<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 Section240.14a-11(c) or
Section240.14a-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:
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<PAGE>
ZORAN CORPORATION
----------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JUNE 18, 1999
------------------------
TO THE STOCKHOLDERS:
The Annual Meeting of Stockholders of ZORAN CORPORATION, a Delaware
corporation (the "Company"), will be held at the offices of the Company, 3112
Scott Boulevard, Santa Clara, California on June 18, 1999 at 2:00 p.m. for the
following purposes:
1. To elect six (6) directors.
2. To approve an amendment to the Company's 1993 Stock Option Plan to
increase the number of shares of Common Stock reserved for issuance
thereunder by 350,000 shares.
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 100,000 shares.
4. To ratify the appointment of PricewaterhouseCoopers LLP as the
independent accountants of the Company for the fiscal year ending
December 31, 1999.
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 29, 1998 shall be
entitled to vote at the meeting.
By order of the Board of Directors
DENNIS C. SULLIVAN
SECRETARY
Santa Clara, California
May 28, 1999
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 to be
held June 18, 1999 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 the Company,
3112 Scott Boulevard, Santa Clara, California. The Company's principal executive
offices are located at 3112 Scott Boulevard, Santa Clara, California. Its
telephone number at that address is (408) 919-4111.
These proxy solicitation materials were mailed on or about May 28, 1999 to
all stockholders entitled to vote at the Annual Meeting.
RECORD DATE
Stockholders of record at the close of business on April 29, 1999 are
entitled to notice of, and to vote at, the Annual Meeting. At the record date,
10,380,053 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.
DEADLINE FOR RECEIPT OF STOCKHOLDER PROPOSALS FOR 2000 ANNUAL MEETING
The Company's bylaws require advance notice of any stockholder proposals to
be brought before a stockholders' meeting. Under the bylaws, in order for
business to be properly brought before a meeting by a stockholder, the
stockholder must have given timely notice thereof in writing to the Secretary of
the Company. To be timely, a stockholder proposal to be presented at an annual
meeting must be received at the Company's principal executive offices not less
than 120 calendar days in advance of the date that the
<PAGE>
Company's proxy statement was released to stockholders in connection with the
previous year's annual meeting of stockholders, except that if no annual meeting
was held in the previous year or the date of the annual meeting has been changed
by more than 30 calendar days from the date contemplated at the time of the
previous year's proxy statement, or in the event of a special meeting, notice by
the stockholder to be timely must be received not later than the close of
business on the 10th day following the day on which such notice of the date of
the meeting was mailed or such public disclosure was made.
Accordingly, proposals of stockholders intended to be presented at the 2000
Annual Meeting of Stockholders must be received by the Company no later than
January 29, 2000. 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").
2
<PAGE>
PROPOSAL NO. 1
ELECTION OF DIRECTORS
A board of six directors will be elected at the Annual Meeting. Unless
otherwise instructed, the proxy holders will vote the proxies received by them
for the six 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 six 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.
<TABLE>
<CAPTION>
NAME OF NOMINEE AGE PRINCIPAL OCCUPATION DIRECTOR SINCE
- ---------------------------- --- ------------------------------------------ ---------------
<S> <C> <C> <C>
Levy Gerzberg............... 54 President and Chief Executive Officer of 1981
the Company
Uzia Galil.................. 74 Chairman of the Board of Directors, Elron 1983
Electronics Industries, Ltd.
George T. Haber............. 47 President and Chief Executive Officer, 1996
GigaPixel Corporation
James D. Meindl............. 66 Professor of Microelectronics, Georgia 1986
Institute of Technology
Arthur B. Stabenow.......... 60 Chairman of the Board and Chief Executive 1990
Officer, Micro Linear Corporation
Philip M. Young............. 59 General Partner, U.S. Venture Partners 1986
</TABLE>
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
3
<PAGE>
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 been a director of the Company since December 1996. Mr. Haber
also served as Executive Vice President of the Company from December 1996 to
August 1997. Since August 1997, Mr. Haber has served as President and Chief
Executive Officer of GigaPixel Corporation, a developer of 3-D graphics
rendering systems. 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.A. 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 1985, 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, CardioThoracic Systems, Inc., Vical Incorporated and 3Dfx
Interactive, Inc.
BOARD MEETINGS AND COMMITTEES
The Board of Directors of the Company held four meetings during the year
ended December 31, 1998. 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, 1998, 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 and Arthur B.
Stabenow, 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, 1998.
The Audit Committee, which consists of Mr. Stabenow 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, 1998.
