UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
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DSP GROUP, INC.
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(NameGroup, Inc.
(Name of Registrant as Specified inIn Its Charter)

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PRELIMINARY PROXY STATEMENT — SUBJECT TO COMPLETION
DSP GROUP, INC.
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JULY 19, 1999

INC.
Notice of Annual Meeting of Stockholders
To Be Held June 9, 2014
To the Stockholders of DSP GROUP, INC.:
NOTICE IS HEREBY GIVEN that the Annual Meetingannual meeting of Stockholders (the
"Annual Meeting")stockholders of DSP Group, Inc., a Delaware corporation, (the "Company"),
will be held at the Company's principal executive offices located at 3120
Scott Boulevard, Santa Clara, California,InterContinental New York Barclay, 111 East 48^th Street, New York City, New York, on Monday, July 19, 1999,June 9, 2014, at 9:008:30 a.m., local time, for the following purposes:
1. ELECTION OF DIRECTORS.Election of Class II Directors. To elect twothree Class II directors, of the
CompanyOfer Elyakim, Gabi Seligsohn and Yair Seroussi, each to serve until the 2002 Annual Meeting2015 annual meeting of Stockholdersstockholders (if Proposal 2 is approved) or until the 2017 annual meeting of stockholders (if Proposal 2 is not approved), and until their successors are elected and qualified;

qualified, subject to their earlier resignation or removal;
2. AMENDMENT AND RESTATEMENT OF THE DSP GROUP, INC. 1993 DIRECTOR
STOCK OPTION PLAN. To ratify and approve an amendment to the DSP Group, Inc.
1993 Director Stock Option Plan to increase the numberAmendment of shares of Common
Stock reserved for issuance thereunder from 175,000 to 275,000 shares;

3. AMENDMENT AND RESTATEMENT OF THE DSP GROUP, INC. 1991 EMPLOYEE
AND CONSULTANT STOCK PLAN. To ratify and approve an amendment to the DSP
Group, Inc. 1991 Employee and Consultant Stock Plan to increase the number of
shares of Common Stock reserved for issuance thereunder from 2,800,000 to
4,300,000 shares;

4. AMENDMENT OF RESTATED CERTIFICATE OF INCORPORATION. To ratify
and approve an amendment to Article IV of the Company's Restated Certificate of Incorporation to increase. To approve the numberamendment of sharesthe Restated Certificate of Common Stock authorized
for issuance byIncorporation of the Company, from 20,000,000 sharesas amended, to 50,000,000 shares.

5. SELECTION OF INDEPENDENT AUDITORS.eliminate the classified structure of the Board of Directors;
3. Selection of Independent Auditors. To ratify the appointment of Kost Forer Gabbay & Gabbay,Kasierer, a member of Ernst & Young International,Global, as the Company’s independent auditors for the Company for the year ending December 31, 1999;2014;
4. Compensation of the Named Executive Officers. Advisory vote to approve the Company’s named executive officers compensation; and

6.
5. To transact such other business as may properly come before the Annual Meetingannual meeting and any adjournment or postponement thereof.
The foregoing items of business are more fully described in the Proxy Statementproxy statement which is attached and made a part hereof. The BoardOur board of Directorsdirectors has fixed the close of business on June 4,
1999April 11, 2014 as the record date for determining the stockholders entitled to notice of and to vote at the Annual Meetingannual 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. 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.

By Order
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 Boardannual 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 Directors

Igal Kohavi,
CHAIRMAN OF THE BOARD

Santa Clara,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.
By Order of the Board of Directors,
Ofer Elyakim
Chief Executive Officer
Los Altos, California
June __, 1999

April [●], 2014
Mailed to Stockholders
on or about June __, 1999

April [●], 2014
PRELIMINARY PROXY STATEMENT — SUBJECT TO COMPLETION
DSP GROUP, INC.
3120 SCOTT BOULEVARD
SANTA CLARA, CALIFORNIA 95054

PROXY STATEMENT

GENERAL INFORMATION

This
161 S. San Antonio Road, Suite 10
Los Altos, CA 94022
Proxy Statement
for 2014 Annual Meeting of Stockholders
General Information
This proxy statement is furnished to the stockholders of DSP Group, Inc., a Delaware corporation, (the "Company"), in connection with the solicitation by the Boardour board of Directors (the "Board") of the Companydirectors of proxies in the accompanying form for use in voting at the Annual Meetingannual meeting of Stockholders of the Company (the "Annual Meeting")stockholders to be held on Monday, July
19, 1999,June 9, 2014, at 9:008:30 a.m., local time, at the Company's principal executive
offices located at 3120 Scott Boulevard, Santa Clara, California,InterContinental New York Barclay, 111 East 48^th Street, New York City, New York, and any adjournment or postponement thereof. The shares represented by the proxies received, properly marked, dated, executed and not revoked will be voted at the Annual Meeting.

REVOCABILITY OF PROXY

Any proxy given pursuant to this solicitation may be revoked by the
person giving it at any time before it is exercised by: (i) delivering to the
Company (to the attention of Moshe Zelnik, the Company's Secretary) a written
notice of revocation or a duly executed proxy bearing a later date or (ii)
attending the Annual Meetingannual meeting.
Solicitation, Record Date and voting in person.

SOLICITATION AND VOTING PROCEDURES

Voting Procedures
The solicitation of proxies will be conducted by mail and the
Companywe will bear all attendant costs. These costs will include the expense of preparing and mailing proxy materials for the Annual Meetingannual meeting and reimbursements paid to brokerage firms and others for their expenses incurred in forwarding solicitation material regarding the Annual Meetingannual meeting to beneficial owners of the Company's Common Stock. The Companyour common stock. We may conduct further solicitation personally, telephonically or by facsimile through itsour officers, directors and regular employees, none of whom will receive additional compensation for assisting with the solicitation.
The close of business on June 4, 1999April 11, 2014 has been fixed as the record date (the "Record Date") for determining the holders of shares of Common
Stock of the Companyour common stock entitled to notice of and to vote at the Annual Meeting.annual meeting. As of the close of business on the Record Date, the Companyrecord date, we had ____________[●] shares of Common Stockcommon stock outstanding and entitled to vote at the Annual
Meeting, held by _____ stockholders of record.annual meeting. The presence at the Annual
Meetingannual meeting of a majority or ____________ of these shares of Common Stock of the
Company,our common stock, either in person or by proxy, will constitute a quorum for the transaction of business at the Annual Meeting.annual meeting. An automated system administered by the Company'sour transfer agent will tabulate votes cast by proxy, and an employee of thea representative from our transfer agent will act as the inspector of elections to tabulate votes cast in person at the Annual Meeting.annual meeting. Each outstanding share of Common Stockcommon stock on the Record Daterecord date is entitled to one vote on all matters. Directors shall be
elected by a plurality
Under the General Corporation Law of the votes cast.

The approvalState of the amendmentDelaware, an abstaining vote and restatement of the Company's 1993
Director Stock Option Plana broker “non-vote” are counted as present and 1991 Employee and Consultant Stock Plan and
the ratification of the independent auditors of the Companyare, therefore, included for the current
year will require the affirmative vote of a majority of the shares of the
Company's Common Stock present or represented and entitled to vote at the
Annual Meeting. The amendment of the Restated Certificate of Incorporation to
increase the number of authorized shares of Common Stock will require the
affirmative vote of a majority of the shares of the Company's outstanding
Common Stock. Because abstentions are treated as shares present or
represented and entitled to vote for the purposes of determining whether a matter has been approved byquorum of shares is present at the annual meeting. Abstentions are included in determining the number of shares voted on the proposals submitted to stockholders abstentionsand will have the same effect as negative votes.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“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 stockholderstockholders’ approval of that matter has been obtainedobtained. Pursuant to New York Stock Exchange (“NYSE”) Rule 452, proposal 1 (election of directors), proposal 2 (declassification of the board) and effectivelyproposal 4 (say-on-pay proposal) are non-routine matters and, therefore, may not be voted upon by brokers without instruction from beneficial owners.

With respect to proposal 1 of this proxy statement, each 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 not 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 votes against Proposal
Number 4, the amendment to the Restated Certificate of Incorporation.
However,a vote cast with respect to Proposal

Numbersa 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 proposal 2 of this proxy statement, the affirmative vote of 66 2/3 and 5 requiringpercent (66-2/3%) of shares of our common stock is required for approval. With respect to proposal 3 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 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, although such vote will not be binding on us. Abstentions will have the same effect as “no” votes on proposals 2, 3 and 4 presented at this annual meeting. Broker “non-votes” will have the same effect as “no” votes on proposal 2, and no effect on proposals 3 and 4, presented at this annual meeting.
The Proxy
The persons named as proxy holders, Ofer 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 proposals 2, 3 and 4; and (3) 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 presentof 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 principal executive offices, a written notice of revocation or a duly executed proxy bearing a later date, or (ii) attending the annual meeting and entitledvoting 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 broker non-votes shall have no effect.

2
in person to the inspector of elections at the annual meeting.

PROPOSAL NO. 1
ELECTION OF DIRECTORS

The Company's Bylaws
Our bylaws currently authorize the number of directors to be not less than five noror more than nine. The number of directors on the Boardour board of directors is currently fixed at six. The Company's Boardnine. Our current restated certificate of Directorsincorporation and bylaws provide that the board is to be divided into three classes: Class I, Class II and Class III. Each director serves a three-year term. The Boardboard is currently composed of twothree Class I directors (Messrs. Ayalon(Dr. Reuven Regev, and Limon)Messrs. Norman J. Rice III and Norman P. Taffe), whose terms will expire upon the election and
qualification of directors at the annual meeting of stockholders to be held in 2001; two2016; three Class II directors (Messrs. ShamirOfer Elyakim, Gabi Seligsohn and Shani)Yair Seroussi,), whose terms are expiring at this annual meeting; and three Class III directors (Messrs. Tom Lacey, Kenneth H. Traub and Patrick Tanguy), whose terms will expire at the Annual Meeting and who have been nominated by the Company's
Board to continue to serve as Class II directors for a three-year term
following the Annual Meeting; and two Class III directors (Messrs. Kaplan and
Kohavi), whose terms will expire upon the election and qualification of
directors at the annual meeting of stockholders to be held in 2000.2015.
If Proposal 2 (approval to amend our restated certificate of incorporation to eliminate the classified board structure) is approved, our board will no longer be classified, and all nominees will serve for a one-year term, rather than a three-year term. Specifically, at this annual meeting, if Proposal 2 is approved by stockholders, each Class II director elected by stockholders will hold office for a one-year term expiring at the 2015 annual meeting of stockholders. At eachthe 2015 annual meeting of stockholders, if Proposal 2 has been approved at this annual meeting, each Class III director elected by stockholders will hold office for a one-year term expiring at the 2016 annual meeting of stockholders and the Class II directors previously elected also will need to be re-elected to continue to hold office for another one-year term expiring at the 2016 annual meeting of stockholders. At the 2016 annual meeting of stockholders, if Proposal 2 has been approved at this annual meeting, each Class I director elected by stockholders will hold office for full termsa one-year term expiring at the 2017 annual meeting of stockholders and the Class II and Class III directors previously elected by stockholders also will need to be re-elected to continue to hold office for another one-year term expiring at the 2017 annual meeting of stockholders.
At this annual meeting, the stockholders will elect three years to succeed those directors whose terms are expiring.

In February 1999, in connection with the Stock Purchase Agreement
entered into between the CompanyClass II directors. Ofer Elyakim, Gabi Seligsohn and Magnum Technologies Ltd., the Board
appointed Messrs. Limon and Shani to the Board and concurrently amended the
Company's Bylaws to fix the number of directors serving on the Board at seven.

In June 1999, Millard Phelps resignedYair Seroussi have each been nominated as a Class II director. The
remaining directors ondirector each to serve until the Board amended the Company's Bylaws to fix the
number of directors serving on the Board at six.

At the Annual Meeting, the stockholders will elect two Class II
directors, who will each serve a three-year term until the2015 annual meeting of stockholders to be held in 2002(if Proposal 2 is approved) or until the 2017 annual meeting of stockholders (if Proposal 2 is not approved) and until their successors are elected or appointed and qualified, or until the directors'their earlier resignation or removal. The BoardOur board has no reason to believe that the persons named beloweach of Messrs. Elyakim, Seligsohn and Seroussi will be unable or unwilling to serve as a nominee ordirector if elected.
Class II Director Nominees
Ofer Elyakim, 44, currently serves as our Chief Executive Officer and a member of the Board of Directors. Mr. Elyakim joined us in January 2006 as Director of Business Development and Investor Relations, and was promoted to Vice President of Business Development in May 2007. He was promoted to Senior Vice President, President of South East Asia Operations in May 2008. In July 2009, Mr. Elyakim was appointed our Chief Executive Officer. In May 2011, Mr. Elyakim was appointed to our board. Previously, Mr. Elyakim worked as a director if elected.

Certain information about Messrs. Shamirresearch analyst covering media and Shani, the Class II
nominees, is furnished below:

YAIR SHAMIR has beenbroadcasting 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 Directormember of Ernst & Young Global. A certified public accountant, Mr. Elyakim holds an MBA with honors from Columbia Business School and a BA in Computer Science and Accounting from Tel Aviv University. We believe Mr. Elyakim’s qualifications to sit on our board includehis extensive knowledge of the Company since October 1996company, its products, strategies, and customers through his employment with the company, including as our Chief Executive Officer, his strong leadership skills and his broad experience in executive management roles.

Gabi Seligsohn, 47, has served as one of our directors since May 2013. Mr. Seligsohn was recently appointed as Chief Executive Officer of Kornit Digital Ltd. Kornit Digital develops, manufactures and markets industrial and commercial printing solutions for the garment, apparel and textile industries. Mr. Seligsohnserved as the President and Chief Executive Officer of VCON
Telecommunications, Ltd.Nova Measuring Instruments (NASDAQ: NVMI), a developerprovider of leading-edge stand-alone metrology and marketerthe market leader of video conferencing
systems, since February 1997. From July 1995integrated metrology solutions to February 1997,the semiconductor process control market (“Nova”), from August 2006 to August 2013. Mr. ShamirSeligsohn joined Nova in 1998 and served in several key positions in the company, including as the Executive Vice President, Global Business Management Group from August 2005 to August 2006. From August 2002 until August 2005, Mr. Seligsohn was President of The Challenge Fund-Etgar L.P., a
venture capital firm.Nova’s U.S. subsidiary, Nova Inc. Prior to that, he was Vice President Strategic Business Development at Nova Inc. where he established Nova’s OEM group managing the Applied Materials and Lam Research accounts between the years 2000 to 2002. From January 19941998 to July 1995,2000 he served as Chief
Executive OfficerGlobal Strategic Account Manager for Elite Industries, Ltd.the company’s five leading customers. Mr. Seligsohn joined Nova after serving as a Sales Manager for key financial accounts at Digital Equipment Corporation. Mr. Seligsohn holds an LL.B. from the University of Reading in England. He was voted CEO of the year for the Israeli Hi-Tech industry by the Israeli management institute in 2010. We believe Mr. Seligsohn’s qualifications to sit on our board include his experience as CEO of leading complex global organizations, his financial expertise, his vast experience in leading a NASDAQ-listed company, as well as his executive leadership and management experience.
Yair Seroussi, 58, has served as one of our directors since February 2002. Since 2009 Mr. Seroussi has been the Chairman of the board of directors of Bank Hapoalim, Israel’s leading bank. Mr. Seroussi served as President of the Israeli Bank Association from 2009 to 2011. Mr. Seroussi was the founder and head of Morgan Stanley Israel for 16 years. He was the founder and Chairman of Mustang Mezzanine Fund. He served as the Chairman of the Investment Committee of Mivtachim, Israel’s largest pension fund, and founded and was a food products company.member of various investments committees of private equity funds. Mr. Shamir currently servesSeroussi served as a director of Mercury Interactive, Orckit
Communications, Limited,Israel Corp and Frutarom Industries. Mr. Seroussi is a developer and manufacturer of local loop
communications systems and VCon Telecommunications, Ltd.

SAUL SHANI has been a Directormember of the Company since February 1999.Board of Governors of the Hebrew University, and Chairman of the Eli Hurvitz Strategic Management Forum at the Tel Aviv University. Mr. Shani hasSeroussi served since 1996 as Managing Directorover a decade in Israel’s Ministry of Limon Holdings, Ltd.,Finance where he held several senior positions. Mr. Seroussi holds a consultingBachelor’s degree in Economics and Political Science from the Hebrew University. We believe Mr. Seroussi’s qualifications to sit on our board include his years of experience providing strategic and investment advisory firm. He alsoservices to companies, as well as his leadership and risk assessment skills, and directorship expertise by being a director of various Israeli companies.
Director Independence
Our board of directors has serveddetermined that the director nominees, Messrs. Seligsohn and Seroussi, are “independent” as Chairmanthat term is defined in the published listing requirements of NASDAQ. Director nominee Mr. Elaykim is not deemed “independent” as he is the company’s Chief Executive Officer.

Required Vote
Pursuant to NYSE Rule 452, the uncontested election of directors is no longer a routine matter and, Directortherefore, 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 Global Village Telecom N.V.,specific instructions from such beneficial owners, vote the shares in favor of a private company engageddirector 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 will not affect the election of a Class II director nominee who receives a plurality of votes. Nevertheless, the Company’s bylaws specify that in providing satellite based telephony services, since 1998. From 1990an 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 1996,
Mr. Shani served as co-founder, CEO, Chairman,a director nominee. The nominating and Directorgovernance committee of Sapiens
International Corporation NV (Nasdaq: SPNSF),our board of directors will consider the resignation offered by a providerdirector nominee who receives a greater number of enterprise-wide
solutionsvotes “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 software applications.

the relevant annual meeting.
THE BOARD OF DIRECTORS RECOMMENDS A VOTEFOR
THE ELECTION OF EACH OF THE CLASS II DIRECTOR NOMINEES NAMED ABOVE.

DIRECTORS,

EXECUTIVE OFFICERS AND KEY PERSONNEL

DIRECTORS
The following table sets forth certain information with respect to theour executive officers and directors and key personnelas of the Company:

DIRECTORS, EXECUTIVE OFFICERS AND KEY PERSONNEL

March 19, 2014:

NAME AGE POSITION
---- --- --------

Igal Kohavi 59 Name Age Position
Patrick Tanguy (1)(2)(3) 53 Chairman of the Board Eliyahu Ayalon 56 President, of Directors
Ofer Elyakim (4) 44 Chief Executive Officer and Director

Moshe Zelnik 42 Vice President of Finance,

Dror Levy 40 Chief Financial Officer and Secretary

Gideon Wertheizer 42 Vice President-- Marketing

Samuel L. Kaplan
David Dahan 44 Chief Operating Officer
Thomas Lacey (1)(2) 62 (3) 56 Director

Zvi Limon (2) 40
Gabi Selignohn (3)(4) 47 Director
Reuven Regev(2)(3) 64 Director
Yair ShamirSeroussi (1)(2) 53 58 Director

Saul Shani
Norman Taffe (2)(4) 47 Director
Norman Rice (1) 44(4) 40 Director
Kenneth H. Traub (2)(4) 52 Director
(1) Member of the audit committee
(2) Member of the compensation committee
(3) Member of the nomination and corporate governance committee
(4) Member of the strategy committee, which committee was formed in June 2013
Ofer Elyakim currently serves as our Chief Executive Officer and a member of the Board of Directors. Mr. Elyakim joined us in January 2006 as Director

- --------------------------
(1)of Business Development and Investor Relations, and was promoted to Vice President of Business Development in May 2007. He was promoted to Senior Vice President, President of South East Asia Operations in May 2008. In July 2009, Mr. Elyakim was appointed our Chief Executive Officer. In May 2011, Mr. Elyakim was appointed to our board. Previously, Mr. Elyakim worked as a 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 Ernst & Young Global. A certified public accountant, Mr. Elyakim holds an MBA with honors from Columbia Business School and a BA in Computer Science and Accounting from Tel Aviv University. We believe Mr. Elyakim’s qualifications to sit on our board includehis extensive knowledge of the company, its products, strategies, and customers through his employment with the company, including as our Chief Executive Officer, his strong leadership skills and his broad experience in executive management roles.
Dror Levy currently serves as our Chief Financial Officer. Mr. Levy joined 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, 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.

David Dahancurrently serves as our Chief Operating Officer. Mr. Dahan joined us in that capacity in February 2012 as Chief Operating Officer. Before joining the company, Mr. Dahan was the Chief Operating Officer at PrimeSense, Ltd., a provider of 3D sensing technology for Kinect, from 2007 to 2012. He previously held managerial positions at CEVA, Inc. (NASDAQ: CEVA), a provider of DSP processor technology for the semiconductor industry, including leading the operations at CEVA as Vice President, from 2003 to 2007. Prior to CEVA, Mr. Dahan held the position of Director of VLSI at the company from 2001 to 2003. Mr. Dahan holds a B.Sc. in Electrical and Computer Engineering from Ben Gurion University in Israel and a MBA from Inter Disciplinary Center in Israel.
Thomas A. Laceyhas served as one of our directors since May 2012. Since May 2013, Mr. Lacey has served as Chief Executive Officer and a director ofTessera Technologies, Inc. (NASDAQ: TSRA). He formerly was the Chairman and Chief Executive Officer of Components Direct, a provider of cloud-based product life cycle solutions, and served in those capacities from May 2011 to April 2013. Mr. Lacey also currently serves on the board of directors and the audit committee of International Rectifier Corporation, a leader in power management technology, and has served in those capacities since March 2008. Previously, Mr. Lacey served as the President, Chief Executive Officer and a director of Phoenix Technologies Ltd., a global provider of basic input-output software for personal computers, from February 2010 to February 2011. Prior to joining Phoenix Technologies Ltd., Mr. Lacey was the Corporate Vice President and General Manager of the SunFab™ Thin Film Solar Products group of Applied Materials, Inc., from September 2009. Mr. Lacey previously served as President of Flextronics International’s Components Division, now Vista Point Technologies, from 2006 to 2007. Mr. Lacey joined Flextronics in connection with the sale to Flextronics of publicly-traded International Display Works, where Mr. Lacey had been Chairman, President and Chief Executive Officer from 2004 to 2006. Prior to International Display Works, Mr. Lacey held various management and executive positions at Intel Corporation for 13 years, including Vice President Sales and Marketing, President of Intel Americas, and Vice President and General Manager, Flash Products. Mr. Lacey holds a Bachelor of Arts degree in computer science from the University of California, Berkeley, and masters of business administration degree from the Leavey School of Business at Santa Clara University. We believe Mr. Lacey’s qualifications to sit on our board include his current and past role as CEO of leading technology companies, as well as his executive leadership and management experiences.
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. Since 2011 Dr. Regev has also served as a board member of Asparna Ltd, a real time synchronization and collaboration technology company. From 2009 to 2013 Dr. Regev served as the Chairman of Flexicath Ltd, a medical devices company. From 2006 to 2008, Dr. Regev served as Chief Executive Officer and a board member of Karmelsonix Ltd. (ASX: KSX), a medical devices company focused on Asthma treatment and listed on the Australian Stock Exchange. Between 1995 and 2005, Dr. Regev served as the CEO of Vectory Ltd, the High-Tech investment arm of Elbit Imaging (NASDAQ: EMITF). 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. We believe Dr. Regev’s qualifications to sit on our board include his years of executive and operational experience and his deep understanding of technology companies operating from the U.S. and Israel.

Gabi Seligsohn has served as one of our directors since May 2013. Mr. Seligsohn was recently appointed as Chief Executive Officer of Kornit Digital Ltd. Kornit Digital develops, manufactures and markets industrial and commercial printing solutions for the garment, apparel and textile industries.Mr. Seligsohnserved as the President and Chief Executive Officer of Nova Measuring Instruments (NASDAQ: NVMI), a provider of leading-edge stand-alone metrology and the market leader of integrated metrology solutions to the semiconductor process control market (“Nova”), from August 2006 to August 2013. Mr. Seligsohn joined Nova in 1998 and served in several key positions in the company, including as the Executive Vice President, Global Business Management Group from August 2005 to August 2006. From August 2002 until August 2005, Mr. Seligsohn was President of Nova’s U.S. subsidiary, Nova Inc. Prior to that, he was Vice President Strategic Business Development at Nova Inc. where he established Nova’s OEM group managing the Applied Materials and Lam Research accounts between the years 2000 to 2002. From 1998 to 2000 he served as Global Strategic Account Manager for the company’s five leading customers. Mr. Seligsohn joined Nova after serving as a Sales Manager for key financial accounts at Digital Equipment Corporation. Mr. Seligsohn holds an LL.B. from the University of Reading in England. He was voted CEO of the year for the Israeli Hi-Tech industry by the Israeli management institute in 2010. We believe Mr. Seligsohn’s qualifications to sit on our board include his experience as CEO of leading complex global organizations, his financial expertise, his vast experience in leading a NASDAQ-listed company, as well as his executive leadership and management experience.
Yair Seroussi has served as one of our directors since February 2002. Since 2009 Mr. Seroussi has been the Chairman of the board of directors of Bank Hapoalim, Israel’s leading bank. Mr. Seroussi served as President of the Israeli Bank Association from 2009 to 2011. Mr. Seroussi was the founder and head of Morgan Stanley Israel for 16 years. He was the founder and Chairman of Mustang Mezzanine Fund. He served as the Chairman of the Investment Committee of Mivtachim, Israel’s largest pension fund, and founded and was a member of various investments committees of private equity funds. Mr. Seroussi served as a director of Israel Corp and Frutarom Industries. Mr. Seroussi is a member of the Board of Governors of the Hebrew University, and Chairman of the Eli Hurvitz Strategic Management Forum at the Tel Aviv University. Mr. Seroussi served over a decade in Israel’s Ministry of Finance where he held several senior positions. Mr. Seroussi holds a Bachelor’s degree in Economics and Political Science from 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.

