a Participating Company and, with respect to any Incentive Stock Option granted to such person, who is an employee for purposes of Section 422 of the Code; provided, however, that neither service as a Director nor
payment of a director’s fee shall be sufficient to constitute employment for purposes of the Plan. 
  
 (i) “Exchange Act” means the Securities Exchange Act of 1934, as amended. 
  
 (j) “Fair Market Value” means, as of
any date, the value of a share of Stock or other property as determined by the Board, in its discretion, or by the Company, in its discretion, if such determination is expressly allocated to the Company herein, subject to the following: 

 
 (i) If, on such date, the Stock is listed on a national
or regional securities exchange or market system, the Fair Market Value of a share of Stock shall be the closing price of a share of Stock (or the mean of the closing bid and asked prices of a share of Stock if the Stock is so quoted instead) as
quoted on the Nasdaq National Market, The Nasdaq SmallCap Market or such other national or regional securities exchange or market system constituting the primary market for the Stock, as reported in The Wall Street Journal or such other
source as the Company deems reliable. If the relevant date does not fall on a day on which the Stock has traded on such securities exchange or market system, the date on which the Fair Market Value shall be established shall be the last day on which
the Stock was so traded prior to the relevant date, or such other appropriate day as shall be determined by the Board, in its discretion. 
  
 (ii) If, on such date, the Stock is not listed on a national or regional securities exchange or market system, the Fair Market Value of a
share of Stock shall be as determined by the Board in good faith without regard to any restriction other than a restriction which, by its terms, will never lapse. 
  

 (k) “Incentive Stock Option” means an Option intended to be (as
set forth in the Option Agreement) and which qualifies as an incentive stock option within the meaning of Section 422(b) of the Code. 
  
 (l) “Insider” means an officer or a Director of the Company or any other person whose transactions in Stock are
subject to Section 16 of the Exchange Act. 
  
 (m) “Nonstatutory Stock Option” means an Option not intended to be (as set forth in the Option Agreement) or which does not qualify as an incentive Stock Option. 
  
 (n) “Option” means a right to
purchase Stock (subject to adjustment as provided in Section 4.2) pursuant to the terms and conditions of the Plan. An Option may be either an Incentive Stock Option or a Nonstatutory Stock Option. 
  
 (o) “Option Agreement” means a
written agreement between the Company and an Optionee setting forth the terms, conditions and restrictions of the Option granted to the Optionee and any shares acquired upon the exercise thereof. An Option Agreement may consist of a form of
“Notice of Grant of Stock Option” and a form of “Stock Option Agreement” incorporated therein by reference, or such other form or forms as the Board may approve from time to time. 
  
 (p) “Optionee” means a person who
has been granted one or more Options. 
  
 (q)
“Parent Corporation” means any present or future “parent corporation” of the Company, as defined in Section 424(e) of the Code. 
  
 (r) “Participating Company” means the Company or any Parent Corporation or
Subsidiary Corporation. 
  
 (s)
“Participating Company Group” means, at any point in time, all corporations collectively which are then Participating Companies. 
  
 (t) “Rule 16b-3” means Rule 16b-3 under the Exchange Act, as amended from time to time, or any successor rule or
regulation. 
  
 (u) “Securities
Act” means the Securities Act of 1933, as amended. 
  
 (v) “Service” means an Optionee’s employment or service with the Participating Company Group, whether in the capacity of an Employee, a Director or a Consultant. An Optionee’s Service
shall not be deemed to have terminated merely because of a change in the capacity in which the Optionee renders Service to the Participating Company Group or a change in the Participating Company for which the Optionee renders such Service, provided
that there is no interruption or termination of the Optionee’s Service. Furthermore, an Optionee’s Service with the Participating Company Group shall not be deemed to have terminated if the Optionee takes any military leave, sick leave, or
other bona fide leave of 

  

 
absence approved by the Company; provided, however, that if any such leave exceeds ninety (90) days, on the ninety-first (91st) day of such leave the
Optionee’s Service shall be deemed to have terminated unless the Optionee’s right to return to Service with the Participating Company Group is guaranteed by statute or contract. Notwithstanding the foregoing, unless otherwise designated by
the Company or required by law, a leave of absence shall not be treated as Service for purposes of determining vesting under the Optionee’s Option Agreement. The Optionee’s Service shall be deemed to have terminated either upon an actual
termination of Service or upon the corporation for which the Optionee performs Service ceasing to be a Participating Company. Subject to the foregoing, the Company, in its discretion, shall determine whether the Optionee’s Service has
terminated and the effective date of such termination. 
  
 (w) “Stock” means the common stock of the Company, as adjusted from time to time in accordance with Section 4.2. 
  
 (x) “Subsidiary Corporation” means any present or future “subsidiary corporation” of the Company, as
defined in Section 424(f) of the Code. 
  
 (y)
“Ten Percent Owner Optionee” means an Optionee who, at the time an Option is granted to the Optionee, owns stock possessing more than ten percent (10%) of the total combined voting power of all classes of stock of a
Participating Company within the meaning of Section 422(b)(6) of the Code. 
  
 2.2 Construction. Captions and titles contained herein are for convenience only and shall not affect the meaning or interpretation of any provision of the Plan. Except when otherwise indicated by the context,
the singular shall include the plural and the plural shall include the singular. Use of the term “or” is not intended to be exclusive, unless the context clearly requires otherwise. 
  

	 	3.	ADMINISTRATION. 

  
 3.1 Administration by the Board. The Plan shall be administered by the Board. All questions of interpretation of the Plan or of any
Option shall be determined by the Board, and such determinations shall be final and binding upon all persons having an interest in the Plan or such Option. 
  
 3.2 Authority of Officers. Any officer of a Participating Company shall have the authority to act on behalf of the Company with
respect to any matter, right, obligation, determination or election which is the responsibility of or which is allocated to the Company herein, provided the officer has apparent authority with respect to such matter, right, obligation, determination
or election. 
  
 3.3 Powers of the Board.
In addition to any other powers set forth in the Plan and subject to the provisions of the Plan, the Board shall have the full and final power and authority, in its discretion: 
  

 (a) to determine the persons to whom, and the time or times at which Options shall be
granted and the number of shares of Stock to be subject to each Option; 
  
 (b) to designate Options as Incentive Stock Options or Nonstatutory Stock Options; 
  
 (c) to determine the Fair Market Value of shares of Stock or other property; 
  
 (d) to determine the terms, conditions and restrictions
applicable to each Option (which need not be identical) and any shares acquired upon the exercise thereof, including, without limitation, (i) the exercise price of the Option, (ii) the method of payment for shares purchased upon the exercise of the
Option, (iii) the method for satisfaction of any tax withholding obligation arising in connection with the Option or such shares, including by the withholding or delivery of shares of stock, (iv) the timing, terms and conditions of the
exercisability of the Option or the vesting of any shares acquired upon the exercise thereof, (v) the time of the expiration of the Option, (vi) the effect of the Optionee’s termination of Service with the Participating Company Group on any of
the foregoing, and (vii) all other terms, conditions and restrictions applicable to the Option or such shares not inconsistent with the terms of the Plan; 
  
 (e) to approve one or more forms of Option Agreement; 
  
 (f) to amend, modify, extend, cancel or renew any Option or to waive any restrictions or conditions
applicable to any Option or any shares acquired upon the exercise thereof; 
  
 (g) to accelerate, continue, extend or defer the exercisability of any Option or the vesting of any shares acquired upon the exercise thereof, including with respect to the period following an Optionee’s
termination of Service with the Participating Company Group; 
  
 (h) to prescribe, amend or rescind rules, guidelines and policies relating to the Plan, or to adopt supplements to, or alternative versions of, the Plan, including, without limitation, as the Board deems necessary or
desirable to comply with the laws of, or to accommodate the tax policy or custom of, foreign jurisdictions whose citizens may be granted Options; and 
  
 (i) to correct any defect, supply any omission or reconcile any inconsistency in the Plan or any Option Agreement and to make all other
determinations and take such other actions with respect to the Plan or any Option as the Board may deem advisable to the extent not inconsistent with the provisions of the Plan or applicable law. 
  
 3.4 Administration with Respect to Insiders. With
respect to participation by Insiders in the Plan, at any time that any class of equity security of the Company is registered 

  

 
pursuant to Section 12 of the Exchange Act, the Plan shall be administered in compliance with the requirements, if any, of Rule 16b-3. 
  
 3.5 Indemnification. In addition to such other rights
of indemnification as they may have as members of the Board or officers or employees of the Participating Company Group, members of the Board and any officers or employees of the Participating Company Group to whom authority to act for the Board or
the Company is delegated shall be indemnified by the Company against all reasonable expenses, including attorneys’ fees, actually and necessarily incurred in connection with the defense of any action, suit or proceeding, or in connection with
any appeal therein, to which they or any of them may be a party by reason of any action taken or failure to act under or in connection with the Plan, or any right granted hereunder, and against all amounts paid by them in settlement thereof
(provided such settlement is approved by independent legal counsel selected by the Company) or paid by them in satisfaction of a judgment in any such action, suit or proceeding, except in relation to matters as to which it shall be adjudged in such
action, suit or proceeding that such person is liable for gross negligence, bad faith or intentional misconduct in duties; provided, however, that within sixty (60) days after the institution of such action, suit or proceeding, such person shall
offer to the Company, in writing, the opportunity at its own expense to handle and defend the same. 
  

	 	4.	SHARES SUBJECT TO PLAN. 

  
 4.1 Maximum Number of Shares Issuable. Subject to
adjustment as provided in Section 4.2, the maximum aggregate number of shares of Stock that may be issued under the Plan (after giving effect to the 150 to 1 reverse stock split effected on August 2, 2002) shall be ten million nine hundred ninety
six thousand and ten (10,996,010) and shall consist of authorized but unissued or reacquired shares of Stock or any combination thereof. If an outstanding Option for any reason expires or is terminated or canceled or if shares of Stock are acquired
upon the exercise of an Option subject to a Company repurchase option and are repurchased by the Company at the Optionee’s exercise price, the shares of Stock allocable to the unexercised portion of such Option or such repurchased shares of
Stock shall again be available for issuance under the Plan. Notwithstanding the foregoing, at any such time as the offer and sale of securities pursuant to the Plan is subject to compliance with Section 260.140.45 of Title 10 of the California Code
of Regulations (“Section 260.140.45”), the total number of shares of Stock issuable upon the exercise of all outstanding Options (together with options outstanding under any other stock option plan of the Company) and the
total number of shares provided for under any stock bonus or similar plan of the Company shall not exceed thirty percent (30%) (or such other higher percentage limitation as may be approved by the shareholders of the Company pursuant to Section
260.140.45) of the then outstanding shares of the Company as calculated in accordance with the conditions and exclusions of Section 260.140.45. 
  
 4.2 Adjustments for Changes in Capital Structure. In the event of any stock dividend, stock split, reverse stock split,
recapitalization, combination, reclassification or similar change in the capital structure of the Company, appropriate adjustments shall be made in the number and class of shares subject to the Plan and to any outstanding Options and in the exercise
price per share of any outstanding Options. If a majority of the shares which are of the same class as the shares that are subject to outstanding Options are exchanged for, converted 

  

 
into, or otherwise become (whether or not pursuant to an Ownership Change Event, as defined in Section 8.1) shares of another corporation (the
“New Shares”), the Board may unilaterally amend the outstanding Options to provide that such Options are exercisable for New Shares. In the event of any such amendment, the number of shares subject to, and the exercise price
per share of, the outstanding Options shall be adjusted in a fair and equitable manner as determined by the Board, in its discretion. Notwithstanding the foregoing, any fractional share resulting from an adjustment pursuant to this Section 4.2 shall
be rounded down to the nearest whole number, and in no event may the exercise price of any Option be decreased to an amount less than the par value, if any, of the stock subject to the Option. The adjustments determined by the Board pursuant to this
Section 4.2 shall be final, binding and conclusive. 
  

	 	5.	ELIGIBILITY AND OPTION LIMITATIONS. 

  
 5.1 Persons Eligible for Options. Options may be
granted only to Employees, Consultants, and Directors. For purposes of the foregoing sentence, “Employees,” “Consultants” and “Directors” shall include prospective Employees, prospective Consultants and prospective
Directors to whom Options are granted in connection with written offers of an employment or other service relationship with the Participating Company Group. Eligible persons may be granted more than one (1) Option. 
  
 5.2 Option Grant Restrictions. Any person who is not
an Employee on the effective date of the grant of an Option to such person may be granted only a Nonstatutory Stock Option. An Incentive Stock Option granted to a prospective Employee upon the condition that such person become an Employee shall be
deemed granted effective on the date such person commences Service with a Participating Company, with an exercise price determined as of such date in accordance with Section 6.1. 
  
 5.3 Fair Market Value Limitation. To the extent that options designated as Incentive Stock Options
(granted under all stock option plans of the Participating Company Group, including the Plan) become exercisable by an Optionee for the first time during any calendar year for stock having a Fair Market Value greater than One Hundred Thousand
Dollars ($100,000), the portions of such options which exceed such amount shall be treated as Nonstatutory Stock Options. For purposes of this Section 5.3, options designated as Incentive Stock Options shall be taken into account in the order in
which they were granted, and the Fair Market Value of stock shall be determined as of the time the option with respect to such stock is granted. If the Code is amended to provide for a different limitation from that set forth in this Section 5.3,
such different limitation shall be deemed incorporated herein effective as of the date and with respect to such Options as required or permitted by such amendment to the Code. If an Option is treated as an Incentive Stock Option in part and as a
Nonstatutory Stock Option in part by reason of the limitation set forth in this Section 5.3, the Optionee may designate which portion of such Option the Optionee is exercising. In the absence of such designation, the Optionee shall be deemed to have
exercised the Incentive Stock Option portion of the Option first. Separate certificates representing each such portion shall be issued upon the exercise of the Option. 
  

	 	6.	TERMS AND CONDITIONS OF OPTIONS. 

  
 Options shall be evidenced by Option Agreements specifying
the number of shares of Stock covered thereby, in such form as the Board shall from time to time establish. No Option or purported Option shall be a valid and binding obligation of the Company unless evidenced by a fully executed Option Agreement.
Option Agreements may incorporate all or any of the terms of the Plan by reference and shall comply with and be subject to the following terms and conditions: 
  

6.1 Exercise Price. The exercise price for each Option shall be established in the discretion of the Board; provided, however,
that (a) the exercise price per share for an Incentive Stock Option shall be not less than the Fair Market Value of a share of Stock on the effective date of grant of the Option, (b) the exercise price per share for a Nonstatutory Stock Option shall
be not less than eighty-five percent (85%) of the Fair Market Value of a share of Stock on the effective date of grant of the Option, and (c) no Option granted to a Ten Percent Owner Optionee shall have an exercise price per share less than one
hundred ten percent (110%) of the Fair Market Value of a share of Stock on the effective date of grant of the Option. Notwithstanding the foregoing, an Option (whether an Incentive Stock Option or a Nonstatutory Stock Option) may be granted with an
exercise price lower than the minimum exercise price set forth above if such Option is granted pursuant to an assumption or substitution for another option in a manner qualifying under the provisions of Section 424(a) of the Code. 
  
 6.2 Exercisability and Term of Options. Options shall
be exercisable at such time or times, or upon such event or events, and subject to such terms, conditions, performance criteria and restrictions as shall be determined by the Board and set forth in the Option Agreement evidencing such Option;
provided, however, that (a) no Option shall be exercisable after the expiration of ten (10) years after the effective date of grant of such Option, (b) no Incentive Stock Option granted to a Ten Percent Owner Optionee shall be exercisable after the
expiration of five (5) years after the effective date of grant of such Option, (c) no Option granted to a prospective Employee, prospective Consultant or prospective Director may become exercisable prior to the date on which such person commences
Service with a Participating Company, and (d) with the exception of an Option granted to an officer, Director or Consultant, no Option shall become exercisable at a rate less than twenty percent (20%) per year over a period of five (5) years from
the effective date of grant of such Option, subject to the Optionee’s continued Service. Subject to the foregoing, unless otherwise specified by the Board in the grant of an Option, any Option granted hereunder shall terminate ten (10) years
after the effective date of grant of the Option, unless earlier terminated in accordance with its provisions. 
  
 6.3 Payment of Exercise Price. 
  
 (a) Forms of Consideration Authorized. Except as otherwise provided below, payment of the exercise price for the number of
shares of Stock being purchased pursuant to any Option shall be made (i) in cash, by check or cash equivalent, (ii) by tender to the Company, or attestation to the ownership, of shares of Stock owned by the Optionee having a Fair Market Value (as
determined by the Company without regard to any restrictions on transferability applicable to such stock by reason of federal or state securities laws or agreements 

  

 
with an underwriter for the Company) not less than the exercise price, (iii) by delivery of a properly executed notice together with irrevocable instructions
to a broker providing for the assignment to the Company of the proceeds of a sale or loan with respect to some or all of the shares being acquired upon the exercise of the Option (including, without limitation, through an exercise complying with the
provisions of Regulation T as promulgated from time to time by the Board of Governors of the Federal Reserve System) (a “Cashless Exercise”), (iv) provided that the Optionee is an Employee and in the Company’s sole
discretion at the time the Option is exercised, by delivery of the Optionee’s promissory note in a form approved by the Company for the aggregate exercise price, provided that, if the Company is incorporated in the State of Delaware, the
Optionee shall pay in cash that portion of the aggregate exercise price not less than the par value of the shares being acquired, (v) by such other consideration as may be approved by the Board from time to time to the extent permitted by applicable
law, or (vi) by any combination thereof. The Board may at any time or from time to time, by approval of or by amendment to the standard forms of Option Agreement described in Section 7, or by other means, grant Options which do not permit all of the
foregoing forms of consideration to be used in payment of the exercise price or which otherwise restrict one or more forms of consideration. 
  
