<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant /X/
Filed by a party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12
ZORAN CORPORATION
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11
(1) Title of each class of securities to which transaction applies:
------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------------------
(5) Total fee paid:
------------------------------------------------------------------------
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
------------------------------------------------------------------------
(3) Filing Party:
------------------------------------------------------------------------
(4) Date Filed:
------------------------------------------------------------------------
<PAGE>
ZORAN CORPORATION
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JUNE 6, 1997
TO THE STOCKHOLDERS:
The Annual Meeting of Stockholders of ZORAN CORPORATION, a Delaware
corporation (the "Company"), will be held at the offices of Gray Cary Ware &
Freidenrich, 400 Hamilton Avenue, Palo Alto, California on Friday, June 6,
1997 at 2:00 p.m. for the following purposes:
1. To elect seven (7) directors.
2. To approve amendments to the Company's 1993 Stock Option Plan to
(i) increase the number of shares of Common Stock reserved for
issuance thereunder by 650,000 shares, (ii) limit the aggregate
number of shares of Common Stock subject to options that may be
granted to any employee of the Company during any fiscal year
and (iii) make certain other modifications.
3. To approve an amendment to the Company's 1995 Employee Stock
Purchase Plan to increase the number of shares of Common Stock
reserved for issuance thereunder by 150,000 shares.
4. To ratify the appointment of Price Waterhouse LLP as the
independent accountants of the Company for the fiscal year ending
December 31, 1997.
5. To transact such other business as may properly come before the
meeting, or any adjournment thereof.
Stockholders of record at the close of business on April 18, 1997 shall
be entitled to vote at the meeting.
By order of the Board of Directors
DENNIS C. SULLIVAN
Secretary
Santa Clara, California
April 30, 1997
IMPORTANT: PLEASE FILL IN, DATE, SIGN AND MAIL PROMPTLY THE ENCLOSED PROXY IN
THE POSTAGE-PAID ENVELOPE PROVIDED TO ASSURE THAT YOUR SHARES ARE REPRESENTED AT
THE MEETING. IF YOU ATTEND THE MEETING, YOU MAY VOTE IN PERSON IF YOU WISH TO DO
SO EVEN THOUGH YOU HAVE SENT IN YOUR PROXY.
<PAGE>
ZORAN CORPORATION
3112 SCOTT BOULEVARD
SANTA CLARA, CALIFORNIA 95054
------------------
PROXY STATEMENT
INFORMATION CONCERNING SOLICITATION AND VOTING
GENERAL
The enclosed Proxy is solicited on behalf of Zoran Corporation, a
Delaware corporation (the "Company"), for use at the Annual Meeting of
Stockholders of the Company to be held Friday, June 6, 1997 at 2:00 p.m.,
local time, or at any adjournment thereof, for the purposes set forth herein
and in the accompanying Notice of Annual Meeting of Stockholders. The Annual
Meeting will be held at the offices of Gray Cary Ware & Freidenrich, 400
Hamilton Avenue, Palo Alto, California. The Company's principal executive
offices are located at 3112 Scott Boulevard, Santa Clara, California. Its
telephone number at that address is (408) 986-1314.
These proxy solicitation materials were mailed on or about April 30,
1997 to all stockholders entitled to vote at the Annual Meeting.
RECORD DATE
Stockholders of record at the close of business on April 18, 1997 are
entitled to notice of, and to vote at, the Annual Meeting. At the record
date, 9,170,095 shares of the Company's Common Stock, $0.001 par value, were
issued and outstanding.
REVOCABILITY OF PROXIES
Any proxy given pursuant to this solicitation may be revoked by the
person giving it at any time before its use by delivering to the Company a
written notice of revocation or a duly executed proxy bearing a later date or
by attending the Annual Meeting and voting in person.
VOTING
The shares represented by the proxies received will be voted as you
direct. If you give no direction, the shares will be voted as recommended by
the Board of Directors. Each stockholder is entitled to one vote for each
share of stock held by him or her on all matters.
SOLICITATION
The Company will bear the entire cost of solicitation, including the
preparation, assembly, printing and mailing of this Proxy Statement, the
proxy and any additional soliciting materials sent to stockholders. The
Company may reimburse brokerage firms and other persons representing
beneficial owners of shares for their expenses in forwarding solicitation
materials to such beneficial owners. Proxies may also be solicited by certain
of the Company's directors, officers and regular employees, without
additional compensation, personally or by telephone or telegram. Except as
described above, the Company does not currently intend to solicit proxies
other than by mail.
<PAGE>
DEADLINE FOR RECEIPT OF STOCKHOLDER PROPOSALS FOR 1998 ANNUAL MEETING
Stockholder proposals intended to be considered at the 1998 Annual
Meeting of Shareholders must be received by the Company no later than
December 31, 1997. Such proposals may be included in next year's proxy
statement if they comply with certain rules and regulations promulgated by
the Securities and Exchange Commission (the "SEC").
PROPOSAL NO. 1
ELECTION OF DIRECTORS
A board of seven directors will be elected at the Annual Meeting. Unless
otherwise instructed, the proxy holders will vote the proxies received by
them for the seven nominees named below. All of the nominees are currently
directors of the Company.
If elected, Management's nominees will serve as directors until the
Company's next Annual Meeting of Stockholders and until their successors are
elected and qualified. If a nominee declines to serve or becomes unavailable
to serve for any reason, or if another vacancy occurs before the election
(although Management knows of no reason to anticipate that this will occur),
the proxies may be voted for such substitute nominee as management may
designate.
If a quorum is present and voting, the seven nominees for director
receiving the highest number of votes will be elected as directors.
Abstentions and shares held by brokers that are present but not voted because
the brokers were prohibited from exercising discretionary authority, I.E.,
"broker non-votes," will be counted as present for purposes of determining if
a quorum is present.
The table below sets forth, for the current directors and the nominees
to be elected at the Annual Meeting, certain information with respect to age
and background.
Name of Nominee Age Principal Occupation Director Since
- --------------- --- -------------------- --------------
Levy Gerzberg 52 President and Chief Executive Officer 1981
of the Company
Uzia Galil 72 Chairman of the Board of Directors, 1983
Elron Electronics Industries Ltd.
George T. Haber 45 Executive Vice President of the 1996
Company
Arie Kahana 51 Vice President, Business Development- 1996
Technology, The Israel Corporation Ltd.
James D. Meindl 64 Professor of Microelectronics, Georgia 1986
Institute of Technology
Arthur B. Stabenow 58 Chairman of the Board and Chief 1990
Executive Officer, Micro Linear
Corporation
Philip M. Young 57 General Partner, U.S. Venture Partners 1986
2
<PAGE>
Dr. Gerzberg was a co-founder of the Company in 1981 and has served as
its President and Chief Executive Officer since December 1988 and as a
director since 1981. Dr. Gerzberg also served as the Company's President from
1981 to 1984 and as its Executive Vice President and Chief Technical Officer
from 1985 to 1988. Prior to co-founding the Company, Dr. Gerzberg was
Associate Director of Stanford University's Electronics Laboratory. Dr.
Gerzberg holds a Ph.D. in Electrical Engineering from Stanford University and
an M.S. in Medical Electronics and a B.S. in Electrical Engineering from the
Technion-Israel Institute of Technology (the "Technion") in Haifa, Israel.
Mr. Galil has been a director of the Company since 1983 and has served
as Chairman of the Board of Directors since October 1993. Mr. Galil is
Chairman of the Board of Directors of Elron Electronic Industries Ltd.
("Elron"), an Israeli high technology holding company, and has been its
president and Chief Executive Officer since its formation in 1962. Mr. Galil
has also served as Chairman of the Board of Directors of Elbit Ltd.
("Elbit"), an affiliate of Elron which develops, manufactures and markets
advanced computer-based electronic imaging systems and products for medical
imaging, defense, communications, and multimedia applications, since January
1981, as Chairman of the Executive Committee of Elbit's Board of Directors
from 1978 to 1985 and President of Elbit from 1978 to 1985. Mr. Galil was
reappointed as Chairman of Elbit's Executive Committee in May 1986. Mr. Galil
also serves as a director of the Executive Committee of Elscint Ltd., a
manufacturer of computer-based medical diagnostic imaging systems, and as a
member of the Board of Directors of Opal, Inc., Orbotech Ltd. and NetManage
Inc. From 1980 to 1990, Mr. Galil served as Chairman of the International
Board of Governors of the Technion. Mr. Galil has been a member of the
advisory committee of the Bank of Israel since 1991. Mr. Galil holds a M.S.
in Electrical Engineering from Purdue University and a B.S. from the
Technion. Mr. Galil has also been awarded an honorary doctorate in technical
sciences by the Technion in recognition of his contribution to the
development of science-based industries in Israel, an honorary doctorate in
philosophy by the Weizmann Institute of Science and an honorary doctorate in
engineering by Polytechnic University, New York. Mr. Galil is also a past
recipient of the Israel Industry Prize.
Mr. Haber has served as Executive Vice President and a director of the
Company since December 1996. Mr. Haber was a founder of CompCore Multimedia,
Inc., a developer of multimedia software and semiconductor products
("CompCore"), and served as its President, Chief Executive Officer, Chief
Financial Officer and a director from its founding in November 1993 until its
acquisition by the Company in December 1996. Prior to founding CompCore, Mr.
Haber held engineering positions at Toshiba/SGI from January 1993 to August
1993 and Sun Microsystems, Inc. from 1990 to January 1993. Mr. Haber holds a
B.S. from the Technion.
Mr. Kahana has been a director of the Company since January 1996. Mr.
Kahana has served as Vice President, Business Development - Technology of The
Israel Corporation Ltd., an Israeli investment company, since February 1993.
From January 1991 through January 1993, Mr. Kahana worked at ELOR Optronics
Ltd. as its President and Chief Executive Officer. Mr. Kahana also serves on
the Board of Directors of Tower Semiconductor Ltd., a semiconductor
manufacturing company, RDC Communications, a wireless local area network
company, Idan Cable, a cable television company, VideoSonic, a video
post-production services company, and RAPAC, a systems manufacturing and
distribution company. Mr. Kahana holds an M.B.A. from the Tel-Aviv University
and a B.S. in Electrical Engineering from the Technion.
Professor Meindl has been a director of the Company since March 1986.
Professor Meindl has been a professor of microelectronics at Georgia
Institute of Technology since November 1993. From September 1986 to November
1993, Professor Meindl served as Provost and Senior Vice President of
Academic Affairs at Rensselaer Polytechnic Institute. Prior thereto,
Professor Meindl was a professor of electrical engineering and Director of
the Stanford Electronics Laboratory and Center for Integrated Systems at
Stanford University. Professor Meindl is also a director of SanDisk, Inc. and
Digital Microwave.
Mr. Stabenow has been a director of the Company since November 1990. Mr.
Stabenow has served as Chief Executive Officer of Micro Linear Corporation, a
semiconductor company, since March 1986, and as Chairman of the Board of that
company since August 1989.
Mr. Young has been a director of the Company since January 1986. Mr.
Young has been a general partner of U.S. Venture Partners, a venture capital
partnership, since April 1990. Mr. Young is also a director of The Immune
Response Corporation, FemRx, Inc., CardioThoracic Systems, Inc. and Vical
Incorporated.
3
<PAGE>
Pursuant to an employment agreement with George T. Haber, entered into
in connection with the Company's acquisition of CompCore, the Company has
agreed to use its best efforts to cause Mr. Haber to be reelected to the
Board of Directors at each meeting of stockholders held for the purpose of
electing directors during the term of the agreement. See "Executive
Compensation --Employment, Severance and Change of Control Agreements."
BOARD MEETINGS AND COMMITTEES
The Board of Directors of the Company held six meetings during the year
ended December 31, 1996. The Board of Directors has a Compensation Committee
and an Audit Committee. The Board of Directors has no standing nominating
committee or committee performing similar functions. During the fiscal year
ended December 31, 1996, no incumbent director attended fewer than 75% of the
aggregate of (i) all meetings of the Board of Directors (held during the
period in which such director served) and (ii) all meetings of committees of
the Board on which such director served.
The Compensation Committee, which consists of Uzia Galil, Arthur B.
Stabenow and Arie Kahana, is responsible for reviewing the performance of the
officers of the Company and making recommendations to the Board concerning
salaries and incentive compensation for such officers. The Compensation
Committee held two meetings during the year ended December 31, 1996.
The Audit Committee, which consists of Mr. Stabenow, Mr. Kahana and
James D. Meindl, is responsible for reviewing the Company's financial
statements and significant audit and accounting practices with the Company's
independent auditors and making recommendations to the Directors with respect
thereto. The Audit Committee held four meetings during the year ended
December 31, 1996.
4
<PAGE>
PRINCIPAL STOCKHOLDERS AND SHARE
OWNERSHIP BY MANAGEMENT
The following table sets forth certain information known to the Company
relating to the beneficial ownership of the Company's Common Stock, as of
March 31, 1997, by: (i) each person who is known by the Company to be the
beneficial owner of more than 5% of the outstanding shares of Common Stock;
(ii) each executive officer named in the tables set forth under "Executive
Compensation"; (iii) each director; and (iv) all executive officers and
directors as a group:
NUMBER OF SHARES
NAME AND ADDRESS BENEFICIALLY OWNED (1) PERCENT (1)
- ------------------------------------ ---------------------- -----------
Elron Electronic Industries Ltd. (2) 1,460,166 15.9%
Advanced Technology Center
P.O. Box 1513
Haifa 31015, Israel
The Israel Corporation Ltd. (3) 1,300,439 14.2%
Asia House, 4, Weizman Street
Tel Aviv, 64239, Israel
George T. Haber (4) 826,632 8.8%
c/o Zoran Corporation
3112 Scott Blvd.
Santa Clara, CA 95054
Sorin C. Cismas (5) 783,385 8.4%
c/o Zoran Corporation
3112 Scott Blvd.
Santa Clara, CA 95054
Levy Gerzberg, Ph.D. (6) 400,064 4.2%
Isaac Shenberg, Ph.D. (7) 76,574 *
Meir Tsadik (8) 67,095 *
Ami Kraft (9) 55,211 *
Arthur B. Stabenow (10) 24,747 *
Uzia Galil (11) 16,449 *
James D. Meindl, Ph.D. (12) 15,513 *
Arie Kahana (13) 15,166 *
Philip M. Young (14) 6,325 *
All directors and executive officers as a 1,660,717 16.4%
group (13 persons) (15)
- -----------------------------
* Represents less than 1%
(1) Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission. In computing the number of shares
beneficially owned by a person and the percentage ownership of that
person, shares of Common Stock subject to options or warrants held by
that person that are currently exercisable, or will become exercisable
within 60 days after March 31, 1997, are deemed outstanding. Such
shares, however, are not deemed outstanding for purposes of computing
the percentage ownership of any other person. In general, options
granted under the 1993 Option Plan are fully exercisable from the date
of grant, subject to the Company's right to repurchase any unvested
shares at the
5
<PAGE>
original exercise price in the event of termination of the optionee's
employment. Unless otherwise indicated in the footnotes to this table, the
persons and entities name in the table have sole voting and sole investment
power with respect to all shares beneficially owned, subject to community
property laws where applicable.
(2) Mr. Galil, a director of the Company, is Chairman of the Board,
President and Chief Executive Officer of Elron.
(3) Mr. Kahana, a director of the Company, is Vice President of Business
Development - Technology of The Israel Corporation Ltd. Shoul N.
Eisenberg and Erwin D. Eisenberg are Chairman of the Board and President
and Chief Executive Officer, respectively, of The Israel Corporation
Ltd. In such capacities, the foregoing individuals may be deemed to have
voting and investment control with respect to these shares.
(4) Includes 128,160 shares held by Mr. Haber as custodian for Sabrina
Cismas and 128,160 shares held by him as custodian for Cristina Cismas.
Also includes 173,016 shares subject to a stock option that is currently
exercisable, all of which shares are fully vested.
(5) Includes 124,116 shares held by Mr. Cismas as custodian for Dan Haber
and 124,116 shares held by him as custodian for Emily Haber. Also
includes 173,016 shares subject to a stock option that is currently
exercisable, all of which shares are fully vested.
