Document:

Exhibit 10.11

 

Zoran Corporation

 

2005
Equity Incentive Plan

 

 

TABLE OF CONTENTS

 

	
   

  	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  	
   

  
	
  1.

  	
  Establishment, Purpose and Term of Plan

  	
  1

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  1.1

  	
  Establishment

  	
  1

  
	
   

  	
  1.2

  	
  Purpose

  	
  1

  
	
   

  	
  1.3

  	
  Term of Plan

  	
  1

  
	
   

  	
   

  	
   

  	
   

  
	
  2.

  	
  Definitions and
  Construction

  	
  1

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  2.1

  	
  Definitions

  	
  1

  
	
   

  	
  2.2

  	
  Construction

  	
  7

  
	
   

  	
   

  	
   

  	
   

  
	
  3.

  	
  Administration

  	
  7

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  3.1

  	
  Administration
  by the Committee

  	
  7

  
	
   

  	
  3.2

  	
  Authority of
  Officers

  	
  7

  
	
   

  	
  3.3

  	
  Administration
  with Respect to Insiders

  	
  7

  
	
   

  	
  3.4

  	
  Committee
  Complying with Section 162(m)

  	
  7

  
	
   

  	
  3.5

  	
  Powers of the Committee

  	
  7

  
	
   

  	
  3.6

  	
  Option or SAR
  Repricing

  	
  8

  
	
   

  	
  3.7

  	
  Indemnification

  	
  8

  
	
   

  	
   

  	
   

  	
   

  
	
  4.

  	
  Shares Subject
  to Plan

  	
  9

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  4.1

  	
  Maximum Number
  of Shares Issuable

  	
  9

  
	
   

  	
  4.2

  	
  Share Accounting

  	
  9

  
	
   

  	
  4.3

  	
  Adjustment for
  Certain Unissued Predecessor Plan Shares

  	
  9

  
	
   

  	
  4.4

  	
  Adjustments for
  Changes in Capital Structure

  	
  9

  
	
   

  	
   

  	
   

  	
   

  
	
  5.

  	
  Eligibility,
  Participation and Award Limitations

  	
  10

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  5.1

  	
  Persons Eligible
  for Awards

  	
  10

  
	
   

  	
  5.2

  	
  Participation in
  Plan

  	
  10

  
	
   

  	
  5.3

  	
  Award
  Limitations

  	
  10

  
	
   

  	
   

  	
   

  	
   

  
	
  6.

  	
  Stock Options

  	
  11

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  6.1

  	
  Exercise Price

  	
  12

  
	
   

  	
  6.2

  	
  Exercisability
  and Term of Options

  	
  12

  
	
   

  	
  6.3

  	
  Payment of
  Exercise Price

  	
  12

  
	
   

  	
  6.4

  	
  Effect of
  Termination of Service

  	
  13

  
	
   

  	
  6.5

  	
  Transferability
  of Options

  	
  13

  
	
   

  	
   

  	
   

  	
   

  
	
  7.

  	
  Stock
  Appreciation Rights

  	
  14

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  7.1

  	
  Types of SARs
  Authorized

  	
  14

  
	
   

  	
  7.2

  	
  Exercise Price

  	
  14

  
	
   

  	
  7.3

  	
  Exercisability
  and Term of SARs

  	
  14

  
	
   

  	
  7.4

  	
  Exercise of SARs

  	
  14

  
	
   

  	
  7.5

  	
  Deemed Exercise
  of SARs

  	
  14

  
	
   

  	
  7.6

  	
  Effect of
  Termination of Service

  	
  15

  
	
   

  	
  7.7

  	
  Transferability
  of SARs

  	
  15

  
	
   

  	
   

  	
   

  	
   

  
	
  8.

  	
  Restricted Stock
  Awards

  	
  15

  

 

i

 

	
   

  	
   

  	
   

  	
  Page

  
	
   

  	
  8.1

  	
  Types of
  Restricted Stock Awards Authorized

  	
  15

  
	
   

  	
  8.2

  	
  Purchase Price

  	
  15

  
	
   

  	
  8.3

  	
  Purchase Period

  	
  15

  
	
   

  	
  8.4

  	
  Payment of
  Purchase Price

  	
  15

  
	
   

  	
  8.5

  	
  Vesting and
  Restrictions on Transfer

  	
  16

  
	
   

  	
  8.6

  	
  Voting Rights;
  Dividends and Distributions

  	
  16

  
	
   

  	
  8.7

  	
  Effect of
  Termination of Service

  	
  16

  
	
   

  	
  8.8

  	
  Nontransferability
  of Restricted Stock Award Rights

  	
  16

  
	
   

  	
   

  	
   

  	
   

  
	
  9.

  	
  Restricted Stock
  Unit Awards

  	
  16

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  9.1

  	
  Grant of
  Restricted Stock Unit Awards

  	
  16

  
	
   

  	
  9.2

  	
  Purchase Price

  	
  17

  
	
   

  	
  9.3

  	
  Vesting

  	
  17

  
	
   

  	
  9.4

  	
  Voting Rights,
  Dividend Equivalent Rights and Distributions

  	
  17

  
	
   

  	
  9.5

  	
  Effect of
  Termination of Service

  	
  17

  
	
   

  	
  9.6

  	
  Settlement of
  Restricted Stock Unit Awards

  	
  17

  
	
   

  	
  9.7

  	
  Nontransferability
  of Restricted Stock Unit Awards

  	
  18

  
	
   

  	
   

  	
   

  	
   

  
	
  10.

  	
  Performance
  Awards

  	
  18

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  10.1

  	
  Types of
  Performance Awards Authorized

  	
  18

  
	
   

  	
  10.2

  	
  Initial Value of
  Performance Shares and Performance Units

  	
  18

  
	
   

  	
  10.3

  	
  Establishment of
  Performance Period, Performance Goals and Performance Award Formula

  	
  18

  
	
   

  	
  10.4

  	
  Measurement of
  Performance Goals

  	
  19

  
	
   

  	
  10.5

  	
  Settlement of
  Performance Awards

  	
  20

  
	
   

  	
  10.6

  	
  Voting Rights;
  Dividend Equivalent Rights and Distributions

  	
  21

  
	
   

  	
  10.7

  	
  Effect of
  Termination of Service

  	
  21

  
	
   

  	
  10.8

  	
  Nontransferability
  of Performance Awards

  	
  22

  
	
   

  	
   

  	
   

  	
   

  
	
  11.

  	
  Deferred
  Compensation Awards

  	
  22

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  11.1

  	
  Establishment of
  Deferred Compensation Award Programs

  	
  22

  
	
   

  	
  11.2

  	
  Terms and
  Conditions of Deferred Compensation Awards

  	
  22

  
	
   

  	
   

  	
   

  	
   

  
	
  12.

  	
  Cash-Based
  Awards and Other Stock-Based Awards

  	
  23

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  12.1

  	
  Grant of
  Cash-Based Awards

  	
  23

  
	
   

  	
  12.2

  	
  Grant of Other
  Stock-Based Awards

  	
  23

  
	
   

  	
  12.3

  	
  Value of
  Cash-Based and Other Stock-Based Awards

  	
  23

  
	
   

  	
  12.4

  	
  Payment or
  Settlement of Cash-Based Awards and Other Stock-Based Awards

  	
  24

  
	
   

  	
  12.5

  	
  Voting Rights;
  Dividend Equivalent Rights and Distributions

  	
  24

  
	
   

  	
  12.6

  	
  Effect of
  Termination of Service

  	
  24

  
	
   

  	
  12.7

  	
  Nontransferability
  of Cash-Based Awards and Other Stock-Based Awards

  	
  24

  
	
   

  	
   

  	
   

  	
   

  
	
  13.

  	
  Standard Forms
  of Award Agreement

  	
  24

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  13.1

  	
  Award Agreements

  	
  24

  
	
   

  	
  13.2

  	
  Authority to
  Vary Terms

  	
  24

  
	
   

  	
   

  	
   

  	
   

  
	
  14.

  	
  Change in
  Control

  	
  25

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  14.1

  	
  Accelerated
  Vesting

  	
  25

  
						

 

ii

 

	
   

  	
   

  	
   

  	
  Page

  
	
   

  	
  14.2

  	
  Assumption, Continuation or Substitution

  	
  25

  
	
   

  	
  14.3

  	
  Cash-Out of Outstanding Stock-Based Awards

  	
  25

  
	
   

  	
   

  	
   

  	
   

  
	
  15.

  	
  Compliance with
  Securities Law

  	
  25

  
	
   

  	
   

  	
   

  	
   

  
	
  16.

  	
  Tax Withholding

  	
  26

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  16.1

  	
  Tax Withholding in General

  	
  26

  
	
   

  	
  16.2

  	
  Withholding in Shares

  	
  26

  
	
   

  	
   

  	
   

  	
   

  
	
  17.

  	
  Amendment or
  Termination of Plan

  	
  26

  
	
   

  	
   

  	
   

  	
   

  
	
  18.

  	
  Compliance with
  Section 409A

  	
  26

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  18.1

  	
  Awards Subject to Section 409A

  	
  26

  
	
   

  	
  18.2

  	
  Deferral and/or Distribution Elections

  	
  27

  
	
   

  	
  18.3

  	
  Subsequent Elections

  	
  27

  
	
   

  	
  18.4

  	
  Distributions Pursuant to Deferral Elections

  	
  27

  
	
   

  	
  18.5

  	
  Unforeseeable Emergency

  	
  28

  
	
   

  	
  18.6

  	
  Disabled

  	
  28

  
	
   

  	
  18.7

  	
  Death

  	
  28

  
	
   

  	
  18.8

  	
  No Acceleration of Distributions

  	
  29

  
	
   

  	
   

  	
   

  	
   

  
	
  19.

  	
  Miscellaneous
  Provisions

  	
  29

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  19.1

  	
  Repurchase Rights

  	
  29

  
	
   

  	
  19.2

  	
  Forfeiture Events

  	
  29

  
	
   

  	
  19.3

  	
  Provision of Information

  	
  29

  
	
   

  	
  19.4

  	
  Rights as Employee, Consultant or Director

  	
  29

  
	
   

  	
  19.5

  	
  Rights as a Stockholder

  	
  29

  
	
   

  	
  19.6

  	
  Delivery of Title to Shares

  	
  29

  
	
   

  	
  19.7

  	
  Fractional Shares

  	
  30

  
	
   

  	
  19.8

  	
  Retirement and Welfare Plans

  	
  30

  
	
   

  	
  19.9

  	
  Beneficiary Designation

  	
  30

  
	
   

  	
  19.10

  	
  Severability

  	
  30

  
	
   

  	
  19.11

  	
  No Constraint on Corporate Action

  	
  30

  
	
   

  	
  19.12

  	
  Unfunded Obligation

  	
  30

  
	
   

  	
  19.13

  	
  Choice of Law

  	
  30

  

 

iii

 

Zoran Corporation

2005
Equity Incentive Plan

 

1.             ESTABLISHMENT, PURPOSE AND TERM OF PLAN.

 

1.1           Establishment.  The Zoran Corporation 2005 Equity Incentive
Plan (the “Plan”)
is hereby established effective as of July 29, 2005, the date of its
approval by the stockholders of the Company (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, retain and reward persons performing services for the
Participating Company Group and by motivating such persons to contribute to the
growth and profitability of the Participating Company Group.  The Plan seeks to achieve this purpose by
providing for Awards in the form of Options, Stock Appreciation Rights, Restricted
Stock Purchase Rights, Restricted Stock Bonuses, Restricted Stock Units,
Performance Shares, Performance Units, Deferred Compensation Awards, Cash-Based
Awards and Other Stock-Based Awards.

 

1.3           Term of Plan.  The
Plan shall continue in effect until its termination by the Committee; provided,
however, that all Awards 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)           “Affiliate” means (i) an
entity, other than a Parent Corporation, that directly, or indirectly through
one or more intermediary entities, controls the Company or (ii) an entity,
other than a Subsidiary Corporation, that is controlled by the Company directly
or indirectly through one or more intermediary entities.  For this purpose, the term “control”
(including the term “controlled by”) means the possession, direct or indirect,
of the power to direct or cause the direction of the management and policies of
the relevant entity, whether through the ownership of voting securities, by
contract or otherwise; or shall have such other meaning assigned such term for
the purposes of registration on Form S-8 under the Securities Act.

 

(b)           “Award” means any Option, Stock
Appreciation Right, Restricted Stock Purchase Right, Restricted Stock Bonus,
Restricted Stock Unit, Performance Share, Performance Unit, Deferred
Compensation Award, Cash-Based Award or Other Stock-Based Award granted under
the Plan.

 

(c)           “Award Agreement” means a
written or electronic agreement between the Company and a Participant setting
forth the terms, conditions and restrictions of the Award granted to the
Participant.

 

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

 

(e)           “Cash-Based Award” means an Award
denominated in cash and granted pursuant to Section 12.

 

(f)            “Cause” means, unless such term or an equivalent
term is otherwise defined with respect to an Award by the Participant’s Award
Agreement or by a written contract of employment or service, any of the
following: (i) the Participant’s theft, dishonesty, willful misconduct,
breach of fiduciary duty for personal profit, or falsification of any
Participating Company documents or records; (ii) the Participant’s
material failure to abide by a Participating Company’s code of conduct or other
policies (including, without limitation, policies relating to confidentiality
and reasonable workplace conduct); (iii) the Participant’s unauthorized
use, misappropriation, destruction or diversion of any tangible or intangible
asset or corporate opportunity of a Participating Company (including, without
limitation, the Participant’s improper use or disclosure of a Participating
Company’s confidential 

 

1

 

or proprietary information); (iv) any intentional act by the
Participant which has a material detrimental effect on a Participating Company’s
reputation or business; (v) the Participant’s repeated failure or
inability to perform any reasonable assigned duties after written notice from a
Participating Company of, and a reasonable opportunity to cure, such failure or
inability; (vi) any material breach by the Participant of any employment,
service, non-disclosure, non-competition, non-solicitation or other similar
agreement between the Participant and a Participating Company, which breach is
not cured pursuant to the terms of such agreement; or (vii) the
Participant’s conviction (including any plea of guilty or nolo contendere) of
any criminal act involving fraud, dishonesty, misappropriation or moral
turpitude, or which impairs the Participant’s ability to perform his or her
duties with a Participating Company.

 

(g)           “Change in Control” means,
unless such term or an equivalent term is otherwise defined with respect to an
Award by the Participant’s Award Agreement or by a written contract of
employment or service, the occurrence of any of the following:

 

(i)            any “person”
(as such term is used in Sections 13(d) and 14(d) of the
Exchange Act), other than (1) a trustee or other fiduciary holding
securities of the Company under an employee benefit plan of a Participating
Company or (2) a corporation owned directly or indirectly by the
stockholders of the Company in substantially the same proportions as their
ownership of the stock of the Company, becomes the “beneficial owner” (as
defined in Rule 13d-3 promulgated under the Exchange Act), directly or
indirectly, of securities of the Company representing fifty percent (50%) or
more of (i) the outstanding shares of common stock of the Company or (ii) the
total combined voting power of the Company’s then-outstanding securities
entitled to vote generally in the election of directors; or

 

(ii)           an
Ownership Change Event or series of related Ownership Change Events (collectively,
a “Transaction”)
in which the stockholders of the Company immediately before the Transaction do
not retain immediately after the Transaction direct or indirect beneficial
ownership of more than fifty percent (50%) of the total combined voting power
of the outstanding voting securities of the Company or, in the case of an
Ownership Change Event described in Section 2.1(dd)(iii), the entity to
which the assets of the Company were transferred (the “Transferee”),
as the case may be; or

 

(iii)          a
liquidation or dissolution of the Company.For purposes of the preceding
sentence, indirect beneficial ownership shall include, without limitation, an
interest resulting from ownership of the voting securities of one or more
corporations or other business entities which own the Company or the
Transferee, as the case may be, either directly or through one or more
subsidiary corporations or other business entities.  The Committee shall have the right to
determine whether multiple sales or exchanges of the voting securities of the
Company or multiple Ownership Change Events are related, and its determination
shall be final, binding and conclusive.

 

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

 

(i)            “Committee” means the Compensation Committee and such other committee
or subcommittee of the Board, if any, duly appointed to administer the Plan and
having such powers in each instance as shall be specified by the Board.  If, at any time, there is no committee of the
Board then authorized or properly constituted to administer the Plan, the Board
shall exercise all of the powers of the Committee granted herein, and, in any
event, the Board may in its discretion exercise any or all of such powers.

 

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

 

(k)           “Consultant” means a person engaged to provide consulting or advisory
services (other than as an Employee or a member of the Board) to a
Participating Company, provided that the identity of such person, the nature of
such services or the entity to which such services are provided would not 

 

2

 

preclude the Company from offering or selling securities to such person
pursuant to the Plan in reliance on registration on a Form S-8
Registration Statement under the Securities Act.

 

(l)            “Covered Employee” means any Employee who is or may become
a “covered employee” as defined in Section 162(m), or any successor
statute, and who is designated, either as an individual Employee or a member of
a class of Employees, by the Committee no later than (i) the date ninety
(90) days after the beginning of the Performance Period, or (ii) the date
on which twenty-five percent (25%) of the Performance Period has elapsed, as a “Covered
Employee” under this Plan for such applicable Performance Period.

 

(m)          “Deferred
Compensation Award” means an award granted to a
Participant pursuant to Section 11.

 

(n)           “Director” means a member of
the Board.

 

(o)           “Disability” means the permanent and total disability of the
Participant, within the meaning of Section 22(e)(3) of the Code.

 

(p)           “Dividend Equivalent” means a
credit, made at the discretion of the Committee or as otherwise provided by the
Plan, to the account of a Participant in an amount equal to the cash dividends
paid on one share of Stock for each share of Stock represented by an Award held
by such Participant.

 

(q)           “Employee” means any person treated as an employee (including an
Officer or a member of the Board who is also treated as an employee) in the
records of a Participating Company and, with respect to any Incentive Stock
Option granted to such person, who is an employee for purposes of Section 422
of the Code; provided, however, that neither service as a member of the Board
nor payment of a director’s fee shall be sufficient to constitute employment
for purposes of the Plan.  The Company
shall determine in good faith and in the exercise of its discretion whether an
individual has become or has ceased to be an Employee and the effective date of
such individual’s employment or termination of employment, as the case may
be.  For purposes of an individual’s
rights, if any, under the terms of the Plan as of the time of the Company’s
determination of whether or not the individual is an Employee, all such
determinations by the Company shall be final, binding and conclusive as to such
rights, if any, notwithstanding that the Company or any court of law or
governmental agency subsequently makes a contrary determination as to such
individual’s status as an Employee.

 

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

 

(s)           “Fair Market Value” means, as of any date, the value of a share of Stock or
other property as determined by the Committee, in its discretion, or by the
Company, in its discretion, if such determination is expressly allocated to the
Company herein, subject to the following:

 

(i)            Except
as otherwise determined by the Committee, if, on such date, the Stock is listed
on a national or regional securities exchange or market system, the Fair Market
Value of a share of Stock shall be the closing price of a share of Stock (or
the mean of the closing bid and asked prices of a share of Stock if the Stock
is so quoted instead) as quoted on the Nasdaq National Market, The Nasdaq
SmallCap Market or such other national or regional securities exchange or
market system constituting the primary market for the Stock, as reported in The Wall Street Journal or such other
source as the Company deems reliable.  If
the relevant date does not fall on a day on which the Stock has traded on such
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, or such other appropriate day as shall be
determined by the Committee, in its discretion.

 

(ii)           Notwithstanding
the foregoing, the Committee may, in its discretion, determine the Fair Market
Value on the basis of the opening, closing, or average of the high and low sale
prices of a share of Stock on such date, the preceding trading day or the next
succeeding trading day; and, for purposes other than determining the exercise
price or purchase price of shares pursuant to an Award, the high or low sale
price of a share of Stock on such date, the preceding trading day or the next
succeeding trading day, the average of any such prices determined over a period
of trading days or the actual sale price of a share of Stock received by a
Participant.

 

3

 

The Committee may vary its method of determination of the Fair Market
Value as provided in this Section for different purposes under the Plan.

 

(iii)          If,
on such date, the Stock is not listed on a national or regional securities
exchange or market system, the Fair Market Value of a share of Stock shall be
as determined by the Committee in good faith without regard to any restriction
other than a restriction which, by its terms, will never lapse.

 

(t)            “Full Value Award” means any
Award settled in Stock, other than (i) an Option, (ii) a Stock
Appreciation Right, (iii) a Restricted Stock Purchase Right or an Other
Stock-Based Award under which the Company will receive monetary consideration equal
to the Fair Market Value of the shares subject to such Award or (iv)  an
Other Stock-Based award based on appreciation in the Fair Market Value of the
Stock.

 

(u)           “Incentive Stock Option”
means an Option intended to be (as set forth in the Award Agreement) and which
qualifies as an incentive stock option within the meaning of Section 422(b) of
the Code.

 

(v)           “Insider”
means an Officer, Director or any other person whose transactions in Stock are
subject to Section 16 of the Exchange Act.

 

(w)          “Insider Trading Policy”
means the written policy of the Company pertaining to the purchase, sale,
transfer or other disposition of the Company’s equity securities by Directors,
Officers, Employees or other service providers who may possess material,
nonpublic information regarding the Company or its securities.

 

(x)            “Net-Exercise” means
a procedure by which the Participant will be issued a number of shares of Stock
determined in accordance with the following formula:

 

N = X(A-B)/A, where

“N” = the number of
shares of Stock to be issued to the Participant upon exercise of the Option;

“X” = the total number of
shares with respect to which the Participant has elected to exercise the
Option;

“A” = the Fair Market
Value of one (1) share of Stock determined on the exercise date; and

“B” = the exercise price
per share (as defined in the Participant’s Award Agreement)

 

(y)           “Nonstatutory Stock Option”
means an Option not intended to be (as set forth in the Award Agreement) an
incentive stock option within the meaning of Section 422(b) of the
Code.

 

(z)            “Officer” means any person
designated by the Board as an officer of the Company.

 

(aa)         “Option” means an Incentive
Stock Option or a Nonstatutory Stock Option granted pursuant to Section 6.

 

(bb)        “Option for Full Value Award Exchange Program” means a
program, approved by the affirmative vote of holders of a majority of the
shares of Stock cast in person or by proxy at a meeting of the stockholders of
the Company at which a quorum representing a majority of all outstanding shares
of Stock is present or represented by proxy, which provides for the
cancellation of outstanding options, including options granted pursuant to a
Predecessor Plan, and the grant in substitution therefore of Full Value Awards.

 

(cc)         “Other Stock-Based Award” means an
Award denominated in shares of Stock and granted pursuant to Section 12.

 

4

 

(dd)         “Ownership Change Event” means the occurrence of any of the
following 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;
or (iii) the sale, exchange, or transfer of all or substantially all of
the assets of the Company (other than a sale, exchange or transfer to one or
more subsidiaries of the Company).

 

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

 

(ff)           “Participant” means any
eligible person who has been granted one or more Awards.

 

(gg)         “Participating Company” means the Company or any Parent Corporation, Subsidiary
Corporation or Affiliate.

 

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

 

(ii)           “Performance Award” means an
Award of Performance Shares or Performance Units.

 

(jj)           “Performance Award Formula”
means, for any Performance Award, a formula or table established by the
Committee pursuant to Section 10.3 which provides the basis for computing
the value of a Performance Award at one or more threshold levels of attainment
of the applicable Performance Goal(s) measured as of the end of the
applicable Performance Period.

 

(kk)         “Performance-Based Compensation”
means compensation under an Award that satisfies the requirements of Section 162(m) for
certain performance-based compensation paid to Covered Employees.

 

(ll)           “Performance Goal” means a
performance goal established by the Committee pursuant to Section 10.3.

 

(mm)       “Performance Period” means a
period established by the Committee pursuant to Section 10.3 at the end of
which one or more Performance Goals are to be measured.

 

(nn)         “Performance Share” means a
bookkeeping entry representing a right granted to a Participant pursuant to Section 10
to receive a payment equal to the value of a Performance Share, as determined
by the Committee, based on performance.

 

(oo)         “Performance Unit” means a
bookkeeping entry representing a right granted to a Participant pursuant to Section 10
to receive a payment equal to the value of a Performance Unit, as determined by
the Committee, based upon performance.

 

(pp)         “Predecessor Plan”
means each of the Company’s 1993 Stock Option Plan and 2000 Nonstatutory Stock
Option Plan and options granted by Oak Technology, Inc. and assumed by the
Company pursuant to its acquisition of Oak Technology, Inc.

 

(qq)         “Restricted Stock Award”
means an Award of a Restricted Stock Bonus or a Restricted Stock Purchase
Right.

 

(rr)           “Restricted Stock Bonus”
means Stock granted to a Participant pursuant to Section 8.

 

5

 

(ss)         “Restricted Stock Purchase Right”
means a right to purchase Stock granted to a Participant pursuant to Section 8.

 

(tt)           “Restricted Stock
Unit” or “Stock Unit” means a right
granted to a Participant pursuant to Section 9 or Section 11,
respectively, to receive a share of Stock on a date determined in accordance
with the provisions of such Sections, as applicable, and the Participant’s
Award Agreement.

 

(uu)         “Restriction Period” means
the period established in accordance with Section 8.5 during which shares
subject to a Restricted Stock Award are subject to Vesting Conditions.

 

(vv)         “Retirement”
means termination of Service at or after the normal retirement age as set forth
in the retirement plan of the Company that is applicable to the Participant,
or, if the Participant is not covered by such a retirement plan, the normal
retirement age as defined by the social insurance program in effect in the
country where the Participant resides.

 

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

 

(xx)          “SAR” or “Stock Appreciation Right” means a right granted
to a Participant pursuant to Section 7 to receive payment, for each share
of Stock subject to such SAR, of an amount equal to the excess, if any, of the
Fair Market Value of a share of Stock on the date of exercise of the SAR over
the exercise price.

 

(yy)         “Section 162(m)”
means Section 162(m) of the Code.

 

(zz)          “Section 409A”
means Section 409A of the Code (including regulations or administrative
guidelines thereunder).

 

(aaa)       “Securities Act” means the Securities Act of 1933, as amended.

 

(bbb)      “Service” means a Participant’s employment or service with the
Participating Company Group, whether in the capacity of an Employee, a Director
or a Consultant.  Unless otherwise
provided by the Committee, a Participant’s Service shall not be deemed to have
terminated merely because of a change in the capacity in which the Participant
renders such Service or a change in the Participating Company for which the
Participant renders such Service, provided that there is no interruption or
termination of the Participant’s Service. 
Furthermore, a Participant’s Service shall not be deemed to have
terminated if the Participant takes any military leave, sick leave, or other
bona fide leave of absence approved by the Company.  However, if any such leave taken by a
Participant exceeds ninety (90) days, then on the ninety-first (91st) day
following the commencement of such leave the Participant’s Service shall be
deemed to have terminated, unless the Participant’s right to return to Service
is guaranteed by statute or contract. 
Notwithstanding the foregoing, unless otherwise designated by the
Company or required by law, a leave of absence shall not be treated as Service
for purposes of determining vesting under the Participant’s Award
Agreement.  A Participant’s Service shall
be deemed to have terminated either upon an actual termination of Service or
upon the entity for which the Participant performs Service ceasing to be a
Participating Company.  Subject to the
foregoing, the Company, in its discretion, shall determine whether the
Participant’s Service has terminated and the effective date of such
termination.

 

(ccc)       “Stock” means the common stock of the Company, as adjusted from
time to time in accordance with Section 4.4.

 

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

 

(eee)       “Ten Percent Owner” means a
Participant who, at the time an Option is granted to the Participant, owns
stock possessing more than ten percent (10%) of the total combined voting power
of all 

 

6

 

classes of stock of a Participating Company (other than an Affiliate)
within the meaning of Section 422(b)(6) of the Code.

 

(fff)         “Vesting Conditions” mean
those conditions established in accordance with the Plan prior to the
satisfaction of which shares subject to an Award remain subject to forfeiture
or a repurchase option in favor of the Company exercisable for the Participant’s
purchase price for such shares upon the Participant’s termination of Service.

 

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 and the plural shall include the
singular.  Use of the term “or” is not
intended to be exclusive, unless the context clearly requires otherwise.

 

3.             ADMINISTRATION.

 

3.1           Administration by the Committee.  The Plan shall be administered by the
Committee.  All questions of
interpretation of the Plan or of any Award shall be determined by the
Committee, and such determinations shall be final and binding upon all persons
having an interest in the Plan or such Award.

 

3.2           Authority of Officers. 
Any Officer 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. 
The Board or Committee may, in its discretion, delegate to a committee
comprised of one or more Officers the authority to grant one or more Awards,
without further approval of the Board or the Committee, to any Employee, other
than a person who, at the time of such grant, is an Insider or a Covered
Person; provided, however, that (a) such Awards shall not be granted for
shares in excess of the maximum aggregate number of shares of Stock authorized
for issuance pursuant to Section 4.1, (b) each such Award which is a
Full Value Award shall be subject to the minimum vesting provisions described
in Section 5.3(b), (c) each such Award shall be subject to the terms
and conditions of the appropriate standard form of Award Agreement approved by
the Board or the Committee and shall conform to the provisions of the Plan, and
(d) each such Award shall conform to such limits and guidelines as shall
be established from time to time by resolution of the Board or the Committee.

 

3.3           Administration with Respect to Insiders.  With respect to participation by Insiders in
the Plan, at any time that any class of equity security of the Company is
registered pursuant to Section 12 of the Exchange Act, the Plan shall be
administered in compliance with the requirements, if any, of Rule 16b-3.

 

3.4           Committee Complying with Section 162(m).  If the Company is a “publicly held corporation”
within the meaning of Section 162(m), the Board may establish a Committee
of “outside directors” within the meaning of Section 162(m) to
approve the grant of any Award intended to result in the payment of
Performance-Based Compensation.

 

3.5           Powers of the Committee.  In addition to any other powers set forth in
the Plan and subject to the provisions of the Plan, the Committee shall have
the full and final power and authority, in its discretion:

 

(a)           to
determine the persons to whom, and the time or times at which, Awards shall be
granted and the number of shares of Stock, units or monetary value to be
subject to each Award;

 

(b)           to
determine the type of Award granted;

 

(c)           to
determine the Fair Market Value of shares of Stock or other property;

 

(d)           to
determine the terms, conditions and restrictions applicable to each Award
(which need not be identical) and any shares acquired pursuant thereto,
including, without limitation, (i) the exercise or purchase price of
shares pursuant to any Award, (ii) the method of payment for shares
purchased pursuant to any 

 

7

 

Award, (iii) the method for satisfaction of any tax withholding
obligation arising in connection with Award, including by the withholding or
delivery of shares of Stock, (iv) the timing, terms and conditions of the
exercisability or vesting of any Award or any shares acquired pursuant thereto,
(v) the Performance Measures, Performance Period, Performance Award
Formula and Performance Goals applicable to any Award and the extent to which
such Performance Goals have been attained, (vi) the time of the expiration
of any Award, (vii) the effect of the Participant’s termination of Service
on any of the foregoing, and (viii) all other terms, conditions and
restrictions applicable to any Award or shares acquired pursuant thereto not
inconsistent with the terms of the Plan;

 

(e)           to
determine whether an Award will be settled in shares of Stock, cash, or in any
combination thereof;

 

(f)            to
approve one or more forms of Award Agreement;

 

(g)           to amend,
modify, extend, cancel or renew any Award or to waive any restrictions or
conditions applicable to any Award or any shares acquired pursuant thereto;

 

(h)           to
accelerate, continue, extend or defer the exercisability or vesting of any
Award or any shares acquired pursuant thereto, including with respect to the
period following a Participant’s termination of Service;

 

(i)            without
the consent of the affected Participant and notwithstanding the provisions of
any Award Agreement to the contrary, to unilaterally substitute at any time a
Stock Appreciation Right providing for settlement solely in shares of Stock in
place of any outstanding Option, provided that such Stock Appreciation Right
covers the same number of shares of Stock and provides for the same exercise
price (subject in each case to adjustment in accordance with Section 4.4)
as the replaced Option and otherwise provides substantially equivalent terms
and conditions as the replaced Option, as determined by the Committee;

 

(j)            to
prescribe, amend or rescind rules, guidelines and policies relating to the
Plan, or to adopt sub-plans or supplements to, or alternative versions of, the
Plan, including, without limitation, as the Committee deems necessary or
desirable to comply with the laws or regulations of or to accommodate the tax
policy, accounting principles or custom of, foreign jurisdictions whose
citizens may be granted Awards; and

 

(k)           to
correct any defect, supply any omission or reconcile any inconsistency in the
Plan or any Award Agreement and to make all other determinations and take such
other actions with respect to the Plan or any Award as the Committee may deem
advisable to the extent not inconsistent with the provisions of the Plan or
applicable law.

 

3.6           Option or SAR Repricing. 
Without the affirmative vote of holders of a majority of the shares of
Stock cast in person or by proxy at a meeting of the stockholders of the
Company at which a quorum representing a majority of all outstanding shares of
Stock is present or represented by proxy, the Board shall not approve (a) the
cancellation of outstanding Options or SARs and the grant in substitution
therefore of new Options or SARs having a lower exercise price, (b) the
amendment of outstanding Options or SARs to reduce the exercise price thereof,
or (c) the cancellation of outstanding Options or SARs having exercise
prices per share greater than the then current Fair Market Value of a share of
Stock and the grant in substitution therefore of Full Value Awards.  This paragraph shall not be construed to
apply to “issuing or assuming a stock option in a transaction to which
section 424(a) applies,” within the meaning of Section 424 of
the Code.

 

3.7           Indemnification.  In
addition to such other rights of indemnification as they may have as members of
the Board or the Committee or as officers or employees of the Participating
Company Group, members of the Board or the Committee and any officers or
employees of the Participating Company Group to whom authority to act for the
Board, the Committee or the Company 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 

 

8

 

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.

 

4.             SHARES SUBJECT TO PLAN.

 

4.1           Maximum Number of Shares Issuable.  Subject to adjustment as provided in Sections 4.2,
4.3 and 4.4, the maximum aggregate number of shares of Stock that may be issued
under the Plan shall be equal to four million, five hundred fifty-six thousand
six hundred sixty-three (4,556,663) shares, and shall consist of authorized but
unissued or reacquired shares of Stock or any combination thereof.

 

4.2           Share Accounting.

 

(a)           Each
share of Stock subject to an Award other than a Full Value Award shall be
counted against the limit set forth in Section 4.1 as one (1) share.  Each share of Stock subject to a Full Value
Award shall be counted against the limit set forth in Section 4.1 as one
and three-tenths (1.3) shares.

 

(b)           If an
outstanding Award for any reason expires or is terminated or canceled without
having been exercised or settled in full, or if shares of Stock acquired
pursuant to an Award subject to forfeiture or repurchase are forfeited or
repurchased by the Company for an amount not greater than the Participant’s
original purchase price, the shares of Stock allocable to the terminated portion
of such Award or such forfeited or repurchased shares of Stock shall again be
available for issuance under the Plan. 
Shares of Stock shall not be deemed to have been issued pursuant to the
Plan with respect to any portion of an Award that is settled in cash.  Upon payment in shares of Stock pursuant to
the exercise of an SAR, the number of shares available for issuance under the
Plan shall be reduced by the gross number of shares for which the SAR is
exercised.  If the exercise price of an
Option is paid by tender to the Company, or attestation to the ownership, of
shares of Stock owned by the Participant, or by means of a Net-Exercise, the
number of shares available for issuance under the Plan shall be reduced by the
gross number of shares for which the Option is exercised.  If Options, SARs or Performance Awards are
settled in the form of Stock Units issued pursuant to a stock issuance deferral
award described in Section 11.1(b), the number of shares available for
issuance under the Plan shall be reduced by the number of shares to be counted
with respect to such Full Value Awards, as determined in accordance with Section 4.2(a),
but shall not be further reduced by the number of shares of Stock originally
subject to such Options, SARs or Performance Awards settled in such
manner.  Shares withheld or reacquired by
the Company in satisfaction of tax withholding obligations pursuant to Section 16.2
shall not again be available for issuance under the Plan.

 

4.3           Adjustment for Certain Unissued Predecessor Plan
Shares.  The maximum aggregate number of shares of
Stock that may be issued under the Plan as set forth in Section 4.1 shall
be cumulatively increased from time to time by the number of shares of
Stock subject to that portion of any option outstanding pursuant to a
Predecessor Plan as of the Effective Date which, on or after the Effective
Date, is canceled pursuant to an Option for Full Value Award Exchange Program,
but only to the extent of a maximum of one million two hundred fifty thousand
(1,250,000) shares made subject to Full
Value Awards granted pursuant to such program in replacement of such cancelled
options.

 

4.4           Adjustments for Changes in Capital Structure.  Subject to any required action by the
stockholders of the Company, in the event of any change in the Stock effected
without receipt of consideration by the Company, whether through merger,
consolidation, reorganization, reincorporation, recapitalization,
reclassification, stock dividend, stock split, reverse stock split, split-up,
split-off, spin-off, combination of shares, exchange of shares, or similar
change in the capital structure of the Company, or in the event of payment of a
dividend or distribution to the stockholders of the Company in a form other
than Stock (excepting normal cash dividends) that has a material effect on the
Fair Market Value of shares of Stock, appropriate adjustments shall be made in
the number and kind of shares subject to the Plan and to any outstanding
Awards, in the Award limits set forth in Section 5.3 and in the exercise
or purchase price per share under any outstanding Award in order to prevent
dilution or enlargement of Participants’ rights under the Plan.  For purposes of the foregoing, conversion of
any convertible securities of the Company shall not be treated as “effected
without receipt of consideration by the 

 

9

 

Company.”  If a majority of the
shares which are of the same class as the shares that are subject to
outstanding Awards are exchanged for, converted into, or otherwise become
(whether or not pursuant to an Ownership Change Event) shares of another
corporation (the “New Shares”), the Committee may unilaterally amend
the outstanding Awards to provide that such Awards are for New Shares.  In the event of any such amendment, the
number of shares subject to, and the exercise or purchase price per share of,
the outstanding Awards shall be adjusted in a fair and equitable manner as
determined by the Committee, in its discretion. 
Any fractional share resulting from an adjustment pursuant to this Section 4.4
shall be rounded down to the nearest whole number, and in no event may the
exercise or purchase price under any Award be decreased to an amount less than
the par value, if any, of the stock subject to such Award.  The Committee in its sole discretion, may
also make such adjustments in the terms of any Award to reflect, or related to,
such changes in the capital structure of the Company or distributions as it
deems appropriate, including modification of Performance Goals, Performance
Award Formulas and Performance Periods. 
The adjustments determined by the Committee pursuant to this Section shall
be final, binding and conclusive.

 

The Committee may,
without affecting the number of Shares reserved or available hereunder,
authorize the issuance or assumption of benefits under this Plan in connection
with any merger, consolidation, acquisition of property or stock, or
reorganization upon such terms and conditions as it may deem appropriate,
subject to compliance with Sections 409A and 422 and any related guidance
issued by the U.S. Treasury Department, where applicable.

 

5.             ELIGIBILITY, PARTICIPATION AND AWARD LIMITATIONS.

 

5.1           Persons Eligible for Awards.  Awards may be granted only to
Employees and Consultants.

 

5.2           Participation in Plan.  Awards are granted solely at the discretion
of the Committee.  Eligible persons may
be granted more than one Award.  However,
eligibility in accordance with this Section shall not entitle any person
to be granted an Award, or, having been granted an Award, to be granted an
additional Award.

 

5.3           Award Limitations.

 

(a)           Incentive Stock Option Limitations.

 

(i)            Maximum Number of Shares Issuable Pursuant to Incentive Stock Options.  Subject to adjustment as provided in Section 4.4,
the maximum aggregate number of shares of Stock that may be issued under the
Plan pursuant to the exercise of Incentive Stock Options shall not exceed four
million five hundred fifty-six thousand six hundred sixty-three (4,556,663)
shares.  The maximum aggregate number of
shares of Stock that may be issued under the Plan pursuant to all Awards other
than Incentive Stock Options shall be the number of shares determined in
accordance with Section 4.1, subject to adjustment as provided in
Sections 4.2, 4.3 and 4.4.

 

(ii)           Persons Eligible.  An
Incentive Stock Option may be granted only to a person who, on the effective
date of grant, is an Employee of the Company, a Parent Corporation or a
Subsidiary Corporation (each being an “ISO-Qualifying
Corporation”).  Any
person who is not an Employee of an ISO-Qualifying Corporation on the effective
date of the grant of an Option to such person may be granted only a
Nonstatutory Stock Option.  An Incentive
Stock Option granted to a prospective Employee upon the condition that such
person become an Employee of an ISO-Qualifying Corporation shall be deemed
granted effective on the date such person commences Service with an
ISO-Qualifying Corporation, with an exercise price determined as of such date
in accordance with Section 6.1.

 

(iii)          Fair Market Value Limitation.  To the extent that options designated as
Incentive Stock Options (granted under all stock option plans of the
Participating Company Group, including the Plan) become exercisable by a
Participant for the first time during any calendar year for stock having a Fair
Market Value greater than One Hundred Thousand Dollars ($100,000), the portion
of such options which exceeds such amount shall be treated as Nonstatutory
Stock Options.  For purposes of this
Section, options designated as Incentive Stock Options shall be taken into
account in the order in which they were granted, and the Fair Market Value of 

 

10

 

stock shall be determined as of the time the option with respect to
such stock is granted.  If the Code is
amended to provide for a limitation different from that set forth in this
Section, such different limitation shall be deemed incorporated herein
effective as of the date and with respect to such Options as required or
permitted by such amendment to the Code. 
If an Option is treated as an Incentive Stock Option in part and as a
Nonstatutory Stock Option in part by reason of the limitation set forth in this
Section, the Participant may designate which portion of such Option the
Participant is exercising.  In the
absence of such designation, the Participant shall be deemed to have exercised
the Incentive Stock Option portion of the Option first.  Upon exercise, shares issued pursuant to each
such portion shall be separately identified.

 

(b)           Limit on Full Value Awards without Minimum
Vesting.  Except with
respect to a maximum of five percent (5%) of the maximum aggregate number of
shares of Stock that may be issued under the Plan, as provided in Section 4.1,
and except with respect to Full Value Awards granted pursuant to an Option for
Full Value Award Exchange Program, Full Value Awards which vest on the basis of
the Participant’s continued Service shall not provide for vesting which is any
more rapid than over a three (3) year period, and Full Value Awards which
vest on the basis of the attainment of performance goals shall not provide for
a performance period of less than twelve (12) months.  Full Value Awards granted pursuant to an Option
for Full Value Award Exchange Program which vest on the basis of the
Participant’s continued Service shall not provide for vesting which is any more
rapid than over a two (2) year period. 
The foregoing limitations shall not preclude the acceleration of vesting
of any such Award upon the death, disability, retirement or involuntary
termination of Service of the Participant or upon or following a Change in
Control, as determined by the Committee in its discretion.

 

(c)           Section 162(m) Award Limits.  The following limits shall apply to the grant
of any Award intended to qualify for treatment as Performance-Based
Compensation:

 

(i)            Options and SARs. 
Subject to adjustment as provided in Section 4.4, no Employee shall
be granted within any fiscal year of the Company one or more Options or
Freestanding SARs which in the aggregate are for more than five hundred
thousand (500,000) shares.

 

(ii)           Restricted Stock Awards and Restricted Stock Unit Awards.  Subject to adjustment as provided in Section 4.4,
no Employee shall be granted within any fiscal year of the Company one or more
Restricted Stock Awards or Restricted Stock Unit Awards for more than two
hundred fifty thousand (250,000) shares.

 

(iii)          Performance Awards. 
Subject to adjustment as provided in Section 4.4, no Employee shall
be granted (1) Performance Shares which could result in such Employee
receiving more than one hundred thousand (100,000) shares for each full fiscal
year of the Company contained in the Performance Period for such Award, or (2) Performance
Units which could result in such Employee receiving more than one million five
hundred thousand dollars ($1,500,000) for each full fiscal year of the Company
contained in the Performance Period for such Award.  No Participant may be granted more than one
Performance Award for the same Performance Period.

 

(iv)          Cash-Based Awards and Other Stock-Based Awards.  Subject to adjustment as provided in Section 4.4,
no Employee shall be granted (1) Cash-Based Awards in any fiscal year of
the Company which could result in such Employee receiving more than one million
five hundred thousand dollars ($1,500,000) for each full fiscal year of the
Company contained in the Performance Period for such Award, or (2) Other
Stock-Based Awards in any fiscal year of the Company which could result in such
Employee receiving more than one hundred thousand (100,000) shares for each
full fiscal year of the Company contained in the Performance Period for such
Award.

