DSP GROUP, INC.
 
                            2001 STOCK INCENTIVE PLAN
 
                     (amended and restated on July 18, 2001)
                   (amended and restated on November 25, 2002)
                    (amended and restated on March 12, 2003)
 
      1. Purposes of the Plan. The purposes of this Stock Incentive Plan are to
attract and retain the best available personnel, to provide additional incentive
to Employees, Directors and Consultants and to promote the success of the
Company's business.
 
      2. Definitions. As used herein, the following definitions shall apply:
 
            (a) "Administrator" means the Board or any of the Committees
appointed to administer the Plan.
 
            (b) "Affiliate" and "Associate" shall have the respective meanings
ascribed to such terms in Rule 12b-2 promulgated under the Exchange Act.
 
            (c) "Applicable Laws" means the legal requirements relating to the
administration of stock incentive plans, if any, under applicable provisions of
federal securities laws, state corporate and securities laws, the Code, the
rules of any applicable stock exchange or national market system, and the rules
of any foreign jurisdiction applicable to Awards granted to residents therein.
 
            (d) "Assumed" means that (i) pursuant to a Corporate Transaction
defined in Section 2(q)(i), 2(q)(ii) or 2(q)(iii) or a Related Entity
Disposition, the contractual obligations represented by the Award are assumed by
the successor entity or its Parent in connection with the Corporate Transaction
or Related Entity Disposition or (ii) pursuant to a Corporate Transaction
defined in Section 2(q)(iv) or 2(q)(v), the Award is affirmed by the Company.
The Award shall not be deemed "Assumed" for purposes of terminating the Award
(in the case of a Corporate Transaction) and the termination of the Continuous
Service of the Grantee (in the case of a Related Entity Disposition) if pursuant
to a Corporate Transaction or a Related Entity Disposition the Award is replaced
with a comparable award with respect to shares of capital stock of the successor
entity of its Parent. However, for purposes of determining whether the vesting
of the Award accelerates, the Award shall be deemed "Assumed" if the Award is
replaced with such a comparable stock award or the Award is replaced with a cash
incentive program of the successor entity or Parent thereof which preserves the
compensation element of such Award existing at the time of the Corporate
Transaction or Related Entity Disposition and provides for subsequent payout in
accordance with the same vesting schedule applicable to such Award. The
determination of Award comparability shall be made by the Administrator and its
determination shall be final, binding and conclusive.
 
            (e) "Award" means the grant of an Option, Restricted Stock, or other
right or benefit under the Plan.
 
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            (f) "Award Agreement" means the written agreement evidencing the
grant of an Award executed by the Company and the Grantee, including any
amendments thereto.
 
            (g) "Board" means the Board of Directors of the Company.
 
            (h) "Cause" means, with respect to the termination by the Company,
ParthusCeva, Inc. or a Related Entity of the Grantee's Continuous Service, that
such termination is for "Cause" as such term is expressly defined in a
then-effective written agreement between the Grantee and the Company,
ParthusCeva, Inc. or such Related Entity, or in the absence of such
then-effective written agreement and definition, is based on, in the
determination of the Administrator, the Grantee's: (i) performance of any act or
failure to perform any act in bad faith and to the detriment of the Company,
ParthusCeva, Inc. or a Related Entity; (ii) dishonesty, intentional misconduct
or material breach of any agreement with the Company, ParthusCeva, Inc. or a
Related Entity; or (iii) commission of a crime involving dishonesty, breach of
trust, or physical or emotional harm to any person.
 
            (i) "Change in Control" means a change in ownership or control of
the Company effected through either of the following transactions:
 
                  (i)     the direct or indirect acquisition by any person or
related group of persons (other than an acquisition from or by the Company or by
a Company-sponsored employee benefit plan or by a person that directly or
indirectly controls, is controlled by, or is under common control with, the
Company) of beneficial ownership (within the meaning of Rule 13d-3 of the
Exchange Act) of securities possessing more than fifty percent (50%) of the
total combined voting power of the Company's outstanding securities pursuant to
a tender or exchange offer made directly to the Company's stockholders which a
majority of the Continuing Directors who are not Affiliates or Associates of the
offeror do not recommend such stockholders accept, or
 
                  (ii)    a change in the composition of the Board over a period
of thirty-six (36) months or less such that a majority of the Board members
(rounded up to the next whole number) ceases, by reason of one or more contested
elections for Board membership, to be comprised of individuals who are
Continuing Directors.
 
            (j) "Code" means the Internal Revenue Code of 1986, as amended.
 
            (k) "Committee" means any committee appointed by the Board to
administer the Plan.
 
            (l) "Common Stock" means the common stock of the Company.
 
            (m) "Company" means DSP Group, Inc., a Delaware corporation.
 
            (n) "Consultant" means any person (other than an Employee or a
Director, solely with respect to rendering services in such person's capacity as
a Director) who is engaged by the Company, ParthusCeva, Inc. or any Related
Entity to render consulting or advisory services to the Company, ParthusCeva,
Inc. or such Related Entity.
 
