** **

**UNITEDSTATESSECURITIES AND EXCHANGE COMMISSION**

**WASHINGTON,D.C. 20549**

 

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**AmendmentNo. 1**

** **

**to**

** **

**FORM 10-K**

 
| **x**                                                 | ** ** | **ANNUAL REPORT PURSUANT TO SECTION 13 OR  15(d) OF THE SECURITIES EXCHANGE ACT OF 1934**     |
|-------------------------------------------------------|------------|---------------------------------------------------------------------------------------------------------|
| ** **                                            |
| **For The  Fiscal Year Ended December 31, 2006** |
| ** **                                            |
| **Or**                                                |
| ** **                                            |
| **o**                                                 | ** ** | **TRANSITION REPORT PURSUANT TO SECTION 13 OR  15(d) OF THE SECURITIES EXCHANGE ACT OF 1934** |

 

**Forthe transition periodfrom             to**

 

**CommissionFile Number: 0-27246**

 

**ZORAN CORPORATION**

(Exact Name of registrant as specified in its charter)

 

| **Delaware**                                |   | **94-2794449**       |
|---------------------------------------------|--------|----------------------|
| (State or other  jurisdiction of            |   | (I.R.S. Employer     |
| incorporation or  organization)             |   | Identification  No.) |
|                                        |   |                 |
| **1390  Kifer Road, Sunnyvale, California** |   | **94086**            |
| (Address of  principal executive offices)   |   | (Zip Code)           |

 

**Registrant’s telephone number, including area code:(408) 523 6500**

**Securities registered pursuant to Section 12(b) of theAct:**

** **

|      | **Title of each class** | ** ** |   | ** ** | **Name of Exchange on which registered** | ** ** |
|------|----------------------------------------|------------|--------|------------|-------------------------------------------------------------------|------------|
| None |                                   | None       |   |
|      |                                        |            |        |            |                                                                   |            |  |  |  |

 

**Securities registered pursuant to Section 12(g) of theAct:**

Common Stock, $.001 par value

(Title of class)

 

Indicate by check mark if the registrant is awell-known seasoned issuer, as defined in Rule 405 of the Securities Act.Yes o  No x

 

Indicate by check mark if the registrant isnot required to file reports pursuant to Section 13 orSection 15(d) of the Act. Yes o  No x

 

Indicate by check mark whether the registrant(1) has filed all reports required to be filed by Section 13 or15(d) of the Securities Exchange Act of 1934 during the preceding12 months (or for such shorter period that the registrant was required tofile such reports), and (2) has been subject to such filing requirementsfor the past 90 days. Yes x  No o

 

Indicate by check mark if disclosure ofdelinquent filers pursuant to Item 405 of Regulation S-K is not containedherein, and will not be contained, to the best of registrant’s knowledge, indefinitive proxy or information statements incorporated by reference inPart III of this Form 10-K or any amendment to thisForm 10-K. x

 

Indicateby check mark whether registrant is a large accelerated filer, an acceleratedfiler or a non-accelerated filer (as defined by Rule 12b-2 of the Act).

 
| Large accelerated filer  x |   | Accelerated  filer  o |   | Non-accelerated  filer  o |
|--------------------------------------|--------|---------------------------------|--------|-------------------------------------|

 

Indicate by check mark whether the registrantis a shell company (as defined in Rule 12b-2 of the Exchange Act)Yes o  No x

 

The aggregate market value of registrant’svoting stock held by non-affiliates of registrant based upon the closing saleprice of the Common Stock on June 30, 2006, as reported on the NasdaqGlobal Select Market, was approximately $1,105,691,000.

 

Outstanding shares of registrant’s CommonStock, $0.001 par value, as of March 31, 2007: 49,448,791.

 

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** **

**ZORANCORPORATIONINDEX TOFIRST AMENDMENT TO FORM 10-KFOR YEAR ENDED DECEMBER 31, 2006**
|            | ** ** | ** **                                                                                       | **Page** | ** ** |
|------------|------------|--------------------------------------------------------------------------------------------------|----------|------------|
|       |       | Explanatory Note                                                                                 | i        |       |
|       |       |                                                                                             |     |       |
|       | ** ** | **PART III**                                                                                |     |       |
| Item 10.   |       | Directors,  Executive Officers of the Registrant and Corporate Governance                        | 1        |       |
| Item 11.   |       | Executive  Compensation                                                                          | 5        |       |
| Item 12.   |       | Security  Ownership of Certain Beneficial Owners and Management and Related Stockholder  Matters | 19       |       |
| Item 13.   |       | Certain  Relationships and Related Transactions, and Director Independence                       | 22       |       |
| Item 14.   |       | Principal  Accounting Fees and Services                                                          | 22       |       |
|       |       |                                                                                             |     |       |
|       | ** ** | **PART IV**                                                                                 |     |       |
| Item 15.   |       | Exhibits and  Financial Statement Schedules                                                      | 23       |       |
| Signatures |       |                                                                                             | 24       |       |

 

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** **

**EXPLANATORY NOTE**

This Amendment No. 1 toForm 10-K (“Amended Report”) amends the original Annual Report onForm 10-K of Zoran Corporation for the fiscal year ended December 31,2006, filed with the Securities and Exchange Commission, or the SEC, on April 19,2007 (“Original Report”), to add information required by the following items:

 
|        |   |          |   |                                                                                            |
|--------|--------|---------------|--------|-------------------------------------------------------------------------------------------------|
|   |   | Item 10. |   | Directors, Executive Officers and Corporate  Governance                                         |
|   |   |          |   |                                                                                            |
|   |   | Item 11. |   | Executive Compensation                                                                          |
|   |   |          |   |                                                                                            |
|   |   | Item 12. |   | Security Ownership of Certain Beneficial Owners and  Management and Related Stockholder Matters |
|   |   |          |   |                                                                                            |
|   |   | Item 13. |   | Certain Relationships, Related Transactions, and  Director Independence                         |
|   |   |          |   |                                                                                            |
|   |   | Item 14. |   | Principal Accounting Fees and Services                                                          |

 

ThisAmended Report includes information required by Part III that we originallyexpected to be incorporated by reference from our definitive proxy statement tobe delivered to stockholders in connection with our 2007 annual meeting ofstockholders. We hereby amend Items 10, 11, 12, 13 and 14 ofPart III of the Original Report by deleting the text of such Items intheir entirety and replacing them with the information provided below under therespective headings. This Amended Report does not affect any other items in theOriginal Report.

Exceptas otherwise expressly stated for the items amended in this Amended Report,this Amended Report continues to speak as of the date of the Original Reportand we have not updated the disclosure contained herein to reflect events thathave occurred since the filing of the Original Report. Accordingly, thisAmended Report should be read in conjunction with the Original Report and ourother SEC filings subsequent to the filing of the Original Report.

 

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**PART III**

**Item10.  Directors, Executive Officers andCorporate Governance.**

**Directors and Executive Officers**

Our Board of Directorsconsists of eight directors who will serve until the next annual meeting ofstockholders and until their respective successors are duly elected andqualified.   The following table andrelated narrative set forth certain information regarding our directors andexecutive officers.

 

**DIRECTORS**

 
| Name                                  | ** ** | ** **                                                                                                                  | ** ** | **Principal Occupation** | ** ** | ** ** | ** ** | **Age** | ** ** | **Director  Since** |
|---------------------------------------|------------|-----------------------------------------------------------------------------------------------------------------------------|------------|--------------------------|------------|------------|------------|---------|------------|---------------------|
| Levy Gerzberg, Ph.D.        |       | President and Chief  Executive Officer of Zoran                                                                             |       | 62                       |       | 1981       |
|                                  |       |                                                                                                                        |       |                     |       |       |
| Uzia Galil                            |       | Chairman and Chief  Executive Officer of Uzia Initiative and Management Ltd.; Chairman of  Board of Directors of Zoran |       | 82                       |       | 1983       |
|                                  |       |                                                                                                                        |       |                     |       |       |
| Raymond A. Burgess                    |       | President and Chief  Executive Officer of TeraVicta Technologies Inc.                                                       |       | 48                       |       | 2005       |
|                                  |       |                                                                                                                        |       |                     |       |       |
| James D. Meindl, Ph.D. |       | Professor of  Microelectronics, Georgia Institute of Technology                                                             |       | 74                       |       | 1986       |
|                                  |       |                                                                                                                        |       |                     |       |       |
| James B. Owens, Jr.                   |       | Consultant                                                                                                                  |       | 57                       |       | 2003       |
|                                  |       |                                                                                                                        |       |                     |       |       |
| David Rynne                           |       | Retired                                                                                                                     |       | 65                       |       | 2003       |
|                                  |       |                                                                                                                        |       |                     |       |       |
| Arthur B. Stabenow                    |       | Private Investor                                                                                                            |       | 68                       |       | 1990       |
|                                  |       |                                                                                                                        |       |                     |       |       |
| Philip M. Young                       |       | General Partner, U.S.  Venture Partners                                                                                     |       | 67                       |       | 1986       |

 

**OFFICERS**

 
| **Name**              | ** ** | ** **                                                           | ** ** | **Title** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
|-----------------------|------------|----------------------------------------------------------------------|------------|-----------|------------|------------|------------|------------|------------|------------|
| Karl Schneider        |       | Senior Vice President,  Finance and Chief Financial Officer of Zoran |       | 52        |       |       |
|                  |       |                                                                 |       |      |       |       |
| Isaac Shenberg, Ph.D. |       | Senior Vice President, Business Development of Zoran                 |       | 56        |       |       |
|                       |            |                                                                      |            |           |            |            |            |            |            |            |  |  |  |  |

 

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*Levy Gerzberg*co-founded Zoran in 1981 and has served as Zoran’s President and ChiefExecutive Officer since December 1988 and as a director since 1981. Dr. Gerzbergalso served as Zoran’s President from 1981 to 1984 and as Zoran’s ExecutiveVice President and Chief Technical Officer from 1985 to 1988. Prior toco-founding Zoran, Dr. Gerzberg was Associate Director of StanfordUniversity’s Electronics Laboratory. Dr. Gerzberg has over 25 years ofexperience in the high technology industry in the areas related to integratedcircuits, software and systems utilizing digital signal processing incommunication, consumer electronics and PC markets. Dr. Gerzberg holds aPh.D. in Electrical Engineering from Stanford University and an M.S. in MedicalElectronics and a B.S. in Electrical Engineering from the Technion-IsraelInstitute of Technology in Haifa, Israel.

