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Exhibit 4.2  


 
 

DSP GROUP, INC. 2001 STOCK INCENTIVE PLAN
  
    NOTICE OF STOCK OPTION AWARD



	          Grantee's Name and Address:	 	

	

 	
 	


	

 	
 	







    You
have been granted an option to purchase shares of Common Stock, subject to the terms and conditions of this Notice of Stock Option Award (the "Notice"), the DSP Group, Inc.
2001 Stock Incentive Plan, as amended from time to time (the "Plan") and the Stock Option Award Agreement (the "Option Agreement") attached hereto, as follows. Unless otherwise defined herein, the
terms defined in the Plan shall have the same defined meanings in this Notice. 



	          Award Number	 	 	

	

          Date of Award	
 	
 	


	

          Vesting Commencement Date	
 	
 	


	

          Exercise Price per Share	
 	
$	

 	


	

          Total Number of Shares Subject

          to the Option (the "Shares")	
 	
 	


	

          Total Exercise Price	
 	
$	

 	


	

          Type of Option:	
 	
 	

	
 	

Incentive Stock Option
	

 	
 	
 	

	
 	

Non-Qualified Stock Option
	

          Expiration Date:	
 	
 	


	

          Post-Termination Exercise Period:	
 	
 	

Three (3) Months





Vesting Schedule:  


    Subject to Grantee's Continuous Service (as defined below) and other limitations set forth in this Notice, the Plan and the Option Agreement, the Option may be
exercised, in whole or in part, in accordance with the following schedule: 


    [INSERT
VESTING SCHEDULE] 


    During
any authorized leave of absence, the vesting of the Option as provided in this schedule shall be suspended after the leave of absence exceeds a period of ninety
(90) days. Vesting of the Option shall resume upon the Grantee's termination of the leave of absence and return to service to the Company or a Related Entity. The Vesting Schedule of the Option
shall be extended by the length of the suspension. 


    In
the event of the Grantee's change in status from Employee to Consultant or from an Employee whose customary employment is 20 hours or more per week to an Employee whose
customary employment is fewer than 20 hours per week, vesting of the Option shall continue only to the extent determined by the Administrator as of such change in status. 


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    In the event of termination of the Grantee's Continuous Service for Cause, the Grantee's right to exercise the Option shall terminate concurrently with the termination of the
Grantee's Continuous Service, except as otherwise determined by the Administrator. 


    IN
WITNESS WHEREOF, the Company and the Grantee have executed this Notice and agree that the Option is to be governed by the terms and conditions of this Notice, the Plan, and the
Option Agreement. 



	 	 	DSP Group, Inc.,

a Delaware corporation
	

 	
 	

By:	
 	


	

 	
 	

Title:	
 	







    THE
GRANTEE ACKNOWLEDGES AND AGREES THAT THE SHARES SUBJECT TO THE OPTION SHALL VEST, IF AT ALL, ONLY DURING THE PERIOD OF THE GRANTEE'S CONTINUOUS SERVICE (NOT THROUGH THE ACT OF
BEING HIRED, BEING GRANTED THE OPTION OR ACQUIRING SHARES HEREUNDER). THE GRANTEE FURTHER ACKNOWLEDGES AND AGREES THAT NOTHING IN THIS NOTICE, THE OPTION AGREEMENT, OR THE PLAN SHALL CONFER UPON THE
GRANTEE ANY RIGHT WITH RESPECT TO FUTURE AWARDS OR CONTINUATION OF GRANTEE'S CONTINUOUS SERVICE, NOR SHALL IT INTERFERE IN ANY WAY WITH THE GRANTEE'S RIGHT OR THE RIGHT OF THE GRANTEE'S EMPLOYER TO
TERMINATE GRANTEE'S CONTINUOUS SERVICE, WITH OR WITHOUT CAUSE, AND WITH OR WITHOUT NOTICE. THE GRANTEE ACKNOWLEDGES THAT UNLESS THE GRANTEE HAS A WRITTEN EMPLOYMENT AGREEMENT WITH THE COMPANY TO THE
CONTRARY, GRANTEE'S STATUS IS AT WILL. 