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            (o) "Continuing Directors" means members of the Board who either (i)
have been Board members continuously for a period of at least thirty-six (36)
months or (ii) have been Board members for less than thirty-six (36) months and
were elected or nominated for election as Board members by at least a majority
of the Board members described in clause (i) who were still in office at the
time such election or nomination was approved by the Board.
 
            (p) "Continuous Service" means:
 
                  (i)     that the provision of services to the Company or a
Related Entity in any capacity of Employee, Director or Consultant, is not
interrupted or terminated. Continuous Service shall not be considered
interrupted in the case of (i) any approved leave of absence, (ii) transfers
among the Company, any Related Entity, or any successor, in any capacity of
Employee, Director or Consultant, or (iii) any change in status as long as the
individual remains in the service of the Company or a Related Entity in any
capacity of Employee, Director or Consultant (except as otherwise provided in
the Award Agreement). An approved leave of absence shall include sick leave,
military leave, or any other authorized personal leave. For purposes of each
Incentive Stock Option granted under the Plan, if such leave exceeds ninety (90)
days, and reemployment upon expiration of such leave is not guaranteed by
statute or contract, then the Incentive Stock Option shall be treated as a
Non-Qualified Stock Option on the day three (3) months and one (1) day following
the expiration of such ninety (90) day period; or
 
                  (ii)    for purposes of non-qualified stock options granted
prior to July 18, 2001, that the provision of services to the Company,
ParthusCeva, Inc. or a Related Entity in any capacity of Employee, Director or
Consultant, is not interrupted or terminated. Continuous Service shall not be
considered interrupted in the case of (i) any approved leave of absence, (ii)
transfers among the Company, ParthusCeva, Inc., any Related Entity, or any
successor, in any capacity of Employee, Director or Consultant, or (iii) any
change in status as long as the individual remains in the service of the
Company, ParthusCeva, Inc. or a Related Entity in any capacity of Employee,
Director or Consultant (except as otherwise provided in the Award Agreement). An
approved leave of absence shall include sick leave, military leave, or any other
authorized personal leave.
 
            (q) "Corporate Transaction" means any of the following transactions:
 
                  (i)     a merger or consolidation in which the Company is not
the surviving entity, except for a transaction the principal purpose of which is
to change the state in which the Company is incorporated;
 
                  (ii)    the sale, transfer or other disposition of all or
substantially all of the assets of the Company (including the capital stock of
the Company's subsidiary corporations);
 
                  (iii)   the complete liquidation or dissolution of the
Company;
 
                  (iv)    any reverse merger in which the Company is the
surviving entity but in which securities possessing more than fifty percent
(50%) of the total combined voting
 
                                       A-3
 
<PAGE>
 
power of the Company's outstanding securities are transferred to a person or
persons different from those who held such securities immediately prior to such
merger; or
 
                  (v)     acquisition by any person or related group of persons
(other than the Company or by a Company-sponsored employee benefit plan) of
beneficial ownership (within the meaning of Rule 13d-3 of the Exchange Act) of
securities possessing more than fifty percent (50%) of the total combined voting
power of the Company's outstanding securities (whether or not in a transaction
also constituting a Change in Control).
 
            (r) "Covered Employee" means an Employee who is a "covered employee"
under Section 162(m)(3) of the Code.
 
            (s) "Director" means a member of the Board or the board of directors
of ParthusCeva, Inc. or any Related Entity.
 
            (t) "Disability" means as defined under the long-term disability
policy of the Company, ParthusCeva, Inc. or the Related Entity to which the
Grantee provides services regardless of whether the Grantee is covered by such
policy. If the Company, ParthusCeva, Inc. or the Related Entity to which the
Grantee provides service does not have a long-term disability plan in place,
"Disability" means that a Grantee is unable to carry out the responsibilities
and functions of the position held by the Grantee by reason of any medically
determinable physical or mental impairment. A Grantee will not be considered to
have incurred a Disability unless he or she furnishes proof of such impairment
sufficient to satisfy the Administrator in its discretion.
 
            (u) "Employee" means any person, including an Officer or Director,
who is an employee of the Company, ParthusCeva, Inc. or any Related Entity. The
payment of a director's fee by the Company, ParthusCeva, Inc. or a Related
Entity shall not be sufficient to constitute "employment" by the Company.
 
            (v) "Exchange Act" means the Securities Exchange Act of 1934, as
amended.
 
            (w) "Fair Market Value" means, as of any date, the value of Common
Stock determined as follows:
 
                  (i)     Where there exists a public market for the Common
Stock, the Fair Market Value shall be (A) the closing price for a Share on the
date of the determination (or, if no closing price was reported on that date, on
the last trading date on which a closing price was reported) on the stock
exchange determined by the Administrator to be the primary market for the Common
Stock or the Nasdaq National Market, whichever is applicable or (B) if the
Common Stock is not traded on any such exchange or national market system, the
average of the closing bid and asked prices of a Share on the Nasdaq Small Cap
Market on the date of the determination (or, if no such prices were reported on
that date, on the last date on which such prices were reported), in each case,
as reported in The Wall Street Journal or such other source as the Administrator
deems reliable; or
 
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<PAGE>
 
                  (ii)    In the absence of an established market for the Common
Stock of the type described in (i), above, the Fair Market Value thereof shall
be determined by the Administrator in good faith.
 
