UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

SCHEDULE 14A INFORMATION

Proxy Statement Pursuant to Section 14(a) of the

of the Securities Exchange Act of 1934

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DSP Group, Inc.

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DSP GROUP, INC.

Notice of Annual Meeting of Stockholders

To Be Held May 19, 200816, 2011

To the Stockholders of DSP GROUP, INC.:

NOTICE IS HEREBY GIVEN that the annual meeting of stockholders of DSP Group, Inc., a Delaware corporation, will be held at the InterContinental New York MarriottBarclay, 111 East Side Hotel, 525 Lexington Avenue,84^th Street, New York City, New York, on Monday, May 19, 2008,16, 2011, at 8:30 a.m., local time, for the following purposes:

1.Election of Directors. To elect two Class II directors, Yair Seroussi and Yair Shamir, as specifically named in the attached proxy statement, to serve until the 20112014 annual meeting of stockholders or until his successor istheir successors are elected and qualified;

2.Amendment and Restatement of the 1993 Employee Stock Purchase Plan. To approve an amendment and restatement to the Company’s 1993 Employee Stock Purchase Plan to increase the number of shares of common stock reserved for issuance thereunder from 2,300,000 shares to 2,800,000 shares;

3.Amendment and Restatement of the 1993 Director Stock Option Plan. To ratify and approve an amendment and restatement of the Company’s 1993 Director Stock Option Plan to increase the number of shares of common stock reserved for issuance thereunder from 1,380,8751,680,875 shares to 1,680,875 shares;

3.Amendment and Restatement of the 1993 Employee Stock Purchase Plan. To ratify and approve an amendment and restatement to the Company’s 1993 Employee Stock Purchase Plan to increase the number of shares of common stock reserved for issuance thereunder from 1,000,000 shares to 1,500,000 shares;1,980,875;

4.Selection of Independent Auditors. To ratify the appointment of Kost Forer Gabbay & Kasierer, a member of Ernst & Young Global, as our independent auditors for the year ending December 31, 2008;2011;

5.Compensation of the named executive officers. To approve, in a non-binding vote, the compensation of the Company’s named executive officers;

6.Frequency of Executive Compensation Advisory Vote. To recommend, in a non-binding vote, whether a non-binding stockholder vote to approve the compensation of the Company’s named executive officers should occur every one, two or three years; and

5.7. To transact such other business as may properly come before the annual meeting and any adjournment or postponement thereof.

The foregoing items of business are more fully described in the proxy statement which is attached and made a part hereof.

Our board of directors has fixed the close of business on March 28, 200818, 2011 as the record date for determining the stockholders entitled to notice of and to vote at the annual meeting and any adjournment or postponement thereof.

Whether or not you expect to attend the annual meeting in person, you are urged to mark, sign, date and return the enclosed proxy card as promptly as possible in the postage-prepaid envelope provided to ensure your representation and the presence of a quorum at the annual meeting. Should you receive more than one proxy because your shares are registered in different names and addresses, each proxy should be returned to ensure that all of your shares will be voted. If you send in your proxy card and then decide to attend the annual meeting to vote your shares in person, you may still do so. Your proxy is revocable in accordance with the procedures set forth in the proxy statement.

Santa Clara,San Jose, California

April 1, 20086, 2011

Mailed to Stockholders

on or about April 10, 20086, 2011

DSP GROUP, INC.

2580 North First Street, Suite 460

San Jose, CA 95131

PROXY STATEMENT

FOR 20082011 ANNUAL MEETING OF STOCKHOLDERS

General Information

This proxy statement is furnished to the stockholders of DSP Group, Inc., a Delaware corporation, in connection with the solicitation by our board of directors of proxies in the accompanying form for use in voting at the annual meeting of stockholders to be held on May 19, 2008,16, 2011, at 8:30 a.m., local time, at theInterContinental New York MarriottBarclay, 111 East Side Hotel, 525 Lexington Avenue,84^th Street, New York City, New York, and any adjournment or postponement thereof. The shares represented by proxies received, properly marked, dated, executed and not revoked will be voted at the annual meeting.

Solicitation, Record Date and Voting Procedures

The solicitation of proxies will be conducted by mail and we will bear all attendant costs. These costs will include the expense of preparing and mailing proxy materials for the annual meeting and reimbursements paid to brokerage firms and others for their expenses incurred in forwarding solicitation material regarding the annual meeting to beneficial owners of our common stock. We may conduct further solicitation personally, telephonically or by facsimile through our officers, directors and regular employees, none of whom will receive additional compensation for assisting with the solicitation. We have retained the services of D.F. King,MacKenzie Partners, Inc., a professional proxy solicitation firm, to assist in the solicitation of proxies; and we will pay approximately $8,000$12,500 for its services, in addition to a fee of $5 per call and reimbursement of its out-of-pocket expenses.

The close of business on March 28, 200818, 2011 has been fixed as the record date for determining the holders of shares of our common stock entitled to notice of and to vote at the annual meeting. As of the close of business on the record date, we had 29,434,00023,375,448 shares of common stock outstanding and entitled to vote at the annual meeting. The presence at the annual meeting of a majority of these shares of our common stock, either in person or by proxy, will constitute a quorum for the transaction of business at the annual meeting. An automated system administered by our transfer agent will tabulate votes cast by proxy, and a representative from our transfer agent will act as the inspector of elections to tabulate votes cast in person at the annual meeting. Each outstanding share of common stock on the record date is entitled to one vote on all matters.

Under the General Corporation Law of the State of Delaware, an abstaining vote and a broker “non-vote” are counted as present and are, therefore, included for purposes of determining whether a quorum of shares is present at the annual meeting. Abstentions are included in determining the number of shares voted on the proposals submitted to stockholders (other than the election of directors) and will have the same effect as a “no” vote on such proposals. A broker “non-vote” occurs when a nominee holding shares for a beneficial owner does not vote on a particular matter because the nominee does not have the discretionary voting power with respect to that matter and has not received instructions from the beneficial owner. Broker “non-votes,” and shares as to which proxy authority has been withheld with respect to any matter, are generally not deemed to be entitled to vote for purposes of determining whether stockholders’ approval of that matter has been obtained. Pursuant to New York Stock Exchange (“NYSE”) Rule 452, the uncontested election of directors is no longer a routine matter and, therefore, may not be voted upon by brokers without instruction from beneficial owners. Consequently, proxies submitted by brokers for shares beneficially owned by other persons may not, in the absence of specific instructions from such beneficial owners, vote the shares in favor of a nominee or withhold votes from a director nominee at the brokers’ discretion.

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With respect to our proposal 1 of this proxy statement, theeach director nominee will be elected by a plurality of the votes of shares of our common stock represented and voted at the annual meeting, and abstentions and broker “non-votes” will have no effect on the outcome ofnot affect the election of a Class II director nominee who receives a plurality of votes. Nevertheless, the Company’s bylaws specify that in an uncontested election, any director nominee who receives a greater number of votes “withheld” from his election than votes “for” his election shall promptly tender his resignation following the vote. “Abstentions” will not count as a vote cast with respect to a director nominee. The nomination and corporate governance committee of our board of directors will consider the resignation offered by a director nominee who receives a greater number of votes “withheld” from his election than votes “for” his election and recommend to our board whether to accept the resignation offer. Our board will disclose its determination within ninety days from the date of the certification of the stockholder vote for the relevant annual meeting.

With respect to proposals 2, 3 and 4 of this proxy statement, the affirmative vote of a majority of shares of our common stock represented and voted at the annual meeting is required for approval. With respect to proposal 5 of this proxy statement, the affirmative vote of a majority of shares of our common stock represented and voted at the annual meeting is required for approval, although such vote will not be binding on us. With respect to proposal 6 of this proxy statement, we have determined to view the frequency vote that receives the greatest number of votes cast by the holders of our common stock entitled to vote at the meeting as the advisory vote of stockholders on the frequency of approval of the compensation of our named executive officers, although such vote will not be binding on us. Abstentions will have no effect on the outcome of the vote on the frequency of the advisory vote on the compensation of our named executive officers and will have the same effect as “no” votes on proposals 2, 3, 4 and 4, whereas broker5. Broker “non-votes” will have no effect on such proposals.proposals 2, 3, 4, 5 and 6 presented at this annual meeting.

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The Proxy

The persons named as proxy holders, Eliyahu AyalonOfer Elyakim and Dror Levy, were selected by our board of directors and currently serve as our executive officers.

All shares represented by each properly executed, unrevoked proxy received in time for the annual meeting will be voted in the manner specified therein. If no specification is made on the proxy as to any one or more of the proposals, the common stock represented by the proxy will be voted as to the proposal for which no specification is given as follows: (1) FOR the election of the Class II director nominees named in this proxy statement; (2) FOR the increase of 300,000 shares of common stock reservedproposals 2, 3, 4 and 5; (3) THREE YEARS for issuance under the Company’s 1993 Director Stock Option Plan; (3) FOR the increase of 500,000 shares of common stock reserved for issuance under the Company’s 1993 Employee Stock Purchase Plan;proposal 6; and (4)FOR the ratification of the selection of Kost, Forer, Gabbay & Kasierer, a member of Ernst & Young Global, as our independent auditors for the 2008 fiscal year; and (5) with respect to any other matters that may come before the annual meeting, at the discretion of the proxy holders. We do not presently know of any other business to be conducted at the annual meeting.

Revocability of Proxy

If the shares of common stock are held in your name, you may revoke your proxy given pursuant to this solicitation at any time before the proxy card is voted by: (i) delivering to us (to the attention of Dror Levy, our Secretary), at the address of our principleprincipal executive offices, a written notice of revocation or a duly executed proxy bearing a later date, or (ii) attending the annual meeting and voting in person. If your shares are held in “street name,” you should follow the directions provided by your broker regarding how to revoke your proxy. Your attendance at the annual meeting after having executed and delivered a valid proxy card will not in and of itself constitute a revocation of your proxy. You will be required to give oral notice of your intention to vote in person to the inspector of elections at the annual meeting.