    The
Grantee acknowledges receipt of a copy of the Plan and the Option Agreement, and represents that he or she is familiar with the terms and provisions thereof, and hereby accepts
the Option subject to all of the terms and provisions hereof and thereof. The Grantee has reviewed this Notice, the Plan, and the Option Agreement in their entirety, has had an opportunity to obtain
the advice of counsel prior to executing this Notice, and fully understands all provisions of this Notice, the Plan and the Option Agreement. The Grantee hereby agrees that all disputes arising out of
or relating to this Notice, the Plan and the Option Agreement shall be resolved in accordance with Section 13 of the Option Agreement. The Grantee further agrees to notify the Company upon any
change in the residence address indicated in this Notice. 



	Dated:	 	
	 	Signed:	 	

	 	 	 	 	 	 	Grantee




2





 
Award Number:               


 
 

DSP GROUP, INC. 2001 STOCK INCENTIVE PLAN
  
    STOCK OPTION AWARD AGREEMENT    
  


    1.  Grant of Option. DSP Group, Inc., a Delaware corporation (the "Company"), hereby grants to the Grantee (the
"Grantee") named in the Notice of Stock Option Award (the "Notice"), an option (the "Option") to purchase the Total Number of Shares of Common Stock subject to the Option (the "Shares") set forth in
the Notice, at the Exercise Price per Share set forth in the Notice (the "Exercise Price") subject to the terms and provisions of the Notice, this Stock Option Award Agreement (the "Option Agreement")
and the Company's 2001 Stock Incentive Plan, as amended from time to time (the "Plan"), which are incorporated herein by reference. Unless otherwise defined herein, the terms defined in the Plan shall
have the same defined meanings in this Option Agreement. 


    If
designated in the Notice as an Incentive Stock Option, the Option is intended to qualify as an Incentive Stock Option as defined in Section 422 of the Code. However,
notwithstanding such designation, to the extent that the aggregate Fair Market Value of Shares subject to Options designated as Incentive Stock Options which become exercisable for the first time by
the Grantee during any calendar year (under all plans of the Company or any Parent or Subsidiary) exceeds $100,000, such excess Options, to the extent of the Shares covered thereby in excess of the
foregoing limitation, shall be treated as Non-Qualified Stock Options. For this purpose, Incentive Stock Options shall be taken into account in the order in which they were granted, and
the Fair Market Value of the Shares shall be determined as of the date the Option with respect to such Shares is awarded. 


    2.  Exercise of Option.



    (a) Right to Exercise. The Option shall be exercisable during its term in accordance with the Vesting Schedule set out
in the Notice and with the applicable provisions of the Plan and this Option Agreement. The Option shall be subject to the provisions of Section 11 of the Plan relating to the exercisability or
termination of the Option in the event of a Corporate Transaction, Change in Control or Related Entity Disposition. The Grantee shall be subject to reasonable limitations on the number of
requested exercises during any monthly or weekly period as determined by the Administrator. In no event shall the Company issue fractional Shares. 


    (b) Method of Exercise. The Option shall be exercisable only by delivery of an Exercise Notice (attached as
Exhibit A) which shall state the election to exercise the Option, the whole number of Shares in respect of which the Option is being exercised, and such other provisions as may be required by
the Administrator. The Exercise Notice shall be signed by the Grantee and shall be delivered in person, by certified mail, or by such other method as determined from time to time by the Administrator
to the Company accompanied by payment of the Exercise Price. The Option shall be deemed to be exercised upon receipt by the Company of such written notice accompanied by the Exercise Price, which, to
the extent selected, shall be deemed to be satisfied by use of the broker-dealer sale and remittance procedure to pay the Exercise Price provided in Section 3(d), below. 


    (c) Taxes. No Shares will be delivered to the Grantee or other person pursuant to the exercise of the Option until the
Grantee or other person has made arrangements acceptable to the Administrator for the satisfaction of applicable income tax, employment tax, and social security tax withholding obligations, including,
without limitation, such other tax obligations of the Grantee incident to the receipt of Shares or the disqualifying disposition of Shares received on exercise of an Incentive Stock Option. Upon
exercise of the Option, the Company or the Grantee's employer may offset or withhold (from any amount owed by the Company or the Grantee's employer to the Grantee) or collect from the Grantee or other
person an amount sufficient to satisfy such tax obligations and/or the employer's withholding obligations. 