 

6.             STOCK OPTIONS.

 

Options shall be
evidenced by Award Agreements specifying the number of shares of Stock covered
thereby, in such form as the Committee shall from time to time establish.  No Option or purported Option shall be a
valid and binding obligation of the Company unless evidenced by a fully executed
Award Agreement.  Award Agreements
evidencing Options may incorporate all or any of the terms of the Plan by
reference, including 

 

11

 

the provisions of Section 18 with respect to Section 409A if
applicable, and shall comply with and be subject to the following terms and
conditions:

6.1           Exercise Price.  The
exercise price for each Option shall be established in the discretion of the
Committee; provided, however, that (a) the exercise price per share shall
be not less than the Fair Market Value of a share of Stock on the effective
date of grant of the Option and (b) no Incentive Stock Option granted to a
Ten Percent Owner shall have an exercise price per share less than one hundred
ten percent (110%) of the Fair Market Value of a share of Stock on the
effective date of grant of the Option. 
Notwithstanding the foregoing, an Option (whether an Incentive Stock
Option or a Nonstatutory Stock Option) may be granted with an exercise price
lower than the minimum exercise price set forth above if such Option is granted
pursuant to an assumption or substitution for another option in a manner
qualifying under the provisions of Section 424(a) of the Code.

 

6.2           Exercisability and Term of Options.  Options shall be exercisable at such time or
times, or upon such event or events, and subject to such terms, conditions,
performance criteria and restrictions as shall be determined by the Committee
and set forth in the Award Agreement evidencing such Option; provided, however,
that (a) no Option shall be exercisable after the expiration of ten (10) years
after the effective date of grant of such Option and (b) no Incentive
Stock Option granted to a Ten Percent Owner shall be exercisable after the
expiration of five (5) years after the effective date of grant of such
Option.  Subject to the foregoing, unless
otherwise specified by the Committee in the grant of an Option, each Option
shall terminate ten (10) years after the effective date of grant of the
Option, unless earlier terminated in accordance with its provisions.

 

6.3           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 or by check or cash
equivalent, (ii) by tender to the Company, or attestation to the
ownership, of shares of Stock owned by the Participant having a Fair Market
Value not less than the exercise price, (iii) by delivery of a properly
executed notice of exercise together with irrevocable instructions to a broker
providing for the assignment to the Company 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”), (iv) by delivery of a properly executed
notice electing a Net-Exercise, (v) by such other consideration as may be
approved by the Committee from time to time to the extent permitted by
applicable law, or (vi) by any combination thereof.  The Committee may at any time or from time to
time grant Options which do not permit all of the foregoing forms of
consideration to be used in payment of the exercise price or which otherwise
restrict one or more forms of consideration.

 

(b)           Limitations on Forms of Consideration.

 

(i)            Tender of Stock. 
Notwithstanding the foregoing, an Option may not be exercised by tender
to the Company, or attestation to the ownership, of shares of Stock to the
extent such tender or attestation 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 Committee, an Option may not be exercised by tender to the
Company, or attestation to the ownership, of shares of Stock unless such shares
either have been owned by the Participant for more than six (6) months (or
such other period, if any, as the Committee may permit) and not used for
another Option exercise by attestation during such period, or were not
acquired, directly or indirectly, from the Company.

 

(ii)           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, including with respect to one or more Participants specified by the
Company notwithstanding that such program or procedures may be available to
other Participants.

 

12

 

6.4           Effect of Termination of Service.

 

(a)           Option Exercisability.  Subject to earlier termination of the Option
as otherwise provided herein and unless otherwise provided by the Committee in
the grant of an Option and set forth in the Award Agreement, an Option shall
terminate immediately upon the Participant’s termination of Service to the
extent that it is then unvested and shall be exercisable after the Participant’s
termination of Service to the extent it is then vested only during the
applicable time period determined in accordance with this Section and
thereafter shall terminate:

 

(i)            Disability.  If the
Participant’s Service terminates because of the Disability of the Participant,
the Option, to the extent unexercised and exercisable for vested shares on the
date on which the Participant’s Service terminated, may be exercised by the
Participant (or the Participant’s guardian or legal representative) at any time
prior to the expiration of twelve (12) months after the date on which the
Participant’s Service terminated, but in any event no later than the date of
expiration of the Option’s term as set forth in the Award Agreement evidencing
such Option (the “Option Expiration Date”).

 

(ii)           Death.  If the
Participant’s Service terminates because of the death of the Participant, the
Option, to the extent unexercised and exercisable for vested shares on the date
on which the Participant’s Service terminated, may be exercised by the
Participant’s legal representative or other person who acquired the right to exercise
the Option by reason of the Participant’s death at any time prior to the
expiration of twelve (12) months after the date on which the Participant’s
Service terminated, but in any event no later than the Option Expiration
Date.  The Participant’s Service shall be
deemed to have terminated on account of death if the Participant dies within
three (3) months after the Participant’s termination of Service.

 

(iii)          Other Termination of Service.  If the Participant’s Service terminates for
any reason, except Disability or death, the Option, to the extent unexercised
and exercisable for vested shares on the date on which the Participant’s
Service terminated, may be exercised by the Participant at any time prior to
the expiration of three (3) months after the date on which the Participant’s
Service terminated, but in any event no later than the Option Expiration Date.

 

(b)           Extension if Exercise Prevented by Law.  Notwithstanding the foregoing, if the
exercise of an Option within the applicable time periods set forth in Section 6.4(a) is
prevented by the provisions of Section 15 below, the Option shall remain
exercisable until three (3) months (or such longer period of time as
determined by the Committee, in its discretion) after the date the Participant
is notified by the Company that the Option is exercisable, but in any event no
later than the Option Expiration Date.

 

(c)           Extension if Participant Subject to Section 16(b).  Notwithstanding the foregoing, if a sale
within the applicable time periods set forth in Section 6.4(a) of
shares acquired upon the exercise of the Option would subject the Participant
to suit under Section 16(b) of the Exchange Act, the Option shall
remain exercisable until the earliest to occur of (i) the tenth (10th) day
following the date on which a sale of such shares by the Participant would no
longer be subject to such suit, (ii) the one hundred and ninetieth (190th)
day after the Participant’s termination of Service, or (iii) the Option
Expiration Date.

 

6.5           Transferability of Options. 
During the lifetime of the Participant, an Option shall be exercisable
only by the Participant or the Participant’s guardian or legal
representative.  An Option shall not be
subject in any manner to anticipation, alienation, sale, exchange, transfer,
assignment, pledge, encumbrance, or garnishment by creditors of the Participant
or the Participant’s beneficiary, except transfer by will or by the laws of
descent and distribution. 
Notwithstanding the foregoing, to the extent permitted by the Committee,
in its discretion, and set forth in the Award Agreement evidencing such Option,
a Nonstatutory Stock Option shall be assignable or transferable subject to the
applicable limitations, if any, described in the General Instructions to Form S-8
Registration Statement under the Securities Act.

 

13

 

7.             STOCK APPRECIATION RIGHTS.

 

Stock Appreciation
Rights shall be evidenced by Award Agreements specifying the number of shares
of Stock subject to the Award, in such form as the Committee shall from time to
time establish.  No SAR or purported SAR
shall be a valid and binding obligation of the Company unless evidenced by a
fully executed Award Agreement.  Award
Agreements evidencing SARs may incorporate all or any of the terms of the Plan
by reference, including provisions of Section 18 with respect to Section 409A
if applicable, and shall comply with and be subject to the following terms and
conditions:

 

7.1           Types of SARs Authorized. 
SARs may be granted in tandem with all or any portion of a related
Option (a “Tandem SAR”)
or may be granted independently of any Option (a “Freestanding SAR”).  A Tandem SAR may only be granted concurrently
with the grant of the related Option.

 

7.2           Exercise Price.  The
exercise price for each SAR shall be established in the discretion of the
Committee; provided, however, that (a) the exercise price per share
subject to a Tandem SAR shall be the exercise price per share under the related
Option and (b) the exercise price per share subject to a Freestanding SAR
shall be not less than the Fair Market Value of a share of Stock on the
effective date of grant of the SAR.

 

7.3           Exercisability and Term of SARs.

 

(a)           Tandem SARs.  Tandem SARs shall be exercisable only at the
time and to the extent, and only to the extent, that the related Option is
exercisable, subject to such provisions as the Committee may specify where the
Tandem SAR is granted with respect to less than the full number of shares of
Stock subject to the related Option.  The
Committee may, in its discretion, provide in any Award Agreement evidencing a
Tandem SAR that such SAR may not be exercised without the advance approval of
the Company and, if such approval is not given, then the Option shall
nevertheless remain exercisable in accordance with its terms.  A Tandem SAR shall terminate and cease to be
exercisable no later than the date on which the related Option expires or is
terminated or canceled.  Upon the
exercise of a Tandem SAR with respect to some or all of the shares subject to
such SAR, the related Option shall be canceled automatically as to the number
of shares with respect to which the Tandem SAR was exercised.  Upon the exercise of an Option related to a
Tandem SAR as to some or all of the shares subject to such Option, the related
Tandem SAR shall be canceled automatically as to the number of shares with
respect to which the related Option was exercised.

 

(b)           Freestanding SARs.  Freestanding SARs shall be exercisable at
such time or times, or upon such event or events, and subject to such terms,
conditions, performance criteria and restrictions as shall be determined by the
Committee and set forth in the Award Agreement evidencing such SAR; provided,
however, that no Freestanding SAR shall be exercisable after the expiration of
ten (10) years after the effective date of grant of such SAR.

 

7.4           Exercise of SARs. 
Upon the exercise (or deemed exercise pursuant to Section 7.5) of
an SAR, the Participant (or the Participant’s legal representative or other
person who acquired the right to exercise the SAR by reason of the Participant’s
death) shall be entitled to receive payment of an amount for each share with
respect to which the SAR is exercised equal to the excess, if any, of the Fair
Market Value of a share of Stock on the date of exercise of the SAR over the
exercise price.  Payment of such amount
shall be made (a) in the case of a Tandem SAR, solely in shares of Stock
in a lump sum as soon as practicable following the date of exercise of the SAR
and (b) in the case of a Freestanding SAR, in cash, shares of Stock, or
any combination thereof as determined by the Committee in compliance with Section 409A.  Unless otherwise provided in the Award
Agreement evidencing a Freestanding SAR, payment shall be made in a lump sum as
soon as practicable following the date of exercise of the SAR.  The Award Agreement evidencing any
Freestanding SAR may provide for deferred payment in a lump sum or in
installments in compliance with Section 409A.  When payment is to be made in shares of
Stock, the number of shares to be issued shall be determined on the basis of
the Fair Market Value of a share of Stock on the date of exercise of the
SAR.  For purposes of Section 7, an
SAR shall be deemed exercised on the date on which the Company receives notice
of exercise from the Participant or as otherwise provided in Section 7.5.

 

7.5           Deemed Exercise of SARs. 
If, on the date on which an SAR would otherwise terminate or expire, the
SAR by its terms remains exercisable immediately prior to such termination or
expiration and, if so 

 

14

 

exercised, would result in a payment to the holder of such SAR, then
any portion of such SAR which has not previously been exercised shall
automatically be deemed to be exercised as of such date with respect to such
portion.

 

7.6           Effect of Termination of Service.  Subject to earlier termination of the SAR as
otherwise provided herein and unless otherwise provided by the Committee in the
grant of an SAR and set forth in the Award Agreement, an SAR shall be
exercisable after a Participant’s termination of Service only to the extent and
during the applicable time period determined in accordance with Section 6.4
(treating the SAR as if it were an Option) and thereafter shall terminate.

 

7.7           Transferability of SARs. 
During the lifetime of the Participant, an SAR shall be exercisable only
by the Participant or the Participant’s guardian or legal representative.  An SAR shall not be subject in any manner to
anticipation, alienation, sale, exchange, transfer, assignment, pledge,
encumbrance, or garnishment by creditors of the Participant or the Participant’s
beneficiary, except transfer by will or by the laws of descent and
distribution.  Notwithstanding the
foregoing, to the extent permitted by the Committee, in its discretion, and set
forth in the Award Agreement evidencing such Award, a Tandem SAR related to a
Nonstatutory Stock Option or a Freestanding SAR shall be assignable or
transferable subject to the applicable limitations, if any, described in the
General Instructions to Form S-8 Registration Statement under the
Securities Act.

 

8.             RESTRICTED STOCK AWARDS.

 

Restricted Stock
Awards shall be evidenced by Award Agreements specifying whether the Award is a
Restricted Stock Bonus or a Restricted Stock Purchase Right and the number of
shares of Stock subject to the Award, in such form as the Committee shall from
time to time establish.  No Restricted
Stock Award or purported Restricted Stock Award shall be a valid and binding
obligation of the Company unless evidenced by a fully executed Award
Agreement.  Award Agreements evidencing
Restricted Stock Awards 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:

 

8.1           Types of Restricted Stock
Awards Authorized.  Restricted Stock
Awards may be granted in the form of either a Restricted Stock Bonus or a
Restricted Stock Purchase Right. 
Restricted Stock Awards may be granted upon such conditions as the
Committee shall determine, including, without limitation, upon the attainment
of one or more Performance Goals described in Section 10.4.  If either the grant of a Restricted Stock
Award or the lapsing of the Restriction Period is to be contingent upon the
attainment of one or more Performance Goals, the Committee shall follow
procedures substantially equivalent to those set forth in Sections 10.3
through 10.5(a).

 

8.2           Purchase Price.  The purchase price for shares of Stock
issuable under each Restricted Stock Purchase Right shall be established by the
Committee in its discretion.  No monetary
payment (other than applicable tax withholding) shall be required as a
condition of receiving shares of Stock pursuant to a Restricted Stock Bonus,
the consideration for which shall be services actually rendered to a
Participating Company or for its benefit. 
Notwithstanding the foregoing, if required by applicable state corporate
law, the Participant shall furnish consideration in the form of cash or past
services rendered to a Participating Company or for its benefit having a value
not less than the par value of the shares of Stock subject to a Restricted
Stock Award.

 

8.3           Purchase Period.  A Restricted Stock Purchase Right shall be
exercisable within a period established by the Committee, which shall in no
event exceed thirty (30) days from the effective date of the grant of the
Restricted Stock Purchase Right.

 

8.4           Payment of Purchase Price.  Except
as otherwise provided below, payment of the purchase price for the number of
shares of Stock being purchased pursuant to any Restricted Stock Purchase Right
shall be made (a) in cash or by check or cash equivalent, (b) by such
other consideration as may be approved by the Committee from time to time to
the extent permitted by applicable law, or (c) by any combination
thereof.  The Committee may at any time
or from time to time grant Restricted Stock Purchase Rights which do not permit
all of the foregoing forms of consideration to be used in payment of the purchase
price or which otherwise restrict one or more forms of consideration.

 

15

 

8.5           Vesting and Restrictions on Transfer.  Subject to Section 5.3(b),
Shares issued pursuant to any Restricted Stock Award may (but need not) be made
subject to Vesting Conditions based upon the satisfaction of such Service
requirements, conditions, restrictions or performance criteria, including,
without limitation, Performance Goals as described in Section 10.4, as
shall be established by the Committee and set forth in the Award Agreement
evidencing such Award.  During any
Restriction Period in which shares acquired pursuant to a Restricted Stock
Award remain subject to Vesting Conditions, such shares may not be sold,
exchanged, transferred, pledged, assigned or otherwise disposed of other than
pursuant to an Ownership Change Event or as provided in Section 8.8.  The Committee, in its discretion, may provide
in any Award Agreement evidencing a Restricted Stock Award that, if the
satisfaction of Vesting Conditions with respect to any shares subject to such
Restricted Stock Award would otherwise occur on a day on which the sale of such
shares would violate the Company’s Insider Trading Policy, then the
satisfaction of the Vesting Conditions automatically be deemed to occur on the
next day on which the sale of such shares would not violate the Insider Trading
Policy.  Upon request by the Company,
each Participant shall execute any agreement evidencing such transfer restrictions
prior to the receipt of shares of Stock hereunder and shall promptly present to
the Company any and all certificates representing shares of Stock acquired
hereunder for the placement on such certificates of appropriate legends
evidencing any such transfer restrictions.

 

8.6           Voting Rights; Dividends and Distributions.  Except as provided in this Section, Section 8.5
and any Award Agreement, during any Restriction Period applicable to shares
subject to a Restricted Stock Award, the Participant shall have all of the
rights of a stockholder of the Company holding shares of Stock, including the
right to vote such shares and to receive all dividends and other distributions
paid with respect to such shares. 
However, in the event of a dividend or distribution paid in shares of
Stock or other property or any other adjustment made upon a change in the
capital structure of the Company as described in Section 4.4, any and all
new, substituted or additional securities or other property (other than normal
cash dividends) to which the Participant is entitled by reason of the
Participant’s Restricted Stock Award shall be immediately subject to the same
Vesting Conditions as the shares subject to the Restricted Stock Award with
respect to which such dividends or distributions were paid or adjustments were
made.

 

8.7           Effect of Termination of Service.  Unless otherwise
provided by the Committee in the Award Agreement evidencing a Restricted Stock
Award, if a Participant’s Service terminates for any reason, whether voluntary
or involuntary (including the Participant’s death or disability), then (a) the
Company shall have the option to repurchase for the purchase price paid by the
Participant any shares acquired by the Participant pursuant to a Restricted
Stock Purchase Right which remain subject to Vesting Conditions as of the date
of the Participant’s termination of Service and (b) the Participant shall
forfeit to the Company any shares acquired by the Participant pursuant to a
Restricted Stock Bonus which remain subject to Vesting Conditions as of the
date of the Participant’s termination of Service.  The Company shall have the right to assign at
any time any repurchase right it may have, whether or not such right is then
exercisable, to one or more persons as may be selected by the Company.

 

8.8           Nontransferability of Restricted Stock Award Rights.  Rights to acquire shares of Stock pursuant to
a Restricted Stock Award shall not be subject in any manner to anticipation,
alienation, sale, exchange, transfer, assignment, pledge, encumbrance or
garnishment by creditors of the Participant or the Participant’s beneficiary,
except transfer by will or the laws of descent and distribution.  All rights with respect to a Restricted Stock
Award granted to a Participant hereunder shall be exercisable during his or her
lifetime only by such Participant or the Participant’s guardian or legal
representative.

 

9.             RESTRICTED STOCK UNIT
AWARDS.

 

Restricted
Stock Unit Awards shall be evidenced by Award Agreements specifying the number
of Restricted Stock Units subject to the Award, in such form as the Committee
shall from time to time establish.  No
Restricted Stock Unit Award or purported Restricted Stock Unit Award shall be a
valid and binding obligation of the Company unless evidenced by a fully
executed Award Agreement.  Award
Agreements evidencing Restricted Stock Units may incorporate all or any of the
terms of the Plan by reference, including the provisions of Section 18
with respect to Section 409A, if applicable, and shall comply with and be
subject to the following terms and conditions:

 

9.1           Grant of Restricted Stock Unit Awards.  Restricted Stock Unit Awards may be granted
upon such conditions as the Committee shall determine, including, without
limitation, upon the attainment of one or 

 

16

 

more Performance Goals described in Section 10.4.  If either the grant of a Restricted Stock
Unit Award or the Vesting Conditions with respect to such Award is to be
contingent upon the attainment of one or more Performance Goals, the Committee
shall follow procedures substantially equivalent to those set forth in
Sections 10.3 through 10.5(a).

 

9.2           Purchase Price.  No monetary payment (other than applicable
tax withholding, if any) shall be required as a condition of receiving a
Restricted Stock Unit Award, the consideration for which shall be services
actually rendered to a Participating Company or for its benefit.  Notwithstanding the foregoing, if required by
applicable state corporate law, the Participant shall furnish consideration in
the form of cash or past services rendered to a Participating Company or for
its benefit having a value not less than the par value of the shares of Stock
issued upon settlement of the Restricted Stock Unit Award.

 

9.3           Vesting. 
Subject to Section 5.3(b), Restricted Stock Unit Awards may (but
need not) be made subject to Vesting Conditions based upon the satisfaction of
such Service requirements, conditions, restrictions or performance criteria,
including, without limitation, Performance Goals as described in Section 10.4,
as shall be established by the Committee and set forth in the Award Agreement
evidencing such Award.

 

9.4           Voting Rights, Dividend Equivalent Rights and
Distributions.  Participants
shall have no voting rights with respect to shares of Stock represented by
Restricted Stock Units until the date of the issuance of such shares (as
evidenced by the appropriate entry on the books of the Company or of a duly
authorized transfer agent of the Company). 
However, the Committee, in its discretion, may provide in the Award
Agreement evidencing any Restricted Stock Unit Award that the Participant shall
be entitled to receive Dividend Equivalents with respect to the payment of cash
dividends on Stock during the period beginning on the date such Award is
granted and ending, with respect to the particular shares subject to the Award,
on the earlier of the date the Award is settled or the date on which it is
terminated.  Such Dividend Equivalents,
if any, shall be paid by crediting the Participant with additional whole
Restricted Stock Units as of the date of payment of such cash dividends on
Stock.  The number of additional
Restricted Stock Units (rounded to the nearest whole number) to be so credited
shall be determined by dividing (a) the amount of cash dividends paid on
such date with respect to the number of shares of Stock represented by the
Restricted Stock Units previously credited to the Participant by (b) the
Fair Market Value per share of Stock on such date.  Such additional Restricted Stock Units shall
be subject to the same terms and conditions and shall be settled in the same
manner and at the same time (or as soon thereafter as practicable) as the
Restricted Stock Units originally subject to the Restricted Stock Unit Award.  In the event of a dividend or distribution
paid in shares of Stock or other property or any other adjustment made upon a
change in the capital structure of the Company as described in Section 4.4,
appropriate adjustments shall be made in the Participant’s Restricted Stock Unit
Award so that it represents the right to receive upon settlement any and all
new, substituted or additional securities or other property (other than normal
cash dividends) to which the Participant would be entitled by reason of the
shares of Stock issuable upon settlement of the Award, and all such new,
substituted or additional securities or other property shall be immediately
subject to the same Vesting Conditions as are applicable to the Award.

 

9.5           Effect of Termination of Service.  Unless otherwise provided by the Committee
and set forth in the Award Agreement evidencing a Restricted Stock Unit Award,
if a Participant’s Service terminates for any reason, whether voluntary or
involuntary (including the Participant’s death or disability), then the Participant
shall forfeit to the Company any Restricted Stock Units pursuant to the Award
which remain subject to Vesting Conditions as of the date of the Participant’s
termination of Service.

 

9.6           Settlement of Restricted Stock Unit Awards.  The Company shall issue to a Participant on
the date on which Restricted Stock Units subject to the Participant’s
Restricted Stock Unit Award vest or on such other date determined by the
Committee, in its discretion, and set forth in the Award Agreement one (1) share
of Stock (and/or any other new, substituted or additional securities or other
property pursuant to an adjustment described in Section 9.4) for each
Restricted Stock Unit then becoming vested or otherwise to be settled on such
date, subject to the withholding of applicable taxes, if any.  If permitted by the Committee, subject to the
provisions of Section 18 with respect to Section 409A, the
Participant may elect in accordance with terms specified in the Award Agreement
to defer receipt of all or any portion of the shares of Stock or other property
otherwise issuable to the Participant pursuant to this Section, and such
deferred issuance date(s) elected by the Participant shall be set forth in
the Award Agreement.  Notwithstanding the
foregoing, the Committee, in its discretion, may provide for 

 

17

 

settlement of any Restricted Stock Unit Award by payment to the
Participant in cash of an amount equal to the Fair Market Value on the payment
date of the shares of Stock or other property otherwise issuable to the
Participant pursuant to this Section. 
The Committee, in its discretion, may provide in any Award Agreement
evidencing a Restricted Stock Unit Award that, if the settlement of the Award
with respect to any shares would otherwise occur on a day on which the sale of
such shares would violate the Company’s Insider Trading Policy, then the
settlement with respect to such shares shall occur on the next day on which the
sale of such shares would not violate the Insider Trading Policy.

 

9.7           Nontransferability of Restricted Stock Unit Awards.  The right to receive shares pursuant to a
Restricted Stock Unit Award shall not be subject in any manner to anticipation,
alienation, sale, exchange, transfer, assignment, pledge, encumbrance, or
garnishment by creditors of the Participant or the Participant’s beneficiary,
except transfer by will or by the laws of descent and distribution.  All rights with respect to a Restricted Stock
Unit Award granted to a Participant hereunder shall be exercisable during his
or her lifetime only by such Participant or the Participant’s guardian or legal
representative.

 

10.           PERFORMANCE AWARDS.

 

Performance Awards
shall be evidenced by Award Agreements in such form as the Committee shall from
time to time establish.  No Performance
Award or purported Performance Award shall be a valid and binding obligation of
the Company unless evidenced by a fully executed Award Agreement.  Award Agreements evidencing Performance
Awards may incorporate all or any of the terms of the Plan by reference,
including the provisions of Section 18 with respect to Section 409A,
if applicable, and shall comply with and be subject to the following terms and
conditions:

 

10.1         Types of Performance Awards Authorized.  Performance Awards may be granted in the form
of either Performance Shares or Performance Units.  Each Award Agreement evidencing a Performance
Award shall specify the number of Performance Shares or Performance Units
subject thereto, the Performance Award Formula, the Performance Goal(s) and
Performance Period applicable to the Award, and the other terms, conditions and
restrictions of the Award.

 

10.2         Initial Value of Performance Shares and Performance Units.  Unless otherwise provided by the Committee in
granting a Performance Award, each Performance Share shall have an initial
monetary value equal to the Fair Market Value of one (1) share of Stock,
subject to adjustment as provided in Section 4.4, on the effective date of
grant of the Performance Share, and each Performance Unit shall have an initial
monetary value established by the Committee at the time of grant.  The final value payable to the Participant in
settlement of a Performance Award determined on the basis of the applicable
Performance Award Formula will depend on the extent to which Performance Goals
established by the Committee are attained within the applicable Performance
Period established by the Committee.

 

10.3         Establishment of Performance Period, Performance Goals and Performance
Award Formula.  In granting
each Performance Award, the Committee shall establish in writing the applicable
Performance Period (subject to Section 5.3(b)), Performance Award Formula
and one or more Performance Goals which, when measured at the end of the
Performance Period, shall determine on the basis of the Performance Award
Formula the final value of the Performance Award to be paid to the
Participant.  Unless otherwise permitted
in compliance with the requirements under Section 162(m) with respect
to each Performance Award intended to result in the payment of
Performance-Based Compensation, the Committee shall establish the Performance
Goal(s) and Performance Award Formula applicable to each Performance Award
no later than the earlier of (a) the date ninety (90) days after the
commencement of the applicable Performance Period or (b) the date on which
25% of the Performance Period has elapsed, and, in any event, at a time when
the outcome of the Performance Goals remains substantially uncertain.  Once established, the Performance Goals and
Performance Award Formula applicable to a Covered Employee shall not be changed
during the Performance Period.  The
Company shall notify each Participant granted a Performance Award of the terms
of such Award, including the Performance Period, Performance Goal(s) and
Performance Award Formula.

 

18

 

10.4         Measurement of Performance Goals.  Performance Goals shall be established by the
Committee on the basis of targets to be attained (“Performance Targets”) with respect to one or more
measures of business or financial performance (each, a “Performance Measure”), subject to the following:

 

(a)           Performance Measures.  Performance Measures shall have the same
meanings as used in the Company’s financial statements, or, if such terms are
not used in the Company’s financial statements, they shall have the meaning
applied pursuant to generally accepted accounting principles, or as used
generally in the Company’s industry. 
Performance Measures shall be calculated with respect to the Company and
each Subsidiary Corporation consolidated therewith for financial reporting
purposes or such division or other business unit as may be selected by the
Committee.  For purposes of the Plan, the
Performance Measures applicable to a Performance Award shall be calculated in
accordance with generally accepted accounting principles, but prior to the
accrual or payment of any Performance Award for the same Performance Period and
excluding the effect (whether positive or negative) of any change in accounting
standards or any extraordinary, unusual or nonrecurring item, as determined by
the Committee, occurring after the establishment of the Performance Goals
applicable to the Performance Award. 
Each such adjustment, if any, shall be made solely for the purpose of
providing a consistent basis from period to period for the calculation of
Performance Measures in order to prevent the dilution or enlargement of the
Participant’s rights with respect to a Performance Award.  Performance Measures may be one or more of
the following, as determined by the Committee:

 

(i)            revenue;

 

(ii)           sales;

 

(iii)          expenses;

 

(iv)          operating
income;

 

(v)           gross
margin;

 

(vi)          operating
margin;

 

(vii)         earnings
before any one or more of: stock-based compensation expense, interest, taxes,
depreciation and amortization;

 

(viii)        pre-tax
profit;

 

(ix)           net
operating income;

 

(x)            net
income;

 

(xi)           economic
value added;

 

(xii)          free
cash flow;

 

(xiii)         operating
cash flow;

 

(xiv)        stock
price;

 

(xv)         earnings
per share;

 

(xvi)        return
on stockholder equity;

 

(xvii)       return
on capital;

 

(xviii)      return
on assets;

 

19

 

(xix)         return
on investment;

 

(xx)          employee
satisfaction;

 

(xxi)         employee
retention;

 

(xxii)        balance
of cash, cash equivalents and marketable securities;

 

(xxiii)       market
share;

 

(xxiv)       customer
satisfaction;

 

(xxv)        product
development;

 

(xxvi)       research
and development expenses;

 

(xxvii)      completion
of an identified special project; and

 

(xxviii)     completion
of a joint venture or other corporate transaction.

 

(b)           Performance Targets.  Performance Targets may include a minimum,
maximum, target level and intermediate levels of performance, with the final
value of a Performance Award determined under the applicable Performance Award
Formula by the level attained during the applicable Performance Period.  A Performance Target may be stated as an
absolute value or as a value determined relative to an index, budget or other
standard selected by the Committee.

 

10.5         Settlement of Performance Awards.

 

(a)           Determination of Final Value.  As soon as practicable following the
completion of the Performance Period applicable to a Performance Award, the
Committee shall certify in writing the extent to which the applicable
Performance Goals have been attained and the resulting final value of the Award
earned by the Participant and to be paid upon its settlement in accordance with
the applicable Performance Award Formula.

 

(b)           Discretionary Adjustment of Award
Formula.  In its
discretion, the Committee may, either at the time it grants a Performance Award
or at any time thereafter, provide for the positive or negative adjustment of
the Performance Award Formula applicable to a Performance Award granted to any
Participant who is not a Covered Employee to reflect such Participant’s
individual performance in his or her position with the Company or such other
factors as the Committee may determine. 
If permitted under a Covered Employee’s Award Agreement, the Committee
shall have the discretion, on the basis of such criteria as may be established
by the Committee, to reduce some or all of the value of the Performance Award
that would otherwise be paid to the Covered Employee upon its settlement
notwithstanding the attainment of any Performance Goal and the resulting value
of the Performance Award determined in accordance with the Performance Award
Formula.  No such reduction may result in
an increase in the amount payable upon settlement of another Participant’s
Performance Award that is intended to result in Performance-Based Compensation.

 

(c)           Effect of Leaves of Absence.  Unless otherwise required by law or a
Participant’s Award Agreement, payment of the final value, if any, of a
Performance Award held by a Participant who has taken in excess of thirty (30)
days in leaves of absence during a Performance Period shall be prorated on the
basis of the number of days of the Participant’s Service during the Performance
Period during which the Participant was not on a leave of absence.

 

(d)           Notice to Participants.  As soon as practicable following the
Committee’s determination and certification in accordance with
Sections 10.5(a) and (b), the Company shall notify each Participant
of the determination of the Committee.

 

20

 

(e)           Payment in Settlement of Performance Awards.  Subject to the provisions of Section 18
with respect to Section 409A, as soon as practicable following the
Committee’s determination and certification in accordance with
Sections 10.5(a) and (b), payment shall be made to each eligible
Participant (or such Participant’s legal representative or other person who
acquired the right to receive such payment by reason of the Participant’s
death) of the final value of the Participant’s Performance Award.  Payment of such amount shall be made in cash,
shares of Stock, or a combination thereof as determined by the Committee.  Unless otherwise provided in the Award
Agreement evidencing a Performance Award, payment shall be made in a lump
sum.  If permitted by the Committee, and
subject to the provisions of Section 18 with respect to Section 409A,
the Participant may elect to defer receipt of all or any portion of the payment
to be made to Participant pursuant to this Section, and such deferred payment
date(s) elected by the Participant shall be set forth in the Award
Agreement.  If any payment is to be made
on a deferred basis, the Committee may, but shall not be obligated to, provide
for the payment during the deferral period of Dividend Equivalents or interest.

 

(f)            Provisions Applicable to Payment in Shares.  If payment is to be made in shares of Stock,
the number of such shares shall be determined by dividing the final value of
the Performance Award by the value of a share of Stock determined by the method
specified in the Award Agreement.  Such
methods may include, without limitation, the closing market price on a
specified date (such as the settlement date) or an average of market prices
over a series of trading days.  Shares of
Stock issued in payment of any Performance Award may be fully vested and freely
transferable shares or may be shares of Stock subject to Vesting Conditions as
provided in Section 8.5.  Any shares
subject to Vesting Conditions shall be evidenced by an appropriate Award
Agreement and shall be subject to the provisions of Sections 8.5 through
8.8 above.

 

10.6         Voting Rights; Dividend Equivalent Rights and Distributions.  Participants shall have no voting rights with
respect to shares of Stock represented by Performance Share Awards until the
date of the issuance of such shares, if any (as evidenced by the appropriate
entry on the books of the Company or of a duly authorized transfer agent of the
Company).  However, the Committee, in its
discretion, may provide in the Award Agreement evidencing any Performance Share
Award that the Participant shall be entitled to receive Dividend Equivalents
with respect to the payment of cash dividends on Stock during the period
beginning on the date the Award is granted and ending, with respect to the
particular shares subject to the Award, on the earlier of the date on which the
Performance Shares are settled or the date on which they are forfeited.  Such Dividend Equivalents, if any, shall be
credited to the Participant in the form of additional whole Performance Shares
as of the date of payment of such cash dividends on Stock.  The number of additional Performance Shares
(rounded to the nearest whole number) to be so credited shall be determined by
dividing (a) the amount of cash dividends paid on the dividend payment
date with respect to the number of shares of Stock represented by the
Performance Shares previously credited to the Participant by (b) the Fair
Market Value per share of Stock on such date. 
Dividend Equivalents may be paid currently or may be accumulated and
paid to the extent that Performance Shares become nonforfeitable, as determined
by the Committee.  Settlement of Dividend
Equivalents may be made in cash, shares of Stock, or a combination thereof as
determined by the Committee, and may be paid on the same basis as settlement of
the related Performance Share as provided in Section 10.5.  Dividend Equivalents shall not be paid with
respect to Performance Units.  In the
event of a dividend or distribution paid in shares of Stock or other property
or any other adjustment made upon a change in the capital structure of the
Company as described in Section 4.4, appropriate adjustments shall be made
in the Participant’s Performance Share Award so that it represents the right to
receive upon settlement any and all new, substituted or additional securities
or other property (other than normal cash dividends) to which the Participant
would entitled by reason of the shares of Stock issuable upon settlement of the
Performance Share Award, and all such new, substituted or additional securities
or other property shall be immediately subject to the same Performance Goals as
are applicable to the Award.

 

10.7         Effect of Termination of Service.  Unless otherwise provided by the Committee
and set forth in the Award Agreement evidencing a Performance Award, the effect
of a Participant’s termination of Service on the Performance Award shall be as
follows:

 

(a)           Death, Disability or Retirement.  If the Participant’s Service terminates
because of the death, Disability or Retirement of the Participant before the
completion of the Performance Period applicable to the Performance Award, the
final value of the Participant’s Performance Award shall be determined by the
extent to which the applicable Performance Goals have been attained with
respect to the entire Performance Period and 

 

21

 

shall be prorated based on the number of months of the Participant’s
Service during the Performance Period. 
Payment shall be made following the end of the Performance Period in any
manner permitted by Section 10.5.

 

(b)           Other Termination of Service.  If the Participant’s Service terminates for
any reason except death, Disability or Retirement before the completion of the
Performance Period applicable to the Performance Award, such Award shall be
forfeited in its entirety; provided, however, that in the event of an
involuntary termination of the Participant’s Service, the Committee, in its
sole discretion, may waive the automatic forfeiture of all or any portion of
any such Award and provide for payment of such Award or portion thereof on the
same basis as if the Participant’s Service had terminated by reason of
Retirement.

 

10.8         Nontransferability of Performance Awards.  Prior to settlement in accordance with the
provisions of the Plan, no Performance Award shall be subject in any manner to
anticipation, alienation, sale, exchange, transfer, assignment, pledge,
encumbrance, or garnishment by creditors of the Participant or the Participant’s
beneficiary, except transfer by will or by the laws of descent and
distribution.  All rights with respect to
a Performance Award granted to a Participant hereunder shall be exercisable
during his or her lifetime only by such Participant or the Participant’s
guardian or legal representative.

 

11.           DEFERRED COMPENSATION AWARDS.

 

11.1         Establishment of Deferred Compensation Award Programs.  This Section 11 shall not be effective
unless and until the Committee determines to establish a program pursuant to
this Section.  The Committee, in its
discretion and upon such terms and conditions as it may determine, subject to
the provisions of Section 18 with respect to Section 409A, may
establish one or more programs pursuant to the Plan under which:

 

(a)           Elective Cash Compensation Reduction
Awards.  Participants
designated by the Committee who are Insiders or otherwise among a select group
of highly compensated Employees may irrevocably elect, prior to a date
specified by the Committee and complying with Section 409A, to reduce such
Participant’s compensation otherwise payable in cash (subject to any minimum or
maximum reductions imposed by the Committee) and to be granted automatically at
such time or times as specified by the Committee one or more Awards of Stock
Units with respect to such numbers of shares of Stock as determined in
accordance with the rules of the program established by the Committee and
having such other terms and conditions as established by the Committee.

 

(b)           Stock Issuance Deferral Awards.  Participants designated by the Committee who
are Insiders or otherwise among a select group of highly compensated Employees
may irrevocably elect, prior to a date specified by the Committee and complying
with Section 409A, to be granted automatically an Award of Stock Units
with respect to such number of shares of Stock and upon such other terms and
conditions as established by the Committee in lieu of:

 

(i)            shares
of Stock otherwise issuable to such Participant upon the exercise of an Option;

 

(ii)           cash or
shares of Stock otherwise issuable to such Participant upon the exercise of an
SAR; or

 

(iii)          cash
or shares of Stock otherwise issuable to such Participant upon the settlement
of a Performance Award.

 

11.2         Terms and Conditions of Deferred Compensation Awards.  Deferred Compensation Awards granted pursuant
to this Section 11 shall be evidenced by Award Agreements in such form as
the Committee shall from time to time establish.  No such Deferred Compensation Award or
purported Deferred Compensation Award shall be a valid and binding obligation
of the Company unless evidenced by a fully executed Award Agreement.  Award Agreements evidencing Deferred
Compensation Awards may incorporate all or any of the terms of the Plan by reference,
including the provisions of Section 18 with respect to Section 409A,
and, except as provided below, shall comply with and be subject to the terms
and conditions of Section 9.

 

22

 

(a)           Voting Rights; Dividend Equivalent Rights and Distributions. 
Participants shall have no voting rights with respect to shares of Stock
represented by Stock Units until the date of the issuance of such shares (as
evidenced by the appropriate entry on the books of the Company or of a duly
authorized transfer agent of the Company). 
However, a Participant shall be entitled to receive Dividend Equivalents
with respect to the payment of cash dividends on Stock during the period
beginning on the date the Stock Units are granted automatically to the
Participant and ending on the earlier of the date on which such Stock Units are
settled or the date on which they are forfeited.  Such Dividend Equivalents shall be paid by
crediting the Participant with additional whole Stock Units as of the date of
payment of such cash dividends on Stock. 
The number of additional Stock Units (rounded to the nearest whole
number) to be so credited shall be determined by dividing (A) the amount
of cash dividends paid on the dividend payment date with respect to the number
of shares of Stock represented by the Stock Units previously credited to the
Participant by (B) the Fair Market Value per share of Stock on such
date.  Such additional Stock Units shall
be subject to the same terms and conditions and shall be settled in the same
manner and at the same time (or as soon thereafter as practicable) as the Stock
Units originally subject to the Stock Unit Award.  In the event of a dividend or distribution
paid in shares of Stock or other property or any other adjustment made upon a
change in the capital structure of the Company as described in Section 4.4,
appropriate adjustments shall be made in the Participant’s Stock Unit Award so
that it represents the right to receive upon settlement any and all new,
substituted or additional securities or other property (other than normal cash
dividends) to which the Participant would entitled by reason of the shares of
Stock issuable upon settlement of the Award.

 

(b)           Settlement of Stock Unit Awards.  A Participant electing to receive an Award of
Stock Units pursuant to this Section 11 shall specify at the time of such
election a settlement date with respect to such Award which complies with Section 409A.  The Company shall issue to the Participant on
the settlement date elected by the Participant, or as soon thereafter as
practicable, a number of whole shares of Stock equal to the number of vested
Stock Units subject to the Stock Unit Award. 
Such shares of Stock shall be fully vested, and the Participant shall
not be required to pay any additional consideration (other than applicable tax
withholding) to acquire such shares.

 

12.           CASH-BASED AWARDS AND OTHER STOCK-BASED AWARDS.

 

                                Cash-Based Awards and
Other Stock-Based Awards shall be evidenced by Award Agreements in such form as
the Committee shall from time to time establish.  No such Award or purported Award shall be a
valid and binding obligation of the Company unless evidenced by a fully
executed Award Agreement.  Award
Agreements evidencing Cash-Based Awards and Other Stock-Based Awards may
incorporate all or any of the terms of the Plan by reference, including the
provisions of Section 18 with respect to Section 409A, if applicable,
and shall comply with and be subject to the following terms and conditions:

 

12.1         Grant of Cash-Based Awards.  Subject to the provisions of the Plan, the
Committee, at any time and from time to time, may grant Cash-Based Awards to
Participants in such amounts and upon such terms and conditions, including the
achievement of performance criteria, as the Committee may determine.

 

12.2         Grant of Other Stock-Based Awards.  The Committee may grant other types of
equity-based or equity-related Awards not otherwise described by the terms of
this Plan (including the grant or offer for sale of unrestricted securities,
stock-equivalent units, stock appreciation units, securities or debentures
convertible into common stock or other forms determined by the Committee) in
such amounts and subject to such terms and conditions as the Committee shall
determine.  Such Awards may involve the
transfer of actual shares of Stock to Participants, or payment in cash or
otherwise of amounts based on the value of Stock and may include, without
limitation, Awards designed to comply with or take advantage of the applicable
local laws of jurisdictions other than the United States.

 

12.3         Value of Cash-Based and Other Stock-Based Awards.  Each Cash-Based Award shall specify a
monetary payment amount or payment range as determined by the Committee.  Each Other Stock-Based Award shall be
expressed in terms of shares of Stock or units based on such shares of Stock,
as determined by the Committee.  Subject
to Section 5.3(b), the Committee may require the satisfaction of such
Service requirements, conditions, restrictions or performance criteria,
including, without limitation, Performance Goals as described in Section 10.4,
as shall be established by the Committee and set forth in the Award Agreement
evidencing such Award.  If the Committee
exercises its discretion to establish performance criteria, the final value of
Cash-Based 

 

23

 

Awards or Other Stock-Based Awards that will be paid to the Participant
will depend on the extent to which the performance criteria are met.  The establishment of performance criteria
with respect to the grant or vesting of any Cash-Based Award or Other
Stock-Based Award intended to result in Performance-Based Compensation shall
follow procedures substantially equivalent to those applicable to Performance
Awards set forth in Section 10.

 

12.4         Payment or Settlement of Cash-Based Awards and Other
Stock-Based Awards.  Payment
or settlement, if any, with respect to a Cash-Based Award or an Other
Stock-Based Award shall be made in accordance with the terms of the Award, in
cash, shares of Stock or other securities or any combination thereof as the
Committee determines.  The determination
and certification of the final value with respect to any Cash-Based Award or
Other Stock-Based Award intended to result in Performance-Based Compensation
shall comply with the requirements applicable to Performance Awards set forth
in Section 10.  To the extent
applicable, payment or settlement with respect to each Cash-Based Award and
Other Stock-Based Award shall be made in compliance with the provisions of Section 18
with respect to Code Section 409A.

