**EXHIBIT10.03**

 

**SILICON IMAGE, INC.**

 

**1999 EQUITY INCENTIVE PLAN**

 

Adopted July 20,1999

As Amended March29, 2001As Amended and Restated May 20, 2003

 

**1.****             PURPOSE**.  The purpose of this Plan is to provideincentives to attract, retain and motivate eligible persons whose present andpotential contributions are important to the success of the Company, its Parentand Subsidiaries, by offering them an opportunity to participate in theCompany’s future performance through awards of Options, Restricted Stock and StockBonuses.  Capitalized terms not definedin the text are defined in Section 23.

 

**2.****             SHARES SUBJECT TO THE PLAN**.

 

2.1           Number of Shares Available.  Subject to Sections 2.2 and 18, the totalnumber of Shares reserved and available for grant and issuance pursuant to thisPlan will be 2,000,000 Shares plus Shares that are subject to:(a) issuance upon exercise of an Option but cease to be subject to suchOption for any reason other than exercise of such Option; (b) an Awardgranted hereunder but are forfeited or are repurchased by the Company at theoriginal issue price; and (c) an Award that otherwise terminates withoutShares being issued.  In addition, anyauthorized shares not issued or subject to outstanding grants under the SiliconImage, Inc. 1995 Equity Incentive Plan (the “***Prior Plan***”) on the Effective Date (asdefined below) and any shares issued under the Prior Plan that are forfeited orrepurchased by the Company or that are issuable upon exercise of optionsgranted pursuant to the Prior Plan that expire or become unexercisable for anyreason without having been exercised in full, will no longer be available forgrant and issuance under the Prior Plan, but will be available for grant andissuance under this Plan.  In addition,on the first business day of each calendar year of the Company during the termof the Plan, the aggregate number of Shares reserved and available for grantand issuance pursuant to this Plan will be increased automatically by a numberof Shares equal to 5% of the total outstanding shares of the Company, provided,that the Board or the Committee may in its sole discretion reduce the amount ofthe increase in any particular year; and, provided further, that no morethan 10,000,000 shares shall qualify as ISOs (as defined in Section 5below).  At all times the Company shallreserve and keep available a sufficient number of Shares as shall be requiredto satisfy the requirements of all outstanding Options granted under this Planand all other outstanding but unvested Awards granted under this Plan.

 

2.2           Adjustment of Shares.  In the event that the number of outstandingshares is changed by a stock dividend, recapitalization, stock split, reversestock split, subdivision, combination, reclassification or similar change inthe capital structure of the Company without consideration, then (a) the numberof Shares reserved for issuance under this Plan, (b) the Share amounts setforth in Section 3 below, (c) the number of Shares subject to each Annual Grantdescribed in Section 9 below, (d) the Exercise Prices of and number of Sharessubject to outstanding Options, and (e) the number of Shares subject to otheroutstanding Awards will be proportionately adjusted, subject to any requiredaction by the Board or the stockholders of the Company and compliance withapplicable securities laws; provided, however, that fractions ofa Share will not be issued but will either be replaced by a cash payment equalto the Fair Market Value of such fraction of a Share or will be rounded up tothe nearest whole Share, as determined by the Committee.

 

**3.****             ELIGIBILITY**.  ISOs (as defined in Section 5 below) may begranted only to employees (including officers and directors who are alsoemployees) of the Company or of a Parent or Subsidiary of the Company.  All other Awards may be granted toemployees, officers, directors, consultants, independent contractors andadvisors of the Company or any Parent or Subsidiary of the Company; providedsuch consultants, contractors and advisors render bona fide services not inconnection with the offer and sale of securities in a capital-raisingtransaction.  No person will be eligibleto receive more than 500,000 Shares in any calendar year under this Planpursuant to the grant of Awards hereunder, other than new employees of the Companyor of a Parent or Subsidiary of the Company (including new employees who arealso officers and directors of the Company or any Parent or

 

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Subsidiary of theCompany), who are eligible to receive up to a maximum of 750,000 Shares in thecalendar year in which they commence their employment.  A person may be granted more than one Awardunder this Plan.

 

**4.****             ADMINISTRATION**.

 

4.1           Committee Authority.  This Plan will be administered by theCommittee or by the Board acting as the Committee.  Except for automatic grants to Eligible Directors pursuant toSection 9 hereof, and subject to the general purposes, terms and conditions ofthis Plan, and to the direction of the Board, the Committee will have fullpower to implement and carry out this Plan. Except for automatic grants to Eligible Directors pursuant to Section 9hereof, the Committee will have the authority to:

 

(a)           construe and interpretthis Plan, any Award Agreement and any other agreement or document executedpursuant to this Plan;

 

(b)           prescribe, amend andrescind rules and regulations relating to this Plan or any Award;

 

(c)           select persons toreceive Awards;

 

(d)           determine the form andterms of Awards;

 

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

 

(f)            determine whetherAwards will be granted singly, in combination with, in tandem with, inreplacement of, or as alternatives to, other Awards under this Plan or anyother incentive or compensation plan of the Company or any Parent or Subsidiaryof the Company;

 

(g)           grant waivers of Planor Award conditions;

 

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

 

(i)            correct any defect,supply any omission or reconcile any inconsistency in this Plan, any Award orany Award Agreement;

 

(j)            determine whether an Awardhas been earned; and

 

(k)           make all otherdeterminations necessary or advisable for the administration of this Plan.

