Exhibit 10.1


 


SEPARATION AGREEMENT


This Separation Agreement (this “Agreement”) is made
and entered into as of __________, 2002, by and among DSP Group, Inc., a
Delaware corporation (“DSPGI”), DSP Group Ltd., an Israeli corporation
(“DSPGL”), Ceva, Inc., a Delaware corporation (“Ceva, Inc.”), DSP Ceva Inc., a
Delaware corporation (“DSP Ceva”), and Corage, Ltd., an Israeli corporation
(“Corage, Ltd.”).


Recitals


A.            DSPGI owns all of the issued and outstanding capital
stock of DSPGL and Ceva, Inc.


B.            Ceva, Inc. owns all of the issued and outstanding capital
stock of DSP Ceva.


C.            DSPGL owns all of the issued and outstanding capital
stock of Corage, Ltd.


D.            DSPGI and DSPGL are in the business of designing,
manufacturing and marketing high performance digital signal processing
integrated circuit devices for telephone answering devices, computer telephony
devices and voice-over broadband products (the “Products Business”), and in the
business of developing and licensing designs for programmable digital signal
processor cores, including, without limitation, digital signal processing cores
used as the central processor in semiconductor chips for specific applications
(the “Licensing Business”).


E.             DSPGI and DSPGL collectively own and license certain
intangible property, including but not limited to patents, trademarks and other
intellectual property, relating to the Licensing Business, the beneficial
rights to which in the United States are owned by DSPGI and in the rest of the
world are owned by DSPGL.


F.             The Boards of Directors of DSPGI and DSPGL have
determined that it is appropriate and desirable, on the terms and conditions
contemplated by this Agreement, for the parties to separate the Licensing
Business and its assets from the Products Business by taking the following
actions (such actions collectively constituting the “Separation”):


(i)            DSPGL will transfer to Corage, Ltd.
all of its right, title and interest in the Licensing Business Assets (but
reserving the right to use certain Transferable Licensing IP, as it currently
exists, in the Products Business), in exchange for the issuance by Corage, Ltd.
to DSPGL of shares of Corage, Ltd. capital stock;


(ii)           DSPGL will distribute to DSPGI all of
the issued and outstanding capital stock of Corage, Ltd.;

















 


(iii)          In exchange for the issuance by Ceva,
Inc. to DSPGI of shares of Ceva, Inc. capital stock, DSPGI simultaneously will
contribute and transfer to Ceva, Inc. (A) all right, title and interest of
DSPGI in the Licensing Business Assets (but reserving the right to use certain
Transferable Licensing IP (as defined in the Technology Transfer Agreements),
as it currently exists, in the Products Business), and (B) all of the issued
and outstanding shares of capital stock of Corage, Ltd.; and


(iv)          In exchange for the issuance to Ceva,
Inc., of shares of DSP Ceva capital stock, Ceva, Inc. in turn will contribute
and transfer to DSP Ceva (A) all of the issued and outstanding shares of
capital stock of Corage, Ltd., so that Corage, Ltd. will be a wholly-owned
subsidiary of DSP Ceva; and (B) all of the right, title and interest of Ceva,
Inc. in the Licensing Business Assets.


G.            The Boards of Directors of DSPGI and Ceva, Inc. have
determined further that, following completion of the Separation, it is
appropriate and desirable, on the terms and conditions of this Agreement and
the Combination Agreement, for DSPGI to distribute to holders of shares of
DSPGI Common Stock the outstanding shares of Ceva, Inc. Common Stock owned
directly or indirectly by DSPGI (the “Distribution”).


H.            DSPGI and Ceva, Inc. intend that the Separation shall
qualify as either a reorganization under Section 368(a)(1)(D) of the Internal
Revenue Code of 1986, as amended (the “Code”) or as an exchange under Section
351 of the Code and intend that the Separation and the Distribution qualify
under Section 355 of the Code and that Section 355(e) of the Code shall not
apply to the Separation and the Distribution.


I.              DSPGI and Ceva, Inc. have entered into the Combination
Agreement dated April 4, 2002, with Parthus Technologies Plc (“Parthus”) (the
“Combination Agreement”), providing, among other things, for the combination of
Parthus  and
Ceva, Inc. in a transaction in which shares of Ceva, Inc. will be issued to the
shareholders of Parthus, and Ceva, Inc. will acquire all of the outstanding
capital stock of Parthus  (the “Combination”).


J.             The consummation of the Separation and the Distribution
is a condition to the consummation of the Combination.


K.            The parties wish to set forth the principal corporate
transactions required to effect the Separation and the Distribution and certain
other agreements that will govern certain matters relating to the Separation
and the Distribution, and the relationship of the parties following the
Separation and the Distribution.


Agreements


For good and valuable consideration, the sufficiency
of which is hereby acknowledged, the parties, intending to be legally bound,
agree as follows:


 


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ARTICLE I

DEFINITIONS


For the purpose of this Agreement the following terms
shall have the following meanings:


“Action” means any demand, action, suit, countersuit,
arbitration, inquiry, proceeding or investigation by or before any federal,
state, local, foreign or international Governmental Authority or any
arbitration or mediation tribunal.


“Active Trade or Business” means the active conduct of
the trade or business (as defined in Section 355(b)(2) of the Code) conducted
by Ceva, Inc. immediately prior to the Distribution Date.


“Affiliate” of any Person means a Person that
controls, is controlled by, or is under common control with such Person.  As used herein, “control” means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of such entity, whether through
ownership of voting securities or other interests, by contract or otherwise.


“Agent” means the distribution agent to be appointed
by DSPGI to distribute to the stockholders of DSPGI pursuant to the
Distribution the shares of Ceva, Inc. Common Stock held by DSPGI.


“Agreed Amount” means part, but not all, of the
Claimed Amount.


“Ancillary Agreements” means the documents executed and delivered by the parties pursuant to Section
2.2 of this Agreement


“Applicable Deadline” has the meaning given in Section
8.3(b).


“Arbitration Act” means the United States Arbitration
Act, 9 U.S.C. 1-14, as the same may be amended from time to time.


“Award” means any issuance of DSPGI Options to a
single person with the same date of grant and exercise price.


“Claim Notice” means written notification which
contains (i) a description of the Damages incurred or reasonably expected to be
incurred by the Indemnitee and the Claimed Amount of such Damages, to the
extent then known, (ii) a statement that the Indemnitee is entitled to
indemnification under Article V for such Damages and a reasonable explanation
of the basis therefor, and (iii) a demand for payment in the amount of such
Damages.


“Claimed Amount” means the amount of any Damages
incurred or reasonably expected to be incurred by the Indemnitee.


“Code” has the meaning given in the Recitals.


 


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“Combination” has the meaning given in the Recitals.


“Combination Agreement” has the meaning given in the
Recitals.


“Combination Closing” means the closing of the
transactions contemplated under the Combination Agreement.


“Combination Effective Date” means the date on which
the Combination Closing occurs.


“Commission” means the United States Securities and
Exchange Commission.


“Consents” means any consent, waiver or approval from,
or notification requirements to, any third party.


“Ceva Assumed Liabilities” has the meaning given in
Section 2.5.


“Ceva Balance Sheet” means the Most Recent Balance
Sheet as such term is defined in the Combination Agreement.


“Ceva, Inc. Common Stock” means Common Stock, $.001
par value per share, of Ceva, Inc.


“Ceva Employees” means the current employees of Ceva,
Inc., Corage, Ltd. or DSP Ceva and any other employees who are hired by Ceva,
Inc., Corage, Ltd. or DSP Ceva prior to the Distribution Date.


“Ceva, Inc. Group” means Ceva, Inc., and each
Subsidiary of Ceva, Inc. (including any Subsidiary contributed to Ceva, Inc.
pursuant to the Separation) immediately after the Combination Effective Date.


“Ceva, Inc. Indemnitees” has the meaning given in
Section 5.3.


“Ceva, Inc. Technology Transfer Agreement” has the
meaning given in Section 2.2(e).


“Corage, Ltd. Stock Certificates” has the meaning
given in Section 2.2(c).


“Corage, Ltd. Stock Powers” has the meaning given in
Section 2.2(c).


“Corage, Ltd. Technology Transfer Agreement” has the
meaning given in Section 2.2(a).


“Cost Sharing Agreement” means the Cost Sharing
Agreement dated as of January 1, 1998, between DSPGI and DSPGL.


“Damages” means any and all debts, obligations and
other liabilities (whether absolute, accrued, contingent, fixed or otherwise,
or whether known or unknown, or due or to become due or otherwise), diminution
in value, monetary damages, fines, fees, penalties, interest obligations, deficiencies,
losses and expenses (including amounts paid in settlement, interest, court
costs, costs of investigators, fees and expenses of attorneys, accountants,
financial advisors and other experts, and other expenses of litigation), other
than those costs and expenses of arbitration of a 


 


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Dispute which are to be
shared equally by the Indemnitee and the Indemnifying Party as set forth in
Article VIII.


“Definitive Guidance” means, with respect to the United
States, temporary or final Treasury regulations, a Revenue Ruling, Revenue
Procedure or Notice issued by the IRS or a final decision of the United States
Tax Court, and with respect to any other jurisdiction, any similar guidance.


“Dispute” means the dispute resulting if the
Indemnifying Party disputes its liability for all or part of the Claimed
Amount.


“Distribution” has the meaning given in the Recitals.


“Distribution Date” means the date determined pursuant
to Section 3.1 on which the Distribution occurs.


“DSP Europe” means DSP Group Europe Sarl, a French
company.


“DSP Japan” means Nikon DSP K.K., a Japanese company.


“DSPGI Common Stock” means the Common Stock, $.001 par
value per share, of DSPGI.


“DSPGI Group” means DSPGI and each Subsidiary of DSPGI
(other than any member of the Ceva, Inc. Group) immediately after the
Distribution Date.


“DSPGI Indemnitees” has the meaning given in Section
5.2.


“DSPGI Legacy Option” has the meaning set forth in
Section 3.7(c).


“Employees Proprietary Information Agreements” shall
have the meaning set forth in Section 2.6(c).


“Environmental Liabilities” means all Liabilities
relating to, arising out of or resulting from any Environmental Law or contract
or agreement relating to environmental, health or safety matters (including all
removal, remediation or cleanup costs, investigatory costs, governmental
response costs, natural resources damages, property damages, personal injury
damages, costs of compliance with any settlement, judgment or other
determination of Liability and indemnity, contribution or similar obligations)
and all costs and expenses, interest, fines, penalties or other monetary
sanctions in connection therewith.


“Environmental Law” means any federal, state, local,
foreign or international statute, ordinance, rule, regulation, code, license,
permit, authorization, approval, consent, common law (including tort and
environmental nuisance law), legal doctrine, order, judgment, decree,
injunction, requirement or agreement with any Governmental Authority, now or
hereafter in effect relating to health, safety, pollution or the environment
(including ambient air, surface water, groundwater, land surface or subsurface
strata) or to emissions, discharges, releases or threatened releases of any
substance currently or at any time hereafter listed, defined, designated 


 


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or classified as
hazardous, toxic waste, radioactive or dangerous, or otherwise regulated, under
any of the foregoing, or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or handling of any
such substances, including the Comprehensive Environmental Response,
Compensation and Liability Act, the Superfund Amendments and Reauthorization
Act and the Resource Conservation and Recovery Act and comparable provisions in
state, local, foreign or international law.


“Form 10” has the meaning given in Section 3.3.


“Governmental Approval” means any authorization,
consent, order or approval of, or declarations or filings with, or expirations
of any waiting period imposed by any Governmental Authority.


“Governmental Authority” shall mean any federal,
state, local, foreign or international court, government, department,
commission, board, bureau, agency, official or other regulatory, administrative
or governmental authority.


“Group” means with respect to Ceva, Inc., the Ceva,
Inc. Group, and with respect to DSPGI, the DSPGI Group.


“Income Tax Return” shall mean any tax return relating
to income tax.


“Indemnifying Party” has the meaning given in Section
5.4(a).


“Indemnitee” has the meaning given in Section 5.4(a).


“Indemnity Payment” has the meaning given in Section
5.4(a).


“Information” means information, whether or not
patentable or copyrightable, in written, oral, electronic or other tangible or
intangible forms, stored in any medium, including studies, reports, records,
books, contracts, instruments, surveys, discoveries, ideas, concepts, know-how,
techniques, designs, specifications, drawings, blueprints, diagrams, models,
prototypes, samples, flow charts, data, computer data, disks, diskettes, tapes,
computer programs or other software, marketing plans, customer names,
communications by or to attorneys (including attorney-client privileged
communications), memos and other materials prepared by attorneys or under their
direction (including attorney work product), and other technical, financial,
employee or business information or data.


“Information Statement” has the meaning given in
Section 3.3.


“Insurance Proceeds” means those monies:


(i)            received by an insured from an
insurance carrier; or


(ii)           paid by an insurance carrier on
behalf of the insured;


 


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in any such case net of any applicable premium
adjustments (including reserves and retrospectively rated premium adjustments)
and net of any costs or expenses incurred in the collection thereof.


“IRS” means the United States Internal Revenue
Service.


“Liabilities” means any and all losses, claims,
charges, debts, demands, actions, causes of action, suits, damages,
obligations, payments, costs and expenses, sums of money, accounts, reckonings,
bonds, specialties, indemnities and similar obligations, exonerations,
covenants, contracts, controversies, agreements, promises, doings, omissions,
variances, guarantees, make whole agreements and similar obligations, and other
liabilities, including all contractual obligations, whether absolute or
contingent, matured or unmatured, liquidated or unliquidated, accrued or unaccrued,
known or unknown, whenever arising, and including those arising under any law,
rule, regulation, Action, threatened or contemplated Action (including the
costs and expenses of demands, assessments, judgments, settlements and
compromises relating thereto and attorneys’ fees and any and all costs and
expenses, whatsoever reasonably incurred in investigating, preparing or
defending against any such Actions or threatened or contemplated Actions),
order or consent decree of any Governmental Authority or any award of any
arbitrator or mediator of any kind, and those arising under any contract,
commitment or undertaking, including those arising under this Agreement or any
Ancillary Agreement, in each case, whether or not recorded or reflected or
required to be recorded or reflected on the books and records or financial
statements of any Person.


“Licensing Business” has the meaning given in the
Recitals.


“Licensing Business Assets” means all of DSPGL’s and
DSPGI’s right, title and interest in and to the following assets (all as
defined in the Technology Transfer Agreements, to the extent not defined
herein):


(a)           the Transferable Licensing IP;


(b)           the Other Transferable Assets;


(c)           the Third
Party Licenses;


(d)           the Other Contracts; and


(e)           the Employee Proprietary Information
Agreements.


Licensing Business Assets shall not include any
accounts receivables or any other current assets. Ceva Assumed Liabilities
shall not include any accounts payable or any other current liabilities or any
intercompany indebtedness of the Licensing Business.


“Licensing Business Employees” means the employees set
forth on Schedule A attached hereto.


“Non-Assigned Assets” has the meaning set forth in
Section 2.3.


 


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“Non-Transferable Employee” shall have the meaning set
forth in Section 2.6(b).


“Person” means an individual, a general or limited
partnership, a corporation, a trust, a joint venture, an unincorporated
organization, a limited liability entity, any other entity and any Governmental
Authority.


“Post-Distribution DSPGI Adjusted Option” means an
DSPGI Adjusted Option that vests after the Distribution Date.


