EMPLOYMENT AGREEMENT
 
 
 
THIS AGREEMENT, made and entered into this ____ day of April, 1996 by and
between DSP Semiconductors Ltd., of Givat Shmuel,  a company existing under the
laws of the State of Israel  (hereinafter the "Company"), and Eli Ayalon of 4
Remez Street, Kiryat Tivon 36000, Israel (hereinafter "Ayalon"), effective as of
the 22nd day of April, 1996 (the "Effective Date").
 
                                       RECITAL
 
The Company agreed to employ Ayalon as President and Chief Executive Officer, in
the framework of which Ayalon shall serve as President and CEO of its US parent
company, DSP Group, Inc., and Ayalon agrees to such employment, on the terms and
subject to the conditions set forth herein.
 
                                      AGREEMENT
 
NOW, THEREFORE, the parties hereto hereby agree as follows:
 
1.  EMPLOYMENT DUTIES
 
1.1 AYALON'S DUTIES
 
    1.1.1.    Ayalon shall perform the responsibilities of the President and
              Chief Executive Officer of the Company, as well as those as
              President and CEO of its US parent company, DSP Group, Inc., and
              any responsibilities incidental thereto, all such, as stated, to
              be commensurate with his background, education, experience and
              professional standing.  Ayalon shall devote his full productive
              time, attention, energy, and skill to the business of the Company
              during the Employment Term set forth below. Ayalon shall not
              become engaged in any other occupation whether for compensation
              or not  while employed hereunder, without the express written
              consent of the Company's Board of Directors.
 
    1.1.2     Ayalon acknowledges that his employment with the Company will
              require frequent travel spanning extended periods outside Israel.
              Furthermore, Ayalon agrees to extensive world-wide travel under
              his employment with the Company.
 
    1.1.3     Ayalon understands and acknowledges that as his position is a
              senior managerial position in substance, as defined in the Work
              and Rest Hours Law, 1951, and requires a high level of trust, the
              provisions of said law shall not apply to Ayalon and Ayalon
              agrees that he may be required to work beyond the regular working
              hours of the Company, for no additional compensation other than
              as specified in this Agreement.
 
    1.1.4     Ayalon agrees and undertakes throughout the Employment Term not
              to receive any payment, compensation or any other benefit from
              any third party
 
 
<PAGE>
 
              directly or indirectly related to his employment hereunder or to
              the Company or its parent company, DSP Group, Inc.
 
    1.1.5     Ayalon agrees and undertakes not to perform any act or to omit to
              perform any act which may breach his fiduciary duty to the
              Company or its parent company, DSP Group, Inc. or which may place
              him in a position of conflict of interest with the objectives of
              the Company or its parent company, as the case may be. In
              addition, Ayalon agrees and undertakes to promptly inform the
              Company and its parent company, DSP group, Inc., of any such
              matter which may place him in such a situation of  potential
              conflict of interest.
    1.1.6     Ayalon agrees that, to the extent that Ayalon shall be elected to
              serve as a director on the Board of the Company or of DSP Group,
              Inc., he will receive no additional compensation for said acting
              as a director of either said company.
2.  TERM
 
    This Employment Agreement commenced as of the Effective Date and shall
    continue indefinitely, unless sooner terminated under the terms of this
    Agreement.  As used herein, the term "Employment Term" refers to the entire
    period of employment of Ayalon under this Agreement, beginning April 22,
    1996.
 
3.  COMPENSATION
 
    Ayalon shall be compensated as follows:
 
3.1 FIXED SALARY
 
    3.1.1.    Ayalon shall receive a fixed monthly Gross Salary of NIS 47,000
              (the "Gross Salary"), payable on a monthly basis. The Gross
              Salary shall be adjusted monthly to the Consumer Price Index (the
              "Index"). The Gross Salary shall be adjusted to the monthly
              increase of the last published Index, in comparison to the last
              published Index known at the time of execution of this Agreement.
 
    3.1.2     It is hereby agreed by the parties that the Gross Salary
              adjustments according to the Index, shall be deemed to include
              any adjustments for Cost of Living Increase ("Tosefet Yoker")
              that apply to Ayalon as an employee, unless such adjustment to
              the Cost of Living Increase shall be higher than the adjustment
              to the last published Index in any given month, in which case the
              Index adjustments shall be in respect of the Tosefet Yoker alone.
 
 
<PAGE>
 
 
    3.2  BONUS
 
         During the Employment Term, Ayalon shall be entitled to receive an
         annual bonus, at the sole discretion of the Board of Directors.
 