Norman J. Rice, III has served as one of our directors since May 2013. Since July 2010 Mr. Rice has served as Managing Partner of New Castle Capital Group, LLC, a private equity firm specializing in divestiture, management buyout and exit opportunities for organizations in the middle market. From June 2005 until March 2009, Mr. Rice was the Vice President of the Communications, Media and Entertainment (CME) Vertical Business Unit of CA, Inc. (n/k/a CA Technologies, Inc.) (NASDAQ: CA), an independent enterprise information technology management software and solutions company. From March 2005 until June 2005, Mr. Rice served as Vice President of Business Development of the Aprisma Management Technologies Business Unit of Concord Communications, Inc., a provider of network service management software solutions, until its acquisition by CA, Inc. in June 2005. Prior to that, Mr. Rice was the Vice President of Business and Corporate Development at Aprisma Management Technologies, Inc., a company that provided Network assurance solutions, from January 2002 until its acquisition by Concord Communications, Inc. in February 2005. From May 2000 until October 2001, Mr. Rice was the Director of Software Solutions and Business Development of HoustonStreet Exchange, Inc., a subsidiary of BayCorp Holdings, Ltd. (AMEX: MWH). Mr. Rice also served in technology consulting and business development roles in the United States and Europe for MicroStrategy, Inc. (NASDAQ: MSTR), from March 1999 to May 2000. In addition, Mr. Rice served as an Advisory Board Member of vKernel (n/k/a Quest Software), a then leading provider of performance and capacity management software that ensures vm performance of VMware, Hyper-V and Red Hat environments from June 2009 to January 2011. Mr. Rice has also served on the Compensation Committee
(2) MemberBoard of Directors of Nitro Security Inc. (n/k/a McAfee, Inc.), a then leading provider of security information and event management (SIEM) solutions that provides complete visibility and situational awareness to protect critical information and infrastructure, from July 2007 to September 2008. Mr. Rice has worked for leading private investment firms that focus on enhancing stockholder value for technology related businesses, including as a manager in a Gores Technology Group business from September 2002 until March 2005, as a consultant for The Gores Group, LLC from June 2006 until May 2007 and as a consultant to Marlin Equity Partners, LLC from May 2007 to April 2008. Mr. Rice holds Master’s degrees in Engineering and Management from Dartmouth College and a Bachelor of Science from the University of Michigan. We believe Mr. Rice’s qualifications to sit on our board include hisexpertise in business strategy, general management, global sales, marketing, product management and business development.
Norman P. Taffe has served as one of our directors since May 2013. Mr. Taffe has been a general manager at SunPower Corporation since June 2013. Since October 2012, Mr. Taffehas served as a member of the Audit Committee

IGAL KOHAVI has beenBoard of Directors of Integrated Device Technology, Inc. (NASDAQ: IDTI), a mixed-signal semiconductor solutions company. He is also Chairman of the Board of Directors of the Company since
September 1995. Dr. KohaviSecond Harvest Food Bank, a non-profit organization, where he has served as a board member since 1995July 2008. Previously, Mr. Taffe served as Chairmanthe Executive Vice President of Consumer and Computation Division of Cypress Semiconductor Corporation (NASDAQ: CY) (“Cypress”), a provider of high-performance, mixed-signal, programmable solutions that provide customers with rapid time-to-market and exceptional system value, from May 2005 until May 2012. Prior to that, Mr. Taffe held numerous positions with Cypress, including Marketing Director of the Venture
Fundsprogrammable logic and interface products divisions from April 1999 to July 2001, Managing Director of Dovrat-Sherm & Co. Ltd., an Israeli investment bank at which he
formerlyCypress’ mergers and acquisitions and venture funds from July 2001 to September 2002, Managing Director of the wireless business unit from September 2002 to January 2005, and Vice President of the Personal Communications Division from January 2005 to May 2005. Mr. Taffe also served as Presidenta member of the Board of Directors of Cypress Envirosystems, a Cypress-funded independent company that develops system-level products for reducing energy costs with wireless technology, from October 1994September 2007 to January 1996. Between March
1993February 2013. He completed the Program for Management Development at Harvard Business School and October 1994,has a Bachelor of Science degree in Electrical Engineering from the University of Michigan. We believe Mr. Taffe’s qualifications to sit on our board include his 20 plus years in senior executive positions and his extensive experience in the technology industry.

Patrick Tanguy has served as one of our directors since November 1999 and was appointed as our non-executive Chairman in May 2013. Since September 2007, Mr. Tanguy has been a Managing Director at Wendel, a French-listed investment company. At Wendel, he notably serves as a non-executive director of various company holdings. From February 1991 to September 2007, Mr. Tanguy served as Managing Director and Chief Executive Officer of Clal Electronic
Industries Ltd. Dr. Kohavivarious manufacturing and service company: Prezioso S.A., an industrial coating and insulation specialist; Monne-Decroix, a real estate development company; Technal Group, an aluminum building systems company; Hays DX France, an express transport services company; DAFSA, a supplier of economic data and financial information; and Steelcase Strafor, an office furniture manufacturer. Mr Tanguy started his professional career in 1984 at Bain & Co in London and Paris where he was promoted to Partner in 1990. Mr Tanguy received a MBA from HEC Paris. 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.
Kenneth H. Traubhas served as one of our directors since May 2012. Mr. Traub is currently the President and Chief Executive Officer of Ethos Management LLC since 2009, which specializes in investing in and enabling companies to execute strategies to build and unlock stockholder value, and Mr. Traub is also serves ascurrently general partner of Rosemark Capital, a director of Mercury Interactive
Corporation (Nasdaq: MERQ) ("Mercury Interactive"), a provider of
client/server and web testing tools.

ELIYAHU AYALON joined the Company in April 1996private equity firm since 2013. Mr. Traub served as President, Chief Executive Officer and Director. From May 1992director of American Bank Note Holographics, Inc., or ABNH, a global leader in product and document security, from 1999 until its sale in 2008 to April 1996,JDS Uniphase Corporation, or JDSU, a leading provider of optical and communications products. Mr. AyalonTraub managed the turnaround, growth and sale of ABNH. Following the sale of ABNH, Mr. Traub served as President and Chief Executive Officer of Mennen Medical Ltd., a
developer and manufacturer of medical instruments and apparatus.

MOSHE ZELNIK joined the Company in May 1999 as Vice President of Finance,JDSU in 2008.In 1994, Mr. Traub co-founded Voxware, Inc., a pioneer in “Voice over IP’ communication technologies and acted as its Executive Vice President, Chief Financial Officer and Secretary.

GIDEON WERTHEIZER joined the Company in September 1990 as Project
Manager of the Company's VLSI Design Center and becamedirector until June 1998. Prior to Voxware, he was Vice President of Finance of Trans-Resources, Inc. Mr. Traub currently serves on the VLSI Design Center in August 1995. In November 1997, Mr. Wertheizer was
appointed Vice President, Marketingboards of directors of the Company.

SAMUEL L. KAPLAN has beenfollowing publicly traded companies: (i) MRV Communications, Inc. (NASDAQ: MRVC) since November 2011 and as Chairman since January 2012, where he is a Directormember of the Companyaudit committee, compensation committee and nominating and governance committee; (ii) Athersys, Inc. (NASDAQ: ATHX) since June 2012 where he is a member of the audit committee and compensation committee; and (iii) Vitesse Semiconductor Corp. (NASDAQ: VTSS) since March 2013, where he is a member of the compensation committee. Mr. Traub also served on the board of Phoenix Technologies Ltd. (NASDAQ:PTEC) from November 2009 through its sale in December 2010, where he was a member of the audit committee and compensation committee, served on the board of MIPS Technologies, Inc. (NASDAQ: MIPS) from November 2011 through its sale in February 2013, where he was a member of the audit and governance committee, and served on the board of iPass, Inc. (NASDAQ: IPAS) from June 2009 through June 2013, where he was a member of the compensation committee and the corporate governance and nominating committee, and served on the board of Xyratex Limited (NASDAQ: XRTX) from June 2013 through its sale in March 2014, where he was a member of the audit committee. Mr. Traub received a Master’s in Business Administration from Harvard Business School in 1988 and a Bachelor of Arts degree from Emory University in 1983. We believe Mr. Traub’s qualifications to sit on our board include his extensive experience and expertise in managing and growing companies to maximize shareholder value.

Board Leadership Structure
Our board of directors has a Chairman who is a non-employee director. Our Chairman is responsible forsetting the agenda for board meetings, presiding over meetings of the board, facilitating communication among directors and ensuring an appropriate information flow from senior management to the board.Our Chief Executive Officer joined as a member of our board in May 1993.
Mr. Kaplan2011. Our board of directors unanimously appointed our Chief Executive Officer to the board in consideration of the insights he brings to the board in light of his day to day leadership of the company and intimate knowledge of our business and operations.
Director Independence
Our board of directors has been a partnerdetermined that all non-employee directors of the board, currently consisting of Messrs. Lacey, Regev, Rice, Seligsohn, Seroussi, Taffe, Tanguy and Traub, are “independent” as that term is defined in the law firmNASDAQ listing standards. In making this determination, our board of Kaplan, Strangisdirectors considered transactions and Kaplan,
P.A.relationships between each director or his immediate family and the company and our subsidiaries, of Minneapolis, Minnesota, since October 1978. Mr. Kaplan also serves aswhich there were none in 2013. The purpose of this review was to determine whether any such relationships or transactions were material and, therefore, inconsistent with a trusteedetermination that the director is independent. As a result of USP Real Estate Investment Trust, a real estate investment trust.

ZVI LIMON has been a Directorthis review, our board affirmatively determined, based on its understanding of such transactions and relationships, that all of our non-employee directors are independent of the Company since February 1999.
Mr. Limoncompany 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 servedthe 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 Chairman of Limon Holdings Ltd., a consulting and
investment advisory firm since 1993. He presently servesneeded or as a director of
Eltek Ltd. (Nasdaq: ELTKF), a developer and manufacturer of PC boards.

RELATIONSHIPS AMONG DIRECTORS OR EXECUTIVE OFFICERS

requested by the board or committee.
Relationships among Directors or Executive Officers
There are no family relationships among any of theour directors or executive officersofficers.

Meetings and Committees of the Company.

MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS

Board of Directors
During 1998, the Board2013, our board of directors met four times.15 times in meetings or telephonically. No director attended fewer than 75% of the aggregate of either (i) the total number of Boardboard meetings held during the period for which he was a Directordirector, or (ii) the total number of committee meetings of the Boardboard held in 2013 on which he served, heldexcept that (x) Messrs. Rice and Taffe attended four of the six board meetings during the period for which each of them was a director, and (y) Mr. Taffe attended four of the six strategic committee meetings during the period for which he was a director. The Board currently has two committees:member of such committee. 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 stockholders’ 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.
Compensation Committee and the Audit Committee.

The Compensation Committee held fourcompensation committee met in meetings or telephonically five times in 1998. In 1998, the
Compensation Committee consisted of Messrs. Kaplan, Phelps and Shamir.2013. The Compensation Committeecompensation committee currently consists of Messrs. Kaplan,Seroussi, Taffe, Traub and Tanguy with Dr. Regev as the Chairman. Messrs. Zvi Limon, Yair Shamir and Shani. ItsTanguy were members of the compensation committee until June 2013 (Messrs. Limon and Shamir are no longer members of our board of directors). Our board of directors has determined that all current members of the compensation committee are “independent” as that term is defined in the NASDAQ listing standards. The committee’s functions are to establish and apply the Company'sour compensation policies with respect to the Company'sour executive officers. The 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 held
The audit committee met four times in meetings or telephonically in 1998. In 1998 the Audit
Committee consisted of Messrs. Kaplan, Phelps and Shamir.2013. The Audit Committeeaudit committee currently consists of Messrs. Kaplan,Lacey, Rice and Seroussi with Mr. Tanguy as the Chairman. Messrs. Limon, Seroussi, Shamir and Tanguy were members of the audit committee until June 2013 (Messrs. Limon and Shamir.Shamir are no longer members of our board of directors). The Audit Committee
recommendsaudit committee is directly responsible for the engagementappointment, compensation, retention and oversight of the Company'sour independent auditors. In addition, the Audit Committeeaudit committee is primarily responsible for approving the audit and non-audit services performed by the Company'sour independent auditors and for reviewing and evaluating the Company'sour accounting principles and itsour system of internal accounting controls. COMPENSATION OF DIRECTORS

Directors whoAdditional 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, January 2005, February 2009 and January 2014 and a copy of which is available on our website atwww.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 the Company do not receive any
additional compensation for their services as Directors. Directors who are
not employeesconcerns regarding questionable accounting or auditing matters.

After considering transactions and relationships between each member of the Company receive an annual retainer of $20,000, payable
in quarterly installments of $5,000 each. The retainer contemplates
attendance at four Board meetings per year. Additional Board meetings of a
face-to-face nature are compensated ataudit committee or his immediate family and the rate of $500 per meeting. In
addition, committee meetings of a face-to-face naturecompany and on a telephonic
basis are compensated atour subsidiaries and reviewing the rate of $500 per meeting. All directors are
reimbursed for expenses incurred in connection with attending Board and
committee meetings.

Each outside directorqualifications of the Company is also entitled to participate
in the 1993 Director Option Plan (the "Director Option Plan"). The Director
Option Plan provides for the grant of non-statutory options to non-employee
Directorsmembers of the Company. The Director Option Plan is designed to work
automatically; however, to the extent administration is necessary, it will be
provided by the Boardaudit committee, our board of Directors. The Director Option Plan providesdirectors has determined that each eligible director is granted an option to purchase 15,000 shares of
Common Stock under the Director Option Plan on the date on which he or she
first becomes a Directorall current members of the Company. In addition, on the same date, each
new directoraudit committee are (1) ”independent” as that term is granted an option to purchase 10,000 shares of Common Stock
under the 1991 Employee and Consultant Stock Plan (the "1991 Stock Plan").
Thereafter, each outside director is granted an option to purchase 5,000
additional shares of Common Stock (a "Subsequent Option") on January 1 of
each year if, on such date, he or she shall have served on the Company's
Board of Directors for at least six months. In addition, an option to
purchase 5,000 shares of Common Stock (a "Committee Option") is granted on
January 1 of each year to each outside director for each committee of the
Board on which he or she shall have served as a chairperson for at least six
months.

On January 2, 1998, each of Messrs. Kaplan, Phelps and Shamir were
granted Subsequent Options to purchase up to 5,000 shares of the Company's
Common Stock, at an exercise price of $19.25 per share, under the Director
Option Plan.

On January 2, 1998, Mr. Kaplan was granted a Committee Option to
purchase up to 5,000 shares of the Company's Common Stock, at an exercise
price of $19.25 per share, under the Director Option Plan.

On July 2, 1998 each of Messrs. Ayalon and Kohavi were granted
options to purchase up to 150,000 shares of the Company's Common Stock, at an
exercise price of $18.5625, under the 1991 Stock Plan.

On January 4, 1999, each of Messrs. Kaplan, Phelps and Shamir were
granted Subsequent Options to purchase up to 5,000 shares of the Company's
Common Stock, at an exercise price of $20.375 per share, under the Director
Option Plan.

On January 4, 1999, each of Messrs. Kaplan and Phelps were granted
Committee Options to purchase up to 5,000 shares of the Company's Common
Stock, at an exercise price of $20.375 per share, under the Director Option
Plan.

On February 5, 1999, the date on which they were appointed as
directors of the Company, each of Messrs. Limon and Shani were granted an
option to purchase up to 15,000 shares of the Company's Common Stock, at an
exercise price of $13.625 per share under the Director Option Plan. On the
same date, each of Messrs. Limon and Shani also were granted an option to
purchase up to 10,000 shares of the Company's Common Stock, at an exercise
price of $13.625 per share, under the 1991 Stock Plan.

On April 21, 1999, each of Messrs. Ayalon and Kohavi were granted
options to purchase up to 225,000 shares of the Company's Common Stock, at an
exercise price of $18.4375, under the 1991 Stock Plan.

SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE.defined in Section 16(a)10A of the Securities Exchange Act of 1934, as amended (the "Exchange Act"“Exchange Act”), requires; (2) “independent” as that term is defined in the Company'sNASDAQ listing standards; and (3) financially literate and have the requisite financial sophistication as required by the NASDAQ listing standards. Furthermore, our board of directors executive officers
and persons who own more than 10%has determined that Mr. Tanguy qualifies as an audit committee financial expert, as defined by the applicable rules of the Company's Common Stock
(collectively, "Reporting Persons") to file reports of ownership and changes
in ownership of the Company's Common Stock with the Securities and Exchange Commission and the Nasdaq Stock Market, Inc. Copies of these reports are also
required to be deliveredAct, pursuant to the Company.

Except as set forth below,fact that, among other things, he was the Company believes, based solely on its
reviewChief Executive Officer of Prezioso S.A., and Monne-Decroix and Technal Group, and in those capacities had acquired the copies of such reports received or written representations from
certain Reporting Persons, that duringrelevant experience and expertise and has the fiscal year ended December 31,
1998, all Reporting Persons complied with all applicable filing requirements,
except for the following: Mr. Phelps inadvertently failed to report a sale of
the Company's Common Stock on his Form 4 for the period of the sale; such
sale was subsequently reported on a later Form 4.

SECURITY OWNERSHIP OF
CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth certain information known to the
Company with respect to beneficial ownership of the Company's Common Stock as
of June 4, 1999, by (i) each stockholder known to the Company to own
beneficially more than 5% of the Company's Common Stock; (ii) each of the
Company's directors; (iii) the Named Executive Officers (including three former
executive officers) determined for the fiscal year ended December 31, 1998;
and (iv) all directors and executive officers of the Company as a group:

NAME OF SHARES APPROXIMATE PERCENT
BENEFICIAL OWNER BENEFICIALLY OWNED (1) BENEFICIALLY OWNED (2)
- ---------------- ---------------------- ----------------------

Magnum Technology, Ltd.
c/o Rothschild Corporate Fiduciary Services, Ltd.
P.O. Box 472
St. Peter's House, Le Bordage
St. Peter Port, Guernsey
Channel Islands GY1 6AX (3)............... 2,896,500 ----%

Loomis, Sayles & Company, L.P.
One Financial Center
Boston, Massachusetts 02111 (4)........... 450,800 ----%

Mellon Bank Corporation
One Mellon Bank Center
Pittsburgh, Pennsylvania 15258 (5)......... 537,300 ----%

Samuel L. Kaplan (6)...................... 78,188 *

Zvi Limon ................................ * *

Millard Phelps (7)........................ 13,167 *

Yair Shamir (8)........................... 11,667 *

Saul Shani ............................... * *

Eliyahu Ayalon (9)........................ 104,133 *

Avi Basher (10)........................... 20,242 *

Igal Kohavi (11).......................... 219,960 ----%

David Tolub .............................. 357 *

Gideon Wertheizer (12).................... 12,997 *

Amir Karni ............................... * *

All directors and executive officers
as a group (11 persons) (13).............. 460,711 ----%

- ------------------------------------
* Less than 1%

(1) To the Company's knowledge, except asattributes set forth in the footnotesapplicable rules as being required for an audit committee financial expert.
Nomination and Corporate Governance Committee
The nomination and corporate governance committee met twice in meetings or telephonically in 2013. The nomination and corporate governance committee currently consists of Messrs. Seligsohn, Tanguy and Dr. Regev with Mr. Lacey as the Chairman. Messrs. Seroussi and Tanguy and Dr. Regev were members of the nomination and corporate governance committee until June 2013. 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 this
table, and subject to applicable community property laws, each person
namedassist the board in this table has sole voting and investment power with respectall matters relating to the shares set forth opposite such person's name.

(2) Beneficial ownership is determined in accordance withestablishment, implementation and monitoring of policies and processes regarding the rulesrecruitment and nomination of candidates to the board and committees of the Securitiesboard, and Exchange Commissionthe development, evaluation and generally includes voting or
investment power with respectmonitoring 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 securities. Sharesthe board of revisions to the code from time to time as appropriate. Additional duties and powers of the Company's
Common Stock, subject to options currently exercisable or exercisable on
or before August 3, 1999, are deemed outstanding for computing the
percentage of the person holding such options, but are not deemed
outstanding for computing the percentage of any other person. Percentages
are based on __________ shares of the Company's Common Stock outstanding
as of June 4, 1999.

(3) Magnum Technology, Ltd. ("Magnum") filed Amendment No. 1 to a Schedule
13D, dated February 19, 1999, with the Securitiesnomination and Exchange Commission
on behalf of itself. Magnum reported sole voting and dispositive power
over 2,896,500 shares.

(4) Loomis, Sayles & Company, L.P. ("Loomis") filed a Schedule 13G, dated
February 10, 1999, with the Securities and Exchange Commission on behalf
of itself. Loomis reported sole voting power over 375,400 shares and
shared dispositive power over 450,800 over shares.

(5) Mellon Bank Corporation ("Mellon Bank") filed a Schedule 13G, dated
February 5, 1999, with the Securities and Exchange Commission on behalf
of itself. Mellon Bank reported sole voting power over 492,900 shares,
sole dispositive power over 497,100 shares and shared dispositive power
over 40,200 shares.

(6) Includes 22,520 shares held of record by the Kaplan, Strangis and Kaplan,
P.A. Profit Sharing Trust FBO Samuel L. Kaplan. Also includes 34,668
shares of the Company's Common Stock, subject to options which are
currently exercisable or will become exercisable on or before August 3,
1999.

(7) Includes 13,167 shares of the Company's Common Stock subject to options
which are currently exercisable or will become exercisable on or before
August 3, 1999.

(8) Includes 11,667 shares of the Company's Common Stock subject to options
which are currently exercisable or will become exercisable on or before
August 3, 1999.

(9) Includes 100,000 shares of the Company's Common Stock subject to options
which are currently exercisable or will become exercisable on or before
August 3, 1999.

(10) Includes 19,375 shares of the Company's Common Stock subject to options
which are currently exercisable or will become exercisable on or before
August 3, 1999.

(11) Includes 217,500 shares of the Company's Common Stock subject to options
which are currently exercisable or will become exercisable on or before
August 3, 1999.

(12) Includes 12,244 shares of the Company's Common Stock subject to options
which are currently exercisable or will become exercisable on or before
August 3, 1999.

(13) See footnotes (6) through (12). Includes 408,621 shares of the Company's
Common Stock subject to options which are currently exercisable or will
become exercisable on or before August 3, 1999.

PROPOSAL NO. 2
AMENDMENT AND RESTATEMENT OF THE COMPANY'S
1993 DIRECTOR STOCK OPTION PLAN

GENERAL

The Company's stockholders are being asked to act upon a proposal to
ratify the action of the Board amending and restating the Company's 1993
Director Stock Option Plan (the "Director Option Plan").

The Board of the Directors of the Company amended and restated the
Director Option Plan in June 1999, subject to stockholder approval to
increase the number of shares of Common Stock reserved for issuance under the
Director Option Plan from 175,000 shares to 275,000 shares.

The purpose of the amendment is to enable the company to retain
talented personnel for service as directors of the Company and to attract new
talented personnel by offering them participation in the Company's Director
Option Plan. Management believes that without such incentive it will be
unable to attract and retain talented new personnel for the Company's Board.

A general description of the principal terms of the Director Option
Plan is set forth below. However, the summary does not purport to be a
complete description of all of the provisions of the Director Option Plan.
Any stockholder of the company who wishes to obtain a copy of the actual plan
document may obtain a copy by writing to the Company, attention: Corporate
and Investor Relations.

THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR APPROVAL
OF THE PROPOSED AMENDMENT TO THE DIRECTOR OPTION PLAN.

GENERAL DESCRIPTION

In January 1994, the Board of Directors of the Company adopted the
Director Option Plan, which was approved by the stockholders in January 1994.
The Director Option Plan was subsequently amended and restated, as approved
by the stockholders in May 1996. A total of 175,000 shares are currently
reserved for issuance under the Director Option Plan. Options granted under
the Director Option Plan shall be nonstatutory stock options. See "Certain
Federal Income Tax Information" below for information concerning the tax
treatment of nonstatutory stock options. As of May 31, 1999, options to
purchase approximately 134,999 shares were outstanding under the Director
Option Plan, a total of approximately 6,001 options to purchase shares had
been exercised under the Director Option Plan, and approximately 34,000
shares remained reserved for issuance thereunder.

SUMMARY OF DIRECTOR OPTION PLAN

PURPOSES. The purposes of the Director Option Plan are to attract
and retain the best available personnel for service as directors of the
Company, to provide additional incentive to the outside directors of the
Company to serve as directors, and to encourage their continued service on
the Board.

