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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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SCHEDULE 14D-9
SOLICITATION/RECOMMENDATION STATEMENT
PURSUANT TO SECTION 14(d)(4) OF THE
SECURITIES EXCHANGE ACT OF 1934
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DSP COMMUNICATIONS, INC.
(NAME OF SUBJECT COMPANY)
DSP COMMUNICATIONS, INC.
(NAME OF PERSON(S) FILING STATEMENT)
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COMMON STOCK, PAR VALUE $.001 PER SHARE
(TITLE OF CLASS OF SECURITIES)
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23332K106
((CUSIP) NUMBER OF CLASS OF SECURITIES)
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STEPHEN P. PEZZOLA, ESQ.
GENERAL COUNSEL AND CORPORATE SECRETARY
DSP COMMUNICATIONS, INC.
20300 STEVENS CREEK BOULEVARD
CUPERTINO, CALIFORNIA 95014
(408) 777-2700
(NAME, ADDRESS AND TELEPHONE NUMBER OF PERSON AUTHORIZED TO RECEIVE
NOTICE AND COMMUNICATION ON BEHALF OF THE PERSON(S) FILING STATEMENT).
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WITH A COPY TO:
KENTON J. KING, ESQ.
SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP
525 UNIVERSITY AVENUE, SUITE 220
PALO ALTO, CALIFORNIA 94301
(650) 470-4500
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ITEM 1. SECURITY AND SUBJECT COMPANY.
The name of the subject company is DSP Communications, Inc., a Delaware
corporation (the "Company"), and the address of the principal executive offices
of the Company is 20300 Stevens Creek Boulevard, Cupertino, California 95014.
The title of the class of equity securities to which this statement relates is
the common stock, par value $.001 per share (the "Shares" or the "Company Common
Stock"), of the Company.
ITEM 2. TENDER OFFER OF THE BIDDER.
This statement relates to the tender offer by CWC Acquisition Corporation,
a Delaware corporation ("Purchaser") that is a direct, wholly owned subsidiary
of Intel Corporation, a Delaware corporation ("Parent"), disclosed in a Tender
Offer Statement on Schedule 14D-1, dated October 20, 1999 (as amended or
supplemented from time to time, the "Schedule 14D-1"), to purchase all of the
issued and outstanding Shares, at a price of $36.00 per Share, or such higher
per Share consideration paid by Purchaser to stockholders who have tendered
Shares pursuant to the Offer, net to the seller in cash (the "Offer Price"),
upon the terms and subject to the conditions set forth in the Offer to Purchase,
dated October 20, 1999 (as amended or supplemented from time to time, the "Offer
to Purchase"), and the related Letter of Transmittal (which, together with the
Offer to Purchase, constitute the "Offer").
The Offer is being made pursuant to an Agreement and Plan of Merger, dated
as of October 13, 1999 (the "Merger Agreement"), by and among Parent, Purchaser
and the Company. The Merger Agreement provides, among other things, that as soon
as practicable after the satisfaction or waiver of the conditions set forth in
the Merger Agreement, in accordance with the relevant provisions of the Delaware
General Corporation Law, as amended (the "DGCL"), Purchaser will be merged with
and into the Company (the "Merger" and, together with the Offer, the
"Transaction"). Following consummation of the Merger, the Company will continue
as the surviving corporation (the "Surviving Corporation") and will be a direct,
wholly owned subsidiary of Parent. A copy of the Merger Agreement is filed as
Exhibit 2 hereto and is incorporated herein by reference.
As set forth in the Schedule 14D-1, the principal executive offices of each
of Parent and Purchaser are located at 2200 Mission College Boulevard, Santa
Clara, California 95052.
ITEM 3. IDENTITY AND BACKGROUND.
(a) NAME AND ADDRESS OF THE COMPANY
The name and address of the Company, which is the person filing this
statement, are set forth in Item 1 above. Unless the context otherwise requires,
references to the Company in this Schedule 14D-9 are to the Company together
with its subsidiaries, viewed as a single entity.
(b) Except as set forth in this Item 3(b), to the knowledge of the Company,
there are no material contracts, agreements, arrangements or understandings and
no actual or potential conflicts of interest between the Company or its
affiliates and (i) the Company's executive officers, directors or affiliates or
(ii) Parent or Purchaser or their respective executive officers, directors or
affiliates.
ARRANGEMENTS WITH EXECUTIVE OFFICERS, DIRECTORS OR AFFILIATES OF THE COMPANY
Certain contracts, arrangements or understandings between the Company or
its affiliates and certain of the Company's directors, executive officers and
affiliates are described in the Information Statement of the Company attached to
this statement as Schedule I (the "Information Statement"). The Information
Statement is being furnished to the Company's stockholders pursuant to Section
14(f) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"),
and Rule 14f-1 issued under the Exchange Act in connection with Parent's right
(after acquiring a majority of the Shares pursuant to the Offer) to designate
persons to the Board of Directors of the Company (the "Company Board") other
than at a meeting of the stockholders of the Company. The Information Statement
is herein incorporated by reference.
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EMPLOYMENT AGREEMENTS WITH PARENT
The following is a summary of certain provisions of letter agreements,
dated as of October 13, 1999, entered into by Parent with the following: Davidi
Gilo, Chairman of the Board, President and Chief Executive Officer, Joseph Perl,
former President and Chief Executive Officer, Shmuel Arditi, Chief Operating
Officer, David Aber, Chief Financial Officer, and Stephen P. Pezzola, General
Counsel and Secretary of the Company (each, a "Parent Employment Agreement")
(copies of which are filed herewith as Exhibits 11, 12, 13, 14 and 15,
respectively, and incorporated herein by reference). The Parent Employment
Agreements will become effective after the time that Parent accepts Shares for
purchase in the Offer and are contingent on the occurrence of the acceptance of
such Shares (the "Assumption Time"). The individuals listed above (other than
Mr. Arditi) have existing employment contracts with the Company that will remain
in effect in all respects except as set forth in the Parent Employment
Agreements. In addition, in connection with entering into their respective
Parent Employment Agreement, Mr. Gilo and Dr. Perl have entered into noncompete
agreements with Parent (copies of which are filed herewith as Exhibits 9 and 10,
respectively, and incorporated herein by reference) which are described below.
Pursuant to his Parent Employment Agreement, Mr. Gilo will be employed by
the Company or Parent until March 31, 2000, and will be available for
consultation with senior management of the Company, but in no event for more
than ten hours a week. Mr. Gilo has agreed that at the end of his employment
period, he will voluntarily terminate his employment and will be entitled to
severance in the amount of $525,000. In addition, Mr. Gilo has agreed to pay
back any loans made to him by the Company within ten (10) days following the
Assumption Time and to execute a proprietary information and inventions
agreement with Parent. Pursuant to his noncompete agreement, Mr. Gilo has agreed
that, for the two year period commencing on October 13, 1999, he will not engage
in the Company's business in regions where the Company does business (with
certain very limited exceptions). The noncompete agreement also provides for a
two-year non-solicitation of customers and Company employees. In consideration
for Mr. Gilo's agreement not to compete or solicit, Parent will pay Mr. Gilo $5
million within 30 days following the date that Parent and Purchaser accept
Shares for purchase in the Offer but in no event prior to January 1, 2000. In
the event that any payments or benefits received by Mr. Gilo become subject to
the excise tax (the "Excise Tax") imposed by Section 4999 of the Internal
Revenue Code of 1986, as amended (the "Code"), Parent will pay to Mr. Gilo such
additional amounts as are necessary to make him whole with respect to the Excise
Tax (and any taxes, including Excise Tax, that may become payable with respect
to such additional amounts).
Pursuant to his Parent Employment Agreement, Mr. Aber will be employed by
the Company or Parent until March 31, 2000, and will continue to perform
services in the manner in which he has been performing services for the Company
and its affiliates for approximately ten hours a week. Mr. Aber has agreed that
at the end of the employment period, he will voluntarily terminate his
employment and will be entitled to severance in the amount of $40,000. If any
portion of any payments or benefits received by Mr. Aber pursuant to his Parent
Employment Agreement or any other agreement with the Company becomes subject to
the Excise Tax. Parent will pay to Mr. Aber such additional amounts as are
necessary to make him whole with respect to such Excise Tax (and any taxes,
including Excise Tax, that may become payable with respect to such additional
amounts). In connection with entering into his Parent Employment Agreement, Mr.
Aber will execute a proprietary information and inventions agreement with
Parent, and he has agreed to pay back any loans made to him by the Company,
pursuant to the terms of such loans but no later than March 31, 2000.
Pursuant to his Parent Employment Agreement, Mr. Pezzola will be employed
by the Company or Parent until March 31, 2000, and will continue to perform
services in the manner in which he has been performing services for the Company
and its affiliates for approximately ten hours a week. Mr. Pezzola has agreed
that at the end of the employment period, he will voluntarily terminate his
employment and will be entitled to severance in the amount of $50,000. If any
portion of any payments or benefits received by Mr. Pezzola pursuant to his
Parent Employment Agreement or any other agreements with the Company becomes
subject to Excise Tax, Parent will pay to Mr. Pezzola such additional amounts as
are necessary to make him whole with respect to such Excise Tax (and any taxes,
including Excise Tax, that may become payable with respect to such additional
amounts). In connection with entering into his Parent Employment Agreement, Mr.
Pezzola will execute a proprietary information and inventions agreement with
Parent.
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Pursuant to his Parent Employment Agreement, Dr. Perl will be employed by
the Company or Parent until August 31, 2001, and will remain an employee of the
Company and Parent consistent with his current duties and responsibilities. Dr.
Perl has agreed that at the end of the employment period, he will voluntarily
terminate his employment and will not be entitled to any severance or consulting
fee. Dr. Perl will, however, be entitled to severance pay under his Employment
Agreement with the Company, dated as of July 22, 1998, as amended on June 1,
1999 (the "Perl Employment Agreement"), pursuant to which he will receive
severance equal to his then-current monthly salary multiplied by the number of
months left until the end of the original term of the Perl Employment Agreement.
In addition, in connection with entering into his Parent Employment Agreement.
Dr. Perl will execute a proprietary information and inventions agreement with
Parent. Dr. Perl has also agreed to pay back any loans made to him by the
Company, pursuant to the terms of such loans, but no later than August 31, 2001.
Pursuant to his noncompete agreement, Dr. Perl has agreed that, for the
twenty-one month period commencing on October 13, 1999, he will not engage in
the Company's business in regions where the Company does business (with certain
very limited exceptions). The noncompete agreement also provides for a
twenty-one month non-solicitation of customers and Company employees. Dr. Perl
will not receive any additional consideration for entering into his noncompete
agreement.
Pursuant to his Parent Employment Agreement, Mr. Arditi, who holds certain
options granted by the Company (the "Arditi Options"), of which one-third of the
Shares covered thereby have vested, will remain an employee of the Company. The
remainder of the Arditi Options will be subject to accelerated vesting as
follows: (i) 45,000 options will vest upon the achievement of 1999 fourth
quarter 1999 revenue of at least $41.3 million, (ii) 45,000 options will vest on
the achievement by the Company of calender year 2000 revenues of at least $289
million and (iii) 45,000 options will vest if the Company ships commercial
quantities of products to any two (2) entities out of the New Business Accounts,
(as defined in his Parent Employment Agreement), by December 31, 2000.
Furthermore, if the Company terminates Mr. Arditi's employment without cause
prior to the date by which he could achieve any of the foregoing goals, that
portion of Arditi Options that would accelerate upon achievement of those future
goals will become fully vested and exercisable as of the date of termination. In
consideration of the modification of the Arditi Options, Parent will grant to
Mr. Arditi as soon as practicable following the Assumption Time 50,000 options
to purchase shares of common stock, par value $.001 per share, of Parent
("Parent Common Stock") at an exercise price equal to the fair market value of
such stock on the grant date. These new options will vest on the seventh
anniversary from the date of the grant, provided that, in the event (i) the
Company achieves fourth quarter 1999 revenue of at least $41.3 million, the
vesting of 10,000 of the new options will be accelerated to January 15, 2001 and
(ii) the Company achieves calender year 2000 revenues of at least $289 million,
the vesting of 40,000 of the new options will be accelerated to January 15,
2001.
PAYMENTS IN RESPECT OF THE TRANSACTION
In connection with the Transaction, the Company Board has approved the
following bonuses for Mr. Gilo, Mr. Aber and Mr. Pezzola in recognition of their
past efforts, their efforts in connection with the Transaction and their
continued employment with the Company through the consummation of the Offer.
- A lump sum payment in the amount of $5.0 million to Mr. Gilo.
- A lump sum payment in the amount of $2.5 million to Mr. Pezzola.
- A lump sum payment in the amount of $2.5 million to Mr. Aber.
The payments set forth above will be made to the above individuals
following the Assumption Time, on January 3, 2000.
If any portion of any payments or benefits received by any of the above
individuals becomes subject to the Excise Tax, Parent shall pay to each such
individual such additional amounts as are necessary to make him whole with
respect to such Excise Tax (and any taxes, including Excise Tax, that may become
payable with respect to such additional amounts).
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STOCK OPTIONS
The Merger Agreement provides that, at the Effective Time (as hereinafter
defined), each option to purchase shares granted to employees of the Company
under the 1994 Employee and Consultant Stock Option Plan, 1995 Employee and
Consultant Stock Plan, the 1996 Stock Option Plan, the 1996 Non-Statutory
Employee and Consultant Stock Option Plan, and the 1998 Non-Qualified Stock
Option Plan which is then outstanding and unexercised will cease to represent a
right to acquire Shares and will be converted automatically into an option to
purchase shares of Parent Common Stock, and Parent will assume each such option
(an "Assumed Option") subject to the terms of the applicable option plan and the
agreement evidencing the grant thereunder of such Assumed Option; provided,
however, that from and after the Effective Time, (i) the number of shares of
Parent Common Stock purchasable upon exercise of such Assumed Option will be
equal to the number of Shares that were purchasable under such Assumed Option
immediately prior to the Effective Time multiplied by the Exchange Ratio (as
defined below), and rounded down to the nearest whole share, and (ii) the per
Share exercise price under each such Assumed Option will be adjusted by dividing
the per Share exercise price of each such Assumed Option by the Exchange Ratio,
rounded up to the nearest cent. In the case of any Assumed Options which are
"incentive stock options" (as defined in Section 422 of the Code) the exercise
price, the number of shares of Parent Common Stock purchasable pursuant to such
options and the terms and conditions of exercise of such options will be
determined in order to comply with Section 424(a) of the Code. The duration and
other terms of an Assumed Option will be the same as the original option except
that all references to the Company will be deemed to be references to Parent.
The terms of each Assumed Option will, in accordance with its terms, be subject
to further adjustment as appropriate to reflect any stock split, stock dividend,
recapitalization or other similar transaction with respect to Parent Common
Stock on or subsequent to the Effective Time. The "Exchange Ratio" is equal to
the ratio obtained by dividing the Offer Price by the closing price of one share
of Parent Common Stock on The Nasdaq National Market on the trading day
immediately preceding the Effective Time.
Notwithstanding the foregoing, Parent and Purchaser agree that if Purchaser
accepts Shares for purchase in the Offer, Parent and Purchaser will not
terminate the Merger Agreement, and will not take any action that would allow
the Company to terminate the Merger Agreement, until Parent has offered the
holders of the Assumed Options the opportunity, after not less than five (5)
business days notice, to have such Assumed Options assumed by Parent. With
respect to any such assumption of Assumed Options, all references to the
Effective Time in the previous paragraph shall instead refer to the date of such
assumption.
The Merger Agreement further provides that options to purchase Shares under
the Company's 1995 Director Stock Option Plan immediately became fully vested
and exercisable upon execution of the Merger Agreement and will remain
exercisable until the closing date of the Merger and, following such closing
date, such options shall expire and terminate and be of no further force or
effect.
EMPLOYEE STOCK PURCHASE PLAN
The Company has reserved a maximum of 2,000,000 shares of Company Common
Stock for issuance under the 1995 Employee Stock Purchase Plan (the "ESPP").
Under this plan, eligible employees are permitted to purchase shares of Company
Common Stock at the end of each six month purchase period during a two year
offering period (the "Offering Period"), through payroll deductions not
exceeding 10% of an employee's gross salary. The price per share is equal to 85%
of the fair market value of the Company Common Stock on the first day of the
Offering Period or on the last day of the applicable purchase period, whichever
is lower. As of September 30, 1999, an aggregate of $159,791 in payroll
deductions had been set aside for the purchase of shares pursuant to the ESPP.
The Merger Agreement provides that the Offering Period which is in effect as of
October 13, 1999 (or, if the closing of the Merger will occur during an Offering
Period which will have commenced following the Offering Period in effect as of
October 13, 1999, such subsequent Offering Period) will be shortened such that
the day on which the Shares will be purchased under the ESPP will be the closing
date of the Merger.
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INDEMNIFICATION
The Company maintains indemnification agreements with all of its directors
and executive officers (the "Indemnitees"). These agreements provide for the
Company to indemnify the Indemnitees to the fullest extent permitted by law if
the Indemnitee was or is or becomes a party to or witness or other participant
in, or is threatened to be made, a party to or witness or other participant in,
any threatened, pending or completed action, suit, arbitration or proceeding,
whether civil, criminal, administrative or investigative or other (other than an
action or suit by or in the right of the Company or any subsidiary of the
Company) or any inquiry or investigation that the Indemnitee in good faith
believes might lead to the institution of any such action, suit, arbitration or
proceeding, whether civil, criminal, administrative, investigative or other, by
reason of (or arising in part out of) any event or occurrence related to the
fact that the Indemnitee (i) is or was a director, officer, employee, agent or
fiduciary of the Company or any subsidiary of the Company, (ii) is or was
serving at the request of the Company as a director, officer, employee, agent or
fiduciary of another corporation, partnership, joint venture, trust or other
enterprise, or (iii) by reason of any action or inaction on the part of the
Indemnitee while serving in any such capacity against any and all expenses
(including reasonable attorneys' fees and all other costs, expenses and
obligations paid or incurred in connection with investigating, defending, being
a witness in or participating in (including on appeal), or preparing to defend,
be a witness in or participate in, any such action, suit, arbitration,
proceeding, inquiry or investigation, judgments, fines, penalties and amounts
paid in settlement (if such settlement is approved in advance by the Company,
which approval cannot be unreasonably withheld), including all interest,
assessments and other charges paid or payable in connection therewith or in
respect thereof, in each case to the extent actually and reasonably incurred by
the Indemnitee (collectively, "Expenses")). The indemnification agreements also
provide for the advancement of Expenses to the Indemnitees, within twenty (20)
days after receipt by the Company of the written request of the Indemnitee, as
well as the reimbursement to the Company by such Indemnitees of any such
advances if it is determined by a final judicial determination (as to which all
rights to appeal therefrom have been exhausted or lapsed) that the Indemnitee is
not entitled to indemnification by the Company thereunder. A copy of the
Company's form of Indemnification Agreement has been filed as Exhibit 16 to this
Schedule 14D-9 and is incorporated herein by reference in its entirety.
The Merger Agreement requires that, from and after the Effective Time,
Parent shall cause the Surviving Corporation to indemnify, defend and hold
harmless (and also cause the Surviving Corporation to advance Expenses as
incurred to the fullest extent permitted under applicable law to), to the extent
not covered by insurance, the Indemnitees against (i) all Expenses based in
whole or in part on or arising in whole or in part out of the fact that such
person is or was an officer or director of the Company or any of its
subsidiaries, whether or not pertaining to any matter existing or occurring at
or prior to the Effective Time and whether or not asserted or claimed prior to
or at or after the Effective Time; and (ii) all Expenses based in whole or in
part on or arising in whole or in part out of or pertaining to the Merger
Agreement or the transactions contemplated thereby to the fullest extent
required or permitted under applicable law. The Merger Agreement also requires
that, from and after the Effective Time, Parent shall cause the Surviving
Corporation to fulfill and honor in all respects the obligations of the Company
pursuant to any indemnification agreements between the Company and its directors
and officers as of or prior to October 13, 1999 (or indemnification agreements
in the Company's customary form for directors joining the Company Board prior to
the Effective Time) and any indemnification provisions under the Company's
certificate of incorporation or bylaws as in effect immediately prior to the
Effective Time. The Surviving Corporation's aggregate obligation to indemnify
and hold harmless all Indemnitees for all matters to which such Indemnitees may
be entitled to be indemnified or held harmless as described above shall in no
event exceed the Company's stockholders' equity as of June 30, 1999. In
addition, the Merger Agreement provides that, for a period of six years after
the Effective Time, Parent will maintain or cause the Surviving Corporation to
maintain in effect, if available, directors' and officers' liability insurance
covering those persons who, as of immediately prior to the Effective Time, are
covered by the Company's directors' and officers' liability insurance policy
(the "Insured Parties") on terms no less favorable to the Insured Parties than
those of the Company's present directors' and officers' liability insurance
policy; provided, however, that in no event will Parent or the Surviving
Corporation be required to expend on an annual basis in excess of 200% of the
annual premium currently paid by the Company for such coverage (or such coverage
as is available for 200% of such annual premium); provided, further, that, in
lieu of
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maintaining such existing insurance as provided above, Parent, at its election,
may cause coverage to be provided under any policy maintained for the benefit of
Parent or any of its subsidiaries, so long as the terms are not materially less
advantageous to the intended beneficiaries thereof than such existing insurance.
The foregoing description of the indemnification provided to the directors and
officers of the Company pursuant to the Merger Agreement is qualified by
reference to the complete text of Section 5.7 of the Merger Agreement which is
incorporated by reference herein in its entirety. The Merger Agreement has been
filed as Exhibit 2 to this Schedule 14D-9.
Article X of the Company's certificate of incorporation, as amended to
date, limits the personal liability of the directors of the Company to the
fullest extent permitted by the DGCL. Such Article X also authorizes the Company
to indemnify, to the fullest extent permitted by law, any person made or
threatened to be made a party to an action or proceeding, whether criminal,
civil, administrative or investigative, by reason of the fact that he, his
testator or intestate is or was a director, officer or employee of the Company
(or any predecessor thereto) or serves or has served, at the request of the
Company (or any predecessor thereto), at any other enterprise as a director,
officer or employee. A copy of such Article X has been filed as Exhibit 17 to
this Schedule 14D-9 and is incorporated herein by reference in its entirety.
Article VI of the Company's bylaws, as amended to date, requires that the
Company indemnify, to the maximum extent permitted by the DGCL, each of its
directors and officers against any expenses, judgments, fines, settlements or
other amounts incurred in connection with any proceeding arising by reason of
the fact that such person is or was an agent of the Company. A copy of such
Article VI has been filed as Exhibit 18 to this Schedule 14D-9 and is
incorporated herein by reference in its entirety.
ARRANGEMENTS WITH PARENT, PURCHASER OR THEIR AFFILIATES
CONFIDENTIALITY AGREEMENT
The following is a summary of certain material provisions of the Corporate
Non-Disclosure Agreement No. 465514, dated June 2, 1999, as amended effective
August 31, 1999, between the Company and Parent (the "Confidentiality
Agreement"). This summary does not purport to be complete and is qualified in
its entirety by reference to the complete text of the Confidentiality Agreement,
a copy of which is filed as Exhibit 1 hereto and is incorporated herein by
reference. Capitalized terms used and not otherwise defined below shall have the
meanings set forth in the Confidentiality Agreement.
The Confidentiality Agreement contains customary provisions pursuant to
which each of Parent and the Company agreed to keep confidential all nonpublic,
confidential or proprietary information which is furnished to one party by the
other, subject to certain customary exceptions. In the Confidentiality
Agreement, Parent and the Company have agreed, among other things, that, prior
to February 2001, neither party will, without the prior written consent of the
other, subject to certain customary exceptions, (i) acquire, offer to acquire,
or agree to acquire, directly or indirectly, by purchase or otherwise, any
voting securities of the other party, (ii) make, or in any way participate,
directly or indirectly, in any "solicitation" of "proxies" to vote (as such
terms are used in the proxy rules of the Securities and Exchange Commission (the
"SEC")) or seek to advise or influence any person or entity with respect to the
voting of any voting securities of the other party, (iii) form, join or in any
way participate, directly or indirectly, in a "group" (as such term is defined
by Section 13(d)(3) of the Exchange Act) with respect to any voting securities
of the other party, or (iv) otherwise act, alone or in concert with others,
directly or indirectly, to seek control of the management, board of directors or
policies of the other party. Notwithstanding the foregoing, the Confidentiality
Agreement provides that the foregoing restrictions as applied against a party
will terminate in the event that (a) any third party unaffiliated with such
party initiates a tender offer or exchange offer for the other party's common
stock, or (b) the other party enters into an agreement to merge with, or sell or
dispose of 50% or more of its assets or earning power, to any party not
affiliated with the other party.
THE MERGER AGREEMENT
The following is a summary of certain material provisions of the Merger
Agreement. This summary does not purport to be complete and is qualified in its
entirety by reference to the complete text of the Merger
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Agreement, a copy of which is filed as Exhibit 2 hereto and is incorporated
herein by reference. Capitalized terms used and not otherwise defined below
shall have the meaning set forth in the Merger Agreement.
The Offer. The Merger Agreement provides for the making of the Offer.
Pursuant to the Offer, each tendering stockholder will receive the Offer Price
for each Share tendered in the Offer. Purchaser's obligation to accept for
payment or pay for Shares is subject to the satisfaction of certain conditions
(see "Conditions to the Offer"). Pursuant to the Merger Agreement, Purchaser
expressly reserves the right to waive any of the conditions to the Offer (except
as otherwise provided in the Merger Agreement), and to make any change in the
terms or conditions of the Offer; provided that, without the written consent of
the Company, Purchaser may not (i) decrease the Offer Price, (ii) change the
form of consideration payable in the Offer, (iii) reduce the maximum number of
Shares to be purchased in the Offer, (iv) add additional conditions to the
Offer, (v) amend the conditions to the Offer set forth in Annex A to the Merger
Agreement to broaden their scope, (vi) amend any other term of the Offer in a
manner adverse to the holders of the Shares, (vii) extend the Offer except as
permitted by the terms of the Merger Agreement, or (viii) amend or waive the
Minimum Condition.
Notwithstanding the foregoing, Purchaser may, without the consent of the
Company Board, (i) from time to time extend the Offer if at the scheduled
Expiration Date any conditions of the Offer have not been satisfied or waived,
(ii) extend the Offer for any period required by any rule, regulation,
interpretation or position of the SEC applicable to the Offer or (iii) extend
the Offer for any reason on one or more occasions for an aggregate period of not
more than ten (10) business days beyond the latest Expiration Date that would
otherwise be permitted under clause (i) or (ii) of this sentence if, on such
Expiration Date, there have not been tendered at least 90% of the outstanding
Shares. In addition, if at the time of any scheduled Expiration Date any one or
more of the conditions to the Offer set forth on Annex A to the Merger Agreement
are not satisfied and none of the events set forth in paragraphs (a) through (f)
of Annex A to the Merger Agreement that would permit Purchaser not to accept
tendered Shares for payment has occurred and is continuing, then, provided that
such conditions are reasonably capable of being satisfied, Purchaser will extend
the Offer from time to time unless any such condition is no longer reasonably
capable of being satisfied or any such event has occurred. In no event, however,
will Purchaser be required to extend the Offer beyond January 31, 2000 (provided
that if on January 31, 2000 any applicable waiting period under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR
Act"), has not expired or terminated and none of the events set forth in
paragraphs (a) through (f) of Annex A to the Merger Agreement that would permit
Purchaser not to accept Shares tendered for payment has occurred and is
continuing, then such January 31, 2000 date will be automatically extended to
April 30, 2000).
Board Representation. Promptly upon the purchase by Purchaser of the Shares
pursuant to the Offer and if the Minimum Condition has been met, Parent will be
entitled to designate such number of directors, rounded up to the next whole
number, on the Company Board as is equal to the product of the total number of
directors on the Company Board (determined after giving effect to the directors
elected pursuant to this sentence) and the percentage that the aggregate number
of Shares so purchased bears to the total number of Shares then outstanding on a
fully diluted basis. Notwithstanding the foregoing, the Company will use its
best efforts to ensure that two of the members of the Company Board as of
October 13, 1999 (the "Continuing Directors") will remain members of the Company
Board until the effective time of the Merger (the "Effective Time"). If a
Continuing Director resigns from the Company Board, Parent, Purchaser and the
Company will permit the remaining Continuing Director or Directors to appoint
the resigning Director's successor who will be deemed to be a Continuing
Director. Following the election or appointment of Parent's designees to the
Company Board pursuant to the Merger Agreement and prior to the Effective Time,
if there are any Continuing Directors, any amendment of the Merger Agreement,
any termination of the Merger Agreement by the Company, any extension by the
Company of the time for the performance of any of the obligations or other acts
of Parent or Purchaser or any waiver of any of the Company's rights under the
Merger Agreement or any other determination with respect to any action to be
taken or not to be taken by the Company relating to the Merger Agreement, will
require the concurrence of a majority of such Continuing Directors. The
Company's obligation to appoint designees of Parent to the Company Board will be
subject to Section 14(f) of the Exchange Act and Rule 14f-1 promulgated
thereunder.
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<PAGE> 9
The Merger. As soon as practicable after the satisfaction or waiver of the
conditions to the Merger, Purchaser will be merged with and into the Company, as
a result of which the separate corporate existence of Purchaser will cease and
the Company will continue as the Surviving Corporation and a direct, wholly
owned subsidiary of Parent. The Effective Time will occur at the date and time
that a certificate of merger or a certificate of ownership and merger in such
form as is required by the DGCL (the "Certificate of Merger") is filed with the
Secretary of State of the State of Delaware, or such later time as Parent and
the Company may agree upon and as may be set forth in the Certificate of Merger.
The Surviving Corporation will continue its corporate existence under the laws
of the State of Delaware. The Certificate of Incorporation of Purchaser in
effect at the Effective Time will be the Certificate of Incorporation of the
Surviving Corporation. The bylaws of Purchaser in effect at the Effective Time
will be the bylaws of the Surviving Corporation. The directors of Purchaser at
the Effective Time will be the initial directors of the Surviving Corporation
until their successors are duly elected and qualified, and the officers of
Purchaser at the Effective Time will be the initial officers of the Surviving
Corporation until their successors are duly elected and qualified.
Consideration to be Paid in the Merger. In the Merger, each outstanding
Share (except for Excluded Shares) will be converted into the right to receive
the Offer Price, without interest thereon (the "Merger Consideration"). Each
share of common stock of Purchaser issued and outstanding immediately prior to
the Effective Time will be converted into one share of common stock of the
Surviving Corporation.
Options. At the Effective Time, each option to purchase Shares granted to
employees of the Company under the Company's 1995 Employee and Consultant Stock
Plan, 1996 Stock Option Plan, 1994 Employee and Consultant Stock Option Plan,
1998 Non-Qualified Stock Option Plan and 1996 Non-Statutory Employee and
Consultant Stock Option Plan, which are then outstanding and unexercised, will
be converted automatically into options to purchase shares of Parent Common
Stock and Parent will assume each such option plan, subject to the terms of the
applicable option plans. In each case, the number of shares of Parent Common
Stock purchasable upon exercise of an assumed option will be equal to the number
of Shares that were purchasable under such assumed option immediately prior to
the Effective Time multiplied by the Exchange Ratio (as defined below), and
rounded down to the nearest whole share. Further, the per share exercise price
under each such assumed option will be adjusted by dividing the per share
exercise price of each such assumed option by the Exchange Ratio, and rounding
up to the nearest cent. The terms of each assumed option will, in accordance
with its terms, be subject to further adjustment as appropriate to reflect any
stock split, stock dividend, recapitalization or other similar transaction with
respect to Parent Common Stock on or subsequent to the Effective Time. The
duration and other terms of the assumed options will be the same as the original
option except that all references to the Company will be deemed to be references
to Parent. The "Exchange Ratio" is equal to the ratio obtained by dividing the
Offer Price by the closing price of one share of Parent Common Stock on The
Nasdaq National Market on the trading day immediately preceding the Effective
Time.
Notwithstanding the foregoing, Parent and Purchaser agree that if Purchaser
accepts Shares for purchase in the Offer, Parent and Purchaser will not
terminate the Merger Agreement, and will not take any action that would allow
the Company to terminate the Merger Agreement, until Parent has offered the
holders of the Assumed Options the opportunity, after not less than five (5)
business days notice, to have such Assumed Options assumed by Parent. With
respect to any such assumption of Assumed Options, all references to the
Effective Time in the previous paragraph shall instead refer to the date of such
assumption.
By virtue of the execution of the Merger Agreement, options to purchase
Shares under the Company's 1995 Director Stock Option Plan became fully vested
and exercisable on October 13, 1999 and will remain exercisable until the
closing date of the Merger and, following such closing date, such options will
expire and terminate and be of no further force or effect. With respect to the
ESPP, the Offering Period (as defined in the ESPP) which is in effect as of
October 13, 1999 (or, if the closing of the Merger will occur during an Offering
Period which will have commenced following the Offering Period in effect as of
October 13, 1999, such subsequent Offering Period) will be shortened such that
the New Exercise Date (as defined in the ESPP) will be the closing date of the
Merger.
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<PAGE> 10
Representations and Warranties. The Merger Agreement contains
representations and warranties by the Company, on the one hand, and Parent and
Purchaser, on the other hand. The terms of a limited number of the Company's
representations and warranties provide that the Company will only be in breach
of the applicable representation or warranty if the breach has a "Material
Adverse Effect on the Company." Material Adverse Effect on the Company is
defined as any circumstance, change in, or effect on the Company and its
subsidiaries, taken as a whole, that is, or is reasonably likely in the
foreseeable future to be, materially adverse to the operations, financial
condition, earnings or results of operations, or the business (financial or
otherwise), of the Company and its subsidiaries, taken as a whole, provided that
none of the following shall be deemed, either alone or in combination, to
constitute a Material Adverse Effect on the Company: (i) a change in the market
price or trading volume of the Company Common Stock, (ii) conditions affecting
the wireless communications components industry as a whole, (iii) a failure by
the Company to meet internal earnings or revenue projections or the earnings or
revenue projections of equity analysts, provided that, except for delays or
disruptions in the fabrication of chips by the Company's major suppliers, this
clause (iii) does not exclude any underlying change, effect, event, occurrence,
state of facts or developments that resulted in such failure to meet such
projections; (iv) any disruption of customer or supplier relationships arising
out of or resulting from actions contemplated by the parties in connection with,
or which is attributable to, the execution and announcement of the Merger
Agreement or to the identity of Parent; or (v) the termination of the ASIC
Patent License Agreement dated as of October 3, 1995 by and between the Company
and Qualcomm Incorporated. The terms of a limited number of Parent's and
Purchaser's representations and warranties provide that Parent and the Company
will only be in breach of the applicable representation or warranty if the
breach has a "Material Adverse Effect on Parent." Material Adverse Effect on
Parent is defined in the Merger Agreement as any circumstance, change in or
effect on (or circumstance, change in, or effect involving a prospective change
in) Parent and its subsidiaries, taken as a whole, that materially and adversely
affects the ability of Parent and/or Purchaser to consummate the Offer or the
Merger.
The representations and warranties of the Company, on the one hand, and
Parent and Purchaser, on the other hand, include:
- due organization, existence and good standing (including, in the case of
the Company, its subsidiaries); qualification to do business (including,
in the case of the Company, its subsidiaries) except where the failure to
be so qualified would not have a Material Adverse Effect on the Company
or a Material Adverse Effect on Parent, as the case may be; and, in the
case of the Company, a true and complete listing of its equity
investments.
- corporate power and authority to enter into the Merger Agreement and
perform its obligations under the Merger Agreement and, in the case of
the Company, the Stock Option Agreement; proper execution, delivery and
enforceability of the Merger Agreement and, in the case of the Company,
the Stock Option Agreement.
- accuracy of the information about the Company in the proxy statement and
accuracy of the information about Parent and Purchaser in the Offer
documents and the proxy statement.
- governmental and third-party approvals and compliance of the Merger
Agreement and, in the case of the Company, the Stock Option Agreement,
with each party's charter documents, material agreements and applicable
law.
- absence of material legal proceedings and injunctions.
- absence of broker's fees arising from the transactions contemplated by
the Merger Agreement.
- in the case of Parent and Purchaser, that they will have the funds
necessary to acquire the Shares and that, as of October 13, 1999, neither
of them is the beneficial owner of any shares of Company Common Stock.
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<PAGE> 11
The Merger Agreement contains additional representations and warranties of
the Company. These include:
- capitalization of the Company and its subsidiaries.
- approval of the Offer, the Merger, the Merger Agreement and the Stock
Option Agreement by the Company Board.
- filings with the SEC and accuracy of financial statements.
- absence of existing defaults under its charter documents, material
agreements and applicable law.
- absence of undisclosed liabilities of the Company and its subsidiaries
(other than liabilities incurred after June 30, 1999 in the ordinary
course of business, consistent with past practice, no one or group of
which, taken together, constitutes a Material Adverse Effect on the
Company), and since June 30, 1999, no events, changes or effects with
respect to the Company or its subsidiaries that, individually or in the
aggregate, have had or reasonably would be expected to have, a Material
Adverse Effect on the Company.
- the Company's and its subsidiaries' possession of all material permits,
licenses, variances, exemptions, orders and approvals necessary for the
lawful conduct of their respective businesses and compliance with
applicable laws.
- employee benefit plans, labor, employment and related matters.
- no releases of hazardous material (except for those which, individually
on in the aggregate, would not have a Material Adverse Effect on the
Company) and no violations of environmental laws (except for those which,
individually on in the aggregate, would not have a Material Adverse
Effect on the Company).
- payment of taxes and filing of tax returns.
- intellectual property.
- "Year 2000" capability.
- foundry relationships.
- insurance.
- certain business practices.
- product warranties and guaranties.
- suppliers and customers.
- grants, incentives and subsidies.
No representations or warranties made by the Company, Parent or Purchaser
will survive beyond the Effective Time.
Conduct of Business Before the Merger. Each of the Company, Parent and
Purchaser has agreed to do certain things before the Merger occurs.
The Company has agreed to, and to cause each of its subsidiaries, to:
- conduct its operations in the ordinary course consistent with past
practice and, to the extent consistent therewith, with no less diligence
and effort than would be applied in the absence of the Merger Agreement.
- use all commercially reasonable efforts to preserve intact its business
organization.
- use all commercially reasonable efforts to keep available the services of
its current officers and employees.
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<PAGE> 12
- use all commercially reasonable efforts to preserve its relationships
with customers, suppliers, distributors, lessors, creditors, employees,
contractors and others having business dealings with it.
Parent and the Company have also agreed to:
- use all reasonable efforts to do all things reasonably necessary, proper
or advisable under Applicable Law to consummate and make effective the
transactions contemplated by the Merger Agreement, including the making
of required filings, the obtaining of consents of all third parties and
governmental authorities necessary or advisable to consummate the Merger,
contesting any legal proceedings relating to the Merger, and executing
any additional instruments necessary to consummate the transactions
contemplated by the Merger Agreement.
- consult and cooperate with one another, and consider in good faith the
views of one another, in connection with any analyses, appearances,
presentations, letters, white papers, memoranda, briefs, arguments,
opinions or proposals made or submitted by or on behalf of any party in
connection with proceedings under or relating to the HSR Act or any other
foreign, federal, or state antitrust, competition, or fair trade law.
- not issue any press release or make any other public statements without
the prior consent of the other party.
- promptly tell the other party about (a) any events or circumstances that
would cause or would be likely to cause any representations or warranties
to not be true or (b) any material failure to comply with or satisfy in
any material respect any covenant, condition or agreement to be complied
with or satisfied under the Merger Agreement.
Subject to certain agreed exceptions, the Company has agreed for itself and
on behalf of its subsidiaries not to:
- amend its charter documents.
- authorize for issuance, issue, sell, deliver or agree to issue any stock
of any class or any other securities or equity equivalents, except for
the issuance and sale of Shares pursuant to Company Stock Options
outstanding as of October 13, 1999.
- split, combine or reclassify any shares of its capital stock or declare,
set aside or pay any dividend or other distribution of any kind in
respect of its capital stock.
- adopt a plan of complete or partial liquidation, dissolution, merger or
other reorganization other than the Merger.
- alter any subsidiary's corporate structure or ownership.
- incur or assume any debt, except under existing lines of credit in the
ordinary course of business or amend the terms of any existing debt.
- become responsible for the obligations of any other person except for
third party guarantees and lease agreements not to exceed $500,000 in the
aggregate, and obligations of the Company's subsidiaries incurred in the
ordinary course of business consistent with past practice.
- make any loans to or investments in any other person, except to
subsidiaries and customary loans or advances to employees in the ordinary
course of business consistent with past practice.
- encumber its capital stock.
- mortgage or pledge any of its material assets or create or permit any
material lien on those assets.
- except as required by Applicable Law, enter into, adopt, amend or
terminate any employee compensation, benefit or similar plan or increase
any compensation or fringe benefits.
- grant any severance or termination pay, except as required by law or by
any written agreements existing on October 13, 1999.
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<PAGE> 13
- voluntarily accelerate the vesting of any stock options.
- sell, license or dispose of any material assets in any single transaction
or series of related transactions having a fair market value in excess of
$350,000 in the aggregate, except for sales of products and licenses of
software in the ordinary course of business consistent with past
practices.
- enter into any exclusive license, distribution, marketing, sales or other
agreements.
- license any source code to any third party other than with respect to
internal use in the ordinary course of business consistent with past
practices.
- except as required as a result of a change in law or in generally
accepted accounting principles, change any of its accounting principles,
practices or methods.
- revalue in any material respect any of its assets other than in the
ordinary course of business consistent with past practice or as required
by generally accepted accounting principles.
- acquire any other business or entity or any equity interest therein.
- enter into any material agreement.
- modify or waive any right under any material contracts.
- modify its standard product warranty terms or modify any existing product
warranties in any material and adverse manner.
- authorize any new or additional capital expenditure(s) that in the
aggregate are in excess of $50,000 per month.
- authorize any new or additional manufacturing capacity expenditure or
expenditures for any manufacturing capacity contracts or arrangements.
- acquire any other asset or related group of assets in a single
transaction or series of related transactions with a cost in excess of $1
million or permit all such acquisitions taken together to exceed $3
million.
- make any material tax election or settle or compromise any material
income tax liability.
- permit any insurance policy naming it as a beneficiary or loss payee to
expire, be canceled or be terminated, except if a comparable insurance
policy is obtained and in effect.
- fail to file any tax returns when due or fail to cause such tax returns
when filed to be complete and accurate in all material respects.
- fail to pay any taxes or other material debts when due.
- settle or compromise any legal proceeding that relates to the
transactions contemplated by the Merger Agreement, the settlement or
compromise of which involves more than $1,500,000 or would otherwise be
material to the Company, or relates to any intellectual property matters.
- take or fail to take any action that could reasonably be expected to
limit the use of any net operating losses, built-in losses, tax credits
or other similar items.
- take or fail to take any action that could reasonably be expected to
cause any transaction intended by the Company or its subsidiaries to be a
reorganization under Section 368(a) under the Code to fail to qualify as
such a reorganization.
- take or agree in writing or otherwise to take any of the actions
described above.
The Company also has agreed that it will:
- upon reasonable notice, provide Parent with reasonable access to the
Company's employees, plants, offices, warehouses and other facilities and
to all books and records and personnel files of current employees of the
Company and its subsidiaries as Parent may reasonably require, and cause
its officers and those of its subsidiaries to furnish Parent with such
financial and operating data and other
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<PAGE> 14
information with respect to the business and properties of the Company
and its subsidiaries as Parent may from time to time reasonably request.
- provide Parent with periodic financial information.
- provide Parent with reasonable access to the Company's employees to,
among other things, deliver offers of continued employment and provide
information to the employees about Parent.
Acquisition Proposals.
The term "Third Party Acquisition" is used herein to mean any of the
following:
- an acquisition of the Company by anyone other than Parent, Purchaser or
any of their affiliates (a "Third Party").
- the acquisition by a Third Party of any material portion (which includes
15% or more) of the assets of the Company and its subsidiaries, taken as
a whole, other than the sale of its products in the ordinary course of
business consistent with past practices.
- an acquisition by a Third Party of 15% or more of the outstanding Shares.
- the Company's adoption of a plan of liquidation or declaration or payment
of an extraordinary dividend.
- the Company's or any of its subsidiaries' repurchase of more than 15% of
the outstanding Shares.
- the Company's or any of its subsidiaries' acquisition of any interest or
investment in any business whose annual revenues, net income or assets is
equal to or greater than 15% of the annual revenues, net income or assets
of the Company.
The Company has agreed that it will:
- cease any discussions or negotiations with any other persons with respect
to any Third Party Acquisition.
- request each person that has executed a confidentiality agreement in
connection with its consideration of acquiring the Company or any of its
subsidiaries to return all confidential information heretofore furnished
to such person by or on behalf of the Company or any of its subsidiaries.
- not, directly or indirectly, encourage, solicit, participate in or
initiate discussions with, or provide any information to anyone except
Parent and Purchaser concerning, any Third Party Acquisition; provided,
however, that nothing herein shall prevent the Company Board from taking
and disclosing to the Company's stockholders a position contemplated by
Rules 14d-9 and 14e-2 promulgated under the Exchange Act with regard to
any tender or exchange offer.
- notify Parent if the Company or any of its subsidiaries or affiliates
receives any proposal or inquiry concerning a Third Party Acquisition.
- provide a copy of any written agreements, proposals, or other materials
the Company receives about a Third Party Acquisition.
- advise Parent from time to time of the status and any developments
concerning any Third Party Acquisition.
Except as described below, the Company Board will not withdraw or modify
its recommendation of the Offer or the Merger. It also may not approve,
recommend, cause or permit the Company to enter into any agreement or obligation
relating to any Third Party Acquisition. However, if the Company Board
determines in its good faith judgment, after consultation with and based upon
the advice of legal counsel, that its fiduciary duties require it to do so, the
Company Board may withdraw its recommendation of the Offer or the Merger or
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<PAGE> 15
approve or recommend any bona fide proposal to acquire, directly or indirectly,
solely for cash and/or securities, all Company Common Stock then outstanding, or
all or substantially all of the Company's assets:
- that is fully financed and contains terms that the Company Board by a
majority vote determines in good faith, based as to the financial terms
on the written advice of the Company's financial advisor or another
financial advisor of nationally recognized reputation, to be more
favorable to the Company's stockholders than the Merger; and
- that the Company Board by a majority vote determines in its good faith
judgment (following and based on consultation with the Company's
financial advisor or another financial advisor of nationally recognized
reputation and its legal or other advisers) to be reasonably capable of
being completed (taking into account all legal, financial, regulatory and
other aspects of the proposal and the person making the proposal); and
- that does not contain a "right of first refusal" or "right of first
offer" with respect to any counter-proposal that Parent may make; and
- that does not contain any financing or "due diligence" condition.
An offer that has all of these characteristics is sometimes referred to
herein as a "Superior Proposal."
The Company Board may only withdraw its recommendation of the Offer or the
Merger or approve or recommend any Superior Proposal (a) after providing written
notice to Parent advising Parent that the Company Board has received a Superior
Proposal, specifying the material terms and conditions and identifying the
person making the Superior Proposal, and (b) if Parent does not, within three
(3) business days of receipt of such proposal, make an offer that the Company
Board by a majority vote determines in good faith, based, as to the financial
terms, on the written advice of the Company's financial adviser or another
financial advisor of nationally recognized reputation, to be at least as
favorable to the Company stockholders as the Superior Proposal. If Parent fails
to make this offer, the Company may enter into an agreement with respect to the
Superior Proposal only if the Merger Agreement is concurrently terminated in
accordance with its terms and the Company has paid all amounts owing to Parent
as a result of such termination (as described below under "-- Termination of the
Merger Agreement -- Liquidated Damages and Expenses").
Conditions to the Merger. The obligation of each of the Company, Parent and
Purchaser to consummate the Merger is subject to the satisfaction of each of the
following conditions:
- the Merger Agreement has been approved and adopted by the requisite vote
of the Company's stockholders, if such vote is required by Applicable
Law.
- no law or order by any United States federal or state court or
governmental authority prohibits, restrains, enjoins or restricts the
Merger.
- all governmental or regulatory notices, approvals or other requirements
necessary to consummate the transactions contemplated by the Merger
Agreement and to operate the Company's business after the Effective Time
in all material respects as it was operated prior thereto (other than
under the HSR Act) shall have been given, obtained or complied with, as
applicable (other than under the HSR Act).
- the Proxy Statement, if required to be prepared and disseminated to the
Company's stockholders, shall have been cleared by the SEC and shall not
be the subject of any stop order.
The Company will not be required to complete the Merger unless:
- Parent's and Purchaser's representations and warranties in the Merger
Agreement are true and correct at and as of the Effective Time (except to
the extent that the aggregate of all breaches thereof would not have a
Material Adverse Effect on Parent).
- Parent and Purchaser shall have performed in all material respects each
of its covenants and obligations to be performed at or before the
Effective Time.
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<PAGE> 16
Parent and Purchaser will not be required to complete the Merger unless:
- the Company's representations and warranties in the Merger Agreement
shall be true and correct at and as of the Effective Time (except to the
extent that the aggregate of all breaches thereof would not have a
Material Adverse Effect on the Company).
- the Company shall have performed in all material respects each of its
covenants and obligations to be performed at or before the Effective
Time.
- since June 30, 1999, there have been no events, changes, or effects,
individually or in the aggregate, with respect to the Company or its
subsidiaries that constitute a Material Adverse Effect on the Company.
- in connection with complying with any applicable law (including the HSR
Act) or obtaining any requisite consent, Parent will not be (i) required,
or be construed to be required, to sell or divest any assets or business
or to restrict any business operations in order to obtain the consent or
successful termination of any review of any Governmental Entity regarding
the transactions contemplated by the Merger Agreement or (ii) prohibited
from owning, and no material limitation shall be imposed on Parent's
ownership of, any material portion of the Company's business or assets.
Assurances cannot be given that all of the conditions to completing the
Merger will be satisfied.
Termination. The Merger Agreement may be terminated and the Merger may be
abandoned at any time prior to the Effective Time, before or after it has been
approved by the Company's stockholders. This termination may occur in the
following ways:
- Parent, Purchaser and the Company mutually agree to terminate it.
- Parent and Purchaser, or the Company, decide to terminate it because:
1. any U.S. state or federal court or other U.S. governmental authority
has issued a non-appealable, final order restraining, enjoining or
otherwise prohibiting the Merger; or
2. the Merger is not completed by April 30, 2000 (provided that if the
January 31, 2000 date described below in "Conditions to the Offer" is
automatically extended, as described in such section, to April 30,
2000, then the April 30, 2000 date shall be automatically extended to
July 31, 2000) (as the case may be, the "Final Date"), unless the
failure to complete the Merger by that date is due to the failure of
the party seeking to terminate the Merger Agreement to perform its
obligations under the Merger Agreement.
- The Company decides to terminate it because:
1. Parent's and Purchaser's representations or warranties in the Merger
Agreement are breached or are untrue such that the conditions to the
Company's obligation to complete the Merger would be incapable of being
satisfied by the Final Date, so long as the Company has not breached
its own obligations under the Merger Agreement in any material respect;
2. Parent or Purchaser fails to perform its agreements in the Merger
Agreement, and this failure has a Material Adverse Effect on Parent or
materially adversely affects (or materially delays) the ability of the
Company to consummate the Merger, and Parent and Purchaser, as the case
may be, has not cured such breach within five (5) business days after
notice by the Company thereof and provided that the Company has not
breached its own obligations under the Merger Agreement in any material
respect;
3. the Company Board has received a Superior Proposal and responded in a
way that permitted termination of the Merger Agreement, including the
payment of liquidated damages and expenses to Parent; or
4. Purchaser shall have failed to commence the Offer within five business
days following the date of the initial public announcement of the Offer
or if, by the date described below in "Certain
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<PAGE> 17
Conditions of the Offer," Purchaser shall have terminated the Offer;
provided that the Company has not breached its own obligations under
the Merger Agreement in any material respect that in any manner shall
have proximately contributed in any material respect to the foregoing
failure.
- Parent or Purchaser decides to terminate it because:
1. the Company's representations or warranties in the Merger Agreement are
breached or are untrue such that the conditions to Parent's and
Purchaser's obligations to complete the Merger would be incapable of
being satisfied by the Final Date, so long as neither Parent nor
Purchaser has breached its own obligations under the Merger Agreement
in any material respect;
2. the Company fails to perform its agreements in the Merger Agreement,
and this failure has a Material Adverse Effect on the Company or
materially adversely affects (or materially delays) the ability of
Purchaser to consummate the Offer or the ability of Parent, Purchaser
or the Company to consummate the Merger, and the Company has not cured
such breach within five (5) business days after notice by Parent or
Purchaser thereof and provided that neither Parent nor Purchaser has
breached its own obligations under the Merger Agreement in any material
respect;
3. the Company Board has recommended a Superior Proposal to the Company's
stockholders;
4. the Company Board has withdrawn or adversely modified its approval or
recommendation of the Merger Agreement, the Offer or the Merger;
5. at any time after the date on which Purchaser has accepted Shares for
payment pursuant to the Offer, the Company Board has stopped using all
reasonable efforts to hold a stockholders' meeting to vote on the
Merger; or
6. due to an occurrence, that if occurring after the commencement of the
Offer would result in a failure to satisfy any of the conditions
described below in "Certain Conditions of the Offer," Purchaser shall
have failed to commence the Offer within five (5) business days
following the date of the initial public announcement of the Offer, or
Purchaser has terminated the Offer in accordance with the provisions
described below in "Certain Conditions of the Offer"; provided that
neither Parent nor Purchaser has breached its own obligations under the
Merger Agreement in any material respect that in any manner shall have
proximately contributed in any material respect to the failure to
commence or termination of the Offer.
Effect of Termination. Upon termination, the Merger Agreement becomes void
provided that the confidentiality and fees and expenses provisions remain in
effect. Also, termination will not relieve either party from liability for any
intentional breach by it of any covenant in the Merger Agreement before it was
terminated. No representations or warranties made by the Company, Parent or
Purchaser shall survive beyond a termination of the Merger Agreement.
Liquidated Damages and Expenses. The Company has agreed to pay Parent $45
million as liquidated damages if the Merger Agreement is terminated as follows:
- It is terminated by the Company because the Company Board received a
Superior Proposal and responded in a way that permitted its termination.
- It is terminated by Parent and Purchaser because the Company Board
recommended to the Company's stockholders a Superior Proposal or the
Company Board withdrew or adversely modified its approval or
recommendation of the Merger Agreement, the Offer or the Merger.
- It is terminated by Parent and Purchaser because of a failure by the
Company to perform its agreements in the Merger Agreement which entitles
Parent and Purchaser to terminate the Merger Agreement, and either (a) at
the time of such termination, an offer by a third party to consummate a
Company Acquisition (as defined below) is outstanding or has been
publicly announced (and not withdrawn), and such Company Acquisition
occurs, or (b) within six (6) months of termination, the Company enters
into an agreement with respect to a Company Acquisition or the Company
publicly announces a plan or proposal with respect to a Company
Acquisition and that Company Acquisition
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<PAGE> 18
having a per share valuation at the time of announcement that is more
favorable to the Company's stockholders than the Merger occurs. As used
herein, a "Company Acquisition" means the occurrence of any of the
following events: (i) the acquisition by a Third Party of fifty percent
(50%) or more of the assets of the Company and its subsidiaries, taken as
a whole; (ii) the acquisition by a Third Party of fifty percent (50%) or
more of the outstanding Shares or any securities convertible into or
exchangeable for Shares that would constitute fifty percent (50%) or more
of the outstanding Shares upon such conversion or exchange, or any
combination of the foregoing; (iii) the acquisition by the Company of the
assets or stock of a Third Party if, as a result of which, the
outstanding Shares of the Company immediately prior thereto are increased
by one hundred percent (100%) or more, or (iv) the merger, consolidation
or business combination of the Company with or into a Third Party, where,
following such merger, consolidation or business combination, the
stockholders of the Company immediately prior to such transaction do not
hold, immediately after such transaction, securities of the surviving
entity constituting more than fifty percent (50%) of the total voting
power of the surviving entity.
- It is terminated by Parent and Purchaser due to the Minimum Condition not
being satisfied which entitles Parent or Purchaser to terminate the
Merger Agreement, and either (a) at the time of such termination, an
offer by a Third Party to consummate a Company Acquisition is outstanding
or has been publicly announced (and not withdrawn), and such Company
Acquisition occurs, or (b) within six (6) months of termination of the
Merger Agreement, the Company enters into an agreement with respect to a
Company Acquisition or the Company publicly announces a plan or proposal
with respect to a Company Acquisition and that Company Acquisition having
a per share valuation at the time of announcement that is more favorable
to the Company's stockholders than the Merger occurs.
In addition, the Company has agreed to pay Parent up to $5 million as
reimbursement of its fees and expenses if the Merger Agreement is terminated as
follows:
- It is terminated by Parent and Purchaser due to a failure to satisfy any
of the conditions described below in "Conditions to the Offer" under
circumstances where the termination fee is payable.
- It is terminated by the Company because the Company Board received a
Superior Proposal and responded in a way that permitted its termination.
- It is terminated by Parent and Purchaser because the Company's
representations or warranties in the Merger Agreement are untrue as of
October 13, 1999 such that the conditions to Parent's and Purchaser's
obligations to complete the Merger could not be satisfied by the Final
Date, so long as neither Parent nor Purchaser has breached its own
obligations under the Merger Agreement in any material respect.
- It is terminated by Parent and Purchaser because the Company fails to
perform its agreements in the Merger Agreement, and this failure has a
Material Adverse Effect on the Company or materially adversely affects
(or materially delays) the ability of Purchaser to consummate the Offer
or the ability of Parent, Purchaser or the Company to consummate the
Merger, and the Company has not cured such breach within five (5)
business days after notice by Parent or Purchaser thereof and provided
that neither Parent nor Purchaser has breached its own obligations under
the Merger Agreement in any material respect
- It is terminated by Parent and Purchaser because the Company Board
recommended to the Company's stockholders a Superior Proposal.
- It is terminated by Parent and Purchaser because the Company Board has
withdrawn or adversely modified its approval or recommendation of the
Offer or the Merger.
Further, Parent has agreed to pay the Company up to $5 million as
reimbursement of its fees and expenses if the Merger Agreement is terminated by
the Company because:
- Parent's and Purchaser's representations or warranties in the Merger
Agreement are untrue such that the conditions to the Company's obligation
to complete the Merger could not be satisfied by the Final
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Date, so long as the Company has not breached its own obligations under
the Merger Agreement in any material respect.
- Parent or Purchaser fails to perform its agreements in the Merger
Agreement, and this failure has a Material Adverse Effect on Parent or
materially adversely affects (or materially delays) the ability of the
Company to consummate the Merger, and Parent or Purchaser, as the case
may be, has not cured such breach within five (5) business days after
notice by the Company thereof and provided that the Company has not
breached its own obligations under the Merger Agreement in any material
respect.
If a request for expense reimbursement exceeds $2.5 million, the requesting
party will accompany such request with invoices or other reasonable evidence of
its payment of such expenses. Except as described above, whether or not the
Merger occurs, the parties to the Merger Agreement have agreed to pay their own
fees and expenses incurred in connection with the Merger Agreement.
Extension and Waiver. At any time prior to the Effective Time, Parent,
Purchaser and the Company may agree to:
- extend the time for the performance of any of the obligations or other
acts of the other party.
- waive any inaccuracies in the other's representations and warranties.
- waive the other's compliance with any of the agreements or conditions in
the Merger Agreement.
Amendment. The Merger Agreement may be amended, modified and supplemented
in any and all respects by the parties at any time before or after the Company's
stockholders approve the Merger. However, any change which by law requires the
approval of the Company's stockholders will require their subsequent approval to
be effective.
MISCELLANEOUS
The Merger Agreement provides that in connection with the compliance by
Parent or Purchaser with any applicable law (including the HSR Act) or obtaining
the consent or approval of any governmental entity whose consent or approval may
be required to consummate the transactions contemplated by the Merger Agreement,
Parent will not be (i) required, or be construed to be required, to sell or
divest any assets or business or to restrict any business operations in order to
obtain the consent or successful termination of any review of any such
governmental entity regarding the transactions contemplated by the Merger
Agreement or (ii) prohibited from owning, and no material limitation shall be
imposed on Parent's ownership of, any material portion of the Company's business
or assets.
CONDITIONS TO THE OFFER
Notwithstanding any other provision of the Offer or the Merger Agreement,
and subject to any applicable rules and regulations of the SEC, including Rule
14e-1(c) relating to Purchaser's obligation to pay for or return tendered shares
after termination of the Offer, Purchaser is not required to accept for payment
or pay for any Shares tendered pursuant to the Offer, may delay the acceptance
for payment of any Shares or extend the Offer one or more times in accordance
with the Merger Agreement and may terminate the Offer at any time after January
31, 2000 (provided that if on January 31, 2000 the condition set forth in clause
(ii) below regarding the HSR Act is not satisfied and none of the events set
forth in paragraphs (a) through (f) below has occurred and is continuing, then
such January 31, 2000 date shall be automatically extended to April 30, 2000) if
(i) less than a majority of the outstanding Shares on a fully-diluted basis
(including for purposes of such calculation all Shares issuable upon exercise of
all vested Company Stock Options and unvested Company Stock Options that vest
prior to the Final Date, but excluding any Shares held by the Company or any of
its subsidiaries) has been tendered pursuant to the Offer (the "Minimum
Condition") by the expiration of the Offer and not withdrawn; (ii) any
applicable waiting period under the HSR Act has not expired or terminated; (iii)
all necessary consents and approvals from the Office of the Chief Scientist of
the Israeli Ministry of Trade and Industry and the Investment Center of the
Ministry of Finance of the State of Israel and any other foreign Governmental
Entities shall not have been obtained; or (iv) at any time after
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October 13, 1999, and before acceptance for payment of any Shares, any of the
following events shall occur and be continuing:
(a) there shall have been any action (other than a second request by
the appropriate Governmental Entity with jurisdiction under the HSR Act)
taken, or any statute, rule, regulation, judgment, order or injunction
promulgated, entered, enforced, enacted, issued or deemed applicable to the
Offer or the Merger by any domestic or foreign court or other Governmental
Entity which directly or indirectly (i) prohibits, or makes illegal, the
acceptance for payment, payment for or purchase of Shares or the
consummation of the Offer, the Merger or the other transactions
contemplated by the Merger Agreement, (ii) renders Purchaser unable to
accept for payment, pay for or purchase some or all of the Shares, (iii)
imposes material limitations on the ability of Parent effectively to
exercise full rights of ownership of the Shares, including the right to
vote the Shares purchased by it on all matters properly presented to the
Company's stockholders, or (iv) otherwise has a Material Adverse Effect on
the Company;
(b) (i) the representations and warranties of the Company contained in
the Merger Agreement shall not be true and correct (except to the extent
that the aggregate of all breaches thereof would not have a Material
Adverse Effect on the Company) as of October 13, 1999 and as of the
consummation of the Offer with the same effect as if made at and as of the
consummation of the Offer (except to the extent such representations
specifically relate to an earlier date, in which case such representations
shall be true and correct as of such earlier date, and in any event,
subject to the foregoing Material Adverse Effect qualification), (ii) the
Company shall have failed to perform in all material respects its covenants
and obligations contained in the Merger Agreement (other than the covenants
that require the Company to either notify Parent of any actual or potential
breach of its representations or warranties or breach of any of its
agreements under the Merger Agreement or to amend the Company Disclosure
Schedule), or (iii) there shall have occurred since September 30, 1999 any
events or changes that constitute a Material Adverse Effect on the Company;
(c) it shall have been publicly disclosed or Parent shall have
otherwise learned that (i) any person or "group" (as defined in Section
13(d)(3) of the Exchange Act) shall have acquired or entered into a
definitive agreement or agreement in principle to acquire beneficial
ownership of more than 20% of the Shares or any other class of capital
stock of the Company, through the acquisition of stock, the formation of a
group or otherwise, or shall have been granted any option, right or
warrant, conditional or otherwise, to acquire beneficial ownership of more
than 20% of the Shares and (ii) such person or group shall not have
tendered such Shares pursuant to the Offer;
(d) the Company Board shall have withdrawn, or modified or changed in
a manner adverse to Parent and Purchaser (including by amendment of the
Schedule 14D-9), its recommendation of the Offer, the Merger Agreement or
the Merger, or recommended another proposal or offer, or the Company Board
shall have resolved to do any of the foregoing;
(e) the Merger Agreement shall have terminated in accordance with its
terms; or
(f) there shall have occurred (i) any general suspension of trading
in, or limitation on prices for, securities on The New York Stock Exchange
(the "NYSE") or The Nasdaq National Market, for a period in excess of
twenty-four (24) hours (excluding suspensions or limitations resulting
solely from physical damage or interference with such exchanges not related
to market conditions), (ii) the commencement of a war, armed hostilities or
other national or international calamity directly or indirectly involving
the United States that constitutes a Material Adverse Effect on the Company
or materially adversely affects or delays the consummation of the Offer,
(iii) the average of the closing prices of the Standard & Poor's 500 Index
for any twenty (20) consecutive trading days shall be twenty-five percent
(25%) or more below the closing price of such index on any trading day on
or after the date hereof that precedes the commencement of such 20 trading
day period, (iv) a declaration of a banking moratorium or any suspension of
payments in respect of banks in the United States (whether or not
mandatory), or (v) in the case of any of the foregoing existing at the time
of the commencement of the Offer, a material acceleration or worsening
thereof; which in the good faith judgment of Parent, in any
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<PAGE> 21
such case, and regardless of the circumstances (including any action or
inaction by Parent) giving rise to such condition makes it inadvisable to
proceed with the Offer or the acceptance for payment of or payment for the
Shares.
The foregoing conditions (other than the Minimum Condition) are for the
sole benefit of Parent and Purchaser and, subject to the Merger Agreement, may
be waived by Parent and Purchaser, in whole or in part at any time and from time
to time, in the sole discretion of Parent and Purchaser. The failure by Parent
and Purchaser at any time to exercise any of the foregoing rights shall not be
deemed a waiver of any such right and each such right shall be deemed an ongoing
right which may be asserted at any time and from time to time.
TENDER AND VOTING AGREEMENT
General. As a condition and inducement to Parent's entering into the Merger
Agreement and incurring the liabilities therein, Mr. Gilo and Dr. Perl (each, a
"Stockholder"), concurrently with the execution of the Merger Agreement, entered
into a Tender and Voting Agreement and Irrevocable Proxy (each, the "Tender
Agreement") with Parent and Purchaser, with respect to all of the Shares owned
by such Stockholder. The Tender Agreements signed by Mr. Gilo and Dr. Perl,
respectively, are substantially identical. The following is a summary of the
material provisions of the Tender Agreements. This summary does not purport to
be complete and is qualified in its entirety by reference to the complete text
of the Tender Agreements, copies of which are filed, respectively, as Exhibits 4
and 5, hereto and are incorporated herein by reference. Capitalized terms not
otherwise defined below shall have the meanings set forth in the Tender
Agreements.
Tender of Shares. Pursuant to the Tender Agreement, each Stockholder has
agreed to tender into the Offer, no later than ten (10) business days following
the commencement of the Offer, all Shares beneficially owned by him. Purchaser's
obligation to accept for payment and pay for such Shares is subject to the terms
and conditions of the Offer.
Voting of Shares. Pursuant to the Tender Agreement, each Stockholder has
agreed to vote his Shares in connection with any meeting of the Company's
stockholders, or in connection with any written consent of the Company's
stockholders, (i) in favor of approval of the Merger Agreement and any actions
required in furtherance of the transactions contemplated thereby, including
without limitation voting such shares in favor of the election to the Company
Board of each person designated by Parent for nomination thereto pursuant to the
terms of the Merger Agreement at any meeting of the Company's stockholders
called for the election of directors; (ii) against any action or agreement that
would result in a breach in any respect of any covenant, representation or
warranty or any other obligation or agreement of the Company under the Merger
Agreement; and (iii) except as otherwise agreed to in writing in advance by
Parent, against: (A) any Third Party Acquisition, (B) any change in a majority
of the individuals who, as of October 13, 1999, constitute the Board of
Directors of the Company (except as otherwise contemplated by the Merger
Agreement), (C) any extraordinary corporate transaction, such as a merger,
consolidation or other business combination involving the Company or any of its
subsidiaries and any Third Party, (D) a sale, lease, transfer or disposition of
any assets of the Company's or any of its subsidiaries' business outside the
ordinary course of business, or any assets which are material to its business
whether or not in the ordinary course of business, or a reorganization,
recapitalization, dissolution or liquidation of the Company or any of its
subsidiaries, (E) any change in the present capitalization of the Company or any
amendment of the Company's Certificate of Incorporation or bylaws, (F) any other
material change in the Company's corporate structure or affecting its business,
or (G) any other action which is intended, or could reasonably be expected, to
impede, interfere with, delay, postpone or materially adversely affect the
Offer, the Merger or any of the other transactions contemplated by the Merger
Agreement or the Stock Option Agreement, or any of the transactions contemplated
by the Tender Agreement.
Grant of Proxy. In addition, each Stockholder has granted Purchaser an
irrevocable proxy to vote at any meeting (and any adjournment or postponement
thereof) of the Company's stockholders called for purposes of considering
whether to approve the Merger Agreement, the Merger or any of the other
transactions contemplated by the Merger Agreement, or any Third Party
Acquisition, or to execute a written consent of
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<PAGE> 22
stockholders in lieu of any such meeting, all Shares beneficially owned by such
Stockholder as of the date of such meeting or written consent in favor of the
approval of the Merger Agreement, the Merger and the other transactions
contemplated by the Merger Agreement, or against a Third Party Acquisition, as
the case may be.
Restrictions on Transfer. During the term of the Tender Agreement, each
Stockholder has agreed that he will not, directly or indirectly (i) except as
expressly contemplated by the Tender Agreement, offer for sale, sell, transfer,
tender, pledge, encumber, assign or otherwise dispose of, or enter into any
contract, option or other arrangement or understanding with respect to or
consent to the offer for sale, sale, transfer, tender, pledge, encumbrance,
assignment or other disposition of, any or all of the Shares or any interest
therein; (ii) grant any proxies or powers of attorney or deposit any Shares into
a voting trust or enter into a voting agreement with respect to any Shares; or
(iii) take any action that would make any representation or warranty of such
Stockholder contained in the Tender Agreement untrue or incorrect or have the
effect of preventing or disabling such Stockholder from performing any of such
Stockholder's obligations under the Tender Agreement. The Tender Agreement does
permit each Stockholder to transfer his Shares to any family member, certain
entities owned by or formed for the benefit of such Stockholder or his family
members, and certain successors to such Stockholder; provided, that in the case
of any such transfer, the transferee executes an agreement to be bound by the
terms of the Tender Agreement, or terms substantially identical thereto. In
addition, each Stockholder has agreed not to enter into any agreement or
understanding with any person the effect of which would be inconsistent or
violative of the provisions and agreements contained in the Tender Agreement.
No Solicitation. Each Stockholder has also agreed that he will immediately
cease any discussions or negotiations with any other persons with respect to any
Third Party Acquisition. Pursuant to the Tender Agreement, neither Stockholder
may, directly or indirectly, encourage, solicit, participate in or initiate
discussions or negotiations with or provide any information to any person or
group (other than Parent and Purchaser) concerning any Third Party Acquisition.
Each Stockholder will promptly (i) notify Parent in the event such Stockholder
receives any proposal or inquiry concerning a Third Party Acquisition, including
the terms and conditions thereof and the identity of the party submitting such
proposal, and any request for confidential information in connection with a
potential Third Party Acquisition, (ii) provide a copy of any written
agreements, proposals or other materials the Stockholder receives from any such
person or group, and (iii) advise Parent from time to time of the status, at any
time upon Parent's request, and promptly following any developments concerning a
potential Third Party Acquisition.
Director Matters Excluded. In the Tender Agreement, Parent and Purchaser
have each acknowledged and agreed that no provision thereof limits or otherwise
restricts each Stockholder with respect to any act or omission that such
Stockholder may undertake or authorize in his capacity as a director of the
Company, including, without limitation, any vote that such Stockholder may make
as a director of the Company with respect to any matter presented to the Company
Board.
Termination. The Tender Agreement, and all rights and obligations of the
parties thereunder, terminates upon the earlier of (a) the date on which the
Merger Agreement is terminated in accordance with its terms, (b) the date Shares
are accepted for payment by Purchaser pursuant to the Offer, and (c) July 31,
2000.
STOCK OPTION AGREEMENT
General. As a condition and inducement to Parent's entering into the Merger
Agreement and incurring the liabilities therein, the Company, concurrently with
the execution of the Merger Agreement, entered into a Stock Option Agreement
(the "Stock Option Agreement") with Parent. The following is a summary of the
material provisions of the Stock Option Agreement. This summary does not purport
to be complete and is qualified in its entirety by reference to the complete
text of the Stock Option Agreement, a copy of which is filed as Exhibit 3 hereto
and is incorporated herein by reference. Capitalized terms not otherwise defined
below shall have the meanings set forth in the Stock Option Agreement.
Option Grant. Pursuant to the Stock Option Agreement, the Company granted
Parent an irrevocable option to purchase 8,000,000 Shares (the "Option Shares")
at an exercise price of $36.00 per Share ("Option Price"), subject to adjustment
as provided for therein.
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<PAGE> 23
Exercise of Option. Parent may exercise the Option, in whole or in part, at
any time or from time to time on or after the occurrence of a Triggering Event
(as defined below). If Parent wishes to exercise the Option at such time as the
Option is exercisable and has not terminated, Parent is required to deliver
written notice (the "Exercise Notice") to the Company specifying Parent's
intention to exercise the Option, the total number of Option Shares it wishes to
purchase and a date and time for the closing of such purchase (an "Option
Closing"), which date will not be less than two (2) nor more than thirty (30)
business days after the later of (i) the date such Exercise Notice is given and
(ii) the expiration or termination of any applicable waiting period under the
HSR Act.
As used in the Stock Option Agreement, the term "Triggering Event" means
the earlier to occur of (i) the time immediately prior to the occurrence of any
of the events (or series of events) specified in the Merger Agreement giving
rise to the obligation of the Company to pay the Termination Fee, and (ii) the
date on which Purchaser has accepted for payment the Shares pursuant to the
Offer; provided, however, that clause (ii) of this sentence shall only
constitute a Triggering Event if the number of Option Shares plus the number of
Shares tendered pursuant to the Offer will, upon issuance of the Option Shares,
equal at least ninety percent (90%) of the issued and outstanding shares of
Company Common Stock.
Certain Conditions. The obligation of the Company to issue Option Shares
under the Stock Option Agreement upon the exercise of the Option is subject to
the satisfaction or waiver of the following conditions: (a) any waiting periods
applicable to the acquisition of the Option Shares by Parent pursuant to the
Stock Option Agreement under the HSR Act and any material foreign competition
laws shall have expired or been terminated; and (b) no statute, rule or
regulation shall be in effect, and no order, decree or injunction entered by any
court of competent jurisdiction or governmental entity in the United States
shall be in effect that prohibits the exercise of the Option or acquisition or
issuance of Option Shares pursuant to the Stock Option Agreement.
Adjustments Upon Changes in Capitalization. In the event of any change in
the number of issued and outstanding shares of Company Common Stock by reason of
any stock dividend, stock split, recapitalization, merger, rights offering,
share exchange or other change in the corporate or capital structure of the
Company, Parent shall receive, upon exercise of the Option, the stock or other
securities, cash or property to which Parent would have been entitled if Parent
had exercised the Option and had been a holder of record of shares of Company
Common Stock on the record date fixed for determination of holders of shares of
Company Common Stock entitled to receive such stock or other securities, cash or
property at the same aggregate price as the aggregate Option Price of the Option
Shares.
Cancellation Amount. If, subsequent to a Triggering Event and prior to the
Expiration Date, any Third Party shall have acquired fifty percent (50%) or more
of the then outstanding shares of the Company Common Stock (a "Share
Acquisition"), or the Company shall have entered into a written definitive
agreement with any Third Party providing for a Company Acquisition (as defined
below), then Parent, in lieu of exercising the Option, has the right at any time
thereafter (for so long as the Option is exercisable) to request in writing that
the Company pay, and promptly (but in any event not more than twenty (20)
business days) after the giving by Parent of such request, the Company shall pay
to Parent, in cancellation of the Option, an amount in cash (the "Cancellation
Amount") equal to:
(1) the excess over $36 of the greater of (A) the last sale price of a
share of Company Common Stock as reported on the NYSE on the last trading
day prior to the date of the Exercise Notice, and (B)(I) the highest price
per share of Company Common Stock offered to be paid or paid by any Third
Party pursuant to or in connection with such Share Acquisition or Company
Acquisition or (II) if such Company Acquisition consists of a purchase and
sale of assets, the sum of (a) the aggregate consideration offered to be
paid or paid in any transaction or proposed transaction in connection with
a Company Acquisition and (b) the amount of cash receivable by the Company
upon the exercise or conversion of outstanding in-the-money options,
warrants, rights or convertible securities, divided by the sum of (x) the
number of shares of Company Common Stock then outstanding plus (y) the
number of shares issuable upon exercise or conversion of outstanding
in-the-money options, warrants, rights or convertible securities,
multiplied by
(2) the number of Option Shares then covered by the Option.
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<PAGE> 24
Profit Limitation. Notwithstanding anything to the contrary contained in
the Stock Option Agreement, (1) Parent's Total Payment (as defined below), if
any, which Parent may derive under the Stock Option Agreement will in no event
exceed $55 million and Parent will pay any excess over such amount to the
Company and (2) the Option may not be exercised for a number of Shares as would,
as of the date of exercise, result in a Notional Total Payment (as defined
below), together with the actual Total Payment immediately preceding such
exercise, exceeding $55 million. The term "Total Payment" means the sum (before
taxes) of the following: (i) any Cancellation Amount received by Parent pursuant
to the Stock Option Agreement, (ii)(x) the net cash amounts received by Parent
pursuant to the sales, within twelve (12) months following exercise of the
Option, of Option Shares (or any other securities into which such Option Shares
shall be converted or exchanged) to any unaffiliated party, less (y) the
aggregate Option Price for such shares, (iii) any amounts received by Parent
upon transfer of the Option (or any portion thereof) to any unaffiliated party,
and (iv) the termination fee actually received by Parent pursuant to the Merger
Agreement. The term "Notional Total Payment" means, with respect to any number
of Option Shares as to which Parent may propose to exercise the Option, the
Total Payment determined as of the date of such proposed exercise assuming that
the Option were exercised on such date for such number of Shares held by Parent
as of such date and were sold for cash at the closing market price for the
Company Common Stock as of the close of business on the preceding trading day
(less customary brokerage commissions).
As used in the Stock Option Agreement, "Company Acquisition" means the
occurrence of any of the following events: (i) the acquisition by a Third Party
of fifty percent (50%) or more of the assets of the Company and its subsidiaries
taken as a whole; (ii) the acquisition by a Third Party of fifty percent (50%)
or more of the outstanding shares of the Company Common Stock or any securities
convertible into or exchangeable or exercisable for shares of the Company Common
Stock that would constitute fifty percent (50%) or more of the outstanding
shares upon such conversion or exchange or exercise, or any combination of the
foregoing; (iii) the acquisition by the Company of the assets or stock of a
Third Party if, as a result of which the outstanding shares of Company Common
Stock immediately prior thereto are increased by one hundred percent (100%) or
more; or (iv) the merger, consolidation or business combination of the Company
with or into a Third Party, where, following such merger, consolidation or
business combination, the stockholders of the Company immediately prior to such
transaction do not hold, immediately after such transaction, securities of the
surviving entity constituting more than fifty percent (50%) of the total voting
power of the surviving entity.
Expiration. The Option shall expire at the earlier of (y) the Effective
Time and (z) upon termination of the Merger Agreement in accordance with its
terms unless Parent has the right, or has the possibility of obtaining the
right, to receive a termination fee pursuant to the Merger Agreement, in which
case the Option will not terminate until the later of (A) five (5) business days
following the time such termination fee becomes unconditionally payable and (B)
the expiration of the period in which Parent has such right to receive such
termination fee (such expiration date is referred to as the "Expiration Date").
Registration Rights. Parent may, by written notice (a "Registration
Notice"), request at any time or from time to time within two (2) years
following a Triggering Event (the "Registration Period"), in order to permit the
sale, transfer or other disposition of the Option Shares that have been acquired
by or are issuable to Parent upon exercise of the Option ("Registrable
Securities"), that the Company register under the Securities Act of 1933, as
amended (the "Act"), the offering, sale and delivery, or other transfer or
disposition, of the Registrable Securities by Parent. Any such Registration
Notice must relate to a number of Registrable Securities equal to at least
twenty percent (20%) of the Option Shares, unless the remaining number of
Registrable Securities is less than such amount, in which case Parent will be
entitled to exercise its rights hereunder but only for all of the remaining
Registrable Securities (a "Permitted Offering"). Parent's registration rights
under the Stock Option Agreement terminate at such time as Parent shall be
entitled to sell all of the remaining Registrable Securities pursuant to Rule
144(k) under the Act. The Company is required to use all reasonable efforts to
qualify any Registrable Securities Parent desires to sell or otherwise dispose
of under applicable state securities or "blue sky" laws; provided, however, that
the Company is not required to qualify to do business, consent to general
service of process or submit to taxation in any jurisdiction by reason
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<PAGE> 25
of this provision. Without Parent's prior written consent (which may be withheld
in its sole discretion), no other securities are permitted to be included in any
such registration.
The Company is required to use all reasonable efforts to cause each such
registration statement to become effective as promptly as possible, to obtain
all consents or waivers of other persons that are required therefor and to keep
such registration statement effective for a period of at least ninety (90) days
from the day such registration statement first becomes effective. The
obligations of the Company pursuant to the Stock Option Agreement to file a
registration statement and to maintain its effectiveness may be suspended for
one or more periods not exceeding ninety (90) days in the aggregate if the
Company Board determines in good faith that the filing of such registration
statement or the maintenance of its effectiveness would require disclosure of
nonpublic information that would materially and adversely affect the Company, or
the Company is required under the Act to include audited financial statements
for any period in such registration statement and such financial statements are
not yet available for inclusion in such registration statement. Parent shall be
entitled to make up to two (2) demand requests for registration of Options
Shares under the Stock Option Agreement. For purposes of determining whether the
two (2) demand requests have been made, only requests relating to a registration
statement that has become effective under the Act will be counted.
If, during the Registration Period, the Company shall propose to register
under the Act the offering, sale and delivery of Company Common Stock for cash
for its own account or for any other stockholder of the Company pursuant to a
firm commitment underwriting, the Company is required to, in addition to its
other obligations under the Stock Option Agreement, allow Parent the right to
participate in such registration so long as Parent participates in such
underwriting on terms reasonably satisfactory to the managing underwriters of
such offering; provided, however, that, if the managing underwriter of such
offering advises the Company in writing that in its opinion the number of shares
of Company Common Stock requested to be included in such registration exceeds
the number that it would be in the best interests of the Company to sell in such
offering, the Company will, after fully including therein all shares of Company
Common Stock to be sold by the Company, include the shares of Company Common
Stock requested to be included therein by Parent pro rata (based on the number
of shares of Company Common Stock requested to be included therein) with the
shares of Company Common Stock requested to be included therein by persons other
than the Company and persons to whom the Company owes a contractual obligation
(other than any director, officer or employee of the Company to the extent any
such person is not currently owed such contractual obligation).
