SERVICE AGREEMENT
BETWEEN NIKO CONSULTING AND MANAGEMENT (1995) LTD.
AND DSP SEMICONDUCTORS LTD.
THIS SERVICE AGREEMENT is made and entered into this 15th day of August, 1996,
by and between DSP Semiconductors Ltd., an Israeli company (the "Corporation"),
and Niko Consulting and Management (1995) Ltd., an Israeli company (the
"Contractor").
RECITAL
The Corporation desires to engage the services of Igal Kohavi ("Kohavi") as the
Chairman of the Board of Directors of the Corporation and of the Board of
Directors of its parent company, DSP Group, Inc., and the Contractor is willing
to make available those services, on the terms and subject to the conditions set
forth herein.
AGREEMENT
NOW THEREFORE, the parties hereto hereby agree as follows:
1. DUTIES OF THE PARTIES
a. General. The Corporation hereby contracts with the contractor to
hire the services of Kohavi, and the Contractor hereby agrees to
provide those services to the Corporation, on the terms and
conditions hereinafter set forth.
It is clearly understood that the services of Kohavi are provided by
the Contractor on an independent contractor basis, and that no
employer-employee relationship will exist between the Corporation and
Kohavi.
b. Corporation's Duties. The Corporation shall allow Kohavi to, and
Kohavi shall, perform responsibilities normally incident to his
position as Chairman, commensurate with his background, education,
experience and professional standing. The Corporation shall provide
Kohavi with the use of a private office, stenographic help, office
equipment, supplies, customary services and cooperation suitable for
the performance of his duties.
c. Kohavi's Duties. Unless otherwise agreed to by the parties, Kohavi
shall serve as the Corporation's Chairman as well as the Chairman of
the Board of Directors of its parent company, DSP Group, Inc. Kohavi
shall devote on average thirty (30) hours per week of his productive
time, attention, energy, and skill to the business of the Corporation
during the service period set forth below. Kohavi shall report
directly to the Corporation's Board of Directors. Kohavi is expected
to work approximately one hundred twenty (120) days per annum for the
Corporation.
2. TERM.
This Agreement shall commence as of October 1, 1995, and shall continue
for a period of three (3) years, unless sooner terminated under the terms
of this Agreement. Thereafter, this Agreement may be renewed by the
Contractor and the Board of Directors of the Corporation and the Board of
Directors of its parent company, DSP Group, Inc. (as the case may be) on
such terms as the parties may agree to in writing. Absent written notice
to the contrary thirty (30) days prior to the end of the service period,
this Agreement will be renewed for consecutive one (1) year extensions.
As used herein, the term "service period" refers to the entire period of
service hereunder, including any agreed-to extension.
3. COMPENSATION
As compensation for the services provided under this agreement, the
Corporation shall pay the Contractor sums as follows:
a. Fixed Payment. A fixed annual sum of Two Hundred and Fifty Thousand
Dollars ($250,000), plus VAT. The Corporation agrees to review the
fixed sum following the end of each twelve (12) month period during
the service period based upon Kohavi's services and the Corporation's
financial results during the calendar year, and to make such increase
as may be determined appropriate in the discretion of the
Corporation's Board of Directors.
b. Payment. The above sum shall be payable on a monthly basis.
c. Bonus Compensation. During the service period, the Corporation shall
pay the Contractor a bonus or bonuses at the discretion of the Board
of Directors, based on the performance of Kohavi.
d. The Corporation shall provide Kohavi with Director and Officer
Insurance, if reasonably available to the Corporation, similar in
coverage and effect to that covering its other officers and
directors. Kohavi shall in no event receive less insurance coverage
than that available to any other officer or director. The
Corporation shall, at a minimum, keep in full force and effect its
indemnification agreement previously entered into with Kohavi.
4. EXPENSES.
The Corporation shall reimburse the contractor for Kohavi's normal and
reasonable expenses incurred for travel, entertainment and similar items
in promoting and carrying out the business of the Corporation in
accordance with the Corporation's general policy as adopted by the
Corporation's management from time to time. As a condition of
reimbursement, the Contractor agrees to provide the Corporation with
copies of all available invoices and receipts, and otherwise account to
the Corporation
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in sufficient detail to allow the Corporation to claim an income tax
deduction for such paid item, if such item is deductible. Reimbursements
shall be made on a monthly, or more frequent basis. The Corporation
shall also reimburse the Contractor for all professional membership dues
incurred by Kohavi, if any; all technical books purchased by Kohavi; and
all moving and relocation expenses, incurred by Kohavi at the
Corporation's request.