“Pre-Distribution DSPGI Adjusted Option” means a DSPGI
Adjusted Option that vested on or before the Distribution Date.


“Prime Rate” means the rate which Citibank, N.A. (or
any successor thereto or other major money center commercial bank agreed to by
DSPGI and Ceva, Inc. ) announces from time to time as its prime lending rate,
as in effect from time to time.


“Proposed Acquisition Transaction” means a transaction
or series of transactions as a result of which any Person or any group of
related Persons would (directly or indirectly) acquire, or have the right to
acquire, (A) from Ceva, Inc. or one or more holders of outstanding shares of
Ceva, Inc. capital stock, any shares of Ceva, Inc. capital stock or (B) from
Ceva, Inc. or from any Ceva, Inc. Subsidiary any shares of capital stock of a
Ceva, Inc. Subsidiary; except that none of the following shall be a Proposed
Acquisition Transaction:  (i) any
transaction, whether having occurred prior to the Distribution or to occur
after the Distribution, that the IRS rules in the Tax Rulings is not part of a
plan or series of transactions related to the Distribution; (ii) the
transactions contemplated by the Combination Agreement and any transactions
that reasonably flow from the transactions contemplated by the Combination
Agreement; (iii) the grant of stock options by Ceva, Inc. to any employee or
director of the Ceva, Inc. Group which grant, based on the unqualified opinion
of Hale and Dorr LLP or other Ceva, Inc. Tax Advisor acceptable to Dragon,
whose approval shall not be unreasonably withheld, would not under Section
355(e) of the Code and then-applicable Treasury Regulations be considered part
of a plan or series of transactions related to the Distribution; (iv) the
issuance of stock by Ceva, Inc. to any employee or director of the Ceva, Inc.
Group (including the issuance of stock upon the exercise of a stock option)
which issuance, based on the unqualified opinion of Hale and Dorr LLP or other
Ceva, Inc. Tax Advisor acceptable to Dragon, whose approval shall not be
unreasonably withheld, would not under Section 355(e) of the Code and
then-applicable Treasury Regulations be considered part of a plan or series of
transactions related to the Distribution; or (v) any other transactions
specifically permitted by then-applicable Treasury Regulations promulgated
under Section 355(e) of the Code and to which DSPGI has consented in its
discretion, which discretion shall be exercised in good faith solely to
preserve the Tax-Free Status of the Separation and Distribution.


“Record Date” means the close of business on the date
to be determined by the DSPGI Board of Directors as the record date for determining
stockholders of DSPGI entitled to receive shares of Ceva, Inc. Common Stock in
the Distribution.


“Representation Date” means any date on which Ceva,
Inc. makes any representation (i) to the IRS or a Tax Advisor for the purpose
of obtaining a Subsequent Tax Opinion/Ruling, or 


 


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(ii) to DSPGI for the
purpose of any determination required to be made by DSPGI pursuant to Section
4.2.


“Representation Letters” means any representation
letters and any other materials (including, without limitation, the ruling
request and the related supplemental submissions to the IRS) delivered or
deliverable by DSPGI or Ceva, Inc., as the case may be, in connection with the
issuance by the IRS of the Tax Rulings, or the rendering by a Tax Advisor
and/or the issuance by the IRS of the Subsequent Tax Opinion/Ruling.


“Securities Act” means the Securities Act of 1933, as
amended, together with the rules and regulations promulgated thereunder.


“Separation” has the meaning given in the Recitals.


“Separation Closing” has the meaning given in Section
2.1.


“Subsequent Tax Opinion/Ruling” means either (i) any
unqualified opinion of a Tax Advisor selected by Ceva, Inc. with the consent of
DSPGI, which consent shall not be unreasonably withheld, confirming, in form
and substance satisfactory to each of Ceva, Inc. and DSPGI in its discretion,
which discretion shall be exercised in good faith solely to preserve the
Tax-Free Status of the Separation and Distribution, that, as a consequence of
the consummation of a subsequent transaction, no income, gain or loss for U.S.
federal income tax purposes will be recognized by DSPGI, the stockholders or
former stockholders of DSPGI, or any DSPGI Affiliate with respect to the
Distribution, or (ii) an IRS private letter ruling to the same effect.


“Subsidiary” of any Person means any corporation or
other organization whether incorporated or unincorporated of which at least a
majority of the securities or interests having by the terms thereof ordinary voting
power to elect at least a majority of the board of directors or others
performing similar functions with respect to such corporation or other
organization is directly or indirectly owned or controlled by such Person or by
any one or more of its Subsidiaries, or by such Person and one or more of its
Subsidiaries; provided, however, that no Person that is not directly or
indirectly wholly owned by any other Person shall be a Subsidiary of such other
Person unless such other Person controls, or has the right, power or ability to
control, that Person.


“Tax Advisor” means the nationally recognized
professional law firm or accounting firm designated by DSPGI or Ceva, Inc., as
applicable, as its Tax Advisor.


“Tax-Free Status of the Separation and Distribution”
means the nonrecognition of taxable gain or loss for U.S. federal income tax
purposes and for Israeli tax purposes to DSPGI, DSPGI Affiliates and DSPGI’s
stockholders in connection with the Separation and the Distribution.


“Tax Indemnification Agreement” means the Tax
Indemnification and Allocation Agreement dated as of the date of this Agreement
between DSPGI and Ceva, Inc.


“Tax-Related Losses” means (i) all U.S. federal,
state, local and foreign income taxes (including interest and penalties
thereon) imposed pursuant to any settlement, final 


 


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determination, judgment
or otherwise, and (ii) all legal, accounting and other professional fees and
court costs incurred in connection with such taxes.


“Tax Rulings” means any rulings by the IRS deliverable
to DSPGI in connection with the Separation and the Distribution.


“Technology Transfer Agreements” means the Corage,
Ltd. Technology Transfer Agreement and the Ceva, Inc. Technology Transfer
Agreement.


“Third Party Claim” has the meaning given in Section
5.5(a).


“Transferable Employees” shall have the meaning set
forth in Section 2.6(a).


“Transferring Entities” shall mean DSPGI and all of
its Affiliates immediately prior to the Effective Date, other than DSP Group
Ltd., Corage, Ltd., Ceva, Inc. and their Subsidiaries.


ARTICLE II

THE SEPARATION


2.1.          Separation
Closing.  Consummation of the
Separation (the “Separation Closing”) shall take place on the Distribution Date
but in any event prior to the Combination Effective Date, at such time and
place as may be determined by the Board of Directors of DSPGI.  All actions constituting the Separation
shall be occur and be deemed to have occurred on and as of the Distribution
Date, effective immediately prior to the Distribution becoming effective.


2.2.          Actions
to be Taken at Separation Closing. 
At Separation Closing, the parties shall take the actions described
below in this Section 2.2, in the following order:


(a)           DSPGL
and Corage, Ltd. shall execute and deliver a Technology Transfer Agreement
substantially in the form attached as Exhibit 2.2(a) (the “Corage, Ltd.
Technology Transfer Agreement”) and such other instruments of conveyance as
Corage, Ltd. may reasonably request;


(b)           Corage,
Ltd. shall issue to DSPGL, free and clear of all liens and encumbrances,
certificates representing 1,000 shares of Corage, Ltd. common stock, $.001 per
share par value, as consideration for the transfer of Licensing Business Assets
as provided in this Agreement, the Corage, Ltd. Technology Transfer Agreement
and other related documents;


(c)           DSPGL
shall distribute to DSPGI all of the issued and outstanding shares of Corage,
Ltd. capital stock, free and clear of all liens and encumbrances, by delivery
to DSPGI of the original certificate or certificates therefor (the “Corage,
Ltd. Stock Certificates”), together with stock powers executed in blank (the
“Corage, Ltd. Stock Powers”);


(d)           DSPGI
shall contribute to Ceva, Inc. all of the issued and outstanding shares of
Corage, Ltd. capital stock, by delivery to Ceva, Inc. of the Corage, Ltd. Stock
Certificates and the Corage, Ltd. Stock Powers;


 


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(e)           DSPGI
and Ceva, Inc. shall execute and deliver a Technology Transfer Agreement
substantially in the form attached as Exhibit 2.2(e) (the “Ceva, Inc.
Technology Transfer Agreement”) and such other instruments of conveyance as
Ceva, Inc. may reasonably request;


(f)            Ceva,
Inc. shall issue to DSPGI, free and clear of all liens and encumbrances,
certificates representing  1,000 shares
of Ceva, Inc. Common Stock as consideration for the transfer of Licensing
Business Assets as provided in this Agreement, the Ceva, Inc. Technology
Transfer Agreement and other related documents and the contribution of capital
stock of Ceva, Inc.;


(g)           Ceva,
Inc. and DSP Ceva shall execute and deliver a Technology Transfer Assignment
and Assumption Agreement substantially in the form attached as Exhibit
2.2(g) and such other instruments of conveyance as DSP Ceva may reasonably
request;


(h)           Ceva,
Inc. shall contribute to DSP Ceva all of this issued and outstanding shares of
Corage, Ltd. capital stock, by delivery to DSP Ceva of the Corage, Ltd. Stock
Certificates and the Corage, Ltd. Stock Powers;


(i)            DSP
Ceva shall issue to Ceva, Inc., free and clear of all liens and encumbrances,
certificates representing 1,000 shares of DSP Ceva common stock, $1.00 per
share par value, as consideration for the transfer of Licensing Business Assets
as provided in this Agreement, the DSP Ceva Technology Transfer Agreement and
other related documents;


(j)            DSPGI,
Ceva, Inc. and DSP Ceva shall execute and deliver a Transition Services
Agreement in a form to be mutually agreed upon by the parties;


(k)           DSPGL,
Corage, Ltd., DSP Japan and DSP Europe shall execute and deliver a Transition
Services Agreement in a form to be mutually agreed upon by the parties;


(l)            DSPGI
and DSPGL shall amend the Intercompany Services Agreement between them dated
July 1, 1998, and Section 3.2 of the Cost Sharing Agreement, as necessary
to delete or modify provisions that relate to the Licensing Business;


(m)          each
of the parties shall deliver to the other a certificate substantially in the
form attached as Exhibit 2.2(m), executed by one of its executive
officers;


(n)           each
of the parties shall deliver to the other a certificate substantially in the
form attached as Exhibit 2.2(n), executed by its secretary, with true
and correct copies of the attachments required thereby; and


(o)           each
of the parties issuing or receiving shares of capital stock of any of the other
companies pursuant to this Section shall execute and deliver cross-receipts
evidencing their issuance or transfer and receipt of shares of such shares of
capital stock;


 


and at any time, and from time to time, after the
Distribution Date, at the request of Ceva, Inc. and without further
consideration, DSPGI shall promptly execute and deliver (or shall cause its
appropriate Subsidiary to execute and deliver) such instruments of sale,
transfer, conveyance, 


 


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assignment and confirmation as Ceva, Inc. may
reasonably request, and take any and all such other action as Ceva, Inc. may
reasonably request more effectively to transfer, convey and assign to Ceva,
Inc. (or a Subsidiary of Ceva, Inc.) and to confirm Ceva Inc.’s or a Subsidiary
of Ceva, Inc.’s title to all of the Licensing Business Assets and all of the
outstanding shares of capital stock of Corage, Ltd. and to put Ceva, Inc. in
actual possession and operating control (through its ownership of the
outstanding capital stock of Corage, Ltd., the Licensing Business Assets) of
the Licensing Business Assets.


2.3.          Consents.  Schedule 2.3 lists all of the
Consents.  Each party hereto shall use
commercially reasonable efforts to obtain, at its expense, all of the
Consents.  If any Consent shall not have
been obtained by the Distribution Date, this Agreement and the Ancillary
Agreements shall not constitute an assignment of the agreement, right or other
Licensing Business Asset to which it relates (each a “Non-Assigned Asset”)
unless and until such time as such Consent has been obtained.  Following Separation Closing, DSPGI and
Ceva, Inc. each shall (or shall cause their Subsidiaries to) use commercially
reasonable efforts to obtain all such Consents as soon as practicable.  Upon any such Consent being obtained, the
Non-Assigned Assets to which it relates automatically shall be deemed to have
been assigned as contemplated by the relevant Ancillary Agreements.


2.4.          Working
Capital; Prorations of Certain Items. As of the Combination Effective Date,
the working capital of the Licensing Business calculated as the excess of the
current assets of the Licensing Business over the current liabilities of the
Licensing Business as of the Combination Effective Date (excluding the
contribution of U.S.$40 million to Ceva, Inc. as contemplated by Section 3.2(e)
of this Agreement), each determined on a basis consistent with the
determination of current assets and current liabilities on the Ceva Balance Sheet,
shall be not less than zero.  For
purposes of this section, working capital shall not include any Taxes, as such
term is defined in the Combination Agreement. 
The Parties further agree, that all accrued or prepaid income and
accrued or prepaid expenses relating to the License Business, each as
determined in accordance with U.S. generally accepted accounting principles
consistently applied and included in the working capital, shall be
appropriately allocated under U.S. generally accepted accounting principles for
periods before and after the Combination Effective Date, and the Parties shall
agree to settle the amounts thereof not more than sixty days following the
Combination Effective Date.


2.5.          Assumption
of Ceva Assumed Liabilities.  After
the Distribution Date, Ceva, Inc. shall assume, pay, discharge and perform in
accordance with their terms the following (the “Ceva Assumed Liabilities”): (i)
any and all Liabilities that are expressly contemplated by this Agreement or
any agreement or document contemplated by, or executed and delivered pursuant
to, this Agreement (including but not limited to the Ancillary Agreements) as
Liabilities to be assumed by any member of the Ceva, Inc. Group; (ii) all
Liabilities, including Liabilities related to Ceva Employees and product
Liabilities, payable under or pursuant to, relating to, arising out of or
resulting from (a) the operation of the Licensing Business, as conducted at any
time prior to, on or after the Distribution Date, or (b) the Licensing Business
Assets; (iii) all Liabilities, reflected on the Ceva Balance Sheet, subject to
the discharge of such Liabilities subsequent to the date of the Ceva Balance
Sheet; and (iv) all Liabilities of the DSPGI Group arising or assumed after the
date of the Ceva Balance Sheet which are of a nature or type that would have
resulted in such Liabilities being included as Liabilities on the Ceva Balance
Sheet had they 


 


12

















 


arisen or been assumed on or before the date of the
Ceva Balance Sheet, determined on a basis consistent with the determination of
the Liabilities of the Licensing Business on the Ceva Balance Sheet.  Notwithstanding anything to the contrary in
this Agreement, the Ceva Assumed Liabilities excludes all Taxes (as defined in
the Combination Agreement) except as provided in Article IV of this Agreement
or in the Tax Indemnification Agreement.


2.6.          Transfer of Employees.


(a)           Prior to the Separation Closing,
DSPGI, on behalf of itself and the Transferring Entities, will transfer or
release to Ceva, Inc. the employees of its licensing division described on Schedule
2.6(a) to this Agreement (“Transferable Employees”), and Ceva, Inc. shall
accept such transfer and assume (and shall pay, perform and discharge when due)
all obligations with respect to such employees accruing from and after the
Separation Closing.