(6) Includes 373,323 shares subject to stock options that are currently
exercisable, of which 302,837 shares will be vested within 60 days after
March 31, 1997.
(7) Includes 74,785 shares subject to stock options that are currently
exercisable, of which 54,921 shares will vest within 60 days after March
31, 1997.
(8) Includes 66,431 shares subject to stock options that are currently
exercisable, all of which will be vested within 60 days after March 31,
1997. Excludes 45,791 shares subject to options that were cancelled on
March 31, 1997 in connection with Mr. Tsadik's termination.
(9) Includes 54,512 shares subject to stock options that are currently
exercisable, of which 43,812 shares will vest within 60 days after March
31, 1997.
(10) Consists of 14,166 shares subject to stock options that are currently
exercisable, all of which will be vested within 60 days after March 31,
1997.
(11) Includes 3,008 shares held by Ella Galil. Mr. Galil and Ella Galil are
husband and wife. Mr. Galil may be deemed to be a beneficial owner of
shares held by Ella Galil, although Mr. Galil disclaims beneficial
ownership of such shares. Also includes 5,000 shares subject to stock
options that are currently exercisable, all of which shares are fully
vested. Excludes 1,460,166 shares held by Elron. Mr. Galil is Chairman
of the Board, President and Chief Executive Officer of Elron and may be
deemed to be a beneficial owner of shares held by it, although Mr. Galil
disclaims beneficial ownership of such shares.
(12) Includes 1,176 shares held by James and Frederica Meindl as trustees of
the Meindl Trust dated February 4, 1972. Also includes 14,166 shares
subject to stock options that are currently exercisable, all of which
shares will be vested within 60 days after March 31, 1997.
(13) Includes 14,166 shares subject to stock options that are currently
exercisable, all of which shares will be vested within 60 days after
March 31, 1997. Excludes 1,300,439 shares held by The Israel
Corporation, Ltd. Mr. Kahana is Vice President, Business Development -
Technology of The Israel Corporation Ltd. and may be deemed to be a
beneficial owner of the shares, although Mr. Kahana disclaims beneficial
ownership of such shares.
(14) Includes 6,266 shares subject to stock options that are currently
exercisable, all of which shares will be fully vested within 60 days
after March 31, 1997.
(15) Includes 948,752 shares subject to stock options that are currently
exercisable, of which 732,981 shares will be fully vested within 60 days
after March 31, 1997. Excludes shares held by Elron and The Israel
Corporation Ltd. which may be deemed to be beneficially owned by Messrs.
Galil and Kahana, respectively, but as to which such persons disclaim
beneficial ownership. See footnotes (2), (3), (11) and (13) above.
6
<PAGE>
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), requires the Company's directors and executive officers, and
persons who own more than 10% of a registered class of the Company's equity
securities, to file with the SEC initial reports of ownership and reports of
changes in ownership of Common Stock and other equity securities of the
Company. Officers, directors and greater-than-10% beneficial owners are
required by SEC regulation to furnish the Company with copies of all reports
they file under Section 16(a).
To the Company's knowledge, based solely on its review of the copies of
such reports furnished to the Company and written representations that no
other reports were required, all Section 16(a) filing requirements applicable
to its officers, directors and greater than 10% beneficial owners were
complied with during the year ended December 31, 1996.
7
<PAGE>
EXECUTIVE COMPENSATION
SUMMARY OF CASH AND CERTAIN OTHER COMPENSATION
The following table sets forth information concerning the compensation
received for services rendered to the Company during the years ended December
31, 1994, 1995 and 1996 by the Chief Executive Officer of the Company and the
three other most highly compensated executive officers of the Company whose
total salary and bonus for such fiscal year exceeded $100,000 (collectively,
the "Named Executive Officers"):
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
AWARDS
-------------
ANNUAL COMPENSATION OPTIONS
------------------- GRANTED ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY(1) BONUS (SHARES) COMPENSATION
- --------------------------- ---- ------------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Levy Gerzberg, Ph.D. 1996 $250,000 $100,000 -- $ 832 (2)
President and Chief 1995 $190,866 $ 40,000 116,666 $ 876 (2)
Executive Officer 1994 $175,000 -- 293,385 $ 983 (2)
Meir Tsadik (3) 1996 $130,850 -- -- $31,849 (4)
Vice President, Research and 1995 $121,678 $40,000 117,222 $29,015 (4)
Development and Chief
Operating Officer
Isaac Shenberg, Ph.D. (5) 1996 $108,890 $60,000 -- $25,399 (4)
Vice President, Sales and 1995 $106,337 $50,000 -- $23,337 (4)
Marketing
Ami Kraft 1996 $ 96,477 $30,000 -- $25,046 (4)
Vice President, Finance and 1995 $ 93,482 $20,000 -- $23,846 (4)
Chief Financial Officer 1994 $ 79,086 -- 58,612 $16,554 (6)
</TABLE>
- ----------------------
(1) Includes amounts (if any) deferred under the Company's 401(k) Plan.
(2) Represents premiums paid by the Company with respect to term life
insurance for the benefit of Dr. Gerzberg.
(3) Mr. Tsadik joined the Company as an officer in January 1995. Mr.
Tsadik's employment with the Company terminated effective March 31, 1997.
(4) Consists of (i) premiums paid by the Company under an insurance policy
that covers certain vacation, severance and other benefits that may be
payable to the Named Executive Officer and (ii) contributions by the
Company toward a continuing education fund for his benefit. The Company
paid insurance premiums for the benefit of Messrs. Tsadik, Shenberg and
Kraft in the amount of $22,039, $17,236 and $17,814, respectively, in
1996 and $19,935, $15,796 and $16,881, respectively, in 1995. In
addition, the Company made continuing education contributions for the
benefit of Messrs. Tsadik, Shenberg and Kraft in the amount of $9,810,
$8,163 and $7,232, respectively, in 1996 and $9,080, $7,541 and $6,965,
respectively, in 1995.
(5) Dr. Shenberg joined the Company as an officer in January 1995.
8
<PAGE>
(6) Consists of (i) $12,654 in premiums paid by the Company under an
insurance policy that covers certain vacation, severance and other
benefits that may be payable to Mr. Kraft and (ii) $3,900 in
contributions by the Company toward a continuing education fund for his
benefit.
OPTION EXERCISES AND YEAR-END HOLDINGS
The following table sets forth information concerning the stock options
held as of December 31, 1996 by the Named Executive Officers:
AGGREGATE OPTION EXERCISES IN LAST FISCAL
YEAR AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
SHARES UNDERLYING UNEXERCISED VALUE OF UNEXERCISED IN-THE-MONEY
SHARES OPTIONS AT DECEMBER 31, 1996 OPTIONS AT DECEMBER 31, 1996 (1)
ACQUIRED ON VALUE ----------------------------- ---------------------------------
NAME EXERCISE REALIZED EXERCISABLE (2) UNEXERCISABLE EXERCISABLE (2) UNEXERCISABLE
- ---------------- ----------- -------- ----------------------------- ---------------------------------
<S> <C> <C> <C> <C> <C> <C>
Levy Gerzberg 36,729 $857,580 373,323 -- $5,441,739 --
Meir Tsadik 5,000 $121,750 112,222 -- $2,003,163 --
Isaac Shenberg 13,268 $296,408 74,964 -- $1,338,107 --
Ami Kraft 4,100 $103,935 54,512 -- $ 973,039 --
</TABLE>
- ----------------
(1) Based on the closing price of $18.00, as reported on the Nasdaq National
Market on December 31, 1996, less the exercise price.
(2) All options are fully exercisable, subject to the Company's right to
repurchase any unvested shares at the original exercise price in the
event of the optionee's termination. Options (or shares issued upon
exercise thereof) vest over periods of two to four years from the date
of grant.
EMPLOYMENT, SEVERANCE AND CHANGE OF CONTROL AGREEMENTS
The Company has entered into an employment agreement (the "Employment
Agreement") with George T. Haber, the Company's Executive Vice President and
a member of the Board of Directors. The Employment Agreement took effect upon
the consummation of the Company's acquisition of CompCore on December 27,
1996 and continues for a term of two years thereafter. The Employment
Agreement provides that Mr. Haber will serve as Executive Vice President of
the Company and will report directly to the Company's Chief Executive
Officer. It also provides that the Company will use its best efforts to cause
Mr. Haber to be elected to the Company's Board of Directors at each meeting
of stockholders held for the purpose of electing directors. The Employment
Agreement entitles Mr. Haber to an initial base salary of $195,000, subject
to adjustment from time to time, and requires him to devote his full time and
attention to the affairs of the Company. Under the agreement, if the Company
terminates Mr. Haber's employment other than for cause (or if he voluntarily
terminates his employment following certain specified actions by the
Company), he will be entitled to a lump-sum severance payment equal to 12
months' salary plus continued coverage under the Company's life, medical,
dental and disability plans, as in effect on the date of termination, for a
period of 12 months after termination.
9
<PAGE>
COMPENSATION OF DIRECTORS
Directors do not receive cash compensation for their services as members
of the Board of Directors.
The Company has entered into a Professional Services Agreement with
James Meindl, pursuant to which Professor Meindl provides consulting services
to the Company. Under this Agreement, the Company pays Professor Meindl
consulting fees of $2,500 per quarter.
The Company's 1995 Outside Directors Stock Option Plan (the "Directors
Plan") provides for formula-based grants of options to non-employee
directors. Under the Directors Plan, each current non-employee director of
the Company was granted a nonstatutory stock option to purchase 20,000 shares
of Common Stock (an "Initial Option") on December 15, 1995, the date of the
Company's initial public offering, and each new non-employee director of the
Company will automatically be granted an Initial Option on the date on which
such person first becomes a non-employee director of the Company. Thereafter,
on the date immediately following each annual stockholders' meeting, each
non-employee director who is reelected at the meeting to an additional term
will be granted an additional option to purchase 4,800 shares of Common Stock
(an "Annual Option") if, on such date, he shall have served on the Board of
Directors for at least six months. The Directors Plan provides that each
Initial Option shall become exercisable in installments as to one-fourth of
the total number shares subject to the option on each of the first, second,
third and fourth anniversaries of the date of grant, and each Annual Option
shall become exercisable in full one year after the date of grant, subject to
the director's continuous service. The exercise price per share of all
options granted under the Directors Plan shall be equal to the fair market
value of a share of the Company's Common Stock on the date of grant. Options
granted under the Directors Plan have a term of ten years.
10
<PAGE>
PERFORMANCE GRAPH
Set forth below is a graph indicating cumulative total return at
December 31, 1995 and 1996 on $100 invested, alternatively, in the Company's
Common Stock, the CRSP Total Return Index for the Nasdaq Stock Market and the
Nasdaq Electronic Components Stock Index on December 15, 1995 (the date of
the Company's initial public offering).
[GRAPH]
12/15/95 12/31/95 12/31/96
---------- ---------- ----------
Zoran Corporation . . . . . . . . . . $100.00 $153.70 $133.33
CRSP Total Return Index for the
Nasdaq Stock Market . . . . . . . . $100.00 $102.17 $125.66
Nasdaq Electronic Components . . . . $100.00 $ 99.70 $172.28
REPORT OF THE COMPENSATION COMMITTEE
ON EXECUTIVE COMPENSATION
COMPENSATION PHILOSOPHY
The goals of the Company's compensation policy are to attract, retain
and reward executive officers who contribute to the overall success of the
Company by offering compensation that is competitive in the semiconductor
industry, to motivate executives to achieve the Company's business objectives
and to align the interests of officers with the long-term interests of
stockholders. The Company currently uses salary, bonuses and stock options to
meet these goals.
11
<PAGE>
FORMS OF COMPENSATION
The Company provides its executive officers with a compensation package
consisting of base salary, incentive bonuses and participation in benefit
plans generally available to other employees. In setting total compensation,
the Compensation Committee considers individual and Company performance, as
well as market information regarding compensation paid by other companies in
the Company's industry.
BASE SALARY. Salaries for executive officers are initially set based on
negotiation with individual executive officers at the time of recruitment and
with reference to salaries for comparable positions in the semiconductor
industry for individuals of similar education and background to the executive
officers being recruited. The Company also gives consideration to the
individual's experience, reputation in his or her industry and expected
contributions to the Company. Salaries are generally reviewed annually by the
Compensation Committee and are subject to increases based on (i) the
Compensation Committee's determination that the individual's level of
contribution to the Company has increased since his or her salary had last
been reviewed and (ii) increases in competitive pay levels. The initial base
salary of George T. Haber, the Company's Executive Vice President, was fixed
at $195,000 per year by the employment agreement between Mr. Haber and the
Company, the terms of which were negotiated at arm's length in connection
with the Company's acquisition of CompCore. See "Executive Compensation --
Employment, Severance and Change of Control Agreements."
BONUSES. It is the policy of the Company that a substantial component of
each officer's potential annual compensation take the form of a
performance-based bonus. Bonus payments to officers other than the Chief
Executive Officer are determined by the Compensation Committee, in
consultation with the Chief Executive Officer, based on the financial
performance of the Company and the achievement of the officer's individual
performance objectives. The Chief Executive Officer's bonus is determined by
the Compensation Committee, without participation by the Chief Executive
Officer, based on the same factors.
LONG-TERM INCENTIVES. Longer term incentives are provided through the
1993 Stock Option Plan, which rewards executives and other employees through
the growth in value of the Company's stock. The Compensation Committee
believes that employee equity ownership is highly motivating, provides a
major incentive for employees to build stockholder value and serves to align
the interests of employees with those of stockholders. Grants of stock
options to executive officers are based upon each officer's relative
position, responsibilities, historical and expected contributions to the
Company, and the officer's existing stock ownership and previous option
grants, with primary weight given to the executive officers' relative rank
and responsibilities. Initial stock option grants designed to recruit an
executive officer to join the Company may be based on negotiations with the
officer and with reference to historical option grants to existing officers.
Stock options are granted at market price of the Company's Common Stock on
the date of grant and will provide value to the executive officers only when
the price of the Common Stock increases over the exercise price.
1996 COMPENSATION
Compensation for the Chief Executive Officer and the Company's other
executive officers for 1996 was set according to the Company's established
compensation policy described above.
After the end of fiscal 1996, the Company paid cash bonuses to the
Company's executive officers, including a cash bonus of $100,000 to Dr.
Gerzberg. These payments were based upon the Company's successes in 1996 in
the execution of its operating and strategic plan, including substantial
growth in revenue and operating income and the successful acquisition of
CompCore, and the individual executives' contributions to these successes and
the overall performance of the Company and upon the individual officers'
performance with respect to certain specific operational and strategic
objectives.
Uzia Galil
Arie Kahana
Arthur B. Stabenow
12
<PAGE>
CERTAIN TRANSACTIONS
The Company and George T. Haber, its Executive Vice President and a
member of the Board of Directors, have entered into the Employment Agreement.
See "Executive Compensation -- Employment, Severance and Change of Control
Agreements."
The Company's acquisition of CompCore took place pursuant to an Amended
and Restated Agreement and Plan of Reorganization dated November 27, 1996
(the "Plan of Reorganization") among CompCore, the Company and its
wholly-owned subsidiary. Under the Plan of Reorganization, 10% of the shares
of the Company's Common Stock that were issuable to CompCore's shareholders,
including 65,362 shares issuable to Mr. Haber, or his children, have been
placed in escrow until December 27, 1997 to provide a fund against which the
Company and its affiliates may be indemnified for losses, damages, costs and
expenses they may incur by reason of any breach of CompCore's representation
and warranties set forth in the Plan of Reorganization.
Also, under the Plan of Reorganization, the Company assumed all
outstanding options under CompCore's 1994 Stock Option Plan, including
options held by Mr. Haber that are currently exercisable for 173,016 shares
of Common Stock of the Company. Ten percentof the shares that are issuable
upon exercise of these assumed options are subject to indemnification claims
subject to the same terms and conditions as the escrowed shares described
above. Accordingly, in the event of an indemnification claim, the shares
subject to assumed options may be reduced by up to 10%, in proportion to the
number of shares deducted from the escrow, without any corresponding decrease
in the aggregate exercise price of the assumed options. In the event an
assumed option is exercised during the escrow period, 10% of the shares
issued upon exercise will be placed in escrow until December 27, 1997.
