Document:

Exhibit 10.4

 

CORAGE, LTD. TECHNOLOGY TRANSFER AGREEMENT

This
Technology Transfer Agreement (this “Agreement”), effective as of
_______________, 2002 (the “Effective Date”), is entered into by and between
DSP Group Ltd. (“DSPGL”), an Israeli corporation, and Corage, Ltd. (“Corage”),
an Israeli corporation and a wholly owned subsidiary of DSPGL.

RECITALS

A.            DSPGL is engaged in the business of
designing, manufacturing and marketing high performance digital signal
processing integrated circuit devices for cordless telephone, computer
telephony, voice-over-broadband and other products.

B.            Corage is engaged in the business of
developing and licensing to third parties digital signal processing cores for
the manufacture of integrated circuit devices.

C.            DSPGL owns or otherwise holds
certain intellectual property rights and other assets relating to the digital
signal processing cores described on Exhibit A to this Agreement, which
intellectual property rights and other assets it desires to assign to Corage,
and Corage desires to receive such assignment of intellectual property rights
and other assets from DSPGL, in accordance with the terms and conditions set
forth herein.

AGREEMENTS

Now,
therefore, in consideration of the mutual covenants and the other terms and conditions
contained herein, the Parties (as defined below) hereby agree as follows:

ARTICLE I

DEFINITIONS

In
addition to the capitalized terms defined elsewhere in this Agreement, the
following terms shall have the following meanings:

Section 1.1.            “Additional Necessary Licensed IP”
shall mean all technology, information and materials of any kind, such as designs, development kits, emulators, tools, libraries, test
suites, documentation, parts lists, board layouts, design materials, databases,
know-how, methods, processes, and work in progress, each to the extent that
they are necessary to continue operating the Licensing Business as currently
conducted by the licensing division of DSPGL, but are not included in the
Licensing Business Assets.  The parties
acknowledge and agree that the Additional Necessary Licensed IP does not
include the Licensed IP Modules or Process Information.

Section 1.2.            Affiliate.  “Affiliate” of any Person shall mean a Person that
controls, is controlled by, or is under common control with such Person.  As used herein, “control” of a 

 

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Person means the possession, directly or indirectly,
of the power to direct or cause the direction of the management and policies of
such Person, whether through ownership of voting securities or other interests,
by contract or otherwise.  A Person
shall be deemed an Affiliate only for so long as such control exists.  Notwithstanding the foregoing, DSPGL and
Corage shall not be considered Affiliates of each other, and DSPGL shall not be
deemed to control Corage

Section 1.3.            Combination Agreement.  “Combination Agreement” shall have the
meaning set forth in the Separation Agreement.

Section 1.4.            Confidential Information.  “Confidential Information” shall mean the
Corage Confidential Information or DSPGL Confidential Information, as
applicable.

Section
1.5.            Corage Confidential
Information.  “Corage Confidential Information” shall mean any
and all (a) Existing Cores, Other Transferable Licensing IP, patent applications
and provisional patent applications included in the Transferable Patents, Other
Transferable Assets, Third Party Licenses, Other Contracts and Employee
Proprietary Information Agreements, including all technology, information and
materials included in such items, and (b) other technology, information and
materials related to research, products, services, hardware or software,
inventions, processes, designs, drawings, engineering or other technology which
is supplied or licensed by Corage (in this capacity, the “Disclosing Party”) to
DSPGL (in this capacity, the “Receiving Party”) after the Effective Date and
which is designated in writing as proprietary or confidential (or with a
similar designation) or, if disclosed orally or by demonstration, is designated
as confidential or proprietary at the time of disclosure and summarized in a
writing so designated within thirty (30) days of the initial disclosure.  Corage Confidential Information shall not
include, however, information or material which (i) is or becomes available to
the relevant public other than as a result of a wrongful act or omission by the
Receiving Party, (ii) except with respect to the items described in subsection
(a) above, was available to the Receiving Party (without a duty of confidentiality
owed to the Disclosing Party with respect to such information or material)
prior to its receipt from the Disclosing Party, (iii) becomes available to the
Receiving Party from a Person not otherwise bound by a confidentiality
agreement with the Disclosing Party with respect to such information or
material, or (iv) except with respect to the items described in subsection (a)
above, was independently developed by the Receiving Party.

Section
1.6.            Corage Employees.  “Corage Employees” shall have the meaning
set forth in the Separation Agreement.

Section 1.7.            Corage
Licensed Products.  “Corage
Licensed Products” shall mean digital signal processing
cores designed and developed by or for Corage, its
successors or assigns, and its or their Affiliates, that consist principally of
an Existing Core and that also incorporate one or more of the Licensed Chip
Modules, where such Licensed Chip Modules are bundled with, and are used with,
such Existing Core.

Section 1.8.            Ceva Inc. Technology Transfer
Agreement.  “Ceva Inc. Technology
Transfer Agreement” shall mean the Ceva Inc. Technology Transfer Agreement of
even date herewith by and between Ceva Inc. and DSP Group Inc.

 

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Section
1.9.            Disclosing Party.  “Disclosing
Party” shall have the meaning set forth in Sections 1.5 and 1.10, as
applicable.

Section
1.10.          DSPGL Confidential
Information.  “DSPGL Confidential Information” shall mean any and
all (a) Licensed IP Modules and Process Information and all technology,
information and materials included in such items, and (b) other technology,
information and materials related to research, products, services, hardware or
software, inventions, processes, designs, drawings, engineering or other
technology which is supplied or licensed by DSPGL (in this capacity, the
“Disclosing Party”) to Corage (in this capacity, the “Receiving Party”) after
the Effective Date and which is designated in writing as proprietary or
confidential (or with a similar designation) or, if disclosed orally or by
demonstration, is designated as confidential or proprietary at the time of
disclosure and summarized in a writing so designated within thirty (30) days of
the initial disclosure.  DSPGL
Confidential Information shall not include, however, information or material
which (i) is or becomes available to the relevant public other than as a result
of a wrongful act or omission by the Receiving Party, (ii) except with respect
to the items described in subsection (a) above, was available to the Receiving
Party (without a duty of confidentiality owed to the Disclosing Party with
respect to such information or material) prior to its receipt from the
Disclosing Party, (iii) becomes available to the Receiving Party from a Person
not otherwise bound by a confidentiality agreement with the Disclosing Party
with respect to such information or material, or (iv) except with respect to
the items described in subsection (a) above, was independently developed by the
Receiving Party.

Section
1.11.          DSPGL Products.  “DSPGL
Products” shall mean any products now or hereafter manufactured, sold or
otherwise distributed by, for or under license from DSPGL, its successors and
assigns, or its or their current or future Affiliates.

Section
1.12.          Effective Date.  “Effective
Date” shall have the meaning set forth in the Preamble.

Section
1.13.          Existing Cores.  “Existing
Cores” shall mean the digital signal processing cores set forth on Exhibit A
to this Agreement, including the designs that constitute such cores.

Section 1.14.          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.

Section
1.15.          Licensed Chip Modules.  “Licensed
Chip Modules” shall mean the chip modules set forth in item G.2 of Exhibit G
to this Agreement.

Section
1.16.          Licensed IP Modules.  “Licensed IP Modules” shall mean the Licensed Chip Modules and the
Licensed Software Modules.

Section
1.17.          Licensed Software
Modules.  “Licensed Software Modules” shall mean (a) the software modules set forth
in item G.1 of Exhibit G to this Agreement, and (b) the database set
forth in item G.3 of Exhibit G to this Agreement.

Section 1.18.          Licensing Business.  “Licensing Business” shall have the meaning
set forth in the Separation Agreement.

 

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Section 1.19.          Licensing
Business Assets.  “Licensing Business Assets” shall have the
meaning set forth in the Separation Agreement.

Section
1.20.          Other Contracts.  “Other
Contracts” shall have the meaning set forth in Section 5.2.

Section
1.21.          Other Intangible
Property Rights.  “Other Intangible Property Rights” shall mean
copyrights, rights in mask works (including, but not limited to, the rights
protected under 17 U.S.C. §§ 901-914 or any successor statute), trade secrets,
and other rights with respect to confidential or proprietary information,
database rights, and other intellectual property rights, but specifically
excluding (a) patents and patent applications, (b) trademarks, service marks
and trade names, and registrations of, and applications to register,
trademarks, service marks and trade names, and other rights with respect to
source or origin, (c) Internet domain names and registrations thereof, and (d)
rights with respect to the items in clauses (a) through (c).

Section
1.22.          Other Transferable
Assets.  “Other Transferable Assets” shall have the meaning set
forth in Article IV.

Section
1.23.          Other Transferable
Licensing IP.  “Other Transferable Licensing IP” shall mean the
development kits, emulators, tools, libraries, test suites, documentation,
parts lists, board layouts, design materials, databases, work in progress, and
other technology and materials set forth in items B.3 through B.7 of Exhibit
B to this Agreement.

Section
1.24.          Party or Parties.  “Party” or “Parties” shall mean DSPGL and/or
Corage, including their permitted successors and assigns.

Section
1.25.          Person.  “Person”
shall mean 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.

Section 1.26.          Process
Information.  “Process Information” shall mean the information set forth in item G.4
of Exhibit G to this Agreement.

Section 1.27.          Products Business.  “Products Business” shall have the meaning
set forth in the Separation Agreement.

Section
1.28.          Receiving Party.  “Receiving
Party” shall have the meaning set forth in Sections 1.5 and 1.10, as
applicable.

Section
1.29.          Representative.  “Representative”
shall mean with respect to a Person, any and all directors, officers,
employees, representatives, or agents of such Person.

Section 1.30.          Separation Agreement.  “Separation Agreement” shall mean the
Separation Agreement of even date herewith by and among DSP Group Inc., DSPGL,
Ceva, Inc., DSP Ceva, Inc. and Corage

Section
1.31.          Third Party or Third
Parties.  “Third Party” or “Third Parties” shall mean any entity
other than a Party or an Affiliate of a Party.

 

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Section
1.32.          Third Party Licenses.  “Third
Party Licenses” shall have the meaning set forth in Section 5.1.

Section
1.33.          Transferable Domain
Names.  “Transferable
Domain Names” shall mean the Internet domain
names set forth in part B.2.3 of Exhibit B to this Agreement,
including the registrations of such domain names and any rights under contract
(including agreements with domain name registrars) for registrations of such
domain names.

Section
1.34.          Transferable Licensing
IP.  “Transferable Licensing IP” shall mean (a) the Transferable
Domain Names, Transferable Marks and Transferable Patents, and (b) the Other
Intangible Property Rights in and to (i) the Existing Cores and (ii) the Other
Transferable Licensing IP.