(b)           To
the extent that any Transferable Employees shall have entered into assignable
employment contracts with DSPGI, DSPGI shall assign, and shall cause other
Transferring Entities to assign, all of the rights of the Transferring Entities
under any such employment contracts to Ceva, Inc., to the extent such rights
are assignable.  For any Transferable
Employee without an assignable employment contract (“Non-Transferable
Employee”), DSPGI shall fully release, and shall cause other Transferring
Entities to fully release, such employee from employment, thereby allowing
Ceva, Inc., to use its best efforts to employ such Non-Transferable Employee.


(c)           Prior
to the Separation Closing, DSPGI, on behalf of itself and the Transferring
Entities, shall transfer and assign to Ceva, Inc., and Ceva, Inc. shall accept
such transfer and assume, all of the rights and obligations of the Transferring
Entities under all agreements entered into by the Transferable Employees and
the Licensing Business Employees with the Transferring Entities, or any of
them, relating to confidentiality, assignment of inventions and similar matters
(“Employee Proprietary Information Agreements”), which agreements shall remain
in full force and effect in accordance with their terms, provided that DSPGI
shall retain its rights under the Employee Proprietary Information Agreements
to the extent required to bring actions (at law, in equity or otherwise) for
any breach of such Employee Proprietary Information Agreements relating to acts
or omissions prior to the Separation Closing by Transferable Employees who
become employees of Ceva, Inc.  The
Parties shall reasonably cooperate in connection with any action against any of
the Transferable Employees.


ARTICLE III

THE DISTRIBUTION


3.1.          The
Distribution.  Subject to Section
3.4, DPSGI shall effect the Distribution on the Distribution Date, as described
in this Article III.


(a)           Subject
to Section 3.4, on or prior to the Distribution Date, DSPGI shall deliver to
the Agent for the benefit of holders of record of DSPGI Common Stock on the
Record Date, a single stock certificate, endorsed by DSPGI in blank,
representing all of the outstanding shares of Ceva, Inc. Common Stock, and
shall cause the transfer agent for the shares of DSPGI Common Stock to instruct
the Agent to distribute on the Distribution Date the appropriate 


 


13

















 


number of such shares of Ceva, Inc. Common Stock to
each such holder or designated transferee or transferees of such holder.


(b)           Subject
to Section 3.5, each holder of DSPGI Common Stock on the Record Date (or such
holder’s designated transferee or transferees) shall be entitled to receive in
the Distribution a number of shares of Ceva, Inc. Common Stock equal to the
number of shares of DSPGI Common Stock held by such holder on the Record Date
multiplied by a fraction, the numerator of which is the number of shares of
Ceva, Inc. Common Stock beneficially owned by DSPGI on the Record Date, and the
denominator of which is the number of shares of DSPGI Common Stock outstanding
on the Record Date.


(c)           Ceva,
Inc. and DSPGI, as the case may be, shall provide to the Agent all share
certificates and any information required in order to complete the Distribution
on the basis specified above.


3.2.          Actions
Prior to the Distribution.


(a)           DSPGI
and Ceva, Inc. shall mail, prior to the date determined by the Board of
Directors of DSPGI as the record date, to the holders of common stock of DSPGI,
the Information Statement and such other information concerning Ceva, Inc., its
business, operations and management, the Separation, the Distribution, and such
other matters as DSPGI and Ceva, Inc. shall reasonably determine and as may be
required by law.


(b)           DSPGI
and Ceva, Inc. shall prepare and file with the appropriate Governmental
Authority any documents or statements which are required to reflect the
establishment of, or amendments to, any employee benefit and other plans necessary
or appropriate in connection with the Separation and Distribution.


(c)           DSPGI
and Ceva, Inc. shall take all such action as may be necessary or appropriate
under the securities or Blue Sky laws of the United States (and any comparable
laws under any foreign jurisdiction) in connection with the Distribution.


(d)           DSPGI
and Ceva, Inc. shall take all reasonable steps necessary and appropriate to
cause the conditions set forth in Section 3.4 (subject to Sections 3.5(d)) to
be satisfied and to effect the Distribution on the Distribution Date.


(e)           Immediately
prior to effecting the Distribution, DSPGI shall contribute to Ceva, Inc., in
immediately available funds, U.S. $40 million; it being acknowledged by the
Parties that, in accordance with Section 8.3 of the Combination Agreement,
Ceva, Inc. will bear U.S.$2.0 million of the transaction fees and expenses.


3.3.          Form
10.  DSPGI and Ceva, Inc. shall
prepare and file with the Commission the General Form for Registration of
Securities on Form 10, including the Information Statement describing the
Distribution and information concerning the business, operations and financial
information of Ceva, Inc. to be distributed to the stockholders of DSPGI (the
“Information Statement”), pursuant to which all the outstanding shares of
common stock of Ceva, Inc. as of the Distribution Date will be registered under
the Securities Exchange Act of 1934, as amended, (together with all amendments
thereto, the “Form 10”).  Each of DSPGI
and Ceva, Inc. shall 


 


14

















 


respond to any comments of the Commission and use such
commercially reasonable efforts as may be necessary in order to cause the Form
10 to become and remain effective as required by law, including, but not
limited to, filing such amendments to the Form 10 as may be required by the
Commission or applicable securities laws. 
The Form 10 shall have become effective on or prior to the Distribution
Date, and there shall be no stop-order in effect with respect thereto. DSPGI
and Ceva, Inc. shall take such other actions and make any other filings as may
be necessary or appropriate under the securities or blue sky laws of the United
States or any other relevant jurisdiction in connection with the Distribution;
and, with respect to any such actions and filings, where applicable, shall use
commercially reasonable effort to have such filings become effective or
accepted.


3.4.          Conditions
to Distribution.  The obligation of
DSPGI to effect the Distribution is subject to the satisfaction at or prior to
the Distribution Date of the following conditions:


(a)           DSPGI
and Ceva, Inc. shall have fulfilled these conditions set forth in Section
6.2(a) of the Combination Agreement;


(b)           all
Governmental Approvals necessary to consummate the Distribution shall have been
obtained and be in full force and effect;


(c)           DSPGI
and Ceva, Inc. shall have fulfilled the conditions set forth in Section 7.4(c)
of the Combination Agreement;


(d)           no
order, injunction or decree issued by any court or agency of competent jurisdiction
or other legal restraint or prohibition preventing the consummation of the
Distribution shall be in effect and no other event outside the control of DSPGI
shall have occurred or failed to occur that prevents the consummation of the
Distribution;


(e)           the
Combination Agreement shall not have been terminated, and all conditions to the
obligations of the parties thereunder to consummate the Combination shall have
been satisfied or waived, except only the consummation of the Distribution; and


(f)            each
of the Licensing Business Employees shall be Ceva Employees.


3.5.          Fractional
Shares.  No fractional shares of
Ceva, Inc. Common Stock shall be issued in connection with the
Distribution.  Any fractional interest
shall be rounded to the nearest whole share and issued to any holder of record
or beneficial owner of DSPGI Common Stock as of the Record Date that has such
fractional share interest.


3.6.          The
Ceva, Inc. Board of Directors. 
DSPGI and Ceva, Inc. each shall take all actions which may be required
to elect or otherwise appoint as directors of Ceva, Inc., on or prior to the
Distribution Date, such individuals as may be designated by Ceva, Inc. Board of
Directors (which designation shall be approved by the majority of Ceva, Inc.’s
directors who are at such time neither officers nor directors of DSPGI) as
additional or substitute members of the Board of Directors of Ceva, Inc. on the
Distribution Date.


3.7.          Adjustment
of DSPGI Stock Options.


 


15

















 


(a)           Each
outstanding option to purchase DSPGI Common Stock granted prior to the
Distribution Date and held by Ceva Employees (each a “DSPGI Option”) shall be
adjusted as set forth in this Section 3.7. 
Each DSPGI Option shall be converted as of the Distribution Date, into
two options: an option (a “DSPGI Adjusted Option”) to purchase the same number
of shares of DSPGI Common Stock covered by the DSPGI Option and as to which the
DSPGI Option has not been exercised as of the Distribution Date (“DSPGI Option
Number”) and an option (a “Ceva, Inc. Option”) to purchase a number of shares
of Ceva, Inc. Common Stock equal to the DSPGI Option Number times a fraction,
the numerator of which is the total number of shares of Ceva, Inc. Common Stock
distributed to DSPGI stockholders in the Distribution and the denominator of
which is the total number of shares of DSPGI Common Stock outstanding on the
record date for the Distribution (the “Distribution Ratio”).  The terms of the DSPGI Adjusted Option and
the Ceva, Inc. Option (other than the exercise price and the number of shares)
shall be substantially the same as the DSPGI Option from which they were
converted.  If and to the extent the
vesting of any DSPGI Option is subject to vesting based on the continuous
employment of the holder thereof with DSPGI or its Subsidiaries, the vesting of
the DSPGI Adjusted Option and Ceva, Inc. Option into which it is converted
shall be subject to the same vesting schedule and continuation of the holder’s
employment with Ceva, Inc. or its Subsidiaries, giving credit for continuous
employment with DSPGI or Ceva, Inc. or their respective Subsidiaries, prior to
the Distribution Date.  The exercise
prices per share for each DSPGI Adjusted Option and the Ceva, Inc. Option shall
be established in a manner so that: (1) the aggregate “intrinsic value” (i.e.
the market value of the stock underlying the option, less the exercise price of
such option, multiplied by the number of shares then covered by such option)
after the Distribution of the DSPGI Adjusted Option plus the Ceva, Inc. Option
is not greater than the intrinsic value of the related DSPGI Option immediately
prior to the Distribution; and (2) the ratio of the exercise price per option
to the market value per share after the Distribution is not lower than the
ratio of the exercise price of the DSPGI Option to the market value per share
of DSPGI Common Stock immediately prior to the Distribution.  The determination of the exercise prices for
each DSPGI Adjusted Option and Ceva, Inc. Option shall be made by DSPGI as
advised by its professional advisors. 
The exercise prices for each DSPGI Adjusted Option and Ceva, Inc. Option
shall be determined as follows:


(i)            Calculate the aggregate intrinsic
value of the DSPGI Option immediately prior to the Distribution and determine
the ratio of the exercise price for the DSPGI Option to the market value of
DSPGI Common Stock immediately prior to the Distribution (the “Pre-Distribution
Exercise Price to Market Price Ratio”).


(ii)           Calculate the preliminary DSPGI
Adjusted Option exercise price by dividing (x) the market value of DSPGI Common
Stock (without Ceva, Inc.) immediately after the Distribution by (y) the sum of
(1) the market value of DSPGI Common Stock immediately after the Distribution
and (2) the market value of Ceva, Inc. Common Stock immediately after the
Distribution multiplied by the Distribution Ratio, and multiplying the result
by the exercise price for the DSPGI Option.


(iii)          Divide the preliminary DSPGI Adjusted
Option exercise price by the market value of DSPGI Common Stock immediately
after the Distribution to determine the “DSPGI Adjusted Exercise Price to
Market Price Ratio.”  If the DSPGI
Adjusted Exercise Price to Market Price Ratio is less than the Pre-Distribution
Exercise Price to Market Price Ratio, 


 


16

















 


increase the preliminary DSPGI Adjusted Option
exercise price to align the DSPGI Adjusted Exercise Price to Market Ratio with
the Pre-Distribution Exercise Price to Market Price Ratio in order to determine
the final Adjusted DSPGI Option exercise price.


(iv)          Calculate the preliminary Ceva, Inc.
Option exercise price by multiplying the DSPGI Option exercise price by the
result obtained by dividing (1) one minus the fraction calculated in paragraph
(ii) above by (2) the Distribution Ratio.


(v)           Divide the preliminary Ceva, Inc.
Option exercise price by the market value of Ceva, Inc. Common Stock
immediately before the Distribution to determine the “Ceva, Inc. Adjusted
Exercise Price to Market Price Ratio.” 
If the Ceva, Inc. Adjusted Exercise Price to Market Ratio is less than
the Pre-Distribution Exercise Price to Market Price Ratio, increase the
preliminary Ceva, Inc. Option exercise price to align the Ceva, Inc. Adjusted
Exercise Price to Market Price Ratio with the Pre-Distribution Exercise Price
to Market Price Ratio in order to determine the final Ceva, Inc. Option
exercise price.


(vi)          Finally, add the aggregate intrinsic
values of the DSPGI Adjusted Option and Ceva, Inc. Option and compare the sum to
the aggregate intrinsic value calculated in paragraph (i) above and make final
adjustments, if necessary, so that the aggregate intrinsic values of the DSPGI
Adjusted Option and Ceva, Inc. Option do not exceed the original aggregate
intrinsic value of the DSPGI Option.


(b)           The
Ceva, Inc. Options to be granted with respect to each Adjusted Option shall be
issued under Ceva, Inc.’s 2000 Stock Incentive Plan, and Ceva, Inc. shall take
all corporate action and make all required filings under applicable state Blue
Sky laws and the Securities Act to (i) issue the Ceva, Inc. Options
required under this Section 3.7 and (ii) to register or qualify the
Ceva, Inc. Options and/or the underlying shares of Ceva, Inc. Common Stock so
that the shares of Ceva, Inc. Common Stock acquired upon exercise of each Ceva,
Inc. Option are freely tradable under the Securities Act (except for shares
acquired by Affiliates of Ceva, Inc.) and each applicable state’s Blue Sky
laws.


(c)           Each
outstanding DSPGI Option granted prior to the Distribution Date and not
described in Section 3.7(a) (a “DSPGI Legacy Option”) shall be adjusted as set
forth in this Section 3.7(c).  As of the
Distribution Date, the exercise price and, if appropriate, the number of shares
subject to each DSPGI Legacy Option shall be adjusted to reflect the reduction
in value of DSPGI Common Stock as a result of the Distribution.  The exercise price per share and, if
appropriate, the number of shares subject to each DSPGI Legacy Option shall be
adjusted in a manner so that: (1) the aggregate “intrinsic value” (i.e. the
market value of the stock underlying the option, less the exercise price of
such option, multiplied by the number of shares then covered by such option)
after the Distribution is not greater than the intrinsic value of the DSPGI
Option immediately prior to the Distribution; and (2) the ratio of the exercise
price of the DSPGI Legacy Option to the market value per share of DSPGI Common
Stock after the Distribution is not lower than the ratio of the exercise price
of the DSPGI Option to the market value per share of DSPGI Common Stock
immediately prior to the Distribution. 
The determination of the exercise price and the number of shares subject
to each DSPGI Legacy Option shall be made by DSPGI as advised by its
professional advisors.


 


17

















 


(d)           Notwithstanding
anything herein or in the Ancillary Agreements to the contrary and the to
extent permitted by applicable law:


(i)            All compensation deductions
attributable to the amounts included in the gross income of a Ceva Employee as
a result of the exercise of a Pre-Distribution DSPGI Adjusted Option shall be
allocated to and claimed by the DSPGI Group, and the Ceva, Inc. Group shall not
report such deductions on its Income Tax Returns.


(ii)           All compensation deductions
attributable to the amounts included in the gross income of a Ceva Employee as
a result of the exercise of a Post-Distribution DSPGI Adjusted Option shall be
allocated to and claimed by the Ceva, Inc. Group, and the DSPGI Group shall not
report such deductions on its Income Tax Returns.


(iii)          To the extent that a Ceva Employee
exercises DSPGI Adjusted Options and such options are included in an Award some
of which are Pre-Distribution DSPGI Adjusted Options and others of which are
Post-Distribution DSPGI Adjusted Options, for purposes of this Agreement, all
of the Pre-Distribution DSPGI Adjusted Options shall be deemed to have been
exercised before any of the Post-Distribution DSPGI Adjusted Options are treated
as having been exercised.