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PROPOSAL NO. 1

ELECTION OF DIRECTORS

Our bylaws authorize the number of directors to be not less than five or more than nine. The number of directors on our board of directors is currently fixed at eight.seven. The board is divided into three classes: Class I, Class II and Class III. Each director serves a three-year term. The board is currently composed of three Class I directors (Messrs. Eliyahu Ayalon, Zvi Limon and Louis Silver), whose terms will expire at the annual meeting of stockholders to be held in 2010;2013; two Class II directors (Messrs. Yair Seroussi and Yair Shamir), whose terms will expire at this year’s annual meeting of stockholders,stockholders; and threetwo Class III directors (Messrs. Gerrit Johan Frederik Kaat,(Mr. Patrick Tanguy and Avigdor Willenz)Dr. Reuven Regev), whose terms will expire at the annual meeting of stockholders to be held in 2009.2012. Avigdor Willenz resigned as a director effective as of January 31, 2011. Dr. Regev was appointed as a director effective as of January 31, 2011. At each annual meeting of stockholders, directors will be elected for full terms of three years to succeed those directors whose terms are expiring.

At this annual meeting, the stockholders will specifically elect two Class II directors. Messrs. Seroussi and Shamir have each been nominated to serve a three-year term, until the annual meeting of stockholders to be held in 2011,2014, or until their successors are elected or appointed and qualified, or until their earlier resignation or removal. Our board has no reason to believe that each of Messrs. Seroussi and Shamir will be unable or unwilling to serve as a nominee or as a director if elected.

Class II Director Nominees

Yair Seroussihas served as one of our directors since February 2002. Mr. Seroussi is currently the Managing Directorchairman of Amdeal Holdings Ltd., an entity actingthe board of directors of Bank Hapoalim, Israel’s leading bank. Previously, he was serving as the advisory director, head of Morgan Stanley in charge of its activities in Israel, since 1993. Mr. Seroussi also servesDuring this period, he served as a directorboard member of Israel Corp., anvarious Israeli holding company; and Frutarom Industries, a multinational flavor and fragrance house; each of which is traded on The Tel-Aviv Stock Exchange.companies. Mr. Seroussi is also a director of Wintegra, Inc. and on the Board of Governors of the Hebrew University. We believe Mr. Seroussi’s qualifications to sit on our board include his years of experience providing strategic and investment advisory services to companies, as well as his leadership and risk assessment skills, and directorship expertise by being a director of various Israeli companies.

Yair Shamirhas served as one of our directors since October 1996 and is also the Chairman of our compensation committee. Mr. Shamir serveshas served as Executive Chairman of I.A.I. (Israel Aircraft Industries) since July 2005 and is Chairmanhas been a Managing Partner of Catalyst Fund L.P., an Israeli Venture Capital firm, since 2000. Mr. Shamir currently serves as a director of Orckit Communications, Limited, a developer and manufacturer of local loop communications systems; Commtouch Software Ltd., an email and Web defense technology provider listed on NASDAQ; and Cyalume Technologies Holdings, Inc., a provider of safety, security and training products for military use. Mr. Shamir was the Chairman of El-Al, Israel Airlines from April 2004 to January 2005. From 1997 to 2008, he served as Chairman of VCON Telecommunications Ltd., a developer and marketer of video conference systems, and was its CEO from 1997 to 2005. From 1994 to 2006, Mr. Shamir was a director of Mercury Interactive Corporation. In connection with the Securities and Exchange Commission’s investigation into possible violations of securities laws by Mercury Interactive Corporation, the Commission issued a “Wells” notice in June 2006 informing him that they were considering bringing a civil injunctive action against him. Mr. Shamir submitted an offer of settlement to the Commission, neither admitting nor denying the Commission’s allegations. On January 26, 2009, the settlement received a final judgment by the District Court of Northern District of California. From 2005 to 2007, Mr. Shamir served aswas also Chairman of Shamir Optical Industry Ltd, a leading designer, manufacturer and distributor of progressive spectacle lenses for presbyopia. We believe Mr. Shamir wasShamir’s qualifications to sit on our board include his executive positions at global organizations, years of experience providing strategic advisory services to other Israeli companies, his leadership and risk assessment skills, and public company expertise by being a director of various public companies, as well as the Chairmandeep understanding of El-Al, Israel Airlines from April 2004 to January 2005. Since 1997, he has served as Chairmanour company, acquired during his 14 plus years of VCON Telecommunications Ltd., a developer and marketer of video conference systems and was its Chief Executive Officer from 1997 to 2005.service on our board.

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Director Independence

Our board of directors has determined that the director nominees, Messrs. Seroussi and Shamir, are “independent” as that term is defined in Rule 4200the published listing requirements of the listing standards of the National Association of Securities Dealers.NASDAQ.

Required Vote

Pursuant to NYSE Rule 452, the uncontested election of directors is no longer a routine matter and, therefore, may not be voted upon by brokers without instruction from beneficial owners. Consequently, proxies submitted by brokers for shares beneficially owned by other persons may not, in the absence of specific instructions from such beneficial owners, vote the shares in favor of a director nominee or withhold votes from a director nominee at the brokers’ discretion.

The director nominees will be elected by a plurality of the votes cast. Abstentions and broker non-votes arewill not counted towardaffect the nominee’s total.election of a Class II director nominee who receives a plurality of votes. Nevertheless, the Company’s bylaws specify that in an uncontested election, any director nominee who receives a greater number of votes “withheld” from his election than votes “for” his election shall promptly tender his resignation following the vote. “Abstentions” will not count as a vote cast with respect to a director nominee. The nominating and governance committee of our board of directors will consider the resignation offered by a director nominee who receives a greater number of votes “withheld” from his election than votes “for” his election and recommend to our board whether to accept the resignation offer. Our board will disclose its determination within ninety days from the date of the certification of the stockholder vote for the relevant annual meeting.

THE BOARD OF DIRECTORS RECOMMENDS A VOTEFOR

THE ELECTION OF EACH OF THE DIRECTOR NOMINEENOMINEES NAMED ABOVE.

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EXECUTIVE OFFICERS AND DIRECTORS

The following table sets forth certain information with respect to our executive officers and directors as of March 10, 2008:18, 2011:

Eliyahu Ayalonis currently our Executive Chairman. He joined us in April 1996 as President, Chief Executive Officer and a director. In January 2000, Mr. Ayalon was appointed to serve as Chairman of our board. Between April 2005 and January 2006, Mr. Ayalon stepped down as Chief Executive Officer and became our Executive Chairman. Mr. Ayalon resumed as ourthe Chief Executive Officer inposition from January 2006.2006 to July 2009. Mr. Ayalon is also a member of the board of directors of CEVA, Inc., a developerNASDAQ listed company that develops and licensorlicenses of DSP cores and related platform-level IP to the semiconductor industry, as of November 2002, and was the Chairman until February 2005. Mr. Ayalon previously served as President and Chief Executive Officer of Mennen from May 1992 to April 1996. Mr. Ayalon is a member of the Board of Governors of the Technion-Israel Institute of Technology and a member of the executive committee of the University Center of Ariel, Israel. We believe Mr. Ayalon’s qualifications to sit on our board include his years of executive experience in the high technology and semiconductor industries, and his deep understanding of our company, people and products acquired during his 15 plus years of service on our board and as our Chief Executive Officer.

Brian RobertsonOfer Elyakimjoined us in October 2007 in connection with the acquisitionJanuary 2006 as Director of the CordlessInvestor Relations and VoIP Terminals Business Development, and was promoted to Vice President of NXP B.V. Prior to joining us, Mr. Robertson was the General Manager of the Cordless and IP Terminals business line at NXP B.V. beginning in December 2006. From July 2005 to September 2006, Mr. Robertson was the Regional Marketing Director – Asia Pacific of the Business Unit Mobile & Personal of NXP B.V. and also at Philips Semiconductors B.V. prior to the founding of NXP B.V. From January 2004 to July 2005, Mr. Robertson led Philips Semiconductors B.V.’s regional marketing and sales for Identification Asia. From April 2003 to January 2004, he led the Global Marketing & Applications Mobile and Personal division at Philips Semiconductors B.V. From September 2001 to March 2003, Mr. Robertson was a Global Account Director (Sales) at Philips Semiconductors B.V.

Boaz Edan joined usDevelopment in May 1999 as Vice President, Operations and served as2007. He was promoted to Senior Vice President, Products Division Manager until October 2002 whereby he becamePresident of South East Asia Operations in May 2008. In July 2009, Mr. Elyakim was appointed our Chief OperatingExecutive Officer. Previously, Mr. Edan previously servedElyakim worked as Material Directora research analyst covering media and broadcasting companies at CIBC World Markets in New York. Prior to that, he held several management positions at Radvision, Tundo Communications and Kost Forer Gabbay & Kasierer, a member of Tower Semiconductor Ltd.,Ernst & Young Global. A certified public accountant, Mr. Elyakim holds an MBA with honors from Columbia Business School and a foundry manufacturer of semiconductor integrated circuits,BA in Computer Science and Accounting from 1996 to May 1999.Tel Aviv University.

Dror Levyjoined us in August 2002 as Corporate Controller and was promoted to the position of Vice President of Finance in January 2006 and as our Chief Financial Officer and Secretary in July 2006. Prior to joining the Company, Mr. Levy worked at Kost Forer Gabbay & Kasierer, a member of Ernst & Young Global,

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where he served as an account manager in the high-tech practice. Mr. Levy is a certified public accountant and holds an M.B.A. from Tel Aviv University and a B.A. in Business and Accounting from the Israeli College of Management.