 

4.2           Committee Discretion.  Except for automatic grants to EligibleDirectors pursuant to Section 9 hereof, any determination made by the Committeewith respect to any Award will be made in its sole discretion at the time ofgrant of the Award or, unless in contravention of any express term of this Planor Award, at any later time, and such determination will be final and bindingon the Company and on all persons having an interest in any Award under thisPlan.  The Committee may delegate to oneor more officers of the Company the authority to grant an Award under this Planto Participants who are not Insiders of the Company.

 

**5.****             OPTIONS**.  The Committee may grant Options to eligiblepersons and will determine whether such Options will be Incentive Stock Optionswithin the meaning of the Code (“***ISO***”) or Nonqualified Stock Options (“***NQSOs***”), the numberof Shares subject to the Option, the Exercise Price of the Option, the periodduring which the Option may be exercised, and all other terms and conditions ofthe Option, subject to the following:

 

5.1           Form of Option Grant.  Each Option granted under this Plan will beevidenced by an Award Agreement which will expressly identify the Option as anISO or an NQSO (“***StockOption Agreement***”), and, except as otherwise required bythe terms of Section 9 hereof, will be in such form and contain such provisions

 

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(which need not be thesame for each Participant) as the Committee may from time to time approve, andwhich will comply with and be subject to the terms and conditions of this Plan.

 

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

 

5.3           Exercise Period.  Except for automatic grants to EligibleDirectors pursuant to Section 9 hereof, Options may be exercisable within thetimes or upon the events determined by the Committee as set forth in the StockOption Agreement governing such Option; provided, however, thatno Option will be exercisable after the expiration of ten (10) years from thedate the Option is granted; and provided further that no ISO granted toa person who directly or by attribution owns more than ten percent (10%) of thetotal combined voting power of all classes of stock of the Company or of anyParent or Subsidiary of the Company (“***Ten Percent Stockholder***”) will be exercisableafter the expiration of five (5) years from the date the ISO is granted.  The Committee also may provide for Optionsto become exercisable at one time or from time to time, periodically orotherwise, in such number of Shares or percentage of Shares as the Committeedetermines.

 

5.4           Exercise Price.  The Exercise Price of an Option will bedetermined by the Committee when the Option is granted and may be not less than85% of the Fair Market Value of the Shares on the date of grant; provided that:(i) the Exercise Price of an ISO will be not less than 100% of the Fair MarketValue of the Shares on the date of grant; and (ii) the Exercise Price of anyISO granted to a Ten Percent Stockholder will not be less than 110% of the FairMarket Value of the Shares on the date of grant.  Payment for the Shares purchased may be made in accordance withSection 8 of this Plan.

 

5.5           Method of Exercise.  Options may be exercised only by delivery tothe Company of a written stock option exercise agreement  (the “***Exercise Agreement***”) in a form approved by theCommittee (which need not be the same for each Participant), stating the numberof Shares being purchased, the restrictions imposed on the Shares purchasedunder such Exercise Agreement, if any, and such representations and agreementsregarding Participant’s investment intent and access to information and othermatters, if any, as may be required or desirable by the Company to comply withapplicable securities laws, together with payment in full of the Exercise Pricefor the number of Shares being purchased.

 

5.6           Termination.  Notwithstanding the exercise periods setforth in the Stock Option Agreement, exercise of an Option will always besubject to the following:

 

(a)           If the Participant isTerminated for any reason except death or Disability, then the Participant mayexercise such Participant’s Options only to the extent that such Options wouldhave been exercisable upon the Termination Date no later than three (3) monthsafter the Termination Date (or such shorter or longer time period not exceedingfive (5) years as may be determined by the Committee, with any exercise beyondthree (3) months after the Termination Date deemed to be an NQSO), but in anyevent, no later than the expiration date of the Options.

 

(b)           If the Participant isTerminated because of Participant’s death or Disability (or the Participantdies within three (3) months after a Termination other than for Cause orbecause of Participant’s Disability), then Participant’s Options may beexercised only to the extent that such Options would have been exercisable byParticipant on the Termination Date and must be exercised by Participant (orParticipant’s legal representative or authorized assignee) no later than twelve(12) months after the Termination Date (or such shorter or longer time periodnot exceeding five (5) years as may be determined by the Committee, with anysuch exercise beyond (a) three (3) months after the Termination Date when theTermination is

 

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for any reason other thanthe Participant’s death or Disability, or (b) twelve (12) months after theTermination Date when the Termination is for Participant’s death or Disability,deemed to be an NQSO), but in any event no later than the expiration date ofthe Options.

 

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

 

5.8           Limitations on ISO.  The aggregate Fair Market Value (determinedas of the date of grant) of Shares with respect to which ISO are exercisablefor the first time by a Participant during any calendar year (under this Planor under any other incentive stock option plan of the Company, Parent orSubsidiary of the Company) will not exceed $100,000.  If the Fair Market Value of Shares on the date of grant withrespect to which ISO are exercisable for the first time by a Participant duringany calendar year exceeds $100,000, then the Options for the first $100,000worth of Shares to become exercisable in such calendar year will be ISO and theOptions for the amount in excess of $100,000 that become exercisable in thatcalendar year will be NQSOs.  In theevent that the Code or the regulations promulgated thereunder are amended afterthe Effective Date of this Plan to provide for a different limit on the FairMarket Value of Shares permitted to be subject to ISO, such different limitwill be automatically incorporated herein and will apply to any Options grantedafter the effective date of such amendment.