*Uzia Galil* hasbeen a director of Zoran since 1983 and has served as Chairman of the Board ofDirectors since October 1993. Mr. Galil currently serves as Chairmanand Chief Executive Officer of Uzia Initiative and Management Ltd., acompany specializing in the promotion and nurturing of new businesses associatedwith mobile communication, electronic commerce and medical informatics, whichhe founded in November 1999. From 1962 until November 1999,Mr. Galil served as President and Chief Executive Officer of ElronElectronic Industries Ltd., an Israeli high technology holding company,where he also served as Chairman of the Board of Directors. FromJanuary 1981 until leaving Elron, Mr. Galil also served as Chairmanof the Board of Directors of Elbit Ltd., an electronic communicationaffiliate of Elron, and as a member of the Board of Directors of ElbitSystems Ltd., a defense electronics affiliate of Elron, and all otherprivate companies held in the Elron portfolio. Mr. Galil currently servesas a director of Orbotech Ltd., NetManage Inc. and Partner Communications Ltd.From 1980 to 1990, Mr. Galil served as Chairman of the International Boardof Governors of the Technion. Mr. Galil holds an M.S. in Electrical Engineering from PurdueUniversity and a B.S. from the Technion. Mr. Galil has also been awardedan honorary doctorate in technical sciences by the Technion in recognition ofhis contribution to the development of science-based industries in Israel, anhonorary doctorate in philosophy by the Weizmann Institute of Science, anhonorary doctorate in engineering by Polytechnic University, New York, anhonorary doctorate from the Ben-Gurion University of the Negev in Israel, andthe Solomon Bublick Prize Laureate from the Hebrew University of Jerusalem.Mr. Galil is also a recipient of the Israel Prize.

*Raymond A. Burgess*has been a director of Zoran since April 2005. Since November 2006,Mr. Burgess has been Chief Executive Officer of TeraVicta TechnologiesInc., a provider of broadband MEMS switches and modules.  From November 2005 to September 2006, Mr. Burgesswas Chief Executive Officer of Tao Group, a private software company engaged inthe development and sale of embedded software to enable multimedia in consumerand mobile communications devices. From July 2004 to November 2005,Mr. Burgess was engaged as a consultant to companies in the semiconductorindustry and related fields. From April 2004 to July 2004, Mr. Burgessserved as Senior Vice President, Strategy, Marketing and Communications ofFreescale Semiconductor, Inc. From September 2000 to March 2004,Mr. Burgess served as Corporate Vice President, Strategy, Marketing andCommunications for the Semiconductor Products Sector of Motorola, Inc.,and he held a variety of other executive positions during a 20 year career atMotorola.

*James D. Meindl*has been a director of Zoran since March 1986. Dr. Meindl has beenJoseph M. Pettit Chair Professor in microelectronics at Georgia Institute ofTechnology since November 1993. From September 1986 to November 1993,Dr. Meindl served as Provost and Senior Vice President of Academic Affairsat Renssalaer Polytechnic Institute. Prior thereto, Dr. Meindl was aprofessor of electrical engineering and Director of the Stanford ElectronicsLaboratory and Center for Integrated Systems at Stanford University. Dr. Meindlis also a director of SanDisk, Inc. and Stratex Networks.

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* *

*James B. Owens, Jr.*has been a director of Zoran since May 2003. Since January 2005,Mr. Owens has been principally engaged as a consultant to companies in thesemiconductor industry. From January 2002 to January 2005, Mr. Owensserved as President and Chief Executive Officer and a director of Strasbaugh, aprovider of semiconductor manufacturing equipment. From December 1999 toAugust 2001, Mr. Owens served as President and Chief ExecutiveOfficer of Surface Interface, a supplier of high-end metrology equipment to thesemiconductor and hard disk markets. From August 1998 toDecember 1999, Mr. Owens served as President of Verdant Technologies,a division of Ultratech Stepper. Mr. Owens holds a B.S. in Physics fromStetson University, an M.S. in Management from the University of Arkansas andan M.S.E.E. from Georgia Institute of Technology.

*David Rynne* hasbeen a director of Zoran since August 2003. Mr. Rynne is a retired seniorfinancial executive with more than 35 years of experience in growingtechnology companies. Most recently, Mr. Rynne served as Chief ExecutiveOfficer of Receipt.com from July to December 1999 and as Vice President ofNortel Networks from August 1998 to June 1999. He served as ChiefFinancial Officer of Bay Networks from January 1997 to August 1998.Prior to joining Bay Networks, Mr. Rynne served as Chief Financial Officerat Tandem Computers from June 1983 to December 1996, and held avariety of financial management positions during an 18 year career at BurroughsCorporation. He is currently Chairman of the Board of Directors ofNetfuel, Inc., a programmable network company, and serves on the Board ofDirectors of PD-LD, Inc., a fiber optic component company, and SynnexCorporation, an IT product distribution company.

*Arthur B. Stabenow*has been a director of Zoran since November 1990. Mr. Stabenow hasbeen principally engaged as a private investor since January 1999. FromMarch 1986 to January 1999, Mr. Stabenow was Chief ExecutiveOfficer of Micro Linear Corporation, a semiconductor company. Mr. Stabenowalso serves as a director of Applied Micro Circuits Corporation.

*PhilipM. Young* has been a director of Zoran sinceJanuary 1986. Mr. Young has been a managing principal of U.S. VenturePartners, a venture capital management company, since April 1990, and ageneral partner or managing member of the general partners of various venturecapital funds managed by that company. Mr. Young is also a director ofseveral private companies.

*KarlSchneider*joined Zoran as Corporate Controller in 1998 andwas elected Vice President, Finance and Chief Financial Officer in 1998 andSenior Vice President, Finance and Chief Financial Officer in July 2003. From1996 through 1997, Mr. Schneider served as Controller for the Film Measurementand Robotics and Integrated Technologies divisions of KLA-Tencor, asemiconductor equipment company. Mr. Schneider served as the CorporateController for SCM Microsystems, Inc. from 1995 to 1996, Controller for ReplyCorporation from 1994 to 1995, Director of Finance for Digital F/X from 1992 to1994 and Controller for Flextronics from 1987 through 1991. Mr. Schneider holdsa B.S. in Business Administration from San Diego State University.

*IsaacShenberg*has served as Senior Vice President, Business andStrategic Development since 1998 and previously as Vice President, Sales andMarketing from 1995 through 1998. From 1990 to 1995, Dr. Shenberg served as ourProduct Line Business Manager. Prior to joining Zoran, Dr. Shenberg was ImagesProcessing Group manager and Electro Optics Department manager at Rafael, aleading aerospace provider in Israel. Dr. Shenberg holds a Ph.D in ElectricalEngineering from Stanford University and a B.S. and M.S. in ElectricalEngineering from the Technion-Israel Institute of Technology in Haifa, Israel.

**Compliance with Section 16(a) ofthe Exchange Act**

Section 16(a) of the Securities Exchange Act of1934 requires our executive officers and directors and persons who beneficiallyown more than 10% of our common stock to file initial reports of beneficialownership and reports of changes in beneficial ownership with the SEC. Suchpersons are required by SEC regulations to furnish us with copies of allSection 16(a) forms filed by such person.

Based solely on our review of such forms furnished tous and written representations from certain reporting persons, we believe thatall filing requirements applicable to our executive officers, directors andgreater-than-10% stockholders were complied with, except that one statement ofchanges in beneficial ownership of securities in connection with optionsgranted to directors on June 23, 2006 was filed late for each of Messrs. Galil,Burgess, Meindl, Owens, Rynne, Stabenow and Young.

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**Code of Ethics**

We have adopted aCode of Conduct and Ethics that applies to all of our officers, directors andemployees, including our Chief Executive Officer, Chief Financial Officer andController. This code is available on our website at http://www.zoran.com/Corporate-Governance*.* If we make any substantive amendments tothe code or grant any waiver from a provision of the code to any executiveofficer or director, we will promptly disclose the nature of the amendment orwaiver on our website, as well as via any other means then required by NASDAQlisting standards or applicable law.

**Shareholder Nominations**

There have been nomaterial changes to the procedures by which shareholders may recommend nomineesto Zoran’s Board of Directors.

**Audit Committee**

Zoran has an Audit Committee, the members of which areMessrs. Burgess, Owens, Rynne and Stabenow. Mr. Stabenow is Chairman ofthe committee. The Board of Directors has determined that each of the membersof the Audit Committee is independent for purposes of the applicable rules ofNasdaq and the SEC. The Board has also determined that Messrs. Burgess,Owens, Rynne and Stabenow qualify as audit committee financial experts, as

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definedin the rules of the SEC. The functions of the Audit Committee includeoverseeing the quality of our financial reports and other financialinformation, retaining our independent registered public accounting firm,reviewing their independence, reviewing and approving the planned scope of ourannual audit, reviewing and approving any fee arrangements with our independentregistered public accounting firm, overseeing their audit work, reviewing andpre-approving any non-audit services that may be performed by them, reviewingthe adequacy of accounting and financial controls, reviewing our criticalaccounting policies and reviewing and approving any related party transactions.

**Item11.  Executive Compensation.**

**Compensation Discussion andAnalysis**

This sectiondiscusses the principles underlying our executive compensation policies anddecisions, and the most important factors relevant to an analysis of thesepolicies and decisions.  We providequalitative information regarding how our executive officers are compensated,and provide perspective on the data presented in the tables and narrative thatfollow this section.

Our executivecompensation program for executive officers is designed to attract individualswho have the skills we need to achieve our business plan, to motivate thoseindividuals, to reward them fairly over time, and to retain those who continueto perform at or above the levels that we expect.  Our program is also designed to reinforce asense of ownership, urgency and overall entrepreneurial spirit among executive officers,and to link rewards to measurable corporate and individual performance.

*CompensationProgram*

Our executivecompensation program currently has three primary components:

·                  Basesalary

·                  Annualperformance-based cash bonus

·                  Equity

Executive officersare eligible to participate in all of our respective local employee benefitplans, which may include medical, dental, vision, group life, employeeassistance program, short term and long term disability, accidental death anddismemberment insurance, our 401(k) plan, or other benefit plans, in each caseon the same basis as other employees.

