**Exhibit10.40**

 

**ZORANCORPORATION**

**EXECUTIVERETENTION AND SEVERANCE PLAN**

**Adopted November 8, 2002**

 

**1.****                                      ESTABLISHMENTAND PURPOSE**

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## 1.1                                 **Establishment.**  The Zoran Corporation Executive Retentionand Severance Plan (the *“**Plan**”*) is hereby established bythe Compensation Committee of the Board of Directors of Zoran Corporation,effective November 8, 2002 (the *“**Effective Date**”*).

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## 1.2                                 **Purpose.**  The Company draws upon the knowledge,experience and advice of its Officers and Key Employees in order to manage itsbusiness for the benefit of the Company’s stockholders.  Due to the widespread awareness of thepossibility of mergers, acquisitions and other strategic alliances in theCompany’s industry, the topic of compensation and other employee benefits inthe event of a Change in Control is an issue in competitive recruitment andretention efforts.  The Committeerecognizes that the possibility or pending occurrence of a Change in Controlcould lead to uncertainty regarding the consequences of such an event and couldadversely affect the Company’s ability to attract, retain and motivate itsOfficers and Key Employees.  TheCommittee has therefore determined that it is in the best interests of theCompany and its stockholders to provide for the continued dedication of its Officersand Key Employees notwithstanding the possibility or occurrence of a Change inControl by establishing this Plan to provide designated Officers and KeyEmployees with enhanced financial security in the event of a Change in Control.  The purpose of this Plan is to provide itsParticipants with specified compensation and benefits in the event oftermination of employment under circumstances specified herein upon orfollowing a Change in Control.

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2.             **Definitions and Construction**

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## 2.1                                 **Definitions.**  Whenever used in this Plan, the followingterms shall have the meanings set forth below:

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### (a)                                  *“**Annual Bonus**”*means an amount equal to the greatest of (1) the aggregate of all bonusesearned by the Participant (whether or not actually paid) under the terms of theprograms, plans or agreements providing for such bonuses for the fiscal year ofthe Company immediately preceding the fiscal year of the Change in Control,(2) the aggregate of all bonuses earned by the Participant (whether or notactually paid) under the terms of the programs, plans or agreements providingfor such bonuses for the fiscal year of the Company immediately preceding thefiscal year of the Participant’s Termination Upon a Change in Control, or(3) the aggregate of all annual bonuses that would be earned by theParticipant at the targeted annual rate (assuming attainment of 100% of allapplicable performance goals) under the terms of the programs, plans oragreements providing for such bonuses in which the Participant wasparticipating for the fiscal year of the Participant’s Termination Upon aChange in Control.

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### (b)                                 *“**Base SalaryRate**”* means a Participant’s monthly base salarydetermined at the greater of (1) the Participant’s monthly base salary rate ineffect immediately prior to the Participant’s Termination Upon a Change inControl or (2) the Participant’s monthly base salary rate in effect immediatelyprior to the applicable Change in Control. For this purpose, base salary does not include any bonuses, commissions,fringe benefits, car allowances, other irregular payments or any othercompensation except base salary.

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### (c)                                  *“**BenefitPeriod**”* means (1) with respect to a Participant whois the Chief Executive Officer, a period of thirty-six (36) months,(2) with respect to a Participant who is an Executive Officer (other thanthe Chief Executive Officer), a period of eighteen (18) months, and(3) with respect to a Participant who is a Key Employee (other than anExecutive Officer), a period of nine (9) months.

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### (d)                                 *“**Board**”*means the Board of Directors of the Company.

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### (e)                                  *“**Cause**”*means the occurrence of any of the following, as determined in good faith by avote of not less than two-thirds of the entire membership of the Board at ameeting of the Board called and held for such purpose (after reasonable noticeto the Participant and an opportunity for the Participant, together with theParticipant’s counsel, to be heard before the Board):

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#### (1)                                  theParticipant’s commission of any act of fraud, embezzlement or dishonesty;

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#### (2)                                  theParticipant’s unauthorized use or disclosure of confidential information ortrade secrets of any member of the Company Group; or

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#### (3)                                  theParticipant’s intentional misconduct adversely affecting the business oraffairs of any member of the Company Group.

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### (f)                                    *“**Change in Control**”*means, except as otherwise provided in the Participation Agreement applicableto a given Participant, the occurrence of any of the following:

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#### (1)                                  any“person” (as such term is used in Sections 13(d) and 14(d) of theSecurities Exchange Act of 1934, as amended (the *“**Exchange Act**”*)), other than atrustee or other fiduciary holding securities of the Company under an employeebenefit plan of the Company, becomes the “beneficial owner” (as defined inRule 13d-3 promulgated under the Exchange Act), directly or indirectly, ofsecurities of the Company representing more than fifty percent (50%) of(i) the outstanding shares of common stock of the Company or (ii) thetotal combined voting power of the Company’s then–outstanding securitiesentitled to vote generally in the election of directors;

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#### (2)                                  theCompany is party to a merger or consolidation which results in the holders ofthe voting securities of the Company outstanding immediately prior theretofailing to retain immediately after such merger or consolidation direct orindirect beneficial ownership of more than fifty percent (50%) of the totalcombined voting power of the securities entitled to vote generally in theelection of directors of the Company or the surviving entity outstandingimmediately after such merger or consolidation;

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#### (3)                                  thesale or disposition of all or substantially all of the Company’s assets orconsummation of any transaction having similar effect (other than a sale ordisposition to one or more subsidiaries of the Company); or

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#### (4)                                  achange in the composition of the Board within any consecutive two-year periodas a result of which fewer than a majority of the directors are IncumbentDirectors.

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### (g)                                 *“**Change inControl Period**”* means a period commencing upon the dateof the consummation of a Change in Control and ending on the date occurringeighteen (18) months thereafter.

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### (h)                                 *“**ChiefExecutive Officer**”* means the individual who, immediatelyprior to the consummation of a Change in Control, serves as the Company’s ChiefExecutive Officer as appointed by the Board.

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### (i)                                     *“**Code**”*means the Internal Revenue Code of 1986, as amended, or any successorthereto and any applicable regulations promulgated thereunder.

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### (j)                                     *“**Committee**”*means the Compensation Committee of the Board.