 

5.9           Modification, Extension or Renewal.  The Committee may modify, extend or renewoutstanding Options and authorize the grant of new Options in substitutiontherefor, provided that any such action may not, without the written consent ofa Participant, impair any of such Participant’s rights under any Optionpreviously granted.  Any outstanding ISOthat is modified, extended, renewed or otherwise altered will be treated inaccordance with Section 424(h) of the Code. The Committee may reduce the Exercise Price of outstanding Optionswithout the consent of Participants affected by a written notice to them; provided,however, that the Exercise Price may not be reduced below the minimumExercise Price that would be permitted under Section 5.4 of this Plan forOptions granted on the date the action is taken to reduce the Exercise Price.

 

5.10         No Disqualification.  Notwithstanding any other provision in thisPlan, no term of this Plan relating to ISO will be interpreted, amended oraltered, nor will any discretion or authority granted under this Plan beexercised, so as to disqualify this Plan under Section 422 of the Code or,without the consent of the Participant affected, to disqualify any ISO underSection 422 of the Code.

 

**6.****             RESTRICTED STOCK**.  A Restricted Stock Award is an offer by theCompany to sell to an eligible person Shares that are subject torestrictions.  The Committee willdetermine to whom an offer will be made, the number of Shares the person maypurchase, the price to be paid (the “***Purchase Price***”), the restrictions to which theShares will be subject, and all other terms and conditions of the RestrictedStock Award, subject to the following:

 

6.1           Form of Restricted Stock Award.  All purchases under a Restricted Stock Awardmade pursuant to this Plan will be evidenced by an Award Agreement (“***RestrictedStock Purchase Agreement***”) that will be in such form(which need not be the same for each Participant) as the Committee will fromtime to time approve, and will comply with and be subject to the terms andconditions of this Plan.  The offer ofRestricted Stock will be accepted by the Participant’s execution and deliveryof the Restricted Stock Purchase Agreement and full payment for the Shares tothe Company within thirty (30) days from the date the Restricted Stock PurchaseAgreement is delivered to the person. If such person does not execute and deliver the Restricted StockPurchase Agreement along with full payment for the Shares to the Company withinthirty (30) days, then the offer will terminate, unless otherwise determined bythe Committee.

 

6.2           Purchase Price.  The Purchase Price of Shares sold pursuantto a Restricted Stock Award will be determined by the Committee on the date theRestricted Stock Award is granted, except in the case of

 

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a sale to a Ten PercentStockholder, in which case the Purchase Price will be 100% of the Fair MarketValue.  Payment of the Purchase Pricemay be made in accordance with Section 8 of this Plan.

 

6.3           Terms of RestrictedStock Awards.  Restricted StockAwards shall be subject to such restrictions as the Committee may impose.  These restrictions may be based uponcompletion of a specified number of years of service with the Company or uponcompletion of the performance goals as set out in advance in the Participant’sindividual Restricted Stock Purchase Agreement.  Restricted Stock Awards may vary from Participant to Participantand between groups of Participants. Prior to the grant of a Restricted Stock Award, the Committeeshall:  (a) determine the nature, lengthand starting date of any Performance Period for the Restricted Stock Award; (b)select from among the Performance Factors to be used to measure performancegoals, if any; and (c) determine the number of Shares that may be awarded tothe Participant.  Prior to the paymentof any Restricted Stock Award, the Committee shall determine the extent towhich such Restricted Stock Award has been earned.  Performance Periods may overlap and Participants may participatesimultaneously with respect to Restricted Stock Awards that are subject todifferent Performance Periods and having different performance goals and othercriteria.

 

6.4           Termination During Performance Period.  If a Participant is Terminated during aPerformance Period for any reason, then such Participant will be entitled topayment (whether in Shares, cash or otherwise) with respect to the RestrictedStock Award only to the extent earned as of the date of Termination inaccordance with the Restricted Stock Purchase Agreement, unless the Committeewill determine otherwise.

 

**7.****             STOCK BONUSES**.

 

7.1           Awards of Stock Bonuses.  A Stock Bonus is an award of Shares (whichmay consist of Restricted Stock) for services rendered to the Company or anyParent or Subsidiary of the Company.  AStock Bonus may be awarded for past services already rendered to the Company,or any Parent or Subsidiary of the Company pursuant to an Award Agreement (the“***Stock Bonus Agreement***”)that will be in such form (which need not be the same for each Participant) asthe Committee will from time to time approve, and will comply with and besubject to the terms and conditions of this Plan.  A Stock Bonus may be awarded upon satisfaction of suchperformance goals as are set out in advance in the Participant’s individualAward Agreement (the “***Performance Stock Bonus Agreement***”) that will be in suchform (which need not be the same for each Participant) as the Committee willfrom time to time approve, and will comply with and be subject to the terms andconditions of this Plan.  Stock Bonusesmay vary from Participant to Participant and between groups of Participants,and may be based upon the achievement of the Company, Parent or Subsidiaryand/or individual performance factors or upon such other criteria as theCommittee may determine.