            (x) "Grantee" means an Employee, Director or Consultant who receives
an Award under the Plan.
 
            (y) "Immediate Family" means any child, stepchild, grandchild,
parent, stepparent, grandparent, spouse, former spouse, sibling, niece, nephew,
mother-in-law, father-in-law, son-in law, daughter-in-law, brother-in-law, or
sister-in-law, including adoptive relationships, any person sharing the
Grantee's household (other than a tenant or employee), a trust in which these
persons (or the Grantee) have more than fifty percent (50%) of the beneficial
interest, a foundation in which these persons (or the Grantee) control the
management of assets, and any other entity in which these persons (or the
Grantee) own more than fifty percent (50%) of the voting interests.
 
            (z) "Incentive Stock Option" means an Option intended to qualify as
an incentive stock option within the meaning of Section 422 of the Code
 
            (aa) "Non-Qualified Stock Option" means an Option not intended to
qualify as an Incentive Stock Option.
 
            (bb) "Officer" means a person who is an officer of the Company or a
Related Entity within the meaning of Section 16 of the Exchange Act and the
rules and regulations promulgated thereunder.
 
            (cc) "Option" means an option to purchase Shares pursuant to an
Award Agreement granted under the Plan.
 
            (dd) "Parent" means a "parent corporation," whether now or hereafter
existing, as defined in Section 424(e) of the Code.
 
            (ee) "Performance-Based Compensation" means compensation qualifying
as "performance-based compensation" under Section 162(m) of the Code.
 
            (ff) "Plan" means this 2001 Stock Incentive Plan.
 
            (gg) "Related Entity" means any Parent or Subsidiary of the Company
or ParthusCeva, Inc. and any business, corporation, partnership, limited
liability company or other entity in which the Company, ParthusCeva, Inc. or a
Parent or a Subsidiary of the Company or ParthusCeva, Inc. holds a substantial
ownership interest, directly or indirectly.
 
            (hh) "Related Entity Disposition" means the sale, distribution or
other disposition by the Company, ParthusCeva, Inc. or a Parent or a Subsidiary
of either company of all or substantially all of the interests of the Company,
ParthusCeva, Inc. or a Parent or a Subsidiary of either company in any Related
Entity effected by a sale, merger or consolidation or other transaction
involving that Related Entity or the sale of all or substantially all of the
assets of
 
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<PAGE>
 
that Related Entity, other than any Related Entity Disposition to the Company,
ParthusCeva, Inc. or a Parent or a Subsidiary of either company.
 
            (ii) "Restricted Stock" means Shares issued under the Plan to the
Grantee for such consideration, if any, and subject to such restrictions on
transfer, rights of first refusal, repurchase provisions, forfeiture provisions,
and other terms and conditions as established by the Administrator.
 
            (jj) "Rule 16b-3" means Rule 16b-3 promulgated under the Exchange
Act or any successor thereto.
 
            (kk) "Share" means a share of the Common Stock.
 
            (ll) "Spin-off Transaction" means a distribution by the Company to
its stockholders of all or any portion of the securities of any Subsidiary of
the Company.
 
            (mm) "Subsidiary" means a "subsidiary corporation," whether now or
hereafter existing, as defined in Section 424(f) of the Code.
 
      3. Stock Subject to the Plan.
 
            (a) Subject to the provisions of Section 10, below, the maximum
aggregate number of Shares which may be issued pursuant to all Awards is
1,370,825 Shares, increased by any Shares that are represented by Awards under
the Company's 1991 Employee and Consultant Stock Plan that are forfeited, expire
or are cancelled without delivery of the Shares or which result in forfeiture of
the Shares back to the Company on or after May 15, 2001. Notwithstanding the
foregoing, subject to the provisions of Section 10, below, of the number of
Shares specified above, the maximum aggregate number of Shares available for
grant of Incentive Stock Options shall be 1,000,000 Shares and the maximum
aggregate number of Shares which may be issued pursuant to all Awards of
Restricted Stock is 1,000,000 Shares. The Shares to be issued pursuant to Awards
may be authorized, but unissued, or reacquired Common Stock.
 
            Initially, 1,000,000 Shares were reserved for issuance under the
Plan, increased by (i) any Shares available for future Awards under the
Company's 1991 Employee and Consultant Stock Plan as of May 15, 2001 and (ii)
any Shares that are represented by Awards under the Company's 1991 Employee and
Consultant Stock Plan that are forfeited, expire or are cancelled without
delivery of the Shares or which result in forfeiture of the Shares back to the
Company on or after May 15, 2001. On May 15, 2001, the 184,128 Shares available
for future Awards under the 1991 Employee and Consultant Stock Plan were added
to the Plan for a total reserve of 1,184,128 Shares. As a result of the
Company's distribution of all (or substantially all) of the shares of capital
stock of Ceva, Inc. in November 2002, the number of shares reserved for issuance
under the Plan was adjusted so that 1,370,825 Shares are available for issuance
under the Plan.
 
