EXHIBIT 10.28
DSP GROUP, INC.
1993 DIRECTOR STOCK OPTION PLAN
(As Amended November 3, 1997)
1. PURPOSES OF THE PLAN. The purposes of this Director Stock Option Plan
are to attract and retain the best available personnel for service as Directors
of the Company, to provide additional incentive to the Outside Directors of the
Company to serve as Directors, and to encourage their continued service on the
Board.
All options granted hereunder shall be "nonstatutory stock options."
2. DEFINITIONS. As used herein, 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.
c. "COMMON STOCK" shall mean the Common Stock of the Company.
d. "COMPANY" shall mean DSP Group, Inc., a Delaware corporation.
e. "CONTINUOUS STATUS AS A DIRECTOR" shall mean the absence of any
interruption or termination of service as a Director.
f. "DIRECTOR" shall mean a member of the Board.
g. "EFFECTIVE DATE" shall have the meaning as set forth in Section 6
below.
h. "EMPLOYEE" shall mean any person, including officers and
Directors, employed by the Company or any Parent or Subsidiary of the
Company. The payment of a Director's fee by the Company shall not be
sufficient in and of itself to constitute "employment" by the Company.
i. "EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as
amended.
j. "FIRST OPTION" shall have the meaning as set forth in Section
4.b.ii. below.
k. "OPTION" shall mean a stock option granted pursuant to the Plan.
l. "OPTIONED STOCK" shall mean the Common Stock subject to an
Option.
m. "OPTIONEE" shall mean an Outside Director who receives an Option.
n. "OUTSIDE DIRECTOR" shall mean a Director who is not an Employee.
o. "PARENT" shall mean a "parent corporation," whether now or
hereafter existing, as defined in Section 424(e) of the Code.
p. "PLAN" shall mean this 1993 Director Stock Option Plan.
q. "SHARE" shall mean a share of the Common Stock, as adjusted in
accordance with Section 11 of the Plan.
r. "SUBSEQUENT OPTION" shall have the meaning as set forth in
Section 4.b.iii. below.
s. "SUBSIDIARY" shall mean a "Subsidiary Corporation," whether
now or hereafter existing, as defined in Section 424(f) of the Code.
t. "AFFILIATE" and "ASSOCIATE" shall have the respective meanings
ascribed to such terms in Rule 126-2 promulgated under the Exchange Act.
u. "CHANGE IN CONTROL" means a change in ownership or control of
the Company effected through either of the following transactions:
(i) the direct or indirect acquisition by any person or
related group of persons (other than an acquisition from or by the Company or
by a Company-sponsored employee benefit
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plan or by a person that directly or indirectly controls, is controlled by,
or is under common control with, the Company) of beneficial ownership (within
the meaning of Rule 13d-3 of the Exchange Act) of securities possessing more
than fifty percent (50%) of the total combined voting power of the Company's
outstanding securities pursuant to a tender or exchange offer made directly
to the Company's stockholders which a majority of the Continuing Directors
who are not Affiliates or Associates of the offeror do not recommend such
stockholders accept, or
(ii) a change in the composition of the Board over a period of
thirty-six (36) months or less such that a majority of the Board members
(rounded up to the next whole number) ceases, by reason of one or more
contested elections for Board membership, to be comprised of individuals who
are Continuing Directors.
v. "CONTINUING DIRECTORS" means members of the Board who either
(i) have been Board members continuously for a period of at least thirty-six
(36) months or (ii) have been Board members for less than thirty-six (36)
months and were elected or nominated for election as Board members by at
least a majority of the Board members described in clause (i) who were still
in office at the time such election or nomination was approved by the Board.
w. "CORPORATE TRANSACTION" means any of the following
stockholder-approved transactions to which the Company is a party:
(i) a merger or consolidation in which the Company is not the
surviving entity, except for a transaction the principal purpose of which is
to change the state in which the Company is incorporated;
(ii) the sale, transfer or other disposition of all or
substantially all of the assets of the Company (including the capital stock
of the Company's subsidiary corporations) in connection with the complete
liquidation or dissolution of the Company; or
(iii) any reverse merger in which the Company is the surviving
entity but in which securities possessing more than fifty percent (50%) of
the total combined voting power of the Company's outstanding securities are
transferred to a person or persons different from those who held such
securities immediately prior to such merger.