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### (k)                                  *“**Company**”*means Zoran Corporation, a Delaware corporation, and, following a Change inControl, a Successor that agrees to assume all of the terms and provisions ofthis Plan or a Successor which otherwise becomes bound by operation of law tothis Plan.

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### (l)                                     *“**Company Group**”*means the group consisting of the Company and each present or future parent andsubsidiary corporation or other business entity thereof.

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### (m)                               *“**Disability**”*means a Participant’s permanent and total disability within the meaning ofSection 22(e)(3) of the Code.

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### (n)                                 *“**Executive Officer**”*means an individual who, immediately prior to the consummation of a Change inControl, serves as an executive officer of the Company appointed by the Board.

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### (o)                                 *“**Good Reason**”*means the occurrence of any of the following conditions upon or following aChange in Control, without the Participant’s informed written consent, whichcondition(s) remain(s) in effect ten (10) days after written notice to theCompany from the Participant of such condition(s):

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#### (1)                                  assignmentof the Participant to a position that is not a Substantive FunctionalEquivalent of the position which the Participant occupied immediately prior tothe Change in Control;

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#### (2)                                  adecrease in the Participant’s Base Salary Rate or a decrease in theParticipant’s target bonus amount (subject to applicable performancerequirements with respect to the actual amount of bonus compensation earned bythe Participant);

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#### (3)                                  anyfailure by the Company to (i) continue to provide the Participant with theopportunity to participate, on terms no less favorable than those in effect forthe benefit of any employee group which customarily includes a person holdingthe employment position or a comparable position with the Company Group thenheld by the Participant, in any benefit or compensation plans and programs,including, but not limited to, the Company Group’s life, disability, health,dental, medical, savings, profit sharing, stock purchase and retirement plans,if any, in which the Participant was participating immediately prior to thedate of the Change in Control, or their equivalent, or (ii) provide theParticipant with all other fringe benefits (or their equivalent) from time totime in effect for the benefit of any employee group which customarily includesa person holding the employment position or a comparable position with theCompany Group then held by the Participant;

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#### (4)                                  therelocation of the Participant’s work place for the Company Group to a locationthat increases the regular commute distance between the Participant’s residenceand work place by more than thirty (30) miles (one-way), or the imposition oftravel requirements substantially more demanding of the Participant than suchtravel requirements existing immediately prior to the Change in Control; or

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#### (5)                                  anymaterial breach of this Plan by the Company with respect to the Participant.

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The existence of GoodReason shall not be affected by the Participant’s temporary incapacity due tophysical or mental illness not constituting a Disability.  The Participant’s continued employment shallnot constitute consent to, or a waiver of rights with respect to, any conditionconstituting Good Reason hereunder.  Forthe purposes of any determination regarding the existence of Good Reasonhereunder, any claim by the Participant that Good Reason exists shall bepresumed to be correct unless the Company establishes to the Board that GoodReason does not exist, and the Board, acting in good faith, affirms suchdetermination by a vote of not less than two-thirds of its entire membership.

 

### (p)                                 *“**IncumbentDirector**”* means a director who either (1) is amember of the Board as of the Effective Date, or (2) is elected, ornominated for election, to the Board with the affirmative votes of at least amajority of the Incumbent Directors at the time of such election or nomination,but (3) was not elected or nominated in connection with an actual orthreatened proxy contest relating to the election of directors of the Company.

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### (q)                                 *“**Key Employee**”*means an individual, other than an Executive Officer, who, immediately prior tothe consummation of a Change in Control, is employed by the Company Group andhas been designated by the Board or the Committee as eligible to participate inthe Plan.

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### (r)                                    *“**Option**”*means any option to purchase shares of the capital stock of the Company or ofany other member of the Company Group granted to a Participant by the Companyor any other Company Group member, whether granted before or after a Change inControl.

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### (s)                                  *“**Participant**”*means each Executive Officer and each Key Employee designated by the Committeeto participate in the Plan, provided such individual has executed aParticipation Agreement.

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### (t)                                    *“**ParticipationAgreement**”* means an Agreement to Participate in the ZoranCorporation Executive Retention and Severance Plan in the form attached heretoas Exhibit A or in such other form as the Committee may approvefrom time to time; provided, however, that, after a Participation Agreement hasbeen entered into between a Participant and the Company, it may be modifiedonly by a supplemental written agreement executed by both the Participant andthe Company.  The terms of such forms ofParticipation Agreement need not be identical with respect to eachParticipant.  For example, aParticipation Agreement may limit the duration of a Participant’s participationin the Plan or may modify the definition of “Change in Control” with respect toa Participant.

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### (u)                                 *“**Release**”*means a general release of all known and unknown claims against the Company andits affiliates and their stockholders, directors, officers, employees, agents,successors and assigns substantially in the appropriate form attached hereto asExhibit B, with any modifications thereto determined by legalcounsel to the Company to be necessary or advisable to comply with applicablelaw or to accomplish the intent of Section 8 hereof.

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### (v)                                 *“**RestrictedStock**”* means any shares of the capital stock of the Companyor of any other member of the Company Group granted to a Participant by theCompany or any other Company Group member or acquired upon the exercise of anOption, whether such shares are granted or acquired before or after a Change inControl, including any shares issued in exchange for any such shares by aSuccessor or any other member of the Company Group.

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### (w)                               *“**SubstantiveFunctional Equivalent**”* means an employment positionoccupied by a Participant after a Change in Control that:

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#### (1)                                  isin a substantive area of competence (such as, accounting, executive management,finance, human resources, marketing, sales and service, or operations, etc.)that is consistent with the Participant’s experience and not materiallydifferent from the position occupied by the Participant immediately prior tothe Change in Control;

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#### (2)                                  allowsthe Participant to serve in a role and perform duties that are functionallyequivalent to those performed immediately prior to the Change in Control (suchas business unit executive with profit and loss responsibility, product linemanager, marketing strategist, geographic sales manager, executive officer,etc.); and

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#### (3)                                  doesnot otherwise constitute a material, adverse change in the Participant’sresponsibilities or duties, as measured against the Participant’sresponsibilities or duties prior to the Change in Control, causing it to be ofmaterially lesser rank or responsibility within the Company or an equivalentbusiness unit of its parent.

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### (x)                                   *“**Successor**”*means any successor in interest to substantially all of the business and/orassets of the Company.