Section
1.35.          Transferable Marks.  “Transferable
Marks” shall mean the trademarks, service marks and trade names set forth in
parts B.2.1 and B.2.2 of Exhibit B to this Agreement, including any
registrations of, and applications to register, such trademarks, service marks
and trade names.

Section
1.36.          Transferable Patents.  “Transferable
Patents” shall mean all patents, patent applications and provisional patent
applications (including any patents issuing in respect of such patent
applications and provisional patent applications) set forth in part B.1 of Exhibit B
to this Agreement, together with any continuations, continuations-in-part, reissues,
divisionals and  renewals of any such
patents and patent applications and any foreign counterparts thereof.

Section
1.37.          Transferring Entities.  “Transferring Entities” shall mean DSPGL and
all of its Affiliates immediately prior to the Effective Date, other than DSP
Group Inc., Corage, Ceva, Inc. and their subsidiaries.

ARTICLE II

TRANSFER OF INTELLECTUAL PROPERTY RIGHTS

Section
2.1.            Assignment.  Except only for the rights retained by, or
granted back to, DSPGL (for itself, its successors and assigns, and its and
their current and future Affiliates) elsewhere in this Agreement, DSPGL, on
behalf of itself and the Transferring Entities, hereby irrevocably assigns,
sells, transfers and sets over to Corage, and its successors and assigns, all
right, title and interest of the Transferring Entities throughout the world in
and to the Transferable Licensing IP, including, but not limited to, all
benefits, privileges, causes of action, and remedies relating to the
Transferable Licensing IP, whether before or hereafter accrued, including, without
limitation, the exclusive rights to (a) apply for and maintain all
registrations, applications, renewals and/or extensions therefor, (b) bring
actions (at law, in equity or otherwise) for all past, present and/or future
infringements or misappropriations thereof, (c) settle and retain proceeds from
any such actions, and (d) grant licenses or other interests therein to any
Person.  The foregoing includes (and
DSPGL, on behalf of itself and the Transferring Entities, hereby irrevocably
assigns, sells, transfers and sets over to Corage, and its successors and
assigns) the goodwill and reputation of the business connected
with and symbolized by the Transferable Marks.  Corage hereby accepts such assignment and
assumes (and shall pay, perform and discharge 

 

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when
due) all obligations with respect to such Transferable Licensing IP accruing
from and after the Effective Date.

Section
2.2.            Retention of Certain
Rights.

(a)           Subject to the terms and conditions of
this Agreement, and notwithstanding Section 2.1, DSPGL retains for itself, its
successors and assigns, and its and their current and future Affiliates (and
Corage hereby grants to DSPGL, its successors and assigns, and its and their
current and future Affiliates), a nonexclusive, perpetual, irrevocable,
royalty-free, worldwide right and license to prepare derivative works of and
otherwise modify, make, reproduce, sell and otherwise distribute, transmit,
import, and otherwise use and exploit the Transferable Licensing IP (except for
the Transferable Domain Names and Transferable Marks) solely in connection with
the design, development, testing, manufacture, sale and other distribution,
support, and other use and exploitation of DSPGL Products, including the right
and license to prepare derivative works of and otherwise modify, make,
reproduce, sell and otherwise distribute, transmit, import, and otherwise use
and exploit any DSPGL Products based on, incorporating or otherwise using all
or any portion of the Transferable Licensing IP.  Subject to the limitations set forth Section 2.2(b) below, the
rights and licenses set forth in this Section 2.2(a) include (i) the right
to disclose the Transferable Licensing IP, provided that such disclosure is
solely for use and exploitation in connection with DSPGL Products and in
accordance with the confidentiality obligations set forth in this Agreement,
and (ii) a license under the Transferable Patents to make, use and sell DSPGL
Products.  Subject to the limitations
set forth in Section 2.2(b) below, the rights and licenses set forth in this
Section 2.2(a) also include the right to grant licenses and/or sublicenses
(with the rights of the licensees and/or sublicensees to grant further
sublicenses) of any of the foregoing rights and licenses, provided that the
licenses and/or sublicenses of (A) the Existing Cores are limited to use and
exploitation as part of DSPGL Products that offer material functions and
features in addition to the Existing Cores themselves, and (B) the Other
Transferable Licensing IP are limited to use and exploitation in connection
with DSPGL Products.

 

(b)           Notwithstanding any rights retained
by or granted to DSPGL or any other Transferring Entity in this Agreement or
otherwise, DSPGL shall not, and shall ensure that each Transferring Entity
shall not, under any circumstances grant any licenses or sublicenses of the
Existing Cores (or disclose the designs of the Existing Cores constituting
Corage Confidential Information) to any third party, during the Noncompetition
Period (as that term is defined in the Separation Agreement) other than in
connection with the contracted design or manufacture of DSPGL Products by third
parties for DSPGL, its successors and assigns, and its and their current and
future Affiliates, provided that DSPGL, its successors and assigns, and its and
their current and future Affiliates shall not provide any such designs of the
Existing Cores to any such third party that has not previously executed a
license/sublicense and/or confidentiality agreement on terms and conditions
generally imposed by DSPGL for its own comparable materials, and provided
further, that such licenses/sublicenses shall cover only the technology or
information reasonably required by such contract designer or manufacturer in
order to manufacture or design, as applicable, the DSPGL Products for DSPGL,
its successors and assigns, and its and their current and future Affiliates.

 

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(c)           During the Noncompetition Period, if
DSPGL desires to license and/or sublicense the Existing Cores to a customer or
potential customer in a manner prohibited by Section 2.2(b), Corage will, at
its option, either (i) negotiate in good faith with DSPGL a non-exclusive,
commercial license permitting such license and/or sublicense on terms and
conditions and at pricing comparable to those Corage makes generally available
to other customers of such Existing Cores, or (ii) negotiate in good faith with
such customer or potential customer such license and/or sublicense on terms and
conditions and at pricing comparable to those Corage makes generally available
to other customers of such Existing Cores.

Section 2.3.            License
of Transferable Marks.  Subject
to the terms and conditions of this Agreement, Corage hereby grants to DSPGL,
its successors and assigns, and its and their current and future Affiliates, a
nonexclusive, perpetual, royalty-free, worldwide license to use the
Transferable Marks solely in connection with DSPGL Products that incorporate,
are based on or otherwise use the Transferable Licensing IP to which such
Transferable Marks relate, including the marketing, advertising, packaging,
sales and distribution of such DSPGL Products. 
DSPGL agrees that all goodwill arising out of the use of the
Transferable Marks by DSPGL, its successors and assigns, and its and their
current and future Affiliates will inure exclusively to the benefit of
Corage  DSPGL agrees to use the
appropriate trademark legend (either “TM” or circled “R”) with the first prominent
use of the Transferable Marks in any marketing, advertising and packaging
materials, to indicate Corage’s ownership of the Transferable Marks in
accordance with the practices DSPGL generally uses to identify the owners of
third-party marks that DSPGL is authorized to use, and, in connection with the
use of the Transferable Marks, to conform substantially with other written
trademark usage guidelines of Corage notified to DSPGL which Corage imposes on
its licensees generally (and with which Corage itself complies), provided that
DSPGL, its successors and assigns, and its and their current and future
Affiliates will have a reasonable opportunity to comply with any new or
modified usage guidelines.  DSPGL agrees
to provide samples of such materials using the Transferable Marks to Corage for
its inspection upon Corage’s reasonable request, and DSPGL shall use
commercially reasonable efforts to remedy any defect in its use of the
Transferable Marks.  If DSPGL fails to
remedy any such defect within sixty (60) days of receiving Corage’s written
notice describing such defect in detail, Corage will have the right, upon
written notice to DSPGL, to suspend DSPGL’s license set forth in this Section
2.3 with respect to the DSPGL materials that contain such defect until such
defect is remedied.

Section
2.4.            Support.  Corage
shall make available (or cause to be made available) to DSPGL, its successors
and assigns, and its and their current and future Affiliates, maintenance and
support services for the Existing Cores and the Other Transferable Licensing IP
solely to support the use and exploitation thereof authorized by this
Agreement.  Such maintenance and support
services shall be of a scope and at rates comparable to those of and at which
Corage makes (or causes to be made) similar maintenance and support services
available to its customers generally or, if it does not make such services
available to its customers generally, it shall do so at market rates.  For purposes of the determination of rates
and other terms and conditions for the maintenance and support services, DSPGL,
its successor and assigns, and its and their Affiliates shall be treated as a
single customer.  The maintenance and
support services provided under this Section 2.4 shall include:

(a)           providing error corrections and other
modifications to the Existing Cores and Other Transferable Licensing IP,
telephone and email support, and assistance in diagnosis 

 

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and remedying of errors
and defects in the Existing Cores and the Other Transferable Licensing IP, each
in accordance with Corage’s standard support policies and practices; and

(b)           providing updates, upgrades, new
versions and successors to the Existing Cores and Other Transferable Licensing
IP, provided that Corage shall have no obligation under this Section 2.4(b)
until the Parties enter into a maintenance and support services agreement
expressly covering such updates, upgrades, new versions or successor versions.  The Parties shall negotiate the terms and
conditions of a maintenance and support services agreement which is reasonably
acceptable to both Parties.

ARTICLE III

EMPLOYEE PROPRIETARY INFORMATION AGREEMENTS

                DSPGL,
on behalf of itself and the Transferring
Entities, hereby transfers and assigns to Corage, and Corage hereby accepts such
transfer and assumes, all of the rights and obligations of the Transferring
Entities under all agreements entered into
by the Corage 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 DSPGL 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
Effective Date by the Corage Employees who become employees of Corage  The Parties shall reasonably cooperate in
connection with any action against any of the Corage Employees.

ARTICLE IV

TRANSFER OF OTHER TRANSFERABLE ASSETS

DSPGL,
on behalf of itself and the Transferring Entities, hereby irrevocably assigns
and transfers to Corage, and its successors and assigns, all of the right,
title and interest of the Transferring Entities in and to the tangible assets,
licenses and permits of its Licensing Business as described on Exhibit D
to this Agreement and such other equipment, furniture and furnishings as are
used principally by the Licensing Business (“Other Transferable Assets”), and
Corage and its successors and assigns hereby accept such assignment and
transfer, and assume (and shall pay, perform and discharge when due) all
obligations in respect to such Other Transferable Assets accruing from and
after the Effective Date.