We view the threeprimary components of executive compensation as related, but we do not believethat compensation should be derived entirely from one component, or thatsignificant compensation from one component should necessarily reducecompensation from other components.  OurCompensation Committee determines the appropriate levels for each compensationcomponent based primarily on:

·                  competitivebenchmarking consistent with our recruiting and retention goals;

·                  internalconsistency; and

·                  otherrelevant considerations such as rewarding extraordinary performance.

We fix executiveofficer base compensation at salary levels we believe enable us to hire andretain individuals in a competitive environment and to reward satisfactoryindividual performance and a satisfactory level of contribution to our overallbusiness goals. We also take into account the base compensation that is payableby companies that we believe to be our competitors and by other private andpublic companies with which we believe we generally compete for executives. Tothis end, we access executive compensation surveys and other databases andreview them when making crucial executive officer hiring decisions and annuallywhen we review executive compensation. We designed our executive bonus plan tofocus our management on achieving key corporate financial objectives, tomotivate certain desired individual behaviors and to reward substantialachievement of these company financial objectives and individual goals. Weutilize cash bonuses to reward performance achievements with a time

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horizon of one year orless, and we utilize salary as the base amount necessary to match ourcompetitors for executive talent. We utilize stock options to reward long-termperformance, with excellent corporate performance and extended officer tenureproducing potentially significant value for the officer.

We believe that,as is common in the technology sector, stock option awards are the primarycompensation-related motivator in attracting and retaining senior levelemployees, and that salary and bonus levels are secondary considerations formost senior level employees.  OurCompensation Committee has adopted no formal or informal policies or guidelines(except as described below) for allocating compensation between long-term andcurrent compensation, between cash and non-cash compensation, or amongdifferent forms of non-cash compensation. However, our Compensation Committee’s philosophy is to make a greaterpercentage of an employee’s compensation performance-based as he or she becomesmore senior and to keep cash compensation to the minimum competitive levelwhile providing the opportunity to be well rewarded through equity if thecompany performs well over time.

Our CompensationCommittee intends to continue its practice of performing an annual strategicreview of our executive officer compensation to determine whether it providesadequate incentive and motivation to our executive officers and whether it adequatelycompensates our executive officers relative to comparable officers in othercompanies with which we compete for executives. These companies may or may notbe public companies or even in technology companies. Compensation Committeemeetings often include other directors and typically include, for all or aportion of each meeting, our Chief Executive Officer, Chief Financial Officer,Vice President, Human Resources and our external counsel. For compensationdecisions, including equity compensation decisions, relating to executiveofficers other than our Chief Executive Officer, our Compensation Committeetypically considers recommendations from the Chief Executive Officer.

*BaseSalary*

For 2006, ourCompensation Committee set executive officer salaries at approximately the50th percentile of salaries of executives with similar roles at comparablepublic companies, based on the semiannual Radford Executive Survey oftechnology companies, with reference to companies having revenues in the rangeof $200 million to $500 million.

For 2007, ourCompensation Committee approved salary increases of four percent for each ofour named executive officers, to maintain those salaries at approximately the50th percentile under the Radford Executive Survey,which is expected to show an increase of this magnitude in 2007.

*AnnualPerformance-Based Cash Bonuses*

We use incentivecash bonuses to reward performance and achievements with a time horizon ofapproximately one year.  CompensationCommittee approved bonus arrangements for 2006 (“2006 Bonus Plan”) that weredesigned to reward executives for achieving key financial objectives andindividual goals. The 2006 Bonus Plan was unwritten.  The Compensation Committee determined theamount of the target bonus for an executive as a percentage of the executive’sbase salary, and selected the financial targets and individual goals that wouldresult in payment of the bonus. The committee also retained discretion toadjust the targets or pay discretionary bonuses as appropriate.

For 2006, ourCompensation Committee set executive officer incentive bonus levels atapproximately the 75th percentile of incentive bonus compensation forexecutives with similar roles at comparable public companies.

Under the 2006Bonus Plan, Chief Executive Officer Levy Gerzberg was eligible to receive abonus of 100% of his base salary, Chief Financial Officer Karl Schneider waseligible to receive a bonus of 70% of his base salary, and Senior VicePresident, Business Development Isaac Shenberg was eligible to receive a bonusof 60% of his base salary.  Dr.Gerzberg’s 2006 target bonus was earned by the degree to which the Companyachieved the financial targets selected by the Compensation Committee (revenueand non-GAAP earnings per share) and set by the Board of Directors by theirapproval of the Company’s 2006 annual operating plan.  For Mr. Schneider and Dr. Shenberg,two-thirds of the target bonus was earned by achievement of those samefinancial targets, and one-third was earned by achievement of specific managementobjectives recommended by the Chief Executive Officer and

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approved by theCompensation Committee.  In all cases, aproportional amount of the bonuses may be earned if the financial targets areachieved at the level of 80% or more, and proportional extra bonus may beearned if the financial targets are over-achieved, to a cap to 120%.  When multiple financial targets are measured,the results on each are combined for a blended result in calculating bonus achievement.  In 2006, the financial targets for bonuspurposes were a revenue target of $520.3 million and a non-GAAPearnings-per-share target of $0.92.  TheCompany’s actual revenues were below target and its earnings per share wereabove target, with the result that the executive officers were entitled tobonuses below target levels.  We definenon-GAAP earnings per share, for bonus purposes, to mean the non-GAAP earningsper share that we report in connection with our quarterly announcement offinancial results.

The CompensationCommittee recently approved a performance-based cash bonus plan for 2007 (“2007Bonus Plan”), in which all vice presidents, including the named executiveofficers, are eligible to participate. The target bonus pool for all employees,including the named executive officers, is 10% of non-GAAP net income for 2007before any bonus deduction, of which no more than 25% may be paid to executiveofficers and non-executive vice presidents. The 2007 Bonus Plan is substantially the same as the 2006 Bonus Plan,and the Compensation Committee has again selected revenue and non-GAAPearnings-per-share measured, fixed at particular targets by Board approval ofour 2007 annual operating plan, and has selected particular managementobjectives for executives other than the Chief Executive Officer.

Generally, theCommittee tries to establish both target financial objectives and individualobjectives each year so that the relative difficulty of achieving theobjectives is roughly consistent from year to year. Over the past severalyears, the Company’s performance has ranged from exceeding the target levelcorporate objectives, to meeting the objectives and failing to achieve theobjectives. The level of achievement of individual performance objectives hasalso varied by individual in any given year, as well as by the named executiveofficers as a group from year to year. The amounts of actual bonus paymentsunder the 2007 Bonus Plan could be higher or lower than the target levels, atthe discretion of the Committee, based on achievement of Company and individualgoals.

The CompensationCommittee felt that the largest portion of each bonus should be based on ourexecutive officers’ success as a team and thus based on corporate financialgoals. Each component of the bonus is independent of the other components, andwe will pay the applicable percentage of the bonus if an objective is attained,regardless of whether any or all of the other objectives are attained. TheCompensation Committee chose revenues and non-GAAP net income per share becauseit believed that, as a “growth company,” we should reward revenue growth, butonly if that revenue growth is achieved cost effectively. Likewise, it believeda “profitable company” with little or no growth was not acceptable. Thus, theCompensation Committee considered the chosen metrics to be the best indicatorsof financial success and stockholder value creation. The individual performanceobjectives are determined by the Chief Executive Officer.

Our bonus plandoes not formally provide for the exercise of discretion, but our CompensationCommittee may exercise discretion such as awarding an exceptional bonus amountfor specific performance achievement beyond established goals.  There were no such discretionary awards in2006. Further details about our executive bonus plan are provided below in thefootnotes to the “2006 Grants of Plan-Based Awards” table, which shows the“threshold” and “maximum” bonus amounts that could have been earned by eachnamed executive officer in 2006.

*StockOptions*

We use stock optionsas a long-term incentive vehicle for several reasons:

·                  Inthe technology sector, equity awards are the primary factor in attracting andretaining executive officers, while salary and bonus levels are secondaryconsiderations to most executives.

·                  Stockoptions foster attention to stock ownership and focus executives on increasinglong-term value for the stockholders. Thus, options align the interests ofexecutives with those of our stockholders.

·                  Stockoptions are performance-based. Their value depends entirely on an increase inthe stock price above the option exercise price.  Our stock options are granted with anexercise price no less than the fair market value of the stock on the grantdate.

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·                  Thevesting period for stock options granted to executives is four years, whichencourages executive retention.

In 2005 we usedrestricted stock units as an element of equity incentive compensation, inconjunction with stock option grants.  In2006 our compensation committee consulted with our management and determinedthat management believed that the options provided them with a greaterincentive to enhance shareholder value. Accordingly, in 2006 and 2007 our Compensation Committee has used stockoptions as the exclusive equity incentive compensation mechanism.

Our 2005 EquityIncentive Plan (“2005 Equity Incentive Plan”) was approved by our stockholdersat our annual meeting of stockholders in 2006. The 2005 Equity Incentive Plan gives the Compensation Committee latitudeto design stock-based incentive compensation by awarding stock options,restricted stock, stock bonuses, stock appreciation rights, and restrictedstock units in order to promote high performance and achievement of corporategoals, and to encourage the growth of stockholder value.

In determining thenumber of options to be granted to executive officers, the Committee takes intoaccount: the individual’s position and scope of responsibility; the vestingperiod (and thus, retention value) remaining on the executive’s existingoptions; the executive’s ability to affect profitability and stockholder value;the individual’s historic and recent job performance; equity compensation forsimilar positions at comparable companies; and the value of stock options inrelation to other elements of total compensation.

Despite theCompensation Committee’s belief that the 75th percentile was the appropriate target forexecutive equity incentive compensation, for 2006, our Compensation Committeeset executive officer equity incentive compensation levels that were at orbelow approximately the 50th percentile of equity incentive compensationfor executives with similar roles at comparable public companies.  This reduction from target compensationlevels was due to the fact that the Company had a limited number of sharesavailable for grants to employees generally, so the executive option grantswere reduced.

In April 2007 theCompensation Committee gave final approval to executive officer stock optiongrants that it had reviewed in October 2006, but had not determined withfinality until the Company’s release of quarterly results after it was onceagain current with its period reports under the Securities Exchange Act of1934.