 (b) Limitations on Forms of Consideration. 
  
 (i) Tender of Stock. Notwithstanding the foregoing, an Option may not be exercised by tender to the
Company, or attestation to the ownership, of shares of Stock to the extent such tender or attestation would constitute a violation of the provisions of any law, regulation or agreement restricting the redemption of the Company’s stock. Unless
otherwise provided by the Board, an Option may not be exercised by tender to the Company, or attestation to the ownership, of shares of Stock unless such shares either have been owned by the Optionee for more than six (6) months or were not
acquired, directly or indirectly, from the Company. 
  
 (ii) Cashless Exercise. The Company reserves, at any and all times, the right, in the Company’s sole and absolute discretion, to establish, decline to approve or terminate any program or procedures for the exercise of Options by
means of a Cashless Exercise. 
  
 (iii)
Payment by Promissory Note. No promissory note shall be permitted if the exercise of an Option using a promissory note would be a violation of any law. Any permitted promissory note shall be on such terms as the Board shall determine at the
time the Option is granted. The Board shall have the authority to permit or require the Optionee to secure any promissory note used to exercise an Option with the shares of Stock acquired upon the exercise of the Option or with other collateral
acceptable to the Company. Unless otherwise provided by the Board, if the Company at any time is subject to the regulations promulgated by the Board of Governors of the Federal Reserve System or any other governmental entity affecting the extension
of credit in connection with the Company’s securities, any promissory note shall comply with such applicable regulations, and the Optionee shall pay the unpaid principal and accrued interest, if any, to the extent necessary to comply with such
applicable regulations. 
  

 6.4 Tax Withholding. The Company shall have the right, but not the obligation, to
deduct from the shares of Stock issuable upon the exercise of an Option, or to accept from the Optionee the tender of, a number of whole shares of Stock having a Fair Market Value, as determined by the Company, equal to all or any part of the
federal, state, local and foreign taxes, if any, required by law to be withheld by the Participating Company Group with respect to such Option or the shares acquired upon the exercise thereof. Alternatively or in addition, in its discretion, the
Company shall have the right to require the Optionee, through payroll withholding, cash payment or otherwise, including by means of a Cashless Exercise, to make adequate provision for any such tax withholding obligations of the Participating Company
Group arising in connection with the Option or the shares acquired upon the exercise thereof. The Fair Market Value of any shares of Stock withheld or tendered to satisfy any such tax withholding obligations shall not exceed the amount determined by
the applicable minimum statutory withholding rates. The Company shall have no obligation to deliver shares of Stock or to release shares of Stock from an escrow established pursuant to the Option Agreement until the Participating Company
Group’s tax withholding obligations have been satisfied by the Optionee. 
  
 6.5 Repurchase Rights. Shares issued under the Plan may be subject to a right of first refusal, one or more repurchase options, or other conditions and restrictions as determined by the Board in its discretion
at the time the Option is granted. The Company shall have the right to assign at any time any repurchase right it may have, whether or not such right is then exercisable, to one or more persons as may be selected by the Company. Upon request by the
Company, each Optionee shall execute any agreement evidencing such transfer restrictions prior to the receipt of shares of Stock hereunder and shall promptly present to the Company any and all certificates representing shares of Stock acquired
hereunder for the placement on such certificates of appropriate legends evidencing any such transfer restrictions. 
  
 6.6 Effect of Termination of Service. 
  
 (a) Option Exercisability. Subject to earlier termination of the Option as otherwise provided herein and unless otherwise
provided by the Board in the grant of an Option and set forth in the Option Agreement, an Option shall be exercisable after an Optionee’s termination of Service only during the applicable time period determined in accordance with this Section
6.6 and thereafter shall terminate: 
  
 (i)
Disability. If the Optionee’s Service with the Participating Company Group terminates because of the Disability of the Optionee, the Option, to the extent unexercised and exercisable on the date on which the Optionee’s Service
terminated, may be exercised by the Optionee (or the Optionee’s guardian or legal representative) at any time prior to the expiration of twelve (12) months (or such longer period of time as determined by the Board, in its discretion) after the
date on which the Optionee’s Service terminated, but in any event no later than the date of expiration of the Option’s term as set forth in the Option Agreement evidencing such Option (the “Option Expiration Date”).

  
 (ii) Death. If the Optionee’s
Service with the Participating Company Group terminates because of the death of the Optionee, the Option, to the extent unexercised and exercisable on the date on which the Optionee’s Service terminated, may be 

  

 
exercised by the Optionee’s legal representative or other person who acquired the right to exercise the Option by reason of the Optionee’s death at
any time prior to the expiration of twelve (12) months (or such longer period of time as determined by the Board, in its discretion) after the date on which the Optionee’s Service terminated, but in any event no later than the Option Expiration
Date. The Optionee’s Service shall be deemed to have terminated on account of death if the Optionee dies within three (3) months (or such longer period of time as determined by the Board, in its discretion) after the Optionee’s termination
of Service. 
  
 (iii) Other Termination of
Service. If the Optionee’s Service with the Participating Company Group terminates for any reason, except Disability or death, the Option, to the extent unexercised and exercisable by the Optionee on the date on which the Optionee’s
Service terminated, may be exercised by the Optionee at any time prior to the expiration of three (3) months (or such longer period of time as determined by the Board, in its discretion) after the date on which the Optionee’s Service
terminated, but in any event no later than the Option Expiration Date. 
  
 (b) Extension if Exercise Prevented by Law. Notwithstanding the foregoing, if the exercise of an Option within the applicable time periods set forth in Section 6.6(a) is prevented by the provisions of
Section 10 below, the Option shall remain exercisable until three (3) months (or such longer period of time as determined by the Board, in its discretion) after the date the Optionee is notified by the Company that the Option is exercisable, but in
any event no later than the Option Expiration Date. 
  
 (c) Extension if Optionee Subject to Section 16(b). Notwithstanding the foregoing, if a sale within the applicable time periods set forth in Section 6.6(a) of shares acquired upon the exercise of the Option would subject the
Optionee to suit under Section 16(b) of the Exchange Act, the Option shall remain exercisable until the earliest to occur of (i) the tenth (10th) day following the date on which a sale of such shares by the Optionee would no longer be subject to
such suit, (ii) the one hundred and ninetieth (190th) day after the Optionee’s termination of Service, or (iii) the Option Expiration Date. 
  
 6.7 Transferability of Options. During the lifetime of the Optionee, an Option shall be exercisable only by the Optionee or the
Optionee’s guardian or legal representative. No Option shall be assignable or transferable by the Optionee, except by will or by the laws of descent and distribution. Notwithstanding the foregoing, to the extent permitted by the Board, in its
discretion, and set forth in the Option Agreement evidencing such Option, a Nonstatutory Stock Option shall be assignable or transferable subject to the applicable limitations, if any, described in Section 260.140.41 of Title 10 of the California
Code of Regulations, Rule 701 under the Securities Act, and the General Instructions to Form S-8 Registration Statement under the Securities Act. 
  

	 	7.	STANDARD FORMS OF OPTION AGREEMENT. 

 
 7.1 Option Agreement. Unless otherwise provided by
the Board at the time the Option is granted, an Option shall comply with and be subject to the terms and conditions set 

  

 
forth in the form of Option Agreement approved by the Board concurrently with its adoption of the Plan and as amended from time to time. 
  
 7.2 Authority to Vary Terms. The Board shall have the
authority from time to time to vary the terms of any standard form of Option Agreement described in this Section 7 either in connection with the grant or amendment of an individual Option or in connection with the authorization of a new standard
form or forms; provided, however, that the terms and conditions of any such new, revised or amended standard form or forms of Option Agreement are not inconsistent with the terms of the Plan. 
  

	 	8.	CHANGE IN CONTROL. 

  
 8.1 Definitions. 
  
 (a) An “Ownership Change Event”
shall be deemed to have occurred if any of the following occurs with respect to the Company: (i) the direct or indirect sale or exchange in a single or series of related transactions by the shareholders of the Company of more than fifty percent
(50%) of the voting stock of the Company; (ii) a merger or consolidation in which the Company is a party; (iii) the sale, exchange, or transfer of all or substantially all of the assets of the Company; or (iv) a liquidation or dissolution of the
Company. 
  
 (b) A “Change in
Control” shall mean an Ownership Change Event or a series of related Ownership Change Events (collectively, a “Transaction”) wherein the shareholders of the Company immediately before the Transaction do not
retain immediately after the Transaction, in substantially the same proportions as their ownership of shares of the Company’s voting stock immediately before the Transaction, direct or indirect beneficial ownership of more than fifty percent
(50%) of the total combined voting power of the outstanding voting stock of the Company or the corporation or corporations to which the assets of the Company were transferred (the “Transferee Corporation(s)”), as the case may
be. For purposes of the preceding sentence, indirect beneficial ownership shall include, without limitation, an interest resulting from ownership of the voting stock of one or more corporations which, as a result of the Transaction, own the Company
or the Transferee Corporation(s), as the case may be, either directly or through one or more subsidiary corporations. The Board shall have the right to determine whether multiple sales or exchanges of the voting stock of the Company or multiple
Ownership Change Events are related, and its determination shall be final, binding and conclusive. 
  
 8.2 Effect of Change in Control on Options. In the event of a Change in Control, the surviving, continuing, successor, or
purchasing corporation or parent corporation thereof, as the case may be (the “Acquiring Corporation”), may either assume the Company’s rights and obligations under outstanding Options or substitute for outstanding
Options substantially equivalent options for the Acquiring Corporation’s stock. Any Options which are neither assumed or substituted for by the Acquiring Corporation in connection with the Change in Control nor exercised as of the date of the
Change in Control shall terminate and cease to be outstanding effective as of the date of the Change in Control. Notwithstanding the foregoing, shares acquired upon exercise of an Option prior to the Change in Control and any consideration 

  

 
received pursuant to the Change in Control with respect to such shares shall continue to be subject to all applicable provisions of the Option Agreement
evidencing such Option except as otherwise provided in such Option Agreement. 
  

	 	9.	PROVISION OF INFORMATION. 

  
 At least annually, copies of the Company’s balance
sheet and income statement for the just completed fiscal year shall be made available to each Optionee and purchaser of shares of Stock upon the exercise of an Option. The Company shall not be required to provide such information to key employees
whose duties in connection with the Company assure them access to equivalent information. 
  

	 	10.	COMPLIANCE WITH SECURITIES LAW. 

  
 The grant of Options and the issuance of shares of Stock
upon exercise of Options shall be subject to compliance with all applicable requirements of federal, state and foreign law with respect to such securities. Options may not be exercised if the issuance of shares of Stock upon exercise would
constitute a violation of any applicable federal, state or foreign securities laws or other law or regulations or the requirements of any stock exchange or market system upon which the Stock may then be listed. In addition, no Option may be
exercised unless (a) a registration statement under the Securities Act shall at the time of exercise of the Option be in effect with respect to the shares issuable upon exercise of the Option or (b) in the opinion of legal counsel to the Company,
the shares issuable upon exercise of the Option may be issued in accordance with the terms of an applicable exemption from the registration requirements of the Securities Act. The inability of the Company to obtain from any regulatory body having
jurisdiction the authority, if any, deemed by the Company’s legal counsel to be necessary to the lawful issuance and sale of any shares hereunder shall relieve the Company of any liability in respect of the failure to issue or sell such shares
as to which such requisite authority shall not have been obtained. As a condition to the exercise of any Option, the Company may require the Optionee to satisfy any qualifications that may be necessary or appropriate, to evidence compliance with any
applicable law or regulation and to make any representation or warranty with respect thereto as may be requested by the Company. 
  

	 	11.	TERMINATION OR AMENDMENT OF PLAN. 

  
 The Board may terminate or amend the Plan at any time.
However, subject to changes in applicable law, regulations or rules that would permit otherwise, without the approval of the Company’s shareholders, there shall be (a) no increase in the maximum aggregate number of shares of Stock that may be
issued under the Plan (except by operation of the provisions of Section 4.2), (b) no change in the class of persons eligible to receive Incentive Stock Options, and (c) no other amendment of the Plan that would require approval of the Company’s
shareholders under any applicable law, regulation or rule. No termination or amendment of the Plan shall affect any then outstanding Option unless expressly provided by the Board. In any event, no termination or amendment of the Plan may adversely
affect any then outstanding Option without the consent of the Optionee, unless such termination or amendment is required to 

  

 
enable an Option designated as an Incentive Stock Option to qualify as an Incentive Stock Option or is necessary to comply with any applicable law,
regulation or rule. 
  

	 	12.	SHAREHOLDER APPROVAL. 

  
 The Plan or any increase in the maximum aggregate number of shares of Stock issuable thereunder as provided
in Section 4.1 (the “Authorized Shares”) shall be approved by the shareholders of the Company within twelve (12) months of the date of adoption thereof by the Board. Options granted prior to shareholder approval of the Plan
or in excess of the Authorized Shares previously approved by the shareholders shall become exercisable no earlier than the date of shareholder approval of the Plan or such increase in the Authorized Shares, as the case may be. 
  

	
	PLEASE NOTE THE NUMBER OF OPTION SHARES AND EXERCISE PRICE REFLECTED IN THE NOTICE OF GRANT AND ALL REFERENCES TO SUCH
TERMS IN THIS STOCK OPTION AGREEMENT AND IN THE 1999 STOCK OPTION PLAN REFLECT THE 150 TO 1 RE VERSE STOCK SPLIT EFFECTUATED ON AUGUST 2, 2002.

  
 PortalPlayer, Inc.

 Stock Option Agreement 
  
 PortalPlayer, Inc. has granted to the individual (the “Optionee”) named in the Notice of Grant of Stock Options (the
“Notice”) to which this Stock Option Agreement (the “Option Agreement”) is attached an option (the “Option”) to purchase certain shares of Stock upon the terms and conditions
set forth in the Notice and this Option Agreement. The Option has been granted pursuant to and shall in all respects be subject to the terms and conditions of the PortalPlayer, Inc. 1999 Stock Option Plan (the “Plan”), as
amended to the Date of Option Grant, the provisions of which are incorporated herein by reference. By signing the Notice, the Optionee: (a) represents that the Optionee has read and is familiar with the terms and conditions of the Notice, the Plan
and this Option Agreement, including the Effect of Termination of Service set forth in Section 7 and the Right of First Refusal set forth in Section 11, (b) accepts the Option subject to all of the terms and conditions of the Notice, the Plan and
this Option Agreement, (c) agrees to accept as binding, conclusive and final all decisions or interpretations of the Board upon any questions arising under the Notice, the Plan or this Option Agreement, and (d) acknowledges receipt of a copy of the
Notice, the Plan and this Option Agreement. 
  
 1. Definitions
and Construction. 
  
 1.1 Definitions.
Unless otherwise defined herein, capitalized terms shall have the meanings assigned to such terms in the Notice or the Plan. Whenever used herein, the following terms shall have their respective meanings set forth below: 
  
 (a) “Date of Option Grant” means the
effective date of grant of the Option set forth in the Notice. 
  
 (b) “Exercise Price” means the purchase price per share of Stock as set forth in the Notice and as adjusted from time to time pursuant to Section 9. 
  
 (c) “Number of Option Shares” means the
total number of shares of Stock subject to the Option as set forth in the Notice and as adjusted from time to time pursuant to Section 9. 
  
 (d) “Option Expiration Date” means the date ten (10) years after the Date of Option Grant. 
  

 1 

 (e) “Vested Shares” means, on any relevant date, that portion of the
Number of Option Shares which has vested in accordance with vesting schedule set forth in the Notice. Provided that the Optionee’s Service has not terminated prior to the relevant date, an initial installment of shares will become Vested Shares
on the initial “Full Vest” date set forth in the Notice, and thereafter the remaining shares will become Vested Shares in substantially equal installments at the periodic rate set forth in the Notice, with the last such installment vesting
on the last “Full Vest” date set forth in the Notice. 
  
 1.2 Construction. Captions and titles contained herein are for convenience only and shall not affect the meaning or interpretation of any provision of this Option Agreement. Except when otherwise indicated by
the context, the singular shall include the plural and the plural shall include the singular. Use of the term “or” is not intended to be exclusive, unless the context clearly requires otherwise. 
  
