Exhibit 10.3
EMPLOYMENT AGREEMENT
THIS AGREEMENT, made and entered into this ____ day of April, 1996 by and
between DSP Semiconductors Ltd., of Givat Shmuel, a company existing under the
laws of the State of Israel (hereinafter the "Company"), and Eli Ayalon of 4
Remez Street, Kiryat Tivon 36000, Israel (hereinafter "Ayalon"), effective as of
the 22nd day of April, 1996 (the "Effective Date").
RECITAL
The Company agreed to employ Ayalon as President and Chief Executive Officer, in
the framework of which Ayalon shall serve as President and CEO of its US parent
company, DSP Group, Inc., and Ayalon agrees to such employment, on the terms and
subject to the conditions set forth herein.
AGREEMENT
NOW, THEREFORE, the parties hereto hereby agree as follows:
1. EMPLOYMENT DUTIES
1.1 AYALON'S DUTIES
1.1.1. Ayalon shall perform the responsibilities of the President and
Chief Executive Officer of the Company, as well as those as
President and CEO of its US parent company, DSP Group, Inc., and
any responsibilities incidental thereto, all such, as stated, to
be commensurate with his background, education, experience and
professional standing. Ayalon shall devote his full productive
time, attention, energy, and skill to the business of the Company
during the Employment Term set forth below. Ayalon shall not
become engaged in any other occupation whether for compensation
or not while employed hereunder, without the express written
consent of the Company's Board of Directors.
1.1.2 Ayalon acknowledges that his employment with the Company will
require frequent travel spanning extended periods outside Israel.
Furthermore, Ayalon agrees to extensive world-wide travel under
his employment with the Company.
1.1.3 Ayalon understands and acknowledges that as his position is a
senior managerial position in substance, as defined in the Work
and Rest Hours Law, 1951, and requires a high level of trust, the
provisions of said law shall not apply to Ayalon and Ayalon
agrees that he may be required to work beyond the regular working
hours of the Company, for no additional compensation other than
as specified in this Agreement.
1.1.4 Ayalon agrees and undertakes throughout the Employment Term not
to receive any payment, compensation or any other benefit from
any third party
directly or indirectly related to his employment hereunder or to
the Company or its parent company, DSP Group, Inc.
1.1.5 Ayalon agrees and undertakes not to perform any act or to omit to
perform any act which may breach his fiduciary duty to the
Company or its parent company, DSP Group, Inc. or which may place
him in a position of conflict of interest with the objectives of
the Company or its parent company, as the case may be. In
addition, Ayalon agrees and undertakes to promptly inform the
Company and its parent company, DSP group, Inc., of any such
matter which may place him in such a situation of potential
conflict of interest.
1.1.6 Ayalon agrees that, to the extent that Ayalon shall be elected to
serve as a director on the Board of the Company or of DSP Group,
Inc., he will receive no additional compensation for said acting
as a director of either said company.
2. TERM
This Employment Agreement commenced as of the Effective Date and shall
continue indefinitely, unless sooner terminated under the terms of this
Agreement. As used herein, the term "Employment Term" refers to the entire
period of employment of Ayalon under this Agreement, beginning April 22,
1996.
3. COMPENSATION
Ayalon shall be compensated as follows:
3.1 FIXED SALARY
3.1.1. Ayalon shall receive a fixed monthly Gross Salary of NIS 47,000
(the "Gross Salary"), payable on a monthly basis. The Gross
Salary shall be adjusted monthly to the Consumer Price Index (the
"Index"). The Gross Salary shall be adjusted to the monthly
increase of the last published Index, in comparison to the last
published Index known at the time of execution of this Agreement.
3.1.2 It is hereby agreed by the parties that the Gross Salary
adjustments according to the Index, shall be deemed to include
any adjustments for Cost of Living Increase ("Tosefet Yoker")
that apply to Ayalon as an employee, unless such adjustment to
the Cost of Living Increase shall be higher than the adjustment
to the last published Index in any given month, in which case the
Index adjustments shall be in respect of the Tosefet Yoker alone.
3.2 BONUS
During the Employment Term, Ayalon shall be entitled to receive an
annual bonus, at the sole discretion of the Board of Directors.