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 optioned and
sold under the Plan is 175,000 Shares (the "Pool") of Common Stock. The
Shares may be authorized, but unissued, or reacquired Common Stock.
If an Option should expire or become unexercisable for any reason without
having been exercised in full, the unpurchased Shares which were subject thereto
shall, unless the Plan shall have been terminated, become available for future
grant under the Plan. If Shares which were acquired upon exercise of an Option
are subsequently repurchased by the Company, such Shares shall not in any event
be returned to the Plan and shall not become available for future grant under
the Plan.
4. ADMINISTRATION OF AND GRANTS OF OPTIONS UNDER THE PLAN.
a. ADMINISTRATOR. Except as otherwise required herein, the Plan
shall be administered by the Board.
b. PROCEDURE FOR GRANTS. All grants of Options hereunder shall
be automatic and nondiscretionary and shall be made strictly in accordance
with the following provisions:
i) No person shall have any discretion to select which
Outside Directors shall be granted Options or to determine the number of
Shares to be covered by Options granted to Outside Directors.
ii) Each person who is an Outside Director on the Effective
Date of this Plan and each Outside Director who subsequently becomes a member
of the Board of Directors shall be automatically granted an Option to
purchase 15,000 Shares (the "First Option") on the date on which the later of
the following events occurs: (A) the Effective Date of this Plan, as
determined in accordance with Section 6
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hereof; or (B) the date on which such person first becomes an Outside
Director, whether through election by the stockholders of the Company or
appointment by the Board of Directors to fill a vacancy.
iii) Additionally, beginning on January 1, 1997, each Outside
Director shall be automatically granted (i) an Option to purchase 5,000
Shares (a "Subsequent Option"), on January 1 of each year, if on such date,
he or she shall have served on the Board for at least six (6) months and (ii)
an Option to purchase 5,000 Shares (a "Committee Option"), on January 1 of
each year, for each committee of the Board on which he or she shall have
served as the chairperson for at least six (6) months on such date.
iv) Notwithstanding the provisions of subsections (ii) and
(iii) hereof, in the event that a grant would cause the number of Shares
subject to outstanding Options, plus the number of shares previously
purchased upon exercise of Options to exceed the Pool, then each such
automatic grant shall be for that number of Shares determined by dividing the
total number of Shares remaining available for grant by the number of grants
to be made on the automatic grant date. Any further grants shall then be
deferred until such time, if any, as additional Shares become available for
grant under the Plan through action of the stockholders to increase the
number of Shares which may be issued under the Plan or through cancellation
or expiration of Options previously granted hereunder.
v) Notwithstanding the provisions of subsections ii) and
iii) hereof, any grant of an Option made before the Company has obtained
stockholder approval of the Plan in accordance with Section 17 hereof shall
have their exercisability conditioned upon obtaining such stockholder
approval of the Plan in accordance with Section 17 hereof.
vi) The terms of any Option granted hereunder shall be as
follows:
a) The First Option shall be exercisable only while
the Outside Director remains a Director of the Company, except as set forth
in Section 9 hereof.
b) The exercise price per Share shall be 100% of the
fair market value (as defined in Section 8.b. hereunder) per Share on the
date of grant of the First Option.
c) The First Option shall vest and become exercisable
as to one-third of the Shares subject to the First Option on the first
anniversary of the date of grant of the First Option, and shall vest and
become exercisable as to one-third of the Shares subject to the First Option
at the end of each twelve-month period thereafter, subject to the provisions
set forth in Section 9, below.