ARTICLE V

TRANSFER OF CERTAIN RELATED RIGHTS AND OBLIGATIONS

Section
5.1.            Assignment and
Assumption of License Agreements.  DSPGL, on behalf of itself and
the Transferring Entities, hereby assigns and delegates to Corage all of the
rights and obligations of the Transferring Entities under all agreements under
which the Transferring Entities, or any of them, have granted licenses of the
Existing Cores to Third Parties, as described on Exhibit E to this
Agreement (the “Third Party Licenses”), including all rights to royalties,
license fees and other amounts payable thereunder, and Corage hereby accepts
such assignment and delegation, and assumes (and shall pay, perform and
discharge when due) all 

 

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obligations
under the Third Party Licenses accruing from and after the Effective Date.  DSPGL represents and warrants to Corage that
the Transferring Entities and DSP Group Inc. have not granted to any Third
Party any licenses of the Existing Cores except pursuant to the Third Party
Licenses described on Exhibit E to this Agreement.

Section
5.2.            Assignment and
Assumption of Other Contracts.  DSPGL, on behalf of itself and
the Transferring Entities, hereby assigns and delegates to Corage all of the
rights and obligations of the Transferring Entities under the other contracts
relating to the Transferable Licensing IP, Corage Employees and/or the Other
Transferable Assets described on Exhibit F to this Agreement (the
“Other Contracts”), and Corage hereby accepts such assignment and assumes (and
shall pay, perform and discharge when due) all obligations under the Other
Contracts accruing from and after the Effective Date.

ARTICLE VI

LICENSE TO CORAGE OF CERTAIN INTELLECTUAL PROPERTY

Section
6.1.            Licensed Software
Modules. Subject to the terms and conditions of this Agreement, DSPGL, on
behalf of itself and the Transferring Entities, hereby grants to Corage, its
successors and assigns, and its and their current and future Affiliates a
nonexclusive, perpetual, irrevocable, royalty-free, worldwide right and
license, under the intellectual property rights of the Transferring Entities in
and to the Licensed Software Modules and Licensed Chip Modules, to prepare
derivative works of and otherwise modify, reproduce, and otherwise use such
Licensed Software Modules and Licensed Chip Modules solely for internal use by
Corage, its successors and assigns, and its and their current and future
Affiliates, for research and development (e.g., testing, benchmarking, etc.) of
its and their own respective products. 
The parties agree to discuss in good faith broadening the scope of the
license granted in this Section 6.1 to allow Corage to sell and otherwise
distribute particular Licensed Software Modules and Licensed Chip Modules on a
case-by-case basis upon mutually agreeable terms and conditions.

Section
6.2.            VP140 License.  The Parties will negotiate in good faith an
agreement under which VoicePump, Inc., a subsidiary of DSP Group Inc., will
grant to Corage the right to sublicense to third-party semiconductor makers the
right to develop and make semiconductor products based on the design of
VoicePump’s VP140 chip in exchange for a share of revenue (as defined by the
mutual agreement of the Parties) derived by Corage from such sublicenses in an
amount equal to twenty-five percent (25%).

Section 6.3.            Process Information.  Subject to the terms and conditions of this
Agreement, DSPGL, on behalf of the Transferring Entities, hereby grants to
Corage, its successors and assigns, and its and their current and future
Affiliates a nonexclusive, perpetual, irrevocable, royalty-free, worldwide
right and license, under the intellectual property rights of the Transferring
Entities in and to the Process Information, to prepare derivative works of and
otherwise modify, reproduce, and otherwise use such Process Information solely
for internal use by Corage, its successors and assigns, and its and their
current and future Affiliates, for the design and development of its and their
own respective products.

Section 6.4.            Additional
Necessary Licensed IP.

 

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(a)           To the extent, if any,
that there is any Additional Necessary Licensed IP (e.g., development tools
necessary for implementing the Existing Cores), DSPGL, on behalf of itself and
the Transferring Entities, hereby grants to Corage, its successors and assigns,
and its and their current and future Affiliates a nonexclusive, perpetual,
irrevocable, royalty-free, worldwide right and license, under the intellectual
property rights of the Transferring Entities in and to such Additional
Necessary Licensed IP, to prepare derivative works of and otherwise modify,
make, reproduce, sell and otherwise distribute, transmit, import, and otherwise
use and exploit such Additional Necessary Licensed IP to the extent
necessary to continue operating the Licensing Business as currently conducted
and currently contemplated to be conducted by the licensing division of
DSPGL.  Such
right and license includes (i) the right to disclose such Additional Necessary
Licensed IP, provided that such disclosure is in accordance with the
confidentiality obligations set forth in this Agreement, and (ii) the right to
grant licenses and/or sublicenses (with the rights of the licensees and/or
sublicensees to grant further sublicenses) of all or any of the foregoing
rights, in each case, to the extent necessary to continue operating the
Licensing Business as currently conducted and currently contemplated to be
conducted by the licensing division of DSPGL.  Such Additional Necessary
Licensed IP, if any, will be identified by Corage during
the two (2) year period commencing on the Effective Date, and DSPGL shall, from time to time upon the request of Corage during such two
(2) year period and without further
consideration, deliver to Corage, as applicable, copies of any tangible
embodiments of any such Additional Necessary Licensed IP which DSPGL has not
previously delivered to Corage pursuant to this Agreement.

(b)           In addition, to the extent, if any, that any patents owned
or licensed (with the right to sublicense) by the Transferring Entities as of
the Effective Date or any patents issuing in respect of applications owned or
licensed (with the right to sublicense) by the Transferring Entities as of the
Effective Date are necessary to the continued development, distribution and
licensing of the Existing Cores and Other Transferable Licensing IP as
currently carried out and currently contemplated to be carried out by the
licensing division of DSPGL, DSPGL, on behalf of itself and the Transferring
Entities, hereby grants to Corage, its successors and assigns, and its and
their current and future Affiliates, a non-exclusive, perpetual, irrevocable,
royalty-free, worldwide right and license to make, use and sell such Existing
Cores and Other Transferable IP (provided that (i) any sublicense to Corage,
its successors and assigns, and its and their current and future Affiliates of
any patents licensed to the Transferring Entities shall be subject to any
restrictions and other terms and conditions of the license to the Transferring
Entities or under which the Transferring Entities have the right to grant such
sublicense and, without limitation of the generality of the foregoing, shall be
subject to Corage’s making any payments required by the sublicense or the
exercise of rights thereunder, and (ii) Corage, its successors and assigns, and
its and their current and future Affiliates indemnify and hold harmless (and
shall indemnify and hold harmless) the Transferring Entities from any damages
or other liabilities resulting from or relating to any breach of any terms and
conditions of the license or sublicense by Corage, its successors and assigns,
and its and their current and future Affiliates).

 

10

 

ARTICLE VII

CONSIDERATION

                In partial consideration of the assignments and
licenses set forth herein, as of the Effective Date Corage has issued and/or
will issue to DSPGL shares of its Common Stock in accordance with the
Separation Agreement.

ARTICLE VIII

CONFIDENTIALITY

Section
8.1.            Disclosure Limitation.  Each
Party (as Receiving Party) shall use the same care and measures to protect the
confidentiality of the Confidential Information of the other Party (as
Disclosing Party) as the Receiving Party uses for its own confidential or
proprietary information or material of a similar nature, but no less than a
reasonable degree of care.  Such
measures shall include instructing and requiring all recipients of Confidential
Information to maintain the confidentiality of such Confidential Information
and restricting disclosure of such Confidential Information to those
Representatives of the Receiving Party and its Affiliates, its and their
contractors, suppliers and licensees, and other authorized third parties who
have a “need to know” consistent with the purposes for which such Confidential
Information is disclosed.  The Receiving
Party further agrees not to remove or destroy any proprietary rights or
confidentiality legends or markings placed upon any documentation or other
materials.  Nothing in the foregoing
will preclude the Receiving Party from performing its obligations or exercising
its rights under this Agreement, including, without limitation, any disclosure
inherent in any commercial activities authorized by this Agreement.

Section
8.2.            Permitted Disclosures.  Notwithstanding
Section 8.1, the Receiving Party may disclose the Disclosing Party’s
Confidential Information in the event that the Receiving Party is required (by
the disclosure requirements of any rule, regulation, or form of any
Governmental Authority or by interrogatories, requests for information or
documents by any Governmental Authority or other Person in legal proceedings,
subpoenas, civil investigative demands, or other similar processes) to disclose
such Confidential Information, provided that the Receiving Party so required
shall provide the Disclosing Party with prompt written notice of any such
requirement so that the Disclosing Party may object to production and seek a
protective order or other appropriate remedy, and/or waive compliance with the
provisions of this Agreement.  If the Disclosing
Party objects to production and seeks a protective order or other appropriate
remedy, the Receiving Party shall exercise commercially reasonable efforts (at
the sole expense of the Disclosing Party) to cooperate, including, without
limitation, by cooperating with the Disclosing Party to obtain an appropriate
protective order or other reasonable assurance that confidential treatment will
be accorded such Confidential Information.

ARTICLE IX

WARRANTY AND DISCLAIMERS

Section
9.1.            Authority.  Each
of DSPGL and Corage hereby represents and warrants to the other that it has the
corporate authority to enter into and perform its obligations under this
Agreement, and its execution, delivery and performance of this Agreement have
been duly and validly authorized.

 

11

 

Section 9.2.            Sufficiency.  DSPGL,
on behalf of itself and the Transferring Entities,  hereby represents and warrants to Corage that:

(a)           the Transferable Licensing IP (together with the Transferable
Licensing IP under the Ceva Inc. Technology Transfer Agreement) constitutes all
of the intellectual property assets of the Transferring Entities and DSP Group
Inc. that are used principally in the Licensing Business (as opposed to the
Products Business) as currently conducted by the licensing division of the
Transferring Entities and DSP Group Inc.;

(b)           the assignments, licenses and other rights granted by the
Transferring Entities to Corage under this Agreement (together with the
assignments, licenses and other rights granted by DSP Group Inc. to Ceva Inc.
under the Ceva Inc. Technology Transfer Agreement) accord to Corage and Ceva
Inc. the rights (as between the Transferring Entities and DSP Group Inc., on
one hand, and Corage and Ceva Inc., on the other hand) with respect to the
intellectual property assets of the Transferring Entities and DSP Group Inc.
that are necessary for continued operation of the Licensing Business as
currently conducted by the licensing division of the Transferring Entities and
DSP Group Inc.;

(c)           the assignment and delivery of the Existing Cores, Other
Transferable Licensing IP, Transferable Domain Names, Transferable Marks,
Transferable Patents, and Other Transferable Assets to Corage pursuant to this
Agreement (together with the assignment and delivery of such assets to Ceva,
Inc. pursuant to the Ceva Inc. Technology Transfer Agreement) has vested or
will vest good title to such assets free and clear of all material liens,
mortgages, pledges, security interests, prior assignments and similar
encumbrances; and

(d)           the Other Contracts (together with
the Other Contracts under the Ceva Inc. Technology Transfer Agreement) include all of the licenses under which the Transferring Entities and
DSP Group Inc. have obtained from third parties designs, development
kits, emulators, tools, libraries, test suites, documentation, parts lists,
board layouts, design materials, databases, know-how, methods, processes and
work in progress used principally in the Licensing Business (as opposed to the
Products Business) as currently conducted by the licensing division of Transferring Entities and DSP Group Inc.