 

7.2           Terms of Stock Bonuses.  The Committee will determine the number ofShares to be awarded to the Participant. If the Stock Bonus is being earned upon the satisfaction of performancegoals pursuant to a Performance Stock Bonus Agreement, then the Committee will:(a)  determine the nature, length andstarting date of any Performance Period for each Stock Bonus; (b) select fromamong the Performance Factors to be used to measure the performance, if any;and (c) determine the number of Shares that may be awarded to theParticipant.  Prior to the payment ofany Stock Bonus, the Committee shall determine the extent to which such StockBonuses have been earned.  PerformancePeriods may overlap and Participants may participate simultaneously withrespect to Stock Bonuses that are subject to different Performance Periods anddifferent performance goals and other criteria.  The number of Shares may be fixed or may vary in accordance withsuch performance goals and criteria as may be determined by the Committee.  The Committee may adjust the performancegoals applicable to the Stock Bonuses to take into account changes in law andaccounting or tax rules and to make such adjustments as the Committee deemsnecessary or appropriate to reflect the impact of extraordinary or unusualitems, events or circumstances to avoid windfalls or hardships.

 

7.3           Form of Payment.  The earned portion of a Stock Bonus may bepaid currently or on a deferred basis with such interest or dividendequivalent, if any, as the Committee may determine.  Payment may

 

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be made in the form ofcash or whole Shares or a combination thereof, either in a lump sum payment orin installments, all as the Committee will determine.

 

**8.****             PAYMENT FOR SHARE PURCHASES**.

 

8.1           Payment.  Payment for Shares purchased pursuant tothis Plan may be made in cash (by check) or, where expressly approved for theParticipant by the Committee and where permitted by law:

 

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

 

(b)           by surrender of sharesthat either:  (1) have been owned byParticipant for more than six (6) months and have been paid for within themeaning of SEC Rule 144 (and, if such shares were purchased from the Company byuse of a promissory note, such note has been fully paid with respect to suchshares); or (2) were obtained by Participant in the public market;

 

(c)           by tender of a fullrecourse promissory note having such terms as may be approved by the Committeeand bearing interest at a rate sufficient to avoid imputation of income underSections 483 and 1274 of the Code; provided, however, thatParticipants who are not employees or directors of the Company will not beentitled to purchase Shares with a promissory note unless the note isadequately secured by collateral other than the Shares;

 

(d)           by waiver ofcompensation due or accrued to the Participant for services rendered;

 

(e)           with respect only topurchases upon exercise of an Option, and provided that a public market for theCompany’s stock exists:

 

(1)           through a “same daysale” commitment from the Participant and a broker-dealer that is a member ofthe National Association of Securities Dealers (an “***NASD Dealer***”) whereby the Participantirrevocably elects to exercise the Option and to sell a portion of the Sharesso purchased to pay for the Exercise Price, and whereby the NASD Dealerirrevocably commits upon receipt of such Shares to forward the Exercise Pricedirectly to the Company; or

 

(2)           through a “margin”commitment from the Participant and a NASD Dealer whereby the Participantirrevocably elects to exercise the Option and to pledge the Shares so purchasedto the NASD Dealer in a margin account as security for a loan from the NASDDealer in the amount of the Exercise Price, and whereby the NASD Dealerirrevocably commits upon receipt of such Shares to forward the Exercise Pricedirectly to the Company; or

 

(f)            by any combination ofthe foregoing.

 

8.2           Loan Guarantees.  The Committee may help the Participant payfor Shares purchased under this Plan by authorizing a guarantee by the Companyof a third-party loan to the Participant.

 

**9.**             **AUTOMATIC GRANTS TO ELIGIBLE DIRECTORS.**

 

9.1           Types of Options andShares.  Options granted under thisPlan and subject to this Section 9 shall be NQSOs.

 

9.2           Eligibility.  Options subject to this Section 9 shall begranted only to Eligible Directors.

 

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9.3           Annual Grants.Immediately following each annual meeting of stockholders, (a) each EligibleDirector will automatically be granted an Option for 30,000 Shares, providedthe Eligible Director is a member of the Board on such date and has servedcontinuously as a member of the Board of Directors of the Company (or theCompany’s California predecessor) for a period of at least one year since thedate when such Eligible Director first became a member of the Board; and (b)each Eligible Director who is a member of a standing committee of the Boardwill automatically be granted an option for an additional 10,000 Shares foreach such committee on which such Eligible Director serves, provided suchEligible Director is a member of such committee on such date and has servedcontinuously as a member of such committee of the Company (or the Company’sCalifornia predecessor) for a period of at least one year since the date whensuch Eligible Director first joined such committee.  The Options described in this Section 9.3 are referred to as the“***Annual Grants***.”

 

9.4           Exercise Price;Vesting; Exercise Period.  Theexercise price of an Annual Grant shall be the Fair Market Value of the Sharesat the time of grant.  Provided thedirector continues to provide services to the Company, an Annual Grant shallbecome vested and exercisable with respect to one twenty-fourth (1/24) of theShares each month following the date of grant until fully vested; provided,however, that an Annual Grant shall become fully vested immediately prior tothe consummation of a Change in Control. The Exercise Period of an Annual Grant shall end five (5) years afterthe date of grant.

 

**10.****          WITHHOLDING TAXES**.

 

10.1         Withholding Generally.  Whenever Shares are to be issued insatisfaction of Awards granted under this Plan, the Company may require theParticipant to remit to the Company an amount sufficient to satisfy federal,state and local withholding tax requirements prior to the delivery of anycertificate or certificates for such Shares. Whenever, under this Plan, payments in satisfaction of Awards are to bemade in cash, such payment will be net of an amount sufficient to satisfyfederal, state, and local withholding tax requirements.

