CEVA INC (Form: 10-12G/A, Received: 07/10/2002 08:17:01)

December 31,

Number of options excisable as of December 31

Weighted average exercise price of options excisable as of December 31

As filed with the Securities and Exchange Commission on July 10, 2002

Registration No. 0-49842

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Amendment No. 1 to

FORM 10

GENERAL FORM FOR REGISTRATION OF SECURITIES

Pursuant to Section 12(b) or (g) of the

Securities Exchange Act of 1934

CEVA, INC.

(Exact Name of Registrant as Specified in its Charter)

Delaware		77-0556376
(State or other Jurisdiction of Incorporation or Organization)		(I.R.S. Employer Identification No.)

3120 Scott Blvd. Santa Clara, California		95054
(Address of Principal Executive Offices)		(Zip Code)

Registrant’s telephone number, including area code: (408) 986-4300

Securities to be registered pursuant to Section 12(b) of the Act:

None

Securities to be registered pursuant to Section 12(g) of the Act:

Common Stock, $0.001 par value

(Title of Class)

Item 1. Business.

The information required by this item is contained under the sections “Summary,” “Forward-Looking Statements,” “Risk Factors,” “Separation of DSP Cores Licensing Business from DSP Group,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Business” of the information statement included herewith as Exhibit 99.1 (the “Information Statement”), and such sections are incorporated herein by reference.

Item 2. Financial Information.

The information required by this item is contained under the sections “Summary,” “Unaudited Pro Forma Condensed Combined Financial Data of ParthusCeva,” “Selected Historical Consolidated Financial Data,” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of the Information Statement; and the historical financial information of Parthus Technologies plc is contained in its annual report on Form 20-F filed under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) with the Securities and Exchange Commission (the “Commission”) on May 17, 2002, and included herewith as Exhibit 99.2. Such information is incorporated herein by reference.

Item 3. Properties.

The information required by this item is contained under the section “Business—Facilities” of the Information Statement, and such section is incorporated herein by reference.

Item 4. Security Ownership of Certain Beneficial Owners and Management.

The information required by this item is contained under the section “Management—Security Ownership of Certain Beneficial Owners and Management” of the Information Statement, and such section is incorporated herein by reference.

Item 5. Directors and Executive Officers.

The information required by this item is contained under the section “Management—Executive Officers and Directors” of the Information Statement, and such section is incorporated herein by reference.

Item 6. Executive Compensation.

The information required by this item is contained under the section “Management—Executive Compensation” of the Information Statement, and such section is incorporated herein by reference.

Item 7. Certain Relationships and Related Transactions.

The information required by this item is contained under the sections “Separation of DSP Cores Licensing Business from DSP Group,” “Management” and “Transactions with Related Parties” of the Information Statement, and such sections are incorporated herein by reference.

Item 8. Legal Proceedings.

The information required by this item is contained under the section “Business—Legal Proceedings” of the Information Statement, and such section is incorporated herein by reference.

Item 9. Market Price of and Dividends on the Registrant’s Common Equity and Related Stockholder

Matters.

The information required by this item is contained under the sections “Separation of DSP Cores Licensing Business from DSP Group,” “Dividend Policy” and “Description of Capital Stock” of the Information Statement, and such sections are incorporated herein by reference.

Item 10. Recent Sales of Unregistered Securities.

1. On November 22, 1999, the Registrant issued 20,000,000 shares of its common stock to DSP Group, Inc. (as adjusted to reflect stock splits and stock dividends to date) for aggregate consideration of $1,000. The issuance was made in accordance with Section 4(2) of the Securities Act of 1933, as amended (the “Securities Act”).

2. In connection with the contribution of assets by DSP Group to the Registrant, on , 2002 the Registrant issued 1,000 shares of its common stock to DSP Group. The issuance was made in accordance with Section 4(2) of the Securities Act.

3. Between November 1999 and March 31, 2002, the Registrant granted options to purchase 2,577,700 shares of its common stock at prices ranging from $5.37 to $6.53 per share to employees, directors and consultants pursuant to its 2000 Stock Incentive Plan (all numbers as adjusted to reflect stock splits and dividends prior to the date hereof). Such grants were made in reliance on Rule 701 promulgated under Section 3(b) of the Securities Act.

Item 11. Description of Registrant’s Securities to be Registered.

The information required by this item is contained under the section “Description of Capital Stock” of the Information Statement, and such section is incorporated herein by reference.

Item 12. Indemnification of Directors and Officers.

The information required by this item is contained under the section “Description of Capital Stock—Limitation of Directors’ and Officers’ Liability; Indemnification” of the Information Statement, and such section is incorporated herein by reference.

Item 13. Financial Statements and Supplementary Data.

The information required by this item is included in the financial statements beginning on page F-1 of the Information Statement, and the financial statements of Parthus contained in the annual report on Form 20-F filed by Parthus under the Exchange Act with the Commission on May 17, 2002, as amended and included herewith as Exhibit 99.2. Such information is incorporated herein by reference.

Item 14. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.

None.

Item 15. Financial Statements and Exhibits.

(a) Financial Statements

The information required by this item is contained in the financial statements beginning on page F-1 of the Information Statement and such information is incorporated herein by reference.

(b) Exhibits

Exhibit Number		Description
2.1		Combination Agreement, dated as of April 4, 2002, among DSP Group, Inc., Ceva, Inc. and Parthus Technologies plc†
2.2		Amendment No. 1 to Combination Agreement, dated as of July , 2002, among DSP Group, Inc., Ceva, Inc. and Parthus Technologies plc**

3.1		Amended and Restated Certificate of Incorporation of the Registrant*

3.2		Amended and Restated Bylaws of the Registrant*

4.1		Specimen Common Stock Certificate**

9.1		Form of Voting Agreement†

10.1		Form of Separation Agreement among DSP Group, Inc., DSP Group, Ltd., Ceva, Inc., DSP Ceva, Inc. and Corage, Ltd.*

10.2		Form of Tax Indemnification and Allocation Agreement between DSP Group, Inc. and the Registrant*

10.3		Form of Technology Transfer Agreement between DSP Group, Inc. and the Registrant*

10.4		Form of Technology Transfer Agreement between DSP Group, Ltd. and Corage, Ltd.*

10.5		Form of Technology Transfer Agreement between DSP Ceva, Inc. and Registrant*

10.6		Form of Transition Services Agreement among DSP Group, Inc., DSP Ceva, Inc. and the Registrant**

10.7		Form of Transition Services Agreement between DSP Group, Ltd. and Corage, Ltd.**

10.8		Ceva, Inc. 2000 Stock Incentive Plan**

10.9		ParthusCeva, Inc. 2002 Stock Incentive Plan*

10.10		ParthusCeva, Inc. 2002 Employee Stock Purchase Plan**

10.11		Parthus 2000 Share Option Plan(1)

10.12		Parthus’ Chicory Systems, Inc. 1999 Employee Stock Option / Stock Issuance Plan†

10.13		Form of Indemnification Agreement*

21.1		Subsidiaries of the Registrant†

99.1		ParthusCeva, Inc. Information Statement dated July 10, 2002*

99.2		Parthus Technologies plc Amendment 1 to its Report on Form 20-F, filed with the Securities and Exchange Commission on July 9, 2002*

†

Previously filed

Filed herewith.

To be filed by amendment.

(1)

Incorporated by reference to the registration statement on Form S-8 of Parthus Technologies plc, filed with the Commission on June 6, 2000.

SIGNATURES

Pursuant to the requirements of Section 12 of the Securities Exchange Act of 1934, the Registrant has duly caused this Amendment No. 1 to Registration Statement on Form 10 to be signed on its behalf by the undersigned, thereunto duly authorized.

CEVA, I NC .

By:		/s/ Y ANIV A RIELI
		Yaniv Arieli Treasurer and Secretary

Date: July 10, 2002

Exhibit 3.1

AMENDED AND RESTATED CERTIFICATE OF INCORPORATION OF CEVA, INC.

The undersigned, being the duly elected Secretary of Ceva, Inc., a corporation organized and existing under and by virtue of the provisions of the General Corporation Law of the State of Delaware (the “Corporation”), does hereby certify:

1. The name of the Corporation is Ceva, Inc. The Corporation was originally incorporated under the name DSP Cores Inc. and the original Certificate of Incorporation was filed with the Secretary of State of the State of Delaware on November 22, 1999. An amendment to the Certificate of Incorporation was filed with the Secretary of State of the State of Delaware on March 21, 2000, changing the name of the Corporation to Corage, Inc. A subsequent amendment to the Certificate of Incorporation was filed with the Secretary of State of the State of Delaware on December 15, 2000, increasing the authorized capital of the Corporation. The most recent amendment to the Certificate of Incorporation was filed with the Secretary of State of the State of Delaware on April 4, 2002, changing the name of the Corporation to Ceva, Inc.

2. The Board of Directors of the Corporation has duly adopted resolutions proposing to amend and restate the Certificate of Incorporation and all amendments thereto, declaring said amendment and restatement to be advisable and in the best interests of the Corporation and its stockholders, and authorizing the appropriate officers of the Corporation to solicit the consent of the sole stockholder thereof. The sole stockholder of the Corporation duly approved the proposed amendment and restatement by written consent. The resolution setting forth the proposed amendment and restatement is as follows:

RESOLVED, that the Certificate of Incorporation of the Corporation and all amendments thereto be amended and restated in its entirety as follows:

ARTICLE I

The name of the corporation is ParthusCeva, Inc. (the “Corporation”).

ARTICLE II

The address of its registered office in the State of Delaware is 1209 Orange Street, in the City of Wilmington, 19801, County of New Castle. The name of its registered agent at such address is The Corporation Trust Company.

ARTICLE III

The nature of the business of the Corporation and the objects or purposes to be transacted, promoted or carried on by it are as follows: To engage in any lawful act or activity for which

corporations may be organized under the General Corporation Law of the State of Delaware. The Corporation is to have perpetual existence.

ARTICLE IV

The total number of shares of all classes of stock that the Corporation is authorized to issue is ONE HUNDRED FIVE MILLION (105,000,000) shares, with a par value of one tenth of one cent ($0.001) per share. ONE HUNDRED MILLION (100,000,000) shares shall be Common Stock, with a par value of one tenth of one cent ($0.001) per share, and FIVE MILLION (5,000,000) shares shall be Preferred Stock, with a par value of one tenth of one cent ($0.001) per share.

Any of the shares of Preferred Stock may be issued from time to time in one or more series. Subject to the limitations and restrictions set forth in this Article IV, the Board of Directors of the Corporation (the “Board”), by resolution or resolutions, is authorized to create or provide for any such series, and to fix the designations, preferences and relative, participating, optional or other special rights, and qualifications, limitations or restrictions thereof, including, without limitation, the authority to fix or alter the dividend rights, dividend rates, conversion rights, exchange rights, voting rights, rights and terms of redemption (including sinking and purchase fund provisions), the redemption price or prices, the dissolution preferences and the rights in respect to any distribution of assets of any wholly unissued series of Preferred Stock and the number of shares constituting any such series, and the designation thereof, or any of them. In case the number of shares of any series shall be so decreased, the shares constituting such decrease shall resume the status which they had prior to the adoption of the resolution originally fixing the number of shares of such series.

Notwithstanding the foregoing, there shall be no limitation or restriction on any variation between any of the different series of Preferred Stock as to the designations, preferences and relative, participating, optional or other special rights, and the qualifications, limitations or restrictions thereof; and the several series of Preferred Stock may, except as hereinafter in this Article IV otherwise expressly provided, vary in any and all respects as fixed and determined by the resolution or resolutions of the Board, providing for the issuance of the various series; provided , however , that all shares of any one series of Preferred Stock shall have the same designation, preferences and relative, participating, optional or other special rights and qualifications, limitations and restrictions.

Except as otherwise required by law, or as otherwise fixed by resolution or resolutions of the Board with respect to one or more series of Preferred Stock, the entire voting power and all voting rights shall be vested exclusively in the Common Stock, and each stockholder of the Corporation who at the time possesses voting power for any purpose shall be entitled to one vote for each share of such stock standing in his/her name on the books of the Corporation. Dividends may be declared and paid on the Common Stock from funds lawfully available therefore as and when determined by the Board and subject to any preferential dividend or other rights of any then outstanding Preferred Stock. Upon the dissolution or liquidation of the Corporation, whether voluntary or involuntary, holders of Common Stock will be entitled to receive all assets of the

Corporation available for distribution to its stockholders, subject to any preferential or other rights of any then outstanding Preferred Stock.

ARTICLE V

Any action required or permitted to be taken by the stockholders of the Corporation must be effected at a duly called annual or special meeting of such holders and may not be effected by any consent in writing by such holders. At any annual or special meeting of stockholders of the Corporation, only such business shall be conducted as shall have been brought before such meeting in the manner provided by the Bylaws of the Corporation (the “Bylaws”). Notwithstanding any other provisions of law, this Certificate of Incorporation or the Bylaws, and notwithstanding that a lesser percentage may be specified by law, the affirmative vote of the holders of at least seventy-five percent (75%) of the votes which all the stockholders would be entitled to cast in any annual election of directors or class of directors shall be required to amend or repeal or to adopt any provision inconsistent with, this Article V.

ARTICLE VI

In furtherance of and not in limitation of the powers conferred it by the State of Delaware, the Board is expressly authorized to make, alter, or repeal the Bylaws. The Corporation’s Bylaws also may be adopted, amended, altered or repealed by the affirmative vote of the holders of at least seventy-five percent (75%) of the votes which all the stockholders would be entitled to cast in any annual election of directors or class of directors. Notwithstanding any other provisions of law, this Certificate of Incorporation or the Bylaws, and notwithstanding that a lesser percentage may be specified by law, the affirmative vote of the holders of at least seventy-five percent (75%) of the votes which all the stockholders would be entitled to cast in any annual election of directors or class of directors shall be required to amend or repeal or to adopt any provision inconsistent with, this Article VI.

ARTICLE VII

The number of directors which constitute the whole Board shall be as specified in the Bylaws. Elections of directors need not be by written ballot unless the Bylaws shall so provide.

ARTICLE VIII

Whenever a compromise or arrangement is proposed between the Corporation and its creditors or any class of them and/or between the Corporation and its stockholders or any class of them, any court of equitable jurisdiction within the State of Delaware may, on the application in a summary way of the Corporation or of any creditor or stockholder thereof, or on the application of any receiver or receivers appointed for the Corporation under the provisions of Section 291 of Title 8 of the Delaware Code or on the application of trustees in dissolution or of any receiver or receivers appointed for the Corporation under the provisions of Section 279 of Title 8 of the Delaware Code order a meeting of the creditors or class of creditors, and/or of the stockholders or class of stockholders of the Corporation, as the case may be, to be summoned in such manner as the said court directs. If a majority in number representing three-fourths in value of the

creditors or class of creditors, and/or of the stockholders or class of stockholders of the Corporation, as the case may be, agree to any compromise or arrangement and to any reorganization of the Corporation as a consequence of such compromise or arrangement, the said compromise or arrangement and the said reorganization shall, if sanctioned by the court to which the said application has been made, be binding on all the creditors or class of creditors, and/or on all the stockholders or class of stockholders, of the Corporation, as the case may be, and also on the Corporation.

ARTICLE IX

The Corporation reserves the right to amend, alter, change or repeal any provision contained in this Certificate of Incorporation, in the manner now or hereafter prescribed by statute, and all rights conferred upon stockholders herein are granted subject to this reservation.

ARTICLE X

To the fullest extent permitted by Delaware statutory or decisional law, as amended or interpreted, no director of the Corporation shall be personally liable to the Corporation or its stockholders for monetary damages for breach of fiduciary duty as a director. No amendment to or repeal of this provision shall apply to or have any effect on the liability or alleged liability of any director of the Corporation for or with respect to any acts or omissions of such director occurring prior to such amendment or repeal. This Article X does not affect the availability of equitable remedies for breach of fiduciary duties.

ARTICLE XI

To the fullest extent permitted by Delaware statutory or decisional law, as amended or interpreted, the Corporation is authorized to provide indemnification of (and advancement of expenses to) directors, officers, employees or agents (and any other persons to which the laws of the State of Delaware permits the Corporation to provide indemnification) through Bylaw provisions, agreements with such persons, vote of stockholders or disinterested directors, or otherwise, in excess of the indemnification and advancement otherwise permitted by Section 145 of the Delaware General Corporation Law, subject only to limits created by applicable Delaware statutory or decisional law, with respect to actions for breach of duty to a corporation, its stockholders, and others.

This Amended and Restated Certificate of Incorporation was duly adopted by the Board of Directors and the sole stockholder of the Corporation in accordance with Sections 242 and 245 of the Delaware General Corporation Law.

IN WITNESS WHEREOF, this Amended and Restated Certificate of Incorporation is executed on behalf of the Corporation by its Secretary this day of , 2002.

, Secretary

Exhibit 3.2

AMENDED AND RESTATED BYLAWS

ParthusCeva, Inc.

(originally, DSP Cores Inc.; formerly, Corage, Inc. and Ceva, Inc.)

a Delaware corporation

Effective as of , 2002

TABLE OF CONTENTS


ARTICLE I OFFICES.		1

Section 1.1	Registered Office.	1

Section 1.2	Other Offices.	1

ARTICLE II STOCKHOLDERS’ MEETINGS		1

Section 2.1	Place of Meetings.	1

Section 2.2	Annual Meetings.	1

Section 2.3	Special Meetings.	1

Section 2.4	Notice of Meetings.	2

Section 2.5	Quorum and Voting.	3

Section 2.6	Voting Rights.	3

Section 2.7	Voting Procedures and Inspectors of Elections.	4

Section 2.8	List of Stockholders.	5

Section 2.9	Stockholder Proposals at Annual Meetings.	6

Section 2.10	Nominations of Persons for Election to the Board of Directors.	6

ARTICLE III DIRECTORS		7

Section 3.1	Number and Term of Office.	7

Section 3.2	Powers.	8

Section 3.3	Vacancies.	8

Section 3.4	Resignations and Removals.	8

Section 3.5	Meetings.	9

Section 3.6	Quorum and Voting.	9

Section 3.7	Action Without Meeting.	10

Section 3.8	Fees and Compensation.	10

Section 3.9	Committees.	10

ARTICLE IV OFFICERS		12

Section 4.1	Officers Designated.	12

Section 4.2	Tenure and Duties of Officers.	12

ARTICLE V EXECUTION OF CORPORATE INSTRUMENTS, AND VOTING OF SECURITIES OWNED BY THE CORPORATION		13

Section 5.1	Execution of Corporate Instruments.	13


Section 5.2	Voting of Securities Owned by Corporation	14

ARTICLE VI SHARES OF STOCK		14

Section 6.1	Form and Execution of Certificates	14

Section 6.2	Lost Certificates	15

Section 6.3	Transfers	15

Section 6.4	Fixing Record Dates	15

Section 6.5	Registered Stockholders	16

ARTICLE VII OTHER SECURITIES OF THE CORPORATION		16

ARTICLE VIII INDEMNIFICATION OF OFFICERS, DIRECTORS, EMPLOYEES AND AGENTS		16

Section 8.1	Right to Indemnification	16

Section 8.2	Authority to Advance Expenses	17

Section 8.3	Right of Claimant to Bring Suit	17

Section 8.4	Provisions Nonexclusive	18

Section 8.5	Authority to Insure	18

Section 8.6	Survival of Rights	18

Section 8.7	Settlement of Claims	18

Section 8.8	Effect of Amendment	18

Section 8.9	Subrogation	18

Section 8.10	No Duplication of Payments	19

ARTICLE IX NOTICES		19

ARTICLE X AMENDMENTS		20

AMENDED AND RESTATED BYLAWS

PARTHUSCEVA, INC.

ARTICLE I

Offices

S ECTION 1.1 Registered Office.

The registered office of the corporation in the State of Delaware shall be in the City of Wilmington, County of New Castle.

S ECTION 1.2 Other Offices.

The corporation shall also have and maintain an office or principal place of business and any other offices, both within and without the State of Delaware and both within and without the United States, as the Board of Directors of the corporation (the “Board of Directors”) may from time to time determine or the business of the corporation may require.

ARTICLE II

STOCKHOLDERS’ MEETINGS

S ECTION 2.1 Place of Meetings.

Meetings of the stockholders of the corporation shall be held at such place, either within or without the State of Delaware, and either within or without the United States, as may be designated from time to time by the Board of Directors, or, if not so designated, then at the office of the corporation required to be maintained pursuant to Section 1.2 of Article I hereof.

S ECTION 2.2 Annual Meetings.

The annual meetings of the stockholders of the corporation, commencing with the year 2001, for the purpose of election of directors and for such other business as may lawfully come before it, shall be held at such place and time as may be designated from time to time by the Board of Directors.

S ECTION 2.3 Special Meetings.

Special Meetings of the stockholders of the corporation may be called, for any purpose or purposes, by the Chairman of the Board (or the Vice-Chairman of the Board in the Chairman’s absence) or the President or the Board of Directors at any time. Business transacted at any

special meeting of stockholders shall be limited to matters relating to the purpose or purposes stated in the notice of meeting.

S ECTION 2.4 Notice of Meetings.

(a) Except as otherwise provided by law or the Amended and Restated Certificate of Incorporation of the Corporation (the “Certificate of Incorporation”), written notice of each meeting of stockholders, specifying the place, if any, date and hour, the means of remote communication, if any, by which stockholders and proxy holders may be deemed to be present in person and vote at such meeting, and purpose or purposes of the meeting, shall be given not less than ten nor more than sixty days before the date of the meeting to each stockholder entitled to vote thereat, directed to his/her address as it appears upon the books of the corporation; except that where the matter to be acted on is a merger or consolidation of the Corporation or a sale, lease or exchange of all or substantially all of its assets, such notice shall be given not less than twenty nor more than sixty days prior to such meeting. Without limiting the manner by which notice otherwise may be given to stockholders, any notice shall be effective if given by a form of electronic transmission consented to (in a manner consistent with the Delaware General Corporation Law) by the stockholder to whom notice is given .

(b) If at any meeting action is proposed to be taken which, if taken, would entitle stockholders fulfilling the requirements of section 262(d) of the Delaware General Corporation Law to an appraisal of the fair value of their shares, the notice of such meeting shall contain a statement of that purpose and to that effect and shall be accompanied by a copy of that statutory section.

(c) When a meeting is adjourned to another time or place, notice need not be given of the adjourned meeting if the time, place, if any, thereof and the means of remote communications, if any, by which stockholders and proxy holders may be deemed to be present in person and vote at such adjourned meetingare announced at the meeting at which the adjournment is taken unless the adjournment is for more than thirty days, or unless after the adjournment a new record date is fixed for the adjourned meeting, in which event a notice of the adjourned meeting shall be given to each stockholder of record entitled to vote at the meeting.

(d) Notice of the time, place and purpose of any meeting of stockholders may be waived by a written waiver signed by the person entitled to notice, or a waiver by electronic transmission by the person entitled to notice, either before or after such meeting, and to the extent permitted by law, will be waived by any stockholder by his/her attendance thereat, in person or by proxy, except when the person attends a meeting for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened. Any stockholder so waiving notice of such meeting shall be bound by the proceedings of any such meeting in all respects as if due notice thereof had been given.

(e) Unless and until voted, every proxy shall be revocable at the pleasure of the person who executed it or of his/her legal representatives or assigns, except in those cases where an irrevocable proxy permitted by statute has been given.

S ECTION 2.5 Quorum and Voting.

(a) At all meetings of stockholders, except where otherwise provided by law, the Certificate of Incorporation, or these Bylaws, the presence, in person or by proxy duly authorized, of the holders of a majority of the outstanding shares of stock entitled to vote shall constitute a quorum for the transaction of business. Shares, the voting of which at said meeting have been enjoined, or which for any reason cannot be lawfully voted at such meeting, shall not be counted to determine a quorum at said meeting. In the absence of a quorum, any meeting of stockholders may be adjourned, from time to time, by vote of the holders of a majority of the shares represented thereat, but no other business shall be transacted at such meeting. At such adjourned meeting at which a quorum is present or represented by proxy, any business may be transacted which might have been transacted at the original meeting. The stockholders present at a duly called or convened meeting, at which a quorum is present, may continue to transact business until adjournment, notwithstanding the withdrawal of enough stockholders to leave less than a quorum.

(b) Except as otherwise provided by law, the Certificate of Incorporation or these Bylaws, all action taken by the holders of a majority of the voting power represented at any meeting at which a quorum is present shall be valid and binding upon the corporation.

(c) Where a separate vote by a class or classes is required, except as otherwise provided by law, the Certificate of Incorporation or these Bylaws, a majority of the outstanding shares of such class or classes, present in person or represented by proxy, shall constitute a quorum entitled to take action with respect to that vote on that matter and the affirmative vote of the majority of shares of such class or classes present in person or represented by proxy at the meeting shall be the act of such class.

S ECTION 2.6 Voting Rights.

(a) Except as otherwise provided by law, only persons in whose names shares entitled to vote stand on the stock records of the corporation on the record date for determining the stockholders entitled to vote at said meeting shall be entitled to vote at such meeting. Shares standing in the names of two or more persons shall be voted or represented in accordance with the determination of the majority of such persons, or, if only one of such persons is present in person or represented by proxy, such person shall have the right to vote such shares and such shares shall be deemed to be represented for the purpose of determining a quorum.

(b) Every person entitled to vote or to execute consents shall have the right to do so either in person or by an agent or agents authorized by a written proxy executed by such person or his/her duly authorized agent, which proxy shall be filed with the Secretary of the corporation at or before the meeting at which it is to be used. Said proxy so appointed need not be a stockholder. No proxy shall be voted on after three years from its date unless the proxy provides for a longer period. Unless and until voted, every proxy shall be revocable at the pleasure of the person who executed it or of his/her legal representatives or assigns, except in those cases where an irrevocable proxy permitted by statute has been given.

(c) Without limiting the manner in which a stockholder may authorize another person or persons to act for him/her as proxy pursuant to subsection (b) of this section, the following shall constitute a valid means by which a stockholder may grant such authority:

(1) A stockholder may execute a writing authorizing another person or persons to act for him/her as proxy. Execution may be accomplished by the stockholder or his/her authorized officer, director, employee or agent signing such writing or causing his/her signature to be affixed to such writing by any reasonable means including, but not limited to, by facsimile signature.

(2) A stockholder may authorize another person or persons to act for him/her as proxy by transmitting or authorizing the transmission of a telegram, cablegram, or other means of electronic transmission to the person who will be the holder of the proxy or to a proxy solicitation firm, proxy support service organization or like agent duly authorized by the person who will be the holder of the proxy to receive such transmission; provided that any such telephone, telegram, cablegram or other means of electronic transmission must either set forth or be submitted with information from which it can be determined that the telegram, cablegram or other electronic transmission was authorized by the stockholder. Such authorization can be established by the signature of the stockholder on the proxy, either in writing or by a signature stamp or facsimile signature, or by a number or symbol from which the identity of the stockholder can be determined, or by any other procedure deemed appropriate by the inspectors or other persons making the determination as to due authorization.

If it is determined that such telegrams, cablegrams or other electronic transmissions are valid, the inspectors or, if there are no inspectors, such other persons making that determination shall specify the information upon which they relied.

(d) Any copy, facsimile telecommunication or other reliable reproduction of the writing or transmission created pursuant to subsection (c) of this section may be substituted or used in lieu of the original writing or transmission for any and all purposes for which the original writing or transmission could be used; provided that such copy, facsimile telecommunication or other reproduction shall be a complete reproduction of the entire original writing or transmission.

S ECTION 2.7 Voting Procedures and Inspectors of Elections.

(a) The corporation shall, in advance of any meeting of stockholders, appoint one or more inspectors to act at the meeting and make a written report thereof. The corporation may designate one or more persons as alternate inspectors to replace any inspector who fails to act. If no inspector or alternate is able to act at a meeting of stockholders, the person presiding at the meeting shall appoint one or more inspectors to act at the meeting. Each inspector, before entering upon the discharge of his/her duties, shall take and sign an oath faithfully to execute the duties of inspector with strict impartiality and according to the best of his/her ability.

(b) The inspectors shall (i) ascertain the number of shares outstanding and the voting power of each, (ii) determine the shares represented at a meeting and the validity of proxies and ballots, (iii) count all votes and ballots, (iv) determine and retain for a reasonable period a record of the disposition of any challenges made to any determination by the inspectors, and (v) certify

their determination of the number of shares represented at the meeting and their count of all votes and ballots. The inspectors may appoint or retain other persons or entities to assist the inspectors in the performance of the duties of the inspectors.

(c) The date and time of the opening and the closing of the polls for each matter upon which the stockholders will vote at a meeting shall be announced at the meeting. No ballot, proxies or votes, nor any revocations thereof or changes thereto, shall be accepted by the inspectors after the closing of the polls unless the Court of Chancery upon application by a stockholder shall determine otherwise.

(d) In determining the validity and counting of proxies and ballots, the inspectors shall be limited to an examination of the proxies, any envelopes submitted with those proxies, any information provided in accordance with Sections 211(e) or 212(c)(2) of the Delaware General Corporation Law, or any information provided pursuant to Section 211(a)(2)(B)(i) or (iii) thereof, ballots and the regular books and records of the corporation, except that the inspectors may consider other reliable information for the limited purpose of reconciling proxies and ballots submitted by or on behalf of banks, brokers, their nominees or similar persons which represent more votes than the holder of a proxy is authorized by the record owner to cast or more votes than the stockholder holds of record. If the inspectors consider other reliable information for the limited purpose permitted herein, the inspectors at the time they make their certification pursuant to subsection (b)(v) of this section shall specify the precise information considered by them including the person or persons from whom they obtained the information, when the information was obtained, the means by which the information was obtained and the basis for the inspectors’ belief that such information is accurate and reliable.

S ECTION 2.8 List of Stockholders.

The officer who has charge of the stock ledger of the corporation shall prepare and make, at least ten days before every meeting of stockholders, a complete list of the stockholders entitled to vote at said meeting, arranged in alphabetical order, showing the address of and the number of shares registered in the name of each stockholder. The corporation need not include electronic mail addresses or other electronic contact information on such list. Such list shall be open to the examination of any stockholder, for any purpose germane to the meeting for a period of at least ten days prior to the meeting, either: (i) on a reasonably accessible electronic network; provided that the information required to gain access to such list is provided with the notice of the meeting; or (ii) during ordinary business hours, at the principal office of the corporation. The list shall be produced and kept at the time and place of meeting during the whole time thereof, and may be inspected by any stockholder who is present. If the meeting is to be held solely by means of remote communication, then the list shall also be open to the examination of any stockholder during the whole time of the meeting on a reasonably accessible electronic network, and the information required to access such list shall be provided with the notice of the meeting. In the event that the corporation determines to make the list available on an electronic network, the corporation may take reasonable steps to ensure that such information is available only to stockholders of the corporation.

S ECTION 2.9 Stockholder Proposals at Annual Meetings.

At an annual meeting of the stockholders, only such business shall be conducted as shall have been properly brought before the meeting. To be properly brought before an annual meeting, business must be specified in the notice of meeting (or any supplement thereto) given by or at the direction of the Board of Directors, otherwise properly brought before the meeting by or at the direction of the Board of Directors or otherwise properly brought before the meeting by a stockholder. In addition to any other applicable requirements, for business to be properly brought before an annual meeting by a stockholder, the stockholder must have given timely notice thereof in writing to the Secretary of the corporation. To be timely, a stockholder’s notice must be delivered to or mailed and received at the principal executive offices of the corporation, not less than forty-five days nor more than seventy-five days prior to the date on which the corporation first mailed its proxy materials for the previous year’s annual meeting of stockholders (or the date on which the corporation mails its proxy materials for the current year if during the prior year the corporation did not hold an annual meeting or if the date of the annual meeting was changed more than thirty days from the prior year). A stockholder’s notice to the Secretary shall set forth as to each matter the stockholder proposes to bring before the annual meeting (i) a brief description of the business desired to be brought before the annual meeting and the reasons for conducting such business at the annual meeting, (ii) the name and record address of the stockholder proposing such business, (iii) the class and number of shares of the corporation which are beneficially owned by the stockholder, and (iv) any material interest of the stockholder in such business.

Notwithstanding anything in the Bylaws to the contrary, no business shall be conducted at the annual meeting except in accordance with the procedures set forth in this Section 2.9; provided , however , that nothing in this Section 2.9 shall be deemed to preclude discussion by any stockholder of any business properly brought before the annual meeting in accordance with said procedure.

The Chairman of an annual meeting shall, if the facts warrant, determine and declare to the meeting that business was not properly brought before the meeting in accordance with the provisions of this Section 2.9, and if he/she should so determine he/she shall so declare to the meeting, and any such business not properly brought before the meeting shall not be transacted.

Nothing in this Section 2.9 shall affect the right of a stockholder to request inclusion of a proposal in the corporation’s proxy statement to the extent that such right is provided by an applicable rule of the Securities and Exchange Commission.

S ECTION 2.10 Nominations of Persons for Election to the Board of Directors.

In addition to any other applicable requirements, only persons who are nominated in accordance with the following procedures shall be eligible for election as directors. Nominations of persons for election to the Board of Directors may be made at a meeting of stockholders by or at the direction of the Board of Directors, by any nominating committee or person appointed by the Board of Directors or by any stockholder of the corporation entitled to vote for the election of directors at the meeting only upon compliance with the notice procedures set forth in this Section 2.10. Such nominations, other than those made by or at the direction of the Board of

Directors, shall be made pursuant to timely notice in writing to the Secretary of the corporation. To be timely, a stockholder’s notice must be delivered to or mailed and received at the principal executive offices of the corporation, not less than forty-five days nor more than seventy-five days prior to the date on which the corporation first mailed its proxy materials for the previous year’s annual meeting of stockholders (or the date on which the corporation mails its proxy materials for the current year if during the prior year the corporation did not hold an annual meeting or if the date of the annual meeting was changed more than thirty days from the prior year). Such stockholder’s notice shall set forth (a) as to each person whom the stockholder proposes to nominate for election or re-election as a director, (i) the name, age, business address and residence address of the person, (ii) the principal occupation or employment of the person, (iii) the class and number of shares of the corporation which are beneficially owned by the person, and (iv) any other information relating to the person that is required to be disclosed in solicitations for proxies for election of directors pursuant to Rule 14a under the Securities Exchange Act of 1934; and (b) as to the stockholder giving the notice, (i) the name and record address of the stockholder, (ii) the class and number of shares of the corporation which are beneficially owned by the stockholder, and (iii) such other requirements as imposed by Delaware General Corporation Law. The corporation may require any proposed nominee to furnish such other information as may reasonably be required by the corporation to determine the eligibility of such proposed nominee to serve as a director of the corporation. No person shall be eligible for election as a director of the corporation unless nominated in accordance with the procedures set forth herein. These provisions shall not apply to nomination of any persons entitled to be separately elected by holders of preferred stock.

The Chairman of the meeting shall, if the facts warrant, determine and declare to the meeting that a nomination was not made in accordance with the foregoing procedure, and if he/she should so determine, he/she shall so declare to the meeting and the defective nomination shall be disregarded.

Notwithstanding the foregoing provisions of this Section 2.10, if the stockholder (or a qualified representative of the stockholder) does not appear at the annual or special meeting of stockholders of the corporation to present a nomination, such nomination shall be disregarded, notwithstanding that proxies in respect of such vote may have been received by the corporation.

ARTICLE III

DIRECTORS

S ECTION 3.1 Number and Term of Office.

The number of directors of the corporation shall not be less than six (6) nor more than eight (8) until changed by amendment of the Certificate of Incorporation or by a Bylaw amending this Section 3.1 duly adopted by the vote of holders of a majority of the outstanding shares or by the Board of Directors. The exact number of directors shall be fixed from time to time, within the limits specified in the Certificate of Incorporation or in this Section 3.1, by a Bylaw or amendment thereof duly adopted by the vote of a majority of the shares entitled to vote represented at a duly held meeting at which a quorum is present or by the Board of Directors.

Subject to the foregoing provisions for changing the number of directors, the number of directors of the corporation has been fixed at eight (8).

Any amendment, change or repeal of this Section 3.1, or any other amendment to these Bylaws that will have the effect of permitting circumvention of or modifying this Section 3.1, shall require the favorable vote, at a stockholders’ meeting, of the holders of at least a majority of the then-outstanding shares of stock of the Corporation entitled to vote.

Except as provided in Section 3.3, the directors shall be elected by a plurality vote of the shares represented in person or by proxy, at the stockholders annual meeting in each year and entitled to vote on the election of directors. Elected directors shall hold office until the next annual meeting for the years in which their terms expire and until their successors shall be duly elected and qualified. Directors need not be stockholders. If, for any cause, the Board of Directors shall not have been elected at an annual meeting, they may be elected as soon thereafter as convenient at a special meeting of the stockholders called for that purpose in the manner provided in these Bylaws.

S ECTION 3.2 Powers.

The powers of the corporation shall be exercised, its business conducted and its property controlled by or under the direction of the Board of Directors.

S ECTION 3.3 Vacancies.

Vacancies and newly created directorships including those resulting from any increase in the authorized number of directors may be filled by a majority of the directors then in office, although less than a quorum, or by a sole remaining director, and each director so elected shall hold office for the unexpired portion of the term of the director whose place shall be vacant, and until his/her successor shall have been duly elected and qualified. A vacancy on the Board of Directors shall be deemed to exist under this section in the case of the death, removal or resignation of any director, or if the stockholders fail at any meeting of stockholders at which directors are to be elected (including any meeting referred to in Section 3.4 below) to elect the number of directors then constituting the whole Board of Directors.

S ECTION 3.4 Resignations and Removals.

(a) Any director may resign at any time by delivering his/her written resignation to the Secretary in writing or by electronic transmission, such resignation to specify whether it will be effective at a particular time, upon receipt by the Secretary or at the pleasure of the Board of Directors. If no such specification is made it shall be deemed effective at the pleasure of the Board of Directors. When one or more directors shall resign from the Board of Directors, effective at a future date, a majority of the directors then in office, including those who have so resigned, shall have power to fill such vacancy or vacancies, the vote thereon to take effect when such resignation or resignations shall become effective, and each director so chosen shall hold office for the unexpired portion of the term of the director whose place shall be vacated and until his/her successor shall have been duly elected and qualified.

(b) At a special meeting of stockholders called for the purpose in the manner hereinabove provided, the Board of Directors, or any individual director, may be removed from office, with or without cause, and a new director or directors elected by a vote of stockholders holding a majority of the outstanding shares entitled to vote at an election of directors.

(c) Unless the certificate of incorporation otherwise provides, if the Board of Directors is classified, stockholders may effect removal only for cause.

S ECTION 3.5 Meetings.

(a) The annual meeting of the Board of Directors shall be held immediately after the annual stockholders’ meeting and at the place where such meeting is held or at the place announced by the Chairman at such meeting. No notice of an annual meeting of the Board of Directors shall be necessary and such meeting shall be held for the purpose of electing officers and transacting such other business as may lawfully come before it.

(b) Except as hereinafter otherwise provided, regular meetings of the Board of Directors shall be held in the principal office of the corporation. Regular meetings of the Board of Directors may also be held at any place within or without the State of Delaware, and within or without the United States, which has been designated by resolutions of the Board of Directors or the written consent of all directors.

(c) Special meetings of the Board of Directors may be held at any time and place within or without the State of Delaware whenever called by the Chairman of the Board (or the Vice-Chairman of the Board, in the Chairman’s absence), the President, or by any of the directors.

(d) Written notice of the time and place of all regular and special meetings of the Board of Directors shall be delivered personally to each director or sent by telephone, telegram or facsimile transmission or other form of electronic transmission at least 48 hours before the start of the meeting, or sent by first class mail at least 120 hours before the start of the meeting. Notice of any meeting may be waived in writing at any time before or after the meeting and will be waived by any director by attendance thereat.

S ECTION 3.6 Quorum and Voting.

(a) A quorum of the Board of Directors shall consist of a majority of the exact number of directors fixed from time to time in accordance with Section 3.1 of Article III hereof, but not less than one; provided , however , at any meeting whether a quorum be present or otherwise, a majority of the directors present may adjourn from time to time until the time fixed for the next regular meeting of the Board of Directors, without notice other than by announcement at the meeting.

(b) At each meeting of the Board of Directors at which a quorum is present all questions and business shall be determined by a vote of a majority of the directors present, unless a different vote be required by law, the Certificate of Incorporation, or these Bylaws.

(c) Any member of the Board of Directors, or of any committee thereof, may participate in a meeting by means of conference telephone or other communication equipment by means of which all persons participating in the meeting can hear each other, and participation in a meeting by such means shall constitute presence in person at such meeting.

(d) The transactions of any meeting of the Board of Directors, or any committee thereof, however called or noticed, or wherever held, shall be as valid as though had at a meeting duly held after regular call and notice, if a quorum be present and if, either before or after the meeting, each of the directors not present shall sign a written waiver of notice, or a consent to holding such meeting, or an approval of the minutes thereof. All such waivers, consents or approvals shall be filed with the corporate records or made a part of the minutes of the meeting.

S ECTION 3.7 Action Without Meeting.

Unless otherwise restricted by the Certificate of Incorporation or these Bylaws, any action required or permitted to be taken at any meeting of the Board of Directors or of any committee thereof may be taken without a meeting, if all members of the Board of Directors or of such committee, as the case may be, consent thereto in writing or by electronic transmission, and such writing or writings or electronic transmissions are filed with the minutes of proceedings of the Board of Directors or committee. Such filing shall be in paper form if the minutes are maintained in paper form and shall be in electronic form if the minutes are maintained in electronic form.

S ECTION 3.8 Fees and Compensation.

Directors and members of committees may receive such compensation, if any, for their services, and such reimbursement for expenses, as may be fixed or determined by resolution of the Board of Directors.

S ECTION 3.9 Committees.

(a) Management Committee: The Corporation shall have a Management Committee consisting of the Chairman of the Board, the Vice-Chairman of the Board, the Chief Executive Officer and the Chief Technology Officer of the Corporation. Special meetings of the Management Committee may be called by any one member of the Management Committee on not less than two days’ prior notice, given in the manner provided for the giving of written notice to members of the Board of Directors of the time and place of special meetings of the Board of Directors. Regular meetings of the Management Committee shall be held on the first business day of each quarter unless cancelled or changed by a vote of not less than three members of the Management Committee. Regular and special meetings of the Management Committee may be held at the principal office of the corporation required to be maintained pursuant to Section 1.2 of Article I hereof; or at any place which has been designated from time to time by resolution of such committee or by written consent of a majority of the members thereof. The Management Committee shall be consulted with respect to any proposed budget, business plan, major policy or business decision before implementation thereof by the Corporation or submission thereof to the Board of Directors for review or approval. In the event any member of the Management Committee shall cease to be a member, his/her successor in the position held by him/her shall

automatically become a member of the Management Committee. Until his/her successor is designated, the vacancy on the Management Committee shall be filled on a temporary basis by a member of the Board of Directors by a vote of not less than six directors.

(b) Executive Committee: By a vote of not less than six directors, the Board of Directors may appoint an Executive Committee consisting of one or more members, each of whom shall be a director. The Executive Committee, to the extent permitted by law, shall have and may exercise, when the Board of Directors is not in session, all powers of the Board of Directors in the management of the business and affairs of the Corporation, except such committee shall not have the power or authority to amend these Bylaws or to approve or recommend to the stockholders any action which must be submitted to stockholders for approval under the Delaware General Corporation Law.

(c) Other Committees: The Board of Directors may, by a vote of not less than six directors, from time to time appoint such other committees as may be permitted by law. Such other committees appointed by the Board of Directors shall have such powers and perform such duties as may be prescribed by the resolution or resolutions creating such committee.

(d) Term: The Board of Directors may at any time increase or decrease the number of members of a committee or terminate the existence of a committee by a vote of not less than six directors. The membership of a committee member shall terminate on the date of his/her death or voluntary resignation, but, by a vote of not less than six directors, the Board of Directors may at any time for any reason remove any individual committee member and the Board of Directors may fill any committee vacancy created by death, resignation, removal or increase in the number of members of the committee. The Board of Directors, upon a vote of not less than six directors, may designate one or more directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of the committee. Notwithstanding anything to the contrary contained herein, this Section 3.9(d) shall not be applicable to the Management Committee set forth in Section 3.9(a).

(e) Meetings: Unless otherwise provided by the Board of Directors, regular meetings of a committee appointed pursuant to this Section 3.9 shall be held at such times and places as are determined by the Board of Directors, or by any such committee, and when notice thereof has been given to each member of such committee, no further notice of such regular meetings need be given thereafter; special meetings of any such committee may be held at the principal office of the corporation; or at any place which has been designated from time to time by resolution of such committee or by written consent of all members thereof, and may be called by any director who is a member of such committee, upon written notice to the members of such committee of the time and place of such special meeting given in the manner provided for the giving of written notice to members of the Board of Directors of the time and place of special meetings of the Board of Directors. Notice of any special meeting of any committee may be waived in writing at any time after the meeting and will be waived by any director by attendance thereat. Notwithstanding anything to the contrary contained herein, this Section 3.9(e) shall not be applicable to the Management Committee set forth in Section 3.9(a).

(f) Q uorum: A majority of the authorized number of members of any committee, including the Management Committee set forth in Section 3.9(a), shall constitute a quorum for

the transaction of business, and the act of a majority of those present at any meeting at which a quorum is present shall be the act of such committee.

ARTICLE IV

OFFICERS

S ECTION 4.1 Officers Designated.

The officers of the corporation shall be a Chairman of the Board, a President, a Secretary, and a Treasurer. The Board of Directors may also appoint a Vice-Chairman of the Board, one or more Vice-Presidents, assistant secretaries, assistant treasurers, and such other officers and agents with such powers and duties as it or he/she shall deem necessary. The order of the seniority of the Vice-Presidents shall be in the order of their nomination, unless otherwise determined by the Board of Directors. The Board of Directors may assign such additional titles to one or more of the officers as they shall deem appropriate. Any one person may hold any number of offices of the corporation at any one time unless specifically prohibited therefrom by law. The salaries and other compensation of the officers of the corporation shall be fixed by or in the manner designated by the Board of Directors.

S ECTION 4.2 Tenure and Duties of Officers.

(a) General: All officers shall hold office at the pleasure of the Board of Directors and until their successors shall have been duly elected and qualified, unless sooner removed. Any officer elected or appointed by the Board of Directors may be removed at any time by the Board of Directors. If the office of any officer becomes vacant for any reason, the vacancy may be filled by the Board of Directors. Nothing in these Bylaws shall be construed as creating any kind of contractual right to employment with the corporation.

(b) Duties of the Chairman and Vice-Chairman of the Board of Directors: The Chairman of the Board of Directors (if there be such an officer appointed), when present, shall preside at all meetings of the stockholders and the Board of Directors. The Chairman of the Board of Directors shall perform such other duties and have such other powers as the Board of Directors shall designate from time to time. The Vice-Chairman shall assume and perform the duties of the Chairman in the absence or disability of the Chairman, and the Vice-Chairman shall perform such other duties and have such other powers as the Board of Directors shall designate from time to time.

(c) Duties of President: The President shall be the chief executive officer of the corporation and shall preside at all meetings of the stockholders and at all meetings of the Board of Directors, unless a chairman of the meeting has been appointed and is present. The President shall perform such other duties and have such other powers as the Board of Directors shall designate from time to time.

(d) Duties of Vice-Presidents: Vice-Presidents, in the order of their seniority, as determined by the Board of Directors, may assume and perform the duties of the President in the absence or disability of the President or whenever the office of the President is vacant. The

Vice-President shall perform such other duties and have such other powers as the Board of Directors or the President shall designate from time to time.

(e) Duties of Secretary: The Secretary shall attend all meetings of the stockholders and of the Board of Directors and any committee thereof, and shall record all acts and proceedings thereof in the minute book of the corporation, which may be maintained in either paper or electronic form. The Secretary shall give notice, in conformity with these Bylaws, of all meetings of the stockholders, and of all meetings of the Board of Directors and any Committee thereof requiring notice. The Secretary shall perform such other duties and have such other powers as the Board of Directors shall designate from time to time. The President may direct any Assistant Secretary to assume and perform the duties of the Secretary in the absence or disability of the Secretary, and each Assistant Secretary shall perform such other duties and have such other powers as the Board of Directors or the President shall designate from time to time.

(f) Duties of Treasurer: The Treasurer shall keep or cause to be kept the books of account of the corporation in a thorough and proper manner, and shall render statements of the financial affairs of the corporation in such form and as often as required by the Board of Directors or the President. The Treasurer, subject to the order of the Board of Directors, shall have the custody of all funds and securities of the corporation. The Treasurer shall perform all other duties commonly incident to his/her office and shall perform such other duties and have such other powers as the Board of Directors or the President shall designate from time to time. The President may direct any Assistant Treasurer to assume and perform the duties of the Treasurer in the absence or disability of the Treasurer, and each Assistant Treasurer shall perform such other duties and have such other powers as the Board of Directors or the President shall designate from time to time.

ARTICLE V

EXECUTION OF CORPORATE INSTRUMENTS,

ANDVOTING OF SECURITIES OWNED BY THE CORPORATION

S ECTION 5.1 Execution of Corporate Instruments.

(a) The Board of Directors may, in its discretion, determine the method and designate the signatory officer or officers, or other person or persons, to execute any corporate instrument or document, or to sign the corporate name without limitation, except where otherwise provided by law, and such execution or signature shall be binding upon the corporation.

(b) Unless otherwise specifically determined by the Board of Directors or otherwise required by law, formal contracts of the corporation, promissory notes, deeds of trust, mortgages and other evidences of indebtedness of the corporation, and other corporate instruments or documents requiring the corporate seal, and certificates of shares of stock owned by the corporation, shall be executed, signed or endorsed by the Chairman of the Board (if there be such an officer appointed), the Vice-Chairman of the Board in the Chairman’s absence (if there be such an officer appointed), or by the President; such documents may also be executed by any Vice-President and by the Secretary or Treasurer or any Assistant Secretary or Assistant Treasurer. All other instruments and documents requiring the corporate signature, but not

requiring the corporate seal, may be executed as aforesaid or in such other manner as may be directed by the Board of Directors.

(c) All checks and drafts drawn on banks or other depositaries on funds to the credit of the corporation, or in special accounts of the corporation, shall be signed by such person or persons as the Board of Directors shall authorize so to do.

(d) Execution of any corporate instrument may be effected in such form, either manual, facsimile or electronic signature, as may be authorized by the Board of Directors.

S ECTION 5.2 Voting of Securities Owned by Corporation.

All stock and other securities of other corporations owned or held by the corporation for itself, or for other parties in any capacity, shall be voted, and all proxies with respect thereto shall be executed, by the person authorized so to do by resolution of the Board of Directors or, in the absence of such authorization, by the Chairman of the Board (if there be such an officer appointed), the Vice-Chairman of the Board in the Chairman’s absence (if there be such an officer appointed), or by the President, or by any Vice-President.

ARTICLE VI

SHARES OF STOCK

S ECTION 6.1 Form and Execution of Certificates.

The shares of the corporation shall be represented by certificates; provided that the Board of Directors may provide by resolution or resolutions that some or all of any or all classes or series of its stock shall be uncertificated shares. Any such resolution shall not apply to shares represented by a certificate until such certificate is surrendered to the corporation. Certificates for the shares of stock of the corporation shall be in such form as is consistent with the Certificate of Incorporation and applicable law. Every holder of stock in the corporation shall be entitled to have a certificate signed by, or in the name of the corporation by, the Chairman of the Board (if there be such an officer appointed) or the Vice-Chairman of the Board in the Chairman’s absence (if there be such an officer appointed), or the President or any Vice-President and by the Treasurer or Assistant Treasurer or the Secretary or Assistant Secretary, certifying the number of shares owned by him/her in the corporation. Any or all of the signatures on the certificate may be a facsimile. In case any officer, transfer agent, or registrar who has signed or whose facsimile signature has been placed upon a certificate shall have ceased to be such officer, transfer agent, or registrar before such certificate is issued, it may be issued with the same effect as if he/she were such officer, transfer agent, or registrar at the date of issue. If the corporation shall be authorized to issue more than one class of stock or more than one series of any class, the powers, designations, preferences and relative, participating, optional or other special rights of each class of stock or series thereof and the qualifications, limitations or restrictions of such preferences and/or rights shall be set forth in full or summarized on the face or back of the certificate which the corporation shall issue to represent such class or series of stock; provided that, except as otherwise provided in section 202 of the Delaware General Corporation Law, in lieu of the foregoing requirements, there may be set forth on the face or

back of the certificate which the corporation shall issue to represent such class or series of stock, a statement that the corporation will furnish without charge to each stockholder who so requests the powers, designations, preferences and relative, participating, optional or other special rights of each class of stock or series thereof and the qualifications, limitations or restrictions of such preferences and/or rights.

S ECTION 6.2 Lost Certificates.

The Board of Directors may direct a new certificate or certificates to be issued in place of any certificate or certificates theretofore issued by the corporation alleged to have been lost or destroyed, upon the making of an affidavit of that fact by the person claiming the certificate of stock to be lost or destroyed. When authorizing such issue of a new certificate or certificates, the Board of Directors may, in its discretion and as a condition precedent to the issuance thereof, require the owner of such lost or destroyed certificate or certificates, or his/her legal representative, to indemnify the corporation in such manner as it shall require and/or to give the corporation a surety bond in such form and amount as it may direct as indemnity against any claim that may be made against the corporation with respect to the certificate alleged to have been lost or destroyed.

S ECTION 6.3 Transfers.

Transfers of record of shares of stock of the corporation shall be made only upon its books by the holders thereof, in person or by attorney duly authorized, and upon the surrender of a certificate or certificates for a like number of shares, properly endorsed.

S ECTION 6.4 Fixing Record Dates.

(a) In order that the corporation may determine the stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof, the Board of Directors may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted by the Board of Directors, and which record date shall not be more than sixty nor less than ten days before the date of such meeting. If no record date is fixed by the Board of Directors, the record date for determining stockholders entitled to notice of or to vote at a meeting of stockholders shall be at the close of business on the day next preceding the day on which notice is given, or, if notice is waived, at the close of business on the day next preceding the date on which the meeting is held. A determination of stockholders of record entitled notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting; provided , however , that the Board of Directors may fix a new record date for the adjourned meeting.

(b) In order that the corporation may determine the stockholders entitled to receive payment of any dividend or other distribution or allotment of any rights or the stockholders entitled to exercise any rights in respect of any change, conversion or exchange of stock, or for the purpose of any other lawful action, the Board of Directors may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted, and which record date shall be not more than sixty days prior to such action. If no record date is

fixed, the record date for determining stockholders for any such purpose shall be at the close of business on the day on which the Board of Directors adopts the resolution relating thereto.

S ECTION 6.5 Registered Stockholders.

The corporation shall be entitled to recognize the exclusive right of a person registered on its books as the owner of shares to receive dividends, and to vote as such owner, and shall not be bound to recognize any equitable or other claim to or interest in such share or shares on the part of any other person, whether or not it shall have express or other notice thereof, except as otherwise provided by the laws of Delaware.

ARTICLE VII

OTHER SECURITIES OF THE CORPORATION

All bonds, debentures and other corporate securities of the corporation, other than stock certificates, may be signed by the Chairman of the Board (if there be such an officer appointed), the Vice-Chairman of the Board in the Chairman’s absence (if there be such an officer appointed), the President, any Vice-President or such other person as may be authorized by the Board of Directors and the corporate seal impressed thereon or a facsimile of such seal imprinted thereon and attested by the signature of the Secretary or an Assistant Secretary, or the Treasurer or an Assistant Treasurer; provided , however , that where any such bond, debenture or other corporate security shall be authenticated by the manual signature of a trustee under an indenture pursuant to which such bond, debenture or other corporate security shall be issued, the signature of the persons signing and attesting the corporate seal on such bond, debenture or other corporate security may be the imprinted facsimile of the signatures of such persons. Interest coupons appertaining to any such bond, debenture or other corporate security, authenticated by a trustee as aforesaid, shall be signed by the Treasurer or an Assistant Treasurer of the corporation, or such other person as may be authorized by the Board of Directors, or bear imprinted thereon the facsimile signature of such person. In case any officer who shall have signed or attested any bond, debenture or other corporate security, or whose facsimile signature shall appear thereon or before the bond, debenture or other corporate security so signed or attested shall have been delivered, such bond, debenture or other corporate security nevertheless may be adopted by the corporation and issued and delivered as though the person who signed the same or whose facsimile signature shall have been used thereon had not ceased to be such officer of the corporation.

ARTICLE VIII

INDEMNIFICATION OF OFFICERS, DIRECTORS, EMPLOYEES AND AGENTS

S ECTION 8.1 Right to Indemnification.

Each person who was or is a party or is threatened to be made a party to or is involved (as a party, witness, or otherwise), in any threatened, pending, or completed action, suit, or proceeding, whether civil, criminal, administrative, or investigative (hereinafter a “Proceeding”), by reason of the fact that he/she, or a person of whom he/she is the legal representative, is or was

a director, officer, employee, or agent of the corporation or is or was serving at the request of the corporation as a director, officer, employee, or agent of another corporation or of a partnership, joint venture, trust, or other enterprise, including service with respect to employee benefit plans, whether the basis of the Proceeding is alleged action in an official capacity as a director, officer, employee, or agent or in any other capacity while serving as a director, officer, employee, or agent (hereafter an “Agent”), shall be indemnified and held harmless by the corporation to the fullest extent authorized by the Delaware General Corporation Law, as the same exists or may hereafter be amended or interpreted (but, in the case of any such amendment or interpretation, only to the extent that such amendment or interpretation permits the corporation to provide broader indemnification rights than were permitted prior thereto) against all expenses, liability, and loss (including attorneys’ fees, judgments, fines, ERISA excise taxes or penalties, and amounts paid or to be paid in settlement, and any interest, assessments, or other charges imposed thereon, and any federal, state, local, or foreign taxes imposed on any Agent as a result of the actual or deemed receipt of any payments under this Article) reasonably incurred or suffered by such person in connection with investigating, defending, being a witness in, or participating in (including on appeal), or preparing for any of the foregoing in, any Proceeding (hereinafter “Expenses”); provided , however , that except as to actions to enforce indemnification rights pursuant to Section 8.3 of this Article, the corporation shall indemnify any Agent seeking indemnification in connection with a Proceeding (or part thereof) initiated by such person only if the Proceeding (or part thereof) was authorized by the Board of Directors. The right to indemnification conferred in this Article VIII shall be a contract right.

S ECTION 8.2 Authority to Advance Expenses.

Expenses incurred by an officer or director (acting in his/her capacity as such) in defending a Proceeding shall be paid by the corporation in advance of the final disposition of such Proceeding; provided, however, that if required by the Delaware General Corporation Law, as amended, such Expenses shall be advanced only upon delivery to the corporation of an undertaking by or on behalf of such director or officer to repay such amount if it shall ultimately be determined that he/she is not entitled to be indemnified by the corporation as authorized in this Article or otherwise. Expenses incurred by other Agents of the corporation (or by the directors or officers not acting in their capacity as such, including service with respect to employee benefit plans) may be advanced upon such terms and conditions as the Board of Directors deems appropriate. Any obligation to reimburse the corporation for Expense advances shall be unsecured and no interest shall be charged thereon.

S ECTION 8.3 Right of Claimant to Bring Suit.

If a claim under Section 8.1 or 8.2 of this Article VIII is not paid in full by the corporation within sixty days after a written claim has been received by the corporation, the claimant may at any time thereafter bring suit against the corporation to recover the unpaid amount of the claim and, if successful in whole or in part, the claimant shall be entitled to be paid also the expense (including attorneys’ fees) of prosecuting such claim. It shall be a defense to any such action (other than an action brought to enforce a claim for expenses incurred in defending a Proceeding in advance of its final disposition where the required undertaking has been tendered to the corporation) that the claimant has not met the standards of conduct that make it permissible under the Delaware General Corporation Law for the corporation to

indemnify the claimant for the amount claimed. The burden of proving such a defense shall be on the corporation. Notwithstanding the foregoing, the failure of the corporation (including its Board of Directors, independent legal counsel, or its stockholders) to have made a determination prior to the commencement of such action that indemnification of the claimant is proper under the circumstances because he/she has met the applicable standard of conduct set forth in the Delaware General Corporation Law shall not be a defense to the action or create a presumption that claimant has not met the applicable standard of conduct.

S ECTION 8.4 Provisions Nonexclusive.

The rights conferred on any person by this Article VIII shall not be exclusive of any other rights that such person may have or hereafter acquire under any statute, provision of the Certificate of Incorporation, agreement, vote of stockholders or disinterested directors, or otherwise, both as to action in an official capacity and as to action in another capacity while holding such office. To the extent that any provision of the Certificate of Incorporation, agreement, or vote of the stockholders or disinterested directors is inconsistent with these Bylaws, the provision, agreement, or vote shall take precedence.

S ECTION 8.5 Authority to Insure.

The corporation may purchase and maintain insurance to protect itself and any Agent against any Expense, whether or not the corporation would have the power to indemnify the Agent against such Expense under applicable law or the provisions of this Article VIII.

S ECTION 8.6 Survival of Rights.

The rights provided by this Article VIII shall continue as to a person who has ceased to be an Agent and shall inure to the benefit of the heirs, executors, and administrators of such a person.

S ECTION 8.7 Settlement of Claims .

The corporation shall not be liable to indemnify any Agent under this Article VIII (a) for any amounts paid in settlement of any action or claim effected without the corporation’s written consent, which consent shall not be unreasonably withheld, or (b) for any judicial award if the corporation was not given a reasonable and timely opportunity, at its expense, to participate in the defense of such action.

S ECTION 8.8 Effect of Amendment .

Any amendment, repeal, or modification of this Article VIII shall not adversely affect any right or protection of any Agent existing at the time of such amendment, repeal, or modification.

S ECTION 8.9 Subrogation.

In the event of payment under this Article VIII, the corporation shall be subrogated to the extent of such payment to all of the rights of recovery of the Agent, who shall execute all papers

required and shall do everything that may be necessary to secure such rights, including the execution of such documents necessary to enable the corporation effectively to bring suit to enforce such rights.

S ECTION 8.10 No Duplication of Payments.

The corporation shall not be liable under this Article VIII to make any payment in connection with any claim made against the Agent to the extent the Agent has otherwise actually received payment (under any insurance policy, agreement, vote, or otherwise) of the amounts otherwise indemnifiable hereunder.

ARTICLE IX

NOTICES

Whenever, under any provisions of these Bylaws, notice is required to be given to any stockholder, the same shall be given either (i) in writing, timely and duly deposited in the United States and/or international mail, postage prepaid, and addressed to his/her last known post office address as shown by the stock record of the corporation or its transfer agent, or (ii) by a means of electronic transmission that satisfies the requirements of Section 2.4(e) of these Bylaws, and has been consented to by the stockholder to whom the notice is given. Any notice required to be given to any director may be given by either of the methods hereinabove stated, except that such notice other than one which is delivered personally, shall be sent to such address or (in the case of electronic communication) such e-mail address, facsimile telephone number or other form of electronic address as such director shall have filed in writing or by electronic communication with the Secretary of the corporation, or, in the absence of such filing, to the last known post office address of such director. If no address of a stockholder or director be known, such notice may be sent to the office of the corporation required to be maintained pursuant to Section 1.2 of Article I hereof. An affidavit of mailing, executed by a duly authorized and competent employee of the corporation or its transfer agent appointed with respect to the class of stock affected, specifying the name and address or the names and addresses of the stockholder or stockholders, director or directors, to whom any such notice or notices was or were given, and the time and method of giving the same, shall be conclusive evidence of the statements therein contained. All notices given by mail, as above provided, shall be deemed to have been given as at the time of mailing and all notices given by means of electronic transmission shall be deemed to have been given as at the sending time recorded by the electronic transmission equipment operator transmitting the same. It shall not be necessary that the same method of giving notice be employed in respect of all directors, but one permissible method may be employed in respect of any one or more, and any other permissible method or methods may be employed in respect of any other or others. The period or limitation of time within which any stockholder may exercise any option or right, or enjoy any privilege or benefit, or be required to act, or within which any director may exercise any power or right, or enjoy any privilege, pursuant to any notice sent him/her in the manner above provided, shall not be affected or extended in any manner by the failure of such a stockholder or such director to receive such notice. Whenever any notice is required to be given under the provisions of the statutes or of the Certificate of Incorporation, or of these Bylaws, a waiver thereof in writing signed by the person or persons entitled to said notice, or a waiver by electronic transmission by the person entitled to notice, whether before or

after the time stated therein, shall be deemed equivalent thereto. Whenever notice is required to be given, under any provision of law or of the Certificate of Incorporation or Bylaws of the corporation, to any person with whom communication is unlawful, the giving of such notice to such person shall not be required and there shall be no duty to apply to any governmental authority or agency for a license or permit to give such notice to such person. Any action or meeting which shall be taken or held without notice to any such person with whom communication is unlawful shall have the same force and effect as if such notice had been duly given. In the event that the action taken by the corporation is such as to require the filing of a certificate under any provision of the Delaware General Corporation Law, the certificate shall state, if such is the fact and if notice is required, that notice was given to all persons entitled to receive notice except such persons with whom communication is unlawful.

ARTICLE X

AMENDMENTS

These Bylaws may be repealed, altered or amended or new Bylaws adopted at any meeting of the stockholders, either annual or special, by the affirmative vote of a majority of the stock entitled to vote at such meeting, unless a larger vote is required by these Bylaws or the Certificate of Incorporation. The Board of Directors shall also have the authority to repeal, alter or amend these Bylaws or adopt new Bylaws (including, without limitation, the amendment of any Bylaws setting forth the number of directors who shall constitute the whole Board of Directors) by unanimous written consent or at any annual, regular, or special meeting by the affirmative vote of a majority of the whole number of directors, subject to the power of the stockholders to change or repeal such Bylaws and provided that the Board of Directors shall not make or alter any Bylaws fixing the qualifications, classifications, or term of office of directors.

CERTIFICATE OF SECRETARY

The undersigned, Secretary of ParthusCeva, Inc. (originally, DSP Cores Inc.; formerly, Corage, Inc. and Ceva, Inc.), a Delaware corporation, hereby certifies that the foregoing is a full, true and correct copy of the Amended and Restated Bylaws of said corporation, with all amendments to date of this Certificate.

WITNESS the signature of the undersigned as of the th day of , 2002.

,Secretary

Exhibit 10.1

SEPARATION AGREEMENT

This Separation Agreement (this “Agreement”) is made and entered into as of , 2002, by and among DSP Group, Inc., a Delaware corporation (“DSPGI”), DSP Group Ltd., an Israeli corporation (“DSPGL”), Ceva, Inc., a Delaware corporation (“Ceva, Inc.”), DSP Ceva, Inc., a Delaware corporation (“DSP Ceva”), and Corage, Ltd., an Israeli corporation (“Corage, Ltd.”).

Recitals

A. DSPGI owns all of the issued and outstanding capital stock of DSPGL and Ceva, Inc.

B. Ceva, Inc. owns all of the issued and outstanding capital stock of DSP Ceva.

C. DSPGL owns all of the issued and outstanding capital stock of Corage, Ltd.

D. DSPGI and DSPGL are in the business of designing, manufacturing and marketing high performance digital signal processing integrated circuit devices for telephone answering devices, computer telephony devices and voice-over broadband products (the “Products Business”), and in the business of developing and licensing designs for programmable digital signal processor cores, including, without limitation, digital signal processing cores used as the central processor in semiconductor chips for specific applications (the “Licensing Business”).

E. DSPGI and DSPGL collectively own and license certain intangible property, including but not limited to patents, trademarks and other intellectual property, relating to the Licensing Business, the beneficial rights to which in the United States are owned by DSPGI and in the rest of the world are owned by DSPGL.

F. The Boards of Directors of DSPGI and DSPGL have determined that it is appropriate and desirable, on the terms and conditions contemplated by this Agreement, for the parties to separate the Licensing Business and its assets from the Products Business by taking the following actions (such actions collectively constituting the “Separation”):

(i) DSPGL will transfer to Corage, Ltd. all of its right, title and interest in the Licensing Business Assets (but reserving the right to use certain Transferable Licensing IP, as it currently exists, in the Products Business), in exchange for the issuance by Corage, Ltd. to DSPGL of shares of Corage, Ltd. capital stock;

(ii) DSPGL will distribute to DSPGI all of the issued and outstanding capital stock of Corage, Ltd.;

(iii) In exchange for the issuance by Ceva, Inc. to DSPGI of shares of Ceva, Inc. capital stock, DSPGI simultaneously will contribute and transfer to Ceva, Inc. (A) all right, title and interest of DSPGI in the Licensing Business Assets (but reserving the right to use

certain Transferable Licensing IP (as defined in the Technology Transfer Agreements), as it currently exists, in the Products Business), and (B) all of the issued and outstanding shares of capital stock of Corage, Ltd.; and

(iv) In exchange for the issuance to Ceva, Inc., of shares of DSP Ceva capital stock, Ceva, Inc. in turn will contribute and transfer to DSP Ceva (A) all of the issued and outstanding shares of capital stock of Corage, Ltd., so that Corage, Ltd. will be a wholly-owned subsidiary of DSP Ceva; and (B) all of the right, title and interest of Ceva, Inc. in the Licensing Business Assets.

G. The Boards of Directors of DSPGI and Ceva, Inc. have determined further that, following completion of the Separation, it is appropriate and desirable, on the terms and conditions of this Agreement and the Combination Agreement, for DSPGI to distribute to holders of shares of DSPGI Common Stock the outstanding shares of Ceva, Inc. Common Stock owned directly or indirectly by DSPGI (the “Distribution”).

H. DSPGI and Ceva, Inc. intend that the Separation shall qualify as either a reorganization under Section 368(a)(1)(D) of the Internal Revenue Code of 1986, as amended (the “Code”) or as an exchange under Section 351 of the Code and intend that the Separation and the Distribution qualify under Section 355 of the Code and that Section 355(e) of the Code shall not apply to the Separation and the Distribution.

I. DSPGI and Ceva, Inc. have entered into the Combination Agreement dated April 4, 2002, as amended, with Parthus Technologies plc (the “Combination Agreement”), providing, among other things, for the combination of Parthus Technologies plc and Ceva, Inc. in a transaction in which shares of Ceva, Inc. will be issued to the shareholders of Parthus Technologies plc, and Ceva, Inc. will acquire all of the outstanding capital stock of Parthus Technologies plc (the “Combination”).

J. The consummation of the Separation and the Distribution is a condition to the consummation of the Combination.

K. The parties wish to set forth the principal corporate transactions required to effect the Separation and the Distribution and certain other agreements that will govern certain matters relating to the Separation and the Distribution, and the relationship of the parties following the Separation and the Distribution.

Agreements

For good and valuable consideration, the sufficiency of which is hereby acknowledged, the parties, intending to be legally bound, agree as follows:

ARTICLE I

DEFINITIONS

For the purpose of this Agreement the following terms shall have the following meanings:

“Action” means any demand, action, suit, countersuit, arbitration, inquiry, proceeding or investigation by or before any federal, state, local, foreign or international Governmental Authority or any arbitration or mediation tribunal.

“Active Trade or Business” means the active conduct of the trade or business (as defined in Section 355(b)(2) of the Code) conducted by Ceva, Inc. immediately prior to the Distribution Date.

“Affiliate” of any Person means a Person that controls, is controlled by, or is under common control with such Person. As used herein, “control” means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such entity, whether through ownership of voting securities or other interests, by contract or otherwise.

“Agent” means the distribution agent to be appointed by DSPGI to distribute to the stockholders of DSPGI pursuant to the Distribution the shares of Ceva, Inc. Common Stock held by DSPGI.

“Agreed Amount” means part, but not all, of the Claimed Amount.

“Ancillary Agreements” means the documents executed and delivered by the parties pursuant to Section 2.2 of this Agreement

“Applicable Deadline” has the meaning given in Section 8.3(b).

“Arbitration Act” means the United States Arbitration Act, 9 U.S.C. 1-14, as the same may be amended from time to time.

“Award” means any issuance of DSPGI Options to a single person with the same date of grant and exercise price.

“Claim Notice” means written notification which contains (i) a description of the Damages incurred or reasonably expected to be incurred by the Indemnitee and the Claimed Amount of such Damages, to the extent then known, (ii) a statement that the Indemnitee is entitled to indemnification under Article V for such Damages and a reasonable explanation of the basis therefor, and (iii) a demand for payment in the amount of such Damages.

“Claimed Amount” means the amount of any Damages incurred or reasonably expected to be incurred by the Indemnitee.

“Code” has the meaning given in the Recitals.

“Combination” has the meaning given in the Recitals.

“Combination Agreement” has the meaning given in the Recitals.

“Combination Closing” means the closing of the transactions contemplated under the Combination Agreement.

“Combination Effective Date” means the date on which the Combination Closing occurs.

“Commission” means the United States Securities and Exchange Commission.

“Consents” means any consent, waiver or approval from, or notification requirements to, any third party.

“Corage Assumed Liabilities” has the meaning given in Section 2.5.

“Corage Balance Sheet” means the Most Recent Balance Sheet as such term is defined in the Combination Agreement.

“Ceva, Inc. Common Stock” means Common Stock, $.001 par value per share, of Ceva, Inc.

“Corage Employees” means the current employees of Ceva, Inc., Corage, Ltd. or DSP Ceva and any other employees who are hired by Ceva, Inc., Corage, Ltd. or DSP Ceva prior to the Distribution Date.

“Ceva, Inc. Group” means Ceva, Inc., and each Subsidiary of Ceva, Inc. (including any Subsidiary contributed to Ceva, Inc. pursuant to the Separation) immediately after the Combination Effective Date.

“Ceva, Inc. Indemnitees” has the meaning given in Section 5.3.

“Ceva, Inc. Technology Transfer Agreement” has the meaning given in Section 2.2(e).

“Corage, Ltd. Stock Certificates” has the meaning given in Section 2.2(c).

“Corage, Ltd. Stock Powers” has the meaning given in Section 2.2(c).

“Corage, Ltd. Technology Transfer Agreement” has the meaning given in Section 2.2(a).

“Cost Sharing Agreement” means the Cost Sharing Agreement dated as of January 1, 1998, between DSPGI and DSPGL.

“Damages” means any and all debts, obligations and other liabilities (whether absolute, accrued, contingent, fixed or otherwise, or whether known or unknown, or due or to become due or otherwise), diminution in value, monetary damages, fines, fees, penalties, interest obligations, deficiencies, losses and expenses (including amounts paid in settlement, interest, court costs, costs of investigators, fees and expenses of attorneys, accountants, financial advisors and other experts, and other expenses of litigation), other than those costs and expenses of arbitration of a Dispute which are to be shared equally by the Indemnitee and the Indemnifying Party as set forth in Article VIII.

“Definitive Guidance” means, with respect to the United States, temporary or final Treasury regulations, a Revenue Ruling, Revenue Procedure or Notice issued by the IRS or a

final decision of the United States Tax Court, and with respect to any other jurisdiction, any similar guidance.

“Dispute” means the dispute resulting if the Indemnifying Party disputes its liability for all or part of the Claimed Amount.

“Distribution” has the meaning given in the Recitals.

“Distribution Date” means the date determined pursuant to Section 3.1 on which the Distribution occurs.

“DSP Europe” means DSP Group Europe Sarl, a French company.

“DSP Japan” means Nikon DSP K.K., a Japanese company.

“DSPGI Common Stock” means the Common Stock, $.001 par value per share, of DSPGI.

“DSPGI Group” means DSPGI and each Subsidiary of DSPGI (other than any member of the Ceva, Inc. Group) immediately after the Distribution Date.

“DSPGI Indemnitees” has the meaning given in Section 5.2.

“DSPGI Legacy Option” has the meaning set forth in Section 3.7(c).

“Employees Proprietary Information Agreements” shall have the meaning set forth in Section 2.6(c).

“Environmental Liabilities” means all Liabilities relating to, arising out of or resulting from any Environmental Law or contract or agreement relating to environmental, health or safety matters (including all removal, remediation or cleanup costs, investigatory costs, governmental response costs, natural resources damages, property damages, personal injury damages, costs of compliance with any settlement, judgment or other determination of Liability and indemnity, contribution or similar obligations) and all costs and expenses, interest, fines, penalties or other monetary sanctions in connection therewith.

“Environmental Law” means any federal, state, local, foreign or international statute, ordinance, rule, regulation, code, license, permit, authorization, approval, consent, common law (including tort and environmental nuisance law), legal doctrine, order, judgment, decree, injunction, requirement or agreement with any Governmental Authority, now or hereafter in effect relating to health, safety, pollution or the environment (including ambient air, surface water, groundwater, land surface or subsurface strata) or to emissions, discharges, releases or threatened releases of any substance currently or at any time hereafter listed, defined, designated or classified as hazardous, toxic waste, radioactive or dangerous, or otherwise regulated, under any of the foregoing, or otherwise relating to the manufacture, processing, distribution, use, treatment, storage, disposal, transport or handling of any such substances, including the Comprehensive Environmental Response, Compensation and Liability Act, the Superfund

Amendments and Reauthorization Act and the Resource Conservation and Recovery Act and comparable provisions in state, local, foreign or international law.

“Form 10” has the meaning given in Section 3.3.

“Governmental Approval” means any authorization, consent, order or approval of, or declarations or filings with, or expirations of any waiting period imposed by any Governmental Authority.

“Governmental Authority” shall mean any federal, state, local, foreign or international court, government, department, commission, board, bureau, agency, official or other regulatory, administrative or governmental authority.

“Group” means with respect to Ceva, Inc., the Ceva, Inc. Group, and with respect to DSPGI, the DSPGI Group.

“Income Tax Return” shall mean any tax return relating to income tax.

“Indemnifying Party” has the meaning given in Section 5.4(a).

“Indemnitee” has the meaning given in Section 5.4(a).

“Indemnity Payment” has the meaning given in Section 5.4(a).

“Information” means information, whether or not patentable or copyrightable, in written, oral, electronic or other tangible or intangible forms, stored in any medium, including studies, reports, records, books, contracts, instruments, surveys, discoveries, ideas, concepts, know-how, techniques, designs, specifications, drawings, blueprints, diagrams, models, prototypes, samples, flow charts, data, computer data, disks, diskettes, tapes, computer programs or other software, marketing plans, customer names, communications by or to attorneys (including attorney-client privileged communications), memos and other materials prepared by attorneys or under their direction (including attorney work product), and other technical, financial, employee or business information or data.

“Information Statement” has the meaning given in Section 3.3.

“Insurance Proceeds” means those monies:

(i) received by an insured from an insurance carrier; or

(ii) paid by an insurance carrier on behalf of the insured;

in any such case net of any applicable premium adjustments (including reserves and retrospectively rated premium adjustments) and net of any costs or expenses incurred in the collection thereof.

“IRS” means the United States Internal Revenue Service.

“Liabilities” means any and all losses, claims, charges, debts, demands, actions, causes of action, suits, damages, obligations, payments, costs and expenses, sums of money, accounts, reckonings, bonds, specialties, indemnities and similar obligations, exonerations, covenants, contracts, controversies, agreements, promises, doings, omissions, variances, guarantees, make whole agreements and similar obligations, and other liabilities, including all contractual obligations, whether absolute or contingent, matured or unmatured, liquidated or unliquidated, accrued or unaccrued, known or unknown, whenever arising, and including those arising under any law, rule, regulation, Action, threatened or contemplated Action (including the costs and expenses of demands, assessments, judgments, settlements and compromises relating thereto and attorneys’ fees and any and all costs and expenses, whatsoever reasonably incurred in investigating, preparing or defending against any such Actions or threatened or contemplated Actions), order or consent decree of any Governmental Authority or any award of any arbitrator or mediator of any kind, and those arising under any contract, commitment or undertaking, including those arising under this Agreement or any Ancillary Agreement, in each case, whether or not recorded or reflected or required to be recorded or reflected on the books and records or financial statements of any Person.

“Licensing Business” has the meaning given in the Recitals.

“Licensing Business Assets” means all of DSPGL’s and DSPGI’s right, title and interest in and to the following assets (all as defined in the Technology Transfer Agreements, to the extent not defined herein):

(a) the Transferable Licensing IP;

(b) the Other Transferable Assets;

(d) the Other Contracts; and

(e) the Employee Proprietary Information Agreements.

Licensing Business Assets shall not include any accounts receivables or any other current assets. Corage Assumed Liabilities shall not include any accounts payable or any other current liabilities or any intercompany indebtedness of the Licensing Business.

“Licensing Business Employees” means the employees set forth on Schedule A attached hereto.

“Non-Assigned Assets” has the meaning set forth in Section 2.3.

“Non-Transferable Employee” shall have the meaning set forth in Section 2.6(b).

“Person” means an individual, a general or limited partnership, a corporation, a trust, a joint venture, an unincorporated organization, a limited liability entity, any other entity and any Governmental Authority.

“Post-Distribution DSPGI Adjusted Option” means an DSPGI Adjusted Option that vests after the Distribution Date.

“Pre-Distribution DSPGI Adjusted Option” means a DSPGI Adjusted Option that vested on or before the Distribution Date.

“Prime Rate” means the rate which Citibank, N.A. (or any successor thereto or other major money center commercial bank agreed to by DSPGI and Ceva, Inc. ) announces from time to time as its prime lending rate, as in effect from time to time.

“Proposed Acquisition Transaction” means a transaction or series of transactions as a result of which any Person or any group of related Persons would (directly or indirectly) acquire, or have the right to acquire, (A) from Ceva, Inc. or one or more holders of outstanding shares of Ceva, Inc. capital stock, any shares of Ceva, Inc. capital stock or (B) from Ceva, Inc. or from any Ceva, Inc. Subsidiary any shares of capital stock of a Ceva, Inc. Subsidiary; except that none of the following shall be a Proposed Acquisition Transaction: (i) any transaction, whether having occurred prior to the Distribution or to occur after the Distribution, that the IRS rules in the Tax Rulings is not part of a plan or series of transactions related to the Distribution; (ii) the transactions contemplated by the Combination Agreement and any transactions that reasonably flow from the transactions contemplated by the Combination Agreement; (iii) the grant of stock options by Ceva, Inc. to any employee, independent contractor or director of the Ceva, Inc. Group which grant, based on the unqualified opinion of Hale and Dorr LLP or other Ceva, Inc. Tax Advisor acceptable to DSPGI, whose approval shall not be unreasonably withheld, would not under Section 355(e) of the Code and then-applicable Treasury Regulations be considered part of a plan or series of transactions related to the Distribution; (iv) the issuance of stock by Ceva, Inc. or its Subsidiaries to any employee, independent contractor or director of the Ceva, Inc. Group (including the issuance of stock upon the exercise of a stock option) which issuance, based on the unqualified opinion of Hale and Dorr LLP or other Ceva, Inc. Tax Advisor acceptable to DSPGI, whose approval shall not be unreasonably withheld, would not under Section 355(e) of the Code and then-applicable Treasury Regulations be considered part of a plan or series of transactions related to the Distribution; or (v) any other transactions specifically permitted by then-applicable Treasury Regulations promulgated under Section 355(e) of the Code and to which DSPGI has consented in its discretion, which discretion shall be exercised in good faith solely to preserve the Tax-Free Status of the Separation and Distribution.

“Record Date” means the close of business on the date to be determined by the DSPGI Board of Directors as the record date for determining stockholders of DSPGI entitled to receive shares of Ceva, Inc. Common Stock in the Distribution.

“Representation Date” means any date on which Ceva, Inc. makes any representation (i) to the IRS or a Tax Advisor for the purpose of obtaining a Subsequent Tax Opinion/Ruling, or (ii) to DSPGI for the purpose of any determination required to be made by DSPGI pursuant to Section 4.2.

“Representation Letters” means any representation letters and any other materials (including, without limitation, the ruling request and the related supplemental submissions to the IRS) delivered or deliverable by DSPGI or Ceva, Inc., as the case may be, in connection with the

issuance by the IRS of the Tax Rulings, or the rendering by a Tax Advisor and/or the issuance by the IRS of the Subsequent Tax Opinion/Ruling.

“Securities Act” means the Securities Act of 1933, as amended, together with the rules and regulations promulgated thereunder.

“Separation” has the meaning given in the Recitals.

“Separation Closing” has the meaning given in Section 2.1.

“Subsequent Tax Opinion/Ruling” means either (i) any unqualified opinion of a Tax Advisor selected by Ceva, Inc. with the consent of DSPGI, which consent shall not be unreasonably withheld, confirming, in form and substance satisfactory to each of Ceva, Inc. and DSPGI in its discretion, which discretion shall be exercised in good faith solely to preserve the Tax-Free Status of the Separation and Distribution, that, as a consequence of the consummation of a subsequent transaction, no income, gain or loss for U.S. federal income tax purposes will be recognized by DSPGI, the stockholders or former stockholders of DSPGI, or any DSPGI Affiliate with respect to the Distribution, or (ii) an IRS private letter ruling to the same effect.

“Subsidiary” of any Person means any corporation or other organization whether incorporated or unincorporated of which at least a majority of the securities or interests having by the terms thereof ordinary voting power to elect at least a majority of the board of directors or others performing similar functions with respect to such corporation or other organization is directly or indirectly owned or controlled by such Person or by any one or more of its Subsidiaries, or by such Person and one or more of its Subsidiaries; provided, however, that no Person that is not directly or indirectly wholly owned by any other Person shall be a Subsidiary of such other Person unless such other Person controls, or has the right, power or ability to control, that Person.

“Tax Advisor” means the nationally recognized professional law firm or accounting firm designated by DSPGI or Ceva, Inc., as applicable, as its Tax Advisor.

“Tax-Free Status of the Separation and Distribution” means the nonrecognition of taxable gain or loss for U.S. federal income tax purposes and for Israeli tax purposes to DSPGI, DSPGI Affiliates and DSPGI’s stockholders in connection with the Separation and the Distribution.

“Tax Indemnification Agreement” means the Tax Indemnification and Allocation Agreement dated as of the date of this Agreement between DSPGI and Ceva, Inc.

“Tax-Related Losses” means (i) all U.S. federal, state, local and foreign income taxes (including interest and penalties thereon) imposed pursuant to any settlement, final determination, judgment or otherwise, and (ii) all legal, accounting and other professional fees and court costs incurred in connection with such taxes.

“Tax Rulings” means any rulings by the IRS deliverable to DSPGI in connection with the Separation and the Distribution.

“Technology Transfer Agreements” means the Corage, Ltd. Technology Transfer Agreement and the Ceva, Inc. Technology Transfer Agreement.

“Third Party Claim” has the meaning given in Section 5.5(a).

“Transferable Employees” shall have the meaning set forth in Section 2.6(a).

“Transferring Entities” shall mean DSPGI and all of its Affiliates immediately prior to the Effective Date, other than DSP Group Ltd., Corage, Ltd., Ceva, Inc. and their Subsidiaries.

ARTICLE II

THE SEPARATION

2.1. Separation Closing . Consummation of the Separation (the “Separation Closing”) shall take place on the Distribution Date but in any event prior to the Combination Effective Date, at such time and place as may be determined by the Board of Directors of DSPGI. All actions constituting the Separation shall be occur and be deemed to have occurred on and as of the Distribution Date, effective immediately prior to the Distribution becoming effective.

2.2. Actions to be Taken at Separation Closing . At Separation Closing, the parties shall take the actions described below in this Section 2.2, in the following order:

(a) DSPGL and Corage, Ltd. shall execute and deliver a Technology Transfer Agreement substantially in the form attached as Exhibit 2.2(a) (the “Corage, Ltd. Technology Transfer Agreement”) and such other instruments of conveyance as Corage, Ltd. may reasonably request;

(b) Corage, Ltd. shall issue to DSPGL, free and clear of all liens and encumbrances, certificates representing 1,000 shares of Corage, Ltd. common stock, $.001 per share par value, as consideration for the transfer of Licensing Business Assets as provided in this Agreement, the Corage, Ltd. Technology Transfer Agreement and other related documents;

(c) DSPGL shall distribute to DSPGI all of the issued and outstanding shares of Corage, Ltd. capital stock, free and clear of all liens and encumbrances, by delivery to DSPGI of the original certificate or certificates therefor (the “Corage, Ltd. Stock Certificates”), together with stock powers executed in blank (the “Corage, Ltd. Stock Powers”);

(d) DSPGI shall contribute to Ceva, Inc. all of the issued and outstanding shares of Corage, Ltd. capital stock, by delivery to Ceva, Inc. of the Corage, Ltd. Stock Certificates and the Corage, Ltd. Stock Powers;

(e) DSPGI and Ceva, Inc. shall execute and deliver a Technology Transfer Agreement substantially in the form attached as Exhibit 2.2(e) (the “Ceva, Inc. Technology Transfer Agreement”) and such other instruments of conveyance as Ceva, Inc. may reasonably request;

(f) Ceva, Inc. shall issue to DSPGI, free and clear of all liens and encumbrances, certificates representing 1,000 shares of Ceva, Inc. Common Stock as consideration for the transfer of Licensing Business Assets as provided in this Agreement, the Ceva, Inc. Technology Transfer Agreement and other related documents and the contribution of capital stock of Ceva, Inc.;

(g) Ceva, Inc. and DSP Ceva shall execute and deliver a Technology Transfer Assignment and Assumption Agreement substantially in the form attached as Exhibit 2.2(g) and such other instruments of conveyance as DSP Ceva may reasonably request;

(h) Ceva, Inc. shall contribute to DSP Ceva all of this issued and outstanding shares of Corage, Ltd. capital stock, by delivery to DSP Ceva of the Corage, Ltd. Stock Certificates and the Corage, Ltd. Stock Powers;

(i) DSP Ceva shall issue to Ceva, Inc., free and clear of all liens and encumbrances, certificates representing 1,000 shares of DSP Ceva common stock, $1.00 per share par value, as consideration for the transfer of Licensing Business Assets as provided in this Agreement, the DSP Ceva Technology Transfer Agreement and other related documents;

(j) DSPGI, Ceva, Inc. and DSP Ceva shall execute and deliver a Transition Services Agreement in a form to be mutually agreed upon by the parties;

(k) DSPGL, Corage, Ltd., DSP Japan and DSP Europe shall execute and deliver a Transition Services Agreement in a form to be mutually agreed upon by the parties;

(l) DSPGI and DSPGL shall amend the Intercompany Services Agreement between them dated July 1, 1998, and Section 3.2 of the Cost Sharing Agreement, as necessary to delete or modify provisions that relate to the Licensing Business;

(m) each of the parties shall deliver to the other a certificate substantially in the form attached as Exhibit 2.2(m) , executed by one of its executive officers;

(n) each of the parties shall deliver to the other a certificate substantially in the form attached as Exhibit 2.2(n) , executed by its secretary, with true and correct copies of the attachments required thereby; and

(o) each of the parties issuing or receiving shares of capital stock of any of the other companies pursuant to this Section shall execute and deliver cross-receipts evidencing their issuance or transfer and receipt of shares of such shares of capital stock;

and at any time, and from time to time, after the Distribution Date, at the request of Ceva, Inc. and without further consideration, DSPGI shall promptly execute and deliver (or shall cause its appropriate Subsidiary to execute and deliver) such instruments of sale, transfer, conveyance, assignment and confirmation as Ceva, Inc. may reasonably request, and take any and all such other action as Ceva, Inc. may reasonably request more effectively to transfer, convey and assign to Ceva, Inc. (or a Subsidiary of Ceva, Inc.) and to confirm Ceva, Inc.’s or a Subsidiary of Ceva, Inc.’s title to all of the Licensing Business Assets and all of the outstanding shares of capital stock of Corage, Ltd. and to put Ceva, Inc. in actual possession and operating control (through its

ownership of the outstanding capital stock of Corage, Ltd., the Licensing Business Assets) of the Licensing Business Assets.

2.3. Consents . Schedule 2.3 lists all of the Consents. Each party hereto shall use commercially reasonable efforts to obtain, at its expense, all of the Consents. If any Consent shall not have been obtained by the Distribution Date, this Agreement and the Ancillary Agreements shall not constitute an assignment of the agreement, right or other Licensing Business Asset to which it relates (each a “Non-Assigned Asset”) unless and until such time as such Consent has been obtained. Following Separation Closing, DSPGI and Ceva, Inc. each shall (or shall cause their Subsidiaries to) use commercially reasonable efforts to obtain all such Consents as soon as practicable. Upon any such Consent being obtained, the Non-Assigned Assets to which it relates automatically shall be deemed to have been assigned as contemplated by the relevant Ancillary Agreements.

2.4. Working Capital; Prorations of Certain Items . As of the Combination Effective Date, the working capital of the Licensing Business calculated as the excess of the current assets of the Licensing Business over the current liabilities of the Licensing Business as of the Combination Effective Date (excluding the contribution of U.S.$40 million to Ceva, Inc. as contemplated by Section 3.2(e) of this Agreement), each determined on a basis consistent with the determination of current assets and current liabilities on the Corage Balance Sheet, shall be not less than zero. For purposes of this section, working capital shall not include any Taxes, as such term is defined in the Combination Agreement. The Parties further agree, that all accrued or prepaid income and accrued or prepaid expenses relating to the License Business, each as determined in accordance with U.S. generally accepted accounting principles consistently applied and included in the working capital, shall be appropriately allocated under U.S. generally accepted accounting principles for periods before and after the Combination Effective Date, and the Parties shall agree to settle the amounts thereof not more than sixty days following the Combination Effective Date.

2.5. Assumption of Corage Assumed Liabilities . After the Distribution Date, Ceva, Inc. shall assume, pay, discharge and perform in accordance with their terms the following (the “Corage Assumed Liabilities”): (i) any and all Liabilities that are expressly contemplated by this Agreement or any agreement or document contemplated by, or executed and delivered pursuant to, this Agreement (including but not limited to the Ancillary Agreements) as Liabilities to be assumed by any member of the Ceva, Inc. Group; (ii) all Liabilities, including Liabilities related to Corage Employees and product Liabilities, payable under or pursuant to, relating to, arising out of or resulting from (a) the operation of the Licensing Business, as conducted at any time prior to, on or after the Distribution Date, or (b) the Licensing Business Assets; (iii) all Liabilities, reflected on the Corage Balance Sheet, subject to the discharge of such Liabilities subsequent to the date of the Corage Balance Sheet; and (iv) all Liabilities of the DSPGI Group arising or assumed after the date of the Corage Balance Sheet which are of a nature or type that would have resulted in such Liabilities being included as Liabilities on the Corage Balance Sheet had they arisen or been assumed on or before the date of the Corage Balance Sheet, determined on a basis consistent with the determination of the Liabilities of the Licensing Business on the Corage Balance Sheet. Notwithstanding anything to the contrary in this Agreement, the Corage Assumed Liabilities excludes all Taxes (as defined in the Combination Agreement) except as provided in Article IV of this Agreement or in the Tax Indemnification Agreement.

2.6. Transfer of Employees .

(a) Prior to the Separation Closing, DSPGI, on behalf of itself and the Transferring Entities, will transfer or release to Ceva, Inc. the employees of its licensing division described on Schedule 2.6(a) to this Agreement (“Transferable Employees”), and Ceva, Inc. shall accept such transfer and assume (and shall pay, perform and discharge when due) all obligations with respect to such employees accruing from and after the Separation Closing.

(b) To the extent that any Transferable Employees shall have entered into assignable employment contracts with DSPGI, DSPGI shall assign, and shall cause other Transferring Entities to assign, all of the rights of the Transferring Entities under any such employment contracts to Ceva, Inc., to the extent such rights are assignable. For any Transferable Employee without an assignable employment contract (“Non-Transferable Employee”), DSPGI shall fully release, and shall cause other Transferring Entities to fully release, such employee from employment, thereby allowing Ceva, Inc., to use its best efforts to employ such Non-Transferable Employee.

(c) Prior to the Separation Closing, DSPGI, on behalf of itself and the Transferring Entities, shall transfer and assign to Ceva, Inc., and Ceva, Inc. shall accept such transfer and assume, all of the rights and obligations of the Transferring Entities under all agreements entered into by the Transferable Employees and the Licensing Business Employees with the Transferring Entities, or any of them, relating to confidentiality, assignment of inventions and similar matters (“Employee Proprietary Information Agreements”), which agreements shall remain in full force and effect in accordance with their terms, provided that DSPGI shall retain its rights under the Employee Proprietary Information Agreements to the extent required to bring actions (at law, in equity or otherwise) for any breach of such Employee Proprietary Information Agreements relating to acts or omissions prior to the Separation Closing by Transferable Employees who become employees of Ceva, Inc. The Parties shall reasonably cooperate in connection with any action against any of the Transferable Employees.

ARTICLE III

THE DISTRIBUTION

3.1. The Distribution . Subject to Section 3.4, DPSGI shall effect the Distribution on the Distribution Date, as described in this Article III.

(a) Subject to Section 3.4, on or prior to the Distribution Date, DSPGI shall deliver to the Agent for the benefit of holders of record of DSPGI Common Stock on the Record Date, a single stock certificate, endorsed by DSPGI in blank, representing all of the outstanding shares of Ceva, Inc. Common Stock, and shall cause the transfer agent for the shares of DSPGI Common Stock to instruct the Agent to distribute on the Distribution Date the appropriate number of such shares of Ceva, Inc. Common Stock to each such holder or designated transferee or transferees of such holder.

(b) Subject to Section 3.5, each holder of DSPGI Common Stock on the Record Date (or such holder’s designated transferee or transferees) shall be entitled to receive in the Distribution a number of shares of Ceva, Inc. Common Stock equal to the number of shares

of DSPGI Common Stock held by such holder on the Record Date multiplied by a fraction, the numerator of which is the number of shares of Ceva, Inc. Common Stock beneficially owned by DSPGI on the Record Date, and the denominator of which is the number of shares of DSPGI Common Stock outstanding on the Record Date.

(c) Ceva, Inc. and DSPGI, as the case may be, shall provide to the Agent all share certificates and any information required in order to complete the Distribution on the basis specified above.

3.2. Actions Prior to the Distribution .

(a) DSPGI and Ceva, Inc. shall mail, prior to the date determined by the Board of Directors of DSPGI as the record date, to the holders of common stock of DSPGI, the Information Statement and such other information concerning Ceva, Inc., its business, operations and management, the Separation, the Distribution, and such other matters as DSPGI and Ceva, Inc. shall reasonably determine and as may be required by law.

(b) DSPGI and Ceva, Inc. shall prepare and file with the appropriate Governmental Authority any documents or statements which are required to reflect the establishment of, or amendments to, any employee benefit and other plans necessary or appropriate in connection with the Separation and Distribution.

(c) DSPGI and Ceva, Inc. shall take all such action as may be necessary or appropriate under the securities or Blue Sky laws of the United States (and any comparable laws under any foreign jurisdiction) in connection with the Distribution.

(d) DSPGI and Ceva, Inc. shall take all reasonable steps necessary and appropriate to cause the conditions set forth in Section 3.4 (subject to Sections 3.5(d)) to be satisfied and to effect the Distribution on the Distribution Date.

(e) Immediately prior to effecting the Distribution, DSPGI shall contribute to Ceva, Inc., in immediately available funds, U.S. $40 million; it being acknowledged by the Parties that, in accordance with Section 8.3 of the Combination Agreement, Ceva, Inc. will bear U.S.$2.0 million of the transaction fees and expenses.

3.3. Form 10 . DSPGI and Ceva, Inc. shall prepare and file with the Commission the General Form for Registration of Securities on Form 10, including the Information Statement describing the Distribution and information concerning the business, operations and financial information of Ceva, Inc. to be distributed to the stockholders of DSPGI (the “Information Statement”), pursuant to which all the outstanding shares of common stock of Ceva, Inc. as of the Distribution Date will be registered under the Securities Exchange Act of 1934, as amended, (together with all amendments thereto, the “Form 10”). Each of DSPGI and Ceva, Inc. shall respond to any comments of the Commission and use such commercially reasonable efforts as may be necessary in order to cause the Form 10 to become and remain effective as required by law, including, but not limited to, filing such amendments to the Form 10 as may be required by the Commission or applicable securities laws. The Form 10 shall have become effective on or prior to the Distribution Date, and there shall be no stop-order in effect with respect thereto. DSPGI and Ceva, Inc. shall take such other actions and make any other filings as may be

necessary or appropriate under the securities or blue sky laws of the United States or any other relevant jurisdiction in connection with the Distribution; and, with respect to any such actions and filings, where applicable, shall use commercially reasonable effort to have such filings become effective or accepted.

3.4. Conditions to Distribution . The obligation of DSPGI to effect the Distribution is subject to the satisfaction at or prior to the Distribution Date of the following conditions:

(a) DSPGI and Ceva, Inc. shall have fulfilled these conditions set forth in Section 6.2(a) of the Combination Agreement;

(b) all Governmental Approvals necessary to consummate the Distribution shall have been obtained and be in full force and effect;

(d) no order, injunction or decree issued by any court or agency of competent jurisdiction or other legal restraint or prohibition preventing the consummation of the Distribution shall be in effect and no other event outside the control of DSPGI shall have occurred or failed to occur that prevents the consummation of the Distribution;

(e) the Combination Agreement shall not have been terminated, and all conditions to the obligations of the parties thereunder to consummate the Combination shall have been satisfied or waived, except only the consummation of the Distribution; and

(f) each of the Licensing Business Employees shall be Corage Employees.

3.5. Fractional Shares . No fractional shares of Ceva, Inc. Common Stock shall be issued in connection with the Distribution. Any fractional interest shall be aggregated and sold by Ceva’s transfer agent, with the cash due to each stockholder for such fraction issued to any holder of record or beneficial owner of DSPGI Common Stock as of the Record Date that has such fractional share interest, or such other procedure as the parties may agree.

3.6. The Ceva, Inc. Board of Directors . DSPGI and Ceva, Inc. each shall take all actions which may be required to elect or otherwise appoint as directors of Ceva, Inc., on or prior to the Distribution Date, such individuals as may be designated by Ceva, Inc. Board of Directors (which designation shall be approved by the majority of Ceva, Inc.’s directors who are at such time neither officers nor directors of DSPGI) as additional or substitute members of the Board of Directors of Ceva, Inc. on the Distribution Date.

3.7. Adjustment of DSPGI Stock Options .

(a) Each outstanding option to purchase DSPGI Common Stock granted prior to the Distribution Date and held by Corage Employees (each a “DSPGI Option”) shall be adjusted as set forth in this Section 3.7. Each DSPGI Option shall be converted as of the Distribution Date, into two options: an option (a “DSPGI Adjusted Option”) to purchase the same number of shares of DSPGI Common Stock covered by the DSPGI Option and as to which the DSPGI Option has not been exercised as of the Distribution Date (“DSPGI Option Number”)

and an option (a “Ceva, Inc. Option”) to purchase a number of shares of Ceva, Inc. Common Stock equal to the DSPGI Option Number times a fraction, the numerator of which is the total number of shares of Ceva, Inc. Common Stock distributed to DSPGI stockholders in the Distribution and the denominator of which is the total number of shares of DSPGI Common Stock outstanding on the record date for the Distribution (the “Distribution Ratio”). The terms of the DSPGI Adjusted Option and the Ceva, Inc. Option (other than the exercise price and the number of shares) shall be substantially the same as the DSPGI Option from which they were converted. If and to the extent the vesting of any DSPGI Option is subject to vesting based on the continuous employment of the holder thereof with DSPGI or its Subsidiaries, the vesting of the DSPGI Adjusted Option and Ceva, Inc. Option into which it is converted shall be subject to the same vesting schedule and continuation of the holder’s employment with Ceva, Inc. or its Subsidiaries, giving credit for continuous employment with DSPGI or Ceva, Inc. or their respective Subsidiaries, prior to the Distribution Date. The exercise prices per share for each DSPGI Adjusted Option and the Ceva, Inc. Option shall be established in a manner so that: (1) the aggregate “intrinsic value” (i.e. the market value of the stock underlying the option, less the exercise price of such option, multiplied by the number of shares then covered by such option) after the Distribution of the DSPGI Adjusted Option plus the Ceva, Inc. Option is not greater than the intrinsic value of the related DSPGI Option immediately prior to the Distribution; and (2) the ratio of the exercise price per option to the market value per share after the Distribution is not lower than the ratio of the exercise price of the DSPGI Option to the market value per share of DSPGI Common Stock immediately prior to the Distribution. The determination of the exercise prices for each DSPGI Adjusted Option and Ceva, Inc. Option shall be made by DSPGI as advised by its professional advisors. The exercise prices for each DSPGI Adjusted Option and Ceva, Inc. Option shall be determined as follows:

(i) Calculate the aggregate intrinsic value of the DSPGI Option immediately prior to the Distribution and determine the ratio of the exercise price for the DSPGI Option to the market value of DSPGI Common Stock immediately prior to the Distribution (the “Pre-Distribution Exercise Price to Market Price Ratio”).

(ii) Calculate the preliminary DSPGI Adjusted Option exercise price by dividing (x) the market value of DSPGI Common Stock (without Ceva, Inc.) immediately after the Distribution by (y) the sum of (1) the market value of DSPGI Common Stock immediately after the Distribution and (2) the market value of Ceva, Inc. Common Stock immediately after the Distribution multiplied by the Distribution Ratio, and multiplying the result by the exercise price for the DSPGI Option.

(iii) Divide the preliminary DSPGI Adjusted Option exercise price by the market value of DSPGI Common Stock immediately after the Distribution to determine the “DSPGI Adjusted Exercise Price to Market Price Ratio.” If the DSPGI Adjusted Exercise Price to Market Price Ratio is less than the Pre-Distribution Exercise Price to Market Price Ratio, increase the preliminary DSPGI Adjusted Option exercise price to align the DSPGI Adjusted Exercise Price to Market Ratio with the Pre-Distribution Exercise Price to Market Price Ratio in order to determine the final Adjusted DSPGI Option exercise price.

(iv) Calculate the preliminary Ceva, Inc. Option exercise price by multiplying the DSPGI Option exercise price by the result obtained by dividing (1) one minus the fraction calculated in paragraph (ii) above by (2) the Distribution Ratio.

(v) Divide the preliminary Ceva, Inc. Option exercise price by the market value of Ceva, Inc. Common Stock immediately before the Distribution to determine the “Ceva, Inc. Adjusted Exercise Price to Market Price Ratio.” If the Ceva, Inc. Adjusted Exercise Price to Market Ratio is less than the Pre-Distribution Exercise Price to Market Price Ratio, increase the preliminary Ceva, Inc. Option exercise price to align the Ceva, Inc. Adjusted Exercise Price to Market Price Ratio with the Pre-Distribution Exercise Price to Market Price Ratio in order to determine the final Ceva, Inc. Option exercise price.

(vi) Finally, add the aggregate intrinsic values of the DSPGI Adjusted Option and Ceva, Inc. Option and compare the sum to the aggregate intrinsic value calculated in paragraph (i) above and make final adjustments, if necessary, so that the aggregate intrinsic values of the DSPGI Adjusted Option and Ceva, Inc. Option do not exceed the original aggregate intrinsic value of the DSPGI Option.

(b) The Ceva, Inc. Options to be granted with respect to each Adjusted Option shall be issued under Ceva, Inc.’s 2000 Stock Incentive Plan, and Ceva, Inc. shall take all corporate action and make all required filings under applicable state Blue Sky laws and the Securities Act to (i) issue the Ceva, Inc. Options required under this Section 3.7 and (ii) to register or qualify the Ceva, Inc. Options and/or the underlying shares of Ceva, Inc. Common Stock so that the shares of Ceva, Inc. Common Stock acquired upon exercise of each Ceva, Inc. Option are freely tradable under the Securities Act (except for shares acquired by Affiliates of Ceva, Inc.) and each applicable state’s Blue Sky laws.

(c) Each outstanding DSPGI Option granted prior to the Distribution Date and not described in Section 3.7(a) (a “DSPGI Legacy Option”) shall be adjusted as set forth in this Section 3.7(c). As of the Distribution Date, the exercise price and, if appropriate, the number of shares subject to each DSPGI Legacy Option shall be adjusted to reflect the reduction in value of DSPGI Common Stock as a result of the Distribution. The exercise price per share and, if appropriate, the number of shares subject to each DSPGI Legacy Option shall be adjusted in a manner so that: (1) the aggregate “intrinsic value” (i.e. the market value of the stock underlying the option, less the exercise price of such option, multiplied by the number of shares then covered by such option) after the Distribution is not greater than the intrinsic value of the DSPGI Option immediately prior to the Distribution; and (2) the ratio of the exercise price of the DSPGI Legacy Option to the market value per share of DSPGI Common Stock after the Distribution is not lower than the ratio of the exercise price of the DSPGI Option to the market value per share of DSPGI Common Stock immediately prior to the Distribution. The determination of the exercise price and the number of shares subject to each DSPGI Legacy Option shall be made by DSPGI as advised by its professional advisors.