ADMINISTRATION. The Director Option Plan shall be administered by
the Board, but all grants of options under the Director Option Plan shall be
automatic and nondiscretionary and shall be made strictly in accordance with
the Director Option Plan.

The Director Option Plan provides that each eligible director is
granted an option to purchase 15,000 shares of Common Stock (the "First
Option") on the later of the effective date of the Initial Public Offering
(February 11, 1994), or the date on which the optionee first becomes a
director of the Company. Thereafter, each outside director is to be granted
an option to purchase 5,000 additional shares of Common Stock (a "Subsequent
Option") on January 1 of each year if, on such date, he or she shall have
served on the Company's Board of Directors for at least six months. In
addition, an option to purchase 5,000 shares of Common Stock (a "Committee
Option") is to be

granted on January 1 of each year to each outside director for eachcorporate governance committee
of the Board on which he or she shall have served as a chairperson for at
least six months.

The Board shall have the authority, in its discretion to determine,
upon review of relevant information, the fair market value of the Common
Stock, the exercise price per share of the options to be granted and to
interpret the Director Option Plan. All decisions, determinations and
interpretations of the Board shall be final and binding.

ELIGIBILITY. The Director Option Plan provides that options may be
granted only to outside directors of the Company.

STOCK OPTIONS. Each option granted under the Director Option Plan is
to be evidenced by a written stock option agreement between the Company and
the optionee and is subject to the following additional terms and conditions:

(a) EXERCISE OF THE OPTION. Any stock option granted under the
Director Option Plan shall be exercisable on the third anniversary of the
date of the grant of the stock option and one-third of the shares of Common
Stock shall vest every 12 months from the date of the grant. An option is
exercised by giving written notice of exercise to the Company, specifying the
number of full shares of Common Stock to be purchased and tendering payment
of the purchase price to the Company. The acceptable methods of payment for
shares issued upon exercise of an option are set forth in the option
agreementits charter, which was adopted and may consistapproved in January 2005, and a copy of (1) cash; (2) check; (3) promissory note; (4)
shareswhich is available on our website atwww.dspg.com.
Strategy Committee
The strategy committee was established in June 2013. It met in meetings or telephonically six times in 2013. The strategy committee currently consists of Common Stock; (5) the delivery of a properly executed exercise
notice togetherMessrs. Elyakim, Rice, Seligsohn and Taffe with such other documentationMr. Traub as the Company and the broker,
if applicable, shall require to effect an exercise and delivery to the
Company of the amount of sale or loan proceeds required to pay the exercise
price; (6) any combination of the foregoing methods or (7) such other
consideration and method of payment permitted under applicable law.

(b) EXERCISE PRICE. The exercise price of options granted
under the Director Option Plan shall be 100% of the fair market value per
share of Common Stock on the date of grant of the option.

(c) TERMINATION. If an outside director ceases to serve as a
director of the Company, he or she may, but only within three (3) months
after the date he or she ceases to be a director, exercise his or her options
as to all or part of the shares as to which the director was entitled to
exercise at the date of such termination, provided that the option is
exercised no later than its expiration date.

(d) DISABILITY. If a director is unable to continue his or her
service as a director with the Company as a result of total and permanent
disability, he or she may exercise, but only within six months from the date
of such disability, his or her options to the extent such options were
exercisable at the date of disability, provided that the option is exercised
no later than its expiration date.

(e) DEATH. If a director should die during his or her service
to the Company, options may be exercised at any time within 12 months after
the date of death by the director's estate or a person who acquired the right
to exercise the option by bequest or inheritance, but only to the extent of
the right to exercise that would have accrued had the director continued
living and remained in continuous service as a director for six months after
the date of death, provided that the option is exercised no later than its
expiration date. If a director should die within three months after the
termination of his or her service to the Company as a director, the options
may be exercised at any time within 12 months after the date of death by the
director's estate or a person who acquired the right to exercise the option
by bequest or inheritance, but only to the extent that such options would
have been exercisable by the director at the date of death, provided that the
option is exercised no later than its expiration date.

(f) TERM AND TERMINATION OF OPTIONS. Stock options shall be
exercisable as to 100% of the shares of Common Stock subject to such stock
options on the third anniversary of the date of the grant of the stock
option, and that one-third of the shares of Common Stock shall vest every 12
months from the date of the grant. The term of each option shall be 10 years
from the date of the grant.

(g) NONTRANSFERABILITY OF OPTIONS. An option is not
transferable by a director, other than by will or the laws of descent and
distribution, and is exercisable during the director's lifetime only by the
director.

(h) OTHER PROVISIONS. The option agreement may contain such
other terms, provisions and conditions not inconsistent with the Director
Option Plan as may be determined by the Board.

ADJUSTMENTS; DISSOLUTIONS; MERGERS AND ASSET SALES. In the event any
change, such as a stock split or dividend, is made in the Company's
capitalization which results in an increase or decrease in the number of
outstanding shares of Common Stock without receipt of consideration by the
Company, an appropriate adjustment shall be made in the number of shares
under the Director Option Plan and the price per share covered by each
outstanding option.

In the event of the proposed dissolution or liquidation of the
Company, all outstanding options will terminate immediately prior to the
consummation of such proposed action. However, the Board may, in its
discretion, make provision for accelerating the exercisability of options
outstanding under the Director Option Plan in the event of such a proposed
dissolution or liquidation. In the event of the merger of the Company with or
into another corporation or a proposed sale of all or substantially all of
the assets of the Company, each outstanding option shall be assumed or
substituted by such successor corporation. However, if a successor does not
so assume or substitute, the Board may determine, in its sole discretion and
in lieu of such assumption or substitution, that the participant shall have
the right to exercise the option as to all shares subject to such option,
including shares as to which the option would not otherwise be exercisable.
If the Board determines that options shall be fully exercisable in lieu of
assumption or a substitution, the Company shall notify the participant that
the option will be fully exercisable for a period of 30 days from the date of
such notice and that the option will terminate upon the expiration of such
period.

AMENDMENT AND TERMINATION OF THE DIRECTOR OPTION PLAN. The Board may
amend the Director Option Plan at any time or from time to time or may
terminate the Director Option Plan without approval of the stockholders;
provided, however, that stockholder approval is required for any amendment to
the Director Option Plan for which stockholder approval would be required
under applicable law, as in effect at the time. However, no action by the
Board of Directors or stockholders may alter or impair any option previously
granted under the Director Option Plan. In any event, the Director Option
Plan shall terminate in January 2004.

AMENDED PLAN BENEFITS

The benefits or amounts that will be received by or allocated to
directors under the Director Option Plan will not change as a result of the
proposed amendment. The Company cannot now determine the number of options to
be granted in the future under the Director Option Plan to all current
directors as a group. The benefits or amounts that will be received by or
allocated to the Company's directors under the Director Option Plan will not
change as a result of the proposed amendment and remain fixed and
non-discretionary, as described above.

CERTAIN FEDERAL INCOME TAX INFORMATION

A director will not recognize any taxable income at the time he or
she is granted a nonstatutory option under the Director Option Plan. However,
upon its exercise, the director will recognize taxable income generally
measured as the excess of the then fair market value of the shares purchased
over the purchase price.

The Company will be entitled to a tax deduction in the same amount
as the ordinary income recognized by a director with respect to shares
acquired upon exercise of an option.

The foregoing summary of the federal income tax consequences of
Director Option Plan transactions is based upon federal income tax laws in
effect on the date of this Proxy Statement. This summary does not purport to
be complete, and does not discuss foreign, state or local tax consequences.

VOTE REQUIRED

The affirmative vote of the holders of a majority of the shares of
the Company's Common Stock present or represented at the Annual Meeting is
required to approve the amendment and restatement of the Director Option Plan.

THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE APPROVAL OF THE
PROPOSED AMENDMENT TO THE DIRECTOR OPTION PLAN.
AN ABSTENTION WILL HAVE THE SAME
EFFECT AS A VOTE AGAINST THE PROPOSAL.

PROPOSAL NO. 3
AMENDMENT AND RESTATEMENT OF THE COMPANY'S
1991 EMPLOYEE AND CONSULTANT STOCK PLAN

GENERAL

The Company's stockholders are being asked to act upon a proposal to
ratify the action of the Board amending the 1991 Stock Plan.

The Board has approved an amendment and restatement of the 1991
Stock Plan to increase the number of shares of Common Stock reserved for
issuance thereunder by 1,500,000 shares, bringing the total number of shares
issuable under the 1991 Stock Plan to 4,300,000. TheChairman.The purpose of the increasestrategy committee is to enable the Company to retain talented employeesreview and consultants and to
attract talented new employees and consultants by offering them participation
in the Company's 1991 Stock Plan. Management believes that without such
incentive it will be unable to attract and retain talented individuals
providing servicesmake recommendations to the Company. Inboard regarding the event the stockholders do not
approve the proposed increase in the number of shares of Common Stock
reserved for issuance under the 1991 Stock Plan, the Company will not be able
to issue employees additional incentive stock options under the 1991 Stock
Plan because options have already been granted with respect to substantially
allstrategic direction of the shares reserved undercompany, review and assess the 1991 Stock Plan.

A general descriptionlong-range strategic objectives of the principal termscompany and provide oversight of the 1991 Stock Plan
is set forth below. However, the summary does not purport to be a complete
description of allcompany’s strategic plan and its implementation. Additional duties and powers of the provisions of the 1991 Stock Plan. Any stockholder
of the Company who wishes to obtain a copy of the actual plan document may
obtain a copy by writing to the Company, attention: Corporate and Investor
Relations.

THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR APPROVAL
OF THE PROPOSED AMENDMENT AND RESTATEMENT OF THE 1991 STOCK PLAN.

GENERAL DESCRIPTION

In October 1991, the Board of Directors of the Company adopted the
1991 Stock Plan, which was approved by the stockholders in October 1991. The
1991 Stock Plan was subsequently amended and restated, as approved by the
stockholders in January 1994, April 1994, May 1995, May 1996 and May 1998. A
total of 2,800,000 shares are currently reserved for issuance under the 1991
Stock Plan and the Company's terminated 1991 Israeli Option Plan. Options
granted under the 1991 Stock Plan may be either incentive stock options, as
defined in Section 422 of the Internal Revenue Code of 1986, as amended (the
"Code"), or non-statutory stock options. See "Certain Federal Income Tax
Information" below for information concerning the tax treatment of both
incentive stock options and non-statutory stock options. As of December 31,
1998, options to purchase approximately 2,187,622 shares were outstanding
under the 1991 Stock Plan, a total of approximately 1,588,919 options to
purchase shares had been exercised under the 1991 Stock Plan, and
approximately 23,460 shares remained reserved for issuance thereunder.

SUMMARY OF THE 1991 STOCK PLAN

PURPOSES. The purposes of the 1991 Stock Plan are to attract and
retain the best available personnel for positions of substantial
responsibility, to provide additional incentive for employees and consultants
of the Company and to promote the success of the Company's business.

ADMINISTRATION. With respect to the grant of options to employees
who are also officers or directors subject to Section 16 of the Exchange Act,
the 1991 Stock Plan shall be administered by (i) the Board of Directors of
the Company provided that the Board may do so in compliance with Rule 16b-3
promulgated under the Exchange Act; or (ii) astrategy committee designated by the
Board and constituted in such a manner as to comply with Rule 16b-3. With
respect to grants to employees or consultants who are neither officers nor
directors of the Company, the 1991 Stock Plan shall be administered by the
Board or by a committee of the Board. The 1991 Stock Plan is currently
administered by the Compensation Committee of the Board.

The administrators of the 1991 Stock Plan have full power to select,
from among the employees and consultants of the Company eligible for awards,
the individuals to whom awards will be granted, to make any combination of
awards to any participant, and to determine the specific terms of each grant,
including the number of shares subject to each option, subject to the
provisions of the 1991 Stock Plan. The interpretation and construction of any
provision of the 1991 Stock Plan by the administrators shall be final and
conclusive. Members of the Board receive no additional compensation for their
services in connection with the administration of the 1991 Stock Plan.

ELIGIBILITY. The 1991 Stock Plan provides that options may be
granted to employees (including officers and directors who are also
employees) and consultants to the Company or its subsidiaries. Incentive
stock options may only be granted to employees. No employee or consultant may
be granted in any fiscal year of the Company, options to purchase more than
500,000 shares of Company Common Stock.

STOCK OPTIONS. Each option granted under the 1991 Stock Plan is to
be evidenced by a written stock option agreement between the Company and the
optionee and is subject to the following additional terms and conditions:

(1) EXERCISE OF THE OPTION. The Board or its committee
determines on the date of grant when options will become exercisable. An
option is exercised by giving written notice of exercise to the Company,
specifying the number of full shares of Common Stock to be purchased and
tendering payment of the purchase price to the Company. The acceptable
methods of payment for shares issued upon exercise of an option are set forth in the option agreementits charter, which was adopted and may consistapproved in June 2013.
Compensation Committee Interlocks and Insider Participation
The compensation committee currently consists of (1) cash; (2) check; (3)
promissory note; (4) shares of Common Stock; (5) the delivery of a properly
executed exercise notice togetherMessrs. Seroussi, Taffe, Traub and Tanguy with such other documentationDr. Regev as the BoardChairman. Messrs. Limon, Yair Shamir and the broker, if applicable, shall require to effect an exercise and
delivery to the CompanyTanguy were members of the amount of sale or loan proceeds required to
pay the exercise price; (6) a reduction in the amount of any Company
liability to the optionee, including any liability attributable to the
optionee's participation in any Company-sponsored deferred compensation program or arrangement; (7) any combination of the foregoing methods or (8)
such other consideration and method of payment permitted under applicable law.

(2) EXERCISE PRICE. The exercise price of options granted
under the 1991 Stock Plan is determined on the date of grant. The exercise
price of incentive stock options must be at least 100% of the fair market
value per share of the Common Stock at the time of grant. In the case of
incentive stock options granted to an employee who at the time of grant owns
more than 10% of the voting power of all classes of stock of the Company or
any parent or subsidiary thereof, the exercise price must be at least 110% of
the fair market value per share of the Common Stock at the time of grant. In
the event of the grant of a non-statutory option with an exercise price below
the then fair market value of the Common Stock, the difference between fair
market value on the date of grant and the exercise price would be treated as
a compensation expense for accounting purposes and would therefore affect the
Company's earnings.

(3) TERMINATION. If the optionee's employment or consulting
relationship with the Company is terminated for any reason (other than death
or total and permanent disability), options may be exercised within such
period as is determined by the Board or its committee after such termination
as to all or part of the shares as to which the optionee was entitled to
exercise at the date of such termination, provided that the option is
exercised no later than its expiration date.

(4) DISABILITY. If an optionee is unable to continue his or
her employment or consulting relationship with the Company as a result of
total and permanent disability, options may be exercised at any time within
12 months from the date of disability to the extent such options were
exercisable at the date of disability, provided that the option is exercised
no later than its expiration date.

(5) DEATH. If an optionee should die, options may be exercised
at any time within 12 months after the date of death by the optionee's estate
or a person who acquired the right to exercise the option by bequest or
inheritance, but only to the extent that such options would have been
exercisable by the optionee at the date of death, provided that the option is
exercised no later than its expiration date.

(6) TERM AND TERMINATION OF OPTIONS. At the time an option is
granted, the Board or its committee determines the period within which the
option may be exercised. In no event may the term of an incentive stock
option be longer than ten years. No option may be exercised by any person
after the expiration of its term. An incentive stock option granted to an
optionee who, at the time such option is granted, owns stock possessing more
than 10% of the voting power of all classes of stock of the Company may not
have a term of more than five years.

(7) NONTRANSFERABILITY OF OPTIONS. An option is not
transferable by the optionee, other than by will or the laws of descent and
distribution, and is exercisable during the optionee's lifetime only by the
optionee.

(8) OTHER PROVISIONS. The option agreement may contain such
other terms, provisions and conditions not inconsistent with the 1991 Stock
Plan as may be determined by the Board or its committee.

ADJUSTMENTS; DISSOLUTIONS; MERGERS AND ASSET SALES. In the event any
change, such as a stock split or dividend, is made in the Company's
capitalization which results in an increase or decrease in the number of
outstanding shares of Common Stock without receipt of consideration by the
Company, an appropriate adjustment shall be made in the number of shares
under the 1991 Stock Plan, the price per share covered by each outstanding
option and the maximum number of shares that may be awarded under options to
any individual in any fiscal year of the Company.

In the event of the proposed dissolution or liquidation of the
Company, all outstanding options will terminate immediately prior to the
consummation of such proposed action. However, the Board may, in its
discretion, make provision for accelerating the exercisability of options
outstanding under the 1991 Stock Plan in the event of such a proposed
dissolution or liquidation. In the event of the merger of the Company with or
into another corporation or a proposed sale of all or substantially all of
the assets of the Company, each outstanding option shall be assumed or
substituted by such successor corporation. However, if a successor does not
assume or substitute the outstanding option, the Board may determine, in its
sole discretion and in lieu of such assumption or substitution, that the
participant shall have the right to exercise the option as to all shares
subject to such option, including shares as to which the option would not
otherwise be exercisable. If the Board determines that options shall be fully
exercisable in lieu of assumption or substitution, the Company shall notify
the participant that the option will be fully exercisable for a period of 15
days from the date of such notice and that the option will terminate upon the
expiration of such period.

In the event of a "Change of Control" of the Company, as defined in
the 1991 Stock Plan, the following acceleration and valuation provisions
shall apply: (1) except as otherwise determined by the Board, in its
discretion, in the event of an anticipated Change of Control, any options
outstanding on the date such Change of Control is determined to have occurred
that are not yet exercisable and vested on such date shall become fully
exercisable and vested; (2) except as otherwise determined by the Board, in
its discretion, in the event of an anticipated Change of Control, all
outstanding options, to the extent they are exercisable and vested (including
options that shall become exercisable and vested pursuant to (1) above),
shall be terminated in exchange for a cash payment equal to the Change of
Control Price (reduced by the exercise price applicable to such options).
These cash proceeds shall be paid to the optionee or, in the event of death
of an optionee, prior to payment, to the estate of the optionees or a person
who acquired the right to exercise the option by bequest or inheritance; and
(3) any payment made in the event of a Change of Control shall not exceed the
maximum amount which could be paid to an optionee without having the payment
treated as an "excess parachute payment" within the meaning of Section 280G
of the Code.

AMENDMENT AND TERMINATION OF THE 1991 STOCK PLAN. The Board may
amend the 1991 Stock Plan at any time or from time to time or may terminate
the 1991 Stock Plan without approval of the stockholders; provided, however,
that stockholder approval is required for any amendment to the 1991 Stock
Plan for which stockholder approval would be required under applicable law,
as in effect at the time. However, no action by the Board of Directors or
stockholders may alter or impair any option previously granted under the 1991
Stock Plan. The Board may accelerate the vesting of any option or waive any
condition or restriction pertaining to such option at any time. The Board may
also substitute new stock options for previously granted stock options,
including previously granted stock options having higher option prices, and
may reduce the exercise price of any option to the then current fair market
value, if the fair market value of the Common Stock covered by such option
shall have declined since the date the option was granted. In any event, the
1991 Stock Plan shall terminate in October 2001. Any options outstanding
under the 1991 Stock Plan at the time of its termination shall remain
outstanding until they expire by their terms.

AMENDED PLAN BENEFITS

The benefits or amounts that will be received by or allocated to the
Named Executive Officers, all current executive officers and all other
employees under the 1991 Stock Plan will not change as a result of the
proposed amendment, except that additional shares will be available for
issuance under the 1991 Stock Plan. Such benefits

and amounts are not determinable because all awards are made at the
discretion of the Compensation Committee. The benefits or amounts that will
be received by or allocated to the Company's non-employee directors under the
1991 Stock Plan will not change as a result of the proposed amendments and
remain fixed and non-discretionary, as described above.

CERTAIN U.S. FEDERAL INCOME TAX INFORMATION

An optionee in the United States who is granted an incentive stock
option will not recognize taxable income either at the time of grant or
exercise, although the exercise may subject the optionee to the alternative
minimum tax. Upon the sale or exchange of the shares more than two years
after grant of the option and one year after exercise, any gain or loss will
be treated as long-term capital gain or loss. If these holding periods are
not satisfied, the optionee will recognize ordinary income at the time of
sale or exchange equal to the difference between the exercise price and the
lower of (i) the fair market value of the shares at the date of the option
exercise or (ii) the sale price of the shares. Any gain or loss recognized on
such a premature disposition of the shares in excess of the amount treated as
ordinary income will be characterized as long-term or short-term capital gain
or loss, depending on the holding period.

An optionee in the United States will not recognize any taxable
income at the time he or she is granted a non-statutory stock option.
However, upon its exercise, the optionee will recognize taxable income
generally measured as the excess of the then fair market value of the shares
purchased over the purchase price. Any taxable income recognized in
connection with an option exercised by an optionee who is also an employee or
a former employee of the Company will be subject to tax withholding by the
Company. Upon resale of such shares by the optionee, any difference between
the sales price and the optionee's purchase price, to the extent not
recognized as taxable income as described above, will be treated as long-term
or short-term capital gain or loss, depending on the holding period.

The Company will be entitled to a tax deduction in the same amount
as the ordinary income recognized by an optionee with respect to shares
acquired upon exercise of an option.

The foregoing summary of the federal income tax consequences of 1991
Stock Plan transactions is based upon federal income tax laws in effect on
the date of this Proxy Statement. This summary does not purport to be
complete, and does not discuss foreign, state or local tax consequences.

VOTE REQUIRED

THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR APPROVAL
OF THE PROPOSED AMENDMENT AND RESTATEMENT OF THE 1991 STOCK PLAN.
AN ABSTENTION WILL HAVE THE SAME EFFECT
AS A VOTE AGAINST THE PROPOSAL.

PROPOSAL 4:
AMENDMENT TO ARTICLE IV OF THE COMPANY'S
RESTATED CERTIFICATE OF INCORPORATION TO INCREASE
THE TOTAL NUMBER OF AUTHORIZED SHARES OF COMMON STOCK

The Company's stockholders are asked to act upon a proposal to
authorize the Board of Directors to amend, at any time prior to the next
Annual meeting of Stockholders of the Company, Article IV of the Company's
Restated Certificate of Incorporation to increase the number of authorized
shares of Common Stock from 20,000,000 shares to 50,000,000 shares. In June
1999, the Board approved this amendment of the Restated Certificate of
Incorporation, subject to stockholder approval. The Board directed that this
proposal be submitted to the Company's stockholders for consideration and
action.

The following is the text of the first paragraph of Article IV of
the Company's Restated Certificate of Incorporation, as proposed to be
amended to effect the increase in the total number of authorized shares of
Common Stock of the Company:

"The Corporation is authorized to issue two classes of stock to be
designated, respectively, Preferred Stock, par value $.001 per share
("Preferred"), and Common Stock, par value $.001 per share ("Common").
The total number of shares of Common that the Corporation shall have
the authority to issue is 50,000,000. The total number of shares of
Preferred that the Corporation shall have authority to issue is
5,000,000. The Preferred Stock may be issued from time to time in one
or more series."

If this Proposal is approved by the stockholders of the Company, the
amendment to Article IV of the Restated Certificate of Incorporation would be
effected on any date (the "Effective Date") selected by the Board of
Directors on or prior to the Company's next Annual Meeting of Stockholders,
which the Board anticipates will be held in June 2000, and the Company will
file a Certificate of Amendment of its Restated Certificate of Incorporation
with the Secretary of State of the State of Delaware reflecting the increase
in authorized shares. If the amendment is not effected by such date, the
Board will take action to abandon the amendment pursuant to Section 242(c) of
the Delaware General Corporation Law.

PURPOSES AND EFFECTS OF THE INCREASE IN THE TOTAL NUMBER OF AUTHORIZED SHARES
OF COMMON STOCK

The amendment to the Restated Certificate of Incorporation described
in this Proposal Number 4 would increase the number of shares of Common Stock
that the Company is authorized to issue from 20,000,000 to 50,000,000 shares.
The Company believes that the availability of the additional shares will
provide it with the flexibility to meet business needs as they arise, to take
advantage of favorable opportunities and to respond to a changing corporate
environment. For example, shares of stock may be required in order to effect
such things as financings, corporate mergers or acquisitions, an increase in
the number of shares reserved under any of the Company's stock option or
stock purchase plans, stock dividends, stock splits or other corporate
purposes. At present, the Company has no specific plans, agreements or
understandings to undertake any such actions that would involve the issuance
of additional shares of capital stock. No further action or authorization by
the stockholders would be necessary prior to the issuance of additional
shares unless applicable laws or regulations require such approval.

Stockholders should note that certain disadvantages may result from
the adoption of this Proposal Number 4. After the proposed amendment to the
Restated Certificate of Incorporation is effected, there would be a greater
number of shares of Common Stock available for issuance by the Company, and
stockholders could therefore experience a significant reduction in the
stockholders' interest in the Company with respect to earnings per share,
voting, liquidation value and book and market value per share if the
additional authorized shares are issued.

The availability for issuance of additional shares of the Company's
Common Stock would also enable the Board to render more difficult or
discourage an attempt to obtain control of the Company. For example, the
issuance of shares in a public or private sale, merger or similar transaction
would increase the number of

outstanding shares, thereby possibly diluting the interest of a party
attempting to obtain control of the Company. The Company is not aware of any
pending or threatened efforts to obtain control of the Company.

