EXHIBIT 10.31
RESTATED AND AMENDED EMPLOYMENT AGREEMENT
OF STEPHEN P. PEZZOLA
WITH
DSP COMMUNICATIONS, INC. AND DSP TELECOM, INC.
THIS RESTATED AND AMENDED EMPLOYMENT AGREEMENT (this "Agreement"), made and
entered into effective as of the 16th day of January, 1999, by and between DSP
Communications, Inc., a Delaware corporation (hereinafter "DSPC"), DSP TELECOM,
INC., a California corporation (hereinafter the "Corporation"), and STEPHEN P.
PEZZOLA (hereinafter "Pezzola").
RECITALS
A. DSPC is the parent corporation of the Corporation.
B. Effective September 16, 1996, Pezzola entered into an employment
agreement with the Corporation and DSPC to serve as DSPC's General Counsel and
to serve as an employee of the Corporation, and such agreement was amended and
restated on January 1, 1998 (as so amended and restated, the "Employment
Agreement").
C. The terms of the Employment Agreement are hereby amended and restated
in full as of January 16, 1999.
AGREEMENT
NOW, THEREFORE, the parties hereto hereby agree as follows:
1. EMPLOYMENT DUTIES.
a. GENERAL. The Corporation hereby agrees to employ Pezzola, and
Pezzola hereby agrees to accept employment with the Corporation, on the terms
and conditions hereinafter set forth.
b. CORPORATION'S DUTIES. The Corporation shall allow Pezzola to,
and Pezzola shall, perform responsibilities normally incident to his position as
General Counsel of DSPC, commensurate with his background, education, experience
and
professional standing. The Corporation shall provide Pezzola with a private
office, stenographic help, office equipment, supplies, assistant or secretary,
customary services and cooperation suitable for the performance of his duties.
c. PEZZOLA'S DUTIES. Unless otherwise agreed to by the parties,
Pezzola shall serve as General Counsel and Secretary of DSPC. Pezzola shall
devote such time in executing his duties as General Counsel as is deemed
needed by DSPC's Chairman of the Board of Directors. Pezzola shall not be
required to devote his full time efforts to the Corporation or DSPC. It is
intended that Pezzola will work the majority of his time, approximately
thirty (30) hours per week, and that he will serve as General Counsel of
entities other than DSPC, the Corporation, or their affiliates, and as an
owner in an investment entity. Pezzola shall report directly to the Chairman
of the Board of Directors of DSPC. Mr. Pezzola shall also inform the Chairman
of the DSPC Compensation Committee of any other positions that he takes with
any other entity, beyond the positions that he currently holds. Pezzola's
duties shall be performed primarily in the San Francisco Bay Area, and more
particularly, in either Cupertino or Oakland, California, at the option of
Pezzola.
2. EMPLOYMENT TERM. This Agreement shall terminate December 31, 2000
("Employment Term"), unless (a) extended as set forth herein, or (b) terminated
sooner under the terms of this Agreement. Thereafter, this Agreement may be
renewed by Pezzola and the DSPC Board of Directors of DSPC 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 Employment Term, this Agreement will be
renewed for consecutive one (1) year extensions. As used herein, the term
"Employment Term" refers to the entire period of employment of Pezzola
hereunder, including any extensions.
3. COMPENSATION. Pezzola shall be compensated as follows:
a. FIXED SALARY. Effective January 16, 1999, Pezzola shall receive
a fixed annual salary of Two Hundred Thousand Dollars ($200,000). The
Corporation agrees to review the fixed salary following the end of each calendar
year during the Employment Term based upon Pezzola's services and the financial
results of DSPC
2
during the calendar year, and to make such increases as may be determined
appropriate in the discretion of DSPC's Compensation Committee of the Board of
Directors ("Compensation Committee").
b. PAYMENT. Pezzola's fixed salary shall be payable on a
semi-monthly basis.
c. BONUS COMPENSATION. During the Employment Term, Pezzola shall
participate in each bonus plan adopted by the Corporation's Board of Directors.