            (b) Any Shares covered by an Award (or portion of an Award) which is
forfeited or canceled, expires or is settled in cash, shall be deemed not to
have been issued for purposes of determining the maximum aggregate number of
Shares which may be issued under the Plan.
 
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<PAGE>
 
Shares that actually have been issued under the Plan pursuant to an Award shall
not be returned to the Plan and shall not become available for future issuance
under the Plan, except that if unvested Shares are forfeited, or repurchased by
the Company at their original purchase price, such Shares shall become available
for future grant under the Plan.
 
      4. Administration of the Plan.
 
            (a) Plan Administrator.
 
                  (i)     Administration with Respect to Directors and Officers.
With respect to grants of Awards to Directors or Employees who are also Officers
or Directors of the Company, the Plan shall be administered by (A) the Board or
(B) a Committee designated by the Board, which Committee shall be constituted in
such a manner as to satisfy the Applicable Laws and to permit such grants and
related transactions under the Plan to be exempt from Section 16(b) of the
Exchange Act in accordance with Rule 16b-3. Once appointed, such Committee shall
continue to serve in its designated capacity until otherwise directed by the
Board.
 
                  (ii)    Administration With Respect to Consultants and Other
Employees. With respect to grants of Awards to Employees or Consultants who are
neither Directors nor Officers of the Company, the Plan shall be administered by
(A) the Board or (B) a Committee designated by the Board, which Committee shall
be constituted in such a manner as to satisfy the Applicable Laws. Once
appointed, such Committee shall continue to serve in its designated capacity
until otherwise directed by the Board. The Board may authorize one or more
Officers to grant such Awards and may limit such authority as the Board
determines from time to time.
 
                  (iii)   Administration With Respect to Covered Employees.
Notwithstanding the foregoing, grants of Awards to any Covered Employee intended
to qualify as Performance-Based Compensation shall be made only by a Committee
(or subcommittee of a Committee) which is comprised solely of two or more
Directors eligible to serve on a committee making Awards qualifying as
Performance-Based Compensation. In the case of such Awards granted to Covered
Employees, references to the "Administrator" or to a "Committee" shall be deemed
to be references to such Committee or subcommittee.
 
                  (iv)    Administration Errors. In the event an Award is
granted in a manner inconsistent with the provisions of this subsection (a),
such Award shall be presumptively valid as of its grant date to the extent
permitted by the Applicable Laws.
 
            (b) Powers of the Administrator. Subject to Applicable Laws and the
provisions of the Plan (including any other powers given to the Administrator
hereunder), and except as otherwise provided by the Board, the Administrator
shall have the authority, in its discretion:
 
                  (i)     to select the Employees, Directors and Consultants to
whom Awards may be granted from time to time hereunder;
 
                  (ii)    to determine whether and to what extent Awards are
granted hereunder;
 
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<PAGE>
 
                  (iii)   to determine the number of Shares or the amount of
other consideration to be covered by each Award granted hereunder;
 
                  (iv)    to approve forms of Award Agreements for use under the
Plan;
 
                  (v)     to determine the terms and conditions of any Award
granted hereunder;
 
                  (vi)    to amend the terms of any outstanding Award granted
under the Plan, provided that any amendment that would adversely affect the
Grantee's rights under an outstanding Award shall not be made without the
Grantee's written consent and the reduction of the exercise price of any Option
awarded under the Plan shall be subject to stockholder approval which shall mean
approval by the holders of a majority of the Shares of Common Stock of the
Company present or represented by proxy (and entitled to vote) at a meeting of
the Company's stockholders except as otherwise provided by Applicable Laws and
subject to Section 10;
 
                  (vii)   to construe and interpret the terms of the Plan and
Awards, including without limitation, any notice of award or Award Agreement,
granted pursuant to the Plan;
 
                  (viii)  to establish additional terms, conditions, rules or
procedures to accommodate the rules or laws of applicable foreign jurisdictions
and to afford Grantees favorable treatment under such rules or laws; provided,
however, that no Award shall be granted under any such additional terms,
conditions, rules or procedures with terms or conditions which are inconsistent
with the provisions of the Plan; and
 
                  (ix)    to take such other action, not inconsistent with the
terms of the Plan, as the Administrator deems appropriate.
 
      5. Eligibility. Awards other than Incentive Stock Options may be granted
to Employees, Directors and Consultants. Incentive Stock Options may be granted
only to Employees of the Company or a Parent or a Subsidiary of the Company. An
Employee, Director or Consultant who has been granted an Award may, if otherwise
eligible, be granted additional Awards. Awards may be granted to such Employees,
Directors or Consultants who are residing in foreign jurisdictions as the
Administrator may determine from time to time.
 
