Exhibit 10.18


ZORAN CORPORATION


1995 OUTSIDE DIRECTORS STOCK OPTION PLAN


(As Amended
Through April 21, 2002)


1.                                      Establishment,
Purpose and Term of Plan.


1.1                                 Establishment.  The Zoran Corporation 1995 Outside Directors
Stock Option Plan (the “Plan”) is hereby
established effective as of the effective date of the initial registration by
the Company of its Stock under Section 12 of the Exchange Act (the “Effective Date”).


1.2                                 Purpose.  The purpose of the Plan is to advance the
interests of the Participating Company Group and its stockholders by providing
an incentive to attract and retain highly qualified persons to serve as Outside
Directors of the Company and by creating additional incentive for Outside
Directors to promote the growth and profitability of the Participating Company
Group.


1.3                                 Term of Plan.  The Plan shall continue in effect until the
earlier of its termination by the Board or the date on which all of the shares
of Stock available for issuance under the Plan have been issued and all
restrictions on such shares under the terms of the Plan and the agreements
evidencing Options granted under the Plan have lapsed.  However, all Options shall be granted, if at
all, within ten (10) years from the Effective Date.


2.                                      Definitions
and Construction.


2.1                                 Definitions.  Whenever used herein, the following terms
shall have their respective meanings set forth below:


(a)                                  “Board” means the Board of Directors of the Company.  If one or more Committees have been appointed
by the Board to administer the Plan, “Board” also means such Committee(s).


(b)                                 “Code” means the Internal Revenue Code of 1986, as amended,
and any applicable regulations promulgated thereunder.


(c)                                  “Committee” means a committee of the Board duly appointed to
administer the Plan and having such powers as shall be specified by the
Board.  Unless the powers of the
Committee have been specifically limited, the Committee shall have all of the
powers of the Board granted herein, including, without limitation, the power to
amend or terminate the Plan at any time, subject to the terms of the Plan and
any applicable limitations imposed by law.


(d)                                 “Company” means Zoran Corporation, a Delaware corporation, or
any successor corporation thereto.













(e)                                  “Consultant” means any person, including an advisor, engaged
by a Participating Company to render services other than as an Employee or a
Director.


(f)                                    “Director” means a member of the Board or the board of
directors of any other Participating Company.


(g)                                 “Employee” means any person treated as an employee (including
an officer or a Director who is also treated as an employee) in the records of
a Participating Company; provided, however, that neither service as a Director
nor payment of a director’s fee shall be sufficient to constitute employment
for purposes of the Plan.


(h)                                 “Exchange Act” means the Securities Exchange Act of 1934, as
amended.


(i)                                     “Fair Market Value” means, as of any date, if there is then a
public market for the Stock, the closing price of the Stock (or the mean of the
closing bid and asked prices of the Stock if the Stock is so reported instead)
as reported on the National Association of Securities Dealers Automated
Quotation (“NASDAQ”) System, the NASDAQ
National Market System or such other national or regional securities exchange
or market system constituting the primary market for the Stock.  If the relevant date does not fall on a day
on which the Stock is trading on NASDAQ, the NASDAQ National Market System or
other national or regional securities exchange or market system, the date on
which the Fair Market Value shall be established shall be the last day on which
the Stock was so traded prior to the relevant date.  If there is then no public market for the
Stock, the Fair Market Value on any relevant date shall be as determined by the
Board without regard to any restriction other than a restriction which, by its
terms, will never lapse.


(j)                                     “Option” means a right to purchase Stock (subject to
adjustment as provided in Section 4.2) pursuant to the terms and condition
of the Plan.


(k)                                  “Optionee” means a person who has been granted one or more
Options.


(l)                                     “Option Agreement” means a written agreement between the
Company and an Optionee setting forth the terms, conditions and restrictions of
the Option granted to the Optionee.


(m)                               “Outside Director” means a Director of the Company who is not
an Employee.


(n)                                 “Parent Corporation” means any present or future “parent
corporation” of the Company, as defined in Section 424(e) of the Code.


(o)                                 “Participating Company” means the Company or any Parent
Corporation or Subsidiary Corporation.


(p)                                 “Participating Company Group” means, at any point in time,
all corporations collectively which are then Participating Companies.



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(q)                                 “Rule 16b–3” means Rule 16b–3 as promulgated under
the Exchange Act, as amended from time to time, or any successor rule or
regulation.