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Eli FogelLior Blankajoined us in July 20032007 as SeniorCorporate Vice President & Chief Technology Officer. Mr. Fogel served as Senior Vice President for Engineering &and Platform Division Manager and became our Chief Technology Officer in July 2010. Mr. Blanka has more than 20 years experience in the wireless and SoC industries. He previously was employed at Intel beginning in 2000, including serving as 3.5G cellular phone cross sites manager from 2004 to 2006, and DSP CommunicationCommunications as CDMA phone reference design manager from 19961998 to 1999 (later acquired by Intel). At Intel,2000. From 1992 to 1997, Mr. FogelBlanka served as R&D department manager for military systems at Arit/Reshef, and project manager for security systems at the Chief Technology OfficerIsraeli Ministry of Defense from 1986 to 1992 Mr. Blanka earned a B.Sc. in Electrical Engineering from the Cellular Communication Division.Technion – Israel Institute of Technology.

Gerrit Johan Frederik Kaat has served as one of our directors since October 2007. Mr. Kaat is Senior Vice President of NXP Semiconductors B.V. and responsible for strategy and technology in the Business Unit Mobile and Personal. NXP B.V. was formed after the disentanglement of Philips Semiconductors from Philips in September 2006. Mr. Kaat served in several research and development, and business management functions with Philips Semiconductors B.V. since February 1980. He was the General Manager of the Business Unit Mobile and Personal of Philips Semiconductors from October 2003 until September 2006 and for the same business unit until April 2007 within NXP Semiconductors. From 1996 to 2003, Mr. Kaat worked in the Business Unit Mobile Communications of Philips Semiconductors as the General Manger of the Business Line Cellular.

Zvi Limon has served as one of our directors since February 1999. Mr. Limon is a partner at Magma Venture Capital, a consulting and investment advisory firm. Since 2006, Mr. Limon also has been a general partner at Magnum Communicationsof Rimon Investment Fund, a consulting and investment advisory firm, since 1998 and a partner of Rimon Fund, an investment fund, since September 2006.firm. He served as Chairmanchairman of Limon Holdings Ltd., a consulting and investment advisory firm, from October 1993 to July 2000. The Company elected and agreed to nominate Mr. Limon to the board of directors asis a representative of Magnum Technology, Ltd. under certain conditions pursuant to the terms of a stock purchase agreement, dated February 11, 1999, with Magnum, filed as an exhibit to our quarterly report on form 10-Q for the quarter ended March 31, 1999. Mr. Limon also serves as a member of the board of directorsdirector of CEVA, Inc., Tefron Ltd., a NASDAQ listed apparels company, and various private companies. He also was a director of GVT (Holding) SA, the parent company of Global Village Telecom in Brazil. We believe Mr. Limon’s qualifications to sit on our board include his years of experience providing strategic and investment advisory services to companies, his understanding of our company acquired during his 10 plus years of service on our board and his board experience by being a board member of various public and private companies.

Reuven Regev has served as one of our directors since January 2011. Dr. Regev is the Chairman and Chief Executive Officer of Topscan Ltd, a computer peripheral electronic devices company, a company he founded, since 2008. Dr. Regev is also serving as the Chairman of Flexicath Ltd, a medical devices company, since 2009. From 2006 to 2008, Dr. Regev served as Chief Executive Officer and a board member of Karmelsonix Ltd., a medical devices company focused on Asthma treatment and listed on the Australian Stock Exchange. Dr. Regev received a B.Sc. and an M.Sc in Electrical Eng. Communications and Control Systems from the Technion, Israel. He received a M.Sc. and a Ph.D. in Industrial Engineering and Management from Stanford University, California. The Company believes Dr. Regev’s qualifications to sit on the Company’s Board of Directors include his years of executive and operational experience and his deep understanding of technology companies operating from the U.S. and Israel.

Yair Seroussi has served as one of our directors since February 2002. Mr. Seroussi is currently the Managing Directorchairman of Amdeal Holdings Ltd., an entity actingthe board of directors of Bank Hapoalim, Israel’s leading bank. Previously, he was serving as the advisory director, head of Morgan Stanley in charge of its activities in Israel, since 1993. Since 2002, Mr. Seroussi also hasDuring this period, he served as Chairmana board member of Eyal Microwave, a designer and manufacturer of microwave applications. Mr. Seroussi also serves as a director of Israel Corp., anvarious Israeli holding company; Frutarom Industries, a multinational flavor and fragrance house; and Aspen Real Estate, a real estate company, each of which is traded on The Tel-Aviv Stock Exchange.companies. Mr. Seroussi is also on the Board of Governors of the Hebrew University. We believe Mr. Seroussi’s qualifications to sit on our board include his years of experience providing strategic and investment advisory services to companies, as well as his leadership and risk assessment skills, and directorship expertise by being a director of various Israeli companies.

Yair Shamir has served as one of our directors since October 1996 and is also the Chairman of our compensation committee. Mr. Shamir serveshas served as Executive Chairman of I.A.I. (Israel Aircraft Industries) since July 2005 and is Chairmanhas been a Managing Partner of Catalyst Fund L.P., an Israeli Venture Capital firm, since 2000. Mr. Shamir is also Chairmancurrently serves as a director of Shamir Optical Industry Ltd,Orckit Communications, Limited, a leading designer,developer and manufacturer of local loop communications systems; Commtouch Software Ltd., an email and distributorWeb defense technology provider listed on NASDAQ; and Cyalume Technologies Holdings, Inc., a provider of progressive spectacle lensessafety, security and training products for presbyopia since August 2005.military use. Mr. Shamir was the Chairman of El-Al, Israel Airlines from April 2004 to January 2005. From 1997 to date,2008, he servesserved as Chairman of VCON Telecommunications Ltd., a developer and marketer of video conference systems, and was its CEO from 1997 to 2005. From 1994 to 2006, Mr. Shamir currently serves aswas a director of Mercury Interactive Corporation. In connection with the Securities and Exchange Commission’s investigation into possible violations of securities laws by Mercury Interactive Corporation, the Commission issued a provider“Wells” notice in June 2006 informing him that they were considering bringing a civil injunctive action against him. Mr. Shamir submitted an offer of performance management solutions;settlement to the Commission, neither admitting nor denying the Commission’s allegations. On January 26, 2009, the settlement received a final judgment by the

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District Court of Northern District of California. From 2005 to 2007, Mr. Shamir was also Chairman of Shamir Optical Industry Ltd, a leading designer, manufacturer and Orckit Communications, Limited,distributor of progressive spectacle lenses for presbyopia. We believe Mr. Shamir’s qualifications to sit on our board include his executive positions at global organizations, years of experience providing strategic advisory services to other Israeli companies, his leadership and risk assessment skills, and public company expertise by being a developer and manufacturerdirector of local loop communications systems.various public companies, as well as the deep understanding of our company, acquired during his 14 plus years of service on our board.

Louis Silverhas served as a member of our board of directors since November 1999. He is a Principal of RP Capital Group, an alternative investment firm focused on investment opportunities in EEMEAthe Eastern Europe/Middle East/Africa Region (EEMEA) and has served as an advisor to RP Capital Group since April 2005. From January 2005 until January 2006, he acted as a private banking consultant. From August 2002 until April 2005, he acted as a legal and business development advisor to companies and individuals. From September 1996 until June 2002, he served as an advisor and counsel to Discount Bank & Trust Company. Mr. Silver is currently a member of the board of directors of CEVA, Inc., He was a director of Scopus Video Networks Ltd., a developerformer NASDAQ-listed company, until December 2008. We believe Mr. Silver’s qualifications to sit on our board include his financial expertise, his years of digital video networking productsexperience providing strategic and AxisMobile plc,investment advisory services to companies, his leadership and risk assessment skills, and public company expertise by being a providerboard member of consumer mobile email technology to communicationCEVA, and his understanding of our company acquired during his 10 plus years of service providers.on our board.

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Patrick Tanguy has served as one of our directors since November 1999. Since September 2007, Mr. Tanguy has been a Managing Director at Wendel, a French-listed investment company. From February 2006 to September 2007, Mr. Tanguy was the Chief Executive Officer of Prezioso S.A., an industrial coating and insulation specialist. From April 2004 to February 2006, Mr. Tanguy was the Chief Executive Officer of Monne-Decroix, a real estate development company. He served as Chief Executive Officer of Technal Group, an aluminum building systems company, from 1999 to March 2004. From May 1998 to September 1999, Mr. Tanguy served as a director of Hays DX France, an express transport services company. From August 1993 to April 1998, he served as the Chairman of Groupe DAFSA, a supplier of economic data and financial information. Since February 2010, he has served on the board of directors of Legrand, a French publicly traded company. We believe Mr. Tanguy’s qualifications to sit on our board include his experience as CEO of leading complex global organizations, his financial expertise, as well as his executive leadership and management experience, and his understanding of our company acquired during his 10 plus years of service on our board.

Avigdor Willenz has served as oneBoard Leadership Structure

We separated the roles of our directors since February 2008. Mr. Willenz served as Chief Executive Officer and Chairman of the boardBoard in July 2009 in recognition of, directorsamong other things, the differences and responsibilities between the two roles. Our Chief Executive Officer is responsible for implementing the strategic direction of Galileo Technology Ltd. from 1992 until 2001. He served as a director in Marvell(R) Technology Group Ltd. from 2001 to 2002 following the mergercompany and the day-to-day leadership and performance of Galileo Technology with Marvell. From 1988 to 1992, Mr. Willenz was Corporate Product Definition Manager/Chief Engineer for Integrated Device Technology (IDT). Mr. Willenz currently serves as a memberthe company. Our Chairman of the board provides guidance to our Chief Executive Officer on corporate strategies and reviews the strategic initiatives of directorsthe company with the Chief Executive Officer and the rest of Wintegra, Inc.the board. The board values the insights of our Chairman in light of his deep understanding of our company, people and Pixer Ltd. Mr. Willenz previously served as a memberproducts and the semiconductor industry. Our Chairman also sets the agenda for board meetings in consultation with judgment, presides over meetings of the board, offacilitates communication among directors of Radware Ltd. Mr. Willenz holds a B.Sc.E.E.and ensures an appropriate information flow from Technion, Israel Institute of Technology.senior management to the board.