*Tax andAccounting Considerations*

We record cashcompensation as an expense at the time the obligation is incurred.Historically, all cash compensation we have paid has been tax deductible forus. Under Section 162(m) of the Internal Revenue Code, compensation inexcess of $1,000,000 per year to named executive officers is not taxdeductible to us unless certain requirements are met. The deductibility ofcompensation to the named executive officers in 2006 was affected by thelimitations of Section 162(m) and it is conceivable that futurecompensation may also be non-deductible under Section 162(m).

We account forequity compensation paid to our executives and employees under the rules ofSFAS No. 123R, which requires us to estimate and record a non-cashexpense over the vesting period of the equity compensation award. Any gainrecognized by employees from nonqualified stock options is tax-deductible forus. However, gains recognized by an employee with respect to an incentive stockoption will not be deductible unless there is a “disqualifying disposition” ofthe shares by the employee. A disqualifying disposition occurs when an employeesells or disposes of incentive stock option shares within two years after thegrant date or within one year after the exercise date. The employee is taxed onthe gain at ordinary income tax rates. In addition, if in the future we grantrestricted stock or restricted stock unit awards that are not subject toperformance vesting, they may not be fully deductible by us at the time theaward is otherwise taxable to the employee.

*Overviewof the Executive Compensation Process*

The CompensationCommittee makes all decisions regarding compensation (including salary andbonus levels and specific bonus and equity awards) for all of our executiveofficers, including our named executive officers. The Committee meets on a regularlyscheduled basis and at other times as needed. At the Committee’s request, 

8

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Committee meetingstypically have included, for all or a portion of each meeting, our ChiefExecutive Officer, our Chief Financial Officer, our Vice President, Human Resources,our Vice President, Legal and our outside corporate legal counsel.

The Committeegenerally conducts an annual review of our executive officer compensation toassess whether compensation programs and decisions are aligned with ourcorporate goals, provide appropriate incentives and motivation to our executiveofficers, and are competitive with compensation for comparable officers incompanies with which we compete for executives. The Chief Executive Officerannually evaluates the performance of each member of the senior executive teamother than himself. He makes recommendations to the Committee regarding salaryadjustments for the current year, as well as performance bonus payments andequity awards based on performance of the company and individual performance ofeach executive during the preceding year. The conclusions reached andrecommendations based on these evaluations are presented to the Committee. TheCommittee, in its sole discretion, determines whether to accept, modify orreject any recommended adjustments or awards to the senior executives. TheCommittee evaluates the performance of the Chief Executive Officer each yearand makes all decisions regarding salary adjustments, bonus payments and equityawards.

*Benchmarkingof Executive Compensation*

In January 2006,our Compensation Committee decided to set executive officer salaries andexecutive officer incentive cash bonus target compensation at approximately the50th percentile and 75th percentile, respectively, for executives withsimilar roles at comparable public companies. Our Compensation Committee believes that the 50th percentile for base salaries and the 75th percentile for incentive cash bonus is theminimum cash compensation level that would allow us to attract and retaintalented officers.  Our CompensationCommittee also set executive officer equity incentive compensation atapproximately the 75th percentile for executives in similar positionsat comparable companies.  TheCompensation Committee believes that this greater focus on equity incentivecompensation is appropriate given the Company’s growth objectives.  For benchmarking information on salary andincentive cash bonus compensation, the Company uses the semiannual RadfordExecutive Survey of technology companies, with reference to companies havingrevenues in the range of $200 million to $500 million.  For benchmarking information on equityincentive compensation for executives the Company engaged a consultant tosurvey face value of equity awards to executives at comparable companiesselected by Company management. Benchmarking of equity incentive compensation amounts was a grossmeasure of the number of shares covered by the award and the fair market valueof the comparable company shares on the date of grant.

Our CompensationCommittee realizes that using benchmarks may be inappropriate in somecircumstances, but believes that it is generally the best approach at thispoint in the life cycle of our company. In instances where an executive officer is uniquely key to our success,our Compensation Committee may provide compensation in excess of statedpercentiles. Our Compensation Committee’s judgments about market levels ofequity incentive compensation awards were based on a report obtained from anindependent consulting firm specializing in executive compensation, which wasengaged by the Company.  Our CompensationCommittee used this report to assist in the adjustment of the equity incentivecompensation to our executives; the report compared the Company’s executivecompensation with that of our competitors and other similar sized companies inthe semiconductor industry.  TheCompensation Committee’s choice of the stated percentiles to apply to the datain the report reflected consideration of our stockholders’ interests in payingwhat was necessary, but not significantly more than necessary, to achieve ourcorporate goals, while conserving cash and equity as much as practicable.

*StockOption Practices*

In 2006 we adoptednew policies governing stock option grants and other equity awards, includingthe following:

·                  Allawards including awards to executive officers are granted by the CompensationCommittee or the Board of Directors.

·                  Awardsare generally considered at regularly scheduled quarterly meetings of the Boardor Committee, and action may not be taken by unanimous written consent.

9

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·                  Awardsare generally granted effective as of the later of (i) the second trading dayfollowing the Company’s public announcement of its financial results for thepreceding quarter or (ii) the date of the Compensation Committee or Board ofDirectors meeting.

·                  Theexercise price of stock options and stock appreciation rights is generally theclosing price of the Company’s common stock on the grant date, as reported bythe Nasdaq National Market.

·                  Keyterms and conditions of awards shall be communicated to recipients promptly.

*Severanceand Change of Control Payments*

We maintain anExecutive Retention and Severance Plan (“Retention Plan”) that provides forbenefits for our executive officers and key employees upon a change in controlof Zoran. We maintain the Retention Plan to provide severance and change ofcontrol arrangements to enable us to induce these executives to work at adynamic and rapidly growing company where their longer-term compensationlargely depends on future stock appreciation. The arrangements also mitigate a potential disincentive for executiveswhen they are evaluating a potential acquisition of the company, particularlywhen the services of the executive officers may not be required by theacquiring company. For a detailed description of these severance and change ofcontrol benefits, please see the discussion under “— Change of ControlAgreements” below. Absent a change of control event, no executive officer isentitled upon termination to either equity vesting acceleration or cashseverance payments.

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* *

*OtherBenefits*

Executive officersare eligible to participate in all of our respective local employee benefitplans, which may include medical, dental, vision, group life, employeeassistance program, short term and long term disability, and accidental deathand dismemberment insurance, our 401(k) plan or other such benefit plans, ineach case on the same basis as other employees. There were no special benefits or perquisites provided to any executiveofficer in 2006.

**Executive Compensation Tables**

The followingtable summarizes the compensation earned during the year endedDecember 31, 2006, by our Chief Executive Officer, our Chief FinancialOfficer and each other executive officer serving as such at the end of2006  (collectively, “named executiveofficers”).

**SummaryCompensation Table**

 
| Name and   Principal Position | ** ** | ** ** | ** ** | **Year** | ** ** | **Salary  ($)** | ** ** | **Bonus ($)** | ** ** | **Stock  Awards ($)  (1)** | ** ** | **Option Awards ($)  (1)** | ** ** | **Non-Equity Incentive Plan Compensation ($)** | ** ** | **All Other Compensation   ($)** | ** ** | **Total  ($)** |
|-------------------------------|------------|------------|------------|----------|------------|-----------------|------------|---------------|------------|----------------------------|------------|----------------------------|------------|------------------------------------------------|------------|----------------------------------|------------|----------------|
| Levy Gerzberg, Ph.D.          |       | 2006       |       | $        | 437,500    |            | —     |          | $          | 216,291                    |       | $                          | 2,238,193  |                                           | $          | 398,600                          |       | $              | 2,594 (2) |   | $ | 3,293,178 |
| President and Chief           |       |       |       |     |       |            |       |          |       |                       |       |                       |       |                                           |       |                             |
| Executive Officer             |       |       |       |     |       |            |       |          |       |                       |       |                       |       |                                           |       |                             |
|                          |       |       |       |     |       |            |       |          |       |                       |       |                       |       |                                           |       |                             |
| Karl Schneider      |       | 2006       |       | $        | 275,000    |            | —     |          | $          | 72,095                     |       | $                          | 737,398    |                                           | $          | 167,500                          |       | $              | 2,522 (2) |   | $ | 1,254,515 |
| Senior Vice President,        |       |       |       |     |       |            |       |          |       |                       |       |                       |       |                                           |       |                             |
| Finance and Chief             |       |       |       |     |       |            |       |          |       |                       |       |                       |       |                                           |       |                             |
| Financial Officer             |       |       |       |     |       |            |       |          |       |                       |       |                       |       |                                           |       |                             |
|                          |       |       |       |     |       |            |       |          |       |                       |       |                       |       |                                           |       |                             |
| Isaac Shenberg, Ph.D.    |       | 2006       |       | $        | 210,000    |            | —     |          | $          | 64,887                     |       | $                          | 752,359    |                                           | $          | 109,300                          |       | $              | 36,953 (3) |   | $ | 1,173,499 |
| Senior Vice President,        |       |       |       |     |       |            |       |          |       |                       |       |                       |       |                                           |       |                             |
| Business Development          |       |       |       |     |       |            |       |          |       |                       |       |                       |       |                                           |       |                             |

----

| (1)    |   | These amounts reflect the dollar amount recognized  for financial statement reporting purposes for the year ended  December 31, 2006 in accordance with FAS 123(R), with the exception  that estimated forfeitures related to service-based vesting were disregarded  in these amounts. Assumptions used in the calculation of this amount for  purposes of our financial statements for the years ended December 31,  2004, 2005 and 2006 are included in Note 11 of Notes to Consolidated  Financial Statements for the year ended December 31, 2006 included in  our Annual Report on Form 10-K filed with the SEC. |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
| (2)    |   | Represents matching contributions to the named  executive officer’s 401(k) plan, and premiums paid by Zoran with respect to  term life insurance for the benefit of the named executive officer.                                                                                                                                                                                                                                                                                                                                                                                                                                      |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
| (3)    |   | Consists of premiums paid under an insurance/pension  policy that covers certain severance and other benefits totaling $22,779,  payments towards the lease of an automobile totaling $11,000 and continuing  education contributions totaling $3,174.                                                                                                                                                                                                                                                                                                                                                                                     |

 

11

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Thefollowing table provides certain information concerning grants of options topurchase our common stock made to the named executive officers during the yearended December 31, 2006.  The tablealso provides information with regard to cash bonuses for 2006 under ourperformance-based, non-equity incentive plan to each named executive officer.