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### (y)                                 *“**TerminationUpon a Change in Control**”* means the occurrence of any ofthe following events:

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#### (1)                                  terminationby the Company Group of the Participant’s employment for any reason other thanCause during the Change in Control Period; or

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#### (2)                                  theParticipant’s resignation for Good Reason during the Change in Control Periodfrom all capacities in which the Participant is then rendering service to theCompany Group;

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provided, however, thatTermination Upon a Change in Control shall not include any termination of theParticipant’s employment which is (i) for Cause, (ii) a result of theParticipant’s death or Disability, or (iii) a result of the Participant’svoluntary termination of employment other than for Good Reason.

 

## 2.2                                 **Construction.**  Captions and titles contained herein are forconvenience only and shall not affect the meaning or interpretation of anyprovision of the Plan.  Except whenotherwise indicated by the context, the singular shall include the plural andthe plural shall include the singular. Use of the term “or” is not intended to be exclusive, unless the contextclearly requires otherwise.

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3.             **Eligibility**

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The Board or Committeeshall designate those Executive Officers and Key Employees who shall beeligible to become Participants in the Plan.

 

4.             **Treatment of Options Upon a Change in Control**

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Notwithstanding anyprovision to the contrary contained in any agreement evidencing an Optiongranted to a Participant, in the event of a Change in Control in which thesurviving, continuing, successor, or purchasing corporation or other businessentity or parent thereof, as the case may be (the *“**Acquiring Corporation**”*), does notassume the Company’s rights and obligations under the then-outstanding Optionsheld by the Participant or substitute for such Options substantially equivalentoptions for the Acquiring Corporation’s stock, then the vesting andexercisability of each such Option shall be accelerated in full effectiveimmediately prior to but conditioned upon the consummation of the Change inControl.

 

5.             **Severance Benefits**

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In the event of aParticipant’s Termination Upon a Change in Control and provided that theParticipant has executed and not revoked a Release at the time of suchTermination Upon a Change in Control, the Participant shall be entitled toreceive, in addition to all compensation and benefits earned by the Participantthrough the date of the Participant’s termination of employment, the followingseverance payments and benefits:

 

## 5.1                                 **Salary andBonus.**  Subject to Section 6,within thirty (30) days following the later of the Participant’s termination ofemployment or the last day following the Participant’s execution of the Releaseon which the Participant may, by its terms, revoke such Release, the Companyshall pay to the Participant in a lump sum cash payment an amount equal to thesum of (a) the Participant’s Base Salary Rate multiplied by the number of monthsin the Benefit Period applicable to the Participant and (b) the Participant’sAnnual Bonus multiplied by a ratio, the numerator of which is the number ofmonths in the Benefit Period applicable to the Participant and the denominatorof which is twelve (12).

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## 5.2                                 **Health andLife Insurance Benefits.**  Forthe period commencing immediately following the Participant’s termination ofemployment and continuing for the duration of the Benefit Period applicable tothe Participant, the Company shall arrange to provide the Participant and hisor her dependents with health (including medical and dental) and life insurancebenefits substantially similar to those provided to the Participant and his orher dependents immediately prior to the date of such termination of employment(without giving effect to any reduction in such benefits constituting GoodReason).  Such benefits shall beprovided to the Participant at the same premium cost to the Participant and atthe same coverage level as in effect as of the Participant’s termination ofemployment (without giving effect to any reduction in such benefitsconstituting Good Reason); provided, however, that the Participant shall besubject to any change in the premium cost and/or level of coverage applicablegenerally to all employees holding the position or comparable position with theCompany which the Participant held immediately prior to the Change inControl.  The Company may satisfy itsobligation to provide a continuation of health insurance benefits by payingthat portion of the Participant’s premiums required under the ConsolidatedOmnibus Budget Reconciliation Act (*“**COBRA**”*) that exceed the amountof premiums that the

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## Participant would havebeen required to pay for continuing coverage had he or she continued inemployment.  If the Company is notreasonably able to continue such coverage under the Company’s benefit plans,the Company shall provide substantially equivalent coverage under other sourcesor will reimburse the Participant for premiums (in excess of the Participant’spremium cost described above) incurred by the Participant to obtain his or herown such coverage.  If the Participantbecomes eligible to receive such coverage under another employer’s benefitplans during the applicable Benefit Period, the Participant shall report sucheligibility to the Company, and the Company’s obligations under thisSection 5.2 shall be secondary to the coverage provided by such otheremployer’s plans.  For the balance ofany period in excess of the applicable Benefit Period during which theParticipant is entitled to continuation coverage under COBRA, the Participantshall be entitled to maintain coverage for himself or herself and theParticipant’s eligible dependents at the Participant’s own expense.

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## 5.3                                 **Accelerationof Vesting of Options, Cash Incentive Program and Restricted Stock; Extensionof Option Exercise Period.** Notwithstanding any provision to the contrary contained in any agreementevidencing an Option or shares of Restricted Stock granted to a Participant,the vesting and exercisability of each of the Participant’s outstanding Optionsand the vesting of the Participant’s Cash Incentive Program and shares ofRestricted Stock shall be accelerated in full effective as of the date of theParticipant’s termination of employment so that each Option and share ofRestricted Stock held by the Participant shall be immediately exercisable andfully vested.  Furthermore, the Option,to the extent unexercised on the date on which the Participant’s employmentterminated, may be exercised by the Participant (or the Participant’s guardianor legal representative) at any time prior to the later of the date specifiedin the agreement evidencing such Option or the expiration of one (1) year afterthe date on which the Participant’s employment terminated, but in any event nolater than the date of expiration of the Option’s term as set forth in theagreement evidencing such Option.

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## 5.4                                 **Indemnification;Insurance.**

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### (a)                                  Inaddition to any rights a Participant may have under any indemnificationagreement previously entered into between the Company and such Participant (a *“**PriorIndemnity Agreement**”*), from and after the date of theParticipant’s termination of employment, the Company shall indemnify and holdharmless the Participant against any costs or expenses (including attorneys’fees), judgments, fines, losses, claims, damages or liabilities incurred inconnection with any claim, action, suit, proceeding or investigation, whethercivil, criminal, administrative or investigative, by reason of the fact thatthe Participant is or was a director, officer, employee or agent of the CompanyGroup, or is or was serving at the request of the Company Group as a director,officer, employee or agent of another corporation, partnership, joint venture,trust or other enterprise, whether asserted or claimed prior to, at or afterthe date of the Participant’s termination of employment, to the fullest extentpermitted under applicable law, and the Company shall also advance fees andexpenses (including attorneys’ fees) as incurred by the Participant to thefullest extent permitted under applicable law. In the event of a conflict between the provisions of a Prior IndemnityAgreement and the provisions of this Plan, the Participant may elect whichprovisions shall govern.