(iv)          All compensation deductions
attributable to the amounts included in the gross income of a Ceva Employee as
a result of the exercise of a Ceva, Inc. Option after the Distribution Date
shall be allocated to and claimed by the Ceva, Inc. Group, and the DSPGI Group
shall not report such deductions on its Income Tax Returns.


(e)           Notwithstanding
anything herein or in the Ancillary Agreements to the contrary, Ceva, Inc.
shall be responsible for any payroll taxes and withholding taxes arising out of
the exercise of a DSPGI Adjusted Option or a Ceva, Inc. Option by a Ceva
Employee.  DSPGI Group shall provide the
Ceva, Inc. Group with any information necessary to make such withholdings and
shall collect any required  withholdings
upon the exercise of a DSPGI Adjusted Option (and shall not permit the exercise
of any such option unless the optionee has made provisions for such withholding
tax) and remit such withholding tax to the Ceva, Inc. Group.


(f)            Notwithstanding
anything herein to the contrary, Section 3.7 of this Agreement shall terminate
upon the publication of Definitive Guidance which the tax advisors for DSPGI
and Ceva, Inc. mutually agree is contrary to the provisions of this Section
3.7, and nothing contained herein shall preclude DSPGI and Ceva, Inc. after
such termination of this Section 3.7, from filing amended returns or refund
claims with respect to exercise of options prior to the termination of this
Section 3.7 in accordance with such Definitive Guidance.


ARTICLE IV

CERTAIN TAX
MATTERS


4.1.          Representations
and Warranties.


(a)           DSPGI.  DSPGI hereby represents and warrants that
any facts presented or representations made in the Tax Rulings or the
Representation Letters are true, correct and 


 


18

















 


complete solely to the extent arising out of any
information provided by or on behalf of DSPGI or, if made before the
Distribution Date, Ceva, Inc.


(b)           Ceva,
Inc.  Ceva, Inc. hereby represents
and warrants that any facts presented or representations made in the Tax
Rulings or the Representation Letters are true, correct and complete solely to
the extent arising out of any information provided by or on behalf of Parthus,
or if made after the Distribution Date, by or on behalf of Ceva, Inc.


4.2.          Restrictions on Ceva, Inc.


(a)           Until the first day after the
two-year anniversary of the Distribution Date, Ceva, Inc. shall not enter into
any Proposed Acquisition Transaction or, to the extent Ceva, Inc. has the right
to prohibit any Proposed Acquisition Transaction, permit any Proposed
Acquisition Transaction to occur unless prior to the consummation of such
Proposed Acquisition Transaction DSPGI has determined, in its sole and absolute
discretion, which discretion shall be exercised in good faith solely to
preserve the Tax-Free Status of the Separation and Distribution, that such
Proposed Acquisition Transaction would not jeopardize the Tax-Free Status of
the Separation and Distribution. The foregoing shall not prohibit Ceva, Inc.
from entering into a contract or agreement to consummate any Proposed
Acquisition Transaction if such contract or agreement requires satisfaction of
the above-described requirement prior to the consummation of such Proposed
Acquisition Transaction, such requirement to be satisfied through the
cooperation of the parties as described in Section 4.3(b)(ii).


(b)           Until
the first day after the two-year anniversary of the Distribution Date, (i)
Ceva, Inc. shall continue to conduct the Active Trade or Business; and (ii)
Ceva, Inc. shall not (A) liquidate, dispose of, or otherwise discontinue the
conduct of all or a substantial portion (but in no instance more than 60% of
the gross assets of Ceva, Inc. or 60% of the consolidated gross assets of the
Ceva, Inc. Group) of the Active Trade or Business or (B) dispose of any
business or assets that would cause Ceva, Inc. to be operated in a manner
inconsistent in any material respect with the business purposes for the
Distribution as set forth in the Representation Letters and Tax Rulings, in
each case unless DSPGI has determined, in its sole and absolute discretion,
which discretion shall be exercised in good faith solely to preserve the
Tax-Free Status of the Separation and Distribution, that such liquidation,
disposition, or discontinuance would not jeopardize the Tax-Free Status of the
Separation and Distribution.  Ceva, Inc.
shall continue the active conduct of the Active Trade or Business primarily
through officers and employees of Ceva, Inc. or its Subsidiaries (and not
primarily through independent contractors). Notwithstanding the foregoing, (A)
except with respect to any corporation or other entity the status of which as
the direct owner of an active trade or business is material to the Tax-Free
Status of the Separation and Distribution, liquidations of any of Ceva, Inc.’s
Subsidiaries into Ceva, Inc. or one or more Subsidiaries directly or indirectly
controlled by Ceva, Inc. shall not be deemed to breach this Section 4.2(b) and
(B) Ceva, Inc. shall not be prohibited from liquidating, disposing of or
otherwise discontinuing the conduct of one or more trades or businesses that
constituted an immaterial part of the Active Trade or Business, or any portion
thereof. For purposes of the preceding sentence and clause (b)(ii) above, asset
retirements, sale-leaseback arrangements and discontinuances of product lines
within a trade or business the active conduct of which is continued shall not
be deemed a liquidation, disposition or discontinuance of a trade or business
or portion thereof. Solely for purposes of this Section 4.2(b), Ceva, Inc.
shall not be 


 


19

















 


treated as directly or indirectly controlling a
Subsidiary unless Ceva, Inc. owns, directly or indirectly, shares of capital
stock of such Subsidiary constituting (A) 80% or more of the total combined
voting power of all outstanding shares of voting stock of such Subsidiary and
(B) 80% or more of the total number of outstanding shares of each class or
series of capital stock of such Subsidiary other than voting stock.  The foregoing shall not prohibit Ceva, Inc.
from entering into a contract or agreement to consummate any transaction
described in this paragraph if such contract or agreement requires satisfaction
of the above-described requirements prior to the consummation of such
transaction, such requirements to be satisfied through the cooperation of the
parties as described in Section 4.3(b)(ii).


(c)           Prior
to the Distribution Date, Ceva, Inc. shall fully discharge and satisfy all of
the then existing indebtedness owed by it or its Subsidiaries to DSPGI or any
DSPGI Affiliate (other than payables incurred in the ordinary course of the
business). From such date until the first day after the two-year anniversary of
the Distribution Date, Ceva, Inc. shall not, and shall not permit any of its
Subsidiaries to, create, incur, assume or allow to exist any such indebtedness
(other than payables incurred in the ordinary course of the business) with
DSPGI or any DSPGI Affiliate.


(d)           Notwithstanding
the foregoing, the provisions of Section 4.2 shall not prohibit Ceva, Inc. from
implementing any transaction upon which the IRS has granted a favorable ruling
in, or which is described in reasonable detail in, the Tax Rulings or any
Subsequent Tax Opinion/Ruling.


4.3.          Cooperation
and Other Covenants.


(a)           Each
of Ceva, Inc. and DSPGI shall furnish the other with a copy of any ruling
requests or other documents delivered to the IRS that relates to the
Distribution or that could otherwise be reasonably expected to have an impact
on the Tax-Free Status of the Separation and Distribution.


(b)           (i)            Each
of Ceva, Inc. and DSPGI shall cooperate with the other and shall take (or
refrain from taking) all such actions as the other may reasonably request in
connection with obtaining any DSPGI determination referred to in Section
4.2.  Such cooperation shall include,
without limitation, providing any information, and/or representations, and/or
Powers of Attorney reasonably requested by Ceva, Inc. or DSPGI, as applicable
to enable it (or its Tax Advisor) to obtain and maintain any Subsequent Tax
Opinion/Ruling that would permit any action described in Section 4.2 to be
taken by Ceva, Inc. or Ceva, Inc., DSPGI or their respective Affiliates.   From and after any Representation Date in
connection with obtaining any such determination or the receipt of a Subsequent
Tax Opinion/Ruling and until the first day after the first anniversary of the
date of such determination or receipt, neither party shall take (nor shall it
refrain from taking) any action that would have caused such representation to
be untrue unless the other party has determined, in its sole and absolute
discretion, which discretion shall be exercised in good faith solely to
preserve the Tax-Free Status of the Separation and Distribution, that such
action would not jeopardize the Tax-Free Status of the Separation and
Distribution.


 


20

















 


(ii)           In the event that Ceva, Inc. notifies
DSPGI that it desires to take one of the actions described in Section 4.2 and
DSPGI concludes that such action might jeopardize the Tax-Free Status of the
Separation and Distribution, Ceva, Inc., may seek a Subsequent Tax
Opinion/Ruling that would permit Ceva, Inc. to take the specified action, and
DSPGI shall use commercially reasonable efforts to assist Ceva, Inc. in
obtaining such Subsequent Tax Opinion/Ruling; provided, however, that the
reasonable costs and expenses of obtaining any such Subsequent Tax
Opinion/Ruling shall be borne by Ceva, Inc.


(c)           (i)            Until
all restrictions set forth in Section 4.2 have expired, Ceva, Inc. shall give
DSPGI written notice of any intention to effect or permit an action or
transaction described in Section 4.2 and which is prohibited thereunder at such
time within a period of time reasonably sufficient to enable DSPGI to make the
determination referred to in Section 4.2. 
Each such notice by Ceva, Inc. shall set forth the terms and conditions
of the proposed action or transaction, including, without limitation, as
applicable, the nature of any related action proposed to be taken by the Board
of Directors of Ceva, Inc., the approximate number of shares of Ceva, Inc.
capital stock proposed to be transferred or issued, the approximate value of
Ceva, Inc.’s assets (or assets of any of Ceva, Inc.’s Subsidiaries) proposed to
be transferred, the proposed timetable for such action or transaction, and the
number of shares of Ceva, Inc. capital stock otherwise then owned by the other
party to the proposed action or transaction, all with sufficient particularity
to enable DSPGI to make any such required determination. All information
provided by Ceva, Inc. to DSPGI pursuant to this Section 4.3 shall be deemed
subject to the confidentiality obligations of this Agreement.


(ii)           Promptly, but in any event within ten
business days, after DSPGI receives such written notice from Ceva, Inc., DSPGI
shall evaluate such information and notify Ceva, Inc. in writing of (A) such
determination or (B) DSPGI’s requirement that Ceva, Inc. obtain a Subsequent
Tax Opinion/Ruling prior to undertaking such action or transaction.  If DSPGI makes a determination that an
action or transaction described in Section 4.2 would jeopardize the Tax-Free
Status of the Separation and Distribution, such notice to Ceva, Inc. shall set
forth, in reasonable detail, the reasons therefor. In the event that Ceva, Inc.
does not receive written notice of DSPGI’s determination or requirement that
Ceva, Inc. obtain a Subsequent Tax Opinion/Ruling within ten business days after
the notification by Ceva, Inc., then DSPGI shall be deemed to have elected to
require that Ceva, Inc. obtain a Subsequent Tax Opinion/Ruling prior to
undertaking such action or transaction. 
Ceva, Inc. shall notify DSPGI promptly, but in any event within ten
business days, after the receipt of a Subsequent Tax Opinion/Ruling.


4.4.          Indemnification
For Tax Liabilities.


(a)           (i)            Notwithstanding
any other provision of this Agreement to the contrary, subject to Section
4.4(b), Ceva, Inc. shall indemnify, defend and hold harmless DSPGI and each
DSPGI Affiliate (or any successor to any of them) against any and all
Tax-Related Losses incurred by DSPGI or any of them in connection with any
proposed tax assessment or tax controversy with respect to the Distribution or
the Separation to the extent caused by any breach by Ceva, Inc. of any of its
representations, warranties or covenants made pursuant to Article IV of this
Agreement or in any Representation Letter issued by Ceva, Inc. after the
Combination Effective Date.


 


21

















 


(ii)           Notwithstanding any other provision
of this Agreement to the contrary, DSPGI shall indemnify, defend and hold
harmless Ceva, Inc. and each Ceva, Inc. Affiliate (or any successor to any of
them) against (A) any and all Tax-Related Losses incurred by Ceva, Inc. or any
of them in connection with any proposed tax assessment or tax controversy with
respect to the Distribution or the Separation other than a Tax-Related Loss
incurred by Ceva, Inc. as a result of any breach by Ceva, Inc. of any of its
representations, warranties or covenants made pursuant to Article IV of this
Agreement or in any Representation Letter issued by Ceva, Inc. after the
Combination Effective Date and (B) any sales and use, gross receipts, or other
similar transfer taxes imposed on the transfers occurring pursuant to the
Separation and Distribution.


(iii)          All interest or penalties incurred in
connection with any Tax-Related Losses or any indemnification obligation under
subsection (ii)(B) above shall be computed for the time period up to and
including the date that the Indemnifying Party pays its indemnification
obligation in full.


(b)           The
Indemnifying Party shall pay any amount due and payable to the Indemnitee
pursuant to this Section 4.4 on or before the 90th day following the earlier of
agreement or determination that such amount is due and payable to the
Indemnitee.  All payments made pursuant
to this Section 4.4 shall be made by wire transfer to the bank account
designated by the Indemnitee for such purpose, and on the date of such wire
transfer the Indemnifying Party shall give the Indemnitee notice of the
transfer.


4.5.          Procedure
For Indemnification For Tax Liabilities.


(a)           If
an Indemnitee receives notice of the assertion of any Third-Party Claim with
respect to which an Indemnifying Party may be obligated under Section 4.4 to
provide indemnification, the Indemnitee shall give the Indemnifying Party
notice thereof (together with a copy of such Third-Party Claim, process or other
legal pleading) promptly after becoming aware of such Third-Party Claim;
provided, however, that the failure of the Indemnitee to give notice as
provided in this Section shall not relieve the Indemnifying Party of its
obligations under Section 4.4, except to the extent that the Indemnifying Party
is actually prejudiced by such failure to give notice. Such notice shall
describe such Third-Party Claim in reasonable detail.


(b)           DSPGI
and Ceva, Inc. shall jointly control the defense of, and cooperate with each
other with respect to defending, any Third-Party Claim with respect to which
either party is obligated under Section 4.4 to provide indemnification,
provided that either party shall forfeit such joint control right with respect
to a particular Third-Party Claim if such party or any Affiliate of such party
makes any public statement or filing, or takes any action (including, but  not limited to, the filing of any submission
or pleading, or the giving of a deposition or 
production of documents, in any administrative or court proceeding) in
connection with such Third-Party Claim that is inconsistent in a material
respect with any representation or warranty made by such party in this
Agreement, the Tax Rulings, the Subsequent Tax Opinion/Ruling or the Representation
Letters.


(c)           Ceva,
Inc. and DSPGI shall exercise their rights to jointly control the defense of
any such Third-Party Claim solely for the purpose of defeating such Third-Party



 


22

















 


Claim and, unless required by applicable law, neither
Ceva, Inc. nor DSPGI shall make any statements or take any actions that could
reasonably result in the shifting of liability for any Tax-Related Losses
arising out of such Third-Party Claim from the party making such statement or
taking such action (or any of its Affiliates) to the other party (or any of its
Affiliates).


(d)           Statements
made or actions taken by either Ceva, Inc. or DSPGI in connection with the
defense of any such Third-Party Claim shall not prejudice the rights of such
party in any subsequent action or proceeding between the parties.