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, 1999, 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:
<TABLE>
<CAPTION>
NUMBER OF SHARES
BENEFICIALLY
NAME AND ADDRESS OWNED(1) PERCENT(1)
- -------------------------------------------------------------------------------- -------------------- -------------
<S> <C> <C>
Elron Electronic Industries Ltd.(2)............................................. 1,463,965 14.1%
Advanced Technology Center
P.O. Box 1513
Haifa 31015, Israel
The Israel Corporation, Ltd..................................................... 925,440 8.9%
Asia House, 4, Weizman Street
Tel Aviv, 64239, Israel
Levy Gerzberg, Ph.D.(3)......................................................... 456,414 4.2%
George T. Haber(4).............................................................. 324,332 3.1%
Aharon Aharon(5)................................................................ 142,273 1.4%
Isaac Shenberg, Ph.D.(6)........................................................ 109,053 1.0%
Paul R. Goldberg(7)............................................................. 85,386 *
Alex Sinar(8)................................................................... 60,053 *
Arthur B. Stabenow(9)........................................................... 44,981 *
James D. Meindl, Ph.D.(10)...................................................... 44,742 *
Philip M. Young(11)............................................................. 35,695 *
Uzia Galil(12).................................................................. 35,100 *
All directors and executive officers as a group
(14 persons)(13).............................................................. 1,454,161 13.9%
</TABLE>
- ------------------------
* 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, 1999, 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 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 named 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.
5
<PAGE>
(3) Includes 441,323 shares subject to stock options that are currently
exercisable.
(4) Includes 55,660 shares held by Mr. Haber as custodian for Sabrina Cismas and
55,660 shares held by him as custodian for Cristina Cismas.
(5) Includes 82,800 shares subject to stock options that are currently
exercisable.
(6) Includes 99,785 shares subject to stock options that are currently
exercisable.
(7) Includes 48,124 shares subject to stock options that are currently
exercisable.
(8) Includes 33,921 shares subject to stock options that are currently
exercisable.
(9) Includes 34,400 shares subject to stock options that are currently
exercisable.
(10) Includes 1,176 shares held by James and Frederica Meindl as trustees of the
Meindl Trust dated February 4, 1972. Also includes 43,566 shares subject to
stock options that are currently exercisable.
(11) Includes 35,666 shares subject to stock options that are currently
exercisable.
(12) 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 34,400 shares subject to stock options that are
currently exercisable. Excludes 1,463,965 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.
(13) Includes 992,676 shares subject to stock options that are currently
exercisable or will become exercisable within 60 days after March 31, 1999.
Excludes shares held by Elron, which may be deemed to be beneficially owned
by Mr. Galil, but as to which he disclaims beneficial ownership. See
footnotes (2) and (12) above. Excludes shares and options held by Mr. Sinar,
who is a Named Executive Officer but was no longer employed by the Company
as of March 31, 1999.
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, 1998, except that one transaction was
reported late by each of Dr. Gerzberg and Mr. Haber.
6
<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, 1996, 1997 and 1998 by the Chief Executive Officer of the Company and the
four 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............................. 1998 $ 294,270 -- 231,666(2) $ 154(3)
President and Chief 1997 $ 270,095 $ 100,000 75,000 $ 538(3)
Executive Officer 1996 $ 250,000 $ 100,000 -- $ 832(3)
Paul R. Goldberg(4)............................. 1998 $ 149,209 -- 55,000(2) $ 120(3)
Vice President, Audio 1997 $ 136,166 $ 58,750 10,000 $ 518(3)
Products and Intellectual Properties 1996 $ 68,539 -- -- 140(3)
Isaac Shenberg, Ph.D.(5)........................ 1998 $ 145,000 -- 55,000(2) $ 24,430(6)
Vice President, Sales 1997 $ 120,542 $ 50,000 40,000 $ 44,169(6)
and Marketing 1996 $ 108,890 60,000 -- $ 25,399(6)
Aharon Aharon(7)................................ 1998 $ 160,000 -- 110,000(2) $ 28,652(6)
Vice President, Engineering 1997 $ 122,653 $ 45,000 60,000 $ 34,053(6)
Alex Sinar(8)................................... 1998 $ 137,377 -- 40,000(2) $ 102(6)
Former Vice President, Manufacturing 1997 $ 127,393 $ 30,000 30,000 $ 442(6)
</TABLE>
- ------------------------
(1) Includes amounts (if any) deferred under the Company's 401(k) Plan.
(2) Includes options granted in replacement of repriced options to Dr. Gerzberg,
Mr. Goldberg, Dr. Shenberg, Mr. Aharon and Mr. Sinar with respect to 191,666
shares, 40,000 shares, 40,000 shares, 90,000 shares and 30,000 shares,
respectively.