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### (b)                                 Fora period of six (6) years from and after the date of termination of employmentof a Participant who was an officer and/or director of the Company at any timeprior to such termination of employment, the Company shall maintain a policy ofdirectors’ and officers’ liability insurance for the benefit of suchParticipant which provides him or her with coverage no less favorable than thatprovided for the Company’s continuing officers and directors.

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6.             **Federal Excise Tax Under Section 4999 of the Code**

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## 6.1                                 **ExcessParachute Payment.**  In theevent that any payment or benefit received or to be received by the Participantpursuant to this Plan or otherwise (collectively, the *“**Payments**”*)would subject the Participant to any excise tax pursuant to Section 4999 of theCode (the *“**ExciseTax**”*) due to the characterization of such Payments as anexcess parachute payment under Section 280G of the Code, then, notwithstandingthe other provisions of this Plan, the amount of such Payments will not exceedthe amount which produces the greatest after-tax benefit to the Participant.

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## 6.2                                 **Determinationby Accountants.**  Upon the occurrence of any event (the*“**Event**”*) that would give rise toany Payments pursuant to this Plan, the Company shall promptly request adetermination in

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## writing to be made withinthirty (30) days of the date of the Event by independent public accountants(the *“**Accountants**”*) selected by theCompany and reasonably acceptable to the Participant of the amount and type ofsuch Payments which would produce the greatest after-tax benefit to theParticipant.  For the purposes of suchdetermination, the Accountants may rely on reasonable, good faithinterpretations concerning the application of Sections 280G and 4999 of theCode.  The Company and the Participantshall furnish to the Accountants such information and documents as theAccountants may reasonably request in order to make their requireddetermination.  The Company shall bearall fees and expenses the Accountants may reasonably charge in connection withtheir services contemplated by this Section. In the event that the report of the Accountants is not received withinthirty (30) days following the Participant’s Termination Upon Change inControl, the Company shall pay to the Participant the cash severance benefitsrequired by Section 5.1 above (subject to any reduction necessary to producethe greatest after-tax benefit to the Participant) within ten (10) days of thedate of the Accountants’ report of their determination.

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7.             **Conflict in Benefits; Noncumulation of Benefits**

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## 7.1                                 **Effect ofPlan.**  The terms of thisPlan, when accepted by a Participant pursuant to an executed ParticipationAgreement, shall supersede all prior arrangements, whether written or oral, andunderstandings regarding the subject matter of this Plan and shall be theexclusive agreement for the determination of any payments and benefits due tothe Participant upon the events described in Sections 4, 5 and 6.

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## 7.2                                 **Noncumulationof Benefits.**  Except asexpressly provided in a written agreement between a Participant and the Companyentered into after the date of such Participant’s Participation Agreement andwhich expressly disclaims this Section 7.2 and is approved by the Board or theCommittee, the total amount of payments and benefits that may be received bythe Participant as a result of the events described in Sections 4, 5 and 6pursuant to (a) the Plan, (b) any agreement between the Participant and theCompany or (c) any other plan, practice or statutory obligation of the Company,shall not exceed the amount of payments and benefits provided by this Plan uponsuch events (plus any payments and benefits provided pursuant to an agreementevidencing an Option, Cash Incentive Program or award of Restricted Stock, asdescribed in Section 4, or a Prior Indemnity Agreement, as described in Section5.3(a)), and the aggregate amounts payable under this Plan shall be reduced tothe extent of any excess (but not below zero).

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8.             **Exclusive Remedy**

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The payments and benefitsprovided by Section 5 and Section 6 (plus any payments and benefitsprovided pursuant to an agreement evidencing an Option, Cash Incentive Programor award of Restricted Stock, as described in Section 4, or a Prior IndemnityAgreement, as described in Section 5.3(a)), if applicable, shall constitute theParticipant’s sole and exclusive remedy for any alleged injury or other damagesarising out of the cessation of the employment relationship between theParticipant and the Company in the event of the Participant’s Termination Upona Change in Control.  The Participantshall be entitled to no other compensation, benefits, or other payments fromthe Company as a result of any Termination Upon a Change in Control withrespect to which the payments and benefits described in Section 5 andSection 6 (plus any payments and benefits provided pursuant to anagreement evidencing an Option, Cash Incentive Program or award of RestrictedStock, as described in Section 4, or a Prior Indemnity Agreement, as describedin Section 5.3(a)), if applicable, have been provided to the Participant,except as expressly set forth in this Plan or, subject to the provisions ofSections 7.2, in a duly executed employment agreement between Company andthe Participant.

 

9.             **Proprietary and Confidential Information**

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The Participant agrees tocontinue to abide by the terms and conditions of the confidentiality and/orproprietary rights agreement between the Participant and the Company.

 

10.           **Nonsolicitation**

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If the Company performsits obligations to deliver the payments and benefits set forth inSection 5 and Section 6 (plus any payments and benefits providedpursuant to an agreement evidencing an Option, Cash

 

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Incentive Program or award of Restricted Stock, as described in Section4, or a Prior Indemnity Agreement, as described in Section 5.3(a)), then for aperiod equal to the Benefit Period applicable to a Participant following theParticipant’s Termination Upon a Change in Control, the Participant shall not,directly or indirectly, recruit, solicit or invite the solicitation of anyemployees of the Company to terminate their employment relationship with theCompany.

 

11.           **No Contract of Employment**

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Neither the establishmentof the Plan, nor any amendment thereto, nor the payment of any benefits shallbe construed as giving any person the right to be retained by the Company, aSuccessor or any other member of the Company Group.  Except as otherwise established in an employment agreementbetween the Company and a Participant, the employment relationship between theParticipant and the Company is an “at-will” relationship.  Accordingly, either the Participant or theCompany may terminate the relationship at any time, with or without cause, andwith or without notice except as otherwise provided by Section 14.  In addition, nothing in this Plan shall in anymanner obligate any Successor or other member of the Company Group to offeremployment to any Participant or to continue the employment of any Participantwhich it does hire for any specific duration of time.