The expenses associated with the preparation and filing of any registration
statement filed in connection with Parent's exercise of its registration rights
under the Stock Option Agreement and any sale covered thereby (including any
fees related to blue sky qualifications and filing fees in respect of the SEC or
the National Association of Securities Dealers, Inc.) ("Registration Expenses")
will be paid by the Company, except for underwriting discounts or commissions or
brokers' fees in respect of Option Shares to be sold by Parent and the fees and
disbursements of Parent's counsel. The Company is not required to pay for any
Registration Expenses with respect to such registration if the registration
request is subsequently withdrawn at the request of Parent unless Parent agrees
to forfeit its right to request one registration; provided, however, that, if at
the time of such withdrawal Parent has learned of a material adverse change in
the results of operations, condition, business or prospects of the Company not
known to Parent at the time of the request and has withdrawn the request within
a reasonable period of time following disclosure by the Company to Parent of
such material adverse change, then Parent shall not be required to pay any of
such expenses and shall not forfeit such right to request one registration.
ITEM 4. THE SOLICITATION OR RECOMMENDATION.
(a) RECOMMENDATION OF THE COMPANY BOARD
At a meeting held on October 13, 1999, the Company Board (a) determined the
Offer and the Merger to be fair to, and in the best interests of, the Company's
stockholders, (b) approved the Merger Agreement and the Transaction, and (c)
recommended that the Company's stockholders accept the Offer and tender their
Shares thereunder and approve and adopt the Merger Agreement and the Merger.
Such Company Board
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action was unanimous except that Davidi Gilo, the Company's Chairman of the
Board, President and Chief Executive Officer, abstained from such action due to
his interests in the Transaction.
A letter to the Company's stockholders communicating the Company Board's
recommendation is filed herewith as Exhibit 6, and is incorporated herein by
reference.
(b) BACKGROUND; REASONS FOR THE COMPANY BOARD'S RECOMMENDATION
BACKGROUND
Beginning in the spring of 1997, the Company's management, in periodic
consultation with the Company's directors, began to explore various possible
strategic alternatives to improve long-term stockholder value and to ensure that
the Company had sufficient access to suppliers and manufacturers of chipsets to
meet current demand and to satisfy the Company's future growth plans. These
strategic alternatives generally included, among others, various partnering
transactions and joint ventures, licensing arrangements, a business combination
involving the Company and the sale of the Company.
On May 1, 1997, the Company engaged Merrill Lynch & Co. ("Merrill Lynch")
to serve as its financial advisor and to assist the Company in its review of
strategic alternatives.
Between the spring and fall of 1997, the Company's management, in
consultation with Merrill Lynch, identified and reviewed a list of leading
candidates that might be expected to have an interest in potentially engaging in
one or more of the above strategic transactions with the Company. From time to
time throughout the period and thereafter, representatives of the Company's
senior management or Merrill Lynch, on behalf of the Company, had a number of
informal discussions and meetings with these parties (including several
discussions that were initiated by such parties) to assess the feasibility of
the Company's strategic alternatives and the potential level of interest of such
parties in pursuing one or more of these alternatives. As a result of this
process, several parties expressed an interest in exploring a possible business
combination with the Company and several parties, including Parent, eventually
entered into confidentiality agreements with the Company.
In late March 1999, representatives of Merrill Lynch had a number of
telephone conversations with representatives of Parent to discuss, on a
preliminary basis, possible strategic relationships between the Company and
Parent. In connection with such preliminary discussions, Merrill Lynch provided
Parent with certain public information relating to the Company.
On or about April 13, 1999, acting under a previously existing
confidentiality agreement between the Company and Parent, the Company provided
Parent with certain requested financial and operating information relating to
the Company.
On April 13, 1999, representatives of each of the Company and Merrill Lynch
met with representatives of Parent to further discuss possible strategic
relationships between the Company and Parent, and the Company's representatives
presented an overview of the Company and its products.
On April 22, 1999, a representative of Parent telephoned a representative
of the Company and suggested additional meetings to discuss possible
relationships between Parent and the Company.
On June 4, 1999, the Company entered into the Confidentiality Agreement
with Parent (see "Confidentiality Agreement"). Following the execution of such
agreement, the Company provided Parent with additional financial and operating
information relating to the Company.
Also, on June 4, representatives of each of the Company and Merrill Lynch
met at Parent's offices to discuss the Company's business and financials and to
respond to a list of questions previously submitted by Parent to the Company.
On June 18, 1999, representatives of each of the Company and Merrill Lynch
participated in a conference call with representatives of Parent to discuss the
Company's business and financial outlook.
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On July 8 and July 16, 1999, representatives of each of the Company and
Merrill Lynch met at Parent's offices and held a conference call, respectively,
to further discuss with Parent the Company's business and financial position.
On or around July 29, 1999, representatives of the Company held a
conference telephone call with representatives of another party interested in
exploring a business combination (the "First Other Party") with the Company to
discuss, on a preliminary basis, various issues relating to the Company's
operations and a business combination with the Company. No specific proposals
were made by either party during such call, although the Company and the First
Other Party each indicated a willingness to have further discussions to explore
the possibility of a business combination of the Company with the First Other
Party.
On August 5, 1999, representatives of each of the Company and Merrill Lynch
met at Parent's offices to further discuss the Company's business and financial
position.
On August 9, 1999, the Company entered into a confidentiality and
standstill agreement with the First Other Party. Later that month, following a
number of conversations between representatives of each of the First Other Party
and the Company with respect to issues of price, due diligence, transaction
structure and process, the First Other Party advised the Company that it was not
prepared to have any further discussions relating to a business combination with
the Company unless the Company could assure the First Other Party that certain
contractual arrangements that the Company had in place with a third party would
not be terminated as a result of the Company engaging in a business combination
with the First Other Party. The Company was not in a position to provide such
assurance.
On August 13, 1999, representatives of Parent held a telephone conversation
with representatives of each of the Company and Merrill Lynch to further discuss
the process for moving forward with a possible transaction between the Company
and Parent.
On August 16 and 17, 1999, representatives of each of the Company and
Parent held a conference call and a meeting at Parent's offices, respectively,
to further discuss the Company's business and its financial outlook.
On August 20, 1999, Parent provided the Company with a list of questions
seeking financial and operating information relating to the Company.
During August 24 through August 26, 1999, representatives of Parent visited
the Company's offices in Tel Aviv, Israel to conduct further due diligence with
respect to the Company.
On August 31, 1999, Parent and the Company amended the Confidentiality
Agreement to insert a standstill provision in contemplation of a possible
transaction between the parties.
On August 31 and September 1, 1999, representatives of each of Parent, the
Company and Merrill Lynch met at Parent's offices to further discuss the
Company's business and financial outlook and to respond to a list of questions
submitted by Parent on August 20, 1999. The Company provided Parent with certain
materials describing the Company, its operations and prospects. Over the next
month, numerous conference calls took place between Parent and Merrill Lynch to
discuss the timing and process of a potential business combination transaction,
and Parent continued its due diligence review of the Company during such period.
During September 22 through September 24, representatives of Parent visited
the Company's premises in Tel Aviv, Israel to conduct additional diligence and
to further discuss the Company's products and business with local management
personnel.
On September 29, 1999, representatives of Parent spoke via telephone with
representatives of Merrill Lynch and indicated Parent's possible willingness to
acquire the Company pursuant to a stock-for-stock merger at an exchange ratio
providing no premium to the then current trading price of the Shares. Merrill
Lynch's representatives indicated that the Company would not be willing to
consider any proposal which did not contemplate a significant premium to the
Company's then current stock price.
Also, on September 29, the Company entered into a confidentiality and
standstill agreement with a competitor that was interested in exploring a
business combination with the Company (the "Second Other
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Party"). After the execution of this agreement, the Company provided the Second
Other Party with certain requested financial and operating information relating
to the Company.
On September 30, 1999, representatives of Parent met with representatives
of the Company to discuss issues relating to the terms of a possible acquisition
of the Company by Parent, including price, form of consideration and transaction
structure.
Also, on September 30, representatives of each of the Company and the
Second Other Party, together with their respective legal and financial advisors,
met to discuss various issues relating to the Company's operations and the
Second Other Party's potential interest in acquiring the Company. No specific
proposals were made by either party at that meeting, although each of the
Company and the Second Other Party indicated a willingness to have further
discussions to explore the possibility of an acquisition of the Company by the
Second Other Party.
On October 2, 1999, representatives of each of the Company and Parent met
to discuss further various issues relating to the acquisition of the Company by
Parent, including the price that would be paid for the Shares and whether such
price should be in the form of cash or shares of Parent's common stock.
Also, on October 2, the Company received an indication of interest from the
Second Other Party proposing to acquire the Company pursuant to a
stock-for-stock merger in which the stockholders of the Company would receive a
fixed number of shares of the Second Other Party's common stock having a value
of $35.00 per Share. The proposal was subject to a number of conditions,
including (i) negotiation and execution of definitive agreement, (ii)
confirmatory business, financial and legal due diligence, (iii) the ability of
the Second Other Party to utilize the pooling of interests method of accounting
to account for the acquisition of the Company, (iv) approval by the Second Other
Party's Board of Directors and (v) other regulatory approvals. The Second Other
Party also indicated that its obligation to consummate a transaction with the
Company would be subject to the Company not experiencing a material adverse
change prior to the closing of the transaction. The Second Other Party also
proposed a termination fee of $65 million and a stock option to buy 19.9% of the
Company's outstanding Shares, exercisable under certain circumstances. Following
the receipt of such proposal, a number of conference calls took place between
representatives of each of Merrill Lynch and the Second Other Party's financial
advisor on October 2 and October 3. During the course of such calls, Merrill
Lynch indicated to the Second Other Party's financial advisor that the price
contained in the Second Other Party's indication of interest would not be
attractive to the Company. In response, the Second Other Party's financial
advisor indicated that the Second Other Party might be willing to consider
improving its proposal as to price. However, since that time, the Second Other
Party did not increase the proposed price or again indicate a willingness to
consider doing so. Also during this time period, during the course of a number
of telephone conversations between the respective legal advisors of the Company
and the Second Other Party, the Company's legal advisors informed the Second
Other Party's legal advisors that the Company was not prepared to accept certain
of the conditions to closing proposed by the Second Other Party, particularly
the approach to the no material adverse change condition required by the Second
Other Party, as they adversely impacted the certainty of closure desired by the
Company.
On October 3, 1999, representatives of the Company, together with
representatives of Merrill Lynch and the Company's legal advisors, met via
telephone conference call with representatives of Parent. During the course of
such telephone call, Parent indicated that it was working towards proposing an
acquisition of the Company pursuant to an all-cash tender offer for a purchase
price of $36.00 per Share in cash, a 68.9% premium over the $21.3125 closing
price of the Shares on October 1, 1999, the last trading day prior to such
telephone call. Parent also indicated that its ability to submit such a proposal
would be contingent upon approval by Parent's board of directors at a meeting
scheduled to be held during the week of October 11, 1999, confirmatory due
diligence, and negotiation of the definitive form of a merger agreement and
related agreements.
On or about October 4, 1999, in response to a due diligence request list
that had been previously furnished to the Company by Parent, the Company began
providing Parent with extensive financial and operating information relating to
the Company. Numerous telephone calls between representatives of Parent
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<PAGE> 29
and the Company regarding due diligence and requests for information were made
throughout the weeks of October 4 and October 11 and, during that period, Parent
continued its review of the Company.
On October 5, 1999, representatives of each of the Company, Merrill Lynch
and the Company's legal advisors commenced negotiations with Parent and its
legal advisors with respect to the terms of a possible merger agreement and
related agreements that were being requested by Parent. Such negotiations
progressed through various meetings and conference calls throughout that week.
On or about October 7, 1999, representatives of Merrill Lynch had a
telephone conversation with the Second Other Party's financial advisor in which
the Second Other Party's financial advisor advised Merrill Lynch that the Second
Other Party's proposed price remained unchanged.
On the morning of October 10, 1999, the Company Board held a special
meeting and analyzed and reviewed, with the Company's management, Merrill Lynch
and the Company's legal advisors, among other things, the various strategic,
financial and legal considerations concerning a possible transaction with
Parent, the potential impact on the Company's stockholders of a transaction with
Parent at the price being proposed by Parent, and the terms and conditions of
the most recent draft of the Merger Agreement. During this meeting, Merrill
Lynch provided the Company Board with an overview and the status of the
discussions held with other parties during past two years, including the First
Other Party and the Second Other Party, in connection with Merrill Lynch's
review of the Company's strategic alternatives. The Company's legal advisors
then summarized the terms of the most recent draft of the Merger Agreement that
had been negotiated by the parties as well as the issues that remained to be
negotiated by the parties. Among such issues that remained to be negotiated were
the definition of a "Company Material Adverse Effect," the circumstances under
which a termination fee would be payable by the Company to Parent, the amount of
such termination fee, Parent's request for the Company to enter into the Stock
Option Agreement, the survival of the Company's representations and warranties
past the consummation of the Offer and until the closing date of the Merger and
having Parent's obligation to consummate the Merger be conditioned on the
accuracy of the Company's representations and warranties as of the closing date
of the Merger. The Company's management and its legal and financial advisors
also reported to the Company Board on the status of the discussions with the
Second Other Party, the terms of the indication of interest made by the Second
Other Party, the various ways in which the Second Other Party's proposal was
inferior to the proposal put forth by Parent (particularly as to price and
certainty of closing) and that the Second Other Party had not improved its
proposal with respect to price despite a request by Merrill Lynch that the
Second Other Party put forth its best and final proposal. No decision was
reached by the Company Board at the meeting, but it was the consensus of the
directors that the Company's management and legal and financial advisors should
continue to negotiate the terms of the Merger Agreement and related agreements
with Parent and report back to the Company Board once management was prepared to
make a recommendation.
During the afternoon of October 10, 1999, the Company, together with
representatives of Merrill Lynch and the Company's legal advisors, resumed
negotiating the terms of the Merger Agreement and related agreements that were
being requested by Parent. Parent continued to insist that the Company's
execution of the Stock Option Agreement was a prerequisite to its willingness to
enter into a definitive merger agreement with the Company and continued to seek
a termination fee, payable in certain circumstances, of 5% of the equity value
of the Transaction. In addition, certain terms of the various employment and
covenant not to compete agreements that were requested by Parent of various
senior members of the Company's management were also negotiated. Such
negotiations continued through October 13, 1999, and by the evening of October
13, 1999, the Company and Parent agreed upon forms of the definitive Merger
Agreement and Stock Option Agreement, and each of Davidi Gilo and Dr. Joseph
Perl agreed upon the forms of the definitive Tender Agreements that each would
be prepared to enter into with Parent.
On October 11, 1999, the Company was informed by Parent that Parent's Board
of Directors had approved the acquisition of the Company by Parent, subject to
the negotiation and execution of a definitive Merger Agreement.
On the night of October 13, 1999, the Company Board held a special meeting
to review, with the advice and assistance of the Company's financial and legal
advisors, the final proposed terms and conditions of the
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Merger Agreement, the Stock Option Agreement and related agreements. At such
meeting, the Company's financial advisor provided a written opinion that, as of
the date of the Merger Agreement, the proposed cash consideration to be received
by the holders of the Shares, other than Parent and its affiliates, pursuant to
the Offer and the Merger, was fair to such stockholders, from a financial point
of view. In addition, the Company's legal advisors informed the Company Board of
the recent material changes made to the Merger Agreement. The Company Board was
also informed that, to date, the Second Other Party had still not improved or
modified its previous indication of interest as to price, although the Second
Other Party had agreed to a collar around the fixed exchange ratio that it had
proposed. Following the Company Board's review of the final terms of the Offer
and the Merger, the Company Board determined (which determination was unanimous
other than that Davidi Gilo, the Chairman of the Board, President and Chief
Executive Officer of the Company, abstained due to his interests in the
Transaction) that the Merger Agreement, and the transactions contemplated
thereby, including the Offer and the Merger, are fair to and in the best
interests of the Company's stockholders, approved the Merger Agreement, the
Stock Option Agreement and the transactions contemplated thereby, including the
Offer and the Merger, authorized the execution and delivery of the Merger
Agreement and the Stock Option Agreement, recommended that the Company's
stockholders accept the Offer and tender their Shares pursuant to the Offer, and
recommended that the Company's stockholders approve and adopt the Merger
Agreement.
Later during the early morning of October 14, 1999, the Company, Parent and
Purchaser executed and delivered the Merger Agreement, the Company and Parent
executed and delivered the Stock Option Agreement, and Parent and Purchaser
executed and delivered a Tender Agreement with each of Davidi Gilo and Joseph
Perl. In addition, various members of the Company's senior management entered
into employment agreements with Parent.
On the morning of October 14, 1999, the Company and Parent issued a joint
press release announcing the execution of the Merger Agreement. A copy of that
press release is filed as Exhibit 8 to this Schedule 14D-9.
REASONS FOR THE TRANSACTION; FACTORS CONSIDERED BY THE COMPANY BOARD
In approving the Offer, the Merger, the Merger Agreement and the other
transactions contemplated thereby and recommending that all holders of Shares
accept the Offer and tender their Shares pursuant to the Offer, the Company
Board considered a number of factors including:
1. the presentations and views expressed by management of the Company
regarding, among other things: (a) the financial condition, results of
operations, cash flows, business and prospects of the Company, including
the prospects of, and uncertainties facing, the Company if it remains
independent; (b) the continued viability of the Company's current
strategies; (c) the likelihood of achieving maximum long-term value on a
stand-alone basis; (d) the strategic alternatives available to the Company
and the associated advantages and disadvantages; (e) the fact that no other
party had submitted to the Company a proposal as attractive as the
transaction proposed by Parent, either as to price or as to other terms and
conditions; (f) the fact that in view of the discussions held with various
parties, including the First Other Party and the Second Other Party,
management of the Company believed it was unlikely that any other party
would propose an acquisition or strategic business combination that would
be more favorable to the Company and its stockholders than the Offer and
the Merger; and (g) the recommendation of the Offer and the Merger by the
management of the Company;
2. the presentations of Merrill Lynch at the meetings of the Company
Board held on October 10, 1999 and October 13, 1999 and the opinion of
Merrill Lynch, dated October 13, 1999, to the effect that, as of such date
and based upon and subject to certain matters stated in such opinion, the
proposed cash consideration to be received by the holders of Shares (other
than Parent and its affiliates) pursuant to the Offer and the Merger was
fair to such holders from a financial point of view. The full text of the
written opinion dated October 13, 1999 of Merrill Lynch, which sets forth
the assumptions made, matters considered and limitations on the review
undertaken, is attached hereto as Exhibit 7, and is incorporated herein by
reference. The opinion of Merrill Lynch is directed only to the fairness,
from a financial point of view, of the cash consideration to be received in
the Offer and the Merger by holders of Shares (other than Parent and its
affiliates) and is not intended to constitute, and does not constitute, a
recommenda-
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tion as to whether any stockholder should tender Shares pursuant to the
Offer or as to whether to vote to adopt the Merger Agreement. Holders of
Shares are urged to read such opinion carefully in its entirety;
3. the historical market prices, price to earnings ratios, recent
trading activity and trading range of the Shares, including that the Offer
Price (i) represents a premium of approximately 28.6% over the $28.00
closing price of the Shares on the NYSE on October 13, 1999, the last full
trading day preceding the public announcement of the execution of the
Merger Agreement, and (ii) is higher than the historical all-time high
trading price of the Shares;
4. the premiums paid in comparable acquisition transactions;
5. the extensive arms-length negotiations between the Company and
Parent leading to the belief of the Company Board that $36.00 per Share
represented the highest price per Share that could be negotiated with
Parent;
6. the history and progress of the Company's discussions with the
Second Other Party, the First Other Party and other parties, including,
without limitation, (i) that the proposal made by the Second Other Party on
October 2, 1999 contemplated the acquisition of the Company pursuant to a
stock-for-stock merger in which the stockholders of the Company would
receive a fixed number of shares of the Second Other Party's common stock
having a value of $35.00 at the time of execution of an agreement, (ii)
that the Second Other Party did not improve its proposal to increase its
proposed price despite being given the opportunity to do so, (iii) that,
while the Second Other Party's proposal contemplated a collar with respect
to the value of the Second Other Party's stock, the Second Other Party's
proposal would still subject the Company's stockholders to the risks and
uncertainties associated with equity securities, (iv) the risks of sharing
information with the Second Other Party given that it is a competitor of
the Company, (v) the refusal of the Second Other Party to agree to the
definition of "Company Material Adverse Effect On the Company" sought by
the Company, (vi) the significantly longer period of time which it would
take to consummate a transaction with the Second Other Party as compared to
Parent, and (vii) the uncertainty as to whether a transaction with the
Second Other Party would ever be consummated.
7. that the Offer and the Merger provide for a prompt cash tender
offer for all Shares to be followed by a merger for the same consideration,
thereby enabling the Company's stockholders to obtain the benefits of the
transaction in exchange for their Shares at the earliest possible time;
8. the fact that Parent's and Purchaser's obligations under the Offer
are not subject to any financing condition, and the representation of
Parent and Purchaser that they have sufficient funds available to them to
consummate the Offer and the Merger;
9. that pursuant to the Merger Agreement, between the execution of the
Merger Agreement and the closing of the Offer, the Company is required to
obtain Parent's consent before it can take certain actions;
10. the limited ability of Parent and Purchaser to terminate the Offer
or the Merger Agreement;
11. that, in the Merger Agreement, Purchaser is required to extend the
Offer up to January 31, 2000 if certain conditions are not satisfied as of
any Expiration Date, as extended, and that Purchaser is required to extend
the Offer up to April 30, 2000 if, on January 31, 2000, the condition to
the Offer relating to the expiration or termination of the waiting period
applicable under the HSR Act is not satisfied, provided that none of the
events specified in the Conditions to the Offer that would permit Purchaser
not to accept Shares tendered for payment has occurred and is continuing
(see "The Conditions to the Offer");
12. the fact that, pursuant to the Merger Agreement, the Company and
its representatives may not (i) furnish to a third party who has submitted
an unsolicited acquisition proposal (a "Third Party Acquiror") information
concerning the Company's business properties or assets, and (ii)
participate in discussions or negotiations with such Third Party Acquiror
concerning an unsolicited acquisition proposal;
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13. the fact that, pursuant to the Merger Agreement, the Company Board
has the right to terminate the Merger Agreement if, prior to the purchase
of Shares by Purchaser, the Company has received a Superior Proposal and
the Company Board has determined, in its good faith judgment, after
consultation with and based upon the advice of legal counsel, to approve or
recommend such Superior Proposal in order in order to comply with its
fiduciary duties under applicable law;
14. the circumstances upon which the $45 million termination fee and
the $5 million expense reimbursement becomes payable by the Company to
Parent;
15. the terms and provisions of the Stock Option Agreement, including
(i) that the Stock Option provided for therein would become exercisable by
Parent upon the occurrence of any event that would trigger the payment of a
termination fee by the Company pursuant to the terms of the Merger
Agreement, and (ii) that the profit that Parent may obtain pursuant to the
Stock Option Agreement and the termination fee cannot exceed $55 million in
the aggregate;
16. the conditions to the Offer, including, as it relates thereto, the
definition of Company Material Adverse Effect;
17. the other provisions of the Offer, the Merger Agreement and the
Stock Option Agreement;
18. the consents and approvals required to consummate the Merger and
the favorable prospects for receiving all such consents and approvals; and
19. that, while the Offer gives the Company's stockholders the
opportunity to realize a premium over the price at which the Shares traded
immediately prior to the public announcement of the Offer and the Merger,
the consummation of the Offer and the Merger would eliminate the
opportunity for stockholders to participate in the future growth and
profits of the Company.
The foregoing discussion of information and factors considered and given
weight by the Company Board is not intended to be exhaustive, but is believed to
include all of the material factors considered by the Company Board. In view of
the variety of factors considered in connection with its evaluation of the Offer
and the Merger, the Company Board did not find it practicable to, and did not,
quantify or otherwise assign relative weights to the specific factors considered
in reaching its determinations and recommendations. In addition, individual
members of the Company Board may have given different weights to different
factors.
ITEM 5. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED.
The Company retained Merrill Lynch, pursuant to the terms of a letter
agreement, dated as of May 1, 1997, as amended on October 7, 1999 (collectively,
the "Merrill Lynch Letter Agreement"), to assist the Company as its financial
advisor in connection with any proposed business combination of the Company with
another party (a "Transaction").
Pursuant to the terms of the Merrill Lynch Letter Agreement, the Company
agreed to pay Merrill Lynch, as follows:
- a fee equal to $1 million, contingent upon and payable in cash upon the
earlier of (a) any public announcement of an offer or proposal by a
purchaser (which was supported by the Company's management) to effect a
Transaction or (b) the execution of a definitive agreement to effect a
Transaction; and
- a fee equal to 0.7% of the Aggregate Purchase Price(as defined below)
paid in such Transaction less all fees previously paid to Merrill Lynch
in connection with such engagement less $500,000, payable upon
consummation of a Transaction or if the Transaction involves a tender
offer or an exchange offer, upon the closing of such offer. Such fee is
owed if during the period of Merrill Lynch's retention by the Company or
within two years thereafter, (a) a Transaction is consummated by a
purchaser which Merrill Lynch identified, as to which Merrill Lynch
advised the Company or with which the Company or Merrill Lynch had
discussions during the term of Merrill Lynch's retention by the Company
or (b) the Company enters into an agreement with any such purchaser which
results in a Transaction.
The "Aggregate Purchase Price" is defined in the Merrill Lynch Letter Agreement
as the value of the consideration paid to the Company or its stockholders in
connection with a Transaction, plus the value of any indebtedness of the Company
or any subsidiary of the Company which is assumed, retired or decreased in
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connection with a Transaction. The Aggregate Purchase Price is approximately
$1.7 billion. Accordingly, the total amount of fees that will be paid to Merrill
Lynch pursuant to the Merrill Lynch Letter Agreement is approximately $11.6
million.
The Company has also agreed to reimburse Merrill Lynch for all reasonable
out-of-pocket expenses incurred by Merrill Lynch (including fees and
disbursements of counsel, and of other consultants and advisors retained by
Merrill Lynch) in connection with the matters contemplated by the Merrill Lynch
Letter Agreement, and to indemnify Merrill Lynch (and its officers, directors,
employees, controlling persons and agents) against certain liabilities, or
contribute to losses sustained by them, arising out of or in connection with
Merrill Lynch's engagement, including liabilities arising under federal
securities laws.
In the ordinary course of business, Merrill Lynch and its affiliates may
actively trade securities of the Company, Parent and their affiliates for their
own accounts and for the accounts of customers and, accordingly, may at any time
hold a long or short position in such securities.
ITEM 6. RECENT TRANSACTIONS AND INTENT WITH RESPECT TO SECURITIES.
(a) No transactions in the Shares have been effected during the past 60
days by the Company or, to the best of the Company's knowledge, by any executive
officer, director, affiliate or subsidiary of the Company.
(b) To the best knowledge of the Company, all of its executive officers,
directors, affiliates and subsidiaries currently intend to tender pursuant to
the Offer all Shares held of record or beneficially owned by them (other than
Shares issuable upon exercise of stock options and Shares, if any, which if
tendered could cause such persons to incur liability under the provisions of
Section 16(b) of the Exchange Act, which Shares shall be exchanged in the
Merger).
ITEM 7. CERTAIN NEGOTIATIONS AND TRANSACTIONS BY THE SUBJECT COMPANY.
(a) Except as set forth in this Schedule 14D-9, the Company is not engaged
in any negotiation in response to the Offer which relates to or would result in
(i) an extraordinary transaction, such as a merger or reorganization, involving
the Company or any subsidiary of the Company; (ii) a purchase, sale or transfer
of a material amount of assets by the Company or any subsidiary of the Company;
(iii) a tender offer for or other acquisition of securities by or of the
Company; or (iv) any material change in the present capitalization or dividend
policy of the Company.
(b) Except as described in Item 3(b) and Item 4 above (the provisions of
which are hereby incorporated by reference), there are no transactions, board
resolutions, agreements in principle or signed contracts in response to the
Offer which relate to or would result in one or more of the matters referred to
in paragraph (a) of this Item 7.
ITEM 8. ADDITIONAL INFORMATION TO BE FURNISHED.
DGCL 203
Section 203 of the DGCL purports to regulate certain business combinations
of a corporation organized under Delaware law, such as the Company, with a
stockholder beneficially owning 15% or more of the outstanding voting stock of
such corporation (an "Interested Stockholder"). Section 203 provides, in
relevant part, that the corporation shall not engage in any business combination
for a period of three years following the date such stockholder first becomes an
Interested Stockholder unless (i) prior to the date the stockholder first
becomes an Interested Stockholder, the board of directors of the corporation
approved either the business combination or the transaction which resulted in
the stockholder becoming an Interested Stockholder, (ii) upon becoming an
Interested Stockholder, the Interested Stockholder owned at least 85% of the
voting stock of the corporation outstanding at the time the transaction
commenced, or (iii) on or subsequent to the date the stockholder becomes an
Interested Stockholder, the business combination is approved by the board of
directors and authorized at an annual or special meeting of stockholders by the
affirmative vote of at least two-thirds of the outstanding voting stock which is
not owned by the Interested Stockholder. The Company
32
<PAGE> 34
Board has approved the Merger Agreement and the transactions contemplated
thereby, including the Offer and the Merger, and, therefore, Section 203 of the
DGCL is inapplicable to the Offer and the Merger.
SECTION 14(f) INFORMATION STATEMENT
The Information Statement attached as Schedule I hereto is being furnished
in connection with the possible designation by Parent, pursuant to the Merger
Agreement, of certain persons to be appointed to the Company Board other than at
a meeting of the Company's stockholders.
ANTITRUST -- UNITED STATES
Under the HSR Act, and the rules that have been promulgated thereunder by
the Federal Trade Commission (the "FTC"), certain acquisition transactions may
not be consummated unless certain information has been furnished to the
Antitrust Division of the United States Department of Justice (the "Antitrust
Division") and the FTC and certain waiting period requirements have been
satisfied. The acquisition of the Shares by Purchaser pursuant to the Offer is
subject to such requirements.
Under the provisions of the HSR Act applicable to the Offer, the purchase
of Shares under the Offer may not be consummated until the expiration of a
15-day calendar day waiting period following the filing by Parent of a
Notification and Report Form with respect to the Offer. Such filing is expected
to be made as soon as practicable from the day hereof. The Antitrust Division or
the FTC may extend the waiting periods of such filing by requesting additional
information or documentary material relevant to the acquisition. If such a
request is made, the waiting period will be extended until 11:59 P.M., New York
City time, on the tenth day after Parent has substantially complied with such
request. Thereafter, such waiting periods can be extended only by court order or
consent. Although the Company is required to file certain information and
documentary material with the Antitrust Division and the FTC in connection with
the Offer, neither the Company's failure to make such filings nor a request to
the Company from the Antitrust Division for additional information or
documentary material will extend the waiting period. However, if the Antitrust
Division or the FTC raises substantive issues in connection with a proposed
transaction, the parties frequently engage in negotiations with the relevant
governmental agency concerning possible means of addressing these issues and may
agree to delay consummation of the transaction while such negotiations continue.
The Antitrust Division and the FTC frequently scrutinize the legality under
the antitrust laws of transactions. At any time before or after the consummation
of any such transactions, the Antitrust Division or the FTC could,
notwithstanding termination of the waiting period, take such action under the
antitrust laws as it deems necessary or desirable in the public interest,
including seeking to enjoin the purchase of the Shares pursuant to the Offer or
seeking divestiture of the Shares so acquired or divestiture of substantial
assets of Parent or the Company or any of their respective subsidiaries. State
attorneys general may also bring legal actions under the antitrust laws, and
private parties may bring such actions under certain circumstances. While the
Company does not believe that the acquisition of the Shares by Purchaser will
violate the antitrust laws, there can be no assurance that a challenge to the
Offer on antitrust grounds will not be made, or if such a challenge is made,
what the result will be.
NON-U.S. REGULATORY APPROVALS
Israel
The closing of the Offer, and the acceptance of Shares by Purchaser under
the Offer, is subject to all necessary approvals from (i) the Investment Center
of the Ministry of Trade and Industry of the State of Israel (the "Investment
Center"), (ii) the Office of the Chief Scientist of the Ministry of Trade and
Industry of the State of Israel (the "OCS") and (iii) the Antitrust Director of
the State of Israel (the "Antitrust Director"), unless an exemption is obtained.
Parent and the Company intend to seek approval of the Investment Center
pursuant to the "approved enterprise" programs in which the Company participates
and pursuant to which the Company receives certain tax benefits.
33
<PAGE> 35
Parent and the Company intend to seek approval of the OCS pursuant to
certain royalty-bearing grants which the Company has received from the OCS in
order to fund certain research and development programs.
The Antitrust Director oversees antitrust enforcement in Israel. If the
acquisition of the Shares by Purchaser pursuant to the Offer is deemed to be a
"merger" within the meaning and scope of the Restrictive Trade Practices Law,
5748-1988 of the State of Israel, then both Purchaser and the Company will be
required to make filings with the Antitrust Director regarding sales activity in
Israel, and obtain the approval of the Antitrust Director to the transaction.
The Antitrust Director is required to respond to all such filings within 30
days.
Other
Certain other countries have regulatory requirements that may be applicable
to the Offer and the Merger. The parties are in the process of determining
whether and to what extent such requirements are applicable and, if so, what
impact such requirements would have on the timing of the Offer and the Merger.
APPRAISAL RIGHTS
No appraisal rights are available to holders of Shares in connection with
the Offer. However, if the Merger is consummated, holders of Shares may have
certain rights under Section 262 of the DGCL to dissent and demand appraisal of,
and payment in cash for the fair value of, their Shares. Such rights, if the
statutory procedures are complied with, could lead to a judicial determination
of the fair value (excluding any element of value arising from accomplishment or
expectation of the Merger) required to be paid in cash to such dissenting
holders for their Shares. Any such judicial determination of the fair value of
the Shares could be based upon considerations in addition to the applicable
offer price and the market value of the Shares, including asset values and the
investment value of the Shares. The value so determined could be more or less
than the Offer Price.
If any holder of Shares who demands appraisal under Section 262 of the DGCL
fails to perfect, or effectively withdraws or loses his or her right to
appraisal, as provided in the DGCL, each of the Shares of such holder will be
converted into the Offer Price in accordance with the Merger Agreement. A
stockholder may withdraw his or her demand for appraisal by delivery to
Purchaser of a written withdrawal of his or her demand for appraisal and
acceptance of the Merger.
Failure to follow the steps required by Section 262 of the DGCL for
perfecting appraisal rights may result in the loss of such rights.
LITIGATION
On October 15, 1999, a complaint was filed by a stockholder, on her own
behalf and purportedly on behalf of the other stockholders of the Company,
against the Company and its directors and Parent in the Superior Court of the
State of California, County of Santa Clara, in a lawsuit captioned, Antinea F.
Jaconette, on behalf of Herself and all Others Similarly Situated v. DSP
Communications, Inc., Intel Corporation, Davidi Gilo, Lewis S. Broad, Neill H.
Brownstein, Shigeru Iwamoto, Joseph Perl, Avraham Fischer, Andrew W. Schonzeit
and Does 1-25, inclusive. The complaint alleges, among other things, breaches of
fiduciary duties by the directors of the Company, and aiding and abetting of
breach of fiduciary duties by Intel, in connection with the Offer and the Merger
and seeks monetary damages and injunctive relief. The Company believes that such
lawsuit is without merit, and intends to vigorously defend such action.
ITEM 9. MATERIAL TO BE FILED AS EXHIBITS.
<TABLE>
<S> <C>
Exhibit 1. Corporate Nondisclosure Agreement, dated June 2, 1999, as
amended effective August 31, 1999, by and between DSP
Communications, Inc. and Intel Corporation.
Exhibit 2. Agreement and Plan of Merger, dated as of October 13, 1999,
by and among DSP Communications, Inc., Intel Corporation and
CWC Acquisition Corporation.
Exhibit 3. Stock Option Agreement, dated as of October 13, 1999, by and
between DSP Communications, Inc. and Intel Corporation.
</TABLE>
34
<PAGE> 36
<TABLE>
<S> <C>
Exhibit 4. Tender and Voting Agreement, dated as of October 13, 1999,
by and among Davidi Gilo, Intel Corporation and CWC
Acquisition Corporation.
Exhibit 5. Tender and Voting Agreement, dated as of October 13, 1999,
by and among Joseph Perl, Intel Corporation and CWC
Acquisition Corporation.
Exhibit 6. Letter to Stockholders from Davidi Gilo dated October 20,
1999.*
Exhibit 7. Letter of Merrill Lynch, Pierce, Fenner & Smith
Incorporated, dated October 13, 1999 to the Board of
Directors of the Company.*
Exhibit 8. Press Release issued by DSP Communications, Inc. and Intel
Corporation on October 14, 1999.
Exhibit 9. Covenant Not to Compete, dated as of October 13, 1999, by
and between Intel Corporation and Davidi Gilo.
Exhibit 10. Covenant Not to Compete, dated as of October 13, 1999, by
and between Intel Corporation and Joseph Perl.
Exhibit 11. Letter Agreement, dated as of October 13, 1999, by and
between Intel Corporation and Davidi Gilo.
Exhibit 12. Letter Agreement, dated as of October 13, 1999, by and
between Intel Corporation and Joseph Perl.
Exhibit 13. Letter Agreement, dated as of October 13, 1999, by and
between Intel Corporation and Shmuel Arditi.
Exhibit 14. Letter Agreement, dated as of October 13, 1999, by and
between Intel Corporation and David Aber.
Exhibit 15. Letter Agreement, dated as of October 13, 1999, by and
between Intel Corporation and Stephen P. Pezzola.
Exhibit 16. Form of Indemnification Agreement for directors and
executive officers.
Exhibit 17. Article X of the Company's Certificate of Incorporation, as
amended to date.
Exhibit 18. Article VI of the Company's Bylaws, as amended to date.
Exhibit 19. 1995 Employee and Consultant Stock Plan.
Exhibit 20. 1995 Employee Stock Purchase Plan.
Exhibit 21. 1995 Director Stock Option Plan.
Exhibit 22. 1996 Stock Option Plan.
Exhibit 23. 1998 Non-Qualified Stock Option Plan.
Exhibit 24. Amended and Restated Employment Agreement, dated as of
August 12, 1999, between DSP Communications, Inc., DSP
Telecom, Inc. and Stephen P. Pezzola.
Exhibit 25. Employment Agreement, dated as of October 12, 1998, by and
between DSP Telecom, Inc. and Davidi Gilo.
Exhibit 26. Employment Agreement, dated as of July 15, 1999, by and
between DSP Telecom, Inc. and Shmuel Arditi.
Exhibit 27. Intentionally omitted.
Exhibit 28. Employment Agreement, dated as of August 12, 1999, by and
between D.S.P.C. Technologies Ltd. and David Aber.
</TABLE>
- ---------------
* Copy attached to, or enclosed with, copies of this schedule mailed to
stockholders.
35
<PAGE> 37
SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.
DSP COMMUNICATIONS, INC.
By: /s/ STEPHEN P. PEZZOLA
------------------------------------
Name: Stephen P. Pezzola
Title: General Counsel and
Corporate Secretary
Dated: October 20, 1999
36
<PAGE> 38
SCHEDULE I
INFORMATION STATEMENT PURSUANT TO
SECTION 14(f) OF THE SECURITIES
EXCHANGE ACT OF 1934 AND RULE 14f-1 THEREUNDER
GENERAL
This Information Statement is being mailed on or about October 20, 1999 as
part of the Solicitation/ Recommendation Statement on Schedule 14D-9 (the
"Schedule 14D-9") of DSP Communications, Inc., a Delaware corporation (the
"Company"), to the holders of record of shares of common stock, par value $.001
per share, of the Company (the "Shares" or the "Company Common Stock"). You are
receiving this Information Statement in connection with the possible election of
persons designated by Parent (as defined below) to a majority of the seats on
the Board of Directors of the Company (the "Company Board").
On October 13, 1999, the Company, Intel Corporation, a Delaware corporation
("Parent"), and CWC Acquisition Corporation, a Delaware corporation and a
direct, wholly owned subsidiary of Parent ("Purchaser"), entered into an
Agreement and Plan of Merger (the "Merger Agreement"), pursuant to which (i)
Parent shall cause Purchaser to commence a tender offer (the "Offer") for all
outstanding Shares at a price of $36.00 per Share, net to the seller in cash,
and (ii) Purchaser shall be merged with and into the Company (the "Merger"). As
a result of the Offer and the Merger, the Company will become a direct, wholly
owned subsidiary of Parent.
The Merger Agreement provides that, promptly after the purchase of a
majority of the outstanding Shares pursuant to the Offer, Parent shall be
entitled to designate such number of directors (the "Parent Designees") to the
Company Board as will give Parent representation proportionate to its ownership
interest. The Merger Agreement requires the Company to take such action as
Parent may request to cause the Parent Designees to be elected to the Company
Board under the circumstances described therein. This Information Statement is
required by Section 14(f) of the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), and Rule 14f-1 thereunder.
You are urged to read this Information Statement carefully. You are not,
however, required to take any action. Capitalized terms used and not otherwise
defined shall have the meaning set forth in the Schedule 14D-9.
The information contained in this Information Statement concerning Parent
and Purchaser has been furnished to the Company by Parent. The Company assumes
no responsibility for the accuracy or completeness of such information.
RIGHT TO DESIGNATE DIRECTORS; PARENT DESIGNEES
The Merger Agreement provides that, promptly upon the purchase of and
payment by Purchaser for Shares pursuant to the Offer which represent at least a
majority of the outstanding Shares (on a fully diluted basis), Parent will be
entitled to designate such number of directors, rounded up to the next whole
number, on the Company Board as shall give Parent, subject to compliance with
Section 14(f) of the Exchange Act and Rule 14f-1 promulgated thereunder,
representation on the Company Board equal to the product of the total number of
directors on the Company Board (giving effect to the directors elected pursuant
to this sentence) multiplied by the percentage that the aggregate number of
Shares beneficially owned by Purchaser, Parent and any of their affiliates bears
to the total number of Shares then outstanding. The Company shall, upon the
request of Purchaser, use its reasonable best efforts to cause the Parent
Designees to be so elected, including, if necessary, increasing the size of the
Company Board or securing the resignations of incumbent directors.
Notwithstanding the foregoing, the Merger Agreement requires that, until the
Effective Time, the Company Board shall include at least two directors who were
members of the Company Board on the date that the Merger Agreement was executed.
S-1
<PAGE> 39
The following table sets forth certain information with respect to
individuals Parent may designate as the Parent Designees (including age as of
the date hereof, current principal occupation or employment and five-year
employment history). Unless otherwise noted, each individual is a citizen of the
United States. Unless otherwise noted, the business address of each designee is
c/o Intel Corporation, 2200 Mission College Boulevard, Santa Clara, California
95052.
<TABLE>
<CAPTION>
NAME OF PRINCIPAL OCCUPATION(S)
PARENT DESIGNEE AGE DURING PAST FIVE (5) YEARS
--------------- --- --------------------------
<S> <C> <C>
Leslie L. Vadasz.......................... 63 Senior Vice President, Corporate Business
Development
of Parent since 1991; Director of Parent since 1988.
Arvind Sodhani............................ 45 Vice President and Treasurer of Parent since 1988;
Vice President and Treasurer of Purchaser since
1999.
Cary I. Klafter........................... 50 Director of Corporate Affairs of Parent since 1996;
Vice President and Director of Purchaser since 1999.
Partner, Morrison & Foerster from prior to 1994 to
1996.
Suzan A. Miller........................... 35 Senior Counsel of Parent since 1999; Senior Attorney
of Parent from 1991 to 1999; President and Director
of Purchaser since 1999.
Tiffany Doon Silva........................ 33 Senior Attorney of Parent since 1999; Vice
President, Secretary and Director of Purchaser since
1999; Associate, Gibson, Dunn & Crutcher LLP from
1995 to 1999.
</TABLE>
Parent has informed the Company that each of the individuals listed above
has consented to act as a director, if so designated. If necessary, Parent may
choose additional or other Parent Designees, subject to the requirements of Rule
14f-1.
Based solely on the information set forth in the Offer to Purchase, none of
the Parent Designees (i) is currently a director of, or holds any position with,
the Company, (ii) has a familial relationship with any directors or executive
officers of the Company, or (iii) to the best knowledge of Parent, beneficially
owns any securities (or any rights to acquire such securities) of the Company.
The Company has been advised by Parent that, to the best of Parent's knowledge,
none of the Parent Designees has been involved in any transactions with the
Company or any of its directors, officers, or affiliates which are required to
be disclosed pursuant to the rules and regulations of the Securities and
Exchange Commission (the "SEC"), except as may be disclosed herein.
DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY
The following table sets forth certain information with respect to the
directors and executive officers of the Company as of October 20, 1999:
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Davidi Gilo................................ 42 Chairman of the Board of Directors, Chief
Executive Officer and President
David Aber................................. 44 Senior Vice President and Chief Financial Officer
Arnon Kohavi............................... 35 Senior Vice President of Strategic Relations
Stephen P. Pezzola......................... 43 General Counsel and Corporate Secretary
Shmuel Arditi.............................. 36 Chief Operating Officer
Gabriel Hilevitz........................... 50 Executive Vice President
Lewis S. Broad(1)(2)....................... 42 Director
Neill H. Brownstein(1)..................... 55 Director
Andrew W. Schonzeit(2)..................... 42 Director
Avraham Fischer............................ 42 Director
</TABLE>
- ---------------
(1) Member of the Audit Committee
(2) Member of the Compensation Committee
S-2
<PAGE> 40
Davidi Gilo was appointed as the Company's Chairman of the Board of
Directors in October 1998, and was appointed as Chief Executive Officer and
President in June 1999. He devotes approximately three-quarters of his time to
the Company. Mr. Gilo also previously served as the Chairman of the Board of the
Company from its founding in 1987 through November 1997. From November 1997
until April 1998, he continued as an employee of the Company serving as an
advisor to the Chairman of the Board. Since July 1995, Mr. Gilo has served as
Chairman of the Board of Directors of Zen Research N.V., a developer of high-
speed CD ROM-reading equipment. Between 1987 and 1993 he was the President and
Chief Executive Officer of DSP Group, Inc. ("DSP Group"), and he served as
Chairman of the Board of DSP Group from 1987 until April 1995. Since 1996, Mr.
Gilo has served as a Director of Cycle Group, Ltd., a developer of technologies
to recycle wood chips and pallets into animal bedding and industrial absorbents.
Mr. Gilo has served as a Director of PhaseCom, Inc. since 1996 and as its Chief
Executive Officer since 1999.
Lewis S. Broad has been a member of the Board since October 1992. Mr. Broad
is a private investor. He is also a member of the Boards of Carrier Services,
Inc., a marketer of prepaid phone cards and of Met Trading, L.L.C., an equity
option and index option trading firm. He holds a B.A. degree from Cornell
University and a Masters of Business Administration from The Wharton School,
University of Pennsylvania.
Neill H. Brownstein was appointed as a member of the Board in February
1995. Mr. Brownstein is also President of Neill H. Brownstein Corporation, a
strategic investment management consulting firm which he founded in 1976. From
June 1970 to January 1995, Mr. Brownstein was associated with Bessemer
Securities Corporation and Bessemer Venture Partners, and during that period he
served as a founding general partner of three affiliated venture capital funds.
Mr. Brownstein received a Masters in Business Administration from the Kellogg
Graduate School of Management at Northwestern University and his A.B. degree
from Columbia College of Columbia University.
Avraham Fischer has been a member of the Board since June 1996. Mr. Fischer
is a senior partner in the law firm of Fischer, Behar & Co., of Tel Aviv,
Israel, where he has practiced since 1983.
Andrew Schonzeit has been a member of the Board since October 1992. He has
served as the President of Idesco Corp., a manufacturer and distributor of
identification, security and safety products, since 1984 and as its Chairman of
the Board since 1989.
David Aber joined the Company in October 1997 as Vice President of Finance,
and in October 1998, he was promoted to Senior Vice President and Chief
Financial Officer. From 1987 until June 1997, Mr. Aber served as managing and
audit partner at Doron & Co., a public accounting firm in Tel Aviv, Israel, and
from June 1997 until October 1997, he served as an employee of Doron & Co. Mr.
Aber received his Bachelor of Arts degree in Economics and Accounting from the
University of Tel Aviv and is a licensed CPA. He was an assistant lecturer at
the University of Tel Aviv for 10 years.
Arnon Kohavi joined the Company in July 1994 as Director of Strategic
Planning. In October 1995 he was promoted to Vice President of Business
Development of the Company and in April 1999, he was appointed as Senior Vice
President of Strategic Relations. From May 1994 until July 1994, Mr. Kohavi was
Manager of Business Development of DSP Group, Inc., and from January 1993 until
February 1994, he served as Marketing Manager of Actodyne General, a
privately-owned musical instrument company. From January 1992 until January
1993, Mr. Kohavi was an associate with Robert Charles Lesser & Co., a management
consulting firm.
Stephen P. Pezzola joined the Company in September 1996 as General Counsel
and was appointed as Corporate Secretary in January 1997. Mr. Pezzola devotes
approximately three-quarters of his time to the Company. From May 1986 until
September 1996, Mr. Pezzola was a founding shareholder and president of the law
firm of Pezzola & Reinke, APC, of Oakland, California. Since 1993, Mr. Pezzola
has been a Director of PriMed Management Consulting Services, Inc. Since
September 1996, Since September 1996, he has also served as General Counsel and
Director of Zen Research, N.V., a developer of technology for high-speed CD ROM
and DV ROM-reading equipment, and of PhaseCom, Inc., a developer of high speed
cable and wireless modems. Since 1999, Mr. Pezzola has been a Director of U.S.
Cancer Care, Inc. Mr. Pezzola received his Juris Doctor degree from Boalt Hall,
University of California at Berkeley.
S-3
<PAGE> 41
Shmuel Arditi co-founded and has been Chief Executive Officer of CTP
Systems Ltd., a company specializing in developing low-mobility systems and
technology for the wireless communications market, since 1990. In October 1995,
the Company bought all of the shares of CTP Systems and Mr. Arditi continued in
his position as General Manager. In May 1999, Mr. Arditi was appointed as Chief
Operating Officer of the Company. Mr. Arditi holds a Bachelor of Science degree
in Electronic Engineering from the Ben Gurion University in Israel.
Gabriel Hilevitz joined the Company in June 1990 as an engineering manager.
In October 1995 he was appointed as manager of the North American business unit
and from October 1996 served as Vice President of Marketing and Sales worldwide.
In April 1999, Mr. Hilevitz was appointed Executive Vice President in DSP
Communications Inc., and General Manager of DSPC Technologies Ltd. in Israel.
Between January 1978 and June 1990, Mr. Hilevitz served as an R&D engineer and
then as a department manager at Tadiran Ltd., an Israeli electronics and
communications equipment manufacturer. Mr. Hilevitz received his Bachelor of
Science degree in electrical engineering from the Technion -- Israel Institute
of Technology, Haifa in 1974.
RELATIONSHIPS AMONG DIRECTORS OR EXECUTIVE OFFICERS
There are no family relationships among any of the directors or executive
officers of the Company, except that Messrs. Schonzeit and Broad are
brothers-in-law.
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
During 1998, the Company Board met ten times and acted by written consent
two times. No Director attended fewer than 75% of the aggregate of the total
number of meetings of the Company Board, plus the total number of all meetings
of committees of the Board on which he served. The Company Board currently has
two committees: the Compensation Committee and the Audit Committee.
The Compensation Committee held three meetings in 1998 and acted by written
consent six times. The Compensation Committee currently consists of Messrs.
Broad and Schonzeit and during all of 1998, Shigeru Iwamoto, a former director,
was also a member of the committee. Its functions are to establish and apply the
Company's compensation policies with respect to the Company's Executive
Officers, and to administer the Company's stock option plans.
The Audit Committee held five meetings in 1998. The Audit Committee
currently consists of Messrs. Brownstein and Broad. The Audit Committee
recommends engagement of the Company's independent auditors and is primarily
responsible for approving the services performed by the Company's independent
auditors and for reviewing and evaluating the Company's accounting principles
and its system of internal accounting controls.
COMPENSATION OF DIRECTORS
Directors who are employees of the Company do not receive any compensation
for their services as Directors. Each non-employee Director receives an annual
retainer of $20,000, payable in quarterly installments of $5,000 each at the end
of each fiscal quarter. The retainer contemplates attendance at four Company
Board meetings per year. Additional Company Board meetings of a face-to-face
nature are compensated at the rate of $1,000 per meeting. Additional Board
meetings on a telephonic basis are compensated at the rate of $250 per meeting.
In addition, committee meetings of a face-to-face nature held on a day other
than a Company Board meeting are compensated at the rate of $500 per meeting or,
if a committee meeting is held on a telephonic basis, at the rate of $250 per
meeting. All Directors are reimbursed for expenses incurred in connection with
attending Company Board and committee meetings.
Each non-employee Director of the Company is also entitled to participate
in the Company's 1995 Director Stock Option Plan (the "Director Option Plan").
The Company Board and the stockholders have authorized a total of 600,000 Shares
for issuance under the Director Option Plan. The Director Option Plan provides
for the grant of non-statutory options to non-employee Directors of the Company.
The Director
S-4
<PAGE> 42
Option Plan is designed to work automatically and not to require administration;
however, to the extent administration is necessary, it will be provided by the
Company Board.
The Director Option Plan provides that each eligible Director is granted an
option to purchase 32,000 shares of Common Stock (the "First Option") on the
later of the effective date of the Initial Public Offering (March 7, 1995) and
the date on which the optionee first becomes a Director of the Company.
Thereafter, each non-employee Director is to be granted an option to purchase
8,000 additional Shares (a "Subsequent Option") on January 1 of each year if, on
such date, he or she shall have served on the Company Board for at least six
months.
Options granted under the Director Option Plan have a term of ten years
unless terminated sooner upon termination of the optionee's status as a Director
or otherwise pursuant to the Director Option Plan. No option granted under the
Director Option Plan is transferable by the optionee other than by will or the
laws of descent and distribution, and each option is exercisable, during the
lifetime of the optionee, only by such optionee. The Director Option Plan
provides that the First Option shall become exercisable as to 25% of the shares
subject to the First Option on the first anniversary of the date of grant of the
First Option and is to become exercisable as to 6.25% of the shares subject to
the First Option at the end of each three-month period thereafter. Each
Subsequent Option becomes exercisable in full on the first anniversary of the
date of its grant.
The exercise price of all stock options granted under the Director Option
Plan is equal to the fair market value of a Share on the date of grant of the
option. Fair Market Value is defined under the Director Option Plan as the
closing sale price of the Shares as reported on The New York Stock Exchange (the
"NYSE") on the date of grant.
In the event of a merger of the Company with or into another corporation or
a sale of substantially all of the Company's assets, the Director Option Plan
requires that each outstanding option be assumed or an equivalent option
substituted by the successor corporation. The Director Option Plan will
terminate in March 2005. The Board of Directors may amend or terminate the
Director Option Plan; provided, however, that (i) stockholder approval is
required for any amendment to the Director Option Plan for which stockholder
approval would be required under applicable law, as in effect at the time; (ii)
no such action may adversely affect any outstanding options, and (iii) the
provisions of the Director Option Plan affecting the grant and terms of options
granted thereunder may not be amended more than once in any six-month period.
Executive officers of the Company are not eligible to participate in the
Director Option Plan.
On January 1, 1998, each of Lewis Broad, Neill Brownstein, Avraham Fischer,
Shigeru Iwamoto and Andrew Schonzeit, were granted Subsequent Options to
purchase 8,000 Shares, at an exercise price of $12.00 per Share, under the
Director Option Plan. On January 1, 1999, each of such directors was granted
Subsequent Options to purchase 8,000 Shares at an exercise price of $15.31 per
Share, under the Director Option Plan.
On November 16, 1998, Avraham Fischer was granted non-qualified options to
purchase 100,000 Shares at an exercise price of $9.94 per share, under the
Company's 1998 Non-Qualified Stock Option Plan. These options became exercisable
as to all shares subject to the option six months after the date of grant and
have a term of five years from the date of grant.
The Merger Agreement further provides that options to purchase Shares under
the Company's 1995 Director Stock Option Plan immediately became fully vested
and exercisable upon execution of the Merger Agreement and will remain
exercisable until the closing date of the Merger and, following such closing
date, such options shall expire and terminate and be of no further force or
effect.
S-5
<PAGE> 43
SECURITY OWNERSHIP OF
CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information known to the Company
with respect to beneficial ownership of the Company's Common Stock as of October
20, 1999, by (i) each stockholder known to the Company to own beneficially more
than 5% of the outstanding shares of Company Common Stock; (ii) each of the
Company's Directors; (iii) the Chief Executive Officer and four other executive
officers of the Company, and two former executive officers; and (iv) all
executive officers and Directors of the Company as a group. Except as indicated
in the footnotes to this table and subject to applicable community property
laws, the persons named in the table, based on information provided by such
persons, have sole voting and investment power with respect to all shares of
Company Common Stock shown as beneficially owned by them.
<TABLE>
<CAPTION>
NAME AND ADDRESS OF AMOUNT & NATURE OF PERCENT OF
BENEFICIAL OWNER BENEFICIAL OWNERSHIP(1) CLASS(1)
------------------- ----------------------- ----------
<S> <C> <C>
Gilder Gagnon Howe & Co. LLC(2)............................. 9,398,065 23.3%
1775 Broadway, 26th Floor
New York, NY 10019
J.&W. Seligman & Co. Incorporated(3)........................ 2,203,400 5.5%
100 Park Avenue, 8th Floor
New York, NY 10017
Davidi Gilo(4).............................................. 2,733,104 6.6%
c/o DSP Communications, Inc.
20300 Stevens Creek Blvd.
Cupertino, CA 95014
Joseph Perl(5).............................................. 450,176 1.1%
David Aber(6)............................................... 136,763 *
Arnon Kohavi(7)............................................. 180,799 *
Stephen P. Pezzola(8)....................................... 220,348 *
Nathan Hod(9)............................................... -- *
Gerald Dogon(10)............................................ 233,226 *
Lewis S. Broad(11).......................................... 221,000 *
Andrew W. Schonzeit(12)..................................... 91,964 *
Neill H. Brownstein(13)..................................... 140,744 *
Avraham Fischer(14)......................................... 148,000 *
All Directors and Executive Officer as a group (13
persons)(15).............................................. 5,006,338 11.5%
</TABLE>
- ---------------
* Less than 1%
(1) Number of Shares and percentage ownership include Shares issuable pursuant
to stock options held by the person in question exercisable within 60 days
after October 20, 1999. Percentages are based on 40,385,683 Shares
outstanding as of October 20, 1999.
(2) With respect to information relating to Gilder Gagnon Howe & Co. LLC
("GGH"), the Company has relied on information supplied by such entity on
its Schedule 13G filings with the SEC dated August 11, 1998, November 10,
1998 and February 16, 1999. Pursuant to the Schedule 13G filings, GGH has
sole voting power with respect to only 68,275 of these Shares and has sole
investment power with respect to none of these Shares.
(3) With respect to information relating to J.&W. Seligman & Co. Incorporated,
and related entities, the Company has relied on Information supplied by
such entity in its Schedule 13G filing with the SEC dated February 10,
1999. Pursuant to the Schedule 13G filing, J.&W. Seligman & Co.
Incorporated does not have sole voting or dispositive power with respect to
any of the Shares.
(4) Includes (i) 731,604 Shares held by Harmony Management, Inc., of which
Davidi Gilo and Shamaya Gilo are the sole shareholders and (ii) 786,000
Shares held by The Gilo Family Trust, of which Mr. Gilo serves as trustee.
Also includes 1,215,500 Shares issuable pursuant to stock options. Excludes
S-6
<PAGE> 44
1,217,440 Shares held in three trusts for the benefit of Mr. Gilo's
children, as to which Mr. Gilo has no voting or investment power; Mr. Gilo
disclaims any beneficial ownership of such shares.
(5) Includes 448,398 Shares issuable pursuant to stock options. Dr. Perl, the
former Chief Executive Officer and President, ceased to be an officer and
director of the Company in June 1999.
(6) Includes 135,000 Shares issuable pursuant to stock options.
(7) Includes 160,043 Shares issuable pursuant to stock options.
(8) Includes 201,500 Shares issuable pursuant to stock options.
(9) Mr. Hod, the former Chairman of the Board, left the Company in December
1998.
(10) Includes 230,658 Shares issuable pursuant to stock options. Mr. Dogon, a
former executive officer and Director, ceased to be an officer in October
1998 and a Director in January 1999.
(11) Includes 35,000 Shares issuable pursuant to stock options.
(12) Includes 64,000 Shares issuable pursuant to stock options. Excludes 24,600
Shares held in four trusts for the benefit of Mr. Schonzeit's children, as
to which Mr. Schonzeit has no voting or investment power. Mr. Schonzeit
disclaims any beneficial ownership of such Shares.
(13) Includes 38,000 Shares issuable pursuant to stock options.
(14) Includes 148,000 Shares issuable pursuant to stock options.
(15) See Footnotes (4) through (14). Includes 3,125,808 Shares issuable pursuant
to stock options. Includes Shares beneficially owned by Nathan Hod, Gerald
Dogon and Joseph Perl, who served as executive officers and directors in
fiscal 1998, but who are no longer executive officers or directors of the
Company. Also includes Shares beneficially owned by Shmuel Arditi and
Gabriel Hilevitz, who are currently executive officers but were not
executive officers in 1998.
S-7
<PAGE> 45
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth all compensation earned for the years ended
December 31, 1998, 1997 and 1996, by the Company's Chief Executive Officer, each
of the four other most highly compensated executive officers of the Company, and
two former executive officers of the Company (collectively, the "Named Executive
Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
AWARDS
------------
ANNUAL COMPENSATION SECURITIES
------------------------------ UNDERLYING ALL OTHER
YEAR SALARY($) BONUS(1)($) OPTIONS(#) COMPENSATION ($)(2)
---- --------- ----------- ------------ -------------------
<S> <C> <C> <C> <C> <C>
Davidi Gilo(3).................. 1998 $146,923 $ 37,560 1,628,000 $450,000(5)
Chairman of the Board, Chief 1997 $300,000 $ -- 1,170,000(4) --
Executive Officer and
President 1996 $300,000 $ 375,000 770,000 --
Joseph Perl(6).................. 1998 $213,354 $ 129,375 950,000(7) $105,177(8)
Former Chief Executive Officer 1997 $191,695 -- -- $ 24,384(9)
and President 1996 $176,678 $ 130,000 400,000 $ 12,574(2)
David Aber(10).................. 1998 $137,031 $ 42,195 225,000(11) $ 27,726(2)
Senior Vice President and
Chief 1997 $ 20,392 -- 100,000 $ 3,913(2)
Financial Officer 1996 -- -- -- --
Arnon Kohavi.................... 1998 $139,920 $ 34,980 175,000(12) $ 509
Senior Vice President of
Strategic 1997 $129,320 $ 26,235 140,000(13) --
Relations 1996 $121,800 $ 27,500 -- --
Stephen P. Pezzola(14).......... 1998 $115,000 $ 40,000 200,000(15) --
General Counsel and Corporate 1997 $ 95,000 -- 68,000(16) --
Secretary 1996 $ 26,250 $ 30,000 38,000 --
Nathan Hod...................... 1998 $271,057 $ 143,750 350,000(18) $653,751(20)
Former Chairman of the Board 1997 $200,000 -- 400,000(19) $ 23,838(21)
and Chief Executive
Officer(17) 1996 $200,000 $ 250,000 200,000 --
Gerald Dogon.................... 1998 $186,908 $ 94,953 240,000(23) $ 44,735(2)
Former Chief Financial 1997 $169,812 -- 200,000(24) $ 29,550(25)
Officer(22) 1996 $162,853 $ 130,000 200,000 $ 12,060(2)
</TABLE>
- ---------------
(1) The Company's executive officers are eligible for annual cash bonuses. Such
bonuses are generally based upon achievement of corporate performance
objectives determined by the Compensation Committee; however, the bonuses
of the Chairman of the Board, the Chief Executive Officer and the General
Counsel are specified in employment agreements, subject to increases as may
be awarded by the Compensation Committee. Bonuses are awarded by the Chief
Executive Officer based upon individual, as well as corporate performance
(except the bonuses provided in employment agreements). The Company
generally pays bonuses in the year following that in which the bonuses were
earned.
(2) On behalf of Dr. Perl, Mr. Aber, Mr. Hod and Mr. Dogon, the Company made
monthly payments to a severance fund, a pension fund and a risk/disability
fund. The amounts held in such funds on their behalf are generally payable
to them upon termination of their employment with the Company.
(3) Mr. Gilo served as Chairman of the Board throughout 1996 and until November
1997, and he continued to serve as a non-officer employee of the Company
until April 1998. In October 1998, Mr. Gilo was re-appointed as Chairman of
the Board, and compensation information for 1998 therefore reflects the
periods from January 1 through March 31, 1998 and October 12 through
December 31, 1998.
(4) Includes 770,000 options that were granted prior to 1997 that were repriced
in March 1997. See "Repricing of Options."
S-8
<PAGE> 46
(5) Severance payment paid pursuant to Mr. Gilo's prior employment agreement in
connection with Mr. Gilo's resignation as Chairman of the Board in November
1997.
(6) Dr. Perl was appointed as Chief Executive Officer and President of the
Company in July 1998. Prior to that time, he served as the Company's Chief
Technical Officer. Dr. Perl resigned as Chief Executive Officer and
President in June 1999.
(7) Includes 400,000 options that were granted prior to 1998 that were repriced
in October 1998. Also includes 200,000 options that were granted in June
1998 and were subsequently terminated in October 1998 in connection with
the option repricing program. See "Repricing of Options."
(8) Includes travel, shipping, interim housing and related expenses in the
amount of $24,811. Also includes $37,743 paid to Dr. Perl for accrued but
unused vacation, and $42,623 paid to the severance, pension and disability
funds referenced in footnote 2. Dr. Perl also received an interest-free
loan in the amount of $1 million for residential housing in connection with
Dr. Perl's relocation from Israel to the United States. See "Employment
Agreements."
(9) Includes $10,224 paid to Dr. Perl for accrued but unused vacation, and
$14,160 paid to the severance, pension and disability funds referenced in
footnote 2.
(10) Mr. Aber joined the Company in October 1997.
(11) Includes 100,000 options that were granted prior to 1998 that were repriced
in October 1998. Also includes 50,000 options that were granted in June
1998 and were subsequently terminated in October 1998 in connection with
the option repricing program. See "Repricing of Options."
(12) Includes 50,000 options that were granted in June 1998 and were
subsequently terminated in October 1998 in connection with the option
repricing program. See "Repricing of Options."
(13) Includes 70,000 options that were granted in January 1997 and were
subsequently terminated in March 1997 in connection with the March 1997
repricing program. See "Repricing of Options."
(14) Mr. Pezzola joined the Company in September 1996.
(15) Includes 30,000 options that were granted prior to 1998 that were repriced
in October 1998. Also includes 10,000 options that were granted in June
1998 and were subsequently terminated in October 1998 in connection with
the option repricing program. See "Repricing of Options."
(16) Includes 38,000 options that were granted prior to 1997 that were repriced
in March 1997. See "Repricing of Options."
(17) Mr. Hod resigned as an executive officer and director of the Company in
October 1998.
(18) Includes 150,000 options that were granted in June 1998 and were
subsequently terminated in October 1998 in connection with the option
repricing program. See "Repricing of Options."
(19) Includes 200,000 options that were granted prior to 1997 that were repriced
in March 1997. See "Repricing of Options."
(20) Includes a $600,000 severance payment made pursuant to Mr. Hod's amended
employment agreement in connection with his departure from the Company, and
$53,751 paid to the severance, pension and disability funds referred to in
footnote 2.
(21) Payment to Mr. Hod for accrued but unused vacation.
(22) Mr. Dogon resigned as an executive officer of the Company in October 1998
and as a director of the Company in January 1999.
(23) Includes 120,000 options that were granted in June 1998 and were
subsequently terminated in October 1998 in connection with the option
repricing program. See "Repricing of Options."
(24) All of such options represent options that were granted prior to 1997 that
were repriced in connection with the March 1997 repricing program. See
"Repricing of Options."
(25) Includes $16,842 paid to Mr. Dogon for accrued but unused vacation, and
$12,708 paid to the severance, pension and disability funds referenced in
footnote 2.
S-9
<PAGE> 47
OPTION GRANTS
The following table sets forth certain information with respect to stock
options granted during fiscal year 1998 to each of the Named Executive Officers.
In accordance with the rules of the SEC, also shown below is the potential
realizable value over the term of the option (the period from the grant date to
the expiration date) based on assumed rates of stock appreciation of 5% and 10%,
compounded annually, calculated based on the closing price of the Shares on the
grant date. These amounts are based on certain assumed rates of appreciation and
do not represent the Company's estimate of future stock price. Actual gains, if
any, on stock option exercises will be dependent on the future performance of
the Shares.
OPTION GRANTS IN FISCAL YEAR 1998
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS(1)
-------------------------
% OF TOTAL POTENTIAL REALIZABLE VALUE AT
NUMBER OF OPTIONS ASSUMED ANNUAL RATES OF
SECURITIES GRANTED TO STOCK PRICE APPRECIATION FOR
UNDERLYING EMPLOYEES EXERCISE OPTION TERM
OPTIONS IN FISCAL PRICE EXPIRATION ------------------------------
NAME GRANTED(#) YEAR 1998 ($/SHARE) DATE 5% 10%
---- ---------- ----------- --------- ---------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Davidi Gilo.............. 378,000 5.61% $10.50 10/12/03 -- $ 102,168
400,000 5.94% $ 8.19 10/12/03 $ 139,053 $1,033,114
850,000 12.62% $ 6.69 10/12/03 $1,570,488 $3,470,368
Joseph Perl.............. 400,000(2) 5.94% $ 6.69 1/24/02 $ 464,997 $ 983,440
200,000(3) 2.97% $13.50 6/16/03 $ 745,960 $1,648,377
200,000(4) 2.97% $ 6.69 6/16/03 $ 342,812 $ 751,197
150,000 2.23% $ 5.25 10/8/03 $ 217,572 $ 480,777
Arnon Kohavi............. 50,000(3) 0.74% $13.50 6/16/03 $ 86,490 $ 412,094
50,000(4) 0.74% $ 6.69 6/16/03 $ 85,703 $ 187,799
75,000 1.11% $ 5.25 10/8/03 $ 108,786 $ 240,388
David Aber............... 100,000(2) 1.49% $ 6.13 10/28/02 $ 134,090 $ 289,192
50,000(3) 0.74% $13.50 6/16/03 $ 186,490 $ 412,094
50,000(4) 0.74% $ 6.13 6/16/03 $ 78,752 $ 172,628
25,000 0.37% $ 5.25 10/8/03 $ 36,262 $ 80,129
Stephen P. Pezzola....... 30,000(2) 0.44% $ 6.69 7/22/02 $ 40,578 $ 86,887
10,000(3) 0.15% $13.50 6/16/00 $ 13,838 $ 28,350
10,000(4) 0.15% $ 6.69 6/16/00 $ 5,711 $ 11,609
150,000 2.23% $ 5.25 10/8/03 $ 217,572 $ 480,777
Nathan Hod............... 200,000(5) 2.97% $13.50 7/16/03 $ 745,960 $1,648,377
150,000(6) 2.23% $ 6.69 12/31/00 $ 114,710 $ 236,279
Gerald Dogon............. 120,000(3) 1.78% $13.50 6/16/03 $ 447,576 $ 989,026
120,000(4) 1.78% $ 6.69 6/16/03 $ 205,687 $ 450,718
</TABLE>
- ---------------
(1) All options were granted pursuant to the 1995 Employee and Consultant Stock
Plan, the 1996 Stock Option Plan or the 1998 Non-Qualified Stock Option
Plan.
(2) These options were originally granted prior to 1998, but were repriced in
October 1998. See "Repricing of Options."
(3) These options were granted in June 1998, but were effectively canceled by
subsequent repricing in October 1998. See "Repricing of Options."
(4) These options are the repriced options that effectively replaced options
granted in June 1998. See "Repricing of Options."
(5) These options were granted in June 1998, but 150,000 of these options were
effectively canceled by subsequent repricing in October 1998 pursuant to an
amendment to Mr. Hod's employment agreement entered into in connection with
his resignation as Chairman of the Board. The 150,000 options were also
amended such that the termination date of the options was changed to
December 31, 2000. The remaining 50,000 options were terminated in October
1998. See "Repricing of Options."
(6) These options are the 150,000 repriced options that effectively replaced Mr.
Hod's options granted in June 1998. See "Repricing of Options."
S-10
<PAGE> 48
AGGREGATE OPTION EXERCISES IN FISCAL YEAR 1998
AND STOCK OPTION VALUES AT END OF FISCAL YEAR 1998
The following table sets forth information concerning option exercises
during fiscal 1998, and the aggregate value of unexercised options as of
December 31, 1998 held by each of the Named Executive Officers:
<TABLE>
<CAPTION>
AGGREGATE OPTION
EXERCISES IN
FISCAL YEAR 1998 NUMBER OF SECURITIES VALUE OF UNEXERCISED
------------------------- UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS AT
SHARES OPTIONS AT DECEMBER 31, 1998 DECEMBER 31, 1998(1)
ACQUIRED ON VALUE ---------------------------- ---------------------------
NAME EXERCISE(#) REALIZED($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Davidi Gilo............. 567,688 $2,787,697 856,832 358,668 $6,713,517 $1,729,045
Joseph Perl............. 160,000 $2,167,748 474,117 363,281 $4,320,489 $3,305,569
Arnon Kohavi............ 68,190 $ 849,912 159,838 111,250 $1,326,229 $ 912,993
Stephen P. Pezzola...... 5,000 $ 33,125 162,167 60,833 $1,488,527 $ 512,286
David Aber.............. -- -- 93,750 81,250 $ 877,734 $ 751,953
Nathan Hod.............. 60,000 $1,107,414 382,558 -- $4,235,019 --
Gerald Dogon............ 20,000 $ 346,475 406,365 221,993 $4,033,847 $1,433,584
</TABLE>
- ---------------
(1) Calculated on the basis of the closing sale price of the Shares as reported
on the NYSE on December 31, 1998 of $15.3125 per share, minus the exercise
price.
EMPLOYMENT AGREEMENTS
Effective October 12, 1998, Davidi Gilo entered into an employment
agreement with the Company pursuant to which he serves as Chief Executive
Officer and Chairman of the Company's Board and devotes at least 30 hours per
week to his Company duties. The term of the agreement extends through August 31,
2002, with automatic annual one-year extensions until either party gives notice
of termination, unless sooner terminated pursuant to the terms of the agreement.
The agreement provides for an annual base salary of $300,000, with annual
increases as may be determined by the Board of Directors in its discretion. In
addition, Mr. Gilo is entitled to participate in each bonus plan adopted by the
Board of Directors. Mr. Gilo's annual bonus under the agreement will be equal to
(i) 25% of Mr. Gilo's base salary should the Company meet 80% of its plan for
revenues and earnings per share as presented to the Board in January of each
year (the "Yearly Plan") during the term of Mr. Gilo's employment; (ii) 75% of
his base salary should the Company meet 100% of its Yearly Plan; and (iii) 125%
of his base salary should the Company meet 120% of its Yearly Plan, with the
bonus prorated if the Yearly Plan is met between 80% and 100%, or between 100%
and 120%. The agreement may be terminated by Mr. Gilo upon 90 days' prior
written notice or, without cause, by the Company upon written notice. A
termination without cause shall also be deemed to occur in the event that a
person or group of persons purchases over 50% of the voting stock of the Company
from existing stockholders in a tender or exchange offer not recommended by the
Company Board, or if a majority of the members of the board are replaced in any
36 month period through contested elections. In the event the Company terminates
the agreement without cause, the Company shall pay Mr. Gilo a severance fee
equal to the full amount of compensation that he could have expected to earn
under the agreement, as and when payable, through the end of the term. If the
agreement is terminated for certain types of cause (as defined in the
agreement), or Mr. Gilo or the Company elects not to renew the agreement, the
Company shall pay Mr. Gilo a severance fee equal to his then-current monthly
salary multiplied by six (6). If the Company terminates the agreement for
certain types of cause involving wilful misconduct, no severance will be paid.
If Mr. Gilo voluntarily elects to terminate his employment, then the Company
shall pay Mr. Gilo a severance fee equal to his then-current monthly salary
multiplied by the lesser of the number 18 or the number of months left in the
original term of the agreement plus nine (9).
In September 1996, Stephen P. Pezzola entered into an employment agreement
with the Company, which agreement was amended and restated effective as of
January 1, 1998, January 16, 1999 and August 12,
S-11
<PAGE> 49
1999. Pursuant to the amended agreement, Mr. Pezzola serves as General Counsel
of the Company and devotes approximately 30 hours per week to his duties as
General Counsel. The term of the agreement extends through August 12, 2001, with
automatic annual one-year extensions until either party gives notice of
termination, unless sooner terminated pursuant to the terms of the agreement.
The agreement provides that Mr. Pezzola receive an annual base salary of
$200,000, with annual increases as may be determined by the Compensation
Committee in its discretion. In addition, Mr. Pezzola is entitled to participate
in each bonus plan adopted by the Board of Directors. Mr. Pezzola's annual bonus
under the agreement will be equal to (i) 25% of Mr. Pezzola's base salary should
the Company meet 80% of its Yearly Plan during the term of Mr. Pezzola's
employment; (ii) 50% of his base salary should the Company meet 100% of its
Yearly Plan; and (iii) 100% of his base salary should the Company meet 120% of
its Yearly Plan, with the bonus prorated if the Yearly Plan is met between 80%
and 100%, or between 100% and 120%. The agreement may be terminated by Mr.
Pezzola upon 60 days' prior written notice or, without cause, by the Company
upon written notice. If the Company terminates the agreement without cause (as
defined in the agreement), the Company shall pay Mr. Pezzola a severance fee
equal to his then current monthly salary multiplied by the greater of the number
of full months left until the end of the then current employment term, or six
(6). If the agreement is not renewed after August 12, 2001 or if the Company
terminates the agreement for certain types of cause (as defined in the
agreement), the Company shall pay Mr. Pezzola a severance fee equal to his
then-current monthly salary multiplied by six (6). If Mr. Pezzola voluntarily
elects to terminate his employment, the Company shall pay Mr. Pezzola a
severance fee equal to his then-current monthly salary multiplied by three (3).
If the Company terminates the agreement for certain types of cause involving
wilful misconduct, no severance will be paid.
On August 12, 1999, David Aber entered into an employment agreement with
the Company pursuant to which Mr. Aber serves as Senior Vice President and Chief
Financial Officer of the Company. The term of the agreement extends through
August 12, 2001, with automatic annual one-year extensions until either party
gives notice of termination, unless sooner terminated pursuant to the terms of
the agreement. The agreement provides that Mr. Aber receive an annual base
salary of NIS 660,000 (approximately $154,000), with annual increases as may be
determined by the Compensation Committee in its discretion. In addition, Mr.
Aber is entitled to participate in each bonus plan adopted by the Board of
Directors. Mr. Aber's annual bonus under the agreement will be equal to (i) 25%
of Mr. Aber's base salary should the Company meet 80% of its Yearly Plan during
the term of Mr. Aber's employment; (ii) 50% of his base salary should the
Company meet 100% of its Yearly Plan; and (iii) 100% of his base salary should
the Company meet 120% of its Yearly Plan, with the bonus prorated if the Yearly
Plan is met between 80% and 100%, or between 100% and 120%. The agreement may be
terminated by Mr. Aber upon 60 days' prior written notice or, without cause, by
the Company upon written notice. If the Company terminates the agreement without
cause (as defined in the agreement), the Company shall pay Mr. Aber a severance
fee equal to his then current monthly salary multiplied by the greater of the
number of full months left until the end of the then current employment term, or
six (6). If the agreement is not renewed after August 12, 2001 or if the Company
terminates the agreement for certain types of cause (as defined in the
agreement), the Company shall pay Mr. Aber a severance fee equal to his
then-current monthly salary multiplied by six (6). If Mr. Aber voluntarily
elects to terminate his employment, the Company shall pay Mr. Aber a severance
fee equal to his then-current monthly salary multiplied by three (3). If the
Company terminates the agreement for certain types of cause involving wilful
misconduct, no severance will be paid.
On August 1, 1999, Shmuel Arditi entered into an employment agreement with
the Company pursuant to which Mr. Arditi serves as Chief Operating Officer of
the Company. The agreement has an unlimited term. The agreement provides that
Mr. Arditi receive an annual base salary of $155,000, with annual increases as
may be determined by the Company's Chief Executive Officer in his discretion. In
addition, Mr. Arditi is entitled to participate in each bonus plan adopted by
the Board of Directors. The agreement also provides that the Company will
reimburse Mr. Arditi for airfare for himself and his family and up to $20,000
for all reasonable expenses incurred in connection with his relocation from
Israel to California and for airfare and up to $10,000 in connection with his
return to Israel upon the conclusion of his employment with the Company. The
Company will also pay Mr. Arditi a housing subsidy of $1,500 per month for the
first two years of his employment in California. In addition, for each six
months of his employment, the Company has agreed to
S-12
<PAGE> 50
pay for one round-trip business class airline ticket for each of Mr. Arditi and
his family between Israel and California. The agreement may be terminated by Mr.
Arditi upon 60 days' prior written notice or, without cause, by the Company upon
60 days' prior written notice. If the Company terminates the agreement without
cause (as defined in the agreement), the Company shall pay Mr. Arditi a
severance fee equal to his then current monthly salary multiplied by six (6). If
Mr. Arditi voluntarily elects to terminate his employment, the Company shall not
pay Mr. Arditi a severance fee unless Mr. Arditi gives the Company at least four
months' prior written notice and actively works to train a successor. In such
event, Mr. Arditi will be paid a severance fee equal to his then current monthly
salary multiplied by four (4). If the Company terminates the agreement for
cause, no severance will be paid.
PAYMENTS IN RESPECT OF THE TRANSACTION
In connection with the Transaction, the Company Board has approved the
following bonuses for Davidi Gilo, David Aber and Stephen P. Pezzola in
recognition of their past efforts, their efforts in connection with the
Transaction and their continued employment with the Company through the
consummation of the Offer.
- A lump sum payment in the amount of $5 million to Davidi Gilo.
- A lump sum payment in the amount of $2.5 million to Stephen P. Pezzola.
