DSP GROUP, INC.
1998 NON-OFFICER EMPLOYEE STOCK OPTION PLAN
1. PURPOSES OF THE PLAN. The purposes of this Non-Officer Employee Stock
Option Plan are to attract and retain the best available personnel, to provide
additional incentive to Employees (excluding Officers) and to promote the
success of the Company's business.
2. DEFINITIONS. As used herein, the following definitions shall apply:
(a) "ADMINISTRATOR" means the Board or any of the Committees
appointed to administer the Plan.
(b) "AFFILIATE" and "ASSOCIATE" shall have the respective meanings
ascribed to such terms in Rule 12b-2 promulgated under the Exchange Act.
(c) "APPLICABLE LAWS" means the legal requirements relating to the
administration of stock option plans, if any, under applicable provisions of
federal securities laws, state corporate and securities laws, the Code, the
rules of any applicable stock exchange or national market system, and the rules
of any foreign jurisdiction applicable to Awards granted to residents therein.
(d) "AWARD" means the grant of an Non-Qualified Stock Option or other
right or benefit under the Plan.
(e) "AWARD AGREEMENT" means the written agreement evidencing the
grant of an Award executed by the Company and the Grantee, including any
amendments thereto.
(f) "BOARD" means the Board of Directors of the Company.
(g) "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 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
twenty-four (24) 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.
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(h) "CODE" means the Internal Revenue Code of 1986, as amended.
(i) "COMMITTEE" means any committee appointed by the Board to
administer the Plan.
(j) "COMMON STOCK" means the common stock of the Company.
(k) "COMPANY" means DSP Group, Inc., a Delaware corporation.
(l) "CONSULTANT" means any person (other than an Employee or, solely
with respect to rendering services in such person's capacity as a Director) who
is engaged by the Company or any Related Entity to render consulting or advisory
services to the Company or such Related Entity.
(m) "CONTINUING DIRECTORS" means members of the Board who either
(i) have been Board members continuously for a period of at least twenty-four
(24) months or (ii) have been Board members for less than twenty-four (24)
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.
(n) "CONTINUOUS SERVICE" means that the provision of services to the
Company or a Related Entity in any capacity of Employee, Director or Consultant,
is not interrupted or terminated. Continuous Service shall not be considered
interrupted in the case of (i) any approved leave of absence, (ii) transfers
between locations of the Company or among the Company, any Related Entity, or
any successor, in any capacity of Employee, Director or Consultant, or (iii) any
change in status as long as the individual remains in the service of the Company
or a Related Entity in any capacity of Employee, Director or Consultant (except
as otherwise provided in the Award Agreement). An approved leave of absence
shall include sick leave, military leave, or any other authorized personal
leave.
(o) "CORPORATE TRANSACTION" means any of the following transactions:
(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;
(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; or
(iv) an acquisition by any person or related group of persons
(other than the Company or by a Company-sponsored employee benefit plan) of
beneficial ownership
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(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 (whether or not in a transaction also
constituting a Change in Control), but excluding any such transaction that
the Administrator determines shall not be a Corporate Transaction.
(p) "DIRECTOR" means a member of the Board or the board of directors
of any Related Entity.
(q) "DISABILITY" means that a Grantee would qualify for benefit
payments under the long-term disability policy of the Company or the Related
Entity to which the Grantee provides services regardless of whether the Grantee
is covered by such policy.
(r) "EMPLOYEE" means any person who is an employee of the Company or
any Related Entity. The payment of a director's fee by the Company or a Related
Entity shall not be sufficient to constitute "employment" by the Company.
(s) "EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.
(t) "FAIR MARKET VALUE" means, as of any date, the value of Common
Stock determined as follows:
(i) Where there exists a public market for the Common Stock, the
Fair Market Value shall be (A) the closing price for a Share for the last market
trading day prior to the time of the determination (or, if no closing price was
reported on that date, on the last trading date on which a closing price was
reported) on the stock exchange determined by the Administrator to be the
primary market for the Common Stock or the Nasdaq National Market, whichever is
applicable or (B) if the Common Stock is not traded on any such exchange or
national market system, the average of the closing bid and asked prices of a
Share on the Nasdaq Small Cap Market for the day prior to the time of the
determination (or, if no such prices were reported on that date, on the last
date on which such prices were reported), in each case, as reported in THE WALL
STREET JOURNAL or such other source as the Administrator deems reliable; or
(ii) In the absence of an established market for the Common Stock
of the type described in (i), above, the Fair Market Value thereof shall be
determined by the Administrator in good faith.