 

12.           **Arbitration**

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## 12.1                           **DisputesSubject to Arbitration.**  Anyclaim, dispute or controversy arising out of this Plan, the interpretation,validity or enforceability of this Plan or the alleged breach thereof shall besubmitted by the parties to binding arbitration by the American ArbitrationAssociation; provided, however, that (a) the arbitrator shall have no authorityto make any ruling or judgment that would confer any rights with respect totrade secrets, confidential and proprietary information or other intellectualproperty; and (b) this arbitration provision shall not preclude the partiesfrom seeking legal and equitable relief from any court having jurisdiction withrespect to any disputes or claims relating to or arising out of the misuse ormisappropriation of intellectual property. Judgment may be entered on the award of the arbitrator in any courthaving jurisdiction.

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## 12.2                           **Site ofArbitration.**  The site of thearbitration proceeding shall be in Santa Clara, California or any other sitemutually agreed to by the Company and the Participant.

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## 12.3                           **Costs andExpenses Borne by Company.** All costs and expenses of arbitration, including but not limited toreasonable attorneys’ fees and other costs reasonably incurred by theParticipant in connection with an arbitration in accordance with this Section12, shall be paid by the Company.  Notwithstandingthe foregoing, if the Participant initiates the arbitration, and the arbitratorfinds that the Participant’s claims were totally without merit or frivolous,then the Participant shall be responsible for the Participant’s own attorneys’fees and costs.

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13.           **Successors and Assigns**

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## 13.1                           **Successorsof the Company.**  The Companyshall require any successor or assign (whether direct or indirect, by purchase,merger, consolidation or otherwise) to all or substantially all of the businessand/or assets of the Company, expressly, absolutely and unconditionally toassume and agree to perform this Plan in the same manner and to the same extentthat the Company would be required to perform it if no such succession orassignment had taken place.  Failure ofthe Company to obtain such agreement shall be a material breach of this Planand shall entitle the Participant to resign for Good Reason and to receive thebenefits provided under this Plan in the event of Termination Upon a Change inControl.

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## 13.2                           **Acknowledgmentby Company.**  If, after aChange in Control, the Company fails to reasonably confirm that it hasperformed the obligation described in Section 13.1 within thirty (30) daysafter written notice from the Participant, such failure shall be a materialbreach of this Plan and shall entitle the Participant to resign for Good Reasonand to receive the benefits provided under this Plan in the event ofTermination Upon a Change in Control.

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## 13.3                           **Heirs andRepresentatives of Participant.** This Plan shall inure to the benefit of and be enforceable by theParticipant’s personal or legal representatives, executors, administrators,successors, heirs, distributees, devises, legatees or other beneficiaries.  If the Participant should die while anyamount would still be payable to the Participant hereunder (other than amountswhich, by their terms, terminate upon the death of the Participant) if theParticipant had continued to live, then all such amounts, unless otherwiseprovided herein, shall be paid in accordance with the terms of this Plan to theexecutors, personal representatives or administrators of the Participant’sestate.

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14.           **Notices**

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## 14.1                           **General.**  For purposes of this Plan, notices and allother communications provided for herein shall be in writing and shall bedeemed to have been duly given when personally delivered or when mailed byUnited States certified mail, return receipt requested, or by overnightcourier, postage prepaid, as follows:

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### (a)                                  ifto the Company:

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Zoran Corporation

3112 Scott Boulevard

Santa Clara, California95054

Attention: President

 

### (b)                                 ifto the Participant, at the home address which the Participant most recentlycommunicated to the Company in writing.

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Either party may providethe other with notices of change of address, which shall be effective uponreceipt.

 

## 14.2                           **Notice ofTermination.**  Any terminationby the Company of the Participant’s employment during the Change in ControlPeriod or any resignation by the Participant during the Change in ControlPeriod shall be communicated by a notice of termination or resignation to theother party hereto given in accordance with Section 14.1.  Such notice shall indicate the specifictermination provision in this Plan relied upon, shall set forth in reasonabledetail the facts and circumstances claimed to provide a basis for terminationunder the provision so indicated, and shall specify the termination date.

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15.           **Termination and Amendment of Plan**

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This Plan and/or anyParticipation Agreement executed by a Participant may not be terminated withrespect to such Participant without the written consent of theParticipant.  This Plan and/or anyParticipation Agreement executed by a Participant may be modified, amended orsuperseded with respect to such Participant only by a supplemental writtenagreement between the Participant and the Company.

 

16.           **Miscellaneous Provisions**

#  

## 16.1                           **UnfundedObligation.**  Any amountspayable to Participants pursuant to the Plan are unfunded obligations.  The Company shall not be required tosegregate any monies from its general funds, or to create any trusts, orestablish any special accounts with respect to such obligations.  The Company shall retain at all timesbeneficial ownership of any investments, including trust investments, which theCompany may make to fulfill its payment obligations hereunder.  Any investments or the creation ormaintenance of any trust or any Participant account shall not create orconstitute a trust or fiduciary relationship between the Board or the Companyand a Participant, or otherwise create any vested or beneficial interest in anyParticipant or the Participant’s creditors in any assets of the Company.

##  

## 16.2                           **No Duty toMitigate; Obligations of Company.** A Participant shall not be required to mitigate the amount of anypayment or benefit contemplated by this Plan by seeking employment with a newemployer or otherwise, nor shall any such payment or benefit (except forbenefits to the extent described in Section 5.2) be reduced by any compensationor benefits that the Participant may receive from employment by another

##  

9

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## employer.  Except as otherwise provided by this Plan,the obligations of the Company to make payments to the Participant and to makethe arrangements provided for herein are absolute and unconditional and may notbe reduced by any circumstances, including without limitation any set-off,counterclaim, recoupment, defense or other right which the Company may haveagainst the Participant or any third party at any time.

##  

## 16.3                           **NoRepresentations.**  Byexecuting a Participation Agreement, the Participant acknowledges that inbecoming a Participant in the Plan, the Participant is not relying and has notrelied on any promise, representation or statement made by or on behalf of theCompany which is not set forth in this Plan.

##  

## 16.4                           **Waiver.**  No waiver by the Participant or the Companyof any breach of, or of any lack of compliance with, any condition or provisionof this Plan by the other party shall be considered a waiver of any othercondition or provision or of the same condition or provision at another time.