The Company believes that all transactions between the Company and its
officers, directors, principal stockholders and other affiliates have been
and will be on terms no less favorable to the Company than could be obtained
from unaffiliated parties. All such future transactions will be approved by a
majority of the Company's independent and disinterested directors.
PROPOSAL NO. 2
AMENDMENT TO 1993 STOCK OPTION PLAN
GENERAL
At the Annual Meeting, the stockholders are being asked to approve an
amendment to the Company's 1993 Stock Option Plan (the "Option Plan") to (i)
increase the number of shares of Common Stock reserved for issuance
thereunder by 650,000 shares, (ii) limit the number of shares of Common Stock
subject to options that may be granted under the Option Plan to any employee
of the Company or any subsidiary during any fiscal year to an aggregate of
500,000 shares, (iii) permit the grant of options to prospective employees,
directors and consultants of the Company or its eligible subsidiaries and
(iv) eliminate the stockholder approval requirement in connection with
amendments to the Option Plan that add material benefits to optionees under
the Option Plan.
Management believes that the availability of additional options to
purchase Common Stock is necessary to enable the Company to continue to
provide its employees with equity ownership as an incentive to contribute to
the Company's success. As a result of the Company's acquisition of CompCore
in December 1996, the number of employees who are eligible to receive options
under the Option Plan increased by approximately 44%. The proposed increase
in the share reserve under the Option Plan is necessitated in part by this
increase in the number of employees, as well as by the Company's anticipated
future growth and need to provide additional long-term performance incentives
to current employees.
13
<PAGE>
As of March 31, 1997, only 106,505 authorized shares remained available
for future option grants under the Option Plan, a number that the Board of
Directors has determined to be insufficient to meet the Company's current and
anticipated needs. In order to provide an adequate reserve of shares to
permit the Company to continue to provide long-term equity incentives both in
the near-term and on an ongoing basis, the Board of Directors has amended the
Option Plan, subject to stockholder approval, to increase the number of
shares authorized for issuance under the Option Plan by 650,000 shares.
The stockholders are also being asked to approve two additional
amendments to the Option Plan intended to give the Company's Board of
Directors additional flexibility in recruiting personnel and in adapting to
changes in the competitive business environment. The first such amendment
would permit the Board of Directors to grant nonstatutory stock options to
prospective employees, prospective consultants and prospective directors in
connection with written offers of employment or engagement. The Board
believes that the ability to include stock options as a part of a written
employment offer can assist the Company in its efforts to compete for the
best candidates. Similarly, the second amendment would give the Board added
flexibility to meet competitive challenges in recruiting and retaining its
highly skilled workforce. This amendment would delete a provision from the
Option Plan that currently requires the Company to seek stockholder approval
of any amendment that would add any material benefit to optionees under the
Option Plan. Prior to the Securities and Exchange Commission's recent
adoption of amendments to Rule 16b-3 under the Securities Exchange Act of
1934, this provision was intended to comply with one of the conditions under
a prior version of Rule 16b-3 to the exemption of the grant of options to a
company's officers and directors from certain "short-swing profit" recovery
provisions of Section 16(b). Rule 16b-3, as amended to date, no longer
conditions the availability of the exemption on stockholder approval of such
plan amendments. Accordingly, the Board of Directors has proposed, subject
to stockholder approval, to eliminate this requirement from the Option Plan.
In addition to the proposed increase in the maximum number of shares
issuable under the Option Plan, the stockholders are also being asked to
approve an amendment placing a limit on the number of shares for which
options may be granted in any fiscal year to any employee, including the
Company's executive officers. This limit is intended to preserve the
Company's ability to deduct in full for federal income tax purposes the
ordinary income recognized by its executive officers in connection with stock
options granted under the Option Plan. Effective January 1, 1994, Section
162(m) of the Internal Revenue Code of 1986, as amended (the "Code"), was
amended to limit the amounts that a publicly-held corporation may deduct in
connection with compensation paid to its chief executive officer and its four
other most highly-compensated officers. For purposes of Section 162(m), any
compensation expense attributable to stock options is counted against this
deduction limit unless, among other things, the plan under which the options
are granted limits the number of shares for which options may be granted to
the optionee in a specified period. To enable the Company to continue to
deduct such amounts in full, the Board of Directors has amended the Option
Plan, subject to stockholder approval, to provide that no employee may be
granted, in any fiscal year, options to purchase more than 500,000 shares of
Common Stock in the aggregate, subject to appropriate adjustment in the event
of a stock split or similar change in the Company's capital structure.
The Board of Directors believes that the Company's stock option program
is an important factor in attracting and retaining the high caliber employees
and consultants essential to the success of the Company and in aligning their
long-term interests with those of the stockholders. Because competition for
highly qualified individuals in the Company's industry is intense, management
believes that to successfully attract the best candidates, the Company must
offer a competitive stock option program as an essential component of its
compensation packages. The Board of Directors further believes that stock
options serve an important role in motivating their holders to contribute to
the Company's continued growth and profitability. The proposed amendments
are intended to ensure that the Option Plan will continue to have available a
reasonable number of shares to meet these needs for the remainder of its
term, to preserve the full tax deductibility of compensation related to
options granted under the plan and to provide the Board of Directors with the
necessary flexibility to adapt the Company's stock option program to meet its
future needs.
14
<PAGE>
SUMMARY OF THE 1993 STOCK OPTION PLAN, AS AMENDED
The following summary of the Option Plan is qualified in its entirety by
the specific language of the Option Plan, a copy of which is available to any
stockholder upon request. Additional information concerning options
outstanding under the Option Plan is set forth under "Executive Compensation."
PURPOSE
The purposes of the Option Plan are to attract and retain the best
available personnel for positions of substantial responsibility and to
provide additional incentives to employees, directors and consultants of the
Company and its subsidiaries to promote the success of the Company's
business. The Option Plan provides for the grant of incentive stock options
within the meaning of Section 422 of the Code and nonstatutory stock options.
SHARES SUBJECT TO OPTION PLAN.
The stockholders have previously authorized the issuance of a maximum of
1,490,000 shares under the Option Plan, of which only 106,505 shares remained
available for future option grants as of March 31, 1997. The Board of
Directors has amended the Option Plan, subject to stockholder approval, to
authorize an additional 650,000 shares for issuance upon the exercise of
options granted under the Option Plan. In addition, to preserve the
deductibility of option-based compensation under Section 162(m) of the Code,
the Board has amended the Plan to provide that no employee may be granted, in
any fiscal year, options to purchase more than 500,000 shares in the
aggregate. Appropriate adjustments will be made to the shares subject to the
Option Plan, the foregoing grant limit and the terms of outstanding options
upon any stock dividend, stock split, reverse stock split, recapitalization,
combination, reclassification, or similar change in the capital structure of
the Company. To the extent that any outstanding option under the Option Plan
expires or terminates prior to exercise in full, the shares of Common Stock
for which such option is not exercised are returned to the Option Plan and
become available for future grant. As of March 31, 1997, options for
1,137,557 shares were outstanding at a weighted average exercise price of
$3.57 per share and options for 245,938 shares had been exercised; the
foregoing excludes options that were assumed in connection with the Company's
acquisition of CompCore of which options for 820,045 shares of Common Stock
were outstanding as of March 31, 1997 at a weighted average exercise price of
$1.19 per share. The closing price of the Company's Common Stock as reported
on The Nasdaq National Market on March 31, 1997 was $16.125 per share.
ADMINISTRATION
The Option Plan is administered by the Board of Directors of the
Company, or by a committee appointed by the Board and consisting of at least
two members of the Board. For purposes of this discussion, the term "Board"
refers to the Board of Directors or any committee authorized to administer
the Option Plan. Subject to the provisions of the Option Plan, the Board
determines the persons to whom options are to be granted, the number of
shares to be covered by each option, whether an option is to be an incentive
stock option or a nonstatutory stock option, the timing and terms of
exercisability and vesting of each option, the exercise price and the type of
consideration to be paid to the Company for shares acquired pursuant to an
option, the time of expiration of each option, and all other terms and
conditions of options granted under the Option Plan. The Board may amend,
modify, extend, renew, or grant a new option in substitution for, any option,
waive any restrictions or conditions applicable to any option or any shares
acquired thereunder, and accelerate, continue, extend or defer the
exercisability of any option or the vesting of any shares acquired under the
Option Plan. The Board is authorized to interpret the Option Plan and
options granted thereunder, and all determinations of the Board are final and
binding on all persons having an interest in the Option Plan or any option.
15
<PAGE>
ELIGIBILITY
The Option Plan provides that options may be granted to current and
prospective employees (including officers and employee directors),
non-employee directors (other than directors serving on the Compensation
Committee) and consultants of the Company and its majority-owned
subsidiaries, provided that no employee of the Company or any subsidiary may
be granted, in any fiscal year, options to purchase more than 500,000 shares
in the aggregate. During the fiscal year ended December 31, 1996, all
current executive officers as a group and all current employees who are not
executive officers (including officers who are not executive officers) as a
group were granted options to purchase 40,000 shares and 25,515 shares,
respectively, under the Option Plan. During that fiscal year, no options were
granted under the Option Plan to any Named Executive Officer, any
non-employee director or any other nominee for election as a director. As of
March 31, 1997, the Company had approximately 119 employees, including 7
executive officers, and 2 non-employee directors eligible to participate in
the Option Plan. While any eligible person may be granted a nonstatutory
stock option, only employees may be granted incentive stock options.
TERMS OF OPTIONS
Each option is evidenced by a stock option agreement between the Company
and the person to whom such option is granted, which sets forth the terms and
conditions of the option. The following terms and conditions generally apply
to all options, unless the stock option agreement provides otherwise:
EXERCISE OF THE OPTION. The Board determines when options granted under
the Option Plan may be exercisable. In general, an option granted under the
Plan is immediately exercisable, subject to the Company's right to repurchase
any unvested shares issued upon exercise of such option, at the original
exercise price, upon the optionee's termination as an employee, director or
consultant of the Company. An option may be exercised by written notice of
exercise to the Company specifying the number of full shares of Common Stock
to be purchased (which may not be less than 10 shares), along with tender of
payment to the Company of the purchase price. Unless otherwise provided in
the stock option agreement, the purchase price of shares purchased upon
exercise of an option may be paid by cash, check or any other means
authorized by the Board and permitted by the Delaware General Corporation
Law, including surrender of shares of the Company's Common Stock having a
fair market value equal to the exercise price or a cashless exercise
procedure in which the optionee assigns the proceeds of a sale or loan with
respect to some or all of the shares acquired upon the exercise.
EXERCISE PRICE. The exercise price of options granted under the Option
Plan is determined by the Board and must not be less than: (i) the fair
market value of the Common Stock on the date the option is granted in the
case of incentive stock options; or (ii) 85% percent of such fair market
value in the case of nonstatutory stock options. Where the participant owns
stock representing more than 10% of the total combined voting power of the
Company's outstanding capital stock, the exercise price for a stock option
must not be less than 110% of such fair market value.
TERMINATION OF EMPLOYMENT. If an optionee's employment or other service
with the Company terminates for any reason other than permanent and total
disability or death, options under the Option Plan may be exercised not later
than 90 days after such termination (or such other period of time as is
determined by the Board), but may be exercised only to the extent the options
were exercisable on the date of termination, subject to the condition that no
option may be exercised after expiration of its term.
DISABILITY. If an optionee should become permanently and totally
disabled while employed by or engaged in other service for the Company, or
within 90 days after termination of employment or other service, options may
be exercised at any time within one year following the date of disability,
but only to the extent the options were exercisable on the date of
termination or disability, whichever occurs first, subject to the condition
that no option may be exercised after expiration of its term.
DEATH. If an optionee should die while employed by or engaged in other
service to the Company, or within 90 days after termination of employment or
other service, options may be exercised at any time within one year following
the date of death, but only to the extent the options were exercisable on the
date of termination or death, whichever occurs first, subject to the
condition that no option may be exercised after expiration of its term.
16
<PAGE>
TERMINATION OF OPTIONS. All options granted under the Option Plan expire
on the date specified in the option agreement, but in no event shall the term
of an incentive stock option exceed 10 years. However, no incentive stock
option granted to any participant who owns stock possessing more than 10% of
the total combined voting power of the Company's outstanding capital stock
may have a term exceeding five years from the date of grant.
NONTRANSFERABILITY OF OPTIONS. An option is not transferable by the
optionee other than by will or the laws of descent and distribution and is
exercisable during his lifetime only by him, or in the event of his death, by
a person who acquires the right to exercise the option by bequest or
inheritance or by reason of the death of the optionee.
OTHER PROVISIONS. The option agreement may contain such other terms,
provisions and conditions not inconsistent with the Option Plan as may be
determined by the Board.
ADJUSTMENTS UPON MERGER OR DISSOLUTION
Upon any merger or consolidation in which the Company is not the
surviving corporation, all outstanding options shall either be assumed by the
surviving entity or shall terminate, unless otherwise determined by the
Board. Unless otherwise determined by the Board, upon the dissolution or
liquidation of the Company, all outstanding options shall terminate if they
are not exercised.
AMENDMENT AND TERMINATION OF THE OPTION PLAN
The Board of Directors may amend the Option Plan at any time or from
time to time or may terminate it without the approval of the stockholders;
provided, however, that stockholder approval is required for any amendment
that increases the maximum number of shares for which options may be granted
or changes the standards of eligibility. However, no such action by the Board
of Directors or stockholders may alter or impair any option previously
granted under the Option Plan. In any event, the Option Plan will terminate
in July 2003.
FEDERAL INCOME TAX CONSEQUENCES
The following summary is intended only as a general guide as to the
United States federal income tax consequences under current law of
participation in the Option Plan and does not attempt to describe all
possible federal or other tax consequences of such participation or tax
consequences based on particular circumstances.
INCENTIVE STOCK OPTIONS
An optionee recognizes no taxable income for regular income tax purposes
as the result of the grant or exercise of an incentive stock option
qualifying under Section 422 of the Code. Optionees who do not dispose of
their shares for two years following the date the option was granted nor
within one year following the exercise of the option will normally recognize
a long-term capital gain or loss equal to the difference, if any, between the
sale price and the purchase price of the shares. If an optionee satisfies
such holding periods upon a sale of the shares, the Company will not be
entitled to any deduction for federal income tax purposes. If an optionee
disposes of shares within two years after the date of grant or within one
year from the date of exercise (a "disqualifying disposition"), the
difference between the fair market value of the shares on the determination
date (see discussion under "Nonstatutory Stock Options" below), and the
option exercise price (not to exceed the gain realized on the sale if the
disposition is a transaction with respect to which a loss, if sustained,
would be recognized) will be taxed as ordinary income at the time of
disposition. Any gain in excess of that amount will be a capital gain. If a
loss is recognized, there will be no ordinary income, and such loss will be a
capital loss. A capital gain or loss will be long-term if the optionee's
holding period is more than 12 months. Any ordinary income recognized by the
optionee upon the disqualifying disposition of the shares generally should be
deductible by the Company for federal income tax purposes, except to the
extent such deduction is limited by applicable provisions of the Code or the
regulations thereunder.
The difference between the option exercise price and the fair market
value of the shares on the determination date of an incentive stock option
(see discussion under "Nonstatutory Stock Options" below) is an
17
<PAGE>
adjustment in computing the optionee's alternative minimum taxable income and
may be subject to an alternative minimum tax which is paid if such tax
exceeds the regular tax for the year. Special rules may apply with respect
to certain subsequent sales of the shares in a disqualifying disposition,
certain basis adjustments for purposes of computing the alternative minimum
taxable income on a subsequent sale of the shares and certain tax credits
which may arise with respect to optionees subject to the alternative minimum
tax.