Commencing in 1999, Pezzola shall be entitled to receive an annual bonus equal
to (i) twenty-five percent (25%) of his annual base salary should the
Corporation meet eighty percent (80%) of its plan as presented to the Board in
January of each year, during the term of Pezzola's employment ("Yearly Plan");
(ii) fifty percent (50%) of his annual base salary should the Corporation meet
its Yearly Plan; and (iii) one hundred percent (100%) of his annual base salary
should the Corporation meet one hundred twenty percent (120%) of its Yearly
Plan, with the bonus prorated if the Yearly Plan is met between eighty percent
(80%) and one hundred percent (100%); or between one hundred percent (100%) and
one hundred twenty percent (120%). For purposes of this Section, the meeting of
the Yearly Plan shall be based upon the actual revenues and earnings per share
for each applicable year (each weighted fifty percent (50%)) compared to the
revenues and earnings per share projected in the Yearly Plan (with each item
weighted fifty percent (50%)), and no item shall be counted if it is not at
least eighty percent (80%) met.
d. VACATION. Pezzola shall accrue paid vacation at the rate of
twenty-five (25) days for each twelve (12) months of employment. Pezzola shall
be compensated at his usual rate of compensation during any such vacation.
Pezzola shall be entitled to ten (10) paid holidays during each twelve (12)
months of employment. Pezzola shall receive sick leave or disability leave in
accordance with the terms of the Corporation's standard sick leave or disability
leave policy.
e. BENEFITS. During the employment term, Pezzola and his dependents
shall be entitled to participate in any group plans or programs maintained by
the
3
Corporation for any employees relating to group health, disability, life
insurance and other related benefits as in effect from time to time. The level
of benefits shall be based on the salary payable to Pezzola. The Corporation
and DSPC shall provide Pezzola with Director and Officer Insurance, if
reasonably available to the Corporation and DSPC, and all of its officers and
directors. Pezzola shall in no event receive less insurance coverage than that
available to any other employee.
4. EXPENSES. The Corporation shall reimburse Pezzola for his 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. The Corporation shall pay Pezzola's cellular telephone expenses
to the extent incurred in carrying out the business of the Corporation. The
Corporation shall also reimburse Pezzola for the portion of his professional
membership dues incurred, if any; legal education and seminar expenses; and
California Bar Association dues or fees necessary to maintain his certification
as an attorney in California, as are allocable to the Corporation from time to
time, based on the percentage of Pezzola's time each year that is spent on
Corporation matters. The Corporation shall also reimburse Pezzola for
legal/technical books purchased by Pezzola that are used in carrying out
Pezzola's duties to the Corporation. As a condition of payment or
reimbursement, Pezzola agrees to provide the Corporation with copies of all
available invoices and receipts, and otherwise account to the Corporation 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.
5. INDEMNIFICATION. The parties entered into an Indemnification
Agreement, effective September 16, 1996, under which DSPC indemnifies Pezzola
for actions he may take on behalf of the Corporation or DSPC.
6. CONFIDENTIALITY AND COMPETITIVE ACTIVITIES. Pezzola agrees that
during the Employment Term he is in a position of special trust and confidence
and has access to confidential and proprietary information about the
Corporation's business and plans.
4
Pezzola 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 that is in competition, in any manner whatsoever,
with the Corporation. Notwithstanding anything in the foregoing to the
contrary, Pezzola shall be allowed to invest as a shareholder in publicly-traded
companies, or through a venture capital firm or an investment pool.
7. 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 employment
term continue to develop, compile and acquire said items (all hereinafter
collectively referred to as the "Corporation's Property"). It is expected that
Pezzola will gain knowledge of and utilize the Corporation's Property during the
course and scope of his employment 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 Pezzola's employment is terminated, for whatever reason, Pezzola
agrees not to copy, make known, disclose or use, any of the Corporation's
Property without the Corporation's prior written consent. In such event,
Pezzola further agrees 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 after any termination of this
Agreement. Pezzola agrees upon termination of employment to deliver to the
Corporation all confidential papers, documents, records, lists and notes
(whether prepared by Pezzola or others) comprising or containing the Corpora-
5
tion's Property. Pezzola recognizes that violation of covenants and agreements
contained in this Section 7 may result in irreparable injury to the Corporation
which would not be fully compensable by way of money damages.
8. TERMINATION.
a. GENERAL. The Corporation may terminate this Agreement without
cause, by written notice. Pezzola may voluntarily terminate his employment
hereunder upon sixty (60) days' advance written notice to the Corporation.
b. TERMINATION FOR CAUSE. The Corporation may immediately terminate
Pezzola's employment at any time for cause. Termination for cause shall be
effective from the receipt of written notice thereof to Pezzola specifying the
grounds for termination and all relevant facts. Cause shall be deemed to
include: (i) material neglect of his duties or a significant 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) intentionally imparting confidential information relating to the
Corporation or DSPC or their business to competitors or to other third parties
other than in the course of carrying out his 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 Pezzola's death. In addition, if any disability or
incapacity of Pezzola 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 (excluding any accrued vacation) out of any one
hundred twenty (120) calendar day period, the Corporation may terminate
Pezzola's employment upon written notice. Payment of salary to Pezzola during
any sick leave shall only be to the extent that Pezzola has accrued sick leave
or vacation days. Pezzola shall accrue sick leave at the same rate generally
available to the Corporation's employees.