##  

## 16.5                           **Choice ofLaw.**  The validity,interpretation, construction and performance of this Plan shall be governed bythe substantive laws of the State of California, without regard to its conflictof law provisions.

##  

## 16.6                           **Validity.**  The invalidity or unenforceability of anyprovision of this Plan shall not affect the validity or enforceability of anyother provision of this Plan, which shall remain in full force and effect.

##  

## 16.7                           **Benefits NotAssignable.**  Except asotherwise provided herein or by law, no right or interest of any Participantunder the Plan shall be assignable or transferable, in whole or in part, eitherdirectly or by operation of law or otherwise, including, without limitation, byexecution, levy, garnishment, attachment, pledge or in any other manner, and noattempted transfer or assignment thereof shall be effective.  No right or interest of any Participant underthe Plan shall be liable for, or subject to, any obligation or liability ofsuch Participant.

##  

## 16.8                           **TaxWithholding.**  All paymentsmade pursuant to this Plan will be subject to withholding of applicable incomeand employment taxes.

##  

## 16.9                           **Consultationwith Legal and Financial Advisors.** By executing a Participation Agreement, the Participant acknowledgesthat this Plan confers significant legal rights, and may also involve thewaiver of rights under other agreements; that the Company has encouraged the Participantto consult with the Participant’s personal legal and financial advisors; andthat the Participant has had adequate time to consult with the Participant’sadvisors before executing the Participation Agreement.

##  

17.           **Agreement**

#  

By executing aParticipation Agreement, the Participant acknowledges that the Participant hasreceived a copy of this Plan and has read, understands and is familiar with theterms and provisions of this Plan.  ThisPlan shall constitute an agreement between the Company and the Participantexecuting a Participation Agreement.

 

IN WITNESS WHEREOF, the undersigned Secretary of theCompany certifies that the foregoing Plan was duly adopted by the Committee onNovember 8, 2002.

 
|   |   |
|--------|--------|

 

10

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**EXHIBIT A**

 

 

FORM OF

 

AGREEMENT TOPARTICIPATE IN THE

 

ZORAN CORPORATION

 

EXECUTIVERETENTION AND SEVERANCE PLAN

 

11

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**AGREEMENT TOPARTICIPATE IN THE**

**ZORANCORPORATION**

**EXECUTIVERETENTION AND SEVERANCE PLAN**

**AdoptedNovember 8, 2002**

 

In consideration of the benefits provided by the ZoranCorporation Executive Retention and Severance Plan (the *“**Plan**”*), the undersigned employeeof Zoran Corporation (the *“**Company**”*) and the Company agreethat, as of the date written below, the undersigned shall become a Participantin the Plan and shall be fully bound by and subject to all of itsprovisions.  All references to a“Participant” in the Plan shall be deemed to refer to the undersigned.

 

The undersigned employee acknowledges that the Planconfers significant legal rights and may also constitute a waiver of rightsunder other agreements with the Company; that the Company has encouraged theundersigned to consult with the undersigned’s personal legal and financialadvisors; and that the undersigned has had adequate time to consult with theundersigned’s advisors before executing this agreement.

 

The undersigned employee acknowledges that he or shehas received a copy of the Plan and has read, understands and is familiar withthe terms and provisions of the Plan. The undersigned employee further acknowledges that (1) by accepting thearbitration provision set forth in Section 12 of the Plan, the undersigned iswaiving any right to a jury trial in the event of any dispute covered by suchprovision and (2) except as otherwise established in an employment agreementbetween the Company and the undersigned, the employment relationship betweenthe undersigned and the Company is an “at-will” relationship.

 
|   | Executed on |              |   |   |   |
|--------|-------------|-------------------|--------|--------|--------|
|   |        |              |   |
|   |        | PARTICIPANT       |
|   |        |              |   |
|   |        |              |
|   |        | Signature         |
|   |        |              |   |
|   |        |              |
|   |        | Name Printed      |
|   |        |              |   |
|   |        |              |
|   |        | Address           |
|   |        |              |   |
|   |        |              |   |
|   |        | ZORAN CORPORATION |
|   |        |              |
|   |        | By:               |   |
|   |        |              |
|   |        | Title:            |   |
|        |             |                   |        |        |        |  |  |

 

12

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**EXHIBIT B**

 

 

FORMS OF

 

GENERAL RELEASE OFCLAIMS

 

13

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**GENERALRELEASE OF CLAIMS**

**[Age40 and over]**

 

This Agreement is by and between [**Employee Name**] (“Employee”) and [**Zoran Corporation or successor that agrees to assumethe Executive Retention and Severance Plan following a Change in Control**](the “Company”).  This Agreement willbecome effective on the eighth (8th) day after it is signed by Employee (the“Effective Date”), provided that the Company has signed this Agreement andEmployee has not revoked this Agreement (by written notice to [**Company Contact Name**] at the Company) priorto that date.

 

RECITALS

 

A.                                   Employeewas employed by the Company as of                      ,              .

 

B.                                     Employeeand the Company entered into an Agreement to Participate in the ZoranCorporation Executive Retention and Severance Plan (such agreement and planbeing referred to herein as the “Plan”) effective asof                      ,              wherein Employee is entitled to receive certain benefits in the event of aTermination Upon a Change in Control (as defined by the Plan), providedEmployee signs and does not revoke a Release (as defined by the Plan).

 

C.                                     AChange in Control (as defined by the Plan) has occurred as a result of [**briefly describe change in control**]

 

D.                                    Employee’semployment is being terminated as a result of a Termination Upon a Change inControl.  Employee’s last day of workand termination are effective asof                      ,              .  Employee desires to receive the payments andbenefits provided by the Plan by executing this Release.

 

NOW, THEREFORE, theparties agree as follows:

 

1.                                       Commencingon the Effective Date, the Company shall provide Employee with the applicablepayments and benefits set forth in the Plan in accordance with the terms of thePlan.  Employee acknowledges that thepayments and benefits made pursuant to this paragraph are made in fullsatisfaction of the Company’s obligations under the Plan.  Employee further acknowledges that Employeehas been paid all wages and accrued, unused vacation that Employee earnedduring his or her employment with the Company.