(e)           DSPGL’s sole and exclusive liability, and Corage’s sole
and exclusive remedy, for any breach by DSPGL of the warranties set forth in
this Section 9.2 will be that (i) the DSPGL will assign or license, and will
cause the Transferring Entities to assign or license, to Corage, at no cost to
Corage, any omitted assets to the extent necessary for DSPGL to achieve
compliance with such warranties or DSPGL will obtain, or will cause the
Transferring Entities to obtain, for Corage, at no cost to Corage, a reasonable
substitute to such omitted assets, and (ii) if DSPGL fails to achieve such
compliance within a reasonable period of time following receipt of notice of
such breach from Corage, DSPGL will pay the direct damages resulting from such
breach.  The rights and remedies set
forth herein shall not be cumulative with those for breach of Section 11.2(b).

Section
9.3.            Limitation of
Warranties.  EXCEPT AS EXPRESSLY PROVIDED IN THIS ARTICLE IX, ALL
OF THE ASSETS, RIGHTS, TECHNOLOGY, AND OTHER INFORMATION AND MATERIALS
ASSIGNED, LICENSED OR OTHERWISE 

 

12

 

CONVEYED IN CONNECTION
WITH THIS AGREEMENT ARE PROVIDED “AS IS.” 
NEITHER PARTY MAKES, AND NEITHER PARTY RECEIVES, ANY OTHER WARRANTIES,
WHETHER EXPRESS, IMPLIED, STATUTORY, OR OTHERWISE, INCLUDING, WITHOUT
LIMITATION, ANY WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR
PURPOSE, OR NON-INFRINGEMENT OF THIRD-PARTY RIGHTS.  WITHOUT LIMITATION OF THE GENERALITY OF THE FOREGOING, NEITHER
PARTY MAKES, OR SHALL BE DEEMED TO MAKE, ANY REPRESENTATION OR WARRANTY THAT
THE USE OR EXPLOITATION OF ANY PRODUCT WILL BE FREE FROM INFRINGEMENT OF ANY
INTELLECTUAL PROPERTY RIGHT OTHER THAN THE RIGHTS EXPRESSLY GRANTED
HEREIN.  THE FOREGOING WILL NOT
SUPERSEDE OR LIMIT IN ANY WAY ANY REPRESENTATIONS OR WARRANTIES EXPRESSLY MADE
BY THE PARTIES IN THE SEPARATION AGREEMENT OR THE COMBINATION AGREEMENT.

ARTICLE X

LIMITATION OF LIABILITY

NOTWITHSTANDING
ANYTHING HEREIN TO THE CONTRARY, NEITHER PARTY SHALL HAVE ANY LIABILITY
WHATSOEVER FOR ANY INCIDENTAL, INDIRECT, CONSEQUENTIAL, PUNITIVE, OR SPECIAL
DAMAGES OF ANY KIND, OR ANY LOSS OF REVENUE OR PROFITS, LOSS OF BUSINESS, OR
LOSS OF DATA, ARISING OUT OF OR RELATED TO THIS AGREEMENT OR THE SUBJECT MATTER
HEREOF (OR THE CEVA INC. TECHNOLOGY TRANSFER AGREEMENT OR THE PROVISIONS OF THE
SEPARATION AGREEMENT RELATED TO THIS AGREEMENT OR THE CEVA INC. TECHNOLOGY
TRANSFER AGREEMENT), HOWEVER CAUSED AND REGARDLESS OF THE THEORY OF LIABILITY
(INCLUDING CONTRACT, TORT, OR OTHERWISE), EVEN IF INFORMED IN ADVANCE OF THE
POSSIBILITY OF SUCH DAMAGES.  IN
ADDITION, IN NO EVENT WILL THE AGGREGATE LIABILITY OF EITHER PARTY AND ITS
AFFILIATES (INCLUDING, IN THE CASE OF DSPGL, DSP GROUP, INC.) ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE SUBJECT MATTER
HEREOF (OR THE CEVA INC. TECHNOLOGY TRANSFER AGREEMENT OR THE PROVISIONS OF THE
SEPARATION AGREEMENT RELATED TO THIS AGREEMENT OR THE CEVA INC. TECHNOLOGY
TRANSFER AGREEMENT) CUMULATIVELY EXCEED TEN MILLION US DOLLARS
($10,000,000).  THE FOREGOING WILL NOT
SUPERSEDE OR LIMIT IN ANY WAY THE RIGHTS AND OBLIGATIONS OF THE PARTIES UNDER
THE COMBINATION AGREEMENT.

ARTICLE XI

OTHER AGREEMENTS

Section
11.1.          No Rights to Updates.  Except as otherwise expressly provided in
this Agreement, (a) the assets, rights, technology, and other information and
materials assigned, licensed or otherwise conveyed by each Party under this
Agreement, including the Existing Cores, the Other Transferable Licensing IP,
the Licensed IP Modules and the Process Information, are assigned, licensed and
otherwise conveyed as such assets, rights, technology, and other information
and materials exist as of the Effective Date, and (b) each Party retains all
right, title and interest in and to any modifications made by or for such
Party, and shall have no 

 

 

13

 

obligation to provide
such modifications to the other Party. 
In addition, neither Party assumes any obligations other than those
expressly set forth in this Agreement. 
Without limitation of the generality of the foregoing, neither Party is
obligated to provide any consulting or technical assistance except as otherwise
provided herein.

Section
11.2.          Further Assurances.

(a)           At any time and from time to time
after the Effective Date, at the request of a Party, the other Party shall
execute and deliver such written instruments and extend such other cooperation
as may be necessary in the reasonable opinion of the other Party to effect,
evidence, record or perfect any of the assignments, transfers, licenses and
other rights (including retentions thereof) set forth in this Agreement,
including execution and acknowledgement of assignments and other instruments.

(b)           To the extent that DSPGL or any
Transferring Entity retains ownership of any assets or intellectual property
rights used principally in the Licensing Business (as opposed to the Products
Business), but which are not included in the Licensing Business Assets, at the
request of Corage during the two (2) year period commencing on the Effective
Date, DSPGL, on behalf of itself and the Transferring Entities, covenants and
agrees to transfer such assets and intellectual property rights to Corage
without any additional consideration, provided that such additional assets or
intellectual property rights shall be subject to all the rights of DSPGL, its
successors and assigns, and its and their current and future Affiliates set
forth herein, including, without limitation, those set forth in Sections 2.2,
2.3 and 2.4.  The rights and
remedies for breach of this Section 11.2(b) shall be only those set forth in
Section 9.2 and shall not be cumulative with any other rights or remedies.

Section
11.3.          No Obligation to Obtain
New Rights.  Corage acknowledges that, from and after the
Effective Date, except only as set forth above in Section 11.2 and Article
VIII, DSPGL has no obligation to preserve, protect, obtain or enforce any
rights in the Transferable Licensing IP, including, without limitation, any
obligation to register any copyright, to file or prosecute any patent
application, or to bring actions for infringement or misappropriation of any
Transferable Licensing IP.  Neither this
Agreement nor the conduct of either Party under this Agreement imposes or shall
be deemed to impose any such obligation, by implication, estoppel, inference,
or otherwise.

Section
11.4.          Maintenance of
Transferable Licensing IP.  As of the Effective Date, Corage shall
have the sole responsibility to execute and deliver such documents, pay such
maintenance and other fees, and take such other measures as may be necessary or
desirable to preserve, protect, obtain or enforce the Transferable Licensing IP
and Corage’s rights therein, including, without limitation, prosecution and
maintenance of any Transferable Patents, registration and maintenance of any
Transferable Marks and Transferable Domain Names, and registration, renewal and
recordation of any Other Intangible Property Rights, provided that DSPGL shall
assist Corage in connection with the foregoing in accordance with Section 11.2
without any additional consideration but subject to reimbursement of expenses.

Section
11.5.          Delivery.  Upon the Effective Date, DSPGL shall deliver
to Corage (a) the tangible Other Transferable Assets, and (b) to the extent in
DSPGL’s possession, copies of 

 

14

 

tangible embodiments of
the Transferring Entities of the Transferable Licensing IP, Third Party
Licenses, employment agreements of Transferred Employees, intangible Other
Transferable Assets, and Other Contracts. 
Notwithstanding the foregoing, each Party may retain copies of any
assets, technology, and other information and materials assigned, licensed or
otherwise conveyed to the other Party under this Agreement (except for tangible
Other Transferable Assets as to which no copies can be made), solely to the
extent necessary for such Party to exercise the rights expressly granted to such
Party under this Agreement, and subject to the rights and obligations with
respect thereto as set forth in this Agreement.

Section
11.6.          Residuals.  Notwithstanding anything herein to the
contrary, each Party may use residual information for any purpose, including
without limitation use in development, manufacture, promotion, sale and
maintenance of its products and services; provided that this right to residual
information does not represent a license under any patents or copyrights of the
other Party.  The term “residual
information” means any information that is retained in the unaided memories of
a Party’s personnel who have had access to the other Party’s Confidential
Information in accordance with this Agreement. 
An individual’s memory is unaided if the individual has not
intentionally memorized the Confidential Information for the purpose of
retaining and subsequently using or disclosing it.  This Section 11.6 does not imply any exception to, or limitation of,
the obligations of the Parties under Section 6.3 of the Separation Agreement.

Section
11.7.          Interpretation of Rights.  The Parties acknowledge and agree that (a)
any right of a Party granted or referenced herein includes the right (i) to
have such right exercised for the benefit of such Party (e.g., the right to
make includes the right to have made, the right to reproduce includes to right
to have reproduced, etc.), and (ii) to make offers of such right (e.g., a right
to sell includes the right to offer to sell), and (b) the right to distribute
includes the right to distribute through multiple layers of distribution.  In addition, the Parties acknowledge and
agree that (1) an Affiliate of a Party shall have the right to
exercise a right or license granted to such Affiliate hereunder only to the
extent such Party so authorizes, and such Affiliate must be subject to (and
agree to) any terms and conditions of this Agreement applicable to such right
or license (e.g., limitations on use or confidentiality obligations with
respect to the subject matter of such right or license), and (2) a successor or
assign of DSPGL or Corage shall have the right to exercise the rights and
licenses granted to such successor or assign hereunder only if such successor
or assign is subject to (and agrees to be bound by) all of the terms and
conditions of this Agreement, to the same extent as DSPGL or Corage, in
accordance with Section 12.8.