 

12.5         Voting Rights; Dividend Equivalent Rights and
Distributions.  Participants
shall have no voting rights with respect to shares of Stock represented by
Other Stock-Based Awards until the date of the issuance of such shares of Stock
(as evidenced by the appropriate entry on the books of the Company or of a duly
authorized transfer agent of the Company), if any, in settlement of such
Award.  However, the Committee, in its
discretion, may provide in the Award Agreement evidencing any Other Stock-Based
Award that the Participant shall be entitled to receive Dividend Equivalents
with respect to the payment of cash dividends on Stock during the period
beginning on the date such Award is granted and ending, with respect to the
particular shares subject to the Award, on the earlier of the date the Award is
settled or the date on which it is terminated. 
Such Dividend Equivalents, if any, shall be paid in accordance with the
provisions set forth in Section 9.4. 
Dividend Equivalent rights shall not be granted with respect to
Cash-Based Awards.

 

12.6         Effect of Termination of Service.  Each Award Agreement evidencing a Cash-Based
Award or Other Stock-Based Award shall set forth the extent to which the
Participant shall have the right to retain such Award following termination of
the Participant’s Service.  Such
provisions shall be determined in the sole discretion of the Committee, need
not be uniform among all Cash-Based Awards or Other Stock-Based Awards, and may
reflect distinctions based on the reasons for termination.

 

12.7         Nontransferability of Cash-Based Awards and Other
Stock-Based Awards.  Prior to
the payment or settlement of a Cash-Based Award or Other Stock-Based Award, the
Award shall not be subject in any manner to anticipation, alienation, sale,
exchange, transfer, assignment, pledge, encumbrance, or garnishment by
creditors of the Participant or the Participant’s beneficiary, except transfer
by will or by the laws of descent and distribution.  The Committee may impose such additional
restrictions on any shares of Stock issued in settlement of Cash-Based Awards
and Other Stock-Based Awards as it may deem advisable, including, without
limitation, minimum holding period requirements, restrictions under applicable
federal securities laws, under the requirements of any stock exchange or market
upon which such shares of Stock are then listed and/or traded, or under any
state securities laws applicable to such shares of Stock.

 

13.           STANDARD FORMS OF AWARD AGREEMENT.

 

13.1         Award Agreements.  Each Award shall comply with and be subject
to the terms and conditions set forth in the appropriate form of Award
Agreement approved by the Committee and as amended from time to time.  Any Award Agreement may consist of an
appropriate form of Notice of Grant and a form of Agreement incorporated
therein by reference, or such other form or forms, including electronic media,
as the Committee may approve from time to time.

 

13.2         Authority to Vary Terms.  The Committee shall have the authority from
time to time to vary the terms of any standard form of Award Agreement either
in connection with the grant or amendment of an individual Award 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 Award Agreement are not inconsistent with the terms
of the Plan.

 

24

 

14.           CHANGE IN CONTROL. 
Subject to the
requirements and limitations of Section 409A if applicable, the Committee
may provide for any one or more of the following:

 

14.1         Accelerated Vesting. 
The Committee may, in its discretion, provide in any Award Agreement or,
in the event of a Change in Control, may take such actions as it deems
appropriate to provide for the acceleration of the exercisability, vesting
and/or settlement in connection with such Change in Control of each or any
outstanding Award or portion thereof and shares acquired pursuant thereto upon
such conditions, including termination of the Participant’s Service prior to,
upon, or following such Change in Control, to such extent as the Committee
shall determine.

 

14.2         Assumption, Continuation or Substitution.  In the event of a Change in Control, the
surviving, continuing, successor, or purchasing corporation or other business
entity or parent thereof, as the case may be (the “Acquiror”), may, without the consent of any
Participant, either assume or continue the Company’s rights and obligations
under each or any Award or portion thereof outstanding immediately prior to the
Change in Control or substitute for each or any such outstanding Award or
portion thereof a substantially equivalent award with respect to the Acquiror’s
stock, as applicable.  For purposes of
this Section, if so determined by the Committee, in its discretion, an Award
denominated in shares of Stock shall be deemed assumed if, following the Change
in Control, the Award confers the right to receive, subject to the terms and
conditions of the Plan and the applicable Award Agreement, for each share of
Stock subject to the Award immediately prior to the Change in Control, the
consideration (whether stock, cash, other securities or property or a
combination thereof) to which a holder of a share of Stock on the effective
date of the Change in Control was entitled; provided, however, that if such
consideration is not solely common stock of the Acquiror, the Committee may,
with the consent of the Acquiror, provide for the consideration to be received
upon the exercise or settlement of the Award, for each share of Stock subject
to the Award, to consist solely of common stock of the Acquiror equal in Fair
Market Value to the per share consideration received by holders of Stock
pursuant to the Change in Control.  Any
Award or portion thereof which is neither assumed or continued by the Acquiror
in connection with the Change in Control nor exercised or settled as of the
time of consummation of the Change in Control shall terminate and cease to be
outstanding effective as of the time of consummation of the Change in Control.

 

14.3         Cash-Out of Outstanding Stock-Based Awards.  The Committee may, in its discretion and
without the consent of any Participant, determine that, upon the occurrence of
a Change in Control, each or any Award denominated in shares of Stock or
portion thereof outstanding immediately prior to the Change in Control and not
previously exercised or settled shall be canceled in exchange for a payment
with respect to each vested share (and each unvested share, if so determined by
the Committee) of Stock subject to such canceled Award in (i) cash, (ii) stock
of the Company or of a corporation or other business entity a party to the
Change in Control, or (iii) other property which, in any such case, shall
be in an amount having a Fair Market Value equal to the Fair Market Value of
the consideration to be paid per share of Stock in the Change in Control,
reduced by the exercise or purchase price per share, if any, under such Award.  In the event such determination is made by
the Committee, the amount of such payment (reduced by applicable withholding
taxes, if any) shall be paid to Participants in respect of the vested portions
of their canceled Awards as soon as practicable following the date of the Change
in Control and in respect of the unvested portions of their canceled Awards in
accordance with the vesting schedules applicable to such Awards.

 

15.           COMPLIANCE WITH SECURITIES LAW.

 

The grant of
Awards and the issuance of shares of Stock pursuant to any Award shall be
subject to compliance with all applicable requirements of federal, state and
foreign law with respect to such securities and the requirements of any stock
exchange or market system upon which the Stock may then be listed.  In addition, no Award may be exercised or
shares issued pursuant to an Award unless (a) a registration statement
under the Securities Act shall at the time of such exercise or issuance be in
effect with respect to the shares issuable pursuant to the Award or (b) in
the opinion of legal counsel to the Company, the shares issuable pursuant to
the Award may be issued in accordance with the terms of an applicable exemption
from the registration requirements of the Securities Act.  The inability of the Company to obtain from
any regulatory body having jurisdiction the authority, if any, deemed by the
Company’s legal counsel to be necessary to the lawful issuance and sale of any
shares hereunder shall relieve the Company of any liability in respect of the
failure to issue or sell such shares as to which such requisite authority shall
not have been obtained.  As a condition
to issuance of any Stock, the Company may require 

 

25

 

the Participant to satisfy any qualifications that may be necessary or
appropriate, to evidence compliance with any applicable law or regulation and
to make any representation or warranty with respect thereto as may be requested
by the Company.

 

16.           TAX WITHHOLDING.

 

16.1         Tax Withholding in General. 
The Company shall have the right to deduct from any and all payments
made under the Plan, or to require the Participant, through payroll
withholding, cash payment or otherwise, to make adequate provision for, the
federal, state, local and foreign taxes, if any, required by law to be withheld
by the Participating Company Group with respect to an Award or the shares
acquired pursuant thereto.  The Company
shall have no obligation to deliver shares of Stock, to release shares of Stock
from an escrow established pursuant to an Award Agreement, or to make any
payment in cash under the Plan until the Participating Company Group’s tax
withholding obligations have been satisfied by the Participant.

 

16.2         Withholding in Shares. 
The Company shall have the right, but not the obligation, to deduct from
the shares of Stock issuable to a Participant upon the exercise or settlement
of an Award, or to accept from the Participant the tender of, a number of whole
shares of Stock having a Fair Market Value, as determined by the Company, equal
to all or any part of the tax withholding obligations of the Participating
Company Group.  The Fair Market Value of
any shares of Stock withheld or tendered to satisfy any such tax withholding
obligations shall not exceed the amount determined by the applicable minimum
statutory withholding rates.

 

17.           AMENDMENT OR TERMINATION OF PLAN.

 

The Committee may
amend, suspend or terminate the Plan at any time.  However, without the approval of the Company’s
stockholders, there shall be (a) no increase in the maximum aggregate
number of shares of Stock that may be issued under the Plan (except by
operation of the provisions of Section 4.4), (b) no change in the
class of persons eligible to receive Incentive Stock Options, and (c) no
other amendment of the Plan that would require approval of the Company’s
stockholders under any applicable law, regulation or rule, including the rules of
any stock exchange or market system upon which the Stock may then be
listed.  No amendment, suspension or
termination of the Plan shall affect any then outstanding Award unless
expressly provided by the Committee. 
Except as provided by the next sentence, no amendment, suspension or
termination of the Plan may adversely affect any then outstanding Award without
the consent of the Participant. 
Notwithstanding any other provision of the Plan to the contrary, the
Committee may, in its sole and absolute discretion and without the consent of
any Participant, amend the Plan or any Award Agreement, to take effect
retroactively or otherwise, as it deems necessary or advisable for the purpose
of conforming the Plan or such Award Agreement to any present or future law,
regulation or rule applicable to the Plan, including, but not limited to, Section 409A.

 

18.           COMPLIANCE WITH SECTION 409A.

 

18.1         Awards Subject to Section 409A.  The provisions of this Section 18 shall
apply to any Award or portion thereof that is or becomes subject to Section 409A,
notwithstanding any provision to the contrary contained in the Plan or the
Award Agreement applicable to such Award. 
Awards subject to Section 409A include, without limitation:

 

(a)           Any
Nonstatutory Stock Option that permits the deferral of compensation other than
the deferral of recognition of income until the exercise of the Award.

 

(b)           Each
Deferred Compensation Award.

 

(c)           Any
Restricted Stock Unit Award, Performance Award, Cash-Based Award or Other
Stock-Based Award that either (i) provides by its terms for settlement of
all or any portion of the Award on one or more dates following the Short-Term
Deferral Period (as defined below) or (ii) permits or requires the
Participant to elect one or more dates on which the Award will be settled.

 

26

 

Subject to any
applicable U.S. Treasury Regulations promulgated pursuant to Section 409A
or other applicable guidance, the term “Short-Term Deferral Period” means the period ending on the later of (i) the date
that is two and one-half months from the end of the Company’s fiscal year in
which the applicable portion of the Award is no longer subject to a substantial
risk of forfeiture or (ii) the date that is two and one-half months from
the end of the Participant’s taxable year in which the applicable portion of
the Award is no longer subject to a substantial risk of forfeiture.  For this purpose, the term “substantial risk
of forfeiture” shall have the meaning set forth in any applicable U.S. Treasury
Regulations promulgated pursuant to Section 409A or other applicable
guidance.

 

18.2         Deferral and/or Distribution Elections.  Except as otherwise permitted or required by Section 409A
or any applicable U.S. Treasury Regulations promulgated pursuant to Section 409A
or other applicable guidance, the following rules shall apply to any
deferral and/or distribution elections (each, an “Election”)
that may be permitted or required by the Committee pursuant to an Award subject
to Section 409A:

 

(a)           All
Elections must be in writing and specify the amount of the distribution in
settlement of an Award being deferred, as well as the time and form of
distribution as permitted by this Plan.

 

(b)           All
Elections shall be made by the end of the Participant’s taxable year prior to
the year in which services commence for which an Award may be granted to such
Participant; provided, however, that if the Award qualifies as “performance-based
compensation” for purposes of Section 409A and is based on services
performed over a period of at least twelve (12) months, then the Election may
be made no later than six (6) months prior to the end of such period.

 

(c)           Elections
shall continue in effect until a written election to revoke or change such
Election is received by the Company, except that a written election to revoke
or change such Election must be made prior to the last day for making an Election
determined in accordance with paragraph (b) above or as permitted by Section 18.3.

 

18.3         Subsequent Elections.  Any Award subject to Section 409A which
permits a subsequent Election to delay the distribution or change the form of
distribution in settlement of such Award shall comply with the following
requirements:

 

(a)           No
subsequent Election may take effect until at least twelve (12) months after the
date on which the subsequent Election is made;

 

(b)           Each
subsequent Election related to a distribution in settlement of an Award not
described in Section 18.3(b), 18.4(b), or 18.4(f) must result in a
delay of the distribution for a period of not less than five (5) years
from the date such distribution would otherwise have been made; and

 

(c)           No
subsequent Election related to a distribution pursuant to Section 18.4(d) shall
be made less than twelve (12) months prior to the date of the first scheduled
payment under such distribution.

 

18.4         Distributions Pursuant to Deferral Elections.  No distribution in settlement of an Award
subject to Section 409A may commence earlier than:

 

(a)           Separation
from service (as determined by the Secretary of the United States Treasury);

 

(b)           The date
the Participant becomes Disabled (as defined below);

 

(c)           Death;

 

(d)           A specified
time (or pursuant to a fixed schedule) that is either (i) specified by the
Committee upon the grant of an Award and set forth in the Award Agreement
evidencing such Award or (ii) specified by the Participant in an Election
complying with the requirements of Section 18.2 and/or 18.3, as
applicable;

 

27

 

(e)           To the
extent provided by the Secretary of the U.S. Treasury, a change in the
ownership or effective control or the Company or in the ownership of a substantial
portion of the assets of the Company; or

 

(f)            The
occurrence of an Unforeseeable Emergency (as defined below).

 

Notwithstanding
anything else herein to the contrary, to the extent that a Participant is a “Specified
Employee” (as defined in Section 409A(a)(2)(B)(i)) of the Company, no
distribution pursuant to Section 18.4(a) in settlement of an Award
subject to Section 409A may be made before the date which is six (6) months
after such Participant’s date of separation from service, or, if earlier, the
date of the Participant’s death.

 

18.5         Unforeseeable Emergency. 
The Committee shall have the authority to provide in the Award Agreement
evidencing any Award subject to Section 409A for distribution in
settlement of all or a portion of such Award in the event that a Participant
establishes, to the satisfaction of the Committee, the occurrence of an
Unforeseeable Emergency.  In such event,
the amount(s) distributed with respect to such Unforeseeable Emergency
cannot exceed the amounts necessary to satisfy such Unforeseeable Emergency
plus amounts necessary to pay taxes reasonably anticipated as a result of such
distribution(s), after taking into account the extent to which such hardship is
or may be relieved through reimbursement or compensation by insurance or
otherwise or by liquidation of the Participant’s assets (to the extent the
liquidation of such assets would not itself cause severe financial
hardship).  All distributions with
respect to an Unforeseeable Emergency shall be made in a lump sum as soon as
practicable following the Committee’s determination that an Unforeseeable
Emergency has occurred.

 

The occurrence of
an Unforeseeable Emergency shall be judged and determined by the
Committee.  The Committee’s decision with
respect to whether an Unforeseeable Emergency has occurred and the manner in
which, if at all, the distribution in settlement of an Award shall be altered
or modified, shall be final, conclusive, and not subject to approval or appeal.

 

18.6         Disabled.  The
Committee shall have the authority to provide in any Award subject to Section 409A
for distribution in settlement of such Award in the event that the Participant
becomes Disabled.  A Participant shall be
considered “Disabled” if either:

 

(a)           the
Participant is unable to engage in any substantial gainful activity by reason
of any medically determinable physical or mental impairment which can be
expected to result in death or can be expected to last for a continuous period
of not less than twelve (12) months, or

 

(b)           the
Participant is, by reason of any medically determinable physical or mental
impairment which can be expected to result in death or can be expected to last
for a continuous period of not less than twelve (12) months, receiving income
replacement benefits for a period of not less than three (3) months under
an accident and health plan covering employees of the Participant’s employer.

 

All distributions
payable by reason of a Participant becoming Disabled shall be paid in a lump
sum or in periodic installments as established by the Participant’s Election,
commencing as soon as practicable following the date the Participant becomes
Disabled.  If the Participant has made no
Election with respect to distributions upon becoming Disabled, all such
distributions shall be paid in a lump sum as soon as practicable following the
date the Participant becomes Disabled.

 

18.7         Death.  If a
Participant dies before complete distribution of amounts payable upon
settlement of an Award subject to Section 409A, such undistributed amounts
shall be distributed to his or her beneficiary under the distribution method
for death established by the Participant’s Election as soon as administratively
possible following receipt by the Committee of satisfactory notice and
confirmation of the Participant’s death. 
If the Participant has made no Election with respect to distributions
upon death, all such distributions shall be paid in a lump sum as soon as
practicable following the date of the Participant’s death.

 

28

 

18.8         No Acceleration of Distributions. 
Notwithstanding anything to the contrary herein, this Plan
does not permit the acceleration of the time or schedule of any distribution
under this Plan, except as provided by Section 409A and/or the Secretary of
the U.S. Treasury.

 

19.           MISCELLANEOUS PROVISIONS.

 

19.1         Repurchase Rights.  Shares issued under the Plan may be subject
to one or more repurchase options, or other conditions and restrictions as
determined by the Committee in its discretion at the time the Award is
granted.  The Company shall have the
right to assign at any time any repurchase right it may have, whether or not
such right is then exercisable, to one or more persons as may be selected by
the Company.  Upon request by the
Company, each Participant shall execute any agreement evidencing such transfer
restrictions prior to the receipt of shares of Stock hereunder and shall
promptly present to the Company any and all certificates representing shares of
Stock acquired hereunder for the placement on such certificates of appropriate
legends evidencing any such transfer restrictions.

 

19.2         Forfeiture Events.

 

(a)           The
Committee may specify in an Award Agreement that the Participant’s rights,
payments, and benefits with respect to an Award shall be subject to reduction,
cancellation, forfeiture, or recoupment upon the occurrence of specified
events, in addition to any otherwise applicable vesting or performance
conditions of an Award.  Such events may
include, but shall not be limited to, termination of Service for Cause or any
act by a Participant, whether before or after termination of Service, that
would constitute Cause for termination of Service.

 

(b)           If the
Company is required to prepare an accounting restatement due to the material
noncompliance of the Company, as a result of misconduct, with any financial
reporting requirement under the securities laws, any Participant who knowingly
or through gross negligence engaged in the misconduct, or who knowingly or
through gross negligence failed to prevent the misconduct, and any Participant
who is one of the individuals subject to automatic forfeiture under Section 304
of the Sarbanes-Oxley Act of 2002, shall reimburse the Company the amount of
any payment in settlement of an Award earned or accrued during the twelve-
(12-) month period following the first public issuance or filing with the
United States Securities and Exchange Commission (whichever first occurred) of
the financial document embodying such financial reporting requirement.

 

19.3         Provision of Information. 
Each Participant shall be given access to information concerning the
Company equivalent to that information generally made available to the Company’s
common stockholders.

 

19.4         Rights as Employee, Consultant or Director.  No person, even though eligible pursuant to Section 5,
shall have a right to be selected as a Participant, or, having been so
selected, to be selected again as a Participant.  Nothing in the Plan or any Award granted
under the Plan shall confer on any Participant a right to remain an Employee,
Consultant or Director or interfere with or limit in any way any right of a
Participating Company to terminate the Participant’s Service at any time.  To the extent that an Employee of a
Participating Company other than the Company receives an Award under the Plan,
that Award shall in no event be understood or interpreted to mean that the
Company is the Employee’s employer or that the Employee has an employment
relationship with the Company.

 

19.5         Rights as a Stockholder. 
A Participant shall have no rights as a stockholder with respect to any
shares covered by an Award until the date of the issuance of such shares (as
evidenced by the appropriate entry on the books of the Company or of a duly
authorized transfer agent of the Company). 
No adjustment shall be made for dividends, distributions or other rights
for which the record date is prior to the date such shares are issued, except
as provided in Section 4.4 or another provision of the Plan.

 

19.6         Delivery of Title to Shares. 
Subject to any governing rules or regulations, the Company shall
issue or cause to be issued the shares of Stock acquired pursuant to an Award
and shall deliver such shares to or for the benefit of the Participant by means
of one or more of the following: (a) by delivering to the Participant 

 

29

 

evidence of book entry shares of Stock credited to the account of the
Participant, (b) by depositing such shares of Stock for the benefit of the
Participant with any broker with which the Participant has an account
relationship, or (c) by delivering such shares of Stock to the Participant
in certificate form.

 

19.7         Fractional Shares.  The Company shall not be required to issue
fractional shares upon the exercise or settlement of any Award.

 

19.8         Retirement and Welfare Plans.  Neither Awards made under this Plan nor
shares of Stock or cash paid pursuant to such Awards may be included as “compensation”
for purposes of computing the benefits payable to any Participant under any Participating
Company’s retirement plans (both qualified and non-qualified) or welfare
benefit plans unless such other plan expressly provides that such compensation
shall be taken into account in computing a Participant’s benefit.

 

19.9         Beneficiary Designation. 
Subject to local laws and procedures, each Participant may file with the
Company a written designation of a beneficiary who is to receive any benefit
under the Plan to which the Participant is entitled in the event of such
Participant’s death before he or she receives any or all of such benefit.  Each designation will revoke all prior
designations by the same Participant, shall be in a form prescribed by the
Company, and will be effective only when filed by the Participant in writing
with the Company during the Participant’s lifetime.  If a married Participant designates a
beneficiary other than the Participant’s spouse, the effectiveness of such
designation may be subject to the consent of the Participant’s spouse.  If a Participant dies without an effective
designation of a beneficiary who is living at the time of the Participant’s
death, the Company will pay any remaining unpaid benefits to the Participant’s
legal representative.

 

19.10       Severability.  If any one or more of the provisions (or any
part thereof) of this Plan shall be held invalid, illegal or unenforceable in
any respect, such provision shall be modified so as to make it valid, legal and
enforceable, and the validity, legality and enforceability of the remaining
provisions (or any part thereof) of the Plan shall not in any way be affected
or impaired thereby.

 

19.11       No Constraint on Corporate Action. 
Nothing in this Plan shall be construed to: (a) limit,
impair, or otherwise affect the Company’s or another Participating Company’s
right or power to make adjustments, reclassifications, reorganizations, or
changes of its capital or business structure, or to merge or consolidate, or
dissolve, liquidate, sell, or transfer all or any part of its business or
assets; or (b) limit the right or power of the Company or another
Participating Company to take any action which such entity deems to be
necessary or appropriate.

 

19.12       Unfunded Obligation. 
Participants shall have the status of general unsecured creditors of the
Company.  Any amounts payable to
Participants pursuant to the Plan shall be unfunded and unsecured obligations
for all purposes, including, without limitation, Title I of the Employee
Retirement Income Security Act of 1974. 
No Participating Company shall be required to segregate any monies from
its general funds, or to create any trusts, or establish any special accounts
with respect to such obligations.  The
Company shall retain at all times beneficial ownership of any investments,
including trust investments, which the Company may make to fulfill its payment
obligations hereunder.  Any investments
or the creation or maintenance of any trust or any Participant account shall
not create or constitute a trust or fiduciary relationship between the Committee
or any Participating Company and a Participant, or otherwise create any vested
or beneficial interest in any Participant or the Participant’s creditors in any
assets of any Participating Company.  The
Participants shall have no claim against any Participating Company for any
changes in the value of any assets which may be invested or reinvested by the
Company with respect to the Plan.

 

19.13       Choice of Law.  Except
to the extent governed by applicable federal law, the validity, interpretation,
construction and performance of the Plan and each Award Agreement shall be
governed by the laws of the State of California, without regard to its conflict
of law rules.

 

30

 

IN
WITNESS WHEREOF, the undersigned Secretary of the Company certifies that the
foregoing sets forth the Zoran Corporation 2005 Equity Incentive Plan as duly
adopted by the Board on May 26, 2005 and amended on July 19, 2005 and
April      , 2006.

 

	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Secretary

  

 

31

 

PLAN HISTORY AND NOTES TO
COMPANY

 

	
  May 26, 2005

  	
   

  	
  Board adopts Plan with a reserve of 4,500,000
  shares, subject to increase by up to 1,250,000 shares subject to Predecessor
  Plan options cancelled pursuant to an Option for Full Value Award Exchange
  Program and to be made subject to replacement Full Value Awards.

  
	
   

  	
   

  	
   

  
	
  July 19, 2005

  	
   

  	
  To seek reversal of negative voting recommendation
  by Institutional Shareholder Services, Board amends Plan prior to reconvening
  the annual meeting of stockholders adjourned on July 13, 2005 to reduce
  the fixed share reserve (and ISO share issuance limit) from 4,500,000 shares
  to 1,800,000 shares and to revise the share accounting provisions of
  Section 4.2(b) to eliminate “liberal share counting.”

  
	
   

  	
   

  	
   

  
	
  July 29, 2005

  	
   

  	
  Stockholders approve Plan.

  
	
   

  	
   

  	
   

  
	
  February 6, 2006

  	
   

  	
  On this date, pursuant to its Offer to Exchange
  filed with the SEC on Schedule TO, the Company accepted for cancellation
  options granted under the Predecessor Plans for 1,065,536 shares and issued
  in exchange therefore pursuant to the Plan awards of Restricted Stock and
  Restricted Stock Units for 197,433 shares. Per Section 4.3, the share
  reserve of the Plan was increased by 256,663 shares (i.e., 197,433 multiplied
  by the Full Value Award ratio of 1.3).

  
	
   

  	
   

  	
   

  
	
  April     , 2006

  	
   

  	
  Board approves amendment to Plan to increase share
  reserve by 2,500,000 shares from 2,056,663 shares to 4,556,663 shares, to
  clarify the effect of Change in Control on awards and to conform Sections
  2.1(t) [Full Value Awards], 3.6 [Option or SAR Repricing] and 4.2(b) [Share
  Accounting] to comments from Institutional Shareholder Services.

  
	
   

  	
   

  	
   

  
	
  June 22, 2006

  	
   

  	
  Stockholders approve amendment to Plan to increase
  share reserve by 2,500,000 shares.

  
	
   

  	
   

  	
   

  
	
  IMPORTANT NOTE: Implementation of
  Section 11—Deferred Compensation Awards or deferral of settlement of any
  Award

  	
   

  	
  Upon establishment of a Deferred Compensation Award
  program pursuant to Section 11 or provision for deferral of settlement
  of any Award, determine whether such program will constitute a “top-hat”
  pension plan under ERISA. If so, file notice with Dept. of Labor under ERISA
  Reg. 2520.104-23 within 120 days of adoption of resolutions by the Committee
  to establish the program to obtain exemption from reporting and disclosure
  requirements of ERISA. Include claims procedure in award agreements
  evidencing such awards.

  
	
   

  	
   

  	
   

  
	
  IMPORTANT NOTE: IRC 162(m) 5 year reapproval of
  performance goals

  	
   

  	
  Because the Committee may change the targets under
  performance goals, Section 162(m) requires stockholder reapproval
  of the material terms of performance goals no later than the annual meeting
  in the 5th year following the year in which the public company stockholders
  initially approved such material terms. See Treas. Reg. 1.162-27(e)(4)(vi).

  

 

 

ZORAN CORPORATION

STOCK OPTION AGREEMENT

(For U.S. Participants)

 

Zoran Corporation has
granted to the Participant named in the Notice of Grant of Stock
Option (the “Grant Notice”)
to which this Stock Option Agreement (the “Option
Agreement”) is attached an option (the “Option”) to purchase certain
shares of Stock upon the terms and conditions set forth in the Grant Notice and
this Option Agreement.  The Option has
been granted pursuant to and shall in all respects be subject to the terms and
conditions of the Zoran Corporation 2005 Equity Incentive Plan (the “Plan”), as amended to the
Date of Grant, the provisions of which are incorporated herein by
reference.  By signing the Grant Notice,
the Participant: (a) acknowledges receipt of and represents that the
Participant has read and is familiar with the Grant Notice, this Option
Agreement, the Plan and a prospectus for
the Plan in the form most recently registered with the Securities and Exchange
Commission (the “Plan Prospectus”), (b) accepts the
Option subject to all of the terms and conditions of the Grant Notice, this
Option Agreement and the Plan and (c) agrees to accept as binding,
conclusive and final all decisions or interpretations of the Committee upon any
questions arising under the Grant Notice, this Option Agreement or the Plan.

 

1.                                       DEFINITIONS AND CONSTRUCTION.

 

1.1                                 Definitions.  Unless otherwise defined herein, capitalized
terms shall have the meanings assigned to such terms in the Grant Notice or the
Plan.

 

1.2                                 Construction.  Captions and titles contained herein are for
convenience only and shall not affect the meaning or interpretation of any
provision of this Option Agreement. 
Except when otherwise indicated by the context, the singular shall
include the plural and the plural shall include the singular.  Use of the term “or” is not intended to be
exclusive, unless the context clearly requires otherwise.

 

2.                                       TAX CONSEQUENCES.

 

2.1                                 Tax Status of Option.  This Option is intended to have the tax
status designated in the Grant Notice.

 

(a)                                  Incentive Stock Option.  If the Grant
Notice so designates, this Option is intended to be an Incentive Stock Option
within the meaning of Section 422(b) of the Code, but the Company
does not represent or warrant that this Option qualifies as such.  The Participant should consult with the
Participant’s own tax advisor regarding the tax effects of this Option and the
requirements necessary to obtain favorable income tax treatment under Section 422
of the Code, including, but not limited to, holding period requirements.  (NOTE TO PARTICIPANT: If the Option is
exercised more than three (3) months after the date on which you cease to
be an Employee (other than by reason of your death or permanent and total
disability as defined in Section 22(e)(3) of the Code), the Option
will be treated as a Nonstatutory Stock Option and not as an Incentive Stock
Option to the extent required by Section 422 of the Code.)

 

(b)                                 Nonstatutory Stock Option. 
If the Grant Notice so designates, this Option is intended to be a
Nonstatutory Stock Option and shall not be treated as an Incentive Stock Option
within the meaning of Section 422(b) of the Code.

 

2.2                                 ISO Fair Market Value Limitation.  If the Grant Notice
designates this Option as an Incentive Stock Option, then to the
extent that the Option (together with all Incentive Stock Options granted to
the Participant under all stock option plans of the Participating Company
Group, including the Plan) becomes exercisable for the first time during any
calendar year for shares having a Fair Market Value greater than One Hundred
Thousand Dollars ($100,000), the portion of such options which exceeds such
amount will be treated as Nonstatutory Stock Options.  For purposes of this Section 2.2,
options designated as Incentive Stock Options are taken into account in the
order in which they were granted, and the Fair Market Value of stock is
determined as of 

 

 

the time
the option with respect to such stock is granted.  If the Code is amended to provide for a
different limitation from that set forth in this Section 2.2, such
different limitation shall be deemed incorporated herein effective as of the
date required or permitted by such amendment to the Code.  If the Option is treated as an Incentive
Stock Option in part and as a Nonstatutory Stock Option in part by reason of
the limitation set forth in this Section 2.2, the Participant may
designate which portion of such Option the Participant is exercising.  In the absence of such designation, the
Participant shall be deemed to have exercised the Incentive Stock Option
portion of the Option first.  Separate
certificates representing each such portion shall be issued upon the exercise
of the Option.  (NOTE TO PARTICIPANT: If
the aggregate Exercise Price of the Option (that is, the Exercise Price
multiplied by the Number of Option Shares) plus the aggregate exercise price of
any other Incentive Stock Options you hold (whether granted pursuant to the
Plan or any other stock option plan of the Participating Company Group) is
greater than $100,000, you should contact the Chief Financial Officer of the
Company to ascertain whether the entire Option qualifies as an Incentive Stock
Option.)

 

3.                                       ADMINISTRATION.

 

All questions of
interpretation concerning this Option Agreement shall be determined by the
Committee.  All determinations by the
Committee shall be final and binding upon all persons having an interest in the
Option.  Any Officer shall have the
authority to act on behalf of the Company with respect to any matter, right, obligation,
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, or election.

 

4.                                       EXERCISE OF THE OPTION.

 

4.1                                 Right to Exercise.  Except as otherwise provided herein, the
Option shall be exercisable on and after the Initial Vesting Date and prior to
the termination of the Option (as provided in Section 6) in an amount not
to exceed the number of Vested Shares less the number of shares previously
acquired upon exercise of the Option.  In
no event shall the Option be exercisable for more shares than the Number of
Option Shares, as adjusted pursuant to Section 9.

 

4.2                                 Method of Exercise.  Exercise of the Option shall be by means of
electronic or written notice (the “Exercise Notice”) in a form
authorized by the Company.  An electronic
Exercise Notice must be digitally signed or authenticated by the Participant in
such manner as required by the notice and transmitted to the Company or an
authorized representative of the Company (including a third-party administrator
designated by the Company).  In the event
that the Participant is not authorized or is unable to provide an electronic
Exercise Notice, the Option shall be exercised by a written Exercise Notice
addressed to the Company, which shall be signed by the Participant and
delivered in person, by certified or registered mail, return receipt requested,
by confirmed facsimile transmission, or by such other means as the Company may
permit, to the Company, or an authorized representative of the Company
(including a third-party administrator designated by the Company).  Each Exercise Notice, whether electronic or
written, must state the Participant’s election to exercise the Option, the
number of whole shares of Stock for which the Option is being exercised and
such other representations and agreements as to the Participant’s investment
intent with respect to such shares as may be required pursuant to the
provisions of this Option Agreement. 
Further, each Exercise Notice must be received by the Company prior to
the termination of the Option as set forth in Section 6 and must be
accompanied by full payment of the aggregate Exercise Price for the number of
shares of Stock being purchased.  The
Option shall be deemed to be exercised upon receipt by the Company of such
electronic or written Exercise Notice and the aggregate Exercise Price.

 

4.3                                 Payment of Exercise Price.

 

(a)                                  Forms of Consideration
Authorized.  Except as otherwise provided below, payment
of the aggregate Exercise Price for the number of shares of Stock for which the
Option is being exercised shall be made (i) in cash or by check or cash
equivalent, (ii) if permitted by the Company, by tender to the Company, or
attestation to the ownership, of whole shares of Stock owned by the Participant
having a Fair Market Value not less than the aggregate Exercise Price, (iii) by
means of a Cashless Exercise, as defined in Section 4.3(b), or (iv) by
any combination of the foregoing.

 

2

 

(b)                                 Limitations on Forms of
Consideration.

 

(i)                                     Tender of Stock. 
Notwithstanding the foregoing, the Option may not be exercised by tender
to the Company, or attestation to the ownership, of shares of Stock to the
extent such tender or attestation would constitute a violation of the
provisions of any law, regulation or agreement restricting the redemption of
the Company’s stock.  If required by the
Company, the Option may not be exercised by tender to the Company, or
attestation to the ownership, of shares of Stock unless such shares either have
been owned by the Participant for more than six (6) months or such other
period, if any, required by the Company (and not used for another option
exercise by attestation during such period) or were not acquired, directly or
indirectly, from the Company.

 

(ii)                                  Cashless Exercise.  A
“Cashless Exercise”
means the delivery of a properly executed notice together with irrevocable
instructions to a broker in a form acceptable to the Company providing for the
assignment to the Company of the proceeds of a sale or loan with respect to
some or all of the shares of Stock acquired upon the exercise of the Option
pursuant to a program or procedure approved by the Company (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).  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 such program or procedure,
including with respect to the Participant notwithstanding that such program or
procedures may be available to others.

 

4.4                                 Tax Withholding.  At the time the Option is exercised, in whole
or in part, or at any time thereafter as requested by the Company, the
Participant hereby authorizes withholding from payroll and any other amounts
payable to the Participant, and otherwise agrees to make adequate provision for
(including by means of a Cashless Exercise to the extent permitted by the
Company), any sums required to satisfy the federal, state, local and foreign
tax withholding obligations of the Participating Company Group, if any, which
arise in connection with the Option.  The
Company shall have no obligation to deliver shares of Stock until the tax
withholding obligations of the Participating Company Group have been satisfied
by the Participant.

 

4.5                                 Beneficial Ownership of Shares; Certificate Registration.  The
Participant hereby authorizes the Company, in its sole discretion, to deposit
for the benefit of the Participant with any broker with which the Participant
has an account relationship of which the Company has notice any or all shares
acquired by the Participant pursuant to the exercise of the Option.  Except as provided by the preceding sentence,
a certificate for the shares as to which the Option is exercised shall be
registered in the name of the Participant, or, if applicable, in the names of
the heirs of the Participant.

 

4.6                                 Restrictions on Grant of the Option and Issuance of Shares.  The
grant of the Option and the issuance of shares of Stock upon exercise of the
Option shall be subject to compliance with all applicable requirements of
federal, state or foreign law with respect to such securities.  The Option may not be exercised if the
issuance of shares of Stock upon exercise would constitute a violation of any
applicable federal, state or foreign securities laws or other law or
regulations or the requirements of any stock exchange or market system upon
which the Stock may then be listed.  In
addition, the Option may not be exercised unless (i) a registration
statement under the Securities Act shall at the time of exercise of the Option
be in effect with respect to the shares issuable upon exercise of the Option or
(ii) in the opinion of legal counsel to the Company, the shares issuable
upon exercise of the Option may be issued in accordance with the terms of an
applicable exemption from the registration requirements of the Securities Act.  THE PARTICIPANT IS CAUTIONED THAT THE OPTION MAY NOT
BE EXERCISED UNLESS THE FOREGOING CONDITIONS ARE SATISFIED.  ACCORDINGLY, THE PARTICIPANT MAY NOT BE
ABLE TO EXERCISE THE OPTION WHEN DESIRED EVEN THOUGH THE OPTION IS VESTED.  The inability of the Company to obtain from
any regulatory body having jurisdiction the authority, if any, deemed by the
Company’s legal
counsel to be necessary to the lawful issuance and sale of any shares subject
to the Option shall relieve the Company of any liability in respect of the
failure to issue or sell such shares as to which such requisite authority shall
not have been obtained.  As a condition
to the exercise of the Option, the Company may require the Participant to
satisfy any qualifications that may be necessary or appropriate, to evidence
compliance with any applicable law or regulation and to make any representation
or warranty with respect thereto as may be requested by the Company.

 

3

 

4.7                                 Fractional Shares.  The Company shall not be required to issue
fractional shares upon the exercise of the Option.

 

5.                                       NONTRANSFERABILITY OF THE OPTION.

 

During the lifetime of
the Participant, the Option shall be exercisable only by the Participant or the
Participant’s guardian or legal representative. 
The Option shall not be subject in any manner to anticipation,
alienation, sale, exchange, transfer, assignment, pledge, encumbrance, or
garnishment by creditors of the Participant or the Participant’s beneficiary,
except transfer by will or by the laws of descent and distribution.  Following the death of the Participant, the
Option, to the extent provided in Section 7, may be exercised by the
Participant’s
legal representative or by any person empowered to do so under the deceased
Participant’s will or
under the then applicable laws of descent and distribution.

 

6.                                       TERMINATION OF THE OPTION.

 

The Option shall
terminate and may no longer be exercised after the first to occur of (a) the
close of business on the Option Expiration Date, (b) the close of business
on the last date for exercising the Option following termination of the
Participant’s
Service as described in Section 7, or (c) a Change in Control to the
extent provided in Section 8.

 

7.                                       EFFECT OF TERMINATION OF SERVICE.

 

7.1                                 Option Exercisability.  The
Option shall terminate immediately upon the Participant’s termination of
Service to the extent that it is then unvested and shall be exercisable after
the Participant’s termination of Service to the extent it is then vested only
during the applicable time period as determined below and thereafter shall
terminate.

 

(a)                                  Disability.  If the Participant’s Service terminates because of the
Disability of the Participant, the Option, to the extent unexercised and
exercisable for Vested Shares on the date on which the Participant’s Service terminated, may
be exercised by the Participant (or the Participant’s guardian or legal representative) at
any time prior to the expiration of twelve (12) months after the date on which
the Participant’s
Service terminated, but in any event no later than the Option Expiration Date.

 

(b)                                 Death.  If the Participant’s Service terminates
because of the death of the Participant, the Option, to the extent unexercised
and exercisable for Vested Shares on the date on which the Participant’s
Service terminated, may be exercised by the Participant’s legal representative
or other person who acquired the right to exercise the Option by reason of the
Participant’s death at any time prior to the expiration of twelve (12) months after
the date on which the Participant’s Service terminated, but in any event no
later than the Option Expiration Date. 
The Participant’s Service shall be deemed to have terminated on account
of death if the Participant dies within three (3) months after the
Participant’s termination of Service.

 

(c)                                  Other Termination of Service.  If the Participant’s Service terminates for
any reason, except Disability or death, the Option, to the extent unexercised
and exercisable for Vested Shares by the Participant on the date on which the
Participant’s Service terminated, may be exercised by  the Participant at any time prior to the
expiration of three (3) months after the date on which the Participant’s
Service terminated, but in any event no later than the Option Expiration Date.

 

7.2                                 Extension if Exercise Prevented by Law.  Notwithstanding the foregoing, if the
exercise of the Option within the applicable time periods set forth in Section 7.1
is prevented by the provisions of Section 4.6, the Option shall remain exercisable
until three (3) months after the date the Participant is notified by the
Company that the Option is exercisable, but in any event no later than the
Option Expiration Date.

 

7.3                                 Extension if Participant Subject to Section 16(b).  Notwithstanding the foregoing, if a sale
within the applicable time periods set forth in Section 7.1 of shares
acquired upon the exercise of the Option would subject the Participant to suit
under Section 16(b) of the Exchange Act, the Option shall remain
exercisable until the earliest to occur of (i) the tenth (10th) day
following the date on which a sale of such shares by the 

 

4

 

Participant
would no longer be subject to such suit, (ii) the one hundred and
ninetieth (190th) day after the Participant’s termination of Service, or (iii) the
Option Expiration Date.

 

8.                                       EFFECT OF CHANGE IN CONTROL.

 

In the event of a Change
in Control, the surviving, continuing, successor, or purchasing entity or
parent thereof, as the case may be (the “Acquiror”),
may, without the consent of the Participant, assume or continue in full force
and effect the Company’s rights and obligations under the Option or substitute
for the Option a substantially equivalent option for the Acquiror’s stock.  For purposes of this Section, the Option
shall be deemed assumed if, following the Change in Control, the Option confers
the right to receive, subject to the terms and conditions of the Plan and this
Option Agreement, for each share of Stock subject to the Option immediately
prior to the Change in Control, the consideration (whether stock, cash, other
securities or property or a combination thereof) to which a holder of a share
of Stock on the effective date of the Change in Control was entitled; provided,
however, that if such consideration is not solely common stock of the Acquiror,
the Committee may, with the consent of the Acquiror, provide for the
consideration to be received upon the exercise of the Option, for each share of
Stock subject to the Option, to consist solely of common stock of the Acquiror equal
in Fair Market Value to the per share consideration received by holders of
Stock pursuant to the Change in Control. 
The Option shall terminate and cease to be outstanding effective as of
the time of consummation of the Change in Control to the extent that the Option
is neither assumed or continued by the Acquiror in connection with the Change
in Control nor exercised as of the date of the Change in Control.

 

9.                                       ADJUSTMENTS FOR CHANGES IN
CAPITAL STRUCTURE.

 

Subject to any required
action by the stockholders of the Company, in the event of any change in the
Stock effected without receipt of consideration by the Company, whether through
merger, consolidation, reorganization, reincorporation, recapitalization,
reclassification, stock dividend, stock split, reverse stock split, split-up,
split-off, spin-off, combination of shares, exchange of shares, or similar
change in the capital structure of the Company, or in the event of payment of a
dividend or distribution to the stockholders of the Company in a form other
than Stock (excepting normal cash dividends) that has a material effect on the
Fair Market Value of shares of Stock, appropriate adjustments shall be made in
the number, Exercise Price and kind of shares subject to the Option, in order
to prevent dilution or enlargement of the Participant’s rights under the
Option.  For purposes of the foregoing,
conversion of any convertible securities of the Company shall not be treated as
“effected without receipt of consideration by the Company.”  Any fractional share resulting from an
adjustment pursuant to this Section shall be rounded down to the nearest
whole number, and in no event may the Exercise Price be decreased to an amount
less than the par value, if any, of the stock subject to the Option.  The Committee in its sole discretion, may
also make such adjustments in the terms of the Option to reflect, or related
to, such changes in the capital structure of the Company or distributions as it
deems appropriate.  The adjustments
determined by the Committee pursuant to this Section shall be final,
binding and conclusive.