NONSTATUTORY STOCK OPTIONS
Options not designated and qualifying as incentive stock options will be
nonstatutory stock options. Nonstatutory stock options have no special tax
status. An optionee generally recognizes no taxable income as the result of
the grant of such an option. Upon exercise of a nonstatutory stock option,
the optionee normally recognizes ordinary income in the amount of the
difference between the option exercise price and the fair market value of the
shares on the determination date (as defined below). If the optionee is an
employee, such ordinary income generally is subject to withholding of income
and employment taxes. The "determination date" is the date on which the
option is exercised unless the shares are subject to a substantial risk of
forfeiture and are not transferable, in which case the determination date is
the earlier of (i) the date on which the shares are transferable or (ii) the
date on which the shares are not subject to a substantial risk of forfeiture.
If the determination date is after the exercise date, the optionee may
elect, pursuant to Section 83(b) of the Code, to have the exercise date be
the determination date by filing an election with the Internal Revenue
Service not later than 30 days after the date the option is exercised. Upon
the sale of stock acquired by the exercise of a nonstatutory stock option,
any gain or loss, based on the difference between the sale price and the fair
market value on the determination date, will be taxed as capital gain or
loss. A capital gain or loss will be long-term if the optionee's holding
period is more than 12 months. No tax deduction is available to the Company
with respect to the grant of a nonstatutory stock option or the sale of the
stock acquired pursuant to such grant. The Company generally should be
entitled to a deduction equal to the amount of ordinary income recognized by
the optionee as a result of the exercise of a nonstatutory stock option,
except to the extent such deduction is limited by applicable provisions of
the Code or the regulations thereunder.
REQUIRED VOTE
The affirmative vote of the holders of a majority of the shares of
Common Stock present or represented by proxy and entitled to vote at the
Annual Meeting is required for approval of this proposal. Abstentions and
broker non-votes will each be counted as present for purposes of determining
the presence of a quorum. Abstentions will have the same effect as a negative
vote. Broker non-votes, on the other hand, will have no effect on the outcome
of the vote.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS VOTE "FOR" THE
APPROVAL OF THE AMENDMENTS TO THE 1993 STOCK OPTION PLAN.
PROPOSAL NO. 3
AMENDMENT TO 1995 EMPLOYEE STOCK PURCHASE PLAN
At the Annual Meeting, the stockholders are being asked to approve an
amendment to the Company's 1995 Employee Stock Purchase Plan (the "Purchase
Plan")to increase the number of shares of Common Stock reserved for issuance
thereunder by 150,000 shares. The Purchase Plan provides for the purchase of
the Company's Common Stock by employees of the Company and any subsidiaries
designated by the Board. Management believes that the Purchase Plan is an
important factor in attracting and retaining qualified employees essential to
the success of the Company. The proposed increase in the share reserve under
the Purchase Plan is necessitated in part by the substantial increase in the
number of employees of the Company resulting from its acquisition of CompCore
in December 1996. As of March 31, 1997, a total of 24,197 shares of the
Company's Common Stock had been issued under the Purchase Plan, leaving
125,803 shares available for issuance.
18
<PAGE>
SUMMARY OF THE PURCHASE PLAN, AS AMENDED
The following summary of the Purchase Plan is qualified in its entirety
by the specific provisions of the Purchase Plan, a copy of which is available
to any stockholder upon request.
GENERAL
The Purchase Plan is intended to qualify as an "employee stock purchase
plan" under Section 423 of the Code. Each participant in the Purchase Plan is
granted, at the beginning of each offering under the plan (an "Offering"),
the right to purchase through accumulated payroll deductions up to a number
of shares of the Common Stock of the Company (a "Purchase Right") determined
on the first day of the Offering. The Purchase Right is automatically
exercised on the last day of each purchase period within the Offering unless
the participant has withdrawn from participation in the Offering or in the
Purchase Plan prior to such date.
SHARES SUBJECT TO PLAN
As proposed to be amended, a maximum of 300,000 of the Company's
authorized but unissued or reacquired shares of Common Stock may be issued
under the Purchase Plan, subject to appropriate adjustment in the event of a
stock dividend, stock split, reverse stock split, recapitalization,
combination, reclassification or similar change in the Company's capital
structure or in the event of any merger, sale of assets or other
reorganization of the Company. If any Purchase Right expires or terminates,
the shares subject to the unexercised portion of such Purchase Right will
again be available for issuance under the Purchase Plan.
ADMINISTRATION
The Purchase Plan is administered by the Board of Directors or a duly
appointed committee of the Board (hereinafter referred to as the "Board").
Subject to the provisions of the Purchase Plan, the Board determines the
terms and conditions of Purchase Rights granted under the plan. The Board
will interpret the Purchase Plan and Purchase Rights granted thereunder, and
all determinations of the Board will be final and binding on all persons
having an interest in the Purchase Plan or any Purchase Rights.
ELIGIBILITY
Any employee of the Company or of any present or future parent or
subsidiary corporation of the Company designated by the Board for inclusion
in the Purchase Plan is eligible to participate in an Offering under the plan
so long as the employee is customarily employed for more than 20 hours per
week and more than five months in any calendar year. However, no employee who
owns or holds options to purchase, or as a result of participation in the
Purchase Plan would own or hold options to purchase, 5% or more of the total
combined voting power or value of all classes of stock of the Company or of
any parent or subsidiary corporation of the Company is entitled to
participate in the Purchase Plan. As of March 31, 1997, 117 employees were
eligible to participate in the Purchase Plan. During the fiscal year ended
December 31, 1996, Messrs. Tsadik, Shenberg and Kraft purchased 664 shares,
789 shares and 699 shares, respectively, under the Purchase Plan and all
current executive officers as a group and all current employees who are not
executive officers (including officers who are not executive officers) as a
group purchased 2,892 shares and 21,305 shares, respectively, under the
Purchase Plan. During that fiscal year, neither Dr. Gerzberg nor any other
nominee for election as a director was eligible to participate in the
Purchase Plan.
OFFERINGS
Generally, each Offering of Common Stock under the Purchase Plan is for
a period of 24 months (an "Offering Period"). Offering Periods under the
Purchase Plan are overlapping, with a new Offering Period beginning every six
months. However, employees may only participate in one Offering at a time.
Offering Periods generally commence on the first day of May and November of
each year (an "Offering Date") and end on the last day of the second
following April and October, respectively. Each Offering Period is generally
comprised of four six-month purchase periods ("Purchase Periods"). Shares are
purchased on the last day of each Purchase Period ("Purchase
19
<PAGE>
Dates"). The Board may establish a different term for one or more Offerings
(not to exceed 27 months) or Purchase Periods or different commencement or
ending dates for an Offering or a Purchase Period.
PARTICIPATION AND PURCHASE OF SHARES
Participation in the Purchase Plan is limited to eligible employees who
authorize payroll deductions, which may not exceed 10% of compensation for
each pay period during an Offering or such other rate as the Board
determines. Once an employee becomes a participant in the Purchase Plan, the
employee will automatically participate in each successive Offering until
such time as the employee ceases to be an eligible employee, withdraws from
the Purchase Plan, or terminates employment.
The Purchase Plan provides that each participant in an Offering has a
maximum Purchase Right equal to the lesser of the number of whole shares
determined by dividing $50,000 by the fair market value of a share of Common
Stock on the Offering Date or 5,000 shares, subject to certain limitations.
These dollar and share amounts are pro-rated for any Offering Period that is
less than 23 1/2 months or more than 24 1/2 months in duration.
Notwithstanding any other provision of the Purchase Plan, no participant may
purchase under the Purchase Plan shares of Common Stock having a fair market
value exceeding $25,000 in any calendar year (measured by the fair market
value of the Company's Common Stock on the Offering Date).
At the end of each Purchase Period, a participant acquires the number of
shares of the Company's Common Stock determined by dividing the total amount
of payroll deductions from the participant's compensation during the Purchase
Period by the purchase price, limited in any case by the number of shares
subject to the participant's Purchase Right for the Offering. The purchase
price per share at which the shares are sold under the Purchase Plan
generally equals 85% of the lesser of the fair market value of a share of
Common Stock on the Offering Date or on the Purchase Date. The fair market
value of the Common Stock on any relevant date generally will be the closing
price per share on such date as reported on the Nasdaq National Market. Any
payroll deductions under the Purchase Plan not applied to the purchase of
shares are returned to the participant, except for an amount insufficient to
purchase another whole share, which amount may be applied to the next
Offering.
A participant may withdraw from an Offering at any time without
affecting his or her eligibility to participate in future Offerings. However,
once a participant withdraws from an Offering, that participant may not again
participate in the same Offering.
CHANGE IN CONTROL
The Purchase Plan provides that, in the event of (i) a sale or exchange
by the stockholders in a single or series of related transactions of more
than 50% of the Company's voting stock, (ii) a merger or consolidation in
which the Company is a party, (iii) the sale, exchange or transfer of all or
substantially all of the assets of the Company, or (iv) a liquidation or
dissolution of the Company wherein, upon any such event, the stockholders of
the Company immediately before such event do not retain direct or indirect
beneficial ownership of more than 50% of the total combined voting power of
the voting stock of the Company, its successor, or the corporation to which
the assets of the Company were transferred (a "Change in Control"), the
acquiring or successor corporation may assume the Company's rights and
obligations under the Purchase Plan or substitute substantially equivalent
Purchase Rights for such corporation's stock. If the acquiring or successor
corporation elects not to assume or substitute for the outstanding Purchase
Rights, the Board may adjust the next Purchase Date to a date on or before
the date of the Change in Control. Any Purchase Rights that are not assumed,
substituted for, or exercised prior to the Change in Control will terminate.
20
<PAGE>
TERMINATION OR AMENDMENT
The Purchase Plan will continue until terminated by the Board of
Directors or until all of the shares reserved for issuance under the Purchase
Plan have been issued. The Board may amend or terminate the Purchase Plan at
any time, except that the approval of the Company's stockholders is required
within 12 months of the adoption of any amendment increasing the number
of shares authorized for issuance under the Purchase Plan or changing the
definition of the corporations that may be designated for inclusion in the
Purchase Plan.
SUMMARY OF FEDERAL INCOME TAX CONSEQUENCES OF THE PURCHASE PLAN
The following summary is intended only as a general guide as to the
United States federal income tax consequences under current law of
participation in the Purchase Plan and does not attempt to describe all
potential tax consequences. Furthermore, the tax consequences are complex and
subject to change, and a taxpayer's particular situation may be such that
some variation of the described rules is applicable.
A participant recognizes no taxable income either as a result of
commencing to participate in the Purchase Plan or purchasing shares of the
Company's Common Stock under the terms of the Purchase Plan so long as it
qualifies under Section 423 of the Code. If a participant disposes of shares
purchased under the Purchase Plan within two years from the first day of the
applicable Offering or within one year from the Purchase Date (a
"disqualifying disposition"), the participant will realize ordinary income in
the year of such disposition equal to the amount by which the fair market
value of the shares on the date the shares were purchased exceeds the
purchase price. The amount of the ordinary income will be added to the
participant's basis in the shares, and any additional gain or resulting loss
recognized on the disposition of the shares will be a capital gain or loss. A
capital gain or loss will be long-term if the participant's holding period is
more than twelve months, otherwise it will be short-term.
If the participant disposes of shares purchased under the Purchase Plan
at least two years after the first day of the applicable Offering and at
least one year after the Purchase Date, the participant will realize ordinary
income in the year of disposition equal to the lesser of (i) the excess of
the fair market value of the shares on the date of disposition over the
purchase price or (ii) 15% of the fair market value of the shares on the
first day of the applicable Offering. The amount of any ordinary income will
be added to the participant's basis in the shares, and any additional gain
recognized upon the disposition after such basis adjustment will be a
long-term capital gain. If the fair market value of the shares on the date of
disposition is less than the purchase price, there will be no ordinary income
and any loss recognized will be a long-term capital loss.
If the participant still owns the shares at the time of death, ordinary
income will be recognized in the year of death equal to the lesser of (i) the
excess of the fair market value of the shares on the date of death over the
purchase price or (ii) 15% of the fair market value of the shares on the
first day of the Offering in which the shares were purchased.
The Company should be entitled to a tax deduction in the year of a
disqualifying disposition equal to the amount of ordinary income recognized
by the participant as a result of the disposition, except to the extent such
deduction is limited by applicable provisions of the Code or the regulations
thereunder. In all other cases, no deduction is allowed to the Company.
VOTE REQUIRED AND BOARD RECOMMENDATION
The affirmative vote of a majority of the shares present or represented
by proxy and voting at the Annual Meeting of Stockholders, at which a quorum
representing a majority of all outstanding shares of Common Stock of the
Company is present, either in person or by proxy, is required for approval of
this proposal. Abstentions and broker non-votes will each be counted as
present for purposes of determining the presence of a quorum but will have no
effect on the outcome of the vote.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE "FOR" THE
APPROVAL OF THE AMENDMENT TO THE 1995 EMPLOYEE STOCK PURCHASE PLAN.
21
<PAGE>
PROPOSAL NO. 4
RATIFICATION OF APPOINTMENT OF INDEPENDENT ACCOUNTANTS
The Board of Directors of the Company has selected Price Waterhouse LLP
as independent accountants to audit the financial statements of the Company
for the fiscal year ending December 31, 1997. A representative of Price
Waterhouse LLP is expected to be present at the Annual Meeting with the
opportunity to make a statement if the representative desires to do so, and
is expected to be available to respond to appropriate questions.
Effective August 25, 1995, Price Waterhouse LLP was engaged as principal
independent accountants for the Company. Ernst & Young LLP ("E&Y"), dismissed
effective August 25, 1995, had been the principal independent accountants of
the Company. The decision to change independent accountants was made to allow
the Company to engage a single auditor for both the Company and its Israeli
subsidiary, Zoran Microelectronics Ltd. ("ZML"), and was approved by the
Company's Board of Directors. In connection with the audits of the Company's
financial statements for each of the two years in the period ended December
31, 1994 and the subsequent interim period, there were no disagreements with
E&Y on any matter of accounting principles or practices, financial statement
disclosure or auditing scope or procedures, which disagreements if not
resolved to E&Y's satisfaction would have caused them to make reference to
the matter in their report. The reports of E&Y on the financial statements of
Zoran Corporation as of and for the years ended December 31, 1993 and 1994
did not contain an adverse opinion or disclaimer of opinion, nor were they
qualified or modified as to uncertainty, audit scope or accounting
principles. Further, during this period, the Company was not advised by E&Y
that internal controls necessary for the Company to develop reliable
financial statements did not exist, that management's representations could
not be relied upon, or that there was a need to expand significantly the
scope of the audit or conduct any further investigation, which expanded audit
or further investigation could not be conducted as a result of E&Y's
dismissal. During the two most recent years and through August 25, 1995,
Zoran Corporation had not consulted with Price Waterhouse LLP on items which
involved either the Company's accounting principles or the form of audit
opinion or concerned the subject matter of a disagreement or reportable event
with the former auditor. The Company's Israeli subsidiary, ZML, has engaged
an independent auditor in Israel as its auditor since its inception in 1983.
This auditor became affiliated with Price Waterhouse LLP in 1995.
The ratification of the selection of Price Waterhouse LLP will require
the affirmative vote of not less than a majority of the shares of the
Company's Common Stock represented and voting at the Annual Meeting.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE "FOR" THE
RATIFICATION OF THE SELECTION OF PRICE WATERHOUSE LLP.
OTHER BUSINESS
The Company currently knows of no other matters to be submitted at the
Annual Meeting. If any other matters properly come before the Annual Meeting,
it is the intention of the persons named in the enclosed form of proxy to
vote the shares they represent as the Board of Directors may recommend.
THE BOARD OF DIRECTORS
Dated: April 30, 1997
22
<PAGE>
APPENDIX 1
ZORAN CORPORATION
1993 STOCK OPTION PLAN
(AS AMENDED THROUGH APRIL 23, 1997)
1. PURPOSES OF THE PLAN. The purposes of this Stock Option Plan are to
attract and retain the best available personnel for positions of substantial
responsibility, to provide additional incentives to Employees, Non-Employee
Directors and Consultants of the Company and its Subsidiaries, and to promote
the success of the Company's business. Options granted hereunder may be either
Incentive Stock Options or Nonstatutory Stock Options at the discretion of the
Committee.