 2. Tax Consequences. 
  
 2.1 Tax Status of Option. This Option is intended to
have the tax status designated in the Notice. 
  
 (a) Incentive Stock Option. If the Notice so designates, this Option is intended to be an Incentive Stock Option within the meaning of Section 422(b) of the Code, but the Company does not represent or warrant that this Option
qualifies as such. The Optionee should consult with the Optionee’s own tax advisor regarding the tax effects of this Option and the requirements necessary to obtain favorable income tax treatment under Section 422 of the Code, including, but
not limited to, holding period requirements. (NOTE TO OPTIONEE: If the Option is exercised more than three (3) months after the date on which you cease to be an Employee (other than by reason of your death or permanent and total disability as
defined in Section 22(e)(3) of the Code), the Option will be treated as a Nonstatutory Stock Option and not as an Incentive Stock Option to the extent required by Section 422 of the Code.) 
  
 (b) Nonstatutory Stock Option. If the Notice so
designates, this Option is intended to be a Nonstatutory Stock Option and shall not be treated as an Incentive Stock Option within the meaning of Section 422(b) of the Code. 
  
 2.2 ISO Fair Market Value Limitation. If the Notice designates this Option as an Incentive Stock
Option, then to the extent that the Option (together with all Incentive Stock Options granted to the Optionee under all stock option plans of the Participating Company Group, including the Plan) becomes exercisable for the first time during any
calendar year for shares having a Fair Market Value greater than One Hundred Thousand Dollars ($100,000), the portion of such options which exceeds such amount will be treated as Nonstatutory Stock Options. For purposes of this Section 2.2, options
designated as Incentive Stock Options are taken into account in the order in which they were granted, and the Fair Market Value of stock is determined as of the time the option with respect to such stock is granted. If the Code is amended to provide
for a different limitation from that set forth in this Section 2.2, such different limitation shall be deemed incorporated herein effective as of the date required or permitted by such amendment to the Code. If the Option is treated as an Incentive
Stock Option in part and as a Nonstatutory Stock Option in part by reason of the limitation set forth in this Section 2.2, the 

  

 2 

 
Optionee may designate which portion of such Option the Optionee is exercising. In the absence of such designation, the Optionee shall be deemed to have
exercised the Incentive Stock Option portion of the Option first. Separate certificates representing each such portion shall be issued upon the exercise of the Option. (NOTE TO OPTIONEE: If the aggregate Exercise Price of the Option (that is, the
Exercise Price multiplied by the Number of Option Shares) plus the aggregate exercise price of any other Incentive Stock Options you hold (whether granted pursuant to the Plan or any other stock option plan of the Participating Company Group) is
greater than $100,000, you should contact the Chief Financial Officer of the Company to ascertain whether the entire Option qualifies as an Incentive Stock Option.) 
  
 3. Administration. All questions of interpretation concerning this Option Agreement shall be determined by the Board.
All determinations by the Board shall be final and binding upon all persons having an interest in the Option. Any officer of a Participating Company shall have the authority to act on behalf of the Company with respect to any matter, right,
obligation, or election which is the responsibility of or which is allocated to the Company herein, provided the officer has apparent authority with respect to such matter, right, obligation, or election. 
  
 4. Exercise of the Option. 
  
 4.1 Right to Exercise. Except as otherwise provided
herein, the Option shall be exercisable prior to the termination of the Option (as provided in Section 6) in an amount not to exceed the number of Vested Shares less the number of shares previously acquired upon exercise of the Option, subject to
the Company’s repurchase rights set forth in Section 11. In no event shall the Option be exercisable for more shares than the Number of Option Shares. 
  
 4.2 Method of Exercise. Exercise of the Option shall be by written notice to the Company which must state the election to exercise
the Option, the number of whole shares of Stock for which the Option is being exercised and such other representations and agreements as to the Optionee’s investment intent with respect to such shares as may be required pursuant to the
provisions of this Option Agreement. The written notice must be signed by the Optionee and must be delivered in person, by certified or registered mail, return receipt requested, by confirmed facsimile transmission, or by such other means as the
Company may permit, to the Chief Financial Officer of the Company, or other authorized representative of the Participating Company Group, prior to the termination of the Option as set forth in Section 6, accompanied by full payment of the aggregate
Exercise Price for the number of shares of Stock being purchased. The Option shall be deemed to be exercised upon receipt by the Company of such written notice and the aggregate Exercise Price. 
  
 4.3 Payment of Exercise Price. 
  
 (a) Forms of Consideration Authorized. Except as
otherwise provided below, payment of the aggregate Exercise Price for the number of shares of Stock for which the Option is being exercised shall be made (i) in cash, by check, or cash equivalent, (ii) by tender to the Company, or attestation to the
ownership, of whole shares of Stock owned by the Optionee having a Fair Market Value (as determined by the Company without regard to any restrictions on transferability applicable to such stock by reason of federal or state securities laws or
agreements 

  

 3 

 
with an underwriter for the Company) not less than the aggregate Exercise Price, (iii) by means of a Cashless Exercise, as defined in Section 4.3(b), or (iv)
by any combination of the foregoing. 
  
 (b)
Limitations on Forms of Consideration. 
  
 (i) Tender of Stock. Notwithstanding the foregoing, the Option may not be exercised by tender to the Company, or attestation to the ownership, of shares of Stock to the extent such tender or attestation would constitute a violation
of the provisions of any law, regulation or agreement restricting the redemption of the Companys stock. The Option may not be exercised by tender to the Company, or attestation to the ownership, of shares of Stock unless such shares either have been
owned by the Optionee for more than six (6) months or were not acquired, directly or indirectly, from the Company. 
  
 (ii) Cashless Exercise. A “Cashless Exercise” means the delivery of a properly executed notice together with
irrevocable instructions to a broker in a form acceptable to the Company providing for the assignment to the Company of the proceeds of a sale or loan with respect to some or all of the shares of Stock acquired upon the exercise of the Option
pursuant to a program or procedure approved by the Company (including, without limitation, through an exercise complying with the provisions of Regulation T as promulgated from time to time by the Board of Governors of the Federal Reserve System).
The Company reserves, at any and all times, the right, in the Company’s sole and absolute discretion, to decline to approve or terminate any such program or procedure. 
  
 4.4 Tax Withholding. At the time the Option is exercised, in whole or in part, or at any time
thereafter as requested by the Company, the Optionee hereby authorizes withholding from payroll and any other amounts payable to the Optionee, and otherwise agrees to make adequate provision for (including by means of a Cashless Exercise to the
extent permitted by the Company), any sums required to satisfy the federal, state, local and foreign tax withholding obligations of the Participating Company Group, if any, which arise in connection with the Option, including, without limitation,
obligations arising upon (i) the exercise, in whole or in part, of the Option, (ii) the transfer, in whole or in part, of any shares acquired upon exercise of the Option, (iii) the operation of any law or regulation providing for the imputation of
interest, or (iv) the lapsing of any restriction with respect to any shares acquired upon exercise of the Option. The Company shall have no obligation to deliver shares of Stock until the tax withholding obligations of the Participating Company
Group have been satisfied by the Optionee. 
  
 4.5 Certificate Registration. Except in the event the Exercise Price is paid by means of a Cashless Exercise, the certificate for the shares as to which the Option is exercised shall be registered in the name of the Optionee, or, if
applicable, in the names of the heirs of the Optionee. 
  
 4.6 Restrictions on Grant of the Option and Issuance of Shares. The grant of the Option and the issuance of shares of Stock upon exercise of the Option shall be subject to compliance with all applicable requirements of federal, state
or foreign law with respect to such securities. The Option may not be exercised if the issuance of shares of Stock upon exercise would constitute a violation of any applicable federal, state or foreign securities laws or other 

  

 4 

 
law or regulations or the requirements of any stock exchange or market system upon which the Stock may then be listed. In addition, the Option may not be
exercised unless (i) a registration statement under the Securities Act shall at the time of exercise of the Option be in effect with respect to the shares issuable upon exercise of the Option or (ii) in the opinion of legal counsel to the Company,
the shares issuable upon exercise of the Option may be issued in accordance with the terms of an applicable exemption from the registration requirements of the Securities Act. THE OPTIONEE IS CAUTIONED THAT THE OPTION MAY NOT BE EXERCISED UNLESS THE
FOREGOING CONDITIONS ARE SATISFIED. ACCORDINGLY, THE OPTIONEE MAY NOT BE ABLE TO EXERCISE THE OPTION WHEN DESIRED EVEN THOUGH THE OPTION IS VESTED. The inability of the Company to obtain from any regulatory body having jurisdiction the authority, if
any, deemed by the Companys legal counsel to be necessary to the lawful issuance and sale of any shares subject to the Option shall relieve the Company of any liability in respect of the failure to issue or sell such shares as to which such
requisite authority shall not have been obtained. As a condition to the exercise of the Option, the Company may require the Optionee to satisfy any qualifications that may be necessary or appropriate, to evidence compliance with any applicable law
or regulation and to make any representation or warranty with respect thereto as may be requested by the Company. 
  
 4.7 Fractional Shares. The Company shall not be required to issue fractional shares upon the exercise of the Option. 
  
 5. Nontransferability of the Option. The Option may be exercised
during the lifetime of the Optionee only by the Optionee or the Optionee’s guardian or legal representative and may not be assigned or transferred in any manner except by will or by the laws of descent and distribution. Following the death of
the Optionee, the Option, to the extent provided in Section 7, may be exercised by the Optionee’s legal representative or by any person empowered to do so under the deceased Optionee’s will or under the then applicable laws of descent and
distribution. 
  
 6. Termination of the Option. The Option
shall terminate and may no longer be exercised after the first to occur of (a) the Option Expiration Date, (b) the last date for exercising the Option following termination of the Optionee’s Service as described in Section 7, or (c) a Change in
Control to the extent provided in Section 8. 
  
 7. Effect of
Termination of Service. 
  
 7.1 Option
Exercisability. 
  
 (a) Disability. If
the Optionee’s Service with the Participating Company Group terminates because of the Disability of the Optionee, the Option, to the extent unexercised and exercisable on the date on which the Optionee’s Service terminated, may be
exercised by the Optionee (or the Optionee’s guardian or legal representative) at any time prior to the expiration of twelve (12) months after the date on which the Optionee’s Service terminated, but in any event no later than the Option
Expiration Date. 
  
 (b) Death. If the
Optionee’s Service with the Participating Company Group terminates because of the death of the Optionee, the Option, to the extent unexercised and 

  

 5 

 
exercisable on the date on which the Optionee’s Service terminated, may be exercised by the Optionee’s legal representative or other person who
acquired the right to exercise the Option by reason of the Optionee’s death at any time prior to the expiration of twelve (12) months after the date on which the Optionee’s Service terminated, but in any event no later than the Option
Expiration Date. The Optionee’s Service shall be deemed to have terminated on account of death if the Optionee dies within three (3) months after the Optionee’s termination of Service. 
  
 (c) Other Termination of Service. If the
Optionee’s Service with the Participating Company Group terminates for any reason, except Disability or death, the Option, to the extent unexercised and exercisable by the Optionee on the date on which the Optionee’s Service terminated,
may be exercised by the Optionee at any time prior to the expiration of three (3) months (or such other longer period of time as determined by the Board, in its discretion) after the date on which the Optionee’s Service terminated, but in any
event no later than the Option Expiration Date. 
  
 7.2 Extension if Exercise Prevented by Law. Notwithstanding the foregoing, if the exercise of the Option within the applicable time periods set forth in Section 7.1 is prevented by the provisions of Section 4.6, the Option shall
remain exercisable until three (3) months after the date the Optionee is notified by the Company that the Option is exercisable, but in any event no later than the Option Expiration Date. 
  
 7.3 Extension if Optionee Subject to Section 16(b).
Notwithstanding the foregoing, if a sale within the applicable time periods set forth in Section 7.1 of shares acquired upon the exercise of the Option would subject the Optionee to suit under Section 16(b) of the Exchange Act, the Option shall
remain exercisable until the earliest to occur of (i) the tenth (10th) day following the date on which a sale of such shares by the Optionee would no longer be subject to such suit, (ii) the one hundred and ninetieth (190th) day after the
Optionee’s termination of Service, or (iii) the Option Expiration Date. 
  
 8. Change in Control. In the event of a Change in Control, the Acquiring Corporation may either assume the Company’s rights and obligations under the Option or substitute for the Option a substantially
equivalent option for the Acquiring Corporation’s stock. The Option shall terminate and cease to be outstanding effective as of the date of the Change in Control to the extent that the Option is neither assumed or substituted for by the
Acquiring Corporation in connection with the Change in Control nor exercised as of the date of the Change in Control. Notwithstanding the foregoing, shares acquired upon exercise of the Option prior to the Change in Control and any consideration
received pursuant to the Change in Control with respect to such shares shall continue to be subject to all applicable provisions of this Option Agreement except as otherwise provided herein. 
  
 9. Adjustments for Changes in Capital Structure. In the event of any
stock dividend, stock split, reverse stock split, recapitalization, combination, reclassification, or similar change in the capital structure of the Company, appropriate adjustments shall be made in the number, Exercise Price and class of shares of
stock subject to the Option. If a majority of the shares which are of the same class as the shares that are subject to the Option are exchanged for, converted into, or otherwise become (whether or not pursuant to an Ownership Change Event) shares of
another corporation (the “New Shares”), the Board may unilaterally amend the Option 

  

 6 

 
to provide that the Option is exercisable for New Shares. In the event of any such amendment, the Number of Option Shares and the Exercise Price shall be
adjusted in a fair and equitable manner, as determined by the Board, in its discretion. Notwithstanding the foregoing, any fractional share resulting from an adjustment pursuant to this Section 9 shall be rounded down to the nearest whole number,
and in no event may the Exercise Price be decreased to an amount less than the par value, if any, of the stock subject to the Option. The adjustments determined by the Board pursuant to this Section 9 shall be final, binding and conclusive.

  
 10. Rights as a Shareholder, Employee or Consultant.
The Optionee shall have no rights as a shareholder with respect to any shares covered by the Option until the date of the issuance of a certificate for the shares for which the Option has been exercised (as evidenced by the appropriate entry on the
books of the Company or of a duly authorized transfer agent of the Company). No adjustment shall be made for dividends, distributions or other rights for which the record date is prior to the date such certificate is issued, except as provided in
Section 9. If the Optionee is an Employee, the Optionee understands and acknowledges that, except as otherwise provided in a separate, written employment agreement between a Participating Company and the Optionee, the Optionee’s employment is
“at will” and is for no specified term. Nothing in this Option Agreement shall confer upon the Optionee any right to continue in the Service of a Participating Company or interfere in any way with any right of the Participating Company
Group to terminate the Optionee’s Service as an Employee or Consultant, as the case may be, at any time. 
  
 11. Right of First Refusal. 
  
 11.1 Grant of Right of First Refusal. Except as provided in Section 11.7 below, in the event the Optionee, the Optionee’s
legal representative, or other holder of shares acquired upon exercise of the Option proposes to sell, exchange, transfer, pledge, or otherwise dispose of any shares acquired upon exercise of the Option (the “Transfer
Shares”) to any person or entity, including, without limitation, any shareholder of a Participating Company, the Company shall have the right to repurchase the Transfer Shares under the terms and subject to the conditions set forth in
this Section 11 (the “Right of First Refusal”). 
  
 11.2 Notice of Proposed Transfer. Prior to any proposed transfer of the Transfer Shares, the Optionee shall deliver written notice (the “Transfer Notice”) to the Company describing fully
the proposed transfer, including the number of Transfer Shares, the name and address of the proposed transferee (the “Proposed Transferee”) and, if the transfer is voluntary, the proposed transfer price, and containing such
information necessary to show the bona fide nature of the proposed transfer. In the event of a bona fide gift or involuntary transfer, the proposed transfer price shall be deemed to be the Fair Market Value of the Transfer Shares, as determined by
the Board in good faith. If the Optionee proposes to transfer any Transfer Shares to more than one Proposed Transferee, the Optionee shall provide a separate Transfer Notice for the proposed transfer to each Proposed Transferee. The Transfer Notice
shall be signed by both the Optionee and the Proposed Transferee and must constitute a binding commitment of the Optionee and the Proposed Transferee for the transfer of the Transfer Shares to the Proposed Transferee subject only to the Right of
First Refusal. 
  

 7 

 11.3 Bona Fide Transfer. If the Company determines that the information provided
by the Optionee in the Transfer Notice is insufficient to establish the bona fide nature of a proposed voluntary transfer, the Company shall give the Optionee written notice of the Optionee’s failure to comply with the procedure described in
this Section 11, and the Optionee shall have no right to transfer the Transfer Shares without first complying with the procedure described in this Section 11. The Optionee shall not be permitted to transfer the Transfer Shares if the proposed
transfer is not bona fide. 
  