(d) Notwithstanding anything herein or in the Ancillary Agreements to the contrary and the to extent permitted by applicable law:

(i) All compensation deductions attributable to the amounts included in the gross income of a Corage Employee as a result of the exercise of a Pre-Distribution DSPGI Adjusted Option shall be allocated to and claimed by the DSPGI Group, and the Ceva, Inc. Group shall not report such deductions on its Income Tax Returns.

(ii) All compensation deductions attributable to the amounts included in the gross income of a Corage Employee as a result of the exercise of a Post-Distribution DSPGI Adjusted Option shall be allocated to and claimed by the Ceva, Inc. Group, and the DSPGI Group shall not report such deductions on its Income Tax Returns.

(iii) To the extent that a Corage Employee exercises DSPGI Adjusted Options and such options are included in an Award some of which are Pre-Distribution DSPGI Adjusted Options and others of which are Post-Distribution DSPGI Adjusted Options, for purposes of this Agreement, all of the Pre-Distribution DSPGI Adjusted Options shall be deemed to have been exercised before any of the Post-Distribution DSPGI Adjusted Options are treated as having been exercised.

(iv) All compensation deductions attributable to the amounts included in the gross income of a Corage Employee as a result of the exercise of a Ceva, Inc. Option after the Distribution Date shall be allocated to and claimed by the Ceva, Inc. Group, and the DSPGI Group shall not report such deductions on its Income Tax Returns.

(e) Notwithstanding anything herein or in the Ancillary Agreements to the contrary, Ceva, Inc. shall be responsible for any payroll taxes and withholding taxes arising out of the exercise of a DSPGI Adjusted Option or a Ceva, Inc. Option by a Corage Employee. DSPGI Group shall provide the Ceva, Inc. Group with any information necessary to make such withholdings and shall collect any required withholdings upon the exercise of a DSPGI Adjusted Option (and shall not permit the exercise of any such option unless the optionee has made provisions for such withholding tax) and remit such withholding tax to the Ceva, Inc. Group.

(f) Notwithstanding anything herein to the contrary, Section 3.7 of this Agreement shall terminate upon the publication of Definitive Guidance which the tax advisors for DSPGI and Ceva, Inc. mutually agree is contrary to the provisions of this Section 3.7, and nothing contained herein shall preclude DSPGI and Ceva, Inc. after such termination of this Section 3.7, from filing amended returns or refund claims with respect to exercise of options prior to the termination of this Section 3.7 in accordance with such Definitive Guidance.

ARTICLE IV

CERTAIN TAX MATTERS

4.1. Representations and Warranties .

(a) DSPGI . DSPGI hereby represents and warrants that any facts presented or representations made in the Tax Rulings or the Representation Letters are true, correct and complete solely to the extent arising out of any information provided by or on behalf of DSPGI or, if made before the Distribution Date, Ceva, Inc.

(b) Ceva, Inc . Ceva, Inc. hereby represents and warrants that any facts presented or representations made in the Tax Rulings or the Representation Letters are true, correct and complete solely to the extent arising out of any information provided by or on behalf of Parthus Technologies plc, or if made after the Distribution Date, by or on behalf of Ceva, Inc.

4.2. Restrictions on Ceva, Inc.

(a) Until the first day after the one-year anniversary of the Distribution Date, Ceva, Inc. shall not directly or indirectly enter into any agreement, understanding, arrangement or substantial negotiations, as such terms are defined in Treasury Regulation Section 1.355-7T(h)(1), regarding a Proposed Acquisition Transaction or, to the extent Ceva, Inc. has the right to prohibit any Proposed Acquisition Transaction, permit any Proposed Acquisition Transaction to occur unless prior to the consummation of such Proposed Acquisition Transaction DSPGI has determined, in its sole and absolute discretion, which discretion shall be exercised in good faith solely to preserve the Tax-Free Status of the Separation and Distribution, that such Proposed Acquisition Transaction would not jeopardize the Tax-Free Status of the Separation and Distribution. The foregoing shall not prohibit Ceva, Inc. from entering into a contract or agreement to consummate any Proposed Acquisition Transaction if such contract or agreement requires satisfaction of the above-described requirement prior to the consummation of such Proposed Acquisition Transaction, such requirement to be satisfied through the cooperation of the parties as described in Section 4.3(b)(ii).

(b) Until the first day after the two-year anniversary of the Distribution Date, (i) Ceva, Inc. shall continue to conduct the Active Trade or Business; and (ii) Ceva, Inc. shall not (A) liquidate, dispose of, or otherwise discontinue the conduct of all or a substantial portion (but in no instance more than 60% of the gross assets of Ceva, Inc. or 60% of the consolidated gross assets of the Ceva, Inc. Group) of the Active Trade or Business or (B) dispose of any business or assets that would cause Ceva, Inc. to be operated in a manner inconsistent in any material respect with the business purposes for the Distribution as set forth in the Representation Letters and Tax Rulings, in each case unless DSPGI has determined, in its sole and absolute discretion, which discretion shall be exercised in good faith solely to preserve the Tax-Free Status of the Separation and Distribution, that such liquidation, disposition, or discontinuance would not jeopardize the Tax-Free Status of the Separation and Distribution. Ceva, Inc. shall continue the active conduct of the Active Trade or Business primarily through officers and employees of Ceva, Inc. or its Subsidiaries (and not primarily through independent contractors). Notwithstanding the foregoing, (A) except with respect to any corporation or other entity the status of which as the direct owner of an active trade or business is material to the Tax-Free Status of the Separation and Distribution, liquidations of any of Ceva, Inc.’s Subsidiaries into Ceva, Inc. or one or more Subsidiaries directly or indirectly controlled by Ceva, Inc. shall not be deemed to breach this Section 4.2(b) and (B) Ceva, Inc. shall not be prohibited from liquidating, disposing of or otherwise discontinuing the conduct of one or more trades or businesses that constituted an immaterial part of the Active Trade or Business, or any portion thereof. For purposes of the preceding sentence and clause (b)(ii) above, asset retirements, sale-leaseback arrangements and discontinuances of product lines within a trade or business the active conduct of which is continued shall not be deemed a liquidation, disposition or discontinuance of a trade or business or portion thereof. Solely for purposes of this Section 4.2(b), Ceva, Inc. shall not be treated as directly or indirectly controlling a Subsidiary unless Ceva, Inc. owns, directly or

indirectly, shares of capital stock of such Subsidiary constituting (A) 80% or more of the total combined voting power of all outstanding shares of voting stock of such Subsidiary and (B) 80% or more of the total number of outstanding shares of each class or series of capital stock of such Subsidiary other than voting stock. The foregoing shall not prohibit Ceva, Inc. from entering into a contract or agreement to consummate any transaction described in this paragraph if such contract or agreement requires satisfaction of the above-described requirements prior to the consummation of such transaction, such requirements to be satisfied through the cooperation of the parties as described in Section 4.3(b)(ii).

(c) Prior to the Distribution Date, Ceva, Inc. shall fully discharge and satisfy all of the then existing indebtedness owed by it or its Subsidiaries to DSPGI or any DSPGI Affiliate (other than payables incurred in the ordinary course of the business). From such date until the first day after the two-year anniversary of the Distribution Date, Ceva, Inc. shall not, and shall not permit any of its Subsidiaries to, create, incur, assume or allow to exist any such indebtedness (other than payables incurred in the ordinary course of the business) with DSPGI or any DSPGI Affiliate.

(d) Notwithstanding the foregoing, the provisions of Section 4.2 shall not prohibit Ceva, Inc. from implementing any transaction upon which the IRS has granted a favorable ruling in, or which is described in reasonable detail in, the Tax Rulings or any Subsequent Tax Opinion/Ruling.

4.3. Cooperation and Other Covenants .

(a) Each of Ceva, Inc. and DSPGI shall furnish the other with a copy of any ruling requests or other documents delivered to the IRS that relates to the Distribution or that could otherwise be reasonably expected to have an impact on the Tax-Free Status of the Separation and Distribution.

(b) (i) Each of Ceva, Inc. and DSPGI shall cooperate with the other and shall take (or refrain from taking) all such actions as the other may reasonably request in connection with obtaining any DSPGI determination referred to in Section 4.2. Such cooperation shall include, without limitation, providing any information, and/or representations, and/or Powers of Attorney reasonably requested by Ceva, Inc. or DSPGI, as applicable to enable it (or its Tax Advisor) to obtain and maintain any Subsequent Tax Opinion/Ruling that would permit any action described in Section 4.2 to be taken by Ceva, Inc. or Ceva, Inc., DSPGI or their respective Affiliates. From and after any Representation Date in connection with obtaining any such determination or the receipt of a Subsequent Tax Opinion/Ruling and until the first day after the first anniversary of the date of such determination or receipt, neither party shall take (nor shall it refrain from taking) any action that would have caused such representation to be untrue unless the other party has determined, in its sole and absolute discretion, which discretion shall be exercised in good faith solely to preserve the Tax-Free Status of the Separation and Distribution, that such action would not jeopardize the Tax-Free Status of the Separation and Distribution.

(ii) In the event that Ceva, Inc. notifies DSPGI that it desires to take one of the actions described in Section 4.2 and DSPGI concludes that such action might

jeopardize the Tax-Free Status of the Separation and Distribution, Ceva, Inc., may seek a Subsequent Tax Opinion/Ruling that would permit Ceva, Inc. to take the specified action, and DSPGI shall use commercially reasonable efforts to assist Ceva, Inc. in obtaining such Subsequent Tax Opinion/Ruling; provided, however, that the reasonable costs and expenses of obtaining any such Subsequent Tax Opinion/Ruling shall be borne by Ceva, Inc.

(c) (i) Until all restrictions set forth in Section 4.2 have expired, Ceva, Inc. shall give DSPGI written notice of any intention to effect or permit an action or transaction described in Section 4.2 and which is prohibited thereunder at such time within a period of time reasonably sufficient to enable DSPGI to make the determination referred to in Section 4.2. Each such notice by Ceva, Inc. shall set forth the terms and conditions of the proposed action or transaction, including, without limitation, as applicable, the nature of any related action proposed to be taken by the Board of Directors of Ceva, Inc., the approximate number of shares of Ceva, Inc. capital stock proposed to be transferred or issued, the approximate value of Ceva, Inc.’s assets (or assets of any of Ceva, Inc.’s Subsidiaries) proposed to be transferred, the proposed timetable for such action or transaction, and the number of shares of Ceva, Inc. capital stock otherwise then owned by the other party to the proposed action or transaction, all with sufficient particularity to enable DSPGI to make any such required determination. All information provided by Ceva, Inc. to DSPGI pursuant to this Section 4.3 shall be deemed subject to the confidentiality obligations of this Agreement.

(ii) Promptly, but in any event within ten business days, after DSPGI receives such written notice from Ceva, Inc., DSPGI shall evaluate such information and notify Ceva, Inc. in writing of (A) such determination or (B) DSPGI’s requirement that Ceva, Inc. obtain a Subsequent Tax Opinion/Ruling prior to undertaking such action or transaction. If DSPGI makes a determination that an action or transaction described in Section 4.2 would jeopardize the Tax-Free Status of the Separation and Distribution, such notice to Ceva, Inc. shall set forth, in reasonable detail, the reasons therefor. In the event that Ceva, Inc. does not receive written notice of DSPGI’s determination or requirement that Ceva, Inc. obtain a Subsequent Tax Opinion/Ruling within ten business days after the notification by Ceva, Inc., then DSPGI shall be deemed to have elected to require that Ceva, Inc. obtain a Subsequent Tax Opinion/Ruling prior to undertaking such action or transaction. Ceva, Inc. shall notify DSPGI promptly, but in any event within ten business days, after the receipt of a Subsequent Tax Opinion/Ruling.

4.4. Indemnification For Tax Liabilities .

(a) (i) Notwithstanding any other provision of this Agreement to the contrary, subject to Section 4.4(b), Ceva, Inc. shall indemnify, defend and hold harmless DSPGI and each DSPGI Affiliate (or any successor to any of them) against any and all Tax-Related Losses incurred by DSPGI or any of them in connection with any proposed tax assessment or tax controversy with respect to the Distribution or the Separation to the extent caused by any breach by Ceva, Inc. of any of its representations, warranties or covenants made pursuant to Article IV of this Agreement or in any Representation Letter issued by Ceva, Inc. after the Combination Effective Date.

(ii) Notwithstanding any other provision of this Agreement to the contrary, DSPGI shall indemnify, defend and hold harmless Ceva, Inc. and each Ceva, Inc.

Affiliate (or any successor to any of them) against (A) any and all Tax-Related Losses incurred by Ceva, Inc. or any of them in connection with any proposed tax assessment or tax controversy with respect to the Distribution or the Separation other than a Tax-Related Loss incurred by Ceva, Inc. as a result of any breach by Ceva, Inc. of any of its representations, warranties or covenants made pursuant to Article IV of this Agreement or in any Representation Letter issued by Ceva, Inc. after the Combination Effective Date and (B) any sales and use, gross receipts, or other similar transfer taxes imposed on the transfers occurring pursuant to the Separation and Distribution.

(iii) All interest or penalties incurred in connection with any Tax-Related Losses or any indemnification obligation under subsection (ii)(B) above shall be computed for the time period up to and including the date that the Indemnifying Party pays its indemnification obligation in full.

(b) The Indemnifying Party shall pay any amount due and payable to the Indemnitee pursuant to this Section 4.4 on or before the 90th day following the earlier of agreement or determination that such amount is due and payable to the Indemnitee. All payments made pursuant to this Section 4.4 shall be made by wire transfer to the bank account designated by the Indemnitee for such purpose, and on the date of such wire transfer the Indemnifying Party shall give the Indemnitee notice of the transfer.

4.5. Procedure For Indemnification For Tax Liabilities .

(a) If an Indemnitee receives notice of the assertion of any Third-Party Claim with respect to which an Indemnifying Party may be obligated under Section 4.4 to provide indemnification, the Indemnitee shall give the Indemnifying Party notice thereof (together with a copy of such Third-Party Claim, process or other legal pleading) promptly after becoming aware of such Third-Party Claim; provided, however, that the failure of the Indemnitee to give notice as provided in this Section shall not relieve the Indemnifying Party of its obligations under Section 4.4, except to the extent that the Indemnifying Party is actually prejudiced by such failure to give notice. Such notice shall describe such Third-Party Claim in reasonable detail.

(b) DSPGI and Ceva, Inc. shall jointly control the defense of, and cooperate with each other with respect to defending, any Third-Party Claim with respect to which either party is obligated under Section 4.4 to provide indemnification, provided that either party shall forfeit such joint control right with respect to a particular Third-Party Claim if such party or any Affiliate of such party makes any public statement or filing, or takes any action (including, but not limited to, the filing of any submission or pleading, or the giving of a deposition or production of documents, in any administrative or court proceeding) in connection with such Third-Party Claim that is inconsistent in a material respect with any representation or warranty made by such party in this Agreement, the Tax Rulings, the Subsequent Tax Opinion/Ruling or the Representation Letters.

(c) Ceva, Inc. and DSPGI shall exercise their rights to jointly control the defense of any such Third-Party Claim solely for the purpose of defeating such Third-Party Claim and, unless required by applicable law, neither Ceva, Inc. nor DSPGI shall make any statements or take any actions that could reasonably result in the shifting of liability for any Tax-

Related Losses arising out of such Third-Party Claim from the party making such statement or taking such action (or any of its Affiliates) to the other party (or any of its Affiliates).

(d) Statements made or actions taken by either Ceva, Inc. or DSPGI in connection with the defense of any such Third-Party Claim shall not prejudice the rights of such party in any subsequent action or proceeding between the parties.

(e) If either DSPGI or Ceva, Inc. fails to jointly defend any such Third-Party Claim, the other party shall solely defend such Third-Party Claim and the party failing to jointly defend shall use commercially reasonable efforts to cooperate with the other party in its defense of such Third-Party Claim; provided, however, that an Indemnitee may not compromise or settle any such Third-Party Claim without the prior written consent of the Indemnifying Party, which consent shall not be unreasonably withheld or delayed. All costs and expenses of either party incurred in connection with, and during the course of, the joint control of the defense of any such Third-Party Claim shall be initially paid by the party that incurs such costs and expenses. Such costs and expenses shall be reallocated and reimbursed in accordance with the respective indemnification obligations of the parties at the conclusion of the defense of such Third-Party Claim.

4.6. Survival . The rights and obligations of each of DSPGI and Ceva, Inc. and their respective Indemnitees under this Article IV shall survive until thirty days following the expiration of the applicable statute of limitations.

4.7. Section 355(e) Notice . Promptly after the Combination Effective Date, DSPGI shall file with the appropriate Internal Revenue Service Center a notice under Section 355(e)(4)(E) of the Code substantially in the form of Exhibit A to this Agreement.

ARTICLE V

INDEMNIFICATION

5.1. Release of Claims .

(a) Except as provided in Section 5.1(c), effective as of the Distribution Date, Ceva, Inc. does hereby, for itself, its respective Affiliates (other than any member of the DSPGI Group), successors and assigns, and all Persons who at any time prior to the Distribution Date have been stockholders, directors, officers, agents or employees of any member of the Ceva, Inc. Group (in each case, in their respective capacities as such), remise, release and forever discharge each of DSPGI, its respective Affiliates (other than any member of the Ceva, Inc. Group), successors and assigns, and all Persons who at any time prior to the Distribution Date have been stockholders, directors, officers, agents or employees of DSPGI (in each case, in their respective capacities as such), and their respective heirs, executors, administrators, successors and assigns, from any and all Liabilities whatsoever, whether at law or in equity (including any right of contribution), whether arising under any contract or agreement, by operation of law or otherwise, existing or arising from all acts and events occurring or failing to occur or alleged to have occurred or to have failed to occur and all conditions existing or alleged to have existed on or before the Distribution Date (including any contractual arrangements or arrangements existing or alleged to exist between them on or before the Distribution Date).

(b) Except as provided in Section 5.1(c), effective as of the Distribution Date, DSPGI does hereby, for itself and its Affiliates (other than any member of the Ceva, Inc. Group), successors and assigns, and all Persons who at any time prior to the Distribution Date have been stockholders, directors, officers, agents or employees of any member of the DSPGI Group (in each case, in their respective capacities as such), remise, release and forever discharge Ceva, Inc., the respective members of the Ceva, Inc. Group, their respective Affiliates (other than any member of the DSPGI Group), successors and assigns, and all Persons who at any time prior to the Distribution Date have been stockholders, directors, officers, agents or employees of any member of the Ceva, Inc. Group (in each case, in their respective capacities as such), and their respective heirs, executors, administrators, successors and assigns, from any and all Liabilities whatsoever, whether at law or in equity (including any right of contribution), whether arising under any contract or agreement, by operation of law or otherwise, existing or arising from all acts and events occurring or failing to occur or alleged to have occurred or to have failed to occur and all conditions existing or alleged to have existed on or before the Distribution Date (including any contractual arrangements or arrangements existing or alleged to exist between them on or before the Distribution Date).

(c) Nothing in Section 5.1(a) or (b) shall impair any right of any Person to enforce this Agreement, any Ancillary Agreement, or the Tax Indemnification Agreement. Nothing in Section 5.1(a) or (b) shall release any Person from:

(i) any Liability, contingent or otherwise, assumed, transferred, assigned or allocated to the Group of which such Person is a member in accordance with, or any other Liability of any member of any Group under, this Agreement or any Ancillary Agreement;

(ii) any Liability that the parties may have with respect to indemnification or contribution pursuant to this Agreement for claims brought against the parties by third Persons, which Liability shall be governed by the provisions of this Article V and Article VI and, if applicable, the appropriate provisions of the Ancillary Agreements; or

(iii) any Liability the release of which would result in the release of any Person other than a Person released pursuant to this Section 5.1; provided, however, that the parties shall not bring suit or permit any of their Subsidiaries to bring suit against any Person with respect to any Liability to the extent that such Person would be released with respect to such Liability by this Section 5.1 but for the provisions of this clause (iii).

(d) Ceva, Inc. shall not make, and shall not permit any member of the Ceva, Inc. Group to make, any claim or demand, or commence any Action asserting any claim or demand, including any claim of contribution or any indemnification, against DSPGI or any member of the DSPGI Group or any other Person released pursuant to Section 5.1(a), with respect to any Liabilities released pursuant to Section 5.1(a). DSPGI shall not, and shall not permit any member of the DSPGI Group, to make any claim or demand, or commence any Action asserting any claim or demand, including any claim of contribution or any indemnification, against Ceva, Inc. or any member of the Ceva, Inc. Group, or any other Person released pursuant to Section 5.1(b), with respect to any Liabilities released pursuant to Section 5.1(b).

(e) It is the intent of each of DSPGI and Ceva, Inc., by virtue of the provisions of this Section 5.1, to provide for a full and complete release and discharge of all Liabilities existing or arising from all acts and events occurring or failing to occur or alleged to have occurred or to have failed to occur and all conditions existing or alleged to have existed on or before the Distribution Date, between or among Ceva, Inc. or any member of the Ceva, Inc. Group, on the one hand, and DSPGI or any member of the DSPGI Group, on the other hand (including any contractual agreements or arrangements existing or alleged to exist between or among any such members on or before the Distribution Date), except as expressly set forth in Section 5.1(c). At any time, at the request of any other party, each party shall cause each member of its respective Group to execute and deliver releases reflecting the provisions hereof.

5.2. Indemnification by Ceva, Inc . Except as provided in Section 5.4, Ceva, Inc. shall indemnify, defend and hold harmless DSPGI, each member of the DSPGI Group and each of their respective directors, officers and employees, and each of the heirs, executors, successors and assigns of any of the foregoing (collectively, the “DSPGI Indemnitees”), from and against any and all Liabilities of the DSPGI Indemnitees relating to, arising out of or resulting from any of the following items (without duplication):

(a) the failure of Ceva, Inc. or any other member of the Ceva, Inc. Group or any other Person to pay, perform, or discharge any Corage Assumed Liabilities in accordance with their respective terms, whether prior to or after the Combination Effective Date or the date of this Agreement;

(b) any breach by Ceva, Inc. or any member of the Ceva, Inc. Group of this Agreement, any of the Ancillary Agreements, or the Tax Indemnification Agreement subject to any limitations set forth in the Ancillary Agreements or the Tax Indemnification Agreement; and

(c) any breach by Ceva, Inc. or any member of the Ceva, Inc. Group of any covenants or obligations in the Combination Agreement or in any documents or instruments executed and delivered by Ceva, Inc. or any member of the Ceva, Inc. Group, occurring at any time on or after the Distribution Date.

5.3. Indemnification by DSPGI . Except as otherwise provided in Section 5.5, DSPGI shall indemnify, defend and hold harmless Ceva, Inc., each member of the Ceva, Inc. Group and each of their respective directors, officers and employees, and each of the heirs, executors, successors and assigns of any of the foregoing (collectively, the “Ceva, Inc. Indemnitees”), from and against any and all Liabilities of the Ceva, Inc. Indemnitees relating to, arising out of or resulting from any of the following items (without duplication):

(a) the failure of DSPGI or any other member of the DSPGI Group or any other Person to pay, perform or otherwise promptly discharge any Liabilities of DSPGI or the DSPGI Group, which includes any and all Liabilities which are not Corage Assumed Liabilities, whether prior to or after the Distribution Date or the date of this Agreement;

(b) any breach by DSPGI or any member of the DSPGI Group of this Agreement, any of the Ancillary Agreements or the Tax Indemnification Agreement, including

any breach or inaccuracy of any representation or warranty made herein or therein subject to any limitations set forth in the Ancillary Agreements or the Tax Indemnification Agreement; and

(c) any breach by DSPGI or any member of the DSPGI Group of any covenants or obligations in the Combination Agreement or in any documents or instruments executed and delivered by DSPGI or any member of the DSPGI Group, occurring at any time after the Distribution Date.

5.4. Indemnification Obligations Net of Insurance Proceeds and Other Amounts .

(a) The parties intend that any Liability subject to indemnification or reimbursement pursuant to this Article V or Article VI will be net of Insurance Proceeds that actually reduce the amount of the Liability. Accordingly, the amount which any party (an “Indemnifying Party”) is required to pay to any Person entitled to indemnification hereunder (an “Indemnitee”) will be reduced by any Insurance Proceeds theretofore actually recovered by or on behalf of the Indemnitee in reduction of the related Liability. If an Indemnitee receives a payment (an “Indemnity Payment”) required by this Agreement from an Indemnifying Party in respect of any Liability and subsequently receives Insurance Proceeds, then the Indemnitee shall pay to the Indemnifying Party an amount equal to the excess of the Indemnity Payment received over the amount of the Indemnity Payment that would have been due if the Insurance Proceeds had been received, realized or recovered before the Indemnity Payment was made.

(b) An insurer who would otherwise be obligated to pay any claim shall not be relieved of the responsibility with respect thereto or, solely by virtue of the indemnification provisions hereof, have any subrogation rights with respect thereto, it being expressly understood and agreed that no insurer or any other third party shall be entitled to a “windfall” (i.e., a benefit they would not be entitled to receive in the absence of the indemnification provisions) by virtue of the indemnification provisions hereof. Nothing in this Agreement or any Ancillary Agreement shall obligate any member of any Group to seek to collect or recover any Insurance Proceeds.

5.5. Procedures for Indemnification of Third Party Claims .

(a) If an Indemnitee shall receive notice or otherwise learn of the assertion by a Person (including any Governmental Authority) of any claim or of the commencement by any such Person of any Action (collectively, a “Third Party Claim”) with respect to which an Indemnifying Party may be obligated to provide indemnification to such Indemnitee pursuant to Section 5.2 or 5.3, or any other Section of this Agreement, any Ancillary Agreement, such Indemnitee shall give such Indemnifying Party written notice thereof within twenty days after becoming aware of such Third Party Claim. Any such notice shall describe the facts constituting the basis for the Third Party Claim and the amount of the claimed Damages in reasonable detail. Notwithstanding the foregoing, no delay or failure of any Indemnitee to give the notice as provided in this Section 5.5(a) shall not relieve the related Indemnifying Party of its obligations under this Article V, except to the extent of any damage or liability arising out of such delay or failure.

(b) An Indemnifying Party may elect to defend, with counsel reasonably satisfactory to the Indemnitee (and, unless the Indemnifying Party has specified any reservations or exceptions, to seek to settle or compromise), at such Indemnifying Party’s own expense, any Third Party Claim. Within thirty days after the receipt of the notice from an Indemnitee in accordance with Section 5.5(a) (or sooner, if the nature of such Third Party Claim so requires), the Indemnifying Party shall notify the Indemnitee of its election whether the Indemnifying Party shall assume responsibility for defending such Third Party Claim, which election shall specify any reservations or exceptions; provided that (i) the Indemnifying Party may only assume control of such defense if (A) it acknowledges in writing to the Indemnitee that any Damages, fines, costs or other liabilities that may be assessed against the Indemnitee in connection with such Third Party Claim constitute Damages for which the Indemnitee shall be indemnified pursuant to this Article V and (B) the ad damnum is less than or equal to the amount of Damages for which the Indemnifying Party is liable under this Article V and (ii) the Indemnifying Party may not assume control of the defense of Third Party Claim involving criminal liability or in which equitable relief is sought against the Indemnitee; provided however, with respect to a Third Party Claim involving both equitable relief and monetary damages and in which the liability and damages phases of the proceeding are separated, the Indemnifying Party may assume the defense of the portion of the proceeding solely as it relates to monetary damages. After notice from an Indemnifying Party to an Indemnitee of its election to assume the defense of a Third Party Claim, such Indemnitee shall have the right to employ separate counsel and to participate in (but not control) the defense, compromise, or settlement thereof, but the fees and expenses of such counsel shall be the expense of such Indemnitee except as set forth in the next sentence. In the event that the Indemnifying Party has elected to assume the defense of the Third Party Claim but has specified, and continues to assert, any reservations or exceptions in such notice, then, in any such case, the reasonable fees and expenses of one separate counsel for all Indemnitees shall be borne by the Indemnifying Party.

(c) If an Indemnifying Party elects not to assume responsibility for defending a Third Party Claim, or fails to notify an Indemnitee of its election as provided in Section 5.5(a), such Indemnitee may defend such Third Party Claim at the cost and expense of the Indemnifying Party.

(d) Unless the Indemnifying Party has failed to assume the defense of the Third Party Claim in accordance with the terms of this Agreement, no Indemnitee may settle or compromise any Third Party Claim without the written consent of the Indemnifying Party, which consent shall not be unreasonably withheld, conditioned or delayed.

(e) No Indemnifying Party shall consent to entry of any judgment or enter into any settlement of the Third Party Claim without the written consent of the Indemnitee; provided that the consent of the Indemnitee shall not be required if the Indemnifying Party agrees in writing to pay any amounts payable pursuant to such settlement or judgment and such settlement or judgment includes a complete release of the Indemnitee from further liability and has no other adverse effect on the Indemnitee.

(f) In order to seek indemnification under this Article V, an Indemnitee shall deliver a Claim Notice to the Indemnifying Party.

(g) During the thirty-day period following the delivery of a Claim Notice, the Indemnifying Party and the Indemnitee shall use good faith efforts to resolve the Claim described therein. If within the thirty-day period following delivery of the Claim Notice, the parties agree in writing that the Indemnitee is entitled to the Claimed Amount or the Agreed Amount, the Indemnifying Party shall within five days of such agreement deliver to the Indemnitee, a payment of the Claimed Amount or the Agreed Amount, whichever is applicable by check or by wire transfer. If the Claim is not entirely resolved within such thirty-day period, the Indemnifying Party and the Indemnitee shall discuss in good faith the submission of the Dispute to binding arbitration, and if the Indemnifying Party and the Indemnified Party agree in writing to submit the Dispute to such arbitration, then the provisions of Article VIII. The provisions of this Section 5.5(g) shall not obligate the Indemnifying Party and the Indemnitee to submit to arbitration or any other alternative dispute resolution procedure with respect to any Dispute, and in the absence of an agreement by the Indemnifying Party and the Indemnitee to arbitrate a Dispute, such Dispute shall be resolved in a state or federal court sitting in New York, New York.

5.6. Additional Matters .

(a) Any claim on account of a Liability which does not result from a Third Party Claim shall be asserted by written notice given by the Indemnitee to the related Indemnifying Party. Such Indemnifying Party shall have a period of thirty days after the receipt of such notice within which to accept responsibility for such claim in writing. If such Indemnifying Party does not accept responsibility therefor within such thirty-day period, such Indemnifying Party shall be deemed to have refused to accept responsibility to make payment. If such Indemnifying Party does not respond within such thirty-day period or rejects such claim in whole or in part, such Indemnitee shall be free to pursue such remedies as may be available to such party as contemplated by this Agreement, the Ancillary Agreements and the Tax Indemnification Agreement without prejudice to its right to receive indemnification from the Indemnifying Party if it is ultimately determined that such rejection was improper.

(b) In the event of payment by or on behalf of any Indemnifying Party to any Indemnitee in connection with any Third Party Claim, such Indemnifying Party shall be subrogated to and shall stand in the place of such Indemnitee as to any events or circumstances in respect of which such Indemnitee may have any right, defense or claim relating to such Third Party Claim against any claimant or plaintiff asserting such Third Party Claim or against any other person. Such Indemnitee shall cooperate with such Indemnifying Party in a reasonable manner, and at the cost and expense of such Indemnifying Party, in prosecuting any subrogated right, defense or claim.

(c) In the event of an Action in which the Indemnifying Party is not a named defendant, if the Indemnifying Party shall so request, the parties shall endeavor to substitute the Indemnifying Party for the named defendant if at all practicable. If such substitution or addition cannot be achieved for any reason or is not requested, the named defendant shall allow the Indemnifying Party to manage the Action as set forth in this Section and the Indemnifying Party shall fully indemnify the named defendant against all costs of defending the Action (including court costs, sanctions imposed by a court, attorneys’ fees, experts’ fees and all other external

expenses), the costs of any judgment or settlement, and the cost of any interest or penalties relating to any judgment or settlement.

5.7. Remedies Cumulative . The remedies provided in this Article V shall be cumulative and, subject to the provisions of Article VIII, shall not preclude assertion by any Indemnitee of any other rights or the seeking of any and all other remedies against any Indemnifying Party.

5.8. Survival of Indemnities . The rights and obligations of each of DSPGI and Ceva, Inc. and their respective Indemnitees under this Article V shall survive the sale or other transfer by any party of any assets or businesses or the assignment by it of any Liabilities until the second anniversary following the Distribution Date.

5.9. Tax-Related Losses . Notwithstanding anything herein to the contrary, Article IV shall govern and shall be the exclusive remedy for any breach of any representation, warranty or covenant contained in Article IV of this Agreement; provided, however, that Article VIII shall govern any disputes among the parties arising out of Article IV. Except as otherwise specifically provided in this Agreement or in any Ancillary Agreement, as applicable, the indemnification rights afforded by this Article V are the exclusive remedy for all other matters relating to this Agreement, the Ancillary Agreements and the transactions contemplated hereby and thereby.

ARTICLE VI

INTERIM OPERATIONS AND CERTAIN OTHER MATTERS

6.1. Certain Business Matters .

(a) Except as may be expressly set forth in Section 6.2 below or in any Ancillary Agreement, no member of any Group shall have any duty to refrain from (i) engaging in the same or similar activities or lines of business as any member of any other Group, (ii) doing business with any potential or actual supplier or customer of any member of any other Group, or (iii) engaging in, or refraining from, any other activities whatsoever relating to any of the potential or actual suppliers or customers of any member of any other Group.

(b) Each of DSPGI and Ceva, Inc. is aware that from time to time certain business opportunities may arise which more than one Group may be financially able to undertake, and which are, from their nature, in the line of more than one Group’s business and are of practical advantage to more than one Group. In connection therewith, the parties agree that if, following the Distribution Date and prior to (but not following) the Combination Effective Date, any of DSPGI or Ceva, Inc. acquires knowledge of an opportunity that meets the foregoing standard with respect to more than one Group, none of DSPGI or Ceva, Inc. shall have any duty to communicate or offer such opportunity to any of the others and may pursue or acquire such opportunity for itself, or direct such opportunity to any other Person in each case subject to the provisions of Section 6.2.

6.2. Non-Competition, Solicitation and Hiring .

(a) Subject to the restrictions and rights set forth in the Technology Transfer Agreements, the DSPGI Group acknowledges that, prior to the Distribution, it has and will have become privy to certain confidential information and trade secrets of Ceva, Inc. and further acknowledges that it will derive substantial benefits from the consummation of the transactions contemplated by this Agreement and that Ceva, Inc. is consummating such transactions in reliance upon the agreement in this Section 6.2 that the knowledge and expertise developed by Ceva, Inc. and available to the DSPGI Group will be preserved and will not be used in competition with Ceva, Inc. The DSPGI Group acknowledges that it is reasonable and necessary for the protection of Ceva, Inc. and its Subsidiaries that the DSPGI Group agree, and accordingly the DSPGI Group does agree that, for a period of five years following the Distribution Date (the “Noncompetition Period”), the DSPGI Group shall not, and shall ensure that Affiliates of the DSPGI Group shall not directly or indirectly engage in any business that is competitive with the Licensing Business.

(b) Subject to the restrictions and rights set forth in the Technology Transfer Agreements, the Ceva, Inc. Group acknowledges that, prior to the Distribution, it has and will have become privy to certain confidential information of DSPGI and further acknowledges that it will derive substantial benefits from the consummation of the transactions contemplated by this Agreement and that DSPGI is consummating such transactions in reliance upon the agreement in this Section 6.2 that the knowledge and expertise developed by DSPGI and available to the Ceva, Inc. Group (and the rights to use which have not been conveyed to Ceva, Inc., DSP Ceva or Corage, Ltd. pursuant to the transactions contemplated by Section 2.2 of this Agreement) will be preserved and will not be used in competition with DSPGI. The Ceva, Inc. Group acknowledges that its is reasonable and necessary for the protection of DSPGI and its Subsidiaries that the Ceva, Inc. Group agree, and accordingly the Ceva, Inc. Group does agree that, during the Noncompetition Period, the Ceva, Inc. Group shall not and shall ensure that Affiliates of the Ceva, Inc. Group shall not directly or indirectly engage in any business that is competitive with the Products Business.

(c) For a period of three years after the Distribution Date, each of DSPGI and Ceva, Inc. shall not, either directly or indirectly (including through an Affiliate), solicit for hire any employee of the other or its Subsidiaries; provided, however, that such restriction shall not apply to (i) any individual whose employment with such party has been terminated or (ii) any general employment solicitations that are not targeted at any such employees, such as advertisements in publications in general circulation.

(d) For purposes of this Section 6.2, neither DSPGI nor Ceva, Inc. will be deemed to be engaged indirectly in an activity as a result of another Person engaging in that activity unless that Person is its Affiliate.

(e) The invalidity or non-enforceability of this Section 6.2 in any respect shall not affect the validity or enforceability of this Section 6.2 in any other respect or of any other provisions of this Agreement. In the event that any provision of this Section 6.2 shall be held invalid or unenforceable by a court of competent jurisdiction by reason of the geographic or business scope or the duration thereof, such invalidity or unenforceability shall attach only to the scope or duration of such provision and shall not affect or render invalid or unenforceable any other provision of this Agreement, and, to the fullest extent permitted by law, this Agreement

shall be construed as if the geographic or business scope or the duration of such provision had been more narrowly drafted so as not to be invalid or unenforceable.

(f) Each of Ceva, Inc. and DSPGI acknowledges that the other party would suffer irreparable harm if it were to breach its obligations under Sections 6.2(a) or (b), respectively, and that the other party’s remedy at law for any such breach is and will be insufficient and inadequate and that the other shall be entitled to equitable relief, including by way of temporary and permanent injunction, in addition to any remedies the other party may have at law.

6.3. Late Payments . Except as expressly provided to the contrary in this Agreement or in any Ancillary Agreement, any amount not paid when due pursuant to this Agreement or any Ancillary Agreement or the Tax Indemnification Agreement (and any amounts billed or otherwise invoiced or demanded and properly payable that are not paid within thirty days of such bill, invoice or other demand) shall accrue interest at a rate per annum equal to the Prime Rate plus two percent.

ARTICLE VII

EXCHANGE OF INFORMATION; CONFIDENTIALITY

7.1. Agreement for Exchange of Information; Archives .

(a) Each of DSPGI and Ceva, Inc., on behalf of its respective Group, agrees to provide, or cause to be provided, to the other Group, at any time before or after the Distribution Date, as soon as reasonably practicable after written request therefor, any Information in the possession or under the control of such Group which the requesting party reasonably needs (i) to comply with reporting, disclosure, filing or other requirements imposed on the requesting party (including under applicable securities or tax laws) by a Governmental Authority having jurisdiction over the requesting party, (ii) for use in any other judicial, regulatory, administrative, tax or other proceeding or in order to satisfy audit, accounting, claims, regulatory, litigation, tax or other similar requirements, or (iii) to comply with its obligations under this Agreement or any Ancillary Agreement; provided , however , that in the event that any party determines that any such provision of Information could be commercially detrimental, violate any law or agreement, or waive any attorney client privilege, the parties shall take all reasonable measures to permit the compliance with such obligations in a manner that avoids any such harm or consequences.

(b) After the Combination Effective Date, Ceva, Inc. shall have access during regular business hours (as in effect from time to time) to the documents and objects of historic significance that relate to the business of Ceva, Inc. that are located in the records of DSPGI. Ceva, Inc. may obtain copies (but not originals) of documents for bona fide business purposes and Ceva, Inc. shall comply with any rules, procedures or other requirements, and shall be subject to any restrictions (including prohibitions on removal of specified objects), that are then applicable to DSPGI. Nothing herein shall be deemed to restrict the access of any member of the DSPGI Group to any such documents.

7.2. Ownership of Information . Any Information owned by one Group that is provided to a requesting party pursuant to Section 7.1 shall be deemed to remain the property

and confidential information of the providing party. Unless specifically set forth herein, nothing contained in this Agreement shall be construed as granting or conferring rights of license or otherwise in any such Information.

7.3. Compensation for Providing Information . The party requesting such Information shall reimburse the other party for the reasonable costs, if any, of creating, gathering and copying such Information, to the extent that such costs are incurred for the benefit of the requesting party. Except as may be otherwise specifically provided elsewhere in this Agreement or in any other agreement between the parties, such costs shall be computed in accordance with the providing party’s standard methodology and procedures.

7.4. Record Retention . To facilitate the possible exchange of Information pursuant to this Article VII and other provisions of this Agreement after the Distribution Date, the parties shall exercise their reasonable best efforts to retain all Information in their respective possession or control on the Distribution Date. No party will destroy, or permit any of its Subsidiaries to destroy, any Information which the other party may have the right to obtain pursuant to this Agreement prior to the third anniversary of the date of this Agreement without first using its reasonable best efforts to notify the other party of the proposed destruction and giving the other party the opportunity to take possession of such information prior to such destruction; provided, however, that in the case of any Information relating to Taxes (as such term is defined in the Combination Agreement) or to Environmental Liabilities, such period shall be extended to the expiration of the applicable statute of limitations (giving effect to any extensions thereof).

7.5. Limitation of Liability . No party shall have any liability to any other party in the event that any Information exchanged or provided pursuant to this Agreement which is an estimate or forecast, or which is based on an estimate or forecast, is found to be inaccurate, in the absence of willful misconduct by the party providing such Information. No party shall have any liability to any other party if any Information is destroyed after reasonable best efforts by such party to comply with the provisions of Section 7.4.

7.6. Other Agreements Providing for Exchange of Information . The rights and obligations granted under this Article VII are subject to any specific limitations, qualifications or additional provisions on the sharing, exchange or confidential treatment of Information set forth in any Ancillary Agreement.

7.7. Production of Witnesses; Records; Cooperation .

(a) After the Distribution Date, except in the case of an adversarial Action by one party against another party, each party hereto shall exercise its reasonable best efforts to make available to each other party, upon written request, the former, current and future directors, officers, employees, other personnel and agents of the members of its respective Group as witnesses and any books, records or other documents within its control or which it otherwise has the ability to make available, to the extent that any such person (giving consideration to business demands of such directors, officers, employees, other personnel and agents) or books, records or other documents may reasonably be required in connection with any Action in which the requesting party may from time to time be involved, regardless of whether such Action is a matter with respect to which indemnification may be sought hereunder.

(b) If an Indemnifying Party chooses to defend or to seek to compromise or settle any Third Party Claim, the other parties shall make available to such Indemnifying Party or such other party, as the case may be, upon written request, the former, current and future directors, officers, employees, other personnel and agents of the members of its respective Group as witnesses and any books, records or other documents within its control or which it otherwise has the ability to make available, to the extent that any such person (giving consideration to business demands of such directors, officers, employees, other personnel and agents) or books, records or other documents may reasonably be required in connection with such defense, settlement or compromise, or such prosecution, evaluation or pursuit, as the case may be, and shall otherwise cooperate in such defense, settlement or compromise, or such prosecution, evaluation or pursuit, as the case may be.

(c) Without limiting the foregoing, the parties shall cooperate and consult to the extent reasonably necessary with respect to any Actions.

(d) Without limiting any provision of this Section, each of the parties agrees to cooperate, and to cause each member of its respective Group to cooperate, with each other in the defense of any infringement or similar claim with respect to any intellectual property and shall not claim to acknowledge, or permit any member of its respective Group to claim to acknowledge, the validity or infringing use of any intellectual property of a third Person in a manner that would hamper or undermine the defense of such infringement or similar claim.

(e) The obligation of the parties to provide witnesses pursuant to this Section 7.7 is intended to be interpreted in a manner so as to facilitate cooperation and shall include the obligation to provide as witnesses inventors and other officers without regard to whether the witness or the employer of the witness could assert a possible business conflict (subject to the exception set forth in the first sentence of Section 7.7(a)).

(f) In connection with any matter contemplated by this Section 7.7, the parties shall enter into a mutually acceptable joint defense agreement so as to maintain to the extent practicable any applicable attorney-client privilege or work product immunity of any member of any Group.

7.8. Confidentiality .

(a) Subject to Section 7.9, each of DSPGI and Ceva, Inc., on behalf of itself and each member of its respective Group, agrees to hold, and to cause its respective directors, officers, employees, agents, accountants, counsel and other advisors and representatives to hold, in strict confidence, with at least the same degree of care that applies to DSPGI’s confidential and proprietary information pursuant to policies in effect as of the Distribution Date, all Information concerning each such other Group that is either in its possession (including Information in its possession prior to any of the date hereof, the Combination Effective Date or the Distribution Date) or furnished by any such other Group or its respective directors, officers, employees, agents, accountants, counsel and other advisors and representatives at any time pursuant to this Agreement, any Ancillary Agreement, the Tax Indemnification Agreement or otherwise, and shall not use any such Information other than for such purposes as shall be expressly permitted hereunder or thereunder, except, in each case, to the extent that such

Information has been (i) in the public domain through no fault of such party or any member of such Group or any of their respective directors, officers, employees, agents, accountants, counsel and other advisors and representatives, (ii) later lawfully acquired from other sources by such party (or any member of such party’s Group) which sources are not themselves bound by a confidentiality obligation), or (iii) independently generated without reference to any proprietary or confidential Information of the other party.

(b) Each party agrees not to release or disclose, or permit to be released or disclosed, any such Information to any other Person, except its directors, officers, employees, agents, accountants, counsel and other advisors and representatives who need to know such Information (who shall be advised of their obligations hereunder with respect to such Information), except in compliance with Section 7.9. Without limiting the foregoing, when any Information is no longer needed for the purposes contemplated by this Agreement, any Ancillary Agreement or the Tax Indemnification Agreement, each party shall promptly after request of any other party either return to the other party all Information in a tangible form (including all copies thereof and all notes, extracts or summaries based thereon) or certify to the other party that it has destroyed such Information (and such copies thereof and such notes, extracts or summaries based thereon).

(c) The terms and conditions of this Section 7.8 shall not apply to any Confidential Information (as defined in the Technology Transfer Agreements), which instead shall be subject to the confidentiality and other provisions of the Technology Transfer Agreements.

7.9. Protective Arrangements . If any party or any member of its Group either determines on the advice of its counsel that it is required to disclose any Information pursuant to applicable law or receives any demand under lawful process or from any Governmental Authority to disclose or provide Information of any other party (or any member of any other party’s Group) that is subject to the confidentiality provisions hereof, such party shall notify the other party prior to disclosing or providing such Information and shall cooperate at the expense of the requesting party in seeking any reasonable protective arrangements requested by such other party. Subject to the foregoing, the Person that received such request may thereafter disclose or provide Information to the extent required by such law (as so advised by counsel) or by lawful process or such Governmental Authority.

7.10. Reimbursement . Except to the extent otherwise contemplated by any Ancillary Agreement, a party providing information to the other party under this Article VII shall be entitled to receive from the recipient of such information, upon presentation of invoices thereof, payments for such amount relating to supplies, disbursements and other out-of-pocket expenses, as may be reasonably incurred in providing such information.

ARTICLE VIII

ARBITRATION; DISPUTE RESOLUTION

8.1. Agreement to Arbitrate . Except as otherwise specifically provided in any Ancillary Agreement, the procedures for discussion, negotiation and arbitration set forth in this

Article VIII shall apply to all disputes, controversies or claims (whether sounding in contract, tort or otherwise) that may arise out of or relate to, or arise under or in connection with this Agreement or any Ancillary Agreement, or the transactions contemplated hereby or thereby (including all actions taken in furtherance of the transactions contemplated hereby or thereby on or prior to the date hereof), or the commercial or economic relationship of the parties relating hereto or thereto, between or among any member of the DSPGI Group and the Ceva, Inc. Group. Each party agrees on behalf of itself and each member of its respective Group that the procedures set forth in this Article VIII shall be the sole and exclusive remedy in connection with any dispute, controversy or claim relating to any of the foregoing matters and irrevocably waives any right to commence any Action in or before any Governmental Authority, except as expressly provided in Sections 8.7(b) and 8.8 and except to the extent provided under the United States Federal Arbitration Act in the case of judicial review of arbitration results or awards. Each party on behalf of itself and each member of its respective Group irrevocably waives any right to any trial by jury with respect to any claim, controversy or dispute set forth in the first sentence of this Section 8.1.

8.2. Escalation .

(a) It is the intent of the parties to exercise their respective reasonable best efforts to resolve expeditiously any dispute, controversy or claim between or among them with respect to the matters covered hereby that may arise from time to time on a mutually acceptable negotiated basis. In furtherance of the foregoing, any party involved in a dispute, controversy or claim may deliver a notice (an “Escalation Notice”) demanding an in person meeting involving representatives of the parties at a senior level of management of the parties (or if the parties agree, of the appropriate strategic business unit or division within such entity). A copy of any such Escalation Notice shall be given to the Chief Financial Officer, or like officer or official, of each party involved in the dispute, controversy or claim (which copy shall state that it is an Escalation Notice pursuant to this Agreement). Any agenda, location or procedure for such discussions or negotiations between the parties may be established by the parties from time to time; provided , however , that the parties shall exercise their reasonable best efforts to meet within thirty days of the Escalation Notice.

(b) The parties may, by mutual consent, retain a mediator to aid the parties in their discussions and negotiations by informally providing advice to the parties. Any opinion expressed by the mediator shall be strictly advisory and shall not be binding on the parties, nor shall any opinion expressed by the mediator be admissible in any arbitration proceedings. The mediator may be chosen from a list of mediators previously selected by the parties or by other agreement of the parties.

(c) Costs of the mediation shall be borne equally by the parties involved in the matter, except that each party shall be responsible for its own expenses. Mediation is not a prerequisite to a demand for arbitration under Section 8.3.

8.3. Demand for Arbitration .

(a) At any time after the first to occur of (i) the date of the meeting actually held pursuant to the applicable Escalation Notice or (ii) in the event no such meeting occurs,

forty-five days after the delivery of an Escalation Notice, any party involved in the dispute, controversy or claim (regardless of whether such party delivered the Escalation Notice) may, unless the Applicable Deadline has occurred, make a written demand (the “Arbitration Demand Notice”) that the dispute be resolved by binding arbitration, which Arbitration Demand Notice shall be given to the parties to the dispute, controversy or claim in the manner set forth in Section 11.5. If party shall deliver an Arbitration Demand Notice to another party, such other party may itself deliver an Arbitration Demand Notice to such first party with respect to any related dispute, controversy or claim with respect to which the Applicable Deadline has not passed without the requirement of delivering an Escalation Notice. No party may assert that the failure to resolve any matter during any discussions or negotiations, the course of conduct during the discussions or negotiations or the failure to agree on a mutually acceptable time, agenda, location or procedures for the meeting, in each case, as contemplated by Section 8.2, is a prerequisite to a demand for arbitration under Section 8.3.

(b) Except as may be expressly provided in any Ancillary Agreement, any Arbitration Demand Notice may be given until one year and forty-five days after the later of the occurrence of the act or event giving rise to the underlying claim or the date on which such act or event was, or should have been, in the exercise of reasonable due diligence, discovered by the party asserting the claim (as applicable and as it may in a particular case be specifically extended by the parties in writing, the “Applicable Deadline”). Any discussions, negotiations or mediations between the parties pursuant to this Agreement or otherwise shall not toll the Applicable Deadline unless expressly agreed in writing by the parties. Each of the parties agrees on behalf of itself and each member of its Group that if an Arbitration Demand Notice with respect to a dispute, controversy or claim is not given prior to the expiration of the Applicable Deadline, as between or among the parties and the members of their Groups, such dispute, controversy or claim will be barred, notwithstanding any longer statute of limitations afforded by any applicable law. Subject to Sections 8.7(d) and 8.8, upon delivery of an Arbitration Demand Notice pursuant to Section 8.3(a) prior to the Applicable Deadline, the dispute, controversy or claim shall be decided by a sole arbitrator in accordance with the rules set forth in this Article VIII.

8.4. Arbitrators .

(a) Within fifteen days after a valid Arbitration Demand Notice is given, the parties involved in the dispute, controversy or claim referenced therein shall attempt to select a sole arbitrator satisfactory to all such parties.

(b) If such parties are not able jointly to select a sole arbitrator within such fifteen-day period, such parties shall each appoint an arbitrator within thirty days after delivery of the Arbitration Demand Notice. If one party appoints an arbitrator within such time period and the other party or parties fail to appoint an arbitrator within such time period, the arbitrator appointed by the one party shall be the sole arbitrator of the matter.

(c) If a sole arbitrator is not selected pursuant to paragraph (a) or (b) above and, instead, two or more arbitrators are selected pursuant to paragraph (b) above, the arbitrators shall, within thirty days after the appointment of the later of them to be appointed, select an additional arbitrator who shall act as the sole arbitrator of the dispute. After selection of such

sole arbitrator, the initial arbitrators shall have no further role with respect to the dispute. In the event that the arbitrators so appointed do not, within thirty days after the appointment of the later of them to be appointed, agree on the selection of the sole arbitrator, any party involved in such dispute may apply to the American Arbitration Association to select the sole arbitrator, which selection shall be made by such organization within thirty days after such application. Any arbitrator selected pursuant to this paragraph (c) shall be disinterested with respect to any of the parties and the matter and shall be reasonably competent in the applicable subject matter.

(d) The sole arbitrator selected pursuant to paragraph (a), (b) or (c) above shall set a time for the hearing of the matter which will commence no later than ninety days after the date of appointment of the sole arbitrator pursuant to paragraph (a), (b) or (c) above and which hearing will be no longer than thirty days (unless in the judgment of the arbitrator the matter is unusually complex and sophisticated and thereby requires a longer time, in which event such hearing shall be no longer than ninety days). The final decision of such arbitrator will be rendered in writing to the parties not later than sixty days after the last hearing date, unless otherwise agreed by the parties in writing.

(e) The place of any arbitration hereunder will be New York, New York, unless otherwise agreed by the parties.

8.5. Hearings . Within the time period specified in Section 8.4(d), the matter shall be presented to the arbitrator at a hearing by means of written submissions of memoranda and verified witness statements and exhibits, filed simultaneously, and responses, if necessary in the judgment of the arbitrator or both the parties. If the arbitrator deems it to be essential to a fair resolution of the dispute, live cross-examination or direct examination may be permitted, but is not generally contemplated to be necessary. The arbitrator shall actively manage the arbitration with a view to achieving a just, speedy and cost-effective resolution of the dispute, claim or controversy. The arbitrator may, in his or her discretion, set time and other limits on the presentation of each party’s case, its memoranda or other submissions, and refuse to receive any proffered evidence, which the arbitrator, in his or her discretion, finds to be cumulative, unnecessary, irrelevant or of low probative nature. Except as otherwise set forth herein, any arbitration hereunder will be conducted in accordance with the American Arbitration Association Commercial Rules then prevailing. Except as expressly set forth in Section 8.8(b), the decision of the arbitrator shall be final and binding on the parties, and judgment thereon may be had and shall be enforceable in any court having jurisdiction over the parties. Arbitration awards will bear interest at an annual rate of the Prime Rate plus two percent per annum. To the extent that the provisions of this Agreement and the prevailing rules of the American Arbitration Association conflict, the provisions of this Agreement shall govern.

8.6. Discovery and Certain Other Matters .

(a) Any party involved in the applicable dispute may request limited document production from the other party or parties of specific and expressly relevant documents, with the reasonable expenses of the producing party incurred in such production paid by the requesting party. Any such discovery (which rights to documents shall be substantially less than document discovery rights prevailing under the Federal Rules of Civil Procedure) shall be conducted expeditiously and shall not cause the hearing provided for in Section 8.5 to be

adjourned except upon consent of all parties involved in the applicable dispute or upon an extraordinary showing of cause demonstrating that such adjournment is necessary to permit discovery essential to a party to the proceeding. Depositions, interrogatories or other forms of discovery (other than the document production set forth above) shall not occur except by consent of the parties involved in the applicable dispute. Disputes concerning the scope of document production and enforcement of the document production requests shall be determined by written agreement of the parties involved in the applicable dispute or, failing such agreement, will be referred to the arbitrator for resolution. All discovery requests will be subject to the proprietary rights and rights of privilege of the parties, and the arbitrator will adopt procedures to protect such rights and to maintain the confidential treatment of the arbitration proceedings (except as may be required by law). Subject to the foregoing, the arbitrator shall have the power to issue subpoenas to compel the production of documents relevant to the dispute, controversy or claim.

(b) The arbitrator shall have full power and authority to determine issues of arbitrability but shall otherwise be limited to interpreting or construing the applicable provisions of this Agreement or any Ancillary Agreement, and shall have no authority or power to limit, expand, alter, amend, modify, revoke or suspend any condition or provision of this Agreement or any Ancillary Agreement; it being understood, however, that the arbitrator will have full authority to implement the provisions of this Agreement or any Ancillary Agreement, and to fashion appropriate remedies for breaches of this Agreement (including interim or permanent injunctive relief); provided , however , that the arbitrator shall not have (i) any authority in excess of the authority a court having jurisdiction over the parties and the controversy or dispute would have absent these arbitration provisions or (ii) any right or power to award punitive or multiple damages. It is the intention of the parties that in rendering a decision the arbitrator give effect to the applicable provisions of this Agreement and the Ancillary Agreements and follow applicable law (it being understood and agreed that this sentence shall not give rise to a right of judicial review of the arbitrator’s award).

(c) If a party fails or refuses to appear at and participate in an arbitration hearing after due notice, the arbitrator may hear and determine the controversy upon evidence produced by the appearing party.

(d) Arbitration costs will be borne equally by each party involved in the matter, except that each party will be responsible for its own attorney’s fees and other costs and expenses, including the costs of witnesses selected by such party.

8.7. Certain Additional Matters .

(a) Any arbitration award shall be a bare award limited to a holding for or against a party and shall be without findings as to facts, issues or conclusions of law (including with respect to any matters relating to the validity or infringement of patents or patent applications) and shall be without a statement of the reasoning on which the award rests, but must be in adequate form so that a judgment of a court may be entered thereupon. Judgment upon any arbitration award hereunder may be entered in any court having jurisdiction thereof.

(b) Prior to the time at which an arbitrator is appointed pursuant to Section 8.4, any party may seek one or more temporary restraining orders in a court of competent

jurisdiction if necessary in order to preserve and protect the status quo. Neither the request for, or grant or denial of, any such temporary restraining order shall be deemed a waiver of the obligation to arbitrate as set forth herein and the arbitrator may dissolve, continue or modify any such order. Any such temporary restraining order shall remain in effect until the first to occur of the expiration of the order in accordance with its terms or the dissolution thereof by the arbitrator.

(c) Except as required by law, the parties shall hold, and shall cause their respective officers, directors, employees, agents and other representatives to hold, the existence, content and result of mediation or arbitration in confidence in accordance with the provisions of Article VIII and except as may be required in order to enforce any award. Each of the parties shall request that any mediator or arbitrator comply with such confidentiality requirement.

(d) If at any time the sole arbitrator shall fail to serve as an arbitrator for any reason, the parties shall select a new arbitrator who shall be disinterested as to the parties and the matter in accordance with the procedures set forth herein for the selection of the initial arbitrator. The extent, if any, to which testimony previously given shall be repeated or as to which the replacement arbitrator elects to rely on the stenographic record (if there is one) of such testimony shall be determined by the replacement arbitrator.

8.8. Limited Court Actions .

(a) Notwithstanding anything herein to the contrary, in the event that any party reasonably determines the amount in controversy in any dispute, controversy or claim (or any series of related disputes, controversies or claims) under this Agreement or any Ancillary Agreement is, or is reasonably likely to be, in excess of $5 million, excluding any interest accrued thereon, and if such party desires to commence an Action in lieu of complying with the arbitration provisions of this Article, such party shall so state in its Arbitration Demand Notice. If the other parties to the arbitration do not agree that the amount in controversy in such dispute, controversy or claim (or such series of related disputes, controversies or claims) is, or is reasonably likely to be, in excess of $5 million, the arbitrator selected pursuant to Section 8.4 hereof shall decide whether the amount in controversy in such dispute, controversy or claim (or such series of related disputes, controversies or claims) is, or is reasonably likely to be, in excess of $5 million. The arbitrator shall set a date that is no later than ten days after the date of his or her appointment for submissions by the parties with respect to such issue. There shall not be any discovery in connection with such issue. The arbitrator shall render his or her decision on such issue within five days of such date so set by the arbitrator. If the arbitrator determines that the amount in controversy in such dispute, controversy or claim (or such series of related disputes, controversies or claims) is or is reasonably likely to be in excess of $5 million, the provisions of Sections 8.4(d) and (e), 8.5, 8.6, 8.7 and 8.10 hereof shall not apply and on or before (but, except as expressly set forth in Section 8.8(b), not after) the twentieth business day after the date of such decision, any party to the arbitration may elect, in lieu of arbitration, to commence an Action with respect to such dispute, controversy or claim (or such series of related disputes, controversies or claims) in any court of competent jurisdiction. If the arbitrator does not so determine, the provisions of this Article (including with respect to time periods) shall apply as if no determinations were sought or made pursuant to this Section 8.8(a).

(b) If an arbitration award in excess of $5 million is issued in any arbitration proceeding commenced hereunder, any party may, within sixty days after the date of such award, submit the dispute, controversy or claim (or series of related disputes, controversies or claims) giving rise thereto to a court of competent jurisdiction, regardless of whether such party or any other party sought to commence an Action in lieu of proceeding with arbitration in accordance with Section 8.8(a). In such event, the applicable court may elect to rely on the record developed in the arbitration or, if it determines that it would be advisable in connection with the matter, allow the parties to seek additional discovery or to present additional evidence. Each party shall be entitled to present arguments to the court with respect to whether any such additional discovery or evidence shall be permitted and with respect to all other matters relating to the applicable dispute, controversy or claim (or series of related disputes, controversies or claims).

8.9. Continuity of Service and Performance . Unless otherwise agreed in writing, the parties will continue to provide service and honor all other commitments under this Agreement and each Ancillary Agreement during the course of dispute resolution pursuant to the provisions of this Article VIII with respect to all matters not subject to such dispute, controversy or claim.

8.10. Law Governing Arbitration Procedures . The interpretation of the provisions of this Article VIII, only insofar as they relate to the agreement to arbitrate and any procedures pursuant thereto, shall be governed by the Arbitration Act and other applicable U.S. federal law. In all other respects, the interpretation of this Agreement shall be governed as set forth in Section 11.2.

ARTICLE IX

FURTHER ASSURANCES AND ADDITIONAL COVENANTS

9.1. Further Assurances .

(a) In addition to the actions specifically provided for elsewhere in this Agreement, each of the parties hereto shall use its commercially reasonable efforts, prior to, on and after the Distribution Date, to take, or cause to be taken, all actions, and to do, or cause to be done, all things reasonably necessary, proper or advisable under applicable laws, regulations and agreements to consummate and make effective the transactions contemplated by this Agreement, the Ancillary Agreements and the Tax Indemnification Agreement.

(b) Prior to the Distribution Date, if one or more of the parties identifies any commercial or other service that is needed to assure a smooth and orderly transition of the businesses in connection with the consummation of the transactions contemplated hereby, and that is not otherwise governed by the provisions of this Agreement or any Ancillary Agreement, the parties will cooperate in determining whether there is a mutually acceptable arm’s-length basis on which one or more of the other parties will provide such service.

ARTICLE X

TERMINATION

10.1. Termination by Mutual Consent . This Agreement may be terminated at any time after the termination of the Combination Agreement by the mutual consent of DSPGI and Ceva, Inc.

10.2. Other Termination . The obligations of the parties under Article III (including the obligation to pursue or effect the Distribution) may be terminated by DSPGI if the Distribution Date shall not have occurred on or before December 31, 2002.

10.3. Effect of Termination . In the event of any termination of this Agreement prior to the Combination Effective Date, no party to this Agreement (or any of its directors or officers) shall have any Liability or further obligation to any other party. In the event of any termination of this Agreement on or after the Combination Effective Date, only the provisions of Article III will terminate and the other provisions of this Agreement, each Ancillary Agreement and the Tax Indemnification Agreement shall remain in full force and effect.

ARTICLE XI

MISCELLANEOUS

11.1. Counterparts; Entire Agreement; Corporate Power .

(a) This Agreement may be executed in one or more counterparts, all of which shall be considered one and the same agreement, and shall become effective when one or more counterparts have been signed by each of the parties and delivered to the other party.

(b) This Agreement, and the Exhibits, Schedules and Appendices hereto contain the entire agreement between the parties with respect to the subject matter hereof, supersede all previous agreements, negotiations, discussions, writings, understandings, commitments and conversations with respect to such subject matter and there are no agreements or understandings between the parties other than those set forth or referred to herein or therein.

(c) DSPGI represents on behalf of itself and each other member of the DSPGI Group and Ceva, Inc. represents on behalf of itself and each other member of the Ceva, Inc. Group as follows:

(i) each such Person has the requisite corporate or other power and authority and has taken all corporate or other action necessary in order to execute, deliver and perform each of this Agreement, each of the Ancillary Agreements and the Tax Indemnification Agreement to which it is a party and to consummate the transactions contemplated hereby and thereby; and

(ii) this Agreement, each Ancillary Agreement and the Tax Indemnification Agreement to which it is a party has been duly executed and delivered by it and constitutes a valid and binding agreement of it enforceable in accordance with the terms thereof.

11.2. Governing Law . This Agreement shall be governed by and construed and interpreted in accordance with the laws of the State of Delaware (other than as to its laws of arbitration which shall be governed under the Arbitration Act or other applicable federal law pursuant to Section 8.10), irrespective of the choice of laws principles of the State of Delaware, as to all matters, including matters of validity, construction, effect, enforceability, performance and remedies.

11.3. Assignability . Except as set forth in any Ancillary Agreement or the Tax Indemnification Agreement, this Agreement, each Ancillary Agreement and the Tax Indemnification Agreement shall be binding upon and inure to the benefit of the parties hereto and thereto, respectively, and their respective successors and assigns; provided, however, that no party hereto or thereto may assign its respective rights or delegate its respective obligations under this Agreement, any Ancillary Agreement or the Tax Indemnification Agreement without the express prior written consent of the other parties hereto or thereto.

11.4. Third Party Beneficiaries . Except for the indemnification rights under this Agreement of any DSPGI Indemnitee or Ceva, Inc. Indemnitee in their respective capacities as such, (i) the provisions of this Agreement, each Ancillary Agreement and the Tax Indemnification Agreement are solely for the benefit of the parties and are not intended to confer upon any Person except the parties any rights or remedies hereunder, and (ii) there are no third party beneficiaries of this Agreement, any Ancillary Agreement or the Tax Indemnification Agreement and none of this Agreement, any Ancillary Agreement or the Tax Indemnification Agreement shall provide any third person with any remedy, claim, liability, reimbursement, claim of action or other right in excess of those existing without reference to this Agreement, any Ancillary Agreement or the Tax Indemnification Agreement. No party hereto shall have any right, remedy or claim with respect to any provision of this Agreement, any Ancillary Agreement or the Tax Indemnification Agreement to the extent such provision relates solely to the other two parties hereto or the members of such other two parties’ respective Groups.

11.5 . Notices . All notices requests, demands, waivers and other communications under this Agreement, any Ancillary Agreement or the Tax Indemnification Agreement shall be in writing and shall be deemed to have been duly given if delivered personally or by facsimile transmission or mailed (certified or registered mail, postage prepaid, return receipt requested):

If to DSPGI:

DSP Group, Inc.

Attention:

Fax No.:

If to Ceva, Inc.:

Ceva, Inc.

Attention:

Fax No.:

or to such other person or address as any party shall specify by notice in writing to the other party. All such notices, requests, demands, waivers and communications shall be deemed to have been received on the date on which hand delivered, upon transmission of the facsimile transmission by the sender and issuance by the transmitting machine of a confirmation slip confirming that the number of pages constituting the notice have been transmitted without error, or on the third business day following the date on which so mailed, except for a notice of change of address, which shall be effective only upon receipt thereof. In the case of a notice sent by facsimile transmission, the sender shall contemporaneously mail a copy of the notice to the addressee at the address provided for above. However, such mailing shall in no way alter the time at which the facsimile notice is deemed received. In no event shall the provision of notice pursuant to this Section 11.5 constitute notice for service of process.

11.6. Severability . If any provision of this Agreement, any Ancillary Agreement or the Tax Indemnification Agreement or the application thereof to any Person or circumstance is determined by a court of competent jurisdiction to be invalid, void or unenforceable, the remaining provisions hereof or thereof, or the application of such provision to Persons or circumstances or in jurisdictions other than those as to which it has been held invalid or unenforceable, shall remain in full force and effect and shall in no way be affected, impaired or invalidated thereby, so long as the economic or legal substance of the transactions contemplated hereby or thereby, as the case may be, is not affected in any manner adverse to any party. Upon such determination, the parties shall negotiate in good faith in an effort to agree upon such a suitable and equitable provision to effect the original intent of the parties.

11.7. Force Majeure . No party shall be deemed in default of this Agreement, any Ancillary Agreement or the Tax Indemnification Agreement to the extent that any delay or failure in the performance of its obligations under this Agreement, any Ancillary Agreement or the Tax Indemnification Agreement results from any cause beyond its reasonable control and without its fault or negligence, such as acts of God, acts of civil or military authority, embargoes, epidemics, war, riots, insurrections, fires, explosions, earthquakes, floods, unusually severe weather conditions, labor problems or unavailability of parts, or, in the case of computer systems, any failure in electrical or air conditioning equipment. In the event of any such excused delay, the time for performance shall be extended for a period equal to the time lost by reason of the delay.

11.8. Publicity . Prior to the Distribution, each of Ceva, Inc. and DSPGI shall consult with each other prior to issuing any press releases or otherwise making public statements with respect to the Separation and the Distribution or any of the other transactions contemplated hereby and prior to making any filings with any Governmental Authority with respect thereto.

11.9. Expenses . Except as expressly set forth in this Agreement (including Section 3.1(h) hereof) or in any Ancillary Agreement or in the Tax Indemnification Agreement, whether or not the Distribution is consummated, each party hereto shall bear its own respective third party fees, costs and expenses paid or incurred in connection with the Distribution.

11.10. Headings . The article, section and paragraph headings in this Agreement and in the Ancillary Agreements and the Tax Indemnification Agreement are for reference purposes

only and shall not affect in any way the meaning or interpretation of this Agreement, any Ancillary Agreement or the Tax Indemnification Agreement.

11.11. Waivers of Default . Waiver by any party of any default by the other party of any provision of this Agreement, any Ancillary Agreement or the Tax Indemnification Agreement shall not be deemed a waiver by the waiving party of any subsequent or other default, nor shall it prejudice the rights of the other party.

11.12. Specific Performance . In the event of any actual or threatened default in, or breach of, any of the terms, conditions and provisions of this Agreement, any Ancillary Agreement or the Tax Indemnification Agreement, the party or parties who are or are to be thereby aggrieved shall have the right to specific performance and injunctive or other equitable relief of its rights under this Agreement, such Ancillary Agreement or the Tax Indemnification Agreement, in addition to any and all other rights and remedies at law or in equity, and all such rights and remedies shall be cumulative. The parties agree that the remedies at law for any breach or threatened breach, including monetary damages, are inadequate compensation for any loss and that any defense in any action for specific performance that a remedy at law would be adequate is waived. Any requirements for the securing or posting of any bond with such remedy are waived.

11.13. Amendments . No provisions of this Agreement, any Ancillary Agreement or the Tax Indemnification Agreement shall be deemed waived, amended, supplemented or modified by any party, unless such waiver, amendment, supplement or modification is in writing and signed by the authorized representative of the party against whom it is sought to enforce such waiver, amendment, supplement or modification.

11.14. Interpretation . Words in the singular shall be held to include the plural and vice versa and words of one gender shall be held to include the other genders as the context requires. The terms “hereof,” “herein,” and “herewith” and words of similar import shall, unless otherwise stated, be construed to refer to this Agreement (or the applicable Ancillary Agreement or the Tax Indemnification Agreement) as a whole (including all of the Schedules, Exhibits and Appendices hereto and thereto) and not to any particular provision of this Agreement (or such Ancillary Agreement or the Tax Indemnification Agreement). Article, Section, Exhibit, Schedule and Appendix references are to the Articles, Sections, Exhibits, Schedules and Appendices to this Agreement (or the applicable Ancillary Agreement) unless otherwise specified. The word “including” and words of similar import when used in this Agreement (or the applicable Ancillary Agreement or the Tax Indemnification Agreement) shall mean “including, without limitation,” unless the context otherwise requires or unless otherwise specified. The word “or” shall not be exclusive.

The parties have caused this Agreement to be executed by their duly authorized representatives.

D SP G ROUP , I NC .

By:


Name:

Title:

D SP G ROUP L TD .

By:


Name:

Title:

C EVA I NC .

By:


Name:

Title:

D SP C EVA , I NC .

By:


Name:

Title:

C ORAGE , L TD .

By:


Name:

Title:

Exhibit 10.2

TAX INDEMNIFICATION AND ALLOCATION AGREEMENT

This Tax Indemnification and Allocation Agreement (the “Agreement”) is entered into as of , 2002, by and between DSP Group, Inc., a Delaware corporation ( “DSPGI” ), and Ceva, Inc., a Delaware corporation (“Ceva”). ( DSPGI and Ceva are sometimes collectively referred to herein as the “Companies”).

RECITALS

A. DSPGI is the common parent of an affiliated group of corporations, which includes Ceva. The members of the affiliated group have heretofore joined in filing consolidated Federal Income Tax returns.

B. DSPGI and Ceva have entered into the Separation Agreement (defined below) providing for the Separation and Distribution, each as fully described in such Agreement.

C. After the stock of Ceva is distributed to DSPGI’s shareholders pursuant to the Distribution, Ceva and its subsidiaries will no longer be members of the affiliated group of which DSPGI is the common parent.

D. DSPGI and Ceva desire to provide for and agree upon the allocation between them of liabilities for Taxes (as defined herein) arising prior to, as a result of, and subsequent to the actions contemplated by the Separation Agreement and the entitlement to refunds thereof, allocate responsibility and provide for cooperation in connection with the filing of returns in respect of Taxes, and provide for certain other matters relating to Taxes.

NOW, THEREFORE, in consideration of the mutual covenants and agreements hereinafter set forth, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows:

S ECTION 1. Definition of Terms.

For purposes of this Agreement (including the recitals hereof), the following terms have the following meanings:

“Affiliate” means any entity that directly or indirectly is “controlled” by the person or entity in question. “Control” means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a person, whether through ownership of voting securities, by contract or otherwise. Except as otherwise provided herein, the term Affiliate shall refer to Affiliates of a person as determined immediately after the Distribution. The term “Affiliate” includes a Subsidiary of an entity.

“Agreement” shall mean this Tax Indemnification and Allocation Agreement.

“Code” means the U.S. Internal Revenue Code of 1986, as amended, or any successor law.

“Companies” means DSPGI and Ceva, collectively, and “Company” means any one of DSPGI and Ceva.

“Consolidated or Combined Income Tax” means any Income Tax computed by reference to the assets or activities of a Group.

“Consolidated or Combined State Income Tax” means any State Income Tax computed by reference to the assets or activities of a Group.

“Consolidated or Combined Foreign Income Tax” means any Foreign Income Tax computed by reference to the assets or activities of a Group.

“Consolidated Tax Liability” means, with respect to any DSPGI Federal Consolidated Return, the tax liability of the group as that term is used in Treasury Regulation Section 1.1552–1(a)(1) (including applicable interest, additions to the tax, additional amounts and penalties as provided in the Code), provided that such tax liability shall be treated as including any alternative minimum tax liability under Code Section 55.

“Ceva Group” means Ceva and its Subsidiaries and wholly-owned limited liability companies as determined immediately after the Distribution Date.

“DSPGI Federal Consolidated Return” means any United States Federal Tax Return for the affiliated group (as that term is defined in Code Section 1504) that includes DSPGI as the common parent and any member of the Ceva Group.

“DSPGI Group” means DSPGI and its Subsidiaries and wholly owned limited liability companies, excluding any entity that is a member of the Ceva Group.

“Distribution” shall have the meaning set forth in the Separation Agreement.

“Distribution Date” means the Distribution Date as that term is defined in the Separation Agreement.

“Federal Income Tax” means any Tax imposed by Subtitle A or F of the Code.

“Foreign Income Tax” means any Tax imposed by any foreign country or any possession of the United States, or by any political subdivision of any foreign country or United States possession, which is an income tax as defined in Treasury Regulation Section 1.901–2.

“Group” means the DSPGI Group or the Ceva Group, as the context requires.

“Income Tax” means any Federal Income Tax, State Income Tax, or Foreign Income Tax.

“Payment Date” means (i) with respect to any DSPGI Federal Consolidated Return, the due date for any required installment of estimated taxes determined under Code Section 6655, the due date (determined without regard to extensions) for filing the return determined under Code Section 6072, and the date the return is filed, and (ii) with respect to any Tax Return for any Consolidated or Combined State Income Tax, the corresponding dates determined under the applicable Tax Law.

“Post-Distribution Period” shall have the meaning set forth in Section 2.4(b).

“Post-Distribution Tax Return” means any Tax Return for any Tax Period beginning after the Distribution Date.

“Pre-Distribution Period” shall have the meaning set forth in Section 2.4(b).

“Pre-Distribution Tax Return” means any Tax Return for any Tax Period beginning on or before the Distribution Date.

“Prime Rate” means the rate which (or any successor thereto or other money center commercial bank agreed to by DSPGI and Ceva) announces from time to time as its prime lending rate, as in effect from time to time.

“Responsible Company” means, with respect to any Tax Return, the Company having responsibility for preparing and filing such Tax Return under this Agreement.

“Separate Company Tax” means any Tax computed by reference to the assets and activities of a member or members of a single Group.

“Separation Agreement” means the Separation Agreement by and among DSP Group Inc., DSP Group Ltd., Ceva, Inc., DSP Ceva Inc. and Corage, Ltd. Dated , 2002

“State Income Tax” means any Tax imposed by any State of the United States or by any political subdivision of any such State which is imposed on or measured by net income, including state and local franchise or similar Taxes measured by net income.

“Subsequent Tax Opinion/Ruling” shall have the meaning set forth in the Separation Agreement.

“Subsidiary” shall have the meaning set forth in Treasury Regulations section 1.1502–1(c).

“Tax” or “Taxes” means any income, gross income, gross receipts, profits, capital stock, franchise, withholding, payroll, social security, workers compensation, unemployment, disability, property, ad valorem, stamp, excise, severance, occupation, service, sales, use, license, lease, transfer, import, export, value added, alternative minimum, estimated or other tax of any kind (including any fee, assessment, or other charge in the nature of or in lieu of any tax) imposed by any governmental entity or

political subdivision thereof, and any interest, penalties, additions to tax, or additional amounts in respect of the foregoing.

“Tax Authority” means, with respect to any Tax, the governmental entity, or political subdivision thereof that imposes such Tax, and the agency (if any) charged with the collection of such Tax for such entity or subdivision.

“Tax Item” means, with respect to any Income Tax, any item of income, gain, loss, deduction, and credit.

“Tax Law” means the law of any governmental entity or political subdivision thereof relating to any Tax.

“Tax Period” means, with respect to any Tax, the period for which the Tax is reported as provided under the Code or other applicable Tax Law.

“Tax Records” means Tax Returns, Tax Return workpapers, documentation relating to any Tax contests, and any other books of account or records required to be maintained under the Code or other applicable Tax Laws or under any record retention agreement with any Tax Authority.

“Tax Return” means any report of Taxes due, any claims for refund of Taxes paid, any information return with respect to Taxes, or any other similar report, statement, declaration, or document required to be filed under the Code or other Tax Law, including any attachments, exhibits, or other materials submitted with any of the foregoing, and including any amendments or supplements to any of the foregoing.

“Tax Rulings” shall have the meaning set forth in the Separation Agreement.

“Treasury Regulations” means the regulations promulgated from time to time under the Code as in effect for the relevant Tax Period.

S ECTION 2. Allocation of Tax Liabilities.

2.1 General Rule .

(a) DSPGI Liability . DSPGI shall be liable for Taxes not specifically allocated to Ceva under this Section 2. DSPGI shall indemnify and hold harmless the Ceva Group from and against any liability for Taxes for which DSPGI is liable under this Section 2.1(a).

(b) Ceva Liability . Ceva shall be liable for, and shall indemnify and hold harmless the DSPGI Group from and against, any liability for Taxes that are allocated to Ceva under this Agreement.

2.2 Allocation of United States Federal Income Tax .

(a) Pre-Distribution Period . DSPGI shall be liable for, and shall hold the Ceva Group harmless for, any Federal Income Tax relating to the DSPGI Federal Consolidated Return for all Tax Periods ending on or before the Distribution Date and for the Pre-Distribution Period. DSPGI is entitled to any refunds of Federal Income Tax for Tax Periods ending on or before the Distribution Date and for the Pre-Distribution Period.

(b) Post-Distribution Period . The DSPGI Group and the Ceva Group shall each be liable for, and shall indemnify the other against, its respective liability for Federal Income Taxes for the Post-Distribution Period and for all Tax Periods beginning on or after the Distribution Date.

2.3 Allocation of State and Foreign Income Taxes .

(a) Separate Company Taxes . In the case of any State Income Tax or Foreign Income Tax which is a Separate Company Tax:

(i) Pre-Distribution Period . DSPGI shall be liable for, and shall indemnify the Ceva Group against, any Separate Company Tax for all Tax Periods ending on or before the Distribution Date and for the Pre-Distribution Period. DSPGI is entitled to any refunds of Separate Company Taxes for Tax Periods ending on or before the Distribution Date and for the Pre-Distribution Period.

(ii) Post-Distribution Period . Ceva shall be liable for, and shall hold the DSPGI Group harmless against, any Separate Company Taxes imposed on any member of the Ceva Group for the Post-Distribution Period and for any Tax Periods beginning after the Distribution Date. DSPGI shall be liable for, and shall hold the Ceva Group harmless against, any Separate Company Taxes of any member of the DSPGI Group for the Post-Distribution Period and for any Tax Periods beginning after the Distribution Date.

(b) Allocation of Consolidated or Combined Income Taxes . In the case of any State Income Tax or Foreign Income Tax which is a Consolidated or Combined Income Tax:

(i) Pre-Distribution Period . DSPGI shall be liable for, and shall hold Ceva Group harmless for, any State Income Tax or Foreign Income Tax relating to Consolidated or Combined Returns for all Tax Periods ending on or before the Distribution Date and for the Pre-Distribution Period. DSPGI is entitled to any refunds of Tax attributable to Tax Periods ending on or before the Distribution Date and for the Pre-Distribution Period.

(ii) Post-Distribution Period . The DSPGI Group and the Ceva Group shall each be liable for, and shall indemnify the other against, its respective liability for Consolidated or Combined State Income Taxes and Consolidated or

Combined Foreign Income Taxes for any Tax Period beginning after the Distribution Date and for the Post-Distribution Period.

2.4 Other Taxes; Allocation .

(a) Other Taxes . All Taxes other than those specifically allocated pursuant to Sections 2.2 and 2.3 shall be allocated based on the legal entity on which the legal incidence of the Tax is imposed. As between the parties to this Agreement, Ceva shall be liable for all Taxes imposed on any member of the Ceva Group. The Companies believe that there is no Tax not specifically allocated pursuant to Sections 2.2 and 2.3 which is legally imposed on more than one legal entity (e.g., joint and several liability); however, if there is any such Tax, it shall be allocated in accordance with past practices as reasonably determined by the affected Companies, or in the absence of such practices, in accordance with any allocation method agreed upon by the affected Companies.

(b) Allocation of Straddle Periods. In the case of any Tax Period beginning on or before the Distribution Date and ending after the Distribution Date (a “Straddle Period”), Tax Items shall be apportioned between the portion of the Straddle Period ending on the Distribution Date (the “Pre-Distribution Period”) and the portion of the Straddle Period beginning after the Distribution Date (the “Post-Distribution Period”) in accordance with the principles in Treasury Regulation Section 1.1502-76(b) using a closing-of-the-books method. However, Tax Items (other than extraordinary items within the meaning of Treasury Regulation Section 1.1502-76(b)(2)(ii)(C)) for the month including the Distribution Date will be allocated to the Pre-Distribution Period and the Post-Distribution Period using the principles of the ratable allocation method of Treasury Regulation Section 1.1502-76(b)(2)(iii). In determining the apportionment of Tax Items between the Pre-Distribution Period and the Post-Distribution Period, any Tax Items arising as a result of the Separation or the Distribution shall be treated as extraordinary items described in Treasury Regulation Section 1.1502-76(b)(2)(ii)(C) and shall be allocated to the Pre-Distribution Period.

2.5 Indemnification Payments . If any Company (the “Payor”) is required to pay to a Tax Authority a Tax that is properly allocated to another Company (the “Responsible Party”) under this Agreement, the Responsible Party shall reimburse the Payor within ninety (90) days of delivery by the Payor to the Responsible Party of an invoice for the amount due, accompanied by evidence of payment and a statement detailing the Taxes paid and describing in reasonable detail the particulars relating thereto. The reimbursement shall include interest on the Tax payment computed at the Prime Rate based on the number of days from the date of the payment to the Tax Authority to the date of reimbursement under this Section 2.5.

2.6 Limitation . Notwithstanding anything herein to the contrary, to the extent that responsibility for Taxes is allocated among DSPGI and Ceva by the Separation Agreement, the Separation Agreement shall govern and this Agreement shall not govern.

S ECTION 3. Preparation and Filing of Tax Returns.

3.1 General . Except as otherwise provided in this Section 3, Tax Returns shall be prepared and filed when due (including extensions) by the person obligated to file such Tax Returns under the Code or applicable Tax Law. The Companies shall provide, and shall cause their Affiliates to provide, assistance and cooperate with one another in accordance with Section 4 with respect to the preparation and filing of Tax Returns, including providing information required to be provided in Section 4.

3.2 DSPGI’s Responsibility . DSPGI has the exclusive obligation and right to prepare and file, or to cause to be prepared and filed:

(a) DSPGI Federal Consolidated Returns for all Tax Periods;

(b) DSPGI Consolidated or Combined State Income Tax Returns for all Tax Periods and DSPGI Consolidated or Combined Foreign Income Tax Returns for all Tax Periods; and

(c) Tax Returns for State Income Taxes and Foreign Income Taxes that are Separate Company Taxes for members of the DSPGI Group (excluding for this purpose members of the Ceva Group).

3.3 Ceva’s Responsibility . Ceva shall prepare and file, or shall cause to be prepared and filed, all Tax Returns required to be filed by or with respect to the Ceva or members of the Ceva Group other than those Tax Returns which DSPGI is required to prepare and file under Section 3.2.

3.4 Tax Accounting Practices .

(a) General . Except as otherwise provided in this Section 3.4, any Pre-Distribution Tax Return, and any Post-Distribution Tax Return to the extent Tax Items reported on such Tax Return might reasonably affect Tax Items reported on any Pre-Distribution Tax Return, shall be prepared in accordance with past Tax accounting practices used with respect to the Tax Returns in question (unless such past practices are no longer permissible under the Code or other applicable Tax Law). To the extent any Tax Items are not covered by past practices (or in the event such past practices are no longer permissible under the Code or other applicable Tax Law), such Tax Items shall be reported in accordance with reasonable Tax accounting practices selected by DSPGI or Ceva depending on whose Tax Liability under Section 2 is affected thereby. If the Tax liability of both DSPGI and Ceva under Section 2 would be affected by the reporting of the Tax Item, the parties shall negotiate in good faith to determine the reporting of the Tax Item. Any dispute regarding the proper tax treatment of the Tax Item shall be referred for resolution pursuant to Section 6.2, sufficiently in advance of the filing date of such Tax Return (including extensions) to permit timely filing of the return.

(b) Reporting of Separation and Distribution Tax Items . The tax treatment reported on any Tax Return of Tax Items relating to the Separation and Distribution shall be consistent with the treatment of such item in the Tax Rulings or any Subsequent Tax

Tax Opinion/Ruling (unless such treatment is not permissible under the Code). To the extent there is a Tax Item relating to the Separation or Distribution which is not covered by the Tax Rulings or any Subsequent Tax Opinion/Ruling, the Companies shall agree on the tax treatment of any such Tax Item reported on any Tax Return. For this purpose, the tax treatment of such Tax Items on a Tax Return shall be determined by the Responsible Company with respect to such Tax Return and shall be agreed to by the other Company unless either (i) there is no reasonable basis as defined under Section 6662 of the Code for such tax treatment, or (ii) such tax treatment would have a material impact on the other Company or the Tax Rulings or any Subsequent Tax Opinion/Ruling. Such Tax Return shall be submitted for review pursuant to Section 3.5(a), and any dispute regarding such proper tax treatment shall be referred for resolution pursuant to Section 6.2, sufficiently in advance of the filing date of such Tax Return (including extensions) to permit timely filing of the return.

3.5 Right to Review Tax Returns .

(a) General . The Responsible Company with respect to any Tax Return shall make such Tax Return and related workpapers available for review by the other Company, if requested, to the extent (i) such Tax Return relates to Taxes for which the requesting party may be liable, (ii) such Tax Return relates to Taxes for which the requesting party may be liable in whole or in part or for any additional Taxes owing as a result of adjustments to the amount of Taxes reported on such Tax Return, or (iii) the requesting party reasonably determines that it must inspect such Tax Return to confirm compliance with the terms of this Agreement. The Responsible Company shall use its commercially reasonable efforts to make such Tax Return available for review as required under this paragraph sufficiently in advance of the due date for filing such Tax Returns to provide the requesting party with a meaningful opportunity to analyze and comment on such Tax Returns and have such Tax Returns modified before filing, taking into account the person responsible for payment of the tax (if any) reported on such Tax Return and the materiality of the amount of Tax liability with respect to such Tax Return. The Companies shall attempt in good faith to resolve any issues arising out of the review of such Tax Returns. Issues that cannot be resolved in the Companies shall be resolved in the manner set forth in Section 6.2.

(b) Execution of Returns Prepared by Other Party . In the case of any Tax Return which is required to be prepared and filed by one Company under this Agreement and which is required by law to be signed by another Company (or by its authorized representative), the Company which is legally required to sign such Tax Return shall not be required to sign such Tax Return under this Agreement if there is no reasonable basis for the tax treatment of any material items reported on the Tax Return.

S ECTION 4. Assistance and Cooperation .

4.1 General . After the Distribution Date, each of the Companies shall cooperate (and cause their respective Affiliates to cooperate) with each other and with each other’s agents, including legal counsel and accounting firms, in connection with Tax matters relating to the Companies and their Affiliates including (i) preparation and filing of Tax

Returns, (ii) determining the liability for and amount of any Taxes due (including estimated Taxes) or the right to and amount of any refund of Taxes, (iii) examinations of Tax Returns, and (iv) any administrative or judicial proceeding in respect of Taxes assessed or proposed to be assessed. Such cooperation shall include making all information and documents in their possession relating to the other Company and their Affiliates available to such other Company as provided in Section 5. Each of the Companies shall also make available to each other, as reasonably requested and available, personnel (including officers, directors, employees and agents of the Companies or their respective Affiliates) responsible for preparing, maintaining, and interpreting information and documents relevant to Taxes, and personnel reasonably required as witnesses or for purposes of providing information or documents in connection with any administrative or judicial proceedings relating to Taxes. Any information or documents provided under this Section 4 shall be kept confidential by the Company receiving the information or documents, except as may otherwise be necessary in connection with the filing of Tax Returns or in connection with any administrative or judicial proceedings relating to Taxes.

4.2 Income Tax Return Information . Each Company will provide to the other Company information and documents relating to their respective Groups required by the other Company to prepare Tax Returns. The Responsible Company shall determine a reasonable compliance schedule in accordance with past practice. Any additional information or documents the Responsible Company requires to prepare such Tax Returns will be provided in accordance with past practices, if any, or as the Responsible Company reasonably requests and in sufficient time for the Responsible Company to file such Tax Returns on a timely basis.

S ECTION 5. Tax Records.

5.1 Retention of Tax Records . Each Company shall preserve and keep all Tax Records for so long as the contents thereof may become material in the administration of any matter under the Code or other applicable Tax Law, but in any event until the later of (i) the expiration of any applicable statutes of limitation, and (ii) seven years after the Distribution Date. If, prior to the expiration of the applicable statute of limitation and such seven-year period, a Company reasonably determines that any Tax Records which it is required to preserve and keep under this Section 5 are no longer material in the administration of any matter under the Code or other applicable Tax Law, such Company may dispose of such records upon 90 days prior notice to the other Company. Such notice shall include a list of the records to be disposed of describing in reasonable detail each file, book, or other records being disposed. The notified Company shall have the opportunity, at its cost and expense, to copy or remove, within such 90-day period, all or any part of such Tax Records.

5.2 Access to Tax Records . The Companies and their respective Affiliates shall make available to each other for inspection and copying during normal business hours upon reasonable notice all Tax Records in their possession to the extent reasonably required by the other Company in connection with the preparation of Tax Returns, audits, litigation, or the resolution of items under this Agreement.

S ECTION 6. Tax Disputes.

6.1 Tax Disputes Relating to the Separation and Distribution . Notwithstanding anything herein to the contrary, Article IV of the Separation Agreement shall govern and shall be the exclusive remedy with respect to any Tax dispute related to the Separation and Distribution.

6.2 Other Tax Disputes . To the extent that there is any dispute between the Companies relating to this Agreement (other than a dispute governed by Section 6.1 hereof), the provisions of Article VIII of the Separation Agreement shall govern the resolution of such dispute.

S ECTION 7. Effective Date.

This Agreement shall be effective on the Distribution Date.

S ECTION 8. Interest Under This Agreement .

Anything herein to the contrary notwithstanding, to the extent one Company (“indemnitor”) makes a payment of interest to another Company (“Indemnitee”) under this Agreement with respect to the period from the date that the indemnitee made a payment of Tax to a Tax Authority to the date that the indemnitor reimbursed the indemnitee for such Tax payment, the interest payment shall be treated as interest expense to the indemnitor (deductible to the extent provided by law) and as interest income by the indemnitee (includable in income to the extent provided by law). The amount of the payment shall not be adjusted to take into account any associated Tax benefit to the indemnitor or increase in Tax to the indemnitee.

S ECTION 9. Late Payments .

Any amount owed by one party to another party under this Agreement which is not paid when due shall bear interest at the Prime Rate plus two percent, compounded semiannually, from the due date of the payment to the date paid. To the extent interest required to be paid under this Section 9 duplicates interest required to be paid under any other provision of this Agreement, interest shall be computed at the higher of the interest rate provided under this Section 9 or the interest rate provided under such other provision.

S ECTION 10. Expenses.

Except as provided in Section 11, each party and its Affiliates shall bear their own expenses incurred in connection with preparation of Tax Returns, Tax Contests, and other matters related to Taxes under the provisions of this Agreement.

S ECTION 11. General Provisions .

11.1 Addresses and Notices . Any notice, demand, claim, or other communication under this Agreement shall be in writing and shall be deemed to have

been given upon the delivery or mailing hereof, as the case may be, if delivered personally or sent by certified mail, return receipt requested, postage prepaid, to the parties at the following addresses (or at such other address as a party may specify by notice to the other):

If to DSPGI, to:		DSP Group Inc.

		_______________

		_______________

		Attn: _______________, DSP Group Inc.

If to Ceva, to:		Ceva, Inc.

		_______________

		_______________

		Attn: _______________, Ceva, Inc.

11.2 Binding Effect . This Agreement shall be binding upon and inure to the benefit of the parties hereto and their successors and assigns.

11.3 Waiver . No failure by any party to insist upon the strict performance of any obligation under this Agreement or to exercise any right or remedy under this Agreement shall constitute waiver of any such obligation, right, or remedy or any other obligation, rights, or remedies under this Agreement.

11.4 Invalidity of Provisions . If any provision of this Agreement is or becomes invalid, illegal or unenforceable in any respect, the validity, legality, and enforceability of the remaining provisions contained herein shall not be affected thereby.

11.5 Further Action . The parties shall execute and deliver all documents, provide all information, and take or refrain from taking action as may be necessary or appropriate to achieve the purposes of this Agreement, including the execution and delivery to the other parties and their Affiliates and representatives of such powers of attorney or other authorizing documentation as is reasonably necessary or.

11.6 Integration . This Agreement and the other agreements, including the Separation Agreement, being entered into concurrently herewith, constitute the entire agreement among the parties pertaining to the subject matter hereof and thereof and supersedes all prior agreements and understandings pertaining thereto.

11.7 Construction . The language in all parts of this Agreement shall in all cases be construed according to its fair meaning and shall not be strictly construed for or against any party.

11.8 No Double Recovery Subrogation . No provision of this Agreement shall be construed to provide an indemnity or other recovery for any costs, damages, or other amounts for which the damaged party has been fully compensated under any other

provision of this Agreement or under any other agreement or action at law or equity. Unless expressly required in this Agreement, a party shall not be required to exhaust all remedies available under other agreements or at law or equity before recovering under the remedies provided in this Agreement. Subject to any limitations provided in this Agreement, the indemnifying party shall be subrogated to all rights of the indemnified party for recovery from any third party.

11.9 Counterparts . This Agreement may be executed in two or more counterparts, each of which shall be deemed an original and all of which taken together shall constitute one and the same instrument.

11.10 Governing Law . This Agreement shall be governed by and construed in accordance with the laws of the State of Delaware applicable to contracts executed in and to be performed in that State.

IN WITNESS WHEREOF, each of the parties has caused this Agreement to be executed on its behalf by its officers thereunto duly authorized, all as of the day and year first written above.

D SP G ROUP , I NC .

By:


Name:

Title:

C EVA , I NC .

By:


Name:

Title:

Exhibit 10.3

CEVA, INC. TECHNOLOGY TRANSFER AGREEMENT

This Technology Transfer Agreement (this “Agreement”), effective as of , 2002 (the “Effective Date”), is entered into by and between DSP Group Inc. (“DSPGI”), a Delaware corporation, and Ceva, Inc. (“Ceva”), a Delaware corporation and a wholly owned subsidiary of DSPGI.

RECITALS

A. DSPGI is engaged in the business of designing, manufacturing and marketing high performance digital signal processing integrated circuit devices for cordless telephone, computer telephony, voice-over-broadband and other products.

B. Ceva is engaged in the business of developing and licensing to third parties digital signal processing cores for the manufacture of integrated circuit devices.

C. DSPGI owns or otherwise holds certain intellectual property rights and other assets relating to the digital signal processing cores described on Exhibit A to this Agreement, which intellectual property rights and other assets it desires to assign to Ceva, and Ceva desires to receive such assignment of intellectual property rights and other assets from DSPGI, in accordance with the terms and conditions set forth herein.

AGREEMENTS

Now, therefore, in consideration of the mutual covenants and the other terms and conditions contained herein, the Parties (as defined below) hereby agree as follows:

ARTICLE I

DEFINITIONS

In addition to the capitalized terms defined elsewhere in this Agreement, the following terms shall have the following meanings:

S ECTION 1.1. “ Additional Necessary Licensed IP ” shall mean all technology, information and materials of any kind, such as designs, development kits, emulators, tools, libraries, test suites, documentation, parts lists, board layouts, design materials, databases, know-how, methods, processes, and work in progress, each to the extent that they are necessary to continue operating the Licensing Business as currently conducted by the licensing division of DSPGI, but are not included in the Licensing Business Assets. The parties acknowledge and agree that the Additional Necessary Licensed IP does not include the Licensed IP Modules or Process Information.

S ECTION 1.2. Affiliate . “Affiliate” of any Person shall mean a Person that controls, is controlled by, or is under common control with such Person. As used herein, “control” of a Person means the possession, directly or indirectly, of the power to direct or cause the direction

of the management and policies of such Person, whether through ownership of voting securities or other interests, by contract or otherwise. A Person shall be deemed an Affiliate only for so long as such control exists. Notwithstanding the foregoing, DSPGI and Ceva shall not be considered Affiliates of each other, and DSPGI shall not be deemed to control Ceva.

S ECTION 1.3. Combination Agreement . “Combination Agreement” shall have the meaning set forth in the Separation Agreement.

S ECTION 1.4. Confidential Information . “Confidential Information” shall mean the Ceva Confidential Information or DSPGI Confidential Information, as applicable.

S ECTION 1.5. Ceva Confidential Information . “Ceva Confidential Information” shall mean any and all (a) Existing Cores, Other Transferable Licensing IP, patent applications and provisional patent applications included in the Transferable Patents, Other Transferable Assets, Third Party Licenses, Other Contracts and Employee Proprietary Information Agreements, including all technology, information and materials included in such items, and (b) other technology, information and materials related to research, products, services, hardware or software, inventions, processes, designs, drawings, engineering or other technology which is supplied or licensed by Ceva (in this capacity, the “Disclosing Party”) to DSPGI (in this capacity, the “Receiving Party”) after the Effective Date and which is designated in writing as proprietary or confidential (or with a similar designation) or, if disclosed orally or by demonstration, is designated as confidential or proprietary at the time of disclosure and summarized in a writing so designated within thirty (30) days of the initial disclosure. Ceva Confidential Information shall not include, however, information or material which (i) is or becomes available to the relevant public other than as a result of a wrongful act or omission by the Receiving Party, (ii) except with respect to the items described in subsection (a) above, was available to the Receiving Party (without a duty of confidentiality owed to the Disclosing Party with respect to such information or material) prior to its receipt from the Disclosing Party, (iii) becomes available to the Receiving Party from a Person not otherwise bound by a confidentiality agreement with the Disclosing Party with respect to such information or material, or (iv) except with respect to the items described in subsection (a) above, was independently developed by the Receiving Party.

S ECTION 1.6. Ceva Employees . “Ceva Employees” shall have the meaning set forth in the Separation Agreement.

S ECTION 1.7. Ceva Licensed Products . “Ceva Licensed Products” shall mean digital signal processing cores designed and developed by or for Ceva, its successors or assigns, and its or their Affiliates, that consist principally of an Existing Core and that also incorporate one or more of the Licensed Chip Modules, where such Licensed Chip Modules are bundled with, and are used with, such Existing Core.

S ECTION 1.8. Corage Ltd. Technology Transfer Agreement . “Corage Ltd. Technology Transfer Agreement” shall mean the Corage, Ltd. Technology Transfer Agreement of even date herewith by and between Corage, Ltd. and DSP Group Ltd.

S ECTION 1.9. Disclosing Party . “Disclosing Party” shall have the meaning set forth in Sections 1.5 and 1.10, as applicable.

S ECTION 1.10. DSPGI Confidential Information . “DSPGI Confidential Information” shall mean any and all (a) Licensed IP Modules and Process Information and all technology, information and materials included in such items, and (b) other technology, information and materials related to research, products, services, hardware or software, inventions, processes, designs, drawings, engineering or other technology which is supplied or licensed by DSPGI (in this capacity, the “Disclosing Party”) to Ceva (in this capacity, the “Receiving Party”) after the Effective Date and which is designated in writing as proprietary or confidential (or with a similar designation) or, if disclosed orally or by demonstration, is designated as confidential or proprietary at the time of disclosure and summarized in a writing so designated within thirty (30) days of the initial disclosure. DSPGI Confidential Information shall not include, however, information or material which (i) is or becomes available to the relevant public other than as a result of a wrongful act or omission by the Receiving Party, (ii) except with respect to the items described in subsection (a) above, was available to the Receiving Party (without a duty of confidentiality owed to the Disclosing Party with respect to such information or material) prior to its receipt from the Disclosing Party, (iii) becomes available to the Receiving Party from a Person not otherwise bound by a confidentiality agreement with the Disclosing Party with respect to such information or material, or (iv) except with respect to the items described in subsection (a) above, was independently developed by the Receiving Party.

S ECTION 1.11. DSPGI Products . “DSPGI Products” shall mean any products now or hereafter manufactured, sold or otherwise distributed by, for or under license from DSPGI, its successors and assigns, or its or their current or future Affiliates.

S ECTION 1.12. Effective Date . “Effective Date” shall have the meaning set forth in the Preamble.

S ECTION 1.13. Existing Cores . “Existing Cores” shall mean the digital signal processing cores set forth on Exhibit A to this Agreement, including the designs that constitute such cores.

S ECTION 1.14. Governmental Authority . “Governmental Authority” shall mean any federal, state, local, foreign or international court, government, department, commission, board, bureau, agency, official or other regulatory, administrative or governmental authority.

S ECTION 1.15. Licensed Chip Modules . “Licensed Chip Modules” shall mean the chip modules set forth in item G.2 of Exhibit G to this Agreement.

S ECTION 1.16. Licensed IP Modules . “Licensed IP Modules” shall mean the Licensed Chip Modules and the Licensed Software Modules.

S ECTION 1.17. Licensed Software Modules . “Licensed Software Modules” shall mean (a) the software modules set forth in item G.1 of Exhibit G to this Agreement, and (b) the database set forth in item G.3 of Exhibit G to this Agreement.

S ECTION 1.18. Licensing Business . “Licensing Business” shall have the meaning set forth in the Separation Agreement.

S ECTION 1.19. Licensing Business Assets . “Licensing Business Assets” shall have the meaning set forth in the Separation Agreement.

S ECTION 1.20. Other Contracts . “Other Contracts” shall have the meaning set forth in Section 5.2.

S ECTION 1.21. Other Intangible Property Rights . “Other Intangible Property Rights” shall mean copyrights, rights in mask works (including, but not limited to, the rights protected under 17 U.S.C. §§ 901-914 or any successor statute), trade secrets, and other rights with respect to confidential or proprietary information, database rights, and other intellectual property rights, but specifically excluding (a) patents and patent applications, (b) trademarks, service marks and trade names, and registrations of, and applications to register, trademarks, service marks and trade names, and other rights with respect to source or origin, (c) Internet domain names and registrations thereof, and (d) rights with respect to the items in clauses (a) through (c).

S ECTION 1.22. Other Transferable Assets . “Other Transferable Assets” shall have the meaning set forth in Article IV.

S ECTION 1.23. Other Transferable Licensing IP . “Other Transferable Licensing IP” shall mean the development kits, emulators, tools, libraries, test suites, documentation, parts lists, board layouts, design materials, databases, work in progress, and other technology and materials set forth in items B.3 through B.7 of Exhibit B to this Agreement.

S ECTION 1.24. Party or Parties . “Party” or “Parties” shall mean DSPGI and/or Ceva, including their permitted successors and assigns.

S ECTION 1.25. Person . “Person” shall mean an individual, a general or limited partnership, a corporation, a trust, a joint venture, an unincorporated organization, a limited liability entity, any other entity and any Governmental Authority.

S ECTION 1.26. Process Information . “Process Information” shall mean the information set forth in item G.4 of Exhibit G to this Agreement.

S ECTION 1.27. Products Business . “Products Business” shall have the meaning set forth in the Separation Agreement.

S ECTION 1.28. Receiving Party . “Receiving Party” shall have the meaning set forth in Sections 1.5 and 1.10, as applicable.

S ECTION 1.29. Representative . “Representative” shall mean with respect to a Person, any and all directors, officers, employees, representatives, or agents of such Person.

S ECTION 1.30. Separation Agreement . “Separation Agreement” shall mean the Separation Agreement of even date herewith by and among DSPGI, DSP Group Ltd., Ceva, Inc., DSP Ceva, Inc. and Corage, Ltd.

S ECTION 1.31. Third Party or Third Parties . “Third Party” or “Third Parties” shall mean any entity other than a Party or an Affiliate of a Party.

S ECTION 1.32. Third Party Licenses . “Third Party Licenses” shall have the meaning set forth in Section 5.1.

S ECTION 1.33. Transferable Domain Names . “Transferable Domain Names” shall mean the Internet domain names set forth in part B.2.3 of Exhibit B to this Agreement, including the registrations of such domain names and any rights under contract (including agreements with domain name registrars) for registrations of such domain names.

S ECTION 1.34. Transferable Licensing IP . “Transferable Licensing IP” shall mean (a) the Transferable Domain Names, Transferable Marks and Transferable Patents, and (b) the Other Intangible Property Rights in and to (i) the Existing Cores and (ii) the Other Transferable Licensing IP.

S ECTION 1.35. Transferable Marks . “Transferable Marks” shall mean the trademarks, service marks and trade names set forth in parts B.2.1 and B.2.2 of Exhibit B to this Agreement, including any registrations of, and applications to register, such trademarks, service marks and trade names.

S ECTION 1.36. Transferable Patents . “Transferable Patents” shall mean all patents, patent applications and provisional patent applications (including any patents issuing in respect of such patent applications and provisional patent applications) set forth in part B.1 of Exhibit B to this Agreement, together with any continuations, continuations-in-part, reissues, divisionals and renewals of any such patents and patent applications and any foreign counterparts thereof.

S ECTION 1.37. Transferring Entities . “Transferring Entities” shall mean DSPGI and all of its Affiliates immediately prior to the Effective Date, other than DSP Group Ltd., Corage, Ltd., Ceva, Inc. and their subsidiaries.