(3) Represents premiums paid by the Company with respect to term life insurance
for the benefit of Dr. Gerzberg and Messrs. Goldberg and Sinar,
respectively.
(4) Mr. Goldberg joined the Company as an officer in June 1996.
(5) Dr. Shenberg joined the Company as an officer in January 1995.
(6) Consists of (i) premiums paid by the Company under an insurance policy that
covers certain 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 Dr. Shenberg and Mr. Aharon in the amounts of $21,080 and
$25,300, respectively, in 1998 and $19,086 and $17,580, respectively, in
1997, and for the benefit of Dr. Shenberg in the amount of $17,236 in 1996.
In addition, the Company made continuing education contributions for the
benefit of Dr. Shenberg and Mr. Aharon in the amounts of $3,350 and $3,352,
respectively, in 1998 and $9,041 and $9,200, respectively, in 1997, and for
the benefit of Dr. Shenberg in the amount of $8,163 in 1996.
(7) Mr. Aharon joined the Company as an officer in February 1997.
(8) Mr. Sinar became an officer of the Company in February 1997. Mr. Sinar's
employment with the Company terminated in February 1999.
7
<PAGE>
OPTION GRANTS
The following table sets forth information concerning grants of options to
purchase the Company's Common Stock made during the year ended December 31, 1998
to the Named Executive Officers:
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL
REALIZABLE
VALUE AT
INDIVIDUAL GRANTS IN FISCAL 1998 ASSUMED ANNUAL
----------------------------------------------------- RATES OF STOCK
% OF TOTAL PRICE
NUMBER OF OPTIONS APPRECIATION
SECURITIES GRANTED TO FOR OPTION
UNDERLYING EMPLOYEES IN EXERCISE OR TERM(1)
OPTIONS FISCAL BASE EXPIRATION ---------------
NAME GRANTED YEAR(2) PRICE(3) DATE 5% ($) 10% ($)
- --------------------------- ----------- ------------ ----------- ---------- ------ -------
<S> <C> <C> <C> <C> <C> <C>
Levy Gerzberg, Ph.D........ 40,000(4) 2.4% $ 5.94 7/22/08 $149,425 $378,673
191,666(5) 11.5% $ 5.94 8/4/08 $715,994 $1,814,469
Paul R. Goldberg........... 15,000(4) .9% $ 5.94 7/22/08 $56,035 $142,002
40,000(6) 2.4% $ 5.94 8/4/08 $149,425 $378,673
Isaac Shenberg, Ph.D....... 15,000(4) .9% $ 5.94 7/22/08 $56,035 $142,002
40,000(7) 2.4% $ 5.94 8/4/08 $149,425 $378,673
Aharon Aharon.............. 20,000(4) 1.2% $ 5.94 7/22/08 $74,713 $189,336
90,000(8) 5.4% $ 5.94 8/4/08 $336,207 $852,015
Alex Sinar................. 10,000(4) .6% $ 5.94 7/22/08 $37,356 $94,668
30,000(9) 1.8% $ 5.94 8/4/08 $112,069 $284,005
</TABLE>
- ------------------------
(1) Potential gains are net of exercise price, but before taxes associated with
the exercise. These amounts represent certain hypothetical gains based on
assumed rates of appreciation, based on the Securities and Exchange
Commission's rules, and do not represent the Company's estimate or
projection of future Common Stock prices. Actual gains, if any, on stock
option exercises are dependent on the future performance of the Company,
overall market conditions and the optionees' continued employment through
the vesting period. The amounts reflected in this table may not be achieved.
(2) The Company granted options to purchase an aggregate of 1,665,491 shares of
Common Stock during the year, including options to purchase an aggregate of
924,164 shares granted in replacement of repriced options. See "Report of
the Compensation Committee on Repricing of Options" and "Ten-Year Option
Repricings."
(3) All options were granted at an exercise price equal to the fair market value
of the Common Stock on August 4, 1998.
(4) The option vests at the rate of 1/48 of such shares for each month of
continuous service to the Company after August 4, 1998.
(5) Represents options granted in replacement of repriced options, consisting of
(i) options for an aggregate of 116,666 shares that vest as to an aggregate
of 29,167 shares per month over four months and (ii) an option for 75,000
shares that vests as to 2.083 shares per month over 36 months.
(6) Represents options granted in replacement of repriced options, consisting of
(i) options for an aggregate of 30,000 shares that vest in 24 monthly
installments (ii) an option for 10,000 shares that vests in 36 monthly
installments.
(7) Represents an option granted in replacement of repriced options, which vests
in 36 monthly installments.