 11.4 Exercise
of Right of First Refusal. If the Company determines the proposed transfer to be bona fide, the Company shall have the right to purchase all, but not less than all, of the Transfer Shares (except as the Company and the Optionee otherwise agree)
at the purchase price and on the terms set forth in the Transfer Notice by delivery to the Optionee of a notice of exercise of the Right of First Refusal within thirty (30) days after the date the Transfer Notice is delivered to the Company. The
Companys exercise or failure to exercise the Right of First Refusal with respect to any proposed transfer described in a Transfer Notice shall not affect the Companys right to exercise the Right of First Refusal with respect to any proposed transfer
described in any other Transfer Notice, whether or not such other Transfer Notice is issued by the Optionee or issued by a person other than the Optionee with respect to a proposed transfer to the same Proposed Transferee. If the Company exercises
the Right of First Refusal, the Company and the Optionee shall thereupon consummate the sale of the Transfer Shares to the Company on the terms set forth in the Transfer Notice within sixty (60) days after the date the Transfer Notice is delivered
to the Company (unless a longer period is offered by the Proposed Transferee); provided, however, that in the event the Transfer Notice provides for the payment for the Transfer Shares other than in cash, the Company shall have the option of paying
for the Transfer Shares by the present value cash equivalent of the consideration described in the Transfer Notice as reasonably determined by the Company. For purposes of the foregoing, cancellation of any indebtedness of the Optionee to any
Participating Company shall be treated as payment to the Optionee in cash to the extent of the unpaid principal and any accrued interest canceled. 
  
 11.5 Failure to Exercise Right of First Refusal. If the Company fails to exercise the Right of First Refusal in full (or to such
lesser extent as the Company and the Optionee otherwise agree) within the period specified in Section 11.4 above, the Optionee may conclude a transfer to the Proposed Transferee of the Transfer Shares on the terms and conditions described in the
Transfer Notice, provided such transfer occurs not later than ninety (90) days following delivery to the Company of the Transfer Notice. The Company shall have the right to demand further assurances from the Optionee and the Proposed Transferee (in
a form satisfactory to the Company) that the transfer of the Transfer Shares was actually carried out on the terms and conditions described in the Transfer Notice. No Transfer Shares shall be transferred on the books of the Company until the Company
has received such assurances, if so demanded, and has approved the proposed transfer as bona fide. Any proposed transfer on terms and conditions different from those described in the Transfer Notice, as well as any subsequent proposed transfer by
the Optionee, shall again be subject to the Right of First Refusal and shall require compliance by the Optionee with the procedure described in this Section 11. 
  
 11.6 Transferees of Transfer Shares. All transferees of the Transfer Shares or any interest therein,
other than the Company, shall be required as a condition of such transfer to 

  

 8 

 
agree in writing (in a form satisfactory to the Company) that such transferee shall receive and hold such Transfer Shares or interest therein subject to all
of the terms and conditions of this Option Agreement, including this Section 11 providing for the Right of First Refusal with respect to any subsequent transfer. Any sale or transfer of any shares acquired upon exercise of the Option shall be void
unless the provisions of this Section 11 are met. 
  
 11.7 Transfers Not Subject to Right of First Refusal. The Right of First Refusal shall not apply to any transfer or exchange of the shares acquired upon exercise of the Option if such transfer or exchange is in connection with an
Ownership Change Event. If the consideration received pursuant to such transfer or exchange consists of stock of a Participating Company, such consideration shall remain subject to the Right of First Refusal unless the provisions of Section 11.9
below result in a termination of the Right of First Refusal. 
  
 11.8 Assignment of Right of First Refusal. The Company shall have the right to assign the Right of First Refusal at any time, whether or not there has been an attempted transfer, to one or more persons as may
be selected by the Company. 
  
 11.9 Early
Termination of Right of First Refusal. The other provisions of this Option Agreement notwithstanding, the Right of First Refusal shall terminate and be of no further force and effect upon (a) the occurrence of a Change in Control, unless the
Acquiring Corporation assumes the Company’s rights and obligations under the Option or substitutes a substantially equivalent option for the Acquiring Corporations stock for the Option, or (b) the existence of a public market for the class of
shares subject to the Right of First Refusal. A “public market” shall be deemed to exist if (i) such stock is listed on a national securities exchange (as that term is used in the Exchange Act) or (ii) such stock is traded on
the over-the-counter market and prices therefor are published daily on business days in a recognized financial journal. 
  
 12. Stock Distributions Subject to Option Agreement. If, from time to time, there is any stock dividend, stock split or other change, as described
in Section 9, in the character or amount of any of the outstanding stock of the corporation the stock of which is subject to the provisions of this Option Agreement, then in such event any and all new, substituted or additional securities to which
the Optionee is entitled by reason of the Optionee’s ownership of the shares acquired upon exercise of the Option shall be immediately subject to the Right of First Refusal with the same force and effect as the shares subject to the Right of
First Refusal immediately before such event. 
  
 13. Notice of
Sales Upon Disqualifying Disposition. The Optionee shall dispose of the shares acquired pursuant to the Option only in accordance with the provisions of this Option Agreement. In addition, if the Notice designates this Option as an Incentive
Stock Option, the Optionee shall (a) promptly notify the Chief Financial Officer of the Company if the Optionee disposes of any of the shares acquired pursuant to the Option within one (1) year after the date the Optionee exercises all or part
of the Option or within two (2) years after the Date of Option Grant and (b) provide the Company with a description of the circumstances of such disposition. Until such time as the Optionee disposes of such shares in a manner consistent with the
provisions of this Option Agreement, unless otherwise expressly authorized by the Company, the Optionee shall hold all shares acquired pursuant to the Option in the Optionee’s name (and not in 

  

 9 

 
the name of any nominee) for the one-year period immediately after the exercise of the Option and the two-year period immediately after Date of Option Grant.
At any time during the one-year or two-year periods set forth above, the Company may place a legend on any certificate representing shares acquired pursuant to the Option requesting the transfer agent for the Companys stock to notify the Company of
any such transfers. The obligation of the Optionee to notify the Company of any such transfer shall continue notwithstanding that a legend has been placed on the certificate pursuant to the preceding sentence. 
  
 14. Legends. 
  
 The Company may at any time place legends referencing the Right of First
Refusal and any applicable federal, state or foreign securities law restrictions on all certificates representing shares of stock subject to the provisions of this Option Agreement. The Optionee shall, at the request of the Company, promptly present
to the Company any and all certificates representing shares acquired pursuant to the Option in the possession of the Optionee in order to carry out the provisions of this Section. Unless otherwise specified by the Company, legends placed on such
certificates may include, but shall not be limited to, the following: 
  
 14.1 “THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD, TRANSFERRED, ASSIGNED OR HYPOTHECATED UNLESS THERE IS AN EFFECTIVE
REGISTRATION STATEMENT UNDER SUCH ACT COVERING SUCH SECURITIES, THE SALE IS MADE IN ACCORDANCE WITH RULE 144 OR RULE 701 UNDER THE ACT, OR THE COMPANY RECEIVES AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE COMPANY, STATING THAT SUCH SALE,
TRANSFER, ASSIGNMENT OR HYPOTHECATION IS EXEMPT FROM THE REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS OF SUCH ACT.” 
  
 14.2 “THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO A RIGHT OF FIRST REFUSAL OPTION IN FAVOR OF THE CORPORATION OR ITS
ASSIGNEE SET FORTH IN AN AGREEMENT BETWEEN THE CORPORATION AND THE REGISTERED HOLDER, OR SUCH HOLDERS PREDECESSOR IN INTEREST, A COPY OF WHICH IS ON FILE AT THE PRINCIPAL OFFICE OF THIS CORPORATION.” 
  
 14.3 If the Notice designates this Option as an Incentive
Stock Option: “THE SHARES EVIDENCED BY THIS CERTIFICATE WERE ISSUED BY THE CORPORATION TO THE REGISTERED HOLDER UPON EXERCISE OF AN INCENTIVE STOCK OPTION AS DEFINED IN SECTION 422 OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED
(“ISO”). IN ORDER TO OBTAIN THE PREFERENTIAL TAX TREATMENT AFFORDED TO ISOs, THE SHARES SHOULD NOT BE TRANSFERRED PRIOR TO [INSERT LATER OF TWO YEARS AFTER THE DATE OF OPTION GRANT OR ONE YEAR AFTER THE DATE OF EXERCISE
HERE]. SHOULD THE REGISTERED HOLDER ELECT TO TRANSFER ANY OF THE SHARES PRIOR TO THIS DATE AND FOREGO ISO TAX TREATMENT, THE TRANSFER AGENT FOR THE SHARES SHALL NOTIFY THE CORPORATION IMMEDIATELY. THE REGISTERED HOLDER SHALL HOLD ALL SHARES
PURCHASED UNDER THE INCENTIVE STOCK OPTION IN THE REGISTERED 

  

 10 

 
HOLDERS NAME (AND NOT IN THE NAME OF ANY NOMINEE) PRIOR TO THIS DATE OR UNTIL TRANSFERRED AS DESCRIBED ABOVE.” 
  
 15. Lock-Up Agreement. The Optionee hereby agrees that in the event of
any underwritten public offering of stock, including an initial public offering of stock, made by the Company pursuant to an effective registration statement filed under the Securities Act, the Optionee shall not offer, sell, contract to sell,
pledge, hypothecate, grant any option to purchase or make any short sale of, or otherwise dispose of any shares of stock of the Company or any rights to acquire stock of the Company for such period of time from and after the effective date of such
registration statement as may be established by the underwriter for such public offering; provided, however, that such period of time shall not exceed one hundred eighty (180) days from the effective date of the registration statement to be filed in
connection with such public offering. The foregoing limitation shall not apply to shares registered in the public offering under the Securities Act. 
  
 16. Restrictions on Transfer of Shares. No shares acquired upon exercise of the Option may be sold, exchanged, transferred (including, without
limitation, any transfer to a nominee or agent of the Optionee), assigned, pledged, hypothecated or otherwise disposed of, including by operation of law, in any manner which violates any of the provisions of this Option Agreement and any such
attempted disposition shall be void. The Company shall not be required (a) to transfer on its books any shares which will have been transferred in violation of any of the provisions set forth in this Option Agreement or (b) to treat as owner of such
shares or to accord the right to vote as such owner or to pay dividends to any transferee to whom such shares will have been so transferred. 
  
 17. Miscellaneous Provisions. 
  
 17.1 Binding Effect. Subject to the restrictions on transfer set forth herein, this Option Agreement shall inure to the benefit of
and be binding upon the parties hereto and their respective heirs, executors, administrators, successors and assigns. 
  
 17.2 Termination or Amendment. The Board may terminate or amend the Plan or the Option at any time; provided, however, that except
as provided in Section 8 in connection with a Change in Control, no such termination or amendment may adversely affect the Option or any unexercised portion hereof without the consent of the Optionee unless such termination or amendment is necessary
to comply with any applicable law or government regulation or is required to enable the Option, if designated an Incentive Stock Option in the Notice, to qualify as an Incentive Stock Option. No amendment or addition to this Option Agreement shall
be effective unless in writing. 
  
 17.3
Notices. Any notice required or permitted hereunder shall be given in writing and shall be deemed effectively given (except to the extent that this Option Agreement provides for effectiveness only upon actual receipt of such notice) upon
personal delivery or upon deposit in the United States Post Office, by registered or certified mail, with postage and fees prepaid, addressed to the other party at the address shown below that partys signature or at such other address as such party
may designate in writing from time to time to the other party. 
  

 11 

 17.4 Integrated Agreement. The Notice, this Option Agreement and the Plan
constitute the entire understanding and agreement of the Optionee and the Participating Company Group with respect to the subject matter contained herein or therein and supersedes any prior agreements, understandings, restrictions, representations,
or warranties among the Optionee and the Participating Company Group with respect to such subject matter other than those as set forth or provided for herein or therein. To the extent contemplated herein or therein, the provisions of the Notice and
the Option Agreement shall survive any exercise of the Option and shall remain in full force and effect. 
  
 17.5 Applicable Law. This Option Agreement shall be governed by 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 the State of California. 
  
 17.6 Counterparts. The Notice may be executed in counterparts, each of which shall be deemed an original, but all of which together
shall constitute one and the same instrument. 
  

 12 

			
	  ̈ Incentive Stock
Option
	  	 Optionee:
                                        
 

	  ̈ Nonstatutory Stock
Option
	  	             Date:
                                    

  
 STOCK OPTION
EXERCISE NOTICE 
  
 PortalPlayer, Inc. 
 Attention: Chief Financial Officer 
 3255-I Scott Blvd., Building 1

 Santa Clara, CA 95054 
  
 Ladies and Gentlemen: 
  
 1. Option. I was granted an option (the “Option”) to purchase shares of the common stock (the
“Shares”) of PortalPlayer, Inc. (the “Company”) pursuant to the Company’s 1999 Stock Option Plan (the “Plan”), my Notice of Grant of Stock Options (the
“Notice”) and my Stock Option Agreement (the “Option Agreement”) as follows: 
  

			
	 Grant Number:
	  	 ____________________

		
	 Date of Option Grant:
	  	 ____________________

		
	 Number of Option Shares:
	  	 ____________________

		
	 Exercise Price per Share:
	  	 $
                                    

  
 2. Exercise of
Option. I hereby elect to exercise the Option to purchase the following number of Shares, all of which are Vested Shares in accordance with the Notice and the Option Agreement: 
  

			
	 Total Shares Purchased:
	  	 ____________________

		
	 Total Exercise Price (Total Shares X Price per Share)
	  	 $
                                     
 

  
 3.
Payments. I enclose payment in full of the total exercise price for the Shares in the following form(s), as authorized by my Option Agreement: 
  

			
	  ̈ Cash:
	  	 $
                                     
 

		
	  ̈ Check:
	  	 $
                                     
 

		
	  ̈ Tender of Company
Stock:
	  	 Contact Plan Administrator

  
 4. Tax
Withholding. I authorize payroll withholding and otherwise will make adequate provision for the federal, state, local and foreign tax withholding obligations of the Company, if any, in connection with the Option. 
  

 1 

 5. Optionee Information. 
  

			
	My address is: 	  	 
		
	 	  	 

			
		
	My Social Security Number is:	  	 

  
 6. Notice of
Disqualifying Disposition. If the Option is an Incentive Stock Option, I agree that I will promptly notify the Chief Financial Officer of the Company if I transfer any of the Shares within one (1) year from the date I exercise all or part of
the Option or within two (2) years of the Date of Option Grant. 
  
 7. Binding Effect. I agree that the Shares are being acquired in accordance with and subject to the terms, provisions and conditions of the Option Agreement, including the Right of First Refusal set forth therein, to all of
which I hereby expressly assent. This Agreement shall inure to the benefit of and be binding upon the my heirs, executors, administrators, successors and assigns. 
  
 8. Transfer. I understand and acknowledge that the Shares have not been registered under the Securities Act of
1933, as amended (the “Securities Act”), and that consequently the Shares must be held indefinitely unless they are subsequently registered under the Securities Act, an exemption from such registration is available, or they
are sold in accordance with Rule 144 or Rule 701 under the Securities Act. I further understand and acknowledge that the Company is under no obligation to register the Shares. I understand that the certificate or certificates evidencing the Shares
will be imprinted with legends which prohibit the transfer of the Shares unless they are registered or such registration is not required in the opinion of legal counsel satisfactory to the Company. I am aware that Rule 144 under the Securities Act,
which permits limited public resale of securities acquired in a nonpublic offering, is not currently available with respect to the Shares and, in any event, is available only if certain conditions are satisfied. I understand that any sale of the
Shares that might be made in reliance upon Rule 144 may only be made in limited amounts in accordance with the terms and conditions of such rule and that a copy of Rule 144 will be delivered to me upon request. 
  
 I understand that I am purchasing the Shares pursuant to the terms of the
Plan, the Notice and my Option Agreement, copies of which I have received and carefully read and understand. 
  

	
	 Very truly yours,

	
	 
	 (Signature)

  

			
	 Receipt of the above is hereby acknowledged.

	
	 PortalPlayer, Inc.

		
	By:	 	 
		
	 Title:
	 	 
		
	 Dated:
	 	 

  

 2Prepared by R.R. Donnelley Financial -- Form of 2004 Stock Incentive Plan

 Exhibit 10.3 
  
 PORTALPLAYER, INC. 
  