c. POWERS OF THE BOARD. Subject to the provisions and
restrictions of the Plan, the Board shall have the authority, in its
discretion: (i) to determine, upon review of relevant information and in
accordance with Section 8.b. of the Plan, the fair market value of the Common
Stock; (ii) to determine the exercise price per share of Options to be
granted, which exercise price shall be determined in accordance with Section
8.a. of the Plan; (iii) to interpret the Plan; (iv) to prescribe, amend and
rescind rules and regulations relating to the Plan; (v) to authorize any
person to execute on behalf of the Company any instrument required to
effectuate the grant of an Option previously granted hereunder; and (vi) to
make all other determinations deemed necessary or advisable for the
administration of the Plan.
d. EFFECT OF BOARD'S DECISION. All decisions, determinations and
interpretations of the Board shall be final and binding on all Optionees and
any other holders of any Options granted under the Plan.
5. ELIGIBILITY. Options may be granted only to Outside Directors. All
Options shall be automatically granted in accordance with the terms set forth in
Section 4.b. hereof. An Outside Director who has been granted an Option may, if
he or she is otherwise eligible, be granted an additional Option or Options in
accordance with such provisions.
The Plan shall not confer upon an Optionee any right with respect to
continuation of service as a Director or nomination to serve as a Director, nor
shall it interfere in any way with any rights which the Director or the Company
may have to terminate his or her directorship at any time.
6. TERM OF PLAN; EFFECTIVE DATE. The Plan shall become effective on the
date on which the Company's registration statement on Form S-1 (or any successor
form thereof) is declared effective by the Securities and Exchange Commission
(the "Effective Date"). It shall continue in effect for a term of ten (10)
years, unless sooner terminated under Section 13 of the Plan, subject to the
limitations set forth in this Plan.
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7. TERM OF OPTION. The term of each Option shall be ten (10) years from
the date of grant thereof.
8. EXERCISE PRICE AND CONSIDERATION.
a. EXERCISE PRICE. The per Share exercise price for the Shares
to be issued pursuant to exercise of an Option shall be 100% of the fair
market value per Share on the date of grant of the Option.
b. FAIR MARKET VALUE. The fair market value per Share shall be
the mean of the bid and asked prices of the Common Stock in the
over-the-counter market on the date of grant, as reported in THE WALL STREET
JOURNAL (or, if not so reported, as otherwise reported by the National
Association of Securities Dealers Automated Quotation ("NASDAQ") System) or,
in the event that the Common Stock is traded on the NASDAQ National Market
System or listed on a stock exchange, the fair market value per Share shall
be the closing price on such system or exchange on the date of grant of the
Option, as reported in THE WALL STREET JOURNAL; provided, however, that if
such market or exchange is closed on the date of the grant of the Option then
the fair market value per Share shall be based on the most recent date on
which such trading occurred immediately prior to the date of the grant of the
Option; provided, further, that for purposes of First Options granted on the
Effective Date, the fair market value per share shall be the initial public
offering price as set forth in the final prospectus filed with the Securities
and Exchange Commission pursuant to Rule 424 under the Securities Act of
1933, as amended.
c. FORM OF CONSIDERATION. The consideration to be paid for the
Share to be issued upon exercise of an Option shall consist entirely of cash,
check, other Shares having a fair market value on the date of surrender equal
to the aggregate exercise price of the Shares as to which said Option shall
be exercised (which, if acquired from the Company, shall have been held for
at least six months), delivery of a properly executed exercise notice,
together with such other documentation as the Company and the broker, if
applicable, shall require to effect an exercise of the Option and delivery to
the Company of the sale or loan proceeds required to pay the exercise price,
or any combination of such methods of payment and/or any other consideration
or method of payment as shall be permitted under applicable corporate law.
9. EXERCISE OF OPTION.
a. PROCEDURE FOR EXERCISE: RIGHTS AS A STOCKHOLDER. An Option
granted hereunder shall be exercisable at such times as are set forth in
Section 4.b. hereof; provided, however, that no Options shall be exercisable
until stockholder approval of the Plan in accordance with Section 17 hereof
has been obtained.
An option may not be exercised for a fraction of a Share.