2. DEFINITIONS. As used herein, and in any Option granted hereunder, the
following definitions shall apply:
(a) "BOARD" shall mean the Board of Directors of the Company.
(b) "CODE" shall mean the Internal Revenue Code of 1986, as amended,
and any applicable regulations promulgated thereunder.
(c) "COMMON STOCK" shall mean the Common Stock of the Company.
(d) "COMPANY" shall mean Zoran Corporation, a Delaware corporation.
(e) "COMMITTEE" shall mean the Committee appointed by the Board in
accordance with paragraph (a) of Section 4 of the Plan. If the Board does not
appoint or ceases to maintain a Committee, the term "Committee" shall refer to
the Board.
(f) "CONSULTANT" shall mean any independent contractor retained to
perform services for the Company.
(g) "CONTINUOUS SERVICE" shall mean the absence of any interruption
or termination of service with the Company, a successor of the Company or any
Parent or Subsidiary, whether in the capacity of an Employee, a Non-Employee
Director, or a Consultant. Continuous Service shall not be considered
interrupted (i) during any period of sick leave, military leave or any other
leave of absence approved by the Board, (ii) in the case of transfers between
locations of the Company or between the Company and any Parent, Subsidiary or
successor of the Company, or (iii) merely as a result of a change in the
capacity in which the Optionee renders such service provided that no
interruption or termination of the Optionee's service occurs.
(h) "DISINTERESTED PERSON" shall mean a person who has not at any
time within one year prior to service as a member of the Committee (or during
such service)
1
<PAGE>
been granted or awarded Options or other equity securities pursuant to the
Plan or any other plan of the Company or any Parent or Subsidiary.
Notwithstanding the foregoing, a member of the Committee shall
not fail to be a Disinterested Person merely because he or she participates in a
plan meeting the requirements of Rule 16b-3(c)(2)(i)(A) or (B) promulgated under
the Exchange Act.
(i) "EMPLOYEE" shall mean any person, including officers (whether or
not they are directors), employed by the Company or any Subsidiary.
(j) "EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as
amended.
(k) "INCENTIVE STOCK OPTION" shall mean any option granted under this
Plan and any other option granted to an Employee in accordance with the
provisions of Section 422 of the Code, and the regulations promulgated
thereunder.
(l) "NON-EMPLOYEE DIRECTOR" shall mean any director of the Company or
any Subsidiary who is not employed by the Company or such Subsidiary.
(m) "NONSTATUTORY STOCK OPTION" shall mean an Option granted under
the Plan that is subject to the provisions of Section 1.83-7 of the Treasury
Regulations promulgated under Section 83 of the Code.
(n) "OPTION" shall mean a stock option granted pursuant to the Plan.
(o) "OPTION AGREEMENT" shall mean a written agreement between the
Company and the Optionee regarding the grant and exercise of Options to purchase
Shares and the terms and conditions thereof as determined by the Committee
pursuant to the Plan.
(p) "OPTIONED SHARES" shall mean the Common Stock subject to an
Option.
(q) "OPTIONEE" shall mean an Employee, Non-Employee Director or
Consultant who receives an Option.
(r) "PARENT" shall mean a "parent corporation," whether now or
hereafter existing, as defined by Section 424(e) of the Code.
(s) "PLAN" shall mean this 1993 Stock Option Plan.
(t) "REGISTRATION DATE" shall mean the effective date of the first
registration statement filed by the Company pursuant to Section 12(g) of the
Exchange Act with respect to any class of the Company's equity securities.
2
<PAGE>
(u) "SECTION 162(m)" means Section 162(m) of the Code.
(v) "SECURITIES ACT" shall mean the Securities Act of 1933, as
amended.
(w) "SHARE" shall mean a share of the Common Stock subject to an
Option, as adjusted in accordance with Section 11 of the Plan.
(x) "SUBSIDIARY" shall mean a "subsidiary corporation," whether now
or hereafter existing, as defined in Section 424(f) of the Code.
3. STOCK SUBJECT TO THE PLAN. Subject to the provisions of Section 11
of the Plan, the maximum aggregate number of Shares which may be issued under
the Plan shall be two million one hundred forty thousand (2,140,000). If an
Option expires or becomes unexercisable for any reason without having been
exercised in full, the Shares which were subject to the Option but as to
which the Option was not exercised shall, unless the Plan shall have been
terminated, become available for other Option grants under the Plan.
The Company intends that as long as it is not subject to the reporting
requirements of Section 13 or 15(d) of the Exchange Act and is not an investment
company registered or required to be registered under the Investment Company Act
of 1940, all offers and sales of Options and Shares issuable upon exercise of
any Option shall be exempt from registration under the provisions of Section 5
of the Securities Act, and the Plan shall be administered in such a manner so as
to preserve such exemption. The Company intends that the Plan shall constitute
a written compensatory benefit plan within the meaning of Rule 701(b) of 17 CFR
Section 230.701 promulgated by the Securities and Exchange Commission pursuant
to such Act. The Committee shall designate which Options granted under the Plan
by the Company are intended to be granted in reliance on Rule 701.
4. ADMINISTRATION OF THE PLAN.
(a) PROCEDURE. The Plan shall be administered by the Board. The
Board may appoint a Committee consisting of not less than two (2) members of the
Board to administer the Plan, subject to such terms and conditions as the Board
may prescribe. Once appointed, the Committee shall continue to serve until
otherwise directed by the Board. From time to time, the Board may increase the
size of the Committee and appoint additional members thereof, remove members
(with or without
3
<PAGE>
cause) and appoint new members in substitution therefor, fill vacancies,
however caused, and remove all members of the Committee and, thereafter,
directly administer the Plan.
Members of the Board or Committee who are either eligible for
Options or have been granted Options may vote on any matters affecting the
administration of the Plan or the grant of options pursuant to the Plan, except
that no such member shall act upon the granting of an Option to himself, but any
such member may be counted in determining the existence of a quorum at any
meeting of the Board or the Committee during which action is taken with respect
to the granting of an Option to him or her.
The Committee shall meet at such times and places and upon such
notice as the chairperson determines. A majority of the Committee shall
constitute a quorum. Any acts by the Committee may be taken at any meeting at
which a quorum is present and shall be by majority vote of those members
entitled to vote. Additionally, any acts reduced to writing or approved in
writing by all of the members of the Committee shall be valid acts of the
Committee.
(b) PROCEDURE AFTER REGISTRATION DATE. Notwithstanding
subsection (a) above, after the date of registration of the Company's Common
Stock on a national securities exchange or the Registration Date, the Plan shall
be administered either by: (i) the full Board, provided that all members of the
Board are Disinterested Persons: or (ii) a Committee of two (2) or more
directors, each of whom is a Disinterested Person. After such date, the Board
shall take all action necessary to administer the Plan in accordance with the
then effective provisions of Rule 16b-3 promulgated under the Exchange Act,
provided that any amendment to the Plan required for compliance with such
provisions shall be made consistent with the provisions of Section 13 of the
Plan, and said regulations.
(c) POWERS OF THE COMMITTEE. Subject to the provisions of the Plan,
the Committee shall have the authority: (i) to determine, upon review of
relevant information, the fair market value of the Common Stock; (ii) to
determine the exercise price of Options to be granted, the Employees, Directors
or Consultants to whom and the time or times at which Options shall be granted,
and the number of Shares to be represented by each Option; (iii) to interpret
the Plan; (iv) to prescribe, amend and rescind rules and regulations relating to
the Plan; (v) to determine the terms and provisions of each Option granted under
the Plan (which need not be identical) and, with the consent of the holder
thereof, to modify or amend any Option; (vi) to authorize any person to execute
on behalf of the Company any instrument required to effectuate the grant of an
Option previously granted by the Committee; (vii) to accelerate or (with the
consent of the Optionee) defer an exercise date of any Option, subject to the
provisions of Section 9(a) of the Plan; (viii) to determine whether Options
granted under the Plan will be Incentive Stock Options or Nonstatutory Stock
Options; (ix) to make all other determinations deemed necessary or advisable for
the administration of the Plan; and (x) to designate which options granted under
the Plan will be issued in reliance on Rule 701.
4
<PAGE>
(d) EFFECT OF COMMITTEE'S DECISION. All decisions, determinations
and interpretations of the Committee shall be final and binding on all potential
or actual Optionees, any other holder of an Option or other equity security of
the Company and all other persons.
5. ELIGIBILITY AND OPTION LIMITATIONS.
(a) PERSONS ELIGIBLE FOR OPTIONS. Options under the Plan may be
granted only to Employees, Non-Employee Directors or Consultants whom the
Committee, in its sole discretion, may designate from time to time. For
purposes of the foregoing sentence, "Employees," "Non-Employee Directors" and
"Consultants" shall include prospective Employees, prospective Non-Employee
Directors and prospective Consultants to whom Options are granted in connection
with written offers of employment or other service relationship. Incentive
Stock Options may be granted only to Employees. Any person who is not an
Employee on the effective date of grant of an Option to such person may be
granted only a Nonstatutory Stock Option. An Employee who has been granted an
Option, if he or she is otherwise eligible, may be granted an additional Option
or Options. However, the aggregate fair market value (determined in accordance
with the provisions of Section 8(a) of the Plan) of the Shares subject to one or
more Incentive Stock Options grants that are exercisable for the first time by
an Optionee during any calendar year (under all stock option plans of the
Company and its Parents and Subsidiaries) shall not exceed $100,000 (determined
as of the grant date).
(b) SECTION 162(m) GRANT LIMIT. Subject to adjustment as provided in
Section 11, no Employee shall be granted one or more Options within any fiscal
year of the Company which in the aggregate are for the purchase of more than
five hundred thousand (500,000) Shares (the "SECTION 162(m) GRANT LIMIT"). An
Option which is canceled in the same fiscal year of the Company in which it was
granted shall continue to be counted against the Section 162(m) Grant Limit for
such period.
(c) NO RIGHT TO CONTINUING EMPLOYMENT. Neither the establishment nor
the operation of the Plan shall confer upon any Optionee or any other person any
right with respect to continuation of employment or other service with the
Company or any Subsidiary, nor shall the Plan interfere in any way with the
right of the Optionee or the right of the Company (or any Parent or Subsidiary)
to terminate such employment or service at any time.
(d) DIRECTORS SERVING ON COMMITTEE. At any time that any class of
equity security of the Company is registered pursuant to Section 12 of the
Exchange Act, no member of a Committee established to administer the Plan in
compliance with the "disinterested administration" requirements of Rule 16b-3,
if any, while a member, shall be eligible to be granted an Option.
6. TERM OF PLAN. The Plan shall become effective upon its adoption by
the Board or its approval by vote of the holders of the outstanding shares of
the Company entitled to vote on the adoption of the Plan (in accordance with the
provisions of Section
5
<PAGE>
18 hereof), whichever is earlier. It shall continue in effect for a term of
ten (10) years unless sooner terminated under Section 13 of the Plan.
7. TERM OF OPTION. Unless the Committee determines otherwise, the term
of each Option granted under the Plan shall be ten (10) years from the date of
grant. The term of the Option shall be set forth in the Option Agreement. No
Incentive Stock Option shall be exercisable after the expiration of ten (10)
years from the date such Option is granted, and no Incentive Stock Option
granted to any Employee who, at the date such Option is granted, owns (within
the meaning of Section 424(d) of the Code) more than ten percent (10%) of the
total combined voting power of all classes of stock of the Company or any Parent
or subsidiary shall be exercisable after the expiration of five (5) years from
the date such Option is granted.
8. OPTION PRICE AND CONSIDERATION.
(a) OPTION PRICE. Except as provided in subsection (b) below, the
option price for the Shares to be issued pursuant to any Option shall be such
price as is determined by the Committee, which shall in no event be less than:
(i) in the case of Incentive Stock Options, the fair market value of such Shares
on the date the Option is granted; or (ii) in the case of Nonstatutory Stock
Options, 85% of such fair market value. Fair market value of the Common Stock
shall be determined by the Committee, using such criteria as it deems relevant;
provided, however, that if there is a public market for the Common Stock, the
fair market value per Share shall be the average of the last reported bid and
asked prices of the Common Stock on the date of grant, as reported in THE WALL
STREET JOURNAL (or, if not so reported, as otherwise reported by the NASDAQ
System) or, in the event the Common Stock is listed on a national securities
exchange (within the meaning of Section 6 of the Exchange Act) or on the NASDAQ
National Market System (or any successor national market system), the fair
market value per Share shall be the closing price on such exchange on the date
of grant of the Option, as reported in THE WALL STREET JOURNAL.
(b) TEN PERCENT SHAREHOLDERS. No Option shall be granted to any
Employee who, at the date such Option is granted, owns (within the meaning of
Section 424(d) of the Code) more than ten percent (10%) of the total combined
voting power of all classes of stock of the Company or any Parent or Subsidiary,
unless the option price for the Shares to be issued pursuant to such Option is
at least equal to 110% of the fair market value of such Shares on the grant date
determined by the Committee in the manner set forth in subsection (a) above.
(c) CONSIDERATION. The consideration to be paid for the Optioned
Shares shall be payment in cash or by check unless payment in some other manner,
including other shares of the Company's Common Stock or such other consideration
and method of payment for the issuance of Optioned Shares as may be permitted
under Section 152 of the Delaware General Corporation Law, is authorized by the
Committee at the time of the grant of the Option. Any cash or other property
received by the
6
<PAGE>
Company from the sale of Shares pursuant to the Plan shall constitute part of
the general assets of the Company.
9. EXERCISE OF OPTION.
(a) VESTING PERIOD. Any Option granted hereunder shall be
exercisable at such times and under such conditions as determined by the
Committee and as shall be permissible under the terms of the Plan, which shall
be specified in the Option Agreement evidencing the Option. Unless the
Committee specifically determines otherwise at the time of the grant of the
option, each Option shall vest and become exercisable, cumulatively, in four
substantially equal installments on each of the first four anniversaries of the
date of the grant of the option, subject to the Optionee's Continuous Service.
However, no Option granted to a prospective Employee, prospective Non-Employee
Director or prospective Consultant may become exercisable prior to the date on
which such person commences service.
(b) EXERCISE PROCEDURES. An Option shall be deemed to be exercised
when written notice of such exercise has been given to the Company in accordance
with the terms of the Option by the person entitled to exercise the Option, and
full payment for the Shares with respect to which the Option is exercised has
been received by the Company. An Option may not be exercised for fractional
shares or for less than ten (10) Shares. As soon as practicable following the
exercise of an Option in the manner set forth above, the Company shall issue or
cause its transfer agent to issue stock certificates representing the Shares
purchased. Until the issuance of such stock certificates (as evidenced by the
appropriate entry on the books of the Company or of a duly authorized transfer
agent of the Company), no right to vote or receive dividends or any other rights
as a stockholder shall exist with respect to the Optioned Shares notwithstanding
the exercise of the Option. No adjustment will be made for a dividend or other
rights for which the record date is prior to the date of the transfer by the
Optionee of the consideration for the purchase of the Shares, except as provided
in Section 11 of the Plan. After the Registration Date, the exercise of an
Option by any person subject to short-swing trading liability under
Section 16(b) of the Exchange Act shall be subject to compliance with all
applicable requirements of Rule 16b-3(d) or (e) promulgated under the Exchange
Act.
(c) DEATH OF OPTIONEE. In the event of the death during the Option
period of an Optionee who is at the time of his death, or was within the ninety
(90) day period immediately prior thereto, an Employee, Non-Employee Director or
Consultant, and who was in Continuous Service from the date of the grant of the
Option until the date of death or termination, the Option may be exercised, at
any time within one (1) year following the date of death, by the Optionee's
estate or by a person who acquired the right to exercise the Option by bequest
or inheritance, but only to the extent of the accrued right to exercise at the
time of the termination or death, whichever comes first.