Director Independence

Our board of directors has determined that all non-employee directors of the board, currently consisting of Messrs. Kaat, Limon, Regev, Seroussi, Shamir, Silver Tanguy and Willenz,Tanguy, are “independent” as that term is defined in the NASDAQ listing standards. In making this determination, our board of directors considered transactions and relationships between each director or his immediate family and the company and our subsidiaries, including those reported in the section below captioned, “Certain Relationships and Related Transactions.”subsidiaries. The purpose of this review was to determine whether any such relationships or transactions were material and, therefore, inconsistent with a determination that the director is independent. As a result of this review, our board

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affirmatively determined, based on its understanding of such transactions and relationships, that all of our non-employee directors are independent of the company and, therefore, a majority of the members of our board is independent, under the standards set forth by the NASDAQ listing standards.

The Board’s Role in Risk Oversight

Our board of directors oversees an enterprise-wide approach to risk management, designed to support the achievement of business objectives, including organizational and strategic objectives, to improve long-term organizational performance and enhance stockholder value. The involvement of the full board in setting our business strategy is a key part of its assessment of management’s plans for risk management and its determination of what constitutes an appropriate level of risk for the company. Our board’s role in the company’s risk oversight process includes receiving regular reports from members of senior management on areas of material risk to the company, including operational, financial, legal and regulatory, and strategic and reputational risks. While the full board has the ultimate oversight responsibility for the risk management process, various committees of the board also have responsibility for risk management. For example, financial risks, including internal controls, are overseen by the audit committee and risks that may be implicated by our executive compensation programs are overseen by the compensation committee. Moreover, our nomination and corporate governance committee conducts an annual board assessment and reports its findings to the full board. Upon identification of a risk, the assigned board committee or the full board discuss or review risk management and risk mitigation strategies. Additional review or reporting on enterprise risks is conducted as needed or as requested by the board or committee.

Relationships among Directors or Executive Officers

There are no family relationships among any of our directors or executive officers.

Meetings and Committees of the Board of Directors

During 2007,2010, our board of directors met 8 times in meetings or telephonically. No director attended fewer than 75% of the aggregate of either (i) the total number of board meetings held during the period for which he was a director, or (ii) the total number of committee meetings of the board held in 20072010 on which he served. Mr. Kaat was appointed to our board in October 2007 and therefore only attended two meetings of our board of directors in 2007. In light of the geographic dispersion of our directors, the directors’ attendance at the annual meeting of stockholders is encouraged but not required. Director attendance at each annual stockholder’sstockholders’ meeting will be posted on our web site atwww.dspg.com. It is also the general policy of our board that at the conclusion of each meeting of the board the independent directors shall meet separately with no members of management present, and that the Chairman of our nomination and corporate governance committee shall act as the chair of such meetings of the independent directors.present.

Compensation Committee

The compensation committee met 2 times in meetings or telephonically once in 2007.2010. The compensation committee currently consists of Messrs. Limon, Shamir and Silver. Our board of directors has determined that all current members of the compensation committee are “independent” as that term is defined in the NASDAQ

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listing standards. The committee’s functions are to establish and apply our compensation policies with respect to our executive officers. Additional duties and powers of the compensation committee are set forth in its charter, which was adopted and approved in January 2005, and a copy of which is available on our website atwww.dspg.com.

Audit Committee

The audit committee met 5 times in meetings or telephonically in 2007.2010. The audit committee currently consists of Messrs. Limon, Seroussi, Shamir and Tanguy. The audit committee is directly responsible for the appointment, compensation, retention and oversight of our independent auditors. In addition, the audit committee is responsible for approving the audit and non-audit services performed by our independent auditors and for reviewing and evaluating our accounting principles and our system of internal accounting controls. Additional

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duties and powers of the audit committee are set forth in its amended and restated charter, which was adopted and approved in November 2002 and further amended in July 2003, and January 2005 and February 2009, and a copy of which is available on our website atwww.dspg.com. www.dspg.com. The audit committee has also established procedures for (a) the receipt, retention and treatment of complaints received by us regarding accounting, internal accounting controls or auditing matters, and (b) the confidential, anonymous submission by our employees of concerns regarding questionable accounting or auditing matters.

After considering transactions and relationships between each member of the audit committee or his immediate family and the company and our subsidiaries and reviewing the qualifications of the members of the audit committee, our board of directors has determined that all current members of the audit committee are (1) “independent” as that term is defined in Section 10A of the Securities Exchange Act of 1934, as amended (the “Exchange Act”); (2) “independent” as that term is defined in the NASDAQ listing standards; and (3) financially literate and have the requisite financial sophistication as required by the NASDAQ listing standards. Furthermore, our board of directors has determined that Mr. Tanguy qualifies as an audit committee financial expert, as defined by the applicable rules of the Exchange Act, pursuant to the fact that, among other things, he is currentlywas the Chief Executive Officer of Prezioso S.A., and was the Chief Executive Officer of Monne-Decroix and Technal Group, and in those capacities hashad acquired the relevant experience and expertise and has the attributes set forth in the applicable rules as being required for an audit committee financial expert.

Nomination and Corporate Governance Committee

The nomination and corporate governance committee met in meetings or telephonically once in 2007.2010. The nomination and corporate governance committee consists of Messrs. Seroussi, Silver and Tanguy. Mr. Willenz was appointed toa member of the nomination and corporate governance committee in February 2008.2010. He resigned as a director effective as of January 31, 2011. Our board of directors has determined that all current members of the nomination and corporate governance committee are “independent” as that term is defined in the NASDAQ listing standards. The nomination and corporate governance committee is to assist the board in all matters relating to the establishment, implementation and monitoring of policies and processes regarding the recruitment and nomination of candidates to the board and committees of the board, and the development, evaluation and monitoring of our corporate governance processes and principles. The committee also is responsible for developing, implementing and monitoring compliance of our code of business conduct and ethics and making recommendations to the board of revisions to the code from time to time as appropriate. Additional duties and powers of the nomination and corporate governance committee are set forth in its charter, which was adopted and approved in January 2005, and a copy of which is available on our website atwww.dspg.com.

Compensation Committee Interlocks and Insider Participation

Our compensation committee during 20072010 consisted of Messrs. Limon, Shamir and Silver; Mr. Shamir served as its Chairman. No member of this committee is a present or former officer or employee of the company or any of our subsidiaries. Mr. Silver is a member of the board of directors and a member of the compensation

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committee of the board of CEVA, Inc. and Mr. Ayalon, our Chairman of the board of directors, and Chief Executive Officer, is a member of the board of directors of CEVA, Inc. Other than as noted with respect to Mr. Ayalon, none of our executive officers served on the board of directors or compensation committee of any entity which has one or more executive officers serving as a member of our board or compensation committee.

Qualifications of Directors

Our board of directors has not established any special qualifications or any minimum criteria for director nominees. In considering candidates for the board, the nomination and corporate governance committee will consider the entirety of each candidate’s credentials. However, as specified in the charter for the nomination and corporate governance committee, the nomination and corporate governance committee shall consider certain

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qualifications such as the nominee’s personal and professional integrity, ability, judgment, broad experience in business, finance or administration, familiarity with our industry, ability to serve the long-term interests of our stockholders and sufficient time available to devote to our affairs. The nomination and corporate governance committee does not assign specific weights to particular criteria and no particular criterion is necessarily applicable to all prospective director nominees. The committee believes that the backgrounds and qualifications of the directors, considered as a group, should provide a significant composite mix of experience, knowledge and abilities that will allow our board to fulfill its responsibilities. The nomination and corporate governance committee will also use its best efforts to seek to ensure that the composition of our board of directors at all times adheres to the independence requirements applicable to companies listed on the NASDAQ, Global Select Market, as well as other regulatory requirements applicable to us.

Diversity of the Board

Our board of directors does not have a formal policy requiring the nominating and corporate governance committee to consider the diversity of directors in its nomination process. Nonetheless, our board values diversity and diversity is one of the factors considered by the committee in the director identification and nomination process. The committee seeks nominees with a broad diversity of experience, professions, education, skills, geographic representation and backgrounds with a view to have a slate of candidates for election that represents a diversity of views, experiences, and backgrounds.

Director Nomination Process

We do not have a formal director nomination process.

Continuing Directors

Generally, the nomination and corporate governance committee identifies nominees by first evaluating the current members of the board willing to continue in service. Current members of the board with skills and experience that are relevant to our business and who are willing to continue in service are considered for renomination. The nomination and corporate governance committee will balance the value of continuity of service by existing members of the board with that of obtaining a new perspective.

New Directors

Generally, once a need to add a new board member is identified, the nomination and corporate governance committee will initiate a search by working with staff support, seeking input from board members and senior management and, if necessary, hiring a consultant or search firm. After a slate of possible candidates is identified, members of the nomination and corporate governance committee, other members of the board and senior management have the opportunity to interview the prospective candidate(s). The remaining members of the board who do not interview the prospective candidate(s) are kept informed of the progress. A potential new director also may be recommended by a current director, after which the input of the nomination and corporate governance committee and the other members of the board on the merits of his or her appointment to the board would be sought. The nomination and corporate governance committee ultimately recommends the best candidate(s) the committee members determine after the selection process for approval by the full board.