(r)                                    “Service” means the Optionee’s service with the Participating
Company Group, whether in the capacity of an Employee, a Director or a
Consultant.  The Optionee’s Service shall
not be deemed to have terminated merely because of a change in the capacity in
which the Optionee renders Service to the Participating Company Group or a
change in the Participating Company for which the Optionee renders such
Service, provided that there is no interruption or termination of the Optionee’s
Service.  The Optionee’s Service shall be
deemed to have terminated either upon an actual termination of Service or upon
the corporation for which the Optionee performs Service ceasing to be a
Participating Company.


(s)                                  “Stock” means the common stock, par value $0.001, of the
Company, as adjusted from time to time in accordance with Section 4.2.


(t)                                    “Subsidiary Corporation” means any present or future “subsidiary
corporation” of the Company, as defined in Section 424(f) of the Code.


2.2                                 Construction.  Captions and titles contained herein are for
convenience only and shall not affect the meaning or interpretation of any
provision of the Plan.  Except when
otherwise indicated by the context, the singular shall include the plural, the
plural shall include the singular, and use of the term “or” shall include the
conjunctive as well as the disjunctive.


3.                                      Administration.


3.1                                 Administration by the Board.  The Plan shall be administered by the Board,
including any duly appointed Committee of the Board.  All questions of interpretation of the Plan
or of any Option shall be determined by the Board, and such determinations
shall be final and binding upon all persons having an interest in the Plan or
such Option.  Any officer of a
Participating Company shall have the authority to act on behalf of the Company
with respect to any matter, right, obligation, determination or election which
is the responsibility of or which is allocated to the Company herein, provided
the officer has apparent authority with respect to such matter, right,
obligation, determination or election.


3.2                                 Limitations on Authority of the Board.
 Notwithstanding any other provision
herein to the contrary, the Board shall have no authority, discretion, or power
to select the Outside Directors who will receive Options, to set the exercise
price of the Options, to determine the number of shares of Stock to be subject
to an Option or the time at which an Option shall be granted, to establish the
duration of an Option, or to alter any other terms or conditions specified in
the Plan, except in the sense of administering the Plan subject to the
provisions of the Plan.


4.                                      Shares
Subject to Plan.


4.1                                 Maximum Number of Shares Issuable.  Subject to adjustment as provided in Section 4.2,
the maximum aggregate number of shares of Stock that may be issued under the
Plan shall be three hundred fifty thousand (350,000) and shall consist of
authorized but unissued shares or reacquired shares of Stock or any combination
thereof.  If an outstanding Option for
any reason expires or is terminated or canceled or shares of Stock acquired,
subject to 



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repurchase, upon the exercise of an Option are
repurchased by the Company, the shares of Stock allocable to the unexercised
portion of such Option, or such repurchased shares of Stock, shall again be
available for issuance under the Plan.


4.2                                 Adjustments for Changes in Capital Structure.  In the event of any stock dividend, stock
split, reverse stock split, recapitalization, combination, reclassification or
similar change in the capital structure of the Company, appropriate adjustments
shall be made in the number and class of shares subject to the Plan, to the “Initial
Option” and “Annual Option” (as defined in Section 6.1), and to any
outstanding Options, and in the exercise price of any outstanding Options.  If a majority of the shares which are of the
same class as the shares that are subject to outstanding Options are exchanged
for, converted into, or otherwise become (whether or not pursuant to an
Ownership Change Event as defined in Section 8.1) shares of another
corporation (the “New Shares”),
the Board may unilaterally amend the outstanding Options to provide that such
Options are exercisable for New Shares. 
In the event of any such amendment, the number of shares subject to, and
the exercise price of, the outstanding Options shall be adjusted in a fair and
equitable manner as determined by the Board, in its sole discretion.  Notwithstanding the foregoing, any fractional
share resulting from an adjustment pursuant to this Section 4.2 shall be
rounded down to the nearest whole number, and in no event may the exercise
price of any Option be decreased to an amount less than the par value, if any,
of the stock subject to the Option.


5.                                      Eligibility
and Type of Options.


5.1                                 Persons Eligible for Options.  An Option shall be granted only to a person
who, at the time of grant, is an Outside Director.


5.2                                 Options Authorized.  Options shall be nonstatutory stock options;
that is, options which are not treated as incentive stock options within the
meaning of Section 422(b) of the Code.