- A lump sum payment in the amount of $2.5 million to David Aber.
The payments set forth above will be made to the above individuals
following the consummation of the Offer, on January 3, 2000.
If any portion of any payments or benefits received by any of the above
individuals becomes subject to the Excise Tax, Parent shall pay to each such
individual such additional amounts as are necessary to make him whole with
respect to such Excise Tax (and any taxes, including Excise Tax, that may become
payable with respect to such additional amounts).
COMPENSATION COMMITTEE
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The following is the Report of the Compensation Committee of the Company
Board, describing the compensation policies and rationale applicable to the
Company's executive officers with respect to the compensation paid to such
executive officers for fiscal year 1998. The information contained in the report
shall not be deemed to be "soliciting material" or to be "filed" with the SEC
nor shall such information be incorporated by reference into any future filing
under the Securities Act of 1933, as amended, or the Exchange Act, except to the
extent that the Company specifically incorporates it by reference into such
filing.
In fiscal year 1998, the members of the Compensation Committee were Messrs.
Broad, Iwamoto and Schonzeit, each of whom were non-employee directors of the
Company. In August 1999, Mr. Iwamoto resigned from the Company's Board.
Compensation Policy. The Company's Compensation Policy as established by
the Compensation Committee is that executive officers' total annual cash
compensation should vary with the performance of the Company and that long-term
incentives awarded to such officers should be aligned with the interest of the
Company's stockholders. The Company's executive compensation program is designed
to attract and retain executive officers who will contribute to the Company's
long-term success, to reward executive officers who contribute to the Company's
financial performance and to link executive officer compensation and stockholder
interests through the grant of stock options under the 1995 Employee and
Consultant Stock Plan, the 1996 Stock Option Plan and the 1998 Non-Qualified
Stock Option Plan (the "Option Plans").
Compensation of the Company's executive officers consists of three
principal components: salary, bonus and long-term incentive compensation
consisting of stock option grants.
S-13
<PAGE> 51
Salary. The minimum base salaries for the Company's Chairman of the Board,
Chief Executive Officer and General Counsel are specified in employment
agreements, and are subject to annual increases by the Compensation Committee in
its discretion. The base salaries of all executive officers are reviewed
annually and, subject to minimum amounts specified in employment agreements, are
set by the Compensation Committee. When setting base salary levels, in a manner
consistent with the Compensation Committee's policy outlined above, the
Committee considers competitive market conditions for executive compensation,
Company performance and individual performance.
Bonus. The Compensation Committee evaluated the performance and set bonuses
payable to the executive officers for the 1998 fiscal year. The performance
factors utilized by the Compensation Committee to determine whether bonuses
should be awarded to Company executive officers for fiscal 1998 included the
following: the level of sales of the Company's products during fiscal 1998; the
executive officer's overall individual performance in his position and relative
contribution to Company performance during the year; and the Board's desire to
retain the executive officer in the face of considerable competition for
executive talent within the industry. Based on the Company's performance in
1998, bonuses in the aggregate amount of $284,110 were paid to current executive
officers and $238,703 to two former executive officers in 1998. The bonuses of
the current Chairman of the Board and Chief Executive Officer, and the former
Chairman of the Board and Chief Financial Officer were specified in employment
agreements, subject to increase by the Compensation Committee based on the
performance factors discussed above. The Board of Directors or the Compensation
Committee in the future may modify the foregoing criteria or select other
performance factors with respect to executive officer bonuses for a given fiscal
year.
Long-term Incentive Compensation. The Company believes that option grants
(i) align executive interests with stockholder interests by creating a direct
link between compensation and stockholder return, (ii) give executives a
significant, long-term interest in the Company's success, and (iii) help retain
key executive officers in a competitive market for executive talent.
The Company's stock option plans authorize the Committee to grant stock
options to employees and consultants, including executive officers. Option
grants are made from time to time to executive officers whose contributions have
or will have a significant impact on the Company's long-term performance. The
Company's determination of whether option grants are appropriate each year is
based upon individual performance measures established for each individual.
Options are not necessarily granted to each executive officer during each year.
Generally, options granted to executive officers vest 25% on the first
anniversary of the date of grant and thereafter in equal monthly installments
over a period of three years, and expire five years from the date of grant;
however, in 1998, the vesting of options of executive officers that were
repriced were also subject to acceleration upon the occurrence of certain
milestones based on the market price of the Company's common stock. Details on
stock options granted to certain executive officers in 1998 are provided in the
table entitled "Option Grants in 1998" and details regarding the option
repricing in 1998 are provided in "Repricing of Options."
Compensation of Chairman of the Board And Chief Executive Officer. As
described above in "Employment Agreements," the minimum salary and bonus of
Davidi Gilo, the Chairman of the Board, and Joseph Perl, the former Chief
Executive Officer, are provided in their respective employment agreements and
are subject to increases as determined by the Board of Directors. The base
salaries specified in the employment agreements, and the long term incentive
compensation in the form of options granted to Mr. Gilo and Dr. Perl were
established by negotiations with Mr. Gilo and Dr. Perl, respectively, and in
determining the amount of the salary and other compensation paid to these
persons, the Compensation Committee considered factors including the performance
of Mr. Gilo and Dr. Perl and their contributions to the Company, the level of
salary and long term incentive compensation paid to persons in similar positions
at other companies in the Company's industry, and the considerable competition
for executive talent within the industry.
Mr. Gilo's and Dr. Perl's bonuses, under each of their employment
agreements, is based on the Company's performance each year. In 1998, certain of
the performance milestones set forth in Mr. Gilo's and Dr. Perl's employment
agreements, to determine the amount of each of their bonuses, were met and
bonuses
S-14
<PAGE> 52
of $37,560 and $129,375 were paid to Mr. Gilo and Dr. Perl, respectively, in
1998. Mr. Gilo's bonus was prorated to reflect that he served as Chairman of the
Board commencing in October 1998.
The salary and bonus compensation paid to Mr. Hod, the Company's former
Chairman of the Board and, until July 1998, the Company's Chief Executive
Officer, was specified in his employment agreement. In 1998, certain of the
performance milestones set forth in Mr. Hod's employment agreement, to determine
the amount of his bonus, were met and a bonus of $143,750 was paid to Mr. Hod in
1998. In addition, in connection with Mr. Hod's resignation as Chairman of the
Board, the Compensation Committee and the Board of Directors agreed to pay a
severance payment to Mr. Hod of $600,000, after considering the performance of
the Company in 1998 and the contributions of Mr. Hod to the Company. See
"Certain Relationships and Related Transactions."
Compensation Policy Regarding Deductibility. The Company is required to
disclose its policy regarding qualifying executive compensation for
deductibility under Section 162(m) of the Internal Revenue Code of 1986, as
amended (the "Code"), which provides that, for purposes of the regular income
tax and the alternative minimum tax, the otherwise allowable deduction for
compensation paid or accrued with respect to a covered employee of a
publicly-held corporation is limited to $1 million per year. For the fiscal year
ended December 31, 1998, no executive officer of the Company received $1
million. It is expected that the compensation to be paid to the Company's
Executive Officers for fiscal 1999 will exceed the $1 million limit for any
officer. The Company's Option Plans are structured so that any compensation
deemed paid to an executive officer when he exercises an outstanding option
under either of the Option Plans, with an exercise price equal to the fair
market value of the option shares on the grant date, will qualify as
performance-based compensation which will not be subject to the $1 million
limitation. The Compensation Committee currently intends to limit the dollar
amount of all other compensation payable to the Company's executive officers to
no more than $1 million.
Repricing of Options. In October 1998, the Compensation Committee adopted
an option repricing program for previously granted options to the Company's
employees, including its executive officers. Between July 1998 and October 1998,
stock prices in the general market and the price of the Shares declined
dramatically, even though the Company consistently met or exceeded analysts'
expectations. As a result of this decline, the Compensation Committee believed
that the relationship between the exercise price of many of its options and the
recent market price of the Shares did not provide effective equity incentives
for the Company's officers and employees. Equity incentives are a significant
component of the total compensation package of the Company's employees and play
a substantial role in the Company's ability to retain the services of
individuals essential to the Company's long-term success. The Compensation
Committee felt that the Company's ability to retain key employees would be
significantly impaired unless value was restored to their options. Accordingly,
the Compensation Committee determined it was necessary to effect an option
repricing program ("Repricing Program") to provide realistic incentives for the
employees to whom such options had been granted.
In light of the Company's circumstances at the time and the competitive
environment for its employees, the Compensation Committee adopted the Repricing
Program to reprice stock options whose option exercise prices were greater than
the current market price of the Company's common stock, excluding options that
had been previously repriced in March 1997. Under the terms of the Repricing
Program, in October 1998, options which were previously granted but not
previously repriced, at exercise prices greater than $6.13 and $6.69 per Share
for non-executives and executives, respectively, were exchanged. The exercise
price of the new options for non-executives and executives are: $6.13 and $6.69
per share, respectively. Notwithstanding the original vesting schedule of the
repriced options for non-executives, the vesting schedule of the new options was
amended such that one-sixth ( 1/6) of the options vest six months after the date
of the repricing, and one-thirty-sixth ( 1/36) of the options vest at the end of
each month thereafter for the following 30 months. In addition, certain of these
new options are subject to acceleration of vesting upon the occurrence of
certain milestones based upon the market price of the Shares. The repriced
options of executives retained their original vesting schedules, except that the
repriced options are subject to acceleration of vesting upon the occurrence of
certain milestones based upon the market price of the Shares.
S-15
<PAGE> 53
The following table sets forth the number of options repriced for the Named
Executive Officers for the fiscal years ended December 31, 1997 and December 31,
1998:
<TABLE>
<CAPTION>
OPTION REPRICINGS IN 1997 AND 1998
--------------------------------------------------------------------------
LENGTH OF
NUMBER OF MARKET EXERCISE ORIGINAL
SECURITIES PRICE AT PRICE AT NEW OPTION TERMS
UNDERLYING TIME OF TIME OF EXERCISE REMAINING
DATE OF OPTIONS REPRICING REPRICING PRICE AT DATE OF
NAME REPRICING REPRICED(#) ($/SHARE) ($/SHARE) ($/SHARE) REPRICING
---- --------- ----------- --------- --------- --------- ------------
<S> <C> <C> <C> <C> <C> <C>
Davidi Gilo................ 3/06/97 350,000 $9.88 $22.75 $10.88 5.50 years
3/06/97 210,000 $9.88 $24.00 $10.88 4.75 years
3/06/97 210,000 $9.88 $28.00 $10.88 4.75 years
Joseph Perl................ 10/12/98 400,000 $6.69 $10.25 $ 6.69 3.28 years
10/12/98 200,000 $6.69 $13.50 $ 6.69 4.68 years
David Aber................. 10/07/98 100,000 $6.13 $17.88 $ 6.13 4.06 years
10/07/98 50,000 $6.13 $13.50 $ 6.13 4.69 years
Arnon Kohavi............... 3/06/97 70,000 $9.88 $24.25 $10.88 4.87 years
10/12/98 50,000 $6.69 $13.50 $ 6.69 4.68 years
Nathan Hod................. 3/06/97 100,000 $9.88 $21.25 $10.88 4.75 years
3/06/97 100,000 $9.88 $21.25 $10.88 5.75 years
10/12/98 150,000 $6.69 $13.50 $ 6.69 4.68 years
Stephen P. Pezzola......... 3/06/97 8,000 $9.88 $18.25 $10.88 4.29 years
3/06/97 30,000 $9.88 $21.25 $10.88 4.75 years
10/12/98 30,000 $6.69 $15.25 $ 6.69 3.78 years
10/12/98 10,000 $6.69 $13.50 $ 6.69 1.68 years
Gerald Dogon............... 3/06/97 100,000 $9.88 $21.25 $10.88 4.75 years
3/06/97 100,000 $9.88 $21.25 $10.88 5.75 years
10/12/98 120,000 $6.69 $13.50 $ 6.69 4.68 years
</TABLE>
The above Report on Executive Compensation is submitted by the Compensation
Committee:
Lewis S. Broad
Andrew W. Schonzeit
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
No member of the Company's Compensation Committee was an officer, former
officer or employee of the Company or any subsidiary during fiscal year 1998. No
executive officer of the Company served as a member of the compensation
committee or the board of directors of another entity, one of whose executive
officers served on the Company's Compensation Committee or the Company Board
during fiscal year 1998.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In connection with Davidi Gilo's appointment as Chairman of the Board in
October 1998, the Company sold 350,000 Shares to Mr. Gilo on October 12, 1998.
The purchase price was $2,340,625, or $6.6875 per Share, which was the closing
Share price as reported on the NYSE on October 12, 1998. The purchase price was
paid by delivery by Mr. Gilo to the Company of a promissory note in the
principal amount of $2,340,625. The note bears interest at the rate of 6.5% per
annum. Principal and interest under the note are due and payable on December 31,
2001. The note is secured by a deed of trust on certain real property owned by
Mr. Gilo.
In November 1998, Mr. Gilo exercised options to purchase 412,500 Shares.
The exercise price was paid by delivery by Mr. Gilo to the Company of a
promissory note in the principal amount of $3,233,433. The note bears interest
at the rate of 6.5% per annum. Principal and interest under the note are due and
payable on the earlier of December 31, 2001 or the date on which Mr. Gilo sells
certain Shares. The note is secured by a deed of trust on certain real property
owned by Mr. Gilo and certain Shares owned by Mr. Gilo.
S-16
<PAGE> 54
In connection with Joseph Perl's relocation from Israel to California in
June 1998, the Company loaned $1 million to Dr. Perl and his wife, in exchange
for the delivery by Dr. and Mrs. Perl to the Company of a promissory note in the
principal amount of $1 million. The note bears no interest. Principal under the
note is due and payable on the earlier to occur of Dr. Perl's ceasing to be an
employee of the Company or the sale of Dr. Perl's home in California. The note
is secured by a deed of trust on certain real property owned by Dr. and Mrs.
Perl.
Avraham Fischer, a Director of the Company, is a senior partner of the law
firm of Fischer, Behar & Co., which serves as legal counsel on matters regarding
Israeli law for the Company and its Israeli subsidiaries. The Company paid
approximately $248,610 in legal fees to Fischer, Behar & Co. during 1998.
Effective January 1, 1998, Nathan Hod entered into an employment agreement
with the Company which replaced his prior employment agreement and pursuant to
which he served as Chairman of the Board of Directors and Chief Executive
Officer. In July 1998, Mr. Hod resigned as Chief Executive Officer, and on
October 12, 1998, Mr. Hod resigned as Chairman of the Board and as a Director of
the Company. In connection with Mr. Hod's resignation, Mr. Hod and the Company
entered into an amendment to his employment agreement pursuant to which Mr. Hod
remained an employee of the Company and served as an advisor to Davidi Gilo, the
Company's Chairman of the Board, through December 31, 1998. The amended
agreement, which terminated on December 31, 1998, provided that Mr. Hod was
entitled to receive his annual salary at the rate of $250,000 through December
31, 1998 and would receive his annual bonus for 1998 as specified in his
employment agreement. In addition, the agreement provided that the Company would
pay Mr. Hod a severance fee of $600,000. The Company has also agreed to provide
Mr. Hod with an office allowance with a value of approximately $500 per month
for up to a two year period. The amended agreement also amended certain of Mr.
Hod's outstanding options such that (i) 133,356 of his options were immediately
vested in full in October 1998; (ii) 150,000 of the options were immediately
vested in full in October 1998, had the exercise price of such options reduced
from $13.50 to $6.69 per Share, and had the termination date extended through
December 31, 2000, notwithstanding Mr. Hod's departure from the Company; and
(iii) 250,000 of his outstanding options were immediately terminated.
Effective January 1, 1998, Gerald Dogon entered into an employment
agreement with the Company pursuant to which he served as Chief Financial
Officer and Executive Vice President. In October 1998, Mr. Dogon resigned as
Chief Financial Officer and Executive Vice President, and in January 1999, he
resigned as a Director of the Company. Mr. Dogon currently serves as a
non-officer employee of the Company. The term of the agreement extends through
December 31, 2000, with automatic annual one-year extensions until either party
gives notice of termination, unless sooner terminated in accordance with the
terms of the agreement. The agreement originally provided for an annual base
salary of $165,135, which amount included an annual vehicle allowance, with
annual increases as may be determined by the Board of Directors in its
discretion. Currently Mr. Dogon is paid $100,000 per year under the agreement.
Through the end of 1998, Mr. Dogon's annual bonus under the agreement was equal
to (i) 25% of Mr. Dogon's base salary should the Company meet 80% of its Yearly
Plan during the term of Mr. Dogon's employment; (ii) 50% of his base salary
should the Company meet 100% of its Yearly Plan; and (iii) 100% of his base
salary should the Company meet 120% of its Yearly Plan, with the bonus prorated
if the Yearly Plan is met between 80% and 100%, or between 100% and 120%. The
agreement may be terminated by Mr. Dogon upon 90 days' prior written notice. In
the event the Company terminates the agreement without cause (as defined in the
agreement), the Company shall pay Mr. Dogon a severance fee equal to his
then-current rate of fixed monthly salary multiplied by the number of months
left until December 31, 2000. If the agreement is terminated for certain types
of cause (as defined in the agreement), or if Mr. Dogon or the Company elects
not to renew the agreement, the Company shall pay Mr. Dogon a severance fee
equal to his then-current rate of fixed monthly salary multiplied by six (6). If
the Company terminates the agreement for certain types of cause involving wilful
misconduct, no severance will be paid. If Mr. Dogon voluntarily elects to
terminate his employment, then the Company shall pay Mr. Dogon a severance fee
equal to his then-current rate of fixed monthly salary multiplied by the lesser
of the number 12 or the number of months left in the original term of the
agreement plus six (6).
S-17
<PAGE> 55
Effective July 22, 1998, Dr. Joseph Perl entered into an employment
agreement with the Company pursuant to which he served as Chief Executive
Officer and President of the Company. In June 1999, Dr. Perl resigned as Chief
Executive Officer and President, and as a Director of the Company. Pursuant to a
June 1, 1999 amendment to Dr. Perl's agreement, Dr. Perl currently serves as a
non-officer employee of the Company and devotes at least a majority of his
weekly working hours to the business of the Company. The term of the amended
agreement extends through August 31, 2001, unless sooner terminated pursuant to
the terms of the agreement. The agreement provides for an annual base salary of
$225,000, with annual increases as may be determined by the Board of Directors
in its discretion. In addition, Dr. Perl is entitled to participate in each
bonus plan adopted by the Board of Directors. Dr. Perl's annual bonus under the
agreement will be equal to (i) 25% of Dr. Perl's base salary should the Company
meet 80% of its Yearly Plan during the term of Dr. Perl's employment; (ii) 50%
of his base salary should the Company meet 100% of its Yearly Plan; and (iii)
100% of his base salary should the Company meet 120% of its Yearly Plan, with
the bonus prorated if the Yearly Plan is met between 80% and 100%, or between
100% and 120%. Pursuant to the agreement and in connection with Dr. Perl's
relocation from Israel to California, the Company loaned Dr. Perl $1 million on
an interest-free basis for the purchase of a home in the Cupertino, California
area. The agreement also provides that the Company will reimburse Dr. Perl for
all reasonable expenses incurred in connection with his relocation from Israel
to California and in connection with his return to Israel upon the conclusion of
his employment with the Company. In addition, for each six months of his
employment, the Company has agreed to pay for one round-trip airline ticket for
each of Dr. Perl and his wife and children between Israel and California. The
agreement may be terminated by Dr. Perl or, without cause, by the Company, upon
90 days' prior written notice. In the event the Company terminates the agreement
without cause (as defined in the agreement) or Dr. Perl elects to terminate the
agreement, the Company shall pay Dr. Perl a severance fee equal to his
then-current monthly salary multiplied by the number of months left until the
end of the original term of the agreement. If the agreement is terminated for
certain types of cause (as defined in the agreement), the Company shall pay Dr.
Perl a severance fee equal to his then-current monthly salary multiplied by six
(6). If the Company terminates the agreement for certain types of cause
involving wilful misconduct, no severance will be paid.
The Company has entered into indemnification agreements with each of its
directors and executive officers. Such agreements require the Company to
indemnify such individuals to the fullest extent permitted by Delaware law.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires the Company's directors,
executive officers and persons who own more than 10% of the Shares
(collectively, "Reporting Persons") to file reports of ownership and changes in
ownership of the Shares to the SEC and the NYSE. Copies of these reports are
also required to be delivered to the Company.
Except as set forth below, the Company believes, based solely on its review
of the copies of such reports received or written representations from certain
Reporting Persons, that during fiscal 1998, all Reporting Persons complied with
all applicable filing requirements. Exception: Arnon Kohavi, a Vice President of
the Company, inadvertently filed a late Form 4 for two transactions effected in
July 1998.
S-18
<PAGE> 56
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO. DOCUMENT DESCRIPTION
- ----------- ------------------------------------------------------------
<S> <C>
Exhibit 1. Corporate Nondisclosure Agreement, dated June 2, 1999, as
amended effective August 31, 1999, by and between DSP
Communications, Inc. and Intel Corporation.
Exhibit 2. Agreement and Plan of Merger, dated as of October 13, 1999,
by and among DSP Communications, Inc., Intel Corporation and
CWC Acquisition Corporation.
Exhibit 3. Stock Option Agreement, dated as of October 13, 1999, by and
between DSP Communications, Inc. and Intel Corporation.
Exhibit 4. Tender and Voting Agreement, dated as of October 13, 1999,
by and among Davidi Gilo, Intel Corporation and CWC
Acquisition Corporation.
Exhibit 5. Tender and Voting Agreement, dated as of October 13, 1999,
by and among Joseph Perl, Intel Corporation and CWC
Acquisition Corporation.
Exhibit 6. Letter to Stockholders from Davidi Gilo dated October 20,
1999.*
Exhibit 7. Letter of Merrill Lynch, Pierce, Fenner & Smith
Incorporated, dated October 13, 1999 to the Board of
Directors of the Company.*
Exhibit 8. Press Release issued by DSP Communications, Inc. and Intel
Corporation on October 14, 1999.
Exhibit 9. Covenant Not to Compete, dated as of October 13, 1999, by
and between Intel Corporation and Davidi Gilo.
Exhibit 10. Covenant Not to Compete, dated as of October 13, 1999, by
and between Intel Corporation and Joseph Perl.
Exhibit 11. Letter Agreement, dated as of October 13, 1999, by and
between Intel Corporation and Davidi Gilo.
Exhibit 12. Letter Agreement, dated as of October 13, 1999, by and
between Intel Corporation and Joseph Perl.
Exhibit 13. Letter Agreement, dated as of October 13, 1999, by and
between Intel Corporation and Shmuel Arditi.
Exhibit 14. Letter Agreement, dated as of October 13, 1999, by and
between Intel Corporation and David Aber.
Exhibit 15. Letter Agreement, dated as of October 13, 1999, by and
between Intel Corporation and Stephen P. Pezzola.
Exhibit 16. Form of Indemnification Agreement for directors and
executive officers.
Exhibit 17. Article X of the Company's Certificate of Incorporation, as
amended to date.
Exhibit 18. Article VI of the Company's Bylaws, as amended to date.
Exhibit 19. 1995 Employee and Consultant Stock Plan.
Exhibit 20. 1995 Employee Stock Purchase Plan.
Exhibit 21. 1995 Director Stock Option Plan.
Exhibit 22. 1996 Stock Option Plan.
Exhibit 23. 1998 Non-Qualified Stock Option Plan.
Exhibit 24. Amended and Restated Employment Agreement, dated as of
August 12, 1999, between DSP Communications, Inc., DSP
Telecom, Inc. and Stephen P. Pezzola.
Exhibit 25. Employment Agreement, dated as of October 12, 1998, by and
between DSP Telecom, Inc. and Davidi Gilo.
Exhibit 26. Employment Agreement, dated as of July 15, 1999, by and
between DSP Telecom, Inc. and Shmuel Arditi.
Exhibit 27. Intentionally omitted.
Exhibit 28. Employment Agreement, dated as of August 12, 1999, by and
between D.S.P.C. Technologies Ltd. and David Aber.
</TABLE>
- ---------------
* Copy attached to, or enclosed with, copies of this schedule mailed to
stockholders.
<PAGE> 1
AGREEMENT DATE: JUNE 2, 1999 EXHIBIT 1
Corporate Non-Disclosure Agreement
This Corporate Non-Disclosure Agreement ("Agreement") is entered into and made
effective as of the date set forth above, by and between Intel Corporation and
its majority owned subsidiaries ("Intel"), and the Participant identified below
("Participant"). Unless the Participant indicates that this Agreement will apply
only to the specific division or location, this Agreement will apply to the
Participant's entire Company.
THE PARTIES AGREE AS FOLLOWS:
1. Confidential Information Transmittal Form. The confidential,
proprietary and made secret information of the disclosing party
("Confidential Information") to be disclosed hereunder is that
information which (i) is described in the Confidential Information
Transmittal Record ("CITR") executed from time to time hereafter and
(ii) is marked with a "confidential", "proprietary", or similar legend.
CITRs are subject to the terms of this Agreement. CITRs will be
executed, in writing or in electronic form, by the parties prior to the
disclosure of Confidential Information. All Confidential Information
received from the disclosing party will be in tangible form. To be
considered Confidential Information, non-tangible disclosures must be
identified as confidential prior to disclosure and produced in writing,
marked as provided above and delivered to the receiving party within
thirty (30) days of the original date of disclosure. The CITR will
indicate the disclosing party, a description of the Confidential
Information disclosed, the names of the representatives of the parties
and the dates when the disclosure covered by the CITR commenced.
2. Obligations of Receiving Party. The receiving party will maintain the
confidentiality of the Confidential Information of the disclosing party
with at least the same degree of care that it uses to protect its own
confidential and proprietary information, but no less than a reasonable
degree of care under the circumstances. The receiving party will not
disclose any of the disclosing party's Confidential Information to any
employees or to any third parties except to the receiving party's
employees, parent company and majority-owned subsidiaries who have a
need to know and who agree to abide by nondisclosure terms at least as
comprehensive as those set forth herein: provided that the receiving
party will be liable for breach by any such entity. The receiving party
will not make any copies of the Confidential Information received from
the disclosing party except as necessary for its employees, parent
company and majority-owned subsidiaries with a need to know. Any copies
which are made will be identified as belonging to the disclosing party
and marked "confidential", "proprietary", or with a similar legend.
3. Period of Non-Assertion. Unless a shorter period is indicated in the
applicable CITR, the disclosing party will not insert any claims of
breach of this Agreement or misappropriation of trade secrets against
the receiving party arising from the receiving party's disclosure of
the disclosing party's Confidential Information made more than five
<PAGE> 2
(5) years from the date of the CITR under which such information was
disclosed. However, unless at least one of the exceptions set for in
Section 4 below has occurred, the receiving party will continue to
treat such confidential Information as the confidential information of
the disclosing party and only disclose any such Confidential
Information to third parties under the terms of a non-disclosure
agreement.
4. Termination of Obligation of Confidentiality. The receiving party will
not be liable for the disclosure of any Confidential Information which
is:
(a) rightfully in public domain other than by a breach of duty to
the disclosing party
(b) rightfully received from a third party without any obligation
of confidentiality
(c) rightfully known to the receiving party without any limitation
on use or disclosure prior to its receipt from the disclosing
party
(d) independently developed by employees of the receiving party;
or
(e) generally made available to third parties by the disclosing
party without restriction on disclosure.
5. Title. Title or the right to possess Confidential Information as
between the parties will remain in the disclosing party.
6. No Obligation of Disclosure: Termination. Neither party has any
obligation to disclose Confidential Information to the other. Either
party may terminate this Agreement at any time without cause upon
written notice to the other party: provided that each party's
obligations with respect to Confidential Information disclosed during
the term of this Agreement will survive any such termination. Either
party may, at any time: (a) cease giving Confidential Information to
the other party without any liability and/or (b) request in writing the
return or destruction of all or part of its Confidential Information
previously disclosed, and all copies thereof, and the receiving party
will promptly comply with such request, and certify in writing its
compliance.
7. Residuals. Notwithstanding anything herein to the contrary, either
party may use Residuals for any purpose, including without limitation
use in development manufacture, promotion, sale and maintenance of its
products or services: provided that this right to Residuals does not
represent a licence under any patents, copyrights or other intellectual
property rights of the disclosing party. The term "Residuals" means any
information retained in the unaided memories of the receiving party's
employees who have had access to the disclosing party's Confidential
Information pursuant to the terms of this Agreement. An employee's
memory is unaided if the employee has not intentionally memorized the
Confidential Information for the purpose of retaining and subsequently
using or disclosing it.
8. General.
<PAGE> 3
(a) This Agreement is neither intended to nor will it be
considered as creating a joint venture, partnership or other
form of business association between the parties, nor an
obligation to buy or sell products using or incorporating the
Confidential Information.
(b) Both parties understand and acknowledge that no license under
any patent, copyright, trade secret, or other intellectual
property right is granted to or conferred upon, either party
in this Agreement or by the disclosure of any Confidential
Information by one party to the other party as contemplated
hereunder, either expressly, by implication, inducement,
estoppel or otherwise, and that any license under such
intellectual property rights must be express and in writing.
(c) The failure of either party to enforce any right resulting
from breach of any provision of this Agreement by the other
party will not be deemed a waiver of any right relating to a
subsequent breach of such provision or of any other right
hereunder.
(d) This Agreement will be governed by laws of the State of
Delaware without reference to conflict of laws principles.
(e) This Agreement, any accompanying CITR and CITRs executed from
time to time hereafter which incorporate the terms of this
Agreement, constitutes the entire agreement between the
parties with respect to the disclosure(s) of Confidential
Information described in each CITR, and may not be amended
except in a writing signed by a duly authorized representative
of the respective parties. Any other agreements between the
parties, including non-disclosure agreements, will not be
affected by this Agreement.
INTEL CONTACT: Mohammad Aboobaker M/S: FMS-92 TEL NO: 356-6084
AGREED:
INTEL CORPORATION
2200 Mission College Blvd.
Santa Clara, CA 95052-8119 PARTICIPANT: DSP Communications
20300 Stevens Creek Blvd.
Cupertino, CA 95014
/s/ DAVIDI GILO
-----------------------------------------
Signature of Authorized Representative
(e.g. President or V.P.)
David Gilo
-----------------------------------------
Printed Name
Chairman
-----------------------------------------
Title
<PAGE> 4
Addendum No. 1
to
Corporate Non-Disclosure Agreement 4655141
between
Intel Corporation ("Intel")
and
DSP Communications Inc. ("Company")
Effective August 31, 1999 (the "Effective Date"), the above-referenced Agreement
is modified solely with respect to the Confidential Information Transmittal
Records dated after August 31, 1999, and before December 31, 1999, executed in
connection with the consideration of a possible business transaction involving
an acquisition of the Company (the "Transaction"), as follows:
1. Sentence 2 of Section 2 Obligations of Receiving Party is hereby
deleted and replaced with the following:
The receiving party will not disclose any of the disclosing party's
Confidential Information to any employees or to any third parties
except to employees of the receiving party or its employees, parent
company and majority-owned subsidiaries and financial advisors,
attorneys and accountants who have a need to know such Confidential
Information (collectively "Representatives"), and who agree to abide by
nondisclosure terms at least as comprehensive as those set forth
herein; provided that the receiving party will be liable for breach by
any such entity.
2. Section 7 Residuals is hereby deleted and replaced with the following:
The Company understands that Intel is a diverse corporation which
conducts research and development activities in an immense variety of
technologies, often resulting in new commercial product development.
The Company acknowledges that Intel may already be working on similar
technology as that disclosed by the Company, and that Intel's personnel
to whom the disclosure is made may be wholly unaware of this work.
Intel's receipt of Confidential Information under this agreement shall
not create any obligation in any way limiting, restricting, or
prohibiting Intel's assignment of employees or contractors.
Notwithstanding anything herein to the contrary, Intel may use
residuals of the Confidential Information for any purpose including
without limitation use in development, manufacture, promotion, sale and
maintenance of Intel's products and services. The term "residuals" as
used herein means any information relating to the Company's technology
retained in the unaided memories of Intel's Representatives who have
had access to such Confidential Information pursuant to the terms of
this agreement. A Representative's
<PAGE> 5
memory is unaided if the Representative has not intentionally memorized
the Confidential Information for the purpose of retaining and
subsequently using or disclosing it. This provision grants no patent or
copyright license.
3. Section 8 General hereby becomes Section 11 General.
4. A new Section 8 is hereby added:
Section 8 Press Releases/Disclosures. Neither party nor any of its
affiliates shall make, or cause to be made, without the prior written
consent of the other party, any public or private disclosure or other
announcement with respect to the existence of the Agreement, the fact
that any investigations, discussions or negotiations are taking or have
taken place concerning the Transaction between the parties, or the
diligence or Confidential Information has been requested or received
from the parties, or any of the terms, conditions or other facts with
respect to any such potential Transaction, including the status
thereof. Any press release or other public disclosure or other
announcement with respect to any of the foregoing matters required by
law or the rules of any applicable securities exchange or market system
shall be submitted to the nondisclosing party within a reasonable time
prior to release in order for the nondisclosing party to provide
comments and, where possible, request confidential treatment of such
disclosure.
Intel and the Company understand that each party is subject to the
reporting and disclosure requirements of the Securities Exchange Act of
1934 and as such is required to disclose certain material information
regarding itself and its business and operations. From time to time,
however, Intel and its affiliates and the Company and its affiliates
may have in their possession certain material information that has not
yet been disclosed to the public. To the extent that any information
disclosed to receiving party constitutes material nonpublic information
about disclosing party, receiving party acknowledges its obligations
under the securities laws and acknowledges that failure to abide by
such restrictions may subject Recipient to criminal and/or civil
penalties.
5. A new Section 9 is hereby added:
Section 9 No Representations. Except as may be specifically provided
hereafter in a definitive written agreement, neither party shall be
deemed to
<PAGE> 6
make or have made any representation or warranty, express or implied,
as to the accuracy or completeness of any Confidential Information
which either party furnished to the other, and neither party shall bear
any liability to the other party or the other party's employees, agents
or consultants resulting from the use of any Confidential Information
by the other party or its employees, agents or consultants.
6. A new Section 10 is hereby added:
Section 10 Standstill. Without prior written consent of the other party
to this Agreement, neither party will for a period of eighteen (18)
months from the Effective Date: (i) acquire, offer to acquire, or agree
to acquire, directly or indirectly, by purchase or otherwise, any
voting securities or direct or indirect rights or options to acquire
any voting securities of the other party, (ii) make, or in any way
participate, directly or indirectly, in any "solicitation" of any
"proxy" to vote (as such terms are used in the proxy rules of the
Securities and Exchange Commission) or seek to advise or influence any
person or entity with respect to the voting of any voting securities of
the other party, (iii) form, join or in any way participate, directly
or indirectly, in a "group" within the meaning of Section 13(d)(3) of
the Securities Exchange Act of 1934, as amended, with respect to any
voting securities of the other Party; (iv) otherwise act, along or in
concert with others, directly or indirectly, to seek control of the
management, board of directors, or policies of the other party; or (v)
seek any modification to or waiver of the terms or conditions of this
Section 10, unless, in any such case, specifically invited to do so by
actions of the Board of Directors or Chief Executive Officer of the
Company. Notwithstanding the above, either party and its affiliates
and/or its retirement plans may acquire not to exceed 2% of the
outstanding equity securities of the other party. The provisions of
this paragraph pertaining to Intel's obligations shall terminate in the
event that: (a) any third party unaffiliated with the Company initiates
a tender offer or exchange offer for the common stock of the Company or
(b) the Company enters into an agreement to merge with, or sell or
dispose of 50% or more of its assets or earning power, to any party not
affiliated with the Company. The provisions of this paragraph
pertaining to the Company's obligation shall terminate in the event
that: (a) any third party unaffiliated with Intel initiates a tender
offer or exchange offer for the common stock of Intel or (b) Intel
enters into an agreement to merge with, or sell or dispose of 50% or
more of its assets or earning power, to any party not affiliated with
Intel.
<PAGE> 7
7. New Section 11 is hereby added:
Section 11 Non-Exclusive Relationship: the Company acknowledges that
(a) Intel has invested and will continue to invest in a wide range of
companies in numerous market segments, (b) Intel may invest in multiple
competitors, with similar or identical strategies, within the same
market segment and (c) Intel will not maintain an exclusive
relationship with any one company.
8. New Section 12 is hereby added:
Section 12 Material Inside Information: Each party hereby acknowledges
that it is aware (and that its Representatives who are apprized of a
possible transaction have been advised) that the United States and
other applicable securities laws prohibit any person who has material,
non-public information about a company from purchasing or selling
securities of such company or from communicating such information to
any other person under circumstances in which it is reasonably
foreseeable that such person is likely to purchase or sell such
securities.
Except as modified herein, the terms and conditions of the Agreement remain in
full force and effect.
Agreed and accepted:
INTEL CORPORATION DSP Communications, Inc.
By: /s/ Guy Anthony By: /s/ Stephen P. Pezzola
------------------------- --------------------------------------
Guy Anthony Stephen P. Pezzola
- ----------------------------- -----------------------------------------
Printed Name Printed Name
Asst Treasurer General Counsel and Secretary
- ----------------------------- -----------------------------------------
Title Title
8/31/99 September 7, 1999
- ----------------------------- -----------------------------------------
Date Date
<PAGE> 8
Signature Page to Addendum No. 1 to Corporate
Non-Disclosure Agreement 4655141
<PAGE> 9
CITR DATE: August 31, , 1999 CNDA# 4665141
----------------- - --------------------------------
(Date Disclosure(s) will commence (Fill in Number from Executed CNDA)
Participant's Name: DSP Communications, Inc.
------------------------------------------------------------
Location of Disclosure: 2200 Mission College Blvd., Santa Clara, CA 95042
--------------------------------------------------------
Street Address City State Zip Code
Intel and Participant agree that the Confidential Information described below
shall be kept confidential by the receiving party. This CITR incorporates all
the terms and conditions of the Corporate Non-Disclosure Agreement ("CNDA")
executed by the parties.
1. Describe Confidential Information disclosed by each party. (Be
specific, include subject or product, any document title,
drawing/document number, date, rev., etc.) Identify visuals, foils, and
verbal disclosures. (Use additional sheets if necessary).
Intel Confidential Information:________________________________________
Participant's Confidential Information: Preliminary Due Diligence Per
-------------------------------
Attached List
-----------------------------------------------------------------------
2. This CITR covers the above described Confidential Information to be
conveyed commencing on the CITR Date stated above provided it is marked
as required under the CNDA.
3. Unless a shorter period is indicated below, the disclosing party will
not assert any claims of breach or misappropriation of trade secrets
against the receiving party arising from the receiving party's
disclosure of the disclosing party's Confidential Information under
this CITR more than five (5) years from the date when such information
was disclosed. However, unless at least one of the exceptions set
forth in Section 4 of the CNDA has occurred, the receiving party will
continue to treat such Confidential Information as the confidential
information of the disclosing party and only disclose any such
Confidential Information to third parties under the terms of a
non-disclosure agreement. Either party may at any time request in
writing the immediate return of all or part of its Confidential
Information disclosed hereunder, and all copies thereof, and the
receiving party shall promptly comply with such request. If initialed
and filled in below, the period after which the disclosing party agrees
not to assert claims against the receiving party with respect to the
Confidential Information disclosed under this CITR will be ____ months
(not less than twenty-four (24) months nor more than sixty (60)
months), (______/______)
4. Confidential Information may be controlled by U.S. Export Regulations,
and export, re-export or foreign disclosure (including to subsidiary
employees) may require U.S. Government approval. The receiving party
shall not use, export, transfer, make available or otherwise disclose
any Confidential Information in violation of U.S. Export Regulations,
including any use or development in nuclear, missile, chemical and/or
biological weapons activities.
<PAGE> 10
5. All other terms and conditions of the executed CNDA shall remain in
full force and effect. Nothing contained herein shall be construed as
amending or modifying the terms of the CNDA referenced above.
6. Both parties understand and acknowledge that no license under any
patent, copyright, trade secret or other intellectual property right is
granted to or conferred upon either party in this Agreement or by the
disclosure of any Confidential Information by one party to the other
party as contemplated hereunder, either expressly, by implication,
inducement, estoppel or otherwise, and that any license under such
intellectual property rights must be express and in writing.
PARTICIPANT DSP Communications, Inc.
------------------------------
(Company Name, Division/Sub if
applicable)
20300 Stevens Creek Blvd.
------------------------------
INTEL CORPORATION Street Address
2200 Mission College Blvd.
Santa Clara, CA 95052-8119 Cupertino, CA 95014
------------------------------
City, State, Zip
Represented By: Represented By:
/s/ GUY SMITH /s/ STEPHEN P. PEZZOLA
- --------------------------------- -----------------------------------------
Signature Signature
Guy Smith Stephen P. Pezzola
- --------------------------------- -----------------------------------------
Printed Name Printed Name
Asst. Treasurer General Counsel and Corporate Secretary
- --------------------------------- -----------------------------------------
Title Title
8/31/99 9/7/99 as of 8/31/99
- --------------------------------- -----------------------------------------
Date Date
PLEASE SEND ONE COPY OF THE CITR TO: INTEL CORPORATION, ATTN:
Post Contract Mgmt, FM6-03
1900 Pririe City Road, Folsom, CA 95630-9598
<PAGE> 1
Exhibit 2
- --------------------------------------------------------------------------------
AGREEMENT AND PLAN OF MERGER
DATED AS OF OCTOBER 13, 1999
AMONG
DSP COMMUNICATIONS, INC.,
INTEL CORPORATION
AND
CWC ACQUISITION CORPORATION
- --------------------------------------------------------------------------------
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C> <C>
ARTICLE 1 THE OFFER...................................................................1
Section 1.1. The Offer.....................................................1
Section 1.2. Company Actions...............................................4
Section 1.3. Boards of Directors and Committees; Section 14(f) of
Exchange Act..................................................5
ARTICLE 2 THE MERGER..................................................................6
Section 2.1. The Merger....................................................6
Section 2.2. Effective Time................................................6
Section 2.3. Closing of the Merger.........................................7
Section 2.4. Effects of the Merger.........................................7
Section 2.5. Certificate of Incorporation and Bylaws.......................7
Section 2.6. Directors.....................................................7
Section 2.7. Officers......................................................7
Section 2.8. Conversion of Shares..........................................7
Section 2.9. Dissenters' Rights............................................8
Section 2.10. Exchange of Certificates......................................8
Section 2.11. Assumed Stock Options.........................................9
ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF THE COMPANY..............................11
Section 3.1. Organization and Qualification; Subsidiaries; Investments....11
Section 3.2. Capitalization of the Company and its Subsidiaries...........12
Section 3.3. Authority Relative to this Agreement; Recommendation.........14
Section 3.4. SEC Reports; Financial Statements............................15
Section 3.5. Information Supplied.........................................15
Section 3.6. Consents and Approvals; No Violations........................16
Section 3.7. No Default...................................................16
Section 3.8. No Undisclosed Liabilities; Absence of Changes...............17
Section 3.9. Litigation...................................................18
Section 3.10. Compliance with Applicable Law...............................18
Section 3.11. Employee Benefits............................................18
Section 3.12. Labor and Employment Matters.................................22
Section 3.13. Environmental Laws and Regulations...........................23
Section 3.14. Taxes........................................................24
Section 3.15. Intellectual Property........................................26
Section 3.16. Insurance....................................................32
Section 3.17. Certain Business Practices...................................32
Section 3.18. Product Warranties...........................................32
Section 3.19. Suppliers and Customers......................................32
</TABLE>
i
<PAGE> 3
<TABLE>
<S> <C> <C> <C>
Section 3.20. Vote Required................................................33
Section 3.21. Opinion of Financial Advisor.................................33
Section 3.22. Brokers......................................................33
Section 3.23. Takeover Statutes............................................33
Section 3.24. Grants, Incentives and Subsidies.............................33
Section 3.25. Representations Complete.....................................34
ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF PARENT AND ACQUISITION...................34
Section 4.1. Organization.................................................34
Section 4.2. Authority Relative to this Agreement.........................35
Section 4.3. Information Supplied.........................................35
Section 4.4. Consents and Approvals; No Violations........................35
Section 4.5. Litigation...................................................36
Section 4.6. Brokers or Finders...........................................36
Section 4.7. Financing....................................................36
Section 4.8. Ownership of the Company.....................................36
Section 4.9. Acquisition's Operations.....................................36
ARTICLE 5 COVENANTS..................................................................36
Section 5.1. Conduct of Business of the Company...........................36
Section 5.2. No Solicitation or Negotiation...............................40
Section 5.3. Meeting of Stockholders......................................41
Section 5.4. Access to Information........................................42
Section 5.5. Certain Filings; Reasonable Efforts..........................43
Section 5.6. Public Announcements.........................................44
Section 5.7. Indemnification and Directors' and Officers' Insurance.......44
Section 5.8. Notification of Certain Matters..............................46
Section 5.9. Additions to and Modification of Company Disclosure Schedule.46
Section 5.10. Employee Matters.............................................46
Section 5.11. Company......................................................47
Section 5.12. Takeover Statutes............................................47
Section 5.13. Company Stock Options........................................47
Section 5.14. Israeli Operations...........................................48
Section 5.15. Real Property Transfer Taxes.................................48
ARTICLE 6 CONDITIONS TO CONSUMMATION OF THE MERGER...................................48
Section 6.1. Conditions to Each Party's Obligations to Effect the Merger..48
Section 6.2. Conditions to the Obligations of the Company.................48
Section 6.3. Conditions to the Obligations of Parent and Acquisition......49
ARTICLE 7 TERMINATION; AMENDMENT; WAIVER.............................................50
Section 7.1. Termination..................................................50
Section 7.2. Effect of Termination........................................51
Section 7.3. Fees and Expenses............................................52
Section 7.4. Amendment....................................................54
</TABLE>
ii
<PAGE> 4
<TABLE>
<S> <C> <C> <C>
Section 7.5. Extension; Waiver............................................54
ARTICLE 8 MISCELLANEOUS..............................................................54
Section 8.1. Nonsurvival of Representations and Warranties................54
Section 8.2. Entire Agreement; Assignment.................................55
Section 8.3. Validity.....................................................55
Section 8.4. Notices......................................................55
Section 8.5. Governing Law and Venue; Waiver of Jury Trial................56
Section 8.6. Descriptive Headings.........................................57
Section 8.7. Parties in Interest..........................................57
Section 8.8. Certain Definitions..........................................57
Section 8.9. Personal Liability...........................................59
Section 8.10. Specific Performance.........................................59
Section 8.11. No Obligation to Comply with Certain Requirements............59
Section 8.12. Counterparts.................................................60
Section 8.13. Ambiguities..................................................60
Section 8.14. Waiver.......................................................60
Section 8.15. Execution....................................................60
Section 8.16. Schedules....................................................60
</TABLE>
iii
<PAGE> 5
TABLE OF EXHIBITS
Exhibit A.............Form of Certificate of Merger
TABLE OF CONTENTS
TO
COMPANY DISCLOSURE SCHEDULE
Section 1.3(a)........Exceptions Relating to Subsidiary Boards
Section 3.1(a)........Subsidiaries
Section 3.1(c)........Equity Investments
Section 3.2(a)........Company Securities
Section 3.2(b)........Certain Capitalization and Other Matters
Section 3.4...........Company SEC Reports
Section 3.6...........Consents and Approvals
Section 3.7...........Defaults
Section 3.8...........Undisclosed Liabilities; Absence of Changes
Section 3.9...........Litigation
Section 3.10..........Non-Compliance with Law
Section 3.11(a).......Employee Plans
Section 3.11(c).......Employee Benefits Affected by this Transaction
Section 3.11(d).......Employee Benefits to Former Employees
Section 3.11(e).......Employee Matters
Section 3.11(g).......Employee Benefit Matters
Section 3.11(h).......Stock Options
Section 3.11(j).......No Events Under Compensation and Benefit Plans
Section 3.11(k).......Foreign Plans
Section 3.11(l).......Amendments and Actions under ERISA and other Applicable
Law
Section 3.11(m).......Medicare Compliance
Section 3.11(r).......Retroactive Premiums or Payments
Schedule 3.12.........Employment Matters
Schedule 3.12(d)......Non-Continuing Employees
Section 3.14(b).......Delinquent or Inaccurate Tax Returns
Section 3.14(d).......Tax Claims
Section 3.14(e).......Excess Parachute Payments
Section 3.14(f).......Tax Sharing Agreements
Section 3.14(g).......Limitations on Use of NOLs
Section 3.14(h).......Section 481 Adjustments
Section 3.15(a).......Intellectual Property
Section 3.15(b)(iii)..Trademarks
Section 3.15(c)(ii)...Patent Proceedings
Section 3.15(d)(ii)...Unauthorized Disclosure Policies and Agreements
Section 3.15(e)(i)....Inbound License Agreements
Section 3.15(e)(ii)...Outbound License Agreements
iv
<PAGE> 6
Section 3.15(f).......Ownership of Intellectual Property
Section 3.15(h).......No Infringement by the Company
Section 3.15(i).......Pending and Threatened Infringement Claims
Section 3.15(j).......Infringement Matters
Section 3.15(k).......Change in Control Re: Intellectual Property
Section 3.15(l).......Non-Company Intellectual Property Rights
Section 3.15(m).......Existing and Currently Manufactured Software
Section 3.15(o).......Year 2000 Compliance
Section 3.15(p).......Foundry Relationships
Section 3.16..........Insurance
Section 3.18..........Product Warranties
Section 3.19..........Suppliers and Customers
Section 3.22..........Brokers
Section 3.24..........Grants
Section 5.1...........Conduct of Business
Section 5.5(a)(ii)....Non-Required Consents
Section 5.4(a)........Access to Information
Section 6.3(e)........Third Party Consents
v
<PAGE> 7
TABLE OF DEFINED TERMS
<TABLE>
<CAPTION>
Cross Reference
Term in Agreement Page
- ---- ---------------- ----
<S> <C> <C>
Acquisition ..............................................Preamble, ................1
affiliate ................................................Section 8.8(a), .........59
Agreement ................................................Preamble, ................1
Applicable Law ...........................................Section 8.8(b), .........59
Assumed Option Plan ......................................Section 2.11(a), ........10
Assumed Option Plans .....................................Section 2.11(a), ........10
business day .............................................Section 8.8(c), .........60
Business System ..........................................Section 3.15(o), ........32
capital stock ............................................Section 8.8(d), .........60
Certificate of Merger ....................................Section 2.2, .............7
Certificates .............................................Section 2.10(b), .........9
Closing Date .............................................Section 2.3, .............7
Closing ..................................................Section 2.3, .............7
Code .....................................................Section 3.14(a), ........25
Code .....................................................Section 2.11(a), ........11
Commonly Controlled Entity ...............................Section 3.11(a), ........20
Company Acquisition ......................................Section 8.8(e), .........60
Company Board ............................................Section 1.1(b), ..........2
Company Common Stock .....................................Preamble, ................1
Company Disclosure Schedule ..............................Article 3, ..............12
Company Permits ..........................................Section 3.10, ...........19
Company Plans ............................................Section 8.8(f), .........60
Company ..................................................Preamble, ................1
Company SEC Reports ......................................Section 3.4(a), .........15
Company Securities .......................................Section 3.2(a), .........14
Company Software .........................................Section 3.15(l), ........31
Company Stock Option .....................................Section 3.2, ............13
Compensation and Benefit Plans ...........................Section 3.11(a), ........19
Confidentiality Agreement ................................Section 5.5(c), .........45
Continuing Directors .....................................Section 1.3(a), ..........6
Copyrights ...............................................Section 3.15(a), ........27
DGCL .....................................................Section 2.1, .............6
Dissenting Common Stock ..................................Section 2.9, .............8
Effective Time ...........................................Section 2.2, .............7
Environmental Laws .......................................Section 3.13(a), ........24
ERISA ....................................................Section 3.11(a), ........19
Exchange Act .............................................Section 1.1(a), ..........1
Exchange Agent ...........................................Section 2.10(a), .........9
Exchange Fund ............................................Section 2.10(a), .........9
Exchange Ratio ...........................................Section 2.11(a), ........11
Fairness Opinion .........................................Section 1.2(a), ..........4
</TABLE>
vi
<PAGE> 8
<TABLE>
<S> <C> <C>
Final Date ...............................................Section 7.1(b), .........52
Financial Advisor ........................................Section 1.2(a), ..........4
Foreign Plans ............................................Section 3.11(l), ........21
Governmental Entity ......................................Section 3.6, ............17
Grants ...................................................Section 3.24, ...........34
Hazardous Material .......................................Section 3.13(a), ........24
hereof, herein and herewith ..............................Section 8.8(g), .........60
HSR Act ..................................................Section 3.6, ............16
Inbound License Agreements ...............................Section 3.15(e), ........29
include or including .....................................Section 8.8(h), .........60
Indemnified Liabilities ..................................Section 5.7(a), .........46
Indemnified Persons ......................................Section 5.7(a), .........46
Insurance Policies .......................................Section 3.16, ...........33
Insured Parties ..........................................Section 5.7(c), .........47
Intellectual Property ....................................Section 3.15(a), ........27
knowledge or known .......................................Section 8.8(i), .........60
Lien .....................................................Section 3.2(b), .........14
Material Adverse Effect on Parent ........................Section 4.1(b), .........36
Material Adverse Effect on the Company ...................Section 3.1(b), .........12
Meeting ..................................................Section 5.3(c), .........43
Merger Consideration .....................................Section 2.8(a), ..........8
Merger ...................................................Section 2.1, .............7
Merger ...................................................Section 2.11(b), ........11
Minimum Condition ........................................Section 1.1(a), ..........2
Notice of Superior Proposal ..............................Section 5.2(b), .........42
OCS ......................................................Section 3.6, ............16
Offer Documents ..........................................Section 1.1(c), ..........3
Other Interests ..........................................Section 3.1(c), .........13
Outbound License Agreements ..............................Section 3.15(e), ........29
Parent Common Stock ......................................Section 2.11(a), ........10
Parent ...................................................Preamble, ................1
Patents ..................................................Section 3.15(a), ........27
Pension Plans ............................................Section 3.11(a), ........19
person ...................................................Section 8.8(j), .........61
Proxy Statement ..........................................Section 3.5, ............16
Schedule 14D-1 ...........................................Section 1.1(c), ..........3
Schedule 14D-9 ...........................................Section 1.2(b), ..........4
SEC ......................................................Section 3.4(a), .........15
SEC ......................................................Section 1.1(b), ..........2
Shares ...................................................Preamble, ................1
Software .................................................Section 3.15(l), ........31
Stock Option Agreement ...................................Section 8.8(k), .........61
subsidiary or subsidiaries ...............................Section 8.8(l), .........61
Superior Proposal ........................................Section 5.2(c), .........42
Supply Contracts .........................................Section 3.15(p), ........32
Surviving Corporation ....................................Section 2.1, .............7
Takeover Statute .........................................Section 3.23, ...........34
</TABLE>
vii
<PAGE> 9
<TABLE>
<S> <C> <C>
Tax or Taxes .............................................Section 3.14(a)(i), .....25
Tax Return ...............................................Section 3.14(a)(ii), ....26
Third Party Acquisition ..................................Section 5.2(c), .........42
Third Party ..............................................Section 5.2(c), .........42
Trade Secrets ............................................Section 3.15(a), ........27
Trademarks ...............................................Section 3.15(a), ........27
Year 2000 Capable ........................................Section 3.15(o), ........32
</TABLE>
viii
<PAGE> 10
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (this "Agreement"), dated as of
October 13, 1999, is by and among DSP Communications, Inc., a Delaware
corporation (the "Company"), Intel Corporation, a Delaware corporation
("Parent"), and CWC Acquisition Corporation, a Delaware corporation and a wholly
owned subsidiary of Parent ("Acquisition"). Initially capitalized and certain
other terms not otherwise defined herein shall have the meanings ascribed to
such terms in Section 8.8 of this Agreement.
WHEREAS, the Boards of Directors of the Company, Parent and
Acquisition have each (i) determined that the Merger (as defined in Section 2.1)
is advisable and fair and in the best interests of their respective stockholders
and (ii) approved the Merger upon the terms and subject to the conditions set
forth in this Agreement; and
WHEREAS, in furtherance thereof, it is proposed that Acquisition
shall, within five (5) business days after the public announcement hereof,
commence a tender offer (the "Offer") to acquire all of the outstanding shares
(the "Shares") of common stock, par value $0.001 per share, of the Company (the
"Company Common Stock"), at a price of Thirty-Six Dollars ($36.00) per Share,
net to the seller in cash, less any required withholding taxes (such amount, or
any greater amount per share paid pursuant to the Offer, being hereinafter
referred to as the "Offer Price"), in accordance with the terms and subject to
the conditions provided herein.
NOW, THEREFORE, in consideration of the foregoing premises and
the representations, warranties, covenants and agreements herein contained, and
intending to be legally bound hereby, the Company, Parent and Acquisition hereby
agree as follows:
ARTICLE 1
THE OFFER
Section 1.1 The Offer.
(a) Provided that this Agreement shall not have been terminated
and subject to the terms hereof, as promptly as practicable, but in no event
later than five (5) business days after the public announcement of the execution
hereof by the parties, Acquisition shall (and Parent shall cause Acquisition to)
commence (within the meaning of Rule 14d-2 under the Securities Exchange Act of
1934, as amended (the "Exchange Act")), the Offer for any and all of the Shares,
at the Offer Price. The obligation of Acquisition to accept for payment and to
pay for any Shares tendered (and the obligation of Parent to cause Acquisition
to accept for payment and to pay for any Shares tendered) shall be subject only
to (i) the condition that at least a majority of Shares on a fully-diluted basis
(including for
<PAGE> 11
purposes of such calculation all Shares issuable upon exercise of all vested
Company Stock Options (as defined in Section 3.2(a)) and unvested Company Stock
Options that vest prior to the Final Date (as defined in Section 7.1), but
excluding any Shares held by the Company or any of its subsidiaries) be validly
tendered (the "Minimum Condition"), and (ii) the other conditions set forth in
Annex A. Acquisition expressly reserves the right to increase the Offer Price or
to make any other changes in the terms and conditions of the Offer; provided,
however, that unless previously approved by the Company in writing, no change
may be made that (i) decreases the Offer Price, (ii) changes the form of
consideration to be paid in the Offer, (iii) reduces the maximum number of
Shares to be purchased in the Offer, (iv) imposes conditions to the Offer in
addition to those set forth in Annex A, (v) amends the conditions set forth in
Annex A to broaden the scope of such conditions, (vi) amends any other term of
the Offer in a manner adverse to the holders of the Shares, (vii) extends the
Offer except as provided in Section 1.1(b), or (viii) amends or waives the
Minimum Condition. It is agreed that the conditions set forth in Annex A are for
the sole benefit of Parent and Acquisition and may be waived by Parent and
Acquisition, in whole or in part at any time and from time to time, in their
sole discretion, other than the Minimum Condition, as to which prior written
Company approval is required. The failure by Parent and Acquisition at any time
to exercise any of the foregoing rights shall not be deemed a waiver of any such
right, and each such right shall be deemed an ongoing right that may be asserted
at any time and from time to time. The Company agrees that no Shares held by the
Company or any of its subsidiaries will be tendered in the Offer.
(b) Subject to the terms and conditions thereof, the Offer shall
expire at midnight, New York City time, on the date that is twenty (20) business
days after the date the Offer is commenced; provided, however, that without the
consent of the Company's Board of Directors (the "Company Board"), Acquisition
may (i) from time to time extend the Offer, if at the scheduled expiration date
of the Offer any of the conditions to the Offer shall not have been satisfied or
waived, until such time as such conditions are satisfied or waived; (ii) extend
the Offer for any period required by any rule, regulation, interpretation or
position of the Securities and Exchange Commission (the "SEC") or the staff
thereof applicable to the Offer; or (iii) extend the Offer for any reason on one
or more occasions for an aggregate period of not more than ten (10) business
days beyond the latest expiration date that would otherwise be permitted under
clause (i) or (ii) of this sentence if on such expiration date there shall not
have been tendered at least 90% of the outstanding Shares. Parent and
Acquisition agree that, if any one or more of the conditions to the Offer set
forth on Annex A are not satisfied and none of the events set forth in
paragraphs (a) through (f) of Annex A that would permit Acquisition not to
accept tendered Shares for payment has occurred and is continuing at the time of
any scheduled expiration date of the Offer, then, provided, that such conditions
are reasonably capable of being satisfied, Acquisition shall extend the Offer
from time to time unless any such condition is no longer reasonably capable of
being satisfied or any such event has occurred; provided, however, that in no
event shall Acquisition be required to extend the Offer beyond January 31, 2000
(provided that if on January 31, 2000 the condition set forth in clause (ii) of
the first paragraph of Annex A hereto regarding the HSR Act is not satisfied and
none of the events set forth in paragraphs (a) through (f) of Annex A that would
permit Acquisition not to accept Shares tendered for payment has occurred and is
continuing, then
2
<PAGE> 12
such January 31, 2000 date shall be automatically extended to April 30, 2000) .
Subject to the terms and conditions of the Offer and this Agreement, Acquisition
shall (and Parent shall cause Acquisition to) accept for payment, and pay for,
all Shares validly tendered and not withdrawn pursuant to the Offer that
Acquisition becomes obligated to accept for payment and pay for pursuant to the
Offer, as promptly as practicable after the expiration of the Offer.
(c) As soon as practicable on the date the Offer is commenced,
Parent and Acquisition shall file with the SEC a Tender Offer Statement on
Schedule 14D-1 (together with all amendments and supplements thereto, and
including all exhibits thereto, the "Schedule 14D-1") with respect to the Offer.
The Schedule 14D-1 shall contain as an exhibit or incorporate by reference the
Offer to Purchase (or portions thereof) and forms of the related letter of
transmittal and summary advertisement. Parent and Acquisition agree that they
shall cause the Schedule 14D-1, the Offer to Purchase and all amendments or
supplements thereto (which together constitute the "Offer Documents") to comply
in all material respects with the Exchange Act and the rules and regulations
thereunder and other Applicable Laws. Parent and Acquisition further agree that
the Offer Documents, on the date first published, sent or given to the Company's
stockholders, shall not contain any untrue statement of a material fact or omit
to state any material fact required to be stated therein or necessary in order
to make the statements therein, in light of the circumstances under which they
were made, not misleading, except that no representation or warranty is made by
Parent or Acquisition with respect to information supplied by the Company or any
of its stockholders in writing specifically for inclusion or incorporation by
reference in the Offer Documents. The Company agrees that the information
provided by the Company in writing specifically for inclusion or incorporation
by reference in the Offer Documents shall not contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading. Each of Parent,
Acquisition and the Company agrees promptly to correct any information provided
by it for use in the Offer Documents if and to the extent that such information
shall have become false or misleading in any material respect, and Parent and
Acquisition further agree to take all steps necessary to cause the Schedule
14D-1 as so corrected to be filed with the SEC and the other Offer Documents as
so corrected to be disseminated to the Company's stockholders, in each case as
and to the extent required by applicable federal securities laws. The Company
and its counsel shall be given reasonable opportunity to review and comment on
the Offer Documents prior to the filing thereof with the SEC. Parent and
Acquisition agree to provide in writing to the Company and its counsel with any
comments Parent, Acquisition or their counsel may receive from the SEC or its
staff with respect to the Offer Documents promptly after receipt of such
comments.
(d) Parent shall provide or cause to be provided to Acquisition
all of the funds necessary to purchase any of the Shares that Acquisition
becomes obligated to purchase pursuant to the Offer.
3
<PAGE> 13
Section 1.2 Company Actions.
(a) The Company hereby approves of and consents to the Offer and
represents that the Company Board, at a meeting duly called and held, has,
subject to the terms and conditions set forth herein, (i) after evaluating the
Merger, determined that this Agreement and the transactions contemplated hereby,
including the Offer and the Merger, taken together, are at a price and on terms
that are adequate and are otherwise in the best interests of the Company and its
stockholders; (ii) approved this Agreement and the transactions contemplated
hereby, including the Offer and the Merger, in all respects; and (iii) resolved
to recommend that the stockholders of the Company accept the Offer, tender their
Shares thereunder to Acquisition and approve and adopt this Agreement and the
Merger. To the extent that such recommendation is not withdrawn in accordance
with Section 5.2(b) hereof, the Company consents to the inclusion of such
recommendation and approval in the Offer Documents. The Company also represents
that the Company has received the opinion of Merrill Lynch, Pierce, Fenner &
Smith Incorporated, financial advisor to the Company Board (the "Financial
Advisor"), that, as of October 13, 1999, the cash consideration to be received
by the stockholders of the Company pursuant to the Offer and the Merger is fair
to such stockholders from a financial point of view (the "Fairness Opinion").
The Company has been authorized by the Financial Advisor to permit, subject to
the prior review and consent by the Financial Advisor and its counsel (such
consent not to be unreasonably withheld), the inclusion of the Fairness Opinion
(or a reference thereto) in the Offer Documents, the Schedule 14D-9 and the
Proxy Statement.
(b) The Company shall file with the SEC, concurrently with the
filing of the Schedule 14D-1, a Solicitation/Recommendation Statement on
Schedule 14D-9 (together with all amendments and supplements thereto, and
including all exhibits thereto, the "Schedule 14D-9") containing the
recommendations described in Section 1.2(a) and shall cause the Schedule 14D-9
to be mailed to the stockholders of the Company, together with the Offer
Documents, promptly after the commencement of the Offer. The Company agrees that
it shall cause the Schedule 14D-9 to comply in all material respects with the
Exchange Act and the rules and regulations thereunder and other Applicable Laws.
The Company further agrees that the Schedule 14D-9, on the date first published,
sent or given to the Company's stockholders, shall not contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading, except that no
representation or warranty is made by the Company with respect to information
supplied by Parent or Acquisition in writing specifically for inclusion or
incorporation by reference in the Schedule 14D-9. Parent and Acquisition agree
that the information provided by them specifically in writing for inclusion or
incorporation by reference in the Schedule 14D-9 shall not contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading. Each of the
Company, Parent and Acquisition agrees promptly to correct any information
provided by it for use in the Schedule 14D-9 or the Offer Documents if and to
the extent that such information shall have become false or misleading in any
material respect, and the Company further agrees to take all
4
<PAGE> 14
steps necessary to cause the Schedule 14D-9 as so corrected to be filed with the
SEC and be disseminated to the Company's stockholders, in each case as and to
the extent required by applicable federal securities laws. Parent and its
counsel shall be given reasonable opportunity to review and comment on the
Schedule 14D-9 prior to the filing thereof with the SEC. The Company agrees to
provide in writing to Parent and its counsel any comments the Company or its
counsel may receive from the SEC or its staff with respect to the Schedule 14D-9
promptly after receipt of such comments.
(c) In connection with the Offer, the Company shall, or shall
cause its transfer agent, promptly following a request by Parent, to furnish
Parent with such information, including updated lists of the stockholders of the
Company, mailing labels and updated lists of security positions, and such
assistance as Parent or its agents may reasonably request in communicating the
Offer to the record and beneficial holders of Shares. Subject to the
requirements of Applicable Law, and except for such steps as are necessary to
disseminate the Offer Documents and any other documents necessary to consummate
the Merger, Parent and Acquisition and their agents shall hold in confidence the
information contained in any such labels, listings and files, will use such
information only in connection with the Offer and the Merger and, if this
Agreement shall be terminated, will deliver, and will use their reasonable
efforts to cause their agents to deliver, to the Company all copies and any
extracts or summaries from such information then in their possession or control.
(d) Solely in connection with the tender and purchase of Shares
pursuant to the Offer and the consummation of the Merger, the Company hereby
waives any and all rights of first refusal it may have with respect to Shares
owned by, or issuable to, any person, other than rights to repurchase unvested
shares, if any, that may be held by persons following exercise of employee stock
options.
Section 1.3 Boards of Directors and Committees; Section 14(f) of
Exchange Act.
(a) Promptly upon the purchase by Acquisition of Shares pursuant
to the Offer and from time to time thereafter, if the Minimum Condition has been
met, and subject to the second to last sentence of this Section 1.3(a), Parent
shall be entitled to designate up to such number of directors, rounded up to the
next whole number, on the Company Board as will give Parent representation on
the Company Board equal to the product of the number of directors on the Company
Board (giving effect to any increase in the number of directors pursuant to this
Section 1.3) and the percentage that such number of Shares so purchased bears to
the total number of outstanding Shares on a fully-diluted basis, and the Company
shall use its best efforts to, upon request by Parent, promptly, at the
Company's election, either increase the size of the Company Board or secure the
resignation of such number of directors as is necessary to enable Parent's
designees to be elected to the Company Board and to cause Parent's designees to
be so elected. At such times, and subject to the second to last sentence of this
Section 1.3(a), the Company shall use its best efforts to cause the individuals
designated by Parent to constitute the same percentage as is on the Company
Board of (i) each committee of the Company Board (other than any committee of
the Company Board established to take action under this Agreement), (ii) each
Board of Directors of each
5
<PAGE> 15
subsidiary of the Company (subject to Applicable Law and except to the extent
described in Section 1.3(a) of the Company Disclosure Schedule) and (iii) each
committee of each such Board of Directors. Notwithstanding the foregoing, the
Company shall use its best efforts to ensure that two of the members of the
Company Board as of the date hereof (the "Continuing Directors") shall remain
members of such Board until the Effective Time. If a Continuing Director resigns
from the Company Board, Parent, Acquisition and the Company shall permit the
remaining Continuing Director or Directors to appoint the resigning Director's
successor who shall be deemed to be a Continuing Director.
(b) The Company's obligation to appoint designees to the Company
Board shall be subject to Section 14(f) of the Exchange Act and Rule 14f-1
promulgated thereunder. The Company shall promptly take all action required
pursuant to such Section and Rule in order to fulfill its obligations under this
Section 1.3 and shall include in the Schedule 14D-9 such information with
respect to the Company and its officers and directors as is required under such
Section and Rule in order to fulfill its obligations under this Section 1.3.
Parent shall supply to the Company in writing and be solely responsible for any
information with respect to itself and its nominees, officers, directors and
affiliates required by such Section and Rule.
(c) Following the date of the election or appointment of Parent's
designees to the Company Board pursuant to this Section 1.3 and prior to the
Effective Time, if there shall be any Continuing Directors, any amendment of
this Agreement, any termination of this Agreement by the Company, any extension
by the Company of the time for the performance of any of the obligations or
other acts of Parent or Acquisition or any waiver of any of the Company's rights
hereunder or any other determination with respect to any action to be taken or
not to be taken by the Company relating to this Agreement, will require the
concurrence of a majority of such Continuing Directors.
ARTICLE 2
THE MERGER
Section 2.1. The Merger. At the Effective Time and upon the terms
and subject to the conditions of this Agreement and in accordance with the
provisions of the Delaware General Corporation Law, as amended (the "DGCL"),
Acquisition shall be merged with and into the Company (the "Merger"). Following
the Merger, the Company shall continue as the surviving corporation (the
"Surviving Corporation") and the separate corporate existence of Acquisition
shall cease. Parent, as the sole stockholder of Acquisition, hereby approves the
Merger and this Agreement.
Section 2.2. Effective Time. Subject to the terms and conditions
set forth in this Agreement, on the Closing Date, a Certificate of Merger or
Certificate of Ownership and Merger substantially in the form of Exhibit A (the
"Certificate of Merger") shall be duly executed and acknowledged by Acquisition
and the Company and thereafter delivered for filing to the Secretary of State of
the State of Delaware as provided in the DGCL. The Merger
6
<PAGE> 16
shall become effective at such time as a properly executed copy of the
Certificate of Merger is duly filed with the Secretary of State of the State of
Delaware or such later time as Parent and the Company may agree upon and as may
be set forth in the Certificate of Merger (the time the Merger becomes effective
being referred to herein as the "Effective Time").
Section 2.3. Closing of the Merger. The closing of the Merger
(the "Closing") will take place at a time and on a date (the "Closing Date") to
be specified by the parties, which shall be no later than the second business
day after satisfaction (or waiver) of the latest to occur of the conditions set
forth in Article 6, at the offices of Gibson, Dunn & Crutcher LLP, One
Montgomery Street, San Francisco, California 94104, unless another time, date or
place is agreed to in writing by the parties hereto.
Section 2.4. Effects of the Merger. The Merger shall have the
effects set forth in the DGCL. Without limiting the generality of the foregoing
and subject thereto, at the Effective Time, all the properties, rights,
privileges and powers of the Company and Acquisition shall vest in the Surviving
Corporation, and all debts, liabilities and duties of the Company and
Acquisition shall become the debts, liabilities and duties of the Surviving
Corporation.
Section 2.5. Certificate of Incorporation and Bylaws. The
Certificate of Incorporation of Acquisition in effect at the Effective Time
shall be the Certificate of Incorporation of the Surviving Corporation until
amended in accordance with Applicable Law. The bylaws of Acquisition in effect
at the Effective Time shall be the bylaws of the Surviving Corporation until
amended in accordance with Applicable Law.
Section 2.6. Directors. The directors of Acquisition at the
Effective Time shall be the initial directors of the Surviving Corporation, each
to hold office in accordance with the Certificate of Incorporation and bylaws of
the Surviving Corporation until such director's successor is duly elected or
appointed and qualified or until such director's earlier death, resignation or
removal in accordance with the certificate of incorporation and bylaws of the
Surviving Corporation.
Section 2.7. Officers. The officers of Acquisition at the
Effective Time shall be the initial officers of the Surviving Corporation, each
to hold office in accordance with the Certificate of Incorporation and bylaws of
the Surviving Corporation until such officer's successor is duly elected or
appointed and qualified or until such officer's earlier death, resignation or
removal in accordance with the certificate of incorporation and bylaws of the
Surviving Corporation.
Section 2.8. Conversion of Shares.
(a) At the Effective Time, each Share issued and outstanding
immediately prior to the Effective Time (other than (i) Shares held in the
Company's treasury or by any of the Company's subsidiaries and (ii) Shares held
by Parent, Acquisition or any other subsidiary of Parent) shall, by virtue of
the Merger and without any action on the part of Acquisition, the
7
<PAGE> 17
Company or the holder thereof, be converted into and shall become the right to
receive an amount in cash equal to the Offer Price, without interest (the
"Merger Consideration").
(b) At the Effective Time, each outstanding share of the common
stock of Acquisition shall be converted into one share of common stock of the
Surviving Corporation.
(c) At the Effective Time, each Share held in the treasury of
the Company and each Share held by Parent, Acquisition or any subsidiary of
Parent, Acquisition or the Company immediately prior to the Effective Time
shall, by virtue of the Merger and without any action on the part of
Acquisition, the Company or the holder thereof, be canceled, retired and cease
to exist, and no Merger Consideration shall be delivered with respect thereto.
Section 2.9. Dissenters' Rights. Notwithstanding any provision of
this Agreement to the contrary, if and to the extent required by the DGCL,
shares of Company Common Stock which are issued and outstanding immediately
prior to the Effective Time and which are held by holders of such shares of
Company Common Stock who have properly exercised appraisal rights with respect
thereto (the "Dissenting Common Stock") in accordance with Section 262 of the
DGCL, shall not be exchangeable for the right to receive the Merger
Consideration, and holders of such shares of Dissenting Common Stock shall be
entitled to receive payment of the appraised value of such shares of Dissenting
Common Stock in accordance with the provisions of Section 262 of the DGCL unless
and until such holders fail to perfect or effectively withdraw or otherwise lose
their rights to appraisal and payment under the DGCL. If, after the Effective
Time, any such holder fails to perfect or effectively withdraws or loses such
right, such shares of Dissenting Common Stock shall thereupon be treated as if
they had been converted into and to have become exchangeable for, at the
Effective Time, the right to receive the Merger Consideration, without any
interest thereon. Notwithstanding anything to the contrary contained in this
Section 2.12, if (i) the Merger is rescinded or abandoned or (ii) the
stockholders of the Company revoke the authority to effect the Merger, then the
right of any stockholder to be paid the fair value of such stockholder's
Dissenting Common Stock pursuant to Section 262 of the DGCL shall cease. The
Company shall give Parent prompt notice of any demands received by the Company
for appraisals of shares of Dissenting Common Stock. The Company shall not,
except as required by applicable law or with the prior written consent of
Parent, make any payment with respect to any demands for appraisals or offer to
settle or settle any such demands.
Section 2.10. Exchange of Certificates.
(a) From time to time following the Effective Time, Parent shall
deliver to its transfer agent, or a depository or trust institution of
recognized standing selected by Parent and Acquisition and reasonably
satisfactory to the Company (the "Exchange Agent"), for the benefit of the
holders of Shares for exchange in accordance with this Article 2, an amount of
cash equal to the aggregate Merger Consideration then payable pursuant to
Section 2.8 (such amount of cash is hereinafter referred to as the "Exchange
Fund"), in exchange for outstanding Shares.
8
<PAGE> 18
(b) Promptly after the Effective Time, but in no event more than
three business days thereafter, the Exchange Agent shall mail to each holder of
record of a certificate or certificates that immediately prior to the Effective
Time represented outstanding Shares (the "Certificates") and whose shares were
converted into the right to receive Merger Consideration pursuant to Section
2.8: (i) a letter of transmittal (which shall specify that delivery shall be
effected and risk of loss and title to the Certificates shall pass only upon
delivery of the Certificates to the Exchange Agent and shall be in such form and
have such other provisions as Parent and the Company may reasonably specify) and
(ii) instructions for use in effecting surrender of the Certificates in exchange
for Merger Consideration; provided, however, that such letter of transmittal
shall be substantially in the form and substance of a letter of transmittal and
instructions approved by the Company at or before the Closing, such approval not
to be unreasonably withheld. Upon surrender of a Certificate for cancellation to
the Exchange Agent, together with such letter of transmittal duly executed, the
holder of such Certificate shall be entitled to receive in exchange therefor a
check representing the Merger Consideration, and the Certificate so surrendered
shall forthwith be canceled. In the event of a transfer of ownership of Shares
that is not registered in the transfer records of the Company, a check
representing the proper amount of Merger Consideration may be issued to a
transferee if the Certificate representing such Shares is presented to the
Exchange Agent accompanied by all documents required to evidence and effect such
transfer and by evidence that any applicable stock transfer taxes have been
paid. Until surrendered as contemplated by this Section 2.10, each Certificate
shall be deemed at any time after the Effective Time to represent only the right
to receive upon such surrender the Merger Consideration.
(c) In the event that any Certificate for Shares shall have been
lost, stolen or destroyed, the Exchange Agent shall issue in exchange therefor
upon the making of an affidavit of that fact by the holder thereof the Merger
Consideration; provided, however, that Parent or the Exchange Agent may, in its
discretion, require the delivery of a reasonable and customary bond or
indemnity.
(d) If, after the Effective Time, Certificates are presented to
the Surviving Corporation for any reason, they shall be canceled and exchanged
as provided in this Article 2.
(e) Any portion of the Exchange Fund that remains undistributed
to the stockholders of the Company upon the expiration of one hundred eighty
(180) days after the Effective Time shall be delivered to Parent upon demand and
any stockholders of the Company who have not theretofore complied with this
Article 2 shall thereafter look only to Parent as general creditors for payment
of their claims for Merger Consideration.
(f) Neither Parent nor Acquisition nor the Company shall be
liable to any holder of Shares for any amount of cash from the Exchange Fund
delivered to a public official pursuant to any applicable abandoned property,
escheat or similar Applicable Law.
Section 2.11. Assumed Stock Options.
9
<PAGE> 19
(a) At the Effective Time, each option to purchase Shares granted
to employees of the Company under the Company's 1995 Employee and Consultant
Stock Plan, 1996 Stock Option Plan, 1994 Employee and Consultant Stock Option
Plan, 1998 Non-Qualified Stock Option Plan, 1996 Nonstatutory Employee and
Consultant Stock Option Plan and Option Exchange Program (collectively, the
"Assumed Option Plans" and individually as an "Assumed Option Plan"), which are
then outstanding and unexercised, shall cease to represent a right to acquire
Shares and shall be converted automatically into options to purchase shares of
common stock, par value $0.001 per share, of Parent ("Parent Common Stock"), and
Parent shall assume each such option (hereinafter, an "Assumed Option") subject
to the terms of the applicable Assumed Option Plan, in each case as heretofore
amended or restated, as the case may be, and the agreement evidencing the grant
thereunder of such Assumed Option; provided, however, that from and after the
Effective Time, (i) the number of shares of Parent Common Stock purchasable upon
exercise of such Assumed Option shall be equal to the number of Shares that were
purchasable under such Assumed Option immediately prior to the Effective Time
multiplied by the Exchange Ratio (as defined below), and rounded down to the
nearest whole share, and (ii) the per Share exercise price under each such
Assumed Option shall be adjusted by dividing the per Share exercise price of
each such Assumed Option by the Exchange Ratio, and rounding up to the nearest
cent. In the case of any Assumed Options which are "incentive stock options" (as
defined in Section 422 of the Internal Revenue Code of 1986, as amended (the
"Code")), the exercise price, the number of shares of Parent Common Stock
purchasable pursuant to such options and the terms and conditions of exercise of
such options shall be determined in order to comply with Section 424(a) of the
Code. The duration and other terms of the Assumed Option shall be the same as
the original option except that all references to the Company shall be deemed to
be references to Parent. The terms of each Assumed Option shall, in accordance
with its terms, be subject to further adjustment as appropriate to reflect any
stock split, stock dividend, recapitalization or other similar transaction with
respect to Parent Common Stock on or subsequent to the Effective Time. The
"Exchange Ratio" shall be equal to the ratio obtained by dividing the Offer
Price by the closing price of one share of Parent Common Stock on the Nasdaq
National Market on the trading day immediately preceding the Effective Time.
(b) Parent shall reserve for issuance a sufficient number of
Parent Common Stock for delivery upon the exercise of Assumed Options. As soon
as practicable following the Effective Time, Parent shall take all action
necessary to register the Parent Common Stock subject to the Assumed Options
under the Securities Act of 1933, as amended, and the rules and regulations of
the Securities and Exchange Commission thereunder (the "Securities Act")
pursuant to a registration statement on Form S-8 (or any successor form) to the
extent such registration is required under the Securities Act, and to cause the
effectiveness of such registration statement or registration statements (and the
current status of the prospectus or prospectuses contained therein) to be
maintained for so long as the Assumed Options remain outstanding.
(c) Notwithstanding the foregoing provisions of Sections 2.11(a)
and (b), Parent and Acquisition agree that if Acquisition accepts Shares for
purchase in the Offer, Parent and Acquisition shall not terminate this
Agreement, and shall not take any action that
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would allow the Company to terminate this Agreement, until Parent has offered
the holders of the Assumed Options the opportunity, after not less than five (5)
business days notice, to have such Assumed Options assumed by Parent as
contemplated by Sections 2.11(a) and (b); provided that, with respect to any
assumption of such Assumed Options under this Section 2.11(c), all references to
the Effective Time in Sections 2.11(a) and (b) (but nowhere else in this
Agreement) shall instead refer to the date of such assumption. The provisions of
this Section 2.11(c) are intended to be for the benefit of, and will be
enforceable by, each holder of Assumed Options and the heirs and representatives
of such person.