(8) Represents options granted in replacement of repriced options, consisting of
(i) an option for 60,000 shares that vests in 30 monthly installments (ii)
an option for 30,000 shares that vests in 42 monthly installments.
(9) Represents an option granted in replacement of repriced options, which vests
in 36 monthly installments.
8
<PAGE>
OPTION EXERCISES AND YEAR-END HOLDINGS
The following table sets forth information concerning the stock options held
as of December 31, 1998 by the Named Executive Officers:
AGGREGATE OPTION EXERCISES IN LAST FISCAL
YEAR AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
VALUE OF UNEXERCISED
SHARES UNDERLYING UNEXERCISED IN-THE-MONEY
SHARES OPTIONS AT DECEMBER 31, 1998 OPTIONS AT DECEMBER 31, 1998(1)
ACQUIRED ON VALUE -------------------------------- --------------------------------
NAME EXERCISE REALIZED EXERCISABLE(2) UNEXERCISABLE EXERCISABLE(2) UNEXERCISABLE
- ------------------------ ----------- ---------- ------------- ----------------- ------------- -----------------
<S> <C> <C> <C> <C> <C> <C>
Levy Gerzberg........... 16,000 $ 251,315 451,323 -- $ 7,898,153 --
Paul R. Goldberg........ 3,438 $ 39,537 51,562 -- $ 902,335 --
Isaac Shenberg.......... 4,000 $ 51,562 102,785 -- $ 1,798,738 --
Aharon Aharon........... -- -- 110,000 -- $ 1,925,000 --
Alex Sinar.............. 21,000 $ 218,375 68,921 -- $ 1,206,118 --
</TABLE>
- ------------------------
(1) Based on the closing price of $17.50, as reported on the Nasdaq National
Market on December 31, 1998, 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.
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 non-employee director of the Company is
automatically granted a nonstatutory stock option to purchase 20,000 shares of
Common Stock (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 is granted an
additional option to purchase 4,800 shares of Common Stock (an "Annual Option")
if, on such date, he has 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.
9
<PAGE>
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.
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.
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.
1998 COMPENSATION
Compensation for the Chief Executive Officer and other executive officers
for 1998 was set according to the Company's established compensation policy
described above. In light of the Company's financial performance during fiscal
1998, none of the Company's executive officers earned a bonus for that year.
Uzia Galil
Arthur B. Stabenow
10
<PAGE>
REPORT OF THE COMPENSATION COMMITTEE
ON REPRICING OF OPTIONS
In July 1998, the Compensation Committee reviewed the options held by the
Company's executive officers and employees and considered the fact that the
broad decline in the price of the Common Stock of the Company had resulted in a
substantial number of stock options granted pursuant to the 1993 Stock Option
Plan being substantially "under water"--i.e., having exercise prices well above
the recent trading prices for the Common Stock. The Committee was advised by
management that management believed that the Company's total compensation
package for long-term employees, which included substantial amounts of
under-water options, was less attractive than compensation offered by other
companies in the same geographic location, because options granted to new hires
at other companies would be granted at current trading prices, providing more
opportunity for appreciation than the Company's options. The Committee also
considered the probability that the recent decline in the Company's share price
would result in perceived inequities between longer-term employees holding
higher-priced options and recent hires who had been granted options with
exercise prices set at the lower current trading price of the Company's shares,
and that employee morale could suffer as a consequence.
The Committee recognized that competition for highly skilled technical,
managerial and marketing personnel and that stock options are an important and
cost-effective means of retaining employees and providing them with an incentive
to work toward the Company's success and help maximize stockholder value. The
Committee recognized that an exchange of under-water options for options at fair
market value would provide additional incentive to employees because of the
increased potential for appreciation and also recognized that the Committee
could delay the vesting schedules of the new options, so that optionees
participating in the exchange would have an additional incentive to remain with
the Company. On balance, considering all of these factors, the Committee
determined that it would be in the best interests of the Company and its
shareholders to restore the incentive for employees and executive officers to
remain with the Company and to exert their maximum efforts on behalf of the
Company by granting replacement stock options under the 1993 Stock Option Plan
for those options with exercise prices above recent trading prices, at the
optionee's election, with delayed vesting.
Accordingly, the Committee approved an offer to all officers and other
employees of the Company to exchange outstanding options with exercise prices
above the then-current trading price for options with an exercise price equal to
the then-current trading price, with vesting to recommence as of the effective
date of the exchange, August 4, 1998 (the "Effective Date"), subject to the
following:
- If the option was vesting on a monthly basis as of the Effective Date, the
option would vest in equal monthly installments over the vesting period
that was remaining as of the Effective Date.
