# **Exhibit 10.46**

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**OAK TECHNOLOGY, INC.**

 

**OUTSIDE DIRECTORNON-QUALIFIED STOCK OPTION AGREEMENT**

 

 

 

**                THISOUTSIDE DIRECTOR STOCK OPTION AGREEMENT** (this **“Agreement”**)by and between Oak Technology, Inc., a Delaware corporation (the **“Company”**),and                  (the **“Director”**), is made as of                (such date being sometimesreferred to herein as the **“Date of Grant”**).

 

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

 

                **A**.                  The Company has adopted andimplemented its 1994 Stock Option Plan (the **“Plan”**) pursuant towhich stock options are granted to non-employee directors of the Company, whichare intended to be non-qualified stock options (that is, options not intendedto be incentive stock options within the meaning of Section 422 of theInternal Revenue Code of 1986, as amended (the **“Code”**)), to purchaseshares of the authorized but unissued Common Stock or treasury shares of theCompany, $0.001 par value (**“Common Stock”**).

 

                **B.**                  Pursuant to the Plan, anon-qualified stock option has been granted to the Director.  Unless otherwise defined in this Agreementor the context otherwise requires, all capitalized terms used in this Agreementshall have the respective meanings assigned to those terms in the Plan.

 

**A G R E E M E N T**

 

**                NOW,THEREFORE**, in reliance on the foregoing Recitals and in considerationof the mutual covenants hereinafter set forth, the parties hereby agree asfollows:

 

                **1****.                   Grant of Stock Option**.  The Company hereby grants to the Director anon-transferable and non-assignable option to purchase an aggregateof up to               shares of the Company’s Common Stock atthe exercise price of $**             **per share, the FairMarket Value of the Common Stock as of the Date of Grant, upon the terms andconditions set forth herein (such purchase right being sometimes referred to hereinas “the Option” or “this Option”).

 

**                2.                   Term and Type of Option**.  Unless earlier terminated in accordance withSection 4 or 5.2 hereof, this Option and all rights of the Director topurchase Common Stock hereunder shall expire with respect to all of the sharesthen subject to this Agreement at 5:00 p.m. Pacific time on **                **. This Option is a non-qualified stock option in that it is notintended to qualify as an incentive stock option within the meaning ofSection 422 of the Code.  Accordingly,the Director understands that under current law he or she will recognizeordinary income for federal income tax purposes in connection with exercise ofthis Option in an amount equal to the excess (if any) of the Fair Market Valueof the shares of Common Stock so purchased (determined as of the date of suchexercise) over the exercise price paid for such shares.

 

**                3.                   Exercise and VestingSchedule**.  Subjectto the remaining provisions of this Agreement, each Option or part of thatOption shall be exercisable as it vests. The Date of Grant is referred to herein as the “**Start Date**” of theOption.  Each Option granted pursuant tothis Agreement shall vest as to twenty-four percent (24%) of the shares coveredby the Option on the one-year anniversary of the Start Date of the Option andas to an additional two percent (2%) of the shares covered by the Option oneach subsequent monthly anniversary of the Start Date thereafter for so long asthe Director is an Eligible Director (as defined in Section 4).  Notwithstanding anything to the contrary inthis Section 3 or in Section 4, in the event that the Director hasnot yet vested twenty-four percent (24%) of the Option and the Director is notre-elected at the Company’s Annual Stockholders’ Meeting immediately followingthe Start Date of the Option, twenty-four percent (24%) of

 

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the Option shall accelerateand become immediately exercisable.  TheDirector may cumulate each installment and exercise the same, in whole or inpart, after it vests and becomes exercisable, at any time prior to expirationof the term of the Option.  All furthervesting ceases upon the Termination Date (as defined in Section 4).  In no event shall the Option be exercisablefor more shares than the number of shares set forth in Section 1.

 

**                                      3.1            Cumulative Nature of ExerciseSchedule**.  Theexercise dates specified above refer to the earliest dates on which this Optionmay be exercised with respect to the stated percentages of the Common Stockcovered by this Option, and this Option may be exercised with respect to all orany part of any such percentage of the total shares at any time on or aftersuch dates (until the expiration date specified in Section 2 above or anyearlier termination of this Option pursuant to Section 4 or 5.2 of thisAgreement).