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    3.  Method of Payment. Payment of the Exercise Price shall be made by any of the following, or a combination thereof, at
the election of the Grantee; provided, however, that such exercise method does not then violate any Applicable Law and, provided further, that the portion of the Exercise Price equal to the par value
of the Shares must be paid in cash or other legal consideration permitted by the Delaware General Corporation Law: 



    (a) cash;



    (b) check;



    (c) surrender
of Shares or delivery of a properly executed form of attestation of ownership of Shares as the Administrator may require (including withholding of Shares
otherwise deliverable upon exercise of the Option) which have a Fair Market Value on the date of surrender or attestation equal to the aggregate Exercise Price of the Shares as to which the Option is
being exercised (but only to the extent
that such exercise of the Option would not result in an accounting compensation charge with respect to the Shares used to pay the exercise price); or 


    (d) payment
through a broker-dealer sale and remittance procedure pursuant to which the Grantee (i) shall provide written instructions to a Company-designated
brokerage firm to effect the immediate sale of some or all of the purchased Shares and remit to the Company, out of the sale proceeds available on the settlement date, sufficient funds to cover the
aggregate exercise price payable for the purchased Shares and (ii) shall provide written directives to the Company to deliver the certificates for the purchased Shares directly to such
brokerage firm in order to complete the sale transaction. 




    4.  Restrictions on Exercise. The Option may not be exercised if the issuance of the Shares subject to the Option upon
such exercise would constitute a violation of any Applicable Laws. 


    5.  Termination or Change of Continuous Service. In the event the Grantee's Continuous Service terminates, other than
for Cause, the Grantee may, to the extent otherwise so entitled at the date of such termination (the "Termination Date"), exercise the Option during the Post-Termination Exercise Period.
In the event of termination of the Grantee's Continuous Service for Cause, the Grantee's right to exercise the Option shall, except as otherwise determined by the Administrator, terminate concurrently
with the termination of the Grantee's Continuous Service. In no event shall the Option be exercised later than the Expiration Date set forth in the Notice. In the event of the Grantee's change in
status from Employee, Director or Consultant to any other status of Employee, Director or Consultant, the Option shall remain in effect and, except to the extent otherwise determined by the
Administrator, continue to vest; provided, however, that with respect to any Incentive Stock Option that shall remain in effect after a change in status from Employee to Director or Consultant, such
Incentive Stock Option shall cease to be treated as an Incentive Stock Option and shall be treated as a Non-Qualified Stock Option on the day three (3) months and one (1) day
following such change in status. Except as provided in Sections 6 and 7 below, to the extent that the Grantee is not entitled to exercise the Option on the Termination Date, or if the Grantee does not
exercise the Option within the Post-Termination Exercise Period, the Option shall terminate. 


    6.  Disability of Grantee. In the event the Grantee's Continuous Service terminates as a result of his or her
Disability, the Grantee may, but only within twelve (12) months from the Termination Date (and in no event later than the Expiration Date), exercise the Option to the extent he or she was
otherwise entitled to exercise it on the Termination Date; provided, however, that if such Disability is not a "disability" as such term is defined in Section 22(e)(3) of the Code and the
Option is an Incentive Stock Option, such Incentive Stock Option shall cease to be treated as an Incentive Stock Option and shall be treated as a Non-Qualified Stock Option on the day
three (3) months and one (1) day following the Termination Date. To the extent that the Grantee is not entitled to exercise the Option on the Termination Date, or if the Grantee does not
exercise the Option to the extent so entitled within the time specified herein, the Option shall terminate. 


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    7.  Death of Grantee. In the event of the termination of the Grantee's Continuous Service as a result of his or her
death, or in the event of the Grantee's death during the Post-Termination Exercise Period or during the twelve (12) month period following the Grantee's termination of Continuous
Service as a result of his or her Disability, the Grantee's estate, or a person who acquired the right to exercise the Option by bequest or inheritance, may exercise the Option, but only to the extent
the Grantee could exercise the Option at the date of termination, within twelve (12) months from the date of death (but in no event later than the Expiration Date). To the extent that the
Grantee is not entitled to exercise the Option on the date of death, or if the Option is not exercised to the extent so entitled within the time specified herein, the Option shall terminate. 