ARTICLE II

TRANSFER OF INTELLECTUAL PROPERTY RIGHTS

S ECTION 2.1. Assignment . Except only for the rights retained by, or granted back to, DSPGI (for itself, its successors and assigns, and its and their current and future Affiliates) elsewhere in this Agreement, DSPGI, on behalf of itself and the Transferring Entities, hereby irrevocably assigns, sells, transfers and sets over to Ceva, and its successors and assigns, all right, title and interest of the Transferring Entities throughout the world in and to the Transferable Licensing IP, including, but not limited to, all benefits, privileges, causes of action, and remedies relating to the Transferable Licensing IP, whether before or hereafter accrued, including, without limitation, the exclusive rights to (a) apply for and maintain all registrations, applications, renewals and/or extensions therefor, (b) bring actions (at law, in equity or otherwise) for all past, present and/or future infringements or misappropriations thereof, (c) settle and retain proceeds from any such actions, and (d) grant licenses or other interests therein to any Person. The foregoing includes (and DSPGI, on behalf of itself and the Transferring Entities, hereby irrevocably assigns, sells, transfers and sets over to Ceva, and its successors and assigns) the goodwill and reputation of the business connected with and symbolized by the Transferable Marks. Ceva hereby accepts such assignment and assumes (and shall pay, perform and discharge

when due) all obligations with respect to such Transferable Licensing IP accruing from and after the Effective Date.

S ECTION 2.2. Retention of Certain Rights .

(a) Subject to the terms and conditions of this Agreement, and notwithstanding Section 2.1, DSPGI retains for itself, its successors and assigns, and its and their current and future Affiliates (and Ceva hereby grants to DSPGI, its successors and assigns, and its and their current and future Affiliates), a nonexclusive, perpetual, irrevocable, royalty-free, worldwide right and license to prepare derivative works of and otherwise modify, make, reproduce, sell and otherwise distribute, transmit, import, and otherwise use and exploit the Transferable Licensing IP (except for the Transferable Domain Names and Transferable Marks) solely in connection with the design, development, testing, manufacture, sale and other distribution, support, and other use and exploitation of DSPGI Products, including the right and license to prepare derivative works of and otherwise modify, make, reproduce, sell and otherwise distribute, transmit, import, and otherwise use and exploit any DSPGI Products based on, incorporating or otherwise using all or any portion of the Transferable Licensing IP. Subject to the limitations set forth Section 2.2(b) below, the rights and licenses set forth in this Section 2.2(a) include (i) the right to disclose the Transferable Licensing IP, provided that such disclosure is solely for use and exploitation in connection with DSPGI Products and in accordance with the confidentiality obligations set forth in this Agreement, and (ii) a license under the Transferable Patents to make, use and sell DSPGI Products. Subject to the limitations set forth in Section 2.2(b) below, the rights and licenses set forth in this Section 2.2(a) also include the right to grant licenses and/or sublicenses (with the rights of the licensees and/or sublicensees to grant further sublicenses) of any of the foregoing rights and licenses, provided that the licenses and/or sublicenses of (A) the Existing Cores are limited to use and exploitation as part of DSPGI Products that offer material functions and features in addition to the Existing Cores themselves, and (B) the Other Transferable Licensing IP are limited to use and exploitation in connection with DSPGI Products.

(b) Notwithstanding any rights retained by or granted to DSPGI or any other Transferring Entity in this Agreement or otherwise, DSPGI shall not, and shall ensure that each Transferring Entity shall not, under any circumstances grant any licenses or sublicenses of the Existing Cores (or disclose the designs of the Existing Cores constituting Ceva Confidential Information) to any third party, during the Noncompetition Period (as that term is defined in the Separation Agreement) other than in connection with the contracted design or manufacture of DSPGI Products by third parties for DSPGI, its successors and assigns, and its and their current and future Affiliates, provided that DSPGI, its successors and assigns, and its and their current and future Affiliates shall not provide any such designs of the Existing Cores to any such third party that has not previously executed a license/sublicense and/or confidentiality agreement on terms and conditions generally imposed by DSPGI for its own comparable materials, and provided further, that such licenses/sublicenses shall cover only the technology or information reasonably required by such contract designer or manufacturer in order to manufacture or design, as applicable, the DSPGI Products for DSPGI, its successors and assigns, and its and their current and future Affiliates.

(c) During the Noncompetition Period, if DSPGI desires to license and/or sublicense the Existing Cores to a customer or potential customer in a manner prohibited by Section 2.2(b), Ceva will, at its option, either (i) negotiate in good faith with DSPGI a non-exclusive, commercial license permitting such license and/or sublicense on terms and conditions and at pricing comparable to those Ceva makes generally available to other customers of such Existing Cores, or (ii) negotiate in good faith with such customer or potential customer such license and/or sublicense on terms and conditions and at pricing comparable to those Ceva makes generally available to other customers of such Existing Cores.

S ECTION 2.3. License of Transferable Marks . Subject to the terms and conditions of this Agreement, Ceva hereby grants to DSPGI, its successors and assigns, and its and their current and future Affiliates, a nonexclusive, perpetual, royalty-free, worldwide license to use the Transferable Marks solely in connection with DSPGI Products that incorporate, are based on or otherwise use the Transferable Licensing IP to which such Transferable Marks relate, including the marketing, advertising, packaging, sales and distribution of such DSPGI Products. DSPGI agrees that all goodwill arising out of the use of the Transferable Marks by DSPGI, its successors and assigns, and its and their current and future Affiliates will inure exclusively to the benefit of Ceva. DSPGI agrees to use the appropriate trademark legend (either “TM” or circled “R”) with the first prominent use of the Transferable Marks in any marketing, advertising and packaging materials, to indicate Ceva’s ownership of the Transferable Marks in accordance with the practices DSPGI generally uses to identify the owners of third-party marks that DSPGI is authorized to use, and, in connection with the use of the Transferable Marks, to conform substantially with other written trademark usage guidelines of Ceva notified to DSPGI which Ceva imposes on its licensees generally (and with which Ceva itself complies), provided that DSPGI, its successors and assigns, and its and their current and future Affiliates will have a reasonable opportunity to comply with any new or modified usage guidelines. DSPGI agrees to provide samples of such materials using the Transferable Marks to Ceva for its inspection upon Ceva’s reasonable request, and DSPGI shall use commercially reasonable efforts to remedy any defect in its use of the Transferable Marks. If DSPGI fails to remedy any such defect within sixty (60) days of receiving Ceva’s written notice describing such defect in detail, Ceva will have the right, upon written notice to DSPGI, to suspend DSPGI’s license set forth in this Section 2.3 with respect to the DSPGI materials that contain such defect until such defect is remedied.

S ECTION 2.4. Support . Ceva shall make available (or cause to be made available) to DSPGI, its successors and assigns, and its and their current and future Affiliates, maintenance and support services for the Existing Cores and the Other Transferable Licensing IP solely to support the use and exploitation thereof authorized by this Agreement. Such maintenance and support services shall be of a scope and at rates comparable to those of and at which Ceva makes (or causes to be made) similar maintenance and support services available to its customers generally or, if it does not make such services available to its customers generally, it shall do so at market rates. For purposes of the determination of rates and other terms and conditions for the maintenance and support services, DSPGI, its successor and assigns, and its and their Affiliates shall be treated as a single customer. The maintenance and support services provided under this Section 2.4 shall include:

(a) providing error corrections and other modifications to the Existing Cores and Other Transferable Licensing IP, telephone and email support, and assistance in diagnosis

and remedying of errors and defects in the Existing Cores and the Other Transferable Licensing IP, each in accordance with Ceva’s standard support policies and practices; and

(b) providing updates, upgrades, new versions and successors to the Existing Cores and Other Transferable Licensing IP, provided that Ceva shall have no obligation under this Section 2.4(b) until the Parties enter into a maintenance and support services agreement expressly covering such updates, upgrades, new versions or successor versions. The Parties shall negotiate the terms and conditions of a maintenance and support services agreement which is reasonably acceptable to both Parties.

ARTICLE III

EMPLOYEE PROPRIETARY INFORMATION AGREEMENTS

DSPGI, on behalf of itself and the Transferring Entities, hereby transfers and assigns to Ceva, and Ceva hereby accepts such transfer and assumes, all of the rights and obligations of the Transferring Entities under all agreements entered into by the Ceva Employees with the Transferring Entities, or any of them, relating to confidentiality, assignment of inventions and similar matters (“Employee Proprietary Information Agreements”), which agreements shall remain in full force and effect in accordance with their terms, provided that DSPGI shall retain its rights under the Employee Proprietary Information Agreements to the extent required to bring actions (at law, in equity or otherwise) for any breach of such Employee Proprietary Information Agreements relating to acts or omissions prior to the Effective Date by the Ceva Employees who become employees of Ceva. The Parties shall reasonably cooperate in connection with any action against any of the Ceva Employees.

ARTICLE IV

TRANSFER OF OTHER TRANSFERABLE ASSETS

DSPGI, on behalf of itself and the Transferring Entities, hereby irrevocably assigns and transfers to Ceva, and its successors and assigns, all of the right, title and interest of the Transferring Entities in and to the tangible assets, licenses and permits of its Licensing Business as described on Exhibit D to this Agreement and such other equipment, furniture and furnishings as are used principally by the Licensing Business (“Other Transferable Assets”), and Ceva and its successors and assigns hereby accept such assignment and transfer, and assume (and shall pay, perform and discharge when due) all obligations in respect to such Other Transferable Assets accruing from and after the Effective Date.

ARTICLE V

TRANSFER OF CERTAIN RELATED RIGHTS AND OBLIGATIONS

S ECTION 5.1. Assignment and Assumption of License Agreements . DSPGI, on behalf of itself and the Transferring Entities, hereby assigns and delegates to Ceva all of the rights and obligations of the Transferring Entities under all agreements under which the Transferring Entities, or any of them, have granted licenses of the Existing Cores to Third Parties, as described on Exhibit E to this Agreement (the “Third Party Licenses”), including all rights to royalties, license fees and other amounts payable thereunder, and Ceva hereby accepts such assignment and delegation, and assumes (and shall pay, perform and discharge when due) all

obligations under the Third Party Licenses accruing from and after the Effective Date. DSPGI represents and warrants to Ceva that the Transferring Entities and DSP Group Ltd. have not granted to any Third Party any licenses of the Existing Cores except pursuant to the Third Party Licenses described on Exhibit E to this Agreement.

S ECTION 5.2. Assignment and Assumption of Other Contracts . DSPGI, on behalf of itself and the Transferring Entities, hereby assigns and delegates to Ceva all of the rights and obligations of the Transferring Entities under the other contracts relating to the Transferable Licensing IP, Ceva Employees and/or the Other Transferable Assets described on Exhibit F to this Agreement (the “Other Contracts”), and Ceva hereby accepts such assignment and assumes (and shall pay, perform and discharge when due) all obligations under the Other Contracts accruing from and after the Effective Date.

ARTICLE VI

LICENSE TO CEVA OF CERTAIN INTELLECTUAL PROPERTY

S ECTION 6.1. Licensed Software Modules . Subject to the terms and conditions of this Agreement, DSPGI, on behalf of itself and the Transferring Entities, hereby grants to Ceva, its successors and assigns, and its and their current and future Affiliates a nonexclusive, perpetual, irrevocable, royalty-free, worldwide right and license, under the intellectual property rights of the Transferring Entities in and to the Licensed Software Modules and Licensed Chip Modules, to prepare derivative works of and otherwise modify, reproduce, and otherwise use such Licensed Software Modules and Licensed Chip Modules solely for internal use by Ceva, its successors and assigns, and its and their current and future Affiliates, for research and development (e.g., testing, benchmarking, etc.) of its and their own respective products. The parties agree to discuss in good faith broadening the scope of the license granted in this Section 6.1 to allow Ceva to sell and otherwise distribute particular Licensed Software Modules and Licensed Chip Modules on a case-by-case basis upon mutually agreeable terms and conditions.

S ECTION 6.2. VP140 License . The Parties will negotiate in good faith an agreement under which VoicePump, Inc., a subsidiary of DSPGI, will grant to Ceva the right to sublicense to third-party semiconductor makers the right to develop and make semiconductor products based on the design of VoicePump’s VP140 chip in exchange for a share of revenue (as defined by the mutual agreement of the Parties) derived by Ceva from such sublicenses in an amount equal to twenty-five percent (25%).

S ECTION 6.3. Process Information . Subject to the terms and conditions of this Agreement, DSPGI, on behalf of the Transferring Entities, hereby grants to Ceva, its successors and assigns, and its and their current and future Affiliates a nonexclusive, perpetual, irrevocable, royalty-free, worldwide right and license, under the intellectual property rights of the Transferring Entities in and to the Process Information, to prepare derivative works of and otherwise modify, reproduce, and otherwise use such Process Information solely for internal use by Ceva, its successors and assigns, and its and their current and future Affiliates, for the design and development of its and their own respective products.

S ECTION 6.4. Additional Necessary Licensed IP .

(a) To the extent, if any, that there is any Additional Necessary Licensed IP (e.g., development tools necessary for implementing the Existing Cores), DSPGI, on behalf of itself and the Transferring Entities, hereby grants to Ceva, its successors and assigns, and its and their current and future Affiliates a nonexclusive, perpetual, irrevocable, royalty-free, worldwide right and license, under the intellectual property rights of the Transferring Entities in and to such Additional Necessary Licensed IP, to prepare derivative works of and otherwise modify, make, reproduce, sell and otherwise distribute, transmit, import, and otherwise use and exploit such Additional Necessary Licensed IP to the extent necessary to continue operating the Licensing Business as currently conducted and currently contemplated to be conducted by the licensing division of DSPGI. Such right and license includes (i) the right to disclose such Additional Necessary Licensed IP, provided that such disclosure is in accordance with the confidentiality obligations set forth in this Agreement, and (ii) the right to grant licenses and/or sublicenses (with the rights of the licensees and/or sublicensees to grant further sublicenses) of all or any of the foregoing rights, in each case, to the extent necessary to continue operating the Licensing Business as currently conducted and currently contemplated to be conducted by the licensing division of DSPGI. Such Additional Necessary Licensed IP, if any, will be identified by Ceva during the two (2) year period commencing on the Effective Date, and DSPGI shall, from time to time upon the request of Ceva during such two (2) year period and without further consideration, deliver to Ceva, as applicable, copies of any tangible embodiments of any such Additional Necessary Licensed IP which DSPGI has not previously delivered to Ceva pursuant to this Agreement.

(b) In addition, to the extent, if any, that any patents owned or licensed (with the right to sublicense) by the Transferring Entities as of the Effective Date or any patents issuing in respect of applications owned or licensed (with the right to sublicense) by the Transferring Entities as of the Effective Date are necessary to the continued development, distribution and licensing of the Existing Cores and Other Transferable Licensing IP as currently carried out and currently contemplated to be carried out by the licensing division of DSPGI, DSPGI, on behalf of itself and the Transferring Entities, hereby grants to Ceva, its successors and assigns, and its and their current and future Affiliates, a non-exclusive, perpetual, irrevocable, royalty-free, worldwide right and license to make, use and sell such Existing Cores and Other Transferable IP (provided that (i) any sublicense to Ceva, its successors and assigns, and its and their current and future Affiliates of any patents licensed to the Transferring Entities shall be subject to any restrictions and other terms and conditions of the license to the Transferring Entities or under which the Transferring Entities have the right to grant such sublicense and, without limitation of the generality of the foregoing, shall be subject to Ceva’s making any payments required by the sublicense or the exercise of rights thereunder, and (ii) Ceva, its successors and assigns, and its and their current and future Affiliates indemnify and hold harmless (and shall indemnify and hold harmless) the Transferring Entities from any damages or other liabilities resulting from or relating to any breach of any terms and conditions of the license or sublicense by Ceva, its successors and assigns, and its and their current and future Affiliates).

ARTICLE VII

CONSIDERATION

In partial consideration of the assignments and licenses set forth herein, as of the Effective Date Ceva has issued and/or will issue to DSPGI shares of its Common Stock in accordance with the Separation Agreement.

ARTICLE VIII

CONFIDENTIALITY

S ECTION 8.1. Disclosure Limitation . Each Party (as Receiving Party) shall use the same care and measures to protect the confidentiality of the Confidential Information of the other Party (as Disclosing Party) as the Receiving Party uses for its own confidential or proprietary information or material of a similar nature, but no less than a reasonable degree of care. Such measures shall include instructing and requiring all recipients of Confidential Information to maintain the confidentiality of such Confidential Information and restricting disclosure of such Confidential Information to those Representatives of the Receiving Party and its Affiliates, its and their contractors, suppliers and licensees, and other authorized third parties who have a “need to know” consistent with the purposes for which such Confidential Information is disclosed. The Receiving Party further agrees not to remove or destroy any proprietary rights or confidentiality legends or markings placed upon any documentation or other materials. Nothing in the foregoing will preclude the Receiving Party from performing its obligations or exercising its rights under this Agreement, including, without limitation, any disclosure inherent in any commercial activities authorized by this Agreement.

S ECTION 8.2. Permitted Disclosures . Notwithstanding Section 8.1, the Receiving Party may disclose the Disclosing Party’s Confidential Information in the event that the Receiving Party is required (by the disclosure requirements of any rule, regulation, or form of any Governmental Authority or by interrogatories, requests for information or documents by any Governmental Authority or other Person in legal proceedings, subpoenas, civil investigative demands, or other similar processes) to disclose such Confidential Information, provided that the Receiving Party so required shall provide the Disclosing Party with prompt written notice of any such requirement so that the Disclosing Party may object to production and seek a protective order or other appropriate remedy, and/or waive compliance with the provisions of this Agreement. If the Disclosing Party objects to production and seeks a protective order or other appropriate remedy, the Receiving Party shall exercise commercially reasonable efforts (at the sole expense of the Disclosing Party) to cooperate, including, without limitation, by cooperating with the Disclosing Party to obtain an appropriate protective order or other reasonable assurance that confidential treatment will be accorded such Confidential Information.

ARTICLE IX

WARRANTY AND DISCLAIMERS

S ECTION 9.1. Authority . Each of DSPGI and Ceva hereby represents and warrants to the other that it has the corporate authority to enter into and perform its obligations under this Agreement, and its execution, delivery and performance of this Agreement have been duly and validly authorized.

S ECTION 9.2. Sufficiency . DSPGI, on behalf of itself and the Transferring Entities, hereby represents and warrants to Ceva that:

(a) the Transferable Licensing IP (together with the Transferable Licensing IP under the Corage Ltd. Technology Transfer Agreement) constitutes all of the intellectual property assets of the Transferring Entities and DSP Group Ltd. that are used principally in the Licensing Business (as opposed to the Products Business) as currently conducted by the licensing division of the Transferring Entities and DSP Group Ltd.;

(b) the assignments, licenses and other rights granted by the Transferring Entities to Ceva under this Agreement (together with the assignments, licenses and other rights granted by DSP Group Ltd. to Corage Ltd. under the Corage Ltd. Technology Transfer Agreement) accord to Ceva and Corage Ltd. the rights (as between the Transferring Entities and DSP Group Ltd., on one hand, and Ceva and Corage Ltd., on the other hand) with respect to the intellectual property assets of the Transferring Entities and DSP Group Ltd. that are necessary for continued operation of the Licensing Business as currently conducted by the licensing division of the Transferring Entities and DSP Group Ltd.;

(c) the assignment and delivery of the Existing Cores, Other Transferable Licensing IP, Transferable Domain Names, Transferable Marks, Transferable Patents, and Other Transferable Assets to Ceva pursuant to this Agreement (together with the assignment and delivery of such assets to Corage, Ltd. pursuant to the Corage Ltd. Technology Transfer Agreement) has vested or will vest good title to such assets free and clear of all material liens, mortgages, pledges, security interests, prior assignments and similar encumbrances; and

(d) the Other Contracts (together with the Other Contracts under the Corage Ltd. Technology Transfer Agreement) include all of the licenses under which the Transferring Entities and DSP Group Ltd. have obtained from third parties designs, development kits, emulators, tools, libraries, test suites, documentation, parts lists, board layouts, design materials, databases, know-how, methods, processes and work in progress used principally in the Licensing Business (as opposed to the Products Business) as currently conducted by the licensing division of Transferring Entities and DSP Group Ltd.

(e) DSPGI’s sole and exclusive liability, and Ceva’s sole and exclusive remedy, for any breach by DSPGI of the warranties set forth in this Section 9.2 will be that (i) the DSPGI will assign or license, and will cause the Transferring Entities to assign or license, to Ceva, at no cost to Ceva, any omitted assets to the extent necessary for DSPGI to achieve compliance with such warranties or DSPGI will obtain, or will cause the Transferring Entities to obtain, for Ceva, at no cost to Ceva, a reasonable substitute to such omitted assets, and (ii) if DSPGI fails to achieve such compliance within a reasonable period of time following receipt of notice of such breach from Ceva, DSPGI will pay the direct damages resulting from such breach. The rights and remedies set forth herein shall not be cumulative with those for breach of Section 11.2(b).

S ECTION 9.3. Limitation of Warranties . EXCEPT AS EXPRESSLY PROVIDED IN THIS ARTICLE IX, ALL OF THE ASSETS, RIGHTS, TECHNOLOGY, AND OTHER INFORMATION AND MATERIALS ASSIGNED, LICENSED OR OTHERWISE

CONVEYED IN CONNECTION WITH THIS AGREEMENT ARE PROVIDED “AS IS.” NEITHER PARTY MAKES, AND NEITHER PARTY RECEIVES, ANY OTHER WARRANTIES, WHETHER EXPRESS, IMPLIED, STATUTORY, OR OTHERWISE, INCLUDING, WITHOUT LIMITATION, ANY WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, OR NON-INFRINGEMENT OF THIRD-PARTY RIGHTS. WITHOUT LIMITATION OF THE GENERALITY OF THE FOREGOING, NEITHER PARTY MAKES, OR SHALL BE DEEMED TO MAKE, ANY REPRESENTATION OR WARRANTY THAT THE USE OR EXPLOITATION OF ANY PRODUCT WILL BE FREE FROM INFRINGEMENT OF ANY INTELLECTUAL PROPERTY RIGHT OTHER THAN THE RIGHTS EXPRESSLY GRANTED HEREIN. THE FOREGOING WILL NOT SUPERSEDE OR LIMIT IN ANY WAY ANY REPRESENTATIONS OR WARRANTIES EXPRESSLY MADE BY THE PARTIES IN THE SEPARATION AGREEMENT OR THE COMBINATION AGREEMENT.

ARTICLE X

LIMITATION Of LIABILITY

NOTWITHSTANDING ANYTHING HEREIN TO THE CONTRARY, NEITHER PARTY SHALL HAVE ANY LIABILITY WHATSOEVER FOR ANY INCIDENTAL, INDIRECT, CONSEQUENTIAL, PUNITIVE, OR SPECIAL DAMAGES OF ANY KIND, OR ANY LOSS OF REVENUE OR PROFITS, LOSS OF BUSINESS, OR LOSS OF DATA, ARISING OUT OF OR RELATED TO THIS AGREEMENT OR THE SUBJECT MATTER HEREOF (OR THE CORAGE LTD. TECHNOLOGY TRANSFER AGREEMENT OR THE PROVISIONS OF THE SEPARATION AGREEMENT RELATED TO THIS AGREEMENT OR THE CORAGE LTD. TECHNOLOGY TRANSFER AGREEMENT), HOWEVER CAUSED AND REGARDLESS OF THE THEORY OF LIABILITY (INCLUDING CONTRACT, TORT, OR OTHERWISE), EVEN IF INFORMED IN ADVANCE OF THE POSSIBILITY OF SUCH DAMAGES. IN ADDITION, IN NO EVENT WILL THE AGGREGATE LIABILITY OF EITHER PARTY AND ITS AFFILIATES (INCLUDING, IN THE CASE OF DSPGI, DSP GROUP, LTD.) ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE SUBJECT MATTER HEREOF (OR THE CORAGE LTD. TECHNOLOGY TRANSFER AGREEMENT OR THE PROVISIONS OF THE SEPARATION AGREEMENT RELATED TO THIS AGREEMENT OR THE CORAGE LTD. TECHNOLOGY TRANSFER AGREEMENT) CUMULATIVELY EXCEED TEN MILLION US DOLLARS ($10,000,000). THE FOREGOING WILL NOT SUPERSEDE OR LIMIT IN ANY WAY THE RIGHTS AND OBLIGATIONS OF THE PARTIES UNDER THE COMBINATION AGREEMENT.

ARTICLE XI

OTHER AGREEMENTS

S ECTION 11.1. No Rights to Updates . Except as otherwise expressly provided in this Agreement, (a) the assets, rights, technology, and other information and materials assigned, licensed or otherwise conveyed by each Party under this Agreement, including the Existing Cores, the Other Transferable Licensing IP, the Licensed IP Modules and the Process Information, are assigned, licensed and otherwise conveyed as such assets, rights, technology, and other information and materials exist as of the Effective Date, and (b) each Party retains all

right, title and interest in and to any modifications made by or for such Party, and shall have no obligation to provide such modifications to the other Party. In addition, neither Party assumes any obligations other than those expressly set forth in this Agreement. Without limitation of the generality of the foregoing, neither Party is obligated to provide any consulting or technical assistance except as otherwise provided herein.

S ECTION 11.2. Further Assurances .

(a) At any time and from time to time after the Effective Date, at the request of a Party, the other Party shall execute and deliver such written instruments and extend such other cooperation as may be necessary in the reasonable opinion of the other Party to effect, evidence, record or perfect any of the assignments, transfers, licenses and other rights (including retentions thereof) set forth in this Agreement, including execution and acknowledgement of assignments and other instruments.

(b) To the extent that DSPGI or any Transferring Entity retains ownership of any assets or intellectual property rights used principally in the Licensing Business (as opposed to the Products Business), but which are not included in the Licensing Business Assets, at the request of Ceva during the two (2) year period commencing on the Effective Date, DSPGI, on behalf of itself and the Transferring Entities, covenants and agrees to transfer such assets and intellectual property rights to Ceva without any additional consideration, provided that such additional assets or intellectual property rights shall be subject to all the rights of DSPGI, its successors and assigns, and its and their current and future Affiliates set forth herein, including, without limitation, those set forth in Sections 2.2, 2.3 and 2.4. The rights and remedies for breach of this Section 11.2(b) shall be only those set forth in Section 9.2 and shall not be cumulative with any other rights or remedies.

S ECTION 11.3. No Obligation to Obtain New Rights . Ceva acknowledges that, from and after the Effective Date, except only as set forth above in Section 11.2 and Article VIII, DSPGI has no obligation to preserve, protect, obtain or enforce any rights in the Transferable Licensing IP, including, without limitation, any obligation to register any copyright, to file or prosecute any patent application, or to bring actions for infringement or misappropriation of any Transferable Licensing IP. Neither this Agreement nor the conduct of either Party under this Agreement imposes or shall be deemed to impose any such obligation, by implication, estoppel, inference, or otherwise.

S ECTION 11.4. Maintenance of Transferable Licensing IP . As of the Effective Date, Ceva shall have the sole responsibility to execute and deliver such documents, pay such maintenance and other fees, and take such other measures as may be necessary or desirable to preserve, protect, obtain or enforce the Transferable Licensing IP and Ceva’s rights therein, including, without limitation, prosecution and maintenance of any Transferable Patents, registration and maintenance of any Transferable Marks and Transferable Domain Names, and registration, renewal and recordation of any Other Intangible Property Rights, provided that DSPGI shall assist Ceva in connection with the foregoing in accordance with Section 11.2 without any additional consideration but subject to reimbursement of expenses.

S ECTION 11.5. Delivery . Upon the Effective Date, DSPGI shall deliver to Ceva (a) the tangible Other Transferable Assets, and (b) to the extent in DSPGI’s possession, copies of tangible embodiments of the Transferring Entities of the Transferable Licensing IP, Third Party Licenses, employment agreements of Transferred Employees, intangible Other Transferable Assets, and Other Contracts. Notwithstanding the foregoing, each Party may retain copies of any assets, technology, and other information and materials assigned, licensed or otherwise conveyed to the other Party under this Agreement (except for tangible Other Transferable Assets as to which no copies can be made), solely to the extent necessary for such Party to exercise the rights expressly granted to such Party under this Agreement, and subject to the rights and obligations with respect thereto as set forth in this Agreement.

S ECTION 11.6. Residuals . Notwithstanding anything herein to the contrary, each Party may use residual information for any purpose, including without limitation use in development, manufacture, promotion, sale and maintenance of its products and services; provided that this right to residual information does not represent a license under any patents or copyrights of the other Party. The term “residual information” means any information that is retained in the unaided memories of a Party’s personnel who have had access to the other Party’s Confidential Information in accordance with this Agreement. An individual’s memory is unaided if the individual has not intentionally memorized the Confidential Information for the purpose of retaining and subsequently using or disclosing it. This Section 11.6 does not imply any exception to, or limitation of, the obligations of the Parties under Section 6.3 of the Separation Agreement.

S ECTION 11.7. Interpretation of Rights . The Parties acknowledge and agree that (a) any right of a Party granted or referenced herein includes the right (i) to have such right exercised for the benefit of such Party (e.g., the right to make includes the right to have made, the right to reproduce includes to right to have reproduced, etc.), and (ii) to make offers of such right (e.g., a right to sell includes the right to offer to sell), and (b) the right to distribute includes the right to distribute through multiple layers of distribution. In addition, the Parties acknowledge and agree that (1) an Affiliate of a Party shall have the right to exercise a right or license granted to such Affiliate hereunder only to the extent such Party so authorizes, and such Affiliate must be subject to (and agree to) any terms and conditions of this Agreement applicable to such right or license (e.g., limitations on use or confidentiality obligations with respect to the subject matter of such right or license), and (2) a successor or assign of DSPGI or Ceva shall have the right to exercise the rights and licenses granted to such successor or assign hereunder only if such successor or assign is subject to (and agrees to be bound by) all of the terms and conditions of this Agreement, to the same extent as DSPGI or Ceva, in accordance with Section 12.8.

S ECTION 11.8. Subject to Third Party Rights . Notwithstanding anything else in this Agreement, neither Party shall be obligated to assign, license or otherwise convey, or be deemed to assign, license or otherwise convey, any assets, rights, technology, or other information or materials owned by, or subject to the rights of, a Third Party, or any agreement with a Third Party, if and to the extent such Party does not have the right so to assign, license or convey, provided that such Party shall use commercially reasonable efforts to obtain the consent of the Third Party to any assignment, license or other conveyance contemplated by this Agreement at no charge to the assignee or licensee, as applicable (such efforts will include payment of any fees to the Third Party required to effect the assignment, license or conveyance). Each Party

acknowledges and agrees that all assignments, licenses and other conveyances made hereunder are subject to the Third Party Licenses granted before the Effective Date.

S ECTION 11.9. No Obligation to Bring or Defend Legal Actions . Neither Party shall have any obligation hereunder to bring any claim or action against any third party for infringement or misappropriation of any of the intellectual property rights assigned or licensed hereunder, or to defend any claim or action brought by a third party with respect to any such intellectual property rights (including, without limitation, a claim or action with respect to the validity or enforceability of any such rights).

S ECTION 11.10. No Other Rights . The assignments, licenses and other conveyances of rights are only those expressly set forth in this Agreement. Neither Party assigns, licenses or otherwise conveys (or shall be deemed to assign, license or otherwise convey) any rights (whether by implication, estoppel, inference or otherwise, or by any conduct of a Party under this Agreement) other than as expressly set forth in this Agreement.

ARTICLE XII

MISCELLANEOUS

S ECTION 12.1. Relationship of Parties . Nothing contained in this Agreement shall be deemed to constitute either Party or any of its Affiliates the partner, agent, or legal representative of the other Party or its Affiliates or to create any fiduciary relationship for any purpose whatsoever. Except as otherwise specifically provided in this Agreement, nothing in this Agreement shall confer on either Party or any of its Affiliates any authority to act for, bind, or create or assume any obligation or responsibility on behalf of the other Party or its Affiliates.

Section 12.2. Notices . All notices provided pursuant to this Agreement shall be delivered by personal delivery, overnight courier, or facsimile, and shall be deemed effective on the date on which delivery to the intended recipient of the notice was accomplished. Such notices shall be delivered to the following addresses:

If to DSPGI:		If to Ceva:

Moshe Zelnick		[Name]
Chief Financial Officer		[Position]
DSP Group Ltd.		Ceva, Inc.
5 Shenkar Street		[address]
Herzeliya 46120 Israel		[address]
Fax: 972-9-954-1513		Fax:

S ECTION 12.3. Choice of Law . This Agreement shall be governed by and construed and interpreted in accordance with the laws of the State of Delaware (other than as to its laws of arbitration which shall be governed under the Arbitration Act (as defined in the Separation Agreement) or other applicable federal law pursuant to Section 8.10 of the Separation Agreement), irrespective of the choice of laws principles of the State of Delaware, as to all matters, including matters of validity, construction, effect, enforceability, performance and remedies. Any dispute by either Party arising out of or relating to this Agreement shall be finally

settled in accordance with the procedures and terms set forth in Article VIII of the Separation Agreement.

S ECTION 12.4. Entire Agreement . This Agreement constitutes the entire agreement between the Parties pertaining to the subject matter hereof and supersedes all previous communications, agreements, and understandings between the Parties relating to the subject matter hereof. Neither Party has entered into this Agreement in reliance upon any representation, warranty, or undertaking of the other Party that is not set out or referred to in this Agreement. If there is a conflict between this Agreement and the Separation and Distribution Agreement, the terms of this Agreement will govern

S ECTION 12.5. Severability . Whenever possible, each provision of this Agreement shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement shall be held to be prohibited by or invalid under applicable law, such provision shall be ineffective only to the extent of such prohibition or invalidity, without invalidating the remainder of such provision or the remaining provisions of this Agreement.

S ECTION 12.6. Headings . The section or other headings herein are inserted only for convenience and ease of reference and are not to be considered in the construction or interpretation of any provision of this Agreement. Unless otherwise stated, references to Sections herein are references to Sections hereof.

S ECTION 12.7. Amendments; Waivers . This Agreement may be amended, and the taking of any action required hereunder may be waived, by the written consent of each Party at the time such amendment or waiver is sought. No such waiver shall operate as a waiver of, or estoppel with respect to, any other action. No failure to exercise, and no delay in exercising, any right, remedy, or power hereunder shall operate as a waiver thereof, nor shall single or partial exercise of any right, remedy, or power hereunder preclude any other or further exercise thereof or the exercise of any other right, remedy, or power provided herein or by law or at equity. The waiver of the time for performance of any act or condition hereunder does not constitute a waiver of the act or condition itself.

S ECTION 12.8. Successors; No Assignment . Each Party agrees that it will not assign, sell, delegate, or otherwise transfer, whether voluntarily or involuntarily, any right or obligation under this Agreement, provided, however, that either Party (“Assigning Party”) may assign, sell, delegate and otherwise transfer this Agreement, together with all of the Assigning Party’s rights and obligations hereunder without such approval in connection with a merger, reorganization, reincorporation into another state, or sale of all, or substantially all, of such Party’s business and assets relating to this Agreement, if the assignee agrees to be bound by all of the terms and conditions of this Agreement to the same extent as the Assigning Party. For the purposes of this Section 12.8, the Parties hereby consent to the transactions contemplated by the Combination Agreement to occur on the Effective Date, provided that any successor to Ceva is subject to (and has agreed in writing to assume) any and all obligations, limitations, and liabilities applicable to Ceva set forth in this Agreement. Any purported assignment, sale, delegation or other transfer in violation of this Section 12.8 shall be null and void. Subject to the foregoing limits on assignment and delegation, this Agreement shall be binding upon and shall inure to the benefit of the Parties and their respective successors and assigns.

S ECTION 12.9. Counterparts . This Agreement may be executed in any number of counterparts, each of which shall be deemed an original and all of which shall constitute one and the same Agreement.

S ECTION 12.10. Recovery of Costs and Attorney’s Fees . In any legal action, or other proceeding brought to enforce or interpret the terms of this Agreement, the substantially prevailing Party shall be entitled to reasonable attorney’s fees and any other costs incurred in that proceeding in addition to any other relief to which it is entitled.

S ECTION 12.11. Third Party Beneficiaries . The provisions of this Agreement are solely for the benefit of the Parties (including their permitted successors and assigns), and not for the benefit of any Third Party.

IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed by their duly authorized Representatives as of the day and year first written above.

DSP G ROUP I NC .

By:


Name:

Title:

CEVA, I NC .

By:


Name:

Title:

Exhibit 10.4

CORAGE, LTD. TECHNOLOGY TRANSFER AGREEMENT

This Technology Transfer Agreement (this “Agreement”), effective as of , 2002 (the “Effective Date”), is entered into by and between DSP Group Ltd. (“DSPGL”), an Israeli corporation, and Corage, Ltd. (“Corage”), an Israeli corporation and a wholly owned subsidiary of DSPGL.

RECITALS

A. DSPGL is engaged in the business of designing, manufacturing and marketing high performance digital signal processing integrated circuit devices for cordless telephone, computer telephony, voice-over-broadband and other products.

B. Corage is engaged in the business of developing and licensing to third parties digital signal processing cores for the manufacture of integrated circuit devices.

C. DSPGL owns or otherwise holds certain intellectual property rights and other assets relating to the digital signal processing cores described on Exhibit A to this Agreement, which intellectual property rights and other assets it desires to assign to Corage, and Corage desires to receive such assignment of intellectual property rights and other assets from DSPGL, in accordance with the terms and conditions set forth herein.

AGREEMENTS

Now, therefore, in consideration of the mutual covenants and the other terms and conditions contained herein, the Parties (as defined below) hereby agree as follows:

ARTICLE I

DEFINITIONS

In addition to the capitalized terms defined elsewhere in this Agreement, the following terms shall have the following meanings:

S ECTION 1.1. “Additional Necessary Licensed IP ” shall mean all technology, information and materials of any kind, such as designs, development kits, emulators, tools, libraries, test suites, documentation, parts lists, board layouts, design materials, databases, know-how, methods, processes, and work in progress, each to the extent that they are necessary to continue operating the Licensing Business as currently conducted by the licensing division of DSPGL, but are not included in the Licensing Business Assets. The parties acknowledge and agree that the Additional Necessary Licensed IP does not include the Licensed IP Modules or Process Information.

S ECTION 1.2 Affiliate . “Affiliate” of any Person shall mean a Person that controls, is controlled by, or is under common control with such Person. As used herein, “control” of a Person means the possession, directly or indirectly, of the power to direct or cause the direction

of the management and policies of such Person, whether through ownership of voting securities or other interests, by contract or otherwise. A Person shall be deemed an Affiliate only for so long as such control exists. Notwithstanding the foregoing, DSPGL and Corage shall not be considered Affiliates of each other, and DSPGL shall not be deemed to control Corage.

S ECTION 1.3. Combination Agreement . “Combination Agreement” shall have the meaning set forth in the Separation Agreement.

S ECTION 1.4. Confidential Information . “Confidential Information” shall mean the Corage Confidential Information or DSPGL Confidential Information, as applicable.

S ECTION 1.5. Corage Confidential Information . “Corage Confidential Information” shall mean any and all (a) Existing Cores, Other Transferable Licensing IP, patent applications and provisional patent applications included in the Transferable Patents, Other Transferable Assets, Third Party Licenses, Other Contracts and Employee Proprietary Information Agreements, including all technology, information and materials included in such items, and (b) other technology, information and materials related to research, products, services, hardware or software, inventions, processes, designs, drawings, engineering or other technology which is supplied or licensed by Corage (in this capacity, the “Disclosing Party”) to DSPGL (in this capacity, the “Receiving Party”) after the Effective Date and which is designated in writing as proprietary or confidential (or with a similar designation) or, if disclosed orally or by demonstration, is designated as confidential or proprietary at the time of disclosure and summarized in a writing so designated within thirty (30) days of the initial disclosure. Corage Confidential Information shall not include, however, information or material which (i) is or becomes available to the relevant public other than as a result of a wrongful act or omission by the Receiving Party, (ii) except with respect to the items described in subsection (a) above, was available to the Receiving Party (without a duty of confidentiality owed to the Disclosing Party with respect to such information or material) prior to its receipt from the Disclosing Party, (iii) becomes available to the Receiving Party from a Person not otherwise bound by a confidentiality agreement with the Disclosing Party with respect to such information or material, or (iv) except with respect to the items described in subsection (a) above, was independently developed by the Receiving Party.

S ECTION 1.6. Corage Employees . “Corage Employees” shall have the meaning set forth in the Separation Agreement.

S ECTION 1.7. Corage Licensed Products . “Corage Licensed Products” shall mean digital signal processing cores designed and developed by or for Corage, its successors or assigns, and its or their Affiliates, that consist principally of an Existing Core and that also incorporate one or more of the Licensed Chip Modules, where such Licensed Chip Modules are bundled with, and are used with, such Existing Core.

S ECTION 1.8. Ceva Inc. Technology Transfer Agreement . “Ceva Inc. Technology Transfer Agreement” shall mean the Ceva Inc. Technology Transfer Agreement of even date herewith by and between Ceva, Inc. and DSP Group Inc.

S ECTION 1.9. Disclosing Party . “Disclosing Party” shall have the meaning set forth in Sections 1.5 and 1.10, as applicable.

S ECTION 1.10. DSPGL Confidential Information . “DSPGL Confidential Information” shall mean any and all (a) Licensed IP Modules and Process Information and all technology, information and materials included in such items, and (b) other technology, information and materials related to research, products, services, hardware or software, inventions, processes, designs, drawings, engineering or other technology which is supplied or licensed by DSPGL (in this capacity, the “Disclosing Party”) to Corage (in this capacity, the “Receiving Party”) after the Effective Date and which is designated in writing as proprietary or confidential (or with a similar designation) or, if disclosed orally or by demonstration, is designated as confidential or proprietary at the time of disclosure and summarized in a writing so designated within thirty (30) days of the initial disclosure. DSPGL Confidential Information shall not include, however, information or material which (i) is or becomes available to the relevant public other than as a result of a wrongful act or omission by the Receiving Party, (ii) except with respect to the items described in subsection (a) above, was available to the Receiving Party (without a duty of confidentiality owed to the Disclosing Party with respect to such information or material) prior to its receipt from the Disclosing Party, (iii) becomes available to the Receiving Party from a Person not otherwise bound by a confidentiality agreement with the Disclosing Party with respect to such information or material, or (iv) except with respect to the items described in subsection (a) above, was independently developed by the Receiving Party.

S ECTION 1.11. DSPGL Products. “DSPGL Products” shall mean any products now or hereafter manufactured, sold or otherwise distributed by, for or under license from DSPGL, its successors and assigns, or its or their current or future Affiliates.

S ECTION 1.12. Effective Date. “Effective Date” shall have the meaning set forth in the Preamble.

S ECTION 1.13. Existing Cores . “Existing Cores” shall mean the digital signal processing cores set forth on Exhibit A to this Agreement, including the designs that constitute such cores.

S ECTION 1.15. Licensed Chip Modules . “Licensed Chip Modules” shall mean the chip modules set forth in item G.2 of Exhibit G to this Agreement.

S ECTION 1.16. Licensed IP Modules . “Licensed IP Modules” shall mean the Licensed Chip Modules and the Licensed Software Modules.

S ECTION 1.18. Licensing Business . “Licensing Business” shall have the meaning set forth in the Separation Agreement.

S ECTION 1.19. Licensing Business Assets . “Licensing Business Assets” shall have the meaning set forth in the Separation Agreement.

S ECTION 1.20. Other Contracts . “Other Contracts” shall have the meaning set forth in Section 5.2.

S ECTION 1.22. Other Transferable Assets . “Other Transferable Assets” shall have the meaning set forth in Article IV.

S ECTION 1.24. Party or Parties . “Party” or “Parties” shall mean DSPGL and/or Corage, including their permitted successors and assigns.

S ECTION 1.26. Process Information . “Process Information” shall mean the information set forth in item G.4 of Exhibit G to this Agreement.

S ECTION 1.27. Products Business . “Products Business” shall have the meaning set forth in the Separation Agreement.

S ECTION 1.28. Receiving Party . “Receiving Party” shall have the meaning set forth in Sections 1.5 and 1.10, as applicable.

S ECTION 1.29. Representative . “Representative” shall mean with respect to a Person, any and all directors, officers, employees, representatives, or agents of such Person.

S ECTION 1.30. Separation Agreement . “Separation Agreement” shall mean the Separation Agreement of even date herewith by and among DSP Group Inc., DSPGL, Ceva, Inc., DSP Ceva, Inc. and Corage.

S ECTION 1.31. Third Party or Third Parties . “Third Party” or “Third Parties” shall mean any entity other than a Party or an Affiliate of a Party.

S ECTION 1.32. Third Party Licenses . “Third Party Licenses” shall have the meaning set forth in Section 5.1.

Section 1.35. Transferable Marks . “Transferable Marks” shall mean the trademarks, service marks and trade names set forth in parts B.2.1 and B.2.2 of Exhibit B to this Agreement, including any registrations of, and applications to register, such trademarks, service marks and trade names.

Section 1.36. Transferable Patents . “Transferable Patents” shall mean all patents, patent applications and provisional patent applications (including any patents issuing in respect of such patent applications and provisional patent applications) set forth in part B.1 of Exhibit B to this Agreement, together with any continuations, continuations-in-part, reissues, divisionals and renewals of any such patents and patent applications and any foreign counterparts thereof.

Section 1.37. Transferring Entities . “Transferring Entities” shall mean DSPGL and all of its Affiliates immediately prior to the Effective Date, other than DSP Group Inc., Corage, Ltd., Ceva, Inc. and their subsidiaries.

ARTICLE II

TRANSFER OF INTELLECTUAL PROPERTY RIGHTS

S ECTION 2.1. Assignment . Except only for the rights retained by, or granted back to, DSPGL (for itself, its successors and assigns, and its and their current and future Affiliates) elsewhere in this Agreement, DSPGL, on behalf of itself and the Transferring Entities, hereby irrevocably assigns, sells, transfers and sets over to Corage, and its successors and assigns, all right, title and interest of the Transferring Entities throughout the world in and to the Transferable Licensing IP, including, but not limited to, all benefits, privileges, causes of action, and remedies relating to the Transferable Licensing IP, whether before or hereafter accrued, including, without limitation, the exclusive rights to (a) apply for and maintain all registrations, applications, renewals and/or extensions therefor, (b) bring actions (at law, in equity or the Other Contracts (together with the Other Contracts under the Ceva Inc. Technology Transfer Agreement) include all of the licenses under which the Transferring Entities and DSP Group Inc. have obtained from third parties designs, development kits, emulators, tools, libraries, test suites, documentation, parts lists, board layouts, design materials, databases, know-how, methods, processes and work in progress used principally in the Licensing otherwise) for all past, present and/or future infringements or misappropriations thereof, (c) settle and retain proceeds from any such actions, and (d) grant licenses or other interests therein to any Person. The foregoing includes (and DSPGL, on behalf of itself and the Transferring Entities, hereby irrevocably assigns, sells, transfers and sets over to Corage, and its successors and assigns) the goodwill and reputation of the business connected with and symbolized by the Transferable Marks. Corage hereby accepts such assignment and assumes (and shall pay,

perform and discharge when due) all obligations with respect to such Transferable Licensing IP accruing from and after the Effective Date.

S ECTION 2.2. Retention of Certain Rights .

(a) Subject to the terms and conditions of this Agreement, and notwithstanding Section 2.1, DSPGL retains for itself, its successors and assigns, and its and their current and future Affiliates (and Corage hereby grants to DSPGL, its successors and assigns, and its and their current and future Affiliates), a nonexclusive, perpetual, irrevocable, royalty-free, worldwide right and license to prepare derivative works of and otherwise modify, make, reproduce, sell and otherwise distribute, transmit, import, and otherwise use and exploit the Transferable Licensing IP (except for the Transferable Domain Names and Transferable Marks) solely in connection with the design, development, testing, manufacture, sale and other distribution, support, and other use and exploitation of DSPGL Products, including the right and license to prepare derivative works of and otherwise modify, make, reproduce, sell and otherwise distribute, transmit, import, and otherwise use and exploit any DSPGL Products based on, incorporating or otherwise using all or any portion of the Transferable Licensing IP. Subject to the limitations set forth Section 2.2(b) below, the rights and licenses set forth in this Section 2.2(a) include (i) the right to disclose the Transferable Licensing IP, provided that such disclosure is solely for use and exploitation in connection with DSPGL Products and in accordance with the confidentiality obligations set forth in this Agreement, and (ii) a license under the Transferable Patents to make, use and sell DSPGL Products. Subject to the limitations set forth in Section 2.2(b) below, the rights and licenses set forth in this Section 2.2(a) also include the right to grant licenses and/or sublicenses (with the rights of the licensees and/or sublicensees to grant further sublicenses) of any of the foregoing rights and licenses, provided that the licenses and/or sublicenses of (A) the Existing Cores are limited to use and exploitation as part of DSPGL Products that offer material functions and features in addition to the Existing Cores themselves, and (B) the Other Transferable Licensing IP are limited to use and exploitation in connection with DSPGL Products.

(b) Notwithstanding any rights retained by or granted to DSPGL or any other Transferring Entity in this Agreement or otherwise, DSPGL shall not, and shall ensure that each Transferring Entity shall not, under any circumstances grant any licenses or sublicenses of the Existing Cores (or disclose the designs of the Existing Cores constituting Corage Confidential Information) to any third party, during the Noncompetition Period (as that term is defined in the Separation Agreement) other than in connection with the contracted design or manufacture of DSPGL Products by third parties for DSPGL, its successors and assigns, and its and their current and future Affiliates, provided that DSPGL, its successors and assigns, and its and their current and future Affiliates shall not provide any such designs of the Existing Cores to any such third party that has not previously executed a license/sublicense and/or confidentiality agreement on terms and conditions generally imposed by DSPGL for its own comparable materials, and provided further, that such licenses/sublicenses shall cover only the technology or information reasonably required by such contract designer or manufacturer in order to manufacture or design, as applicable, the DSPGL Products for DSPGL, its successors and assigns, and its and their current and future Affiliates.

(c) During the Noncompetition Period, if DSPGL desires to license and/or sublicense the Existing Cores to a customer or potential customer in a manner prohibited by Section 2.2(b), Corage will, at its option, either (i) negotiate in good faith with DSPGL a non-exclusive, commercial license permitting such license and/or sublicense on terms and conditions and at pricing comparable to those Corage makes generally available to other customers of such Existing Cores, or (ii) negotiate in good faith with such customer or potential customer such license and/or sublicense on terms and conditions and at pricing comparable to those Corage makes generally available to other customers of such Existing Cores.

S ECTION 2.3. License of Transferable Marks . Subject to the terms and conditions of this Agreement, Corage hereby grants to DSPGL, its successors and assigns, and its and their current and future Affiliates, a nonexclusive, perpetual, royalty-free, worldwide license to use the Transferable Marks solely in connection with DSPGL Products that incorporate, are based on or otherwise use the Transferable Licensing IP to which such Transferable Marks relate, including the marketing, advertising, packaging, sales and distribution of such DSPGL Products. DSPGL agrees that all goodwill arising out of the use of the Transferable Marks by DSPGL, its successors and assigns, and its and their current and future Affiliates will inure exclusively to the benefit of Corage. DSPGL agrees to use the appropriate trademark legend (either “TM” or circled “R”) with the first prominent use of the Transferable Marks in any marketing, advertising and packaging materials, to indicate Corage’s ownership of the Transferable Marks in accordance with the practices DSPGL generally uses to identify the owners of third-party marks that DSPGL is authorized to use, and, in connection with the use of the Transferable Marks, to conform substantially with other written trademark usage guidelines of Corage notified to DSPGL which Corage imposes on its licensees generally (and with which Corage itself complies), provided that DSPGL, its successors and assigns, and its and their current and future Affiliates will have a reasonable opportunity to comply with any new or modified usage guidelines. DSPGL agrees to provide samples of such materials using the Transferable Marks to Corage for its inspection upon Corage’s reasonable request, and DSPGL shall use commercially reasonable efforts to remedy any defect in its use of the Transferable Marks. If DSPGL fails to remedy any such defect within sixty (60) days of receiving Corage’s written notice describing such defect in detail, Corage will have the right, upon written notice to DSPGL, to suspend DSPGL’s license set forth in this Section 2.3 with respect to the DSPGL materials that contain such defect until such defect is remedied.

S ECTION 2.4. Support . Corage shall make available (or cause to be made available) to DSPGL, its successors and assigns, and its and their current and future Affiliates, maintenance and support services for the Existing Cores and the Other Transferable Licensing IP solely to support the use and exploitation thereof authorized by this Agreement. Such maintenance and support services shall be of a scope and at rates comparable to those of and at which Corage makes (or causes to be made) similar maintenance and support services available to its customers generally or, if it does not make such services available to its customers generally, it shall do so at market rates. For purposes of the determination of rates and other terms and conditions for the maintenance and support services, DSPGL, its successor and assigns, and its and their Affiliates shall be treated as a single customer. The maintenance and support services provided under this Section 2.4 shall include:

(a) providing error corrections and other modifications to the Existing Cores and Other Transferable Licensing IP, telephone and email support, and assistance in diagnosis and remedying of errors and defects in the Existing Cores and the Other Transferable Licensing IP, each in accordance with Corage’s standard support policies and practices; and

(b) providing updates, upgrades, new versions and successors to the Existing Cores and Other Transferable Licensing IP, provided that Corage shall have no obligation under this Section 2.4(b) until the Parties enter into a maintenance and support services agreement expressly covering such updates, upgrades, new versions or successor versions. The Parties shall negotiate the terms and conditions of a maintenance and support services agreement which is reasonably acceptable to both Parties.

ARTICLE III

EMPLOYEE PROPRIETARY INFORMATION AGREEMENTS

DSPGL, on behalf of itself and the Transferring Entities, hereby transfers and assigns to Corage, and Corage hereby accepts such transfer and assumes, all of the rights and obligations of the Transferring Entities under all agreements entered into by the Corage Employees with the Transferring Entities, or any of them, relating to confidentiality, assignment of inventions and similar matters (“Employee Proprietary Information Agreements”), which agreements shall remain in full force and effect in accordance with their terms, provided that DSPGL shall retain its rights under the Employee Proprietary Information Agreements to the extent required to bring actions (at law, in equity or otherwise) for any breach of such Employee Proprietary Information Agreements relating to acts or omissions prior to the Effective Date by the Corage Employees who become employees of Corage. The Parties shall reasonably cooperate in connection with any action against any of the Corage Employees.

ARTICLE IV

TRANSFER OF OTHER TRANSFERABLE ASSETS

DSPGL, on behalf of itself and the Transferring Entities, hereby irrevocably assigns and transfers to Corage, and its successors and assigns, all of the right, title and interest of the Transferring Entities in and to the tangible assets, licenses and permits of its Licensing Business as described on Exhibit D to this Agreement and such other equipment, furniture and furnishings as are used principally by the Licensing Business (“Other Transferable Assets”), and Corage and its successors and assigns hereby accept such assignment and transfer, and assume (and shall pay, perform and discharge when due) all obligations in respect to such Other Transferable Assets accruing from and after the Effective Date.

ARTICLE V

TRANSFER OF CERTAIN RELATED RIGHTS AND OBLIGATIONS

S ECTION 5.1. Assignment and Assumption of License Agreements . DSPGL, on behalf of itself and the Transferring Entities, hereby assigns and delegates to Corage all of the rights and obligations of the Transferring Entities under all agreements under which the Transferring Entities, or any of them, have granted licenses of the Existing Cores to Third Parties, as described on Exhibit E to this Agreement (the “Third Party Licenses”), including all rights to

royalties, license fees and other amounts payable thereunder, and Corage hereby accepts such assignment and delegation, and assumes (and shall pay, perform and discharge when due) all obligations under the Third Party Licenses accruing from and after the Effective Date. DSPGL represents and warrants to Corage that the Transferring Entities and DSP Group Inc. have not granted to any Third Party any licenses of the Existing Cores except pursuant to the Third Party Licenses described on Exhibit E to this Agreement.

S ECTION 5.2. Assignment and Assumption of Other Contracts . DSPGL, on behalf of itself and the Transferring Entities, hereby assigns and delegates to Corage all of the rights and obligations of the Transferring Entities under the other contracts relating to the Transferable Licensing IP, Corage Employees and/or the Other Transferable Assets described on Exhibit F to this Agreement (the “Other Contracts”), and Corage hereby accepts such assignment and assumes (and shall pay, perform and discharge when due) all obligations under the Other Contracts accruing from and after the Effective Date.

ARTICLE VI

LICENSE TO CORAGE OF CERTAIN INTELLECTUAL PROPERTY

S ECTION 6.1. Licensed Software Modules . Subject to the terms and conditions of this Agreement, DSPGL, on behalf of itself and the Transferring Entities, hereby grants to Corage, its successors and assigns, and its and their current and future Affiliates a nonexclusive, perpetual, irrevocable, royalty-free, worldwide right and license, under the intellectual property rights of the Transferring Entities in and to the Licensed Software Modules and Licensed Chip Modules, to prepare derivative works of and otherwise modify, reproduce, and otherwise use such Licensed Software Modules and Licensed Chip Modules solely for internal use by Corage, its successors and assigns, and its and their current and future Affiliates, for research and development (e.g., testing, benchmarking, etc.) of its and their own respective products. The parties agree to discuss in good faith broadening the scope of the license granted in this Section 6.1 to allow Corage to sell and otherwise distribute particular Licensed Software Modules and Licensed Chip Modules on a case-by-case basis upon mutually agreeable terms and conditions.

S ECTION 6.2. VP140 License . The Parties will negotiate in good faith an agreement under which VoicePump, Inc., a subsidiary of DSP Group Inc., will grant to Corage the right to sublicense to third-party semiconductor makers the right to develop and make semiconductor products based on the design of VoicePump’s VP140 chip in exchange for a share of revenue (as defined by the mutual agreement of the Parties) derived by Corage from such sublicenses in an amount equal to twenty-five percent (25%).

S ECTION 6.3. Process Information . Subject to the terms and conditions of this Agreement, DSPGL, on behalf of the Transferring Entities, hereby grants to Corage, its successors and assigns, and its and their current and future Affiliates a nonexclusive, perpetual, irrevocable, royalty-free, worldwide right and license, under the intellectual property rights of the Transferring Entities in and to the Process Information, to prepare derivative works of and otherwise modify, reproduce, and otherwise use such Process Information solely for internal use by Corage, its successors and assigns, and its and their current and future Affiliates, for the design and development of its and their own respective products.

S ECTION 6.4. Additional Necessary Licensed IP .

(a) To the extent, if any, that there is any Additional Necessary Licensed IP (e.g., development tools necessary for implementing the Existing Cores), DSPGL, on behalf of itself and the Transferring Entities, hereby grants to Corage, its successors and assigns, and its and their current and future Affiliates a nonexclusive, perpetual, irrevocable, royalty-free, worldwide right and license, under the intellectual property rights of the Transferring Entities in and to such Additional Necessary Licensed IP, to prepare derivative works of and otherwise modify, make, reproduce, sell and otherwise distribute, transmit, import, and otherwise use and exploit such Additional Necessary Licensed IP to the extent necessary to continue operating the Licensing Business as currently conducted and currently contemplated to be conducted by the licensing division of DSPGL. Such right and license includes (i) the right to disclose such Additional Necessary Licensed IP, provided that such disclosure is in accordance with the confidentiality obligations set forth in this Agreement, and (ii) the right to grant licenses and/or sublicenses (with the rights of the licensees and/or sublicensees to grant further sublicenses) of all or any of the foregoing rights, in each case, to the extent necessary to continue operating the Licensing Business as currently conducted and currently contemplated to be conducted by the licensing division of DSPGL. Such Additional Necessary Licensed IP, if any, will be identified by Corage during the two (2) year period commencing on the Effective Date, and DSPGL shall, from time to time upon the request of Corage during such two (2) year period and without further consideration, deliver to Corage, as applicable, copies of any tangible embodiments of any such Additional Necessary Licensed IP which DSPGL has not previously delivered to Corage pursuant to this Agreement.

(b) In addition, to the extent, if any, that any patents owned or licensed (with the right to sublicense) by the Transferring Entities as of the Effective Date or any patents issuing in respect of applications owned or licensed (with the right to sublicense) by the Transferring Entities as of the Effective Date are necessary to the continued development, distribution and licensing of the Existing Cores and Other Transferable Licensing IP as currently carried out and currently contemplated to be carried out by the licensing division of DSPGL, DSPGL, on behalf of itself and the Transferring Entities, hereby grants to Corage, its successors and assigns, and its and their current and future Affiliates, a non-exclusive, perpetual, irrevocable, royalty-free, worldwide right and license to make, use and sell such Existing Cores and Other Transferable IP (provided that (i) any sublicense to Corage, its successors and assigns, and its and their current and future Affiliates of any patents licensed to the Transferring Entities shall be subject to any restrictions and other terms and conditions of the license to the Transferring Entities or under which the Transferring Entities have the right to grant such sublicense and, without limitation of the generality of the foregoing, shall be subject to Corage’s making any payments required by the sublicense or the exercise of rights thereunder, and (ii) Corage, its successors and assigns, and its and their current and future Affiliates indemnify and hold harmless (and shall indemnify and hold harmless) the Transferring Entities from any damages or other liabilities resulting from or relating to any breach of any terms and conditions of the license or sublicense by Corage, its successors and assigns, and its and their current and future Affiliates).

ARTICLE VII

CONSIDERATION

In partial consideration of the assignments and licenses set forth herein, as of the Effective Date Corage has issued and/or will issue to DSPGL shares of its Common Stock in accordance with the Separation Agreement.

ARTICLE VIII

CONFIDENTIALITY

ARTICLE IX

WARRANTY AND DISCLAIMERS

S ECTION 9.1. Authority . Each of DSPGL and Corage hereby represents and warrants to the other that it has the corporate authority to enter into and perform its obligations under this Agreement, and its execution, delivery and performance of this Agreement have been duly and validly authorized.

S ECTION 9.2. Sufficiency . DSPGL, on behalf of itself and the Transferring Entities, hereby represents and warrants to Corage that:

(a) the Transferable Licensing IP (together with the Transferable Licensing IP under the Ceva Inc. Technology Transfer Agreement) constitutes all of the intellectual property assets of the Transferring Entities and DSP Group Inc. that are used principally in the Licensing Business (as opposed to the Products Business) as currently conducted by the licensing division of the Transferring Entities and DSP Group Inc.;

(b) the assignments, licenses and other rights granted by the Transferring Entities to Corage under this Agreement (together with the assignments, licenses and other rights granted by DSP Group Inc. to Ceva Inc. under the Ceva Inc. Technology Transfer Agreement) accord to Corage and Ceva Inc. the rights (as between the Transferring Entities and DSP Group Inc., on one hand, and Corage and Ceva Inc., on the other hand) with respect to the intellectual property assets of the Transferring Entities and DSP Group Inc. that are necessary for continued operation of the Licensing Business as currently conducted by the licensing division of the Transferring Entities and DSP Group Inc.;

(c) the assignment and delivery of the Existing Cores, Other Transferable Licensing IP, Transferable Domain Names, Transferable Marks, Transferable Patents, and Other Transferable Assets to Corage pursuant to this Agreement (together with the assignment and delivery of such assets to Ceva, Inc. pursuant to the Ceva Inc. Technology Transfer Agreement) has vested or will vest good title to such assets free and clear of all material liens, mortgages, pledges, security interests, prior assignments and similar encumbrances; and

(d) the Other Contracts (together with the Other Contracts under the Ceva Inc. Technology Transfer Agreement) include all of the licenses under which the Transferring Entities and DSP Group Inc. have obtained from third parties designs, development kits, emulators, tools, libraries, test suites, documentation, parts lists, board layouts, design materials, databases, know-how, methods, processes and work in progress used principally in the Licensing Business (as opposed to the Products Business) as currently conducted by the licensing division of Transferring Entities and DSP Group Inc.

(e) DSPGL’s sole and exclusive liability, and Corage’s sole and exclusive remedy, for any breach by DSPGL of the warranties set forth in this Section 9.2 will be that (i) the DSPGL will assign or license, and will cause the Transferring Entities to assign or license, to Corage, at no cost to Corage, any omitted assets to the extent necessary for DSPGL to achieve compliance with such warranties or DSPGL will obtain, or will cause the Transferring Entities to obtain, for Corage, at no cost to Corage, a reasonable substitute to such omitted assets, and (ii) if DSPGL fails to achieve such compliance within a reasonable period of time following receipt of notice of such breach from Corage, DSPGL will pay the direct damages resulting from such breach. The rights and remedies set forth herein shall not be cumulative with those for breach of Section 11.2(b).

Section 9.3. Limitation of Warranties . EXCEPT AS EXPRESSLY PROVIDED IN THIS ARTICLE IX, ALL OF THE ASSETS, RIGHTS, TECHNOLOGY, AND OTHER INFORMATION AND MATERIALS ASSIGNED, LICENSED OR OTHERWISE

ARTICLE X

LIMITATION OF LIABILITY

NOTWITHSTANDING ANYTHING HEREIN TO THE CONTRARY, NEITHER PARTY SHALL HAVE ANY LIABILITY WHATSOEVER FOR ANY INCIDENTAL, INDIRECT, CONSEQUENTIAL, PUNITIVE, OR SPECIAL DAMAGES OF ANY KIND, OR ANY LOSS OF REVENUE OR PROFITS, LOSS OF BUSINESS, OR LOSS OF DATA, ARISING OUT OF OR RELATED TO THIS AGREEMENT OR THE SUBJECT MATTER HEREOF (OR THE CORAGE INC. TECHNOLOGY TRANSFER AGREEMENT OR THE PROVISIONS OF THE SEPARATION AGREEMENT RELATED TO THIS AGREEMENT OR THE CORAGE INC. TECHNOLOGY TRANSFER AGREEMENT), HOWEVER CAUSED AND REGARDLESS OF THE THEORY OF LIABILITY (INCLUDING CONTRACT, TORT, OR OTHERWISE), EVEN IF INFORMED IN ADVANCE OF THE POSSIBILITY OF SUCH DAMAGES. IN ADDITION, IN NO EVENT WILL THE AGGREGATE LIABILITY OF EITHER PARTY AND ITS AFFILIATES (INCLUDING, IN THE CASE OF DSPGL, DSP GROUP, INC.) ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE SUBJECT MATTER HEREOF (OR THE CORAGE INC. TECHNOLOGY TRANSFER AGREEMENT OR THE PROVISIONS OF THE SEPARATION AGREEMENT RELATED TO THIS AGREEMENT OR THE CORAGE INC. TECHNOLOGY TRANSFER AGREEMENT) CUMULATIVELY EXCEED TEN MILLION US DOLLARS ($10,000,000). THE FOREGOING WILL NOT SUPERSEDE OR LIMIT IN ANY WAY THE RIGHTS AND OBLIGATIONS OF THE PARTIES UNDER THE COMBINATION AGREEMENT.

ARTICLE XI

OTHER AGREEMENTS

S ECTION 11.2. Further Assurances .

(b) To the extent that DSPGL or any Transferring Entity retains ownership of any assets or intellectual property rights used principally in the Licensing Business (as opposed to the Products Business), but which are not included in the Licensing Business Assets, at the request of Corage during the two (2) year period commencing on the Effective Date, DSPGL, on behalf of itself and the Transferring Entities, covenants and agrees to transfer such assets and intellectual property rights to Corage without any additional consideration, provided that such additional assets or intellectual property rights shall be subject to all the rights of DSPGL, its successors and assigns, and its and their current and future Affiliates set forth herein, including, without limitation, those set forth in Sections 2.2, 2.3 and 2.4. The rights and remedies for breach of this Section 11.2(b) shall be only those set forth in Section 9.2 and shall not be cumulative with any other rights or remedies.

S ECTION 11.3. No Obligation to Obtain New Rights . Corage acknowledges that, from and after the Effective Date, except only as set forth above in Section 11.2 and Article VIII, DSPGL has no obligation to preserve, protect, obtain or enforce any rights in the Transferable Licensing IP, including, without limitation, any obligation to register any copyright, to file or prosecute any patent application, or to bring actions for infringement or misappropriation of any Transferable Licensing IP. Neither this Agreement nor the conduct of either Party under this Agreement imposes or shall be deemed to impose any such obligation, by implication, estoppel, inference, or otherwise.

S ECTION 11.4. Maintenance of Transferable Licensing IP . As of the Effective Date, Corage shall have the sole responsibility to execute and deliver such documents, pay such maintenance and other fees, and take such other measures as may be necessary or desirable to preserve, protect, obtain or enforce the Transferable Licensing IP and Corage’s rights therein, including, without limitation, prosecution and maintenance of any Transferable Patents, registration and maintenance of any Transferable Marks and Transferable Domain Names, and registration, renewal and recordation of any Other Intangible Property Rights, provided that DSPGL shall assist Corage in connection with the foregoing in accordance with Section 11.2 without any additional consideration but subject to reimbursement of expenses.

S ECTION 11.5. Delivery . Upon the Effective Date, DSPGL shall deliver to Corage (a) the tangible Other Transferable Assets, and (b) to the extent in DSPGL’s possession, copies of tangible embodiments of the Transferring Entities of the Transferable Licensing IP, Third Party Licenses, employment agreements of Transferred Employees, intangible Other Transferable Assets, and Other Contracts. Notwithstanding the foregoing, each Party may retain copies of any assets, technology, and other information and materials assigned, licensed or otherwise conveyed to the other Party under this Agreement (except for tangible Other Transferable Assets as to which no copies can be made), solely to the extent necessary for such Party to exercise the rights expressly granted to such Party under this Agreement, and subject to the rights and obligations with respect thereto as set forth in this Agreement.

S ECTION 11.7. Interpretation of Rights . The Parties acknowledge and agree that (a) any right of a Party granted or referenced herein includes the right (i) to have such right exercised for the benefit of such Party (e.g., the right to make includes the right to have made, the right to reproduce includes to right to have reproduced, etc.), and (ii) to make offers of such right (e.g., a right to sell includes the right to offer to sell), and (b) the right to distribute includes the right to distribute through multiple layers of distribution. In addition, the Parties acknowledge and agree that (1) an Affiliate of a Party shall have the right to exercise a right or license granted to such Affiliate hereunder only to the extent such Party so authorizes, and such Affiliate must be subject to (and agree to) any terms and conditions of this Agreement applicable to such right or license (e.g., limitations on use or confidentiality obligations with respect to the subject matter of such right or license), and (2) a successor or assign of DSPGL or Corage shall have the right to exercise the rights and licenses granted to such successor or assign hereunder only if such successor or assign is subject to (and agrees to be bound by) all of the terms and conditions of this Agreement, to the same extent as DSPGL or Corage, in accordance with Section 12.8.

acknowledges and agrees that all assignments, licenses and other conveyances made hereunder are subject to the Third Party Licenses granted before the Effective Date.

ARTICLE XII

MISCELLANEOUS

S ECTION 12.2. Notices . All notices provided pursuant to this Agreement shall be delivered by personal delivery, overnight courier, or facsimile, and shall be deemed effective on the date on which delivery to the intended recipient of the notice was accomplished. Such notices shall be delivered to the following addresses:

If to DSPGL:		If to Corage:

Moshe Zelnick		[Name]
Chief Financial Officer		[Position]
DSP Group Ltd.		Corage, Ltd.
5 Shenkar Street		[address]
Herzeliya 46120 Israel		[address]
Fax: 972-9-954-1513		Fax:

settled in accordance with the procedures and terms set forth in Article VIII of the Separation Agreement.

S ECTION 12.8. Successors; No Assignment . Each Party agrees that it will not assign, sell, delegate, or otherwise transfer, whether voluntarily or involuntarily, any right or obligation under this Agreement, provided, however, that either Party (“Assigning Party”) may assign, sell, delegate and otherwise transfer this Agreement, together with all of the Assigning Party’s rights and obligations hereunder without such approval in connection with a merger, reorganization, reincorporation into another state, or sale of all, or substantially all, of such Party’s business and assets relating to this Agreement, if the assignee agrees to be bound by all of the terms and conditions of this Agreement to the same extent as the Assigning Party. For the purposes of this Section 12.8, the Parties hereby consent to the transactions contemplated by the Combination Agreement to occur on the Effective Date, provided that any successor to Corage is subject to (and has agreed in writing to assume) any and all obligations, limitations, and liabilities applicable to Corage set forth in this Agreement. Any purported assignment, sale, delegation or other transfer in violation of this Section 12.8 shall be null and void. Subject to the foregoing limits on assignment and delegation, this Agreement shall be binding upon and shall inure to the benefit of the Parties and their respective successors and assigns.

S ECTION 12.9. Counterparts . This Agreement may be executed in any number of counterparts, each of which shall be deemed an original and all of which shall constitute one and the same Agreement.

IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed by their duly authorized Representatives as of the day and year first written above.

D SP G ROUP L TD .

By:


Name:

Title:

C ORAGE , L TD .

By:


Name:

Title:

Exhibit 10.5

DSP CEVA, INC. TECHNOLOGY TRANSFER AGREEMENT

This DSP Ceva Technology Transfer Agreement (this “Agreement”), effective as of , 2002 (the “Effective Date”), is entered into by and between Ceva, Inc. (“Ceva”), a Delaware corporation, and DSP Ceva, Inc. (“DSP Ceva”), a Delaware corporation and a wholly owned subsidiary of Ceva.

RECITALS

A. Ceva has received from DSP Group, Inc. (“DSPGI”) certain assets and rights related to developing and licensing digital signal processing cores, and has assumed certain related obligations, pursuant to the Ceva, Inc. Technology Transfer Agreement between DSPGI and Ceva dated , 2002 (“DSPGI Agreement”)

B. Ceva desires to assign and transfer such assets, rights, and obligations and DSP Ceva desires to and assume such assets, rights, and obligations from Ceva, in accordance with the terms and conditions set forth herein.

AGREEMENTS

Now, therefore, in consideration of the mutual covenants and the other terms and conditions contained herein, the parties hereby agree as follows:

ARTICLE I.

DEFINITIONS

In addition to the capitalized terms defined elsewhere in this Agreement, the following terms shall have the following meanings:

S ECTION 1.1. Party or Parties . “Party” or “Parties” shall mean DSP Ceva and/or Ceva, as applicable, including their respective permitted successors and assigns.

S ECTION 1.2. Transferred Assets . “Transferred Assets” small mean all assets, contracts and intellectual property rights assigned and transferred to Ceva by DSPGI under the DSPGI Agreement.

S ECTION 1.3. Other Terms . Except as expressly defined or otherwise modified herein, all capitalized terms in this Agreement shall have the same meanings as set forth in the DSPGI Agreement.

ARTICLE II.

ASSIGNMENT OF DSPGI AGREEMENT

S ECTION 2.1. Assignment of DSPGI Agreement . Ceva hereby assigns and transfers the DSPGI Agreement and all rights and obligations thereunder to DSP Ceva and DSP Ceva accepts such assignment and transfer. Ceva agrees to assume and shall assume all of the rights and obligations of Ceva set forth in the DSPGI Agreement, and DSP Ceva agrees to be bound and shall be bound by all the terms and conditions of the DSPGI Agreement as if DSP Ceva were an original party thereto. Assumption of the DSPGI Agreement by DSP Ceva will not affect Ceva’s obligations thereunder.

S ECTION 2.2. Transfer of Assets . Ceva hereby irrevocably assigns and transfers to DSP Ceva, all of its right, title and interest throughout the world in and to the Transferred Assets.

S ECTION 2.3. Delivery . Upon the Effective Date, Ceva shall deliver to DSP Ceva (a) the tangible Other Transferable Assets, and (b) the copies of tangible embodiments of the Transferable Licensing IP, Third Party Licenses, employment agreements of Transferred Employees, intangible Other Transferable Assets, and Other Contracts, in each case as received from DSPGI.

S ECTION 2.4. No Additional Delivery Obligation . The Parties hereby acknowledge and agree that all Transferred Assets assigned or transferred hereunder will be transferred to DSP Ceva from Ceva and that the Transferring Entities have no additional obligation (other than the obligation to deliver such assets to Ceva in accordance with the DSPGI Agreement) to deliver any Transferred Assets directly to DSP Ceva hereunder.

S ECTION 2.5. Further Assurances . At any time and from time to time after the Effective Date, at the request of a Party, the other Party shall execute and deliver such written instruments and extend such other cooperation as may be necessary in the reasonable opinion of the other Party to effect, evidence, record or perfect any of the assignments, transfers and other rights set forth in this Agreement, including execution and acknowledgement of assignments and other instruments.

ARTICLE III.

MISCELLANEOUS

S ECTION 3.1. Relationship of Parties . Nothing contained in this Agreement shall be deemed to constitute either Party or any of its Affiliates the partner, agent, or legal representative of the other Party or its Affiliates or to create any fiduciary relationship for any purpose whatsoever. Except as otherwise specifically provided in this Agreement, nothing in this Agreement shall confer on either Party or any of its Affiliates any authority to act for, bind, or create or assume any obligation or responsibility on behalf of the other Party or its Affiliates.

S ECTION 3.2. Notices . All notices provided pursuant to this Agreement shall be delivered by personal delivery, overnight courier, or facsimile, and shall be deemed effective on the date on which delivery to the intended recipient of the notice was accomplished. Such notices shall be delivered to the following addresses:

If to Ceva:

If to DSP Ceva:

S ECTION 3.3. Choice of Law . This Agreement shall be governed by and construed and interpreted in accordance with the laws of the State of Delaware (other than as to its laws of arbitration which shall be governed under the Arbitration Act (as defined in the Separation Agreement) or other applicable federal law pursuant to Section 8.10 of the Separation Agreement), irrespective of the choice of laws principles of the State of Delaware, as to all matters, including matters of validity, construction, effect, enforceability, performance and remedies. Any dispute by either Party arising out of or relating to this Agreement be finally settled in accordance with the procedures and terms set forth in Article VIII of the Separation Agreement.

S ECTION 3.4. Entire Agreement . This Agreement constitutes the entire agreement between the Parties pertaining to the subject matter hereof and supersedes all previous communications, agreements, and understandings between the Parties relating to the subject matter hereof. Neither Party has entered into this Agreement in reliance upon any representation, warranty, or undertaking of the other Party that is not set out or referred to in this Agreement. If there is a conflict between this Agreement and the Separation and Distribution Agreement, the terms of this Agreement will govern

S ECTION 3.5. Severability . Whenever possible, each provision of this Agreement shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement shall be held to be prohibited by or invalid under applicable law, such provision shall be ineffective only to the extent of such prohibition or invalidity, without invalidating the remainder of such provision or the remaining provisions of this Agreement.

S ECTION 3.6. Headings . The section or other headings herein are inserted only for convenience and ease of reference and are not to be considered in the construction or interpretation of any provision of this Agreement. Unless otherwise stated, references to Sections herein are references to Sections hereof.

S ECTION 3.7. Amendments; Waivers . This Agreement may be amended, and the taking of any action required hereunder may be waived, by the written consent of each Party at the time such amendment or waiver is sought. No such waiver shall operate as a waiver of, or estoppel with respect to, any other action. No failure to exercise, and no delay in exercising, any right, remedy, or power hereunder shall operate as a waiver thereof, nor shall single or partial exercise of any right, remedy, or power hereunder

preclude any other or further exercise thereof or the exercise of any other right, remedy, or power provided herein or by law or at equity. The waiver of the time for performance of any act or condition hereunder does not constitute a waiver of the act or condition itself.

S ECTION 3.8. Successors; No Assignment . Each Party agrees that it will not assign, sell, delegate, or otherwise transfer, whether voluntarily or involuntarily, any right or obligation under this Agreement, provided, however, that either Party (“Assigning Party”) may assign, sell, delegate and otherwise transfer this Agreement, together with all of the Assigning Party’s rights and obligations hereunder without such approval in connection with a merger, reorganization, reincorporation into another state, or sale of all, or substantially all, of such Party’s business and assets relating to this Agreement, if the assignee agrees to be bound by all of the terms and conditions of this Agreement to the same extent as the Assigning Party. Any purported assignment, sale, delegation or other transfer in violation of this Section 3.8 shall be null and void. Subject to the foregoing limits on assignment and delegation, this Agreement shall be binding upon and shall inure to the benefit of the Parties and their respective successors and assigns.

S ECTION 3.9. Counterparts . This Agreement may be executed in any number of counterparts, each of which shall be deemed an original and all of which shall constitute one and the same Agreement.

S ECTION 3.10. Recovery of Costs and Attorney’s Fees . In any legal action, or other proceeding brought to enforce or interpret the terms of this Agreement, the substantially prevailing Party shall be entitled to reasonable attorney’s fees and any other costs incurred in that proceeding in addition to any other relief to which it is entitled.

S ECTION 3.11. Third Party Beneficiaries . The provisions of this Agreement are solely for the benefit of the Parties (including their permitted successors and assigns), and not for the benefit of any Third Party, except that DSPGI shall be a beneficiary of DSP Ceva’s agreement to be bound by the terms and conditions of the DSPGI Agreement.

IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed by their duly authorized Representatives as of the day and year first written above.

C EVA , I NC .						D SP C EVA , I NC .




Printed Name						Printed Name

Title						Title

Date						Date

Consent of DSP Group, Inc.

DSP Group, Inc. hereby consents and agrees to this Agreement and all assignments and transfers contemplated hereunder.

Acknowledged and agreed:

D SP G ROUP , I NC .





Printed Name

Title

Date

Exhibit 10.9

CEVA, INC.

2002 STOCK INCENTIVE PLAN

1. Purpose

The purpose of this 2002 Stock Incentive Plan (the “Plan”) of Ceva, Inc. a Delaware corporation (“Ceva” or the “Company”), is to advance the interests of the Company’s stockholders by enhancing the Company’s ability to attract, retain and motivate persons who make (or are expected to make) important contributions to the Company by providing such persons with equity ownership opportunities and performance-based incentives and thereby better aligning the interests of such persons with those of the Company’s stockholders. Except where the context otherwise requires, the term “Company” shall include any of the Company’s present or future parent or subsidiary corporations as defined in Sections 424(e) or (f) of the Internal Revenue Code of 1986, as amended, and any regulations promulgated thereunder (the “Code”) and any other business venture (including, without limitation, joint venture or limited liability company) in which the Company has a controlling interest, as determined by the Board of Directors of the Company (the “Board”).

2. Eligibility

All of the Company’s employees, officers, directors, consultants and advisors are eligible to be granted options or restricted stock awards (each, an “Award”) under the Plan. Each person who has been granted an Award under the Plan shall be deemed a “Participant”.

3. Administration and Delegation

(a) Administration by Board of Directors . The Plan will be administered by the Board. The Board shall have authority to grant Awards and to adopt, amend and repeal such administrative rules, guidelines and practices relating to the Plan as it shall deem advisable. The Board may correct any defect, supply any omission or reconcile any inconsistency in the Plan or any Award in the manner and to the extent it shall deem expedient to carry the Plan into effect and it shall be the sole and final judge of such expediency. All decisions by the Board shall be made in the Board’s sole discretion and shall be final and binding on all persons having or claiming any interest in the Plan or in any Award. No director or person acting pursuant to the authority delegated by the Board shall be liable for any action or determination relating to or under the Plan made in good faith.

(b) Appointment of Committees . To the extent permitted by applicable law, the Board may delegate any or all of its powers under the Plan to one or more committees or subcommittees of the Board (a “Committee”). All references in the Plan to the “Board” shall mean the Board or a Committee of the Board or the executive officers referred to in Section 3(c)

to the extent that the Board’s powers or authority under the Plan have been delegated to such Committee or executive officers.

(c) Delegation to Executive Officers . To the extent permitted by applicable law, the Board may delegate to one or more executive officers of the Company the power to grant Awards to employees or officers of the Company or any of its present or future subsidiary corporations and to exercise such other powers under the Plan as the Board may determine, provided that the Board shall fix the terms of the Awards to be granted by such executive officers (including the exercise price of such Awards, which may include a formula by which the exercise price will be determined) and the maximum number of shares subject to Awards that the executive officers may grant; provided further, however, that no executive officer shall be authorized to grant Awards to any “executive officer” of the Company (as defined by Rule 3b-7 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) or to any “officer” of the Company (as defined by Rule 16a-1 under the Exchange Act).

4. Stock Available for Awards

(a) Number of Shares . Subject to adjustment under Section 7, Awards may be made under the Plan for up to [ ] shares of common stock, $.001 par value per share, of the Company (the “Common Stock”). If any Award expires or is terminated, surrendered or canceled without having been fully exercised or is forfeited in whole or in part (including as the result of shares of Common Stock subject to such Award being repurchased by the Company at the original issuance price pursuant to a contractual repurchase right) or results in any Common Stock not being issued, the unused Common Stock covered by such Award shall again be available for the grant of Awards under the Plan, subject, however, in the case of Incentive Stock Options (as hereinafter defined), to any limitations under the Code. Shares issued under the Plan may consist in whole or in part of authorized but unissued shares or treasury shares.

(b) Per-Participant Limit . Subject to adjustment under Section 7, the maximum number of shares of Common Stock with respect to which Awards may be granted to any Participant under the Plan shall be [ ] per calendar year. The per–Participant limit described in this Section 4(b) shall be construed and applied consistently with Section 162(m) of the Code (“Section 162(m)”).

5. Stock Options

(a) General . The Board may grant options to purchase Common Stock (each, an “Option”) and determine the number of shares of Common Stock to be covered by each Option, the exercise price of each Option and the conditions and limitations applicable to the exercise of each Option, including conditions relating to applicable federal or state securities laws, as it considers necessary or advisable. An Option which is not intended to be an Incentive Stock Option (as hereinafter defined) shall be designated a “Nonstatutory Stock Option”.

(b) Incentive Stock Options . An Option that the Board intends to be an “incentive stock option” as defined in Section 422 of the Code (an “Incentive Stock Option”) shall only be granted to employees of ParthusCeva or its parent or subsidiary corporations and shall be subject to and shall be construed consistently with the requirements of Section 422 of the Code. The Company shall have no liability to a Participant, or any other party, if an Option (or any part thereof) which is intended to be an Incentive Stock Option is not an Incentive Stock Option.

(c) Exercise Price . The Board shall establish the exercise price at the time each Option is granted and specify it in the applicable option agreement.

(d) Duration of Options . Each Option shall be exercisable at such times and subject to such terms and conditions as the Board may specify in the applicable option agreement.

(e) Exercise of Option . Options may be exercised by delivery to the Company of a written notice of exercise signed by the proper person or by any other form of notice (including electronic notice) approved by the Board together with payment in full as specified in Section 5(f) for the number of shares for which the Option is exercised.

(f) Payment Upon Exercise. Common Stock purchased upon the exercise of an Option granted under the Plan shall be paid for as follows:

(1) in cash or by check, payable to the order of the Company;

(2) except as the Board may, in its sole discretion, otherwise provide in an option agreement, by (i) delivery of an irrevocable and unconditional undertaking by a creditworthy broker to deliver promptly to the Company sufficient funds to pay the exercise price and any required tax withholding or (ii) delivery by the Participant to the Company of a copy of irrevocable and unconditional instructions to a creditworthy broker to deliver promptly to the Company cash or a check sufficient to pay the exercise price and any required tax withholding;

(3) when the Common Stock is registered under the Securities Exchange Act of 1934 (the “Exchange Act”), by delivery of shares of Common Stock owned by the Participant valued at their fair market value as determined by (or in a manner approved by) the Board in good faith (“Fair Market Value”), provided (i) such method of payment is then permitted under applicable law and (ii) such Common Stock, if acquired directly from the Company was owned by the Participant at least six months prior to such delivery;

(4) to the extent permitted by the Board, in its sole discretion by (i) delivery of a promissory note of the Participant to the Company on terms determined by the Board, or (ii) payment of such other lawful consideration as the Board may determine; or

(5) by any combination of the above permitted forms of payment.

(g) Substitute Options . In connection with a merger or consolidation of an entity with the Company or the acquisition by the Company of property or stock of an entity, the Board may grant Options in substitution for any options or other stock or stock-based awards granted by such entity or an affiliate thereof. Substitute Options may be granted on such terms as the Board deems appropriate in the circumstances, notwithstanding any limitations on Options contained in the other sections of this Section 5 or in Section 2.

6. Restricted Stock .

(a) Grants . The Board may grant Awards entitling recipients to acquire shares of Common Stock, subject to the right of the Company to repurchase all or part of such shares at their issue price or other stated or formula price (or to require forfeiture of such shares if issued at no cost) from the recipient in the event that conditions specified by the Board in the applicable Award are not satisfied prior to the end of the applicable restriction period or periods established by the Board for such Award (each, a “Restricted Stock Award”).

(b) Terms and Conditions . The Board shall determine the terms and conditions of any such Restricted Stock Award, including the conditions for repurchase (or forfeiture) and the issue price, if any.

(c) Stock Certificates . Any stock certificates issued in respect of a Restricted Stock Award shall be registered in the name of the Participant and, unless otherwise determined by the Board, deposited by the Participant, together with a stock power endorsed in blank, with the Company (or its designee). At the expiration of the applicable restriction periods, the Company (or such designee) shall deliver the certificates no longer subject to such restrictions to the Participant or if the Participant has died, to the beneficiary designated, in a manner determined by the Board, by a Participant to receive amounts due or exercise rights of the Participant in the event of the Participant’s death (the “Designated Beneficiary”). In the absence of an effective designation by a Participant, Designated Beneficiary shall mean the Participant’s estate.

7. Adjustments for Changes in Common Stock and Certain Other Events

(a) Changes in Capitalization . In the event of any stock split, reverse stock split, stock dividend, recapitalization, combination of shares, reclassification of shares, spin-off or other similar change in capitalization or event, or any distribution to holders of Common Stock other than a normal cash dividend, (i) the number and class of securities available under this Plan, (ii) the per-Participant limit set forth in Section 4(b), (iii) the number and class of securities and exercise price per share subject to each outstanding Option, and (iv) the repurchase price per share subject to each outstanding Restricted Stock Award shall be appropriately adjusted by the Company (or substituted Awards may be made, if applicable) to the extent the Board shall determine, in good faith, that such an adjustment (or substitution) is necessary and appropriate. If this Section 7(a) applies and Section 7(c) also applies to any event, Section 7(c) shall be applicable to such event, and this Section 7(a) shall not be applicable.

(b) Liquidation or Dissolution . In the event of a proposed liquidation or dissolution of the Company, the Board shall upon written notice to the Participants provide that all then unexercised Options will (i) become exercisable in full as of a specified time at least 10 business days prior to the effective date of such liquidation or dissolution and (ii) terminate effective upon such liquidation or dissolution, except to the extent exercised before such effective date. The Board may specify the effect of a liquidation or dissolution on any Restricted Stock Award granted under the Plan at the time of the grant.

(1) Definition . A “Reorganization Event” shall mean: (a) any merger or consolidation of the Company with or into another entity as a result of which all of the Common Stock of the Company is converted into or exchanged for the right to receive cash, securities or other property or (b) any exchange of all of the Common Stock of the Company for cash, securities or other property pursuant to a share exchange transaction.

(2) Consequences of a Reorganization Event on Options . Upon the occurrence of a Reorganization Event, or the execution by the Company of any agreement with respect to a Reorganization Event, the Board shall provide that all outstanding Options shall be assumed, or equivalent options shall be substituted, by the acquiring or succeeding corporation (or an affiliate thereof). For purposes hereof, an Option shall be considered to be assumed if, following consummation of the Reorganization Event, the Option confers the right to purchase, for each share of Common Stock subject to the Option immediately prior to the consummation of the Reorganization Event, the consideration (whether cash, securities or other property) received as a result of the Reorganization Event by holders of Common Stock for each share of Common Stock held immediately prior to the consummation of the Reorganization Event (and if holders were offered a choice of consideration, the type of consideration chosen by the holders of a majority of the outstanding shares of Common Stock); provided, however, that if the consideration received as a result of the Reorganization Event is not solely common stock of the acquiring or succeeding corporation (or an affiliate thereof), the Company may, with the consent of the acquiring or succeeding corporation, provide for the consideration to be received upon the exercise of Options to consist solely of common stock of the acquiring or succeeding corporation (or an affiliate thereof) equivalent in fair market value to the per share consideration received by holders of outstanding shares of Common Stock as a result of the Reorganization Event.

Notwithstanding the foregoing, if the acquiring or succeeding corporation (or an affiliate thereof) does not agree to assume, or substitute for, such Options, then the Board shall, upon written notice to the Participants, provide that all then unexercised Options will become exercisable in full as of a specified time prior to the Reorganization Event and will terminate immediately prior to the consummation of such Reorganization Event, except to the extent exercised by the Participants before the consummation of such Reorganization Event; provided, however, that in the event of a Reorganization Event under the terms of which holders of Common Stock will receive upon consummation thereof a cash payment for each share of Common Stock surrendered pursuant to such Reorganization Event (the “Acquisition Price”),

then the Board may instead provide that all outstanding Options shall terminate upon consummation of such Reorganization Event and that each Participant shall receive, in exchange therefor, a cash payment equal to the amount (if any) by which (A) the Acquisition Price multiplied by the number of shares of Common Stock subject to such outstanding Options (whether or not then exercisable), exceeds (B) the aggregate exercise price of such Options. To the extent all or any portion of an Option becomes exercisable solely as a result of the first sentence of this paragraph, upon exercise of such Option the Participant shall receive shares subject to a right of repurchase by the Company or its successor at the Option exercise price. Such repurchase right (1) shall lapse at the same rate as the Option would have become exercisable under its terms and (2) shall not apply to any shares subject to the Option that were exercisable under its terms without regard to the first sentence of this paragraph.

(3) Consequences of a Reorganization Event on Restricted Stock Awards . Upon the occurrence of a Reorganization Event, the repurchase and other rights of the Company under each outstanding Restricted Stock Award shall inure to the benefit of the Company’s successor and shall apply to the cash, securities or other property which the Common Stock was converted into or exchanged for pursuant to such Reorganization Event in the same manner and to the same extent as they applied to the Common Stock subject to such Restricted Stock Award.

8. General Provisions Applicable to Awards

(a) Transferability of Awards . Except as the Board may otherwise determine or provide in an Award, Awards shall not be sold, assigned, transferred, pledged or otherwise encumbered by the person to whom they are granted, either voluntarily or by operation of law, except by will or the laws of descent and distribution, and, during the life of the Participant, shall be exercisable only by the Participant. References to a Participant, to the extent relevant in the context, shall include references to authorized transferees.

(b) Documentation . Each Award shall be evidenced in such form (written, electronic or otherwise) as the Board shall determine. Each Award may contain terms and conditions in addition to those set forth in the Plan.

(c) Board Discretion . Except as otherwise provided by the Plan, each Award may be made alone or in addition or in relation to any other Award. The terms of each Award need not be identical, and the Board need not treat Participants uniformly.

(d) Termination of Status . The Board shall determine the effect on an Award of the disability, death, retirement, authorized leave of absence or other change in the employment or other status of a Participant and the extent to which, and the period during which, the Participant, the Participant’s legal representative, conservator, guardian or Designated Beneficiary may exercise rights under the Award.

(e) Withholding . Each Participant shall pay to the Company, or make provision satisfactory to the Board for payment of, any taxes required by law to be withheld in connection with Awards to such Participant no later than the date of the event creating the tax liability.

Except as the Board may otherwise provide in an Award, when the Common Stock is registered under the Exchange Act, Participants may satisfy such tax obligations in whole or in part by delivery of shares of Common Stock, including shares retained from the Award creating the tax obligation, valued at their Fair Market Value; provided, however, that the total tax withholding where stock is being used to satisfy such tax obligations cannot exceed the Company’s minimum statutory withholding obligations (based on minimum statutory withholding rates for federal and state tax purposes, including payroll taxes, that are applicable to such supplemental taxable income). The Company may, to the extent permitted by law, deduct any such tax obligations from any payment of any kind otherwise due to a Participant.

(f) Amendment of Award . The Board may amend, modify or terminate any outstanding Award, including but not limited to, substituting therefor another Award of the same or a different type, changing the date of exercise or realization, and converting an Incentive Stock Option to a Nonstatutory Stock Option, provided that the Participant’s consent to such action shall be required unless the Board determines that the action, taking into account any related action, would not materially and adversely affect the Participant.

(g) Conditions on Delivery of Stock . The Company will not be obligated to deliver any shares of Common Stock pursuant to the Plan or to remove restrictions from shares previously delivered under the Plan until (i) all conditions of the Award have been met or removed to the satisfaction of the Company, (ii) in the opinion of the Company’s counsel, all other legal matters in connection with the issuance and delivery of such shares have been satisfied, including any applicable securities laws and any applicable stock exchange or stock market rules and regulations, and (iii) the Participant has executed and delivered to the Company such representations or agreements as the Company may consider appropriate to satisfy the requirements of any applicable laws, rules or regulations.

(h) Acceleration . The Board may at any time provide that any Award shall become immediately exercisable in full or in part, free of some or all restrictions or conditions, or otherwise realizable in full or in part, as the case may be.

9. Miscellaneous

(a) No Right To Employment or Other Status . No person shall have any claim or right to be granted an Award, and the grant of an Award shall not be construed as giving a Participant the right to continued employment or any other relationship with the Company. The Company expressly reserves the right at any time to dismiss or otherwise terminate its relationship with a Participant free from any liability or claim under the Plan, except as expressly provided in the applicable Award.

(b) No Rights As Stockholder . Subject to the provisions of the applicable Award, no Participant or Designated Beneficiary shall have any rights as a stockholder with respect to any shares of Common Stock to be distributed with respect to an Award until becoming the record holder of such shares. Notwithstanding the foregoing, in the event the Company effects a split of the Common Stock by means of a stock dividend and the exercise price of and the number of

shares subject to such Option are adjusted as of the date of the distribution of the dividend (rather than as of the record date for such dividend), then an optionee who exercises an Option between the record date and the distribution date for such stock dividend shall be entitled to receive, on the distribution date, the stock dividend with respect to the shares of Common Stock acquired upon such Option exercise, notwithstanding the fact that such shares were not outstanding as of the close of business on the record date for such stock dividend.

(c) Effective Date and Term of Plan . The Plan shall become effective on the date on which it is adopted by the Board, but no Award granted to a Participant that is intended to comply with Section 162(m) shall become exercisable, vested or realizable, as applicable to such Award, unless and until the Plan has been approved by the Company’s stockholders to the extent stockholder approval is required by Section 162(m) in the manner required under Section 162(m) (including the vote required under Section 162(m)). No Awards shall be granted under the Plan after the completion of ten years from the earlier of (i) the date on which the Plan was adopted by the Board or (ii) the date the Plan was approved by the Company’s stockholders, but Awards previously granted may extend beyond that date.

(d) Amendment of Plan . The Board may amend, suspend or terminate the Plan or any portion thereof at any time, provided that to the extent required by Section 162(m), no Award granted to a Participant that is intended to comply with Section 162(m) after the date of such amendment shall become exercisable, realizable or vested, as applicable to such Award, unless and until such amendment shall have been approved by the Company’s stockholders if required by Section 162(m) (including the vote required under Section 162(m)).

(e) Authorization of Sub-Plans . The Board may from time to time establish one or more sub-plans under the Plan for purposes of satisfying applicable blue sky, securities or tax laws of various jurisdictions. The Board shall establish such sub-plans by adopting supplements to this Plan containing (i) such limitations on the Board’s discretion under the Plan as the Board deems necessary or desirable or (ii) such additional terms and conditions not otherwise inconsistent with the Plan as the Board shall deem necessary or desirable. All supplements adopted by the Board shall be deemed to be part of the Plan, but each supplement shall apply only to Participants within the affected jurisdiction and the Company shall not be required to provide copies of any supplement to Participants in any jurisdiction which is not the subject of such supplement.

(f) Governing Law . The provisions of the Plan and all Awards made hereunder shall be governed by and interpreted in accordance with the laws of the State of Delaware, without regard to any applicable conflicts of law.

Exhibit 10.13

PARTHUSCEVA, INC.

INDEMNIFICATION AGREEMENT

This Indemnification Agreement (“ Agreement ”) is effective as of , 2002, between ParthusCeva, Inc., a Delaware corporation (the “ Company ”), and (“ Indemnitee ”).

WHEREAS, the Company and Indemnitee recognize the continued difficulty in obtaining directors’ and officers’ liability insurance, the significant increases in the cost of such insurance and the general reductions in the coverage of such insurance;

WHEREAS, the Company and Indemnitee further recognize the substantial increase in corporate litigation in general, subjecting officers and directors to expensive litigation risks at the same time as the availability and coverage of liability insurance has been severely limited;

WHEREAS, Indemnitee does not regard the current protection available as adequate under the present circumstances, and the Indemnitee and other officers, directors and key personnel of the Company may not be willing to continue to serve in such capacities without additional protection;

WHEREAS, the Company desires to attract and retain the services of highly qualified individuals, such as Indemnitee, to serve the Company and, in part, in order to induce Indemnitee to continue to provide services to the Company, wishes to provide for the indemnification and advancing of expenses to Indemnitee to the maximum extent permitted by law; and

WHEREAS, in view of the considerations set forth above, the Company desires that effective as of the date hereof, Indemnitee shall be indemnified by the Company as set forth herein.

NOW, THEREFORE, the Company and Indemnitee hereby agree as follows:

1. Indemnification.

(a) Third Party Proceedings. The Company shall indemnify Indemnitee to the fullest extent permitted by law if Indemnitee was or is or becomes a party to or witness or other participant in, or is threatened to be made a party to or witness or other participant in, any threatened, pending or completed action, suit, arbitration or proceeding, whether civil, criminal, administrative, investigative or other (other than an action or suit by or in the right of the Company or any subsidiary of the Company) or any inquiry or investigation that Indemnitee in good faith believes might lead to the institution of any such action, suit, arbitration or proceeding, whether civil, criminal, administrative, investigative or other, by reason of (or arising in part out of) any event or occurrence related to the fact that Indemnitee (i) is or was a director, officer, employee, agent or fiduciary of the Company or any subsidiary of the Company, (ii) is or was serving at the request of the Company as a director, officer, employee, agent or fiduciary of another corporation, partnership, joint venture, trust or other enterprise, or (iii) by

reason of any action or inaction on the part of Indemnitee while serving in any such capacity, against any and all expenses (including reasonable attorneys’ fees and all other costs, expenses and obligations paid or incurred in connection with investigating, defending, being a witness in or participating in (including on appeal), or preparing to defend, be a witness in or participate in, any such action, suit, arbitration, proceeding, inquiry or investigation), judgments, fines, penalties and amounts paid in settlement (if such settlement is approved in advance by the Company, which approval shall not be unreasonably withheld), including all interest, assessments and other charges paid or payable in connection therewith or in respect thereof (collectively, hereinafter “ Expenses ”), in each case to the extent actually and reasonably incurred by Indemnitee, if Indemnitee acted in good faith and in a manner Indemnitee reasonably believed to be in or not opposed to the best interests of the Company, and, with respect to any criminal action or proceeding, had no reasonable cause to believe Indemnitee’s conduct was unlawful. The termination of any action, suit, arbitration or proceeding, inquiry or investigation by judgment, order, settlement, conviction, or upon a plea of nolo contendere or its equivalent, shall not, of itself, create a presumption that Indemnitee did not act in good faith and in a manner which Indemnitee reasonably believed to be in or not opposed to the best interests of the Company, or, with respect to any criminal action or proceeding, that Indemnitee had reasonable cause to believe that Indemnitee’s conduct was unlawful.

(b) Proceedings by or in the Right of the Company. The Company shall indemnify Indemnitee to the fullest extent permitted by law if Indemnitee was or is or becomes a party to or witness or other participant in, or is threatened to be made a party to or witness or other participant in, any threatened, pending or completed action or suit by or in the right of the Company or any subsidiary of the Company to procure a judgment in its favor by reason of any event or occurrence related to the fact that Indemnitee (i) is or was a director, officer, employee, agent or fiduciary of the Company or any subsidiary of the Company, (ii) is or was serving at the request of the Company as a director, officer, employee, agent or fiduciary of another corporation, partnership, joint venture, trust or other enterprise, or (iii) by reason of any action or inaction on the part of Indemnitee while serving in any such capacity, against any and all Expenses and, to the fullest extent permitted by law, amounts paid in settlement of any such action or suit, in each case to the extent actually and reasonably incurred by Indemnitee, if Indemnitee acted in good faith and in a manner Indemnitee reasonably believed to be in or not opposed to the best interests of the Company, except that no indemnification shall be made in respect of any claim, issue or matter as to which Indemnitee shall have been adjudged to be liable to the Company unless and only to the extent that the Court of Chancery of the State of Delaware or the court in which such action or suit is brought shall determine upon application that, in view of all the circumstances of the case, Indemnitee is fairly and reasonably entitled to indemnity for such Expenses and then only to the extent that the Court of Chancery of the State of Delaware or such other court shall determine.

(c) Mandatory Payment of Expenses. Notwithstanding any other provision of this Agreement, to the extent that Indemnitee has been successful on the merits or otherwise, including, without limitation, the dismissal of an action without prejudice, in defense of any action, suit, arbitration, proceeding, inquiry or investigation referred to in Section (1)(a) or (b) hereof or in the defense of any claim, issue or matter therein, Indemnitee shall be indemnified against all Expenses incurred in connection therewith.

2. Expenses; Indemnification Procedure.

(a) Advancement of Expenses. The Company shall advance all Expenses and, to the fullest extent permitted by law, amounts paid in settlement of any action, suit, arbitration, proceeding, inquiry or investigation referred to in Section (1)(a) or (b) hereof. Indemnitee hereby undertakes to repay such amounts advanced only if, and to the extent that, it shall ultimately be determined by a final judicial determination (as to which all rights of appeal therefrom have been exhausted or lapsed) that Indemnitee is not entitled to be indemnified by the Company as authorized hereby. The advances to be made hereunder shall be paid by the Company to Indemnitee within twenty (20) days after receipt of the written request of the Indemnitee.

(b) Notice/Cooperation by Indemnitee. Indemnitee shall, as a condition precedent to Indemnitee’s right to be indemnified under this Agreement, give the Company notice in writing as soon as practicable of any claim made against Indemnitee for which indemnification will or could be sought under this Agreement. Notice to the Company shall be directed to the Chief Executive Officer of the Company at the principal offices of the Company (or such other address as the Company shall designate in writing to Indemnitee). Notice shall be deemed received five (5) business days after the date postmarked if sent by domestic certified or registered mail, properly addressed; otherwise notice shall be deemed received when such notice shall actually be received by the Company. In addition, Indemnitee shall give the Company such information and cooperation as it may reasonably require and as shall be within Indemnitee’s power.

(c) Procedure. Any indemnification and advances provided for in Section 1 and this Section 2 shall be made no later than thirty (30) and twenty (20) days, respectively, after receipt of the written request of Indemnitee. If a claim under this Agreement, under any statute, or under any provision of the Company’s Certificate of Incorporation or Bylaws providing for indemnification, is not paid in full by the Company within thirty (30) days after a written request for payment thereof has first been received by the Company, Indemnitee may, but need not, at any time thereafter bring an action against the Company to recover the unpaid amount of the claim and, subject to Section 14 of this Agreement, Indemnitee shall also be entitled to be paid for the Expenses of bringing such action. It shall be a defense to any such action (other than an action brought to enforce a claim for Expenses incurred in connection with any action, suit, arbitration, proceeding, inquiry or investigation in advance of its final disposition) that Indemnitee has not met the standards of conduct or did not have such belief which make it permissible under applicable law for the Company to indemnify Indemnitee for the amount claimed, but the burden of proving such defense shall be on the Company, and Indemnitee shall be entitled to receive interim payments of Expenses pursuant to Section 2(a) unless and until such defense may be determined by a final judicial determination (as to which all rights of appeal therefrom have been exhausted or lapsed). It is the parties’ intention that if the Company contests Indemnitee’s right to indemnification, the question of Indemnitee’s right to indemnification shall be for the court to decide, and neither the failure of the Company (including its Board of Directors, any committee or subgroup of the Board of Directors, independent legal counsel or its stockholders) to have made a determination that indemnification of Indemnitee is proper in the circumstances because Indemnitee has met any applicable standard of conduct or had any particular belief, nor an actual determination by the Company (including

its Board of Directors, any committee or subgroup of the Board of Directors, independent legal counsel or its stockholders) that Indemnitee has not met such standard of conduct or did not have such belief, shall create a presumption that Indemnitee has or has not met the applicable standard of conduct or did not have any particular belief.