      6. Terms and Conditions of Awards.
 
            (a) Type of Awards. The Administrator is authorized under the Plan
to award any type of arrangement to an Employee, Director or Consultant that is
not inconsistent with the provisions of the Plan and that by its terms involves
or might involve the issuance of (i) Shares, (ii) an Option or similar right
with a fixed or variable price related to the Fair Market Value of the Shares
and with an exercise or conversion privilege related to the passage of time, the
occurrence of one or more events, or the satisfaction of performance criteria or
other conditions, or (iii) any other security with the value derived from the
value of the Shares. Such awards include, without limitation, Options or sales
or bonuses of Restricted Stock, and an Award may
 
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<PAGE>
 
consist of one such security or benefit, or two (2) or more of them in any
combination or alternative.
 
            (b) Designation of Award. Each Award shall be designated in the
Award Agreement. In the case of an Option, the Option shall be designated as
either an Incentive Stock Option or a Non-Qualified Stock Option. 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 a Grantee during any calendar year
(under all plans of the Company or any Parent or Subsidiary of the Company)
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 grant date of the relevant Option.
 
            (c) Conditions of Award. Subject to the terms of the Plan, the
Administrator shall determine the provisions, terms, and conditions of each
Award including, but not limited to, the Award vesting schedule, repurchase
provisions, rights of first refusal, forfeiture provisions, form of payment
(cash, Shares, or other consideration) upon settlement of the Award, payment
contingencies, and satisfaction of any performance criteria. The performance
criteria established by the Administrator may be based on any one of, or
combination of, increase in share price, earnings per share, total stockholder
return, return on equity, return on assets, return on investment, net operating
income, cash flow, revenue, economic value added, personal management
objectives, or other measure of performance selected by the Administrator.
Partial achievement of the specified criteria may result in a payment or vesting
corresponding to the degree of achievement as specified in the Award Agreement.
 
            (d) Acquisitions and Other Transactions. The Administrator may issue
Awards under the Plan in settlement, assumption or substitution for, outstanding
awards or obligations to grant future awards in connection with the Company or a
Related Entity acquiring another entity, an interest in another entity or an
additional interest in a Related Entity whether by merger, stock purchase, asset
purchase or other form of transaction.
 
            (e) Deferral of Award Payment. The Administrator may establish one
or more programs under the Plan to permit selected Grantees the opportunity to
elect to defer receipt of consideration upon exercise of an Award, satisfaction
of performance criteria, or other event that absent the election would entitle
the Grantee to payment or receipt of Shares or other consideration under an
Award (but only to the extent that such deferral programs would not result in an
accounting compensation charge unless otherwise determined by the
Administrator). The Administrator may establish the election procedures, the
timing of such elections, the mechanisms for payments of, and accrual of
interest or other earnings, if any, on amounts, Shares or other consideration so
deferred, and such other terms, conditions, rules and procedures that the
Administrator deems advisable for the administration of any such deferral
program.
 
            (f) Separate Programs. The Administrator may establish one or more
separate programs under the Plan for the purpose of issuing particular forms of
Awards to one or more
 
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<PAGE>
 
classes of Grantees on such terms and conditions as determined by the
Administrator from time to time.
 
            (g) Individual Option Limit. The maximum number of Shares with
respect to which Options may be granted to any Grantee in any fiscal year of the
Company shall be seven hundred and fifty thousand (750,000) Shares. In
connection with a Grantee's commencement of Continuous Service, a Grantee may be
granted Options for up to an additional seven hundred and fifty thousand
(750,000) Shares which shall not count against the limit set forth in the
previous sentence. The foregoing limitations shall be adjusted proportionately
in connection with any change in the Company's capitalization pursuant to
Section 10, below. To the extent required by Section 162(m) of the Code or the
regulations thereunder, in applying the foregoing limitations with respect to a
Grantee, if any Option is canceled, the canceled Option shall continue to count
against the maximum number of Shares with respect to which Options may be
granted to the Grantee. For this purpose, the repricing of an Option shall be
treated as the cancellation of the existing Option and the grant of a new
Option.
 
            (h) Early Exercise. The Award Agreement may, but need not, include a
provision whereby the Grantee may elect at any time while an Employee, Director
or Consultant to exercise any part or all of the Award prior to full vesting of
the Award. Any unvested Shares received pursuant to such exercise may be subject
to a repurchase right in favor of the Company or a Related Entity or to any
other restriction the Administrator determines to be appropriate.
 
            (i) Term of Award. The term of each Award shall be the term stated
in the Award Agreement, provided, however, that the term of an Award shall be no
more than ten (10) years from the date of grant thereof. However, in the case of
an Incentive Stock Option granted to a Grantee who, at the time the Option is
granted, owns stock representing more than ten percent (10%) of the voting power
of all classes of stock of the Company or any Parent or Subsidiary of the
Company, the term of the Incentive Stock Option shall be five (5) years from the
date of grant thereof or such shorter term as may be provided in the Award
Agreement.
 
            (j) Transferability of Awards. Incentive Stock Options may not be
sold, pledged, assigned, hypothecated, transferred, or disposed of in any manner
other than by will or by the laws of descent or 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. Other Awards shall be transferred by will
and by the laws of descent and distribution, and during the lifetime of the
Grantee, by gift and or 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.
 