5. CONFIDENTIALITY AND COMPETITIVE ACTIVITIES
The Contractor agrees that during the service period, Kohavi will be in a
position of special trust and confidence and have access to confidential
and proprietary information about the Corporation's business and plans.
The Contractor undertakes that Kohavi will not directly or indirectly,
either as an employee, employer, consultant, agent, principal, partner,
stock-holder, corporate officer, director, or in any similar individual
or representative capacity, engage or participate in any business that is
in competition with the Corporation. Notwithstanding anything in the
foregoing to the contrary, Kohavi shall be allowed to invest as a
shareholder in publicly-traded companies, or through a venture capital
firm or an investment pool in which he has no active role. As a
precondition of his engagement, the Corporation may require Kohavi to
personally sign this undertaking.
6. TRADE SECRETS.
a. Special Techniques. It is hereby agreed that the Corporation has
developed or acquired certain products, technology, unique or
special methods, manufacturing and assembly processes and
techniques, trade secrets, special written marketing plans and
special customer arrangements, and other proprietary rights and
confidential information and shall during the service period
continue to develop, compile and acquire said items (all hereinafter
collectively referred to as the "Corporation's Property"). It is
expected that Kohavi will gain knowledge of and utilize the
Corporation's Property during the course and scope of his engagement
with the Corporation, and will be in a position of trust with
respect to the Corporation's Property.
b. Corporation's Property. It is hereby stipulated and agreed that the
Corporation's Property shall remain the Corporation's sole property.
In the event that this Agreement is terminated, for whatever reason,
The Contractor agrees that Kohavi will not copy, make known disclose
or use, any of the Corporation's Property without the Corporation's
prior written consent which may be unreasonably withheld. In such
event, the Contractor further agrees for itself and for Kohavi, not
to endeavor or attempt in any way to interfere with or induce a
breach of any prior proprietary contractual relationship that the
Corporation may have with any employee, customer, contractor,
supplier, representative, or distributor for nine (9) months. The
Contractor agrees upon termination of his agreement to cause Kohavi
to deliver to the Corporation all confidential papers, documents,
records,
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lists and notes (whether prepared by Kohavi or others) comprising or
containing the Corporations' Property. The Corporation recognizes
that violation of covenants and agreements contained in this Section
6 may result in irreparable injury to the Corporation which would not
be fully compensable by way of money damages. As a precondition of
his engagement, the Corporation may require Kohavi to personally sign
this undertaking.
c. Covenant Not to Compete. For a period of one (1) year from the date
of any termination of this agreement with the Corporation, the
Contractor and/or Kohavi shall not, directly or indirectly, either as
an employee, employer, consultant, agent, principal, partner,
stockholder, corporate officer, Director, or in any other individual
or representative capacity, engage or participate in any activities
within the States of Israel and California, which are the same as, or
competitive with, the activities in which the Corporation is
presently engaged. As a precondition of his engagement, the
Corporation may require Kohavi to personally sign this undertaking.
7. TERMINATION
a. General. The Corporation may terminate this Agreement without cause,
by written notice. The Contractor may voluntarily terminate his
agreement hereunder upon ninety (90) days' advance written notice to
the Corporation.
b. Termination for Cause. The Corporation may immediately terminate
this agreement at any time for cause. Termination for cause shall be
effective from the receipt of written notice thereof to the
Contractor specifying the grounds for termination and all relevant
facts. Cause shall be deemed to include: (i) neglect of Kohavi's
duties or a violation of any of the provisions of this Agreement,
which continues after written notice and a reasonable opportunity
(not to exceed thirty (30) days) in which to cure; (ii) fraud,
embezzlement, defalcation or conviction of any felonious offense; or
(iii) any intentional imparting of confidential information relating
to the Corporation or its business to competitors or to other third
parties other than in the course of carrying out of the duties
hereunder. The Corporation'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.
c. Termination Upon Death or Disability. This Agreement shall
automatically terminate upon Kohavi's death. In addition, if any
disability or incapacity of Kohavi to perform his duties as the
result of any injury, sickness, or physical, mental or emotional
condition continues for a period of thirty (30) business days out of
any one hundred twenty (120) calendar-day period, the Corporation may
terminate this Agreement upon written notice.