 

10.                                 RIGHTS AS A STOCKHOLDER,
DIRECTOR, EMPLOYEE OR CONSULTANT.

 

The Participant shall
have no rights as a stockholder with respect to any shares covered by the
Option until the date of the issuance of the shares for which the Option has
been exercised (as evidenced by the appropriate entry on the books of the
Company or of a duly authorized transfer agent of the Company).  No adjustment shall be made for dividends,
distributions or other rights for which the record date is prior to the date
the shares are issued, except as provided in Section 9.  If the Participant is an Employee, the
Participant understands and acknowledges that, except as otherwise provided in
a separate, written employment agreement between a Participating Company and
the Participant, the Participant’s employment is “at will” and is for
no specified term.  Nothing in this
Option Agreement shall confer upon the Participant any right to continue in the
Service of a Participating Company or interfere in any way with any right of
the Participating Company Group to terminate the Participant’s Service as a Director, an Employee
or Consultant, as the case may be, at any time.

 

11.                                 NOTICE OF SALES UPON
DISQUALIFYING DISPOSITION.

 

The Participant shall
dispose of the shares acquired pursuant to the Option only in accordance with
the provisions of this Option Agreement. 
In addition, if the Grant Notice
designates this Option as an Incentive 

 

5

 

Stock Option, the Participant
shall (a) promptly notify the Chief Financial Officer of the Company if
the Participant disposes of any of the shares acquired pursuant to the Option
within one (1) year after the date the Participant exercises all or part
of the Option or within two (2) years after the Date of Grant and (b) provide
the Company with a description of the circumstances of such disposition.  Until such time as the Participant disposes
of such shares in a manner consistent with the provisions of this Option
Agreement, unless otherwise expressly authorized by the Company, the
Participant shall hold all shares acquired pursuant to the Option in the
Participant’s name
(and not in the name of any nominee) for the one-year period immediately after
the exercise of the Option and the two-year period immediately after Date of
Grant.  At any time during the one-year
or two-year periods set forth above, the Company may place a legend on any
certificate representing shares acquired pursuant to the Option requesting the
transfer agent for the Company’s
stock to notify the Company of any such transfers.  The obligation of the Participant to notify
the Company of any such transfer shall continue notwithstanding that a legend
has been placed on the certificate pursuant to the preceding sentence.

 

12.                                 LEGENDS.

 

The Company may at any
time place legends referencing any applicable federal, state or foreign
securities law restrictions on all certificates representing shares of stock
subject to the provisions of this Option Agreement.  The Participant shall, at the request of the
Company, promptly present to the Company any and all certificates representing
shares acquired pursuant to the Option in the possession of the Participant in
order to carry out the provisions of this Section.  Unless otherwise specified by the Company,
legends placed on such certificates may include, but shall not be limited to,
the following:

 

“THE SHARES EVIDENCED BY
THIS CERTIFICATE WERE ISSUED BY THE CORPORATION TO THE REGISTERED HOLDER UPON
EXERCISE OF AN INCENTIVE STOCK OPTION AS DEFINED IN SECTION 422 OF THE
INTERNAL REVENUE CODE OF 1986, AS AMENDED (“ISO”).  IN ORDER TO OBTAIN THE PREFERENTIAL TAX
TREATMENT AFFORDED TO ISOs, THE SHARES SHOULD NOT BE TRANSFERRED PRIOR TO [INSERT DISQUALIFYING DISPOSITION DATE HERE].  SHOULD THE REGISTERED HOLDER ELECT TO
TRANSFER ANY OF THE SHARES PRIOR TO THIS DATE AND FOREGO ISO TAX TREATMENT, THE
TRANSFER AGENT FOR THE SHARES SHALL NOTIFY THE CORPORATION IMMEDIATELY.  THE REGISTERED HOLDER SHALL HOLD ALL SHARES
PURCHASED UNDER THE INCENTIVE STOCK OPTION IN THE REGISTERED HOLDER’S NAME (AND NOT IN THE
NAME OF ANY NOMINEE) PRIOR TO THIS DATE OR UNTIL TRANSFERRED AS DESCRIBED
ABOVE.”

 

13.                                 MISCELLANEOUS PROVISIONS.

 

13.1                           Termination or Amendment. 
The Committee may terminate or amend the Plan or the Option at any time;
provided, however, that except as provided in Section 8 in connection with
a Change in Control, no such termination or amendment may adversely affect the
Option or any unexercised portion hereof without the consent of the Participant
unless such termination or amendment is necessary to comply with any applicable
law or government regulation.  No
amendment or addition to this Option Agreement shall be effective unless in
writing.

 

13.2                           Further Instruments.  The parties hereto agree to execute such
further instruments and to take such further action as may reasonably be
necessary to carry out the intent of this Option Agreement.

 

13.3                           Binding Effect. 
Subject to the restrictions on transfer set forth herein, this Option
Agreement shall inure to the benefit of and be binding upon the parties hereto
and their respective heirs, executors, administrators, successors and assigns.

 

13.4                           Delivery of Documents and Notices.  Any document relating to participation in the
Plan or any notice required or permitted hereunder shall be given in writing
and shall be deemed effectively given (except to the extent that this Option
Agreement provides for effectiveness only upon actual receipt of such notice)
upon personal delivery, electronic delivery at the e-mail address, if any,
provided for the Participant by a Participating Company, or upon deposit in the
U.S. Post Office or foreign postal service, by registered or certified mail, or
with a nationally recognized overnight courier service, with postage and fees
prepaid, addressed to the other party at the 

 

6

 

address of
such party set forth in the Grant Notice or at such other address as such party
may designate in writing from time to time to the other party.

 

(a)                                  Description
of Electronic Delivery.  The Plan documents, which may include but do
not necessarily include: the Plan, the Grant Notice, this Option Agreement, the
Plan Prospectus, and any reports of the Company provided generally to the
Company’s stockholders, may be delivered to the Participant
electronically.  In addition, the
Participant may deliver electronically the Grant Notice and Exercise Notice
called for by Section 4.2 to the Company or to such third party involved
in administering the Plan as the Company may designate from time to time.  Such means of electronic delivery may include
but do not necessarily include the delivery of a link to a Company intranet or
the internet site of a third party involved in administering the Plan, the
delivery of the document via e-mail or such other means of electronic delivery
specified by the Company.

 

(b)                                 Consent
to Electronic Delivery.  The
Participant acknowledges that the Participant has read Section 13.4(a) of
this Option Agreement and consents to the electronic delivery of the Plan
documents and the delivery of the Grant Notice and Exercise Notice, as
described in Section 13.4(a).  The
Participant acknowledges that he or she may receive from the Company a paper
copy of any documents delivered electronically at no cost to the Participant by
contacting the Company by telephone or in writing.  The Participant further acknowledges that the
Participant will be provided with a paper copy of any documents if the
attempted electronic delivery of such documents fails.  Similarly, the Participant understands
that the Participant must provide the Company or any designated third party
administrator with a paper copy of any documents if the attempted electronic
delivery of such documents fails.  The
Participant may revoke his or her consent to the electronic delivery of
documents described in Section 13.4(a) or may change the electronic
mail address to which such documents are to be delivered (if Participant has
provided an electronic mail address) at any time by notifying the Company of
such revoked consent or revised e-mail address by telephone, postal service or
electronic mail.  Finally, the
Participant understands that he or she is not required to consent to electronic
delivery of documents described in Section 13.4(a).

 

13.5                           Integrated Agreement. 
The Grant Notice, this Option Agreement and the Plan, together with any the
Superseding Agreement, if any, shall constitute the entire understanding and
agreement of the Participant and the Participating Company Group with respect
to the subject matter contained herein and supersede any prior agreements,
understandings, restrictions, representations, or warranties among the Participant
and the Participating Company Group with respect to such subject matter.  To the extent contemplated herein, the
provisions of the Grant Notice, the Option Agreement and the Plan shall survive
any exercise of the Option and shall remain in full force and effect.

 

13.6                           Applicable Law.  This
Option Agreement shall be governed by the laws of the State of California as
such laws are applied to agreements between California residents entered into
and to be performed entirely within the State of California.

 

13.7                           Counterparts.  The
Grant Notice may be executed in counterparts, each of which shall be deemed an
original, but all of which together shall constitute one and the same
instrument.

 

7

 

	
  TM Incentive Stock Option

  	
  Participant:

  	
   

  
	
  TM Nonstatutory Stock Option

  	
   

  
	
   

  	
  Date:

  	
   

  
				

 

STOCK
OPTION EXERCISE NOTICE

 

Zoran Corporation

Attention: Stock
Administration

1390 Kifer Road

Sunnyvale, CA 94086

 

Ladies and Gentlemen:

 

1.                                       Option.  I was granted an option (the “Option”) to purchase shares
of the common stock (the “Shares”)
of Zoran Corporation (the “Company”)
pursuant to the Company’s
2005 Equity Incentive Plan (the “Plan”),
my Notice of Grant of Stock Option (the “Grant Notice”)
and my Stock Option Agreement (the “Option
Agreement”) as follows:

 

	
  Date of Grant:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Number of Option Shares:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Exercise Price per Share:

  	
   

  	
  $

  	
   

  

 

2.                                       Exercise of Option.  I hereby elect to exercise the Option to
purchase the following number of Shares, all of which are Vested Shares in
accordance with the Grant Notice and the Option Agreement:

 

 

	
  Total Shares Purchased:

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Total Exercise Price (Total Shares  X 
  Price per Share)

  	
   

  	
  $

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
							

 

3.                                       Payments.  I enclose payment in full of the total
exercise price for the Shares in the following form(s), as authorized by my
Option Agreement:

 

 

	
  TM  Cash:

  	
   

  	
  $

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  TM  Check:

  	
   

  	
  $

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  TM  Tender of
  Company Stock:

  	
  Contact Plan Administrator

  
	
   

  	
   

  
	
  TM  Cashless
  Exercise (same-day sale):

  	
  Contact Plan Administrator

  
							

 

4.                                       Tax Withholding.  I authorize payroll withholding and otherwise
will make adequate provision for the federal, state, local and foreign tax
withholding obligations of the Company, if any, in connection with the
Option.  If I am exercising a
Nonstatutory Stock Option, I enclose payment in full of my withholding taxes,
if any, as follows:

 

(Contact
Plan Administrator for amount of tax due.)

 

	
  TM  Cash:

  	
   

  	
  $

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  TM  Check:

  	
  $

  	
   

  
	
   

  	
   

  	
   

  
	
  TM  Tender of
  Company Stock:

  	
  Contact Plan Administrator

  
	
   

  	
   

  	
   

  
	
  TM  Cashless
  Exercise (same-day sale):

  	
  Contact Plan Administrator

  
							

 

 

5.                                       Participant Information.

 

	
  My address is:

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  My Social Security Number is:

  	
   

  
			

 

6.                                       Notice of Disqualifying Disposition.  If the Option is an Incentive Stock Option, I
agree that I will promptly notify the Chief Financial Officer of the Company if
I transfer any of the Shares within one (1) year from the date I exercise
all or part of the Option or within two (2) years of the Date of Grant.

 

7.                                       Binding Effect.  I agree that the Shares are being acquired in
accordance with and subject to the terms, provisions and conditions of the
Grant Notice, the Option Agreement and the Plan, to all of which I hereby
expressly assent.  This Agreement shall
inure to the benefit of and be binding upon my heirs, executors,
administrators, successors and assigns.

 

 

	
   

  	
  Very truly yours,

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  (Signature)

  
	
   

  	
   

  
	
   

  	
   

  
	
  Receipt of the above is hereby acknowledged.

  	
   

  
	
   

  	
   

  
	
  ZORAN CORPORATION

  	
   

  
	
   

  	
   

  
	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Title:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Dated:

  	
   

  	
   

  
	
   

  	
   

  	
   

  

 

2

 

ZORAN CORPORATION

STOCK OPTION AGREEMENT

(For Non-U.S. Participants)

 

Zoran Corporation has
granted to the Participant named in the Notice of Grant of Stock
Option (the “Grant Notice”)
to which this Stock Option Agreement (the “Option
Agreement”) is attached an option (the “Option”) to purchase certain
shares of Stock upon the terms and conditions set forth in the Grant Notice and
this Option Agreement.  The Option has
been granted pursuant to and shall in all respects be subject to the terms and
conditions of the Zoran Corporation 2005 Equity Incentive Plan (the “Plan”), as amended to the
Date of Grant, the provisions of which are incorporated herein by
reference.  By signing the Grant Notice,
the Participant: (a) acknowledges receipt of and represents that the
Participant has read and is familiar with the Grant Notice, this Option
Agreement, the Plan and a prospectus for
the Plan in the form most recently registered with the Securities and Exchange
Commission (the “Plan Prospectus”), (b) accepts the
Option subject to all of the terms and conditions of the Grant Notice, this
Option Agreement and the Plan and (c) agrees to accept as binding,
conclusive and final all decisions or interpretations of the Committee upon any
questions arising under the Grant Notice, this Option Agreement or the Plan.

 

1.                                       DEFINITIONS AND CONSTRUCTION.

 

1.1                                 Definitions.  Unless otherwise defined herein, capitalized
terms shall have the meanings assigned to such terms in the Grant Notice or the
Plan.

 

1.2                                 Construction.  Captions and titles contained herein are for
convenience only and shall not affect the meaning or interpretation of any
provision of this Option Agreement. 
Except when otherwise indicated by the context, the singular shall
include the plural and the plural shall include the singular.  Use of the term “or” is not intended to be
exclusive, unless the context clearly requires otherwise.

 

2.                                       CERTAIN CONDITIONS OF THE OPTION.

 

2.1                                 Compliance with Local Law.  The Participant agrees that the Participant
will not acquire shares pursuant to the Option or transfer, assign, sell or
otherwise deal with such shares except in compliance with Local Law.

 

2.2                                 Employment Conditions.  In accepting the Option, the Participant
acknowledges that:

 

(a)                                  Any notice period mandated under Local Law
shall not be treated as Service for the purpose of determining the vesting of
the Option; and the Participant’s right to exercise the Option after
termination of Service, if any, will be measured by the date of termination of
the Participant’s active Service and will not be extended by any notice period
mandated under Local Law.  Subject to the
foregoing and the provisions of the Plan, the Company, in its sole discretion,
shall determine whether the Participant’s Service has terminated and the
effective date of such termination.

 

(b)                                 The Plan is established
voluntarily by the Company.  It is discretionary in nature and it may be modified, amended, suspended or terminated by the Company at any time, unless
otherwise provided in the Plan and this Option
Agreement.

 

(c)                                  The grant of the Option
is voluntary and occasional and does not create any contractual or other right to receive future
grants of Options, or benefits in lieu of Options, even if Options have been
granted repeatedly in the past.

 

(d)                                 All decisions with
respect to future Option grants, if any, will be at the sole discretion of
the Company.

 

 

(e)                                  The Participant’s participation in the
Plan shall not create a right to further Service with any Participating Company
and shall not interfere with the ability of any Participating Company to
terminate the Participant’s Service at any time, with or without cause.

 

(f)                                    The Participant is
voluntarily participating in the Plan.

 

(g)                                 The Option is an
extraordinary item that does not constitute compensation of any kind for
Service of any kind rendered to any Participating Company, and which is outside the scope of the Participant’s employment contract,
if any.

 

(h)                                 The Option is not part
of normal or expected compensation or salary for any purpose, including, but
not limited to, calculating any severance, resignation, termination, redundancy,
end-of-service payments, bonuses, long-service awards, pension or retirement
benefits or similar payments.

 

(i)                                     In the event that the Participant is not
an employee of the Company, the Option grant will not be interpreted to form an
employment contract or relationship with the Company; and furthermore the
Option grant will not be interpreted to form an employment contract with any other
Participating Company.

 

(j)                                     The future value of the
underlying shares is unknown and cannot be predicted with
certainty.  If the underlying shares do
not increase in value, the Option will have no value.  If the Participant
exercises the Option and obtains shares, the value of those shares acquired
upon exercise may increase or decrease in value, even below the Exercise Price.

 

(k)                                  No claim or entitlement
to compensation or damages arises from termination of the Option or diminution
in value of the Option or shares purchased through exercise of the Option
resulting from termination of the Participant’s Service (for any reason whether
or not in breach of Local Law) and the Participant irrevocably releases the
Company and each other Participating Company from any such claim that may
arise.  If, notwithstanding the
foregoing, any such claim is found by a court of competent jurisdiction to have
arisen then, by signing this Option Agreement, the Participant shall be deemed
irrevocably to have waived the Participant’s entitlement to pursue such a claim.

 

2.3                                 Data Privacy Consent.

 

(a)                                  The Participant hereby explicitly and unambiguously consents
to the collection, use and transfer, in electronic or other form, of the
Participant’s personal data as described in this document by and among the
members of the Participating Company Group for the exclusive purpose of
implementing, administering and managing the Participant’s participation in the
Plan.

 

(b)                                 The Participant
understands that the Participating Company Group holds certain personal
information about the Participant, including, but not limited to, the
Participant’s name, home address and telephone number, date of birth, social
insurance number or other identification number, salary, nationality, job
title, any shares or directorships held in the Company, details of all Options
or any other entitlement to shares awarded, canceled, exercised, vested,
unvested or outstanding in the Participant’s favor, for the purpose of
implementing, administering and managing the Plan (“Data”).  The Participant
understands that Data may be transferred to any third parties assisting in the
implementation, administration and management of the Plan, that these
recipients may be located in the Participant’s country or elsewhere, and that
the recipient’s country may have different data privacy laws and protections
than the Participant’s country.  The
Participant understands that he or she may request a list with the names and
addresses of any potential recipients of the Data by contacting the Participant’s
local human resources representative. 
The Participant authorizes the recipients to receive, possess, use,
retain and transfer the Data, in electronic or other form, for the purposes of
implementing, administering and managing the Participant’s participation in the
Plan, including any requisite transfer of such Data as may be required to a
broker or other third party with whom the Participant may elect to deposit any
shares acquired upon exercise of the Option. 
The Participant understands that Data
will be held only as long as is necessary to implement, administer and manage
the Participant’s participation in the Plan. 
The Participant understands that he or she may, at any time, view Data,
request additional information about the storage and processing of Data,
require any necessary amendments to Data or refuse or withdraw the consents
herein, in any case without cost, by 

 

2

 

contacting in writing the Participant’s
local human resources representative. 
The Participant understands, however, that refusing or withdrawing the
Participant’s consent may affect the Participant’s ability to participate in
the Plan.  For more information on the
consequences of the Participant’s refusal to consent or withdrawal of consent,
the Participant understands that he or she may contact the Participant’s local
human resources representative.

 

3.                                       ADMINISTRATION.

 

All questions of
interpretation concerning this Option Agreement shall be determined by the
Committee.  All determinations by the
Committee shall be final and binding upon all persons having an interest in the
Option.  Any Officer shall have the
authority to act on behalf of the Company with respect to any matter, right,
obligation, 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, or election.

 

4.                                       EXERCISE OF THE OPTION.

 

4.1                                 Right to Exercise.  Except as otherwise provided herein, the
Option shall be exercisable on and after the Initial Vesting Date and prior to
the termination of the Option (as provided in Section 6) in an amount not
to exceed the number of Vested Shares less the number of shares previously
acquired upon exercise of the Option.  In
no event shall the Option be exercisable for more shares than the Number of
Option Shares, as adjusted pursuant to Section 9.

 

4.2                                 Method of Exercise.  Exercise of the Option shall be by means of
electronic or written notice (the “Exercise Notice”) in a form
authorized by the Company.  An electronic
Exercise Notice must be digitally signed or authenticated by the Participant in
such manner as required by the notice and transmitted to the Company or an
authorized representative of the Company (including a third-party administrator
designated by the Company).  In the event
that the Participant is not authorized or is unable to provide an electronic
Exercise Notice, the Option shall be exercised by a written Exercise Notice
addressed to the Company, which shall be signed by the Participant and
delivered in person, by certified or registered mail, return receipt requested,
by confirmed facsimile transmission, or by such other means as the Company may
permit, to the Company, or an authorized representative of the Company (including
a third-party administrator designated by the Company).  Each Exercise Notice, whether electronic or
written, must state the Participant’s election to exercise the Option, the
number of whole shares of Stock for which the Option is being exercised and
such other representations and agreements as to the Participant’s investment
intent with respect to such shares as may be required pursuant to the
provisions of this Option Agreement. 
Further, each Exercise Notice must be received by the Company prior to
the termination of the Option as set forth in Section 6 and must be
accompanied by full payment of the aggregate Exercise Price for the number of
shares of Stock being purchased.  The
Option shall be deemed to be exercised upon receipt by the Company of such
electronic or written Exercise Notice and the aggregate Exercise Price.

 

4.3                                 Payment of Exercise Price.

 

(a)                                  Forms of Consideration
Authorized.  Except as otherwise provided below, payment
of the aggregate Exercise Price for the number of shares of Stock for which the
Option is being exercised shall be made (i) in cash or by check or cash
equivalent, (ii) if permitted by the Company, by tender to the Company, or
attestation to the ownership, of whole shares of Stock owned by the Participant
having a Fair Market Value not less than the aggregate Exercise Price, (iii) by
means of a Cashless Exercise, as defined in Section 4.3(b), or (iv) by
any combination of the foregoing.

 

(b)                                 Limitations on Forms of
Consideration.

 

(i)                                     Tender of Stock. 
Notwithstanding the foregoing, the Option may not be exercised by tender
to the Company, or attestation to the ownership, of shares of Stock to the
extent such tender or attestation would constitute a violation of the
provisions of any law, regulation or agreement restricting the redemption of
the Company’s stock.  If required by the
Company, the Option may not be exercised by tender to the Company, or
attestation to the ownership, of shares of Stock unless such shares either have
been owned by the Participant for more than six (6) months or such other
period, if any, required by the Company (and not used for 

 

3

 

another
option exercise by attestation during such period) or were not acquired,
directly or indirectly, from the Company.

 

(ii)                                  Cashless Exercise.  A
“Cashless Exercise”
means the delivery of a properly executed notice together with irrevocable
instructions to a broker in a form acceptable to the Company providing for the
assignment to the Company of the proceeds of a sale or loan with respect to
some or all of the shares of Stock acquired upon the exercise of the Option
pursuant to a program or procedure approved by the Company (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).  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 such program or procedure,
including with respect to the Participant notwithstanding that such program or
procedures may be available to others.

 

4.4                                 Tax Withholding.  Regardless of any action taken by the Company
or any other Participating Company with respect to any or all income tax,
social insurance, payroll tax, payment on account or other tax-related
withholding (the “Tax Obligations”), the Participant acknowledges
that the ultimate liability for all Tax Obligations legally due by the
Participant is and remains the Participant’s responsibility and that the
Company (a) makes no representations or undertakings regarding the
treatment of any Tax Obligations in connection with any aspect of the Option,
including the grant, vesting or exercise of the Option, the subsequent sale of shares
acquired pursuant to such exercise, or the receipt of any dividends and (b) does
not commit to structure the terms of the grant or any other aspect of the
Option to reduce or eliminate the Participant’s liability for Tax Obligations.  At the time of exercise of the Option, the
Participant shall pay or make adequate arrangements satisfactory to the Company
to satisfy all withholding obligations of the Company and any other
Participating Company.  In this regard,
at the time the Option is exercised, in whole or in part, or at any time
thereafter as requested by the Company or any other Participating Company, the
Participant hereby authorizes withholding of all applicable Tax Obligations
from payroll and any other amounts payable to the Participant, and otherwise
agrees to make adequate provision for withholding of all applicable Tax
Obligations, if any, by each Participating Company which arise in connection
with the Option.  Alternatively, or in
addition, if permissible under applicable law, including Local Law, the Company
or any other Participating Company may (i) sell or arrange for the sale of
shares acquired by the Participant to satisfy the Tax Obligations, and/or (ii) withhold
in shares, provided that only the amount of shares necessary to satisfy the
minimum withholding amount required by applicable law, including Local Law, is
withheld.  Finally, the Participant shall
pay to the Company or any other Participating Company any amount of the Tax
Obligations that any such company may be required to withhold as a result of
the Participant’s participation in the Plan that cannot be satisfied by the
means previously described.  The Company
shall have no obligation to process the exercise of the Option or to deliver shares
until the Tax Obligations as described in this Section have been satisfied
by the Participant.

 

4.5                                 Beneficial Ownership of Shares; Certificate Registration.  The
Participant hereby authorizes the Company, in its sole discretion, to deposit
for the benefit of the Participant with any broker with which the Participant
has an account relationship of which the Company has notice any or all shares
acquired by the Participant pursuant to the exercise of the Option.  Except as provided by the preceding sentence,
a certificate for the shares as to which the Option is exercised shall be
registered in the name of the Participant, or, if applicable, in the names of
the heirs of the Participant.

 

4.6                                 Restrictions on Grant of the Option and Issuance of Shares.  The
grant of the Option and the issuance of shares of Stock upon exercise of the
Option shall be subject to compliance with all applicable requirements of United
States federal or state or Local Law with respect to such securities.  The Option may not be exercised if the
issuance of shares of Stock upon exercise would constitute a violation of any
applicable federal, state or foreign securities laws, including Local Law, or
other law or regulations or the requirements of any stock exchange or market
system upon which the Stock may then be listed. 
In addition, the Option may not be exercised unless (i) a
registration statement under the Securities Act shall at the time of exercise
of the Option be in effect with respect to the shares issuable upon exercise of
the Option or (ii) in the opinion of legal counsel to the Company, the
shares issuable upon exercise of the Option may be issued in accordance with
the terms of an applicable exemption from the registration requirements of the
Securities Act.  THE PARTICIPANT IS
CAUTIONED THAT THE OPTION MAY NOT BE EXERCISED UNLESS THE FOREGOING
CONDITIONS ARE SATISFIED.  ACCORDINGLY,
THE PARTICIPANT MAY NOT BE ABLE TO EXERCISE THE OPTION WHEN DESIRED EVEN
THOUGH THE OPTION IS VESTED.  The
inability of the Company to obtain from any regulatory body 

 

4

 

having
jurisdiction the authority, if any, deemed by the Company’s legal counsel to be
necessary to the lawful issuance and sale of any shares subject to the Option
shall relieve the Company of any liability in respect of the failure to issue
or sell such shares as to which such requisite authority shall not have been
obtained.  As a condition to the exercise
of the Option, the Company may require the Participant to satisfy any
qualifications that may be necessary or appropriate, to evidence compliance
with any applicable law or regulation and to make any representation or
warranty with respect thereto as may be requested by the Company.

 

4.7                                 Fractional Shares.  The Company shall not be required to issue
fractional shares upon the exercise of the Option.

 

5.                                       NONTRANSFERABILITY OF THE OPTION.

 

During the lifetime of
the Participant, the Option shall be exercisable only by the Participant or the
Participant’s guardian or legal representative. 
The Option shall not be subject in any manner to anticipation,
alienation, sale, exchange, transfer, assignment, pledge, encumbrance, or
garnishment by creditors of the Participant or the Participant’s beneficiary,
except transfer by will or by the laws of descent and distribution.  Following the death of the Participant, the
Option, to the extent provided in Section 7, may be exercised by the
Participant’s
legal representative or by any person empowered to do so under the deceased
Participant’s will or
under the then applicable laws of descent and distribution.

 

6.                                       TERMINATION OF THE OPTION.

 

The Option shall
terminate and may no longer be exercised after the first to occur of (a) the
close of business on the Option Expiration Date, (b) the close of business
on the last date for exercising the Option following termination of the
Participant’s
Service as described in Section 7, or (c) a Change in Control to the
extent provided in Section 8.

 

7.                                       EFFECT OF TERMINATION OF SERVICE.

 

7.1                                 Option Exercisability.  The
Option shall terminate immediately upon the Participant’s termination of
Service to the extent that it is then unvested and shall be exercisable after
the Participant’s termination of Service to the extent it is then vested only
during the applicable time period as determined below and thereafter shall
terminate.

 

(a)                                  Disability.  If the
Participant’s Service terminates because of the Disability of the Participant, the
Option, to the extent unexercised and exercisable for Vested Shares on the date
on which the Participant’s Service terminated, may be exercised by the
Participant (or the Participant’s guardian or legal representative) at any time prior
to the expiration of twelve (12) months after the date on which the Participant’s Service terminated, but in any event no
later than the Option Expiration Date.

 

(b)                                 Death.  If the
Participant’s Service terminates because of the death of the Participant, the
Option, to the extent unexercised and exercisable for Vested Shares on the date
on which the Participant’s Service terminated, may be exercised by the
Participant’s legal representative or other person who acquired the right to
exercise the Option by reason of the Participant’s death at any time prior to
the expiration of twelve (12) months after the date on which the Participant’s
Service terminated, but in any event no later than the Option Expiration
Date.  The Participant’s Service shall be
deemed to have terminated on account of death if the Participant dies within
three (3) months after the Participant’s termination of Service.

 

(c)                                  Other Termination of
Service.  If the Participant’s Service terminates for
any reason, except Disability or death, the Option, to the extent unexercised
and exercisable for Vested Shares by the Participant on the date on which the
Participant’s Service terminated, may be exercised by  the Participant at any time prior to the
expiration of three (3) months after the date on which the Participant’s
Service terminated, but in any event no later than the Option Expiration Date.

 

7.2                                 Extension if Exercise Prevented by Law.  Notwithstanding the foregoing, if the
exercise of the Option within the applicable time periods set forth in Section 7.1
is prevented by the provisions of 

 

5

 

Section 4.6,
the Option shall remain exercisable until three (3) months after the date
the Participant is notified by the Company that the Option is exercisable, but
in any event no later than the Option Expiration Date.

 

7.3                                 Extension if Participant Subject to Section 16(b).  Notwithstanding the foregoing, if a sale
within the applicable time periods set forth in Section 7.1 of shares
acquired upon the exercise of the Option would subject the Participant to suit
under Section 16(b) of the Exchange Act, the Option shall remain
exercisable until the earliest to occur of (i) the tenth (10th) day
following the date on which a sale of such shares by the Participant would no
longer be subject to such suit, (ii) the one hundred and ninetieth (190th)
day after the Participant’s
termination of Service, or (iii) the Option Expiration Date.

 

8.                                       EFFECT OF CHANGE IN CONTROL.

 

In the event of a Change
in Control, the surviving, continuing, successor, or purchasing entity or
parent thereof, as the case may be (the “Acquiror”),
may, without the consent of the Participant, assume or continue in full force
and effect the Company’s rights and obligations under the Option or substitute
for the Option a substantially equivalent option for the Acquiror’s stock.  For purposes of this Section, the Option
shall be deemed assumed if, following the Change in Control, the Option confers
the right to receive, subject to the terms and conditions of the Plan and this
Option Agreement, for each share of Stock subject to the Option immediately prior
to the Change in Control, the consideration (whether stock, cash, other
securities or property or a combination thereof) to which a holder of a share
of Stock on the effective date of the Change in Control was entitled; provided,
however, that if such consideration is not solely common stock of the Acquiror,
the Committee may, with the consent of the Acquiror, provide for the
consideration to be received upon the exercise of the Option, for each share of
Stock subject to the Option, to consist solely of common stock of the Acquiror equal
in Fair Market Value to the per share consideration received by holders of
Stock pursuant to the Change in Control. 
The Option shall terminate and cease to be outstanding effective as of
the time of consummation of the Change in Control to the extent that the Option
is neither assumed or continued by the Acquiror in connection with the Change
in Control nor exercised as of the date of the Change in Control.

 

9.                                       ADJUSTMENTS FOR CHANGES IN
CAPITAL STRUCTURE.

 

Subject to any required
action by the stockholders of the Company, in the event of any change in the
Stock effected without receipt of consideration by the Company, whether through
merger, consolidation, reorganization, reincorporation, recapitalization,
reclassification, stock dividend, stock split, reverse stock split, split-up,
split-off, spin-off, combination of shares, exchange of shares, or similar
change in the capital structure of the Company, or in the event of payment of a
dividend or distribution to the stockholders of the Company in a form other
than Stock (excepting normal cash dividends) that has a material effect on the
Fair Market Value of shares of Stock, appropriate adjustments shall be made in
the number, Exercise Price and kind of shares subject to the Option, in order
to prevent dilution or enlargement of the Participant’s rights under the
Option.  For purposes of the foregoing,
conversion of any convertible securities of the Company shall not be treated as
“effected without receipt of consideration by the Company.”  Any fractional share resulting from an
adjustment pursuant to this Section shall be rounded down to the nearest
whole number, and in no event may the Exercise Price be decreased to an amount
less than the par value, if any, of the stock subject to the Option.  The Committee in its sole discretion, may
also make such adjustments in the terms of the Option to reflect, or related
to, such changes in the capital structure of the Company or distributions as it
deems appropriate.  The adjustments determined
by the Committee pursuant to this Section shall be final, binding and
conclusive.

 

10.                                 RIGHTS AS A STOCKHOLDER,
DIRECTOR, EMPLOYEE OR CONSULTANT.

 

The Participant shall
have no rights as a stockholder with respect to any shares covered by the Option
until the date of the issuance of the shares for which the Option has been
exercised (as evidenced by the appropriate entry on the books of the Company or
of a duly authorized transfer agent of the Company).  No adjustment shall be made for dividends,
distributions or other rights for which the record date is prior to the date
the shares are issued, except as provided in Section 9.  If the Participant is an Employee, the
Participant understands and acknowledges that, except as otherwise provided in
a separate, written employment agreement between a Participating Company and
the Participant, the Participant’s employment is “at will” and is for
no specified term.  Nothing in this
Option Agreement shall confer upon the Participant any right to continue in the
Service of a 

 

6

 

Participating Company or interfere in any way with any
right of the Participating Company Group to terminate the Participant’s Service as a Director,
an Employee or Consultant, as the case may be, at any time.

 

11.                                 LEGENDS.

 

The Company may at any
time place legends referencing any applicable federal, state or foreign
securities law, including Local Law, restrictions on all certificates
representing shares of stock subject to the provisions of this Option
Agreement.  The Participant shall, at the
request of the Company, promptly present to the Company any and all
certificates representing shares acquired pursuant to the Option in the
possession of the Participant in order to carry out the provisions of this
Section.

 

12.                                 MISCELLANEOUS PROVISIONS.

 

12.1                           Termination or Amendment. 
The Committee may terminate or amend the Plan or the Option at any time;
provided, however, that except as provided in Section 8 in connection with
a Change in Control, no such termination or amendment may adversely affect the
Option or any unexercised portion hereof without the consent of the Participant
unless such termination or amendment is necessary to comply with any applicable
law or government regulation.  No
amendment or addition to this Option Agreement shall be effective unless in
writing.

 

12.2                           Further Instruments.  The parties hereto agree to execute such
further instruments and to take such further action as may reasonably be
necessary to carry out the intent of this Option Agreement.

 

12.3                           Binding Effect. 
Subject to the restrictions on transfer set forth herein, this Option
Agreement shall inure to the benefit of and be binding upon the parties hereto
and their respective heirs, executors, administrators, successors and assigns.

 

12.4                           Delivery of Documents and Notices.  Any document relating to participation in the
Plan or any notice required or permitted hereunder shall be given in writing
and shall be deemed effectively given (except to the extent that this Option
Agreement provides for effectiveness only upon actual receipt of such notice)
upon personal delivery, electronic delivery at the e-mail address, if any,
provided for the Participant by a Participating Company, or upon deposit in the
U.S. Post Office or foreign postal service, by registered or certified mail, or
with a nationally recognized overnight courier service, with postage and fees
prepaid, addressed to the other party at the address of such party set forth in
the Grant Notice or at such other address as such party may designate in
writing from time to time to the other party.

 

(a)                                  Description
of Electronic Delivery.  The Plan documents, which may include but do
not necessarily include: the Plan, the Grant Notice, this Option Agreement, the
Plan Prospectus, and any reports of the Company provided generally to the
Company’s stockholders, may be delivered to the Participant
electronically.  In addition, the
Participant may deliver electronically the Grant Notice and Exercise Notice
called for by Section 4.2 to the Company or to such third party involved
in administering the Plan as the Company may designate from time to time.  Such means of electronic delivery may include
but do not necessarily include the delivery of a link to a Company intranet or
the internet site of a third party involved in administering the Plan, the
delivery of the document via e-mail or such other means of electronic delivery
specified by the Company.

 

(b)                                 Consent
to Electronic Delivery.  The
Participant acknowledges that the Participant has read Section 12.4(a) of
this Option Agreement and consents to the electronic delivery of the Plan
documents and the delivery of the Grant Notice and Exercise Notice, as
described in Section 12.4(a).  The
Participant acknowledges that he or she may receive from the Company a paper
copy of any documents delivered electronically at no cost to the Participant by
contacting the Company by telephone or in writing.  The Participant further acknowledges that the
Participant will be provided with a paper copy of any documents if the
attempted electronic delivery of such documents fails.  Similarly, the Participant understands
that the Participant must provide the Company or any designated third party
administrator with a paper copy of any documents if the attempted electronic
delivery of such documents fails.  The
Participant may revoke his or her consent to the electronic delivery of
documents described in Section 12.4(a) or may change the electronic
mail address to which such documents are to be delivered (if Participant has
provided an electronic mail address) at any time by notifying the Company of
such revoked consent or revised e-mail address by telephone, postal service or
electronic mail.  Finally, the
Participant 

 

7

 

understands that he or she is not required to consent to
electronic delivery of documents described in Section 12.4(a).

 

12.5                           Integrated Agreement. 
The Grant Notice, this Option Agreement and the Plan, together with any the
Superseding Agreement, if any, shall constitute the entire understanding and
agreement of the Participant and the Participating Company Group with respect
to the subject matter contained herein and supersede any prior agreements,
understandings, restrictions, representations, or warranties among the
Participant and the Participating Company Group with respect to such subject
matter.  To the extent contemplated
herein, the provisions of the Grant Notice, the Option Agreement and the Plan
shall survive any exercise of the Option and shall remain in full force and
effect.

 

12.6                           Applicable Law.  This
Option Agreement shall be governed by the laws of the State of California as
such laws are applied to agreements between California residents entered into
and to be performed entirely within the State of California.  For purposes of litigating any dispute that
arises directly or indirectly from the relationship of the parties as evidenced
by this Option Agreement, the parties hereby submit to and consent to the
jurisdiction of the State of California and agree that such litigation shall be
conducted only in the courts of the County of Santa Clara, California, or the
federal courts of the United States for the Northern District of California,
and no other courts, where this Option Agreement is made and/or performed.

 

12.7                           Counterparts.  The
Grant Notice may be executed in counterparts, each of which shall be deemed an
original, but all of which together shall constitute one and the same
instrument.

 

8

 

	
   

  	
   

  	
  Participant:

  	
   

  
	
   

  	
   

  	
   

  
	
  Date:

  	
   

  	
   

  	
   

  
					

 

 

STOCK OPTION EXERCISE NOTICE

 

Zoran Corporation

Attention: Stock
Administration

1390 Kifer Road

Sunnyvale, CA 94086

 

Ladies and Gentlemen:

 

1.                                       Option.  I was granted an option (the “Option”) to purchase shares
of the common stock (the “Shares”)
of Zoran Corporation (the “Company”)
pursuant to the Company’s
2005 Equity Incentive Plan (the “Plan”),
my Notice of Grant of Stock Option (the “Grant Notice”)
and my Stock Option Agreement (the “Option Agreement”)
as follows:

 

	
  Date of Grant:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Number of Option Shares:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Exercise Price per Share:

  	
  $

  	
   

  

 

2.                                       Exercise of Option.  I hereby elect to exercise the Option to
purchase the following number of Shares, all of which are Vested Shares in
accordance with the Grant Notice and the Option Agreement:

 

	
  Total Shares Purchased:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Total Exercise Price (Total Shares  X 
  Price per Share)

  	
   

  	
  $

  	
   

  

 

3.                                       Payments.  I enclose payment in full of the total
exercise price for the Shares in the following form(s), as authorized by my
Option Agreement:

 

                                                                                                                                                                                                                                                                                                                                                                                                

	
  TM  Cash:

  	
   

  	
  $

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  TM  Check:

  	
  $

  	
   

  
	
   

  	
   

  	
   

  
	
  TM  Tender of
  Company Stock:

  	
  Contact Plan Administrator

  
	
   

  	
   

  	
   

  
	
  TM  Cashless
  Exercise (same-day sale):

  	
  Contact Plan Administrator

  
						

 

4.                                       Tax Withholding.  I authorize payroll withholding and otherwise
will make adequate provision for the federal, state, local and foreign tax
withholding obligations of the Company, if any, in connection with the
Option.  If I am exercising a
Nonstatutory Stock Option, I enclose payment in full of my withholding taxes,
if any, as follows:

 

(Contact Plan Administrator for
amount of tax due.)

 

	
  TM  Cash:

  	
   

  	
  $

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  TM  Check:

  	
  $

  	
   

  
	
   

  	
   

  	
   

  
	
  TM  Tender of
  Company Stock:

  	
  Contact Plan Administrator

  
	
   

  	
   

  	
   

  
	
  TM  Cashless
  Exercise (same-day sale):

  	
  Contact Plan Administrator

  
						

 

 

5.                                       Participant Information.

 

	
  My address is:

  	
   

  	 

	
   

  	
   

  
	
   

  	
   

  
	
  My Tax Identification Number is:

  	
   

  
				

 

6.                                       Binding Effect.  I agree that the Shares are being acquired in
accordance with and subject to the terms, provisions and conditions of the
Grant Notice, the Option Agreement and the Plan, to all of which I hereby
expressly assent.  This Agreement shall
inure to the benefit of and be binding upon my heirs, executors,
administrators, successors and assigns.

 

 

	
   

  	
   

  	
  Very truly yours,

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (Signature)

  
	
   

  	
   

  	
   

  
	
  Receipt of the above is hereby acknowledged.

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  ZORAN CORPORATION

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Title:

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Dated:

  	
   

  	
   

  	
   

  
						

 

2

 

ZORAN CORPORATION

STOCK
OPTION AGREEMENT

(For
Chief Executive Officer)

 

                Zoran
Corporation has granted to the Participant named in the Notice of
Grant of Stock Option (the “Grant Notice”)
to which this Stock Option Agreement (the “Option
Agreement”) is attached an option (the “Option”) to purchase certain
shares of Stock upon the terms and conditions set forth in the Grant Notice and
this Option Agreement.  The Option has
been granted pursuant to and shall in all respects be subject to the terms and
conditions of the Zoran Corporation 2005 Equity Incentive Plan (the “Plan”), as amended to the
Date of Grant, the provisions of which are incorporated herein by
reference.  By signing the Grant Notice,
the Participant: (a) acknowledges receipt of and represents that the
Participant has read and is familiar with the Grant Notice, this Option
Agreement, the Plan and a prospectus for
the Plan in the form most recently registered with the Securities and Exchange
Commission (the “Plan Prospectus”), (b) accepts the Option
subject to all of the terms and conditions of the Grant Notice, this Option
Agreement and the Plan and (c) agrees to accept as binding, conclusive and
final all decisions or interpretations of the Committee upon any questions
arising under the Grant Notice, this Option Agreement or the Plan.

 

1.             DEFINITIONS
AND CONSTRUCTION.

 

1.1           Definitions.  Unless
otherwise defined herein, capitalized terms shall have the meanings assigned to
such terms in the Grant Notice or the Plan.

 

1.2           Construction.  Captions
and titles contained herein are for convenience only and shall not affect the
meaning or interpretation of any provision of this Option Agreement.  Except when otherwise indicated by the
context, the singular shall include the plural and the plural shall include the
singular.  Use of the term “or” is not
intended to be exclusive, unless the context clearly requires otherwise.

 

2.             TAX
CONSEQUENCES.

 

2.1           Tax Status
of Option.  This Option is intended to have the tax
status designated in the Grant Notice.

 

(a)           Incentive
Stock Option.  If the
Grant Notice so designates, this Option is intended to be an Incentive Stock
Option within the meaning of Section 422(b) of the Code, but the
Company does not represent or warrant that this Option qualifies as such.  The Participant should consult with the
Participant’s own tax advisor regarding the tax effects of this Option and the
requirements necessary to obtain favorable income tax treatment under Section 422
of the Code, including, but not limited to, holding period requirements.  (NOTE TO PARTICIPANT: If the Option is
exercised more than three (3) months after the date on which you cease to
be an Employee (other than by reason of your death or permanent and total
disability as defined in Section 22(e)(3) of the Code), the Option
will be treated as a Nonstatutory Stock Option and not as an Incentive Stock
Option to the extent required by Section 422 of the Code.)

 

 

 

(b)           Nonstatutory
Stock Option.  If the
Grant Notice so designates, this Option is intended to be a Nonstatutory Stock
Option and shall not be treated as an Incentive Stock Option within the meaning
of Section 422(b) of the Code.