 

**                                      3.2             Overriding Limitation on TimeFor Exercise**. Notwithstanding any other provisions of this Agreement, the Option maynot be exercised after the expiration of ten (10) years from the Date of Grant.

 

 

**                4                    Rights on Cessation ofService as a Director.** An Option may be exercised after the date (the “**Termination Date**”) onwhich a Director ceases to be a member of the Board (referred to as ceasing tobe an “**EligibleDirector**”) only as set forth below:

 

**                                      4.1                 Death.**  If a Director ceases to be an EligibleDirector because of the death of the Director, the Option may, for a period oftwelve (12) months following the Termination Date, be exercised in accordancewith Section 6.2 to the extent it was exercisable by the Director on theTermination Date.

 

**                                      4.2                 Disability.**  If the Director ceases to be an EligibleDirector because of a Disability, the Director may, within twelve (12) monthsfollowing the Termination Date, exercise the Option to the extent it was exercisableby the Director on the Termination Date unless the Director dies prior thereto,in which event the Director shall be treated as though the Director’s deathoccurred on the date the Director ceased to be an Eligible Director resultingfrom such Disability and the provisions of Section 4.1 above shall apply.

 

**                                      4.3                 Other Termination.**  If the Director ceases to be an EligibleDirector for any reason other than provided in Sections 4.1 or 4.2 above,the Director or the Director’s estate may, within three (3) months after theTermination Date, exercise the Option to the extent it was exercisable by theDirector on the Termination Date.

 

**                5.                   Adjustments upon Changesin Capitalization or Change of Control**.

 

**                                      5.1                 Stock Splits and SimilarEvents**. Appropriate adjustments shall be made in the number and class of sharesof capital stock subject to the Plan as described in Section 2 of the Plan andto any outstanding Options and in the exercise price of any outstanding Optionsin the event of a stock dividend, stock split, reverse stock split,recapitalization, combination, reclassification, or like change in the capitalstructure of the Company.  In the eventa majority of the shares which are of the same class as the shares that aresubject to outstanding Options are exchanged for, converted into, or otherwisebecome shares of another corporation (the **“New Shares”**), the Company mayunilaterally amend such Options to provide that each Option is exercisable forNew Shares.  In the event of any suchamendment, the number of shares subject to and the exercise price of eachOption shall be adjusted in a fair and equitable manner.

 

**                                      5.2                 Change of Control**.  In the event of a Change of Control (asdefined below), the vesting of all Options granted pursuant to the Plan shallaccelerate and the Options shall become immediately exercisable in full priorto the consummation of such Change of Control at such times and on suchconditions as the Board shall determine. Furthermore, the Board, in its sole discretion, may arrange with thesurviving, continuing, successor, or purchasing corporation or parentcorporation thereof, as the case may be (the **“Acquiring Corporation”**),for the Acquiring Corporation to assume the Company’s rights and obligationsunder outstanding Options (which, for purposes of this Section 5.2, shallinclude Options that become immediately exercisable and vested as providedabove) not exercised by the Director prior to the consummation of the Change ofControl or substitute options for the Acquiring Corporation’s stock for suchoutstanding 

 

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Options.  Any Options which are neither assumed norsubstituted for by the Acquiring Corporation in connection with the Change ofControl nor exercised prior to the consummation of the Change of Control shallterminate and cease to be outstanding as of the effective date of the Change ofControl.    A **“Change of Control”**shall be deemed to have occurred in the event any of the following occurs withrespect to the Company:

 

                                                             **5.2.1**              thedirect or indirect sale or exchange by the stockholders of the Company of allor substantially all of the stock of the Company where the stockholders of theCompany before such sale or exchange do not retain, directly or indirectly, atleast a majority of the beneficial interest in the voting stock of the Companyafter such sale or exchange.

 

**                                                             5.2.2**              a merger or consolidation in whichthe Company is not the surviving corporation, other than a merger orconsolidation with a wholly-owned Subsidiary, a reincorporation of the Companyin a different jurisdiction, or other transaction in which there is nosubstantial change in the Stockholders of the Company and the Options areassumed or substituted by the Acquiring Corporation, which assumption orsubstitution shall be binding on the Director.