6
d. SEVERANCE PAY. If this Agreement is terminated by the
Corporation without cause pursuant to Section 8.a. (above), the Corporation
shall pay Pezzola a severance/consulting fee equal to the full amount of the
compensation that he could have expected under this Agreement, as and when
payable under this Agreement, without deduction except for tax withholding
amounts, through the end of the term, during which Pezzola shall remain as a
consultant to the Corporation in a non-policy-making role. If this Agreement is
terminated with cause pursuant to Section 8.b. (above), the Corporation shall
not be obligated to pay Pezzola any severance/consulting fee. If this Agreement
is not renewed on or after December 31, 2000, then the Corporation shall pay
Pezzola a severance/consulting fee equal to his then-current monthly rate of
fixed salary compensation, multiplied by the number four (4). The Corporation
shall pay Pezzola a severance/consulting fee equal to his monthly salary at his
then-current rate of fixed salary compensation, multiplied by the number three
(3), if Pezzola voluntarily elects to terminate his employment, unless the
Corporation successfully claims that a termination in accordance with Section
8.b. is in order.
9. CORPORATE OPPORTUNITIES.
a. DUTY TO NOTIFY. In the event that Pezzola, during the Employment
Term, shall become aware of any material and significant business opportunity
directly related to any of the Corporation's significant businesses, Pezzola
shall promptly notify the Corporation's Directors of such opportunity. Pezzola
shall not appropriate for himself 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. Pezzola'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 of California relating to the fiduciary duties of
an agent or employee.
b. FAILURE TO NOTIFY. In the event that Pezzola fails to notify the
Corporation of, or so appropriates, any such opportunity without the express
written
7
consent of the Board of Directors, Pezzola shall be deemed to have violated the
provisions of this Section notwithstanding the following:
i. The capacity in which Pezzola shall have acquired such
opportunity; or
ii. The probable success in the Corporation's hands of such
opportunity.
c. CORPORATION DEFINED. For purposes of Sections 6, 7, 8 and 9, the
term "Corporation" shall also include DSPC and all of DSPC's subsidiaries.
10. 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.
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
provision.
c. PERSONAL SERVICES. It is understood that the services to be
performed by Pezzola hereunder are personal in nature and the obligations to
perform such services and the conditions and covenants of this Agreement cannot
be assigned by Pezzola. 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. 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
8
provisions hereof shall not be affected thereby, provided that no such
severability shall be effective if it causes a material detriment to any party.
e. APPLICABLE LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of California, applicable to
contracts between California residents entered into and to be performed entirely
within the State of California.
f. 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 giving written notice to the other party hereto of such
change in the manner above provided.
g. 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.
h. CONFLICT POTENTIAL AND DUTY TO NOTIFY. Pezzola agrees to notify
the Chairman of the Compensation Committee of: (1) any investments into any
company or other entity of his own personal funds which is in excess of Two
Hundred Thousand Dollars ($200,000); (2) any investment which results in Pezzola
owing over five percent (5%) of an entity; or (3) any other employment or
consulting arrangement that Pezzola is a party to. If the Chairman of the
Compensation Committee deems such investment or arrangement to be a conflict, he
and Pezzola shall attempt to
9
resolve the conflict. If such conflict cannot be so resolved, then the Chairman
of the Compensation Committee shall discuss the matter with the entire board.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first written above.
DSP TELECOM, INC. DSP COMMUNICATIONS, INC.
a California corporation a California corporation
20300 Stevens Creek Blvd., 20300 Stevens Creek Blvd.,
Suite 465 Suite 465
Cupertino, CA 95014 Cupertino, CA 95014
By: /s/ Davidi Gilo By: /s/ Lewis Broad
--------------------------- ---------------------------
Davidi Gilo, Chairman Lewis Broad, Chairman
of the Board of Directors of the Compensation Committee
/s/ Stephen P. Pezzola
- ------------------------------
STEPHEN P. PEZZOLA
40 Yorkshire Drive
Oakland, CA 94618
10