**Exhibit10.2**

 

**ZORAN CORPORATION**

 

**1995 OUTSIDE DIRECTORS STOCK OPTIONPLAN**

 

**(As Amended Through April 21, 2002)**

 

1.                                        **Establishment, Purpose and Term of Plan.**

 

1.1           ***Establishment.***  The Zoran Corporation 1995 Outside DirectorsStock Option Plan (the “**Plan**”) is hereby established effective asof the effective date of the initial registration by the Company of its Stockunder Section 12 of the Exchange Act (the “**Effective Date**”).

 

1.2           ***Purpose.***  The purpose of the Plan is to advance theinterests of the Participating Company Group and its stockholders by providingan incentive to attract and retain highly qualified persons to serve as OutsideDirectors of the Company and by creating additional incentive for OutsideDirectors to promote the growth and profitability of the Participating CompanyGroup.

 

1.3           ***Term of Plan.***  The Plan shall continue in effect until theearlier of its termination by the Board or the date on which all of the sharesof Stock available for issuance under the Plan have been issued and all restrictionson such shares under the terms of the Plan and the agreements evidencingOptions granted under the Plan have lapsed. However, all Options shall be granted, if at all, within ten (10) yearsfrom the Effective Date.

 

2.             **Definitionsand Construction**.

 

2.1           ***Definitions.***  Whenever used herein, the following termsshall 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 administerthe Plan, “Board” also means such Committee(s).

 

(b)           “**Code**”means the Internal Revenue Code of 1986, as amended, and any applicableregulations promulgated thereunder.

 

(c)           “**Committee**”means a committee of the Board duly appointed to administer the Plan and havingsuch powers as shall be specified by the Board.  Unless the powers of the Committee have been specificallylimited, the Committee shall have all of the powers of the Board grantedherein, including, without limitation, the power to amend or terminate the Planat any time, subject to the terms of the Plan and any applicable limitationsimposed by law.

 

(d)           “**Company**”means Zoran Corporation, a Delaware corporation, or any successor corporationthereto.

 

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(e)           “**Consultant**”means any person, including an advisor, engaged by a Participating Company torender services other than as an Employee or a Director.

 

(f)            “**Director**”means a member of the Board or the board of directors of any otherParticipating Company.

 

(g)           “**Employee**”means any person treated as an employee (including an officer or a Director whois also treated as an employee) in the records of a Participating Company;provided, however, that neither service as a Director nor payment of adirector’s fee shall be sufficient to constitute employment for purposes of thePlan.

 

(h)           “**Exchange Act**”means the Securities Exchange Act of 1934, as amended.

 

(i)            “**Fair MarketValue**” means, as of any date, if there is then a public market forthe Stock, the closing price of the Stock (or the mean of the closing bid andasked prices of the Stock if the Stock is so reported instead) as reported onthe National Association of Securities Dealers Automated Quotation (“**NASDAQ**”)System, the NASDAQ National Market System or such other national or regionalsecurities exchange or market system constituting the primary market for theStock.  If the relevant date does notfall on a day on which the Stock is trading on NASDAQ, the NASDAQ NationalMarket System or other national or regional securities exchange or marketsystem, the date on which the Fair Market Value shall be established shall bethe last day on which the Stock was so traded prior to the relevant date.  If there is then no public market for theStock, the Fair Market Value on any relevant date shall be as determined by theBoard without regard to any restriction other than a restriction which, by itsterms, will never lapse.

 

(j)            “**Option**”means a right to purchase Stock (subject to adjustment as provided inSection 4.2) pursuant to the terms and conditions of the Plan.

 

(k)           “**Optionee**”means a person who has been granted one or more Options.

 

(l)            “**OptionAgreement**” means a written agreement between the Company and anOptionee setting forth the terms, conditions and restrictions of the Optiongranted to the Optionee.

 

(m)          “**OutsideDirector**” means a Director of the Company who is not an Employee.

 

(n)           “**ParentCorporation**” means any present or future “parent corporation” of theCompany, as defined in Section 424(e) of the Code.

 

(o)           “**ParticipatingCompany**” means the Company or any Parent Corporation or SubsidiaryCorporation.

 

(p)           “**ParticipatingCompany Group**” means, at any point in time, all corporationscollectively which are then Participating Companies.

 

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(q)           “**Rule 16b-3**”means Rule 16b–3 as promulgated under the Exchange Act, as amendedfrom time to time, or any successor rule or regulation.