    3.3  VACATION
 
         Ayalon shall accrue paid vacation at the rate of 26 business days for
         each twelve (12) months of employment. Ayalon may not accumulate his
         vacation days for more than thirty-six (36) months of employment.
 
    3.4  SICK LEAVE
 
         Ayalon shall accrue sick leave at the rate of up to 30 days for each
         twelve (12) months of employment and subject to Ayalon producing
         medical certificates as shall be required by the Company. Such sick
         days may be accumulated to up to 180 days, but Ayalon shall not be
         entitled to receive any remuneration in respect of any such days that
         are not actually used. Any payment received by Ayalon from the
         Manager's Insurance under disability payments shall be set off from
         the Gross Salary, and Ayalon hereby irrevocably waive any claim or
         demend in relation to such deducion including any claim or demand or
         suit that such dedution has worsened in any way his terms of
         employment.
 
    3.5  BENEFITS
 
         3.5.1     During the term of Ayalon's employment, Ayalon shall be
                   entitled to Manager's Insurance (Bituach Minhalim) in an
                   amount equal to 15.83% of the Gross Salary, which shall be
                   paid monthly to said Manager's Insurance Plan directly by
                   the Company. The insurance shall be allocated as follows:
                   (i) 8.33% in respect of severance compensation, (ii) 5% in
                   respect of pension and (iii) 2.5% of the Gross Salary in
                   respect of disability.  An additional 5% of the Gross Salary
                   shall be deducted by the Company from the monthly payment of
                   Ayalon's Salary as Ayalon's contribution to said Manager's
                   Insurance.
 
 
<PAGE>
 
 
         3.5.2     The Manager's Insurance policy provided for Ayalon's benefit
                   or shall be registered in Company's name. The contributions
                   to the Manager's Insurance Policy shall be paid by the
                   Company in lieu of any other legal obligation to make
                   payments on account of severance or pension in respect of
                   Ayalon's employment during the Employment Term. Should the
                   provisions made for severance pay not cover the amount owed
                   by the Company to Ayalon by law, then the Company shall pay
                   Ayalon the difference, all in accordance with Israeli law.
                   Ayalon's agreement to the last two sentences shall exempt
                   the Company from the requirement to apply to the Minister of
                   Labor and Welfare for an approval under Section 14 of the
                   Severance Pay Law; however, should such application be
                   deemed necessary, Ayalon's signature hereupon shall be
                   deemed his consent to the Company's application in Ayalon's
                   name in such matter.
 
         3.5.3     The sums accumulated in the Manager's Insurance policy shall
                   be transferred to Ayalon upon termination of his employment
                   hereunder, unless Ayalon has committed an act in breach of
                   Ayalon's fiduciary duty towards the Company or its parent
                   company, DSP Group, Inc., as determined solely by the
                   Company.
 
         3.5.4     The Company shall provide and pay Ayalon Recreation Funds
                   (Dmai Havra'ah) at the rate required by law and regulations.
 
         3.5.5     The Company shall contribute to a Continuing Education Fund
                   chosen by it for the benefit of Ayalon in an amount equal to
                   7.5% of his Gross Salary per month subject to Ayalon's
                   contribution of an additional 2.5% of his Gross Salary per
                   month.
 
         3.5.6     The Company shall provide Ayalon with a car for use in
                   connection with his employment and for personal reasonable
                   use.  The Company shall bear all expenses due to use and
                   maintenance of the car, in the same fashion as is customary
                   with the Company.
 
         3.5.7     The Company shall provide Ayalon with a telephone in his
                   private residence solely for use in connection with his
                   employment with the Company, and shall bear the expense of
                   the telephone bills, subject to timely presentation of such
                   bills by Ayalon to the Company.
 
         3.5.8     The Company shall provide at its expense a hotel room
                   located in Tel-Aviv or its area, for an average of 2 days a
                   week, subject to Company's approval. The hotel shall be
                   selected by the Company, at its sole discretion.
 
         3.5.9     Within sixty (60) days of the date hereof, the Company shall
                   provide Ayalon with directors and officers' liability
                   insurance as is customary at the Company.
 
4.  EXPENSES
 
    The Company shall reimburse Ayalon for his normal and reasonable expenses
    incurred for travel, entertainment and similar items in promoting and
    carrying out the business of the Company in accordance with the Company's
    general policy, in effect from time to
 
 
<PAGE>
 
 
    time. As a condition of reimbursement, Ayalon agrees to provide the Company
    with copies of all available invoices and receipts, and otherwise account
    to the Company in sufficient detail to allow the Company to claim an income
    tax deduction for such paid item, if item is deductible. Reimbursement
    shall be made on a monthly, or more frequent, basis.
 