    8.  Transferability of Option. The Option, if an Incentive Stock Option, may not be transferred in any manner other than
by will or by the laws of descent and distribution and may be exercised during the lifetime of the Grantee only by the Grantee; provided, however, that the Grantee may designate a beneficiary of the
Grantee's Incentive Stock Option in the event of the Grantee's death on a beneficiary designation form provided by the Administrator. The Option, if a Non-Qualified Stock Option, may be
transferred to any person by will and by the laws of descent and distribution. Non-Qualified Stock Options also may be transferred during the lifetime of the Grantee by gift and pursuant
to a domestic relations order to members of the Grantee's Immediate Family to the extent and in the manner determined by the Administrator. The terms of the Option shall be binding upon the executors,
administrators, heirs, successors and transferees of the Grantee. 


    9.  Term of Option. The Option may be exercised no later than the Expiration Date set forth in the Notice or such
earlier date as otherwise provided herein. 


    10. Tax Consequences. Set forth below is a brief summary as of the date of this Option Agreement of some of the federal
tax consequences of exercise of the Option and disposition of the Shares. THIS SUMMARY IS NECESSARILY INCOMPLETE, AND THE TAX LAWS AND REGULATIONS ARE SUBJECT TO CHANGE. THE GRANTEE SHOULD CONSULT A
TAX ADVISER BEFORE EXERCISING THE OPTION OR DISPOSING OF THE SHARES. 



    (a) Exercise of Incentive Stock Option. If the Option qualifies as an Incentive Stock Option, there will be no regular
federal income tax liability upon the exercise of the Option, although the excess, if any, of the Fair Market Value of the Shares on the date of exercise over the Exercise Price will be treated as
income for purposes of the alternative minimum tax for federal tax purposes and may subject the Grantee to the alternative minimum tax in the year of exercise. 



    (b) Exercise of Incentive Stock Option Following Disability. If the Grantee's Continuous Service terminates as a result
of Disability that is not total and permanent disability as defined in Section 22(e)(3) of the Code, to the extent permitted on the date of termination, the Grantee must exercise an Incentive
Stock Option within three (3) months of such termination for the Incentive Stock Option to be qualified as an Incentive Stock Option. 


    (c) Exercise of Non-Qualified Stock Option. On exercise of a Non-Qualified Stock Option, the
Grantee will be treated as having received compensation income (taxable at ordinary income tax rates) equal to the excess, if any, of the Fair Market Value of the Shares on the date of exercise over
the Exercise Price. If the Grantee is an Employee or a former Employee, the Company will be required to withhold from the Grantee's compensation or collect from the Grantee and pay to the applicable
taxing authorities an amount in cash equal to a percentage of this compensation income at the time of exercise, and may refuse to honor the exercise and refuse to deliver Shares if such withholding
amounts are not delivered at the time of exercise. 


    (d) Disposition of Shares. In the case of a Non-Qualified Stock Option, if Shares are held for more than one
year, any gain realized on disposition of the Shares will be treated as long-term capital gain for federal income tax purposes and subject to tax at a maximum rate of 20%. In the case of
an Incentive Stock Option, if Shares transferred pursuant to the Option are held for more than one year after receipt of the Shares and are disposed more than two years after the Date of 



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Award, any gain realized on disposition of the Shares also will be treated as capital gain for federal income tax purposes and subject to the same tax rates and holding periods that apply to Shares
acquired upon exercise of a Non-Qualified Stock Option. If Shares purchased under an Incentive Stock Option are disposed of prior to the expiration of such one-year or
two-year periods, any gain realized on such disposition will be treated as compensation income (taxable at ordinary income rates) to the extent of the difference between the Exercise Price
and the lesser of (i) the Fair Market Value of the Shares on the date of exercise, or (ii) the sale price of the Shares. 




    11. Entire Agreement: Governing Law. The Notice, the Plan and this Option Agreement constitute the entire agreement of
the parties with respect to the subject matter hereof and supersede in their entirety all prior undertakings and agreements of the Company and the Grantee with respect to the subject matter hereof,
and may not be modified adversely to the Grantee's interest except by means of a writing signed by the Company and the Grantee. Nothing in the Notice, the Plan and this Option Agreement (except as
expressly provided therein) is intended to confer any rights or remedies on any persons other than the parties. The Notice, the Plan and this Option Agreement are to be construed in accordance with
and governed by the internal laws of the State of California without giving effect to any choice of law rule that would cause the application of the laws of any jurisdiction other than the internal
laws of the State of California to the rights and duties of the parties. Should any provision of the Notice, the Plan or this Option Agreement be determined by a court of law to be illegal or
unenforceable, such provision shall be enforced to the fullest extent allowed by law and the other provisions shall nevertheless remain effective and shall remain enforceable. 