(c) Notice to Insurers. If, at the time of the receipt by the Company of a notice of a claim pursuant to Section 2(b) hereof, the Company has officers’ and directors’ liability insurance in effect, the Company shall give prompt notice of the commencement of the action, suit, arbitration, proceeding, inquiry or investigation relating to the claim, to the insurers in accordance with the procedures set forth in the respective policies. The Company shall thereafter take all necessary or desirable action to cause such insurers to pay, on behalf of the Indemnitee, all amounts payable as a result of such action, suit, arbitration, proceeding, inquiry or investigation in accordance with the terms of such policies.

(d) Selection of Counsel. In the event the Company shall be obligated under Section 2(a) hereof to pay the Expenses of any action, suit, arbitration, proceeding, inquiry or investigation against Indemnitee, the Company, if appropriate, shall be entitled to assume the defense of such action, suit, arbitration, proceeding, inquiry or investigation, with counsel approved by Indemnitee, upon the delivery to Indemnitee of written notice of its election so to do. After delivery of such notice, approval of such counsel by Indemnitee and the retention of such counsel by the Company, the Company will not be liable to Indemnitee under this Agreement for any fees of counsel subsequently incurred by Indemnitee with respect to the same action, suit, arbitration, proceeding, inquiry or investigation; provided that, (i) Indemnitee shall have the right to employee Indemnitee’s counsel in any such action, suit, arbitration, proceeding, inquiry or investigation at Indemnitee’s expense and (ii) if (A) the employment of counsel by Indemnitee has been previously authorized by the Company, (B) Indemnitee shall have reasonably concluded that there may be a conflict of interest between the Company and Indemnitee in the conduct of any such defense or (C) the Company shall not continue to retain such counsel to defend such action, suit, arbitration, proceeding, inquiry or investigation, then the fees and Expenses of Indemnitee shall be at the expense of the Company.

3. Additional Indemnification Rights; Nonexclusivity.

(a) Scope. The Company hereby agrees to indemnify the Indemnitee to the fullest extent permitted by law, notwithstanding that such indemnification is not specifically authorized by the other provisions of this Agreement, the Company’s Certificate of Incorporation, the Company’s Bylaws or by statute. In the event of any change after the date of this Agreement in any applicable law, statute or rule which expands the right of a Delaware corporation to indemnify a member of its board of directors or an officer, employee, agent or fiduciary of the Company, or any subsidiary of the Company, it is the intent of the parties hereto that Indemnitee shall enjoy by this Agreement the greater benefits so afforded by such change. In the event of any change in any applicable law, statute or rule which narrows the right of a Delaware corporation to indemnify a member of its board of directors or an officer, employee, agent or fiduciary of the Company, or any subsidiary of the Company, such change, to the extent not otherwise required by such law, statute or rule to be applied to this Agreement, shall have no effect on this Agreement or the parties’ rights and obligations hereunder.

(b) Nonexclusivity. The indemnification provided by this Agreement shall be in addition to any rights to which Indemnitee may be entitled under the Company’s Certificate of Incorporation, its Bylaws, any agreement, any vote of stockholders or disinterested directors, the General Corporation Law of the State of Delaware, or otherwise, both as to action in Indemnitee’s official capacity and as to action in any other capacity while holding such office. The indemnification provided under this Agreement shall continue as to Indemnitee for any action taken or not taken while serving in an indemnified capacity even though Indemnitee may have ceased to serve in such capacity at the time of any such action, suit, arbitration, proceeding, inquiry or investigation or other covered proceeding.

4. No Duplication of Payments. The Company shall not be liable under this Agreement to make any payment in connection with any action, suit, arbitration, proceeding, inquiry or investigation against Indemnitee to the extent Indemnitee has otherwise actually received payment (under any insurance policy, Bylaw or otherwise) of the amounts otherwise indemnifiable hereunder.

5. Partial Indemnification. If Indemnitee is entitled under any provision of this Agreement to indemnification by the Company for some or a portion of the Expenses reasonably incurred by Indemnitee in the investigation, defense, appeal or settlement of any civil or criminal action, arbitration, or any other proceeding, but not, however, for all of the total amount thereof, the Company shall nevertheless indemnify Indemnitee for the portion thereof to which Indemnitee is entitled.

6. Mutual Acknowledgment. Both the Company and Indemnitee acknowledge that in certain instances, Federal law or applicable public policy may prohibit the Company from indemnifying its directors and officers under this Agreement or otherwise. Indemnitee understands and acknowledges that the Company has undertaken or may be required in the future to undertake with the Securities and Exchange Commission to submit the question of indemnification to a court in certain circumstances for a determination of the enforceability (consistent with public policy) of the Company’s agreement to indemnify Indemnitee.

7. Contribution. If the indemnification provided in this Agreement is unavailable and may not be paid to Indemnitee for any reason other than statutory limitations set forth in the Delaware General Corporation Law, then in respect of any threatened, pending or completed action, suit, arbitration, proceeding, inquiry or investigation in which the Company is jointly liable with Indemnitee (or would be if joined in such action, suit, arbitration, proceeding, inquiry or investigation), the Company shall contribute to the amount of Expenses actually and reasonably incurred and paid or payable by Indemnitee in such proportion as is appropriate to reflect (i) the relative benefits received by the Company on the one hand and Indemnitee on the other hand from the transaction from which such action, suit, arbitration, proceeding, inquiry or investigation arose, and (ii) the relative fault of the Company on the one hand and of Indemnitee on the other in connection with the events which resulted in such Expenses, as well as any other relevant equitable considerations. The relative fault of the Company on the one hand and of Indemnitee on the other shall be determined by reference to, among other things, the parties’ relative intent, knowledge, access to information and opportunity to correct or prevent the circumstances resulting in such Expenses. The Company agrees that it would not be just and

equitable if contribution pursuant to this Section 7 were determined by pro rata allocation or any other method of allocation which does not take account of the foregoing equitable considerations.

8. Officers’ and Directors’ Liability Insurance.

(a) Initial Coverage. The Company shall, from time to time, make the good faith determination whether or not it is practicable for the Company to obtain and maintain a policy or policies of insurance with reputable insurance companies providing the officers and directors of the Company with coverage for losses from wrongful acts, or to ensure the Company’s performance of its indemnification obligations under this Agreement. Among other considerations, the Company will weigh the costs of obtaining such insurance coverage against the protection afforded by such coverage. To the extent the Company maintains officers’ and directors’ liability insurance, Indemnitee shall be covered by such policies in such a manner as to provide Indemnitee the same rights and benefits as are accorded to the most favorably insured of the Company’s directors, if Indemnitee is a director; or of the Company’s officers, if Indemnitee is not a director of the Company but is an officer; or of the Company’s key employees, if Indemnitee is not an officer or director but is a key employee. Notwithstanding the foregoing, the Company shall have no obligation to obtain or maintain such insurance if (A) the Company determines in good faith that (i) such insurance is not reasonably available, (ii) the premium costs for such insurance are disproportionate to the amount of coverage provided or (iii) the coverage provided by such insurance is limited by exclusions so as to provide an insufficient benefit, or (B) Indemnitee is covered by similar insurance maintained by a subsidiary or parent of the Company.

(b) Notice Upon Termination. In the event that the insurance coverage provided in Section 8(a) is canceled or will not be renewed or replaced by the Company because the Company has determined in good faith that such insurance is not reasonably available, that the premium costs for such insurance are disproportionate to the amount of coverage provided, that the coverage provided by such insurance is limited by the exclusions so as to provide an insufficient benefit, or otherwise, then the Company shall notify the Indemnitee in writing within fifteen (15) days after the date that such insurance is canceled or the date the decision not to renew or replace such insurance is made.

(c) “Tail” Coverage. In the event that the insurance coverage provided in Section 8(a) is canceled or will not be renewed or replaced, the Company will make the good faith determination whether or not it is practicable for the Company to obtain and maintain a “tail” insurance policy or policies with reputable insurance companies providing the officers and directors of the Company with coverage for losses for wrongful acts, or to assure the Company’s performance of its indemnification obligations under this Agreement. Among other considerations, the Company will weigh the costs of obtaining such insurance coverage against the protection afforded by such coverage.

9. Severability. Nothing in this Agreement is intended to require or shall be construed as requiring the Company to do or fail to do any act in violation of applicable law. The Company’s inability, pursuant to court order, to perform its obligations under this Agreement shall not constitute a breach of this Agreement. The provisions of this Agreement shall be severable as provided in this Section 9. If this Agreement or any portion hereof shall be

invalidated on any ground by any court of competent jurisdiction, then the Company shall nevertheless indemnify Indemnitee to the full extent permitted by any applicable portion of this Agreement that shall not have been invalidated, and the balance of this Agreement not so invalidated shall be enforceable in accordance with its terms.

10. Exceptions. Any other provision herein to the contrary notwithstanding, the Company shall not be obligated pursuant to the terms of this Agreement:

(a) Excluded Action or Omissions. To indemnify Indemnitee for acts, omissions or transactions from which Indemnitee may not be relieved of liability under applicable law;

(b) Claims Initiated by Indemnitee. To indemnify or advance Expenses to Indemnitee with respect to proceedings or claims initiated or brought voluntarily by Indemnitee and not by way of defense, except (i) with respect to proceedings brought to establish or enforce a right to indemnification under this Agreement or any other statute or law, (ii) in specific cases if the Board of Directors has approved the initiation or bringing of such proceedings or claims or (iii) as otherwise required under Section 145 of the Delaware General Corporation Law;

(c) Lack of Good Faith. To indemnify Indemnitee for any Expenses incurred by the Indemnitee with respect to any proceeding instituted by Indemnitee to enforce or interpret this Agreement, if a court of competent jurisdiction determines that each of the material assertions made by the Indemnitee in such proceeding was not made in good faith or was frivolous; or

(d) Claims Under Section16(b). To indemnify Indemnitee for Expenses and the payment of profits arising from the purchase and sale by Indemnitee of securities in violation of Section 16(b) of the Securities Exchange Act of 1934, as amended, or any similar successor statute.

11. Construction of Certain Phrases.

(a) The Company . For purposes of this Agreement, references to the “Company” shall include, in addition to the resulting corporation, any constituent corporation (including any constituent of a constituent) absorbed in a consolidation or merger which, if its separate existence had continued, would have had power and authority to indemnify its directors, officers, employees, agents or fiduciaries, so that if Indemnitee is or was a director, officer, employee, agent or fiduciary of such constituent corporation, or is or was serving at the request of such constituent corporation as a director, officer, employee, agent or fiduciary of another corporation, partnership, joint venture, trust or other enterprise, Indemnitee shall stand in the same position under the provisions of this Agreement with respect to the resulting or surviving corporation as Indemnitee would have with respect to such constituent corporation if its separate existence had continued.

(b) Other Phrases . For purposes of this Agreement, references to “other enterprises” shall include employee benefit plans; references to “fines” shall include any excise taxes assessed on Indemnitee with respect to an employee benefit plan; and references to “serving at the request of the Company” shall include any service as a director, officer, employee,

agent or fiduciary of the Company which imposes duties on, or involves services by, such director, officer, employee, agent or fiduciary with respect to an employee benefit plan, its participants or its beneficiaries; and if Indemnitee acted in good faith and in a manner Indemnitee reasonably believed to be in the interest of the participants and beneficiaries of an employee benefit plan, Indemnitee shall be deemed to have acted in a manner “not opposed to the best interests of the Company” as referred to in this Agreement.

12. Counterparts. This Agreement may be executed in one or more counterparts, each of which shall constitute an original.

13. Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors (including any direct or indirect successor of the Company by purchase, merger, consolidation or otherwise to all or substantially all the business and/or assets of the Company), assigns, estates, spouses, heirs, executors and personal and legal representatives.

14. Expenses and Attorneys’ Fees. In the event that any action is instituted by Indemnitee under this Agreement, or under any directors’ and officers’ liability insurance policy maintained by the Company, to enforce or interpret any of the terms hereof or thereof, Indemnitee shall be entitled to be paid all court costs and Expenses incurred by Indemnitee with respect to such action and shall be entitled to the advancement of such costs and Expenses with respect to such action, regardless of whether Indemnitee is ultimately successful in such action, unless as a part of such action the court having jurisdiction over such action determines that each of the material assertions made by Indemnitee as a basis for such action was not made in good faith or were frivolous. In the event of an action instituted by or in the name of the Company under this Agreement to enforce or interpret any of the terms of this Agreement, Indemnitee shall be entitled to be paid all court costs and Expenses, including attorneys’ fees, incurred by Indemnitee in defense of such action (including reasonable costs and Expenses incurred with respect to Indemnitee’s counterclaims and cross-claims made in such action) and shall be entitled to the advancement of such costs and expenses with respect to such action, unless as a part of such action the court having jurisdiction over such action determines that each of Indemnitee’s material defenses to such action were made in bad faith or were frivolous.

15. Notice. All notices, requests, demands and other communications under this Agreement shall be in writing and shall be deemed duly given (i) if delivered by hand and receipted for by the party addressee, on the date of such receipt or (ii) if mailed by domestic certified or registered mail with postage prepaid, on the fifth business day after the date postmarked. Addresses for notice to either party are as shown on the signature page of this Agreement, or as subsequently modified by written notice.

16. Consent to Jurisdiction. The Company and Indemnitee each hereby irrevocably consent to the jurisdiction of the courts of the State of Delaware for all purposes in connection with any action, suit, arbitration, proceeding, inquiry or investigation which arises out of or relates to this Agreement and agree that any action, suit, arbitration, proceeding, inquiry or investigation instituted under this Agreement shall be commenced, prosecuted and continued

only in the Court of Chancery of the State of Delaware in and for New Castle County, which shall be the exclusive and only proper forum for adjudicating such a claim.

17. Choice of Law. This Agreement shall be governed by and its provisions construed and enforced in accordance with the laws of the State of Delaware, as applied to contracts between Delaware residents, entered into and to be performed entirely within the State of Delaware, without regard to the conflict of laws principles thereof.

18. Subrogation. In the event of payment under this Agreement, the Company shall be subrogated to the extent of such payment to all of the rights of recovery of Indemnitee, who shall execute all documents required and shall do all acts that may be necessary to secure such rights and to enable the Company effectively to bring suit to enforce such rights.

19. Continuation of Indemnification. All agreements and obligations of the Company contained herein shall continue during the period that Indemnitee is a director, officer or agent of the Company and shall continue thereafter for all claims made or threatened prior to the sixth anniversary of the termination of Indemnitee’s service with the Company, whether civil, criminal, arbitrational, administrative or investigative, by reason of the fact that Indemnitee was serving in the capacity referred to herein.

20. Amendment and Termination. Subject to Section 19, no amendment, modification, termination or cancellation of this Agreement shall be effective unless it is in writing signed by both the parties hereto.

21. Waiver. No failure or delay on the part of the Company or Indemnitee in exercising any power or right hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such right or power, or any abandonment or discontinuance of steps to enforce such a right or power, preclude any other or further exercise thereof or the exercise of any other right or power.

22. Headings. Section headings used herein are for convenience of reference only, are not part of this Agreement and are not to affect the construction of, or to be taken into consideration in interpreting, this Agreement.

23. Integration and Entire Agreement; No Implied Right of Employment. This Agreement sets forth the entire understanding between the parties hereto and supersedes and merges all previous written and oral negotiations, commitments, understandings and agreements relating to the subject matter hereof between the parties hereto. Nothing contained in this Agreement is intended to create in Indemnitee any right to continued employment.

[signature page to follow]

IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above written.

P ARTHUSCEVA , I NC .

By:
		Name: Title:

AGREED TO AND ACCEPTED

(Signature) (Name of Indemnitee) (Email) (Address)

Signature Page

Exhibit 99.1

SUBJECT TO COMPLETION, DATED JULY 10, 2002

INFORMATION STATEMENT RELATING TO THE SEPARATION OF

CEVA, INC. FROM DSP GROUP, INC.

AND COMBINATION OF CEVA, INC. WITH PARTHUS TECHNOLOGIES PLC

Common Stock

(par value $0.001 per share)

This information statement is being furnished in connection with (i) the pro rata distribution by DSP Group, Inc. to its stockholders of all outstanding shares of common stock of Ceva, Inc. in connection with the separation of Ceva from DSP Group, and (ii) the subsequent combination of Parthus Technologies plc with Ceva and the issuance of ParthusCeva’s common stock to the former Parthus shareholders.

Pursuant to the terms and conditions of the Separation Agreement and related agreements, each dated as of , 2002, among DSP Group, Ceva and certain other subsidiaries of DSP Group, DSP Group contributed its DSP cores licensing business to Ceva and its subsidiaries and distributed all of the issued and outstanding stock of Ceva to DSP Group stockholders. Shares of Ceva’s common stock were distributed to holders of record of DSP Group’s common stock as of the close of business on the record date of the distribution, which was , 2002. Each of those holders received one share of Ceva common stock for every two shares of DSP Group common stock held on , 2002, the record date. You do not have to take any action to receive your shares of Ceva common stock. The Ceva common stock will be delivered as promptly as practicable after the date of this information statement. No consideration will be paid by holders of DSP Group common stock for the shares of Ceva common stock they receive.

Immediately following the distribution described above, pursuant to the terms and conditions of a Combination Agreement dated as of April 4, 2002, by and among DSP Group, Ceva and Parthus, as amended, Parthus combined with Ceva and Ceva changed its name to ParthusCeva, Inc. The combination was effected as a scheme of arrangement under the laws of the Republic of Ireland. The existing shares of Parthus were cancelled and the existing Parthus shareholders received one share of ParthusCeva’s common stock for every Parthus ordinary shares held by them.

Prior to the separation, no public market existed for ParthusCeva’s common stock. ParthusCeva has filed applications to list its common stock on the Nasdaq National Market under the symbol “PCVA” and on the London Stock Exchange under the symbol “PCV.”

Stockholders with inquiries relating to the distribution should contact American Stock Transfer & Trust Company, the distribution agent, at (718) 921-8145 or (800) 937-5449, or Elaine Coughlan, Chief Financial Officer of ParthusCeva, at (011)(353)(1) 5700.

In reviewing this information statement, you should carefully consider the matters described under the caption “ Risk Factors ” beginning on page 7.

DSP Group Stockholder approval of the separation and combination is not required or sought. We are not asking you for a proxy and you are requested not to send us a proxy. This information statement is first being mailed to holders of record of DSP Group’s common stock on , 2002.

This information statement is not an offer to sell, or a solicitation of an offer to buy, any securities of ParthusCeva.

Neither the Securities and Exchange Commission nor any other regulatory body has approved or disapproved these securities or passed upon the accuracy or adequacy of this information statement. Any representation to the contrary is a criminal offense.

The date of this information statement is , 2002

TABLE OF CONTENTS

		Page

Summary		1

Forward-Looking Statements		6

Risk Factors		7

Separation of DSP Cores Licensing Business from DSP Group		26

Combination with Parthus Technologies plc		34

Dividend Policy		35

Capitalization		36

Unaudited Pro Forma Condensed Combined Financial Data of ParthusCeva		37

Selected Historical Consolidated Financial Data		45

Management’s Discussion and Analysis of Financial Condition and Results of Operations		47

Business		60

Management		82

Security Ownership of Certain Beneficial Owners and Management		86

Transactions with Related Parties		94

Description of Capital Stock		94

Shares Eligible for Future Sale		97

Additional Information		97

Index to Consolidated Financial Statements		F-1

SUMMARY

The following is a summary of some of the information contained in this information statement. We urge you to read the entire information statement carefully, especially the risks associated with our business discussed under “Risk Factors” and our financial statements.

We describe in this information statement the business contributed to us by DSP Group, Inc., described under “Separation of DSP Cores Licensing Business from DSP Group,” and the business acquired by us in the combination with Parthus described under “Combination with Parthus Technologies” as if they had been operated by ParthusCeva for all periods presented herein, except for our historical financial statements or as otherwise indicated. We are an independent public company, and DSP Group has no continuing stock ownership in us. Accordingly, our historical financial results as part of DSP Group may not reflect our financial results in the future as an independent company or what our financial results would have been had we been a stand-alone company during the periods presented herein.

Our Business

ParthusCeva licenses to semiconductor companies and electronic equipment manufacturers (also known as original equipment manufacturers, or OEMs) complete, integrated intellectual property (IP) solutions that enable a wide variety of electronic devices. Our programmable digital signal processing (DSP) cores and application-level IP platforms power handheld wireless devices, global positioning system (GPS) devices, consumer audio products, automotive applications and a range of other consumer products. We intend to license complete system solutions consisting of our IP platforms built around our DSP cores technology, while also continuing to license our DSP cores and IP platforms as stand-alone offerings. ParthusCeva was formed in 2002 through the combination of Ceva, the former DSP cores licensing business of DSP Group, founded in 1991, and Parthus, a provider of platform-level IP for the consumer electronics market, founded in 1993.

Our DSP cores licensing business (formerly the business of Ceva) develops and licenses designs of programmable DSP cores and DSP core-based sub-systems. A programmable DSP core is a special-purpose, software-controlled processor that, through complex mathematical calculations, analyzes, manipulates and enhances digital voice, audio and video signals. Chips incorporating these core designs as their central processor are used in a wide variety of electronic devices, including digital cellular telephones, modems, hard disk drive controllers, MP3 players, voice over packet products and digital cameras, and are critical to the performance of the electronic products in which they are used. A DSP core-based sub-system incorporates additional hardware blocks required as interfaces from the DSP core for the overall system.

Our platform-level IP business (formerly the business of Parthus) develops semiconductor intellectual property for a range of consumer electronic products and licenses this technology to semiconductor manufacturers and OEMs. Our portfolio of IP platforms spans major broadband and local area wireless connectivity technologies as well as key application IP including multimedia, location and smartphone/handheld technologies. The intellectual property we license can take the form of schematics and designs for silicon chips and circuitry and software to perform particular functions on those chips. In addition, we also sell finished modules (which we refer to as Hard IP) to these customers.

Strategy

Our goal is to become the leading licensor of programmable DSP cores and platform-level IP solutions. In particular, we seek to establish our DSP core technology and IP solutions as the standards for high-volume and emerging applications. To meet these goals we intend to:

•

Provide an integrated solution. We seek to maximize our competitive advantage by focusing on providing integrated solutions, both for our programmable DSP cores and our application-level IP platforms, and we intend to continue to invest in the development of technology for complete systems.

•

Enhance our performance leadership. We seek to maximize our expertise in DSP, analog, mixed-signal and related software technology, and to capitalize on that expertise to address critical customer demands. We intend to enhance our existing DSP cores and IP platforms with additional features and performance, while developing new offerings that will focus on other emerging applications across the range of end markets we serve.

•

Target top-tier customers. We seek to strengthen relationships and expand licensing and royalty arrangements with our existing customers and to extend our customer base with other key industry companies in order to facilitate the development of our technology. We believe that we can achieve the best results by targeting our sales and marketing activities at high-volume semiconductor companies and leading OEMs with a track record of successful end-user deployments. Parthus and Ceva together have entered into license agreements with nine of the top ten semiconductor companies worldwide.

•

Focus on large and fast-growing markets. We believe that our expertise in programmable DSP cores and platform-level IP allows us to target fast-growing segments within the consumer electronics market, such as wireless communications, mobile computing, automotive electronics, and consumer entertainment. We intend to strengthen our relationships and expand licensing and royalty arrangements with customers in those markets and to extend our customer base with key industry leaders within each of those segments.

•

Take advantage of the industry shift towards open-standard architectures. We believe that the industries in which we compete are moving away from proprietary IP solutions towards open-standard architectures, and that this trend creates an opportunity for providers of licensable DSP cores and platform-level IP. As a consequence, we intend to use our expertise to create leading products and services in critical open standards fields, such as Bluetooth, GPS and Multimedia to position ourselves to take advantage of this trend. We also participate in the development of industry standards in these and other emerging technology areas.

•

Focus on a portfolio approach to the licensing of our IP platforms. We seek to differentiate ourselves through the breadth of our IP offerings and our capability to integrate these offerings into a single solution built around our family of state-of-the-art DSP cores. In tandem with targeting top-tier customers, we intend to focus on offering a variety of solutions. Our product architecture is designed to allow multiple platforms to reside on the same piece of silicon, significantly reducing the cost and complexity of integration while simultaneously improving power dissipation and time to market for next-generation devices. This approach enables our customers to develop product solutions for next-generation devices that incorporate multiple functions. This approach will also provide our customers with the benefits of “one-stop shopping” and a technology roadmap for the next generation of multi-functional devices.

•

Establish, maintain and expand relationships with key technology providers. We have established and seek to expand our close working relationships with:

•

contract semiconductor companies, usually referred to as silicon foundries, in order to assure adequate supplies of chips for our customers who purchase our technology in chip form and in order to give OEMs a means of obtaining competitive manufacturing capabilities;

•

third-party suppliers of block-level semiconductor intellectual property, in order to have access to their most current technologies; and

•

developers of both application-level and system-level software so that we can continue to offer complete platform solutions.

In addition, we have and seek to expand our relationships with companies that offer complementary technologies for designing system-on-a-chip applications based on our DSP core designs. We believe that these relationships will increase the markets for our products.

Separation of the DSP Cores Licensing Business from DSP Group

Ceva, Inc. was formed as a Delaware corporation and wholly-owned subsidiary of DSP Group in November 1999. The separation of the DSP cores licensing business from DSP Group, including the transfer of related assets, liabilities and intellectual property rights, was completed on , 2002.

We believe that we will realize the following benefits by separating from DSP Group:

•

We will be able to focus on developing our business and pursuing strategic opportunities in the licensing of technology to third parties, increase our research and development efforts, better target our markets, and focus our sales and support infrastructures in different markets than those of DSP Group.

•

As a stand-alone, independent company, our management will be able to devote time and energy exclusively to our business.

•

We plan to make our technology accessible to all potential users, free of competitive considerations faced by DSP Group.

•

Our employees will be motivated by incentive compensation programs tied to the market performance of our common stock.

•

As a more focused company, we expect to be able to make decisions more quickly, deploy resources more rapidly and efficiently and enhance our responsiveness to customers and partners.

•

We expect to have direct access to the capital markets to issue debt or equity securities and to grow through acquisitions.

Combination of Parthus and Ceva

On , 2002, Parthus and Ceva combined their businesses under the terms and conditions of a Combination Agreement, dated as of April 4, 2002, as amended by and among DSP Group, Ceva and Parthus. As part of the combination, Ceva changed its name to ParthusCeva, Inc., and Parthus became a wholly-owned subsidiary of ParthusCeva. Pursuant to arms-length negotiations between DSP group and Parthus, and as set forth in the Combination Agreement, immediately following the separation and combination, approximately 50.1% of the outstanding shares of common stock of ParthusCeva were held by the stockholders of DSP Group, and approximately 49.9% were held by the former shareholders of Parthus.

Our principal headquarters are located at 2033 Gateway Place, Suite 150, San Jose, CA 95110-1002, and our telephone number at this location is (408) 514-2900.

PalmDSPcore, PineDSPcore, OakDSPcore, OCEM, TeakDSPcore, Pine, Teak and Teaklite are United States registered trademarks of ParthusCeva or its affiliates. Parthus, the Parthus logo and BlueStream are European Community trademarks of ParthusCeva or its affiliates. The registration of the following trademarks is pending in the United States: ParthusCeva, the ParthusCeva logo, Ceva, the Ceva logo, SmartCores, Assyst, Parthus, the Parthus logo, MachStream, MobiStream, WarpStream, MediaStream, BlueStream and NavStream. Application for the following trademarks is pending in other jurisdictions: ParthusCeva, the ParthusCeva logo, Ceva, the Ceva logo, SmartCores, Assyst, Parthus, the Parthus logo, MachStream, MobiStream, WarpStream, MediaStream, InfoStream, BlueStream and NavStream. The following trademarks are in use: PalmASSYST, PINE ASSYST SIMULATOR, XpertTeak, XpertDSP, XpertPalm, OpenKey, DSCKey, VoPKey, EDP, SmartCores Enabled, PDKit, ODKit, TLDKit, TDKit and In8Stream. All other trademarks and service marks appearing in this information statement are the property of their respective owners.

Summary Unaudited Pro Forma Condensed Combined Financial Data

The following table presents summary unaudited pro forma financial data of ParthusCeva, giving effect to the combination of Parthus and Ceva as if it had occurred as of January 1, 2001 for statements of operations purposes and on March 31, 2002 for balance sheet purposes. Per share data and the number of shares outstanding have been computed on the assumption that one share of Ceva’s common stock will be distributed for every two shares of DSP Group’s common stock outstanding on the record date for the distribution and that the aggregate number of shares of Ceva’s common stock to be issued to Parthus shareholders in connection with the combination will represent 49.9% of the total number of shares of ParthusCeva common stock outstanding after the combination. This information should be read in conjunction with the unaudited pro forma combined financial statements and related notes included elsewhere in this information statement. These selected unaudited pro forma combined financial data are presented for illustrative purposes only and are not necessarily indicative of the operating results or financial position that would have been achieved had the combination been consummated as of the dates indicated or that may be achieved in the future.

	Year Ended December 31, 2001			Three Months Ended March 31, 2002
	(U.S. Dollars in thousands, except per share data)
Pro Forma Combined Condensed Statements of Operations Data:
Revenues	$	66,163		$	14,769
Gross profit		52,848			11,941
Operating expenses		68,412			16,927
Operating loss		(15,564	)		(4,986	)
Net loss for the period	$	(12,604	)	$	(4,464	)
Basic and diluted net loss per share	$	(0.47	)	$	(0.17	)
Weighted average number of shares used in computing basic and diluted net loss per share		26,946			26,946

	March 31, 2002
Pro Forma Combined Condensed Balance Sheet Data:
Cash and cash equivalents	$	89,840
Working capital		75,276
Total assets		184,261
Total stockholders’ equity	$	152,258

Summary Historical Financial Data of Ceva

The following table presents summary historical consolidated financial data of Ceva, giving effect to the transfer of the DSP cores licensing business from DSP Group to Ceva as if this business had operated as a separate entity throughout the relevant periods. This information should be read in conjunction with the unaudited financial statements and related notes included elsewhere in this information statement. This historical consolidated financial data is presented for illustrative purposes only and is not necessarily indicative of the operating results or financial position that would have been achieved had the separation been consummated as of the dates indicated or that may be achieved in the future.

	Year Ended December 31, 2001		Three Months Ended March 31, 2002
	(U.S. Dollars in thousands, except per share data)
Consolidated Statement of Income Data:
Revenues	$	25,244	$	4,096
Gross profit		23,993		3,785
Operating expenses		10,845		3,046
Operating income		13,148		739
Net income	$	10,355	$	515

	March 31, 2002
Consolidated Balance Sheet Data:
Working capital	$	5,615
Total assets		12,254
Total stockholders’ equity and Parent company investment	$	7,853

FORWARD-LOOKING STATEMENTS

This information statement and other materials filed or to be filed by ParthusCeva with the Securities and Exchange Commission, as well as information included in oral statements or other written statements made or to be made by ParthusCeva, contain forward-looking statements that involve risks and uncertainties. These forward-looking statements are not historical facts but rather are based on current expectations, estimates and projections about our industry, our beliefs and assumptions. We use words such as “anticipate,” “expect,” “intend,” “plan,” “believe,” “seek,” “estimate” and variations of these words and similar expressions to identify forward-looking statements. These statements are not guarantees of future performance and are subject to certain risks, uncertainties and other factors, some of which are beyond our control, are difficult to predict and could cause actual results to differ materially from those expressed or forecasted in the forward-looking statements. These risks and uncertainties include those described in “Risk Factors” and elsewhere in this information statement and the documents incorporated by reference in this information statement. You should not place undue reliance on these forward-looking statements, which reflect our view only as of the date of this information statement.

RISK FACTORS

You should carefully consider each of the following risks and uncertainties associated with our company and ownership of our common stock, as well as all other information set forth in this information statement or incorporated by reference into this information statement. Holding our common stock involves risks. The occurrence of any of the following risks could materially and adversely affect our business, financial condition and operating results, which could result in a decline in the trading price of our common stock.

RISKS RELATING TO THE SEPARATION OF OUR DSP CORES LICENSING BUSINESS

FROM DSP GROUP

We may have potential business conflicts of interest with DSP Group with respect to our past and ongoing relationships and we may not be able to resolve these conflicts on terms that are most favorable to us.

Conflicts of interest may arise between DSP Group and us in a number of areas relating to our past and ongoing relationships, including:

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labor, tax, employee benefit, indemnification and other matters arising from our separation from DSP Group;

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intellectual property matters;

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employee retention and recruiting;

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the nature, quality and pricing of transitional services DSP Group has agreed to provide us; and

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business opportunities that may be attractive to both DSP Group and us.

We may not be able to resolve any of the potential conflicts of interest discussed above, and even if we do, the resolution may be less favorable than if we were dealing with an unaffiliated party. Under the separation agreement, DSP Group has agreed not to compete with us for a period of five years in the business of developing and licensing designs for programmable digital signal processor cores, and we have agreed not to compete with DSP Group in the business of designing, manufacturing and marketing high performance digital signal processor-based integrated circuit devices for telephone answering devices, computer telephony devices and voice-over broadband products for a period of five years.

We currently use DSP Group’s operational, administrative and technical infrastructure and if these services are not sufficient to meet our needs or if we are not able to replace these services, we may be unable to manage critical operational functions of our business.

Pursuant to our transition services agreements, DSP Group and its subsidiaries have agreed to provide transitional services to us and our subsidiaries following our separation from DSP Group, including services related to:

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management and information services, including network, hardware and software maintenance and support;

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general and administrative services, including financial, accounting, payroll, human resources, procurement and motor vehicle fleet administration;

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limited research and development services, including testing and computer-aided design; and

•

sales and marketing services in Japan and Europe.

In addition, DSP Group, Ltd. has assigned to us a lease covering the facilities we will occupy in Herzeliya, Israel. We also use a portion of DSP Group’s Santa Clara, California facilities under the transition services agreements referred to above.

The transition services agreements provide that DSP Group will continue to provide these services to us in exchange for fees payable by us to DSP Group and its subsidiaries for initial terms of two years following the effective date of our separation from DSP Group. Although those entities are contractually obligated to provide us with these services, these services may not be provided at the same level as when we were part of DSP Group, and we may not be able to obtain the same benefits. In addition, we cannot assure you that during the initial terms of the transition services agreements, the quality of services and level of responsiveness will meet our needs. If we are unable to obtain sufficient quality of these services or replace these services which are not effectively provided, our business and results of operations could be harmed.

After the initial terms of the transition services agreements, we will need to either extend the term of these agreements, engage others to perform these services or perform these services internally. We cannot assure you that DSP Group or its subsidiaries will continue to provide us with these services after the initial terms of the transition services agreements, that the quality of services and level of responsiveness will meet our needs or that the cost of these services will not be significantly higher if we purchase them from unaffiliated providers or employ staff to handle them internally.

In addition, these transition services agreements were entered into in the context of a parent-subsidiary relationship with DSP Group and were negotiated in the overall context of our separation from DSP Group. The prices charged to us under these transition services agreements may be lower than the prices that we may be required to pay third parties for similar services or the costs of similar services if we undertake them ourselves. If we fail to find replacements for these services in a timely fashion, or if we are not able to replace them on favorable terms, our business, results of operations and financial condition could be harmed.

For a more detailed description of the services provided to us by DSP Group and certain of its subsidiaries, please see “Separation of DSP Cores Licensing Business from DSP Group.”

Restrictions on our ability to issue stock and take certain other actions could inhibit our growth.

The restrictions in the separation agreement on issuances of our capital stock and other specified actions by us during the one-year period following the distribution, or the liquidation, disposition or discontinuation of the DSP cores licensing business during the two-year period following the distribution, and the requirement that we indemnify DSP Group if we do not comply with these restrictions, could limit our ability to grow our business and compete effectively during the period following the distribution. In addition, these restrictions and indemnification obligations could make us a less attractive acquisition or merger candidate during this period.

We could be subject to joint and several liability for taxes of DSP Group.

As a former member of a group filing consolidated income tax returns with DSP Group, we could be liable for federal income taxes of DSP Group and other members of the consolidated group, including taxes, if any, incurred on the distribution of our stock to the stockholders of DSP Group. DSP Group has agreed to indemnify us against these taxes, other than taxes for which we have indemnified them.

Our historical financial information may not be representative of our results as a separate company.

Ceva’s historical consolidated financial statements have been carved out from the consolidated financial statements of DSP Group using the historical results of operations and historical bases of the assets and liabilities of the DSP cores licensing business. Accordingly, the historical financial information we have included in this information statement does not necessarily reflect what our financial position, results of operations and cash flows would have been had this business operated as a separate, stand-alone entity during the periods presented. DSP Group did not account for us, and we did not operate, as a separate, stand-alone entity for the periods presented. Our costs and expenses include allocations from DSP Group for centralized corporate services and infrastructure costs, including accounting and legal, research and development, sales and marketing, and general

administration costs, as well as financial income. In addition, because the accompanying financial statements relate to a period ending several months prior to the separation of the DSP cores licensing business from DSP Group, the assets and liabilities transferred in the separation will be subject to change between the date of the financial statements and the separation.

These allocations have been determined on bases that we and DSP Group consider to reasonably reflect the utilization of services provided to us or the benefit we received. The historical financial information for Ceva presented herein is not necessarily indicative of what our results of operations, financial position and cash flows will be in the future. We have not made adjustments to our historical financial information to reflect the significant changes in the cost structure, funding and operations which will result from the separation of the DSP cores licensing business from DSP Group and the combination with Parthus, potentially including increased costs associated with reduced economies of scale, increased marketing expenses related to building our brand and increased costs associated with being a stand-alone, publicly traded company. If our actual results differ significantly from these estimates, our stock price could be harmed.

Some of our directors and executive officers may have conflicts of interest because of their ownership of DSP Group’s common stock.

Some of our directors and executive officers, including Gideon Wertheizer, our Executive Vice President—Business Development and Chief Technology Officer, and Eliyahu Ayalon, the Chairman of our board of directors, will continue to hold a significant number of shares of DSP Group’s common stock and options to purchase shares of DSP Group’s common stock. Ownership of DSP Group’s common stock by our directors and executive officers after our separation from DSP Group could create, or appear to create, conflicts of interest when directors and executive officers are faced with decisions that could have different implications for DSP Group and us.

RISKS RELATING TO THE DISTRIBUTION

We have agreed to indemnify DSP Group if certain of our actions or Parthus’ actions cause the separation and distributions to be taxable to DSP Group.

DSP Group has received a private letter ruling from the Internal Revenue Service to the effect that, among other things, the distribution of our stock to the DSP Group stockholders will be tax-free under Section 355 of the Internal Revenue Code of 1986, as amended, and that the receipt of shares of our common stock in the distribution will not result in the recognition of income, gain or loss to stockholders of DSP Group for federal income tax purposes. The continuing validity of this ruling is subject to factual representations and assumptions made in the private letter ruling request. We are not currently aware of any facts or circumstances which would cause these representations and assumptions to be untrue.

Notwithstanding the receipt of this private letter ruling, if we and/or DSP Group engage in certain activities, the distribution may become taxable to DSP Group and possibly to its stockholders. For example, it is possible that even a small issuance of our capital stock, when combined with the 49.9% of our capital stock issued to shareholders of Parthus in the combination, may cause the distribution to be taxable.

The separation agreement generally provides that we will not issue capital stock or take other specified actions during the one-year period following the distribution, or liquidate, dispose of, discontinue or take similar actions with respect to the DSP cores licensing business during the two-year period following the distribution, unless either DSP Group consents to the action, or we receive a supplemental ruling from the Internal Revenue Service or an opinion of tax counsel satisfactory to DSP Group providing that the action will not cause the distribution to be taxable to either DSP Group or to its stockholders.

If we make such an issuance or take any other prohibited actions without complying with the terms of the separation agreement, we will be required to indemnify DSP Group for the tax liability.

We also have agreed to indemnify DSP Group for any tax liability of DSP Group to the extent that the liability results from the inaccuracy of any factual information provided or representation made by Parthus, or by us after the distribution, in the application for rulings filed with the Internal Revenue Service or in connection with any tax opinion regarding the separation and distribution.

If the distribution were rendered taxable to DSP Group and its stockholders, then:

•

corporate-level taxable gain would be recognized by DSP Group in an amount equal to the difference between the market value of the Ceva’s common stock at the time of distribution to the DSP Group stockholders and DSP Group’s basis in that stock (and the tax would be determined by multiplying such gain by DSP Group’s net effective tax rate at the time of the distribution (currently approximately 38%)); and

•

each holder of DSP Group’s common stock who received shares of our common stock in the distribution would be treated as having received a taxable dividend in an amount equal to the fair market value of our common stock received (assuming that DSP Group had sufficient current or accumulated “earnings and profits”).

The distribution could adversely affect the aggregate value of an existing investment in DSP Group’s common stock.

Following the separation and distribution, the value of our common stock and DSP Group’s common stock will not necessarily be related. The combined value of our common stock and DSP Group’s common stock after the separation and distribution may be less than the trading price of DSP Group’s common stock immediately before the separation and distribution. As a result of the separation and distribution, the trading price range of DSP Group’s common stock may be lower than the trading price range of DSP Group’s common stock immediately before the separation and distribution.

RISKS RELATING TO THE COMBINATION OF PARTHUS AND CEVA

A number of factors could impair our ability to successfully integrate the businesses of Parthus and Ceva, and thereby harm the combined company’s business, financial condition and operating results.

We must integrate the operations of Ceva and Parthus, each of which has previously operated independently of the other. We cannot assure you that we will be able to successfully integrate these businesses in a timely and efficient manner, if at all. To integrate operations, we will need to focus on a number of key tasks, including:

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retaining and integrating management, engineering and other key employees of each of Ceva and Parthus;

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retaining existing customers, suppliers, distributors, licensees, vendors and others that have historically done business with Ceva or Parthus;

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integrating sales efforts so that customers can do business easily with the combined company; and

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preventing delays in ongoing research and development activities to permit efficient time-to-market introductions and time-to-volume production for acquired products and new technologies.

We may face difficulties in effecting the successful integration of these businesses, including the following:

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impairment and/or loss of relationships with employees, customers, suppliers, distributors, licensees, vendors and others that have historically done business with Ceva or Parthus;

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adverse financial results associated with integration of the two businesses, including unanticipated expenses related to the integration and deployment of acquired technologies; and

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disruption of our business and distraction of our management.

In addition, the anticipated benefits of the combination may not be realized because, among other reasons:

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ParthusCeva’s technology may not be as robust as expected or may not achieve the expected performance, features or product yield;

•

ParthusCeva’s intellectual property, including its patent portfolio, may not be as valuable as expected; and

•

the value of the combination may not be accretive.

We may not succeed in addressing these risks. Further, we cannot assure you that our growth rate will equal the historical growth rates experienced by Ceva or Parthus.

The integration of Parthus and Ceva, as well as any future acquisitions or strategic investments, could interrupt our business and our financial condition could be harmed.

The integration of Parthus and Ceva and any future acquisitions or strategic investment may entail numerous risks, including the following:

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difficulties integrating acquired operations, personnel, technologies or products;

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diversion of management’s focus from our core business concerns;

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write-offs related to acquired assets, including write-offs related to impairment of goodwill and other intangible assets; and

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dilution to existing stockholders and earnings per share.

Any such difficulties encountered as a result of the integration of Parthus and Ceva or any future acquisitions or strategic investments could adversely affect our business, operating results and financial condition. In July 2001, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 142, “Goodwill and Other Intangible Assets,” which requires that goodwill and intangible assets with indefinite useful lives no longer be amortized, but instead be tested for impairment annually, or more frequently when events or circumstances occur indicating that goodwill might be impaired. If we determine through the impairment review process that goodwill has been impaired, we will record the impairment charge in our statement of operations. Any future write-off of goodwill or intangible assets could be significant and would likely have an adverse impact on our reported operating results.

In connection with the combination, we expect to write off substantial acquired in-process research and development, which may adversely affect our stock price.

The amount of excess cost attributable to in-process research and development of Parthus is estimated to be approximately $16.5 million. This in-process research and development was not considered to have reached technological feasibility or future use and, in accordance with generally accepted accounting principles, the value of such in-process research and development will be expensed by ParthusCeva. This amount will be recorded as part of ParthusCeva’s research and development expense in the fiscal quarter during which the combination is consummated. This write-off will reduce ParthusCeva’s net income, negatively impact ParthusCeva’s results of operations and reduce ParthusCeva’s earnings per share for that fiscal quarter. As a result, ParthusCeva’s stock price could be significantly and adversely affected.

Employee uncertainty related to the combination could harm the combined company.

Former Ceva and Parthus employees may experience uncertainty about their future roles with the combined company until or after strategies for ParthusCeva are implemented and may terminate their respective employment relationships as a result of the combination. In addition, we may streamline our operations to achieve cost savings or in response to general economic conditions. We cannot assure you that any such efforts will be properly tailored or will achieve the cost savings and other benefits we want. Employee uncertainty may adversely affect our ability to attract and retain employees necessary to implement our strategies and may disrupt our operations.

RISKS RELATING TO THE PARTHUSCEVA BUSINESS

We may not be successful in licensing integrated, system-level solutions.

We intend to offer our application-level IP platforms built around our DSP cores, as well as to continue to offer our DSP cores and IP platforms on a stand-alone basis, as Ceva and Parthus, respectively, have done in the past. We have no experience in offering DSP cores and IP platforms as an integrated solution, and may not be successful in obtaining licensees for these integrated solutions. Any licenses for such integrated solutions may be on terms less favorable than we currently anticipate.

We may be required to invest substantial resources, including to support additional sales and marketing efforts and to fund additional research and development expenditures, to attract customers and improve the technologies for our integrated solutions. We cannot assure you that any increased expenditure related to the offering of our integrated solutions will generate a corresponding return for our business.

We rely significantly on revenue derived from a small number of licensees and customers, and our results and business may be materially harmed if any one of them terminates their relationship with us.

A limited number of licensees and customers will account for a substantial portion of our revenues in any period. For example, four DSP core licensees generated more than 67% of Ceva’s revenues in the first quarter of 2002, with revenues from one licensee accounting for 29%. Similarly, more than 10% of Parthus’ annual revenues in each of 1999, 2000 and 2001 were derived from a single customer, STMicroelectronics. We expect to continue to derive a significant portion of our revenue from a small number of licensees and customers in the future. The termination of a licensing arrangement with a key licensee, whether as a result of competition, technological change or otherwise, would adversely affect our sales and results of operations. We cannot assure you that any of our significant licensees or customers will not terminate their relationship with us. If we fail to replace the revenue lost from termination of these significant relationships by attracting new licensees and customers, our financial results for a particular period may be seriously harmed, which may affect our stock price. In addition, our unit royalties from licenses are totally dependent upon the success of our licensees in introducing products incorporating our technology and the success of those products in the marketplace. Ceva’s revenues from unit royalties declined from approximately $1.685 million for the first quarter of 2001 to approximately $963,000 for the first quarter of 2002 due to the global economic slowdown. If we do not retain our current licensees and customers and continue to attract new licensees and customers, our business may be harmed.

Our quarterly operating results will fluctuate due to a variety of factors and are not a meaningful indicator of future quarterly performance.

The operating results of each of our DSP cores licensing business and Parthus have fluctuated from quarter to quarter in the past, and our operating results as a combined company may continue to do so in the future. As a result, it is possible that in some quarters ParthusCeva’s operating results could be below the expectations of securities analysts and investors, which could cause our common stock price to fall. Factors that may affect our results of operations in the future include, among other things:

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timely introduction, demand and market acceptance of new or enhanced products;

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new product announcements and introductions by competitors;

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supply constraints for and changes in the cost of components incorporated in our products;

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timing and volume of orders and production;

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gain or loss of significant customers, licensees, distributors and suppliers; and

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changes in our pricing policies and those of our competitors and suppliers.

ParthusCeva’s operating results will also be affected by general economic and other conditions affecting the timing of customer orders and capital spending. Unfavorable general economic conditions have harmed our DSP cores licensing business and Parthus’ business in the past and may continue to harm our business in the future.

Seasonal trends may cause our quarterly operating results to fluctuate, which may adversely affect the market price of our common stock.

Historically, there have been seasonal variations in the operating results of our DSP cores licensing business. Typically this business has generated more licensing and prepaid royalty revenues in the last quarter of the fiscal year, which we believe may be due to our licensees’ desire to exhaust their year-end budgets, as well as prepare for the next year’s new design trends. These seasonal trends may cause ParthusCeva’s operating results to fluctuate, which may have an adverse effect on our stock price.

We depend on market acceptance of third-party semiconductor intellectual property (SIP).

In recent years, both the manufacturing processes and the complexity of semiconductor chips have advanced significantly, requiring chip manufacturers to either devote the substantial resources required to develop all of the components found in many of today’s complex chips, or outsource some of these functions to third parties. Due to a lack of qualified personnel, many semiconductor designers and manufacturers are increasingly licensing from third parties proven re-useable intellectual property components, such as DSP cores, general purpose processors, memory technologies and logic blocks. Our programmable DSP technology is part of a relatively young and evolving market for third-party semiconductor intellectual property (SIP). Our future growth will depend on the level of acceptance by the market of this intellectual property concept and the variety of intellectual property offerings available on the market, which to a large extent are not in our control. If the market shifts and third-party (SIP) is no longer desired by our customers, our business, results of operations and financial condition could be materially harmed.

Since we do not sell our products directly to end users, we depend on the success of our licensees to promote our solutions in the marketplace.

We license our technology primarily to semiconductor companies, such as STMicroelectronics, Texas Instruments and National Semiconductor, who then incorporate our technology into the products they sell or incorporate our intellectual property with technology from other sources to produce components that they sell. We rely to a large extent on manufacturers and designers of application-specific integrated circuits (ASICs) and application-specific standard products (ASSPs) to add value to our licensed DSP cores by providing complete SmartCores-based programmable DSP solutions to meet the specific application needs of system OEMs. We believe that our licensee network is essential to improving our brand name recognition, bringing more rapid acceptance of our architectures and platforms and ensuring that there are multiple, reliable sources of products incorporating our technologies available at competitive prices. We cannot assure you that we will be able to maintain our current relationships or establish new relationships with additional licensees, and any failure by us to do so could have a material adverse effect on our business. Existing and potential licensees are not contractually obligated to use our architecture and some of them design and develop processors based on competing architectures, including their own, and others may do so in the future. None of our current semiconductor manufacturer customers is obligated to license new or future generations of our technology designs. In addition, because we do not control the business practices of our customers, we do not influence the degree to which they promote our technology or set the prices at which they sell products incorporating our

technology to consumer product manufacturers. We cannot assure you that our licensees will devote satisfactory efforts to promote our solutions which is important to our business and future growth.

We also depend significantly on system OEMs to adopt our solutions and on their success in selling products containing our technology.

Although we have licensed directly to system OEMs in the past, these companies typically purchase chips or components containing our technology from our semiconductor manufacturing licensees. As system OEMs are the creators of many of the final products containing our technology, our success is substantially dependent upon the adoption and continued use of chips containing our technology by system OEMs. We face numerous risks because of this fact, including the potential difficulties in persuading large system OEMs to rely on our technology for their critical components, rather than developing the technology themselves or relying on competing products of more established companies with greater resources and name recognition than we have. In addition, we might face difficulties in persuading users of our technologies to bear certain development costs associated with adopting our technologies and to make other necessary investments to produce embedded processors using our technologies, and of electronic product manufacturers to incorporate our technologies into their products. We depend on electronic product manufacturers to incorporate our technology in their products, and any failure by them to do so or to successfully sell their products to end users could substantially limit our revenue growth.

We also face substantial risks which are beyond our control that influence the success or failure of our existing or potential system OEM customers, including the competition they face and the market acceptance of their products; their engineering, marketing and management capabilities and the technical challenges unrelated to our technology that they face in developing their products; and their financial and other resources. The failure of one or more of the system OEMs using our technology may have a material adverse effect on our business, results of operations and financial condition.

If we are unable to meet the changing needs of our end-users or address evolving market demands, our business may be harmed.

The markets for programmable DSP cores and IP Platforms are characterized by rapidly changing technology, emerging markets and new and developing end-user needs, requiring significant expenditure for research and development. Our future success will depend on our ability to develop enhancements to and new generations of our IP platforms and our SmartCores family of DSP cores, DSP based sub-systems and related development tools to address the requirements of specific product applications, and to introduce these new technologies in a timely manner. Our success will further depend upon our ability to successfully identify, anticipate and respond to technological changes in hardware, software and architecture, and the needs associated with emerging markets within our field. We cannot assure you that we will be able to introduce systems and solutions that reflect prevailing industry standards on a timely basis, to meet the specific technical requirements of our end-users or to avoid significant losses due to rapid decreases in market prices of our products, and our failure to do so may seriously harm our business.

To remain competitive, we must be able to meet our needs for substantial capital, and financing from other sources may not be available on favorable terms, if at all.

We believe that success in our markets requires substantial capital in order to maintain the flexibility to take advantage of opportunities as they arise and to fund our anticipated combined research and development needs. Our capital requirements may vary greatly from quarter to quarter, depending on, among other things, capital expenditures, fluctuations in our operating results, financing activities, acquisitions and investments and receipt of receivables. In the past, capital needs for our DSP cores licensing business have been satisfied by DSP Group. However, following the separation of the DSP cores licensing business from DSP Group, DSP Group will no longer provide funds to finance our working capital or other cash requirements. We believe that the existing

resources of Ceva and Parthus, including existing cash and cash equivalents, and anticipated cash flows from operations, will be adequate to meet the combined company’s projected working capital, capital expenditure and research and development requirements for at least the next 12 months. However, we may need to raise funds sooner if, among other things, we acquire additional businesses, products or technologies. We cannot assure you that additional financing will be available on commercially reasonable terms, if at all, which may prevent ParthusCeva from taking advantage of available opportunities. To the extent that existing resources and anticipated cash flows are not adequate for the combined company’s operational and other cash needs, our operating results and financial position could be harmed. If additional funds were raised through the issuance of equity securities, your percentage ownership in ParthusCeva would be reduced. Moreover, our ability to raise funds using equity securities may be limited because the separation agreement provides that we will not issue capital stock or take certain other actions during the one-year period following the distribution unless either DSP Group consents to the action or we receive a supplemental ruling from the Internal Revenue Service or an opinion of tax counsel satisfactory to DSP Group to the effect that the action will not cause the distribution to be taxable to either DSP Group or its stockholders. If we were to issue equity securities without fulfilling these conditions, we would be required to indemnify DSP Group if such issuance causes the distribution to be taxable to DSP Group. Similarly, future debt financings could involve restrictive covenants that may limit our ability to manage and grow our business.

We depend on a limited number of key personnel who would be difficult to replace. If we lose the services of these individuals or cannot hire additional qualified personnel, our business will be harmed.

The success of ParthusCeva will depend to a significant extent upon our key employees and senior management. The loss of the service of these employees could materially harm us. We believe that the future success of ParthusCeva will depend in large part upon our ability to attract and retain highly skilled technical, managerial and marketing personnel. Competition for skilled employees in these fields is intense. We cannot assure you that we will be successful in attracting and retaining the required personnel. In addition, we cannot assure you that the Ceva and Parthus management teams who became part of our company as a result of the separation and the combination, or their respective employees will remain employed by ParthusCeva, or if they remain employed, will successfully work together to build our business.

The continued growth and success of ParthusCeva will also depend on the managerial and technical skills of key technical, sales and management personnel, whose knowledge of our business and industry would be difficult to replace. Any of the members of our senior management team can terminate his or her employment agreement with us on one to three months’ prior notice. In addition, although Ceva employees have executed agreements containing non-competition provisions, the enforceability of these provisions in Israel has been questioned and we cannot assure you that a court would enforce the terms of these provisions. Because of these facts, our employees could join competitors. If any of the members of ParthusCeva’s senior management team, including Kevin Fielding, Gideon Wertheizer or Eoin Gilley, are unable or unwilling to continue in ParthusCeva’s employ, our results of operations could be materially harmed.

ParthusCeva’s success will also depend on our ability to manage our expanding and geographically dispersed operations successfully.

Any expansion of our operations in the near future is likely to place a significant strain on our existing managerial resources and may require us to retain additional management personnel. Expansion may also require us to implement additional operating and financial controls, improve coordination among engineering and finance functions, and hire additional personnel. As part of this process, we would need to install additional reporting and management information systems for production monitoring and financial reporting. To the extent we are unable to attract additional management personnel in a timely fashion, or lose the services of our existing management personnel, our operating results and financial position could be harmed.

Although ParthusCeva will be headquartered in San Jose, California, most of our executives will be based in Dublin, Ireland and Herzeliya, Israel and most of our employees will be based in Dublin. Accordingly, our ability to compete successfully will depend in part on the ability of a limited number of key executives located in geographically dispersed offices to integrate management, address the needs of ParthusCeva’s customers and respond to changes in our markets. If we are unable to effectively manage our remote operations, our business may be harmed.

We may seek to expand our business through acquisitions that could result in diversion of resources and extra expenses, which could disrupt our business and harm our financial condition.

We may pursue acquisitions of businesses, products and technologies, or establish joint venture arrangements in the future that could expand our business. The negotiation of potential acquisitions or joint ventures as well as the integration of acquired or jointly developed businesses, technologies or products could cause diversion of management’s time and our resources. Future acquisitions could result in:

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potential dilutive issuances of equity securities;

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the incurrence of debt and contingent liabilities;

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amortization of intangibles;

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research and development write-offs; and

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other acquisition-related expenses.

Acquired businesses or joint ventures may not be successfully integrated with our operations. If any acquisition or joint venture were to occur, ParthusCeva may not receive the intended benefits of the acquisition or joint venture. If future acquisitions disrupt our operations, or if we have difficulty integrating the businesses or technologies we acquire, our business, financial condition and results of operations could suffer.

ParthusCeva may not be able to adequately protect its intellectual property.

ParthusCeva’s success and ability to compete will depend in large part upon protecting our proprietary technologies. We will rely on a combination of patent, copyright, trademark, trade secret, mask work and other intellectual property rights, confidentiality procedures and licensing arrangements to establish and protect our proprietary rights. These agreements and measures may not be sufficient to protect our technology from third-party infringement, or to protect us from the claims of others. As a result, we face risks associated with our patent position, including the potential need to engage in significant legal proceedings to enforce our patents, the possibility that the validity or enforceability of our patents may be denied, the possibility that third parties will be able to compete against us without infringing our patents and the possibility that our products may infringe patent rights of third parties.

As part of their confidentiality procedures, Parthus and Ceva generally have entered into non-disclosure agreements with their employees, consultants and corporate partners and have attempted to control access to and distribution of their technologies, documentation and other proprietary information. We plan to continue these procedures. Despite these procedures, third parties could copy or otherwise obtain and make unauthorized use of our technologies or independently develop similar technologies. The steps Parthus and Ceva have taken and that ParthusCeva may take in the future may not prevent misappropriation of our solutions or technologies, particularly in foreign countries where laws or law enforcement practices may not protect our proprietary rights as fully as in the United States.

Effective protection of intellectual property rights may be unavailable or limited, both in the United States and in foreign countries. Patent protection throughout the world is generally established on a country-by-country basis. Ceva and Parthus have applied for patent protection for some of their technologies both inside the

United States and in various countries outside the United States. However, we cannot assure you that pending patents that are being transferred and assigned to ParthusCeva will issue or that the issued patents will be valid or enforceable. We cannot assure you that the protection of our proprietary rights will be adequate or that our competitors will not independently develop similar technologies, duplicate our services or design around any patents or other intellectual property rights we hold.

Our tradenames or trademarks may be registered or utilized by third parties in countries other than those in which we have registered them, impairing our ability to enter and compete in these markets. In the United States, the trademark SmartCore has been registered by an unrelated company. While we have successfully co-existed with this other trademark holder, we cannot assure you that this state of affairs will continue. If we were forced to change any of our brand names, we would lose a significant amount of our brand equity.

If we fail to protect our intellectual property rights and proprietary technologies adequately, if there are changes in applicable laws that are adverse to our interests, or if we become involved in litigation relating to our intellectual property rights and proprietary technologies or relating to the intellectual property rights of others, our business, results of operations and financial condition could be harmed.

Our business will suffer if we are sued for infringement of the intellectual property rights of third parties or if we cannot obtain licenses to these rights on commercially acceptable terms.

Although neither Ceva nor Parthus was involved in any material litigation regarding its respective intellectual property prior to the combination, we will be subject to the risk of adverse claims and litigation alleging infringement of the intellectual property rights of others in the future. Many participants in the semiconductor intellectual property industry have an increasing number of patents and patent applications and have frequently demonstrated a readiness to pursue litigation based on allegations of patent and other intellectual property infringement. Our products rely on technology that could be the subject of existing patents or patent applications of third parties. There are a large number of patents held by others, including our competitors, pertaining to the broad areas in which we are active. We have not, and cannot reasonably, investigate all such patents. From time to time, we have become aware of patents in our technology areas and have sought legal counsel regarding the validity of such patents and their impact on how we operate our business, and we will continue to seek such counsel when appropriate in the future. Third parties may assert infringement claims in the future with respect to our current or future products. These claims may require us to enter into license arrangements or result in protracted and costly litigation, regardless of the merits of these claims.

Any necessary licenses may not be available or, if available, may not be obtainable on commercially reasonable terms. If we cannot obtain necessary licenses on commercially reasonable terms, we may be forced to stop licensing our technology, and our business would be seriously harmed. For additional discussion of our intellectual property and proprietary rights, please see “Business—Proprietary Rights.”

In any potential dispute involving our patents or other intellectual property, our licensees could also become the target of litigation. Some of our license agreements require us to provide technical support and information to a licensee who is subject to litigation involving the use of our technology. We are also generally bound to indemnify many of our licensees under the terms of their license agreements, particularly with respect to our IP platforms licensing business, and we may agree to indemnify others in the future. We could incur substantial expenses for these support and indemnification obligations. In addition to the time and expense required for us to supply support or indemnification to these licensees, their development, marketing and sales of products incorporating our technology could be severely disrupted or shut down as a result of litigation, which in turn could have a material adverse effect on our business, financial condition and results of operations.

The industries in which we sell our products are experiencing a challenging period of slow growth and have experienced and will continue to experience other cyclical effects which may negatively impact our operating results and business.

The primary customers for our products are semiconductor design and manufacturing companies, system OEMs and electronic equipment manufacturers, particularly in the telecommunications field. These industries are highly cyclical and have been subject to significant economic downturns at various times. These downturns are characterized by production overcapacity and reduced revenues, which at times may, if the downturn is sufficiently prolonged or severe, encourage semiconductor companies or electronic product manufacturers to reduce their expenditure on our technology. During 2001, the semiconductor industry as a whole experienced the most severe contraction in its history, with total semiconductor sales worldwide declining by more than 30%, according to the Semiconductor Industry Association. The market for semiconductors used in mobile communications was particularly hard hit, with the overall decline in sales worldwide estimated by Gartner Dataquest to have been well above 30%. If the market does not recover by the third quarter of 2002, our business could be materially and adversely affected. In addition, economic problems in certain regions have harmed and may continue to negatively affect our business. For example, in recent years certain Asian countries have experienced significant economic difficulties, including currency devaluation and instability, business failures and a depressed business environment. These difficulties triggered a significant downturn in the semiconductor market, resulting in reduced budgets for our solutions which, in turn, negatively impacted our Asian activity. Our business is harmed when capital and research and development budgets of our current and potential customers are curtailed.

The slow growth of the telecommunication and semiconductor industries has resulted and may continue to result in the reduction of capital and research and development budgets or the delay of product introduction, both of which have resulted and may continue to result in a reduction in demand for our products. Our success depends on increasing demand for products that use our technology. In particular, in 2001, more than 56% of Ceva’s sales of DSP cores were to chip manufacturers whose products are incorporated into digital cellular telephones. Recently there has been a downturn in the cellular handset industry. As a result, the growth rate of sales by our customers and potential customers has slowed significantly. Demand for other products that incorporate our DSP cores, such as MP3 devices, hard disk drives and voice over packet network services, has also weakened. For example, Ceva’s total revenues decreased by 31% for the first quarter of 2002 as compared to the first quarter of 2001 as a result of the global economic slowdown which inhibited Ceva’s ability to obtain new licensees and lowered Ceva’s royalties from our existing licensees. Continued weakening demand for digital cellular telephone and these other products will adversely affect our ability to maintain our current growth rate, and could harm our financial results.

Our failure to detect unknown defects could materially harm our relationship with customers, reputation and business.

Designs as complex as those we offer frequently contain undetected errors. Despite testing, errors may occur in existing or new designs, which could result in loss of revenue or market share, failure to achieve market acceptance, diversion of development resources, injury to our reputation, indemnification claims, litigation, increased insurance costs and increased service costs, any of which could materially harm our business. Furthermore, we often provide implementation, customization, consulting and other technical services in connection with our IP. In addition, since we typically do not control the manufacturing of products containing our technology, which are made in many different foundries chosen by our licensees, we may be blamed for their manufacturing defects. Our inability to meet customer expectations or project milestones in a timely manner could also result in a loss of or delay in revenue, loss of market share, failure to achieve market acceptance, injury to our reputation, litigation and increased costs which could harm our results of operation and financial condition.

Because customers rely on our DSP core designs as a central part of their applications, errors in our products might discourage customers from purchasing our products. These errors could also result in product liability or warranty claims. Although we attempt to reduce the risk of losses resulting from these claims through warranty disclaimers and liability limitation clauses in our license agreements, these contractual provisions may not be enforceable in every instance. Furthermore, although we maintain errors and omissions insurance, this insurance coverage may not adequately cover these claims. If a court refused to enforce the liability-limiting provisions of our agreements for any reason, or if liabilities arose that were not contractually limited or adequately covered by insurance, our business could be materially harmed.

We have a very lengthy sales cycle, which increases the likelihood that our quarterly revenue will fluctuate and which may, in turn, adversely affect the market price of our common stock.

Our lengthy sales cycle may also cause our revenue and operating results to vary unpredictably from period to period. The period of time between our initial contact with a potential customer and the receipt of a request for a quote on an intellectual property license is generally at least six months, and the time from such a request to a binding contract is generally at least another four to six months. Due to the complexity of our technology and of the legal framework in which our industry operates, we must devote a substantial amount of time to negotiating the terms of our licensing arrangements with our customers. In addition, customers perform, and require us to perform, extensive process and product evaluation and testing before entering into purchase or licensing arrangements. Even after we enter into an agreement and provide a final product to a customer in the form of silicon or intellectual property, we expect that it will be at least six months more before the customer begins to sell its products incorporating our technology, and therefore even longer before we begin to receive royalty income or subsequent re-use license fees.

Many of the milestones along the sales cycle for our IP platforms business are beyond our control and difficult to predict. This fact makes it more difficult to forecast our quarterly results and can cause substantial variations in results from quarter to quarter that are unrelated to the long-term trends in our business. This lack of predictability and variability in our results could harm our stock price and could significantly affect it in particular periods.

The markets in which we operate are highly competitive, and as a result we could experience a loss of sales, lower prices and lower revenue.

The markets for the products in which our technology is used are highly competitive. Aggressive competition could result in substantial declines in the prices that we are able to charge for our intellectual property. It could also cause our existing customers to move their orders to our competitors. Many of our competitors are large companies that have significantly greater financial and other resources than we have. As a result, they may be able more quickly and effectively to:

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respond to new technologies or technical standards;

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react to changing customer requirements and expectations;

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devote needed resources to the development, production, promotion and sale of products; or

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deliver competitive products at lower prices.

In addition, we may face increased competition from smaller, niche semiconductor design companies in the future. Some of our customers may also decide to satisfy their needs through in-house design and production. We compete on the basis of price, product quality, design cycle time, reliability, performance, customer support, name recognition and reputation and financial strength. Our inability to compete effectively on these bases could have a material adverse effect on our business, results of operations and financial condition.

Terrorist attacks and threats or actual war may negatively impact all aspects of ParthusCeva’s operations, revenues, costs and stock price.

Recent terrorist attacks in the United States, as well as any future events occurring in response to or in connection with them, including, without limitation, future terrorist attacks against United States targets, rumors or threats of war, actual conflicts involving the United States or its allies or military or trade disruptions impacting our domestic or foreign suppliers, may substantially negatively impact our operations. Any of these events could cause consumer confidence and spending to decrease or result in increased volatility in the United States and worldwide financial markets and economy. They also could result in economic recession in the United States or abroad. Any of these occurrences could have a significant impact on our operating results, revenues and costs.

RISKS RELATING TO THE DSP CORES LICENSING BUSINESS

Our DSP cores licensing business depends on OEMs and their suppliers to obtain required complementary components.

Some of the raw materials, components and subassemblies included in the products manufactured by our OEM customers, which also incorporate our DSP cores products, are obtained from a limited group of suppliers. Supply disruptions, shortages or termination of any of these sources could have an adverse effect on the business and results of operations of our DSP cores licensing business due to the delay or discontinuance of orders for our products by customers until those necessary components are available.

The future growth of our DSP cores licensing business depends in part on our ability to license to system OEMs and small-to-medium-sized semiconductor companies directly.

Historically our DSP cores licensing business has derived a substantial portion of its revenue in any period from license fees from a relatively small number of licenses. Because of the high license fees we currently charge, only large semiconductor companies or vertically integrated system OEMs typically license our DSP core technologies. Part of our current growth strategy for our DSP cores licensing business is to broaden its client base by offering tailored packages to small- and medium-sized semiconductor companies and other system OEMs to enable them to license our DSP core technology. We plan to expand the sales and marketing organization of our DSP cores licensing business for this purpose. We cannot assure you that we will be successful in expanding this marketing and sales organization for this purpose and in promoting its products to system OEMs and small- to medium-sized semiconductor companies. If we are unable to effectively develop and market its intellectual property through this model, our DSP cores licensing business revenues will continue to be dependent on a smaller number of licensees and the loss of any such relationship could harm its business and results of operations.

The success of our DSP cores licensing business depends on its ability to compete successfully with other providers of DSP solutions.

The market for programmable DSP solutions is highly competitive and is dominated by large, fully integrated semiconductor companies that have significant brand recognition, a large installed base of customers and a large network of field support and field application engineers. We and the companies that license our technology from us compete with companies such as 3DSP, BOPS, LSI Logic and Infineon Technologies, which license DSP cores, and companies such as Analog Devices, Agere, Motorola, and Texas Instruments, which sell their own complete general purpose DSP or application specific DSP solutions. Our DSP cores licensing business faces competition also from some of its strategic partners, which are not committed exclusively to our technology and may develop products competing with our DSP cores products, or products based on architectures of our direct competitors.

As demand for programmable DSP solutions increases, large manufacturers of off-the-shelf chips and system manufacturers may make their intellectual property available to others, and developers of microprocessors, microcontrollers or other processors may devote more resources to create DSP extensions to their products. It is also possible that new competitors or alliances among competitors could emerge. For example, Agere Systems and Motorola formed an alliance for the implementation of new programmable DSP architectures. These existing or future alliances could rapidly acquire significant market share in our markets.

We cannot assure you that our DSP cores licensing business will be able to compete successfully against current or future competitors, or that we will be able to improve or even maintain our competitive position or that our new products will achieve market acceptance. If our DSP cores licensing business is unable to maintain its competitive position in the marketplace, its business, results of operations and financial condition may be harmed.

Our DSP cores licensing business may need to increase its research and development efforts to remain competitive.

The DSP cores market is experiencing extensive efforts by some of our competitors to use new technologies to manipulate their chip designs to increase the parallel processing of the chips and/or designs they offer. For example, one such technology used is Very Long Instruction Word (VLIW), of which some of our competitors possess elements, but which we do not possess at the present time. If such technology continues to improve the programming processing of these chips, or if other new technologies are demanded by our customers, we may need to change the focus of our research and development to obtain such technologies. Failure to do so could hurt our ability to remain competitive and could have an adverse effect on our results of operations. Our DSP cores licensing business spent $1.7 million, or 41% of its total revenues, on research and development in the first quarter of 2002 and $5.1 million, or 20% of its total revenues, in 2001, on research and development and expects to continue to invest heavily in this area. However, we cannot assure you that this or future expenditures will result in new and enhanced products or such products will be accepted in the market.

RISKS RELATING TO OUR IP PLATFORMS LICENSING BUSINESS

We depend on third-party foundries to produce the chips we sell, and any failure by them to deliver the chips we require on time would limit our ability to satisfy our customers’ demands.

Our business strategy calls for revenue from the sale of silicon chips embodying our intellectual property to comprise an increasing percentage of the total revenue of our IP platforms licensing business over the next two years. We currently have strategic relationships with several leading semiconductor foundries, including Taiwan Semiconductor Manufacturing Company and United Microelectronics Corporation (UMC), under which arrangements we can have chips produced using our design. Further, our agreement with UMC gives us reserved capacity in its production facilities. Any interruption in these or similar strategic relationships could harm our ability to develop this part of our business profitably. We do not have the ability to produce chips independently and thus depend on UMC and other foundries to:

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allocate a portion of their manufacturing capacity to our needs;

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produce acceptable quality silicon wafers and chips with acceptable manufacturing yields; and

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deliver chips on a timely basis at a competitive price.

We are dependent upon our relationships with other providers of intellectual property and software in the semiconductor industry, and our ability to innovate and to meet changing market demands may be limited if such relationships do not continue and grow.

Our ability to succeed in the mobile Internet device market will depend on maintaining existing and developing new relationships with other providers of intellectual property and other software developers in the

semiconductor industry. We believe that these relationships are important to our continued ability to develop and license intellectual property that meets the needs of our target markets. Our business, financial condition and results of operations could be materially harmed if we cannot retain or attract such relationships or if one or more of our successful relationships deteriorates or is terminated.

RISKS RELATING TO PARTHUSCEVA’S INTERNATIONAL OPERATIONS

Potential political, economic and military instability in Israel may adversely affect our results of operations.

Some of our principal research and development facilities are located in the State of Israel. In addition, although we are incorporated in Delaware, some of our directors and executive officers are residents of Israel. Although substantially all of our sales currently are being made to customers outside Israel, we are nonetheless directly influenced by the political, economic and military conditions affecting Israel. Any major hostilities involving Israel, or the interruption or curtailment of trade between Israel and its present trading partners, could significantly harm our business, operating results and financial condition.

Israel’s economy has been subject to numerous destabilizing factors, including a period of rampant inflation in the early to mid-1980’s, low foreign exchange reserves, fluctuations in world commodity prices, military conflicts and civil unrest. In addition, Israel and companies doing business with Israel have been the subject of an economic boycott by the Arab countries since Israel’s establishment. Although they have not done so to date, these restrictive laws and policies may have an adverse impact on our operating results, financial condition or expansion of our business.

Since the establishment of the State of Israel in 1948, a state of hostility has existed, varying in degree and intensity, between Israel and the Arab countries. Although Israel has entered into various agreements with certain Arab countries and the Palestinian Authority, and various declarations have been signed in connection with efforts to resolve some of the economic and political problems in the Middle East, hostilities between Israel and some of its Arab neighbors have recently escalated and intensified. We cannot predict whether or in what manner these conflicts will be resolved. Our results of operations may be negatively affected by the obligation of key personnel to perform military service. In addition, certain of our officers and employees are currently obligated to perform annual reserve duty in the Israel Defense Forces and are subject to being called for active military duty at any time. Although we have operated effectively under these requirements since our inception, we cannot predict the effect of these obligations on the company in the future. Our operations could be disrupted by the absence, for a significant period, of one or more of our officers or key employees due to military service.

The Israeli tax benefits and government program that we currently receive or participate in require us to meet several conditions and may be terminated or reduced in the future, which could increase our costs.

We receive certain tax benefits in Israel, particularly as a result of the “Approved Enterprise” status of our facilities and programs. To maintain our eligibility for these tax benefits, we must continue to meet certain conditions, relating principally to adherence to the investment program filed with the Investment Center of the Israeli Ministry of Industry and Trade and to periodic reporting obligations. We believe that we will be able to continue to meet such conditions. Should we fail to meet such conditions in the future, however, these benefits would be cancelled and we would be subject to corporate tax in Israel at the standard rate of 36%, and could be required to refund tax benefits already received. In addition, we cannot assure you that such grants and tax benefits will be continued in the future at their current levels or otherwise.

We also receive funding as part of our participation in magnet research programs supported by the Office of Chief Scientist operated by Israel’s Ministry of Industry and Trade. In the first quarter of 2002, we received $239,000 in grants to us from these programs. In the years 2001 and 2000, we recorded $542,000 and $578,000, respectively, in grants to us from these programs. All of these grants are non-refundable.

The termination or reduction of certain programs and tax benefits (particularly benefits available to us as a result of the Approved Enterprise status of our facilities and programs) or a requirement to refund tax benefits already received may seriously harm our business, operating results and financial condition.

The corporate tax rate applicable to our IP platforms licensing business may increase, which could adversely impact our cash flow, financial condition and results of operations.

We have significant operations in the Republic of Ireland and a substantial portion of the taxable income on our IP platforms licensing business has historically been generated there. Currently, some of our Irish subsidiaries are taxed at rates substantially lower than U.S. tax rates. Although there is no expectation of any changes to Irish tax law, if our Irish subsidiaries were no longer to qualify for these lower tax rates or if the applicable tax laws were rescinded or changed, our operating results could be materially adversely affected. In addition, because the IP platforms licensing business will be owned by subsidiaries of a U.S. corporation, distributions to the U.S. corporation, and in certain circumstances undistributed income of the subsidiaries, may be subject to U.S. tax. Moreover, if U.S. or other foreign tax authorities were to change applicable tax laws or successfully challenge the manner in which our subsidiaries’ profits are currently recognized, our overall taxes could increase, and our business, cash flow, financial condition and results of operations could be materially adversely affected.

Our results of operations may be affected by currency fluctuations.

Due to our multinational operations, our business is subject to fluctuations based upon changes in the exchange rates between the U.S. dollar, British pound, the euro and new Israeli shekels, the currencies in which we collect revenues or pay expenses. Part of our expenses in Israel are paid in Israeli currency, which subjects us to the risks of foreign currency fluctuations and to economic pressures resulting from Israel’s general rate of inflation. Additionally, some of our revenues and part of our expenses in Dublin, Ireland are paid in euros, which subjects us to similar risks with respect to the European economies. While a significant part of our sales and expenses are denominated in United States dollars and euros, a portion of our expenses are denominated in new Israeli shekels and the euro. As a result, an increase in the value of Israeli shekels and/or the euro in comparison to the United States dollar could increase the cost of our technology development, research and development expenses and general and administrative expenses. We cannot assure you that currency fluctuations, changes in the rate of inflation between these regions and the U.S. or any of the other factors mentioned above will not have a material adverse effect on our business, financial condition and results of operations. From time to time, we may use derivative instruments in order to minimize the effects of such developments. Our hedging positions may be partial, may not exist at all in the future or may not succeed to minimize our foreign currency fluctuation risks. Our reporting currency will be the U.S. dollar and, therefore, fluctuations in the exchange rate between the U.S. dollar and other currencies in which we transact business may cause fluctuations in our reported financial information.

Foreign courts might not enforce judgments rendered in the United States, which may make it difficult to collect on judgments rendered against us.

Most of our directors and officers as well as the experts named in this information statement are not residents of the United States, and most of our assets and their assets are located outside the United States. Service of process upon our non-U.S. resident directors, officers or the experts named herein and the enforcement of judgments obtained in the United States against us, our directors and executive officers, or the experts named herein, may be difficult to obtain.

There is also doubt as to the enforceability in Ireland and in Israel of judgments obtained in any federal or state court in the United States in civil and commercial matters, including actions predicated upon the civil liability provisions of the U.S. securities laws. The United States does not currently have a treaty with the Republic of Ireland and/or Israel providing for the reciprocal recognition and enforcement of judgments, other

than arbitration awards, in civil and commercial matters. Therefore, a final judgment for the payment of a fixed debt or sum of money rendered by any federal or state court in the United States based on civil liability, whether or not based solely upon the U.S. federal securities laws, would not automatically be enforceable in the Republic of Ireland or in Israel. In addition, there is doubt as to whether an Irish or an Israeli court would impose civil liability based solely on the U.S. federal securities laws in an action brought in a court of competent jurisdiction in the Republic of Ireland or in Israel.

RISKS RELATING TO HOLDING PARTHUSCEVA COMMON STOCK

AND TO PARTHUSCEVA BECOMING A PUBLIC COMPANY

Our securities have no prior market, and we cannot assure you that our stock price will not decline.

There has not been a public market for our common stock, and an active public market for our common stock may not develop or be sustained. The market price of our common stock could be subject to significant fluctuations. Among the factors that could affect the stock price are:

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negative market reaction to the separation of the DSP cores licensing business from DSP Group;

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negative market reaction to the combination of Parthus and Ceva;

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quarterly variations in our operating results;

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changes in revenue or earnings estimates or publication of research reports by analysts;

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speculation in the press or investment community;

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strategic actions by us or our competitors, such as acquisitions or restructurings;

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actions by institutional stockholders;

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general market conditions; or

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domestic and international economic factors unrelated to our performance.

In particular, the realization of any of the risks described in these “Risk Factors” could have a significant and adverse effect on the market price of our common stock. We cannot assure you that you will be able to resell your shares of our common stock at any particular price, or at all.

Substantial sales of our common stock may occur in connection with the distribution and combination, which could cause our stock price to decline.

DSP Group is distributing all of the shares of our common stock it holds to DSP Group’s stockholders. In addition, we are issuing new shares to all of the former Parthus shareholders as part of the combination. Other than shares held by certain of our insiders and former Parthus “affiliates” under applicable securities laws, substantially all of these shares will be eligible for immediate resale in the public market. We are unable to predict whether significant amounts of common stock will be sold in the open market following the distribution and combination. We are also unable to predict whether a sufficient number of buyers will be in the market at that time. Any sales of substantial amounts of common stock in the public market, or the perception that such sales might occur, whether as a result of the distribution or otherwise, could harm the market price of our common stock.

Market prices of technology companies have been highly volatile and the market for our common stock may be volatile as well.

The stock market has experienced significant price and trading volume fluctuations, and the market prices of shares of technology companies generally have been extremely volatile and have recently experienced sharp declines. Broad market fluctuations may adversely affect the trading price of our common stock regardless of our

actual performance. In the past, following periods of volatility in the market price of a public company’s securities, securities class action litigation has often been instituted against that company. Such litigation could result in substantial costs and a diversion of management’s attention and resources.

The anti-takeover provisions in our charter documents and in Delaware law could prevent or delay transactions that our stockholders may favor.

Our certificate of incorporation and bylaws contain provisions which could make it harder for a third party to acquire us without the consent of our board of directors. For example, if a potential acquirer were to make a hostile bid for us, the acquirer would not be able to call a special meeting of stockholders to remove our board of directors or act by written consent without a meeting. The acquirer would also be required to provide advance notice of its proposal to remove directors at an annual meeting. In addition, our board of directors will be authorized to issue preferred stock in series, with the terms of each series to be fixed by the board of directors.

Section 203 of the General Corporation Law of the State of Delaware limits business combination transactions with 15% stockholders that have not been approved by the board of directors. These provisions and other similar provisions make it more difficult for a third party to acquire us without negotiation. These provisions may apply even if the offer may be considered beneficial by some stockholders.

Our board of directors could choose not to negotiate with an acquirer that it did not feel was in the strategic interests of ParthusCeva. If the acquirer were discouraged from offering to acquire us or prevented from successfully completing a hostile acquisition by the anti-takeover measures, you could lose the opportunity to sell your shares at a favorable price.

Our ability to pay dividends is limited.

We currently intend to retain all future earnings to fund the development and growth of our business and, therefore, do not anticipate paying any dividends. Section 170 of the General Corporation Law of the State of Delaware provides that we can pay dividends only out of surplus or net profits for the fiscal year in which the dividend is declared and/or the preceding fiscal year. In addition, because our Israeli subsidiary received certain benefits under Israeli laws relating to its Approved Enterprise status, the payment of dividends by our Israeli subsidiary to us may subject us to certain Israeli taxes to which we would not otherwise be subject. For additional information regarding our dividend policy, please see “Dividend Policy” and “Description of Capital Stock.”

SEPARATION OF DSP CORES LICENSING BUSINESS FROM DSP GROUP

Overview

In October 2000, DSP Group announced its plan to establish Ceva, one of its wholly-owned subsidiaries, as an independent business focused on the licensing of technology for the design and manufacture of DSP cores. The separation of the DSP cores licensing business from DSP Group, including the transfer of related assets, liabilities and intellectual property rights, was substantially completed on , 2002. DSP Group distributed its shares of Ceva’s common stock to the DSP Group stockholders on , 2002.

Benefits of the Separation

We believe that we will realize benefits from the separation of the DSP cores licensing business from DSP Group, including the following:

•

Greater Strategic Focus . DSP Group designs, manufactures and markets DSP integrated circuit devices for highly-integrated digital cordless phones, Internet telephony devices and other digital speech products. Our focus for the DSP cores licensing business will be on developing businesses and strategic opportunities in the licensing of technology to third parties for the manufacturing of these products. Our separation from DSP Group and the subsequent combination with Parthus will allow the board of directors, management team and employees of the combined company to focus specifically on our business and strategic opportunities. As a combined entity, we will have a greater ability to modify our business processes and organization to fulfill our goals with respect to enhanced research and development and the creation of targeted markets and sales and support infrastructures that better accommodate the needs of our business, customers and employees.

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Greater Management Focus. As a stand-alone, independent company, our management can devote time and energy exclusively to our business. Our business requires a significant amount of executive attention at the sales and marketing level because license agreements are typically not finalized without the involvement of a sophisticated negotiator. The separation will enable our management team to focus on the licensing business without the distractions of the competing needs of DSP Group’s business.

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Avoid Conflicts of Interest. As a licensor of intellectual property, we can make our technology accessible to all potential users. Our relationship with DSP Group raised competitive considerations for both DSP Group and potential customers of the products of the DSP cores licensing business, including direct competitors of DSP Group. We believe our separation from DSP Group will enable us to enter into license agreements with direct competitors of DSP Group, to offer more competitive agreements to potential customers, and to enter into mergers, joint ventures and technology development relationships as the opportunities present themselves.

•

Better Incentives for Employees and Greater Accountability. We expect the motivation of our employees and the focus of our management will be strengthened by incentive compensation programs tied to the market performance of our common stock. Our separation from DSP Group and combination with Parthus will enable us to offer our employees compensation directly linked to the performance of our business, which we expect to enhance our ability to attract and retain qualified personnel.

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Increased Speed and Responsiveness. As a stand-alone company, we expect to be able to make decisions more quickly, deploy resources more rapidly and efficiently and operate with more agility than we could as a part of a more diverse organization. In addition, we expect to enhance our responsiveness to the needs of our customers and partners.

•

Direct Access to Capital Markets . As a separate company, we will have direct access to the capital markets to finance our operational and financial requirements, including growth through acquisitions.

Arrangements Between Ceva and DSP Group

We have provided below a summary description of the separation agreement along with the other key agreements. This description is a summary of the material terms of these agreements. You should read the full text of these agreements, which have been filed with the Securities and Exchange Commission as exhibits to the registration statement of which this information statement is a part.

Separation Agreement

The separation agreement contains the key provisions relating to our separation from DSP Group and DSP Group’s distribution of our shares to its stockholders.

The Separation . The separation of the DSP cores licensing business from DSP Group, including the transfer of related assets, liabilities and intellectual property rights, was substantially completed immediately prior to the consummation of our combination with Parthus. The separation agreement provides for the transfer to us of assets and liabilities from DSP Group related to the DSP cores licensing business as described in this information statement in exchange for the issuance by us to DSP Group of 1,000 shares of our common stock, effective on the separation date. Further, in accordance with the separation agreement, DSP Group’s Israeli subsidiary, DSP Group, Ltd., transferred to DSP Group all of the share capital of Corage, Ltd., an Israeli company, which DSP Group then contributed to us. We subsequently contributed all of the Corage, Ltd. share capital to DSP Ceva, Inc., our wholly-owned subsidiary, and upon the closing of the combination Corage, Ltd. changed its name to ParthusCeva, Ltd. Following this contribution of assets, DSP Group surrendered shares of Ceva’s common stock to Ceva without consideration, to adjust the number of Ceva’s common stock held by DSP Group to the exact number of Ceva’s common stock to be distributed to the DSP Group stockholders, which it then distributed. Ceva then acquired Parthus pursuant to a scheme of arrangement. Following the separation and combination, ParthusCeva, Ltd. is a wholly-owned subsidiary of DSP Ceva. The various ancillary agreements that are exhibits to the separation agreement (or forms thereof mutually agreed upon by the parties) and which detail the separation and various interim and ongoing relationships among DSP Group, its subsidiaries, us and our subsidiaries following the separation date include:

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a technology transfer agreement whereby DSP Group transfers and/or assigns certain technology, third party licenses and other contracts to us;

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a technology transfer assignment and assumption agreement whereby we transfer and/or assign the technology, as well as our rights under the transfer agreement, to DSP Ceva;

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a technology transfer agreement whereby DSP Group, Ltd. transfers and/or assigns certain technology, third party licenses and other contracts to Corage, Ltd.;

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a transition services agreement among DSP Group, DSP Ceva and us;

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a transition services agreement between DSP Group, Ltd. and Corage, Ltd.; and

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a tax indemnification and allocation agreement between DSP Group and us.

To the extent that the terms of any of these ancillary agreements conflict with the separation agreement, the terms of these agreements will govern. These agreements are described more fully below.

The Contribution . As part of the assets contributed to us in the separation, DSP Group also contributed to us a total of the sum of $40 million as initial working capital plus cash equal to the amount by which the transaction costs of the separation and combination exceed $2 million.

The Distribution. DSP Group distributed all of the shares of our common stock outstanding on the separation date to its stockholders on a pro rata basis. DSP Group will not issue any fractional shares in the distribution. Instead, DSP Group stockholders will receive cash for any fractional shares of ParthusCeva common stock owed to them in an amount equal to (1) the fractional share that would otherwise be issuable multiplied by (2) the closing price of the ParthusCeva common stock on the first day after the distribution.

Representations, warranties, covenants and indemnification regarding the distribution.

The separation agreement contains representations and warranties from DSP Group and Ceva as to the accuracy of facts and representations made by DSP Group, Ceva and Parthus in connection with the tax rulings issued by the Internal Revenue Service in connection with the separation, distribution and combination. Under the separation agreement, we have agreed that, (a) during the two-year period immediately following completion of the distribution, we will not:

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liquidate or dispose of all or a substantial portion of the “active trade or business” as defined in the separation agreement;

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discontinue the conduct of our “active trade or business”; or

•

except in accordance with the provisions of the separation agreement, dispose of any business or assets that would cause us to be operated in a manner inconsistent in any material respect with the business purposes of the distribution as set forth in the representation letter sent to, and the tax rulings issued by, the Internal Revenue Service in connection with the separation and distribution; and

(b) during the one-year period immediately following completion of the distribution, we will not, except in accordance with the terms of the separation agreement, directly or indirectly, enter into any agreement, understanding, arrangement or substantial negotiations regarding a proposed acquisition transaction (as that term is defined in the separation agreement);

unless (1) the IRS has ruled that such action or transaction is not pursuant to a plan or series of transaction related to the distribution (2) DSP Group expressly consents in writing to the action or transaction, which consent may be withheld by DSP Group in its sole discretion taking into account solely the preservation of the tax-free treatment of the distribution, or (3) we obtain a supplemental ruling from the Internal Revenue Service or a tax opinion from a nationally recognized law firm or accounting firm reasonably acceptable to DSP Group that the action will not adversely affect the tax-free status of the distribution. In addition, we have represented and warranted that any factual information presented or representations made by Parthus (or by us after the distribution) in the application for supplemental rulings or any supplement to this application filed with the Internal Revenue Service regarding the separation, distribution and combination are true, correct and complete.

Under the terms of the separation agreement, we have agreed to indemnify DSP Group and its affiliates for any tax liability incurred by DSP Group or such affiliates with respect to the distribution as a result of our breach of any of our representation, warranties or covenants made in the separation agreement or in any representation letter issued by us after the combination with respect to the tax matters listed in the separation agreement.

In the event that the Internal Revenue Service subsequently determines that DSP Group’s distribution of Ceva’s common stock to its stockholders is not a tax-free transaction as to DSP Group, DSP Group will recognize a corporate-level taxable gain in an amount equal to the difference between the market value of the Ceva’s common stock at the time of distribution to the DSP Group stockholders and DSP Group’s basis in that stock (and its tax owed would be determined by multiplying such gain by DSP Group’s net effective tax rate at the time of the distribution (currently approximately 38%)).

These rights and obligations shall survive until 30 days following the expiration of the applicable statute of limitations. There are no limitations on such rights and obligations relating to the amount of any claim for indemnification.

In addition, each of the parties has agreed to indemnify the other with respect to:

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the failure to pay, perform or discharge any liabilities for which it is responsible under the separation agreement;

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the breach by it or any of its affiliates of the terms of the separation agreement and the ancillary agreements associated with the separation agreement; and

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the breach by it or any of its affiliates of any of the covenants or obligations of the combination agreement or any other documents or instruments executed or delivered by that party in connection with the separation, distribution and combination. These rights and obligations shall survive until the second anniversary following the distribution date. The amount of any claims for indemnification will be reduced by the amount of any insurance proceeds. There are no other limitations on such rights and obligations relating to the amount of any claim for indemnification.

The limitations on the issuance of shares of our capital stock and other restrictions discussed above could have a negative impact on our financial flexibility following the distribution.

Dispute Resolution. If problems arise between the parties to the separation agreement, the parties have agreed to the following procedures:

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the parties will make a good-faith effort to first resolve the dispute through negotiation;

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in connection with such attempts to resolve the dispute, the parties may agree to attempt to resolve such dispute through non-binding mediation; and

•

after certain events occur as described in the Separation Agreement, the parties can resort to binding arbitration. In addition, under limited circumstances any party acting in good faith may initiate litigation in lieu of complying with the arbitration provisions of the Separation Agreement.

Noncompetition and Nonsolicitation. Subject to the restrictions and rights set forth in the technology transfer agreements, DSP Group has agreed that for a period of five years from the distribution date, DSP Group will not, and will ensure that affiliates of DSP Group will not, directly or indirectly engage in any business which is competitive with the DSP cores licensing business. Furthermore, we have agreed that, subject to the restrictions and rights set forth in the technology transfer agreements, for a period of five years from the distribution date, we will not, and will ensure that our affiliates will not, directly or indirectly engage in designing, manufacturing and marketing high performance DSP integrated circuit devices for telephone answering devices, computer telephony devices and voice-over broadband products. This restriction does not, however, prevent us from licensing our products to third parties who use them to make these or similar products. In addition, except in accordance with the terms of the agreement, for three years after the distribution date, the parties each agree that they will not solicit for hire any employee of the other party.

Expenses. Each party to the separation agreement will bear its own respective third party fees, costs and expenses paid or incurred in connection with the transactions contemplated thereby.

Ceva Technology Transfer Agreement

Asset Transfer and Assumption of Liabilities. The Ceva technology transfer agreement identifies the assets, including but not limited to intellectual property, that DSP Group transferred to us and the liabilities that we assumed from DSP Group in the separation in exchange for the issuance by us to DSP Group of shares of our common stock. The agreement also describes when and how these transfers and assumptions occurred.

Retention of Certain Rights. Notwithstanding the assignment and assumption, DSP Group reserves for itself, its successors and assigns, the nonexclusive, royalty-free right to use, make, modify, reproduce, sell, import, prepare derivative works from, and sublicense (subject to certain restrictions) the intangible property transferred by DSP Group to us, as such intangible property exists on the date of the transfer, solely in connection with the design, manufacture, development, testing, use and sale or other distribution of its products. DSP Group also retains the right to use our trademarks and logos in connection with the marketing and distribution of its products.

DSP Ceva Technology Transfer Agreement

The DSP Ceva technology transfer agreement implements the transfer from us to our wholly-owned subsidiary, DSP Ceva, of the assets transferred by DSP Group to us and the assumption by DSP Ceva of liabilities assumed by us from DSP Group in the separation in exchange for the issuance by DSP Ceva to us of shares in its share capital. The agreement also describes when and how these transfers and assumptions occurred.

Corage, Ltd. Technology Transfer Agreement

Asset Transfer and Assumption of Liabilities. The Corage, Ltd. technology transfer agreement identifies the assets that DSP Group, Ltd., an Israeli subsidiary of DSP Group, transferred to Corage, Ltd., our Israeli subsidiary, as well as the liabilities Corage, Ltd. assumed from DSP Group, Ltd. in the separation in exchange for the issuance by Corage, Ltd. to DSP Group, Ltd. of shares in its share capital. The agreement also describes when and how these transfers and assumptions occurred.

Retention of Certain Rights. Notwithstanding these assignments and assumptions, DSP Group, Ltd. reserves, for itself and its successors and assigns, the nonexclusive, royalty-free right to use, make, modify, reproduce, sell, import, prepare derivative works from, and sublicense (subject to certain restrictions) the intangible property transferred by DSP Group, Ltd. to us as that intangible property exists on the date of the transfer, solely in connection with the design, manufacture, development, testing, use and sale or other distribution of its products. DSP Group, Ltd. also retains the right to use our trademarks and logos transferred to Corage, Ltd. in connection with the marketing and distribution of DSP Group, Ltd.’s products.

Ceva and DSP Group have transferred ParthusCeva’s assets used for sales made by ParthusCeva’s DSP cores licensing division in the United States to DSP Ceva and for sales of ParthusCeva’s DSP cores licensing division made outside the United States to Corage, Ltd. to take advantage of the positive tax treatment provided by this structure. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Israeli Taxation and Investment Programs.”

Transition Services Agreement Among DSP Group, DSP Ceva and Us

Services. The transition services agreement governs the provision of transitional services by DSP Group to us and to DSP Ceva after the separation date. DSP Group is obligated to provide certain general and administrative services, including but not limited to financial, accounting, payroll, human resources, procurement and motor vehicle fleet administration, and management and information services, including network, hardware and software maintenance and support, to us and to DSP Ceva, and we and DSP Ceva are obligated to pay DSP Group an agreed amount.

Term. The term of the transition services agreement commences on the date of the separation agreement and continues until such time as DSP Group is no longer required to provide any transition services. However, we may terminate or limit the services to be provided by DSP Group at any time, upon at least 60 days’ notice.

Use of Facilities. During the first year following the separation date, and for so long thereafter as the parties agree, we and DSP Ceva will occupy and utilize portions of DSP Group’s facilities in Santa Clara, California. We and DSP Ceva are obligated to pay an agreed amount to DSP Group for our respective pro rata shares of the rent and other costs of occupying and operating these facilities.

Transition Services Agreement between DSP Group, Ltd. and Corage, Ltd.

Services. The transition services agreement governs the provision of transitional services by DSP Group, Ltd. and the subsidiaries of DSP Group, Inc., Nikon DSP K.K. and DSP Group Europe Sarl, to Corage, Ltd. after the separation date. DSP Group, Ltd. is obligated to provide certain research and development services, including testing, computer-aided design, circuit design, project control and layout services, general and administrative

services, including but not limited to financial, accounting, payroll, human resources, procurement and motor vehicle fleet administration, and management and information services, including network, hardware and software maintenance and support, to Corage, Ltd., as Corage, Ltd. requires and requests. In addition, Nikon DSP K.K. and DSP Group Europe Sarl are obligated to provide to Corage, Ltd., general and administrative services and management and information services, as well as sales and marketing services by dedicated employees, with respect to Ceva’s operations in Japan and Europe. For research and development services, Corage, Ltd., is obligated to pay DSP Group, Ltd. at agreed rates for services provided, intended to reflect market rates.

Term. The term of the transition services agreement is two years following the separation date. However, Corage, Ltd. may terminate or limit any of the services (other than research and development services, which are provided as ordered) provided by DSP Group, Ltd., Nikon DSP K.K. or DSP Group Europe Sarl at any time upon at least sixty days’ prior notice.

The transition services agreements were entered into in the context of a parent-subsidiary relationship with DSP Group and were negotiated on an arms length basis in the overall context of our separation from DSP Group. The prices charged to us under the transition services agreements may be lower than the prices that we may be required to pay third parties for similar services or the costs of similar services if we undertake them ourselves. If we fail to find replacements for these services after the expiration of the term of the agreements, or if we are unable to replace them on terms as favorable as those provided in the transition services agreements, our business, results of operations and financial condition could be harmed.

Tax Indemnification and Allocation Agreement

We were included as part of DSP Group’s consolidated group for federal income tax purposes until the separation date. In general, under the U.S. tax code, each member of a consolidated group is jointly and severally liable for the federal income tax liability of each other member of the consolidated group. Pursuant to arms-length negotiations between DSP Group and Parthus to allocate the responsibilities between us and DSP Group for tax liabilities that may be asserted in the future, in addition to the indemnification provided in the Separation Agreement, we have entered into a tax indemnification and allocation agreement with DSP Group pursuant to which DSP Group will be liable for, and will indemnify us for, any federal income tax related to the consolidated return for all periods ending on or before the distribution date. Under that agreement, we and DSP Group will each be liable for, and shall indemnify the other against, liability for our respective federal income tax for subsequent periods after the distribution. In the case of income taxes other than federal income taxes, the tax indemnification and allocation agreement provides for an allocation that is generally similar to the allocation of federal income taxes. Taxes other than income taxes are allocated based on the legal entity on which the legal incidence of the tax is imposed.

In general, the separation agreement described above, rather than the tax indemnification and allocation agreement, governs indemnification for any taxes due by reason of the distribution.

Other Tax Matters

Voting Agreements

As a condition to the combination of Parthus and Ceva, our stockholders Brian Long, William McCabe, Sven-Christer Nilsson, Eli Ayalon, Gideon Wertheizer, Joan Scully, Peter McManamon, Michael Peirce, Enterprise Ireland, Kelburn Limited and Issachar Ohana each entered into individual voting agreements with us on the following terms. These agreements, which account for approximately 20.2% of our outstanding stock (based on outstanding stock held by these persons, but will also apply to any additional stock they acquire,

including by exercise of options) as of the date of the combination provide that such stockholder will vote all his or her ParthusCeva shares for the ParthusCeva nominees to our board or directors and, with respect to all other matters to be voted on by our stockholders, either in accordance with the recommendations of our board or directors or, if the board of directors makes no recommendation, for or against such matters in the same proportion as the shares owned by all other stockholders (excluding the stockholder who is the subject of the voting agreement and any transferee or assignee who is an affiliate of that stockholder). Each voting agreement terminates upon the earlier of two years from the date of the agreement, the sale of all or substantially all of our assets or a consolidation or merger of ParthusCeva as a result of which our stockholders prior to such a consolidation or merger hold less than 50% of the voting equity of the surviving or resulting entity, a liquidation, dissolution or winding up of our business operations, the execution by us of a general assignment for the benefit of creditors or the appointment of a receiver or trustee to take possession of our property and assets. In the event that any of these stockholders wishes to transfer any of their shares to a party or group, who, after the transfer, will hold more than 3% of ParthusCeva’s common stock, the transferee must also agree to be bound by the terms of this agreement.

Treatment of DSP Group Stock Options

On the distribution date, each outstanding option to purchase DSP Group’s common stock granted prior to the distribution was adjusted as described below.

On the distribution date, each DSP Group option held by any person who will serve as an employee of ParthusCeva following the separation was converted into two options: an option to purchase the same number of shares of DSP Group’s common stock covered by the original DSP Group option (which remained unexercised as of the distribution date) and an option to purchase the same number of shares of ParthusCeva’s common stock.

The exercise prices per share for each converted DSP Group option and ParthusCeva option was established in a manner so that:

(i) the aggregate “intrinsic value” (which is the market value of the stock underlying the option, less the exercise price of that option, multiplied by the number of shares then covered by that option) after the distribution of the converted DSP Group option plus the intrinsic value of the new ParthusCeva option was not greater than the intrinsic value of the original DSP Group option immediately prior to the distribution;

(ii) the ratio of the exercise price of the converted DSP Group option to the market value per share of DSP Group’s common stock after the distribution was not lower than the ratio of the exercise price of the original DSP Group option to the market value per share of DSP Group’s common stock immediately prior to the distribution; and

(iii) the ratio of the exercise price of the new ParthusCeva option to the market value per share of ParthusCeva’s common stock after the distribution was not lower than the ratio of the exercise price of the original DSP Group option to the market value per share of DSP Group’s common stock immediately prior to the distribution.

The determination of the exercise prices for each converted DSP Group option and ParthusCeva option was made by DSP Group with the advice of its professional advisors.

The terms of each converted DSP Group option and each new ParthusCeva option (other than the exercise price and the number of shares) are substantially similar to the original DSP Group option from which they were converted. In the case of non-qualified stock options, if, and to the extent that the vesting of any converted DSP Group non-qualified stock option is subject to vesting based on the continuous employment of the option holder with DSP Group or its subsidiaries, the vesting of the converted DSP Group non-qualified stock option is subject to the same vesting schedule as the original DSP Group option and continuation of the holder’s employment with either DSP Group or ParthusCeva or their respective subsidiaries, as the case may be, and giving credit for continuous employment with DSP Group or ParthusCeva or their respective subsidiaries, prior to the distribution date.

In the case of stock options intended to qualify under Section 422 of the Internal Revenue Code, if, and to the extent that the vesting of any converted DSP Group incentive stock option is subject to vesting based on the continuous employment of the option holder with DSP Group or its subsidiaries, the vesting of the converted DSP Group incentive stock option is subject to the same vesting schedule as the original DSP Group option and continuation of the holder’s employment with DSP Group or its respective subsidiaries, and giving credit for continuous employment with DSP Group or ParthusCeva or their respective subsidiaries, prior to the distribution date. Any converted DSP Group incentive stock option held by an option holder who terminates employment with DSP Group or its subsidiaries as of the distribution date will cease vesting and terminate on the forty-sixth day following the distribution. DSP Group may amend DSP Group incentive stock options held by individuals who will terminate employment with DSP Group as of the distribution to provide that the option will vest based on continuation of the holder’s employment with ParthusCeva or their respective subsidiaries, as the case may be.

All of the ParthusCeva options issued in connection with the distribution are non-qualified stock options. The vesting of each ParthusCeva option is subject to the same vesting schedule as the original DSP Group option and continuation of the holder’s employment with either DSP Group or ParthusCeva or their respective subsidiaries, as the case may be, with credit given for continuous employment with DSP Group or ParthusCeva or their respective subsidiaries, prior to the distribution date. The ParthusCeva options granted with respect to each original DSP Group option were issued under the Ceva 2000 Stock Incentive Plan.

COMBINATION WITH PARTHUS TECHNOLOGIES PLC

Overview

On , 2002, immediately after the separation described above, Parthus and Ceva effected a combination of their businesses pursuant to the terms and conditions of a Combination Agreement, dated as of April 4, 2002, as amended by and among DSP Group, Ceva and Parthus. As part of the combination, Ceva immediately changed its name to ParthusCeva, Inc., and Parthus became a wholly owned subsidiary of ParthusCeva. Pursuant to arms-length negotiations between DSP Group and Parthus and as set forth in the Combination Agreement, immediately following the combination, the stockholders of DSP Group and the former stockholders of Parthus owned approximately 50.1% and 49.9%, respectively, of the common stock of ParthusCeva. The parties structured the transaction to provide for the combination to occur immediately after the separation to allow the former Parthus shareholders to receive ParthusCeva’s common stock, while permitting the distribution of ParthusCeva’s common stock to the DSP Group stockholders to receive tax-free treatment under the U.S. federal tax laws.

Strategic Rationale for the Combination

The combination of Ceva and Parthus brings together a market-leading provider of DSP cores architectures with a top supplier of complete platform level-IP solutions, which we believe strongly positions us to become a leading supplier of open-standard IP solutions to the industry.

Management and Operations

ParthusCeva is headquartered in San Jose, California, and has principal offices in Dublin, Ireland, and Herzeliya, Israel. It has over 400 employees, with 330 involved in research and development. The board of directors of ParthusCeva is comprised of eight members, including five non-employee directors. The management includes former executive officers of both Parthus and Ceva.

Terms of the Combination

The combination was effected through a scheme of arrangement pursuant to the laws of the Republic of Ireland—a form of corporate reorganization that is approved by the shareholders and sanctioned by the High Court of Ireland. The scheme provided as follows:

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Immediately prior to the combination with Ceva, Parthus repurchased a portion of its existing share capital and distributed to its shareholders an aggregate of $60 million in cash in exchange for such share capital.

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The remaining existing Parthus shares were then cancelled and each Parthus shareholder received new shares of ParthusCeva’s common stock.

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Immediately following the combination, the stockholders of DSP Group and the former stockholders of Parthus own approximately 50.1% and 49.9%, respectively, of the common stock of ParthusCeva.

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ParthusCeva assumed all outstanding Parthus share options and the option plans and option agreements that govern them. These options continue with the same terms and conditions, except that they have become options to purchase shares of ParthusCeva’s common stock and have been adjusted in the manner set forth below. Option holders will no longer be able to obtain Parthus shares or ADSs upon exercise of such options.