 

(r)            “**Service**”means the Optionee’s service with the Participating Company Group, whether inthe capacity of an Employee, a Director or a Consultant.  The Optionee’s Service shall not be deemedto have terminated merely because of a change in the capacity in which theOptionee renders Service to the Participating Company Group or a change in theParticipating Company for which the Optionee renders such Service, providedthat there is no interruption or termination of the Optionee’s Service.  The Optionee’s Service shall be deemed tohave terminated either upon an actual termination of Service or upon thecorporation for which the Optionee performs Service ceasing to be aParticipating Company.

 

(s)           “**Stock**”means the common stock, par value $0.001, of the Company, as adjusted from timeto time in accordance with Section 4.2.

 

(t)            “**SubsidiaryCorporation**” means any present or future “subsidiary corporation” ofthe Company, as defined in Section 424(f) of the Code.

 

2.2           ***Construction.***  Captions and titles contained herein are forconvenience only and shall not affect the meaning or interpretation of anyprovision of the Plan.  Except whenotherwise indicated by the context, the singular shall include the plural, theplural shall include the singular, and use of the term “or” shall include theconjunctive as well as the disjunctive.

 

3.             **Administration.**

 

3.1           ***Administration by the Board.***  The Plan shall be administered by the Board,including any duly appointed Committee of the Board.  All questions of interpretation of the Plan or of any Optionshall be determined by the Board, and such determinations shall be final andbinding upon all persons having an interest in the Plan or such Option.  Any officer of a Participating Company shallhave the authority to act on behalf of the Company with respect to any matter,right, obligation, determination or election which is the responsibility of orwhich is allocated to the Company herein, provided the officer has apparentauthority with respect to such matter, right, obligation, determination orelection.

 

3.2           ***Limitations on Authority of theBoard.***  Notwithstandingany other provision herein to the contrary, the Board shall have no authority,discretion, or power to select the Outside Directors who will receive Options,to set the exercise price of the Options, to determine the number of shares ofStock to be subject to an Option or the time at which an Option shall begranted, to establish the duration of an Option, or to alter any other terms orconditions specified in the Plan, except in the sense of administering the Plansubject to the provisions of the Plan.

 

4.             **Shares Subject to Plan.**

 

4.1           ***Maximum Number of Shares Issuable.***  Subject to adjustment as provided inSection 4.2, the maximum aggregate number of shares of Stock that may beissued under the Plan shall be three hundred fifty thousand (350,000) and shallconsist of authorized but unissued shares or reacquired shares of Stock or anycombination thereof.  If an outstanding

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Option for any reason expires or is terminated or canceled or shares ofStock acquired, subject to repurchase, upon the exercise of an Option arerepurchased by the Company, the shares of Stock allocable to the unexercisedportion of such Option, or such repurchased shares of Stock, shall again beavailable for issuance under the Plan.

 

4.2           ***Adjustments for Changes in CapitalStructure.***  In the eventof any stock dividend, stock split, reverse stock split, recapitalization,combination, reclassification or similar change in the capital structure of theCompany, appropriate adjustments shall be made in the number and class ofshares subject to the Plan, to the “Initial Option” and “Annual Option” (asdefined in Section 6.1), and to any outstanding Options, and in theexercise price of any outstanding Options. If a majority of the shares which are of the same class as the sharesthat are subject to outstanding Options are exchanged for, converted into, orotherwise become (whether or not pursuant to an Ownership Change Event asdefined in Section 8.1) shares of another corporation (the “**New Shares**”),the Board may unilaterally amend the outstanding Options to provide that suchOptions are exercisable for New Shares. In the event of any such amendment, the number of shares subject to, andthe exercise price of, the outstanding Options shall be adjusted in a fair andequitable manner as determined by the Board, in its sole discretion.  Notwithstanding the foregoing, anyfractional share resulting from an adjustment pursuant to this Section 4.2shall be rounded down to the nearest whole number, and in no event may theexercise price of any Option be decreased to an amount less than the par value,if any, of the stock subject to the Option.

 

5.             Eligibilityand Type of Options.

 

5.1           ***Persons Eligible for Options.***  An Option shall be granted only to a personwho, at the time of grant, is an Outside Director.

 

5.2           ***Options Authorized.***  Options shall be nonstatutory stock options;that is, options which are not treated as incentive stock options within themeaning of Section 422(b) of the Code.