(e)           If
either DSPGI or Ceva, Inc. fails to jointly defend any such Third-Party Claim,
the other party shall solely defend such Third-Party Claim and the party
failing to jointly defend shall use commercially reasonable efforts to
cooperate with the other party in its defense of such Third-Party Claim;
provided, however, that an Indemnitee may not compromise or settle any such
Third-Party Claim without the prior written consent of the Indemnifying Party,
which consent shall not be unreasonably withheld or delayed. All costs and
expenses of either party incurred in connection with, and during the course of,
the joint control of the defense of any such Third-Party Claim shall be
initially paid by the party that incurs such costs and expenses. Such costs and
expenses shall be reallocated and reimbursed in accordance with the respective
indemnification obligations of the parties at the conclusion of the defense of
such Third-Party Claim.


4.6.          Survival.
 The rights and obligations of each
of DSPGI and Ceva, Inc. and their respective Indemnitees under this Article IV
shall survive until thirty days following the expiration of the applicable
statute of limitations.


4.7.          Section
355(e)
Notice.  Promptly after the Combination Effective Date, DSPGI
shall file with the appropriate Internal Revenue Service Center a notice under
Section 355(e)(4)(E) of the Code substantially in the form of Exhibit A
to this Agreement.


ARTICLE V

INDEMNIFICATION


5.1.          Release
of Claims.


(a)           Except
as provided in Section 5.1(c), effective as of the Distribution Date, Ceva,
Inc. does hereby, for itself, its respective Affiliates (other than any member
of the DSPGI Group), successors and assigns, and all Persons who at any time
prior to the Distribution Date have been stockholders, directors, officers,
agents or employees of any member of the Ceva, Inc. Group (in each case, in
their respective capacities as such), remise, release and forever discharge
each of DSPGI, its respective Affiliates (other than any member of the Ceva,
Inc. Group), successors and assigns, and all Persons who at any time prior to
the Distribution Date have been stockholders, directors, officers, agents or
employees of DSPGI (in each case, in their respective capacities as such), and
their respective heirs, executors, administrators, successors and assigns, from
any and all Liabilities whatsoever, whether at law or in equity (including any
right of contribution), whether arising under any contract or agreement, by
operation of law or otherwise, existing or arising from all acts and events
occurring or failing to occur or alleged to have occurred or to have failed to
occur and all conditions existing or alleged to have existed on or 


 


23

















 


before the Distribution Date (including any
contractual arrangements or arrangements existing or alleged to exist between
them on or before the Distribution Date).


(b)           Except
as provided in Section 5.1(c), effective as of the Distribution Date, DSPGI
does hereby, for itself and its Affiliates (other than any member of the Ceva,
Inc. Group), successors and assigns, and all Persons who at any time prior to
the Distribution Date have been stockholders, directors, officers, agents or
employees of any member of the DSPGI Group (in each case, in their respective
capacities as such), remise, release and forever discharge Ceva, Inc., the
respective members of the Ceva, Inc. Group, their respective Affiliates (other
than any member of the DSPGI Group), successors and assigns, and all Persons
who at any time prior to the Distribution Date have been stockholders,
directors, officers, agents or employees of any member of the Ceva, Inc. Group
(in each case, in their respective capacities as such), and their respective
heirs, executors, administrators, successors and assigns, from any and all
Liabilities whatsoever, whether at law or in equity (including any right of
contribution), whether arising under any contract or agreement, by operation of
law or otherwise, existing or arising from all acts and events occurring or
failing to occur or alleged to have occurred or to have failed to occur and all
conditions existing or alleged to have existed on or before the Distribution
Date (including any contractual arrangements or arrangements existing or
alleged to exist between them on or before the Distribution Date).


(c)           Nothing
in Section 5.1(a) or (b) shall impair any right of any Person to enforce this
Agreement, any Ancillary Agreement, or the Tax Indemnification Agreement.  Nothing in Section 5.1(a) or (b) shall
release any Person from:


(i)            any Liability, contingent or
otherwise, assumed, transferred, assigned or allocated to the Group of which
such Person is a member in accordance with, or any other Liability of any
member of any Group under, this Agreement or any Ancillary Agreement;


(ii)           any Liability that the parties may
have with respect to indemnification or contribution pursuant to this Agreement
for claims brought against the parties by third Persons, which Liability shall
be governed by the provisions of this Article V and Article VI and, if
applicable, the appropriate provisions of the Ancillary Agreements; or


(iii)          any Liability the release of which
would result in the release of any Person other than a Person released pursuant
to this Section 5.1; provided, however, that the parties shall not bring suit
or permit any of their Subsidiaries to bring suit against any Person with
respect to any Liability to the extent that such Person would be released with
respect to such Liability by this Section 5.1 but for the provisions of this
clause (iii).


(d)           Ceva,
Inc. shall not make, and shall not permit any member of the Ceva, Inc. Group to
make, any claim or demand, or commence any Action asserting any claim or
demand, including any claim of contribution or any indemnification, against
DSPGI or any member of the DSPGI Group or any other Person released pursuant to
Section 5.1(a), with respect to any Liabilities released pursuant to Section
5.1(a).  DSPGI shall not, and shall not
permit any member of the DSPGI Group, to make any claim or demand, or commence
any Action asserting any claim or demand, including any claim of contribution
or any indemnification, against Ceva, Inc. or any member of the Ceva, Inc.
Group, or any other Person 


 


24

















 


released pursuant to Section 5.1(b), with respect to
any Liabilities released pursuant to Section 5.1(b).


(e)           It
is the intent of each of DSPGI and Ceva, Inc., by virtue of the provisions of
this Section 5.1, to provide for a full and complete release and discharge of
all Liabilities existing or arising from all acts and events occurring or
failing to occur or alleged to have occurred or to have failed to occur and all
conditions existing or alleged to have existed on or before the Distribution
Date, between or among Ceva, Inc. or any member of the Ceva, Inc. Group, on the
one hand, and DSPGI or any member of the DSPGI Group, on the other hand
(including any contractual agreements or arrangements existing or alleged to
exist between or among any such members on or before the Distribution Date),
except as expressly set forth in Section 5.1(c).  At any time, at the request of any other party, each party shall
cause each member of its respective Group to execute and deliver releases
reflecting the provisions hereof.


5.2.          Indemnification
by Ceva, Inc.  Except as provided in
Section 5.4, Ceva, Inc. shall indemnify, defend and hold harmless DSPGI, each
member of the DSPGI Group and each of their respective directors, officers and
employees, and each of the heirs, executors, successors and assigns of any of
the foregoing (collectively, the “DSPGI Indemnitees”), from and against any and
all Liabilities of the DSPGI Indemnitees relating to, arising out of or
resulting from any of the following items (without duplication):


(a)           the
failure of Ceva, Inc. or any other member of the Ceva, Inc. Group or any other
Person to pay, perform, or discharge any Ceva Assumed Liabilities in accordance
with their respective terms, whether prior to or after the Combination
Effective Date or the date of this Agreement;


(b)           any
breach by Ceva, Inc. or any member of the Ceva, Inc. Group of this Agreement,
any of the Ancillary Agreements, or the Tax Indemnification Agreement subject
to any limitations set forth in the Ancillary Agreements or the Tax
Indemnification Agreement; and


(c)           any
breach by Ceva, Inc. or any member of the Ceva, Inc. Group of any covenants or
obligations in the Combination Agreement or in any documents or instruments
executed and delivered by Ceva, Inc. or any member of the Ceva, Inc. Group,
occurring at any time on or after the Distribution Date.


5.3.          Indemnification
by DSPGI.  Except as otherwise
provided in Section 5.5, DSPGI shall indemnify, defend and hold harmless Ceva,
Inc., each member of the Ceva, Inc. Group and each of their respective
directors, officers and employees, and each of the heirs, executors, successors
and assigns of any of the foregoing (collectively, the “Ceva, Inc.
Indemnitees”), from and against any and all Liabilities of the Ceva, Inc.
Indemnitees relating to, arising out of or resulting from any of the following
items (without duplication):


(a)           the
failure of DSPGI or any other member of the DSPGI Group or any other Person to
pay, perform or otherwise promptly discharge any Liabilities of DSPGI or the
DSPGI Group, which includes any and all Liabilities which are not Ceva Assumed
Liabilities, whether prior to or after the Distribution Date or the date of
this Agreement;


 


25

















 


(b)           any
breach by DSPGI or any member of the DSPGI Group of this Agreement, any of the
Ancillary Agreements or the Tax Indemnification Agreement, including any breach
or inaccuracy of any representation or warranty made herein or therein subject
to any limitations set forth in the Ancillary Agreements or the Tax
Indemnification Agreement; and


(c)           any
breach by DSPGI or any member of the DSPGI Group of any covenants or
obligations in the Combination Agreement or in any documents or instruments
executed and delivered by DSPGI or any member of the DSPGI Group, occurring at
any time after the Distribution Date.


5.4.          Indemnification
Obligations Net of Insurance Proceeds and Other Amounts.


(a)           The
parties intend that any Liability subject to indemnification or reimbursement
pursuant to this Article V or Article VI will be net of Insurance Proceeds that
actually reduce the amount of the Liability. 
Accordingly, the amount which any party (an “Indemnifying Party”) is
required to pay to any Person entitled to indemnification hereunder (an
“Indemnitee”) will be reduced by any Insurance Proceeds theretofore actually
recovered by or on behalf of the Indemnitee in reduction of the related
Liability.  If an Indemnitee receives a
payment (an “Indemnity Payment”) required by this Agreement from an
Indemnifying Party in respect of any Liability and subsequently receives
Insurance Proceeds, then the Indemnitee shall pay to the Indemnifying Party an
amount equal to the excess of the Indemnity Payment received over the amount of
the Indemnity Payment that would have been due if the Insurance Proceeds had
been received, realized or recovered before the Indemnity Payment was made.


(b)           An
insurer who would otherwise be obligated to pay any claim shall not be relieved
of the responsibility with respect thereto or, solely by virtue of the
indemnification provisions hereof, have any subrogation rights with respect
thereto, it being expressly understood and agreed that no insurer or any other
third party shall be entitled to a “windfall” (i.e., a benefit they would not
be entitled to receive in the absence of the indemnification provisions) by
virtue of the indemnification provisions hereof.  Nothing in this Agreement or any Ancillary Agreement shall
obligate any member of any Group to seek to collect or recover any Insurance
Proceeds.


5.5.          Procedures
for Indemnification of Third Party Claims.


(a)           If
an Indemnitee shall receive notice or otherwise learn of the assertion by a
Person (including any Governmental Authority) of any claim or of the
commencement by any such Person of any Action (collectively, a “Third Party
Claim”) with respect to which an Indemnifying Party may be obligated to provide
indemnification to such Indemnitee pursuant to Section 5.2 or 5.3, or any
other Section of this Agreement, any Ancillary Agreement, such Indemnitee shall
give such Indemnifying Party written notice thereof within twenty days after
becoming aware of such Third Party Claim. 
Any such notice shall describe the facts constituting the basis for the
Third Party Claim and the amount of the claimed Damages in reasonable
detail.  Notwithstanding the foregoing,
no delay or failure of any Indemnitee to give the notice as provided in this
Section 5.5(a) shall not relieve the related Indemnifying Party of its
obligations under this Article V, except to the extent of any damage or
liability arising out of such delay or failure.


 


26

















 


(b)           An
Indemnifying Party may elect to defend, with counsel reasonably satisfactory to
the Indemnitee (and, unless the Indemnifying Party has specified any
reservations or exceptions, to seek to settle or compromise), at such
Indemnifying Party’s own expense, any Third Party Claim.  Within thirty days after the receipt of the
notice from an Indemnitee in accordance with Section 5.5(a) (or sooner, if the
nature of such Third Party Claim so requires), the Indemnifying Party shall notify
the Indemnitee of its election whether the Indemnifying Party shall assume
responsibility for defending such Third Party Claim, which election shall
specify any reservations or exceptions; provided that (i) the Indemnifying
Party may only assume control of such defense if (A) it acknowledges in writing
to the Indemnitee that any Damages, fines, costs or other liabilities that may
be assessed against the Indemnitee in connection with such Third Party Claim
constitute Damages for which the Indemnitee shall be indemnified pursuant to
this Article V and (B) the ad damnum is less than or equal to the amount of
Damages for which the Indemnifying Party is liable under this Article V and
(ii) the Indemnifying Party may not assume control of the defense of Third
Party Claim involving criminal liability or in which equitable relief is sought
against the Indemnitee; provided however, with respect to a Third Party Claim
involving both equitable relief and monetary damages and in which the liability
and damages phases of the proceeding are separated, the Indemnifying Party may
assume the defense of the portion of the proceeding solely as it relates to
monetary damages.  After notice from an
Indemnifying Party to an Indemnitee of its election to assume the defense of a Third
Party Claim, such Indemnitee shall have the right to employ separate counsel
and to participate in (but not control) the defense, compromise, or settlement
thereof, but the fees and expenses of such counsel shall be the expense of such
Indemnitee except as set forth in the next sentence.  In the event that the Indemnifying Party has elected to assume
the defense of the Third Party Claim but has specified, and continues to
assert, any reservations or exceptions in such notice, then, in any such case,
the reasonable fees and expenses of one separate counsel for all Indemnitees
shall be borne by the Indemnifying Party.


(c)           If
an Indemnifying Party elects not to assume responsibility for defending a Third
Party Claim, or fails to notify an Indemnitee of its election as provided in
Section 5.5(a), such Indemnitee may defend such Third Party Claim at the cost
and expense of the Indemnifying Party.


(d)           Unless
the Indemnifying Party has failed to assume the defense of the Third Party
Claim in accordance with the terms of this Agreement, no Indemnitee may settle
or compromise any Third Party Claim without the written consent of the
Indemnifying Party, which consent shall not be unreasonably withheld,
conditioned or delayed.


(e)           No
Indemnifying Party shall consent to entry of any judgment or enter into any
settlement of the Third Party Claim without the written consent of the
Indemnitee; provided that the consent of the Indemnitee shall not be required
if the Indemnifying Party agrees in writing to pay any amounts payable pursuant
to such settlement or judgment and such settlement or judgment includes a
complete release of the Indemnitee from further liability and has no other
adverse effect on the Indemnitee.


(f)            In
order to seek indemnification under this Article V, an Indemnitee shall deliver
a Claim Notice to the Indemnifying Party.


 


27

















 


(g)           During
the thirty-day period following the delivery of a Claim Notice, the
Indemnifying Party and the Indemnitee shall use good faith efforts to resolve
the Claim described therein.  If within
the thirty-day period following delivery of the Claim Notice, the parties agree
in writing that the Indemnitee is entitled to the Claimed Amount or the Agreed
Amount, the Indemnifying Party shall within five days of such agreement deliver
to the Indemnitee, a payment of the Claimed Amount or the Agreed Amount,
whichever is applicable by check or by wire transfer.  If the Claim is not entirely resolved within such thirty-day
period, the Indemnifying Party and the Indemnitee shall discuss in good faith
the submission of the Dispute to binding arbitration, and if the Indemnifying
Party and the Indemnified Party agree in writing to submit the Dispute to such
arbitration, then the provisions of Article VIII.  The provisions of this Section 5.5(g) shall not obligate the
Indemnifying Party and the Indemnitee to submit to arbitration or any other
alternative dispute resolution procedure with respect to any Dispute, and in
the absence of an agreement by the Indemnifying Party and the Indemnitee to
arbitrate a Dispute, such Dispute shall be resolved in a state or federal court
sitting in New York, New York.