(d) The parties acknowledge that upon the execution of this
Agreement, each option to purchase Shares under the Company's 1995 Director
Stock Option Plan shall immediately become fully vested and exercisable and
shall remain exercisable until the Closing Date and, following such Closing
Date, such options shall expire and terminate and be of no further force or
effect.
(e) With respect to the Company's 1995 Employee Stock Purchase
Plan (the "ESPP"), the Offering Period (as defined in the ESPP) which is in
effect as of the date hereof (or, if the Closing Date shall occur during an
Offering Period which shall have commenced following the Offering Period in
effect as of the date hereof, such subsequent Offering Period) shall be
shortened such that the New Exercise Date (as defined in the ESPP) shall be the
Closing Date. The Company shall provide notice of such New Exercise Date to
participants in the ESPP in accordance with the terms of the ESPP.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to each of Parent and
Acquisition, subject to the exceptions set forth in the Disclosure Schedule (the
"Company Disclosure Schedule") delivered by the Company to Parent in accordance
with Section 5.9 (which exceptions shall specifically identify a Section or
subsection, as applicable, to which such exception relates) that:
Section 3.1. Organization and Qualification; Subsidiaries;
Investments.
(a) Section 3.1(a) of the Company Disclosure Schedule sets forth
a true and complete list of all the Company's directly and indirectly owned
subsidiaries, together with the jurisdiction of incorporation of each subsidiary
and the percentage of each subsidiary's outstanding capital stock or other
equity interests owned by the Company or another subsidiary of the Company. Each
of the Company and its subsidiaries is duly organized, validly existing and in
good standing under the laws of the jurisdiction of its incorporation or
organization and has all requisite corporate power and authority to own, lease
and operate its properties and to carry on its businesses as now being
conducted. The Company has heretofore made available to Parent accurate and
complete copies of the certificate of incorporation and bylaws (or similar
governing documents), as currently in full
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<PAGE> 21
force and effect, of the Company and each of its subsidiaries. Section 3.1(a) of
the Company Disclosure Schedule specifically identifies each subsidiary of the
Company that contains any material assets or through which the Company conducts
any material operations.
(b) The Company and its subsidiaries are duly qualified or
licensed and in good standing to do business in each jurisdiction in which the
property owned, leased or operated by them or the nature of the business
conducted by them makes such qualification or licensing necessary, except in
such jurisdictions where the failure to be so duly qualified or licensed and in
good standing would not, individually or in the aggregate, have a Material
Adverse Effect on the Company. When used in connection with the Company or its
subsidiaries, the term "Material Adverse Effect on the Company" means any
circumstance, change in, or effect on the Company and its subsidiaries, taken as
a whole, that is, or is reasonably likely in the foreseeable future to be,
materially adverse to the operations, financial condition, earnings or results
of operations, or the business (financial or otherwise), of the Company and its
subsidiaries, taken as a whole, provided that none of the following shall be
deemed, either alone or in combination, to constitute a Material Adverse Effect
on the Company: (i) a change in the market price or trading volume of the
Company Common Stock, (ii) conditions affecting the wireless communications
components industry as a whole, (iii) a failure by the Company to meet internal
earnings or revenue projections or the earnings or revenue projections of equity
analysts, provided that, except for the matters described in item 3.5 of Section
3.8 of the Company Disclosure Schedule, this Section 3.1(b)(iii) shall not
exclude any underlying change, effect, event, occurrence, state of facts or
developments that in and of itself, without reference to its impact on such
projections, would constitute a Material Adverse Effect on the Company and that
resulted in such failure to meet such projections; (iv) any disruption of
customer or supplier relationships arising out of or resulting from actions
contemplated by the parties in connection with, or which is attributable to, the
execution and announcement of this Agreement or to the identity of Parent; or
(v) the termination of the ASIC Patent License Agreement dated as of October 3,
1995 by and between the Company and Qualcomm Incorporated, a Delaware
corporation ("Qualcomm"), by Qualcomm.
(c) Section 3.1(c) of the Company Disclosure Schedule sets forth
a true and complete list of each equity investment in an amount of Five Hundred
Thousand Dollars ($500,000) or more or that represents a five percent (5%) or
greater ownership interest in the subject of such investment made by the Company
or any of its subsidiaries in any person other than the Company's subsidiaries
("Other Interests"). The Other Interests are owned by the Company, by one or
more of the Company's subsidiaries or by the Company and one or more of its
subsidiaries, in each case free and clear of all Liens (as defined in Section
3.2).
(d) The Shares constitute the only class of equity securities of
the Company or its subsidiaries registered or required to be registered under
the Exchange Act.
Section 3.2. Capitalization of the Company and its Subsidiaries.
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<PAGE> 22
(a) The authorized capital stock of the Company consists of
110,000,000 Shares, of which, as of the close of business on October 13, 1999,
41,028,672 Shares were issued and outstanding (of which 644,100 are held in
treasury by the Company's European subsidiary) and 5,000,000 shares of preferred
stock, par value $0.001 per share, no shares of which are outstanding. All of
the outstanding Shares have been validly issued and are fully paid,
nonassessable and free of preemptive rights. As of the close of business on
October 13, 1999, approximately 9,742,570 Shares were reserved for issuance and,
as of the close of business on October 13, 1999, 7,762,336 Shares were issuable
upon or otherwise deliverable in connection with the exercise of outstanding
Company Stock Options. For purposes hereof, "Company Stock Option" means any
option, warrant or other right to purchase Shares. Between the close of business
on October 1, 1999 and the date hereof, no shares of the Company's capital stock
have been issued other than pursuant to Company Stock Options already in
existence on such date and, between the close of business on October 1, 1999 and
the date hereof, no stock options have been granted, except as set forth in
Section 3.2(a) of the Company Disclosure Schedule. Except as set forth above or
in Section 3.2(a) of the Company Disclosure Schedule, as of the date hereof,
there are outstanding (i) no shares of capital stock or other voting securities
of the Company, (ii) no securities of the Company or any of its subsidiaries
convertible into or exchangeable or exercisable for shares of capital stock or
other securities of the Company, (iii) no options, preemptive or other rights to
acquire from the Company or any of its subsidiaries, and, except as described in
the Company SEC Reports (as defined below), no obligations of the Company or any
of its subsidiaries to issue, any capital stock, voting securities or securities
convertible into or exchangeable or exercisable for capital stock or other
securities of the Company and (iv) no equity equivalent interests in the
ownership or earnings of the Company or its subsidiaries or other similar rights
(collectively "Company Securities"). As of the date hereof, there are no
outstanding rights or obligations of the Company or any of its subsidiaries to
repurchase, redeem or otherwise acquire any Company Securities. Except as set
forth in Section 3.2(a) of the Company Disclosure Schedule, there are no
stockholder agreements, voting trusts or other agreements or understandings to
which the Company is a party or by which it is bound relating to the voting or
registration of any shares of capital stock of the Company. The Company has not
voluntarily accelerated the vesting of any Company Stock Options as a result of
the Offer or the Merger or any other change in control of the Company.
(b) Except as set forth in Section 3.2(b) of the Company
Disclosure Schedule, all of the outstanding capital stock of the Company's
subsidiaries is owned by the Company, directly or indirectly, free and clear of
any Lien or any other limitation or restriction (including any restriction on
the right to vote or sell the same except as a matter of Applicable Law). Except
as set forth in Section 3.2(b) of the Company Disclosure Schedule, any directors
qualifying shares issued by a foreign subsidiary of the Company to any director
of such subsidiary are beneficially owned by the Company or another subsidiary
of the Company. Except as set forth in Section 3.2(b) of the Company Disclosure
Schedule, there are no securities of the Company or any of its subsidiaries
convertible into or exchangeable or exercisable for, or other rights to acquire
from the Company or any of its subsidiaries, any capital stock or other
ownership interests in or any other securities of any subsidiary of the Company,
and there exists no other contract, understanding, arrangement or obligation
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<PAGE> 23
(whether or not contingent) providing for the issuance or sale, directly or
indirectly, of any such capital stock. Except as set forth in Section 3.2(b) of
the Company Disclosure Schedule, there are no outstanding contractual
obligations of the Company or its subsidiaries to repurchase, redeem or
otherwise acquire any outstanding shares of capital stock or other ownership
interests in any subsidiary of the Company. With respect to any exception to
ownership set forth in Section 3.2(b) of the Company Disclosure Schedule, the
schedule completely and correctly identifies the record and the beneficial owner
of any such shares, whether such record or beneficial owner is an employee,
agent or affiliate of the Company, and any agreement, arrangement or
understanding, whether written or oral, with respect to such ownership. With
respect to any exception to the contractual obligations of the Company set forth
in Section 3.2(b) of the Company Disclosure Schedule, the schedule completely
and correctly identifies the parties to such obligations and the nature of any
relationship of such party or any third party beneficiary of such obligations to
the Company and any agreement, arrangement or understanding, whether written or
oral, with respect to such relationship. For purposes of this Agreement, "Lien"
means, with respect to any asset (including any security), any mortgage, lien,
pledge, charge, security interest or encumbrance of any kind in respect of such
asset; provided, however, that the term "Lien" shall not include (i) statutory
liens for Taxes that are not yet due and payable or are being contested in good
faith by appropriate proceedings and are disclosed in Section 3.14 of the
Company Disclosure Schedule or that are otherwise not material, (ii) statutory
or common law liens to secure obligations to landlords, lessors or renters under
leases or rental agreements confined to the premises rented, (iii) deposits or
pledges made in connection with, or to secure payment of, workers' compensation,
unemployment insurance, old age pension or other social security programs
mandated by Applicable Law, (iv) statutory or common law liens in favor of
carriers, warehousemen, mechanics and materialmen, to secure claims for labor,
materials or supplies and other like liens, and (v) restrictions on transfer of
securities imposed by applicable state and federal securities laws.
Section 3.3. Authority Relative to this Agreement;
Recommendation.
(a) The Company has all necessary corporate power and authority
to execute and deliver this Agreement and the Stock Option Agreement, to perform
its obligations under this Agreement and the Stock Option Agreement, and to
consummate the transactions contemplated hereby. The execution and delivery of
this Agreement and the Stock Option Agreement, and the consummation of the
transactions contemplated hereby and thereby, have been duly and validly
authorized by the Company Board, and no other corporate proceedings on the part
of the Company are necessary to authorize this Agreement or the Stock Option
Agreement, or to consummate the transactions contemplated hereby or thereby,
except the approval of this Agreement by the holders of a majority of the
outstanding Shares. This Agreement and the Stock Option Agreement have been duly
and validly executed and delivered by the Company and, assuming the due
authorization, execution and delivery by Parent and Acquisition, constitute the
valid, legal and binding agreements of the Company, enforceable against the
Company in accordance with their terms, subject to any applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws now or hereafter in
effect relating to creditors' rights generally or to general principles of
equity.
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<PAGE> 24
(b) Without limiting the generality of the foregoing, the Board
of Directors of the Company has unanimously (i) approved this Agreement, the
Stock Option Agreement, the Offer, the Merger and the other transactions
contemplated hereby, (ii) resolved to recommend approval and adoption of this
Agreement, the Merger and the other transactions contemplated hereby by the
Company's stockholders, and (iii) has not withdrawn or modified such approval or
resolution to recommend (except as otherwise permitted in this Agreement).
Section 3.4. SEC Reports; Financial Statements.
(a) The Company has filed all required forms, reports and
documents (the "Company SEC Reports") with the SEC since January 1, 1998, each
of which complied at the time of filing in all material respects with all
applicable requirements of the Securities Act and the Exchange Act, except as
set forth in Section 3.4 of the Company Disclosure Schedule. None of such
Company SEC Reports, including any financial statements or schedules included or
incorporated by reference therein, when filed, contained any untrue statement of
a material fact or omitted to state a material fact required to be stated or
incorporated by reference therein or necessary in order to make the statements
therein in light of the circumstances under which they were made not misleading,
except to the extent superseded by a Company SEC Report filed subsequently and
prior to the date hereof. The audited consolidated financial statements of the
Company included in the Company SEC Reports fairly present, in conformity in all
material respects with generally accepted accounting principles applied on a
consistent basis (except as may be indicated in the notes thereto), the
consolidated balance sheets of the Company and its consolidated subsidiaries as
of the dates thereof and their statements of operations, statements of
stockholders' equity and statements of cash flows for the periods then ended.
Notwithstanding the foregoing, the Company shall not be deemed to be in breach
of any of the representations or warranties in this Section 3.4(a) as a result
of any changes to the Company SEC Reports that the Company may make in response
to comments received from the SEC on the Proxy Statement (as defined in Section
3.5).
(b) The Company has heretofore made, and hereafter will make,
available to Acquisition or Parent a complete and correct copy of any amendments
or modifications to agreements, documents or other instruments that previously
had been filed by the Company with the SEC pursuant to the Exchange Act.
Section 3.5. Information Supplied. None of the information
supplied or to be supplied by the Company for inclusion or incorporation by
reference in the proxy statement relating to the meeting of the Company's
stockholders to be held in connection with the Merger (the "Proxy Statement")
will, at the date mailed to stockholders of the Company and at the time of the
meeting of stockholders of the Company to be held in connection with the Merger,
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to make the statements
therein in light of the circumstances under which they are made not misleading.
The Proxy Statement insofar as it relates to the meeting of the Company's
stockholders to vote on the Merger will comply as to form in all material
respects with the provisions of the Exchange Act and the rules and
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<PAGE> 25
regulations thereunder. Notwithstanding the foregoing, the Company makes no
representation, warranty or covenant with respect to any information supplied or
required to be supplied by Parent or Acquisition that is contained in or omitted
from the Proxy Statement.
Section 3.6. Consents and Approvals; No Violations. Except for
filings, permits, authorizations, consents and approvals as may be required
under applicable requirements of the Securities Act, the Exchange Act, state
securities or blue sky laws, and the Hart-Scott-Rodino Antitrust Improvements
Act of 1976, as amended (the "HSR Act"), any filings under similar merger
notification laws or regulations of foreign Governmental Entities (as defined
below), including filings with the Office of the Chief Scientist of the Israeli
Ministry of Trade & Industry (the "OCS") and the Investment Center of the
Ministry of Finance of the State of Israel, and the filing and recordation of
the Certificate of Merger as required by the DGCL, no material filing with or
notice to and no material permit, authorization, consent or approval of any
United States (federal, state or local) or foreign court or tribunal, or
administrative, governmental or regulatory body, agency or authority (a
"Governmental Entity"), including the OCS, is necessary for the execution and
delivery by the Company of this Agreement or the Stock Option Agreement or the
consummation by the Company of the transactions contemplated hereby or thereby.
Neither the execution, delivery and performance of this Agreement or the Stock
Option Agreement by the Company, nor the consummation by the Company of the
transactions contemplated hereby or thereby, will (a) conflict with or result in
any breach of any provision of the respective Certificate of Incorporation or
bylaws (or similar governing documents) of the Company or any of its
subsidiaries, (b) except as set forth in Section 3.6 of the Company Disclosure
Schedule, result in a violation or breach of or constitute (with or without due
notice or lapse of time or both) a default (or give rise to any right of
termination, amendment, cancellation or acceleration or Lien) under any of the
terms, conditions or provisions of any material note, bond, mortgage, indenture,
lease, license, contract (including any material Supply Contract), agreement or
other instrument or obligation to which the Company or any of its subsidiaries
is a party or by which any of them or any of their respective properties and
assets is bound or (c) except as set forth in Section 3.6 of the Company
Disclosure Schedule, violate any material order, writ, injunction, decree, law,
statute, rule or regulation applicable to the Company or any of its subsidiaries
or any of their respective properties or assets.
Section 3.7. No Default. Except as set forth in Section 3.7 of
the Company Disclosure Schedule, neither the Company nor any of its subsidiaries
is in breach, default or violation (and no event has occurred that with notice
or the lapse of time or both would constitute a breach, default or violation) of
any term, condition or provision of (i) its Certificate of Incorporation or
bylaws (or similar governing documents), (ii) any material note, bond, mortgage,
indenture, lease, license, contract (including any material Supply Contract),
agreement or other instrument or obligation to which the Company or any of its
subsidiaries is now a party or by which it or any of its properties and assets
is bound or (iii) any material order, writ, injunction, decree, law, statute,
rule or regulation applicable to the Company or any of its subsidiaries or any
of its properties or assets.
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Section 3.8. No Undisclosed Liabilities; Absence of Changes.
Except as and to the extent publicly disclosed by the Company in the Company SEC
Reports or as set forth in Section 3.8 of the Company Disclosure Schedule,
neither the Company nor any of its subsidiaries has any material liabilities or
obligations of any nature, whether or not accrued, contingent or otherwise, that
would be required by generally accepted accounting principles to be reflected on
a consolidated balance sheet of the Company (including the notes thereto), other
than liabilities or obligations incurred after June 30, 1999 in the ordinary
course of business, consistent with past practice, no one or group of which,
taken together, constitutes a Material Adverse Effect on the Company. Except as
publicly disclosed by the Company in the Company SEC Reports or as set forth in
Section 3.8 of the Company Disclosure Schedule, since June 30, 1999, there have
been no events, changes or effects with respect to the Company or its
subsidiaries that, individually or in the aggregate, have had or reasonably
would be expected to have, a Material Adverse Effect on the Company. Without
limiting the generality of the foregoing, except as and to the extent publicly
disclosed by the Company in the Company SEC Reports or as set forth in Section
3.8 of the Company Disclosure Schedule, since June 30, 1999, the Company and its
subsidiaries have conducted their respective businesses in all material respects
only in, and have not engaged in any material transaction other than according
to, the ordinary and usual course of such businesses consistent with past
practices, and there has not been any (i) damage, destruction or other casualty
loss with respect to any material asset or property owned, leased or otherwise
used by the Company or any of its subsidiaries, not covered by insurance; (ii)
declaration, setting aside or payment of any dividend or other distribution in
respect of the capital stock of the Company or any of its subsidiaries (other
than wholly-owned subsidiaries) or any repurchase, redemption or other
acquisition by the Company or any of its subsidiaries of any outstanding shares
of capital stock or other securities of, or other ownership interests in, the
Company or any of its subsidiaries; (iii) amendment of any material term of any
outstanding security of the Company or any of its subsidiaries; (iv) incurrence,
assumption or guarantee by the Company or any of its subsidiaries of any
indebtedness for borrowed money other than in the ordinary course of business
and in amounts and on terms consistent with past practices; (v) creation or
assumption by the Company or any of its subsidiaries of any Lien on any material
asset other than in the ordinary course of business consistent with past
practices; (vi) loan, advance or capital contributions made by the Company or
any of its subsidiaries to, or investment in, any person other than (1) loans or
advances to employees in connection with business-related expenses incurred in
the ordinary course of business consistent with past practices, (2) loans made
to employees consistent with past practices that are not in the aggregate in
excess of Two Hundred Thousand Dollars ($200,000), and (3) loans, advances or
capital contributions to or investments in wholly-owned subsidiaries, and in
each case made in the ordinary course of business consistent with past
practices; (vii) transaction or commitment made, or any contract or agreement
entered into, by the Company or any of its subsidiaries relating to its assets
or business (including the acquisition (by sale, license or otherwise) or
disposition (by sale, license or otherwise) of any assets) or any relinquishment
by the Company or any of its subsidiaries of any contract, agreement or other
right, in any such case, material to the Company and its subsidiaries, taken as
a whole; (viii) any exclusive license, distribution, marketing, sales or other
agreement entered into or any agreement to enter into any exclusive license,
distribution, marketing, sales or other agreement; or (ix) change by the Company
or
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<PAGE> 27
any of its subsidiaries in any of its accounting principles, practices or
methods. Since June 30, 1999, except as disclosed in the Company SEC Reports
filed prior to the date hereof or in Section 3.8 of the Company Disclosure
Schedule or increases in the ordinary course of business consistent with past
practices, there has not been any increase in the compensation payable or that
could become payable by the Company or any of its subsidiaries to (a) officers
of the Company or any of its subsidiaries or (b) any employee of the Company or
any of its subsidiaries whose annual cash compensation is One Hundred Thousand
Dollars ($100,000) or more.
Section 3.9. Litigation. Except as publicly disclosed by the
Company in the Company SEC Reports or as set forth in Section 3.9 of the Company
Disclosure Schedule, there is no suit, claim, action, arbitration, proceeding or
investigation pending or, to the knowledge of the Company, threatened against
the Company or any of its subsidiaries or any of their respective properties or
assets before any Governmental Entity or brought by any person that is material
or would reasonably be expected to prevent or delay the consummation of the
transactions contemplated by this Agreement beyond the Final Date. Except as
publicly disclosed by the Company in the Company SEC Reports, neither the
Company nor any of its subsidiaries is subject to any outstanding order, writ,
injunction or decree that would reasonably be expected to be material or would
reasonably be expected to prevent or delay the consummation of the transactions
contemplated hereby.
Section 3.10. Compliance with Applicable Law. Except as publicly
disclosed, to a reasonable degree of specificity, by the Company in the Company
SEC Reports or in Section 3.10 of the Company Disclosure Schedule, the Company
and its subsidiaries hold all material permits, licenses, variances, exemptions,
orders and approvals of all Governmental Entities necessary for the lawful
conduct of their respective businesses (the "Company Permits"). Except as
publicly disclosed, to a reasonable degree of specificity, by the Company in the
Company SEC Reports, the Company and its subsidiaries are in material compliance
with the terms of the Company Permits. Except as publicly disclosed, to a
reasonable degree of specificity, by the Company in the Company SEC Reports, the
businesses of the Company and its subsidiaries have been and are being conducted
in material compliance with all material Applicable Laws, other than (x) labor,
employment and employee benefit laws which are the subject of Section 3.11 and
3.12, (y) environmental laws which are the subject of Section 3.13 and (z) Taxes
which are the subject of Section 3.14. Except as publicly disclosed by the
Company in the Company SEC Reports, no investigation or review by any
Governmental Entity with respect to the Company or any of its subsidiaries is
pending or, to the knowledge of the Company, threatened, nor, to the knowledge
of the Company, has any Governmental Entity indicated an intention to conduct
the same.
Section 3.11. Employee Benefits.
(a) For purposes of this Agreement, "Compensation and Benefit
Plans" means, collectively, each written bonus, deferred compensation, pension,
retirement, profit-sharing, thrift, savings, employee stock ownership, stock
bonus, stock purchase, restricted stock, stock option, employment, termination,
severance, compensation, medical,
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<PAGE> 28
health, or other plan, agreement, policy or arrangement, that covers employees
or directors of the Company or any of its subsidiaries, or pursuant to which
former employees or directors of the Company or any of its subsidiaries are
entitled to current or future benefits. To the knowledge of the Company, there
are no oral Compensation and Benefit Plans to which the Company is a party. The
Company has made available to Parent copies of all "employee pension benefit
plans" (as defined in Section 3(2) of the Employee Retirement Income Security
Act of 1974, as amended ("ERISA")) (sometimes referred to herein as "Pension
Plans"), "employee welfare benefit plans" (as defined in Section 3(l) of ERISA)
and all other Compensation and Benefit Plans maintained, or contributed to, by
the Company or of its subsidiaries or any person that, together with the Company
and its subsidiaries, is treated as a single employer under Section 414(b), (c),
(m) or (o) of the Code (the Company and each such other person, a "Commonly
Controlled Entity") for the benefit of any current employees, officers or
directors of the Company or any of its subsidiaries. The Company has also made
available to Parent true, complete and correct copies of (i) the most recent
annual report on Form 5500 filed with the Internal Revenue Service with respect
to each Compensation and Benefit Plan (if any such report was required), (ii)
the most recent summary plan description for each Compensation and Benefit Plan
for which such summary plan description is required and (iii) each trust
agreement and group annuity contract related to any Compensation and Benefit
Plan. Each Compensation and Benefit Plan has been administered in all material
respects in accordance with its terms. Neither the Company nor any Commonly
Controlled Entity maintains or has ever maintained a "defined benefit plan" (as
defined in Section 415 of the Code). Each of Company's subsidiaries and all the
Compensation and Benefit Plans are all in compliance with applicable provisions
of ERISA and the Code. Section 3.11(a) of the Company Disclosure Schedule sets
forth a complete and correct list of all Compensation and Benefit Plans.
(b) The Company and its subsidiaries have performed in all
material respects their obligations under each Compensation and Benefit Plan;
each Compensation and Benefit Plan and each trust or other funding medium, if
any, established in connection therewith has at all times been established,
maintained and operated in material compliance with its terms and the
requirements prescribed by Applicable Law, including ERISA and the Code.
(c) With respect to those Pension Plans that are intended to be
qualified under Section 401(a) of the Code, except as set forth in Section
3.11(c) of the Company Disclosure Schedule, each such Pension Plan has been the
subject of a determination letters from the Internal Revenue Service to the
effect that such Pension Plans are qualified and exempt from Federal income
taxes under Sections 401(a) and 501(a), respectively, of the Code, and no such
determination letter has been revoked nor has any event occurred since the date
of its most recent determination letter or application therefor that would
materially adversely affect its qualification or materially increase its costs.
(d) At all times on and after the effective date of ERISA,
neither Company nor any of its subsidiaries nor any entity which is under
"common control" with the Company (within the meaning of Section 4001 of ERISA)
has maintained, contributed to or otherwise
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had any obligation with respect to any "multiemployer plan" (as defined in
Section 3(37) of ERISA).
(e) Except as provided in Section 3.11(e) of the Company
Disclosure Schedule, there are no suits, actions, disputes, claims (other than
routine claims for benefits), arbitrations, administrative or other proceedings
pending or, to the knowledge of Company, threatened, anticipated or expected to
be asserted with respect to any Compensation and Benefits Plan or any related
trust or other funding medium thereunder or with respect to Company or its
subsidiaries, as the sponsor or fiduciary thereof or with respect to any other
fiduciary thereof.
(f) No Compensation and Benefit Plan maintained by Company or its
subsidiaries or any related trust or other funding medium thereunder or any
fiduciary thereof is, to the knowledge of Company, the subject of a material
audit, investigation or examination by an governmental or quasi-governmental
agency.
(g) Except as provided in Section 3.11(g) of the Company
Disclosure Schedule, (i) no "reportable event" (as such term is used in Section
4043 of ERISA) or "prohibited transaction" (as such term is used in Section 4975
of the Code and/or Section 406 of ERISA), has occurred with respect to any
Compensation and Benefit Plan established or maintained by Company or its
subsidiaries primarily for the benefit of participants employed within the
United States; (ii) neither Company nor its subsidiaries has any commitment,
intention or understanding to create, terminate or adopt any Compensation and
Benefit Plan that would result in any additional liability to Parent, the
Company or its subsidiaries; and (iii) since the beginning of the current fiscal
year of any Compensation and Benefit Plan, no event had occurred and no
condition or circumstance has existed that could result in a material increase
in the benefits under or the expense of maintaining such Compensation and
Benefit Plan maintained by Company, and its subsidiaries from the level of
benefits or expense incurred for the most recently completed fiscal year of such
Compensation and Benefit Plan.
(h) Section 3.11(h) of the Company Disclosure Schedule lists all
outstanding Company Stock Options as of the date hereof, identifying for each
such option: (i) the holder of such option and such holder's relationship to the
Company, (ii) the number of shares issuable, (iii) the number of vested shares,
(iv) the date of expiration and (v) the exercise price.
(i) All contributions required to be made under the terms of any
Compensation and Benefit Plan as of the date hereof have been timely made.
(j) Except as provided by this Agreement or in Section 3.11(j) of
the Company Disclosure Schedule, the execution of, and performance of the
transactions contemplated by, this Agreement will not (either along with or upon
the occurrence of any additional or subsequent events) constitute an event under
any Compensation and Benefit Plan or agreement that will or may reasonably be
expected to result in any payment (whether severance pay or otherwise),
acceleration, vesting or increase in benefits with respect to any employee,
former employee or director of the Company, or its subsidiaries, whether or not
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any such payment would be an "excess parachute payment" (within the meaning of
Section 280G of the Code).
(k) With respect to each Compensation and Benefit Plan required
to be maintained or contributed to by the law or applicable custom or rule of
the relevant jurisdiction outside of the United States (the "Foreign Plans"),
are listed on Section 3.11(k) of the Company Disclosure Schedule. As regards
each such Foreign Plan:
(i) Each of the Foreign Plans is in compliance in all
material respects with the provisions of the laws of each jurisdiction in which
each such Foreign Plan is maintained, to the extent those laws are applicable to
the Foreign Plans;
(ii) All contributions to, and payments from, the Foreign
Plans which may have been required to be made in accordance with the terms of
any such Foreign Plan, and, when applicable, the law of the jurisdiction in
which such Foreign Plan is maintained, have been timely made or shall be made by
the Effective Date. All such contributions to the Foreign Plans, and all
payments under the Foreign Plans, for any period ending before the Closing Date
that are not yet, but will be, required to be made, are reflected as an accrued
liability on the balance sheet included in the most recently filed Company SEC
Report;
(iii) All material reports, returns and similar documents,
if any, with respect to any Foreign Plan required to be filed with any
governmental body or distributed to any Foreign Plan participant have been duly
and timely filed or distributed or will be filed or distributed by the Closing
Date, and all of the Foreign Plans have obtained from the governmental body
having jurisdiction with respect to such plans any required determinations, if
any, that such Foreign Plans are in compliance with the laws of the relevant
jurisdiction if such determinations are required in order to give effect to the
Foreign Plan;
(iv) Each of the Foreign Plans has been administered at
all times, and in all material respects, in accordance with its terms. To the
knowledge of Company, there are no pending investigations by any governmental
body involving the Foreign Plans, and no pending claims (except for claims for
benefits payable in the normal operation of the Foreign Plans), suits or
proceedings against any Foreign Plan or asserting any rights or claims to
benefits under any Foreign Plan; and
(v) The consummation of the transactions contemplated by
this Agreement will not by itself create or otherwise result in any material
liability with respect to any Foreign Plan other than the triggering of payment
to participants.
(l) Each Compensation and Benefit Plan complies in all material
respects with all applicable requirements of (i) the Age Discrimination in
Employment Act of 1967, as amended, and the regulations thereunder and (ii)
Title VII of the Civil Rights Act of 1964, as amended, and the regulations
thereunder and all other applicable laws. All amendments and actions required to
bring each of the Compensation and Benefit Plans into conformity with all of the
applicable provisions of ERISA and other applicable laws have been made or taken
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except to the extent that such amendments or actions are not required by law to
be made or taken until a date after the Effective Time and are disclosed Section
3.11(l) of the Company Disclosure Schedule or will be provided to Parent within
fourteen (14) days of the date hereof.
(m) Except as disclosed in Section 3.11(m) of the Company
Disclosure Schedule, each group medical plan sponsored by the Company or its
subsidiaries materially complies with the Medicare Secondary Payor Provisions of
Section 1826 (b) of the Social Security Act, and the regulations promulgated
thereunder.
(n) The Surviving Corporation, the Company and its subsidiaries
may terminate or amend any Compensation and Benefit Plan maintained by the
Company or its subsidiaries or may cease contributions to any such Compensation
and Benefit Plans without incurring any material liability other than a benefit
liability accrued in accordance with the terms of such Compensation and Benefit
Plan immediately prior to such amendment, termination or ceasing of
contributions.
(o) Neither the Company nor any of its subsidiaries maintained
any Compensation and Benefit Plan which is a "group health plan" (as such term
is defined in Section 5000(b)(1) of the Code) that has not been administered and
operated in all respects in compliance with the applicable requirements of
Section 601 of ERISA and section 4980B(b) of the Code and the Company and its
subsidiaries are not subject to any liability, including additional
contributions, fines, penalties or loss of tax deduction as a result of such
administration and operation.
(p) Neither the Company nor any of its subsidiaries has incurred,
nor does the Company reasonably expect either it or any subsidiary to incur, any
liability for any tax imposed under Sections 4971 through 4980B of the Code or
civil liability under Section 501(i) or (1) of ERISA;
(q) Neither the Company nor any of its subsidiaries has incurred
any liability for any tax, excise tax, penalty or fee with respect to any
Compensation and Benefit Plan, including taxes arising under Section 4971
through 4980B of the Code and civil liability under Section 501(i) or (l) of
ERISA, and no event has occurred and no circumstance has existed that could give
rise to any such liability.
(r) No insurance policy nor any other contract or agreement
affecting any Compensation and Benefit Plan requires or permits a retroactive
increase in premiums or payments due thereunder.
Section 3.12 Labor and Employment Matters. Except as set forth on
Section 3.12 of the Company Disclosure Schedule:
(a) No collective bargaining agreement exists that is binding on
the Company or any of its subsidiaries, and the Company has not been officially
apprised that any petition has been filed or proceeding instituted by an
employee or group of employees of the
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<PAGE> 32
Company, or any of its subsidiaries, with the National Labor Relations Board
seeking recognition of a bargaining representative.
(b) (i) There is no labor strike, dispute, slow down or
stoppage pending or threatened against the Company or any of its subsidiaries;
and
(ii) Neither the Company nor any of its subsidiaries has
received any demand letters, civil rights charges, suits or drafts of suits with
respect to claims made by any of their respective employees.
(c) All individuals who are performing consulting or other
services for the Company or any of its subsidiaries are or were correctly
classified by the Company as either "independent contractors" or "employees" as
the case may be, and, at the Closing Date, will qualify for such classification.
(d) The Company has previously delivered to Parent a list (it
being agreed that the Company will update and correct such list and deliver it
to Parent, if necessary to make such list accurate, within five (5) business
days of the date hereof) of the name of each officer, employee and consultant of
the Company or any of the Company's subsidiaries, together with such person's
position or function, annual base salary or wages and any incentives or bonus
arrangement with respect to such person. Except as set forth in Section 3.12(d)
of the Company Disclosure Schedule, as of the date hereof, the Company has not
received any information that would lead it to believe that any such person will
or may cease to be engaged by the Company or such subsidiary for any reason,
including because of the consummation of the transactions contemplated by this
Agreement.
(e) The Company and each of its subsidiaries is in compliance in
all material respects with all applicable foreign, federal, state and local
laws, rules and regulations respecting employment, employment practices, terms
and conditions of employment and wages and hours, in each case, with respect to
employees.
(f) The Company and each of its subsidiaries has in all material
respects withheld and reported all amounts required by law or by agreement to be
withheld and reported with respect to wages, salaries and other payments to
employees.
(g) There are no pending or, to the Company's knowledge,
threatened claims or actions against the Company or any of its subsidiaries
under any worker's compensation policy or long-term disability policy.
Section 3.13. Environmental Laws and Regulations.
(a) The term "Environmental Laws" means any applicable federal,
state, local or foreign law, statute, treaty, ordinance, rule, regulation,
policy, permit, consent, approval, license, judgment, order, decree or
injunction relating to: (i) Releases (as defined in 42 U.S.C. sec. 9601(22)) or
threatened Releases of Hazardous Material (as hereinafter defined) into the
environment, (ii) the generation, treatment, storage, disposal, use, handling,
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<PAGE> 33
manufacturing, transportation or shipment of Hazardous Material, (iii) the
health or safety of employees in the workplace, (iv) protecting or restoring
natural resources or (e) the environment. The term "Hazardous Material" means
(1) hazardous substances (as defined in 42 U.S.C. sec. 9601(14)), including
"hazardous waste" as defined in 42 U.S.C. sec. 6903, (2) petroleum, including
crude oil and any fractions thereof, (3) natural gas, synthetic gas and any
mixtures thereof, (4) asbestos and/or asbestos containing materials, (5) PCBs or
materials containing PCBs, (6) any material regulated as a medical waste, (7)
lead containing paint, (8) radioactive materials and (9) "Hazardous Substance"
or "Hazardous Material" as those terms are defined in any indemnification
provision in any contract, lease, or agreement to which the Company or any of
its subsidiaries is a party.
(b) During the period of ownership or operation by the Company
and its subsidiaries of any of their current or previously owned or leased
properties, there have been no Releases of Hazardous Material by the Company or
any of its subsidiaries in, on, under or affecting such properties or any
surrounding site, and neither the Company nor any of its subsidiaries has
disposed of any Hazardous Material in a manner that has led, or could reasonably
be anticipated to lead to a Release, except in each case for those which,
individually or in the aggregate, would not have a Material Adverse Effect on
the Company. There have been no Releases of Hazardous Material by the Company or
any of its subsidiaries in, on, under or affecting their current or previously
owned or leased properties or any surrounding site at times outside of such
periods of ownership, operation or lease, except in each case for those which,
individually on in the aggregate, would not have a Material Adverse Effect on
the Company. Since January 1, 1998, neither the Company nor any of its
subsidiaries has received any written notice of, or entered into any order,
settlement or decree relating to: (i) any violation of any Environmental Laws or
the institution or pendency of any suit, action, claim, proceeding or
investigation by any Governmental Entity or any third party in connection with
any alleged violation of Environmental Laws or (ii) the response to or
remediation of Hazardous Material at or arising from any of the Company's
properties or any subsidiary's properties. There have been no violations of any
Environmental Laws by the Company or any subsidiary which violations,
individually or in the aggregate, could reasonably be expected to have a
Material Adverse Effect on the Company.
(c) There are no past or present events, conditions,
circumstances, activities, practices, incidents, actions, omissions or plans
that constitute a violation by the Company or any of its subsidiaries of, or are
reasonably likely to prevent or interfere with the Company's or any of its
subsidiaries' future compliance with, any Environmental Laws, other than any of
the foregoing that, individually or in the aggregate, could not reasonably be
expected to have a Material Adverse Effect on the Company.
Section 3.14. Taxes.
(a) Definitions. For purposes of this Agreement:
(i) the term "Code" means the Internal Revenue Code of
1986, as amended;
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(ii) the term "Tax" (including "Taxes") means all taxes,
charges, fees and other like assessments payable to any Governmental Entity,
including, without limitation, federal, state, local, foreign and other net
income, gross income, gross receipts, sales, use, ad valorem, transfer,
franchise, profits, license, lease, service, service use, withholding, payroll,
employment, excise, severance, stamp, occupation, premium, property, windfall
profits, customs, duties or other taxes, whether disputed or not, together with
any interest and any penalties, additions to tax or additional amounts with
respect thereto; and
(iii) the term "Tax Return" means any return, declaration,
report, statement, information statement and other document filed or required to
be filed with any Governmental Entity with respect to Taxes.
(b) Except as set forth in Section 3.14(b) of the Company
Disclosure Schedule, the Company and its subsidiaries have duly and timely filed
all Tax Returns required to be filed; and such Tax Returns are complete and
accurate and correctly reflect the Tax liability required to be reported
thereon. Such Tax Returns do not contain a disclosure statement under Section
6662 of the Code (or any predecessor provision or comparable provision of state,
local or foreign law).
(c) The Company and its subsidiaries have paid or adequately
provided in the financial statements included in the SEC Reports for all Taxes
(whether or not shown on any Tax Return) accrued through the date of such
Company SEC Reports; all Taxes the Company and its subsidiaries accrued
following the end of the most recent period covered by the Company SEC Report
have been accrued in the ordinary course of business of the Company and each
such subsidiary and have been paid when due in the ordinary course of business;
and no material election has been made with respect to Taxes of the Company or
its subsidiaries in any Tax Returns that have not been provided to Parent.
(d) Except as set forth in Section 3.14(d) of the Company
Disclosure Schedule, no material claim for assessment or collection of Taxes is
presently being asserted against the Company or its subsidiaries and neither the
Company nor any of its subsidiaries is a party to any pending action,
proceeding, or investigation by any governmental taxing authority nor does the
Company have knowledge of any such threatened action, proceeding or
investigation.
(e) Except as set forth in Section 3.14(e) of the Company
Disclosure Schedule, neither the Company nor any of its subsidiaries is a party
to any agreement, contract, arrangement or plan that has resulted or would
result, individually or in the aggregate, in connection with this Agreement or
any change of control of the Company or any of its subsidiaries, in the payment
of any "excess parachute payments" within the meaning of Section 280G of the
Code.
(f) Except as set forth in Section 3.14(f) of the Company
Disclosure Schedule, neither the Company nor any of its subsidiaries is a party
to or bound by any obligation under any Tax sharing, Tax allocation, Tax
indemnity or similar agreement or arrangement.
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(g) Except as set forth in Section 3.14(g) of the Company
Disclosure Schedule, there is currently no limitation on the utilization of net
operating losses, built-in losses, tax credits or other similar items of the
Company or its subsidiaries under Section 382, 383, 384 or 1502 of the Code and
the Treasury Regulations thereunder.
(h) Except as set forth in Section 3.14(h) of the Company
Disclosure Schedule, neither the Company nor any of its subsidiaries has agreed
to, or is required to make, any adjustment under Section 481 of the Code by
reason of a change in accounting method.
(i) Neither the Company nor any of its subsidiaries are
"consenting corporations" within the meaning of Section 341(f)(1) of the Code.
Section 3.15. Intellectual Property.
(a) Section 3.15(a) of the Company Disclosure Schedule sets
forth, for the Intellectual Property owned, in whole or in part, including
jointly with others, by the Company or any of its subsidiaries, a complete and
accurate list of all United States and foreign (i) patents and patent
applications; (ii) Trademark registrations and applications and material
unregistered Trademarks; and (iii) copyright registrations and applications,
indicating for each, the applicable jurisdiction, registration number (or
application number) and date issued (or date filed). For purposes of this
Agreement, "Intellectual Property" means: trademarks and service marks (whether
registered or unregistered), trade names and designs, together with all goodwill
related to the foregoing (collectively, "Trademarks"); patents (including any
continuations, continuations in part, renewals and applications for any of the
foregoing) (collectively "Patents"); copyrights (including any registrations and
applications therefor and whether registered or unregistered) (collectively,
"Copyrights"); computer software; databases; works of authorship; mask works;
trade secrets and, to the extent protectible as a matter of law, other
confidential information, technology; know-how, proprietary processes, formulae,
algorithms, models, user interfaces, customer lists, inventions, discoveries,
concepts, ideas, techniques, methods, source codes, object codes, methodologies
and, with respect to all of the foregoing, related confidential data or
information (collectively, "Trade Secrets").
(b) Trademarks.
(i) All Trademark registrations are currently in
compliance in all material respects with all legal requirements (including the
timely post-registration filing of affidavits of use and incontestability and
renewal applications) other than any requirement that, if not satisfied, would
not result in a cancellation of any such registration or otherwise materially
affect the priority and enforceability of the Trademark in question.
(ii) No registered Trademark has been within the last
three (3) years or is now involved in any opposition or cancellation proceeding
in the United States Patent and Trademark Office. To the Company's knowledge, no
such action has been threatened in writing within the one (1)-year period prior
to the date of this Agreement.
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(iii) Except as set forth in Section 3.15(b)(iii) of the
Company Disclosure Schedule, to the Company's knowledge, there has been no prior
use of any material Trademark by any third party that confers upon said third
party superior rights in any such Trademark.
(iv) Except as set forth in Section 3.15(b)(iv) of the
Company Disclosure Schedule, the Company and its subsidiaries have adequately
policed the Trademarks against third party infringement, and the Trademarks
registered in the United States have been continuously used by the Company or
one of its subsidiaries since the date set forth in, the form appearing in, and
in connection with the goods and services listed in, their respective
registration certificates or renewal certificates, as the case may be.
(c) Patents.
(i) All issued Patents are currently in compliance with
legal requirements (including payment of filing, examination, and maintenance
fees and proofs of working or use) other than any requirement that, if not
satisfied, would not result in a revocation or otherwise materially affect the
enforceability of the Patent in question.
(ii) Except as set forth in Section 3.15(c)(ii) of the
Company Disclosure Schedule, no Patent has been or is now involved in any
interference, reissue, reexamination or opposing proceeding in the United States
Patent and Trademark Office. To the Company's knowledge, except as set forth in
Section 3.15(c)(ii) of the Company Disclosure Schedule, no such action has been
threatened within the one (1)-year period prior to the date of this Agreement.
(iii) To the Company's knowledge, there is no patent or
patent application of any person that invalidates any claim the Company or any
of its subsidiaries has in any issued Patent.
(d) Trade Secrets.
(i) The Company and each of its subsidiaries have taken
reasonable steps in accordance with normal industry practice to protect their
respective rights in confidential information and Trade Secrets.
(ii) Without limiting the generality of Section
3.15(d)(i), except as set forth on Section 3.15(d)(ii) of the Company Disclosure
Schedule and except as would not be materially adverse to the Company and its
subsidiaries, taken as a whole, or its business, the Company and each of its
subsidiaries enforces a policy of requiring each relevant employee, consultant
and contractor to execute agreements that contain provisions designed to prevent
unauthorized disclosure of the Company's confidential information and Trade
Secrets. With respect to employees, such agreements are substantially in the
Company's standard forms and also assign to the Company or such subsidiary, as
the case may be, all rights to any Intellectual Property relating to the
Company's or such subsidiary's business that is developed by the employee in the
course of his or her activities for the Company or any of its
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<PAGE> 37
subsidiaries or is developed during working hours using the resources of the
Company or any such subsidiary. With respect to contractors and consultants, the
agreements either assign all Intellectual Property Rights developed pursuant to
the agreement or license such rights on agreed-upon terms. Except under
confidentiality obligations, to the Company's knowledge, there has been no
disclosure by the Company or any subsidiary of material confidential information
or Trade Secrets.
(e) License Agreements.
Section 3.15(e)(i) of the Company Disclosure Schedule sets
forth a complete and accurate list of all license agreements granting to the
Company or any of its subsidiaries any material right to use or practice any
rights under any Intellectual Property other than software commercially
available on standard terms for a license fee of no more than One Hundred
Thousand Dollars ($100,000) (collectively, the "Inbound License Agreements"),
indicating for each the title and the parties. Section 3.15(e)(ii) of the
Company Disclosure Schedule sets forth a complete and accurate list of all
license agreements under which the Company or any of its subsidiaries licenses
software or grants other rights in to use or practice any rights under any
Intellectual Property, excluding licenses to customers that in the twelve-month
period prior to the date hereof have purchased or licensed products for which
the total payments to the Company and its subsidiaries did not exceed One
Hundred Thousand Dollars ($100,000) and otherwise are not material to the
Company (collectively, the "Outbound License Agreements"), indicating for each
the title and the parties thereto. Except as set forth in Section 3.15(e) of the
Company Disclosure Schedule, there is no material outstanding or, to the
Company's knowledge, threatened dispute or disagreement with respect to any
Inbound License Agreement or any Outbound License Agreement.
(f) Ownership; Sufficiency of IP Assets. Except as set forth in
Section 3.15(f) of the Company Disclosure Schedule, the Company or one of its
subsidiaries owns or possesses adequate licenses or other rights to use, free
and clear of Liens, orders and arbitration awards, all of its Intellectual
Property used in its business. The Intellectual Property identified in Section
3.15(a) of the Company Disclosure Schedule, together with the Company's and its
subsidiaries' unregistered copyrights, mask works and Trade Secrets and the
Company's and such subsidiaries' rights under the licenses granted to the
Company or any of its subsidiaries under the Inbound License Agreements,
constitute, except as set forth in Section 3.15(f) of the Company Disclosure
Schedule, all the material Intellectual Property rights used in the operation of
the Company's and its subsidiaries' businesses as they are currently conducted
and are all the Intellectual Property rights necessary to operate such
businesses after the Effective Time in substantially the same manner as such
businesses have been operated by the Company and its subsidiaries prior thereto.
(g) Protection of IP. The Company has taken reasonable steps to
protect the Intellectual Property of the Company and its subsidiaries.
(h) No Infringement by the Company. Except as set forth on
Section 3.15(h) of the Company Disclosure Schedule, to the Company's knowledge,
the
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products used, manufactured, marketed, sold or licensed by the Company and its
subsidiaries, and all Intellectual Property used in the conduct of the Company's
and its subsidiaries' businesses as currently conducted, do not infringe upon,
violate or constitute the unauthorized use of any valid and enforceable
Intellectual Property rights owned or controlled by any third party.
(i) No Pending or Threatened Infringement Claims. Except and to
the extent publicly disclosed in the Company SEC Reports or in Section 3.15(i)
of the Company Disclosure Schedule, no litigation is now or, within the three
(3) years prior to the date of this Agreement, was pending and, to the Company's
knowledge, no notice or other claim in writing has been received by the Company
within the one (1) year prior to the date of this Agreement, (i) alleging that
the Company any of its subsidiaries has engaged in any activity or conduct that
infringes upon, violates or constitutes the unauthorized use of the Intellectual
Property rights of any third party or (ii) challenging the ownership, use,
validity or enforceability of any Intellectual Property owned or exclusively
licensed by or to the Company. Except as specifically disclosed in one or more
subsections of this Section 3.15 of the Company Disclosure Schedules, no
Intellectual Property (y) that is owned by the Company or any of its
subsidiaries is subject to any outstanding order, judgment, decree, stipulation
or agreement restricting the use, sale, transfer, assignment or licensing
thereof by the Company or any such subsidiary, except as may be specifically
provided in any such Outbound License Agreement, or (z) that is the subject of
an Inbound License Agreement is, to the knowledge of the Company, subject to any
outstanding judgment, decree, stipulation or agreement restricting the use,
sale, transfer, assignment or licensing thereof by the Company or any of its
subsidiaries, except as provided in the Inbound License Agreements.
(j) No Infringement by Third Parties. Except as and to the extent
publicly disclosed in the Company SEC Reports or as set forth in Section 3.15(j)
of the Company Disclosure Schedule, to the knowledge of the Company, no third
party is misappropriating, infringing, diluting or violating any Intellectual
Property owned or exclusively licensed to the Company or any of its
subsidiaries, and no such claims have been brought against any third party by
the Company or any of its subsidiaries which are now pending or which have been
pending in the last five (5) years.
(k) Assignment; Change of Control. Except as set forth in Section
3.15(k) of the Company Disclosure Schedule, the execution, delivery and
performance by the Company of this Agreement, and the consummation of the
transactions contemplated hereby, will not result in the loss or impairment of,
or give rise to any right of any third party to terminate or alter, any of the
Company's or any of its subsidiaries' rights to own any of its Intellectual
Property or their respective rights under any Inbound License Agreement or
Outbound License Agreement, nor require the consent of any Governmental
Authority or third party in respect of any such Intellectual Property.
(l) Software. To the knowledge of the Company, the Software owned
or purported to be owned by the Company or any of its subsidiaries (the "Company
Software"), was either (i) developed by employees of the Company or any of its
subsidiaries within the
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scope of their employment; (ii) developed by independent contractors who have
assigned their rights to the Company or any of its subsidiaries pursuant to
written agreements; or (iii) otherwise acquired by the Company or a subsidiary
from a third party. To the knowledge of the Company, except as set forth in
Section 3.15(l) of the Company Disclosure Schedule, the Company Software does
not contain any programming code, documentation, tools or other materials or
development environments that embody Intellectual Property rights of any person
other than the Company or any of its subsidiaries, except for such materials,
tools, documentation or development environments obtained by the Company or any
of its subsidiaries from other persons who (y) make such materials or
development environments generally available on standard commercial terms or (z)
who have licensed the Company or its subsidiaries the right to include such
materials, tools, documentation and development environments in the Company
Software. For purposes of this Section 3.15(l), "Software" means any and all (i)
computer programs, including any and all software implementations of algorithms,
models and methodologies, whether in source code or object code, (ii) databases
and compilations, including any and all data and collections of data, whether
machine readable or otherwise, (iii) descriptions, schematics, flow-charts and
other work product used to design, plan, organize and develop any of the
foregoing, and (iv) all documentation, including user manuals and training
materials, relating to any of the foregoing.
(m) Performance of Existing Software Products. To the knowledge
of the Company, except as set forth in Section 3.15(m) of the Company Disclosure
Schedule, the Company's and its subsidiaries' existing and currently
manufactured and marketed Software products listed and described on Section
3.15(m) of the Company Disclosure Schedule perform in all material respects,
free of significant bugs, viruses or programming errors, the functions described
in any agreed specifications or end user documentation or other information
provided to customers of the Company or any of its subsidiaries on which such
customers relied when licensing or otherwise acquiring such products.
(n) Documentation. Except as set forth in Section 3.15(n) of the
Company Disclosure Schedule, the Company and its subsidiaries have taken
reasonable actions customary in the software industry to document the Company
Software and its operation, such that the Company Software, including the source
code and documentation, have been written so that they may be reasonably
understood, modified and maintained by reasonably competent programmers.
(o) Year 2000 Capability.
(i) Except as set forth in Section 3.15(o) of the Company
Disclosure Schedule, all of the Company's and its subsidiaries' material
products (including products currently under development) will record, store,
process and calculate and present calendar dates falling on and after December
31, 1999, and will calculate any information dependent on or relating to such
dates and with the same functionality, data integrity and performance as the
products record, store, process, calculate and present calendar dates on or
before December 31, 1999, or calculate any information dependent on or relating
to such dates (collectively, "Year 2000 Capable"). Except as set forth in
Section 3.15(o) of the Company
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Disclosure Schedule, (i) all of the Company's and its subsidiaries' material
products will lose no significant functionality with respect to the introduction
of records containing dates falling on or after December 31, 1999; and (ii) , to
the knowledge of the Company, all of the Company's and its subsidiaries'
internal computer systems comprised of software, hardware, databases or embedded
control systems (microprocessor controlled, robotic or other device) related to
the Company's and its subsidiaries' businesses (collectively, the "Business
Systems"), that constitutes any material part of, or is material to the use,
operation or enjoyment of, any material tangible or intangible asset or real
property of the Company and its subsidiaries, including its accounting systems,
are Year 2000 Capable. Except as set forth on Section 3.15(o) of the Company
Disclosure Schedule, the current versions of the Company Software may be used
prior to, during and after December 31, 1999, such that such Company Software
will operate prior to, during and after such time period without error caused by
date data that represents or references different centuries or more than one
century.
(ii) Except as set forth on Section 3.15(o) of the Company
Disclosure Schedule, the Company's material products and, to the Company's
knowledge, the conduct of the Company's business with its material customers and
suppliers will not be materially adversely affected by the failure of such
products, or the failure of the products and Software of the Company's customers
and suppliers, to be Year 2000 Capable. Except as set forth on Section 3.15(o)
of the Company Disclosure Schedule, neither the Company nor any of its
subsidiaries is reasonably likely to incur material expenses arising from or
relating to the failure of any of its products or, to the knowledge of the
Company, its Business Systems (including all products sold on or prior to the
date hereof) as a result of the failure of such products or services to be Year
2000 Capable.
(p) Foundry Relationships. Section 3.15(p) of the Company
Disclosure Schedule sets forth a complete and correct description of each and
every (i) foundry relationship, wafer or digital signal processor manufacturing
and fabricating agreement, understanding or commitment, and (ii) integrated
circuit die or device purchase, supply or service agreement, understanding or
commitment, used by or in connection with the Company's business, in whole or in
part, whether written or oral (the "Supply Contracts"). The Company has
delivered to Parent a correct and complete copy of each written Supply Contract
and provided a written summary of each material oral Supply Contract. There are
no fees, penalties, price uplifts, shortfall payments, bill backs or other
amounts outstanding under such Supply Contracts. The quantities available for
purchase under each written Supply Contract are as stated on the face of such
Supply Contract and are summarized in Section 3.15(p) of the Company Disclosure
Schedule. Each manufacturing or service site that requires qualification under
the terms of a Supply Contract is qualified, and no unresolved differences with
respect to product or process specifications remains outstanding. All
manufacturing or service terms and conditions are as they appear to be on the
face of the written Supply Contracts. The Company has not received any written
or oral notice from the other party to any Supply Contract, or from any other
supplier to the Company, to the effect that such party will not accept purchase
orders from the Company on such terms, conditions and quantities consistent with
past practices. Prices required to be paid for products or services under such
Supply Contract are summarized on Section 3.15(p) of the Company
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Disclosure Schedule. Except as set forth in Section 3.15(p) of the Company
Disclosure Schedule, no condition exists that permit a termination or a material
change of such Supply Contracts by the other party under such Supply Contract.
Section 3.15(p) of the Company Disclosure Schedule sets forth correct and
complete information regarding wafer starts, applicable lead times and
cancellation provisions for all products in production as of the date hereof.
Section 3.15(p) of the Company Disclosure Schedule sets forth correct and
complete manufacturing information since January 1, 1998 regarding yields under
the Supply Contracts.
Section 3.16. Insurance. Except as set forth in Section 3.16 of
the Company Disclosure Schedule, each of the Company and its subsidiaries
maintains insurance policies (the "Insurance Policies") against all risks of a
character and in such amounts as are customarily insured against by similarly
situated companies in the same or similar businesses. Each Insurance Policy is
in full force and effect and is valid, outstanding and enforceable, and all
premiums due thereon have been paid in full or are being paid under an
installment program. None of the Insurance Policies will terminate or lapse (or
be affected in any other materially adverse manner) by reason of the
transactions contemplated by this Agreement. Each of the Company and its
subsidiaries has complied in all material respects with the provisions of each
Insurance Policy under which it is the insured party. No insurer under any
Insurance Policy has canceled or generally disclaimed liability under any such
policy or, to the Company's knowledge, indicated any intent to do so or not to
renew any such policy. All material claims under the Insurance Policies have
been filed in a timely fashion.
Section 3.17. Certain Business Practices. None of the Company,
any of its subsidiaries or any directors, officers, agents or employees of the
Company or any of its subsidiaries has (i) used any funds of the Company or any
of its subsidiaries for unlawful contributions, gifts, entertainment or other
unlawful expenses related to political activity, (ii) caused the Company or any
of its subsidiaries to make any unlawful payment to foreign or domestic
government officials or employees or to foreign or domestic political parties or
campaigns or violated any provision of the Foreign Corrupt Practices Act of
1977, as amended, or (iii) caused the Company or any of its subsidiaries to make
any other unlawful payment.
Section 3.18. Product Warranties. Section 3.18 of the Company
Disclosure Schedule sets forth a list of all agreements which contain the
written product warranties given by the Company or any of its subsidiaries and
currently in effect with respect to its products. There have not been any
material deviations from such warranties and guaranties, and neither the
Company, any of its subsidiaries nor any of their respective salesmen,
employees, distributors and agents is authorized to undertake obligations to any
customer or to other third parties materially in excess of such warranties or
guaranties. Neither the Company nor any of its subsidiaries has made any
material oral warranty or guaranty with respect to its products not described on
such schedule.
Section 3.19. Suppliers and Customers. The documents and
information supplied by the Company to Parent or any of its representatives in
connection with this
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Agreement with respect to relationships and volumes of business done with its
significant suppliers and customers are accurate in all material respects.
Section 3.19 of the Company Disclosure Schedule sets forth the names of the
twenty-five (25) largest customers (based on revenues) and the ten (10) largest
suppliers (based on payables) of the Company and its subsidiaries during the
last twelve (12) months ended September 30, 1999. During the last twelve (12)
months, the Company has received no notices of termination or written threats of
termination from any of the ten (10) largest suppliers or the twenty-five (25)
largest customers of the Company and its subsidiaries.
Section 3.20. Vote Required. The affirmative vote of the holders
of a majority of the outstanding Shares is the only vote of the Company's
capital stock necessary to approve the Merger and adopt this Agreement.
Section 3.21. Opinion of Financial Advisor. The Fairness Opinion
has not been withdrawn, revoked or modified. A true and complete copy of such
opinion has been delivered to Parent.
Section 3.22. Brokers. No broker, finder or investment banker
(other than as set forth in Section 3.22 of the Company Disclosure Schedule),
true and correct copies of whose engagement agreements have been provided to
Parent) is entitled to any brokerage, finder's or other fee or commission in
connection with the transactions contemplated by this Agreement based upon
arrangements made by or on behalf of the Company.
Section 3.23. Takeover Statutes. No "fair price," "moratorium,"
"control share acquisition" or other similar anti-takeover statute or regulation
(each a "Takeover Statute") is applicable to the Company, the Shares, the Offer,
the Merger or any of the other transactions contemplated by this Agreement. The
Company represents that the restrictions on "business combinations" contained in
Section 203 of the DGCL are inapplicable to the transactions contemplated by
this Agreement provided that such transactions are consummated in accordance
with the terms hereof.
Section 3.24. Grants, Incentives and Subsidies. Section 3.24 of
the Company Disclosure Schedule provides a complete list of all outstanding
grants, incentives and subsidies (collectively, "Grants") from the Government of
the State of Israel or any agency thereof, or from any foreign governmental or
administrative agency, to the Company, including grants from the OCS. Section
3.24 of the Company Disclosure Schedule includes the aggregate amounts of each
Grant, and the aggregate outstanding obligations thereunder of the Company with
respect to royalties, or the outstanding amounts to be paid by the OCS to the
Company and the composition of such obligations or amount by the product or
product family to which it relates. Except as disclosed in Section 3.24 of the
Company Disclosure Schedule, the Company and each of its subsidiaries are in
compliance with the terms and conditions of their respective Grants and have
duly fulfilled all the undertakings relating thereto. Except as set forth in
Section 3.24 of the Company Disclosure Schedule, (i) no funds need to be paid,
(ii) no filings, permits, authorizations, consents or approvals are required, or
(iii) no adverse consequence will result from the transfer or continuation of
the Grants as
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result of, or in connection with, the consummation of either the Offer or the
Merger. Except as set forth in Section 3.24 of the Company Disclosure Schedule,
there are no restrictions on the use, transfer or licensing of any Intellectual
Property connected with or associated with any of the above rights, incentives
or subsidies as a result of, or in connection with, the consummation of either
the Offer or the Merger.
Section 3.25. Representations Complete. To the knowledge of the
Company, none of the representations or warranties made by the Company in this
Agreement nor any statement made in any Schedule or certificate furnished by the
Company pursuant to this Agreement, or furnished in or in connection with
documents mailed or delivered to the stockholders of the Company in connection
with soliciting their proxy or consent to this Agreement and the Merger,
contains or will contain at the Effective Time, any untrue statement of a
material fact, or omits or will omit at the Effective Time to state any material
fact necessary in order to make the statements contained herein or therein, in
the light of the circumstances under which made, not misleading.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF
PARENT AND ACQUISITION
Parent and Acquisition, jointly and severally, hereby represent
and warrant to the Company as follows:
Section 4.1. Organization.
(a) Each of Parent and Acquisition is duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation and has all requisite power and authority to own, lease and
operate its properties and to carry on its business as now being conducted.
Parent has heretofore made available to the Company accurate and complete copies
of the Certificates of Incorporation and bylaws as currently in full force and
effect, of Parent and Acquisition. Parent owns all of the issued and outstanding
capital stock of Acquisition.
(b) Each of Parent and Acquisition is duly qualified or
licensed and in good standing to do business in each jurisdiction in which the
property owned, leased or operated by it or the nature of the business conducted
by it makes such qualification or licensing necessary, except in such
jurisdictions where the failure to be so duly qualified or licensed and in good
standing would not have a Material Adverse Effect on Parent. When used in
connection with Parent or its subsidiaries (including Acquisition), the term
"Material Adverse Effect on Parent" means any circumstance, change in or effect
on (or circumstance, change in, or effect involving a prospective change on)
Parent and its subsidiaries, taken as a whole, that materially and adversely
affects the ability of Parent and/or Acquisition to consummate the Offer or the
Merger.
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Section 4.2. Authority Relative to this Agreement. Each of Parent
and Acquisition has all necessary corporate power and authority to execute and
deliver this Agreement, to perform its obligations under this Agreement and to
consummate the transactions contemplated hereby. The execution and delivery of
this Agreement and the consummation of the transactions contemplated hereby have
been duly and validly authorized by the boards of directors of Parent and
Acquisition and by Parent as the sole stockholder of Acquisition, and no other
corporate proceedings on the part of Parent or Acquisition are necessary to
authorize this Agreement or to consummate the transactions contemplated hereby.
This Agreement has been duly and validly executed and delivered by each of
Parent and Acquisition and constitutes, assuming the due authorization,
execution and delivery hereof by the Company, a valid, legal and binding
agreement of each of Parent and Acquisition enforceable against each of Parent
and Acquisition in accordance with its terms, subject to any applicable
bankruptcy, insolvency, reorganization, moratorium or similar laws now or
hereafter in effect relating to creditors' rights generally or to general
principles of equity.
Section 4.3. Information Supplied. None of the information
supplied or to be supplied by Parent or Acquisition for inclusion or
incorporation by reference in the Offer Documents or the Proxy Statement will at
the date mailed to stockholders and at the times of the meeting or meetings of
stockholders of the Company to be held in connection with the Merger contain any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary in order to make the statements therein in
light of the circumstances under which they are made not misleading.
Notwithstanding the foregoing, neither Parent nor Acquisition makes any
representation, warranty or covenant with respect to any information supplied or
required to be supplied by the Company that is contained in or omitted from the
Proxy Statement.
Section 4.4. Consents and Approvals; No Violations. Except for
filings, permits, authorizations, consents and approvals as may be required
under and other applicable requirements of the Securities Act, the Exchange Act,
state securities or blue sky laws, the HSR Act, and any filings under similar
merger notification laws or regulations of foreign Governmental Entities,
including filings with the OCS, and the filing and recordation of the
Certificate of Merger as required under the DGCL, no material filing with or
notice to, and no material permit, authorization, consent or approval of any
Governmental Entity is necessary for the execution and delivery by Parent or
Acquisition of this Agreement or the consummation by Parent or Acquisition of
the transactions contemplated hereby. Neither the execution, delivery and
performance of this Agreement by Parent or Acquisition nor the consummation by
Parent or Acquisition of the transactions contemplated hereby will (a) conflict
with or result in any breach of any provision of the respective Certificates of
Incorporation or bylaws (or similar governing documents) of Parent or
Acquisition, (b) result in a violation or breach of or constitute (with or
without due notice or lapse of time or both) a default (or give rise to any
right of termination, amendment, cancellation or acceleration or Lien) under any
of the terms, conditions or provisions of any material note, bond, mortgage,
indenture, lease, license, contract, agreement or other instrument or obligation
to which Parent or Acquisition or any of Parent's other subsidiaries is a party
or by which any of them or any
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of their respective properties and assets is bound or (c) violate any material
order, writ, injunction, decree, law, statute, rule or regulation applicable to
Parent or Acquisition or any of Parent's other subsidiaries or any of their
respective properties or assets.
Section 4.5. Litigation. There is no suit, claim, action,
proceeding or investigation pending or, to the knowledge of Parent threatened,
against Parent or any of its subsidiaries or any of their respective properties
or assets before any Governmental Entity that could reasonably be expected to
prevent or delay the consummation of the transactions contemplated by this
Agreement beyond the Final Date. Neither Parent nor any of its subsidiaries is
subject to any outstanding order, writ, injunction or decree that could
reasonably be expected to prevent or delay the consummation of the transactions
contemplated hereby.
Section 4.6. Brokers or Finders. No broker, finder or investment
banker is entitled to any brokerage, finder's or other fee or commission in
connection with the transactions contemplated by this Agreement based upon
arrangements made by or on behalf of Parent or Acquisition.
Section 4.7. Financing. Parent and Acquisition have available
(through cash on hand and existing credit arrangements or otherwise) all the
funds necessary for the acquisition of all Shares and to perform their
respective obligations under this Agreement, including the payment in full for
all Shares validly tendered or outstanding as of the Effective Time and the
payment of all fees and expenses related to the transactions that are
contemplated hereby, required to be paid by them hereunder.
Section 4.8. Ownership of the Company. As of the date hereof,
neither Parent nor Acquisition, nor any subsidiary of Parent, is the beneficial
owner of any shares of Company Common Stock.
Section 4.9. Acquisition's Operations. Acquisition was formed
solely for the purpose of engaging in the transactions contemplated hereby and
has not engaged in any business activities or conducted any operations other
than in connection with the transactions contemplated hereby.
ARTICLE 5
COVENANTS
Section 5.1. Conduct of Business of the Company. Except as
contemplated by this Agreement or as described in Section 5.1 of the Company
Disclosure Schedule, during the period from the date hereof to the Effective
Time, the Company will and will cause each of its subsidiaries to (a) conduct
its operations in the ordinary course of business consistent with past practice
and, to the extent consistent therewith, with no less diligence and effort than
would be applied in the absence of this Agreement, and (b) use all commercially
reasonable efforts to preserve intact its current business organizations, keep
available the service of its
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current officers and employees and preserve its relationships with customers,
suppliers, distributors, lessors, creditors, employees, contractors and others
having business dealings with it with the intention that its goodwill and
ongoing businesses shall be unimpaired at the Effective Time. Without limiting
the generality of the foregoing, except as otherwise expressly provided in this
Agreement or in Section 5.1 of the Company Disclosure Schedule or as required by
Applicable Law, prior to the Effective Time, neither the Company nor any of its
subsidiaries shall, without the prior written consent of Parent:
(a) amend its Certificate of Incorporation or bylaws (or other
similar governing instrument);
(b) authorize for issuance, issue, sell, deliver or agree or
commit to issue, sell or deliver (whether through the issuance or granting of
options, warrants, commitments, subscriptions, rights to purchase or otherwise)
any stock of any class or any other debt or equity securities or equity
equivalents (including any stock options or stock appreciation rights) except
for the issuance and sale of Shares pursuant to Company Stock Options
outstanding on the date hereof;
(c) split, combine or reclassify any shares of its capital stock,
declare, set aside or pay any dividend or other distribution (whether in cash,
stock or property or any combination thereof) in respect of its capital stock,
make any other actual, constructive or deemed distribution in respect of its
capital stock or otherwise make any payments to stockholders in their capacity
as such, or redeem or otherwise acquire any of its securities or any securities
of any of its subsidiaries, except as may be required under the terms of any
Company Stock Option;
(d) adopt a plan of complete or partial liquidation, dissolution,
merger, consolidation, restructuring, recapitalization or other reorganization
of the Company or any of its subsidiaries (other than the Merger);
(e) alter through merger, liquidation, reorganization,
restructuring or any other fashion the corporate structure of any subsidiary;
(f) (i) incur or assume any long-term or short-term debt or issue
any debt securities except, in each case, for borrowings under existing lines of
credit in the ordinary course of business consistent with past practice, or
modify or agree to any amendment of the terms of any of the foregoing; (ii)
assume, guarantee, endorse or otherwise become liable or responsible (whether
directly, contingently or otherwise) for the obligations of any other person
except for obligations of subsidiaries of the Company incurred in the ordinary
course of business consistent with past practice, other than third-party
guarantees and lease agreements not to exceed Five Hundred Thousand Dollars
($500,000) in the aggregate; (iii) make any loans, advances or capital
contributions to or investments in any other person (other than in accordance
with Section 5.1(m)(vii) and to subsidiaries of the Company or customary loans
or advances to employees in each case in the ordinary course of business
consistent with past practice); (iv) pledge or otherwise subject to any Lien
shares of capital
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stock of the Company or any of its subsidiaries; or (v) mortgage or pledge any
of its material assets, tangible or intangible, or create or suffer to exist any
material Lien thereupon;
(g) except as may be required by Applicable Law, enter into,
adopt or amend or terminate any bonus, special remuneration, profit sharing,
compensation, severance, termination, stock option, stock appreciation right,
restricted stock, performance unit, stock equivalent, stock purchase agreement,
pension, retirement, deferred compensation, employment, health, life, or
disability insurance, dependent care, severance or other employee benefit plan,
agreement, trust, fund or other arrangement for the benefit or welfare of any
director, officer, employee or consultant in any manner or increase in any
manner the compensation or fringe benefits of any director, officer or employee
or pay any benefit not required by any plan and arrangement as in effect as of
the date hereof (including the granting of stock appreciation rights or
performance units), except in accordance with Section 5.13;
(h) grant any severance or termination pay to any director,
officer, employee or consultant, except payments made pursuant to written
agreements outstanding on the date hereof or the current severance policies of
the Company described on Section 3.11(a) of the Company Disclosure Schedule, or
as required by applicable federal, state or local law or regulations;
(i) exercise its discretion or otherwise voluntarily accelerate
the vesting of any Company Stock Option as a result of the Merger, any other
"change in control" of the Company (as defined in the Assumed Option Plans) or
otherwise.
(j) except as set forth in Section 5.1(j) of the Company
Disclosure Schedule (i) sell, lease, license, transfer or otherwise dispose of
any material assets in any single transaction or series of related transactions
(including in any transaction or series of related transactions having a fair
market value in excess of Three Hundred and Fifty Thousand Dollars ($350,000) in
the aggregate), other than sales of its products and licenses of software in the
ordinary course of business consistent with past practices, (ii) enter into any
exclusive license, distribution, marketing, sales or other agreement or sell,
transfer or otherwise dispose of any Intellectual Property, or (iii) other than
with respect to internal use in the ordinary course of business consistent with
past practices, license any source code to any third party;
(k) except as may be required as a result of a change in law or
in generally accepted accounting principles, change any of the accounting
principles, practices or methods used by it;
(l) revalue in any material respect any of its assets, including
writing down the value of inventory or writing-off notes or accounts receivable,
other than in the ordinary course of business consistent with past practice or
as required by generally accepted accounting principles;
(m) (i) except as set forth in Section 5.1(m)(i) of the Company
Disclosure Schedule, acquire (by merger, consolidation or acquisition of stock
or assets) any corporation, partnership or other person or division thereof or
any equity interest therein; (ii) enter into any
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contract or agreement that would be material to the Company and its
subsidiaries, taken as a whole; (iii) amend, modify or waive any right under any
material contract of the Company or any of its subsidiaries; (iv) modify its
standard warranty terms for its products or amend or modify any product
warranties in effect as of the date hereof in any material manner that is
adverse to the Company or any of its subsidiaries; (v) authorize any new capital
expenditure or expenditures that are not set forth in Section 5.1(m)(v) of the
Company Disclosure Schedule and that in the aggregate are in excess of Fifty
Thousand Dollars ($50,000) per month (vi) authorize any new or additional
manufacturing capacity expenditure or expenditures for any manufacturing
capacity contracts or arrangements; or (vii) acquire any other asset or related
group of assets, or make any investment, in a single transaction or series of
related transactions with a cost in excess of One Million Dollars ($1,000,000),
provided that in no event shall the aggregate of all acquisitions and
investments exceed Three Million Dollars ($3,000,000);
(n) make any material tax election or settle or compromise any
material income tax liability or permit any insurance policy naming it as a
beneficiary or loss-payee to expire, or to be canceled or terminated, unless a
comparable insurance policy reasonably acceptable to Parent is obtained and in
effect;
(o) fail to file any Tax Returns when due (or, alternatively,
fail to file for available extensions) or fail to cause such Tax Returns when
filed to be complete and accurate in all material respects;
(p) fail to pay any Taxes or other material debts when due;
(q) settle or compromise any pending or threatened suit, action
or claim that (i) relates to the transactions contemplated hereby or (ii) the
settlement or compromise of which would involves more than One Million Five
Hundred Thousand Dollars ($1,500,000) or that would otherwise be material to the
Company or that relates to any Intellectual Property matters;
(r) take any action or fail to take any action that could
reasonably be expected to (i) limit the utilization of any of the net operating
losses, built-in losses, tax credits or other similar items of the Company or
its subsidiaries under Section 382, 383, 384 or 1502 of the Code and the
Treasury Regulations thereunder, or (ii) cause any transaction in which the
Company or any of its subsidiaries was a party that was intended to be treated
as a reorganization under Section 368(a) of the Code to fail to qualify as a
reorganization under Section 368(a) of the Code; or
(s) take or agree in writing or otherwise to take any of the
actions described in Sections 5.1(a) through 5.1(r) (and it shall use all
reasonable efforts not to take any action that would make any of the
representations or warranties of the Company contained in this Agreement untrue
or incorrect).
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Section 5.2. No Solicitation or Negotiation.
(a) The Company, its subsidiaries and other affiliates (as
reasonably determined by the Company) and their respective officers and other
employees with managerial responsibilities, directors, representatives
(including the Financial Advisor or any other investment banker and any
attorneys and accountants) and agents shall immediately cease any discussions or
negotiations with any other persons with respect to any Third Party Acquisition.
The Company also agrees promptly to request each person that has heretofore
executed a confidentiality agreement in connection with its consideration of
acquiring (whether by merger, acquisition of stock or assets or otherwise) the
Company or any of its subsidiaries, if any, to return all confidential
information heretofore furnished to such person by or on behalf of the Company
or any of its subsidiaries. Neither the Company nor any of its subsidiaries and
other affiliates shall, nor shall the Company authorize or permit any of its or
their respective officers, directors, employees, representatives or agents to,
directly or indirectly, encourage, solicit, participate in or initiate
discussions or negotiations with or provide any information to any person or
group (other than Parent and Acquisition or any designees of Parent and
Acquisition) concerning any Third Party Acquisition; provided, however, that
nothing herein shall prevent the Company Board from taking and disclosing to the
Company's stockholders a position contemplated by Rules 14d-9 and 14e-2
promulgated under the Exchange Act with regard to any tender or exchange offer.
The Company shall promptly (and in any event within one business day after
becoming aware thereof) (i) notify Parent in the event the Company or any of its
subsidiaries and other affiliates or any of their respective officers,
directors, employees and agents receives any proposal or inquiry concerning a
Third Party Acquisition, including the terms and conditions thereof and the
identity of the party submitting such proposal, and any request for confidential
information in connection with a potential Third Party Acquisition, (ii) provide
a copy of any written agreements, proposals or other materials the Company
receives from any such person or group (or its representatives), and (iii)
advise Parent from time to time of the status, at any time upon Parent's
request, and promptly following any developments concerning the same.
(b) Except as set forth in this Section 5.2(b), the Company Board
shall not withdraw or modify its recommendation of the transactions contemplated
hereby or approve or recommend, or cause or permit the Company to enter into any
agreement or obligation with respect to, any Third Party Acquisition.
Notwithstanding the foregoing, if the Company Board by a majority vote
determines in its good faith judgment, after consultation with and based upon
the advice of legal counsel, that it is required to do so in order to comply
with its fiduciary duties, the Company Board may withdraw its recommendation of
the transactions contemplated hereby or approve or recommend a Superior
Proposal, but in each case only (i) after receiving a Superior Proposal and
providing written notice thereof to Parent (a "Notice of Superior Proposal"),
specifying the material terms and conditions of such Superior Proposal and
identifying the person or group making such Superior Proposal and (ii) if Parent
does not, within three (3) business days after Parent's receipt of the Notice of
Superior Proposal, make an offer that the Company Board by a majority vote
determines in its good faith judgment (based, as to the financial terms, on the
written advice of the Financial Advisor or another financial advisor of
nationally recognized reputation) to be at least as favorable to
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the Company's stockholders as such Superior Proposal; provided, however, that
the Company shall not be entitled to enter into any agreement with respect to a
Superior Proposal unless and until this Agreement is terminated pursuant to
Section 7.1 and the Company has paid all amounts due to Parent pursuant to
Section 7.3. Any disclosure that the Company Board may be compelled to make with
respect to the receipt of a proposal for a Third Party Acquisition or otherwise
in order to comply with its fiduciary duties or Rule 14d-9 or 14e-2 will not
constitute a violation of this Agreement; provided, however, that such
disclosure does not state that any action will be taken by the Company Board in
violation of this Agreement.
(c) For purposes of this Agreement, "Third Party Acquisition"
means the occurrence of any of the following events: (i) the acquisition of the
Company by merger or otherwise by any person (which includes a "person" as such
term is defined in Section 13(d)(3) of the Exchange Act) other than Parent,
Acquisition or any affiliate thereof (a "Third Party"); (ii) the acquisition by
a Third Party of any material portion (which shall include fifteen percent (15%)
or more) of the assets of the Company and its subsidiaries, taken as a whole,
other than the sale of its products in the ordinary course of business
consistent with past practices; (iii) the acquisition by a Third Party of
fifteen percent (15%) or more of the outstanding Shares; (iv) the adoption by
the Company of a plan of liquidation or the declaration or payment of an
extraordinary dividend; (v) the repurchase by the Company or any of its
subsidiaries of more than fifteen percent (15%) of the outstanding Shares; or
(vi) the acquisition (or any group of acquisitions) by the Company or any of its
subsidiaries by merger, purchase of stock or assets, joint venture or otherwise
of a direct or indirect ownership interest or investment in any business (or
businesses) whose annual revenues, net income or assets is equal or greater than
fifteen percent (15%) of the annual revenues, net income or assets of the
Company, respectively. For purposes of this Agreement, a "Superior Proposal"
means any bona fide proposal (1) to acquire, directly or indirectly, for
consideration consisting solely of cash and/or securities, all of the Shares
then outstanding, or all or substantially all the assets, of the Company, (2)
that is fully-financed and contains terms that the Company Board by a majority
vote determines in its good faith judgment (based, as to the financial terms, on
the written advice of the Financial Advisor or another financial advisor of
nationally recognized reputation) to be more favorable to the Company's
stockholders than the Merger, (3) that the Company Board by a majority vote
determines in its good faith judgment (following and based on consultation, as
to the financial terms, with the Financial Advisor or another financial advisor
of nationally recognized reputation and its legal and other advisors) to be
reasonably capable of being completed (taking into account all legal, financial,
regulatory and other aspects of the proposal and the person making the
proposal), (4) that does not contain a "right of first refusal" or "right of
first offer" with respect to any counter-proposal that Parent might make and (5)
that does not contain any financing or "due diligence" condition.
Section 5.3. Meeting of Stockholders.
(a) The Company shall, following the acceptance for payment of
Shares by Acquisition pursuant to the Offer, take all actions necessary in
accordance with the DGCL its Certificate of Incorporation and bylaws to duly
call, give notice of, convene and hold a
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meeting of its stockholders as promptly as practicable to consider and vote upon
the adoption and approval of this Agreement and the transactions contemplated
hereby (the "Meeting"). The stockholder vote required for the adoption and
approval of the transactions contemplated by this Agreement shall be the vote
required by the DGCL the Company's Certificate of Incorporation and bylaws. The
Company will, through the Company Board, recommend to its stockholders approval
of such matters subject to the provisions of Section 5.2(b). The Company shall,
promptly after payment for the tendered shares by Acquisition pursuant to the
Offer, prepare and file with the SEC the Proxy Statement for the solicitation of
a vote of the holders of Shares approving the Merger, which, subject to the
provisions of Section 5.2(b), shall include the recommendation of the Company
Board that stockholders of the Company vote in favor of the approval and
adoption of this Agreement and the written opinion of the Financial Advisor that
the consideration to be received by the stockholders of the Company pursuant to
the Offer and the Merger is fair to such stockholders from a financial point of
view. The Company shall use all reasonable efforts to have the Proxy Statement
cleared by the SEC as promptly as practicable after such filing, and promptly
thereafter mail the Proxy Statement to the stockholders of the Company. Whenever
any event occurs which is required to be set forth in an amendment or supplement
to the Proxy Statement, the Company will promptly inform Parent of such
occurrence and cooperate in filing with the SEC or its staff or any other
government officials, and/or mailing to stockholders of the Company, such
amendment or supplement. Notwithstanding anything to the contrary contained in
this Agreement, the Company may adjourn or postpone (i) the Meeting to the
extent necessary to ensure that any necessary supplement or amendment to the
Proxy Statement is provided to the Company's stockholders in advance of a vote
on the Merger and this Agreement or (ii) the time for which the Meeting is
originally scheduled (as set forth in the Proxy Statement), if there are
insufficient Shares represented, either in person or by proxy, to constitute a
quorum necessary to conduct the business of the Meeting. Notwithstanding the
foregoing, in the event that Parent, Acquisition or any other subsidiary of
Parent, shall acquire at least 90 percent of the Shares pursuant to the Offer or
otherwise, each of the parties hereto shall take all necessary and appropriate
action to cause the Merger to become effective as soon as practicable after such
acquisition, without a meeting of stockholders in accordance with Section 253 of
the DGCL.