Section
11.8.          Subject to Third Party
Rights.  Notwithstanding anything else in this Agreement,
neither Party shall be obligated to assign, license or otherwise convey, or be
deemed to assign, license or otherwise convey, any assets,
rights, technology, or other information or materials owned by, or
subject to the rights of, a Third Party, or any agreement with a Third Party,
if and to the extent such Party does not have the right so to assign, license
or convey, provided that such Party shall use commercially reasonable efforts
to obtain the consent of the Third Party to any assignment, license or other
conveyance contemplated by this Agreement at no charge to the assignee or
licensee, as applicable (such efforts will include payment of any fees to the
Third Party required to effect the assignment, license or conveyance). Each Party acknowledges and agrees that all assignments, licenses and
other conveyances made hereunder are subject to the Third Party Licenses
granted before the Effective Date.

 

15

 

Section 11.9.          No
Obligation to Bring or Defend Legal Actions.  Neither Party shall have any obligation
hereunder to bring any claim or action against any third party for infringement
or misappropriation of any of the intellectual property rights assigned or
licensed hereunder, or to defend any claim or action brought by a third party
with respect to any such intellectual property rights (including, without
limitation, a claim or action with respect to the validity or enforceability of
any such rights).

Section
11.10.        No Other Rights.  The
assignments, licenses and other conveyances of rights are only those expressly
set forth in this Agreement.  Neither
Party assigns, licenses or otherwise conveys (or shall be deemed to assign,
license or otherwise convey) any rights (whether by implication, estoppel,
inference or otherwise, or by any conduct of a Party under this Agreement)
other than as expressly set forth in this Agreement.

ARTICLE XII

MISCELLANEOUS

Section
12.1.          Relationship of Parties.  Nothing
contained in this Agreement shall be deemed to constitute either Party or any
of its Affiliates the partner, agent, or legal representative of the other
Party or its Affiliates or to create any fiduciary relationship for any purpose
whatsoever.  Except as otherwise
specifically provided in this Agreement, nothing in this Agreement shall confer
on either Party or any of its Affiliates any authority to act for, bind, or
create or assume any obligation or responsibility on behalf of the other Party
or its Affiliates.

Section
12.2.          Notices.  All
notices provided pursuant to this Agreement shall be delivered by personal
delivery, overnight courier, or facsimile, and shall be deemed effective on the
date on which delivery to the intended recipient of the notice was
accomplished.  Such notices shall be
delivered to the following addresses:

If
to DSPGL:                                                                                          If
to Corage:

Moshe Zelnick                                                                                     [Name]

Chief Financial Officer                                                                         [Position]

DSP Group Ltd.                                                                                    Corage,
Ltd.

5 Shenkar Street                                                                                   [address]

Herzeliya 46120 Israel                                                                          [address]

Fax:  972-9-954-1513                                                                             Fax:

Section
12.3.          Choice of 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 (as defined in
the Separation Agreement) or other applicable federal law pursuant to Section
8.10 of the Separation Agreement), 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.  Any
dispute by either Party arising out of or relating to this Agreement shall be
finally settled in accordance with the procedures and terms set forth in
Article VIII of the Separation Agreement.

 

16

 

Section
12.4.          Entire Agreement.  This
Agreement constitutes the entire agreement between the Parties pertaining to
the subject matter hereof and supersedes all previous communications,
agreements, and understandings between the Parties relating to the subject
matter hereof.  Neither Party has entered
into this Agreement in reliance upon any representation, warranty, or
undertaking of the other Party that is not set out or referred to in this
Agreement.  If there is a conflict
between this Agreement and the Separation and Distribution Agreement, the terms
of this Agreement will govern

Section
12.5.          Severability.  Whenever
possible, each provision of this Agreement shall be interpreted in such manner
as to be effective and valid under applicable law, but if any provision of this
Agreement shall be held to be prohibited by or invalid under applicable law,
such provision shall be ineffective only to the extent of such prohibition or
invalidity, without invalidating the remainder of such provision or the
remaining provisions of this Agreement.

Section
12.6.          Headings.  The
section or other headings herein are inserted only for convenience and ease of
reference and are not to be considered in the construction or interpretation of
any provision of this Agreement.  Unless
otherwise stated, references to Sections herein are references to Sections
hereof.

Section
12.7.          Amendments; Waivers.  This
Agreement may be amended, and the taking of any action required hereunder may
be waived, by the written consent of each Party at the time such amendment or
waiver is sought.  No such waiver shall
operate as a waiver of, or estoppel with respect to, any other action.  No failure to exercise, and no delay in
exercising, any right, remedy, or power hereunder shall operate as a waiver
thereof, nor shall single or partial exercise of any right, remedy, or power
hereunder preclude any other or further exercise thereof or the exercise of any
other right, remedy, or power provided herein or by law or at equity.  The waiver of the time for performance of
any act or condition hereunder does not constitute a waiver of the act or
condition itself.

Section
12.8.          Successors; No
Assignment.  Each Party agrees that it will not assign, sell,
delegate, or otherwise transfer, whether voluntarily or involuntarily, any
right or obligation under this Agreement, provided, however, that
either Party (“Assigning Party”) may assign,
sell, delegate and otherwise transfer this Agreement, together with all of the
Assigning Party’s rights and obligations hereunder without such approval in connection with a merger, reorganization, reincorporation into
another state, or sale of all, or substantially all, of such Party’s business
and assets relating to this Agreement, if the assignee agrees to be bound by
all of the terms and conditions of this Agreement to the same extent as the
Assigning Party.  For the purposes of
this Section 12.8, the Parties hereby consent to the transactions contemplated
by the Combination Agreement to occur on the Effective Date, provided that any
successor to Corage is subject to (and has agreed in writing to assume) any and
all obligations, limitations, and liabilities applicable to Corage set forth in
this Agreement.  Any purported
assignment, sale, delegation or other transfer in violation of this Section
12.8 shall be null and void.  Subject to
the foregoing limits on assignment and delegation, this Agreement shall be
binding upon and shall inure to the benefit of the Parties and their respective
successors and assigns.

 

17

 

Section
12.9.          Counterparts.  This
Agreement may be executed in any number of counterparts, each of which shall be
deemed an original and all of which shall constitute one and the same
Agreement.

Section
12.10.        Recovery of Costs and
Attorney’s Fees.  In any legal action, or other proceeding
brought to enforce or interpret the terms of this Agreement, the substantially
prevailing Party shall be entitled to reasonable attorney’s fees and any other
costs incurred in that proceeding in addition to any other relief to which it
is entitled.

Section 12.11.        Third Party Beneficiaries.  The provisions of this Agreement are solely
for the benefit of the Parties (including their permitted successors and
assigns), and not for the benefit of any Third Party.

IN
WITNESS WHEREOF, the Parties have caused this Agreement to be executed by their
duly authorized Representatives as of the day and year first written above.

	
   

  	
   

  DSP
  GROUP LTD.

  
	
   

  	
   

   

  By:

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  

 

 

	
   

  	
  CORAGE,
  LTD.

  
	
   

  	
   

   

  By:

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  

 

 

 

18Exhibit 10.12

 

CHICORY SYSTEMS, INC.

1999 EMPLOYEE
STOCK OPTION/STOCK ISSUANCE PLAN

(amended and restated as of August 4, 2000)

ARTICLE
ONE

GENERAL
PROVISIONS

I.              PURPOSE OF THE PLAN

 

This 1999 Employee Stock
Option/Stock Issuance Plan (amended and restated as of August 4, 2000) is
intended to promote the interests of Chicory Systems, Inc., a Delaware
corporation, by providing eligible persons in the Corporation’s employ or
service with the opportunity to acquire a proprietary interest, or otherwise
increase their proprietary interest, in the Corporation as an incentive for
them to continue in such employ or service.

Capitalized terms herein
shall have the meanings assigned to such terms in the attached Appendix.

II.                                     STRUCTURE
OF THE PLAN

A.            The Plan shall be divided into two
(2) separate equity programs:

(i)            the Option Grant
Program under which eligible persons may, at the discretion of the Plan
Administrator, be granted options to purchase shares of Common Stock, and

(ii)           the Stock Issuance
Program under which eligible persons may, at the discretion of the Plan
Administrator, be issued shares of Common Stock directly, either through the
immediate purchase of such shares or as a bonus for services rendered the
Corporation (or any Parent or Subsidiary).

B.            The provisions of Articles One and
Four shall apply to both equity programs under the Plan and shall accordingly
govern the interests of all persons under the Plan.

III.                                 ADMINISTRATION
OF THE PLAN

A.            The Plan shall be administered by
the Board.  However, any or all
administrative functions otherwise exercisable by the Board may be delegated to
the Committee.  Members of the Committee
shall serve for such period of time as the Board may determine and shall be
subject to removal by the Board at any time. 
The Board may also at any time terminate the functions of the Committee
and reassume all powers and authority previously delegated to the Committee.

 

 

 

B.            The Plan Administrator shall have
full power and authority (subject to the provisions of the Plan) to establish
such rules and regulations as it may deem appropriate for proper administration
of the Plan and to make such determinations under, and issue such
interpretations of, the Plan and any outstanding options or stock issuances
thereunder as it may deem necessary or advisable.  Decisions of the Plan Administrator shall be final and binding on
all parties who have an interest in the Plan or any option grant or stock
issuance thereunder.

IV.                                ELIGIBILITY

A.            The persons eligible to participate
in the Plan are as follows:

(i)            Employees,

(ii)           non-employee
members of the Board or the non-employee members of the board of directors of
any Parent or Subsidiary, and

(iii)          consultants and
other independent advisors who provide services to the Corporation (or any Parent
or Subsidiary).

B.            The Plan Administrator shall have
full authority to determine, (i) with respect to the grants made under the
Option Grant Program, which eligible persons are to receive such  grants, the time or times when those grants
are to be made, the number of shares to be covered by each such grant, the
status of the granted option as either an Incentive Option or a Non-Statutory
Option, the time or times when each option is to become exercisable, the
vesting schedule (if any) applicable to the option shares and the maximum term
for which the option is to remain outstanding, and (ii) with respect to stock
issuances made under the Stock Issuance Program, which eligible persons are to
receive such issuances, the time or times when those issuances are to be made,
the number of shares to be issued to each Participant, the vesting schedule (if
any) applicable to the issued shares and the consideration to be paid by the
Participant for such shares.

C.            The Plan Administrator shall have
the absolute discretion either to grant options in accordance with the Option
Grant Program or to effect stock issuances in accordance with the Stock
Issuance Program.