- If the option was subject to a "vesting cliff" that had not yet vested as
of the effective Effective Date (as when the first twelve months of
vesting occurs in a single installment one year after the option was
granted, after which monthly vesting commences), then, on the
originally-scheduled cliff vesting date (the "Cliff Date"), the option
would vest as to a number of shares equal to (x) the number of shares
subject to the original vesting cliff, multiplied by (y) the number of
months between the Effective Date and the Cliff Date, divided by (z) the
number of months between the original grant date and the Cliff Date.
Thereafter, the portion of the option remaining unvested would vest in
equal monthly installments over the remainder of the original vesting
period.
- Notwithstanding any of the foregoing, any portion of an option that was
subject to a vesting cliff that could be accelerated upon the achievement
of predefined performance goals (such portion being referred to as a
"Performance Option") would be subject to a new vesting cliff of equal
duration commencing on the Effective Date, subject to acceleration upon
the achievement of the same performance goals as applied prior to the
Effective Date.
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<PAGE>
In the case of all options other than Performance Options, the amount of vesting
forfeited in the exchange can be recaptured in the event that the Company
achieves predefined revenue targets in any two consecutive quarters in which the
Company has net income. All exchanged options will terminate no later than 10
years from the Effective Date.
The offer to exchange options was commenced on July 22, 1998, and through
the Effective Date options for 924,164 shares with exercise prices ranging from
$10.63 to $19.75 were exchanged for options for an equal number of shares at an
exercise price of $5.94, the closing price of the Company's Common Stock on the
Effective Date. See "Ten-Year Option Repricings" table for further information
concerning the repricing.
Uzia Galil
Arthur B. Stabenow
12
<PAGE>
TEN-YEAR OPTION REPRICINGS
The following table provides the specified information concerning all
repricings of options to purchase the Company's Common Stock held by any
executive officer of the Company since December 15, 1995, the date of the
Company's initial public offering:
<TABLE>
<CAPTION>
MARKET
NUMBER OF PRICE OF EXERCISE
SHARES STOCK AT PRICE AT NEW LENGTH OF ORIGINAL
UNDERLYING TIME OF TIME OF EXERCISE OPTION TERM REMAINING
NAME AND POSITION DATE REPRICED REPRICING REPRICING PRICE AT DATE OF REPRICING
- ---------------------------------------- --------- ----------- ----------- ----------- ----------- ----------------------
<S> <C> <C> <C> <C> <C> <C>
Levy Gerzberg, Ph.D..................... 8/4/98 75,000 $ 5.94 $ 19.75 $ 5.94 9 years
President and Chief Executive 8/4/98 116,666 $ 5.94 $ 10.63 $ 5.94 7 years, 2 months
Officer
Aharon Aharon........................... 8/4/98 60,000 $ 5.94 $ 17.50 $ 5.94 8 years, 6 months
Senior Vice President and 8/4/98 30,000 $ 5.94 $ 17.50 $ 5.94 9 years, 6 months
Chief Operating Officer
Isaac Shenberg, Ph.D.................... 8/4/98 40,000 $ 5.94 $ 19.75 $ 5.94 9 years
Senior Vice President,
Business and Strategic
Development
Karl Schneider.......................... 8/4/98 10,000 $ 5.94 $ 13.38 $ 5.94 9 years, 6 months
Vice President, Finance and
Chief Financial Officer
Paul Goldberg........................... 8/4/98 30,000 $ 5.94 $ 11.25 $ 5.94 8 years
Vice President, Audio Products 8/4/98 10,000 $ 5.94 $ 19.75 $ 5.94 9 years
and Intellectual Properties
Alon Ironi.............................. 8/4/98 11,000 $ 5.94 $ 19.75 $ 5.94 9 years
Vice President, Engineering,
Israel
Ronald Richter.......................... 8/4/98 17,000 $ 5.94 $ 19.75 $ 5.94 9 years
Vice President, Worldwide
Sales
Shmuel Farkash.......................... 8/4/98 14,000 $ 5.94 $ 14.00 $ 5.94 8 years, 8 months
Vice President, Video 8/4/98 10,000 $ 5.94 $ 13.38 $ 5.94 9 years, 6 months
Products
Alex Sinar.............................. 8/4/98 30,000 $ 5.94 $ 19.75 $ 5.94 9 years
Former Vice President,
Manufacturing
</TABLE>
13
<PAGE>
PERFORMANCE GRAPH
Set forth below is a graph indicating cumulative total return at December
31, 1995, 1996, 1997 and 1998 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).