Each additional share of Common Stock authorized by the amendment to
the Restated Certificate of Incorporation described in this Proposal Number 4
would have the same rights and privileges as each share of Common Stock
currently authorized or outstanding.

VOTE REQUIRED

The affirmative vote of the holders of a majority of the outstanding
shares of Common Stock entitled to vote at the Annual Meeting will be
necessary for the approval of the amendment to Article IV of the Restated
Certificate of Incorporation.

THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR APPROVAL
OF THE PROPOSED AMENDMENT TO ARTICLE IV OF
THE COMPANY'S RESTATED CERTIFICATE OF INCORPORATION.

AN ABSTENTION WILL HAVE THE SAME
EFFECT AS A VOTE AGAINST THE PROPOSAL.

PROPOSAL NO. 5
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS

Kost, Forer & Gabbay, a member of Ernst & Young International, has
been appointed by the Board to be the Company's independent auditors for the
Company's fiscal year ending December 31, 1999. In the event that
ratification of this selection of independent auditors is not approved by a
majority of the shares of Common Stock voting at the Annual Meeting in person
or by proxy, management will review its future selection of independent
auditors.

A representative of Kost, Forer & Gabbay is expected to be present
at the Annual Meeting. The representative will have an opportunity to make a
statement and will be able to respond to appropriate questions.

THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR RATIFICATION OF THE
APPOINTMENT OF KOST, FORER & GABBAY AS THE
COMPANY'S INDEPENDENT AUDITORS FOR THE FISCAL YEAR
ENDING DECEMBER 31, 1999.

EXECUTIVE COMPENSATION AND OTHER INFORMATION

SUMMARY COMPENSATION TABLE

The following table sets forth all compensation earned by the Company's
Chief Executive Officer and the Named Executive Officers of the Company for the
years ended December 31, 1998, 1997 and 1996:

SUMMARY COMPENSATION TABLE

LONG-TERM
ANNUAL COMPENSATION COMPENSATION AWARDS
-------------------------------- -------------------
SECURITIES
SALARY (1) BONUS (2) UNDERLYING OPTIONS
NAME AND PRINCIPAL POSITION YEAR $ $ (#)
- --------------------------- ---- ---------------- ------------- -------------------

Eliyahu Ayalon 1998 $294,952 $240,000 150,000
Chief Executive Officer, President and 1997 283,747 212,500 150,000
Director 1996 157,493(3) 72,000 160,000

Igal Kohavi 1998 294,630 240,000 150,000
Chairman of the Board 1997 280,620 212,500 150,000
1996 250,000 72,000 140,000

Avi Basher (4) 1998 174,082 45,000 10,000
Vice President of Finance, Chief Financial 1997 163,299 45,000 30,000
Officer and Secretary 1996 31,822(5) -- 50,000

David Tolub (6) 1998 110,859(7) -- 50,000
Vice President -- Sales 1997 -- -- --
1996 -- -- --

Gideon Wertheizer (8) 1998 172,122 50,000 20,000
Vice President -- Marketing 1997 146,362 45,000 15,000
1996 -- -- --

Amir Karni (9) 1998 125,644 10,000 10,000
Former Vice President, Research and 1997 61,317(10) -- 22,000
Development 1996 -- -- --

- --------------------------
(1) The salaries of officers located in Israel include social benefit
payments and car allowances.

(2) The Company's executive officers are eligible for annual cash bonuses. Such
bonuses are generally based upon achievement of corporate performance
objectives determined by the Company's Compensation Committee. Bonuses are
awarded by the Compensation Committee based upon individual, as well as
corporate, performance. The Company pays bonuses in the year following that
in which the bonuses were earned.

(3) Represents Mr. Ayalon's salary from his appointment as Chief Executive
Officer, President and Director of the Company in April 1996.

(4) Mr. Basher resigned as Vice President of Finance, Chief Financial
Officer and Secretary in May 1999.

(5) Represents Mr. Basher's salary from his appointment as Vice President of
Finance, and Chief Financial Officer of the Company in October 1996.

(6) Mr. Tolub was appointed an executive officer of the Company in May 1998
and resigned as such in April 1999.

(7) Includes $12,357 of commissions earned by Mr. Tolub in 1998.

(8) Mr. Wertheizer was appointed an executive officer of the Company in
November 1997.

(9) Mr. Karni resigned as Vice President, Research and Development in
November 1998.

(10) Represents Mr. Karni's salary from his appointment as Vice President of
Research and Development of the Company in July 1997.

OPTION GRANTS

The following table sets forth certain information with respect to
stock options granted during 1998 to each of the Named Executive Officers. In
accordance with the rules of the Securities and Exchange Commission, also
shown below is the potential realizable value over the term of the option
(the period from the grant date to the expiration date) based on assumed
rates of stock appreciation of 5% and 10%, compounded annually. These amounts
are based on certain assumed rates of appreciation and do not represent the
Company's estimate of future stock price. Actual gains, if any, on stock
option exercises will be dependent on the future performance of the Company's
Common Stock.

OPTION GRANTS IN 1998
INDIVIDUAL GRANTS (1)

POTENTIAL REALIZABLE
NUMBER OF VALUE AT ASSUMED ANNUAL RATES
SECURITIES % OF TOTAL OF STOCK PRICE APPRECIATION
UNDERLYING OPTIONS FOR OPTION TERM
OPTIONS GRANTED TO
GRANTED EMPLOYEES EXERCISE EXPIRATION
NAME (#) IN 1998 PRICE DATE 5% 10%
- ---------------------- ---------- ---------- ---------- ----------- ------------ ------------

Eliyahu Ayalon 150,000 18.94% $18.563 07/02/05 $1,133,551 $2,641,655

Igal Kohavi 150,000 18.94% 18.563 07/02/05 1,133,551 2,641,655

Avi Basher 10,000 1.26% 18.875 08/03/05 76,840 179,070

David Tolub 50,000 6.31% 19.50 05/27/05 396,923 924,999

Gideon Wertheizer 20,000 2.53% 18.875 08/03/05 153,680 358,141

Amir Karni 10,000 1.26% 18.875 08/03/05 76,840 179,070

- --------------------------
(1) All options were granted pursuant to the 1991 Stock Plan.

OPTION EXERCISES AND OPTION VALUES

The following table sets forth information concerning option
exercises during 1998 and the aggregate value of unexercised options as of
December 31, 1998 held by each of the Named Executive Officers.

AGGREGATED OPTION EXERCISES IN 1998
AND OPTION VALUES AT DECEMBER 31, 1998

NUMBER OF SECURITIES VALUE OF UNEXERCISED
AGGREGATE OPTION UNDERLYING UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS AT
EXERCISES IN 1998 AT DECEMBER 31, 1998 DECEMBER 31, 1998 (1)
------------------------ ------------------------------ -----------------------------
SHARES
ACQUIRED VALUE
ON EXERCISE REALIZED
NAME (#) ($)(2) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ----------------- ----------- ----------- ------------- ------------- ----------- -------------

Eliyahu Ayalon -- -- 85,000 257,500 $423,594 $735,781

Igal Kohavi -- -- 177,500 252,500 719,219 686,406

Avi Basher 12,500 $146,945 11,250 53,750 115,313 543,438

David Tolub -- -- -- 50,000 -- 68,750

Gideon Wertheizer 5,586 57,959 8,437 36,645 21,563 94,160

Amir Karni -- -- 6,874 25,126 20,193 64,432

- --------------------------
(1) Calculated on the basis of the closing price of the Company's Common
Stock as reported on the Nasdaq National Market on December 31, 1998 of
$20.875 per share, minus the exercise price.

(2) Calculated on the basis of the broker's reported sale price of the
Company's Common Stock subject to the option, minus the exercise price.

EMPLOYMENT AGREEMENTS

The following Named Executive Officers have written employment
agreements with the Company: Messrs. Ayalon and Kohavi.

In April 1996, Mr. Ayalon entered into an employment agreement with
DSP Semiconductors, Ltd., the Company's wholly owned subsidiary in Israel
("DSP Semiconductors"), pursuant to which Mr. Ayalon is to serve as the
President and Chief Executive Officer of the Company. The term of the
agreement is indefinite. The agreement originally provided for a fixed
monthly salary of NIS 47,000 (approximately U.S. $15,000), which shall be
adjusted monthly to the Consumer Price Index of Israel. In June 1997, the
Board of Directors increased Mr. Ayalon's monthly salary to NIS 69,295
(approximately U.S. $20,500). Mr. Ayalon also is entitled to an annual bonus,
the amount of which is determined at the sole discretion of the Board of
Directors. The agreement may be terminated by the Company or Mr. Ayalon,
without cause (as defined in the agreement), upon six months advance written
notice. Mr. Ayalon's employment agreement was amended in November 1997 to
provide for the following: (i) Mr. Ayalon's base compensation shall be fixed
at the commencement of each year, but shall not be subject to reduction
during the term of the agreement; (ii) if Mr. Ayalon terminates the agreement
without good reason or if the Company terminates the agreement for cause,
then no further payments shall be made to Mr. Ayalon pursuant to the
agreement and he shall be subject to a one-year prohibition against
competition in addition to the customary prohibitions against disclosure of
trade secrets; (iii) upon a change of control of the Company or if the
agreement is terminated by Mr. Ayalon for good reason or by the Company
without cause, then all rights of Mr. Ayalon under the agreement would
continue for two years and all options held by Mr. Ayalon would accelerate
and immediately vest and be exercisable in whole or in part at any time
during the remaining two-year term of the agreement; and (iv) in the event of
death or permanent disability of Mr. Ayalon, all options shall accelerate and
immediately vest.

In June 1997, Mr. Kohavi entered into an employment agreement with
DSP Semiconductors pursuant to which Mr. Kohavi is to serve as the Chairman
of the Board of Directors of the Company. The term of the agreement is
indefinite. The agreement provided for a fixed monthly salary of NIS 69,295
(approximately U.S. $20,500), which shall be adjusted monthly to the Consumer
Price Index of Israel. Mr. Kohavi also shall be entitled to an annual bonus,
the amount of which is determined at the sole discretion of the Board of
Directors. The agreement may be terminated by the Company or Mr. Kohavi,
without cause (as defined in the agreement), upon six months advance written
notice. Mr. Kohavi's employment agreement was amended in November 1997 to
provide for the following: (i) Mr. Kohavi's base compensation shall be fixed
at the commencement of each year, but shall not be subject to reduction
during the term of the agreement; (ii) if Mr. Kohavi terminates the agreement
without good reason or if the Company terminates the agreement for cause,
then no further payments shall be made to Mr. Kohavi pursuant to the
agreement and he shall be subject to a one year prohibition against
competition in addition to the customary prohibitions against disclosure of
trade secrets; (iii) upon a change of control of the Company or if the
agreement is terminated by Mr. Kohavi for good reason or by the Company
without cause, then all rights of Mr. Kohavi under the agreement would
continue for two years and all options held by Mr. Kohavi would accelerate
and immediately vest and be exercisable in whole or in part at any time
during the remaining two-year term of the agreement; and (iv) in the event of
death or permanent disability of Mr. Kohavi, all options shall accelerate and
immediately vest.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

The Compensation Committee of the Company during 1998 consisted of
Messrs. Kaplan, Phelps and Shamir; Mr. Kaplan served as its Chairman.2013. No member of this committee is a present or former officer or employee of the Companycompany or any of itsour subsidiaries. Other than Mr. Kohavi, noNone of our executive officer of the Companyofficers served on the board of directors or compensation committee of any entity which has one or more executive officers serving as a member of the Company's Boardour board or compensation committee.

Qualifications of Directors
Our board of directors has not established any special qualifications or Compensation Committee. Mr.
Kohavi servesany 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 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 NASDAQ, 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.
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, 2013, all Reporting Persons complied with all applicable filing requirements.
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 Boardnomination and corporate governance committee, c/o DSP Group, Inc., 2161 S. San Antonio Road, Suite 10, Los Altos, CA 94022. The Chairman of VCON Telecommunications, Ltd.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., 2161 S. San Antonio Road, Suite 10, Los Altos, CA 94022.
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 public companyproposal considered by the nomination and corporate governance committee for the 2015 annual meeting, a stockholder must submit its proposal and other relevant information in writing to the attention of our Secretary at our principal executive offices no later than [●]. With respect to general stockholder proposals, the stockholder must submit the following relevant information: (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, (ii) the name and address, as they appear on our books, of the stockholder proposing such business, (iii) the class and number of shares of our common stock which are beneficially owned by the stockholder, (iv) any material interest of the stockholder in such business, (v) as to the stockholder giving the notice and 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 his or 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 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 principal executive offices no later than [●]: (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 principal occupation or employment of such person, (C) the class and number of shares of our common stock which are beneficially owned by such person, (D) a description of all arrangements or understandings between the stockholder and each nominee and any other person or persons (naming such person or persons) pursuant to which the nominations are to be made by the stockholder, and (E) any other information relating to such person that is required to be disclosed in solicitations of proxies for elections of directors, or is otherwise required, in each case pursuant to Regulation 14A under the Securities Exchange 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, 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.
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. The code satisfies the requirements under the Sarbanes-Oxley Act of 2002, as well as NASDAQ rules applicable to issuers listed on the Nouveau Marcheand located in Israel, for which
Mr. Shamir serves as PresidentNASDAQ. The code, among other things, addresses issues relating to conflicts of interests, including internal reporting of violations and CEO.

COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION

NOTWITHSTANDING ANYTHING TO THE CONTRARY SET FORTH IN ANY OF THE
COMPANY'S PREVIOUS FILINGS UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
THE EXCHANGE ACT THAT MIGHT INCORPORATE FUTURE FILINGS, INCLUDING THIS PROXY

STATEMENT IN WHOLE OR IN PART, THE FOLLOWING REPORT AND THE STOCK PERFORMANCE
GRAPH THAT FOLLOWS SHALL NOT BE DEEMED TO BE INCORPORATED BY REFERENCE INTO
ANY SUCH FILINGS.disclosures, and compliance with applicable laws, rules and regulations. The Compensation Committeepurpose of the Company's Boardcode 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 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 Directors,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.

SECURITY OWNERSHIP OF
CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information known to us with respect to beneficial ownership of our common stock as of April 1, 2014, by (i) each stockholder known to us to own beneficially more than 5% of our common stock; (ii) each of our directors as of April 1, 2014; (iii) the named executive officers; and (iv) all of our directors and executive officers as a group. Except as otherwise indicated, the address of each of the executive officers and directors is c/o DSP Group, Inc., 161 S. San Antonio Road, Suite 10, Los Altos, CA 94022.
Beneficial ownership is determined in accordance with the rules of the Securities and Exchange Commission and generally includes voting power and/or investment power with respect to securities. The percentages are based on 22,552,663 shares of our common stock outstanding as of April 1, 2014. Shares of common stock subject to options, stock appreciation rights or restricted stock units currently exercisable or exercisable within 60 days of April 1, 2014 are deemed outstanding for purposes of computing the percentage beneficially owned by the person holding the options or stock appreciation rights, but are not deemed outstanding for purposes of computing the percentage beneficially owned by any other person. Except as indicated by footnote, we believe that the persons named in this table, based on information provided by them, have sole voting and investment power with respect to the shares of common stock indicated.
Name of
Beneficial Owner Shares
Beneficially Owned Approximate Percent
Beneficially Owned Options and Stock Appreciation Rights Included in Shares
Beneficially Owned (5)
BlackRock, Inc. (1)
40 East 52nd Street
New York, NY 10022 3,886,713 17.2% _
Dimensional Fund Advisors LP (2)
Palisades West, Building One
6300 Bee Cave Road
Austin, Texas, 78746 1,858,364 8.2% _
Starboard Value LP and affiliates (3)
830 Third Avenue, 3rd Floor
New York, New York 10022 1,650,000 7.3% _
Rima Senvest Management, LLC (4)
110 East 55th Street Suite 1600
New York, New York 10022 1,176,622 5.2% _
Ofer Elyakim 403,211 1.8% 364,701

Name of
Beneficial Owner Shares
Beneficially Owned Approximate Percent
Beneficially Owned Options and Stock Appreciation Rights Included in Shares
Beneficially Owned (5)
Dror Levy 202,086 * 195,836
David Dahan 29,184 * 18,125
Thomas A. Lacey 26,000 * 25,000
Reuven Regev 50,000 * 50,000
Norman J. Rice III 1,980 * _
Gabi Seligsohn 10,000 * 10,000
Yair Seroussi 120,000 * 120,000
Norman Taffe 1,600 * _
Patrick Tanguy 130,000 * 130,000
Kenneth H. Traub 39,153 * 25,000
All directors and executive officers
as a group (11 persons) 1,013,214 4.3% 938,662
* Less than 1%
(1) Based on a Schedule 13G/A filed by BlackRock, Inc. on January 10, 2014, with the Securities and Exchange Commission, reporting beneficial ownership as of December 31, 2013.
(2) Based on a Schedule 13G/A jointly filed by Dimensional Fund Advisors LP and Dimensional Holdings Inc. on February 10, 2014, with the Securities and Exchange Commission, reporting beneficial ownership as of December 31, 2013.
(3) Based on a Schedule 13D/A jointly filed by Starboard Value LP, Starboard Value and Opportunity Master Fund Ltd., Starboard Value GP LLC, Starboard Value and Opportunity S LLC, Starboard Principal Co LP, Starboard Principal Co GP LLC, Jeffrey C. Smith, Mark R. Mitchell and Peter A. Feld on March 6, 2014 with the Securities and Exchange Commission, reporting aggregate beneficial ownership as of March 5, 2014. The Schedule 13D/A reported sole voting and dispositive power of 1,650,000 shares by Starboard Value LP, sole voting and dispositive power of 1,212,301 shares by Starboard Value and Opportunity Master Fund Ltd., sole voting and dispositive power of 437,699 shares by Starboard Value and Opportunity S LLC, sole voting and dispositive power of 1,650,000 shares by Starboard Value GP LLC, sole voting and dispositive power of 1,650,000 shares by Starboard Principal Co LP, sole voting and dispositive power of 1,650,000 shares by Starboard Principal Co GP LLC, and shared voting and dispositive power of 1,650,000 shares by Jeffrey C. Smith, Mark R. Mitchell and Peter A. Feld.
(4) Based on a Schedule 13G/A jointly filed by Rima Senvest Management, LLC and Richard Mashaal on February 13, 2014, with the Securities and Exchange Commission, reporting beneficial ownership as of December 31, 2013.
(5) For purposes of the above table, with respect to stock appreciation right awards granted to all of our executive officers, the number of shares of our common stock subject to stock appreciation right awards that are currently exercisable or exercisable within 60 days of April 1, 2014 is calculated based on 50% of the units subject to such awards for grants prior to 2009, 75% of the units subject to such awards for grants in 2009, 67% of the units subject to such awards for grants in 2010 and 2011 and 50% of the units subject to such awards for grants in 2013. The percentages represent the maximum number of shares that could be issued upon the exercise of those stock appreciation right awards. Our directors do not receive stock appreciation right awards.

Equity Compensation Plan Information
The following table sets forth certain information regarding our equity compensation plans as of December 31, 2013.
(a) (b) (c)
Plan category Number of securities to be issued upon exercise of outstanding options, warrants and rights Weighted-average exercise price of outstanding options, warrants and rights Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a))
Equity compensation plans approved by security holders 1,125,000 $ 5.76 2,374,414 (1)
Equity compensation plans not approved by security holders (2) 3,505,413 $ 8.82 182,536
Total 4,630,413 $ 8.08 2,556,950
(1) The amount includes 713,903 shares of common stock available for future issuance under our 1993 Employee Stock Purchase Plan as of December 31, 2013.
(2) Neither the Amended and Restated 1998 Non-Officer Employee Stock Option Plan (the “1998 Plan”) nor the Amended and Restated 2003 Israeli Share Incentive Plan (the “2003 Plan”) was previously approved by our stockholders. The total number of shares of common stock available for the grant of options under the 2003 Plan was increased on the first day of each calendar year beginning in 2004 by a number of shares equal to three percent of the number of shares of our common stock outstanding as of such date or a lesser number as determined by the administrator of the plan; provided, however that in May 2011, our board of directors approved an amendment and restatement of the 2003 Plan to eliminate the automatic annual increase in the authorized number of shares of our common stock available for grant under the 2003 Plan after 2012. Furthermore, after our stockholders approved our 2012 Equity Incentive Plan at the 2012 annual meeting of stockholders, the 2003 Plan terminated.
Amended and Restated 1998 Non-Officer Employee Stock Option Plan
Our board of directors adopted the 1998 Plan in November 1998. As of December 31, 2013, 5,062,881 shares of common stock were authorized and 182,536 shares of common stock remained available for grant. The board of directors, or a committee designated by the board of directors, administers the 1998 Plan. The administrator has the sole discretion to interpret any provision of the 1998 Plan, and to determine the terms and conditions of awards of non-qualified stock options or stock appreciation rights under the 1998 Plan. Options and stock appreciation rights currently may be granted to our employees and employees of any of our subsidiaries. Officers may not be granted options or stock appreciation rights under the 1998 Plan. The material features of the 1998 Plan are summarized below.
Term. The term of each option or stock appreciation right shall be stated in the applicable option or stock appreciation right agreement.

Exercise Price or Base Appreciation Right.The exercise price per share of common stock for an option and the base appreciation amount for a stock appreciation right shall be determined by the administrator.
Vesting. Each option or stock appreciation right shall vest in accordance with a schedule as determined by the administrator.
Early Exercise. An option may include a provision whereby the participant may elect to exercise any part or all of the option prior to vesting of the option. Any unvested shares received pursuant to such exercise may be subject to a repurchase right in favor of the Company or any other restriction the administrator determines to be appropriate.
Transferability. Options and stock appreciation rights are transferable to the extent provided in the applicable option agreement or stock appreciation right agreement.
Termination of Employment. A participant may not exercise an option or stock appreciation right after the termination of the participant’s employment, director or consulting relationship with us or with any of our subsidiaries, except to the extent specified in the applicable option or stock appreciation right agreement. Where the option or stock appreciation right agreement permits the exercise of the option or stock appreciation right following termination of the participant’s employment or other service relationship with us or any of our subsidiaries, the option or stock appreciation right shall terminate to the extent not exercised on the last day of the specified period or the last day of the term of the option or stock appreciation right, which ever occurs first.
Acquisition of the Company.If we are acquired whether by sale, transfer of assets, merger or similar transaction, the administrator shall have the authority to provide for the full automatic vesting and exercisability of one or more outstanding unvested options or unvested stock appreciation rights under the 1998 Plan on such terms and conditions as the administrator may specify.
Amendment and Termination of the Plan. The 1998 Plan will continue until it is terminated by the board of directors. The board may amend the 1998 Plan at any time or from time to time or may suspend or terminate it, without approval of the stockholders, except as required by law. However, no action by the board of directors or stockholders may alter or impair any option or stock appreciation right previously granted under the 1998 Plan. No option or stock appreciation right may be granted during any suspension of or after termination of the 1998 Plan.
Amended and Restated 2003 Israeli Share Incentive Plan
Our board of directors adopted the 2003 Plan in November 2002. Pursuant to the plan terms, the number of shares authorized for issuance increased annually on the first business day of each calendar year equal to three percent of the number of shares of our common stock issued and outstanding as of such date or a lesser number of shares as determined by the board of directors; provided, however that in May 2011, our board of directors approved an amendment and restatement of the 2003 Plan to eliminate the automatic annual increase in the authorized number of shares of our common stock available for grant under the 2003 Plan after 2012. Furthermore, after our stockholders approved the 2012 Equity Incentive Plan at the 2012 annual meeting of stockholders, the 2003 Plan terminated. As of December 31, 2013, 10,700,543 shares of common stock were granted under the 2003 Plan and stock option and stock appreciation rights to acquire 2,433,819 shares of common stock remained outstanding under the 2003 Plan.

The board of directors, or a committee designated by the board of directors, administered the 2003 Plan. The administrator had the sole discretion to interpret any provision of the 2003 Plan and to determine the terms and conditions of the options and stock appreciation rights issued under the 2003 Plan. Our employees and other service providers and employees and other service providers of any of our subsidiaries were eligible to receive grants of options and stock appreciation rights. The material features of the 2003 Plan are summarized below.
Term.The term of each option or stock appreciation right were stated in the applicable option agreement or stock appreciation right agreement.
Exercise Price or Base Appreciation Right.The exercise price per share of common stock for an option and the base appreciation amount for a stock appreciation right were determined by the administrator and were set forth in the applicable option or stock appreciation right agreement.
Vesting. Each option or stock appreciation right vested in accordance with a schedule as determined by the administrator.
Transferability. Options and stock appreciation rights were non-transferable except as provided in the option or stock appreciation right agreement. During the lifetime of the participant, the option or stock appreciation right were exercisable only by the participant.
Termination of Employment. In the event a participant’s employment relationship with us or any of our subsidiaries was terminated other than for cause or as a result of death or disability, the vested portion of the option or stock appreciation right was exercisable for 90 days after the date of termination. In the event a participant’s employment relationship with us or any of our subsidiaries was terminated as a result of death or disability, the vested portion of the option or stock appreciation right was exercisable for 12 months after the date of termination. In the event a participant’s employment relationship with us or any of our subsidiaries was terminated for cause, the option or stock appreciation right was immediately terminated and ceased to be exercisable. In no event was an option or stock appreciation right exercisable after the expiration date of the option or stock appreciation right.
Acquisition of the Company. The terms of an option or stock appreciation right agreement could provide for the full automatic vesting and exercisability of the option or stock appreciation right in the event we were acquired by sale, transfer of assets, merger or similar transaction.