V.                                    STOCK
SUBJECT TO THE PLAN

A.            The stock issuable
under the Plan shall be shares of authorized but unissued or reacquired Common
Stock.  The maximum number of shares of
Common Stock which may be issued over the term of the Plan shall not exceed One
Million (1,000,000) shares.

B.            Shares of Common Stock subject to
outstanding options shall be available for subsequent issuance under the Plan
to the extent (i) the options expire or terminate for any reason prior to
exercise in full or (ii) the options are cancelled in accordance with the
cancellation-regrant provisions of Article Two.  Unvested shares issued under the Plan and subsequently
repurchased by the Corporation, at the option exercise or direct issue price
paid 

 

 

2

 

per share, pursuant to the Corporation’s repurchase
rights under the Plan shall be added back to the number of shares of Common
Stock reserved for issuance under the Plan and shall accordingly be available
for reissuance through one or more subsequent option grants or direct stock
issuances under the Plan.

C.            Should any change be made to the Common
Stock by reason of any stock split, stock dividend, recapitalization,
combination of shares, exchange of shares or other change affecting the
outstanding Common Stock as a class without the Corporation’s receipt of
consideration, appropriate adjustments shall be made to (i) the maximum number
and/or class of securities issuable under the Plan and (ii) the number and/or
class of securities and the exercise price per share in effect under each
outstanding option in order to prevent the dilution or enlargement of benefits
thereunder.  The adjustments determined
by the Plan Administrator shall be final, binding and conclusive.  In no event shall any such adjustments be
made in connection with the conversion of one or more outstanding shares of the
Corporation’s preferred stock into shares of Common Stock.

 

 

3

 

ARTICLE TWO

OPTION
GRANT PROGRAM

I.              OPTION TERMS

 

Each option shall be
evidenced by one or more documents in the form approved by the Plan
Administrator; provided, however, that each such document shall comply
with the terms specified below.  Each
document evidencing an Incentive Option shall, in addition, be subject to the
provisions of the Plan applicable to such options.

A.            Exercise
Price.

1.             The exercise price per share shall be fixed by the Plan
Administrator in accordance with the following provisions:

(i)            The exercise price
per share shall not be less than eighty-five percent (85%) of the Fair Market
Value per share of Common Stock on the option grant date.

(ii)           If the person to
whom the option is granted is a 10% Stockholder, then the exercise price per
share shall not be less than one hundred ten percent (110%) of the Fair Market
Value per share of Common Stock on the option grant date.

2.             The exercise price shall become immediately due upon
exercise of the option and shall, subject to the provisions of Section I of
Article Four and the documents evidencing the option, be payable in cash or
check made payable to the Corporation. 
Should the Common Stock be registered under Section 12 of the 1934 Act
at the time the option is exercised, then the exercise price may also be paid
as follows:

(i)            in shares of Common
Stock held for the requisite period necessary to avoid a charge to the
Corporation’s earnings for financial reporting purposes and valued at Fair
Market Value on the Exercise Date, or

(ii)           to the extent the
option is exercised for vested shares, through a special sale and remittance
procedure pursuant to which the Optionee shall concurrently provide irrevocable
instructions (A) to a Corporation-designated brokerage firm to effect the
immediate sale of the purchased shares and remit to the Corporation, out of the
sale proceeds available on the settlement date, sufficient funds to cover the
aggregate exercise price payable for the purchased shares plus all applicable
Federal, state and local income and employment taxes required to be withheld by
the Corporation by reason of such exercise and (B) to the Corporation to
deliver the certificates for the purchased shares directly to such brokerage
firm in order to complete the sale.

 

 

4

 

 

Except to the extent such
sale and remittance procedure is utilized, payment of the exercise price for
the purchased shares must be made on the Exercise Date.

B.            Exercise
and Term of Options. 
Each option shall be exercisable at such time or times, during such
period and for such number of shares as shall be determined by the Plan
Administrator and set forth in the documents evidencing the option grant.  However, no option shall have a term in
excess of ten (10) years measured from the option grant date.

C.            Effect of
Termination of Service.

1.             The following provisions shall govern the exercise of
any options held by the Optionee at the time of cessation of Service or death:

(i)            Should the Optionee
cease to remain in Service for any reason other than death, Disability or
Misconduct, then the Optionee shall have a period of three (3) months following
the date of such cessation of Service during which to exercise each outstanding
option held by such Optionee.

(ii)           Should Optionee’s
Service terminate by reason of Disability, then the Optionee shall have a
period of twelve (12) months following the date of such cessation of Service
during which to exercise each outstanding option held by such Optionee.

(iii)          If the Optionee
dies while holding an outstanding option, then the personal representative of
his or her estate or the person or persons to whom the option is transferred
pursuant to the Optionee’s will or the laws of inheritance or the Optionee’s
designated beneficiary or beneficiaries of that option shall have a twelve
(12)-month period following the date of the Optionee’s death to exercise such
option.

(iv)          Under no circumstances,
however, shall any such option be exercisable after the specified expiration of
the option term.

(v)           During the
applicable post-Service exercise period, the option may not be exercised in the
aggregate for more than the number of vested shares for which the option is
exercisable on the date of the Optionee’s cessation of Service.  Upon the expiration of the applicable
exercise period or (if earlier) upon the expiration of the option term, the
option shall terminate and cease to be outstanding for any vested shares for
which the option has not been exercised. 
However, the option shall, immediately upon the Optionee’s cessation of
Service, terminate and cease to be outstanding with respect to any and all
option shares for which the option is not otherwise at the time exercisable or
in which the Optionee is not otherwise at that time vested.

 

 

5

 

(vi)          Should Optionee’s
Service be terminated for Misconduct or should Optionee otherwise engage in
Misconduct while holding one or more outstanding options under the Plan, then
all those options shall terminate immediately and cease to remain outstanding.

2.             The Plan Administrator shall have the discretion,
exercisable either at the time an option is granted or at any time while the
option remains outstanding, to:

(i)            extend the period
of time for which the option is to remain exercisable following Optionee’s
cessation of Service or death from the limited period otherwise in effect for
that option to such greater period of time as the Plan Administrator shall deem
appropriate, but in no event beyond the expiration of the option term, and/or

(ii)           permit the option
to be exercised, during the applicable post-Service exercise period, not only
with respect to the number of vested shares of Common Stock for which such
option is exercisable at the time of the Optionee’s cessation of Service but
also with respect to one or more additional installments in which the Optionee
would have vested under the option had the Optionee continued in Service.

D.            Stockholder
Rights.  The
holder of an option shall have no stockholder rights with respect to the shares
subject to the option until such person shall have exercised the option, paid
the exercise price and become the recordholder of the purchased shares.

E.             Unvested
Shares.  The Plan
Administrator shall have the discretion to grant options which are exercisable
for unvested shares of Common Stock. 
Should the Optionee cease Service while holding such unvested shares,
the Corporation shall have the right to repurchase, at the exercise price paid
per share, any or all of those unvested shares.  The terms upon which such repurchase right shall be exercisable
(including the period and procedure for exercise and the appropriate vesting
schedule for the purchased shares) shall be established by the Plan
Administrator and set forth in the document evidencing such repurchase
right.  The Plan Administrator may not
impose a vesting schedule upon any option grant or the shares of Common Stock
subject to that option which is more restrictive than twenty percent (20%) per
year vesting, with the initial vesting to occur not later than one (1) year
after the option grant date.  However,
such limitation shall not be applicable to any option grants made to
individuals who are officers of the Corporation, non-employee Board members or
independent consultants.

F.             First
Refusal Rights. 
Until such time as the Common Stock is first registered under Section 12
of the 1934 Act, the Corporation shall have the right of first refusal with
respect to any proposed disposition by the Optionee (or any successor in
interest) of any shares of Common Stock issued under the Plan.  Such right of first refusal shall be
exercisable in accordance with the terms established by the Plan Administrator
and set forth in the document evidencing such right.

 

 

6

 

 

G.            Limited
Transferability of Options.  An Incentive Stock Option shall be exercisable only by the
Optionee during his or her lifetime and shall not be assignable or transferable
other than by will or by the laws of inheritance following the Optionee’s
death. A Non-Statutory Option may be assigned in whole or in part during the
Optionee’s lifetime to one or more members of the Optionee’s family or to a
trust established exclusively for one or more such family members or to
Optionee’s former spouse, to the extent such assignment is in connection with
the Optionee’s estate plan or pursuant to a domestic relations order.  The assigned portion may only be exercised
by the person or persons who acquire a proprietary interest in the
Non-Statutory Option pursuant to the assignment. The terms applicable to the
assigned portion shall be the same as those in effect for the option immediately
prior to such assignment and shall be set forth in such documents issued to the
assignee as the Plan Administrator may deem appropriate.  Notwithstanding the foregoing, the Optionee
may also designate one or more persons as the beneficiary or beneficiaries of
his or her outstanding options under the Plan, and  those options shall, in accordance with such designation,
automatically be transferred to such beneficiary or beneficiaries upon the
Optionee’s death while holding those options. 
Such beneficiary or beneficiaries shall take the transferred options
subject to all the terms and conditions of the applicable agreement evidencing
each such transferred option, including (without limitation) the limited time
period during which the option may be exercised following the Optionee’s death.

 

II.            INCENTIVE OPTIONS

 

The terms specified below
shall be applicable to all Incentive Options. 
Except as modified by the provisions of this Section II, all the
provisions of Articles One, Two and Four shall be applicable to Incentive
Options.  Options which are specifically
designated as Non-Statutory Options shall not be subject to the terms of this
Section II.

A.            Eligibility.  Incentive Options may only be granted to
Employees.

B.            Exercise
Price.  The
exercise price per share shall not be less than one hundred percent (100%) of
the Fair Market Value per share of Common Stock on the option grant date.

C.            Dollar
Limitation.  The
aggregate Fair Market Value of the shares of Common Stock (determined as of the
respective date or dates of grant) for which one or more options granted to any
Employee under the Plan (or any other option plan of the Corporation or any
Parent or Subsidiary) may for the first time become exercisable as Incentive
Options during any one (1) calendar year shall not exceed the sum of One
Hundred Thousand Dollars ($100,000).  To
the extent the Employee holds two (2) or more such options which become
exercisable for the first time in the same calendar year, the foregoing
limitation on the exercisability of such options as Incentive Options shall be
applied on the basis of the order in which such options are granted.

D.            10%
Stockholder.  If
any Employee to whom an Incentive Option is granted is a 10% Stockholder, then
the option term shall not exceed five (5) years measured from the option grant
date.