(b) Each of Parent and Acquisition agrees to (and Parent shall
cause Acquisition to) vote in favor of the Merger all Shares purchased pursuant
to the Offer and all other Shares owned by Parent or any other subsidiary of
Parent.
Section 5.4. Access to Information.
(a) Between the date hereof and the Effective Time, upon
reasonable notice and except as set forth on Section 5.4 of the Company
Disclosure Schedule and subject in each instance to the requirements of
Applicable Law, the Company will give Parent and its authorized representatives
reasonable access to all employees, plants, offices, warehouses and other
facilities and to all books and records and personnel files of current employees
of the Company and its subsidiaries as Parent may reasonably require, and will
cause its officers and those of its subsidiaries to furnish Parent with such
financial and operating data and other
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information with respect to the business and properties of the Company and its
subsidiaries as Parent may from time to time reasonably request. Between the
date hereof and the Effective Time, Parent shall make available to the Company,
as reasonably requested by the Company, a designated officer of Parent to answer
questions and make available such information regarding Parent and its
subsidiaries as is reasonably requested by the Company taking into account the
nature of the transactions contemplated by this Agreement.
(b) Between the date hereof and the Effective Time, the Company
shall furnish to Parent (i) within two (2) business days following preparation
thereof (and in any event within twenty (20) business days after the end of each
calendar month, commencing with October 1999), an unaudited balance sheet as of
the end of such month and the related statements of earnings, stockholders'
equity and cash flows, without notes to such financial statements, (ii) within
two (2) business days following preparation thereof (and in any event within
twenty (20) business days after the end of each fiscal quarter) an unaudited
balance sheet as of the end of such quarter and the related statements of
earnings, stockholders' equity and cash flows for the quarter then ended, with
condensed notes to such financial statements, and (iii) within two (2) business
days following preparation thereof (and in any event within ninety (90) calendar
days after the end of each fiscal year) an audited balance sheet as of the end
of such year and the related statements of earnings, stockholders' equity
(deficit) and cash flows, all of such financial statements referred to in clause
(i) to be prepared in conformity with the practices consistently applied by the
Company with respect to such financial statements and all of such financial
statements referred to in clauses (ii) and (iii) to be prepared in accordance
with generally accepted accounting principles (except that the quarterly
financial statements may not have all of the footnote disclosure required by
such generally accepted accounting principles) in conformity with the practices
consistently applied by the Company with respect to such financial statements.
All the foregoing shall be in accordance with the books and records of the
Company and shall fairly present its financial position (taking into account the
differences between the monthly, quarterly and annual financial statements
prepared by the Company in conformity with its past practices) as of the last
day of the period then ended.
(c) Each of the parties hereto will hold, and will cause its
consultants and Advisors to hold, in confidence all documents and information
furnished to it by or on behalf of another party to this Agreement in connection
with the transactions contemplated by this Agreement pursuant to the terms of
that certain Standard Non-Disclosure Agreement #4655141 entered into between the
Company and Parent dated June 2, 1999 (the "Confidentiality Agreement").
Section 5.5. Certain Filings; Reasonable Efforts.
(a) Subject to the terms and conditions herein provided,
including Section 5.2(b), each of the parties hereto agrees to use all
reasonable efforts to take or cause to be taken all action and to do or cause to
be done all things reasonably necessary, proper or advisable under Applicable
Law to consummate and make effective the transactions contemplated by this
Agreement, including using all reasonable efforts to do the following,
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(i) cooperate in the preparation and filing of the Proxy Statement and any
amendments thereto, any filings that may be required under the HSR Act and any
filings under similar merger notification laws or regulations of foreign
Governmental Entities, including OCS and the Investment Center of the Ministry
of Finance of the State of Israel; (ii) obtain consents of all third parties and
Governmental Entities necessary, proper, advisable or reasonably requested by
Parent or the Company, for the consummation of the transactions contemplated by
this Agreement; (iii) contest any legal proceeding relating to the Merger; and
(iv) execute any additional instruments necessary to consummate the transactions
contemplated hereby. Subject to the terms and conditions of this Agreement,
Parent and Acquisition agree to use all reasonable efforts to cause the
Effective Time to occur as soon as practicable after the Company stockholder
vote with respect to the Merger or the purchase by Acquisition of 90% or more of
the outstanding Shares pursuant to the Offer. The Company agrees to use all
reasonable efforts to encourage its employees to accept any offers of employment
extended by Parent. If at any time after the Effective Time any further action
is necessary to carry out the purposes of this Agreement the proper officers and
directors of each party hereto shall take all such necessary action.
(b) Subject to Section 8.11, Parent and the Company will consult
and cooperate with one another, and consider in good faith the views of one
another, in connection with any analyses, appearances, presentations, letters,
white papers, memoranda, briefs, arguments, opinions or proposals made or
submitted by or on behalf of any party hereto in connection with proceedings
under or relating to the HSR Act or any other foreign, federal, or state
antitrust, competition, or fair trade law. Subject to Section 8.11, in this
regard but without limitation, each party hereto shall promptly inform the other
of any material communication between such party and the Federal Trade
Commission, the Antitrust Division of the United States Department of Justice,
or any other federal, foreign or state antitrust or competition Governmental
Entity regarding the transactions contemplated herein.
Section 5.6. Public Announcements. Neither Parent, Acquisition
nor the Company shall issue any press release or otherwise make any public
statements with respect to the transactions contemplated by this Agreement,
including the Merger, or any Third Party Acquisition, without the prior consent
of Parent and Acquisition (in the case of the Company) or the Company (in the
case of Parent or Acquisition), except (i) as may be required by Applicable Law,
or by the rules and regulations of, or pursuant to any agreement with, the New
York Stock Exchange, (ii) following a change, if any, of the Company Board's
recommendation of the Merger (in accordance with Section 5.2(b)) or (iii) only
in the case of a release or statement relating to a Third Party Acquisition, if
the Company Board has been advised by outside legal counsel that a press release
or other public statement is required by Applicable Law. The first public
announcement of this Agreement, the Offer and the Merger shall be a joint press
release agreed upon by Parent, Acquisition and the Company.
Section 5.7. Indemnification and Directors' and Officers'
Insurance.
(a) From and after the acceptance of Shares for payment in the
Offer, Parent shall cause the Surviving Corporation to indemnify, defend and
hold harmless (and
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shall also cause the Surviving Corporation to advance expenses as incurred to
the fullest extent permitted under Applicable Law to), to the extent not covered
by insurance, each person who is now or has been prior to the date hereof or who
becomes prior to the Effective Time an officer or director of the Company or any
of the Company's subsidiaries (the "Indemnified Persons") against (i) all
losses, claims, damages, costs, expenses (including counsel fees and expenses),
settlement, payments or liabilities arising out of or in connection with any
claim, demand, action, suit, proceeding or investigation based in whole or in
part on or arising in whole or in part out of the fact that such person is or
was an officer or director of the Company or any of its subsidiaries, whether or
not pertaining to any matter existing or occurring at or prior to the Effective
Time and whether or not asserted or claimed prior to or at or after the
Effective Time ("Indemnified Liabilities"); and (ii) all Indemnified Liabilities
based in whole or in part on or arising in whole or in part out of or pertaining
to this Agreement, the Stock Option Agreement or the transactions contemplated
hereby or thereby, in each case to the fullest extent required or permitted
under Applicable Law. Nothing contained herein shall make Parent, Acquisition,
the Company or the Surviving Corporation, an insurer, a co-insurer or an excess
insurer in respect of any insurance policies which may provide coverage for
Indemnified Liabilities, nor shall this Section 5.7 relieve the obligations of
any insurer in respect thereto. The parties hereto intend, to the extent not
prohibited by Applicable Law, that the indemnification provided for in this
Section 5.7 shall apply without limitation to negligent acts or omissions by an
Indemnified Person. Each Indemnified Person is intended to be a third party
beneficiary of this Section 5.7 and may specifically enforce its terms. This
Section 5.7 shall not limit or otherwise adversely affect any rights any
Indemnified Person may have under any agreement with the Company or under the
Company's Certificate of Incorporation or bylaws as presently in effect or as
provided by Delaware law.
(b) From and after the Effective Time, Parent shall cause the
Surviving Corporation to fulfill and honor in all respects the obligations of
the Company pursuant to any indemnification agreements between the Company and
its directors and officers as of or prior to the date hereof (or indemnification
agreements in the Company's customary form for directors joining the Company
Board prior to the Effective Time) and any indemnification provisions under the
Company's certificate of incorporation or bylaws as in effect immediately prior
to the Effective Time. The Surviving Corporation's aggregate obligation to
indemnify and hold harmless all Indemnified Persons for all matters to which
such Indemnified Persons may be entitled to be indemnified or held harmless
under subsections (a) and (b) of this Section 5.7 shall in no event exceed the
Company's stockholders' equity as of June 30, 1999.
(c) For a period of six years after the Effective Time, Parent
will maintain or cause the Surviving Corporation to maintain in effect, if
available, directors' and officers' liability insurance covering those persons
who, as of immediately prior to the Effective Time, are covered by the Company's
directors' and officers' liability insurance policy (the "Insured Parties") on
terms no less favorable to the Insured Parties than those of the Company's
present directors' and officers' liability insurance policy; provided, however,
that in no event shall Parent or the Company be required to expend on an annual
basis in excess of 200% of the
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annual premium currently paid by the Company for such coverage (or such coverage
as is available for 200% of such annual premium); provided further, that, in
lieu of maintaining such existing insurance as provided above, Parent, at its
election, may cause coverage to be provided under any policy maintained for the
benefit of Parent or any of its subsidiaries, so long as the terms are not
materially less advantageous to the intended beneficiaries thereof than such
existing insurance.
(d) Neither Parent nor any of its affiliates shall be obligated
to guarantee the payment or performance of the Company's obligations under
subsection (a) or (b) of this Section 5.7, so long as the Surviving Corporation
honors such obligations to the extent of the Company's stockholders' equity at
June 30, 1999. In no event, however, shall Parent or any such affiliate have any
liability or obligation to any Indemnified Person arising from the Company's
breach of, or inability to perform its obligations under, subsection (a) or (b)
of this Section 5.7 in excess of the difference between the stockholders' equity
of the Company at June 30, 1999 and the aggregate of all amounts paid by the
Company in satisfaction of such obligation. The provisions of this Section 5.7
are intended to be for the benefit of, and will be enforceable by, each person
entitled to indemnification hereunder and the heirs and representatives of such
person. Parent will not permit the Company to merge or consolidate with any
other Person unless the Company will ensure that the surviving or resulting
entity assumes the obligations imposed by this Section 5.7.
Section 5.8. Notification of Certain Matters. The Company shall
give prompt notice to Parent, and Parent shall give prompt notice to the
Company, of (i) the occurrence or nonoccurrence of any event the occurrence or
nonoccurrence of which has caused or would be likely to cause any representation
or warranty contained in this Agreement by such first party to be untrue or
inaccurate in any material respect at or prior to the Effective Time and (ii)
any material failure by such first party to comply with or satisfy in any
material respect any covenant, condition or agreement to be complied with or
satisfied by it hereunder; provided, however, that the delivery of any notice
pursuant to this Section 5.8 shall not cure such breach or non-compliance or
limit or otherwise affect the remedies available hereunder to the party
receiving such notice.
Section 5.9. Additions to and Modification of Company Disclosure
Schedule. Concurrently with the execution and delivery of this Agreement, the
Company has delivered a Company Disclosure Schedule that includes all of the
information required by the relevant provisions of this Agreement. In addition,
the Company shall deliver to Parent and Acquisition such additions to or
modifications of any Sections of the Company Disclosure Schedule necessary to
make the information set forth therein true, accurate and complete in all
material respects as soon as practicable after such information is available to
the Company after the date of execution and delivery of this Agreement;
provided, however, that such disclosure shall not be deemed to constitute an
exception to its representations and warranties under Article 3, nor limit the
rights and remedies of Parent and Acquisition under this Agreement for any
breach by the Company of such representation and warranties.
Section 5.10. Employee Matters.
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(a) The Company agrees to provide Parent with, and to cause each
of its subsidiaries to provide Parent with, reasonable access to its employees
during normal working hours following the date of this Agreement, to among other
things, deliver offers of continued employment and to provide information to
such employees about Parent.
(b) With respect to any welfare plans in which employees of the
Company and its subsidiaries are eligible to participate after the Effective
Time, Parent shall, and shall cause the Surviving Corporation to (i) waive all
limitations as to preexisting conditions exclusions and waiting periods with
respect to participation and coverage requirements applicable to such employees
and (ii) provide each such employee with credit for any co-payments and
deductibles paid prior to the Effective Time in satisfying any applicable
deductible or out-of-pocket requirements under any such plan.
Section 5.11. Intentionally omitted.
Section 5.12 Takeover Statutes. If any Takeover Statute is or may
become applicable to the Offer, the Merger or any of the other transactions
contemplated by this Agreement or the Stock Option Agreement, the Company and
the Company Board shall promptly grant such approvals and take such lawful
actions as are necessary so that such transactions may be consummated as
promptly as practicable on the terms contemplated by this Agreement or the Stock
Option Agreement, as the case may be, or by the Offer or the Merger, as the case
may be, and otherwise take such lawful actions to eliminate or minimize the
effects of such statute, and any regulations promulgated thereunder, on such
transactions.
Section 5.13 Company Stock Options.
(a) The Company agrees that, from and after the date hereof, it
will take any required action that (i) is necessary or appropriate for Parent to
assume any of the Assumed Options or any of the Assumed Option Plans, (ii)
prevents the acceleration of the vesting or exercisability of any Assumed Option
or (iii) prevents the transactions contemplated by this Agreement from causing
the acceleration of the vesting or exercisability of any Assumed Option, and the
Company further agrees that it will refrain from taking any other action that is
not consistent with the foregoing. In addition, and in furtherance of this
covenant, the Company agrees that the Company Board will adopt a resolution
under the Company's 1995 Employee and Consultant Stock Plan and 1996
Nonstatutory Employee and Consultant Stock Option Plan that will prevent the
acceleration of the vesting of Assumed Options under such plans.
(b) From and after the date hereof, the Company agrees that with
respect to each grant of a Company Option in connection with an offer of
employment for a new employee, such grant will not include or be subject to any
change of control provisions and will not be in an amount in excess of such
grants made to new employees of a similar grade, consistent with past practices,
and in no event will any one new employee receive options to purchase in excess
of 10,000 Shares unless approved by Parent and set forth in Section 5.13 of the
Company Disclosure Schedule.
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(c) The Company agrees to cause the Company Board to adopt all
resolutions reasonably necessary or appropriate to further the purposes of
subsections (a) and (b) of this Section 5.13 and provide that all options
outstanding under each Assumed Option Plan can be assumed by Parent.
Section 5.14 Israeli Operations. It is Parent's intention that
the business operations and facilities of the Company (including its research
and development activities) that are currently located in Israel shall remain in
Israel.
Section 5.15 Real Property Transfer Taxes. Parent shall pay any
applicable New York real property transfer taxes or other similar taxes imposed
upon the Company or its stockholders in connection with the completion of the
transactions contemplated by this Agreement.
ARTICLE 6
CONDITIONS TO CONSUMMATION OF THE MERGER
Section 6.1. Conditions to Each Party's Obligations to Effect the
Merger. The respective obligations of each party hereto to effect the Merger are
subject to the satisfaction at or prior to the Effective Time of the following
conditions:
(a) this Agreement shall have been approved and adopted by the
requisite vote of the stockholders of the Company, if required by Applicable Law
and the certificate of incorporation, in order to consummate the Merger;
(b) no statute, rule, regulation, executive order, decree, ruling
or injunction shall have been enacted, entered, promulgated or enforced by any
United States federal or state court or United States federal or state
Governmental Entity that prohibits, restrains, enjoins or restricts the
consummation of the Merger;
(c) any governmental or regulatory notices, approvals or other
requirements necessary to consummate the transactions contemplated hereby and to
operate the Business after the Effective Time in all material respects as it was
operated prior thereto (other than under the HSR Act) shall have been given,
obtained or complied with, as applicable; and
(d) the Proxy Statement, if required to be prepared and
disseminated to the Company's stockholders, shall have been cleared by the SEC
and shall not be the subject of any stop order.
Section 6.2. Conditions to the Obligations of the Company. The
obligation of the Company to effect the Merger is subject to the satisfaction at
or prior to the Effective Time of the following conditions:
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(a) the representations and warranties of Parent and Acquisition
contained in this Agreement shall be true and correct (except to the extent that
the aggregate of all breaches thereof would not have a Material Adverse Effect
on Parent) at and as of the Effective Time with the same effect as if made at
and as of the Effective Time (except to the extent such representations
specifically relate to an earlier date, in which case such representations shall
be true and correct as of such earlier date, and in any event, subject to the
foregoing Material Adverse Effect qualification) and, at the Closing, Parent and
Acquisition shall have delivered to the Company a certificate to that effect,
executed by two (2) executive officers of Parent and Acquisition; and
(b) each of the covenants and obligations of Parent and
Acquisition to be performed at or before the Effective Time pursuant to the
terms of this Agreement shall have been duly performed in all material respects
at or before the Effective Time and, at the Closing, Parent and Acquisition
shall have delivered to the Company a certificate to that effect, executed by
two (2) executive officers of Parent and Acquisition.
Section 6.3. Conditions to the Obligations of Parent and
Acquisition. The respective obligations of Parent and Acquisition to effect the
Merger are subject to the satisfaction at or prior to the Effective Time of the
following conditions:
(a) the representations and warranties of the Company contained
in this Agreement shall be true and correct (except to the extent that the
aggregate of all breaches thereof would not have a Material Adverse Effect on
the Company) at and as of the Effective Time with the same effect as if made at
and as of the Effective Time (except to the extent such representations
specifically relate to an earlier date, in which case such representations shall
be true and correct as of such earlier date, and in any event, subject to the
foregoing Material Adverse Effect qualification) and, at the Closing, the
Company shall have delivered to Parent and Acquisition a certificate to that
effect, executed by two (2) executive officers of the Company;
(b) each of the covenants and obligations of the Company to be
performed at or before the Effective Time pursuant to the terms of this
Agreement shall have been duly performed in all material respects at or before
the Effective Time and, at the Closing, the Company shall have delivered to
Parent and Acquisition a certificate to that effect, executed by two (2)
executive officers of the Company;
(c) since June 30, 1999, there shall have been no events, changes
or effects, individually or in the aggregate, with respect to the Company or its
subsidiaries that constitutes a Material Adverse Effect on the Company; or
(d) in connection with the compliance by Parent or Acquisition
with any Applicable Law (including the HSR Act) or obtaining the consent or
approval of any Governmental Entity whose consent or approval may be required to
consummate the transactions contemplated by this Agreement, Parent shall not be
(i) required, or be construed to be required, to sell or divest any assets or
business or to restrict any business operations in order to obtain the consent
or successful termination of any review of any such Governmental
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Entity regarding the transactions contemplated hereby or (ii) prohibited from
owning, and no material limitation shall be imposed on Parent's ownership of,
any material portion of the Company's business or assets.
ARTICLE 7
TERMINATION; AMENDMENT; WAIVER
Section 7.1. Termination. This Agreement may be terminated and
the Merger may be abandoned at any time prior to the Effective Time whether
before or after approval and adoption of this Agreement by the Company's
stockholders:
(a) by mutual written consent of Parent, Acquisition and the
Company;
(b) by Parent and Acquisition or the Company if (i) any court of
competent jurisdiction in the United States or other United States federal or
state Governmental Entity shall have issued a final order, decree or ruling, or
taken any other final action, restraining, enjoining or otherwise prohibiting
the Merger and such order, decree, ruling or other action is or shall have
become nonappealable or (ii) the Merger has not been consummated by April 30,
2000 (provided that if the January 31, 2000 date set forth in the first
paragraph of Annex A is automatically extended, pursuant to the terms of Annex
A, to April 30, 2000, then the April 30, 2000 date set forth in this Section
7.1(b) shall be automatically extended to July 31, 2000) (as the case may be,
the "Final Date"); provided, however, that no party may terminate this Agreement
pursuant to this clause (ii) if such party's failure to fulfill any of its
obligations under this Agreement shall have been a principal reason that the
Effective Time shall not have occurred on or before said date;
(c) by the Company if (i) there shall have been a breach of any
representations or warranties on the part of Parent or Acquisition set forth in
this Agreement or if any representations or warranties of Parent or Acquisition
shall have become untrue such that, in either such instance, the conditions set
forth in Section 6.2(a) would be incapable of being satisfied by the Final Date,
provided that the Company has not breached any of its obligations hereunder in
any material respect; (ii) there shall have been a breach by Parent or
Acquisition of any of their respective covenants or agreements hereunder having
a Material Adverse Effect on Parent or materially adversely affecting (or
materially delaying) the ability of the Company to consummate the Merger, and
Parent or Acquisition, as the case may be, has not cured such breach within five
(5) business days after notice by the Company thereof, provided that the Company
has not breached any of its obligations hereunder in any material respect; or
(iii) the Company Board has received a Superior Proposal, has complied with the
provisions of Section 5.3(b), and has made the payment called for by Section
7.3(a);
(d) by Parent and Acquisition if (i) there shall have been a
breach of any representations or warranties on the part of the Company set forth
in this Agreement or if any representations or warranties of the Company shall
have become untrue such that, in either such instance, the conditions set forth
in Section 6.3(a) would be incapable of being satisfied
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by the Final Date, provided that neither Parent nor Acquisition has breached any
of their respective obligations hereunder in any material respect; (ii) there
shall have been a breach by the Company of one or more of its covenants or
agreements hereunder having a Material Adverse Effect on the Company (or, in the
case of Section 5.2, any material breach thereof) or materially adversely
affecting (or materially delaying) the ability of Acquisition to consummate the
Offer or of Parent, Acquisition or the Company to consummate the Merger, and the
Company has not cured such breach within five (5) business days after notice by
Parent or Acquisition thereof, provided that neither Parent nor Acquisition has
breached any of their respective obligations hereunder in any material respect;
(iii) the Company Board shall have recommended to the Company's stockholders a
Superior Proposal; (iv) the Company Board shall have withdrawn or adversely
modified its approval or recommendation of this Agreement, the Offer or the
Merger; or (v) at any time after the date on which Acquisition has accepted
Shares for payment pursuant to the Offer, the Company Board (with the
concurrence of, or because of the vote of, one or more of the Continuing
Directors) shall have ceased using all reasonable efforts to call, give notice
of, or convene or hold the Meeting as promptly as practicable or shall have
adopted a resolution not to effect any of the foregoing;
(e) by the Company, if Acquisition shall have failed to commence
the Offer within five business days following the date of the initial public
announcement of the Offer or if, by the applicable date set forth in the first
paragraph of Annex A, Acquisition shall have terminated the Offer; provided,
however, that the right to terminate this Agreement pursuant to this subsection
(e) shall not be available to the Company if it has breached in any material
respect its obligations under this Agreement that in any manner shall have
proximately contributed in any material respect to a failure referenced in this
subsection (e); or
(f) by Parent and Acquisition, if, due to an occurrence that if
occurring after the commencement of the Offer would result in a failure to
satisfy any of the conditions set forth in Annex A, Acquisition shall have
failed to commence the Offer within five business days following the date of the
initial public announcement of the Offer or if Acquisition shall have terminated
the Offer in accordance with the provisions of Annex A; provided, however, that
the right to terminate this Agreement pursuant to this subsection (f) shall not
be available to Parent and Acquisition if either of them has breached in any
material respect its obligations under this Agreement in any manner that shall
have proximately contributed in any material respect to the failure to commence
or termination of the Offer.
Section 7.2. Effect of Termination. In the event of the
termination and abandonment of this Agreement pursuant to Section 7.1, this
Agreement shall forthwith become void and have no effect without any liability
on the part of any party hereto or its affiliates, directors, officers or
stockholders other than the provisions of this Section 7.2 and Sections 5.4(c)
and 7.3. Nothing contained in this Section 7.2 shall relieve any party from
liability for any intentional breach of any covenant in this Agreement prior to
such termination. The representation and warranties made herein shall not
survive beyond the Effective Time or a termination of this Agreement, and,
except for payments that may be
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required under Section 7.3, no party shall have any liability for breach of any
representation or warranty. Nothing set forth herein shall limit any rights any
party may have arising out of the intentional fraudulent conduct of any other
party hereto.
Section 7.3. Fees and Expenses.
(a) In the event that this Agreement shall be terminated pursuant
to:
(i) Section 7.1(c)(iii) or 7.1(d)(iii) or (iv);
(ii) Section 7.1(d)(ii) (other than by reason of one or
more breaches of the covenants set forth in Sections 5.8 and 5.9) and either (A)
at the time of such termination, there is outstanding an offer by a Third Party
to consummate, or a Third Party shall have publicly announced (and not
withdrawn) a plan or proposal with respect to, a Company Acquisition (as defined
in Section 8.8(e)), and that Company Acquisition occurs or (B) within six (6)
months after the date on which this Agreement has been terminated the Company
enters into an agreement with respect to a Company Acquisition or the Company
publicly announces a plan or proposal with respect to a Company Acquisition and
that Company Acquisition having a per share valuation at the time of
announcement that is more favorable to the Company's stockholders than the
Merger occurs; or
(iii) Section 7.1(f) due to the Minimum Condition not
being satisfied and either (A) at the time of such termination, there is
outstanding an offer by a Third Party to consummate, or a Third Party shall have
publicly announced (and not withdrawn) a plan or proposal with respect to, a
Company Acquisition, and that Company Acquisition occurs or (B) within six (6)
months after the date on which this Agreement has been terminated the Company
enters into an agreement with respect to a Company Acquisition or the Company
publicly announces a plan or proposal with respect to a Company Acquisition and
that Company Acquisition having a per share valuation at the time of
announcement that is more favorable to the Company's stockholders than the
Merger occurs;
Parent and Acquisition would suffer direct and substantial damages, which
damages cannot be determined with reasonable certainty. To compensate Parent and
Acquisition for such damages, the Company shall pay to Parent the amount of
Forty-Five Million Dollars ($45,000,000) immediately upon the occurrence of the
event described in this Section 7.3(a) giving rise to such damages. The Company
hereby waives any right to set-off or counterclaim against such amount.
(b) Upon termination of this Agreement pursuant to (A) Section
7.1(f) in circumstances where the termination fee set forth in Section
7.3(a)(iii) is payable or (B) Section 7.1(c)(iii) or Section 7.1(d)(i) as a
result of a breach of a representation or warranty as of the date hereof or
Section 7.1(d)(ii), (iii) or (iv), in addition to any other remedies that
Parent, Acquisition or their affiliates may have as a result of such termination
(including pursuant to Section 7.3(a) or otherwise), the Company shall pay to
Parent up to the amount of Five Million Dollars ($5,000,000) as reimbursement
for the out-of-pocket costs, fees and expenses incurred by any of them or on
their behalf in connection with this Agreement, the
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Stock Option Agreement, the Offer, the Merger and the consummation of all
transactions contemplated by this Agreement and the Stock Option Agreement
(including fees payable to investment bankers, counsel to any of the foregoing
and accountants); provided, however, that if Parent requests reimbursement for
such costs, fees and expenses in excess of Two Million Five Hundred Thousand
Dollars ($2,500,000), Parent shall accompany such request with invoices or other
reasonable evidence of its or Acquisition's payment of such costs, fees and
expenses. If such request for reimbursement of such costs, fees and expenses is
in excess of Two Million Five Hundred Thousand Dollars ($2,500,000), the Company
shall promptly pay to Parent Two Million Five Hundred Thousand Dollars
($2,500,000) after Parent has requested reimbursement pursuant to this
subsection (b), and shall pay any balance promptly following receipt of such
invoices or other evidence. Notwithstanding any of the foregoing, Parent shall
not be entitled to receive more than Five Million Dollars ($5,000,000) pursuant
to this subsection (b). Nothing contained in this Section 7.3(b) shall relieve
any party of any liability for breach of this Agreement which would otherwise
exist.
(c) Upon termination of this Agreement pursuant to Section
7.1(c)(i) or (ii), in addition to any other remedies that the Company or its
affiliates may have as a result of such termination, Parent shall pay to the
Company the amount of Five Million Dollars ($5,000,000) as reimbursement for the
out-of-pocket costs, fees and expenses incurred by any of them or on their
behalf in connection with this Agreement, the Stock Option Agreement, the Offer,
the Merger and the consummation of all transactions contemplated by this
Agreement and the Stock Option Agreement (including fees payable to investment
bankers, counsel to any of the foregoing and accountants); provided, however,
that if the Company requests reimbursement for such costs, fees and expenses in
excess of Two Million Five Hundred Thousand Dollars ($2,500,000), the Company
shall accompany such request with invoices or other reasonable evidence of the
payment thereof. If the Company makes such request for reimbursement of such
costs, fees and expenses in excess of Two Million Five Hundred Thousand Dollars
($2,500,000), Parent shall promptly pay to the Company Two Million Five Hundred
Thousand Dollars ($2,500,000) after the Company has requested reimbursement
pursuant to this subsection (c), and shall pay any balance promptly following
receipt of such invoices or other evidence. Notwithstanding any of the
foregoing, the Company shall not be entitled to receive more than Five Million
Dollars ($5,000,000) pursuant to this subsection (c). Nothing contained in this
Section 7.3(c) shall relieve any party of any liability for breach of this
Agreement which would otherwise exist.
(d) Except as specifically provided in this Section 7.3, each
party shall bear its own expenses in connection with this Agreement and the
transactions contemplated hereby. The parties acknowledge that Parent shall pay
the fees imposed in connection with its filing under the HSR Act.
(e) The parties acknowledge that the agreements contained in this
Article 7 (including this Section 7.3) are an integral part of the transactions
contemplated by this Agreement and that, without these agreements, the parties
would not enter into this Agreement. Accordingly, if any party fails promptly to
pay the amounts required pursuant to Section 7.3 when due (including
circumstances where, in order to obtain such payment a party
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<PAGE> 63
commences a suit that results in a final nonappealable judgment against another
party for such amounts), the defaulting party shall pay to the other party (i)
their costs and expenses (including reasonable attorneys' fees) in connection
with such suit and (ii) interest on the amount that was determined to be due and
payable hereunder at the rate announced by Citibank, N.A. as its "reference
rate" in effect on the date such payment was required to be made.
Section 7.4. Amendment. This Agreement may be amended, modified
and supplemented in any and all respects by action taken by the Company, Parent
and Acquisition at any time before or after approval of the Merger by the
stockholders of the Company but after any such approval no amendment shall be
made that requires the approval of such stockholders under Applicable Law
without such approval, at any time prior to the Effective Time with respect to
any of the terms contained herein. This Agreement (including, subject to Section
5.9, the Company Disclosure Schedule) may be amended only by an instrument in
writing signed on behalf of the parties hereto.
Section 7.5. Extension; Waiver. At any time prior to the
Effective Time, each party hereto may (i) extend the time for the performance of
any of the obligations or other acts of the other party, (ii) waive any
inaccuracies in the representations and warranties of the other party contained
herein or in any document, certificate or writing delivered pursuant hereto or
(iii) waive compliance by the other party with any of the agreements or
conditions contained herein. Any agreement on the part of any party hereto to
any such extension or waiver shall be valid only if set forth in an instrument,
in writing, signed on behalf of such party. The failure of any party hereto to
assert any of its rights hereunder shall not constitute a waiver of such rights.
ARTICLE 8
MISCELLANEOUS
Section 8.1. Nonsurvival of Representations and Warranties.
(a) The representations and warranties made herein shall not
survive beyond the Effective Time or a termination of this Agreement. This
Section 8.1 shall not limit any covenant or agreement of the parties hereto that
by its terms requires performance after the Effective Time.
(b) Except for the representations and warranties contained in
Article 3 of this Agreement, the Company makes no other express or implied
representation or warranty to Parent or Acquisition. Parent and Acquisition
acknowledge that, in entering into this Agreement, they have not relied on any
representations or warranties of the Company other than the representations and
warranties of the Company set forth in Article 3 of this Agreement.
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<PAGE> 64
(c) Except for the representations and warranties contained in
Article 4 of this Agreement, Parent and Acquisition make no other express or
implied representation or warranty to the Company. The Company acknowledges
that, in entering into this Agreement, it has not relied on any representations
or warranties of Parent and Acquisition other than the representations and
warranties of Parent and Acquisition set forth in Article 4 of this Agreement.
Section 8.2. Entire Agreement; Assignment. This Agreement
(including the Company Disclosure Schedule and the Exhibits and Annex A, all of
which are incorporated by reference into this Agreement), the Confidentiality
Agreement and the Stock Option Agreement (a) constitute the entire agreement
between the parties hereto with respect to the subject matter hereof and
supersede all other prior and contemporaneous agreements and understandings both
written and oral between the parties with respect to the subject matter hereof
and (b) shall not be assigned by operation of law or otherwise; provided,
however, that Acquisition may assign any or all of its rights and obligations
under this Agreement to any wholly owned subsidiary of Parent, but no such
assignment shall relieve Acquisition of its obligations hereunder if such
assignee does not perform such obligations.
Section 8.3. Validity. If any provision of this Agreement or the
application thereof to any person or circumstance is held invalid or
unenforceable, the remainder of this Agreement and the application of such
provision to other persons or circumstances shall not be affected thereby and to
such end the provisions of this Agreement are agreed to be severable.
Section 8.4. Notices. All notices and other communications
pursuant to this Agreement shall be in writing and shall be deemed given if
delivered personally, telecopied, sent by nationally-recognized overnight
courier or mailed by registered or certified mail (return receipt requested),
postage prepaid, to the parties at the addresses set forth below or to such
other address as the party to whom notice is to be given may have furnished to
the other parties hereto in writing in accordance herewith. Any such notice or
communication shall be deemed to have been delivered and received (i) in the
case of personal delivery, on the date of such delivery, (ii) in the case of
telecopier, on the date sent if confirmation of receipt is received and such
notice is also promptly mailed by registered or certified mail (return receipt
requested), (iii) in the case of a nationally-recognized overnight courier in
circumstances under which such courier guarantees next business day delivery, on
the next business day after the date when sent and (iv) in the case of mailing,
on the third business day following that on which the piece of mail containing
such communication is posted:
if to Parent or Acquisition: Intel Corporation
2200 Mission College Boulevard
Santa Clara, California 95052
Telecopier: (408) 765-1859
Attention: General Counsel
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<PAGE> 65
with a copy to: Gibson, Dunn & Crutcher LLP
One Montgomery Street
Telesis Tower
San Francisco, California 94104
Telecopier: (415) 986-5309
Attention: Kenneth R. Lamb, Esq.
if to the Company to: DSP Communications, Inc.
20300 Stevens Creek Boulevard
Cupertino, California 95015
Telecopier: (408) 777-2744
Attention: General Counsel
with a copy to: Skadden, Arps, Slate, Meagher &
Flom, LLP
525 University Ave.
Palo Alto, California 94301
Telecopier: (650) 470-4570
Attention: Kenton J. King, Esq.
or to such other address as the person to whom notice is given may have
previously furnished to the others in writing in the manner set forth above.
Section 8.5. Governing Law and Venue; Waiver of Jury Trial.
(a) THIS AGREEMENT SHALL BE DEEMED TO BE MADE IN AND IN ALL
RESPECTS SHALL BE INTERPRETED, CONSTRUED AND GOVERNED BY AND IN ACCORDANCE WITH
THE LAW OF THE STATE OF DELAWARE WITHOUT REGARD TO THE CONFLICT OR CHOICE OF LAW
PRINCIPLES THEREOF OR OF ANY OTHER JURISDICTION. The parties hereby irrevocably
submit to the jurisdiction of the courts of the State of Delaware and the
Federal courts of the United States of America located in the State of Delaware
solely in respect of the interpretation and enforcement of the provisions of
this Agreement and of the documents referred to in this Agreement, and in
respect of the transactions contemplated hereby, and hereby waive, and agree not
to assert, as a defense in any action, suit or proceeding for the interpretation
or enforcement hereof or of any such document, that it is not subject thereto or
that such action, suit or proceeding may not be brought or is not maintainable
in said courts or that the venue thereof may not be appropriate or that this
Agreement or any such document may not be enforced in or by such courts, and the
parties hereto irrevocably agree that all claims with respect to such action or
proceeding shall be heard and determined in such a Delaware State or Federal
court. The parties hereby consent to and grant any such court jurisdiction over
the person of such parties and over the subject matter of such dispute and agree
that mailing of process or other papers in connection with any such action or
proceeding in the manner provided in Section 8.4 or in such other manner as may
be permitted by Applicable Law, shall be valid and sufficient service thereof.
(b) The parties agree that irreparable damage would occur and
that the parties would not have any adequate remedy at law in the event that any
of the provisions of this Agreement were not performed in accordance with their
specific terms or were otherwise
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<PAGE> 66
breached. It is accordingly agreed that the parties shall be entitled to an
injunction or injunctions to prevent breaches of this Agreement and to enforce
specifically the terms and provisions of this Agreement in any Federal court
located in the State of Delaware or in Delaware state court, this being in
addition to any other remedy to which they are entitled at law or in equity.
(c) EACH PARTY ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY WHICH
MAY ARISE UNDER THIS AGREEMENT IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT
ISSUES, AND THEREFORE EACH SUCH PARTY HEREBY IRREVOCABLY AND UNCONDITIONALLY
WAIVES ANY RIGHT SUCH PARTY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY
LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT
OR THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT. EACH PARTY CERTIFIES AND
ACKNOWLEDGES THAT (I) NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY
HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE
EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER, (II) EACH SUCH PARTY
UNDERSTANDS AND HAS CONSIDERED THE IMPLICATIONS OF THIS WAIVER, (III) EACH SUCH
PARTY MAKES THIS WAIVER VOLUNTARILY, AND (IV) EACH SUCH PARTY HAS BEEN INDUCED
TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE WAIVERS AND
CERTIFICATIONS IN THIS SECTION 8.5.
Section 8.6. Descriptive Headings; Article and Section
References. The table of contents and the descriptive headings herein are
inserted for convenience of reference only and are not intended to be part of or
to affect the meaning or interpretation of this Agreement. All Article, Section,
Subsection, Schedule, Exhibit and Annex references in this Agreement are to
Articles, Sections, subsections, Schedules, Exhibits and Annexes, respectively,
of or to this Agreement unless specified otherwise.
Section 8.7. Parties in Interest. This Agreement shall be binding
upon and inure solely to the benefit of each party hereto and its successors and
permitted assigns and, except for Sections 2.11(c), 5.7 and 8.2, nothing in this
Agreement is intended to or shall confer upon any other person any rights,
benefits or remedies of any nature whatsoever under or by reason of this
Agreement; provided, however, that the Financial Advisor is intended to be a
third party beneficiary of the review and consent process contemplated by the
last sentence of Section 1.2(c).
Section 8.8. Certain Definitions. For the purposes of this
Agreement the term:
(a) "affiliate" means a person that, directly or indirectly,
through one or more intermediaries controls, is controlled by or is under common
control with the first-mentioned person.
(b) "Applicable Law" means, with respect to any person, any
domestic or foreign, federal, state or local statute, law, ordinance, rule,
regulation, order, writ, injunction, judgment, decree or other requirement of
any Governmental Entity existing as of the date hereof, the expiration date of
the Offer, as of the Effective Time or as of any relevant date contemplated
herein applicable to such Person or any of its respective properties, assets,
officers, directors, employees, consultants or agents.
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(c) "business day" means any day other than a day on which the
New York Stock Exchange is closed.
(d) "capital stock" means common stock, preferred stock,
partnership interests, limited liability company interests or other ownership
interests entitling the holder thereof to vote with respect to matters involving
the issuer thereof.
(e) "Company Acquisition" means the occurrence of any of the
following events: (i) the acquisition by a Third Party of fifty percent (50%) or
more of the assets of the Company and its subsidiaries, taken as a whole; (ii)
the acquisition by a Third Party of fifty percent (50%) or more of the
outstanding Shares or any securities convertible into or exchangeable for Shares
that would constitute fifty percent (50%) or more of the outstanding Shares upon
such conversion or exchange, or any combination of the foregoing; (iii) the
acquisition by the Company of the assets or stock of a Third Party if, as a
result of which the outstanding Shares of the Company immediately prior thereto
are increased by one hundred percent (100%) or more, or (iv) the merger,
consolidation or business combination of the Company with or into a Third Party,
where, following such merger, consolidation or business combination, the
stockholders of the Company immediately prior to such transaction do not hold,
immediately after such transaction, securities of the surviving entity
constituting more than fifty percent (50%) of the total voting power of the
surviving entity.
(f) Intentionally omitted.
(g) "hereof," "herein" and "herewith" and words of similar import
shall, unless otherwise stated, be construed to refer to this Agreement as a
whole and not to any particular provision of this Agreement, and article,
section, paragraph, exhibit and schedule references are to the articles,
sections, paragraphs, exhibits and schedules of this Agreement unless otherwise
specified.
(h) "include" or "including" means "include, without limitation"
or "including, without limitation," as the case may be, and the language
following "include" or "including" shall not be deemed to set forth an
exhaustive list.
(i) "knowledge" or "known" means, with respect to any matter in
question, the actual knowledge of such matter of any member of the Board of
Directors or any officer of the Company or any of its subsidiaries or of the
following employees of the Company: Eli Fogel, Gaby Helivitz, Avner Kol,
Shulamit Chen, Duane Sharman and David Yaish, or any member of the Board of
Directors or any officer of Parent or any of its subsidiaries, as the case may
be, and each of such persons shall be deemed to have actual knowledge of all
books and records in their possession or control and all books and records to
which he or she has reasonable access.
(j) "person" means an individual, corporation, partnership,
limited liability company, association, trust, unincorporated organization or
other legal entity including any Governmental Entity.
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(k) "Stock Option Agreement" means that certain Stock Option
Agreement of even date herewith between the Company and Parent.
(l) "subsidiary" or "subsidiaries" of the Company, Parent, the
Surviving Corporation or any other person means any corporation, partnership,
limited liability company, association, trust, unincorporated association or
other legal entity of which the Company, Parent, the Surviving Corporation or
any such other person, as the case may be (either alone or through or together
with any other subsidiary), owns, directly or indirectly, 50% or more of the
capital stock the holders of which are generally entitled to vote for the
election of the board of directors or other governing body of such corporation
or other legal entity.
All terms defined in this Agreement shall have the defined
meanings contained herein when used in any certificate or other document made or
delivered pursuant hereto unless otherwise defined therein. The definitions
contained in this Agreement are applicable to the singular as well as the plural
forms of such terms and to the masculine as well as to the gender and neuter
genders of such term. Any agreement, instrument or statute defined or referred
to herein or in any agreement or instrument that is referred to herein means
such agreement, instrument or statute as from time to time amended, modified or
supplemented, including (in the case of agreements and instruments) by waiver or
consent and (in the case of statutes) by succession of comparable successor
statutes and all attachments thereto and instruments incorporated therein.
Section 8.9. Personal Liability. This Agreement shall not create
or be deemed to create or permit any personal liability or obligation on the
part of any direct or indirect stockholder of the Company or Parent or
Acquisition or any officer, director, employee, agent, representative or
investor of any party hereto.
Section 8.10. Specific Performance. The parties hereby
acknowledge and agree that the failure of any party to perform its agreements
and covenants hereunder, including its failure to take all actions as are
necessary on its part to the consummation of the Offer or the Merger, will cause
irreparable injury to the other parties, for which damages, even if available,
will not be an adequate remedy. Accordingly, each party hereby consents to the
issuance of injunctive relief by any court of competent jurisdiction to compel
performance of such party's obligations and to the granting by any court of the
remedy of specific performance of its obligations hereunder; provided, however,
that if a party hereto is entitled to receive any payment or reimbursement of
expenses pursuant to Section 7.3(a), (b) or (c), it shall not be entitled to
specific performance to compel the consummation of the Offer or the Merger.
Section 8.11. No Obligation to Comply with Certain Requirements.
Notwithstanding any provision of this Agreement or otherwise, in connection with
the compliance by the parties hereto with any Applicable Law (including the HSR
Act) and obtaining the consent or approval of any Governmental Entity whose
consent or approval may be required to consummate the transactions contemplated
by this Agreement, Parent shall not
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be required, or be construed to be required, to proffer to, or agree to: (1)
sell or hold separate, or agree to sell or hold separate, before or after the
Effective Time, any assets, businesses or any interests in any assets or
businesses, of Parent, the Company or any of their respective affiliates (or to
consent to any sale, or agreement to sell, by Parent or the Company of any
assets or businesses, or any interests in any assets or businesses), or any
change in or restriction on the operation by Parent or the Company of any assets
or businesses, and (2) enter into any agreement or be bound by any obligation
that, in Parent's good faith judgment, would likely have an adverse effect on
the benefits to Parent of the transactions contemplated by this Agreement.
Section 8.12. Counterparts. This Agreement may be executed in one
or more counterparts, each of which shall be deemed to be an original but all of
which shall constitute one and the same agreement.
Section 8.13. Ambiguities. The parties have participated jointly
in the negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the parties, and no presumption or burden of proof
shall arise or disfavoring any party by virtue of the authorship of any
provisions of this Agreement.
Section 8.14. Waiver. Any waiver of compliance with any
obligation, covenant, agreement, provision or condition of this Agreement or
consent pursuant to this Agreement shall not be effective unless evidenced by an
instrument in writing executed by the party to be charged. Any waiver of
compliance with any such obligation, covenant, agreement, provision or condition
of this Agreement shall not operate as a waiver of, or estoppel with respect to,
any subsequent or other non-compliance.
Section 8.15. Execution. This Agreement may be executed by
facsimile signatures and such signature shall be deemed binding for all purposes
hereof, without delivery of an original signature being thereafter required.
Section 8.16. Schedules. The Company Disclosure Schedule shall be
construed with and as an integral part of this Agreement to the same extent as
if the same had been set forth verbatim herein.
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IN WITNESS WHEREOF, each of the parties has caused this Agreement
to be duly executed on its behalf as of the day and year first above written.
DSP COMMUNICATIONS, INC.,
a Delaware corporation
By: /s/ DAVIDI GILO
---------------------------------
Name: Davidi Gilo
Title: Chairman of the Board
INTEL CORPORATION,
a Delaware corporation
By: /s/ ARVIND SODHANI
---------------------------------
Name: Arvind Sodhani
Title: Treasurer
CWC ACQUISITION CORPORATION,
a Delaware corporation
By: /s/ SUZAN A. MILLER
---------------------------------
Name: Suzan A. Miller
Title: President
[SIGNATURE PAGE TO AGREEMENT AND PLAN OF MERGER BY AND AMONG DSP COMMUNICATIONS,
INC., INTEL CORPORATION AND CWC ACQUISITION CORPORATION]
<PAGE> 71
ANNEX A
CONDITIONS OF THE OFFER
Capitalized terms used but not defined herein shall have the
meanings set forth in the Agreement and Plan of Merger (the "Agreement") of
which this Annex A is a part. Notwithstanding any other provision of the Offer
or this Agreement, and subject to any applicable rules and regulations of the
SEC, including Rule 14e-1(c) relating to Acquisition's obligation to pay for or
return tendered shares after termination of the Offer, Acquisition shall not be
required to accept for payment or pay for any Shares tendered pursuant to the
Offer, may delay the acceptance for payment of any Shares or extend the Offer
one or more times pursuant to Section 1.1(b) of this Agreement and may terminate
the Offer at any time after January 31, 2000 (provided that if on January 31,
2000 the condition set forth in clause (ii) below regarding the HSR Act is not
satisfied and none of the events set forth in paragraphs (a) through (f) below
has occurred and is continuing, then such January 31, 2000 date shall be
automatically extended to April 30, 2000) if (i) less than a majority of the
outstanding Shares on a fully-diluted basis (including for purposes of such
calculation all Shares issuable upon exercise of all vested Company Stock
Options and unvested Company Stock Options that vest prior to the Final Date,
but excluding any Shares held by the Company or any of its subsidiaries) has
been tendered pursuant to the Offer by the expiration of the Offer and not
withdrawn; (ii) any applicable waiting period under the HSR Act has not expired
or terminated; (iii) all necessary consents and approvals from the OCS and the
Investment Center of the Ministry of Finance of the State of Israel and any
other foreign Governmental Entities shall not have been obtained; or (iv) at any
time after the date of this Agreement, and before acceptance for payment of any
Shares, any of the following events shall occur and be continuing:
(a) there shall have been any action (other than a second
request by the appropriate Governmental Entity with jurisdiction under the HSR
Act) taken, or any statute, rule, regulation, judgment, order or injunction
promulgated, entered, enforced, enacted, issued or deemed applicable to the
Offer or the Merger by any domestic or foreign court or other Governmental
Entity which directly or indirectly (i) prohibits, or makes illegal, the
acceptance for payment, payment for or purchase of Shares or the consummation of
the Offer, the Merger or the other transactions contemplated by this Agreement,
(ii) renders Acquisition unable to accept for payment, pay for or purchase some
or all of the Shares, (iii) imposes material limitations on the ability of
Parent effectively to exercise full rights of ownership of the Shares, including
the right to vote the Shares purchased by it on all matters properly presented
to the Company's stockholders, or (iv) otherwise has a Material Adverse Effect
on the Company;
(b) (i) the representations and warranties of the Company
contained in this Agreement shall not be true and correct (except to the extent
that the aggregate of all breaches thereof would not have a Material Adverse
Effect on the Company) at the date hereof and as of the consummation of the
Offer with the same effect as if made at and as of the consummation of the Offer
(except to the extent such representations specifically relate to an earlier
date, in which case such representations shall be true and correct as of such
earlier date,
<PAGE> 72
and in any event, subject to the foregoing Material Adverse Effect
qualification), (ii) the Company shall have failed to perform in all material
respects its covenants and obligations contained in this Agreement (other than
those set forth in Sections 5.8 and 5.9), or (iii) there shall have occurred
since September 30, 1999 any events or changes that constitute a Material
Adverse Effect on the Company;
(c) it shall have been publicly disclosed or Parent shall have
otherwise learned that (i) any person or "group" (as defined in Section l3(d)(3)
of the Exchange Act) shall have acquired or entered into a definitive agreement
or agreement in principle to acquire beneficial ownership of more than 20% of
the Shares or any other class of capital stock of the Company, through the
acquisition of stock, the formation of a group or otherwise, or shall have been
granted any option, right or warrant, conditional or otherwise, to acquire
beneficial ownership of more than 20% of the Shares and (ii) such person or
group shall not have tendered such Shares pursuant to the Offer;
(d) the Company Board shall have withdrawn, or modified or
changed in a manner adverse to Parent and Acquisition (including by amendment of
the Schedule 14D-9), its recommendation of the Offer, this Agreement or the
Merger, or recommended another proposal or offer, or the Company Board, shall
have resolved to do any of the foregoing;
(e) this Agreement shall have terminated in accordance with its
terms; or
(f) there shall have occurred (i) any general suspension of
trading in, or limitation on prices for, securities on the New York Stock
Exchange or the Nasdaq National Market, for a period in excess of twenty-four
(24) hours (excluding suspensions or limitations resulting solely from physical
damage or interference with such exchanges not related to market conditions),
(ii) the commencement of a war, armed hostilities or other national or
international calamity directly or indirectly involving the United States that
constitutes a Material Adverse Effect on the Company or materially adversely
affects or delays the consummation of the Offer, (iii) the average of the
closing prices of the Standard & Poor's 500 Index for any twenty (20)
consecutive trading days shall be twenty-five percent (25%) or more below the
closing price of such index on any trading day on or after the date hereof that
precedes the commencement of such 20 trading day period, (iv) a declaration of a
banking moratorium or any suspension of payments in respect of banks in the
United States (whether or not mandatory), or (v) in the case of any of the
foregoing existing at the time of the commencement of the Offer, a material
acceleration or worsening thereof;
which in the good faith judgment of Parent, in any such case, and regardless of
the circumstances (including any action or inaction by Parent) giving rise to
such condition makes it inadvisable to proceed with the Offer or the acceptance
for payment of or payment for the Shares.
The foregoing conditions (other than the Minimum Condition) are
for the sole benefit of Parent and Acquisition and, subject to the Agreement,
may be waived by Parent and Acquisition, in whole or in part at any time and
from time to time, in the sole discretion of Parent and Acquisition. The failure
by Parent and Acquisition at any time to exercise any of the
<PAGE> 73
foregoing rights shall not be deemed a waiver of any such right and each such
right shall be deemed an ongoing right which may be asserted at any time and
from time to time.
<PAGE> 1
Exhibit 3
STOCK OPTION AGREEMENT
THIS STOCK OPTION AGREEMENT (this "Stock Option Agreement"), dated as of
October 13, 1999, is by and between Intel Corporation, a Delaware corporation
("Grantee"), and DSP Communications, Inc., a Delaware corporation ("Issuer").
RECITALS
A. Grantee, CWC Acquisition Corporation, a Delaware corporation and
wholly-owned subsidiary of Grantee ("Acquisition"), and Issuer are
simultaneously entering into an Agreement and Plan of Merger (the "Merger
Agreement") which provides, among other things, that upon the terms and subject
to the conditions thereof, Acquisition will commence a tender offer (the
"Offer") for all the issued and outstanding shares of Issuer's common stock,
$.001 par value ("Issuer Common Stock"), and, after accepting for payment the
shares tendered in the Offer (the "Tendered Shares"), Acquisition will merge
with and into Issuer with Issuer to continue as the surviving corporation as a
wholly-owned subsidiary of Grantee (the "Merger").
B. As a condition to its willingness to enter into the Merger Agreement,
Grantee has required that Issuer agree, and Issuer has agreed, to enter into
this Stock Option Agreement, which provides, among other things, that Issuer
grant to Grantee an option to purchase shares of Issuer Common Stock, upon the
terms and subject to the conditions provided for herein.
NOW, THEREFORE, in consideration of the premises and mutual covenants
and agreements contained in this Stock Option Agreement and the Merger
Agreement, and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties agree as follows:
1. GRANT OF OPTION. Issuer hereby grants to Grantee an irrevocable
option (the "Option") to purchase Eight Million (8,000,000) shares of Issuer
Common Stock (the "Option Shares"), in the manner set forth below, at an
exercise price of Thirty-Six Dollars ($36.00) per share of Issuer Common Stock,
subject to adjustment as provided below (the "Option Price"). Initially
capitalized terms used but not defined herein shall have the meanings set forth
in the Merger Agreement. Issuer represents and warrants to Grantee that the
number of Option Shares constitutes less than twenty percent (20%) of the number
of outstanding shares of Issuer's Common Stock on the date hereof.
2. EXERCISE OF OPTION.
(a) Subject to the satisfaction or waiver of the conditions set
forth in Section 9 of this Stock Option Agreement, prior to the
termination of this Stock Option Agreement in accordance with its terms,
Grantee may exercise the Option, in whole or in part, at any time or
from time to time on or after the occurrence of a Triggering Event (as
defined
<PAGE> 2
below). The Option shall terminate and not be exercisable at any time
following the Expiration Date (as defined in Section 11). The term
"Triggering Event" means the earlier to occur of (i) the time
immediately prior to the occurrence of any of the events (or the last of
any series of events, as applicable) specified in Section 7.3(a) of the
Merger Agreement giving rise to the obligation of the Company to pay the
fee specified in Section 7.3(a) and (ii) the date on which Acquisition
has accepted for payment the Tendered Shares; provided, however, that
clause (ii) of this sentence shall only constitute a Triggering Event if
the number of Option Shares plus the number of Tendered Shares will,
upon issuance of the Option Shares, equal at least ninety percent (90%)
of the issued and outstanding shares of Issuer Common Stock.
(b) If Grantee wishes to exercise the Option at such time as the
Option is exercisable and has not terminated, Grantee shall deliver
written notice (the "Exercise Notice") to Issuer specifying Grantee's
intention to exercise the Option, the total number of Option Shares it
wishes to purchase and a date and time for the closing of such purchase
(a "Closing"), which date shall not be less than two (2) nor more than
thirty (30) business days after the later of (i) the date such Exercise
Notice is given and (ii) the expiration or termination of any applicable
waiting period under the HSR Act. If, subsequent to a Triggering Event
and prior to the Expiration Date, any Third Party shall have acquired
fifty percent (50%) or more of the then outstanding shares of Issuer
Common Stock (a "Share Acquisition"), or Issuer shall have entered into
a written definitive agreement with any Third Party providing for a
Company Acquisition (as defined below), then Grantee, in lieu of
exercising the Option, shall have the right at any time thereafter (for
so long as the Option is exercisable under Section 2(a) hereof) to
request in writing that Issuer pay, and promptly (but in any event not
more than twenty (20) business days) after the giving by Grantee of such
request, Issuer shall pay to Grantee, in cancellation of the Option, an
amount in cash (the "Cancellation Amount") equal to: (1) the excess over
the Option Price of the greater of (A) the last sale price of a share of
Issuer Common Stock as reported on the New York Stock Exchange on the
last trading day prior to the date of the Exercise Notice, and (B) (I)
the highest price per share of Issuer Common Stock offered to be paid or
paid by any Third Party pursuant to or in connection with such Share
Acquisition or Company Acquisition or (II) if such Company Acquisition
consists of a purchase and sale of assets, the sum of (a) the aggregate
consideration offered to be paid or paid in any transaction or proposed
transaction in connection with a Company Acquisition and (b) the amount
of cash receivable by Issuer upon the exercise or conversion of
outstanding in-the-money options, warrants, rights or convertible
securities, divided by the sum of (x) the number of shares of Issuer
Common Stock then outstanding plus (y) the number of shares issuable
upon exercise or conversion of outstanding in-the-money options,
warrants, rights or convertible securities, multiplied by (2) the number
of Option Shares then covered by the Option. If all or a portion of the
price per share of Issuer Common Stock offered, paid or payable or the
aggregate consideration offered, paid or payable for the stock or assets
of Issuer, each as contemplated by the immediately preceding sentence,
consists of non-cash
2
<PAGE> 3
consideration, such price or aggregate consideration shall be the cash
consideration, if any, plus the fair market value of the non-cash
consideration as determined jointly by the investment bankers of Issuer
and the investment bankers of Grantee.
(c) Notwithstanding anything to the contrary contained herein,
(1) Grantee's Total Payment (as defined below), if any, which Grantee
may derive hereunder shall in no event exceed Fifty-Five Million Dollars
($55,000,000) and Grantee shall pay any excess over such amount to the
Issuer and (2) the Option may not be exercised for a number of Shares as
would, as of the date of exercise, result in a Notional Total Payment
(as defined below), together with the actual Total Payment immediately
preceding such exercise, exceeding Fifty-Five Million Dollars
($55,000,000); provided that if any exercise of the Option would result
in a Notional Total Payment, together with the actual Total Payment
immediately preceding such exercise, exceeding Fifty-Five Million
Dollars ($55,000,000), then Grantee, at its election, may either (A)
reduce the number of shares of Issuer Common Stock subject to the
Option, (B) deliver to Issuer for cancellation shares of Issuer Common
Stock previously purchased by Grantee, (C) pay cash to Issuer or (C)
take any action representing any combination of the preceding clauses
(A), (B) and (C), so that Grantee's Notional Total Payment, when
aggregated with the actual Total Payment immediately preceding such
exercise, does not exceed Fifty-Five Million Dollars ($55,000,000) after
taking into account the foregoing actions. As used herein, (1) "Total
Payment" shall mean the sum (before taxes) of the following: (i) any
Cancellation Amount received by Grantee pursuant to Section 2(b) hereof,
(ii) (x) the net cash amounts received by Grantee pursuant to the sale,
within twelve (12) months following exercise of the Option, of Option
Shares (or any other securities into which such Option Shares shall be
converted or exchanged) to any unaffiliated party, less (y) the
aggregate Option Price for such shares, (iii) any amounts received by
Grantee upon transfer of the Option (or any portion thereof) to any
unaffiliated party, and (iv) the amount actually received by Grantee
pursuant to Section 7.3(a) of the Merger Agreement; and (2) "Notional
Total Payment" with respect to any number of Option Shares as to which
Grantee may propose to exercise the Option shall be the Total Payment
determined as of the date of such proposed exercise assuming that the
Option were exercised on such date for such number of shares and
assuming further that such shares, together with all other Option Shares
held by Grantee as of such date, were sold for cash at the closing
market price for the Issuer Common Stock as of the close of business on
the preceding trading day (less customary brokerage commissions). For
purposes of this Section 2, references to Grantee shall be deemed to
include references to Acquisition or any other affiliate of Grantee.
(d) As used herein, "Company Acquisition" means the occurrence of
any of the following events: (i) the acquisition by a Third Party of
fifty percent (50%) or more of the assets of the Issuer and its
subsidiaries, taken as a whole; (ii) the acquisition by a Third Party of
fifty percent (50%) or more of the outstanding shares of Issuer Common
Stock or any securities convertible into or exchangeable for shares of
Issuer Common
3
<PAGE> 4
Stock that would constitute fifty percent (50%) or more of the
outstanding shares of Issuer Common Stock upon such conversion or
exchange, or any combination of the foregoing; (iii) the acquisition by
the Issuer of the assets or stock of a Third Party if, as a result of
which the outstanding shares of Issuer Common Stock immediately prior
thereto are increased by one hundred percent (100%) or more, or (iv) the
merger, consolidation or business combination of the Issuer with or into
a Third Party, where, following such merger, consolidation or business
combination, the stockholders of the Issuer immediately prior to such
transaction do not hold, immediately after such transaction, securities
of the surviving entity constituting more than fifty percent (50%) of
the total voting power of the surviving entity.
3. PAYMENT OF OPTION PRICE AND DELIVERY OF CERTIFICATE. Any Closings
under Section 2 of this Stock Option Agreement shall be held at the principal
executive offices of Issuer, or at such other place as Issuer and Grantee may
agree. At any Closing hereunder, (a) Grantee or its designee shall make payment
to Issuer of the aggregate price for the Option Shares being so purchased by
delivery of a certified check, official bank check or wire transfer of funds
pursuant to Issuer's instructions payable to Issuer in an amount equal to the
product obtained by multiplying the Option Price by the number of Option Shares
to be purchased, and (b) upon receipt of such payment, Issuer shall deliver to
Grantee or its designee a certificate or certificates representing the number of
validly issued, fully paid and non-assessable Option Shares so purchased, in the
denominations and registered in such names designated to Issuer in writing by
Grantee.
4. REGISTRATION AND LISTING OF OPTION SHARES.
(a) Grantee may, by written notice (a "Registration Notice"),
request at any time or from time to time within two (2) years
following a Triggering Event (the "Registration Period"), in order to
permit the sale, transfer or other disposition of the Option Shares
that have been acquired by or are issuable to Grantee upon
exercise of the Option ("Registrable Securities"), that Issuer register
under the Securities Act of 1933, as amended (the "Act"), the offering,
sale and delivery, or other transfer or disposition, of the Registrable
Securities by Grantee. Any such Registration Notice must relate to a
number of Registrable Securities equal to at least twenty percent (20%)
of the Option Shares, unless the remaining number of Registrable
Securities is less than such amount, in which case Grantee shall be
entitled to exercise its rights hereunder but only for all of the
remaining Registrable Securities (a "Permitted Offering"). Grantee's
rights hereunder shall terminate at such time as Grantee shall be
entitled to sell all of the remaining Registrable Securities pursuant
to Rule 144(k) under the Act. Issuer shall use all reasonable efforts
to qualify any Registrable Securities Grantee desires to sell or
otherwise dispose of under applicable state securities or "blue sky"
laws; provided, however, that Issuer shall not be required to qualify
to do business, consent to general service of process or submit to
taxation in any jurisdiction by reason of this provision. Without
Grantee's prior written consent (which may be withheld in its sole
discretion), no
4
<PAGE> 5
other securities may be included in any such registration. Issuer will
use all reasonable efforts to cause each such registration statement to
become effective as promptly as possible, to obtain all consents or
waivers of other persons that are required therefor and to keep such
registration statement effective for a period of at least ninety (90)
days from the day such registration statement first becomes effective.
The obligations of Issuer hereunder to file a registration statement and
to maintain its effectiveness may be suspended for one or more periods
not exceeding ninety (90) days in the aggregate if the Board of
Directors of Issuer shall have determined in good faith that the filing
of such registration statement or the maintenance of its effectiveness
would require disclosure of nonpublic information that would materially
and adversely affect Issuer, or Issuer is required under the Act to
include audited financial statements for any period in such registration
statement and such financial statements are not yet available for
inclusion in such registration statement. Grantee shall be entitled to
make up to two (2) requests for registration of Options Shares under
this Section 4(a). For purposes of determining whether the two (2)
requests have been made under this Section 4(a), only requests relating
to a registration statement that has become effective under the Act will
be counted.
(b) If, during the Registration Period, Issuer shall propose to
register under the Act the offering, sale and delivery of Issuer Common
Stock for cash for its own account or for any other stockholder of
Issuer pursuant to a firm commitment underwriting, it will, in addition
to Issuer's other obligations under this Section 4, allow Grantee the
right to participate in such registration so long as Grantee
participates in such underwriting on terms reasonably satisfactory to
the managing underwriters of such offering; provided, however, that, if
the managing underwriter of such offering advises Issuer in writing that
in its opinion the number of shares of Issuer Common Stock requested to
be included in such registration exceeds the number that it would be in
the best interests of Issuer to sell in such offering, Issuer will,
after fully including therein all shares of Issuer Common Stock to be
sold by Issuer, include the shares of Issuer Common Stock requested to
be included therein by Grantee pro rata (based on the number of shares
of Issuer Common Stock requested to be included therein) with the shares
of Issuer Common Stock requested to be included therein by persons other
than Issuer and persons to whom Issuer owes a contractual obligation
(other than any director, officer or employee of Issuer to the extent
any such person is not currently owed such contractual obligation).
(c) The expenses associated with the preparation and filing of
any registration statement pursuant to this Section 4 and any sale
covered thereby (including any fees related to blue sky qualifications
and filing fees in respect of SEC or the National Association of
Securities Dealers, Inc.) ("Registration Expenses") will be paid by
Issuer, except for underwriting discounts or commissions or brokers'
fees in respect of Option Shares to be sold by Grantee and the fees and
disbursements of Grantee's counsel; provided, however, that Issuer will
not be required to pay for any Registration Expenses with respect to
such registration if the registration request is subsequently withdrawn
at
5
<PAGE> 6
the request of Grantee unless Grantee agrees to forfeit its right to
request one registration; provided further, however, that, if at the
time of such withdrawal Grantee has learned of a material adverse change
in the results of operations, condition, business or prospects of Issuer
not known to Grantee at the time of the request and has withdrawn the
request within a reasonable period of time following disclosure by
Issuer to Grantee of such material adverse change, then Grantee shall
not be required to pay any of such expenses and shall not forfeit such
right to request one registration. Grantee will provide all information
reasonably requested by Issuer for inclusion in any registration
statement to be filed hereunder.
(d) In connection with each registration under this Section 4,
Issuer shall indemnify and hold each holder of the Option or Option
Shares participating in such offering (a "Holder"), its underwriters and
each of their respective affiliates harmless against any and all losses,
claims, damage, liabilities and expenses (including, without limitation,
investigation expenses and fees and disbursements of counsel and
accountants), joint or several, to which such Holder, its underwriters
and each of their respective affiliates may become subject, under the
Act or otherwise, insofar as such losses, claims, damages, liabilities
or expenses (or actions in respect thereof) arise out of or are based
upon an untrue statement or alleged untrue statement of a material fact
contained in any registration statement (including any prospectus
therein), or any amendment or supplement thereto, or arise out of or are
based upon the omission or alleged omission to state therein a material
fact required to be stated therein or necessary to make the statements
therein not misleading, other than such losses, claims, damages,
liabilities or expenses (or actions in respect thereof) that arise out
of or are based upon an untrue statement or alleged untrue statement of
a material fact contained in written information furnished by a Holder
to Issuer expressly for use in such registration statement.
(e) In connection with any registration statement pursuant to
this Section 4, Grantee shall cause each Holder to contractually agree
to furnish Issuer with such information concerning itself and the
proposed sale or distribution as shall reasonably be required in order
to ensure compliance with the requirements of the Act and to provide
representations and warranties customary for selling stockholders who
are unaffiliated with the issuer. In addition, Grantee shall, and
Grantee shall cause each Holder to contractually agree to, indemnify and
hold Issuer, its underwriters and each of their respective affiliates
harmless against any and all losses, claims, damages, liabilities and
expenses (including, without limitation, investigation expenses and fees
and disbursement of counsel and accountants), joint or several, to which
Issuer, its underwriters and each of their respective affiliates may
become subject under the Act or otherwise, insofar as such losses,
claims, damages, liabilities or expenses (or actions in respect thereof)
arise out of or are based upon an untrue statement or alleged untrue
statement of a material fact contained in written information furnished
by any Holder to Issuer expressly for use in such registration
statement; provided, however, that in no event shall any indemnification
6
<PAGE> 7
amount contributed by a Holder hereunder exceed the proceeds of the
offering received by such Holder.
(f) Upon the issuance of Option Shares hereunder, Issuer will use
all commercially reasonable efforts to promptly list such Option Shares
on the New York Stock Exchange or with such national or other exchange
on which the shares of Issuer Common Stock are at the time listed.
5. REPRESENTATIONS AND WARRANTIES OF ISSUER. Issuer hereby represents
and warrants to Grantee as follows:
(a) Issuer is a corporation duly organized, validly existing and
in good standing under the laws of the State of Delaware and has all
requisite corporate power and authority to enter into and perform its
obligations under this Stock Option Agreement.
(b) The execution and delivery of this Stock Option Agreement and
the consummation of the transactions contemplated hereby have been duly
and validly authorized by the Board of Directors of Issuer and no other
corporate proceedings on the part of Issuer are necessary to authorize
this Stock Option Agreement or to consummate the transactions
contemplated hereby. The Board of Directors of Issuer has duly approved
the issuance and sale of the Option Shares, upon the terms and subject
to the conditions contained in this Stock Option Agreement, and the
consummation of the transactions contemplated hereby. This Stock Option
Agreement has been duly and validly executed and delivered by Issuer
and, assuming this Stock Option Agreement has been duly executed and
delivered by Grantee, constitutes a valid and binding obligation of
Issuer enforceable against Issuer in accordance with its terms, subject
to bankruptcy, insolvency, reorganization, moratorium or other similar
laws affecting or relating to creditors' rights generally; the
availability of injunctive relief and other equitable remedies; and
limitations imposed by law on indemnification for liability under
federal securities laws.
(c) Issuer has taken all necessary action to authorize and
reserve for issuance and to permit it to issue, and at all times from
the date of this Stock Option Agreement through the date of expiration
of the Option will have reserved for issuance upon exercise of the
Option, a sufficient number of authorized shares of Issuer Common Stock
for issuance upon exercise of the Option, each of which shares, upon
issuance pursuant to this Stock Option Agreement and when paid for as
provided herein, will be validly issued, fully paid and nonassessable,
and shall be delivered free and clear of all claims, liens, charges,
encumbrances and security interests (other than those imposed by
Grantee, its affiliates or by Applicable Law).
(d) The execution, delivery and performance of this Stock Option
Agreement by Issuer and the consummation by it of the transactions
contemplated hereby, except as
7
<PAGE> 8
required by the HSR Act and any material foreign competition authorities
(if applicable), and, with respect to Section 4 hereof, compliance with
the provisions of the Act and any applicable state securities laws, do
not require the consent, waiver, approval, license or authorization of
or result in the acceleration of any obligation under, or constitute a
default under, any term, condition or provision of the Certificate of
Incorporation or bylaws, or any indenture, mortgage, lien, lease,
agreement, contract, instrument, order, judgment, ordinance, regulation
or decree or any restriction to which Issuer or any property of Issuer
or its subsidiaries is bound, except where failure to obtain such
consents, waivers, approvals, licenses or authorizations or where such
acceleration or defaults could not, individually or in the aggregate,
reasonably be expected to materially and adversely affect Grantee's
rights hereunder or to have a Material Adverse Effect on Issuer.
6. REPRESENTATIONS AND WARRANTIES OF GRANTEE. Grantee hereby represents
and warrants to Issuer that:
(a) Grantee is a corporation duly organized, validly existing and
in good standing under the laws of the State of Delaware, and has all
requisite corporate power and authority to enter into and perform its
obligations under this Stock Option Agreement.
(b) The execution and delivery of this Stock Option Agreement and
the consummation of the transactions contemplated hereby have been duly
and validly authorized by the Board of Directors of Grantee and no other
corporate proceedings on the part of Grantee are necessary to authorize
this Stock Option Agreement or to consummate the transactions
contemplated hereby. This Stock Option Agreement has been duly and
validly executed and delivered by Grantee and, assuming this Stock
Option Agreement has been duly executed and delivered by Issuer,
constitutes a valid and binding obligation of Grantee enforceable
against Grantee in accordance with its terms, subject to bankruptcy,
insolvency, reorganization, moratorium or other similar laws affecting
or relating to creditors' rights generally; the availability of
injunctive relief and other equitable remedies; and limitations imposed
by law on indemnification for liability under federal securities laws.
(c) Grantee is acquiring the Option and it will acquire the
Option Shares issuable upon the exercise thereof for its own account and
not with a view to the distribution or resale thereof in any manner not
in accordance with Applicable Law.
7. COVENANTS OF GRANTEE. Grantee agrees not to transfer or otherwise
dispose of the Option or the Option Shares, or any interest therein, except that
Grantee may transfer or dispose of the Option Shares so long as such transaction
is in compliance with the Act and any applicable state securities laws. Grantee
further agrees to the placement of the following legend on the
8
<PAGE> 9
certificates representing the Option Shares (in addition to any legend required
under applicable state securities laws) and any legend referring to the
provisions of Section 12 hereof:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER EITHER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR ANY
APPLICABLE STATE LAW GOVERNING THE OFFER AND SALE OF SECURITIES. NO
TRANSFER OR OTHER DISPOSITION OF THESE SHARES, OR OF ANY INTEREST
THEREIN, MAY BE MADE EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE ACT AND SUCH OTHER STATE LAWS OR PURSUANT TO
EXEMPTIONS FROM REGISTRATION UNDER THE ACT, SUCH OTHER STATE LAWS, AND
THE RULES AND REGULATIONS PROMULGATED THEREUNDER."
8. HSR COMPLIANCE EFFORTS. Grantee and Issuer shall take, or cause to be
taken, all commercially reasonable actions to consummate and make effective the
transactions contemplated by this Stock Option Agreement, including, without
limitation, reasonable efforts to obtain any necessary consents of third parties
and Governmental Entities and the filing by Grantee and Issuer promptly of any
required HSR Act notification forms and the documents required to comply with
the HSR Act.
9. CERTAIN CONDITIONS. The obligation of Issuer to issue Option Shares
under this Stock Option Agreement upon exercise of the Option shall be subject
to the satisfaction or waiver of the following conditions:
(a) any waiting periods applicable to the acquisition of the
Option Shares by Grantee pursuant to this Stock Option Agreement under
the HSR Act and any material foreign competition laws shall have expired
or been terminated; and
(b) no statute, rule or regulation shall be in effect, and no
order, decree or injunction entered by any court of competent
jurisdiction or Governmental Entity in the United States shall be in
effect that prohibits the exercise of the Option or acquisition or
issuance of Option Shares pursuant to this Stock Option Agreement.
10. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION. In the event of any
change in the number of issued and outstanding shares of Issuer Common Stock by
reason of any stock dividend, stock split, recapitalization, merger, rights
offering, share exchange or other change in the corporate or capital structure
of Issuer, Grantee shall receive, upon exercise of the Option, the stock or
other securities, cash or property to which Grantee would have been entitled if
Grantee had exercised the Option and had been a holder of record of shares of
Issuer Common Stock on the record date fixed for determination of holders of
shares of Issuer Common Stock entitled to receive such stock or other
securities, cash or property at the same aggregate price as the aggregate Option
Price of the Option Shares.
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<PAGE> 10
11. EXPIRATION. The Option shall expire at the earlier of (y) the
Effective Time and (z) upon termination of the Merger Agreement in accordance
with its terms unless Grantee has the right, or has the possibility of obtaining
the right, to receive a termination fee pursuant to Section 7.3(a) of the Merger
Agreement, in which case the Option will not terminate until the later of (A) 5
business days following the time such termination fee becomes unconditionally
payable and (B) the expiration of the period in which the Grantee has such right
to receive such termination fee (such expiration date is referred to as the
"Expiration Date").
12. GENERAL PROVISIONS.
(a) Survival. All of the representations, warranties and
covenants contained herein shall survive a Closing and shall be deemed
to have been made as of the date hereof and as of the date of each
Closing.
(b) Further Assurances. If Grantee exercises the Option, or any
portion thereof, in accordance with the terms of this Stock Option
Agreement, Issuer and Grantee will execute and deliver all such further
documents and instruments and use all reasonable efforts to take all
such further action as may be necessary in order to consummate the
transactions contemplated thereby.
(c) Severability. It is the desire and intent of the parties that
the provisions of this Stock Option Agreement be enforced to the fullest
extent permissible under the law and public policies applied in each
jurisdiction in which enforcement is sought. Accordingly, in the event
that any provision of this Stock Option Agreement would be held in any
jurisdiction to be invalid, prohibited or unenforceable for any reason,
such provision, as to such jurisdiction, shall be ineffective, without
invalidating the remaining provisions of this Stock Option Agreement or
affecting the validity or enforceability of such provision in any other
jurisdiction. Notwithstanding the foregoing, if such provision could be
more narrowly drawn so as not be invalid, prohibited or unenforceable in
such jurisdiction, it shall, as to such jurisdiction, be so narrowly
drawn, without invalidating the remaining provisions of this Stock
Option Agreement or affecting the validity or enforceability of such
provision in any other jurisdiction.
(d) Assignment; Transfer of Stock Option. This Stock Option
Agreement shall be binding on and inure to the benefit of the parties
hereto and their respective successors and permitted assigns; provided,
however, that Issuer and Grantee, without the prior written consent of
the other party, shall not be entitled to assign or otherwise transfer
any of its rights or obligations hereunder and any such attempted
assignment or transfer shall be void; provided further, that Grantee
shall be entitled to assign or transfer this Stock Option Agreement or
any rights hereunder to any wholly-owned subsidiary of Grantee without
Issuer's consent so long as such wholly-owned subsidiary agrees in
writing to be bound by the terms and provisions hereof.
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<PAGE> 11
(e) Specific Performance. The parties acknowledge and agree that
in the event of a breach of any provision of this Stock Option
Agreement, the aggrieved party would be without an adequate remedy at
law. The parties therefore agree that in the event of a breach of any
provision of this Stock Option Agreement, the aggrieved party may elect
to institute and prosecute proceedings in any court of competent
jurisdiction to enforce specific performance or to enjoin the continuing
breach of such provisions, as well as to obtain damages for breach of
this Stock Option Agreement. By seeking or obtaining any such relief,
the aggrieved party will not be precluded from seeking or obtaining any
other relief to which it may be entitled.
(f) Amendments. This Stock Option Agreement may not be modified,
amended, altered or supplemented except upon the execution and delivery
of a written agreement executed by Grantee and Issuer.
(g) Notices. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be deemed to be
sufficient if contained in a written instrument and shall be deemed
given if delivered personally, telecopied, sent by
nationally-recognized, overnight courier or mailed by registered or
certified mail (return receipt requested), postage prepaid, to the other
party at the following addresses (or such other address for a party as
shall be specified by like notice):
If to Grantee:
Intel Corporation
2200 Mission College Boulevard
Santa Clara, California 95052
Telecopier: (408) 765-1859
Attention: General Counsel
with a copy to:
Gibson, Dunn & Crutcher LLP
One Montgomery Street
Telesis Tower
San Francisco, California 94104
Telecopier: (415) 986-5309
Attention: Kenneth R. Lamb
11
<PAGE> 12
If to Issuer:
DSP Communications, Inc.
20300 Stevens Creek Boulevard
Cupertino, California 95015
Telecopier: (408) 777-2744
Attention: General Counsel
with a copy to:
Skadden, Arps, Slate, Meagher & Flom, LLP
525 University Avenue
Palo Alto, California 94301
Telecopier: (650) 470-4570
Attention: Kenton J. King, Esq.
(h) Headings. The headings contained in this Stock Option
Agreement are for reference purposes only and shall not affect in any
way the meaning or interpretation of this Stock Option Agreement.
(i) Counterparts. This Stock Option Agreement may be executed in
one or more counterparts, each of which shall be an original, but all of
which together shall constitute one and the same agreement.
(j) Governing Law and Venue; Waiver of Jury Trial.
(1) THIS STOCK OPTION AGREEMENT SHALL BE DEEMED TO BE MADE
IN AND IN ALL RESPECTS SHALL BE INTERPRETED, CONSTRUED AND
GOVERNED BY AND IN ACCORDANCE WITH THE LAW OF THE STATE OF
DELAWARE WITHOUT REGARD TO THE CONFLICT OF LAW PRINCIPLES
THEREOF. The parties hereby irrevocably submit to the
jurisdiction of the courts of the State of Delaware and the
Federal courts of the United States of America located in the
State of Delaware solely in respect of the interpretation and
enforcement of the provisions of this Stock Option Agreement and
of the documents referred to in this Stock Option Agreement, and
in respect of the transactions contemplated hereby, and hereby
waive, and agree not to assert, as a defense in any action, suit
or proceeding for the interpretation or enforcement hereof or of
any such document, that it is not subject thereto or that such
action, suit or proceeding may not be brought or is not
maintainable in said courts or that the venue thereof may not be
appropriate or that this Stock Option Agreement or any such
document may not be enforced in or by such courts, and the
parties hereto irrevocably agree that all claims with respect to
such action or proceeding shall be heard and determined in such a
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<PAGE> 13
Delaware State or Federal court. The parties hereby consent to
and grant any such court jurisdiction over the person of such
parties and over the subject matter of such dispute and agree
that mailing of process or other papers in connection with any
such action or proceeding in the manner provided in Section 12(g)
or in such other manner as may be permitted by Applicable Law,
shall be valid and sufficient service thereof.
(2) The parties agree that irreparable damage would occur
and that the parties would not have any adequate remedy at law in
the event that any of the provisions of this Stock Option
Agreement were not performed in accordance with their specific
terms or were otherwise breached. It is accordingly agreed that
the parties shall be entitled to an injunction or injunctions to
prevent breaches of this Stock Option Agreement and to enforce
specifically the terms and provisions of this Stock Option
Agreement in any Federal court located in the State of Delaware
or in Delaware state court, this being in addition to any other
remedy to which they are entitled at law or in equity.