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The number of shares of ParthusCeva’s common stock purchasable upon the exercise of each Parthus option is equal to the number of shares of ParthusCeva’s common stock that would have been received for the Parthus shares underlying the option, had the option been exercised prior to the combination with Ceva. The exercise price per share was also adjusted proportionately.

ParthusCeva Common Stock

We have filed applications to list our common stock on The Nasdaq National Market under the symbol “PCVA” and on the London Stock Exchange under the symbol “PCV.”

DIVIDEND POLICY

We have never declared or paid any cash dividends on our capital stock and do not anticipate paying any cash dividends in the foreseeable future. Our board of directors will have discretion as to whether future dividends will be paid, after taking into account factors such as our financial condition, operating results and current and anticipated cash needs.

CAPITALIZATION

The following table sets forth our capitalization as of March 31, 2002:

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on an actual basis (not giving effect to the contribution and combination described below) ;

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pro forma to give effect to :

—

the contribution of the DSP cores licensing business of DSP Group to us, including a sum of $40 million plus the amount by which the transaction costs of the separation and combination exceed $2 million and $2.3 million in assets, as though it had occurred on March 31, 2002;

—

the combination of Ceva and Parthus as though it had closed on March 31, 2002; and

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the results of the cancellation of the Company’s common stock in connection with its separation from DSP Group.

	March 31, 2002
	Actual		Pro Forma
	(U.S. Dollars in thousands)
Stockholders’ equity and parent company investment:
Common stock, $.001 par value; 100,000,000 shares authorized; 20,000,000 shares issued and outstanding—actual; 26,946,108 shares issued and outstanding—pro forma	$	20	$	27
Preferred stock, $.001 par value; none authorized—actual; 5,000,000 shares authorized—pro forma; none issued and outstanding—actual and pro forma		—		—
Parent company investment		7,833		—
Additional paid-in capital		—		152,231

Total stockholders’ equity	$	7,853	$	152,258

All share numbers above exclude:

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2,577,700 (1,785,299 pro forma) shares of our common stock subject to outstanding options under our 2000 Stock Incentive Plan at a weighted average exercise price of $5.50 per share ($8.15 per share pro forma); and

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8,354,980 (5,639,330 pro forma) shares of our common stock available for issuance pursuant to future option grants under our 2000 Stock Incentive Plan, of which, 2,287,355 (1,143,678 pro forma) shares of our common stock will be subject to options to be granted on the distribution date to holders of options to purchase shares of DSP Group’s common stock.

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The pro forma share numbers above also excludes 2,631,147 additional shares of our common stock that will be subject to options to be assumed by us in connection with the combination with Parthus. As of March 31, 2002, there were outstanding options to purchase an aggregate of 116,229,154 ordinary shares of Parthus.

You should read this table together with “Separation of DSP Cores Licensing Business from DSP Group—Treatment of DSP Group Stock Options,” “Management—Stock Plans,” “Description of Capital Stock” and note 5 to our consolidated financial statements.

UNAUDITED PRO FORMA CONDENSED COMBINED

FINANCIAL DATA OF PARTHUSCEVA

The following unaudited pro forma condensed combined financial statements have been prepared to give effect to the acquisition of Parthus Technologies plc (“Parthus”) under the purchase method of accounting after giving effect to the pro forma adjustments described in the accompanying notes.

The following unaudited pro forma condensed combined balance sheet as of March 31, 2002 gives effect to the acquisition of Parthus as if it had occurred on that date, and reflects the allocation of the purchase price to the Parthus assets acquired and liabilities assumed, based on their estimated fair values at the date of acquisition based upon the Ceva, Inc. (“Ceva”) preliminary estimates of their fair values. The allocation of purchase price for the acquisition is subject to revision when additional information concerning asset and liability valuations is obtained. In the opinion of Ceva’s management, the asset and liability valuations for the acquisition will not be materially different from the pro forma financial data presented. The unaudited pro forma condensed combined financial information reflects Ceva’s best estimates; however, the actual financial position and results of operations may differ significantly from the pro forma amounts reflected herein because of various factors, including, without limitation, access to additional information, changes in value and changes in operating results between the date of preparation of the unaudited pro forma condensed financial information and the date on which the transaction closed. The excess of the consideration given by Ceva in the transaction over the fair value of Parthus’ identifiable assets and liabilities has been recorded as goodwill. Goodwill will be tested for impairment on an annual basis. Patents will be amortized over their useful lives, unless the useful life is deemed to be indefinite. An intangible asset with an indefinite useful life will not be amortized until its useful life is determined to be no longer indefinite. Intangible assets that are amortized will be reviewed for impairment annually and on an interim basis. Any portion of the purchase price allocated to in-process research and development will be charged to expenses immediately upon the consummation of the transaction.

The following unaudited pro forma condensed combined statements of operations for the three-month period ended March 31, 2002 and for the year ended December 31, 2001 give effect to the transaction as if it had occurred on January 1, 2001 and combine the historical statements of operations of Ceva and Parthus for those periods. Integration costs are not included in the accompanying pro forma condensed combined financial statements.

This pro forma information should be read in conjunction with the respective consolidated historical financial statements (including notes thereto) of Ceva included in this Form 10 and of Parthus included in its annual report on Form 20-F.

Unaudited pro forma condensed combined financial information is presented for illustrative purposes only and is not necessarily indicative of the financial position or results of operations that would have actually been reported had the transaction occurred at the beginning of the periods presented, nor is it necessarily indicative of future financial position or results of operations. These unaudited pro forma condensed combined financial statements are based upon the respective historical financial statements of Ceva and Parthus and do not incorporate, nor do they assume, any benefits from cost savings or synergies of the combined company. The pro forma adjustments are based on available financial information and certain estimations and assumptions that Ceva believes are reasonable and that are set forth in the notes to the unaudited pro forma condensed combined financial statements.

PARTHUSCEVA, INC.

UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET

As of March 31, 2002

(U.S. Dollars in Thousands)

	Ceva, Inc.		Parthus Technologies Plc		Pro forma adjustments				Pro forma combined
	Historical				References
ASSETS
Current Assets:
Cash and cash equivalents	$	—	$	115,840	$	(26,000	)	A, B, G, H	$	89,840
Trade receivables, net		8,079		4,241		—				12,320
Other accounts receivable and prepaid expenses		415		2,660		—				3,075
Deferred income tax		240		—		—				240
Inventories		109		522		—				631

Total current assets		8,843		123,263		(26,000	)			106,106
Long term lease deposits		185		—		—				185
Severance pay fund		1,160		—		—				1,160
Property and equipment, net		2,066		6,781		—				8,847
Investments		—		4,500						4,500
Goodwill		—		62,691		(48,320	)	C, E		14,371
Other intangible assets				4,092		45,000		D, F		49,092

Total Assets	$	12,254	$	201,327	$	(29,320	)		$	184,261


LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities:
Trade payables	$	1,141	$	4,423	$	—			$	5,564
Accrued expenses and other payables		1,752		11,984		—				13,736
Related party—DSP Group Inc.		—		—		5,658		Q		5,658
Income taxes payable		242		1,961		—				2,203
Deferred revenues		93		3,576		—				3,669

Total current liabilities		3,228		21,944		5,658				30,830
Accrued severance pay		1,173		—		—				1,173

Total liabilities		4,401		21,944		5,658				32,003
Parent company investment		7,833		—		(7,833	)	Q, R		—
Stockholders’ equity		20		179,383		27,145		A, B, J, G, K, I, R		152,258

Total Liabilities and Stockholders’ Equity	$	12,254	$	201,327	$	(29,320	)		$	184,261

See accompanying notes to unaudited pro forma condensed combined financial statements.

PARTHUSCEVA, INC.

UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS

For the year ended December 31, 2001

(U.S. Dollars in Thousands Except Per Share Data)

	Ceva, Inc.		Parthus Technologies Plc			Pro forma adjustments				Pro forma combined
	Historical					References
Revenues	$	25,244	$	40,919		$	—			$	66,163
Cost of revenues		1,251		12,064			—				13,315

Gross profit		23,993		28,855			—				52,848

Operating Expenses
Research & development, net		5,095		28,578			—				33,673
Marketing & sales		2,911		10,857			—				13,768
General & administration		2,839		7,171			—				10,010
Amortization of goodwill & other intangible assets		—		9,195			623		L, M		9,818
In process research and development		—		10,895			(10,895	)	P		—
Amortization of noncash stock compensation		—		1,806			(1,428	)	N, O		378
Restructuring charge		—		765			—				765

Total operating expenses		10,845		69,267			(11,700	)			68,412

Income (loss) from operations		13,148		(40,412	)		11,700				(15,564	)
Financial income, net		462		6,153			—				6,615
Minority interest		—		(100	)		—				(100	)

Income (loss) before taxes on income		13,610		(34,359	)		11,700				(9,049	)
Taxes on income		3,255		300			—				3,555

Net income (loss)	$	10,355	$	(34,659	)	$	11,700			$	(12,604	)

Basic and diluted net earnings (loss) per share	$	0.52								$	(0.47	)
Weighted average number of shares of Common Stock used in computation of basic and diluted net earnings (loss) per share (in thousands)											26,946

See accompanying notes to unaudited pro forma condensed combined financial statements.

PARTHUSCEVA, INC.

UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS

For the three months ended March 31, 2002

(U.S. Dollars in Thousands Except Per Share Data)

	Ceva, Inc.		Parthus Technologies Plc			Pro forma adjustments				Pro forma combined
	Historical					References
Revenues	$	4,096	$	10,673		$	—			$	14,769
Cost of revenues		311		2,517			—				2,828

Gross profit		3,785		8,156			—				11,941

Operating expenses
Research & development, net		1,650		7,230			—				8,880
Marketing & sales		703		2,303			—				3,006
General & administration		693		1,586			—				2,279
Amortization of goodwill & other intangible assets		—		340			2,115		L, M		2,455
Amortization of noncash stock compensation		—		525			431		N, O		94
Loss on disposal of division		—		213			—				213

Total operating expenses		3,046		12,197			1,684				16,927

Income (loss) from operations		739		(4,041	)		(1,684	)			(4,986	)
Financial income, net		18		746			—				764

Income (loss) before taxes on income		757		(3,295	)		(1,684	)			(4,222	)
Taxes on income		242		—			—				242

Net income (loss)	$	515	$	(3,295	)	$	(1,684	)		$	(4,464	)

Basic and diluted net earnings (loss) per share										$	(0.17	)

Weighted average number of shares of Common Stock used in computation of basic net earnings (loss) per share (in thousands)											26,946

See accompanying notes to unaudited pro forma condensed combined financial statements.

NOTES TO PARTHUSCEVA UNAUDITED PRO FORMA

CONDENSED COMBINED CONSOLIDATED FINANCIAL STATEMENTS

1. BASIS OF PRO FORMA PRESENTATION

On April 4, 2002, Ceva, Inc. (“Ceva” or “the Company”) entered into an agreement to acquire 100 percent of the outstanding share capital of Parthus Technologies plc (“Parthus”), an Irish company, in consideration of the issuance of shares of Ceva’s common stock equal to 49.9% of the aggregate number of shares of Ceva’s common stock outstanding immediately after the acquisition.

The total consideration for the acquisition is approximately $129 million (including $5 million of costs related to the acquisition), which will be financed by an assumed issuance of 13,446,108 shares of common stock of the Company. However, the actual number of shares of common stock to be issued by Ceva, and the related consideration, will depend on the actual number of ordinary shares of Parthus and Common Stock of DSP Group (the “Parent”) outstanding on the closing date of the acquisition, as well as the market price of the Company’s common stock. The transaction has been accounted for using the purchase method of accounting, and accordingly, the purchase price has been allocated to the assets acquired and liabilities assumed based upon their fair values at the date the acquisition was completed. Because Ceva had no outstanding shares traded in a public market on the date the transaction was announced, the value of the consideration given was not objectively evidenced. Accordingly, it was determined based upon related authoritative guidance, to set the measurement date for valuing this transaction as the closing price for ParthusCeva’s common stock on the consummation date of the transactions. The closing share price of the Parthus’ ADSs on the Nasdaq National Market on July 3, 2002 was used in this pro forma presentation as the best estimate for the value of Ceva’s common stock to be issued, as if the consummation of the transactions had occurred on that date, as the value of Ceva’s common stock to be issued is expected to approximate the value of the purchased Parthus ordinary shares. In a similar manner, the number of shares used was the number of outstanding shares of DSP Group common stock at that same date. As a result, the pro forma financial information presented herein is not necessarily indicative of the final value of the consideration, which will be determined at the consummation date based on the actual number of ParthusCeva’s common stock issued and the market price per share of ParthusCeva’s common stock as of the consummation date. Ceva will adjust its shares outstanding prior to the distribution by means of an issuance of shares to DSP Group in exchange for the assets contributed, followed by a surrender of shares of Ceva common stock by DSP Group to Ceva for no consideration.

The number of shares to be issued upon the combination was calculated as follows:

Number of Ceva’s common stock currently issued to DSP Group	20,000,000
Number of Ceva’s common stock outstanding following the separation (1:2 ratio) (giving effect to surrender for cancellation without consideration of all outstanding Ceva’s common stock not distributed to DSP’s Group’s stockholders)	13,500,000	(X)
Percentage of Ceva’s common stock held by former DSP Group’s stockholders post-combination	50.1	%
Total number of ParthusCeva’s common stock outstanding post-combination	26,946,108	(Y)
Number of shares to be issued to former Parthus shareholders (constituting 49.9% of the ParthusCeva’s common stock post-combination):	13,446,108	(X-Y)

The Ceva options issued in exchange for Parthus options are valued herein by applying the Black-Scholes valuation model to the Parthus options in accordance with FASB Interpretation No. 44 (“FIN 44”), “Accounting for Certain Transactions Involving Stock Compensation—an Interpretation of APB 25.” The calculations were made using the following assumptions: (i) valuation date is July 3, 2002, (ii) market share price is $2.88, (iii) risk-free interest rate is 2%, (iv) volatility is 60%, (v) time to expiration is 5 years and (vi) annual dividend rate is 0%. The intrinsic value of unvested options of Parthus has been allocated to deferred compensation. Such deferred compensation was deducted from the fair value of the awards in determining the amount of the purchase price. The final amount of deferred compensation will also be determined on the consummation date based on the closing price of ParthusCeva's Common Stock on the date of completion of the acquisition. The calculation of the

NOTES TO PARTHUSCEVA UNAUDITED PRO FORMA

CONDENSED COMBINED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

deferred compensation amounting to $755,000 was based on the number of unvested options outstanding multiplied by the difference between the market price on that date of $2.88 (July 3, 2002) and the exercise price. The Company has entered into a tax indemnification and allocation agreement with DSP Group, its parent company, pursuant to which DSP Group will be liable for, and will indemnify Ceva for, any federal income tax related to the consolidated tax return of DSP Group for all periods ending on or before the distribution date. This liability is accounted for as a contingent liability of the purchase price.

The purchase consideration is estimated as follows (U.S. Dollars in thousands):

Common Stock	$	109,708
Assumption of Parthus options		14,590
Less—Deferred compensation		(755	)
Estimated transaction expenses		5,000

Total consideration	$	128,543

The value of the 13,446,108 shares of Ceva’s common stock to be issued upon the consummation of the acquisition was calculated based on the market price of Parthus’ ADSs on July 3, 2002 and after taking into consideration the future distribution of cash dividend by Parthus to its shareholders in the amount of $60 million, as follows:

Number of Parthus’ ADSs outstanding		58,926,526
Price per ADS (US Dollars)	$	2.88
Total value of Parthus’ ADSs	$	169,708,395

Less—Cash dividend paid	$	(60,000,000	)
Net value	$	109,708,395

The preliminary purchase price allocation, which is subject to change based on Ceva’s final analysis, is as follows (U.S. Dollars in thousands):

Tangible assets acquired	$	74,544
Intangible assets acquired:
Patents		49,092
Goodwill		14,371
In-process research and development		16,480
Liabilities assumed		(21,944	)
Merger and restructuring costs		(4,000	)

Total consideration	$	128,543

In accordance with SFAS No. 142, “Goodwill and Other Intangible Assets,” goodwill arising from acquisitions would not be amortized. In lieu of amortization, Ceva is required to perform an annual impairment review. If Ceva determines, through the impairment review process, that goodwill has been impaired, it will record the impairment charge in its statement of operations. Ceva will also assess the impairment of goodwill whenever events or changes in circumstances indicate that the carrying value may not be recoverable.

NOTES TO PARTHUSCEVA UNAUDITED PRO FORMA

CONDENSED COMBINED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

2. PRO FORMA ADJUSTMENTS

The amount of the excess cost attributable to in-process research and development of Parthus is estimated to be approximately $50 million. This amount will be recorded as part of the Company’s research and development expense during the fiscal quarter in which the acquisition is consummated. This expense has not been included in the pro-forma combined condensed statements of operations, as it does not represent a continuing expense.

Adjustments included in the pro forma condensed combined balance sheet and statements of operations are summarized as follows:

(A) Distribution of $60 million cash to Parthus’ shareholders prior to the acquisition.

(B) Additional cash investment of $43 million by DSP Group prior to the acquisition (representing the Company’s estimate of the contribution of $40 million plus transaction expenses over $2 million).

(D) Valuation of Parthus’ intangible assets allocated to patents of $49 million.

(E) Elimination of Parthus’ goodwill from previous acquisitions of $63 million.

(F) Elimination of Parthus’ patents from previous acquisitions of $4 million.

(G) Transaction costs paid by Ceva of $5 million.

(H) Transaction costs paid by Parthus of $4 million.

(I) Elimination of Parthus’ stockholders’ equity accounts of $179 million.

(J) Shares and options issued upon the acquisition by Ceva valued at $129 million.

(K) Write-off of estimated acquired in-process research and development of $16 million.

(L) Elimination of goodwill and patents amortization recorded in Parthus from previous acquisitions of $9.2 million for the year ended December 31, 2001 and $340,000 for the three month period ended March 31, 2002.

(M) Amortization of patents (amortized over 5 years) of $9.8 million for the year ended December 31, 2001 and $2.5 million for the three month period ended March 31, 2002.

(N) Elimination of amortization of deferred stock compensation recorded in Parthus in respect of options exchanged upon consummation of the acquisition of $1.8 million for the year ended December 31, 2001 and $525,000 for the three month period ended March 31, 2002.

(O) Amortization of deferred stock compensation arising from the options exchanged in the acquisition of $378,000 for the year ended December 31, 2001 and $94,000 for the three month period ended March 31, 2002.

(P) Elimination of in-process research and development recorded in Parthus from previous acquisitions of $10.8 million.

(Q) Conversion of parent company’s investment account in Ceva into an inter-company account between Ceva and DSP Group (the former parent company after the separation). This amount will be settled between the parties under the terms of the Separation Agreement whereby DSP Group will retain all rights to the accounts receivable of Ceva existing on the date of the separation, and will also retain nearly all of Ceva’s current liabilities existing on the separation date.

NOTES TO PARTHUSCEVA UNAUDITED PRO FORMA

CONDENSED COMBINED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(R) Conversion of parent company’s investment account in Ceva into stockholders equity, consisting of the value of property and equipment and inventory assigned by DSP Group upon consummation of the acquisition of $2.2 million.

The pro forma combined stockholders’ equity, after appropriate reclassifications, comprises the following (U.S. Dollars in thousands):

Common stock, $0.001 par value	$	54
Additional paid in capital		169,439
Deferred compensation		(755	)
Accumulated deficit		(16,480	)

Total stockholders’ equity:	$	152,258

Shares used in the pro forma net loss per share calculation reflect approximately 26.9 million shares of Common Stock of Ceva, Inc. expected to be issued to shareholders of Parthus as if they had been outstanding from January 1, 2001. Pro forma weighted average number of shares used in computing basic and diluted net loss per share excludes employee stock options outstanding in each period because they are anti-dilutive.

3. SENSITIVITY ANALYSIS:

As explained in note 1 to these unaudited pro forma condensed combined financial data, the final determination of the purchase price will be calculated based on the closing market price of ParthusCeva’s Common Stock at the date of the consumption date of the acquisition.

The following table represents the anticipated Goodwill, Total assets and Total Stockholders equity that would result from different price per share at the date of the closing:

Price per Parthus ADS

Price per share of Parthus’ ADSs (US dollars)	2			2.5		3		3.5		4
Goodwill and other intangible assets	$	(2,573	)	$	30,324	$	63,463	$	96,809	$	130,359
Total assets		118,225			151,122		184,261		217,607		251,157
Stockholders’ equity	$	86,222		$	119,119	$	152,258	$	185,604	$	219,154

SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA

Selected Historical Financial Data of Ceva

The following selected consolidated financial data of the DSP cores licensing business of DSP Group transferred to Ceva should be read in conjunction with, and are qualified by reference to, our consolidated financial statements and related notes to our consolidated financial statements and “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

The consolidated statement of income data for 1999 through 2001 and the consolidated balance sheet data as of December 31, 2000 and 2001 are derived from, and are qualified by reference to, the audited consolidated financial statements included elsewhere in this information statement, which have been audited by Kost Forer & Gabbay, a member of Ernst & Young International, our independent auditors. The selected consolidated statement of income data for 1997 and 1998 and the selected consolidated balance sheet data as of December 31, 1997 through 1999 are derived from our audited consolidated financial statements not included in this information statement. The consolidated financial data as of March 31, 2002 and for the three months ended March 31, 2001 and 2002 are derived from unaudited financial statements included elsewhere in this information statement. We have prepared the unaudited information on the same basis as the audited consolidated financial statements and have included all adjustments, consisting only of normal recurring adjustments, that we consider necessary for a relevant presentation of our financial position and operating results for these periods.

The financial information below reflects the separation of the DSP cores licensing business from DSP Group, and is presented as if this business had operated as a separate entity throughout the relevant periods. This information has been derived from the consolidated financial statements of DSP Group using the historical results of operations and historical bases of assets and liabilities of our DSP cores licensing business. These historical results may not necessarily be indicative of what our results of operations and financial position would have been had this business operated as a separate company during the periods presented, nor are they an indicator of future performance.

	Year Ended December 31,											Three Months Ended March 31,
	1997			1998		1999		2000		2001		2001		2002
	(in thousands, except share and per share data)											(unaudited)
Consolidated Statement of Income Data:
Revenues:
Licenses and royalties	$	6,790		$	11,614	$	16,249	$	19,951	$	20,959	$	4,810	$	3,213
Technical support, maintenance and other		1,975			1,630		1,952		2,959		4,285		1,158		883

Total revenues		8,765			13,244		18,201		22,910		25,244		5,968		4,096
Cost of revenues		288			280		207		410		1,251		266		311

Gross profit		8,477			12,964		17,994		22,500		23,993		5,702		3,785
Operating expenses:
Research and development, net		2,692			3,404		3,230		4,835		5,095		1,207		1,650
Selling and marketing		1,012			1,137		1,997		2,466		2,911		628		703
General and administrative		1,877			2,020		2,480		2,810		2,839		680		693
Total Operating Expenses		5,581			6,561		7,707		10,111		10,845		2,515		3,046
Operating income		2,896			6,403		10,287		12,389		13,148		3,187		739
Financial income, net		92			174		292		322		462		106		18

Income before taxes on income		2,988			6,577		10,579		12,711		13,610		3,293		757
Taxes on income (benefit)		(397	)		359		1,453		3,438		3,255		858		242

Net income	$	3,385		$	6,218	$	9,126	$	9,273	$	10,355	$	2,435	$	515

	December 31,										March 31, 2002
	1997		1998		1999		2000		2001		March 31, 2002
	(in thousands)
Consolidated Balance Sheet Data
Working capital	$	94	$	893	$	1,173	$	411	$	1,996	$	5,615
Total assets	$	2,093	$	3,831	$	6,915	$	9,615	$	12,197	$	12,254
Total Stockholders’ equity and Parent Company investment	$	709	$	1,680	$	2,556	$	2,020	$	4,345	$	7,853

Selected Historical Financial Data of Parthus

The selected consolidated financial data of Parthus are included in its annual report on Form 20-F for fiscal 2001, filed with the Securities and Exchange Commission on May 17, 2002, and as an exhibit to the Form 10 of which this information statement is a part. Such information is incorporated by reference in this information statement.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL

CONDITION AND RESULTS OF OPERATIONS

The following discussion of the financial condition and results of operations of our DSP cores licensing business assumes that this business had operated as a stand-alone entity for the periods presented. This discussion does not give effect to the combination of this business with Parthus.

A discussion of the financial condition and results of operations of Parthus is included in its annual report on Form 20-F for fiscal 2001, filed with the Securities and Exchange Commission on May 17, 2002 and as an exhibit to the Form 10 of which this information statement forms a part. Such information is incorporated by reference in this information statement.

You should read the following discussion together with our consolidated financial statements and the related notes included elsewhere in this information statement. This discussion contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth under “Risk Factors” and elsewhere in this information statement.

Overview

Our DSP cores licensing business develops and licenses designs of programmable digital signal processor (DSP) cores and DSP core-based sub-systems. A programmable DSP is a special-purpose, software-controlled processor that, through complex mathematical calculations, analyzes, manipulates and enhances digital voice, audio and video signals. The programmable DSP cores we design are used as the central processors in semiconductor chips made for specific applications. These chips are used in a wide variety of electronic devices, including digital cellular telephones, modems, hard disk drive controllers, MP3 players, voice over packet products and digital cameras, and are critical to the performance of the electronic products in which they are used. A DSP core-based sub-system incorporates additional hardware blocks required as interfaces from the DSP core for the overall system.

Our product line, first introduced in 1991, consists of a family of five DSP core designs and one DSP core-based sub-system, the XpertTeak, that are sold under the SmartCores brand name throughout the world. Each of our SmartCores products offers a different balance of high performance, power-efficiency and cost-effectiveness. Our designs are independent of specific semiconductor manufacturing processes, and can therefore be used by a wide variety of customers. The DSP cores we design are appropriate for use in both current and emerging applications requiring digital signal processing. We market our designs as well as a wide array of software and hardware development tools and technical support services.

We license our designs to leading semiconductor companies throughout the world. These companies incorporate our cores and core-based subsystems into application-specific chips or custom-designed chips that they manufacture, market and sell to original equipment manufacturers (OEMs) of a variety of electronic products. We also license our designs to OEMs directly. To date, we have licensed our cores to more than 60 licensees, including leading semiconductor companies and OEMs such as Atmel, Fujitsu, Infineon Technologies, Kawasaki, LSI Logic, Mitsubishi, National Semiconductor, NEC, Oki, Philips Semiconductors, Samsung, Seiko-Epson, Sony and Tower Semiconductors, some of which have multiple licenses with us. We generate our revenues from license and support fees and from royalties. Our goal is to establish our licensable DSP cores as the standard in DSP-based chips for high-volume and emerging digital signal processing applications.

For the purpose of separating the DSP cores licensing business and technology activities into an independent company, we were incorporated in Delaware in November 1999 under the name DSP Cores, Inc. as a wholly-owned subsidiary of DSP Group and changed our name to Ceva, Inc. in April 2002. We have two wholly-owned subsidiaries, DSP Ceva, Inc., a Delaware corporation, and ParthusCeva, Ltd., an Israeli company wholly owned

by DSP Ceva. DSP Ceva holds our intellectual property rights in the United States and conducts our marketing, sales and technical support for our U.S. customers. In addition to conducting our research and development activities, ParthusCeva, Ltd. is engaged in marketing, sales, technical support and certain general and administrative functions associated with the sale of our products in areas other than the United States. In addition, we utilize the services of DSP Group and its subsidiaries in Japan and France, for sales and technical support activities for us and their costs are allocated to us under the transition service agreements with DSP Group and its subsidiaries. For additional information relating to the terms of various agreements we entered into with DSP Group in connection with the separation of the DSP cores licensing business and technology activities from DSP Group, including the separation agreement, the transition services agreements and the technology transfer agreements, please see the section captioned “Separation of DSP Cores Licensing Business from DSP Group.”

The financial information presented in this information statement and our consolidated financial statements reflect our separation from DSP Group and have been prepared as if the separation of the DSP cores licensing business from DSP Group had been in effect throughout the relevant periods. The historical consolidated financial statements show the DSP cores licensing business as a carved out entity from the consolidated financial statements of DSP Group, using the historical results of operations and historical bases of assets and liabilities of our DSP cores licensing business as described in this information statement. This information may not be indicative of our future financial position, results of operations or cash flows, nor is it necessarily indicative of what our financial position, results of operations or cash flows would have been had we been a separate, stand-alone entity for the periods presented. We have not made adjustments to our historical financial information to reflect the significant changes in the cost structure, funding and operations which will result from the separation of the DSP cores licensing business from DSP Group and the combination with Parthus, including any increased costs associated with reduced economies of scale, increased marketing expenses related to building our brand, and increased costs associated with being a stand-alone, publicly traded company. Additionally, upon the termination of the transition services agreements with DSP Group and its subsidiaries, we may be required to incur additional expenses for services that DSP Group and its subsidiaries have agreed to provide pursuant to the transition services agreements, including general and administrative services, information services, sales and marketing services and certain research and development services, because the prices charged to us by DSP Group and its subsidiaries for such services may be lower than the prices that we may be required to pay third parties for similar services or the costs of similar services if we undertake them ourselves. As a result, the cost of retaining such services after the termination of the transaction services agreements with DSP Group and its subsidiaries may be higher than the cost allocation for such services reflected in our historical financial statements. However, we do not believe that such additional costs, if any, will be material.

The combined company’s target for revenues in 2003 is currently approximately $75 million to $80 million, with targeted profits of approximately $17 million to $18 million. The combined company’s current strategic goal is to achieve operating margins of approximately 20% in 2003. The achievement of these goals is dependent, among other factors, upon the revival of our target markets and an absence of change in our competitive environment, and is subject to all of the risks and uncertainties set forth above under “Risk Factors.”

Critical Accounting Policies and Estimates

Our discussion and analysis of the financial condition and results of operations of our DSP cores licensing business are based upon the consolidated financial statements of this business, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. On an on-going basis, we evaluate our estimates, including those related to bad debts, taxes on income, financing operations, warranty obligations and contingencies and litigation. We base our estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other

sources. Actual results may differ from these estimates. In December 2001, the Securities and Exchange Commission requested that all registrants discuss their “critical accounting policies” in the discussion and analysis of their financial condition and results of operations. The Securities and Exchange Commission indicated that a “critical accounting policy” is one which is both important to the portrayal of our financial condition and results and requires our management’s most difficult, subjective or complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain.

Our significant accounting policies are fully described in Note 2 to our consolidated financial statements. Not all of these significant accounting policies, however, require management to make difficult, complex or subjective judgements or estimates. We believe that our accounting policies relating to revenue recognition, business combination, goodwill and other identifiable intangibles described below fit the definition of “critical accounting policies.”

Revenue Recognition

The DSP cores licensing business reports revenue in two categories: licensing and royalties, and technical support and other. The first, licensing and royalty revenues are derived from the following: (i) licensing revenues from our license agreements; and (ii) royalty revenues when our licensees sell products incorporating our technology. Technical support and other revenues are derived from providing training, maintenance and technical support services to our customers. All license, royalties and technical support agreements are denominated in U.S. dollars. We recognize revenues based upon the country of origin of our licensees. Therefore, our geographic revenue stream fluctuates from period to period depending upon the country of origin of new license agreements signed and recognized in a given period.

We recognize software revenue in accordance with SOP 97-2, “Software Revenue Recognition,” as amended by SOP 98-9, “Modification of SOP 97-2, Software Revenue Recognition, with Respect to Certain Transactions.” SOP 97-2 specifies that extended payment terms in a software licensing arrangement may indicate that the software license fees are not deemed to be fixed or determinable. If the fee is not fixed or determinable, or if collection is not considered probable, revenue is recognized as payments become due. However, SOP 97-2 specifies that if the Company has a standard business practice of using extended payment terms in software licensing arrangements and has a history of successfully collecting the software license fees under the original terms of the software licensing arrangement without making concessions, the Company should recognize the software license fees when all other SOP 97-2 revenue recognition criteria are met. The Company has concluded that for certain software arrangements with extended payment terms, the “fixed or determinable” presumption has been overcome and software license fees have been recognized upon meeting the remaining SOP 97-2 revenue recognition criteria. Maintenance and technical support revenues included in multiple element arrangements are deferred and recognized on a straight-line basis over the term of the maintenance and the support agreement or when such services are performed.

Business Combinations

We account for the combination with Parthus utilizing the purchase method of accounting with Ceva treated as the accounting acquirer. The purchase method of accounting requires the determination of the acquiring entity in all business combinations. Statement 141 provides that all pertinent facts and circumstances should be considered. Statement 141 provides that, in particular, the following facts and circumstances be considered: voting rights, minority voting interest, composition of the board of directors and senior management composition. In determining the accounting acquirer, we also took into consideration the balance sheet and results of operations data of both companies, as well as the distribution of cash by Parthus to its shareholders prior to the combination.

The FASB notes that in general, no one factor set forth above is more important in identifying the acquirer than others. Based on the above guidance, considering especially the fact that DSP Group’s stockholders will hold more than 50% (on actual and on fully diluted basis) of the voting stock of ParthusCeva, the existence of a

management committee, the fact that the chairman of the board of directors of ParthusCeva is an employee of DSP Group, the existence of the voting agreement between the stockholders of ParthusCeva, the fact that the stockholders of Parthus will receive cash in the combination and the fact that Ceva is the legal acquirer, we came to the conclusion that the acquirer for accounting purposes is Ceva.

The business combination of Parthus and Ceva requires management to estimate the fair value of the assets acquired and liabilities assumed in the combination. These estimates of fair value are based on our business plan for the entities acquired including redundancies, restructuring, use of assets acquired and assumptions as to the ultimate resolution of obligations assumed for which no future benefit will be received. Should the actual use of assets or resolution of obligations differ from our estimates, revisions to the estimated fair values would be required. If a change in estimate occurs after one year of the acquisition, the change would be recorded in our statement of operations.

Goodwill and Other Identifiable Intangibles

We assess the impairment of goodwill and other identifiable intangibles whenever events or changes in circumstances indicate that the carrying value may not be recoverable. Some factors we consider important which could trigger an impairment review include the following:

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Significant under performance relative to expected historical or projected future operating results;

•

Significant changes in the manner of our use of the acquired assets or the strategy for our overall business; and

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Significant negative industry or economic trends.

In accordance with SFAS No. 142, “Goodwill and Other Intangible Assets,” on January 1, 2002 we will cease amortizing goodwill arising from acquisitions completed prior to July 1, 2001. In lieu of amortization, we are required to perform an initial impairment review of our goodwill in 2002 and an annual impairment review thereafter. If we determine through the impairment review process that goodwill has been impaired, we would record the impairment charge in our statement of operations.

Results of Operations

Three months ended March 31, 2002 and 2001

Total Revenues

The total revenues for the DSP cores licensing business decreased to $4.1 million in the three months ended March 31, 2002 from $6.0 million in the three months ended March 31, 2001. This decrease of 32% was due to our decreased revenues from licensing royalty revenues, as well as decreased technical support and other revenues primarily due to the slowdown in the global economy, which affected our ability to sign new license agreements, as well as the number of products shipped by our customers.

Licensing and royalty revenues for the DSP cores licensing business accounted for 78% of the total revenues for the DSP cores licensing business for the first quarter of 2002, as compared to 81% of the total revenues for the first quarter of 2001. Technical support and other revenues in the DSP cores licensing business accounted for 22% of the total revenues for the DSP cores licensing business for the first quarter of 2002, as compared to 19% of the total revenues for the first quarter of 2001.

We had four customers who generated more than 66% of our revenues in the first three months ended March 31, 2002, with revenues from these four licensees accounting for 29%, 14%, 13% and 10% of total revenues for the DSP cores licensing business. Revenues from three licensees generated more than 73% of our revenues for the three months ended March 31, 2001, with revenues from these three licensees accounting for

36%, 19% and 18% of total revenues for the DSP cores licensing business in that period. The same customer generated revenues of 13% for the first three months ended March 31, 2002 and 19% for the first three months ended March 31, 2001. However, generally, the composition of our significant customers that generate greater than 10% of our revenues in any given quarter varies because we generally recognize a substantial amount of the revenues derived from a license agreement during the quarter that the DSP cores technology is delivered to the customer, which is typically at the time of the signing of the license agreement. Our license agreements do not generally provide for substantial ongoing license payments although they may provide for royalties based on product shipments. As a result, our revenues in any given quarter are largely dependent on our ability to attract and sign license agreements with new customers.

Licensing and Royalty Revenues

Licensing and royalty revenues decreased in the first quarter of 2002 to $3.2 million from $4.8 million in the same quarter of 2001. This decrease of 33% was due to decreases in both licensing revenues and royalty revenues.

Licensing Revenues

Licensing revenues for the DSP cores licensing business decreased to $1.8 million in the three months ended March 31, 2002 from $2.9 million in the three months ended March 31, 2001. The decrease of approximately 39% was due primarily to the recognition of one new license agreement in the first three months ended March 31, 2002 as compared to two new license agreements in the same period in 2001. We believe our ability to enter into new license agreements in 2002 was particularly hindered by the slowdown in the global wireless and cellular market.

Unit and Prepaid Royalty Revenues

Unit and prepaid royalty revenues were $1.4 million for the three months ended March 31, 2002 and $1.9 million for the three months ended March 31, 2001. We had nine unit royalty-paying licensees in the three months ended March 31, 2002 and seven in the three months ended March 31, 2001. The decrease was due to lower quantities of products shipped by our licensees, mostly in the cellular markets, as well as from lower per-unit royalties from some of our license agreements due to volume pricing, which were slightly off-set by higher prepaid revenues in the first quarter of 2002 as compared to 2001. Royalty-generating licensees reported sales of 22.3 million chips incorporating our technology in the three months ended March 31, 2002 and 29.0 million chips for the three months ended March 31, 2001.

One royalty-generating licensee accounted for more than 18% of the total revenues for the DSP cores licensing business in the three months ended March 31, 2001.

Technical Support and Other Revenues

Technical support and other revenues for the DSP cores licensing business decreased to $0.9 million in the three months ended March 31, 2002 from $1.2 million in the three months ended March 31, 2001. The decrease of approximately 25% was due primarily to provision of fewer technical support and related services to our licensees in 2002 as compared to 2001, primarily from the slowdown in the global wireless and cellular markets.

Geographic Revenue Analysis

In the three months ended March 31, 2002, revenues for the DSP cores licensing business in the United States represented 32% of total revenues for the DSP cores licensing business, while Japan represented 7%, the rest of Asia represented 10% and Europe and the rest of the world represented 52% of our total revenues. In the three months ended March 31, 2001, United States revenues represented 45% of the total revenues, while

Japan represented 21%, the rest of Asia represented 20% and Europe and the rest of the world represented 14% of this revenue.

Cost of Revenues

Cost of revenues for the DSP cores licensing business was $311,000 in the three months ended March 31, 2002, as compared to $266,000 in the three months ended March 31, 2001. The increase of approximately 17% in cost of revenues is primarily due to a slight increase in the number of our technical support personnel in order to better support our customers. Cost of revenues for the DSP cores licensing business accounted for 8% of total revenues in the DSP cores licensing business for the three months ended March 31, 2002, as compared to 4% of total revenues for the three months ended March 31, 2001. The increase was primarily due to our lower revenues in the three months ended March 31, 2002, as compared to the same period in 2001. The above resulted in total gross profits of 92% and 96% for the first quarters ended March 31, 2002 and 2001, respectively. Cost of revenues consisted mainly of payroll of employees involved in providing various technical and support services to our customers and associated facilities expenses.

Research and Development Expenses, Net

Research and development expenses for the DSP cores licensing business, net of related research grants we received from the Office of Chief Scientist magnet programs, were $1.6 million in the three months ended March 31, 2002 as compared to $1.2 million in the three months ended March 31, 2001. In the three months ended March 31, 2002, we recorded $239,000 in research grants from the magnet programs for the DSP cores licensing business. In the three months ended March 31, 2001, we recorded $97,000 in these research grants. We have no obligation to pay royalties on the intellectual property developed using these research grants, and all monies received are non-refundable. The increase of approximately 25% in research and development expenses in 2002, as compared to 2001, was mainly due to an increase in engineering personnel by 13% and to our investment in the development of our new XpertTeak platform. Research and development expenses as a percentage of total revenues within the DSP cores licensing business was 40% in the three months ended March 31, 2002 as compared to 20% in the three months ended March 31, 2001. The increase was primarily due to our lower revenues in the three months ended March 31, 2002, as compared to the same period in 2001. Research and development expenses consisted mainly of payroll for employees involved in research and development, depreciation and maintenance fees relating to equipment and software tools and associated facilities expenses.

Sales and Marketing Expenses

Sales and marketing expenses for the DSP cores licensing business increased by 12% to $703,000 in the three months ended March 31, 2002 from $628,000 in the same quarter in 2001. This increase was due primarily to an increase in the number of sales and marketing personnel as a result of increased sales and marketing efforts. Sales and marketing expenses as a percentage of total revenues for the DSP cores licensing business were 17% in the three months ended March 31, 2002 as compared to 11% in the three months ended March 31, 2001. The increase was primarily due to our lower revenues in the three months ended March 31, 2002, as compared to the same period in 2001. Sales and marketing expenses consisted mainly of payroll of direct sales and marketing employees, sales commissions, production of marketing literature and trade show expenses.

General and Administrative Expenses

General and administrative expenses for the DSP cores licensing business were $693,000 in the three months ended March 31, 2002 as compared to $680,000 in the three months ended March 31, 2001. General and administrative expenses as a percentage of total revenues for the DSP cores licensing business were 17% in the three months ended March 31, 2002, as compared to 11% in the three months ended March 31, 2001. General and administrative expenses consisted mainly of allocated employee, accounting, legal, facilities and maintenance costs.

Financial Income, Net

Financial income, net, for the DSP cores licensing business was $18,000 for the three months ended March 31, 2002, as compared to $106,000 for the three months ended March 31, 2001. This decrease was due primarily to our lower net income for the three months ended March 31, 2002, as compared to the same period in 2001, which resulted from less income for investment purposes, as well as a lower rate of return for existing investments.

Taxes on Income

The DSP cores licensing business had an effective tax expense of $242,000 and $858,000 for the three months ended March 31, 2002 and 2001, respectively. The effective tax expense in the first quarter of 2002 was lower than the effective tax expense in 2001 due to a lower percentage of revenues generated in the United States, which are subject to higher tax rates than revenues earned elsewhere, which benefit from Israeli tax holiday treatment and tax-exempt income status. Revenues generated in the United States represented 32% of the total revenues for the DSP cores licensing business for the three months ended March 31, 2002 as compared to 45% of total revenues for the three months ended March 31, 2001.

Years Ended December 31, 2001 and 2000

Total Revenues

Total revenues for our DSP cores licensing business were $25.2 million in 2001 as compared to $22.9 million in 2000. This increase of 10% was primarily the result of an increase in revenues from new licensees of our technology and higher number of technical support agreements.

Licensing and royalty revenues for the DSP cores licensing business accounted for 83% of the total revenues for the DSP cores licensing business in 2001 as compared to 87% of the total revenues in 2000. Technical support and other revenues in the DSP cores licensing business accounted for 17% of the total revenues for the DSP cores licensing business in 2001 as compared to 13% of the total revenues in 2000. Revenues from three of our licensees for the DSP cores licensing business accounted for 24%, 15% and 14% of the total revenues for the DSP cores licensing business’ total revenues in 2001. Revenues from one of our licensees from the DSP cores licensing business accounted for 18% of the total revenues for the DSP cores licensing business’ total revenues in 2000.

Licensing and Royalty Revenues

Licensing and royalty revenues increased in 2001 to $21.0 million from $20.0 million in 2000. This increase of 5% was due to an increase in licensing and royalty revenues that was slightly off-set by a slight decrease in royalty revenues.

Licensing Revenues

Licensing revenues for the DSP cores licensing business increased by 9% to $13.7 million in 2001 from $12.6 million in 2000 due primarily to more revenue received from certain of our agreements in 2001 as compared to 2000, primarily as a result of higher licensing fees we were able to negotiate for the licensing of certain of our products in 2001, as opposed to the prices charged in 2000.

Unit and Prepaid Royalty Revenues

Unit and prepaid royalty revenues for the DSP cores licensing business in 2001 were $7.3 million, as compared to $7.4 million in 2000, representing a slight decrease of 1%. Our royalty-paying licensees reported sales of 79.2 million units of DSP core-based chips incorporating our DSP core technology in 2001, as compared

to 111.3 million units in 2000. To date, a majority of the royalties for our DSP cores licensing business have been from PineDSPCores and OakDSPCores. In the year 2001, our first TeakLite DSP Core licensee started to ship products utilizing our TeakLite technology, and 47% of our total unit and prepaid royalties in 2001 were generated from the agreement with this TeakLite DSP core licensee, which generates higher royalty revenues than our license agreements for Pine and Oak Cores. In the future, we expect more of the royalties for our DSP cores licensing business to be derived from our newer products, Teak, TeakLite and PalmDSPCore.

Technical Support and Other Revenues

Technical support and other revenues for the DSP cores licensing business increased to $4.3 million in 2001 from $2.9 million in 2000, representing an increase of 48%. This growth was driven mainly by the increasing number of technical support agreements we entered into with our licensees and the broader offering of applications, services and development tools we licensed in 2001.

Geographic Revenue Analysis

In 2001, revenues generated in the Unites States for the DSP cores licensing business represented 43% of its total revenues, while Japan represented 13%, the rest of Asia represented 16% and Europe and the rest of the world represented 28%. In 2000, revenues generated in the United States represented 52% of total revenues for the DSP cores licensing business, while Japan represented 15%, the rest of Asia represented 12% and Europe and the rest of the world represented 21%. The decrease in the revenues generated in the United States was due primarily to fewer licensing deals signed with U.S. companies and recognized in 2001 as compared with 2000.

Cost of Revenues

Cost of revenues for the DSP cores licensing business increased significantly to $1.3 million in 2001 from $0.4 million in 2000. The increase was primarily due to an increase in support personnel of 233% for our DSP cores licensing business, as our business grew and we began to provide more support to our licensees. We expect the cost of revenues for our DSP cores licensing business to increase in the future as we continue to expand our technical support services for the DSP cores licensing business. Cost of revenues accounted for 5% of the total revenues in 2001, as compared to 2% of the total revenues in 2000.

Research and Development Expenses, Net

Research and development expenses, net, for the DSP cores licensing business increased by 6% to $5.1 million in 2001 from $4.8 million in 2000. Research and development costs for the DSP cores licensing business are net of related research grants from the Office of Chief Scientist magnet programs in Israel. In 2001 and 2000, we recorded $542,000 and $578,000, respectively, in these research grants from the magnet programs. We have no obligation to pay royalties on the intellectual property developed using these grants, and all monies received are non-refundable. The increase of approximately 6% in research and development expenses for the DSP cores licensing business in 2001 as compared to 2000 primarily resulted from a slight increase in engineering personnel. We intend to continue to expand our research and development efforts to focus on the development of DSP cores with high performance, low power consumption and manufacturing process independence, while maintaining compatibility with our existing DSP cores products. Research and development expenses for the DSP cores licensing business, as a percentage of the total revenues for the DSP cores licensing business were 20% in 2001 as compared to 21% in 2000.

Sales and Marketing Expenses

Sales and marketing expenses for the DSP cores licensing business increased to $2.9 million in 2001 from $2.5 million in 2000. The increase of approximately 16% in sales and marketing expenses in 2001 as compared to those in 2000 was primarily due to an increase in commissions paid to our sales representatives. In addition,

we incurred higher facility and overhead costs for the services we used from DSP Group’s Japanese subsidiary, Nikon DSP K.K., which provides marketing and sales services for our DSP cores licensing business in Japan, and an increase in our market data research and communications efforts. Sales and marketing expenses as a percentage of total revenues for the DSP cores licensing business were 12% in 2001 and 11% in 2000.

General and Administrative Expenses

General and administrative expenses for our DSP cores licensing business were $2.8 million in both 2001 and 2000. General and administrative expenses as a percentage of total revenues for the DSP cores licensing business decreased to 11% in 2001 from 12% in 2000. The decrease was due to higher total revenues in 2001 as compared to 2000.

Financial Income, Net

Financial income, net for our DSP cores licensing business was $462,000 in 2001 as compared to $322,000 in 2000. This increase of 43% was due to higher levels of working capital and higher accounts receivable, as well as from higher net income in our DSP cores licensing business from operations.

Provision for Income Taxes

The effective tax rate was 24% in 2001 as compared to 27% in 2000. The decrease in the effective tax rate for the DSP cores licensing business was primarily due to a lower percentage of total revenues generated in the United States, which are subject to higher tax rates than revenues earned elsewhere which benefit from Israeli tax holiday treatment and tax-exempt income status. Revenues generated in the United States represented 43% of total revenues for the DSP cores licensing business in 2001 as compared to 52% of total revenues in 2000. If our United States revenues increase in the future, our effective tax rate may increase as well.

Years Ended December 31, 2000 and 1999

Total Revenues

Total revenues for the DSP cores licensing business were $22.9 million in 2000, as compared to $18.2 million in 1999. This increase of approximately 26% was primarily due to increases in licensing revenues, as well as an increase in royalty revenues.

Licensing and royalty revenues accounted for 87% of the total revenues in the DSP cores licensing business in 2000 as compared to 89% of those total revenues in 1999. Technical support and other revenues accounted for 13% of the total revenues in 2000 for the DSP cores licensing business as compared to 11% of total revenues in 1999. Revenues from one of our licensees accounted for 18% of the total revenues in 2000, while revenues from four of our licensees accounted for 15%, 12%, 11% and 10% of those total revenues in 1999.

Licensing and Royalty Revenues

Licensing and royalty revenues increased in 2000 to $20.0 million from $16.2 million in 1999. This increase of 23% was due to an increase in both licensing and royalty revenues.

Licensing Revenues

Licensing revenues for the DSP cores licensing business increased by 21% from $10.4 million in 1999 to $12.6 million in 2000, due primarily to an increased number of licenses of our newer DSP cores products.

Unit and Prepaid Royalty Revenues

Unit and prepaid royalty revenues for the DSP cores licensing business increased by 26% to $7.4 million in 2000 as compared to $5.9 million in 1999. Royalty-generating licensees of our DSP cores reported sales of approximately 79.2 million units of microprocessors incorporating our technologies in 2000 as compared to approximately 55.3 million units in 1999. Our unit and prepaid royalty revenues increased by 38% in 2000 as compared to 1999.

Technical Support and Other Revenues

Technical support and other revenues increased by 45% to $2.9 million in 2000 from $2.0 million in 1999. This increase was due primarily to a different mix and pricing for technical support services and the broader offering of development tools associated with our licenses as well as a higher number of technical support agreements in 2000 as compared to 1999.

Geographic Revenue Analysis

In 2000, revenues generated in the United States represented 52% of the total revenues for the DSP cores licensing business, while Japan represented 15%, the rest of Asia represented 12% and Europe and the rest of the world represented 21% of these total revenues. In 1999 revenues generated in the United States represented 25% of the total revenues for the DSP cores licensing business, while Japan represented 37%, the rest of Asia represented 9% and Europe and the rest of the world represented 29% of these total revenues.

Cost of Revenues

Cost of revenues for the DSP cores licensing business was $410,000 in 2000, as compared to $207,000 in 1999. This increase of approximately 98% was due to the addition to our technical support staff of a third member. Cost of revenues accounted for 2% of the total revenues in 2000 for the DSP cores licensing business as compared to 1% of these revenues in 1999.

Research and Development Expenses, Net

Research and development expenses for the DSP cores licensing business increased to $4.8 million in 2000 from $3.2 million in 1999. Research and development costs for the DSP cores licensing business are net of related research grants from the Office of Chief Scientist magnet programs in Israel. In 2000, we received $578,000 in these research grants, and in 1999 we received $70,000 in grants. We have no obligation to pay royalties on the intellectual property developed using these grants, and all monies received are non-refundable. The 50% increase of our research and development expenses in 2000, as compared to 1999, was primarily due to an approximate 32% increase in the number of engineering personnel, as well as from higher expenses associated with mask charges for our Teak and TeakLite DSP Cores’ development chips. Research and development expenses for the DSP cores licensing business, as a percentage of the total revenues for the DSP cores licensing business were 21% in 2000 as compared to 18% in 1999.

Sales and Marketing Expenses

Sales and marketing expenses for the DSP cores licensing business increased to $2.5 million in 2000 from $2.0 million in 1999. This increase of 25% was due primarily to an increase in the compensation paid to our sales and marketing personnel. The increase in expenses was also attributed to our increased sales and marketing efforts, including travel expenses and higher facility costs. Sales and marketing expenses for the DSP cores licensing business were 11% of its total revenues in both 2000 and 1999.

General and Administrative Expenses

General and administrative expenses for the DSP cores licensing business increased to $2.8 million in 2000 from $2.5 million in 1999. This increase of 12% was primarily due to an increase in accounting, tax and legal professional expenses we incurred with respect to preparations for the proposed separation of the licensing division from DSP Group, including the tax planning and filing of an application with the tax authorities in both Israel and the United States in order to receive a tax-free ruling for the separation. General and administrative expenses for the DSP cores licensing business, as a percentage of the total revenues for the DSP cores licensing business decreased slightly to 12% in 2000 from 14% in 1999.

Financial Income, Net

Financial income, net was $322,000 in 2000 as compared to $292,000 in 1999. This increase of 10% was primarily due to higher levels of working capital and accounts receivable, as well as from higher net income in our DSP cores licensing business operations.

Provision for Income Taxes

The effective tax rate for our DSP cores licensing business was 27% in 2000 as compared to 14% in 1999. The higher tax rate in 2000 was due to a higher percentage of total revenues generated in the United States, which are subject to higher tax rates than revenues earned elsewhere which benefit from Israeli tax holiday treatment and tax-exempt income status. Revenues generated in the United States for the DSP cores licensing business represented 52% of the total revenues in 2000 as compared to 25% of total revenues in 1999.

Liquidity and Capital Resources

Prior to the separation of the DSP cores licensing business from DSP Group, all of the year end available cash from these operations was transferred to DSP Group. As part of the assets contributed to us in the separation, DSP Group also contributed a total of the sum of $40 million as initial working capital plus cash equal to the amount by which the transaction costs of the separation and combination exceed $2 million.

Operating activities for the DSP cores licensing business provided net cash of $9.5 million in 2001, $10.6 million in 2000 and $9.1 million in 1999. Cash generated from operations in all three years was primarily from net income, and, in 2000 and 1999, the corresponding increases in income tax liabilities were additionally offset by increases in trade receivables. In 2001, our net income was mainly offset by the increase in our trade receivables. Net cash used during the three months ended March 31, 2002 for operating activities for the DSP cores licensing business was $3.0 million, as compared to $2.8 million of net cash provided by operating activities for the three months ended March 31, 2001. Cash used by the DSP cores licensing business during the three months ended March 31, 2002 was primarily due to lower income, a decrease in income tax payable and a 2001 bonus payments to employees. Cash generated during the three months ended March 31, 2001 was primarily from net income and the decrease in trade receivables, which was off-set by decreases in income tax payable.

Cash flow from operations of the DSP cores licensing business has been used to fund our working capital requirements as well as property and equipment expenditures which to date have been relatively low due to the fact that the DSP cores licensing business model requires no manufacturing facilities. Capital equipment purchases of computer hardware and software used in engineering development in the DSP cores licensing business, the company vehicles, furniture and fixtures amounted to approximately $1.5 million in 2001, $696,000 in 2000 and $832,000 in 1999. Capital expenditures for the DSP cores licensing business were $56,000 during the three months ended March 31, 2002, as compared to $691,000 during the three months ended March 31, 2001. The high level of expenditures in 2001 as compared to 2000 and to 1999 was due to investments in new software for the design of our next generation of DSP cores for our research and development team.

In the future, we may invest significantly in purchasing new engineering tools for the DSP cores licensing business and renewing current engineering software licenses that we shared with DSP Group prior to the separation. We also may invest in integrating our management, accounting, sales and technical support systems and software with those of Parthus. Additionally, as our business expands, we may need to devote increasing amounts of cash to fund working capital needs, principally for the anticipated increases in headcount and office space expansion.

Future capital requirements for the DSP cores licensing business will depend on a number of factors, including the timing and rate of the expansion of the business of the new combined company. We anticipate a substantial increase in our capital expenditures for the combined company to support anticipated growth in operations, purchases of hardware and software for research and development and increases in personnel. We believe that current working capital and cash flow from operations of the combined company will provide sufficient capital to fund our operations for the next 12 months. We cannot assure you, however, that the underlying assumed levels of revenues and expenses will prove to be accurate. We may need to raise additional funds through public or private financing or other arrangements in order to:

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support more rapid expansion of the business of the new combined company than we currently anticipate;

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develop and introduce new or enhanced DSP core designs or services;

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respond to competitive pressures;

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invest in or acquire complementary businesses or technologies; or

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respond to unanticipated requirements or developments.

We cannot be certain that external financing will be available to us when we need it on favorable terms, if at all. If additional funds are raised through the issuance of equity securities, dilution to existing stockholders may result. Future debt financings could involve restrictive covenants that may limit our ability to manage and grow our business. If sufficient funds are not available, we may not be able to introduce new or enhanced DSP core designs or related services, expand our operations or compete effectively in any of our markets, any of which could materially harm our business, financial condition and results of operations.

Seasonality

We have experienced seasonal variations in the operating results of our DSP cores licensing business. Historically it has generated more licensing and prepaid royalty revenues in the last quarter of the fiscal year, which we believe may be due to our licensees’ desire to exhaust their year-end budgets as well as prepare for the next year’s new design trends. Therefore, licensing and prepaid royalty revenues for the DSP cores licensing business may continue to be higher in the fourth quarter, which could result in our revenues being flat or slightly down in the subsequent fiscal first quarter. See also “Risk Factors.” We depend on a relatively small number of licensees in each particular period and our inability to enter into new license agreements in a specific period, as well as other factors, could cause our operating results to fluctuate significantly, which may affect our stock price.”

Israeli Taxation and Investment Programs

Our DSP cores licensing business operations have been granted Approved Enterprise status under Israeli law under four separate investment plans which were assigned to us from DSP Group in the separation, and one plan approved for our activities. According to the provisions of such Israeli plans, we have chosen to enjoy “alternative plan benefits,” which provide for tax exemption in Israel instead of receipt of governmental grants. Accordingly, our Israeli subsidiary, ParthusCeva, Ltd.’s income from an Approved Enterprise is tax-exempt for a period of two or four years, and is subject to a reduced corporate tax rate of 10% or 25% for an additional period

of six or eight years. In addition, by virtue of related Israeli law, ParthusCeva, Ltd. is entitled to claim accelerated rates of depreciation on equipment used by an Approved Enterprise during the first five tax years from the beginning of use of the equipment. We are currently being taxed under the 10% tax bracket for our DSP cores licensing business operations outside of the United States. The period of tax benefits is subject to limits of the earlier of 12 years from the commencement of production, or 14 years from receiving the approval and are scheduled to gradually expire starting in 2005 through 2009. To maintain ParthusCeva, Ltd.’s eligibility for these tax benefits, we must continue to meet several conditions, including making specified investments in fixed assets and equity funding. According to the approvals we received from the government of Israel, we are obligated to invest $9,038,000 in specified properties by the end of 2002. As of March 31, 2002, we have already invested $6,238,000 of the aggregated required investment amount. We are also obligated to finance 30% of these investments by issuance of share capital. However, even if we meet these conditions, these programs and tax benefits may not continue in the future at their current levels or at any level, and if we fail to comply with these conditions in the future, the benefits received could be cancelled, we may be required to refund tax benefits already received, and we could be required to pay increased taxes.

We also receive funding as part of our participation in research programs supported by the Office of Chief Scientist operated by Israel’s Ministry of Industry and Trade. We have received $542,000 of royalty-free magnet grants in 2001, $578,000 in 2000 and $70,000 in 1999. The Israeli government has reduced the benefits available under these programs in recent years and has indicated that it may reduce or eliminate these benefits in the future.

Quantitative and Qualitative Disclosures About Market Risk

As a significant part of both the revenues and expenses of our business are denominated in U.S. dollars, we have experienced only insignificant foreign exchange gains and losses to date. However, although we have not done so to date as part of the DSP cores licensing business, because recent increases in the volatility of the exchange rate of the NIS versus U.S. dollar could have an adverse effect on the expenses that we incur in the State of Israel, we may hedge part of the risk of a devaluation of the NIS in the future. We will ensure that options contracts meet the requirements of cash flow hedges, as defined by SFAS No. 133 (as discussed further below), and are all effective as hedges of these expenses. Such amounts will be recorded in earnings in 2002.

BUSINESS

Overview

ParthusCeva licenses to semiconductor companies and electronic equipment manufacturers complete, integrated intellectual property solutions that enable a wide variety of electronic devices. Our programmable DSP cores and application-level IP platforms power wireless connectivity, handheld devices, consumer electronics products, GPS devices, consumer audio products and automotive applications. We intend to license highly integrated system solutions consisting of our IP platforms built around our DSP cores technology, while also continuing to license our DSP cores and IP platforms as stand-alone offerings. ParthusCeva was formed in , 2002 through the combination of Ceva, the former DSP cores licensing business of DSP Group, founded in 1991, and Parthus, a provider of platform-level IP for the consumer electronics market, founded in 1993.

Our DSP cores licensing business (formerly the business of Ceva) develops and licenses designs of programmable DSP cores and DSP core-based sub-systems. A programmable DSP core is a special-purpose, software-controlled processor that, through complex mathematical calculations, analyzes, manipulates and enhances digital voice, audio and video signals. These chips are used in a wide variety of electronic devices, including digital cellular telephones, modems, hard disk drive controllers, MP3 players, voice over packet products and digital cameras, and are critical to the performance of the electronic products in which they are used. A DSP core-based sub-system incorporates additional hardware blocks required as interfaces from the DSP core for the overall system.

Our platform-level IP business (formerly the business of Parthus) develops semiconductor intellectual property for a range of consumer electronic products and licenses this technology to semiconductor manufacturers and OEMs. Our portfolio of IP platforms spans broadband and local area wireless connectivity as well as key application IP including multimedia, location and technologies and smartphone/handheld technologies. The intellectual property we license can take the form of schematics and designs for silicon chips and circuitry and software to perform particular functions on those chips. In addition, we also sell finished modules (which we refer to as Hard IP) to these customers.

We believe that the continuing evolution of the wireless and consumer electronics market has created significant demand for semiconductor intellectual property providers that can add greater value by delivering complete system solutions that combine DSP processor cores with application-specific IP platforms (such as analog, mixed-signal, digital baseband and software). We anticipate that our approach will permit our customers to introduce feature-rich products while simultaneously minimizing their development cost, risk, complexity and time to market.

Industry Background

Semiconductors, the key building blocks of electronic products, are devices that permit the controlled flow of electronic signals. An integrated circuit is a semiconductor that combines a number of individual electronic circuits, each of which performs a particular function. Continuous improvements in semiconductor design have led to smaller, more complex integrated circuits that perform a wide range of functions. As the performance of semiconductors has improved and their size, cost, and power consumption have decreased, they have been used in an increasing number of applications, including telecommunications systems, automotive electronics, audio and video devices and a range of other consumer electronics products. Rising consumer expectations have increased the demand for more frequent introductions of high-performance semiconductors with lower power consumption and enhanced functionality.

System-on-a-Chip

Semiconductor manufacturing processes have advanced significantly in recent years to allow a substantial increase in the number of circuits placed on a single chip. At the same time, requirements for increased product functionality, higher performance and lower cost have driven demand for such system-level integration. Through this integration, complete electronic systems containing both analog and digital functions are combined on a single silicon chip, known as a system-on-a-chip. A typical system-on-a-chip incorporates a processor (such as a DSP core or a general purpose processor), memory, input/output devices and other specific components, as well as software.

The increased complexity of system-on-a-chip design and manufacturing requires a high level of design resources to fully capitalize on the improvements in semiconductor manufacturing technology and to maximize functionality. Designers’ capabilities and semiconductor companies’ internal design resources have not kept pace with the advances in this technology. As a result, chip manufacturers are facing a growing “design gap” between their increasing manufacturing potential and needs and their limited chip design capabilities.

Semiconductor Intellectual Property

To address this “design gap,” many semiconductor designers and manufacturers are increasingly choosing to license proven intellectual property components, such as processor cores and application-specific IP from third parties, rather than to develop those technologies internally. By relying on third parties for the most advanced designs of specialized components, system-on-a-chip designers and manufacturers can create differentiated products while reducing their development costs, complexity, risk and time to market.

The creation of licensable, re-useable design components, which we refer to as third-party semiconductor intellectual property (SIP), is a relatively new and emerging trend in the semiconductor market. According to Gartner-Dataquest, the market for semiconductor intellectual property was $892 million in 2001, representing a 25% year-on-year growth from 2000.

Semiconductor intellectual property providers have traditionally delivered intellectual property blocks only for digital functions and only for individual components with a relatively narrow function, referred to as block-level IP. The continuing evolution of electronic products has created significant demand for semiconductor intellectual property providers that add greater value by offering complete, integrated analog and digital systems, as well as software, which we refer to as platform-level IP. We believe that this approach provides semiconductor companies and electronic product manufacturers with several key advantages, including improved time to market and a reduction in the risks, costs and complexities in bringing new products and technologies to market.

Digital Signal Processor Cores

A key piece of semiconductor IP in the computer chips driving many electronic products is the DSP core, which processes the digital data derived from converted analog signals. Once a signal (such as the human voice) has been converted to digital form, a DSP core is used to analyze, manipulate and enhance the data. The signal can then be transmitted over a network (such as the cellular telephone network), compressed and stored (such as in answering machines) or recognized as a command (such as through voice recognition). Digital signal processing is used in many fields, including telecommunications, speech and music processing, imaging, medicine and seismology. As the number of electronic devices that require the processing of digital data has grown, so has the demand for reliable DSP cores.

As illustrated in the diagram below, a DSP-based system-on-a-chip includes several components. The DSP core controls the processing of the chip and uses mathematical calculations to process information. Other parts of the system-on-a-chip include data memory components, which host the data before and after it is processed by the DSP core, and the program memory component, which stores the software used to operate the DSP core. A chip designer may add its own specific proprietary technology to provide differentiated functionality (such as special functions and input/output electronics, which control the transfer of data between the DSP core and other electronic devices that are connected to the chip), referred to as “logic” and “input/output” in the diagram below.

Programmable DSP cores are instructed by software programs to process ultra-fast mathematical calculations, including addition, subtraction and multiplication. The math-intensive signal processing performed by the DSP core is generally used for data compression, error correction, voice recognition and security.

A programmable DSP-based design allows the same chip to be programmed and reprogrammed with different software and used for several generations and different applications of products, which reduces the internal development costs for manufacturers and allows them to differentiate their products through varying the software functionality. In addition, a programmable approach allows for “field upgrades” of the technology, such as replacement of software through remote downloading, rather than physical removal and replacement of the entire chip.

According to Forward Concepts, a market research firm, worldwide programmable DSP chip shipments have increased from $4.4 billion in 1999 to $6.1 billion in 2000 and decreased to $4.3 billion in 2001. Forward Concepts predicts that this market will grow at a compound annual rate of 18% from 2000 to 2005.

Licensable DSP cores are typically licensed to semiconductor companies or directly to system OEMs. By using licensable DSP cores, manufacturers of ASSPs (application-specific standard products, which are off-the-shelf chips targeted to a specific type of application for a broad range of system OEMs) and ASICs (application-specific integrated circuits, which are chips that are customized to meet a specific customer’s needs) have multiple sources of DSP technology, thereby enabling competition among their chip suppliers as well as a wider variety of more differentiated products.

The manufacturers of DSP-based system-on-a-chip face a “make or buy” dilemma—whether to develop a given DSP chip design or to license it from a third party. Internal development of a DSP core requires considerable design resources and specialization, which many semiconductor companies do not have. In today’s rapidly evolving markets, the scarcity of engineering talent means that it is usually not cost-effective for most semiconductor companies and designers to devote the engineering resources necessary to develop complicated components such as a programmable DSP core. Therefore, companies may concentrate on the integration of software, hardware and embedded memory, and rely on licensing other intellectual property, such as DSP cores, from third parties.

Licensing also offers a substantial time-to-market advantage, which in most cases is a crucial factor for a manufacturer’s competitive market positioning. Further, the licensee can choose the method and source of chip production. This is a significant advantage for the licensee, as a licensed chip can easily be produced by several manufacturers, eliminating its upon a single source of chip production.

End Markets

Third-party semiconductor intellectual property is licensed and deployed by semiconductor companies and electronic equipment manufacturers serving a wide variety of high-volume end markets. These include the markets for:

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Second-generation (2G), “second-and-a-half”-generation (2.5G) and third-generation (3G) cellular telephones —cellular telephones that combine voice communications and high-speed data transmission capabilities permitting access to the Internet and other advanced features;

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Internet-enabled personal digital assistants, or PDAs —hand-held devices that incorporate electronic calendars, address books and remote access to the Internet and other data networks;

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“Intelligent” pagers —personal paging devices that incorporate advanced data communications features, such as access to e-mail, news, weather and stock quotes;

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Global positioning system (GPS) devices —devices used in automobiles, wireless connections for personal computers and industrial controls accessed through wireless Internet connections;

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Other internet devices —products such as laptop computers, set-top boxes, Internet appliances and gaming consoles, which are increasingly connected to the Internet via either broadband wireless technologies or wireless local area network (W-LAN) technologies;

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Hard drive controllers —the devices which control the reading and writing of data for personal computers;

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voice over packet products, such as voice-over Internet Protocol (VoIP) and voice-over digital subscriber line (VoDSL) applications;

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wireline telecommunications applications, such as digital subscriber line (DSL) applications;

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automotive applications;

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consumer audio devices, such as MP3 players; and

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digital still cameras.

Products such as these require state-of-the-art functionality, but generally must also be easy to use and convenient in terms of both size and battery life. Providers of semiconductor intellectual property help address these requirements by focusing on integrated circuit technology that:

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permits high-data-rate communications in conformity with industry standards;

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allows the integration of more advanced features at reasonable prices by combining functions on a single system-on-a-chip; and

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helps speed time to market by reducing product development time through design reuse.

The ParthusCeva Solution

We offer complete, open, integrated solutions for semiconductor manufacturers and OEMs, comprising wireless communication, application and multimedia IP platforms built around our DSP processor core architectures. Our IP licensing business model, including royalties, offers a scalable business with multiple revenue streams and solid gross margins.

Our DSP cores licensing business develops and licenses designs of programmable DSP cores. These designs are used in a wide variety of electronic devices, including digital cellular telephones, modems, hard disk drive controllers, MP3 players, voice over packet products and digital cameras, and are critical to the performance of the electronic products in which they are used. Our designs are independent of specific semiconductor manufacturing processes, and can therefore be used by a wide variety of customers. The DSP cores we design are appropriate for use in both current and emerging applications requiring digital signal processing. We market our technology and designs as well as a wide array of software and hardware development tools and technical support services. We license our DSP core designs to leading semiconductor companies throughout the world. These companies incorporate our designs into application-specific chips or custom-designed chips that they manufacture, market and sell to OEMs of a variety of electronic products. We also license our designs to OEMs directly.

Our IP platforms licensing business develops highly integrated semiconductor intellectual property solutions that are crucial to the cost-effective implementation of new generations of consumer electronic devices, including mobile-Internet products. Our IP platforms enable a range of wireless devices that are used by individuals to communicate, transact business and access information easily, flexibly and affordably. Our extensive intellectual property portfolio covers broadband wireless solutions (2G, 2.5G, 3G), wireless local area networking solutions (802.11, Bluetooth) and key application and multimedia solutions (including audio, multimedia, GPS and smartphone technologies). We make our intellectual property available to our customers under licenses, as part of development projects or in silicon chip form.

The key benefits we offer our licensees include:

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An extensive IP portfolio. Our IP portfolio spans the bulk of mobile Internet, wireless application and multimedia technologies, as well as a suite of programmable DSP cores. This portfolio often allows us to provide a customer with the required solution with reduced development cost, complexity and risk, therefore reducing the customer’s time to market.

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The ability to deliver complete system solutions. Our broad IP portfolio allows us to provide our customers with complete solutions at the system level, including application-specific IP platforms and general-purpose DSP cores. Our company combines market-leading DSP architectures with a top supplier of complete platform level-IP solutions, which we believe strongly positions us to become a leading supplier of open-standard IP solutions to the industry.

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Flexible IP deployment and support. To meet specific customer circumstances and requirements, we intend to offer system-level solutions composed of our IP platforms built around our DSP cores, as well as to license our platforms and cores as stand-alone offerings. We make our solutions available in the form of licensed intellectual property rights, dedicated development projects, or “hard IP” embodied in silicon chips or circuit boards. In addition, we offer our licensees specialized intellectual property integration support. We believe that this flexibility facilitates the adoption and integration of our intellectual property.

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Leading-edge technology. Our licensing relationships with a number of leading semiconductor companies and OEMs, as well as our communications with potential customers, help to assure that we are developing additional intellectual property that meets market requirements as they evolve. A number of our employees also participate actively in international standards-setting bodies in order to influence and learn about new technological developments.

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The ability to provide a production-ready solution. We fully test the platforms and DSP cores we provide so that they are ready for product integration. In addition, we have strategic relationships with several leading semiconductor foundries, including STMicroelectronics, Taiwan Semiconductor Manufacturing Company and United Microelectronics Corporation (UMC), under which these foundries manufacture chips to our design. Further, under our agreement with UMC, we have reserved capacity in its production facilities. These relationships allow us to assure our customers access to low-cost production.

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A diverse and experienced research and development staff. We have more than 330 employees engaged in product development in a broad range of areas, including analog, digital, software, mixed-signal and digital signal processing technology. We believe that the breadth of knowledge, experience, and stability of our workforce allow us to provide better and faster services to our customers, and to maintain and develop our core intellectual property efficiently.

Strategy

The combination of Parthus and Ceva will position us to address what we believe to be two of the major converging trends in our industry. First, we believe that our industry is moving towards open-standard processor architectures and away from traditional proprietary solutions. Second, we believe that increased semiconductor product complexity and demands for reduced time-to-market have led more companies to decide to license complete platform level-IP solutions, rather than licensing individual components from multiple suppliers. ParthusCeva will combine market-leading DSP architectures with an established, leading supplier of complete platform level IP solutions. We believe ParthusCeva will be well positioned to take full advantage of these major industry shifts and become a leading supplier of open-standard DSP solutions to the industry.

Our goal is to extend our leadership in programmable DSP cores and platform-level IP solutions. To meet these goals we intend to:

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Provide an integrated solution. We seek to maximize the competitive advantage provided by our ability to offer an integrated IP solution—including communications, applications and multimedia IP built around our DSP processor core architectures. We believe that this integrated solution will favorably position us to capitalize on what we believe is the industry trend towards the licensing of open-standard IP architectures.

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Take advantage of the industry shift towards open-standard architectures. We believe that the industry trend away from proprietary IP towards open-standard architectures creates an opportunity for providers of licensable DSP cores and platform-level IP. As a consequence, we intend to use our expertise in critical open standards fields such as Bluetooth, GPS and Multimedia in order to position ourselves to take advantage of this trend. Towards this end, we have participated and intend to continue to participate in the development of industry standards in these and other emerging technology areas.

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Focus on convergence of technologies through an open architecture. We seek to ensure that our platforms, as well as other third-party IP, can be rapidly integrated into a single integrated circuit through adherence to the specifications of our open, flexible and highly power-efficient architectures.

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Enhance our performance leadership. We seek to maximize our expertise in DSP, analog, mixed-signal and radio frequency technology and to use that expertise to address critical customer demands. We intend to enhance our existing DSP cores and IP platforms with additional features and performance, while developing new offerings that will focus on other emerging applications across the range of end markets we serve.

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Target top-tier customers. We seek to strengthen relationships and expand licensing and royalty arrangements with our existing customers and to extend our customer base with key industry companies in order to facilitate the development of our technology. We believe that we can achieve the best rate of return on our investment in technology by targeting our sales and marketing activities at high-volume semiconductor companies and leading electronic product manufacturers with a track record of

successful end-user deployments. Parthus and Ceva together have entered into license agreements with nine of the top ten semiconductor companies worldwide.

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Focus on large and fast-growing markets. We believe that our expertise in programmable DSP cores and platform-level IP favorably positions us to target fast-growing segments within the consumer electronics market, such as wireless communications, mobile computing, automotive electronics, and consumer entertainment. We intend to strengthen our relationships and expand licensing and royalty arrangements with customers in those markets and to extend our customer base with key industry leaders within each of those segments. We believe that we can achieve the best results by targeting our sales activities at leaders within those markets.

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Establish, maintain and expand relationships with key technology providers. We have established and seek to expand our close working relationships with:

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third-party suppliers of block-level semiconductor intellectual property, in order to have access to their most current technologies; and

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developers of both application-level and system-level software so that we can continue to offer complete platform solutions.

Products and Technology

DSP Cores Licensing Business

Our DSP cores licensing business develops and licenses designs of programmable DSP cores. According to Gartner-Dataquest, we had a 69% market share for licensed DSP cores in 2001. A programmable DSP core is a special purpose, software-controlled processor that, through complex mathematical calculations, analyzes, manipulates and enhances digital voice, audio and video signals. The programmable DSP cores we design are used as the central processors in semiconductor chips made for specific applications. These chips are used in a wide variety of electronic devices, including digital cellular telephones, modems, hard disk drive controllers, MP3 players, voice over packet products and digital cameras, and are critical to the performance of the electronic products in which they are used.

Our SmartCores family of cores is currently composed of five offerings: PineDSPCore, OakDSPCore, TeakLite, Teak and PalmDSPCore and a DSP core-based sub-system: the XpertTeak. By offering a range of performance, price and power consumption balances, our cores family addresses a wide range of applications, from low-end, high-volume applications, such as digital answering machines, hard disk controllers, low-speed modems and VoIP terminals, to high-performance applications such as 3G cellular communication devices, broadband modems, consumer multimedia and VoIP gateways. Our current offerings are:

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PineDSPCore. Introduced in 1991, the PineDSPCore was the first DSP core we developed. Due to its small die size and compact instruction code, it has been primarily used for low-end, high-volume applications, including digital answering machines, fax machines, low-speed modems and hard disk drive controllers. We currently generate revenues from the PineDSPCore, although we are no longer actively promoting it.

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OakDSPCore. The OakDSPCore’s hardware units are operative through a set of soft cores known as an instruction set, which is a central processing unit (CPU) type instruction allowing the core to also

provide micro-control functionality. The small die size, low-power consumption and balance between cost and performance of our OakDSPCore make it well suited for second generation (2G) digital cellular telephones using GSM, TDMA and CDMA (code-division multiple access) standards, soft modems, voice-over packet network applications and Internet audio devices.

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TeakLite. TeakLite is a “soft core” which significantly facilitates its incorporation of its design into a licensee’s chip and foundry specifications. TeakLite offers the same instruction set as OakDSPCore; it is superior to the OakDSPCore in terms of portability, operating speed and power consumption. TeakLite is primarily designed for 2G and 2.5G cellular telephones, modems, consumer multimedia (digital still cameras and audio appliances, including MP3 players), hard disk drive controllers and voice-over IP applications.

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Teak. Like TeakLite, Teak is a “soft core” and is designed with a focus on power reduction features. The Teak offers high performance, the ability to process multiple instructions in parallel and excellent code density, making it well suited for 2.5G and 3G cellular telephones, broadband modems and consumer multimedia applications.

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PalmDSPCore. With faster processing capabilities and the ability to process multiple instructions in parallel, PalmDSPCore is a sub-family of three DSP soft cores designed to meet the high-performance, low-cost and low-power requirements of a range of applications. These include 2.5G cellular telephones, broadband modems, and voice-over packet network gateways, for which we offer a 16-bit core, and consumer audio and video applications, for which we offer 20-bit and 24-bit cores.

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XpertTeak. XpertTeak is a highly integrated, low power Teak core based DSP sub-system. In addition to the Teak core, it incorporates advanced peripherals and a system interface set such as direct memory accesses (DMA) controllers, timers, power consumption management units, serial ports and CPU interfaces.

Our designs are independent of specific semiconductor manufacturing processes, and can therefore be used by a wide variety of customers. The DSP cores we design are appropriate for use in both current and emerging applications requiring digital signal processing. We market our designs as well as a wide array of software development tools and technical support services. Revenues from hardware development tools have not been significant to date.

We believe the following to be the key benefits of our DSP cores offerings:

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Low power consumption. Our cores have been designed to satisfy low power consumption requirements—a key feature of products that rely on batteries, such as cell phones and portable audio products, or are sensitive to power dissipation, such as telecommunications equipment.

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Low cost. Our technology is designed to address the cost requirements for high volume, highly competitive applications through reduced chip size (by carefully selecting functions we offer and also by allowing multiple functions to be placed on one chip) and minimization of the size of required memory.

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Flexibility. Our open, “soft-core” DSP architecture allows our licensees to differentiate their products, in particular through software. It allows the licensees to create diversified versions of their embedded intellectual property solutions, reuse the same chip design for multiple generations of products and select different physical library vendors or silicon suppliers. In addition, because of our “soft-core” architecture, our cores can be easily integrated across multiple semiconductor manufacturing processes with different geometry technologies.

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Improved time to market. Our technology shortens the typical semiconductor design cycle and improves our customers’ time to market by shortening the process of porting the core design to physical hardware layout, and by providing an efficient environment for designing the software to be used in our core designs.

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Tightly coupled development tools and architecture. We provide our licensees with both DSP cores and the related software development and hardware emulation tools to assist in product development, which speeds their development process.

Applications for our DSP Cores

Solutions using DSP cores technology are currently used in a wide variety of applications. We focus our efforts on the following selected high-volume, high-growth markets and applications:

Cellular telephone handsets. The cellular handset market is currently the largest market for DSP cores technology. Cellular telephones use DSP cores for voice compression, by which the human voice is compressed after being digitized, and channel coding, by which DSP techniques are used to encode the information. Our DSP cores are currently used in all types of digital cellular telephones and we believe they will continue to be used in the next generations of cellular telephones (2.5G and 3G). These next-generation phones are expected to incorporate video, audio and data features in addition to voice, extending the use of advanced DSP cores in their designs. Our OakDSPCore and TeakLite cores are widely used in current cellular telephones, and our Teak and PalmDSPCore offerings target the next generation of cellular telephones.

According to the market research firm, Forward Concepts, approximately 416 million cellular telephones were shipped in 2000. According to this research, our SmartCores technology was used in almost 20% of the worldwide market of DSP cores used in these telephones.

Hard disk drives. Hard disk drive controllers are an important application for DSP cores. A hard disk drive controller is the chip that controls the mechanism that reads and writes data from a memory disk platter. The hard disk drive controller market is characterized by high volume and extreme price sensitivity. Programmable DSP cores are designed to meet the requirements of this market by providing flexibility in the adoption of advanced search algorithms within the controller, resulting in the capability to support higher density, lower cost disks. We believe that the compact code size, heat dissipation characteristics and flexibility of our PineDSPCore, OakDSPCore and TeakLite offerings are particularly well suited to this cost competitive market.

Digital Subscriber Line applications. Digital subscriber line (DSL) technology significantly increases the bandwidth of copper telephone lines for data transmission. The use of DSL-related applications is driven by the increasing demand for high-speed connectivity to the Internet.

A programmable DSP core is used primarily to improve the quality of the signals received through the telephone line. By offering flexibility across multiple DSL standards, our programmable DSP solution is designed to allow a customer to re-use the same chip for different DSL markets. In addition, a programmable DSP solution allows for field upgrades of the technology as standards evolve or are enhanced. We believe our TeakLite, Teak and PalmDSPCore offerings are well suited to address the different cost and performance requirements of multiple DSL standards.

Voice-over packet network applications. Voice-over packet network technology enables the transmission of voice, along with video and data, over the same infrastructure in the form of small units of digital information (“packets”). This technology allows telecommunications operators to offer higher-value, unified services that combine fast data access, cheap voice rates and advanced voice and fax services to their customers.

DSP technology is a key element in voice-over packet network applications. Our programmable DSP technology is designed to handle:

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voice compression, by which digitally encoded speech is processed to take up less storage space and transmission bandwidth;

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echo cancellation, which involves the elimination of echoes in two-way transmissions;

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dual-tone multiple frequency (DTMF) algorithms, which produce tones that are generated when pressing buttons on touch-tone telephones;

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caller ID, which is a telephone company service that identifies the caller’s telephone number to the party that is called; and

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fax, which involves the processing and transmission of fax information over packet network.

We believe that our SmartCores family (in particular our TeakLite, Teak and PalmDSPCore) is an attractive solution for these applications, because they provide a low-power, cost-effective, programmable platform for the local area network (LAN) and packet-based telephony markets. Our Teak and TeakLite cores are designed to provide a low power consumption, low-cost solution for small to middle size residential gateways and integrated accesses devices. Our PalmDSPCore is designed to provide higher performance and can be embedded in multi- channel, multi-service central office gateways, where channel density and heat dissipation are the most important factors.

Consumer audio applications. Consumer electronics constitute a large market for DSP cores technology. Digital versatile disc (DVD) players and digital set-top boxes require DSP cores for their high fidelity audio features. In addition, recent improvements in the speed of Internet connections have provided the ability to easily download music from the Internet. This has created a significant market for DSP-based portable players (such as MP3 players) that decode high quality audio. Furthermore, we expect demand for digital audio to expand to the home audio market in the future. DSP cores technology is used to decode the compressed data being downloaded from the Internet or retrieved from the on–board memory or disk that stores the high-fidelity audio data. Although not currently deployed for this purpose, DSP cores technology may also be used in the future to enhance the security of digital stored media by preventing unauthorized copies or downloads of audio and visual data.

Our technology can be used in low-power, price-sensitive semiconductor products targeted specifically to the portable audio market. In addition, our 24-bit PalmDSPCore can easily be used for current audio compression algorithms.

Digital still cameras. Digital still cameras are a relatively new, yet fast-growing, market. Digital still cameras use a DSP chip to adjust the contrast and detail of the image captured by the lens and to compress the digital data for storage on the memory card. Our OakDSPCore, TeakLite and Teak offerings provide a low-power, cost-effective and programmable platform for this application.

IP Platforms Licensing Business

The continuing evolution of the consumer electronics market has created significant demand for semiconductor intellectual property providers that can add greater value by delivering the complete system solutions that combine RF, mixed-signal and DSP cores technology, as well as related software—which we refer to as platform-level IP. This approach permits our customers to introduce feature-rich products while simultaneously minimizing their development cost, risk, complexity and time to market. We also offer our technology in discrete building blocks for specific functions that our customers use to develop complete systems and products.

Our platforms are licensed and deployed by some of the world’s largest semiconductor companies and OEMs in wireless communications devices, Internet appliances, GPS devices, Internet audio products and other consumer electronic devices. Our current platforms include:

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BlueStream. BlueStream is highly functional platform supporting Bluetooth communications—an emerging standard for wireless communications among electronic devices over short distances. This

platform includes a comprehensive radio component; a digital baseband, offered both in baseband IP and as a full system-on-a-chip; and a complete software stack designed for baseband and host interface.

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NavStream. NavStream is a complete GPS platform delivering precise location information (less than five meters within five seconds) to any device, including mobile phones, personal digital assistants (PDAs), and GPS-enabled vehicles, anywhere in the world. One of the key differentiators of the NavStream platform is its ability to track GPS signals and determine a user’s location indoors. NavStream is one of the few technologies that comply with the U.S. Federal Communications Commission’s e-911 Location Accuracy Directive, which requires that all mobile telephones enable the location of the caller to be determined to within 150 meters.

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InfoStream. InfoStream is a mobile computing platform for the next generation of wireless devices, including 3G “smart” cellular phones, PDAs, Internet appliances and home entertainment/multimedia devices. The platform was developed in conjunction with Psion and delivers high performance, low power consumption and high levels of on-chip integration.

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MobiStream. MobiStream is an advanced platform for applications using the GPRS (general packet radio services) mobile communications standard. This platform combines high data rates and integrated multimedia on low baseband power consumption solutions. In 2002, we also entered into an agreement with UbiNetics, a leading provider of 3G technology based on the W-CDMA wireless communications standard, that will allow us to integrate UbiNetics’ technology with the MobiStream technology to create a full multi-mode 2.5G/3G platform.

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MachStream. MachStream is a high-performance modular silicon platform that accelerates critical mobile-Internet applications, including multimedia, security, Java and next-generation browser scripting languages, while delivering significant improvements in the power efficiency and cost levels required for mobile devices.

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In8Stream. In April 2002, we announced the launch of In8Stream, a multi-mode wireless local area network (WLAN) platform employing the 802.11 standard for wireless communications between electronic devices over short distances. In8Stream targets the entire range of 802.11 WLAN standards through a single, flexible architecture.

Each of the IP platforms described above has been developed for a specific end-market. They all adhere, however, to the specifications of our open, flexible and highly power-efficient architecture, which allows the rapid integration of our platforms and various third-party intellectual property into a single integrated circuit. Our solutions are based on a substantial portfolio of intellectual property that we have developed over the past nine years. This broad portfolio includes building blocks for analog integrated circuits, digital integrated circuits, systems software and other functions.

Development and Integration

We have significant expertise in the design and development of high-performance digital, analog, mixed-signal and software technology for our customers. Our development services include complete development activities, including development of specific systems or technology on a contract basis. Our policy is to retain ownership of, or rights to use, the intellectual property we develop under contract. Our integration services include consulting services to supplement or facilitate the integration of our licensed intellectual property and that of third parties into a customer’s product. In performing either development or integration services, we focus on designing comprehensive systems tailored to specific requirements, making the key design decisions and tradeoffs required to create the most competitive system for the customer while shortening their time-to-market.

We support products through manufacturing and volume production to meet customer requirements. We are able to do this because of our strength in a number of key areas, including:

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Back-end support. Our computer aided design (CAD) team develops in-house design flows. The team provides each design group working on a development project a template identifying which CAD tools to use to meet its specific design goals. The team also writes software to assure that the identified tools can be used on an integrated and seamless basis. In addition, a team of layout engineers with experience in digital, analog, radio frequency and system-on-a-chip layout processes determines the physical layout requirements for each project.

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System integration laboratory. We have an in-house capacity to test the performance of our intellectual property as embodied in silicon against a variety of parameters. This capability enables us to perform complete system-level product development combining our integrated circuit and software intellectual property.

Customers, Sales, Marketing and Technical Support

ParthusCeva Licensing Business

Our strategy is to engage in licensing and royalty agreements with leading semiconductor manufacturers and OEMs that have a track record of successful adoption and deployment of key next-generation technologies. We intend to offer complete system solutions which will include both our application-level IP platforms and our DSP cores. We anticipate that the terms of the licenses for these solutions will include both a license fee component and a royalty component.

Although the precise terms of our contracts vary from licensee to licensee, they generally require payment of an initial license fee, a re-use license fee, ongoing per-unit royalties or some combination of these fees. Under the terms of these license agreements, we may also provide integration services and technical support to help accelerate the customer’s product development cycle. Key features of these arrangements include:

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Initial license fees. Initial license fees are typically non-refundable and are generally paid in installments upon reaching defined development milestones. Our licenses are typically perpetual in duration but may in some cases be limited to fixed terms.

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Re-use license fees. A re-use license fee is payable for each new product that incorporates technology previously licensed from us. Re-use license fees are payable when a licensee sends a design using our intellectual property for manufacture in a subsequent product. Alternatively, licensees may pay a one-time buyout fee in lieu of subsequent re-use fees.

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Per-unit royalties. A per-unit royalty is paid for each product incorporating our intellectual property that is sold, supplied or distributed by the licensee. These royalties are calculated either as a percentage of the licensee’s sale price per product or as a fixed amount per unit sold. We generally give volume pricing to our licensees, and our per unit royalties rate will go down as more products incorporating our intellectual property are shipped. As products incorporating our technology are brought to market, we expect revenue from royalties to increase. We have no control, however, over when our customers will ultimately bring such products to market. Some of our licenses include prepaid royalties, in which a customer pays the royalties on a certain minimum number of products at the time we sign the license, which are typically non-refundable.

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Support and maintenance. We generally require licensees to pay a quarterly support and maintenance fee for a minimum of two years for integrated circuits and three years for software. After that mandatory period the customer may extend the support and maintenance agreement on an annual basis.

DSP Cores Licensing Business

We license our DSP core designs to leading semiconductor companies throughout the world. These companies incorporate our cores into application-specific chips or custom-designed chips that they manufacture, market and sell to OEMs of a variety of electronic products. We also license our core designs to OEMs directly. Our programmable DSP cores enable semiconductor chip manufacturers and OEMs to design flexible, cost-effective, low-power, application-specific system-on-a-chip solutions. By offering a range of performance, price and power consumption balances, our SmartCore family addresses a wide range of applications. To date, we have licensed our cores to more than 60 licensees, including Atmel, Fujitsu, Infineon Technologies, Kawasaki, LSI Logic, Mitsubishi, National Semiconductor, NEC, Oki, Philips Semiconductors, Samsung, Seiko-Epson, Sony and Tower Semiconductors.

We generate revenue from license fees and prepaid royalties as well as per-unit royalties. We currently license our cores together with our advanced software development tools to enable our licensees to incorporate our DSP core designs into their semiconductor chip products. In addition, we typically license our SmartCores together with technical support services, for which our licensees pay us an annual support fee.

Technical Support of the DSP Cores Licensing Business

We offer technical support services through our offices in Israel and the United States, as well as through the Japanese subsidiary of DSP Group, which will provide us with dedicated employees to provide various technical support services to our customers. Each of our independent sales representatives in Southeast Asia also maintains engineers who provide technical support services for our products. Our technical support services include:

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technical support, consisting of assisting with implementation, responding to customer specific inquiries, training and, when and if they become available, distributing updates and upgrades of our products;

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application support, consisting of providing general hardware and software design examples, ready to use software modules and guidelines to our licensees to assist them in using our technology; and

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design services, consisting of creating customer specific implementations of our DSP cores. These revenues have not been significant to date.

We believe that our customer technical support services are key factors in our licensees’ ability to embed our SmartCores in their designs and products. Our technology is highly complex, combining sophisticated DSP cores architecture, integrated circuit design and development tools. Effective customer support is critical in helping our customers implement programmable DSP core-based solutions and helps to shorten the time to market of their DSP-based applications. To provide this high quality support, our support organization is made up of experienced engineers and professional support personnel. In addition, we conduct detailed technical training for our licensees and their customers and visit our licensees on a regular basis to closely track the implementation of our technology.

IP Platforms Licensing Business

Our strategy is to engage in licensing and royalty agreements with leading semiconductor manufacturers and OEMs that have a track record of successful adoption and deployment of key next generation technologies. In total, our IP platform licensing business has executed 80 licensing agreements through March 2002, 54 of which have royalty components. Licensees include 3Com, Agilent, ARM, Cirrus Logic, Creative Technology, Fujitsu, Hitachi, Infineon Technologies, Macom, Maxim, Motorola, National Semiconductor, nVidia, Prariecomm, Psion, Samsung, Sharp Microelectronics, Sigmatel, Sony, STMicroelectronics, Tripath, Ubinetics, and T-blox. STMicroelectronics accounted for approximately 67% of Parthus’ total revenue in 1999, 39% in 2000 and 31% in 2001.

Maintaining close relationships with our customers is a core part of our strategy. We typically launch each new platform or platform upgrade with a signed license agreement with a blue-chip customer, which helps ensure that we are clearly focused on viable applications that meet broad industry needs. Strengthening these relationships is a significant part of our strategy. It allows us to create a roadmap for the future development of existing platforms, and it helps us to anticipate the next potential applications for the market. We seek to use these relationships to deliver new platforms in a faster time to market through our research and development base.

We license to our customers complete platform solutions to perform specific application functions. These solutions typically incorporate both intellectual property to be embodied on a silicon chip and intellectual property in the form of software. On occasion we enter into portfolio licensing agreements whereby a customer licenses multiple platforms. By entering into a portfolio license, our customers have access to multiple technology platforms in our portfolio, enabling them to obtain from one supplier all of the IP required to build next-generation electronic devices. We believe that portfolio license arrangements will generally be larger than other license agreements and will allow us to develop close, strategic long-term relationships with our portfolio license customers. Although the precise terms of each of our contracts vary from licensee to licensee, they generally require payment of an initial license fee, a re-use license fee, ongoing per-unit royalties or some combination of these fees. Under the terms of these license agreements, we may also provide integration services to help accelerate the customer’s product development cycle.

In addition, we enter into collaborative agreements for the sale or distribution of our products where the third party can provide additional access to special expertise or potential customers. For example, in February 2002, we entered an agreement with UbiNetics that will enable Parthus to market the UbiNetics multi-mode wireless communications solution as part of our portfolio of platform-level IP and license the solution through our global sales channel and semiconductor relationships.

Sales Force of ParthusCeva

Our combined sales and marketing force numbers approximately 50 people. We have a total of 15 sales offices, located in Atlanta, Georgia; Dallas, Texas; San Diego, California; San Jose, California; Dublin, Ireland; Herzeliya, Israel; Hong Kong, China; Seoul, Korea; Tokyo, Japan; Taipei, Taiwan; Northampton, England; Helsinki, Finland; Stockholm, Sweden; Munich, Germany; and Caen, France. We have also contracted with additional sales representatives to further our coverage of other significant customers in key geographic areas, including Japan and the U.S. For sales in Japan and Europe we use the services of DSP Group in its Tokyo and Sophia Antipolis, France offices. We also have independent sales representatives covering Southeast Asia in Hong Kong, South Korea and Taiwan. In addition, we systematically conduct sales prospecting from principal offices, and the sales leads are distributed to our regional offices and representatives.

Marketing of ParthusCeva

We use a variety of marketing initiatives to stimulate demand and brand awareness in our target markets. These marketing efforts include presenting at key industry trade shows and conferences, distributing global press releases, organizing customer seminars, posting information on our website, issuing periodic newsletters and producing marketing materials. In addition, we have established co-marketing programs with our strategic alliance partners and customers.

Our marketing and business development department participates in refining our intellectual property offerings to address new specific market needs and to use our brand name and strategic relationships to reach and create demand within system OEMs and semiconductor companies.

Our marketing department is responsible for defining the road map for our next generation of our IP platforms and DSP cores and their key features. In defining the road map, the marketing department coordinates with our sales and research and development departments to take into consideration future trends in semiconductor technology, including DSP cores architectures and digital signal processing algorithms, and competitive positioning of our products. Our marketing department also runs competitive analyses to help us maintain our competitive position.

Technology Partners

DSP Cores Licensing Business

We have established relationships with a network of independent third parties that provide services and technologies complementary to ours, including leading service companies such as Tality, design tool vendors such as Cadence, Mentor and Synopsys, and real time operating systems (RTOS) vendors such as CMX, multi-core debugger vendors such as Allant (a subsidiary of ARM Holding) and DSP software companies such as Espico, Ensigma and Vocal. We believe that these third-party partners offer existing and potential users of our technologies value-added solutions and help to establish our DSP cores as an industry standard.

IP Platforms Licensing Business

We maintain close relationships with companies in what we believe to be three key areas of the semiconductor industry: pure contract manufacturers of silicon chips, referred to as silicon foundries (including Taiwan Semiconductor Manufacturing Company and United Microelectronics Corporation (UMC)); providers of block-level semiconductor intellectual property; and operating system and application software developers.

With respect to other intellectual property providers, we have historically worked with a number of leading companies in this field to integrate their intellectual property into our systems. We continue to develop these relationships.

We have also developed close relationships with external software providers to further enhance our offerings. We formed an alliance with Symbian, a company formed by Ericsson, Matsushita, Motorola, Nokia and Psion to develop and promote an industry-wide standard operating system for mobile computing, on the first deployment of InfoStream. We have also completed a system integrator license with Microsoft which enables us to integrate either Pocket PC or Smartphone software technologies with our InfoStream hardware platform, and market the combined solution to semiconductor manufacturers and OEM customers.

Research and Development

Our future competitive position will largely depend on our ability to develop new generations of IP platforms and DSP cores in a timely manner to meet the evolving and rapidly changing requirements of our target markets. Towards this end, we intend to maintain significant research and development teams dedicated to developing new technological solutions and new versions of our existing technology.

As we integrate the businesses and workforces of Parthus and Ceva, we anticipate that we will be able to combine the complementary technical skills of the research and development personnel of the two companies to further enhance our competitive advantage. We also expect to continue to invest substantial funds and personnel resources in research and development activities.

DSP Cores Licensing Business

All of our DSP cores and related development tools have been developed internally by our research and development team. Our first product was introduced in 1991. Since then we have introduced five new generations of products with enhanced performance and one DSP core-based subsystem. We have also continuously sought to improve our existing line of products.

Our DSP cores licensing business research and development team consists of 43 employees. Our research and development expenses, net of related non-refundable research grants from the Office of Chief Scientist magnet programs in Israel, were $5.1 million in 2001, $4.8 million in 2000 and $3.2 million in 1999. Nearly all of the IP for our DSP cores licensing business has been developed internally.

Our research and development team consists of engineers who possess significant experience in developing advanced programmable DSP cores. We believe that our strengths are in our expertise in digital signal processing algorithms coupled with our deep understanding of processor architectures. These strengths allow us to design processors to run licensee-designed software that consumes less power and requires smaller memory space.

Our research and development projects are focused in three areas: product improvement, next generation product evolution and future product revolution.

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Product improvement is the process of making incremental modifications to our SmartCores designs that enhance their performance and ease of implementation. In addition, we continuously enhance our development tools by adding features to improve the productivity of the software development process.

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Next-generation product evolution is the process of developing new products, based on the same design concepts as the current generation, with substantially better performance and significant new features.

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Future product revolution is the process of developing new products that represent a significant departure from previous generation design concepts and which incorporate evolving trends in processor architecture.

Our research and development projects are initiated based on new technology trends, emerging applications and inputs from customers and our sales and marketing personnel. We have a budgeting process in which we assess each project, establish financial goals and targets and assign resources. We monitor our projects through a variety of processes. We have frequent staff meetings to update our staff on progress and share information. We also conduct regular project reviews with the participation of management, sales, marketing and customer support. In these meetings we review a number of aspects of the project including human, financial and technical resources used and required in the future, achievement of milestones and problems encountered. In addition, we re-evaluate the project in light of the initial definition and current market conditions.

IP Platforms Licensing Business

Since 1993, our IP platform licensing business has developed a core intellectual property portfolio that includes a broad array of high-performance analog, digital and software building blocks that provide optimum cost performance for applications, especially in the mobile-Internet market. This business has 280 full-time research and development staff located at eight development sites in Ireland, the United States and the United Kingdom. A significant number of our IP platforms research and development staff have advanced degrees. These individuals have expertise in all the disciplines required to take a product from conception through design and into volume manufacturing, including:

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systems architecture, including modeling and partitioning;

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analog and mixed-signal technology;

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IP integration for system-on-a-chip development;

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software development; and

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systems integration.

Research and development efforts for our IP platforms business are focused on delivering further innovative solutions that offer clear benefits to our customers in the areas of:

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faster and higher performance, which is essential for the take-up of new services or content;

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lower power requirements, which is critical for battery life;

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smaller and lighter chip components, for better overall product design;

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easier manufacturing of extremely complex technology; and

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higher value at lower cost.

Our IP platforms licensing business is involved in research programs with a number of university and independent research groups worldwide. These include both student sponsorships at undergraduate, masters and doctorate levels, and joint research programs. In addition, several members of our staff work one day per week at affiliated academic institutions, providing a strong link to the faculty and student bodies. We also encourage our research and development personnel to maintain active roles in the various international organizations that develop and maintain standards in the electronics and related industries. This involvement allows us to influence the development of new standards; keeps us informed as to important new developments regarding standards; and allows us to demonstrate our expertise to customers and potential customers who also participate in these standards-setting bodies.

Proprietary Rights

Our success and ability to compete are dependent on our ability to develop and maintain the proprietary aspects of our intellectual property and to operate without infringing the proprietary rights of others. We rely on a combination of patent, trademark, trade secret and copyright laws and contractual restrictions to protect the proprietary aspects of our technology. These legal protections afford only limited protection of our technology. We also seek to limit disclosure of our intellectual property and trade secrets by requiring employees and consultants with access to our proprietary information to execute confidentiality agreements with us and by restricting access to our source code and other intellectual property. Due to rapid technological change, we believe that factors such as the technological and creative skills of our personnel, new product developments and enhancements to existing products are more important than specific legal protections of our technology in establishing and maintaining a technology leadership position.

We have an active program to protect our proprietary technology through the filing of patents:

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In connection with our DSP cores licensing business, we hold three U.S. patents, with expiration dates between 2013 and 2019, and have 16 patent applications pending in the United States, 11 pending in Israel, four pending in Japan, four pending in Europe and four pending in South Korea.

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In connection with our IP platform licensing business, we currently hold 16 U.S. patents, with expiration dates between 2011 and 2020, and 13 non-U.S. patents on various aspects of our technology. We also have 39 patent applications pending in the United States and an additional 20 pending in the United Kingdom and other jurisdictions.

We actively pursue foreign patent protection in other countries where we feel it is prudent to do so. Our policy is to apply for patents or for other appropriate statutory protection when we develop valuable new or improved technology. The status of patents involves complex legal and factual questions, and the breadth of claims allowed is uncertain. Accordingly, we cannot assure you that any patent application filed by us will result

in a patent being issued, or that our issued patents, and any patents that may be issued in the future, will afford adequate protection against competitors with similar technology; nor can we provide assurance that patents issued to us will not be infringed or that others will not design around our technology. In addition, the laws of certain countries in which our products are or may be developed, manufactured or sold, may not protect our products and intellectual property rights to the same extent as the laws of the United States. We can provide no assurance that our pending patent applications or any future applications will be approved or will not be challenged by third parties, that any issued patents will effectively protect our technology, or that patents held by third parties will not have an adverse effect on our ability to do business.

The semiconductor industry is characterized by frequent litigation regarding patent and other intellectual property rights. Questions of infringement in the semiconductor field involve highly technical and subjective analyses. Litigation may in the future be necessary to enforce our patents and other intellectual property rights, to protect our trade secrets, to determine the validity and scope of the proprietary rights of others, or to defend against claims of infringement or invalidity. We cannot assure you that we would be able to prevail in any such litigation, or be able to devote the financial resources required to bring such litigation to a successful conclusion.

In any potential dispute involving our patents or other intellectual property, our licensees could also become the targets of litigation. We are generally bound to indemnify licensees under the terms of our license agreements. Although our indemnification obligations are generally subject to a maximum amount, these obligations could nevertheless result in substantial expenses. In addition to the time and expense required for us to indemnify our licensees, a licensee’s development, marketing and sale of products embodying our solutions could be severely disrupted or shut down as a result of litigation.

We also rely on trademark, copyright and trade secret laws to protect our intellectual property. PalmDSPcore, PineDSPcore, OakDSPcore, OCEM, TeakDSPcore, Pine, Teak and Teaklite are United States registered trademarks of ParthusCeva or its affiliates. Parthus, the Parthus logo and BlueStream are European Community trademarks of ParthusCeva or its affiliates. The registration of the following trademarks is pending in the United States: ParthusCeva, the ParthusCeva logo, Ceva, the Ceva logo, SmartCores, Assyst, Parthus, the Parthus logo, MachStream, MobiStream, WarpStream, MediaStream, BlueStream and NavStream. Application for the following trademarks is pending in other jurisdictions: ParthusCeva, the ParthusCeva logo, Ceva, the Ceva logo, SmartCores, Assyst, Parthus, the Parthus logo, MachStream, MobiStream, WarpStream, MediaStream, InfoStream, BlueStream and NavStream. The following trademarks are in use: PalmASSYST, PINE ASSYST SIMULATOR, XpertTeak, XpertDSP, XpertPalm, OpenKey, DSCKey, VoPKey, EDP, SmartCores Enabled, PDKit, ODKit, TLDKit, TDKit and In8Stream.

Competition

We believe that the combination of Parthus and Ceva will position us to offer a unique range of solutions, including one of the most comprehensive offerings of DSP cores and IP platforms. We anticipate, however, that we will continue to face much of same competitive environments historically faced by our separate DSP cores and IP platforms licensing businesses.

DSP Cores Licensing Business

The programmable DSP cores market is highly competitive and is characterized by rapid technological change due to, among other things, the increasing demand for software-based DSP solutions for the emerging wireless, telecommunications and multimedia applications. These trends lead to frequent product introductions, short product life-cycles and increased product capabilities, typically representing significant performance, power consumption and cost improvements in each new generation of products.