 

 

7

 

III.                                 CORPORATE
TRANSACTION

A.            The shares subject to each option
outstanding under the Plan at the time of a Corporate Transaction shall
automatically vest in full so that each such option shall, immediately prior to
the effective date of the Corporate Transaction, become exercisable for all of
the shares of Common Stock at the time subject to that option and may be
exercised for any or all of those shares as fully-vested shares of Common
Stock.  However, the shares subject to
an outstanding option shall not vest on such an accelerated basis if
and to the extent:  (i) such option is
assumed by the successor corporation (or parent thereof) in the Corporate
Transaction and any repurchase rights of the Corporation with respect to the
unvested option shares are concurrently assigned to such successor corporation
(or parent thereof) or (ii) such option is to be replaced with a cash incentive
program of the successor corporation which preserves the spread existing on the
unvested option shares at the time of the Corporate Transaction and provides
for subsequent payout in accordance with the same vesting schedule applicable
to those unvested option shares or (iii) the acceleration of such option is
subject to other limitations imposed by the Plan Administrator at the time of
the option grant.

B.            All outstanding repurchase rights
shall also terminate automatically, and the shares of Common Stock subject to
those terminated rights shall immediately vest in full, in the event of any
Corporate Transaction, except to the extent: (i) those repurchase rights are
assigned to the successor corporation (or parent thereof) in connection with
such Corporate Transaction or (ii) such accelerated vesting is precluded by
other limitations imposed by the Plan Administrator at the time the repurchase
right is issued.

C.            Immediately following the
consummation of the Corporate Transaction, all outstanding options shall
terminate and cease to be outstanding, except to the extent assumed by the
successor corporation (or parent thereof).

D.            Each option which is assumed in
connection with a Corporate Transaction shall be appropriately adjusted,
immediately after such Corporate Transaction, to apply to the number and class
of securities which would have been issuable to the Optionee in consummation of
such Corporate Transaction, had the option been exercised immediately prior to
such Corporate Transaction.  Appropriate
adjustments shall also be made to (i) the number and class of securities
available for issuance under the Plan following the consummation of such
Corporate Transaction and (ii) the exercise price payable per share under each
outstanding option, provided the aggregate
exercise price payable for such securities shall remain the same.  To the extent the actual holders of the
Corporation’s outstanding Common Stock receive cash consideration for their
Common Stock in consummation of the Corporate Transaction, the successor
corporation may, in connection with the assumption of the outstanding options
under this Plan, substitute one or more shares of its own common stock with a
fair market value equivalent to the cash consideration paid per share of Common
Stock in such Corporate Transaction.

 

 

8

 

E.             The Plan Administrator shall have
the discretion, exercisable either at the time the option is granted or at any
time while the option remains outstanding, to structure one or more options so
that those options shall automatically accelerate and vest in full (and any
repurchase rights of the Corporation with respect to the unvested shares
subject to those options shall immediately terminate) upon the occurrence of a
Corporate Transaction, whether or not those options are to be assumed in the
Corporate Transaction.

F.             The Plan Administrator shall also
have full power and authority, exercisable either at the time the option is
granted or at any time while the option remains outstanding, to structure such
option so that the shares subject to that option will automatically vest on an
accelerated basis should the Optionee’s Service terminate by reason of an
Involuntary Termination within a designated period (not to exceed eighteen (18)
months) following the effective date of any Corporate Transaction in which the
option is assumed and the repurchase rights applicable to those shares do not
otherwise terminate.  Any option so
accelerated shall remain exercisable for the fully-vested option shares until
the expiration or sooner termination of the option term.  In addition, the Plan Administrator may
provide that one or more of the Corporation’s outstanding repurchase rights
with respect to shares held by the Optionee at the time of such Involuntary
Termination shall immediately terminate on an accelerated basis, and the shares
subject to those terminated rights shall accordingly vest at that time.

G.            The portion of any Incentive Option
accelerated in connection with a Corporate Transaction shall remain exercisable
as an Incentive Option only to the extent the applicable One Hundred Thousand
Dollar limitation is not exceeded.  To
the extent such dollar limitation is exceeded, the accelerated portion of such
option shall be exercisable as a Non-Statutory Option under the Federal tax
laws.

H.            The grant of options under the Plan
shall in no way affect the right of the Corporation to adjust, reclassify,
reorganize or otherwise change its capital or business structure or to merge,
consolidate, dissolve, liquidate or sell or transfer all or any part of its
business or assets.

 

IV.           CANCELLATION AND REGRANT OF OPTIONS

 

The Plan Administrator
shall have the authority to effect, at any time and from time to time, with the
consent of the affected option holders, the cancellation of any or all
outstanding options under the Plan and to grant in substitution therefor new
options covering the same or different number of shares of Common Stock but
with an exercise price per share based on the Fair Market Value per share of
Common Stock on the new option grant date.

 

 

9

 

ARTICLE THREE

STOCK
ISSUANCE PROGRAM

I.              STOCK ISSUANCE TERMS

 

Shares of Common Stock
may be issued under the Stock Issuance Program through direct and immediate
issuances without any intervening option grants.  Each such stock issuance shall be evidenced by a Stock Issuance
Agreement which complies with the terms specified below.

A.            Purchase
Price.

1.             The purchase price per share shall be fixed by the Plan
Administrator but shall not be less than eighty-five percent (85%) of the Fair
Market Value per share of Common Stock on the issue date.  However, the purchase price per share of
Common Stock issued to a 10% Stockholder shall not be less than one hundred and
ten percent (110%) of such Fair Market Value.

2.             Subject to the provisions of Section I of Article Four,
shares of Common Stock may be issued under the Stock Issuance Program for any
of the following items of consideration which the Plan Administrator may deem
appropriate in each individual instance:

(i)            cash or check made
payable to the Corporation, or

(ii)           past services
rendered to the Corporation (or any Parent or Subsidiary).

B.            Vesting
Provisions.

1.             Shares of Common Stock issued under the Stock Issuance
Program may, in the discretion of the Plan Administrator, be fully and
immediately vested upon issuance or may vest in one or more installments over
the Participant’s period of Service or upon attainment of specified performance
objectives.  However, the Plan Administrator
may not impose a vesting schedule upon any stock issuance effected under the
Stock Issuance Program which is more restrictive than twenty percent (20%) per
year vesting, with initial vesting to occur not later than one (1) year after
the issuance date.  Such limitation
shall not apply to any Common Stock issuances made to the officers of the
Corporation, non-employee Board members or independent consultants.

2.             Any new, substituted or additional securities or other
property (including money paid other than as a regular cash dividend) which the
Participant may have the right to receive with respect to the Participant’s
unvested shares of Common Stock by reason of any stock dividend, stock split,
recapitalization, combination of shares, exchange of shares or 

 

 

10

 

other change affecting the outstanding Common Stock as
a class without the Corporation’s receipt of consideration shall be issued
subject to (i) the same vesting requirements applicable to the Participant’s
unvested shares of Common Stock and (ii) such escrow arrangements as the Plan
Administrator shall deem appropriate.

3.             The Participant shall have full stockholder rights with
respect to any shares of Common Stock issued to the Participant under the Stock
Issuance Program, whether or not the Participant’s interest in those shares is
vested.  Accordingly, the Participant
shall have the right to vote such shares and to receive any regular cash
dividends paid on such shares.

4.             Should the Participant cease to remain in Service while
holding one or more unvested shares of Common Stock issued under the Stock
Issuance Program or should the performance objectives not be attained with
respect to one or more such unvested shares of Common Stock, then those shares
shall be immediately surrendered to the Corporation for cancellation, and the
Participant shall have no further stockholder rights with respect to those
shares.  To the extent the surrendered
shares were previously issued to the Participant for consideration paid in cash
or cash equivalent (including the Participant’s purchase-money indebtedness),
the Corporation shall repay to the Participant the cash consideration paid for
the surrendered shares and shall cancel the unpaid principal balance of any outstanding
purchase-money note of the Participant attributable to such surrendered shares.

5.             The Plan Administrator may in its discretion waive the
surrender and cancellation of one or more unvested shares of Common Stock (or
other assets attributable thereto) which would otherwise occur upon the
non-completion of the vesting schedule applicable to those shares.  Such waiver shall result in the immediate
vesting of the Participant’s interest in the shares of Common Stock as to which
the waiver applies.  Such waiver may be
effected at any time, whether before or after the Participant’s cessation of
Service or the attainment or non-attainment of the applicable performance
objectives.

C.            First
Refusal Rights. 
Until such time as the Common Stock is first registered under Section 12
of the 1934 Act, the Corporation shall have the right of first refusal with
respect to any proposed disposition by the Participant (or any successor in
interest) of any shares of Common Stock issued under the Stock Issuance Program.  Such right of first refusal shall be
exercisable in accordance with the terms established by the Plan Administrator
and set forth in the document evidencing such right.

II.                                     CORPORATE
TRANSACTION

A.            Upon the occurrence of a Corporate
Transaction, all outstanding repurchase rights under the Stock Issuance Program
shall terminate automatically, and the shares of Common Stock subject to those
terminated rights shall immediately vest in full, except to the extent: (i)
those repurchase rights are assigned to the successor corporation (or parent
thereof) in connection with such Corporate Transaction or (ii) such accelerated
vesting is precluded by other limitations imposed by the Plan Administrator at
the time the repurchase right is issued.

 

 

11

 

B.            The Plan Administrator shall have
the discretionary authority, exercisable either at the time the unvested shares
are issued or any time while the Corporation’s repurchase rights with respect
to those shares remain outstanding, to provide that those rights shall
automatically terminate on an accelerated basis, and the shares of Common Stock
subject to those terminated rights shall immediately vest, in the event the
Participant’s Service should subsequently terminate by reason of an Involuntary
Termination within a designated period (not to exceed eighteen (18) months)
following the effective date of any Corporate Transaction in which those
repurchase rights are assigned to the successor corporation (or parent
thereof).

 

III.           SHARE ESCROW/LEGENDS

 

Unvested shares may, in
the Plan Administrator’s discretion, be held in escrow by the Corporation until
the Participant’s interest in such shares vests or may be issued directly to
the Participant with restrictive legends on the certificates evidencing those
unvested shares.

 

12

 

ARTICLE FOUR

MISCELLANEOUS

I.              FINANCING

 

The Plan Administrator
may permit any Optionee or Participant to pay the option exercise price under
the Option Grant Program or the purchase price for shares issued under the
Stock Issuance Program by delivering a full-recourse, interest bearing
promissory note payable in one or more installments and secured by the
purchased shares.  In no event, however,
may the maximum credit available to the Optionee or Participant exceed the sum
of (i) the aggregate option exercise price or purchase price payable for the
purchased shares (less the par value of those shares) plus (ii) any Federal,
state and local income and employment tax liability incurred by the Optionee or
the Participant in connection with the option exercise or share purchase.