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d. Compensation Upon Termination. Notwithstanding any provisions of
this Agreement, the Corporation may terminate this Agreement for any
reason. If the Corporation terminates this Agreement without cause
(including upon death or disability as specified in paragraph c
above), the Corporation shall pay the Contractor an amount equal to
the monthly fixed payment at the then-current rate, multiplied by the
number nine (9). The Corporation shall not pay any amount of
compensation if this Agreement is terminated by the Corporation for
cause. If the Contractor voluntarily terminates this agreement no
compensation shall be due. In the event of a nonrenewal by the
Corporation, the Corporation shall pay to the Contractor as a
compensation an amount equal to the fixed monthly payment at the
then-current rate, multiplied by the number (6).
8. CORPORATE OPPORTUNITIES.
a. Duty to Notify. In the event that the Contractor or Kohavi, during
the service period, shall become aware of any business opportunity
related to the Corporations' digital signal processing business, they
shall promptly notify the Corporation's Directors of such
opportunity. The Contractor or Kohavi shall not appropriate for
themselves, or for any other person other than the Corporation, or
any affiliate of the Corporation, any such opportunity unless, as to
any particular opportunity, the Board of Directors of the Corporation
fails to take appropriate action within thirty (30) days. The
Contractor's and Kohavi's duty to notify the Corporation and to
refrain from appropriating all such opportunities for thirty (30)
days shall neither be limited by nor shall such duty limit, the
application of the general law relating to the fiduciary duties of
agents or officers.
b. Failure to Notify. In the event that the Contractor of Kohavi fails
to notify the Corporation of, or so appropriates, any such
opportunity without the express written consent of the Board of
Directors, the Contractor shall be deemed to have violated the
provisions of this Section, notwithstanding the following:
i. The capacity in which such opportunity was acquired; or
ii. The probable success in the Corporation's hands of such
opportunity.
9. MISCELLANEOUS
a. 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.
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b. 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 provisions.
c. Personal Services. It is understood that the services to be
performed by Kohavi hereunder are personal in nature and the
obligations to perform such services and the conditions and covenants
of this Agreement cannot be performed by the Contractor through any
other person, or assigned by Kohavi. 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
Corporation.
d. Indemnity. It is expressly agreed that Kohavi is the employee of
the Contractor only. The Contractor undertakes to make all necessary
payments to the tax and National Insurance authorities in respect of
Kohavi, and further undertakes to immediately indemnify the
Corporation for any liability that may be imposed on it for any
failure of the Contractor. The Corporation shall be entitled to set
off any sum owed to it by the Contractor pursuant to the
indemnification obligations under this provision.
e. 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 severabilty shall be effective if it causes a
material detriment to any party.
f. Applicable Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of California.
g. Notices. All notices, requests, demands, instructions or other
communications required or permitted to be given under this Agreement
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
seventy-two (72) hours 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 given written notice to the
other party of such change in the manner above provided.
[Remainder of page intentionally left blank]
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h. Merger, Transfer of Assets, or Dissolution of the Corporation. This
Agreement shall not be terminated by any dissolution of the
Corporation resulting from either merger or consolidation in which
the Corporation is not the consolidated or surviving corporation or a
transfer of all or substantially all of the assets of the
Corporation. In such event, the rights, benefits and obligations
herein shall automatically be assigned to the surviving or resulting
corporation or to the transferee of the assets.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first written above
DSP Semiconductors, Ltd. Niko Consulting and Management
and Israeli company an Israeli company (1995) Ltd.
By: /s/ Eli Ayalon By: /s/ Igal Kohavi
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Name: Eli Ayalon Name: Igal Kohavi
Title: President and CEO Title: President
Agreed by:
DSP Group, Inc.
a Delaware corporation
By: /s/ Eli Ayalon
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Name: Eli Ayalon
Title: President and Chief Executive Officer
I, Igal Kohavi, an employee of Niko Consulting and Management (1995) Ltd.,
will cause that the Contractor fulfill its obligations under the above
Service Agreement and will personally render the services required of the
Contractor under the above Services Agreement.
/s/ Igal Kohavi
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Igal Kohavi
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