**CONFIDENTIALTREATMENT REQUESTED****EXHIBIT 10.35****CONSULTING AGREEMENT**This Consulting Agreement (“Agreement”) is executed on March 15, 2006 with an effectivedate as of March 24, 2006 (“Effective Date”), by and between Silicon Image, Inc., a Delawarecorporation maintaining its principal place of business at 1060 E. Arques Ave., Sunnyvale,California 94085 (“Company”) and Dr. David D. Lee (“Dr. Lee”).WHEREAS, Dr. Lee was a founder of the Company, and has served as the Company’s Chief ExecutiveOfficer and Chairman of the Board;WHEREAS, after more than eleven years of service to the Company, Dr. Lee has expressed a desire totransition from full-time employment by the Company and has agreed with Company to continue toadvise and provide consulting services to the Company, and also pursue other interests;WHEREAS, Dr. Lee is willing to perform such services, on the terms set forth below;WHEREAS, Dr. Lee is working with the Business Strategy Committee of the Board of Directors of theCompany (the “Business Strategy Committee”) and the Chief Executive Officer, hassubstantial knowledge of the Company’s technology and strategy, and may continue to have access toconfidential information of Company, and therefore agrees to the non-competition provision inSection 13 below;NOW THEREFORE, in consideration of the mutual promises contained herein, Company and Dr. Lee agreeas follows: **1.** **Termination of Employment**. **A.** Effective as of the Effective Date, Dr. Lee resigns as an employee ofCompany, and the Severance Agreement (as defined in Section 19 below) betweenCompany and Dr. Lee is terminated as set forth in Section 19. Company agrees thatthe indemnity agreement entered into as of November 25, 2002 by Company and Dr. Lee(the “Indemnity Agreement”) will continue to remain in effect, inaccordance with its terms, after the Effective Date. Furthermore, Company agreesthat any other indemnification and exculpation provisions set forth in Company’sCertificate of Incorporation and By-Laws, and any other indemnification andexculpation provisions existing on the Effective Date, shall remain in full forceand effect with respect to Dr. Lee in accordance with their terms.  **B.** Dr. Lee’s resignation from employment by the Company as of theEffective Date will not result in any acceleration of his existing options topurchase shares of the Company’s stock. Stock options previously granted to Dr.Lee by the Company will continue to vest while Dr. Lee renders services hereunderand remain exercisable according to their terms, provided that upon termination ofhis Agreement, Dr. Lee’s post-termination exercise period (other than theapplicable period for cause, death or disability) shall be nine (9) months;provided further that if Dr. Lee is terminated pursuant to Dr. Lee’s purportedviolation of Section 13 below, Dr. Lee’s post-termination exercise period shall bereduced to three (3) months. Dr. Lee expressly acknowledges that Dr. Lee hasconsulted his personal tax advisor as to the effect of Section 409A of the InternalRevenue Code of 1986, as amended (“Section 409A”). The Company has consulted withits tax advisors regarding Section 409A.  **C.** For a period of eighteen months following the Effective Date of thisAgreement, (a)
 

 
   Company will reimburse Dr. Lee for COBRA premiums actually paid by Dr. Lee for Dr.Lee and his eligible family members to continue to receive medical insurancecoverage at a level commensurate with the coverage provided to Dr. Lee immediatelyprior to the Effective Date, or at Dr. Lee’s election the Company will make a lumpsum payment equal to the eighteen month COBRA premium so that Dr. Lee may purchasemedical insurance coverage; provided, that the foregoing obligation shall cease if athird party commences payment of Dr. Lee’s COBRA or medical insurance premiums, and(b) Company will provide Dr. Lee with administrative assistant support. **2.** **Services:**Dr. Lee agrees to perform the services described in Exhibit A (the“Services”), and to devote such time as is reasonably necessary to perform theServices. Dr. Lee will perform all Services in a diligent and good faith manner andCompany will work in good faith to support Dr. Lee’s work in connection with such Services.  **3.** **Payment for Services:**Company will pay Dr. Lee the fees set forth in Exhibit Afor the performance of the Services during the term of this Agreement.  **4.** **Term:**This Agreement will commence on the Effective Date and will continue until thefirst anniversary of the Effective Date or until termination as provided in Section 14below. This Agreement may be extended for an additional year upon mutual written agreementof the parties hereto.  **5.