EXECUTIVE COMPENSATION
Compensation Discussion & Analysis
Overview of Compensation Philosophy and Objectives
We operate in a very competitive, dynamic and challenging industry. Our compensation policy, as established by the compensation committee of our board of directors, is designed to attract, motivate and retain highly talented individuals who will contribute to our long-term success, reward our executive officers who contribute to our positive financial performance and provide a strong link between our executive officers’ compensation and long-term interests of our stockholders. We believe that our executive officers’ compensation should not be based on the short-term performance of our stock, whether favorable or unfavorable, but rather that the price of our stock will, in the long-term, reflect our operating performance and ultimately the management of the company by our executive officers. The various compensation levels for our executive officers are set based on the scope of their responsibilities and performance. Our policy for allocating between long-term and currently paid compensation is to ensure adequate base compensation to attract and retain key personnel, while providing them incentives to maximize long-term value for our company and stockholders. We further believe that the executive officers’ total annual cash compensation should vary with the company’s performance and that the higher an executive officer’s level of responsibility within the company, the greater the percentage of such executive officer’s compensation should be tied to the company’s performance. However, notwithstanding the above principles, we rely upon judgment and not rigid guidelines or formulas in determining the amount and mix of compensation elements for each executive officer. The compensation committee has complete discretion over each element of our executive officers’ compensation, except to the extent the company’s performance-based bonus plan applies.
The compensation committee, which is comprised solely of independent, non-employee Boardboard members, has the authority and responsibility to establish the overall compensation strategy for the Company,company, including salaryreviewing, analyzing and bonus levels,approving the compensation structure for our Chief Executive Officer, other executive officers and other key employees each year; and administer the Company'sour incentive compensation and benefit plans, 401(k) plans,plan and employee stock option and
purchase plans, and review and make recommendations toplan. The compensation committee regularly updates the Boardboard of directors with respect to its undertakings in establishing the Company's executive compensation.company’s overall compensation strategy. Messrs. Kaplan,Limon, Shamir and Shani areTanguy were the current members of the compensation committee, with Mr. Shamir acting as the Chairman, until June 2013 and thereafter Messrs. Regev, Taffe, Traub, Seroussi and Tanguy have been the members of the compensation committee with Mr. Regev as the Chairman.
Role of Chief Executive Officer and Compensation Committee.

COMPENSATION POLICY. The Company's compensation policy, as
established by theConsultants in Compensation Committee, states that the executive
officers' total annual cash compensation should vary withDecisions
Mr. Elyakim, our Chief Executive Officer, reviews the performance of each executive officer (other than himself) and provides recommendation to the Companycompensation committee. The assessment by Mr. Elyakim of the performance of each executive officer, and that long-term incentives awardedthe individual and corporate performance of each executive officer and his conclusions thereon, including with respect to such officers should be
alignedsalary adjustments and annual award amounts, are then presented to the compensation committee in connection with the interestcommittee’s annual review of each executive officer’s total compensation. While the committee considers Mr. Elyakim’s recommendations, it independently evaluates the recommendations and makes all final compensation decisions.

The charter of the Company'scompensation committee authorizes the committee to engage the services of consultants to assist in the determination of the compensation of our executive officers and directors. The compensation committee engaged the services of Compensia, Inc. in 2013 to review and provide the committee with general comparative information about director compensation programs of peer companies, general observations about outside director compensation practices for cash retainers and equity awards, market practices for stock ownership guidelines for directors and officers, general observations of stock ownership guidelines for peer companies and “best practices” for aligning executive and director interests with that of stockholders. The Company has
designed its executiveCompensia did not directly recommend any specific compensation elements or specific parameters for the company’s director compensation program or stock ownership guidelines. Compensia was paid an aggregate fee and expenses of approximately $14,700 for their services in 2013. No compensation consultant was engaged in 2013 with respect to attract and retain executive officers who will contributeofficer compensation. Compensia was not engaged for any other services relating to the Company's long-term success, to reward
executive officers who contribute tocompany in 2013. No member of the Company's financial performance and
to link executive officer compensation and stockholder interests through the
grantcommittee or management has any affiliation with Compensia.
Principal Elements of stock options under the 1991 Employee and Consultant Stock Plan (the
"1991 Stock Plan").

Executive Compensation
Compensation of the Company'sour executive officers consists of three principal components: base salary, bonus payable pursuant to the terms of a performance-based plan, and long-term incentive compensation consisting of grants of stock option grants.

SALARY.options, stock appreciation rights and restricted stock units. The overall compensation of our executive officers is set by the compensation committee, in consultation with the board of directors, after an annual review by the compensation committee of each executive officer’s overall performance for the prior year and the overall performance of the company for the prior year.
Base Salary. The base salaries of the Company'sour executive officers are
reviewed annually and are set by the Compensation Committee.compensation committee. When setting base salary levels, in a manner consistent with the Compensation Committee's
policy outlined above, the Committeecompensation committee considers competitive market conditions for executive compensation, the Company'scompany’s performance, and the performance of the individual executive officer for the then completed year and any promotion or other change in job responsibility of the individual executive officer. BONUS. ForThe determination of the fiscal year endedbase salaries of the executive officers 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 in its annual review.
2013 Performance-Based Bonus Plan.In March 2013, the compensation committee of the board approved a 2013 performance-based bonus plan applicable for the Chief Executive Officer, Chief Financial Officer and Chief Operating Officer. The 2013 performance-based bonus plan was effective from January 1, 2013 to December 31, 1998,2013. The payment of bonuses under the Compensation
Committee evaluated2013 performance-based bonus plan was based on two components: (1) 60% of any bonus payable under the plan was based on the company’s achievement of certain financial performance metrics, consisting of annual revenue target of $150.5 million, earnings before interest, taxes, depreciation and amortization (“EBITDA”) target of $4.5 million and free cash flow target of $2.2 million which equals plan operating income on a non-GAAP basis, each based on the company’s 2013 annual budget which was approved by the board, and (2) 40% of any bonus payable under the plan was discretionary and based upon achievement of individual performance goals by the executive officers.

The individual performance goals for the discretionary bonus were determined by the compensation committee, in its sole discretion, taking into account such tangible and intangible individual performance factors as it considered appropriate. No specific weightings were applied to any performance goal. The compensation committee’s determination as to whether individual performance goals were met was subjective in nature. The compensation committee considered the following general categories of performance goals for the executive officers in evaluating the achievement of the discretionary bonus portion of the 2013 performance-based bonus plan: (1) improvements in gross margins from the previous year; (2) improvements in cash flow from operations; (3) the executive officers’ ability to prudently manage operating expenses; (4) changes in our market share in various product lines as compared both to our industry peers and to the previous year; (5) changes in the stock price of our common stock as compared both to our industry peers and to the previous year; (6) with respect to Messrs. Elyakim and Dahan, each of their contributions to an enhanced product development plan and strategy that are responsive to changing market trends; (7) with respect to Messrs. Elyakim and Dahan, each of their contributions to obtaining new design wins for emerging products and penetrating new markets; (8) each executive officer’s contribution to the hiring and retention of top management personnel; (9) the successful transition of the company and improvements in corporate governance and transparency; and (10) the time and effort that each executive officer applied in connection with the execution of his duties. However, the compensation committee did not consider any specific performance goals, did not assign a particular weight to any individual performance factor or consider a particular performance factor as the primary determinant. The determination by the compensation committee of the achievement of individual performance factors by any of the executive officers was necessarily subjective. Because no particular performance factor was a primary determinant and the compensation committee considered a number of various factors, we do not believe it is useful to an investor to list such factors. We do not disclose the specific performance goals because we believe such disclosure would cause us competitive harm in that it would reveal confidential future business plans and objectives.
Bonuses under the plan were capped. Payment of bonuses (if any) under the 2013 performance-based bonus plan was to be made in 2014 in a single lump sum, subject to payroll taxes and tax withholdings.

Chief Executive Officer
Criteria % of Total Bonus
A. Annual Revenue Target A = 15% x Annual Revenue Score
Annual Revenue Score:
● 0 if annual revenues are more than 10% below plan
● 0.5 if annual revenues are 10% below plan
● 1.0 if annual revenues meet plan
● 2.0 if annual revenues are 10% above plan
The payout based on the annual revenue score is linear between any two points.
B. EBITDA Target B = 25% x EBITDA Score
EBITDA Score:
● 0 at zero or negative EBITDA
● 1.0 if actual EBITDA meet plan
● 2.0 if actual EBITDA is 50% above plan
The payout based on the EBITDA score is linear between any two points.
C. Free Cash Flow Target C = 20% x Free Cash Flow Score
Free Cash Flow Score:
● 0 if zero or negative free cash flows
● 1.0 if free cash flows equals plan operating income on a non-GAAP basis
● 2.0 if actual free cash flows is 100% above plan operating income on a non-GAAP basis
The payout based on the free cash flow score is linear between any two points.
D. Discretionary Component 40% of total bonus payable under the plan
D = 40% to 80% of annual salary
Total (A+B+C+D) x Annual Salary
The target bonus payout under the 2013 performance-based bonus plan for the Chief Executive Officer was 1.0x of his annual base salary and the cap under the plan was 2.0x of his annual base salary.

Chief Financial Officer and Chief Operating Officer
Criteria % of Total Bonus
A. Annual Revenue Target A = 15% x Annual Revenue Score
Annual Revenue Score:
● 0 if annual revenues are more than 10% below plan
● 0.25 if annual revenues are 10% below plan
● 0.5 if annual revenues meet plan
● 1.0 if annual revenues are 10% above plan
The payout based on the annual revenue score is linear between any two points.
B. EBITDA Target B = 25% x EBITDA Score
EBITDA Score:
● 0 at zero or negative EBITDA
● 0.5 if actual EBITDA meet plan
● 1.0 if actual EBITDA is 50% above plan
The payout based on the EBITDA score is linear between any two points.
C. Free Cash Flow Target C = 20% x Free Cash Flow Score
Free Cash Flow Score:
● 0 if zero or negative free cash flows
● 0.5 if free cash flows equals plan operating income on a non-GAAP basis
● 1.0 if actual free cash flows is 100% above plan operating income on a non-GAAP basis
The payout based on the free cash flow score is linear between any two points.
D. Discretionary Component 40% of total bonus payable under the plan
D = 20% to 40% of annual salary
Total (A+B+C+D) x Annual Salary

The target bonus payout under the 2013 performance-based bonus plan for the Chief Financial Officer and Chief Operating Officer was 0.5x of their respective annual base salary and the cap under the plan was 1.0x of their respective annual base salary.
Based on the terms of the 2013 performance-based bonus plan, Messrs. Elyakim, Levy and Dahan were paid a bonus of $500,000, $200,000 and $168,484, respectively, in January 2014. The company achieved all the financial performance metrics under the plan with the EBITDA target being greater than 50% above plan and the free cash flows target being greater than 100% above plan. The compensation committee further assessed that each of the executive officers achieved most of his 2013 individual performance goals and therefore awarded each executive officer a percentage, ranging from 64% to 87%, of the maximum amount of the discretionary bonus payable under the plan.
Due to their strategic significance, the company believes that the disclosure of the 2013 Annual Revenue Score, EBITDA Score and Free Cash Flow Score would cause future competitive harm to the company since the disclosure of such financial metrics would provide its competitors with information about the company’s business model and indicate the priority the company places on its business initiatives. Therefore this information is not disclosed.
2014 Performance-Based Bonus Plan
In March 2014, our compensation committee of the board approved a 2014 performance-based bonus plan applicable for our Chief Executive Officer, Chief Financial Officer and Chief Operating Officer. The payment of bonuses under the 2014 performance-based bonus plan is based upon the company’s achievement of five separate components, four of which are based on business objectives and one is at the discretion of the compensation committee. Each component has a specified weighting and such weighting differs among the Plans; provided that the discretionary component is weighted 20% in each of the Plans. No bonus would be payable based on the achievement of the business objective components if the company’s 2014 earnings before interest, taxes, depreciation and amortization (“EBITDA”), excluding any restricting and non-recurring charges to be determined by the compensation committee, are less than a specified amount set forth in the bonus plans as determined by the compensation committee.
The cap for the bonus payout under the 2014 performance-based bonus plan for the Chief Financial Officer and Chief Operating Officer is 1.0x of their respective annual base salary and the cap for the Chief Executive Officer under the plan is 2.0x of his annual base salary.
Other than under the circumstances whereby there is a change of control transaction involving the company or termination of employment under specified circumstances as set forth in the employment agreement, payment of bonuses payable(if any) under the 2014 performance-based bonus plans is to be made in the following year. Any such bonuses would be paid in cash in a single lump sum, subject to payroll taxes and tax withholdings.
Solely with respect to the Chief Executive Officer and Chief Financial Officer, in the otherevent of termination of employment during 2014 by (i) either one of them (X) after complying with the advance notice provision in his respective employment agreement, or (Y) for good reason (as defined in his respective employment agreement), or (ii) the company without cause (as defined in his respective employment agreement), the bonusunder their respective planwould be determined on the following basis: (a) all numbers under the “Target” column of the plan would be reduced by a percentage equal to the percent of the year remaining after the date of termination of employment, (b) all non-numerical requirements under the “Target” column of the plan would remain unchanged, (c) the 1.0 and 2.0 multiplier under the “Target” column of the plan would be multiplied by their respective annual base salary for the part of the year prior to the date of termination of employment, and (d) the maximum bonus payable under the discretionary bonus component would be 40% of their respective annual base salary for the part of the year prior to the date of termination of employment.

The following is a description of the 2014 performance-based bonus plan as applicable to each of our Chief Executive Officer, Chief Financial Officer and Chief Operating Officer.
Chief Executive Officer
Weight Objective Target Payout
Specified
Weighting Aggregate
Revenue ● 0 if actual aggregate revenue is less than 90% of agreed amount based on the company’s 2014 budget approved by the board of directors (the “Revenue Target”)
● 1.0 if actual aggregate revenue is equal to 100% of the Revenue Target
● 2.0 if actual aggregate revenue is greater than 110% of the Revenue Target
Payout is linear between percentage points (i.e. if the company achieves 105% of the Revenue Target, 105% of the bonus amount payable upon achievement of such target would be payable).
Specified
Weighting Office
Segment ● 0 if the actual office segment revenue is less than an agreed amount determined by the compensation committee (the “Office Segment Revenue Target”) and certain strategic design win(s) are not achieved
● 1.0 if the actual office segment revenue is greater than the Office Segment Revenue Target and certain strategic design win(s) are achieved
● 2.0 if the actual office segment revenue is greater than the Office Segment Revenue Target and certain additional strategic design win(s) are achieved
If a target is met partially but not entirely, the compensation committee in its discretion may pay a portion of the payout based on achievement of that target based on its judgment as to the percentage of the target achieved.
Specified
Weighting Mobile
Segment ● 0 if certain strategic design win(s) are not achieved
● 1.0 if certain strategic design win(s) are achieved with certain specified parameter(s)
● 2.0 if certain additional strategic design win(s) are achieved with certain specified parameter(s)
If a target is met partially but not entirely, the compensation committee in its discretion may pay a portion of the payout based on achievement of that target based on its judgment as to the percentage of the target achieved.
Specified
Weighting ULE/Home
Automation
Segment ● 0 if certain strategic design win(s) are not achieved
● 1.0 if certain strategic design win(s) are achieved with certain specified parameter(s)
● 2.0 if certain additional strategic design win(s) are achieved with certain specified parameter(s)
If a target is met partially but not entirely, the compensation committee in its discretion may pay a portion of the payout based on achievement of that target based on its judgment as to the percentage of the target achieved.
20% Compensation
Committee
Discretion The compensation committee will apply its discretion based primarily on its evaluation of how management has performed in positioning the company for future success and enhancement of stockholder value.
The maximum total discretionary bonus is 40% of annual base salary.
Payable at the sole discretion of the compensation committee.

Chief Financial Officer and Chief Operating Officer
Weight Objective Target Payout
Specified
Weighting Aggregate
Revenue ● 0 if actual aggregate revenue is less than 90% of agreed amount based on the company’s 2014 budget approved by the board of directors (the “Revenue Target”)
● 0.5 if actual aggregate revenue is equal to 100% of the Revenue Target
● 1.0 if actual aggregate revenue is greater than 110% of the Revenue Target Payout is linear between percentage points (i.e. if the company achieves 105% of the Revenue Target, 105% of the bonus amount payable upon achievement of such target would be payable).
Specified
Weighting Office
Segment ● 0 if the actual office segment revenue is less than an agreed amount determined by the compensation committee (the “Office Segment Revenue Target”) and certain strategic design win(s) are not achieved
● 0.5 if the actual office segment revenue is greater than the Office Segment Revenue Target and certain strategic design win(s) are achieved
● 1.0 if the actual office segment revenue is greater than the Office Segment Revenue Target and certain additional strategic design win(s) are achieved If a target is met partially but not entirely, the compensation committee in its discretion may pay a portion of the payout based on achievement of that target based on its judgment as to the percentage of the target achieved.
Specified
Weighting Mobile
Segment ● 0 if certain strategic design win(s) are not achieved
● 0.5 if certain strategic design win(s) are achieved with certain specified parameter(s)
● 1.0 if certain additional strategic design win(s) are achieved with certain specified parameter(s) If a target is met partially but not entirely, the compensation committee in its discretion may pay a portion of the payout based on achievement of that target based on its judgment as to the percentage of the target achieved.
Specified
Weighting ULE/Home
Automation
Segment
● 0 if certain strategic design win(s) are not achieved
● 0.5 if certain strategic design win(s) are achieved with certain specified parameter(s)
● 1.0 if certain additional strategic design win(s) are achieved with certain specified parameter(s) If a target is met partially but not entirely, the compensation committee in its discretion may pay a portion of the payout based on achievement of that target based on its judgment as to the percentage of the target achieved.
20% Compensation
Committee
Discretion The compensation committee will apply its discretion based primarily on its evaluation of how management has performed in positioning the company for future success and enhancement of stockholder value.
The maximum total discretionary bonus is 40% of annual base salary.
Payable at the sole discretion of the compensation committee.

Due to their strategic significance, the company believes that the disclosure of the 2014 Revenue Target and Office Segment Revenue Target, names of the strategic customers that the company is aiming to achieve design wins and the related parameters associated with these strategic design wins would cause future competitive harm to the company and therefore are not disclosed. In addition, the company believes the disclosure of the weightings that apply to the four business objective components within each bonus plan would cause future competitive harm since the weightings indicate the priority the company places on its business initiatives and therefore are not disclosed.
Long-term Incentive Compensation. Grants of stock options, stock appreciation rights and restricted stock units are made from time to time to our employees, including executive officers, whose contributions have or will have a significant impact on our long-term performance. We believe that the grant of the Company. The
performance factors utilized by the Compensation Committee in determining
whether bonuses should be awarded to the Company's executive officers
included the following: (1) increased sales of the Company's productsstock options, stock appreciation rights and increased profitability of the Company during fiscal 1998; (2) the officer's
overall individual performance in his position and his relative contribution
to the Company's performance during the year; and (3) the desire of the Board
of Directors to retain the executive officer in the face of considerable
competition for executive talent within the industry. The Board of Directors
or the Compensation Committee in the future may modify the foregoing criteria
or select other performance factors with respect to bonuses paid to executive
officers for any given fiscal year.

LONG-TERM INCENTIVE COMPENSATION. The Company believes thatrestricted stock option grantsunits (1) align our executive officerofficers’ interests with stockholder interests by creating a direct link between compensation and stockholder return,return; (2) give executive officers a significant, long-term interest in the
Company's success,our success; and (3) help retain key executive officers in a competitive market for executive talent. In 2013, we provided long-term awards to our executive officers through the grant of restricted stock units.
Compensation of Chief Executive Officer. The 1991 Stock Plan authorizescompensation committee’s determination of Mr. Elyakim’s remuneration generally was based upon methods consistent with those used for the Board, orother executive officers.
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 committee thereof,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.
Types of Equity Awards.Equity incentive awards are granted based upon the compensation 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 equity awards granted to the executive officer during previous years, the value of such awards and the vesting status of such awards, and the comparability with equity awards made to our other executives officers and similarly situated executive officers at peer companies. All equity awards are made at the fair market price at the time of the grant 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.

No stock options or stock appreciation rights were granted to employeesour executive officers in 2013. In January 2013, the compensation committee granted restricted stock units to Messrs. Elyakim, Levy and consultantsDahan in the amounts of 66,000, 25,000 and 20,000 units, respectively. These January 2013 restricted stock unit grants vest over a four year period from the grant date with 25% of the Company, includingrestricted stock units granted vesting on the first anniversary of the grant date and 6.25% vesting each quarter thereafter.
In August 2013, for employee retention purposes and in view of the conclusion of the proxy contest involving the company, the compensation committee granted restricted stock units to Messrs. Elyakim, Levy and Dahan in the amounts of 35,000, 20,000 and 15,000 units, respectively. These August 2013 restricted stock unit grants fully vest two years after the grant date.
In February 2014, the compensation committee granted restricted stock units to Messrs. Elyakim, Levy and Dahan in the amounts of 45,000, 22,000 and 17,000 units, respectively. These February 2014 restricted stock unit grants have the same vesting schedule as the January 2013 restricted stock unit grants discussed above.
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. Under certain circumstances such as in 2013, the compensation committee determined that it was in the best interests of the company for employee retention purposes to make a mid-year grant of restricted stock units to the executive officers. Stock option grants are made from time to time to
executive officers whose contributions have or will have a significant impact
on the Company's long-term performance. The Company's determination of
whetheroptions, stock option grants are appropriate is based upon individual
performance measures established for each individual on an annual basis.
Optionsappreciation rights and restricted stock units are not necessarily granted to each employee every year. Grants of stock options, stock appreciation rights and/or restricted stock units 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.
Stock Ownership Guidelines. In October 2013, the board adopted a set of stock ownership guidelines for directors and executive officers so as to align this group’s interests with those of our stockholders.
Pursuant to the guidelines, directors are required to own (personally and collectively with members of the director’s immediate family or with family trusts), within five years following the later of (a) his or her first election or appoint to the board, or (b) October 31, 2013, an amount of common stock valued at the lesser of its purchase price or its fair market value (measured on October 31st of each year) equal to at least three times the total annual retainer cash compensation paid by the company for board service (excluding for this purpose compensation that is not paid to all independent directors, such as compensation for committee or chair service). For purposes of this ownership guideline, unvested restricted stock or restricted stock units, and vested and unvested stock options would not be considered when determining a director’s stock ownership. Until such time as a board member reaches his or her share ownership minimum, such board member will be required to hold at least 50% of the shares of common stock received upon lapse of the vesting restrictions pursuant to equity awards (net of any shares utilized to pay for the exercise price of the equity award and tax withholding). This ownership requirement may be waived by the board in individual cases, depending on the financial circumstances of a director, as determined in the discretion of the board.

Pursuant to the guidelines, the named executive officers of the company, currently the Chief Executive Officer, the Chief Financial Officer and the Chief Operating Officer, are required to own (personally and collectively with members of the executive officer’s immediate family or with family trusts), within five years following the later of (a) his or her first appointment as an executive officer, duringor (b) October 31, 2013, an amount of common stock valued at the lesser of its purchase price or its fair market value (measured on October 31st of each year. Generally,year) equal to at least three times the annual base salary for the Chief Executive officer or at least one times the annual base salary for each of the Chief Financial Officer and Chief Operating officer. For purposes of this ownership guideline, a 0.5 intrinsic value of vested in-the-money options grantedand stock appreciation rights are included in the minimum ownership calculation.
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. 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 2013 are specified in the summary compensation table of the proxy statement.
We currently do not provide any material retirement benefits or perquisites 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. 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. None 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 in the employment agreements section of the 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 vest as to 25%(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 grant onfacts regarding the first anniversaryrestatement are known.
Tax and Accounting Treatment of the date of grant with the remaining
options vesting quarterly over the next three years and expire five years
from the date of grant. Details on stock options granted to certain executive
officers in 1998 are provided in the table entitled "Option Grants in 1998."

COMPENSATION OF CHIEF EXECUTIVE OFFICER. The Board of Directors
considered the following factors in evaluating the performance of, and
setting the bonus compensation for, Mr. Ayalon, the Company's Chief Executive
Officer and President since April 1996: the increase in the net income of the
Company from the prior year, the Company's stock price and the time and
effort that Mr. Ayalon individually applied in connection with the execution
of his duties. The Compensation Committee believes that the salary, bonus and
long-term incentive

compensation paid to Mr. Ayalon for the fiscal year ended December 31, 1998
were appropriate based on the above criteria.