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. Full payment may consist of any consideration and method of payment
allowable under Section 8.c. of the Plan. Until the issuance (as evidenced by
the appropriate entry on the books of the Company or of a duly authorized
transfer agent of the Company) of the stock certificate evidencing such Shares,
no right to vote or receive dividends or any other rights as a stockholder shall
exist with respect to the Optioned Stock, notwithstanding the exercise of the
Option. A share certificate for the number of Shares so acquired shall be
issued to the Optionee as soon as practicable after exercise of the Option. No
adjustment will be made for a dividend or other right for which the record date
is prior to the date the stock certificate is issued, except as provided in
Section 11 of the Plan.
Exercise of an Option in any manner shall result in a decrease in the
number of Shares which thereafter may be available, both for purposes of the
Plan and for sale under the Option, by the number of Shares as to which the
Option is exercised.
b. TERMINATION OF STATUS AS A DIRECTOR. If an Outside Director
ceases to serve as a Director, he or she may, but only within three (3)
months after the date he or she ceases to be a Director of the Company,
exercise his or her Option to the extent that he or she was entitled to
exercise it at the date of such termination. Notwithstanding the foregoing,
in no event may the Option be exercised after its term set forth in Section 7
has expired. To the extent that such Outside Director was not entitled to
exercise an Option at the date of such termination, or does not exercise such
Option (which he or she was entitled to exercise) within the time specified
herein, the Option shall terminate.
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c. DISABILITY OF OPTIONEE. Notwithstanding the provisions of
Section 9.b. above, in the event a Director is unable to continue his or her
service as a Director with the Company as a result of his or her total and
permanent disability (as defined in Section 22.3 of the Internal Revenue Code),
he or she may, but only within six (6) months from the date of such termination,
exercise his or her Option to the extent he or she was entitled to exercise it
at the date of such termination. Notwithstanding the foregoing, in no event may
the Option be exercised after its term set forth in Section 7 has expired. To
the extent that he or she was not entitled to exercise the Option at the date of
termination, or if he or she does not exercise such Option (which he or she was
entitled to exercise) within the time specified herein, the Option shall
terminate.
d. DEATH OF OPTIONEE. In the event of the death of an Optionee:
i) during the term of the Option who is, at the time of his
or her death, a Director of the Company and who shall have been in Continuous
Status as a Director since the date of grant of the Option, the Option may be
exercised, at any time within twelve (12) months 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 right to
exercise that would have accrued had the Optionee continued living and
remained in Continuous Status as Director for six (6) months after the date
of death. Notwithstanding the foregoing, in no event may the Option be
exercised after its term set forth in Section 7 has expired.
ii) within three (3) months after the termination of
Continuous Status as a Director, the Option may be exercised, at any time
within twelve (12) months 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 right to exercise that
had accrued at the date of termination. Notwithstanding the foregoing, in no
event may the option be exercised after its term set forth in Section 7 has
expired.
10. NONTRANSFERABILITY OF OPTIONS. The 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 or distribution. The designation of a
beneficiary by an Optionee does not constitute a transfer. An Option may be
exercised during the lifetime of an Optionee only by the Optionee or a
transferee permitted under this Section.
11. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION, DISSOLUTION, MERGER OR
ASSET SALE.
a. CHANGES IN CAPITALIZATION. Subject to any required action by
the stockholders of the Company, the number of Shares covered by each
outstanding Option and the number of Shares which have been authorized for
issuance under the Plan but as to which no Options have yet been granted or
which have been returned to the Plan upon cancellation or expiration of an
Option, as well as the price per Share covered by each such outstanding
Option, shall be proportionately adjusted for an increase or decrease in the
number of issued Shares resulting from a stock split, reverse stock split,
stock dividend, combination or reclassification of the Common Stock, or any
other increase or decrease in the number of issued shares 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 issuance 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 prices of Shares subject to an Option.