(u) "GRANTEE" means an Employee who receives an Award pursuant to an
Award Agreement under the Plan.
(v) "NON-QUALIFIED STOCK OPTION" means an Option not intended to
qualify as an incentive stock option within the meaning of Section 422 of the
Code.
(w) "OFFICER" means a person who is an officer of the Company or a
Related Entity within the meaning of Section 16 of the Exchange Act and the
rules and regulations promulgated thereunder.
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(x) "OPTION" means an option to purchase Shares pursuant to an Award
Agreement granted under the Plan.
(y) "PARENT" means a "parent corporation," whether now or hereafter
existing, as defined in Section 424(e) of the Code.
(z) "PLAN" means this 1998 Non-Officer Employee Stock Option Plan.
(aa) "RELATED ENTITY" means any Parent, Subsidiary and any business,
corporation, partnership, limited liability company or other entity in which the
Company, a Parent or a Subsidiary holds a substantial ownership interest,
directly or indirectly.
(bb) "RULE 16b-3" means Rule 16b-3 promulgated under the Exchange Act
or any successor thereto.
(cc) "SHARE" means a share of the Common Stock.
(dd) "SUBSIDIARY" means a "subsidiary corporation," whether now or
hereafter existing, as defined in Section 424(f) of the Code.
(ee) "RELATED ENTITY DISPOSITION" means the sale, distribution or
other disposition by the Company of all or substantially all of the Company's
interests in any Related Entity effected by a sale, merger or consolidation or
other transaction involving that Related Entity or the sale of all or
substantially all of the assets of that Related Entity.
3. STOCK SUBJECT TO THE PLAN.
(a) Subject to the provisions of Section 10, below, the maximum
aggregate number of Shares which may be issued pursuant to all Awards is 950,000
Shares. The Shares to be issued pursuant to Awards may be authorized, but
unissued, or reacquired Common Stock.
(b) Any Shares covered by an Award (or portion of an Award) which is
forfeited or canceled, expires or is settled in cash, shall be deemed not to
have been issued for purposes of determining the maximum aggregate number of
Shares which may be issued under the Plan. If any unissued Shares are retained
by the Company upon exercise of an Award in order to satisfy the exercise price
for such Award or any withholding taxes due with respect to such Award, such
retained Shares subject to such Award shall become available for future issuance
under the Plan (unless the Plan has terminated). Shares that actually have been
issued under the Plan pursuant to an Award shall not be returned to the Plan and
shall not become available for future issuance under the Plan, except that if
unvested Shares are forfeited, or repurchased by the Company at their original
purchase price, such Shares shall become available for future grant under the
Plan.
4. ADMINISTRATION OF THE PLAN.
(a) PLAN ADMINISTRATOR.
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(i) ADMINISTRATION. The Plan shall be administered by (A) the
Board or (B) a Committee designated by the Board, which Committee shall be
constituted in such a manner as to satisfy the Applicable Laws. Once appointed,
such Committee shall continue to serve in its designated capacity until
otherwise directed by the Board. The Board may authorize one or more Officers
to grant such Awards and may limit such authority as the Board determines from
time to time.
(ii) ADMINISTRATION ERRORS. In the event an Award is granted in
a manner inconsistent with the provisions of this subsection (a), such Award
shall be presumptively valid as of its grant date to the extent permitted by the
Applicable Laws.