COMPENSATION POLICY REGARDING DEDUCTIBILITY.
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. The
non-performance based compensation to be paid to the Company's executive
officers in 1998 did not exceed the $1 million limit per officer. The 1991Our 2001 Stock Equity Plan isand 2012 Equity Incentive Plan are structured so that any compensation deemed paid to an executive officer in connection with the exercise of option grants made under suchthe plan will qualify as performance-based compensation which will not be subject to the $1 million limitation. The Compensation Committee currently intends to
limitGenerally, our executive officers are granted stock options, stock appreciation rights and restricted stock units under the dollar amount of all other compensation payable2012 Equity Incentive Plan and were granted stock options and stock appreciation rights under the 2001 Stock Equity Plan and 2003 Israeli Share Incentive Plan prior to the Company's
executive officers to no more than $1 million.termination of those plans. The Compensation Committeecompensation 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 maywarrant. The compensation committee also reserves the right to use suchits 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 exemption contemplated underapplication and interpretation surrounding this section currently exist.
2013 “Say on Pay” Advisory Vote on Executive Compensation
Our stockholders provide an advisory vote annually on executive compensation. At our 2013 annual meeting of stockholders, approximately 70% of the 1991 Stock Plan.

votes cast in the “say on pay” advisory vote were “FOR” approval of our executive compensation. The compensation committee considered the vote results and as a result of the favorable approval did not make any significant changes to our executive compensation policies and decisions as a result of the 2013 advisory vote.

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:
Reuven Regev (Chairman)
Norman Taffe
Kenneth Traub
Yair Seroussi
Patrick Tanguy

2013 Summary Compensation Committee:

Samuel L. Kaplan
Millard Phelps
Yair Shamir

STOCK PERFORMANCE GRAPH

Table
The graph below comparesfollowing table sets forth the cumulative total stockholder return oncompensation awarded to, earned by or paid to our principal executive officer, principal financial officer and the Company's Commonother executive officers whose total compensation in fiscal year 2013 exceeded $100,000 for the periods presented. We refer to these executive officers as our “named executive officers.”
Name and Principal Position Year Salary ($) Bonus ($) Option Awards
($)(1) All Other Compensation
($) (2) Total
($)
Ofer Elyakim 2013 300,000 500,000 647,017 95,001 1,542,018
Chief Executive Officer 2012 260,000 — 268,254 177,851 706,105
2011 260,000 — 327,817 101,507 689,324
Dror Levy * 2013 221,654 200,000 290,627 90,251 802,532
Chief Financial Officer and 2012 186,625 — 111,757 86,130 384,512
Secretary 2011 201,224 — 144,054 89,794 435,072
David Dahan * 2013 213,466 168,484 229,049 61,691 672,690
Chief Operating Officer (3) 2012 180,514 — 138,785 57,199 376,498
2011 — — — — —
(1) The amounts shown in this column do not reflect compensation actually received by the named executive officer. Instead, the amounts represent the aggregate grant date fair value of the awards based on FASB ASC No. 718, “Stock Compensation” (“FASB ASC No. 718”). In addition, the amounts shown in this column include the benefit provided to our named executive officers under our Employee Stock Purchase Plan, which is derived mainly from a discount of 15% to fair market value when share purchases are made during the purchase period under the plan. The above benefit is available to all eligible employees.
(2) See the table captioned “2013 All Other Compensation” below for greater detail.
(3) Mr. Dahan became an executive officer of the company effective February 1, 2012.
* Base salaries of Messrs. Levy and Dahan are denominated in New Israeli Shekel (NIS). The NIS amounts are translated into U.S. dollar at the average annual exchange rate of NIS 3.61 into U.S. dollar.

2013 All Other Compensation
The following tables set forth all other compensation awarded to, earned by or paid to each of our named executive officers during fiscal year 2013. The NIS amounts relating to the 2013 all other compensation for Messrs. Elyakim, Levy and Dahan are translated into U.S. dollar at the average annual exchange rate of NIS into U.S. dollar.
Name Israeli Social Benefits
(1) Car Allowance
(2) Education Fund
(3) Vacation (4) Social Security Payments (5) Disability Insurance Payments (6) Other Total ($)
Ofer Elyakim 40,965 7,924 23,049 7,777 8,633 3,397 3,256 95,001
Dror Levy 29,546 26,124 16,625 3,359 8,633 1,552 4,413 90,251
David Dahan 28,421 — 16,010 3,667 8,633 1,281 3,679 61,691
(1) Based on Israeli labor laws, an Israeli employee is entitled to severance pay upon termination of employment by the employer for any reason, including retirement, based on the most recent monthly base 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 payable to our 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. The amounts represent the above referenced contributions we made on behalf of each of the named executive officers in 2013.
(2) We generally provide all of our Israeli employees with a car for business-related purposes and pay the associated expenses. For Mr. Dahan, the car allowance is part of his base salary.
(3) 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, which amounts contributed by us to each of the named executive officers in 2013 are as specified.
(4) Represents the dollar value of any positive difference between the vacation days to which the named executive officer is entitled in 2013 and the vacation days used by such named executive officer in 2013.

(5) Represents payments we made to the Israeli government that the employees will receive in the event of unemployment or other disability.
(6) As is customary in Israel, we make a payment of up to 2.5% of each employee’s monthly base salary to cover employer liability associated with employment disability.
2013 Grants of Plan Based Awards
The following table sets forth each equity award granted to our named executive officers during fiscal year 2013.
Estimated Future Payouts Under Equity Incentive Plan Awards All Other Stock Awards:
Number of Sharesof Stock All Other Option Awards:
Number of
Securities Underlying Exercise or Base Price of Option Closing Price on Grant Grant Date Fair Value of Stock andOption
Name Grant Date Approval
Date Threshold
(#) Target
(#) Maximum
(#) or Units
(#) (1) Options
(#) Awards
($/Sh) Date
($/Sh) Awards
($) (2)
Ofer Elyakim 1/29/13 1/29/13 — — — 66,000 — — 6.26 398,160
8/14/13 8/14/13 — — — 35,000 — — 7.22 244,665
Dror Levy 1/29/13 1/29/13 — — — 25,000 — — 6.26 150,818
8/14/13 8/14/13 — — — 20,000 — — 7.22 139,809
David Dahan 1/29/13 1/29/13 — — — 20,000 — — 6.26 120,655
8/14/13 8/14/13 — — — 15,000 — — 7.22 104,857
(1) Represents shares underlying restricted stock units granted pursuant to our 2012 Equity Incentive Plan.
(2) Represents the fair value of the restricted stock units as of the date they were granted, computed in accordance with FASB ASC 718. For a discussion of valuation assumptions under FASB ASC 718, see Note 2 to our 2013 Consolidated Financial Statements included in our 2013 Annual Report on Form 10-K.

Outstanding Equity Awards at Fiscal Year-End 2013
The following table sets forth information concerning unexercised options, stock appreciation rights and restricted stock units held by each of our named executive officers as of December 31, 2013. None of our named executive officers had any stock awards outstanding at fiscal year-end 2013.
Option Awards
Number of Securities Underlying Unexercised Options
(#) Number of Securities Underlying Unexercised Options
(#) Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options Option Exercise Price Option Expiration
Name Exercisable Unexercisable (#) ($)(3) Date (4)(5)
Ofer Elyakim 7,500 (1)
37,500 (1)
120,000 (2)
109,378 (1)
48,127 (1)
22,969 (1)
—
— —
—
—
7,278 (1)
21,872 (1)
29,530 (1)
66,000 (8)
35,000 (9) —
—
—
—
—
—
— 21.70
10.23
5.97
7.26
7.49
6.16
0.00
0.00 1/24/2014
1/30/2015
2/02/2016
1/27/2017
1/31/2018
2/1/2019
—
—
Dror Levy 20,000 (1)
35,000 (1)
67,500 (1)
49,999 (1)
20,627 (1)
10,937 (1)
—
— —
—
—
3,333 (1)
9,372 (1)
14,062 (1)
25,000 (8)
20,000 (9) —
—
—
—
—
—
— 21.70
10.23
5.97
7.26
7.49
6.16
0.00
0.00 1/24/2014
1/30/2015
2/02/2016
1/27/2017
1/31/2018
2/1/2019
—
—
David Dahan 13,125 (1)
—
— 16,875 (1)
20,000 (8)
15,000 (9) —
—
— 6.16
0.00
0.00 2/1/2019
—
—
(1) Represents shares underlying stock appreciation rights granted pursuant to Amended and Restated 2003 Israeli Share Incentive Plan
(2) Represents shares underlying stock appreciation rights granted pursuant to our 1998 Non-Officer Employee Stock Option Plan
(3) All stock options, stock appreciation rights and restricted stock units were granted at fair market value on the grant date, as reported on NASDAQ.
(4) The table sets forth the number of units granted pursuant to a stock appreciation right award. When the vested stock appreciation rights granted prior to 2009 are exercised, the number of underlying shares that may be received upon exercise cannot exceed 50% of the number of stock appreciation right units granted. When the vested stock appreciation rights granted in 2009, 2010, 2011, 2012 are exercised, the number of underlying shares that may be received upon exercise cannot exceed 75%, 67%, 67% and 50% , respectively, of the number of stock appreciation right units granted.

(6) Stock options granted to our executive officers generally 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.
(7) 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.
(8) Restricted stock units granted hereunder vest over a four year period from the grant date with 25% vesting on the first anniversary of the grant date and 6.25% each quarter thereafter.
(9) Restricted stock units granted hereunder fully vest on the second anniversary of the grant date.
2013 Option Exercises and Stock Vested
None of our named executive officers exercised any equity awards in 2013.
Nonqualified Deferred Compensation
We do not provide any nonqualified defined contribution or other deferred compensation plans to our named executive officers.
Employment Agreements
Each of our named executive officers has a written employment agreement with us.

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 employment agreement was amended in January 31, 2011, May 16, 2011, November 5, 2012, March 5, 2013 and October 31, 2013. Mr. Elyakim’s current annual salary is $300,000, subject to adjustment from time to time. In addition to any other bonus program approved by the board, Mr. Elyakim is eligible for a bonus under the terms of an annual performance-based bonus plan approved by the compensation committee of our board of directors. Pursuant to Mr. Elyakim’s employment agreement, as amended,if Mr. Elyakim desires to terminate his employment with the cumulative total return oncompany (which for purposes of Mr. Elyakim’s employment agreement includes any subsidiary of the Standard &
Poor's 500 Indexcompany) without good reason (as defined in his employment agreement), he will have to notify the company eighteen months in advance. Similarly, if the company desires to terminate Mr. Elyakim’s employment with the company without cause, it will have to notify Mr. Elyakim eighteen months in advance. However, if the company wishes to terminate Mr. Elyakim’s employment but fails to provide him with the eighteen-month advance written notice, Mr. Elyakim would be entitled to receive an amount equal to eighteen months of his then-effective salary. If the requisite advance notice of eighteen months is provided by Mr. Elyakim to the company if he desires to terminate his employment with the company without good reason, then: (i) all of his rights under his employment agreement would continue during the eighteen-month period, and Standard & Poor's Technology Sector Index. The period
shown commences on February 11, 1994,(ii) all equity awards held by him prior to the termination of his employment with the company would accelerate and immediately vest eighteen months following the date thatof such requisite notice and be exercisable in whole or in part at any time from the Company's Common
Stock was registered under Section 12date of the Exchange Act,vesting of the respective equity awards for a period of two years. In addition, if Mr. Elyakim’s employment with the company is terminated by (i) the company following a change in control (as defined in his employment agreement); (ii) Mr. Elyakim for good reason; or (iii) the company without cause (as defined in his employment agreement), all of Mr. Elyakim’s rights under his employment agreement would continue for eighteen months and ends on
December 31, 1998,all equity awards held by Mr. Elyakim would accelerate and immediately vest and be exercisable in whole or in part at any time for two years following the termination of his employment. Furthermore, if Mr. Elyakim’s employment is terminated by the company without cause, by Mr. Elyakim for good reason, or by Mr. Elyakim without good reason after providing the requisite notice of eighteen months in advance, Mr. Elyakim shall be paid a pro-rata portion of any performance-based bonus for the year in which his full-time employment is terminated. Unless otherwise specified in the relevant bonus plan, if Mr. Elyakim’s bonus plan for that year includes a formula-based element, the formula-based portion of his bonus shall be determined by (a) comparing the company’s results of operations during the portion of the year ending at the end of the Company's last fiscal year. The graph
assumes an investmentquarter immediately preceding his termination of $100 on February 11, 1994,employment to the budget for the same period to determine his OI Score (generally a component of the performance-based bonus plan) and (b) multiplying the reinvestmentresulting OI Score by the portion of any dividends.

The comparisonshis annual salary payable for period preceding the date of his termination. However, if Mr. Elyakim’s termination of employment occurs during the first quarter of a year, the formula-based portion of his bonus shall be equal to the formula-based portion of his bonus for the preceding year, multiplied by the portion of his annual salary payable for the portion of the current year that precedes his termination of employment. Unless otherwise specified in the graph below are based upon historical data
and are not indicative of, nor intended to forecast, future performancerelevant bonus plan, if his bonus plan for that year includes a discretionary element, the discretionary portion of the Company's Common Stock.

TOTAL RETURN TO STOCKHOLDERS
FEBRUARY 11, 1994 TO DECEMBER 31, 1998

CUMULATIVE TOTAL RETURN
-----------------------------------------------------------------------
2/11/94 3/94 6/94 9/94 12/94 3/95 6/95 9/95 12/95 3/96

DSP GROUP, INC. $100 $116 $### $158 $139 $163 $179 $127 $ 82 $ 89
S&P 500 100 93 93 98 98 108 118 127 135 142
S&P TECHNOLOGY SECTOR 100 99 95 104 111 125 154 163 160 169

CUMULATIVE TOTAL RETURN
--------------------------------------------------------------------------
6/96 9/96 12/96 3/97 6/97 9/97 12/97 3/98 6/98 9/98 12/98

DSP GROUP, INC. $ 66 $ 59 $ 61 $ 66 $107 $280 $143 $137 $141 $105 $149
S&P 500 148 153 166 170 200 215 221 252 260 234 284
S&P TECHNOLOGY SECTOR 183 201 227 229 279 326 286 346 375 369 495

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

OTHER TRANSACTIONS

The Companybonus shall equal 2/3rds of the performance based portion of his bonus; provided that if there is no performance based element, his discretionary bonus shall be the maximum discretionary bonus for the year multiplied by a fraction equal to the portion of the year preceding his termination of employment.

In June 2002, in connection with Dror Levy’s initial employment as our Controller, he entered into a consultingan employment agreement date as of June 29,
1998,with DSP Israel. No further agreement was entered into with Mr. Phelps, an outside director ofLevy when he became our Chief Financial Officer. Mr. Levy’s employment agreement was amended in January 31, 2011, May 16, 2011, November 5, 2012, March 5, 2013 and October 31, 2013. Mr. Levy’s current annual salary is approximately $230,000, subject to adjustment from time to time (Mr. Levy’s salary is determined in NIS and is 800,000 NIS annually). In addition to any other bonus program approved by the Company. Pursuant toboard, Mr. Levy is eligible for a bonus under the terms of an annual performance-based bonus plan approved by the compensation committee of our board of directors. Pursuant to Mr. Levy’s employment agreement, from May 1998 through December 1998,as amended,if Mr. Phelps wasLevy desires to terminate his employment with the company (which for purposes of Mr. Levy’s employment agreement includes any subsidiary of the company) without good reason (as defined in his employment agreement), he will have to notify the company one year in advance. Similarly, if the company desires to terminate Mr. Levy’s employment with the company without cause, it will have to notify Mr. Levy one year in advance. However, if the company wishes to terminate Mr. Levy’s employment but fails to provide advicehim with the one-year advance written notice, Mr. Levy would be entitled to receive an amount equal to one year of his then-effective salary. If the requisite advance notice of one year is provided by Mr. Levy to the Company's Chairmancompany if he desires to terminate his employment with the company without good reason, then: (i) all of his rights under his employment agreement would continue during the Board regarding
identifying potential mergerone-year period, and acquisition candidates. The agreement
provided that Mr. Phelps be paid $4,000 per month for his services.

On February 2, 1999, the Company entered into a stock purchase
agreement with Magnum Technologies, Ltd., an international investment fund
("Magnum"), in which the Company issued and sold 2,300,000 new shares of the
Company's Common Stock to Magnum. Based in part on Magnum's representations,
the transaction was exempt from the registration requirements of the
Securities Act of 1933 according to Section 4(2) of the Securities Act. These
shares, representing 19.6% of the Company's outstanding Common Stock at the
time of the transaction, were issued for a price of $15 per share, or an
aggregate of $34.5 million in total net proceeds(ii) all equity awards held by him prior to the Company. As parttermination of his employment with the agreement, Magnum may acquire additional shares of the Company in the
open market, but may not bring its total holdings to more than 35% of the
Company's outstanding shares of Common Stock. Furthermore, Magnum has agreed
not to sell any of the shares of the Company's Common Stock it purchased
without the prior written consent of the Company for a period ofcompany would accelerate and immediately vest one year following the date of this transaction,such requisite notice and also to restrict its salesbe exercisable in whole or in part at any time from the date of the sharesvesting of the respective equity awards for a period of one year. In addition, if Mr. Levy’s employment with the company is terminated by (i) the company following a change in control (as defined in his employment agreement); (ii) Mr. Levy for good reason; or (iii) the company without cause (as defined in his employment agreement), all of Mr. Levy’s rights under his employment agreement would continue for one year and all equity awards held by Mr. Levy would accelerate and immediately vest and be exercisable in whole or in part at any time for one year following the termination of his employment. Furthermore, if Mr. Levy’s employment is terminated by the company without cause, by Mr. Levy for good reason, or by Mr. Levy without good reason after providing the requisite notice of one year in advance, Mr. Levy shall be paid a pro-rata portion of any performance-based bonus for the year in which his full-time employment is terminated. Unless otherwise specified in the relevant bonus plan, if Mr. Levy’s bonus plan for that year includes a formula-based element, the formula-based portion of his bonus shall be determined by (a) comparing the company’s results of operations during the portion of the year ending at the end of the quarter immediately preceding his termination of employment to the budget for the same period to determine his OI Score (generally a component of the performance-based bonus plan) and (b) multiplying the resulting OI Score by the portion of his annual salary payable for period preceding the date of his termination of employment. However, if Mr. Levy’s termination of employment occurs during the first quarter of a year, the formula-based portion of his bonus shall be equal to the formula-based portion of his bonus for the preceding year, multiplied by the portion of his annual salary payable for the portion of the current year that precedes his termination of employment. Unless otherwise specified in the relevant bonus plan, if his bonus plan for that year includes a discretionary element, the discretionary portion of the bonus shall equal 2/3rds of the performance based portion of his bonus; provided that if there is no performance based element, his discretionary bonus shall be the maximum discretionary bonus for the year multiplied by a fraction equal to the portion of the year preceding his termination of employment.
In connection with David Dahan’s appointment as our Chief Operating Officer, he executed an employment agreement with DSP Group Israel, effective February 1, 2012, which agreement was further amended on March 5, 2013. Mr. Dahan’s current annual salary is approximately $223,000, subject to adjustment from time to time (Mr. Dahan’s salary is determined in NIS and is 62,600 NIS per month linked to the Israeli consumer price index). Mr. Dahan also is eligible for a bonus under the terms of an annual performance-based bonus plan approved by the compensation committee of our board of directors. Pursuant to the terms of Mr. Dahan’s employment agreement, as amended, if he desires to terminate his employment with us, he must notify us three months in advance. Similarly, if we desire to terminate Mr. Dahan’s employment with us, we must notify Mr. Dahan three months in advance; provided that we may terminate Mr. Dahan’s employment immediately without notice for cause (as defined in his employment agreement). Other than for cause, we also may terminate Mr. Dahan’s employment without the three-months advance notice if we pay him an amount equal to three-months of his then-effective salary. Mr. Dahan’s employment agreement does not provide for any additional compensation in the event of termination of his employment or a change in control of the company.

Potential Payments Upon Termination or Change of Control
The following tables set forth the amount of compensation to each of Messrs. Elyakim, Levy and Dahan in the event termination of such executive officer’s employment or a change in control of our company occurred as of December 31, 2013.
Name: Ofer Elyakim Termination for
Cause ($) Voluntary Termination by
Employee After Provision
of Requisite Notice ($) Termination upon
Death of Employee ($) Termination w/o
Cause or for Good
Reason ($) Upon a Change in Control and Termination w/o Cause ($)
Base Salary —(1) 599,136 —(1) 599,136 599,136
Bonus (2) 500,000 500,000 500,000 500,000 500,000
Vested and Unvested Options/SARs/RSUs (3) 1,174,114 2,124,260 1,174,114 2,464,110 2,464,110
Accrued Vacation Pay 65,341 65,341 65,341 65,341 65,341
Total 1,739,455 3,288,737 1,739,455 3,628,587 3,628,587
(1) The columns do not include base salary earned for time periods worked prior to the termination of employment due to cause or death of employee.
(2) The bonus was determined based on the terms of the 2013performance-based bonus plan applicable for Mr. Elyakim and assuming for purposes of achievement of the parameters of such plan that the termination of employment occurred on the last day of fiscal year 2013.
(3) As of December 31, 2013 (the last trading day of fiscal 2013), Mr. Elyakim had 606,000 “in-the-money” options, SARs and RSUs outstanding, of which 402,198 “in-the-money” options, SARs and RSUs were vested. All outstanding equity awards would immediately vest upon (i) voluntary termination by Mr. Elyakim after provision of requisite notice to us (other than 35,000 retention RSUs granted during 2013), (ii) termination of employment by us without cause or by Mr. Elyakim for good reason, or (iii) termination without cause upon a change in control. The calculations are based on our closing stock price as December 31, 2013 ($9.71 per share).
Name: Dror Levy Termination for
Cause ($) Voluntary Termination by
Employee After Provision
of Requisite Notice ($) Termination upon
Death of Employee ($) Termination w/o
Cause or for Good
Reason ($) Upon a Change in Control and Termination w/o Cause($)
Base Salary —(1) 326,190 —(1) 326,190 326,190
Bonus (2) 200,000 200,000 200,000 200,000 200,000
Vested and Unvested Options/SARs/RSUs (3) 666,695 1,052,750 666,695 1,246,950 1,246,950
Accrued Vacation Pay 45,398 45,398 45,398 45,398 45,398
Total 912,093 1,624,338 912,093 1,818,538 1,818,538
(1) The columns do not include base salary earned for time periods worked prior to the termination of employment due to cause or death of employee.

(2) The bonus was determined based on the terms of the 2013performance-based bonus plan applicable for Mr. Levy and assuming for purposes of achievement of the parameters of such plan that the termination of employment occurred on the last day of fiscal year 2013.
(2) As of December 31, 2013 (the last trading day of fiscal 2013), Mr. Levy had 310,000 “in-the-money” options, SARs and RSUs outstanding, of which 217,816 “in-the-money” options, SARs and RSUs were vested. All outstanding equity awards would immediately vest upon (i) voluntary termination by Mr. Levy after provision of requisite notice to us (other than 20,000 retention RSUs granted during 2013), (ii) termination of employment by us without cause or by Mr. Levy for good reason, or (iii) termination without cause upon a change in control. The calculations are based on our closing stock price as December 31, 2013 ($9.71 per share).
Name: David Dahan Termination for
Cause ($) Voluntary Termination by
Employee After Provision
of Requisite Notice ($) Termination upon
Death of Employee ($) Termination w/o
Cause or for Good
Reason ($) Upon a Change in Control and Termination ($)
Base Salary —(1) — —(1) 55,933 —
Bonus (2) 168.484 168,484 168,484 168,484 168,484
Vested and Unvested Options/SARs/RSUs (3) 93,188 93,188 93,188 93,188 433,038
Accrued Vacation Pay 14,475 14,475 14,475 14,475 14,475
Total 276,147 276,147 276,147 332,080 615,997
(1) The columns do not include base salary earned for time periods worked prior to the termination of employment due to cause or death of employee.
(2) The bonus was determined based on the terms of the 2013performance-based bonus plan applicable for Mr. Dahan and assuming for purposes of achievement of the parameters of such a plan that the termination of employment occurred on the last day of fiscal year 2013.
(3) As of December 31, 2013 (the last trading day of fiscal 2013), Mr. Dahan had 26,250 “in-the-money” SARs vested and 35,000 “in-the-money” RSUs unvested, whichwould accelerate and immediately vest in the event of a change of control of the company. The calculations are based on our closing stock price as December 31, 2013 ($9.71 per share).