            (k) Time of Granting Awards. The date of grant of an Award shall for
all purposes be the date on which the Administrator makes the determination to
grant such Award, or such other date as is determined by the Administrator.
Notice of the grant determination shall be given to each Employee, Director or
Consultant to whom an Award is so granted within a reasonable time after the
date of such grant.
 
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<PAGE>
 
      7. Award Exercise or Purchase Price, Consideration and Taxes.
 
            (a) Exercise or Purchase Price. The exercise or purchase price, if
any, for an Award shall be as follows:
 
                  (i)     In the case of an Incentive Stock Option:
 
                          (A) granted to an Employee who, at the time of the
grant of such Incentive Stock Option owns stock representing more than ten
percent (10%) of the voting power of all classes of stock of the Company or any
Parent or Subsidiary of the Company, the per Share exercise price shall be not
less than one hundred ten percent (110%) of the Fair Market Value per Share on
the date of grant; or
 
                          (B) granted to any Employee other than an Employee
described in the preceding paragraph, the per Share exercise price shall be not
less than one hundred percent (100%) of the Fair Market Value per Share on the
date of grant.
 
                  (ii)    In the case of a Non-Qualified Stock Option, the per
Share exercise price shall be not less than eighty-five percent (85%) of the
Fair Market Value per Share on the date of grant.
 
                  (iii)   In the case of Awards intended to qualify as
Performance-Based Compensation, the exercise or purchase price, if any, shall be
not less than one hundred percent (100%) of the Fair Market Value per Share on
the date of grant.
 
                  (iv)    In the case of other Awards, such price as is
determined by the Administrator.
 
                  (v)     Notwithstanding the foregoing provisions of this
Section 7(a), in the case of an Award issued pursuant to Section 6(d), above,
the exercise or purchase price for the Award shall be determined in accordance
with the principles of Section 424(a) of the Code.
 
            (b) Consideration. Subject to Applicable Laws, the consideration to
be paid for the Shares to be issued upon exercise or purchase of an Award
including the method of payment, shall be determined by the Administrator (and,
in the case of an Incentive Stock Option, shall be determined at the time of
grant). In addition to any other types of consideration the Administrator may
determine, the Administrator is authorized to accept as consideration for Shares
issued under the Plan the following, provided that the portion of the
consideration equal to the par value of the Shares must be paid in cash or other
legal consideration permitted by the Delaware General Corporation Law:
 
                  (i)     cash;
 
                  (ii)    check;
 
                  (iii)   delivery of Grantee's promissory note with such
recourse, interest, security, and redemption provisions as the Administrator
determines as appropriate;
 
                                      A-11
 
<PAGE>
 
                  (iv)    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
Award) 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 said Award shall
be exercised (but only to the extent that such exercise of the Award would not
result in an accounting compensation charge with respect to the Shares used to
pay the exercise price unless otherwise determined by the Administrator);
 
                  (v)     with respect to Options, payment through a
broker-dealer sale and remittance procedure pursuant to which the Grantee (A)
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 (B) 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; or
 
                  (vi)    any combination of the foregoing methods of payment.
 
            (c) Taxes. No Shares shall be delivered under the Plan to any
Grantee or other person until such Grantee or other person has made arrangements
acceptable to the Administrator for the satisfaction of any foreign, federal,
state, or local income and employment tax withholding obligations, including,
without limitation, obligations incident to the receipt of Shares or the
disqualifying disposition of Shares received on exercise of an Incentive Stock
Option. Upon exercise of an Award the Company shall withhold or collect from
Grantee an amount sufficient to satisfy such tax obligations.
 
      8. Exercise of Award.
 
            (a) Procedure for Exercise; Rights as a Stockholder.
 
                  (i)     Any Award granted hereunder shall be exercisable at
such times and under such conditions as determined by the Administrator under
the terms of the Plan and specified in the Award Agreement.
 
                  (ii)    An Award shall be deemed to be exercised when written
notice of such exercise has been given to the Company in accordance with the
terms of the Award by the person entitled to exercise the Award and full payment
for the Shares with respect to which the Award is exercised, including, to the
extent selected, use of the broker-dealer sale and remittance procedure to pay
the purchase price as provided in Section 7(b)(v). Until the issuance (as
evidenced by the appropriate entry on the books of the Company or of a duly
authorized transfer agent of the Company) of the stock certificate evidencing
such Shares, no right to vote or receive dividends or any other rights as a
stockholder shall exist with respect to Shares subject to an Award,
notwithstanding the exercise of an Option or other Award. The Company shall
issue (or cause to be issued) such stock certificate promptly upon exercise of
the Award. 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 the Award Agreement or Section 10, below.
 
                                      A-12
 
<PAGE>
 
            (b) Exercise of Award Following Termination of Continuous Service.
 
                  (i)     An Award may not be exercised after the termination
date of such Award set forth in the Award Agreement and may be exercised
following the termination of a Grantee's Continuous Service only to the extent
provided in the Award Agreement.
 