 

10.2         Stock Withholding.  When, under applicable tax laws, aParticipant incurs tax liability in connection with the exercise or vesting ofany Award that is subject to tax withholding and the Participant is obligatedto pay the Company the amount required to be withheld, the Committee may in itssole discretion allow the Participant to satisfy the minimum withholding taxobligation by electing to have the Company withhold from the Shares to beissued that number of Shares having a Fair Market Value equal to the minimumamount required to be withheld, determined on the date that the amount of taxto be withheld is to be determined.  Allelections by a Participant to have Shares withheld for this purpose will bemade in accordance with the requirements established by the Committee and be inwriting in a form acceptable to the Committee

 

**11.****          TRANSFERABILITY**.

 

11.1         Except as otherwiseprovided in this Section 11, Awards granted under this Plan, and any interesttherein, will not be transferable or assignable by Participant, and may not bemade subject to execution, attachment or similar process, otherwise than bywill or by the laws of descent and distribution or as determined by theCommittee and set forth in the Award Agreement with respect to Awards that arenot ISOs.

 

11.2         All Awards other thanNQSO’s.  All Awards other thanNQSO’s shall be exercisable: (i) during the Participant’s lifetime, only by(A) the Participant, or (B) the Participant’s guardian or legalrepresentative; and (ii) after Participant’s death, by the legal representativeof the Participant’s heirs or legatees.

 

11.3         NQSOs.  Unless otherwise restricted by theCommittee, an NQSO shall be exercisable: (i) during the Participant’s lifetimeonly by (A) the Participant, (B) the Participant’s guardian or legalrepresentative, (C) a Family Member of the Participant who has acquiredthe NQSO by “permitted transfer;” and (ii) after Participant’s death, by thelegal representative of the Participant’s heirs or legatees.

 

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“Permitted transfer”means, as authorized by this Plan and the Committee in an NQSO, any transfereffected by the Participant during the Participant’s lifetime of an interest insuch NQSO but only such transfers which are by gift or domestic relationsorder.  A permitted transfer does notinclude any transfer for value and neither of the following are transfers forvalue:  (a) a transfer of under adomestic relations order in settlement of marital property rights or (b) atransfer to an entity in which more than fifty percent of the voting interestsare owned by Family Members or the Participant in exchange for an interest inthat entity.

 

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**12.****          PRIVILEGES OF STOCK OWNERSHIP;RESTRICTIONS ON SHARES.**

 

12.1         Voting and Dividends.  No Participant will have any of the rightsof a stockholder with respect to any Shares until the Shares are issued to theParticipant.  After Shares are issued tothe Participant, the Participant will be a stockholder and have all the rightsof a stockholder with respect to such Shares, including the right to vote andreceive all dividends or other distributions made or paid with respect to suchShares; provided, that if such Shares are Restricted Stock, then anynew, additional or different securities the Participant may become entitled toreceive with respect to such Shares by virtue of a stock dividend, stock splitor any other change in the corporate or capital structure of the Company willbe subject to the same restrictions as the Restricted Stock; provided, further,that the Participant will have no right to retain such stock dividends or stockdistributions with respect to Shares that are repurchased at the Participant’sPurchase Price or Exercise Price pursuant to Section 12.

 

12.2         Financial Statements.  The Company will provide financialstatements to each Participant prior to such Participant’s purchase of Sharesunder this Plan, and to each Participant annually during the period suchParticipant has Awards outstanding; provided, however, theCompany will not be required to provide such financial statements toParticipants whose services in connection with the Company assure them accessto equivalent information.

 

12.3         Restrictions onShares.  At the discretion of theCommittee, the Company may reserve to itself and/or its assignee(s) in theAward Agreement a right to repurchase a portion of or all Unvested Shares heldby a Participant following such Participant’s Termination at any time withinninety (90) days after the later of Participant’s Termination Date and the dateParticipant purchases Shares under this Plan, for cash and/or cancellation ofpurchase money indebtedness, at the Participant’s Exercise Price or PurchasePrice, as the case may be.

 

**13.****          CERTIFICATES**.  All certificates for Shares or other securitiesdelivered under this Plan will be subject to such stock transfer orders,legends and other restrictions as the Committee may deem necessary oradvisable, including restrictions under any applicable federal, state orforeign securities law, or any rules, regulations and other requirements of theSEC or any stock exchange or automated quotation system upon which the Sharesmay be listed or quoted.

 

**14.****          ESCROW; PLEDGE OF SHARES**.  To enforce any restrictions on aParticipant’s Shares, the Committee may require the Participant to deposit allcertificates representing Shares, together with stock powers or otherinstruments of transfer approved by the Committee, appropriately endorsed inblank, with the Company or an agent designated by the Company to hold in escrowuntil such restrictions have lapsed or terminated, and the Committee may causea legend or legends referencing such restrictions to be placed on thecertificates.  Any Participant who ispermitted to execute a promissory note as partial or full consideration for thepurchase of Shares under this Plan will be required to pledge and deposit withthe Company all or part of the Shares so purchased as collateral to secure thepayment of Participant’s obligation to the Company under the promissory note; provided,however, that the Committee may require or accept other or additionalforms of collateral to secure the payment of such obligation and, in any event,the Company will have full recourse against the Participant under thepromissory note notwithstanding any pledge of the Participant’s Shares or othercollateral.  In connection with anypledge of the Shares, Participant will be required to execute and deliver awritten pledge agreement in such form as the Committee will from time to timeapprove.  The Shares purchased with thepromissory note may be released from the pledge on a pro rata basis as thepromissory note is paid.