** **Relationship of Parties:**Dr. Lee will perform the Services under the general directionof Company’s Chief Executive Officer. Dr. Lee, however, will determine in Dr. Lee’s solediscretion the manner and means by which the services are accomplished, subject to theexpress condition that Dr. Lee will at all times comply with applicable law. Dr. Lee is anindependent contractor without authority to bind Company by contract or otherwise, andneither Dr. Lee nor Dr. Lee’s employees and agents are agents or employees of Company.  **6.** **Time Commitment:**It is anticipated that Dr. Lee will spend at least eighty percent(80%) of his work time, calculated on a quarterly basis, on the Services covered by thisAgreement. Company recognizes that the term of this Agreement will be a transition periodthat will allow Dr. Lee to transition to other employment, and that this Agreement is notintended to preclude Dr. Lee from working on other matters, subject to the terms andconditions of this Agreement.  **7.** **Employment Taxes and Benefits:**Dr. Lee acknowledges and agrees that Dr. Lee isobligated to report as income all compensation received by Dr. Lee pursuant to thisAgreement, and Dr. Lee will indemnify, hold harmless and, at Company’s request, defendCompany and Company’s subsidiaries, affiliates, directors, officers, employees, agents andindependent contractors to the extent of any obligation imposed on Company to pay anywithholding taxes, social security, unemployment or disability insurance or similar items,including interest and penalties thereon, in connection with any payments made to Dr. Leeby Company pursuant to this Agreement.  **8.** **Indemnification:**A. Dr. Lee will indemnify, hold harmless Company against all claims, liabilities,damages, losses and expenses, including but not limited to reasonable attorneys’ feesand costs of suit, finally adjudicated to have arisen out of Dr. Lee’s gross negligenceand willful misconduct or any violation of Section 9 below; providedhowever, that Dr. Lee shall not be obligated to indemnify Company for: (i)settlements entered into without first obtaining Dr. Lee’s written consent; providedsuch consent shall not be unreasonably withheld; (ii) any action taken at
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the express direction of Company; or (iii) to the extent such indemnification isadjudicated to be unlawful.B. Company will defend, indemnify and hold harmless Dr. Lee from and against all claims,liabilities, damages, losses and expenses arising out of Dr. Lee’s lawful actions underthe Agreement that are taken at the direction of the Company; providedhowever, that the Company shall not be obligated to defend, indemnify or holdharmless Dr. Lee under this Agreement for: (i) any matter for which Dr. Lee is obligatedto indemnify the Company pursuant to Section 8(A) above; (ii) proceedings and claimsinitiated or brought voluntarily by Dr. Lee and not by way of defense, except withrespect to proceedings specifically authorized by the Board of Directors of the Companyor brought to establish or enforce a right to indemnification arising under thisAgreement or any statute or law or otherwise, but such indemnification may be providedby Company in specific cases if the Board finds it appropriate, (iii) settlementsentered into without the Company’s authorization and prior written consent; (iv) anaction for an accounting of profits realized by Dr. Lee in violation of Section 16 ofthe Securities Exchange Act of 1934 or other similar law; or (v) to the extent suchindemnification is adjudicated to be unlawful. As a condition of Company’s obligationsunder this Section 8.B (collectively, “Company Indemnification Obligations”),Dr. Lee will (1) provide Company with prompt written notice of any claim, liability,damage, loss or expense (collectively, “Claim Against Dr. Lee”) that will giverise to Company Indemnification Obligations (provided that any failure to provide suchprompt written notice shall only limit coverage to the extent Company is prejudiced bysuch failure to provide prompt written notice), (2) permit Company to have sole controlof the defense, settlement, adjustment or compromise of any such Claim Against Dr. Lee;provided, that (a) Company will not make any acknowledgment of culpability on Dr. Lee’sbehalf without Dr. Lee’s consent, and (b) Dr. Lee may secure his own legalrepresentation at his sole expense, who shall not control or participate in the defense,provided further that if the Company and Dr. Lee are named as co-defendants in an actionand there is a conflict of interest that prevents the Company from representing Dr. Leein such action then, solely with respect to the issues where such conflict of interestexists, Company will no longer control Dr. Lee’s defense in such action and will pay forthe reasonable fees and expenses of Dr. Lee’s counsel in such action, and (3) provideCompany with all reasonable assistance (which shall not be construed to include thepayment of funds by Dr. Lee) in the defense, settlement, adjustment or compromise of anyClaim Against Dr. Lee. Nothing herein shall limit Company’s obligations existing as ofthe Effective Date (including obligations with respect to facts and circumstancesoccurring after the Effective Date) to indemnify Dr. Lee outside of this Agreement,including under the Indemnity Agreement. **9.