We compete with other suppliers of licensed programmable DSP cores and with suppliers of other DSP solutions. We believe that the principal competitive factors of a programmable DSP-based system are processor

performance, overall system cost, power consumption, flexibility, reliability, software availability, ease of implementation, customer support and name recognition.

The market is dominated by large, fully integrated semiconductor companies that have significant brand recognition, a large installed base and a large network of support and field application engineers. We face direct and indirect competition from:

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intellectual property vendors that offer programmable DSP cores;

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intellectual property vendors of general purpose processors with DSP extensions;

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internal design groups of large chip companies that develop proprietary DSP solutions for their own application-specific chips; and

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semiconductor companies that offer off-the-shelf programmable DSP chips.

According to Gartner-Dataquest, our products accounted for approximately 69% of the market for licensed programmable DSP cores in 2001. We face direct competition mainly from various private intellectual property companies such as BOPS, Improv and 3DSP. In addition, some large chip manufacturing companies such as Infineon Technologies and LSI Logic make their proprietary DSP technology available for license to create a second source for their technology.

In recent years, we have also faced competition from companies that offer microcontroller/ microprocessor intellectual property. These companies’ products are used for control and system functions in various applications, including personal digital assistants and video games. Embedded systems typically incorporate both microprocessors responsible for system management and a programmable DSP that is responsible for communication and video/audio/voice compression. Recently, companies such as ARC, ARM Holdings, MIPS, and Tensilica have added a DSP extension to their products in addition to the microcontroller functions, which may successfully compete with our designs in applications that involve low to moderate DSP performance requirements.

With respect to certain large potential customers, we also compete with their internal engineering teams supplying programmable DSP cores, who may design products for use by other divisions internally, rather than licensing our products. These companies, which include Fujitsu, NEC and Philips, both license our designs for some applications and use their own proprietary cores for other applications. In the future, such companies may choose to license their proprietary DSP cores to third parties and, as a result, become direct competitors.

We also compete indirectly with several general purpose programmable DSP semiconductor companies, such as Agere Systems, Analog Devices, Motorola and Texas Instruments. These companies have proprietary chip technologies that can be accessed only as part of their semiconductor products, while our technology is licensed to multiple vendors. OEMs may prefer to buy general purpose chips from large, established semiconductor companies rather than license our products. In addition, the general purpose semiconductor companies are major competitors of semiconductor companies that license our technologies. It is also possible that in the future these DSP semiconductor companies may choose to license their proprietary DSP cores to third parties and compete directly with us.

Our SmartCores architecture is a leading independent DSP technology licensed to other companies, which we make available together with a full package of design tools and technical support. We believe that designs using our SmartCores architecture offer a high performance level along with small memory size and low-power consumption. In addition, our experience in designing and licensing programmable DSP cores can help semiconductor companies and system OEMs to create a competitive system-on-a-chip solution that takes advantage of our licensees’ proprietary intellectual property as well as ours.

IP Platforms Licensing Business

Given the rapid rates of technological change and of new product introductions in our target markets, we believe that a key competitive factor in these markets is whether a solution allows manufacturers to deliver the performance and features demanded by their target markets more quickly than their competitors can. Because of our complete platform approach and our strong resources in key areas such as mixed-signal technology, we believe that we are extremely competitive in delivering complete solutions that meet the requirements of our customers. In addition, we believe that the difficulty of attracting an adequate number of qualified technical staff, particularly in the areas of analog and mixed signal technology, coupled with the difficulty of combining know-how across the range of technologies required to provide a complete solution in this market area, present substantial barriers to entry for new entrants into this area. Other important competitive factors include price, product quality, design cycle time, reliability, performance, customer support, name recognition and reputation and financial strength.

Given our reliance on relationships with a number of leading companies in the semiconductor and electronics industry, our competitive position is dependent on the competitive positions of those companies. In addition, the companies with whom we have relationships do not license our intellectual property exclusively, and several of them also design, develop, manufacture and market products based on their own intellectual property or on other third-party intellectual property. They therefore often compete with each other and with us in various applications.

We compete with a variety of companies, ranging from smaller, niche semiconductor design companies to large semiconductor manufacturers and OEMs, many of whom are our customers. We believe that our principal competition comes from the in-house research and development teams of such manufacturers, many of whom have significantly greater financial and/or technical resources than we do. In addition, we must in such cases overcome any organizational bias against out-sourced solutions before we can compete successfully.

Aside from the in-house research and development groups of such manufacturers, we do not compete with any individual company across the range of our market offerings. Within particular market segments, however, we do face competition to a greater or lesser extent from other industry participants. For example, in the following specific areas we compete with the companies indicated:

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in the Bluetooth and 802.11 technology arenas—with NewLogic and Tality;

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in the GPS market—with SiRF, Snaptrack and Trimble;

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in the GPRS and W-CDMA markets—with TTPcom; and

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in the Internet audio market—with Micronas, e.Digital and Xaudio.

We cannot be certain that we will have the financial resources, technical expertise, and marketing or support capabilities to compete successfully in the future.

Employees

The table below presents the number of our employees as of March 31, 2002 (giving effect to the combination of Ceva and Parthus), by function and geographic location.

Total employees		426

Function
Research and development		323
Sales and marketing		53
Technical support		10
Administration		40

Location
Ireland		228
Israel		59
United States		57
United Kingdom		62
Elsewhere		20

Our employees are not represented by any collective bargaining agreements, and we have never experienced a work stoppage. We believe our employee relations are good.

Competition for personnel in the semiconductor and software industries in general has historically been intense. We believe that our future prospects will depend, in part, on our ability to continue to attract and retain highly skilled technical, marketing and management personnel. In particular, there is a limited supply of highly qualified engineers with analog, mixed-signal and digital signal processing experience.

A number of our employees are located in Israel. Certain provisions of Israeli law and of the collective bargaining agreements between the Histadrut (General Federation of Labor in Israel) and the Coordination Bureau of Economic Organizations (the Israeli federation of employers’ organizations) apply to our Israeli employees.

In addition to our own employees, certain employees of DSP Group and its subsidiaries in Japan and France historically have performed sales and technical support activities for us; the costs associated with these employees have been allocated to us. Going forward, these DSP Group’s sales and technical support people will continue to provide services to ParthusCeva and will charge ParthusCeva the cost of providing such services at agreed-upon prices and fees.

Facilities

Our headquarters are located in San Jose, California and we have principal offices Dublin, Ireland and Herzeliya, Israel.

We lease land and buildings for our executive offices, engineering, sales, marketing, administrative and support operations and design centers. The following table summarizes information with respect to the principal facilities leased by us:

Location	Area (Sq. Feet)	Principal Activities
San Jose, CA, U.S. (Headquarters)	10,000	Sales, marketing, engineering, administration.

Dublin, Ireland (Principal Office)	32,700	Executive offices, engineering, sales, marketing, administration.

Herzeliya, Israel (Principal Office)	10,170	Executive offices, engineering, sales, marketing, administration.

Cork, Ireland	10,000	Engineering, marketing, administration.

Limerick, Ireland	4,000	Engineering, marketing.

Belfast, Northern Ireland	8,000	Engineering, marketing.

Northampton, England	18,000	Engineering, marketing, administration.

Austin, TX, U.S.	10,400	Research and development, marketing, administration.

Caen, France	550	Research and development.

Our Israeli facility is subleased from DSP Group; the sublease on this space expires in November 2003 with an option to extend the lease for up to five additional years upon nine months prior notice and an option to terminate it upon three months prior notice.

Legal Proceedings

None of Ceva, Parthus or DSP Group is currently, nor have any of them in the last 12 months been, involved in any legal or arbitration proceedings that have or, in the last 12 months have had, a significant effect on our or their financial position or results of operations. We are not aware of any threatened or potential legal or arbitration proceedings that could have a significant effect on our financial position or results of operations.

MANAGEMENT

Executive Officers and Directors

Below we identify the people who serve as our executive officers and directors (giving effect to the combination of Ceva and Parthus), as well as their ages as of May 1, 2002:

Name	Age	Position(s)
Eliyahu Ayalon	59	Chairman of the Board of Directors

Brian Long	45	Vice Chairman of the Board of Directors

Kevin Fielding	39	Chief Executive Officer and Director

Zvi Limon(1)	43	Director

Bruce A. Mann(2)	67	Director

William McCabe(1)(2)	44	Director

Sven-Christer Nilsson(1)(2)	58	Director

Louis Silver(1)(2)	48	Director

Gideon Wertheizer	45	Executive Vice President—Business Development and Chief Technology Officer

Eoin Gilley	40	Chief Operating Officer

Elaine Coughlan	30	Chief Financial Officer

William McLean	44	Vice President—Sales

Issachar Ohana	36	Vice President and General Manager of the DSP Intellectual Property Licensing Division

(1)

Member of compensation committee

(2)

Member of audit committee

Eliyahu Ayalon has served as Chairman of our board of directors since the closing of the combination of Parthus and Ceva and as a member of our board of directors since the inception of Ceva, Inc. in November 1999. Mr. Ayalon also served as Ceva’s Chief Executive Officer from November 1999 to January 2001. Mr. Ayalon joined DSP Group in April 1996 as President, Chief Executive Officer and a member of the board of directors. In January 2000, Mr. Ayalon was appointed to serve as Chairman of the board of directors of DSP Group. Mr. Ayalon joined DSP Group from Mennen Medical, a developer and manufacturer of healthcare products, where he served as President and Chief Executive Officer from May 1992 to April 1996. Mr. Ayalon holds a B.Sc. in Electrical Engineering from the Technion-Israel Institute of Technology.

Brian Long has served as Vice Chairman of our board of directors since the closing of the combination of Parthus and Ceva. He also served as Chief Executive Officer and a member of the board of directors of Parthus from 1993 until the combination with Ceva, and was one of the co-founders of Parthus. Mr. Long has more than 20 years’ experience developing intellectual property solutions for the semiconductor industry. Prior to co-founding Parthus, Mr. Long was a chief design engineer with AT&T, a telecommunications company. Mr. Long later held corporate responsibility for mixed-signal technology development at Digital Equipment Corporation, a computer company, coordinating its cooperation with major semiconductor companies in the field of integrated circuit technology design and development. Mr. Long is the named inventor in several U.S. and European integrated circuit design patents and is currently on the board of the National Microelectronics Research Centre, Ireland. He holds undergraduate and masters degrees in Electronic Engineering from Trinity College Dublin, Ireland.

Kevin Fielding has served as our Chief Executive Officer and as a member of our board of directors since the closing of the combination of Parthus and Ceva. He served as President of Parthus from March 2001 until the combination with Ceva, and as a member of the board of directors of Parthus from November 2000 until the combination with Ceva. He served as Chief Operating Officer of Parthus from 1998 to 2001. Mr. Fielding joined Parthus from Digital Semiconductor in Boston, U.S., where he was Managing Director of Digital’s StrongARM business. He has over 18 years’ experience in the semiconductor business in the U.S. and Europe. He holds undergraduate and masters degrees in Electronic Engineering from the National University of Ireland, Cork and an MBA from Northeastern University.

Zvi Limon has served as a member of our board of directors since November 1999. He has also served as a director of DSP Group since February 1999. Mr. Limon is currently self-employed. He served as Chairman of Limon Holdings Ltd., a consulting and investment advisory firm, from October 1993 to July 2000. He holds a B.A. in economics and business administration from Bar Ilan University in France and an MBA from INSEAD Fontainebleu in France.

Bruce A. Mann has served as a member of our board of directors since April 2001. Mr. Mann has been a partner of Morrison & Foerster LLP, our legal counsel, since February 1987, and a Senior Managing Director of WR Hambrecht & Co., an investment banking firm, since October 1999. Mr. Mann holds a B.A. in business administration and a J.D. from the University of Wisconsin.

William McCabe has served as a member of our board of directors since the closing of the combination of Parthus and Ceva. He also served as a non-executive director of Parthus from 1997 until the combination with Ceva. He is the former Chairman of SmartForce plc (formerly CBT Group plc), an Irish company specializing in interactive educational software. He holds a degree in Economics from Queens University, Belfast.

Sven-Christer Nilsson has served as a member of our board of directors since the closing of the combination of Parthus and Ceva. He served as a non-executive director of Parthus from 2000 until the combination with Ceva. He is a co-founder and director of Startupfactory, a venture capital and early-stage investor headquartered in Stockholm, Sweden. Between 1982 and 1999 he held various positions with Ericsson, the telecommunications equipment supplier, including President, Ericsson Radio Systems (Sweden), Vice President, Mobile Switching Systems, Executive Vice President, Cellular Systems-American Standards, and, from 1998, Chief Executive Officer. Mr. Nilsson holds a BSc in Computer Science from the University of Lund, Sweden.

Louis Silver has served as a member of our board of directors since April 2002. He has also served as a director of DSP Group since November 1999. Mr. Silver has served as an advisor and counsel to the Discount Bank & Trust Co., an international bank, since September 1996. From April 1992 to December 1995, Mr. Silver served as Vice President, Secretary and General Counsel of Sapiens International, a provider of enterprise-wide, mission-critical business solutions. He holds an A.B. from Harvard College, an LLB from Tel Aviv University School of Law and an LLM from New York University School of Law.

Gideon Wertheizer has served as our Executive Vice President—Business Development and Chief Technology Officer since the closing of the combination of Parthus and Ceva. He also served as Ceva’s Chief Executive Officer and President from January 2001 until the combination with Parthus. Prior to joining us, Mr. Wertheizer was with DSP Group, starting in September 1990 as Project Manager of the VLSI Design Center and became Vice President of the Design Center in August 1995. In November 1997, Mr. Wertheizer was appointed Vice President—Marketing of DSP Group. In January 2000, Mr. Wertheizer was appointed Executive Vice President of Intellectual Property of DSP Group. Mr. Wertheizer holds a B.S. in Electrical Engineering from Ben Gurion University in Israel and an MBA from University of Bradford in England.

Eoin Gilley has served as our Chief Operating Officer since the closing of the combination of Parthus and Ceva. He served as Chief Operating Officer of Parthus from March 2001 until the combination with Ceva. Mr. Gilley joined Parthus from Artesyn Technologies, a provider of power conversion equipment to the

communications industry, where he spent three years and held the position of Managing Director, Europe. Previously, Mr. Gilley spent 15 years with Apple Computer, including at Apple’s European manufacturing facility plant and, most recently, in Cupertino, California, as Director of Operations for Apple’s Newton Division. From 1995 to early 1998, he held the position of Vice President/General Manager Europe with Quarterdeck International Ltd., a software provider, based in Dublin, Ireland. Mr. Gilley has a B.S. in Engineering and an MBA from Fordham University.

Elaine Coughlan has served as our Chief Financial Officer since the closing of the combination of Parthus and Ceva. She served as Chief Financial Officer of Parthus from March 2001 until the combination with Ceva, and had served as Parthus’ Vice President Finance from August 2000 to March 2001 and as its Corporate Controller from December 1999 to August 2000. Ms. Coughlan joined Parthus from IONA Technologies plc, a provider of enterprise software solutions, where she held senior financial positions including Vice President of Finance, Acting Corporate Controller, Assistant Corporate Controller and European Financial Controller. Previously she spent eight years at Ernst and Young, a public accounting firm, as a senior audit manager specializing in advising clients registered with the Securities and Exchange Commission in the technology sector and handling public offering transactions. She is an Associate of the Institute of Chartered Accountants in Ireland.

William McLean has served as our Vice President—Sales since the closing of the combination of Parthus and Ceva. He served as President, U.S. Operations and Vice President Worldwide Sales of Parthus from 1998 until the combination with Ceva. He joined Parthus from Authentec, a biometrics firm and spin-off from Harris Semiconductor, where he was Vice President and Chief Marketing Officer. Mr. McLean had joined Harris Semiconductor in 1996, serving as Vice President and General Manager of Worldwide Sales and Marketing. Mr. McLean had previously served as Vice President of OEM Sales at Fujitsu Microelectronics, and Vice President of Sales and Marketing for the start-up firm Advanced Telecommunications Modules Ltd., a provider of communications technology. Mr. McLean began his career at Texas Instruments, where he spent 12 years in various sales and marketing positions. Mr. McLean has a B.S. in Electrical Engineering from Christian Brothers University, Memphis, Tennessee.

Issachar Ohana has served as our Vice President and General Manager of the DSP Intellectual Property Licensing Division since the closing of the combination of Parthus and Ceva. Prior to joining us, Mr. Ohana was with DSP Group beginning in August 1994 as a VLSI design engineer. He was appointed Project Manager of DSP Group’s research and development in July 1995, Director of Core Licensing in August 1998, and Vice President—Sales of the Core Licensing Division in May 2000. Mr. Ohana holds a B.Sc. in Electrical and Computer Engineering from Ben Gurion University in Israel and an MBA from University of Bradford in England.

Parthus Repayment of Capital

In their capacity as shareholders of Parthus, the existing directors and executive officers of Parthus (including Brian Long), and their affiliates as a group, will receive in the aggregate approximately 31% of the $60 million cash distribution to shareholders of Parthus discussed above. Within this group, we note that those who will also serve as directors or executive officers of ParthusCeva immediately following the combination (including Brian Long), and their affiliates, will receive in the aggregate approximately 23% of the total distribution) and that Mr. Long himself will receive approximately 18.5% of the total distribution.

The $60 million cash distribution to Parthus shareholders is being made to provide an interim cash return to the Parthus shareholders and to achieve a capital structure for the combined entity that properly reflects the relative contributions of the two constituent companies.

Board Composition and Executive Officers

We currently have authorized eight directors.

Our executive officers are appointed by, and serve at the discretion of, our board of directors. Each of our officers and directors, excluding non-employee directors, devotes substantially full time to our affairs. Our non- employee directors devote such time to our affairs as is necessary to discharge their duties. There are no family relationships among any of our directors, officers or key employees.

Members of our board of directors serve one-year terms. Executive officers are elected by and serve at the discretion of the board of directors.

Board Committees

Our board of directors has established an audit committee and a compensation committee. Our audit committee reviews, acts on and reports to our board of directors with respect to various auditing and accounting matters, including the selection of our independent accountants, the scope of the annual audits, fees to be paid to the independent accountants, the performance of our independent accountants and our accounting practices. Messrs. Bruce A. Mann, William McCabe, Sven-Christer Nilsson and Louis Silver are the current members of our audit committee.

Our compensation committee establishes salaries, incentives and other forms of compensation for our executive officers and other key employees. This committee also administers our incentive compensation and stock plans. Messrs. Zvi Limon, William McCabe, Sven-Christer Nilsson and Louis Silver are the current members of our compensation committee.

Management Committee

Our company has also established a management committee consisting of Messrs. Ayalon, Long, Fielding and Wertheizer. Our bylaws provide that all material business decisions must be raised before the management committee prior to any action being taken. The management committee holds regular meetings; members of the committee do not receive any compensation for serving on the committee.

Compensation Committee Interlocks and Insider Participation

We had no compensation committee and no officers who received compensation from Ceva, Inc. prior to the separation.

Director Compensation

We do not pay directors cash compensation for their services as directors or as members of committees of our board of directors. We reimburse them, however, for their reasonable expenses incurred in attending meetings of the board of directors.

Employment Agreements

It is contemplated by the Combination Agreement that we will enter into employment agreements with Eli Ayalon, Elaine Coughlan, Kevin Fielding, Eoin Gilley, Brian Long, William McLean, Issachar Ohana and Gideon Wertheizer before the effective time of the combination.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth certain information known to us with respect to beneficial ownership of our common stock as of March 31, 2002 by:

•

each person known by us to own beneficially more than 5% of the outstanding shares of common stock after the distribution of our common stock by DSP Group and our combination with Parthus;

•

each of our directors;

•

each Named Executive Officer (see “Management—Executive Compensation”); and

•

all current executive officers and directors as a group.

Beneficial ownership is determined in accordance with the rules of the Securities and Exchange Commission. In computing the number of shares beneficially owned by a person and the percentage ownership of that person, shares of our common stock subject to options held by that person that are currently exercisable or exercisable within 60 days of March 31, 2002 are deemed outstanding. Percentage of beneficial ownership in DSP Group is based upon 26,978,910 shares of DSP Group’s common stock outstanding as of March 31, 2002. Percentage of beneficial ownership in Parthus is based upon 581,880,861 ordinary shares of Parthus outstanding as of March 31, 2002. Percentage of beneficial ownership in ParthusCeva assumes that immediately upon the closing of the separation of the DSP cores licensing business from DSP group and the combination of Ceva and Parthus the existing stockholders of DSP Group will hold 50.1%, and the existing shareholders of Parthus will hold 49.9%, of the outstanding shares of common stock of ParthusCeva (and is based on the number of shares of DSP Group common stock and the number of Parthus ordinary shares outstanding as of March 31, 2002).

To our knowledge, except as set forth in the footnotes to this table and subject to applicable community property laws, each person named in the table has sole voting and investment power with respect to the shares set forth opposite such person’s name. Except as otherwise indicated, the address of each of the persons in this table is as follows: c/o ParthusCeva, Inc., 2033 Gateway Place, Suite 150, San Jose, CA 95110-1002.

Name of Beneficial Owner	Number of Shares of DSP Group	Percentage ownership in DSP Group prior to transactions		Number of Shares of Ceva	Number of Shares of Parthus	Percentage ownership in Parthus prior to transactions		Number of Shares of ParthusCeva after transactions	Percentage ownership in ParthusCeva after transactions(1)
Eliyahu Ayalon(2)	749,949	2.7	%	400,000	—	—		644,961	1.98	%
Brian Long(3)	—	—		—	110,442,422	18.8	%	25,519,530	7.85	%
Kevin Fielding(4)	—	—		—	1,221,237	*		280,219	*
Zvi Limon(5)	33,333	*		8,000	—	—		20,066	*
Bruce Mann(6)	—	—		8,000	—	—		5,400	*
Sven-Christer Nilsson(7)	—	—		—	224,990	*		51,990	*
Louis Silver(8)	33,334	*		—	—	—		16,667	*
Gideon Wertheizer(9)	148,124	*		93,750	—	—		137,340	*
Eoin Gilley(10)	—	—		—	833,330	*		192,550	*
Elaine Coughlan(11)	—	—		—	687,900	*		15,895	*
William McLean(12)	—	—		—	554,580	*		128,140	*
Issachar Ohana(13)	15,998	*		24,000	—	—		24,198	*
All directors and executive officers as a group(14)	980,738	3.5	%	533,750	113,964,459	19.6	%	3,483,967	10.72	%

Less than 1% of the outstanding shares of DSP Group, Parthus or ParthusCeva, as the case may be.

(1)

In connection with the separation of the DSP cores licensing business, DSP Group distributed all of our outstanding shares it held to the DSP Group stockholders, and we granted options to purchase an aggregate of 2,287,355 shares of our common stock to holders of DSP Group options. In addition, in connection with our combination with Parthus we issued shares to former Parthus shareholders.

(2)

Includes 746,250 shares of DSP Group’s common stock subject to options and 400,000 shares of Ceva’s common stock subject to options held by Mr. Ayalon that are currently exercisable or will become exercisable within 60 days of March 31, 2002 (and a corresponding number of ParthusCeva shares subject to a similar option granted for each DSP Group option held by Mr. Ayalon as part of the separation and combination).

(3)

Includes 280,000 Parthus ordinary shares held by Mr. Long’s wife and 2,000,000 Parthus ordinary shares subject to an option that was exercisable as of March 31, 2002 (and which has subsequently been exercised) (and the corresponding number of ParthusCeva shares).

(4)

Includes 1,214,720 Parthus ordinary shares subject to options held by Mr. Fielding that are currently exercisable or will become exercisable within 60 days of March 31, 2002 (and the corresponding number of ParthusCeva shares subject to such option after the separation and combination).

(5)

Consists solely of 33,333 shares of DSP Group’s common stock subject to options and 8,000 shares of Ceva’s common stock subject to options held by Mr. Limon that are currently exercisable or will become exercisable within 60 days of March 31, 2002 (and a corresponding number of ParthusCeva shares subject to a similar option granted for each DSP Group option held by Mr. Limon as part of the separation and combination).

(6)

Consists solely of 8,000 shares of Ceva’s common stock subject to options held by Mr. Mann that are currently exercisable or will become exercisable within 60 days of March 31, 2002.

(7)

Consists solely of Parthus ordinary shares subject to options held by Mr. Nilsson that are currently exercisable or will become exercisable within 60 days of March 31, 2002 (and the corresponding number of ParthusCeva shares subject to such option after the separation and combination).

(8)

Includes 23,334 shares of DSP Group’s common stock subject to options held by Mr. Silver that are currently exercisable or will become exercisable within 60 days of March 31, 2002 (and a corresponding number of ParthusCeva shares subject to a similar option granted for each DSP Group option held by Mr. Silver as part of the separation and combination). Also includes 2,000 shares of DSP Group’s common stock held by the Theodore J. Silver Trust of which Mr. Silver disclaims beneficial ownership and 8,000 shares of DSP Group’s common stock held by the Adrienne Silver Trust of which Mr. Silver disclaims beneficial ownership.

(9)

Consists solely of 148,124 shares of DSP Group’s common stock subject to options and 93,750 shares of Ceva’s common stock subject to options held by Mr. Wertheizer that are currently exercisable or will become exercisable within 60 days of March 31, 2002 (and a corresponding number of ParthusCeva shares subject to a similar option granted for each DSP Group option held by Mr. Wertheizer as part of the separation and combination).

(10)

Consists solely of shares of Parthus ordinary shares subject to options held by Mr. Gilley that are currently exercisable or will become exercisable within 60 days of March 31, 2002 (and the corresponding number of ParthusCeva shares subject to such option after the separation and combination).

(11)

Consists solely of shares of Parthus ordinary shares subject to options held by Ms. Coughlan that are currently exercisable or will become exercisable within 60 days of March 31, 2002 (and the corresponding number of ParthusCeva shares subject to such option after the separation and combination).

(12)

Consists solely of shares of Parthus ordinary shares subject to options held by Mr. McLean that are currently exercisable or will become exercisable within 60 days of March 31, 2002 (and the corresponding number of ParthusCeva shares subject to such option after the separation and combination).

(13)

Includes 15,998 shares of DSP Group’s common stock subject to options and 24,000 shares of Ceva common stock subject to options held by Mr. Ohana that are currently exercisable or will become exercisable within 60 days of March 31, 2002 (and a corresponding number of ParthusCeva shares subject to a similar option granted for each DSP Group option held by Mr. Ohana as part of the separation and combination).

(14)

Includes an aggregate of (a) 975,039 shares of DSP Group’s common stock, (b) 533,750 shares of Ceva’s common stock, and (c) 5,515,520 ordinary shares of Parthus, each subject to options that are currently exercisable or will become exercisable within 60 days of March 31, 2002.

Executive Compensation

Presented below is certain information for fiscal year 2001 concerning the compensation for Eliyahu Ayalon, a member of our board of directors, and Gideon Wertheizer, our Executive Vice President—Business Development and Chief Technology Officer. We had no employees in 2001. Messrs. Ayalon and Wertheizer were the only two executive officers of DSP Group, a majority of whose compensation was allocated to us for fiscal 2001 (the “Named Executive Officers”).

Summary Compensation Table


	2001 Annual Compensation
Name and Principal Position	Salary($)(1)		Bonus($)(2)
Eliyahu Ayalon Member of the Board of Directors	$	191,522	$	210,000
Gideon Wertheizer Executive Vice President—Business Development and Chief Technology Officer	$	206,787	$	100,000
Issachar Ohana Vice President and General Manager of the DSP Intellectual Property Licensing Division	$	177,560	$	0

(1)

Salaries include social benefit payments and car allowances. With respect to Mr. Ohana, salaries also include sales commission in the aggregate amount of $54,110.

(2)

Includes bonus amounts earned in 2001 and paid in 2002.

Comparable information concerning the executive compensation for executive officers employed by Parthus during fiscal 2001 is incorporated herein by reference to Parthus’ annual report on Form 20-F filed with the Securities and Exchange Commission on May 17, 2002.

Option Grants in Fiscal Year 2001

The following table sets forth certain information for each of our Named Executive Officers concerning stock options of Ceva granted to them during the fiscal year ended December 31, 2001.

	Individual Grants
	Number of Ceva Securities Underlying Options Granted(1)	Percent of Total Options Granted(2)		Exercise Price Per Share(3)		Expiration Date(4)	Potential Realizable Value at Assumed Annual Rates of Stock Price Appreciation for Option Term(5)
		Percent of Total Options Granted(2)		Exercise Price Per Share(3)		Expiration Date(4)	5%($)		10%($)
Gideon Wertheizer	300,000	29.9	%	$	5.37	01/22/08	$	655,838	$	1,528,380

(1)

Options granted pursuant to Ceva’s 2000 Stock Incentive Plan. 25% of the options granted vest one year from the date of grant. Thereafter the remaining 75% of the options granted vest quarterly over the next three years.

(2)

In the last fiscal year, Ceva, Inc. granted options to purchase an aggregate of 1,002,740 shares.

(3)

In determining the fair market value of our common stock, our board of directors considered various factors, including our financial condition and business prospects, our operating results, the absence of a market for our common stock and the risks normally associated with high technology companies and relied significantly upon the report of Ducas Economic Planning Ltd. related to the valuation of the DSP cores licensing business. The exercise price may be paid in cash, check, promissory note, shares of our common

stock, through a cashless exercise procedure involving same-day sale of the purchased shares or any combination of such methods.

(4)

Options may terminate before their expiration dates if the optionee’s status as an employee or consultant is terminated or upon the optionee’s death or disability.

(5)

The 5% and 10% assumed annual rates of compounded stock price appreciation are mandated by rules of the Securities and Exchange Commission and do not represent our estimate or projection of our future common stock prices.

In addition, as part of the separation of the DSP cores licensing business from DSP Group and the distribution of the equity of Ceva held by DSP Group to its stockholders, each DSP Group option held by our Named Executive Officers entitled them to receive an option to purchase an equivalent number of shares of ParthusCeva’s common stock. As a result, Messrs. Ayalon, Ohana and Wertheizer received options to purchase , and shares of ParthusCeva’s common stock, respectively.

Information concerning the option grants and option exercises for executive officers employed by Parthus during fiscal 2001 is incorporated herein by reference to Parthus’ annual report on Form 20-F filed with the Securities and Exchange Commission on May 17, 2002.

Stock Plans

2002 Stock Incentive Plan

Our 2002 Stock Incentive Plan was adopted by our board of directors in 2002 and approved by our stockholders in 2002. Up to shares of our common stock, subject to adjustment in the event of stock splits and other similar events, are reserved for issuance under the 2002 Stock Incentive Plan. The 2002 Stock Incentive Plan provides that no participant may be granted awards in excess of shares of common stock in any calendar year. No options have been granted to date under the 2002 plan, which became effective as of the date of the combination with Parthus.

The 2002 Stock Incentive Plan provides for the grant of incentive stock options intended to qualify under Section 422 of the Internal Revenue Code, nonqualified stock options and restricted stock awards. Our officers, employees, directors, outside consultants and advisors and those of our present and future parent and subsidiary corporations are eligible to receive awards under the 2002 Stock Incentive Plan. Under present law, however, incentive stock options may only be granted to employees.

Optionees receive the right to purchase a specified number of shares of our common stock at a specified option price, subject to the terms and conditions of the option grant. We may grant options at an exercise price less than, equal to or greater than the fair market value of our common stock on the date of the grant. Under present law, incentive stock options and options intended to qualify as performance-based compensation under Section 162(m) of the Internal Revenue Code may not be granted at an exercise price less than the fair market value of the common stock on the date of grant, or less than 110% of the fair market value in the case of incentive stock options granted to optionees holding more than 10% of our voting power. The 2002 Stock Incentive Plan permits our board of directors to determine how optionees may pay the exercise price of their options, including by cash, check or in connection with a “cashless exercise” through a broker, by surrender of shares of common stock to us, or by any combination of the permitted forms of payment.

Our board of directors and our compensation committee have authority to administer the 2002 Stock Incentive Plan. Our board of directors or our compensation committee has the authority to adopt, amend and repeal the administrative rules, guidelines and practices relating to the 2002 Stock Incentive Plan and to interpret its provisions. Our board of directors may also delegate authority under the 2002 Stock Incentive Plan to one or more committees or subcommittees of our board of directors or to one or more of our executive officers. Subject to any applicable limitations contained in the 2002 Stock Incentive Plan, our board of directors, our

compensation committee or any other committee or executive officer to whom our board of directors delegates authority, as the case may be, selects the recipients of awards and determines:

•

the number of shares of common stock covered by options and the dates upon which such options become exercisable;

•

the exercise price of options;

•

the duration of options; and

•

the number of shares of common stock subject to any restricted stock awards and the terms and conditions of such awards, including the conditions for repurchase, issue price, and repurchase price.

Our board of directors determines the effect on an award of the disability, death, retirement, authorized leave of absence or other change in employment or other status of a plan participant.

In the event of a proposed liquidation or dissolution event, all unexercised options will become exercisable in full as of a specified period of time before the event and will terminate immediately prior to the event. Our board of directors may specify the effect of a liquidation or dissolution on any restricted stock award under the 2002 Stock Incentive Plan at the time of the grant of such award.

In the event of a merger, consolidation or exchange of all of our common stock in a share exchange transaction, all outstanding options under the 2002 Stock Incentive Plan may be assumed or substituted for by the acquiring or succeeding corporation. If the options are not assumed or substituted for by the acquiring or succeeding corporation, all unexercised options will become exercisable in full as of a specified period of time before the event and will terminate immediately prior to the event. In the event of a merger, consolidation or exchange of all of our common stock in a share exchange transaction, our rights, including repurchase rights, with respect to outstanding restricted stock awards will become the rights of the acquiring or succeeding corporation and shall apply to the cash, securities or other property into which our common stock was converted in the merger, consolidation or share exchange.

No award may be granted under the 2002 Stock Incentive Plan after 2012, but the vesting and effectiveness of awards granted before those dates may extend beyond those date. Our board of directors may at any time amend, suspend, or terminate the 2002 Stock Incentive Plan. See also “Separation of DSP Cores Licensing Business from DSP Group—Treatment of DSP Group Stock Options.”

2000 Stock Incentive Plan

In July 2000, we adopted our 2000 Stock Incentive Plan. As of March 31, 2002, there were options to purchase 2,577,700 shares of common stock outstanding under the 2000 Stock Incentive Plan with a weighted average exercise prices of $5.50 per share, no shares had been issued pursuant to the exercise of options or equity incentive awards under the 2000 Stock Incentive Plan. No further options grants will be made under the 2000 plan.

Our board of directors or a committee designated by the board administers our 2000 Stock Incentive Plan, including selecting the optionees, determining the number of shares to be subject to each option, determining the exercise price of each option and determining the vesting and exercise periods of each option. The exercise price of all incentive stock options and non-statutory stock options granted under our 2000 Stock Incentive Plan must be at least equal to the fair market value of our common stock on the date of grant. With respect to any participant who owns stock possessing more than 10% of the voting power of all our classes of stock, the exercise price of any incentive stock option granted must equal at least 110% of the fair market value on the grant date and the maximum term of any these options must not exceed five years. The maximum term of an incentive stock option granted to any other participant must not exceed ten years. The term of all other awards granted under our 2000 Stock Incentive Plan will be determined by the board or committee.

Generally, options granted under the 2000 Stock Incentive Plan (other than those granted to non-employee directors) vest at a rate of 25% of the shares underlying the option after one year and the remaining shares vest in equal portions over the following 12 quarters, such that all shares are vested after four years.

In the event a participant in our 2000 Stock Incentive Plan terminates employment, or is terminated by us other than for cause, any options which have become exercisable prior to the time of termination shall remain exercisable for twelve months from the date of termination if termination was caused by death or disability, or three months from the date of termination if termination was caused by reasons other than death or disability. In the event a participant in our 2000 Stock Incentive Plan is terminated by us for cause, his or her option shall terminate concurrently with the termination of employment, including options which have become exercisable prior to the time of termination.

In the event we merge with or into another corporation or dispose of all or substantially all of our assets, or in the event of certain other transactions in which our stockholders before the transaction own less than 50% of the total combined voting power of all our outstanding securities after the transaction, all outstanding awards under the 2000 Stock Incentive Plan will become fully vested and exercisable (but will terminate after the completion of any of these events) unless they are assumed or equivalent awards are substituted by the successor corporation or any of its parents or subsidiaries. If the successor corporation or any of its parents or subsidiaries assumes or replaces awards granted under the 2000 Stock Incentive Plan, none of the awards will be subject to accelerated vesting.

Unless terminated sooner, our 2000 Stock Incentive Plan will terminate in 2010. Our board of directors has authority to amend or terminate our 2000 Stock Incentive Plan, provided that this action will not impair the rights of any participant without the written consent of that participant. See also “Separation of DSP Cores Licensing Business from DSP Group—Treatment of DSP Group Stock Options.”

Parthus 2000 Stock Incentive Plan

In connection with our combination with Parthus, we assumed the Parthus 2000 Share Option Plan and the options under it. Each option under that plan became an option to purchase the number of shares of our common stock that the holder of such option would have received had such holder exercised the option prior to the combination and held Parthus ordinary shares, and the exercise price per share was adjusted proportionately. Otherwise, the options outstanding under this plan continue to be governed by the terms of this plan. No further options will be granted or other awards made under this plan. As of March 31, 2002, there were options to purchase 114,350,860 Parthus ordinary shares outstanding under the this plan with a weighted average exercise price of $0.67 per share. A further description of the Parthus 2000 Share Option Plan is incorporated by reference to Parthus’ annual report on Form 20-F filed with Securities and Exchange Commission on May 17, 2002.

Chicory Systems, Inc. 1999 Employee Stock Option/Stock Issuance Plan

Parthus assumed the Chicory Systems, Inc. 1999 Employee Stock Option/Stock Issuance Plan, which we refer to as the Chicory Plan, and the options granted under it, in May 2001 in connection with Parthus’ acquisition of Chicory Systems, Inc. As of June 30, 2002, there were options to purchase 1,964,185 Parthus ordinary shares outstanding under the Chicory Plan with a weighted average exercise price of $0.07 per share. No further options will be granted or other awards made under the Chicory Plan. We assumed the Chicory Plan and the options granted under it in connection with the combination of Parthus and Ceva, and all options under that plan have become options to purchase shares of our common stock. Each option under that plan became an option to purchase the number of shares of our common stock that the holder of such option would have received had such holder exercised the option prior to the combination and held Parthus ordinary shares, and the exercise price per share was adjusted proportionately. Otherwise, the options outstanding under the Chicory Plan continue to be governed by the terms of the Chicory Plan.

In the event a participant in the Chicory Plan terminates employment, or is terminated other than for cause, any options which have become exercisable prior to the time of termination remain exercisable for twelve months from the date of termination if termination was caused by death or disability, or three months from the date of termination if termination was caused by reasons other than death or disability. In the event a participant in the Chicory Plan is terminated for cause, or engages in conduct that would warrant termination for cause, his or her option terminates immediately.

In the event ParthusCeva is a party to a merger or consolidation in which securities possessing more than 50% of the total combined voting power of ParthusCeva’s outstanding securities are transferred to persons different from the persons holding those securities immediately prior to that transaction, or if ParthusCeva sells, transfers or otherwise disposes of all or substantially all of its assets in complete liquidation or dissolution, all options under the Chicory Plan shall automatically vest in full (and shall terminate, except to the extent assumed by the successor corporation) unless the options are assumed by the successor corporation or its parent, the options are replaced with a cash incentive program of the successor corporation which preserves the spread existing on the unvested option shares at the time of the transaction and provides for subsequent payout in accordance with the same vesting schedule applicable to those unvested option shares, or the acceleration of the options is subject to other limitations imposed by the administrator of the Chicory Plan at the time of the option grants.

2002 Employee Stock Purchase Plan

Our 2002 Employee Stock Purchase Plan was adopted by our board of directors and stockholders in , 2002. Our Employee Stock Purchase Plan is intended to qualify as an “Employee Stock Purchase Plan” under Section 423 of the U.S. Internal Revenue Code and is intended to provide our employees with an opportunity to purchase common stock through payroll deductions. An aggregate of 1,000,000 shares of common stock have been reserved for issuance and are available for purchase under our Employee Stock Purchase Plan, pending adjustments for stock splits, future stock dividends or other similar changes in our common stock or our capital structure.

All of our employees who are regularly employed for more than five months in any calendar year and work 20 hours or more per week will be eligible to participate in our 2002 Employee Stock Purchase Plan. All of our employees who were employed by DSP Group prior to the separation will be eligible to enroll in the initial offer period. Employees hired after the completion of the separation of the DSP cores licensing business from DSP Group and the combination with Parthus will be eligible to participate in our 2002 Employee Stock Purchase Plan, subject to a five day waiting period after hiring. Non-employee directors, consultants, and employees subject to the rules or laws of a foreign jurisdiction that prohibit or make impractical their participation in an employee stock purchase plan will not be eligible to participate in our 2002 Employee Stock Purchase Plan.

Our 2002 Employee Stock Purchase Plan designates offer periods, purchase periods and exercise dates. Offer periods will generally be overlapping periods of 24 months. Purchase periods will generally be six-month periods. The initial purchase period commenced on and ends on . Thereafter, purchase periods will commence each February 1 and August 1. Exercise dates are the last day of each purchase period. In the event we merge with or into another corporation, sell all or substantially all of our assets, or enter into other transactions in which all of our stockholders before the transaction own less than 50% of the total combined voting power of our outstanding securities following the transaction, our board of directors or a committee designated by the board may elect to shorten the offer period then in progress.

On the first day of each offer period, a participating employee will be granted a purchase right. A purchase right is a form of option that will be automatically exercised on the appropriate exercise date. During the purchase period, payroll deductions will be made with respect to participating employees and the amounts deducted will be held to purchase our common stock at the end of the purchase period. Participants in the initial offer period will be eligible to purchase shares during the first purchase period through direct payment rather

than payroll deductions. The price per share at which shares of common stock are to be purchased under our 2002 Employee Stock Purchase Plan during any purchase period is the lesser of:

•

85% of the fair market value of the common stock on the date of the grant of the option, which is the commencement of the offer period; or

•

85% of the fair market value of the common stock on the exercise date, which is the last day of a purchase period.

The participant’s purchase right is exercised in this manner on each exercise date arising in the offer period unless, on the first day of any purchase period, the fair market value of our common stock is lower than the fair market value of our common stock on the first day of the offer period. If so, the participant’s participation in the original offer period will be terminated, and the participant will automatically be enrolled in the new offer period effective the same date.

Payroll deductions may range from 1% to 10% in whole percentage increments of a participant’s regular base pay, exclusive of bonuses, overtime, annual awards, other incentive payments, reimbursements or other expense allowances, fringe benefits (cash and noncash), moving expenses, deferred compensation or commissions under any employee welfare or benefit plan. Except for the first purchase period of the initial offer period, participants may not make direct cash payments to their accounts. The maximum number of shares of common stock that any employee may purchase under our 2002 Employee Stock Purchase Plan during a purchase period is shares. U.S. tax laws impose additional limitations on the amount of common stock that may be purchased during any calendar year.

Our 2002 Employee Stock Purchase Plan will be administered by our board of directors or a committee designated by our board, which will have the authority to terminate or amend our 2002 Employee Stock Purchase Plan, subject to specified restrictions, and otherwise to administer and resolve all questions relating to the administration of our 2002 Employee Stock Purchase Plan.

TRANSACTIONS WITH RELATED PARTIES

Option Grants, Agreements and Relationships with Executive Officers and Directors

We have entered into indemnification agreements with each of our executive officers and directors, in addition to the indemnification provided in our bylaws. These agreements, among other things, provide for indemnification of our executive officers and directors for expenses, judgments, fines and settlement amounts incurred by any such person in any action or proceeding arising out of such person’s services as an executive officer or director at our request. We believe these provisions and agreements are necessary to attract and retain qualified persons as executive officers and directors.

One of our directors, Bruce Mann, is a partner of Morrison & Foerster LLP, our legal counsel.

Eli Ayalon, Chairman of our board of directors, is also a director and executive officer of DSP Group, which will provide significant transition and other services to us after the separation. See “Separation of DSP Cores Licensing Business from DSP Group.”

For a description of compensation and option arrangements we have with our executive officers and officers, see “Management—Executive Compensation.”

We occupy premises in Dublin under the terms of a lease with Veton Properties Limited. The lease term is 25 years from July 1, 1996 and has an annual rent of €380,922 (approximately $341,000). Brian Long is a minority shareholder of Veton Properties Limited.

Limitation of Liability and Indemnification Matters

See “Description of Capital Stock—Limitation of Directors’ and Officers’ Liability; Indemnification” for a description of our indemnification obligations with respect to our directors and executive officers.

DESCRIPTION OF CAPITAL STOCK

Authorized and Outstanding Capital Stock

We are authorized to issue up to 105,000,000 shares of common stock. The following description of our capital stock is a summary only and is qualified in its entirety by our Certificate of Incorporation and Bylaws, both of which were included as exhibits to the registration statement of which this information statement forms a part.

Common Stock

As of May 1, 2002, there were 20,000,000 shares of common stock outstanding. Holders of common stock are entitled to one vote per share on all matters to be voted upon by the stockholders. The board of directors may declare a dividend out of funds legally available therefor and, subject to preferences that may be applicable to any then-outstanding preferred stock and the terms of any future agreements with our debtholders, the holders of common stock are entitled to receive ratably any such dividends. In the event of our liquidation, dissolution or winding up, subject to preferences that may be applicable to any then-outstanding preferred stock, holders of our common stock are entitled to share ratably in all of our assets legally available for distribution after payment of all debts and other liabilities. Holders of our common stock have no preemptive rights or other subscription rights to convert their shares into any other securities. There are no redemption or sinking fund provisions applicable to the common stock. All outstanding shares of common stock are fully paid and nonassessable.

Preferred Stock

We are authorized to issue up to 5,000,000 shares of preferred stock that will not be designated as a particular class. Our board of directors will have the authority to issue the undesignated preferred stock in one or

more series and to determine the powers, preferences and rights and the qualifications, limitations or restrictions granted to or imposed upon any wholly unissued series of undesignated preferred stock and to fix the number of shares constituting any series and the designation of such series, without any further vote or action by the stockholders. The issuance of preferred stock, while providing desirable flexibility in connection with possible acquisitions and other corporate purposes, could decrease the amount of earnings and assets available for distribution to holders of common stock, and may have the effect of delaying, deferring or preventing a change of control of our company without further action by our stockholders and may adversely affect the voting and other rights of the holders of our common stock. At present, we have no plans to issue any shares of preferred stock.

Anti-takeover Effects of Provisions of Our Certificate of Incorporation and Bylaws and Delaware Law

Some provisions of Delaware law and some provisions which we have adopted in our certificate of incorporation and bylaws could make the following difficult:

•

acquisition of ParthusCeva by means of a tender offer,

•

acquisition of ParthusCeva by means of a proxy contest or otherwise, or

•

removal of our incumbent officers and directors.

These provisions, summarized below, are expected to discourage coercive takeover practices and inadequate takeover bids. These provisions are also designed to encourage persons seeking to acquire control of us to first negotiate with our board of directors. We believe that the benefits of increased protection of our potential ability to negotiate with the proponent of an unfriendly or unsolicited proposal to acquire or restructure us outweigh the disadvantages of discouraging such proposals because negotiation of such proposals could result in an improvement of their terms.

Stockholder Meetings . Under our bylaws, only the board of directors, the chairman of the board and the president will be able to call special meetings of stockholders.

Requirements for Advance Notification of Stockholder Nominations and Proposals . Our bylaws establish advance notice procedures with respect to stockholder proposals and the nomination of candidates for election as directors, other than nominations made by or at the direction of the board of directors or a committee of the board of directors.

Elimination of Stockholder Action By Written Consent. Our certificate of incorporation eliminates the right of stockholders to act by written consent without a meeting.

Undesignated Preferred Stock. The ability to authorize undesignated preferred stock makes it possible for our board of directors to issue preferred stock with voting or other rights or preferences that could impede the success of any attempt to change control of our company.

Delaware Anti-Takeover Law . We are subject to Section 203 of the Delaware General Corporation Law, an anti-takeover law. In general, Section 203 prohibits a publicly held Delaware corporation from engaging in a “business combination” with an “interested stockholder” for a period of three years following the date the person became an interested stockholder, unless the “business combination” or the transaction in which the person became an interested stockholder is approved in a prescribed manner. Generally, a “business combination” includes a merger, asset or stock sale, or other transaction resulting in a financial benefit to the interested stockholder. Generally, an “interested stockholder” is a person who, together with affiliates and associates, owns or within three years prior to the determination of interested stockholder status did own, 15% or more of a corporation’s voting stock. The existence of this provision may have an anti-takeover effect with respect to transactions not approved in advance by the board of directors, including discouraging attempts that might result in a premium over the market price for the shares of our common stock held by stockholders.

Amendment of Charter Provisions . The amendment of any of the above provisions would require approval by holders of at least a majority of the outstanding common stock.

Limitation of Directors’ and Officers’ Liability; Indemnification

Our Certificate of Incorporation includes provisions that limit the personal liability of our officers and directors for monetary damages for breach of their fiduciary duties as directors, except for liability that cannot be eliminated under the Delaware General Corporation Law. The Delaware General Corporation Law does not permit a provision in a corporation’s certificate of incorporation that would eliminate such liability (i) for any breach of their duty of loyalty to the corporation or its stockholders, (ii) for acts or omissions not in good faith or that involve intentional misconduct or a knowing violation of law, (iii) for any unlawful payment of a dividend or unlawful stock repurchase or redemption, as provided in Section 174 of the Delaware General Corporation Law, or (iv) for any transaction from which the director derived an improper personal benefit.

While these provisions provide directors with protection from awards for monetary damages for breaches of their duty of care, they do not eliminate such duty. Accordingly, these provisions will have no effect on the availability of equitable remedies such as an injunction or rescission based on a director’s breach of his or her duty of care. The provisions described above apply to an officer of a corporation only if he or she is a director of such corporation and is acting in his or her capacity as director, and do not apply to the officers of the corporation who are not directors.

Our Bylaws provide that, to the fullest extent permitted by the Delaware General Corporation Law, we may indemnify our directors, officers, employees and agents. In addition, we have entered into an indemnification agreement pursuant to which we will indemnify such director to the fullest extent permitted by the Delaware General Corporation Law. These agreements, among other things, provide for the indemnification of our directors and officers for certain expenses (including attorneys’ fees), judgments, fines and settlement amounts incurred by any such person in any action or proceeding, including any action by or in the right of ParthusCeva, arising out of such person’s services as a director or officer of ParthusCeva or any other company or enterprise to which such person provides services at our request to the fullest extent permitted by applicable law. We believe that these provisions and agreements will assist us in attracting and retaining qualified persons to serve as directors and officers. At present, there is no pending litigation or proceeding involving any of our directors or officers in which indemnification is required or permitted, and we are not aware of any threatened litigation or proceeding that may result in a claim for such indemnification.

Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of ParthusCeva in accordance with the provisions contained in our charter documents, Delaware law or otherwise, we have been advised that in the opinion of the Securities and Exchange Commission this indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. If a claim for indemnification against such liabilities (other than the payment by us of expenses incurred or paid by a director, officer or controlling person of ParthusCeva in the successful defense of any action, suit, or proceeding) is asserted by such director, officer or controlling person, we will, unless in the opinion of our counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by us is against public policy as expressed in the Securities Act and we will follow the court’s determination.

We maintain insurance on behalf of our officers and directors, insuring them against liabilities that they may incur in such capacities or arising out of such status.

Listing

We have filed applications to list our common stock on the Nasdaq National Market under the symbol “PCVA” and on the London Stock Exchange under the symbol “PCV.”

Transfer Agent and Registrar

The transfer agent and registrar for our common stock is American Stock Transfer & Trust Company. Its address is 6201 15th Street, Brooklyn, NY 11215, and its telephone number is (718) 921-8145 or (800) 937-5449.

SHARES ELIGIBLE FOR FUTURE SALE

Except as described below, all of the shares of our common stock distributed by DSP Group to its stockholders and issued by us to the former Parthus stockholders will be freely tradable without restriction under the Securities Act.

The shares of common stock of ParthusCeva issued to former Parthus shareholders in connection with the combination are not being registered under the Securities Act or the securities laws of any state of the United States. Such securities are instead being issued in reliance upon the exemption provided by Section 3(a)(10) of the Securities Act and applicable exemptions under state securities laws. Securities issued in connection with the combination are freely transferable under U.S. federal securities laws, except for securities held by persons who are deemed to be “affiliates” of Parthus prior to completion of the combination. Such securities held by “affiliates” may be resold by them only in compliance with the resale provisions of Rule 145 promulgated under the Securities Act or as otherwise permitted under the Securities Act.

We will grant shares of our common stock pursuant to our 2000 Stock Incentive Plan subject to restrictions. See “Management—Stock Plans—2000 Stock Incentive Plan.” We currently expect to file a registration statement on Form S-8 under the Securities Act to register shares reserved for issuance under our 2002 Stock Incentive Plan, our 2002 Employee Stock Purchase Plan, our 2002 Non-Employee Director Stock Option Program, the Parthus 2000 Share Option Plan and the Parthus-Chicory Systems, Inc. 1999 Employee Stock Option/Stock Issuance Plan.

ADDITIONAL INFORMATION

We have filed with the Securities and Exchange Commission (the “Commission”), Washington, D.C. 20549, a Registration Statement on Form 10 under the Securities Act of 1933, as amended, with respect to the common stock registered hereby. This information statement does not contain all of the information set forth in the Registration Statement and the exhibits and schedules thereto. Certain items are omitted in accordance with the rules and regulations of the Commission. For further information with respect to ParthusCeva and our common stock offered hereby, reference is made to the Registration Statement and the exhibits and schedules filed as a part thereof. Statements contained in this information statement as to the contents of any agreement or any other document referred to are not necessarily complete, and, in each instance, if such agreement or document is filed as an exhibit, reference is made to the copy of such agreement or document filed as an exhibit to the Registration Statement, each such statement being qualified in all respects by such reference to such exhibit. The Registration Statement, including exhibits and schedules thereto, may be inspected without charge at the public reference facilities maintained by the Commission in Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549, and at the Commission’s regional offices in Chicago, Illinois and New York, New York, and copies of all or any part thereof may be obtained from such office after payment of fees prescribed by the Commission. The Commission maintains a web site at http://www.sec.gov that contains reports, proxy and information statements and other information regarding registrants that file electronically with the Commission.

Copies of Parthus’ annual report on Form 20-F, filed with the Securities and Exchange Commission on May 17, 2002 are available from the Commission or upon request to ParthusCeva, Attention: Investor Relations, 2033 Gateway Place, Suite 150, San Jose, CA 95110-1002; telephone (408) 514-2900.

CEVA, INC. AND ITS SUBSIDIARIES

CONSOLIDATED FINANCIAL STATEMENTS

In U.S. Dollars

Unaudited

INDEX

		Page

Interim Consolidated Balance Sheets for the three months ended March 31, 2001 and 2002		F-2

Interim Consolidated Statements of Income for the three months ended March 31, 2001 and 2002		F-4

Interim Statements of Changes in Stockholders’ Equity and Parent Company Investment for the three months ended March 31, 2001 and 2002		F-5

Interim Consolidated Statements of Cash Flows for the three months ended March 31, 2001 and 2002		F-6

Notes to Interim Consolidated Financial Statements for the three months ended March 31, 2001 and 2002		F-7

Report of Independent Auditors for the years ended December 31, 1999, 2000 and 2001		F-13

Consolidated Balance Sheets for the years ended December 31, 2000 and 2001		F-14

Consolidated Statements of Income for the years ended December 31, 1999, 2000 and 2001		F-16

Statements of Changes in Stockholders’ Equity and Parent Company Investment for the years ended December 31, 1999, 2000 and 2001		F-17

Consolidated Statements of Cash Flows for the years ended December 31, 1999, 2000 and 2001		F-18

Notes to Consolidated Financial Statements for the years ended December 31, 1999, 2000 and 2001		F-19

F-1

CEVA, INC. AND ITS SUBSIDIARIES

INTERIM CONSOLIDATED BALANCE SHEETS

U.S. dollars in thousands

	December 31, 2001		March 31, 2002
	Note 1c		Unaudited
ASSETS
Current Assets:
Trade receivables	$	8,115	$	8,079
Other accounts receivable and prepaid expenses		319		415
Deferred income taxes		240		240
Inventories		50		109

Total current assets		8,724		8,843

Long-Term Investments:
Severance pay fund		1,084		1,160
Long term lease deposits		190		185

		1,274		1,345

Property And Equipment, Net		2,199		2,066

Total assets	$	12,197	$	12,254

The accompanying notes are an integral part of the interim consolidated financial statements.

F-2

CEVA, INC. AND ITS SUBSIDIARIES

INTERIM CONSOLIDATED BALANCE SHEETS

U.S. dollars in thousands (except share data)

	December 31, 2001		March 31, 2002
	Note 1c		Unaudited
LIABILITIES AND STOCKHOLDERS’ EQUITY AND PARENT COMPANY INVESTMENT
CURRENT LIABILITIES:
Trade payables	$	707	$	1,141
Employees and payroll accruals		2,006		1,164
Income tax payable		3,496		242
Accrued expenses		519		588
Deferred revenues		—		93

Total current liabilities		6,728		3,228

Accrued Severance pay		1,124		1,173

STOCKHOLDERS’ EQUITY AND PARENT COMPANY INVESTMENT :
Common Stock:
$0.001 par value: 100,000,000 shares authorized at December 31, 2001, and at March 31, 2002; 20,000,000 shares issued and outstanding at December 31, 2001 and March 31, 2002		20		20
Parent company’s investment		4,325		7,833
Retained earnings		—		—

Total stockholders’ equity and Parent company investment		4,345		7,853

Total liabilities and stockholders’ equity and Parent company investment	$	12,197	$	12,254

The accompanying notes are an integral part of the interim consolidated financial statements.

F-3

CEVA, INC. AND ITS SUBSIDIARIES

INTERIM CONSOLIDATED STATEMENTS OF INCOME

U.S. dollars in thousands (except per share data)

	Three months ended March 31,
	2001		2002
	(Unaudited)
Revenues:
Licenses and royalties	$	4,810	$	3,213
Technical support, maintenance and other		1,158		883

Total revenues		5,968		4,096

Cost of revenues		266		311

Gross profit		5,702		3,785

Operating expenses:
Research and development, net		1,207		1,650
Selling and marketing		628		703
General and administrative		680		693

Total operating expenses		2,515		3,046

Operating income		3,187		739
Financial income, net		106		18

Income before taxes on income		3,293		757
Taxes on income		858		242

Net income	$	2,435	$	515

The accompanying notes are an integral part of the interim consolidated financial statements.

F-4

CEVA, INC. AND ITS SUBSIDIARIES

INTERIM STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

AND PARENT COMPANY INVESTMENT

U.S. dollars in thousands (except share data)

	Common Stock			Parent company investment		Retained earnings			Total stockholders’ equity and Parent company investment
	Shares	Amount		Parent company investment		Retained earnings
Balance as of January 1, 2001 (Note 1c)	20,000,000	$	20	$	2,000	$	—		$	2,020
Net income (unaudited)	—		—		—		2,435			2,435
Capital return to Parent company (unaudited)	—		—		—		(2,435	)		(2,435	)
Contribution from Parent company (unaudited)	—		—		288		—			288

Balance as of March 31, 2001 (unaudited)	20,000,000	$	20	$	2,288	$	—		$	2,308

	Common Stock			Parent company investment		Retained earnings			Total stockholders’ equity and Parent company investment
	Shares	Amount		Parent company investment		Retained earnings
Balance as of January 1, 2002 (Note 1c)	20,000,000	$	20	$	4,325	$	—		$	4,345
Net income (unaudited)	—		—		—		515			515
Capital return to Parent company (unaudited)	—		—		—		(515	)		(515	)
Contribution from Parent company (unaudited)	—		—		3,508		—			3,508

Balance as of March 31, 2002 (unaudited)	20,000,000	$	20	$	7,833	$	—		$	7,853

The accompanying notes are an integral part of the interim consolidated financial statements.

F-5

CEVA, INC. AND ITS SUBSIDIARIES

INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS

U.S. dollars in thousands

	Three months ended March 31,
	2001			2002
	(Unaudited)
Cash flows from operating activities:
Net income	$	2,435		$	515
Adjustments required to reconcile net income to net cash provided by (used in) operating activities:
Depreciation		99			189
Decrease in trade receivables		2,373			36
Increase in other accounts receivable and prepaid expenses		(63	)		(96	)
Decrease (increase) in inventories		2			(59	)
Increase in trade payables		303			434
Decrease in employees and payroll accruals		(691	)		(842	)
Decrease in income tax payable		(2,580	)		(3,254	)
Increase in deferred revenues		888			93
Increase in accrued expenses		70			69
Increase (decrease) in accrued severance pay, net		11			(27	)

Net cash provided by (used in) operating activities		2,847			(2,942	)

Cash flows from investing activities:
Purchase of property and equipment		(691	)		(56	)
Investment in long term lease deposits		(9	)		—
Proceeds from long term lease deposits		—			5

Net cash used in investing activities		(700	)		(51	)

Cash flows from financing activities:
Capital return to Parent company		(2,435	)		(515	)
Contribution from Parent company		288			3,508

Net cash provided by (used in) financing activities		(2,147	)		2,993

Changes in cash and cash equivalents		—			—
Cash and cash equivalents at the beginning of the period		—			—

Cash and cash equivalents at the end of the period	$	—		$	—

The accompanying notes are an integral part of the interim consolidated financial statements.

F-6

CEVA, INC. AND ITS SUBSIDIARIES

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS

U.S. dollars in thousands

NOTE 1:—GENERAL

a. Background:

Ceva, Inc. (the “Company”) is currently a wholly-owned subsidiary of DSP Group, Inc. (the “Parent”). These financial statements reflect the transfer by the Parent of the DSP Core licensing business and operations and the related assets and liabilities of such businesses and operations to the Company immediately prior to the spin-off of the Company to the shareholders of the Parent (the “Separation”).

The Company is engaged in the development and license of designs for programmable Digital Signal Processor cores (“DSP Cores”). A programmable DSP Core is a special purpose, software-controlled processor that, through complex mathematical calculations, analyzes, manipulates and enhances voice, audio and video signals. The programmable DSP Cores that the Company designs are used as the central processor in semiconductor chips made for specific applications. These chips are used in a wide variety of electronic devices, including digital cellular telephones, modems, hard disk drives, MP3 players and digital cameras, and are critical to the performance of the electronic products in which they are used.

The Company licenses its software to semiconductor companies throughout the world. These semiconductor companies then manufacture, market and sell custom-designed chips to system original equipment manufacturers (OEMs) of a variety of electronic products. The Company also licenses its software directly to system OEMs.

The Company was incorporated in Delaware in November 1999. It currently has outstanding 20,000,000 shares of Common Stock, $0.001 par value, all of which are owned by the Parent. The Company was incorporated under the name DSP Cores, Inc. and changed its name to Corage, Inc. in 2001 and changed its name again to Ceva, Inc. in April 2002. The Company had no business or operations prior to the transfer of the DSP Core licensing business and operations from the Parent.

After the Separation, the Company will have two wholly-owned subsidiaries: DSP Ceva, Inc., a Delaware corporation, and Corage, Ltd., an Israeli company, which will be primarily engaged in research and development, marketing, sales, technical support and certain general and administrative functions associated with the Company’s activities.

Prior to the Combination (see Note 6) the Parent will transfer to the Company assets including intellectual property and liabilities related to the DSP Cores licensing business and operations, as well as an amount equal to the sum of $40 million in cash plus cash equal to the amount by which the transaction costs of the separation and combination exceed $2 million. The identification of the assets and liabilities to be transferred was agreed upon between the parties pursuant to the Separation Agreement (See Note 6) and related documents entered into by and between the Company, the Parent and certain of the Parent’s subsidiaries, and are not necessarily indicative of the balances of the related assets and liabilities presented in the accompanying financial statements.

b. Basis of presentation:

F-7

CEVA, INC. AND ITS SUBSIDIARIES

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

U.S. dollars in thousands

were separate entities for all periods presented. The balances of the assets and liabilities presented in the accompanying financial statements are not necessarily indicative of the balances of the assets and liabilities to be transferred upon the Separation.

Changes in Parent investment represent the Parent contribution of its net investment after giving effect to the net income of the Company plus net cash transfers to or from the Parent. Based on the Separation Agreement and related documents between the Company, the Parent and certain of the Parent subsidiaries, upon the Separation, Parent and the Company shall jointly calculate the net investment account and the Company shall pay to Parent, or Parent shall pay to the Company, as the case may be, the net amount thereof.

The Company will begin accumulating its retained earnings on the date on which the Parent transfers to the Company all of the assets and liabilities relating to the Company’s Business.

The transfer of assets, liabilities and operations of the Company’s Business from the Parent is a reorganization of entities under common control and has been accounted for in a manner similar to a pooling of interests. Accordingly, the financial statements of the Company have been restated to include the Company Business as if it had always been operated as a separate entity.

Additionally, the consolidated financial statements include allocations of certain DSP Group, Inc. corporate headquarters’ assets, liabilities and expenses relating to the Company’s Business. Management believes these allocations are reasonable. All material intercompany transactions and balances between the Company’s subsidiaries have been eliminated.

The Company utilized services from certain employees of DSP Group in Japan and France who performed marketing and technical support activities and whose costs were allocated to the Company.

The statements of income include the costs directly attributable to the Company’s Business, including charges for shared facilities, functions and services used by the Company’s Business. Certain costs and expenses have been allocated based on management’s estimates of the costs of services provided to the Company’s Business. Such costs include research and development costs, sales and general and administrative expenses. These allocations and charges are based on either a direct cost pass-through or a percentage of total costs for the services provided based on factors such as headcount or the specific level of activity directly related to such costs.

Payroll and related expenses, such as vacation, bonuses and compensation expenses, relating to the Company’s sales and marketing and research and development activities were attributed on a specific identification basis. Depreciation expenses were attributed based on the specific fixed assets attributed to the Company. General and administrative expenses, including corporate and officers’ salaries and related expenses, were attributed to the Company based on weighted ratio composed of the percentage of time that each of the administration employees spent on the Company’s activities. Rent, maintenance and other administrative expenses were attributed based on the relevant ratios such as square footage and headcount ratios. Other general and administrative expenses, such as legal and accounting fees, were attributed based on management estimations.

Management believes that the foregoing allocations were made on a reasonable basis and would not have been materially different if the Company had operated as a stand-alone entity for all periods presented; however, the allocations of costs and expenses do not necessarily indicate the costs that will have been or will be incurred by the Company on a stand-alone basis.

F-8

CEVA, INC. AND ITS SUBSIDIARIES

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

U.S. dollars in thousands

Also, the financial information included in the consolidated financial statements may not necessarily reflect the financial position, results of operations and cash flows of the Company in the future or what the financial position and results of operations would have been had it been a separate, stand-alone company during the years covered.

Interest income shown in the consolidated financial statements reflects the interest income associated with the aggregate Parent company investment amount and based on the Company’s operating income for each period, using weighted average interest rates for the applicable period, of 3.51% and 2.5% on an annual basis for the periods ended March 31, 2001 and March 31, 2002, respectively.

All of the Company’s net income recorded during the periods presented was returned to the Parent as part of the Parent’s company investment account.

c. The consolidated balance sheet as of December 31, 2001 and the balances of stockholders’ equity and Parent company investment as of December 31, 2000 and 2001, are derived from the audited consolidated financial statements as of December 31, 2001.

d. As for major customers—see Note 4(b).

NOTE 2:—SIGNIFICANT ACCOUNTING POLICIES

The significant accounting policies applied in the annual consolidated financial statements of the Company as of December 31, 2001 have been applied consistently in these financial statements.

NOTE

3:—UNAUDITED INTERIM FINANCIAL STATEMENTS

The accompanying unaudited financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information. Accordingly, they do not include all the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three months ended March 31, 2002 are not necessarily indicative of the results that may be expected for the year ended December 31, 2002.

NOTE 4:—GEOGRAPHIC INFORMATION AND MAJOR CUSTOMER DATA

a. Summary information about geographic areas:

The Company manages its business on a basis of one industry segment, the development and license of designs for programmable Digital Signal Processor (DSP) cores (see Note 1 for a brief description of the Company’s Business) and follows the requirements of Statement of Financial Accounting Standard No. 131, “Disclosures About Segments of an Enterprise and Related Information” (“SFAS No. 131”).

F-9

CEVA, INC. AND ITS SUBSIDIARIES

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

U.S. dollars in thousands

The following is a summary of operations within geographic areas:

	Three months ended March 31,
	2001		2002
	(Unaudited)
Revenues based on end customer location:
United States	$	2,681	$	1,312
Japan		1,235		268
Europe		819		557
Asia (Excluding Japan and Israel)		1,193		350
Israel		40		1,609

	$	5,968	$	4,096

	March 31,
	2001		2002
	(Unaudited)
Long-lived assets by geographical region:
United States	$	34	$	35
Israel		2,120		2,149
Other		55		67

	$	2,209	$	2,251

b. Major customer data as a percentage of total revenues:

	Three months ended March 31,
	2001		2002
	(Unaudited)
Customer A	17.5	%	*) —
Customer B	36.0	%	*) —
Customer C	18.9	%	12.58	%
Customer D	*) —		10.36	%
Customer E	*) —		29.33	%
Customer F	*) —		14.37	%

Represents a percentage lower than 10%.

NOTE 5:—SUBSEQUENT EVENTS

On April 4, 2002, the Parent, the Company and Parthus Technologies plc (“Parthus”) entered into a combination agreement (the “Combination Agreement”) pursuant to which Parthus and the Company agreed to effect a combination of their businesses, whereby the Parent contributes the DSP core licensing business and operations and the related assets and liabilities of such business and operations to the Company and Parthus is acquired by the Company in exchange for the Common Stock of the Company (the “Combination”). The combined company will be renamed ParthusCeva, Inc. (“ParthusCeva”).

F-10

CEVA, INC. AND ITS SUBSIDIARIES

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

U.S. dollars in thousands

Subject to obtaining a ruling from the U.S. Internal Revenue Services that the Separation and distribution of the Company’s Common Stock to the Parent’s stockholders will be a tax-free reorganization and approval of the Combination by the shareholders of Parthus, the Parent will distribute 100% of the equity of the Company it holds pro-rata to the Parent’s stockholders. Immediately following the Separation and distribution of stock to the Parent’s stockholders and pursuant to the Combination, the Parent will issue its Common Stock to the existing shareholders of Parthus and Parthus will become a subsidiary of the Company. As a result of these transactions, the stockholders of the Company will hold shares representing approximately 50.1% of the Common Stock of ParthusCeva and the former shareholders of Parthus will hold shares representing approximately 49.9% of the Common Stock of ParthusCeva.

The following agreements were signed with respect to the mentioned transactions:

Separation Agreement:

The Separation Agreement contains the key provisions relating to the Company’s separation from the Parent and the distribution of the Company’s Common Stock to the Parent’s stockholders.

The Separation Agreement provides for the transfer to the Company of the assets and liabilities from the Parent related to the DSP core licensing business in exchange for a capital contribution from the Parent to the Company as inter-company account between them, and by the issuance of additional shares by the Company to the Parent. Further, in accordance with the Separation Agreement, DSP Group, Ltd. (“DSPGL”), a subsidiary of the Parent, will transfer to the Parent all of the share capital of its subsidiary, Corage, Ltd., which the Parent will contribute to the Company. The Company will subsequently contribute the Corage, Ltd. Common Stock to DSP Ceva, so that, following the Separation, Corage, Ltd. is a wholly-owned subsidiary of DSP Ceva. The various ancillary agreements that are exhibits to the Separation Agreement (or forms thereof mutually agreed upon by the parties) detail the Separation and various interim and ongoing relationships among the Parent and the Company and their respective subsidiaries following the Separation. They include:

—

a technology transfer agreement whereby the Parent transfers and/or assigns certain technology, third party licenses and other contracts to the Company;

—

a technology transfer, assignment and assumption agreement whereby the Company transfers and/or assigns the technology, as well as the Company’s rights under the technology transfer agreement, to DSP Ceva;

—

a technology transfer agreement whereby DSPGL transfers and/or assigns certain technology, third party licenses and other contracts to Corage, Ltd.;

—

a transition services agreement among the Parent, the Company and DSP Ceva, Inc. whereby the Parent will provide certain administrative and other services to the Company and DSP Ceva, Inc. in exchange for reimbursement of the cost of providing such services;

—

a transition services agreement between DSPGL and Corage, Ltd. whereby DSPGL and the subsidiaries of the Parent, Nikon DSP K.K. and DSP Group Europe Sarl, will provide certain administrative and other services to Corage, Ltd. in exchange for reimbursement of the cost of providing such services; and

—

a tax indemnification and allocation agreement between the Parent and the Company whereby the allocation of various federal, state, local and foreign tax liabilities between the Company and other members within the Parent’s consolidated tax reporting group during the period the Company was included in the consolidated tax reporting group are determined based on each party’s respective tax obligations.

F-11

CEVA, INC. AND ITS SUBSIDIARIES

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(U.S. dollars in thousands)

Upon the Separation, the Parent will distribute all of the shares of the Company’s Common Stock outstanding on the date of Separation to the Parent’s stockholders on a pro rata basis.

Combination Agreement:

Pursuant to the terms and conditions of the Combination Agreement, Parthus and the Company will effect a combination of their businesses, whereby, immediately after the Separation and distribution of stock by the Parent, Parthus will be acquired by the Company in exchange for the Common Stock of the Company. The newly combined company will be renamed ParthusCeva and its Common Stock will be quoted on the Nasdaq National Market and traded on the London Stock Exchange upon receipt of related approvals.

F-12

CEVA, INC. AND ITS SUBSIDIARIES

[LOGO OF ERNST & YOUNG]

REPORT OF INDEPENDENT AUDITORS

To the Shareholders of

CEVA, INC.

We have audited the accompanying consolidated balance sheets of Ceva, Inc. (the “Company”) and its subsidiaries as of December 31, 2000 and 2001, and the related consolidated statements of income, changes in stockholders’ equity and parent company investment and cash flows for each of the three years in the period ended December 31, 2001. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit in order to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by the Company’s management, as well as evaluating the overall financial statements presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of the Company and its subsidiaries as of December 31, 2000 and 2001, and the consolidated results of their operations and cash flows for each of the three years in the period ended December 31, 2001, in conformity with accounting principles generally accepted in the United States.

Tel-Aviv, Israel		KOST FORER & GABBAY
January 22, 2002		A Member of Ernst & Young International

The foregoing report is in the form that will be signed upon the separation of the licensing technology business from DSP Group, Inc., including the transfer of related assets, liabilities and intellectual property rights, as described in Note 1 to these consolidated financial statements.

Tel-Aviv, Israel		KOST FORER & GABBAY
May 24, 2002		A Member of Ernst & Young International

F-13

CEVA, INC. AND ITS SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

U.S. dollars in thousands

	December 31,
	2000		2001
ASSETS
Current Assets:
Trade receivables	$	6,575	$	8,115
Other accounts receivable and prepaid expenses		286		319
Deferred income taxes		231		240
Inventories		4		50

Total current assets		7,096		8,724


Long-term Investment:
Severance pay fund		911		1,084
Long term lease deposits		87		190

		998		1,274

Property and Equipment, Net		1,521		2,199

Total assets	$	9,615	$	12,197

The accompanying notes are an integral part of the consolidated financial statements.

F-14

CEVA, INC. AND ITS SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

U.S. dollars in thousands (except share data)

	December 31,
	2000		2001
LIABILITIES AND STOCKHOLDERS’ EQUITY AND PARENT COMPANY INVESTMENT
CURRENT LIABILITIES:
Trade payables	$	463	$	707
Employees and payroll accruals		1,728		2,006
Income tax payable		3,669		3,496
Accrued expenses		825		519

Total current liabilities		6,685		6,728

Accrued Severance Pay		910		1,124

STOCKHOLDERS’ EQUITY AND PARENT COMPANY INVESTMENT:
Common Stock:
$0.001 par value: 10,000,000 shares authorized at December 31, 2000, and 100,000,000 at December 31, 2001; 20,000,000 shares issued and outstanding at December 31, 2000 and 2001		20		20
Parent Company’s investment		2,000		4,325
Retained earnings		—		—

Total stockholders’ equity and Parent company investment		2,020		4,345

Total liabilities and stockholders’ equity and Parent company investment	$	9,615	$	12,197

The accompanying notes are an integral part of the consolidated financial statements.

F-15

CEVA, INC. AND ITS SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

U.S. dollars in thousands (Except share and per share data)

	Year ended December 31,
	1999		2000		2001
Revenues:
Licenses and royalties	$	16,249	$	19,951	$	20,959
Technical support, maintenance and other		1,952		2,959		4,285

Total revenues		18,201		22,910		25,244

Cost of revenues		207		410		1,251

Gross profit		17,994		22,500		23,993

Operating expenses:
Research and development, net		3,230		4,835		5,095
Selling and marketing		1,997		2,466		2,911
General and administrative		2,480		2,810		2,839

Total operating expenses		7,707		10,111		10,845

Operating income		10,287		12,389		13,148
Financial income, net		292		322		462

Income before taxes on income		10,579		12,711		13,610
Taxes on income		1,453		3,438		3,255

Net income	$	9,126	$	9,273	$	10,355

The accompanying notes are an integral part of the consolidated financial statements.

F-16

CEVA, INC. AND ITS SUBSIDIARIES

STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY AND PARENT COMPANY INVESTMENT

U.S. dollars in thousands

	Common Stock			Parent company investment			Retained earnings			Total stockholders’ equity and Parent company investment
	Shares	Amount		Parent company investment			Retained earnings
Balance as of January 1, 1999	—	$	—	$	1,680		$	—		$	1,680

Issuance of Common Stock	20,000,000		20		(20	)		—			—
Net income	—		—		—			9,126			9,126
Capital return to parent company	—		—		—			(9,126	)		(9,126	)
Contribution from parent company	—		—		876			—			876


Balance as of December 31, 1999	20,000,000		20		2,536			—			2,556

Net income	—		—		—			9,273			9,273
Capital return to parent company	—		—		—			(9,273	)		(9,273	)
Distribution to parent company	—		—		(536	)		—			(536	)


Balance as of December 31, 2000	20,000,000		20		2,000			—			2,020

Net income	—		—		—			10,355			10,355
Capital return to parent company	—		—		—			(10,355	)		(10,355	)
Contribution from parent company	—		—		2,325			—			2,325


Balance as of December 31, 2001	20,000,000	$	20	$	4,325		$	—		$	4,345

The accompanying notes are an integral part of the consolidated financial statements.

F-17

CEVA, INC. AND ITS SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

U.S. dollars in thousands

	Year ended December 31,
	1999			2000			2001
Cash flows from operating activities:
Net income	$	9,126		$	9,273		$	10,355
Adjustments required to reconcile net income to net cash provided by operating activities:
Depreciation		229			533			697
Increase in trade receivables		(2,437	)		(1,746	)		(1,540	)
Decrease (increase) in other accounts receivable and prepaid expenses		138			(156	)		(33	)
Decrease (increase) in inventories		22			14			(46	)
Increase in trade payables		223			60			244
Increase (decrease) in deferred revenues		54			(90	)		—
Increase in employees and payroll accruals		564			326			278
Increase (decrease) in accrued expenses		295			370			(306	)
Increase (decrease) in income tax payable		895			1,947			(173	)
Decrease (increase) in deferred income taxes		(35	)		38			(9	)
Increase (decrease) in accrued severance pay, net		3			(14	)		41

Net cash provided by operating activities		9,077			10,555			9,508

Cash flows from investing activities:
Purchase of property and equipment		(832	)		(696	)		(1,474	)
Proceeds from sale of property and equipment		—			—			99
Investment in long term lease deposits		—			(50	)		(103	)
Proceeds from long term lease deposits		5			—			—

Net cash used in investing activities		(827	)		(746	)		(1,478	)

Cash flows from financing activities:
Capital return to parent company		(9,126	)		(9,273	)		(10,355	)
Contribution from (distribution to) parent company		876			(536	)		2,325

Net cash used in financing activities		(8,250	)		(9,809	)		(8,030	)

Changes in cash and cash equivalents		—			—			—
Cash and cash equivalents at the beginning of the year		—			—			—

Cash and cash equivalents at the end of the year	$	—		$	—		$	—

The accompanying notes are an integral part of the consolidated financial statements.

F-18

CEVA, INC. AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

U.S. dollars in thousands

NOTE 1:—GENERAL

a. Background:

Ceva, Inc. (the “Company”) is currently a wholly-owned subsidiary of DSP Group, Inc. (the “Parent”). These financial statements reflect the transfer by the Parent of the DSP Cores licensing business and operations and the related assets and liabilities of such businesses and operations to the Company immediately prior to the spin-off of the Company to the shareholders of the Parent (the “Separation”).

The Company was incorporated in Delaware in November 1999. It currently has outstanding 20,000,000 shares of Common Stock, $0.001 par value, all of which are owned by the Parent. The Company was incorporated under the name DSP Cores, Inc. and changed its name to Corage, Inc. in 2001 and changed its name again to Ceva, Inc. in April 2002. The Company had no business or operations prior to the transfer of the DSP Cores licensing business and operations from the Parent.

Prior to the Combination (see Note 6) the Parent will transfer to the Company assets including intellectual property and liabilities related to the DSP Cores licensing business and operations, as well as an amount equal to the sum of $40 million in cash plus cash equal to the amount by which the transaction costs of the separation and combination exceed $2 million. The identification of assets and liabilities to be transferred was agreed upon between the parties pursuant to the Separation Agreement (See Note 6) and related documents entered into by and between the Company, the Parent and certain of the Parent’s subsidiaries, and are not necessarily indicative of the balances of the related assets and liabilities presented in the accompanying financial statements.

b. Basis of presentation:

The Company’s financial statements include the licensing business and operations of the Parent which have been carved out from the financial statements of the Parent using the historical results of operations and historical bases of the assets and liabilities of the DSP Group business that it comprises. The consolidated financial statements reflect the assets, liabilities, results of operations, financial positions, changes in stockholders’ equity, Parent company investment, and cashflows (the “Company’s Business”) as if the Company and its subsidiaries were separate entities for all periods presented. The balances of the assets and liabilities presented in the accompanying financial statements are not necessarily indicative of the balances of the assets and liabilities to be transferred upon the Separation.

F-19

CEVA, INC. AND ITS SUBSIDIARIES

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

U.S. dollars in thousands

The Company will begin accumulating its retained earnings on the date on which the Parent transfers to the Company all of the assets and liabilities relating to the Company’s Business.

The transfer of assets, liabilities and operations of the Company’s Business from the Parent is a reorganization of entities under common control and has been accounted for in a manner similar to a pooling of interests. Accordingly, the financial statements of the Company have been restated to include the Company’s Business as if it had always been operated as a separate entity.

Additionally, the consolidated financial statements include allocations of certain DSP Group, Inc. corporate headquarters assets, liabilities and expenses relating to the Company’s Business. Management believes these allocations are reasonable. All material intercompany transactions and balances between the Company’s subsidiaries have been eliminated.

The Company utilized services from certain employees of DSP Group in Japan and France who performed marketing and technical support activities and whose costs were allocated to the Company.

The statements of income include the costs directly attributable to the Company’s Business including charges for shared facilities, functions and services used by the Company’s Business. Certain costs and expenses have been allocated based on management’s estimates of the cost of services provided to the Company’s Business. Such costs include research and development costs, sales, general and administrative expenses. Such allocations and charges are based on either a direct cost pass-through or a percentage of total costs for the services provided based on factors such as headcount or the specific level of activity directly related to such costs.

Payroll and related expenses, such as vacation, bonuses and compensation expenses, relating to the Company’s sales and marketing and research and development activities were attributed on a specific identification basis. Depreciation expenses were attributed based on the specific fixed assets attributed to the Company. General and administrative expenses, including corporate and officers’ salaries and related expenses, were attributed to the Company based on weighted ratio composed of the percentage of time that each of the administration employees spent on the Company’s activities. Rent, maintenance and other administrative expenses were attributed based on the relevant ratios, such as square footage and headcount ratios. Other general and administrative expenses, such as legal and accounting fees, were attributed based on management estimations.

Management believes that the foregoing allocations were made on a reasonable basis and would not have been materially different if the company had operated as a stand-alone entity for all periods presented; however, the allocations of costs and expenses do not necessarily indicate the costs that will have been or will be incurred by the Company on a stand-alone basis.

Interest income shown in the consolidated financial statements reflects the interest income associated with the aggregate Parent company investment amount and based on the Company’s operating income for each period, based on weighted average interest rates for the applicable period, of 5.5%, 4.9% and 3.5% on an annual basis for the years ended December 31, 1999, 2000 and 2001, respectively.

F-20

CEVA, INC. AND ITS SUBSIDIARIES

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

U.S. dollars in thousands

All of the Company’s net income recorded during the periods presented was returned to the Parent as part of the Parent’s company investment account.

c. As for major customers—see Note 6(b).

NOTE 2:—SIGNIFICANT ACCOUNTING POLICIES

The consolidated financial statements have been prepared in accordance with Generally Accepted Accounting Principles in the United States (“U.S. GAAP”).

a. Use of estimates:

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates.

b. Principles of consolidation :

The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. Intercompany balances and transactions have been eliminated upon consolidation.

c. Financial statements in U.S. dollars :

The revenues of the Company and Corage, Ltd. are generated in U.S. dollars (“dollars”). In addition, a portion of Corage, Ltd. costs as well as all the costs of the Company are incurred in dollars. Accordingly, the management has determined the dollar as the currency of the primary economic environment of the Company and Corage, Ltd. and, thus, their functional and reporting currency.

Transactions and balances, denominated in dollars, are presented at their original amounts. Non-dollar transactions and balances have been remeasured into U.S. dollars, in accordance with Statement of the Financial Accounting Standard No. 52.

“Foreign Currency Translation” (“SFAS No.52”). All transaction gains and losses from remeasurement of monetary balance sheet items denominated in non-dollar currencies are reflected in the statements of income as financial income or expenses, as appropriate, and have not been material to date.

d. Inventories :

Inventories are stated at the lower of cost or market value. Inventory write-offs are provided for slow items or technologies obsolescence. Cost of inventory is determined using the average cost method.

F-21

CEVA, INC. AND ITS SUBSIDIARIES

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

U.S. dollars in thousands

e. Property and equipment :

Property and equipment are stated at cost, net of accumulated depreciation. Depreciation is calculated using the straight-line method over the estimated useful lives, at the following annual rates:

		%
Computers, software and equipment		20-33
Office furniture and equipment		6
Leasehold improvements		ratably over the term of the lease
Motor vehicles		15

The Company and its subsidiaries periodically assess the recoverability of the carrying amount of property and equipment and provide for any possible impairment loss based upon the difference between the carrying amount and fair value of such assets, in accordance with Statement of Financial Accounting Standard No. 121 “Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of” (“SFAS No.121”). As of December 31, 2001, no impairment losses have been identified.

f. Revenue recognition :

The Company and its subsidiaries generate their revenues from software licensing, pre-paid royalties, unit royalties, maintenance and technical support fees. The Company licenses its software to semiconductor companies throughout the world. These semiconductor companies then manufacture, market and sell custom-designed chips to original equipment manufacturers (OEMs) of a variety of electronic products. The Company also licenses its technology directly to OEMs which are considered end users.

The Company accounts for its software license revenues in accordance with Statement Of Position (“SOP”) 97-2, “Software Revenue Recognition”, as amended. Under SOP 97-2, revenues are recognized when: (1) collection is probable; (2) delivery has occurred; (3) the license fee is otherwise fixed or determinable; (4) persuasive evidence of an arrangement exists and no further obligation exists. SOP 97-2 generally requires revenue earned on software arrangements involving multiple elements to be allocated to each element based on the relative fair value of the elements. The Company has also adopted SOP 98-9, “Modification of SOP 97-2, Software Revenue Recognition with Respect to Certain Transactions,” for all multiple element transactions entered into after January 1, 2000. SOP 98-9 requires that revenue be recognized under the “residual method” when vendor specific objective evidence (“VSOE”) of fair value exists for all undelivered elements and VSOE does not exist for one of the delivered elements. The VSOE of fair value of the undelivered elements (maintenance and technical support) is determined based on the renewal rate or on the price charged for the undelivered element when sold separately.

SOP 97-2 specifies that extended payment terms in a software licensing arrangement may indicate that the software license fees are not deemed to be fixed or determinable. If the fee is not fixed or determinable, or if collection is not considered probable, revenue is recognized as payments become due from the customer, provided that all other revenue recognition criteria have been met. SOP 97-2 specifies that if the Company has a standard business practice of using extended payment terms in software licensing arrangements and has a history of successfully collecting the software license fees under the original terms of the software licensing arrangement without making concessions, the Company should recognize the software license fees when all other SOP 97-2 revenue recognition criteria are met. The Company has concluded that for certain software arrangements with extended payment terms, the “fixed or determinable” presumption has been overcome and software license fees have been recognized upon meeting the remaining SOP 97-2 revenue recognition criteria.

F-22

CEVA, INC. AND ITS SUBSIDIARIES

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(U.S. dollars in thousands)

The Company and its subsidiaries do not grant rights of return.

Certain agreements provide for per-unit royalties to be paid to the Company based on shipments by customers of units containing the Company’s technology. Revenue under such agreements is recognized at the time shipments by the customers are reported to the Company; such reports are prepared by these customers on a periodic basis after units are sold. Non-refundable payments on account of future royalties from similar agreements are recognized upon payment, provided that no future obligation exists.

Revenues from licensing sales are composed as follows:

	Year ended December 31,
	1999		2000		2001
Revenues :
Software licensing	$	10,395	$	12,550	$	13,680
Royalties		5,854		7,401		7,279

	$	16,249	$	19,951	$	20,959

Maintenance and technical support revenues included in multiple element arrangements are deferred and recognized on a straight-line basis over the term of the maintenance and the support agreement or when such services are performed.

Deferred revenues include unearned amounts received under maintenance and technical support contracts and amounts billed to customers not yet recognized as revenues.

g. Income taxes:

Historically, the Company’s and its subsidiaries operations have been included in the consolidated income tax returns filed by the Parent and by DSP Group, Ltd. Income tax expense in the Company’s consolidated financial statements has been calculated on a separate tax return basis.

Ceva, Inc. taxes on income were calculated based on U.S. tax rates. Corage, Ltd. taxes on income were calculated based on Israeli tax rates and laws. These calculations reflect the Parent’s tax strategy, and are not necessarily reflective of the tax strategies that the Company would have followed or will follow as a stand-alone company.

The Company and its subsidiaries account for income taxes in accordance with Statement of Financial Accounting Standard No. 109, “Accounting for Income Taxes” (“SFAS No. 109”). This Statement prescribes the use of the liability method whereby deferred tax assets and liability account balances are determined based on differences between financial reporting and tax bases of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse.

The Company and its subsidiaries provides a valuation allowance, if necessary, to reduce deferred tax assets to their estimated realizable value.

F-23

CEVA, INC. AND ITS SUBSIDIARIES

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

U.S. dollars in thousands

h. Research and development:

Statement of Financial Accounting Standard No. 86 “Accounting for the Costs of Computer Software to be Sold, Leased or Otherwise Marketed” (“SFAS No. 86”), requires capitalization of certain software development costs subsequent to the establishment of technological feasibility.

Based on the Company’s product development process, technological feasibility is established upon completion of a working model. The Company and its subsidiaries do not incur material costs between the completion of the working model and the point at which the product is ready for general release. Therefore, research and development costs are charged to the statement of income as incurred.

i. Accrued severance pay:

The Israeli subsidiary liability for severance pay is calculated pursuant to Israeli severance pay laws for all employees based on the most recent salary of each employee multiplied by the number of years of employment for that employee as of the balance sheet date. The subsidiary’s liability is fully provided by monthly deposits with severance pay funds, insurance policies and by an accrual.

The deposited funds include profits accumulated up to the balance sheet date. The deposited funds may be withdrawn only upon the fulfillment of the obligation pursuant to Israeli severance pay laws or labor agreements. The value of these policies is recorded as an asset in the Company’s balance sheet.

Severance expenses (income) for the years ended December 31, 1999, 2000 and 2001, were approximately $3, $(14) and $41, respectively.

j. Accounting for stock-based compensation:

The Company has elected to follow Accounting Principles Board Statement No. 25, “Accounting for Stock Options Issued to Employees” (“APB 25”) and FASB Interpretation No. 44 “Accounting for Certain Transactions Involving Stock Compensation” (“FIN 44”) in accounting for its employee stock option plans. Under APB 25, when the exercise price of an employee stock option is less than the market price of the underlying stock on the date of grant, compensation expense is recognized. The pro-forma information with respect to the fair value of options required under the provisions of Statement of Financial Accounting Standard No. 123 “Accounting for stock based compensation” (“SFAS No. 123”), is provided in Note 5(e). SFAS No. 123 requires use of an option valuation model to measure the fair value of options at the grant date.

k. Fair value of financial instruments:

The carrying amounts of trade receivables and trade payables approximate their fair values, due to the short-term maturities of these instruments.

l. Concentration of credit risk:

Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of trade receivables. The trade receivables of the Company and its subsidiaries are mainly derived from sales to customers located in the United States, Europe and Asia. The Company and its subsidiaries perform ongoing credit evaluations of their customers and to date have not experienced any material losses. Allowance for doubtful accounts is computed for specific debts for which collectibility is doubtful based upon the Company’s experience.

F-24

CEVA, INC. AND ITS SUBSIDIARIES

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(U.S. dollars in thousands)

The Company and its subsidiaries have no off-balance-sheet concentration of credit risk such as foreign exchange contracts, option contracts or other foreign hedging arrangements.

m. Non-royalty-bearing grants:

Non-royalty-bearing grants from the Government of Israel for funding certain approved research and development projects are recognized at the time when the Company is entitled to such grants, on the basis of the related costs incurred, and included as a deduction from research and development costs.

The Company recorded grants participation in the amounts of $70, $578 and $542 for the years ended December 31, 1999, 2000 and 2001, respectively.

n. Advertising expenses:

Advertising expenses are carried to the statement of operations as incurred.

o. Impact of recently issued accounting standards:

In June 2001, the Financial Accounting Standards Board issued SFAS No. 141, “Business Combinations”, and No. 142, “Goodwill and Other Intangible Assets”, effective for fiscal years beginning after December 15, 2001. Under the new rules, goodwill (and intangible assets deemed to have indefinite lives) will no longer be amortized but will be subject to annual impairment tests in accordance with the Statements. Other intangible assets will continue to be amortized over their useful lives.

In August 2001, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets” (“SFAS 144”), which addresses financial accounting and reporting for the impairment or disposal of long-lived assets and supersedes SFAS No. 121, “Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of,” and the accounting and reporting provision of APB Opinion No. 30, “Reporting the Results of Operations for a disposal of a segment of a business.” SFAS 144 is effective for fiscal years beginning after December 15, 2001, with earlier application encouraged. The Company expects to adopt FAS 144 as of January 1, 2002 and it does not expect that the adoption of SFAS 144 will have a significant impact, if any, on the Company’s financial position and results of operations.

NOTE 3:—OTHER ACCOUNTS RECEIVABLES AND PREPAID EXPENSES

	December 31,
	2000		2001
Prepaid expenses	$	106	$	180
Advance payments		148		33
Other account receivables		32		106

Total	$	286	$	319

F-25

CEVA, INC. AND ITS SUBSIDIARIES

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(U.S. dollars in thousands)

NOTE 4:—PROPERTY AND EQUIPMENT, NET

	December 31,
	2000		2001
Cost:
Computers, software and equipment	$	2,838	$	4,288
Office furniture and equipment		238		243
Leasehold improvements		720		739
Motor vehicles		300		201

		4,096		5,471

Accumulated depreciation		2,575		3,272

Depreciated cost	$	1,521	$	2,199

NOTE 5:—STOCKHOLDERS’ EQUITY

a. Parent Company’s investment:

The accompanying financial statements reflect substantially all of the assets and liabilities covering the conduct of the licensing technology business and the results of the operations of that business which had originally been carried out by Parent and which will be transferred to the Company. The identification of the assets and liabilities to be transferred was agreed upon between the Company and the Parent and their related balances are not necessarily presented in the accompanying financial statements. Parent’s equity in the net assets transferred to the Company are reflected in the opening balance of Parent’s investment in the accompanying balance sheet. The net equity balance for each year also includes additional financing received from Parent. The net income of the Company was recorded as capital return to the Parent. As of December 31, 2001 the consolidated financial statements are presented to reflect the transfer of assets and liabilities as if it already occurred. Based on the agreements between the Parent and the Company, upon the Separation, the Parent and the Company shall jointly calculate the net investment account and the Company shall pay to Parent, or Parent shall pay to the Company, as the case may be, the net amount thereof.

During prior periods the Parent handled virtually all of the Company’s cash transactions, as well as collecting the Company’s receivables and settling accounts with the Company’s suppliers and other creditors.

b. On October 26, 2000, the Company’s Board of Directors declared a stock split in a 1:1,000 ratio.

On May 31, 2001, the Company’s Board of Directors declared a stock split to be effected as a stock dividend to be distributed from the Parent company investment whereby each holder of record of Common Stock received 19 additional shares of Common Stock for each share owned. The effect of such split in the shareholders equity statements was given retroactively.

All stock and stock option information in the consolidated financial statements has been retroactively restated for all periods presented to reflect the stock split and the stock split effected as a stock dividend.

c. Employee stock option plan:

In 2000, the Company adopted the 2000 Incentive Stock Option Plan (the “2000 Plan”). Under the 2000 Plan, employees, officers and directors of the Company and each of its subsidiaries may be granted stock options for the purchase of the Company’s Common Stock. The 2000 Plan expires in 2010 and currently provides for the

F-26

CEVA, INC. AND ITS SUBSIDIARIES

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(U.S. dollars in thousands)

purchase of up to 4,000,000 shares of the Company’s Common Stock. Each option can be exercised to purchase one share, conferring the same rights as the other shares of Common Stock. Options that are cancelled or forfeited before expiration become available for future grants. The exercise price of options under the 2000 Plan shall not be less than 85% of the fair market value of the Common Stock for non-qualified stock options and 100% of the fair market value for qualified options, as determined by the Board of Directors. The exercise basis will be adjusted from time to time upon the occurrence of a stock split, combination, dividend, and stock dividend, and in other certain events.

Options under the 2000 Plan are generally exercisable over a 48-month period beginning 12 months after issuance or as determined by the Board of Directors. Options under the 2000 Plan expire up to ten years after the date of grant.

A summary of activity of options granted to purchase the Company’s Common Stock under the 2000 Plan is as follows:

	Year ended December 31, 2000						Year ended December 31, 2001
	Shares available for grant		Number of options		Weighted average exercise price		Shares available for grant		Number of options		Weighted average exercise price
Outstanding at the beginning of the year	—		—		$	—	2,147,720		1,852,280		$	5.37
Authorized	4,000,000		—			—	—		—			—
Granted	(1,882,280	)	1,882,280			5.37	(1,002,740	)	1,002,740			5.71
Exercised	—		—			—	—		—			—
Canceled	30,000		(30,000	)		5.37	268,990		(268,990	)		5.37

Outstanding at the end of the year	2,147,720		1,852,280		$	5.37	1,413,970		2,586,030		$	5.50

A summary of the weighted average exercise price and the number of options exercisable under the 2000 Plan is as follows:

These options will be measured upon the consummation of the combination of the Company with Parthus based on the then fair value of the Company’s common stock.

d. Parent stock options granted to the Company’s employees:

Since 1991, the Parent has granted options to purchase shares of Common Stock to its key employees, directors and shareholders as an incentive to attract and retain qualified personnel under several plans. As part of these grants, options were granted to employees of the Company.

Under the terms of these plans, options generally become exercisable ratably over a period of up to 4 years, commencing 12 months after issuance, or as determined by the Board of Directors. The options generally expire

F-27

CEVA, INC. AND ITS SUBSIDIARIES

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(U.S. dollars in thousands)

no later than 10 years from the date of the grant and are non-transferable, except under the laws of succession. Each option can be exercised to purchase one share, conferring the same rights as the other shares of Common Stock. Options that are cancelled or forfeited before expiration, become available for future grants. The number of shares to be received upon exercise of the options will be adjusted from time to time upon the occurrence of stock splits and combinations, dividends and stock dividends and other certain events. All options under the plan were granted at fair value.

A summary of the share option activity in respect of the Parent options that were granted to the Company’s employees, and related information is as follows:

	Year ended December 31,
	1999				2000				2001
	Number of options		Weighted average exercise price		Number of options		Weighted average exercise price		Number of options		Weighted average exercise price
Outstanding at the beginning of the year	1,265,034		$	9.12	1,853,288		$	15.65	2,026,975		$	20.62
Granted (*)	1,431,000			17.39	577,500			31.74	312,583			18.82
Exercised	(842,746	)		8.79	(403,813	)		13.76	(108,601	)		8.37
Forfeited or cancelled (**)	—			—	—			—	(85,794	)		25.76

Outstanding at the end of the year	1,853,288		$	15.65	2,026,975		$	20.62	2,145,163		$	20.77

Options exercisable at the end of the year	97,175		$	28.88	406,168		$	18.30	1,036,932		$	19.81

(*)

Including 35,750 options of employees who were transferred from the Parent to the Company during the year 2001.

(**)

Including 14,167 options of employees who were transferred from the Company to the Parent during the year 2001.

The Parent’s options granted to the employees of the Company outstanding as of December 31, 2001 have been classified into range of exercise price as follows:

Exercise price (range)	Options outstanding as of December 31, 2001	Weighted average remaining contractual life (years)	Weighted average exercise price	Options exercisable as of December 31, 2001	Weighted average exercise price of options exercisable
$ 4.5 – $ 9.44	722,848	4.1	$ 8.99	402,842	$ 9.11
$ 9.63 – $17.3	126,774	3.2	12.38	113,816	12.27
$17.9 – $21.94	402,833	6.3	19.11	98,500	18.87
$22 – $39	666,333	5.5	28.85	335,289	29.76
$40.22 – $54.6	226,375	5.6	42.20	86,485	42.06

	2,145,163		$ 20.77	1,036,932	$ 19.81

F-28

CEVA, INC. AND ITS SUBSIDIARIES

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(U.S. dollars in thousands)

Under SFAS No. 123, pro forma information regarding net income (loss) and net earnings (loss) per share is required, and has been determined as if the Parent had accounted for its employee stock options under the fair value method of that Statement. The fair value for these options was estimated at the date of grant using a Black-Scholes option pricing model with the following weighted-average assumptions:

	1999	2000	2001
Dividend yield	0%	0%	0%
Expected volatility	0.76	0.81	0.81
Risk-free interest	5.55%	4.87%	3.7%
Expected life of up to	2.9 years	2.9 years	2.9 years

Weighted average fair value of the Parent options granted to the employees of the Company whose exercise price is equal to market price of the shares of the Parent at date of grant are as follows:

	Weighted average fair value of options grants at an exercise price
	1999		2000		2001
Equal to fair value at date of grants	$	10.64	$	20.61	$	11.47

e. Pro forma information under SFAS No. 123:

The following pro forma information includes the effect of the options granted to the Company’s employees to purchase the Parent’s shares.

For purposes of pro forma disclosures, the estimated fair value of the options is amortized to expense over the options’ vesting period.

	Year ended December 31,
	1999		2000		2001
Net income as reported	$	9,126	$	9,273	$	10,355

Pro forma net income	$	5,761	$	2,431	$	1,450

f. Dividend Policy

The Company has never declared or paid any cash dividends on its capital stock and does not anticipate paying any cash dividends in the foreseeable future. In the event that cash dividends are declared in the future, such dividends will be paid in U.S. Dollars or NIS subject to statutory limitations.

g. Common Stock

Holders of Common Stock are entitled to one vote per share on all matters to be voted upon by the Company’s stockholders. In the event of liquidation, dissolution or winding up, holders of the Company’s Common Stock are entitled to share ratably in all of the Company’s assets. The board of directors may declare a dividend out of funds legally available therefor and the holders of Common Stock are entitled to receive ratably any such dividends. Holders of Common Stock have no preemptive rights or other subscription rights to convert their shares into any other securities. There are no redemption or sinking fund provisions applicable to the Common Stock.

F-29

CEVA, INC. AND ITS SUBSIDIARIES

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

U.S. dollars in thousands

NOTE 6:—GEOGRAPHIC INFORMATION AND MAJOR CUSTOMER DATA

a. Summary information about geographic areas:

The Company manages its business on a basis of one industry segment, the development and license of designs for programmable Digital Signal Processors (see Note 1 for a brief description of the Company’s business) and follows the requirements of Statement of Financial Accounting Standard No. 131 , “Disclosures About Segments of an Enterprise and Related Information” (“SFAS No. 131”).

The following is a summary of operations within geographic areas:

	Year ended December 31,
	1999		2000		2001
Revenues based on customer location:
United States	$	4,493	$	11,953	$	10,853
Japan		6,679		3,342		3,169
Europe		5,029		4,547		6,984
Asia (Excluding Japan)		1,656		2,790		4,081
Other		344		278		157

	$	18,201	$	22,910	$	25,244

	December 31,
Long-lived assets by geographic region:
United States	$	64	$	38	$	47
Israel		1,291		1,518		2,281
Other		40		52		61

	$	1,395	$	1,608	$	2,389

b. Major customer data as a percentage of total revenues:

	Year ended December 31,
	1999		2000		2001
Customer A	* —		* —		15.2	%
Customer B	* —		* —		13.7	%
Customer C	* —		* —		24	%
Customer D	* —		17.6	%	* —
Customer E	12.4	%	* —		* —
Customer F	14.6	%	* —		* —
Customer G	10.2	%	* —		* —
Customer H	11.5	%	* —		* —

Represents a percentage lower than 10%.

F-30

CEVA, INC. AND ITS SUBSIDIARIES

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

U.S. dollars in thousands

NOTE 7:—TAXES ON INCOME

Historically, the Company’s and its subsidiary’s operations have been included in the consolidated income tax returns filed by DSP Group, Inc. and by DSP Group, Ltd. Income tax expense in the Company’s consolidated financial statements has been calculated on a separate tax return basis. These calculations reflect the Parent tax strategy, and are not necessarily reflective of the tax strategies that the Company would have followed or will follow as a stand-alone company.

a. The provision for income taxes is as follows:

	Year ended December 31,
	1999			2000		2001
Domestic taxes:
Current	$	788		$	2,674	$	2,580
Deferred		(35	)		38		(9	)

		753			2,712		2,571
Foreign taxes:
Current		700			726		684

		700			726		684

Provision for taxes on income	$	1,453		$	3,438	$	3,255

b. Income (loss) before taxes on income:

	Year ended December 31,
	1999		2000		2001
Domestic	$	1,982	$	7,532	$	6,767
Foreign		8,597		5,179		6,843

	$	10,579	$	12,711	$	13,610

c. A reconciliation between the Company’s effective tax rate and the U.S. statutory rate:

	Year ended December 31,
	1999			2000			2001
Income before taxes on income	$	10,579		$	12,711		$	13,610

Tax at U.S. statutory rate—35%		3,702			4,449			4,764
Foreign income taxes at rates other than U.S. rate		(2,309	)		(1,087	)		(1,711	)
Other		60			76			202

Provision for taxes on income	$	1,453		$	3,438		$	3,255

F-31

CEVA, INC. AND ITS SUBSIDIARIES

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

U.S. dollars in thousands

d. Deferred income taxes:

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of the Company’s deferred tax assets are as follows:

	December 31
	2000		2001
Reserve and allowances	$	231	$	240

Balance at the end of the year (All domestic)	$	231	$	240

A valuation allowance was not recorded since management believes that these assets will be realized in the future.

e. Assignment of the tax benefits under the Israeli Law for the Encouragement of Capital Investments 1959:

DSP Group, Ltd.’s production facilities have been granted “Approved Enterprise” status under Israeli law in connection with four separate investment plans. According to the provisions of such Israeli law, DSP Group, Ltd. has elected to enjoy “Alternative plan benefits,” which is a waiver of grants in return for tax exemption. Accordingly, DSP Group, Ltd.’s income from an “Approved Enterprise” is tax-exempt for a period of two or four years and is subject to a reduced corporate tax rate of 10%–25% (based on percentage of foreign ownership) for an additional period of eight or six years, respectively. The tax benefits under these investment plans are scheduled to gradually expire starting from 2005 through 2009. The period of tax benefits, as detailed above, is subject to limitations of the earlier of 12 years from commencement of production, or 14 years from receipt of approval.

Since DSP Group, Ltd. is operating under more than one approval, its effective tax rates are a weighted combination of the various applicable rates and tax exemptions and the computation is made for income derived from each program on the basis and formulas specified in the law and in the approvals.