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
CRSP TOTAL RETURN NASDAQ
<S> <C> <C> <C>
Zoran Index for the Nasdaq Electronic
Corporation Stock Market Components
12/15/95 $100.00 $100.00 $100.00
12/31/95 $153.70 $102.17 $99.70
12/31/96 $133.33 $125.66 $172.28
12/31/97 $89.35 $154.30 $180.80
12/31/98 $129.63 $242.41 $291.05
</TABLE>
14
<PAGE>
PROPOSAL NO. 2
AMENDMENT TO 1993 STOCK OPTION PLAN
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
increase the number of shares of Common Stock reserved for issuance thereunder
by 350,000 shares.
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. The proposed increase in the share reserve under the Option Plan is
necessitated by the Company's anticipated future growth and need to provide
additional long-term performance incentives to current employees.
As of March 31, 1999, 76,000 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 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 350,000 shares.
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 amendment is 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.
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
2,590,000 shares under the Option Plan. The Board of Directors has amended the
Option Plan, subject to stockholder approval, to authorize an additional 350,000
shares for issuance upon the exercise of options granted under the Option Plan.
Appropriate adjustments will be made to the shares subject to the Option Plan
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
15
<PAGE>
available for future grant. As of March 31, 1999, options for 2,047,000 shares
were outstanding at a weighted average exercise price of $6.98 per share and
options for 1,357,407 shares had been exercised. The closing price of the Common
Stock as reported on The Nasdaq National Market on March 31, 1999 was $16.375
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.
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. As of March 31,
1999, the Company had approximately 154 employees, including seven executive
officers and three 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 Option
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.
16
<PAGE>
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 90 days 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.
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.
17
<PAGE>
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 share, 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 mid-term or 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 adjustment in
computing the optionee's alternative minimum tax 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 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 a
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 nor 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 mid-term or long-term if
the optionee's holding period is
18
<PAGE>
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.
OPTIONS GRANTED TO CERTAIN PERSONS
During the year ended December 31, 1998: (i) Messrs. Gerzberg, Goldberg,
Shenberg, Aharon and Sinar were granted options to purchase 231,666 shares,
55,000 shares, 55,000 shares, 110,000 and 40,000 shares, respectively; (ii) all
current executive officers as a group were granted options to purchase an
aggregate of 648,666 shares; and (iii) all current employees, including officers
who are not executive officers, as a group were granted options to purchase an
aggregate of 997,625 shares. The foregoing includes options granted in
replacement of repriced options. See "Report of the Compensation Committee on
Repricing of Options." During the year ended December 31, 1998, no options were
granted under the Option Plan to any directors who are not executive officers or
to any associate of any director, executive officer or Board nominee of the
Company, and, other than Messrs. Gerzberg, Shenberg and Aharon, no person was
granted 5% or more of the total amount of options granted under the Option Plan
during that year.
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 will be counted as
present for purposes of determining the presence of a quorum but will be treated
as a vote against the proposal. Broker non-votes will 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 1993 STOCK OPTION PLAN.
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<PAGE>
PROPOSAL NO. 3
AMENDMENT TO 1995 EPLOYEE 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 100,000 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. As of March 31, 1999, a total of 151,220 shares of
the Company's Common Stock had been issued under the Purchase Plan, leaving
148,780 shares available for issuance.
SUMMARY OF THE 1995 EMPLOYEE STOCK PURCHASE PLAN, AS AMENDED
The following summary of the Purchase Plan is qualified in its entirety by
the specific language 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 PURCHASE PLAN
As proposed to be amended, a maximum of 400,000 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
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subsidiary corporation of the Company is entitled to participate in the Purchase
Plan. As of March 31, 1999, 184 employees were eligible to participate in the
Purchase Plan. During the fiscal year ended December 31, 1998, Messrs. Gerzberg,
Goldberg, Shenberg, Aharon and Sinar purchased 1,210 shares, 839 shares, 763
shares, 1,577 shares and 773 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 6,075 shares and 78,279 shares, respectively, under the Purchase
Plan. During that fiscal year, no nominee for election as a director other than
Dr. Gerzberg 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 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.
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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.
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.
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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.
REQUIRED VOTE
The affirmative vote of the holders of a majority of the shares of Common
Stock present or represented by proxy and voting 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
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 STOCK PURCHASE PLAN.
PROPOSAL NO. 4
RATIFICATION OF APPOINTMENT OF INDEPENDENT ACCOUNTANTS
The Board of Directors of the Company has selected PricewaterhouseCoopers
LLP as independent accountants to audit the financial statements of the Company
for the fiscal year ending December 31, 1998. A representative of
PricewaterhouseCoopers 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.