Section 16(a) Beneficial Ownership Reporting Compliance

Section 16(a) of the Exchange Act requires our directors, executive officers and persons who own more than 10% of our common stock (collectively, “Reporting Persons”) to file initial reports of ownership and changes in ownership of our common stock with the Securities and Exchange Commission. Copies of these reports are also required to be delivered to us.

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We believe, based solely on our review of the copies of such reports received or written representations from the Reporting Persons, that during the fiscal year ended December 31, 2007,2010, all Reporting Persons complied with all applicable filing requirements.

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Communications with the Board

Our board of directors believes that full and open communication between stockholders and members of our board is in our best interests and the best interests of our stockholders. Stockholders can contact any director or committee of the board by writing to the Chairman of the nomination and corporate governance committee, c/o DSP Group, Inc., 2580 North First Street, Suite 460, San Jose, CA 95131. The Chairman of the nomination and corporate governance committee will determine the extent to which such stockholder communications should be disseminated to other members of the board and what response, if any, should be made to such communications. Comments or complaints relating to our accounting, internal accounting controls or auditing matters may be referred directly to our audit committee by writing to the Chairman of the audit committee, c/o DSP Group, Inc., 2580 North First Street, Suite 460, San Jose, CA 95131.

Stockholder Proposals

The nomination and corporate governance committee will consider stockholder proposals properly submitted to us, including recommendations of qualified director nominee(s), in accordance with the procedures set forth below. In order to have a proposal considered by the nomination and corporate governance committee for the 20092012 annual meeting, a stockholder must submit its proposal and other relevant information in writing to the attention of our Secretary at our principleprincipal executive offices no later than December 11, 2008. The7, 2011. With respect to general stockholder proposals, the stockholder must submit the following relevant information: (1)(i) a brief description of the business desired to be brought before the annual meeting and the reasons for conducting such business at the annual meeting; (2)meeting, (ii) the name and address, as they appear on our books, of the stockholder proposing such business; (3)business, (iii) the class and number of shares of our common stock which are beneficially owned by the stockholder; (4)stockholder, (iv) any material interest of the stockholder in such business;business, (v) as to the stockholder giving the notice and (5)any Stockholder Associated Person (as defined below), whether and the extent to which any hedging or other transaction or series of transactions has been entered into by or on behalf of, or any other agreement, arrangement or understanding (including, but not limited to, any short position or any borrowing or lending of shares of our common stock) has been made, the effect or intent of which is to mitigate loss or increase profit to or manage the risk or benefit of stock price changes for, or to increase or decrease the voting power of, such stockholder or any such Stockholder Associated Person with respect to any share of our common stock (each, a “Relevant Hedge Transaction”), (vi) as to the stockholder giving the notice and any Stockholder Associated Person, to the extent not set forth pursuant to the immediately preceding clause, (a) whether and the extent to which such stockholder or Stockholder Associated Person has direct or indirect beneficial ownership of any option, warrant, convertible security, stock appreciation right, or similar right with an exercise or conversion privilege or a settlement payment or mechanism at a price related to our common stock, whether or not such instrument or right shall be subject to settlement in the underlying common stock or otherwise, or any other direct or indirect opportunity to profit or share in any profit derived from any increase or decrease in the value of our common stock (a “Derivative Instrument”), (b) any rights to dividends on our common stock beneficially owned by such stockholder that are separated or separable from the underlying shares of our common stock, (c) any proportionate interest in shares of our common stock or Derivative Instruments held, directly or indirectly, by a general or limited partnership in which such stockholder is a partner or, directly or indirectly, beneficially owns an interest in a partner and (d) any performance-related fees (other than an asset-based fee) that such stockholder is entitled to based on any increase or decrease in the value of shares of our common stock or Derivative Instruments, if any, as of the date of such notice, including without limitation, any such interests held by members of such stockholder’s immediate family sharing the same household (which information shall be supplemented by such stockholder and beneficial owner, if any, not later than ten days after the record date for the meeting to disclose such ownership as of the record date); and (vii) any other information that is required to be provided by the stockholder pursuant to Regulation 14A under the Securities Exchange Act of 1934 in the stockholder’shis or

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her capacity as a proponent to a stockholder proposal. A “Stockholder Associated Person” of any stockholder means (i) any person controlling or controlled by, directly or indirectly, or acting in concert with, such stockholder, (ii) any beneficial owner of shares of our common stock owned of record or beneficially by such stockholder and (iii) any person controlling, controlled by or under common control with such Stockholder Associated Person. Subject to any exclusions permitted by applicable law, only stockholder proposals submitted in accordance with the proposal.above requirements will be presented at any annual meeting. The chairman of the meeting may, if the facts warrant, determine and declare at the meeting that business was not properly brought before the meeting and, if he should so determine, he may so declare at the meeting that any such business not properly brought before the meeting will not be transacted.

With respect to recommendations of director nominee(s), the stockholder must submit the following relevant information in writing to the attention of our Secretary at our principleprincipal executive offices no later than December 11, 2008: (1)7, 2011: (i) as to each person whom the stockholder proposes to nominate for election or reelection as a director: (A) the name, age, business address and residence address of such person, (B) the prospective candidate; (2) a brief biographical descriptionprincipal occupation or employment of the prospective candidate, including employment history for the past five years, and a statement of the qualifications of the prospective candidate; (3)such person, (C) the class and number of shares of our common stock if any, which are beneficially owned by the prospective candidate; (4)such person, (D) a description of all arrangements or understandings between the stockholder and the prospective candidateeach nominee and any other person or persons (naming such person or persons) pursuant to which the nomination isnominations are to be made by the stockholder, if the stockholder and the prospective candidate are different individuals; (5) the candidate’s signed consent to serve as a director if elected and to be named in the proxy statement; and (6)(E) any other information relating to such person that is required to be provided by the stockholderdisclosed in solicitations of proxies for elections of directors, or is otherwise required, in each case pursuant to Regulation 14A under the Securities Exchange Act.Act of 1934 (including without limitation such person’s written consent to being named in the proxy statement as a nominee and to serving as a director if elected); and (ii) the information set forth in the above paragraph relating to general stockholder proposals. Once the nomination and corporate governance committee receives the stockholder recommendation, it may deliver to the prospective candidate a questionnaire that requests additional information about the candidate’s independence, qualifications and other matters that would assist the nomination and corporate governance committee in evaluating the candidate, as well as certain information that must be disclosed about the candidate in our proxy statement or other regulatory filings, if nominated.

The nomination and corporate governance committee will not evaluate candidates differently based on who has made the proposal. The committee will consider candidates for the board from any reasonable source, including stockholder recommendations. The committee has the authority under its charter to hire and pay a fee to consultants or search firms to assist in the process of identifying and evaluating candidates. No such consultants or search firms were used for the slate of director nominees at this annual meeting since all directors nominated are for re-election, and, accordingly, no fees have been paid to consultants or search firms in the past fiscal year.

Greater detail about the submission process for stockholder proposals are set forth in our bylaws, a copy of which may be obtained by making a written request to our Secretary at the address of our principal executive offices.

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We have not received a director nominee recommendation from any stockholder (or group of stockholders) that beneficially owns more than five percent of our common stock.

Code of Business Conduct and Ethics

Our board of directors adopted a code of business conduct and ethics in July 2003 and further amended it in January 2005. This code applies to all of our employees and is posted on our web site atwww.dspg.com. www.dspg.com. The code satisfies the requirements under the Sarbanes-Oxley Act of 2002, as well as NASDAQ rules applicable to issuers listed on the NASDAQ Global Select Market.NASDAQ. The code, among other things, addresses issues relating to conflicts of interests, including internal reporting of violations and disclosures, and compliance with applicable laws, rules and regulations. The purpose of the code is to deter wrongdoing and to promote, among other things, honest and ethical conduct and to ensure to the greatest possible extent that our business is conducted in a legal and ethical

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manner. Any waivers to the code with respect to our executive officers and directors may be granted only by the audit committee. Any waivers to the code with respect to the remainder of the employees may be granted by the corporate compliance officer, which is currently our Chief Financial Officer. Any waivers to the code and any amendments to the code applicable to our Chief Executive Officer, Chief Financial Officer, principal accounting officer, controller or persons performing similar functions, will be posted on our web site. Our audit committee has also established procedures for (a) the receipt, retention and treatment of complaints received by us regarding accounting, internal accounting controls or auditing matters, and (b) the confidential, anonymous submission by our employees of concerns regarding questionable accounting or auditing matters.

Corporate Governance Guidelines

Our board of directors adopted a set of corporate governance guidelines in January 2011. The guidelines set forth the practices our board follows with respect to, among other things, the composition of the board and board committees, director responsibilities, director continuing education and performance evaluation of the board. The guidelines are posted on our web site atwww.dspg.com.

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rights (1) align our executive officers’ interests with stockholder interests by creating a direct link between compensation and stockholder return; (2) give executive officers a significant, long-term interest in our success; and (3) help retain key executive officers in a competitive market for executive talent. We grant stock options and stock appreciation rights to our executive officers pursuant to our Amended and Restated 2001 Stock Incentive Plan (the “2001 Stock Plan”) and Amended and Restated 2003 Israeli Share Incentive Plan (the “2003 Stock Plan”). In 2007,2010, we provided long-term awards to our executive officers through the grant of stock appreciation rights, which vest based on continued employment consistent with the general vesting schedules discussed below.