7
<PAGE>
(d) DISABILITY OF OPTIONEE. In the event of the permanent and total
disability during the Option period of an optionee who is at the time of such
disability, or was within the ninety (90) day period prior thereto, an Employee,
Non-Employee Director or Consultant, and who was in Continuous Service from the
date of the grant of the Option until the date of disability or termination, the
Option may be exercised at any time within one (1) year following the date of
disability, but only to the extent of the accrued right to exercise at the time
of the termination or disability, whichever comes first, subject to the
condition that no option shall be exercised after the expiration of the Option
period.
(e) OTHER TERMINATION OF CONTINUOUS SERVICE. If the Continuous
Service of an Optionee shall cease for any reason other than permanent and total
disability or death, he or she may, but only within ninety (90) days (or such
other period of time as is determined by the Committee) after the date his or
her Continuous Service ceases, exercise his or her Option to the extent that he
or she was entitled to exercise it at the date of such termination of Continuous
Service, subject to the condition that no Option shall be exercisable after the
expiration of the Option period.
(f) EXERCISE OF OPTION WITH STOCK AFTER REGISTRATION DATE. After the
Registration Date, the Committee may permit an Optionee to exercise an Option by
delivering shares of the Company's Common Stock. If the Optionee is so
permitted, the option agreement covering such Option may include provisions
authorizing the Optionee to exercise the Option, in whole or in part, by:
(i) delivering whole shares of the Company's Common Stock previously owned by
such Optionee (whether or not acquired through the prior exercise of a stock
option) having a fair market value equal to the aggregate option price for the
Optioned Shares issuable on exercise of the Option; and/or (ii) directing the
Company to withhold from the Shares that would otherwise be issued upon exercise
of the Option that number of whole Shares having a fair market value equal to
the aggregate option price for the Optioned Shares issuable on exercise of the
Option. Shares of the Company's Common Stock so delivered or withheld shall be
valued at their fair market value at the close of the last business day
immediately preceding the date of exercise of the Option, as determined by the
Committee, in accordance with the provisions of Section 8(a) of the Plan. Any
balance of the exercise price shall be paid in cash. Any shares delivered or
withheld in accordance with this provision shall not again become available for
purposes of the Plan and for Options subsequently granted thereunder.
(g) TAX WITHHOLDING. After the Registration Date, when an Optionee
is required to pay to the Company an amount with respect to tax withholding
obligations in connection with the exercise of an option granted under the Plan,
the optionee may elect prior to the date the amount of such withholding tax is
determined (the "Tax Date") to make such payment, or such increased payment as
the Optionee elects to make up to the maximum federal, state and local marginal
tax rates, including any related FICA obligation, applicable to the Optionee and
the particular transaction, by: (i) delivering cash; (ii) delivering part or all
of the payment in previously owned shares of Common Stock (whether or not
acquired through the prior exercise of an Option); and/or
8
<PAGE>
(iii) irrevocably directing the Company to withhold from the Shares that
would otherwise be issued upon exercise of the Option that number of whole
Shares having a fair market value equal to the amount of tax required or
elected to be withheld (a "Withholding Election"). If an Optionee's Tax Date
is deferred beyond the date of exercise and the Optionee makes a Withholding
Election, the Optionee will initially receive the full amount of Optioned
Shares otherwise issuable upon exercise of the option, but will be
unconditionally obligated to surrender to the Company on the Tax Date the
number of Shares necessary to satisfy his or her minimum withholding
requirements, or such higher payment as he or she may have elected to make,
with adjustments to be made in cash after the Tax Date.
Any withholding of Optioned Shares with respect to taxes arising
in connection with the exercise of an Option by any person subject to
short-swing trading liability under Section 16(b) of the Exchange Act shall
satisfy the following conditions:
(i) An advance election to withhold Optioned Shares in
settlement of a tax liability must satisfy the requirements of
Rule 16b-3(d)(1)(i), regarding participant-directed transactions;
(ii) Absent such an election, the withholding of Optioned Shares
to settle a tax liability may occur only during the quarterly window period
described in Rule 16b-3(e);
(iii)Absent an advance election or window-period withholding, the
Optionee may deliver shares of Common Stock owned prior to the exercise of an
Option to settle a tax liability arising upon exercise of the Option, in
accordance with Rule 16b-3(f); or
(iv)The delivery of previously acquired shares of Common Stock
(but not the withholding of newly acquired Shares) will be allowed where an
election under Section 83(b) of the Code accelerates the Tax Date to a day that
occurs less than six (6) months after the advance election and is not within the
quarterly window period described in Rule 16b-3(e).
Any adverse consequences incurred by an Optionee with respect to
the use of shares of Common Stock to pay any part of the option Price or of any
tax in connection with the exercise of an option, including without limitation
any adverse tax consequences arising as a result of a disqualifying disposition
within the meaning of Section 422 of the Code, shall be the sole responsibility
of the Optionee. Shares withheld in accordance with this provision shall not
again become available for purposes of the Plan and for Options subsequently
granted thereunder.
10. NON-TRANSFERABILITY OF OPTIONS. An Option may not be sold, pledged,
assigned, hypothecated, transferred or disposed of in any manner other than by
will or by the laws of descent and distribution and may be exercised, during the
lifetime of the Optionee, only by the Optionee.
9
<PAGE>
11. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION. Subject to any
required action by the shareholders of the Company, the number of shares
subject to the Plan, the Section 162(m) Grant Limit set forth in Section
5(b), the number of Optioned Shares covered by each outstanding Option, and
the per share exercise price of each such Option, shall be proportionately
adjusted for any increase or decrease in the number of issued shares of
Common Stock resulting from a stock split, reverse stock split,
recapitalization, combination, reclassification, the payment of a stock
dividend on the Common Stock or any other increase or decrease in the number
of such shares of Common Stock effected without receipt of consideration by
the Company; provided, however, that conversion of any convertible securities
of the Company shall not be deemed to have been "effected without receipt of
consideration." Such adjustment shall be made by the Board, whose
determination in that respect shall be final, binding and conclusive. Except
as expressly provided herein, no issue by the Company of shares of stock of
any class, or securities convertible into shares of stock of any class, shall
affect, and no adjustment by reason thereof shall be made with respect to,
the number or price of shares of Common Stock subject to an Option.
The Committee may, if it so determines in the exercise of its sole
discretion, also make provision for adjusting the number or class of securities
covered by any Option, as well as the price to be paid therefor, in the event
that the Company effects one or more reorganizations, recapitalizations, rights
offerings, or other increases or reductions of shares of its outstanding Common
Stock, and in the event of the Company being consolidated with or merged into
any other corporation.
Unless otherwise determined by the Board, upon the dissolution or
liquidation of the Company the Options granted under the Plan shall terminate
and thereupon become null and void.
Upon any merger or consolidation, if the Company is not the surviving
corporation, the Options granted under the Plan shall either be assumed by the
new entity or shall terminate in accordance with the provisions of the preceding
paragraph.
12. TIME OF GRANTING OPTIONS. Unless otherwise specified by the
Committee, the date of grant of an Option under the Plan shall be the date on
which the Committee makes the determination granting such Option. Notice of the
determination shall be given to each Optionee to whom an Option is so granted
within a reasonable time after the date of such grant.
13. AMENDMENT AND TERMINATION OF THE PLAN. The Board may amend or
terminate the Plan from time to time in such respects as the Board may deem
advisable, except that, without approval of the shareholders of the Company, no
such revision or amendment shall change the number of Shares subject to the Plan
or change the designation of the class of employees eligible to receive Options.
Any such amendment or termination of the Plan shall not affect Options already
granted, and such Options shall remain in full force and effect as if the Plan
had not been amended or terminated.
10
<PAGE>
14. CONDITIONS UPON ISSUANCE OF SHARES. Shares shall not be issued with
respect to an Option unless the exercise of such Option and the issuance and
delivery of such Shares pursuant thereto shall comply with all relevant
provisions of law, including, without limitation, the Securities Act, the
Exchange Act, the rules and regulations promulgated thereunder, and the
requirements of any stock exchange upon which the Shares may then be listed, and
shall be further subject to the approval of counsel for the Company with respect
to such compliance. As a condition to the exercise of an Option, the Company
may require the person exercising such Option to represent and warrant at the
time of any such exercise that the Shares are being purchased only for
investment and without any present intention to sell or distribute such Shares
if, in the opinion of counsel for the Company, such a representation is required
by any of the aforementioned relevant provisions of law.
15. RESERVATION OF SHARES. During the term of this Plan the Company will
at all times reserve and keep available the number of Shares as shall be
sufficient to satisfy the requirements of the Plan. Inability of the Company to
obtain from any regulatory body having jurisdiction and authority deemed by the
Company's 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
nonissuance or sale of such Shares as to which such requisite authority shall
not have been obtained.
16. INFORMATION TO OPTIONEE. During the term of any option granted under
the Plan, the Company shall provide or otherwise make available to each Optionee
a copy of its financial statements at least annually.
17. OPTION AGREEMENT. Options granted under the Plan shall be evidenced
by Option Agreements.
18. SHAREHOLDER APPROVAL. The Plan shall be subject to approval by the
shareholders of the Company within twelve (12) months before or after the Plan
is adopted. Any option granted before shareholder approval is obtained and any
exercise of such option must be rescinded if such shareholder approval is not
obtained within twelve (12) months after the Plan is adopted. Shares issued
upon the exercise of such options shall not be counted in determining whether
such approval is obtained. Shareholder approval of the Plan and any amendments
thereto requiring shareholder approval shall be by the affirmative vote of the
holders of a majority of the capital stock of the Company present or represented
and entitled to vote at a duly held meeting or by the written consent of the
holders of a majority of the outstanding capital stock of the Company entitled
to vote.
11
<PAGE>
APPENDIX 2
ZORAN CORPORATION
AMENDED AND RESTATED
1995 EMPLOYEE STOCK PURCHASE PLAN
(AS AMENDED THROUGH APRIL 23, 1997)
1. ESTABLISHMENT, PURPOSE AND TERM OF PLAN.
1.1 ESTABLISHMENT. The Zoran Corporation 1995 Employee Stock
Purchase Plan was initially established effective December 14, 1995 (the
"EFFECTIVE DATE"), the effective date of the initial registration by the Company
of its Stock under Section 12 of the Exchange Act (the "INITIAL PLAN"). The
Initial Plan was amended and restated in its entirety as the Zoran Corporation
Amended and Restated 1995 Employee Stock Purchase Plan (the "PLAN") effective as
of the date of commencement of the first Offering under the Plan following
approval of the Plan by the stockholders of the Company on June 6, 1996.
1.2 PURPOSE. The purpose of the Plan to provide Eligible
Employees of the Participating Company Group with an opportunity to acquire a
proprietary interest in the Company through the purchase of Stock. The Company
intends that the Plan shall qualify as an "employee stock purchase plan" under
Section 423 of the Code (including any amendments or replacements of such
section), and the Plan shall be so construed.
1.3 TERM OF PLAN. The Plan shall continue in effect until the
earlier of its termination by the Board or the date on which all of the shares
of Stock available for issuance under the Plan have been issued.
2. DEFINITIONS AND CONSTRUCTION.
2.1 DEFINITIONS. Any term not expressly defined in the Plan but
defined for purposes of Section 423 of the Code shall have the same definition
herein. Whenever used herein, the following terms shall have their respective
meanings set forth below:
(a) "BOARD" means the Board of Directors of the Company. If
one or more Committees have been appointed by the Board to administer the
Plan, "Board" also means such Committee(s).
(b) "CODE" means the Internal Revenue Code of 1986, as
amended, and any applicable regulations promulgated thereunder.
1
<PAGE>
(c) "COMMITTEE" means a committee of the Board duly appointed
to administer the Plan and having such powers as shall be specified by the
Board. Unless the powers of the Committee have been specifically limited,
the Committee shall have all of the powers of the Board granted herein,
including, without limitation, the power to amend or terminate the Plan at
any time, subject to the terms of the Plan and any applicable limitations
imposed by law.
(d) "COMPANY" means Zoran Corporation, a Delaware
corporation, or any successor corporation thereto.
(e) "COMPENSATION" means, with respect to an Offering Period
under the Plan, all amounts paid in cash in the form of base salary during
such Offering Period before deduction for any contributions to any plan
maintained by a Participating Company and described in Section 401(k) or
Section 125 of the Code. Compensation shall not include commissions,
overtime, bonuses, annual awards, other incentive payments, shift premiums,
reimbursements of expenses, allowances, long-term disability, workers'
compensation or any amount deemed received without the actual transfer of
cash or any amounts directly or indirectly paid pursuant to the Plan or any
other stock purchase or stock option plan.
(f) "ELIGIBLE EMPLOYEE" means an Employee who meets the
requirements set forth in Section 5 for eligibility to participate in the
Plan.
(g) "EMPLOYEE" means any person treated as an employee
(including an officer or a Director who is also treated as an employee) in
the records of a Participating Company and for purposes of Section 423 of the
Code; provided, however, that neither service as a Director nor payment of a
director's fee shall be sufficient to constitute employment for purposes of
the Plan.
(h) "EXCHANGE ACT" means the Securities Exchange Act of 1934,
as amended.
(i) "FAIR MARKET VALUE" means, as of any date, if there is
then a public market for the Stock, the closing price of a share of Stock (or
the mean of the closing bid and asked prices of a share of Stock if the Stock
is so reported instead) as reported on the National Association of Securities
Dealers Automated Quotation ("NASDAQ") System, the NASDAQ National Market
System or such other national or regional securities exchange or market
system constituting the primary market for the Stock. If the relevant date
does not fall on a day on which the Stock is trading on NASDAQ, the NASDAQ
National Market System or other national or regional securities exchange or
market system, the date on which the Fair Market Value shall be established
shall be the last day on which the Stock was so traded prior to the relevant
date, or such other appropriate day as shall be determined by the Board, in
its sole discretion. If there is then no public market for the Stock, the
Fair Market Value on any relevant date shall be as determined by the Board
without regard to any restriction other than a restriction
2
<PAGE>
which, by its terms, will never lapse. Notwithstanding the foregoing, the
Fair Market Value per share of Stock on the Effective Date shall be deemed to
be the public offering price set forth in the final prospectus filed with the
Securities and Exchange Commission in connection with the initial public
offering of the Stock.
(j) "OFFERING" means an offering of Stock as provided in
Section 6.
(k) "OFFERING DATE" means, for any Offering Period, the first
day of such Offering Period.
(l) "OFFERING PERIOD" means a period determined in accordance
with Section 6.1.
(m) "PARENT CORPORATION" means any present or future "parent
corporation" of the Company, as defined in Section 424(e) of the Code.
(n) "PARTICIPANT" means an Eligible Employee participating in
the Plan.
(o) "PARTICIPATING COMPANY" means the Company or any Parent
Corporation or Subsidiary Corporation which the Board determines should be
included in the Plan. The Board shall have the sole and absolute discretion
to determine from time to time what Parent Corporations or Subsidiary
Corporations shall be Participating Companies.
(p) "PARTICIPATING COMPANY GROUP" means, at any point in
time, the Company and all other corporations collectively which are then
Participating Companies.
(q) "PURCHASE DATE" means, for any Purchase Period, the last
day of such Purchase Period.
(r) "PURCHASE PERIOD" means a period determined in accordance
with Section 6.2.
(s) "PURCHASE PRICE" means the price at which a share of
Stock may be purchased pursuant to the Plan, as determined in accordance with
Section 9.
(t) "PURCHASE RIGHT" means an option pursuant to the Plan to
purchase such shares of Stock as provided in Section 8 which may or may not
be exercised during an Offering Period. Such option arises from the right of
a Participant to withdraw such Participant's accumulated payroll deductions
not previously applied to the purchase of Stock under the Plan (if any) and
terminate
3
<PAGE>
participation in the Plan or any Offering therein at any time during an
Offering Period.
(u) "STOCK" means the common stock, par value $0.001, of the
Company, as adjusted from time to time in accordance with Section 4.2.
(v) "SUBSIDIARY CORPORATION" means any present or future
"subsidiary corporation" of the Company, as defined in Section 424(f) of the
Code.