 

**15.****          EXCHANGE AND BUYOUT OF AWARDS**.  The Committee may, at any time or from timeto time, authorize the Company, with the consent of the respectiveParticipants, to issue new Awards in exchange for the surrender andcancellation of any or all outstanding Awards. The Committee may at any time buy from a Participant an Award previouslygranted with payment in cash, Shares (including Restricted Stock) or otherconsideration, based on such terms and conditions as the Committee and theParticipant may agree.

 

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**16.****          SECURITIES LAW AND OTHER REGULATORY COMPLIANCE**.  An Award will not be effective unless suchAward is in compliance with all applicable federal and state securities laws,rules and regulations of any governmental body, and the requirements of anystock exchange or automated quotation system upon which the Shares may then be listedor quoted, as they are in effect on the date of grant of the Award and also onthe date of exercise or other issuance. Notwithstanding any other provision in this Plan, the Company will haveno obligation to issue or deliver certificates for Shares under this Plan priorto:  (a) obtaining any approvals fromgovernmental agencies that the Company determines are necessary or advisable;and/or (b) completion of any registration or other qualification of such Sharesunder any state or federal law or ruling of any governmental body that theCompany determines to be necessary or advisable.  The Company will be under no obligation to register the Shareswith the SEC or to effect compliance with the registration, qualification orlisting requirements of any state securities laws, stock exchange or automatedquotation system, and the Company will have no liability for any inability orfailure to do so.

 

**17.****          NO OBLIGATION TO EMPLOY**.  Nothing in this Plan or any Award grantedunder this Plan will confer or be deemed to confer on any Participant any rightto continue in the employ of, or to continue any other relationship with, theCompany or any Parent or Subsidiary of the Company or limit in any way theright of the Company or any Parent or Subsidiary of the Company to terminateParticipant’s employment or other relationship at any time, with or withoutcause.

 

**18.****          CORPORATE TRANSACTIONS**.

 

18.1         Assumption or Replacement of Awards by Successor.  In the event of (a) a dissolution orliquidation of the Company, (b) a merger or consolidation in which theCompany is not the surviving corporation (other than a merger or consolidationwith a wholly-owned subsidiary, a reincorporation of the Company in a differentjurisdiction, or other transaction in which there is no substantial change inthe stockholders of the Company or their relative stock holdings and the Awardsgranted under this Plan are assumed, converted or replaced by the successorcorporation, which assumption will be binding on all Participants), (c) a mergerin which the Company is the surviving corporation but after which thestockholders of the Company immediately prior to such merger (other than anystockholder that merges, or which owns or controls another corporation thatmerges, with the Company in such merger) cease to own their shares or otherequity interest in the Company, (d) the sale of substantially all of the assetsof the Company, or (e) the acquisition, sale, or transfer of more than 50% ofthe outstanding shares of the Company by tender offer or similar transaction,any or all outstanding Awards (including without limitation Annual Grants underSection 9) may be assumed, converted or replaced by the successor corporation(if any), which assumption, conversion or replacement will be binding on allParticipants.  In the alternative, thesuccessor corporation may substitute equivalent Awards or provide substantiallysimilar consideration to Participants as was provided to stockholders (aftertaking into account the existing provisions of the Awards).  The successor corporation may also issue, inplace of outstanding Shares of the Company held by the Participant,substantially similar shares or other property subject to repurchaserestrictions no less favorable to the Participant.  In the event such successor corporation (if any) refuses toassume or substitute Awards, as provided above, pursuant to a transactiondescribed in this Subsection 18.1, such Awards (including without limitationAnnual Grants under Section 9) will expire on such transaction at such time andon such conditions as the Committee will determine.  Notwithstanding anything in this Plan to the contrary, theCommittee may, in its sole discretion, provide that the vesting of any or allAwards granted pursuant to this Plan will accelerate upon a transactiondescribed in this Section 18.  If theCommittee exercises such discretion with respect to Options, such Options willbecome exercisable in full prior to the consummation of such event at such timeand on such conditions as the Committee determines, and if such Options are notexercised prior to the consummation of the corporate transaction, they shallterminate at such time as determined by the Committee.

 

18.2         Other Treatment of Awards.  Subject to any greater rights granted toParticipants under the foregoing provisions of this Section 18, in the event ofthe occurrence of any transaction described in Section 18.1, any outstandingAwards (including without limitation Annual Grants under Section 9) will betreated as provided in the applicable agreement or plan of merger,consolidation, dissolution, liquidation, or sale of assets.