5.  COVENANT NOT TO COMPETE
 
    Ayalon agrees that during the Employment Term as President and Chief
    Executive Officer of the Company, he is and shall be in a position of
    special trust and confidence and will have access to confidential and
    proprietary information about the Company's business and plans.  Ayalon
    agrees that he will not directly or indirectly, either as an employee,
    employer, consultant, agent, principal, partner, stockholder, corporate
    officer, director, or in any similar individual or representative capacity,
    engage or participate in any business and any future Company's business
    during the term of employment, including projects under consideration by
    the Company at the time of termination during the term of his employment,
    or in the event of a termination of employment for any reason whatsoever
    for a period of two (2) years thereafter.
 
    For the purposes of this section 5, the term "Company" shall also mean any
    subsidiaries, any other affiliates or its parent company.
 
6.  CONFIDENTIALITY AND TRADE SECRETS
 
6.1 KNOW-HOW AND INTELLECTUAL PROPERTY
 
    It is understood that the Company has developed or acquired and will
    continue to develop or acquire certain products, technology, unique or
    special methods, manufacturing and assembly processes and techniques, trade
    secrets, written marketing plans and customer arrangements, and other
    proprietary rights and confidential information which are not in the public
    domain, and shall during the Employment Term continue to develop, compile
    and acquire said items (all hereinafter collectively referred to as the
    "Company's Property"). It is expected that Ayalon will gain knowledge of
    and utilize the Company's Property during the course and scope of his
    employment with the Company, and will be in a position of trust with
    respect to the Company's Property.
 
6.2 COMPANY'S PROPERTY
 
    It is hereby stipulated and agreed that the Company's Property shall remain
    the Company's sole property.  It is further stipulated and agreed by the
    parties, as a material inducement for the Company having entered into this
    Agreement and remaining a party hereto (subject to any early termination
    hereof by the Company), that Ayalon shall be bound by the Confidential
    Disclosure and Non-Use Agreement appended hereto as APPENDIX A.
 
    In the event that Ayalon's employment is terminated, for whatever reason,
    Ayalon agrees not to copy, make known, disclose or use, any of the
    Company's Property.  Without derogating from the Company's rights under the
    law of torts, Ayalon further agrees not to endeavor or attempt in any way
    to interfere with or induce a breach of any
 
 
<PAGE>
 
 
    prior contractual relationship that the Company may have with any employee,
    customer, contractor, supplier, representative, or distributor for a period
    of two (2) years from the date of any termination of Ayalon's employment
    with the Company for any reason whatsoever. Ayalon agrees, upon termination
    of employment, to deliver to the Company all confidential papers,
    documents, records, lists and notes (whether prepared by Ayalon or others)
    comprising or containing the Company's Property, without retaining any
    copies thereof, and any other property of the Company.
 
    It is hereby agreed that a breach of sections 5 and 6 including Appendix A
    hereto shall be considered as a material breach of this Agreement.
 
    For the purposes of this section 6, the term "Company" shall also mean any
    subsidiaries, any other affiliates or its parent company.
 
7.  TERMINATION
 
7.1 GENERAL
 
    Either party may terminate this agreement, without cause, upon six (6)
    months' advance written notice to the other party.
 
7.2 TERMINATION FOR CAUSE
 
    The Company may immediately terminate Ayalon's employment at any time for
    Cause. Termination for Cause shall be effective from the receipt of written
    notice thereof to Ayalon. "Cause" shall be deemed to include: (i) material
    neglect of his duties or a material violation of any of the provisions of
    this Agreement, which continues after written notice and a reasonable
    opportunity (not to exceed seven (7) days) in which to cure; (ii)
    conviction of any felonious offense; (iii) intentionally imparting
    confidential information relating to the Company or its business to third
    parties, other than in the course of carrying out his duties hereunder. The
    Company's exercise of its rights to terminate with Cause shall be without
    prejudice to any other remedy it may be entitled at law, in equity, or
    under this Agreement.
 
8.  EMPLOYEE OPTION PLAN
 
    Subsequent to the approval of the shareholder's meeting of DSP Group, Inc.
    which the Company understands will be convened by order of the Board of
    Directors of DSP Group, Inc. within 30 days from the date of execution of
    this Agreement and in any event no later than 60 days from the date of
    execution of this Agreement and subject to the terms and conditions to the
    DSP Group Inc.'s Employee Option Plan for employees of the Company, Ayalon
    shall be entitled to receive up to 120,000 shares of the Common Stock of
    DSP Group Inc. The vesting schedule of said options shall be as follows:
    30,000 of the shares will vest at the end of the first year from the date
    of grant of said options and the number of shares equal to 1/36 of 90,000
    shares will vest at the end of each full month of continued employment with
    the Company thereafter. The exercise price shall be deicded by the
    Company's Board of Directors on the date of the grant of said options.
 