 

2.2           ISO Fair
Market Value Limitation.  If the Grant Notice designates this Option as an Incentive Stock
Option, then to the extent that the Option (together with all
Incentive Stock Options granted to the Participant under all stock option plans
of the Participating Company Group, including the Plan) becomes exercisable for
the first time during any calendar year for shares having a Fair Market Value
greater than One Hundred Thousand Dollars ($100,000), the portion of such
options which exceeds such amount will be treated as Nonstatutory Stock
Options.  For purposes of this Section 2.2,
options designated as Incentive Stock Options are taken into account in the
order in which they were granted, and the Fair Market Value of stock is
determined as of the time the option with respect to such stock is
granted.  If the Code is amended to
provide for a different limitation from that set forth in this Section 2.2,
such different limitation shall be deemed incorporated herein effective as of
the date required or permitted by such amendment to the Code.  If the Option is treated as an Incentive
Stock Option in part and as a Nonstatutory Stock Option in part by reason of
the limitation set forth in this Section 2.2, the Participant may
designate which portion of such Option the Participant is exercising.  In the absence of such designation, the
Participant shall be deemed to have exercised the Incentive Stock Option
portion of the Option first.  Separate
certificates representing each such portion shall be issued upon the exercise
of the Option.  (NOTE TO PARTICIPANT: If
the aggregate Exercise Price of the Option (that is, the Exercise Price
multiplied by the Number of Option Shares) plus the aggregate exercise price of
any other Incentive Stock Options you hold (whether granted pursuant to the
Plan or any other stock option plan of the Participating Company Group) is
greater than $100,000, you should contact the Chief Financial Officer of the
Company to ascertain whether the entire Option qualifies as an Incentive Stock
Option.)

 

3.             ADMINISTRATION.

 

                                All questions of interpretation
concerning this Option Agreement shall be determined by the Committee.  All determinations by the Committee shall be
final and binding upon all persons having an interest in the Option.  Any Officer shall have the authority to act
on behalf of the Company with respect to any matter, right, obligation, 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, or election.

 

4.             EXERCISE
OF THE OPTION.

 

4.1           Right to
Exercise.  Except as otherwise provided herein, the
Option shall be exercisable on and after the Initial Vesting Date and prior to
the termination of the Option (as provided in Section 6) in an amount not
to exceed the number of Vested Shares less the number of shares previously
acquired upon exercise of the Option.  In
no event shall the Option be exercisable for more shares than the Number of
Option Shares, as adjusted pursuant to Section 9.

 

 

 

4.2           Method of
Exercise.  Exercise of the Option shall be by means of
electronic or written notice (the “Exercise Notice”) in a form
authorized by the Company.  An electronic
Exercise Notice must be digitally signed or authenticated by the Participant in
such manner as required by the notice and transmitted to the Company or an
authorized representative of the Company (including a third-party administrator
designated by the Company).  In the event
that the Participant is not authorized or is unable to provide an electronic
Exercise Notice, the Option shall be exercised by a written Exercise Notice
addressed to the Company, which shall be signed by the Participant and
delivered in person, by certified or registered mail, return receipt requested,
by confirmed facsimile transmission, or by such other means as the Company may
permit, to the Company, or an authorized representative of the Company
(including a third-party administrator designated by the Company).  Each Exercise Notice, whether electronic or
written, must state the Participant’s election to exercise the Option, the
number of whole shares of Stock for which the Option is being exercised and
such other representations and agreements as to the Participant’s investment
intent with respect to such shares as may be required pursuant to the
provisions of this Option Agreement. 
Further, each Exercise Notice must be received by the Company prior to
the termination of the Option as set forth in Section 6 and must be
accompanied by full payment of the aggregate Exercise Price for the number of
shares of Stock being purchased.  The
Option shall be deemed to be exercised upon receipt by the Company of such
electronic or written Exercise Notice and the aggregate Exercise Price.

 

4.3           Payment of
Exercise Price.

 

(a)           Forms
of Consideration Authorized. 
Except as otherwise provided below, payment of the aggregate Exercise
Price for the number of shares of Stock for which the Option is being exercised
shall be made (i) in cash or by check or cash equivalent, (ii) if
permitted by the Company, by tender to the Company, or attestation to the
ownership, of whole shares of Stock owned by the Participant having a Fair
Market Value not less than the aggregate Exercise Price, (iii) by means of
a Cashless Exercise, as defined in Section 4.3(b), or (iv) by any
combination of the foregoing.

 

(b)           Limitations on Forms of Consideration.

 

(i)            Tender of Stock.  Notwithstanding the foregoing, the Option may
not be exercised by tender to the Company, or attestation to the ownership, of
shares of Stock to the extent such tender or attestation would constitute a
violation of the provisions of any law, regulation or agreement restricting the
redemption of the Company’s stock.  If
required by the Company, the Option may not be exercised by tender to the
Company, or attestation to the ownership, of shares of Stock unless such shares
either have been owned by the Participant for more than six (6) months or
such other period, if any, required by the Company (and not used for another
option exercise by attestation during such period) or were not acquired,
directly or indirectly, from the Company.

 

(ii)           Cashless Exercise.  A “Cashless
Exercise” means the delivery of a properly executed
notice together with irrevocable instructions to a broker in a form acceptable
to the Company providing for the assignment to the Company of the proceeds of a
sale or loan with respect to some or all of the shares of Stock acquired upon
the exercise of the 

 

 

 

Option pursuant to a program or procedure approved by
the Company (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).  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 such program or procedure, including with respect
to the Participant notwithstanding that such program or procedures may be
available to others.

 

4.4           Tax
Withholding.  At the time the Option is exercised, in whole
or in part, or at any time thereafter as requested by the Company, the
Participant hereby authorizes withholding from payroll and any other amounts
payable to the Participant, and otherwise agrees to make adequate provision for
(including by means of a Cashless Exercise to the extent permitted by the Company),
any sums required to satisfy the federal, state, local and foreign tax
withholding obligations of the Participating Company Group, if any, which arise
in connection with the Option.  The
Company shall have no obligation to deliver shares of Stock until the tax
withholding obligations of the Participating Company Group have been satisfied
by the Participant.

 

4.5           Beneficial
Ownership of Shares; Certificate Registration.  The Participant hereby authorizes the
Company, in its sole discretion, to deposit for the benefit of the Participant
with any broker with which the Participant has an account relationship of which
the Company has notice any or all shares acquired by the Participant pursuant
to the exercise of the Option.  Except as
provided by the preceding sentence, a certificate for the shares as to which
the Option is exercised shall be registered in the name of the Participant, or,
if applicable, in the names of the heirs of the Participant.

 

4.6           Restrictions
on Grant of the Option and Issuance of Shares.  The grant of the Option and the issuance of
shares of Stock upon exercise of the Option shall be subject to compliance with
all applicable requirements of federal, state or foreign law with respect to
such securities.  The Option may not be
exercised if the issuance of shares of Stock upon exercise would constitute a
violation of any applicable federal, state or foreign securities laws or other
law or regulations or the requirements of any stock exchange or market system
upon which the Stock may then be listed. 
In addition, the Option may not be exercised unless (i) a
registration statement under the Securities Act shall at the time of exercise
of the Option be in effect with respect to the shares issuable upon exercise of
the Option or (ii) in the opinion of legal counsel to the Company, the
shares issuable upon exercise of the Option may be issued in accordance with
the terms of an applicable exemption from the registration requirements of the
Securities Act.  THE PARTICIPANT IS
CAUTIONED THAT THE OPTION MAY NOT BE EXERCISED UNLESS THE FOREGOING
CONDITIONS ARE SATISFIED.  ACCORDINGLY,
THE PARTICIPANT MAY NOT BE ABLE TO EXERCISE THE OPTION WHEN DESIRED EVEN
THOUGH THE OPTION IS VESTED.  The
inability of the Company to obtain from any regulatory body having jurisdiction
the authority, if any, deemed by the Company’s legal counsel to be necessary to the
lawful issuance and sale of any shares subject to the Option shall relieve the
Company of any liability in respect of the failure to issue or sell such shares
as to which such requisite authority shall not have been obtained.  As a condition to the exercise of the Option,
the Company may require the Participant to satisfy any qualifications that may
be necessary or 

 

 

 

appropriate, to
evidence compliance with any applicable law or regulation and to make any
representation or warranty with respect thereto as may be requested by the
Company.

 

4.7           Fractional
Shares.  The Company shall not be required to issue
fractional shares upon the exercise of the Option.

 

5.             NONTRANSFERABILITY
OF THE OPTION.

 

                                During
the lifetime of the Participant, the Option shall be exercisable only by the
Participant or the Participant’s guardian or legal representative.  The Option shall not be subject in any manner
to anticipation, alienation, sale, exchange, transfer, assignment, pledge,
encumbrance, or garnishment by creditors of the Participant or the
Participant’s beneficiary, except transfer by will or by the laws of descent
and distribution.  Following the death of
the Participant, the Option, to the extent provided in Section 7, may be
exercised by the Participant’s legal representative or by any person empowered to
do so under the deceased Participant’s will or under the then applicable laws
of descent and distribution.

 

6.             TERMINATION
OF THE OPTION.

 

                                The
Option shall terminate and may no longer be exercised after the first to occur
of (a) the close of business on the Option Expiration Date, (b) the
close of business on the last date for exercising the Option following termination
of the Participant’s Service as described in Section 7, or (c) a
Change in Control to the extent provided in Section 8.

 

7.             EFFECT OF
TERMINATION OF SERVICE.

 

7.1           Option
Exercisability.  The Option
shall terminate immediately upon the Participant’s termination of Service to
the extent that it is then unvested and shall be exercisable after the
Participant’s termination of Service to the extent it is then vested only
during the applicable time period as determined below and thereafter shall
terminate.

 

(a)           Disability.  If the Participant’s Service terminates because of the
Disability of the Participant, the Option, to the extent unexercised and
exercisable for Vested Shares on the date on which the Participant’s Service terminated, may be exercised by
the Participant (or the Participant’s guardian or legal representative) at
any time prior to the expiration of twelve (12) months after the date on which
the Participant’s Service terminated, but in any event no later than
the Option Expiration Date.

 

(b)           Death.  If the Participant’s Service
terminates because of the death of the Participant, the Option, to the extent unexercised and exercisable
for Vested Shares on the date on which the Participant’s Service
terminated, may be exercised by the Participant’s legal representative or other
person who acquired the right to exercise the Option by reason of the
Participant’s death at any time prior to the expiration of twelve (12) months
after the date on which the Participant’s Service terminated, but in any event
no later than the Option Expiration Date. 
The Participant’s Service shall be deemed to have terminated on account
of death if the Participant dies within three (3) months after the
Participant’s termination of Service.

 

 

 

(c)           Other
Termination of Service.  In the event of
the Participant’s Retirement (as defined below) from the Board of Directors of
the Company (the “Board”), the Option, to the
extent unexercised and exercisable on the date on which the Optionee’s
continuous Service terminated, may be exercised at any time thereafter until
the earlier of (i) the expiration of the Option term set forth in the
Grant Notice or (ii) the Participant’s acceptance of a senior executive
management-level position with another entity. 
For the purposes of this Agreement, “Retirement” means the termination
of the Participant’s continuous Service as a result of either of the following,
provided that the Participant has served continuously on the Board for at least
two (2) years: (i) the Participant’s resignation from the Board or (ii) the
expiration of the Participant’s term as a director of the Company after the
Participant has declined to stand for reelection.

 

7.2           Extension if
Exercise Prevented by Law.  Notwithstanding the foregoing, if the
exercise of the Option within the applicable time periods set forth in Section 7.1
is prevented by the provisions of Section 4.6, the Option shall remain
exercisable until three (3) months after the date the Participant is
notified by the Company that the Option is exercisable, but in any event no
later than the Option Expiration Date.

 

7.3           Extension if
Participant Subject to Section 16(b).  Notwithstanding the foregoing, if a sale
within the applicable time periods set forth in Section 7.1 of shares
acquired upon the exercise of the Option would subject the Participant to suit
under Section 16(b) of the Exchange Act, the Option shall remain
exercisable until the earliest to occur of (i) the tenth (10th) day
following the date on which a sale of such shares by the Participant would no
longer be subject to such suit, (ii) the one hundred and ninetieth (190th)
day after the Participant’s termination of Service, or (iii) the Option
Expiration Date.

 

8.             EFFECT OF
CHANGE IN CONTROL.

 

                                In
the event of a Change in Control, the surviving, continuing, successor, or
purchasing entity or parent thereof, as the case may be (the “Acquiror”), may, without the
consent of the Participant, assume or continue in full force and effect the
Company’s rights and obligations under the Option or substitute for the Option
a substantially equivalent option for the Acquiror’s stock.  For purposes of this Section, the Option
shall be deemed assumed if, following the Change in Control, the Option confers
the right to receive, subject to the terms and conditions of the Plan and this
Option Agreement, for each share of Stock subject to the Option immediately
prior to the Change in Control, the consideration (whether stock, cash, other
securities or property or a combination thereof) to which a holder of a share of
Stock on the effective date of the Change in Control was entitled; provided,
however, that if such consideration is not solely common stock of the Acquiror,
the Committee may, with the consent of the Acquiror, provide for the
consideration to be received upon the exercise of the Option, for each share of
Stock subject to the Option, to consist solely of common stock of the Acquiror
equal in Fair Market Value to the per share consideration received by holders
of Stock pursuant to the Change in Control. 
The Option shall terminate and cease to be outstanding effective as of
the time of consummation of the Change in Control to the extent that the Option
is neither 

 

 

 

assumed or continued by the Acquiror in connection
with the Change in Control nor exercised as of the date of the Change in
Control.

 

9.             ADJUSTMENTS
FOR CHANGES IN CAPITAL STRUCTURE.

 

                                Subject to any required action by the
stockholders of the Company, in the event of any change in the Stock effected
without receipt of consideration by the Company, whether through merger,
consolidation, reorganization, reincorporation, recapitalization,
reclassification, stock dividend, stock split, reverse stock split, split-up,
split-off, spin-off, combination of shares, exchange of shares, or similar
change in the capital structure of the Company, or in the event of payment of a
dividend or distribution to the stockholders of the Company in a form other
than Stock (excepting normal cash dividends) that has a material effect on the
Fair Market Value of shares of Stock, appropriate adjustments shall be made in
the number, Exercise Price and kind of shares subject to the Option, in order
to prevent dilution or enlargement of the Participant’s rights under the
Option.  For purposes of the foregoing,
conversion of any convertible securities of the Company shall not be treated as
“effected without receipt of consideration by the Company.”  Any fractional share resulting from an
adjustment pursuant to this Section shall be rounded down to the nearest
whole number, and in no event may the Exercise Price be decreased to an amount
less than the par value, if any, of the stock subject to the Option.  The Committee in its sole discretion, may
also make such adjustments in the terms of the Option to reflect, or related
to, such changes in the capital structure of the Company or distributions as it
deems appropriate.  The adjustments
determined by the Committee pursuant to this Section shall be final,
binding and conclusive.

 

10.           RIGHTS AS A STOCKHOLDER,
DIRECTOR, EMPLOYEE OR CONSULTANT.

 

                                The
Participant shall have no rights as a stockholder with respect to any shares
covered by the Option until the date of the issuance of the shares for which
the Option has been exercised (as evidenced by the appropriate entry on the
books of the Company or of a duly authorized transfer agent of the
Company).  No adjustment shall be made
for dividends, distributions or other rights for which the record date is prior
to the date the shares are issued, except as provided in Section 9.  If the Participant is an Employee, the
Participant understands and acknowledges that, except as otherwise provided in
a separate, written employment agreement between a Participating Company and
the Participant, the Participant’s employment is “at will” and is for no specified
term.  Nothing in this Option Agreement
shall confer upon the Participant any right to continue in the Service of a
Participating Company or interfere in any way with any right of the
Participating Company Group to terminate the Participant’s Service as a Director, an Employee or
Consultant, as the case may be, at any time.

 

11.           NOTICE OF SALES UPON
DISQUALIFYING DISPOSITION.

 

                                The Participant shall dispose of the
shares acquired pursuant to the Option only in accordance with the provisions
of this Option Agreement.  In addition, if the Grant Notice designates this Option as an Incentive Stock
Option, the Participant shall (a) promptly notify the Chief
Financial Officer of the Company if the Participant disposes of any of the
shares acquired pursuant to the Option within one (1) year after the date
the Participant exercises all or part of the 

 

 

 

Option or within two (2) years
after the Date of Grant and (b) provide the Company with a description of
the circumstances of such disposition. 
Until such time as the Participant disposes of such shares in a manner
consistent with the provisions of this Option Agreement, unless otherwise
expressly authorized by the Company, the Participant shall hold all shares
acquired pursuant to the Option in the Participant’s name (and not in the name of any
nominee) for the one-year period immediately after the exercise of the Option
and the two-year period immediately after Date of Grant.  At any time during the one-year or two-year periods
set forth above, the Company may place a legend on any certificate representing
shares acquired pursuant to the Option requesting the transfer agent for the
Company’s stock to notify the Company of any such transfers.  The obligation of the Participant to notify
the Company of any such transfer shall continue notwithstanding that a legend
has been placed on the certificate pursuant to the preceding sentence.

 

12.           LEGENDS.

 

                                The Company may at any time place
legends referencing any applicable federal, state or foreign securities law
restrictions on all certificates representing shares of stock subject to the
provisions of this Option Agreement.  The
Participant shall, at the request of the Company, promptly present to the
Company any and all certificates representing shares acquired pursuant to the
Option in the possession of the Participant in order to carry out the
provisions of this Section.  Unless
otherwise specified by the Company, legends placed on such certificates may
include, but shall not be limited to, the following:

 

“THE
SHARES EVIDENCED BY THIS CERTIFICATE WERE ISSUED BY THE CORPORATION TO THE
REGISTERED HOLDER UPON EXERCISE OF AN INCENTIVE STOCK OPTION AS DEFINED IN SECTION 422
OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (“ISO”).  IN ORDER TO OBTAIN THE PREFERENTIAL TAX
TREATMENT AFFORDED TO ISOs, THE SHARES SHOULD NOT BE TRANSFERRED PRIOR TO [INSERT DISQUALIFYING DISPOSITION DATE HERE].  SHOULD THE REGISTERED HOLDER ELECT TO
TRANSFER ANY OF THE SHARES PRIOR TO THIS DATE AND FOREGO ISO TAX TREATMENT, THE
TRANSFER AGENT FOR THE SHARES SHALL NOTIFY THE CORPORATION IMMEDIATELY.  THE REGISTERED HOLDER SHALL HOLD ALL SHARES
PURCHASED UNDER THE INCENTIVE STOCK OPTION IN THE REGISTERED HOLDER’S NAME (AND NOT IN THE NAME OF ANY
NOMINEE) PRIOR TO THIS DATE OR UNTIL TRANSFERRED AS DESCRIBED ABOVE.”

 

13.           MISCELLANEOUS PROVISIONS.

 

13.1         Termination
or Amendment.  The Committee
may terminate or amend the Plan or the Option at any time; provided, however,
that except as provided in Section 8 in connection with a Change in Control,
no such termination or amendment may adversely affect the Option or any
unexercised portion hereof without the consent of the Participant unless such
termination or amendment is necessary to comply with any applicable law or
government 

 

 

regulation.  No amendment or addition to this Option
Agreement shall be effective unless in writing.

 

13.2         Further Instruments.  The parties hereto agree to execute such
further instruments and to take such further action as may reasonably be
necessary to carry out the intent of this Option Agreement.

 

13.3         Binding
Effect.  Subject to the
restrictions on transfer set forth herein, this Option Agreement shall inure to
the benefit of and be binding upon the parties hereto and their respective
heirs, executors, administrators, successors and assigns.

 

13.4         Delivery of
Documents and Notices.  Any
document relating to participation in the Plan or any notice required or
permitted hereunder shall be given in writing and shall be deemed effectively
given (except to the extent that this Option Agreement provides for
effectiveness only upon actual receipt of such notice) upon personal delivery,
electronic delivery at the e-mail address, if any, provided for the Participant
by a Participating Company, or upon deposit in the U.S. Post Office or foreign
postal service, by registered or certified mail, or with a nationally
recognized overnight courier service, with postage and fees prepaid, addressed
to the other party at the address of such party set forth in the Grant Notice
or at such other address as such party may designate in writing from time to
time to the other party.

 

(a)           Description of Electronic Delivery.  The Plan documents, which may include but do
not necessarily include: the Plan, the Grant Notice, this Option Agreement, the
Plan Prospectus, and any reports of the Company provided generally to the
Company’s stockholders, may be delivered to the Participant
electronically.  In addition, the
Participant may deliver electronically the Grant Notice and Exercise Notice
called for by Section 4.2 to the Company or to such third party involved
in administering the Plan as the Company may designate from time to time.  Such means of electronic delivery may include
but do not necessarily include the delivery of a link to a Company intranet or
the internet site of a third party involved in administering the Plan, the
delivery of the document via e-mail or such other means of electronic delivery
specified by the Company.

 

(b)           Consent to Electronic Delivery.  The
Participant acknowledges that the Participant has read Section 13.4(a) of
this Option Agreement and consents to the electronic delivery of the Plan
documents and the delivery of the Grant Notice and Exercise Notice, as
described in Section 13.4(a).  The
Participant acknowledges that he or she may receive from the Company a paper
copy of any documents delivered electronically at no cost to the Participant by
contacting the Company by telephone or in writing.  The Participant further acknowledges that the
Participant will be provided with a paper copy of any documents if the
attempted electronic delivery of such documents fails.  Similarly, the Participant understands that the Participant must provide the
Company or any designated third party administrator with a paper copy of any documents
if the attempted electronic delivery of such documents fails.  The Participant may revoke his or her consent
to the electronic delivery of documents described in Section 13.4(a) or
may change the electronic mail address to which such documents are to be
delivered (if Participant has provided an electronic mail address) at any time
by notifying the Company of such revoked consent or revised e-mail address by
telephone, postal service or 

 

 

 

electronic mail.  Finally, the
Participant understands that he or she is not required to consent to electronic
delivery of documents described in Section 13.4(a).

 

13.5         Integrated
Agreement.  The Grant Notice,
this Option Agreement and the Plan, together with any the Superseding
Agreement, if any, shall constitute the entire understanding and agreement of
the Participant and the Participating Company Group with respect to the subject
matter contained herein and supersede any prior agreements, understandings,
restrictions, representations, or warranties among the Participant and the
Participating Company Group with respect to such subject matter.  To the extent contemplated herein, the
provisions of the Grant Notice, the Option Agreement and the Plan shall survive
any exercise of the Option and shall remain in full force and effect.

 

13.6         Applicable
Law.  This Option Agreement
shall be governed by the laws of the State of California as such laws are
applied to agreements between California residents entered into and to be
performed entirely within the State of California.

 

13.7         Counterparts.  The Grant Notice may be executed in
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.

 

 

 

	
  TM Incentive Stock Option

  	
  Participant:

  	
   

  
	
  TM Nonstatutory Stock Option

  	
   

  	
   

  
	
   

  	
  Date:

  	
   

  

 

STOCK
OPTION EXERCISE NOTICE

 

Zoran Corporation

Attention: Stock
Administration

1390 Kifer Road

Sunnyvale, CA 94086

 

Ladies and Gentlemen:

 

                1.             Option.  I was granted an option (the “Option”) to purchase shares
of the common stock (the “Shares”)
of Zoran Corporation (the “Company”)
pursuant to the Company’s 2005 Equity Incentive Plan (the “Plan”), my Notice of Grant of Stock Option (the “Grant Notice”) and my Stock
Option Agreement (the “Option
Agreement”) as follows:

 

	
  Date of Grant:

  	
   

  
	
   

  	
   

  
	
  Number of Option Shares:

  	
   

  
	
   

  	
   

  
	
  Exercise Price per Share:

  	
  $

  

 

                2.             Exercise of Option.  I hereby elect to exercise the Option to
purchase the following number of Shares, all of which are Vested Shares in
accordance with the Grant Notice and the Option Agreement:

 

	
  Total Shares Purchased:

  	
   

  
	
   

  	
   

  
	
  Total Exercise Price (Total Shares X Price per
  Share)

  	
  $

  

 

                3.             Payments.  I enclose payment in full of the total
exercise price for the Shares in the following form(s), as authorized by my
Option Agreement:

 

	
  TM Cash:

  	
  $

  
	
   

  	
   

  
	
  TM Check:

  	
  $

  
	
   

  	
   

  
	
  TM Tender of Company Stock:

  	
  Contact Plan Administrator

  
	
   

  	
   

  
	
  TM Cashless Exercise (same-day sale):

  	
  Contact Plan Administrator

  

 

                4.             Tax Withholding.  I authorize payroll withholding and otherwise
will make adequate provision for the federal, state, local and foreign tax
withholding obligations of the Company, if any, in connection with the
Option.  If I am exercising a
Nonstatutory Stock Option, I enclose payment in full of my withholding taxes,
if any, as follows:

 

(Contact
Plan Administrator for amount of tax due.)

 

	
  TM Cash:

  	
  $

  
	
   

  	
   

  
	
  TM Check:

  	
  $

  
	
   

  	
   

  
	
  TM Tender of Company Stock:

  	
  Contact Plan Administrator

  

 

 

 

	
  TM Cashless Exercise (same-day sale):

  	
  Contact Plan Administrator

  

 

                5.             Participant Information.

 

	
  My address is:

  	
   

  
	
   

  	
   

  
	
  My Social Security Number is:

  	
   

  

 

                6.             Notice of Disqualifying Disposition.  If the Option is an Incentive Stock Option, I
agree that I will promptly notify the Chief Financial Officer of the Company if
I transfer any of the Shares within one (1) year from the date I exercise
all or part of the Option or within two (2) years of the Date of Grant.

 

                7.             Binding Effect.  I agree that the Shares are being acquired in
accordance with and subject to the terms, provisions and conditions of the
Grant Notice, the Option Agreement and the Plan, to all of which I hereby
expressly assent.  This Agreement shall
inure to the benefit of and be binding upon my heirs, executors,
administrators, successors and assigns.

 

	
   

  	
  Very truly
  yours,

  
	
   

  	
   

  
	
   

  	
  (Signature)

  

 

Receipt of the above is
hereby acknowledged.

 

ZORAN CORPORATION

 

	
  By:

  	
   

  
	
   

  	
   

  
	
  Title:

  	
   

  
	
   

  	
   

  
	
  Dated:

  	
   

  

 

 

 

ZORAN
CORPORATION

RESTRICTED
STOCK UNITS AGREEMENT

(For U.S.
Participants)

 

Zoran
Corporation has granted to the Participant named in the Notice of
Grant of Restricted Stock Units (the “Grant Notice”)
to which this Restricted Stock Units Agreement (the “Agreement”) is attached an Award consisting of
Restricted Stock Units (the “Units”)
subject to the terms and conditions set forth in the Grant Notice and this
Agreement.  The Award has been granted
pursuant to the Zoran Corporation 2005 Equity Incentive Plan (the “Plan”), as amended to the
Date of Grant, the provisions of which are incorporated herein by
reference.  By signing the Grant Notice,
the Participant: (a) acknowledges receipt of and represents that
the Participant has read and is familiar with the Grant Notice, this
Agreement, the Plan and a prospectus for
the Plan in the form most recently registered with the Securities and Exchange
Commission (the “Plan Prospectus”), (b) accepts the
Award subject to all of the terms and conditions of the Grant Notice, this
Agreement and the Plan and (c) agrees to accept as binding, conclusive and
final all decisions or interpretations of the Committee upon any questions
arising under the Grant Notice, this Agreement or the Plan.

 

1.             DEFINITIONS AND CONSTRUCTION.

 

1.1           Definitions. 
Unless otherwise defined herein, capitalized terms shall have the
meanings assigned to such terms in the Grant Notice or the Plan.

 

1.2           Construction. 
Captions and titles contained herein are for convenience only and shall
not affect the meaning or interpretation of any provision of this
Agreement.  Except when otherwise
indicated by the context, the singular shall include the plural and the plural
shall include the singular.  Use of the
term “or” is not intended to be exclusive, unless the context clearly requires
otherwise.

 

2.             ADMINISTRATION.

 

All questions of interpretation concerning the Grant
Notice and this Agreement shall be determined by the Committee.  All determinations by the Committee shall be
final and binding upon all persons having an interest in the Award.  Any Officer shall have the authority to act
on behalf of the Company with respect to any matter, right, obligation, 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, or election.

 

3.             THE AWARD.

 

3.1           Grant of Units. 
On the Date of Grant, the Participant shall acquire, subject to the
provisions of this Agreement, the Number of Restricted Stock Units set forth in
the Grant Notice, subject to adjustment as provided in Section 9.  Each Unit represents a right to receive on a
date determined in accordance with the Grant Notice and this Agreement one (1) share
of Stock.

 

 

3.2           No Monetary Payment Required. 
The Participant is not required to make any monetary payment (other than
applicable tax withholding, if any) as a condition to receiving the Units or
shares of Stock issued upon settlement of the Units, the consideration for
which shall be past services actually rendered and/or future services to be
rendered to a Participating Company or for its benefit.  Notwithstanding the foregoing, if required by
applicable state corporate law, the Participant shall furnish consideration in
the form of cash or past services rendered to a Participating Company or for
its benefit having a value not less than the par value of the shares of Stock
issued upon settlement of the Units.

 

4.             VESTING OF UNITS.

 

The Units shall vest and become Vested Units as
provided in the Grant Notice.  For
purposes of determining the number of Vested Units following an Ownership
Change Event, credited Service shall include all Service with any corporation
which is a Participating Company at the time the Service is rendered, whether
or not such corporation is a Participating Company both before and after the
Ownership Change Event.

 

5.             COMPANY REACQUISITION RIGHT.

 

In the event that the Participant’s Service terminates for any reason or no
reason, with or without cause, the Participant shall forfeit and the Company
shall automatically reacquire all Units which are not, as of the time of such
termination, Vested Units, and the Participant shall not be entitled to any
payment therefor.

 

6.             SETTLEMENT OF THE AWARD.

 

6.1           Issuance of Shares of Stock.  Subject to the provisions of Section 6.3
below, the Company shall issue to the Participant on the Settlement Date with
respect to each Vested Unit to be settled on such date one (1) share of
Stock.  Shares of Stock issued in
settlement of Units shall not be subject to any restriction on transfer other
than any such restriction as may be required pursuant to Section 6.3, Section 7
or the Company’s Insider Trading Policy.

 

6.2           Beneficial Ownership of
Shares; Certificate Registration.  
The Participant hereby authorizes the Company, in its sole discretion,
to deposit for the benefit of the Participant with any broker with which the
Participant has an account relationship of which the Company has notice any or
all shares acquired by the Participant pursuant to the settlement of the
Award.  Except as provided by the
preceding sentence, a certificate for the shares as to which the Award is
settled shall be registered in the name of the Participant, or, if applicable,
in the names of the heirs of the Participant.

 

6.3           Restrictions on Grant of the
Award and Issuance of Shares. 
The grant of the Award and issuance of shares of Stock upon settlement
of the Award shall be subject to compliance with all applicable requirements of
federal, state or foreign law with respect to such securities.  No shares of Stock may be issued hereunder if
the issuance of such shares would constitute a violation of any applicable
federal, state or foreign securities laws or other law or regulations or the
requirements of any stock exchange or market system upon which the Stock may
then be listed.  The inability of the
Company to obtain from any regulatory body having 

 

2

 

jurisdiction the
authority, if any, deemed by the Company’s legal counsel to be necessary to the
lawful issuance of any shares subject to the Award shall relieve the Company of
any liability in respect of the failure to issue such shares as to which such
requisite authority shall not have been obtained.  As a condition to the settlement of the
Award, the Company may require the Participant to satisfy any qualifications that may
be necessary or appropriate, to evidence compliance with any applicable law or
regulation and to make any representation or warranty with respect thereto as
may be requested by the Company.

 

6.4           Fractional Shares.  The Company shall not be required to issue
fractional shares upon the settlement of the Award.

 

7.             TAX WITHHOLDING.

 

7.1           In General. 
At the time the Grant Notice is executed, or at any time thereafter as
requested by a Participating Company, the Participant hereby authorizes withholding from
payroll and any other amounts payable to the Participant, and otherwise agrees to make adequate
provision for, any sums required to satisfy the federal, state, local and
foreign tax withholding obligations of the Participating Company, if any, which
arise in connection with the Award or the issuance of shares of Stock in
settlement thereof.  The Company shall
have no obligation to deliver shares of Stock until the tax withholding
obligations of the Company have been satisfied by the Participant.

 

7.2           Assignment of Sale Proceeds;
Payment of Tax Withholding by Check.  Subject to
compliance with applicable law and the Company’s Insider Trading Policy, the
Participant shall satisfy the Participating Company’s tax withholding
obligations in accordance with procedures established by the Company providing
for delivery by the Participant to the Company or a broker approved by the Company
of properly executed instructions, in a form approved by the Company, providing
for the assignment to the Company of the proceeds of a sale with respect to
some or all of the shares being acquired upon settlement of Units.  Notwithstanding the foregoing, the
Participant may elect to pay by check the amount of the Participating Company’s
tax withholding obligations arising on any Settlement Date by delivering
written notice of such election to the Company on a form specified by the
Company for this purpose at least thirty (30) days (or such other period
established by the Company) prior to such Settlement Date.  By making such election, the Participant
agrees to deliver a check for the full amount of the required tax withholding
to the applicable Participating Company on or before the third business day
following the Settlement Date.  If the
Participant elects to pay the required tax withholding by check but fails to
make such payment as required by the preceding sentence, the Company is hereby
authorized at its discretion, to satisfy the tax withholding obligations
through any other means authorized by this Section 7, including by
effecting a sale of some or all of the shares being acquired upon settlement of
Units, withholding from payroll and any other amounts payable to the Participant
or by withholding shares in accordance with Section 7.3.

 

7.3           Withholding in Shares. 
The Company may, in its discretion, permit or require the Participant to
satisfy all or any portion of a Participating Company’s tax withholding
obligations by deducting from the shares of Stock otherwise deliverable to the
Participant in settlement of the Award a number of whole shares having a fair
market value, as determined by 

 

3

 

the Company as of the
date on which the tax withholding obligations arise, not in excess of the
amount of such tax withholding obligations determined by the applicable minimum
statutory withholding rates.  Any adverse
consequences to the Participant resulting from the procedure permitted under
this Section, including, without limitation, tax consequences, shall be the
sole responsibility of the Participant.

 

8.             EFFECT OF CHANGE IN CONTROL ON AWARD.

 

In the event of a Change in Control, the surviving,
continuing, successor, or purchasing entity or parent thereof, as the case may
be (the “Acquiror”), may, without the
consent of the Participant, either assume or continue the Company’s rights and
obligations with respect to outstanding Units or substitute for outstanding
Units substantially equivalent rights with respect to the Acquiror’s
stock.  For purposes of this Section, a
Unit shall be deemed assumed if, following the Change in Control, the Unit
confers the right to receive, subject to the terms and conditions of the Plan
and this Agreement, the consideration (whether stock, cash, other securities or
property or a combination thereof) to which a holder of a share of Stock on the
effective date of the Change in Control was entitled; provided, however, that
if such consideration is not solely common stock of the Acquiror, the Committee
may, with the consent of the Acquiror, provide for the consideration to be
received upon settlement of the Unit to consist solely of common stock of the
Acquiror equal in Fair Market Value to the per share consideration received by
holders of Stock pursuant to the Change in Control.  In the event the Acquiror elects not to
assume, continue or substitute for the outstanding Units in connection with a
Change in Control, the Award, to the extent of any Units which are then
unvested, shall terminate and cease to be outstanding effective as of the time
of the Change in Control. 
Notwithstanding the foregoing, the Committee may, in its discretion,
determine that upon a Change in Control, each Vested Unit (and each unvested
Unit if so determined by the Committee) outstanding immediately prior to the
Change in Control shall be canceled in exchange for payment with respect to
each such Unit immediately prior to its cancellation in (a) cash, (b) stock
of the Company or the Acquiror or (c) other property which, in any such
case, shall be in an amount having a Fair Market Value equal to the Fair Market
Value of the consideration to be paid per share of Stock in the Change in
Control (subject to any required tax withholding).  Such payment shall be made as soon as
practicable following the Change in Control.

 

9.             ADJUSTMENTS FOR CHANGES IN CAPITAL STRUCTURE.

 

Subject to any required action by the stockholders of
the Company, in the event of any change in the Stock effected without receipt
of consideration by the Company, whether through merger, consolidation,
reorganization, reincorporation, recapitalization, reclassification, stock
dividend, stock split, reverse stock split, split-up, split-off, spin-off,
combination of shares, exchange of shares, or similar change in the capital
structure of the Company, or in the event of payment of a dividend or
distribution to the stockholders of the Company in a form other than Stock
(excepting normal cash dividends) that has a material effect on the Fair Market
Value of shares of Stock, appropriate adjustments shall be made in the number
of Units subject to the Award and/or the number and kind of shares to be issued
in settlement of the Award, in order to prevent dilution or enlargement of the
Participant’s rights under the Award. 
For purposes of the foregoing, conversion of any convertible securities
of the Company shall not be treated as 

 

4

 

“effected without receipt of consideration by the
Company.”  Any fractional share resulting
from an adjustment pursuant to this Section shall be rounded down to the
nearest whole number.  Such adjustments
shall be determined by the Committee, and its determination shall be final, binding
and conclusive.

 

10.           RIGHTS AS A STOCKHOLDER OR EMPLOYEE.

 

The Participant shall have no rights as a stockholder
with respect to any shares which may be issued in settlement of this Award
until the date of the issuance of a certificate for such shares (as evidenced
by the appropriate entry on the books of the Company or of a duly authorized
transfer agent of the Company).  No
adjustment shall be made for dividends, distributions or other rights for which
the record date is prior to the date such certificate is issued, except as
provided in Section 9.  If the
Participant is an Employee, the Participant understands and acknowledges that,
except as otherwise provided in a separate, written employment agreement
between a Participating Company and the Participant, the Participant’s employment is “at will” and is for no
specified term.  Nothing in this
Agreement shall confer upon the Participant any right to continue in the Service of
a Participating Company or interfere in any way with any right of the Participating
Company Group to terminate the Participant’s Service at any time.

 

11.           LEGENDS.

 

The Company may at any time place legends referencing
any applicable federal, state or foreign securities law restrictions on all
certificates representing shares of stock issued pursuant to this
Agreement.  The Participant shall, at the request of the Company,
promptly present to the Company any and all certificates representing shares
acquired pursuant to this Award in the possession of the Participant in order to carry out the provisions of
this Section.

 

12.           MISCELLANEOUS PROVISIONS.

 

12.1         Termination or Amendment. 
The Committee may terminate or amend the Plan or this Agreement at any
time; provided, however, that except as provided in Section 8 in
connection with a Change in Control, no such termination or amendment may
adversely affect the Participant’s rights under this Agreement without the
consent of the Participant unless such termination or
amendment is necessary to comply with applicable law or government regulation. 
No amendment or addition to this Agreement shall be effective unless in
writing.

 

12.2         Nontransferability of
the Award.  Prior the issuance of shares of Stock on the
applicable Settlement Date, neither this Award nor any Units subject to this Award
shall be subject in any manner to anticipation, alienation, sale, exchange,
transfer, assignment, pledge, encumbrance, or garnishment by creditors of the
Participant or the Participant’s beneficiary, except transfer by will or by the
laws of descent and distribution.  All
rights with respect to the Award shall be exercisable during the Participant’s
lifetime only by the Participant or the Participant’s guardian or legal
representative.

 

12.3         Further Instruments.  The parties hereto agree to execute such
further instruments and to take such further action as may reasonably be
necessary to carry out the intent of this Agreement.

 

5

 

12.4         Binding Effect. 
This Agreement shall inure to the benefit of the successors and assigns
of the Company and, subject to the restrictions on transfer set forth herein,
be binding upon the Participant and the Participant’s heirs, executors,
administrators, successors and assigns.

 

12.5         Delivery of Documents and
Notices.  Any document relating to participation in the
Plan or any notice required or permitted hereunder shall be given in writing
and shall be deemed effectively given (except to the extent that this Agreement
provides for effectiveness only upon actual receipt of such notice) upon
personal delivery, electronic delivery at the e-mail address, if any, provided
for the Participant by a Participating Company, or upon deposit in the U.S.
Post Office or foreign postal service, by registered or certified mail, or with
a nationally recognized overnight courier service, with postage and fees
prepaid, addressed to the other party at the address shown below that party’s
signature to the Grant Notice or at such other address as such party may
designate in writing from time to time to the other party.

 

(a)           Description of Electronic Delivery. 
The Plan documents, which may include but do not necessarily include:
the Plan, the Grant Notice, this Agreement, the Plan Prospectus, and any
reports of the Company provided generally to the Company’s stockholders, may be
delivered to the Participant electronically. 
In addition, the Participant may deliver electronically the Grant Notice
to the Company or to such third party involved in administering the Plan as the
Company may designate from time to time. 
Such means of electronic delivery may include but do not necessarily
include the delivery of a link to a Company intranet or the internet site of a
third party involved in administering the Plan, the delivery of the document
via e-mail or such other means of electronic delivery specified by the Company.

 

(b)           Consent
to Electronic Delivery.  The
Participant acknowledges that the Participant has read Section 12.5(a) of
this Agreement and consents to the electronic delivery of the Plan documents
and Grant Notice, as described in Section 12.5(a).  The Participant acknowledges that he or she
may receive from the Company a paper copy of any documents delivered
electronically at no cost to the Participant by contacting the Company by
telephone or in writing.  The Participant
further acknowledges that the Participant will be provided with a paper copy of
any documents if the attempted electronic delivery of such documents
fails.  Similarly, the Participant understands
that the Participant must provide the Company or any designated third party
administrator with a paper copy of any documents if the attempted electronic
delivery of such documents fails.  The
Participant may revoke his or her consent to the electronic delivery of
documents described in Section 12.5(a) or may change the electronic
mail address to which such documents are to be delivered (if Participant has
provided an electronic mail address) at any time by notifying the Company of
such revoked consent or revised e-mail address by telephone, postal service or
electronic mail.  Finally, the
Participant understands that he or she is not required to consent to electronic
delivery of documents described in Section 12.5(a).

 

12.6         Integrated Agreement. 
The Grant Notice, this Agreement and the Plan, together with the
Superseding Agreement, if any, shall constitute the entire understanding and
agreement of the Participant and the Participating Company Group with respect to
the subject matter contained herein or therein and supersedes any prior agreements,
understandings, restrictions, representations, or warranties among the Participant and the Participating Company 

 

6

 

Group with respect to
such subject matter other than those as set forth or provided for herein or
therein.  To the extent contemplated
herein or therein, the provisions of the Grant Notice and the Agreement shall
survive any settlement of the Award and shall remain in full force and effect.

 

12.7         Applicable Law.  This Agreement shall be governed by the laws
of the State of California as such laws are applied to agreements between
California residents entered into and to be performed entirely within the State
of California.

 

12.8         Counterparts. 
The Grant Notice may be executed in counterparts, each of which shall be
deemed an original, but all of which together shall constitute one and the same
instrument.

 

7

 

 

ZORAN CORPORATION

RESTRICTED STOCK AGREEMENT

(For U.S.
Participants)

 

Zoran Corporation
has granted to the Participant named in the Notice of Grant of
Restricted Stock (the “Grant Notice”)
to which this Restricted Stock Agreement (the “Agreement”) is attached an Award consisting of
Shares subject to the terms and conditions set forth in the Grant Notice and
this Agreement.  The Award has been
granted pursuant to the Zoran Corporation 2005 Equity Incentive Plan (the “Plan”), as amended to the
Date of Grant, the provisions of which are incorporated herein by
reference.  By signing the Grant Notice,
the Participant: (a) acknowledges receipt of and represents that
the Participant has read and is familiar with the Grant Notice, this
Agreement, the Plan and a Plan prospectus
for the Shares in the form most recently registered with the Securities and
Exchange Commission (the “Plan Prospectus”), (b) accepts
the Award subject to all of the terms and conditions of the Grant Notice, this
Agreement and the Plan and (c) agrees to accept as binding, conclusive and
final all decisions or interpretations of the Committee upon any questions
arising under the Grant Notice, this Agreement or the Plan.

 

1.             DEFINITIONS AND CONSTRUCTION.

 

1.1 Definitions.  Unless
otherwise defined herein, capitalized terms shall have the meanings assigned to
such terms in the Grant Notice or the Plan.

 

1.2 Construction. 
Captions and titles contained herein are for convenience only and shall
not affect the meaning or interpretation of any provision of this
Agreement.  Except when otherwise
indicated by the context, the singular shall include the plural and the plural
shall include the singular.  Use of the
term “or” is not intended to be exclusive, unless the context clearly requires
otherwise.