(b) POWERS OF THE ADMINISTRATOR. Subject to Applicable Laws and the
provisions of the Plan (including any other powers given to the Administrator
hereunder), and except as otherwise provided by the Board, the Administrator
shall have the authority, in its discretion:
(i) to select the Employees to whom Awards may be granted
from time to time hereunder;
(ii) to determine whether and to what extent Awards are
granted hereunder;
(iii) to determine the number of Shares or the amount of
other consideration to be covered by each Award granted hereunder;
(iv) to approve forms of Award Agreements for use under the
Plan;
(v) to determine the terms and conditions of any Award
granted hereunder;
(vi) to amend the terms of any outstanding Award granted
under the Plan, provided that any amendment that would adversely affect the
Grantee's rights under an outstanding Award shall not be made without the
Grantee's written consent;
(vii) to construe and interpret the terms of the Plan and
Awards granted pursuant to the Plan, including without limitation, any notice
of Award or Award Agreement, granted pursuant to the Plan;
(viii) to establish additional terms, conditions, rules or
procedures to accommodate the rules or laws of applicable foreign
jurisdictions and to afford Grantees favorable treatment under such laws;
provided, however, that no Award shall be granted under any such additional
terms, conditions, rules or procedures with terms or conditions which are
inconsistent with the provisions of the Plan; and
(ix) to take such other action, not inconsistent with the
terms of the Plan, as the Administrator deems appropriate.
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(c) EFFECT OF ADMINISTRATOR'S DECISION. All decisions,
determinations and interpretations of the Administrator shall be conclusive and
binding on all persons.
5. ELIGIBILITY. Awards may be granted to Employees, excluding Officers.
An Employee who has been granted an Award may, if otherwise eligible, be granted
additional Awards. Awards may be granted to such Employees (excluding Officers)
who are residing in foreign jurisdictions as the Administrator may determine
from time to time.
6. TERMS AND CONDITIONS OF AWARDS.
(a) CONDITIONS OF AWARD. Subject to the terms of the Plan, the
Administrator shall determine the provisions, terms, and conditions of each
Award including, but not limited to, the Award vesting schedule, repurchase
provisions, rights of first refusal, forfeiture provisions, form of payment
(cash, Shares, or other consideration) upon settlement of the Award, payment
contingencies, and satisfaction of any performance criteria. The performance
criteria established by the Administrator may be based on any one of, or
combination of, increase in share price, earnings per share, total
stockholder return, return on equity, return on assets, return on investment,
net operating income, cash flow, revenue, economic value added, personal
management objectives, or other measure of performance selected by the
Administrator. Partial achievement of the specified criteria may result in a
payment or vesting corresponding to the degree of achievement as specified in
the Award Agreement.
(b) ACQUISITIONS AND OTHER TRANSACTIONS. The Administrator may issue
Awards under the Plan in settlement, assumption or substitution for, outstanding
awards or obligations to grant future awards in connection with the Company or a
Related Entity acquiring another entity, an interest in another entity or an
additional interest in a Related Entity whether by merger, stock purchase, asset
purchase or other form of transaction.
(c) DEFERRAL OF AWARD PAYMENT. The Administrator may establish one
or more programs under the Plan to permit selected Grantees the opportunity to
elect to defer receipt of consideration upon exercise of an Award, satisfaction
of performance criteria, or other event that absent the election would entitle
the Grantee to payment or receipt of Shares or other consideration under an
Award. The Administrator may establish the election procedures, the timing of
such elections, the mechanisms for payments of, and accrual of interest or other
earnings, if any, on amounts, Shares or other consideration so deferred, and
such other terms, conditions, rules and procedures that the Administrator deems
advisable for the administration of any such deferral program.
(d) SEPARATE PROGRAMS. The Administrator may establish one or more
separate programs under the Plan for the purpose of issuing particular forms of
Awards to one or more classes of Grantees on such terms and conditions as
determined by the Administrator from time to time.
(e) EARLY EXERCISE. The Award Agreement may, but need not, include a
provision whereby the Grantee may elect at any time while in Continuous Service
to exercise any part or all of the Award prior to full vesting of the Award.
Any unvested Shares received pursuant to
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such exercise may be subject to a repurchase right in favor of the Company or
a Related Entity or to any other restriction the Administrator determines to
be appropriate.
(f) TERM OF AWARD. The term of each Award shall be the term stated
in the Award Agreement.
(g) TRANSFERABILITY OF AWARDS. Awards shall be transferable to the
extent provided in the Award Agreement.
(h) TIME OF GRANTING AWARDS. The date of grant of an Award shall for
all purposes be the date on which the Administrator makes the determination to
grant such Award, or such other date as is determined by the Administrator.
Notice of the grant determination shall be given to each Employee to whom an
Award is so granted within a reasonable time after the date of such grant.
7. AWARD EXERCISE OR PURCHASE PRICE, CONSIDERATION, AND TAXES.
(a) EXERCISE OR PURCHASE PRICE. The exercise price for an Award
shall be determined by the Administrator.