II.                                     EFFECTIVE
DATE AND TERM OF PLAN

A.            The Plan shall become effective when
adopted by the Board, but no option granted under the Plan may be exercised,
and no shares shall be issued under the Plan, until the Plan is approved by the
Corporation’s stockholders.  If such
stockholder approval is not obtained within twelve (12) months after the date
of the Board’s adoption of the Plan, then all options previously granted under
the Plan shall terminate and cease to be outstanding, and no further options
shall be granted and no shares shall be issued under the Plan.  Subject to such limitation, the Plan Administrator
may grant options and issue shares under the Plan at any time after the
effective date of the Plan and before the date fixed herein for termination of
the Plan.

B.            The Plan shall terminate upon the earliest of (i) the expiration of the ten
(10)-year period measured from the date the Plan is adopted by the Board, (ii)
the date on which all shares available for issuance under the Plan shall have
been issued as vested shares or (iii) the termination of all outstanding
options in connection with a Corporate Transaction.  All options and unvested stock issuances outstanding at the time
of a clause (i) termination event shall continue to have full force and effect
in accordance with the provisions of the documents evidencing those options or
issuances.

III.                                 AMENDMENT
OF THE PLAN

A.            The Board shall have complete and
exclusive power and authority to amend or modify the Plan in any or all
respects.  However, no such amendment or
modification shall adversely affect the rights and obligations with respect to options
or unvested stock issuances at the time outstanding under the Plan unless the
Optionee or the Participant consents to such amendment or modification.  In addition, certain amendments may require
stockholder approval pursuant to applicable laws and regulations.

 

 

13

 

 

B.            Options may be granted under the
Option Grant Program and shares may be issued under the Stock Issuance Program
which are in each instance in excess of the number of shares of Common Stock
then available for issuance under the Plan, provided any excess shares actually
issued under those programs shall be held in escrow until there is obtained
stockholder approval of an amendment sufficiently increasing the number of
shares of Common Stock available for issuance under the Plan.  If such stockholder approval is not obtained
within twelve (12) months after the date the first such excess grants or
issuances are made, then (i) any unexercised options granted on the basis of
such excess shares shall terminate and cease to be outstanding and (ii) the
Corporation shall promptly refund to the Optionees and the Participants the
exercise or purchase price paid for any excess shares issued under the Plan and
held in escrow, together with interest (at the applicable Short Term Federal
Rate) for the period the shares were held in escrow, and such shares shall
thereupon be automatically cancelled and cease to be outstanding.

 

IV.           USE OF PROCEEDS

 

Any cash proceeds
received by the Corporation from the sale of shares of Common Stock under the
Plan shall be used for general corporate purposes.

V.            WITHHOLDING

 

The Corporation’s
obligation to deliver shares of Common Stock upon the exercise of any options
granted under the Plan or upon the issuance or vesting of any shares issued
under the Plan shall be subject to the satisfaction of all applicable Federal,
state and local income and employment tax withholding requirements.

VI.           REGULATORY APPROVALS

 

The implementation of the
Plan, the granting of any options under the Plan and the issuance of any shares
of Common Stock (i) upon the exercise of any option or (ii) under the Stock
Issuance Program shall be subject to the Corporation’s procurement of all
approvals and permits required by regulatory authorities having jurisdiction
over the Plan, the options granted under it and the shares of Common Stock
issued pursuant to it.

VII.         NO EMPLOYMENT OR SERVICE RIGHTS

 

Nothing in the Plan shall
confer upon the Optionee or the Participant any right to continue in Service
for any period of specific duration or interfere with or otherwise restrict in
any way the rights of the Corporation (or any Parent or Subsidiary employing or
retaining such person) or of the Optionee or the Participant, which rights are
hereby expressly reserved by each, to terminate such person’s Service at any
time for any reason, with or without cause.

 

14

 

VIII.        FINANCIAL REPORTS

 

The Corporation shall
deliver a balance sheet and an income statement at least annually to each
individual holding an outstanding option under the Plan, unless such individual
is a key Employee whose duties in connection with the Corporation (or any
Parent or Subsidiary) assure such individual access to equivalent information.

 

 

15

 

APPENDIX

The following definitions
shall be in effect under the Plan:

A.            Board shall mean the
Corporation’s Board of Directors.

B.            Code shall mean the
Internal Revenue Code of 1986, as amended.

C.            Committee shall mean a
committee of one (1) or more Board members appointed by the Board to exercise
one or more administrative functions under the Plan.

D.            Common Stock shall mean
the Corporation’s common stock.

E.             Corporate Transaction
shall mean either of the following stockholder-approved transactions to which
the Corporation is a party:

(i)            a merger or
consolidation in which securities possessing more than fifty percent (50%) of
the total combined voting power of the Corporation’s outstanding securities are
transferred to a person or persons different from the persons holding those
securities immediately prior to such transaction, or

(ii)           the sale, transfer
or other disposition of all or substantially all of the Corporation’s assets in
complete liquidation or dissolution of the Corporation.

F.             Corporation shall mean
Chicory Systems, Inc., a Delaware corporation, and any successor corporation to
all or substantially all of the assets or voting stock of Chicory Systems, Inc.
which shall by appropriate action adopt the Plan.

G.            Disability shall mean the
inability of the Optionee or the Participant to engage in any substantial
gainful activity by reason of any medically determinable physical or mental
impairment and shall be determined by the Plan Administrator on the basis of
such medical evidence as the Plan Administrator deems warranted under the
circumstances.

H.            Employee shall mean an
individual who is in the employ of the Corporation (or any Parent or
Subsidiary), subject to the control and direction of the employer entity as to
both the work to be performed and the manner and method of performance.

I.              Exercise Date shall mean
the date on which the Corporation shall have received written notice of the
option exercise.

 

A-1

 

J.             Fair Market Value
per share of Common Stock on any relevant date shall be determined in
accordance with the following provisions:

(i)            If the Common Stock
is at the time traded on the Nasdaq National Market, then the Fair Market Value
shall be the closing selling price per share of Common Stock on the date in
question, as such price is reported by the National Association of Securities
Dealers on the Nasdaq National Market and published in The Wall Street
Journal.  If there is no closing
selling price for the Common Stock on the date in question, then the Fair
Market Value shall be the closing selling price on the last preceding date for
which such quotation exists.

(ii)           If the Common Stock
is at the time listed on any Stock Exchange, then the Fair Market Value shall
be the closing selling price per share of Common Stock on the date in question
on the Stock Exchange determined by the Plan Administrator to be the primary
market for the Common Stock, as such price is officially quoted in the
composite tape of transactions on such exchange and published in The Wall
Street Journal.  If there is no
closing selling price for the Common Stock on the date in question, then the
Fair Market Value shall be the closing selling price on the last preceding date
for which such quotation exists.

(iii)          If the Common Stock
is at the time neither listed on any Stock Exchange nor traded on the Nasdaq
National Market, then the Fair Market Value shall be determined by the Plan
Administrator after taking into account such factors as the Plan Administrator
shall deem appropriate.

K.            Incentive Option shall
mean an option which satisfies the requirements of Code Section 422.

L.             Involuntary
Termination shall mean the termination of the Service of any
individual which occurs by reason of:

(i)            such individual’s
involuntary dismissal or discharge by the Corporation for reasons other than
Misconduct, or

(ii)           such individual’s
voluntary resignation following (A) a change in his or her position with the
Corporation which materially reduces his or her duties and responsibilities or
the level of management to which he or she reports, (B) a reduction in his or
her level of compensation (including base salary, fringe benefits and target
bonus under any corporate-performance based bonus or incentive programs) by
more than fifteen percent (15%) or (C) a relocation of such individual’s place
of employment by more than fifty (50) miles, provided and only if such
change, reduction or relocation is effected without the individual’s consent.

 

 

A-2

 

M.           Misconduct shall mean the
commission of any act of fraud, embezzlement or dishonesty by the Optionee or
Participant, any unauthorized use or disclosure by such person of confidential
information or trade secrets of the Corporation (or any Parent or Subsidiary),
or any other intentional misconduct by such person adversely affecting the
business or affairs of the Corporation (or any Parent or Subsidiary) in a
material manner.  The foregoing
definition shall not be deemed to be inclusive of all the acts or omissions
which the Corporation (or any Parent or Subsidiary) may consider as grounds for
the dismissal or discharge of any Optionee, Participant or other person in the
Service of the Corporation (or any Parent or Subsidiary).

N.            1934 Act shall mean the
Securities Exchange Act of 1934, as amended.

O.            Non-Statutory Option
shall mean an option not intended to satisfy the requirements of Code Section
422.

P.             Option Grant Program
shall mean the option grant program in effect under the Plan.

Q.            Optionee shall mean any
person to whom an option is granted under the Plan.

R.            Parent shall mean any
corporation (other than the Corporation) in an unbroken chain of corporations
ending with the Corporation, provided each corporation in the unbroken chain (other
than the Corporation) owns, at the time of the determination, stock possessing
fifty percent (50%) or more of the total combined voting power of all classes
of stock in one of the other corporations in such chain.

S.             Participant shall mean
any person who is issued shares of Common Stock under the Stock Issuance
Program.

T.            Plan shall mean the
Corporation’s 1999 Employee Stock Option/Stock Issuance Plan (as amended and
restated as of August 4, 2000), as set forth in this document.

U.            Plan Administrator shall
mean either the Board or the Committee acting in its capacity as administrator
of the Plan.

V.            Service shall mean the
provision of services to the Corporation (or any Parent or Subsidiary) by a
person in the capacity of an Employee, a non-employee member of the board of
directors or a consultant or independent advisor, except to the extent
otherwise specifically provided in the documents evidencing the option grant.

W.           Stock Exchange shall mean
either the American Stock Exchange or the New York Stock Exchange.

X.            Stock Issuance Agreement
shall mean the agreement entered into by the Corporation and the Participant at
the time of issuance of shares of Common Stock under the Stock Issuance
Program.

 

 

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Y.            Stock Issuance Program
shall mean the stock issuance program in effect under the Plan.

Z.            Subsidiary shall mean any
corporation (other than the Corporation) in an unbroken chain of corporations
beginning with the Corporation, provided each corporation (other than the last
corporation) in the unbroken chain owns, at the time of the determination,
stock possessing fifty percent (50%) or more of the total combined voting power
of all classes of stock in one of the other corporations in such chain.

AA.        10% Stockholder shall
mean the owner of stock (as determined under Code Section 424(d)) possessing
more than ten percent (10%) of the total combined voting power of all classes
of stock of the Corporation (or any Parent or Subsidiary).

 

 

A-4

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