 

2.             ADMINISTRATION.

 

All questions of interpretation concerning the Grant
Notice and this Agreement shall be determined by the Committee.  All determinations by the Committee shall be
final and binding upon all persons having an interest in the Award.  Any Officer of a Participating Company shall
have the authority to act on behalf of the Company with respect to any matter,
right, obligation, 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, or election.

 

3.             THE AWARD.

 

3.1 Grant and Issuance of Shares. 
On the Date of Grant, the Participant shall acquire and the Company
shall issue, subject to the provisions of this Agreement, a number of Shares
equal to the Total Number of Shares set forth in the Grant Notice.  As a condition to the issuance of the Shares,
the Participant shall execute and deliver to the Company along with the Grant
Notice the Assignment Separate from Certificate duly endorsed (with date and
number of shares blank) in the form attached to the Grant Notice.

 

3.2 No Monetary Payment Required. 
The Participant is not required to make any monetary payment (other than
applicable tax withholding, if any) as a condition to receiving the Shares, the
consideration for which shall be past services actually rendered and/or future
services to be rendered to a Participating Company or for its benefit.  Notwithstanding the foregoing, if required by
applicable state corporate law, the Participant shall furnish consideration in
the form of cash or past services rendered to a Participating Company or for
its benefit having a value not less than the par value of the Shares issued
pursuant to the Award.

 

3.3 Beneficial Ownership of Shares;
Certificate Registration. 
The Participant hereby authorizes the Company, in its sole discretion,
to deposit the Shares with the Company’s transfer agent, including any
successor transfer agent, to be held in book entry form during the term of the
Escrow pursuant to Section 6. 
Furthermore, the Participant hereby authorizes the Company, in its sole
discretion, to deposit, following the term of such Escrow, for the benefit of
the Participant with any broker with which the Participant has an account
relationship of which the Company has notice any or all Shares which are no
longer subject to such Escrow.  Except 

 

 

as provided by the
foregoing, a certificate for the Shares shall be registered in the name of the
Participant, or, if applicable, in the names of the heirs of the Participant.

 

3.4 Issuance of Shares in Compliance
with Law.  The issuance
of the Shares shall be subject to compliance with all applicable requirements
of federal, state or foreign law with respect to such securities.  No Shares shall be issued hereunder if their
issuance would constitute a violation of any applicable federal, state or
foreign securities laws or other law or regulations or the requirements of any
stock exchange or market system upon which the Stock may then be listed.  The inability of the Company to obtain from
any regulatory body having jurisdiction the authority, if any, deemed by the
Company’s legal counsel to be necessary to the lawful issuance of any Shares
shall relieve the Company of any liability in respect of the failure to issue
such Shares as to which such requisite authority shall not have been
obtained.  As a condition to the issuance
of the Shares, the Company may require the Participant to satisfy any qualifications that may
be necessary or appropriate, to evidence compliance with any applicable law or
regulation and to make any representation or warranty with respect thereto as
may be requested by the Company.

 

4.             VESTING OF SHARES.

 

The Shares shall vest and become Vested Shares as
provided in the Grant Notice.  For
purposes of determining the number of Vested Shares following an Ownership
Change Event, credited Service shall include all Service with any corporation
which is a Participating Company at the time the Service is rendered, whether
or not such corporation is a Participating Company both before and after the
Ownership Change Event.

 

5.             COMPANY REACQUISITION RIGHT.

 

5.1 Grant of Company Reacquisition
Right.  Except to the
extent otherwise provided by the Superseding Agreement, in the event that (a) the
Participant’s Service terminates for any reason or no reason, with or without
cause, or (b) the Participant, the Participant’s legal representative, or
other holder of the Shares, attempts to sell, exchange, transfer, pledge, or
otherwise dispose of (other than pursuant to an Ownership Change Event),
including, without limitation, any transfer to a nominee or agent of the
Participant, any Shares which are not Vested Shares (“Unvested Shares”),
the Company shall automatically reacquire the Unvested Shares, and the
Participant shall not be entitled to any payment therefor (the “Company
Reacquisition Right”).

 

5.2 Ownership Change Event.  Upon the occurrence of an Ownership Change
Event, any and all new, substituted or additional securities or other property
to which the Participant is entitled by reason of the Participant’s ownership of Unvested Shares shall be
immediately subject to the Company Reacquisition Right and included in the
terms “Shares,” “Stock” and “Unvested Shares” for all purposes of the Company
Reacquisition Right with the same force and effect as the Unvested Shares
immediately prior to the Ownership Change Event.  For purposes of determining the number of
Vested Shares following an Ownership Change Event, credited Service shall
include all Service with any corporation which is a Participating Company at
the time the Service is rendered, whether or not such corporation is a
Participating Company both before and after the Ownership Change Event.

 

6.             ESCROW.

 

6.1 Appointment of Agent. 
To ensure that Shares subject to the Company Reacquisition Right will be
available for reacquisition, the Participant and the Company hereby appoint the
Secretary of the Company, or any other person designated by the Company, as
their agent and as attorney-in-fact for the Participant (the “Agent”) to hold any and all
Unvested Shares and to sell, assign and transfer to the Company any such
Unvested Shares reacquired by the Company pursuant to the Company Reacquisition
Right.  The Participant understands that appointment
of the Agent is a material inducement to make this Agreement and that such
appointment is coupled with an interest and is irrevocable.  The Agent shall not be personally liable for
any act the Agent may do or omit to do hereunder as escrow agent, agent for the
Company, or attorney in fact for the Participant while acting in good faith and
in the exercise of the Agent’s own good judgment, and any act done or omitted
by the Agent pursuant to the advice of the Agent’s own attorneys shall be
conclusive evidence of such good faith. 
The Agent may rely upon any letter, notice or other document executed by
any signature purporting to be genuine and may resign at any time.

 

2

 

6.2 Establishment of Escrow.  The Participant authorizes the Company to
deposit the Unvested Shares with the Company’s transfer agent to be held in
book entry form, as provided in Section 3.3, and the Participant agrees to
deliver to and deposit with the Agent each certificate, if any, evidencing the
Shares and an Assignment Separate from Certificate with respect to such book
entry shares and each such certificate duly endorsed (with date and number of
Shares blank) in the form attached to the Grant Notice, to be held by the Agent
under the terms and conditions of this Section 6 (the “Escrow”). 
Upon the occurrence of an Ownership Change Event or a change, as
described in Section 8, in the character or amount of any outstanding
stock of the corporation the stock of which is subject to the provisions of
this Agreement, any and all new, substituted or additional securities or other
property to which the Participant is entitled by reason of his or her ownership
of the Shares that remain, following such Ownership Change Event or change
described in Section 8, subject to the Company Reacquisition Right shall
be immediately subject to the Escrow to the same extent as the Shares
immediately before such event.  The
Company shall bear the expenses of the Escrow.

 

6.3 Delivery of Shares to Participant.  The
Escrow shall continue with respect to any Shares for so long as such Shares
remain subject to the Company Reacquisition Right.  Upon termination of the Reacquisition Right
with respect to Shares, the Company shall so notify the Agent and direct the Agent
to deliver such number of Shares to the Participant.  As soon as practicable after receipt of such
notice, the Agent shall cause to be delivered to the Participant the Shares
specified by such notice, and the Escrow shall terminate with respect to such
Shares.

 

7.             TAX MATTERS.

 

7.1 Tax Withholding.

 

(a)           In General. 
At the time the Grant Notice is executed, or at any time thereafter as
requested by a Participating Company, the Participant hereby authorizes withholding from
payroll and any other amounts payable to the Participant, and otherwise agrees to make adequate
provision for, any sums required to satisfy the federal, state, local and
foreign tax withholding obligations of the Participating Company, if any, which
arise in connection with the Award, including, without limitation, obligations
arising upon (a) the transfer of Shares to the Participant, (b) the
lapsing of any restriction with respect to any Shares, (c) the filing of
an election to recognize tax liability, or (d) the transfer by the Participant
of any Shares.  The Company shall have no
obligation to deliver the Shares or to release any Shares from the Escrow
established pursuant to Section 6 until the tax withholding obligations of
the Participating Company have been satisfied by the Participant.

 

(b)           Assignment of Sale Proceeds;
Payment of Tax Withholding by Check.  Subject to
compliance with applicable law and the Company’s Insider Trading Policy, the
Participant shall satisfy the Participating Company’s tax withholding
obligations in accordance with procedures established by the Company providing
for delivery by the Participant to the Company or a broker approved by the
Company of properly executed instructions, in a form approved by the Company,
providing for the assignment to the Company of the proceeds of a sale with
respect to some or all of the shares becoming Vested Shares on a Vesting Date
as provided in the Grant Notice. 
Notwithstanding the foregoing, the Participant may elect to pay by check
the amount of the Participating Company’s tax withholding obligations arising
on any Vesting Date by delivering written notice of such election to the
Company on a form specified by the Company for this purpose at least thirty
(30) days (or such other period established by the Company) prior to such
Vesting Date.  By making such election,
the Participant agrees to deliver a check for the full amount of the required
tax withholding to the applicable Participating Company on or before the third
business day following the Vesting Date. 
If the Participant elects to pay the required tax withholding by check
but fails to make such payment as required by the preceding sentence, the
Company is hereby authorized at its discretion, to satisfy the tax withholding
obligations through any other means authorized by this Section 7,
including by effecting a sale of some or all of the shares becoming Vested
Shares on the Vesting Date, withholding from payroll and any other amounts
payable to the Participant or by withholding shares in
accordance with Section 7.1(c).

 

(c)           Withholding in Shares. 
The Company may, in its discretion, permit or require the Participant to
satisfy all or any portion of a Participating Company’s tax withholding
obligations by deducting a number of whole, Vested Shares otherwise deliverable
to the Participant or by the Participant’s tender to the Company of a number of
whole, Vested Shares or vested shares acquired otherwise than pursuant to the
Award having, in any such case, a fair market value, as determined by the
Company as of the date on which the tax withholding obligations arise, not in
excess of the amount of such tax withholding obligations determined by the 

 

3

 

applicable minimum
statutory withholding rates.  Any adverse
consequences to the Participant resulting from the procedure permitted under
this Section, including, without limitation, tax consequences, shall be the
sole responsibility of the Participant.

 

7.2 Election Under Section 83(b) of
the Code.

 

(a)           The Participant understands that Section 83
of the Code taxes as ordinary income the difference between the amount paid for
the Shares, if anything, and the fair market value of the Shares as of the date
on which the Shares are “substantially vested,” within the meaning of Section 83.  In this context, “substantially vested” means
that the right of the Company to reacquire the Shares pursuant to the Company
Reacquisition Right has lapsed.  The
Participant understands that he or she may elect to have his or her taxable
income determined at the time he or she acquires the Shares rather than when
and as the Company Reacquisition Right lapses by filing an election under Section 83(b) of
the Code with the Internal Revenue Service no later than thirty (30) days after
the date of acquisition of the Shares. 
The Participant understands that failure to make a timely filing under Section 83(b) will
result in his or her recognition of ordinary income, as the Company
Reacquisition Right lapses, on the difference between the purchase price, if
anything, and the fair market value of the Shares at the time such restrictions
lapse.  The Participant further
understands, however, that if Shares with respect to which an election under Section 83(b) has
been made are forfeited to the Company pursuant to its Company Reacquisition
Right, such forfeiture will be treated as a sale on which there is realized a
loss equal to the excess (if any) of the amount paid (if any) by the
Participant for the forfeited Shares over the amount realized (if any) upon their
forfeiture.  If the Participant has paid
nothing for the forfeited Shares and has received no payment upon their
forfeiture, the Participant understands that he or she will be unable to
recognize any loss on the forfeiture of the Shares even though the Participant
incurred a tax liability by making an election under Section 83(b).

 

(b)           The Participant understands that he or
she should consult with his or her tax advisor regarding the advisability of
filing with the Internal Revenue Service an election under Section 83(b) of
the Code, which must be filed no later than thirty (30) days after the date of
the acquisition of the Shares pursuant to this Agreement.  Failure to file an election under Section 83(b),
if appropriate, may result in adverse tax consequences to the Participant.  The Participant acknowledges that he or she
has been advised to consult with a tax advisor regarding the tax consequences
to the Participant of the acquisition of Shares hereunder.  ANY ELECTION UNDER SECTION 83(b) THE
PARTICIPANT WISHES TO MAKE MUST BE FILED NO LATER THAN 30 DAYS AFTER THE DATE
ON WHICH THE PARTICIPANT ACQUIRES THE SHARES. 
THIS TIME PERIOD CANNOT BE EXTENDED. 
THE PARTICIPANT ACKNOWLEDGES THAT TIMELY FILING OF A SECTION 83(b) ELECTION
IS THE PARTICIPANT’S SOLE RESPONSIBILITY, EVEN IF THE PARTICIPANT REQUESTS THE
COMPANY OR ITS REPRESENTATIVE TO FILE SUCH ELECTION ON HIS OR HER BEHALF.

 

(c)           The Participant will notify the Company
in writing if the Participant files an election pursuant to Section 83(b) of
the Code.  The Company intends, in the
event it does not receive from the Participant evidence of such filing, to
claim a tax deduction for any amount which would otherwise be taxable to the
Participant in the absence of such an election.

 

8.             ADJUSTMENTS FOR CHANGES IN CAPITAL STRUCTURE.

 

Subject to any required action by the stockholders of
the Company, in the event of any change in the Stock effected without receipt
of consideration by the Company, whether through merger, consolidation,
reorganization, reincorporation, recapitalization, reclassification, stock
dividend, stock split, reverse stock split, split-up, split-off, spin-off,
combination of shares, exchange of shares, or similar change in the capital
structure of the Company, or in the event of payment of a dividend or
distribution to the stockholders of the Company in a form other than Stock
(excepting normal cash dividends) that has a material effect on the Fair Market
Value of shares of Stock, appropriate adjustments shall be made in the number
and kind of shares subject to the Award, in order to prevent dilution or
enlargement of the Participant’s rights under the Award.  For purposes of the foregoing, conversion of
any convertible securities of the Company shall not be treated as “effected
without receipt of consideration by the Company.”  Any fractional share resulting from an
adjustment pursuant to this Section shall be rounded down to the nearest
whole number.  Such adjustments shall be
determined by the Committee, and its determination shall be final, binding and
conclusive.

 

4

 

9.             RIGHTS AS A STOCKHOLDER, DIRECTOR, EMPLOYEE OR CONSULTANT.

 

The Participant shall have no rights as a stockholder
with respect to any Shares subject to the Award until the date of the issuance
of the Shares (as evidenced by the appropriate entry on the books of the
Company or of a duly authorized transfer agent of the Company).  No adjustment shall be made for dividends,
distributions or other rights for which the record date is prior to the date
the Shares are issued, except as provided in Section 8.  Subject the provisions of this Agreement, the
Participant shall exercise all rights and privileges of a stockholder of the
Company with respect to Shares deposited in the Escrow pursuant to Section 6.  If the Participant is an Employee, the
Participant understands and acknowledges that, except as otherwise provided in
a separate, written employment agreement between a Participating Company and
the Participant, the Participant’s employment is “at will” and is for no specified
term.  Nothing in this Agreement shall
confer upon the Participant any right to continue in the Service of a
Participating Company or interfere in any way with any right of the
Participating Company Group to terminate the Participant’s Service at any time.

 

10.           LEGENDS.

 

The Company may at any
time place legends referencing the Company Reacquisition Right and any
applicable federal, state or foreign securities law restrictions on all
certificates representing the Shares. 
The Participant shall, at the request of the Company, promptly present
to the Company any and all certificates representing the Shares in the
possession of the Participant in order to carry out the provisions of this
Section.  Unless otherwise specified by
the Company, legends placed on such certificates may include, but shall not be
limited to, the following:

 

“THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO
RESTRICTIONS SET FORTH IN AN AGREEMENT BETWEEN THIS CORPORATION AND THE REGISTERED
HOLDER, OR HIS PREDECESSOR IN INTEREST, A COPY OF WHICH IS ON FILE AT THE
PRINCIPAL OFFICE OF THIS CORPORATION.”

 

11.           TRANSFERS IN VIOLATION OF AGREEMENT.

 

No Shares may be sold, exchanged, transferred,
assigned, pledged, hypothecated or otherwise disposed of, including by
operation of law, in any manner which violates any of the provisions of this
Agreement and, except pursuant to an Ownership Change Event, until the date on
which such shares become Vested Shares, and any such attempted disposition
shall be void.  The Company shall not be
required (a) to transfer on its books any Shares which will have been
transferred in violation of any of the provisions set forth in this Agreement
or (b) to treat as owner of such Shares or to accord the right to vote as
such owner or to pay dividends to any transferee to whom such Shares will have
been so transferred.  In order to enforce its rights under this
Section, the Company shall be authorized to give a stop transfer instruction
with respect to the Shares to the Company’s transfer agent.

 

12.           MISCELLANEOUS PROVISIONS.

 

12.1         Termination or Amendment. 
The Committee may terminate or amend the Plan or this Agreement at any
time; provided, however, that no such termination or amendment may adversely
affect the Participant’s rights under this Agreement without the consent of the
Participant unless such termination or amendment is
necessary to comply with applicable law or government regulation. 
No amendment or addition to this Agreement shall be effective unless in
writing.

 

12.2               Nontransferability of the Award. 
The right to acquire Shares pursuant to the Award shall not be subject
in any manner to anticipation, alienation, sale, exchange, transfer,
assignment, pledge, encumbrance, or garnishment by creditors of the Participant
or the Participant’s beneficiary, except transfer by will or by the laws of
descent and distribution.  All rights
with respect to the Award shall be exercisable during the Participant’s
lifetime only by the Participant or the Participant’s guardian or legal
representative.

 

12.3               Further Instruments. 
The parties hereto agree to execute such further instruments and to take
such further action as may reasonably be necessary to carry out the intent of
this Agreement.

 

5

 

12.4               Binding Effect. 
This Agreement shall inure to the benefit of the successors and assigns
of the Company and, subject to the restrictions on transfer set forth herein,
be binding upon the Participant and the Participant’s heirs, executors,
administrators, successors and assigns.

 

12.5               Delivery of Documents and
Notices.  Any document relating to participation in the
Plan or any notice required or permitted hereunder shall be given in writing
and shall be deemed effectively given (except to the extent that this Agreement
provides for effectiveness only upon actual receipt of such notice) upon
personal delivery, electronic delivery at the e-mail address, if any, provided
for the Participant by a Participating Company, or upon deposit in the U.S.
Post Office or foreign postal service, by registered or certified mail, or with
a nationally recognized overnight courier service, with postage and fees
prepaid, addressed to the other party at the address shown below that party’s
signature to the Grant Notice or at such other address as such party may
designate in writing from time to time to the other party.

 

(a)           Description of Electronic Delivery. 
The Plan documents, which may include but do not necessarily include:
the Plan, the Grant Notice, this Agreement, the Plan Prospectus, and any
reports of the Company provided generally to the Company’s stockholders, may be
delivered to the Participant electronically. 
In addition, the parties may deliver electronically any notices called
for in connection with the Escrow and the Participant may deliver
electronically the Grant Notice to the Company or to such third party involved
in administering the Plan as the Company may designate from time to time.  Such means of electronic delivery may include
but do not necessarily include the delivery of a link to a Company intranet or
the internet site of a third party involved in administering the Plan, the
delivery of the document via e-mail or such other means of electronic delivery
specified by the Company.

 

(b)           Consent
to Electronic Delivery.  The
Participant acknowledges that the Participant has read Section 12.5(a) of
this Agreement and consents to the electronic delivery of the Plan documents,
the Grant Notice and notices in connection with the Escrow, as described in Section 12.5(a).  The Participant acknowledges that he or she
may receive from the Company a paper copy of any documents delivered
electronically at no cost to the Participant by contacting the Company by
telephone or in writing.  The Participant
further acknowledges that the Participant will be provided with a paper copy of
any documents if the attempted electronic delivery of such documents
fails.  Similarly, the Participant understands
that the Participant must provide the Company or any designated third party
administrator with a paper copy of any documents if the attempted electronic
delivery of such documents fails.  The
Participant may revoke his or her consent to the electronic delivery of documents
described in Section 12.5(a) or may change the electronic mail
address to which such documents are to be delivered (if Participant has
provided an electronic mail address) at any time by notifying the Company of
such revoked consent or revised e-mail address by telephone, postal service or
electronic mail.  Finally, the
Participant understands that he or she is not required to consent to electronic
delivery of documents described in Section 12.5(a).

 

12.6               Integrated Agreement. 
The Grant Notice, this Agreement and the Plan together with the
Superseding Agreement, if any, shall constitute the entire understanding and
agreement of the Participant and the Participating Company Group with respect to
the subject matter contained herein or therein and supersedes any prior
agreements, understandings, restrictions, representations, or warranties among
the Participant and the Participating Company Group with respect to
such subject matter other than those as set forth or provided for herein or
therein.  To the extent contemplated
herein or therein, the provisions of the Grant Notice and the Agreement shall
survive any settlement of the Award and shall remain in full force and effect.

 

12.7               Applicable Law. 
This Agreement shall be governed by the laws of the State of California
as such laws are applied to agreements between California residents entered
into and to be performed entirely within the State of California.

 

12.8               Counterparts. 
The Grant Notice may be executed in counterparts, each of which shall be
deemed an original, but all of which together shall constitute one and the same
instrument.

 

6

 

ASSIGNMENT
SEPARATE FROM CERTIFICATE

 

FOR VALUE RECEIVED
the undersigned does hereby sell, assign and transfer unto

 

                                                                                                      
(                                  )
shares of the Capital Stock of ZORAN CORPORATION standing in the undersigned’s
name on the books of said corporation represented by Certificate No.                                     
herewith and does hereby irrevocably constitute and appoint                                                                 
Attorney to transfer the said stock on the books of said corporation with full
power of substitution in the premises.

 

 

	
  Dated:

  	
   

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Signature

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Print Name

  

 

 

Instructions:  Please do not
fill in any blanks other than the signature line.  The purpose of this assignment is to enable
the Company to exercise its Company Reacquisition Right set forth in the
Restricted Stock Agreement without requiring additional signatures on the part
of the Participant.

 

 

 

ZORAN CORPORATION

NOTICE OF
GRANT OF STOCK OPTION

(For U.S. Participants)

 

The Participant has been granted an option (the “Option”) to purchase certain
shares of Stock of Zoran Corporation pursuant to the Zoran Corporation  2005 Equity Incentive Plan (the “Plan”), as follows:

 

	
  Participant:

  	
   

  	
   

  	
  Employee ID:

  	
   

  	
   

  
	
  Date of Grant:

  	
   

  	
   

  
	
  Number of Option Shares:

  	
   

  	
   

  
	
  Exercise Price:

  	
  $

  	
   

  
	
  Initial Vesting Date:

  	
  The date one (1) year after [vesting commencement date]

  
	
  Option Expiration Date:

  	
  The date ten (10) years after the Date of Grant

  
	
  Tax Status of Option:

  	
                                  Stock Option. 
  (Enter “Incentive” or “Nonstatutory.” 
  If blank, this Option will be a Nonstatutory.)

  
	
  Vested Shares:

  	
  Except as provided in the Stock Option Agreement,
  the number of Vested Shares (disregarding any resulting fractional share) as
  of any date is determined by multiplying the Number of Option Shares by the “Vested Ratio”
  determined as of such date as follows:

  
	
   

  	
   

  	
  Vested
  Ratio

  
	
   

  	
  Prior to Initial
  Vesting Date

  	
  0

  
	
   

  	
  On Initial Vesting
  Date, provided the Participant’s Service has not terminated prior to such
  date

  	
  

  1/4

  
	
   

  	
  Plus

  	
   

  
	
   

  	
  For each additional
  full month of the Participant’s continuous Service from Initial Vesting Date
  until the Vested Ratio equals 1/1, an additional  

  	
   

   

  1/48

  
	
  Superseding Agreement:

  	
  [None] 
  [Zoran Corporation Executive Retention and Severance Plan]

  
	
   

  	
  The terms and conditions of the foregoing
  Superseding Agreement to which the Participant is a party shall,
  notwithstanding any provision of the Stock Option Agreement to the contrary,
  supersede any inconsistent term or condition set forth in the Stock Option
  Agreement to the extent intended by such Superseding Agreement.

  
							

 

By their signatures below
or by electronic acceptance or authentication in a form authorized by the
Company, the Company and the Participant agree that the Option is governed by
this Grant Notice and by the provisions of the Plan and the Stock Option
Agreement, both of which are made a part of this document.  The Participant acknowledges that copies of
the Plan, the Stock Option Agreement and the prospectus for the Plan are
available on the Company’s internal web site and may be viewed and printed by
the Participant for attachment to the Participant’s copy of this Grant
Notice.  The Participant represents that
the Participant has read and is familiar with the provisions of the Plan and
the Stock Option Agreement, and hereby accepts the Option subject to all of
their terms and conditions.

 

	
  ZORAN CORPORATION

  	
   

  	
  PARTICIPANT

  
	
   

  	
   

  	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  Signature

  
	
  Its:

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  Date

  
	
  Address:

  	
  1390 Kifer Road

  	
   

  	
   

  
	
   

  	
  Sunnyvale, CA 94086

  	
   

  	
  Address

  

 

ATTACHMENTS:               2005 Equity Incentive Plan, as
amended to the Date of Grant; Stock Option Agreement, Exercise Notice and Plan
Prospectus

 

 

 

ZORAN CORPORATION

NOTICE OF
GRANT OF STOCK OPTION

(For Non-U.S. Participants)

 

The Participant has been granted an option (the “Option”) to purchase certain
shares of Stock of Zoran Corporation pursuant to the Zoran Corporation  2005 Equity Incentive Plan (the “Plan”), as follows:

 

	
  Participant:

  	
   

  	
   

  	
  Employee ID:

  	
   

  	
   

  
	
  Date of Grant:

  	
   

  	
   

  
	
  Number of Option Shares:

  	
   

  	
   

  
	
  Exercise Price:

  	
  $

  	
   

  
	
  Initial Vesting Date:

  	
  The date one (1) year after [vesting commencement date]

  
	
  Option Expiration Date:

  	
  The date ten (10) years after the Date of Grant

  
	
  Tax Status of Option:

  	
  [Reserved]

  
	
  Local Law:

  	
  The laws, rules and regulations of [Name of Country], of which the Participant is a resident.

  
	
  Vested Shares:

  	
  Except as provided in the Stock Option Agreement,
  the number of Vested Shares (disregarding any resulting fractional share) as
  of any date is determined by multiplying the Number of Option Shares by the “Vested Ratio”
  determined as of such date as follows:

  
	
   

  	
   

  	
  Vested
  Ratio

  
	
   

  	
  Prior to Initial Vesting
  Date

  	
  0

  
	
   

  	
  On Initial Vesting
  Date, provided the Participant’s Service has not terminated prior to such
  date

  	
  

  1/4

  
	
   

  	
  Plus

  	
   

  
	
   

  	
  For each additional
  full month of the Participant’s continuous Service from Initial Vesting Date
  until the Vested Ratio equals 1/1, an additional  

  	
   

   

  1/48

  
	
  Superseding Agreement:

  	
  [None] 
  [Zoran Corporation Executive Retention and Severance Plan]

  
	
   

  	
  The terms and conditions of the foregoing
  Superseding Agreement to which the Participant is a party shall,
  notwithstanding any provision of the Stock Option Agreement to the contrary,
  supersede any inconsistent term or condition set forth in the Stock Option
  Agreement to the extent intended by such Superseding Agreement.

  
							

 

By their signatures below
or by electronic acceptance or authentication in a form authorized by the
Company, the Company and the Participant agree that the Option is governed by
this Grant Notice and by the provisions of the Plan and the Stock Option
Agreement, both of which are made a part of this document.  The Participant acknowledges that copies of
the Plan, the Stock Option Agreement and the prospectus for the Plan are
available on the Company’s internal web site and may be viewed and printed by
the Participant for attachment to the Participant’s copy of this Grant Notice.  The Participant represents that the
Participant has read and is familiar with the provisions of the Plan and the
Stock Option Agreement, and hereby accepts the Option subject to all of their
terms and conditions.

 

	
  ZORAN CORPORATION

  	
   

  	
  PARTICIPANT

  
	
   

  	
   

  	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  Signature

  
	
  Its:

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  Date

  
	
  Address:

  	
  1390 Kifer Road

  	
   

  	
   

  
	
   

  	
  Sunnyvale, CA 94086

  	
   

  	
  Address

  

 

 

ATTACHMENTS:               2005 Equity Incentive Plan, as
amended to the Date of Grant; Stock Option Agreement, Exercise Notice and Plan
Prospectus

 

 

 

ZORAN CORPORATION

NOTICE OF
GRANT OF RESTRICTED STOCK

(For U.S. Participants)

 

The Participant has been granted an award (the “Award”) pursuant to the
Zoran Corporation 2005 Equity Incentive Plan (the “Plan”) of certain shares of Stock (the “Shares”),
as follows:

 

	
  Participant:

  	
   

  	
   

  	
   

  	
  Employee ID:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Date of Grant:

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Total Number of Shares:

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Vested Shares:

  	
   

  	
  Except as provided in the Restricted Stock Agreement
  and provided that the Participant’s Service has not terminated prior to the
  relevant date, the number of Vested Shares shall cumulatively increase on
  each respective date set forth below by the number of shares set forth
  opposite such date, as follows:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Vesting Date

  	
   

  	
  No. Shares Vesting

  	
   

  	
  Cumulative

  No. Vested Shares

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Superseding Agreement:

  	
   

  	
  [None] [Zoran Corporation Executive Retention and
  Severance Plan]

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  The terms and conditions of the foregoing
  Superseding Agreement to which the Participant is a party shall,
  notwithstanding any provision of the Restricted Stock Agreement to the
  contrary, supersede any inconsistent term or condition set forth in the
  Restricted Stock Agreement to the extent intended by such Superseding
  Agreement.

  
												

 

By their signatures below
or by electronic acceptance or authentication in a form authorized by the
Company, the Company and the Participant agree that the Award is governed by
this Grant Notice and by the provisions of the Plan and the Restricted Stock
Agreement, both of which are made part of this document.  The Participant acknowledges that copies of
the Plan, Restricted Stock Agreement and the prospectus for the Plan are
available on the Company’s internal web site and may be viewed and printed by
the Participant for attachment to the Participant’s copy of this Grant Notice.  The Participant represents that the
Participant has read and is familiar with the provisions of the Plan and the
Restricted Stock Agreement, and hereby accepts the Award subject to all of
their terms and conditions.

 

	
  ZORAN CORPORATION

  	
  PARTICIPANT

  
	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  Signature

  
	
  Its:

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  Date

  
	
   

  	
   

  	
   

  	
   

  
	
  Address:

  	
  1390 Kifer Road

  Sunnyvale, CA 94086

  	
   

  	
  Address

  
						

 

	
  ATTACHMENTS:

  	
  2005 Equity Incentive Plan, as amended to the Date
  of Grant; Restricted Stock Agreement, Assignment Separate From Certificate
  and Plan Prospectus

  

 

 

 

ZORAN CORPORATION

NOTICE OF
GRANT OF RESTRICTED STOCK UNITS

(For U.S. Participants)

 

The Participant has been granted an award of
Restricted Stock Units (the “Award”)
pursuant to the Zoran Corporation 2005 Equity Incentive Plan (the “Plan”), each of which represents
the right to receive on the applicable Settlement Date one (1) share of
Stock of Zoran Corporation, as follows:

 

	
  Participant:

  	
   

  	
   

  	
   

  	
  Employee ID:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Date of Grant:

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Number of Restricted

  Stock Units:

  	
   

  	
                                     , subject to adjustment as provided by
  the Restricted Stock Units Agreement.

  
	
   

  	
   

  	
   

  
	
  Settlement Date:

  	
   

  	
  For each Restricted Stock Unit, except as otherwise
  provided by the Restricted Stock

  Units Agreement, the date on which such unit becomes a Vested Unit in
  accordance

  with the vesting schedule set forth below.

  
	
   

  	
   

  	
   

  
	
  Vested Units:

  	
   

  	
  Except as provided in the Restricted Stock Units
  Agreement and provided that the Participant’s Service has not terminated
  prior to the relevant date, the number of

  Vested Units shall cumulatively increase on each respective date set forth
  below by

  the number of units set forth opposite such date, as follows:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Vesting Date

  	
   

  	
  No. Units Vesting

  	
   

  	
  Cumulative

  No. Vested Units

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Superseding Agreement:

  	
   

  	
  [None] [Zoran Corporation Executive Retention and
  Severance Plan]

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  The terms and conditions of the foregoing
  Superseding Agreement to which the

  Participant is a party shall, notwithstanding any provision of the Restricted
  Stock

  Units Agreement to the contrary, supersede any inconsistent term or condition
  set

  forth in the Restricted Stock Units Agreement to the extent intended by such

  Superseding Agreement.

  
											

 

By their signatures below
or by electronic acceptance or authentication in a form authorized by the
Company, the Company and the Participant agree that the Award is governed by
this Notice and by the provisions of the Plan and the Restricted Stock Units
Agreement, both of which are made a part of this document.  The Participant acknowledges that copies of
the Plan, Restricted Stock Units Agreement and the prospectus for the Plan are
available on the Company’s internal web site and may be viewed and printed by
the Participant for attachment to the Participant’s copy of this Grant
Notice.  The Participant represents that
the Participant has read and is familiar with the provisions of the Plan and
Restricted Stock Units Agreement, and hereby accepts the Award subject to all
of their terms and conditions.

 

	
  ZORAN CORPORATION

  	
  PARTICIPANT

  
	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  Signature

  
	
  Its:

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  Date

  
	
   

  	
   

  	
   

  	
   

  
	
  Address:

  	
  1390 Kifer Road

  Sunnyvale, CA 94086

  	
   

  	
  Address

  
					

 

	
  ATTACHMENTS:

  	
  2005 Equity Incentive Plan, as amended to the Date
  of Grant; Restricted Stock Units Agreement and Plan Prospectus

  

 

 

 

ZORAN CORPORATION

NOTICE OF
GRANT OF RESTRICTED STOCK UNITS

(For Non-U.S. Participants)

 

The Participant has been granted an award of
Restricted Stock Units (the “Award”)
pursuant to the Zoran Corporation 2005 Equity Incentive Plan (the “Plan”), each of which
represents the right to receive on the applicable Settlement Date one (1) share
of Stock of Zoran Corporation, as follows:

 

	
  Participant:

  	
   

  	
  First Name Last Name

  	
   

  	
  Employee ID:

  	
   

  	
  ID

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Date of Grant:

  	
   

  	
  Option Date

  
	
   

  	
   

  	
   

  
	
  Number of Restricted Stock
  Units:

  	
   

  	
  Shares, subject to adjustment as provided by the
  Restricted Stock Units Agreement.

  
	
   

  	
   

  	
   

  
	
  Settlement Date:

  	
   

  	
  For each Restricted Stock Unit, except as otherwise
  provided by the Restricted Stock Units Agreement, the date on which such unit
  becomes a Vested Unit in accordance with the vesting schedule set forth
  below.

  
	
   

  	
   

  	
   

  
	
  Local Law:

  	
   

  	
  The laws, rules and regulations of [Name of Country], of which the Participant is a resident.

  
	
   

  	
   

  	
   

  
	
  Vested Units:

  	
   

  	
  Except as provided in the Restricted Stock Units
  Agreement and provided that the Participant’s Service has not terminated
  prior to the relevant date, the number of Vested Units shall cumulatively
  increase on each respective date set forth below by the number of units set
  forth opposite such date, as follows:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Vesting Date

  	
   

  	
  No. Units Vesting

  	
   

  	
  Cumulative

  No. Vested Units

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Superseding Agreement:

  	
   

  	
  [None] [Zoran Corporation Executive Retention and
  Severance Plan]

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  The terms and conditions of the foregoing
  Superseding Agreement to which the Participant is a party shall,
  notwithstanding any provision of the Restricted Stock Units Agreement to the
  contrary, supersede any inconsistent term or condition set forth in the
  Restricted Stock Units Agreement to the extent intended by such Superseding
  Agreement.

  
										

 

 

By their signatures below
or by electronic acceptance or authentication in a form authorized by the
Company, the Company and the Participant agree that the Award is governed by
this Notice and by the provisions of the Plan and the Restricted Stock Units
Agreement, both of which are made a part of this document.  The Participant acknowledges that copies of
the Plan, Restricted Stock Units Agreement and the prospectus for the Plan are
available on the Company’s internal web site and may be viewed and printed by
the Participant for attachment to the Participant’s copy of this Grant
Notice.  The Participant represents that
the Participant has read and is familiar with the provisions of the Plan and
Restricted Stock Units Agreement, and hereby accepts the Award subject to all
of their terms and conditions.

 

	
  ZORAN CORPORATION

  	
  PARTICIPANT

  
	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  Signature

  
	
  Its:

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  Date

  
	
   

  	
   

  	
   

  	
   

  
	
  Address:

  	
  1390 Kifer Road

  Sunnyvale, CA 94086

  	
   

  	
  Address

  
					

 

	
  ATTACHMENTS:

  	
  2005 Equity Incentive Plan, as amended to the Date
  of Grant; Restricted Stock Units Agreement and Plan ProspectusExhibit 10.12

 

Zoran
Corporation

2005
Outside Directors Equity Plan

 

TABLE OF CONTENTS

 

	
  1.

  	
  Establishment,
  Purpose and Term of Plan

  
	
   

  	
   

  	
   

  
	
   

  	
  1.1

  	
  Establishment

  
	
   

  	
  1.2

  	
  Purpose

  
	
   

  	
  1.3

  	
  Term
  of Plan

  
	
   

  	
   

  	
   

  
	
  2.

  	
  Definitions
  and Construction

  
	
   

  	
   

  	
   

  
	
   

  	
  2.1

  	
  Definitions

  
	
   

  	
  2.2

  	
  Construction

  
	
   

  	
   

  	
   

  
	
  3.

  	
  Administration

  
	
   

  	
   

  	
   

  
	
   

  	
  3.1

  	
  Administration
  by the Board

  
	
   

  	
  3.2

  	
  Authority
  of Officers

  
	
   

  	
  3.3

  	
  Powers
  of the Board

  
	
   

  	
  3.4

  	
  Option
  or SAR Repricing

  
	
   

  	
  3.5

  	
  Indemnification

  
	
   

  	
   

  	
   

  
	
  4.

  	
  Shares
  Subject to Plan

  
	
   

  	
   

  	
   

  
	
   

  	
  4.1

  	
  Maximum
  Number of Shares Issuable

  
	
   

  	
  4.2

  	
  Share
  Accounting

  
	
   

  	
  4.3

  	
  Adjustments
  for Changes in Capital Structure

  
	
   

  	
   

  	
   

  
	
  5.

  	
  Eligibility,
  Participation and Award Limitations

  
	
   

  	
   

  	
   

  
	
   

  	
  5.1

  	
  Persons
  Eligible for Awards

  
	
   

  	
  5.2

  	
  Annual
  Award Limits

  
	
   

  	
   

  	
   

  
	
  6.

  	
  Outside
  Director Awards

  
	
   

  	
   

  	
   

  
	
  7.

  	
  Stock
  Options

  
	
   

  	
   

  	
   

  
	
   

  	
  7.1

  	
  Exercise
  Price

  
	
   

  	
  7.2

  	
  Exercisability
  and Term of Options

  
	
   

  	
  7.3

  	
  Payment
  of Exercise Price

  
	
   

  	
  7.4

  	
  Effect
  of Termination of Service

  
	
   

  	
  7.5

  	
  Transferability
  of Options

  
	
   

  	
   

  	
   

  
	
  8.

  	
  Stock
  Appreciation Rights

  
	
   

  	
   

  	
   

  
	
   

  	
  8.1

  	
  Types
  of SARs Authorized

  
	
   

  	
  8.2

  	
  Exercise
  Price

  
	
   

  	
  8.3

  	
  Exercisability
  and Term of SARs

  
	
   

  	
  8.4

  	
  Exercise
  of SARs

  
	
   

  	
  8.5

  	
  Deemed
  Exercise of SARs

  

 

i

 

	
   

  	
  8.6

  	
  Effect
  of Termination of Service

  
	
   

  	
  8.7

  	
  Transferability
  of SARs

  
	
   

  	
   

  	
   

  
	
  9.

  	
  Restricted
  Stock Unit Awards

  
	
   

  	
   

  	
   

  
	
   

  	
  9.1

  	
  Purchase
  Price

  
	
   

  	
  9.2

  	
  Vesting

  
	
   

  	
  9.3

  	
  Voting
  Rights, Dividend Equivalent Rights and Distributions

  
	
   

  	
  9.4

  	
  Effect
  of Termination of Service

  
	
   

  	
  9.5

  	
  Settlement
  of Restricted Stock Unit Awards

  
	
   

  	
  9.6

  	
  Nontransferability
  of Restricted Stock Unit Awards

  
	
   

  	
   

  	
   

  
	
  10.

  	
  Deferred
  Compensation Awards

  
	
   

  	
   

  	
   

  
	
   

  	
  10.1

  	
  Establishment
  of Deferred Compensation Award Programs

  
	
   

  	
  10.2

  	
  Terms
  and Conditions of Deferred Compensation Awards

  
	
   

  	
   

  	
   

  
	
  11.

  	
  Standard
  Forms of Award Agreement

  
	
   

  	
   

  	
   

  
	
   

  	
  11.1

  	
  Award
  Agreement

  
	
   

  	
  11.2

  	
  Authority
  to Vary Terms

  
	
   

  	
   

  	
   

  
	
  12.

  	
  Change
  in Control

  
	
   

  	
   

  	
   

  
	
   

  	
  12.1

  	
  Effect
  of Change in Control on Options and SARs

  
	
   

  	
  12.2

  	
  Effect
  of Change in Control on Restricted Stock Unit Awards and Deferred
  Compensation Awards

  
	
   

  	
   

  	
   

  
	
  13.

  	
  Compliance
  with Securities Law

  
	
   

  	
   

  	
   

  
	
  14.

  	
  Tax
  Withholding

  
	
   

  	
   

  	
   

  
	
   

  	
  14.1

  	
  Tax
  Withholding in General

  
	
   

  	
  14.2

  	
  Withholding
  in Shares

  
	
   

  	
   

  	
   

  
	
  15.

  	
  Amendment
  or Termination of Plan

  
	
   

  	
   

  	
   

  
	
  16.

  	
  Compliance
  with Section 409A

  
	
   

  	
   

  	
   

  
	
   

  	
  16.1

  	
  Awards
  Subject to Section 409A

  
	
   

  	
  16.2

  	
  Deferral
  and/or Distribution Elections

  
	
   

  	
  16.3

  	
  Subsequent
  Elections

  
	
   

  	
  16.4

  	
  Distributions
  Pursuant to Deferral Elections

  
	
   

  	
  16.5

  	
  Unforeseeable
  Emergency

  
	
   

  	
  16.6

  	
  Disabled

  
	
   

  	
  16.7

  	
  Death

  
	
   

  	
  16.8

  	
  No
  Acceleration of Distributions

  

 

ii

 

	
  17.

  	
  Miscellaneous
  Provisions

  
	
   

  	
   

  	
   

  
	
   

  	
  17.1

  	
  Repurchase
  Rights

  
	
   

  	
  17.2

  	
  Provision
  of Information

  
	
   

  	
  17.3

  	
  Rights
  as Outside Director

  
	
   

  	
  17.4

  	
  Rights
  as a Stockholder

  
	
   

  	
  17.5

  	
  Delivery
  of Title to Shares

  
	
   

  	
  17.6

  	
  Fractional
  Shares

  
	
   

  	
  17.7

  	
  Beneficiary
  Designation

  
	
   

  	
  17.8

  	
  Severability

  
	
   

  	
  17.9

  	
  No
  Constraint on Corporate Action

  
	
   

  	
  17.10

  	
  Unfunded
  Obligation

  
	
   

  	
  17.11

  	
  Choice
  of Law

  

 

iii

 

Zoran
Corporation

2005
Outside Directors Equity Plan

 

1.                                      ESTABLISHMENT,
PURPOSE AND TERM OF PLAN.

 

1.1                                 Establishment. The Zoran Corporation 2005 Outside Directors Equity Plan
(the “Plan”) is hereby established effective as of July 13, 2005
the date of its approval by the stockholders of the Company (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, retain and reward persons performing services as Outside Directors of
the Company and by motivating such persons to contribute to the growth and
profitability of the Participating Company Group. The Plan seeks to achieve
this purpose by providing for Awards in the form of Options, Stock
Appreciation Rights, Restricted Stock Units and Deferred Compensation Awards.