(3) EACH PARTY ACKNOWLEDGES AND AGREES THAT ANY
CONTROVERSY WHICH MAY ARISE UNDER THIS STOCK OPTION AGREEMENT IS
LIKELY TO INVOLVE COMPLICATED AND DIFFICULT ISSUES, AND THEREFORE
EACH SUCH PARTY HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY
RIGHT SUCH PARTY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY
LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO
THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED BY THIS
AGREEMENT. EACH PARTY CERTIFIES AND ACKNOWLEDGES THAT (i) NO
REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS
REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD
NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING
WAIVER, (ii) EACH SUCH PARTY UNDERSTANDS AND HAS CONSIDERED THE
IMPLICATIONS OF THIS WAIVER, (iii) EACH SUCH PARTY MAKES THIS
WAIVER VOLUNTARILY, AND (iv) EACH SUCH PARTY HAS BEEN INDUCED TO
ENTER INTO THIS STOCK OPTION AGREEMENT BY, AMONG OTHER THINGS,
THE WAIVERS AND CERTIFICATIONS IN THIS SECTION 12(j).
(k) Entire Agreement. This Stock Option Agreement and the Merger
Agreement, and any documents and instruments referred to herein and
therein, constitute the entire agreement between the parties hereto and
thereto with respect to the subject
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<PAGE> 14
matter hereof and thereof and supersede all other prior agreements and
understandings, both written and oral, between the parties with respect
to the subject matter hereof and thereof. Nothing in this Stock Option
Agreement shall be construed to give any person other than the parties
to this Stock Option Agreement or their respective successors or
permitted assigns any legal or equitable right, remedy or claim under or
in respect of this Stock Option Agreement or any provision contained
herein.
(l) Expenses. Except as otherwise provided in this Stock Option
Agreement, each party shall pay its own expenses incurred in connection
with this Stock Option Agreement and the transactions contemplated
hereby.
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<PAGE> 15
IN WITNESS WHEREOF, each of the parties has caused this Stock Option
Agreement to be duly executed as of the day and year first above written.
INTEL CORPORATION,
a Delaware corporation
By: /s/ ARVIND SODHANI
-------------------------------------------
Name: Arvind Sodhani
Title: Treasurer
DSP COMMUNICATIONS, INC.,
a Delaware corporation
By: /s/ DAVIDI GILO
-------------------------------------------
Name: Davidi Gilo
Title: Chairman of the Board
[SIGNATURE PAGE TO INTEL/DSP COMMUNICATIONS STOCK OPTION AGREEMENT]
<PAGE> 1
Exhibit 4
TENDER AND VOTING AGREEMENT AND
IRREVOCABLE PROXY
THIS TENDER AND VOTING AGREEMENT AND IRREVOCABLE PROXY, dated as of
October 13, 1999 (this "Agreement"), is entered into by and between Intel
Corporation, a Delaware corporation ("Parent"), and CWC Acquisition Corporation,
a Delaware corporation and wholly-owned subsidiary of Parent ("Acquisition"), on
the one hand, and Davidi Gilo ("Stockholder"), on the other hand.
W I T N E S S E T H:
WHEREAS, concurrently herewith, Parent, Acquisition, and DSP
Communications, Inc., a Delaware corporation (the "Company"), have entered into
an Agreement and Plan of Merger, of even date herewith (as such agreement may
hereafter be amended from time to time, the "Merger Agreement"; initially
capitalized and other terms used but not defined herein shall have the meanings
ascribed to them in the Merger Agreement), pursuant to which Acquisition will
make a tender offer (the "Offer") for all outstanding shares of common stock,
$.001 par value, of the Company ("Company Common Stock") and, after Acquisition
has accepted tendered shares for payment (the date on which such acceptance
occurs, the "Acceptance Date"), the Company and Acquisition will merge with the
Company as the surviving corporation and wholly-owned subsidiary of Parent (the
"Merger");
WHEREAS, Stockholder Beneficially Owns (as defined herein) 1,517,604
shares of Company Common Stock (the "Shares"); and
WHEREAS, as an inducement and a condition to entering into the Merger
Agreement, Parent and Acquisition have requested that Stockholder agree, and
Stockholder has agreed, to enter into this Agreement;
NOW, THEREFORE, in consideration of the foregoing and the mutual
premises, representations, warranties, covenants and agreements contained
herein, the parties hereto hereby agree as follows:
1. Provisions Concerning Company Common Stock.
(a) Tender of Shares. Subject to obtaining the consents described
in Schedule 4(a), Stockholder hereby agrees with Parent and Acquisition that
Stockholder will, promptly after the date of commencement of the Offer (but in
all events not later than ten (10) business days thereafter), tender to
Acquisition all Shares Beneficially Owned by Stockholder on such date (the
"Tendered Shares"). Stockholder further agrees to tender to Acquisition promptly
after Stockholder's acquisition thereof (but in all events not later than ten
(10) business days thereafter) all other shares of Company Common Stock acquired
and Beneficially Owned by Stockholder at any time prior to the Acceptance Date
or the date on which the Offer is terminated
<PAGE> 2
or expires without Acquisition's having accepted shares for payment; all such
subsequently tendered Shares shall constitute "Tendered Shares" for all purposes
of this Agreement. Stockholder agrees not to withdraw any of the Tendered Shares
unless the Offer is terminated or has expired without Acquisition's having
accepted the Tendered Shares for payment. Stockholder acknowledges and agrees
that Acquisition's obligation to accept for payment and pay for the Tendered
Shares is subject to all the terms and conditions of the Offer.
(b) Voting Agreement. Stockholder hereby agrees with Parent and
Acquisition that, at any meeting of the Company's stockholders, however called,
or in connection with any written consent of the Company's stockholders,
Stockholder shall vote the Shares Beneficially Owned by Stockholder, whether
heretofore owned or hereafter acquired, (i) in favor of approval of the Merger
Agreement and any actions required in furtherance of the transactions
contemplated thereby, including without limitation voting such shares in favor
of the election to the Company Board of each person designated by Parent for
nomination thereto pursuant to Section 1.3(a) of the Merger Agreement at any
meeting of the Company's stockholders called for the election of directors; (ii)
against any action or agreement that would result in a breach in any respect of
any covenant, representation or warranty or any other obligation or agreement of
the Company under the Merger Agreement; and (iii) except as otherwise agreed to
in writing in advance by Parent, against: (A) any Third Party Acquisition, (B)
any change in a majority of the individuals who, as of the date hereof,
constitute the Board of Directors of the Company (other than as contemplated by
Section 1.3 of the Merger Agreement), (C) any extraordinary corporate
transaction, such as a merger, consolidation or other business combination
involving the Company or any of its subsidiaries and any Third Party, (D) a
sale, lease, transfer or disposition of any assets of the Company's or any of
its subsidiaries' business outside the ordinary course of business, or any
assets which are material to its business whether or not in the ordinary course
of business, or a reorganization, recapitalization, dissolution or liquidation
of the Company or any of its subsidiaries, (E) any change in the present
capitalization of the Company or any amendment of the Company's Certificate of
Incorporation or bylaws, (F) any other material change in the Company's
corporate structure or affecting its business, or (G) any other action which is
intended, or could reasonably be expected, to impede, interfere with, delay,
postpone or materially adversely affect the Offer, the Merger or any of the
other transactions contemplated by the Merger Agreement or the Stock Option
Agreement, or any of the transactions contemplated by this Agreement.
Stockholder shall not enter into any agreement or understanding with any person
the effect of which would be inconsistent or violative of the provisions and
agreements contained herein. For purposes of this Agreement, "Beneficially Own"
or "Beneficial Ownership" with respect to any securities shall mean
Stockholder's having such ownership, control or power to direct the voting with
respect to, or otherwise enables Stockholder to legally act with respect to,
such securities as contemplated hereby, including pursuant to any agreement,
arrangement or understanding, whether or not in writing. Securities Beneficially
Owned by Stockholder shall (i) include securities Beneficially Owned by all
other persons with whom Stockholder would constitute a "group" as within the
meaning of Section 13(d)(3) of the Exchange Act of 1934, as amended (the
"Exchange Act") and (ii) exclude, until their issuance, any Shares issuable upon
exercise of options held by Stockholder. Stockholder and Parent acknowledge and
agree that nothing in this subsection (b) shall require or be construed to
require
2
<PAGE> 3
Stockholder to take, or not to take, any action in his capacity as a member of
the Company Board.
2. Irrevocable Proxy.
(a) Stockholder hereby constitutes and appoints Acquisition,
which shall act by and through Suzan A. Miller and Guy S. Anthony (each, a
"Proxy Holder"), or either of them, with full power of substitution, its true
and lawful proxy and attorney-in-fact to vote at any meeting (and any
adjournment or postponement thereof) of the Company's stockholders called for
purposes of considering whether to approve the Merger Agreement, the Merger or
any of the other transactions contemplated by the Merger Agreement, or any Third
Party Acquisition, or to execute a written consent of stockholders in lieu of
any such meeting, all Shares Beneficially Owned by Stockholder as of the date of
such meeting or written consent in favor of the approval of the Merger
Agreement, the Merger and the other transactions contemplated by the Merger
Agreement, with such modifications to the Merger Agreement as the parties
thereto may make, or against a Third Party Acquisition, as the case may be. Such
proxy shall be limited strictly to the power to vote the Shares in the manner
set forth in the preceding sentence and shall not extend to any other matters.
(b) The proxy and power of attorney granted herein shall be
irrevocable during the term of this Agreement, shall be deemed to be coupled
with an interest sufficient in law to support an irrevocable proxy and shall
revoke all prior proxies granted by Stockholder. Stockholder shall not grant any
proxy to any person which conflicts with the proxy granted herein, and any
attempt to do so shall be void. The power of attorney granted herein is a
durable power of attorney and shall survive the death or incapacity of
Stockholder.
(c) If Stockholder fails for any reason to vote his, hers or its
Shares in accordance with the requirements of Section 1(b) hereof, then the
Proxy Holder shall have the right to vote the Shares at any meeting of the
Company's stockholders and in any action by written consent of the Company's
stockholders in accordance with the provisions of this Section 2. The vote of
the Proxy Holder shall control in any conflict between his vote of such Shares
and a vote by Stockholder of such Shares.
3. Director Matters Excluded. Parent and Acquisition acknowledge and
agree that no provision of this Agreement shall limit or otherwise restrict
Stockholder with respect to any act or omission that Stockholder may undertake
or authorize in his capacity as a director of the Company, including, without
limitation, any vote that Stockholder may make as a director of the Company with
respect to any matter presented to the Board of Directors of the Company.
4. Other Covenants, Representations and Warranties. Stockholder hereby
represents and warrants to Parent and Acquisition as follows:
(a) Ownership of Shares. Stockholder is the Beneficial Owner of
all the Shares. On the date hereof, the Shares constitute all of the Shares
Beneficially Owned by Stockholder. Stockholder has voting power with respect to
the matters set forth in Section 1(b)
3
<PAGE> 4
hereof with respect to all of the Shares, with no limitations, qualifications
or restrictions on such rights other than asset forth on Schedule 4(a) hereto.
(b) Power; Binding Agreement. Stockholder has the legal capacity,
power and authority to enter into and perform all of its obligations under this
Agreement. The execution, delivery and performance of this Agreement by
Stockholder will not violate any agreement or any court order to which
Stockholder is a party or is subject including, without limitation, any voting
agreement or voting trust. This Agreement has been duly and validly executed and
delivered by Stockholder.
(c) Restriction on Transfer, Proxies and Non-Interference. Except
as expressly contemplated by this Agreement, Stockholder shall not, directly or
indirectly: (i) except as expressly contemplated by this Agreement, offer for
sale, sell, transfer, tender, pledge, encumber, assign or otherwise dispose of,
or enter into any contract, option or other arrangement or understanding with
respect to or consent to the offer for sale, sale, transfer, tender, pledge,
encumbrance, assignment or other disposition of, any or all of the Shares or any
interest therein; (ii) grant any proxies or powers of attorney or deposit any
Shares into a voting trust or enter into a voting agreement with respect to any
Shares; or (iii) take any action that would make any representation or warranty
of Stockholder contained herein untrue or incorrect or have the effect of
preventing or disabling Stockholder from performing any of Stockholder's
obligations under this Agreement. Notwithstanding anything to the contrary
provided in this Agreement, Stockholder shall have the right to transfer Shares
to (i) any Family Member, (ii) the trustee or trustees of a trust for the
benefit of Stockholder and/or one or more Family Members and/or charitable
organizations, (iii) a foundation created or established by Stockholder, (iv) a
corporation of which Stockholder and/or any Family Members owns the majority of
the outstanding capital stock, (v) a partnership of which Stockholder and/or
Family Members owns a majority of the partnership interests, (vi) a limited
liability company of which Stockholder and/or any Family Members owns a majority
of the membership interests, (vii) any other entity of which Stockholder and/or
any Family Members owns a majority of the ownership interests, (viii) the
executor, administrator or personal representative of the estate of Stockholder,
or (ix) any guardian, trustee or conservator appointed with respect to the
assets of Stockholder; provided that in the case of any such transfer, the
transferee shall, as a condition to such transfer, execute an agreement to be
bound by the terms of this Agreement, or terms substantially identical thereto.
"Family Member" shall have the meaning ascribed to "Related Parties" under
Section 672(c) of the Internal Revenue Code of 1986, as amended.
(d) Other Potential Acquirors. Stockholder shall immediately
cease any discussions or negotiations with any other persons with respect to any
Third Party Acquisition. Stockholder shall not, directly or indirectly,
encourage, solicit, participate in or initiate discussions or negotiations with
or provide any information to any person or group (other than Parent and
Acquisition or any designees of Parent and Acquisition) concerning any Third
Party Acquisition. The Stockholder shall promptly (and in any event within one
business day after becoming aware thereof) (i) notify Parent in the event the
Stockholder receives any proposal or inquiry concerning a Third Party
Acquisition, including the terms and conditions thereof and the identity of the
party submitting such proposal, and any request for confidential information in
4
<PAGE> 5
connection with a potential Third Party Acquisition, (ii) provide a copy of any
written agreements, proposals or other materials the Stockholder receives from
any such person or group (or its representatives), and (iii) advise Parent from
time to time of the status, at any time upon Parent's request, and promptly
following any developments concerning the same.
(e) Reliance by Parent and Acquisition. Stockholder understands
and acknowledges that Parent and Acquisition are entering into the Merger
Agreement in reliance upon Stockholder's execution and delivery of this
Agreement.
5. Stop Transfer. Stockholder agrees with, and covenants to, Parent and
Acquisition that Stockholder shall not request that the Company register the
transfer (book-entry or otherwise) of any certificate or uncertificated interest
representing any Shares, unless such transfer is made pursuant to this
Agreement. In the event of a stock dividend or distribution, or any change in
the Company Common Stock by reason of any stock dividend, split-up,
recapitalization, combination, exchange of shares or the like, the term "Shares"
shall be deemed to refer to and include the Shares as well as all such stock
dividends and distributions and any shares into which or for which any or all of
the Shares may be changed or exchanged.
6. Termination. The proxy granted pursuant to Section 2 hereof and,
except as otherwise provided herein, Stockholder's covenants and agreements
contained herein with respect to the Shares, shall terminate upon the earliest
to occur of: (a) the termination of the Merger Agreement in accordance with its
terms; (b) the Acceptance Date; and (c) July 31, 2000. Upon the termination of
this Agreement, this Agreement shall forthwith become null and void, and there
shall be no liability on the part of any party hereto, except (i) that the
provisions of this Section 6 and the provisions of Section 7 shall survive the
termination of this Agreement and (ii) nothing herein shall relieve any party
from liability for any intentional breach hereof.
7. Miscellaneous.
(a) Entire Agreement. This Agreement constitutes the entire
agreement between the parties with respect to the subject matter hereof and
supersedes all other prior agreements and understandings, both written and oral,
among the parties with respect to the subject matter hereof.
(b) Certain Events. Stockholder agrees that this Agreement and
the obligations hereunder shall attach to the Shares and shall be binding upon
any person to which legal or beneficial ownership of any Shares shall pass,
whether by operation of law or otherwise. Notwithstanding any transfer of
Shares, the transferor shall remain liable for the performance of all
obligations under this Agreement of the transferor.
(c) Assignment. This Agreement shall not be assigned by operation
of law or otherwise without the prior written consent of the other party;
provided, however, that Parent may, in its sole discretion, assign its rights
and obligations hereunder to any direct wholly-owned subsidiary of Parent;
provided further that such assignment shall not relieve Parent of its
obligations hereunder if such subsidiary shall fail to perform such obligations
in accordance with the terms of this Agreement.
5
<PAGE> 6
(d) Amendments, Waivers, Etc. This Agreement may not be amended,
changed, supplemented, waived or otherwise modified or terminated, except upon
the execution and delivery of a written agreement executed by the parties
hereto.
(e) Notices. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be given (and shall be
deemed to have been duly received if so given) by hand delivery, telecopy, or by
mail (registered or certified mail, postage prepaid, return receipt requested)
or by any nationally-recognized overnight courier service, such as Federal
Express, providing proof of delivery. Any such notice or communication shall be
deemed to have been delivered and received (i) in the case of hand delivery, on
the date of such delivery, (ii) in the case of telecopy, on the date sent if
confirmation of receipt is received and such notice is also promptly mailed by
registered or certified mail (return receipt requested), (iii) in the case of a
nationally-recognized overnight courier service, in circumstances under which
such courier guarantees next business day delivery, on the next business day
after the date when sent, and (iv) the case of mailing on the third business day
following that on which the piece of mail containing such communication is
posted. All communications hereunder shall be delivered to the respective
parties at the following addresses:
If to Stockholder: Davidi Gilo
20300 Stevens Creek Blvd.
Cupertino, CA 95014
with a copy to: Skadden, Arps, Slate, Meagher & Flom, LLP
525 University Ave., Suite 220
Palo Alto, CA 94301
Facsimile: (650) 470-4570
Attention: Kenton J. King, Esq.
If to Parent or Acquisition: Intel Corporation
2200 Mission College Boulevard
Santa Clara, California 95052
Telecopier: (408) 765-1859
Attention: General Counsel
and
6
<PAGE> 7
Intel Corporation
2200 Mission College Boulevard
Santa Clara, California 95052
Telecopier: (408) 765-6038
Attention: Treasurer
Gibson, Dunn & Crutcher LLP
with a copy to: One Montgomery Street
Telesis Tower
San Francisco, California 94104
Telephone: (415) 393-8200
Telecopier: (415) 986-5309
Attention: Kenneth R. Lamb, Esq.
or to such other address as the person to whom notice is given may have
previously furnished to the others in writing in the matter set forth above.
(f) Severability. Whenever possible, each provision of this
Agreement will be interpreted in such manner as to be effective and valid under
applicable law but if any provision of this Agreement is held to be invalid,
illegal or unenforceable in any respect under any applicable law or rule in any
jurisdiction, such invalidity, illegality or unenforceability will not affect
any other provision or portion of any provision in such jurisdiction, and this
Agreement will be reformed, construed and enforced in such jurisdiction as if
such invalid, illegal or unenforceable provision or portion of any provision had
never been contained herein.
(g) Specific Performance. Each of the parties hereto recognizes
and acknowledges that a breach by it of any covenants or agreements contained in
this Agreement will cause the other party to sustain damage for which it would
not have an adequate remedy at law for money damages, and therefore each of the
parties hereto agrees that in the event of any such breach the aggrieved party
shall be entitled to the remedy of specific performance of such covenants and
agreements and injunctive and other equitable relief in addition to any other
remedy to which it may be entitled, at law or in equity.
(h) No Waiver. The failure of any party hereto to exercise any
right, power or remedy provided under this Agreement or otherwise available in
respect hereof at law or in equity, or to insist upon compliance by any other
party hereto with its obligations hereunder, and any custom or practice of the
parties at variance with the terms hereof, shall not constitute a waiver by such
party of its right to exercise any such or other right, power or remedy or to
demand such compliance.
7
<PAGE> 8
(i) Governing Law. This Agreement shall be governed and construed
in accordance with the laws of the State of Delaware, without giving effect to
the principles of conflicts of law thereof.
(j) Counterparts. This Agreement may be executed in counterparts,
each of which shall be deemed to be an original, but all of which, taken
together, shall constitute one and the same Agreement.
(k) Obligations of Parent. Whenever this Agreement requires a
subsidiary of Parent to take any action, such requirement shall be deemed to
include an undertaking on the part of Parent to cause such subsidiary to take
such action.
(l) Limitations on Warranties. Except for the representations and
warranties contained in this Agreement, Stockholder makes no other express or
implied representation or warranty to Parent or Acquisition. Parent and
Acquisition acknowledge that, in entering into this Agreement, it has not relied
on any representations or warranties of the Stockholder other than the
representations and warranties of the Stockholder set forth in this Agreement.
(m) Stock Transfer Taxes. Acquisition will pay all stock transfer
taxes with respect to the transfer and sale of any Shares to it, Parent or any
affiliate thereof pursuant to this Agreement.
8
<PAGE> 9
IN WITNESS WHEREOF, each of the parties has caused this Agreement to be
duly executed on its behalf as of the day and year first above written.
INTEL CORPORATION,
a Delaware corporation
By: /s/ ARVIND SODHANI
-----------------------------------------
Name: Arvind Sodhani
Title: Treasurer
CWC ACQUISITION CORPORATION,
a Delaware corporation
By: /s/ SUZAN A. MILLER
-----------------------------------------
Name: Suzan A. Miller
Title: President
STOCKHOLDER:
By: /s/ DAVIDI GILO
-----------------------------------------
Name: Davidi Gilo
[SIGNATURE PAGE FOR INTEL/DSP COMMUNICATIONS STOCKHOLDER TENDER AND
VOTING AGREEMENT AND IRREVOCABLE PROXY]
<PAGE> 10
SCHEDULE 4(a)
Limitations, Qualifications or Restrictions on Ownership of Shares
1. 255,604 Shares are subject to the terms of an OTC Options Master Agreement
entered into between Harmony Management Inc. and Goldman Sachs International, as
counterparty, and any transfer or tender of such Shares will require the consent
of Goldman Sachs International.
2. 412,500 Shares are subject to the terms of an ISDA Master Agreement entered
into between the Gilo Family Trust and NationsBank, N.A., as counterparty, and
any transfer or tender of such Shares will require the consent of NationsBank,
N.A.
<PAGE> 1
Exhibit 5
TENDER AND VOTING AGREEMENT AND
IRREVOCABLE PROXY
THIS TENDER AND VOTING AGREEMENT AND IRREVOCABLE PROXY, dated as of
October 13, 1999 (this "Agreement"), is entered into by and between Intel
Corporation, a Delaware corporation ("Parent"), and CWC Acquisition Corporation,
a Delaware corporation and wholly-owned subsidiary of Parent ("Acquisition"), on
the one hand, and Joseph Perl ("Stockholder"), on the other hand.
W I T N E S S E T H:
WHEREAS, concurrently herewith, Parent, Acquisition, and DSP
Communications, Inc., a Delaware corporation (the "Company"), have entered into
an Agreement and Plan of Merger, of even date herewith (as such agreement may
hereafter be amended from time to time, the "Merger Agreement"; initially
capitalized and other terms used but not defined herein shall have the meanings
ascribed to them in the Merger Agreement), pursuant to which Acquisition will
make a tender offer (the "Offer") for all outstanding shares of common stock,
$.001 par value, of the Company ("Company Common Stock") and, after Acquisition
has accepted tendered shares for payment (the date on which such acceptance
occurs, the "Acceptance Date"), the Company and Acquisition will merge with the
Company as the surviving corporation and wholly-owned subsidiary of Parent (the
"Merger");
WHEREAS, Stockholder Beneficially Owns (as defined herein) all shares
of Company Common Stock (the "Shares"); and
WHEREAS, as an inducement and a condition to entering into the Merger
Agreement, Parent and Acquisition have requested that Stockholder agree, and
Stockholder has agreed, to enter into this Agreement;
NOW, THEREFORE, in consideration of the foregoing and the mutual
premises, representations, warranties, covenants and agreements contained
herein, the parties hereto hereby agree as follows:
1. Provisions Concerning Company Common Stock.
(a) Tender of Shares. Subject to obtaining the consents described
in Schedule 4(a), Stockholder hereby agrees with Parent and Acquisition that
Stockholder will, promptly after the date of commencement of the Offer (but in
all events not later than ten (10) business days thereafter), tender to
Acquisition all Shares Beneficially Owned by Stockholder on such date (the
"Tendered Shares"). Stockholder further agrees to tender to Acquisition promptly
after Stockholder's acquisition thereof (but in all events not later than ten
(10) business days thereafter) all other shares of Company Common Stock acquired
and Beneficially Owned by Stockholder at any time prior to the Acceptance Date
or the date on which the Offer is terminated
<PAGE> 2
or expires without Acquisition's having accepted shares for payment; all such
subsequently tendered Shares shall constitute "Tendered Shares" for all purposes
of this Agreement. Stockholder agrees not to withdraw any of the Tendered Shares
unless the Offer is terminated or has expired without Acquisition's having
accepted the Tendered Shares for payment. Stockholder acknowledges and agrees
that Acquisition's obligation to accept for payment and pay for the Tendered
Shares is subject to all the terms and conditions of the Offer.
(b) Voting Agreement. Stockholder hereby agrees with Parent and
Acquisition that, at any meeting of the Company's stockholders, however called,
or in connection with any written consent of the Company's stockholders,
Stockholder shall vote the Shares Beneficially Owned by Stockholder, whether
heretofore owned or hereafter acquired, (i) in favor of approval of the Merger
Agreement and any actions required in furtherance of the transactions
contemplated thereby, including without limitation voting such shares in favor
of the election to the Company Board of each person designated by Parent for
nomination thereto pursuant to Section 1.3(a) of the Merger Agreement at any
meeting of the Company's stockholders called for the election of directors; (ii)
against any action or agreement that would result in a breach in any respect of
any covenant, representation or warranty or any other obligation or agreement of
the Company under the Merger Agreement; and (iii) except as otherwise agreed to
in writing in advance by Parent, against: (A) any Third Party Acquisition, (B)
any change in a majority of the individuals who, as of the date hereof,
constitute the Board of Directors of the Company (other than as contemplated by
Section 1.3 of the Merger Agreement), (C) any extraordinary corporate
transaction, such as a merger, consolidation or other business combination
involving the Company or any of its subsidiaries and any Third Party, (D) a
sale, lease, transfer or disposition of any assets of the Company's or any of
its subsidiaries' business outside the ordinary course of business, or any
assets which are material to its business whether or not in the ordinary course
of business, or a reorganization, recapitalization, dissolution or liquidation
of the Company or any of its subsidiaries, (E) any change in the present
capitalization of the Company or any amendment of the Company's Certificate of
Incorporation or bylaws, (F) any other material change in the Company's
corporate structure or affecting its business, or (G) any other action which is
intended, or could reasonably be expected, to impede, interfere with, delay,
postpone or materially adversely affect the Offer, the Merger or any of the
other transactions contemplated by the Merger Agreement or the Stock Option
Agreement, or any of the transactions contemplated by this Agreement.
Stockholder shall not enter into any agreement or understanding with any person
the effect of which would be inconsistent or violative of the provisions and
agreements contained herein. For purposes of this Agreement, "Beneficially Own"
or "Beneficial Ownership" with respect to any securities shall mean
Stockholder's having such ownership, control or power to direct the voting with
respect to, or otherwise enables Stockholder to legally act with respect to,
such securities as contemplated hereby, including pursuant to any agreement,
arrangement or understanding, whether or not in writing. Securities Beneficially
Owned by Stockholder shall (i) include securities Beneficially Owned by all
other persons with whom Stockholder would constitute a "group" as within the
meaning of Section 13(d)(3) of the Exchange Act of 1934, as amended (the
"Exchange Act") and (ii) exclude, until their issuance, any Shares issuable upon
exercise of options held by Stockholder. Stockholder and Parent acknowledge and
agree that nothing in this subsection (b) shall require or be construed to
require
2
<PAGE> 3
Stockholder to take, or not to take, any action in his capacity as a member of
the Company Board.
2. Irrevocable Proxy.
(a) Stockholder hereby constitutes and appoints Acquisition,
which shall act by and through Suzan A. Miller and Guy S. Anthony (each, a
"Proxy Holder"), or either of them, with full power of substitution, its true
and lawful proxy and attorney-in-fact to vote at any meeting (and any
adjournment or postponement thereof) of the Company's stockholders called for
purposes of considering whether to approve the Merger Agreement, the Merger or
any of the other transactions contemplated by the Merger Agreement, or any Third
Party Acquisition, or to execute a written consent of stockholders in lieu of
any such meeting, all Shares Beneficially Owned by Stockholder as of the date of
such meeting or written consent in favor of the approval of the Merger
Agreement, the Merger and the other transactions contemplated by the Merger
Agreement, with such modifications to the Merger Agreement as the parties
thereto may make, or against a Third Party Acquisition, as the case may be. Such
proxy shall be limited strictly to the power to vote the Shares in the manner
set forth in the preceding sentence and shall not extend to any other matters.
(b) The proxy and power of attorney granted herein shall be
irrevocable during the term of this Agreement, shall be deemed to be coupled
with an interest sufficient in law to support an irrevocable proxy and shall
revoke all prior proxies granted by Stockholder. Stockholder shall not grant any
proxy to any person which conflicts with the proxy granted herein, and any
attempt to do so shall be void. The power of attorney granted herein is a
durable power of attorney and shall survive the death or incapacity of
Stockholder.
(c) If Stockholder fails for any reason to vote his, hers or its
Shares in accordance with the requirements of Section 1(b) hereof, then the
Proxy Holder shall have the right to vote the Shares at any meeting of the
Company's stockholders and in any action by written consent of the Company's
stockholders in accordance with the provisions of this Section 2. The vote of
the Proxy Holder shall control in any conflict between his vote of such Shares
and a vote by Stockholder of such Shares.
3. Director Matters Excluded. Parent and Acquisition acknowledge and
agree that no provision of this Agreement shall limit or otherwise restrict
Stockholder with respect to any act or omission that Stockholder may undertake
or authorize in his capacity as a director of the Company, including, without
limitation, any vote that Stockholder may make as a director of the Company with
respect to any matter presented to the Board of Directors of the Company.
4. Other Covenants, Representations and Warranties. Stockholder hereby
represents and warrants to Parent and Acquisition as follows:
(a) Ownership of Shares. Stockholder is the Beneficial Owner of
all the Shares. On the date hereof, the Shares constitute all of the Shares
Beneficially Owned by Stockholder. Stockholder has voting power with respect to
the matters set forth in Section 1(b)
3
<PAGE> 4
hereof with respect to all of the Shares, with no limitations,
qualifications or restrictions on such rights other than as set forth on
Schedule 4(a) hereto.
(b) Power; Binding Agreement. Stockholder has the legal capacity,
power and authority to enter into and perform all of its obligations under this
Agreement. The execution, delivery and performance of this Agreement by
Stockholder will not violate any agreement or any court order to which
Stockholder is a party or is subject including, without limitation, any voting
agreement or voting trust. This Agreement has been duly and validly executed and
delivered by Stockholder.
(c) Restriction on Transfer, Proxies and Non-Interference. Except
as expressly contemplated by this Agreement, Stockholder shall not, directly or
indirectly: (i) except as expressly contemplated by this Agreement, offer for
sale, sell, transfer, tender, pledge, encumber, assign or otherwise dispose of,
or enter into any contract, option or other arrangement or understanding with
respect to or consent to the offer for sale, sale, transfer, tender, pledge,
encumbrance, assignment or other disposition of, any or all of the Shares or any
interest therein; (ii) grant any proxies or powers of attorney or deposit any
Shares into a voting trust or enter into a voting agreement with respect to any
Shares; or (iii) take any action that would make any representation or warranty
of Stockholder contained herein untrue or incorrect or have the effect of
preventing or disabling Stockholder from performing any of Stockholder's
obligations under this Agreement. Notwithstanding anything to the contrary
provided in this Agreement, Stockholder shall have the right to transfer Shares
to (i) any Family Member, (ii) the trustee or trustees of a trust for the
benefit of Stockholder and/or one or more Family Members and/or charitable
organizations, (iii) a foundation created or established by Stockholder, (iv) a
corporation of which Stockholder and/or any Family Members owns the majority of
the outstanding capital stock, (v) a partnership of which Stockholder and/or
Family Members owns a majority of the partnership interests, (vi) a limited
liability company of which Stockholder and/or any Family Members owns a majority
of the membership interests, (vii) any other entity of which Stockholder and/or
any Family Members owns a majority of the ownership interests, (viii) the
executor, administrator or personal representative of the estate of Stockholder,
or (ix) any guardian, trustee or conservator appointed with respect to the
assets of Stockholder; provided that in the case of any such transfer, the
transferee shall, as a condition to such transfer, execute an agreement to be
bound by the terms of this Agreement, or terms substantially identical thereto.
"Family Member" shall have the meaning ascribed to "Related Parties" under
Section 672(c) of the Internal Revenue Code of 1986, as amended.
(d) Other Potential Acquirors. Stockholder shall immediately
cease any discussions or negotiations with any other persons with respect to any
Third Party Acquisition. Stockholder shall not, directly or indirectly,
encourage, solicit, participate in or initiate discussions or negotiations with
or provide any information to any person or group (other than Parent and
Acquisition or any designees of Parent and Acquisition) concerning any Third
Party Acquisition. The Stockholder shall promptly (and in any event within one
business day after becoming aware thereof) (i) notify Parent in the event the
Stockholder receives any proposal or inquiry concerning a Third Party
Acquisition, including the terms and conditions thereof and the identity of the
party submitting such proposal, and any request for confidential information in
4
<PAGE> 5
connection with a potential Third Party Acquisition, (ii) provide a copy of any
written agreements, proposals or other materials the Stockholder receives from
any such person or group (or its representatives), and (iii) advise Parent from
time to time of the status, at any time upon Parent's request, and promptly
following any developments concerning the same.
(e) Reliance by Parent and Acquisition. Stockholder understands
and acknowledges that Parent and Acquisition are entering into the Merger
Agreement in reliance upon Stockholder's execution and delivery of this
Agreement.
5. Stop Transfer. Stockholder agrees with, and covenants to, Parent and
Acquisition that Stockholder shall not request that the Company register the
transfer (book-entry or otherwise) of any certificate or uncertificated interest
representing any Shares, unless such transfer is made pursuant to this
Agreement. In the event of a stock dividend or distribution, or any change in
the Company Common Stock by reason of any stock dividend, split-up,
recapitalization, combination, exchange of shares or the like, the term "Shares"
shall be deemed to refer to and include the Shares as well as all such stock
dividends and distributions and any shares into which or for which any or all of
the Shares may be changed or exchanged.
6. Termination. The proxy granted pursuant to Section 2 hereof and,
except as otherwise provided herein, Stockholder's covenants and agreements
contained herein with respect to the Shares, shall terminate upon the earliest
to occur of: (a) the termination of the Merger Agreement in accordance with its
terms; (b) the Acceptance Date; and (c) July 31, 2000. Upon the termination of
this Agreement, this Agreement shall forthwith become null and void, and there
shall be no liability on the part of any party hereto, except (i) that the
provisions of this Section 6 and the provisions of Section 7 shall survive the
termination of this Agreement and (ii) nothing herein shall relieve any party
from liability for any intentional breach hereof.
7. Miscellaneous.
(a) Entire Agreement. This Agreement constitutes the entire
agreement between the parties with respect to the subject matter hereof and
supersedes all other prior agreements and understandings, both written and oral,
among the parties with respect to the subject matter hereof.
(b) Certain Events. Stockholder agrees that this Agreement and
the obligations hereunder shall attach to the Shares and shall be binding upon
any person to which legal or beneficial ownership of any Shares shall pass,
whether by operation of law or otherwise. Notwithstanding any transfer of
Shares, the transferor shall remain liable for the performance of all
obligations under this Agreement of the transferor.
(c) Assignment. This Agreement shall not be assigned by operation
of law or otherwise without the prior written consent of the other party;
provided, however, that Parent may, in its sole discretion, assign its rights
and obligations hereunder to any direct wholly-owned subsidiary of Parent;
provided further that such assignment shall not relieve Parent of its
obligations hereunder if such subsidiary shall fail to perform such obligations
in accordance with the terms of this Agreement.
5
<PAGE> 6
(d) Amendments, Waivers, Etc. This Agreement may not be amended,
changed, supplemented, waived or otherwise modified or terminated, except upon
the execution and delivery of a written agreement executed by the parties
hereto.
(e) Notices. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be given (and shall be
deemed to have been duly received if so given) by hand delivery, telecopy, or by
mail (registered or certified mail, postage prepaid, return receipt requested)
or by any nationally-recognized overnight courier service, such as Federal
Express, providing proof of delivery. Any such notice or communication shall be
deemed to have been delivered and received (i) in the case of hand delivery, on
the date of such delivery, (ii) in the case of telecopy, on the date sent if
confirmation of receipt is received and such notice is also promptly mailed by
registered or certified mail (return receipt requested), (iii) in the case of a
nationally-recognized overnight courier service, in circumstances under which
such courier guarantees next business day delivery, on the next business day
after the date when sent, and (iv) the case of mailing on the third business day
following that on which the piece of mail containing such communication is
posted. All communications hereunder shall be delivered to the respective
parties at the following addresses:
If to Stockholder: Joseph Perl
27644 Natoma Rd
----------------------------
Los Altos Hills, CA 94022
----------------------------
Telephone: 650-559-9857
----------------
Facsimile: 650-559-9121
----------------
Attention:
----------------
with a copy to: Skadden, Arps, Slate, Meagher & Flom, LLP
525 University Ave., Suite 220
Palo Alto, CA 94301
Facsimile: (650) 470-4570
Attention: Kenton J. King, Esq.
If to Parent or Acquisition: Intel Corporation
2200 Mission College Boulevard
Santa Clara, California 95052
Telecopier: (408) 765-1859
Attention: General Counsel
and
6
<PAGE> 7
Intel Corporation
2200 Mission College Boulevard
Santa Clara, California 95052
Telecopier: (408) 765-6038
Attention: Treasurer
Gibson, Dunn & Crutcher LLP
with a copy to: One Montgomery Street
Telesis Tower
San Francisco, California 94104
Telephone: (415) 393-8200
Telecopier: (415) 986-5309
Attention: Kenneth R. Lamb, Esq.
or to such other address as the person to whom notice is given may have
previously furnished to the others in writing in the matter set forth above.
(f) Severability. Whenever possible, each provision of this
Agreement will be interpreted in such manner as to be effective and valid under
applicable law but if any provision of this Agreement is held to be invalid,
illegal or unenforceable in any respect under any applicable law or rule in any
jurisdiction, such invalidity, illegality or unenforceability will not affect
any other provision or portion of any provision in such jurisdiction, and this
Agreement will be reformed, construed and enforced in such jurisdiction as if
such invalid, illegal or unenforceable provision or portion of any provision had
never been contained herein.
(g) Specific Performance. Each of the parties hereto recognizes
and acknowledges that a breach by it of any covenants or agreements contained in
this Agreement will cause the other party to sustain damage for which it would
not have an adequate remedy at law for money damages, and therefore each of the
parties hereto agrees that in the event of any such breach the aggrieved party
shall be entitled to the remedy of specific performance of such covenants and
agreements and injunctive and other equitable relief in addition to any other
remedy to which it may be entitled, at law or in equity.
(h) No Waiver. The failure of any party hereto to exercise any
right, power or remedy provided under this Agreement or otherwise available in
respect hereof at law or in equity, or to insist upon compliance by any other
party hereto with its obligations hereunder, and any custom or practice of the
parties at variance with the terms hereof, shall not constitute a waiver by such
party of its right to exercise any such or other right, power or remedy or to
demand such compliance.
7
<PAGE> 8
(i) Governing Law. This Agreement shall be governed and construed
in accordance with the laws of the State of Delaware, without giving effect to
the principles of conflicts of law thereof.
(j) Counterparts. This Agreement may be executed in counterparts,
each of which shall be deemed to be an original, but all of which, taken
together, shall constitute one and the same Agreement.
(k) Obligations of Parent. Whenever this Agreement requires a
subsidiary of Parent to take any action, such requirement shall be deemed to
include an undertaking on the part of Parent to cause such subsidiary to take
such action.
(l) Limitations on Warranties. Except for the representations and
warranties contained in this Agreement, Stockholder makes no other express or
implied representation or warranty to Parent or Acquisition. Parent and
Acquisition acknowledge that, in entering into this Agreement, it has not relied
on any representations or warranties of the Stockholder other than the
representations and warranties of the Stockholder set forth in this Agreement.
(m) Stock Transfer Taxes. Acquisition will pay all stock transfer
taxes with respect to the transfer and sale of any Shares to it, Parent or any
affiliate thereof pursuant to this Agreement.
8
<PAGE> 9
IN WITNESS WHEREOF, each of the parties has caused this Agreement to be
duly executed on its behalf as of the day and year first above written.
INTEL CORPORATION,
a Delaware corporation
By: /s/ ARVIND SODHANI
---------------------------------------------
Name: Arvind Sodhani
Title: Treasurer
CWC ACQUISITION CORPORATION,
a Delaware corporation
By: /s/ SUZAN A. MILLER
---------------------------------------------
Name: Suzan A. Miller
Title: President
STOCKHOLDER:
By: /s/ JOSEPH PERL
---------------------------------------------
Name: Joseph Perl
[SIGNATURE PAGE FOR INTEL/DSP COMMUNICATIONS STOCKHOLDER TENDER AND
VOTING AGREEMENT AND IRREVOCABLE PROXY]
<PAGE> 10
SCHEDULE 4(A)
Limitations, Qualifications or Restrictions on Ownership of Shares
None
<PAGE> 1
EXHIBIT 6
[DSPC LOGO]
October 20, 1999
To the Stockholders of DSP Communications, Inc.
We are pleased to inform you that, on October 13, 1999, DSP Communications,
Inc. (the "Company") entered into an Agreement and Plan of Merger (the "Merger
Agreement") with Intel Corporation ("Parent") and CWC Acquisition Corporation,
Parent's direct, wholly owned subsidiary ("Purchaser"), pursuant to which
Purchaser has today commenced a tender offer (the "Offer") to purchase all of
the outstanding shares of common stock, par value $.001 per share (the
"Shares"), of the Company for $36.00 per Share in cash. Under the Merger
Agreement and subject to the terms thereof, following the Offer, Purchaser will
be merged with and into the Company (the "Merger") and all Shares not purchased
in the Offer (other than Shares held by Parent, Purchaser or the Company, or
Shares held by dissenting stockholders) will be converted into the right to
receive $36.00 per Share in cash.
YOUR BOARD OF DIRECTORS HAS (I) DETERMINED THAT THE OFFER AND THE MERGER
ARE FAIR TO AND IN THE BEST INTERESTS OF THE COMPANY'S STOCKHOLDERS AND (II)
APPROVED THE MERGER AGREEMENT AND THE TRANSACTIONS CONTEMPLATED THEREBY,
INCLUDING THE OFFER AND THE MERGER. THE BOARD RECOMMENDS THAT THE COMPANY'S
STOCKHOLDERS ACCEPT THE OFFER AND TENDER THEIR SHARES PURSUANT TO THE OFFER.
In arriving at its recommendation, the Board of Directors gave careful
consideration to a number of factors described in the attached Schedule 14D-9
that is being filed today with the Securities and Exchange Commission,
including, among other things, the opinion, dated October 13, 1999, of Merrill
Lynch & Co., the Company's financial advisor, to the effect that, as of such
date, the proposed cash consideration to be received by holders of the Shares
(other than Parent and its affiliates) pursuant to the Offer and the Merger was
fair to such holders from a financial point of view.
In addition to the attached Schedule 14D-9 relating to the Offer, also
enclosed is the Offer to Purchase, dated October 20, 1999, of Purchaser,
together with related materials, including a Letter of Transmittal to be used
for tendering your Shares. These documents set forth the terms and conditions of
the Offer and the Merger and provide instructions as to how to tender your
Shares. We urge you to read the enclosed materials carefully.
Sincerely,
/s/ DAVIDI GILO
Davidi Gilo
Chairman of the Board, President and
Chief Executive Officer
DSP COMMUNICATIONS, INC.
20300 Stevens Creek Blvd., Cupertino, California 95014 Tel.(408) 777-2700
Fax.(408) 777-2770 Internet: www.dspc.com
<PAGE> 1
EXHIBIT 7
Board of Directors
DSP Communications, Inc.
October 13, 1999
Page 1
October 13, 1999
Board of Directors
DSP Communications, Inc.
20300 Stevens Creek Boulevard
Cupertino, California 95014
Members of the Board of Directors:
DSP Communications, Inc. (the "Company"), Intel Corporation (the
"Acquiror") and CWC Acquisition Corporation, a wholly owned subsidiary of the
Acquiror (the "Acquisition Sub"), propose to enter into an Agreement and Plan of
Merger dated as of October 13, 1999 (the "Agreement") pursuant to which
Acquisition Sub will conduct a tender offer (the "Offer") for any and all
outstanding shares of the Company's common stock, par value $0.001 per share
(the "Shares"), at $36 per Share, net to the seller in cash. The Agreement also
provides that, following consummation of the Offer, Acquisition Sub will be
merged with the Company in a transaction (the "Merger") in which each
outstanding Share which is not acquired in the Offer (other than dissenting
shares, treasury shares, Shares held by any of the Company's subsidiaries, and
Shares held by Acquiror, Acquisition Sub or any other subsidiary of Acquiror)
will be converted into the right to receive $36 in cash. In connection with the
Offer and the Merger, the parties also propose to enter into an agreement (the
"Option Agreement") pursuant to which the Company will grant to the Acquiror an
option to acquire a number of newly issued Shares equal to approximately 19.9%
of the total Shares outstanding as of the date of the Agreement.
You have asked us whether, in our opinion, the proposed cash
consideration to be received by the holders of the Shares, other than the
Acquiror and its affiliates, in the Offer and the Merger is fair to such
stockholders from a financial point of view.
In arriving at the opinion set forth below, we have, among other
things:
(1) reviewed the Company's Annual Reports, Forms 10-K and related
financial information for the four fiscal years ended December
31, 1998 and the Company's Forms 10-Q and the related unaudited
financial information for the quarterly periods ending March 31,
1999 and June 30, 1999;
<PAGE> 2
Board of Directors
DSP Communications, Inc.
October 13, 1999
Page 2
(2) reviewed certain information, including financial forecasts,
relating to the business, earnings, cash flow, assets and
prospects of the Company, furnished to us by the Company;
(3) conducted discussions with members of senior management of the
Company concerning its businesses and prospects;
(4) reviewed the historical market prices and trading activity for
the Shares and compared them with the historical market prices
and trading activity of certain publicly traded companies which
we deemed to be reasonably similar to the Company;
(5) compared the results of operations of the Company with the
results of operations of certain companies which we deemed to be
reasonably similar to the Company;
(6) compared the proposed financial terms of the transactions
contemplated by the Agreement with the financial terms of
certain other mergers and acquisitions which we deemed to be
relevant;
(7) reviewed a draft of the Agreement, received on October 13, 1999;
(8) reviewed a draft of the Option Agreement, received on October
13, 1999; and
(9) reviewed such other financial studies and analyses and performed
such other investigations and took into account such other
matters as we deemed necessary, including equity analysts'
forecasts with respect to the Company's future performance and
our assessment of general economic, market and monetary
conditions.
In preparing our opinion, we have relied on the accuracy and
completeness of all information supplied or otherwise made available to us by
the Company, and we have not independently verified such information or
undertaken an independent appraisal of the assets of the Company. With respect
to the financial forecasts furnished by the Company, we have assumed that they
have been reasonably prepared and reflect the best currently available estimates
and judgment of the Company's management as to the expected future financial
performance of the Company. We have also assumed that the final forms of the
Agreement and the Option Agreement will be substantially similar to the last
drafts reviewed by us. Our opinion is necessarily based upon market, economic
and other conditions as they exist and can be evaluated on, and on the
information made available to us as of, the date hereof.
We are acting as financial advisor to the Company in connection with
the transactions contemplated by the Agreement and will receive from the Company
for our services (i) a fee payable upon the earlier of public announcement of
the Offer or execution of a definitive agreement with respect to the Offer and
(ii) an additional fee contingent upon completion of the Offer. In addition, the
Company has agreed to indemnify us for certain liabilities arising out of our
engagement. We have, in the past, provided financial advisory and financing
services to the Company and financial advisory
<PAGE> 3
Board of Directors
DSP Communications, Inc.
October 13, 1999
Page 3
services to the Company's current chairman and chief executive officer and have
received fees for the rendering of such services. In addition, in the ordinary
course of our business we may actively trade Shares and other securities of the
Company and securities of the Acquiror for our own account and for the accounts
of customers and, accordingly, may at any time hold a long or short position in
securities of the Company and Acquiror. We also issue research reports on both
the Company and Acquiror and from time to time present potential transactions
to, and solicit engagements from, the Company and Acquiror.
This opinion is for the use and benefit of the Board of Directors of
the Company. Our opinion does not address the merits of the underlying decision
by the Company to engage in the transactions contemplated by the Agreement and
does not constitute a recommendation to any holder of Shares as to whether to
tender such Shares in the Offer or as to how such holder should vote on the
Merger or any matter related thereto.
On the basis of, and subject to the foregoing, we are of the opinion
that, as of the date hereof, the proposed cash consideration to be received by
the holders of the Shares, other than the Acquiror and its affiliates, pursuant
to the Offer and the Merger is fair to such stockholders from a financial point
of view.
Very truly yours,
MERRILL LYNCH, PIERCE, FENNER &
SMITH INCORPORATED
By /s/ Emiko Higashi
-------------------------------
Managing Director
Investment Banking Group
<PAGE> 1
Exhibit 8
INTEL TO ACQUIRE DSP COMMUNICATIONS, INC. FOR APPROXIMATELY
$1.6 BILLION IN CASH
ACQUISITION POSITIONS INTEL FOR GROWTH IN CELLULAR
COMMUNICATIONS AND FOR INTERNET CLIENTS
NOTE: Intel and DSP Communications executives will host a teleconference to
discuss the details of this agreement and answer questions today at noon EDT, 9
a.m. PDT. Press and analysts who are interested in hearing about this
announcement may join the teleconference by dialing (719) 457-2657. A full
recording of the briefing can be accessed through October 21 by dialing (719)
457-0820 with confirmation number 804032.
SANTA CLARA, Calif., Oct. 14, 1999 - Intel Corporation and DSP Communications,
Inc. (NSYE: DSP) today announced the companies have entered into a definitive
agreement under which Intel would acquire DSP Communications, Inc (DSPC) for $36
a share in an all-cash tender offer valued at approximately $1.6 billion.
DSPC is a leading supplier of solutions for digital cellular
communications products. DSPC products enable new generations of feature-rich,
compact, light weight wireless handsets by providing a complete solution,
including chipsets, reference design, software and other key technologies.
This acquisition is an important element of Intel's plan to become the
leading building block supplier to the Internet. In recent years, cellular
telephone adoption has exploded on a worldwide basis. Cellular voice and data
applications are growing at a rapid pace and emerging cellular broadband data
communications networks can enable new Internet applications. In addition,
cellular communication is expected to be integrated into new types of Internet
clients, such as handheld devices and mobile computers, which will include
voice, data and Internet access.
"DSPC brings tremendous experience in cellular digital and voice
technologies which, when combined with Intel's data and Internet expertise,
will provide a more complete solution to the broad cellular market segment,"
said Craig Barrett, president and chief executive officer of Intel. "Cellular
technology is emerging as a new high-speed method of connecting to the Internet
and we believe over time will become increasingly important for connecting PCs
to the Internet."
<PAGE> 2
"Combining DSPC's cellular expertise with Intel's semiconductor and
data capabilities will create a leading provider of cellular voice products, as
well as establish voice and data solutions for the future," said Davidi Gilo,
chairman and chief executive officer of DSPC. "The industry needs suppliers that
can deliver solutions such as chipset, design and software to meet customers'
cellular technology needs."
DSPC's cellular technology solutions allow cellular handset
manufacturers to build better devices with superior performance, high
integration and the smallest form factors while significantly reducing power
consumption, time-to-market and overall system cost. DSPC provides expertise in
digital cellular technologies for personal digital cellular (PDC), time division
multiple access (TDMA), code division multiple access (CDMA) and
third-generation (3G) standards.
Under the agreement, DSPC would become a wholly owned subsidiary of
Intel reporting within Intel's Computing Enhancement Group. DSPC employees will
continue as employees of the new subsidiary. The companies do not anticipate any
immediate changes to their respective product lines and DSPC intends to continue
delivering products to customers under existing agreements, as well as maintain
its existing manufacturing relationships.
The agreement provides for a cash tender offer to acquire all of the
outstanding shares of DSPC common stock at $36 per share, which will commence
by Intel within five business days. The Board of Directors of DSPC has approved
the definitive agreement and has recommended that DSPC stockholders tender their
shares pursuant to the offer. Intel's obligations to accept shares tendered in
the offer will be conditional upon the tender of a majority of outstanding DSPC
shares on a fully-diluted basis, regulatory approvals and other customary
conditions. The current and former chief executive officers of DSPC have agreed
to tender their shares in the offer. It is expected that all shares not
purchased in the tender offer will be converted into the right to receive $36
per share in a second-step merger following the tender offer.
Headquartered in Silicon Valley, DSPC is a leading independent
developer and supplier of form-fit reference designs, chipsets and software to
mobile phone manufacturers. DSPC develops, markets, licenses, and sells
application specific integrated circuits (ASICs) based on digital signal
processing (DSP) technology, software stacks, and reference design development
kits for advanced wireless voice and data communications applications. DSPC
wireless technology products support leading global standards for CDMA, TDMA,
and PDC, and will also support emerging third generation (3G) standards such as
Wideband CDMA and cdma2000. The company's customers include Cadence, Denso,
Kenwood, Kyocera, Kokusai,
2
<PAGE> 3
Lucent Technologies, Motorola, NEC, Philips, Pioneer, SANYO, Sharp, and SK
Teletech. DSPC maintains a presence worldwide with offices in the United States,
Japan, Israel, and Canada. DSPC stock is traded on the New York Stock Exchange
under the symbol DSP. For more information, please visit http://www.dspc.com.
Intel, the world's largest chip maker, is also a leading manufacturer
of computer, networking and communications products. Additional information
about Intel is available at www.intel.com/pressroom.
This release contains forward-looking statements based on current
expectations or beliefs, as well as a number of assumptions about future events,
and these statements are subject to factors and uncertainties that could cause
actual results to differ materially from those described in the for ward-looking
statements. The reader is cautioned not to put undue reliance on these
forward-looking statements, which are not a guarantee of future performance and
are subject to a number of uncertain ties and other factors, many of which are
outside the control of Intel and DSPC. The forward-looking statements in this
release address a variety of subjects including, for example, the expected date
of closing of the acquisition and the potential benefits of the merger. The
following factors, among others, could cause actual results to differ materially
from those described in these forward-looking statements: the risk that DSPC's
business will not be successfully integrated with Intel's business; costs
associated with the merger; the successful completion of the tender; the
inability to obtain the approval of DSPC's stockholders; matters arising in
connection with the parties' efforts to comply with applicable regulatory
requirements relating to the transaction; risks associated with entering into
new market segments; and increased competition and technological changes in the
industries in which Intel and DSPC compete.
For a detailed discussion of these and other cautionary statements,
please refer to Intel's and DSPC's filings with the Securities and Exchange
Commission, including their respective Annual Reports on Form 10-K for the year
ended Dec. 26, 1998, for Intel, and Dec. 31, 1998, for DSPC and their respective
Quarterly Reports on Form 10-Q for the quarter ended March 27, 1999, for Intel
and the quarter ended March 31, 1999, for DSPC.
3
<PAGE> 1
Exhibit 9
CONFIDENTIAL
COVENANT NOT TO COMPETE
THIS COVENANT NOT TO COMPETE (this "Covenant") is made and entered into
as of the 13th day of October, 1999 by and between (i) Intel Corporation, a
Delaware corporation ("Parent"), and (ii) Davidi Gilo (the "Securityholder"), an
individual residing in __________ and a shareholder and/or option holder of DSP
Communications, Inc., a Delaware corporation (the "Company"), with respect to
the following:
RECITALS
The following provisions are made a part of and form the basis for this
Covenant:
A. Concurrently herewith, the Company is being acquired by Parent in
exchange for the consideration set forth in, and in accordance with the other
terms and conditions of, that certain Agreement and Plan of Merger dated as of
October 13, 1999 by and among Parent, CWC Acquisition Subsidiary, a Delaware
Corporation and a wholly owned subsidiary of Parent ("Acquisition") and the
Company (the "Agreement").
B. An important factor in Parent's decision to enter into the Agreement
is the Securityholder's covenant not to be involved, for a specified period of
time, in any business that competes with the business conducted by the Company.
But for the Securityholder's agreement to execute this Covenant, Parent would
not have entered into the Agreement or the related transactions.
AGREEMENT
NOW, THEREFORE, in consideration of the premises, the covenants,
conditions, representations, and agreements contained herein and in the
Agreement, the consummation by Parent of the transactions contemplated by the
Agreement and other good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, the Securityholder covenants and agrees with
Parent as follows:
1. Non-Competition
A. Subject to the terms of the Covenant, the Securityholder
agrees that, for a period commencing on the date hereof and continuing for a
period of twenty-four (24) months from the date hereof (the "Covenant Period"),
the Securityholder shall not directly or indirectly (whether for compensation or
otherwise) own, manage, operate or control, or join or participate in the
ownership, management, operation or control of, or furnish any capital to or be
connected in any manner with, any Competing Business (as hereinafter defined)
that is located in or doing business in the Designated Regions (as hereinafter
defined), either as a general or limited partner, proprietor, common or
preferred shareholder, officer, director, agent, employee, consultant, trustee,
affiliate, or otherwise. Nothing contained in this Covenant shall be construed
to prohibit the Securityholder from (i) purchasing or owning, as a passive
investment, up to four percent (4%) of the issued and outstanding shares of any
publicly traded class of securities of any
<PAGE> 2
corporation engaged in a Competing Business, provided that the Securityholder
does not render any advice of any kind to the management of such corporation or
actively participate in or control, directly or indirectly, any activities of
such corporation or otherwise participate in its business or operations, (ii)
acting as a passive investor of less than 40% of the total assets in any company
through a blind-pool or independently managed investment vehicle such as a
venture capital partnership; or (iii) publishing articles or other writings or
public speaking concerning the Company or its business (so long as not in
violation of any nondisclosure or other commitments to the Company and such
communications are not intended to nor would likely injure the interest of the
Company) or other businesses (whether or not similar to or competitive with the
Company's).
B. During the Covenant Period, the Securityholder without express
prior written approval of Parent, will not (i) solicit any customers of the
Company for or on behalf of any Competing Business or (ii) persuade or attempt
to persuade any customer, supplier, contractor or any other person or party to
cease doing business with the Company or to reduce the amount of business it
does with the Company.
C. During the Covenant Period, the Securityholder will not
knowingly solicit or induce any person who is an employee of the Company to
terminate any relationship such person may have with the Company nor shall the
Securityholder during such period directly or indirectly offer employment to or
compensate or cause any person with which the Securityholder may be affiliated
to offer employment to or compensate, any employee of the Company, or any person
who had been employed by the Company within sixty (60) days of such offer or
compensation (except Messrs. Aber and Pezzola). Notwithstanding the foregoing
however, the Securityholder shall not be precluded from offering employment to
or compensating in any way, persons terminated by the Company with or without
cause. The Securityholder hereby represents and warrants that the Securityholder
has not entered into any agreement, understanding or arrangement with any
employee of the Company pertaining to any business in which the Securityholder
has participated or plans to participate, or to the employment, engagement or
compensation of any such employee.
2. Competing Business Defined. For purposes of this Agreement,
"Competing Business" has the following definition: Any business which consults,
designs, develops, manufactures, sells and or distributes any hardware and/or
software elements used in (i) chipsets for cellular and/or wireless applications
that utilize PDC, GSM, CDMA, TDMA and/or 3G technologies extending such
standards for such applications, (ii) cellular and/or wireless phone handsets
for cellular and/or wireless applications or (iii) cellular and/or wireless base
stations or infrastructure for cellular or other applications using CDMA
technology ("Hardware and/or Software Elements"). The Hardware and/or Software
Elements include, but are not limited to applicable DSPs, processors (including
but not limited to ARM), baseband, analog mixed signal and/or RF, or any
combination thereof).
3. Designated Regions Defined; Related Acknowledgments. For purposes of
this Covenant, "Designated Regions" shall mean all counties, cities, states and
countries throughout the world in which the Company consults, designs, develops,
manufactures, sells and or
2
<PAGE> 3
distributes any Hardware and/or Software Elements. The Securityholder hereby
acknowledges and agrees that the Company is conducting business in various
places throughout the world, and that any Competing Business throughout the
world in such places shall be competitive with the Company's business. The
Securityholder also expressly agrees that, should a court of competent
jurisdiction determine that the Designated Regions are broader than may be
permitted under applicable law, such court shall nevertheless enforce this
Covenant in the broadest geographical areas permitted by such applicable law as
provided under Section 9 of this Covenant.
4. Additional Consideration. In consideration of Securityholder's
agreements in Paragraphs 1, 2 and 3, Parent shall make a payment of Five Million
Dollars ($5,000,000) within 30 days following the date that Intel and CWC
Acquisition Corp. accept shares for purchase in the offer pursuant to the
Agreement but in no event prior to January 1, 2000.
5. Further Payments. If any portion of any payments or benefits received
by the Securityholder, whether payable pursuant to the terms of this Agreement
or any other plan, agreement or arrangement with DSP, shall be subject to tax
imposed by Section 4999 of the Internal Revenue Code of 1986, as amended by any
successor statutory provision, Parent shall promptly pay to Securityholder such
additional amounts as are necessary so that, after taking into account any tax
imposed by such Section 4999 (or any successor statutory provision), and any
federal, state and local income and employment taxes and excise tax payable on
any such additional amounts, Securityholder is in the same after tax position he
would have been if such Section 4999 (or any successor statutory provision) did
not apply to payments or benefits so received by Security holder.
6. Equitable Remedies. The Securityholder hereby acknowledges and agrees
that the obligations under this Covenant are such that Parent cannot adequately
be compensated by damages for breach of such obligations. As a result, the
Securityholder hereby acknowledges and agrees that, in the event of any breach
or threatened breach of this Covenant, Parent shall be entitled not only to
damages or other relief at law, but also to seek equitable relief to enforce the
breached obligations, including, without limitation, preliminary and permanent
injunctive relief (including temporary restraining orders).
7. Binding Agreement. This Covenant and all its terms, provisions, and
conditions shall be binding upon and inure to the benefit of each party to the
Covenant and his or its respective successors and permitted assigns, it being
agreed that only an express written amendment, termination or waiver of this
Covenant by Parent can relieve the Securityholder of his personal obligations
hereunder.
8. Cost and Expenses. If either party to this Covenant brings an action
against the other party to this Covenant to enforce his or its rights under this
Covenant, or for a determination thereof, the prevailing party shall be entitled
to recover his or its reasonable costs and expenses, including, without
limitation, reasonable attorneys' fees and costs, incurred in connection with
such action, including any appeal of such action.
9. Applicable Law. This Covenant shall be construed and enforced in
accordance with the laws of the State of California.
3
<PAGE> 4
10. Captions. The section headings and captions contained in this
Covenant are for reference purposes and convenience only and shall not in any
way affect the meaning or interpretation of this Covenant.
11. Enforceability. If any provision of this Covenant shall be
determined, under applicable law, to be overly broad in duration, geographical
coverage, substantive scope, or otherwise, such provision shall be deemed
narrowed to the broadest term permitted by applicable law and shall be enforced
as so narrowed. If any provision of this Covenant nevertheless shall be
unlawful, void, or unenforceable, it shall be deemed severable from and shall in
no way affect the validity or enforceability of the remaining provisions of this
Covenant.
12. Consideration. The Securityholder has been compensated for the
covenants provided herein by, among other things, the consummation of the
transactions called for by the Agreement for which the Securityholder received a
cash payment for securities of the Company.
13. Notice. Any notices hereunder shall be deemed to be properly given
if provided to the Securityholder at his/her address set forth below in the
manner provided in the Agreement.
14. Waiver. The waiver by either party to this Covenant of a breach of
any provision of the Covenant by the other party to this Covenant shall not
operate or be construed as a waiver of any subsequent breach of the same
provision or of any other provision of this Covenant.
15. Amendment. This Covenant may be altered, amended, or terminated only
by an instrument in writing executed by both parties hereto.
16. Counterparts. This Covenant may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
17. Contingent Agreement: This Agreement shall become effective only
upon consummation of the Offer contemplated by the Agreement.
18. Notice of Breach. Notwithstanding anything to the contrary contained
in this Covenant Not To Compete, no conduct, activity or action shall be deemed
to constitute a breach by the Securityholder of any provision of this Covenant
Not To Compete unless (i) the Parent shall have delivered to the Securityholder
a written notice describing, the conduct, activity or action that the Parent
believes to constitute a breach of this Covenant Not To Compete and (ii) the
Securityholder shall have failed to discontinue such conduct, activity or action
within 14 days after receiving such written notice.
4
<PAGE> 5
IN WITNESS WHEREOF, Parent and the Securityholder have caused this
Covenant to be duly executed as of the date set forth above.
INTEL CORPORATION, a Delaware corporation
DAVIDI GILO
By: /s/ Arvind Sodhani
--------------------------------------
/s/ Davidi Gilo Name: Arvind Sodhani
- ------------------------ --------------------------------------
Davidi Gilo Title: Treasurer
--------------------------------------
Address for Notice Address for Notice
20300 Stevens Creek Blvd. Intel Corporation
Cupertino, CA 95014 2200 Mission College Boulevard
Santa Clara, CA 95052
Fax: (408) 765-1859
Attn: General Counsel
5
<PAGE> 1
Exhibit 10
CONFIDENTIAL
COVENANT NOT TO COMPETE
THIS COVENANT NOT TO COMPETE (this "Covenant") is made and entered into
as of the 13th day of October, 1999 by and between (i) Intel Corporation, a
Delaware corporation ("Parent"), and (ii) Joseph M. Perl, Ph.D. (the
"Securityholder"), an individual residing in __________ and a shareholder and/or
option holder of DSP Communications, Inc., a Delaware corporation (the
"Company"), with respect to the following:
RECITALS
The following provisions are made a part of and form the basis for this
Covenant:
A. Concurrently herewith, the Company is being acquired by Parent in
exchange for the consideration set forth in, and in accordance with the other
terms and conditions of, that certain Agreement and Plan of Merger dated as of
October 13, 1999 by and among Parent, CWC Acquisition Subsidiary, a Delaware
Corporation and a wholly owned subsidiary of Parent ("Acquisition") and the
Company (the "Agreement").
B. An important factor in Parent's decision to enter into the Agreement
is the Securityholder's covenant not to be involved, for a specified period of
time, in any business that competes with the business conducted by the Company.
But for the Securityholder's agreement to execute this Covenant, Parent would
not have entered into the Agreement or the related transactions.
AGREEMENT
NOW, THEREFORE, in consideration of the premises, the covenants,
conditions, representations, and agreements contained herein and in the
Agreement, the consummation by Parent of the transactions contemplated by the
Agreement and other good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, the Securityholder covenants and agrees with
Parent as follows:
1. Non-Competition
A. Subject to the terms of the Covenant, the Securityholder
agrees that, for a period commencing on the date hereof and continuing for a
period of twenty-one (21) months from the date hereof (the "Covenant Period"),
the Securityholder shall not directly or indirectly (whether for compensation or
otherwise) own, manage, operate or control, or join or participate in the
ownership, management, operation or control of, or furnish any capital to or be
connected in any manner with, any Competing Business (as hereinafter defined)
that is located in or doing business in the Designated Regions (as hereinafter
defined), either as a general or limited partner, proprietor, common or
preferred shareholder, officer, director, agent, employee, consultant, trustee,
affiliate, or otherwise. Nothing contained in this Covenant shall be construed
to prohibit the Securityholder from (i) purchasing or owning, as a passive
investment, up to four percent (4%) of the issued and outstanding shares of any
publicly traded class of securities of any corporation engaged in a Competing
Business, provided that the Securityholder does not render
<PAGE> 2
any advice of any kind to the management of such corporation or actively
participate in or control, directly or indirectly, any activities of such
corporation or otherwise participate in its business or operations, (ii) acting
as a passive investor of less than 40% of the total assets in any company
through a blind-pool or independently managed investment vehicle such as a
venture capital partnership; or (iii) publishing articles or other writings or
public speaking concerning the Company or its business (so long as not in
violation of any nondisclosure or other commitments to the Company and such
communications are not intended to nor would likely injure the interest of the
Company) or other businesses (whether or not similar to or competitive with the
Company's).
B. During the Covenant Period, the Securityholder without express
prior written approval of Parent, will not (i) solicit any customers of the
Company for or on behalf of any Competing Business or (ii) persuade or attempt
to persuade any customer, supplier, contractor or any other person or party to
cease doing business with the Company or to reduce the amount of business it
does with the Company.
C. During the Covenant Period, the Securityholder will not
knowingly solicit or induce any person who is an employee of the Company to
terminate any relationship such person may have with the Company nor shall the
Securityholder during such period directly or indirectly offer employment to or
compensate or cause any person with which the Securityholder may be affiliated
to offer employment to or compensate, any employee of the Company, or any person
who had been employed by the Company within sixty (60) days of such offer or
compensation (except Pezzola). Notwithstanding the foregoing however, the
Securityholder shall not be precluded from offering employment to or
compensating in any way, persons terminated by the Company with or without
cause. The Securityholder hereby represents and warrants that the Securityholder
has not entered into any agreement, understanding or arrangement with any
employee of the Company pertaining to any business in which the Securityholder
has participated or plans to participate, or to the employment, engagement or
compensation of any such employee.
2. Competing Business Defined. For purposes of this Agreement,
"Competing Business" has the following definition: Any business which consults,
designs, develops, manufactures, sells and or distributes any hardware and/or
software elements used in (i) chipsets for cellular and/or wireless applications
that utilize PDC, GSM, CDMA, TDMA and/or 3G technologies extending such
standards for such applications, (ii) cellular and/or wireless phone handsets
for cellular and/or wireless applications or (iii) cellular and/or wireless base
stations or infrastructure for cellular or other applications using CDMA
technology. Such hardware and/or software elements include, but are not limited
to DSPs, processors (including but not limited to ARM), baseband, analog mixed
signal and/or RF, or any combination thereof).
3. Designated Regions Defined; Related Acknowledgments. For purposes of
this Covenant, "Designated Regions" shall mean all counties, cities, states and
countries throughout the world in which the Company consults, designs, develops,
manufactures, sells and or distributes any hardware and/or software elements
used in (i) chipsets for cellular and/or wireless applications that utilize PDC,
GSM, CDMA, TDMA and/or 3G technologies extending such standards for such
applications, (ii) cellular and/or wireless phone handsets for cellular and/or
2
<PAGE> 3
wireless applications or (iii) cellular and/or wireless base stations or
infrastructure for cellular or other applications using CDMA technology. Such
hardware and/or software elements include, but are not limited to DSPs,
processors (including but not limited to ARM), baseband, analog mixed signal
and/or RF, or any combination thereof).The Securityholder hereby acknowledges
and agrees that the Company is conducting business in various places throughout
the world, and that any Competing Business throughout the world in such places
shall be competitive with the Company's business. The Securityholder also
expressly agrees that, should a court of competent jurisdiction determine that
the Designated Regions are broader than may be permitted under applicable law,
such court shall nevertheless enforce this Covenant in the broadest geographical
areas permitted by such applicable law as provided under Section 9 of this
Covenant.
4. Equitable Remedies. The Securityholder hereby acknowledges and agrees
that the obligations under this Covenant are such that Parent cannot adequately
be compensated by damages for breach of such obligations. As a result, the
Securityholder hereby acknowledges and agrees that, in the event of any breach
or threatened breach of this Covenant, Parent shall be entitled not only to
damages or other relief at law, but also to seek equitable relief to enforce the
breached obligations, including, without limitation, preliminary and permanent
injunctive relief (including temporary restraining orders).
5. Binding Agreement. This Covenant and all its terms, provisions, and
conditions shall be binding upon and inure to the benefit of each party to the
Covenant and his or its respective successors and permitted assigns, it being
agreed that only an express written amendment, termination or waiver of this
Covenant by Parent can relieve the Securityholder of his personal obligations
hereunder.
6. Cost and Expenses. If either party to this Covenant brings an action
against the other party to this Covenant to enforce his or its rights under this
Covenant, or for a determination thereof, the prevailing party shall be entitled
to recover his or its reasonable costs and expenses, including, without
limitation, reasonable attorneys' fees and costs, incurred in connection with
such action, including any appeal of such action.
7. Applicable Law. This Covenant shall be construed and enforced in
accordance with the laws of the State of California.
8. Captions. The section headings and captions contained in this
Covenant are for reference purposes and convenience only and shall not in any
way affect the meaning or interpretation of this Covenant.
9. Enforceability. If any provision of this Covenant shall be
determined, under applicable law, to be overly broad in duration, geographical
coverage, substantive scope, or otherwise, such provision shall be deemed
narrowed to the broadest term permitted by applicable law and shall be enforced
as so narrowed. If any provision of this Covenant nevertheless shall be
unlawful, void, or unenforceable, it shall be deemed severable from and shall in
no way affect the validity or enforceability of the remaining provisions of this
Covenant.
3
<PAGE> 4
10. Consideration. The Securityholder has been compensated for the
covenants provided herein by, among other things, the consummation of the
transactions called for by the Agreement for which the Securityholder received a
cash payment for securities of the Company.
11. Notice. Any notices hereunder shall be deemed to be properly given
if provided to the Securityholder at his/her address set forth below in the
manner provided in the Agreement.
12. Waiver. The waiver by either party to this Covenant of a breach of
any provision of the Covenant by the other party to this Covenant shall not
operate or be construed as a waiver of any subsequent breach of the same
provision or of any other provision of this Covenant.
13. Amendment. This Covenant may be altered, amended, or terminated only
by an instrument in writing executed by both parties hereto.
14. Counterparts. This Covenant may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
15. Contingent Agreement: This Agreement shall become effective only
upon the consummation of the transactions contemplated by the Agreement.
16. Notice of Breach. Notwithstanding anything to the contrary contained
in this Covenant Not To Compete, no conduct, activity or action shall be deemed
to constitute a breach by the Securityholder of any provision of this Covenant
Not To Compete unless (i) the Parent shall have delivered to the Securityholder
a written notice describing, the conduct, activity or action that the Parent
believes to constitute a breach of this Covenant Not To Compete and (ii) the
Securityholder shall have failed to discontinue such conduct, activity or action
within 45 days after receiving such written notice.
4
<PAGE> 5
IN WITNESS WHEREOF, Parent and the Securityholder have caused this
Covenant to be duly executed as of the date set forth above.
JOSEPH M. PERL, Ph.D. INTEL CORPORATION, a Delaware corporation
By: /s/ Arvind Sodhani
/s/ JOSEPH M. PERL, PH.D. --------------------------------------
- ------------------------------ Name: Arvind Sodhani
Joseph M. Perl, Ph.D. -------------------------------------
Title: Treasurer
-------------------------------------
Address for Notice Address for Notice
27644 Natoma Road Intel Corporation
Los Altos Hills, CA 94022 2200 Mission College Boulevard
Santa Clara, CA 95052
Fax: (408) 765-1859
Attn: General Counsel
5
<PAGE> 1
Exhibit 11
CONFIDENTIAL
LETTER AGREEMENT
October 13, 1999
Davidi Gilo
20300 Stevens Creek Blvd.
Cupertino, CA 95014
Dear Mr. Gilo:
This letter, if accepted, sets forth the terms of your employment with DSP
Communications, Inc. ("DSP") and/or Intel Corporation or any of its subsidiaries
(collectively, the "Company"), after the time that Intel accepts shares for
purchase in the Offer as defined in the Agreement and Plan of Merger among DSP,
Intel Corporation and CWC Acquisition Corporation ("Merger") and is contingent
on the occurrence of the acceptance of such shares (the "Assumption Time"). If
you accept this offer, it would take effect as of the Assumption Time.
The terms of the Employment Agreement of Davidi Gilo with DSP made and entered
into effective as of October 12, 1998 ("Employment Agreement") and attached here
as Exhibit A will continue to apply in all respects except as follows:
1. You shall remain an employee of DSP or the Company until March 31, 2000 (the
"Employment Period"). Notwithstanding anything to the contrary in your
Employment Agreement, at the end of the employment period you will voluntarily
terminate your employment and shall be entitled to severance in the amount of
$525,000. You and the Company hereby agree that this Paragraph 1 constitutes
notice of termination of employment under Paragraph 7a. of your Employment
Agreement and that no further notice is required.
2. You will be expected to only be available for consultation to senior
management of DSP as you are available for time to time, but in no event more
than ten hours per week. You will not be expected to perform services at DSP
offices or any other premises without your approval.
3. In consideration of the Company's agreement in Paragraph 1, above and for
other good and valuable consideration, the sufficiency of which is acknowledged
by you and the Company, you hereby agree to replace Paragraph 6c. of the
Employment Agreement with the Covenant Not to Compete attached hereto as Exhibit
B. In addition, you specifically acknowledge that your agreement to replace
Paragraph 6c. with the Covenant Not to Compete set forth as Exhibit B was a
material factor for the Company in its decision to enter into the Merger.
4. You agree to execute a proprietary information and inventions agreement,
similar to the one attached hereto as Exhibit C, but reasonably acceptable to
you, which shall apply to any matter covered by any similar agreement between
you and DSP and any additional documents as reasonably required by Intel
Corporation memorializing the above terms.
<PAGE> 2
5. You agree that there were no promises or commitments made to you regarding
your employment with DSP or the Company except as set forth in the Employment
Agreement or this Letter Agreement. You acknowledge that you have been given the
opportunity to review this Letter Agreement prior to its execution, that you
understand its contents, and that you have been given the opportunity to consult
with an attorney.
6. You agree to pay back any loans (as set forth on the attached Exhibit D)
made to you by DSP within 10 days following the Assumption Time.
7. This Letter Agreement may be amended or altered only in a writing signed by
you and Intel Corporation. This Agreement shall be construed and interpreted in
accordance with the laws the State of California. Each provision of this
Agreement is severable from the others, and if any provision hereof shall be to
any extent unenforceable, it and the other provisions shall continue to be
enforceable to the full extent allowable, as if such offending provision had not
been a part of this Agreement.
INTEL CORPORATION,
a Delaware corporation
By: /s/ ARVIND SODHANI
-----------------------------------------
Name: Arvind Sodhani
Title: Treasurer
I agree to the terms and conditions in this Letter Agreement.
Date: October 14, 1999
---------------------------
/s/ DAVIDI GILO
- --------------------------------
Davidi Gilo
2
<PAGE> 1
Exhibit 12
CONFIDENTIAL
LETTER AGREEMENT
October 13, 1999
Joseph M. Perl, Ph.D.
20300 Stevens Creek Blvd.
Cupertino, CA 95014
Dear Dr. Perl:
This letter, if accepted, sets forth the terms of your employment with DSP
Communications, Inc. ("DSP") and/or Intel Corporation or any of its subsidiaries
(collectively, the "Company"), after the time that Intel accepts shares for
payment pursuant to the Offer as defined in the Agreement and Plan of Merger
among DSP, Intel Corporation and CWC Acquisition Corporation ("Merger") and is
contingent on the occurrence of the acceptance of such shares ("Assumption
Time"). If you accept this offer, it would take effect as of that Assumption
Time.
The terms of the Employment Agreement of Joseph M. Perl, Ph.D. with DSP made and
entered into effective as of July 22, 1998 and as amended on June 1, 1999
("Employment Agreement") and attached here as Exhibit A will continue to apply
in all respects except as follows:
1. You shall remain an employee of DSP or the Company consistent with your
current duties and responsibilities, but neither DSP nor the Company may
obligate you to spend more than 5 hours on a noncumulative basis, until August
31, 2001 (the "Employment Period"). At the end of the employment period you will
voluntarily terminate your employment and, notwithstanding Paragraph 7d. of your
Employment Agreement, you shall not be entitled to any severance or consulting
fee. You and the Company hereby agree that this Paragraph 1 constitutes notice
of termination of employment under Paragraph 7a. of your Employment Agreement
and that no further notice is required.
2. In consideration of the Company's agreement in Paragraph 1 above, and for
other good and valuable consideration, the sufficiency of which is acknowledged
by you and the Company, you hereby agree to replace Paragraph 6c. of the
Employment Agreement with the Covenant Not to Compete attached hereto as Exhibit
B. In addition, you specifically acknowledge that your agreement to replace
Paragraph 6c. with the Covenant Not to Compete set forth as Exhibit B was a
material factor for the Company in its decision to enter into the Merger.
3. You agree to execute a proprietary information and inventions agreement,
substantially in the form attached hereto as Exhibit C, but reasonably
acceptable to you, which shall apply to any matter covered by any similar
agreement between you and DSP and any additional documents as reasonably
required by Intel Corporation memorializing the above terms.
4. You agree that there were no promises or commitments made to you regarding
your employment with DSP or the Company except as set forth in the Employment
Agreement or this Letter Agreement. You acknowledge that you have been given an
opportunity to review this
<PAGE> 2
Letter Agreement prior to its execution, that you understand its contents, and
that you have been given the opportunity to consult with an attorney.
5. You agree to pay back any loans made to you by DSP (as set forth on the
attached Exhibit D) pursuant to the terms of such loans and agree that to the
extent permitted by applicable law, that DSP or the Company may offset any
amounts due and owing under such loans by any amounts due and owing under this
Letter Agreement or the Employment Agreement. Notwithstanding the above, in no
event may any loan(s) be repaid any later than the last day of your Employment
Period.
6. This Letter Agreement may be amended or altered only in a writing signed
by you and Intel Corporation. This Agreement shall be construed and interpreted
in accordance with the laws of California. Each provision of this Agreement is
severable from the others, and if any provision hereof shall be to any extent
unenforceable, it and the other provisions shall continue to be enforceable to
the full extent allowable, as if such offending provision had not been a part of
this Agreement.
INTEL CORPORATION,
a Delaware corporation
By: /s/ ARVIND SODHANI
--------------------------------------
Name: Arvind Sodhani
Title: Treasurer
I agree to the terms and conditions in this Letter Agreement.
Date: October 14, 1999
---------------------------------------
/s/ JOSEPH PERL
- --------------------------------------------
Joseph Perl
2
<PAGE> 1
Exhibit 13
LETTER AGREEMENT
October 13, 1999
Shmuel Arditi
11 Ben Gurion
Givat Shmuel 51905
Israel
Dear Mr. Arditi:
You have received option grants from DSP Communications, Inc. ("DSP") as set
forth on Exhibit A (the "Option Grants"). Those option grants are subject to
certain vesting acceleration events as set forth in the DSP resolutions of the
compensation committee effective September 29, 1999 set forth on Exhibit B. We
would like to have you remain in the employ of DSP after the merger of DSP with
one of our subsidiary corporations pursuant to an Agreement and Plan of Merger
dated October 13, 1999 (the "Merger Agreement").