The ratification of the selection of PricewaterhouseCoopers 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 PRICEWATERHOUSECOOPERS 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: May 11, 1999
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ZORAN CORPORATION
1993 STOCK OPTION PLAN
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) been granted or
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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.
(u) "SECTION 162(m)" means Section 162(m) of the Code.
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(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 nine hundred forty thousand (2,940,000). 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 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.
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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.
(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
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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 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.
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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 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.
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(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.
(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
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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 (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);
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(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.
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.
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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.
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.
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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.
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ZORAN CORPORATION
AMENDED AND RESTATED
1995 EMPLOYEE STOCK PURCHASE PLAN
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.
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(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
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Board without regard to any restriction other than a restriction 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
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previously applied to the purchase of Stock under the Plan (if any) and
terminate 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 four hundred thousand (400,000) 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.
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5. ELIGIBILITY.
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.
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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
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.
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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 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
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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.
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
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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 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
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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 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
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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.
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
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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.
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
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<PAGE>
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 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
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<PAGE>
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 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
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<PAGE>
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 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
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PLAN HISTORY
October 13, 1995 Board adopts Initial Plan, with an initial reserve of
150,000 shares (post the 1:3 reverse stock split on
12/14/95).
December 14, 1995 Effective date of stockholder action by consent without
meeting, approving Initial Plan, with an initial reserve
of 150,000 shares (post the 1:3 reverse stock split on
12/14/95).
December 14, 1995 The Plan initially was effective December 14, 1995, the
effective date of the initial registration by the Company
of its Stock under Section 12 of the Exchange Act.
January 24, 1996 Subject to stockholder approval, Board amends and
restates the Plan to increase the number of shares
subject to a purchase right and to eliminate a limit on
the number of shares purchasable in a calendar year less
than the calendar year limit imposed by Section 423 of
the Code. The amended and restated Plan will be
effective as of the date of commencement of the first
offering under the Plan following approval by the
stockholders.
May 23, 1996 Stockholders approve Plan, as amended January 24, 1996.
April 23, 1997 Board amends Plan to increase share reserve by
____________ shares to ______________ shares and to
permit increases in the rate of payroll deductions.
[June __, 1997] Stockholders approve amendment increasing share reserve
to ___________ shares.
16
<PAGE>
ZORAN CORPORATION
1995 EMPLOYEE STOCK PURCHASE PLAN
SUBSCRIPTION AGREEMENT
/ / Original Application for participation commencing with the Offering
Period beginning _________________________, 199__.
/ / Change in Percentage of Payroll Deductions effective with the pay period
ending _________________________, 199__.
I hereby elect to participate in the 1995 Employee Stock Purchase Plan
(the "PLAN") of Zoran Corporation (the "COMPANY") and subscribe to purchase
shares of the Company's common stock as determined in accordance with the terms
of the Plan.
I hereby authorize payroll deductions in the amount of
percent (in 1% increments not to exceed 10%) of my "COMPENSATION" (as defined
in the Plan) from each paycheck throughout the "OFFERING PERIOD" (as defined
in the Plan) in accordance with the terms of the Plan. I understand that
these payroll deductions will be accumulated for the purchase of shares of
common stock of the Company at the applicable purchase price determined in
accordance with the Plan. I further understand that, except as otherwise set
forth in the Plan, shares will be purchased for me automatically on the last
day of each Purchase Period unless I withdraw from the Plan or from the
Offering by giving written notice to the Company or unless I terminate
employment.
I further understand that I will automatically participate in each
subsequent Offering which commences immediately after the last day of an
Offering in which I am participating under the Plan until such time as I file
with the Company a notice of withdrawal from the Plan on such form as may be
established from time to time by the Company or I terminate employment.
Shares purchased for me under the Plan should be issued in the name set
forth below. (I understand that shares may be issued either in my name alone or
together with my spouse as community property or in joint tenancy.)
NAME: __________________________________________________
ADDRESS: __________________________________________________
__________________________________________________
MY SOCIAL SECURITY NUMBER: ______________________________________
I hereby authorize withholding from my compensation in order to satisfy
the foreign, federal, state and local tax withholding obligations, if any, which
may arise upon my purchase of shares under the Plan and/or upon my disposition
of shares I acquired under the Plan. I hereby agree that until I dispose of the
shares, unless otherwise permitted by the Company, I will hold all shares I
acquire under the Plan in the name entered above (and not in the name of any
nominee) for at least two (2) years from the first day of the Offering Period in
which, and at least one (1) year from the Purchase Date on which, I acquired
such shares. I further agree that I will promptly notify the Chief Financial
Officer of the Company in writing of any transfer of such shares prior to the
end of the periods referred to in the preceding sentence.