 

                                                             **5.2.3**              amerger or consolidation in which the Company is the surviving corporation wherethe stockholders of the Company before such merger or consolidation do notretain, directly or indirectly, at least a majority of the beneficial interestin the voting stock of the Company after such merger or consolidation.

 

                                                             **5.2.4**              thesale, exchange, or transfer of all or substantially all of the assets of theCompany other than a sale, exchange, or transfer to one (1) or moreSubsidiaries of the Company.

 

                                                             **5.2.5**              aliquidation or dissolution of the Company.

 

                                                             **5.2.6**              anyother transaction which qualifies as a “corporate transaction” under Section424 of the Code wherein the stockholders of the Company give up all of theirequity interest in the Company (except for the acquisition, sale ortransfer of all or substantially all of the outstanding shares of the Company).

 

**                                      5.3                 Board’s Determination Finaland Binding Upon Director**.  To the extent that the foregoing adjustments in thisSection 5 relate to stock or securities of the Company, such adjustmentsshall be made by the Board, whose determination in that respect shall be final,binding and conclusive.  The Companyagrees to give notice of any such adjustment to the Director; provided,however, that any such adjustment shall be effective and binding for allpurposes hereof whether or not such notice is given or received.

 

**                                      5.4                 No Rights Except asExpressly Stated**. Except as hereinabove expressly provided in this Section 5, noadditional rights shall accrue to the Director by reason of any subdivision orcombination of shares of the capital stock of any class or the payment of anystock dividend or any other increase or decrease in the number of shares of anyclass or by reason of any dissolution, liquidation, merger or consolidation orspin-off of assets or of stock of another corporation, and any issue bythe Company of shares of stock of any class or of securities convertible intoshares of stock of any class shall not affect, and no adjustment by reasonthereof shall be made with respect to, the number or exercise price of sharessubject to the Option.  Neither theDirector nor any person claiming under or through the Director shall be, orhave any of the rights or privileges of, a stockholder of the Company inrespect of any of the shares issuable upon the exercise of this Option, unlessand until this Option is properly and lawfully exercised and a certificaterepresenting the shares so purchased is duly issued and delivered to theDirector or to his or her estate.

 

**                                      5.5                 No Limitations on Company’sDiscretion**.  Thegrant of the Option hereby shall not affect in any way the right or power ofthe Company to make adjustments, reclassifications, reorganizations or changesof its capital or business structure or to merge or consolidate or to dissolve,liquidate, sell or transfer all or any part of its business or assets.

 

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**                6.                   Manner of Exercise**.

 

**                                      6.1                 General Instructions forExercise**.  TheOption shall be exercised by the Director by completing, executing and deliveringto the Company a Notice of Exercise (the **“Notice of Exercise”**), insubstantially the form attached hereto as Exhibit A, which Notice ofExercise shall specify the number of shares of Common Stock which the Directorelects to purchase.  The Company’sobligation to deliver shares upon the exercise of this Option shall be subjectto the Director’s satisfaction of all applicable federal, state, local andforeign income and employment tax withholding requirements, if any.  The Director may satisfy any suchwithholding obligations, in whole or in part, by delivery of shares of theCompany’s Common Stock already owned by the Director and which are not subjectto repurchase, forfeiture, vesting or other similar requirements orrestrictions.  The Fair Market Value ofany such shares used to satisfy such withholding obligations shall bedetermined as of the date the amount of tax to be withheld is to bedetermined.  Upon receipt of such Noticeof Exercise and of payment of the purchase price (and payment of any applicabletaxes as provided above), the Company shall, as soon as reasonably possible andsubject to all other provisions hereof, deliver certificates for the shares ofCommon Stock so purchased, registered in the Director’s name or in the name ofhis or her legal representative (if applicable).  Payment of the purchase price upon any exercise of the Optionshall be made by check acceptable to the Company or in cash; provided, however,that the Board may, in its sole and absolute discretion, accept any other legalconsideration to the extent permitted under applicable laws and the Planincluding, without limitation, consummation of an immediate sale proceedstransaction (**“Immediate Sale Proceeds”**), which transaction may beexecuted (a) through a “same day sale” commitment from the Director and abroker-dealer that is a member of the National Association of SecuritiesDealers (a “**NASD Dealer**”) whereby the Director irrevocably elects toexercise the Option and to sell a portion of the shares of Common Stock sopurchased under the Option to pay for the aggregate exercise price, and wherebythe NASD Dealer irrevocably commits upon receipt of such shares to forward theaggregate exercise price directly to the Company or (b) through a “margin”commitment from the Director and a NASD Dealer whereby the Director irrevocablyelects to exercise the Option and to pledge the shares of Common Stock sopurchased to the NASD Dealer in a margin account as security for a loan fromthe NASD Dealer in the amount of the aggregate exercise price, and whereby theNASD Dealer irrevocably commits upon receipt of such shares to forward theaggregate exercise price directly to the Company.