    12. Headings. The captions used in the Notice and this Option Agreement are inserted for convenience and shall not be
deemed a part of the Option for construction or interpretation. 


    13. Dispute Resolution The provisions of this Section 13 shall be the exclusive means of resolving disputes
arising out of or relating to the Notice, the Plan and this Option Agreement. The Company, the Grantee, and the Grantee's assignees (the "parties") shall attempt in good faith to resolve any disputes
arising out of or relating to the Notice, the Plan and this Option Agreement by negotiation between individuals who have authority to settle the controversy. Negotiations shall be commenced by either
party by notice of a written statement of the party's position and the name and title of the individual who will represent the party. Within thirty (30) days of the written notification, the
parties shall meet at a mutually acceptable time and place, and thereafter as often as they reasonably deem necessary, to resolve the dispute. If the dispute has not been resolved by negotiation, the
parties agree that any suit, action, or proceeding arising out of or relating to the Notice, the Plan or this Option Agreement shall be brought in the United States District Court for the Northern
District of California (or should such court lack jurisdiction to hear such action, suit or proceeding, in a California state court in the County of San Francisco) and that the parties shall submit to
the jurisdiction of such court. The parties irrevocably waive, to the fullest extent permitted by law, any objection the party may have to the laying of venue for any such suit, action or proceeding
brought in such court. THE PARTIES ALSO EXPRESSLY WAIVE ANY RIGHT THEY HAVE OR MAY HAVE TO A JURY TRIAL OF ANY SUCH SUIT, ACTION OR PROCEEDING. If any one or more provisions of this Section 13
shall for any reason be held invalid or unenforceable, it is the specific intent of the parties that such provisions shall be modified to the minimum extent necessary to make it or its application
valid and enforceable. 


    14. Notices. Any notice required or permitted hereunder shall be given in writing and shall be deemed effectively given
upon personal delivery or upon deposit in the United States mail by certified mail (if the parties are within the United States) or upon deposit for delivery by an internationally recognized express
mail courier service (for international delivery of notice), with postage and fees prepaid, addressed to the other party at its address as shown beneath its signature in the Notice, or to such other
address as such party may designate in writing from time to time to the other party. 


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EXHIBIT A
  
    DSP GROUP, INC. 2001 STOCK INCENTIVE PLAN
  
    EXERCISE NOTICE


DSP
Group, Inc.

3120 Scott Boulevard

Santa Clara, CA 95054

Attention: Secretary 


    1.  Exercise of Option. Effective as of today,            ,   the undersigned (the
"Grantee") hereby elects to exercise the Grantee's option to purchase            shares of the Common Stock (the "Shares") of DSP Group, Inc. (the "Company") under and pursuant to the
Company's 2001 Stock Incentive Plan, as amended from time to time (the "Plan") and the [  ] Incentive [  ]
Non-Qualified Stock Option Award Agreement (the "Option Agreement") and Notice of Stock Option Award (the "Notice") dated            ,       . Unless
otherwise
defined herein, the terms defined in the Plan shall have the same defined meanings in this Exercise Notice. 



    2.  Representations of the Grantee. The Grantee acknowledges that the Grantee has received, read and understood the
Notice, the Plan and the Option Agreement and agrees to abide by and be bound by their terms and conditions. 


    3.  Rights as Stockholder. Until the stock certificate evidencing such Shares is issued (as evidenced by the appropriate
entry on the books of the Company or of a duly authorized transfer agent of the Company), no right to vote or receive dividends or any other rights as a stockholder shall exist with respect to the
Shares, notwithstanding the exercise of the Option. The Company shall issue (or cause to be issued) such stock certificate promptly after the Option is exercised. No adjustment will be made for a
dividend or other right for which the record date is prior to the date the stock certificate is issued, except as provided in Section 10 of the Plan. 