3.3 VACATION
Ayalon shall accrue paid vacation at the rate of 26 business days for
each twelve (12) months of employment. Ayalon may not accumulate his
vacation days for more than thirty-six (36) months of employment.
3.4 SICK LEAVE
Ayalon shall accrue sick leave at the rate of up to 30 days for each
twelve (12) months of employment and subject to Ayalon producing
medical certificates as shall be required by the Company. Such sick
days may be accumulated to up to 180 days, but Ayalon shall not be
entitled to receive any remuneration in respect of any such days that
are not actually used. Any payment received by Ayalon from the
Manager's Insurance under disability payments shall be set off from
the Gross Salary, and Ayalon hereby irrevocably waive any claim or
demend in relation to such deducion including any claim or demand or
suit that such dedution has worsened in any way his terms of
employment.
3.5 BENEFITS
3.5.1 During the term of Ayalon's employment, Ayalon shall be
entitled to Manager's Insurance (Bituach Minhalim) in an
amount equal to 15.83% of the Gross Salary, which shall be
paid monthly to said Manager's Insurance Plan directly by
the Company. The insurance shall be allocated as follows:
(i) 8.33% in respect of severance compensation, (ii) 5% in
respect of pension and (iii) 2.5% of the Gross Salary in
respect of disability. An additional 5% of the Gross Salary
shall be deducted by the Company from the monthly payment of
Ayalon's Salary as Ayalon's contribution to said Manager's
Insurance.
3.5.2 The Manager's Insurance policy provided for Ayalon's benefit
or shall be registered in Company's name. The contributions
to the Manager's Insurance Policy shall be paid by the
Company in lieu of any other legal obligation to make
payments on account of severance or pension in respect of
Ayalon's employment during the Employment Term. Should the
provisions made for severance pay not cover the amount owed
by the Company to Ayalon by law, then the Company shall pay
Ayalon the difference, all in accordance with Israeli law.
Ayalon's agreement to the last two sentences shall exempt
the Company from the requirement to apply to the Minister of
Labor and Welfare for an approval under Section 14 of the
Severance Pay Law; however, should such application be
deemed necessary, Ayalon's signature hereupon shall be
deemed his consent to the Company's application in Ayalon's
name in such matter.
3.5.3 The sums accumulated in the Manager's Insurance policy shall
be transferred to Ayalon upon termination of his employment
hereunder, unless Ayalon has committed an act in breach of
Ayalon's fiduciary duty towards the Company or its parent
company, DSP Group, Inc., as determined solely by the
Company.
3.5.4 The Company shall provide and pay Ayalon Recreation Funds
(Dmai Havra'ah) at the rate required by law and regulations.
3.5.5 The Company shall contribute to a Continuing Education Fund
chosen by it for the benefit of Ayalon in an amount equal to
7.5% of his Gross Salary per month subject to Ayalon's
contribution of an additional 2.5% of his Gross Salary per
month.
3.5.6 The Company shall provide Ayalon with a car for use in
connection with his employment and for personal reasonable
use. The Company shall bear all expenses due to use and
maintenance of the car, in the same fashion as is customary
with the Company.
3.5.7 The Company shall provide Ayalon with a telephone in his
private residence solely for use in connection with his
employment with the Company, and shall bear the expense of
the telephone bills, subject to timely presentation of such
bills by Ayalon to the Company.
3.5.8 The Company shall provide at its expense a hotel room
located in Tel-Aviv or its area, for an average of 2 days a
week, subject to Company's approval. The hotel shall be
selected by the Company, at its sole discretion.
3.5.9 Within sixty (60) days of the date hereof, the Company shall
provide Ayalon with directors and officers' liability
insurance as is customary at the Company.
4. EXPENSES
The Company shall reimburse Ayalon for his normal and reasonable expenses
incurred for travel, entertainment and similar items in promoting and
carrying out the business of the Company in accordance with the Company's
general policy, in effect from time to
time. As a condition of reimbursement, Ayalon agrees to provide the Company
with copies of all available invoices and receipts, and otherwise account
to the Company in sufficient detail to allow the Company to claim an income
tax deduction for such paid item, if item is deductible. Reimbursement
shall be made on a monthly, or more frequent, basis.