Compensation of Executive Chairman and Chief Executive Officer.    The compensation committee’s determination by the compensation committee of theMessrs. Ayalon and Elyakim’s remuneration of Mr. Ayalon generally was based upon methods consistent with those used for the other executive officers. The compensation committee additionally considered the following factors in evaluating the performance of, and setting the compensation for, Mr. Ayalon:each of Messrs. Ayalon and Elyakim: (1) changes in revenues and net income from the previous year; (2) changes in our market share as compared both to our industry peers and to the previous year; (3) changes in the stock price of our common stock as compared both to our industry peers and to the previous year; (4) his contribution to an enhanced research and development strategy in response to changing market trends; (5) his contribution to the hiring and retention of top management personnel; and (6) the time and effort that Mr. Ayaloneach individually applied in connection with the execution of his duties. With respect to the 2010 compensation for Messrs. Ayalon and Elyakim, the compensation committee also considered the company’s success in improving its gross margin and reducing total operating expenses, and the company’s success in restructuring its operations, including its European operations. With respect to Mr. Ayalon’s compensation, the compensation committee also considered the invaluable guidance and insight he provides to our Chief Executive Officer and his inputs on the strategic initiatives of the company in light of his deep understanding of our company, people and products and the semiconductor industry. The compensation committee believes that the salary and long-term incentive compensation paid to Mr.Messrs. Ayalon and Elyakim during 20072010 were appropriate based on the above criteria.

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Equity Incentive Programs

We intend that our equity incentive awards be the primary vehicle for offering long-term incentives and rewarding our executive officers and key employees. We also regard our equity incentive awards as a key retention tool. This is a very important factor in our determination of the type of award to grant and the number of underlying shares that are granted in connection with that award.

Equity incentive awards are granted based upon individual performance measures established for each individual by the compensation committee.committee’s annual review of each executive officer’s performance for the prior year. The size of each grant is generally set at a level that the compensation committee deems appropriate to create a meaningful opportunity for stock ownership, the individual’s position with the company and the individual’s potential for future responsibility and promotion. In the grant of awards, the compensation committee further considers the executive officer’s past performance, the total compensation being paid to the executive officer, the number of options or stock appreciation rights awarded to the executive officer during previous years and the vesting status of such options or rights, and the comparability with option or stock appreciation right grants made to our other executives officers and similarly situated executive officers at peer companies. All awards of stock options and stock appreciation rights are made at the market price at the time of the awards. The determination for the grant of equity incentive awards is discretionary; no specific goals are considered and no specific weigh is given to any particular goal achieved or any other factor by the compensation committee.

Stock Option Awards Granted.    We grant stock option awards to our executive officers and key employees based upon the criteria discussed above. However, there is no set formula for the granting of stock option awards to individual executive officers. Generally, stock options previously granted to our executive officers vest as to 25% of the grant on the first anniversary of the grant date with the remaining options vesting quarterly over the next three years and expiring seven years from the grant date. Stock options previously granted to our Chief Executive Officer Mr. Ayalon

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vest as to 25% of the grant on the grant date with the remaining options vesting annually over the next three years and expiring seven years from the grant date. During 2007, onlyOnly Mr. Robertson was granted a stock option to purchase 50,000 shares of our common stock was granted to Mr. Robertson in connection with his appointment as our President in October 2007.2010.

Stock Appreciation Right Awards Granted.    Due to the evolution of regulatory, tax and accounting treatment of equity incentive programs and because it is important for us to retain our executive officers and key employees, we realized that it is important that we explore the use of other forms of equity awards. During 2006, we began to grant our executive officers a new equity-based award instrument—a sharestock appreciation right,rights, capped with a ceiling. The stock appreciation right confers upon our executive officers the right to stock appreciation over a preset price during a specified period of time. When the stock appreciation right is exercised, the appreciation amount is paid by the issuance of shares. The ceiling limits the maximum income for eachshares of our common stock. For stock appreciation right such that whenawards granted prior to 2009, the fair market value of our common stock is equal to or greater than two times the exercise price of the stock appreciation right, the portion of the stock appreciation rights that is vested on such date is automatically exercised on the next trading day and the appreciation amount is paid to the executive officer by the issuance of the respectivemaximum number of shares of our common stock. stock issuable upon exercise of the stock appreciation right award equaled 50% of the number of stock appreciation rights granted. With respect to the stock appreciation right awards granted in 2009 to our executive officers, the maximum number of shares of our common stock issuable upon exercise of the stock appreciation right award equaled 75% of the number of stock appreciation rights granted. The change to the ceiling percentage was implemented in 2009 in recognition of the unprecedented market conditions in late 2008 and 2009 that drove down the stock price of the company’s stock significantly which resulted in approximately half of the outstanding equity awards to executive officers being out of the money. In January 2010, the compensation committee granted stock appreciation right awards to our executive officers with the maximum number of shares of our common stock issuable upon exercise of the stock appreciation right award equal to 67% of the number of stock appreciation rights granted.

Stock appreciation rights granted to our executive officers generally vest as to 25% of the grant on the first anniversary of the grant date with the remaining stock appreciation rights vesting quarterly over the next three years and expiring seven years from the date of grant. Stock appreciation rights granted to our Chief Executive OfficerMr. Ayalon vest as to 25% of the grant on the grant date with the remaining stock appreciation rights vesting annually over the next three years and expiring seven years from the date of grant.

Grant of stock appreciation rights to our executive officers are generally made based upon the criteria discussed above. However, there is no set formula for the grant of stock appreciation rights to individual executive officers. During 2007, 1,683,6502010, 2,236,700 stock appreciation right units were granted to our employees. Our named executive officers received 330,000490,000 stock appreciation right units or 20%22% of the total stock appreciation right units granted in 2007.2010. The amounts of the above referenced stock appreciation rights granted to each of the named executive officers in 2010 are specified in the 2010 grants of plan based awards table on page 30 of the proxy statement.

In January 2011, the compensation committee granted stock appreciation right awards to our executive officers with a ceiling such that the maximum number of shares of our common stock issuable upon exercise of the stock appreciation right award equals 67% of the number of stock appreciation rights granted.

Timing of Grants.    Equity incentive awards to our executive officers and other key employees are typically granted annually in conjunction with the compensation committee’s review of their individual performance during the prior year. Options and stock appreciation rights are not necessarily granted to each employee every year. Grants of stock options and/or stock appreciation rights to newly hired executive officers who are eligible to receive them generally are made at the next regularly scheduled compensation committee or board meeting following their hire date.

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Stock Ownership Guidelines.    We do not current require our executive officers and members of our board to own a minimum number of shares of our common stock. The compensation committee is satisfied that stock and option holdings among our executive officers and directors are sufficient at this time to provide motivation and to align this group’s interests with those of our stockholders.

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Retirement Benefits and Perquisites

We do not offer any retirement benefits to our Israeli-based executive officers except for social benefits required pursuant to Israeli labor laws, or are common practice in Israel and are generally available to all Israeli employees. Specifically, based on Israeli labor laws, an Israeli employee is entitled to severance pay upon termination of employment for any reason, including retirement, based on the most recent monthly salary of such employee multiplied by the number of years of employment of such employee. We make a payment of 8.333% of each employee’s monthly base salary to an insurance or pension fund to pay for this future liability owed to Israeli employees upon termination of their employment. In addition, we make a payment of 5% of each employee’s monthly base salary to another insurance or pension fund, which accrued amount may be withdrawn by the employee after retirement or, subject to various tax restrictions in Israel, after leaving our employment. We generally provide all of our Israeli employees with a car for business-related purposes and pay the associated expenses (excluding personal taxes on such benefit). Also, as is customary in Israel applicable to all Israeli employees, we provide our Israeli employees with a certain amount of monthly contributions (7.5% of their base salary) for the benefit of each employee’s study and training purposes. The amounts of the above referenced benefits contributed by us to each of the named executive officers in 2010 are specified in the summary compensation table on page 28 of the proxy statement.

With respect to Mr. Robertson, our President until August 2010, who iswas based onin Switzerland, we paypaid half of the contributions to AHV (Old Age and Survivors’ Insurance), IV (Invalidity Insurance), EO (Loss of Earnings) and ALV (Unemployment Insurance) on Mr. Robertson’s behalf and he payspaid the other half of the contributions. Mr. Robertson also participateparticipated in our Swiss pension plan, which was formerly the NXP Semiconductors Switzerland AG pension plan that was transferred to us in connection with our acquisition of the cordless and VoIP terminals business of NXP B.V. in September 2007. The contributions and the benefits under the Swiss pension plan arewere determined by the rules and regulations in force at any given time of the relevant pension plan. We dodid not offer Mr. Robertson any retirement benefits that arewere not generally available to our Swiss employees in a managerial function. The amounts of the above referenced benefits contributed by us to Mr. Robertson in 2010 are specified in the summary compensation table on page 28 of the proxy statement.

We currently do not provide any material benefits to our executive officers that are not generally available to our employees.

Employment Agreements and Post-Termination Protection

The compensation committee also recognizes that, from time to time, it is appropriate to enter into agreements with certain key employees to ensure that we continue to retain their services and to promote stability and continuity within our company. Moreover, employment agreements are generally customary for employees residing in Israel. We have entered into employment agreements with our Named Executive Officers.named executive officers. The varied terms of their employment agreements reflect the importance of retaining their services and their potential contributions to the attainment of our long-term goals. TheirNone of the employment agreements with our named executive officers provide for tax gross ups and none includes any “single trigger” change-in-control provisions. The employment agreements with our named executive officers are described beginningstarting on page 3032 of thisthe proxy statement.

Financial Restatements

The compensation committee has not adopted a policy with respect to whether we will make retroactive adjustments to any cash- or equity-based incentive compensation paid to executive officers (or others) where the payment was predicated upon the achievement of financial results that were subsequently the subject of a restatement. Our compensation committee believes that this issue is best addressed when the need actually arises, when all of the facts regarding the restatement are known.