2.2 CONSTRUCTION. Captions and titles contained herein are for
convenience only and shall not affect the meaning or interpretation of any
provision of the Plan. Except when otherwise indicated by the context, the
singular shall include the plural, the plural shall include the singular, and
use of the term "or" shall include the conjunctive as well as the disjunctive.
3. ADMINISTRATION. The Plan shall be administered by the Board,
including any duly appointed Committee of the Board. All questions of
interpretation of the Plan or of any Purchase Right shall be determined by
the Board and shall be final and binding upon all persons having an interest
in the Plan or such Purchase Right. Subject to the provisions of the Plan,
the Board shall determine all of the relevant terms and conditions of
Purchase Rights granted pursuant to the Plan; provided, however, that all
Participants granted Purchase Rights pursuant to the Plan shall have the same
rights and privileges within the meaning of Section 423(b)(5) of the Code.
All expenses incurred in connection with the administration of the Plan shall
be paid by the Company.
4. SHARES SUBJECT TO PLAN.
4.1 MAXIMUM NUMBER OF SHARES ISSUABLE. Subject to adjustment as
provided in Section 4.2, the maximum aggregate number of shares of Stock that
may be issued under the Plan shall be three hundred thousand (300,000) and
shall consist of authorized but unissued or reacquired shares of the Stock, or
any combination thereof. If an outstanding Purchase Right for any reason
expires or is terminated or canceled, the shares of Stock allocable to the
unexercised portion of such Purchase Right shall again be available for issuance
under the Plan.
4.2 ADJUSTMENTS FOR CHANGES IN CAPITAL STRUCTURE. In the event of
any stock dividend, stock split, reverse stock split, recapitalization,
combination, reclassification or similar change in the capital structure of
the Company, or in the event of any merger (including a merger effected for
the purpose of changing the Company's domicile), sale of assets or other
reorganization in which the Company is a party, appropriate adjustments shall
be made in the number and class of shares subject to the Plan, to the
Offering Share Limit set forth in Section 8.1 and to each Purchase Right and
in the Purchase Price.
5. ELIGIBILITY.
4
<PAGE>
5.1 EMPLOYEES ELIGIBLE TO PARTICIPATE. Any Employee of a
Participating Company is eligible to participate in the Plan except the
following:
(a) Employees who are customarily employed by the
Participating Company Group for twenty (20) hours or less per week;
(b) Employees who are customarily employed by the
Participating Company Group for not more than five (5) months in any calendar
year; and
(c) Employees who own or hold options to purchase or who, as
a result of participation in the Plan, would own or hold options to purchase,
stock of the Company or of any Parent Corporation or Subsidiary Corporation
possessing five percent (5%) or more of the total combined voting power or
value of all classes of stock of such corporation within the meaning of
Section 423(b)(3) of the Code.
5.2 LEASED EMPLOYEES EXCLUDED. Notwithstanding anything herein to
the contrary, any individual performing services for a Participating Company
solely through a leasing agency or employment agency shall not be deemed an
"Employee" of such Participating Company.
6. OFFERINGS.
6.1 OFFERING PERIODS. Except as otherwise set forth below, the
Plan shall be implemented by sequential Offerings of approximately
twenty-four (24) months duration (an "OFFERING PERIOD"); provided, however
that the first Offering Period shall commence on the Effective Date and end
on October 31, 1997 (the "INITIAL OFFERING PERIOD"). Subsequent Offerings
shall commence on the first days of May and November of each year and end on
the last days of the second April and October, respectively, occurring
thereafter. Notwithstanding the foregoing, the Board may establish a
different term for one or more Offerings or different commencing or ending
dates for such Offerings; provided, however, that no Offering may exceed a
term of twenty-seven (27) months. An Employee who becomes an Eligible
Employee after an Offering Period has commenced shall not be eligible to
participate in such Offering but may participate in any subsequent Offering
provided such Employee is still an Eligible Employee as of the commencement
of any such subsequent Offering. Eligible Employees may not participate in
more than one Offering at a time. In the event the first or last day of an
Offering Period is not a business day, the Company shall specify the business
day that will be deemed the first or last day, as the case may be, of the
Offering Period.
6.2 PURCHASE PERIODS. Each Offering Period shall consist of four
(4) consecutive purchase periods of approximately six (6) months duration
(individually, a "PURCHASE PERIOD"). The Purchase Period commencing on the
5
<PAGE>
Offering Date of the Initial Offering Period shall end on April 30, 1996. A
Purchase Period commencing on the first day of May shall end on the last day
of the next following October. A Purchase Period commencing on the first day
of November shall end on the last day of the next following April.
Notwithstanding the foregoing, the Board may establish a different term for
one or more Purchase Periods or different commencing or ending dates for such
Purchase Periods. In the event the first or last day of a Purchase Period is
not a business day, the Company shall specify the business day that will be
deemed the first or last day, as the case may be, of the Purchase Period.
6.3 GOVERNMENTAL APPROVAL; STOCKHOLDER APPROVAL. Notwithstanding
any other provision of the Plan to the contrary, any Purchase Right granted
pursuant to the Plan shall be subject to (a) obtaining all necessary
governmental approvals or qualifications of the sale or issuance of the
Purchase Rights or the shares of Stock and (b) obtaining stockholder approval
of the Plan. Notwithstanding the foregoing, stockholder approval shall not
be necessary in order to grant any Purchase Right granted in the Plan's
Initial Offering Period; provided, however, that the exercise of any such
Purchase Right shall be subject to obtaining stockholder approval of the Plan.
7. PARTICIPATION IN THE PLAN.
7.1 INITIAL PARTICIPATION. An Eligible Employee shall become a
Participant on the first Offering Date after satisfying the eligibility
requirements of Section 5 and delivering to the Company's payroll office or
other office designated by the Company not later than the close of business
for such office on the last business day before such Offering Date (the
"SUBSCRIPTION DATE") a subscription agreement indicating the Employee's
election to participate in the Plan and authorizing payroll deductions. An
Eligible Employee who does not deliver a subscription agreement to the
Company's payroll or other designated office on or before the Subscription
Date shall not participate in the Plan for that Offering Period or for any
subsequent Offering Period unless such Employee subsequently enrolls in the
Plan by filing a subscription agreement with the Company by the Subscription
Date for such subsequent Offering Period. The Company may, from time to
time, change the Subscription Date as deemed advisable by the Company in its
sole discretion for proper administration of the Plan.
7.2 CONTINUED PARTICIPATION. A Participant shall automatically
participate in the Offering Period commencing immediately after the final
Purchase Date of each Offering Period in which the Participant participates
until such time as such Participant (a) ceases to be an Eligible Employee,
(b) withdraws from the Plan pursuant to Section 13.2 or (c) terminates
employment as provided in Section 14. If a Participant automatically may
participate in a subsequent Offering Period pursuant to this Section 7.2,
then the Participant is not required to file any additional subscription
agreement for such subsequent Offering Period in order to continue
participation in the Plan. However, a Participant may file a subscription
6
<PAGE>
agreement with respect to a subsequent Offering Period if the Participant
desires to change any of the Participant's elections contained in the
Participant's then effective subscription agreement.
8. RIGHT TO PURCHASE SHARES.
8.1 PURCHASE RIGHT. Except as set forth below, during an Offering
Period each Participant in such Offering Period shall have a Purchase Right
consisting of the right to purchase that number of whole shares of Stock
arrived at by dividing Fifty Thousand Dollars ($50,000) by the Fair Market
Value of a share of Stock on the Offering Date of such Offering Period;
provided, however, that such number shall not exceed 5,000 shares (the
"OFFERING SHARE LIMIT"). Shares of Stock may only be purchased through a
Participant's payroll deductions pursuant to Section 10.
8.2 PRO RATA ADJUSTMENT OF PURCHASE RIGHT. Notwithstanding the
foregoing, if the Board shall establish an Offering Period of less than
twenty-three and one-half (23 1/2) months in duration or more than
twenty-four and one-half (24 1/2) months in duration, (a) the dollar amount
in Section 8.1 shall be determined by multiplying $2,083.33 by the number of
months in the Offering Period and rounding to the nearest whole dollar, and
(b) the Offering Share Limit shall be determined by multiplying 208.33 shares
by the number of months in the Offering Period and rounding to the nearest
whole share. For purposes of the preceding sentence, fractional months shall
be rounded to the nearest whole month.
9. PURCHASE PRICE. The Purchase Price at which each share of Stock
may be acquired in a given Offering Period pursuant to the exercise of all or
any portion of a Purchase Right granted under the Plan shall be set by the
Board; provided, however, that the Purchase Price shall not be less than
eighty-five percent (85%) of the lesser of (a) the Fair Market Value of a
share of Stock on the Offering Date of the Offering Period, or (b) the Fair
Market Value of a share of Stock on the Purchase Date of the Offering Period.
Unless otherwise provided by the Board prior to the commencement of an
Offering Period, the Purchase Price for that Offering Period shall be
eighty-five percent (85%) of the lesser of (a) the Fair Market Value of a
share of Stock on the Offering Date of the Offering Period, or (b) the Fair
Market Value of a share of Stock on the Purchase Date of the Offering Period.
10. ACCUMULATION OF PURCHASE PRICE THROUGH PAYROLL DEDUCTION. Shares
of Stock which are acquired pursuant to the exercise of all or any portion of
a Purchase Right for an Offering Period may be paid for only by means of
payroll deductions from the Participant's Compensation accumulated during the
Offering Period. Except as set forth below, the amount of Compensation to be
deducted from a Participant's Compensation during each pay period shall be
determined by the Participant's subscription agreement.
7
<PAGE>
10.1 COMMENCEMENT OF PAYROLL DEDUCTIONS. Payroll deductions
shall commence on the first payday following the Offering Date and shall
continue to the end of the Offering Period unless sooner altered or terminated
as provided in the Plan.
10.2 LIMITATIONS ON PAYROLL DEDUCTIONS. The amount of payroll
deductions with respect to the Plan for any Participant during any pay period
shall be in one percent (1%) increments not to exceed ten percent (10%) of
the Participant's Compensation for such pay period. Notwithstanding the
foregoing, the Board may change the limits on payroll deductions effective as
of a future Offering Date, as determined by the Board. Amounts deducted from
Compensation shall be reduced by any amounts contributed by the Participant
and applied to the purchase of Company stock pursuant to any other employee
stock purchase plan qualifying under Section 423 of the Code.
10.3 ELECTION TO CHANGE OR STOP PAYROLL DEDUCTIONS. During an
Offering Period, a Participant may elect to increase or decrease the amount
deducted or stop deductions from his or her Compensation by filing an amended
subscription agreement with the Company on or before the "Change Notice
Date." The "CHANGE NOTICE DATE" shall initially be the seventh (7th) day
prior to the end of the first pay period for which such election is to be
effective; however, the Company may change such Change Notice Date from time
to time. A Participant who elects to decrease the rate of his or her payroll
deductions to zero percent (0%) shall nevertheless remain a Participant in
the current Offering Period unless such Participant subsequently withdraws
from the Offering or the Plan as provided in Sections 13.1 and 13.2,
respectively, or is automatically withdrawn from the Offering as provided in
Section 13.4.
10.4 PARTICIPANT ACCOUNTS. Individual Plan accounts shall be
maintained for each Participant. All payroll deductions from a Participant's
Compensation shall be credited to such account and shall be deposited with
the general funds of the Company. All payroll deductions received or held by
the Company may be used by the Company for any corporate purpose.
10.5 NO INTEREST PAID. Interest shall not be paid on sums deducted
from a Participant's Compensation pursuant to the Plan.
10.6 COMPANY ESTABLISHED PROCEDURES. The Company may, from time to
time, establish or change (a) a minimum required payroll deduction amount for
participation in an Offering, (a) limitations on the frequency or number of
changes in the rate of payroll deduction during an Offering, (c) an exchange
ratio applicable to amounts withheld in a currency other than U.S. dollars,
(d) payroll deduction in excess of or less than the amount designated by a
Participant in order to adjust for delays or mistakes in the Company's
processing of subscription agreements, (e) the date(s) and manner by which
the Fair Market Value of a share of Stock is determined for purposes of
administration of the Plan, or (vi) such other
8
<PAGE>
limitations or procedures as deemed advisable by the Company in the Company's
sole discretion which are consistent with the Plan and in accordance with the
requirements of Section 423 of the Code.
11. PURCHASE OF SHARES.
11.1 EXERCISE OF PURCHASE RIGHT. On each Purchase Date of an
Offering Period, each Participant who has not withdrawn from the Offering or
whose participation in the Offering has not terminated on or before such
Purchase Date shall automatically acquire pursuant to the exercise of the
Participant's Purchase Right the number of whole shares of Stock arrived at
by dividing the total amount of the Participant's accumulated payroll
deductions for the Purchase Period by the Purchase Price; provided, however,
in no event shall the number of shares purchased by the Participant during an
Offering Period exceed the number of shares subject to the Participant's
Purchase Right. No shares of Stock shall be purchased on a Purchase Date on
behalf of a Participant whose participation in the Offering or the Plan has
terminated on or before such Purchase Date.
11.2 RETURN OF CASH BALANCE. Any cash balance remaining in the
Participant's Plan account shall be refunded to the Participant as soon as
practicable after the Purchase Date. In the event the cash to be returned to
a Participant pursuant to the preceding sentence is an amount less than the
amount necessary to purchase a whole share of Stock, the Company may
establish procedures whereby such cash is maintained in the Participant's
Plan account and applied toward the purchase of shares of Stock in the
subsequent Purchase Period or Offering Period.
11.3 TAX WITHHOLDING. At the time a Participant's Purchase Right
is exercised, in whole or in part, or at the time a Participant disposes of
some or all of the shares of Stock he or she acquires under the Plan, the
Participant shall make adequate provision for the foreign, federal, state and
local tax withholding obligations of the Participating Company Group, if any,
which arise upon exercise of the Purchase Right or upon such disposition of
shares, respectively. The Participating Company Group may, but shall not be
obligated to, withhold from the Participant's compensation the amount
necessary to meet such withholding obligations.
11.4 EXPIRATION OF PURCHASE RIGHT. Any portion of a Participant's
Purchase Right remaining unexercised after the end of the Offering Period to
which such Purchase Right relates shall expire immediately upon the end of
such Offering Period.
12. LIMITATIONS ON PURCHASE OF SHARES; RIGHTS AS A STOCKHOLDER.
12.1 FAIR MARKET VALUE LIMITATION. Notwithstanding any other
provision of the Plan, no Participant shall be entitled to purchase shares of
Stock
9
<PAGE>
under the Plan (or any other employee stock purchase plan which is intended
to meet the requirements of Section 423 of the Code sponsored by the Company
or a Parent Corporation or Subsidiary Corporation) at a rate which exceeds
$25,000 in Fair Market Value, which Fair Market Value is determined for
shares purchased during a given Offering Period as of the Offering Date for
such Offering Period (or such other limit as may be imposed by the Code), for
each calendar year in which the Participant participates in the Plan (or any
other employee stock purchase plan described in this sentence).
12.2 PRO RATA ALLOCATION. In the event the number of shares of
Stock which might be purchased by all Participants in the Plan exceeds the
number of shares of Stock available in the Plan, the Company shall make a pro
rata allocation of the remaining shares in as uniform a manner as shall be
practicable and as the Company shall determine to be equitable.
12.3 RIGHTS AS A STOCKHOLDER AND EMPLOYEE. A Participant shall
have no rights as a stockholder by virtue of the Participant's participation
in the Plan until the date of the issuance of a stock certificate for the
shares of Stock being purchased pursuant to the exercise of the Participant's
Purchase Right. No adjustment shall be made for cash dividends or
distributions or other rights for which the record date is prior to the date
such stock certificate is issued. Nothing herein shall confer upon a
Participant any right to continue in the employ of the Participating Company
Group or interfere in any way with any right of the Participating Company
Group to terminate the Participant's employment at any time.