 

**                                      6.2                 Exercise Procedure AfterDeath**.  To theextent exercisable after the Director’s death, this Option shall be exercisedonly by the Director’s executor(s) or administrator(s) or the person or personsto whom this Option is transferred under the Director’s will or, if theDirector shall fail to make testamentary disposition of this Option, under theapplicable laws of descent and distribution. Any such transferee exercising this Option must furnish the Company with(1) written Notice of Exercise and relevant information as to his, her or itsstatus, (2) evidence satisfactory to the Company to establish the validity ofthe transfer of this Option and compliance with any laws or regulationspertaining to said transfer, and (3) written acceptance of the terms andconditions of this Option as contained in this Agreement.

 

**                7.                   Non-Transferable**.  The Option shall, during the lifetime of theDirector, be exercisable only by the Director and shall not be transferable orassignable by the Director in whole or in part other than by will or the lawsof descent and distribution.  If theDirector shall make any such purported transfer or assignment of the Option,such assignment shall be null and void and of no force or effect whatsoever.

 

**                8.                   Compliance with Securitiesand Other Laws**. The Option may not be exercised and the Company shall not be obligatedto deliver any certificates evidencing shares of Common Stock hereunder if theissuance of shares upon such exercise would constitute a violation of anyapplicable requirements of: (i) the Securities Act of 1933, as amended (ii) the SecuritiesExchange Act of 1934, as amended (the “**Exchange Act**”) (iii) applicablestate or foreign securities laws, (iv) any applicable listing requirementof any stock exchange on which the Company’s Common Stock is then listed, and(v) any other law or regulation applicable to the issuance of suchshares.  Nothing herein shall beconstrued to require the Company to register or qualify any securities underapplicable federal, state or foreign securities laws, or take any action tosecure an exemption from such registration and qualification for the issuanceof any securities upon the exercise of the Option.  To the extent deemed necessary by the Company’s counsel, sharesof Common Stock issued upon exercise of this Option shall include such legendsas in the opinion of the Company’s counsel may be required by applicablefederal, state and foreign securities laws.

 

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**                9.                   No Right to Continue as aDirector**.  Nothingcontained in this Agreement shall confer upon the Director any right tocontinue to serve as a director or employee of the Company or any Parent orSubsidiary of the Company.  The Board inits sole discretion shall determine whether any leave of absence orinterruption in service (including an interruption during military service) shallbe deemed to result in the Director ceasing to be an Eligible Director forpurposes of this Agreement.

 

**                10.                 Option Subject to Terms ofPlan**.  In additionto the provisions hereof, this Agreement and the Option are governed by, andsubject to the terms and conditions of, the Plan.  The Director acknowledges receipt of a copy of the Plan (a copyof which is attached hereto as Exhibit B).  The Director represents that he or she is familiar with the termsand conditions of the Plan, and hereby accepts the Option subject to all of theterms and conditions thereof, which terms and conditions shall control to theextent inconsistent in any respect with the provisions of this Agreement.  The Director hereby agrees to accept asbinding, conclusive and final all decisions and interpretations of the Board asto any questions arising under the Plan or under this Agreement.

 

**                11.                 Intent to Comply with SECRule 16b-3**. Transactions under this Agreement are intended to comply with allapplicable conditions of SEC Rule 16b-3 or its successors under the ExchangeAct.  To the extent any provision ofthis Agreement or any action by the Board fails to so comply, it shall bedeemed null and void, to the extent permitted by law and deemed advisable bythe Board.  Moreover, in the event thisAgreement does not include a provision required by Rule 16b-3 to be statedherein, such provision shall be deemed automatically to be incorporated byreference into this Agreement.