6.                                      Terms
and Conditions of Options.  Options
shall be evidenced by Option Agreements specifying the number of shares of
Stock covered thereby, in such form as the Board shall from time to time establish.  Option Agreements may incorporate all or any
of the terms of the Plan by reference and shall comply with and be subject to
the following terms and conditions:


6.1                                 Automatic Grant of Options.  Subject to execution by an Outside Director
of the appropriate Option Agreement, Options shall be granted automatically and
without further action of the Board, as follows:


(a)                                  Initial Option.  Each
person who is (i) an Outside Director on the Effective Date, or (ii) first
elected or appointed as an Outside Director after the Effective Date shall be
granted an Option to purchase twenty thousand (20,000) shares of Stock on the
Effective Date or the date of such initial election or appointment,
respectively (an “Initial Option”).  Notwithstanding anything herein to the
contrary, a Director of the Company who previously did not qualify as an
Outside Director shall not receive an Initial Option in the event that such
Director subsequently becomes an Outside Director.



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(b)                                 Annual Option.  Each
Outside Director (including any Director of the Company who previously did not
qualify as an Outside Director but who subsequently becomes an Outside
Director) shall be granted, on the date immediately following the date of each
annual meeting of the stockholders of the Company (an “Annual
Meeting”) following which such person remains an Outside Director,
an Option to purchase ten thousand (10,000) shares of Stock (an “Annual Option”). 
Notwithstanding the foregoing, an Outside Director who has not served
continuously as a Director of the Company for at least six (6) months as of the
date immediately following such Annual Meeting shall not receive an Annual
Option on such date.


(c)                                  Right to Decline Option. 
Notwithstanding the foregoing, any person may elect not to receive an Option
by delivering written notice of such election to the Board no later than the
day prior to the date such Option would otherwise be granted.  A person so declining an Option shall receive
no payment or other consideration in lieu of such declined Option.  A person who has declined an Option may
revoke such election by delivering written notice of such revocation to the
Board no later than the day prior to the date such Option would be granted
pursuant to Section 6.1(a) or (b), as the case may be.


6.2                                 Exercise Price.  The exercise price per share of Stock subject
to an Option shall be the Fair Market Value of a share of Stock on the date the
Option is granted.


6.3                                 Exercise Period.  Each Option shall terminate and cease to be
exercisable on the date ten (10) years after the date of grant of the Option
unless earlier terminated pursuant to the terms of the Plan or the Option
Agreement.


6.4                                 Right to Exercise Options.


(a)                                  Initial Option. 
Except as otherwise provided in the Plan or in the Option Agreement, an Initial
Option shall (i) first become exercisable on the date which is one (1) year
after the date on which the Initial Option was granted (the “Initial Option Vesting Date”); and (ii) be exercisable
on and after the Initial Option Vesting Date and prior to the termination
thereof in an amount equal to the number of shares of Stock initially subject
to the Initial Option multiplied by the Vested Ratio as set forth below, less
the number of shares previously acquired upon exercise thereof.  The Vested Ratio described in the preceding
sentence shall be determined as follows:


	
   

  	
  Vested Ratio

  
	
   

  	
   

  
	
  Prior to Initial Option Vesting Date

  	
  0

  
	
   

  	
   

  
	
  On Initial
  Option Vesting Date, provided the Optionee’s Service is 

  continuous from the date of grant of the Initial Option until the Initial 

  Option Vesting Date

  	
  1/4

  
	
   

  	
   

  
	
  Plus

  	
   

  
	
   

  	
   

  
	
  For each full
  year of the Optionee’s continuous Service from the Initial 

  Option Vesting Date until the Vested Ratio equals 1/1, an additional

  	
  1/4

  



 



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(b)                                 Annual Option.  Except
as otherwise provided in the Plan or in the Option Agreement, an Annual Option
shall first become exercisable on the date which is one (1) year after the
date on which the Annual Option was granted (the “Annual
Option Vesting Date”), provided the Optionee’s Service is continuous
from the date of grant of the Annual Option until the Annual Option Vesting
Date.  The Annual Option shall be
exercisable on and after the Annual Option Vesting Date and prior to the
termination thereof in an amount equal to the number of shares of Stock initially
subject to the Annual Option, less the number of shares previously acquired
upon exercise thereof.


6.5                                 Payment of Exercise Price.


(a)                                  Forms of Consideration Authorized.  Except as otherwise provided below, payment
of the exercise price for the number of shares of Stock being purchased
pursuant to any Option shall be made (i) in cash, by check, or cash
equivalent, (ii) by tender to the Company of shares of Stock owned by the
Optionee having a Fair Market Value not less than the exercise price, (iii) by
the assignment of the proceeds of a sale or loan with respect to some or all of
the shares being acquired upon the exercise of the Option (including, without
limitation, through an exercise complying with the provisions of Regulation T
as promulgated from time to time by the Board of Governors of the Federal
Reserve System) (a “Cashless Exercise”),
or (iv) by any combination thereof.