 

6.             **Terms andConditions of Options.** Options shall be evidenced by Option Agreements specifying the number ofshares of Stock covered thereby, in such form as the Board shall from time totime establish.  Option Agreements mayincorporate all or any of the terms of the Plan by reference and shall complywith and be subject to the following terms and conditions:

 

6.1           ***Automatic Grant of Options***.  Subject to execution by an Outside Directorof the appropriate Option Agreement, Options shall be granted automatically andwithout further action of the Board, as follows:

 

(a)           **InitialOption.**  Each person who is(i) an Outside Director on the Effective Date, or (ii) first elected orappointed as an Outside Director after the Effective Date shall be granted anOption to purchase twenty thousand (20,000) shares of Stock on the EffectiveDate or the date of such initial election or appointment, respectively (an “**InitialOption**”).  Notwithstandinganything herein to the contrary, a Director of the Company who previously did

 

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not qualify as an Outside Director shall not receive an Initial Optionin the event that such Director subsequently becomes an Outside Director.

 

(b)           **AnnualOption.**  Each OutsideDirector (including any Director of the Company who previously did not qualifyas an Outside Director but who subsequently becomes an Outside Director) shallbe granted, on the date immediately following the date of each annual meetingof the stockholders of the Company (an “**Annual Meeting**”) following which suchperson remains an Outside Director, an Option to purchase ten thousand (10,000)shares of Stock (an “**Annual Option**”).  Notwithstanding the foregoing, an Outside Director who has notserved continuously as a Director of the Company for at least six (6) months asof the date immediately following such Annual Meeting shall not receive anAnnual Option on such date.

 

(c)           **Right toDecline Option.** Notwithstanding the foregoing, any person may elect not to receive anOption by delivering written notice of such election to the Board no later thanthe day prior to the date such Option would otherwise be granted.  A person so declining an Option shallreceive no payment or other consideration in lieu of such declined Option.  A person who has declined an Option mayrevoke such election by delivering written notice of such revocation to theBoard no later than the day prior to the date such Option would be grantedpursuant to Section 6.1(a) or (b), as the case may be.

 

6.2           ***Exercise Price.***  The exercise price per share of Stocksubject to an Option shall be the Fair Market Value of a share of Stock on thedate the Option is granted.

 

6.3           ***Exercise Period***.  Each Option shall terminate and cease to beexercisable on the date ten (10) years after the date of grant of the Optionunless earlier terminated pursuant to the terms of the Plan or the OptionAgreement.

 

6.4           ***Right to Exercise Options***.

 

(a)           **InitialOption.**  Except as otherwiseprovided in the Plan or in the Option Agreement, an Initial Option shall (i)first become exercisable on the date which is one (1) year after the date onwhich the Initial Option was granted (the “**Initial Option Vesting Date**”); and (ii) beexercisable on and after the Initial Option Vesting Date and prior to thetermination thereof in an amount equal to the number of shares of Stockinitially subject to the Initial Option multiplied by the Vested Ratio as setforth below, less the number of shares previously acquired upon exercisethereof.  The Vested Ratio described inthe preceding sentence shall be determined as follows:

 

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|                                                                                                                                                                    |   | **Vested Ratio** |   |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|------------------|--------|
|                                                                                                                                                                    |   |             |   |
| Prior to Initial  Option Vesting Date                                                                                                                                   |   | 0                |   |
|                                                                                                                                                                    |   |             |   |
| On Initial  Option Vesting Date, provided the Optionee’s Service is continuous from the  date of grant of the Initial Option until the Initial Option Vesting Date |   | 1/4              |   |
|                                                                                                                                                                    |   |             |   |
| Plus                                                                                                                                                                    |   |             |   |
|                                                                                                                                                                    |   |             |   |
| For each full  year of of the Optionee’s continuous Service from the Initial Option Vesting  Date until the Vested Ratio equals 1/1, an additional                 |   | 1/4              |   |

 

(b)           **AnnualOption.**  Except as otherwiseprovided in the Plan or in the Option Agreement, an Annual Option shall firstbecome exercisable on the date which is one (1) year after the date on whichthe Annual Option was granted (the “**Annual Option Vesting Date**”), provided theOptionee’s Service is continuous from the date of grant of the Annual Optionuntil the    Annual Option VestingDate.  The Annual Option shall beexercisable on and after the Annual Option Vesting Date and prior to thetermination thereof in an amount equal to the number of shares of Stockinitially subject to the Annual Option, less the number of shares previouslyacquired upon exercise thereof.

 

6.5           ***Payment of Exercise Price.***

 

(a)           **Forms ofConsideration Authorized.** Except as otherwise provided below, payment of the exercise price forthe number of shares of Stock being purchased pursuant to any Option shall bemade (i) in cash, by check, or cash equivalent, (ii) by tender to theCompany of shares of Stock owned by the Optionee having a Fair Market Value notless than the exercise price, (iii) by the assignment of the proceeds of asale or loan with respect to some or all of the shares being acquired upon theexercise of the Option (including, without limitation, through an exercisecomplying with the provisions of Regulation T as promulgated from time totime by the Board of Governors of the Federal Reserve System) (a “**CashlessExercise**”), or (iv) by any combination thereof.