5.6.          Additional
Matters.


(a)           Any
claim on account of a Liability which does not result from a Third Party Claim
shall be asserted by written notice given by the Indemnitee to the related
Indemnifying Party.  Such Indemnifying
Party shall have a period of thirty days after the receipt of such notice
within which to accept responsibility for such claim in writing.  If such Indemnifying Party does not accept
responsibility therefor within such thirty-day period, such Indemnifying Party
shall be deemed to have refused to accept responsibility to make payment.  If such Indemnifying Party does not respond
within such thirty-day period or rejects such claim in whole or in part, such
Indemnitee shall be free to pursue such remedies as may be available to such
party as contemplated by this Agreement, the Ancillary Agreements and the Tax
Indemnification Agreement without prejudice to its right to receive
indemnification from the Indemnifying Party if it is ultimately determined that
such rejection was improper.


(b)           In
the event of payment by or on behalf of any Indemnifying Party to any
Indemnitee in connection with any Third Party Claim, such Indemnifying Party
shall be subrogated to and shall stand in the place of such Indemnitee as to
any events or circumstances in respect of which such Indemnitee may have any
right, defense or claim relating to such Third Party Claim against any claimant
or plaintiff asserting such Third Party Claim or against any other person.  Such Indemnitee shall cooperate with such
Indemnifying Party in a reasonable manner, and at the cost and expense of such
Indemnifying Party, in prosecuting any subrogated right, defense or claim.


(c)           In
the event of an Action in which the Indemnifying Party is not a named
defendant, if the Indemnifying Party shall so request, the parties shall
endeavor to substitute the Indemnifying Party for the named defendant if at all
practicable.  If such substitution or
addition cannot be achieved for any reason or is not requested, the named
defendant shall allow the Indemnifying Party to manage the Action as set forth
in this Section and the Indemnifying Party shall fully indemnify the named
defendant against all costs of defending the Action (including court costs,
sanctions imposed by a court, attorneys’ fees, experts’ fees and all other
external 


 


28

















 


expenses), the costs of any judgment or settlement, and
the cost of any interest or penalties relating to any judgment or settlement.


5.7.          Remedies
Cumulative.  The remedies provided
in this Article V shall be cumulative and, subject to the provisions of Article
VIII, shall not preclude assertion by any Indemnitee of any other rights or the
seeking of any and all other remedies against any Indemnifying Party.


5.8.          Survival
of Indemnities.  The rights and
obligations of each of DSPGI and Ceva, Inc. and their respective Indemnitees
under this Article V shall survive the sale or other transfer by any party of
any assets or businesses or the assignment by it of any Liabilities until the
second anniversary following the Distribution Date.


5.9.          Tax-Related
Losses.  Notwithstanding anything
herein to the contrary, Article IV shall govern and shall be the exclusive
remedy for any breach of any representation, warranty or covenant contained in
Article IV of this Agreement; provided, however, that Article VIII shall govern
any disputes among the parties arising out of Article IV.  Except as otherwise specifically provided in
this Agreement or in any Ancillary Agreement, as applicable, the
indemnification rights afforded by this Article V are the exclusive remedy for
all other matters relating to this Agreement, the Ancillary Agreements and the
transactions contemplated hereby and thereby.


ARTICLE VI

INTERIM OPERATIONS AND CERTAIN OTHER MATTERS


6.1.          Certain
Business Matters.


(a)           Except
as may be expressly set forth in Section 6.2 below or in any Ancillary
Agreement, no member of any Group shall have any duty to refrain from (i)
engaging in the same or similar activities or lines of business as any member
of any other Group, (ii) doing business with any potential or actual supplier
or customer of any member of any other Group, or (iii) engaging in, or
refraining from, any other activities whatsoever relating to any of the
potential or actual suppliers or customers of any member of any other Group.


(b)           Each
of DSPGI and Ceva, Inc. is aware that from time to time certain business
opportunities may arise which more than one Group may be financially able to
undertake, and which are, from their nature, in the line of more than one
Group’s business and are of practical advantage to more than one Group.  In connection therewith, the parties agree
that if, following the Distribution Date and prior to (but not following) the
Combination Effective Date, any of DSPGI or Ceva, Inc. acquires knowledge of an
opportunity that meets the foregoing standard with respect to more than one
Group, none of DSPGI or Ceva, Inc. shall have any duty to communicate or offer
such opportunity to any of the others and may pursue or acquire such
opportunity for itself, or direct such opportunity to any other Person in each
case subject to the provisions of Section 6.2.


6.2.          Non-Competition,
Solicitation and Hiring.


 


29

















 


(a)           Subject
to the restrictions and rights set forth in the Technology Transfer Agreements,
the DSPGI Group acknowledges that, prior to the Distribution, it has and will
have become privy to certain confidential information and trade secrets of
Ceva, Inc. and further acknowledges that it will derive substantial benefits
from the consummation of the transactions contemplated by this Agreement and that
Ceva, Inc. is consummating such transactions in reliance upon the agreement in
this Section 6.2 that the knowledge and expertise developed by Ceva, Inc. and
available to the DSPGI Group will be preserved and will not be used in
competition with Ceva, Inc.  The DSPGI
Group acknowledges that it is reasonable and necessary for the protection of
Ceva, Inc. and its Subsidiaries that the DSPGI Group agree, and accordingly the
DSPGI Group does agree that, for a period of five years following the
Distribution Date (the “Noncompetition Period”), the DSPGI Group shall not, and
shall ensure that Affiliates of the DSPGI Group shall not directly or
indirectly engage in any business that is competitive with the Licensing
Business.


(b)           Subject
to the restrictions and rights set forth in the Technology Transfer Agreements,
the Ceva, Inc. Group acknowledges that, prior to the Distribution, it has and
will have become privy to certain confidential information of DSPGI and further
acknowledges that it will derive substantial benefits from the consummation of
the transactions contemplated by this Agreement and that DSPGI is consummating
such transactions in reliance upon the agreement in this Section 6.2 that
the knowledge and expertise developed by DSPGI and available to the Ceva, Inc.
Group (and the rights to use which have not been conveyed to Ceva, Inc., DSP
Ceva or Corage, Ltd. pursuant to the transactions contemplated by
Section 2.2 of this Agreement) will be preserved and will not be used in
competition with DSPGI.  The Ceva, Inc.
Group acknowledges that its is reasonable and necessary for the protection of
DSPGI and its Subsidiaries that the Ceva, Inc. Group agree, and accordingly the
Ceva, Inc. Group does agree that, during the Noncompetition Period, the Ceva,
Inc. Group shall not and shall ensure that Affiliates of the Ceva, Inc. Group
shall not directly or indirectly engage in any business that is competitive
with the Products Business.


(c)           For
a period of three years after the Distribution Date, each of DSPGI and Ceva, Inc.
shall not, either directly or indirectly (including through an Affiliate),
solicit for hire any employee of the other or its Subsidiaries; provided,
however, that such restriction shall not apply to (i) any individual whose
employment with such party has been terminated or (ii) any general employment
solicitations that are not targeted at any such employees, such as
advertisements in publications in general circulation.


(d)           For
purposes of this Section 6.2, neither DSPGI nor Ceva, Inc. will be deemed
to be engaged indirectly in an activity as a result of another Person engaging
in that activity unless that Person is its Affiliate.


(e)           The
invalidity or non-enforceability of this Section 6.2 in any respect shall
not affect the validity or enforceability of this Section 6.2 in any other
respect or of any other provisions of this Agreement.  In the event that any provision of this Section 6.2 shall be held
invalid or unenforceable by a court of competent jurisdiction by reason of the
geographic or business scope or the duration thereof, such invalidity or
unenforceability shall attach only to the scope or duration of such provision
and shall not affect or render invalid or unenforceable any other provision of
this Agreement, and, to the fullest extent permitted by law, this Agreement 


 


30

















 


shall be construed as if the geographic or business
scope or the duration of such provision had been more narrowly drafted so as
not to be invalid or unenforceable.


(f)            Each
of Ceva, Inc. and DSPGI acknowledges that the other party would suffer
irreparable harm if it were to breach its obligations under
Sections 6.2(a) or (b), respectively, and that the other party’s remedy at
law for any such breach is and will be insufficient and inadequate and that the
other shall be entitled to equitable relief, including by way of temporary and
permanent injunction, in addition to any remedies the other party may have at
law.


6.3.          Late
Payments.  Except as expressly
provided to the contrary in this Agreement or in any Ancillary Agreement, any
amount not paid when due pursuant to this Agreement or any Ancillary Agreement
or the Tax Indemnification Agreement (and any amounts billed or otherwise
invoiced or demanded and properly payable that are not paid within thirty days
of such bill, invoice or other demand) shall accrue interest at a rate per
annum equal to the Prime Rate plus two percent.


ARTICLE VII

EXCHANGE OF INFORMATION; CONFIDENTIALITY


7.1.          Agreement
for Exchange of Information; Archives.


(a)           Each
of DSPGI and Ceva, Inc., on behalf of its respective Group, agrees to provide,
or cause to be provided, to the other Group, at any time before or after the
Distribution Date, as soon as reasonably practicable after written request
therefor, any Information in the possession or under the control of such Group
which the requesting party reasonably needs (i) to comply with reporting,
disclosure, filing or other requirements imposed on the requesting party
(including under applicable securities or tax laws) by a Governmental Authority
having jurisdiction over the requesting party, (ii) for use in any other
judicial, regulatory, administrative, tax or other proceeding or in order to
satisfy audit, accounting, claims, regulatory, litigation, tax or other similar
requirements, or (iii) to comply with its obligations under this Agreement or
any Ancillary Agreement; provided, however, that in the event
that any party determines that any such provision of Information could be
commercially detrimental, violate any law or agreement, or waive any attorney
client privilege, the parties shall take all reasonable measures to permit the
compliance with such obligations in a manner that avoids any such harm or
consequences.


(b)           After
the Combination Effective Date, Ceva, Inc. shall have access during regular
business hours (as in effect from time to time) to the documents and objects of
historic significance that relate to the business of Ceva, Inc. that are
located in the records of DSPGI.  Ceva,
Inc. may obtain copies (but not originals) of documents for bona fide business
purposes and Ceva, Inc. shall comply with any rules, procedures or other
requirements, and shall be subject to any restrictions (including prohibitions
on removal of specified objects), that are then applicable to DSPGI.  Nothing herein shall be deemed to restrict
the access of any member of the DSPGI Group to any such documents.


7.2.          Ownership
of Information.  Any Information
owned by one Group that is provided to a requesting party pursuant to Section 7.1
shall be deemed to remain the property 


 


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and confidential information of the providing
party.  Unless specifically set forth
herein, nothing contained in this Agreement shall be construed as granting or
conferring rights of license or otherwise in any such Information.


7.3.          Compensation
for Providing Information.  The
party requesting such Information shall reimburse the other party for the
reasonable costs, if any, of creating, gathering and copying such Information,
to the extent that such costs are incurred for the benefit of the requesting
party.  Except as may be otherwise
specifically provided elsewhere in this Agreement or in any other agreement between
the parties, such costs shall be computed in accordance with the providing
party’s standard methodology and procedures.


7.4.          Record
Retention.  To facilitate the
possible exchange of Information pursuant to this Article VII and other
provisions of this Agreement after the Distribution Date, the parties shall
exercise their reasonable best efforts to retain all Information in their
respective possession or control on the Distribution Date.  No party will destroy, or permit any of its
Subsidiaries to destroy, any Information which the other party may have the
right to obtain pursuant to this Agreement prior to the third anniversary of
the date of this Agreement without first using its reasonable best efforts to
notify the other party of the proposed destruction and giving the other party
the opportunity to take possession of such information prior to such
destruction; provided, however, that in the case of any Information relating to
Taxes (as such term is defined in the Combination Agreement) or to
Environmental Liabilities, such period shall be extended to the expiration of
the applicable statute of limitations (giving effect to any extensions
thereof).


7.5.          Limitation
of Liability.  No party shall have
any liability to any other party in the event that any Information exchanged or
provided pursuant to this Agreement which is an estimate or forecast, or which
is based on an estimate or forecast, is found to be inaccurate, in the absence
of willful misconduct by the party providing such Information.  No party shall have any liability to any
other party if any Information is destroyed after reasonable best efforts by
such party to comply with the provisions of Section 7.4.


7.6.          Other
Agreements Providing for Exchange of Information.  The rights and obligations granted under this Article VII are subject
to any specific limitations, qualifications or additional provisions on the
sharing, exchange or confidential treatment of Information set forth in any
Ancillary Agreement.


7.7.          Production
of Witnesses; Records; Cooperation.


(a)           After
the Distribution Date, except in the case of an adversarial Action by one party
against another party, each party hereto shall exercise its reasonable best
efforts to make available to each other party, upon written request, the
former, current and future directors, officers, employees, other personnel and
agents of the members of its respective Group as witnesses and any books,
records or other documents within its control or which it otherwise has the
ability to make available, to the extent that any such person (giving
consideration to business demands of such directors, officers, employees, other
personnel and agents) or books, records or other documents may reasonably be
required in connection with any Action in which the requesting party may from
time to time be involved, regardless of whether such Action is a matter with
respect to which indemnification may be sought hereunder.


 


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(b)           If
an Indemnifying Party chooses to defend or to seek to compromise or settle any
Third Party Claim, the other parties shall make available to such Indemnifying
Party or such other party, as the case may be, upon written request, the
former, current and future directors, officers, employees, other personnel and
agents of the members of its respective Group as witnesses and any books,
records or other documents within its control or which it otherwise has the
ability to make available, to the extent that any such person (giving
consideration to business demands of such directors, officers, employees, other
personnel and agents) or books, records or other documents may reasonably be
required in connection with such defense, settlement or compromise, or such
prosecution, evaluation or pursuit, as the case may be, and shall otherwise
cooperate in such defense, settlement or compromise, or such prosecution,
evaluation or pursuit, as the case may be.


(c)           Without
limiting the foregoing, the parties shall cooperate and consult to the extent
reasonably necessary with respect to any Actions.


(d)           Without
limiting any provision of this Section, each of the parties agrees to
cooperate, and to cause each member of its respective Group to cooperate, with
each other in the defense of any infringement or similar claim with respect to
any intellectual property and shall not claim to acknowledge, or permit any
member of its respective Group to claim to acknowledge, the validity or
infringing use of any intellectual property of a third Person in a manner that
would hamper or undermine the defense of such infringement or similar claim.


(e)           The
obligation of the parties to provide witnesses pursuant to this Section 7.7 is
intended to be interpreted in a manner so as to facilitate cooperation and
shall include the obligation to provide as witnesses inventors and other
officers without regard to whether the witness or the employer of the witness
could assert a possible business conflict (subject to the exception set forth
in the first sentence of Section 7.7(a)).


(f)            In
connection with any matter contemplated by this Section 7.7, the parties shall
enter into a mutually acceptable joint defense agreement so as to maintain to
the extent practicable any applicable attorney-client privilege or work product
immunity of any member of any Group.