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.
Our stock ownership guidelines applicable for our directors are discussed in the Compensation Discussion and Analysis section of this proxy statement.
Cash Compensation Paid to Board Members
Directors who are also employees do not receive any additional compensation for their services as directors.
Prior to October 2013, directors who were not employees received an annual retainer of $32,000, payable in quarterly installments of $8,000 each. The retainer contemplated attendance at four board meetings per year. Additional board meetings of a face-to-face nature were compensated at a rate of $1,000 per meeting. In addition, committee meetings of a face-to-face nature and on a telephonic basis were compensated at a rate of $1,000 per meeting. All directors were reimbursed for expenses incurred in connection with attending board and committee meetings.
In October 2013, the board reviewed and upon recommendation of the compensation committee which consulted with Compensia on industry standards for director compensation of similarly situated companies, updated the director compensation arrangements. Starting in 2014, the annual retainer was increased to $35,000 with no per meeting fees except for a fee of $1,000 for each in-person meeting attended in a year in excess of the regularly scheduled four quarterly meetings. The Chairman of the board would receive an additional six-month period under Rule 144(e)(i)annual retainer of $20,000. The annual retainers for the Chairman and members of the Securities Actaudit committee were increased to $20,000 for the Chairman and $8,000 for the members. The annual retainers for the Chairman and members of 1933.the compensation committee were increased to $11,000 for the Chairman and $5,000 for the members. The Company hasannual retainers for the Chairman and members of the nominating and corporate governance committee were increased to $7,500 for the Chairman and $4,000 for the members. An annual retainer of $17,000 was established for the Chairman of the strategy committee and $7,000 for the members. There would be no per meeting fees for the audit, compensation, nominating and corporate governance, and strategy committee members except for a fee of $1,000 for each in-person meeting attended for such committees in any year in excess of six meetings but not more than ten meetings. All annual cash retainers would be paid on a quarterly basis and in the event a committee member or chair does not serve for the entire period between annual meetings of stockholders, his or her annual cash retainer would be prorated based on the period served.
Equity Award Program
Each of our non-employee directors is also entitled to participate in the director subplan of our 2012 Equity Incentive Plan (the “2012 Plan”). The director subplan provides for the grant of equity awards to our non-employee directors. The director subplan is designed to work automatically; however, to the extent administration is necessary, it would be provided by our board of directors.

Prior to October 2013, each eligible director would be granted an option to purchase 30,000 shares of our common stock on the date on which he or she first became a director (the “First Option”). Thereafter, each non-employee director would be granted a subsequent option to purchase 15,000 shares of our common stock on January 1 of each year if, on such date, he or she 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”) would be granted on January 1 of each year to each non-employee director for each committee of the board on which he or she shall have served as a chairperson for at least six months.
In October 2013, the board reviewed and upon recommendation of the compensation committee which consulted with Compensia on industry standards for director compensation of similarly situated companies, updated the director equity award program. Starting in 2014, the grants of First Options and Subsequent Options to directors were eliminated. Instead, directors would be granted automatically under the director subplan on January 1 of each year 8,000 stock options and 4,000 restricted stock units, all of which would fully vest at the end of one year from the grant date. If a director is appointed for a term commencing during a calendar year, the director would be granted stock options and restricted stock units on the date of appointment and the number of stock options and restricted stock units granted would be based upon the number of days remaining in the in the calendar year following the date such person was nominated as a director. Notwithstanding the change to the director equity award program and in addition to the grants of 8,000 stock options and 4,000 restricted stock units on January 1, 2014 to all board members, the board determined that, for 2014 only, the automatic grant of stock options of 15,000 shares to committee chairs on January 1, 2014 would occur as scheduled.

The following table sets forth the compensation paid to each of our non-employee directors during fiscal year 2013.
Name Fees Paid in Cash
($) Stock Awards
($) Option Awards
($) (1) Total
($)
Thomas A. Lacey (2) 35,000 - 44,925 79,925
-
Reuven Regev (3) 37,000 - 89,850 126,850
-
Norman J. Rice III (4) 24,000 - 117,922 141,922
Gabi Seligsohn (5) 31,000 - 114,434 145,434
-
Yair Seroussi (6) 40,000 - 44,925 84,925
-
Norman Taffe (7) 23,000 - 117,922 140,922
-
Kenneth Traub (8) 41,000 - 44,925 85,925
-
Patrick Tanguy (9) 43,000 - 44,925 87,925
(1) The amounts shown in this column do not reflect compensation actually received by the directors. Instead, the amounts represent the aggregate grant date fair value of the awards based on FASB ASC No. 718.
(2) On January 1, 2013, Mr. Lacey was granted a Subsequent Option (15,000) at an exercise price of $5.76 per share under the 93 Plan. As of December 31, 2013, Mr. Lacey had outstanding stock options to purchase 45,000 shares of our common stock.
(3) On January 1, 2013, Mr. Regev was granted a Subsequent Option (15,000) and a Committee Option (15,000), each at an exercise price of $5.76 per share under the 90 Plan. As of December 31, 2013, Mr. Regev had outstanding stock options to purchase 75,000 shares of our common stock.
(4) On June 12, 2013, in connection with Mr. Rice’s appointment as a director, he was granted a First Option (30,000) at an exercise price of $8.21 per share under the 93 Plan. As of December 31, 2013, Mr. Rice had outstanding stock options to purchase 30,000 shares of our common stock.
(5) On May 2, 2013, in connection with Mr. Seligsohn’s appointment as a director, he was granted a First Option (30,000) at an exercise price of $7.82 per share under the 93 Plan. As of December 31, 2013, Mr. Seligsohn had outstanding stock options to purchase 30,000 shares of our common stock.
(6) On January 1, 2013, Mr. Seroussi was granted a Subsequent Option (15,000) at an exercise price of $5.76 per share under the 93 Plan. As of December 31, 2013, Mr. Seroussi had outstanding stock options to purchase 155,000 shares of our common stock.

(7) On June 12, 2013, in connection with Mr. Taffe’s appointment as a director, he was granted a First Option (30,000) at an exercise price of $8.21 per share under the 93 Plan. As of December 31, 2013, Mr. Taffe had outstanding stock options to purchase 30,000 shares of our common stock.
(8) On January 1, 2013, Mr. Traub was granted a Subsequent Option (15,000) at an exercise price of $5.76 per share under the 93 Plan. As of December 31, 2013, Mr. Traub had outstanding stock options to purchase 45,000 shares of our common stock.
(9) On January 1, 2013, Mr. Tanguy was granted a Subsequent Option (15,000) at an exercise price of $5.76 per share under the 93 Plan. As of December 31, 2013, Mr. Tanguy had outstanding stock options to purchase 165,000 shares of our common stock.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
We have entered into indemnification agreements with each of itsour directors and executive officers. Such agreements require the Companyus to indemnify such individuals to the fullest extent permitted by Delaware law.
All future transactions between the Companyus and itsour officers, directors, principal stockholders and affiliates have been and will be approved by a majority of the Boardour board of Directors,directors, including a majority of theour disinterested, non-employee directors on the Board of Directors,board, and have been or will be on terms no less favorable to the Companyus than could be obtained from unaffiliated third parties. STOCKHOLDER PROPOSALS

ToThere were no related party transactions in 2013.
Review, Approval or Ratification of Transactions with Related Persons
We have adopted a written policy regarding related person transactions which is incorporated in the Charter of the Audit Committee. Pursuant to this policy, our Audit Committee must review and approve any such transactions.

PROPOSAL NO. 2
APPROVAL OF AN AMENDMENT TO THE RESTATED CERTIFICATE OF INCORPORATION OF THE COMPANY TO ELIMINATE THE CLASSIFIED BOARD STRUCTURE
Our board of directors has unanimously determined that it would be consideredin the best interests of the company and our stockholders to amend our restated certificate of incorporation, as amended, to declassify the board of directors and provide for presentationthe annual election of all directors, as described below. We are asking our stockholders to approve an amendment of the restated certificate of incorporation, as amended, which amendment is attached hereto asAppendix A.
Current Classified Board Structure
Article VII, Section A of our restated certificate of incorporation currently divides our directors into three classes. Each class is elected for a three-year term, with the terms staggered so that approximately one third of the directors stand for election each year.
Proposed Declassification of the Board
In May 2013, our board of directors approved the declassification of the board and directed management of the company to take all necessary steps to declassify the board at the 2014 annual meeting of stockholders. Subject to stockholder approval, beginning with this annual meeting, as each director’s existing three-year term expires, that director would then stand for election annually, and at our annual meeting of stockholders in 2016, all directors would stand for election annually. Specifically, at this annual meeting, if Proposal 2 is approved by stockholders, each Class II director elected by stockholders will hold office for a one-year term expiring at the 2015 annual meeting of stockholders. At the 2015 annual meeting of stockholders, if Proposal 2 has been approved at this annual meeting, each Class III director elected by stockholders will hold office for a one-year term expiring at the 2016 annual meeting of stockholders and the Class II directors previously elected also will need to be re-elected to continue to hold office for another one-year term expiring at the 2016 annual meeting of stockholders. At the 2016 annual meeting of stockholders, if Proposal 2 has been approved at this annual meeting, each Class I director elected by stockholders will hold office for a one-year term expiring at the 2017 annual meeting of stockholders and the Class II and Class III directors previously elected by stockholders also will need to be re-elected to continue to hold office for another one-year term expiring at the 2017 annual meeting of stockholders.
Rationale for Declassification of the Board
Our board of directors is committed to strong corporate governance policies and regularly considers and evaluates a broad range of corporate governance issues affecting the company. Our board recognizes that a classified structure may offer several advantages, such as promoting board continuity and stability, enhancing long-term planning, ensuring directors serving on our board have substantial knowledge of the company and increasing the protection against potentially abusive and unfair takeover tactics. Our board also recognizes that a classified structure may appear to reduce directors’ accountability to stockholders, since such a structure does not enable stockholders to express a view on each director’s performance by means of an annual vote. After consideration of the foregoing and other factors, our board believes that the benefits of moving to annual elections outweigh the reasons for keeping a classified board.

Our board has unanimously determined that it is in the best interests of the company and our stockholders to eliminate the classified board structure as proposed. Therefore, our board has unanimously approved the proposed amendment to Article VII, Section A of our restated certificate of incorporation. The proposed changes to the restated certificate of incorporation are set forth below with additions indicated by italicized and underlined text and deletions indicated by strikethrough text.
ARTICLE VII
“Qualified Public Offering” as used in this Restated Certificate of Incorporation shall mean the Corporation’s initial firm commitment underwritten public offering pursuant to an effective registration under the Securities Act of 1933, as amended, covering the offer and sale of Common Stock for the account of the Corporation to the public at an aggregate offering price of not less than $10,000,000. For the management of the business and for the conduct of the affairs of the Corporation, and in further definition, limitation and regulation of the powers of the Corporation, of its directors and of its stockholders or any class thereof, as the case may be, it is further provided that, effective upon the closing of a Qualified Public Offering:
A. The management of the business and the conduct of the affairs of the Corporation shall be vested in its Board of Directors. The number of directors which shall constitute the whole Board of Directors shall be fixed exclusively by one or more resolutions adopted from time to time by the Board of Directors.
The Board of Directors shall be divided into three classes designated as Class I, Class II, and Class III, respectively. Directors shall be assigned to each class in accordance with a resolution or resolutions adopted by the Board of Directors. At the first annual meeting of stockholders following the date hereof, the term of office of the Class I directors shall expire and Class I directors shall be elected for a full term of three years. At the second annual meeting of stockholders following the date hereof, the term of office of the Class II directors shall expire and Class II directors shall be elected for a full term of three years. At the third annual meeting of stockholders following the date hereof, the term of office of the Class III directors shall expire and Class III directors shall be elected for a full term of three years. At each succeeding annual meeting of stockholders, directors shall be elected for a full term of three years to succeed the directors of the class whose terms expire at such annual meeting.Upon the filing of this Amendment to the Restated Certificate of Incorporation (the “Effective Date”), each director shall be elected to hold office for a one-year term expiring at the next annual meeting of stockholders; provided, however, no terms in effect prior to the Effective Date shall be shortened. Notwithstanding the foregoing, however, subject to the rights of the holders of any series of Preferred Stock then outstanding, (i) at the 2014 annual meeting of stockholders, the directors whose terms expire at that meeting shall be elected to hold office for a one-year term expiring at the 2015 annual meeting of stockholders, (ii) at the 2015 annual meeting of stockholders, the directors whose terms expire at that meeting shall be elected to hold office for a one-year term expiring at the 2016 annual meeting of stockholders, and (iii) at the 2016 annual meeting of stockholders and each annual meeting of stockholders thereafter, all directors shall be elected to hold office for a one-year term expiring at the next annual meeting of stockholders.
Notwithstanding the foregoing provisions of this Article, each director shall serve until his or her successor is duly elected and qualified or until his or her death, resignation, or removal. No decrease in the number of directors constituting the Board of Directors shall shorten the term of any incumbent director.
Any vacancies on the Board of Directors resulting from death, resignation, disqualification, removal, or other causes shall be filled by either (1) the affirmative vote of the holders of a majority of the voting power of the then-outstanding shares of voting stock of the corporation entitled to vote generally in the election of directors (the “Voting Stock”) voting together as a single class; or (ii) by the affirmative vote of a majority of the remaining directors then in office, even though less than a quorum of the Board of Directors. Newly created directorships resulting from any increase in the number of directors shall, unless the Board of Directors determines by resolution that any such newly created directorship shall be filled by the stockholders, be filled only by the affirmative vote of the directors then in office, even though less than a quorum of the Board of Directors. Any director elected in accordance with the preceding sentence shall hold office for the remainder of the full term of the class of directors in which the new directorship was created or the vacancy occurred and until such director’s successor shall have been elected and qualified.

Amendment and Restatement of the Bylaws
Our board of directors also approved the amendment and restatement of our amended and restated bylaws to eliminate the board’s classified structure, subject to and effective upon the filing of the amendment to the restated certificate of incorporation eliminating the classified board structure with the Secretary of State of the State of Delaware.
Required Vote
The affirmative vote of the holders of at least 66 2/3 percent (66-2/3%) of shares of our common stock is required to approve the amendment of our restated certificate of incorporation to eliminate the board’s classified structure. Abstentions and broker “non-votes” will have the same effect as “no” votes on this proposal.
THE BOARD OF DIRECTORS RECOMMENDS A VOTEFORApproving AN Amendment TO OUR RestateD Certificate of Incorporation to Eliminate the Classified Board Structure.

PROPOSAL NO. 3
RATIFICATION OF SELECTION OF INDEPENDENT AUDITORS
Our audit committee has selected Kost ForerGabbay & Kasierer (a member of Ernst & Young Global) as our auditors for the current fiscal year, subject to ratification by our stockholders at the annual meeting. We expect a representative of Kost ForerGabbay & Kasierer (a member of Ernst & Young Global) to be available via teleconference to respond to appropriate questions and to make a statement if he or she so desires, but no representative will be present at the annual meeting.
Neither our bylaws nor other governing documents or law require stockholder ratification of the selection of Kost ForerGabbay & Kasierer (a member of Ernst & Young Global) as our independent accountants. However, the audit committee of the board of directors is submitting the selection of Kost ForerGabbay & Kasierer (a member of Ernst & Young Global) to the stockholders for ratification as a matter of good corporate practice. If the stockholders fail to ratify the selection, the audit committee will reconsider whether or not to retain that firm. Even if the selection is ratified, the audit committee in its discretion may direct the appointment of different independent accountants at any time during the year if they determine that such a change would be in our best interests and the best interests of our stockholders.
In connection with the audit of the 2014 financial statements, we entered into an engagement agreement with Kost Forer Gabbay & Kasierer which set forth the terms by which Kost Forer Gabbay & Kasierer will perform audit services for us. That agreement is subject to alternative dispute resolution procedures and an exclusion of punitive damages.
Required Vote
The affirmative vote of the holders of a majority of the shares of our common stock present or represented at the annual meeting is required to approve the ratification of the selection of Kost Forer Gabbay & Kasierer as our independent auditors for fiscal year 2014. Abstentions will have the same effect as “no” votes on this proposal, whereas broker “non-votes” will have no effect.
THE BOARD OF DIRECTORS RECOMMENDS A VOTEFOR THE RATIFICATION OF THE SELECTION OF KOST FORER GABBAY & KASIERER.

Report of the Audit Committee of the Board of Directors
Notwithstanding anything to the contrary set forth in any of the Company’s previous filings under the Securities Act of 1933, as amended (the “Securities Act”) or the Exchange Act of 1934, that might incorporate future filings, including this proxy statement, with the Securities and Exchange Commission, in whole or in part, the following report shall not be deemed to be incorporated by reference into any such filings, nor shall the following report be deemed to be incorporated by reference into any future filings under the Securities Act or the Exchange Act.
The audit committee is directly responsible for the appointment, compensation, retention and oversight of the Company’s independent auditors. Additionally, the audit committee must approve all audit and non-audit services performed by the Company’s independent auditors. Furthermore, the audit committee is responsible for reviewing and evaluating the Company’s accounting principles and the Company’s system of internal accounting controls. Management is responsible for the financial reporting process, including the system of internal controls and for the preparation of consolidated financial statements in accordance with accounting principles generally accepted in the United States. The Company’s independent auditors, Kost Forer Gabbay & Kasierer, a member of Ernst & Young Global, are responsible for auditing those financial statements. However, the members of the audit committee are not professionally engaged in the practice of accounting or auditing and are not experts in the fields of accounting or auditing. The audit committee relies, without independent verification, on the information provided to the committee and on the representations made by management and the independent auditors.
The audit committee hereby reports as follows:
1. The audit committee has reviewed and discussed the audited financial statements with the Company’s management and Kost Forer Gabbay & Kasierer, the Company’s independent auditors.
2. The audit committee has also received from, and discussed with, our independent auditors various communications that our independent auditors are required to provide to the audit committee, including the matters required to be discussed by Auditing Standard No. 16, Communications with Audit Committees, as adopted by the Public Company Accounting Oversight Board.
3. The audit committee met with management periodically during the year to consider the adequacy of the Company’s internal controls and the quality of its financial reporting and discussed these matters with the Company’s independent auditors and with appropriate Company financial personnel and internal auditors.
4. The audit committee discussed with the Company’s senior management, Kost Forer Gabbay & Kasierer and internal auditors the process used for the Company’s Chief Executive Officer and Chief Financial Officer to make the certifications required by the Securities and Exchange Commission and the Sarbanes-Oxley Act of 2002 in connection with the Annual Report on Form 10-K and other periodic filings with the Commission.

5. The audit committee has received the written disclosures and the letter from Kost Forer Gabbay & Kasierer required by the Public Company Accounting Oversight Board regarding its communications with the audit committee concerning independence. The audit committee considered whether the audit and non-audit services provided by Kost Forer Gabbay & Kasierer were compatible with maintaining its independence from the Company. Based on discussions with Kost Forer Gabbay & Kasierer, the audit committee determined that the audit and non-audit services provided to the Company by Kost Forer Gabbay & Kasierer were compatible with maintaining the independence of Kost Forer Gabbay & Kasierer.
6. Based on the reviews and discussions referred to in paragraphs (1) through (5) above, the audit committee recommended to the Company’s board of directors, and the board approved, the audited financial statements included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2013, that was filed with the Securities and Exchange Commission on March 17, 2014.
7. The audit committee has also recommended the selection of Kost Forer Gabbay & Kasierer and, based on the committee’s recommendation, the board of directors has selected Kost Forer Gabbay & Kasierer as the Company’s independent auditors for the fiscal year ending December 31, 2014. The board of directors is submitting the selection of Kost Forer Gabbay & Kasierer to the stockholders for ratification.
Submitted by the audit committee:
Patrick Tanguy (Chairman)
Thomas Lacey
Norman Rice
Yair Seroussi

PRINCIPAL ACCOUNTANT FEES AND SERVICES
Audit Fees
Kost Forer Gabbay & Kasierer performed services for us in fiscal 2012 and 2013 related to financial statement audit work, quarterly reviews, Forms S-8 reviews, tax services, special projects and other ongoing consulting projects. Fees paid or accrued to Kost Forer Gabbay & Kasierer in fiscal 2012 and 2013 were as follows:
2012 2013
Audit Fees (1) $ 360,000 $ 350,000
Audit-Related Fees (2) — —
Tax Fees (3) $ 162,930 $ 88,327
All Other Fees (4) $ 51,842 $ 63,703
Total $ 574,772 $ 502,030
(1) Audit fees represent fees for the audit of consolidated financial statements for the fiscal years ended December 31, 2012 and 2013 and the review of financial statements included in our quarterly reports on Form 10-Q.
(2) Audit-related fees represent fees for accounting professional services on actual or contemplated transactions.
(3) Tax fees represent fees for professional services rendered by our auditors for tax compliance, tax planning andtax advice on actual or contemplated transactions and advisory services for other tax compliance matters.
The audit committee approved 100% of the above set forth fees in 2012 and 2013.
Audit and Non-Audit Services Pre-Approval Policy
Under the Sarbanes-Oxley Act of 2002, all audit and non-audit services performed by Kost Forer Gabbay & Kasierer, our independent auditors, must be approved in advance by the audit committee to assure that such services do not impair the auditors’ independence from the company. In January 2004, the audit committee adopted an audit and non-audit services pre-approval policy which sets forth the procedures and conditions pursuant to which audit and non-audit services to be performed by the independent auditors are to be pre-approved. Pursuant to the policy, certain services or category of services described in detail in the policy may be pre-approved generally on an annual basis together with pre-approved maximum fee levels for such services. The services eligible for annual pre-approval consist of audit services, audit-related services, tax services and other services. If not pre-approved on an annual basis, proposed services must otherwise be separately approved prior to being performed by the independent auditors. The audit committee may also pre-approve particular services on a case-by-case basis. In addition, any services that receive annual pre-approval but exceed the pre-approved maximum fee level also will require separate approval by the audit committee prior to being performed. The audit committee may delegate authority to pre-approve audit and non-audit services to any member of the audit committee, but may not delegate such authority to management. Our independent auditors and Chief Financial Officer are required to periodically report to the audit committee regarding the extent of services provided by the independent auditors in accordance with the pre-approval policy and the fees for the services performed to date.

PROPOSAL NO. 4

Advisory Vote on compensation of the Named Executive Officers
At last year’s annual meeting, we provided our stockholders with the opportunity to cast an advisory vote regarding the compensation of our named executive officers as disclosed in our proxy statement for the 2013 annual meeting of stockholders. At our 2013 annual meeting, our stockholders approved the proposal, with approximately 70% of the votes cast voting in favor of the proposal. At our 2011 annual meeting, our stockholders voted to recommend, on an advisory basis, that advisory votes on executive compensation be held every year. After consideration of the 2011 voting results, our board of directors elected to hold a stockholder “say-on-pay” vote annually. Accordingly, this year we are again asking our stockholders to vote “For” the compensation of our executive officers as disclosed in this proxy statement. Our board of directors and our compensation committee value the opinions of our stockholders. We will consider our stockholders’ concerns and our compensation committee will evaluate whether any actions are necessary to address those concerns. In addition to our annual advisory vote on executive compensation, we are committed to ongoing engagement with our stockholders on executive compensation and corporate governance issues.
As described in detail under the heading “Compensation Discussion and Analysis,” our compensation philosophy supports our key business objectives of creating value for, and promoting the interests of, our stockholders. In order to align the interests of our executives with those of our stockholders, we believe that our executive compensation arrangements must provide our named executive officers with competitive compensation opportunities, based upon both their contribution to the development and financial success of the company and their personal performance. We believe our executive compensation arrangements strikes the appropriate balance between utilizing responsible, measured pay practices and effectively incentivizing our executives to dedicate themselves fully to value creation for our stockholders. This balance is evidenced by the following:
● Our compensation arrangements for the named executive officers are simple, consisting principally of base salary, annual bonus, which may or may not be awarded annually at the discretion of the compensation committee prior to 2011 and based on a performance-based bonus plan starting in 2011, and long-term incentive award, in the form of stock options, stock appreciation rights or restricted stock units, which again may or may not be awarded annually at the discretion of the compensation committee.
● We provide a significant part of executive compensation in the form of performance based incentives. Starting in 2011, our board established a performance-based bonus plan whereby bonuses are awarded under the plan based on achievement of the company’s financial goals based on an annual budget approved by our board. The financial goals under the performance-based bonus plans are generally challenging. Bonuses under the performance-based plan are capped and a significant portion of the bonuses would not be payable for a particular year if the company fails to achieve such financial goals. No bonuses were paid to our executive officers under the 2011 and 2012 performance-based bonus plans as a result of failure to meet the financial goals under the respective plans.

● A significant portion of our named executive officer’s compensation is in the form of long-term incentive awards, currently consisting of stock options, stock appreciation rights and restricted stock units. Generally, such equity awards vest 25% on the first anniversary of the grant date and the remaining equity awards vest quarterly over the following three years.
● We align base salaries with strong pay-for-performance orientation and our compensation committee generally takes a conservative approach on base salary increases. For example, the base salaries of our named executive officers were reduced in 2009 by ten percent from their respective 2008 amounts in consideration of deteriorating market conditions, our financial performance and the company’s desire to reduce operating expenses. The base salaries were restored to their respective 2008 amounts in 2010 for all our named executive officers. Our named executive officers did not receive any increases to their base salary in 2011 or 2012. Only in 2013 did our Chief Executive Officer and Chief Financial Officer receive an increase of approximately 9% in their respective base salaries.
● We do not provide any nonqualified defined contribution or other deferred compensation plans to our named executive officers.
● We do not provide tax gross-ups to our named executive officers.
● None of the employment agreements with our named executive officers includes any “single trigger” change-in-control provisions or golden parachute arrangements.
● The perquisites offered to our named executive officers based in Israel are those generally provided to all of our employees based in Israel.
● The compensation committee is updated on compensation best practices and trends. The committee from time to time as appropriate engages the services of a compensation consultant to provide advice on compensation trends and market information to assist the committee in designing our compensation programs and making compensation decisions.
The vote on this resolution is not intended to address any specific element of compensation; rather, the advisory vote relates to the compensation of our named executive officers, as described in this proxy statement. The vote is advisory, and therefore it is not binding on the company, the compensation committee or our board of directors. The compensation committee will carefully consider the outcome of the vote when considering future executive compensation arrangements.