    4.  Delivery of Payment. The Grantee herewith delivers to the Company the full Exercise Price for the Shares, which, to
the extent selected, shall be deemed to be satisfied by use of the broker-dealer sale and remittance procedure to pay the Exercise Price provided in Section 3(d) of the Option Agreement. 


    5.  Tax Consultation. The Grantee understands that the Grantee may suffer adverse tax consequences as a result of the
Grantee's purchase or disposition of the Shares. The Grantee represents that the Grantee has consulted with any tax consultants the Grantee deems advisable in connection with the purchase or
disposition of the Shares and that the Grantee is not relying on the Company for any tax advice. 


    6.  Taxes. The Grantee agrees to satisfy all applicable foreign, federal, state and local income and employment tax
withholding obligations and herewith delivers to the Company the full amount of such obligations or has made arrangements acceptable to the Company to satisfy such obligations. In the case of an
Incentive Stock Option, the Grantee also agrees, as partial consideration for the designation of the Option as an Incentive Stock Option, to notify the Company in writing within thirty
(30) days of any disposition of any shares acquired by exercise of the Option if such disposition occurs within two (2) years from the Date of Award or within one (1) year from
the date the Shares were transferred to the Grantee. If the Company is required to satisfy any foreign, federal, state or local income or employment tax withholding obligations as a result of such an
early disposition, the Grantee agrees to satisfy the amount of such withholding in a manner that the Administrator prescribes. 


    7.  Successors and Assigns. The Company may assign any of its rights under this Exercise Notice to single or multiple
assignees, and this agreement shall inure to the benefit of the successors and assigns of the Company. This Exercise Notice shall be binding upon the Grantee and his or her heirs, executors,
administrators, successors and assigns. 


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    8.  Headings. The captions used in this Exercise Notice are inserted for convenience and shall not be deemed a part of
this agreement for construction or interpretation. 


    9.  Dispute Resolution. The provisions of Section 13 of the Option Agreement shall be the exclusive means of
resolving disputes arising out of or relating to this Exercise Notice. 


    10. Governing Law; Severability. This Exercise Notice is to be construed in accordance with and governed by the internal
laws of the State of California without giving effect to any choice of law rule that would cause the application of the laws of any jurisdiction other than the internal laws of the State of California
to the rights and duties of the parties. Should any provision of this Exercise Notice be determined by a court of law to be illegal or unenforceable, such provision shall be enforced to the fullest
extent allowed by law and the other provisions shall nevertheless remain effective and shall remain enforceable. 


    11. Notices. Any notice required or permitted hereunder shall be given in writing and shall be deemed effectively given
upon personal delivery or upon deposit in the United States mail by certified mail (if the parties are within the United States) or upon deposit for delivery by an internationally recognized express
mail courier service (for international delivery of notice), with postage and fees prepaid, addressed to the other party at its address as shown below beneath its signature, or to such other address
as such party may designate in writing from time to time to the other party. 


    12. Further Instruments. The parties agree to execute such further instruments and to take such further action as may be
reasonably necessary to carry out the purposes and intent of this agreement. 


    13. Entire Agreement. The Notice, the Plan and the Option Agreement are incorporated herein by reference and together
with this Exercise Notice constitute the entire agreement of the parties with respect to the subject matter hereof and supersede in their entirety all prior undertakings and agreements of the Company
and the Grantee with respect to the subject matter hereof, and may not be modified adversely to the Grantee's interest except by means of a writing signed by the Company and the Grantee. Nothing in
the Notice, the Plan, the Option Agreement and this Exercise Notice (except as expressly provided therein) is intended to confer any rights or remedies on any persons other than the parties. 



	Submitted by:	 	Accepted by:
	

GRANTEE:	
 	
DSP GROUP, INC.
	

 	
 	

By:	
 	


	

	
 	

Title:	
 	


	(Signature)	 	 	 	 
	

Address:	
 	

Address:
	

	
 	

3120 Scott Boulevard
	
	 	Santa Clara, CA 95054




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DSP GROUP, INC. 2001 STOCK INCENTIVE PLAN NOTICE OF STOCK OPTION AWARD

DSP GROUP, INC. 2001 STOCK INCENTIVE PLAN STOCK OPTION AWARD AGREEMENT

EXHIBIT A DSP GROUP, INC. 2001 STOCK INCENTIVE PLAN EXERCISE NOTICE