 

2.                                       Employeeand Employee’s successors release the Company, its respective subsidiaries,stockholders, investors, directors, officers, employees, agents, attorneys,insurers, legal successors and assigns of and from any and all claims, actionsand causes of action, whether now known or unknown, which Employee now has, orat any other time had, or shall or may have against those released partiesbased upon or arising out of any matter, cause, fact, thing, act or omissionwhatsoever directly related to Employee’s employment by the Company or thetermination of such employment and occurring or existing at any time up to andincluding the Effective Date, including, but not limited to, any claims ofbreach of written contract, wrongful termination, retaliation, fraud,defamation, infliction of emotional distress, or national origin, race, age,sex, sexual orientation, disability or other discrimination or harassment underthe Civil Rights Act of 1964, the Age Discrimination In Employment Act of 1967,the Americans with Disabilities Act, the Fair Employment and Housing Act or anyother applicable law.  Notwithstandingthe foregoing, this release shall not apply to any right of the Employeepursuant to Section 5.4 of the Plan or pursuant to a Prior IndemnityAgreement (as such term is defined by the Plan).

 

3.                                       Employeeacknowledges that he or she has read Section 1542 of the Civil Code of theState of California, which states in full:

 

A general release doesnot extend to claims which the creditor does not know or suspect to exist inhis favor at the time of executing the release, which if known by him must havematerially affected his settlement with the debtor.

 

Employee waives anyrights that Employee has or may have under Section 1542 and comparable orsimilar provisions of the laws of other states in the United States to the fullextent that he or she may lawfully waive such

 

14

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rights pertaining to this general release of claims, and affirms thatEmployee is releasing all known and unknown claims that he or she has or mayhave against the parties listed above.

 

4.                                       Employeeand the Company acknowledge and agree that they shall continue to be bound byand comply with the terms and obligations under the following agreements: (i)any proprietary rights or confidentiality agreements between the Company andEmployee, (ii) the Plan, (iii) any Prior Indemnity Agreement (as such term isdefined by the Plan) to which Employee is a party, and (iv) any stock option,stock grant, stock purchase or Cash Incentive Program (as described in Section4 of the Plan) agreements between the Company and Employee.

 

5.                                       ThisAgreement shall be binding upon, and shall inure to the benefit of, the partiesand their respective successors, assigns, heirs and personal representatives.

 

6.                                       Theparties agree that any and all disputes that both (i) arise out of the Plan,the interpretation, validity or enforceability of the Plan or the allegedbreach thereof and (ii) relate to the enforceability of this Agreement or theinterpretation of the terms of this Agreement shall be subject to bindingarbitration pursuant to Section 12 of the Plan.

 

7.                                       Theparties agree that any and all disputes that (i) do not arise out of the Plan,the interpretation, validity or enforceability of the Plan or the allegedbreach thereof and (ii) relate to the enforceability of this Agreement, theinterpretation of the terms of this Agreement or any of the matters hereinreleased or herein described shall be subject to binding arbitration, to theextent permitted by law, in Santa Clara, California or any other cite mutuallyagreed to by the Company and Employee, before the American ArbitrationAssociation, as provided in this paragraph. The parties agree to and hereby waive their rights to jury trial as tosuch matters to the extent permitted by law; provided however, that (a) thearbitrator shall have no authority to make any ruling or judgment that wouldconfer any rights with respect to trade secrets, confidential and proprietaryinformation or other intellectual property; and (b) this arbitration provisionshall not preclude the parties from seeking legal and equitable relief from anycourt having jurisdiction with respect to any disputes or claims relating to orarising out of the misuse or misappropriation of intellectual property.  The Company shall bear the costs of thearbitrator, forum and filing fees and each party shall bear its own respectiveattorney fees and all other costs, unless otherwise provided by law and awardedby the arbitrator.

 

8.                                       ThisAgreement constitutes the entire agreement between the parties with respect tothe subject matter hereof and supersedes all prior negotiations and agreements,whether written or oral, with the exception of any agreements described inparagraph 4 of this Agreement. This Agreement may not be modified or amended except by a document signedby an authorized officer of the Company and Employee.  If any provision of this Agreement is deemed invalid, illegal orunenforceable, such provision shall be modified so as to make it valid, legaland enforceable, and the validity, legality and enforceability of the remainingprovisions of this Agreement shall not in any way be affected.

 

EMPLOYEE UNDERSTANDS THATEMPLOYEE SHOULD CONSULT WITH AN ATTORNEY PRIOR TO SIGNING THIS AGREEMENT ANDTHAT EMPLOYEE IS GIVING UP ANY LEGAL CLAIMS EMPLOYEE HAS AGAINST THE PARTIESRELEASED ABOVE BY SIGNING THIS AGREEMENT. EMPLOYEE FURTHER UNDERSTANDS THAT EMPLOYEE MAY HAVE UP TO 45 DAYS TOCONSIDER THIS AGREEMENT, THAT EMPLOYEE MAY REVOKE IT AT ANY TIME DURING THE 7DAYS AFTER EMPLOYEE SIGNS IT, AND THAT IT SHALL NOT BECOME EFFECTIVE UNTIL THAT7-DAY PERIOD HAS PASSED.  EMPLOYEEACKNOWLEDGES THAT EMPLOYEE IS SIGNING THIS AGREEMENT KNOWINGLY, WILLINGLY ANDVOLUNTARILY IN EXCHANGE FOR THE COMPENSATION AND BENEFITS DESCRIBED INPARAGRAPH 1.

 
| Dated: |            |   |   |
|--------|-----------------|--------|--------|
|   | [Employee Name] |
|   |            |
|   |            |
|   | [Company]       |
|   |            |
|   |            |
| Dated: |            |   | By:    |   |
|        |                 |        |        |  |  |

 

15

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**GENERALRELEASE OF CLAIMS**

**[Underage 40]**

 

This Agreement is by and between [**Employee Name**] (“Employee”) and [**Zoran Corporation or successor that agrees to assumethe Executive Retention and Severance Plan following a Change in Control**](the “Company”).  This Agreement iseffective on the day it is signed by Employee (the “Effective Date”).

 

RECITALS

 

A.                                   Employeewas employed by the Company as of                      ,              .

 

B.                                     Employeeand the Company entered into an Agreement to Participate in the ZoranCorporation Executive Retention and Severance Plan (such agreement and planbeing referred to herein as the “Plan”) effective as of                      ,              whereinEmployee is entitled to receive certain benefits in the event of a TerminationUpon a Change in Control (as defined by the Plan), provided Employee signs aRelease (as defined by the Plan).