If you remain in the employment of DSP, your agreements herein would go into
effect at the "Assumption Time," which means the time that Intel Corporation
accepts shares for payment pursuant to the Offer as defined in the Merger
Agreement and is contingent on the acceptance of such shares.
We recognize that the first accelerated vesting event set forth in the
resolutions has occurred and one third of the options have vested. The balance
of the remaining 2/3 of the options would be subject to accelerated vesting as
set forth in this letter rather than as set forth in the resolutions. The
accelerated vesting events would be as follows:
(i) 45,000 options, which would otherwise have not yet vested, would
vest upon the achievement of 1999 fourth quarter 1999 revenue of at least $41.3
million, (ii) 45,000 options, which would otherwise have not yet vested, would
vest on the achievement by DSP of calendar year 2000 revenues of at least
$289,000,000 and (iii) 45,000 options, which would otherwise have not yet
vested, would vest if DSP achieves the shipment of commercial quantities of
products by DSP to any two (2) entities out of the New Business Accounts
(Philips Consumer Corporation, Hyundai, Samsung, or any other entity which was
not receiving commercial quantities of DSP's products as of January 1, 1999) by
December 31, 2000. All of these accelerated vesting events would be allocated
pro rata among the Option Grants.
If DSP should terminate your employment without cause prior to the date by which
you could achieve any of the foregoing goals, shares that would accelerate upon
achievement of those future goals shall accelerate to the date of your
termination.
In consideration of the foregoing, as soon as practicable following the
Assumption Time, Intel will grant you 50,000 options to purchase Intel stock at
an exercise price equal to the fair market value of the underlying Intel stock
on the grant date. These new options shall vest on the seventh anniversary from
the date of grant. In the event (i) DSP achieves quarter 1999 revenue of at
least $41.3 million, the vesting of 10,000 of the new options shall be
accelerated on January 15, 2001 and (ii) if DSP achieves calendar year 2000
revenues of at least $289 million, the vesting of 40,000 of the new options
shall be vested on January 15, 2001.
<PAGE> 2
INTEL CORPORATION,
a Delaware corporation
By: /s/ ARVIND SODHANI
------------------------------------------------
Name: Arvind Sodhani
Title: Treasurer
I agree to the terms and conditions in this Letter Agreement.
Date: October 14, 1999
-----------------------------------------
/s/ SHMUEL ARDITI
- ----------------------------------------------
Shmuel Arditi
2
<PAGE> 1
Exhibit 14
CONFIDENTIAL
LETTER AGREEMENT
October 13, 1999
David Aber
20300 Stevens Creek Blvd.
Cupertino, CA 95014
Dear Mr. Aber:
This letter, if accepted, sets forth the terms of your employment with DSP
Communications, Inc. ("DSP") and/or Intel Corporation or any of its subsidiaries
(collectively, the "Company"), after the time that Intel accepts shares for
payment pursuant to the Offer as defined in the Agreement and Plan of Merger
among DSP, Intel Corporation and CWC Acquisition Corporation ("Merger") and is
contingent on the occurrence of the acceptance of such shares ("Assumption
Time"). If you accept this offer, it would take effect as of the Assumption
Time.
The terms of the Employment Agreement of David Aber with DSP made and entered
into effective as of August 12, 1999 ("Employment Agreement") and attached here
as Exhibit A will continue to apply in all respects except as follows:
1. You shall remain an employee of DSP or the Company until March 31, 2000
(the "Employment Period"). Notwithstanding anything to the contrary in your
Employment Agreement, at the end of the employment period you will voluntarily
terminate your employment and shall be entitled to severance in the amount of
$40,000. You and the Company hereby agree that this Paragraph 1 constitutes
notice of termination of employment under Paragraph 7a. of your Employment
Agreement and that no further notice is required.
1A. Further Payments. If any portion of any payments or benefits received by
you, whether payable pursuant to the terms of your Employment Agreement or any
other plan, agreement or arrangement with DSP, shall be subject to tax imposed
by Section 4999 of the Internal Revenue Code of 1986, as amended by any
successor statutory provision, the Company shall promptly pay to you such
additional amounts as are necessary so that, after taking into account any tax
imposed by such Section 4999 (or any successor statutory provision), and any
federal, state and local income and employment taxes and excise tax payable on
any such additional amounts, you are in the same after tax position you would
have been if such Section 4999 (or any successor statutory provision) did not
apply to payments or benefits so received by you.
2. You will continue, during the Employment Period, to perform services in
the manner in which you have been performing services for DSP and its
affiliates, subject to the modifications indicated in this Letter Agreement. You
will make yourself available to the Company for approximately ten hours per
week, on a non-cumulative basis, during the Employment Period. You may perform
such services, at your election, either in Oakland or Cupertino, California or
Givat Shmuel, and you shall make yourself reasonably available for phone
consultations and occasional meetings at other sites.
3. You agree to execute a proprietary information and inventions agreement,
similar to the one attached hereto as Exhibit C, but reasonably acceptable to
you, which shall apply to any matter covered by any similar agreement between
you and DSP and any additional documents as reasonably required by Intel
Corporation memorializing the above terms.
4. You agree that there were no promises or commitments made to you
regarding your employment with DSP or the Company except as set forth in the
Employment Agreement or this
<PAGE> 2
Letter Agreement. You acknowledge that you have been given the opportunity to
review this Letter Agreement prior to its execution, that you understand its
contents, and that you have been given the opportunity to consult with an
attorney.
5. You agree to pay back any loans made to you by DSP (as set forth on the
attached Exhibit D) pursuant to the terms of such loans and agree that to the
extent permitted by applicable law, that DSP or the Company may offset any
amounts due and owing under such loans by any amounts due and owing under this
Letter Agreement or the Employment Agreement. Notwithstanding the above, in no
event may any loan(s) be repaid any later than the last day of your Employment
Period
6. This Letter Agreement may be amended or altered only in a writing
signed by you and Intel Corporation. This Agreement shall be construed
and interpreted in accordance with the laws of California. Each provision of
this Agreement is severable from the others, and if any provision hereof shall
be to any extent unenforceable, it and the other provisions shall continue to
be enforceable to the full extent allowable, as if such offending provision had
not been a part of this Agreement.
INTEL CORPORATION,
a Delaware corporation
By: /s/ ARVIND SODHANI
-------------------------------------
Name: Arvind Sodhani
Title: Treasurer
I agree to the terms and conditions in this Letter Agreement.
Date: October 14, 1999
- -----------------------------------------------------
/s/ DAVID ABER
- -----------------------------------------------------
David Aber
2
<PAGE> 1
Exhibit 15
CONFIDENTIAL
LETTER AGREEMENT
October 13, 1999
Stephen P. Pezzola
40 Yorkshire Drive
Oakland, CA 94618
Dear Mr. Pezzola:
This letter, if accepted, sets forth the terms of your employment with DSP
Communications, Inc. ("DSP") and/or Intel Corporation or any of its subsidiaries
(collectively, the "Company"), after the time that Intel accepts shares for
payment pursuant to the Offer as defined in the Agreement and Plan of Merger
among DSP, Intel Corporation and CWC Acquisition Corporation ("Merger") and is
contingent on the occurrence of the acceptance of such shares ("Assumption
Time"). If you accept this offer, it would take effect as of the Assumption
Time.
The terms of the Employment Agreement of Stephen P. Pezzola with DSP made and
entered into effective as of August 12, 1999 ("Employment Agreement") and
attached here as Exhibit A will continue to apply in all respects except as
follows:
1. You shall remain an employee of DSP or the Company until March 31, 2000
(the "Employment Period"). Notwithstanding anything to the contrary in your
Employment Agreement, at the end of the employment period you will voluntarily
terminate your employment and shall be entitled to severance in the amount of
$50,000. You and the Company hereby agree that this Paragraph 1 constitutes
notice of termination of employment under Paragraph 8a. of your Employment
Agreement and that no further notice is required.
1A. Further Payments. If any portion of any payments or benefits received by
you, whether payable pursuant to the terms of your Employment Agreement or any
other plan, agreement or arrangement with DSP, shall be subject to tax imposed
by Section 4999 of the Internal Revenue Code of 1986, as amended by any
successor statutory provision, the Company shall promptly pay to you such
additional amounts as are necessary so that, after taking into account any tax
imposed by such Section 4999 (or any successor statutory provision), and any
federal, state and local income and employment taxes and excise tax payable on
any such additional amounts, you are in the same after tax position you would
have been if such Section 4999 (or any successor statutory provision) did not
apply to payments or benefits so received by you.
2. You will continue, during the Employment Period, to perform services in
the manner in which you have been performing services for DSP and its
affiliates, subject to the modifications indicated in this Letter Agreement. You
will make yourself available to the Company for approximately ten hours per
week, on a non-cumulative basis, during the Employment Period. You may perform
such services, at your election, either in Cupertino, California or Oakland,
California, and you shall make yourself reasonably available for phone
consultations and occasional meetings at sites other than Cupertino, California
or Oakland, California within the ten hours per week.
3. You agree to execute a proprietary information and inventions agreement,
similar to the one attached hereto as Exhibit C, but reasonably acceptable to
you, which shall apply to any matter covered by any similar agreement between
you and DSP and any additional documents as reasonably required by Intel
Corporation memorializing the above terms.
<PAGE> 2
4. You agree that there were no promises or commitments made to you
regarding your employment with DSP or the Company except as set forth in the
Employment Agreement or this Letter Agreement. You acknowledge that you have
been given the opportunity to review this Letter Agreement prior to its
execution, that you understand its contents, and that you have been given the
opportunity to consult with an attorney.
5. You agree to pay back any loans made to you by DSP (as set forth on the
attached Exhibit D) pursuant to the terms of such loans and agree that to the
extent permitted by applicable law, that DSP or the Company may offset any
amounts due and owing under such loans by any amounts due and owing under this
Letter Agreement or the Employment Agreement. Notwithstanding the above, in no
event may any loan(s) be repaid any later than the last day of your Employment
Period
6. This Letter Agreement may be amended or altered only in a writing
signed by you and Intel Corporation. This Agreement shall be construed
and interpreted in accordance with the laws of California. Each provision of
this Agreement is severable from the others, and if any provision hereof shall
be to any extent unenforceable, it and the other provisions shall continue to
be enforceable to the full extent allowable, as if such offending provision had
not been a part of this Agreement.
INTEL CORPORATION,
a Delaware corporation
By: /s/ ARVIND SODHANI
-------------------------------------
Name: Arvind Sodhani
Title: Treasurer
I agree to the terms and conditions in this Letter Agreement.
Date: October 14, 1999
- -----------------------------------------------------
/s/ STEPHEN PEZZOLA
- -----------------------------------------------------
Stephen Pezzola
2
<PAGE> 1
EXHIBIT 16
DSP COMMUNICATIONS, INC.
INDEMNIFICATION AGREEMENT
This Indemnification Agreement ("Agreement") is effective as of
___________, ______________, by and between DSP Communications, Inc., a Delaware
corporation (the "Company") and ____________________ ("Indemnitee").
WHEREAS, the Company and Indemnitee recognize the continued difficulty
in obtaining directors' and officers' liability insurance, the significant
increases in the cost of such insurance and the general reductions in the
coverage of such insurance;
WHEREAS, the Company and Indemnitee further recognize the substantial
increase in corporate litigation in general, subjecting officers and directors
to expensive litigation risks at the same time as the availability and coverage
of liability insurance has been severely limited;
WHEREAS, Indemnitee does not regard the current protection available as
adequate under the present circumstances, and the Indemnitee and other officers,
directors and key personnel of the Company may not be willing to continue to
serve in such capacities without additional protection;
WHEREAS, the Company desires to attract and retain the services of
highly qualified individuals, such as Indemnitee, to serve the Company and, in
part, in order to induce Indemnitee to continue to provide services to the
Company, wishes to provide for the indemnification and advancing of expenses to
Indemnitee to the maximum extent permitted by law; and
WHEREAS, in view of the considerations set forth above, the Company
desires that effective as of the date hereof, Indemnitee shall be indemnified by
the Company as set forth herein.
NOW, THEREFORE, the Company and Indemnitee hereby agree as follows:
1. INDEMNIFICATION.
(a) THIRD PARTY PROCEEDINGS. The Company shall indemnify
Indemnitee to the fullest extent permitted by law if Indemnitee was or is or
becomes a party to or witness or other participant in, or is threatened to be
made a party to or witness or other participant in, any threatened, pending or
completed action, suit, arbitration or proceeding, whether civil, criminal,
administrative or investigative or other (other than an action or suit by or in
the right of the Company or any subsidiary of the Company) or any inquiry or
investigation that Indemnitee in good faith believes might lead to the
institution of any such action, suit, arbitration or proceeding, whether civil,
criminal, administrative, investigative or other, by reason of (or arising in
part out of) any event or occurrence related to the fact that
<PAGE> 2
Indemnitee (i) is or was a director, officer, employee, agent or fiduciary of
the Company or any subsidiary of the Company, (ii) is or was serving at the
request of the Company as a director, officer, employee, agent or fiduciary of
another corporation, partnership, joint venture, trust or other enterprise, or
(iii) by reason of any action or inaction on the part of Indemnitee while
serving in any such capacity, against any and all expenses (including reasonable
attorneys' fees and all other costs, expenses and obligations paid or incurred
in connection with investigating, defending, being a witness in or participating
in (including on appeal), or preparing to defend, be a witness in or participate
in, any such action, suit, arbitration, proceeding, inquiry or investigation,
judgment, fines, penalties and amounts paid in settlement (if such settlement is
approved in advance by the Company, which approval shall not be unreasonably
withheld), including all interest, assessments and other charges paid or payable
in connection therewith or in respect thereof (collectively, hereinafter
"Expenses"), in each case to the extent actually and reasonably incurred by
Indemnitee, if Indemnitee acted in good faith and in a manner Indemnitee
reasonably believed to be in or not opposed to the best interests of the
Company, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe Indemnitee's conduct was unlawful. The termination
of any action, suit, arbitration or proceeding, inquiry or investigation by
judgment, order, settlement, conviction, or upon a plea of nolo contendere or
its equivalent, shall not, if itself, create a presumption that Indemnitee did
not act in good faith and in a manner which Indemnitee reasonably believed to be
in or not opposed to the best interests of the Company, or, with respect to any
criminal action or proceeding, that Indemnitee's had reasonable cause to believe
that Indemnitee's conduct was unlawful.
(b) PROCEEDINGS BY OR IN THE RIGHT OF THE COMPANY. The Company
shall indemnify Indemnitee to the fullest extent permitted by law if Indemnitee
was or is or becomes a party to or witness or other participant in, or is
threatened to be made a party to or witness or other participant in, any
threatened, pending or completed action or suit by or in the right of the
Company or any subsidiary of the Company to procure a judgment in its favor by
reason of any event or occurrence related to the fact that Indemnitee (i) is or
was a director, officer, employee, agent or fiduciary of the Company or any
subsidiary of the Company, (ii) is or was serving at the request of the Company
as a director, officer, employee, agent or fiduciary of another corporation,
partnership, joint venture, trust or other enterprise, or (iii) by reason of any
action or inaction on the part of Indemnitee while serving in any such capacity,
against any and all Expenses and, to the fullest extent permitted by law,
amounts paid in settlement of any such action or suit, in each case to the
extent actually and reasonably incurred by Indemnitee, if Indemnitee acted in
good faith and in a manner Indemnitee reasonably believed to be in or not
opposed to the best interests of the Company, except that no indemnification
shall be made in respect of any claim, issue or matter as to which Indemnitee
shall have been adjudged to be liable to the Company unless and only to the
extent that the Court of Chancery
-2-
<PAGE> 3
of the State of Delaware or the court in which such action or suit is brought
shall determine upon application that, in view of all the circumstances of the
case, Indemnitee is fairly and reasonably entitled to indemnity for such
Expenses and then only to the extent that the Court of Chancery of the State of
Delaware or such other court shall determine.
(c) MANDATORY PAYMENT OF EXPENSES. Notwithstanding any other
provision of this Agreement, to the extent that Indemnitee has been successful
on the merits or otherwise, including, without limitation, the dismissal of an
action without prejudice, in defense of any action, suit, arbitration,
proceeding, inquiry or investigation referred to in Section (l)(a) or (b) hereof
or in the defense of any claim, issue or matter therein, Indemnitee shall be
indemnified against all Expenses incurred in connection therewith.
2. EXPENSES; INDEMNIFICATION PROCEDURE.
(a) ADVANCEMENT OF EXPENSES. The Company shall advance all
Expenses and, to the fullest extent permitted by law, amounts paid in settlement
of any action, suit, arbitration, proceeding, inquiry or investigation referred
to in Section (l)(a) or (b) hereof. Indemnitee hereby undertakes to repay such
amounts advanced only if, and to the extent that, it shall ultimately be
determined by a final judicial determination (as to which all rights of appeal
therefrom have been exhausted or lapsed) that Indemnitee is not entitled to be
indemnified by the Company as authorized hereby. The advances to be made
hereunder shall be paid by the Company to Indemnitee within twenty (20) days
after receipt of the written request of the Indemnitee.
(b) NOTICE/COOPERATION BY INDEMNITEE. Indemnitee shall, as a
condition precedent to Indemnitee's right to be indemnified under this
Agreement, give the Company notice in writing as soon as practicable of any
claim made against Indemnitee for which indemnification will or could be sought
under this Agreement. Notice to the Company shall be directed to the Chief
Executive Officer of the Company at the address shown on the signature page of
this Agreement (or such other address as the Company shall designate in writing
to Indemnitee). Notice shall be deemed received five (5) business days after the
date postmarked if sent by domestic certified or registered mail, properly
addressed; otherwise notice shall be deemed received when such notice shall
actually be received by the Company. In addition, Indemnitee shall give the
Company such information and cooperation as it may reasonably require and as
shall be within Indemnitee's power.
(c) PROCEDURE. Any indemnification and advances provided for
in Section 1 and this Section 2 shall be made no later than thirty (30) and
twenty (20) days, respectively, after receipt of the written request of
Indemnitee. If a claim under this Agreement, under any statute, or under any
provision of the Company's Certificate of Incorporation or Bylaws providing for
indemnification, is not paid in
-3-
<PAGE> 4
full by the Company within thirty (30) days after a written request for payment
thereof has first been received by the Company, Indemnitee may, but need not, at
any time thereafter bring an action against the Company to recover the unpaid
amount of the claim and, subject to Section 14 of this Agreement, Indemnitee
shall also be entitled to be paid for the Expenses of bringing such action. It
shall be a defense to any such action (other than an action brought to enforce a
claim for Expenses incurred in connection with any action, suit, arbitration,
proceeding, inquiry or investigation in advance of its final disposition) that
Indemnitee has not met the standards of conduct or did not have such belief
which make it permissible under applicable law for the Company to indemnify
Indemnitee for the amount claimed, but the burden of proving such defense shall
be on the Company, and Indemnitee shall be entitled to receive interim payments
of Expenses pursuant to Section 2(a) unless and until such defense may be
determined by a final judicial determination (as to which all rights of appeal
therefrom have been exhausted or lapsed). It is the parties' intention that if
the Company contests Indemnitee's right to indemnification, the question of
Indemnitee's right to indemnification shall be for the court to decide, and
neither the failure of the Company (including its Board of Directors, any
committee or subgroup of the Board of Directors, independent legal counsel or
its stockholders) to have made a determination that indemnification of
Indemnitee is proper in the circumstances because Indemnitee has met any
applicable standard of conduct or had any particular belief, nor an actual
determination by the Company (including its Board of Directors, any committee or
subgroup of the Board of Directors, independent legal counsel or its
stockholders) that Indemnitee has not met such standard of conduct or did not
have such belief, shall create a presumption that Indemnitee has or has not met
the applicable standard of conduct or did not have any particular belief.
(d) NOTICE TO INSURERS. If, at the time of the receipt by the
Company of a notice of a claim pursuant to Section 2(b) hereof, the Company has
officers' and directors' liability insurance in effect, the Company shall give
prompt notice of the commencement of the action, suit, arbitration, proceeding,
inquiry or investigation relating to the claim, to the insurers in accordance
with the procedures set forth in the respective policies. The Company shall
thereafter take all necessary or desirable action to cause such insurers to pay,
on behalf of the Indemnitee, all amounts payable as a result of such action,
suit, arbitration, proceeding, inquiry or investigation in accordance with the
terms of such policies.
(e) SELECTION OF COUNSEL. In the event the Company shall be
obligated under Section 2(a) hereof to pay the Expenses of any action, suit,
arbitration, proceeding, inquiry or investigation against Indemnitee, the
Company, if appropriate, shall be entitled to assume the defense of such action,
suit, arbitration, proceeding, inquiry or investigation, with counsel approved
by Indemnitee, upon the delivery to Indemnitee of written notice of its election
so to do. After delivery of such notice, approval of such counsel by Indemnitee
and the retention of such
-4-
<PAGE> 5
counsel by the Company, the Company will not be liable to Indemnitee under this
Agreement for any fees of counsel subsequently incurred by Indemnitee with
respect to the same action, suit, arbitration, proceeding, inquiry or
investigation; provided that, (i) Indemnitee shall have the right to employ
Indemnitee's counsel in any such action, suit, arbitration, proceeding, inquiry
or investigation at Indemnitee's expense and (ii) if (A) the employment of
counsel by Indemnitee has been previously authorized by the Company, (B)
Indemnitee shall have reasonably concluded that there may be a conflict of
interest between the Company and Indemnitee in the conduct of any such defense
or (C) the Company shall not continue to retain such counsel to defend such
action, suit, arbitration, proceeding, inquiry or investigation, then the fees
and Expenses of Indemnitee's counsel shall be at the expense of the Company.
3. ADDITIONAL INDEMNIFICATION RIGHTS; NONEXCLUSIVITY.
(a) SCOPE. The Company hereby agrees to indemnify the
Indemnitee to the fullest extent permitted by law, notwithstanding that such
indemnification is not specifically authorized by the other provisions of this
Agreement, the Company's Certificate of Incorporation, the Company's Bylaws or
by statute. In the event of any change after the date of this Agreement in any
applicable law, statute or rule which expands the right of a Delaware
corporation to indemnify a member of its board of directors or an officer,
employee, agent or fiduciary of the Company, or any subsidiary of the Company,
it is the intent of the parties hereto that Indemnitee shall enjoy by this
Agreement the greater benefits so afforded by such change. In the event of any
change in any applicable law, statute or rule which narrows the right of a
Delaware corporation to indemnify a member of its board of directors or an
officer, employee, agent or fiduciary of the Company, or any subsidiary of the
Company, such change, to the extent not otherwise required by such law, statute
or rule to be applied to this Agreement, shall have no effect on this Agreement
or the parties' rights and obligations hereunder.
(b) NONEXCLUSIVITY. The indemnification provided by this
Agreement shall be in addition to any rights to which Indemnitee may be entitled
under the Company's Certificate of Incorporation, its Bylaws, any agreement, any
vote of stockholders or disinterested directors, the General Corporation Law of
the State of Delaware, or otherwise, both as to action in Indemnitee's official
capacity and as to action in any other capacity while holding such office. The
indemnification provided under this Agreement shall continue as to Indemnitee
for any action taken or not taken while serving in an indemnified capacity even
though Indemnitee may have ceased to serve in such capacity at the time of any
such action, suit, arbitration,
-5-
<PAGE> 6
proceeding, inquiry or investigation or other covered proceeding.
4. NO DUPLICATION OF PAYMENTS. The Company shall not be liable under
this Agreement to make any payment in connection with any action, suit,
arbitration, proceeding, inquiry or investigation against Indemnitee to the
extent Indemnitee has otherwise actually received payment (under any insurance
policy, Bylaw or otherwise) of the amounts otherwise indemnifiable hereunder.
5. PARTIAL INDEMNIFICATION. If Indemnitee is entitled under any
provision of this Agreement to indemnification by the Company for some or a
portion of the Expenses reasonably incurred by Indemnitee in the investigation,
defense, appeal or settlement of any civil or criminal action, arbitration, or
any other proceeding, but not, however, for all of the total amount thereof, the
Company shall nevertheless indemnify Indemnitee for the portion thereof to which
Indemnitee is entitled.
6. MUTUAL ACKNOWLEDGMENT. Both the Company and Indemnitee acknowledge
that in certain instances, Federal law or applicable public policy may prohibit
the Company from indemnifying its directors and officers under this Agreement or
otherwise. Indemnitee understands and acknowledges that the Company has
undertaken or may be required in the future to undertake with the Securities and
Exchange Commission to submit the question of indemnification to a court in
certain circumstances for a determination of the Company's right under public
policy to indemnify Indemnitee.
7. CONTRIBUTION. If the indemnification provided in this Agreement is
unavailable and may not be paid to Indemnitee for any reason other than
statutory limitations set forth in the Delaware General Corporation Law, then in
respect of any threatened, pending or completed action, suit, arbitration,
proceeding, inquiry or investigation in which the Company is jointly liable with
Indemnitee (or would be if joined in such action, suit, arbitration, proceeding,
inquiry or investigation), the Company shall contribute to the amount of
Expenses actually and reasonably incurred and paid or payable by Indemnitee in
such proportion as is appropriate to reflect (i) the relative benefits received
by the Company on the one hand and Indemnitee on the other hand from the
transaction from which such action, suit, arbitration, proceeding, inquiry or
investigation arose, and (ii) the relative fault of the Company on the one hand
and of Indemnitee on the other in connection with the events which resulted in
such Expenses, as well as any other relevant equitable considerations. The
relative fault of the Company on the one hand and of Indemnitee on the other
shall be determined by reference to, among other things, the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
the circumstances resulting in such Expenses. The Company agrees that it would
not be just and equitable if contribution pursuant to this Section 7 were
determined by pro rata allocation or any other method of allocation which does
not take account of the foregoing equitable considerations.
-6-
<PAGE> 7
8. OFFICERS' AND DIRECTORS' LIABILITY INSURANCE.
(a) INITIAL COVERAGE. The Company shall, from time to time,
make the good faith determination whether or not it is practicable for the
Company to obtain and maintain a policy or policies of insurance with reputable
insurance companies providing the officers and directors of the Company with
coverage for losses from wrongful acts, or to ensure the Company's performance
of its indemnification obligations under this Agreement. Among other
considerations, the Company will weigh the costs of obtaining such insurance
coverage against the protection afforded by such coverage. To the extent the
Company maintains officers' and directors' liability insurance, Indemnitee shall
be covered by such policies in such a manner as to provide Indemnitee the same
rights and benefits as are accorded to the most favorably insured of the
Company's directors, if Indemnitee is a director; or of the Company's officers,
if Indemnitee is not a director of the Company but is an officer; or of the
Company's key employees, if Indemnitee is not an officer or director but is a
key employee. Notwithstanding the foregoing, the Company shall have no
obligation to obtain or maintain such insurance if (a) the Company determines in
good faith that (i) such insurance is not reasonably available, (ii) the premium
costs for such insurance are disproportionate to the amount of coverage provided
or (iii) the coverage provided by such insurance is limited by exclusions so as
to provide an insufficient benefit, or (B) Indemnitee is covered by similar
insurance maintained by a subsidiary or parent of the Company.
(b) NOTICE UPON TERMINATION. In the event that the insurance
coverage provided in Section 8(a) is canceled or will not be renewed or replaced
by the Company because the Company has determined in good faith that such
insurance is not reasonably available, that the premium costs for such insurance
are disproportionate to the amount of coverage provided, that the coverage
provided by such insurance is limited by the exclusions so as to provide an
insufficient benefit, or otherwise, then the Company shall notify the Indemnitee
in writing within fifteen (15) days after the date that such insurance is
canceled or the date the decision not to renew or replace such insurance is
made.
(c) "TAIL" COVERAGE. In the event that the insurance coverage
provided in Section 8(a) is canceled or will not be renewed or replaced, the
Company will make the good faith determination whether or not it is practicable
for the Company to obtain and maintain a "tail" insurance policy or policies
with reputable insurance companies providing the officers and directors of the
Company with coverage for losses for wrongful acts, or to assure the Company's
performance of its indemnification obligations under this Agreement. Among other
considerations, the Company will weigh the costs of obtaining such insurance
coverage against the protection afforded by such coverage.
9. SEVERABILITY. Nothing in this Agreement is intended to require or
shall
-7-
<PAGE> 8
be construed as requiring the Company to do or fail to do any act in violation
of applicable law. The Company's inability, pursuant to court order, to perform
its obligations under this Agreement shall not constitute a breach of this
Agreement. The provisions of this Agreement shall be severable as provided in
this Section 9. If this Agreement or any portion hereof shall be invalidated on
any ground by any court of competent jurisdiction, then the Company shall
nevertheless indemnify Indemnitee to the full extent permitted by any applicable
portion of this Agreement that shall not have been invalidated, and the balance
of this Agreement not so invalidated shall be enforceable in accordance with its
terms.
10. EXCEPTIONS. Any other provision herein to the contrary
notwithstanding, the Company shall not be obligated pursuant to the terms of
this Agreement:
(a) EXCLUDED ACTION OR OMISSIONS. To indemnify Indemnitee for
acts, omissions or transactions from which Indemnitee may not be relieved of
liability under applicable law; or
(b) CLAIMS INITIATED BY INDEMNITEE. To indemnify or advance
Expenses to Indemnitee with respect to proceedings or claims initiated or
brought voluntarily by Indemnitee and not by way of defense, except (i) with
respect to proceedings brought to establish or enforce a right to
indemnification under this Agreement or any other statute or law, (ii) in
specific cases if the Board of Directors has approved the initiation or bringing
of such proceedings or claims or (iii) as otherwise required under Section 145
of the Delaware General Corporation Law; or
(c) LACK OF GOOD FAITH. To indemnify Indemnitee for any
Expenses incurred by the Indemnitee with respect to any proceeding instituted by
Indemnitee to enforce or interpret this Agreement, if a court of competent
jurisdiction determines that each of the material assertions made by the
Indemnitee in such proceeding was not made in good faith or was frivolous; or
(d) CLAIMS UNDER SECTION 16(B). To indemnify Indemnitee for
Expenses and the payment of profits arising from the purchase and sale by
Indemnitee of securities in violation of Section 16(b) of the Securities
Exchange Act of 1934, as amended, or any similar successor statute.
11. CONSTRUCTION OF CERTAIN PHRASES.
(a) For purposes of this Agreement, references to the
"Company" shall include, in addition to the resulting corporation, any
constituent corporation (including any constituent of a constituent) absorbed in
a consolidation or merger which, if its separate existence had continued, would
have had power and authority to indemnify its directors, officers, employees,
agents or fiduciaries, so that if Indemnitee is or was a director, officer,
employee, agent or fiduciary of such
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<PAGE> 9
constituent corporation, or is or was serving at the request of such constituent
corporation as a director, officer, employee, agent or fiduciary of another
corporation, partnership, joint venture, trust or other enterprise, Indemnitee
shall stand in the same position under the provisions of this Agreement with
respect to the resulting or surviving corporation as Indemnitee would have with
respect to such constituent corporation if its separate existence had continued.
(b) For purposes of this Agreement, references to "other
enterprises" shall include employee benefit plans; references to "fines" shall
include any excise taxes assessed on Indemnitee with respect to an employee
benefit plan; and references to "serving at the request of the Company" shall
include any service as a director, officer, employee, agent or fiduciary of the
Company which imposes duties on, or involves services by, such director,
officer, employee, agent or fiduciary with respect to an employee benefit plan,
its participants or its beneficiaries; and if Indemnitee acted in good faith and
in a manner Indemnitee reasonably believed to be in the interest of the
participants and beneficiaries of an employee benefit plan, Indemnitee shall be
deemed to have acted in a manner "not opposed to the best interests of the
Company," as referred to in this Agreement.
12. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall constitute an original.
13. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective successors
(including any direct or indirect successor of the Company by purchase, merger,
consolidation or otherwise to all or substantially all the business and/or
assets of the Company), assigns, estates, spouses, heirs, executors and personal
and legal representatives.
14. EXPENSES AND ATTORNEYS' FEES. In the event that any action is
instituted by Indemnitee under this Agreement, or under any directors' and
officers' liability insurance policy maintained by the Company, to enforce or
interpret any of the terms hereof or thereof, Indemnitee shall be entitled to be
paid all court costs and Expenses incurred by Indemnitee with respect to such
action and shall be entitled to the advancement of such costs and Expenses with
respect to such action, regardless of whether Indemnitee is ultimately
successful in such action, unless as a part of such action the court having
jurisdiction over such action determines that each of the material assertions
made by Indemnitee as a basis for such action was not made in good faith or was
frivolous. In the event of an action instituted by or in the name of the Company
under this Agreement to enforce or interpret any of the terms of this Agreement,
Indemnitee shall be entitled to be paid all court costs and Expenses, including
attorneys' fees, incurred by Indemnitee in defense of such action (including
reasonable costs and Expenses incurred with respect to Indemnitee's
counterclaims and cross-claims made in such action) and shall be entitled to the
advancement of such costs and Expenses with respect to
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<PAGE> 10
such action, unless as a part of such action the court having jurisdiction over
such action determines that each of Indemnitee's material defenses to such
action were made in bad faith or were frivolous.
15. NOTICE. All notices, requests, demands and other communications
under this Agreement shall be in writing and shall be deemed duly given (i) if
delivered by hand and receipted for by the party addressee, on the date of such
receipt or (ii) if mailed by domestic certified or registered mail with postage
prepaid, on the fifth business day after the date postmarked. Addresses for
notice to either party are as shown on the signature page of this Agreement, or
as subsequently modified by written notice.
16. CONSENT TO JURISDICTION. The Company and Indemnitee each hereby
irrevocably consent to the jurisdiction of the courts of the State of Delaware
for all purposes in connection with any action, suit, arbitration, proceeding,
inquiry or investigation which arises out of or relates to this Agreement and
agree that any action, suit, arbitration, proceeding, inquiry or investigation
instituted under this Agreement shall be commenced, prosecuted and continued
only in the Court of Chancery of the State of Delaware in and for New Castle
County, which shall be the exclusive and only proper forum for adjudicating such
a claim.
17. CHOICE OF LAW. This Agreement shall be governed by and its
provisions construed and enforced in accordance with the laws of the State of
Delaware, as applied to contracts between Delaware residents, entered into and
to be performed entirely within the State of Delaware, without regard to the
conflict of laws principles thereof.
18. SUBROGATION. In the event of payment under this Agreement, the
Company shall be subrogated to the extent of such payment to all of the rights
of recovery of Indemnitee, who shall execute all documents required and shall do
all acts that may be necessary to secure such rights and to enable the Company
effectively to bring suit to enforce such rights.
19. CONTINUATION OF INDEMNIFICATION. All agreements and obligations of
the Company contained herein shall continue during the period that Indemnitee is
a director, officer or agent of the Company and shall continue thereafter so
long as Indemnitee shall be subject to any possible claim or threatened, pending
or completed action, suit or proceeding, whether civil, criminal, arbitrational,
administrative or investigative, by reason of the fact that Indemnitee was
serving in the capacity referred to herein.
20. AMENDMENT AND TERMINATION. Subject to Section 19, no amendment,
modification, termination or cancellation of this Agreement shall be effective
unless
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<PAGE> 11
it is in writing signed by both the parties hereto.
21. WAIVER. No failure or delay on the part of the Company or
Indemnitee in exercising any power or right hereunder shall operate as a waiver
thereof, nor shall any single or partial exercise of any such right or power, or
any abandonment or discontinuance of steps to enforce such a right or power,
preclude any other or further exercise thereof or the exercise of any other
right or power.
22. HEADINGS. Section headings used herein are for convenience of
reference only, are not part of this Agreement and are not to affect the
construction of, or to be taken into consideration in interpreting, this
Agreement.
23. INTEGRATION AND ENTIRE AGREEMENT; NO IMPLIED RIGHT OF EMPLOYMENT.
This Agreement sets forth the entire understanding between the parties hereto
and supersedes and merges all previous written and oral negotiations,
commitments, understandings and agreements relating to the subject matter hereof
between the parties hereto. Nothing contained in this Agreement is intended to
create in Indemnitee any right to continued employment.
-11-
<PAGE> 12
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
DSP COMMUNICATIONS, INC.
By:
---------------------------------
---------------------------------
President and
Chief Executive officer
AGREED TO AND ACCEPTED:
INDEMNITEE:
- -----------------------------
(Signature)
- -----------------------------
(Name of Indemnitee)
- -----------------------------
(Address)
- -----------------------------
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<PAGE> 1
EXHIBIT 17
ARTICLE X OF THE CERTIFICATE OF
INCORPORATION OF DSP COMMUNICATIONS, INC.
A. To the fullest extent permitted by the Delaware General Corporation Law
as the same exists or may hereafter be amended, a Director of this
Corporation shall not be personally liable to this Corporation, or its
stockholders, for monetary damages for breach of fiduciary duty as a
Director.
B. This Corporation may indemnify to the fullest extent permitted by law
any person made or threatened to be made a party to an action or
proceeding, whether criminal, civil, administrative or investigative,
by reason of the fact that he, his testator or intestate is or was a
Director, officer, or employee of this Corporation, or any predecessor
of this Corporation, or serves or served at any other enterprise as a
Director, officer, or employee at the request of this Corporation, or
any predecessor to this Corporation.
C. Neither any amendment nor repeal of this Articles X, nor the adoption
of any provision of this Corporation's Certificate of Incorporation
inconsistent with this Article X, shall eliminate or reduce the effect
of this Article X, in respect of any matter occurring, or any action or
proceeding accruing or arising or that, but for this Article X, would
accrue or arise, prior to such amendment, repeal, or adoption of any
inconsistent provision.
<PAGE> 1
EXHIBIT 18
ARTICLE VI TO THE BYLAWS OF
DSP COMMUNICATIONS, INC.
ARTICLE VI
INDEMNIFICATION OF DIRECTORS,
OFFICERS, EMPLOYEES, AND OTHER AGENTS
6.1. INDEMNIFICATION OF DIRECTORS AND OFFICERS. The Corporation shall,
to the maximum extent and in the manner permitted by the General Corporation Law
of Delaware, indemnify each of its Directors and officers against expenses
(including attorneys' fees), judgments, fines, settlements, and other amounts
actually and reasonably incurred in connection with any proceeding, arising by
reason of the fact that such person is or was an agent of the Corporation. For
purposes of this Section 6.1, a "Director" or "officer" of the Corporation
includes any person (i) who is or was a Director or officer of the Corporation,
(ii) who is or was serving at the request of the Corporation as a Director or
officer of another corporation, partnership, joint venture, trust or other
enterprise, or (iii) who was a Director or officer of a corporation which was a
predecessor corporation of the Corporation, or of another enterprise at the
request of such predecessor corporation.
6.2. INDEMNIFICATION OF OTHERS. The Corporation shall have the power,
to the maximum extent and in the manner permitted by the General Corporation Law
of Delaware, to indemnify each of its employees and agents (other than Directors
and officers) against expenses (including attorneys' fees), judgments, fines,
settlements, and other amounts actually and reasonably incurred in connection
with any proceeding, arising by reason of the fact that such person is or was an
agent of the Corporation. For purposes of this Section 6.2, an "employee" or
"agent" of the Corporation (other than a Director or officer) includes any
person (i) who is or was an employee or agent of the Corporation, (ii) who is or
was serving at the request of the Corporation as an employee or agent of another
corporation, partnership, joint venture, trust or other enterprise, or (iii) who
was an employee or agent of a corporation which was a predecessor corporation of
the Corporation, or of another enterprise at the request of such predecessor
corporation.
6.3. INSURANCE. The Corporation may purchase and maintain insurance on
behalf of any person who is or was a Director, officer, employee or agent of the
Corporation, or is or was serving at the request of the Corporation as a
Director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise against any liability asserted against him or
her and incurred by him or her in any such capacity, or arising out of his or
her status as such, whether or not the Corporation would have the power to
indemnify him or her against such liability under the provisions of the General
Corporation Law of Delaware.
<PAGE> 1
EXHIBIT 19
DSP COMMUNICATIONS, INC.
1995 EMPLOYEE AND CONSULTANT STOCK PLAN
1. PURPOSES OF THE PLAN. The purposes of this Stock Option Plan are:
a. To attract and retain the best available personnel for
positions of substantial responsibility;
b. To provide additional incentive to Employees and
Consultants to remain with the Company; and
c. To promote the success of the Company's business.
Options granted under the Plan may be Incentive Stock Options or
Nonstatutory Stock Options, as determined by the Administrator at the time of
grant.
2. DEFINITIONS. As used herein, the following definitions shall apply:
a. "ADMINISTRATOR" means the Board or any of its Committees as
shall be administering the Plan, in accordance with Section 4 of the Plan.
b. "APPLICABLE LAWS" means the legal requirements relating to
the administration of stock option plans under state corporate and securities
laws and the Code.
c. "BOARD" means the Board of Directors of the Company.
d. "CODE" means the Internal Revenue Code of 1986, as amended.
e. "COMMITTEE" means a Committee appointed by the Board in
accordance with Section 4 of the Plan.
f. "COMMON STOCK" means the Common Stock of the Company.
g. "COMPANY" means DSP COMMUNICATIONS, INC., a Delaware
corporation.
h. "CONSULTANT" means any person, including an advisor,
engaged by the Company or a Parent or Subsidiary to render services, and who is
compensated for such services, provided that the term "Consultant" shall not
include Directors who are paid only a director's fee by the Company, or who are
not compensated by the Company for their services as Directors.
i. "CONTINUOUS STATUS AS AN EMPLOYEE OR CONSULTANT" means that
the employment or consulting relationship is not interrupted or terminated by
the Company, any parent or Subsidiary. Continuous Status as an Employee or
Consultant shall not be considered interrupted in the case of: (i) any leave of
absence approved by the Company, including sick leave, military leave or any
other personal leave; provided, however, that for purposes of Incentive Stock
Options, no such leave may exceed ninety (90) days, unless re-
<PAGE> 2
employment upon the expiration of such leave is guaranteed by contract
(including certain Company policies) or statute; provided, further, that on the
ninety-first (91st) day of any such leave (where re-employment is not guaranteed
by contract or statute) the Optionee's Incentive Stock Option shall
automatically convect to a Nonstatutory Stock Option; or (ii) transfers between
locations of the Company or between the Company, its Parent, its Subsidiaries or
its successor.
j. "DIRECTOR" means a member of the Board.
k. "DISABILITY" means total and permanent disability as
defined in Section 22(e)(3) of the Code.
l. "EMPLOYEE" means any person, including Officers and
Directors, employed by the Company or any Parent or Subsidiary of the Company.
Neither service as a Director not payment of a Director's fee by the Company
shall be sufficient to constitute "employment" by the Company.
m. "EXCHANGE ACT" means the Securities Exchange Act of 1934,
as amended.
n. "FAIR MARKET VALUE" means, as of any date, the value of
Common Stock determined as follows:
i. If the Common Stock is listed on any established
stock exchange or a national market system, including, without limitation, the
National Market System of the National Association of Securities Dealers, Inc.
Automated Quotation ("Nasdaq") System, the Fair Market Value of a Share of
Common Stock shall be the closing sales price for such stock (or the closing
bid, if not shares were reported) as quoted on such system or exchange (or the
exchange with the greatest volume of trading in Common Stock) on the last market
trading day prior to the date of determination, as reported in The Wall Street
Journal, or such other source as the Administrator deems reliable;
ii. If the Common Stock is quoted on the Nasdaq
System (but not on the National Market System thereof), or is regularly quoted
by a recognized securities dealer, but selling prices are not reported, the Fair
Market Value of a Share of Common Stock shall be the mean between the high bid
and low asked prices for the Common Stock on the last market trading day prior
to the day of determination, as reported in The Wall Street Journal, or such
other source as the Administrator deems reliable;
iii. In the absence of an established market for the
Common Stock, the Fair Market Value shall be determined in good faith by the
Administrator.
o. "INCENTIVE STOCK OPTION" means an Option intended to
qualify as an incentive stock option within the meaning of Section 422 of the
Code and the regulations promulgated thereunder.
p. "NONSTATUTORY STOCK OPTION" means an Option not intended to
qualify as an Incentive Stock Option.
2.
<PAGE> 3
q. "NOTICE OF GRANT" means a written notice evidencing certain
terms and conditions of an individual Option grant. The Notice of Grant is part
of the Option Agreement.
r. "OFFICER" means a person who is an officer of the Company
within the meaning of Section 16 of the Exchange Act and the rules and
regulations promulgated thereunder.
s. "OPTION" means a stock option granted pursuant to the Plan.
t. "OPTION AGREEMENT" means a written agreement between the
Company and an Optionee evidencing the terms and conditions of an individual
Option grant. The Option Agreement is subject to the terms and conditions of the
Plan.
u. "OPTION EXCHANGE PROGRAM" means a program whereby
outstanding options are surrendered in exchange for options with a lower
exercise price.
v. "OPTIONED STOCK" means the Common Stock subject to an
Option.
w. "OPTIONEE" means an Employee or Consultant who holds an
outstanding Option.
x. "PARENT" shall mean a "parent corporation", whether now or
hereafter existing, as defined in Section 424(e) of the Code.
y. "PLAN" shall mean this 1995 U.S. Employee and Consultant
Stock Plan.
z. "RULE 16b-3" means Rule 16b-3 of the Exchange Act, or any
successor to Rule 16b-3, as in effect when discretion is being exercised with
respect to the Plan.
aa. "SHARE" means a share of the Common Stock, as adjusted in
accordance with Section 12 of the Plan.
bb. "SUBSIDIARY" means a "subsidiary corporation", whether now
or hereafter existing, as defined in Section 424(f) of the Code.
3. STOCK SUBJECT TO THE PLAN. Subject to the provisions of Section 12
of the Plan, the maximum aggregate number of Shares which may be optioned and
sold under the Plan is 4,800,000 Shares. The Shares may be authorized, but
unissued, or reacquired Common Stock. However, should the Company reacquire
Shares which were issued pursuant to the exercise of an Option, such Shares
shall not become available for future grant under the Plan.
If an Option expires or becomes unexercisable without having
been exercised in full, or is surrendered pursuant to an Option Exchange
Program, the unpurchased Shares which were subject thereto shall become
available for future grant or sale under the Plan (unless the Plan has been
terminated); provided, however, that Shares that have actually
3.
<PAGE> 4
been issued under the Plan shall not be returned to the Plan and shall not
become available for future distribution under the Plan.
4. ADMINISTRATION OF THE PLAN.
a. PROCEDURE.
i. MULTIPLE ADMINISTRATIVE BODIES. If permitted by
Rule 16b-3, the Plan may be administered by different bodies with respect to
Directors, Officers who are not Directors and Employees who are neither
Directors nor Officers.
ii. ADMINISTRATION WITH RESPECT TO DIRECTORS AND
OFFICERS SUBJECT TO SECTION 16(b). With respect to Option grants made to
Employees who are also Officers or Directors subject to Section 16(b) of the
Exchange Act, the Plan shall be administered by (A) the Board, if the Board may
administer the Plan in compliance with the rules governing a plan intended to
qualify as a discretionary plan under Rule 16b-3, or (B) a committee designated
by the Board to administer the Plan, which committee shall be constituted to
comply with the rules governing a plan intended to qualify as a discretionary
plan under Rule 16b-3. Once appointed, such Committee shall continue to serve in
its designated capacity until otherwise directed by the Board. From time to
time, the Board may increase the size of the Committee and appoint additional
members, remove members (with or without cause) and substitute new members, fill
vacancies (however caused) and remove all members of the Committee and
thereafter directly administer the Plan, all to the extent permitted by the
rules governing a plan intended to qualify as a discretionary plan under Rule
16b-3.
iii. ADMINISTRATION WITH RESPECT TO OTHER PERSONS.
With respect to Option grants made to Employees or Consultants who are neither
Directors nor Officers of the Company, the Plan shall be administered by (i) the
Board; or (ii) a committee designated by the Board, which committee shall be
constituted to satisfy Applicable Laws. Once appointed, such Committee shall
serve in its designated capacity and otherwise directed by the Board. The Board
may increase the size of the new Committee and appoint additional members,
remove members (with or without cause), and substitute new members, fill
vacancies (however caused) and remove all members of the Committee and
thereafter directly administer the Plan, all to the extent permitted by
Applicable Laws.
b. POWERS OF THE ADMINISTRATOR. Subject to the provisions of
the Plan, and in the case of a Committee, subject to the specific duties
delegated by the Board to such Committee, the Administrator shall have the
authority, in its discretion:
i. to determine the Fair Market Value of the Common
Stock, in accordance with Section 2(n) of the Plan;
ii. to select the Consultants and Employees to whom
Options may be granted hereunder;
iii. to determine whether and to what extent Options
are granted hereunder;
4.
<PAGE> 5
iv. to determine the number of shares of Common Stock
to be covered by each Option granted hereunder;
v. to approve forms of agreement for use under the
Plan;
vi. to determine the terms and conditions, not
inconsistent with the terms of the Plan, of any award granted hereunder. Such
terms and conditions include, but are not limited to, the exercise price, the
time or times when Options may be exercised (which may be based on performance
criteria), any vesting acceleration or waiver of forfeiture restrictions and any
restriction or limitation regarding any Option or the shares of Common Stock
relating thereto based in each case on such factors as the Administrator, in its
sole discretion, shall determine;
vii. to reduce the exercise price of any Option to
the then-current Fair Market Value, if the Fair Market Value of the Common Stock
covered by such Option shall have declined since the date the Option was
granted;
viii. to construe and interpret the terms of the Plan
and awards granted pursuant to the Plan;
ix. to prescribe, amend and rescind rules and
regulations relating to the Plan;
x. to modify or amend each Option (subject to Section
16 of the Plan);
xi. to authorize any person to execute on behalf of
the Company any instrument required to effect the grant of an Option previously
granted by the Administrator;
xii. to institute an Option Exchange Program;
xiii. to determine the terms and restrictions
applicable to Options; and
xiv. to make all other determinations deemed
necessary or advisable for administering the Plan.
c. EFFECT OF ADMINISTRATOR'S DECISION. The Administrator's
decisions, determinations and interpretations shall be final and binding on all
Optionees and any other holders of Options.
5. ELIGIBILITY. Nonstatutory Stock Options may be granted to Employees
and Consultants. Incentive Stock Options may be granted only to Employees. If
otherwise eligible, an Employee or Consultant who has been granted an Option may
be granted additional Options.
6. LIMITATIONS.
5.
<PAGE> 6
a. Each Option shall be designated in the Notice of Grant as
either an Incentive Stock Option or a Nonstatutory Stock Option. However,
notwithstanding such designations, to the extent that the aggregate Fair Market
Value of shares subject to an Optionee's incentive stock options granted by the
Company, any Parent or Subsidiary, which become exercisable for the first time
during any calendar year (under all plans of the Company, or any Parent or
Subsidiary), exceeds $100,000, such excess Options shall be treated as
Nonstatutory Stock Options. For purposes of this Section 6.a., Incentive Stock
Options shall be taken into account in the order in which they were granted, and
the Fair Market Value of the Shares shall be determined as of the time of grant.
b. Neither the Plan nor any Option shall confer upon an
Optionee any right with respect to continuing the Optionee's employment or
consulting relationship with the Company, nor shall they interfere in any way
with the Optionee's right or the Company's right to terminate such employment or
consulting relationship at any time, with or without cause.
c. The following limitation shall apply to grants of Options
under the Plan:
No Employee shall be granted, in any fiscal year of the
Company, Options to purchase more than 400,000 Shares.
The foregoing limitation shall be adjusted proportionately in
connection with any change in the Company's capitalization as described in
Section 12.
The limitation set forth in this Section 6.c. is intended to
satisfy the requirements applicable to Options intended to qualify as
"performance-based compensation" (within the meaning of Section 162(m) of the
Code). In the event the Administrator determines that such limitations are not
required to qualify Options as performance-based compensation, the Administrator
may modify or eliminate such limitations.
7. TERM OF PLAN. Subject to Section 16 of the Plan, the Plan shall
become effective upon the earlier to occur of its adoption by the Board, or its
approval by the stockholders of the Company as described in Section 18 of the
Plan. It shall continue in effect for a term of ten (10) years, (unless
terminated earlier) under Section 14 of the Plan.
8. TERM OF OPTION. The term of each Option shall be stated in the
Notice of Grant; provided, however, that in the case of an Incentive Stock
Option, the term shall be ten (10)years from the date of grant or such shorter
term as may be provided in the notice of Grant. Moreover, in the case of an
Incentive Stock Option granted to an Optionee who, at the time the Incentive
Stock Option is granted, owns stock representing more than ten percent (10%) of
the voting power of all classes of stock of the Company, or any Parent or
Subsidiary, the term of the Incentive Stock Option shall be five (5) years from
the date of grant or such shorter term as may be provided in the Notice of
Grant.
9. OPTION EXERCISE PRICE AND CONSIDERATION.
6.
<PAGE> 7
a. EXERCISE PRICE. The per Share exercise price for the Shares
to be issued pursuant to exercise of an Option shall be determined by the
Administrator, subject to the following:
i. In the case of an Incentive Stock Option:
(1) granted to an Employee who, at the time
the Incentive Stock Option is granted, owns stock representing more than ten
percent (10%) of the voting power of all classes of stock of the Company, or any
Parent or Subsidiary, the per share exercise price shall be no less than one
hundred ten percent (110%) of the Fair Market Value per Share on the date of
grant.
(2) granted to any Employee, the per Share
exercise price shall be no less than one hundred percent (100%) of the Fair
Market Value per Share on the date of grant.
ii. In the case of a Nonstatutory Stock Option, the
per Share exercise price shall be determined by the Administrator.
b. WAITING PERIOD AND EXERCISE DATES. At the time an Option is
granted, the Administrator shall fix the period within which the Option may be
exercised and shall determine any conditions which must be satisfied before the
Option may be exercised. In s doing, the Administrator may specify that an
Option may not be exercised until the completion of a service period.
c. FORM OF CONSIDERATION. The Administrator shall determine
the acceptable form of consideration for exercising an Option, including the
method of payment. In the case of an Incentive Stock Option, the Administrator
shall determine the acceptable form of consideration at the time of grant. Such
consideration may consist of:
i. cash;
ii. check;
iii. promissory note;
iv. other Shares which (i) in the case of Shares
acquired upon exercise of an Option, have been owned by the Optionee for more
than six (6) months on the date of surrender; and (ii) have 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;
v. a reduction in the amount of any Company liability
to the Optionee, including any liability attributable to the Optionee's
participation in any Company-sponsored deferred compensation program or
arrangement;
vi. any combination of the foregoing methods of
payment; or
7.
<PAGE> 8
vii. such other consideration and method of payment
for the issuance of Shares to the extent permitted by Applicable Laws.
10. EXERCISE OF OPTION.
a. PROCEDURE FOR EXERCISE; RIGHTS AS A STOCKHOLDER. Any Option
granted hereunder shall be exercisable according to the terms of the Plan, and
at such times and under such conditions as determined by the Administrator and
set forth in the Option Agreement.
An Option may not be exercised for a fraction of a Share.
An Option shall be deemed to be exercised when the Company
receives: (i) written notice of exercise, together with such other documentation
as the Administrator and the broker, if applicable, shall require to effect an
exercise of the Option (all in accordance with the Option Agreement) from the
person entitled to exercise the Option, and (ii) full payment for the Shares
with respect to which the Option is exercised. Full payment may consist of any
consideration and method of payment authorized by the Administrator and
permitted by the Option Agreement and the Plan. Shares issued upon exercise of
an Option shall be issued in the name of the Optionee, or, if requested by the
Optionee, in the name of the Optionee and his or her spouse. Until the stock
certificate evidencing such Shares is issued (as evidenced by the appropriate
entry on the books of the Company or of a duly authorized transfer agent of the
Company), 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. The Company shall issue (or cause to be issued) such
stock certificate promptly after the Option is exercised. 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 12 of the
Plan.
Exercising an Option in any manner shall decrease the number
of Shares thereafter 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 EMPLOYMENT OR CONSULTING RELATIONSHIP. Upon
termination of an Optionee's Continuous Status as an Employee or Consultant,
other than upon the Optionee's death or Disability, the Optionee may exercise
his or her Option, but only within such period of time as is determined by the
Administrator, and only to the extent that the Optionee was entitled to exercise
it at the date of such termination (but in no event later than the expiration of
the term of such Option as set forth in the Notice of Grant). In the case of an
Incentive Stock Option, the Administrator shall determine such period of time
(in no event to exceed ninety (90) days from the date of termination) when the
Option is granted. If, at the date of termination, the Optionee is not entitled
to exercise his or her entire Option, the Shares covered by the unexercisable
portion of the Option shall revert to the Plan. If, after termination, the
Optionee does not exercise his or her Option within the time specified by the
Administrator, the Option shall terminate, and the Shares covered by such Option
shall revert to the Plan.
8.
<PAGE> 9
c. DISABILITY OF OPTIONEE. In the event that an Optionee's
Continuous Status as an Employee or Consultant terminates as a result of
Optionee's Disability, the Optionee may exercise his or her Option at any time
within twelve (12) months from the date of such termination, but only to the
extent that the Optionee was entitled to exercise it at the date of such
termination (but in no event later than the expiration of the term of such
Option as set forth in the Notice of Grant). If, at the date of termination, the
Optionee is not entitled to exercise his or her entire Option, the Shares
covered by the unexercisable portion of the Option shall revert to the Plan. If,
after termination, the Optionee does not exercise his or her Option within the
time specified herein, the Option shall terminate, and the Shares covered by
such Option shall revert to the Plan.
d. DEATH OF OPTIONEE. In the event of the death of an
Optionee, the Option may be exercised at any time within twelve (12) months
following the date of death (but in no event later than the expiration of the
term of such Option as set forth in the Notice of Grant), 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 that the Optionee was entitled to
exercise the Option at the date of death. If, at the time of death, the Optionee
was not entitled to exercise his or her entire Option, the Shares covered by the
unexercisable portion of the Option shall immediately revert to the Plan. If,
after death, the Optionee's estate or a person who acquired the right to
exercise the Option by bequest or inheritance does not exercise the Option
within the time specified herein, the Option shall terminate and the Shares
covered by such Option shall revert to the Plan.
e. RULE 16b-3. Options granted to individuals subject to
Section 16 of the Exchange Act ("Insiders"), must comply with the applicable
provisions of Rule 16b-3 and shall contain such additional conditions or
restrictions as may be required thereunder to qualify for the maximum exemption
from Section 16 of the Exchange Act with respect to Plan transactions.
11. NONTRANSFERABILITY OF OPTIONS. An 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, and may be exercised, during the
lifetime of the Optionee, only by the Optionee.
12. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION, DISSOLUTION, MERGER,
ASSET SALE OR CHANGE OF CONTROL.
a. CHANGES IN CAPITALIZATION. Subject to any required action
by the Stockholders of the Company, the number of Shares of Common Stock covered
by each outstanding Option, and the number of Shares of Common Stock 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 of Common Stock covered
by each such outstanding Option, shall e proportionately adjusted for any
increase or decrease in the number of issued Shares of Common Stock 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 of Common Stock effected without receipt of
consideration by the Company; provided, however, that conversion of any
convertible securities of the Company shall not be
9.
<PAGE> 10
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 price of Shares of Common Stock 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. Subject to the provisions of
paragraph (d) hereof, in the event of a merger of the Company with or into
another corporation, or the sale of substantially all of the assets of the
Company, each outstanding Option shall be assumed or an equivalent option or
right shall be substituted by the successor corporation or a Parent or
Subsidiary of the successor corporation. In the event that the successor
corporation does not agree to assume the Option or to substitute an equivalent
option, the Administrator shall, in lieu of such assumption or substitution,
provide for the Optionee to have the right to exercise the Option as to all or a
portion of the Optioned Stock, including Shares as to which it would not
otherwise be exercisable. If the Administrator makes an Option exercisable in
lieu of assumption or substitution in the event of a merger or sale of assets,
the Administrator shall notify the Optionee that the Option shall be fully
exercisable for a period of fifteen (15) days from the date of such notice, and
the Option will terminate upon the expiration of such period. For the purposes
of this paragraph, the Option shall be considered assumed if, following the
merger or sale of assets, the option confers the right to purchase, for each
Share of Optioned Stock subject to the Option immediately prior to the merger or
sale of assets, the consideration (whether stock, cash or other securities or
property) received in the merger or sale of assets by holders of Common Stock
for each Share held on the effective date of the transaction (and if holders
were offered a choice of consideration, the type of consideration chosen by the
holders of a majority of the outstanding Shares); provided, however, that if
such consideration received in the merger or sale of assets not solely common
stock of the successor corporation or its Parent, the Administrator may, with
the consent of the successor corporation, provide for the consideration to be
received upon the exercise of the Option, for each Share of Optioned Stock
subject to the Option, to be solely common stock of the successor corporation or
its Parent equal in fair market value to the per-share consideration received by
holders of Common Stock in the merger or sale of assets.
d. CHANGE IN CONTROL. In the event of a "Change of Control" of
the Company, as defined in paragraph (e) below, then the following acceleration
and valuation provisions shall apply:
i. Except as otherwise determined by the Board, in
its discretion, in the event of an anticipated Change in Control, any Options
outstanding on the date such
10.
<PAGE> 11
Change in Control is determined to have occurred that are not yet exercisable
and vested on such date shall become fully exercisable and vested;
ii. Except as otherwise determined by the Board, in
its discretion, in the event of an anticipated Change in Control, all
outstanding Options, to the extent they are exercisable and vested (including
Options that shall become exercisable and vested pursuant to subparagraph i.
above), shall be terminated in exchange for a cash payment equal to the Change
in Control Price (reduced by the exercise price applicable to such Options).
These cash proceeds shall be paid to the Optionee or, in the event of death of
an Optionee, prior to payment, to the estate of the Optionee or a person who
acquired the right to exercise the Option by bequest or inheritance.
iii. Any payment made pursuant to this paragraph (d)
shall not exceed the maximum amount which could be paid to an Optionee without
having the payment treated as an "excess parachute payment" within the meaning
of Section 280G of the Code.
e. DEFINITION OF "CHANGE IN CONTROL". For purposes of this
Section 12, a "Change in Control" means the happening of any of the following:
i. When any "person", as such term is used in
Sections 13(d) and 14(d) of the Exchange Act (other than the Company, a
Subsidiary or a Company employee benefit plan, including any trustee of such
plan acting as trustee), is or becomes the "beneficial owner" (as defined in
Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the
Company representing more than twenty-five percent (25%) of the combined voting
power of the Company's then-outstanding securities entitled to vote generally in
the election of directors; or
ii. A merger or consolidation of the Company with any
other corporation, other than a merger or consolidation which would result in
the voting securities of the Company outstanding immediately prior thereto
continuing to represent (either by remaining outstanding or by being converted
into voting securities of the surviving entity) at least seventy-five percent
(75%) of the total voting power represented by the voting securities of the
Company or such surviving entity outstanding immediately after such merger or
consolidation, or the Stockholders of the Company approve an agreement for the
sale or disposition by the Company of all or substantially all the Company's
assets; or
iii. A change in the composition of the Board of
Directors of the Company occurring within a two (2) year period, as a result of
which fewer than a majority of the directors are Incumbent Directors. "Incumbent
Directors" shall mean directors who either (i) are directors of the Company as
of the date the Plan is approved by the Stockholders; or (ii) are elected, or
nominated for election to the Board of Directors of the Company with the
affirmative votes of at least a majority of the Incumbent Directors at the time
of such election or nomination (but shall not include an individual whose
election or nomination is in connection with an actual or threatened proxy
contest relating to the election of directors to the Company).
f. CHANGE IN CONTROL PRICE. For purposes of this Section 12,
"Change in Control Price" shall be, as determined by the Board: (i) the highest
Fair Market Value of a
11.
<PAGE> 12
Share within the 60-day period immediately preceding the date of determination
of the Change of Control Price by the Board (the "60-Day Period"); or (ii) the
highest price paid or offered per Share, as determined by the Board, in any bona
fide transaction or bona fide offer related to the Change in Control of the
Company, at any time within the 60-Day Period; or (iii) some lower price as the
Board, in its discretion, determines to be a reasonable estimate of the fair
market value of a Share.
13. DATE OF GRANT. The date of grant of an Option shall be, for all
purposes, the date on which the Administrator makes the determination granting
such Option, or such other later date as is determined by the Administrator.
Notice of the determination shall be provided to each Optionee within a
reasonable time after the date of such grant.
14. AMENDMENT AND TERMINATION OF THE PLAN.
a. AMENDMENT AND TERMINATION. The Board may at any time amend,
alter, suspend or terminate the Plan.
b. STOCKHOLDER APPROVAL. The Company shall obtain Stockholder
approval of any Plan amendment to the extent necessary and desirable to comply
with Rule 16b-3 or with Section 422 of the Code (or any successor rule or
statute or other applicable law, rule or regulation, including the requirements
of any exchange or quotation system on which the Common Stock is listed or
quoted). Such Stockholder approval, if required, shall be obtained in such a
manner and to such a degree as is required by the applicable law, rule or
regulation.
c. EFFECT OF AMENDMENT OR TERMINATION. No amendment,
alteration, suspension or termination of the Plan shall impair the rights of any
Optionee, unless mutually agreed otherwise between the Optionee and the
Administrator, which agreement must be in writing and signed by the Optionee and
the Company.
15. CONDITIONS UPON ISSUANCE OF SHARES.
g. LEGAL COMPLIANCE. 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 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, Applicable Laws,
and the requirements of any stock exchange or quotation system upon which the
Shares may then be listed or quoted, and shall be further subject to the
approval of counsel for the Company with respect to such compliance.
h. INVESTMENT REPRESENTATION. 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.
16. LIABILITY OF COMPANY.
12.
<PAGE> 13
a. INABILITY TO OBTAIN AUTHORITY. The inability of the Company
to obtain authority from any regulatory body having jurisdiction, which
authority is deemed by the Company 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.
b. GRANTS EXCEEDING ALLOTTED SHARES. If the Option Stock
covered by an Option exceeds, as of the date of grant, the number of Shares
which may be issued under the Plan without additional Stockholder approval, such
Option shall be void with respect to such excess Optioned Stock, unless
Stockholder approval of an amendment sufficiently increasing the number of
Shares subject to the Plan is timely obtained in accordance with Section 14.b of
the Plan.
17. 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.
18. STOCKHOLDER APPROVAL. Continuance of the Plan shall be subject to
approval by the Stockholders of the Company within twelve (12) months before or
after the date the Plan is adopted. Such Stockholder approval shall be obtained
in the manner and to the degree required under applicable federal and state law.
13.
<PAGE> 1
EXHIBIT 20
DSP COMMUNICATIONS, INC.
1995 EMPLOYEE STOCK PURCHASE PLAN
The following constitute the provisions of the 1995 Employee Stock
Purchase Plan of DSP COMMUNICATIONS, INC.
1. PURPOSE. The purpose of the Plan is to provide employees of the Company
and its Designated Subsidiaries with an opportunity to purchase Common Stock of
the Company through accumulated payroll deductions. It is the intention of the
Company to have the Plan qualify as an "Employee Stock Purchase Plan" under
Section 423 of the Internal Revenue Code of 1986, as amended. The provisions of
the Plan, accordingly, shall be construed so as to extend and limit
participation in a manner consistent with the requirements of that section of
the Code.
2. DEFINITIONS.
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 COMMUNICATIONS, INC., a Delaware
corporation.
e. "COMPENSATION" shall mean all base straight time gross earnings,
exclusive of payments for overtime, shift premium, incentive compensation,
incentive payments, bonuses, commissions and other compensation.
f. "DESIGNATED SUBSIDIARIES" shall mean the Subsidiaries which have
been designated by the Board from time to time in its sole discretion as
eligible to participate in the Plan.
g. "EMPLOYEE" shall mean any individual who is an Employee of the
Company for purposes of tax withholding under the Code whose customary
employment with the Company or any Designated Subsidiary is at least twenty (20)
hours per week and more than five (5) months in any calendar year. For purposes
of the Plan, the employment relationship shall be treated as continuing intact
while the individual is on sick leave or other leave of absence approved by the
Company. Where the period of leave exceeds ninety (90) days and the individual's
right to re-employment is not guaranteed either by statute or by contract, the
employment relationship will be deemed to have terminated on the ninety-first
(91st) day of such leave.
h. "ENROLLMENT DATE" shall mean the first day of each Offering
Period.
<PAGE> 2
i. "EXERCISE DATE" shall mean the last day of each Purchase Period.
j. "FAIR MARKET VALUE" shall mean, as of any date, the value of
Common Stock determined as follows:
i. If the Common Stock is listed on any established stock
exchange or a national market system, including without limitation the National
Market System of the National Association of Securities Dealers, Inc. Automated
Quotation ("NASDAQ") System, its Fair Market Value shall be the closing sale
price for the Common Stock (or the mean of the closing bid and asked prices, if
no sales were reported), as quoted on such exchange (or the exchange with the
greatest volume of trading in Common Stock) or system on the date of such
determination, as reported in The Wall Street Journal or such other source as
the Board deems reliable, or;
ii. If the Common Stock is quoted on the NASDAQ system (but
not on the National Market System thereof) or is regularly quoted by a
recognized securities dealer but selling prices are not reported, its Fair
Market Value shall be the mean of the closing bid and asked prices for the
Common Stock on the date of such determination, as reported in The Wall Street
Journal or such other source as the Board deems reliable, or;
iii. In the absence of an established market for the Common
Stock, the Fair Market Value thereof shall be determined in good faith by the
Board.
iv. For purposes of the Enrollment Date under the first
Offering Period under the Plan, the Fair Market Value of the Common Stock shall
be the Price to Public 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.
k. "OFFERING PERIOD" shall mean the period of approximately
twenty-four (24) months during which an option granted pursuant to the Plan may
be exercised, commencing on the first Trading Day on or after January 1 and July
1 of each year and terminating on the last Trading Day in the periods ending
twenty-four (24) months later, except that the first Offering Period shall be a
shortened Offering Period of approximately twenty-two (22) months, commencing
with 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 and ending on the last Trading Day in the period ending December 31,
1996. The second Offering Period under the Plan shall commence with the first
Trading Day on or after July 1, 1995. The duration of Offering Periods may be
changed pursuant to Section 4 of this Plan.
l. "PLAN" shall mean this 1995 Employee Stock Purchase Plan.
m. "PURCHASE PRICE" shall mean an amount equal to eighty-five
percent (85%) of the Fair Market Value of a share of Common Stock on the
Enrollment Date or on the Exercise Date, whichever is lower.
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<PAGE> 3
n. "PURCHASE PERIOD" shall mean the approximately six (6) month
period commencing after one Exercise Date and ending with the next Exercise
Date, except that the first Purchase Period of any Offering Period shall
commence on the Enrollment Date and end with the next Exercise Date; provided,
however, that the first Purchase Period of the first Offering Period under the
Plan shall commence with 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 and end on the last Trading Day occurring in
the period ending June 30, 1995.
o. "RESERVES" shall mean the number of shares of Common Stock
covered by each option under the Plan which have not yet been exercised and the
number of shares of Common Stock which have been authorized for issuance under
the Plan but not yet placed under option.
p. "SUBSIDIARY" shall mean a corporation, domestic or foreign, of
which not less than fifty percent (50%) of the voting shares are held by the
Company or a Subsidiary, whether or not such corporation now exists or is
hereafter organized or acquired by the Company or a Subsidiary.
q. "TRADING DAY" shall mean a day on which national stock exchanges
and the NASDAQ System are open for trading.
3. ELIGIBILITY.
a. Any Employee (as defined in Section 2.g), who shall be employed
by the Company on a given Enrollment Date shall be eligible to participate in
the Plan.
b. Any provisions of the Plan to the contrary notwithstanding, no
Employee shall be granted an option under the Plan (i) if, immediately after the
grant, such Employee (or any other person whose stock would be attributed to
such Employee pursuant to Section 424(d) of the Code) would own capital stock of
the Company and/or hold outstanding options to purchase such stock possessing
five percent (5%) or more of the total combined voting power or value of all
classes of the capital stock of the Company or of any Subsidiary, or (ii) which
permits his or her rights to purchase stock under all employee stock purchase
plans of the Company and its subsidiaries to accrue at a rate which exceeds
Twenty-five Thousand Dollars ($25,000) worth of stock (determined at the fair
market value of the shares at the time such option is granted) for each calendar
year in which such option is outstanding at any time.
4. OFFERING PERIODS. The Plan shall be implemented by consecutive,
overlapping Offering Periods with a new Offering Period commencing on the first
Trading Day on or after January 1 and July 1 each year, or on such other date as
the Board shall determine, and continuing thereafter until terminated in
accordance with Section 19 hereof; provided, however, that the first Offering
Period under the Plan shall be a shortened Offering Period of approximately
twenty-two (22) months, commencing with the first Trading Day on or after
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<PAGE> 4
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 and ending on the last Trading Day in the period ending December 31,
1996. The second Offering Period under the Plan shall commence with the first
Trading Day on or after July 1, 1995. The Board shall have the power to change
the duration of Offering Periods (including the commencement and termination
dates thereof) with respect to future offerings without stockholder approval if
such change is announced at least fifteen (15) days prior to the scheduled
beginning of the first Offering Period to be affected thereafter.
5. PARTICIPATION.
a. An eligible Employee may become a participant in the Plan by
completing a subscription agreement authorizing payroll deductions in the form
of Exhibit A to this Plan and filing it with the Company's payroll office prior
to the applicable Enrollment Date, unless a later time for filing the
subscription agreement is set by the Board for all eligible Employees with
respect to a given Offering Period.
b. Payroll deductions for a participant shall commence on the first
payroll following the Enrollment Date and shall end on the last payroll in the
Offering Period to which such authorization is applicable, unless sooner
terminated by the participant as provided in Section 10 hereof.
6. PAYROLL DEDUCTIONS.
a. At the time a participant files his or her subscription
agreement, he or she shall elect to have payroll deductions made on each pay day
during the Offering Period in an amount not exceeding ten percent (10%) of the
Compensation which he or she receives on each pay day during the Offering
Period, and the aggregate of such payroll deductions during the Offering Period
shall not exceed ten percent (10%) of the participant's Compensation during said
Offering Period.
b. All payroll deductions made for a participant shall be credited
to his or her account under the Plan and will be withheld in whole percentages
only. A participant may not make any additional payments into such account.
c. A participant may discontinue his or her participation in the
Plan as provided in Section 10 hereof, or may increase or decrease the rate of
his or her payroll deductions during the Offering Period by completing or filing
with the Company a new subscription agreement authorizing a change in payroll
deduction rate. The Board may, in its discretion, limit the number of
participation rate changes during any Offering Period. The change in rate shall
be effective with the first full payroll period following five (5) business days
after the Company's receipt of the new subscription agreement unless the Company
elects to process a given change in participation more quickly. A participant's
subscription agreement shall remain in effect for successive Offering Periods
unless terminated as provided in Section 10 hereof.
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<PAGE> 5
d. Notwithstanding the foregoing, to the extent necessary to comply
with Section 423(b)(8) of the Code and Section 3(b) hereof, a participant's
payroll deductions may be decreased to zero percent (0%) at such time during any
Purchase Period which is scheduled to end during the current calendar year (the
"Current Purchase Period") that the aggregate of all payroll deductions which
were previously used to purchase stock under the Plan in a prior Purchase Period
which ended during that calendar year plus all payroll deductions accumulated
with respect to the Current Purchase Period equal Twenty-one Thousand Two
Hundred Fifty Dollars ($21,250). Payroll deductions shall recommence at the rate
provided in such participant's subscription agreement at the beginning of the
first Purchase Period which is scheduled to end in the following calendar year,
unless terminated by the participant as provided in Section 10 hereof.
e. At the time the option is exercised, in whole or in part, or at
the time some or all of the Company's Common Stock issued under the Plan is
disposed of, the participant must make adequate provision for the Company's
federal, state, or other tax withholding obligations, if any, which arise upon
the exercise of the option or the disposition of the Common Stock. At any time,
the Company may, but will not be obligated to, withhold from the participant's
compensation the amount necessary for the Company to meet applicable withholding
obligations, including any withholding required to make available to the Company
any tax deductions or benefits attributable to sale or early disposition of
Common Stock by the Employee.
7. GRANT OF OPTION. On the Enrollment Date of each Offering Period, each
eligible Employee participating in such Offering Period shall be granted an
option to purchase on each Exercise Date during such Offering Period (at the
applicable Purchase Price) up to a number of shares of the Company's Common
Stock determined by dividing such Employee's payroll deductions accumulated
prior to such Exercise Date and retained in the Participant's account as of the
Exercise Date by the applicable Purchase Price; provided that in no event shall
an Employee be permitted to purchase during each Purchase Period more than a
number of Shares determined by dividing Twenty-five Thousand Dollars ($25,000)
by the Fair Market Value of a share of the Company's Common Stock on the
Enrollment Date, and provided further that such purchase shall be subject to the
limitations set forth in Section 3.b and 12 hereof. Exercise of the option shall
occur as provided in Section 8 hereof, unless the participant has withdrawn
pursuant to Section 10 hereof, and shall expire on the last day of the Offering
Period.
8. EXERCISE OF OPTION. Unless a participant withdraws from the Plan as
provided in Section 10 hereof, his or her option for the purchase of shares will
be exercised automatically on the Exercise Date, and the maximum number of full
shares subject to option shall be purchased for such participant at the
applicable Purchase Price with the accumulated payroll deductions in his or her
account. No fractional share will be purchased; any payroll deductions
accumulated in a participant's account which are not sufficient to purchase a
full share shall be retained in the participant's account for the subsequent
Purchase Period or Offering Period, subject to earlier withdrawal by the
participant as provided in Section 10 hereof. Any other monies left over in a
participant's account after the Exercise Date shall be returned to the
participant. During a participant's lifetime, a
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<PAGE> 6
participant's option to purchase shares hereunder is exercisable only by him or
her.
9. DELIVERY. As promptly as practicable after each Exercise Date on which
a purchase of shares occurs, the Company shall arrange the delivery to each
participant, as appropriate, of a certificate representing the shares purchased
upon exercise of his or her option.
10. WITHDRAWAL; TERMINATION OF EMPLOYMENT.
a. A participant may withdraw all but not less than all the payroll
deductions credited to his or her account and not yet used to exercise his or
her option under the Plan at any time by giving written notice to the Company in
the form of Exhibit B to this Plan. All of the participant's payroll deductions
credited to his or her account will be paid to such participant promptly after
receipt of notice of withdrawal and such participant's option for the Offering
Period will be automatically terminated, and no further payroll deductions for
the purchase of shares will be made during the Offering Period. If a participant
withdraws from an Offering Period, payroll deductions will not resume at the
beginning of the succeeding Offering Period unless the participant delivers to
the Company a new subscription agreement.
b. Upon a participant's ceasing to be an Employee (as defined in
Section 2.g hereof), for any reason, including by virtue of him or her having
failed to remain an Employee of the Company for at least twenty (20) hours per
week during an Offering Period in which the Employee is a participant, he or she
will be deemed to have elected to withdraw from the Plan and the payroll
deductions credited to such participant's account during the Offering Period but
not yet used to exercise the option will be returned to such participant or, in
the case of his or her death, to the person or persons entitled thereto under
Section 14 hereof, and such participant's option will be automatically
terminated.
11. INTEREST. No interest shall accrue on the payroll deductions of a
participant in the Plan.
12. STOCK.
a. The maximum number of shares of the Company's Common Stock which
shall be made available for sale under the Plan shall be 2,000,000 shares,
subject to adjustment upon changes in capitalization of the Company as provided
in Section 18 hereof. If on a given Exercise Date the number of shares with
respect to which options are to be exercised exceeds the number of shares then
available under the Plan, the Company shall make a pro rata allocation of the
shares remaining available for purchase in as uniform a manner as shall be
practicable and as it shall determine to be equitable.
b. The participant will have no interest or voting right in shares
covered by his option until such option has been exercised.
c. Shares to be delivered to a participant under the Plan will be
registered
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<PAGE> 7
in the name of the participant or in the name of the participant and his or her
spouse.
13. ADMINISTRATION.
a. ADMINISTRATIVE BODY. The Plan shall be administered by the Board
or a committee of members of the Board appointed by the Board. The Board or its
committee shall have full and exclusive discretionary authority to construe,
interpret and apply the terms of the Plan, to determine eligibility and to
adjudicate all disputed claims filed under the Plan. Every finding, decision and
determination made by the Board or its committee shall, to the full extent
permitted by law, be final and binding upon all parties. Members of the Board
who are eligible Employees are permitted to participate in the Plan, provided
that:
i. Members of the Board who are eligible to participate in the
Plan may not vote on any matter affecting the administration of the Plan or the
grant of any option pursuant to the Plan.
ii. If a committee is established to administer the Plan, no
member of the Board who is eligible to participate in the Plan may be a member
of the committee.
b. RULE 16b-3 LIMITATIONS. Notwithstanding the provisions of
Subsection a. of this Section 13, in the event that Rule 16b-3 promulgated under
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), or any
successor provision ("Rule 16b-3") provides specific requirements for the
administrators of plans of this type, the Plan shall be only administered by
such a body and in such a manner as shall comply with the applicable
requirements of Rule 16b-3. Unless permitted by Rule 16b-3, no discretion
concerning decisions regarding the Plan shall be afforded to any committee or
person that is not "disinterested" as that term is used in Rule 16b-3.
14. DESIGNATION OF BENEFICIARY.
a. A participant may file a written designation of a beneficiary who
is to receive any shares and cash, if any, from the participant's account under
the Plan in the event of such participant's death subsequent to an Exercise Date
on which the option is exercised but prior to delivery to such participant of
such shares and cash. In addition, a participant may file a written designation
of a beneficiary who is to receive any cash from the participant's account under
the Plan in the event of such participant's death prior to exercise of the
option. If a participant is married and the designated beneficiary is not the
spouse, spousal consent shall be required for such designation to be effective.
b. Such designation of beneficiary may be changed by the participant
at any time by written notice. In the event of the death of a participant and in
the absence of a beneficiary validly designated under the Plan who is living at
the time of such participant's death, the Company shall deliver such shares
and/or cash to the executor or administrator of the estate of the participant,
or if no such executor or administrator has been appointed (to the knowledge of
the Company), the Company, in its discretion, may deliver such shares and/or
cash to the spouse or to any one or more dependents or relatives of the
participant,
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<PAGE> 8
or if no spouse, dependent or relative is known to the Company, then to such
other person as the Company may designate.
15. TRANSFERABILITY. Neither payroll deductions credited to a
participant's account nor any rights with regard to the exercise of an option or
to receive shares under the Plan may be assigned, transferred, pledged or
otherwise disposed of in any way (other than by will, the laws of descent and
distribution or as provided in Section 14 hereof) by the participant. Any such
attempt at assignment, transfer, pledge or other disposition shall be without
effect, except that the Company may treat such act as an election to withdraw
funds from an Offering Period in accordance with Section 10 hereof.
