DSPG DSP Group Inc

ITEM 5.02. DEPARTURE OF DIRECTORS OR CERTAIN OFFICERS; ELECTION OF DIRECTORS; APPOINTMENT OF CERTAIN OFFICERS; COMPENSATORY ARRANGEMENTS OF CERTAIN OFFICERS

 

On March 2, 2021, the Compensation Committee (the “Committee”) of the Board of Directors (the “Board”) of DSP Group, Inc. (the “Company”) approved a 2021 Performance-Based Bonus Plan for the Chief Executive Officer (Ofer Elyakim), Chief Financial Officer (Dror Levy) and Chief Business Officer (Tali Chen) of the Company (individually, a “Plan” and collectively, the “Plans”). Each of the Plans is effective as of January 1, 2021.

 

The following is a description of the Plans provided pursuant to Paragraph 10(iii) to Item 601 of Regulation S‑K, which requires a written description of a compensatory plan when there is no formal document containing the compensation information.

 

Pursuant to the Plans, the payment of bonuses is based upon the Company’s achievement of four separate components, three of which are based on business objectives and one is at the discretion of the Committee. Each component has a specified weighting, and each Plan has different targets. No bonus would be payable based on the achievement of the business objective components if the Company’s 2021 earnings before interest, taxes, depreciation and amortization (“EBITDA”) are less than a specified amount set forth in the Plans as determined by the Committee; provided the discretionary component remains at the Committee’s discretion.

 

The cap for the bonus payout under the Plan for the Chief Executive Officer is 2.0x of his annual base salary, the cap for the Chief Financial Officer is 1.4x of his annual base salary and the cap for the Chief Business Officer is 1.2x of her annual base salary.

 

Other than under the circumstances whereby there is a change of control transaction involving the Company, or termination of employment under specified circumstances as set forth in the employment agreement, payment of bonuses (if any) under the Plans is to be made in the following year. Any such bonuses would be paid in cash in a single lump sum, subject to payroll taxes and tax withholdings.

 

In the event of termination of employment of the Chief Executive Officer, Chief Financial Officer or Chief Business Officer during 2021 by (i) any one of them (X) after complying with the advance notice provision in his or her respective employment agreement, or (Y) for good reason (as defined in their respective employment agreement), or (ii) the Company without cause (as defined in their respective employment agreement), the bonus under their respective Plans would be determined on the following basis: (a) all numbers under the “Target” column of the Plans would be reduced by a percentage equal to the percent of the year remaining after the date of termination of employment, and (b) for the Chief Executive Officer, the 1.0 and 2.0 multiplier under the “Target” column of the Plan would be multiplied by his annual base salary for the part of the year prior to the date of termination of employment, (c) for the Chief Financial Officer, the 0.7 and 1.4 multiplier under the “Target” column of the Plan would be multiplied by his annual base salary for the part of the year prior to the date of termination of employment, and (d) (c) for the Chief Business Officer, the 0.6 and 1.2 multiplier under the “Target” column of the Plan would be multiplied by her annual base salary for the part of the year prior to the date of termination of employment. In the event of a “change of control” (as defined in their respective employment agreements) and termination of employment thereafter, the Chief Executive Officer, Chief Financial Officer and Chief Business Officer shall be entitled to an annual bonus at the higher of (a) 1.0 of “Target” for the Chief Executive Officer, an annual bonus at 0.7 of “Target” for the Chief Financial Officer, and an annual bonus at 0.6 of “Target” for the Chief Business Officer, or (b) the pro rata achievement of the annual bonus in accordance with the calculation for the period up to the date of termination for each of them pursuant to the terms of their respective Plans.

 

 

The following is a more detailed description of the Plans as applicable to the Company’s Chief Executive Officer, Chief Financial Officer and Chief Business Officer.

 

 

 

 

 

Due to their strategic significance, the Company believes that the disclosure of the 2021 Revenue Target, the 2022 Revenue Target, the 2021 Non-GAAP Gross Margin targets and the 2021 EBITDA targets would cause future competitive harm to the Company and therefore are not disclosed.

 

 

 

Vesting for the PSU Grant is triggered immediately after either Performance Criteria I or Performance Criteria II is met and the Corporation’s independent auditors complete its audit of the Corporation’s financial results for fiscal year 2021. In the event vesting for the PSU Grant is triggered, 25% of the PSUs shall vest on the first year anniversary of March 1, 2021 with the remaining PSUs vesting 6.25% quarterly thereafter.

 

In the event of a termination by the Corporation “without Cause” or resignation by Mr. Elyakim for “Good Reason” that is either within 6 months prior to, or 12 months following, a “change of control” (as such terms are defined in Mr. Elyakim’s employment agreement) prior to December 31, 2021, Mr. Elyakim shall be entitled to earn his PSU grant based on the higher of  (a) PSUs based on Performance Criteria I at 100%, or (b) in the event actual revenues achieved by the Corporation on a pro-rated basis exceed Performance Criteria I on a pro-rated basis, then linear payout up to Performance Criteria II shall apply.

 

The PSU Grant is made pursuant to the terms and conditions of the Company’s 2012 Stock Incentive Plan (the “Plan”).

 

Due to their strategic significance, the Company believes that the disclosure of the various performance goals of the PSU Grant would cause future competitive harm to the Company and therefore are not disclosed.

 

The foregoing description of the PSU Grant is qualified in its entirety by reference to the complete text of the PSU agreement for such award which is attached as Exhibit 10.1 to this Current Report on Form 8-K and is incorporated herein by reference.