 2004 STOCK INCENTIVE PLAN 
  
 (Adopted by the Board on       , 2004) 
  

 Table of Contents 
  

					
	 	  	 	  	Page

		
	 SECTION 1. ESTABLISHMENT AND PURPOSE
	  	1
		
	 SECTION 2. DEFINITIONS
	  	1
	 (a)
	  	“Affiliate”	  	1
	 (b)
	  	“Award”	  	1
	 (c)
	  	“Board of Directors”	  	1
	 (d)
	  	“Change in Control”	  	1
	 (e)
	  	“Code”	  	2
	 (f)
	  	“Committee”	  	2
	 (g)
	  	“Company”	  	2
	 (h)
	  	“Consultant”	  	2
	 (i)
	  	“Employee”	  	3
	 (j)
	  	“Exchange Act”	  	3
	 (k)
	  	“Exercise Price”	  	3
	 (l)
	  	“Fair Market Value”	  	3
	 (m)
	  	“ISO”	  	3
	 (n)
	  	“Nonstatutory Option” or “NSO”	  	3
	 (o)
	  	“Offeree”	  	3
	 (p)
	  	“Option”	  	3
	 (q)
	  	“Optionee”	  	4
	 (r)
	  	“Outside Director”	  	4
	 (s)
	  	“Parent”	  	4
	 (t)
	  	“Participant”	  	4
	 (u)
	  	“Plan”	  	4
	 (v)
	  	“Purchase Price”	  	4
	 (w)
	  	“Restricted Share”	  	4
	 (x)
	  	“Restricted Share Agreement”	  	4
	 (y)
	  	“SAR”	  	4
	 (z)
	  	“SAR Agreement”	  	4
	 (aa)
	  	“Service”	  	4
	 (bb)
	  	“Share”	  	4
	 (cc)
	  	“Stock”	  	4
	 (dd)
	  	“Stock Option Agreement”	  	4
	 (ee)
	  	“Stock Unit”	  	4
	 (ff)
	  	“Stock Unit Agreement”	  	4
	 (gg)
	  	“Subsidiary”	  	5
		
	 SECTION 3. ADMINISTRATION
	  	5
	 (a)
	  	Committee Composition	  	5
	 (b)
	  	Committee for Non-Officer Grants	  	5
	 (c)
	  	Committee Procedures	  	5
	 (d)
	  	Committee Responsibilities	  	5

  

 PORTALPLAYER, INC. 
 2004 STOCK INCENTIVE PLAN 
  
 -i- 

					
		
	 SECTION 4. ELIGIBILITY
	  	7
	 (a)
	  	General Rule	  	7
	 (b)
	  	Automatic Grants to Outside Directors	  	7
	 (c)
	  	Ten-Percent Stockholders	  	8
	 (d)
	  	Attribution Rules	  	8
	 (e)
	  	Outstanding Stock	  	8
		
	 SECTION 5. STOCK SUBJECT TO PLAN
	  	8
	 (a)
	  	Basic Limitation	  	8
	 (b)
	  	Award Limitation	  	8
	 (c)
	  	Additional Shares	  	8
		
	 SECTION 6. RESTRICTED SHARES
	  	9
	 (a)
	  	Restricted Stock Agreement	  	9
	 (b)
	  	Payment for Awards	  	9
	 (c)
	  	Vesting	  	9
	 (d)
	  	Voting and Dividend Rights	  	9
	 (e)
	  	Restrictions on Transfer of Shares	  	9
		
	 SECTION 7. TERMS AND CONDITIONS OF OPTIONS
	  	9
	 (a)
	  	Stock Option Agreement	  	9
	 (b)
	  	Number of Shares	  	10
	 (c)
	  	Exercise Price	  	10
	 (d)
	  	Withholding Taxes	  	10
	 (e)
	  	Exercisability and Term	  	10
	 (f)
	  	Exercise of Options	  	10
	 (g)
	  	Effect of Change in Control	  	11
	 (h)
	  	Leaves of Absence	  	11
	 (i)
	  	No Rights as a Stockholder	  	11
	 (j)
	  	Modification, Extension and Renewal of Options	  	11
	 (k)
	  	Restrictions on Transfer of Shares	  	11
	 (l)
	  	Buyout Provisions	  	11
		
	 SECTION 8. PAYMENT FOR SHARES
	  	12
	 (a)
	  	General Rule	  	12
	 (b)
	  	Surrender of Stock	  	12
	 (c)
	  	Services Rendered	  	12
	 (d)
	  	Cashless Exercise	  	12
	 (e)
	  	Exercise/Pledge	  	12
	 (f)
	  	Promissory Note	  	12
	 (g)
	  	Other Forms of Payment	  	12
	 (h)
	  	Limitations under Applicable Law	  	12
		
	 SECTION 9. STOCK APPRECIATION RIGHTS
	  	13
	 (a)
	  	SAR Agreement	  	13
	 (b)
	  	Number of Shares	  	13

  

 PORTALPLAYER, INC. 
 2004 STOCK INCENTIVE PLAN 
  
 -ii- 

					
	 (c)
	  	Exercise Price	  	13
	 (d)
	  	Exercisability and Term	  	13
	 (e)
	  	Effect of Change in Control	  	13
	 (f)
	  	Exercise of SARs	  	13
	 (g)
	  	Modification or Assumption of SARs	  	13
		
	SECTION 10. STOCK UNITS	  	14
	 (a)
	  	Stock Unit Agreement	  	14
	 (b)
	  	Payment for Awards	  	14
	 (c)
	  	Vesting Conditions	  	14
	 (d)
	  	Voting and Dividend Rights	  	14
	 (e)
	  	Form and Time of Settlement of Stock Units	  	14
	 (f)
	  	Death of Recipient	  	14
	 (g)
	  	Creditors’ Rights	  	15
		
	SECTION 11. ADJUSTMENT OF SHARES	  	15
	 (a)
	  	Adjustments	  	15
	 (b)
	  	Dissolution or Liquidation	  	15
	 (c)
	  	Reorganizations	  	16
	 (d)
	  	Reservation of Rights.	  	16
		
	SECTION 12. DEFERRAL OF AWARDS	  	16
	 (a)
	  	Committee Powers	  	16
	 (b)
	  	General Rules	  	17
		
	SECTION 13. AWARDS UNDER OTHER PLANS	  	17
		
	SECTION 14. PAYMENT OF DIRECTOR’S FEES IN SECURITIES	  	17
	 (a)
	  	Effective Date	  	17
	 (b)
	  	Elections to Receive NSOs, Restricted Shares or Stock Units	  	17
	 (c)
	  	Number and Terms of NSOs, Restricted Shares or Stock Units	  	17
		
	SECTION 15. LEGAL AND REGULATORY REQUIREMENTS	  	17
		
	SECTION 16. WITHHOLDING TAXES	  	18
	 (a)
	  	General	  	18
	 (b)
	  	Share Withholding	  	18
		
	SECTION 17. OTHER PROVISIONS APPLICABLE TO AWARDS	  	18
	 (a)
	  	Transferability	  	18
	 (b)
	  	Qualifying Performance Criteria	  	18
		
	SECTION 18. NO EMPLOYMENT RIGHTS	  	19
		
	SECTION 19. DURATION AND AMENDMENTS	  	19
	 (a)
	  	Term of the Plan	  	19
	 (b)
	  	Right to Amend or Terminate the Plan	  	19

  

 PORTALPLAYER, INC. 
 2004 STOCK INCENTIVE PLAN 
  
 -iii- 

					
	 (c)
	  	Effect of Termination	  	19
		
	SECTION 20. EXECUTION	  	20

  

 PORTALPLAYER, INC. 
 2004 STOCK INCENTIVE PLAN 
  
 -iv- 

 PORTALPLAYER, INC. 
  
 2004 STOCK INCENTIVE PLAN 
  
 SECTION 1. ESTABLISHMENT AND PURPOSE. 
  
 The Plan was adopted by the Board of Directors on       , 2004, effective as of the date of the initial
offering of Stock to the public pursuant to a registration statement filed by the Company with the Securities and Exchange Commission (the “Effective Date”). The purpose of the Plan is to promote the long-term success of the Company and
the creation of stockholder value by (a) encouraging Employees, Outside Directors and Consultants to focus on critical long-range objectives, (b) encouraging the attraction and retention of Employees, Outside Directors and Consultants with
exceptional qualifications and (c) linking Employees, Outside Directors and Consultants directly to stockholder interests through increased stock ownership. The Plan seeks to achieve this purpose by providing for Awards in the form of restricted
shares, stock units, options (which may constitute incentive stock options or nonstatutory stock options) or stock appreciation rights. 
  
 SECTION 2. DEFINITIONS. 
  
 (a) “Affiliate” shall mean any entity other than a Subsidiary, if the Company and/or one of more Subsidiaries own not less than
50% of such entity. 
  
 (b) “Award” shall
mean any award of an Option, a SAR, a Restricted Share or a Stock Unit under the Plan. 
  
 (c) “Board of Directors” shall mean the Board of Directors of the Company, as constituted from time to time. 
  
 (d) “Change in Control” shall mean the occurrence of any of the following events: 
  
 (i) A change in the composition of the Board of Directors
occurs, as a result of which fewer than one-half of the incumbent directors are directors who either: 
  
 (A) Had been directors of the Company on the “look-back date” (as defined below) (the “original directors”); or

  
 (B) Were elected, or nominated for election,
to the Board of Directors with the affirmative votes of at least a majority of the aggregate of the original directors who were still in office at the time of the election or nomination and the directors whose election or nomination was previously
so approved (the “continuing directors”); or 
  
 (ii) Any “person” (as defined below) who by the acquisition or aggregation of securities, is or becomes the “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of
the Company representing 50% or more of the 

  

 PORTALPLAYER, INC. 
 2004 STOCK INCENTIVE PLAN 
  
 -1- 

 
combined voting power of the Company’s then outstanding securities ordinarily (and apart from rights accruing under special circumstances) having the
right to vote at elections of directors (the “Base Capital Stock”); except that any change in the relative beneficial ownership of the Company’s securities by any person resulting solely from a reduction in the aggregate number of
outstanding shares of Base Capital Stock, and any decrease thereafter in such person’s ownership of securities, shall be disregarded until such person increases in any manner, directly or indirectly, such person’s beneficial ownership of
any securities of the Company; or 
  
 (iii) The
consummation of a merger or consolidation of the Company with or into another entity or any other corporate reorganization, if persons who were not stockholders of the Company immediately prior to such merger, consolidation or other reorganization
own immediately after such merger, consolidation or other reorganization 50% or more of the voting power of the outstanding securities of each of (A) the continuing or surviving entity and (B) any direct or indirect parent corporation of such
continuing or surviving entity; or 
  
 (iv) The
sale, transfer or other disposition of all or substantially all of the Company’s assets. 
  
 For purposes of subsection (d)(i) above, the term “look-back” date shall mean the later of (1) the Effective Date or (2) the date 24 months prior to the date of the event that may constitute a Change in
Control. 
  
 For purposes of subsection (d)(ii)) above, the term
“person” shall have the same meaning as when used in Sections 13(d) and 14(d) of the Exchange Act but shall exclude (1) a trustee or other fiduciary holding securities under an employee benefit plan maintained by the Company or a Parent or
Subsidiary and (2) a corporation owned directly or indirectly by the stockholders of the Company in substantially the same proportions as their ownership of the Stock. 
  
 Any other provision of this Section 2(d) notwithstanding, a transaction shall not constitute a Change in Control if its sole
purpose is to change the state of the Company’s incorporation or to create a holding company that will be owned in substantially the same proportions by the persons who held the Company’s securities immediately before such transaction, and
a Change in Control shall not be deemed to occur if the Company files a registration statement with the Securities and Exchange Commission for the initial offering of Stock to the public. 
  
 (e) “Code” shall mean the Internal Revenue Code of 1986, as amended. 
  
 (f) “Committee” shall mean the Compensation Committee
as designated by the Board of Directors, which is authorized to administer the Plan, as described in Section 3 hereof. 
  
 (g) “Company” shall mean PortalPlayer, Inc. 
  
 (h) “Consultant” shall mean a consultant or advisor who provides bona fide services to the Company,
a Parent, a Subsidiary or an Affiliate as an independent contractor or a member of the board of directors of a Parent or a Subsidiary who is not an Employee. 
  

 PORTALPLAYER, INC. 
 2004 STOCK INCENTIVE PLAN 
  
 -2- 

 (i) “Employee” shall mean any individual who is a common-law employee of the
Company, a Parent or a Subsidiary. 
  
 (j)
“Exchange Act” shall mean the Securities Exchange Act of 1934, as amended. 
  
 (k) “Exercise Price” shall mean, in the case of an Option, the amount for which one Share may be purchased upon exercise of such
Option, as specified in the applicable Stock Option Agreement. “Exercise Price,” in the case of a SAR, shall mean an amount, as specified in the applicable SAR Agreement, which is subtracted from the Fair Market Value of one Share in
determining the amount payable upon exercise of such SAR. 
  
 (l) “Fair Market Value” with respect to a Share, shall mean the market price of one Share, determined by the Committee as follows: 
  
 (i) If the Stock was traded over-the-counter on the date in question but was not traded on The Nasdaq Stock
Market, then the Fair Market Value shall be equal to the last transaction price quoted for such date by the OTC Bulletin Board or, if not so quoted, shall be equal to the mean between the last reported representative bid and asked prices quoted for
such date by the principal automated inter-dealer quotation system on which the Stock is quoted or, if the Stock is not quoted on any such system, by the Pink Sheets LLC; 
  
 (ii) If the Stock was traded on The Nasdaq Stock Market, then the Fair Market Value shall be equal to the
last reported sale price quoted for such date by The Nasdaq Stock Market; 
  
 (iii) If the Stock was traded on a United States stock exchange on the date in question, then the Fair Market Value shall be equal to the closing price reported for such date by the applicable composite-transactions
report; and 
  
 (iv) If none of the foregoing
provisions is applicable, then the Fair Market Value shall be determined by the Committee in good faith on such basis as it deems appropriate. 
  
 In all cases, the determination of Fair Market Value by the Committee shall be conclusive and binding on all persons. 
  
 (m) “ISO” shall mean an employee incentive stock
option described in Section 422 of the Code. 
  
 (n)
“Nonstatutory Option” or “NSO” shall mean an employee stock option that is not an ISO. 
  
 (o) “Offeree” shall mean an individual to whom the Committee has offered the right to acquire Shares under the Plan (other than
upon exercise of an Option). 
  
 (p)
“Option” shall mean an ISO or Nonstatutory Option granted under the Plan and entitling the holder to purchase Shares. 
  

 PORTALPLAYER, INC. 
 2004 STOCK INCENTIVE PLAN 
  
 -3- 

 (q) “Optionee” shall mean an individual or estate who holds an Option or SAR.

  
 (r) “Outside Director” shall mean a
member of the Board of Directors who is not a common-law employee of, or paid consultant to, the Company, a Parent or a Subsidiary. 
  
 (s) “Parent” shall mean any corporation (other than the Company) in an unbroken chain of corporations ending with the Company, if
each of the corporations other than the Company owns stock possessing 50% or more of the total combined voting power of all classes of stock in one of the other corporations in such chain. A corporation that attains the status of a Parent on a date
after the adoption of the Plan shall be a Parent commencing as of such date. 
  
 (t) “Participant” shall mean an individual or estate who holds an Award. 
  
 (u) “Plan” shall mean this 2004 Stock Incentive Plan of PortalPlayer, Inc., as amended from time to time. 
  
 (v) “Purchase Price” shall mean the consideration for
which one Share may be acquired under the Plan (other than upon exercise of an Option), as specified by the Committee. 
  
 (w) “Restricted Share” shall mean a Share awarded under the Plan. 
  
 (x) “Restricted Share Agreement” shall mean the agreement between the Company and the recipient of a
Restricted Share which contains the terms, conditions and restrictions pertaining to such Restricted Shares. 
  
 (y) “SAR” shall mean a stock appreciation right granted under the Plan. 
  
 (z) “SAR Agreement” shall mean the agreement between
the Company and an Optionee which contains the terms, conditions and restrictions pertaining to his or her SAR. 
  
 (aa) “Service” shall mean service as an Employee, Consultant or Outside Director. 
  
 (bb) “Share” shall mean one share of Stock, as
adjusted in accordance with Section 8 (if applicable). 
  
 (cc)
“Stock” shall mean the Common Stock of the Company. 
  
 (dd) “Stock Option Agreement” shall mean the agreement between the Company and an Optionee that contains the terms, conditions and restrictions pertaining to his Option. 
  
 (ee) “Stock Unit” shall mean a bookkeeping entry
representing the equivalent of one Share, as awarded under the Plan. 
  
 (ff) “Stock Unit Agreement” shall mean the agreement between the Company and the recipient of a Stock Unit which contains the terms, conditions and restrictions pertaining to such Stock Unit. 
  

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 (gg) “Subsidiary” shall mean any corporation, if the Company and/or one or more
other Subsidiaries own not less than 50% of the total combined voting power of all classes of outstanding stock of such corporation. A corporation that attains the status of a Subsidiary on a date after the adoption of the Plan shall be considered a
Subsidiary commencing as of such date. 
  
 SECTION 3. ADMINISTRATION.

  
 (a) Committee Composition. The Plan shall
be administered by the Committee. The Committee shall consist of two or more directors of the Company, who shall be appointed by the Board. In addition, the composition of the Committee shall satisfy (i) such requirements as the Securities and
Exchange Commission may establish for administrators acting under plans intended to qualify for exemption under Rule 16b-3 (or its successor) under the Exchange Act; and (ii) such requirements as the Internal Revenue Service may establish for
outside directors acting under plans intended to qualify for exemption under Section 162(m)(4)(C) of the Code. 
  
 (b) Committee for Non-Officer Grants. The Board may also appoint one or more separate committees of the Board, each composed of one or more
directors of the Company who need not satisfy the requirements of Section 3(a), who may administer the Plan with respect to Employees who are not considered officers or directors of the Company under Section 16 of the Exchange Act, may grant Awards
under the Plan to such Employees and may determine all terms of such grants. Within the limitations of the preceding sentence, any reference in the Plan to the Committee shall include such committee or committees appointed pursuant to the preceding
sentence. The Board of Directors may also authorize one or more officers of the Company to designate Employees, other than officers under Section 16 of the Exchange Act, to receive Awards and/or to determine the number of such Awards to be received
by such persons; provided, however, that the Board of Directors shall specify the total number of Awards that such officers may so award. 
  