 

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18.3         Assumption of Awards by the Company.  The Company, from time to time, also maysubstitute or assume outstanding awards granted by another company, whether inconnection with an acquisition of such other company or otherwise, by either;(a) granting an Award under this Plan in substitution of such other company’saward; or (b) assuming such award as if it had been granted under this Plan ifthe terms of such assumed award could be applied to an Award granted under thisPlan.  Such substitution or assumptionwill be permissible if the holder of the substituted or assumed award wouldhave been eligible to be granted an Award under this Plan if the other companyhad applied the rules of this Plan to such grant.  In the event the Company assumes an award granted by anothercompany, the terms and conditions of such award will remain unchanged (exceptthat the exercise price and the number and nature of Shares issuable uponexercise of any such option will be adjusted appropriately pursuant to Section424(a) of the Code).  In the event theCompany elects to grant a new Option rather than assuming an existing option,such new Option may be granted with a similarly adjusted Exercise Price.

 

**19.****          ADOPTION AND STOCKHOLDER APPROVAL**.  This Plan will become effective on the dateon which the registration statement filed by the Company with the SEC under theSecurities Act registering the initial public offering of the Company’s CommonStock is declared effective by the SEC (the “***Effective Date***”).  This Plan shall be approved by thestockholders of the Company (excluding Shares issued pursuant to this Plan),consistent with applicable laws, within twelve (12) months before or after thedate this Plan is adopted by the Board. Upon the Effective Date, the Committee may grant Awards pursuant to thisPlan; provided, however, that: (a) no Option may be exercisedprior to initial stockholder approval of this Plan; (b) no Option grantedpursuant to an increase in the number of Shares subject to this Plan approvedby the Board will be exercised prior to the time such increase has beenapproved by the stockholders of the Company; (c) in the event that initialstockholder approval is not obtained within the time period provided herein,all Awards granted hereunder shall be cancelled, any Shares issued pursuant toany Awards shall be cancelled and any purchase of Shares issued hereunder shallbe rescinded; and (d) in the event that stockholder approval of such increaseis not obtained within the time period provided herein, all Awards grantedpursuant to such increase will be cancelled, any Shares issued pursuant to anyAward granted pursuant to such increase will be cancelled, and any purchase ofShares pursuant to such increase will be rescinded.

 

**20.****          TERM OF PLAN/GOVERNINGLAW**.  Unless earlier terminatedas provided herein, this Plan will terminate ten (10) years from the date thisPlan is adopted by the Board or, if earlier, the date of stockholderapproval.  This Plan and all agreementsthereunder shall be governed by and construed in accordance with the laws ofthe State of California.

 

**21.****          AMENDMENT OR TERMINATION OF PLAN**.  The Board may at any time terminate or amendthis Plan in any respect, including without limitation amendment of any form ofAward Agreement or instrument to be executed pursuant to this Plan; provided,however, that the Board will not, without the approval of thestockholders of the Company, amend this Plan in any manner that requires suchstockholder approval.

 

**22.****          NONEXCLUSIVITY OF THE PLAN**.  Neither the adoption of this Plan by theBoard, the submission of this Plan to the stockholders of the Company for approval,nor any provision of this Plan will be construed as creating any limitations onthe power of the Board to adopt such additional compensation arrangements as itmay deem desirable, including, without limitation, the granting of stockoptions and bonuses otherwise than under this Plan, and such arrangements maybe either generally applicable or applicable only in specific cases.

 

**23.****          DEFINITIONS.**  As used in this Plan, the following termswill have the following meanings:

 

“***Award***” means any award under this Plan,including any Option, Restricted Stock or Stock Bonus.

 

“***Award Agreement***” means, with respect toeach Award, the signed written agreement between the Company and theParticipant setting forth the terms and conditions of the Award.

 

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“***Board***” means the Board of Directors of theCompany.

 

“***Cause***” means the commission of an act oftheft, embezzlement, fraud, dishonesty or a breach of fiduciary duty to theCompany or a Parent or Subsidiary of the Company.

 

“***Change of Control***”means the consummation of any transaction or series of related transactionswhich results in all of the holders of record of the Company’s capital stockimmediately prior to the transaction or transactions holding less than fifty percent(50%) of the voting power of the surviving entity in the transaction ortransactions immediately after the transaction or transactions, including theacquisition of the Company by another entity and any reorganization, merger orconsolidation, or which results in the sale of all or substantially all of theassets of the Company; provided, however, if the surviving entityin the transaction or transactions is wholly owned by another entity, then aChange of Control has occurred only if the holders of record of the Company’scapital stock immediately prior to the transaction or transactions hold lessthan fifty percent (50%) of the voting power of the other entity immediatelyafter the transaction or transactions.

 

“***Code***” means the Internal Revenue Code of1986, as amended.

 

“***Committee***” means the Compensation Committeeof the Board.

 

“***Company***” means Silicon Image, Inc. or anysuccessor corporation.

 

“***Disability***” means a disability, whethertemporary or permanent, partial or total, as determined by the Committee.  For ISO purposes, “Disability” means adisability within the meaning of Code Section 22(e)(3).

 

“***Eligible Director***” means a member of theBoard (1) who is not an employee of the Company or any Parent, Subsidiary orAffiliate of the Company, and (2) whose direct pecuniary interest (as definedby the SEC in Rule 16a-1 promulgated under the Exchange Act) in the Company’sCommon Stock is less than five percent (5%) of total shares of Common Stockoutstanding.

 

“***Exchange Act***” means the Securities ExchangeAct of 1934, as amended.

 

“***Exercise Price***” means the price at whicha holder of an Option may purchase the Shares issuable upon exercise of theOption.