**2006Grants of Plan-Based Awards**

 
| Name                        | ** ** | ** **         | ** ** | **Grant  Date**  | ** ** | **Estimated Future Payouts Under  Non-Equity Incentive Plan  Awards (1)** | ** ** | **All  Other   Stock  Awards:  Number  of Shares  of Stock  or Units  ($)** | ** ** | **All Other  Option  Awards:  Number  of  Securities  Under-lying  Options  ($)** | ** ** | **Exercise or  Base Price  of Option Awards  ($/sh)** |
|-----------------------------|------------|--------------------|------------|------------------|------------|---------------------------------------------------------------------------|------------|-----------------------------------------------------------------------------|------------|-----------------------------------------------------------------------------------|------------|-------------------------------------------------------|
| ** **                  | ** ** | **Threshold  ($)** | ** ** | **Target   ($)** | ** ** | **Maximum  ($)**                                                          | ** ** | ** **                                                                  | ** ** | ** **                                                                        | ** ** | ** **                                            |
| Levy Gerzberg, Ph.D.        |       | N/A                |       | $350,000         |       | $437,500                                                                  |       | $525,500                                                                    |       | —                                                                            |       | —                                                |   | n.a. |
| President and Chief         |       |               |       |             |       |                                                                      |       |                                                                        |       |                                                                              |       |                                                  |   |   |
| Executive Officer           |       |               |       |             |       |                                                                      |       |                                                                        |       |                                                                              |       |                                                  |   |   |
|                        |       |               |       |             |       |                                                                      |       |                                                                        |       |                                                                              |       |                                                  |   |   |
| Karl Schneider              |       | N/A                |       | $154,000         |       | $192,500                                                                  |       | $231,000                                                                    |       | —                                                                            |       | —                                                |   | n.a. |
| Senior Vice President,      |       |               |       |             |       |                                                                      |       |                                                                        |       |                                                                              |       |                                                  |   |   |
| Finance and Chief Financial |       |               |       |             |       |                                                                      |       |                                                                        |       |                                                                              |       |                                                  |   |   |
| Officer                     |       |               |       |             |       |                                                                      |       |                                                                        |       |                                                                              |       |                                                  |   |   |
|                        |       |               |       |             |       |                                                                      |       |                                                                        |       |                                                                              |       |                                                  |   |   |
| Isaac Shenberg, Ph.D.       |       | N/A                |       | $100,800         |       | $126,000                                                                  |       | $151,200                                                                    |       | —                                                                            |       | —                                                |   | n.a. |
| Senior Vice President,      |       |               |       |             |       |                                                                      |       |                                                                        |       |                                                                              |       |                                                  |   |   |
| Business Development        |       |               |       |             |       |                                                                      |       |                                                                        |       |                                                                              |       |                                                  |   |   |

----

| (1) |   | In 2006 the compensation committee put in place a  bonus plan under which the named executive officers could earn bonus payments  if objectives and targets were met. The actual bonus amounts that were earned  are reflected in the Summary Compensation Table above. |
|-----|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

 

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The following table provides certain informationconcerning each unexercised stock option held by the named executive officersas of December 31, 2006.

**Outstanding Equity Awards at December31, 2006**
|                         | ** ** | **Option Awards** | ** ** | **Stock Awards**                                                                       |       |
|-------------------------|------------|-------------------|------------|----------------------------------------------------------------------------------------|------------|
| **Name**                | ** ** | ** **        | ** ** | **Number of  Securities  Underlying  Unexercised  Options (#)  Exercisable** | ** ** | **Number of  Securities  Underlying  Unexercised  Options (#)  Unexercisable** | ** ** | **Option  Exercise  Price ($)** | ** ** | **Option  Expiration  Date** | ** ** | **Number of  Shares or  Units of  Stock That  Have Not  Vested (#)** | ** ** | **Market Value of  Shares or Units  of Stock That  Have Not Vested  ($)** |   |
| Levy Gerzberg, Ph.D.    |       | 29,218            |       | —                                                                                 |       | $ | 13.5833 |   | 8/4/2009 |  (1) |   |   |   |   |
| President and           |       | 135,000           |       | —                                                                                 |       | $ | 27.3333 |   | 7/28/2010 |  (1) |   |   |   |   |
| Chief Executive Officer |       | 42,375            |       | —                                                                                 |       | $ | 12.3600 |   | 8/9/2012 |  (1) |   |   |   |   |
|                         |       | 304,679           |       | —                                                                                 |       | $ | 24.7800 |   | 7/15/2013 |  (1)(5) |   |   |   |   |
|                         |       | 304,679           |       | —                                                                                 |       | $ | 24.7800 |   | 7/15/2013 |  (2)(6) |   |   |   |   |
|                         |       | 60,000            |       | 120,000                                                                                |       | $ | 13.5900 |   | 8/19/2015 |  (3) |   |   |   |   |
|                         |       | 178,125           |       | —                                                                                 |       | $ | 14.6900 |   | 8/9/2012 |  (1) |   |   |   |   |
|                         |       |              |       |                                                                                   |       |   |   |   |   | 27,500 |   | $ | 400,950 |  (4) |
|                    |       |              |       |                                                                                   |       |   |   |   |   |   |   |   |   |
| Karl Schneider          |       | 45,000            |       | —                                                                                 |       | $ | 27.3333 |   | 7/28/2010 |  (1) |   |   |   |   |
| Senior Vice President,  |       | 11,563            |       | —                                                                                 |       | $ | 11.5200 |   | 9/19/2011 |  (1) |   |   |   |   |
| Finance and Chief       |       | 43,750            |       | —                                                                                 |       | $ | 12.3600 |   | 8/9/2012 |  (1) |   |   |   |   |
| Financial  Officer      |       | 100,000           |       | —                                                                                 |       | $ | 24.7800 |   | 7/15/2013 |  (1)(7) |   |   |   |   |
|                         |       | 100,000           |       | —                                                                                 |       | $ | 24.7800 |   | 7/15/2013 |  (2)(8) |   |   |   |   |
|                         |       | 20,000            |       | 40,000                                                                                 |       | $ | 13.5900 |   | 8/19/2015 |  (3) |   |   |   |   |
|                         |       | 31,250            |       | —                                                                                 |       | $ | 14.6900 |   | 8/9/2012 |  (1) |   |   |   |   |
|                         |       | 8,437             |       | —                                                                                 |       | $ | 15.4700 |   | 9/19/2011 |  (1) |   |   |   |   |
|                         |       |              |       |                                                                                   |       |   |   |   |   | 9,167 |   | $ | 133,655 |  (4) |
|                    |       |              |       |                                                                                   |       |   |   |   |   |   |   |   |   |
| Isaac Shenberg, Ph.D.   |       | 20,625            |       | —                                                                                 |       | $ | 13.5833 |   | 8/4/2009 |  (1) |   |   |   |   |
| Senior Vice President,  |       | 60,000            |       | —                                                                                 |       | $ | 27.3333 |   | 7/28/2010 |  (1) |   |   |   |   |
| Business Development    |       | 40,500            |       | —                                                                                 |       | $ | 10.3333 |   | 2/7/2011 |  (1) |   |   |   |   |
|                         |       | 49,719            |       | —                                                                                 |       | $ | 11.5200 |   | 9/19/2011 |  (1) |   |   |   |   |
|                         |       | 82,500            |       | —                                                                                 |       | $ | 12.3600 |   | 8/9/2012 |  (1) |   |   |   |   |
|                         |       | 100,000           |       | —                                                                                 |       | $ | 24.7800 |   | 7/15/2013 |  (1)(7) |   |   |   |   |
|                         |       | 100,000           |       | —                                                                                 |       | $ | 24.7800 |   | 7/15/2013 |  (2)(8) |   |   |   |   |
|                         |       | 18,000            |       | 36,000                                                                                 |       | $ | 13.5900 |   | 8/19/2015 |  (3) |   |   |   |   |
|                         |       |              |       |                                                                                   |       |   |   |   |   | 8,250 |   | $  | 120,285 |  (4) |
|                         |            |                   |            |                                                                                        |            |  |  |  |  |  |  |  |  |  |  |  |  |

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(1)             Option is immediately exercisable andvests over four years with 1/48th ofthe shares vesting each month. 

(2)             Option is immediately exercisable andvests over four years, 25% of the shares vesting after one year, and 1/48th of the shares vesting each month thereafter. 

(3)             Option vests over four years, with 25%vested and exercisable after one year, and 1/48th ofthe shares vesting each month thereafter.

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(4)             Restricted stock unit award, vesting overfour years with 25% of the units vested after one year and 1/16th of the unitsvesting each quarter thereafter.  Marketvalue based on the closing price of Zoran common stock on December 29, 2006.

(5)             44,432 shares were unvested as of December31, 2006. 

(6)             120,602 shares were unvested as ofDecember 31, 2006.

(7)             14,583 shares were unvested as of December31, 2006.

(8)             39,583 shares were unvested as of December31, 2006.

The following table providesinformation with respect to options exercised during 2006 by the namedexecutive officers.