 (c) Committee Procedures. The Board of Directors shall designate one of the members of the Committee as chairman. The Committee may hold
meetings at such times and places as it shall determine. The acts of a majority of the Committee members present at meetings at which a quorum exists, or acts reduced to or approved in writing by all Committee members, shall be valid acts of the
Committee. 
  
 (d) Committee Responsibilities.
Subject to the provisions of the Plan, the Committee shall have full authority and discretion to take the following actions: 
  
 (i) To interpret the Plan and to apply its provisions; 
  
 (ii) To adopt, amend or rescind rules, procedures and forms relating to the Plan; 
  
 (iii) To authorize any person to execute, on behalf of the
Company, any instrument required to carry out the purposes of the Plan; 
  

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 (iv) To determine when Awards are to be granted under the Plan; 
  
 (v) To select the Offerees and Optionees; 
  
 (vi) To determine the number of Shares to be made subject to
each Award; 
  
 (vii) To prescribe the terms and
conditions of each Award, including (without limitation) the Exercise Price and Purchase Price, and the vesting or duration of the Award (including accelerating the vesting of Awards, either at the time of the Award or thereafter, without the
consent of the Participant), to determine whether an Option is to be classified as an ISO or as a Nonstatutory Option, and to specify the provisions of the agreement relating to such Award; 
  
 (viii) To amend any outstanding Award agreement, subject to
applicable legal restrictions and to the consent of the Participant if the Participant’s rights or obligations would be materially impaired; 
  
 (ix) To prescribe the consideration for the grant of each Award or other right under the Plan and to determine the sufficiency of such
consideration; 
  
 (x) To determine the
disposition of each Award or other right under the Plan in the event of a Participant’s divorce or dissolution of marriage; 
  
 (xi) To determine whether Awards under the Plan will be granted in replacement of other grants under an incentive or other compensation
plan of an acquired business; 
  
 (xii) To
correct any defect, supply any omission, or reconcile any inconsistency in the Plan or any Award agreement; 
  
 (xiii) To establish or verify the extent of satisfaction of any performance goals or other conditions applicable to the grant, issuance,
exercisability, vesting and/or ability to retain any Award; and 
  
 (xiv) To take any other actions deemed necessary or advisable for the administration of the Plan. 
  
 Subject to the requirements of applicable law, the Committee may designate persons other than members of the Committee to carry out its responsibilities and may prescribe
such conditions and limitations as it may deem appropriate, except that the Committee may not delegate its authority with regard to the selection for participation of or the granting of Options or other rights under the Plan to persons subject to
Section 16 of the Exchange Act. All decisions, interpretations and other actions of the Committee shall be final and binding on all Offerees, all Optionees, and all persons deriving their rights from an Offeree or Optionee. No member of the
Committee shall be liable for any action that he has taken or has failed to take in good faith with respect to the Plan, any Option, or any right to acquire Shares under the Plan. 
  

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 SECTION 4. ELIGIBILITY. 
  

(a) General Rule. Only Employees shall be eligible for the grant of ISOs. Only Employees, Consultants and Outside Directors shall be
eligible for the grant of Restricted Shares, Stock Units, Nonstatutory Options or SARs. 
  
 (b) Automatic Grants to Outside Directors. 
  
 (i) Each Outside Director who first joins the Board of Directors on or after the Effective Date, and who was not previously an Employee,
shall receive a Nonstatutory Option, subject to approval of the Plan by the Company’s stockholders, to purchase              Shares (subject to adjustment under Section 11) on
the date of his or her election to the Board of Directors. Twenty-five percent (25%) of the Shares subject to each Option granted under this Section 4(b)(i) shall vest and become exercisable on the first anniversary of the date of grant. The balance
of the Shares subject to such Option (i.e. the remaining seventy-five percent (75%)) shall vest and become exercisable monthly over a three-year period beginning on the day which is one month after the first anniversary of the date of grant, at a
monthly rate of 2.0833% of the total number of Shares subject to such Options. Notwithstanding the foregoing, each such Option shall become vested if a Change in Control occurs with respect to the Company during the Optionee’s Service.

  
 (ii) On the first business day following the
conclusion of each regular annual meeting of the Company’s stockholders, commencing with the annual meeting occurring after the Effective Date, each Outside Director who was not elected to the Board for the first time at such meeting and who
will continue serving as a member of the Board of Directors thereafter shall receive an Option to purchase              Shares (subject to adjustment under Section 11), provided that
such Outside Director has served on the Board of Directors for at least six months. Each Option granted under this Section 4(b)(ii) shall vest and become exercisable on the first anniversary of the date of grant; provided, however, that each such
Option shall become exercisable in full immediately prior to the next regular annual meeting of the Company’s stockholders following such date of grant in the event such meeting occurs prior to such first anniversary date. Notwithstanding the
foregoing, each Option granted under this Section 4(b)(ii) shall become vested if a Change in Control occurs with respect to the Company during the Optionee’s Service. 
  
 (iii) The Exercise Price of all Nonstatutory Options granted to an Outside Director under this Section 4(b)
shall be equal to 100% of the Fair Market Value of a Share on the date of grant, payable in one of the forms described in Section 8(a), (b) or (d). 
  
 (iv) All Nonstatutory Options granted to an Outside Director under this Section 4(b) shall terminate on the earlier of (A) the day before
the tenth anniversary of the date of grant of such Options or (B) the date twelve months after the termination of such Outside Director’s Service for any reason; provided, however, that any such Options that are not vested upon the termination
of the Outside Director’s Service for any reason shall terminate immediately and may not be exercised. 
  

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 (c) Ten-Percent Stockholders. An Employee who owns more than 10% of the total combined
voting power of all classes of outstanding stock of the Company, a Parent or Subsidiary shall not be eligible for the grant of an ISO unless such grant satisfies the requirements of Section 422(c)(5) of the Code. 
  
 (d) Attribution Rules. For purposes of Section 4(c) above, in
determining stock ownership, an Employee shall be deemed to own the stock owned, directly or indirectly, by or for such Employee’s brothers, sisters, spouse, ancestors and lineal descendants. Stock owned, directly or indirectly, by or for a
corporation, partnership, estate or trust shall be deemed to be owned proportionately by or for its stockholders, partners or beneficiaries. 
  
 (e) Outstanding Stock. For purposes of Section 4(c) above, “outstanding stock” shall include all stock actually issued and
outstanding immediately after the grant. “Outstanding stock” shall not include shares authorized for issuance under outstanding options held by the Employee or by any other person. 
  
 SECTION 5. STOCK SUBJECT TO PLAN. 
  
 (a) Basic Limitation. Shares offered under the Plan shall be
authorized but unissued Shares or treasury Shares. The aggregate number of Shares authorized for issuance as Awards under the Plan shall not exceed
                         Shares, plus (x) any Shares subject to outstanding options under the Company’s 1999 Stock
Option Plan on the effective date of this Plan that are subsequently forfeited or terminated for any other reason before being exercised and unvested shares that are forfeited pursuant to such plan after the effective date of this Plan and (y) an
annual increase on the first day of each fiscal year during the term of the Plan, beginning January 1, 2005, in each case in an amount equal to the lesser of (i)              Shares
through 2009 and              from 2010 through 2014, (ii) 5% of the outstanding Shares on the last day of the immediately preceding year through 2009 and 3% of the outstanding Shares on
the last day of the preceding year from 2010 through 2014, or (iii) an amount determined by the Board. The limitations of this Section 5(a) shall be subject to adjustment pursuant to Section 11. The number of Shares that are subject to Options or
other Awards outstanding at any time under the Plan shall not exceed the number of Shares which then remain available for issuance under the Plan. The Company, during the term of the Plan, shall at all times reserve and keep available sufficient
Shares to satisfy the requirements of the Plan. 
  
 (b)
Award Limitation. Subject to the provisions of Section 11, no Participant may receive Options, SARs, Restricted Shares or Stock Units under the Plan in any calendar year that relate to more than
                     Shares. 
  
 (c) Additional Shares. If Restricted Shares or Shares issued upon the exercise of Options are forfeited, then such Shares shall again become
available for Awards under the Plan. If Stock Units, Options or SARs are forfeited or terminate for any other reason before being exercised, then the corresponding Shares shall again become available for Awards under the Plan. If Stock Units are
settled, then only the number of Shares (if any) actually issued in 

  

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settlement of such Stock Units shall reduce the number available under Section 5(a) and the balance shall again become available for Awards under the Plan.
If SARs are exercised, then only the number of Shares (if any) actually issued in settlement of such SARs shall reduce the number available in Section 5(a) and the balance shall again become available for Awards under the Plan. 
  
 SECTION 6. RESTRICTED SHARES. 
  
 (a) Restricted Stock Agreement. Each grant of Restricted
Shares under the Plan shall be evidenced by a Restricted Stock Agreement between the recipient and the Company. Such Restricted Shares shall be subject to all applicable terms of the Plan and may be subject to any other terms that are not
inconsistent with the Plan. The provisions of the various Restricted Stock Agreements entered into under the Plan need not be identical. 
  
 (b) Payment for Awards. Subject to the following sentence, Restricted Shares may be sold or awarded under the Plan for such consideration as
the Committee may determine, including (without limitation) cash, cash equivalents, full-recourse promissory notes, past services and future services. To the extent that an Award consists of newly issued Restricted Shares, the Award recipient shall
furnish consideration with a value not less than the par value of such Restricted Shares in the form of cash, cash equivalents, or past services rendered to the Company (or a Parent or Subsidiary), as the Committee may determine. 
  
 (c) Vesting. Each Award of Restricted Shares may or may not be
subject to vesting. Vesting shall occur, in full or in installments, upon satisfaction of the conditions specified in the Restricted Stock Agreement. A Restricted Stock Agreement may provide for accelerated vesting in the event of the
Participant’s death, disability or retirement or other events. The Committee may determine, at the time of granting Restricted Shares of thereafter, that all or part of such Restricted Shares shall become vested in the event that a Change in
Control occurs with respect to the Company. 
  
 (d)
Voting and Dividend Rights. The holders of Restricted Shares awarded under the Plan shall have the same voting, dividend and other rights as the Company’s other stockholders. A Restricted Stock Agreement, however, may require that
the holders of Restricted Shares invest any cash dividends received in additional Restricted Shares. Such additional Restricted Shares shall be subject to the same conditions and restrictions as the Award with respect to which the dividends were
paid. 
  
 (e) Restrictions on Transfer of Shares.
Restricted Shares shall be subject to such rights of repurchase, rights of first refusal or other restrictions as the Committee may determine. Such restrictions shall be set forth in the applicable Restricted Stock Agreement and shall apply in
addition to any general restrictions that may apply to all holders of Shares. 
  
 SECTION 7. TERMS AND CONDITIONS OF OPTIONS. 
  
 (a) Stock Option Agreement. Each grant of an Option under the Plan shall be evidenced by a Stock Option Agreement between the Optionee and the Company. Such Option 

  

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shall be subject to all applicable terms and conditions of the Plan and may be subject to any other terms and conditions which are not inconsistent with the
Plan and which the Committee deems appropriate for inclusion in a Stock Option Agreement. The Stock Option Agreement shall specify whether the Option is an ISO or an NSO. The provisions of the various Stock Option Agreements entered into under the
Plan need not be identical. Options may be granted in consideration of a reduction in the Optionee’s other compensation. 
  
 (b) Number of Shares. Each Stock Option Agreement shall specify the number of Shares that are subject to the Option and shall provide for
the adjustment of such number in accordance with Section 11. 
  
 (c) Exercise Price. Each Stock Option Agreement shall specify the Exercise Price. The Exercise Price of an ISO shall not be less than 100% of the Fair Market Value of a Share on the date of grant, except as otherwise provided
in 4(c), and the Exercise Price of an NSO shall not be less 85% of the Fair Market Value of a Share on the date of grant. Notwithstanding the foregoing, a Stock Option Agreement may specify that the exercise price of an NSO may vary in accordance
with a predetermined formula. Subject to the foregoing in this Section 7(c), the Exercise Price under any Option shall be determined by the Committee at its sole discretion. The Exercise Price shall be payable in one of the forms described in
Section 8. 
  
 (d) Withholding Taxes. As a condition
to the exercise of an Option, the Optionee shall make such arrangements as the Committee may require for the satisfaction of any federal, state, local or foreign withholding tax obligations that may arise in connection with such exercise. The
Optionee shall also make such arrangements as the Committee may require for the satisfaction of any federal, state, local or foreign withholding tax obligations that may arise in connection with the disposition of Shares acquired by exercising an
Option. 
  
 (e) Exercisability and Term. Each Stock
Option Agreement shall specify the date when all or any installment of the Option is to become exercisable. The Stock Option Agreement shall also specify the term of the Option; provided that the term of an ISO shall in no event exceed 10 years from
the date of grant (five years for Employees described in Section 4(c)). A Stock Option Agreement may provide for accelerated exercisability in the event of the Optionee’s death, disability, or retirement or other events and may provide for
expiration prior to the end of its term in the event of the termination of the Optionee’s Service. Options may be awarded in combination with SARs, and such an Award may provide that the Options will not be exercisable unless the related SARs
are forfeited. Subject to the foregoing in this Section 7(e), the Committee at its sole discretion shall determine when all or any installment of an Option is to become exercisable and when an Option is to expire. 
  
 (f) Exercise of Options. Upon Termination of Service. Each
Stock Option Agreement shall set forth the extent to which the Optionee shall have the right to exercise the Option following termination of the Optionee’s Service with the Company and its Subsidiaries, and the right to exercise the Option of
any executors or administrators of the Optionee’s estate or any person who has acquired such Option(s) directly from the Optionee by bequest or inheritance. Such provisions shall be determined in the sole discretion of the Committee, need

  

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not be uniform among all Options issued pursuant to the Plan, and may reflect distinctions based on the reasons for termination of Service. 
  
 (g) Effect of Change in Control. The Committee may determine,
at the time of granting an Option or thereafter, that such Option shall become exercisable as to all or part of the Shares subject to such Option in the event that a Change in Control occurs with respect to the Company. 
  
 (h) Leaves of Absence. An Employee’s Service shall cease
when such Employee ceases to be actively employed by, or a Consultant to, the Company (or any subsidiary) as determined in the sole discretion of the Board of Directors. For purposes of Options, Service does not terminate when an Employee goes on a
bona fide leave of absence, that was approved by the Company in writing, if the terms of the leave provide for continued service crediting, or when continued service crediting is required by applicable law. However, for purposes of determining
whether an Option is entitled to ISO status, an Employee’s Service will be treated as terminating 90 days after such Employee went on leave, unless such Employee’s right to return to active work is guaranteed by law or by a contract.
Service terminates in any event when the approved leave ends, unless such Employee immediately returns to active work. The Company determines which leaves count toward Service, and when Service terminates for all purposes under the Plan. 

 
 (i) No Rights as a Stockholder. An Optionee, or a transferee
of an Optionee, shall have no rights as a stockholder with respect to any Shares covered by his Option until the date of the issuance of a stock certificate for such Shares. No adjustments shall be made, except as provided in Section 11. 

 
 (j) Modification, Extension and Renewal of Options. Within
the limitations of the Plan, the Committee may modify, extend or renew outstanding options or may accept the cancellation of outstanding options (to the extent not previously exercised), whether or not granted hereunder, in return for the grant of
new Options for the same or a different number of Shares and at the same or a different exercise price, or in return for the grant of the same or a different number of Shares. The foregoing notwithstanding, no modification of an Option shall,
without the consent of the Optionee, materially impair his or her rights or obligations under such Option. 
  
 (k) Restrictions on Transfer of Shares. Any Shares issued upon exercise of an Option shall be subject to such special forfeiture conditions,
rights of repurchase, rights of first refusal and other transfer restrictions as the Committee may determine. Such restrictions shall be set forth in the applicable Stock Option Agreement and shall apply in addition to any general restrictions that
may apply to all holders of Shares. 
  
 (l) Buyout
Provisions. The Committee may at any time (a) offer to buy out for a payment in cash or cash equivalents an Option previously granted or (b) authorize an Optionee to elect to cash out an Option previously granted, in either case at such time and
based upon such terms and conditions as the Committee shall establish. 
  

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 SECTION 8. PAYMENT FOR SHARES. 
  
 (a) General Rule. The entire Exercise Price or Purchase Price of Shares issued under the Plan shall be payable
in lawful money of the United States of America at the time when such Shares are purchased, except as provided in Section 8(b) through Section 8(g) below. 
  
 (b) Surrender of Stock. To the extent that a Stock Option Agreement so provides, payment may be made all or in part by surrendering, or
attesting to the ownership of, Shares which have already been owned by the Optionee or his representative. Such Shares shall be valued at their Fair Market Value on the date when the new Shares are purchased under the Plan. The Optionee shall not
surrender, or attest to the ownership of, Shares in payment of the Exercise Price if such action would cause the Company to recognize compensation expense (or additional compensation expense) with respect to the Option for financial reporting
purposes. 
  
 (c) Services Rendered. At the
discretion of the Committee, Shares may be awarded under the Plan in consideration of services rendered to the Company or a Subsidiary prior to the award. If Shares are awarded without the payment of a Purchase Price in cash, the Committee shall
make a determination (at the time of the award) of the value of the services rendered by the Offeree and the sufficiency of the consideration to meet the requirements of Section 6(b). 
  