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Tax and Accounting Treatment of Compensation

Section 162(m) of the Internal Revenue Code, enacted in 1993, generally disallows a tax deduction to publicly held companies for compensation exceeding $1 million paid to certain of the corporation’scompany’s executive officers. The limitation applies only to compensation which is not considered to be performance-based. Only our

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2001 Stock Plan is structured so that any compensation deemed paid to an executive officer in connection with the exercise of option grants made under the plan will qualify as performance-based compensation which will not be subject to the $1 million limitation. Generally, our executive officers are granted stock options and stock appreciation rights under the 2001 Stock Plan and the 2003 Stock Plan. The compensation committee is aware of the limitations imposed by Section 162(m), and the exemptions available therefrom, and will address the issue of deductibility when and if circumstances warrant, and may use such exemptions in addition to the exemption contemplated under the 2001 Stock Plan.warrant. The compensation committee also reserves the right to use its judgment to authorize compensation payments that do not comply with the exemptions in Section 162(m) when the committee believes that such payments are appropriate and in the best interests of our stockholders, after taking into account changing business conditions or the executive officer’s performance. In addition, the compensation committee cannot ensure that compensation intended to qualify for deductibility under Section 162(m) will in fact be deductible because: (1) a number of requirements must be satisfied in order for the compensation to qualify; and (2) uncertainties as to the application and interpretation surrounding this section currently exist.

Compensation Committee Report

The compensation committee has reviewed and discussed the Compensation Discussion and Analysis set forth above with our management. Based on its review and discussions, the committee recommended to our board of directors that the Compensation Discussion and Analysis be included in this report.

Submitted by the compensation committee:

Zvi Limon

Yair Shamir

Louis Silver

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20072010 Summary Compensation Table

The following table sets forth the total compensation awarded to, earned by or paid to our Executive Chairman of the Board of Directors, principal executive officer, former president, principal financial officer and the three other highest paid executive officers whose total compensation in fiscal year 20072010 exceeded $100,000 for the periods presented. We refer to these executive officers as our “Named Executive Officers.“named executive officers.”

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20072010 All Other Compensation

The following table setstables set forth all other compensation awarded to, earned by or paid to each of our Named Executive Officersnamed executive officers during fiscal year 2007.2010. The NIS amounts relating to the 2010 all other compensation for Messrs. Ayalon, Elyakim, Edan, Levy and Fogel are translated into U.S. dollar at the average annual exchange rate of NIS into U.S. dollar. The Swiss Franc (CHF) amounts relating to the 2010 all other compensation for Mr. Robertson are translated into U.S. dollar at the average annual exchange rate of CHF into U.S. dollar.

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20072010 Grants of Plan Based Awards

The following table sets forth each equity award granted to our Named Executive Officersnamed executive officers during fiscal year 2007.2010.

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Outstanding Equity Awards at Fiscal Year-End 20072010

The following table sets forth information concerning unexercised options and stock appreciation rights held by each of our Named Executive Officersnamed executive officers as of December 31, 2007.2010. None of our Named Executive Officersnamed executive officers had any stock awards outstanding at fiscal year-end 2007.2010.

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20072010 Option Exercises and Stock Vested

None of our Named Executive Officersnamed executive officers exercised any options or stock appreciation rights during fiscal year 2007.2010. None of our Named Executive Officersnamed executive officers has received any stock awards and therefore no shares were acquired upon vesting of any stock awards.

Nonqualified Deferred Compensation

We do not provide any nonqualified defined contribution or other deferred compensation plans to our Named Executivenamed executive officers.

Employment Agreements

Each of our Named Executive Officersnamed executive officers has a written employment agreement with us.

In April 1996, Mr.Eliyahu Ayalon entered into an employment agreement with DSP Group, Ltd., our wholly-owned subsidiary in Israel (“DSP Israel”), pursuant to which Mr. Ayalon was to serve as our President and Chief Executive Officer. The term of the agreementMr. Ayalon is indefinite. Effective January 1, 2003,employed at will. Mr. Ayalon’s current annual salary was increased to $350,000,is $315,000, subject to adjustment from time to time. In addition to any other bonus program approved by the board, Mr. Ayalon is also entitled to an annual bonus, the amount of which is determined in the sole discretion of the board. The agreement may be terminated by us or Mr. Ayalon, without cause, upon a six-month advance written notice.compensation committee of our board of directors. Mr. Ayalon’s employment agreement, wasas amended, in November 1997 to provideprovides for the following: (i) Mr. Ayalon’s base compensation shall beis fixed at the commencement of each year but shallwould not be subject to reduction during the term of the agreement, (ii) if Mr. Ayalon terminates thedesires to terminate his employment agreement without good reason (as defined in the employment agreement), he will have to notify the company six months in advance and then all of his rights under the employment agreement would continue during the six-month notice period plus two years, and all equity awards held by Mr. Ayalon would accelerate and immediately vest 6 months following the date of such notice and be exercisable in whole or in part at any time from the date of the vesting of the equity awards for a period that is the longer of two years or as long as Mr. Ayalon serves as a board member, but not later than the expiration of the SARs/options based on their original terms, (iii) if we terminatethe company terminates the agreement for cause, then no further payments shallwould be made to Mr. Ayalon pursuant to the agreement and he shallwould be subject to a one-year prohibition against competition in addition to the customary prohibitions against disclosure of trade secrets, (iii) upon our change of control or(iv) if the company terminates the

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agreement is terminated by Mr. Ayalon for good reason or by us without cause, then all rights of Mr. Ayalon under the agreement would continue for two years and all optionsequity awards held by Mr. Ayalon shallwould accelerate and immediately vest and be exercisable in whole or in part at any time duringfrom the remaining two-year termdate of the agreement, and (iv)vesting of the equity awards for a period that is the longer of two years or as long as Mr. Ayalon serves as a board member, but not later than the expiration of the SARs/options based on their original terms, (v) in the event of death or permanent disability of Mr. Ayalon, all options shallof his equity awards would accelerate and immediately vest. The board further amended Mr. Ayalon’s agreementvest and be exercisable in November 1999 to provide that if Mr. Ayalon terminates the agreement voluntarilywhole or in part at any time provided that he gives a 12-months advance written notice, then all rights of Mr. Ayalon under the agreement would continue during the notice period and for two years and all options held by Mr. Ayalon shall be fully vested six months afterfrom the date of the notice. Additionally, these amendments provide that all vested options held by Mr. Ayalon uponvesting of the date of his cessation of employment with us for any reason shall be exercisableequity awards for a period of two years.years, and (vi) upon a change of control of the company but only if Mr. Ayalon’s employment is terminated, all of his rights under the employment agreement would continue for a period of two years and all equity awards held by Mr. Ayalon would accelerate and immediately vest and be exercisable in whole or in part at any time from the date of the vesting of the equity awards for a period that is the longer of two years or as long as Mr. Ayalon serves as a board member, but not later than the expiration of the SARs/options based on their original terms. In December 2010, Mr. Ayalon notified the company that he intended to resign as Executive Chairman and an executive officer of the company, effective as of May 31, 2011. Thereafter, Mr. Ayalon will continue as a non-executive director and Chairman of the board.

In connection with Ofer Elyakim’s appointment as our Chief Executive Officer in July 2009, he entered into an employment agreement with DSP Israel, effective July 1, 2009. Mr. Elyakim’s current annual salary is $260,000, subject to adjustment from time to time. In addition to any other bonus program approved by the board, Mr. Elyakim is entitled to an annual bonus, the amount of which is determined in the sole discretion of the compensation committee of our board of directors. Mr. Elyakim is employed at will. In January 2011, Mr. Elyakim’s employment agreement was amended to set forth that in the event Mr. Elyakim desires to terminate his employment with the company without good reason (as defined in his employment agreement), he will have to notify us nine months in advance. Similarly, if we desire to terminate Mr. Elyakim’s employment with the company without good reason, we will have to notify Mr. Elyakim nine months in advance. However, if we wish to terminate Mr. Elyakim’s employment but fails to provide him with the nine-months advance written notice, Mr. Elyakim would be entitled to receive an amount equal to the nine-months of his then-effective salary. Mr. Elyakim’s employment agreement does not provide for any additional compensation in the event of termination of his employment or the change in control of our company.

In June 2002, in connection with Dror Levy’s initial employment as our Controller, he entered into an employment agreement with DSP Israel. No further agreement was entered into with Mr. Levy when he became our Chief Financial Officer. Mr. Levy’s current annual salary is approximately $204,400, subject to adjustment from time to time (Mr. Levy’s salary is determined in NIS and is 60,000 NIS per month). In addition to any other bonus program approved by the board, Mr. Levy is entitled to an annual bonus, the amount of which is determined in the sole discretion of the compensation committee of our board of directors. Mr. Levy is employed at will. In January 2011, Mr. Levy’s employment agreement was amended to set forth that in the event Mr. Levy desires to terminate his employment with the company without good reason (as defined in his employment agreement), he will have to notify us five months in advance. Similarly, if we desire to terminate Mr. Levy’s employment with the company without good reason, we will have to notify Mr. Levy five months in advance. However, if we wish to terminate Mr. Levy’s employment but fails to provide him with the five-months advance written notice, Mr. Levy would be entitled to receive an amount equal to the five-months of his then-effective salary. Mr. Levy’s employment agreement does not provide for any additional compensation in the event of termination of his employment or the change in control of our company.