 
<PAGE>
 
 
 
9.  CORPORATE OPPORTUNITIES
 
    In the event that during the Employment Term, any business opportunity
    related to the Company's business shall come to Ayalon's knowledge, Ayalon
    shall promptly notify the Company's Board of Directors of such opportunity.
    Ayalon shall not appropriate for himself or for any other person other than
    the Company, any such opportunity, except with the express written consent
    of the Board of Directors, in advance. Ayalon's duty to notify the Company
    and to refrain from appropriating all such opportunities shall neither be
    limited by, nor shall such duty limit, the application of the general law
    of Israel relating to the fiduciary duties of an agent or employee.
 
10. RESERVE DUTY
 
    Immediately upon receipt of a notice of reserve duty, Ayalon shall report
    such notice to the Company's Board of Directors. Upon Ayalon's return from
    reserve duty, Ayalon shall deliver to the Company appropriate confirmation
    of reserve duty served from his military unit, against which the Company
    shall pay Ayalon his regular compensation package with respect to the
    period served.
 
11. MISCELLANEOUS
 
11.1 ENTIRE AGREEMENT
 
    This Agreement constitutes the entire agreement and understanding between
    the parties with respect to the subject matters herein, and supersedes and
    replaces any prior agreements and understandings, whether oral or written
    between them with respect to such matters. The provisions of this Agreement
    may be waived, altered, amended or repealed in whole or in part only upon
    the written consent of both parties to this Agreement.
 
11.2 NO IMPLIED WAIVERS
 
    The failure of either party at any time to require performance by the other
    party of any provision hereof shall not affect in any way the right to
    require such performance at any time thereafter, nor shall the waiver by
    either party of a breach of any provision hereof be taken or held to be a
    waiver of any subsequent breach of the same provision or any other
    provision.
 
11.3 PERSONAL SERVICES
 
    It is understood that the services to be performed by Ayalon hereunder are
    personal in nature and the obligations to perform such services and the
    conditions and covenants of this Agreement cannot be assigned by Ayalon.
    Subject to the foregoing, and except as otherwise provided herein, this
    Agreement shall inure to the benefit of and bind the successors and assigns
    of the Company.
 
11.4 SEVERABILITY
 
    If for any reason any provision of this Agreement shall be determined to be
    invalid or inoperative, the validity and effect of the other provisions
    hereof shall not be affected
 
 
<PAGE>
 
 
    thereby, provided that no such severability shall be effective if it causes
    a material detriment to any party.
 
11.5 APPLICABLE LAW
 
    This Agreement shall be governed by and construed in accordance with the
    laws of the State of Israel.
 
11.6 NOTICES
 
    All notices, requests, demands, instructions or other communications
    required or permitted to be given under this Agreement or related to it
    shall be in writing and shall be deemed to have been duly given upon
    delivery, if delivered personally, or if given by prepaid telegram, or
    mailed first-class postage prepaid, registered or certified mail, return
    receipt requested, shall be deemed to have been given three (3) days after
    such delivery, if addressed to the other party at the addresses as set
    forth on the signature page below. Either party hereto may change the
    address to which such communications are to be directed by giving written
    notice to the other party hereto of such change in the manner above
    provided.
 
11.7 MERGER, TRANSFER OF ASSETS, OR DISSOLUTION OF THE COMPANY
 
    This Agreement shall not be terminated by any dissolution of the Company
    resulting from either merger or consolidation in which the Company is not
    the consolidated or surviving Company or a transfer of all or substantially
    all of the assets of the Company. In such event, the rights, benefits and
    obligations herein shall automatically be assigned to the surviving or
    resulting company or to the transferee of the assets.
 
11.8 NO CONFLICTING AGREEMENTS
 
    Ayalon declares that he is not bound by any agreement, understanding or
    arrangement according to which the execution of and compliance with this
    Agreement may constitute a breach or default.
 
 
 
 
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first written above.
 
 
 
 
 
DSP Semiconductors Ltd.
 
By: /s/ Igal Kohavi                              /s/ Eli Ayalon
   -------------------------                     -----------------------------
       Igal Kohavi                               Eli Ayalon
Title: Chairman of the Board                     Israeli I.D. No