(b) CONSIDERATION. Subject to Applicable Laws, the consideration to
be paid for the Shares to be issued upon exercise of an Award including the
method of payment, shall be determined by the Administrator. In addition to
any other types of consideration the Administrator may determine, the
Administrator is authorized to accept as consideration for Shares issued under
the Plan the following, provided that the portion of the consideration equal to
the par value of the Shares must be paid in cash or other legal consideration
permitted by the Delaware General Corporation Law:
(i) cash;
(ii) check;
(iii) delivery of Grantee's promissory note with such
recourse, interest, security, and redemption provisions as the Administrator
determines as appropriate;
(iv) surrender of Shares or delivery of a properly executed
form of attestation of ownership of Shares as the Administrator may require
(including withholding of Shares otherwise deliverable upon exercise of the
Award) which have a Fair Market Value on the date of surrender or attestation
equal to the aggregate exercise price of the Shares as to which said Award
shall be exercised (but only to the extent that such exercise of the Award
would not result in an accounting compensation charge with respect to the
Shares used to pay the exercise price unless otherwise determined by the
Administrator);
(v) with respect to Options, payment through a broker-dealer
sale and remittance procedure pursuant to which the Grantee (A) shall provide
written instructions to a Company designated brokerage firm to effect the
immediate sale of some or all of the purchased Shares and remit to the Company,
out of the sale proceeds available on the settlement date,
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sufficient funds to cover the aggregate exercise price payable for the
purchased Shares and (B) shall provide written directives to the Company to
deliver the certificates for the purchased Shares directly to such brokerage
firm in order to complete the sale transaction; or
(vi) any combination of the foregoing methods of payment.
(c) TAXES. No Shares shall be delivered under the Plan to any
Grantee or other person until such Grantee or other person has made arrangements
acceptable to the Administrator for the satisfaction of any foreign, federal,
state, or local income and employment tax withholding obligations, including,
without limitation, obligations incident to the receipt of Shares. Upon
exercise of an Award, the Company shall withhold or collect from Grantee an
amount sufficient to satisfy such tax obligations.
8. EXERCISE OF AWARD.
(a) PROCEDURE FOR EXERCISE; RIGHTS AS A STOCKHOLDER.
(i) Any Award granted hereunder shall be exercisable at such
times and under such conditions as determined by the Administrator under the
terms of the Plan and specified in the Award Agreement.
(ii) An Award 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 Award by the person entitled to exercise the Award and full payment for the
Shares with respect to which the Award is exercised, including, to the extent
selected, use of the broker-dealer sale and remittance procedure to pay the
purchase price as provided in Section 7(b)(v). 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 Shares subject to an Award, notwithstanding the exercise
of an Option or other Award. The Company shall issue (or cause to be issued)
such stock certificate promptly upon exercise of the Award. 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 the Award Agreement
or Section 10, below.
(b) EXERCISE OF AWARD FOLLOWING TERMINATION OF CONTINUOUS SERVICE.
(i) An Award may not be exercised after the termination date of
such Award set forth in the Award Agreement and may be exercised following the
termination of a Grantee's Continuous Service only to the extent provided in the
Award Agreement.
(ii) Where the Award Agreement permits a Grantee to exercise an
Award following the termination of the Grantee's Continuous Service for a
specified period, the Award shall terminate to the extent not exercised on the
last day of the specified period or the last day of the original term of the
Award, whichever occurs first.
(c) BUYOUT PROVISIONS. The Administrator may at any time offer to
buy out for a payment in cash or Shares, an Award previously granted, based on
such terms and conditions as
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the Administrator shall establish and communicate to the Grantee at the time
that such offer is made.
9. CONDITIONS UPON ISSUANCE OF SHARES.
(a) Shares shall not be issued pursuant to the exercise of an Award
unless the exercise of such Award and the issuance and delivery of such Shares
pursuant thereto shall comply with all Applicable Laws, and shall be further
subject to the approval of counsel for the Company with respect to such
compliance.
(b) As a condition to the exercise of an Award, the Company may
require the person exercising such Award 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
Applicable Laws.
10. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION. Subject to any required
action by the shareholders of the Company, the number of Shares covered by each
outstanding Award, and the number of Shares which have been authorized for
issuance under the Plan but as to which no Awards have yet been granted or which
have been returned to the Plan, the exercise or purchase price of each such
outstanding Award, as well as any other terms that the Administrator determines
require adjustment shall be proportionately adjusted for (i) any increase or
decrease in the number of issued Shares resulting from a stock split, reverse
stock split, stock dividend, combination or reclassification of the Shares,
(ii) any other increase or decrease in the number of issued Shares effected
without receipt of consideration by the Company, or (iii) as the Administrator
may determine in its discretion, any other transaction with respect to Common
Stock to which Section 424(a) of the Code applies; 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 Administrator and its determination shall be final, binding and
conclusive. Except as the Administrator determines, 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 hereof shall be made
with respect to, the number or price of Shares subject to an Award.
11. CORPORATE TRANSACTIONS/CHANGES IN CONTROL/RELATED ENTITY
DISPOSITIONS. The Administrator shall have the authority, exercisable either
in advance of any actual or anticipated Corporate Transaction, Change in
Control or Related Entity Disposition or at the time of an actual Corporate
Transaction, Change in Control or Related Entity Disposition and exercisable
at the time of the grant of an Award under the Plan or any time while an
Award remains outstanding, to provide for the full automatic vesting and
exercisability of one or more outstanding unvested Awards under the Plan and
the release from restrictions on transfer and repurchase or forfeiture rights
of such Awards in connection with a Corporate Transaction, Change in Control
or Related Entity Disposition, on such terms and conditions as the
Administrator may specify. The Administrator also shall have the authority
to condition any such Award vesting and exercisability or release from such
limitations upon the subsequent termination of the Continuous Service of the
Grantee within a specified period following the
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effective date of the Corporate Transaction, Change in Control or Related
Entity Disposition. The Administrator may provide that any Awards so vested
or released from such limitations in connection with a Change in Control or
Related Entity Disposition, shall remain fully exercisable until the
expiration or sooner termination of the Award. Effective upon the
consummation of a Corporate Transaction, all outstanding Awards under the
Plan shall terminate unless assumed by the successor company or its Parent.
12. EFFECTIVE DATE AND TERM OF PLAN. The Plan shall become effective upon
its adoption by the Board. It shall continue in effect for a term of ten (10)
years unless sooner terminated. Subject to Section 16, below, and Applicable
Laws, Awards may be granted under the Plan upon its becoming effective.
13. AMENDMENT, SUSPENSION OR TERMINATION OF THE PLAN.
(a) The Board may at any time amend, suspend or terminate the Plan.
To the extent necessary to comply with Applicable Laws, the Company shall obtain
stockholder approval of any Plan amendment in such a manner and to such a degree
as required.
(b) No Award may be granted during any suspension of the Plan or
after termination of the Plan.
(c) Any amendment, suspension or termination of the Plan (including
termination of the Plan under Section 12, above) shall not affect Awards already
granted, and such Awards shall remain in full force and effect as if the Plan
had not been amended, suspended or terminated, unless mutually agreed otherwise
between the Grantee and the Administrator, which agreement must be in writing
and signed by the Grantee and the Company.
14. RESERVATION OF SHARES.
(a) The Company, during the term of the Plan, will at all times
reserve and keep available such number of Shares as shall be sufficient to
satisfy the requirements of the Plan.
(b) The 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. NO EFFECT ON TERMS OF EMPLOYMENT RELATIONSHIP. The Plan shall not
confer upon any Grantee any right with respect to the Grantee's Continuous
Service, nor shall it interfere in any way with his or her right or the
Company's right to terminate the Grantee's Continuous Service at any time, with
or without cause.
16. NO EFFECT ON RETIREMENT AND OTHER BENEFIT PLANS. Except as
specifically provided in a retirement or other benefit plan of the Company or a
Related Entity, Awards shall not be deemed compensation for purposes of
computing benefits or contributions under any retirement plan of the Company or
a Related Entity, and shall not affect any benefits under any other benefit
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plan of any kind or any benefit plan subsequently instituted under which the
availability or amount of benefits is related to level of compensation. The
Plan is not a "Retirement-Plan" or "Welfare Plan" under the Employee
Retirement Income Security Act of 1974, as amended.
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