I am familiar with the provisions of the Plan and hereby agree to
participate in the Plan subject to all of the provisions thereof. I understand
that the Board of Directors of the Company reserves the right to amend the Plan
and my right to purchase stock under the Plan as may be necessary to qualify the
Plan as an employee stock purchase plan as defined in Section 423 of the
Internal Revenue Code of 1986, as amended, or to obtain qualification or
registration of the Company's common stock to be issued out of the Plan under
applicable foreign, federal and state securities laws. I understand that the
effectiveness of this subscription agreement is dependent upon my eligibility to
participate in the Plan.
<PAGE>
Date: _________________ Signature:____________________________
Name
Printed:__________________________
<PAGE>
ZORAN CORPORATION
1995 EMPLOYEE STOCK PURCHASE PLAN
NOTICE OF WITHDRAWAL
I hereby elect to withdraw from the offering of the common stock of
Zoran Corporation (the "COMPANY") under the Company's 1995 Employee Stock
Purchase Plan (the "PLAN") which began on _________________________, 199__ and
in which I am currently participating (the "CURRENT OFFERING").
MAKE ONE ELECTION UNDER SECTION A AND ONE ELECTION UNDER SECTION B:
A. CURRENT OFFERING. As to my participation in the current purchase period
(the "Current Purchase Period") of the Current Offering under the Plan,
I elect as follows (check one):
/ / 1. I elect to terminate my participation in the Current Purchase
Period immediately.
I hereby request that all payroll deductions credited to my
account under the Plan (if any) not previously used to purchase
shares under the Plan shall NOT be used to purchase shares on the
last day of the Current Purchase Period. Instead, I request that
all such amounts be paid to me as soon as practicable. I
understand that this election immediately terminates my interest
in the Current Offering.
/ / 2. I elect to terminate my participation in the Current Offering
following my purchase of shares on the last day of the Current
Purchase Period.
I hereby request that all payroll deductions credited to my
account under the Plan (if any) not previously used to purchase
shares under the Plan shall be used to purchase shares on the
last day of the Current Purchase Period. I understand that this
election will terminate my interest in the Current Offering
immediately following such purchase. I request that any cash
balance remaining in my account under the Plan after my purchase
of shares be returned to me as soon as practicable.
I understand that if no election is made as to participation in the
Current Offering under the Plan, I will be deemed to have elected to participate
in the Current Offering.
B. FUTURE OFFERINGS. As to my participation in future offerings of common
stock under the Plan, I elect as follows (check one):
/ / 1. I elect to participate in future offerings under the Plan.
I understand that by making this election I will participate in
the next offering under the Plan commencing subsequent to the
Current Offering, and in each subsequent offering commencing
immediately after the last day of an offering in which I
participate, until such time as I elect to withdraw from the Plan
or from any such subsequent offering.
/ / 2. I elect NOT to participate in future offerings under the Plan.
I understand that by making this election I terminate my interest
in the Plan and that no further payroll deductions will be made
unless I elect in accordance with the Plan to become a
participant in another offering under the Plan.
I understand that if no election is made as to participation in future
offerings under the Plan, I will be deemed to have elected to participate in
such future offerings.
Date:_____________________ Signature:_______________________________________
Name Printed:____________________________________
<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 Karl Schneider, 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 29,
1999 at the Annual Meeting of Stockholders of the Company to be held at the
Company's offices at 3112 Scott Blvd., Santa Clara, CA 95054 at 2:00 p.m. on
June 18, 1999, 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,
1998.
(TO BE SIGNED ON REVERSE SIDE)
<PAGE>
PLEASE DETACH AND MAIL IN THE ENVELOPE PROVIDED
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 the six (6) directors to the Board of Directors.
FOR WITHHELD
/ / / /
For all nominees except as follows:
- ------------------------------------------------
Nominees: Levy Gerzberg
Uzia Galil
George T. Haber
James O. Meindl
Arthur B. Stabenow
Philip M. Young
2. To approve an amendment to the 1993 Stock Option Plan to increase the
number of shares of Common Stock reserved for issuance thereunder by
350,000 shares.
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 100,000 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, 1998.
FOR AGAINST ABSTAIN
/ / / / / /
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING IN PERSON, YOU ARE URGED TO
SIGN AND PROMPTLY MAIL THIS PROXY IN THE RETURN ENVELOPE SO THAT YOUR STOCK
MAY BE REPRESENTED AT THE MEETING.
MARK HERE FOR ADDRESS / /
CHANGE AND NOTE AT LEFT
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, either 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 stockholder should give their full title. Please
date the Proxy.