The tax exempt income attributable to an “Approved Enterprise” can be distributed to stockholders without subjecting DSP Group Israel to taxes only upon the complete liquidation of DSP Group, Ltd. The Company has determined that such tax exempt income will not be distributed as dividends. Accordingly, no deferred income taxes have been provided on income attributable to DSP Group, Ltd.’s “Approved Enterprise.”

Through December 31, 2001, DSP Group, Ltd. has met all the conditions required under these approvals which include an obligation to invest certain amounts in property and equipment and an obligation to finance a percentage of investments in share capital. Should DSP Group, Ltd. fail to meet such conditions in the future, it could be subject to corporate tax in Israel at the standard rate of 36% and could be required to refund tax benefits already received. Income from sources other than the “Approved Enterprise” during the benefit period will be subject to tax at the standard rate of corporate tax in Israel of 36%.

Under Israeli law, DSP Group, Ltd. is entitled to claim accelerated rates of depreciation on equipment used by an “Approved Enterprise” during the first five tax years from the beginning of such use.

As part of the Separation from DSP Group, Corage, Ltd. applied for assignment of the approved plans and for the relevant tax benefits from DSP Group, Ltd. to Corage, Ltd. According to the assignment the above mentioned benefits would be granted to Corage, Ltd.

F-32

CEVA, INC. AND ITS SUBSIDIARIES

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

U.S. dollars in thousands

f. Tax benefits under the Law for the Encouragement of Capital Investments, 1959:

Corage, Ltd. has been granted the status of “Approved Enterprise” under the Law for the Encouragement of Capital Investments, 1959 (the “Investment Law”). According to the provisions of the Investment Law, Corage, Ltd. has elected to enjoy “alternative benefits”—a waiver of grants in return for tax exemption. The “Approved Enterprise” status will allow Corage, Ltd. a tax exemption on undistributed income derived from the “Approved Enterprise” program. The income derived from this “Approved Enterprise” will be tax exempt for a period of two years, and will enjoy a reduced tax rate thereafter of 10% to 25% for an additional five to eight years (depending on the percentage of foreign investment). The five to ten-year period of benefits will commence with the first year in which Corage, Ltd. earns taxable income. The period of tax benefits, detailed above, is subject to limits of the earlier of 12 years from the commencement of production, or 14 years from receiving the approval.

The entitlement to the above benefits is conditional upon the Company’s fulfilling the conditions stipulated by the above law, regulations published thereunder and the instruments of approval for the specific investments in “Approved Enterprises.” In the event of failure to comply with these conditions, the benefits may be canceled and the Company may be required to refund the amount of the benefits, in whole or in part, including interest.

Should Corage, Ltd. derive income from sources other than the “Approved Enterprise” during the period of benefits, such income shall be taxable at the regular corporate tax rate of 36%.

g. Separation from DSP Group, Ltd.

DSP Group, Ltd. has obtained a tax ruling for the tax exempt split plan pursuant to section 105A(a) to the Israeli Income Tax Ordinance (“section 105”). Under section 105 and according to the ruling, the majority of the assets that will be transferred to Corage, Ltd. and the majority of the assets that will remain in DSP Group, Ltd., cannot be sold for a two-year period and subject to other requirements determined by law.

NOTE 8:—SUBSEQUENT EVENTS (Unaudited)

On April 4, 2002, the Parent, the Company and Parthus Technologies plc (“Parthus”) entered into a combination agreement (the “Combination Agreement”) pursuant to which Parthus and the Company agreed to effect a combination of their businesses, whereby the Parent contributes the DSP core licensing business and operations and the related assets and liabilities of such business and operations to the Company and Parthus will be acquired by the Company in exchange for the Common Stock of the Company (the “Combination”). The new combined company will be renamed ParthusCeva, Inc. (“ParthusCeva”).

Subject to obtaining a ruling from the U.S. Internal Revenue Services that the Separation and distribution of the Company’s Common Stock to the Parent’s stockholders will be a tax-free reorganization and approval of the Combination by the shareholders of Parthus, the Parent will distribute 100% of the equity of the Company it holds pro-rata to the Parent’s stockholders. Immediately following the Separation and distribution of stock to the Parent’s stockholders and pursuant to the Combination, the Company will issue its Common Stock to the existing shareholders of Parthus and Parthus will become a subsidiary of the Company. As a result of these transactions, the stockholders of the Parent will hold shares representing approximately 50.1% of the Common Stock of ParthusCeva and the former shareholders of Parthus will hold shares representing approximately 49.9% of the Common Stock of ParthusCeva.

F-33

CEVA, INC. AND ITS SUBSIDIARIES

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

U.S. dollars in thousands

The following agreements were signed with respect to the mentioned transactions:

Separation Agreement:

The Separation Agreement contains the key provisions relating to the Company’s separation from the Parent and the distribution of the Company’s Common Stock to the Parent’s stockholders.

The Separation Agreement provides for the transfer to the Company of the assets and liabilities from the Parent related to the DSP core licensing business in exchange for a capital contribution from the Parent to the Company as inter-company account between them, and by the issuance of additional shares by the Company to the Parent. Further, in accordance with the Separation Agreement, DSP Group, Ltd. (“DSPGL”), a subsidiary of the Parent, will transfer to the Parent all of the share capital of its subsidiary, Corage, Ltd., which the Parent will contribute to the Company. The Company will subsequently contribute the Corage, Ltd. Common Stock to DSP Ceva, so that, following the Separation, Corage, Ltd. is a wholly-owned subsidiary of DSP Ceva. The various ancillary agreements that are exhibits to the Separation Agreement (or forms thereof mutually agreed upon by the parties), detail the Separation and various interim and ongoing relationships among the Parent and the Company and their respective subsidiaries following the Separation. They include:

—

a technology transfer agreement whereby the Parent transfers and/or assigns certain technology, third party licenses and other contracts to the Company;

—

a technology transfer agreement whereby DSPGL transfers and/or assigns certain technology, third party licenses and other contracts to Corage, Ltd.;

—

a transition services agreement between DSPGL and Corage, Ltd. whereby DSPGL and the subsidiaries of the Parent, Nikon DSP K.K. and DSP Group Europe Sarl will provide certain administrative and other services to Corage, Ltd. in exchange for reimbursement of the cost of providing such services; and

—

Upon the Separation, the Parent will distribute all of the shares of the Company’s Common Stock outstanding on the date of Separation to the Parent’s stockholders on a pro rata basis.

Combination Agreement:

For a more detailed description of the material terms of the Separation Agreement and the ancillary agreements, as well as the Combination Agreement, see sections captioned “Separation of DSP Cores Licensing Business from DSP Group” and “Combination with Parthus Technologies plc.”

F-34

EXHIBIT 99.2

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Amendment Number 1

to the

FORM 20-F

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934 ¨

For the year ended December 31, 2001

Amendment Filed July 9, 2002

Original Filing: May 17, 2002

Commission file number: 0-30262

Parthus Technologies plc

(Exact name of Registrant as specified in its charter)

Republic of Ireland

(Jurisdiction of incorporation of organization)

32-34 Harcourt Street

Dublin 2

Republic of Ireland

Tel: 011-353-1-402-5700

(Address of principal executive offices)

Securities registered or to be registered pursuant to Section 12(b) of the Act:

Title of each class		Name of Each Exchange on Which Registered
American Depositary Shares, evidenced by American Depositary Receipts, each representing ten ordinary shares, nominal value €0.000317 per share.		Nasdaq National Market

Ordinary shares, nominal value €0.000317 per share*		Nasdaq National Market

The ordinary shares are not traded on the Nasdaq National Market but are registered only in connection with the registration of American Depositary Shares pursuant to the requirements of the Securities and Exchange Commission.

Securities registered or to be registered pursuant to Section 12(g) of the Act:

None

Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act:

None

Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of December 31, 2001: 581,180,431 nominal value €0.000317 per share

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨

Indicate by check mark which financial statement item the Registrant has elected to follow. Item 17 ¨ Item 18 x

PARTHUS TECHNOLOGIES PLC

Annual Report on Form 20-F

For The Year Ended December 31, 2001

Amendment Number 1 dated July 9, 2002

CONTENTS

		Page
Cross References to Form 20–F		ii
Presentation of Financial and Other Information		iii
Proposed Combination with Ceva, Inc.		1
Selected Financial Data		3
Operating and Financial Review		6
Risk Factors		21
Business		30
Management		47
Principal Shareholders		53
Related-Party Transactions		54
Additional Information		55
Articles of Association		55
Litigation		55
Dividend Policy		55
Capital Repayment		55
Market Information		56
Exchange Controls		56
Use of Proceeds		57
Taxation		57
Material Contracts		65
Documents on Display		65
Enforcement of Civil Liabilities		65
Financial Statements		F–1

CROSS REFERENCES TO FORM 20-F

		Page
Item 1:	Identity of Directors, Senior Management and Advisers	n/a
Item 2:	Offer Statistics and Expected Timetable	n/a
Item 3:	Key Information
	Selected Consolidated Financial and Statistical Data	3
	Exchange Rate Information	n/a
	Risk Factors	21
Item 4:	Information on the Company
	History and Development of the Company	55
	Business Overview	30
	Organizational Structure	46
	Property, Plant and Equipment	45
Item 5:	Operating and Financial Review and Prospects	6
	Liquidity and Capital Resources	11, 16
	Research and Development; Patents and Licenses	43
Item 6:	Directors, Senior Management and Employees
	Directors and Senior Management	47
	Employees	45
Item 7:	Major Shareholders and Related Party Transactions
	Major Shareholders	53
	Related Party Transactions	54
Item 8:	Financial Information (See Item 18 and the financial statements beginning on page F–1)	–
	Litigation	55
	Dividend Policy	55
Item 9:	The Offer and Listing
	Markets	56
Item 10:	Additional Information
	Articles of Association	55
	Material Contracts	65
	Exchange Controls	56
	Taxation	57
	Documents on Display	65
	Subsidiary Information	–
Item 11:	Quantitative and Qualitative Disclosure About Market Risk	17
Item 12:	Description of Securities Other Than Equity Securities	n/a
Item 13:	Defaults, Dividend Arrearages and Delinquencies	none
Item 14:	Material Modifications to the Rights of Security Holders and Use of Proceeds	none
	Use of Proceeds	57
Item 18:	Financial Statements	F–1
Item 19:	Exhibits (See Exhibit Index)	–

PRESENTATION OF FINANCIAL AND OTHER INFORMATION

Our financial statements are presented in U.S. dollars and have been prepared in accordance with United States generally accepted accounting principles. Our fiscal year ends on December 31.

Unless the context otherwise indicates, references to “Parthus”, “we” or “us” includes Parthus Technologies plc and its subsidiaries. Unless otherwise specified, all references to “U.S. dollars”, “dollars” or “$” are to United States dollars, the legal currency of the United States of America. All references to “euro” or “€” are to the euro, the legal currency of the member countries of the European Monetary Union. All references to “British pounds” or “£” are to the British pound, the legal currency of the United Kingdom. Our ordinary shares trade on the London Stock Exchange in British pounds and our ADSs are quoted on the Nasdaq National Market in U.S. dollars.

On April 7, 2000, we reorganized our equity share capital. Following this reorganization, we have one class of share in issue. All presentations of financial and other information in this annual report reflect this reorganization. All references to share and per share amounts have been restated to reflect share splits that we effected on April 20, 2000 and February 29, 2000 and a bonus issue that we effected on September 29, 1997.

We hold European Community trademarks for Parthus, the Parthus logo and BlueStream. The registration of the following trademarks is pending in the United States: Parthus, the Parthus logo, MachStream, MobiStream, WarpStream, MediaStream, BlueStream and NavStream. Application for the following trademarks is pending in other jurisdictions: Parthus, the Parthus logo, MachStream, MobiStream, WarpStream, MediaStream, InfoStream, BlueStream and NavStream. The following trademarks are in use: In8Stream and PLLXpert.

FORWARD-LOOKING STATEMENTS

This annual report contains forward-looking statements that involve risks and uncertainties. Discussions containing forward-looking statements may be found in the material set forth under “Risk Factors” and “Operating and Financial Review” as well as in the annual report generally. We generally use words such as “believes”, “intends”, “expects”, “anticipates”, “plans” and similar expressions to identify forward-looking statements. This annual report also contains third-party estimates regarding the size and growth of the wireless communications, mobile Internet and semiconductor markets in general. You should not place undue reliance on these forward-looking statements. Our actual results could differ materially from those anticipated in the forward-looking statements for many reasons, including the risks described below under “Risk Factors” and elsewhere in this annual report.

Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot assure you that our future results, levels of activity, performance, achievements or other matters covered in such forward-looking statements will meet these expectations. Except as may be required under applicable law, we are under no duty to update any of the forward-looking statements after the date of this annual report to conform these statements to actual results or to changes in our expectations.

iii

PROPOSED COMBINATION WITH CEVA, INC.

In April 2002, we entered into an agreement with DSP Group, Inc. and Ceva, Inc., providing for the combination of Parthus with Ceva, the DSP cores licensing subsidiary of DSP Group. This combination, to be effected as a merger of equals, has been unanimously approved by the boards of directors of both companies. The new combined company, to be called ParthusCeva, Inc., will be incorporated in Delaware and headquartered in San Jose, California, with principal executive offices in Dublin, Ireland and Herzeliya, Israel.

The combination will create a combined company that we believe will be in a leadership position in the market for digital signal processing (DSP) cores and platform-level IP—the core technologies for all digital communications and multimedia devices. We expect that DSP technology will be fundamental to our customers as they target their products at high-growth markets such as wireless communications, mobile computing, automotive applications, consumer entertainment and computer networking. The combination of Parthus and Ceva will create what we believe will be the leading independent provider of DSP-based IP solutions, with strong customer penetration of many of the world’s largest semiconductor companies and original equipment manufacturers (OEMs). ParthusCeva will be able to offer an integrated IP solution—including communications, applications and multimedia IP built around the company’s DSP core technology. This integrated solution will favorably position ParthusCeva to exploit the industry trend towards the licensing of open-standard IP architectures for the digital economy. Key strengths of ParthusCeva are expected to include:

•

Market leadership in both DSP cores and platform-level IP solutions that build around both DSP and leading RISC cores;

•

A strong position in large and fast-growing markets such as wireless communications, mobile computing, automotive applications, consumer entertainment and computer networking;

•

Strong product offerings, including IP solutions for key applications such as Bluetooth, GPS, W-CDMA, VoIP and MP3;

•

The ability to exploit the industry shift toward the licensing of open-standard processor architectures;

•

Blue-chip semiconductor and OEM customers (including nine out of the top-10 semiconductor companies) with demonstrated strong customer retention and significant cross-selling opportunities;

•

A demonstrated management team; and

•

A proven business model with scalable, high margin revenues.

Under the terms of the combination, we expect that:

•

DSP Group will contribute its DSP cores licensing business, as well as $40 million in net cash, to its wholly owned subsidiary, Ceva, Inc.;

•

Ceva will then be spun off to the existing shareholders of DSP Group, who will thereby become direct shareholders of Ceva;

•

Parthus will distribute an aggregate of $60 million to its existing shareholders in the form of a repayment of share capital;

•

Parthus and Ceva will combine;

•

Ceva will issue common stock to the existing shareholders of Parthus;

•

Ceva will change its name to ParthusCeva, Inc.;

•

Immediately following these transactions, existing Parthus shareholders will hold approximately 49.9% of the combined entity and existing DSP Group shareholders will hold the remaining approximately 50.1%;

•

Existing options to purchase ordinary shares of Parthus will be assumed by PathusCeva and become options to purchase common stock of ParthusCeva;

•

ParthusCeva’s pro forma net cash position upon closing of the combination will be in excess of $80 million (reflecting $40 million net cash to be contributed by DSP Group and the cash to be retained by Parthus following its planned $60 million capital repayment to Parthus shareholders); and

•

ParthusCeva’s common stock will be quoted on Nasdaq and traded on the London Stock Exchange.

ParthusCeva will be headquartered in San Jose, California, and will have more than 400 employees, including approximately 330 involved in research and development. The board of ParthusCeva will comprise eight members in total, including five non-executive directors. Key executives of ParthusCeva will include:

•

Eli Ayalon, currently Chairman and Chief Executive Officer of DSP Group, who will serve as Chairman of ParthusCeva;

•

Brian Long, currently Chief Executive Officer of Parthus, who will serve as Vice Chairman of ParthusCeva;

•

Kevin Fielding, currently President of Parthus, who will become Chief Executive Officer and a board member of ParthusCeva;

•

Gideon Wertheizer, currently Executive Vice President of DSP Group, who will become Executive Vice President -Business Development and Chief Technology Officer of ParthusCeva;

•

Eoin Gilley, currently Chief Operating Officer of Parthus, who will become Chief Operating Officer of ParthusCeva; and

•

Elaine Coughlan, currently Chief Financial Officer of Parthus, who will become the Chief Financial Officer of ParthusCeva.

We expect the combination to be completed by the end of third quarter of 2002. The transaction is subject to:

•

receipt of a favorable private letter ruling from the U.S. Internal Revenue Service regarding the tax-free spin-off of the Ceva business by DSP Group,

•

approval by Parthus shareholders of the combination and the repayment of capital,

•

the approval of the Irish High Court of a scheme of arrangement in accordance with Irish companies legislation, and

•

other customary closing conditions.

SELECTED FINANCIAL DATA

The consolidated financial data set forth below for each of the years in the five-year period ended December 31, 2001, have been derived from our audited consolidated financial statements. We have prepared our consolidated financial statements in accordance with U.S. generally accepted accounting principles, and our financial statements have been audited by KPMG, independent chartered accountants. The data set forth below should be read in conjunction with “Operating and Financial Review “ and our audited consolidated financial statements and the related notes for the three years ended December 31, 2001 included elsewhere in this annual report.

	Year Ended December 31,
	1997			1998			1999			2000			2001
	(in thousands, except per share data)
Statement of Operations Data:
Revenue
IP license	$	—		$	119		$	5,214		$	16,059		$	29,998
IP creation		12,820			15,450			13,826			12,433			6,756
Hard IP		—			—			—			3,428			4,165

Total revenue		12,820			15,569			19,040			31,920			40,919
Cost of revenue
IP license		—			—			(983	)		(2,960	)		(5,052	)
IP creation		(7,459	)		(8,621	)		(8,325	)		(8,334	)		(4,751	)
Hard IP		—			—			—			(2,116	)		(2,261	)

Total cost of revenue		(7,459	)		(8,621	)		(9,308	)		(13,410	)		(12,064	)
Gross margin		5,361			6,948			9,732			18,510			28,855
Research and development		(1,086	)		(3,372	)		7,128			19,090			29,994
Sales and marketing		(812	)		(1,200	)		2,479			9,012			11,054
General and administrative		(1,031	)		(1,369	)		2,994			9,741			7,364
Amortization of goodwill & intangible assets		—			—			—			(1,081	)		(9,195	)
In-process research & development charge		—			—			—			—			(10,895	)
Restructuring charge		—			—			—			—			(765	)

Total operating expenses		(2,929	)		(5,941	)		(12,601	)		(38,924	)		(69,267	)

Income (loss) from operations		2,432			1,007			(2,869	)		(20,414	)		(40,412	)
Interest income, net		56			127			145			5,346			6,394
Foreign exchange gain (loss)		—			—			241			434			(241	)
Minority interest		(183	)		(186	)		(75	)		(204	)		(100	)

Income (loss) before income taxes		2,305			948			(2,558	)		(14,838	)		(34,359	)
Provision for income taxes		(312	)		(231	)		—			(1,205	)		(300	)

Net income (loss)		1,993			717			(2,558	)		(16,043	)		(34,659	)

Preferred dividends		—			(29	)		(54	)		(15	)		—

Net income (loss) available to ordinary shareholders	$	1,993		$	688		$	(2,612	)	$	(16,058	)	$	(34,659	)

Net income (loss) per ordinary share Basic and diluted	$	0.006		$	0.002		$	(0.007	)	$	(0.034	)	$	(0.062	)

Shares used in computing net income (loss) per ordinary share

Basic		314,022,800			317,075,870			362,473,760			471,389,525			558,946,827

Diluted		356,688,700			386,074,820			362,473,760			471,389,525			558,946,827

Non-cash stock compensation expenses of $52,000, $5,540,000 and $1,806,000 for the years ended December 31, 1999, 2000 and 2001 have been recorded as follows:

	Year Ended December 31,
	1999		2000		2001
	(in thousands)
Research and development	$	36	$	923	$	1,416
Sales and marketing		12		120		197
General and administrative		4		4,497		193

	$	52	$	5,540	$	1,806

	December 31,
	1997		1998		1999		2000		2001
	(in thousands)
Balance Sheet Data:
Cash and cash equivalents	$	3,415	$	14,350	$	10,314	$	159,865	$	121,503
Working capital		3,365		13,117		8,057		147,386		107,273
Total assets		7,626		19,208		16,900		179,246		205,820
Minority interest		755		989		909		1,001		—
Redeemable shares		987		2,598		1,635		—		—

Total shareholders’ equity	$	3,558	$	12,109	$	7,881	$	157,516	$	182,087

First Quarter 2002

The consolidated financial data set forth below for the quarters ended March 31, 2002, March 31, 2001 and December 31, 2001 have been derived from our unaudited financial statements.

	Quarter Ended
	March 31, 2002			March 31, 2001			December 31, 2001
	(in thousands)
Revenue
IP licensing	$	8,925		$	5,850		$	8,737
IP creation		831			2,400			1,198
Hard IP		917			1,513			579

Total revenue		10,673			9,763			10,514
Cost of revenue
Licensing and royalties		1,443			986			1,502
IP creation		580			1,692			844
Hard IP		494			824			315

Total cost of revenue		2,517			3,502			2,661


Gross margin		8,156			6,261			7,853

Operating expenses
Research & development		7,637			6,249			8,079
Sales & marketing		2,364			2,704			2,803
General & administration		1,643			1,938			1,791
Amortization of goodwill & intangible assets		340			366			3,810
Restructuring charge		—			—			765
Loss on disposal of division		213			—			—

Total operating expenses		12,197			11,257			17,248

Loss from operations		(4,041	)		(4,996	)		(9,395	)
Interest & similar income, net		680			2,113			1,341
Foreign exchange gain/(loss)		66			(41	)		(43	)
Minority interest		—			(50	)		—

Loss before income tax		(3,295	)		(2,974	)		(8,097	)
Provision for income taxes		—			(150	)		—

Net loss	$	(3,295	)	$	(3,124	)	$	(8,097	)

Net loss per ordinary share (basic and diluted)	$	(0.006	)	$	(0.006	)	$	(0.014	)
Weighted average number of ordinary shares (‘000)		581,528			532,627			579,811

Non-cash stock compensation expenses of $525,000, $336,000 and $525,000 for the quarters ended March 31, 2002, March 31, 2001 and December 31, 2001 have been recorded as follows:

	Quarter ended
	March 31, 2002		March 31, 2001		December 31, 2001
	(in thousands)
Research and development	$	407	$	264	$	414
Sales and marketing		61		35		57
General and administrative		57		37		54

	$	525	$	336	$	525

	March 31, 2002
Balance Sheet Data:	(in thousands)
Cash and cash equivalents	$	115,840
Working Capital		101,319
Total assets		201,327
Total shareholders’ equity		179,383

OPERATING AND FINANCIAL REVIEW

The following discussion of our financial condition and results of operations should be read in conjunction with our “Selected Financial Data” and our consolidated financial statements, including the related notes, each included elsewhere in this annual report.

Overview

We were established in 1993 as a contract developer of semiconductor intellectual property for semiconductor manufacturers and electronic product manufacturers. Between 1993 and 1998, we accumulated expertise in the design and development of digital, analog, mixed-signal and software technology for our customers, focusing in particular on data storage technologies.

In late 1998 we decided to leverage our existing expertise into new and emerging markets, refocusing our strategy to become a leading supplier of fully integrated platform solutions to electronic product manufacturers and semiconductor manufacturers for applications in the mobile Internet market. With this strategy, we generate revenues from IP licensing, IP creation, and Hard IP.

Principal Developments in 2001

Total revenue for the year increased 28% to $40.9 million from $31.9 million in 2000. IP licensing revenue was our largest revenue stream, accounting for 72% of total revenue in 2001. We entered into 25 license agreements during the year, including a portfolio license, with 14 new licensing customers, making a total of 74 license agreements in place by December 31, 2001.

In April 2001, we entered into a multi-year technology portfolio licensing and royalty agreement with STMicroelectronics for the complete suite of our mobile Internet IP platforms. In June 2001 we also acquired the remaining 20% minority interest in Silicon Systems Design Limited from STMicroelectronics for approximately $13.0 million in cash and approximately 18.4 million new Parthus ordinary shares.

In May 2001, we completed our acquisition of Chicory Systems Inc., a privately held company based in Austin, Texas, for approximately $11.7 million in cash and approximately 22.2 million of our ordinary shares, plus contingent consideration of up to a maximum of 21.9 million additional Parthus ordinary shares issuable upon the achievement of certain performance milestones. Through this transaction, we acquired Chicory’s advanced technology for accelerating mobile Internet applications by migrating complex systems software into high-performance silicon.

Recent Developments

In April 2002, we signed an agreement with DSP Group, Inc., and Ceva, Inc., providing for the combination of Parthus with Ceva, the intellectual property licensing subsidiary of DSP Group, in a merger of equals. Subject to tax and other regulatory approvals, we anticipate that this transaction will close in the third quarter of 2002. See “Proposed Combination with Ceva, Inc.” for more details.

In the first quarter of 2002 we announced a broad ranging strategic agreement with UbiNetics, an established expert and market leader in 3G wireless device technology. Under a license agreement, UbiNetics will integrate Parthus’ GPRS/GSM technology into its 3G WCDMA silicon and software technologies to create a fully integrated multi-mode 2.5G/3G (W-CDMA/GPRS/GSM) solution. Parthus will market this multi-mode 2.5G/3G solution as part of our portfolio of technologies, licensing the solution through our global sales channel and semiconductor relationships. To underpin the alliance, Parthus subscribed for a minority shareholding interest in UbiNetics.

Revenue

IP license. The intellectual property that we license consists of IP that we developed in our IP creation business for other customers in the past, IP developed in our research and development activities and third-party IP, and consists of circuit designs, software and related documentation that enable a customer to produce integrated circuits and related technology and software.

Fees are payable upon completion of agreed-upon milestones, such as the delivery of specifications and technical documentation. Each license is designed to meet the specific requirements of the particular customer and can vary from rights to allow the customer to incorporate our technology into the customer’s own product to the complete design of a “system-on-a-chip” product by Parthus.

Revenue from initial license fees is recognized based on the percentage-of-completion method over the period from signing of the license to customer acceptance. The amount of revenue recognized is based on the total license fees under the license agreement and the percentage to completion achieved. The percentage to completion is measured by monitoring progress using records of actual time incurred to date on the project compared with the total estimated project requirements, which corresponds to the costs of earned revenue. We continuously review the expected time of customer acceptance based on our experience with similar projects and make adjustments in revenue recognition accordingly. As a result of this method of revenue recognition, payment and the recognition of revenue are often not contemporaneous. This timing difference means that we typically have deferred, and may occasionally have accrued, revenue on our balance sheet.

In addition to the initial license fees, we receive revenue in two additional ways under our license agreements: re-use fees and per-unit royalties. We will receive re-use fees each time a manufacturer uses intellectual property licensed from us to manufacture a different product. Per-unit royalties are calculated either as a percentage of the licensee’s sale price for products containing our IP or as a fixed amount per unit sold. Alternatively, licensees may pay a one-time buyout fee in lieu of subsequent re-use fees and per-unit royalties. These per-unit royalties are payable by licensees upon shipment of products and we will recognize revenue as they are earned. Through December 31, 2001, we had entered into 51 contracts that provide for us to receive royalties.

IP creation. Historically, the most significant component of our revenue arose from payments for IP creation. For 1999, IP creation accounted for 73% of our total revenue, compared with 39% of our total revenue in 2000 and 17% of our total revenue in 2001. We expect our new multi-technology

portfolio agreement with STMicroelectronics to result in a further significant reduction in the level of IP creation revenue in absolute terms and as a percentage of revenue, as a greater proportion of our business with STMicroelectronics will be based on the IP licensing model. As noted above, our IP creation contracts are usually multi-year contracts. IP creation involves the performance of fee-for-service contracts that are reimbursed on a time-and-materials basis. It is our policy to retain ownership of, or rights to use, the IP created pursuant to our IP creation arrangements. Under the overall terms of a typical IP creation contract we agree to perform specific projects. We recognize revenue from IP creation when the service has been provided and all obligations to the customer under the contract have been fulfilled.

Hard IP. We refer to the incorporation of our intellectual property into reference designs (either as silicon chips or printed circuit boards) as Hard IP.

Cost of Revenue

Cost of IP license revenue includes related labor costs directly attributable to developing or customizing the licensed technology to the customer’s specific needs.

Cost of IP creation revenue includes related labor, travel and other non-recoverable costs directly attributable to consulting work performed for third parties as well as the costs of support and maintenance services to licensees.

Cost of Hard IP revenue includes labor costs and materials directly attributable to the production of reference boards incorporating our IP.

Gross Margin

Our IP license margin reflects the economies associated with licensing previously developed technology. Accordingly, we believe that the margins to be earned on our IP license business will continue to be significantly higher than the margins earned on either our IP creation business or Hard IP business.

Operating Expenses

Our operating expenses increased due to our continued investment, internally and by acquisition, in developing and licensing a strong portfolio of technology platforms.

Research and development expenses consist primarily of related labor and associated costs connected with the development of our intellectual property. Because technological feasibility is generally not established until all design, coding and testing activities are completed, we expense all development costs as incurred. Work that we perform to develop technology for customers on a fee-for-services basis is not included in research and development expenses; nevertheless, we generally retain the right to use intellectual property developed in this manner. Research and development expenses include payments that we make to third parties to license technology from them when we incorporate their technology into our intellectual property as part of our research and development activities.

Sales and marketing expenses consist of related labor costs, including commissions, travel and other costs associated with sales activity, as well as advertising, trade show participation, public relations and other marketing costs.

General and administrative expenses consist primarily of related labor and recruitment costs, information systems and technology, infrastructure, facilities costs, telephone and other office costs and depreciation.

Minority Interest

We performed much of our IP creation work through our subsidiary Silicon Systems Design Limited. STMicroelectronics owned 20% of that subsidiary until June 29, 2001 at which time we purchased its interest.

Provision for Income Taxes

We operate as a holding company with operating subsidiaries in Ireland, the United Kingdom and the United States. Each subsidiary is taxed based on the law of the jurisdiction in which it is incorporated. Because taxes are incurred at the subsidiary level, and one subsidiary’s tax losses cannot be used to offset the taxable income of subsidiaries in other tax jurisdictions, our consolidated effective tax rate may increase to the extent that we report tax losses in some subsidiaries and taxable income in others. In addition, our tax rate may be affected by costs that are not deductible in certain jurisdictions for tax purposes, such as amortization of goodwill.

We have significant operations in the Republic of Ireland. Some of our Irish operating subsidiaries are taxed at rates substantially lower than U.S. or U.K. tax rates. Two Irish subsidiaries currently qualify for a 10% tax rate, which, under current legislation, will remain in force until December 31, 2010, and three other Irish subsidiaries qualify for an exemption from income tax as their revenue source is license fees from qualifying patents within the meaning of Section 234 of the Irish Taxes Consolidation Act 1997. We currently anticipate that we will continue to benefit from this tax treatment, although the extent of the benefit could vary from period to period, and our tax situation may change. In addition, if these subsidiaries were no longer to qualify for these tax rates or if the tax laws were rescinded or changed, our operating results could be materially adversely affected.

Currency Risk

A portion of our revenue, costs, assets and liabilities are denominated in currencies other than the U.S. dollar. Through 2001, we and all of our subsidiaries, other than our U.S. subsidiaries, had functional currencies other than the U.S. dollar. We have implemented a strategic shift over the past three years from being a contractor of semiconductor IP to being a supplier of platform solutions, with our emphasis on licensing to the semiconductor industry. Because this industry is predominantly U.S.-dollar-based, the economic environment in which we operate has consequently shifted to the U.S. dollar. This is evidenced by the fact that the percentage of our revenues denominated in U.S. dollars has grown from approximately 30% in 1999, to 61% in 2000, to 85% in 2001; while the percentage of our total expenses denominated in U.S. dollars grew from approximately 19% in 1999, to 29% in 2000, to 41% in 2001; both of these are expected to continue to increase in 2002. As a result, beginning January 1, 2002, we and certain of our subsidiaries adopted the U.S. dollar as our functional currency. We do not anticipate that either changes in the underlying facts and circumstances noted above, or the change in functional currency, will have a material impact on our business or financial statements.

Certain of our subsidiaries continue to use functional currencies other than the U.S. dollar. These currencies may fluctuate significantly against the U.S. dollar. As a result of such currency fluctuations and the conversion to U.S. dollars for financial reporting purposes, we may experience fluctuations in our operating results on an annual and a quarterly basis. We have not in the past, but may in the future, hedge against fluctuations in exchange rates. Future hedging transactions may not successfully mitigate losses caused by currency fluctuations. We expect to continue to experience the effect of exchange rate fluctuations on an annual and quarterly basis, and currency fluctuations could have a material adverse impact on our results of operations.

The conversion to the euro has not had a material effect on the pricing of, or the market for, our licenses and services, and we do not expect the conversion will have a material effect in future.

First Quarter 2002

The following is our discussion and analysis of our financial condition and results of operations for the quarter ended March 31, 2002.

First Quarter 2002 Compared with First and Fourth Quarters 2001

Revenue

Total revenue for the first quarter 2002 amounted to $10.7 million, a 9% year-on-year increase, and up by 2% on fourth quarter 2001 revenue. Licensing and royalty revenue grew to $8.9 million, up 52% from $5.9 million in the first quarter of 2001 and up 2% from $8.7 million in the fourth quarter of 2001. Royalty revenue was $263,000, up 129% compared with the fourth quarter 2001. Higher margin licensing and royalty revenue represented 84% of total revenue, up from 60% in the first quarter of 2001 and from 83% of total revenue in the fourth quarter 2001. IP creation revenue amounted to $831,000 in the first quarter 2002, down 31% from the fourth quarter 2001, reflecting the continued move away from IP creation to the IP licensing model. Hard IP revenue sequentially increased 58% to $917,000 from $579,000 in the fourth quarter 2001, reflecting improved volumes being shipped by our customers to end markets in the first quarter 2002.

Gross Margins

Gross margins grew to 76%, up 1% over the fourth quarter 2001 and a 12% increase year-on-year. The gross margin improvement reflects the planned shift in the mix of business and the continued growth of IP licensing activity.

Operating Expenses

Research and development expenses amounted to $7.6 million in the first quarter 2002 a decrease of 6% sequentially from $8.1 million in the fourth quarter 2001 as a result of the cost reduction measures described below.

Sales and marketing expenses decreased by 16% sequentially from $2.8 million in the fourth quarter 2001 to $2.4 million in the first quarter 2002 due to seasonal effects of commission payments in the fourth quarter 2001.

General and administrative expenses decreased by 8% sequentially from $1.8 million in the fourth quarter 2001 to $1.6 million as a result of the cost reduction measures described below.

Amortization of goodwill and intangibles decreased to $340,000 from $3.8 million in the fourth quarter 2001 due to the adoption of SFAS 142 “Goodwill and other intangible assets”. SFAS 142 changes the accounting for goodwill from an amortization method to an impairment-only approach.

One-time loss on disposal. In March 2002, we transferred the assets and facility associated with our GSM/GPRS team to UbiNetics, resulting in a loss on disposal of $213,000.

Interest Income

Interest and similar income was $680,000 in the first quarter 2002, down from $1.3 million in the fourth quarter 2001. This reflects the impact of lower cash balances and the lower interest rate environment during the first quarter of 2002.

Operating Loss

Overall, the loss from operations in the first quarter 2002 decreased sequentially by $5.4 million or 56% to $4.0 million from $9.4 million in fourth quarter 2001. Of this decrease, $3.5 million resulted from the change in accounting from the amortization method to an impairment-only approach following the adoption of FAS 142.

Net Loss

The net loss for the first quarter 2002 was $3.3 million, representing a loss of $0.006 per ordinary share or $0.057 per ADS. This compares with a reported net loss for the fourth quarter 2001 of $8.1 million, or a loss of $0.014 per ordinary share or $0.14 per ADS.

Liquidity

At March 31, 2002, we had working capital of $101.3 million, including cash and cash equivalents of $115.8 million, compared with working capital of $107.3 million, including cash and cash equivalents of $121.5 million at December 31, 2001. Principal reasons for the change was our operating cash outflow of $2.1 million during the quarter and our investment of $4.5 million in UbiNetics.

Results of Operations

The following table presents our results of operations expressed as a percentage of total revenue, after giving effect to rounding, for the periods indicated:

	Year Ended December 31,
	1999		2000		2001
Revenue:
IP license	27	%	50	%	73	%
IP creation	73		39		17
Hard IP	—		11		10

Total revenue	100		100		100
Cost of revenue:
IP license	5		9		12
IP creation	44		26		12
Hard IP	—		7		5

Total cost of revenue	49		42		29
Gross margin	51		58		71

Operating expenses:
Research and development	37		60		73
Sales and marketing	13		28		27
General and administrative	16		30		19
Amortization of goodwill &intangible assets	—		3		22
In-process research & development charge	—		—		27
Restructuring charge	—		—		2

Total operating expenses	66		121		170

Loss from operations	(15	)	(63	)	(99	)
Other income :
Interest income, net	1		16		16
Exchange gain, net	1		1		(1	)

Minority interest	—		(1	)	—

Loss before income taxes	(13	)	(47	)	(84	)
Provisions for income taxes	—		(3	)	(1	)

Net loss	(13	)%	(50	)%	(85	)%

2001 Compared with 2000

Revenue

Total revenue increased by 28% from $31.9 million in 2000 to $40.9 million in 2001. The increase in total revenue was due to the increase in IP license revenue and Hard IP revenue, offset by a continued anticipated decrease in IP creation revenue. We continued to expand our customer base in 2001, while maintaining and extending existing key relationships. Revenue from our largest customer, STMicroelectronics, although higher in absolute terms, decreased to 31% of total revenue compared with 39% in 2000, a direct result of broadening our customer base.

In terms of geographic spread, we improved our penetration into the Asian market, which accounted for 11% of total revenue in 2001 compared to 6% in 2000. The United States and Europe represented 47% and 42% of total revenue in 2001 respectively, compared to 2000 when each represented 47% of total revenue.

IP license revenue increased by 87% from $16.1 million, or 50% of total revenue, in 2000 to $30.0 million, or 73% of total revenue, in 2001. The increase reflects the strong licensing activity during 2001. IP license revenue from royalties increased to $532,000 compared to $124,000 in the previous year. Royalty revenue was first recognized in the third quarter of 2000.

IP creation revenue decreased from $12.4 million, or 39% of total revenue, in 2000 to $6.8 million, or 17% of total revenue, in 2001. This decrease was attributable to a planned reduction in the number of IP creation engagements in 2001 as we continued to focus our resources on expanding our IP license business.

Hard IP revenue increased by 2% from $3.4 million, or 11% of total revenue, in 2000 to $4.2 million, or 10% of total revenue, in 2001. We expect Hard IP revenue to remain relatively constant in absolute terms but to decrease as a percentage of total revenue over the next several years.

Cost of Revenue

Total cost of revenue decreased by 11% from $13.4 million, or 42% of total revenue, in 2000 to $12.1 million, or 29% of total revenue, in 2001. Gross margin increased to 71% in 2001 from 58% in 2000. The increase in total cost of revenue and gross margin was due primarily to the continuing change in revenue mix, with the majority of revenue derived from higher gross margin IP licensing activity.

Cost of IP license revenue increased by 71% from $3.0 million, or 19% of IP license revenue, in 2000 to $5.1 million, or 17% of IP license revenue, in 2001. We expect this line item to continue to decrease in future periods as a percentage of IP license revenue as we receive royalties from our customers, because the associated costs are minimal.

Cost of IP creation revenue decreased from $8.3 million, or 67% of IP creation revenue, in 2000 to $4.8 million, or 70% of IP creation revenue, in 2001. The increase in cost of IP creation revenue as a percentage of IP creation revenue was primarily due to increased labor costs. We expect that these costs may continue to increase as a percentage of IP creation revenue due to continuing increases in labor costs.

Cost of Hard IP revenue marginally increased from $2.1 million in 2000 to $2.3 million in 2001. Cost of Hard IP revenue as a percentage of Hard IP revenue decreased from 62% in 2000 to 54% principally due to change in product mix with focus on higher margin products.

Operating Expenses

Total operating expenses for 2001 were $69.3 million, an increase of 78%. This increase was due to our continued investment, internally and by acquisition, in developing and licensing a strong portfolio of technology platforms. The investment has resulted in higher engineering staff, facilities costs, patent costs and depreciation charges throughout, as planned, 2001. We incurred a one-time non-cash charge of $10.9 million in the third quarter 2001 relating to in-process R&D in connection with our acquisition of Chicory Systems Inc. We also incurred a restructuring charge of $765,000, representing severance charges following a headcount reduction of 29 employees in December 2001. Amortization charges for 2001 of $9.2 million increased by $8.1 million from $ 1.1 million in 2000 reflecting the impact of acquisitions made during 2001. Non-cash stock compensation expense decreased from $5.5 million in 2000 to $1.8 million in 2001 due to one-time charges in 2000. The increase also reflects the continued expansion of our sales and marketing and administrative capabilities to support and leverage our investments.

Research and development expenses, the largest element of operating expenses , increased by 57% from $19.1 million, or 60% of total revenue, in 2000 to $30.0 million, or 73% of total revenue, in 2001. We view research and development as a principal strategic investment and have continued our commitment to invest heavily in this area. This commitment is reflected primarily in higher labor and

associated costs resulting from increased headcount throughout 2001 and increased investment in design tools and sub-contract design. The number of research and development personnel was 307 at December 31, 2001 compared with 308 in 2000 and during 2001 peaked at 336. Included in research and development expenses is a non cash stock compensation charge of $1.4 million which increased from $0.9 million in 2000.

Sales and marketing expenses increased by 22% from $9.0 million, or 28% of total revenue, in 2000 to $11.1 million, or 27% of total revenue, in 2001. The increase primarily resulted from the recruitment of additional sales personnel into our existing sales operations to a peak of 49 during 2001 compared to 40 in 2000, related sales commissions and increases in our direct marketing activities and travel costs.

General and administrative expenses decreased by 24% from $9.7 million, or 30% of total revenue, in 2000 to $7.4 million, or 19% of total revenue, in 2001. Included in general and administrative expenses is a non cash stock compensation charge of $0.2 million which decreased from $4.5 million in 2000. The charge in 2000 included a one-time non cash compensation expense of $4.3 million as a result of stock options which were granted to some of our executives. Excluding the non-cash stock compensation charge, general and administrative expenses increased by 37% from $5.2 million in 2000 to $7.2 million in 2001. This increase reflects the additional infrastructure costs associated with the successful integration of our acquisitions and increased facility costs arising from additional sales locations.

Amortization of goodwill & intangible assets increased from $1.1 million in 2000 to $9.2 million in 2001. The increase related primarily to the amortization of goodwill of $7.8 million on our acquisitions of Chicory Systems Inc. and the remaining 20% minority interest in Silicon Systems Design Limited.

In-process research & development charge of $10.9 million in 2001 represents a one time non cash charge relating to our acquisition of Chicory Systems Inc.

The value assigned to purchased in-process technology related to two microprocessor architecture projects, designated as Project A and Project B, was $7,370,000 and $3,525,000, respectively. These projects involved the development of technology to accelerate Internet applications by migrating complex software to silicon chips. Technological feasibility or commercial viability of these projects was not established at the acquisition date. These products were considered to have no alternative future use other than the technological indications for which they were in development. Projects A and B were estimated to be 80% and 50% complete, respectively, estimated costs to completion of these products were approximately $570,000 and $700,000, respectively, and discount rates of 35% and 40%, respectively, were used. Both projects involve completion of hardware and software elements. The hardware component must be finalized before the software piece (consisting of validation work, completion of the driver code, etc.) can be started. At the valuation date, Project A had not completed the software element and Project B had not completed the hardware component. These projects were expected to be completed by the end of 2001 when we expected to commence sales of the products. The principal risks relating to the development of the Project A product technology include developing the reference software and reference manual, testing and debugging. The principal risks relating to the development of the Project B product technology include completing the micro-architecture, developing the driver code and software for the end product, debugging and testing. Each of these steps must be completed before the products can be released into the market.

Our primary focus was on the completion of Project A, not only as a stand-alone architecture, but also with the ability to fully integrate it with existing and future Parthus technology platforms. Costs of approximately $700,000 were incurred on the completion of the Project A architecture. Project A was completed, in line with expectations, in the fourth quarter of 2001 and is the primary architecture used in our Machstream platform technology, which we are currently licensing.

In the third quarter of 2001 after a strategic review we decided to suspend further investment in Project B. We do not believe that this refocus of effort will adversely impact our overall expected return on investment, future results and financial condition.

Restructuring charge of $765,000 in 2001 represents severance charges following a headcount reduction of 29 employees in December 2001.

Interest Income

Interest income, net , increased from $5.3 million in 2000 to $6.4 million in 2001. The increase was due to higher cash balances held throughout 2001 as a result of the closing of our initial public offering in May 2000 and our follow-on offering in November 2000, which generated combined net proceeds to us of approximately $157 million. This was offset by the lower interest rate environment in 2001 which impacted overall returns on cash and cash equivalents invested.

Provision for Income Taxes

The provision for income taxes was $300,000 in 2001 compared to $1.2 million in 2000 and was provided for tax liabilities in non-Irish jurisdictions.

2000 Compared with 1999

Revenue

Total revenue increased by 68% from $19.0 million in 1999 to $31.9 million in 2000. The increase in total revenue was due to the increase in IP license revenue described below as well as the introduction of Hard IP revenue, offset in part by a planned decrease in IP creation revenue. We expanded our customer base significantly in 2000, while continuing to maintain and extend existing key relationships. Revenue from our largest customer, STMicroelectronics, although higher in euro terms, decreased to 39% of total revenue compared with 68% in 1999, a direct result of broadening our customer base and a weakening of the euro against the U.S. dollar.

In terms of geographic spread, we entered new markets in Asia in 2000, which accounted for 6% of total revenue for that year. We also achieved a greater balance between Europe and the United States as our customer based developed and expanded. Europe and the United States each represented 47% of our total revenue in 2000, compared to 68% and 32%, respectively, in 1999.

IP license revenue increased by 208% from $5.2 million, or 27% of total revenue, in 1999 to $16.1 million, or 50% of total revenue, in 2000. The increase in IP license revenue was driven by strong licensing activity and growth in average deal size. We also recognized IP license revenue from royalties for the first time in the third quarter of 2000. The amount of these royalties was $124,000 for the year.

We believe that license fees are likely to grow over time as a percentage of total revenue as demand for our intellectual property continues to grow.

IP creation revenue decreased by 10% from $13.8 million, or 73% of total revenue, in 1999 to $12.4 million, or 39% of total revenue, in 2000. This decrease was attributable both to the weakness of the euro against the U.S. dollar and to a planned reduction in the number of IP creation engagements in 2000 as we continued to refocus our resources on expanding our IP license business.

Hard IP revenue was $3.4 million in 2000. We had no Hard IP revenue in 1999. Our Hard IP revenue derives from our acquisition in March 2000 of the GPS division of Symmetricom Limited. We expect Hard IP revenue to remain relatively constant in absolute terms but to decrease as a percentage of total revenue over the next several years.

Cost of Revenue

Total cost of revenue increased by 44% from $9.3 million, or 49% of total revenue, in 1999 to $13.4 million, or 42% of total revenue, in 2000. Gross margin increased to 58% in 2000 from 51% in 1999. The increase in total cost of revenue and gross margin was due primarily to the continuing change in revenue mix, with the majority of revenue derived from higher gross margin IP licensing activity.

Cost of IP license revenue increased by 201% from $983,000, or 19% of IP license revenue, in 1999 to $3.0 million, or 18% of IP license revenue, in 2000. We expect this line item to decrease in future periods as a percentage of IP license revenue as we receive royalties from our customers, because royalty income has minimal associated costs.

Cost of IP creation revenue remained level at $8.3 million in 1999 and 2000, respectively, representing 60% of IP creation revenue in 1999 and 67% of IP creation revenue in 2000. The increase in cost of IP creation revenue as a percentage of IP creation revenue was primarily due to increased labor costs. We expect that these costs may continue to increase as a percentage of IP creation revenue due to continuing increases in labor costs.

Cost of Hard IP revenue amounted to $2.1 million in 2000, the first year in which we recognized Hard IP revenue. Cost of Hard IP revenue as a percentage of Hard IP revenue was 62% in 2000.

Operating Expenses

Total operating expenses for 2000 were $38.9 million, an increase of 209%. This increase was due to our significant investment in developing the licensing and royalty business model and launching key new product platforms, which resulted in planned higher engineering staff, facilities costs, patent costs and depreciation charges. The increase also reflects the continued expansion of our sales and marketing capabilities and the opening of sales offices in new geographic regions to support and leverage the R&D effort, as well as non cash stock compensation charges.

Research and development expenses, the largest element of operating expenses , increased by 169% from $7.1 million, or 37% of total revenue, in 1999 to $19.1 million, or 60% of total revenue, in 2000. We view research and development as a principal strategic investment and have continued our commitment to invest heavily in this area. This commitment is reflected primarily in higher labor and associated costs resulting from increased headcount, including through our acquisition of the GPS division of Symmetricom Limited. Research and development personnel increased to 308 as of December 31, 2000 from 205 as of December 31, 1999. Included in research and development expenses is a non-cash stock compensation charge of $0.9 million which increased from $36,000 in 1999.

Sales and marketing expenses increased by 260% from $2.5 million, or 13% of total revenue, in 1999 to $9.0 million, or 28% of total revenue, in 2000. The increase primarily resulted from the recruitment of additional sales personnel into our existing sales operations, the expansion of our sales offices into Japan, Korea, Finland and Sweden, related sales commissions, the launch of the new corporate brand and increases in our direct marketing activities and travel costs.

General and administrative expenses increased by 223% from $3.0 million, or 16% of total revenue, in 1999 to $9.7 million, or 30% of total revenue, in 2000. Included in general and administrative expenses is a non-cash stock compensation charge of $4.5 million which increased from $4,000 in 1999. The charge includes a one-time non cash compensation expense of $4.3 million as a result of stock options that were granted to some of our executives. Excluding the non-cash compensation charge, general and administrative expenses increased from $3.0 million in 1999 to $5.2 million in 2000. This increase reflects our commitment to investing in a management and administrative structure to support our business going forward and increased facility costs arising from additional locations.

Amortization of intangible assets of $1.1 million in 2000 related primarily to the amortization of patents acquired as part of our acquisitions of the GPS division of Symmetricom Limited and of the GSM and GPRS technologies and design center of Frontier Design Inc.

Interest Income

Interest income, net , increased from $0.1 million of interest income, net, in 1999 to $5.3 million of interest income, net, in 2000. The increase was due to higher cash balances as a result of the closing of our initial public offering in May 2000, which generated net proceeds to us of approximately $133 million, and of a follow-on offering in November 2000, which generated net proceeds to us of approximately $24 million.

Provision for Income Taxes

The provision for income taxes was $1.2 million in 2000 and was provided for tax liabilities in non-Irish jurisdictions for 2000.

Liquidity and Capital Resources

At December 31, 2001, we had working capital of $107.3 million, including $121.5 million in cash and cash equivalents, compared with working capital at December 31, 2000 of $147.4 million, including $159.9 million in cash and cash equivalents. The principal reason for the annual change is the $25.1 million invested in acquisitions undertaken in 2001.We have no borrowings.

Prior to our initial public offering, we satisfied our working capital requirements and fixed asset expenditures principally through cash generated by operations and equity private placements. In May 2000, we received approximately $140.2 million of gross proceeds from the initial public offering of our ordinary shares and ADSs and in November 2000, we received approximately $23.9 million of gross proceeds from a follow-on offering of our ordinary shares and ADSs. The proceeds from these financings have been and are currently being expended primarily to fund research and development of our portfolio of technology platforms and expansion both organically and through acquisitions.

We believe that the net proceeds from our initial and follow-on public offerings, and existing cash and cash equivalents will suffice to meet our present requirements. The total cash outflow from operating activities in 2001 amounted to $7.9 million and is within the annual cash flow range we anticipated for the business. This compares with a cash inflow of $2.9 million in 2000. Several factors affected cash flow in 2001, particularly in the second half of the year as conditions deteriorated in the operating environment. The timing of signing license agreements shifted in the third and fourth quarter to the latter end of the quarter. Payment terms under license agreements have changed, as customers implement aggressive cash management measures, with a smaller upfront cash component under each contract. These have extended the timing of cash receipts.

We expect that our business will continue to consume cash from operating activities mainly through our investment in growing our IP licensing business until our planned return to profitability, targeted for the second half of 2002. Our accounts receivable and deferred revenues may vary unpredictably and will be affected by the timing of signing our contracts, the milestone terms and the credit terms.

Capital expenditures and acquisition costs were $31.4 million in 2001 and $10.9 million in 2000. Although we have no material commitments for capital expenditures, we anticipate an increase in the rate of capital expenditures consistent with our continued growth in operations, infrastructure and personnel. In May 2001, we spent approximately $12 million in cash in connection with our purchase of Chicory Systems Inc, and in June 2001 we spent approximately $13 million in cash in connection with our purchase from STMicroelectronics of its minority shareholding in our subsidiary, Silicon Systems Design Limited. In March 2000, we invested approximately $6.5 million in cash to partially finance the purchase of the GPS business of Symmetricom Limited.

Net cash provided by financing activities of $1.4 million in 2001 reflects net proceeds from the issuance of share capital. In 2000, net cash provided by financing activities was $158.2 million, reflecting principally our initial and follow-on public offerings conducted in that year.

Our contractual obligations are limited to operating leases as disclosed in note 21 to our financial statements for the year ended December 31, 2001.

Quantitative and Qualitative Disclosure about Market Risks

We are exposed to financial market risks, including changes in interest rates and foreign currency rates. Because we do not have any borrowings, our exposure is limited to movements in interest rates on our surplus cash balances and foreign exchange risk. Our primary foreign exchange risk relates to movements in rates between the U.S. dollar and the euro. Our principal non-U.S.-dollar-denominated assets exposed to foreign exchange risks are our cash balances. We also have non-U.S.-dollar-denominated liabilities that are exposed to foreign exchange risks. Our current policy is not to trade in financial instruments.

Interest income is sensitive to changes in the general level of European Central Bank and U.S. interest rates as our cash balances are held on variable rate demand deposits denominated in U.S. dollars and euro. Our primary foreign currency exchange risk relates to movements in rates between the U.S. dollar and the euro. As of December 31, 2001, we were not a party to any foreign currency hedging or other derivative financial instruments.

The analysis below presents the sensitivity of the market value of our cash balances to selected changes in market rates. The changes chosen represent our view of changes that are reasonable over a one-year period. Fair value estimates by their nature are subjective and involve uncertainties and matters of significant judgments and therefore cannot be determined precisely. The sensitivity analysis below represents the hypothetical change in fair value based on an immediate 10% movement in exchange rates.

	Fair value at December 31, 2000	Fair value at December 31, 2001	Fair value change-plus 10% movement	Fair value change-minus 10% movement
	($ in thousands)
Non U.S. dollar denominated cash	14,114	3,356	336	(336	)
Non U.S. dollar denominated liabilities	11,969	7,555	755	(755	)

Critical Accounting Policies, Estimates and Assumptions

The preparation of consolidated financial statements in accordance with generally accepted accounting principles in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reported period. Management bases its estimates and judgments on historical experience and on other factors that are believed to be reasonable under current circumstances. Actual results may differ from these estimates if these assumptions prove to be incorrect or if conditions develop other than as assumed for purposes of such estimates. The Company’s significant accounting policies and the basis of preparation of our consolidated financial statements are detailed in note 2 on pages F-7 to F-12. The following is a brief discussion of the critical accounting policies used by Parthus which require estimates and judgements by management:

Revenue Recognition. Significant management judgments and estimates must be made and used in connection with the recognition of revenue in any accounting period. Material differences in the amount of revenue in any given period may result if these judgments or estimates prove to be incorrect or if management’s estimates change on the basis of development of the business or market conditions.

We apply the provisions of Statement of Position No.97-2 and No.98-4 “Software Revenue Recognition” in recognizing revenue. A significant portion of our revenue is derived from license agreements with customers to enable them to use our IP, which is customized to each customer’s specific requirements. Revenues from initial license fees are recognized based on the percentage to completion method over the period from signing of the license through to customer acceptance, as IP requires significant modification or customization that takes time to complete. The percentage to completion is measured by monitoring progress using records of actual time incurred to date in the project compared to the total estimated project requirement, which corresponds to the costs related to earned revenues.

Estimates of total project requirements are based on prior experience of customization, delivery and acceptance of the same or similar technology and are reviewed and updated regularly by management. After delivery, if uncertainty exists about customer acceptance of the IP, license revenue would not be recognized until acceptance. Under the percentage to completion method, provisions for estimated losses on uncompleted contracts are recognized in the period in which the likelihood of such losses is determined.

If we do not accurately estimate the resources required or the scope of the work to be performed, or do not manage our projects properly within the planned periods of time or satisfy our obligations under the contracts, then future results may be significantly and negatively affected or losses on existing contracts may need to be recognized.

Acquired Intangibles and Goodwill. Intangible fixed assets and goodwill arising on acquisition are capitalized and amortized to the income statement over the period during which benefits are expected to accrue, currently estimated at five years. Where events and circumstances are present which indicate

that the carrying value may not be recoverable, we will recognize an impairment loss. Factors we consider important which could trigger an impairment include:

•

significant underperformance relative to expected historical or projected future operating results;

•

significant changes in the manner of our use of the acquired assets or the strategy for our overall business;

•

significant negative industry or economic trends;

•

significant decline in our stock price for a sustained period; and

•

changes in the ratio of our market capitalization to net book value.

Such impairment loss is measured by comparing the recoverable amount of the asset with its carrying value. The determination of the value of such intangible assets requires management to make assumptions regarding estimated future cash flows and other factors to determine the fair value of the respective assets. If these estimates or the related assumptions change in the future, we could be required to record impairment charges.

We incurred expenses of $10,895,000 relating to amounts assigned to acquired in-process technology in 2001. The value assigned to acquired in-process technology was determined by identifying those acquired specific in-process research and development projects that would be continued and for which:

•

technological feasibility had not been established at the acquisition date;

•

there was no alternative future use and;

•

the fair value was estimable with reasonable certainty.

Recent Accounting Pronouncements

In June 2001, the Financial Accounting Standards Board (“FASB”) issued SFAS No. 141, “Business Combinations”. This statement requires that the purchase method of accounting be used for all business combinations initiated after June 30, 2001. The adoption of this standard did not have any impact on the Company’s consolidated financial statements.

In July 2001, the FASB issued SFAS No. 142 “Goodwill and Other Intangible Assets” which revises the accounting for purchased goodwill and other intangible assets. SFAS No. 142 is effective for fiscal years beginning after December 15, 2001, with earlier adoption permitted. The Company will adopt SFAS No. 142 effective from January 1, 2002. Under SFAS No. 142, purchased goodwill and intangible assets with indefinite lives are no longer amortized, but instead tested for impairment at least annually. Accordingly, the Company has ceased amortization of all goodwill as of January 1, 2002. Goodwill amortization amounted to $7,824,000 for the year ended December 31, 2001. No goodwill amortization arose in either of the years ended December 31, 1999 and 2000. The Company does not have any intangible assets, other than goodwill, with indefinite lives. Intangible assets with finite lives, primarily patents and intellectual property, will continue to be amortized over their useful lives, currently estimated at five years. The Company recorded amortization of intangible assets of $Nil, $1,081,000 and $1,371,000 for the years ended December 31, 1999, 2000 and 2001 respectively.

amount exceeds the fair value then the second step is required to be completed, which involves the fair value of the reporting unit being allocated to each asset and liability with the excess being implied goodwill. The impairment loss is the amount by which the recorded goodwill exceeds the implied goodwill. The Company is required to complete a “transitional” impairment test for goodwill as of the beginning of the fiscal year in which the statement is adopted. This transitional impairment test requires that the Company complete step one of the goodwill impairment test within six months from December 31, 2001. The Company is currently completing this transitional impairment test and does not expect to incur any impairment charges to goodwill.

SFAS No. 143, “Accounting for Asset Retirement Obligations” (“SFAS No. 143”), addresses financial accounting and reporting for obligations associated with the retirement of tangible long-lived assets and the associated asset retirement costs. The statement requires that the fair value of a liability for an asset retirement obligation be recognized in the period in which it is incurred if a reasonable estimate of fair value can be made. The associated asset retirement costs are capitalized as part of the carrying amount of the long-lived asset. This statement is effective for financial statements issued for fiscal years beginning after June 15, 2002. The Company does not expect that SFAS No. 143 will have a material impact on the financial statements.

SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets,” (“SFAS No. 144”) addresses financial accounting and reporting for the impairment or disposal of long-lived assets. The provisions of this statement are effective for financial statements issued for fiscal years beginning after December 15, 2001. The Company does not expect that SFAS No. 144 will have a material impact on the financial statements.

In April 2002, the Financial Accounting Standards Board (FASB) issued SFAS No. 145 “Rescission of FASB Statements No. 4, 44 and 64, Amendment of FASB Statement No. 13, and Technical Corrections.” SFAS No. 145 provides for the rescission of several previously issued accounting standards, new accounting guidance for the accounting for certain lease modifications and various technical corrections that are not substantive in nature to existing pronouncements. SFAS No. 145 will be adopted beginning January 1, 2003, except for the provisions relating to the amendment of SFAS No. 13, which will be adopted for transactions occurring subsequent to May 15, 2002. Adoption of SFAS No. 145 will not have a material impact on the consolidated financial statements.

RISK FACTORS

You should carefully consider the risks described below before making a decision to invest in our ordinary shares or ADSs. Any of the following risks could materially adversely affect our business, financial condition or results of operations. In such a case, the market price of our ordinary shares and ADSs could decline and you could lose all or part of your investment. This annual report contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those anticipated in the forward-looking statements as a result of many factors, including the risks faced by us described below and elsewhere in this annual report.

Risks Associated With Our Industry

The semiconductor and wireless communications industries are highly cyclical

We sell and license our technology to semiconductor manufacturers such as STMicroelectronics, Texas Instruments and National Semiconductor. These industries are highly cyclical and have been subject to significant economic downturns at various times. These downturns are characterized by production overcapacity, reduced revenues, which, at times may, if the downturn is sufficiently prolonged or severe, encourage semiconductor companies or electronic product manufacturers to reduce their expenditure on our technology.

During 2001, the semiconductor industry as a whole experienced the most severe contraction in its history, with total semiconductor sales worldwide declining by more than 30%. The market for semiconductors used in mobile communications was particularly hard hit, with the overall decline in sales worldwide estimated to have been well above 30%. If the market does not recover by the third quarter of 2002 our business could be materially and adversely affected.

We are dependent upon continued growth in our target markets, and our business could suffer if these markets do not develop as we expect

Our overall business strategy is to be a leading provider of systems solutions for companies that address the mobile Internet device market. Our success is therefore dependent upon growth in this market. A prolonged downturn in this market could render us unable to achieve our overall business goals.

Although we expect this market to continue to grow in the future, it contracted dramatically during 2001, and growth may continue to be impeded if the current economic downturn continues or by such factors as market saturation or low replacement sales. The rate of growth, if any, may also be influenced by numerous other political, economic and other factors, including:

•

advances in competing telecommunications and information technologies;

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fluctuations in manufacturing capacity;

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the perceived health risks of wireless devices use;

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the availability of spectrum space for 3G mobile phone service;

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national and regional regulatory environments; and

•

general economic and political conditions.

The markets in which we operate are highly competitive, and we could as a result experience a loss of sales, lower prices and lower revenue

The market for mobile Internet devices is highly competitive. Aggressive competition could result in substantial declines in the prices that we are able to charge for our intellectual property. It could also cause our existing customers to move their orders to our competitors. Many of our competitors are large companies that have significantly greater financial and other resources than we have. As a result, they may be able more quickly and effectively to:

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respond to new technologies or technical standards;

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react to changing customer requirements and expectations;

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devote needed resources to the development, production, promotion and sale of products; and

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deliver competitive products at lower prices.

In addition, we may in the future face increased competition from smaller, niche semiconductor design companies. Some of our customers may also decide to satisfy their needs through in-house design and production. We compete on the basis of price, product quality, design cycle time, reliability, performance, customer support, name recognition and reputation and financial strength. Our inability to compete effectively on these bases could have a material adverse effect on our business, results of operations and financial condition.

Our industry is subject to rapid product development and technological change, and any inability to continue to meet these market needs would significantly hinder our ability to grow

The market for our products and services is characterized by continuous development and technological improvement. Our success is therefore highly dependent on our ability to develop new designs and products on a cost-effective, timely basis. Our future success is also dependent on our ability to anticipate and respond to new market trends, to rapidly implement new designs that satisfy customers’ desires, and to keep abreast of technological changes within the industry generally. If we are unable to introduce on a timely basis systems solutions that reflect prevailing industry standards, or meet the specific technical requirements of our customers, our business will be adversely affected.

Risks Associated With Our Business

We may not be successful in executing our market strategy, and our revenue model may not be profitable in the long term

Our strategic focus is on the provision of solutions for the mobile Internet market, and we have focused our development efforts and expertise on developing platform-level intellectual property (IP) for this market. We cannot assure you that this market will continue to develop as we expect or that we will be able to penetrate this market in the manner we anticipate.

In addition, we derive revenue from the licensing of technology, including both technology that we have produced at our own direction and expense and technology based on our development work for customers. We expect that revenue from license fees will become increasingly significant as a proportion of our total revenue and that our research and development expenses will increase. We cannot assure you that our licensing-based revenue model will prove to be profitable over the long term. Limited profitability from these revenue streams would have a material adverse effect on our business.

We incurred significant operating losses for the first time in 1999 and continued to incur operating losses in 2000 and 2001 as we invested in growing our IP licensing business. We cannot assure

you when, or to what extent, we will return to profitable operations. Our success in doing so is largely dependent on quickly and effectively executing our market strategy.

Fluctuations in our operating results could adversely affect the market price of our ordinary shares and ADSs

Our revenue and operating results have fluctuated significantly from quarter to quarter in the past and are likely to do so in the future. Such fluctuations may be caused by:

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the unpredictable timing of entering into contracts, as well as modification and cancellation of contracts;

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the varying size, scope and complexity of projects;

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the shifting mix of IP license, IP creation and Hard IP revenue;

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the timing and market acceptance of new technologies, product releases or enhancements by us, our competitors or our customers;

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the timing of customer payments of royalties, which depend on sales of their products that incorporate our technology;

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changes in our and our customers’ development schedules and levels of expenditures on research and development;

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changes in the markets we specifically target; and

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market and general economic conditions.

Under our IP license agreements, we earn license fees and royalties on individually negotiated terms. The timing of revenue recognition from these payments is dependent on the terms of each contract and on the timing of product shipments by third parties. This may cause license and royalty revenue to fluctuate significantly from quarter to quarter. Because gross margins vary depending on the mix of revenue, net income also may fluctuate significantly with changes in license and royalty revenue.

Delays or deferrals in purchasing decisions by our customers may increase as we develop new or enhanced products. Our expense levels in the future will be based, in large part, on our expectations regarding future revenue, and as a result net income for any quarterly period in which material projects are delayed could vary significantly from our budget projections.

Because of these and other factors, you should not rely on quarter-to-quarter comparisons of our results of operations as an indication of our future performance. It is possible that, in future periods, our results of operations will be below the estimates of public market analysts and investors. Such a discrepancy could cause the market price of our ordinary shares and ADSs to decline.

We have a very lengthy sales cycle, which increases the likelihood that our quarterly revenue will fluctuate and which may, in turn, adversely affect the market price of our shares and ADSs

addition, customers perform, and require us to perform, extensive process and product evaluation and testing before entering into purchase or licensing arrangements. Even after we provide a final product to a customer in the form of silicon or intellectual property, we expect that it will be at least six months more before our customer begins to sell its products incorporating our technology, and therefore even longer before we begin to receive royalty income or subsequent re-use license fees.

Many of the milestones along our sales cycle are beyond our control and difficult to predict. This fact makes it more difficult to forecast our quarterly results and can cause substantial variations in results from quarter to quarter that are unrelated to the long-term trends in our business.

We rely on semiconductor manufacturers to adopt our technology and use it in the components they sell, and we may be unsuccessful in expanding our business if these companies adopt technologies from our competitors

We sell and license our technology to semiconductor manufacturers such as STMicroelectronics, Texas Instruments and National Semiconductor. These manufacturers, in turn, incorporate our intellectual property with technology from other sources to produce components that they sell to electronic product manufacturers. The adoption and continued use of our technology by semiconductor manufacturers is important to our continued success. We cannot assure you that we will be able to maintain our current relationships or establish new relationships with additional semiconductor manufacturers, and any failure by us to do so could have a material adverse effect on our business.

We face numerous obstacles in obtaining agreements with such companies on terms consistent with our business model, including:

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the lengthy and expensive process of building a relationship with individual semiconductor manufacturers;

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possible competition with the internal design teams of particular semiconductor manufacturers;

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difficulties in persuading large semiconductor manufacturers to work with us, to rely on us for critical technology, and to disclose to us proprietary manufacturing technology; and

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difficulties in persuading semiconductor manufacturers to bear development costs associated with our technology and to produce products using our technology.

We believe that our principal competition may in the future come from our current and prospective semiconductor manufacturer customers, many of whom continuously evaluate and develop products based on alternative technologies. Moreover, we are subject to risks beyond our control that may influence the success or failure of a particular semiconductor manufacturer, including:

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the competition it faces and the market acceptance of its products;

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its engineering, marketing and management capabilities and the technical challenges unrelated to our technology that it faces in developing its products; and

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its financial and other resources.

None of our current semiconductor manufacturer customers is obligated to license new or future generations of our technology designs. In addition, because we do not control the business practices of our customers, we do not influence the degree to which they promote our technology or set the prices at which they sell products incorporating our technology to consumer product manufacturers.

We depend on electronic product manufacturers to incorporate our technology in their products, and any failure by them to do so or to successfully sell their products to end users could substantially limit our revenue growth

Our revenue is directly dependent on the ability of electronic product manufacturers—particularly those that develop and market high-volume products such as mobile telephones, personal digital assistants and other consumer mobile Internet devices—to sell products incorporating our technology to end users. We are therefore subject to many risks beyond our control that could influence the success or failure of any particular electronic product manufacturer, including:

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competition faced by a company in a particular market;

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market acceptance of its products;

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general economic and market conditions;

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technical challenges unrelated to our systems faced by the company in introducing its products; and

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its financial and other resources.

The companies that incorporate our solutions into their products themselves operate in highly competitive markets. The failure of any of these customers to successfully compete in their own markets could materially limit our business with them.

In recent months, certain portions of the market for electronic products, including the market for wireless devices and other segments that we target, have experienced a reduction in demand, which may have an adverse impact on our revenues and achievement of our targeted strategic goals.

We depend on third-party foundries to produce the chips we design, and any failure by them to deliver the chips we require on time would limit our ability to satisfy our customers’ demands

Our business strategy calls for revenue from the sale of silicon chips embodying our intellectual property to comprise an increasing percentage of our total revenue over the next two years. We currently have strategic relationships with several leading semiconductor foundries, including Taiwan Semiconductor Manufacturing Company and United Microelectronics Corporation (UMC), under which arrangements we can have chips produced to our design. Further, our agreement with UMC furnishes us with reserved capacity in its production facilities. Any interruption in these or similar strategic relationships could harm our ability to develop this part of our business profitably. We do not have the ability to produce chips independently and thus we depend on UMC and the other foundries with which we have relationships to:

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allocate a portion of their manufacturing capacity to our needs;

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produce acceptable quality silicon wafers and chips with acceptable manufacturing yields; and

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deliver chips on a timely basis at a competitive price.

We are dependent upon our strategic relationships with other providers of semiconductor intellectual property and software, and our ability to innovate and to meet changing market demands may be limited if such relationships do not continue and grow

Our ability to succeed in the mobile Internet device market will depend on maintaining existing and developing new relationships with other providers of semiconductor intellectual property and other software developers. We believe that these relationships are important to our continued ability to develop and license intellectual property that meets the needs of our target market. Our business, financial condition and results of operations could be materially adversely affected if we cannot retain or attract strategic relationships or if one or more of our successful relationships deteriorates or is terminated.

We generally face a competitive employment market and may have difficulty attracting and retaining the necessary technical and senior management personnel

Our future success is critically dependent upon our ability to continue to enhance and introduce new generations of technology. We are dependent upon our ability to identify, attract, motivate and retain qualified engineers with the requisite educational background and industry experience. An inability to hire and retain these engineers would adversely affect our ability to enhance our existing intellectual property and to introduce new generations of technology. We are dependent on engineers with experience in mixed-signal and radio frequency technologies in implementing our business strategy. This market has been competitive in recent years in Ireland, where we have the majority of our engineering facilities.

In addition, as we continue to expand our global presence our success will depend on our ability to attract and retain senior management and sales and marketing personnel. In some of the geographic regions in which we operate, such as the United States, the market for such personnel has also been competitive in recent years.

The loss of any of our senior management team or a significant number of our engineers could disrupt our development efforts or business relationships and our ability to continue to innovate and to meet customers’ needs.

We derive a significant portion of our revenue from a single customer, and our total revenue could decrease substantially if this customer were to reduce its level of business with us

STMicroelectronics is our largest customer. We had a multi-year development contract with STMicroelectronics through 2000, which was then replaced in 2001 with a multi-year technology access agreement incorporating both development projects and licensing. STMicroelectronics accounted for approximately 67% of our revenue in 1999, 39% in 2000 and 31% in 2001. Our results of operations could be materially adversely affected if we lost STMicroelectronics as a customer, if our relationship with it deteriorated, or if it were no longer able to conduct a substantial amount of business with us. Our ability to offset any decrease in business with STMicroelectronics through increased sales to new or other existing customers may be limited.

We face uncertainty regarding intellectual property rights and may be unable to adequately protect our investment in technology

Our ability to compete may be affected by our ability to protect and enforce our proprietary rights. We cannot assure you that:

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our pending patent applications or any future patent applications will be granted;

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any issued patents will adequately protect our intellectual property;

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issued patents will not be challenged by third parties;

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the patents of others will not adversely affect our ability to do business; or

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others will not independently develop similar or competing technology, or design around any patents that may be issued to us.

We seek to protect our trade secrets and other proprietary information through agreements with licensees, proprietary information agreements with our employees and consultants and other security measures. We also rely on copyright, trademark and trade secret law to protect our technology and intellectual property. Despite our efforts, however, we can provide no assurance that others will not gain access to our trade secrets, or that we will be able adequately to protect our technology or other intellectual property. Although we intend to protect our rights vigorously, there can be no assurance that these measures will be adequate.

In addition, the laws of some foreign countries in which our technology is or in the future may be licensed do not protect our intellectual property rights to the same extent as the laws of Ireland, the United Kingdom and the United States, thus increasing the possibility that we may not be able to adequately protect our intellectual property rights.

We are subject to the risk of litigation and may be required to expend substantial money and time to protect our investment in technology

The semiconductor industry is characterized by frequent litigation involving patent and other intellectual property rights. Questions of infringement in the semiconductor field are typically a matter of highly technical and subjective analysis. We may be compelled to litigate in the future to enforce our patents and other intellectual property rights, to protect our trade secrets, or to determine the scope of our proprietary rights. We also may be required to defend against claims of infringement or invalidity. There are a large number of patents held by others pertaining to the broad technology areas in which we are active. We have not, and cannot reasonably, investigate all such patents. From time to time, we have become aware of patents in our technology areas and have sought legal counsel regarding such patents, and we will continue to seek such counsel when appropriate in the future. We also point out that there may exist a number of pending patent applications relevant to the technology areas in which we are active. Such pending patent applications are generally not available for public scrutiny and may issue in the future as patents. Any litigation, whether or not decided in our favor, would be costly and divert the efforts and attention of our management and technical personnel from our normal business. There can be no assurance that the other parties to such litigation will not be able to devote substantially greater financial resources than we will, or that we will ultimately prevail.

In any potential dispute regarding intellectual property, our licensees could also become a target of litigation. We are generally bound to indemnify our licensees under the terms of our license agreements. Although our indemnification obligations are generally subject to a maximum amount, these obligations could nevertheless result in substantial expenses. In addition to the time and effort required for us to indemnify our licensees, a licensee’s development, marketing and sale of products embodying our intellectual property could be severely disrupted or shut down as a result of litigation.

Adverse determinations in litigation could result in a loss of our proprietary rights, subject us to significant liabilities or require that we license technology from third parties.

If we fail to successfully integrate any businesses that we acquire, our results of operations could suffer

We have in the recent past acquired businesses and technologies that we believe will complement our existing business, products and technologies—including Chicory Systems, which we acquired in May 2001. Acquisitions remain a part of our strategy for future growth. Integrating any newly acquired business or technology could be expensive and time-consuming. We may not be able to integrate any acquired business successfully. If we are unable to successfully integrate any newly acquired business or technology, our business, financial condition and results of operations could suffer.

Currency fluctuations may adversely affect our results of operations

Our sales are transacted and expenses incurred principally in U.S. dollars, British pounds and euro. Our reporting currency is the U.S. dollar and, therefore, fluctuations in the exchange rate between the U.S. dollar and other currencies in which we transact business may cause fluctuations in our reported financial information that are not necessarily related to our operations.

Risks Associated With Our Ordinary Shares

Insiders continue to have substantial control and could delay or prevent a change in corporate control

As of May 7, 2002, our directors and senior management beneficially owned in the aggregate approximately 158.8 million of our outstanding ordinary shares (including ordinary shares subject to options exercisable within 60 days of that date) (approximately 159.3 million shares on a fully diluted basis). These shareholders, acting together, have the ability to exert substantial influence over all matters requiring approval by our shareholders. These matters include the election and removal of directors and any merger, consolidation or sale of all or substantially all of our assets. In addition, these shareholders may dictate the management of our business and affairs. This concentration of ownership could have the effect of delaying, deferring or preventing a change in control, or impeding a merger, consolidation, takeover or other business combination that you might otherwise approve.

Currency fluctuations may adversely affect the trading prices of our ordinary shares and ADSs and the value of any distributions we make

Because our ordinary shares are traded in British pounds and our ADSs are traded in U.S. dollars, fluctuations in the exchange rate between the two currencies may affect the relative value of the investment of ADS holders. In addition, should we make any distributions on our ordinary shares in euro or British pounds, the depositary will convert such distributions to U.S. dollars. If exchange rates fluctuate during a time when the depositary cannot convert the currencies, ADS holders may lose some or all of the value of the distribution.

The rights of our shareholders are governed by Irish law and differ in some respects from the rights of shareholders under U.S. law

We are a public limited company incorporated under the laws of the Republic of Ireland. The rights of holders of our ordinary shares—and, therefore, many of the rights of our ADS holders—are governed by Irish law and the laws of the European Union, as well as by our articles of association. These rights differ in some respects from the rights of shareholders in typical U.S. corporations. In particular, Irish law significantly limits the circumstances under which shareholders of Irish companies may bring derivative actions. In addition, it may be difficult for our shareholders to prevail in a claim against us under, or to enforce liabilities predicated upon, U.S. securities laws.

It may not be possible for you to enforce judgments of U.S. courts against Parthus or our directors or executive officers

We are an Irish public limited company. All of our directors and most of our executive officers are non-residents of the United States. In addition, a substantial portion of our assets and the assets of our directors and executive officers is located outside of the United States. As a result, it may not be possible for you to effect service of process within the United States on Parthus or its directors and executive officers, or to enforce against them judgments obtained in United States courts based on the civil liability provisions of the securities laws of the United States. In addition, awards of punitive damages and judgments rendered in the United States or elsewhere may be unenforceable in Ireland.”

BUSINESS

Principal Developments in 2001

Parthus’ strategy is to engage in licensing and royalty agreements with leading semiconductor and electronic product companies that have a track record of successful adoption and deployment of key next-generation technologies. In the year, Parthus signed 25 new licenses. Licensing revenue grew by 85% year-on-year shifting the total revenue mix towards higher-margin licensing revenue, which accounted for 72% of total revenue in 2001. In total we have executed 74 licensing agreements through year end 2001, 51 with royalty components.

Portfolio agreements form an important part of our licensing strategy. In 2001, we signed our largest ever contract with STMicroelectronics. This agreement is a multi-year licensing arrangement for our complete portfolio of mobile Internet technologies and platforms. STMicroelectronics is the one of the world’s largest semiconductor companies.

In 2001, two new platforms were launched and licensed. MobiStream delivers next-generation performance for GSM/GPRS (2.5G) wireless communications. MobiStream’s unique architecture is optimized for ultra-low power consumption, full bandwidth performance GPRS, minimum silicon size and minimum cost. The MachStream acceleration platform dramatically improves the performance and power dissipation of key mobile Internet applications, including on-the-fly decompression of wireless multimedia data and applications (e.g. JAR files, ZIP, GIFS, etc.), and complex open software applications such as Java for J2ME compliant devices. Through MachStream, an application on a typical PDA or smartphone will run between 10x and 35x faster while battery life is extended up to ten-fold.

We also released three enhanced platforms were also released. NavStream3000 is our latest and most advanced GPS silicon and software platform. The significant breakthrough is the rapid ability to determine location in practically any environment. Parthus, in partnership with both cellular handset manufacturers and mobile phone operators, has undertaken extensive tests to obtain position fixes in indoor environments including homes, offices and industrial buildings in under 3.5 seconds, exceeding United States FCC e911 requirements for speed and accuracy. BlueStream Release 6 is the latest version of Parthus’ industry-leading Bluetooth platform offering many key upgrades and enhancements that deliver greater Bluetooth functionality, reduced time-to-certification, and lower cost of deployment. Since year-end we have announced two enhanced editions of the InfoStream mobile computing platform optimized for Microsoft Pocket PC 2002 and Microsoft Smartphone mobile technologies as well as an agreement for the development for a Windows CE.Net mobile computing platform.

Partnerships remain at the core of our platform-level IP strategy. During the year we built new strategic partnerships with:

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Microsoft —targeting the InfoStream platform at Microsoft Pocket PC 2002, Smartphone and Win CE.NET smart mobile devices

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Sun Microsystems —for the joint development and deployment of Java technologies targeting wireless devices based on the Parthus MachStream platform

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Insignia Solutions —to integrate Parthus’ MachStream hardware acceleration platform with Insignia’s Jeode software-based Java virtual machine technologies.

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Symbian —targeting the InfoStream platform at Symbian OS for smartphones.

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Wipro Technologies —for semiconductor and system-level design services around the portfolio of Parthus platforms.

Parthus completed two acquisitions in 2001. We acquired the remaining 20% minority interest in Silicon Systems Design Limited (SSD) from STMicroelectronics. SSD was the original Parthus/ST entity that was responsible for IP creation activities. This acquisition has significantly enhanced our engineering resources and our ability to support higher levels of licensing activity. We also acquired Chicory Systems with a team of 26, including highly-qualified microprocessor architects and algorithm development experts. Both acquisitions have been fully integrated.

Developments to Date in 2002

As discussed above, in April 2002, we signed an agreement with DSP Group, Inc., and Ceva, Inc., providing for the combination of Parthus with Ceva, the intellectual property licensing subsidiary of DSP Group, in a merger of equals. Subject to tax and other regulatory approvals, we anticipate that this transaction will close in the third quarter of 2002. See “Proposed Combination with Ceva, Inc.” for more details.

In the first quarter we announced a broad ranging strategic agreement with UbiNetics, an established expert and market leader in 3G wireless device technology. Under a license agreement, UbiNetics will integrate Parthus’ GPRS/GSM technology into its 3G WCDMA silicon and software technologies to create a fully integrated multi-mode 2.5G/3G (W-CDMA/GPRS/GSM) solution. Parthus will market this multi-mode 2.5G/3G solution as part of our portfolio of technologies, licensing the solution through our global sales channel and semiconductor relationships. To underpin the alliance, Parthus subscribed for a minority shareholding interest in UbiNetics.

In April we announced the launch of In8Stream, an 802.11 multi-mode wireless local area network (WLAN) platform. In8Stream targets the entire range of IEEE 802.11 WLAN standards through one flexible architecture. This platform targets the market of wireless local area networking for the home, office and various public hotspot environments (such as airports, malls, coffee-shops) and is one of the fastest growing segments of the communications industry. The IEEE compliant platform incorporates a multi-mode 802.11 hardware core, a complete software stack for Station or Access Point applications and 802.11 multi-protocol baseband core.

Industry Overview

Introduction

Today’s sophisticated electronic products, such as personal computers, mobile telephones and consumer audio and video devices, rely on highly miniaturized computer chips to offer high performance at low cost and small size. These chips, which may incorporate millions of individual electronic circuits, are commonly referred to as integrated circuits or semiconductor devices. Most electronic products require multiple integrated circuits to perform all of their functions. Historically, semiconductor manufacturers have designed, tested and manufactured integrated circuits themselves, and have worked with electronic product manufacturers to integrate those circuits into products. Manufacturers of electronic products therefore require both that each semiconductor device be designed for high performance and that they work together seamlessly within the electronic product to provide the features required to address consumer demands.

Since their introduction, continuous improvements in semiconductor technologies have led to higher performance, more integrated and cheaper semiconductor devices that perform their functions more reliably and that consume less power than their predecessors. As performance has improved and size and cost have decreased, semiconductors have expanded far beyond their original applications in computer systems to applications such as telecommunication systems, automotive products, consumer goods and industrial automation and control systems. Over time, semiconductors have enabled entire new markets and applications, including cellular telephones, portable compact disk players and other now

familiar products. These new markets and applications have, in turn, imposed ever greater demands for semiconductor performance, cost and functionality.

The convergence of the wireless communications and Internet access markets is in turn creating an entirely new area of application—the use of mobile Internet devices to communicate, inform, entertain and transact commerce across public and private communications networks.

The mobile Internet Market

Hand-held devices are an important part of the mobile Internet market, but there is also strong demand for mobile Internet technology in other areas, including automotive, personal computer and industrial applications as well as consumer electronics products. Key products in this emerging market include:

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second-generation (2G), “second-and-a-half-generation” (2.5G), and third-generation (3G) cellular telephones – cellular telephones that combine voice communications and high-speed data transmission capabilities permitting access to the Internet and other advanced features;

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Internet-enabled personal digital assistants, or PDAs—hand-held devices that incorporate electronic calendars, address books and remote access to the Internet and other data networks;

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“intelligent” pagers—personal paging devices that incorporate advanced data communications features, such as access to e-mail, news, weather and stock quotes; and

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products in existing markets that have mobile Internet capabilities, such as GPS systems for automobiles, wireless connections for personal computers and industrial controls accessed through mobile Internet connections.

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products such as laptop computers, set-top boxes, Internet appliances and gaming consoles which are increasingly connected to the Internet via either broadband wireless technologies or wireless local area network (W-LAN) technologies such as Bluetooth and IEE 802.11.

The mobile Internet market will place great demands on manufacturers to bring to market, ever more quickly, products that allow the user access to a variety of wireless data networks, but which are also personal, easy to use and convenient in both size and battery life. Providers of semiconductor intellectual property help address these requirements by focusing on integrated circuit technology that:

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permits high data rate communications in conformity with industry standards;

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allows the integration of more advanced features at reasonable prices by combining functions on a single system-on-a-chip; and

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helps speed time to market by reducing product development time through design reuse.

In order to meet anticipated demands for data transmission to support mobile Internet devices and other applications, industry analysts estimate that 2.5G and 3G cellular phones will need to be able to process data at rates more than 200 times faster than existing cellular phones. In addition, new wireless products must support protocols and networks that make possible the convenient and reliable provision of information, entertainment and business transactions; permit billing and payment; and provide adequate reliability and security. Meeting these performance requirements while complying with an increasing number of emerging standards challenges the resources of many manufacturers, prompting the demand for pre-designed semiconductor intellectual property blocks and software.

System-on-a-chip

Requirements for increased product functionality, higher performance and lower cost are driving demand for system-level integration. Through this integration, complete electronic systems containing both analog and digital functions are combined on a single silicon chip, known as a system-on-a-chip . System-on-a-chip is a key enabling technology for mobile Internet devices, which require integrated circuits that:

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enable improvements in data transmission rates required to support the evolution from 2G to 2.5G and 3G cellular phones and beyond;

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enable product differentiation through feature enhancement;

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are lower in cost and have lower power needs; and

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effectively combine circuits that handle analog signals with circuits that process digital information.

System-on-a-chip development projects benefit greatly from the availability of silicon-proven IP blocks to reduce development cycles and thereby speed time to market.

Platform-level IP

Manufacturers have increasingly come to rely on the use of semiconductor intellectual property because it allows them to draw on areas of expertise that might not be available in their own organizations, reduce product development cycles by building on existing intellectual property, and concentrate their own development efforts on key areas of strategic differentiation, such as manufacturing and distribution.

integrated analog and digital systems, as well as software, which we refer to as platform-level IP. This approach provides electronic product manufacturers and semiconductor manufacturers with several key advantages, including:

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Time to Market. With block-level IP, the manufacturer must expend considerable development time and effort to integrate the IP blocks in the semiconductor device. The provision of an integrated platform-level IP solution enables the manufacturer to get to market faster.

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Risk Reduction. Traditionally, semiconductor intellectual property providers have generally developed discrete IP components, rather than entire IP platforms, and have offered their IP in the form of specifications or software to be integrated in the semiconductor product. Semiconductor manufacturers and electronic product manufacturers must then integrate components designed by or acquired from these different providers and ensure that they function together properly, efficiently and economically. Manufacturers face the risk that these components will fail to function together over the long term or that they will have to expend considerable time, expense and effort to integrate these components. By providing the manufacturer with a more complete, platform-level IP solution we are able to reduce the development risk for the manufacturer.

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Application Expertise. Established expertise and a focus on target markets means that the semiconductor intellectual property provider can supply appropriate intellectual property more quickly and cost efficiently than a developer with more general expertise.

The Parthus Solution

We develop highly integrated semiconductor intellectual property solutions that are crucial to the cost-effective implementation of new generations of mobile Internet products. Our extensive intellectual property portfolio provides our customers with the foundation technology for building future generations of mobile Internet devices and systems, reducing customer time-to-market and facilitating the timely introduction of differentiated products. Over the past nine years we have developed a core intellectual property portfolio that includes a broad array of high-performance analog, digital and software building blocks that provide optimum cost performance for applications in the mobile Internet market. We make our intellectual property available to our customers under licenses, as part of development projects or in silicon chip form.

The key benefits of our solutions include:

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A focus on the mobile Internet market. Our emphasis on the two fundamental domains of the mobile Internet market—communications and applications processing—means that we can meet the specific intellectual property requirements of some of the most rapidly growing and demanding markets in the electronics industry.

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Ability to deliver complete system solutions. Our core intellectual property includes numerous blocks of silicon and software intellectual property, including mixed-signal, radio frequency and digital signal processing technology, allowing us to provide our customers with complete intellectual property solutions at the system level. This, coupled with the breadth of experience of our development professionals, allows us to provide our customers with the complete platform necessary for their products.

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Flexible IP deployment and support. To meet specific customer circumstances and requirements, we make our solutions available either in the form of licensed intellectual property rights, dedicated development projects, or Hard IP embodied in silicon chips or circuit boards. In addition, we offer our licensees specialized intellectual property integration

support. We believe that this flexibility facilitates the adoption and integration of our intellectual property.

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Extensive portfolio of core intellectual property. In our nine years of developing sophisticated semiconductor devices and systems software we have developed a broad portfolio of platform-level IP. The technology markets our platform-level IP portfolio covers includes Bluetooth, 802.11, 3G, GPS, multimedia and application processing for smartphones, PDAs and Internet Appliances. In addition, we have access to key third-party intellectual property blocks, for example our license from ARM and 3G agreement with UbiNetics. This portfolio often allows us to provide a customer with the required solution with little new development work, therefore reducing the customer’s time to market.

•

Leading-edge products. Our relationships with a number of leading electronic product manufacturers and semiconductor manufacturers help to assure that we are developing additional core intellectual property that meets market requirements as they evolve. Our employees also participate actively in international standards-setting bodies in order to influence and learn about new developments.

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Ability to provide a production-ready solution. We fully test the platforms we provide so that they are ready for product integration. In addition, we have strategic relationships with several leading semiconductor foundries, including STMicroelectronics Srl., Taiwan Semiconductor Manufacturing Company and United Microelectronics Corporation (UMC), under which these foundries manufacture chips to our design. Further, our agreement with UMC furnishes us with reserved capacity in its production facilities. These relationships allow us to assure our customers access to low-cost production. Our reserved capacity arrangement with UMC, in particular, allows us to help ensure our customers’ production requirements are met during times of capacity constraint in the market.

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Experienced and stable work force. We have more than 300 employees engaged in product development in a broad range of areas, including analog, digital, software and radio frequency technology. We believe that the breadth of knowledge, experience, and stability of our work force allow us to provide better services, faster, to our customers, and to maintain and develop our core intellectual property efficiently.

Strategy

Our IP licensing and royalty business model offers a scalable business with multiple revenue streams and solid gross margins. Our goal is to become one of the leading suppliers of platform-level intellectual property solutions to the mobile Internet market. To meet this goal we intend to:

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Focus on the mobile Internet market. We intend to continue our focus on solutions that address the requirements of this market. We believe that this focus permits us to leverage our resources more effectively with the opportunity to develop intellectual property that can be broadly applied to a range of customers, creating a broad potential market for our products beyond the mobile phone, ranging from customer entertainment and digital media to automotive applications.

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Concentrate on platform solutions. Competitive pressures continue to require our customers to seek complete platform solutions, rather than traditional, chip-based technology that must be integrated by the customer. We believe that our focus on complete platform solutions is an important competitive advantage, and we intend to continue to invest in the development and subsequent exploitation of technology for complete systems. We also believe that our expertise in mixed-signal and radio frequency technology is an important competitive advantage, and we intend to continue to leverage that expertise to address critical

customer demands. We intend to enhance existing platforms with additional features and performance, while developing new platforms that will focus on other emerging applications for mobile Internet devices. We also intend to create further competitive advantage through the convergence of our platforms through an open, flexible and highly power-efficient architecture that allows the rapid integration of our platforms and various third-party intellectual property into a single integrated circuit.

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Target top-tier customers. We believe that the highest and most rapid rate of return on our investment in core technologies can be achieved by targeting our sales and marketing activities at high-volume semiconductor manufacturers and leading electronic product manufacturers with a track record of successful end-user deployments. To date, we have formed licensing relationships with six of the worlds top ten semiconductor companies. Semiconductor manufacturers have the resources to make significant investments in intellectual property solutions and face broad, highly competitive challenges that can be met through the use of third-party development activities. Leading electronic product manufacturers are important because they define the next generation of products that will use our technology. We further believe that this approach permits us to most effectively leverage our available sales and marketing resources.

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Focus on a portfolio approach to the licensing of our IP platforms. We believe that the breadth of our IP platforms, combined with our capability to integrate these platforms into a single solution, is a key differentiator from our competitors. In tandem with targeting top-tier customers, we intend to focus on offering a portfolio of IP platforms. Our product architecture is designed to allow multiple platforms to reside on the same piece of silicon, significantly reducing the cost and complexity of integration while simultaneously improving power dissipation and time to market for next-generation devices. This approach enables customers to develop product solutions for next-generation mobile Internet devices that incorporate multiple functions, for example a Microsoft ^™ based Smartphone with integrated Bluetooth connectivity. This approach also provides our customers with the benefits of one-stop shopping, combined with a technology roadmap to the next generation of multi-functional mobile Internet devices.

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Establish, maintain and expand relationships with key technology providers for the mobile Internet market. We seek to strengthen relationships and expand licensing and royalty arrangements with our existing customers and to extend our customer base with key industry companies in order to facilitate the development of our technology. There are three types of companies with whom we seek to establish close working relationships:

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contract semiconductor manufacturers, usually referred to as silicon foundries, in order to assure adequate supplies of chips for our customers who purchase our technology in chip form and in order to give electronic product manufacturers a means of obtaining competitive manufacturing capabilities;

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third-party suppliers of block-level semiconductor intellectual property, in order to have access to their most current developments and technologies; and

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developers of both application-level and system-level software so that we can continue to offer complete platform solutions.

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Continue to develop our organization. We intend to focus on consolidating our global organization by continually improving our development process and building highly skilled teams to support our business targets while selectively adding critical technologies and engineering resources. We intend to continue to scale our business, building on our strong research and development base to deliver the full benefits of our high-margin IP licensing

business model. We believe that a talented and stable research and development staff is critical to our continued success. Historically, we have experienced limited attrition and we intend to continue to attract and retain skilled research and development personnel through the opportunity to work on challenging and innovative technologies, coupled with share options and other appropriate employee incentives. We also intend to continue our focus on attracting engineers with skills in our critical core competencies, such as mixed-signal and radio frequency technologies.

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Continue our pursuit of strategic transactions. We believe it will be extremely important to maintain a leadership position in our areas of expertise through targeted acquisitions and strategic alliances that will complement and leverage our organic growth, by acquiring complementary mobile Internet technologies, acquiring additional technical personnel with the skills needed to achieve our overall strategic goals and enlarging our strategic customer relationships. We continuously review acquisition opportunities and have dedicated resources devoted to pursuing such opportunities. When reviewing potential acquisition candidates, we focus on the validity of the fundamental financial and marketing assumptions on which the acquisition is based. We also consider the size and fit of the acquisition, particularly in relation to the people. Pre-planning integration is central to the due diligence process. We completed two acquisitions both in 2000 and 2001, all of which have been integrated successfully into Parthus.

Products and Technology

The continuing evolution of the mobile Internet market has created significant demand for semiconductor intellectual property providers that can add greater value by delivering complete system solutions (which combine RF, mixed signal, digital core and software), which is what we refer to as platform-level IP. This approach permits our customers to introduce feature-rich products while simultaneously minimizing their development cost, risk, complexity and time-to-market. We also offer our technology in discrete building blocks for specific functions that our customers use to develop complete systems and products.

Our IP platforms are licensed and deployed by some of the world’s largest semiconductor and electronics product companies in targeting wireless communications products, such as 3G, Bluetooth or 802.11, and application/multimedia processing, such as smartphone, PDA, Internet appliances, GPS and mp3/Internet audio products.

In 2001, we introduced two new platforms and two platform upgrades. In 2002 we added a further platform targeting the 802.11 wireless local area networking market. Typically we offer these IP platforms to our customers on a license and royalty basis. These solutions include:

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BlueStream. BlueStream is a highly functional Bluetooth offering, including a comprehensive radio component with Silicon Germanium BICMOS RF and CMOS 0.18 micron RF; a digital baseband, offered both in baseband IP and as a full system-on-a-chip; and a complete software stack designed for baseband and host interface. In 2000, Parthus was the number one licensor of Bluetooth technology in the intellectual property industry. Announced licensees include 3Com, Agilent Technologies, Aralion, Fujitsu, Hitachi, PrairieComm and STMicroelectronics.

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MediaStream. MediaStream is an advanced Internet audio technology enabling a range of mobile multimedia applications, including mobile phones, MP3 players, game consoles and high-fidelity in-car entertainment systems. Announced licensees include 3Com, SigmaTel, STMicroelectronics, Creative Technologies and NVIDIA, which has deployed MediaStream to power the audio requirements of the Microsoft Xbox games console.

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NavStream. NavStream is a complete GPS platform delivering precise location information (less than five meters within five seconds) to any device, including mobile phones, personal digital assistants or PDAs, and GPS-enabled vehicles, anywhere in the world. One of the key differentiating advantages of NavStream is its ability to track GPS signals and determine a user’s location in indoor environments. NavStream is one of the few technologies that comply with the U.S. Federal Communications Commission’s e911 Location Accuracy Directive, which requires that all mobile telephones allow the location of the caller to be determined to within 150 meters. Announced licensees include 3Com, ARM, Atmel, Maxim, Samsung and µ-blox.

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InfoStream. InfoStream is a mobile computing platform for the next generation of wireless devices, including 3G “smart” cellular phones, PDAs, Internet appliances and home entertainment/multimedia devices. The platform delivers high performance, low power consumption and high levels of on-chip integration. Announced licensees include Sharp Microelectronics, Psion, STMicroelectronics and Agilent.

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MobiStream. Launched in Q1 2001, MobiStream is an advanced GPRS platform combining high data rates and integrated multimedia on low baseband power consumption solutions. In 2002, we formed a broad ranging strategic alliance with UbiNetics, a leading provider of 3G W-CDMA technology. This alliance will integrate 3G W-CDMA technology with the

MobiStream 2.5G GPRS technology to create a full multi-mode 2.5G/3G platform which Parthus will license to the semiconductor industry. Announced licensees of MobiStream include 3Com and STMicroelectronics.

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MachStream. Launched in May 2001 at the time of our acquisition of Chicory Systems, MachStream is a high performance modular silicon platform that accelerates critical Mobile Internet applications, including multimedia, security, Java and next-generation browser scripting languages, while delivering significant improvements in the power efficiency and cost levels required for mobile devices. The first public announced licensee of MachStream is Sharp Microelectronics.

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In8Stream. In April 2002, we announced the launch of In8Stream, an 802.11 multi-mode wireless local area network (WLAN) platform. In8Stream targets the entire range of IEEE 802.11 WLAN standards through one flexible architecture. The IEEE compliant platform incorporates a multi-mode 802.11 hardware core, a complete software stack for Station or Access Point applications and 802.11 multi-protocol baseband core.

Development and Integration; Technology

We create intellectual property in our development projects and customize our intellectual property to support our licensing business. We have significant expertise in the design and development of high-performance digital, analog, mixed-signal and software technology for our customers. Our development services include complete development activities, including development on a contract basis of specific systems or technology. Our policy is to retain ownership of, or rights to use, the intellectual property we develop under contract. Our integration services include consulting to supplement or facilitate the integration of our licensed intellectual property and that of third parties into a customer’s product. In performing either development or integration services, we focus on designing comprehensive systems tailored to specific requirements, making the key design decisions and tradeoffs required to create the most competitive system for the customer while shortening time-to-market.

We support products through manufacturing and volume production to meet customer requirements. We are able to do this because of our strength in a number of key areas, including:

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Back-end support. Our computer aided design, or CAD, team develops in-house design flows. The team provides each design group working on a development project a template identifying which CAD tools to use to meet its specific design goals. The team also writes software to assure that the identified tools can be used on an integrated and seamless basis. In addition, a team of layout engineers with experience in digital, analog, radio frequency and system-on-a-chip layout processes executes the physical layout requirements for each project.

•

Our portfolio of analog intellectual property covers a broad spectrum of signal processing solutions ranging from precision analog, to mixed-signal, to radio frequency. These solutions are demanding at both the architectural and block implementation level. Examples of our core analog technology include filters for signal conditioning, circuits such as PLLs and DLLs essential to timing referencing, and converters such as ADCs and DACs that bridge the partition between analog and digital domains. To leverage our analog capabilities, in April, 2002 we launched PLLXpert, an online PLL generation engine, which enables the design of risk-free, silicon-proven PLLs in minutes—shortening the typical development time by months.

Customers, Sales and Marketing

Our strategy is to engage in licensing and royalty agreements with leading semiconductor and electronic product companies that have a track record of successful adoption and deployment of key next generation technologies. In total we have executed 74 licensing agreements through the year end 2001, 51 with royalty components, including agreements with 3Com, Agilent, ARM, Atmel, Cirrus Logic, Creative, Creative Technologies, Fairchild Semiconductor, Fujitsu, Hitachi, Infineon Technologies, Macom, Maxim, Motorola, National Semiconductor, nVidia, Philips, Prariecomm, Psion, Samsung, Sharp Microelectronics, Siemens, Sigmatel, Sony, STMicroelectronics, Tripath, Ubinetics, and µ-blox. STMicroelectronics accounted for approximately 67% of our total revenue in 1999, 39% in 2000 and 31% in 2001 and 29% in quarter one, 2002. Since 1998, our revenue from STMicroelectronics has increased year-to-year in absolute terms, but decreased as a percentage of total revenue.

Maintaining close relationships with our customers is a core part of our strategy We typically launch each new platform or platform upgrade with a signed license agreement with a blue-chip customer, which helps ensure that we are clearly focused on viable applications that meet broad industry needs. Strengthening these relationships is a significant part of our strategy. It allows us to create a roadmap for the future development of existing platforms, and it helps us to anticipate the next potential applications for the market. We seek to leverage these relationships to deliver new platforms in a faster time to market through our research and development base.

The leaders within our targeted markets include a small number of very large organizations. We therefore believe it is essential to maintain a comprehensive and capable direct sales and marketing organization focused on these market-share leaders. Towards this end, we have headquartered our sales activities in San Jose, California and have established a direct sales force. Our sales and marketing force numbered 42 people at year end 2001, compared with 40 people at year end 2000 and 13 people at year end 1999. We now have a total of 14 sales offices, including offices in San Jose, California; Dublin, Ireland; Hong Kong, China; Seoul, Korea; Tokyo, Japan; Taipei, Taiwan; San Diego, California; Atlanta, Georgia; Dallas, Texas; Northampton, Great Britain; Helsinki, Finland; Stockholm, Sweden; Munich, Germany; and Caen, France. Our sales offices are closely aligned with key customer accounts and supported by a focused central marketing team. We have also contracted with sales representatives to further leverage coverage of other significant customers in key geographic areas, including Japan and the US.

In addition, we enter into collaborative agreements for the sale or distribution of our products where the third party can provide additional access to special expertise or potential customers. For example, in February 2002 we into a strategic agreement with UbiNetics that will enable us to market the UbiNetics multi-mode W-CDMA/GPRS/GSM solution as part of our portfolio of platform-level IP and license the solution through our global sales channel and semiconductor relationships.

We seek to increase awareness of the uses for our technology in popular mobile Internet products through direct contact with leaders in our targeted markets, close relationships with industry analysts, the placement of articles in trade journals, the co-sponsoring of events and co-marketing programs. We also participate regularly in trade shows and other industry meetings. We believe that these efforts will provide product differentiation that will generate demand for our technology from electronic product manufacturers, as well as increasing demand from semiconductor manufacturers.

Technology Partners

We maintain close relationships with companies in three key areas of increasing importance in the semiconductor industry:

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pure contract manufacturers of silicon chips, referred to as silicon foundries;

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providers of block-level semiconductor intellectual property; and

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operating system and application software developers.

We work closely with a number of silicon foundries, including Taiwan Semiconductor Manufacturing Company and United Microelectronics Corporation (UMC), two of the leading silicon foundries (based on sales volume). We have been involved in-process development and enhancement, chip characterization and core technology development with these partners. We also rely on a number of silicon foundries to provide our intellectual property in hardware form where required by customers. This relationship provides us with access to reserved manufacturing capacity at attractive rates. We can therefore offer flexibility to our customers, allowing them either to license our intellectual property or have us provide them with finished chips.

We have also developed close relationships with external software providers to further enhance our offerings. These providers include the Fraunhofer Institute, in the area of Internet audio encoding and decoding, which has ported its application code to our Audio-DSP platform. In addition, Beach Solutions and First Silicon Solutions sell development tools targeting the same Audio-DSP platform. We formed an alliance with Symbian, a company formed by Ericsson, Motorola, Matsushita, Nokia and Psion to develop and promote an industry-wide standard operating system for mobile computing, on the first deployment of InfoStream. We have also completed a system integrator license with Microsoft which enables Parthus to integrate either Pocket PC or Smartphone software technologies with the InfoStream hardware platform, and market the combined solution to semiconductor and OEM customers of Parthus.

Competition

Given the rapid rates of technological change and of new product introductions in our target markets, we believe that a key competitive factor in these markets is whether a semiconductor intellectual property solution allows manufacturers to deliver the performance and features demanded by their target markets more quickly than their competitors. Because of our complete platform approach, our focus on the Mobile Internet market and our strong resources in key areas such as mixed-signal technology, we believe that we are extremely competitive in delivering complete solutions that meet the requirements of our customers. In addition, we believe that the difficulty of attracting an adequate number of qualified technical staff, particularly in the areas of analog and mixed signal technology, coupled with the difficulty of combining know-how across the range of technologies required to provide a complete solution in this market area, present substantial barriers to entry for new entrants into this area. Other important competitive factors include price, product quality, design cycle time, reliability, performance, customer support, name recognition and reputation and financial strength.