13. WITHDRAWAL.
13.1 WITHDRAWAL FROM AN OFFERING. A Participant may withdraw from
an Offering by signing and delivering to the Company's payroll or other
designated office a written notice of withdrawal on a form provided by the
Company for such purpose. Such withdrawal may be elected at any time prior
to the end of an Offering Period; provided, however, if a Participant
withdraws after a Purchase Date, the withdrawal shall not affect shares of
Stock acquired by the Participant on such Purchase Date. Unless otherwise
indicated, withdrawal from an Offering shall not result in a withdrawal from
the Plan or any succeeding Offering therein. By withdrawing from an Offering
effective as of the close of a given Purchase Date, a Participant may have
shares of Stock purchased on such Purchase Date and immediately commence
participation in the new Offering commencing immediately after such Purchase
Date. A Participant is prohibited from again participating in an Offering at
any time following withdrawal from such Offering. The Company may impose,
from time to time, a requirement that the notice of withdrawal be on file
with the Company's payroll office or other designated office for a reasonable
period prior to the effectiveness of the Participant's withdrawal from an
Offering.
10
<PAGE>
13.2 WITHDRAWAL FROM THE PLAN. A Participant may withdraw from the
Plan by signing and delivering to the Company's payroll office or other
designated office a written notice of withdrawal on a form provided by the
Company for such purpose. Withdrawals made after a Purchase Date shall not
affect shares of Stock acquired by the Participant on such Purchase Date. In
the event a Participant voluntarily elects to withdraw from the Plan, the
Participant may not resume participation in the Plan during the same Offering
Period, but may participate in any subsequent Offering under the Plan by
again satisfying the requirements of Sections 5 and 7.1. The Company may
impose, from time to time, a requirement that the notice of withdrawal be on
file with the Company's payroll office or other designated office for a
reasonable period prior to the effectiveness of the Participant's withdrawal
from the Plan.
13.3 RETURN OF PAYROLL DEDUCTIONS. Upon a Participant's withdrawal
from an Offering or the Plan pursuant to Sections 13.1 or 13.2, respectively,
the Participant's accumulated payroll deductions which have not been applied
toward the purchase of shares of Stock shall be returned as soon as
practicable after the withdrawal, without the payment of any interest, to the
Participant, and the Participant's interest in the Offering or the Plan, as
applicable, shall terminate. Such accumulated payroll deductions may not be
applied to any other Offering under the Plan.
13.4 AUTOMATIC WITHDRAWAL FROM AN OFFERING. If the Fair Market
Value of a share of Stock on a Purchase Date of an Offering (other than the
final Purchase Date of such Offering) is less than the Fair Market Value of a
share of Stock on the Offering Date for such Offering, then every Participant
shall automatically (a) be withdrawn from such Offering at the close of such
Purchase Date and after the acquisition of shares of Stock for such Purchase
Period and (b) be enrolled in the Offering commencing on the first business
day subsequent to such Purchase Period. A Participant may elect not to be
automatically withdrawn from an Offering Period pursuant to this Section 13.4
by delivering to the Company not later than the close of business on the last
day before the Purchase Date a written notice indicating such election.
13.5 WAIVER OF WITHDRAWAL RIGHT. The Company may, from time to
time, establish a procedure pursuant to which a Participant may elect, at
least six (6) months prior to a Purchase Date, to have all payroll deductions
accumulated in his or her Plan account as of such Purchase Date applied to
purchase shares of Stock under the Plan, and (a) to waive his or her right to
withdraw from the Offering or the Plan and (b) to waive his or her right to
increase, decrease, or cease payroll deductions under the Plan from his or
her Compensation during the Purchase Period ending on such Purchase Date.
Such election shall be made in writing on a form provided by the Company for
such purpose and must be delivered to the Company not later than the close of
business on the day preceding the date which is six (6) months before the
Purchase Date for which such election is to first be effective.
11
<PAGE>
14. TERMINATION OF EMPLOYMENT OR ELIGIBILITY. Termination of a
Participant's employment with the Company for any reason, including
retirement, disability or death or the failure of a Participant to remain an
Eligible Employee, shall terminate the Participant's participation in the
Plan immediately. In such event, the payroll deductions credited to the
Participant's Plan account since the last Purchase Date shall, as soon as
practicable, be returned to the Participant or, in the case of the
Participant's death, to the Participant's legal representative, and all of
the Participant's rights under the Plan shall terminate. Interest shall not
be paid on sums returned to a Participant pursuant to this Section 14. A
Participant whose participation has been so terminated may again become
eligible to participate in the Plan by again satisfying the requirements of
Sections 5 and 7.1.
15. TRANSFER OF CONTROL.
15.1 DEFINITIONS.
(a) An "OWNERSHIP CHANGE EVENT" shall be deemed to have
occurred if any of the following occurs with respect to the Company: (i) the
direct or indirect sale or exchange in a single or series of related
transactions by the stockholders of the Company of more than fifty percent
(50%) of the voting stock of the Company; (ii) a merger or consolidation in
which the Company a party; (iii) the sale, exchange, or transfer of all or
substantially all of the assets of the Company; or (iv) a liquidation or
dissolution of the Company.
(b) A "TRANSFER OF CONTROL" shall mean an Ownership Change
Event or a series of related Ownership Change Events (collectively, the
"TRANSACTION") wherein the stockholders of the Company immediately before the
Transaction do not retain immediately after the Transaction, in substantially
the same proportions as their ownership of shares of the Company's voting
stock immediately before the Transaction, direct or indirect beneficial
ownership of more than fifty percent (50%) of the total combined voting power
of the outstanding voting stock of the Company or the corporation or
corporations to which the assets of the Company were transferred (the
"TRANSFEREE CORPORATION(S)"), as the case may be. For purposes of the
preceding sentence, indirect beneficial ownership shall include, without
limitation, an interest resulting from ownership of the voting stock of one
or more corporations which, as a result of the Transaction, own the Company
or the Transferee Corporation(s), as the case may be, either directly or
through one or more subsidiary corporations. The Board shall have the right
to determine whether multiple sales or exchanges of the voting stock of the
Company or multiple Ownership Change Events are related, and its
determination shall be final, binding and conclusive.
15.2 EFFECT OF TRANSFER OF CONTROL ON PURCHASE RIGHTS. In the
event of a Transfer of Control, the surviving, continuing, successor, or
purchasing corporation or parent corporation thereof, as the case may be (the
"ACQUIRING CORPORATION"), may assume the Company's rights and obligations
under the Plan or
12
<PAGE>
substitute substantially equivalent Purchase Rights for stock of the
Acquiring Corporation. If the Acquiring Corporation elects not to assume or
substitute for the outstanding Purchase Rights, the Board may, in its sole
discretion and notwithstanding any other provision herein to the contrary,
adjust the Purchase Date of the then current Purchase Period to a date on or
before the date of the Transfer of Control, but shall not adjust the number
of shares of Stock subject to any Purchase Right. All Purchase Rights which
are neither assumed or substituted for by the Acquiring Corporation in
connection with the Transfer of Control nor exercised as of the date of the
Transfer of Control shall terminate and cease to be outstanding effective as
of the date of the Transfer of Control. Notwithstanding the foregoing, if
the corporation the stock of which is subject to the outstanding Purchase
Rights immediately prior to an Ownership Change Event described in Section
15.1(a)(i) constituting a Transfer of Control is the surviving or continuing
corporation and immediately after such Ownership Change Event less than fifty
percent (50%) of the total combined voting power of its voting stock is held
by another corporation or by other corporations that are members of an
affiliated group within the meaning of Section 1504(a) of the Code without
regard to the provisions of Section 1504(b) of the Code, the outstanding
Purchase Rights shall not terminate unless the Board otherwise provides in
its sole discretion.
16. NONTRANSFERABILITY OF PURCHASE RIGHTS. A Purchase Right may not be
transferred in any manner otherwise than by will or the laws of descent and
distribution and shall be exercisable during the lifetime of the Participant
only by the Participant. The Company, in its absolute discretion, may impose
such restrictions on the transferability of the shares purchasable upon the
exercise of a Purchase Right as it deems appropriate and any such restriction
shall be set forth in the respective subscription agreement and may be
referred to on the certificates evidencing such shares.
17. REPORTS. Each Participant who exercised all or part of his or her
Purchase Right for a Purchase Period shall receive, as soon as practicable
after the Purchase Date of such Purchase Period, a report of such
Participant's Plan account setting forth the total payroll deductions
accumulated, the number of shares of Stock purchased, the Purchase Price for
such shares, the date of purchase and the remaining cash balance to be
refunded or retained in the Participant's Plan account pursuant to Section
11.2, if any. Each Participant shall be provided information concerning the
Company equivalent to that information generally made available to the
Company's common stockholders.
18. RESTRICTION ON ISSUANCE OF SHARES. The issuance of shares under
the Plan shall be subject to compliance with all applicable requirements of
foreign, federal or state law with respect to such securities. A Purchase
Right may not be exercised if the issuance of shares upon such exercise would
constitute a violation of any applicable foreign, federal or state securities
laws or other law or regulations. In addition, no Purchase Right may be
exercised unless (a) a registration statement under the Securities Act of
1933, as amended, shall at the
13
<PAGE>
time of exercise of the Purchase Right be in effect with respect to the
shares issuable upon exercise of the Purchase Right, or (b) in the opinion of
legal counsel to the Company, the shares issuable upon exercise of the
Purchase Right may be issued in accordance with the terms of an applicable
exemption from the registration requirements of said 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 under the Plan 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 a Purchase Right, 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.
19. LEGENDS. The Company may at any time place legends or other
identifying symbols referencing any applicable foreign, federal or state
securities law restrictions or any provision convenient in the administration
of the Plan on some or all of the certificates representing shares of Stock
issued under the Plan. The Participant shall, at the request of the Company,
promptly present to the Company any and all certificates representing shares
acquired pursuant to a Purchase Right 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 THE PURCHASE OF SHARES UNDER AN
EMPLOYEE STOCK PURCHASE PLAN AS DEFINED IN SECTION 423 OF THE INTERNAL REVENUE
CODE OF 1986, AS AMENDED. THE TRANSFER AGENT FOR THE SHARES EVIDENCED HEREBY
SHALL NOTIFY THE CORPORATION IMMEDIATELY OF ANY TRANSFER OF THE SHARES BY THE
REGISTERED HOLDER HEREOF MADE ON OR BEFORE ____________, 19__. THE REGISTERED
HOLDER SHALL HOLD ALL SHARES PURCHASED UNDER THE PLAN IN THE REGISTERED HOLDER'S
NAME (AND NOT IN THE NAME OF ANY NOMINEE) PRIOR TO THIS DATE."
20. NOTIFICATION OF SALE OF SHARES. The Company may require the
Participant to give the Company prompt notice of any disposition of shares
acquired by exercise of a Purchase Right within two years from the date of
granting such Purchase Right or one year from the date of exercise of such
Purchase Right. The Company may require that until such time as a
Participant disposes of shares acquired upon exercise of a Purchase Right,
the Participant shall hold all such shares in the Participant's name (and not
in the name of any nominee) until the lapse of the time periods with respect
to such Purchase Right referred to in the preceding sentence. The Company
may direct that the certificates
14
<PAGE>
evidencing shares acquired by exercise of a Purchase Right refer to such
requirement to give prompt notice of disposition.
21. AMENDMENT OR TERMINATION OF THE PLAN. The Board may at any time
amend or terminate the Plan, except that (a) such termination shall not
affect Purchase Rights previously granted under the Plan, except as permitted
under the Plan, and (b) no amendment may adversely affect a Purchase Right
previously granted under the Plan (except to the extent permitted by the Plan
or as may be necessary to qualify the Plan as an employee stock purchase plan
pursuant to Section 423 of the Code or to obtain qualification or
registration of the shares of Stock under applicable foreign, federal or
state securities laws). In addition, an amendment to the Plan must be
approved by the stockholders of the Company within twelve (12) months of the
adoption of such amendment if such amendment would authorize the sale of more
shares than are authorized for issuance under the Plan or would change the
definition of the corporations that may be designated by the Board as
Participating Companies.
22. CONTINUATION OF INITIAL PLAN AS TO OUTSTANDING PURCHASE RIGHTS. Any
other provision of the Plan to the contrary notwithstanding, the terms of the
Initial Plan shall remain in effect and apply to all Purchase Rights granted
pursuant to the Initial Plan.
IN WITNESS WHEREOF, the undersigned Secretary of the Company certifies
that the foregoing sets forth the Zoran Corporation Amended and Restated 1995
Employee Stock Purchase Plan as duly adopted by the Board of Directors of the
Company on January 24, 1996 and amended through April 23, 1997.
---------------------------------------
Secretary
15
<PAGE>
ZORAN CORPORATION
PROXY FOR ANNUAL MEETING OF STOCKHOLDERS
SOLICITED BY THE BOARD OF DIRECTORS
The undersigned, revoking all prior proxies, hereby appoints Levy
Gerzberg and Ami Kraft, or either of them, with full power of substitution,
as proxies to represent and vote as designated in this proxy any and all of
the shares of stock of Zoran Corporation, held or owned by or standing in the
name of the undersigned on the Company's books on April 18, 1997 at the
Annual Meeting of Stockholders of the Company to be held at the offices of
Gray Cary Ware & Freidenrich, 400 Hamilton Avenue, Palo Alto, California at
2:00 p.m. on June 6, 1997, and any continuation or adjournment thereof, with
all powers the undersigned would possess if personally present at the meeting.
The undersigned hereby directs and authorizes said proxies, and each of
them, or their substitute or substitutes, to vote as specified with respect
to the proposals listed on the reverse side, or, if no specification is made,
to vote in favor thereof.
The undersigned hereby further confers upon said proxies, and each of
them, or their substitute or substitutes, discretionary authority to vote
with respect to all other matters, which may properly come before the meeting
or any continuation or adjournment thereof.
The undersigned hereby acknowledges receipt of: (a) Notice of Annual
Meeting of Stockholders of the Company, (b) accompanying Proxy Statement, and
(c) Annual Report to Stockholders for the fiscal year ending December 31, 1996.
(TO BE SIGNED ON REVERSE SIDE)
<PAGE>
A /X/ PLEASE MARK YOUR
VOTES AS IN THIS
EXAMPLE.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE NOMINEES FOR DIRECTOR AND
FOR PROPOSALS 2, 3 AND 4.
1. Election of seven (7) directors to the Board of Directors.
FOR WITHHELD
/ / / /
NOMINEES: Levy Gerzberg
Uzia Galil
George T. Haber
Arie Kahana
James D. Meindl
Arthur B. Stabenow
Philip M. Young
For all nominees except as follows:
- -----------------------------------
2. To approve amendments to the 1993 Stock Option Plan to (i) increase the
number of shares of Common Stock reserved for issuance thereunder by
650,000 shares, (ii) limit the aggregate number of shares of Common
Stock subject to options that may be granted to any employee of the
Company during any fiscal year and (iii) make certain other
modifications as described in the accompanying Proxy Statement.
FOR AGAINST ABSTAIN
/ / / / / /
3. To approve an amendment to the 1995 Employee Stock Purchase Plan to
increase the number of shares of Common Stock reserved for issuance
thereunder by 150,000 shares.
FOR AGAINST ABSTAIN
/ / / / / /
4. To ratify the appointment of Price Waterhouse LLP as independent
accountants of the Company for the fiscal year ending December 31, 1997.
FOR AGAINST ABSTAIN
/ / / / / /
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING IN PERSON, YOU ARE URGED TO
SIGN AND PROPERLY MAIL THIS PROXY IN THE RETURN ENVELOPE SO THAT YOUR STOCK
MAY BE REPRESENTED AT THE MEETING.
MARK HERE FOR ADDRESS CHANGE AND NOTE BELOW. / /
Signature: Date: Signature: Date:
----------------- -------- --------------- -------
Note: Sign exactly as your name(s) appears on your stock certificate. If
shares of stock are held in the name of two or more persons or in the
name of husband and wife, whether as joint tenants or otherwise, both or
all of such persons should sign the above Proxy. If shares of stock are
held by a corporation, the Proxy should be executed by the President or
Vice President and the Secretary or Assistant Secretary. Executors or
administrators or other fiduciaries who execute the above Proxy for a
deceased shareholder should give their full title. Please date the Proxy.