5. COVENANT NOT TO COMPETE
Ayalon agrees that during the Employment Term as President and Chief
Executive Officer of the Company, he is and shall be in a position of
special trust and confidence and will have access to confidential and
proprietary information about the Company's business and plans. Ayalon
agrees that he will not directly or indirectly, either as an employee,
employer, consultant, agent, principal, partner, stockholder, corporate
officer, director, or in any similar individual or representative capacity,
engage or participate in any business and any future Company's business
during the term of employment, including projects under consideration by
the Company at the time of termination during the term of his employment,
or in the event of a termination of employment for any reason whatsoever
for a period of two (2) years thereafter.
For the purposes of this section 5, the term "Company" shall also mean any
subsidiaries, any other affiliates or its parent company.
6. CONFIDENTIALITY AND TRADE SECRETS
6.1 KNOW-HOW AND INTELLECTUAL PROPERTY
It is understood that the Company has developed or acquired and will
continue to develop or acquire certain products, technology, unique or
special methods, manufacturing and assembly processes and techniques, trade
secrets, written marketing plans and customer arrangements, and other
proprietary rights and confidential information which are not in the public
domain, and shall during the Employment Term continue to develop, compile
and acquire said items (all hereinafter collectively referred to as the
"Company's Property"). It is expected that Ayalon will gain knowledge of
and utilize the Company's Property during the course and scope of his
employment with the Company, and will be in a position of trust with
respect to the Company's Property.
6.2 COMPANY'S PROPERTY
It is hereby stipulated and agreed that the Company's Property shall remain
the Company's sole property. It is further stipulated and agreed by the
parties, as a material inducement for the Company having entered into this
Agreement and remaining a party hereto (subject to any early termination
hereof by the Company), that Ayalon shall be bound by the Confidential
Disclosure and Non-Use Agreement appended hereto as APPENDIX A.
In the event that Ayalon's employment is terminated, for whatever reason,
Ayalon agrees not to copy, make known, disclose or use, any of the
Company's Property. Without derogating from the Company's rights under the
law of torts, Ayalon further agrees not to endeavor or attempt in any way
to interfere with or induce a breach of any
prior contractual relationship that the Company may have with any employee,
customer, contractor, supplier, representative, or distributor for a period
of two (2) years from the date of any termination of Ayalon's employment
with the Company for any reason whatsoever. Ayalon agrees, upon termination
of employment, to deliver to the Company all confidential papers,
documents, records, lists and notes (whether prepared by Ayalon or others)
comprising or containing the Company's Property, without retaining any
copies thereof, and any other property of the Company.
It is hereby agreed that a breach of sections 5 and 6 including Appendix A
hereto shall be considered as a material breach of this Agreement.
For the purposes of this section 6, the term "Company" shall also mean any
subsidiaries, any other affiliates or its parent company.
7. TERMINATION
7.1 GENERAL
Either party may terminate this agreement, without cause, upon six (6)
months' advance written notice to the other party.
7.2 TERMINATION FOR CAUSE
The Company may immediately terminate Ayalon's employment at any time for
Cause. Termination for Cause shall be effective from the receipt of written
notice thereof to Ayalon. "Cause" shall be deemed to include: (i) material
neglect of his duties or a material violation of any of the provisions of
this Agreement, which continues after written notice and a reasonable
opportunity (not to exceed seven (7) days) in which to cure; (ii)
conviction of any felonious offense; (iii) intentionally imparting
confidential information relating to the Company or its business to third
parties, other than in the course of carrying out his duties hereunder. The
Company's exercise of its rights to terminate with Cause shall be without
prejudice to any other remedy it may be entitled at law, in equity, or
under this Agreement.
8. EMPLOYEE OPTION PLAN
Subsequent to the approval of the shareholder's meeting of DSP Group, Inc.
which the Company understands will be convened by order of the Board of
Directors of DSP Group, Inc. within 30 days from the date of execution of
this Agreement and in any event no later than 60 days from the date of
execution of this Agreement and subject to the terms and conditions to the
DSP Group Inc.'s Employee Option Plan for employees of the Company, Ayalon
shall be entitled to receive up to 120,000 shares of the Common Stock of
DSP Group Inc. The vesting schedule of said options shall be as follows:
30,000 of the shares will vest at the end of the first year from the date
of grant of said options and the number of shares equal to 1/36 of 90,000
shares will vest at the end of each full month of continued employment with
the Company thereafter. The exercise price shall be deicded by the
Company's Board of Directors on the date of the grant of said options.