In connection with Lior Blanka’s initial employment as Corporate Vice President and Platform Division Manager of the company, he entered into an employment agreement with DSP Israel, effective July 2007. No further agreement was entered into with Mr. Blanka when he became our Chief Technology Officer. Mr. Blanka’s current annual salary is approximately $197,600, subject to adjustment from time to time (Mr. Blanka’s salary is determined in NIS and is 58,000 NIS per month). In addition to any other bonus program approved by the board, Mr. Blanka may be entitled to an annual bonus, the amount of which is determined in the sole discretion of the compensation committee of our board of directors. Mr. Blanka is employed at will. Mr. Blanka’s employment agreement sets forth that in the event Mr. Blanka desires to terminate his employment

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with the company without good reason (as defined in his employment agreement), he will have to notify us three months in advance. Similarly, if we desire to terminate Mr. Blanka’s employment with the company without good reason, we will have to notify Mr. Blanka three months in advance. Mr. Blanka’s employment agreement does not provide for any additional compensation in the event of termination of his employment or the change in control of our company.

In connection with Mr. Robertson’s initial employment as Vice President & BL Manager, Cordless & Internet Protocol Terminals after outour acquisition of the cordless and VoIP terminals business of NXP B.V., he entered into an employment agreement with DSP Group Switzerland AG, one of our wholly-owned subsidiariesSwiss subsidiary (“DSP Switzerland”), effective September 1, 2007. The agreement remains unchanged notwithstanding Mr. Robertson’s appointment as our President. The agreement provides for a fixed salary of CHF 312,531.25 (was approximately U.S. $270,000 at the date of signing) (the “Annual Salary”) to be paid in 13 monthly installmentsIn August 2010, DSP Switzerland and Mr. Robertson is entitledentered into a termination agreement. Pursuant to an annual bonus, the amount of which is determined in the sole discretion oftermination agreement, Mr. Robertson resigned as our board of directors.President effective August 20, 2010 and his employment with DSP Switzerland terminated on January 31, 2011. In connection with his termination of employment, Mr. Robertson received a severance payment of approximately $124,000, less statutory and contractual deductions. In accordance with the agreement relating to Mr. Robertson’s initial employment, he is entitledpreviously granted stock option awards, such stock options continued to a one-time performance bonus of 80% of the Annual Salary (the “Performance Bonus”) payable as follows: (1) 40% of the Performance Bonus is payable on September 1, 2008;vest until January 31, 2011 and (2) the remaining 40% is payable in four equal installments on the last day of each completed quartersuch stock options were exercisable within 90 days thereafter. Each payment of Performance Bonus is payable only if Mr. Robertson has not resigned from DSP Switzerlandagreed to specified noncompetition and DSP Switzerland has not terminated his employmentnon-solicitation covenants for a justified reason at the time that any paymentperiod of Performance Bonus is due. Mr. Robertson’s12 months from January 31, 2011, as well as confidentiality covenants agreed upon in his original employment with us may be terminated at any time by either party and for any reason upon three months prior notice.agreement.

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In May 1999, Mr. Edan entered into an employment agreement with DSP Israel, pursuant to which Mr. Edan was to serve as our Vice President of Operations. In October 2002, Mr. Edan became our Chief Operating Officer. In May 2007, the compensation committee determinedPursuant to restate Mr. Edan’s base salary in NIS, the Israeli currency, and link annual base salary increases to the Israeli consumer prices index. Also as of May 2007, Mr. Edan’s annual salary was increased to 840,000 NIS (approximately $250,000), subject to adjustment from time to time. The term of thea separation agreement is indefinite. Mr. Edan also is entitled to an annual bonus, the amount of which is determined in the sole discretion of the board. The agreement may be terminated by us or Mr. Edan upon a 90-days advance written notice. However, we have the right to terminate Mr. Edan’s employment without prior notice. In such a case, Mr. Edan shall be paid the amount due to him under the prior notice period at the rate of his then current salary for such period. In July 2003, we agreed to amend all of Mr. Edan’s outstanding option agreements to provide that in the event of his termination by us without cause, all of his options would vest upon termination and could be exercised for a period of two years following termination. Also, in the event Mr. Edan’s employment was terminated because of his death or permanent disability, all of his options would accelerate and immediately vest.

In June 2002, in connection with Mr. Levy’s initial employment as our Controller, he entered into an employment agreement with DSP Israel. No further agreement was entered into with Mr. Levy whenEdan, effective on November 30, 2009, his employment with us terminated on May 31, 2010. In accordance with the agreements relating to Mr. Edan’s previously granted equity awards, such equity awards accelerated and fully vested on May 31, 2010 and he became our Chief Financial Officer. Inhas until May 2007, the compensation committee determined31, 2012 to restate Mr. Levy’s base salary in NIS, the Israeli currency, and link annual base salary increasesexercise such equity awards. Also pursuant to the Israeli consumer prices index. Alsoseparation agreement, Mr. Edan agreed to comply with specified noncompetition and non-solicitation covenants until May 31, 2013, as of October 2007, Mr. Levy’s annual salary was increased to approximately 600,000 NIS ($170,000), subject to adjustment from time to time. Mr. Levy also is entitled to an annual bonus, the amount of which is determined in the sole discretion of the board. Mr. Levy is employed at will. However, if we wish to terminate his employment but fails to provide him withwell as a three-months advance written notice, Mr. Levy would be entitled to receive an amount equal to three-months of his then-effective salary. Further, if Mr. Levy’s employment is terminated for specified reasons (as defined in the employment agreement), in accordance with Israeli law, he would be entitled to a severance pay of one month for each year of employment. Mr. Levy’s employment agreement does not provide for any additional compensation in the event of termination of his employment or the change in control of our company.non-disparagement covenant.

In July 2003, Mr. Fogel entered into an employment agreement with DSP Israel, pursuant to which Mr. Fogel was to serve as our Senior Vice President and Chief Technology Officer. In July 2010, Mr. Fogel became an executive officer in January 2005. The term of the agreement is indefinite. In May 2007, the compensation committee determined to restate Mr. Fogel’s base salary in NIS, the Israeli currency,resigned as our Chief Technology Officer and link annual base salary increases to the Israeli consumer prices index. Also as of May 2007, Mr. Fogel’s annual salary was increased to 720,000 NIS (approximately $210,000), subject to adjustment fromreduced his work time to time. Mr. Fogel also is entitled to an annual bonus, the amount of which is determined in the sole discretion of the board. The agreement may be terminated by us or Mr. Fogel upon two-month advance written notice. However, if we wish to terminate his employment but fails to provide him50%. In connection with a two-month advance written notice, Mr. Fogel would be entitled to receive an amount equal to two-months of his then-effective salary. Further, if Mr. Fogel’s employment is terminated for specified reasons (as defined in the employment agreement), in accordance with Israeli law, he would be entitled to a severance pay of one month for each year of employment.these changes, Mr. Fogel’s employment agreement does notwas amended, effective July 8, 2010, to provide for any additional compensation in the event of termination of his employment or the change in control of our company.

In February 2006,that Mr. Simchony entered into an employment agreement with DSP Israel, pursuantFogel’s salary would be reduced to which Mr. Simchony was to serve as our President. Pursuant to the Agreement, Mr. Simchony was entitled to an annual salary of $220,000, subject to adjustment from time to time. Mr. Simchony also was entitled to an annual bonus, thea gross monthly amount of which was determined in the sole discretion of the board. Mr. Simchony was employed at will. However, if we wish to terminate his employment but failed to provide him with a three-month advance written notice, Mr. Simchony would be entitled to receive an amount equal to three-months of his then-effective salary. Further, if Mr. Simchony’s employment was terminated for specified reasons (as defined in the employment agreement), in accordance with Israeli law, he would be entitled to a severance pay of one month for each year of employment. Mr. Simchony’s employment agreement did not provide for any additional compensation in the

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event of termination of his employment or the change in control of our company. Mr. Simchony resigned from the company in October 2007, and his employment agreement was terminated.NIS 30,000 (approximately U.S.$7,750).

Potential Payments Upon Termination or Change of Control

The following table setstables set forth the amount of compensation to each of Messrs. Ayalon, Robertson, Edan,Elyakim, Levy and Fogel in the event termination of such executive officer’s employment or a change in control of our company occurred as of December 31, 2007.2010.

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The following tables set forth the actual payments made to each of Messrs. Edan and Robertson in connection with their termination of employment with the company prior to and after December 31, 2010, respectively.

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2935

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DIRECTOR COMPENSATION

We use a combination of cash and stock-based incentive compensation to attract and retain qualified candidates to serve on our board. In setting director compensation, we consider the significant amount of time that directors expend in fulfilling their duties to the company as well as the skill-level we require of members of our board. We do not currently have a minimum share ownership requirement for our directors.

Cash Compensation Paid to Board Members

Directors who are also employees do not receive any additional compensation for their services as directors. Directors who are not employees receive an annual retainer of $32,000, payable in quarterly installments of $8,000 each. The retainer contemplates attendance at four board meetings per year. Additional board meetings of a face-to-face nature are compensated at a rate of $1,000 per meeting. In addition, committee meetings of a face-to-face nature and on a telephonic basis are compensated at a rate of $1,000 per meeting. All directors are reimbursed for expenses incurred in connection with attending board and committee meetings.

Stock Option Program

Each of our non-employee directors is also entitled to participate in our 1993 Director Stock Option Plan. The director option plan provides for the grant of non-statutory options to our non-employee directors. The director option plan is designed to work automatically; however, to the extent administration is necessary, it will be provided by our board of directors. The director option plan provides that each eligible director is granted an option to purchase 30,000 shares of our common stock on the date on which he first becomes a director (the “First Option”). Thereafter, each non-employee director is granted a subsequent option to purchase 15,000 shares of our common stock on January 1 of each year if, on such date, he shall have served on our board of directors for at least six months (a “Subsequent Option”). In addition, an additional option to purchase 15,000 shares of our common stock (a “Committee Option”) is granted on January 1 of each year to each non-employee director for each committee of the board on which he shall have served as a chairperson for at least six months.

The following table sets forth the compensation paid to each of our non-employee directors during fiscal year 2007.2010.