                  (ii)    Where the Award Agreement permits a Grantee to
exercise an Award following the termination of the Grantee's Continuous Service
for a specified period, the Award shall terminate to the extent not exercised on
the last day of the specified period or the last day of the original term of the
Award, whichever occurs first.
 
                  (iii)   Any Award designated as an Incentive Stock Option to
the extent not exercised within the time permitted by law for the exercise of
Incentive Stock Options following the termination of a Grantee's Continuous
Service shall convert automatically to a Non-Qualified Stock Option and
thereafter shall be exercisable as such to the extent exercisable by its terms
for the period specified in the Award Agreement.
 
      9. Conditions Upon Issuance of Shares.
 
            (a) Shares shall not be issued pursuant to the exercise of an Award
unless the exercise of such Award and the issuance and delivery of such Shares
pursuant thereto shall comply with all Applicable Laws, and shall be further
subject to the approval of counsel for the Company with respect to such
compliance.
 
            (b) As a condition to the exercise of an Award, the Company may
require the person exercising such Award to represent and warrant at the time of
any such exercise that the Shares are being purchased only for investment and
without any present intention to sell or distribute such Shares if, in the
opinion of counsel for the Company, such a representation is required by any
Applicable Laws.
 
      10. Adjustments Upon Changes in Capitalization. Subject to any required
action by the stockholders of the Company, the number of Shares covered by each
outstanding Award, and the number of Shares which have been authorized for
issuance under the Plan but as to which no Awards have yet been granted or which
have been returned to the Plan, the exercise or purchase price of each such
outstanding Award, the maximum number of Shares with respect to which Options
may be granted to any Grantee in any fiscal year of the Company, as well as any
other terms that the Administrator determines require adjustment shall be
proportionately adjusted for (i) any increase or decrease in the number of
issued Shares resulting from a stock split, reverse stock split, stock dividend,
combination or reclassification of the Shares, or similar transaction affecting
the Shares, (ii) any other increase or decrease in the number of issued Shares
effected without receipt of consideration by the Company, or (iii) as the
Administrator may determine in its discretion, any other transaction with
respect to Common Stock to which Section 424(a) of the Code applies or a similar
transaction; provided, however that conversion of any convertible securities of
the Company shall not be deemed to have been "effected without receipt of
consideration." Such adjustment shall be made by the Administrator and its
determination shall be final, binding and conclusive. Except as the
Administrator determines, no issuance by the
 
                                      A-13
 
<PAGE>
 
Company of shares of stock of any class, or securities convertible into shares
of stock of any class, shall affect, and no adjustment by reason hereof shall be
made with respect to, the number or price of Shares subject to an Award.
Notwithstanding any terms of the Plan to the contrary, in the event of a
Spin-off Transaction, the Administrator may in its discretion and without
approval of the stockholders make such adjustments and take such other action as
it deems appropriate with respect to outstanding Awards under the Plan,
including but not limited to adjustments to the number and kind of shares, the
price per share and the vesting periods of outstanding Awards or the
substitution, exchange or grant of Awards to purchase securities of the
Subsidiary; provided that the Administrator shall not be obligated to make any
such adjustments or take any such action hereunder.
 
      11. Corporate Transactions/Changes in Control/Related Entity Dispositions.
 
            (a) Termination of Award to Extent Not Assumed.
 
                  (i)     Corporate Transaction. Effective upon the consummation
of a Corporate Transaction, all outstanding Awards under the Plan shall
terminate. However, all such Awards shall not terminate to the extent they are
Assumed in connection with the Corporate Transaction.
 
                  (ii)    Related Entity Disposition. Effective upon the
consummation of a Related Entity Disposition, for purposes of the Plan and all
Awards, there shall be a deemed termination of Continuous Service of each
Grantee who is at the time engaged primarily in service to the Related Entity
involved in such Related Entity Disposition and each Award of such Grantee which
is at the time outstanding under the Plan shall be exercisable in accordance
with the terms of the Award Agreement evidencing such Award. However, such
Continuous Service shall not be deemed to terminate as to the portion of any
such award that is Assumed.
 
            (b) Acceleration of Award Upon Corporate Transaction/Change in
Control/Related Entity Disposition.
 
                  (i)     Corporate Transaction. Except as provided otherwise in
an individual Award Agreement, in the event of a Corporate Transaction, for the
portion of each Award that is not Assumed, such portion of the Award shall
automatically become fully vested and exercisable and be released from any
repurchase or forfeiture rights (other than repurchase rights exercisable at
fair market value) for all of the Shares at the time represented by such portion
of the Award, immediately prior to the specified effective date of such
Corporate Transaction.
 
                  (ii)    Change in Control. Except as provided otherwise in an
individual Award Agreement, in the event of a Change in Control (other than a
Change in Control which also is a Corporate Transaction), each Award which is at
the time outstanding under the Plan automatically shall become fully vested and
exercisable and be released from any repurchase or forfeiture rights (other than
repurchase rights exercisable at fair market value), immediately prior to the
specified effective date of such Change in Control, for all of the Shares at the
time represented by such Award.
 