** **Proprietary Information:**The product of all work performed under this Agreement forCompany (“Work Product”), will be the sole property of Company, and Dr. Lee herebyassigns to Company all right, title and interest, including but not limited to all patentrights (including rights in any patent application of Company in which Dr. Lee is listed asan inventor), copyright, mask work rights, trade secret rights and other proprietary rightstherein. During and after the term of this Agreement Dr. Lee will assist Company and itsnominees in every proper way, at Company’s expense, to document, secure, maintain anddefend for Company’s own benefit in any and all countries all copyrights, patent rights,mask work rights, trade secret rights and other proprietary rights in and to the WorkProduct. Since the Work Product is the sole property of Company, Dr. Lee will not seek tocharge or demand payment outside of this Agreement for Company use of Work Product or otherexploitation of its ownership rights in the Work Product.  **10.** **Other Information:**Dr. Lee acknowledges that Company has not asked him to use any other
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   party’s confidential or proprietary information to perform the Services. **11.** **LIMITATION OF LIABILITY.**A.      IN NO EVENT WILL DR. LEE BE LIABLE TO COMPANY FOR ANY LOSS, DAMAGES, CLAIMS OR COSTSWHATSOEVER FOR CONSEQUENTIAL, INDIRECT OR INCIDENTAL DAMAGES, ANY LOST PROFITS OR LOSTSAVINGS, ANY DAMAGES RESULTING FROM BUSINESS INTERRUPTION OR ANY PUNITIVE DAMAGES EVEN IFDR. LEE HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH LOSS, DAMAGES, CLAIMS OR COSTS. THEFOREGOING LIMITATIONS AND EXCLUSIONS APPLY TO THE EXTENT PERMITTED BY APPLICABLE LAW. DR.LEE’S AGGREGATE LIABILITY AND THAT OF HIS AFFILIATES AND SERVICE PROVIDERS UNDER OR INCONNECTION WITH THIS AGREEMENT (INCLUDING UNDER ANY INDEMNITY SET FORTH IN THIS AGREEMENT)WILL BE LIMITED TO THE AMOUNT PAID TO DR. LEE UNDER THIS AGREEMENT. THIS LIMITATION WILLAPPLY EVEN IN THE EVENT OF A FUNDAMENTAL OR MATERIAL BREACH OR A BREACH OF THE FUNDAMENTALOR MATERIAL TERMS OF THIS AGREEMENT.B.      IN NO EVENT WILL COMPANY BE LIABLE TO DR. LEE FOR ANY LOSS, DAMAGES, CLAIMS OR COSTSWHATSOEVER FOR CONSEQUENTIAL, INDIRECT OR INCIDENTAL DAMAGES, ANY LOST PROFITS OR LOSTSAVINGS, ANY DAMAGES RESULTING FROM BUSINESS INTERRUPTION OR ANY PUNITIVE DAMAGES EVEN IFCOMPANY HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH LOSS, DAMAGES, CLAIMS OR COSTS. THEFOREGOING LIMITATIONS AND EXCLUSIONS APPLY TO THE EXTENT PERMITTED BY APPLICABLE LAW.COMPANY’S AGGREGATE LIABILITY (IN ADDITION TO COMPENSATION PAYMENTS TO BE MADE TO DR. LEEHEREUNDER) AND THAT OF ITS AFFILIATES AND SERVICE PROVIDERS UNDER OR IN CONNECTION WITH THISAGREEMENT (INCLUDING UNDER ANY INDEMNITY SET FORTH IN THIS AGREEMENT) WILL BE LIMITED TO$1,000,000. THIS LIMITATION WILL APPLY EVEN IN THE EVENT OF A FUNDAMENTAL OR MATERIALBREACH OR A BREACH OF THE FUNDAMENTAL OR MATERIAL TERMS OF THIS AGREEMENT. THE LIMITATIONSET FORTH IN THIS SECTION 11(B) SHALL NOT APPLY TO COMPANY’S OBLIGATIONS UNDER DR. LEE’SOPTIONS, INDEMNITY AGREEMENT OR EXCULPATION OR INDEMNITY PROVISIONS OF COMPANY’S CERTIFICATEOF INCORPORATION AND BYLAWS. **12.** **Confidentiality:**Dr. Lee will not, during or for a period of two and one-half yearsfollowing the termination of this Agreement, directly or indirectly (a) use any ofCompany’s Confidential Information for the benefit of anyone other than Company, or (b)disclose any of Company’s Confidential Information to anyone other than an employee orindependent contractor of Dr. Lee who is obligated by written contract to protect theconfidentiality thereof and requires such information to perform hereunder, or an employee,director, attorney or agent of Company, or a person designated by Company as an authorizedrecipient of Company’s Confidential Information. Company’s Confidential Informationincludes without limitation all confidential information related to the Services, Company’sconfidential know-how, all information regarding Company not known to the general public,and all confidential information disclosed to Company by third parties (whether acquired ordeveloped by Dr. Lee during Dr. Lee’s performance underthis Agreement or disclosed by Company employees). Confidential Information does notinclude information which (c) is known to Dr. Lee at the time of disclosure to Dr. Lee byCompany, (d) has become publicly known through no wrongful act of Dr. Lee, (e) has beenrightfully received by Dr. Lee from a third party who is authorized to make such disclosure,or (f) has been independently developed by Dr. Lee other than pursuant to this Agreement.  **13.** **Non-Competition:**Dr. Lee agrees not to solicit the services of any of Company’semployees during the term of this Agreement. In addition to not soliciting the services ofCompany’s