 (d) Cashless Exercise. To the extent that a Stock Option Agreement so provides, payment may be made all or in
part by delivery (on a form prescribed by the Committee) of an irrevocable direction to a securities broker to sell Shares and to deliver all or part of the sale proceeds to the Company in payment of the aggregate Exercise Price. 
  
 (e) Exercise/Pledge. To the extent that a Stock Option
Agreement so provides, payment may be made all or in part by delivery (on a form prescribed by the Committee) of an irrevocable direction to a securities broker or lender to pledge Shares, as security for a loan, and to deliver all or part of the
loan proceeds to the Company in payment of the aggregate Exercise Price. 
  
 (f) Promissory Note. To the extent that a Stock Option Agreement or Restricted Stock Agreement so provides, payment may be made all or in part by delivering (on a form prescribed by the Company) a
full-recourse promissory note. However, the par value of the Common Shares being purchased under the Plan, if newly issued, shall be paid in cash or cash equivalents. 
  
 (g) Other Forms of Payment. To the extent that a Stock Option Agreement or Restricted Stock Agreement so
provides, payment may be made in any other form that is consistent with applicable laws, regulations and rules. 
  
 (h) Limitations under Applicable Law. Notwithstanding anything herein or in a Stock Option Agreement or Restricted Stock Agreement to the
contrary, payment may not be made in any form that is unlawful, as determined by the Committee in its sole discretion. 
  
 SECTION 9. STOCK APPRECIATION RIGHTS. 
  

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 (a) SAR Agreement. Each grant of a SAR under the Plan shall be evidenced by a SAR Agreement
between the Optionee and the Company. Such SAR shall be subject to all applicable terms of the Plan and may be subject to any other terms that are not inconsistent with the Plan. The provisions of the various SAR Agreements entered into under the
Plan need not be identical. SARs may be granted in consideration of a reduction in the Optionee’s other compensation. 
  
 (b) Number of Shares. Each SAR Agreement shall specify the number of Shares to which the SAR pertains and shall provide for the adjustment
of such number in accordance with Section 11. 
  
 (c)
Exercise Price. Each SAR Agreement shall specify the Exercise Price. A SAR Agreement may specify an Exercise Price that varies in accordance with a predetermined formula while the SAR is outstanding. 
  
 (d) Exercisability and Term. Each SAR Agreement shall specify
the date when all or any installment of the SAR is to become exercisable. The SAR Agreement shall also specify the term of the SAR. A SAR Agreement may provide for accelerated exercisability in the event of the Optionee’s death, disability or
retirement or other events and may provide for expiration prior to the end of its term in the event of the termination of the Optionee’s service. SARs may be awarded in combination with Options, and such an Award may provide that the SARs will
not be exercisable unless the related Options are forfeited. A SAR may be included in an ISO only at the time of grant but may be included in an NSO at the time of grant or thereafter. A SAR granted under the Plan may provide that it will be
exercisable only in the event of a Change in Control. 
  
 (e)
Effect of Change in Control. The Committee may determine, at the time of granting a SAR or thereafter, that such SAR shall become fully exercisable as to all Common Shares subject to such SAR in the event that a Change in Control occurs
with respect to the Company. 
  
 (f) Exercise of
SARs. Upon exercise of a SAR, the Optionee (or any person having the right to exercise the SAR after his or her death) shall receive from the Company (a) Shares, (b) cash or (c) a combination of Shares and cash, as the Committee shall determine.
The amount of cash and/or the Fair Market Value of Shares received upon exercise of SARs shall, in the aggregate, be equal to the amount by which the Fair Market Value (on the date of surrender) of the Shares subject to the SARs exceeds the Exercise
Price. 
  
 (g) Modification or Assumption of SARs.
Within the limitations of the Plan, the Committee may modify, extend or assume outstanding SARs or may accept the cancellation of outstanding SARs (whether granted by the Company or by another issuer) in return for the grant of new SARs for the same
or a different number of shares and at the same or a different exercise price. The foregoing notwithstanding, no modification of a SAR shall, without the consent of the holder, materially impair his or her rights or obligations under such SAR.

  
 SECTION 10. STOCK UNITS. 
  

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 (a) Stock Unit Agreement. Each grant of Stock Units under the Plan shall be evidenced by a
Stock Unit Agreement between the recipient and the Company. Such Stock Units shall be subject to all applicable terms of the Plan and may be subject to any other terms that are not inconsistent with the Plan. The provisions of the various Stock Unit
Agreements entered into under the Plan need not be identical. Stock Units may be granted in consideration of a reduction in the recipient’s other compensation. 
  
 (b) Payment for Awards. To the extent that an Award is granted in the form of Stock Units, no cash
consideration shall be required of the Award recipients. 
  
 (c) Vesting Conditions. Each Award of Stock Units may or may not be subject to vesting. Vesting shall occur, in full or in installments, upon satisfaction of the conditions specified in the Stock Unit Agreement. A Stock Unit
Agreement may provide for accelerated vesting in the event of the Participant’s death, disability or retirement or other events. The Committee may determine, at the time of granting Stock Units or thereafter, that all or part of such Stock
Units shall become vested in the event that a Change in Control occurs with respect to the Company. 
  
 (d) Voting and Dividend Rights. The holders of Stock Units shall have no voting rights. Prior to settlement or forfeiture, any Stock Unit
awarded under the Plan may, at the Committee’s discretion, carry with it a right to dividend equivalents. Such right entitles the holder to be credited with an amount equal to all cash dividends paid on one Share while the Stock Unit is
outstanding. Dividend equivalents may be converted into additional Stock Units. Settlement of dividend equivalents may be made in the form of cash, in the form of Shares, or in a combination of both. Prior to distribution, any dividend equivalents
which are not paid shall be subject to the same conditions and restrictions (including without limitation, any forfeiture conditions) as the Stock Units to which they attach. 
  
 (e) Form and Time of Settlement of Stock Units. Settlement of vested Stock Units may be made in the form of
(a) cash, (b) Shares or (c) any combination of both, as determined by the Committee. The actual number of Stock Units eligible for settlement may be larger or smaller than the number included in the original Award, based on predetermined performance
factors. Methods of converting Stock Units into cash may include (without limitation) a method based on the average Fair Market Value of Shares over a series of trading days. Vested Stock Units may be settled in a lump sum or in installments. The
distribution may occur or commence when all vesting conditions applicable to the Stock Units have been satisfied or have lapsed, or it may be deferred to any later date. The amount of a deferred distribution may be increased by an interest factor or
by dividend equivalents. Until an Award of Stock Units is settled, the number of such Stock Units shall be subject to adjustment pursuant to Section 11. 
  
 (f) Death of Recipient. Any Stock Units Award that becomes payable after the recipient’s death shall be distributed to the
recipient’s beneficiary or beneficiaries. Each recipient of a Stock Units Award under the Plan shall designate one or more beneficiaries for this purpose by filing the prescribed form with the Company. A beneficiary designation may be changed
by filing the prescribed form with the Company at any time before the Award 

  

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recipient’s death. If no beneficiary was designated or if no designated beneficiary survives the Award recipient, then any Stock Units Award that
becomes payable after the recipient’s death shall be distributed to the recipient’s estate. 
  
 (g) Creditors’ Rights. A holder of Stock Units shall have no rights other than those of a general creditor of the Company. Stock Units
represent an unfunded and unsecured obligation of the Company, subject to the terms and conditions of the applicable Stock Unit Agreement. 
  
 SECTION 11. ADJUSTMENT OF SHARES. 
  
 (a) Adjustments. In the event of a subdivision of the outstanding Stock, a declaration of a dividend payable in Shares, a declaration of a
dividend payable in a form other than Shares in an amount that has a material effect on the price of Shares, a combination or consolidation of the outstanding Stock (by reclassification or otherwise) into a lesser number of Shares, a
recapitalization, a spin-off or a similar occurrence, the Committee shall make such adjustments as it, in its sole discretion, deems appropriate in one or more of: 
  
 (i) The number of Options, SARs, Restricted Shares and Stock Units available for future Awards under Section
5; 
  
 (ii) The limitations set forth in Sections
5(a) and (b); 
  
 (iii) The number of NSOs to be
granted to Outside Directors under Section 4(b); 
  
 (iv) The number of Shares covered by each outstanding Option and SAR; 
  
 (v) The Exercise Price under each outstanding Option and SAR; or 
  
 (vi) The number of Stock Units included in any prior Award which has not yet been settled. 
  
 Except as provided in this Section 11, a Participant shall have no rights by reason of any
issue by the Company of stock of any class or securities convertible into stock of any class, any subdivision or consolidation of shares of stock of any class, the payment of any stock dividend or any other increase or decrease in the number of
shares of stock of any class. 
  
 (b) Dissolution or
Liquidation. To the extent not previously exercised or settled, Options, SARs and Stock Units shall terminate immediately prior to the dissolution or liquidation of the Company. 
  
 (c) Reorganizations. In the event that the Company is a party to a merger or other reorganization, outstanding
Awards shall be subject to the agreement of merger or reorganization. Such agreement shall provide for: 
  

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 (i) The continuation of the outstanding Awards by the Company, if the Company is a
surviving corporation; 
  
 (ii) The assumption of
the outstanding Awards by the surviving corporation or its parent or subsidiary; 
  
 (iii) The substitution by the surviving corporation or its parent or subsidiary of its own awards for the outstanding Awards; 

 
 (iv) Full exercisability or vesting and accelerated
expiration of the outstanding Awards; or 
  
 (v)
Settlement of the full value of the outstanding Awards in cash or cash equivalents followed by cancellation of such Awards. 
  
 (d) Reservation of Rights. Except as provided in this Section 11, an Optionee or Offeree shall have no rights by reason of any subdivision
or consolidation of shares of stock of any class, the payment of any dividend or any other increase or decrease in the number of shares of stock of any class. Any issue by the Company of shares of stock of any class, or securities convertible into
shares of stock of any class, shall not affect, and no adjustment by reason thereof shall be made with respect to, the number or Exercise Price of Shares subject to an Option. The grant of an Option pursuant to the Plan shall not affect in any way
the right or power of the Company to make adjustments, reclassifications, reorganizations or changes of its capital or business structure, to merge or consolidate or to dissolve, liquidate, sell or transfer all or any part of its business or assets.

  
 SECTION 12. DEFERRAL OF AWARDS. 
  
 (a) Committee Powers. The Committee (in its sole discretion)
may permit or require a Participant to: 
  
 (i)
Have cash that otherwise would be paid to such Participant as a result of the exercise of a SAR or the settlement of Stock Units credited to a deferred compensation account established for such Participant by the Committee as an entry on the
Company’s books; 
  
 (ii) Have Shares that
otherwise would be delivered to such Participant as a result of the exercise of an Option or SAR converted into an equal number of Stock Units; or 
  
 (iii) Have Shares that otherwise would be delivered to such Participant as a result of the exercise of an Option or SAR or the settlement
of Stock Units converted into amounts credited to a deferred compensation account established for such Participant by the Committee as an entry on the Company’s books. Such amounts shall be determined by reference to the Fair Market Value of
such Shares as of the date when they otherwise would have been delivered to such Participant. 
  

 PORTALPLAYER, INC. 
 2004 STOCK INCENTIVE PLAN 
  
 -16- 

 (b) General Rules. A deferred compensation account established under this Section 12 may be
credited with interest or other forms of investment return, as determined by the Committee. A Participant for whom such an account is established shall have no rights other than those of a general creditor of the Company. Such an account shall
represent an unfunded and unsecured obligation of the Company and shall be subject to the terms and conditions of the applicable agreement between such Participant and the Company. If the deferral or conversion of Awards is permitted or required,
the Committee (in its sole discretion) may establish rules, procedures and forms pertaining to such Awards, including (without limitation) the settlement of deferred compensation accounts established under this Section 12. 
  
 SECTION 13. AWARDS UNDER OTHER PLANS. 
  
 The Company may grant awards under other plans or programs. Such awards may
be settled in the form of Shares issued under this Plan. Such Shares shall be treated for all purposes under the Plan like Shares issued in settlement of Stock Units and shall, when issued, reduce the number of Shares available under Section 5.

  
 SECTION 14. PAYMENT OF DIRECTOR’S FEES IN SECURITIES.

  
 (a) Effective Date. No provision of this
Section 14 shall be effective unless and until the Board has determined to implement such provision. 
  
 (b) Elections to Receive NSOs, Restricted Shares or Stock Units. An Outside Director may elect to receive his or her annual retainer
payments and/or meeting fees from the Company in the form of cash, NSOs, Restricted Shares or Stock Units, or a combination thereof, as determined by the Board. Such NSOs, Restricted Shares and Stock Units shall be issued under the Plan. An election
under this Section 14 shall be filed with the Company on the prescribed form. 
  
 (c) Number and Terms of NSOs, Restricted Shares or Stock Units. The number of NSOs, Restricted Shares or Stock Units to be granted to Outside Directors in lieu of annual retainers and meeting fees that
would otherwise be paid in cash shall be calculated in a manner determined by the Board. The terms of such NSOs, Restricted Shares or Stock Units shall also be determined by the Board. 
  
 SECTION 15. LEGAL AND REGULATORY REQUIREMENTS. 
  
 Shares shall not be issued under the Plan unless the issuance and delivery of such Shares complies with (or is exempt from)
all applicable requirements of law, including (without limitation) the Securities Act of 1933, as amended, the rules and regulations promulgated thereunder, state securities laws and regulations and the regulations of any stock exchange on which the
Company’s securities may then be listed, and the Company has obtained the approval or favorable ruling from any governmental agency which the Company determines is necessary or advisable. The Company shall not be liable to a Participant or
other persons as to: (a) the non-issuance or sale of Shares as to which the Company has been unable to obtain from any regulatory body having jurisdiction the authority deemed by the Company’s counsel to be 

  

 PORTALPLAYER, INC. 
 2004 STOCK INCENTIVE PLAN 
  
 -17- 

 
necessary to the lawful issuance and sale of any Shares under the Plan; and (b) any tax consequences expected, but not realized, by any Participant or other
person due to the receipt, exercise or settlement of any Award granted under the Plan. 
  
 SECTION 16. WITHHOLDING TAXES. 
  
 (a)
General. To the extent required by applicable federal, state, local or foreign law, a Participant or his or her successor shall make arrangements satisfactory to the Company for the satisfaction of any withholding tax obligations that
arise in connection with the Plan. The Company shall not be required to issue any Shares or make any cash payment under the Plan until such obligations are satisfied. 
  
 (b) Share Withholding. The Committee may permit a Participant to satisfy all or part of his or her withholding
or income tax obligations by having the Company withhold all or a portion of any Shares that otherwise would be issued to him or her or by surrendering all or a portion of any Shares that he or she previously acquired. Such Shares shall be valued at
their Fair Market Value on the date when taxes otherwise would be withheld in cash. In no event may a Participant have Shares withheld that would otherwise be issued to him or her in excess of the number necessary to satisfy the legally required
minimum tax withholding. 
  
 SECTION 17. OTHER PROVISIONS APPLICABLE TO
AWARDS. 
  
 (a) Transferability.
Unless the agreement evidencing an Award (or an amendment thereto authorized by the Committee) expressly provides otherwise, no Award granted under this Plan, nor any interest in such Award, may be sold, assigned, conveyed, gifted, pledged,
hypothecated or otherwise transferred in any manner (prior to the vesting and lapse of any and all restrictions applicable to Shares issued under such Award), other than by will or the laws of descent and distribution; provided, however, that an ISO
may be transferred or assigned only to the extent consistent with Section 422 of the Code. Any purported assignment, transfer or encumbrance in violation of this Section 17(a) shall be void and unenforceable against the Company. 
  
 (b) Qualifying Performance Criteria. The number of Shares or
other benefits granted, issued, retainable and/or vested under an Award may be made subject to the attainment of performance goals for a specified period of time relating to one or more of the following performance criteria, either individually,
alternatively or in any combination, applied to either the Company as a whole or to a business unit or Subsidiary, either individually, alternatively or in any combination, and measured either annually or cumulatively over a period of years, on an
absolute basis or relative to a pre-established target, to previous years’ results or to a designated comparison group or index, in each case as specified by the Committee in the Award: (a) cash flow, (b) earnings per share, (c) earnings before
interest, taxes and amortization, (d) return on equity, (e) total stockholder return, (f) share price performance, (g) return on capital, (h) return on assets or net assets, (i) revenue, (j) income or net income, (k) operating income or net
operating income, (l) operating profit or net operating profit, (m) operating margin or profit margin, (n) return on operating revenue, (o) return on invested capital, or (p) market segment 

  

 PORTALPLAYER, INC. 
 2004 STOCK INCENTIVE PLAN 
  
 -18- 

 
shares (“Qualifying Performance Criteria”). The Committee may appropriately adjust any evaluation of performance under a Qualifying Performance
Criteria to exclude any of the following events that occurs during a performance period: (i) asset write-downs, (ii) litigation or claim judgments or settlements, (iii) the effect of changes in tax law, accounting principles or other such laws or
provisions affecting reported results, (iv) accruals for reorganization and restructuring programs and (v) any extraordinary nonrecurring items as described in Accounting Principles Board Opinion No. 30 and/or in managements’ discussion and
analysis of financial condition and results of operations appearing in the Company’s annual report to stockholders for the applicable year. If applicable, the Committee shall determine the Qualifying Performance Criteria not later than the
90th day of the performance period, and shall determine and certify, for each Participant, the extent to which the
Qualifying Performance Criteria have been met. The Committee may not in any event increase the amount of compensation payable under the Plan upon the attainment of a Qualifying Performance Goal to a Participant who is a “covered employee”
within the meaning of Section 162(m) of the Code. 
  