b. DISSOLUTION OR LIQUIDATION. In the event of the proposed
dissolution or liquidation of the Company, to the extent that an Option has
not been previously exercised, it will terminate immediately prior to the
consummation of such proposed action. The Board may, in the exercise of its
sole discretion in such instances, declare that any Option shall terminate as
of a date fixed by the Board and give each Optionee the right to exercise his
or her Option as to all or any part of the Optioned Stock, including Shares
as to which the Option would not otherwise be exercisable.
c. MERGER OR ASSET SALE. In the event of a Corporate
Transaction, each Option which is at the time outstanding under the Plan
automatically shall become fully vested and exercisable and be released from
any restrictions on transfer and repurchase or forfeiture rights, immediately
prior to the specified effective date of such Corporate Transaction, for all
of the Shares at the time represented by such Option. Effective upon the
consummation of the Corporate Transaction, all outstanding Options under the
Plan shall terminate unless assumed by the successor company or its Parent.
In the event of a Change in Control (other than a Change in Control which
also is a Corporate Transaction), each Option which is at the time
outstanding under the Plan
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automatically shall become fully vested and exercisable and be released from
any restrictions on transfer and repurchase or forfeiture rights, immediately
prior to the specified effective date of such Change in Control, for all of
the Shares at the time represented by such Options. Each such Option shall
remain exercisable until the expiration or sooner termination of the
applicable Option term.
12. TIME OF GRANTING OPTIONS. The date of grant of an Option shall, for
all purposes, be the date determined in accordance with Section 4.b. hereof.
Notice of the determination shall be given to each Outside Director to whom an
Option is so granted within a reasonable time after the date of such grant.
13. AMENDMENT AND TERMINATION OF THE PLAN.
a. AMENDMENT AND TERMINATION. The Board may amend or terminate
the Plan from time to time in such respects as the Board may deem advisable;
provided that, to the extent necessary and desirable to comply with Rule
16b-3 under the Exchange Act (or any other applicable law or regulation), the
Company shall obtain approval of the stockholders of the Company to Plan
amendments to the extent and in the manner required by such law or
regulation. Notwithstanding the foregoing, the provisions set forth in
Section 4 of this Plan (and any other Sections of this Plan that affect the
formula award terms required to be specified in this Plan by Rule 16b-3)
shall not be amended more than once every six months, other than to comport
with changes in the Code, the Employee Retirement Income Security Act of
1974, as amended, or the rules thereunder.
b. EFFECT OF AMENDMENT OR TERMINATION. Any such amendment or
termination of the Plan that would impair the rights of any Optionee shall
not affect Options already granted to such Optionee and such Options shall
remain in full force and effect as if this Plan had not been amended or
terminated, unless mutually agreed otherwise between the Optionee and the
Board, which agreement must be in writing and signed by the Optionee and the
Company.
14. CONDITIONS UPON ISSUANCE OF SHARES. Shares shall not be issued
pursuant to the exercise of 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 of
1933, as amended, the Exchange Act, the rules and regulations promulgated
thereunder, state securities laws, 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.
Inability of the Company to obtain authority from any regulatory body
having jurisdiction, which authority is 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 failure to issue or sell such
Shares as to which such requisite authority shall not have been obtained.
15. RESERVATION OF SHARES. The Company, during the term of this Plan,
will at all times reserve and keep available such number of Shares as shall be
sufficient to satisfy the requirements of the Plan.
16. OPTION AGREEMENT. Options shall be evidenced by written option
agreements in such form as the Board shall approve.
17. STOCKHOLDER APPROVAL.
a. Continuance of the Plan shall be subject to approval by the
stockholders of the Company at or prior to the first annual meeting of
stockholders held subsequent to the granting of an Option hereunder. If such
stockholder approval is obtained at a duly held stockholders' meeting, it may
be obtained by the affirmative vote of the holders of a majority of the
outstanding shares of the Company present or represented and entitled to vote
thereon. If such stockholder approval is obtained by written consent, it may
be obtained by the written consent of the holders of a majority of the
outstanding shares of the Company.
Any required approval of the stockholders of the Company shall be
solicited substantially in accordance with Section 14.a. of the Exchange Act
and the rules and regulations promulgated thereunder.
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