 

1.3                                 Term of Plan. The Plan shall continue in effect
until its termination by the Board; provided, however, that all Awards 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)                                  “Affiliate” means (i) an
entity, other than a Parent Corporation, that directly, or indirectly through
one or more intermediary entities, controls the Company or (ii) an entity,
other than a Subsidiary Corporation, that is controlled by the Company directly
or indirectly through one or more intermediary entities. For this purpose, the
term “control” (including the term “controlled by”) means the possession,
direct or indirect, of the power to direct or cause the direction of the
management and policies of the relevant entity, whether through the ownership
of voting securities, by contract or otherwise; or shall have such other
meaning assigned such term for the purposes of registration on Form S-8
under the Securities Act.

 

(b)                                 “Award” means any Option,
Stock Appreciation Right, Restricted Stock Unit or Deferred Compensation Award
granted under the Plan.

 

(c)                                  “Award Agreement” means a written or
electronic agreement between the Company and a Participant setting forth the
terms, conditions and restrictions of the Award granted to the Participant.

 

(d)                                 “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).

 

(e)                                  “Change in Control” means, unless such
term or an equivalent term is otherwise defined with respect to an Award by the
Participant’s Award Agreement, the occurrence of any of the following:

 

(i)                                     any “person” (as such
term is used in Sections 13(d) and 14(d) of the Exchange Act),
other than (1) a trustee or other fiduciary holding securities of the
Company 

 

 

under
an employee benefit plan of a Participating Company or (2) a corporation
owned directly or indirectly by the stockholders of the Company in
substantially the same proportions as their ownership of the stock of the
Company, becomes the “beneficial owner” (as defined in Rule 13d-3
promulgated under the Exchange Act), directly or indirectly, of securities of
the Company representing fifty percent (50%) or more of (i) the
outstanding shares of common stock of the Company or (ii) the total
combined voting power of the Company’s then-outstanding securities entitled to
vote generally in the election of directors; or

 

(ii)                                  an Ownership Change
Event or series of related Ownership Change Events (collectively, a “Transaction”) in which the
stockholders of the Company immediately before the Transaction do not retain
immediately after the Transaction direct or indirect beneficial ownership of
more than fifty percent (50%) of the total combined voting power of the
outstanding voting securities of the Company or, in the case of an Ownership
Change Event described in Section 2.1(w)(iii), the entity to which the
assets of the Company were transferred (the “Transferee”), as the case may be;
or

 

(iii)                               a liquidation or dissolution of the
Company.

 

For
purposes of the preceding sentence, indirect beneficial ownership shall
include, without limitation, an interest resulting from ownership of the voting
securities of one or more corporations or other business entities which own the
Company or the Transferee, as the case may be, either directly or through
one or more subsidiary corporations or other business entities. The Board shall
have the right to determine whether multiple sales or exchanges of the voting
securities of the Company or multiple Ownership Change Events are related, and
its determination shall be final, binding and conclusive.

 

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

 

(g)                                 “Committee” means the
Compensation Committee and such other committee or subcommittee of the Board,
if any, duly appointed to administer the Plan and having such powers in each
instance 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.

 

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

 

(i)                                     “Consultant” means a person
engaged to provide consulting or advisory services (other than as an Employee
or a Director) to a Participating Company.

 

(j)                                     “Deferred Compensation
Award” means an award granted to a
Participant pursuant to Section 10.

 

(k)                                  “Director” means a member of the
Board.

 

(l)                                     “Disability” means the permanent
and total disability of the Participant within the meaning of Section 22(e)(3) of
the Code.

 

(m)                               “Dividend Equivalent” means a credit, made
at the discretion of the Board or as otherwise provided by the Plan, to the
account of a Participant in an amount equal to the cash dividends paid on one
share of Stock for each share of Stock represented by an Award held by such
Participant.

 

(n)                                 “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.

 

2

 

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

 

(p)                                 “Fair Market Value” means, as of any
date, the value of a share of Stock or other property as determined by the
Board, in its discretion, or by the Company, in its discretion, if such
determination is expressly allocated to the Company herein, subject to the
following:

 

(i)                                     Except as otherwise determined by
the Board, if, on such date, the Stock is listed on a national or regional
securities exchange or market system, the Fair Market Value of a share of Stock
shall be the closing price of a share of Stock (or the mean of the closing bid
and asked prices of a share of Stock if the Stock is so quoted instead) as
quoted on the Nasdaq National Market, The Nasdaq SmallCap Market or such other
national or regional securities exchange or market system constituting the
primary market for the Stock, as reported in The
Wall Street Journal or such other source as the Company deems
reliable. If the relevant date does not fall on a day on which the Stock has
traded on such 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, or such other appropriate day as shall be
determined by the Board, in its discretion.

 

(ii)                                  Notwithstanding the
foregoing, the Board may, in its discretion, determine the Fair Market Value on
the basis of the opening, closing, or average of the high and low sale prices
of a share of Stock on such date, the preceding trading day or the next
succeeding trading day; and, for purposes other than determining the exercise
price or purchase price of shares pursuant to an Award, the high or low sale
price of a share of Stock on such date, the preceding trading day or the next
succeeding trading day, the average of any such prices determined over a period
of trading days or the actual sale price of a share of Stock received by a
Participant. The Board may vary its method of determination of the Fair
Market Value as provided in this Section for different purposes under the
Plan.

 

(iii)                               If, on such date, the Stock is not
listed on a national or regional securities exchange or market system, the Fair
Market Value of a share of Stock shall be as determined by the Board in good
faith without regard to any restriction other than a restriction which, by its
terms, will never lapse.

 

(q)                                 “Full Value Award” means any Award
settled in Stock, other than (i) an Option, (ii) a Stock Appreciation
Right or (iii) a Deferred Compensation Award which is an elective cash
compensation reduction award described in Section 10.1(a) or a stock
issuance deferral award described in Section 10.1(b).

 

(r)                                    “Insider Trading Policy” means the written
policy of the Company pertaining to the purchase, sale, transfer or other
disposition of the Company’s equity securities by Directors, Officers,
Employees or other service providers who may possess material, nonpublic
information regarding the Company or its securities.

 

(s)                                  “Net-Exercise” means a procedure by
which the Participant will be issued a number of shares of Stock determined in
accordance with the following formula:

 

N = X(A-B)/A, where

“N” = the number of
shares of Stock to be issued to the Participant upon exercise of the Option;

“X” = the total number of
shares with respect to which the Participant has elected to exercise the
Option;

“A” = the Fair Market
Value of one (1) share of Stock determined on the exercise date; and

“B” = the exercise price
per share (as defined in the Participant’s Award Agreement)

 

3

 

(t)                                    “Officer” means any person
designated by the Board as an officer of the Company.

 

(u)                                 “Option” means a right to
purchase Stock granted to a Participant pursuant to Section 7. Each Option
shall be a nonstatutory stock option, that is an option not intended to qualify
as an incentive stock option within the meaning of Section 422(b) of
the Code.

 

(v)                                 “Outside
Director”
means a Director who is not an Employee.

 

(w)                               “Ownership Change Event” means the occurrence
of any of the following 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; or (iii) the sale, exchange, or transfer of all or
substantially all of the assets of the Company (other than a sale, exchange or
transfer to one or more subsidiaries of the Company).

 

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

 

(y)                                 “Participant” means any eligible
person who has been granted one or more Awards.

 

(z)                                   “Participating Company” means the Company or
any Parent Corporation, Subsidiary Corporation or Affiliate.

 

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

 

(bb)                          “Restricted Stock Unit” or “Stock Unit” means a right granted
to a Participant pursuant to Section 9 or Section 10, respectively,
to receive a share of Stock on a date determined in accordance with the
provisions of such Sections, as applicable, and the Participant’s Award
Agreement.

 

(cc)                            “Retirement” means a termination
of the Participant’s Service as a result of either of the following, provided
that the Participant has served continuously on the Board for at least two (2) years:
(i) the Participant’s resignation from the Board or (ii) the
expiration of the Participant’s term as a Director after the Participant has
declined to stand for reelection.

 

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

 

(ee)                            “SAR” or “Stock Appreciation Right” means a right granted
to a Participant pursuant to Section 8 to receive payment, for each share
of Stock subject to such SAR, of an amount equal to the excess, if any, of the
Fair Market Value of a share of Stock on the date of exercise of the SAR over
the exercise price.

 

(ff)                                “Section 409A” means Section 409A
of the Code (including regulations or administrative guidelines thereunder).

 

(gg)                          “Securities Act” means the Securities
Act of 1933, as amended.

 

(hh)                          “Service” means a Participant’s
employment or service with the Participating Company Group, whether in the
capacity of an Employee, a Director, or a Consultant. A Participant’s Service
shall not be deemed to have terminated merely because of a change in the
capacity in which the Participant renders such Service or a change in the
Participating Company for which the Participant renders such Service, provided
that there is no interruption or termination of the Participant’s 

 

4

 

Service.
Furthermore, a Participant’s Service shall not be deemed to have terminated if
the Participant takes any military leave, sick leave, or other bona fide leave
of absence approved by the Company. However, if any such leave taken by a
Participant exceeds ninety (90) days, then on the ninety-first (91st) day
following the commencement of such leave the Participant’s Service shall be
deemed to have terminated, unless the Participant’s right to return to Service
is guaranteed by statute or contract. Notwithstanding the foregoing, unless
otherwise designated by the Company or required by law, a leave of absence
shall not be treated as Service for purposes of determining vesting under the
Participant’s Award Agreement. A Participant’s Service shall be deemed to have
terminated either upon an actual termination of Service or upon the entity for
which the Participant performs Service ceasing to be a Participating Company. Subject
to the foregoing, the Company, in its discretion, shall determine whether the
Participant’s Service has terminated and the effective date of such
termination.

 

(ii)                                  “Stock” means the common
stock of the Company, as adjusted from time to time in accordance with Section 4.3.

 

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

 

(kk)                            “Vesting Conditions” mean those conditions
established in accordance with the Plan prior to the satisfaction of which
shares subject to an Award remain subject to forfeiture or a repurchase option
in favor of the Company exercisable for the Participant’s purchase price for
such shares upon the Participant’s termination of Service.

 

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 and the plural shall include
the singular. Use of the term “or” is not intended to be exclusive, unless the
context clearly requires otherwise.

 

3.                                       ADMINISTRATION.

 

3.1                                 Administration by the Board. The Plan shall be
administered by the Board, including any duly appointed Committee of the Board.
At any time that any class of equity security of the Company is registered
pursuant to Section 12 of the Exchange Act, the Plan shall be administered
in compliance with the requirements, if any, of Rule 16b-3. All questions
of interpretation of the Plan or of any Award 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 Award.

 

3.2                                 Authority of Officers. Any Officer 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.

 

3.3                                 Powers of the Board.
In addition to any other powers set forth in the Plan and subject to
the provisions of the Plan, the Board shall have the full and final power and
authority, in its discretion:

 

(a)                                  to determine the persons to whom,
and the time or times at which, Awards shall be granted and the number of
shares of Stock or units to be subject to each Award;

 

(b)                                 to determine the type of Award
granted;

 

(c)                                  to determine the Fair Market Value
of shares of Stock or other property;

 

(d)                                 to determine the terms, conditions
and restrictions applicable to each Award (which need not be identical) and any
shares acquired pursuant thereto, including, without limitation, (i) the
exercise or purchase price of shares pursuant to any Award, (ii) the
method of payment 

 

5

 

for
shares purchased pursuant to any Award, (iii) the method for satisfaction
of any tax withholding obligation arising in connection with Award, including
by the withholding or delivery of shares of Stock, (iv) the timing, terms
and conditions of the exercisability or vesting of any Award or any shares
acquired pursuant thereto, (v) the time of the expiration of any Award, (vi) the
effect of the Participant’s termination of Service on any of the foregoing, and
(vii) all other terms, conditions and restrictions applicable to any Award
or shares acquired pursuant thereto not inconsistent with the terms of the
Plan;

 

(e)                                  to approve one or more
forms of Award Agreement;

 

(f)                                    to amend, modify, extend, cancel or
renew any Award or to waive any restrictions or conditions applicable to any
Award or any shares acquired pursuant thereto;

 

(g)                                 to accelerate, continue, extend or
defer the exercisability or vesting of any Award or any shares acquired
pursuant thereto, including with respect to the period following a Participant’s
termination of Service;

 

(h)                                 without the consent of the affected
Participant and notwithstanding the provisions of any Award Agreement to the
contrary, to unilaterally substitute at any time a Stock Appreciation Right
providing for settlement solely in shares of Stock in place of any outstanding
Option, provided that such Stock Appreciation Right covers the same number of
shares of Stock and provides for the same exercise price (subject in each case
to adjustment in accordance with Section 4.3) as the replaced Option and
otherwise provides substantially equivalent terms and conditions as the
replaced Option, as determined by the Board;

 

(i)                                     to prescribe, amend or rescind
rules, guidelines and policies relating to the Plan, or to adopt sub-plans or
supplements to, or alternative versions of, the Plan, including, without
limitation, as the Board deems necessary or desirable to comply with the laws
or regulations of or to accommodate the tax policy, accounting principles or
custom of, foreign jurisdictions whose citizens may be granted Awards; and

 

(j)                                     to correct any defect, supply any
omission or reconcile any inconsistency in the Plan or any Award Agreement and
to make all other determinations and take such other actions with respect to
the Plan or any Award as the Board may deem advisable to the extent not
inconsistent with the provisions of the Plan or applicable law.

 

3.4                                 Option or SAR Repricing. Without the affirmative vote of
holders of a majority of the shares of Stock cast in person or by proxy at a
meeting of the stockholders of the Company at which a quorum representing a
majority of all outstanding shares of Stock is present or represented by proxy,
the Board shall not approve either (a) the cancellation of outstanding
Options or SARs and the grant in substitution therefore of new Options or SARs
having a lower exercise price or (b) the amendment of outstanding Options
or SARs to reduce the exercise price thereof.

 

3.5                                 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 or the Company 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.

 

6

 

4.                                       SHARES SUBJECT TO
PLAN.

 

4.1                                 Maximum Number of Shares Issuable. Subject to adjustment
as provided in Sections 4.2 and 4.3, the maximum aggregate number of
shares of Stock that may be issued under the Plan shall be equal to six
hundred thousand (600,000) shares, and shall consist of authorized but unissued
or reacquired shares of Stock or any combination thereof.

 

4.2                                 Share Accounting.

 

(a)                                  Each share of Stock subject to an
Award other than a Full Value Award shall be counted against the limit set
forth in Section 4.1 as one (1) share. Each share of Stock subject to
a Full Value Award shall be counted against the limit set forth in Section 4.1
as one and three-tenths (1.3) shares.

 

(b)                                 If an outstanding
Award for any reason expires or is terminated or canceled without having been
exercised or settled in full, or if shares of Stock acquired pursuant to an
Award subject to forfeiture or repurchase are forfeited or repurchased by the
Company for an amount not greater than the Participant’s purchase price, the
shares of Stock allocable to the terminated portion of such Award or such
forfeited or repurchased shares of Stock shall again be available for issuance
under the Plan. Shares withheld or reacquired by the Company in satisfaction of
tax withholding obligations pursuant to Section 14.2 shall not again be
available for issuance under the Plan. Upon payment in shares of Stock pursuant
to the exercise of an SAR, the number of shares available for issuance under
the Plan shall be reduced by the gross number of shares for which the SAR is
exercised. If the exercise price of an Option is paid by tender to the Company,
or attestation to the ownership, of shares of Stock owned by the Participant,
or by means of a Net-Exercise, the number of shares available for issuance
under the Plan shall be reduced by the gross number of shares for which the
Option is exercised.

 

4.3                                 Adjustments for Changes in Capital
Structure. Subject to any
required action by the stockholders of the Company, in the event of any change
in the Stock effected without receipt of consideration by the Company, whether
through merger, consolidation, reorganization, reincorporation,
recapitalization, reclassification, stock dividend, stock split, reverse stock
split, split-up, split-off, spin-off, combination of shares, exchange of
shares, or similar change in the capital structure of the Company, or in the
event of payment of a dividend or distribution to the stockholders of the
Company in a form other than Stock (excepting normal cash dividends) that
has a material effect on the Fair Market Value of shares of Stock, appropriate
adjustments shall be made in the number and kind of shares subject to the Plan
and to any outstanding Awards, in the Award limits set forth in Section 5.2
and in the exercise or purchase price per share under any outstanding Award in
order to prevent dilution or enlargement of Participants’ rights under the Plan.
For purposes of the foregoing, conversion of any convertible securities of the
Company shall not be treated as “effected without receipt of consideration by
the Company.”  If a majority of the shares which are of the same class as
the shares that are subject to outstanding Awards are exchanged for, converted
into, or otherwise become (whether or not pursuant to an Ownership Change
Event) shares of another corporation (the “New Shares”), the Board may unilaterally
amend the outstanding Awards to provide that such Awards are for New Shares. In
the event of any such amendment, the number of shares subject to, and the
exercise or purchase price per share of, the outstanding Awards shall be
adjusted in a fair and equitable manner as determined by the Board, in its
discretion. Any fractional share resulting from an adjustment pursuant to this Section 4.3
shall be rounded down to the nearest whole number, and in no event may the
exercise or purchase price under any Award be decreased to an amount less than
the par value, if any, of the stock subject to such Award. The Board in its
sole discretion, may also make such adjustments in the terms of any Award
to reflect, or related to, such changes in the capital structure of the Company
or distributions as it deems appropriate. The adjustments determined by the
Board pursuant to this Section shall be final, binding and conclusive.

 

7

 

5.                                       ELIGIBILITY,
PARTICIPATION AND AWARD LIMITATIONS.

 

5.1                                 Persons Eligible for Awards. Only those persons
who, at the time of grant, are serving as Outside Directors shall be eligible
to become Participants and to be granted Awards.

 

5.2                                 Annual Award Limits. Subject to adjustment as provided
in Section 4.3, no Participant may be granted within any fiscal year
of the Company one or more Awards for more than twenty thousand (20,000)
shares; provided, however, that the foregoing annual limit shall be increased
by one or more of the following additions, as applicable: (i) an
additional forty thousand (40,000) shares in the fiscal year in which the
Participant is first appointed or elected to the Board as an Outside Director, (ii) an
additional ten thousand (10,000) shares in any fiscal year in which the
Participant is serving as the Chairman of the Board or Lead Director, (iii) an
additional two thousand five hundred (2,500) shares per committee in any fiscal
year in which the Participant is serving on one or more committees of the Board
other than as the chairman of the committee, and (iv) an additional five
thousand (5,000) shares per committee in any fiscal year in which the
Participant is serving on one or more committees of the Board as the chairman
of the committee.

 

6.                                       OUTSIDE DIRECTOR
AWARDS.

 

From time to time, the Board shall set the amount(s) and
type(s) of Awards that shall be granted to all Outside Directors on a periodic,
nondiscriminatory basis pursuant to the Plan, as well as the additional amount(s) and
type(s) of Awards, if any, to be awarded, also on a periodic,
nondiscriminatory basis, in consideration of one or more of the following: (a) the
initial election or appointment of an individual to the Board as an Outside
Director, (b) an Outside Director’s service as Chairman of the Board or
Lead Director, (c) an Outside Director’s service other than as chairman on
one or more of the committees of the Board, and (d) an Outside Director’s
service as the chairman of one or more committees of the Board. The terms and
conditions of each Award shall comply with the applicable provisions of the
Plan. Subject to the limits set forth in Section 5.2 and the foregoing,
the Board shall grant Awards having such terms and conditions as it shall from
time to time determine.

 

7.                                       STOCK OPTIONS.

 

Options shall be evidenced by Award Agreements
specifying the number of shares of Stock covered thereby, in such form as
the Board shall from time to time establish. No Option or purported Option
shall be a valid and binding obligation of the Company unless evidenced by a
fully executed Award Agreement. Award Agreements evidencing Options may incorporate
all or any of the terms of the Plan by reference, including the provisions of Section 16
with respect to Section 409A if applicable, and shall comply with and be
subject to the following terms and conditions:

 

7.1                                 Exercise Price. The exercise price for
each Option shall be the Fair Market Value of a share of Stock on the effective
date of grant of the Option. Notwithstanding the foregoing, an Option may be
granted with an exercise price lower than the minimum exercise price set forth
above if such Option is granted pursuant to an assumption or substitution for
another option in a manner that would qualify under the provisions of Section 424(a) of
the Code.

 

7.2                                 Exercisability and Term of Options. Options shall be exercisable at
such time or times, or upon such event or events, and subject to such terms,
conditions, performance criteria and restrictions as shall be determined by the
Board and set forth in the Award Agreement evidencing such Option; provided,
however, that no Option shall be exercisable after the expiration of ten (10) years
after the effective date of grant of such Option. Subject to the foregoing,
unless otherwise specified by the Board in the grant of an Option, each Option
shall terminate ten (10) years after the effective date of grant of the
Option, unless earlier terminated in accordance with its provisions.

 

7.3                                 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 or by
check or cash equivalent, (ii) by tender to the Company, or 

 

8

 

attestation
to the ownership, of shares of Stock owned by the Participant having a Fair
Market Value not less than the exercise price, (iii) by delivery of a
properly executed notice of exercise together with irrevocable instructions to
a broker providing for the assignment to the Company 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”), (iv) by
delivery of a properly executed notice electing a Net-Exercise, (v) by
such other consideration as may be approved by the Board from time to time
to the extent permitted by applicable law, or (vi) by any combination
thereof. The Board may at any time or from time to time grant Options
which do not permit all of the foregoing forms of consideration to be used in
payment of the exercise price or which otherwise restrict one or more forms of
consideration.

 

(b)                                 Limitations on Forms of
Consideration.

 

(i)                                     Tender of Stock. Notwithstanding the foregoing, an
Option may not be exercised by tender to the Company, or attestation to
the ownership, of shares of Stock to the extent such tender or attestation
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, or attestation to the ownership, of shares of Stock unless such shares
either have been owned by the Participant for more than six (6) months (or
such other period, if any, as the Board may permit) and not used for
another Option exercise by attestation during such period, or were not
acquired, directly or indirectly, from the Company.

 

(ii)                                  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, including with respect to
one or more Participants specified by the Company notwithstanding that such
program or procedures may be available to other Participants.

 

7.4                                 Effect of Termination of Service.

 

(a)                                  Option Exercisability. Subject to earlier termination of
the Option as otherwise provided herein and unless otherwise provided by the
Board in the grant of an Option and set forth in the Award Agreement, an Option
shall terminate immediately upon the Participant’s termination of Service to
the extent that it is then unvested and shall be exercisable after the
Participant’s termination of Service to the extent it is then vested only
during the applicable time period determined in accordance with this Section and
thereafter shall terminate:

 

(i)                                     Disability. If the Participant’s Service
terminates because of the Disability of the Participant, the Option, to the
extent unexercised and exercisable for vested shares on the date on which the
Participant’s Service terminated, may be exercised by the Participant (or
the Participant’s guardian or legal representative) at any time prior to the
expiration of twelve (12) months after the date on which the Participant’s
Service terminated, but in any event no later than the date of expiration of
the Option’s term as set forth in the Award Agreement evidencing such Option
(the “Option Expiration Date”); provided, however,
that if the Participant has served continuously on the Board for at least two (2) years
prior to such termination of Service, the Option, to the extent unexercised and
exercisable for vested shares on the date on which the Participant’s Service
terminated, may be exercised by the Participant (or the Participant’s
guardian or legal representative) at any time prior to the Option Expiration
Date.

 

(ii)                                  Death. If the Participant’s Service
terminates because of the death of the Participant, the Option, to the extent
unexercised and exercisable for vested shares on the date on which the
Participant’s Service terminated, may be exercised by the Participant’s
legal representative or other person who acquired the right to exercise the
Option by reason of the Participant’s death at any time prior to the expiration
of twelve (12) months after the date on which the Participant’s Service
terminated, but in any event no later than the Option Expiration Date;
provided, however, that if the Participant has served continuously on the Board
for at least two (2) years prior to such termination of Service, the
Option, 

 

9

 

to
the extent unexercised and exercisable for vested shares on the date on which
the Participant’s Service terminated, may be exercised by the Participant
(or the Participant’s guardian or legal representative) at any time prior to
the Option Expiration Date. The Participant’s Service shall be deemed to have
terminated on account of death if the Participant dies within three (3) months
after the Participant’s termination of Service.

 

(iii)                               Retirement. If the Participant ‘s Service
terminates because of the Retirement of the Participant, the Option, to the
extent unexercised and exercisable for vested shares on the date on which the
Participant ‘s Service terminated, may be exercised at any time prior to
the Option Expiration Date.

 

(iv)                              Other Termination of Service. If the Participant’s
Service terminates for any reason, except Disability, death or Retirement, the
Option, to the extent unexercised and exercisable for vested shares on the date
on which the Participant’s Service terminated, may be exercised by the Participant
at any time prior to the expiration of three (3) months after the date on
which the Participant’s Service terminated, but in any event no later than the
Option Expiration Date.

 

(b)                                 Extension if Exercise Prevented by Law. Notwithstanding the
foregoing, if the exercise of an Option within the applicable time periods set
forth in Section 7.4(a) is prevented by the provisions of Section 13
below, the Option shall remain exercisable until three (3) months after
the date the Participant is notified by the Company that the Option is
exercisable, but in any event no later than the Option Expiration Date.

 

(c)                                  Extension if Participant Subject to Section 16(b).
Notwithstanding
the foregoing, if a sale within the applicable time periods set forth in Section 7.4(a) of
shares acquired upon the exercise of the Option would subject the Participant
to suit under Section 16(b) of the Exchange Act, the Option shall
remain exercisable until the earliest to occur of (i) the tenth (10th) day
following the date on which a sale of such shares by the Participant would no
longer be subject to such suit, (ii) the one hundred and ninetieth (190th)
day after the Participant’s termination of Service, or (iii) the Option
Expiration Date.

 

7.5          
Transferability of
Options. During the lifetime of the Participant, an Option shall be exercisable
only by the Participant or the Participant’s guardian or legal representative. An
Option shall not be subject in any manner to anticipation, alienation, sale,
exchange, transfer, assignment, pledge, encumbrance, or garnishment by
creditors of the Participant or the Participant’s beneficiary, except transfer
by will or by the laws of descent and distribution. Notwithstanding the
foregoing, an Option shall be assignable or transferable subject to the
applicable limitations, if any, described in the General Instructions to Form S-8
Registration Statement under the Securities Act.

 

8.                                       STOCK APPRECIATION
RIGHTS.

 

Stock Appreciation Rights shall be evidenced by Award
Agreements specifying the number of shares of Stock subject to the Award, in
such form as the Board shall from time to time establish. No SAR or
purported SAR shall be a valid and binding obligation of the Company unless
evidenced by a fully executed Award Agreement. Award Agreements evidencing SARs
may incorporate all or any of the terms of the Plan by reference,
including provisions of Section 16 with respect to Section 409A if
applicable, and shall comply with and be subject to the following terms and
conditions:

 

8.1                                 Types of SARs Authorized. SARs may be granted in tandem
with all or any portion of a related Option (a “Tandem SAR”) or may be
granted independently of any Option (a “Freestanding SAR”). A Tandem SAR may only
be granted concurrently with the grant of the related Option.

 

8.2                                 Exercise Price. The exercise price for each SAR
shall be established in the discretion of the Board; provided, however, that (a) the
exercise price per share subject to a Tandem SAR shall be the exercise price
per share under the related Option and (b) the exercise price per share
subject to 

 

10

 

a
Freestanding SAR shall be not less than the Fair Market Value of a share of
Stock on the effective date of grant of the SAR.

 

8.3                                 Exercisability and Term of SARs.

 

(a)                                  Tandem SARs. Tandem SARs shall be
exercisable only at the time and to the extent, and only to the extent, that
the related Option is exercisable, subject to such provisions as the Board may specify
where the Tandem SAR is granted with respect to less than the full number of
shares of Stock subject to the related Option. The Board may, in its
discretion, provide in any Award Agreement evidencing a Tandem SAR that such
SAR may not be exercised without the advance approval of the Company and,
if such approval is not given, then the Option shall nevertheless remain
exercisable in accordance with its terms. A Tandem SAR shall terminate and
cease to be exercisable no later than the date on which the related Option
expires or is terminated or canceled. Upon the exercise of a Tandem SAR with
respect to some or all of the shares subject to such SAR, the related Option
shall be canceled automatically as to the number of shares with respect to
which the Tandem SAR was exercised. Upon the exercise of an Option related to a
Tandem SAR as to some or all of the shares subject to such Option, the related
Tandem SAR shall be canceled automatically as to the number of shares with
respect to which the related Option was exercised.

 

(b)                                 Freestanding SARs. Freestanding SARs
shall be exercisable at such time or times, or upon such event or events, and
subject to such terms, conditions, performance criteria and restrictions as
shall be determined by the Board and set forth in the Award Agreement
evidencing such SAR; provided, however, that no Freestanding SAR shall be
exercisable after the expiration of ten (10) years after the effective
date of grant of such SAR.

 

8.4                                 Exercise of SARs. Upon the exercise (or deemed
exercise pursuant to Section 8.5) of an SAR, the Participant (or the
Participant’s legal representative or other person who acquired the right to
exercise the SAR by reason of the Participant’s death) shall be entitled to
receive payment of an amount for each share with respect to which the SAR is
exercised equal to the excess, if any, of the Fair Market Value of a share of
Stock on the date of exercise of the SAR over the exercise price. Payment of
such amount shall be made solely in shares of Stock. Unless otherwise provided
in the Award Agreement evidencing a Freestanding SAR, payment upon the exercise
of each SAR shall be made in a lump sum as soon as practicable following the
date of exercise of the SAR. The Award Agreement evidencing any Freestanding
SAR may provide for deferred payment in a lump sum or in installments in
compliance with Section 409A. The number of shares to be issued in payment
of an SAR shall be determined on the basis of the Fair Market Value of a share
of Stock on the date of exercise of the SAR. For purposes of Section 8, an
SAR shall be deemed exercised on the date on which the Company receives notice
of exercise from the Participant or as otherwise provided in Section 8.5.

 

8.5                                 Deemed Exercise of SARs. If, on the date on
which an SAR would otherwise terminate or expire, the SAR by its terms remains
exercisable immediately prior to such termination or expiration and, if so
exercised, would result in a payment to the holder of such SAR, then any
portion of such SAR which has not previously been exercised shall automatically
be deemed to be exercised as of such date with respect to such portion.

 

8.6                                 Effect of Termination of Service. Subject to earlier
termination of the SAR as otherwise provided herein and unless otherwise
provided by the Board in the grant of an SAR and set forth in the Award
Agreement, an SAR shall be exercisable after a Participant’s termination of
Service only to the extent and during the applicable time period determined in
accordance with Section 7.4 (treating the SAR as if it were an Option) and
thereafter shall terminate.

 

8.7                                 Transferability of SARs. During the lifetime of the
Participant, an SAR shall be exercisable only by the Participant or the
Participant’s guardian or legal representative. An SAR shall not be subject in
any manner to anticipation, alienation, sale, exchange, transfer, assignment,
pledge, encumbrance, or garnishment by creditors of the Participant or the
Participant’s beneficiary, except transfer by will or by the laws of descent
and distribution. Notwithstanding the foregoing, an SAR shall be 

 

11

 

assignable
or transferable subject to the applicable limitations, if any, described in the
General Instructions to Form S-8 Registration Statement under the
Securities Act.

 

9.                                       RESTRICTED STOCK
UNIT AWARDS.

 

Restricted Stock Unit Awards shall be evidenced by
Award Agreements specifying the number of Restricted Stock Units subject to the
Award, in such form as the Board shall from time to time establish. No
Restricted Stock Unit Award or purported Restricted Stock Unit Award shall be a
valid and binding obligation of the Company unless evidenced by a fully
executed Award Agreement. Award Agreements evidencing Restricted Stock Units may incorporate
all or any of the terms of the Plan by reference, including the provisions of Section 16
with respect to Section 409A, if applicable, and shall comply with and be
subject to the following terms and conditions:

 

9.1          
Purchase Price. No monetary payment
(other than applicable tax withholding, if any) shall be required as a
condition of receiving a Restricted Stock Unit Award, the consideration for
which shall be services actually rendered to a Participating Company or for its
benefit. Notwithstanding the foregoing, if required by applicable state
corporate law, the Participant shall furnish consideration in the form of
cash or past services rendered to a Participating Company or for its benefit
having a value not less than the par value of the shares of Stock issued upon
settlement of the Restricted Stock Unit Award.

 

9.2                                 Vesting. Restricted Stock Units shall be
made subject to Vesting Conditions based upon the satisfaction of such Service
requirements, conditions, restrictions or performance criteria as shall be
established by the Board and set forth in the Award Agreement evidencing such
Award.

 

9.3                                 Voting Rights, Dividend Equivalent Rights and
Distributions. Participants shall have no voting rights with respect to
shares of Stock represented by Restricted Stock Units until the date of the
issuance of such shares (as evidenced by the appropriate entry on the books of
the Company or of a duly authorized transfer agent of the Company). However,
the Board, in its discretion, may provide in the Award Agreement
evidencing any Restricted Stock Unit Award that the Participant shall be
entitled to receive Dividend Equivalents with respect to the payment of cash
dividends on Stock during the period beginning on the date such Award is
granted and ending, with respect to the particular shares subject to the Award,
on the earlier of the date the Award is settled or the date on which it is
terminated. Such Dividend Equivalents, if any, shall be paid by crediting the
Participant with additional whole Restricted Stock Units as of the date of
payment of such cash dividends on Stock. The number of additional Restricted
Stock Units (rounded to the nearest whole number) to be so credited shall be
determined by dividing (a) the amount of cash dividends paid on such date
with respect to the number of shares of Stock represented by the Restricted
Stock Units previously credited to the Participant by (b) the Fair Market
Value per share of Stock on such date. Such additional Restricted Stock Units
shall be subject to the same terms and conditions and shall be settled in the
same manner and at the same time (or as soon thereafter as practicable) as the
Restricted Stock Units originally subject to the Restricted Stock Unit Award. In
the event of a dividend or distribution paid in shares of Stock or other
property or any other adjustment made upon a change in the capital structure of
the Company as described in Section 4.3, appropriate adjustments shall be
made in the Participant’s Restricted Stock Unit Award so that it represents the
right to receive upon settlement any and all new, substituted or additional
securities or other property (other than normal cash dividends) to which the
Participant would be entitled by reason of the shares of Stock issuable upon
settlement of the Award, and all such new, substituted or additional securities
or other property shall be immediately subject to the same Vesting Conditions
as are applicable to the Award.

 

9.4                                 Effect of Termination of Service. Unless otherwise
provided by the Board and set forth in the Award Agreement evidencing a
Restricted Stock Unit Award, if a Participant’s Service terminates for any
reason, whether voluntary or involuntary (including the Participant’s death or
disability), then the Participant shall forfeit to the Company any Restricted
Stock Units pursuant to the Award which remain subject to Vesting Conditions as
of the date of the Participant’s termination of Service.

 

9.5                                 Settlement of Restricted Stock Unit Awards. The Company shall
issue to a Participant on the date on which Restricted Stock Units subject to
the Participant’s Restricted Stock Unit 

 

12

 

Award
vest or on such other date determined by the Board, in its discretion, and set
forth in the Award Agreement one (1) share of Stock (and/or any other new,
substituted or additional securities or other property pursuant to an
adjustment described in Section 9.3) for each Restricted Stock Unit then
becoming vested or otherwise to be settled on such date, subject to the
withholding of applicable taxes, if any. If permitted by the Board, subject to
the provisions of Section 16 with respect to Section 409A, the
Participant may elect in accordance with terms specified in the Award
Agreement to defer receipt of all or any portion of the shares of Stock or
other property otherwise issuable to the Participant pursuant to this Section,
and such deferred issuance date(s) elected by the Participant shall be set
forth in the Award Agreement. The Board, in its discretion, may provide in
any Award Agreement evidencing a Restricted Stock Unit Award that, if the
settlement of the Award with respect to any shares would otherwise occur on a
day on which the sale of such shares would violate the Company’s Insider
Trading Policy, then the settlement with respect to such shares shall occur on
the next day on which the sale of such shares would not violate the Insider
Trading Policy.

 

9.6                                 Nontransferability  of Restricted Stock Unit Awards. The right to receive
shares pursuant to a Restricted Stock Unit Award shall not be subject in any
manner to anticipation, alienation, sale, exchange, transfer, assignment,
pledge, encumbrance, or garnishment by creditors of the Participant or the
Participant’s beneficiary, except transfer by will or by the laws of descent
and distribution. All rights with respect to a Restricted Stock Unit Award
granted to a Participant hereunder shall be exercisable during his or her
lifetime only by such Participant or the Participant’s guardian or legal
representative.

 

10.                                 DEFERRED
COMPENSATION AWARDS.

 

10.1                           Establishment of Deferred Compensation Award Programs.
This
Section 10 shall not be effective unless and until the Board determines to
establish a program pursuant to this Section. The Board, in its discretion and
upon such terms and conditions as it may determine, subject to the provisions
of Section 16 with respect to Section 409A, may establish one or
more programs pursuant to the Plan under which:

 

(a)                                  Elective Cash Compensation Reduction
Awards. Participants may irrevocably elect, prior to a date
specified by the Board and complying with Section 409A, to reduce such
Participant’s compensation otherwise payable in cash (subject to any minimum or
maximum reductions imposed by the Board) and to be granted automatically at
such time or times as specified by the Board one or more Awards of Stock Units
with respect to such numbers of shares of Stock as determined in accordance
with the rules of the program established by the Board and having such
other terms and conditions as established by the Board.

 

(b)                                 Stock Issuance Deferral Awards. Participants may irrevocably
elect, prior to a date specified by the Board and complying with Section 409A,
to be granted automatically an Award of Stock Units with respect to such number
of shares of Stock and upon such other terms and conditions as established by
the Board in lieu of:

 

(i)                                     shares of Stock otherwise issuable
to such Participant upon the exercise of an Option; or

 

(ii)                                  shares of Stock otherwise issuable
to such Participant upon the exercise of an SAR.

 

10.2                           Terms and Conditions of Deferred Compensation Awards. Deferred Compensation
Awards granted pursuant to this Section 10 shall be evidenced by Award
Agreements in such form as the Board shall from time to time establish. No
such Deferred Compensation Award or purported Deferred Compensation Award shall
be a valid and binding obligation of the Company unless evidenced by a fully
executed Award Agreement. Award Agreements evidencing Deferred Compensation
Awards may incorporate all or any of the terms of the Plan by reference,
including the provisions of 

 

13

 

Section 16
with respect to Section 409A, and, except as provided below, shall comply
with and be subject to the terms and conditions of Section 9.

 

(a)                                  Voting Rights; Dividend Equivalent Rights
and Distributions. Participants shall
have no voting rights with respect to shares of Stock represented by Stock
Units until the date of the issuance of such shares (as evidenced by the
appropriate entry on the books of the Company or of a duly authorized transfer
agent of the Company). However, a Participant shall be entitled to receive
Dividend Equivalents with respect to the payment of cash dividends on Stock
during the period beginning on the date the Stock Units are granted
automatically to the Participant and ending on the earlier of the date on which
such Stock Units are settled or the date on which they are forfeited. Such
Dividend Equivalents shall be paid by crediting the Participant with additional
whole Stock Units as of the date of payment of such cash dividends on Stock. The
number of additional Stock Units (rounded to the nearest whole number) to be so
credited shall be determined by dividing (i) the amount of cash dividends
paid on the dividend payment date with respect to the number of shares of Stock
represented by the Stock Units previously credited to the Participant by (ii) the
Fair Market Value per share of Stock on such date. Such additional Stock Units
shall be subject to the same terms and conditions and shall be settled in the
same manner and at the same time (or as soon thereafter as practicable) as the
Stock Units originally subject to the Stock Unit Award. In the event of a
dividend or distribution paid in shares of Stock or other property or any other
adjustment made upon a change in the capital structure of the Company as
described in Section 4.3, appropriate adjustments shall be made in the
Participant’s Stock Unit Award so that it represents the right to receive upon
settlement any and all new, substituted or additional securities or other
property (other than normal cash dividends) to which the Participant would
entitled by reason of the shares of Stock issuable upon settlement of the
Award.

 

(b)                                 Settlement of Stock Unit Awards. A Participant electing
to receive an Award of Stock Units pursuant to this Section 10 shall
specify at the time of such election a settlement date with respect to such
Award which complies with Section 409A. The Company shall issue to the
Participant on the settlement date elected by the Participant, or as soon
thereafter as practicable, a number of whole shares of Stock equal to the
number of vested Stock Units subject to the Stock Unit Award. Such shares of
Stock shall be fully vested, and the Participant shall not be required to pay
any additional consideration (other than applicable tax withholding) to acquire
such shares.

 

11.                                 STANDARD FORMS OF
AWARD AGREEMENT.

 

11.1                           Award Agreement. Each Award shall
comply with and be subject to the terms and conditions set forth in the
appropriate form of Award Agreement approved by the Board and as amended
from time to time. Any Award Agreement may consist of an appropriate form of
Notice of Grant and a form of Agreement incorporated therein by reference,
or such other form or forms, including electronic media, as the Board may approve
from time to time.

 

11.2                           Authority to Vary Terms. The Board shall have the authority from time to time to
vary the terms of any standard form of Award Agreement either in
connection with the grant or amendment of an individual Award 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 Award Agreement are not inconsistent with the terms of the Plan.

 

12.                                 CHANGE IN CONTROL.

 

12.1                           Effect of Change in Control on Options and SARs.

 

(a)                                  Accelerated Vesting. Notwithstanding any
other provision of the Plan to the contrary, in the event of a Change in
Control, each Option held by a Participant whose Service has not terminated
prior to the date of such Change in Control shall become immediately
exercisable and vested in full as of such date, subject to the consummation of
the Change in Control.

 

14

 

(b)                                 Assumption or Substitution. In the event of a
Change in Control, the surviving, continuing, successor, or purchasing entity
or parent thereof, as the case may be (the “Acquiror”), may, without the
consent of any Participant, either assume or continue the Company’s rights and
obligations under outstanding Options and SARs or substitute for outstanding
Options and SARs substantially equivalent options and stock appreciation rights
(as the case may be) for the Acquiror’s stock. Any Options or SARs which
are neither assumed or continued by the Acquiror in connection with the Change
in Control nor exercised as of the time of consummation of the Change in
Control shall terminate and cease to be outstanding effective as of the time of
consummation of the Change in Control.

 

(c)                                  Cash-Out. The Board may, in
its sole discretion and without the consent of any Participant, determine that,
upon the occurrence of a Change in Control, each or any Option or SAR
outstanding immediately prior to the Change in Control shall be canceled in
exchange for a payment with respect to each vested share (and each unvested
share, if so determined by the Board) of Stock subject to such canceled Option
or SAR in (i) cash, (ii) stock of the Company or of a corporation or
other business entity a party to the Change in Control, or (iii) other
property which, in any such case, shall be in an amount having a Fair Market
Value equal to the excess of the Fair Market Value of the consideration to be
paid per share of Stock in the Change in Control over the exercise price per
share under such Option or SAR (the “Spread”). In the event such
determination is made by the Board, the Spread (reduced by applicable
withholding taxes, if any) shall be paid to Participants in respect of the
vested portion of their canceled Options and SARs as soon as practicable
following the date of the Change in Control and in respect of the unvested
portion of their canceled Options and SARs in accordance with the vesting schedule applicable
to such Awards as in effect prior to the Change in Control.

 

12.2                           Effect of Change in Control on Restricted Stock Unit
Awards and Deferred Compensation Awards. Subject to the provisions of Section 16
with respect to Section 409A if applicable, in the event of a Change in
Control, each Restricted Stock Unit Award and each Deferred Compensation Award
held by a Participant whose Service has not terminated prior to such date shall
become vested in full as of such date, subject to the consummation of the
Change in Control, and shall be settled effective as of the date of the Change
in Control.

 

13.                                 COMPLIANCE WITH
SECURITIES LAW.

 

The grant of Awards and the issuance of shares of
Stock pursuant to any Award shall be subject to compliance with all applicable
requirements of federal, state and foreign law with respect to such securities
and the requirements of any stock exchange or market system upon which the
Stock may then be listed. In addition, no Award may be exercised or
shares issued pursuant to an Award unless (a) a registration statement
under the Securities Act shall at the time of such exercise or issuance be in
effect with respect to the shares issuable pursuant to the Award or (b) in
the opinion of legal counsel to the Company, the shares issuable pursuant to
the Award may be issued in accordance with the terms of an applicable
exemption from the registration requirements of the Securities Act. The
inability of the Company to obtain from any regulatory body having jurisdiction
the authority, if any, deemed by the Company’s legal counsel to be necessary to
the lawful issuance and sale of any shares hereunder shall relieve the Company
of any liability in respect of the failure to issue or sell such shares as to
which such requisite authority shall not have been obtained. As a condition to
issuance of any Stock, the Company may require the Participant to satisfy
any qualifications that may be necessary or appropriate, to evidence
compliance with any applicable law or regulation and to make any representation
or warranty with respect thereto as may be requested by the Company.