16. USE OF FUNDS. All payroll deductions received or held by the Company
under the Plan may be used by the Company for any corporate purpose, and the
Company shall not be obligated to segregate such payroll deductions.
17. REPORTS. Individual accounts will be maintained for each participant
in the Plan. Statements of account will be given to participating Employees at
least annually, which statements will set forth the amounts of payroll
deductions, the Purchase Price, the number of shares purchased and the remaining
cash balance, if any.
18. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION, DISSOLUTION, LIQUIDATION,
MERGER OR ASSET SALE.
a. CHANGES IN CAPITALIZATION. Subject to any required action by the
stockholders of the Company, the Reserves as well as the price per share of
Common Stock covered by each option under the Plan which has not yet been
exercised shall be proportionately adjusted for any increase or decrease in the
number of issued shares of Common Stock 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 shares of Common Stock
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 price of shares of Common Stock subject
to an option.
b. DISSOLUTION OR LIQUIDATION. In the event of the proposed
dissolution or liquidation of the Company, the Offering Periods will terminate
immediately prior to the consummation of such proposed action, unless otherwise
provided by the Board.
c. MERGER OR ASSET SALE. In the event of a proposed sale of all or
substantially all of the assets of the Company, or the merger of the Company
with or into another corporation, each option under the Plan shall be assumed or
an equivalent option shall be substituted by such successor corporation or a
parent or subsidiary of such
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<PAGE> 9
successor corporation, unless the Board determines, in the exercise of its sole
discretion and in lieu of such assumption or substitution, to shorten the
Offering Periods then in progress by setting a new Exercise Date (the "New
Exercise Date"). If the Board shortens the Offering Periods then in progress in
lieu of assumption or substitution in the event of a merger or sale of assets,
the Board shall notify each participant in writing, at least ten (10) business
days prior the New Exercise Date that the Exercise Date for his option has been
changed to the New Exercise Date and that his option will be exercised
automatically on the New Exercise Date, unless prior to such date he has
withdrawn from the Offering Period as provided in Section 10 hereof. For
purposes of this paragraph, an option granted under the Plan shall be deemed to
be assumed if, following the sale of assets or merger, the option confers the
right to purchase, for each share of option stock subject to the option
immediately prior to the sale of assets or merger, the consideration (whether
stock, cash or other securities or property) received in the sale of assets or
merger by holders of Common Stock for each share of Common Stock held on the
effective date of the transaction (and if such holders were offered a choice of
consideration, the type of consideration chosen by the holders of a majority of
the outstanding shares of Common Stock); provided, however, that if such
consideration received in the sale of assets or merger was not solely common
stock of the successor corporation or its parent (as defined in Section 424(e)
of the Code), the Board may, with the consent of the successor corporation and
the participant, provide for the consideration to be received upon exercise of
the option to be solely common stock of the successor corporation or its parent
equal in fair market value to the per share consideration received by holders of
Common Stock and the sale of assets or merger.
19. AMENDMENT OR TERMINATION.
a. The Board of Directors of the Company may at any time and for any
reason terminate or amend the Plan. Except as provided in Section 18 hereof, no
such termination can affect options previously granted, provided that an
Offering Period may be terminated by the Board of Directors on any Exercise Date
if the Board determines that the termination of the Plan is in the best
interests of the Company and its stockholders. Except as provided in Section 18
hereof, no amendment may make any change in any option theretofore granted which
adversely affects the rights of any participant. To the extent necessary to
comply with Rule 16b-3 or under Section 423 of the Code (or any successor rule
or provision or any other applicable law or regulation), the Company shall
obtain stockholder approval in such a manner and to such a degree as required.
b. Without stockholder consent and without regard to whether any
participant rights may be considered to have been "adversely affected," the
Board (or its committee) shall be entitled to change the Offering Periods, limit
the frequency and/or number of changes in the amount withheld during an Offering
Period, establish the exchange ratio applicable to amounts withheld in a
currency other than U.S. dollars, permit payroll withholding in excess of the
amount designated by a participant in order to adjust for delays or mistakes in
the Company's processing of properly completed withholding elections, establish
reasonable waiting and adjustment periods and/or accounting and crediting
procedures to ensure that amounts applied toward the purchase of Common Stock
for each participant properly cor respond with amounts withheld from the
participant's Compensation,
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<PAGE> 10
and establish such other limitations or procedures as the Board (or its
committee) determines in its sole discretion advisable which are consistent with
the Plan.
20. NOTICES. All notices or other communications by a participant to the
Company under or in connection with the Plan shall be deemed to have been duly
given when received in the form specified by the Company at the location, or by
the person, designated by the Company for the receipt thereof.
21. CONDITIONS UPON ISSUANCE OF SHARES. Shares shall not be issued with
respect to an option unless the exercise of such option and the issuance and
delivery of such shares pursuant thereto shall comply with all applicable
provisions of law, domestic or foreign, including, without limitation, the
Securities Act of 1933, as amended, the Exchange Act, as amended, the rules and
regulations promulgated thereunder, 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 applicable provisions of law.
22. TERM OF PLAN. The Plan shall become effective upon the earlier to
occur of its adoption by the Board of Directors or its approval by the
stockholders of the Company. It shall continue in effect for a term of ten (10)
years unless sooner terminated under Section 19 hereof.
23. ADDITIONAL RESTRICTIONS OF RULE 16b-3. The terms and conditions of
options granted hereunder to, and the purchase of shares by, persons subject to
Section 16 of the Exchange Act shall comply with the applicable provisions of
Rule 16b-3. This Plan shall be deemed to contain, and such options shall
contain, and the shares issued upon exercise thereof shall be subject to, such
additional conditions and restrictions as may be required by Rule 16b-3 to
qualify for the maximum exemption from Section 16 of the Exchange Act with
respect to Plan transactions.
24. AUTOMATIC TRANSFER TO LOW PRICE OFFERING PERIOD. To the extent
permitted by Rule 16b-3 of the Exchange Act, if the Fair Market Value of the
Common Stock on any Exercise Date in an Offering Period is lower than the Fair
Market Value of the Common Stock on the Enrollment Date of such Offering Period,
then all participants in such Offering Period shall be automatically withdrawn
from such Offering Period immediately after the exercise of their option on such
Exercise Date and automatically re-enrolled in the immediately following
Offering Period as of the first day thereof.
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EXHIBIT A
SUBSCRIPTION AGREEMENT
___ Original Application Enrollment Date: _________
___ Change in Payroll Deduction Rate
___ Change of Beneficiary(ies)
1. _______________________ hereby elects to participate in the DSP
COMMUNICATIONS, INC. 1995 Employee Stock Purchase Plan (the "Employee Stock
Purchase Plan") and subscribes to purchase shares of the Company's Common Stock
in accordance with this Subscription Agreement and the Employee Stock Purchase
Plan.
2. I hereby authorize payroll deductions from each paycheck in the amount of
_____% of my Compensation on each payday (not to exceed 10%) during the Offering
Period in accordance with the Employee Stock Purchase Plan. (Please note that no
fractional percentages are permitted.)
3. I understand that said payroll deductions shall be accumulated for the
purchase of shares of Common Stock at the applicable Purchase Price determined
in accordance with the Employee Stock Purchase Plan. I understand that if I do
not withdraw from an Offering Period, any accumulated payroll deductions will be
used to automatically exercise my option.
4. I have received a copy of the complete "DSP COMMUNICATIONS, INC. 1995
Employee Stock Purchase Plan." I understand that my participation in the
Employee Stock Purchase Plan is in all respects subject to the terms of the
Plan. I understand that the grant of the option by the Company under this
Subscription Agreement is subject to obtaining stockholder approval of the
Employee Stock Purchase Plan.
5. Shares purchased for me under the Employee Stock Purchase Plan should be
issued in the name(s) of Employee or Employee and spouse only): _______________.
6. I understand that if I dispose of any shares received by me pursuant to the
Plan within two years after the Enrollment Date (the first day of the Offering
Period during which I purchased such shares) or one year after the Exercise
Date, I will be treated for federal income tax purposes as having received
ordinary income at the time of such disposition in an amount equal to the excess
of the fair market value of the shares at the time such shares were purchased
over the price which I paid for the shares. I HEREBY AGREE TO NOTIFY THE COMPANY
IN WRITING WITHIN 30 DAYS AFTER THE DATE OF ANY DISPOSITION OF MY SHARES AND I
WILL MAKE ADEQUATE PROVISION FOR FEDERAL, STATE OR OTHER TAX WITHHOLDING
OBLIGATIONS, IF ANY, WHICH ARISE UPON THE DISPOSITION OF THE COMMON STOCK. The
Company may, but will not be obligated to, withhold from my compensation the
amount necessary to meet any applicable withholding obligation including any
withholding necessary to make available to the Company any tax deductions or
benefits attributable to sale or early disposition of Common Stock by me. If I
dispose of such shares at any time after the expiration of the two-year and
one-year holding periods, I understand that I will be treated for federal income
tax purposes as having received income only at the time of such disposition, and
that such income will be taxed as ordinary income only to the extent of an
amount equal to the lesser of (1) the excess of the fair market value of the
shares at the time of such disposition over
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<PAGE> 12
the purchase price which I paid for the shares; or (2) fifteen (15%) of the fair
market value of the shares on the first day of the Offering Period. The
remainder of the gain, if any, recognized on such disposition will be taxed as
capital gain.
7. I hereby agree to be bound by the terms of the Employee Stock Purchase Plan.
The effectiveness of this Subscription Agreement is dependent upon my
eligibility to participate in the Employee Stock Purchase Plan.
8. In the event of my death, I hereby designate the following as my
beneficiary(ies) to receive all payments and shares due me under the Employee
Stock Purchase Plan:
NAME:
-----------------------------------
(Please Print) (First) (Middle) (Last)
----------------------------------- ----------------------
Relationship (Address)
Employee's Social
Security Number:
-----------------------------------
Employee's Address:
-----------------------------------
-----------------------------------
-----------------------------------
I UNDERSTAND THAT THIS SUBSCRIPTION AGREEMENT SHALL REMAIN IN EFFECT THROUGHOUT
SUCCESSIVE OFFERING PERIODS UNLESS TERMINATED BY ME.
Dated:
---------- -----------------------------------------
Signature of Employee
-----------------------------------------
Spouse's Signature (If beneficiary
is other than spouse)
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<PAGE> 13
EXHIBIT B
DSP COMMUNICATIONS, INC.
1995 EMPLOYEE STOCK PURCHASE PLAN
NOTICE OF WITHDRAWAL
The undersigned participant in the Offering Period of the DSP
COMMUNICATIONS, INC. 1995 Employee Stock Purchase Plan which began on
__________________, 19___ (the "Enrollment Date") hereby notifies the Company
that he or she hereby withdraws from the Offering Period. He or she hereby
directs the Company to pay to the undersigned as promptly as practicable all the
payroll deductions credited to his or her account with respect to such Offering
Period. The undersigned understands and agrees that his or her option for such
Offering Period will be automatically terminated. The undersigned understands
further than no further payroll deductions will be made for the purchase of
shares in the current Offering Period and the undersigned shall be eligible to
participate in succeeding Offering Periods only be delivering to the Company a
new Subscription Agreement.
Name and Address of Participant
-----------------------------------
-----------------------------------
-----------------------------------
Signature:
-----------------------------------
Date:
-----------------------------
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<PAGE> 1
EXHIBIT 21
DSP COMMUNICATIONS, INC.
1995 DIRECTOR STOCK OPTION PLAN
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 COMMUNICATIONS, 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 1995 Director Stock Option Plan.
<PAGE> 2
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.
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 600,000 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 32,000 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 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, 1996, each
Outside Director shall be automatically granted an Option to purchase 8,000
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.
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 Outside Directors on the
automatic grant date. Any further grants shall then be deferred until such time,
if any, as additional Shares become available for
2
<PAGE> 3
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 a First 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 25% 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 6.25% of the Shares subject to the First Option at the end of
each three-month period thereafter, subject to the provisions set forth in
Section 9, below.
vii) The terms of a Subsequent Option granted hereunder
shall be as follows:
a) The Subsequent 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 per Share on the date of grant of the Subsequent Option.
c) The Subsequent Option shall become
exercisable as to 100% of the Shares subject to the Subsequent Option on the
first anniversary of the date of grant of the Subsequent Option.
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
3
<PAGE> 4
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.
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 the 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
Shares 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), any combination of such methods of payment or any other
consideration or method of payment as shall be permitted under applicable
corporate law.
B. EXERCISE OF OPTION.
a. PROCEDURE FOR EXERCISE; RIGHTS AS A STOCKHOLDER. Any 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.
4
<PAGE> 5
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, together with such other
documentation as the Company and the broker, if applicable, shall require to
effect an exercise of the Option, 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.
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.e.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.
5
<PAGE> 6
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 by
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 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 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 price 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 merger of the Company
with or into another corporation, or the sale of substantially all of the assets
of the Company, each outstanding Option shall be assumed or an equivalent option
shall be substituted by the successor corporation or a Parent or Subsidiary of
the successor corporation. In the event that the successor corporation does not
agree to assume the Option or to substitute an equivalent option, the Board
shall, in lieu of such assumption or substitution, provide for the Optionee to
have the right to exercise the Option as to all of the Optioned Stock, including
Shares as to which it would not otherwise be exercisable. If the Board makes an
Option fully exercisable in lieu of assumption or substitution in the event of a
merger or sale of assets, the Board shall notify the Optionee that the Option
shall be fully exercisable for a period of thirty (30) days from the date of
such notice, and the Option will terminate upon the expiration of such period.
For the purposes of this paragraph, the Option shall be considered assumed if,
following the merger or sale of assets, the option or right confers the right to
purchase, for each Share of Optioned Stock subject to the Option immediately
prior to the merger or sale of assets, the
6
<PAGE> 7
consideration (whether stock, cash, or other securities or property) received in
the merger or sale of assets by holder of Common Stock for each Share held on
the effective date of the transaction (and if holders were offered a choice of
consideration, the type of consideration chosen by the holders of a majority of
the outstanding Shares); provided, however, that if such consideration received
in the merger or sale of assets by holders of Common Stock for each Share held
on the effective date of the transaction (and if holders were offered a choice
of consideration, the type of consideration chosen by the holders of a majority
of the outstanding Shares); provided, however, that if such consideration
received in the merger or sale of assets was not solely common stock of the
successor corporation or its Parent, the Board may, with the consent of the
successor corporation, provide for the consideration to be received upon the
exercise of the Option, for each Share of Optioned Stock subject to the Option,
to be solely common stock of the successor corporation or its Parent equal in
Fair Market Value to the per share consideration received by holders of Common
Stock in the merger or sale of assets.
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 "Securities Act"), the Exchange Act, the rules and
regulations promulgated under the Securities Act and the Exchange Act, 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.
7
<PAGE> 8
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 the first meeting of stockholders. 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.
b. 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.
8
<PAGE> 1
EXHIBIT 22
DSP COMMUNICATIONS, INC.
1996 STOCK OPTION PLAN
1. PURPOSES OF THE PLAN. The purposes of this Stock Option Plan are to
attract and retain the best available personnel for positions of substantial
responsibility, to provide additional incentive to Employees, Directors and
Consultants of the Company and its Subsidiaries and to promote the success of
the Company's business. Options granted under the Plan may be Incentive Stock
Options or Non-Qualified Stock Options, as determined by the Administrator at
the time of grant.
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 Options granted to residents therein.
d. "BOARD" means the Board of Directors of the Company.
e. "CODE" means the Internal Revenue Code of 1986, as amended.
f. "COMMITTEE" means any committee appointed by the Board to
administer the Plan.
g. "COMMON STOCK" means the common stock of the Company.
h. "COMPANY" means DSP Communications, Inc., a Delaware
corporation.
i. "CONSULTANT" means any person who is engaged by the Company
or any Parent or Subsidiary to render consulting or advisory services as an
independent contractor and is compensated for such services.
j. "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.
<PAGE> 2
k. "CONTINUOUS STATUS AS AN EMPLOYEE, DIRECTOR OR CONSULTANT"
means that the employment, director or consulting relationship with the Company,
any Parent, or Subsidiary, is not interrupted or terminated. Continuous Status
as an Employee, Director or Consultant shall not be considered interrupted in
the case of (i) any leave of absence approved by the Company or (ii) transfers
between locations of the Company or between the Company, its Parent, any
Subsidiary, or any successor. A leave of absence approved by the Company shall
include sick leave, military leave, or any other personal leave approved by an
authorized representative of the Company. For purposes of Incentive Stock
Options, no such leave may exceed ninety (90) days, unless reemployment upon
expiration of such leave is guaranteed by statute or contract.
l. "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.
m. "COVERED EMPLOYEE" means an Employee who is a "covered
employee" under Section 162(m)(3) of the Code.
n. "DIRECTOR" means a member of the Board.
o. "EMPLOYEE" means any person, including an Officer or
Director, who is an employee of the Company or any Parent or Subsidiary of the
Company for purposes of Section 422 of the Code. The payment of a director's fee
by the Company shall not be sufficient to constitute "employment" by the
Company.
p. "EXCHANGE ACT" means the Securities Exchange Act of 1934,
as amended.
q. "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 sales price for a Share
for the last market trading day prior to the time of the determination (or, if
no sales were reported on that date, on the last trading date on which sales
were 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
<PAGE> 3
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 of the
type described in (i), above, for the Common Stock, the Fair Market Value
thereof shall be determined by the Administrator in good faith.
r. "INCENTIVE STOCK OPTION" means an Option intended to
qualify as an incentive stock option within the meaning of Section 422 of the
Code
s. "NON-QUALIFIED STOCK OPTION" means an Option not intended
to qualify as an Incentive Stock Option.
t. "OFFICER" means a person who is an officer of the Company
within the meaning of Section 16 of the Exchange Act and the rules and
regulations promulgated thereunder.
u. "OPTION" means a stock option granted pursuant to the Plan.
v. "OPTION AGREEMENT" means the written agreement evidencing
the grant of an Option executed by the Company and the Optionee, including any
amendments thereto.
w. "OPTIONED STOCK" means the Common Stock subject to an
Option.
x. "OPTIONEE" means an Employee, Director or Consultant who
receives an Option under the Plan.
y. "PARENT" means a "parent corporation," whether now or
hereafter existing, as defined in Section 424(e) of the Code.
z. "PERFORMANCE-BASED COMPENSATION" means compensation
qualifying as "performance-based compensation" under Section 162(m) of the Code.
aa. "PLAN" means this 1996 Stock Option Plan.
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.
3. STOCK SUBJECT TO THE PLAN.
a. Subject to the provisions of Section 10, below, the maximum
aggregate number of Shares which may be optioned and sold under the Plan is
5,000,000 Shares. The Shares may be authorized, but unissued, or reacquired
Common Stock.
<PAGE> 4
b. If an Option expires or becomes unexercisable without
having been exercised in full, or is surrendered pursuant to an Option exchange
program, such unissued or retained Shares shall become available for future
grant under the Plan (unless the Plan has terminated). Shares that actually have
been issued under the Plan shall not be returned to the Plan and shall not
become available for future distribution 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.
i. ADMINISTRATION WITH RESPECT TO DIRECTORS AND
OFFICERS. With respect to grants of Options to Directors or Employees who are
also Officers or Directors of the Company, 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 and to permit
such grants and related transactions under the Plan to be exempt from Section
16(b) of the Exchange Act in accordance with Rule 16b-3. Once appointed, such
Committee shall continue to serve in its designated capacity until otherwise
directed by the Board.
ii. ADMINISTRATION WITH RESPECT TO CONSULTANTS AND
OTHER EMPLOYEES. With respect to grants of Options to Employees or Consultants
who are neither Directors nor Officers of the Company, 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 Options and may limit such authority by requiring
that such Options must be reported to and ratified by the Board or a Committee
within six (6) months of the grant date, and if so ratified, shall be effective
as of the grant date.
iii. ADMINISTRATION WITH RESPECT TO COVERED
EMPLOYEES. Notwithstanding the foregoing, grants of Options to any Covered
Employee intended to qualify as Performance-Based Compensation shall be made
only by a Committee (or subcommittee of a Committee) which is comprised solely
of two or more Directors eligible to serve on a committee granting Options
qualifying as Performance-Based Compensation. In the case of such Options
granted to Covered Employees, references to the "Administrator" or to a
"Committee" shall be deemed to be references to such Committee or subcommittee.
iv. ADMINISTRATION ERRORS. In the event an Option is
granted in a manner inconsistent with the provisions of this subsection (a),
such Option 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:
<PAGE> 5
i. to select the Employees, Directors and Consultants
to whom Options may be granted from time to time hereunder;
ii. to determine whether and to what extent Options
are granted hereunder;
iii. to determine the number of Shares to be covered
by each Option granted hereunder;
iv. to approve forms of Option Agreement for use
under the Plan;
v. to determine the terms and conditions of any
Option granted hereunder;
vi. to establish additional terms, conditions, rules
or procedures to accommodate the rules or laws of applicable foreign
jurisdictions and to afford Optionees favorable treatment under such laws;
provided, however, that no Option 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;
vii. to amend the terms of any outstanding Option
granted under the Plan, including a reduction in the exercise price of any
Option to reflect a reduction in the Fair Market Value of the Common Stock since
the grant date of the Option, provided that any amendment that would adversely
affect the Optionee's rights under an outstanding Option shall not be made
without the Optionee's written consent;
viii. to construe and interpret the terms of the Plan
and Options granted pursuant to the Plan; and
ix. to take such other action, not inconsistent with
the terms of the Plan, as the Administrator deems appropriate.
c. EFFECT OF ADMINISTRATOR'S DECISION. All decisions,
determinations and interpretations of the Administrator shall be conclusive and
binding on all persons.
5. ELIGIBILITY. Non-Qualified Stock Options may be granted to
Employees, Directors and Consultants. Incentive Stock Options may be granted
only to Employees. An Employee, Director or Consultant who has been granted an
Option may, if otherwise eligible, be granted additional Options. Options may be
granted to such Employees of the Company and its subsidiaries who are residing
in foreign jurisdictions as the Administrator may determine from time to time.
6. TERMS AND CONDITIONS OF OPTIONS.
a. DESIGNATION OF OPTIONS. Each Option shall be designated as
either an Incentive Stock Option or a Non-Qualified Stock Option. However,
notwithstanding such designation, to the extent that the aggregate Fair Market
Value of Shares subject to Options designated as Incentive Stock Options which
become exercisable for the first time by an Optionee
<PAGE> 6
during any calendar year (under all plans of the Company or any Parent or
Subsidiary) exceeds $100,000, such excess Options, to the extent of the Shares
covered thereby in excess of the foregoing limitation, shall be treated as
Non-Qualified Stock Options. For this purpose, Incentive Stock Options shall be
taken into account in the order in which they were granted, and the Fair Market
Value of the Shares shall be determined as of the date the Option with respect
to such Shares is granted.
b. CONDITIONS OF OPTION. Subject to the terms of the Plan, the
Administrator shall determine the provisions, terms, and conditions of each
Option including, but not limited to, the Option vesting schedule, repurchase
provisions, rights of first refusal, forfeiture provisions, 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 vesting corresponding to the degree of achievement as specified in the
Option Agreement.
c. INDIVIDUAL OPTION LIMIT. The maximum number of Shares with
respect to which Options may be granted to any Employee in any fiscal year of
the Company shall be eight hundred thousand (800,000) Shares. The foregoing
limitation shall be adjusted proportionately in connection with any change in
the Company's capitalization pursuant to Section 10, below. To the extent
required by Section 162(m) of the Code or the regulations thereunder, in
applying the foregoing limitation with respect to an Employee, if any Option is
canceled, the canceled Option shall continue to count against the maximum number
of Shares with respect to which Options may be granted to the Employee. For this
purpose, the repricing of an Option shall be treated as the cancellation of the
existing Option and the grant of a new Option.
d. TERM OF OPTION. The term of each Option shall be the term
stated in the Option Agreement, provided, however, that the term of an Incentive
Stock Option shall be no more than ten (10) years from the date of grant
thereof. However, in the case of an Incentive Stock Option granted to an
Optionee who, at the time the Option is granted, owns stock representing more
than ten percent (10%) of the voting power of all classes of stock of the
Company or any Parent or Subsidiary, the term of the Option shall be five (5)
years from the date of grant thereof or such shorter term as may be provided in
the Option Agreement.
e. TRANSFERABILITY OF OPTIONS. Incentive Stock Options 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 and may be
exercised, during the lifetime of the Optionee, only by the Optionee.
Non-Qualified Stock Options shall be transferable to the extent provided in the
Option Agreement.
f. TIME OF GRANTING OPTIONS. The date of grant of an Option
shall for all purposes, be the date on which the Administrator makes the
determination to grant such Option, or such other date as is determined by the
Administrator. Notice of the grant determination shall be given to each
Employee, Director or Consultant to whom an Option is so granted within a
reasonable time after the date of such grant.
<PAGE> 7
7. OPTION EXERCISE PRICE, CONSIDERATION AND TAXES.
a. EXERCISE PRICE. The exercise price for an Option shall be
as follows:
i. In the case of an Incentive Stock Option:
(1) granted to an Employee who, at the time
of the grant of such Incentive Stock Option owns stock representing more than
ten percent (10%) of the voting power of all classes of stock of the Company or
any Parent or Subsidiary, the per Share exercise price shall be not less than
one hundred ten percent (110%) of the Fair Market Value per Share on the date of
grant.
(2) granted to any Employee other than an
Employee described in the preceding paragraph, the per Share exercise price
shall be not less than one hundred percent (100%) of the Fair Market Value per
Share on the date of grant.
ii. In the case of Options intended to qualify as
Performance-Based Compensation, the per Share exercise price shall be not less
than one hundred percent (100%) of the Fair Market Value per Share on the date
of grant.
iii. In the case of a Non-Qualified Stock Option, the
per Share exercise price shall be not less than eighty-five percent (85%) of the
Fair Market Value per Share on the date of grant.
b. CONSIDERATION. Subject to Applicable Laws, the
consideration to be paid for the Shares to be issued upon exercise of an Option
including the method of payment, shall be determined by the Administrator (and,
in the case of an Incentive Stock Option, shall be determined at the time of
grant). 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:
i. cash;
ii. check;
iii. delivery of Optionee's promissory note with such
recourse, interest, security, and redemption provisions as the Administrator
determines as appropriate;
iv. surrender of Shares (including withholding of
Shares otherwise deliverable upon exercise of the Option) which have 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 (but only to the extent
that such exercise of the Option 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. delivery of a properly executed exercise notice
together with such other documentation as the Administrator and the broker, if
applicable, shall require to effect an
<PAGE> 8
exercise of the Option and delivery to the Company of the sale or loan proceeds
required to pay the exercise price; or
vi. any combination of the foregoing methods of
payment.
c. TAXES. No Shares shall be delivered under the Plan to any
Optionee or other person until such Optionee 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 or the disqualifying disposition of Shares received on exercise of an
Incentive Stock Option. Upon exercise of an Option, the Company shall withhold
or collect from Optionee an amount sufficient to satisfy such tax obligations.
8. EXERCISE OF OPTION.
a. PROCEDURE FOR EXERCISE; RIGHTS AS A STOCKHOLDER.
i. Any Option 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 Option Agreement.
ii. 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. 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 Optioned Stock, notwithstanding the exercise of an Option. The Company shall
issue (or cause to be issued) such stock certificate promptly upon 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 the Option Agreement or Section 10, below.
b. EXERCISE OF OPTION FOLLOWING TERMINATION OF EMPLOYMENT,
DIRECTOR OR CONSULTING RELATIONSHIP.
i. Upon termination of an Optionee's Continuous
Status as an Employee, Director or Consultant, other than upon the Optionee's
death or disability, the Optionee may exercise his or her Option within such
period of time as is specified in the Option Agreement to the extent that the
Option is vested on the date of termination (but in no event later than the
expiration of the term of such Option as set forth in the Option Agreement). In
the absence of a specified time in the Option Agreement, the Option shall remain
exercisable for three (3) months following the Optionee's termination. If, on
the date of termination, the Optionee is not vested as to his or her entire
Option, the Shares covered by the unvested portion of the Option shall revert to
the Plan. If, after termination, the Optionee does not exercise his or her
Option within the time specified by the Administrator, the Option shall
terminate, and the Shares covered by such Option shall revert to the Plan.
<PAGE> 9
ii. DISABILITY OF OPTIONEE. If an Optionee's
Continuous Status as an Employee, Director or Consultant terminates as a result
of the Optionee's disability, the Optionee may exercise the Option to the extent
the Option is vested on the date of termination, but only within twelve (12)
months from the date of such termination (and in no event later than the
expiration date of the term of such Option as set forth in the Option
Agreement). If such disability is not a "disability" as such term is defined in
Section 22(e)(3) of the Code, in the case of an Incentive Stock Option such
Incentive Stock Option shall automatically convert to a Non-Qualified Stock
Option on the day three months and one day following such termination. If, on
the date of termination, the Optionee is not vested as to the entire Option, the
Shares covered by the unvested portion of the Option shall revert to the Plan.
If, after termination, the Option is not exercised within the time specified
herein, the Option shall terminate, and the Shares covered by such Option shall
revert to the Plan.
iii. DEATH OF OPTIONEE. In the event of the death of
an Optionee, the Option may be exercised at any time within twelve (12) months
following the date of death (but in no event later than the expiration of the
term of such Option as set forth in the Option Agreement) to the extent vested
on the date of death. If, at the time of death, the Optionee is not vested as to
the entire Option, the Shares covered by the unvested portion of the Option
shall revert to the Plan. The Option may be exercised by the executor or
administrator of the Optionee's estate or, if none, by the person(s) entitled to
exercise the Option under the Optionee's will or the laws of descent or
distribution. If the Option is not so exercised within the time specified
herein, the Option shall terminate, and the Shares covered by such Option shall
revert to the Plan.
c. BUYOUT PROVISIONS. The Administrator may at any time offer
to buy out for a payment in cash or Shares, an Option previously granted, based
on such terms and conditions as the Administrator shall establish and
communicate to the Optionee 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
Option unless the exercise of such Option 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 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 Applicable Laws.
10. ADJUSTMENTS UPON 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, as well as the price per share of Common
Stock covered by each such outstanding Option, shall be proportionately adjusted
for
<PAGE> 10
any increase or decrease in the number of issued shares of Common Stock
resulting from a stock split, reverse stock split, stock dividend, combination
or reclassification of the Common Stock, or any other similar event resulting in
an increase or decrease in the number of issued shares of Common Stock. 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 hereof shall be made with respect to, the
number or price of Shares subject to an Option.
11. CORPORATE TRANSACTIONS.
a. In the event of any 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. However, an outstanding Option under the Plan shall
not so fully vest and be exercisable and released from such limitations if and
to the extent: (i) such Option is, in connection with the Corporate Transaction,
either to be assumed by the successor corporation or Parent thereof or to be
replaced with a comparable Option with respect to shares of the capital stock of
the successor corporation or Parent thereof, (ii) such Option is to be replaced
with a cash incentive program of the successor corporation which preserves the
compensation element of such Option existing at the time of the Corporate
Transaction and provides for subsequent payout in accordance with the same
vesting schedule applicable to such Option or (iii) the vesting, exercisability
and release from such limitations of such Option is subject to other limitations
imposed by the Administrator at the time of the grant of the Option. The
determination of Option comparability under clause (i) above shall be made by
the Administrator, and its determination shall be final, binding and conclusive.
b. Effective upon the consummation of the Corporate
Transaction, all outstanding Options under the Plan shall terminate and cease to
remain outstanding, except to the extent assumed by the successor company or its
Parent.
c. The portion of any Incentive Stock Option accelerated under
this Section 11 in connection with a Corporate Transaction shall remain
exercisable as an Incentive Stock Option under the Code only to the extent the
$100,000 dollar limitation of Section 422(d) of the Code is not exceeded. To the
extent such dollar limitation is exceeded, the accelerated excess portion of
such Option shall be exercisable as a Non-Qualified Stock Option.
12. TERM OF PLAN. The Plan shall become effective upon the earlier to
occur of its adoption by the Board or its approval by the stockholders of the
Company. It shall continue in effect for a term of ten (10) years unless sooner
terminated.
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.
<PAGE> 11
b. No Option may be granted during any suspension of the Plan
or after termination of the Plan.
c. Any amendment, suspension or termination of the Plan shall
not affect Options already granted, and such Options shall remain in full force
and effect as if the Plan had not been amended, suspended or terminated, unless
mutually agreed otherwise between the Optionee and the Administrator, which
agreement must be in writing and signed by the Optionee 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. The Plan shall not confer upon
any Optionee any right with respect to continuation of employment or consulting
relationship with the Company, nor shall it interfere in any way with his or her
right or the Company's right to terminate his or her employment or consulting
relationship at any time, with or without cause.
16. STOCKHOLDER APPROVAL. The grant of Incentive Stock Options under
the Plan shall be subject to approval by the stockholders of the Company within
twelve (12) months before or after the date the Plan is adopted. Such
stockholder approval shall be obtained in the degree and manner required under
Applicable Laws. The Administrator may grant Incentive Stock Options under the
Plan prior to approval by the stockholders, but until such approval is obtained,
no such Incentive Stock Option shall be exercisable. In the event that
stockholder approval is not obtained within the twelve (12) month period
provided above, all Incentive Stock Options previously granted under the Plan
shall terminate.
<PAGE> 1
EXHIBIT 23
DSP COMMUNICATIONS, INC.
1998 NON-QUALIFIED STOCK OPTION PLAN
1. PURPOSES OF THE PLAN. The purposes of this 1998 NON-QUALIFIED STOCK
OPTION PLAN (the "Plan") are to attract and retain the best available personnel
for positions of substantial responsibility, to provide additional incentive to
Employees and Consultants of the DSP COMMUNICATIONS, INC. (the "Company") and
its Subsidiaries, and to promote the success of the Company's business. Options
granted under the Plan shall be Non-Qualified Stock Options.
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 Options granted to residents therein.
d. "BOARD" means the Board of Directors of the Company.
e. "CODE" means the Internal Revenue Code of 1986, as amended.
f. "COMMITTEE" means any committee appointed by the Board to
administer the Plan.
g. "COMMON STOCK" means the common stock of the Company.
h. "COMPANY" means DSP COMMUNICATIONS, INC., a Delaware
corporation.
i. "CONSULTANT" means any person who is engaged by the Company
or any Parent or Subsidiary to render consulting or advisory services as an
independent contractor and is compensated for such services.
j. "CONTINUOUS STATUS AS AN EMPLOYEE OR CONSULTANT" means that
the employment, director or consulting relationship with the Company, any
Parent, or Subsidiary, is not interrupted or terminated. Continuous Status as an
Employee or Consultant shall not be considered interrupted in the case of (i)
any leave of absence approved by the Company, or (ii) transfers between
locations of the Company or between the Company, its Parent, any Subsidiary, or
any successor. A leave of absence approved by the Company shall include sick
leave, military leave, or any other personal leave approved by an authorized
representative of the Company.
<PAGE> 2
k. "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.
l. "COVERED EMPLOYEE" means an Employee who is a "covered
employee" under Section 162(m)(3) of the Code.
m. "DIRECTOR" means a member of the Board.
n. "EMPLOYEE" means any person, including an Officer or
Director, who is an employee of the Company or any Parent or Subsidiary of the
Company for purposes of Section 422 of the Code. Neither service as a Director
nor payment of a Director's fee by the Company shall be sufficient to constitute
"employment" by the Company.
o. "EXCHANGE ACT" means the Securities Exchange Act of 1934,
as amended.
p. "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 sales price for a Share
for the last market trading day prior to the time of the determination (or, if
no sales were reported on that date, on the last trading date on which sales
were 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
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<PAGE> 3
ii. In the absence of an established market of the
type described in (i), above, for the Common Stock, the Fair Market Value
thereof shall be determined by the Administrator in good faith.
q. "INCENTIVE STOCK OPTION" means an Option intended to
qualify as an incentive stock option within the meaning of Section 422 of the
Code.
r. "NON-QUALIFIED STOCK OPTION" means an Option not intended
to qualify as an Incentive Stock Option.
s. "OFFICER" means a person who is an officer of the Company
within the meaning of Section 16 of the Exchange Act and the rules and
regulations promulgated thereunder.
t. "OPTION" means a stock option granted pursuant to the Plan.
u. "OPTION AGREEMENT" means the written agreement evidencing
the grant of an Option executed by the Company and the Optionee, including any
amendments thereto.
v. "OPTIONED STOCK" means the Common Stock subject to an
Option.
w. "OPTIONEE" means an Employee or Consultant who receives an
Option under the Plan.
x. "PARENT" means a "parent corporation," whether now or
hereafter existing, as defined in Section 424(e) of the Code.
y. "PERFORMANCE-BASED COMPENSATION" means compensation
qualifying as "performance-based compensation" under Section 162(m) of the Code.
z. "PLAN" means this 1998 Non-Qualified Stock Option Plan.
aa. "RULE 16b-3" means Rule 16b-3 promulgated under the
Exchange Act or any successor thereto.
bb. "SHARE" means a share of the Common Stock.
cc. "SUBSIDIARY" means a "subsidiary corporation", whether now
or hereafter existing, as defined in Section 424(f) of the Code.
3. STOCK SUBJECT TO THE PLAN.
a. Subject to the provisions of Section 10 (below), the
maximum aggregate number of Shares which may be optioned and sold under the Plan
is five million (5,000,000) Shares. The Shares may be authorized, but unissued,
or reacquired Common Stock.
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<PAGE> 4
b. If an Option expires or becomes unexercisable without
having been exercised in full, or is surrendered pursuant to an Option exchange
program, such unissued or retained Shares shall become available for future
grant under the Plan (unless the Plan has terminated). Shares that actually have
been issued under the Plan shall not be returned to the Plan and shall not
become available for future distribution 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.
i. ADMINISTRATION WITH RESPECT TO EMPLOYEES WHO ARE
ALSO DIRECTORS OR OFFICERS. With respect to grants of Options to Employees who
are also Officers or Directors of the Company, 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 and to permit
such grants and related transactions under the Plan to be exempt from
Section 16(b) of the Exchange Act in accordance with Rule 16b-3. Once appointed,
such Committee shall continue to serve in its designated capacity until
otherwise directed by the Board.
ii. ADMINISTRATION WITH RESPECT TO CONSULTANTS AND
OTHER EMPLOYEES. With respect to grants of Options to Employees or Consultants
who are neither Directors nor Officers of the Company, 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 Options and may limit such authority by requiring
that such Options must be reported to and ratified by the Board or a Committee
within six (6) months of the grant date, and if so ratified, shall be effective
as of the grant date.
iii. ADMINISTRATION WITH RESPECT TO COVERED
EMPLOYEES. Notwithstanding the foregoing, grants of Options to any Covered
Employee intended to qualify as Performance-Based Compensation shall be made
only by a Committee (or subcommittee of a Committee) which is comprised solely
of two (2) or more Directors eligible to serve on a committee granting Options
qualifying as Performance-Based Compensation. In the case of such Options
granted to Covered Employees, references to the "Administrator" or to a
"Committee" shall be deemed to be references to such Committee or subcommittee.
iv. ADMINISTRATION ERRORS. In the event an Option is
granted in a manner inconsistent with the provisions of this subsection (a),
such Option 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:
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<PAGE> 5
i. to select the Employees and Consultants to whom
Options may be granted from time to time hereunder;
ii. to determine whether and to what extent Options
are granted hereunder;
iii. to determine the number of Shares to be covered
by each Option granted hereunder;
iv. to approve forms of Option Agreement for use
under the Plan;
v. to determine the terms and conditions of any
Option granted hereunder;
vi. to establish additional terms, conditions, rules
or procedures to accommodate the rules or laws of applicable foreign
jurisdictions and to afford Optionees favorable treatment under such laws;
provided, however, that no Option 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;
vii. to amend the terms of any outstanding Option
granted under the Plan, including a reduction in the exercise price of any
Option to reflect a reduction in the Fair Market Value of the Common Stock since
the grant date of the Option, provided that any amendment that would adversely
affect the Optionee's rights under an outstanding Option shall not be made
without the Optionee's written consent;
viii. to construe and interpret the terms of the Plan
and Options granted pursuant to the Plan; and
ix. to take such other action, not inconsistent with
the terms of the Plan, as the Administrator deems appropriate.
c. EFFECT OF ADMINISTRATOR'S DECISION. All decisions,
determinations and interpretations of the Administrator shall be conclusive and
binding on all persons.
5. ELIGIBILITY. Options may be granted to Employees and Consultants. An
Employee or Consultant who has been granted an Option may, if otherwise
eligible, be granted additional Options. Options may be granted to such
Employees of the Company and its subsidiaries who are residing in foreign
jurisdictions as the Administrator may determine from time to time.
6. TERMS AND CONDITIONS OF OPTIONS.
a. DESIGNATION OF OPTIONS. Each Option shall be designated in
the Option Agreement as a Non-Qualified Stock Option.
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<PAGE> 6
b. CONDITIONS OF OPTION. Subject to the terms of the Plan, the
Administrator shall determine the provisions, terms, and conditions of each
Option including, but not limited to, the Option vesting schedule, repurchase
provisions, rights of first refusal, forfeiture provisions, 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 vesting corresponding to the degree of achievement as specified in the
Option Agreement.
c. INDIVIDUAL OPTION LIMIT. The maximum number of Shares with
respect to which Options may be granted under this Plan to any Employee in any
fiscal year of the Company shall be one million (1,000,000) Shares. The
foregoing limitation shall be adjusted proportionately in connection with any
change in the Company's capitalization pursuant to Section 10 (below). To the
extent required by Section 162(m) of the Code or the regulations thereunder, in
applying the foregoing limitation with respect to an Employee, if any Option is
canceled, the canceled Option shall continue to count against the maximum number
of Shares with respect to which Options may be granted to the Employee. For this
purpose, the repricing of an Option shall be treated as the cancellation of the
existing Option and the grant of a new Option.
d. TERM OF OPTION. The term of each Option shall be the term
stated in the Option Agreement.
e. TRANSFERABILITY OF OPTIONS. Options shall be transferable
only to the extent provided in the Option Agreement.
f. TIME OF GRANTING OPTIONS. The date of grant of an Option
shall for all purposes, be the date on which the Administrator makes the
determination to grant such Option, or such other date as is determined by the
Administrator. Notice of the grant determination shall be given to each Employee
or Consultant to whom an Option is so granted within a reasonable time after the
date of such grant.
7. OPTION EXERCISE PRICE, CONSIDERATION AND TAXES.
a. EXERCISE PRICE. The exercise price for an Option shall be
as follows:
i. In the case of Options intended to qualify as
Performance-Based Compensation, the per Share exercise price shall be not less
than one hundred percent (100%) of the Fair Market Value per Share on the date
of grant.
ii. In the case of all other Options, the per Share
exercise price shall be not less than eighty-five percent (85%) of the Fair
Market Value per Share on the date of grant.
b. CONSIDERATION. Subject to Applicable Laws, the
consideration to be paid for the Shares to be issued upon exercise of an Option
including the method of payment, shall be
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<PAGE> 7
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:
i. cash;
ii. check;
iii. delivery of Optionee's promissory note with such
recourse, interest, security, and redemption provisions as the Administrator
determines as appropriate;
iv. surrender of Shares (including withholding of
Shares otherwise deliverable upon exercise of the Option) which have 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 (but only to the extent
that such exercise of the Option 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. delivery of a properly executed exercise notice
together with such other documentation as the Administrator 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
vi. any combination of the foregoing methods of
payment.
c. TAXES. No Shares shall be delivered under the Plan to any
Optionee or other person until such Optionee 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 Option, the Company shall withhold or collect
from Optionee an amount sufficient to satisfy such tax obligations.
8. EXERCISE OF OPTION.
a. PROCEDURE FOR EXERCISE; RIGHTS AS A STOCKHOLDER.
i. Any Option 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 Option Agreement.
ii. 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. 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
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<PAGE> 8
stock certificate evidencing such Shares, no right to vote or receive dividends
or any other rights as a stockholder shall exist with respect to Optioned Stock,
notwithstanding the exercise of an Option. The Company shall issue (or cause to
be issued) such stock certificate promptly upon 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 the
Option Agreement or Section 10 (below).
b. EXERCISE OF OPTION FOLLOWING TERMINATION OF EMPLOYMENT OR
CONSULTING RELATIONSHIP.
i. Upon termination of an Optionee's Continuous
Status as an Employee or Consultant, other than upon the Optionee's death or
disability, the Optionee may exercise his or her Option within such period of
time as is specified in the Option Agreement to the extent that the Option is
vested on the date of termination (but in no event later than the expiration of
the term of such Option as set forth in the Option Agreement). In the absence of
a specified time in the Option Agreement, the Option shall remain exercisable
for three (3) months following the Optionee's termination. If, on the date of
termination, the Optionee is not vested as to his or her entire Option, the
Shares covered by the unvested portion of the Option shall revert to the Plan.
If, after termination, the Optionee does not exercise his or her Option within
the time specified by the Administrator, the Option shall terminate, and the
Shares covered by such Option shall revert to the Plan.
ii. DISABILITY OF OPTIONEE. If an Optionee's
Continuous Status as an Employee or Consultant terminates as a result of the
Optionee's disability, the Optionee may exercise the Option to the extent the
Option is vested on the date of termination, but only within twelve (12) months
from the date of such termination (and in no event later than the expiration
date of the term of such Option as set forth in the Option Agreement). If, on
the date of termination, the Optionee is not vested as to the entire Option, the
Shares covered by the unvested portion of the Option shall revert to the Plan.
If, after termination, the Option is not exercised within the time specified
herein, the Option shall terminate, and the Shares covered by such Option shall
revert to the Plan.
iii. DEATH OF OPTIONEE. In the event of the death of
an Optionee, the Option may be exercised at any time within twelve (12) months
following the date of death (but in no event later than the expiration of the
term of such Option as set forth in the Option Agreement) to the extent vested
on the date of death. If, at the time of death, the Optionee is not vested as to
the entire Option, the Shares covered by the unvested portion of the Option
shall revert to the Plan. The Option may be exercised by the executor or
administrator of the Optionee's estate or, if none, by the person(s) entitled to
exercise the Option under the Optionee's will or the laws of descent or
distribution. If the Option is not so exercised within the time specified
herein, the Option shall terminate, and the Shares covered by such Option shall
revert to the Plan.
c. BUYOUT PROVISIONS. The Administrator may at any time offer
to buy out for a payment in cash or Shares, an Option previously granted, based
on such terms and conditions as the Administrator shall establish and
communicate to the Optionee at the time that such offer is made.
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<PAGE> 9
9. CONDITIONS UPON ISSUANCE OF SHARES.
a. 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 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 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 Applicable Laws.
10. ADJUSTMENTS UPON 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, as well as the price per share of Common
Stock covered by each such outstanding Option, shall be proportionately adjusted
for any increase or decrease in the number of issued shares of Common Stock
resulting from a stock split, reverse stock split, stock dividend, combination
or reclassification of the Common Stock, or any other similar event resulting in
an increase or decrease in the number of issued shares of Common Stock. 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 hereof shall be made with respect to, the
number or price of Shares subject to an Option.
11. CORPORATE TRANSACTIONS.
a. In the event of any 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. However, an outstanding Option under the Plan shall
not so fully vest and be exercisable and released from such limitations if and
to the extent: (i) such Option is, in connection with the Corporate Transaction,
either to be assumed by the successor corporation or Parent thereof or to be
replaced with a comparable Option with respect to shares of the capital stock of
the successor corporation or Parent thereof; (ii) such Option is to be replaced
with a cash incentive program of the successor corporation which preserves the
compensation element of such Option existing at the time of the Corporate
Transaction and provides for subsequent payout in accordance with the same
vesting schedule applicable to such Option; or (iii) the vesting, exercisability
and release from such limitations of such Option is subject to other limitations
imposed by the Administrator at the time of the grant of the Option. The
determination of Option comparability under clause (i) above shall be made by
the Administrator, and its determination shall be final, binding and conclusive.
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b. Effective upon the consummation of the Corporate
Transaction, all outstanding Options under the Plan shall terminate and cease to
remain outstanding, except to the extent assumed by the successor company or its
Parent.
12. 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.
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 Option may be granted during any suspension of the Plan
or after termination of the Plan.
c. Any amendment, suspension or termination of the Plan shall
not affect Options already granted, and such Options shall remain in full force
and effect as if the Plan had not been amended, suspended or terminated, unless
mutually agreed otherwise between the Optionee and the Administrator, which
agreement must be in writing and signed by the Optionee 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. The Plan shall not confer upon
any Optionee any right with respect to continuation of employment or consulting
relationship with the Company, nor shall it interfere in any way with his or her
right or the Company's right to terminate his or her employment or consulting
relationship at any time, with or without cause.
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EXHIBIT 24
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 12th day of August, 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, and again on January 16, 1999 (as so amended and
restated, the "Employment Agreement").
C. The terms of the Employment Agreement are hereby amended and
restated in full as of August 12, 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
<PAGE> 2
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 August 12, 2001
("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 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
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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 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.
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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. 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
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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 Corporation'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:
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(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.
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 his monthly salary at his
then-current rate of fixed salary compensation, multiplied by the greater of (i)
the number of full months left until the end of the then-current employment
term, or (ii) six (6), during which time Pezzola may elect to remain as an
employee of the Corporation in a non-policy-making role, devoting substantive
productive time, and his options in DSPC shall continue to vest for the period
of continuous employment, or shall be entitled to the severance without
remaining as an employee. The above severance fee shall be payable in accordance
with the Corporation's normal payroll practices. The Corporation shall pay
Pezzola a severance fee equal to his monthly salary at his then-current rate of
fixed salary compensation, multiplied by the number six (6) if this Agreement is
terminated pursuant to Section 8.b (i) (above) or if Pezzola or the Corporation
elects not to renew this Agreement. The Corporation shall pay Pezzola a
severance 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
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termination in accordance with Sections 8.b (ii) or (iii) is in order. There
shall be no severance in the event that this Agreement is terminated in
accordance with Section 8.b (ii) or (iii).
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 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
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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 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
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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
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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
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
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EXHIBIT 25
EMPLOYMENT AGREEMENT
OF DAVIDI GILO
WITH
DSP TELECOM, INC.
THIS EMPLOYMENT AGREEMENT (this "Agreement"), made and entered into
effective as of this 12th day of October, 1998, by and between DSP TELECOM,
INC., a California corporation (hereinafter the "Corporation"), and DAVIDI GILO
(hereinafter "Gilo").
AGREEMENT
The parties hereto hereby agree as follows:
1. EMPLOYMENT DUTIES.
a. GENERAL. The Corporation hereby agrees to employ Gilo, and Gilo
hereby agrees to accept employment with the Corporation, as Chairman of the
Board of the Corporation on the terms and conditions hereinafter set forth.
b. CORPORATION'S DUTIES. The Corporation shall allow Gilo to, and
Gilo shall, perform responsibilities normally incident to his position as
Chairman, subject to his election by the stockholders of the Corporation's
parent, DSP Communications, Inc., a Delaware corporation ("DSPC"), as a Director
of DSPC, but otherwise as the immediate superior to the Chief Executive Officer
of the Corporation, commensurate with his background, experience and
professional standing. The Corporation shall provide Gilo with a private office,
stenographic help, office equipment, supplies, customary services and
cooperation suitable for the performance of his duties. These duties shall be
performed primarily in Cupertino, California.
c. GILO'S DUTIES. Unless otherwise agreed to by the parties, Gilo
shall serve as the Chairman of the Board of DSPC. Gilo shall devote at least
thirty (30) hours per week on average to the work of the Corporation. Gilo shall
report directly to DSPC's Board of Directors. Gilo's service for DSPC's
subsidiaries, including, without limitation, the Corporation, DSP
Telecommunications, Ltd., CTP Systems, Ltd., DSPC Israel, Ltd., DSPC Japan,
Inc., and CTP Systems, Inc., shall be credited to the hours requirement. Gilo
shall inform the Board of any other positions that he takes with any other
corporation from this date forward.
2. TERM. This Agreement shall terminate on December 31, 2002, unless (a)
extended as set forth herein, or (b) terminated sooner under the terms of this
Agreement. Thereafter, this Agreement may be renewed by Gilo and the Board of
Directors of this Corporation 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,
<PAGE> 2
the term "employment term" refers to the entire period of employment of Gilo
hereunder, including any extensions.
3. COMPENSATION. Gilo shall be compensated as follows:
a. FIXED SALARY. Gilo shall receive a fixed annual salary of Three
Hundred Thousand Dollars ($300,000). The Corporation agrees to review the fixed
salary following the end of each twelve (12) month period during the employment
term based upon Gilo's services and the Corporation's financial results during
the calendar year, and to make such increases as may be determined appropriate
in the discretion of the Corporation's Board of Directors.
b. PAYMENT. Gilo's fixed salary shall be payable on a semi-monthly
basis.
c. BONUS COMPENSATION. During the employment term, Gilo shall
participate in each bonus plan adopted by the Corporation's Board of Directors.
Commencing in 1999, Gilo shall be entitled to receive an annual bonus equal to
(i) twenty-five percent (25%) of his base salary should this Corporation meet
eighty percent (80%) of its plan as presented to the Board in January of each
year, during the term of Gilo's employment ("Yearly Plan"); (ii) seventy-five
percent (75%) of his base salary should this Corporation meet its Yearly Plan;
and (iii) one hundred twenty-five percent (125%) of his base salary should this
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%). The meeting of the Yearly Plan for purposes of this
Section 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. Gilo shall accrue paid vacation at the rate of thirty
(30) days for each twelve (12) months of employment. Gilo shall be compensated
at his usual rate of compensation during any such vacation. Gilo shall be
entitled to ten (10) paid holidays during each twelve (12) months of employment.
e. BENEFITS. During the employment term, Gilo and his dependents
shall be entitled to participate in any group plans or programs maintained by
the 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 Gilo. The Corporation shall
provide Gilo with Director and Officer Insurance, if reasonably available to the
Corporation, and all of its officers and directors. Gilo shall in no event
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receive less insurance coverage than that available to any other employee. The
Corporation shall, at a minimum, keep in full force and effect its
indemnification agreement previously entered into with Gilo.
4. EXPENSES. The Corporation shall reimburse Gilo for his normal and
reasonable expenses incurred for travel, entertainment and similar items in
promoting and carrying out the business of DSPC in accordance with the
Corporation's general policy as adopted by the Corporation's management from
time to time. As a condition of reimbursement, Gilo 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. The
Corporation shall also reimburse Gilo for all professional membership dues
incurred, if any; all technical books purchased by Gilo; and all moving and
relocation expenses, incurred by Gilo at the Corporation's request.
5. CONFIDENTIALITY AND COMPETITIVE ACTIVITIES. Gilo 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. Gilo 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, Gilo shall be allowed to invest as a shareholder in
publicly traded companies, or through a venture capital firm or an investment
pool.
For purposes of this Section 5, the term "Corporation" shall also mean
DSPC or any of its subsidiaries.
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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 employment term
continue to develop, compile and acquire said items (all hereinafter
collectively referred to as the "Corporation's Property"). It is expected that
Gilo 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 Gilo's employment is terminated, for whatever reason, Gilo agrees not
to copy, make known, disclose or use, any of the Corporation's Property without
the Corporation's prior written consent which shall not be unreasonably
withheld. In such event, Gilo 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. Gilo
agrees upon termination of employment to deliver to the Corporation all
confidential papers, documents, records, lists and notes (whether prepared by
Gilo or others) comprising or containing the Corporation's Property. Gilo
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.
c. COVENANT NOT TO COMPETE. For a period of one (1) year from the
date of any termination of Gilo's employment with the Corporation, provided that
he has sold substantially all of his stock in the Corporation, Gilo 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 State of California, which are the same as, or competitive with, the
activities in which the Corporation is presently engaged.
d. CORPORATION DEFINED. For purposes of this Section 6, the term
"Corporation" shall also mean DSPC and any of its subsidiaries.
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7. TERMINATION.
a. GENERAL. The Corporation may terminate this Agreement without
cause, by written notice. Gilo may voluntarily terminate his employment
hereunder upon ninety (90) days' advance written notice to the Corporation. A
change in control (as defined below) of the Corporation, other than a change in
control which is also a transaction described in Section 9.e. below, shall be
deemed to be an immediate termination without cause by the Corporation. As used
herein, "change in control" means a change in ownership or control of the
Corporation 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 Corporation
or by a Corporation-sponsored employee benefit plan or by a person that directly
or indirectly controls, is controlled by, or is under common control with, the
Corporation of beneficial ownership (within the meaning of Rule 13d-3 of the
Securities Exchange Act of 1934, as amended) of securities possessing more than
fifty percent (50%) of the total combined voting power of the Corporation's
outstanding securities pursuant to a tender or exchange offer made directly to
the Corporation'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.
As used herein, "CONTINUING DIRECTORS" means members of the Board of the
Corporation 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.
b. TERMINATION FOR CAUSE. The Corporation may immediately terminate
Gilo's employment at any time for cause. Termination for cause shall be
effective from the receipt of written notice thereof to Gilo 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
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<PAGE> 6
(iii) intentionally imparting confidential information relating to the
Corporation, DSPC, or any of DSPC's subsidiaries, 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 Gilo's death. In addition, if any disability or
incapacity of Gilo 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 Gilo's employment upon
written notice. Payment of salary to Gilo during any sick leave shall only be to
the extent that Gilo has accrued sick leave or vacation days. Gilo shall accrue
sick leave at the same rate generally available to the Corporation's employees.
d. SEVERANCE PAY. If this Agreement is terminated without cause
pursuant to Section 7.a. (above), the Corporation shall pay Gilo 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 Gilo shall remain as a consultant to the Corporation.
The Corporation shall pay Gilo a severance fee equal to his monthly salary at
his then-current rate of fixed salary compensation, multiplied by the number six
(6) if this Agreement is terminated pursuant to Section 7.b (i) (above) or if
Gilo or the Corporation elects not to renew this Agreement. The Corporation
shall pay Gilo a severance fee equal to his monthly salary at his then-current
rate of fixed salary compensation, multiplied by the lesser of the number
eighteen (18) or the number of months left in the original term of this
Agreement as set forth herein plus nine (9), if Gilo voluntarily elects to
terminate his employment, unless the Corporation successfully claims that a
termination in accordance with Section 7. b(ii) and (iii) is in order, or if
Gilo or the Corporation elects not to renew this Agreement. There shall be no
severance in the event that this Agreement is terminated in accordance with
Section 7.b (ii) and (iii).
8. CORPORATE OPPORTUNITIES.
a. DUTY TO NOTIFY. In the event that Gilo, during the employment
term, shall become aware of any material and significant business opportunity
directly related to the Corporation's digital signal processing business or the
Corporation's wireless PBX
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business, or such other businesses that become significant for the Corporation,
Gilo shall promptly notify the Corporation's Directors of such opportunity. Gilo
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. Gilo'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 Gilo fails to notify the
Corporation of, or so appropriates, any such opportunity without the express
written consent of the Board of Directors, Gilo shall be deemed to have violated
the provisions of this Section notwithstanding the following:
i. The capacity in which Gilo shall have acquired such
opportunity; or
ii. The probable success in the Corporation's hands of such
opportunity.
c. CORPORATION DEFINED. For purposes of this Section 8, the term
"Corporation" shall also mean DSPC or any of its subsidiaries.
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.
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 Gilo hereunder are personal in nature and the obligations to
perform such services and the conditions and covenants of this Agreement cannot
be assigned by Gilo. 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
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<PAGE> 8
be determined to be invalid or inoperative, the validity and effect of the other
provisions hereof shall not be affected thereby, provided that no such
severability shall be effective if it causes a material detriment to any party.
e. 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.
f. 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.
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 giving written notice to the other party hereto of such
change in the manner above provided.
h. LEGAL COUNSEL. Gilo has been represented by or has been advised
by the Corporation to seek and obtain the advise of independent counsel of his
own choice and has been given an adequate opportunity to seek and obtain the
advise of such independent counsel in connection with the negotiation of this
Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
DSP TELECOM, INC.
a California corporation
20300 Stevens Creek Blvd., Ste. 465
Cupertino, CA 95014
By: /s/ Lewis Broad /s/ Davidi Gilo
-------------------------------- ----------------------------------------
LEWIS BROAD, Chairman of DAVIDI GILO
Compensation Committee 100 Why Worry Lane
Woodside, CA 94062
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EXHIBIT 26
EMPLOYMENT AGREEMENT
OF SHMUEL ARDITI
WITH
DSP TELECOM, INC.
THIS EMPLOYMENT AGREEMENT (this "Agreement"), is made and entered into
this 15th day of July, 1999 ("Effective Date"), by and between DSP TELECOM,
INC., a California corporation (hereinafter the "Corporation"), and SHMUEL
ARDITI (hereinafter "Arditi").
RECITAL
The Corporation hereby agrees to employ Arditi, and Arditi hereby
agrees to accept employment with the Corporation, on the terms and conditions
hereinafter set forth.
AGREEMENT
NOW, THEREFORE, the parties hereto hereby agree as follows:
1. EMPLOYMENT DUTIES.
a. CORPORATION'S DUTIES. The Corporation shall allow Arditi
to, and Arditi shall, perform responsibilities normally incident to his position
as Chief Operating Officer of the Corporation's parent corporation, DSP
COMMUNICATIONS, INC. ("DSPC"), or other equivalent position commensurate with
his background, education, experience and professional standing. The Corporation
shall provide Arditi with a private office, stenographic help, office equipment,
supplies, customary services and cooperation suitable for the performance of his
duties.
b. ARDITI'S DUTIES. Unless otherwise agreed to by the parties,
Arditi shall serve as Chief Operating Officer of DSPC or other equivalent
position. Arditi shall devote his full productive time, attention, energy, and
skill to the business of DSPC during the employment term set forth below, and
shall not become engaged to render similar services on behalf of any other
entity while employed hereunder, without the Corporation's written consent.
Arditi shall report directly to Davidi Gilo, the Corporation's Chairman of the
Board and Chief Executive Officer. Arditi,
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however, shall be allowed to perform services for the Corporation's affiliates,
including, without limitation: DSP TELECOMMUNICATIONS, LTD.; CTP SYSTEMS, LTD.;
DSPC (ISRAEL), LTD.; DSPC (JAPAN), INC.; CTP SYSTEMS, INC.; and ISOTEL CORP.
(Arditi may only spend time with ComBox, Ltd. and may only have limited duties
that do not consume in the aggregate more than five percent (5%) of his time.)
2. TERM. This Agreement shall be for an unlimited period of time
subject to termination as set forth herein. As used herein, "employment term"
refers to the entire period of employment of Arditi hereunder.
3. COMPENSATION. Arditi shall be compensated as follows:
a. FIXED SALARY. Arditi shall receive a fixed annual salary of
One Hundred Fifty-five Thousand Dollars ($155,000) effective May 1st. The
Corporation agrees to review the fixed salary following the end of each twelve
(12) month period during the employment term based upon Arditi's services and
the Corporation's financial results during the calendar year, and to make such
increases as may be determined appropriate in the discretion of the
Corporation's Chief Executive Officer.
b. PAYMENT. Arditi's fixed salary shall be payable on a
semi-monthly basis, in arrears.
c. BONUS COMPENSATION. During the employment term, Arditi
shall be entitled to a management by objective plan and Corporate bonus plan as
determined by the Corporation's Chief Executive Officer.
d. VACATION. Arditi shall accrue paid vacation at the rate of
twenty (20) working days for each twelve (12) months of employment. Arditi shall
be compensated at his usual rate of compensation during any such vacation.
Arditi shall be entitled to ten (10) paid holidays during each twelve (12)
months of employment as set forth in the Corporation's employee manual as
amended from time to time.
e. BENEFITS. During the employment term, Arditi and his
dependents shall be entitled to participate in any group plans or programs
maintained by the Corporation for any employees
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<PAGE> 3
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 Arditi. The Corporation and DSPC shall provide Arditi with
Officer Insurance, if reasonably available to the Corporation and DSPC, and of
its officers. Arditi shall in no event receive less insurance coverage than that
available to any other vice-presidential level employee of the Corporation.
4. EXPENSES. The Corporation shall reimburse Arditi for expenses as
follows:
a. BUSINESS. For Arditi'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, and for all
expenses incurred at DSPC's request. As a condition of reimbursement, Arditi
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.
b. PROFESSIONAL DUES. The Corporation shall also reimburse
Arditi for all professional membership dues incurred at the request of the
Corporation.
c. RELOCATION EXPENSES. The Corporation agrees to reimburse
Arditi for the airfare for Arditi and his immediate family to fly to the United
States (business class for Arditi and his spouse, economy class for his
children), plus up to Twenty Thousand Dollars ($20,000) for all reasonable
expenses incurred and substantiated by receipts for moving Arditi and his
immediate family from Israel to California, including but not limited to car
rental, and any other reasonable expenses associated with Arditi's relocation.
In addition, Arditi shall be given a monthly housing subsidy of up to an
aggregate amount of One Thousand Five Hundred Dollars ($1,500) per month for the
first two (2) years for housing
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<PAGE> 4
in California, as well as housing while in Israel on the Corporation's business.
For amounts to be eligible for said housing subsidy, receipts for the expenses
must be delivered to the Corporation. The Corporation also agrees to reimburse
Arditi for the airfare for Arditi and his immediate family to fly back to Israel
(business class for Arditi and his spouse, economy class for his children) and
up to Ten Thousand Dollars ($10,000) for all other reasonable expenses incurred
and substantiated by receipts to relocate Arditi and his immediate family back
to Israel at the conclusion of Arditi's employment with the Corporation. There
shall be no reimbursement for return travel to Israel should Arditi take other
employment in the United States prior to returning to Israel. The Corporation
shall reimburse Arditi for his reasonable expenses in attaining a Green Card
Visa status.
d. TRAVEL TO ISRAEL. For each six (6) months of Arditi's
employment with the Corporation, Arditi and his family will be entitled to
travel once to Israel by business class, at the Corporation's expense.
5. CONFIDENTIALITY AND COMPETITIVE ACTIVITIES. Arditi 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. Arditi 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, Arditi shall be allowed to invest as
a shareholder in publicly-traded companies, or through a venture capital firm or
an investment pool. Further notwithstanding anything to the contrary herein,
Arditi may remain as a shareholder and director of ComBox, LTD under the terms
above.
For purposes of this Section 5, the term "Corporation" shall also mean
DSPC or any of its subsidiaries.
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<PAGE> 5
6. TRADE SECRETS.
a. SPECIAL TECHNIQUES. It is hereby agreed that the
Corporation has developed or acquired certain products, technology, unique or
special method, 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 Arditi 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 Arditi's employment is terminated, for whatever reason, Arditi
agrees not to copy, make known, disclose or use, any of the Corporation's
Property without the Corporation's prior written consent, which shall not be
unreasonably withheld. In such event, Arditi 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 twelve (12)
months. Arditi agrees upon termination of employment to deliver to the
Corporation all confidential papers, documents, records, lists and notes
(whether prepared by Arditi or others) comprising or containing the
Corporation's Property. Arditi 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.
c. COVENANT NOT TO COMPETE. For a period of one (1) year from
the date of any termination of Arditi's employment with the Corporation,
provided that he has sold substantially all of his stock in the Corporation,
Arditi shall not, directly or
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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
State of California, which are the same as, or directly competitive with, the
activities in which the Corporation is presently engaged.
d. CORPORATION DEFINED. For purposes of this Section 6, the
term "Corporation" shall also mean DSPC and any of its subsidiaries.
7. TERMINATION.
a. GENERAL. The Corporation may terminate Arditi's employment
under this Agreement without cause, upon sixty (60) days' advance written notice
to Arditi. Arditi 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 Arditi's employment at any time for cause. Termination for cause shall
be effective from the receipt of written notice thereof to Arditi specifying the
grounds for termination and all relevant facts. Cause shall be deemed to include
clearly proven: (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 fifteen (15) 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 Arditi's death. In addition, if any disability or
incapacity of Arditi to perform his duties as the result of any injury,
sickness, or physical, mental
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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 Arditi's employment upon written
notice. Payment of salary to Arditi during any sick leave shall only be to the
extent that Arditi has accrued sick leave or vacation days. Arditi shall accrue
sick leave at the same rate generally available to the Corporation's
vice-president level employees.
d. SEVERANCE PAY. If this Agreement is terminated by the
Corporation without cause pursuant to the first sentence in Section 7.a (above),
the Corporation shall pay Arditi a severance fee equal to his monthly salary at
his then current rate of fixed salary compensation, multiplied by the number six
(6). There shall be no severance in the event that this Agreement is terminated
in accordance with Section 7.b. If Arditi voluntarily terminates his employment,
he shall not be entitled to any severance unless he gives the Corporation at
least four (4) months' written notice and actively works to train a successor
and provides the Corporation with a list of all of his marketing contacts and
current projects ("Arditi Cooperation"). In the event of Arditi's voluntary
termination and Arditi Cooperation, Arditi shall be entitled to a severance fee
equal to his monthly salary at his then current rate of fixed salary
compensation, multiplied by the number four (4).
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8. CORPORATE OPPORTUNITIES.
a. DUTY TO NOTIFY. In the event that Arditi, during the
employment term, shall become aware of any material and significant business
opportunity related to the Corporation's or DSPC's business, Arditi shall
promptly notify the Corporation's Chief Executive Officer of such opportunity.
Arditi 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, or the Chief Executive
Officer, of the Corporation fails to take appropriate action within thirty (30)
days. Arditi'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 Arditi fails to notify
the Corporation of, or so appropriates, any such opportunity without the express
written consent of the Chief Executive Officer, Arditi shall be deemed to have
violated the provisions of this Section, notwithstanding the following:
i. The capacity in which Arditi shall have acquired
such opportunity; 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, specifically excluding stock option agreements, the terms of which
shall not change by the mere fact that Arditi is employed by the Corporation and
not the Israeli affiliate of the Corporation. The provisions of this Agreement
may be waived, altered, amended or repealed in whole or
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<PAGE> 9
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 Arditi hereunder are personal in nature and the obligations to
perform such services and the conditions and covenants of this Agreement cannot
be assigned by Arditi. 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 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
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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.
IN WITNESS WHEREOF, the parties have executed this Employment Agreement
as of the date first written above.
DSP TELECOM, INC.,
a California corporation
20300 Stevens Creek Blvd, 4th Floor
Cupertino, California 95014
By: /s/ STEPHEN P. PEZZOLA /s/ Shmuel Arditi
---------------------------------- ------------------------------------
Stephen P. Pezzola SHMUEL ARDITI
Secretary and General Counsel
------------------------------------
------------------------------------
(Print Address)
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EXHIBIT 28
EMPLOYMENT AGREEMENT
OF DAVID ABER
WITH
D.S.P.C. TECHNOLOGIES LTD.
THIS EMPLOYMENT AGREEMENT (this "Agreement") is made and entered into
effective as of this 12th day of August, 1999, by and between D.S.P.C.
TECHNOLOGIES LTD., an Israeli company (hereinafter the "Corporation"), and DAVID
ABER (hereinafter "Aber").
RECITALS
A. Aber is employed by the Corporation as its Chief Financial Officer.
B. In connection with Aber's employment with the Corporation, the
Corporation and Aber desire to enter into this Employment Agreement according to
the terms and conditions set forth below.
AGREEMENT
NOW, THEREFORE, the parties hereto hereby agree as follows:
1. EMPLOYMENT DUTIES.
a. GENERAL. The Corporation hereby agrees to employ Aber, and
Aber hereby agrees to accept employment with the Corporation, on the terms and
conditions hereinafter set forth.
b. CORPORATION'S DUTIES. The Corporation shall allow Aber to,
and Aber shall, perform responsibilities normally incident to his position as
Chief Financial Officer of both the Corporation and the Corporation's parent
corporation, DSP Communications, Inc., a Delaware corporation ("DSPC"), and as
Senior Vice President of DSPC, commensurate with his background, education,
experience and professional standing. The Corporation shall provide Aber with a
private office, stenographic help, office equipment, supplies, customary
services and cooperation suitable for the performance of his duties. These
duties shall be performed primarily in Israel.
c. ABER'S DUTIES. Unless otherwise agreed to by the parties,
Aber shall serve as the Chief Financial Officer of both the Corporation and DSPC
and also as the Senior Vice President of DSPC. Aber shall devote his full
productive time, attention, energy, and skill to the business of the Corporation
and DSPC during the employment term set forth below, and shall not become
engaged to render similar services on behalf of any other entity while employed
hereunder, without the prior written consent of the Corporation's Board of
Directors or its Chairman. Aber shall report directly to DSPC's Board of
Directors and the Chairman of the Board. Aber shall inform the Board of
Directors of any positions that he takes in any corporation other than the
Corporation or DSPC. Aber, however, shall be allowed to perform services for the
Corporation's affiliates, including, without limitation, DSPC Israel, Ltd., DSP
Telecommunications, Ltd, CTP Systems, Ltd, DSP Telecom, Inc., DSPC Japan, Inc.,
CTP
<PAGE> 2
Systems, Inc., DSPC Europe BVBA, and Isotel Corp., and shall be allowed to serve
on the Board of Directors of up to two (2) corporate entities. Notwithstanding
Aber's offices or titles in DSPC or any of DSPC's subsidiaries or other
affiliates, Aber shall have the authority to conclude contracts in the name of
such company only to the extent that such authority does not cause (i) any
Israeli company to have a permanent establishment in the United States for
purposes of any tax treaty between the United States and Israel or (ii) any
United States company to have a permanent establishment in Israel for purposes
of any tax treaty between the United States and Israel.
d. Aber acknowledges that his employment with the Corporation
will require frequent travel spanning extended periods outside Israel.
Furthermore, Aber agrees to extensive world-wide travel under his employment
with the Corporation.
e. Aber understands and acknowledges that as his position is a
senior managerial position in substance, as defined in the Work and Rest Hours
Law, 1951, and requires a high level of trust, the provisions of said law shall
not apply to Aber and Aber agrees that he may be required to work beyond the
regular working hours of the Corporation, for no additional compensation other
than as specified in this Agreement.
2. TERM. This Agreement shall terminate on August 12, 2001, unless (a)
extended as set forth herein, or (b) terminated sooner under the terms of this
Agreement. Thereafter, this Agreement may be renewed by Aber and the Board of
Directors of this Corporation 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 Aber hereunder, including any agreed-to
extension.
3. COMPENSATION. Aber shall be compensated as follows:
a. FIXED SALARY. Aber shall receive a fixed annual gross salary
of Six Hundred Sixty Thousand (660,000) New Israeli Shekels (the "Gross
Salary"), which amount includes an annual vehicle allowance, payable on a
monthly basis. The Corporation agrees to review the fixed salary following the
end of each twelve (12) month period during the employment term based upon
Aber's services and the Corporation's and DSPC's financial results during the
calendar year, and to make such increases as may be determined appropriate in
the discretion of the Corporation's Board of Directors.
b. BONUS COMPENSATION. During the employment term, Aber shall
participate in each bonus plan adopted by DSPC's Board of Directors, and shall
receive such other bonus pay as may be determined reasonable in the discretion
of DSPC's Board of Directors.
c. VACATION. Aber shall accrue paid vacation at the rate of
twenty-two (22) days for each twelve (12) months of employment. Aber shall be
compensated at his usual rate of compensation during any such vacation. Aber
shall not accumulate unused vacation days for more than twenty four (24) months
of employment. Aber shall be entitled to paid national and Jewish holidays as is
the law or custom in Israel.
d. BENEFITS.
i. During the term of Aber's employment, Aber shall be
entitled to Manager's Insurance (Bituach Menehalim) in an amount equal to 15.83%
of the Gross Salary, which shall be paid monthly to said Manager's Insurance
Plan directly by the Corporation. The
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insurance shall be allocated as follows: (i) 8.33% in respect of severance
compensation, (ii) 5% in respect of pension and (iii) 2.5% of the Gross Salary
in respect of disability. An additional 5% of the Gross Salary shall be deducted
by the Corporation from the monthly payment of Aber's salary as Aber's
contribution to said Manager's Insurance.
ii. The Manager's Insurance policy provided for Aber's
benefit shall be registered in the Corporation's name. The contributions to the
Manager's Insurance Policy shall be paid by the Corporation in lieu of any other
legal obligation to make payments on account of severance or pension in respect
of Aber's employment during the Employment Term, except as otherwise set forth
in Section 7 (below). Should the provisions made for severance pay not cover the
amount owed by the Corporation to Aber by law, then the Corporation shall pay
Aber the difference, all in accordance with Israeli law. Aber's agreement to the
last two sentences shall exempt the Corporation from the requirement to apply to
the Minister of Labor and Welfare for an approval under Section 14 of the
Severance Pay Law; however, should such application be deemed necessary, Aber's
signature hereupon shall be deemed his consent to the Corporation's application
in Aber's name in such matter.
iii. The sums accumulated in the Manager's Insurance
policy shall be transferred to Aber upon termination of his employment
hereunder, unless Aber has committed an act in breach of Aber's fiduciary duty
towards the Corporation, DSPC or any of its affiliates.
iv. The Corporation shall provide and pay Aber
Recreation Funds (Dme'y Havra'ah) at the rate required by law and regulations.
v. The Corporation shall contribute to a Continuing
Education Fund chosen by it for the benefit of Aber in an amount equal to 7.5%
of his Gross Salary per month, subject to Aber's contribution of an additional
2.5% of his Gross Salary per month.
vi. The Corporation and DSPC shall provide Aber with
Director and Officer Insurance, if reasonably available to the Corporation and
DSPC, and all of its officers and directors. Aber shall in no event receive less
Director and Officer insurance coverage than that available to any other
employee. The Corporation shall, at a minimum, keep in full force and effect its
indemnification agreement previously entered into with Aber.
4. EXPENSES. The Corporation shall reimburse Aber 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. As a condition of reimbursement, Aber 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. The
Corporation shall also reimburse Aber for all professional membership dues
incurred, if any; all technical books purchased by Aber; and all other expenses,
incurred by Aber at the Corporation's or DSPC's request.
5. CONFIDENTIALITY AND COMPETITIVE ACTIVITIES. Aber 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. Aber 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
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manner whatsoever, with the Corporation. Notwithstanding anything in the
foregoing to the contrary, Aber shall be allowed to invest as a shareholder in
publicly traded companies, or through a venture capital firm or an investment
pool.
For purposes of this Section 5, the term "Corporation" shall also mean
DSPC or any of its subsidiaries.
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 employment
term continue to develop, compile and acquire said items (all hereinafter
collectively referred to as the "Corporation's Property"). It is expected that
Aber 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 Aber's employment is terminated, for whatever reason, Aber 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, Aber 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. Aber
agrees upon termination of employment to deliver to the Corporation all
confidential papers, documents, records, lists and notes (whether prepared by
Aber or others) comprising or containing the Corporation's Property. Aber
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.
c. COVENANT NOT TO COMPETE. For a period of one (1) year from
the date of any termination of Aber's employment with the Corporation Aber 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,
which are the same as, or competitive with, the activities in which the
Corporation is presently engaged.
d. CORPORATION DEFINED. For purposes of this Section 6, the term
"Corporation" shall also mean DSPC and any of its subsidiaries.
7. TERMINATION.
a. GENERAL. The Corporation may terminate this Agreement without
cause, by written notice. Aber may voluntarily terminate his employment
hereunder upon ninety (90) days' advance written notice to the Corporation.
b. TERMINATION FOR CAUSE. The Corporation may immediately
terminate Aber's employment at any time for cause. Termination for cause shall
be effective from the
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receipt of written notice thereof to Aber 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, DSPC or any of
DSPC's subsidiaries, 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 Aber's death. In addition, if any disability or
incapacity of Aber 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 Aber's employment upon
written notice. Payment of salary to Aber during any sick leave shall only be to
the extent that Aber has accrued sick leave or vacation days. Aber shall accrue
sick leave at the same rate generally available to the Corporation's employees.
d. SEVERANCE PAY. If this Agreement is terminated by the
Corporation without cause pursuant to Sections 7.a or 7.c (above), the
Corporation shall pay Aber a severance fee equal to his monthly salary at his
then-current rate of fixed salary compensation, multiplied by the greater of (i)
the number of full months left until the end of the then-current employment
term, or (ii) six (6), during which time Aber may elect to remain as an employee
of the Corporation in a non-policy making role, devoting substantive productive
time, and his options in DSPC shall continue to vest for the period of
continuous employment, or shall be entitled to the severance without remaining
as an employee. The above severance fee shall be payable in accordance with the
Corporation's normal payroll practices. The Corporation shall pay Aber a
severance fee equal to his monthly salary at his then-current rate of fixed
salary compensation, multiplied by the number six (6) if this Agreement is
terminated pursuant to Section 7.b (i) (above) or if Aber or the Corporation
elects not to renew this Agreement. The Corporation shall pay Aber a severance
fee equal to his monthly salary at his then-current rate of fixed salary
compensation, multiplied by the number three (3), if Aber voluntarily elects to
terminate his employment, unless the Corporation successfully claims that a
termination in accordance with Sections 7.b (ii) or (iii) is in order. There
shall be no severance in the event that this Agreement is terminated in
accordance with Section 7.b (ii) or (iii).
e. MANAGER'S INSURANCE. All sums received by Aber pursuant to
the Manager's Insurance shall be in addition to any sums owing as severance pay
pursuant to this Section 7.
8. CORPORATE OPPORTUNITIES.
a. DUTY TO NOTIFY. In the event that Aber, during the employment
term, shall become aware of any material and significant business opportunity
related to the business of the Corporation, DSPC or any of DSPC's subsidiaries,
Aber shall promptly notify the Corporation's Directors of such opportunity. Aber
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. Aber's duty to notify
the Corporation
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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 Israel relating to the fiduciary duties of an agent or employee.
b. FAILURE TO NOTIFY. In the event that Aber fails to notify the
Corporation of, or so appropriates, any such opportunity without the express
written consent of the Corporation's Board of Directors, Aber shall be deemed to
have violated the provisions of this Section notwithstanding the following:
i. The capacity in which Aber shall have acquired such
opportunity; or
ii. The probable success in the Corporation's hands of
such opportunity.
9. MISCELLANEOUS.
a. ENTIRE AGREEMENT; NO DEROGATION OF RIGHTS. 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 (but excluding any stock option agreements between Aber and
DSPC). Aber agrees that the terms in this Agreement represent an improvement of
the terms of his employment with the Corporation and waives any claim against
the Corporation and its affiliates of a derogation of his rights by virtue of
his signing this Agreement. 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 Aber hereunder are personal in nature and the obligations to
perform such services and the conditions and covenants of this Agreement cannot
be assigned by Aber. 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 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 Israel applicable to
contracts between Israeli residents entered into and to be performed entirely
within the State of Israel.
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
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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.
IN WITNESS WHEREOF, the parties have executed this Employment Agreement
as of the date first written above.
D.S.P.C. TECHNOLOGIES LTD., DAVID ABER
an Israeli company
11 Ben Gurion Street
Givat Shmuel 51905, ISRAEL
By: /s/ Davidi Gilo /s/ David Aber
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DAVIDI GILO DAVID ABER
Chief Executive Officer
Address:
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