**2006 Option Exercises and StockVested**
|                              | ** ** | **Option Awards**                                                   | ** ** | **Stock Awards**                                   | ** ** |
|------------------------------|------------|---------------------------------------------------------------------|------------|----------------------------------------------------|------------|
| ** **                   | ** ** | **Number of Shares  Acquired on  Exercise (#)** | ** ** | **Value Realized on  Exercise ($)** | ** ** | **Number of  Shares  Acquired on  Vesting (#)** | ** ** | **Value Realized on  Vesting ($)** | ** ** |
| Levy  Gerzberg, Ph.D.        |       | 30,937                                                              |       | $                                                  | 304,781    |   |   |   |   |   |
| President  and Chief         |       | 70,000                                                              |       | $                                                  | 606,548    |   |   |   |   |   |
| Executive  Officer           |       | 36,000                                                              |       | $                                                  | 387,720    |   |   |   |   |   |
|                              |       | 96,000                                                              |       | $                                                  | 1,429,498  |   |   |   |   |   |
|                              |       |                                                                |       |                                               |       | 2,500 |   | $ | 39,400 |   |
|                              |       |                                                                |       |                                               |       | 10,000 |   | $ | 170,600 |   |
|                         |       |                                                                |       |                                               |       |   |   |   |   |
| Karl  Schneider              |       | 28,200                                                              |       | $                                                  | 655,086    |   |   |   |   |   |
| Senior  Vice President,      |       | 22,500                                                              |       | $                                                  | 306,151    |   |   |   |   |   |
| Finance  and Chief Financial |       | 37,500                                                              |       | $                                                  | 632,126    |   |   |   |   |   |
| Officer                      |       | 25,000                                                              |       | $                                                  | 391,750    |   |   |   |   |   |
|                              |       |                                                                |       |                                               |       | 833 |   | $ | 13,128 |   |
|                              |       |                                                                |       |                                               |       | 3,333 |   | $ | 56,861 |   |
|                         |       |                                                                |       |                                               |       |   |   |   |   |
| Isaac  Shenberg, Ph.D.       |       | 14,482                                                              |       | $                                                  | 340,037    |   |   |   |   |   |
| Senior  Vice President,      |       | 18,000                                                              |       | $                                                  | 427,320    |   |   |   |   |   |
| Business  Development        |       | 5,518                                                               |       | $                                                  | 130,997    |   |   |   |   |   |
|                              |       | 13,500                                                              |       | $                                                  | 228,960    |   |   |   |   |   |
|                              |       | 9,000                                                               |       | $                                                  | 158,040    |   |   |   |   |   |
|                              |       |                                                                |       |                                               |       | 750 |   | $ | 11,820 |   |
|                              |       |                                                                |       |                                               |       | 3,000 |   | $ | 51,180 |   |

 

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**Potential Payments upon Terminationor Change-in-Control**

*Change-in-ControlAgreements*

Zoran maintains an Executive Retention and SeverancePlan (“Retention Plan”), which provides for certain benefits for Zoran’sexecutive officers and certain key employees upon a change in control of Zoran.The Retention Plan provides that if, in the event of a change in control ofZoran, the company acquiring Zoran does not assume, continue or substitute forthe outstanding options, stock appreciation rights or restricted stock units ofthe participants in the Retention Plan, then the vesting, exercisability andsettlement of such awards will be accelerated in full immediately prior to, butconditioned upon, the consummation of the change in control. The Retention Planprovides for additional benefits if a participant is terminated without “cause”(as that term is defined in the Retention Plan) or resigns as a result ofcertain adverse circumstances described in the Retention Plan, within 18 monthsafter a change in control. Upon such termination, a participant would beentitled to a lump sum payment in an amount equal to the aggregate amount ofhis monthly salary and prorated annual bonus for a period of 36 months in thecase of the chief executive officer, 18 months in the case of other executiveofficers and nine months in the case of other eligible key employees, with the applicableannual bonus amount to be determined at the time of termination. The annualbonus amount will equal the greatest of (i) the aggregate of all bonusesearned by the participant (whether or not paid) for the fiscal year immediatelypreceding the fiscal year of the change in control, (ii) the aggregate ofall bonuses earned by the participant (whether or not paid) for the fiscal yearimmediately preceding the fiscal year of the participant’s termination within18 months following a change in control, or (iii) the aggregate of alltargeted bonus the participant would have earned (assuming attainment of 100%of all applicable performance goals) for the fiscal year of the participant’stermination within 18 months following a change in control. In addition, Zoranwill arrange to provide health (including medical and dental) benefits to theparticipant and his or her dependents and life insurance benefits to theparticipant for 36 months in the case of the chief executive officer, 18 monthsin the case of other executive officers and nine months in the case of othereligible key employees. Zoran may satisfy its obligation to provide continuedhealth insurance benefits by paying that portion of a participant’s premiumsunder the Consolidated Omnibus Budget Reconciliation Act (i.e., COBRA) thatexceed the amount of premiums that the participant would have been required topay had he or she continued in employment. ** **The Retention Plan also providesthat, upon such termination of a participant within 18 months following achange in control, the vesting of outstanding equity awards of such participantwill be accelerated in full. In addition, options and stock appreciation rightsheld by such participant will generally remain exercisable for a period of oneyear after such termination. Additionally, the Retention Plan provides that Zoran will indemnify theparticipant for claims or actions arising out of a participant’s services toZoran and Zoran will also maintain directors’ and officers’ liability insurancefor 6 years following the date of the participant’s termination.  Finally, pursuant the Retention Plan, if thebenefits described above or otherwise received by a participant in connectionwith a change in control would cause a participant to be subject to any excisetax under Section 4999 of the Internal Revenue Code of 1986, as amended, thepayments under the Retention Plan will be automatically reduced if suchreduction would result in a greater after-tax benefits to such participant

*AgreementsSeparate from a Change of Control*

In December 1997, the Company issued an offer letterto Karl Schneider, pursuant to which, if Mr. Schneider’s employment withthe Company is terminated, either by Mr. Schneider or Zoran, for a reasonother than “cause,” as such term is defined in the offer letter, the otherparty to the letter is entitled to three months notice; provided, however, thatif Mr. Schneider accepts an offer of employment from another company whilestill employed with Zoran, Mr. Schneider must notify Zoran within twelvehours of acceptance of such offer, and Zoran may terminate Mr. Schneider’semployment without providing advance notice.

*Managers’Insurance and Education Fund*

We offer to make contributions on behalf of all of ourfull time Israeli employees, including our named executive officer who isresident in Israel, to a fund known as Managers’ Insurance. This fund providesa combination of retirement plan, insurance and severance pay benefits to theemployee, giving the employee or his or her estate payments upon retirement,disability or death and securing the severance pay, if legally entitled, upontermination of employment. Each full-time employee is entitled to participatein the plan, and each employee who

15

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participates contributes an amount equal to 5% of hisor her salary to the retirement plan and we contribute between 13.33% and15.83% of his or her salary (consisting of 5% to the retirement plan, 8.33% tosecure severance payments and up to 2.5% for disability insurance). Under theretirement plan component of the Managers’ Insurance, all of the contributionsmade by the company and by the employee are immediately vested andnon-forfeitable upon contribution to the Managers’ Insurance.

We also provide all of our full-time Israeliemployees, including our named executive officer who is resident in Israel,with an education fund benefit. We contribute to the education fund an amountequal to 7.5% of the employee’s monthly salary and the employee contributes anadditional amount equal to 2.5% of his or her monthly salary. The amountscontributed up to the legally recognized limit are available to the employee ona tax-free basis after the lapse of six years from the initial contribution.

*PotentialPayments*

The following table describes the dollar value ofvacation benefits to our named executive officers in the event they voluntarilyterminate their employment or are terminated due to death or disability.

| Name           | ** ** | ** ** | ** ** | **Accrued Vacation** | ** ** |
|----------------|------------|------------|------------|---------------------------|------------|
| Levy Gerzberg  |       | $          | 77,405     |                      |
| Karl Schneider |       | $          | 46,538     |                      |
| Issac Shenberg |       | $          | 40,000     |                      |

 

The following table describes the dollar value ofpayments upon a termination of employment of our named executive officers inthe event of their termination without cause or good reason (as is applicable)within 18 months following a change of control, assuming that termination tookplace on December 29, 2006.
| **Name**       | ** ** | ** ** | ** ** | **Salary** | ** ** | **Perquisites and Benefits** | ** ** | **Accrued Vacation** | ** ** | **Bonus(1)** | ** ** |
|----------------|------------|------------|------------|------------|------------|----------------------------------------|------------|---------------------------|------------|--------------|------------|
| Levy Gerzberg  |       | $          | 1,312,500  |       | $          | 35,475                                 |       | $                         | 77,405     |         | $          | 1,312,500 |   |
| Karl Schneider |       | $          | 412,500    |       | $          | 27,536                                 |       | $                         | 46,538     |         | $          | 288,750 |   |
| Isaac Shenberg |       | $          | 315,000    |       | $          | 169                                    |       | $                         | 40,000     |         | $          | 189,000 |   |

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(1)             For 2006, bonus meansthe greater of (i) the aggregate of all bonuses earned by the participant(whether or not actually paid) for 2005, (ii) the aggregate of all bonusesearned by the participant (whether or not actually paid) for 2005, or (iii) thetargeted bonus the participant would have earned (assuming attainment of 100%of all applicable performance goals) for 2006.

The following table describes the dollar value ofpayments and benefits upon termination of employment of our named executive officersin the event of their termination without cause or good reason (as applicable)within 18 months following a change of control, assuming that termination tookplace on December 29, 2006 and that the price per share of our common stock was$14.58, the closing price of our stock as reported on the Nasdaq Global SelectMarket on that date.

| Name           | ** ** | ** ** | ** ** | **Acceleration  of Equity Awards** | ** ** |
|----------------|------------|------------|------------|----------------------------------------------|------------|
| Levy Gerzberg  |       | $          | 410,400    |                                         |
| Karl Schneider |       | $          | 136,805    |                                         |
| Isaac Shenberg |       | $          | 123,120    |                                         |

 

**DIRECTOR COMPENSATION**

*Cash Compensation*

Forserving as a member of our Board of Directors, each independent directorreceives an annual retainer of $20,000 and a fee of $2,000 for each Boardmeeting attended.  Board committee chairsreceive $2,500 per quarter, and other committee members receive $1,500 perquarter, and all committee members receive $750 for each committee meetingattended.  In addition, Special Committeemembers received a quarterly fee of $2,500 plus $750 for each conferenceattended (regardless of whether it was a formal committee meeting) in 2006,with a cap of $10,000 per quarter.

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*Stock Options*

Uponappointment or election to the Board of Directors, each independent directorreceives an option to purchase 30,000 shares of common stock, vesting in fourequal annual installments.  Eachincumbent independent director receives an annual grant of an option topurchase 15,000 shares of our common stock, vesting in full the day precedingthe first annual meeting of stockholders after the date of grant of such annualoption, subject to the director’s continued service.  All such options are effective and priced atthe closing price of our common stock on the date of grant.  These options expire after ten years.