 

(b)           **Tender ofStock.**  Notwithstanding theforegoing, an Option may not be exercised by tender to the Company of shares ofStock to the extent such tender of Stock would constitute a violation of theprovisions of any law, regulation or agreement restricting the redemption ofthe Company’s stock.  Unless otherwiseprovided by the Board, an Option may not be exercised by tender to the Companyof shares of Stock unless such shares either have been owned by the Optioneefor more than six (6) months or were not acquired, directly or indirectly, fromthe Company.

 

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(c)           **CashlessExercise.**  The Companyreserves, at any and all times, the right, in the Company’s sole and absolutediscretion, to establish, decline to approve or terminate any program orprocedures for the exercise of Options by means of a Cashless Exercise.

 

6.6           ***Tax Withholding.***  The Company shall have the right, but notthe obligation, to deduct from the shares of Stock issuable upon the exerciseof an Option, or to accept from the Optionee the tender of, a number of wholeshares of Stock having a Fair Market Value equal to all or any part of thefederal, state, local and foreign taxes, if any, required by law to be withheldby the Participating Company Group with respect to such Option or the sharesacquired upon exercise thereof.  Alternativelyor in addition, in its sole discretion, the Company shall have the right torequire the Optionee to make adequate provision for any such tax withholdingobligations of the Participating Company Group arising in connection with theOption or the shares acquired upon exercise thereof.  The Company shall have no obligation to deliver shares of Stockuntil the Participating Company Group’s tax withholding obligations have beensatisfied.

 

7.             **StandardForm of Option Agreement.**

 

7.1           ***Initial Option.***  Unless otherwise provided for by the Boardat the time an Initial Option is granted, each Initial Option shall comply withand be subject to the terms and conditions set forth in the form ofNonstatutory Stock Option Agreement for Outside Directors (Initial Option)adopted by the Board concurrently with its adoption of the Plan and as amendedfrom time to time.

 

7.2           ***Annual Option.***  Unless otherwise provided for by the Boardat the time an Annual Option is granted, each Annual Option shall comply withand be subject to the terms and conditions set forth in the form ofNonstatutory Stock Option Agreement for Outside Directors (Annual Option)adopted by the Board concurrently with its adoption of the Plan and as amendedfrom time to time.

 

7.3           ***Authority to Vary Terms.***  Subject to the limitations set forth inSection 3.2, the Board shall have the authority from time to time to varythe terms of any of the standard forms of Option Agreement described in thisSection 7 either in connection with the grant or amendment of anindividual Option or in connection with the authorization of a new standardform or forms; provided, however, that the terms and conditions of any suchnew, revised or amended standard form or forms of Option Agreement are notinconsistent with the terms of the Plan. Such authority shall include, but not by way of limitation, theauthority to grant Options which are immediately exercisable subject to theCompany’s right to repurchase any unvested shares of Stock acquired by theOptionee upon the exercise of an Option in the event such Optionee’s Service isterminated for any reason.  In no event,however, shall the Board be permitted to vary the terms of any standard form ofOption Agreement if such change would cause the Plan to cease to qualify as a formulaplan pursuant to Rule 16b-3 at any such time as any class of equity security ofthe Company is registered pursuant to Section 12 of the Exchange Act.

 

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8.             **Transferof Control.**

 

8.1           ***Definitions***.

 

(a)           An“**OwnershipChange Event**” shall be deemed to have occurred if any of thefollowing occurs with respect to the Company:

 

(i)            thedirect or indirect sale or exchange in a single or series of relatedtransactions by the stockholders of the Company of more than fifty percent(50%) of the voting stock of the Company;

 

(ii)           amerger or consolidation in which the Company is a party;

 

(iii)          the sale, exchange, or transfer of all orsubstantially all of the assets of the Company; or

 

(iv)          aliquidation or dissolution of the Company.

 

(b)           A“**Transferof Control**” shall mean an Ownership Change Event or a series ofrelated Ownership Change Events (collectively, the “**Transaction**”) wherein thestockholders of the Company immediately before the Transaction do not retainimmediately after the Transaction, in substantially the same proportions astheir ownership of shares of the Company’s voting stock immediately before theTransaction, direct or indirect beneficial ownership of more than fifty percent(50%) of the total combined voting power of the outstanding voting stock of theCompany or the corporation or corporations to which the assets of the Companywere transferred (the “**Transferee Corporation(s)**”), as the casemay be.  For purposes of the precedingsentence, indirect beneficial ownership shall include, without limitation, aninterest resulting from ownership of the voting stock of one or morecorporations which, as a result of the Transaction, own the Company or theTransferee Corporation(s), as the case may be, either directly or through oneor more subsidiary corporations.  TheBoard shall have the right to determine whether multiple sales or exchanges ofthe voting stock of the Company or multiple Ownership Change Events arerelated, and its determination shall be final, binding and conclusive.