(b)                                 Tender of Stock. 
Notwithstanding the foregoing, an Option may not be exercised by tender
to the Company of shares of Stock to the extent such tender of Stock would
constitute a violation of the provisions of any law, regulation or agreement
restricting the redemption of the Company’s stock.  Unless otherwise provided by the Board, an
Option may not be exercised by tender to the Company of shares of Stock unless
such shares either have been owned by the Optionee for more than six (6) months
or were not acquired, directly or indirectly, from the Company.


(c)                                  Cashless Exercise. 
The Company reserves, at any and all times, the right, in the Company’s
sole and absolute discretion, to establish, decline to approve or terminate any
program or procedures for the exercise of Options by means of a Cashless
Exercise.


6.6                                 Tax Withholding.  The Company shall have the right, but not the
obligation, to deduct from the shares of Stock issuable upon the exercise of an
Option, or to accept from the Optionee the tender of, a number of whole shares
of Stock having a Fair Market Value equal to all or any part of the federal,
state, local and foreign taxes, if any, required by law to be withheld by the
Participating Company Group with respect to such Option or the shares acquired
upon exercise thereof.  Alternatively or
in addition, in its sole discretion, the Company shall have the right to require
the Optionee to make adequate provision for any such tax withholding
obligations of the Participating Company Group arising in connection with the
Option or the shares acquired upon exercise thereof.  The Company shall have no obligation to
deliver shares of Stock until the Participating Company Group’s tax withholding
obligations have been satisfied.



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7.                                      Standard
Form of Option Agreement.


7.1                                 Initial Option.  Unless otherwise provided for by the Board at
the time an Initial Option is granted, each Initial Option shall comply with
and be subject to the terms and conditions set forth in the form of
Nonstatutory Stock Option Agreement for Outside Directors (Initial Option)
adopted by the Board concurrently with its adoption of the Plan and as amended
from time to time.


7.2                                 Annual Option.  Unless otherwise provided for by the Board at
the time an Annual Option is granted, each Annual Option shall comply with and
be subject to the terms and conditions set forth in the form of Nonstatutory
Stock Option Agreement for Outside Directors (Annual Option) adopted by the
Board concurrently with its adoption of the Plan and as amended from time to
time.


7.3                                 Authority to Vary Terms.  Subject to the limitations set forth in
Section 3.2, the Board shall have the authority from time to time to vary
the terms of any of the standard forms of Option Agreement described in this
Section 7 either in connection with the grant or amendment of an
individual Option or in connection with the authorization of a new standard
form or forms; provided, however, that the terms and conditions of any such
new, revised or amended standard form or forms of Option Agreement are not
inconsistent with the terms of the Plan. 
Such authority shall include, but not by way of limitation, the
authority to grant Options which are immediately exercisable subject to the
Company’s right to repurchase any unvested shares of Stock acquired by the
Optionee upon the exercise of an Option in the event such Optionee’s Service is
terminated for any reason.  In no event,
however, shall the Board be permitted to vary the terms of any standard form of
Option Agreement if such change would cause the Plan to cease to qualify as a
formula plan pursuant to Rule 16b–3 at any such time as any class of equity
security of the Company is registered pursuant to Section 12 of the
Exchange Act.


8.                                      Transfer
of Control.


8.1                                 Definitions.


(a)                                  An
“Ownership Change Event” shall be deemed
to have occurred if any of the following occurs with respect to the Company:


(i)                                     the
direct or indirect sale or exchange in a single or series of related
transactions by the stockholders of the Company of more than fifty percent
(50%) of the voting stock of the Company;


(ii)                                  a
merger or consolidation in which the Company is a party;


(iii)                               the
sale, exchange, or transfer of all or substantially all of the assets of the
Company; or


(iv)                              a
liquidation or dissolution of the Company.



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(b)                                 A
“Transfer of Control” shall mean an
Ownership Change Event or a series of related Ownership Change Events
(collectively, the “Transaction”)
wherein the stockholders of the Company immediately before the Transaction do
not retain immediately after the Transaction, in substantially the same
proportions as their ownership of shares of the Company’s voting stock
immediately before the Transaction, direct or indirect beneficial ownership of
more than fifty percent (50%) of the total combined voting power of the
outstanding voting stock of the Company or the corporation or corporations to
which the assets of the Company were transferred (the “Transferee
Corporation(s)”), as the case may be.  For purposes of the preceding sentence,
indirect beneficial ownership shall include, without limitation, an interest
resulting from ownership of the voting stock of one or more corporations which,
as a result of the Transaction, own the Company or the Transferee
Corporation(s), as the case may be, either directly or through one or more
subsidiary corporations.  The Board shall
have the right to determine whether multiple sales or exchanges of the voting
stock of the Company or multiple Ownership Change Events are related, and its
determination shall be final, binding and conclusive.