Thefollowing table provides information for 2006 regarding all compensationawarded to, earned by or paid to each person who served as a director for someportion or all of 2006. Other than as set forth in the table and the narrativethat follows it, to date we have not paid any fees to or reimbursed anyexpenses of our directors, made any equity or non-equity awards to directors,or paid any other compensation to directors.
| **Name**                | ** ** | ** ** | ** ** | **Fees Earned**

**or Paid in**

**Cash ($)** | ** ** | **Option Awards**

**($)** | ** ** | **All Other**

**Compensation ($)** | ** ** | **Total ($)** | ** ** |
|-------------------------|------------|------------|------------|-------------------------------------------------------------------|------------|---------------------------------|------------|-----------------------------------------------|------------|--------------------|------------|
| Levy Gerzberg, Ph.D (2) |       | —     |       | —                                                            |       | —                          |       | —                                        |       |
| Uzia Galil              |       | $          | 63,000     |                                                              | $          | 237,658                         |       | —                                        |       | $                  | 300,658    |   |
| Raymond A. Burgess      |       | $          | 76,250     |                                                              | $          | 166,494                         |       | —                                        |       | $                  | 242,744    |   |
| James D. Meindl         |       | $          | 52,500     |                                                              | $          | 237,658                         |       | —                                        |       | $                  | 290,158    |   |
| James B. Owens, Jr.     |       | $          | 67,250     |                                                              | $          | 277,067                         |       | —                                        |       | $                  | 344,317    |   |
| David Rynne             |       | $          | 74,500     |                                                              | $          | 237,658                         |       | —                                        |       | $                  | 312,158    |   |
| Arthur B. Stabenow      |       | $          | 80,500     |                                                              | $          | 237,658                         |       | —                                        |       | $                  | 318,158    |   |
| Philip M. Young         |       | $          | 57,000     |                                                              | $          | 237,658                         |       | —                                        |       | $                  | 294,658    |   |

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(1)             Theseamounts reflect the dollar amount of expense recognized for financial statementreporting purposes for the year ended December 31, 2006 in accordance withFAS 123(R), with the exception that estimated forfeitures related toservice-based vesting were disregarded in these amounts.  Assumptions used in the calculation of thisamount for purposes of our financial statements for the years endedDecember 31, 2004, 2005 and 2006 are included in Note 11 of Notes toConsolidated Financial Statements for the year ended December 31, 2006included in our Annual Report on Form 10-K. At December 31, 2006, thefollowing directors had outstanding options to purchase the number of shares ofZoran common stock set forth following their respective names:  Mr. Galil, 111,000 shares; Mr. Burgess,45,000 shares; Dr. Meindl, 103,800 shares; Mr. Owens, 75,000 shares;Mr. Rynne, 101,733 shares; Mr. Stabenow, 130,050 shares; Mr. Young,111,000 shares.

(2)             Dr. Gerzbergreceives no compensation for serving as a member of the Board of Directors.

**Director Stock Ownership Guidelines**

The Board ofDirectors adopted stock ownership guidelines requiring minimum stock ownershiplevels for our non-employee directors. Holdings include Zoran shares from all sources, including personal andtrust holdings, restricted stock, restricted stock units, stock options andstock appreciation rights.  The currentmembers of the Board of Directors are expected are each expected to own, by May25, 2008, a number of shares of Zoran common stock that have a value at leastequal to three times the annual cash retainer paid for Board service.  New members of the Board of Directors havethree years after their initial election or appointment to comply with thisguideline.

**Compensation Committee Interlocksand Insider Participation**

The members of theCompensation Committee are Mr. Galil, Mr. Stabenow and Dr. Meindl.Mr. Galil is Chairman of the committee. The Board of Directors hasdetermined that each of the members of the Compensation Committee isindependent for purposes of the Nasdaq rules. The Compensation Committeereviews the performance of our executive officers and approves their salariesand incentive compensation.

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**Compensation Committee Report**

The members of theCompensation Committee have reviewed and discussed the Compensation Discussionand Analysis required by Item 402(b) of Regulation S-K with management and,based on such review and discussion, the members of the Compensation Committeerecommended to the Board that the Compensation Discussion and Analysis beincluded in the Annual Report on Form 10-K.

**THE COMPENSATION COMMITTEE**

 

**Uzia Galil, Chairman**

**James Meindl**

**Arthur B. Stabenow**

 

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**Item12.  Security Ownership of CertainBeneficial Owners and Management and Related Stockholder Matters.**

**Securities Authorized forIssuance under Equity Compensation Plans**

Zoran currently maintains three compensation plansthat provide for the issuance of Zoran common stock to officers and otheremployees, directors or consultants. These consist of the 2005 OutsideDirectors Equity Plan, the 1995 Employee Stock Purchase Plan (“Purchase Plan”),and the 2005 Equity Incentive Plan, all of which have been approved bystockholders. The Company previously maintained the 2000 Nonstatutory StockOption Plan (“2000 Plan”) which was not approved by stockholders, and which wasterminated in 2005 upon the approval of the 2005 Equity Incentive Plan by thestockholders. The following tables set forth information regarding outstandingoptions and shares reserved for future issuance under the foregoing plans as ofDecember 31, 2006.

**Equity Compensation Plan Information as of December 31,2006** 
| **Plan Category**                                          | ** ** | **Number of Securities to  be Issued upon  Exercise of  Outstanding  Options, Warrants  and Rights  (a)** | ** ** | **Weighted-Average  Exercise Price of  Outstanding Options,  Warrants and Rights  (b)** | ** ** | **Number of Securities  Remaining Available  for Future Issuance  under Equity  Compensation Plans  (Excluding Shares  Reflected in  Column (a))  (c)** | ** **       |
|-----------------------------------------------------------------|------------|---------------------------------------------------------------------------------------------------------------------------------------------------|------------|------------------------------------------------------------------------------------------------------------------|------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------------|
| Equity compensation  plans approved by security holders         |       | 3,969,585                                                                                                                                         |       | $                                                                                                                | 18.30      |                                                                                                                                                                                                      | 6,271,896   | (1) |
| Equity compensation  plans not approved by security holders (2) |       | 4,126,759                                                                                                                                         |       | $                                                                                                                | 14.80      |                                                                                                                                                                                                      | —           |   |
| Total                                                           |       | 8,096,344                                                                                                                                         |       | $                                                                                                                | 16.52      |                                                                                                                                                                                                      | 6,271,896        | (1) |

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(1)             Includes2,311,447 shares available for future issuance under the Purchase Plan as ofDecember 31, 2006. 

(2)             Consistsof options outstanding under the 2000 Plan. We terminated the 2000 Planeffective July 29, 2005**,** however, alloptions granted to employees and consultants pursuant to the 2000 Plan continueto be governed by the terms and conditions of the 2000 Plan. The materialfeatures of the 2000 Plan are described below. 

**2000 Nonstatutory Stock Option Plan**

The 2000 Plan was terminated effective July 29,2005. The 2000 Plan provided for the grant of nonstatutory stock options toemployees or consultants with exercise prices typically equal to (but not lessthan 85% of) the fair market value of Zoran common stock on the date of grant.No current officer or other person whose eligibility would require stockholderapproval of the 2000 Plan under any law or stock exchange rules was granted anoption under the plan, except as permitted under Nasdaq Rule4350(i)(1)(A)(iii). Under that rule, a company that assumes a pre-existing,stockholder-approved plan in a merger is permitted to use the share reserveunder the assumed plan (after appropriate adjustment to reflect the merger) toissue options to any persons, including officers or directors, who were notemployed by the company at the effective time of the merger, so long as theoptions are granted on or prior to the expiration date of the assumed plan.Such options may be issued under the assumed plan or any other plan maintainedby the issuer. In its acquisition of Oak Technology, Inc. (“Oak”), Zoranassumed the stockholder-approved stock option plans of Oak that were in effectimmediately prior to the effective time of the merger with Oak. As a result,2,832,210 shares that were available for issuance under those plans (asadjusted to reflect the merger) became available for issuance under the 2000Plan until the termination of the 2000 Plan.

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The 2000 Plan was administered by the CompensationCommittee, which determined the optionees and the terms of the options granted,including exercise price and number of shares subject to the options granted.However, Dr. Gerzberg was authorized by the Board of Directors to grantoptions to non-executive officer employees to purchase up to 30,000 shares.Certain options granted under the 2000 Plan were fully exercisable from thedate of grant, subject to Zoran’s right to repurchase unvested shares at theoriginal purchase price upon the optionee’s termination of service. Subject tothe optionee’s continued service, the options generally vested at the rate of25% of the shares on the first anniversary of the date of grant and at the rateof 1/48th of the shares on the last day of each of thenext 36 calendar months thereafter. Options granted under the 2000 Plan had10-year terms and terminate three months after the termination of service,except where service terminates due to the optionee’s death or permanent andtotal disability, in which case the option remained exercisable for one yearafter such termination but in no event beyond the expiration of the option’sterm.

**SecurityOwnership of Certain Beneficial Owners and Management**

The following table sets forth, as of March 31,2007, certain information with respect to the beneficial ownership of Zoran’scommon stock by (i) each stockholder known by Zoran to be the beneficialowner of more than 5% of Zoran’s common stock, (ii) each director anddirector-nominee of Zoran, (iii) each executive officer named in theSummary Compensation Table below, and (iv) all directors and executiveofficers of Zoran as a group. The number of shares beneficially owned by eachstock holder is calculated on the basis of 49,448,791 shares of common stockoutstanding as of March 31, 2007, provided that any additional shares ofcommon stock that a stockholder has the right to acquire within 60 days afterMarch 31, 2007 are deemed to be outstanding and beneficially owned for thepurpose of calculating that stockholder’s percentage beneficial ownership. Theyare not, however, deemed to be outstanding and beneficially owned for thepurpose of computing the percentage ownership of any other person.
| **Beneficial Owner (1)**                             | ** ** | **Number of Shares**