 

14.                                 TAX WITHHOLDING.

 

14.1                           Tax Withholding in General. The Company shall have
the right to deduct from any and all payments made under the Plan, or to
require the Participant, through payroll withholding, cash payment or
otherwise, to make adequate provision for, the federal, state, local and
foreign taxes, if any, required by law to be withheld by the Participating
Company Group with respect to an Award or the shares acquired pursuant thereto.
The Company shall have no obligation to deliver shares of Stock, to release
shares of Stock from an escrow established pursuant to an Award Agreement, or
to make any 

 

15

 

payment
in cash under the Plan until the Participating Company Group’s tax withholding
obligations have been satisfied by the Participant.

 

14.2                           Withholding in Shares. The Company shall have
the right, but not the obligation, to deduct from the shares of Stock issuable
to a Participant upon the exercise or settlement of an Award, or to accept from
the Participant the tender of, a number of whole shares of Stock having a Fair
Market Value, as determined by the Company, equal to all or any part of
the tax withholding obligations of the Participating Company Group. The Fair
Market Value of any shares of Stock withheld or tendered to satisfy any such
tax withholding obligations shall not exceed the amount determined by the
applicable minimum statutory withholding rates.

 

15.                                 AMENDMENT OR
TERMINATION OF PLAN.

 

The
Board may amend, suspend or terminate the Plan at any time. However,
without the approval of the Company’s stockholders, there shall be (a) no
increase in the maximum aggregate number of shares of Stock that may be
issued under the Plan (except by operation of the provisions of Section 4.3)
and (b) no other amendment of the Plan that would require approval of the
Company’s stockholders under any applicable law, regulation or rule, including
the rules of any stock exchange or market system upon which the Stock may then
be listed. No amendment, suspension or termination of the Plan shall affect any
then outstanding Award unless expressly provided by the Board. Except as
provided by the next sentence, no amendment, suspension or termination of the
Plan may adversely affect any then outstanding Award without the consent
of the Participant. Notwithstanding any other provision of the Plan to the
contrary, the Board may, in its sole and absolute discretion and without the
consent of any Participant, amend the Plan or any Award Agreement, to take
effect retroactively or otherwise, as it deems necessary or advisable for the
purpose of conforming the Plan or such Award Agreement to any present or future
law, regulation or rule applicable to the Plan, including, but not limited
to, Section 409A.

 

16.                                 COMPLIANCE WITH SECTION 409A.

 

16.1                           Awards Subject to Section 409A. The provisions of this
Section 16 shall apply to any Award or portion thereof that is or becomes
subject to Section 409A, notwithstanding any provision to the contrary
contained in the Plan or the Award Agreement applicable to such Award. Awards
subject to Section 409A include, without limitation:

 

(a)                                  Any Option that permits the
deferral of compensation other than the deferral of recognition of income until
the exercise of the Award.

 

(b)                                 Each Deferred Compensation Award.

 

(c)                                  Any Restricted Stock Unit Award
that either (i) provides by its terms for settlement of all or any portion
of the Award on one or more dates following the Short-Term Deferral Period (as
defined below) or (ii) permits or requires the Participant to elect one or
more dates on which the Award will be settled.

 

Subject
to any applicable U.S. Treasury Regulations promulgated pursuant to Section 409A
or other applicable guidance, the term “Short-Term Deferral Period” means the period ending on the later of (i) the
date that is two and one-half months from the end of the Company’s fiscal year
in which the applicable portion of the Award is no longer subject to a
substantial risk of forfeiture or (ii) the date that is two and one-half
months from the end of the Participant’s taxable year in which the applicable
portion of the Award is no longer subject to a substantial risk of forfeiture. For
this purpose, the term “substantial risk of forfeiture” shall have the meaning
set forth in any applicable U.S. Treasury Regulations promulgated pursuant to Section 409A
or other applicable guidance.

 

16.2                           Deferral and/or Distribution Elections. Except as otherwise
permitted or required by Section 409A or any applicable U.S. Treasury Regulations
promulgated pursuant to Section 409A or other applicable guidance, the
following rules shall apply to any deferral and/or 

 

16

 

distribution
elections (each, an “Election”) that may be permitted or required
by the Board pursuant to an Award subject to Section 409A:

 

(a)                                  All Elections must be
in writing and specify the amount of the distribution in settlement of an Award
being deferred, as well as the time and form of distribution as permitted
by this Plan.

 

(b)                                 All Elections shall be made by the
end of the Participant’s taxable year prior to the year in which services
commence for which an Award may be granted to such Participant; provided,
however, that if the Award qualifies as “performance-based compensation” for
purposes of Section 409A and is based on services performed over a period
of at least twelve (12) months, then the Election may be made no later
than six (6) months prior to the end of such period.

 

(c)                                  Elections shall continue in effect
until a written election to revoke or change such Election is received by the
Company, except that a written election to revoke or change such Election must
be made prior to the last day for making an Election determined in accordance
with paragraph (b) above or as permitted by Section 16.3.

 

16.3                           Subsequent Elections.
Any Award subject to Section 409A which permits a subsequent
Election to delay the distribution or change the form of distribution in
settlement of such Award shall comply with the following requirements:

 

(a)                                  No subsequent Election may take
effect until at least twelve (12) months after the date on which the subsequent
Election is made;

 

(b)                                 Each subsequent Election related to
a distribution in settlement of an Award not described in Section 16.3(b),
16.4(b), or 16.4(f) must result in a delay of the distribution for a
period of not less than five (5) years from the date such distribution
would otherwise have been made; and

 

(c)                                  No subsequent Election related to a
distribution pursuant to Section 16.4(d) shall be made less than
twelve (12) months prior to the date of the first scheduled payment under such
distribution.

 

16.4                           Distributions Pursuant to Deferral Elections. No distribution in settlement of an
Award subject to Section 409A may commence earlier than:

 

(a)                                  Separation from service (as
determined by the Secretary of the United States Treasury);

 

(b)                                 The date the Participant becomes
Disabled (as defined below);

 

(c)                                  Death;

 

(d)                                 A specified time (or pursuant to a
fixed schedule) that is either (i) specified by the Board upon the grant
of an Award and set forth in the Award Agreement evidencing such Award or (ii) specified
by the Participant in an Election complying with the requirements of Section 16.2
and/or 16.3, as applicable;

 

(e)                                  To the extent provided by the
Secretary of the U.S. Treasury, a change in the ownership or effective control
or the Company or in the ownership of a substantial portion of the assets of
the Company; or

 

(f)                                    The occurrence of an
Unforeseeable Emergency (as defined below).

 

Notwithstanding
anything else herein to the contrary, to the extent that a Participant is a “Specified
Employee” (as defined in Section 409A(a)(2)(B)(i)) of the Company, no
distribution pursuant to 

 

17

 

Section 16.4(a) in
settlement of an Award subject to Section 409A may be made before the
date which is six (6) months after such Participant’s date of separation
from service, or, if earlier, the date of the Participant’s death.

 

16.5                           Unforeseeable Emergency. The Board shall have
the authority to provide in the Award Agreement evidencing any Award subject to
Section 409A for distribution in settlement of all or a portion of such
Award in the event that a Participant establishes, to the satisfaction of the
Board, the occurrence of an Unforeseeable Emergency. In such event, the amount(s) distributed
with respect to such Unforeseeable Emergency cannot exceed the amounts
necessary to satisfy such Unforeseeable Emergency plus amounts necessary to pay
taxes reasonably anticipated as a result of such distribution(s), after taking
into account the extent to which such hardship is or may be relieved
through reimbursement or compensation by insurance or otherwise or by
liquidation of the Participant’s assets (to the extent the liquidation of such
assets would not itself cause severe financial hardship). All distributions
with respect to an Unforeseeable Emergency shall be made in a lump sum as soon
as practicable following the Board’s determination that an Unforeseeable
Emergency has occurred.

 

The
occurrence of an Unforeseeable Emergency shall be judged and determined by the
Board. The Board’s decision with respect to whether an Unforeseeable Emergency
has occurred and the manner in which, if at all, the distribution in settlement
of an Award shall be altered or modified, shall be final, conclusive, and not
subject to approval or appeal.

 

16.6                           Disabled. The Board shall have the authority
to provide in any Award subject to Section 409A for distribution in
settlement of such Award in the event that the Participant becomes Disabled. A
Participant shall be considered “Disabled” if either:

 

(a)                                  the Participant is unable to engage
in any substantial gainful activity by reason of any medically determinable
physical or mental impairment which can be expected to result in death or can
be expected to last for a continuous period of not less than twelve (12)
months, or

 

(b)                                 the Participant is, by reason of
any medically determinable physical or mental impairment which can be expected
to result in death or can be expected to last for a continuous period of not
less than twelve (12) months, receiving income replacement benefits for a
period of not less than three (3) months under an accident and health plan
covering employees of the Participant’s employer.

 

All
distributions payable by reason of a Participant becoming Disabled shall be
paid in a lump sum or in periodic installments as established by the
Participant’s Election, commencing as soon as practicable following the date
the Participant becomes Disabled. If the Participant has made no Election with
respect to distributions upon becoming Disabled, all such distributions shall
be paid in a lump sum as soon as practicable following the date the Participant
becomes Disabled.

 

16.7                           Death. If a Participant dies before
complete distribution of amounts payable upon settlement of an Award subject to
Section 409A, such undistributed amounts shall be distributed to his or
her beneficiary under the distribution method for death established by the
Participant’s Election as soon as administratively possible following receipt
by the Board of satisfactory notice and confirmation of the Participant’s death.
If the Participant has made no Election with respect to distributions upon
death, all such distributions shall be paid in a lump sum as soon as
practicable following the date of the Participant’s death.

 

16.8                           No Acceleration of Distributions. Notwithstanding
anything to the contrary herein, this Plan does not permit the acceleration of
the time or schedule of any distribution under this Plan, except as
provided by Section 409A and/or the Secretary of the U.S. Treasury.

 

17.                                 MISCELLANEOUS
PROVISIONS.

 

17.1                           Repurchase Rights. Shares issued under the Plan may be
subject to one or more repurchase options, or other conditions and restrictions
as determined by the Board in its discretion at 

 

18

 

the
time the Award is granted. The Company shall have the right to assign at any
time any repurchase right it may have, whether or not such right is then
exercisable, to one or more persons as may be selected by the Company. Upon
request by the Company, each Participant shall execute any agreement evidencing
such transfer restrictions prior to the receipt of shares of Stock hereunder
and shall promptly present to the Company any and all certificates representing
shares of Stock acquired hereunder for the placement on such certificates of
appropriate legends evidencing any such transfer restrictions.

 

17.2                           Provision of Information. Each Participant shall
be given access to information concerning the Company equivalent to that
information generally made available to the Company’s common stockholders.

 

17.3                           Rights as Outside Director. Nothing in the Plan or
any Award granted under the Plan shall confer on any Participant a right to
remain an Outside Director, or interfere with or limit in any way any right of
a Participating Company to terminate the Participant’s Service at any time.

 

17.4                           Rights as a Stockholder. A Participant shall have no rights
as a stockholder with respect to any shares covered by an Award until the date
of the issuance of such shares (as evidenced by the appropriate entry on the
books of the Company or of a duly authorized transfer agent of the Company). No
adjustment shall be made for dividends, distributions or other rights for which
the record date is prior to the date such shares are issued, except as provided
in Section 4.3 or another provision of the Plan.

 

17.5                           Delivery of Title to Shares. Subject to any
governing rules or regulations, the Company shall issue or cause to be
issued the shares of Stock acquired pursuant to an Award and shall deliver such
shares to or for the benefit of the Participant by means of one or more of the
following: (a) by delivering to the Participant evidence of book entry
shares of Stock credited to the account of the Participant, (b) by
depositing such shares of Stock for the benefit of the Participant with any
broker with which the Participant has an account relationship, or (c) by
delivering such shares of Stock to the Participant in certificate form.

 

17.6                           Fractional Shares. The Company shall not be required
to issue fractional shares upon the exercise or settlement of any Award.

 

17.7                           Beneficiary Designation. Subject to local laws and
procedures, each Participant may file with the Company a written
designation of a beneficiary who is to receive any benefit under the Plan to
which the Participant is entitled in the event of such Participant’s death
before he or she receives any or all of such benefit. Each designation will
revoke all prior designations by the same Participant, shall be in a form prescribed
by the Company, and will be effective only when filed by the Participant in
writing with the Company during the Participant’s lifetime. If a married
Participant designates a beneficiary other than the Participant’s spouse, the
effectiveness of such designation may be subject to the consent of the
Participant’s spouse. If a Participant dies without an effective designation of
a beneficiary who is living at the time of the Participant’s death, the Company
will pay any remaining unpaid benefits to the Participant’s legal
representative.

 

17.8                           Severability. If any one or more of the
provisions (or any part thereof) of this Plan shall be held invalid,
illegal or unenforceable in any respect, such provision shall be modified so as
to make it valid, legal and enforceable, and the validity, legality and
enforceability of the remaining provisions (or any part thereof) of the Plan
shall not in any way be affected or impaired thereby.

 

17.9                           No Constraint on Corporate Action. Nothing in this Plan
shall be construed to: (a) limit, impair, or otherwise affect the Company’s
or another Participating Company’s right or power to make adjustments,
reclassifications, reorganizations, or changes of its capital or business
structure, or to merge or consolidate, or dissolve, liquidate, sell, or
transfer all or any part of its business or assets; or (b) limit the
right or power of the Company or another Participating Company to take any
action which such entity deems to be necessary or appropriate.

 

19

 

17.10                     Unfunded Obligation. Participants shall have the status
of general unsecured creditors of the Company. Any amounts payable to
Participants pursuant to the Plan shall be unfunded and unsecured obligations
for all purposes, including, without limitation, Title I of the Employee
Retirement Income Security Act of 1974. No Participating Company shall be
required to segregate any monies from its general funds, or to create any
trusts, or establish any special accounts with respect to such obligations. The
Company shall retain at all times beneficial ownership of any investments,
including trust investments, which the Company may make to fulfill its
payment obligations hereunder. Any investments or the creation or maintenance
of any trust or any Participant account shall not create or constitute a trust
or fiduciary relationship between the Board or any Participating Company and a
Participant, or otherwise create any vested or beneficial interest in any
Participant or the Participant’s creditors in any assets of any Participating
Company. The Participants shall have no claim against any Participating Company
for any changes in the value of any assets which may be invested or
reinvested by the Company with respect to the Plan.

 

17.11                     Choice of Law. Except to the extent governed by
applicable federal law, the validity, interpretation, construction and performance
of the Plan and each Award Agreement shall be governed by the laws of the State
of California, without regard to its conflict of law rules.

 

20

 

ZORAN
CORPORATION

2005 OUTSIDE DIRECTORS EQUITY
PLAN

NONSTATUTORY STOCK OPTION
AGREEMENT

 

Zoran Corporation
has granted to the Participant named in the Notice of Grant of Nonstatutory
Stock Option (the “Grant Notice”)
to which this Nonstatutory Stock Option Agreement (the “Option Agreement”) is attached an option (the “Option”) to purchase certain
shares of Stock upon the terms and conditions set forth in the Grant Notice and
this Option Agreement. The Option has been granted pursuant to and shall in all
respects be subject to the terms and conditions of the Zoran Corporation 2005 Outside
Directors Equity Plan (the “Plan”),
as amended to the Date of Grant, the provisions of which are incorporated
herein by reference. By signing the Grant Notice, the Participant: (a) acknowledges
receipt of and represents that the Participant has read and is familiar with
the Grant Notice, this Option Agreement, the Plan and a prospectus for the Plan
in the form most recently registered with the Securities and Exchange
Commission (the “Plan Prospectus”), (b) accepts the Option
subject to all of the terms and conditions of the Grant Notice, this Option
Agreement and the Plan and (c) agrees to accept as binding, conclusive and
final all decisions or interpretations of the Committee upon any questions
arising under the Grant Notice, this Option Agreement or the Plan.

 

1.                                       DEFINITIONS AND CONSTRUCTION.

 

1.1                                 Definitions. Unless
otherwise defined herein, capitalized terms shall have the meanings assigned to
such terms in the Grant Notice or the Plan.

 

1.2                                 Construction. Captions
and titles contained herein are for convenience only and shall not affect the
meaning or interpretation of any provision of this Option Agreement. Except
when otherwise indicated by the context, the singular shall include the plural
and the plural shall include the singular. Use of the term “or” is not intended
to be exclusive, unless the context clearly requires otherwise.

 

2.                                       TAX CONSEQUENCES.

 

This Option is
intended to be a Nonstatutory Stock Option and shall not be treated as an
Incentive Stock Option within the meaning of Section 422(b) of the
Code.

 

3.                                       ADMINISTRATION.

 

All questions of
interpretation concerning this Option Agreement shall be determined by the
Committee. All determinations by the Committee shall be final and binding upon
all persons having an interest in the Option. Any Officer shall have the
authority to act on behalf of the Company with respect to any matter, right,
obligation, 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, or election.

 

4.                                       EXERCISE OF THE OPTION.

 

4.1                                 Right to Exercise. Except
as otherwise provided herein, the Option shall be exercisable on and after the Initial
Vesting Date and prior to the termination of the Option (as provided in Section 6)
in an amount not to exceed the number of Vested Shares less the number of
shares previously acquired upon exercise of the Option. In no event shall the Option
be exercisable for more shares than the Number of Option Shares, as adjusted
pursuant to Section 9.

 

4.2                                 Method of Exercise. Exercise
of the Option shall be by means of electronic or written notice (the “Exercise Notice”)
in a form authorized by the Company. An electronic Exercise Notice must be
digitally signed or authenticated by the Participant in such manner as required
by the notice and transmitted to the Company or an authorized representative of
the Company (including a third-party administrator designated by the Company). In
the event that the Participant is not authorized or is unable to provide an
electronic Exercise Notice, the Option shall be exercised by a written Exercise
Notice addressed to the Company, which shall be signed by the Participant and
delivered in person, by certified or registered mail, return receipt requested,
by confirmed facsimile 

 

 

transmission, or by such
other means as the Company may permit, to the Company, or an authorized
representative of the Company (including a third-party administrator designated
by the Company). Each Exercise Notice, whether electronic or written, must
state the Participant’s election to exercise the Option, the number of whole
shares of Stock for which the Option is being exercised and such other
representations and agreements as to the Participant’s investment intent with
respect to such shares as may be required pursuant to the provisions of
this Option Agreement. Further, each Exercise Notice must be received by the
Company prior to the termination of the Option as set forth in Section 6
and must be accompanied by full payment of the aggregate Exercise Price for the
number of shares of Stock being purchased. The Option shall be deemed to be
exercised upon receipt by the Company of such electronic or written Exercise
Notice and the aggregate Exercise Price.

 

4.3                                 Payment of Exercise Price.

 

(a)                                  Forms of Consideration
Authorized. Except
as otherwise provided below, payment of the aggregate Exercise Price for the
number of shares of Stock for which the Option is being exercised shall be made
(i) in cash or by check or cash equivalent, (ii) if permitted by the
Company, by tender to the Company, or attestation to the ownership, of whole
shares of Stock owned by the Participant having a Fair Market Value not less
than the aggregate Exercise Price, (iii) by means of a Cashless Exercise,
as defined in Section 4.3(b), or (iv) by any combination of the
foregoing.

 

(b)                                 Limitations on Forms of
Consideration.

 

(i)                                     Tender of Stock. Notwithstanding the foregoing, the Option
may not be exercised by tender to the Company, or attestation to the
ownership, of shares of Stock to the extent such tender or attestation would
constitute a violation of the provisions of any law, regulation or agreement
restricting the redemption of the Company’s stock. If required by the Company, the
Option may not be exercised by tender to the Company, or attestation to
the ownership, of shares of Stock unless such shares either have been owned by
the Participant for more than six (6) months or such other period, if any,
required by the Company (and not used for another option exercise by
attestation during such period) or were not acquired, directly or indirectly,
from the Company.

 

(ii)                                  Cashless Exercise. A “Cashless
Exercise” means the delivery of a properly executed
notice together with irrevocable instructions to a broker in a form acceptable
to the Company providing for the assignment to the Company of the proceeds of a
sale or loan with respect to some or all of the shares of Stock acquired upon
the exercise of the Option pursuant to a program or procedure approved by the
Company (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). 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 such program or procedure,
including with respect to the Participant notwithstanding that such program or
procedures may be available to others.

 

4.4                                 Tax Withholding. At
the time the Option is exercised, in whole or in part, or at any time
thereafter as requested by the Company, the Participant hereby authorizes
withholding from payroll and any other amounts payable to the Participant, and
otherwise agrees to make adequate provision for (including by means of a
Cashless Exercise to the extent permitted by the Company), any sums required to
satisfy the federal, state, local and foreign tax withholding obligations of
the Participating Company Group, if any, which arise in connection with the
Option. The Company shall have no obligation to deliver shares of Stock until
the tax withholding obligations of the Participating Company Group have been
satisfied by the Participant.

 

4.5                                 Beneficial Ownership of Shares; Certificate Registration. The Participant hereby authorizes the Company,
in its sole discretion, to deposit for the benefit of the Participant with any
broker with which the Participant has an account relationship of which the
Company has notice any or all shares acquired by the Participant pursuant to
the exercise of the Option. Except as provided by the preceding sentence, a
certificate for the shares as to which the Option is exercised shall be
registered in the name of the Participant, or, if applicable, in the names of
the heirs of the Participant.

 

2

 

4.6                                 Restrictions on Grant of the Option and Issuance of Shares. The grant of the Option and the issuance of
shares of Stock upon exercise of the Option shall be subject to compliance with
all applicable requirements of federal, state or foreign law with respect to
such securities. The Option may not be exercised if the issuance of shares
of Stock upon exercise would constitute a violation of any applicable federal,
state or foreign securities laws or other law or regulations or the
requirements of any stock exchange or market system upon which the Stock may then
be listed. In addition, the Option may not be exercised unless (i) a
registration statement under the Securities Act shall at the time of exercise
of the Option be in effect with respect to the shares issuable upon exercise of
the Option or (ii) in the opinion of legal counsel to the Company, the
shares issuable upon exercise of the Option may be issued in accordance
with the terms of an applicable exemption from the registration requirements of
the Securities Act. THE PARTICIPANT IS CAUTIONED THAT THE OPTION MAY NOT BE
EXERCISED UNLESS THE FOREGOING CONDITIONS ARE SATISFIED. ACCORDINGLY, THE
PARTICIPANT MAY NOT BE ABLE TO EXERCISE THE OPTION WHEN DESIRED EVEN
THOUGH THE OPTION IS VESTED. The inability of the Company to obtain from any
regulatory body having jurisdiction the authority, if any, deemed by the
Company’s legal
counsel to be necessary to the lawful issuance and sale of any shares subject
to the Option shall relieve the Company of any liability in respect of the
failure to issue or sell such shares as to which such requisite authority shall
not have been obtained. As a condition to the exercise of the Option, the
Company may require the Participant to satisfy any qualifications that may be
necessary or appropriate, to evidence compliance with any applicable law or
regulation and to make any representation or warranty with respect thereto as may be
requested by the Company.

 

4.7                                 Fractional Shares. The
Company shall not be required to issue fractional shares upon the exercise of
the Option.

 

5.                                       NONTRANSFERABILITY OF THE OPTION.

 

During the
lifetime of the Participant, the Option shall be exercisable only by the
Participant or the Participant’s guardian or legal representative. The Option
shall not be subject in any manner to anticipation, alienation, sale, exchange,
transfer, assignment, pledge, encumbrance, or garnishment by creditors of the
Participant or the Participant’s beneficiary, except transfer by will or by the
laws of descent and distribution. Following the death of the Participant, the
Option, to the extent provided in Section 7, may be exercised by the
Participant’s
legal representative or by any person empowered to do so under the deceased
Participant’s will or
under the then applicable laws of descent and distribution. Notwithstanding the
foregoing, the Option shall be assignable or transferable subject to the
applicable limitations, if any, described in the General Instructions to Form S-8
Registration Statement under the Securities Act.

 

6.                                       TERMINATION OF THE OPTION.

 

The Option shall
terminate and may no longer be exercised after the first to occur of (a) the
close of business on the Option Expiration Date, (b) the close of business
on the last date for exercising the Option following termination of the
Participant’s
Service as described in Section 7, or (c) a Change in Control to the
extent provided in Section 8.

 

7.                                       EFFECT OF TERMINATION OF SERVICE.

 

7.1                                 Option Exercisability. The Option shall terminate
immediately upon the Participant’s termination of Service to the extent that it
is then unvested and shall be exercisable after the Participant’s termination
of Service to the extent it is then vested only during the applicable time
period as determined below and thereafter shall terminate.

 

(a)                                  Disability. If the Participant’s Service terminates because of the
Disability of the Participant, the Option, to the extent unexercised and
exercisable for Vested Shares on the date on which the Participant’s Service terminated, may be
exercised by the Participant (or the Participant’s guardian or legal representative) at
any time prior to the expiration of twelve (12) months after the date on which
the Participant’s Service terminated, but in any event no later than
the Option Expiration Date; provided, however, that if the Participant has
served continuously on the Board for at least two (2) years prior to such
termination of Service, the Option, to the extent unexercised and exercisable
for Vested Shares on the date on which the Participant’s Service 

 

3

 

terminated, may be
exercised by the Participant (or the Participant’s guardian or legal
representative) at any time prior to the Option Expiration Date.

 

(b)                                 Death. If the Participant’s Service terminates because of the
death of the Participant, the Option, to the extent unexercised and exercisable
for Vested Shares on the date on which the Participant’s Service terminated, may be
exercised by the Participant’s legal representative or other person who
acquired the right to exercise the Option by reason of the Participant’s death
at any time prior to the expiration of twelve (12) months after the date on
which the Participant’s Service terminated, but in any event no later than the
Option Expiration Date. The Participant’s Service shall be deemed to have
terminated on account of death if the Participant dies within three (3) months
after the Participant’s termination of Service; provided, however, that if the
Participant has served continuously on the Board for at least two (2) years
prior to such termination of Service, the Option, to the extent unexercised and
exercisable for Vested Shares on the date on which the Participant’s Service
terminated, may be exercised by the Participant (or the Participant’s
guardian or legal representative) at any time prior to the Option Expiration
Date.

 

(c)                                  Retirement. If the Participant’s Service terminates
because of the Retirement of the Participant, the Option, to the extent
unexercised and exercisable for Vested Shares on the date on which the
Participant’s Service terminated, may be exercised at any time prior to
the Option Expiration Date.

 

(d)                                 Other Termination of
Service. If the
Participant’s Service terminates for any reason, except Disability, death or
Retirement, the Option, to the extent unexercised and exercisable for Vested
Shares by the Participant on the date on which the Participant’s Service
terminated, may be exercised by the Participant at any time prior to the
expiration of three (3) months after the date on which the Participant’s
Service terminated, but in any event no later than the Option Expiration Date.

 

7.2                                 Extension if Exercise Prevented by Law. Notwithstanding
the foregoing, if the exercise of the Option within the applicable time periods
set forth in Section 7.1 is prevented by the provisions of Section 4.6,
the Option shall remain exercisable until three (3) months after the date
the Participant is notified by the Company that the Option is exercisable, but
in any event no later than the Option Expiration Date.

 

7.3                                 Extension if Participant Subject to Section 16(b). Notwithstanding
the foregoing, if a sale within the applicable time periods set forth in Section 7.1
of shares acquired upon the exercise of the Option would subject the
Participant to suit under Section 16(b) of the Exchange Act, the
Option shall remain exercisable until the earliest to occur of (i) the
tenth (10th) day following the date on which a sale of such shares by the
Participant would no longer be subject to such suit, (ii) the one hundred
and ninetieth (190th) day after the Participant’s termination of Service, or (iii) the
Option Expiration Date.

 

4

 

8.                                       EFFECT OF CHANGE IN CONTROL.

 

In the event of a
Change in Control, the Option shall be come immediately exercisable and vested
in full as of the date of the Change of Control, subject to the consumption of
the Change in Control and provided that the Participant’s Service has not
terminated prior to the date of the Change in Control. In addition, the
surviving, continuing, successor, or purchasing entity or parent thereof, as
the case may be (the “Acquiror”),
may, without the consent of the Participant, assume or continue in full force
and effect the Company’s rights and obligations under the Option or substitute
for the Option a substantially equivalent option for the Acquiror’s stock. For
purposes of this Section, the Option shall be deemed assumed if, following the
Change in Control, the Option confers the right to receive, subject to the
terms and conditions of the Plan and this Option Agreement, for each share of
Stock subject to the Option immediately prior to the Change in Control, the
consideration (whether stock, cash, other securities or property or a
combination thereof) to which a holder of a share of Stock on the effective
date of the Change in Control was entitled; provided, however, that if such
consideration is not solely common stock of the Acquiror, the Committee may,
with the consent of the Acquiror, provide for the consideration to be received upon
the exercise of the Option, for each share of Stock subject to the Option, to
consist solely of common stock of the Acquiror equal in Fair Market Value to
the per share consideration received by holders of Stock pursuant to the Change
in Control. The Option shall terminate and cease to be outstanding effective as
of the time of consummation of the Change in Control to the extent that the
Option is neither assumed or continued by the Acquiror in connection with the
Change in Control nor exercised as of the date of the Change in Control.

 

9.                                       ADJUSTMENTS FOR CHANGES IN
CAPITAL STRUCTURE.

 

Subject to any
required action by the stockholders of the Company, in the event of any change
in the Stock effected without receipt of consideration by the Company, whether
through merger, consolidation, reorganization, reincorporation,
recapitalization, reclassification, stock dividend, stock split, reverse stock
split, split-up, split-off, spin-off, combination of shares, exchange of
shares, or similar change in the capital structure of the Company, or in the
event of payment of a dividend or distribution to the stockholders of the
Company in a form other than Stock (excepting normal cash dividends) that
has a material effect on the Fair Market Value of shares of Stock, appropriate
adjustments shall be made in the number, Exercise Price and kind of shares
subject to the Option, in order to prevent dilution or enlargement of the
Participant’s rights under the Option. For purposes of the foregoing,
conversion of any convertible securities of the Company shall not be treated as
“effected without receipt of consideration by the Company.”  Any fractional share resulting from an
adjustment pursuant to this Section shall be rounded down to the nearest
whole number, and in no event may the Exercise Price be decreased to an
amount less than the par value, if any, of the stock subject to the Option. The
Committee in its sole discretion, may also make such adjustments in the
terms of the Option to reflect, or related to, such changes in the capital
structure of the Company or distributions as it deems appropriate. The
adjustments determined by the Committee pursuant to this Section shall be
final, binding and conclusive.

 

10.                                 RIGHTS AS A STOCKHOLDER OR
DIRECTOR.

 

The Participant
shall have no rights as a stockholder with respect to any shares covered by the
Option until the date of the issuance of the shares for which the Option has
been exercised (as evidenced by the appropriate entry on the books of the
Company or of a duly authorized transfer agent of the Company). No adjustment
shall be made for dividends, distributions or other rights for which the record
date is prior to the date the shares are issued, except as provided in Section 9.
Nothing in this Option Agreement shall confer upon the Participant any right to
continue in the Service of a Participating Company or interfere in any way with
any right of the Participating Company Group to terminate the Participant’s Service as a Director at
any time.

 

11.                                 LEGENDS.

 

The Company may at
any time place legends referencing any applicable federal, state or foreign
securities law restrictions on all certificates representing shares of stock
subject to the provisions of this Option Agreement. The Participant shall, at
the request of the Company, promptly present to the Company any and all
certificates representing shares acquired pursuant to the Option in the
possession of the Participant in order to carry out the provisions of this
Section.

 

5

 

12.                                 MISCELLANEOUS PROVISIONS.

 

12.1                           Termination or Amendment. The Committee may terminate
or amend the Plan or the Option at any time; provided, however, that except as
provided in Section 8 in connection with a Change in Control, no such
termination or amendment may adversely affect the Option or any
unexercised portion hereof without the consent of the Participant unless such
termination or amendment is necessary to comply with any applicable law or
government regulation. No amendment or addition to this Option Agreement shall
be effective unless in writing.

 

12.2                           Further Instruments. The parties hereto
agree to execute such further instruments and to take such further action as may reasonably
be necessary to carry out the intent of this Option Agreement.

 

12.3                           Binding Effect. Subject to the restrictions on transfer set
forth herein, this Option Agreement shall inure to the benefit of and be
binding upon the parties hereto and their respective heirs, executors,
administrators, successors and assigns.

 

12.4                           Delivery of Documents and Notices. Any document relating to
participation in the Plan or any notice required or permitted hereunder shall
be given in writing and shall be deemed effectively given (except to the extent
that this Option Agreement provides for effectiveness only upon actual receipt
of such notice) upon personal delivery, electronic delivery at the e-mail
address, if any, provided for the Participant by a Participating Company, or
upon deposit in the U.S. Post Office or foreign postal service, by registered
or certified mail, or with a nationally recognized overnight courier service,
with postage and fees prepaid, addressed to the other party at the address of
such party set forth in the Grant Notice or at such other address as such party
may designate in writing from time to time to the other party.

 

(a)                                  Description of
Electronic Delivery. The Plan documents, which may include
but do not necessarily include: the Plan, the Grant Notice, this Option
Agreement, the Plan Prospectus, and any reports of the Company provided
generally to the Company’s stockholders, may be delivered to the
Participant electronically. In addition, the Participant may deliver
electronically the Grant Notice and Exercise Notice called for by Section 4.2
to the Company or to such third party involved in administering the Plan as the
Company may designate from time to time. Such means of electronic delivery
may include but do not necessarily include the delivery of a link to a
Company intranet or the internet site of a third party involved in
administering the Plan, the delivery of the document via e-mail or such other
means of electronic delivery specified by the Company.

 

(b)                                 Consent to Electronic
Delivery. The
Participant acknowledges that the Participant has read Section 12.4(a) of
this Option Agreement and consents to the electronic delivery of the Plan
documents and the delivery of the Grant Notice and Exercise Notice, as
described in Section 12.4(a). The Participant acknowledges that he or she may receive
from the Company a paper copy of any documents delivered electronically at no
cost to the Participant by contacting the Company by telephone or in writing. The
Participant further acknowledges that the Participant will be provided with a
paper copy of any documents if the attempted electronic delivery of such
documents fails. Similarly, the Participant understands that the Participant
must provide the Company or any designated third party administrator with a
paper copy of any documents if the attempted electronic delivery of such
documents fails. The Participant may revoke his or her consent to the
electronic delivery of documents described in Section 12.4(a) or may change
the electronic mail address to which such documents are to be delivered (if
Participant has provided an electronic mail address) at any time by notifying
the Company of such revoked consent or revised e-mail address by telephone,
postal service or electronic mail. Finally, the Participant understands that he
or she is not required to consent to electronic delivery of documents described
in Section 12.4(a).

 

12.5                           Integrated Agreement. The Grant Notice, this Option
Agreement and the Plan, together with any Superseding Agreement, if any, shall
constitute the entire understanding and agreement of the Participant and the
Participating Company Group with respect to the subject matter contained herein
and supersede any prior agreements, understandings, restrictions,
representations, or warranties among the Participant and the Participating
Company Group with respect to such subject matter. To the extent contemplated
herein, the provisions of the Grant Notice, the Option Agreement and the Plan
shall survive any exercise of the Option and shall remain in full force and
effect.

 

6

 

12.6                           Applicable Law. This Option Agreement shall be governed by
the laws of the State of California as such laws are applied to agreements
between California residents entered into and to be performed entirely within
the State of California.

 

12.7                           Counterparts. The Grant Notice may be executed in
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.

 

7

 

	
  Nonstatutory Stock
  Option

  	
  Participant:

  	
   

  
	
   

  	
  Date:

  	
   

  
				

 

 

STOCK OPTION EXERCISE NOTICE

 

	
  Zoran Corporation

  
	
  Attention: Stock
  Administration

  
	
  1390 Kifer Road

  
	
  Sunnyvale, CA 94086

  
	
   

  
	
  Ladies and Gentlemen:

  

 

1.                                       Option. I was granted an option
(the “Option”)
to purchase shares of the common stock (the “Shares”)
of Zoran Corporation (the “Company”)
pursuant to the Company’s
2005 Outside Directors Equity Plan (the “Plan”),
my Notice of Grant of Nonstatutory Stock Option (the “Grant Notice”) and my Nonstatutory Stock Option
Agreement (the “Option Agreement”)
as follows:

 

	
  Date of Grant:

  	
   

  
	
   

  	
   

  
	
  Number of Option
  Shares:

  	
   

  
	
   

  	
   

  
	
  Exercise Price per
  Share:

  	
  $

  

 

2.                                       Exercise of Option. I hereby elect
to exercise the Option to purchase the following number of Shares, all of which
are Vested Shares in accordance with the Grant Notice and the Option Agreement:

 

	
  Total Shares Purchased:

  	
   

  
	
   

  	
   

  
	
  Total Exercise Price
  (Total Shares X Price per Share)

  	
  $

  
	
   

  	
   

  
	
               

  	
   

  
			

 

3.                                       Payments. I enclose payment in full
of the total exercise price for the Shares in the following form(s), as
authorized by my Option Agreement:

 

	
  TM Cash:

  	
  $

  
	
   

  	
   

  
	
               

  	
   

  
	
  TM Check:

  	
  $

  
	
   

  	
   

  
	
  TM Tender of Company
  Stock:

  	
  Contact Plan
  Administrator

  
	
   

  	
   

  
	
  TM Cashless Exercise
  (same-day sale):

  	
  Contact Plan
  Administrator

  
				

 

4.                                       Participant Information.

 

	
  My address is:

  	
                                                                                                                                           

  
	
   

  
	
   

  	
                                                                                                                                            

  
	
   

  
	
  My Social Security
  Number is:

  	
                                                                                                                         

  
			

 

 

5.                                       Binding Effect. I agree that the
Shares are being acquired in accordance with and subject to the terms,
provisions and conditions of the Grant Notice, the Option Agreement and the
Plan, to all of which I hereby expressly assent. This Agreement shall inure to
the benefit of and be binding upon my heirs, executors, administrators,
successors and assigns.

 

 

	
   

  	
  Very truly yours,

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  (Signature)

  

 

 

Receipt of the
above is hereby acknowledged.

 

ZORAN CORPORATION

 

	
  By:

  	
   

  	
   

  
	
   

  
	
  Title:

  	
   

  	
   

  
	
   

  
	
  Dated:

  	
   

  	
   

  
					

 

2

 

 

ZORAN CORPORATION

2005
OUTSIDE DIRECTORS EQUITY PLAN

NOTICE OF
GRANT OF NONSTATUTORY STOCK OPTION

(INITIAL
OPTION)

 

The Participant has been granted an option (the “Option”) to purchase certain
shares of Stock of Zoran Corporation pursuant to the Zoran Corporation  2005 Outside Directors Equity Plan (the “Plan”), as follows:

 

	
  Participant:

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Date of Grant:

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Number of Option Shares:

  	
   

  	
  30,000

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Exercise Price:

  	
   

  	
  $

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Initial Vesting Date:

  	
   

  	
  The first anniversary of the Date of Grant

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Option Expiration Date:

  	
   

  	
  The date ten (10) years after the Date of Grant

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Tax Status of Option:

  	
   

  	
  Nonstatutory Stock Option.

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Vested Shares:

  	
   

  	
  Except as provided in the Stock Option Agreement,
  the number of Vested Shares (disregarding any resulting fractional share) as
  of any date is determined by multiplying the Number of Option Shares by the “Vested Ratio”
  determined as of such date as follows:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Prior to Initial Vesting Date

  	
  0

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  On Initial Vesting Date, provided the Participant’s
  Service has not terminated prior to such date

  	
  1/4

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Plus

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  For each additional full year of the Participant’s
  continuous Service from Initial Vesting Date until the Vested Ratio equals
  1/1, an additional

  	
  1/4

  	
   

  

 

By their signatures below
or by electronic acceptance or authentication in a form authorized by the
Company, the Company and the Participant agree that the Option is governed by
this Grant Notice and by the provisions of the Plan and the Stock Option
Agreement, both of which are made a part of this document.  The Participant acknowledges that copies of
the Plan, the Stock Option Agreement and the prospectus for the Plan are
available on the Company’s internal web site and may be viewed and printed by
the Participant for attachment to the Participant’s copy of this Grant Notice.  The Participant represents that the
Participant has read and is familiar with the provisions of the Plan and the
Stock Option Agreement, and hereby accepts the Option subject to all of their
terms and conditions.

 

	
  ZORAN CORPORATION

  	
  PARTICIPANT

  
	
   

  	
   

  
	
   

  	
   

  
	
  By: 

  	
   

  
	
   

  	
  Signature

  
	
  Its:

  	
  President & CEO

  	
   

  
	
   

  	
  Date

  
	
  Address:

  	
  1390 Kifer Road

  	
   

  
	
   

  	
  Sunnyvale, CA 94086

  	
  Address

  
	
   

  	
   

  
				

 

	
  ATTACHMENTS:

  	
   

  	
  2005 Outside Directors Equity Plan, as amended to
  the Date of Grant; Nonstatutory Stock Option Agreement, Exercise Notice and
  Plan Prospectus

  

 

 

ZORAN CORPORATION

2005
OUTSIDE DIRECTORS EQUITY PLAN

NOTICE OF
GRANT OF NONSTATUTORY STOCK OPTION

(ANNUAL OPTION)

 

The Participant has been granted an option (the “Option”) to purchase certain
shares of Stock of Zoran Corporation pursuant to the Zoran Corporation  2005 Outside Directors Equity Plan (the “Plan”), as follows:

 

	
  Participant:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Date of Grant:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Number of Option Shares:

  	
   

  	
  15,000

  
	
   

  	
   

  	
   

  
	
  Exercise Price:

  	
   

  	
  $

  
	
   

  	
   

  	
   

  
	
  Initial Vesting Date:

  	
   

  	
  The day immediately preceding the first annual
  meeting of the stockholders of Zoran Corporation occurring after the Date of
  Grant

  
	
   

  	
   

  	
   

  
	
  Option Expiration Date:

  	
   

  	
  The date ten (10) years after the Date of Grant

  
	
   

  	
   

  	
   

  
	
  Tax Status of Option:

  	
   

  	
  Nonstatutory Stock Option.

  
	
   

  	
   

  	
   

  
	
  Vested Shares:

  	
   

  	
  Except as provided in the Stock Option Agreement,
  the number of Vested Shares (disregarding any resulting fractional share) as
  of any date is determined by multiplying the Number of Option Shares by the “Vested Ratio”
  determined as of such date as follows:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Prior to Initial Vesting Date

  	
  0

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  On Initial Vesting Date, provided the Participant’s
  Service has not terminated prior to such date

  	
  1/1

  	
   

  

 

By their signatures below
or by electronic acceptance or authentication in a form authorized by the
Company, the Company and the Participant agree that the Option is governed by
this Grant Notice and by the provisions of the Plan and the Stock Option
Agreement, both of which are made a part of this document.  The Participant acknowledges that copies of
the Plan, the Stock Option Agreement and the prospectus for the Plan are
available on the Company’s internal web site and may be viewed and printed by
the Participant for attachment to the Participant’s copy of this Grant Notice.  The Participant represents that the
Participant has read and is familiar with the provisions of the Plan and the
Stock Option Agreement, and hereby accepts the Option subject to all of their
terms and conditions.

 

	
  ZORAN CORPORATION

  	
  PARTICIPANT

  
	
   

  	
   

  
	
   

  	
   

  
	
  By: 

  	
   

  
	
   

  	
  Signature

  
	
  Its:

  	
  President & CEO

  	
   

  
	
   

  	
  Date

  
	
  Address:

  	
  1390 Kifer Road

  	
   

  
	
   

  	
  Sunnyvale, CA 94086

  	
  Address

  
	
   

  	
   

  
				

 

	
  ATTACHMENTS:

  	
  2005 Outside Directors Equity Plan, as amended to
  the Date of Grant; Nonstatutory Stock Option Agreement, Exercise Notice and
  Plan Prospectus

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00137-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00137-of-00352.parquet"}]]