7.8.          Confidentiality.


(a)           Subject
to Section 7.9, each of DSPGI and Ceva, Inc., on behalf of itself and each
member of its respective Group, agrees to hold, and to cause its respective
directors, officers, employees, agents, accountants, counsel and other advisors
and representatives to hold, in strict confidence, with at least the same
degree of care that applies to DSPGI’s confidential and proprietary information
pursuant to policies in effect as of the Distribution Date, all Information
concerning each such other Group that is either in its possession (including
Information in its possession prior to any of the date hereof, the Combination
Effective Date or the Distribution Date) or furnished by any such other Group
or its respective directors, officers, employees, agents, accountants, counsel
and other advisors and representatives at any time pursuant to this Agreement,
any Ancillary Agreement, the Tax Indemnification Agreement or otherwise, and
shall not use any such Information other than for such purposes as shall be
expressly permitted hereunder or thereunder, except, in each case, to the
extent that such 


 


33

















 


Information has been (i) in the public domain through
no fault of such party or any member of such Group or any of their respective
directors, officers, employees, agents, accountants, counsel and other advisors
and representatives, (ii) later lawfully acquired from other sources by such
party (or any member of such party’s Group) which sources are not themselves
bound by a confidentiality obligation), or (iii) independently generated
without reference to any proprietary or confidential Information of the other
party.


(b)           Each
party agrees not to release or disclose, or permit to be released or disclosed,
any such Information to any other Person, except its directors, officers,
employees, agents, accountants, counsel and other advisors and representatives
who need to know such Information (who shall be advised of their obligations
hereunder with respect to such Information), except in compliance with Section
7.9.  Without limiting the foregoing,
when any Information is no longer needed for the purposes contemplated by this
Agreement, any Ancillary Agreement or the Tax Indemnification Agreement, each
party shall promptly after request of any other party either return to the
other party all Information in a tangible form (including all copies thereof
and all notes, extracts or summaries based thereon) or certify to the other
party that it has destroyed such Information (and such copies thereof and such
notes, extracts or summaries based thereon).


(c)           The
terms and conditions of this Section 7.8 shall not apply to any Confidential
Information (as defined in the Technology Transfer Agreements), which instead
shall be subject to the confidentiality and other provisions of the Technology
Transfer Agreements.


7.9.          Protective
Arrangements.  If any party or any
member of its Group either determines on the advice of its counsel that it is
required to disclose any Information pursuant to applicable law or receives any
demand under lawful process or from any Governmental Authority to disclose or
provide Information of any other party (or any member of any other party’s
Group) that is subject to the confidentiality provisions hereof, such party
shall notify the other party prior to disclosing or providing such Information
and shall cooperate at the expense of the requesting party in seeking any
reasonable protective arrangements requested by such other party.  Subject to the foregoing, the Person that
received such request may thereafter disclose or provide Information to the
extent required by such law (as so advised by counsel) or by lawful process or
such Governmental Authority.


7.10.        Reimbursement.  Except to the extent otherwise contemplated
by any Ancillary Agreement, a party providing information to the other party
under this Article VII shall be entitled to receive from the recipient of such
information, upon presentation of invoices thereof, payments for such amount
relating to supplies, disbursements and other out-of-pocket expenses, as may be
reasonably incurred in providing such information.


ARTICLE VIII

ARBITRATION; DISPUTE RESOLUTION


8.1.          Agreement
to Arbitrate.  Except as otherwise
specifically provided in any Ancillary Agreement, the procedures for
discussion, negotiation and arbitration set forth in this 


 


34

















 


Article VIII shall apply to all disputes,
controversies or claims (whether sounding in contract, tort or otherwise) that
may arise out of or relate to, or arise under or in connection with this
Agreement or any Ancillary Agreement, or the transactions contemplated hereby
or thereby (including all actions taken in furtherance of the transactions
contemplated hereby or thereby on or prior to the date hereof), or the
commercial or economic relationship of the parties relating hereto or thereto,
between or among any member of the DSPGI Group and the Ceva, Inc. Group.  Each party agrees on behalf of itself and
each member of its respective Group that the procedures set forth in this
Article VIII shall be the sole and exclusive remedy in connection with any
dispute, controversy or claim relating to any of the foregoing matters and
irrevocably waives any right to commence any Action in or before any
Governmental Authority, except as expressly provided in Sections 8.7(b) and 8.8
and except to the extent provided under the United States Federal Arbitration
Act in the case of judicial review of arbitration results or awards.  Each party on behalf of itself and each
member of its respective Group irrevocably waives any right to any trial by
jury with respect to any claim, controversy or dispute set forth in the first
sentence of this Section 8.1.


8.2.          Escalation.


(a)           It
is the intent of the parties to exercise their respective reasonable best
efforts to resolve expeditiously any dispute, controversy or claim between or
among them with respect to the matters covered hereby that may arise from time
to time on a mutually acceptable negotiated basis.  In furtherance of the foregoing, any party involved in a dispute,
controversy or claim may deliver a notice (an “Escalation Notice”) demanding an
in person meeting involving representatives of the parties at a senior level of
management of the parties (or if the parties agree, of the appropriate
strategic business unit or division within such entity).  A copy of any such Escalation Notice shall
be given to the Chief Financial Officer, or like officer or official, of each
party involved in the dispute, controversy or claim (which copy shall state
that it is an Escalation Notice pursuant to this Agreement).  Any agenda, location or procedure for such
discussions or negotiations between the parties may be established by the
parties from time to time; provided, however, that the parties
shall exercise their reasonable best efforts to meet within thirty days of the
Escalation Notice.


(b)           The
parties may, by mutual consent, retain a mediator to aid the parties in their
discussions and negotiations by informally providing advice to the
parties.  Any opinion expressed by the
mediator shall be strictly advisory and shall not be binding on the parties,
nor shall any opinion expressed by the mediator be admissible in any arbitration
proceedings.  The mediator may be chosen
from a list of mediators previously selected by the parties or by other
agreement of the parties.


(c)           Costs
of the mediation shall be borne equally by the parties involved in the matter,
except that each party shall be responsible for its own expenses.  Mediation is not a prerequisite to a demand
for arbitration under Section 8.3.


8.3.          Demand
for Arbitration.


(a)           At
any time after the first to occur of (i) the date of the meeting actually held
pursuant to the applicable Escalation Notice or (ii) or in the event no such
meeting occurs, 


 


35

















 


forty-five days after the delivery of an Escalation
Notice, any party involved in the dispute, controversy or claim (regardless of
whether such party delivered the Escalation Notice) may, unless the Applicable
Deadline has occurred, make a written demand (the “Arbitration Demand Notice”)
that the dispute be resolved by binding arbitration, which Arbitration Demand
Notice shall be given to the parties to the dispute, controversy or claim in
the manner set forth in Section 11.5. 
If party shall deliver an Arbitration Demand Notice to another party,
such other party may itself deliver an Arbitration Demand Notice to such first
party with respect to any related dispute, controversy or claim with respect to
which the Applicable Deadline has not passed without the requirement of
delivering an Escalation Notice.  No
party may assert that the failure to resolve any matter during any discussions
or negotiations, the course of conduct during the discussions or negotiations
or the failure to agree on a mutually acceptable time, agenda, location or
procedures for the meeting, in each case, as contemplated by Section 8.2, is a
prerequisite to a demand for arbitration under Section 8.3.


(b)           Except
as may be expressly provided in any Ancillary Agreement, any Arbitration Demand
Notice may be given until one year and forty-five days after the later of the
occurrence of the act or event giving rise to the underlying claim or the date
on which such act or event was, or should have been, in the exercise of
reasonable due diligence, discovered by the party asserting the claim (as
applicable and as it may in a particular case be specifically extended by the
parties in writing, the “Applicable Deadline”).  Any discussions, negotiations or mediations between the parties
pursuant to this Agreement or otherwise shall not toll the Applicable Deadline
unless expressly agreed in writing by the parties.  Each of the parties agrees on behalf of itself and each member of
its Group that if an Arbitration Demand Notice with respect to a dispute,
controversy or claim is not given prior to the expiration of the Applicable
Deadline, as between or among the parties and the members of their Groups, such
dispute, controversy or claim will be barred, notwithstanding any longer
statute of limitations afforded by any applicable law.  Subject to Sections 8.7(d) and 8.8, upon
delivery of an Arbitration Demand Notice pursuant to Section 8.3(a) prior to
the Applicable Deadline, the dispute, controversy or claim shall be decided by
a sole arbitrator in accordance with the rules set forth in this Article VIII.


8.4.          Arbitrators.


(a)           Within
fifteen days after a valid Arbitration Demand Notice is given, the parties
involved in the dispute, controversy or claim referenced therein shall attempt
to select a sole arbitrator satisfactory to all such parties.


(b)           If
such parties are not able jointly to select a sole arbitrator within such
fifteen-day period, such parties shall each appoint an arbitrator within thirty
days after delivery of the Arbitration Demand Notice.  If one party appoints an arbitrator within such time period and
the other party or parties fail to appoint an arbitrator within such time
period, the arbitrator appointed by the one party shall be the sole arbitrator
of the matter.


(c)           If
a sole arbitrator is not selected pursuant to paragraph (a) or (b) above and,
instead, two or more arbitrators are selected pursuant to paragraph (b) above,
the arbitrators shall, within thirty days after the appointment of the later of
them to be appointed, select an additional arbitrator who shall act as the sole
arbitrator of the dispute.  After
selection of such 


 


36

















 


sole arbitrator, the initial arbitrators shall have no
further role with respect to the dispute. 
In the event that the arbitrators so appointed do not, within thirty
days after the appointment of the later of them to be appointed, agree on the
selection of the sole arbitrator, any party involved in such dispute may apply
to the American Arbitration Association to select the sole arbitrator, which
selection shall be made by such organization within thirty days after such
application.  Any arbitrator selected
pursuant to this paragraph (c) shall be disinterested with respect to any of
the parties and the matter and shall be reasonably competent in the applicable
subject matter.


(d)           The
sole arbitrator selected pursuant to paragraph (a), (b) or (c) above shall set
a time for the hearing of the matter which will commence no later than ninety
days after the date of appointment of the sole arbitrator pursuant to paragraph
(a), (b) or (c) above and which hearing will be no longer than thirty days
(unless in the judgment of the arbitrator the matter is unusually complex and
sophisticated and thereby requires a longer time, in which event such hearing
shall be no longer than ninety days). 
The final decision of such arbitrator will be rendered in writing to the
parties not later than sixty days after the last hearing date, unless otherwise
agreed by the parties in writing.


(e)           The
place of any arbitration hereunder will be New York, New York, unless otherwise
agreed by the parties.


8.5.          Hearings.  Within the time period specified in Section
8.4(d), the matter shall be presented to the arbitrator at a hearing by means
of written submissions of memoranda and verified witness statements and
exhibits, filed simultaneously, and responses, if necessary in the judgment of
the arbitrator or both the parties.  If
the arbitrator deems it to be essential to a fair resolution of the dispute,
live cross-examination or direct examination may be permitted, but is not
generally contemplated to be necessary. 
The arbitrator shall actively manage the arbitration with a view to
achieving a just, speedy and cost-effective resolution of the dispute, claim or
controversy.  The arbitrator may, in his
or her discretion, set time and other limits on the presentation of each
party’s case, its memoranda or other submissions, and refuse to receive any
proffered evidence, which the arbitrator, in his or her discretion, finds to be
cumulative, unnecessary, irrelevant or of low probative nature.  Except as otherwise set forth herein, any
arbitration hereunder will be conducted in accordance with the American
Arbitration Association Commercial Rules then prevailing.  Except as expressly set forth in Section
8.8(b), the decision of the arbitrator shall be final and binding on the parties,
and judgment thereon may be had and shall be enforceable in any court having
jurisdiction over the parties. 
Arbitration awards will bear interest at an annual rate of the Prime
Rate plus two percent per annum.  To the
extent that the provisions of this Agreement and the prevailing rules of the
American Arbitration Association conflict, the provisions of this Agreement
shall govern.


8.6.          Discovery
and Certain Other Matters.


(a)           Any
party involved in the applicable dispute may request limited document
production from the other party or parties of specific and expressly relevant
documents, with the reasonable expenses of the producing party incurred in such
production paid by the requesting party. 
Any such discovery (which rights to documents shall be substantially
less than document discovery rights prevailing under the Federal Rules of Civil
Procedure) shall be conducted expeditiously and shall not cause the hearing
provided for in Section 8.5 to be 


 


37

















 


adjourned except upon consent of all parties involved
in the applicable dispute or upon an extraordinary showing of cause
demonstrating that such adjournment is necessary to permit discovery essential
to a party to the proceeding. 
Depositions, interrogatories or other forms of discovery (other than the
document production set forth above) shall not occur except by consent of the
parties involved in the applicable dispute. 
Disputes concerning the scope of document production and enforcement of
the document production requests shall be determined by written agreement of
the parties involved in the applicable dispute or, failing such agreement, will
be referred to the arbitrator for resolution. 
All discovery requests will be subject to the proprietary rights and
rights of privilege of the parties, and the arbitrator will adopt procedures to
protect such rights and to maintain the confidential treatment of the
arbitration proceedings (except as may be required by law).  Subject to the foregoing, the arbitrator
shall have the power to issue subpoenas to compel the production of documents
relevant to the dispute, controversy or claim.


(b)           The
arbitrator shall have full power and authority to determine issues of
arbitrability but shall otherwise be limited to interpreting or construing the
applicable provisions of this Agreement or any Ancillary Agreement, and shall
have no authority or power to limit, expand, alter, amend, modify, revoke or
suspend any condition or provision of this Agreement or any Ancillary
Agreement; it being understood, however, that the arbitrator will have full
authority to implement the provisions of this Agreement or any Ancillary
Agreement, and to fashion appropriate remedies for breaches of this Agreement
(including interim or permanent injunctive relief); provided, however,
that the arbitrator shall not have (i) any authority in excess of the authority
a court having jurisdiction over the parties and the controversy or dispute
would have absent these arbitration provisions or (ii) any right or power to
award punitive or multiple damages.  It
is the intention of the parties that in rendering a decision the arbitrator
give effect to the applicable provisions of this Agreement and the Ancillary
Agreements and follow applicable law (it being understood and agreed that this
sentence shall not give rise to a right of judicial review of the arbitrator’s
award).


(c)           If
a party fails or refuses to appear at and participate in an arbitration hearing
after due notice, the arbitrator may hear and determine the controversy upon
evidence produced by the appearing party.


(d)           Arbitration
costs will be borne equally by each party involved in the matter, except that
each party will be responsible for its own attorney’s fees and other costs and
expenses, including the costs of witnesses selected by such party.


8.7.          Certain
Additional Matters.


(a)           Any
arbitration award shall be a bare award limited to a holding for or against a
party and shall be without findings as to facts, issues or conclusions of law
(including with respect to any matters relating to the validity or infringement
of patents or patent applications) and shall be without a statement of the
reasoning on which the award rests, but must be in adequate form so that a
judgment of a court may be entered thereupon. 
Judgment upon any arbitration award hereunder may be entered in any
court having jurisdiction thereof.


(b)           Prior
to the time at which an arbitrator is appointed pursuant to Section 8.4,
any party may seek one or more temporary restraining orders in a court of
competent 


 


38

















 


jurisdiction if necessary in order to preserve and
protect the status quo.  Neither the
request for, or grant or denial of, any such temporary restraining order shall
be deemed a waiver of the obligation to arbitrate as set forth herein and the
arbitrator may dissolve, continue or modify any such order.  Any such temporary restraining order shall
remain in effect until the first to occur of the expiration of the order in accordance
with its terms or the dissolution thereof by the arbitrator.