 

C.                                     AChange in Control (as defined by the Plan) has occurred as a result of [**briefly describe change in control**]

 

D.                                    Employee’semployment is being terminated as a result of a Termination Upon a Change inControl.  Employee’s last day of workand termination are effective as of                      ,              (the “Termination Date”).  Employeedesires to receive the payments and benefits provided by the Plan by executingthis Release.

 

NOW, THEREFORE, theparties agree as follows:

 

1.                                       Commencingon the Effective Date, the Company shall provide Employee with the applicablepayments and benefits set forth in the Plan in accordance with the terms of thePlan.  Employee acknowledges that thepayments and benefits made pursuant to this paragraph are made in fullsatisfaction of the Company’s obligations under the Plan.  Employee further acknowledges that Employeehas been paid all wages and accrued, unused vacation that Employee earnedduring his or her employment with the Company.

 

2.                                       Employeeand Employee’s successors release the Company, its respective subsidiaries,stockholders, investors, directors, officers, employees, agents, attorneys,insurers, legal successors and assigns of and from any and all claims, actionsand causes of action, whether now known or unknown, which Employee now has, orat any other time had, or shall or may have against those released partiesbased upon or arising out of any matter, cause, fact, thing, act or omissionwhatsoever directly related to Employee’s employment by the Company or thetermination of such employment and occurring or existing at any time up to andincluding the Termination Date, including, but not limited to, any claims ofbreach of written contract, wrongful termination, retaliation, fraud,defamation, infliction of emotional distress, or national origin, race, age,sex, sexual orientation, disability or other discrimination or harassment underthe Civil Rights Act of 1964, the Age Discrimination In Employment Act of 1967,the Americans with Disabilities Act, the Fair Employment and Housing Act or anyother applicable law.  Notwithstanding theforegoing, this release shall not apply to any right of the Employee pursuantto Sections 5.4 of the Plan or pursuant to a Prior Indemnity Agreement (assuch terms are defined by the Plan).

 

3.                                       Employeeacknowledges that he or she has read Section 1542 of the Civil Code of theState of California, which states in full:

 

A general release doesnot extend to claims which the creditor does not know or suspect to exist inhis favor at the time of executing the release, which if known by him must havematerially affected his settlement with the debtor.

 

Employee waives anyrights that Employee has or may have under Section 1542 and comparable orsimilar provisions of the laws of other states in the United States to the fullextent that he or she may lawfully waive such rights pertaining to this generalrelease of claims, and affirms that Employee is releasing all known and unknownclaims that he or she has or may have against the parties listed above.

 

16

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4.                                       Employeeand the Company acknowledge and agree that they shall continue to be bound byand comply with the terms and his obligations under the following agreements:(i) any proprietary rights or confidentiality agreements between the Companyand Employee, (ii) the Plan, (iii) any Prior Indemnity Agreement (as such termis defined by the Plan) to which Employee is a party, and (iv) any stockoption, stock grant, stock purchase or Cash Incentive Program (as described inSection 4 of the Plan) agreements between the Company and Employee.

 

5.                                       ThisAgreement shall be binding upon, and shall inure to the benefit of, the partiesand their respective successors, assigns, heirs and personal representatives.

 

6.                                       Theparties agree that any and all disputes that both (i) arise out of the Plan,the interpretation, validity or enforceability of the Plan or the allegedbreach thereof and (ii) relate to the enforceability of this Agreement or theinterpretation of the terms of this Agreement shall be subject to binding arbitrationpursuant to Section 12 of the Plan.

 

7.                                       Theparties agree that any and all disputes that (i) do not arise out of the Plan,the interpretation, validity or enforceability of the Plan or the allegedbreach thereof and (ii) relate to the enforceability of this Agreement, theinterpretation of the terms of this Agreement or any of the matters hereinreleased or herein described shall be subject to binding arbitration, to theextent permitted by law, in Santa Clara, California or any other cite mutuallyagreed to by the Company and Employee, before the American ArbitrationAssociation, as provided in this paragraph. The parties agree to and hereby waive their rights to jury trial as tosuch matters to the extent permitted by law; provided however, that (a) thearbitrator shall have no authority to make any ruling or judgment that wouldconfer any rights with respect to trade secrets, confidential and proprietaryinformation or other intellectual property; and (b) this arbitration provisionshall not preclude the parties from seeking legal and equitable relief from anycourt having jurisdiction with respect to any disputes or claims relating to orarising out of the misuse or misappropriation of intellectual property.  The Company shall bear the costs of thearbitrator, forum and filing fees and each party shall bear its own respectiveattorney fees and all other costs, unless otherwise provided by law and awardedby the arbitrator.

 

8.                                       ThisAgreement constitutes the entire agreement between the parties with respect tothe subject matter hereof and supersedes all prior negotiations and agreements,whether written or oral, with the exception of any agreements described inparagraph 4 of this Agreement. This Agreement may not be modified or amended except by a documentsigned by an authorized officer of the Company and Employee.  If any provision of this Agreement is deemedinvalid, illegal or unenforceable, such provision shall be modified so as tomake it valid, legal and enforceable, and the validity, legality andenforceability of the remaining provisions of this Agreement shall not in anyway be affected.

 

EMPLOYEE UNDERSTANDS THATEMPLOYEE SHOULD CONSULT WITH AN ATTORNEY PRIOR TO SIGNING THIS AGREEMENT ANDTHAT EMPLOYEE IS GIVING UP ANY LEGAL CLAIMS EMPLOYEE HAS AGAINST THE PARTIESRELEASED ABOVE BY SIGNING THIS AGREEMENT. EMPLOYEE ACKNOWLEDGES THAT EMPLOEE IS SIGNING THIS AGREEMENT KNOWINGLY,WILLINGLY AND VOLUNTARILY IN EXCHANGE FOR THE COMPENSATION AND BENEFITS DESCRIBEDIN PARAGRAPH 1.

 

 
| Dated: |            |   |   |
|--------|-----------------|--------|--------|
|   | [Employee Name] |
|   |            |
|   |            |
|   | [Company]       |
|   |            |
|   |            |
| Dated: |            |   | By:    |   |
|        |                 |        |        |  |  |

 

17

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