 

8.2           ***Effect of Transfer of Control onOptions.***  In the event ofa Transfer of Control, the surviving, continuing, successor, or purchasingcorporation or parent corporation thereof, as the case may be (the “**AcquiringCorporation**”), may either assume the Company’s rights andobligations under outstanding Options or substitute for outstanding Optionssubstantially equivalent options for the Acquiring Corporation’s stock.  In the event the Acquiring Corporationelects not to assume or substitute for outstanding Options in connection with aTransfer of Control, any unexercisable or unvested portion of the outstandingOptions shall be immediately exercisable and vested in full as of the date ten(10) days prior to the date of the Transfer of Control.  The exercise or vesting of any Option thatwas permissible solely by reason of this Section 8.2 shall be conditionedupon the consummation of the Transfer of Control.  Any Options which are neither assumed or substituted for by the AcquiringCorporation in connection with the Transfer of Control nor exercised as of thedate of the Transfer of Control shall terminate and cease to be outstandingeffective as of the date of the Transfer of Control.  Notwithstanding the foregoing, shares acquired upon exercise ofan Option

 

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prior to the Transfer of Control and any consideration receivedpursuant to the Transfer of Control with respect to such shares shall continueto be subject to all applicable provisions of the Option Agreement evidencingsuch Option except as otherwise provided in such Option Agreement.  Furthermore, notwithstanding the foregoing,if the corporation the stock of which is subject to the outstanding Optionsimmediately prior to an Ownership Change Event described inSection 8.1(a)(i) constituting a Transfer of Control is the surviving orcontinuing corporation and immediately after such Ownership Change Event lessthan fifty percent (50%) of the total combined voting power of its voting stockis held by another corporation or by other corporations that are members of anaffiliated group within the meaning of Section 1504(a) of the Code withoutregard to the provisions of Section 1504(b) of the Code, the outstandingOptions shall not terminate.

 

9.             **Nontransferabilityof Options.**  During thelifetime of the Optionee, an Option shall be exercisable only by the Optioneeor 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.

 

10.           **Indemnification.**  In addition to such other rights ofindemnification as they may have as members of the Board or officers oremployees of the Participating Company Group, members of the Board and anyofficers or employees of the Participating Company Group to whom authority toact for the Board is delegated shall be indemnified by the Company against allreasonable expenses, including attorneys’ fees, actually and necessarilyincurred in connection with the defense of any action, suit or proceeding, orin connection with any appeal therein, to which they or any of them may be aparty by reason of any action taken or failure to act under or in connectionwith the Plan, or any right granted hereunder, and against all amounts paid bythem in settlement thereof (provided such settlement is approved by independentlegal counsel selected by the Company) or paid by them in satisfaction of ajudgment in any such action, suit or proceeding, except in relation to mattersas to which it shall be adjudged in such action, suit or proceeding that suchperson is liable for gross negligence, bad faith or intentional misconduct induties; provided, however, that within sixty (60) days after the institution ofsuch action, suit or proceeding, such person shall offer to the Company, inwriting, the opportunity at its own expense to handle and defend the same.

 

11.           **Terminationor Amendment of Plan.** The Board may terminate or amend the Plan at any time.  However, subject to changes in the law orother legal requirements that would permit otherwise, without the approval ofthe Company’s stockholders, there shall be (a) no increase in the totalnumber of shares of Stock that may be issued under the Plan (except byoperation of the provisions of Section 4.2), and (b) no expansion inthe class of persons eligible to receive Options.  Furthermore, to the extent required by Rule 16b-3, provisions ofthe Plan addressing eligibility to participate in the Plan and the amount,price and timing of Options shall not be amended more than once every six (6)months, other than to comport with changes in the Code, the Employee RetirementIncome Security Act of 1974, as amended, or the rules thereunder.  In any event, no termination or amendment ofthe Plan may adversely affect any then outstanding Option, or any unexercisedportion thereof, without the consent of the Optionee, unless such terminationor amendment is necessary to comply with any applicable law or government regulation.

 

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IN WITNESS WHEREOF, the undersigned Secretary of theCompany certifies that the foregoing sets forth the Zoran Corporation 1995Outside Directors Stock Option Plan was duly adopted and amended by the Boardthrough April 21, 2002.

 

 
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|--------|--------|-----------|
|   |   | Secretary |

 

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