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employees, Dr. Lee agrees not to make a job offer to any Company employees whilethey are employed by Company during the term of this Agreement. During the term of thisAgreement Dr. Lee shall not Compete With The Company in any geographic area where theCompany or any subsidiary of the Company engages in business or maintains sales or servicerepresentatives or employees. “Compete With The Company” means, directly orindirectly, to engage in (whether as an employee, consultant, proprietor, partner, directoror otherwise), or have any ownership interest in (other than a 1% or less passive interestin a publicly traded company), or participate in the financing, operation, management, orcontrol of, any person, firm, corporation or business that engages in a “RestrictedBusiness”, as such term is defined hereafter. “Restricted Business” shall mean anybusiness that is engaged or involved in (or, to Dr. Lee’s knowledge after due inquiry,planning or preparing to engage or become involved in) research, development, production,marketing, leasing, selling or servicing any product, product line or service (but doesnot include a company that has multiple divisions or business units, and where the productor services are related to a division or unit for which Dr. Lee provides no direct orindirect services or oversight, and for which Dr. Lee does not have any other decisionmaking responsibility) that competes, or would compete, with any product, product line orservice that is being designed, developed, manufactured, marketed or sold by the Companyor any subsidiary of the Company (or, to Dr. Lee’s knowledge with a product or service thatthe Company or any such subsidiary is planning or preparing to design, develop,manufacture, market or sell). In the event that Company decides not to pursue anopportunity presented to Company by Dr. Lee, Dr. Lee shall have the right to request thatthe Company’s Board of Directors (the “Board”) determine whether or not Dr. Lee’spursuit of such opportunity would result in a violation of the foregoing provisions of thisSection 13. Notwithstanding the foregoing, the Company is aware of Dr. Lee’s position onthe board of directors of, and Dr. Lee’s investment in, Synerchip Co., Ltd. and, providedDr. Lee complies with the guidelines adopted by the Company’s Board of Directors for thispurpose and attached hereto as Exhibit B, such service and investment will not beconsidered to Compete With The Company. **14.** **Termination:**Dr. Lee may immediately terminate this Agreement upon Company Cause.“Company Cause” means any breach of this Agreement, if such breach causes materialharm to Dr. Lee. The Company may immediately terminate this Agreement upon Dr. Lee Cause.“Dr. Lee Cause” means (i) any breach of this Agreement, if such breach causesmaterial harm to the Company; (ii) any gross negligence or willful misconduct by Dr. Lee inDr. Lee’s performance of Services that causes harm to the Company; (iii) Dr. Lee’srepeated failure to diligently perform Services in a reasonable manner pursuant to thisAgreement; (iv) Dr. Lee’s commission of a crime carrying a minimum sentence of one year asdetermined under the laws of any nation or political subdivision thereof in which suchoccurs (or is deemed to occur) or violation of the Foreign Corrupt Practices Act orsuccessor or replacement legislation that results in liability to Company; (v) Dr. Lee’scommission of any act of fraud, embezzlement or dishonesty or breach of fiduciary dutiesowed to the Company; or (vi) Dr. Lee’s abuse of alcohol or controlled substances that has adetrimental effect upon Dr. Lee’s performance of Services. If Dr. Lee claims hehas satisfied a Milestone and the Business Strategy Committee determines that Dr. Lee hasnot satisfied the Milestone, Dr. Lee may terminate the Agreement but shall not be entitledto any further Milestone payments. Dr. Lee may terminate this Agreement upon any of the eventsset forth in clauses (a) through (e) of Section 18.1 of Company’s 1999 Equity IncentivePlan, as amended, other than a transaction in which each of the following are true (i) thestockholders of Company before the transaction own more than 40% of the outstanding sharesof the combined company, and (ii) members of the Board of Directors of Company prior to theannouncement of the transaction represent a majority of the directors following suchtransaction.