**Beneficially Owned (2)** | ** ** | **Percent** | ** ** |
|----------------------------------------------------------------|------------|----------------------------------------------------------------------|------------|-------------|------------|
|                                                           |       |                                                                 |       |        |       |
| Dimensional Fund Advisors, Inc. (3)                            |       | 2,345,383                                                            |       | 4.70        | %          |
|                                                           |       |                                                                 |       |        |       |
| Barclays Global Investors, NA. and  affiliated entities (4)    |       | 3,209,282                                                            |       | 6.50        | %          |
|                                                           |       |                                                                 |       |        |       |
| AXA and affiliated entities (5)                                |       | 3,017,102                                                            |       | 6.10        | %          |
|                                                           |       |                                                                 |       |        |       |
| Levy Gerzberg, Ph.D. (6)                                       |       | 1,213,964                                                            |       | 2.50        | %          |
|                                                           |       |                                                                 |       |        |       |
| Isaac Shenberg, Ph.D. (7)                                      |       | 476,969                                                              |       | *           |       |
|                                                           |       |                                                                 |       |        |       |
| Karl Schneider (8)                                             |       | 373,342                                                              |       | *           |       |
|                                                           |       |                                                                 |       |        |       |
| Uzia Galil (9)                                                 |       | 124,886                                                              |       | *           |       |
|                                                           |       |                                                                 |       |        |       |
| Arthur B. Stabenow (10)                                        |       | 172,446                                                              |       | *           |       |
|                                                           |       |                                                                 |       |        |       |
| James D. Meindl, Ph.D. (11)                                    |       | 90,820                                                               |       | *           |       |
|                                                           |       |                                                                 |       |        |       |
| Philip M. Young (12)                                           |       | 103,200                                                              |       | *           |       |
|                                                           |       |                                                                 |       |        |       |
| David Rynne (13)                                               |       | 86,733                                                               |       | *           |       |
|                                                           |       |                                                                 |       |        |       |
| James B. Owens, Jr. (14)                                       |       | 60,000                                                               |       | *           |       |
|                                                           |       |                                                                 |       |        |       |
| Raymond A. Burgess (15)                                        |       | 15,000                                                               |       | *           |       |
|                                                           |       |                                                                 |       |        |       |
| Directors and executive officers as a  group (10 persons) (16) |       | 2,717,360                                                            |       | 5.50        | %          |

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*                    Lessthan 1%. 

(1)             Exceptas otherwise indicated, the persons named in this table have sole voting andinvestment power with respect to all shares of common stock shown asbeneficially owned by them, subject to community property laws where applicableand to the information contained in the footnotes to this table. Except asotherwise noted, the address for the persons named in this table is c/o 1390Kifer Road, Sunnyvale, California 94086.

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(2)             Underthe rules of the SEC, on a given date a person is deemed to be the beneficialowner of shares that can be acquired by such person within 60 days followingsuch date upon the exercise of options. Excluding options granted under the2005 Equity Incentive Plan and 2005 Outside Directors Plan and as otherwisenoted, options are immediately exercisable, subject to our right to repurchaseunvested shares upon termination of employment or other service at a priceequal to the option exercise price. 

(3)             Basedon information contained in a Schedule 13G filed by the stockholder with theSEC on February 9, 2007. According to the Schedule 13G, all securities arebeneficially owned by advisory clients of Dimensional Fund Advisors, Inc., noone of which, to the knowledge of Dimensional Fund Advisors, Inc., owns morethan 5% of the class. Dimensional Fund Advisors, Inc. disclaims beneficialownership of all such securities. The address of Dimensional Fund Advisors,Inc. is 1299 Ocean Avenue, 11th Floor, Santa Monica, CA 90401.

(4)             Basedon information contained in a Schedule 13G filed by the stockholder with theSEC on January 23, 2007. Includes 2,457,588 shares beneficially held byBarclays Global Investors, NA, 2,284,696 shares for which it possesses solevoting power and 2,457,588 shares for which it possesses sole dispositivepower. Of those shares beneficially held by Barclays Global Investors, NA,751,694 shares are beneficially held by Barclays Global Fund Advisors for whichit possesses shared dispositive power. The address of Barclays Global Investors, NA is 45 Fremont Street, 17thFloor, San Francisco, CA 94105.

(5)             Basedon information contained in a Schedule 13G filed by the stockholder with theSEC on February 13, 2007.  AXA isthe parent holding company for several entities that hold our common stock asinvestment advisors, including AllianceBernstein L.P. Collectively, theseentities have shared voting power with respect to 26,225 shares and shareddispositive power with respect to 75 shares. The address of AXA is 25, avenue Matignon, 75008 Paris, France.

(6)             Includesoptions to purchase 1,072,826 shares of common stock, all of which areexercisable.  Also includes 141,138shares beneficially owned by Levy Gerzberg.

(7)             Consistsof options to purchase 476,969 shares of common stock, all of which areexercisable.

(8)             Includesoptions to purchase 366,250 shares of common stock, all of which are exercisable.  Also includes 7,092 shares beneficially ownedby Karl Schneider.

(9)             Includes4,512 shares held by Mr. Galil’s spouse. Mr. Galil may be deemed tobe a beneficial owner of these shares, although Mr. Galil disclaims suchbeneficial ownership. Also includes options to purchase 96,000 shares of commonstock. Also includes 24,374 shares beneficially owned by Uzia Galil.

(10)       Includesoptions to purchase 115,050 shares of common stock.  Also includes 57,396 shares beneficiallyowned by Art Stabenow.

(11)       Includes111 shares held jointly with Dr. Meindl’s spouse and 1,909 shares held byJames and Frederica Meindl as trustees of the Meindl Trust datedFebruary 4, 1972. Also includes options to purchase 88,800 shares ofcommon stock. 

(12)       Consistsof options to purchase 96,000 shares of common stock. Also includes 7,200shares beneficially owned by Philip Young.

(13)       Consistsof options to purchase 86,733 shares of common stock. 

(14)       Consistsof options to purchase 60,000 shares of common stock. 

(15)       Consistsof options to purchase 15,000 shares of common stock.  

(16)       Seenotes 6 through 15. Includes an aggregate of 2,473,628 shares issuable uponexercise of options that are currently exercisable or will become exercisablewithin 60 days after March 31, 2007 beneficially owned by executiveofficers and directors.

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**Item 13.  Certain Relationships and RelatedTransactions, and Director Independence.**

**Transactions with Related Persons**

In Fiscal Year2006, Zoran has not participated, and is not currently participating in, anytransaction or proposed transaction in which the amount involved exceeded$120,000, and in which any related person had or will have a direct or indirectmaterial interest.

**Review, Approval or Ratificationof Transactions with Related Persons**

The AuditCommittee reviews and approves all related person transactions.

**Director Independence**

Uzia Galil,Raymond A. Burgess, James D. Meindl, James B. Owens, Jr., David Rynne, ArthurB. Stabenow, and Philip M. Young are “independent directors” for purposes ofthe rules of the Nasdaq Stock Market (“Nasdaq”), as currently in effect.

All members of theAudit Committee, Compensation Committee and Nominating and Corporate GovernanceCommittee are “independent” directors for purposes of the rules of Nasdaq, ascurrently in effect.

**Item14.  Principal Accounting Fees andServices.**

**Audit Fees**

The following table sets forth the aggregate feesbilled to Zoran for the years ended December 31, 2005 and 2006 byPricewaterhouseCoopers LLP:

|                    | ** ** | **2005** | ** ** | **2006** | ** ** |
|--------------------|------------|----------|------------|----------|------------|
| Audit fees(1)      |       | $        | 1,101,366  |     | $          | 3,829,639 |   |
| Tax fees(2)        |       | $        | 54,765     |     | $          | 23,572 |   |
| All other  fees(3) |       | $        | 5,500      |     | $          | 1,500 |   |
|               |       |     |       |     |       |
| Total              |       | $        | 1,161,631  |     | $          | 3,854,711 |   |

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(1)             Auditfees consist of fees billed for professional services rendered for the audit ofZoran’s consolidated annual financial statements and review of the interimconsolidated financial statements included in quarterly reports and servicesthat are normally provided by PricewaterhouseCoopers LLP in connection withstatutory and regulatory filings or engagements. Audit fees also include feesrelated to PricewaterhouseCoopers LLP’s audit of the effectiveness of Zoran’sinternal control over financial reporting pursuant to Section 404 of theSarbanes-Oxley Act.  Audit fees for 2006also includes $2,421,372 associated with services provided in conjunction withthe Company’s review of historical stock option practices and the associatedrestatements.  

(2)             Taxfees consist of fees billed for professional services rendered for taxcompliance, tax advice and tax planning (domestic and international). Theseservices include assistance regarding federal, state and international taxcompliance, acquisitions and international tax planning. 

(3)             Otherfees include fees for accounting library software and other miscellaneousservices.

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Company policy requires the Audit Committee topre-approve all audit and permissible non-audit services provided by ourindependent registered public accounting firm. Management is responsible forreporting to the Audit Committee on a quarterly basis regarding expendituresfor non-audit services made in accordance with this pre-approval.

**PART IV**

**Item 15—Exhibits and FinancialStatement Schedules**

The followingdocuments are filed as a part of this report:

(1)  Exhibits:

**EXHIBIT LIST**
|             | ** ** | ** **                                                                                   | ** ** | **Incorporated  by Reference** |
|-------------|------------|----------------------------------------------------------------------------------------------|------------|--------------------------------|
| **Exhibit** | ** ** | ** **                                                                                   | ** ** | ** **                     | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | **Filed** |
| **Number**  | ** ** | **Exhibit Title**                                                                       | ** ** | **Form**                       | ** ** | **File No.** | ** ** | **Exhibit** | ** ** | **Filing Date** | ** ** | **Herewith** |
| 31.1        |       | Certification of Chief Executive Officer, pursuant  to Rule 13a-14(a) or 15d-14(a) | ** ** | ** **                     | ** ** | ** ** |   |   |   |   |   | X |
|        |       |                                                                                         | ** ** | ** **                     | ** ** | ** ** |   |   |   |   |   |   |
| 31.2        |       | Certification of Chief Financial Officer, pursuant  to Rule 13a-14(a) or 15d-14(a) | ** ** | ** **                     | ** ** | ** ** |   |   |   |   |   | X |

 

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**SIGNATURES**

Pursuant to therequirements of Section 13 or 15(d) of the Securities Exchange Act of1934, the registrant has duly caused this report to be signed on its behalf bythe undersigned, thereunto duly authorized.
| Dated: April 30, 2007 | ZORAN CORPORATION |
|----------------------------|-------------------|
|                       |              |   |   |   |
|                            |              | By: |   | /s/    KARL SCHNEIDER |
|                       | ** **        | ** ** |   | **Karl  Schneider**

**Senior  Vice President, Finance and**

**Chief  Financial Officer** |

 

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