We compete against a variety of companies, ranging from smaller, niche semiconductor design companies to large semiconductor and electronic product manufacturers, many of whom are our customers. We believe that our principal competition comes from the in-house research and development teams of such manufacturers, many of whom have significantly greater resources than we do. In addition,

we must in such cases overcome any organizational bias against out-sourced solutions before we can compete successfully.

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we compete in specific areas of the Bluetooth and 802.11 technology arena with NewLogic and Tality;

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we compete in specific areas of the GPS market with SiRF, Snaptrack and Trimble

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we compete in the specific areas of the GPRS and W-CDMA market with TTPcom; and

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we compete in specific areas of the Internet audio market with Micronas.

We cannot be certain that we will have the financial resources, technical expertise, and marketing or support capabilities to compete successfully in the future.

License Arrangements

We license to our customers complete platform solutions to perform specific application functions. These solutions typically incorporate both intellectual property to be embodied on a silicon chip and intellectual property in the form of software. In the third quarter of 2000, we announced our first portfolio license agreements. Agilent Technologies licensed our BlueStream and InfoStream platforms for next generation Bluetooth-enabled mobile computing devices, and 3Com licensed four of our platforms to power its mobile product line. In April 2001, we entered into a multi-year technology portfolio licensing and royalty agreement with STMicroelectronics for the complete suite of Parthus’ mobile Internet IP platforms By entering into a portfolio license, our customers have access to multiple technology platforms in the Parthus portfolio, enabling them to obtain from one supplier all of the IP required to build next-generation mobile Internet devices. For example, a portfolio license can converge our InfoStream platform for smart phones with our BlueStream Bluetooth connectivity platform. We believe that portfolio license arrangements will generally be larger than other license agreements and will allow us to develop close, strategic long-term relationships with our portfolio license customers .

Although the precise terms of our contracts vary from licensee to licensee, they generally require payment of an initial license fee , a re-use license fee , ongoing per-unit royalties or some combination of these fees. Under the terms of these license agreements, we may also provide integration services to help accelerate the customer’s product development cycle. Key features of these arrangements include:

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Initial license fees. Initial license fees are typically nonrefundable and are generally paid in installments upon reaching defined development milestones. Our licenses are typically perpetual in duration but may in some cases be limited to fixed terms.

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Re-use license fees. A re-use license fee is payable for each new product that incorporates technology previously licensed from us. Re-use license fees are payable when a licensee sends a design using our intellectual property for manufacture. Alternatively, licensees may pay a one-time buyout fee in lieu of subsequent re-use fees.

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Per-unit Royalties. A per-unit royalty is paid for each product incorporating our intellectual property that is sold, supplied or distributed by the licensee. These royalties are calculated either as a percentage of the licensee’s sale price per product or as a fixed amount per unit sold. We began realizing revenue from royalties in the third quarter of 2000. As products

using our technology are brought to market, we expect revenue from royalties to increase. We have no control, however, over when our customers will ultimately bring such products to market.

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Research and Development

We believe that our research and development resources give us an important competitive advantage. In the future, our ability to compete will be substantially dependent on our ability to continue to recruit and retain key personnel and to exploit advanced technology in order to meet changing market requirements. Towards this end, we maintain a significant research and development team dedicated to developing new technological solutions and new versions of our existing technology to meet the needs of our customers.

Our research and development efforts are focused on delivering further innovative solutions that offer clear benefits to our customers in the areas of:

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faster and higher performance, which is essential for the take-up of new services or content;

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lower power requirements, which is critical for battery life;

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smaller and lighter chip components, for overall product design;

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easier manufacturing of extremely complex technology; and

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higher value at lower cost.

At year-end 2001, we had 307 full-time research and development staff located at seven development sites in Ireland, the United States, Northern Ireland and England maintaining the high levels we had in 2000. A significant number of our research and development staff have advanced degrees. These individuals have expertise in all the disciplines required to take a product from conception through design and into volume manufacturing, including:

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systems architecture, including modeling and partitioning;

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analog and mixed-signal technology;

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IP integration for system-on-a-chip development;

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software development; and

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systems integration.

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We are currently involved in research programs with a number of university and independent research groups worldwide. These include both student sponsorships at undergraduate, masters and doctorate levels, and joint research programs. We have participated in research programs at the National University of Ireland in Dublin, Cork and Galway; Trinity College, Dublin; Queen’s University, Belfast; the University of California at San Diego; and the National Microelectronics Research Centre, Cork, Ireland. In addition, several members of our staff work one day per week at affiliated academic institutions, providing a strong link to the faculty and student bodies.

We also encourage our research and development personnel to maintain active roles in the various international organizations that develop and maintain standards in the electronics and related industries. This involvement:

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allows us to influence the development of new standards;

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keeps us informed as to important new developments regarding standards; and

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allows us to demonstrate our expertise to customers and potential customers who also participate in these standards-setting bodies.

We expect to continue to invest substantial funds and personnel resources in research and development activities.

Patent and Intellectual Property Protection

Our success and ability to compete are dependent on our ability to develop and maintain the proprietary aspects of our intellectual property and to operate without infringing the proprietary rights of others. We rely on a combination of patent, trademark, trade secret and copyright laws and contractual restrictions to protect the proprietary aspects of our technology. These legal protections afford only limited protection of our technology. We also seek to limit disclosure of our intellectual property by requiring employees and consultants with access to our proprietary information to execute confidentiality agreements with us and by restricting access to our source code and other intellectual property. Due to rapid technological change, we believe that factors such as the technological and creative skills of our personnel, new product developments and enhancements to existing products are more important than specific legal protections of our technology in establishing and maintaining a technology leadership position.

We have an active program to protect our proprietary technology through the filing of patents. Currently, we hold 16 U.S. patents, with expiration dates between 2011 and 2020, and 13 non-U.S. patents on various aspects of our technology. In addition, we have 39 patent applications pending in the United States and an additional 20 patent applications pending in the United Kingdom and other jurisdictions. We can provide no assurance that our pending patent applications or any future applications will be approved or will not be challenged by third parties, that any issued patents will effectively protect our technology, or that patents of others will not have an adverse effect on our ability to do business.

We seek to protect our other trade secrets and proprietary information through agreements with licensees and systems companies, proprietary information agreements with employees and consultants and other security measures. We also rely on trademark, copyright and trade secret laws to protect our intellectual property.

The semiconductor industry is characterized by frequent litigation regarding patent and other intellectual property rights. Questions of infringement in the semiconductor field involve highly technical and subjective analyses. Litigation may in the future be necessary to enforce our patents and other intellectual property rights, to protect our trade secrets, to determine the validity and scope of the proprietary rights of others, or to defend against claims of infringement or invalidity. There can be no assurance that we would be able to prevail in any such litigation, or be able to devote the financial resources required to bring such litigation to a successful conclusion.

expense required for us to indemnify our licensees, a licensee’s development, marketing and sale of products embodying our solutions could be severely disrupted or shut down as a result of litigation.

Employees

The table below presents the number of our employees as of each date indicated, by function and geographical location.

	December 31,
	1999	2000	2001
Total employees	237	387	389
Research and development	205	308	307
Sales and marketing	13	40	42
Administration	19	39	40
Location
Ireland	201	263	237
Northern Ireland	19	28	27
England	0	35	36
United States	17	54	74
Elsewhere	0	7	15

In December 2001 we implemented a headcount reduction of 29 employees as part of an overall cost management plan. Our employees are not represented by any collective bargaining agreements, and we have never experienced a work stoppage. We believe our employee relations are good.

Facilities

Location	Area (Sq. Feet)	Principal Activities
Dublin, Ireland	32,700	Executive offices, engineering, sales,marketing, administration.
Cork, Ireland	10,000	Engineering, marketing, administration.
Belfast, Northern Ireland	8,000	Engineering, marketing.
Limerick, Ireland	4,000	Engineering, marketing.
Northampton, England	18,000	Engineering, marketing, administration.
San Jose, CA, U.S.	10,000	Sales, marketing, engineering, administration.
Austin, TX, U.S	10,400	Research and development, marketing, administration.
Caen, France	550	Research and development.

Group Structure

Parthus Technologies plc, an Irish public limited company, is the ultimate parent of the Parthus group. The following table present the subsidiaries of Parthus, their jurisdictions of organization, and the percentage of Parthus’ direct or indirect holding of each as of May 17, 2002:

Name	Jurisdiction	Proportion held (Directly or Indirectly)
Parthus Ireland Limited	Republic of Ireland	100	%
Silicon Systems Design Limited	Republic of Ireland	100	%
Skelbrook Limited	Republic of Ireland	94	%
Parthus Research Limited	Republic of Ireland	95	%
Silsys Design (US) Inc.	California, USA	100	%
Parthus Technologies Inc.	California, USA	100	%
Chicory Systems Inc.	Delaware, USA	100	%
Parthus (NI) Limited	United Kingdom	100	%
Parthus Technologies SARL	France	100	%
Parthus Holdings BV	The Netherlands	100	%
Parthus Inc	The Cayman Islands	100	%
Parthus (UK) Limited	United Kingdom	100	%
Amadala Limited	Republic of Ireland	100	%
Epron Limited	Republic of Ireland	100	%
Parthus Technologies Limited	Hong Kong	100	%
Parthus Technologies Japan Limited	Japan	100	%

MANAGEMENT

The following table sets forth information with respect to each of our directors and senior management and their position and respective age as of May 17, 2002:

Name	Age	Position
Brian Long	45	Director and Chief Executive Officer
Michael Peirce(1)(2)	57	Chairman of the Board of Directors
Kevin Fielding	39	Director and President
Eoin Gilley	40	Chief Operating Officer
Elaine Coughlan	30	Chief Financial Officer
William McLean	44	President, U.S. Operations and Vice President Worldwide Sales
Peter McManamon	54	Director and Executive Vice President of Corporate Development
William McCabe(1)(2)	44	Director
Sven-Christer Nilsson(1)(2)	58	Director

(1)

Member of the Remuneration Committee

(2)

Member of the Audit Committee

Brian Long has served as our Chief Executive Officer and a Director since 1993 and is one of our co-founders. Mr. Long has more than 20 years’ experience developing intellectual property solutions for the semiconductor industry. Prior to co-founding Parthus, Mr. Long was a chief design engineer with AT&T. Mr. Long later held corporate responsibility for mixed-signal technology development at Digital Equipment Corporation, coordinating its cooperation with major semiconductor companies in the field of integrated circuit technology design and development. Mr. Long is the named inventor in several U.S. and European integrated circuit design patents and is currently on the board of the National Microelectronics Research Centre, Ireland. He was awarded the Irish Entrepreneur of the year for Technology in 2000. He holds undergraduate and masters degrees in Electronic Engineering from Trinity College Dublin, Ireland.

Michael Peirce has served as our Chairman since 1993. He is the founder and Chairman of the Mentec Group, a company specializing in financial, manufacturing and distribution software. Mr. Peirce is a past President of the Irish Electronics Industry Federation and is currently a member of the Advisory Committee of the National Microelectronics Research Centre.

Kevin Fielding was appointed President of our company in March 2001 and has served as a Director since November 2000. He served as our Chief Operating Officer from 1998 to 2001. Mr. Fielding joined Parthus from Digital Semiconductor in Boston, U.S., where he was Managing Director of Digital’s StrongARM business. He has over 18 years’ experience in the semiconductor business in the U.S. and Europe. He holds a BSEE and a MSEE from the National University of Ireland, Cork and an MBA from Northeastern University, Boston.

Eoin Gilley has served as our Chief Operating Officer since March 2001. Mr. Gilley joined Parthus from Artesyn Technologies, where he spent three years and held the position of Managing Director, Europe. From 1995 to early 1998, he held the position of Vice President/General Manager Europe with Quarterdeck International Ltd. based in Dublin. Previously, Mr. Gilley spent 15 years with Apple Computer, including at Apple’s European manufacturing facility and, more recently, in Cupertino, California, as Director of Operations for Apple’s Newton Division. Mr. Gilley has an MBA from Fordham University and a degree in Engineering.

Elaine Coughlan has served as our Chief Financial Officer since March 2001. She served as our Vice President Finance from August 2000 until her current appointment and as our Corporate Controller from December 1999 to August 2000. Prior to joining Parthus she worked for IONA Technologies plc, where she held senior financial positions including Vice President of Finance, Acting Corporate Controller, Assistant Corporate Controller and European Financial Controller. Previously she spent eight years at Ernst & Young as a senior audit manager specializing in advising SEC-registered clients in the technology sector and handling public offering transactions. She is an Associate of the Institute of Chartered Accountants in Ireland.

William McLean has been our President, U.S. Operations and Vice President Worldwide Sales since 1998. He joined Parthus from Authentec, a biometrics firm and spin-off from Harris Semiconductor, where he was Vice President and Chief Marketing Officer. Mr. McLean had joined Harris Semiconductor in 1996, serving as Vice President and General Manager of Worldwide Sales and Marketing. Mr. McLean had previously served as Vice President of OEM Sales at Fujitsu Microelectronics, and Vice President of Sales and Marketing for the start-up firm Advanced Telecommunications Modules Ltd., a provider of communications technology. Mr. McLean began his career at Texas Instruments, where he spent 12 years in various sales and marketing positions. Mr. McLean has a B.S. in Electrical Engineering from Christian Brothers University, Memphis, Tennessee.

Peter McManamon, one of our co-founders, has served as a Director since 1993. He was our Chief Financial Officer from 1993 until his current appointment in March 2001 as Executive Vice President of Corporate Development. Mr. McManamon is currently a member of the executive committee of the Irish Software Association and is a member of the Institute of Directors of Ireland. He gained a degree in Business Studies from Trinity College, Dublin, is qualified as a member of the Institute of Certified Public Accountants (CPA) and has 20 years’ experience in the electronics industry.

William McCabe has served as a Non-Executive Director since 1997. He is the former Chairman of SmartForce plc (formerly CBT Group plc), an Irish company specializing in interactive educational software, quoted on the Nasdaq National Market since 1995. He holds a degree in Economics from Queens University, Belfast.

Sven-Christer Nilsson has been a Non-Executive Director since March 2000. He is a co-founder and director of Startupfactory, a venture capitalist and early-stage investor headquartered in Stockholm, Sweden. Between 1982 and 1999 he held various positions with Ericsson, the telecommunications equipment supplier, including President, Ericsson Radio Systems (Sweden), Vice President, Mobile Switching Systems, Executive Vice President, Cellular Systems-American Standards, and, from 1998, Chief Executive Officer. Mr. Nilsson holds a BSc in Computer Science from the University of Lund, Sweden.

Employment Agreements

We have entered into employment agreements with each of Brian Long, Peter McManamon, Kevin Fielding, William McLean, Eoin Gilley and Elaine Coughlan that provide for salary and benefits packages commensurate with the position of each executive. In addition, Messrs. McLean, Fielding and Gilley and Ms. Coughlan are entitled to participate in our share option plans.

Corporate Governance

Our board of directors has established an audit committee and a remuneration committee. The audit committee is chaired by Mr. Peirce, and its other members are Messrs. McCabe and Nilsson. This committee has responsibility for, among other things, planning and reviewing our annual and quarterly reports and accounts and the involvement of our auditors in that process, focusing particularly on compliance with legal requirements and accounting standards and with the requirements of the Nasdaq

National Market and the U.K. Listing Authority, and ensuring that an effective system of internal controls is maintained. The ultimate responsibility for reviewing and approving our annual and quarterly reports and accounts will remain with our board of directors. The audit committee monitors the adequacy of internal accounting practices and addresses all issues raised and recommendations made by the external auditors. The Chief Financial Officer normally attends meetings of the committee, while the external auditors attend as required and have direct access to the committee chairman at all times.

The remuneration committee is chaired by Mr. Peirce, and its other members are Messrs. McCabe and Nilsson. This committee determines, within agreed terms of reference, our policy on compensation of executive officers and specific remuneration packages for each of the executive directors, including pension rights.

Compensation of Directors and Senior Management

The aggregate compensation, including benefits in kind, paid to our directors and senior management for 2001 was $1,134,000. We also granted to our directors and senior management during 2001 options to purchase an aggregate of 16,150,000 ordinary shares at an average exercise price of $0.45 per share. These options expire in 2008. Our executive directors do not receive any additional compensation for their services as members of the Board but are reimbursed for their reasonable out-of-pocket expenses incurred in attending meetings of the board of directors.

The following table sets out remuneration, including pension contributions, paid to or accrued for all of our directors for 2001:

	Salary and fees		Bonuses		Taxable Benefits		Pension contributions		Total 2001		Total 2000
	(in thousands)
Executive Directors
Brian Long	$	182	$	—	$	2	$	27	$	211	$	363
Kevin Fielding*		192		—		1		19		212		20
Peter McManamon		182		—		3		27		212		363
Non-executive Directors
Michael Peirce		—		—		—		—		—		—
William McCabe		35		—		—		—		35		35
Sven-Christer Nilsson*		40		—		—		—		40		30

	$	631	$	—	$	6	$	73	$	710	$	811

Mr. Fielding was appointed a director on November 27, 2000; Mr. Nilsson was appointed a director on March 31, 2000.

As of December 31, 2001, options to purchase 82,822,073 ordinary shares were outstanding at exercise prices ranging from $0.031 to $2.70 per share. Of these, options to purchase an aggregate of 25,474,350 ordinary shares were held by our directors and senior management. The number of ordinary shares and ordinary shares subject to options held by our directors and senior management on an individual basis as of May 7, 2002, and the relevant grant dates, exercise prices and expiration dates of such options, are set forth below. The percentages of ordinary shares held are based on 586,203,731 shares outstanding as of May 7, 2002.

	Shares		Options
Name	Number of Ordinary Shares Held	Percentage of Total Shares Outstanding	Number of Ordinary Shares Underlying Options	Exercise Price		Dates of Grant	Expiration Date
Brian Long(1)	110,442,422	18.84	—		—	—	—
Michael Peirce	18,383,645	3.14	—		—	—	—
Kevin Fielding	6,157	*	466,680	$	0.032	7/22/98	7/22/05
			226,810	$	0.165	6/1/99	6/1/06
			300,000	$	0.75	2/4/00	2/4/07
			1,000,000	$	2.60	11/7/00	11/7/07
			2,500	$	2.10	11/30/00	11/30/07
			4,900,000	$	0.285	9/20/01	9/20/08
Eoin Gilley	35,930	*	2,250,000	$	1.50	3/2/01	3/2/08
			3,000,000	$	0.285	9/20/01	9/20/08
Elaine Coughlan	—	—	600,010	$	0.165	8/4/99	8/4/06
			70,840	$	0.75	2/4/00	2/4/07
			1,000,000	$	2.60	7/11/00	7/11/07
			2,500	$	2.10	11/30/00	11/30/07
			3,000,000	$	0.285	9/20/01	9/20/08
William McLean	6,720	*	750,010	$	0.032	10/21/98	10/21/05
			500,000	$	2.70	8/7/00	8/7/07
			2,500	$	2.10	11/30/00	11/30/07
			3,000,000	$	0.285	9/20/01	9/20/08
Peter McManamon	29,955,938	5.11	2,500	$	2.10	11/30/00	11/30/07
William McCabe	—	—	—		—	—	—
Sven-Christer Nilsson	—	—	400,000	$	0.75	2/17/00	2/17/07

Represents less than 1% of total.

(1)

Includess 280,000 shares held by Mr. Long’s wife.

Employee Plans

Share Option Plan

In March 1998, our board of directors approved the introduction of a share option plan (which also governed previously granted options). In April 2000, our board of directors authorized an increase in the number of share options that may be granted under the share option plan, up to a maximum level of 25% of our fully diluted share capital at the date of amendment. At our annual general meeting held in May 2001, our shareholders approved a further increase in the number of options that may be granted to 20% of the enlarged fully diluted share capital as at that date.

Under the terms of the plan, options may be granted to our employees, consultants or directors and the employees, consultants and directors of any of our subsidiaries. The option holder is entitled to exercise an option in respect of 25% of the total number of shares subject to option on the first anniversary of the date of grant. Each successive month thereafter, the option holder is entitled to exercise options in respect of 1/48th of the total number of shares subject to the option. All shares allotted under the plan rank equally in all respects with our ordinary shares.

No option may be sold, pledged, assigned, transferred or otherwise disposed of in any other manner by the option holder during his or her lifetime. Options will lapse to the extent that they have not been exercised by the earliest of the seventh anniversary of its date of grant, the expiration of 12 months from the date of death of the option holder or three months from the date of cessation of the option

holder’s status as an employee, consultant or director. The plan is administered by the remuneration committee of the board.

Employee Share Purchase Plan

In June 2000, our company approved the terms of an employee share purchase plan. The purchase plan permits eligible employees to purchase ordinary shares in the form of ADSs equivalent to a percentage of the employee’s earnings, not to exceed 15%, at a price equal to 85% of the fair market value of the ADSs at dates specified by the board of directors pursuant to the plan. We have five million shares reserved for issuance under the purchase plan. Substantially all employees are eligible, and shares are offered based on a percentage of salary up to a specified maximum value. Employees may exercise their purchase right on a twice yearly basis.

Board Action and Powers

Under our articles of association, unless otherwise determined by the company in a general meeting, the number of directors must be not less than three. Our directors can decide when to have meetings and how many of their number represent a quorum of the board of directors. Unless the directors decide otherwise, three directors are required for a quorum.

At every annual general meeting, one third of the directors retire by rotation. A director retiring by rotation may be re-elected at any general meeting. Furthermore, the Irish Companies Act, 1963 provides that a director can be removed from office at any time by a majority vote of the shareholders subject to compliance with the relevant statutory and notice provisions and to the rights of the removed director to claim compensation or damages arising from the removal. The requirement that fewer than all of our directors stand for election at any annual general meeting may have the effect of delaying, deferring or preventing a change in control of our company. Our directors are required to retire when they reach the age of 70, though they may stand for re-election after that time.

Messrs. Fielding, McCabe and Peirce retired by rotation and were re-elected at the 2001 annual general meeting. If there are no changes to the current composition of our board of directors, Mr. Nilsson and one of Messrs. McManamon or Long will retire by rotation at the 2002 annual general meeting, Mr. Peirce and one of Messrs. McManamon or Long will retire by rotation at the 2003 annual general meeting and Messrs. Fielding and McCabe will retire by rotation at the 2004 annual general meeting.

Our directors can appoint any person as an extra director to fill a vacancy. Any director appointed in this way holds office until the next annual general meeting following his appointment and will then be eligible for election, but will not be taken into account in determining the number of directors that are to retire by rotation at such meeting. If not re-elected at the annual general meeting, such director retires at the conclusion of the meeting.

Our directors are given the power to manage our business and to use all of the powers of the company not inconsistent with the articles of association or the Irish Companies Acts, 1963-1999.

Under our articles of association, our directors may, in the manner and on the terms and conditions they think fit, issue debentures, debenture stock and other securities, whether outright or as security for any debt, liability or obligation of the company or of any third party, without limitation on the amount. They may also borrow or raise money and mortgage or charge our company’s property, assets and uncalled capital, or any part thereof, subject to the provisions of Part III of the Irish Companies (Amendment) Act, 1983.

Remuneration and Expenses

The ordinary remuneration of our directors is determined from time to time by an ordinary resolution of the company and is divisible (unless such resolution provides otherwise) among the directors as they may agree, or, failing agreement, equally, except that any director who holds office for only part of the period for which such remuneration is payable is entitled to only a pro rata portion of such remuneration. Any director who holds any executive office (including chairman or deputy chairman) or who serves on any committee, or who otherwise performs services which in the opinion of the directors are outside the scope of the ordinary duties of a director, may be paid such extra remuneration by way of salary, commission or otherwise as the directors may determine.

The directors may be paid all travel, hotel and other expenses properly incurred by them in connection with their attendance at meetings of directors or committees of directors or general meetings or separate meetings of the holders of any class of shares or of debentures of the company or otherwise in connection with the discharge of their duties.

Our service agreements with Messrs. Long and McManamon provide that we may only terminate their employment with a minimum of three years’ notice. None of the members of our board of directors has a service agreement with us or our subsidiaries that provides for benefits upon termination.

Indemnification and Insurance

In general, Section 200 of the Irish Companies Act, 1963 prohibits us from exempting any of our directors or officers from, or indemnifying any of them against, any liability arising from any negligence, default, breach of duty or breach of trust of which he or she may be guilty in relation to us. Section 200 does, however, provide that we may indemnify any of our directors and officers against any liability incurred by them in defending proceedings, whether civil or criminal, if judgment is given in the director’s or officer’s favor or the he or she is acquitted. Additionally, upon our election, we can provide an indemnity under Section 200 where a director or officer is granted relief by a court under either Section 391 of the Irish Companies Act, 1963 or Section 42 of the Irish Companies (Amendment) Act, 1983. Our articles of association contain a provision for this indemnity but specifically exclude the auditors from such indemnity.

We have obtained directors and officers insurance for some of our directors, officers, affiliates, partners or employees for liabilities relating to the performance of their duties.

At present, there is no pending material litigation or proceeding involving any of our directors or officers where indemnification will be required or permitted. We are not aware of any threatened material litigation or proceeding that may result in a claim for indemnification of a director or officer.

PRINCIPAL SHAREHOLDERS

The following table contains information concerning each shareholder known by us to beneficially own more than three percent of our outstanding ordinary shares (in the form of ordinary shares or ADSs). Beneficial ownership is determined in accordance with the rules of the Securities and Exchange Commission and includes voting or investment power with respect to our shares.

The number of shares outstanding used in calculating the percentage for each listed shareholder includes the shares underlying options held by such shareholder that are exercisable within 60 days of May 7, 2002. Percentage of beneficial ownership is based on 586,203,731 shares outstanding at May 7, 2002. All holders of our ordinary shares (in the form of ordinary shares or ADSs), including those shareholders listed below, have the same voting rights with respect to such shares.

Name of Beneficial Owner	Percent		Number
Brian Long(1)	18.84	%	110,442,422
Ollaberry Limited(2)	17.14	%	100,492,422
The Goldman Sachs Group, Inc.(3)(4)	4.40	%	25,806,628
Peter McManamon(5)	5.11	%	29,955,938
Lomas Limited.(6)	4.54	%	26,637,138
Kelburn Limited(4)	4.52	%	26,518,309
Enterprise Ireland(4)	4.31	%	25,236,861
Michael Peirce	3.14	%	18,383,645

(1)

Includes 280,000 shares held by Mr. Longs’ wife. In addition 100,492,422 of the shares held by Mr. Long are subject to a put and call option agreement with Ollaberry Limited, an affiliate of Mr. Long.

(2)

All shares are held by Mr. Long and are subject to the option described in note (1).

(3)

The Goldman Sachs Group, Inc. may be deemed to own beneficially and indirectly in the aggregate 25,806,628 shares through the investment partnerships GS Capital Partners III, L.P., GS Capital Partners III Offshore, L.P., Goldman Sachs & Co. Verwaltungs, GmbH, Stone Street Fund 1998, L.P., and Bridge Street Fund 1998, L.P., of each of which affiliates of the Goldman Sachs Group are the general partner or managing general partner. The funds share voting and investment power with The Goldman Sachs Group.

(4)

Neither we nor any of our officers, directors or affiliates holds any voting power in this entity.

(5)

26,637,138 of the shares held by Mr. McManamon are subject to a put and call option agreement with Lomas Limited, an affiliate of Mr. McManamon.

(6)

All shares are held by Mr. McManamon and are subject to the option described in note (5).

On December 8, 1998, the share ownership of Brian Long was reduced from approximately 50% to approximately 36% when the Goldman Sachs Group acquired shares both by acquisition from existing shareholders and by subscription. In May 2000 the share ownership of Mr. Long was reduced to 23% and the share ownership of the Goldman Sachs Group was reduced to 17% after our initial public offering, and in November 2000 the share ownership of Mr. Long was reduced to 21% and the share ownership of the Goldman Sachs Group was reduced to 13% after our follow-on offering. The share ownership of Goldman Sachs Group was further reduced to approximately 4.4% in 2001 in connection with a block sale of shares.

Holdings by U.S. Shareholders

As of May 7, 2002, there were approximately 12,100 holders of record of our ordinary shares (in the form of ordinary shares or ADSs), including approximately 85 holders of record located in the United States holding approximately 6% of our outstanding securities.

RELATED-PARTY TRANSACTIONS

We deal in the normal course of business with STMicroelectronics, which held 20% of the equity of Silicon Systems Design Limited, one of our subsidiaries, until June 29, 2001. On that date, Parthus acquired its 20% shareholding for consideration of $38.6 million in cash and Parthus shares. During the year, Parthus and STMicroelectronics entered into a multi-technology portfolio licensing and royalty agreement for the complete suite of Parthus mobile Internet IP platforms. Revenue generated from STMicroelectronics was $12.6 million in 2001 and $12.4 million in 2000. Our account receivable balances with STMicroelectronics at December 31, 2001 and 2000 were $404,500 and $12,500, respectively.

During 1999, we advanced an interest-free loan of $400,000 to William McLean, President of U.S. Operations and Vice President of Worldwide Sales. The loan was repayable on demand at any time before June 30, 2002. Mr. McLean repaid the loan in full in March 2000.

We occupy premises in Dublin under the terms of a lease with Veton Properties Limited dated November 8, 1996. The lease term is 25 years from July 1, 1996, subject to annual rent of €380,922 (approximately $341,000). Brian Long and Peter McManamon are minority shareholders of Veton Properties Limited.

William McCabe and Sven-Christer Nilsson, our non-executive directors, receive directors fees of approximately $10,000 and $40,000 per annum, respectively, plus reasonable expenses. Mr. McCabe is also entitled to approximately $25,000 per annum for consulting services rendered to us.

ADDITIONAL INFORMATION

Background

We began operations in 1993. In April 2000 we re-registered as a public limited company, or “plc”, under the laws of the Republic of Ireland and changed our name to Parthus Technologies plc. Our principal executive office is located at 32-34 Harcourt Street, Dublin 2, Republic of Ireland and our telephone number is 011-353-1-402-5700. The address of our United States headquarters is 2033 Gateway Place, Suite 150, San Jose, California 95110 and our telephone number at that location is 1-408-514-2900. Our worldwide web address is http://www.parthus.com . Information contained on our website is not part of this annual report.

Articles of Association

Information regarding our articles of association is incorporated by reference to “Description of Share Capital” in our registration statement on Form F-1 (registration no. 333-12734) filed with the Securities and Exchange Commission on October 23, 2000, as amended.

Litigation

We are not currently, nor were we during 2001, involved in any litigation or arbitration proceedings that have had or that we expect to have a significant effect on our financial position or results of operations. We are not aware of any threatened or potential legal or arbitration proceedings that could have a significant effect on our financial position or results of operations.

Dividend Policy

Except for periodic payments of fixed cash dividends on preference shares, we have never paid dividends on our share capital. We currently intend to retain future earnings, if any, to fund the development and growth of our business and currently do not anticipate paying cash dividends in the foreseeable future. Payment of future dividends, if any, will be at the discretion of our board of directors after taking into account various factors, including our financial condition, operating results, current and anticipated cash needs and plans for expansion.

Under Irish law, any payment of dividends would be subject to the Irish Companies Acts, 1963-1999, which require, among other things, that all dividends be recommended by our board of directors and approved or ratified by our shareholders. Moreover, under Irish law, dividends may be paid only out of profits available for distribution determined in accordance with the Irish Companies Acts, 1963-1999 and accounting principles generally accepted in the Republic of Ireland, which differ in some respects from United States generally accepted accounting principles.

In the event that dividends are paid in the future, holders of the ADSs will be entitled to receive payments in U.S. dollars in respect of dividends on the underlying ordinary shares in accordance with the deposit agreement.

Capital Repayment

In connection with (and conditional upon) the proposed combination of Parthus and Ceva, we intend to distribute an aggregate of $60 million in cash to the existing shareholders of Parthus in the form of a repayment of share capital. See “Proposed Combination with Ceva, Inc.”, above.

Market Information

Our ADSs are quoted on the Nasdaq National Market under the symbol “PRTH” and our ordinary shares are traded on the London Stock Exchange under the symbol “PRH”. Public trading of our ADSs on the Nasdaq National Market began on May 19, 2000, and unconditional trading of our ordinary shares on the London Stock Exchange began on May 26, 2000. Prior to that, there was no public market for our ordinary shares or ADSs. The following table sets forth the high and low prices of our ADSs and our ordinary shares for (1) each calendar year since trading began; (2) each of the six quarters in the period ending December 31, 2001; and (3) each of the six months in the period ending December 31, 2001.

	Nasdaq National Market		London Stock Exchange
	High ($)	Low ($)	High (£)	Low (£)
2000 (from May 19)	51.75	18.44	4.09	0.85
2001	31.88	2.75	2.11	0.20
July through September 2000	51.75	25.88	4.09	1.72
October through December 2000	47.00	20.98	3.24	1.54
January through March 2001	31.88	17.00	2.11	0.82
April through June 2001	15.13	9.65	1.09	0.47
July through September 2001	9.20	2.80	0.64	0.20
October through December 2001	6.82	2.75	0.48	0.20
July 2001	9.20	6.60	0.64	0.43
August 2001	8.85	5.35	0.62	0.37
September 2001	5.75	2.80	0.38	0.20
October 2001	5.90	2.75	0.42	0.20
November 2001	6.82	5.35	0.48	0.39
December 2001	6.10	4.45	0.42	0.33

On May 15, 2002, the last reported sale price for the ADSs on the Nasdaq National Market was $4.00 per ADS, and the last reported sale price for the ordinary shares on the London Stock Exchange was £0.28 per ordinary share.

Exchange Controls

Except as indicated below, there are no restrictions on non-residents of the Republic of Ireland dealing in domestic securities (which include shares or depositary receipts of Irish companies such as our company), and dividends and redemption proceeds are freely transferable to non-resident holders of such securities.

The Financial Transfers Act, 1992 gives power to the Minister for Finance of Ireland to make provision for the restriction of financial transfers between the Republic of Ireland and other countries. Financial transfers are broadly defined and include all transfers that would be movements of capital or payments within the meaning of the treaties governing the European Communities. The acquisition or disposal of ADSs issued by an Irish company and associated payments may fall within this definition. In addition, dividends or payments on redemption or purchase of shares and payments on a liquidation of an Irish company would fall within this definition. Currently, orders under this Act prohibit some financial transfers to or by the order of or on behalf of residents of the Federal Republic of Yugoslavia, Serbia, Iraq or Angola unless permission for the transfer has been given by the Central Bank of Ireland.

Use of Proceeds

In May 2000, we conducted the initial public offering of our ordinary shares (in the form of shares and ADSs) and in November 2000 we conducted a follow-on public offering, each in the United States, the United Kingdom and Ireland, with private offerings to institutions elsewhere. We received approximately $132.5 million in net proceeds from the May 2000 offering and approximately $24 million in net proceeds from the November 2000 offering. To the date, we have used approximately $12 million as partial consideration in cash for our acquisition of Chicory Systems Inc., and approximately $13 million as partial consideration in cash for the minority interest in our subsidiary Silicon Systems Design Limited previously held by STMicroelectronics. In addition, we have used approximately $9 million for capital expenditures and approximately $5 million on operating activities. We have invested $4.5 million in exchange for a minority shareholding in UbiNetics plc. The balance of the funds have been invested at market rates with financial institutions pending their use for our continued investment, internally and by acquisition, in developing and consolidating our portfolio of technology platforms. We intend in connection with the proposed combination of Parthus and Ceva to distribute an aggregate of $60 million in cash to the existing shareholders of Parthus in the form of a repayment of share capital.

Taxation

The following discussion describes the material Irish taxation and U.S. federal income tax consequences of the acquisition, ownership and disposition of ordinary shares or ADSs representing ordinary shares to U.S. holders (as defined below). The discussion is based on the tax laws of the Republic of Ireland, the Double Taxation Convention between the Republic of Ireland and the United States of America (referred to as the Treaty), the United States Internal Revenue Code of 1986, as amended (referred to as the Tax Code), judicial decisions, administrative pronouncements and U.S. Treasury regulations, changes to any of which after the date hereof could apply on a retroactive basis and affect the tax consequences described herein. This discussion only applies to you if you hold ADSs or ordinary shares as capital assets for U.S. federal income tax purposes.

Please note that this discussion only addresses Irish taxation and U.S. federal income tax issues and may not address all of the tax consequences that may be relevant to you in light of your particular circumstances. In particular, it does not address special issues relevant to some purchasers, including:

•

dealers in securities;

•

banks;

•

tax-exempt organizations;

•

insurance companies;

•

persons holding ADSs or ordinary shares as part of a hedging, straddle or conversion transaction;

•

purchasers whose functional currency is not the U.S. dollar; and

•

persons who own, directly or by attribution, 10% or more of our outstanding voting share capital.

Potential investors are advised to satisfy themselves as to the overall tax consequences, including, specifically, the consequences under Irish laws and state, local and other laws, of the acquisition, ownership and disposition of ADSs and ordinary shares in their own particular circumstances, by consulting their own tax advisors.

For purposes of this discussion, you are a “U.S. holder” if you are a beneficial owner of ADSs or ordinary shares and are, for U.S. federal income tax purposes:

•

a citizen or resident of the United States;

•

a corporation or other entity treated as a corporation for U.S federal income tax purposes organized under the laws of the United States or any political subdivision of the United States;

•

an estate the income of which is subject to U.S. federal income taxation on a net income basis; or

•

a trust, provided that a court within the United States is able to exercise primary supervision over the administration of such trust and one or more U.S. persons have the authority to control all substantial decisions of such trust.

Additionally, in order for this discussion to apply to you, you must also:

•

not be resident, or ordinarily resident, in the Republic of Ireland for Irish tax purposes; and

•

not be engaged in a trade or business in the Republic of Ireland through a permanent establishment.

For the purposes of the Treaty and the Tax Code, U.S. holders of ADSs will be treated as the owners of ordinary shares represented by ADSs evidenced by ADRs.

Irish Taxation

The following discussion reflects the material Irish tax consequences to U.S. holders of the acquisition, ownership and disposition of ordinary shares and ADSs.

Taxation of Parthus

For Irish tax purposes, the residence of a company is in the jurisdiction where the central management and control of the company is located. Subject to certain exceptions, all Irish incorporated companies are deemed to be Irish tax resident. Companies which are resident in the Republic of Ireland are subject to Irish corporation tax on their total profits (wherever arising and, generally, whether or not remitted to the Republic of Ireland). The question of residence, by virtue of management and control, is essentially one of fact. It is the present intention of the company’s management to continue to manage and control the company from the Republic of Ireland, so that the company will continue to be resident in the Republic of Ireland.

The standard rate of Irish corporation tax on trading income is currently 16%. Current legislation provides that the standard rate of corporation tax for trading income (with certain exceptions) is to be reduced to 12.5% for the year 2003 and subsequent years.

Patent exemption is available to Irish resident companies whose income derives from qualifying royalties or license fees paid in respect of qualifying patents. The main requirement to qualify for the exemption is that the research, planning, processing, experimentation, testing, devising, designing,

developing or similar activity leading to the invention which is the subject of the patent is carried out in Ireland. Under Irish law, income from such qualifying patents is disregarded for taxation purposes. There is no termination date for this relief specified in the legislation.

To the extent that the company is involved in the “manufacture” of goods in Ireland, income from this activity, in respect of its software development operations, can qualify for a 10% rate of tax. This relief is available until December 31, 2010.

Corporation tax is charged at the rate of 25% on a company’s non-trading income and certain types of trading income not eligible for the lower rates discussed above.

Irish capital duty, a tax on the issuance of share capital by companies, is payable at the rate of 1% of proceeds received by the company in consideration of such issuance.

Taxation of Dividends

If we decide to pay dividends, such dividends will generally be subject to withholding tax. Withholding tax may not apply where an exemption is permitted by legislation and where the company has received all necessary documentation prior to the payment of the dividend. The company will withhold any applicable withholding tax at source.

Irish Withholding Tax

Non-Irish Resident Shareholders—Dividends on Ordinary Shares

Shareholders who are individuals resident in the United States (or several other countries) and who are not resident or ordinarily resident in the Republic of Ireland may receive dividends free from withholding tax where the shareholder has provided the company with the relevant declaration and residency certificate required by legislation.

Corporate shareholders that are not resident in the Republic of Ireland and who are ultimately controlled by persons resident in the United States (or several other countries), or whose principal class of shares or its 75% or greater parent’s principal class of shares are substantially or regularly traded on a recognized stock exchange in an EU country or a country with which the Republic of Ireland has concluded a double taxation treaty, may receive dividends free from withholding tax where they provide the company with the relevant declaration, auditor’s certificate and Irish Revenue Commissioner’s certificate required by Irish law. Exemption from withholding is extended to include corporate shareholders resident in another EU member state or another country with which Ireland has concluded a double tax agreement (and not controlled by Irish residents) and other non-resident companies that are wholly owned by two or more companies each of whose principal class of shares is substantially and regularly traded on a recognized stock exchange in an EU country or a country with which the Republic of Ireland has concluded a double taxation treaty, where the aforementioned declarations and certificates have been provided.

U.S. holders of ordinary shares (as opposed to ADSs; see below) should note, however, that these documentation requirements may be burdensome. As described below, these documentation requirements do not apply in the case of ADSs.

U.S. holders that do not fulfil the documentation requirements or otherwise do not qualify for the withholding tax exemption may be able to claim treaty benefits under the Treaty. U.S. holders that are entitled to benefits under the Treaty will be able to claim a partial refund of the 20% withholding tax from the Irish Revenue Commissioners.

Non-Irish Resident Shareholders—Dividends on ADSs

Special arrangements are available in the case of shares held in Irish companies through American depositary banks using ADSs. American depositary banks that receive dividends from Irish companies and pay the dividends on to the U.S. ADS holder are allowed a less rigorous certification procedure. Specifically, the depositary bank will be allowed to receive and pass on a dividend from the Irish company on a gross basis (without any withholding tax) in the following circumstances:

•

where the depositary bank’s ADS register shows that the direct beneficial owner has a U.S. address on the register; and

•

if there is a further intermediary between the depositary bank and the beneficial shareholder, where the depositary bank received confirmation for the intermediary that the beneficial shareholder’s address in the intermediary’s records is in the U.S.

Income Tax

Under certain circumstances, non-Irish resident shareholders will be subject to Irish income tax on dividend income, though this liability is limited to tax at the standard rate (20%). However, a U.S. holder will not have an Irish income tax liability on dividends from the company if the U.S. holder is neither resident nor ordinarily resident in the Republic of Ireland and the U.S. holder is:

•

an individual resident in the United States (or several other countries);

•

a corporation that is ultimately controlled by persons resident in the United States (or several other countries);

•

a corporation whose principal class of shares (or its 75% or greater parent’s principal class of shares) are substantially and regularly traded on a recognized stock exchange in an EU country or a country with which the Republic of Ireland has concluded a double taxation treaty;

•

a corporation resident in another EU member state or in a country with which Ireland has concluded a double taxation agreement, which is not controlled directly or indirectly by Irish residents; or

•

a corporation that is wholly owned by two or more corporations each of whose principal class of shares is substantially and regularly traded on a recognized stock exchange in an EU country or a country with which the Republic of Ireland has concluded a double taxation treaty.

Taxation of Capital Gains

A U.S. holder is not subject to Irish capital gains tax on the disposal of ordinary shares or ADSs.

Irish Capital Acquisitions Tax

Irish capital acquisitions tax (referred to as CAT) applies to gifts and inheritances.

Where a gift or inheritance is taken under a disposition made after December 1, 1999, it will be within the charge to CAT:

•

to the extent that the property of which the gift or inheritance consists is situated in the Republic of Ireland at the date of the gift or inheritance;

•

where the person making the gift or inheritance is or was resident or ordinarily resident in the Republic of Ireland at the date of the disposition under which the gift or inheritance is taken;

•

in the case of a gift taken under a discretionary trust where the person from whom the gift is taken was resident or ordinarily resident in the Republic of Ireland at the date he made the settlement, or at the date of the gift or, if he is dead at the date of the gift, at his death; or

•

where the person receiving the gift or inheritance is resident or ordinarily resident in the Republic of Ireland at the date of the gift or inheritance.

Where a gift or an inheritance is taken under a disposition made prior to December 1, 1999 CAT is chargeable in the following circumstances:

•

to the extent that the property of which the gift or inheritance consists is situated in the Republic of Ireland at the date of the gift or inheritance;

•

where the person making the gift or inheritance is or was domiciled in Ireland at the date of the disposition under which the gift or inheritance is taken;

•

in the case of a gift taken under a discretionary trust, where the disponer, who is usually the settlor, in relation to that trust was domiciled in Ireland at the date he made the settlement, or at the date of the gift or, where the gift is taken after his death, at the date of his death.

The person who receives the gift or inheritance is primarily liable for CAT. A person is secondarily liable if he is the donor, his personal representative or an agent, trustee or other person in whose care the property constituting the gift or inheritance or the income therefrom is placed. Taxable gifts or inheritances received by an individual since December 5, 1991 from donors in the same threshold class are aggregated and only the excess over a specified tax-free threshold is taxed. The tax-free threshold is dependent on the relationship between the donor and the donees and the aggregation since December 5, 1991 of all previous gifts and inheritances, within the same tax threshold.

The tax-free threshold amounts currently in force are:

•

€21,108 in the case of persons who are not related to one another;

•

€42,215 in the case of gifts or inheritances received from inter alia a brother or sister or from a brother or sister of a parent or from a grandparent; and

•

€422,148 in the case of gifts and inheritances received from a parent (or from a grandparent by a minor child of a deceased child) and specified inheritances received by a parent from a child.

Gifts and inheritances passing between spouses are exempt from CAT. CAT is charged at the rate of 20%.

Because the company is required to maintain its share register in Ireland, ordinary shares will be and ADSs may be regarded as located in the Republic of Ireland. Accordingly, ordinary shares will be subject to CAT and ADSs may be subject to CAT notwithstanding the fact that the holder may be domiciled and/or resident outside the Republic of Ireland. There is no gift and inheritance tax convention between the United States and the Republic of Ireland. Although an estate tax convention between the two countries was ratified in 1951, estate duty was abolished in the Republic of Ireland in 1975 and it is not clear whether the estate tax convention is applicable to Irish gift and inheritance taxes that replaced the former estate duty. As a matter of practice, the Irish Revenue Commissioners apply the convention in respect of inheritance tax.

Irish Probate Tax

Irish probate tax was abolished under the Finance Act, 2001. No probate tax will arise on any assets passing in respect of a death occurring on or after December 6, 2000.

Irish Stamp Duty

Ordinary Shares

Irish stamp duty, which is a tax on certain documents, including CREST operator instructions, is payable on all transfers of the ordinary shares (other than between spouses) wherever a document of transfer is executed. Where the transfer is attributable to a sale, stamp duty will be charged at a rate of 1%, rounded to the nearest pound (the ad valorem rate) of the amount or value of the consideration (i.e. purchase price). Where the consideration for the sale is expressed in a currency other than Euro, the duty will be charged on the Euro equivalent calculated at the rate of exchange prevailing at the date of the transfer. In the case of a transfer by way of gift (subject to certain exceptions) or for a consideration less than the market value of the ordinary shares transferred, stamp duty will be charged at the ad valorem rate on such market value.

Transfers of ordinary shares between associated companies (subject to the satisfaction of certain conditions) are exempt from stamp duty in the Republic of Ireland. In the case of transfers of ordinary shares where no beneficial interest passes (e.g. a transfer of shares from a beneficial owner to his nominee), no stamp duty arises where the transfer contains the appropriate certificate and, in the absence of such certificate, a flat rate of €12.70 (the nominal rate) will apply.

ADSs Representing Ordinary Shares

A transfer by a shareholder to the depositary or custodian of ordinary shares for deposit under the deposit agreement in return for ADSs and a transfer of ordinary shares from the depositary or the custodian upon surrender of ADSs for the purposes of withdrawal of the underlying ordinary shares in accordance with the terms of the deposit agreement will be stampable at the ad valorem rate if the transfer relates to a sale or contemplated sale or any other change in the beneficial ownership of such ordinary shares. Where the transfer merely relates to a transfer where no change in the beneficial ownership in the underlying ordinary shares is effected or contemplated, no stamp duty arises where the transfer contains the appropriate certificate and, in the absence of such certificate, the nominal rate stamp duty of €12.70 applies.

Under Irish law, it is not free from doubt whether the mere withdrawal of ordinary shares in exchange for ADSs or ADSs for ordinary shares would be deemed to constitute a change in beneficial ownership. Accordingly, it is not certain that holders would not be subject to stamp duty at the ad valorem rate when merely withdrawing ordinary shares in exchange for ADSs or ADSs for ordinary shares and consequently the depositary reserves the right in such circumstances to require payment of stamp duty at the ad valorem rate from the holders.

Transfers of ADSs are exempt from Irish stamp duty as long as the ADSs are dealt in on the Nasdaq National Market or any recognized stock exchange in the United States or Canada.

The person accountable for payment of stamp duty is the transferee or, in the case of a transfer by way of gift or for a consideration less than the market value, both parties to the transfer. Stamp duty is normally payable within 30 days after the date of execution of the transfer. Late or inadequate payment of stamp duty will result in liability for interest, penalties and fines.

U.S. Federal Income Tax Considerations

Taxation of Dividends

Subject to the discussion below under “Passive Foreign Investment Company Considerations”, the gross amount of a distribution paid on an ordinary share or ADS will be a dividend for U.S. federal income tax purposes to the extent paid out of our current or accumulated earnings and profits (as determined for U.S. federal income tax purposes). To the extent that a distribution exceeds our earnings and profits, it will be treated as a nontaxable return of capital to the extent of your basis in such shares and thereafter as a capital gain. Dividends paid by us generally will be treated as foreign source income and will not be eligible for the dividends-received deduction generally allowed to corporate shareholders under the U.S. federal income tax law.

The amount of any distribution will equal the fair market value in U.S. dollars of the Irish pounds or other property received on the date received by you in the case of shares, or by the depositary, in the case of ADSs, based on the spot exchange rate on such date. You will have a basis in any Irish pounds distributed, equal to the U.S. dollar value of Irish pounds on the date received by you, in the case of shares, or by the depositary, in the case of ADSs. Any gain or loss recognized upon a subsequent disposition of Irish pounds will generally be U.S. source ordinary income or loss.

Any Irish tax withheld from a distribution will generally be treated for U.S. tax purposes as a foreign tax that may be claimed as a foreign tax credit against your U.S. federal income tax liability. Dividends distributed by us will generally be categorized as “passive income” (generally dividends, interest, royalties, rents, annuities and certain types of gains) or, in the case of some holders, as “financial services income” (generally dividends, interest, royalties, rents, annuities and certain types of gains derived in the active conduct of a banking, financing or similar business), which is treated separately from other types of income for purposes of computing allowable foreign tax credits for U.S. tax purposes. The rules relating to the determination of the foreign tax credit are complex and you should consult your own tax advisors to determine whether and to what extent a credit would be available. In lieu of claiming a credit, you may claim a deduction of foreign taxes paid in the taxable year. A deduction generally does not reduce U.S. tax on a dollar-for-dollar basis like a tax credit.

Taxation of Capital Gains

Upon the sale or exchange of a share or ADS, you will recognize a gain or a loss for U.S. federal income tax purposes in an amount equal to the difference between the amount realized and your adjusted tax basis in the share or ADS. Subject to the discussion below under “Passive Foreign Investment Company Considerations”, such gain or loss will be a capital gain or loss. Such gain or loss will generally be treated as U.S. source gain or loss. If you are an individual, any such capital gain will generally be subject to U.S. federal income tax at a maximum rate of 20% if you have held the share or ADS for more than one year or 18% for shares or ADSs acquired after the year 2000 and held for more than five years.

The surrender of ADSs in exchange for shares and the surrender of shares in exchange for ADSs will not be a taxable event for U.S. federal income tax purposes. Accordingly, you will not recognize any gain or loss upon such surrender.

Passive Foreign Investment Company Considerations

Based on current and projected income, and our estimates as to the market value of our assets (determined by reference to the market value of the ordinary shares at year end), we believe that we will not be treated as a passive foreign investment company (“PFIC”) for U.S. federal income tax purposes for our current taxable year, or for future taxable years. However, an actual determination of PFIC status is factual in nature and generally cannot be made until the close of the applicable taxable year. We will be a PFIC if either:

•

75% or more of our gross income in a taxable year is passive income; or

•

the average percentage of the value of our assets that produce or are held for the production of passive income is at least 50 percent. The IRS has indicated that cash balances, even if held as working capital, are considered to be assets that produce passive income.

Since the determination of whether we will be a PFIC is based on the composition of our income and assets from time to time, and because the market price of the ordinary shares is volatile, there can be no assurance that we will not become a PFIC with respect to any particular tax year.

If we were classified as a PFIC, unless you timely make an election to mark your ordinary shares to market annually as described in the Tax Code, a special tax regime would apply to both:

•

any “excess distribution”, which would be your share of distributions in any year that are greater than 125% of the average annual distributions received by you in the three preceding years or your holding period, if shorter, and

•

any gain realized on the sale or other disposition of the shares or ADSs.

Under this regime, any excess distribution and realized gain would be treated as ordinary income and would be subject to tax as if:

•

the excess distribution or gain had been realized ratably over your holding period for the shares or ADSs,

•

the amount allocated to the taxable year in which you realize the excess distribution or gain will be taxed as ordinary income,

•

the amount allocated to each prior year, with certain exceptions, will be taxed at the highest applicable tax rate, and

•

the interest charge generally applicable to underpayments of tax had been imposed on the taxes deemed to have been payable in those previous years.

You are urged to consult your own tax advisor concerning the potential application of the PFIC rules to your ownership and disposition of shares or ADSs.

United States Information Reporting and Backup Withholding

Dividend payments with respect to shares or ADSs and proceeds from the sale, exchange or redemption of shares or ADSs may be subject to information reporting to the IRS and possible U.S. backup withholding at a 31% rate. Backup withholding will generally not apply to you, however, if you furnish a correct taxpayer identification number or certificate of foreign status and make any other required certification or if you are otherwise exempt from backup withholding. If you are required to establish your exempt status you generally must provide such certification on IRS Form W-9 in the case of U.S. persons and on IRS Form W-8BEN, or a suitable substitute form, in the case of non-U.S. persons.

Amounts withheld as backup withholding may be credited against your U.S. federal income tax liability, and you may obtain a refund of any excess amounts withheld under the backup withholding rules, by filing the appropriate claim for refund with the IRS and furnishing any required information.

Material Contracts

The descriptions of those material contracts entered into since December 31, 1999 that are contained in our Annual Report on Form 20-F for the Year-Ended December 31, 2000 (which we filed with the SEC on June 26, 2001 (registration number 0-30262)) are hereby incorporated herein by reference.

In addition, below is a summary of additional material contracts to which we are a party and that have been entered into since the filing of our last Annual Report on Form 20-F. Copies of the agreements incorporated by reference above or described below are available as exhibits to this Annual Report, our last Annual Report on Form 20-F, or our registration statements on Form F-1 (file numbers 333-11904 and 333-12734, filed with the SEC on May 3, 2000 and October 23, 2000, respectively, as amended).

Combination Agreement among Parthus, DSP Group, Inc. and Ceva, Inc. dated April 4, 2002. This agreement sets forth the terms of the proposed combination of Parthus and Ceva, which are described under the heading “Proposed Combination with Ceva, Inc.”, above.

Documents on Display

We are subject to the reporting requirements for foreign private issuers under the U.S. Securities Exchange Act of 1934. In connection with the Exchange Act, we file reports, including this annual report on Form 20-F, and other information with the Securities and Exchange Commission. Such reports and other information may be obtained, upon written request, from Morgan Guaranty Trust Company of New York, as depositary, at its office located at 60 Wall Street, New York, NY 10260. Such reports and other information may also be inspected and copied at prescribed rates at the public reference facilities maintained by at Public Reference Room of the Commission, 450 Fifth Street, N.W., Washington, D.C. 20549, and at the Commission’s regional offices located in Chicago, Illinois and in New York, New York after payment of prescribed fees.

ENFORCEMENT OF CIVIL LIABILITIES

INDEX TO FINANCIAL STATEMENTS

Consolidated Financial Statements of Parthus Technologies plc and subsidiaries:



Report of independent chartered accountants		F-2

Consolidated balance sheets at December 31, 2000 and 2001		F-3

Consolidated statements of operations for the years ended December 31, 1999, 2000 and 2001		F-4

Consolidated statements of shareholders’ equity and comprehensive income for the years ended December 31, 1999, 2000 and 2001		F-5

Consolidated statements of cash flows for the years ended December 31, 1999, 2000 and 2001		F-6

Notes to the consolidated financial statements of Parthus Technologies plc		F-7

F-1

REPORT OF INDEPENDENT CHARTERED ACCOUNTANTS

To the Directors and Shareholders of Parthus Technologies plc

We have audited the accompanying consolidated balance sheets of Parthus Technologies plc and subsidiaries as of December 31, 2000 and 2001 and the related consolidated statements of operations, shareholders’ equity and comprehensive income and cash flows for each of the years in the three year period ended December 31, 2001. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Parthus Technologies plc and subsidiaries as of December 31, 2000 and 2001, and the consolidated results of their operations and their cash flows for each of the years in the three year period ended December 31, 2001 in conformity with accounting principles generally accepted in the United States.

KPMG

Chartered Accountants

Dublin, Ireland

January 25, 2002

F-2

PARTHUS TECHNOLOGIES PLC

CONSOLIDATED BALANCE SHEETS

	December 31,
	2000			2001
	(in thousands)
ASSETS
Current assets
Cash and cash equivalents	$	159,865		$	121,503
Short term investments—available for sale (note 4)		—			1,800
Accounts receivable		3,245			3,541
Government grants receivable		904			—
Prepayments and other current assets (note 5)		2,851			3,365
Inventory (note 6)		1,250			797

Total current assets		168,115			131,006
Property, plant and equipment, net (note 7)		4,891			7,691
Goodwill, net (note 9)		—			62,691
Intangible assets, net (note 10)		6,240			4,432

Total assets	$	179,246		$	205,820

LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities
Accounts payable	$	3,802		$	5,672
Accrued liabilities (note 11)		9,438			11,178
Deferred revenue		5,680			4,759
Taxes payable		1,809			2,124

Total current liabilities		20,729			23,733
Minority interests (note 12)		1,001			—
Shareholders’ equity
Ordinary shares, par value €0.000317per share; 8,000,000,000 shares authorized at December 3l, 2000 and 2001; 530,595,999 and 581,180,431 shares issued and outstanding at December 31, 2000 and 2001 (note 14)		191			205
Additional paid in capital		177,657			239,138
Deferred stock compensation		(4,147	)		(5,052	)
Accumulated other comprehensive income		(1,705	)		(3,065	)
Retained earnings		(14,480	)		(49,139	)

Total shareholders’ equity		157,516			182,087

Total liabilities and shareholders’ equity	$	179,246		$	205,820

The accompanying notes are an integral part of these consolidated financial statements.

F-3

PARTHUS TECHNOLOGIES PLC

CONSOLIDATED STATEMENTS OF OPERATIONS

	Year ended December 31,
	1999			2000			2001
	(in thousands, except share and per share data)
Revenue
IP license	$	5,214		$	16,059		$	29,998
IP creation		13,826			12,433			6,756
Hard IP		—			3,428			4,165

Total revenue		19,040			31,920			40,919


Cost of revenue
IP license		983			2,960			5,052
IP creation		8,325			8,334			4,751
Hard IP		—			2,116			2,261


Total cost of revenue		9,308			13,410			12,064

Gross margin		9,732			18,510			28,855
Research and development (note 15)		7,128			19,090			29,994
Sales and marketing (note 15)		2,479			9,012			11,054
General and administrative (note 15)		2,994			9,741			7,364
Amortization of goodwill and intangible assets		—			1,081			9,195
In-process research and development charge (note 8)		—			—			10,895
Restructuring charge (note 17)		—			—			765

Total operating expenses		12,601			38,924			69,267
Loss from operations		(2,869	)		(20,414	)		(40,412	)
Interest income		172			5,346			6,394
Interest expense (note 16)		(27	)		—			—
Foreign exchange gain (loss)		241			434			(241	)
Minority interest (note 12)		(75	)		(204	)		(100	)

Loss before provision for income taxes		(2,558	)		(14,838	)		(34,359	)
Provision for income taxes (note 18)		—			(1,205	)		(300	)

Net loss		(2,558	)		(16,043	)		(34,659	)
Preference dividends (note 13)		(54	)		(15	)		—

Net loss available to ordinary shareholders	$	(2,612	)	$	(16,058	)	$	(34,659	)

Net loss per ordinary share
Basic and diluted	$	(0.007	)	$	(0.034	)	$	(0.062	)


Weighted average number of ordinary shares
Outstanding
Basic and diluted		362,473,760			471,389,525			558,946,827

The accompanying notes are an integral part of these consolidated financial statements.

F-4

PARTHUS TECHNOLOGIES PLC

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

AND COMPREHENSIVE INCOME

	Number of Ordinary Shares	Amount		Additional Paid-in Capital			Deferred Stock Compensation			Accumulated Other Comprehensive Income			Retained Earnings			Total Share- holders’ Equity
	(in thousands, except share data)
Balance at December 31, 1998	362,473,760	$	143	$	7,876		$	—		$	(100	)	$	4,190		$	12,109
Comprehensive income:
Net loss	—		—		—			—			—			(2,558	)		(2,558	)
Currency translation adjustment	—		—		—			—			(1,668	)		—			(1,668	)

Total comprehensive Income																	(4,226	)
Non cash stock compensation	—		—		2,726			(2,726	)		—			—			—
Stock compensation Expense	—		—		—			52			—			—			52
Preference dividends	—		—		—			—			—			(54	)		(54	)

Balance at December 31, 1999	362,473,760		143		10,602			(2,674	)		(1,768	)	$	1,578		$	7,881

Comprehensive income:
Net loss	—		—		—			—			—			(16,043	)		(16,043	)
Currency translation adjustment	—		—		—			—			63			—			63

Total comprehensive Income																	(15,980	)
Exercise of share options	39,477,264		11		1,377			—			—			—			1,388
Issue of ordinary shares	128,644,975		37		172,858			—			—			—			172,895
Share issue costs	—		—		(14,193	)		—			—			—			(14,193	)
Non cash stock compensation	—		—		7,013			(7,013	)		—			—			—
Stock compensation Expense	—		—		—			5,540			—			—			5,540
Preference dividends	—		—		—			—			—			(15	)		(15	)

Balance at December 31, 2000	530,595,999	$	191	$	177,657		$	(4,147	)	$	(1,705	)	$	(14,480	)	$	157,516

Comprehensive income:
Net loss	—		—		—			—			—			(34,659	)		(34,659	)
Currency translation adjustment	—		—		—			—			(1,360	)		—			(1,360	)

Total comprehensive Income																	(36,019	)
Exercise of share options	7,976,400		2		1,160			—			—			—			1,162
Issue of ordinary shares	42,608,032		12		58,372			—			—			—			58,384
Share issue costs	—		—		(762	)		—			—			—			(762	)
Non-cash stock compensation	—		—		2,711			(2,711	)		—			—			—
Stock compensation expense	—		—		—			1,806			—			—			1,806

Balance at December 31, 2001	581,180,431	$	205	$	239,138		$	(5,052	)	$	(3,065	)	$	(49,139	)	$	182,087

The accompanying notes are an integral part of these consolidated financial statements.

F-5

PARTHUS TECHNOLOGIES PLC

CONSOLIDATED STATEMENTS OF CASH FLOWS

	Year ended December 31,
	1999			2000			2001
	(in thousands)
Cash flows from operating activities
Net loss	$	(2,558	)	$	(16,043	)	$	(34,659	)
Adjustments to reconcile net loss to net cash (used in) provided by operating activities
Loss on disposal of fixed assets		—			1			1
Depreciation		1,089			1,944			2,668
Amortization of goodwill and intangible assets		—			1,081			9,195
In-process research and development charge		—			—			10,895
Non-cash interest expense		27			—			—
Undistributed earnings of minority interest		75			204			100
Unrealized foreign exchange gains		(143	)		(341	)		(556	)
Non-cash stock compensation expense		52			5,540			1,806
Changes in assets and liabilities
Increase in accounts receivable		(1,396	)		(249	)		(472	)
(Increase) decrease in prepayments and other current assets		(375	)		(2,575	)		455
(Increase) decrease in related party receivables		(425	)		400			—
(Increase) decrease in inventory		—			(288	)		425
Increase in accrued liabilities		2,096			5,563			838
Increase (decrease) in deferred revenue		874			3,940			(946	)
(Decrease) increase in taxes payable		(358	)		1,232			404
Increase in accounts payable		654			2,456			1,930

Net cash (used in) provided by operating activities		(388	)		2,865			(7,916	)
Cash flows from investing activities
Purchase of fixed assets		(1,281	)		(3,428	)		(5,538	)
Sale of fixed assets		—			1			—
Purchase of business and intangible assets		—			(7,453	)		(25,108	)
Cash acquired with subsidiary undertaking		—			—			1,061
Purchase of short term investments		—			—			(1,800	)

Net cash used in investing activities		(1,281	)		(10,880	)		(31,385	)
Cash flows from financing activities
Proceeds from issuance of share capital		—			172,424			2,209
Share issuance costs		—			(12,535	)		(762	)
Redemption of redeemable shares		(664	)		(1,623	)		—
Proceeds from (repayment of) bank overdraft		84			(84	)		—
Preference dividends paid		(54	)		(15	)		—

Net cash (used in) provided by financing activities		(634	)		158,167			1,447
Effect of exchange rate movements on cash		(1,733	)		(601	)		(508	)

Net (decrease) increase in cash and cash equivalents		(4,036	)		149,551			(38,362	)
Cash and cash equivalents at beginning of year		14,350			10,314			159,865

Cash and cash equivalents at end of year	$	10,314		$	159,865		$	121,503

The accompanying notes are an integral part of these consolidated financial statements.

F-6

PARTHUS TECHNOLOGIES PLC

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

1. Business Overview

Parthus Technologies plc and its subsidiary companies (collectively known as the ‘‘Company’’) is a leading supplier of platform-level intellectual property solutions to the mobile Internet market. The Company offers businesses significant time-to-market advantages by delivering system level solutions for mobile Internet devices that can be integrated quickly and easily with customer owned technology and third party industry standards. The Company’s customers consist primarily of leading electronic product and semiconductor manufacturers.

2. Significant accounting polices

(a) Basis of preparation

The accounting policies noted below were applied in the preparation of the accompanying financial statements and are in conformity with accounting principles generally accepted in the United States (“US GAAP”).

(b) Use of estimates

The preparation of financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates.

(c) Principles of consolidation

The consolidated financial statements incorporate the financial statements of the Company and all of its subsidiaries. All significant intercompany balances and transactions have been eliminated on consolidation.

(d) Revenue recognition

The Company recognizes revenue in accordance with the provisions of the American Institute of Certified Public Accountants’ Statement of Position No. 97-2 and No. 98-4 ‘‘Software Revenue Recognition’’ (SOP 97-2 and SOP 98-4) as follows:

Intellectual Property (IP) Licence revenue consists of license fees received under the terms of license agreements with customers to enable them to use the Company’s IP which is customized to each customer’s specific requirements. The Company licenses its IP to leading semiconductor manufacturers and electronic product manufacturers for applications in the Mobile-Internet market. The Company’s IP consists of software and related documentation that enable a customer to produce integrated circuits and related technology and software. In general the time between the signing of a license and final customer acceptance is between three and twelve months with most time allocated to the period between delivery and acceptance of the technology. Delivery generally occurs within a short time period after signing.

Fees are payable upon completion of agreed upon milestones, such as delivery of specifications and technical documentation. Each licence is designed to meet the specific requirements of the particular customer and can vary from rights to incorporate Company technology into a customer’s own application specific product to the complete design of a ‘‘system on a chip’’.

No upgrades or modifications to the licensed IP are provided. Following customer acceptance, the Company has no further obligations under the license agreement.

F-7

CEVA, INC. AND ITS SUBSIDIARIES

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Revenues from initial license fees are recognized based on the percentage to completion method over the period from signing of the license through to customer acceptance. Initial license fees are recognized using the percentage of completion method as software requires significant modification or customization. The amount of revenue recognized is based on the total license fees under the license agreement and the percentage to completion achieved. The percentage to completion is measured by monitoring progress using records of actual time incurred to date in the project compared to the total estimated project requirement, which corresponds to the costs related to earned revenues. Estimates of total project requirements are based on prior experience of customization, delivery and acceptance of the same or similar technology and are reviewed and updated regularly by management. After delivery, if uncertainty exists about customer acceptance of the software, license revenue would not be recognized until acceptance. Under the percentage to completion method, provisions for estimated losses on uncompleted contracts are recognized in the period in which the likelihood of such losses is determined.

The Company believes that the use of the percentage of completion method is appropriate as the Company has the ability to make reasonably dependable estimates of the extent of progress towards completion, contract revenues and contract costs. In addition, contracts executed include provisions that clearly specify the enforceable rights regarding services to be provided and received by the parties to the contracts, the consideration to be exchanged and the manner and terms of settlement. In all cases the Company expects to perform its contractual obligations and its licensees are expected to satisfy their obligations under the contract.

The excess of license fees received over revenue recognized in respect of such fees is recorded as deferred revenue.

In addition to the license fees, contracts generally contain an agreement to provide post contract (support, maintenance and training) which consists of an identified customer contact at the Group and telephone or e-mail support. Fees for post contract support which take place after customer acceptance are specified in the contract. Revenue for post contract support is recognized on a straight-line basis over the period for which support and maintenance and training is contractually agreed by the Company with the licensee.

IP creation is the development and design of integrated circuits. Revenues from IP creation comprise revenues arising from fee for service contracts based on time and materials. Revenue from IP creation is recognized when the service has been provided and all obligations to the customer under the contract have been fulfilled.

Hard IP is the incorporation of intellectual property into reference designs (either as silicon chips or printed circuit boards). Revenues from Hard IP are recognized when reference designs are complete, delivery has occurred and all obligations to the customer are fulfilled.

(e) Research and development

Research and development expenditure is expensed in the period in which it is incurred.

(f) Government grants

Government grants received relating to capital expenditure are offset against the cost of the related property, plant and equipment.

Grants relating to categories of operating expenditures are credited to income in the period in which the expenditure to which they relate is charged.

F-8

PARTHUS TECHNOLOGIES PLC

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(g) Pension costs

The Company contributes to defined contribution plans covering all eligible employees. The Company contributes to these plans based upon various fixed percentages of employee compensation, and such contributions are expensed as incurred. The amounts of contributions expensed by the Company for the years ended December 31, 1999, 2000 and 2001 were $848,000, $1,529,000 and $1,727,000, respectively.

(h) Cash equivalents

The Group considers all highly liquid investments with original maturity dates of three months or less to be cash equivalents.

(i) Property, plant and equipment

The cost of property, plant and equipment is their purchase cost, together with any incidental costs of acquisition.

Depreciation is calculated so as to write off the cost of property, plant and equipment, less estimated residual values, on a straight line basis over the expected useful economic lives of the assets concerned. The principal economic lives used for this purpose are:

Work stations		3—4years
`Plant and machinery		3—5years
Office equipment		4—5years
Motor vehicles		4 years

(j) Intangible assets

Intangible assets represent the acquisition of intellectual property and patents which are amortized over five years on a straight line basis, representing the estimated period over which benefits are expected to accrue. Where events and circumstances are present which indicate that the carrying amount of an intangible asset may not be recoverable, the Company estimates the future undiscounted cash flows expected to result from use of the asset and its eventual disposition. Where future undiscounted cash flows are less than the carrying amount of the asset, the Company will recognize an impairment loss, otherwise no loss is recognized. This impairment loss is measured by comparing the fair value of the asset with its carrying value.

(k) Goodwill

Goodwill arising on acquisition is capitalized and amortized over five years on a straight line basis, representing the estimated period over which benefits are expected to accrue. Where events and circumstances are present which indicate that the carrying amount of goodwill may not be recoverable, the Company estimates the future undiscounted cash flows expected to result from use of the goodwill and its eventual disposition. Where future undiscounted cash flows are less than the carrying amount of the asset, the Company will recognize an impairment loss, otherwise no loss is recognized. The impairment loss is measured by comparing the fair value of the asset with its carrying value. The Company adopted SFAS No. 142 “Goodwill and Intangible Assets” effective from January 1, 2002. SFAS No. 142 changes the accounting for goodwill from an amortization method to an impairment only approach. Amortization of goodwill ceases on adoption of SFAS No. 142.

(l) Investments—available for sale

The Company has classified short term investments as available for sale in accordance with the terms of SFAS No. 115 “Accounting for Certain Investments in Debt and Equity Securities”. The investments are reported at fair value with unrealized gains and losses reported in a separate component of shareholder equity. No unrealized gain or loss arose in the year ended December 31, 2001.

F-9

PARTHUS TECHNOLOGIES PLC

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(m) Inventory

Inventory is valued at the lower of cost and net realizable value and after provisions for obsolescence. Cost in the case of raw materials comprises the purchase price and attributable costs, less trade discounts. Cost in the case of work in progress and finished goods, comprises fixed labor, raw materials costs and attributable overheads.

(n) Operating leases

Costs in respect of operating leases are charged on a straight line basis over the lease term.

(o) Accounting for stock based compensation

The Company has elected to use the intrinsic value-based method to account for all of its employee stock based compensation plans under APB Opinion No. 25, “Accounting for Stock Issued to Employees”.

Stock compensation is amortized on a straight-line basis over the vesting period of the options, typically four years. The Company has adopted the disclosure requirements of the Statement of Financial Accounting Standards (‘‘SFAS’’) No. 123, “Accounting for Stock Based Compensation” (see note 15).

The Company has not granted options to non employees.

(p) Foreign currencies and translation of subsidiaries

The Company reporting currency is the US dollar ($).

The functional currency of the Company is Euro and the functional currency of the Company’s overseas operations is the local currency in which its operations conduct their business.

The assets and liabilities of subsidiaries denominated in foreign currencies are translated into Euro at rates of exchange at the balance sheet date.

Statements of income of overseas subsidiaries are translated into Euro at the average exchange rate for the period. Translation differences are taken to the cumulative translation adjustment.

Assets and liabilities so determined are translated into the Company’s reporting currency at the exchange rate at the balance sheet date. Revenues, expenses, gains and losses are translated at a weighted average of the exchange rates during the period, and all translation effects of exchange rate changes are included in the cumulative translation adjustment as a separate component of shareholders’ equity.

Transactions in currencies other than the functional currency are recorded at the rate at the date of the transaction. Monetary assets and liabilities denominated in currencies other than the functional currency are translated at exchange rates prevailing at the balance sheet date. Adjustments resulting from these translations are taken to income and, where material, are separately disclosed.

Dividends declared by the Company will be declared in Euro.

F-10

PARTHUS TECHNOLOGIES PLC

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(q) Disclosure about fair value of financial instruments

The following methods and assumptions were used to estimate the fair value of each material class of financial instrument:

The carrying amount of cash, cash equivalents, short term investments, unbilled revenue, other receivables, prepayments and other current assets and accounts receivable approximates fair value due to the short term maturities of these instruments.

The carrying amount of accounts payable, payments received on account, accrued liabilities and taxes payable approximates fair value due to the short term maturities of these instruments.

(r) Income taxes

The Company applies SFAS’ No. 109, ‘‘Accounting for Income Taxes’’, which requires the asset and liability method of accounting for income taxes. Under the asset and liability method of SFAS No. 109, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates that will apply to taxable income in the years in which these temporary differences are expected to be recovered or settled.

(s) Advertising costs

All costs associated with advertising and promotion are expensed as incurred. The advertising and promotion expense was $78,000, $1,566,000 and $753,000 for the years ended December 31, 1999, 2000 and 2001, respectively.

(t) Net loss per ordinary share

Basic net loss per ordinary share has been computed by dividing net loss available to ordinary shareholders by the weighted average numbers of ordinary shares outstanding during the period. Diluted net loss per ordinary share is computed by adjusting the weighted average number of ordinary shares outstanding during the period for all potentially dilutive ordinary shares outstanding during the period and adjusting net loss for any changes in loss that would result from the conversion of such potential ordinary shares.

There is no difference, for the years presented, in net loss used for basic and diluted net loss per ordinary share. The reconciliation of the number of shares used in the computation of basic and diluted net income loss per ordinary share is as follows:

	Year ended December 31,
	1999	2000	2001
Weighted average number of ordinary shares outstanding for basic net loss per ordinary share	362,473,760	471,389,525	558,946,827
Effect of dilutive share options outstanding	—	—	—

Weighted average number of ordinary shares for diluted net loss per ordinary share	362,473,760	471,389,525	558,946,827

In the years ended December 31, 1999, 2000 and 2001, share options (see note 15) are anti dilutive.

(u) Allowance for bad debts

The Company recorded an allowance for bad debts in the year ended December 31, 2001 of $232,000. No such allowance was recorded at December 31, 2000.

F-11

PARTHUS TECHNOLOGIES PLC

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(v) Comprehensive income

Total comprehensive income includes net income and other comprehensive income which, for the Company, is comprised of currency translation adjustments.

(w) Recently issued accounting standards

SFAS No. 142 requires a two step impairment test for goodwill. The first step is to compare the carrying amount of the reporting unit’s assets to the fair value of the reporting unit. If the carrying amount exceeds the fair value then the second step is required to be completed, which involves the fair value of the reporting unit being allocated to each asset and liability with the excess being implied goodwill. The impairment loss is the amount by which the recorded goodwill exceeds the implied goodwill. The Company is required to complete a “transitional” impairment test for goodwill as of the beginning of the fiscal year in which the statement is adopted. This transitional impairment test requires that the Company complete step one of the goodwill impairment test within six months from December 31, 2001. The Company is currently completing this transitional impairment test and does not expect to incur any impairment charges to goodwill.

SFAS No. 143, “Accounting for Asset Retirement Obligations” (“SFAS No. 143”), addresses financial accounting and reporting for obligations associated with the retirement of tangible long-lived assets and the associated asset retirement costs. The statement requires that the fair value of a liability for an asset retirement obligation be recognized in the period in which it is incurred if a reasonable estimate of fair value can be made. The associated asset retirement costs are capitalised as part of the carrying amount of the long-lived asset. This statement is effective for financial statements issued for fiscal years beginning after June 15, 2002. The Company does not expect that SFAS No. 143 will have a material impact on the financial statements.

In April 2002, the Financial Accounting Standards Board (FASB) issued SFAS No. “Rescission of FASB Statements No. 4, 44 and 64, Amendment of FASB Statement No. 13, and Technical Corrections.” SFAS No. 145 provides for the rescission of several previously issued accounting standards, new accounting guidance for the accounting for certain lease modifications and various technical corrections that are not substantive in nature to existing pronouncements. SFAS No. 145 will be adopted beginning January 1, 2003, except for the provisions relating to the amendment of SFAS No. 13, which will be adopted for transactions occurring subsequent to May 15, 2002. Adoption of SFAS No. 145 will not have a material impact on the consolidated financial statements.

F-12

PARTHUS TECHNOLOGIES PLC

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

3. Related party transactions

The Company trades in the normal course of business with STMicroelectronics Srl., which held 20% of the equity of Silicon Systems Design Limited, a subsidiary undertaking, until June 29, 2001. On that date, Parthus acquired the STMicroelectronics Srl. 20% shareholding in Silicon Systems Design for consideration of $38,640,000 (see note 8).

During the year ended December 31, 2001 Parthus and STMicroelectronics Srl. entered into a multi-technology portfolio licensing and royalty agreement for the complete suite of Parthus mobile Internet IP Platforms. Revenue generated from STMicroelectronics Srl. during the years ended December 31, 1999, 2000 and 2001 was $12,879,000, $12,442,000 and $12,592,000, respectively. The account receivables balances with STMicroelectronics Srl. at December 31, 2000 and 2001 were $12,500 and $404,500 respectively.

William McCabe and Sven-Christer Nilsson, our non-executive directors receive directors fees of approximately $10,000 and $40,000 per annum, plus reasonable expenses. Mr. McCabe is also entitled to approximately $25,000 per annum for consulting services rendered to us.

On July 1, 1996 the Group entered into a property lease agreement with Veton Properties Limited to lease its head office. The lease term is 25 years from July 1, 1996 subject to annual rent of €380,922 ($341,000). Brian Long and Peter McManamon are minority shareholders in the equity of Veton Properties Limited.

During the year ended December 31, 1999, the Group advanced an interest free loan of $400,000 to William McLean, president of US operations and vice president of world-wide sales. The loan was repaid in full in March 2000.

4. Short term investments—available for sale

The Company has classified its investment portfolio, comprising short term minimum “AA” rated securities, as available for sale. The investments are reported at fair value. The balance was converted into cash in January 2002.

5. Prepayments and other current assets

	December 31,
	2000		2001
	(in thousands)
VAT taxes recoverable	$	456	$	201
Prepayments		1,538		859
Accrued income		483		2,087
Other current assets		374		218

	$	2,851	$	3,365

F-13

PARTHUS TECHNOLOGIES PLC

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

6. Inventory

	December 31,
	2000		2001
	(in thousands)
Raw materials	$	964	$	635
Work in progress		261		103
Finished goods		25		59

	$	1,250	$	797

7. Property, plant and equipment

	December 31,
	2000			2001
	(in thousands)
Cost
Work stations	$	7,847		$	11,611
Office equipment		1,356			2,775
Plant and machinery		476			539
Motor vehicles		50			—

		9,729			14,925
Less accumulated depreciation		(4,838	)		(7,234	)

Property, plant and equipment (net)	$	4,891		$	7,691

Depreciation charged to income for the years ended December 31, 1999, 2000 and 2001 was $1,089,000, $1,944,000 and $2,668,000 respectively.

8. Acquisitions

Acquisition of Chicory Systems Inc.

On May 22, 2001 the Company acquired 100% of the outstanding shares in Chicory Systems Inc., a company incorporated in the United States of America. The results of Chicory Systems Inc have been included in the consolidated financial statements since May 22, 2001. Chicory Systems Inc. delivers innovative, silicon-based intellectual property that accelerates critical mobile Internet applications.

The aggregate purchase price was $43,441,000, comprising cash of $11,708,000 and the issuance of 22,221,442 new ordinary shares with a fair market value of $31,733,000. The fair market value of the issued shares was determined based on the average market price of Parthus’ shares over the 5-day period before and after the terms of the acquisition were agreed to and announced.

The acquisition agreement provides for the issuance of a maximum of 21.9 million additional Parthus ordinary shares contingent upon the achievement by Chicory of certain performance targets over the period to December 31, 2002. Such potential additional purchase consideration will be recorded as goodwill.

All outstanding unvested options over ordinary shares in Chicory Systems Inc. were exchanged for a total of 1,950,167 options over ordinary shares in the Company, the intrinsic value of which was recorded as deferred stock compensation of $2,711,000 and is being amortized on a straight line basis over the remaining option vesting period of two to four years.

F-14

PARTHUS TECHNOLOGIES PLC

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

The purchase price exceeded the amounts allocated to the assets acquired and liabilities assumed by $32,884,000 and this excess has been classified as goodwill. The following table summarises the estimated fair values of the assets acquired and liabilities assumed at the date of acquisition.

	$’000
Cash	1,061
Prepayments	76
Property, plant and equipment	132
In-process research and development	10,895
Accounts payable and accrued liabilities	(1,243	)

Net assets acquired	10,921
Purchase consideration including costs of acquisition	43,805

Goodwill	32,884

The value assigned to purchased in-process technology relates to two microprocessor architecture projects (Project A and Project B) valued at $7,370,000 and $3,525,000 respectively. The estimated fair value of the acquired in-process research and development projects that had not yet reached technological feasibility and had no alternative future use amounted to $10,895,000.

Technological feasibility or commercial viability of these projects was not established at the acquisition date. These products were considered to have no alternative future use other than the technological indications for which they were in development. Accordingly, these amounts were immediately expensed in the consolidated statement of operations on the acquisition date in accordance with FASB Interpretation No. 4, “Applicability of FASB Statement No. 2 to Business Combinations Accounted for by the Purchase Method.” The estimated fair values of these projects were determined using discounted cash flow models. Projects A and B were estimated to be 80% and 50% complete, respectively; estimated costs to completion of these products were approximately $570,000 and $700,000, respectively, and discount rates of 35% and 40%, respectively, were used. Both projects involve completion of hardware and software elements. The hardware component must be finalized before the software piece (consisting of validation work, completion of the driver code, etc.) can be started. At the valuation date, Project A had not completed the software element and the Project B had not completed the hardware component. These projects were expected to be completed by the end of 2001, when the company expected to commence sales of the products. The principal risks relating to the development of the Project A product technology include completing the hardware solutions, developing the reference software and reference manual, testing and debugging. The principal risks relating to the development of the Project B product technology include completing the micro-architecture, developing the driver code and software for the end product, debugging and testing. Each of these steps must be completed before the products can be released into the market.

The primary focus of Parthus was on the completion of Project A, not only as a stand alone architecture but also with the ability to fully integrate it with existing and future Parthus technology platforms. Costs of approximately $700,000 were incurred on the completion of the Project A architecture. Project A was completed, in line with expectations, in the fourth quarter of fiscal 2001 and is the primary architecture used in Parthus’ Machstream platform technology which Parthus is currently licensing.

In the third quarter of fiscal 2001, following a strategic review, Parthus decided to suspend further investment in Project B.

Acquisition of minority interest in Silicon Systems Design Limited

On June 29, 2001 the Company acquired the remaining 20% minority interest in Silicon Systems Design Limited, a subsidiary of the Company, from STMicroelectronics Srl.

The purchase price was $38,602,000 before acquisition costs of $38,000, comprising cash of $12,998,000 and the issuance of 18,393,670 new ordinary shares with a fair market value of $25,604,000. The fair market value of the issued shares was determined based on the average market price of Parthus’ shares over the 5-day period before and after the terms of the acquisition were agreed to and announced. The excess of total purchase consideration of $38,640,000 including acquisition costs over the fair value of the minority interest acquired of $1,009,000 (note 12) has been allocated to goodwill.

F-15

PARTHUS TECHNOLOGIES PLC

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Proforma information

The proforma effect of the acquisitions of Chicory Systems Inc. and the minority interest in Silicon Systems Design Limited if completed on January 1, 2001, would have resulted in revenues, net loss and basic and diluted loss per ordinary share of $40,919,000, $43,769,000 and $0.076 respectively for the year ended December 31, 2001. The proforma effect of the acquisitions, if completed on January 1, 2000 would have resulted in revenues, net loss and basic and diluted loss per ordinary share of $31,920,000, $32,690,000 and $0.064 respectively for the year ended December 31, 2000. The unaudited proforma information does not purport to represent what the Company’s results of operations would actually have been had the acquisition occurred on such dates, nor does it purport to represent the results of operations of the Company for any future period.

Acquisition of the UK based GPS business of Symmetricom Limited

On March 29, 2000 the Company acquired the UK based GPS business of Symmetricom Limited, a wholly owned subsidiary of Symmetricom, Inc., for cash consideration of $6,453,000. On the same date, Symmetricom Inc. subscribed for 2,045,000 ordinary shares for consideration of $1,859,000. The business combination has been accounted for as a purchase. The total purchase consideration of $8,312,000 was allocated as follows:

	(in thousands)
Plant and equipment	$	896
Inventory		1,095
Intangible assets—patents		6,321

	$	8,312

The patents acquired have an estimated life of five years.

9. Goodwill

	December 31,
	2000		2001
	(in thousands)
Acquired during year (note 8)	$	—	$	70,515
Less: accumulated amortization		—		(7,824	)

	$	—	$	62,691

10. Intangible assets

	December 31,
	2000			2001
	(in thousands)
Cost	$	7,321		$	6,793
Less: accumulated amortization		(1,081	)		(2,361	)

	$	6,240		$	4,432

Intangible assets represent the acquisition of certain intellectual property from Frontier Design on May 4, 2000 for cash consideration of $1,000,000 together with the value of patents acquired on the purchase of the UK based GPS business of Symmetricom Limited in 2000.

F-16

PARTHUS TECHNOLOGIES PLC

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

11. Accrued liabilities

	December 31,
	2000		2001
	(in thousands)
Salary accruals	$	2,429	$	4,047
CAD rental		1,094		312
Professional fees		374		1,052
Amount due to Forbairt, an Irish Government Agency		314		167
Share issue costs accruals		1,658		51
Other accruals		3,569		5,549

	$	9,438	$	11,178

12. Minority interest

	December 31,
	2000			2001
	(in thousands)
Opening balance	$	909		$	1,001
Share of profit for year		204			100
Currency translation adjustment		(112	)		(92	)
Minority interest acquired (note 8)		—			(1,009	)

	$	1,001		$	—

13. Redeemable shares

The Company paid dividends of $15,000 during the year ended December 31, 2000 to holders of 4% cumulative redeemable preference shares. These shares were redeemed for cash at par on April 7, 2000.

The Company redeemed 50,000 redeemable preference shares of €1.269738 each and 16,527,600 “B” redeemable preference shares of €0.031743 each for cash at par on April 7, 2000.

In 1994 and 1995 the Company raised finance through the issue of 29,230,400 redeemable ordinary shares with put and call option arrangements to enable the investors to call upon the Company to buy out the investors’ redeemable ordinary shares at a price to be determined based upon a multiple of ten times one year’s average of the after tax profits in a specified three year period prior to the exercise of the option. In the year to December 31, 1999, 19,000,000 redeemable ordinary shares were repurchased for cash of $664,000. The difference between the carrying amount and the estimated repurchase price of the redeemable ordinary shares was accreted to income over the term of the related financing. The Company redeemed the remaining 10,230,400 redeemable ordinary shares in April 2000 for cash of $295,000.

F-17

PARTHUS TECHNOLOGIES PLC

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

14. Equity share capital

On April 7, 2000 the Company reorganized its equity share capital. The Company reclassified 96,901,920 “A” convertible preferred ordinary shares and 14,022,800 “C” deferred ordinary shares in issue into an equal number of ordinary shares. Following the reorganization, the Company had one class of shares in issue. All references to ordinary shares, “A” convertible preferred ordinary shares and “C” deferred ordinary shares were restated to reflect the capital reorganization of April 7, 2000.

On February 29, 2000 the Company effected a stock split of four ordinary shares for each one ordinary share outstanding at that date.

On April 20, 2000 the Company effected a stock split of 10 ordinary shares for each one ordinary share outstanding at that date.

All references to share and per share amounts have been restated to reflect these stock splits.

Holders of ordinary shares will be entitled to receive such dividends as may be recommended by the board of directors of the Company and approved by the shareholders as the board of directors of the Company may decide.

On March 29, 2000 Symmetricom, Inc. subscribed for 2,045,000 ordinary shares as part of the acquisition by the Company of the UK based GPS business of Symmetricom Limited (see note 8).

On March 29, 2000 3 Com Ventures Inc. subscribed for 4,398,720 ordinary shares for cash consideration of $4 million.

On March 31, 2000 ARM Limited subscribed for 2,199,360 ordinary shares for cash consideration of $2 million.

On May 19, 2000 the Company completed an initial public offering (“IPO”) of its shares on both the Nasdaq National Market and London Stock Exchange. The Company issued a total of 111,309,328 ordinary shares for gross proceeds of $140.2 million. Expenses incurred in connection with the offering amounted to $12.5 million.

On November 8, 2000 the Company completed an offering of 8,300,705 ordinary shares for gross proceeds of $23.9 million. Expenses incurred in connection with the offering amounted to $1.7 million.

In June 2000, the Company approved the introduction of an Employee Share Purchase Plan (“ESPP”) which provides eligible employees with the opportunity to purchase ordinary shares in the form of American Depositary Shares (“ADSs”) at a price of 85% of the ADS market value over a designated period. Substantially all employees are eligible to participate and shares are offered based on a percentage of salary up to a specified maximum value. Employees may exercise their purchase right on a twice yearly basis. A total of 500,000 ADSs have been reserved for issuance under this plan. On December 30, 2000 the Company issued 39,186 ADSs to employees under the ESPP. During the year ended December 31, 2001, the Company issued a total of 199,292 ADSs (equivalent to 1,992,920 ordinary shares) to employees under the ESPP for consideration of $1 million.

During the years ended December 31, 2000 and 2001 employees exercised 39,477,264 and 7,976,400 options to purchase ordinary shares for gross proceeds of $1.4 million and $1.2 million respectively.

On May 22, 2001 the Company issued 22,221,442 ordinary shares with a fair market value of $31,733,000 as part consideration for the purchase of Chicory Systems Inc. (see note 8).

On June 29, 2001 the Company issued 18,393,670 ordinary shares with a fair market value of $25,604,000 as part consideration for the acquisition of the 20% interest in Silicon Systems Design Limited not owned by the Company (see note 8).

F-18

PARTHUS TECHNOLOGIES PLC

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

15. Share options

Non cash stock compensation expenses of $52,000, $5,540,000 and $1,806,000 for the years ended December 31 1999, 2000 and 2001 have been recorded as follows:

	Year Ended December 31,
	1999		2000		2001
	(in thousands)
Research and development	$	36	$	923	$	1,416
Sales and marketing		12		120		197
General and administrative		4		4,497		193

	$	52	$	5,540	$	1,806

The Company granted 23,705,600 options over ordinary shares of €0.000317 each to employees in December 1996 at an exercise price of €0.007936 ($0.008) per share, the estimated market value of an ordinary share in the Company at that date. All of these options were exercised during the year ended December 31, 2000.

On March 30, 1998, the Board of Directors approved the introduction of a fixed share option plan (“the plan”), to include previous option grants. At the annual general meeting held on May 10, 2001, the shareholders approved an increase in the number of options that may be granted to 20% of the enlarged fully diluted share capital as at that date.

Under the terms of the plan, options may be granted to employees, consultants, or directors of the Company and any of its subsidiaries. The option holder shall be entitled, to exercise an option in respect of 25% of the total number of shares which are subject to option on the first anniversary of the date of grant. On each successive month thereafter, the option holder shall be entitled to exercise options in respect of 1/48th of the total number of shares subject to option. All unexercised options shall lapse on the seventh anniversary of the date of grant. All shares allotted under the plan rank pari passu in all respects with the ordinary shares of the Company.

No option may be sold, pledged, assigned, transferred or otherwise disposed of in any other manner by the optionee during his lifetime. Options will lapse to the extent that they have not been exercised by the earliest of the seventh anniversary of its date of grant, the expiration of twelve months from the date of death of the optionee or the date of cessation of the optionee as an employee or Director of the Company. The plan will be administered by the Remuneration Committee of the Board of the Company.

During 1999, the Company recognized deferred compensation cost of $2,726,000, which is being amortized on a straight line basis over the vesting period of the options, and compensation expense of $52,000 for those instances in which the exercise price of the Company’s options were less than the estimated fair market value of the underlying shares on the date of grant.

In 2000, the Company recognized total deferred compensation cost of $7,013,000, of which $2,633,000 is being amortized on a straight line basis. Compensation expense of $5,540,000 was recorded for the year ended December 31, 2000 including an amount of $4,380,000 arising from the grant in December 1998, of an option to purchase 2,000,000 shares to each of Mr. Brian Long and Mr. Peter McManamon at an exercise price of $0.165115 per ordinary share. The options were exercisable in a two year period from the occurrence of an Option Event as defined in the option agreements. The option agreements were amended in April 2000 to provide that an Option Event was the date on which final agreement was reached between the Company and the underwriters on the offer price of the Company’s shares in its initial public offering and the underwriting agreement was signed. The compensation cost of $4,380,000 was established on the date the Option Event occurred, May 19, 2000 and was recorded as an expense at that time as the options fully vested on that date.

The Company recognized deferred compensation cost of $2,711,000 during the year ended December 31, 2001 on the purchase of Chicory Systems Inc. representing the intrinsic value arising on the grant of options over ordinary shares in the Company in exchange for unvested shares in the acquired company. This cost is being amortized on a straight line basis.

Other than the assumption of options on the acquisition of Chicory Systems Inc., all options granted subsequent to the IPO on May 19, 2000 have been granted at exercise prices equal to market value on the date of grant.

F-19

PARTHUS TECHNOLOGIES PLC

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

The following table summarizes the transactions for the Company’s share option plans for the years ended December 31, 2001:

	Options outstanding		Weighted average exercise price
Outstanding at December 31, 1998	52,575,600		$	0.032
Cancelled	(1,648,000	)	$	0.032
Granted	18,162,000		$	0.165

Outstanding at December 31, 1999	69,089,600		$	0.067
Cancelled	(3,056,050	)	$	2.236
Granted	30,212,000		$	1.638
Exercised	(39,477,264	)	$	0.038

Outstanding at December 31, 2000	56,768,286		$	0.806
Cancelled	(6,949,350	)	$	1.132
Granted	40,979,537		$	0.446
Exercised	(7,976,400	)	$	0.146

Outstanding at December 31, 2001	82,822,073		$	0.664

The following table summarizes information concerning outstanding and exercisable share options as of December 31, 2001:

		Options Outstanding			Options Exercisable
Exercise Price	Number of Shares	Average Remaining Contractual Life	Weighted Average Excercise Price		Number of Shares	Weighted Average Exercise Price
$0.031—$0.165	22,589,353	3.5 years	$	0.120	12,478,984	$	0.119
$0.285—$0.750	41,667,160	6.5 years	$	0.437	3,155,280	$	0.750
$0.909—$1.126	6,513,160	5.7 years	$	0.972	2,338,090	$	0.967
$1.150—$2.700	12,052,400	5.5 years	$	2.302	4,048,070	$	2.390

The weighted average fair value of the options granted in fiscal 1999, 2000 and 2001 was $0.034, $0.842 and $0.352 respectively. The fair value was estimated using the minimum value method in 1999 and the Black-Scholes option pricing method in 2000 and 2001 with the following assumptions: no expected dividend yield, expected volatility of 80%, risk free interest rate of 5% and an expected life of 5 years.

F-20

PARTHUS TECHNOLOGIES PLC

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Had the Company determined compensation expense based on the fair value at the grant date for these options under SFAS No. 123, the Company’s net income for the three years ending December 31, 2001 would have been reduced to the pro-forma amounts indicated below.

	Year ended December 31,
	1999			2000			2001
	(in thousands, except per share data)
Net loss as reported
— as reported	$	(2,612	)	$	(16,058	)	$	(34,659	)
— pro-forma	$	(2,706	)	$	(14,898	)	$	(32,853	)
Basic and diluted net loss per Ordinary Share
— as reported	$	(0.007	)	$	(0.034	)	$	(0.062	)
— pro-forma	$	(0.007	)	$	(0.032	)	$	(0.059	)

16. Interest expense

	Year ended December 31,
	1999		2000		2001
	(in thousands)
Accretion of redeemable preference shares	$	27	$	—		—

	$	27	$	—	$	—

17. Restructuring charge

Restructuring charges of $765,000, representing severance costs, arise from the Company’s headcount reduction in December 2001.

18. Income taxes

The Irish, US and UK subsidiaries file tax returns in Ireland, the United States and the United Kingdom, respectively.

The components of income before provision for income tax expenses are as follows:

	Year ended December 31,
	1999		2000			2001
	(in thousands)
Ireland	$	—	$	(21,045	)	$	(41,654	)
Other		—		6,207			7,295

	$	—	$	(14,838	)	$	(34,359	)

F-21

PARTHUS TECHNOLOGIES PLC

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Provision for income taxes:

	Year ended December 31,
	1999		2000		2001
	(in thousands)
Ireland	$	—	$	—	$	—
Other		—		1,205		300

	$	—	$	1,205	$	300

The Company’s consolidated effective tax rate differed from the statutory rate as set forth below:

	Year ended December 31,
	1999			2000			2001
	(in thousands)
Taxes at Irish statutory rate of 20% in 2001; (24% in 2000) (28% in 1999);	$	(716	)	$	(3,561	)	$	(6,872	)
Income taxed at reduced rates		—			284			(1,026	)
Losses at reduced rates		498			2,297			5,571
Movement in valuation allowance		229			2,264			2,707
Other		(11	)		(79	)		(80	)

	$	—		$	1,205		$	300

The tax effects of temporary differences that give rise to significant portions of deferred tax assets are as follows:

	As of December 31,
	2000			2001
	(in thousands)
Deferred tax assets:
Benefit of tax operating losses	$	2,548		$	5,255
Less: Valuation allowance		(2,548	)		(5,255	)

	$	—		$	—

The Company has provided a valuation allowance for the total amount of deferred tax assets as realization of these assets is not deemed likely principally due to the occurrence of operating losses.

Some of the Company’s operating subsidiaries are taxed at rates substantially lower than US and UK rates. Two Irish subsidiary companies currently qualify for a 10% tax rate, which under current legislation will remain in force until December 31, 2010. Three other Irish subsidiaries qualify for an exemption from income tax as their revenue source is licence fees from qualifying patents within the meaning of Section 234 of the Irish Taxes Consolidation Act 1997.

F-22

PARTHUS TECHNOLOGIES PLC

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

19. Employee benefits

Certain Group employees are eligible to participate in a defined contribution pension plan (the ‘‘plan’’). Participants in the plan may elect to defer a portion of their pre-tax earnings into the plan, which is run by an independent party. The Group makes pension contributions at rates varying between 10% and 15% of the participant’s pensionable salary. Contributions to this plan are recorded as an expense in the consolidated statement of operations.

The Group’s US operations maintain a retirement plan (the ‘‘US Plan’’) that qualifies as a deferred salary arrangement under Section 401(k) of the Internal Revenue Code. Participants in the US Plan may elect to defer a portion of their pre-tax earnings, up to the Internal Revenue Service annual contribution limit. The Company matches 100% of each participant’s contributions up to a maximum of 6% of employee’s base pay. Each participant may contribute up to 15% of base remuneration. Contributions to this plan are recorded in the year contributed as an expense in the consolidated statement of operations.

Total contributions for the years ended December 31, 1999, 2000 and 2001 were $848,000, $1,529,000 and $1,727,000, respectively.

20. Business Segment Information

The directors are of the opinion that the Company operates in a single industry segment. The analysis of the Company’s operations by geographical area is as follows:

Revenue by destination

	Year ended December 31,
	1999		2000		2001
	(in thousands)
United States	$	6,161	$	15,095	$	19,369
Europe, Middle East and Africa		12,879		14,903		17,012
Asia		—		1,922		4,538

Total	$	19,040	$	31,920	$	40,919

Other than $4,444,000 of revenue which originates in the UK, all of the Company’s revenue originates in Ireland. ST Microelectronics Srl., a company based in Italy, accounts for a significant portion of the Company’s revenues. (See note 3).

Loss from operations by origin

	Year ended December 31,
	1999			2000			2001
	(in thousands)
Ireland	$	(2,818	)	$	(21,287	)	$	(41,366	)
United Kingdom		(165	)		37			219
United States		114			(86	)		419
Rest of world		—			922			316

Total	$	(2,869	)	$	(20,414	)	$	(40,412	)

F-23

PARTHUS TECHNOLOGIES PLC

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Property, plant and equipment by origin

	Year ended December 31,
	2000		2001
	(in thousands)
Ireland	$	3,315	$	5,027
United Kingdom		917		1,226
United States		659		1,438

Total	$	4,891	$	7,691

Depreciation by origin

	Year ended December 31,
	1999		2000		2001
	(in thousands)
Ireland	$	973	$	1,360	$	1,670
United Kingdom		93		460		575
United States		23		124		423

Total	$	1,089	$	1,944	$	2,668

Capital expenditures by origin

	Year ended December 31,
	1999		2000		2001
	(in thousands)
Ireland	$	997	$	2,676	$	3,555
United Kingdom		48		230		911
United States		236		522		1,072

Total	$	1,281	$	3,428	$	5,538

The following table sets forth the clients which represented 10% or more of the Company’s net revenue in each of the periods set out below.

	Year ended December 31,
	1999		2000		2001
	(in thousands)
Client A	$	12,879	$	12,442	$	12,592
Client B	$	—	$	3,379	$	—

F-24

PARTHUS TECHNOLOGIES PLC

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

21. Commitments and Contingencies

The Company is not party to any litigation or other legal proceedings that the Company believes could reasonably be expected to have a material adverse effect on the Company’s business, results of operations and financial condition.

Under the terms of capital grant agreements, amounts received of $1,034,000 may become repayable in full should certain circumstances specified within the grant agreements occur. The Company has not recognized any loss contingency, having assessed as remote the likelihood of these events arising.

The Company has several non-cancellable operating leases, primarily for equipment. These leases generally contain renewal options and require the Company to pay all executory costs such as maintenance and insurance.

The Company paid $ 631,000, $1,176,641 and $1,699,309 in rental expense for the fiscal years ended December 31, 1999, 2000 and 2001, respectively.

Future minimum rental commitments for operating leases with non-cancellable terms in excess of one year are as follows:

	Minimum rental payments
	(in thousands)
2002	$	1,746
2003	$	1,407
2004	$	1,215
2005	$	919
2006	$	908

22. Supplemental Disclosure of Cash Flow Information

	Year ended December 31,
	1999		2000		2001
	(in thousands)
Cash paid for interest	$	—	$	—	$	—
Cash paid for income taxes	$	249	$	4	$	395
Shares issued as non cash consideration	$	—	$	1,859	$	57,337

23. Subsequent Events—Unaudited Information

In April 2002, the company announced that it had entered into an agreement with DSP Group, Inc and Ceva Inc., providing for the merger of Parthus with Ceva, the intellectual property subsidiary of DSP Group. This combination to be effected by a merger of equals, has been unanimously approved by the board of directors of both companies. The new combined company, to be called Parthus Ceva, Inc., will be incorporated in Delaware and headquartered in San Jose, California, with principal executive offices in Dublin, Ireland and Herzeliya, Israel.

Following the announcement of the company’s intention to enter into a combination agreement with Ceva, Inc., the company agreed to issue an aggregate of 2,114,109 Parthus ordinary shares effective May 28, 2002 to the former shareholders of Chicory Systems, Inc., in full satisfaction of the company’s obligations with respect to a contingent issuance of a further 21.9 million ordinary shares in connection with the Company’s acquisition of Chicory. The 2,114,109 share issuance will be accounted for as additional purchase consideration and recorded as additional goodwill of $887,926 in the second quarter of 2002.

F-25

SIGNATURES

The registrant certifies that it meets all the requirements for filing on Form 20-F and that it has duly caused and authorized the undersigned to sign this annual report on its behalf.

P ARTHUS T ECHNOLOGIES PLC

By:		/s/ K EVIN F IELDING
		Kevin Fielding President


By:		/s/ E LAINE C OUGHLAN
		Elaine Coughlan Chief Financial Officer

Date July 9, 2002

INDEX TO EXHIBITS

Exhibit		Description
(1)1.1		Memorandum of Association of the Registrant.

(1)1.2		Articles of Association of the Registrant.

(2)2.1		Specimen ordinary share certificate.

(3)2.2		Form of Deposit Agreement.

(3)2.3		Form of American Depositary Receipt (included in Exhibit 2.2).

(1)4.1		Deed of Warranties dated December 8, 1998 between the Registrant, Brian Long, Peter McManamon, Michael Peirce and Kelburn Limited and GS Capital Partners III, L.P. and others

(1)4.2		Lease dated November 8, 1996 between the Registrant and Veton Properties Limited.

(5)4.3		Combination Agreement among Parthus, DSP Group, Inc. and Ceva, Inc. dated April 4, 2002.

4.4		Employment Agreement between Parthus Technologies plc and Brian Long dated as of October 25, 1996

4.5		Employment Agreement between Parthus Technologies plc and Peter McManamon dated as of October 25, 1996

4.6		Employment Agreement between Parthus Technologies plc and Kevin Fielding dated as of March 3, 1998

4.7		Employment Agreement between Parthus Technologies plc and Eoin Gilley dated as of November 10, 2000

4.8		Employment Agreement between Parthus Technologies plc and Elaine Coughlan dated as of August 10, 1999

4.9		Employment Agreement between Parthus Technologies plc and William McLean dated as of November 4, 1998

8.1		Subsidiaries of the Registrant.

10.1		Consent of KPMG.

(1)

Filed as an exhibit to the Registrant’s Registration Statement on Form F-1 (registration no. 333–11904) filed on May 3, 2000, and incorporated herein by reference.

(2)

Filed as an exhibit to Amendment No. 1 to the Registrant’s Registration Statement on Form F-1 (registration no. 333-11904) filed on May 12, 2000, and incorporated herein by reference.

(3)

Filed as an exhibit to the Registrant’s Statement on Form F-6 (registration no. 333-11902) filed on May 3, 2000, and incorporated herein by reference.

(4)

Filed as an exhibit to the Registrant’s Registration Statement on Form F-1 (registration no. 333–12734) filed on October 23, 2000, and incorporated herein by reference.

(5)

Filed as an exhibit to the Registrant’s Annual Report on Form 20-F for the year ended December 31, 2001, filed on May 17, 2002.