9. CORPORATE OPPORTUNITIES
In the event that during the Employment Term, any business opportunity
related to the Company's business shall come to Ayalon's knowledge, Ayalon
shall promptly notify the Company's Board of Directors of such opportunity.
Ayalon shall not appropriate for himself or for any other person other than
the Company, any such opportunity, except with the express written consent
of the Board of Directors, in advance. Ayalon's duty to notify the Company
and to refrain from appropriating all such opportunities shall neither be
limited by, nor shall such duty limit, the application of the general law
of Israel relating to the fiduciary duties of an agent or employee.
10. RESERVE DUTY
Immediately upon receipt of a notice of reserve duty, Ayalon shall report
such notice to the Company's Board of Directors. Upon Ayalon's return from
reserve duty, Ayalon shall deliver to the Company appropriate confirmation
of reserve duty served from his military unit, against which the Company
shall pay Ayalon his regular compensation package with respect to the
period served.
11. MISCELLANEOUS
11.1 ENTIRE AGREEMENT
This Agreement constitutes the entire agreement and understanding between
the parties with respect to the subject matters herein, and supersedes and
replaces any prior agreements and understandings, whether oral or written
between them with respect to such matters. The provisions of this Agreement
may be waived, altered, amended or repealed in whole or in part only upon
the written consent of both parties to this Agreement.
11.2 NO IMPLIED WAIVERS
The failure of either party at any time to require performance by the other
party of any provision hereof shall not affect in any way the right to
require such performance at any time thereafter, nor shall the waiver by
either party of a breach of any provision hereof be taken or held to be a
waiver of any subsequent breach of the same provision or any other
provision.
11.3 PERSONAL SERVICES
It is understood that the services to be performed by Ayalon hereunder are
personal in nature and the obligations to perform such services and the
conditions and covenants of this Agreement cannot be assigned by Ayalon.
Subject to the foregoing, and except as otherwise provided herein, this
Agreement shall inure to the benefit of and bind the successors and assigns
of the Company.
11.4 SEVERABILITY
If for any reason any provision of this Agreement shall be determined to be
invalid or inoperative, the validity and effect of the other provisions
hereof shall not be affected
thereby, provided that no such severability shall be effective if it causes
a material detriment to any party.
11.5 APPLICABLE LAW
This Agreement shall be governed by and construed in accordance with the
laws of the State of Israel.
11.6 NOTICES
All notices, requests, demands, instructions or other communications
required or permitted to be given under this Agreement or related to it
shall be in writing and shall be deemed to have been duly given upon
delivery, if delivered personally, or if given by prepaid telegram, or
mailed first-class postage prepaid, registered or certified mail, return
receipt requested, shall be deemed to have been given three (3) days after
such delivery, if addressed to the other party at the addresses as set
forth on the signature page below. Either party hereto may change the
address to which such communications are to be directed by giving written
notice to the other party hereto of such change in the manner above
provided.
11.7 MERGER, TRANSFER OF ASSETS, OR DISSOLUTION OF THE COMPANY
This Agreement shall not be terminated by any dissolution of the Company
resulting from either merger or consolidation in which the Company is not
the consolidated or surviving Company or a transfer of all or substantially
all of the assets of the Company. In such event, the rights, benefits and
obligations herein shall automatically be assigned to the surviving or
resulting company or to the transferee of the assets.
11.8 NO CONFLICTING AGREEMENTS
Ayalon declares that he is not bound by any agreement, understanding or
arrangement according to which the execution of and compliance with this
Agreement may constitute a breach or default.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first written above.
DSP Semiconductors Ltd.
By: /s/ Igal Kohavi /s/ Eli Ayalon
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Igal Kohavi Eli Ayalon
Title: Chairman of the Board Israeli I.D. No
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