 SECTION 18. NO EMPLOYMENT
RIGHTS. 
  
 No provision of the Plan, nor any right or
Option granted under the Plan, shall be construed to give any person any right to become, to be treated as, or to remain an Employee. The Company and its Subsidiaries reserve the right to terminate any person’s Service at any time and for any
reason, with or without notice. 
  
 SECTION 19. DURATION AND AMENDMENTS.

  
 (a) Term of the Plan. The Plan, as set
forth herein, shall terminate automatically on [                        ], 2014 and may be terminated on any earlier date
pursuant to Subsection (b) below. 
  
 (b) Right to Amend
or Terminate the Plan. The Board of Directors may amend the Plan at any time and from time to time. Rights and obligations under any Award granted before amendment of the Plan shall not be materially impaired by such amendment, except with
consent of the Participant. An amendment of the Plan shall be subject to the approval of the Company’s stockholders only to the extent required by applicable laws, regulations or rules. 
  
 (c) Effect of Termination. No Awards shall be granted under the
Plan after the termination thereof. The termination of the Plan shall not affect Awards previously granted under the Plan. 
  
 [Remainder of this page intentionally left blank] 
  

 PORTALPLAYER, INC. 
 2004 STOCK INCENTIVE PLAN 
  
 -19- 

 SECTION 20. EXECUTION. 
  
 To record the adoption of the Plan by the Board of Directors, the Company has caused its authorized officer to execute the
same. 
  

			
	PORTALPLAYER, INC.
		
	By	 	 
		
	Name	 	 
		
	Title	 	 

  

 PORTALPLAYER, INC. 
 2004 STOCK INCENTIVE PLAN 
  
 -20- 

 PORTALPLAYER, INC. 
  
 2004 STOCK INCENTIVE PLAN 
  
 NOTICE OF STOCK
OPTION GRANT 
  
 You have been
granted the following Option to purchase Common Stock of PORTALPLAYER, INC. (the “Company”) under the Company’s 2004 Stock Incentive Plan (the “Plan”): 
  

			
	 Name of Optionee:
	  	[Name of Optionee]
		
	 Total Number of Option Shares Granted:
	  	[Total Number of Shares]
		
	 Type of Option:
	  	 ̈ Incentive Stock Option
		
	 	  	 ̈ Nonstatutory Stock Option
		
	 Exercise Price Per Share:
	  	$                    
		
	 Grant Date:
	  	[Date of Grant]
		
	 Vesting Commencement Date:
	  	[Vesting Commencement Date]
		
	 Vesting Schedule:
	  	This Option becomes exercisable with respect to the first 1/4th of the shares subject to this Option when you complete 12 months of continuous “Service” (as defined in the Plan) from the Vesting Commencement Date. Thereafter, this Option becomes exercisable with respect to an
additional 1/48th of the shares subject to this Option when you complete each additional month of
Service.
		
	 Expiration Date:
	  	[Expiration Date] This Option expires earlier if your Service terminates earlier, as described in the Stock Option Agreement.

  

 PORTALPLAYER, INC. 
 NOTICE OF STOCK OPTION GRANT 
  
 -1- 

 By your signature and the signature of the Company’s representative below, you and the Company agree
that this Option is granted under and governed by the term and conditions of the Plan and the Stock Option Agreement, both of which are attached to and made a part of this document. 
  

									
	OPTIONEE:	 	 	 	PORTALPLAYER, INC.
				
	 	 	 	 	By:	 	 
	 Optionee’s Signature
	 	 	 	 	 	 
				
	 	 	 	 	Title:	 	 
	 Optionee’s Printed Name
	 	 	 	 	 	 

  

 PORTALPLAYER, INC. 
 NOTICE OF STOCK OPTION GRANT 
  
 -2- 

 PORTALPLAYER, INC. 
 2004 STOCK INCENTIVE PLAN 
  
 STOCK OPTION AGREEMENT 
  

			
		
	 Tax Treatment
	  	This Option is intended to be an incentive stock option under Section 422 of the Internal Revenue Code or a nonstatutory option, as provided in the Notice of Stock Option Grant. Even if this
Option is designated as an incentive stock option, it shall be deemed to be an nonstatutory option to the extent required by the $100,000 annual limitation under Section 422(d) of the Internal Revenue Code.
		
	 Vesting
	  	This Option becomes exercisable in installments, as shown in the Notice of Stock Option Grant. This Option will in no event become exercisable for additional shares after your Service has
terminated for any reason.
		
	 Term
	  	This Option expires in any event at the close of business at Company headquarters on the day before the 10th anniversary of the Grant Date, as shown on the Notice of Stock Option Grant (fifth
anniversary for a more than 10% stockholder as provided under the Plan if this is an incentive stock option). This Option may expire earlier if your Service terminates, as described below.
		
	 Regular
 Termination
	  	If your Service terminates for any reason except death or “Total and Permanent Disability” (as defined in the Plan), then this Option will expire at the close of business at Company
headquarters on the date three (3) months after the date your Service terminates (or, if earlier, the Expiration Date). The Company has discretion to determine when your Service terminates for all purposes of the Plan and its determinations are
conclusive and binding on all persons.
		
	 Death
	  	If you die, then this Option will expire at the close of business at Company headquarters on the date 12 months after the date your Service terminates (or, if earlier, the Expiration Date).
During that period of up to 12 months, your estate or heirs may exercise the Option.
		
	 Disability
	  	If your Service terminates because of your Total and Permanent Disability, then this Option will expire at the close of business at Company headquarters on the date 12 months after the date
your Service terminates (or, if earlier, the Expiration Date).

  

 PORTALPLAYER, INC. 
 STOCK OPTION AGREEMENT 
  
 -3- 

			
		
	 Leaves of Absence
	  	 For purposes of this Option, your Service does not terminate when you go on a military leave, a sick leave or another bona fide leave of
absence, if the leave was approved by the Company in writing and if continued crediting of Service is required by the terms of the leave or by applicable law. But your Service terminates when the approved leave ends, unless you immediately return to
active work.
  
 If you go on a leave of absence, then the vesting schedule
specified in the Notice of Stock Option Grant may be adjusted in accordance with the Company’s leave of absence policy or the terms of your leave. If you commence working on a part-time basis, then the vesting schedule specified in the Notice
of Stock Option Grant may be adjusted in accordance with the Company’s part-time work policy or the terms of an agreement between you and the Company pertaining to your part-time schedule.

		
	 Restrictions on
 Exercise
	  	The Company will not permit you to exercise this Option if the issuance of shares at that time would violate any law or regulation. The inability of the Company to obtain approval from any
regulatory body having authority deemed by the Company to be necessary to the lawful issuance and sale of the Company stock pursuant to this Option shall relieve the Company of any liability with respect to the non-issuance or sale of the Company
stock as to which such approval shall not have been obtained. However, the Company shall use its best efforts to obtain such approval.
		
	 Notice of Exercise
	  	When you wish to exercise this Option you must notify the Company by completing the attached “Notice of Exercise of Stock Option” form and filing it with the Human Resources
Department of the Company. You notice must specify how many shares you wish to purchase. Your notice must also specify how your shares should be registered. The notice will be effective when it is received by the Company. If someone else wants to
exercise this Option after your death, that person must prove to the Company’s satisfaction that he or she is entitled to do so.
		
	 Form of Payment
	  	When you submit your notice of exercise, you must include payment of the Option exercise price for the shares you are purchasing. Payment may be made in the following
form(s):
		
	 	  	 •      Your personal check, a cashier’s check or a money order.

  

 PORTALPLAYER, INC. 
 STOCK OPTION AGREEMENT 
  
 -4- 

			
		
	 	  	 •      Certificates for shares of Company stock that you own, along with any forms needed to effect a
transfer of those shares to the Company. The value of the shares, determined as of the effective date of the Option exercise, will be applied to the Option exercise price. Instead of surrendering shares of Company stock, you may attest to the
ownership of those shares on a form provided by the Company and have the same number of shares subtracted from the Option shares issued to you. However, you may not surrender, or attest to the ownership of shares of Company stock in payment of the
exercise price if your action would cause the Company to recognize a compensation expense (or additional compensation expense) with respect to this Option for financial reporting purposes.

		
	 	  	 •      By delivering on a form approved by the Committee of an irrevocable direction to a securities
broker approved by the Company to sell all or part of your Option shares and to deliver to the Company from the sale proceeds in an amount sufficient to pay the Option exercise price and any withholding taxes. The balance of the sale proceeds, if
any, will be delivered to you. The directions must be given by signing a special “Notice of Exercise” form provided by the Company.

		
	 	  	 •      Irrevocable directions to a securities broker or lender approved by the Company to pledge Option
shares as security for a loan and to deliver to the Company from the loan proceeds an amount sufficient to pay the Option exercise price and any withholding taxes. The directions must be given by signing a special “Notice of Exercise” form
provided by the Company.

		
	 	  	Notwithstanding the foregoing, payment may not be made in any form that is unlawful, as determined by the Company in its sole discretion.
		
	 Withholding Taxes
 and Stock
 Withholding
	  	You will not be allowed to exercise this Option unless you make arrangements acceptable to the Company to pay any withholding taxes that may be due as a result of the Option exercise. These
arrangements may include withholding shares of Company stock that otherwise would be issued to you when you exercise this Option. The value of these shares, determined as of the effective date of the Option exercise, will be applied to the
withholding taxes.

  

 PORTALPLAYER, INC. 
 STOCK OPTION AGREEMENT 
  
 -5- 

			
	 Restrictions on
 Resale
	  	By signing this Agreement, you agree not to sell any Option shares at a time when applicable laws, Company policies or an agreement between the Company and its underwriters prohibit a sale
(e.g., a lock-up period after the Company goes public). This restriction will apply as long as you are an employee, consultant or director of the Company or a subsidiary of the Company.
		
	 Transfer of Option
	  	 In general, only you can exercise this Option prior to your death. You cannot transfer or assign this Option, other than as designated by you by
will or by the laws of descent and distribution, except as provided below. For instance, you may not sell this Option or use it as security for a loan. If you attempt to do any of these things, this Option will immediately become invalid. You may in
any event dispose of this Option in your will. Regardless of any marital property settlement agreement, the Company is not obligated to honor a notice of exercise from your former spouse, nor is the Company obligated to recognize your former
spouse’s interest in your Option in any other way.
  
 However, if this Option
is designated as a nonstatutory stock option in the Notice of Stock Option Grant, then the “Committee” (as defined in the Plan) may, in its sole discretion, allow you to transfer this Option as a gift to one or more family members. For
purposes of this Agreement, “family member” means a child, stepchild, grandchild, parent, stepparent, grandparent, spouse, former spouse, sibling, niece, nephew, mother-in-law, father-in-law or sister-in-law (including adoptive
relationships), any individual sharing your household (other than a tenant or employee), a trust in which one or more of these individuals have more than 50% of the beneficial interest, a foundation in which you or one or more of these persons
control the management of assets, and any entity in which you or one or more of these persons own more than 50% of the voting interest.
  
 In addition, if this Option is designated as a nonstatutory stock option in the Notice of Stock Option Grant, then the Committee may, in its sole discretion, allow you to
transfer this option to your spouse or former spouse pursuant to a domestic relations order in settlement of marital property rights.
  
 The Committee will allow you to transfer this Option only if both you and the transferee(s) execute the forms prescribed by the Committee, which include the consent of
the transferee(s) to be bound by this Agreement.

  

 PORTALPLAYER, INC. 
 STOCK OPTION AGREEMENT 
  
 -6- 

			
	 Retention Rights
	  	Neither your Option nor this Agreement gives you the right to be retained by the Company or a subsidiary of the Company in any capacity. The Company and its subsidiaries reserve the right to
terminate your Service at any time, with or without cause.
		
	 Stockholder
 Rights
	  	You, or your estate or heirs, have no rights as a stockholder of the Company until you have exercised this Option by giving the required notice to the Company and paying the exercise price.
No adjustments are made for dividends or other rights if the applicable record date occurs before you exercise this Option, except as described in the Plan.
		
	 Adjustments
	  	In the event of a stock split, a stock dividend or a similar change in Company stock, the number of shares covered by this Option and the exercise price per share may be adjusted pursuant to
the Plan.
		
	 Applicable Law
	  	This Agreement will be interpreted and enforced under the laws of the State of Delaware (without regard to their choice-of-law provisions).
		
	 The Plan and
 Other Agreements
	  	The text of the Plan is incorporated in this Agreement by reference. All capitalized terms in the Stock Option Agreement shall have the meanings assigned to them in the Plan. This Agreement
and the Plan constitute the entire understanding between you and the Company regarding this Option. Any prior agreements, commitments or negotiations concerning this Option are superseded. This Agreement may be amended only by another written
agreement, signed by both parties.

  
 BY SIGNING THE COVER
SHEET OF THIS AGREEMENT, 
 YOU AGREE TO ALL OF THE TERMS AND CONDITIONS 
 DESCRIBED ABOVE AND IN THE PLAN. 
  

 PORTALPLAYER, INC. 
 STOCK OPTION AGREEMENT 
  
 -7- 

 PORTALPLAYER, INC. 
 2004 STOCK INCENTIVE PLAN 
  
 NOTICE OF EXERCISE OF STOCK OPTION 
  
 You
must sign this Notice on the last page before submitting 
 it to the Company 
  

			
	OPTIONEE INFORMATION:	 	 
		
	 Name:        __________________________________________
	 	 Social Security Number:

		
	 	 	 
		
	 Address:   __________________________________________
	 	 Employee Number:

		
	 	 	 

  

			
	OPTION INFORMATION:	  	 
	 Date of Grant:     ______________________, 200_
	  	Type of Stock Option:
	 Exercise Price per Share:
$                                
	  	 ̈ Nonstatutory (NSO)
	 Total number of shares of Common Stock of PORTALPLAYER, INC. (the “Company”) covered
by
 option:    _________________________________
	  	 ̈ Incentive (ISO)

  
 EXERCISE INFORMATION:

  
 Number of shares of Common Stock of the Company for which option is being
exercised now:                                     . (These
shares are referred to below as the “Purchased Shares.”) 
  
 Total
exercise price for the Purchased Shares: $                             
  
 Form of payment enclosed [check all that apply]:

  

	 ̈	Check for $                    , payable to
“PORTALPLAYER, INC.” 

	 ̈	Certificate(s) for ______________ shares of Common Stock of the Company that I have owned for at least six months or have purchased in the open market. (These shares will be valued
as of the date when the Company receives this notice.) 

	 ̈	Attestation Form covering                      shares of Common Stock of
the Company. (These shares will be valued as of the date when the Company receives this notice.) 

  

 -1- 

 Name(s) in which the Purchased Shares should be registered  
 [please check one box]: 
  

			
	  ̈        In my name only
	  	 
	  ̈        In the names of my spouse and myself as community property
	  	My spouse’s name (if applicable):
		
	 	  	 
	  ̈        In the names of my spouse and myself as joint tenants with the right of survivorship
	  	 
		
	  ̈        In the name of an eligible revocable trust
	  	Full legal name of revocable trust:
	 	  	 
	 	  	 
	 	  	 
		
	The certificate for the Purchased Shares should be sent to the	  	 
	following address:	  	 
	 	  	 
	 	  	 
	 	  	 
	 	  	 
	 	  	 
	 	  	 

  
 ACKNOWLEDGMENTS: 
  

	1.	I understand that all sales of Purchased Shares are subject to compliance with the Company’s policy on securities trades. 

  

	2.	I hereby acknowledge that I received and read a copy of the prospectus describing the Company’s 2004 Stock Incentive Plan and the tax consequences of an exercise.

  

	3.	In the case of a nonstatutory option, I understand that I must recognize ordinary income equal to the spread between the fair market value of the Purchased Shares on the date of
exercise and the exercise price. I further understand that I am required to pay withholding taxes at the time of exercising a nonstatutory option. 

  

	4.	In the case of an incentive stock option, I agree to notify the Company if I dispose of the Purchased Shares before I have met both of the tax holding periods applicable to
incentive stock options (that is, if I make a disqualifying disposition). 

  

	5.	 I acknowledge that the Company has encouraged me to consult my own adviser to determine the form of ownership that is appropriate for me. In the event that I choose
to 

  

 -2- 

	 	 
transfer my Purchased Shares to a trust that does not satisfy the requirements of the Internal Revenue Service (i.e., a trust that is not an eligible
revocable trust), I also acknowledge that the transfer will be treated as a “disposition” for tax purposes. As a result, the favorable ISO tax treatment will be unavailable and other unfavorable tax consequences may occur.

  
 SIGNATURE AND DATE: 
  
 _______________________________________________    ______________     , 200   
  

 -3-

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