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 **15.** **Effect of Termination:**Upon the termination of this Agreement pursuant to Section 14 orupon expiration of the term of this Agreement, each party shall be released from allobligations and liabilities to the other occurring or arising after the date of suchtermination under this Agreement, as applicable, except that any such termination shall notrelieve Dr. Lee or Company of their respective obligations and agreements under any ofSections 1, 3, 7, 8, 9, 10, 11, 12, 14, 15, 17 , 18 and 19 hereof, nor shall any suchtermination relieve Dr. Lee or Company from any liability arising from any breach of thisAgreement, provided, however if this Agreement is terminated by eitherparty pursuant to Section 14, Company shall not be obligated to pay for any Services thathave not been rendered or any milestones set forth in Exhibit A that have not beenaccomplished.  **16.** **Assignment:**The rights and liabilities of the parties hereto shall bind and inure tothe benefit of their respective successors, executors and administrators, as the case maybe; provided that, since Company has specifically contracted for Dr. Lee’s services, Dr.Lee may not assign or delegate his obligations under this Agreement either in whole or inpart without the prior written consent of Company.  **17.** **Governing Law; Severability:**This Agreement shall be governed by and construed inaccordance with the laws of the State of California. Both parties agree that arbitrationbetween the parties will take place in Santa Clara County, California and further agreethat any dispute regarding the interpretation or enforcement of this Agreement shall bedecided by confidential, final and binding arbitration conducted by Judicial Arbitrationand Mediation Services (“JAMS”) under the then existing JAMS rules rather than bylitigation in court, trial by jury, administrative proceeding or in any other forum. Thedecision of such arbitration may be enforced by the party in whose favor it is given in anycourt with jurisdiction over the party against whom enforcement is sought. If anyprovision of this Agreement other than those provisions relating to the assignment ofrights to the Company is found by a court of competent jurisdiction to be unenforceable forany reason, the remainder of this Agreement shall continue in full force and effect.  **18.** **Export:**Dr. Lee will not export outside the United States, if a United States citizen,or re-export, if a foreign citizen, any Confidential Information or direct product thereof,except as permitted by the laws and regulations of the United States and as directed byCompany. Company shall not direct Dr. Lee to export outside the United States anyConfidential Information or direct product thereof, except as permitted by the laws andregulations of the United States.  **19.** **Complete Understanding; Modification; Waiver of Benefits under Severance Agreement:**This Agreement constitutes the full and complete understanding and agreement of the partiesrelating to the subject matter hereof and supersedes all prior understandings andagreements relating to such subject matter. Any waiver, modification, or amendment of anyprovision of this Agreement shall be effective only if in writing and signed by the partieshereto. Where there is a conflict between the terms and conditions of this Agreement andExhibit A, the terms of this Agreement will control. This Agreement may be executed in oneor more counterparts, each of which shall for all purposes be deemed to be an original andall of which shall constitute the same instrument. Dr. Lee hereby waives any benefits under that certain August 15, 1997 Amendedand Restated Severance Agreement between Dr. Lee and Company as amended on January 24, 2000and March 29, 2001 (collectively, the “Severance Agreement”), and such agreement(including amendments to such agreement) is hereby terminated without any obligation beingowed to the other other than as set forth herein.  **20.** **Notices:**Any notices required or permitted hereunder will be given to the appropriateparty at the address specified below or at such other address as the party may specify inwriting. Such notice
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   shall be deemed given upon personal delivery to the appropriateaddress or three (3) days after the date of mailing if sent by certified or registeredmail.  **21.** **Reporting:**Dr. Lee will report to the Chief Executive Officer and/or the Board on thestatus of Dr. Lee’s performance hereunder upon Company’s request and shall make a report tothe Business Strategy Committee on a quarterly basis of the plans described in themilestones set forth in Section II of Exhibit A.
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IN WITNESS WHEREOF, the parties hereto have signed this Agreement as of the date first writtenabove.   **COMPANY** **CONSULTANT**   Silicon Image, Inc. Name: David D. Lee   1060 E. Arques Ave. Address Omitted   Sunnyvale, California 94085                    Signature: /s/ Steve Tirado Signature: /s/ David D. Lee   Name: Steve Tirado     Title: Chief Executive Officer     Exhibit A – Statement of Work