 

“***Fair Market Value***” means, as of anydate, the value of a share of the Company’s Common Stock determined as follows:

 

(a)           if such Common Stock isthen quoted on the Nasdaq National Market, its closing price on the NasdaqNational Market on the date of determination as reported in The Wall StreetJournal***;***

 

(b)           if such Common Stock ispublicly traded and is then listed on a national securities exchange, itsclosing price on the date of determination on the principal national securitiesexchange on which the Common Stock is listed or admitted to trading as reportedin The Wall Street Journal;

 

(c)           if such Common Stock ispublicly traded but is not quoted on the Nasdaq National Market nor listed oradmitted to trading on a national securities exchange, the average of theclosing bid and asked prices on the date of determination as reported in TheWall Street Journal;

 

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(d)           in the case of an Awardmade on the Effective Date, the price per share at which shares of theCompany’s Common Stock are initially offered for sale to the public by theCompany’s underwriters in the initial public offering of the Company’s CommonStock pursuant to a registration statement filed with the SEC under theSecurities Act;  or

 

(e)           if none of theforegoing is applicable, by the Committee in good faith.

 

“***Family Member***” includes any of the following:

 

(a)           child, stepchild,grandchild, parent, stepparent, grandparent, spouse, former spouse, sibling,niece, nephew, mother-in-law, father-in-law, son-in-law, daughter-in-law,brother-in-law, or sister-in-law of the Participant, including any such personwith such relationship to the Participant by adoption;

 

(b)           any person (other thana tenant or employee) sharing the Participant’s household;

 

(c)           a trust in which thepersons in (a) and (b) have more than fifty percent of the beneficial interest;

 

(d)           a foundation in whichthe persons in (a) and (b) or the Participant control the management of assets;or

 

(e)           any other entity inwhich the persons in (a) and (b) or the Participant own more than fifty percentof the voting interest.

 

“***Insider***” means an officer or director of theCompany or any other person whose transactions in the Company’s Common Stockare subject to Section 16 of the Exchange Act.

 

“***Option***” means an award of an option topurchase Shares pursuant to Section 5.

 

“***Parent***” means any corporation (other than theCompany) in an unbroken chain of corporations ending with the Company if eachof such corporations other than the Company owns stock possessing 50% or moreof the total combined voting power of all classes of stock in one of the othercorporations in such chain.

 

“***Participant***” means a person who receives anAward under this Plan.

 

“***Performance Factors***” means the factorsselected by the Committee from among the following measures to determinewhether the performance goals established by the Committee and applicable toAwards have been satisfied:

 

(a)           Net revenue and/or netrevenue growth;

 

(b)           Earnings before incometaxes and amortization and/or earnings before income taxes and amortizationgrowth;

 

(c)           Operating income and/oroperating income growth;

 

(d)           Net income and/or netincome growth;

 

(e)           Earnings per shareand/or earnings per share growth;

 

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(f)            Total stockholderreturn and/or total stockholder return growth;

 

(g)           Return on equity;

 

(h)           Operating cash flowreturn on income;

 

(i)            Adjusted operatingcash flow return on income;

 

(j)            Economic value added;and

 

(k)           Individual confidentialbusiness objectives.

 

“***Performance Period***” means the period ofservice determined by the Committee, not to exceed five years, during whichyears of service or performance is to be measured for Restricted Stock Awardsor Stock Bonuses.

 

“***Plan***” means this Silicon Image, Inc. 1999Equity Incentive Plan, as amended from time to time.

 

“***Restricted Stock Award***” means anaward of Shares pursuant to Section 6.

 

“***SEC***” means the Securities and ExchangeCommission.

 

“***Securities Act***” means the Securities Actof 1933, as amended.

 

“***Shares***” means shares of the Company’s CommonStock reserved for issuance under this Plan, as adjusted pursuant to Sections 2and 18, and any successor security.

 

“***Stock Bonus***” means an award of Shares,or cash in lieu of Shares, pursuant to Section 7.

 

“***Subsidiary***” means any corporation (other thanthe Company) in an unbroken chain of corporations beginning with the Company ifeach of the corporations other than the last corporation in the unbroken chainowns stock possessing 50% or more of the total combined voting power of allclasses of stock in one of the other corporations in such chain.

 

“***Termination***” or “***Terminated***” means, for purposes of this Planwith respect to a Participant, that the Participant has for any reason ceasedto provide services as an employee, officer, director, consultant, independentcontractor, or advisor to the Company or a Parent or Subsidiary of theCompany.  An employee will not be deemedto have ceased to provide services in the case of (i) sick leave,(ii) military leave, or (iii) any other leave of absence approved bythe Committee, provided, that such leave is for a period of not more than 90days, unless reemployment upon the expiration of such leave is guaranteed bycontract or statute or unless provided otherwise pursuant to formal policyadopted from time to time by the Company and issued and promulgated toemployees in writing.  In the case ofany employee on an approved leave of absence, the Committee may make suchprovisions respecting suspension of vesting of the Award while on leave fromthe employ of the Company or a Subsidiary as it may deem appropriate, exceptthat in no event may an Option be exercised after the expiration of the termset forth in the Option agreement.  TheCommittee will have sole discretion to determine whether a Participant hasceased to provide services and the effective date on which the Participantceased to provide services (the “***Termination Date***”).

 

“***Unvested Shares***” means “Unvested Shares” asdefined in the Award Agreement.

 

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“***Vested Shares***” means “Vested Shares” asdefined in the Award Agreement.

 

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