                                      A-14
 
<PAGE>
 
                  (iii)   Related Entity Disposition. Except as provided
otherwise in an individual Award Agreement, effective upon the consummation of a
Related Entity Disposition, for the portion of each Award of a Grantee who is at
the time engaged primarily in service to the Related Entity involved in such
Related Entity Disposition that is not Assumed, such portion of the Award of
such Grantee automatically shall become fully vested and exercisable and be
released from any repurchase or forfeiture rights (other than repurchase rights
exercisable at fair market value) for all of the Shares at the time represented
by such portion of the Award, immediately prior to the specified effective date
of such Related Entity Disposition.
 
            (c) Effect of Acceleration on Incentive Stock Options. The portion
of any Incentive Stock Option accelerated under this Section 11 in connection
with a Corporate Transaction, Change in Control or Related Entity Disposition
shall remain exercisable as an Incentive Stock Option under the Code only to the
extent the $100,000 dollar limitation of Section 422(d) of the Code is not
exceeded. To the extent such dollar limitation is exceeded, the accelerated
excess portion of such Option shall be exercisable as a Non-Qualified Stock
Option.
 
      12. Effective Date and Term of Plan. The Plan shall become effective upon
the earlier to occur of its adoption by the Board or its approval by the
stockholders of the Company. It shall continue in effect for a term of ten (10)
years unless sooner terminated. Subject to Section 17, below, and Applicable
Laws, Awards may be granted under the Plan upon its becoming effective.
 
      13. Amendment, Suspension or Termination of the Plan.
 
            (a) The Board may at any time amend, suspend or terminate the Plan;
provided, however, that no such amendment shall be made without stockholder
approval to the extent such approval is required by Applicable Laws, or if such
amendment would:
 
                  (i)     increase the number of Shares authorized for issuance
under Section 3(a) of the Plan excluding such increases pursuant to Section 10
of the Plan;
 
                  (ii)    permit decreasing the exercise price of any Option
outstanding under the Plan; or
 
                  (iii)   change any of the provisions of this Section 13(a).
 
For purposes of this Section, approval of the stockholders means, except as
provided by Applicable Laws, approval by the holders of a majority of the Shares
of Common Stock of the Company present or represented by proxy (and entitled to
vote) at a meeting of the Company's stockholders.
 
            (b) No Award may be granted during any suspension of the Plan or
after termination of the Plan.
 
            (c) Any amendment, suspension or termination of the Plan (including
termination of the Plan under Section 12, above) shall not affect Awards already
granted, and such Awards shall remain in full force and effect as if the Plan
had not been amended, suspended or
 
                                      A-15
 
<PAGE>
 
terminated, unless mutually agreed otherwise between the Grantee and the
Administrator, which agreement must be in writing and signed by the Grantee and
the Company.
 
      14. Reservation of Shares.
 
            (a) The Company, during the term of the Plan, will at all times
reserve and keep available such number of Shares as shall be sufficient to
satisfy the requirements of the Plan.
 
            (b) The inability of the Company to obtain authority from any
regulatory body having jurisdiction, which authority is deemed by the Company's
counsel to be necessary to the lawful issuance and sale of any Shares hereunder,
shall relieve the Company of any liability in respect of the failure to issue or
sell such Shares as to which such requisite authority shall not have been
obtained.
 
      15. No Effect on Terms of Employment/Consulting Relationship. The Plan
shall not confer upon any Grantee any right with respect to the Grantee's
Continuous Service, nor shall it interfere in any way with his or her right or
the Company's right to terminate the Grantee's Continuous Service at any time,
with or without Cause, and with or without notice. The Company's ability to
terminate the employment of a Grantee who is employed at will is in no way
affected by its determination that the Grantee's Continuous Service has been
terminated for Cause for the purposes of this Plan.
 
      16. No Effect on Retirement and Other Benefit Plans. Except as
specifically provided in a retirement or other benefit plan of the Company or a
Related Entity, Awards shall not be deemed compensation for purposes of
computing benefits or contributions under any retirement plan of the Company or
a Related Entity, and shall not affect any benefits under any other benefit plan
of any kind or any benefit plan subsequently instituted under which the
availability or amount of benefits is related to level of compensation. The Plan
is not a "Retirement Plan" or "Welfare Plan" under the Employee Retirement
Income Security Act of 1974, as amended.
 
      17. Plan Approval. The Plan was adopted by the Board in March of 2001 and
adopted by the stockholders of the Company in May 2001. On July 18, 2001, the
Board adopted and approved an amendment and restatement of the Plan to amend
various terms of the Plan in anticipation of the distribution of all (or
substantially all) of the shares of capital stock of Ceva, Inc. held by the
Company to the stockholders of the Company. In November 2002, the Board adopted
and approved an amendment and restatement of the Plan to include an appendix to
the Plan designed to comply with changes in Israeli tax law effective January 1,
2003, which amendment did not require approval by the Company's stockholders. In
March 2003, the Board adopted and approved an amendment and restatement of the
Plan to amend the appendix to the Plan in order to comply with further changes
in Israeli tax law which amendment did not require approval by the Company's
stockholders.
 
                                      A-16
 
</TEXT>
</DOCUMENT>