(c)           Except
as required by law, the parties shall hold, and shall cause their respective
officers, directors, employees, agents and other representatives to hold, the
existence, content and result of mediation or arbitration in confidence in
accordance with the provisions of Article VIII and except as may be required in
order to enforce any award.  Each of the
parties shall request that any mediator or arbitrator comply with such confidentiality
requirement.


(d)           If
at any time the sole arbitrator shall fail to serve as an arbitrator for any
reason, the parties shall select a new arbitrator who shall be disinterested as
to the parties and the matter in accordance with the procedures set forth
herein for the selection of the initial arbitrator.  The extent, if any, to which testimony previously given shall be
repeated or as to which the replacement arbitrator elects to rely on the
stenographic record (if there is one) of such testimony shall be determined by
the replacement arbitrator.


8.8.          Limited
Court Actions.


(a)           Notwithstanding
anything herein to the contrary, in the event that any party reasonably
determines the amount in controversy in any dispute, controversy or claim (or
any series of related disputes, controversies or claims) under this Agreement
or any Ancillary Agreement is, or is reasonably likely to be, in excess of $5
million, excluding any interest accrued thereon,  and if such party desires to commence an Action in lieu of complying
with the arbitration provisions of this Article, such party shall so state in
its Arbitration Demand Notice.  If the
other parties to the arbitration do not agree that the amount in controversy in
such dispute, controversy or claim (or such series of related disputes,
controversies or claims) is, or is reasonably likely to be, in excess of $5
million, the arbitrator selected pursuant to Section 8.4 hereof shall decide
whether the amount in controversy in such dispute, controversy or claim (or
such series of related disputes, controversies or claims) is, or is reasonably
likely to be, in excess of $5 million. 
The arbitrator shall set a date that is no later than ten days after the
date of his or her appointment for submissions by the parties with respect to
such issue.  There shall not be any
discovery in connection with such issue. 
The arbitrator shall render his or her decision on such issue within
five days of such date so set by the arbitrator.  If the arbitrator determines that the amount in controversy in
such dispute, controversy or claim (or such series of related disputes,
controversies or claims) is or is reasonably likely to be in excess of $5
million, the provisions of Sections 8.4(d) and (e), 8.5, 8.6, 8.7 and 8.10
hereof shall not apply and on or before (but, except as expressly set forth in
Section 8.8(b), not after) the twentieth business day after the date of such
decision, any party to the arbitration may elect, in lieu of arbitration, to
commence an Action with respect to such dispute, controversy or claim (or such
series of related disputes, controversies or claims) in any court of competent
jurisdiction.  If the arbitrator does
not so determine, the provisions of this Article (including with respect to
time periods) shall apply as if no determinations were sought or made pursuant
to this Section 8.8(a).


 


39

















 


(b)           If
an arbitration award in excess of $5 million is issued in any arbitration
proceeding commenced hereunder, any party may, within sixty days after the date
of such award, submit the dispute, controversy or claim (or series of related
disputes, controversies or claims) giving rise thereto to a court of competent
jurisdiction, regardless of whether such party or any other party sought to
commence an Action in lieu of proceeding with arbitration in accordance with
Section 8.8(a).  In such event, the
applicable court may elect to rely on the record developed in the arbitration
or, if it determines that it would be advisable in connection with the matter,
allow the parties to seek additional discovery or to present additional
evidence.  Each party shall be entitled
to present arguments to the court with respect to whether any such additional
discovery or evidence shall be permitted and with respect to all other matters
relating to the applicable dispute, controversy or claim (or series of related
disputes, controversies or claims).


8.9.          Continuity
of Service and Performance.  Unless
otherwise agreed in writing, the parties will continue to provide service and
honor all other commitments under this Agreement and each Ancillary Agreement
during the course of dispute resolution pursuant to the provisions of this
Article VIII with respect to all matters not subject to such dispute,
controversy or claim.


8.10.        Law
Governing Arbitration Procedures. 
The interpretation of the provisions of this Article VIII, only insofar
as they relate to the agreement to arbitrate and any procedures pursuant
thereto, shall be governed by the Arbitration Act and other applicable U.S.
federal law.  In all other respects, the
interpretation of this Agreement shall be governed as set forth in
Section 11.2.


ARTICLE IX

FURTHER ASSURANCES AND ADDITIONAL COVENANTS


9.1.          Further
Assurances.


(a)           In
addition to the actions specifically provided for elsewhere in this Agreement,
each of the parties hereto shall use its commercially reasonable efforts, prior
to, on and after the Distribution Date, to take, or cause to be taken, all
actions, and to do, or cause to be done, all things reasonably necessary,
proper or advisable under applicable laws, regulations and agreements to
consummate and make effective the transactions contemplated by this Agreement,
the Ancillary Agreements and the Tax Indemnification Agreement.


(b)           Prior
to the Distribution Date, if one or more of the parties identifies any
commercial or other service that is needed to assure a smooth and orderly
transition of the businesses in connection with the consummation of the
transactions contemplated hereby, and that is not otherwise governed by the
provisions of this Agreement or any Ancillary Agreement, the parties will
cooperate in determining whether there is a mutually acceptable arm’s-length
basis on which one or more of the other parties will provide such service.


 


40

















 


ARTICLE X

TERMINATION


10.1.        Termination
by Mutual Consent.  This Agreement
may be terminated at any time after the termination of the Combination
Agreement by the mutual consent of DSPGI and Ceva, Inc.


10.2.        Other
Termination.  The obligations of the
parties under Article III (including the obligation to pursue or effect the
Distribution) may be terminated by DSPGI if the Distribution Date shall not
have occurred on or before December 31, 2002.


10.3.        Effect
of Termination.  In the event of any
termination of this Agreement prior to the Combination Effective Date, no party
to this Agreement (or any of its directors or officers) shall have any
Liability or further obligation to any other party.  In the event of any termination of this Agreement on or after the
Combination Effective Date, only the provisions of Article III will terminate
and the other provisions of this Agreement, each Ancillary Agreement and the
Tax Indemnification Agreement shall remain in full force and effect.


ARTICLE XI

MISCELLANEOUS


11.1.        Counterparts;
Entire Agreement; Corporate Power.


(a)           This
Agreement may be executed in one or more counterparts, all of which shall be
considered one and the same agreement, and shall become effective when one or
more counterparts have been signed by each of the parties and delivered to the
other party.


(b)           This
Agreement, and the Exhibits, Schedules and Appendices hereto contain the entire
agreement between the parties with respect to the subject matter hereof,
supersede all previous agreements, negotiations, discussions, writings,
understandings, commitments and conversations with respect to such subject
matter and there are no agreements or understandings between the parties other
than those set forth or referred to herein or therein.


(c)           DSPGI
represents on behalf of itself and each other member of the DSPGI Group and
Ceva, Inc. represents on behalf of itself and each other member of the Ceva,
Inc. Group as follows:


(i)            each such Person has the requisite
corporate or other power and authority and has taken all corporate or other
action necessary in order to execute, deliver and perform each of this
Agreement, each of the Ancillary Agreements and the Tax Indemnification
Agreement to which it is a party and to consummate the transactions contemplated
hereby and thereby; and


(ii)           this Agreement, each Ancillary
Agreement and the Tax Indemnification Agreement to which it is a party has been
duly executed and delivered by it and constitutes a valid and binding agreement
of it enforceable in accordance with the terms thereof.


 


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11.2.        Governing
Law.  This Agreement shall be
governed by and construed and interpreted in accordance with the laws of the
State of Delaware (other than as to its laws of arbitration which shall be
governed under the Arbitration Act or other applicable federal law pursuant to
Section 8.10), irrespective of the choice of laws principles of the State of
Delaware, as to all matters, including matters of validity, construction,
effect, enforceability, performance and remedies.


11.3.        Assignability.  Except as set forth in any Ancillary
Agreement or the Tax Indemnification Agreement, this Agreement, each Ancillary
Agreement and the Tax Indemnification Agreement shall be binding upon and inure
to the benefit of the parties hereto and thereto, respectively, and their
respective successors and assigns; provided, however, that no party hereto or
thereto may assign its respective rights or delegate its respective obligations
under this Agreement, any Ancillary Agreement or the Tax Indemnification
Agreement without the express prior written consent of the other parties hereto
or thereto.


11.4.        Third Party Beneficiaries.  Except for the indemnification rights under
this Agreement of any DSPGI Indemnitee or Ceva, Inc. Indemnitee in their
respective capacities as such, (i) the provisions of this Agreement, each
Ancillary Agreement and the Tax Indemnification Agreement are solely for the
benefit of the parties and are not intended to confer upon any Person except
the parties any rights or remedies hereunder, and (ii) there are no third
party beneficiaries of this Agreement, any Ancillary Agreement or the Tax
Indemnification Agreement and none of this Agreement, any Ancillary Agreement
or the Tax Indemnification Agreement shall provide any third person with any
remedy, claim, liability, reimbursement, claim of action or other right in
excess of those existing without reference to this Agreement, any Ancillary
Agreement or the Tax Indemnification Agreement.  No party hereto shall have any right, remedy or claim with
respect to any provision of this Agreement, any Ancillary Agreement or the Tax
Indemnification Agreement to the extent such provision relates solely to the
other two parties hereto or the members of such other two parties’ respective
Groups.


11.5.        Notices.  All notices requests, demands, waivers and
other communications under this Agreement, any Ancillary Agreement or the Tax
Indemnification Agreement shall be in writing and shall be deemed to have been
duly given if delivered personally or by facsimile transmission or mailed
(certified or registered mail, postage prepaid, return receipt requested): 


 


	
  If to DSPGI:

  	
  DSP Group, Inc.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Attention:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Fax No.:

  	
   

  
	
   

  	
   

  	
   

  
	
  If to Ceva, Inc.:

  	
  Ceva, Inc.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Attention:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Fax No.:

  	
   

  



 


 


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or to such other person or address as any party shall
specify by notice in writing to the other party.  All such notices, requests, demands, waivers and communications
shall be deemed to have been received on the date on which hand delivered, upon
transmission of the facsimile transmission by the sender and issuance by the
transmitting machine of a confirmation slip confirming that the number of pages
constituting the notice have been transmitted without error, or on the third
business day following the date on which so mailed, except for a notice of
change of address, which shall be effective only upon receipt thereof.  In the case of a notice sent by facsimile
transmission, the sender shall contemporaneously mail a copy of the notice to
the addressee at the address provided for above.  However, such mailing shall in no way alter the time at which the
facsimile notice is deemed received.  In
no event shall the provision of notice pursuant to this Section 11.5
constitute notice for service of process.


11.6.        Severability.  If any provision of this Agreement, any
Ancillary Agreement or the Tax Indemnification Agreement or the application
thereof to any Person or circumstance is determined by a court of competent
jurisdiction to be invalid, void or unenforceable, the remaining provisions
hereof or thereof, or the application of such provision to Persons or
circumstances or in jurisdictions other than those as to which it has been held
invalid or unenforceable, shall remain in full force and effect and shall in no
way be affected, impaired or invalidated thereby, so long as the economic or
legal substance of the transactions contemplated hereby or thereby, as the case
may be, is not affected in any manner adverse to any party.  Upon such determination, the parties shall
negotiate in good faith in an effort to agree upon such a suitable and
equitable provision to effect the original intent of the parties.


11.7.        Force
Majeure.  No party shall be deemed
in default of this Agreement, any Ancillary Agreement or the Tax
Indemnification Agreement to the extent that any delay or failure in the
performance of its obligations under this Agreement, any Ancillary Agreement or
the Tax Indemnification Agreement results from any cause beyond its reasonable
control and without its fault or negligence, such as acts of God, acts of civil
or military authority, embargoes, epidemics, war, riots, insurrections, fires,
explosions, earthquakes, floods, unusually severe weather conditions, labor
problems or unavailability of parts, or, in the case of computer systems, any
failure in electrical or air conditioning equipment.  In the event of any such excused delay, the time for performance
shall be extended for a period equal to the time lost by reason of the delay.


11.8.        Publicity.  Prior to the Distribution, each of Ceva,
Inc. and DSPGI shall consult with each other prior to issuing any press
releases or otherwise making public statements with respect to the Separation
and the Distribution or any of the other transactions contemplated hereby and
prior to making any filings with any Governmental Authority with respect
thereto.


11.9.        Expenses.  Except as expressly set forth in this
Agreement (including Section 3.1(h) hereof) or in any Ancillary Agreement or in
the Tax Indemnification Agreement, whether or not the Distribution is
consummated, each party hereto shall bear its own respective third party fees,
costs and expenses paid or incurred in connection with the Distribution.


11.10.      Headings.  The article, section and paragraph headings
in this Agreement and in the Ancillary Agreements and the Tax Indemnification
Agreement are for reference purposes 


 


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only and shall not affect in any way the meaning or
interpretation of this Agreement, any Ancillary Agreement or the Tax
Indemnification Agreement.


11.11.      Waivers
of Default.  Waiver by any party of
any default by the other party of any provision of this Agreement, any
Ancillary Agreement or the Tax Indemnification Agreement shall not be deemed a
waiver by the waiving party of any subsequent or other default, nor shall it
prejudice the rights of the other party.


11.12.      Specific
Performance.  In the event of any
actual or threatened default in, or breach of, any of the terms, conditions and
provisions of this Agreement, any Ancillary Agreement or the Tax
Indemnification Agreement, the party or parties who are or are to be thereby
aggrieved shall have the right to specific performance and injunctive or other
equitable relief of its rights under this Agreement, such Ancillary Agreement
or the Tax Indemnification Agreement, in addition to any and all other rights
and remedies at law or in equity, and all such rights and remedies shall be
cumulative.  The parties agree that the
remedies at law for any breach or threatened breach, including monetary
damages, are inadequate compensation for any loss and that any defense in any
action for specific performance that a remedy at law would be adequate is
waived.  Any requirements for the
securing or posting of any bond with such remedy are waived.


11.13.      Amendments.  No provisions of this Agreement, any
Ancillary Agreement or the Tax Indemnification Agreement shall be deemed
waived, amended, supplemented or modified by any party, unless such waiver,
amendment, supplement or modification is in writing and signed by the
authorized representative of the party against whom it is sought to enforce
such waiver, amendment, supplement or modification.


11.14.      Interpretation.  Words in the singular shall be held to
include the plural and vice versa and words of one gender shall be held to
include the other genders as the context requires.  The terms “hereof,” “herein,” and “herewith” and words of similar
import shall, unless otherwise stated, be construed to refer to this Agreement
(or the applicable Ancillary Agreement or the Tax Indemnification Agreement) as
a whole (including all of the Schedules, Exhibits and Appendices hereto and
thereto) and not to any particular provision of this Agreement (or such
Ancillary Agreement or the Tax Indemnification Agreement).  Article, Section, Exhibit, Schedule and
Appendix references are to the Articles, Sections, Exhibits, Schedules and Appendices
to this Agreement (or the applicable Ancillary Agreement) unless otherwise
specified.  The word “including” and
words of similar import when used in this Agreement (or the applicable
Ancillary Agreement or the Tax Indemnification Agreement) shall mean
“including, without limitation,” unless the context otherwise requires or
unless otherwise specified.  The word
“or” shall not be exclusive.


 


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The parties have caused this Agreement to be executed by
their duly authorized representatives.


 


	
   

  	
  DSP GROUP, INC.

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  DSP GROUP LTD.

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  CEVA, INC.

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  DSP CEVA INC.

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  CORAGE, LTD.

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  



 


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