8.2                                 Affect of Transfer of Control on Options.  In the event of a Transfer of Control, the
surviving, continuing, successor, or purchasing corporation or parent
corporation thereof, as the case may be (the “Acquiring
Corporation”), may either assume the Company’s rights and
obligations under outstanding Options or substitute for outstanding Options
substantially equivalent options for the Acquiring Corporation’s stock.  In the event the Acquiring Corporation elects
not to assume or substitute for outstanding Options in connection with a
Transfer of Control, any unexercisable or unvested portion of the outstanding
Options shall be immediately exercisable and vested in full as of the date ten
(10) days prior to the date of the Transfer of Control.  The exercise or vesting any Option that was
permissible solely by reason of this Section 8.2 shall be conditioned upon
the consummation of the Transfer of Control. 
Any Options which are neither assumed or substituted for by the
Acquiring Corporation in connection with the Transfer of Control nor exercised
as of the date of the Transfer of Control shall terminate and cease to be outstanding
effective as of the date of the Transfer of Control.  Notwithstanding the foregoing, shares
acquired upon exercise of an Option prior to the Transfer of Control and any
consideration received pursuant to the Transfer of Control with respect to such
shares shall continue to be subject to all applicable provisions of the Option
Agreement evidencing such Option except as otherwise provided in such Option
Agreement.  Furthermore, notwithstanding
the foregoing, if the corporation the stock of which is subject to the
outstanding Options immediately prior to an Ownership Change Event described in
Section 8.1(a)(i) constituting a Transfer of Control is the surviving or
continuing corporation and immediately after such Ownership Change Event less
than fifty percent (50%) of the total combined voting power of its voting stock
is held by another corporation or by other corporations that are members of an
affiliated group within the meaning of Section 1504(a) of the Code without
regard to the provisions of Section 1504(b) of the Code, the outstanding
Options shall not terminate.


9.                                      Nontransferability
of Options.  During the lifetime
of the Optionee, an Option shall be exercisable only by the Optionee or the
Optionee’s guardian or legal representative. 
No Option shall be assignable or transferable by the Optionee, except by
will or by the laws of descent and distribution.



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10.                               Indemnification.  In addition to such other rights of
indemnification as they may have as members of the Board or officers or
employees of the Participating Company Group, members of the Board and any
officers or employees of the Participating Company Group to whom authority to
act for the Board is delegated shall be indemnified by the Company against all
reasonable expenses, including attorneys’ fees, actually and necessarily
incurred in connection with the defense of any action, suit or proceeding, or
in connection with any appeal therein, to which they or any of them may be a
party by reason of any action taken or failure to act under or in connection
with the Plan, or any right granted hereunder, and against all amounts paid by
them in settlement thereof (provided such settlement is approved by independent
legal counsel selected by the Company) or paid by them in satisfaction of a
judgment in any such action, suit or proceeding, except in relation to matters
as to which it shall be adjudged in such action, suit or proceeding that such
person is liable for gross negligence, bad faith or intentional misconduct in
duties; provided, however, that within sixty (60) days after the institution of
such action, suit or proceeding, such person shall offer to the Company, in
writing, the opportunity at its own expense to handle and defend the same.


11.                               Termination
or Amendment of Plan.  The Board
may terminate or amend the Plan at any time. 
However, subject to changes in the law or other legal requirements that
would permit otherwise, without the approval of the Company’s stockholders,
there shall be (a) no increase in the total number of shares of Stock that
may be issued under the Plan (except by operation of the provisions of Section 4.2),
and (b) no expansion in the class of persons eligible to receive Options.  Furthermore, to the extent required by Rule 16b–3,
provisions of the Plan addressing eligibility to participate in the Plan and
the amount, price and timing of Options shall not be amended more than once
every six (6) months, other than to comport with changes in the Code, the
Employee Retirement Income Security Act of 1974, as amended, or the rules
thereunder.  In any event, no termination
or amendment of the Plan may adversely affect any then outstanding Option, or
any unexercised portion thereof, without the consent of the Optionee, unless
such termination or amendment is necessary to comply with any applicable law or
government regulation.


IN WITNESS WHEREOF, the undersigned Secretary of the
Company certifies that the foregoing sets forth the Zoran Corporation 1995
Outside Directors Stock Option Plan was duly adopted and amended by the Board
through April 21, 2002.


	
  

  	
   

  
	
   

  	
   

  
	
   

  	
  Secretary

  



 



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