 

**                12.                 Notices**.  All notices and other communications of anykind which either party to this Agreement may be required or may desire toserve on the other party hereto in connection with this Agreement shall be inwriting and may be delivered by personal service or by registered or certifiedmail, return receipt requested, deposited in the United States mail withpostage thereon fully prepaid, addressed to the other party at the addressesindicated on the signature page hereof or as otherwise provided below.  Service of any such notice or othercommunication so made by mail shall be deemed complete on the date of actualdelivery as shown by the addressee’s registry or certification receipt or atthe expiration of the third (3rd) business day after the date of mailing,whichever is earlier in time.  Eitherparty may from time to time, by notice in writing served upon the other asaforesaid, designate a different mailing address or a different person to whichsuch notices or other communications are thereafter to be addressed ordelivered.

 

**                13.                 Further Assurances**.  The Director shall, upon request of the Company,take all actions and execute all documents requested by the Company which theCompany deems to be reasonably necessary to effectuate the terms and intent ofthis Agreement and, when required or permitted by any provision of thisAgreement to transfer all or any portion of the Common Stock purchasedhereunder to the Company (and its assignees), the Director shall deliver suchCommon Stock endorsed in blank or accompanied by Stock Assignments Separatefrom Certificate endorsed in blank, so that title thereto will pass by deliveryalone.  Any sale or transfer by theDirector of the Common Stock to the Company (and its assignees) shall be madefree of any and all claims, encumbrances, liens and restrictions of every kind,other than those imposed by this Agreement.

 

**                14.                 Successors**.  Except to the extent the same isspecifically limited by the terms and provisions of this Agreement, thisAgreement is binding upon the Director and the Director’s successors, heirs andpersonal representatives, and upon the Company, its successors and assigns.

 

**                15.                 Termination or Amendment.**  Subject to the terms and conditions of thePlan, the Board may terminate or amend the Plan and/or the Option at any time;provided, however, that no such termination or amendment may adversely affectthe Option or any unexercised portion hereof without the consent of theDirector.

 

**                16.                 Integrated Agreement**.  This Agreement and the Plan constitute theentire understanding and agreement of the Director and the Company with respectto the subject matter contained herein, and there are no agreements,understandings, restrictions, representations, or warranties between theDirector and the Company other than those set forth or provided forherein.  To the extent contemplatedherein, the provisions of this Agreement shall survive any exercise of theOption and shall remain in full force and effect.  

 

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**                17.                 Other Miscellaneous Terms**.  Titles and captions contained in thisAgreement are inserted only as a matter of convenience and for reference, andin no way define, limit, extend or describe the scope of this Agreement or theintent of any provision hereof.  ThisAgreement shall be governed by and construed in accordance with the laws of theState of California, irrespective of its choice of law principles.

 

**                18.                 Independent Tax Advice**.  The Director agrees that he or she hasobtained or will obtain the advice of independent tax counsel (or hasdetermined not to obtain such advice, having had adequate opportunity to do so)regarding the federal, state and/or foreign income tax consequences of thereceipt and exercise of the Option and of the disposition of Common Stockacquired upon exercise hereof.  TheDirector acknowledges that he or she has not relied and will not rely upon anyadvice or representation by the Company or by its employees or representativeswith respect to the tax treatment of the Option.

 

**                INWITNESS WHEREOF**, the parties hereto have executed thisAgreement as of the date first above written.

 
| **COMPANY:**                                   | **DIRECTOR:**                            |
|------------------------------------------------|------------------------------------------|
|                                           |                                     |
| **OAK TECHNOLOGY, INC.**a Delaware corporation |                                     |
|                                           |                                     |
|                                           |                                     |
|                                           | (Signature)                              |
|                                           |                                     |
| By:                                            | John Edmunds                             |   | Name Printed: |   |
|                                           |                                     |   |   |
| Its:                                           | Chief Financial Officer & VP Finance |   | Address: |
|                                           |                                     |
| Address:                                       |                                     |
| 139 Kifer Court  Sunnyvale, CA  94086     |                                     |

 

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