Required Vote
The affirmative vote of a majority of the shares present or represented and entitled to vote either in person or by proxy is required to approve this Proposal 4. Abstentions will have the same effect as “no” votes on this proposal, whereas broker “non-votes” will have no effect.
Accordingly, we ask our stockholders to vote on the following resolution at the annual meeting:
“RESOLVED, that the compensation of the named executive officers, as disclosed in the Company’s proxy statement for the 2014 Annual Meeting of Stockholders pursuant to the Company'scompensation disclosure rules of the Securities and Exchange Commission, including Compensation Discussion and Analysis, compensation tables and narrative discussion, is hereby APPROVED.”
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTEFORTHE APPROVAL OF THE COMPENSATION OF OUR NAMED EXECUTIVE OFFICERS, AS DISCLOSED IN THIS PROXY STATEMENT.

STOCKHOLDER PROPOSALS
Requirements for Stockholder Proposals to Be Brought Before an Annual Meeting and Considered for Inclusion in our Proxy Materials. In addition to submitting information related to the proposal as described elsewhere in this proxy statement, pursuant to Rule 14a-8 under the Exchange Act and the Company’s bylaws, stockholder proposals intended for consideration by the Company for presentation and inclusion in its proxy materials for the annual meeting of stockholders to be held in 2000, a stockholder proposal2015 must be received by Moshe Zelnik,Dror Levy, Secretary, DSP Group, Inc., 3120 Scott Boulevard,
Santa Clara, California 95054,2161 S. San Antonio Road, Suite 10, Los Altos, CA 94022, no later than February 18, 2000.

[●] in order to be considered for inclusion in our proxy materials for that meeting.
Discretionary Authority. The proxies to be solicited by our board of directors for the 2015 annual meeting will confer discretionary authority on the proxy holders to vote on any stockholder proposal presented at such annual meeting if we fail to receive notice of such stockholder’s proposal for the meeting by [●].
OTHER MATTERS

The Board
Annual Report
Our annual report for the fiscal year ended December 31, 2013 has been mailed concurrently with the mailing of Directorsthese proxy materials to all stockholders entitled to notice of, and to vote at, the annual meeting.
Form 10-K
Our annual report on Form 10-K for the fiscal year ended December 31, 2013 is included in the annual report for the fiscal year ended December 31, 2013, which is mailed concurrently with the mailing of these proxy materials. Upon written request to our Secretary, Dror Levy, at the address of our principal executive offices, the exhibits set forth on the exhibit index of the Form 10-K may be made available at a reasonable charge.
Internet Availability of Proxy Materials
In addition to the mailing, the notice of the annual meeting, this proxy statement and the proxy card are available for your review, print and download on our website atwww.dspg.com.Our website and the information contained therein or connected thereto are not intended to be incorporated into this proxy statement.
Householding of Annual Meeting Materials
In December 2000, the Securities and Exchange Commission adopted new rules that permit us to send a single set of annual reports and proxy statements to any household at which two or more stockholders reside if we believe they are members of the same family. Each stockholder will continue to receive a separate proxy card. Upon written request to our Secretary, Dror Levy, at the address of our principal executive offices or by phone at (408) 986-4300, you may revoke your decision to household, and we will deliver a separate copy of the annual report or proxy statement, as applicable, to you at the shared address within 30 days of your request.

A number of brokerage firms have already instituted householding. If your family has multiple accounts of our stock, you may have received householding notification from your broker. Please contact your broker directly if you have questions, require additional copies of the proxy statement or annual report, or wish to revoke your decision to household, and thereby receive multiple reports.
Other Matters
Our board of directors knows of no other business which will be presented at the Annual Meeting.annual meeting. If any other business is properly brought before the Annual Meeting,annual meeting, it is intended that proxies in the enclosed form will be voted in respect thereof in accordance with the judgments of the persons voting the proxies.

27
proxy holders.
It is important that the proxies be returned promptly and that your shares beare represented. Stockholders are urged to mark, date, execute and promptly return the accompanying proxy card in the enclosed envelope.
By Order of the Board of Directors,
Ofer Elyakim
Chief Executive Officer
April [●], 2014
Los Altos, California

PRELIMINARY PROXY CARD — SUBJECT TO COMPLETION
This Proxy is Solicited on Behalf of
The Board of Directors Igal Kohavi,
CHAIRMAN OF THE BOARD

June __, 1999
Santa Clara, California

THIS PROXY IS SOLICITED ON BEHALF OF
THE BOARD OF DIRECTORS OFof DSP GROUP, INC.
FOR THE 1999 ANNUAL MEETING OF THE STOCKHOLDERS

JULY 19, 1999

Group, Inc.
For the 2012 Annual Meeting of Stockholders
The undersigned stockholder of DSP GROUP, INC., a Delaware corporation (the “Company”), hereby acknowledges receipt of the Notice of Annual Meeting of Stockholders and Proxy Statement, each dated June __, 1999,April [●], 2014, the Company’s Annual Report for the year ended December 31, 2013 and the 1998Company’s Annual Report to
Stockholderson Form 10-K for the year ended December 31, 2013 and hereby appoints Eliyahu AyalonOfer Elyakim and Moshe ZelnikDror Levy, or either of them, proxies, with full power to each of substitution, on behalf and in the name of the undersigned, to represent the undersigned at the 19992014 Annual Meeting of Stockholders of DSP GROUP, INC.the Company to be held on July 19, 1999Monday, June 9, 2014, at 9:008:30 a.m., local time, at DSP GROUP, INC.'s principal executive offices
located at 3120 Scott Boulevard, Santa Clara, California,the InterContinental New York Barclay, 111 East 48^th Street, New York City, New York, and at any adjournmentpostponement or adjournmentsadjournment thereof, and to vote all shares of Common Stockcommon stock of the Company which the undersigned would be entitled to vote if then and there personally present, on the matters set forth below.
THIS PROXY WILL BE VOTED AS DIRECTED OR, IF NO CONTRARY DIRECTION IS INDICATED, WILL BE VOTED (1) FOR THE ELECTION OF DIRECTORS, FOR THE AMENDMENTCLASS II DIRECTOR NOMINEES, (2)FOR PROPOSALS 2, 3 AND RESTATEMENT OF THE DSP GROUP, INC. 1993 DIRECTOR OPTION PLAN, FOR THE
AMENDMENT4, AND RESTATEMENT OF THE DSP GROUP 1991 EMPLOYEE AND CONSULTANT STOCK
PLAN, FOR THE AMENDMENT AND RESTATEMENT OF ARTICLE IV OF THE RESTATED
CERTIFICATE OF INCORPORATION, FOR THE RATIFICATION OF THE APPOINTMENT OF
KOST, FORER & GABBAY AS INDEPENDENT AUDITORS, AND(3) AS SAID PROXIES DEEM ADVISABLE ON SUCH OTHER MATTERS AS MAY PROPERLY COME BEFORE THE MEETING.
1. ELECTION OF A DIRECTOR:

____ FOR the nominee listed below ____ WITHHOLDTHREE CLASS II DIRECTORS EACH TO SERVE UNTIL THE 2015 ANNUAL MEETING OF STOCKHOLDERS (IF PROPOSAL 2 IS APPROVED) OR UNTIL THE 2017 ANNUAL MEETING OF STOCKHOLDERS (IF PROPOSAL 2 IS NOT APPROVED):
____FOR the nominees listed below (except as indicated) ____WITHHOLD AUTHORITY to vote for the nominees listed below
If you wish to withhold authority to vote (except as indicated) for the nomineefollowing nominees, strike a line through such nominee’s name listed below

IF YOU WISH TO WITHHOLD AUTHORITY TO VOTE FOR ANY NOMINEE, STRIKE A LINE
THROUGH SUCH NOMINEE'S NAME LISTED BELOW.

YAIR SHAMIR
SAUL SHANI

below.
Ofer Elyakim
Gabi Seligsohn
Yair Seroussi
2. PROPOSAL TO RATIFY AND APPROVE THEAN AMENDMENT AND RESTATEMENT OF THE
DSP GROUP, INC. 1993 DIRECTOR OPTION PLAN TO INCREASE THE NUMBER OF SHARES
RESERVED FOR ISSUANCE THEREUNDER:

_____ FOR _____ AGAINST _____ ABSTAIN

3. PROPOSAL TO RATIFY AND APPROVE THE AMENDMENT AND RESTATEMENT OF THE
DSP GROUP, INC. 1991 EMPLOYEE AND CONSULTANT STOCK PLAN TO INCREASE THE
NUMBER OF SHARES RESERVED FOR ISSUANCE THEREUNDER:

_____ FOR _____ AGAINST _____ ABSTAIN

4. PROPOSAL TO RATIFY THE AMENDMENT AND RESTATEMENT OF ARTICLE IV OF THE RESTATED CERTIFICATE OF INCORPORATION OF THE COMPNAY, AS AMENDED, TO INCREASEELIMINATE THE NUMBERCLASSIFIED STRUCTURE OF AUTHORIZED SHARESTHE BOARD OF COMMON STOCK:

_____ FOR _____ AGAINST _____ ABSTAIN

5.DIRECTORS:
_____FOR _____AGAINST _____ABSTAIN
3. PROPOSAL TO RATIFY THE APPOINTMENT OF KOST FORER GABBAY & GABBAYKASIERER, A MEMBER OF ERNST & YOUNG GLOBAL, AS THE COMPANY'S INDEPENDENT AUDITORS OF DSP GROUP, INC. FOR FISCAL 1999:

_____ FOR _____ AGAINST _____ ABSTAIN

DATED: _____________________, 1999

________________________________________
(Signature)

THE YEAR ENDING DECEMBER 31, 2014:
_____FOR _____AGAINST _____ABSTAIN
4. ADVISORY VOTE TO APPROVE THE COMPANY’S NAMED EXECUTIVE OFFICERS COMPENSATION:
_____FOR _____AGAINST _____ABSTAIN
The undersigned acknowledges receipt of the accompanying Notice of Annual Meeting of Stockholders and Proxy Statement.
DATED: _____________________, 2014
(Signature)
(Signature)
This Proxy should be marked, dated and signed by the stockholder(s) exactly as his or her name appears hereon, and returned promptly in the enclosed envelope. Persons signing in a fiduciary capacity should so indicate. If shares are held by joint tenants or as community property, both should sign.
Appendix A
PROPOSED CERTIFICATE OF AMENDMENT OF
THE RESTATED CERTIFICATE OF INCORPORATION
OF
DSP GROUP, INC.
DSP Group, Inc., a corporation organized and existing under and by virtue of the General Corporation Law of the State of Delaware,
DOES HEREBY CERTIFY:
FIRST: That at a special telephonic meeting of the Board of Directors of DSP Group, Inc. duly held on May 28, 2013, and pursuant to an unanimous written consent of the Board of Directors, effective March 25, 2014, resolutions were duly adopted setting forth a proposed amendment of the Restated Certificate of Incorporation of said corporation, declaring said amendment to be advisable and calling a meeting of the stockholders of said corporation for consideration thereof. The resolution setting forth the proposed amendment is as follows:
RESOLVED, that, subject to the approval of the stockholders of this Corporation, Section A of Article VII of this Corporation’s Restated Certificate of Incorporation be amended to read in full as follows:
“The management of the business and the conduct of the affairs of the Corporation shall be vested in its Board of Directors. The number of directors which shall constitute the whole Board of Directors shall be fixed exclusively by one or more resolutions adopted from time to time by the Board of Directors.
Upon the filing of this Amendment to the Restated Certificate of Incorporation (the “Effective Date”), each director shall be elected to hold office for a one-year term expiring at the next annual meeting of stockholders; provided, however, no terms in effect prior to the Effective Date shall be shortened. Notwithstanding the foregoing, however, subject to the rights of the holders of any series of Preferred Stock then outstanding, (i) at the 2014 annual meeting of stockholders, the directors whose terms expire at that meeting shall be elected to hold office for a one-year term expiring at the 2015 annual meeting of stockholders, (ii) at the 2015 annual meeting of stockholders, the directors whose terms expire at that meeting shall be elected to hold office for a one-year term expiring at the 2016 annual meeting of stockholders, and (iii) at the 2016 annual meeting of stockholders and each annual meeting of stockholders thereafter, all directors shall be elected to hold office for a one-year term expiring at the next annual meeting of stockholders.
Notwithstanding the foregoing provisions of this Article, each director shall serve until his or her name appears hereon,successor is duly elected and returned promptlyqualified or until his or her death, resignation, or removal. No decrease in the enclosed
envelope. Persons signingnumber of directors constituting the Board of Directors shall shorten the term of any incumbent director.
Any vacancies on the Board of Directors resulting from death, resignation, disqualification, removal, or other causes shall be filled by either (1) the affirmative vote of the holders of a majority of the voting power of the then-outstanding shares of voting stock of the corporation entitled to vote generally in the election of directors (the “Voting Stock”) voting together as a fiduciary
capacity should so indicate. Ifsingle class; or (ii) by the affirmative vote of a majority of the remaining directors then in office, even though less than a quorum of the Board of Directors. Newly created directorships resulting from any increase in the number of directors shall, unless the Board of Directors determines by resolution that any such newly created directorship shall be filled by the stockholders, be filled only by the affirmative vote of the directors then in office, even though less than a quorum of the Board of Directors. Any director elected in accordance with the preceding sentence shall hold office for the remainder of the full term of the class of directors in which the new directorship was created or the vacancy occurred and until such director’s successor shall have been elected and qualified.”
SECOND: That thereafter, pursuant to resolution of its Board of Directors, the annual meeting of the stockholders of said corporation was duly called and held on June 9, 2014, upon notice in accordance with Section 222 of the General Corporation Law of the State of Delaware, at which meeting the necessary number of shares are heldas required by joint tenantsstatute and the Restated Certificate of Incorporation was voted in favor of the amendment.
THIRD: That said amendment was duly adopted in accordance with the provisions of Section 242 of the General Corporation Law of the State of Delaware.
FOURTH: That the capital of said corporation shall not be reduced under or as
community property, both should sign.

~~NAME AGE POSITION ---- --- --------~~ ~~Igal Kohavi 59~~
Name	Age	Position
Patrick Tanguy (1)(2)(3)	53	Chairman of the Board ~~Eliyahu Ayalon 56 President,~~ of Directors
Ofer Elyakim (4)	44	Chief Executive Officer and Director ~~Moshe Zelnik 42 Vice President of Finance,~~
Dror Levy	40	Chief Financial Officer and Secretary ~~Gideon Wertheizer 42 Vice President-- Marketing Samuel L. Kaplan~~
David Dahan	44	Chief Operating Officer
Thomas Lacey (1)~~(2) 62~~ (3)	56	Director ~~Zvi Limon (2) 40~~
Gabi Selignohn (3)(4)	47	Director
Reuven Regev(2)(3)	64	Director
Yair ~~Shamir~~Seroussi (1)(2) 53	58	Director ~~Saul Shani~~
Norman Taffe (2)(4)	47	Director
Norman Rice (1) 44(4)	40	Director
Kenneth H. Traub (2)(4)	52	Director

by reason of said amendment.

IN WITNESS WHEREOF, DSP Group, Inc. has caused this certificate to be signed by Dror Levy, Chief Financial Officer and Secretary on this [●]th day of [●], 2014.

By:

___________________
Dror Levy
Chief Financial Officer and Secretary

[X]	Preliminary Proxy Statement
[ ]	Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
[ ]	Definitive Proxy Statement
[ ]	Definitive Additional Materials
[ ]	Soliciting Material Pursuant to Rule 14a-12

[X]	No fee required.

[ ]	Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.

	(1)	Title of each class of securities to which transaction applies:
		N/A

	(2)	Aggregate number of securities to which transaction applies:
		N/A

	(3)	Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined):
		N/A

	(4)	Proposed maximum aggregate value of transaction:
		N/A

	(5)	Total fee paid:
		N/A

[ ]	Fee paid previously with preliminary materials.

[ ]	Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the form or schedule and the date of its filing.

	(1)	Amount previously paid:
		N/A
	(2)	Form, Schedule or Registration Statement no.:
		N/A
	(3)	Filing Party:
		N/A
	(4)	Date Filed:
		N/A

	(1)	Member of the audit committee
	(2)	Member of the compensation committee
	(3)	Member of the nomination and corporate governance committee
	(4)	Member of the strategy committee, which committee was formed in June 2013

Name of Beneficial Owner	Shares Beneficially Owned	Approximate Percent Beneficially Owned	Options and Stock Appreciation Rights Included in Shares Beneficially Owned (5)

BlackRock, Inc. (1) 40 East 52nd Street New York, NY 10022	3,886,713	17.2%	_

Dimensional Fund Advisors LP (2) Palisades West, Building One 6300 Bee Cave Road Austin, Texas, 78746	1,858,364	8.2%	_

Starboard Value LP and affiliates (3) 830 Third Avenue, 3rd Floor New York, New York 10022	1,650,000	7.3%	_

Rima Senvest Management, LLC (4) 110 East 55th Street Suite 1600 New York, New York 10022	1,176,622	5.2%	_

Ofer Elyakim	403,211	1.8%	364,701

	(a)	(b)	(c)
Plan category	Number of securities to be issued upon exercise of outstanding options, warrants and rights	Weighted-average exercise price of outstanding options, warrants and rights	Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a))

Equity compensation plans approved by security holders	1,125,000	$ 5.76	2,374,414 (1)

Equity compensation plans not approved by security holders (2)	3,505,413	$ 8.82	182,536

Total	4,630,413	$ 8.08	2,556,950

Criteria	% of Total Bonus
A. Annual Revenue Target	A = 15% x Annual Revenue Score Annual Revenue Score: ● 0 if annual revenues are more than 10% below plan ● 0.5 if annual revenues are 10% below plan ● 1.0 if annual revenues meet plan ● 2.0 if annual revenues are 10% above plan The payout based on the annual revenue score is linear between any two points.
B. EBITDA Target	B = 25% x EBITDA Score EBITDA Score: ● 0 at zero or negative EBITDA ● 1.0 if actual EBITDA meet plan ● 2.0 if actual EBITDA is 50% above plan The payout based on the EBITDA score is linear between any two points.
C. Free Cash Flow Target	C = 20% x Free Cash Flow Score Free Cash Flow Score: ● 0 if zero or negative free cash flows ● 1.0 if free cash flows equals plan operating income on a non-GAAP basis ● 2.0 if actual free cash flows is 100% above plan operating income on a non-GAAP basis The payout based on the free cash flow score is linear between any two points.
D. Discretionary Component	40% of total bonus payable under the plan D = 40% to 80% of annual salary
Total	(A+B+C+D) x Annual Salary

Name and Principal Position	Year	Salary ($)		Bonus ($)		Option Awards ($)(1)		All Other Compensation ($) (2)		Total ($)
Ofer Elyakim	2013		300,000		500,000		647,017		95,001		1,542,018
Chief Executive Officer	2012		260,000		—		268,254		177,851		706,105
	2011		260,000		—		327,817		101,507		689,324

Dror Levy *	2013		221,654		200,000		290,627		90,251		802,532
Chief Financial Officer and	2012		186,625		—		111,757		86,130		384,512
Secretary	2011		201,224		—		144,054		89,794		435,072

David Dahan *	2013		213,466		168,484		229,049		61,691		672,690
Chief Operating Officer (3)	2012		180,514		—		138,785		57,199		376,498
	2011		—		—		—		—		—

Name	Israeli Social Benefits (1)		Car Allowance (2)		Education Fund (3)		Vacation (4)		Social Security Payments (5)		Disability Insurance Payments (6)		Other		Total ($)

Ofer Elyakim		40,965		7,924		23,049		7,777		8,633		3,397		3,256		95,001

Dror Levy		29,546		26,124		16,625		3,359		8,633		1,552		4,413		90,251

David Dahan		28,421		—		16,010		3,667		8,633		1,281		3,679		61,691

			Estimated Future Payouts Under Equity Incentive Plan Awards						All Other Stock Awards: Number of Sharesof Stock		All Other Option Awards: Number of Securities Underlying		Exercise or Base Price of Option		Closing Price on Grant		Grant Date Fair Value of Stock andOption
Name	Grant Date	Approval Date	Threshold (#)		Target (#)		Maximum (#)		or Units (#) (1)		Options (#)		Awards ($/Sh)		Date ($/Sh)		Awards ($) (2)

Ofer Elyakim	1/29/13	1/29/13		—		—		—		66,000		—		—		6.26		398,160
	8/14/13	8/14/13		—		—		—		35,000		—		—		7.22		244,665
Dror Levy	1/29/13	1/29/13		—		—		—		25,000		—		—		6.26		150,818
	8/14/13	8/14/13		—		—		—		20,000		—		—		7.22		139,809
David Dahan	1/29/13	1/29/13		—		—		—		20,000		—		—		6.26		120,655
	8/14/13	8/14/13		—		—		—		15,000		—		—		7.22		104,857

	Option Awards
	Number of Securities Underlying Unexercised Options (#)	Number of Securities Underlying Unexercised Options (#)	Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options	Option Exercise Price	Option Expiration
Name	Exercisable	Unexercisable	(#)	($)(3)	Date (4)(5)

Ofer Elyakim	7,500 (1) 37,500 (1) 120,000 (2) 109,378 (1) 48,127 (1) 22,969 (1) — —	— — — 7,278 (1) 21,872 (1) 29,530 (1) 66,000 (8) 35,000 (9)	— — — — — — —	21.70 10.23 5.97 7.26 7.49 6.16 0.00 0.00	1/24/2014 1/30/2015 2/02/2016 1/27/2017 1/31/2018 2/1/2019 — —

Dror Levy	20,000 (1) 35,000 (1) 67,500 (1) 49,999 (1) 20,627 (1) 10,937 (1) — —	— — — 3,333 (1) 9,372 (1) 14,062 (1) 25,000 (8) 20,000 (9)	— — — — — — —	21.70 10.23 5.97 7.26 7.49 6.16 0.00 0.00	1/24/2014 1/30/2015 2/02/2016 1/27/2017 1/31/2018 2/1/2019 — —

David Dahan	13,125 (1) — —	16,875 (1) 20,000 (8) 15,000 (9)	— — —	6.16 0.00 0.00	2/1/2019 — —

Name: Ofer Elyakim	Termination for Cause ($)	Voluntary Termination by Employee After Provision of Requisite Notice ($)	Termination upon Death of Employee ($)	Termination w/o Cause or for Good Reason ($)	Upon a Change in Control and Termination w/o Cause ($)

Base Salary	—(1)	599,136	—(1)	599,136	599,136
Bonus (2)	500,000	500,000	500,000	500,000	500,000
Vested and Unvested Options/SARs/RSUs (3)	1,174,114	2,124,260	1,174,114	2,464,110	2,464,110
Accrued Vacation Pay	65,341	65,341	65,341	65,341	65,341
Total	1,739,455	3,288,737	1,739,455	3,628,587	3,628,587

Name: Dror Levy	Termination for Cause ($)	Voluntary Termination by Employee After Provision of Requisite Notice ($)	Termination upon Death of Employee ($)	Termination w/o Cause or for Good Reason ($)	Upon a Change in Control and Termination w/o Cause($)

Base Salary	—(1)	326,190	—(1)	326,190	326,190
Bonus (2)	200,000	200,000	200,000	200,000	200,000
Vested and Unvested Options/SARs/RSUs (3)	666,695	1,052,750	666,695	1,246,950	1,246,950
Accrued Vacation Pay	45,398	45,398	45,398	45,398	45,398
Total	912,093	1,624,338	912,093	1,818,538	1,818,538

Name: David Dahan	Termination for Cause ($)	Voluntary Termination by Employee After Provision of Requisite Notice ($)	Termination upon Death of Employee ($)	Termination w/o Cause or for Good Reason ($)	Upon a Change in Control and Termination ($)

Base Salary	—(1)	—	—(1)	55,933	—
Bonus (2)	168.484	168,484	168,484	168,484	168,484
Vested and Unvested Options/SARs/RSUs (3)	93,188	93,188	93,188	93,188	433,038
Accrued Vacation Pay	14,475	14,475	14,475	14,475	14,475
Total	276,147	276,147	276,147	332,080	615,997

Name	Fees Paid in Cash ($)	Stock Awards ($)	Option Awards ($) (1)	Total ($)
Thomas A. Lacey (2)	35,000	-	44,925	79,925
		-
Reuven Regev (3)	37,000	-	89,850	126,850
		-
Norman J. Rice III (4)	24,000	-	117,922	141,922

Gabi Seligsohn (5)	31,000	-	114,434	145,434
		-
Yair Seroussi (6)	40,000	-	44,925	84,925
		-
Norman Taffe (7)	23,000	-	117,922	140,922
		-
Kenneth Traub (8)	41,000	-	44,925	85,925
		-
Patrick Tanguy (9)	43,000	-	44,925	87,925

	2012		2013
Audit Fees (1)	$	360,000	$	350,000
Audit-Related Fees (2)		—		—
Tax Fees (3)	$	162,930	$	88,327
All Other Fees (4)	$	51,842	$	63,703
Total	$	574,772	$	502,030

	DATED: _____________________, 2014


	(Signature)


	(Signature)

	This Proxy should be marked, dated and signed by the stockholder(s) exactly as his or her name appears hereon, and returned promptly in the enclosed envelope. Persons signing in a fiduciary capacity should so indicate. If shares are held by joint tenants or as community property, both should sign.